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Barrick Gold (T.ABX) down 13% in 48 hours as Pascua-Lama delay weighs

Peter Kennedy Peter Kennedy, Stockhouse
1 Comment| November 1, 2013

Shares of Barrick Gold Corp. (TSX: T.ABX, Stock Forum) tumbled again Friday as investors balked at buying into the company’s cost and debt reduction plan.

After sliding 6% on Thursday, the stock was down another 7% to $18.85 in late morning trading, leaving the Toronto gold mining giant with a market cap of $18.9 billion, based on over one billion shares outstanding. The 52-week range is $37.95 and $14.22.

On Thursday, the company unveiled a series of measures aimed at reducing costs and debt.

They include a plan to suspend construction at its troubled $8 billion Pascua-Lama mine in Chile as it moves to reign in costs and roll the project out more efficiently.

Late Thursday the company also launched a $3 billion bought deal offering aimed at reducing debt.

Under an agreement with a syndicate of underwriters led by RBC Capital Markets, Barclays and GMP Securities, the offering is comprised of 163.5 million shares, priced at $18.35, the company said in a press release.

Barrick is the world’s leading gold producer. The spot gold price as down US$15.46 on Friday to US$1,308.29.

In its morning investment newsletter, Canaccord Genuity said the suspension of construction at Pascua-Lama will be “an overhang,” especially because production economics have been called into question as re-start of construction is dependent on “go-forward costs, outlook for metal prices, and reduced certainty with legal and regulatory environments.”

As a result of the delay at Pascua, Barrick expects a capex reduction in 2014 of $1 billion. A Bay Street analyst noted that the halt is unlikely to get lifted until the permitting situation is resolved, which is currently expected in late 2014 when the environmental remediation is completed, Canaccord said in its newsletter.

The delay may be at least 18 to 24 months,  and will likely result in higher capex given current plus 25% annual cost inflation in Argentina which Goldcorp Inc. (TSX: T.G, Stock Forum) recently reported at its Cerro Negro project.

Also impacted by the Pascua delay is Silver Wheaton (TSX: T.SLW, Stock Forum), which owns a silver stream from the project, Canaccord said. Pascua Lama is worth 20% of Silver Wheaton’s net asset value or $1.53 billion.

Silver Wheaton has announced that it will receive silver deliveries from Barrick’s other mines (Pierina, Valedero and Lagunas Norte) for an additional year, and will grant Barrick an additional year to reach 75% design capacity completion test, now December 31, 2017.

Tags: GOLD

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Taking into account the information of this article and the fact that Barrick Gold Corp. tumbled again last Friday and the stock fell 7.7% to close at $18.72, does anyone has an opinion about the stock forecast for the coming 6-12 months? Is this the lowest moment for the company and what are the chances for start going up from this point?
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November 3, 2013
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