Barrick Mining (ABX.TO)

He doesn’t have exposure to the precious metal space. The issue with the whole sector is that if you wanted to participate in the upside in gold prices, historically you would’ve been much better just to buy the gold itself. These companies had huge cost overruns and poor success with acquisitions. CapX has also been a challenge for them.

Barrick (ABX-T) or Goldcorp (G-T)? Gold is around $1200-$1300 an ounce, about equal to the cost to profitably bring on a new mine today. If gold goes any lower, you’ll see capacity fall off, which ultimately will turn the gold price around. The issue is which company can do better in a rising gold market. This company has been languishing because it has a balance sheet that isn’t very good, particularly compared to Goldcorp’s. It had to raise equity to fix the balance sheet whereas Goldcorp didn’t, except where they have to make acquisitions.

It’s interesting that sometimes the gold producers don’t necessarily act in conjunction with gold. Chart shows a down trend from March. It could find support at around $16.50 or so. There may be a good trade from the end of June/early July into October.

It is trying to form a base, but recently has been under some pressure. You want to see signs of positive technicals before buying.

(A Top Pick April 26/13. Up 0.58%.) A year ago, they said they were going to concentrate on capital discipline, changing of the old guard, etc. and then, close to their annual meeting, they were talking about merging with Newmont (NEM-T) to get $1 billion worth of synergies. He wants them to concentrate on efficiencies, capital discipline and spending money on their good projects that have shorter-term profitability. The stock should go up again. A good earnings and cash flow producer and right now it is undervalued.

Trading at 1.5X BV and trading at a very low price to cash flow multiple of about 5. Three or four years ago it was trading at 20 times. Has clearly had its problems. Cost capital expenditures have been put on ice. More recently they were discussing a merger with Newmont Mining (NEM-N). This would not be his choice right now. Would prefer Goldcorp (G-T).

Stock vs. Stock: ABX or SLW. Silver and gold will just trade in a range for the next couple of years.

Newmont reneged on merger agreement. If you are going to be in the golds, be in the mid-caps. He doesn’t need this kind of thing.

[Caller wanted to short] It is scary to short commodities that are sensitive to geopolitical issues. He owns it long because it was too cheap at one point. It is a good proxy for gold and is nice and liquid. He can hold on the uncertainty in Russia.

(Top Pick Feb 1/13, Down 26.88%) Making the right moves and is the cheaper one in the group right now. He lightened up on the sector in the last few days. There is a lot of money on the sidelines in the sector so when they come back in, ABX is a good choice.

(A Top Pick Jan 18/13. Down 29.73%.) If you get gold back up to $1600-$1800 again, we may have an entirely different outlook for the company. Earnings will certainly rebound as there is tremendous earnings leverage.

Doesn’t own any gold and doesn’t think gold is a good hedge against inflation. Would rather own hard assets such as railways, property or pipelines. These tend to trade up on replacement value.

(Top Pick Feb 6/13, Down 30.80%) Management is focused on capital discipline. Came out with weak numbers. Average down and now many clients are above water.

He is looking at it. They are getting their act together. Prefers G-T. He would also look at bullion. He loves the juniors but you have to be careful to make sure they have enough cash on hand to pay the dividend and to survive the slide in the price of gold.

Just did a fantastic breakout recently. They are cleaning up their shop. There is no resistance until $28.