Barrick Gold chief executive Mark Bristow said that the value of many of its assets is unrealised in its share price, with its market valuation essentially accounted for by the Nevada Gold Mines joint venture with Newmont and its copper assets.

"The value of just our interest in Nevada Gold Mines and our copper portfolio alone exceeds our current market valuation. According to the current market value of our shares, the rest of our business has a negative value of $1.2 billion. This includes our interest in three tier one gold mines outside Nevada—Kibali, Loulo-Gounkoto and Pueblo Viejo—the world-class Fourmile project, other gold mines and development projects still in the pipeline," he said during the company's June quarter results conference call.

Bristow based his calculations on net asset value (NAV) analyst consensus of and market-based price to NAV multiple of 1.68 times for NGM, and 1.2 times for its copper business, resulting in an implied valuation of $31.7 billion.

That gap is a little smaller today with Barrick shares up 9% to $18.93, and a $33.3 billion market capitalisation, after the company reported increased profits and margins and an improved performance in the quarter to June 30.

Bristow said the company has taken advantage of what it sees as its undervaluation to reinitiate its $1 billion share buyback programme. It bought 2.95 million shares for $49 million during the June quarter. "We put in the buyback approvals to manage shorts in the market and any softness in the stock. The way the model works is when we get extra cash net of debt, we will pay that as a dividend, but we have the flexibility as we go towards that point of using that money to buy back stock. … Right now, there's no question that the shares are a good buy," said Bristow.

With Bristow believing the value of several assets is not reflected in the company's share price, he rejected the idea of selling any. "Moving high-quality assets out of the portfolio makes no sense. The mining industry has too many companies with not enough management as it is. Breaking these companies up without a third-party acquisition by competent management is a challenge to deliver value. … We've transitioned out of the mid-cap instant gratification model. We are in for the long term. … To take this company back to the some to the individual parts would not make any sense," he said.

Costs

During the June quarter, Barrick saw its all-in sustaining cost increase to $1498/oz, a 10.6% increase over the prior year period and 1.6% increase from the March quarter. However, a higher gold price saw the company's AISC margin increase to 35.9% from 28.7% in the prior quarter.

Bristow said the company expects to start seeing its AISC come down as it completes development projects and is set to obtain higher production from many assets. Barrick expects a stronger second-semester performance that will see AISC drop to around $1400/oz, while its five-year outlook sees further reductions towards $1100/oz, including cost reductions in Nevada, Pueblo Viejo, Veladero in Argentina and Porgera in Papua New Guinea. "We will effectively switch sustaining capital over to growth capital with the $1 billion tailings dawn at Pueblo Viejo, funding Lumwana for $2 billion and then our share of Reko Diq, which will be $1.5 billion," Bristow told Mining Journal.

With labour costs a key cost driver and retention a key success factor, Barrick, which during COVID-19 saw turnover rates hit 25% in Nevada, continues to adjust to benefit its human resources. Bristow said the company recently completed a restructuring that removed a whole level of management, is investing in new mobile equipment and running an automation trial. "We've challenged management on parking equipment because every time you don't use equipment efficiently, you end up with [more] operators. If you can remove a piece of equipment, suddenly you can reallocate those people to different positions," he said.

Fourmile

With rising production and increasing margins boosting the company's performance, Bristow focused on the future opportunity Fourmile, its fully-owned exploration project in Nevada, represents for the company. Barrick has returned numerous drill intercepts with wide widths grading more than 2oz/t at Fourmile.

"Four Mile is a particularly exciting prospect. The more we learn about it, the more it looks like it could be the largest undeveloped high-grade gold deposit in the world today, directly adjacent to Nevada Gold Mines existing infrastructure in one of the world's best mining jurisdictions. … It is not to be underestimated. In the fullness of time, this asset has the potential to be as valuable to Barrick as our current stake in Nevada Gold Mines," he said.

The company has 10 drill rigs on site and is planning to update Fourmile's resource estimate towards the end of the year when it will also release details about the development route that will provide the basis of a prefeasibility (PFS). The PFS will include potential production and capital cost numbers. Bristow said the company is still trying to get a handle on the optimum way to access the orebody, which is adjacent to and along the strike of the existing underground infrastructure of the NGM Goldrush mine.

"The Goldrush twin declines were exploration declines made into operational declines, but they are halfway up a hill. If you're going to access ore bodies underneath a mountain, you want to try and get in at the valley level. We're looking at different options. Can we access it from Cortez? There's an option to access from the north, where the metallurgical infrastructure is. What is the optimum way to integrate Fourmile infrastructure with Goldrush infrastructure," he said.

M&A

Barrick is four to five years into its organic growth strategy following the acquisition of Randgold Resources in 2019 and the creation of NGM in 2020. The company's results are starting to show the fruit of that, and investors, in a market often characterised by instant gratification, may be starting to take note.

"The market is starting to learn that this is what Randgold was all about assets that keep producing. Tanzania, we fixed. Lumwana was considered a poor asset. Nevada has been a challenge to get right. Pueblo Viejo has a long tail, and suddenly, you have value. We are getting on top of Turquoise Ridge, which is high grade and low cost but technically challenged, so we need to backfill all the time. Underlying these are high-quality assets," said Bristow.

Bristow said he does not think the $1.6 billion Gold Fields acquisition of Osisko Mining will spur further consolidation. "There are not that many assets out there, and there are six mines for sale from Newmont, which are going to feed the mid-cap to small-cap part of the industry. That is a lot to put into the market and it is going to be interesting whether there is stomach for it," he said.