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Why Barrick Gold Stock Fell 11% in September

By Reuben Gregg Brewer - Updated Oct 9, 2019 at 9:59AM

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The shares of the giant miner had more than one headwind to deal with.

What happened

The shares of Barrick Gold (GOLD -0.79%), one of the largest gold miners in the world, fell a little more than 11% in September, according to data provided by S&P Global Market Intelligence. That was well more than peer Newmont Goldcorp, which only dropped 5%. Both companies had one headwind in common, but Barrick was working on something else that wasn't really much of a help during the month.

Gold Miner holding a gold nugget

Image source: Getty Images.

So what

The common problem that Barrick and Newmont faced last month was a drop in the spot price of gold. As miners, these two companies don't control the value of the product they sell. Copper, which is another key commodity for Barrick, was also weak. So, some of Barrick's price drop is inherently related to the prices of the commodities it sells. But the difference in the stock performance between Barrick and Newmont suggests there's more going on, since Newmont's decline was roughly in line with the drop in gold.   

What else was going on? The second notable headwind for Barrick was the finalization of the acquisition of miner Acacia. This deal was originally agreed to in July. While the merger itself is relatively old news, the deal was completed in September -- requiring the issuance of 24.8 million new Barrick shares.

Besides the new shares, there's some heavy lifting to do now that Acacia is part of Barrick if the company wants to make the deal worthwhile. That includes cutting costs and opening up a closed mine, among other things. The benefits of the deal are likely to show up over time, but right now there's more to be done. Add in the new shares, and it's understandable that investors were a little leery about Barrick's future last month. 

Now what

Although the merger news and gold prices were notable issues in September, neither was really out of the ordinary for Barrick. So investors shouldn't read too much into this single month. That said, it is worth keeping an eye on efforts to integrate Acacia. That's particularly true since the company has been aggressively reworking its business over the past few years (including forming a joint venture with Newmont), leaving it with a lot on its plate today. Strong execution will be key through this volatile period.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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