Please ensure Javascript is enabled for purposes of website accessibility

Why Barrick Gold Corporation Stock Advanced 37.9% in February

By Reuben Gregg Brewer - Mar 14, 2016 at 11:25AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Barrick Gold has benefited along with the rest of the mining industry from this trend.

Image source: Barrick Gold.

What: Barrick Gold Corporation's (GOLD 1.24%) shares rose nearly 38% in February. That's pretty impressive, but not nearly as much as some of its fellow miners. Here's why.

So what: The reason behind Barrick's stock advance is pretty simple: Precious-metals prices have started to advance after a long and painful downturn. Weak global growth and political uncertainty have helped push investors toward safe-haven assets. Gold, Barrick's main commodity, fits that bill.

 But here's the interesting thing: Some precious-metals companies saw their shares advance more than 75%, including Coeur Mining (CDE 4.78%). Why was Barrick's move so "modest" in comparison?

A big piece of the answer comes down to costs. Barrick's all-in sustaining costs for gold are around $900 an ounce. That's comfortably below where the barbarous metal was trading before the recent gold rally. But Coeur's costs, which it expresses in silver equivalent ounces (combining its silver and gold costs into one number), were above the price of silver before silver headed higher last month. In fact, the company's $15.50 all-in costs per silver equivalent ounce are still above where silver has been trading recently.

This makes a big difference, because Barrick is benefiting from higher precious-metals prices, but it isn't the difference between the company surviving or not. Coeur, on the other hand, is more of a marginal miner and needs higher prices for its business model to work. Investors are aware of this fact and simply got more excited about the upside benefit for Coeur of higher prices as compared with Barrick. (That said, investors were far more pessimistic about Coeur's prospects while gold was falling, too.)

Now what: Barrick Gold is probably a good choice for more conservative investors interested in the gold space. Believe it or not, its relatively subdued advance is evidence. While it definitely lacks the upside potential of more marginal players, it's likely to be a survivor even if gold prices head back down and stay there for a while. You can't say the same thing about the marginal miners.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Barrick Gold Corporation Stock Quote
Barrick Gold Corporation
$18.78 (1.24%) $0.23
Coeur Mining, Inc. Stock Quote
Coeur Mining, Inc.
$3.51 (4.78%) $0.16

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/27/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.