The misery only gets worse for Barrick Gold – by Darcy Keith (Globe and Mail – June 26, 2013)

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The misery at Barrick Gold Corp. is only getting worse, with the stock today sinking to its lowest level in more than two decades amid plunging bullion prices and as Credit Suisse backed away from an earlier gutsy recommendation to buy its beaten-down shares.

Analyst Anita Soni downgraded Barrick to “neutral” from “outperform,” and dramatically cut her price target, as Credit Suisse lowered its price forecasts for gold. It now sees bullion averaging $1,452 (U.S.) an ounce in 2013 and $1,390 in 2014, down from earlier forecasts of $1,580 from $1,500, respectively.

But Ms. Soni also made clear it’s not just the gold price that is hurting the outlook on Barrick, but rather a “confluence” of factors that also includes uncertainty over the Pascua-Lama project, high debt levels relative to peers, and potential write-downs. These “in isolation would likely have been weathered, but in combination reduces the risk/reward profile for the company.”

“We are reducing our rating until the company provides clarity on the path for Pascua and for handling asset sales and its financial leverage,” Ms. Soni said. She expects Barrick will provide some clarity on Pascua-Lama, located on the Chilean-Argentian border, before third-quarter results are released in late October. First production at the project has been delayed due to work required to comply with orders from Chile’s environmental regulator.

Due to the lower gold price assumptions, Credit Suisse’s net asset value estimate for Barrick was reduced to $18.40 from $34.50. It lowered its earnings per share forecast for 2013 to $2.61 from $3.24. For next year, it sees earnings of $2.28, down from $2.92.

The rapid decline in gold and copper prices in the second quarter of this year has significantly increased the probability of asset write-downs at Pascua-Lama, as well as at the Jabal Sayid, Lumwana, and Buzwagi projects, she said.

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