Rising inflation has many people if rising inflation makes gold miners such as Barrick Gold (GOLD) value investments. Historically, gold hit its highest prices during times of high inflation.
For example, the highest recorded gold price was $2,505.10 a troy ounce on 1 January 1980, Macrotrends estimates. The US inflation rate rose to 13..55% in 1980, Macrotrends estimates.
The 12-month inflation rate in the United States rose to 8.5% in March 2022, Statista estimates. In contrast, the US 12-month rate was 2.6% in March 2021. The price of gold rose to $1,891.30 per ounce on 29 April 2022, Macrotrends notes.
Is Barrick Gold a Value Investment?
Many people will wonder if rising gold prices will make Barrick Gold (NYSE: GOLD) a value investment.
Barrick Gold Corp (GOLD) was the second-largest gold producer worldwide in 2020 with a production of 4.84 million troy ounces, Elements estimates. Yet Mr. Market paid $22.31 for Barrick on 29 April 2022.
Barrick mined 4.468 million ounces of gold in 2021 and 1.23 million ounces of gold in the fourth quarter of 2021. The Barrick Gold Corp operates over 15 gold mines in eight countries.
How Barrick Gold could cash in on Electric Vehicles
Moreover, Barrick (GOLD) produced 423 million pounds of copper in 2021. I think demand for copper could increase because electric vehicle production is exploding.
To explain, the average battery electric vehicle such as a Tesla Y contains 183 pounds of copper, Copper.org estimates. Companies such as Tesla Motors (NASDAQ: TSLA) plan to produce millions of electric vehicles. Tesla built 305,407 electric vehicles and delivered 310,048 electrics in the first quarter of 2022, insideevs estimates.
Tesla production grew by 69% between first quarter 2021 and first quarter 2022, insideevs estimates. Similarly, Tesla (TSLA) deliveries rose by 68% between the first quarter of 2021 and the first quarter of 2022.
Copper prices rose to a historic high of $4.43 a pound on 28 March 2022, Macrotrends reports. Copper was trading at $4.45 a pound 26 April 2022. Mr. Market paid as little as $2.19 for an ounce of copper on 30 March 2020 just two years ago.
Hence, demand and prices for one of Barrack’s primary products is rising as technology changes. I think copper prices will rise higher as demand for EVs grows.
For example, Ford (F) claims to have 200,000 reservations for purchase of its F-150 Lightning Pickup, Yahoo! Reports. Thus, the F-150 Lightning sold out before production began. Ford’s management hopes to produce 600,000 electric vehicles a year by the end of 2023 and two million EVs annually in four years, CarandDriver notes.
Is Barrick Gold Making Money?
Barrick (GOLD) makes some money. For example, Barrick reported a quarterly gross profit of $1.405 billion on 31 December 2021. The quarterly gross profit rose from $1.244 billion on 31 March 2021.
Barrick reported a quarterly operating income of $1.325 billion on 31 December 2021. The quarterly operating income rose from $1.244 billion on 31 March 2021.
Similarly, Barrick Gold’s quarterly revenues rose from $2.956 billion on 31 March 2021 to $3.31 billion on 31 December 2021. Hence, Barrick is making some more money from its metals.
How Much Cash is Barrick Gold generating?
One question investors need to ask is how much cash can gold producers generate? The financial numbers show Barrack can generate cash.
For example, Barrick reported a $1.302 billion quarterly operating cash flow on 31 March 2021. The quarterly operating cash flow grew to $1.387 billion on 31 December 2021. In contrast, Barrack’s free cash flow fell from $763 million on 31 March 2021 to $718 million on 31 December 2021.
Barrick (GOLD) had $5.28 billion in cash and short-term investments on 31 December 2021. The cash and short-term investments grew from $5.13 billion in June 2021.
What Value Does Barrick Gold Offer?
I think Barrick Gold (GOLD) offers some value. Barrick had $46.89 billion in total assets on 31 December 2021.
I believe Mr. Market underpaid for Barrick at $22.31 on 29 April 2022. So yes, I consider Barrick a value investment because it is a cash-rich company with a low-stock price.
Barrick is a reliable dividend stock that paid a 10₵ quarterly dividend on 15 March 2022. Barrick’s quarterly dividend fell from 14.1₵ on 30 November 2021.
If you want to make money from gold, Barrick Gold is worth examining. I think Barrick Gold is a value investment in today’s world, but I think it is a company that is incapable of fast growth. If you want a cheap value investment GOLD is worth examining.
Originally published at https://marketmadhouse.com on April 29, 2022.