Barrick shrugs downgrade, but foray into copper weighs on prospects

Barrick Gold Corp. closed down slightly and outperformed a weak broader market on Tuesday despite a downgrade from CIBC World Markets, which is advising investors to remain cautious as the miner diversifies into copper.

Barrick is up some 12% this summer, tracking bullion’s spectacular rise, but investors have not welcomed its move into base metals. In April it outbid a Chinese company for Equinox in a $7.7 billion deal, its first real foray outside gold. The global growth outlook has clouded considerably since then and copper – a good indicator of economic activity – is trading at 9-month lows.

The Globe and Mail quotes the CIBC research note: “We believe that gold stocks need broad appeal in order to outperform. With a growth profile in bullion that is a few years off, we think that ABX will not garner enough investor interest to have it as an overweight position.”

At the time of the Equinox deal Reuters quoted one analyst as saying: “Perhaps copper is the new gold. The long-term prospects for base metals look good.” On Tuesday the red metal hit $8,446.75 a tonne, close to its lowest since early December last year.

Barrick boasts the globe’s largest unhedged gold output, gold reserves and market capitalization and has 26 operating mines (including African Barrick Gold) and three projects under construction.

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