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Barrick Profit Margins Soar in Q3 2020

gold mining

Barrick, it seems, is becoming more profitable by the day. With gold above $1,900 for much of the past quarter, Barrick is benefiting from higher metal prices. Barrick’s Q3 US$3.54 billion in revenue, up from US$2.68 billion, surprised even the most bullish on the street. The gold market remains one of the best performing sectors in recent quarters.

Barrick Posts Massive US$882-million Q3 2020 Profit

Barrick’s Q3 results came out on a day that saw gold soar more than $50 bucks an ounce. What I find most interesting about the company’s latest earnings report is the rate of increase. Barrick is growing its profit faster than Apple and Microsoft. While gold is up big in 2020, if it continues climbing, Barrick should continue to beat estimates. Consider this from OttawaMatters.com:

“On an adjusted basis, Barrick says it earned US$726 million or 41 cents per share in its third quarter, up from an adjusted profit of US$264 million or 15 cents per share in the same quarter last year.”

The company essentially more than doubled its earnings from the same quarter last year. With Barrick’s costs remaining stable, it has incredible leverage to a rising gold price.

Apple, for instance, posted quarterly revenue of $59.7 billion, an increase of 11 percent from the year-ago quarter, and quarterly earnings per diluted share of $2.58, up 18 percent.”

Now, while Barrick’s Q3 US$3.54 billion in revenue is but a fraction of Apple’s US$59.7 billion, what I find curious is their respective market caps.

Barrick vs. Apple: Mining vs. Tech Valuations

Barrick was up over 7% Thursday to a market cap of about $52 billion. While Apple’s market cap is above $2 trillion, sitting at roughly $2.02 trillion Thursday afternoon – almost 40 times that of Barrick Gold.

While Apple’s market cap is almost 40 times than the world’s largest gold miner, Apple’s Q3 revenue ($59.7 billion) was only about 17 times that of Barrick’s ($3.54 billion).

While Barrick may never get the fanfare or valuations Apple does, I would be shocked not to see the revenue to market cap ratios narrow between these two industry leaders.

Despite the trend to go digital, which benefits the tech behemoth, if the global recession we are in continues, Apple and Microsoft’s revenues may come under pressure at some point. While central banks print trillions to stabilize the economy, gold appears positioned for high prices – the metal is up over $50 today alone.

Barrick’s leverage to the price of gold is a warning for the sector. According to an OttawaMatters.com report,

“Rather than the operations side, the revenue came from higher realized metal prices, National Bank Financial analyst Mike Parkin said in a note to clients, as well as significantly lower taxes than expected.”

While central banks print money at will, Barrick produces the oldest and often most trusted form of money – gold. If Barrick’s Q3 2020 results are a sign of things to come, investors like Warren Buffett won’t be the only ones gobbling up shares in the world’s largest gold company.

 


Alexander Smith

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