Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Following yesterday’s announcement of leadership changes in Barrick Gold (TSX:ABX), S&P Capital IQ said the firm keeps its strong buy recommendation on the company’s shares.
The world’s largest gold miner surprised the market yesterday after announcing it replaced Aaron Regent as president and chief executive officer with Jamie Sokalsky, who was the company’s chief financial officer.
The Toronto-based miner also revealed director John L. Thornton has been appointed co-chairman with Barrick’s founder Peter Munk.
What was not divulged were the details about why the Toronto-based company decided to make this move, though Munk did hint at the weak share price.
The management reshuffle wasn’t seen as a threat by analysts at New York-based S&P Capital IQ.
“We don’t believe this changes any of the fundamentals and note that the announcement didn’t contain any change in production or cost guidance,” said equity analyst Leo Larkin.
“On that basis, we continue to estimate EPS of $5.14 for ’12 and $5.93 for ’13 and maintain our 12-month target price of $67. We think ABX’s valuation is compelling, trading at about 7.9X our ’12 estimate,” added Larkin.
Last month, Barrick increased its dividend by 33%, in a move that was welcome by investors, who have been calling for a bigger piece of the pie for years. Barrick thought the decision would help push up share prices that have underperformed increases in the gold price over the last decade.
