Boston, MA 11/19/2013 (wallstreetpr) – Barrick Gold Corporation (USA) (NYSE:ABX) is facing multiple issues and the trend in the share prices reflect that.
- Falling Gold Demand/ Low prices: Gold demand and the prices have been fluctuating very widely since last two years. They are down from the historic highs. Demand from China and India, major consumers of gold, is subdued, in fact the Indian government has taken several steps to curb excessive demand for gold. The NYSE Arca Gold Bug index has lost 50% in the last two years.
- Bad Investments: Barrick Gold Corporation (USA) (NYSE:ABX) was not satisfied being the world’s largest gold and least-cost producer. The Founder and Co-Chairman, Peter Munk, desired to diversify and become a major mixed commodity miner. The plan failed due to a variety of reasons, but mainly on account of bad investment decisions. Questions were being raised for a desperate gamble in taking over Equinox in 2011 for $7 billion. A project in Pakistan got entangled in the country’s complex military-political issues.
- Even in Gold mining, increasing cost of production among some reasons has played a spoilsport. The company was forced to stop work at its Pascua-Lama mine after spending a good amount in development work. The company could not make much headway between the two governments involved; the mine is on the Argentine-Chile border. It has already sold three mines in Australia and has identified 10 mines which contribute to high production costs. The company is also selling its co-owned Marigold mine in Nevada. Barrick Gold Corporation (USA) (NYSE:ABX) owns one-third of the mine, the rest being owned by Goldcorp.
Investors are increasingly getting worried about issues of corporate governance at the company. They have also questioned Munk’s style of functioning. Munk will be leaving the board next year. Issues about executive pay packages have also been raised after it was announced that Munck’s successor; co-chairman John Thornton, was to get $11.9 million as bonus.
Barrick Gold Corporation (USA) (NYSE:ABX)’s difficulties need a very long-term perspective and it may be beyond the capacity of the ‘old guard’ at the helms of the company.
