Why analysts are bullish on Barrick Gold Corp (USA)(NYSE: ABX)

Barrick Gold Corp (USA)(NYSE: ABX), the world’s biggest gold producer, is exploring options for its Lagunas Norte mine in Peru, including the sale of part or all of the asset. ABX is working with Toronto-Dominion Bank, may prefer to hold 50 percent of Lagunas Norte, however, it is unclear whether the company wanted to keep control of the open-pit mine as an operator. As per the industry experts, the mine could be worth about $1.4 billion, based on about two times the net asset value ascribed to high-quality gold mines. A Credit Suisse analyst has put the mine’s NAV at $711 million.

Moreover, the mining companies in South America have also reviewed the asset, alongside global miners and private equity firms. Lagunas Norte is one of Barrick’s five core mines, operating more than 4,000 meters above sea level in the Andes Mountains, and has 4.2 million ounces of proven and probable gold reserves at the end of 2016.

Additionally, the US Federal Reserve has increased its benchmark interest rate by 25 basis points to the range of 0.75% to 1%. A rising interest rate environment is generally considered bad for gold, which offers zero-yield and comes with a holding cost, that makes it relatively less attractive. However, the rate hike was widely expected, including a possibility of more than three rate increases for 2017. Therefore after the Fed news, the price of gold for April delivery rose almost 2% to settle at approximately $1,220 an ounce and the shares of Barrick Gold rose 6.8%. In addition, the increase in gold prices also indicates that investors, remain concerned about the global economic and political environment and continue to favor gold as a safe haven asset.

Meanwhile, Barrick Gold Corp has reported the earnings per share of $0.22 for the quarter, beating the analyst consensus estimate of $0.19. The company had posted revenue growth of 3.6 percent to $2320.00 million for the quarter, beating the analyst’s expectations of $2182.76 million.

Barrick Gold Corp is upgraded by RBC Capital Mkts to ” Outperform” from the earlier rating “Sector Perform” according to the research note. The brokerage firm has raised the price target to $ 23 from a previous price target of $19.

Barrick Gold Corp stock has risen 35.56% in a year (source: Google Finance). According to tipranks.com, 7 analysts has covered the stock while recommending a “Moderate Buy”. ABX has an average price target of $21.04, which is a further upside of 11.26%.

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