By Ben Levisohn
At the height of the cold war in 1983, ABC ran a TV movie called the Day After, a fictional portrait of nuclear war between the U.S. and the Soviet Union.
Barrick Gold (ABX) resorted to its own nuclear option yesterday, when it reported an $8.6 billion write-down and cut its dividend by 75%. Still, the stock reacted better than many would have thought, as Barrick’s shares gained early and finished down just 0.9%, largely because there wasn’t much that was shocking in the release.
After another day to consider, investors are pushing Barrick’s shares higher again. Its stock has gained 1.7% to $17.10 today at 11:08 a.m.
Sterne Agee’s Michael Dudas and Satyadeep Jain are impressed with the way the company is “[navigating lower than anticipated gold prices.” They write:
The company aims to reduce the percentage of mines in portfolio with all-in costs above $1,000/oz. The four consistent outperforms (Goldstrike, Cortez, Lagunas Norte and Veladero) and new Pueblo Viejo comprise the core mines that contribute to almost 60% of total company production at all-in sustaining costs of just $650-$700/oz. Barrick Management aims to maximize cash flow from mines with all-in sustaining costs of greater than $1,000/oz by optimizing mine plans or defer/close/sell some of these assets.
Cowen’s Adam Graf and Misha Levental consider the downside of cost reductions: