Barrick Gold (NYSE:GOLD) had a tough year in FY2021, with production down year-over-year due to challenges at Hemlo, a mechanical mill failure at Goldstrike, and having no contribution from Porgera. However, 2022 has started off on the right foot, with the company announcing a more attractive dividend framework, enjoying much higher metals prices, and reporting exceptional reserve replacement. As we close out Q1, the most recent news has strengthened the bull thesis, with the Reko Diq Project getting a second lease on life. Given Barrick’s attractive valuation and an upgrade to its development pipeline, I would view sharp pullbacks as buying opportunities.
Barrick Gold released news last weekend that the company has reached an agreement on a framework to provide for the reconstitution of the Reko Diq project in Pakistan. This project has a long history following the joint acquisition of a 75% interest in the project (Tethyan Copper Company) by Barrick and Antofagasta (OTC:ANFGF) in 2006, translating to a 37.5% interest for each company. The project lies in the western Chagai region of the province of Balochistan in Pakistan, roughly 35 kilometers south of Afghanistan. Let’s look at the project below and what this means for Barrick.
At the time of the 2006 acquisition of Tethyan Copper (company holding 75% interest in Reko Diq), the Reko Diq gold-copper project was home to ~15 billion pounds of copper and 10 million ounces of gold, with an additional ~12 billion pounds of copper and ~12 million ounces of gold in the inferred category. This made it one of the largest porphyry ore deposits globally. However, continued drilling was able to upgrade this resource to ~31.3 billion pounds of copper and ~25.3 million ounces of gold, in addition