Why This Top TSX Gold Stock Could Be Under Near-Term Pressure

Here’s why Barrick Gold (TSX:ABX)(NYSE:GOLD) remains a top gold pick for long-term investors in this space today.

| More on:

Barrick Gold (TSX:ABX)(NYSE:GOLD) has been one of my top picks in the gold mining space for quite some time.

The fact that Warren Buffett, one of the best investors of all time, showed interest in this stock certainly makes it an option worth considering for investors. Nevertheless, there’s some concern with this stock in the near term. Let’s dive into the details.

Profit-sharing deal with PNG is not bullish for Barrick Gold

Barrick Gold recently made an announcement regarding an agreement with the Papua New Guinea (PNG) government for the Porgera gold mine. Under this new agreement, PNG’s ownership will increase to 51%, while the percentage ownership of Barrick Gold and the Zijin Mining Group Ltd will be reduced to 49%. Moreover, the Toronto-based gold miner will bear the entire reopening cost of the site.

This mine has been operational for the past two decades, and Barrick Gold had bought a stake in 2006 after it completed the acquisition of another Canada-based company, Place Domer Inc. However, recent stoppages have provided downside for Barrick stock in the past. The company was looking to reopen this mine as soon as possible, and it appears the company ultimately capitulated on this deal.

Yes, only 5% of Barrick’s annual production comes from Porgera. However, this mine has low operating costs and is a high-grade asset. The all-in sustaining cost of gold for this mine is only $985 per ounce. Indeed, considering where gold prices are today, this mine generates a tonne of cash flow for Barrick. Therefore, investors may be rightly pessimistic about this rather onerous agreement right now.

Barrick remains an excellent pick for the long term

That said, I think Barrick is a great long-term holding for investors.

Over the years, Barrick Gold has been successful in building a relatively big moat in the form of some world-class reserves and mines. Indeed, this is a key contributing factor to investors like Warren Buffett stepping in to invest in Barrick in the past.

The company’s operations are among the most diverse globally. Barrick operates in more than 10 countries and has some of the best operating metrics among its peers.

Although gold prices have lagged where I think they should be right now, there’s optimism that gold can once again regain its lustre among investors looking for a solid hedge. I see the recent Papua New Guinea news as short term in nature and would invite investors to look at the bigger picture with this stock.

And on this basis, Barrick looks cheap today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Chris MacDonald has no position in any of the stocks mentioned.

More on Metals and Mining Stocks

construction workers talk on the job site
Metals and Mining Stocks

2 No-Brainer Mining Stocks to Buy With $200 Right Now

You can buy these top Canadian mining stocks with just a $200 investment right now to start your long-term wealth…

Read more »

Concept of multiple streams of income
Stocks for Beginners

Lock Up This 9.2% Dividend Yield From a Top Royalty Stock

Royalty stocks have a strong advantage when it comes to creating passive income for investors. But this one has the…

Read more »

Safety helmets and gloves hang from a rack on a mining site.
Metals and Mining Stocks

Is First Quantum Minerals Stock a Good Buy Right Now?

First Quantum is a TSX stock that trades 61% below all-time highs. However, the mining stock still trades at a…

Read more »

nugget gold
Metals and Mining Stocks

The Best Gold Stock to Invest $1,000 in Right Now

Here are two of the best Canadian gold stocks that can yield some eye-popping returns in the long run.

Read more »

nugget gold
Stocks for Beginners

The Ultimate Mining Stock to Buy With $1,000 Right Now

This mining stock just saw a drop, but don't let that keep you from diving in. This miner is due…

Read more »

A plant grows from coins.
Metals and Mining Stocks

Canadian Mining Stocks: Buy, Sell, or Hold?

Explore 2025’s top Canadian mining stocks – gold, uranium, and base metals offer big potential in a dynamic, commodity-driven market.

Read more »

farmer holds box of leafy greens
Metals and Mining Stocks

3 Reasons to Buy Nutrien Stock Like There’s No Tomorrow

Nutrien stock has lost 34% of its value just this year alone and looks incredibly cheap today. Yet, secular trends…

Read more »

Canada national flag waving in wind on clear day
Tech Stocks

Trump Trade: Canadian Stocks to Watch

With Trump returning to the presidency, there are some sectors that could boom in Canada, and others to watch. But…

Read more »