Barrick's Strategic Move: Selling Ivory Coast Mine Amid Bullion Boom

In the dynamic world of investing, preferences vary greatly. Some investors are drawn to the thrill of options and risky stocks, while others, like myself, favor "boring but lucrative" investments. Barrick Gold Corporation's recent decision to seek a buyer for its Ivory Coast mine, Tongon, amidst soaring bullion prices, is a strategic move that aligns with this investment philosophy.

Barrick, the world's second-largest gold producer, has been rebuilding its business under CEO Mark Bristow. The company has paid down debt, exercised restraint in dealmaking, and diversified into copper. However, it has faced challenges in matching production to cost targets, particularly in Nevada and Africa. The decision to sell the Tongon mine is a step towards focusing on core assets and optimizing costs.

The Tongon mine, initially planned to close in 2020 due to depleting reserves, has seen its life extended until 2030 following new discoveries. These discoveries have boosted output expectations, with production set to rise above 200,000 ounces of gold in 2023 and continue to increase until at least 2026. Divesting the mine could provide Barrick with a substantial cash infusion, allowing it to pay down debt, invest in other projects, or return capital to shareholders.

Barrick's operational costs have risen, particularly in Nevada and Africa, while peers like Newmont and Agnico Eagle have performed better. The company has missed production targets for 11 consecutive quarters. However, Barrick's diverse portfolio, including productive mines in the US and Africa, and expansion into copper, offers potential for future growth.

Geopolitical risks and political instability in Africa have also impacted Barrick's underperformance. In Mali, the military government threatened to withdraw Barrick's Loulo mine concession, causing investor concern. In the Dominican Republic, an extension to Barrick's Pueblo Viejo mine took longer than expected to complete. These issues, coupled with higher operational costs and missed production targets, have led investors to turn sour on the world's second-biggest gold producer.



Despite these challenges, Barrick's strategic move to sell the Tongon mine is a step towards focusing on core assets and optimizing costs. This move could enhance Barrick's overall portfolio performance and stability, appealing to investors seeking 'boring but lucrative' investments.

In conclusion, Barrick's decision to seek a buyer for its Ivory Coast mine, amid soaring bullion prices, is a strategic move that aligns with the investment philosophy of favoring stable and predictable investments. By focusing on core assets and optimizing costs, Barrick is positioning itself to deliver consistent returns to shareholders, even in the face of geopolitical risks and operational challenges.