Barrick’s stock wipes out a decade of returns

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Save for a brief moment in 2008, when it looked like the global financial system could collapse, Barrick Gold Corp.'s stock hasn't seen its current price since May 2003.

As of end of day Friday, the shares traded at $22.94. The last time they were in this territory was May 8, 2003, when they closed at $23.46

Here's the shocking part. The gold price back then? $349 (U.S.) per ounce. Today? $1,500 per ounce.

Just think about that. Gold is now over four times more expensive, yet Barrick's expected value, as deemed by the market, is the same as it was a decade ago.

That said, Barrick looks a lot different today, so a direct comparison can be tricky. Back in 2003, the gold producer hadn't yet bought Placer Dome, nor had it scooped up Equinox Minerals to make a bet on copper.

But it's worth looking at high level snapshots of both production and costs today relative to ten years ago to compare and contrast. The results today are much more encouraging, but investors just don't trust gold producers anymore – particularly those who made billion-dollar blunders.

2003:
To understand just how different the world looked in 2003, simply read this quote Barrick's former chief executive officer, the late Greg Wilkins, from the company's second quarter conference call that year.

"While we had some weakness in the gold price in April, following resolution of the Iraq war, the gold price came back and averaged $347 per ounce for the quarter."

Premature closure of the Iraq War aside, the average gold price came in at $347 per ounce (and Barrick actually recorded a realized price of $352 per ounce.)

Some other important figures:

Quarterly production: 1.5 million ounces

Cash costs: $185 per ounce

Net income per share: 11 cents

Cash on balance sheet: Just shy of $1-billion

Long-term debt: $757-million

2013:
First, a disclaimer: We can't compare the same the quarter from each year, because Barrick last reported fourth-quarter results. And the latest results included a massive $3.8-billion writedown on the Equinox acquisition, so we have to use adjusted figures. However, you'll get the gist of the dislocation.

Realized gold price last quarter: $1,714 per ounce

Quarterly production: 2.0 million ounces

Cash costs: $584 per ounce

Adjusted net earnings per share: $1.11 per share (even after the massive $4-billion share issuance in 2009)

Cash on balance sheet: $2.1-billion

Long-term debt: $12-billion

Of course, there's also copper production to consider. But for simplicity's sake, let's keep that out of the equation for now because capital expenditures on it are baked into net earnings.

There's also the caveat that Barrick now reports all-in cash costs, which is a much more comprehensive measure of its expenses than the out-dated 'cash cost' metric. The updated cost is $972 per ounce.

Even at that all-in price, Barrick theoretically made about $700 per ounce last quarter, way more than back in 2003. But the market doesn't care. Nor do investors care that adjusted net earnings of $3.83-billion or $3.82 per share for all of 2012 were the company's second highest ever.

Today they look at the extremely expensive Equinox acquisition, the net debt of $11.6-billion and the troubled Pascua Lama project that's now in limbo. If only expansion wasn't so pricey.

(Tim Kiladze is a Globe and Mail Reporter.)

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