Barrick Gold assets undervalued as investors overreact to risk exposure, analysts say

Jefferies analysts assert Barrick Gold (ABX, GOLD) is significantly undervalued, maintaining a 'Buy' rating and a US$29 price target, citing a substantial discount to peers (0.61x P/NAV vs. 1.19x) due to market overreaction to perceived geopolitical and project-specific risks. They contend that even if high-risk assets are valued at zero, Barrick remains undervalued, suggesting the market overlooks embedded value in its broader portfolio and potential catalysts like increased buybacks and core asset performance improvements.

Analysis

According to a Jefferies research note, Barrick Gold Corp. is significantly mispriced by the market, presenting a contrarian investment opportunity. The firm highlights a substantial valuation discount, with Barrick trading at a price-to-net-asset-value (P/NAV) of 0.61x and an enterprise value to 2026 EBITDA multiple of 3.3x, compared to senior peer averages of 1.19x and 5.9x, respectively. This discount is attributed to negative investor sentiment driven by concerns over geopolitical risk, particularly exposure to Mali and the Reko Diq project in Pakistan, and a perceived lack of near-term catalysts. Jefferies argues these fears are overstated and that the market is unduly punishing Barrick's entire portfolio. A stress test scenario, which values the Reko Diq and Loulo-Gounkoto assets at zero, shows Barrick's NAV would only decrease by 13% to $29.66 per share, still leaving the stock undervalued relative to peers. The analysis suggests the market is overlooking significant upside from exploration at Fourmile and Goldrush, operational improvements at core assets like Nevada Gold Mines and Pueblo Viejo, and potential for increased buybacks fueled by up to $2 billion from planned asset divestitures.

Key Decisions for Investors

• Investors should assess Barrick Gold as a potential contrarian buy, as its valuation discount to peers appears to excessively penalize for geopolitical risk while overlooking the value of its core assets.
• Monitor for specific catalysts that could trigger a re-rating, including announcements of increased capital returns from asset sales, and sequential production and cost improvements at the Nevada Gold Mines and Pueblo Viejo projects.
• Consider the margin of safety implied by the analyst's stress test, which suggests the stock remains undervalued even if its highest-risk assets in Pakistan and Mali are valued at zero.
• For investors bullish on gold, Barrick may offer alpha potential beyond simple commodity price appreciation if the significant valuation gap relative to its peers narrows towards the historical mean.