Barrick looks undervalued at CAD 48.07 with fair value closer to CAD 55, as gold’s safe-haven role comes into focus with a looming U.S. shutdown.
Introduction
As investors brace for a likely U.S. government shutdown on October 1, gold is again in the spotlight as a hedge against political and financial instability. Barrick Mining (ABX:CA), one of the world’s largest gold producers, stands out as a direct beneficiary of rising safe-haven demand. With its shares trading at CAD 48.07, the company appears undervalued relative to fair value estimates, offering a potential buffer in volatile weeks ahead.
- Value: Simply Wall St’s model suggests Barrick is ~15% undervalued, assigning a fair value of ~CAD 56 - meaningful upside from today’s levels.
- Future: Analysts expect moderate earnings growth driven by stable gold output and expanding copper exposure, with long-term upside if gold prices rise further under a “Great Unwinding” scenario of fiscal stress and geopolitical tension.
- Past: Barrick has shown resilience across cycles, though past earnings have been sensitive to commodity prices. Management has worked to reduce volatility by improving cost discipline and diversifying its resource base.
- Health: The balance sheet remains strong, with relatively low net debt and disciplined capital allocation. This gives Barrick the flexibility to weather downturns and invest during periods of strength.
- Dividend: The current dividend yield sits near 2.5%, backed by a sustainable payout ratio. It’s not high compared to other miners, but it reflects management’s focus on maintaining balance sheet flexibility.
Investment Thesis
At CAD 48.07, Barrick Mining trades below a reasonable fair value of ~CAD 56. With safe-haven demand for gold likely to strengthen if the U.S. shutdown drags on, the company offers investors both defensive exposure and upside potential. Barrick looks compelling as a hedge against macro and political uncertainty.
Final Note:
The key risks include a faster-than-expected resolution to U.S. fiscal issues, a sharp drop in gold prices, or cost pressures from energy and labor. Conversely, a prolonged shutdown or escalation of geopolitical tensions could accelerate safe-haven flows into gold, pushing Barrick’s fair value closer to CAD 60. For a broader look at how such macro scenarios affect markets, see Capital in Transition.
Disclosure
I/we have a beneficial long position in ABX:CA through stock ownership. I wrote this article myself and it expresses my own opinions.
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Disclaimer
The user gmalan has a position in TSX:ABX. Simply Wall St has no position in any of the companies mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
