JPMorgan’s John Bridges digs into Barrick’s shift away from a production-driven business model to one guided by cash flow. He writes:
Barrick is changing corporate strategy from growth to cashflow. The 8moz production target is gone and in comes the mantra that “returns drive production”. A casualty of the reduced optimism for metal prices and the aggressive growth strategy that contributed to cost overruns was the book value of thePascua Lama (PL) project, and some other assets. We feel the company is doing the best it can to re-focus on cashflows. The company has wisely ended the “drive” to reach 8moz pa but it is still advancing PL in part because “the decision to stop, or suspend, is much different from the decision to start construction”. Barrick’s Goldrush project inNevada is illustrative of the new paradigm, where instead of a super pit a higher cashflow underground model is being investigated for this deposit.
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