Barrick Mining: Undervalued?
Barrick Mining is increasingly back on investors’ radar. The world’s third-largest Western gold producer has been drawing growing attention on social media, with a clear investment thesis emerging: the stock may be undervalued. At least, that’s what more and more investors seem to believe.
A key point often cited is the high cash flow, which stood at USD 1.351 billion in the first half of the year alone. In the current second half of the year, that figure could rise even further, as Barrick concentrated a significant amount of capex in the second quarter. The high gold price also enables extremely high profit margins—unprecedented in the industry’s history. Finally, analysts view the stock as undervalued compared to its peer group, particularly on a price-to-cash-flow basis. The strategic shift toward more copper in its portfolio allows Barrick to benefit from the high prices for the red metal. The copper price hit a new all-time high in North America just this week.
However, one thing is also clear: more than 80% of EBITDA still comes from the gold business. And that brings us to the risks. Compared to competitors such as Agnico Eagle or Newmont, Barrick likely faces the highest geopolitical risk, for example, with mines and major projects in Mali, the Democratic Republic of the Congo and Pakistan. In addition, the company is feeling the impact of rising operating costs due to global inflation quite significantly. Some producers, such as B2Gold, are better able to absorb these costs.
Overall, however, we see the planned spin-off and IPO of Barrick’s North American gold business as the strongest investment case for Barrick bulls. Some analysts see a valuation of more than USD 50 billion for the new entity. Barrick as a whole is currently valued at just under USD 70 billion.
Kobo Resources: Strong Drilling Results
With the Kossou project, Kobo Resources appears to have indeed struck gold—in the truest sense of the word. Just earlier this September, the Canadian company provided an update on its current drilling operations. Management’s primary focus is on testing the boundaries of the already known mineralization. The company has now scored successes in the north of Kossou with several high-grade drill holes. In this so-called Road Cut Zone, the team encountered, among other things, 5 m at 4.55 g/t gold, 6 m at 2.30 g/t gold, and a one-metre interval at a staggering 68.6 g/t gold.
To date, the company has completed 51,295 m of drilling at Kossou and is steadily working toward its first resource estimate, which CEO Edward Gosselin says is expected in early 2027. To that end, both drilling programs are currently running in parallel. In addition to expanding operations beyond the boundaries of the known mineralization, Gosselin also plans to drill to depths of 200 m and beyond.
The market has not yet recognized the stock’s potential, as Kobo Resources stands out not only for its high gold grades but also for its strong infrastructure. The Kossou gold project is located in Côte d’Ivoire, which the Fraser Institute ranks as the best mining location in West Africa. The project lies about 20 km northwest of the capital, Yamoussoukro, and near the Kossou Dam. This ensures access to labour, road infrastructure, and energy and water supplies.
What is exciting is that there are already producing gold mines in the vicinity, such as Perseus Mining’s Yaouré Mine. Analysts assume Perseus needs ore here because the facility will not operate at full capacity long term. It is located less than 10 km from Kossou. However, this does not necessarily mean that the Australians will be the sure bet to acquire Kobo Resources. Other Canadian and Chinese companies are also active in Côte d’Ivoire.
Established investors appear to share this view. Chang Ying No. 1 Fund holds just under 10% of the company’s shares, while Swiss fund Gold2000 is also among the shareholders. The strongest investment argument, however, may be management’s stake, which stands at nearly half of the company. With a market capitalization of just CAD 31 million, Kobo Resources remains one of the true small-cap gems in the gold sector. If the resource estimate proves convincing, the share price is likely to rise significantly.
Lundin Gold: The Cash Cow Delivers
Gold companies with just a single mine are few and far between. Lundin Gold is likely the prime example of this in the Western world. The Canadian company operates the Fruta del Norte mine in Ecuador. This underground complex is among the highest-grade deposits ever discovered. The processing plant processes over 5,500 metric tons of ore per day and produces approximately 475,000 to 525,000 ounces of gold per year. With an extremely high ore grade of 8.4 g/t gold, production in the first half of the year totalled nearly 239,000 ounces. By comparison, S&P Global estimates that the average gold mine worldwide yields only 1 g/t of gold. In monetary terms, Fruta del Norte generated revenues of more than USD 1 billion and free cash flow of USD 445 million in the first half of the year alone.
What makes this unique is that Lundin Gold has no intention of diversifying. Its expansion strategy is entirely focused on the existing mine. The deposit is proving to be so large that gold mining here is likely to continue for decades to come. With FDN East, Bonza Sur, and Trancaloma, the company is currently exploring and developing three new mineralization zones simultaneously.
However, anyone considering an investment in Lundin Gold should also consider Ecuador’s country risk. In recent years, a lack of regulations protecting the indigenous population, strict environmental rulings by the Constitutional Court, and bureaucratic hurdles have deterred many mining companies. Production at Fruta del Norte, however, was not affected by these issues. Through a reform program, the government is attempting to reignite investor interest in the country.
Lundin Gold currently has a market capitalization of approximately CAD 22 billion. The stock has tracked the gold price quite closely, particularly this year. With these expansion initiatives, the Canadian company could perform strongly again in the future.
With Lundin Gold, investors are betting on a highly profitable company that, however, carries significant country risk. Kobo Resources is consistently reporting drilling successes at its gold project, yet the stock remains largely overlooked by investors. Barrick is always a double-edged sword: high risk, but also plenty of opportunities.
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