Barrick Beats Guidance Though Cuts Outlook
Contributed Opinion

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Barrick Gold Corp. (ABX:TSX; GOLD:NYSE) had a strong fourth quarter, exceeding production and earnings estimates, allowing it to meet its 2024 full-year guidance. Both gold and copper production increased by 15% and 33%, respectively, from the third quarter. However, the suspension of first sales and then mining at its Loulo-Gounkoto mine in Mali meant that the fourth-quarter sales were lower and 2025 guidance was reduced. Costs were within guidance and most analysts' expectations, and they were the lowest quarter for the year.

Barrick is now guiding to gold production for 2025 of between 3.15 and 3.5 million ounces, slightly below previous guidance, though in-line once Loulo is removed. Once again, it expects production to be lowest in the first quarter and rise throughout the year. Gold cash costs are expected to be up slightly, with a range of $1,050 to $1,130 per ounce, while copper costs are expected to be lower on higher volumes. The somewhat cautious guidance for 2025 suggests that perhaps CEO Mark Bristow, in tempering his usual optimism, has learned that meeting more modest guidance than missing optimistic estimates is received better by the market.

Company Optimistic on Mine Restart, Despite Pause in Talks

All in all, both the 2024 results and the guidance for this year are positive, particularly given the removal of Loulo. CEO Mark Bristow, however, said he was optimistic about a potential restart of the mine, though talks with the government are currently suspended, and there is clearly a good deal of frustration on Barrick's side. The company made a $84 million payment in the fourth quarter under the impression that they had secured an agreement, but things went downhill rapidly. The mine is on care and maintenance and staff are still being compensated, meaning the mine could ramp up again quickly on any agreement.

Operational highlights from the results call included the increased potential for Reko Diq, the new copper mine in Pakistan, which Bristow says gets "more exciting every day," following the completion of a feasibility study on the first phase. Bristow also said the company had identified new targets in Nevada, which accounts for nearly half of its total gold production. Barrick ended the year with a net debt of $650 billion after repurchasing $354 million of shares in the last quarter, for a total of almost half a billion for the year.

Company Might Move to the US

Separately, Bristow said the company was considering redomiciling to the United States (from Canada) to gain greater access to a more efficient market. A U.S. domicile would put the company in the S&P 500, meaning automatic fund buying.

A move would be complicated, however, unless Barrick were to merge with a U.S. company. The shares have a lot of potential on an asset basis, while the high copper exposure also provides upside.

We are holding

Agnico Beats Again, on Record Output

Agnico Eagle Mines Ltd. (AEM:TSX; AEM:NYSE) met guidance in its fourth quarter and full year, as production rose to record levels, beating the midpoint of expectations, while costs were slightly higher. It slightly reduced guidance for 2025 production, however, while costs are expected to increase by around 3%.

Agnico's costs, however, remain the lowest of its peers, with 2024 cash costs of just $903 per ounce, and AISC $1,239. Under its 3-year guidance, Agnico is expecting a more positive 2027. It increased year-end reserves, largely due to the inclusion of new deposits converted from resources. Also, the company reduced debt by $1.3 billion during the year after returning close to $1 billion to shareholders in dividends and share buybacks, adding it was "on our way to potentially no net debt very shortly."

Agnico once again demonstrated why it is the best of the large miners, with consistent performance in low-risk jurisdictions. Although the stock is trading at relatively low multiples relative to its historical valuations, we are holding, given the strong recent performance and the uncertain near-term gold outlook.

It remains a core holding for us.

Strong Quarter for Royal Gold

Royal Gold Inc. (RGLD:NASDAQ; RGL:TSX) had a strong fourth quarter across all metrics, allowing it to meet its full-year guidance. Stream sales had been pre-released.

However, the company said it expected its first-quarter production to be a little lower; Royal does not issue its full-year guidance until March.

The company ended the year with $195 million in cash, and an undrawn $1 billion credit facility, and announced its 24th consecutive annual dividend increase. Royal is one of our favorite royalty companies, and has arguably higher leverage than the other large peers.

Given the stock's performance this year and the unclear gold outlook, we are holding for now.

Multiple Challenges for Nestlé as Growth Slows

Nestle SA (NESN:VX; NSRGY:OTC) saw results broadly down on the prior year, though in line with the company's reduced guidance following the unexpected change in CEO in September. Organic growth increased but by the smallest amount in a quarter century.

Free cash flow also increased, even on lower sales volume. The company increased its annual dividend once again, with the yield of 3.7% the higher yield this century. Nestlé is seeking to cut costs amid higher commodity prices, and reverse the decline in sales volume amid changing consumer tastes.

Though the valuation is reasonable after a slide in the stock price over the past three years, the challenges the company and its new CEO face are formidable.

The stock price jumped after the earnings were released, and we would hold here.

Gladstone Steps up Investments as Earnings Dip

Gladstone Investment Corp. (GAIN: NASDAQ) reported quarterly earnings down from the year-ago quarter (23 cents vs 26), broadly as expected. This was largely due to the decrease in interest rates in the economy as well as a large incentive fee paid to the advisor after a large capital gain in the quarter. Total assets increased, however, as it made new loans and acquisitions for its largest-ever investment quarter. It expects to continue to make new investments in the period ahead, given a strong M&A environment.

The balance sheet remains strong, and there was no change in companies on non-accrual. The quarterly earnings were shy of the dividend, though annual earnings covered the payout. We are not concerned about this quarterly miss for now since Gladstone has increased its investments and has some outstanding fees it expects. It also has spillover income equivalent to 55 cents per share, so the dividend is not at risk in the near term. But the level of rates in the economy and their impact on Gladstone's earnings is something we shall be monitoring.

Strong Long-Term Returns From Income and Gains

We are also monitoring the company's ongoing share issuance under its ATM program, though this is modest at present. If the premium over NAV, currently 5%, widens, then the ATM use could increase.

The current yield on the regular monthly dividend is just under 7%, though Gladstone makes special payments from net capital gains, and these can be significant given the company's large weighting in equity relative to other Business Development Companies. In the last quarter, for example, it had a bonus cash distribution of 70 cents, equivalent to almost nine regular monthly payments. These vary in both amounts and timing; the previous one was in December 2023 at 88 cents. Though unpredictable and variable, they are significant in boosting long-term returns.

We are holding for now.

TOP BUYS this week: We continue to stand aside from buying gold stocks this week, though Lara Exploration Ltd. (LRA:TSX.V) and Fox River Resources Corp. (FOX:CNSX) can continue to be purchased.