Stephen Walker, chief of global mining research at RBC Dominion Securities, cut his price target on Barrick shares to $32 (U.S.) from $37, still rating the company at “sector perform.” Anita Soni of Credit Suisse trimmed hers to $38 from $40, holding the rating at “outperform.”
“We believe Barrick has the ability to generate strong free cash flow over the next five years which we expect would be used to fund its large capital expenditure program ($6-billion in 2013 and $4.6-billion estimated in 2014,” Mr. Walker said in a research note today.
“In the near-term, we believe Barrick’s ability to increase its earnings payout ratio from the current 18 per cent (80 cents/share) is limited given its capital spending commitments, although free cash flow could rebound following completion of the Pascua-Lama project, currently estimated in early 2015.”
Barrick said it is “working to address environmental and other regulatory requirements to the satisfaction of Chilean authorities,” though construction on the Argentina side of the project continues.
That’s where the “critical infrastructure” is based, it said, adding it’s too soon to peg any impact of the court decision.
Barrick stock tumbled 8.6 per cent yesterday on news of the injunction.
“Barrick underperformed its peers by 5 per cent today and 15 per cent year-to-date, which is reflected in our revised [target price],” Ms. Soni said of yesterday’s market action.
“We continue to recommend ABX on a 12-month timeframe for re-rating as it continues to resolve the issues which weight on the stock,” she added, referring to Barrick by its stock symbol and citing issues two other issues, as well.
- Barrick’s woes in Chile deepen as Pascua-Lama is suspended
- Tim Kiladze's Streetwise (for subscribers): Cost overruns plague Iamgold
Auto makers recall millions of vehicles
Japanese auto makers are recalling some 3 million vehicles, some in Canada, because of a problem with airbags.
The troubles for Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co. relate to the airbags on the passenger side of the vehicles, and could spread to other car makers as the supplier, Japan’s Takata Corp., has other customers.
No injuries have been cited, but the inflator on the bags are at threat of bursting.
“It is possible that the passenger front airbag inflators in affected vehicles may deploy with too much pressure, which may cause the inflator casing to rupture and could result in injury,” Honda said in a statement as it recalled more than 100,000 vehicles in Canada.
“Honda is aware of one crash in which a passenger front airbag deployed with too much pressure, causing the casing to rupture. Honda is not aware of any injuries or deaths related to this issue.”
Cyprus woes deepen
The crisis in Cyprus is proving to be far more troublesome, with potentially far wider ramifications than it first appeared.
First, according to a draft plan of the bailout deal, the rescue by international lenders has climbed to €23-billion ($30-billion), up from €17.5-billion, with Cyprus itself having to bear the brunt of the extra burden to escape bankruptcy.
This comes because its economy is expected to plunge further into a tailspin.
“But even the new projections incorporate a considerable degree of optimism over the medium-term prospects,” said Jonathan Loynes of Capital Economics.
“Cyprus could therefore still be forced into further fiscal tightening to meet its borrowing targets, casting more doubt on the sustainability of the bailout,” he said in a report today.
Bank depositors and bondholders are going to take a hit. While deposits of under €100,000 won’t be touched, “even bigger losses on larger deposits may still prompt increased concerns amongst depositors in other euro zone countries with weak banking sectors.”
The fallout could spread to the gold market as well, given that among the measures cited in the document, Cyprus would sell its excess gold reserves, worth some €400-million.
That could come to nothing, said Julian Jessop, a colleague of Mr. Loynes at Capital Economics, but there is speculation this could spread. Gold prices tumbled yesterday partly on word of the proposal.