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Analysts cut outlook for Barrick shares as work suspended on big Pascua-Lama mine

These are stories Report on Business is following  Thursday, April 11, 2013.

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Analysts cut Barrick outlook
Analysts are cutting their outlook for Barrick Gold Corp. shares after the mining giant suspended work on its huge gold and silver project in Chile.

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As The Globe and Mail's Pav Jordan reports, Barrick announced late yesterday it was putting construction of the Pascua-Lama project on hold in the wake of a court order related to allegations of pollution of groundwater and rivers in a desert area where water is at a premium.

No allegations have been proven, but the appeals court decision will set back an $8-billion mine that's already over budget and behind the original schedule.

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.

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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.

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.

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"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."

Markets climb
Global markets are on the rise again this morning as a reading on claims for jobless benefits in the United States were better than expected.

That's a key reading given last Friday's report showing tepid job creation in March.

Tokyo's Nikkei climbed by about 2 per cent, and Hong Kong's Hang Seng 0.3 per cent.

In Europe, London's FTSE 100, Germany's DAX and the Paris CAC 40 were up by between 0.1 per cent and 0.5 per cent by about 8:30 a.m. ET.

Dow Jones industrial average and S&P 500 futures were little changed.

"Currency markets are receiving most of the attention leading into the NA open, as equities are only vaguely higher, bond yields are mixed, commodities are flat; and the [U.S. dollar] is notably weak," said chief currency strategist Camilla Sutton of Bank of Nova Scotia.

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About the Author
Report on Business News Editor

Michael Babad is a Report on Business editor and co-author of three business books. He has been with Report on Business for several years, and has also been a reporter and editor at The Toronto Star, The Financial Post and United Press International. His articles have appeared in major newspapers around the world. More

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