February 6, 2012 - Barrick Gold Corporation (ABX-NYSE) engages in the production and sale of gold, as well as related activities, such as exploration and mine development. The company has a portfolio of 25 operating mines and a pipeline of projects located in North America, South America, the Australia Pacific region, and Africa.

Gold has been one of the few safe harbors during these economically troubling times. The price has gone up and up and up and has only recently retreated from its high of $1918. It's trading at $1745 as of this writing. Barrick owns a lot of gold. Proven and probable reserves in 2010 were 139.8 million ounces. That's probably why earnings have gone higher every year since 2004 when they were 19 cents a share.

If 19 anlaysts are correct with their consensus view of $4.87 for earnings in 2011, then it will be another golden year for ABX (used to be American Barrick Gold, hence the A in the symbol). That's well above the $3.32 registered in 2010. For 2012, 24 analysts have a consensus estimate of $5.67. Revenues followed the same pattern, going up every year. For 2011, analysts think sales tallied $14.33 billion, a 31.1% jump from 2010 when they were $10.92 billion. For 2012, consensus is for another 16.1% rise to $16.63 billion.

Here's why this company is so profitable: the cost of bringing up the gold, the cash operating cost in 2011, was $465 an ounce. The average price for selling the gold was $1600 an ounce. For copper, the average operating cost was $1.65. The average selling price was $3.75. Do the math, and it's easy to see that if you sell lots of gold and copper, you make lots of money.

Management is saying that it sees higher operating costs (mostly labor, lower grades of gold, and higher royalties) of about 10% in 2012. It thinks overall gold output will be about the same as 2011. Copper should see more production, however, but operating costs should also rise about 10%. To achieve the higher earnings forecasted for 2012, analysts have assumed a $1700 an ounce price for gold and $3.40 a pound for copper.
ABX recovered between 7.6 and 7.8 million ounces of gold in 2011, a little behind the amount for 2010, about 2.5%. Copper recoveries for 2011 should finish at 455 million pounds, well ahead of the 2010 number. Copper results were helped by the acquisition of Equinox and its ownership of the Lumwama copper mine.

New mines are coming online. Pueblo Viejo, a gold mine in the Dominican Republic, started in the middle of last year. Pascua-Lama, a gold mine on the Chile and Argentina borders, has proven reserves of 17.9 million ounces of gold and 671 million ounces of silver as of December 31, 2010. Production from this mine should begin in the middle of 2013. Management's goal is to produce 9 million ounces of gold a year by 2015.

- Essential numbers:
- Market Cap: $49.02 billion
- Forward P/E: 8.65
- Price to book: 2.23
- Operating margin: 46.49%
- Profit margin: 31.05%
- Return on assets: 9.88%
- Revenues for last 12 months: $13.46 billion
- Total cash: $2.96 billion
- Cash per share: $2.97
- Total debt: $13.38 billion
- Current ratio: 2.27
- Book value per share: $22.38
- Beta: .56
- 52 week change: 3.58%
- Total share outstanding: 999.80 million
- Float: 997.49 million
- Annual dividend: 60 cents
- Yield: 1.2%

Investors concerned about another economic meltdown will look more closely as ABX. With all its reserves, it definitely will have plenty of the yellow metal for a long time. If prices for gold simply stay where they are, profits will be good for some time even if operating costs move up 10%. But if gold loses its luster, this stock will reflect it.

- Company Web site: www.barrick.com