Gold has been and still is one of the most valuable commodities or currencies, as one might say.
It has been this way for centuries, ever since it was discovered, a good amount of transactions used to be based on gold.
Okay, so gold has been a piece of cake for investors and consumers acting as a store of value for thousands of years, today it is widely considered as a good fighter against inflation.
Also, it can be a great way to invest to avoid the crash of other assets during challenging economic times. Today’s most respected investors are stacking up gold for the possible black swan happening on the near future.
Bill Ackman, Ray Dalio, even Warren Buffett are all buying gold, which in some cases is unusual, as such investors often did not see much value in it previously.
The inflation rates today scare the living hell out of investors. Massive money printing, or, often times referred more innocently as “quantitative easing“, “debt monetization” or “security printing” had always been known to drive inflation to record highs.
That is exactly what the Federal Reserve is doing during recessions or “surprise” economic conditions like the pandemic. In the short term this practice might seem to be working but in the long-run, even more destruction is often still there to come.
It is crucial to understand how currency is created and its value.
Not that we have some basis on what gold means as a commodity, let’s get to one of the largest producers of this yellow precious metal in the world, Barrick Gold. The roots of this company go back as far as the early 1900s and those roots are not that close to gold or any other metal.
It used to be an American oil and gas company called Barrick Resources which was having much difficulty staying in business during the global economic crisis of the 1930s. Drastic changes had to be made and the most reasonable way to survive was to start focusing on gold.
Barrick Resources at that time had already had an infrastructure of mining, digging, mainly getting everything there is under ground so this transition to gold was not too difficult or expensive.
So, finally the company had turned into profitability and stayed that way till this day. In 1983 Barrick Resources went public and soon became a leader in gold and copper mining globally. The corporation had also went through some name changes in the eighties and nineties but after all, it had stuck with the Barrick Gold Corporation.
10 years after the IPO, the company had become one of the greatest and biggest gold miners on the planet.
This wouldn’t have been possible without some great acquisitions. One of them just happened to be Lac Minerals which had helped Barrick achieve such rapid worldwide growth. The company soon started expanding, more notably, to South America.
It had purchased mines previously owned by Arequipa. Later on, a company operating in Africa, had decided to sell itself out to Barrick, that followed with an acquisition of one of the largest and most respected mining and mineral exploration companies in the US called Homestake.
By the early 2000s, the corporation had become the second-largest miner in the world. Soon after, a subsidiary called the African Barrick Gold has been created, because of the need of an even larger expansion.
This subsidiary would later be welcomed by the arms of the London Stock Exchange where it would raise a substantial amount of capital for future business. Placer Dome is another notable acquisition that happened in 2006 and cost Barrick more than 10 billion dollars.
This one is quite important because Dome at that time was a major competitor in the Canadian market and beyond, it had opened up new waters for the company in terms of mining locations, partners and more.
Equinox Minerals was another largely important division the company had acquired which was seen as an opportunity by other mining companies but finally, in a full-blown auction, Barrick Gold was the one to take it over.
A lot more acquisitions followed after with a vision to win new customers, perfect locations and market share.
After all, when you control a large part of the world’s commodity, you control its prices, right? These other mergers and acquisitions that followed had been quite complicated.
In the late 2010s Barrick started seeking new partners to help achieve its plan of having the most of this yellow metal in the entire world. One of these partnerships happened to be Shandong Gold, a large and widely respected company in China, with a base of investors, a network of people of influence.
This partnership was neither a merger nor an acquisition, the announcement was that both corporations would share the funds with each other to establish a strong mining infrastructure in certain parts, profitable parts of China.
This deal let the joint venture create new, greater mining locations to maximize profitability. The same year, a company called Rangold Resources was starting to intimidate Barrick with its growing infrastructure, so there was no other way to get around it but just do a merger.
That merger happened to be worth nearly 7 billion dollars. A year later, another event followed, this time, the largest one in the company’s history, valued at 19 billion dollars.
However, this acquisition never actually happened as Newmont Corporation, an American mining giant harshly rejected the offer and replied with great insults to Barrick Gold.
Although the offer was not accepted and the deal did not go through, the same year when the fiasko and the series of insults happened, both Newmont and Barrick had come together and started the famous Nevada Gold mines.
These mines would later be known as powerful capital savers for both companies, saving more than half a billion during the first year of operations.
Barrick Gold has the majority of the ownership in these mines so it is quite probable that some time later it will try to purchase the share owned by the Newmont Corporation.
One of the more important things to mention is that Newmont’s insults towards Barrick were not without any basis. The Canadian mining giant is known for its questionable practices and operations, to say the least.
The corporation has been having tons of class-action lawsuits for environmental-care flaws, ignorance of human rights and a lot more completely inadequate practices. The operations o this corporation in some parts of the world and mining locations are beyond terrible.
The terribility of it is in accusations of massive amounts of murder, rape, laundering of money, evading taxes and destructive actions towards nature. Lots of these things had been known to be happening mostly in South America.
The killings and rape are known to take place in Barrick’s mining locations in Argentina and Chile. Also, there has been a report of a mining facility having a spill of “M” liters of pure cyanide into multiple rivers in Argentina.
A million liters of cyanide.
And that is not all, the corporation has allegedly been avoiding and not complying with environmental regulations in this country whatsoever, which resulted in temporary “stop” for mining operations. Not only that, afterwards, the government of Argentina had given an order to close the mining location.
In terms of rape, murder and forced evictions, the guilty always just happen to be the mine guards.
Loads of lawsuits, cases have been opened against the company coming from women and even men from South America and Africa which have been going forward pretty well as the public and the courts are completely aware of the company’s wrongdoings.
People from all over the world have been able to receive massive compensations after the proceedings, for damages, education and relocation expenses.
Hundreds of community homes around the mines have been burned by these guards and bribed police officers, which reportedly claimed that they had been told to take these actions.
Massive protests had taken place a few years ago which also resulted in several people being killed and dozens – severely injured.
There had also been clashes between the company operations and North American tribes in regards to the mining territory, locations and mainly, land. Not only that, the environmental impacts of mining and practices were being fought over.
Terrible things happened which could have been avoided.
However, as investors, we should also take a look at the Barrick Gold stock and the financials of the company.
Recently, the company was moved to trade from the Toronto Stock Exchange to New York Stock Exchange as it was believed that this transition would give more investors access to buying its shares. And it certainly did.
We are looking at a 3 month average daily trading volume of around 18 million shares, which makes the company stock quite a liquid one.
With a market capitalization of nearly 50 billion dollars, it remains the second-largest gold and copper mining corporation in the entire world. The company also pays dividends of around 1.2%.
To look at the recent history of the company stock, it should be noted that it was having enormous growth both in the nineties and until 2010.
What happened to Barrick Gold that had thrown the stock down from around +9500% to +1600% all time growth?
Well, mainly, the view of the public, government and the media was not the best, to say the least.
The public hatred for this company was very intense as people started worrying about the environment and heard the recurring acts of violence towards people living in communities near the mines owned by Barrick Gold.
Also, the forced closure of a mine in Argentina was a terrible loss for the company. However, as of now, when the world’s finance is falling apart the safest way for people to hold the present value of their money is to buy gold. Or, of course, gold mining companies like Barrick Gold.
As legendary investors like Warren Buffett of Berkshire Hathaway are “stacking up gold” by buying shares in this company, who previously had been known to be against buying and holding commodities, one should reconsider gold and think about what kind of value can these kinds of investments bring.
As a company which has been having rough times in the past 10 years but still has terrific infrastructure and is starting to go upwards rapidly, has an investor like Berkshire Hathaway under its wing, it shall be considered a very strong buy.