No Reason for Lag in Barrick Shares - Dundee Capital

March 13, 2009 | By: FP Trading Desk

Shares in Barrick Gold Corp. (ABX), the world's biggest gold producer have been lagging the pack so far this year, thus setting the scene for a nice rally in the weeks to come, according Dundee Capital Markets.

Analyst Paul Burchell said in a note to clients:

Barrick's share price has been correlated to the price of gold for several years; however, the recent underperformance of the company's shares has strained the relationship, suggesting a near-term correction to the upside.

So far in 2009, Barrick stock has lost 17%, compared to gold bullion, up 3% this year and the S&P TSX Global Gold Index down 5.5% year-to-date. But with in line year end results reported in February, Mr. Burchell believes there is no reason for the lag, especially given Barrick's otherwise strong correlation to the price of bullion over the past five years.

Overall, the five-year trend would suggest that Barrick's shares should be trading around $45.00 in the current gold price environment. Looked at another way, the ratio between Barrick's share price and the price of gold is currently well below the five-year trend, suggesting the stock has been oversold

Mr. Burchell dropped his price target on Barrick from C$53 to C$49 based on an adjustment to his net asset value estimate, but maintained his "buy" recommendation on the stock.

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