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UNIVERSITY OF MIAMI
ACC 685 – Financial Statement Analysis & Valuation
Will Huneycutt
Term Project
October 21, 2017
Investment Analysis
Barrick Gold and Newmont Mining Corporations
Barrick Gold Corporation Newmont Mining Corporation
Brookfield Place, TD Canada Trust Tower 6363 South Fiddler’s Green Circle
Suite 3700 Greenwood Village, Colorado
161 Bay Street, P.O. Box 212
Toronto, Canada M5J 2S1
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Contents
1. Company Description …………………………………………………………………………………………………………….. 4
1.1 Barrick Gold Corporation………………………………………………………………………………………………. 4
1.2 Newmont Mining Corporation ……………………………………………………………………………………….. 4
2. Common Size Income …………………………………………………………………………………………………………….. 4
2.1 Barrick Gold ………………………………………………………………………………………………………………… 4
2.2 Newmont Mining …………………………………………………………………………………………………………. 5
3. Liquidity ……………………………………………………………………………………………………………………………….. 5
3.1 Barrick Gold ………………………………………………………………………………………………………………… 5
3.2 Newmont Mining …………………………………………………………………………………………………………. 5
4. Capital Structure and Solvency ………………………………………………………………………………………………… 6
4.1 Barrick Gold ………………………………………………………………………………………………………………… 6
4.2 Newmont Mining …………………………………………………………………………………………………………. 6
5. Operating Performance …………………………………………………………………………………………………………… 6
5.1 Barrick Gold ………………………………………………………………………………………………………………… 6
5.2 Newmont Mining …………………………………………………………………………………………………………. 6
6. Profitability …………………………………………………………………………………………………………………………… 7
6.1 Barrick Gold ………………………………………………………………………………………………………………… 7
6.2 Newmont Mining …………………………………………………………………………………………………………. 7
7. Asset Utilization…………………………………………………………………………………………………………………….. 7
7.1 Barrick Gold ………………………………………………………………………………………………………………… 7
7.2 Newmont Mining …………………………………………………………………………………………………………. 8
8. Market Measures ……………………………………………………………………………………………………………………. 8
8.1 Barrick Gold ………………………………………………………………………………………………………………… 8
8.2 Newmont Mining …………………………………………………………………………………………………………. 8
8. Notes and Disclosures …………………………………………………………………………………………………………….. 9
8.1 Barrick Gold ………………………………………………………………………………………………………………… 9
8.2 Newmont Mining ……………………………………………………………………………………………………….. 10
8. Conclusion ………………………………………………………………………………………………………………………….. 11
9. References …………………………………………………………………………………………………………………………… 13
10. Appendix …………………………………………………………………………………………………………………………… 14
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Tables
Table 2.1: Barrick Gold Common Size Income ……………………………………………………………………………… 4
Table 2.2: Newmont Mining Common Size Income ………………………………………………………………………. 5
Table 3.1: Liquidity …………………………………………………………………………………………………………………… 5
Table 4.1: Capital Structure and Solvency ……………………………………………………………………………………. 6
Table 5.1: Operating Performance ……………………………………………………………………………………………….. 7
Table 6.1: Profitability ……………………………………………………………………………………………………………….. 7
Table 7.1: Asset Utilization ………………………………………………………………………………………………………… 8
Table 8.1: Market Measures ……………………………………………………………………………………………………….. 9
Table 9.1: Barrick Gold Common Size Income Statement…………………………………………………………….. 15
Table 9.2: Barrick Gold Common Size Balance Sheet ………………………………………………………………….. 16
Table 9.3: Newmont Mining Common Size Income Statement ……………………………………………………… 17
Table 9.4: Newmont Mining Common Size Balance Sheet …………………………………………………………… 18
Table 9.5: Summary of Ratios …………………………………………………………………………………………………… 19
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1. Company Description
1.1 Barrick Gold Corporation
Barrick Gold Corporation is the largest international gold and copper mining company and is based in
Toronto, Canada. Barrick operates nine gold mines in North America, Central America, South America,
Africa, Australia, and the Middle East. North, Central, and South America represented 70% of 2016
production. In Canada, the Goldstrike and Cortez mines produced 49% of 2016 production. Barrick also
has non-controlling interests in assets including Porgera and Kalgoorlie, and copper mines, such as
Zaldivar and Lumwana. Gold was 95% of 2016 revenues and is expected to increase from 5.52 million
ounces of gold in 2016 to 5.60-5.90 million ounces in 2017. Reserves for the end of fiscal year 2016 are
reported at 85.9 million ounces which Barrick reports to be the largest in the gold mining industry. 1,2
1.2 Newmont Mining Corporation
Newmont Mining Corporation is the second largest international gold and copper mining company and
is based in Greenwood Village, Colorado. Competitors of the two largest gold mining companies
include AngloAshanti, Goldcorp, and Kinross Gold. Newmont operates gold mines in United States,
Australia, Peru, Ghana and Suriname. The United States, Australia, Ghana, Peru, and Suriname
represented 39%, 34%, 15%, 12%, and 2% of 2016 production, respectively. Newmont operates five
sites in North America including Carlin, Phoenix, Twin Creeks, Long Canyon, and Cripple Creek &
Victor. Newmont has has non-controlling interests in assets including Yanacocha and Merian. 5.2
million ounces of gold accounted for 96% of 2016 revenues is expected to be 5.0-5.4 million ounces in
2019. Reserves for the end of fiscal year 2016 are reported at 68.5 million ounces. 3,4
2. Common Size Income
2.1 Barrick Gold
Barrick Gold’s revenues decreased 5% from $9.0 billion in 2015 to $8.5 billion in 2016. Cost of goods
per dollar of revenue decreased from 2015 to 2016 resulting in a higher gross profit margin. 2016 gross
profits were $3.1 billion compared to $2.1 billion in 2015. In 2015, Barrick reported an impairment
charge of $3.9 billion which led to an operating loss of $2.4 billion and net loss of $3.1 billion. Earnings
improved in 2016 to $2.5 billion in operating income and $861 million in net profits. Comprehensive
income is reported for changes in derivatives used to hedge and investments including post-retirement
benefit obligation but do not significantly impact income or ratios. 1,2
Table 2.1: Barrick Gold Common Size Income
Barrick Gold Corporation
Common-Size Income Statement
(in millions USD, except per share data)
Revenues 8,558 100.00% 9,029 100.00% 8,558 94.78% 9,029 100.00%
Gross Profit 3,153 36.84% 2,122 23.50% 3,153 148.59% 2,122 100.00%
Loss Before Finance Items and Income Taxes 2,553 29.83% (2,418) –26.78% 2,553 –105.58% (2,418) 100.00%
Net Income (Loss) 861 10.06% (3,113) –34.48% 861 –27.66% (3,113) 100.00%
Year
Year
Vertical
Horizontal
2015
2016
2016
2015
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2.2 Newmont Mining
Newmont Mining’s revenues increased 10% from $6.0 billion in 2015 to $6.7 billion in 2016. Cost of
goods per dollar of revenue increased slightly from 2015 to 2016. 2016 gross profits were $2.9 billion
compared to $2.5 billion in 2015. In 2015, Newmont reported a $592 million operating income and $304
million net profit. However, a $1.0 billion impairment charge resulted in a lower operating income of
$59 million and net loss of $923 million in 2016. Comprehensive income is reported for changes in
derivatives used to hedge and investments including post-retirement benefit obligation but do not
significantly impact income or ratios. 3,4
Table 2.2: Newmont Mining Common Size Income
Newmont Mining Corporation
Common-Size Income Statement
(in millions USD, except per share data)
Sales 6,711 100.00% 6,085 100.00% 6,711 110.29% 6,085 100.00%
Gross Profit 2,939 43.79% 2,507 41.20% 2,939 117.23% 2,507 100.00%
Operating Income 59 0.88% 592 9.73% 59 9.97% 592 100.00%
Net Income (Loss) (923) –13.75% 304 5.00% (923) -303.62% 304 100.00%
Year
Year
Vertical
Horizontal
2016
2016
2015