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Barrick Gold tumbles to sit above $18 ahead of quarterly results

Published: 12:53 23 Apr 2013 EDT

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With shares at a 20-year low, a stunning 54 per cent drop in market value over the last two years, and an eleventh-hour pushback from large investors in the offing, these are far from golden days for Barrick Gold Corp. (TSE:ABX) (NYSE: ABX) as the gold giant readies itself to go before shareholders at its annual meeting in Toronto tomorrow. 

The Toronto-based gold producer recently has been the subject of write-downs, project delays and of course, has seen the market for gold collapsing under it, all of which has conspired to see the company trading at levels reminiscent of a time when the price of gold hovered in the $300s.

To top it off, the week before last brought Barrick a new humiliation as the company suffered the very public loss of its title of number one gold miner in terms of market value, handing the crown of world’s largest gold miner by market cap to Goldcorp Inc. (TSE: G.TO) (NYSE: GG).

It’s all a bit much for Barrick founder Peter Munk’s chosen successor, co-chairman John Thornton -- himself now a subject of controversy over the matter of his US$11.9 million signing bonus. The bonus, which brought his compensation for the year 2012 to $17 million, stuck in the craw of a group of institutional investors who came out in force on Friday to protest the move, calling it “unprecedented in Canada.”

The group, which includes some of Canada’s biggest pension funds -- including the Caisse de dépôt et placement du Québec, the Ontario Municipal Employees Retirement System (OMERS), Ontario Teachers' Pension Plan and the Canada Pension Plan Investment Board – issued a statement late last week that read in part: "This compensation is inconsistent with the governance principle of pay-for-performance and is therefore disproportionate and sets a troubling precedent in Canadian capital markets.”

The investor group, which between them manages more than $900 billion in assets, warned that they would vote against both an advisory resolution on executive compensation and the election of the members of the Barrick board's compensation committee, raising the spectre of investor rebellion at the impending meeting.

Barrick has, in company with their gold-producing cohorts, been subject to the tanking gold market of recent days, which saw the commodity’s largest two-day fall in decades, however Barrick alone is held hostage to a series of legal and regulatory travails at its massive Pascua-Lama project in South America, which has consistently contributed to the stock’s poor performance.

The most recent setback stopped construction on the Chilean side of the border-straddling project by order of court injunction due to environmental concerns of the local indigenous population.

Slated by the company to be one of the world’s lowest cost producing gold mines, should the trouble-plagued project ever commence production, Pascua-Lama has already been the subject of delays, cost overruns and legal trouble.

The court-ordered work stoppage has the potential for even more significant consequences as the resource to be extracted lies principally on the Chilean side, rendering the mine untenable should problems persist.

The halting of construction was enough to prompt Moody’s Investors Service to put the gold producer under review for a potential ratings downgrade last week.

Analysts’ estimates have consistently trended down and currently put the expected earnings for the current quarter at 91 cents per share, down markedly on last year’s figure of $1.09 per share and down 24 cents per share on the estimates posted 90 days ago. Revenue for the quarter is expected to come in at $3.59 billion, down on last years’ figure of $3.64 billion.

The company is anticipated to post its quarterly results before market open tomorrow.

Shares in Barrick have fallen from a 52-week high of $44.75 on the TSX to less than half that, trading at $18.39 per share as of this afternoon, down more than 10 cents a share for the day.

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