Barrick Gold (NYSE:ABX) Selling Gold Mines

Just when many investors believed the future of gold might be finally back on track, some major news is out that may curb beliefs that things could change in the near future.

In a perhaps unexpected turn of events, Barrick Gold (NYSE:ABX) is thought to be considering the sale of three of its Australian gold mines. According to Businessweek, Barrick is looking to sell off its mining locations in Western Australia, the three of which combined to produce 452,000 ounces of gold in 2012. 

Going off of sales, Barrick is the world’s leading gold producer, and the company is working with Bank of America Corp (NYSE:BAC) and UBS AG (NYSE:UBS) in hopes of finding a potential buyer for these mines.

Things have been slowing down significantly for Barrick for some time now. The company’s CEO started selling off assets and attempting to cut costs well before the massive plunge that occurred on April 15th, showing that Barrick has been poised for a slowdown. 

Projects have been put on hold and altogether stopped as the Toronto-based company looks to sell Barrick Energy Inc. and its 50% share in Kabanga.

A Rough Time for Gold

The move from Barrick may seem a bit abrupt, but the fact remains gold is not exactly enjoying a resurgence at the moment. Just last week, the price of gold plunged to its lowest level in 12 years, finally hitting $1,321.95 in Singapore on April 16th, according to the Economic Times. 

Many analysts believed gold might actually be ready for an uptick in 2013, although the recent turn of events in regards to the price have largely curbed these notions. 

It’s important to realize that even though gold is slumping now, it’s been in way worse shape in the past. Twelve years ago, the price of gold dropped to just over $250/ounce, putting it over $1,000 lower than it is right now in terms of overall price.

A major slip back down to $250 isn’t completely implausible, but the chances that such a slump could occur are relatively low. Even so, investors are not exactly holding out hopes for the metal at the moment, although analysts don’t believe the slump will last forever.

To make matters worse for Barrick, the company is in an enormous amount of debt. While Barrick claims to have $2 billion in cash at the moment, it owes $3 billion in debt payments for 2013/2014, with an additional $1.2 billion in interest that needs to be paid off.

In order to avoid complete catastrophe, halting operations and selling assets are both considered necessary rather than optional. 

A Mysterious Future

The future of gold is difficult for many analysts to put their fingers on. As the Economic Times points out, the World Gold Council (WGC) believes much of the slump has to do with speculative traders in future markets.

Speculation can have a dramatic impact on the overall price of precious metals such as gold and can result in either inflation or in major slumps, such as what was seen last week. Because speculators have vastly different views on the short-term vs. long-term viability of gold, it should stand to reason why the metal has fallen to where it is.

It’s not the end of the line for gold, however, which is something that needs to be kept in consideration. Demand for the metal has boosted in India and China, due mainly to the fact that prices are so low at the moment. As one might expect, an increase in demand could see gold prices increasing once again soon—perhaps before the end of the year.

Gold, silver, and other precious metals have indeed fluctuated in price over the years. It seems as if whenever a major slump hits, panic ensues and causes some people to believe the end is near. While gold has, of course, seen better days, to say it can’t be rescued at this point in time would be simply going too far, and no one is willing to make such a statement at the moment.

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