Course 409: Hard-Asset Stocks
What about Growth?
In this course
1 Introduction
2 Has Barrick Capitalized on Its Natural Endowments?
3 What about Growth?
4 What Has Company Performance Meant to Shareholders?
5 Has It Delivered the Diversification Benefits of a Hard-Asset Stock?
6 What Does It Cost?
7 Conclusion: Appraising the Asset

In the volatile hard-assets market, earnings growth is often nothing more than a spike in oil or metals prices. But Barrick has delivered the real thing. Although gold prices have been declining since the early 1980s, Barrick has made production increases a catalyst for earnings growth. From 1986 to 1998, according to Barrick's annual report, production increased at an annualized rate of 37% to 3.2 million ounces per year. Only the South African mining giants produce more. Over the same period, Barrick has made several large gold strikes, boosting its reserves and laying the foundation for continued production growth. South Africa's rock hounds, by contrast, have uncovered almost no new reserves. Barrick's cash-flow statements tell the same growth story. And in the hard-assets market, cash flow is a better measure of performance than earnings, which include noncash charges that can differ dramatically from company to company. Cash flow is roughly equal to earnings before depletion and depreciation charges, eliminating some of the distortions that lead two companies with comparable cash profits to report very different earnings. As long as cash flows are rising, as Barrick's have been, a hard-asset producer is delivering genuine growth.

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