Canada’s Barrick Gold Corporation is facing an uneven path as it tries to reclaim its former stock price and revenue. Amid positive restructuring actions taken after several tumultuous years, including a change in leadership, the company faces a challenging progression ahead.

Coming off of a third quarter ending September 30 2016 that showed less gold produced from its various mines, at only 83% of what it claimed a year prior, Barrick has also posted a minor decrease in net income of 3%. Meanwhile, the total comprehensive income is down by a staggering 26% from last year.

The decrease in gold production comes on the heels of the company selling some mines. The mines were sold in order to service debt. Such a decrease in gold production means that the revenue, at least at this stage, has also decreased.

As well, the reduced revenue comes as the company sold less gold than it did previously (though still more than expected for this quarter).

As well, by increasing its discounted cash flows the company is looking to once again increase its net value. As the company sheds profits and restructures itself in order to better produce gold and service it’s debt, the Barrick Gold Corporation has some challenges ahead.

Paying down the company’s debt remains a priority for Barrick and it has made strides in this area. Barrick has aims to pay down $2 billion in debt this fiscal year and, according to the Q3 report, is on track to do so, paying $461 million this quarter.

Yet Barrick remains at the mercy of the gold market, a notably volatile commodity if ever there was one. This reflects the dramatic change in Barrick’s stock price over the past few years, which had a ceiling of just over $50 and difference of almost $40.

When questioned about the change in stock price, Barrick Senior Vice President Andy Lloyd pointed out the volatility in the market, stating that “[o]ur share price will always be highly correlated to the price of gold, regardless of how well the company is executing on its strategy.” When asked about how Barrick’s new leadership affected the stock price, Lloyd said “virtually every market commentator has credited Mr. [John] Thornton with driving an unprecedented turnaround at the company.” Thornton is the chairman of the company.

Nour El-Khadri, a business professor at the University of Ottawa, believes that the restructuring has been mildly successful and quite strategic. By shedding high cost operations Barrick is looking to increase its profit by decreasing some of its more expensive costs.

Looking forward, Barrick will always have the volatility of gold to deal with. S&P Global, however, expects that the price of gold will increase through 2018. And though it is rated at BBB- S&P Global expects the company to “generate credit ratings that are considered strong for the current rating over the next two years.” The ratings agency also believes that a favourable gold price environment and improvement in Barrick’s cost position can translate into better debt repayment and a freer cash flow.

El-Khadri is somewhat optimistic about the future for the company, which he calls “promising.” As Barrick redesigns its whole business process by reducing its inefficiencies and by partnering with the tech giant Cisco El-Khadri says that the company can expect to have better results for investors. But with all of this being said, El-Khadri doesn’t expect gold to rise over the short term. The comeback continues.

Barrick Gold Stock Price by Nate7 on TradingView.com

Source: TradingView

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Goldcorp’s Stock Prices by shaunamcginn on TradingView.com

The Canadian mining giant saw a 22% decrease in gold production in its third quarter of 2016, a figure indicative of production challenges, such as worker strikes and blockades, at two mine sites in Mexico and Argentina.

The Peñasquito gold mine – which is located in Mexico and is the company’s largest – halted production in late September because of a blockade set up by protesting mine workers. Fuelled by anger over loss of work contracts, it interrupted production for at least a week. Reuters reported that the blockade ended when Goldcorp reached an agreement with the community that promised to renew contracts and improve infrastructure near the mine site.

When asked about how these protests affected production, Goldcorp stated that the decrease was largely a result of Peñasquito’s operations moving to a planned ‘low grade’ zone. ‘Low grade’ refers to an area of the mine that is expected to produce less gold than usual. In regards to the worker’s strike, the company claimed it was resolved quickly and therefore did not drastically harm production numbers. It also stated it will continue to “deepen relationships” with the communities it works in.

Similar issues arose in the Cerro Negro gold mine in Argentina, another of the company’s largest. That mine also experienced production slowdowns, due to a reduction in the workforce. Goldcorp said this reduction was planned, as part of a strategy to “set up the site for long-term success.” It added that it’s expected that after this restructuring, the mine will be back on track to return to previous levels of productivity.

Based on an analysis of their third quarter financial statement, these challenges outlined above are mainly responsible for the decrease. While Goldcorp has other mines at work, it relies on Peñasquito and Cerro Negro for the bulk of its gold production. Overall, the company posited the decrease as something it could easily recover from.

But Josh Wolfson, a Senior Equity Research Analyst at Dundee Capital Markets, said it’s unusual to have such stark differences in production numbers between quarters. However, he said it wouldn’t be “unreasonable” for Goldcorp to expect to bounce back quickly from a 22% decrease, especially in an industry like mining that often finds itself in flux.

Goldcorp’s second quarter in 2016 saw similarly low production numbers. And it may be because it was a year of reevaluating for the company. A January 16^th press release included comments from CEO David Garofalo, who said that 2016 was a year of rethinking Goldcorp’s business model. He said the company aims to increase gold production by 20% over the next five years.

The company also recently released its Guidance 2017 report, a document made mostly for investors that outlines production estimates for the year ahead. Goldcorp projected that both Peñasquito and Cerro Negro will produce 410,000 ounces of gold each in 2017.

What was unclear was how Goldcorp plans to mitigate the risk of further worker’s strikes or blockades. Goldcorp describes itself as being focused on “responsible mining practices.” It is also a proponent of Corporate Social Responsibility (CSR), a framework that encourages the use of environmental and people-friendly business practices.

In addition to their 2015 annual financial report, Goldcorp issued a 2015 sustainability report. In it, the company indicates that it spent 27 million on infrastructure and community investments. In the ‘Management Approach’ section of the report, it states that “Without community support, we cannot operate safely and sustainably.”

Goldcorp is expected to release its 2016 annual financial report on February 16^th.