Barrick's Cost Pressures Challenge Profit Momentum Amid IPO Hype

What happened

Barrick Mining's profits are under pressure from rising unit costs, threatening to dampen momentum despite higher gold prices. This operational headwind emerges as the company navigates a crowded market narrative centered on its planned late-2026 IPO of a North American 'NewCo' holding key joint venture assets. According to the DeepValue report, Barrick has set aggressive 2026 capex guidance of $4.0B–$4.45B, which could squeeze free cash flow and strain its new 50% attributable free cash flow payout framework. Critical risks include potential IPO delays due to Newmont's transfer restrictions and a security review at the Reko Diq project that may reset timelines and capital budgets. Despite strong FY2025 free cash flow of $3.87B and a robust balance sheet, the stock has already rallied 170.95% over the past year, pricing in much of the optimistic catalyst story and leaving little margin for error.

Implication

The immediate implication is that rising costs could erode margins, pressuring Barrick's ability to sustain shareholder returns under its 50% payout framework without compromising growth investments. Longer-term, the NewCo IPO's success is pivotal for valuation unlock, but it depends on resolving JV transfer restrictions with Newmont, adding significant execution and timeline risk. The 2026 capex ramp increases financial strain, potentially leading to reduced payouts if costs exceed guidance or if gold prices soften, undermining the dividend policy's credibility. Investors should prioritize upcoming disclosures on the IPO structure and Reko Diq review, as these will serve as key catalysts or breaking points for the stock's premium. Given the sharp appreciation and embedded optimism, waiting for clarity on these fronts may provide better risk-adjusted entry points, aligning with the DeepValue report's 'WAIT' rating.

Thesis delta

The new article on rising unit costs does not fundamentally shift the core thesis from the DeepValue report but reinforces existing concerns about operational efficiency and capital discipline. It highlights an additional headwind that could exacerbate Barrick's capex challenges, threatening profit margins and potentially delaying the value unlock expected from the IPO. Investors should view this as a reminder to critically assess cost management alongside the binary IPO and project milestones that drive the investment case.