Barrick Gold (GOLD), the world’s second largest gold producer, has been transformed since it merged with Randgold and the latter’s Dr. Mark Bristow took over as CEO, asserts Adrian Day, resource sector expert and editor of Global Analyst.

Dr. Bristow is a dynamo. In his less than two years at the helm, he has dramatically cut debt and has cut costs including slashing the bloated Toronto corporate headquarters. He has also achieved the decades-old goal of combining Barrick’s and Newmont’s Nevada operations, cutting duplicative overhead.

Meanwhile, he has visited every one of the company’s operations around the world and has reacquired Acadia Mining and solved political problems in Tanzania and is working on Papua New Guinea.

The result is a company focused on “profitable ounces” instead of growth, with a strong balance sheet. Barrick always had world-class assets, but now is making them work for the benefit of shareholders.

Barrick has a deep exploration pipeline — as deep as any major company. It has gold and copper assets in 13 countries primarily in North and South America, the Caribbean, and Africa. It has several development projects in the same jurisdictions, with 71 million ounces of gold reserves.

One of the most significant improvements has been in the balance sheet, with net debt down to around $1 billion, and around $4 billion in cash.

Most debt maturities are not until 2033 and beyond, so we may not see much of a reduction in absolute debt levels going forward, but the company is in its best financial shape in well over a decade. In 2012, the company has almost $12 billion of net debt.

The stock is trading at a price-to-cash flow multiple under 10 times, and free cash flow multiple of 17 times. It is trading just over two times book. These multiples are lower than most other major gold miners.

Today, it is not only one of the largest gold miners, but one of the best and one of the most undervalued. We rank this as "mid-risk" in our investment pyramid.

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