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Gold/Mining/Energy : Barrick Gold (ABX)
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To: GTC Trader who wrote (1247)6/5/1999 10:27:00 AM
From: Ron Everest  Read Replies (1) of 3558
 
The process of forward selling described earlier is excellent for ABX and other producers using this system, there is very small risk. Those that proclaim that this type of forward selling is a type of speculation or collusion are wrong. IMO GATA will never be able to make a case against the CBs, Gold Banks or large producers. They may have the appearance of being on to something, however they will never find the "smoking gun" they are looking for, too many very large players involved and too broad and international arena. GATA will not likely find the support and large $ funds needed to make their case IMO.

The future production is effectively sold when the price is sufficient to guarantee margin as is the nature of derivative use. In the case of $385 forward sales values per ounce such as ABX has transacted, the margin is enhanced by approximately $120 per ounce. With Barrick's Q1 average cash cost of $160 their margin before administrative costs is $225, not too shabby.

IMO what is annoying to the small producer is that they don't have the credit rating to qualify as a counterparty. A natural event to this type of business will be the gradual consolidation of the industry until we see another cycle with Gold up considerably.

There is also the thought that there is a new paridigm developing involving low gold prices for a decade or more: lower finding costs, more divesting by CBs. Could be 15 years or never for a return to previous patterns.....change is happening.

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