Hi THC,
I think the margin call would be US$0.00.
According to Barrick's last conference call, they have the option, at their sole discretion, to convert their written calls to spot-deferred forwards.
Later on in the conference call, they said they would experience a slight increase in margin at prices above $600/oz, but this would be insignificant in relation to the increase in cashflow from their unhedged annual production at the higher prices.
I know a lot of people out there hate Barrick, for a variety of reasons, and I'm not too happy with them myself. They're well-positioned for a stagnant/trading market, but not for a sudden turn-around/bull market. That's the price of a hedge.
At this point, what with the clarification in ECB policy, I would very much like to see Barrick cover the 4 million ozs in calls, reducing their total hedge allotments by at least a third (6 million ozs), or preferably by half (9 million ozs), within the next year or so.
I believe Barrick is slated to produce in excess of 3 million oz per year. If one were to spread their current forward commitments out evenly over the forward period, that amounts to a bit over 1 million ozs per year.
In other words, by my calculation and with what is publicly known, Barrick has about two-thirds of its production free to participate to any upside per annum. Not as much bang for the buck as a totally unhedged producer, but not exactly chicken feed either. |
