Hi nickel61,
Yes, Barrick has a hedge, thanks for the heads-up. :o)
However, about two-thirds of annual production is de facto unhedged, as Barrick has the option of deferring their forward sales for better spot prices, if and when they materialize, for up to 15 years. I don't think they have to cover and I don't think they will cover. They just need to pull the ore from the ground in a more or less regular fashion. They want higher prices as much as any unhedged mine, and will profit handsomely from higher prices.
Why invest in Barrick?
1) ABX is a major XAU component
2) ABX has large proven reserves
3) ABX has a record of aggressively increasing reserves
4) ABX has a low average extraction cost
5) ABX has strong management
6) ABX is geographically diversified
7) ABX has more than adequate financial strength
8) ABX appears to be well-connected, politically
9) ABX has plenty of upside exposure due to the flexibility of their hedging program
Think about some of the above when choosing another mining investment.
Sure, it would be nice if, considering how things may be changing in the precious metals world, ABX had no hedge at all, but they do -- and a big one at that. Too much hedge? How much is too much? Any at all? A few years production? It depends on the mine. Granted, 4-5 years is a lot in absolute terms, but I believe ABX can easily handle it. There is no reason that I can perceive that they cannot work their forward sales off from a portion of their current annual production, yet still participate substantially from a rise in AU.
Please provide a complete and detailed line of reasoning to illustrate this is not the case. Implying they're toast simply because they have a hedge program is insufficient analysis.
Happy T-Day! |
