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Gold/Mining/Energy : Barrick Gold (ABX)
ABX 8.065+2.3%Jan 29 3:59 PM EST
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To: Dave Lyall who wrote ()1/4/2000 12:53:00 PM
From: nickel61  Read Replies (1) of 3558
 
Now lets get back to analysizing the short squeeze danger that American Barrick faces with the current short squeeze in the physical gold market. It would be helpful to know exactly where their hedge book has exposure. Perhaps they would be willing to comment on my assumption that eighty percent of their total hedges are within the next 5 calendar years and that the calls are spread fairly equally over the same time period. If their true cost of production is fairly reperesented by taking their after tax earnings of $301,000,000 and their realized average sale price of $400/ounce and dividing it by their total production of 3,200,000 ounces of gold production for an all in after tax cost of $305.87/ounce. Significantly higher than the cash cost they like to talk about. This method of calculation cuts through all the BS AND LETS THE INVESTOR SEE THE TRUE PRODUCTIVIITY OF THE BUSINESS AFTER TAX. With the current spot market twenty five dollars below their true all in cost per ounce why are they still hedging? To replicate the above calculation take the total ounces of gold produced and divide them into their total after tax profits to arrive at what the shareholders really make in profit per ounce and then subtract that profit from their own stated average realized sale price per ounce to get a more illuminating full cost per ounce.Managements tend to hate this type of calculation because it makes it very difficult to put their individual spin on things. Naked so to speak.
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