Yes, I think that it seemed likely that someone would side with the "official" interests, and given Barrick's mindset and how deeply hedged they already were, it makes sense that it would be them. They have much to gain from working with Goldman and the Feds: if they can contain the POG below $360, they will put a world of hurt on the unhedged producers, particularly in South Africa. Barrick will then be able to benefit from the strapped exploration companies puking up their resources for some of Barrick's cash.
Something no one has mentioned yet: Since they restructured their hedges, Barrick is probably in a position to sell forward once again to protect their negative price points. And protect them they must. Despite their claim to cover their hedges with calls, they cannot be receiving a guaranteed $360 for two years production without some form of risk if the price goes above that. I don't believe they ever have actually opened up the details of their hedge positions, so they are free to fudge and spin what the net effect is. However, if gold were to explode beyond $360, I think it likely that Barrick could be hurt very badly.
Thanks for your thoughts,
/BSG |
