>But doesn't the fact that Barrick hedges most of it's
>production several years out mean that with a nice move in
> gold they only reap rewards longer term??
For 2000, they have 3.7moz forward at $360, 3.1moz calls at $319
For 2000, they have 3.7moz forward at $360, 3.7moz calls at $335
Lets look at 2000:
For a gold price from 0-to-319, they will get $360 for all 3.7moz of their production.
For a gold price from $319 to 360, they will still get $360 for all of their production, and the calls will be "in the money". At $360, the calls would be worth $127.1 million.
When gold goes over $360, 3.7moz production still had to be sold at $360, but the increasing value of the calls will offset 3.1moz of the position. They will not lose money, but would not get any of the increase in spot gold on 600,000 ounce (16%) of their production. The year is almost half over so most of these numbers are getting to be a moot point.
For 2001, they are even better balanced with 3.7 forward vs. 3.7 calls
A chart and/or table would be a better way to show this, let me see if I can come up with one. |
