The article refers to Barrick and quotes management, so is of interest to us. It is also balanced, something that anti-hedgers are not.
Thousands of companies hedge to lock in acceptable revenues and key cost inputs to remove the risk of price swings. McDonalds and Burger King hedge the cost of beef in their hamburger patties. Farmers hedge revenues for their crops or livestock and key cost inputs, oil and gas companies hedge their production. Many hedge their exposure to foreign currencies.
Gold speculators have lost money using the tools of hedging,...but they did not really hedge because their positions were not balanced properly. If we are going to talk about hedging on this thread, it should be specific to Barrick. If you can find a problem with what Barrick has done or said, tell us what and show us with reference to their financial statements and/or newsreleases. If not, your arguments belong on another thread because general articles about speculating on the POG is not hedging, and is not what Barrick is doing. It is misleading to claim Barrick has problem hedges.
Anyone who takes the time to look through the balance sheets and income statements of Barrick over the last 10 years will realize that hedging their revenues for their gold production has made Barrick a great deal of money over the last 15 years when compared to their peers. Presently a small percentage of Barrick's total resource of gold equivalents in the ground has a locked in price for gold revenue, so no one can say Barrick will not increase in asset value, or gold revenues in the future because they are somehow hedged inappropriately.
Barrick continues making money no matter where the POG goes short of a total collapse in the POG because Barrick is a exploration, mine development and prudent management company,...their hedges only serve to limit risk of swings in the POG. There is no risk to their current mine development or profitability outlook if the POG climbs. |
