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Gold/Mining/Energy : Barrick Gold (ABX)
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To: russet who wrote (2489)5/3/2002 2:04:59 PM
From: Tommaso  Read Replies (2) of 3558
 
Thanks for the clear and extensive explanation of hedging.

It does appear that the major risk is inflation that would push up operating costs. To hedge as you have described is to bet on the stability of the currency in which the hedge is denominated. If energy and labor costs began to rise at a rate higher than what ABX realizes on the interest from those bonds, they will be committed to deliver gold at a loss. Of course, increasing efficiencies in producing gold would help to offset that.
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