Read Barrick's 2001 year end. If you did you might discover Barrick's hedging is a lot different than what you, or whoever you listen to is thinking. There is a lot of disclosure there,...beyond what's been presented in the past, to fall in line with the current accounting problems in the states.
If you want to criticize, read the document before hand until you get a basic understanding of what they are doing. Perhaps you should read Ashanti's financial statements to see how different the two are, and why Ashanti's options became toxic and blew up in their face,...they were not hedged, they were gambling on the POG declining or staying the same, but Barrick is not, they are just locking in a revenue stream.
Calandra's article slights Barrick's hedgebook, but it's clear he did not read or analyze the financial statements, but relied on others opinions as you are. So read it, get an understanding of it, and then reread my past posts and we can discuss it. I'm currently unable to get past the basics, because several of you have preconceived notions of Barrick based on the false understandings that you seem to have picked up from other people's writings.
Just for the record,...I'm not directly long Barrick (and I don't think Enigma is either) but have exposure through swing trading XGD.to, a Barclays Group exchange traded fund trading on the TSX in Canada. Barrick is the number one holding at 24% together with another 7 Canadian big and medium cap gold producers. The majority of my gold stock holdings are explorers with valuable properties like FGX and NRI, and small to midcap producers.
I have discussed my holdings in previous posts, but I guess that statement was ignored, much like my discussion of the nature of Barricks hedging program, their vast reserves and resources, cost structures, and how Barricks assets and income will increase in value with the POG because only 18% of resources are hedged by forward selling or options, coming due at different times over a period of 15 years. This percentage will drop even more if the POG continues to climb to say $1000 and additional potential resources associated with the new find in Peru and other unlisted resources that will be undoubtedly found by drilling the open sections of their resources in Africa, North America, Australia or South America are turned economic. So what if they locked in for a current 28% of the measured economic ore (reserves) at gold prices averaging around $350,...the other 72% is free to get the spot price, and will accelerate in writeups almost 3 times faster than the paper writedowns from the mark to market of the hedgebook in years to come (so if POG rises above $365, the balance sheet gets bigger, faster). The higher the POG, the more money Barrick will generate in revenue, and the higher their profits will be. Also Barrick's large resource base means as the POG rises, and with some drilling, the reserves (starts on page 89 on report) (proved measured economic ore) will get larger and larger compared to the hedged portion (so the balance sheet will again get bigger faster than 3 times because the value of the larger and larger unhedged reserves will grow much faster than the diminishing hedged portion will get written down). This is something I have repeated several times, but no one on your side seems to recognize what I'm talking about, even though Barrick says exactly the same thing in their annual reports. So read it, and become enlightened.
http://www.barrick.com/4_Annual_Report/ |
