Do you think that the mark to market writedowns of the hedgebook result in reduction in cashflow expected from this year or future years? As I have said over and over, they do not unless the investments they made from the sale of gold in prior years become impaired. The majority of these investments are high grade bonds from government sources that will be allowed to mature, so will suffer no losses, but provide the interest income to deliver the average $365 per oz discussed in Barricks financial statements. The minority in corporate bonds and other investments are being wound down, and if Barrick was taking losses on these it would show up in the notes,...and it isn't, so the losses if present are immaterial to date.
The only writedowns are to the notional value of the hedgebook which was based on comparing the value of the hedgebook using last quarters average gold prices, to what the gold was initially sold at in prior years plus the investment income. If the value at todays prices is greater, they take a writedown to the notional value against income (and get to pay lower income taxes),...if it is less, as it as been for the last 14 years when they made multi billions more than they should have by hedging instead of accepting spot, you write the value of the hedge book up and increase income (and pay higher income taxes). In any event the hedgebook value can not go below the original price they sold the leased gold at plus the income they received by investing the proceeds minus the lease charges, if they have no investment losses (and investment losses would show up in the financial statements, especially the notes if anticipated),...a point that seems to be beyond the comprehension of the poorly prepared fools that write articles like the one you referenced.
Barrick has hedged to insure that a percentage of cashflows they will get in future years would be fixed to a known $ per oz figure. A far higher percentage of gold production in future years is free to get the spot price. By so doing, the article ignores the fact that 80% of Barricks production in near years excepting the current one (because we don't know what percentage of the current years hegdes will get rolled over, and what percentage will be called or delivered to) gets the spot price because on average only 20% of any future years gold production is currently hedged. Why does this article, and so many others ignore this fact? Perhaps because it wouldn't be very newsworthy then,...would it?
Have you read Barricks yearend?,...I think not. Perhaps you would take the time and cross reference the statements in this article to statements from the pages in Barricks year end report, or the last quarter report so we would have actual confirmation from a verifiable source of impairment to cashflow or the debt rating of Barrick. Why are you all too lazy to do this?
Can you provide the proof,...or are you just another Clown(ggggggggggggg) |
