Financial statements presented by Gaap rules are on the website.
Barrick has stated publicly what their derivative position relating to gold is, and they are closing it out,..writing calls and max-min contracts. If your discussing currency or interest rate hedges, this is a waste of time. The currency hedges are minor, and the interest rate hedges are positioned to help them in rising interest rate situations. Their forward sales is their biggest position, 18 million oz, and has no counterparty risk as the proceeds are invested in high quality bonds with the bank the loan is from and if the bank goes under and renegs on the bond and interest, Barrick does not have to deliver to the forward sale,...no counterparty risk except maybe on interest due, but if paid monthly Barrick will know quickly the bank is failing.
As stated by Barrick, the gold loans can be wound down over 15 years,...and with the exception of this year come due at about 1-2 million oz per year. So with 6 million oz production per year and plenty of reserves, resources and new finds to stabilize that production, and only a fraction of production getting the "hedged price" of $345 in future years with the balance getting the market price,...there is no hedge to blow up and their average revenue per oz will rise with the POG. This is part of the public record and the public record is the only real evidence that exists. All the rest is speculation.
Barrick has no net debt, and no leverage in their forward sales position as the gold loans are covered 5 times by reserves, let alone resources and the $5.5 billion bond portfolio that exists from proceeds of the forward sales,... and all of this too is recorded in their financial statements and subsequent newsreleases.
This debate that Barrick is going bankrupt has been going on for a month. Read what I have said in that time, with information backed by Barrick statements from financial statements and newsreleases, and then read the financial statements before replying to me again because the useless speculation with no proof that most present here is not worth debating.
The only thing the other side has now is Barrick is lying and is like Enron. There is no sense debating that either, as Enron was a much more complex animal, and committed numerous crimes and deceptions, and there is no evidence that Barrick corporate structure, balance sheet, revenues, costs, and loan positions are anything like Enron's,...just more useless speculation. Newmont is not saying their forward selling will harm them in any way except that if gold rises much more there will be an opportunity lost to acquire higher revenues until they deliver to the hedge. Kinross says the same thing, and their forward selling program is set up similarly to Barricks. A comparison to Ashanti's derivative position is silly because none of these are set up the same way.
None of the big producer stocks are moving much now. They have high P/E's and are known quantities for cashflow and reserves so will now move only in proportion to the POG unless something changes in their balance sheet or income statement. The mid to small ones are in speculative froth and are way ahead of the POG. I'm not here to debate the relative performance of gold miners. That is subject to speculative froth and manipulated by a similar bunch of ANALysts that pumped the techs, dot commies, house builders and so on.
I'm also not here to debate the POG,...I hope it goes a lot higher.
I'm also no longer here to debate the long essays by the Gata folks that speculate endlessly as to why Barrick's hedges will blow up and they will go bankrupt shortly,...there is no proof. When there is proof one way or the other, one of us can come back and gloat.
My only point is Barricks forward sales of gold in the ground will not blow up in their face, and they will not go bankrupt as the others say,... unless inflation pushes cash costs near or above the spot POG,... which would put all miners at risk, don't you think? Barrick's average revenue per oz of gold (according to the public statements by Barrick) is all that matters to this debate. If they deliver on average 1.2 million oz Au every year for the next 15 to satisfy their forward sales contracts coming due, and sell the other 4.8 million oz Au production at spot,...their average revenue per oz may not be quite as high as the unhedged producers average revenue, but it will be profitable to Barrick (especially if the POG continues to rise) and allow them to continue to run their operations they way they have for 15+ years. I have displayed calculations to this effect in prior posts.
Most of the rest of what is going on here is personality, and I will not participate further in that either as I have jumped out of the gutter and prefer to use my time analyzing stocks.
Show me proof, or forget the debate with me. |
