Ross Healy, a major whistle blower on the ridiculous valuations of tech and dotcommie stocks a few years back (the guy called for Nortel to dip to the $10 range when it was trading at $120 based on income projections and balance sheet number crunching) came out today and said his number one stock pick is Barrick. This guy's organization knows financial statements inside and out, and they understand Barrick's hedging program,...they are number crunchers.
Few analysts in Canada are calling for lower gold prices now, a common prediction this year is a peak at $400 to $450 depending on what the US dollar does...don't know about CNBC as the volume is off (gggggggg) Guess we can thank Bush and his war against the anti-American muslims terrorists and supporters for the ever climbing POG.
The problems with the horror stories about the conservatively hedged producers like Barrick, Newmont, Kinross and others is they all start from a few uninformed sources, and circle around gaining momentum and ferocity with each turn around the gossip table. No one bothers to check the facts.
Once an understanding is gained about the simple, low risk nature, of Barrick's (and others) presold gold, it is easy to understand why the companies say the hedges,...or preselling of their gold in the ground to earn some interest income, will not force them into bankruptcy. The hedges limit a small portion of their annual production from experiencing the rise in gold (although they could buy some gold calls to increase that exposure), but most of the annual production will get the spot price. This covered forward selling bears no resemblance to the derivative book that blew up on Ashanti,... or the high risk, high leverage speculation, credit problems with high interest charges, and financial statement lies that caught up to Enron.
Barrick is the most profitable gold producer in the world. They also have the strongest balance sheet, near the lowest cost reserves, and the largest undeveloped gold deposit in the world today in Pascua/Veladero with 26 million Au oz so far, and open all over the place. They also have what many in the industry consider to be the best resource evaluation and exploration teams in the business today. Not only did they pioneer the hedge program we have been discussing here, they are one of the most aggressive companies in the industry at partnering with and supporting small juniors exploration companies to tap into their low cost, efficient exploration abilities,...something that is not well known outside the industry. |
