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Gold/Mining/Energy : Barrick Gold (ABX)
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To: russet who wrote (3284)1/16/2003 9:29:44 AM
From: Tommaso  Read Replies (2) of 3558
 
Barrick has been such a laggard that I am now willing to consider buying into it.

But there is something in their explanation of hedging that is worrisome:

>>>10. Could Barrick lose money on its hedge program?

No, because all its hedge contracts are at prices in excess of the cost of production. Barrick could have an opportunity cost if the spot price of gold consistently exceeded the rising price of our contracts for the next 15 years. However, for a small percentage of our production, we are prepared to make this concession in order to limit the risk to our shareholders of gold's possible downside.
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This assumes that the cost of production will not rise. But if there is general inflation, the costs of production most certainly will rise, and it will not be that easy for Barrick to deliver the gold and still make a profit.
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