What's going to happen to Barrick ? Who knows ??
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Subject Member Profile Date Posted
Barricks Math wrs
NEW 12/5/2003 3:34:43 PM
Barrick has 16m oz sold forward that they want to deliver into and every dollar that gold goes up, they have $16m less in net equity. So if they currently have a cushion of $1200m in equity, then they have until gold gets to $480/oz before thier cushion is evaporated. In the meantime they are working furiously to produce gold and deliver into the existing forward contracts. However, they have a production cost per ounce of $285 and so they net $115 for each ounce sold. This means that if they produce three and a half ounces, they can cover costs by selling two and a half and deliver one while just breaking even. That is a rate of dehedging of 28% of production and at 5.5moz per year, that would be only about 1.5m oz per year which only reduces their loss per $ounce increase in gold by $1.5 per year. If gold gets to 480 by the end of next year then they will be dehedged by say optimistically 2m more ounces and they will now be underwater by 14m oz but their cushion will be gone. Now however their profit per ounce will be $195 and they need only produce 1.5 ounces to sell in order to deliver one ounce of gold but now they cannot stand for gold to rise any further. Hence if gold makes it to $500/oz next year, Barrick will become technically insolvent after only eliminating 2moz of it's hedges. I believe someone is going to foreclose on 85m oz of gold for the price of about $5B because their forward contracts average around $350/oz and to free up the liens on the company you would need to pay $350*14,000,000 = $4.9B or if you must have gold and can buy 14m oz on the spot market at $500/oz then you pay $7B for 85m oz which with gold at $1000/oz or more, is worth north of $85B so do you think someone with deep pockets is waiting to cash in when they drive gold through the roof next year?
I do...............
GOT GOLD???????????
If you really, really think hard about this, what is going to happen to people without gold when we go back to a gold standard and they have heavy $ denominated debt? With gold at $1000/oz and payrolls the same as they are today, people will be so far in the hole they can't ever look up again and if they didn't have gold then they are going to find themselves in perpetual slavery. My advice is to trade the current fiat for gold before it's repriced too badly and also to get the heck out of debt because I can see the noose tightening around peoples necks. I suspect this last ten years of gold price falling may have been a trap to steal the gold mines from marginal producers and Barrick was the tool used to do this. While Barrick was busy hedging and becoming indebted to it's bankers, it was sucking up much of the worlds gold reserves so that when gold went back up, it's bankers could foreclose and be in perfect position to a return to hard money.
Anyone buy that conspiracy theory?
RE: Barricks Math jrmfl
NEW 12/5/2003 3:36:19 PM
that would be the carlyle group. bankrupt common, default
and get it for pennies.
sound familiar?
RE: You think they are holding the notes? wrs
NEW 12/5/2003 3:41:01 PM
Are they the other side of Barricks hedges? Im not sure that has been revealed but it could well be the case. Whoever the counter-part is, it is most certainly someone in a position to know how things are going to turn out and to position themselves accordingly................
RE: I suspect ABX's counterparty on leases tz250
NEW 12/5/2003 4:23:42 PM
To be the Bullion banks but also believe that if ABX were to go insolvent I dont believe any one entity "could" demands payment leading up to this event. Since we are truly post free market capitalism I suspect credit gets extended (read bailout) while legislation works its way into protecting the ABX's of the world through price controls, excise taxes, user fees ect..
Maybe Barrack is the Bank albeit serving the same masters.
If Barrack were to fail imagine the moonshot for gold and the ripple effects--too mind boggling for me.
I'm starting to think Gold will see $3000 per ounce adjusted for deflation today, hence $800 oz.
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