The idiot doing that analysis is a fool, and doesn't understand a covered forward leasing contract is. You clearly don't either, or you wouldn't continue to embarrass yourself by posting this foolishness.
The losses from the hedgebook are notional, an accounting exercise, and dissolve once the gold is delivered to the hedge. Barrick doesn't owe the counterparties money, they owe them gold,...and Barrick's has lots of "cheap to produce" gold.
Barrick loses nothing by producing the hedged ozs of Gold unless the cost to produce an oz rises above the amount they received for each hedged oz. The capex for all the mines have been paid off,... they have no net debt, and their costs to produce an oz of gold are in the mid US$200's.
The payments for those pre-sold gold ounces have been sitting in bonds collecting interest since they sold the gold they got from the forward lease contract, and the interest plus past payments continue to give them postive cashflow per hedged oz produced as their average revenue was US$320 per oz and their average current costs to produce that oz to cover the lease are in the mid US$200's. I think even that twit ANALyst you cited could figure out that is a profit per oz.
About 75% of current annual production receives the spot price, so their average revenue per oz is in the high US$300's and rises every time the POG rises. They are in no danger of losing money if the POG keeps climbing and costs remain at current levels.
It is amazing that so many can be so stupid about such a simple concept as preselling future production,...something many other commodity producers do (coal, PGM's, base metals, oil and gas, food crops etc,), but it seems only gold ANALysts from the nutcase fringe, and their brain dead readers fail to understand it.
Why don't you ask this twit analyst to come on to this thread and explain how this notional loss due to the hedge affects the huge cashflow Barrick makes each year from mining and processing their gold,...it doesn't in the slightest because Barrick owes physical gold, not dollars to the counterparties. It also does not affect their net balance sheet,...it will never by itself cause Barrick to trigger the net worth clause, because it is an imaginary number and has no effect on the cashflow, funds used in operations, or balance sheet assets.
Analysts who have a clue about this industry do not make these stupid statements, because they know what a notional valuation is, and what a covered forward selling contract is. Clearly the bimbo writing the analysis you cite doesn't. |
