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Gold/Mining/Energy : Barrick Gold (ABX)
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To: Ken Benes who wrote (3475)12/10/2003 1:38:17 PM
From: tyc:>  Read Replies (1) of 3558
 
>>This allowed Barrick to generate a massive, cumulative $2.3 billion profit

I don't know whether this is true. If true, when was the profit made ? I would assume that it was booked ONLY as each hedging transaction was CLOSED. And the profit would have been the difference between the cost of production and the proceeds of the hedge in that final year.

If that is so, won't the profit/loss on their remaining hedges be the difference between their costs of production and the proceeds of the hedge in the year that each hedge is ultimately closed ? The amount that they will receive on closing each hedge can be pre-calculated. Only the costs of production remain uncertain. Is this not so ? Are you suggesting that their costs of production will be so high as to generate a loss on these transactions ? Even if this remote possibility occurs, will they really have suffered a loss if unhedged production compensates ? Does every aspect of a company's operations have to be profitable every year for overall performance to be acceptable ?
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