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Gold/Mining/Energy : Barrick Gold (ABX)
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To: Robert Salasidis who wrote (3510)8/2/2006 9:36:06 PM
From: russet   of 3558
 
The math suggests they paid up the difference between spot gold price plus used the invested proceeds from the original forward sale which should be about $400 per oz now to buy gold on the spot market and close the contracts out. This would have supported the gold market over the last quarter. Of course they may have done some other deal with the counterparties and central banks. I'll have to have a close look at the full quarter financial statements to determine which.

Hedge book reduction

Barrick believes the long-term outlook for gold prices is positive and has aggressively reduced its gold hedge program. During the second quarter, the remaining legacy Placer Dome gold hedge position was eliminated, for a total reduction of 7.7 million ounces year to date. The total cost of reducing the Placer Dome gold hedge position was approximately $1.8-billion, of which $300-million remains to be paid. During the second quarter, the company's realized price on its gold sales was reduced by $35 per ounce, primarily as a result of hedge accounting adjustments related to the acquired Placer Dome hedge position. The corporate gold sales contract position currently totals 2.8 million ounces, and the company intends to continue to reduce this position opportunistically, such that it is eliminated by no later than the end of 2009.
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