Hi Tom,
I'm one of those guys who sold my Barrick just because of their continuing hedges. And the market has proven that to be a mistake (so far).
However, I must add that when ABX sold forward to yield a capped price of $340 per ounce, that seemed a pretty good price too. Now we must ask whether Abx can produce at that cost now.
See this quotation from an old posting on another thread.
"The recent high profile blow-ups of mine costs at NOVAGOLD and Gammon Lake are poster children of this trend, but unfortunately are more representative of the rule than the exception.Nearly every mining company is experiencing the same problem these days, making industry returns on investment close to 0% even with gold at $800/oz. Capital has been strangled from the sector this year, making it likely that even more mine projects will be shelved, and thus the vicious circle will continue until gold is a MUCH higher price. Let me get this straight - $800 IS NOT A GREAT GOLD PRICE! In 1980, when the U.S. money supply was roughly 15% what it was today (not including massive growth in other worldwide currencies), $800 was a good, if not great price. But in today’s world, $800 is the equivalent of roughly $30 oil (oil is currently $95/barrel), in other words a price level where few, if any projects have any chance at material profitability. And, as investors know, stocks do not go up when an industry cannot operate profitably. |
