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Gold/Mining/Energy : Gold Price Monitor

GDXJ 101.44

+3.5%

Nov 12 4:00 PM EST

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To: Greg Ford who wrote (9163)	4/2/1998 9:59:00 AM
From: Enigma	Read Replies (4) of 116758

Since Barrick's production is already hedged it doesn't matter if the price the gold is sold at is today's price, or anywhere between it and the forward price. Let's say the average hedged price is $400/oz - Barrick will get this price even if the spot price stays at $300. i.e. it will get $300 cash and $100 by buying the forward contracts as they come due (400-300). If the spot price moved to $500 Barick would still get $400. i.e. $500 cash less $100 loss on buying back the forward contract. However the beauty of Barrick's situation is that it has call options in place to ensure that it participates even when the spot price exceeds the forward price - the last I heard was that it will participate to the extent of 60% of a move beyond the hedge price. Very clever, and innovative. (I notice that Peter Lynch completely missed this in his (positive) comments about Barrick)

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