Barrick dismisses European bank's impact on gold
05:47 p.m May 12, 1998 Eastern
By Paul Simao
TORONTO, May 12 (Reuters) - The establishment of a European central bank
will have a negligible impact on the future price of gold, Barrick Gold
Corp. Chairman Peter Munk said during a spirited sermon to shareholders
at the company's annual meeting on Tuesday.
Munk spared neither fire nor brimstone in a thundering denunciation of
those who have argued the European Union's 11 member countries will be
major sellers of gold when a European central bank is created on January
1, 1999.
Gold analysts have said the European central bank's decision to hold a
certain portion of its reserves -- estimates range from five to 30
percent -- in gold would be an important benchmark for central banks
outside and within the EU.
Central bank sales of gold were cited as the trigger for gold bullion's
dramatic fall from a 1997 high of $363 an ounce to a low of $277.90 an
ounce early this year.
Munk said the European central bank's decision, if and when it was
announced, would not change the fundamentals for gold bullion.
''My proposition to you is that it does not matter because the
composition of the new central European bank is such that the balance of
the gold of those nations that have more than 30 percent will remain in
what is going to be called and which, de facto and legally, remains the
national central banks,'' Munk told shareholders.
Munk contended it would be the central banks of France, Germany and
Italy that would decide the future direction of bullion.
Total gold reserves held by the 11 members of the EU amount to more than
10,200 tonnes, of which 75 percent is controlled by the German, French
and Italian central banks.
Germany has 29 percent of its reserves in gold, France holds 48 percent
in gold and Italy maintains a 28-percent holding.
The world average for gold as a percentage of central bank foreign
exchange reserves is 15 percent.
Munk said he had received personal assurances during a recent gold
industry conference in Davos, Switzerland that ruled out sales by
Germany, France and Italy.
''Those three have made categorical statements in our presence in Davos,
Switzerland that they do not have any intentions to demonetize any
amount of gold,'' Munk said.
Sporting his trademark fedora and sipping a cappuccino, a relaxed Munk
later told reporters that Barrick, North America's second largest gold
producer, was poised to become a ''consolidator'' for the gold industry.
''On the assumption that the gold industry will not improve, I think
Barrick will stand out more and more as a result of its cash flow and,
as such...we will be in a position to make acquisitions and mergers,''
he said.
The Toronto-based company recently reported a 33 percent increase in its
first quarter profits to $75 million, or $0.20 a share, from $55
million, or $0.15 a share, in the same period last year.
Following its annual meeting, Barrick raised its cash dividend to $0.09
a share from $0.08 a share.
Barrick, more than any other gold producer, has relied heavily on
acquisitions to increase reserves and fuel its hungry growth strategy.
The 1996 purchase of Arequipa Resources, which gave Barrick access to
the low cost Pierina mine in Peru, was one example of a willingness to
pay top dollar for prized assets.
Pierina, due to come onstream later this year, is estimated to hold 8.1
million ounces of gold reserves.
With the imminent completion of Pierina, Barrick is now turning its
attention to developing the Pascua orebody on the border between Chile
and Argentina.
Barrick recently increased its ownership in the property to 90 percent
and purchased an adjacent property just inside the Argentine border.
''We think Pascua may well contain the largest gold and silver reserves
in the whole of South America,'' Barrick Chief Operating Officer John
Carrington told shareholders.
The Pascua mine currently has reserves of 11 million ounces of gold and
335 million ounces of silver.
Barrick shares fell C$1.00 to close at C$31.20 on the Toronto Stock
Exchange.
($1-$1.43 Canadian) REUTERS |
