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Gold/Mining/Energy : Gold Price Monitor

GDXJ 120.00

+2.0%

Dec 22 4:00 PM EST

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To: John Hunt who wrote (34172)	5/20/1999 12:14:00 AM
From: Greg Ford	Read Replies (2) of 116822

Basically, Barrick would enter into a transaction with a bullion bank in the over the counter market. They would contact the bank and execute a sell order for gold. The bank would borrow gold from a central bank and sell the gold through the futures market. They would then take the proceeds and invest it as instructed by Barrick. Barrick would be obligated to pay a lease fee for each roll period that it sets. Barrick with its credit lines could continue to roll the gold forward for up to 15 years. When they settle the contract they would enter into a paper transaction to purchase gold and offset the purchase price against the forward price. They would not delivery physical gold. They would however sell physical gold on a regular basis through the spot market. The interesting thing about Barrick's program is that they are now investing the proceeds in credit derivatives and other higher bearing interest products. This would imply that they are taking more risk to earn a higher return. Also it appears that they have a large number of call options outstanding. They may use the call premium to start forward sales. Hope this helps. Greg

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