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Gold/Mining/Energy : Barrick Gold (ABX) -- Ignore unavailable to you. Want to Upgrade?

To: Enigma who wrote (1506)	12/6/1999 10:13:00 AM
From: nickel61	Read Replies (2) \| Respond to of 3558

The analysis is that gold hedging positions and their outcomes are almost unknowable for most common shareholders even large institutional ones.Therefore it is important that this additional risk be understood by all shareholders and that management has a responsibility to full and timely disclosure of these positions and the rationale behind them. Without that the common stock investor may buy a stock that he thinks will benefit from a higher gold price when in fact a higher gold price might well bankrupt the company and cause the loss of his total investment. Witness what has happened over the last several months to the shareholders of Ashanti and Cambior. Your arguement seems to be that the Barrick management is so much smarter than the managements of these two other gold producers that the shareholders have no need to worry. I find that overly naive. These hedge books are dynamic and highly complicated and are traded in the Over-the-counter market where they are not necessarily open to public disclosure.In that situation it is almost impossible to fully understand the risks you or your clients are being exposed to by management and their actions to "hedge". If indeed all they were doing were hedging their future production there would be less to worry about. But the sheer magnitude of ABX's hedge book makes it appear that it is seeking to profit from a decline in the gold price like a hedge fund would seek to do, rather than protect their future cash flows like a prudent producer of gold who is offsetting some of its normal business risk. What we are engaged in here is a discussion to further understand the magnitude of their involvement and the effects that has had in the lowering of the gold price. And to ask the question why? Are we as shareholders underwriting a firm that seeks to lower the price of its only commodity ? And Why? Are the best interests of the shareholders being served in this way ? Are management and the board of directors selling the stock of ABX? And why are they selling if they think the "hedging strategy(sic)" is beneficial to the interests of shareholders? Furthermore if the all in costs of mining an ounce of gold is about $280/ounce for the remaining producers why is not the management of American Barrick seeking to reduce its short postion at this price level since there is already a 2000 tonnes annual shortfall in production versus demand at these price levels. What are they waiting for? Are they hoping to use there hedge book to buy up all their competitors who have been put into financial distress by the current low price enviroment? Well DD you have a Pekenees. Feel free to add your comments to the discussion.And thank you for providing such a wonderful foil.