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

To: Enigma who wrote (1683)	12/30/1999 10:39:00 AM
From: nickel61	Read Replies (1) \| Respond to of 3558

All gold production of Barrick, like all gold producers is sold into the spot market. The leased gold is also sold into the spot market therefore depressing the price.The proceeds from the sale of the leased gold goes into the purchase of Treasury Notes paying 6% interest versus the 1% on the gold lease the advantage to doing the whole transaction is the ability to "earn" the 5% point spread. The lease is to be repaid in gold not dollars!!!! therefore none of the proceeds of the sale of the leased gold goes to reduce the loan the loan will be repaid by gold!!!!In THE FUTURE WHEN IT IS MINED OR IN THE CASE OF A HEDGE FUND BY BUYING IT BACK IN THE FUTURE WHEN THE LEASE MATURES OR IT IS CALLED!!!!!!! That is why it is risky because the FUTURE value of the dollar(or other currency)THAT IS USED TO CALCULATE THE COSTS OF MINING THE GOLD IN THE FUTURE could be at a disadvantageous rate in the distant future when the actual gold is mined. A simple way to say this is the costs of mining the gold in the future(lets say five or ten years from now) could be much higher (in the local currency or in the US $)than you anticipated and you must recognize this is a risk since none of us can forcast costs in that distant a future. If you don't understand the basic dynamics of why hedging exists how can you really comment on the rightness or wrongness of the "emotional comments"near the end?