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Gold/Mining/Energy : Samex Mining | OTC:BB - SMXMF | Canada - V.SXG -- Ignore unavailable to you. Want to Upgrade?

To: Travbfree who wrote (412)	2/7/2000 12:19:00 PM
From: Travbfree	Read Replies (1) \| Respond to of 539

(This article by Bill Murphy starts at post #410 and reads in sequence to #417) Same basics that long-time Cafe members are aware of: There is a 120-tonne monthly supply/demand deficit at $285 gold, with around 10,000 tonnes of gold already lent out by central banks. The big shorts have been counting on producer forward sales every month to fill the monthly supply/demand gap. But Placer Dome just announced that it will deliver into forward sales as they come due but not sell forward anymore as has been the company's practice. Gold shorts can color that future gold supply gone. Barrick Gold may do the same. The pressure will be on other producers to follow suit. The reason for the pressure on hedged gold producers could not be more obvious. Press reports credited Placer Dome's announcement as the reason for Friday's $23 rally in the price of gold. Does that mean that if five other major gold producers announce the same sort of restriction of hedging, the gold price will rally $115? If just one announcement can have that dramatic effect on the gold price, shareholders will scream for all the heavily hedged producers to do the same thing. Gold share prices soared on Friday. One has to wonder what has taken the producers so long to make moves such as Placer's. Do shareholders of gold producers want their companies to reduce hedging and have their investments double or triple in value because of soaring gold prices? Or do they want what they had the past couple of years: big hedges on the books and share prices in the dumpster? The pressure on Barrick Gold will be immense when it makes a financial presentation to analysts Monday. Placer President Jay Taylor said Friday that "the industry needs to do its part" -- in essence, Reuters reported, "issuing a challenge to other producers to rethink their hedging stances." If just Placer Dome's announcement can move the price of gold up that much, then how can Barrick tell financial analysts that it will not change its hedging policy? My guess is that if that happens, many financial analysts will just go home and sell Barrick stock. It would be a disastrous decision by Barrick and probably would be made only if the call comes in from Washington to do so, which would be further evidence of U.S. government meddling in the gold price. One more thing. Let us bring back Ashanti and its hedge book with its hundreds of millions of dollars in losses. What is to be done about that? If Ashanti's hedges have not been covered, its losses are mounting again. How many other Ashantis or Cambiors are out there? There have to be other overly hedged and therefore exposed gold company blowups ready to surface on the next sharp rise in the price of gold. With the class-action lawsuit having been brought against Ashanti, top brass at these companies are going to freak when they realize the implications of the lawsuit. That is just one more reason why Barrick's executives better get their act together and start making decisions that at least look responsible. If they do not follow Placer on Monday and curtail their hedging, and the price of gold still explodes, creating hedge problems for Barrick along with a faltering Barrick share price, the Barrick bigshots will be in scalding water. That is a no-brainer, and the Bushes and Mulroneys and other big names on the Barrick board will be getting their own wakeup call, if they have not gotten one already. Barrick Chairman Peter Munk is supposed to be on CNBC on Tuesday morning. That should produce a smile. Here is some additional input from the www.kitco.com web site about what Barrick will do on Monday: "Copyright ¸ 1999 Gambler/Kitco Inc. All rights reserved. "There's a rumor that Barrick is suspending their hedging activities, as posted by GATA. This is completely true! "I was hoping to post this information on Tuesday but was too busy. "I had lunch with a client/friend of mine who has a brother in Barrick management. The brother told his sister to buy Barrick calls because an announcement would be made the following week about the suspension. "The real news is that not only has Barrick decided to suspend its hedging, it has reversed course and has been COVERING a portion of its forward sales. The last gold price rise in September spooked management and of course inspired investor dissension. "The brother could not be more specific about the amount covered and was very uncomfortable spilling the beans that they had covered. "A similar situation occurred back in January 93 when a different client/friend and I were having lunch with her brother, a vice president of Upjohn. He encouraged his sister to buy calls, as Upjohn was going to make an important announcement concerning an AIDS inhibitor drug. I bought thousands of out-of-the-money calls, but the announcement didn't come until a week later on CNBC and it turned out that Upjohn didn't get the FDA approval. So sometimes even hearing the news from the horse's mouth is no guarantee." (This article is continued on post #414)