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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: GST who wrote (48377)	2/7/2000 3:09:00 PM
From: baystock	Read Replies (1) \| Respond to of 116764

The ABX news today is actually bullish for gold: <<John Ing, a gold analyst and president of Maison Placements in Toronto, called Barrick's announcement ''a bold step.'' The company's plans to buy back 6.8 million ounces will ''significantly reduce their hedge books,'' he said. >> MONDAY, FEBRUARY 7 2000 2:11 PM EST TORONTO, Feb 07, 2000 (The Canadian Press via COMTEX) -- Mining giant Barrick Gold announced major changes to its hedging program today that should continue to push the price of bullion higher. Toronto-based Barrick, the world's fourth-largest gold producer, said it would reduce the amount of gold in its hedging program by 32 per cent or 1.3 million ounces by the end of the year. The company will also buy back 6.8 million ounces of call options, spread its contracts over a longer time and accept a lower price for its gold on the futures market. ''With some key changes to enhance our leverage to rising gold prices, we will now be able to provide earlier participation in rallies while maintaining the downside protection,'' Barrick's chief financial officer, Jamie Sokalsky, said in a release. Barrick's announcement follows a move last week by Canada's second-largest gold producer, Vancouver-based Placer Dome. It announced Friday that it would suspend its hedging due to higher anticipated bullion prices. Hedging is an insurance strategy used by many gold producers to protect themselves against price downturns by selling gold months and years in advance at a set price. One downside, however, is that this depresses the long-term outlook for the commodity. The price of gold steadily climbed today as industry watchers expected such an announcement from Barrick. Bullion closed today in London at $313 US an ounce, $2.60 higher than Friday's closing price in New York which had followed a $23.20 one-day rise. However, the price eased in later North American trading today. John Ing, a gold analyst and president of Maison Placements in Toronto, called Barrick's announcement ''a bold step.'' The company's plans to buy back 6.8 million ounces will ''significantly reduce their hedge books,'' he said. Like many critics of hedging programs, Ing said the industry has been ''shooting itself in the foot'' by selling tomorrow's gold at today's prices. ''And now at long last they've been able to figure it out that these gold sales are bad for their business as well for their companies.'' Other major international gold producers have also recently announced that they won't sell gold forward because they expect gold prices to rise this year. For Placer Dome, the announcement had a sudden and dramatic effect on its share price, up 24 per cent Friday afternoon. The price was little changed in heavy trading today. Barrick shares edged up slightly after today's announcement, as executives met with analysts to discuss their plans. In making the announcement, the company said it expects to increase production by 35 per cent to five million ounces in 2003 -- at a relatively low cost of $145 US per ounce. Barrick should generate $1.5 billion US in free cash flow over the next five years, after building three new mines, the company said. ''By focusing on our high-quality, low-cost mines, we expect to increase earnings and cash flow to levels never seen before in the gold industry,'' president Randall Oliphant said in a release. ''The projects driving our growth have excellent rates of return and exciting potential for expansion. We are entering a new phase of growth with 40 per cent of our reserves in development.'' Copyright (c) 1999 The Canadian Press (CP), All rights reserved.

To: GST who wrote (48377)	2/7/2000 3:16:00 PM
From: Enigma	Read Replies (1) \| Respond to of 116764

I don't think you have analysed it correctly - I listened to the conference call and heard that Barrick will participate fully from production for the next two years in increases in the POG as a result of the call options which were purchased 'extremely cheaply' in December. They didn't mention the price - presumably the expiry is at least up to 2 years.

To: GST who wrote (48377)	2/7/2000 3:21:00 PM
From: goldsheet	Read Replies (2) \| Respond to of 116764

> When the trend is down, shorting can't fail. When the trend is up, shorting can't work ... and when the trend is sideways, like the last three years, you pocket huge quantities of cash (about $2 million per day cash flow) to purchase and develop properties that are out of the reach of smaller firms.

To: GST who wrote (48377)	2/7/2000 3:23:00 PM
From: BSGrinder	Read Replies (1) \| Respond to of 116764

It appears to me that Barrick has declared war on the rest of the industry. It seems they have just spent a lot of money repositioning the net of all their hedges at a higher level: $360 for year 2000. If gold stays significantly below that price, they gain, while everyone on the unhedged side loses (allowing Barrick to purchase further reserves at firesale prices). If the price moves above $360, their hedge book turns negative and they look stupid. So it would seem that they will keep selling forward as much as is required to keep the price below $360. Therefore, you are right, if gold rallies strongly, particularly past $360, then Barrick is losing control. /BSG