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

To: Tommaso who wrote (2493)	5/3/2002 5:13:12 PM
From: russet	Respond to of 3558

>>Although the U.S.$ is going up,<< Meant to say U.S.$ is going down. A declining dollar would make gold hedges established using dollar-denominated bonds somewhat less profitable that the hedges have been during the recent years of rising dollar and low inflation. True, but everything is relative to something, and in your example it is relative to the U.S.$. Barrick hedges currency risk too,...their current balance sheet indicates they have some of those Australian dollar contracts, and they undoubtedly spread the bond buying in different currencies relative to the current mix of gold production,...although they may not be buying the Tanzanian currency, or the Argentine one, and perhaps others that have blown up. The term hedging means many things to different people. Some consider it a very aggressive and speculative way to make money. Others understand it as a way to smooth out price fluctuations of outputs and inputs making it easier to forecast cashflows and profits in the future and know in advance what resources will be available for future growth and development. In Barrick's case, I believe they seek to maintain and grow cashflow to allow for future growth in reserves, resources, assets and profits. In bad POG years they must settle for replacement of reserves and resources and reduction in costs,...of course assets are cheap and a strong P/E makes it easy to exchange shares for prospective properties. In good POG years, cashflow and shareprice will boom, new low cost mines will be brought on stream and the drill bit will aggressively be employed to find next years low cost deposits. Maybe Monk will turn Barrick into a royalty trust next year, following Trizec Hahn. Perhaps the gold producers will follow the oil and gas industry lead in Canada. We are turning everything into income trusts up here.