This post not directed at you Tommaso, but using your post of Calandra's release to put Pollitt's comments in some context.
You folks are remaining ignorant of Barrick by being lazy and using sensationalistic journalism and Gata crap as your primary means of researching gold companies. I certainly do not believe Calandra is a good financial statement analyst, or an analyst of any kind, and Pollitt's comments do not imply the entire hedge book is due this year, and the article is very misleading to the uninformed. Pollitt's comments, in the article, which may have been taken out of context by Calandra's sensationalism, is not a good analysis of Barrick's hedges, or what a writeoff of their hedge book really is or what impact if any it has to the ability of Barrick to generate cashflow, develop mines or any other activity.
Assigning a value to Barrick's hedge book and writing down (or up) its current value versus the current gold price as if it was liquidated today is a paper exercise only. I remind everyone that Barrick has 15 years to deliver the majority of the 18 million oz of borrowed gold. Barrick locked in a certain price for their 18 million oz,...nothing more, nothing less. They will utilize gold production in future years, to pay back the gold loans. Over the 15 years, the amount they have to pay back each year except this one is fairly even and only amounts to an average of around 1 million oz per year. Pollitt suggests a notional value of Barrick's short position, but I feel that statement is a silly one,...very sensationalistic and likely meant to sway people to his gold picks and away from the well managed, big gold producers because they are all hedged to some extent,...Newmont, Anglo-American, Anglogold and Barrick all still have large hedgebooks. I believe Pollitt prefers mid and small cap producers, so his comments about large cap producers should read with that in mind,..he is biased and invested in other companies. Bottom line, Barrick is not threatened at all by having to deliver 1 million oz to its gold loans each year for the next 15 years, and the market doesn't seem to think so either today as Barrick posted a good gain even though the POG was down until market close.
A separate issue are the $5 million oz of written calls and options due this year. To say that they could all be called and Barrick would have trouble rolling them over or delivering to some of them is misleading as well. Barrick's big chunk of cash in the balance sheet, strong production in their mines, low cash costs, high cashflow, no net debt etc., etc., means they will have no trouble rolling over the contracts into additional short or long term hedges. They refer to this in their 2001 yearend report and I think those slamming Barrick, and those interesting in learning the truth about this company, should get down and read that 101 page report because your ignorance of the company shows through every post you make. Gold leasing rates are still low,...and long term interest is at pretty good levels, so the contango over 3-15 years is still pretty good, so Barrick can still lock in good prices for their gold compared to the current POG.
Before coming back to us with further ignorant remarks from ANALysts with agendas and news reporters interested in a good story rather than the truth, read all 101 pages of Barricks yearend, especially pg 44-93 which gives all the financial details and good descriptions of the derivative program and philosophy. If you don't do this, why should we reply?
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http://www.barrick.com/4_Annual_Report/
For 2001,we chose not to elect hedge
accounting on any contracts outside of
our normal gold sales contracts.The total
market gain on these derivative positions
was $33 million in 2001,related primarily
to option premiums earned and to the
decline in US dollar interest rates.
We make use of a number of strategies
to reduce risk and improve returns in our
Premium Gold Sales Program,which result
in recognizing the instruments on the
balance sheet at fair value and recording
changes in fair value through the income
statement.
Our Premium Gold Sales Program
represents a “AA-”rated off-balance
sheet asset worth a notional amount of
$5.5 billion,on which we earn interest
at fixed rates with a diversified group of
counterparties with strong credit ratings.
To improve returns,we have diversified
this asset by investing approximately
$1 billion or 17 percent of the overall
Program into an off-balance sheet fixed-
income portfolio of corporate securities
with a number of top fund managers,
with changes in fair value being reflected
in the income statement and on the
balance sheet.
We have locked in gold borrowing costs
on approximately two-thirds of the overall
Program while maintaining floating lease
rates on the balance to maximize the
forward premium earned.While the fixed
lease rates are normal sale contracts and
are off-balance sheet,the floating lease
rate contracts are recorded on the
balance sheet at fair value.
Third,we sell gold call options to
generate additional revenue.The calls
are written at prices at which we would
be comfortable adding to our forward
sales program if we are exercised.We
have the ability to convert the call options
exercised,at our discretion,including
related premium income,into spot deferred
contracts,which accrue contango
(US$Interest Rate –Gold Lease Rate )
the new delivery date .The call options
and the premiums from expired options
are recorded on the balance sheet and
the fair value adjusted through earnings.
Outside of the gold program,we
make use of other hedges to manage our
cash flows,specifically:foreign currency
hedges on Canadian dollars and Australian
dollars to cover approximately one or
two years of operating costs;by-product
revenues,primarily silver,to reduce
volatility on our operating costs and
other interest rate hedging through
which we have locked in the rates on
our $200 million Bulyanhulu project
financing,for the full nine-year term at
an all in rate of approximately 8 percent.
We also lock in interest rates on our cash
deposits.All of these derivative instruments
are recognized on the balance sheet and
changes in the fair value are recorded in
Non-hedge derivative gain (loss)on the
income statement.
For Nickle,...I agree with enigma,...I have know idea why you bother posting here. Read up on the Barrick projects below, and I believe it is about time, you in particular, read the 101 page Barrick year end report several times before you post to me again,...and wait until next weekend because I really am too busy to keep removing your veil of ignorance about Barrick, only to have you slam it back down after you read some Gata crap.
ASSETS AND OPPORTUNITIES to add to current current reserves and replace Nevada production.
•Pascua-Lama/Veladero –with its
25 million-ounce gold reserve,the
world ’s largest undeveloped gold
property.With the Homestake
merger,Veladero –previously a
joint venture –is now 100 percent
Barrick ’s,and the proximity of the
Property to Pascua-Lama allows
us to take a unified approach to
developing this district.In 2002,
we ’re putting a plan in place
for a Phase One heap leach
operation,followed by full-scale
development of Pascua-Lama
as gold and silver prices improve
or our economies of scale lower
costs and improve economic
returns.We see this district as
being capable of producing
1.5 million ounces annually
at about $125 an ounce.
•In Canada,at Eskay Creek,we
see substantial opportunities
to expand both production and
reserves.In the U.S.,exploration
at the Meikle Mine,at Banshee
and at the Ren Property promises
to breathe new life in to the
underground –offering the
prospect of low-cost production
close to existing infrastructure.
•Moving from the Americas to
Africa,at Bulyanhulu,our District
Development Program will build
on a base of increased production,
as well as on excellent results
a several exploration projects
in the region.In fact,Kabanga,
our exciting large nickel deposit –
acquired with Bulyanhulu in
the Sutton acquisition –is fast
becoming a significant asset in
its own right,offering us a variety
of options to realize its value.
•In Australia,continued exploration
makes us increasingly optimistic
about Cowal and its nearly
3 million ounces of reserves.
We also think 2002 could be the
year that our commitment to early-
stage exploration within our District
Development Program pays off in
a big way.Taken together,we
have a variety of organic growth
opportunities at various stages.
THE VALUE OF HOMESTAKE
The organic growth opportunities
I ’ve outlined are just one way we ’re
building value at Barrick.For another,
consider the Homestake merger.
To begin with,Homestake was
a strong fit in terms of corporate
culture.As a company that was both
value-and values-driven,Homestake
shared Barrick ’s commitment to
corporate responsibility.Our
common emphasis on worker safety,
environmental responsibility and
community building is a calling card
wherever we operate in the world.
And that cultural fit was matched
by the compatibility of our assets
and operations.When we looked at
Homestake,we saw an opportunity
to increase production by 50 percent
at the same low costs by issuing
35 percent more stock,which
we believe will lead to growth in
earnings and cash flow per share
and improve our return on equity.
Consider that the merger
brought together Barrick ’s three
world-class assets – Goldstrike,
Pierina and Bulyanhulu –with five
new Homestake properties.
In North America,they include:
Eskay Creek,a truly premier property
in British Columbia,with high-grade
reserves averaging over an ounce of
gold and 55 ounces of silver per ton.
Homestake also brought Barrick the
Hemlo and Round Mountain joint
ventures in Ontario and Nevada,
respectively.Both are good,solid
low-cost producers.
In Australia,Homestake ’s holdings
comprised a group of quality,low-
cost mines capable of generating
about a million ounces of gold
at $186 per ounce:half of the
Kalgoorlie Super Pit,Australia ’s
larges gold mine,and three mines
that make up the Yilgarn Properties.
On the administration front,we
have more than achieved our original
estimate of administration and
financial synergies,with $60 million
in after-tax savings built into the
2002 plan.We foresee achieving this
amount and more on a sustainable
basis going forward –and beyond
that,we see additional benefits on
the operational side.
Case in point:with the Homestake
merger,Barrick acquired 20 million
ounces of future production. |
