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

To: nickel61 who wrote (2800)	5/17/2002 10:23:27 AM
From: tyc:>	Read Replies (3) \| Respond to of 3558

When you talk about the "cost" of gold, why do you use the market price ? Why don't you use the cost of production ? Isn't the seller's profit the difference between his production costs and what he gets for his production? When the production has already been sold, what has the current market price got to do with the profit he makes ? >>Example: Barrick sold 1,000,000 ounces of gold at $290/ounce in 1999. The proceeds $290 X 1,000,000 = $290,000,000 are invested in bonds yeilding 6% for five years....... .....So the Premium is the difference between the two. $388 million total proceeds (the origional spot sale plus five years or investment returns) minus the current spot cost of 1,051,010 ounces or gold at $290/ounce that is $305 million ....<< I am not concerned about whether the forward sale was less profitable than a spot sale if the price stays the same or goes up. The sale was profitable because the price obtained was considerably higher than the cost of production will be. That being the case, please explain how the producer is "underwater". No ! Don't bother. I've heard enough.