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

To: tyc:> who wrote (2825)	5/18/2002 9:31:33 AM
From: nickel61	Respond to of 3558

Timing is of course essential to the effect that short covering has but in general I agree with you. The total market hedges have created a huge potential buying power that is lying dorman and threatens to supercharge a rise in gold much like a short covering rally in stocks. That is of course why the analysis of it's size and the liklihood of it being covered is so important to an understanding of the likly upside of the spot gold price. The other consideration is was the spot price of gold effected negatively when the hedges were put on over the last ten years so that the current spot price is actually below the free market equalibrium point. If it is then the swing back would both exacerbate the short covering effects of the hedge buybacks and the duration of the rally.

To: tyc:> who wrote (2825)	5/18/2002 9:43:40 AM
From: nickel61	Read Replies (1) \| Respond to of 3558

Put quite simply the Barrick hedge book alone represents 18 million ounces of future spot market buying pressure. Either direcly in an attempt to cover the hedges in the spot market or by withdrawing that amount of gold from the future spot deliveries. Multiply that number by the other brain dead hedgers like Placer Dome, Ashanti, and the Austrailian nut case gold miners and you have a very powerful market dynamics that can be exploited by those who understand it.

To: tyc:> who wrote (2825)	5/18/2002 9:47:05 AM
From: nickel61	Read Replies (1) \| Respond to of 3558

Reuters Company News Aurion Gold to continue cutting hedge book LONDON, May 17 (Reuters) - Australia's largest gold producer Aurion Gold Ltd (Australia:AOR.AX - News) said on Friday it will continue to reduce its hedge book in order to take advantage of higher market prices. "We are working on our hedge book to reduce positions over time. We will continue to manage this and drop it to lower levels," Aurion Gold's general manager, Rob Dougall told reporters. Dougall said the company planned to reduce its forward sales exposure to 60 percent from 86 percent of its total reserves over the next two years. It will do this by delivering gold into its hedge book and by increasing its reserves. "It does not make sense with the market at the moment to reduce the hedge book now. We plan to reduce (hedging) commitments to 60 percent of our reserves within the next 12 - 24 months," Dougall said at a presentation here. But an upturn in prices or a rise in the Australian dollar (AUD=) would give the company the opportunity to reduce its forward sales earlier and gain more exposure to firmer bullion. "We will do it on a faster basis if the market allows us to do that," Dougall said. Aurion Gold, which was formed in December 2001 by the merger of Goldfields Ltd and Delta Gold, reduced its hedge book slightly to 5.5 million ounces at the end of the last quarter. Australia is the world's third largest gold producer, mining about 300 tonnes a year. Gold hedging -- selling unmined nuggets at fixed prices -- has been a popular industry tactic to guarantee revenue and thwart cyclical price downturns. But critics assert the practice stymies market-driven price moves. It has also punished some heavily hedged companies, which actually lost money when they were forced to buy back gold hedges at higher prices than they had agreed to sell under options agreements. Overall Australian miners, including Aurion, Newcrest Mining Ltd (Australia:NCM.AX - News) and WMC Ltd (Australia:WMC.AX - News) reduced their hedging positions in the March quarter by 200,000 ounces to 24.3 million ounces, excluding positions held by the former Normandy Mining. Due to hedging, Aurion it achieved an average spot sales price of A$581 an ounce in the March quarter, beating the spot market average of A$461 an ounce. "We have to make sure we deliver profits whatever the Australian dollar does. We need to protect ourselves against a strengthening Australian dollar," managing director Terry Burgess said. Gold prices at around $310.00 an ounce are currently near their highest for more than two years. Aurion also reported a net profit of A$20 million for the March quarter achieved on gold production of 238,711 ounces, mined at an average total cost of A$419 an ounce.

To: tyc:> who wrote (2825)	5/18/2002 10:26:28 AM
From: nickel61	Respond to of 3558

Just to clarify what I just said. Barrick sells an ounce of borrowed gold today at $312 and invests in a five year US treasury note yeilding 5% to maturity in May of 2007. That is 5% compounded for five years which allows them to claim a "sale" price of $398/ounce!!!!!!!!! Yes that is as simple as it is...The whole process is bullshit unless you somehow think they are doing something else for you...they aren't it is just they are more aggressive about dressing it up...PERIOD. The plan looked somewhat feasible in a constantly declining market but is absurd in a rising gold market...It is market manipulation (through the selling of additional gold into the spot market when the short is established) and then just plain bs when the books claim that they got a "premium" which is nothing more then the compounding of the proceeds they got from shorting their own product. The game came about because they wanted to push the spot price of gold lower to take out the other competitors and it happened to work with the big picture financial interests of the world financial community. Namely a lower gold price meant that the US Treasury could inflate the value of the US dollar and our trading partners went along with it because it allowed them to export to the US market with a low currency price for their production and stimulate economic activity in their domestic markets. The US gets to print money with no perception in the financial markets of the amount being excessive because the US dollar is able to show a rising trend against it's historical benchmark of gold and therefore there is no inflation, and we can continue to inflate the US dollar money supply almost without check. Nice game if you can pull it off. Barrick of course is just a minor player in this drama, but their participation is critical if you wanted to ensure that the price of gold would continue under pressure.

To: tyc:> who wrote (2825)	5/18/2002 10:30:07 AM
From: nickel61	Respond to of 3558

Just to clarify what I just said. Barrick sells an ounce of borrowed gold today at $312 and invests in a five year US treasury note yeilding 5% to maturity in May of 2007. That is 5% compounded for five years which allows them to claim a "sale" price of $398/ounce!!!!!!!!! Yes that is as simple as it is...The whole process is bullshit unless you somehow think they are doing something else for you...they aren't it is just they are more aggressive about dressing it up...PERIOD. The plan looked somewhat feasible in a constantly declining market but is absurd in a rising gold market...It is market manipulation (through the selling of additional gold into the spot market when the short is established) and then just plain bs when the books claim that they got a "premium" which is nothing more then the compounding of the proceeds they got from shorting their own product. The game came about because they wanted to push the spot price of gold lower to take out the other competitors and it happened to work with the big picture financial interests of the world financial community. Namely a lower gold price meant that the US Treasury could inflate the value of the US dollar and our trading partners went along with it because it allowed them to export to the US market with a low currency price for their production and stimulate economic activity in their domestic markets. The US gets to print money with no perception in the financial markets of the amount being excessive because the US dollar is able to show a rising trend against it's historical benchmark of gold and therefore there is no inflation, and we can continue to inflate the US dollar money supply almost without check. Nice game if you can pull it off. Barrick of course is just a minor player in this drama, but their participation is critical if you wanted to ensure that the price of gold would continue under pressure.