Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : Precious and Base Metal Investing -- Ignore unavailable to you. Want to Upgrade?

To: Claude Cormier who wrote (6298)	12/23/2002 2:20:07 PM
From: Tommaso	Read Replies (2) \| Respond to of 39344

>>>GG is very expensive. <<< If gold hits $400 would it still seem expensive?

To: Claude Cormier who wrote (6298)	12/23/2002 3:29:25 PM
From: russet	Read Replies (1) \| Respond to of 39344

But Barrick? What happen to their hedges if gold goes startit above $400 and does not come back? The vast majority of Barrick's hedges are covered shorts (forward gold leasing contracts with bullion bank counterparties-JP Morgan is one of 8 other bullion banks, each of which has a small portion of the total contracts with Barrick). The contracts are uncallable by the banks unless Barrick's production or reserves fall below certain thresholds that would threaten their ability to deliver gold into the contracts on expiry. The expiry dates of the contracts are spread out over 17 years, at most 2 million oz coming due in any year (after the next few years, no more than 1 million oz come due in any year),...not hard to deliver into with 5.5 million oz annual production. The total amounts of the forward contract covered shorts are not only covered many times over by reserves, but they are also covered by cash in bonds from the original spot sales of the gold,...a near US$6 billion off balance sheet bond portfolio with Barricks counterparty banks. If the counterparties go bankrupt with a rising price of gold, Barrick keeps the gold in lieu of payment from the bond fund with that counterparty thereby reacquiring total exposure to the POG rise for that portion of hedges. I would think Barrick would like the counterparties to fail in a rising gold market, n'est pas? The only thing Barrick's forward leasing contracts did was establish a very low risk floor price for a portion of Barricks annual production. As the gold price rises, Barrick's reserves rise (a lot of drilled off resources will move into the reserve category) and their cashflow increases because approximately 75% of current annual production is unhedged (why do all the conspiracists ignore this figure?). Barrick has no risk other than the normal production and geopolitical risks common to all producers. They only have opportunity lost on the hedged portion of gold reserves that sell for an average of US$340 when the gold price is higher than that. Newmont, Kinross, Anglo, Placer, and many others have very similar contracts in place with the same Bullion Banks. They are all acting to reduce them by delivering into them as they come due,...which makes sense in a rising gold environment. What about that lawsuit? I would not take it with a grain of salt. The lawsuit is fluff, a marketing scam. Barrick's production, reserves, and hedging amounts are like pi$$ing in the bucket of Lake Ontario compared to the trading in gold futures contracts in London and New York. They have little influence on the markets, either short or long term. The action in future gold contracts in any year dwarves Barrick's total hedge book that it took them 18 years to accumulate. The lawsuit will give Barrick the forum it needs to dismiss the misleading statements from the far right nutcase gold conspiracists, and at the conspiracists expense, as Barrick will countersue for costs and damages if the case proceeds.