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

To: Ken Benes who wrote (3323)	1/20/2003 2:16:44 PM
From: russet	Read Replies (1) \| Respond to of 3558

What you are saying, barrick enters into agreements with a conglomerate of bullion bankers, who in turn do business with the central bankers and abx has absolutely no recourse to the funds they receive for a promise to deliver gold tomorrow. The banker fails and barrick has a huge gain from the funds they receive and does not have to pay back the gold. I see your problem now,...you read but fail to understand what you read. The counterparty agreement gives Barrick recourse,...they have the right to refuse to deliver the gold if denied access to the bond held by the bullion bank. This has been detailed in newsreleases previously posted to this thread. Barrick does not hold the bond portfolio resulting from the forward sale of the gold,...the bank does. If the bank fails, and the bond portfolio is seized by creditors, Barrick does not have to deliver the gold to the contract. This equals no counterparty risk to Barrick. The great stockmarket genius Sprott (of Sprott Financial Securities) tried to pillory Barrick in much the same way you and your rabid goldbug friends try to do on a frequent basis, and got something slammed up his arse, as he retracted his statements and the result was this newsrelease (no doubt if you had significant financial assets and market profile, it would be worthwhile for Barrick to go after you too),... Paul Haavardsrud National Post Saturday, June 22, 2002 National Post Randall Oliphant, president and CEO of Barrick, has long defended the gold producer's hedge book. CALGARY - High-profile fund manager Eric Sprott backtracked yesterday on allegations Barrick Gold Corp.'s hedging program would leave the company vulnerable to massive losses if the price of gold moved dramatically higher. The founder of Sprott Securities issued a formal written retraction of an earlier research comment that had highlighted his concerns over the risk of gold hedges in a rising market for gold prices. After consulting with Barrick and further analysis of the firm's public filings, Mr. Sprott retracted his warning to clients that Barrick could be subject to potentially ruinous margin calls if gold continues to rise sharply. "When a series of misleading and utterly irresponsible statements are made they need to be corrected for the proper functioning of the capital markets," said Barrick spokesman Vince Borg. "They have done that and we accept that." Mr. Sprott issued the retraction, saying he recognized his primary assumption about Barrick's gold hedging program was incorrect. Earlier, his call had assumed the liability for the hedging program rested with Barrick, when in fact the primary hedging transaction is done, not by Barrick, but at a bullion bank. "Is Barrick Gold Corp. subject to margin calls in a rising gold market?" Mr. Sprott asked rhetorically in a note disseminated yesterday. "As the company asserts in various filings, the answer to that question is simply no." Mr. Sprott, who recently told the Financial Post his concerns were strong enough to convince him to sell Barrick shares short in his hedge fund, could not be reached yesterday for further comment. Mr. Sprott also said the suggestion Barrick had already been subjected to a margin call by its counterparty lenders was incorrect. An earlier investment decision made by Barrick had been misunderstood by Mr. Sprott and other market watchers, he noted. While investors would benefit if Barrick consolidated the disclosure of its hedge book into a single document, on the whole the firm's disclosure, which he had been critical of in the original note on March 31, is also commendable, he wrote. "I'm pleased that [Sprott Securities] has come out and done this, because it sets the record straight, corrects the misstatements that were made and addresses the primary issues of false information that they had previously put out," said Jamie Sokalsky, chief financial officer at Barrick. As the largest hedged gold producer in the world, Barrick, the world's second-largest gold producer, has been a lightening rod for criticism from those who believe producer hedging programs have kept the price of gold artificially low. Despite numerous explanations over the years from chief executive Randall Oliphant, and other members of Barrick's management team, about how the firm still reaps tremendous benefits from rising prices, goldbugs have remained adamant Barrick's hedge book will one day bring about its demise. Although Mr. Sprott still fundamentally disagrees with producer hedging, he said it was unfair to single out Barrick in his earlier note. "Furthermore, it was also unfair to imply that it is Barrick that is at risk in a rising gold price/lease rate environment," he wrote. "In fact, of all gold hedgers, Barrick would appear to be one of the gold companies that is least at risk."