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

To: russet who wrote (3466)	11/24/2003 1:58:21 PM
From: tyc:>	Respond to of 3558

>>Barrick settled for a price for their production that guaranteed a good profit I agree that the x% of reserves have already been sold, although the sale has not yet "settled". It seems to me that profit (and therefore tax) on these sales will depend upon the cost of production in the year of settlement. The amount of profit is not guaranteed. P.S. I see now that you make the same point later in your posting (I think).

To: russet who wrote (3466)	12/2/2003 4:38:58 PM
From: Ken Benes	Respond to of 3558

As the price of gold continues to rise beyond the price barrick received for the forward sale, there is a cost to maintain the options necessary to offset their short position. It is interesting to note that barrick was on the vanguard of being on the short side of gold when it was declining in price and now with the price of gold rising, they are johnny come lately to abandoning their forward sales policy. I just wonder, if they will again be on the wrong side of the market. The markets are certainly skeptical of barrick which is reflected in its share price. Ken

To: russet who wrote (3466)	12/9/2003 2:47:15 PM
From: Ken Benes	Read Replies (2) \| Respond to of 3558

Reading the following analysis of Barrick's condition, you might want to reappraise your previous explanation of barricks immunity to a rising gold price. "For each dollar that gold rises in price, Barrick now suffers a loss of $16 million. One dollar for each of the16 million ounces of gold that remain hedged. Therefore, every $10 rise in gold translates into $160 million dollars in additional losses! It is true that they also benefit by about $55 million, with each $10 gold rise due to their 5.5 million ounces of production. However, they show a net loss of over $10 million for each dollar increase in gold. Further to Barrick’s advantage, their 19 counter parties have agreed to a number of extremely beneficial terms. Their gold deferred agreements allow Barrick to roll over most of their hedges; there are no discretionary “right to break” provisions, and no credit downgrade clauses. Additionally, Barrick is not subject to margin calls regardless of the gold price. In what appears to be such an enviable condition with their $1 billion of cash and equivalents and enormous gold reserves and production, why should Barrick be concerned, if indeed they are? Yet, their sudden ubiquitous visibility makes me wonder. When I delved into Barrick’s most recent financial statement I may have found the answer. Their hedge book is already saddled with $1.213 billion of accumulated unrealized losses due to the rising gold price. This figure is from their September 30, 2003 quarterly report, and is based upon a gold price of $385. With gold presently trading at $403 this figure is now about $1240 billion. Next, according to their report there is an onerous provision in all of their master trading agreements that their growing unrealized hedging losses are causing to seriously pressure them. It is that, “Barrick must maintain a minimum consolidated net worth of at least $US2 billion-currently it is US$3.4 billion” (remember, this assumes only a $1.213 billion unrealized loss). If Barrick violates this ever-present clause they may be forced to either somehow repay the gold that they owe or to suffer other consequences"