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

To: Ron Everest who wrote (1241)	6/4/1999 6:11:00 PM
From: Ken Benes	Read Replies (4) \| Respond to of 3558

Ron: The 12.5 million ounces of gold sold forward by Barrick is the equivalent of 400 tonnes of gold. This is almost the exact amount to be sold by Britain in the future. If 400 tonnes in sales can knock 30.00 from the price of gold, imagine what would happen if Barrick announced that they would close all of their positions. Extrapolate this to the entire gold industry and it is no mystery why the price of gold is so low. Also, in your note, you refer to an arrangement between Barrick and the bankers who lease the gold. Consider for a moment, Barrick the producer, enters into an agreement with an entity that has no interest in a rising price but stands to profit handsomely by a declining gold price; an entity that also engages the business of hedge funds interested in profiting from the gold carry trade; and finally an entity that has close ties to the central banks. You have to believe that if it is a fact that the central banks want to contain the price of gold and are willing to sell/lease their hoard, they must have a close business relationship with the bankers who have to market the gold. This coordinated effort between the central banks, the investment bankers, and the producers is a cozy arrangement that is profitable for everyone except those who believe gold is a store of wealth. Further, Barrick projects an unparrelled audacity when they complain about low gold prices and the forces that are driving the price of gold. They are the forces and when taken in its totality with the foreign producers, and other domestic producers, it would take nothing short a surprise nuclear attack to promote a rush to gold that would overcome the efforts of this trio. I would love to see Gata take on Barrick rather than the Central Bankers who probably view GATA as nothing more than a gnat funded by the producers to obfuscate the dimensions of the banker/producer relationship. Gold will not move until the producers sever their ties with the central banks. Ken

To: Ron Everest who wrote (1241)	6/4/1999 11:52:00 PM
From: Exsrch	Read Replies (3) \| Respond to of 3558

Ron, Let me commend you on your explanation. Your message will do alot to bring understanding to the "Premium Gold Sales" and dispel erroneous assumptions about the risks associated with ABX future earning. There is one point I would add to your message: - ABX has the option to cancel contracts (and pay a penalty); however, they also have the option to defer the CB/GB contract up to 10 years while paying the contractual interest rate. The "So What" of that point is ABX can take full advantage of the rise in AU prices above US$385. The only penalty would be the interest to the CB/GB (this assumes the interest rate would not increase with AU prices. Your feedback would be appreciated the that point). The interest penalty to CB/GB (w/ AU above US$385) would be insignificant to earning per share compared to NEM, PDG etc. because ABX is operationally far superior. Even with 12.5 MM onces sold forward they can pay the interest penalty and increase earning at a rate above their peer group (premium multiple?). Having talked up the shiny side of the coin, let me discuss the other side (risks). We have to remember that ABX does not actually sell their gold above spot. They are like everyone else and they can get no more than what the market will bear. They sell above spot via two methods. 1. Accounting 2. Cantango The explanation: 1. ABX borrows gold (enters contract) from CB via its own GB. 2. ABX sells gold at spot price. 3. ABX takes proceeds from the sale of gold at spot and invests the money in Money Markets (hope nothing with a higher beta). 4. The accumulated interest they earn (so far about 7.5% on average)is added (via accounting) to the original sale of the gold and viola you have average ounces sold at above spot. This accumulated interest is the "cantango". I believe this is recorded on their book when physical gold is returned to CB. Ron, I like to talk about other things (re: ABX) but let me keep the reply to the subject you originally wrote about. If you would like to discuss ABX in real time let me know. If anyone has comments or sees errors please respond and let me know. I look forward to our interaction to learn and hopefully make a better investment. Cheers, Excsrch.