MineWeb: Barrick looks ridiculous; and there''s no gold behind TRAKRS

Section:

By Nicole Mordant

VANCOUVER, British Columbia, Dec. 2 (Reuters) -- Barrick
Gold Corp., whose name has become synonymous with selling
gold on forward markets, said on Tuesday it had formally
committed itself to drop hedging as a strategy, sending
bullion prices to a fresh 7-1/2 high.

In an interview with Reuters, Barrick chief executive Greg
Wilkins said the world's third biggest gold miner would, over
time, empty its forward sales book -- the biggest in the gold
business -- although it was in no rush, or under any pressure,
to get rid of it.

"But eventually the hedge book will come to zero. We aren't
qualifying the policy. We are adopting truly a no-hedging
policy," Wilkins said.

Gold surged to a 7-1/2 year high, hitting $405.55 an ounce,
after Wilkins firmed up informal comments made by Barrick
chairman and founder Peter Munk 11 days ago. Munk said
then that the Toronto-based firm's commitment to hedging
was a thing of the past.

As promised, the firm also posted a formal no-hedging
policy statement on its Web site on Tuesday.

Before the news, which also helped to lift Barrick's share
price off earlier lows, bullion was trading at around $402 an
ounce.

"Investors will be pleased that the company has an intention
to reduce their hedge, book thus increasing its leverage to
the commodity," said Haytham Hodaly, an analyst at Salman
Partners.

Barrick's stock was trading at C$29.03, down 32 Canadian
cents, on the Toronto Stock Exchange on Tuesday, up from
a morning low of C$28.89.

Tells of why, but mum on how

Wilkins, who took the helm at Barrick in February, said he
had spent the last eight to nine months speaking to investors
and hearing their concerns about the firm's hedge book,
which critics say reduces the firm's exposure to rising gold
prices.

Currently weighing in at 16 million ounces of gold, Barrick
has reduced the hedge book from a peak of 24 million ounces
18 months ago.

But it remains far fatter than the hedge programs of rivals
Newmont Mining Corp., a staunch anti-hedger with about
2.5 million gold ounces sold forward, and Placer Dome Inc.
with about 10 million ounces. The share prices of both
Newmont and Placer have outperformed Barrick's this year
as bullion has risen.

"The (hedging) program has worked incredibly well and
continues to work well but I can't deny that there is a hedging
discount in the capital markets," Wilkins said.

"I don't believe that it is prudent or necessary to continue
pursuing a strategy that doesn't allow the value of the
company to surface in the marketplace."

Wilkins said Barrick no longer needed the financial security
offered by the predetermined prices of the sales program.
With $1 billion in cash on its balance sheet and access to
capital markets, Barrick is able to fund its growth plans,
which may include a drive into Asia.

Analysts said it was crucial to know how Barrick plans to cut
back its hedge positions, as it could be expensive if the gold
price continues to rise. But Wilkins declined to provide
details, saying only that many options were being considered.

Some analysts said Barrick had woken up too late in the gold
cycle to change a policy that has been bitterly attacked by
anti-hedging groups since the bullion price began rising in
2001. But there was also praise for Barrick.

"Yes, obviously they have been a bit late. But hindsight is
20-20 and it's the same hedge book that has been very
successful for them throughout the last two decades,"
Hodaly said.

"Long-term investors will remember that this helped them
when the gold price was at dismal levels," he said.

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