Chicago Tribune notes growing disbelief in U.S. government''s inflation figures


9:57p ET Sunday, March 28, 2004

Dear Friend of GATA and Gold:

GATA supporters are already squawking about the
increasing speculation that Newmont Mining will
bid to acquire Barrick Gold, the mammoth gold
hedger and handmaiden of J.P. Morgan Chase
and the U.S. Exchange Stabilization Fund. Why,
our friends ask, would anyone who believes in
gold and silver want anything to do with the
company that has done so much to undermine
them and to assume liabilities like Barrick's?
Why would anyone want to be part of the
company responsible for the line at the bottom
of this comparison chart:

Presumably Newmont would have to have good
answers prepared for such questions if it sought
the approval of its shareholders for acquiring
Barrick, and presumably then Barrick's books would
have to be laid bare and examined publicly, more or
less -- a wonderfully interesting prospect while
we're waiting for trial in the case of Blanchard vs.

In any event with its acquisition of Normandy
Mining a couple of years ago, Newmont has some
experience converting a hedging operation to a
non-hedging one. And maybe Barrick has been
telling close to the truth about its hedge book
-- maybe repayment of the hedges can be postponed
indefinitely and maybe Morgan Chase and the ESF
are the ones really on the hook here. Maybe the
U.S. taxpayer is.

And if Barrick's hedges -- both gold and silver
-- can be managed somehow, the company DOES have
some great mines.

In short, maybe judgment can be withheld on this
issue for a while. At least Jim Sinclair seems
somewhat sympathetic in his commentary tonight,
which is appended.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

* * *

Newmont and Barrick

By Jim Sinclair
Sunday, March 28, 2004

If this story is factual and Newmont's acquisition bid is
accepted by Barrick,in my opinion we have seen a major
victim of gold derivatives. Barrick hasa $1.7 billion loss
on its gold derivatives, which are designed as margin-free
as they pertain to the gold price alone.

But a closer examination ofpublic documents reveal a
footnote that the counterparties on the gold derivatives can
call on Barric for funds based not on the gold price itself
but primarily on the position of Barrick's balance sheet
plus the gold price.

In the past year we in the mineral exploration business
have seen Barrick exercising a much stricter control over
its operating costs in the past year. In Tanzania alone
Barrick helped inflate exploration costs by the salaries
and rents they paid and by their liberal management. But
all this changed significantly in the past 12 months.

Barrick has returned to traditional management and
industry-scale cost allowances. They have moved many
of their people from Dar es Salaam into the field at the
Bulyanhulu mine. So it is obvious that Barrick's top
management has a keen eye on the company's balance
sheet condition as the price of gold increases their
derivative losses.

New accounting rules now require that all derivatives are
marked to the properties on whose behalf they have been
entered into. These OTC derivatives in general have been
part of the financing programs for new production and are
embedded in the financing loan agreements.They are not
as easy to cover as one might think without paying off the
entire development loan.

No one outside of management and their advisers know if
this is the case for Barrick, as the disclosure laws concerning
derivatives leaves them non-transparent in terms ofproviding
details of the special performance that all OTC derivatives

But the new laws do require that if you are a gold producer
and declare yourself a professional derivatives dealer as well,
you can avoid the mark-to-market requirements and charges
to the economics of each project the derivative is identified
as being attached to.

If you do not declare yourself to be a professional derivatives
dealer as well as a gold producer, then you have to mark to
market and charge each project with the derivative loss.

About 18 months ago most of Barrick's projects took economic
nosedives, and thismay have beenbecause of the derivative

I am sure after the Normandy purchase by Newmont, which
almost caused a financial problem for the company, managment
there is prepared to face Barrick's derivative positions. I would
warn Newmont that the gold banks Newmont will be dealing with
also have come up the learning curve. So this time if the banks
are threatened with having to take over a property if the mining
company steps away from the debt, the banks well might take it

I wish all those involved in this potential deal the best of luck.
I would suggest that no stockholder stands in the way of any
deal Newmont and Barrick agree to.

Not one company in the gold industry has said a word to me
concerning the hundreds of thousands of dollars I spent
advertising in 1999 and 2000 in major mineral trade publications
such as The Mining Journal and Mining Monthly, begging the
industry to stop the madness of hedging gold and derivative
financing of projects that were then uneconomic. Now they are
paying up for this. I told them that they were ensuring bankrupcy
for the industry if they did not stop.

Some years ago I visited with Barrick President Randall Oliphant
and his legal counsel. I was asked for my opinion on their hedging.
I replied that with gold at $305 Barrick had a problem and at
$354.50 "you, Mr. Oliphant, have a problem."

I find a potential deal good for the stockholder but am saddened
because I feel I know why it is happening.


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