NovaGold may be the next battlefield in the gold war


1:56a ET Monday, August 7, 2006

Dear Friend of GATA and Gold:

Bob Moriarty of 321Gold has written a wonderful analysis of Barrick Gold's attempt to take over NovaGold. He argues that Barrick is bankrupt if its hedge book is ever factored into the company's net worth and that NovaGold is worth far more than what Barrick has offered.

Moriarty's analysis is titled "Is Barrick Trying to Turn a Silk Purse into a Sow's Ear?" and you can find it here:

Barrick's bid for NovaGold evokes the contest between another big gold hedger, AngloGold, and unhedged Newmont Mining for Australia's Normandy Mining, which was heavily hedged, in late 2001 and early 2002. Hedging made that contest of interest to more than the participants themselves, since hedging is the mechanism by which big mining companies assist central banks in suppressing the gold price. Newmont won the battle for Normandy and Normandy's hedges were gradually closed out, boosting the gold price.

If the acquisition of NovaGold is to be the mechanism by which Barrick obtains enough new gold to avoid closing the massive remainder of its hedge book, then the acquisition may be seen as another part of the gold price suppression scheme.

Gold's partisans who are not Barrick shareholders -- and do ANY gold partisans own Barrick stock? -- might much prefer for Barrick to have to buy back its hedges out of above-ground gold in the short term, thereby pushing gold's price up, rather than to be able to cover them out of new production over the long term. Of course NovaGold shareholders might do a lot better that way as well.

After all, what WOULD the gold price be if Barrick had to buy 9.5 million ounces tomorrow? And what WOULD NovaGold's price and the price of all good mining shares be then?

A lot higher -- so much so that the gold price might claim a few of the zeroes that are stored in central bank vaults where the gold is supposed to be.

Moriarty's analysis suggests as much.

Thus owning and holding tight to NovaGold shares (as GATA does, all 1,000 of them) may be not only a way to do well but also a way to do good, a way of striking a blow against the rigging of the gold market.

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