National Post pushes Kuwait story GATA''s way


9p EDT Sunday, October 24, 1999

Dear Friend of GATA and Gold:

Here's a report by GATA Chairman Bill Murphy to his
subscribers at about his trip
to the Denver Gold Group conference last week. I know
it will interest you.

Gold Anti-Trust Action Committee Inc.

* * *

The Hatfields meet the McCoys in Denver

By Bill "Midas" Murphy

October 24, 1999

When I was growing up I read about these two hillbilly
families in Kentucky named the Hatfields and the
McCoys. While they had so much in common, they were
always sparring with each other over their whiskey
making, women, territories, and general ways.

That appears to be what we have now in the gold-
producing world. The Hatfields are the gold producers
who still believe in the use of substantial forward
sale coverage, a la Barrick Gold, Normandy Mining, and
Sons of Gwalia. The McCoys believe in minimal or no
forward sales at this point. This camp includes Gold
Fields, Newmont Mining, Homestake Mining, Agnico-Eagle,
et al.

All these companies have so much in common, but
significantly disagree about the wisdom of forward
coverage in today's gold market.

As a result of the serious financial problems of
Ashanti and Cambior, this issue is the hot topic in the
gold world and will continue to be so for the
foreseeable future.

A few days ago I went to Denver to visit with as many
executives from gold mining companies as I could at the
Denver Gold Group Conference. Last Sunday GATA
encouraged gold company shareholders to send faxes to
these companies offering support to the McCoys and
urging the Hatfields to take back their forward

Our logic is very straightforward:

* The supply/demand fundamentals are very bullish. Much
higher gold prices are on the horizon.

* Shareholders invest in gold companies to benefit from
a rising price in gold. As proven on the recent price
upswing, the share prices of heavily hedged producers
will lag.

* Potential gold share investors will scrutinize
hedging policies and shy away from the heavily hedged
producers. They will do so because of a desire to
profit from advancing gold prices; more and more
shareholders will not want the discomfort of fearing
that their company will actually collapse because of a
booming gold price. Increasingly they will shy away
from the big hedgers.

* The horrific fates of Cambior and Ashanti will
further scare away potential investors from the heavily
hedged gold producers on the next gold price upswing.

* Executives who do not take prudent action by taking
back some coverage when they can on price setbacks will
most likely face the wrath of shareholders.

Excerpts from this Bloomberg dispatch shed more light
on what is developing:


Gold Conference Sounds
Cautious Note as
Hedging Draws Scrutiny

DENVER, Oct. 23 (Bloomberg) -- Investors at this week's
annual gold conference in Denver weren't as euphoric as
the metal's recent price surge would suggest.

Instead of celebrating the past month's 13 percent
gain, gold executives and their shareholders were
nervously fixated on hedging contracts, which companies
use to try to protect themselves against erratic price

Hedging programs were called into question this month
after rising gold prices -- usually good news for
producers -- sent shares of Canada's Cambior Inc. and
Ghana's Ashanti Goldfields Co. reeling. Both companies
entered into contracts betting prices wouldn't rise in
the months ahead, and their stocks got hit when they

"I have a better understanding of this whole hedge book
issue, and it's going to help me restructure my
portfolio," said Gil Atzmon, portfolio manager at U.S.
Global Investors Inc., a San Antonio-based mutual-fund
company that has US$140 million invested in gold and
gold equities.

After most presentations at the conference, whose
attendees included AngloGold Ltd., the biggest
producer, and Barrick Gold Corp., ranked No. 4,
investors buttonholed managers to ask about one thing:
hedging. It's an aspect of their business some
companies often don't fully disclose.

Some investors, newly enlightened about the risks of
hedging, said they favor producers that do little or
none of it. Companies that hedged usually do so by
arranging to lock in at least some of their sales at a
fixed price.

"I will increase my exposure in companies that have
more exposure to a rising gold price and decrease in
those that have given up that exposure by overhedging,"
said Atzmon.

Companies are responding to higher gold prices in a
variety of ways. Some, such as Echo Bay Mines Ltd. of
Englewood, Colorado, and Johannesburg-based Gold Fields
Ltd., said they're reducing their hedge positions.
Battle Mountain Gold Co. plans to hedge more.

Others, such as Franco-Nevada Mining Corp. and Goldcorp
Ltd., aren't hedged at all and have no plans to start.
Cambior said in its presentation that it's looking for
partners and considering selling its base-metals
business to boost shareholder value. Ashanti didn't
attend at the conference.

Gold prices soared after Sept. 26, when 15 central
banks said they will limit gold sales for the next five


And consider this from Graham Birch, who manages $1
billion in mining sector equities for Mercury Asset

"LONDON, Oct 22 (Bloomberg) -- Hedging has been the hot
topic at gold conference in Denver this week. Questions
about companies' hedge books are being raised. So far
the stock market has done a pretty good job of
punishing companies with hedging problems.

"In the end we'll probably see a huge increased
transparency about what mining companies are doing.
Otherwise companies will be faced with a flood of
questions about hedges every time they give a

GATA's fax campaign was right on target. The action
that Cafe member and world-famous novelist Arthur
Hailey took in announcing that he sold his Barrick Gold
shares because of the company's hedging policies made
its mark. As more and more Arthur Haileys of the world
take similar action, the share prices of these heavily
hedged companies will lag. This will cause the
institutional money managers to dump these shares in a
relative sense, as these managers compete on a
performance basis. This will exert further pressure on
managements to reduce forward coverage, etc. That is
just a matter of time and is a given in my book. That
is why GATA will encourage these companies to cover
sooner rather than later. Good for them and good for
gold as producer buybacks can only be very constructive
for the gold price.

My trip to Denver was most enjoyable. After my lunch
with Golden Star Resources executives and some Cafe
members at the Brown Palace, I hightailed it over to
the Westin Hotel, the destination of your faxes to gold
company executives. Wouldn't you know that the first
one I would bump in to was Barrick CFO, Jamie Sokalsky?
This was quite amusing. Robert Champignion de
Crespigny, Normandy Mining's chairman, sat at the table
next to me at lunch. He was the one who refused to
visit with me in Vancouver, Canada, after one of his
senior executives made an appointment for me to travel
2,000 miles to meet him.

This was to be a positive energy trip, so I said
nothing to either one.

And that is exactly what it was, a very positive

While I did not attend the conference itself, the real
action was taking place in the lounge on the hotel's
main floor, in the hospitality suites, and at private
dinners. Those I had some access to.

Cafe members Doug Pollitt and Peter Bojtos seemed to
know many of the players in attendance and were very
helpful in giving me direction. After saying hello to
Roger Kebble, chairman of Durban Roodeport Deep Ltd., I
visited with Louis Lepry, CEO of Metallica Resources
Inc. Louis was very charming and I learned all about
his company's exciting south-of-the-border gold

Then a short visit with Frank Veneroso and Marshall
Auerback of Veneroso Associates. Frank was one of the
stars of the conference, as many of the producers are
beginning to realize that he is the one with the
correct supply/demand and gold loan numbers. Now that
the manipulation game is changing, the gold world is
comprehending that Frank has been right all along. That
is very good news for gold bullion and gold company
shareholders, as Frank's equilibrium price for gold is
a bit north of $600.

I had a great chat with the spirited John Embry, the
highly regarded money manager for Royal Bank of Canada.
A big sports fan, John is one of the few around who
still remembers some of the players I played with and
against during my stint with the Patriots of the old
American Football League.

On to the Gold Fields Ltd. hospitality suite with Doug
and Peter. The host, Chris Thompson, chairman of Gold
Fields, could not have been nicer. Not only has he
become one of the leaders in the gold industry, he is a
real gentleman.

I also had the pleasure of meeting and talking with Ron
Binns, CFO of Euro-Nevada; Catherine McLoud-Seltzer,
president of Pacific Rim; Joseph Conway, president of
Repadre Capital Corporation; and Bernard Swanepool, CEO
of Harmony Gold Mining.

On to the Aussie hospitality suite. Right up my alley,
being a beer drinker.

First up was Peter Lalor, chairman of the super-hedged
Sons of Gwalia. I was introduced to the chairman by
Peter Bojtos, as they used to work together. PB got a
chuckle out of having the two of his meet, as we are on
opposite ends of the hedging issue.

Alan Brash, corporate development manager for Acacia
Resources, was pleasant and uncertain, as his company
is in the middle of a takeover bid. Terry Burgess,
financial evaluation nanger for Delta Gold (another big
hedger), was also very engaging.

On my way out I spent some time with Brett Kebble of
JCI of South Africa.

Time for dinner. Doug knew of some dinners planned by
one of the well-known brokerages, so Doug, Peter B, and
I scooted it over to the restaurant where they were
being held. It just so happened that one of the dinners
was for Wayne Murdy, CEO of Newmont Mining. There just
happened to be three extra seats, so we were graciously
asked to join. Murdy is a class act. Newmont Mining
shareholders have a strong, confident steward at the

The evening ended with a good conversation with Rex
McLennan, CFO of Placer Dome. Another smart cookie.

I also had the opportunity to talk with money managers
and gold market analysts. It was most enjoyable and has
given me a better idea of how to best direct the
activities of the Gold Anti-Trust Action Committee.

As to the markets:

There is much consternation in our camp about the
current price setback. While none of us likes it, this
market action is very normal, especially since the
bullion dealer camp is doing whatever it can to beat
down the gold price ahead of the Ashanti workout.

Every $10 in the gold price affects the Ashanti
negotiations in a big way. The lower the gold price is,
the easier the workout becomes. Ashanti has a
standstill agreement with the dealers regarding margin
calls until Monday, October 25. Hard to say how this
will play out.

This is my kind of headline:


"NEW YORK, Oct. 20 -- Robert Mundell, winner of the
1999 Nobel Economics Prize, today described gold sales
by national central banks over the past 5 years as

The CFTC commitment of traders report showed as of this
past Tuesday the large specs still net short 17,000
gold contracts even after this big move up. Small specs
are long some 16,000 contracts. The last three trading
sessions were negative for gold, so those numbers are
most likely even more constructive than at first

16,000 silver long silver specs were taken out on this
setback. As always, the silver specs are mega-long and
will probably stay like that all the way up. What is
important here is the open interest has washed out once
again close to that hard-core level of 75,000
contracts. That is why I think the price of silver
should start to move up again very soon.

Harry Schultz spotted an interesting comment by Jude
Wanniski, the noted economist, on Gary North's Y2K site
( Wanniski was talking about
potential global financial and banking sector systemic
failures due to Y2K-related breakdowns:

"This is why the dollar must be fixed to gold prior to
Y2K or Greenspans's 'century date change,' to reduce
this gigantic problem by simplification."

While gold was mired in the $250s, I mentioned to the
Cafe that sources told me that the Saudis were on the
hunt for physical gold. Yesterday, from a completely
different source, that information was confirmed to me
again. The Saudis are looking for physical gold in size
and are paying premiums to get it.

The gold move that is under way now is the real McCoy!
One day soon the price of gold will suddenly rocket up
again. Silver will join the party. On this next leg up
the share prices of the junior and exploration
companies will soar too. This time there may not be
much stock for sale, and buying in at great prices
could become difficult.