Armstrong accused of hiding valuables


Noon EST Thursday, December 16, 1999

Dear Friend of GATA and Gold:

Our good friend Arthur Hailey has carried the gold
cause back to his native Canada with the article
written about him in the November 25 issue of
Canadian Business magazine.

You may especially enjoy the abuse Hailey suffers
from Barrick Gold at the end of the article. Rather
than argue with Hailey on the merits of the issues
he has raised, the company tries to dismiss him with
an insult -- which, of course, only suggests that
maybe Hailey is not so easily argued with by a
company that follows hedging policies as extreme
as Barrick's.

The article is below.

Gold Anti-Trust Action Committee Inc.

* * *


Author Arthur Hailey has aimed
a poison pen at Barrick

By Paul Kaimla
Canadian Business
November 25, 1999

It's been 30 years since Arthur Hailey became a
household name with his disaster novel, "Airport,"
which was made into the widely imitated and
satirized 1970 movie of the same name starring Burt
Lancaster and Dean Martin. Since then the Canadian
citizen and former Toronto resident has written
books that expose the dirty secrets of everything
from the automobile to the pharmaceutical
industries. But now the cantankerous 79-year-old
author has turned his critical eye toward the gold
industry -- and zeroed in on Toronto-based Barrick
Gold Corp., North America's second-largest bullion

In an open letter to Barrick executives written
from his retirement home in the wealthy Bahamian
enclave of Lyford Cay on Oct. 17, Hailey accuses the
company of shafting shareholders by engaging in an
activity that suppresses the world price of bullion-
hedging. The term refers to the practice of
"selling forward" future gold production at the
current spot price or at a premium to the spot

Here's an example. When gold was as low as US$260 an
ounce this past summer, a mining company may have
entered a contract to sell, say, a third of its
production in 2001 for US$300 an ounce. As the price
of bullion fell in the late 1990s, such hedging by
gold mining firms increased as they tried to lock in
spot prices to protect themselves from further

But ironically, the practice of hedging itself
weighs down the price of bullion because it creates
additional supply. When a company hedges, it
effectively injects gold that it will not mine for
years into the market today; even though it is only
on paper, it still influences the equilibrium
between supply and demand.

Barrick has drawn criticism from gold bulls because
of its aggressive and pioneering role in hedging; it
sells forward the vast majority of its annual
production. In its 1998 annual report, Barrick
states that it sold forward its next three years of
production, or 11.5 million ounces, at US$385 an
ounce. That hedge position was increased by 2.5
million ounces this year.

In a recent interview with Canadian Business, Hailey
explained that he had been a Barrick shareholder for
several years. But this fall, he sold about
US$100,000 worth of stock owned by him and his wife.

In his letter to company execs, Hailey explains:
"Disgusted with the excessive hedging (much of it
concealed) by Barrick, and the present opposition to
allowing the gold price to rise to natural and
honest levels, I have sold our Barrick shares and am
actively urging others to do the same." Hailey says
that he has since heard reports that other
shareholders have bailed out of Barrick as a result
of his letter, and he is continuing to campaign
against the Canadian firm among the rich and famous
in the Bahamas. "I tell them: 'You simply cannot
trust these people to put shareholder interest
first, because quite clearly some at the top are
looking out solely for themselves,'" Hailey writes.

Barrick, meanwhile, is not about to take all this
sitting down. "We care when any shareholder comes to
a misinformed opinion about the benefit that hedging
has provided our company," says Barrick's vice
president of corporate communications, Vince Borg,
adding that his firm will write Hailey a reply.

Borg takes issue with the author's suggestion that
Barrick conceals some of its hedging, saying that it
makes full disclosure of its forward sales each
quarter. He also argues that Barrick's hedging
program involves too small an amount of gold over
too long a period of time to dent the world price.

In Borg's view, hedging would hurt the price only in
the most extreme scenario -- for instance, if there
were no hedging in the world market at all, and
major gold producers suddenly began selling forward
all at once.

Borg says that while hedging has earned Barrick a
total premium of US$1.5 billion above gold's spot
price over the past 12 years, the company is
committed to a bullion rally because three-quarters
of its 51.5 million ounces in reserves remains un-
hedged. For each $25 rise in the price of gold, the
company's value increases by $1 billion based on the
gold it has in the ground.

According to Borg, Hailey's comments are typical of
gold bugs who believe there is a conspiracy between
Barrick, Wall Street banks, and the U.S. Federal
Reserve, which apparently wants the price of gold to
remain low because it's an inflation indicator.

"Have you ever talked to these gold bugs, the Arthur
Haileys of the world?" Borg asks. "We're part of the
Alan Greenspan, Queen Elizabeth, and the central-
computer-in-Brussels conspiracy to stop the end of
the world from happening, when gold is supposed to
shoot through the roof."