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Troubled Newmont mine''s awful hedge terms may not be so common
TORONTO, March 7 (CP) -- Barrick Gold Corp. reassured
investors Friday that it won't face a hedging disaster
similar to one unfolding at major competitor Newmont
A blowup for Newmont, the world's biggest producer, has
sparked fears investors will shy away from other producers
that sell gold in forward contracts at locked-in prices.
Unlike the Newmont situation, none of Barrick's 19 bullion
bank counterparties have unilateral and discretionary rights
to terminate the forward sales contracts, Canada's largest
gold producer stated Friday.
Barrick also said it has sold forward only 21 percent of its
gold reserves, and its contracts give it the right to sell
gold at market prices or the hedge price, whichever is higher.
Earlier this week, Standard amp; Poor's cut its credit rating
on Newmont's Yandal operations in Australia, acquired
in the American company's 2001 takeover of Normandy
Mining, after reviewing the project's hedging exposure.
Newmont has disclosed that Yandal faces a negative
mark-to-market value of US$288 million on its hedge
book. This situation could worsen because the mine's
counterparties have the right to require Yandal to settle
the contracts in cash before they come due.
quot;That's why we thought it was necessary to point out
the differences in our case,quot; said Barrick's Vincent Borg.
Investors are nervous, and Canadian gold stocks have
suffered. Shares in Barrick and Placer Dome Ltd. have
lagged the sector's rally of the past year, largely because
many investors and analysts distrust the companies'