You are here

Unrealized loss on Barrick''s gold hedging nears $2 billion

Section: Daily Dispatches

By Nicole Mordant
a href=
Friday, February 13, 2004

VANCOUVER, British Columbia -- Barrick Gold Corp. said
Friday it was prepared to lose out on higher gold prices on
a third of its output this year as it lives up to a promise
to wipe out its bulky hedge book.

The Toronto-based miner, the world's third-largest bullion
producer, owns the gold industry's biggest hedge book,
a thick pile of contracts it entered into over many years
to lock in prices for its as yet unmined gold.

Barrick scored when the gold price was weak but the
metal's 65 percent gain in the past three years to over
$400 an ounce has overtaken the price it has pre-sold
much of 15.5 million ounces of its production.

Hedging has become unpopular with investors, who want
to see the full benefit of today's high gold prices.

Chief executive Greg Wilkins said on Friday the company
would deliver at least 1.5 million ounces out of anticipated
production of 4.9 million to 5.0 million ounces in 2004 into
hedge contracts, even if it means losing money on sales.

quot;We will accept the opportunity cost of managing the book
down,quot; Wilkins said in a conference call with analysts to
discuss Barrick's fourth quarter and 2003 results.

A total of 1.5 million ounces quot;is a minimum amount and
could perhaps be higher, depending on what happens in
the gold market,quot; said Wilkins, who was appointed
Barrick's head a year ago after his predecessor was

Asked if Barrick, whose hedge contracts do not have to
be closed out this year, would sell its gold into
lower-priced contracts even if bullion jumped to $500,
Wilkins said:

quot;We have set a target to manage the book down. But we
will then be benefiting substantially from the higher gold
pricesquot; on unhedged production. About 82 percent of
Barrick's gold reserves in the ground are not hedged.

Wilkins said Barrick had already reduced its hedge book
by 300,000 ounces since Jan. 1, selling the gold at prices
about $50 an ounce below the spot market price.

Barrick reported fourth quarter earnings of $77 million, or
14 cents a share, late on Thursday, up from the $54 million
or 10 cents per share in the same period a year ago.

But Wilkins said if one-off items such as a derivative and
tax gain were stripped out of earnings, the per share figure
would have been 8 cents. This was bang-on analysts'
expectations as polled by Reuters Research.

Barrick said its gold reserves, the amount of gold in the
ground it can mine profitably, dropped to 86 million ounces
at the end of 2003 calculated at a price of $325 per ounce.

This compares with 86.9 million ounces a year ago, when
Barrick calculated reserves using a $300 price. At the less
economic price of $300 an ounce, current reserves would
be 82 million ounces.

Gold miners update their reserve holdings once a year,
adding ounces acquired through exploration or acquisition,
and subtracting those mined out.

Barrick said its cash cost to produce an ounce of gold was
$199 in the December quarter.

Barrick reported fourth quarter production figures last month.
The firm, which has gold mines on five continents, said then
it had produced 1.3 million ounces of gold in the three months,
for a total of 5.51 million ounces in 2003.

In the same release, Barrick said it had reduced its hedge
book by 600,000 ounces to 15.5 million ounces.

The firm repeated its expectation to produce between 4.9
million and 5 million ounces of gold this year at a cash cost
of between $205 and $215 an ounce.


To subscribe to GATA's dispatches, send an e-mail to:

To unsubscribe, send an e-mail to:



Free sites:

a href=http://www.jsmineset.com

a href=

a href=

a href=

a href=

a href=

a href=

a href=

a href=

a href=http://www.silver-investor.com

a href=

a href=

a href=

a href=http://www.financialsense.com

a href=http://www.goldensextant.com

a href=

a href=http://www.howestreet.com

a href=http://www.depression2.tv

a href=

a href=http://www.howestreet.com

a href=

a href=

a href=http://www.goldcolony.com

a href=http://www.miningstocks.com

a href=http://www.mineralstox.com

a href=http://www.321gold.com

a href=http://www.SilverSeek.com

a href=http://www.investmentrarities.com

Subscription site:

a href=

a href=http://www.hsletter.com

Eagle Ranch discussion site:

a href=



Centennial Precious Metals
3033 East 1st Ave.
Suite 403
Denver, Colorado 80206
Michael Kosares, Proprietor
US (800) 869-5115
Canada 1-800-294-9462
European Union 00-800-2760-2760
Australia 0011-800-2760-2760

Colorado Gold
222 South 5th St.
Montrose, Colorado 81401
Don Stott, Proprietor

El Dorado Discount Gold
Box 11296
Glendale, Arizona 85316
a href=http://www.eldoradogold.net
Harvey Gordin, President
Office: 623-434-3322
Mobile: 602-228-8203

Investment Rarities Inc.
7850 Metro Parkwa
Minneapolis, Minnesota 55425
a href=http://www.gloomdoom.com
Greg Westgaard, Sales Manager
1-800-328-1860, Ext. 8889

178 West Service Road
Champlain, N.Y. 12919
Toll Free:1-877-775-4826
Fax: 518-298-3457
620 Cathcart, Suite 900
Montreal, Quebec H3B 1M1
Fax: 514-875-6484
a href=http://www.kitco.com

Lee Certified Coins
P.O. Box 1045
454 Daniel Webster Highway
Merrimack, New Hampshire 03054
Ed Lee, Proprietor

Miles Franklin Ltd.
3015 Ottawa Ave. South
St. Louis Park, Minn. 55416
1-800-822-8080 / 952-929-1129
fax: 952-925-0143
a href=http://www.milesfranklin.com
Contacts: David Schectman,
Andy Schectman, and Bob Sichel

Resource Consultants Inc.
6139 South Rural Road
Suite 103
Tempe, Arizona 85283-2929
Pat Gorman, Proprietor
1-800-494-4149, 480-820-5877

Swiss America Trading Corp.
15018 North Tatum Blvd.
Phoenix, Arizona 85032
a href=http://www.buycoin.com
Dr. Fred I. Goldstein, Senior Broker



If you benefit from GATA's dispatches, please
consider making a financial contribution to
GATA. We welcome contributions as follows.

By check:

Gold Anti-Trust Action Committee Inc.
c/o Chris Powell, Secretary/Treasurer
7 Villa Louisa Road
Manchester, CT 06043-7541

By credit card (MasterCard, Visa, and
Discover) over the Internet:

a href=

By GoldMoney:

a href=http://www.GoldMoney.com
Gold Anti-Trust Action Committee Inc.
Holding number 50-08-58-L

Donors of $750 or more will, upon request,
be sent a print of Alain Despert's colorful
painting symbolizing our cause, titled quot;GATA.quot;

GATA is a civil rights and educational
organization under the U.S. Internal Revenue
Code and contributions to it are tax-deductible
in the United States.