From Reuters
Tuesday, November 23, 2004
http://www.reuters.com/newsArticle.jhtml?type=topNews&storyID=6898925 [1]
(Figures in U.S. dollars)
VANCOUVER, British Columbia -- Today's higher gold
prices won't stop Barrick Gold Corp. from reducing its
hedge book, the world's third-biggest gold miner said
on Tuesday, adding that it remains "very committed"
to bringing down its bulky forward sales position.
"A higher gold price does not preclude us from
reducing the position. As prices are high we can
blend lower-priced contracts (with sales at spot
prices) and still experience earnings and cash-flow
growth," said Jamie Sokalsky, Barrick's chief financial
officer.
He declined to give a hedge reduction target for 2005.
To protect itself in times of lower gold prices, Barrick,
as did many other gold producers during the 1990s,
sold millions of ounces of unmined gold at preset
prices, leaving it with the biggest hedge book in the
industry.
Now that gold prices have leapt by 80 percent since
early 2001, many of these contracted sales are at
below-market prices. This has angered investors and
led Barrick to pledge to whittle down the thick pile of
contracts, even if it means selling its gold at
weaker-than-market levels.
"We are still very committed to getting this position
down," Sokalsky said. He was speaking in Toronto
at a Scotia Capital mining conference, which was
monitored over the Internet.
This year Barrick promised to cut at least 1.5 million
hedged ounces, a target it has surpassed.
At the end of September, if Barrick had closed out its
entire hedged position, it would have earned $1.7
billion less for its gold than it could have got in the
market.
With every $1 climb in the gold price, the position gets
deeper under water as the opportunity cost of selling
committed ounces increases.
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(Korelin Business Report -- audio)
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