Barrick Announces Plan to Eliminate Gold Hedges

September 10, 2009 by · Leave a Comment
Filed under: Stock Market News 

This is pretty big news in my opinion.  Barrick, being one of the world’s largest gold producers is now going “unhedged”.   If you don’t know what that means then here is short little lesson to help you understand the depth is this article.  Hedging works sort of like the futures market does for agriculture.   Mining is a very capital intensive process and it literally takes years to bring new mines online.  Mining producers need to lock in a price for the material they mine (in this case gold) so when they bring it to market, they get a price that is above the cost of production because of the lag time between digging it up and selling the finished product.

This is where the hedge comes in, they basically sell forward delivery commitments on the gold they are going to produce so they “lock” in the price.   This work great when the price drops below the contract value but in Barrick’s case, it has hurt their profitability because they had hedges that were way below the market price of gold.  Now that they are going “unhedged” and if they gold price continues at these levels, you should see more profits coming from this company among others with all things being equal.  DISCLOSURE: I am not a financial advisor and this article or any articles in this website should not be taken as a recommendation to purchase this or any other securities.  Please talk to a registered financial advisor before making any investment decisions.

News (MSN Money Central):

Barrick Gold Corporation announced today that it has entered into an agreement with a syndicate of underwriters, led by RBC Capital Markets, Morgan Stanley & Co. Incorporated, J.P. Morgan Securities Inc. and Scotia Capital Inc., for a bought deal public offering for gross proceeds of approximately $3.0 billion representing 81.2 million common shares of Barrick at a price of $36.95 per share.

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Gold mining stocks attractive in turbulent times

February 19, 2009 by · Leave a Comment
Filed under: Commodities News 

No doubt, in times of currency devaluation, gold asserts itself as a store of wealth and a secondary reserve currency.  I have followed this sector and it is following the 7 year bull trend that gold has shown.  It looks like between now and the end of next week, gold will make another shot to top $1,000/oz.  Time to protect your wealth before is gets debased through all our bailout and stimulus activity.

News:

The prospects for equity markets and numerous sector indexes have dimmed during the global recession, but gold and the companies that mine it have not lost their luster.

With gold prices nudging their all-time high and energy and other costs falling, mining company profit margins are widening, making their shares attractive, analysts said on Thursday.

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