Strange things are happening with Barrick Gold

Section:

By Veronica Brown

http://www.reuters.com/newsArticle.jhtml?
type=topNews&storyID=3870906&pageNumber=1

LONDON, Nov. 21 (Reuters) -- Barrick Gold Corp. stunned
bullion markets on Friday by saying it was changing its
hedging policy, and is no longer committed to selling the
metal on forward markets as it is now cash-rich.

"The commitment to hedging is gone. ... Hedging to us is
no longer a requirement for running our business as it no
longer creates shareholder value," Barrick Chairman and
founder Peter Munk told reporters on the sidelines of a
gold investment summit in London.

"Hedging was a means to overcome cyclicality. Over the
next decade, we will do no more hedging," Munk added.

Spot gold, which had been trending lower on the back of a
steadier dollar, reversed direction and jumped nearly $4 an
ounce on the development to around $397.00.

At 1311 GMT, prices were at $396.50/397.30 an ounce, up
from Thursday's New York close of $393.30/394.00.

"It's a bit of a knee-jerk reaction, but will set a good base
for the New York open," a trader said.

As Canada's biggest gold producer, Barrick is the world's
second-largest gold miner by market value and one of the
largest bullion producers.

On Thursday, Munk had extolled the virtues of hedging by
Barrick, which has one of the largest gold hedge books in
the industry.

In an address to the conference Munk had said hedging
via forward sales was a key factor in funding exploration
and development projects.

"There is no other more fundamental responsibility on a
group of people who run a mining company who every
single day extract reserves, which are their only asset,
than to replace them," he said on Thursday. Last month,
Barrick CEO Greg Wilkins said the hedgebook was too
big, and that it wanted to cut it back by about one third
to 20 percent of gold reserves.

Toronto-based Barrick has one of the largest hedge books
in the gold industry, which is equal to around three years
of output. The book currently consists of about 16 million
ounces of gold that has been sold forward.

Gold's rise over the last couple of years to levels last
seen in 1996 has largely followed from miners buying
back previously hedged positions, although the pace of
so-called de-hedging is slowing. Earlier this week gold
reached $400.25 an ounce.

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