Bullion bust-out turns head, Calandra writes from New Orleans conference

Barrick profit edges up, hedge book still weighty

By Nicole Mordant
a href=http://biz.yahoo.com/rc/031027/minerals_barrick_earns_4.htmlhttp://biz.y...

VANCOUVER, British Columbia, Oct. 27 (Reuters) -- Barrick
Gold Corp. posted a profit in line with analyst expectations on
Monday but for the first time this year the world's No. 2 bullion
producer did not reduce its bulky hedge book over the quarter.

A robust gold price meant the Toronto-based producer opted
to deliver its product into the spot market, where it got a
better price than from its hedge program, under which it has
sold forward 16.1 million ounces of gold.

But Barrick admitted again that the size of the hedge book,
equal to about three years' worth of mine output, was too
big and that it wanted to cut it back by about a third to 20
percent of gold reserves.

quot;We will continue to look at ways to bring the book into line
that make some sense,quot; Greg Wilkins, Barrick's chief
executive, said.

quot;But we are not going to spend a lot of hard-earned
shareholder cash to necessarily do what the market can do
for us as quickly,quot; he said on a conference call.

The world's second biggest gold miner by market value said
it sold its gold at an average $365 an ounce in the third
quarter. The minimum price on its secretive hedge book is
$345 an ounce.

The hedging program, vilified by a vocal contingent of
investors who oppose any gold firm reducing its exposure
to the gold price, is under water to the tune of $1.2
billion -- its unrealized mark to market value at September
price levels.

Barrick reported earnings of $35 million, or 7 cents a share,
for the three months to Sept 30., a touch higher than the $34
million, or 6 cents a share, in the year-ago quarter and in
line with the 7 cents a share expected by analysts.

The first of North America's million-ounce-plus gold producers
to report results in the current earnings season, Barrick said
it produced 1.48 million ounces of gold in the period at a total
cash cost of $180 an ounce.

Good performances from Betze-Post mine in Nevada,
Australia's Kalgoorlie, and Canada's Eskay Creek operations
offset poorer performances from Nevada's Meikle mine and
the Bulyanhulu site in Tanzania.

Barrick said it was on track to reach its forecast 5.4 million
to 5.5 million ounces of gold production this year at an
expected total cash cost of between $190 and $195 an
ounce.

Canada's biggest gold miner said it expected to receive
approval of an environmental impact study on its Veladero
project in Argentina quot;any day,quot; after which it would begin
construction.

Veladero is one of four gold projects expected to add 2
million ounces a year to Barrick's production profile,
ramping up from 2005 at a development cost of $2 billion.

But comments by Wilkins about Pascua-Lama, a project
on the Chile-Argentina border, had analysts concerned that
the largest of the planned developments could be delayed
or in jeopardy.

The last of the four projects scheduled to start production,
in 2008, Pascua-Lama, is expected to produce 800,000
ounces of gold a year. But development costs are dear at
over $1 billion, partly due to the mine's high altitude.

quot;There are a couple of fairly significant technical decisions
we have to take ... We are just rerunning the economics.
We want to sure we have it right,quot; Wilkins said. He added
that a project study was being quot;refinedquot;, not quot;reconsidered.quot;

Barrick said it had spent $91 million on repurchasing 5.3
million of its shares during the quarter, part of a share
buyback program. It had $1 billion of cash at quarter end.

Barrick shares closed lower on the Toronto Stock
Exchange on Monday, losing 17 Canadian cents to C$25.43.
The company reported its financial results after the market
closed.

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