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Gwalia''s lenders and hedging banks had early knowledge of company''s collapse
10:57a ET Monday, September 1, 2004
Dear Friend of GATA and Gold:
There's a big gold industry conference in
Shanghai, and Barrick Gold's chief financial
officer, Jamie Sokalsky, is spreading GATA's
message there.
At least it seems so from the Reuters dispatch
from the conference, which has an interview
with Sokalsky that is appended.
Sokalsky says:
* Barrick's gold price forecast is higher even
than Newmont's -- the high $400s by the end
of this year.
* Industry hedge buybacks are far from over
and Barrick will use gold price "volatility"
to keep reducing its own hedges. This is as
good as saying that Barrick, once the great
hedger that used central bank gold to help
knock the price down, now is putting a floor
under the price.
* Gold demand is far outpacing mine supply,
and the gap is being covered by ... selling by
central banks. That is, Barrick acknowledges
that central bank intervention has been
suppressing the gold price.
This market manipulation and the signs of its
weakening couldn't be plainer. And yet they
are not reported in the mainstream financial
press or at MineWeb -- which seems still not
to have reported even the bankruptcy of
Australia's big overhedged gold miner, Sons
of Gwalia, more than a week ago, just as
the World Gold Council has declined to
comment on it.
That is, gold is the secret knowledge of
the financial universe and is not to be
permitted to the Western public. If you
want to know what's really going on with
gold, maybe you should learn Chinese.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
* * *
Gold Producers Cut Hedging, Bullish on Price
By Lewa Pardomuan
Reuters
Monday, September 6, 2004
SHANGHAI -- Major gold producers, expecting prices
to rise toward 16-year highs in the next few months,
are slashing their hedge books to take advantage,
leading industry officials said.
Barrick Gold Corp., the world's third-largest bullion
producer, estimated that prices would rise to their
highest levels since 1988, its chief financial officer,
Jamie Sokalsky, told Reuters on Monday.
"It seems that, for the first time in many years,
many factors are bullish for gold. Demand is strong
in areas of the world like China, and the U.S. dollar
should remain weak," Sokalsky said on the
sidelines of a global gold conference.
Hedging, the selling of yet-to-be-mined nuggets at a
preset price to lock in revenue, began falling out of
favour as gold prices rose. Hedging protects miners
when prices fall but can backfire when prices increase.
Gold rose as high as $424.60 an ounce this year but
has not traded above $450 since 1988. It was trading
around $401.25 an ounce on Monday.
Sokalsky said gold would move into the "mid-$400s to
high-$400s" an ounce range by the end of this year
and hold there in 2005.
Newmont Mining Corp., the world's largest gold miner,
expected gold to trade between $380 and $450 or
higher for the next 12 months, company president
Pierre Lassonde said on Sunday.
Many miners have scrapped or reduced their hedges
because they also put a lid on the maximum price,
preferring to take their chances on global bullion
prices that have risen around 40 percent since 2002.
Hedging has been blamed for restricting demand and
weakening prices because gold purchasers have
already bought unmined metal for future delivery.
Removing hedges, on the other hand, stimulates
demand.
"We are going to use the volatility of the gold
market to continue to reduce our hedge position.
I think there's still a lot of de-hedging to be
done in the industry," Sokalsky said.
Toronto-based Barrick slashed its hedge book by
850,000 ounces to 13.9 million ounces, or 16
percent of its in-the-ground reserves, during the
second quarter.
Newmont expected more gold firms that hedged
their output to declare bankruptcy as prices rose,
Lassonde said.
Last week Australian mining house Sons of Gwalia
Ltd. said it faced bankruptcy after discovering that
its mines might not have enough gold left to meet
its hedge commitments and finance its foreign
exchange exposures.
A year ago South Africa's AngloGold Ashanti Ltd.,
the world's second-largest producer, announced a
dramatic change to its hedge policy, cutting forward
commitments to 30 percent of five years' production
from 50 percent.
Sokalsky said in addition to a poor outlook for the
U.S. economy and the dollar, tighter supply also
supported gold.
There is "a declining supply in the market place
because there has been less exploration. Between
mines' supply and demand, there's a shortage in
the neighbourhood of anywhere from 500 tonnes
to higher," he said.
"That supply has been met by some central bank
selling, but that differential between supply and
demand should widen over time."
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