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Where The Buck Stops
Samuel Martirosian (firstname.lastname@example.org) takes up the cudgel for
GATA and writes to CANADIAN INVESTOR re Barrick Gold ABX:
I am a gold investor. The message below has been circulated among the
large gold investing community. Your company (Barrick Gold ABX) was
mentioned along with Anglogold as one of the most damaging companies
that bring devastation to the gold industry overall.
Your habitual gold hedging habits are destroying the gold prices and
your shareholders at the same time. If you continue to conduct your
business in the same irresponsible manner, very soon you will not have
any shareholders left.
Are you planning to do anything to remedy this sad situation?
Below are some suggestions on how you can recover from the mess that you
have created. Mr. Randall please tell Mr. Munk, there is an army of
gold investors out there that is growing daily and watching what
Barrick does and not just what it says.
FROM Bill Murphy, Chairman Gold Anti-Trust Action Committee as it
appeared at www.lemetropolecafe.com: -
Take a premier producer like Barrick Gold Corporation for example. They
have been providing cover for the specs up till now. This is how it
could all change. As a guesstimate, they could now book some $800 to
$900 million in hedging profits by buying back their forward sales at
present day gold prices. All that buying would boost the price of gold
as there already is a natural supply/demand deficit that is greater
than 1,000 tonnes.
After they were done buying, they could announce that the buy back had
been completed. Other producers would then most likely follow suit and
buy in their hedges too, as Barrick is a leader. All this buying would
turn the technical systems bullish, and the black box gold buying would
kick in to boost the gold price up even further.
Right about then, the gold lease crowd would be mighty nervous. Most
likely, many of them would also decide to cover. The "in crowd" hedge
funds would certainly get a drift of what was going on and some would
put on monster long gold positions to take on the 3,000 short position
that the specs ( the borrowers among them ) now have on.
This is not wishful thinking. All Barrick has to do is shake a tail
feather and get off the pot. Do you think Barrick shareholders would
object to that scenario that we have just laid out?
In Barrick's recent conference call, they made mention of cajoling the
central banks for greater transparency in their gold dealings. If
Barrick is serious that they would really like a higher gold price, why
do they not show some leadership? They could probably orchestrate it
Instead, Barrick tells us about their new "premium gold program" - a
fancy word for hedge - and a need to sell forward to enhance the
project economics of their new project Pascau in Chile. This is a 20m
oz project that a US$350/oz. (this is where they need the hedging) gold
price is needed to make it work and a US $950m investment generates only
10% internal rate of return. This opens up a number of questions?
1) Why would any sensible company go to the trouble and risk of
developing a gold project 4,600m high up in the Andes for such a meager
2) Why would any sensible central bank lend gold to help finance the
development of another 20m oz. which would hit the market and keep
prices low thus depressing the value of their existing oz.?
3) How does Barrick grow its profits without this project in a flat gold
price? - isn't it time for them to take action that will boost the gold
price for the benefit of their present shareholders?
4) Barrick, amongst others, criticizes central banks for selling their
gold out of reserves when they are effectively doing the same.
To: Peter Munk, Chairman - Barrick Gold Corporation
From: Bill Murphy, Chairman - Gold Anti-Trust Action Committee
On behalf of the GATA committee, we invite Barrick Gold Corporation, a
significant leader in the gold industry, to support us in our effort to
focus on various injustices that have devastated your gold industry and
have left goldstock shareholders completely demoralized. We would be
happy to come up to Toronto to explain our course of action to you and
so that you may get to know us as individuals.
Thank you for your consideration.
SAMUEL MARTIROSIAN THEN RECEIVED THIS REPLY: -
Thanks for your interest in Canadian Investor.
I was interested in learning about your point of view and am glad I had
the chance to ask Mr.Oliphant about his hedging program.