Seeking Alpha

Barrick's Thornton opens the door to hedging

  • Barrick Gold (ABX -1.6%) has signaled a potentially titanic shift in the gold mining industry: a second look at hedging.
  • John Thornton, set to become sole chairman of ABX, says “I don’t know why you wouldn’t look at it, if for nothing else as a kind of analytical intellectual exercise... I don’t understand people in the industry who would say you should never do that."
  • Analysts say the large gold producers aren’t going to start hedging big chunks of their output, since no one wants to be seen selling at the bottom, and many investors still want their mining investments to track the price of the metal - but when the top man at the top gold producer says hedging isn’t a dirty word, that alone may open the door.
  • Gold ETFs: GLD, IAU, PHYS, SGOL, UGL, DGP, GLL, DZZ, UGLD, DGL, DGZ, AGOL, GLDI, DGLD, TBAR, UBG.
  • Gold miner ETFs: GDX, GDXJ, NUGT, DUST, GLDX, GGGG, RING, PSAU, JNUG, JDST.
Comments (14)
  • Experienced new mgt team may mean good things for this moribund company
    5 Dec 2013, 03:40 PM Reply Like
  • To gofergold. There is absolutely nothing political about mining and refining gold processes. It takes real knowledge and intelligence to do it efficiently and at a profit.

     

    I say this because in such a sophisticated business as gold mining and refining, new comers make a mess of things. And you will never know it until years later.

     

    Your suggestions on new management only works in political organizations; where the BS can change on a dime and the
    process or organization almost never suffers. Not only not so in real and sophisticated processes, almost never; where knowing and understanding what is actually going on is essential for continuing productively.

     

    And where any real process discontinuities not addressed can and usually do have dire consequences; where new people have little or no clue will cause huge and hidden damage, just out of ignorance.

     

    Where real knowledge and expertise matter such as gold mining and refining, experience is nearly everything; and if politics is interjected, a mess will be had and large sums of money will be lost to thieves or incredibly foolish new people; just really, really stupid.

     

    So, take your new management ideas and put them anywhere you want, just not in gold mining or refining.

     

    Or in gold mining and refining, the actual process is everything and politics or anything new not derived from the actual gold refining or mining process itself is a waste and/or thievery.

     

    Or your one sentence thought on new management I have taken the time to explain above: not a chance in reality. Though it may happen in politics; and stockholders and others related will suffer again if it does.
    9 Dec 2013, 07:41 PM Reply Like
  • All part of the collusion by big gov't and big banks to frighten people into selling so they themselves can buy on the cheap. Like we've been seeing for months now. Why do you think China came out against virtual currency ? Could it be because they're buying gold buy the ton and patiently waiting for the dollar to collapse under its own weight ?
    5 Dec 2013, 03:42 PM Reply Like
  • Just what the market needs - yet another conspiracy theory! There's not much in the way of motive for the US government to buy gold.
    9 Dec 2013, 08:28 AM Reply Like
  • nothing like selling at the bottom but when ur stopped out, ur stopped out
    5 Dec 2013, 04:04 PM Reply Like
  • very encouraging to hear the "anointed one" talk sensibly about the subject of hedging. I mean - no one will force a company to hedge certain risks but when there are liquid instruments that can reduce the risk of loss and increase the potential for profit why on earth wouldn't one use them. Mining companies have more risks to try and mitigate than most companies.Gold price, Diesel fuel price, Electricity price, Weather risk, Employee accident risk, Foreign Exchange risk, Interest Rate volatility risk, Key personnel risk and the list goes on.Previously, many companies de hedged their forward gold sales - a prudent move at the time but stating "we will never hedge the gold price risk" must be regarded as almost corporately criminal.

     

    Still lower to go I fear - far better things to invest in with about 1/100th of the risk + many companies (not in the gold or commodities space) much better run by far better people.

     

    Thornton may be the answer for ABX.
    5 Dec 2013, 04:05 PM Reply Like
  • I like gold's action the last couple of days. I like that copper has held up. Palladium has held up. Nickle and zinc may be turning up. Oil and natural gas have turned up. I'm positioned for a gold pop up.
    Long: DRGDF, ANV, IAG, ABX, KGILF.
    5 Dec 2013, 08:08 PM Reply Like
  • ABX hedged massively previous and I believe it capped its stk price. I'm not surprised that Thornton, a Goldman man, would immediately look at the derivative alternative but I for the life of me cannot understand why hedging is a topic now with gold at its present level.

     

    There were a lot of theories as to collusion of ABX with bullion banks as well-I try not to get too involved with conspiracy theories but they are "out there."

     

    I do not think I would ever touch ABX-I think hedging is a bad idea unless the company is against the wall financially.
    5 Dec 2013, 08:48 PM Reply Like
  • If mr.Thornton had wanted to hedge when gold was at 1900.00 USD,
    I would have said bravo.
    If he wants to hedge at1220.00USD where it is at the limit some
    Barrick mines are below their AIC limits,then it is stupid,
    It is better to close those mines then to lock them for years of
    losses
    6 Dec 2013, 08:51 AM Reply Like
  • Any of you think you can figure out what is going to happen next, simply bet on it. Now if you're not sure, then hedging what you have is okay. Averaging up or down is okay too. Now if you've had enough, sell and go play in another sandbox. [in which you will not be able to foretell the future either].
    What I am saying is the fundamentals and technicals change very fast in this world of ours, so about all you can do is either go with the flow, taking an occasional lump, or stick to the risk free deals that are out there and be happy with your minimal returns.
    I don't know what is in the future, but my gut says the PM's just may be a buy in here. If I was sure, I would sell my numismatics, stocks etc and about everything and buy PM's. I am not sure, so I stay diversified. IF the PM's accommodated me, then fine. IF they do, I will be in a world of trouble. but that is precisely what I see ahead unless some real men step up and begin to do what is right. I doubt that will happen until the carnage is over.
    Capt. Brian
    The Lost Navigator
    6 Dec 2013, 12:02 AM Reply Like
  • And then there are people who wonder why these gold mining stocks are priced so low.
    At Barrick's they're not running a gold mine, they keep a Las Vegas betting circus.
    6 Dec 2013, 03:23 AM Reply Like
  • i think if you bot the stock here, hedging is great, because you'd be locking in a safer 15% type return over time. Unfortunately, they might run into a lot of resistance from those who bot in the 30+ as they might prefer to bet the ranch on GP.....
    6 Dec 2013, 08:09 AM Reply Like
  • With real inflation higher than any loan rate the banks would have given, Barrick was strong-armed into that stock issuance. Now with all these "unsold" shares, London Gold Fixing Ltd. is left holding the bag? Please...
    6 Dec 2013, 10:38 AM Reply Like
  • My point about hedging wasn't suggesting that one would hedge at current cash levels unless you are fortunate enough to be a low all in cash cost producer and reasonably believe that we might go a bit lower from here.In addition hedging is an art and has many different aspects and is not restricted to the end product (bullion) itself. One may have quite a bit of exposure in the diesel, electricity, foreign exchange and interest rate areas - all have the capacity to be hedged.

     

    My main point is not to ignore hedging but build plans and models that can be implemented if certain things occur.

     

    It is not as expensive as some people think and can save/make a company millions.
    10 Dec 2013, 03:44 PM Reply Like
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