Traditionally one of the largest gold hedgers, Barrick Gold (ABX-T) announced on Wednesday that it would trim its hedge position by about 3 million ounces by year-end.
To do so, the company will forego renewal of its call and variable price sales contracts. The company will also discontinue its practise of investing a portion of its spot deferred contracts in corporate bond funds. It will instead leave all proceeds invested with its average AA-rated bank counterparties.
Barrick’s senior vice-president and CFO Jamie Sokalsky said in a press release, "a simple spot deferred program makes more sense in today’s environment. The overall Program will be simpler, smaller and better positioned to take greater advantage of rising gold prices. At the same time, it will continue to generate significant additional revenues and provide secure and predictable cash flows.”
At the end of the first quarter, Barrick had 18 million ounces of spot deferred contracts, representing 22% of reserves, and 6 million ounces of call and variable price sales contracts in the Premium Gold Sales Program.
The move is part of the major’s plan to sell half of its gold production at the spot price. The company said that for the balance of the year half of its production is expected to be sold at an average price of US$365 per oz.
The company produced 6 million oz. of gold in 2001, and expects to produce 5.7 million ounces in 2002 at a cash cost of US$167 per oz.
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