VANCOUVER, British Columbia (Reuters) - Today's higher gold
prices won't stop Barrick Gold Corp.
"A higher gold price does not preclude us from reducing the position. As prices are high we can blend lower-priced contracts (with sales at spot prices) and still experience earnings and cash flow growth," said Jamie Sokalsky, Barrick's chief financial officer.
He declined to give a hedge reduction target for 2005.
To protect itself in times of lower gold prices, Barrick, as did many other gold producers during the 1990s, sold millions of ounces of unmined gold at preset prices, leaving it with the biggest hedge book in the industry.
Now that gold prices have leapt by 80 percent since early 2001, many of these contracted sales are at below-market prices. This has angered investors and led Barrick to pledge to whittle down the thick pile of contracts, even if it means selling its gold at weaker-than-market levels.
"We are still very committed to getting this position down," Sokalsky said. He was speaking in Toronto at a Scotia Capital mining conference, which was monitored over the Internet.
This year Barrick promised to cut at least 1.5 million hedged ounces, a target it has surpassed.
At the end of September, if Barrick had closed out its entire hedged position, it would have earned $1.7 billion less for its gold than it could have got in the market.
With every $1 climb in the gold price, the position gets deeper under water as the opportunity cost of selling committed ounces increases.
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