Barrick Gold Corporation (or as I prefer to call, them Fuck-Shit gold corp, as that is the literal translation of it.) is the biggest gold miner in the world. I generally never talk about them and for good reason. Barrick has hedged or sold future production for years as gold prices have skyrocketed. They still have contracts to sell at $350/oz. (Mining costs are about $600/oz.) Essentially this is the situation with this company: They are not a gold miner, at best they are a bankrupt financial institution, at worst a group of drunken sailors gambling with the shareholders money.
The biggest miner in the sector does not believe gold prices are going up, so they sell there future production away for pennies. What kind of message do you think that sends to people about gold? (Not to mention there 2009 oil prices were hedged last year at $100/barrel, which makes no sense whatsoever. The common thread between the two being a declining dollar so if oil goes up, what do you think will happen to gold, or for that matter all commodities? Selling there profit short, buying there cost at the top, diluting the company to cover the difference...there's value for the shareholders...) Now as gold reaches prices higher than ever, Barrick has no choice, they have announced they will eliminate there hedge book...again...then they announced really it will only be some of it, because in reality they can't afford to. Their plan to accomplish this is to dilute the company some more, actually by 10% so that's another 80 million shares issued at 36 so that's almost 3 billion dollars, that should cover the hedge book right? Not even close. Barely 30% in fact. Another point to bring up, where will they get the gold? They won't. They will pay there hedged contracts market price for gold in cash. Cute trick huh? Pay for gold, and get paper.
Ladies and gentlemen, this is what happens when you go to bed with the government (Goldman Sachs/ J.P Morgan) Barrick, being the gold production monster it is has for years now provided Goldman and Morgan with the gold they sell to cap prices from going too high. Now they will pay for it dearly and no one will shed a tear. When the shareholders in Barrick realize just how bad this mess is, they will revolt, abandoning the stock all together leaving it open for attack by the shorts. As Jim Willie so brilliantly put it "How many decades of profits will be lost due to there reckless hedge book?" Gambling. Unsuccessfully too. Barrick Gold will fall. Hard. 7.2 million ounces of gold production a year will be in jeopardy, and the largest gold miner in the world (who never believed in it to begin with) will ironically become the sacrificial lamb that sends gold to 1200 and beyond. There has constantly been false reports about a merger between Barrick and Newmont mining. They are always discredited. Barrick wants Newmont's gold, scratch that NEEDS their gold, Newmont wants Barricks operations, but neither one of them will ever agree with each other because of there "policies". Simply put Newmont has never hedged. That will pay off for them soon.
I have a point of writing this of course, which I will now divulge. Newmont mining sold senior notes and has incorporated some debt recently to raise cash. A few monthes ago, Newmont bought back nearly 1/5 million shares outstanding on the company bringing it from 650 million to 465 million, a small tally for a monster gold miner like Newmont, being that Barrick has 2x that. (I will post a link to this article below) Needless to say, Newmont has some room to run in the Shares outstanding field. Lets not forget that the biggest un-hedged gold miner is probably making some good money on gold's recent climb. (Are you starting to see where I'm going with this?)
When the public finds out about the disaster that is Barrick, share prices will plummet. Under 20 or worse possibly. At which time, for a combination of cash and stock, the second largest gold miner will buy out the first, bringing Newmont Mining's annual production to over 13 million ounces a year, miles away from the next closest competitor, Anglo Ashanti at 5 million.
Now, I always say never trty and plan a take over, cause you can be assuered if you do that it won't happen. I thought for times that IAG would get bought when it was still 7-8, I thought Newmont might buy Yamana out after it sold 3 mines leaving it fairly tempting. Agnico Eagle has tripled there credit line while IAG prepares to open a monster gold mine less that 5 miles from there Flagship LaRonde... hmm. All are suspicions, educated guesses. If Newmont is able to act quick enough there will be no guessing about it. They will NOT miss their opportunity to bring them to number 1. This "theory" I am almost 100% about. We'll say 92% for now. Another prediction for the wall.
3-6 month time line predictions:
Gold will trade at 1250
Oil will trade at 90 or better
The Euro will reach close to 1.60 conversion rate
The dollar will reach .7200
Newmont mining will buy Barrick Gold.
Pay attention. This could be beyond huge...
-J
Barrick Gold, ripe for the bear Raid
http://finance.yahoo.com/news/Newmont-Mining-gets-nearly-apf-417199584.html?x=0&.v=1
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