Barrick’s is the world’s largest mining company. They seemingly went from offering a gold hedge to hedge against lower gold prices to massively shorting the gold market. With gold on a huge upswing they had to sell stock last month to close some of their short positions so they weren’t wiped out. With gold rising, they’re forced to sell even more stock.
The Golden Truth – American Barrick Issues $1.25 Billion In Debt To Further Reduce Gold Hedge
With the ink barely dry on its $4 billion stock deal, American Barrick (ABX) announced a surprise debt deal to raise another $1.25 billion in order to further reduce its gold hedge book. The stock deal was used to extinguish Barrick’s $3 billion fixed-price hedges plus some of its floating-price hedge exposure, incurring 10% shareholder equity dilution and a $5.6 billion charge to earnings.
I hate to burst the egos of gold market analytic geniuses like Jon Nadler, Jeffrey Christian and Robert Prechter (note: sarcasm intended) – all three of whom believe the gold market has topped and likely to crash - but as a betting man I like the odds of placing my chips on the view of the people running the world’s largest gold mining company rather than three stooges who provide useless investment advice and don’t invest a nickel of their own money in the markets.
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