Barrick: GATA is spreading misleading information re: NovaGold bid
Dorothy Kosich
'22-AUG-06 06:17'
RENO, NV (Mineweb.com) --A top Barrick official Monday accused the Gold Anti-Trust Action Committee (GATA) of deliberately trying to mislead the investment community and the news media in Barrick’s bid to acquire Vancouver-based NovaGold.
In an exclusive interview with Mineweb, Barrick Senior Vice President Corporate Communications, Vince Borg, called GATA’s efforts to link the senior mining company’s unsolicited bid for NovaGold with Barrick’s hedgebook “misleading” and based on an “errant set of suppositions.”
GATA urged NovaGold shareholders, in an August 14 news release, “not to tender their shares to Barrick before Barrick closes its short position in gold.” The organization said that Barrick’s alleged short position of about 12 million ounces of gold “long has been a major suppressing force against the gold price and against the price of gold mining shares.”
Meanwhile, in a separate article, GATA Chairman Bill Murphy claimed that the major company “is desperate for the unhedged gold in the group at NovaGold, with which Barrick would extricate itself from a nightmare. Taking over NovaGold would help Barrick immensely.”
In an August 7th article, Chris Powell, Secretary-Treasurer for GATA, asserted: “If the acquisition of NovaGold is to be the mechanism by which Barrick obtains enough new gold to avoid closing the massive remainder of its hedge book, then the acquisition may be seen as another part of the gold-price suppression scheme.”
Powell then wrote, “Gold's partisans who are not Barrick shareholders -- and do ANY gold partisans own Barrick stock? -- might much prefer for Barrick to have to buy back its hedges out of above-ground gold in the short term, thereby pushing gold's price up, rather than to be able to cover them out of new production over the long term. Of course NovaGold shareholders might do a lot better that way as well.”
Borg responded that Barrick has had a no-hedge policy for the past three years. During the second quarter, Barrick eliminated the remainder of the Placer Dome hedgebook, in turn reducing its corporate gold sales by 7.7 million ounces in the year-to-date at a cost of $1.8 billion, of which $300 million remains to be paid. The corporate gold sales contract now stands at 2.8 million ounces with a goal of eliminating this position no later than the end of 2009.
Barrick has been net buyers of gold this year, buying 7.5 million ounces to settle Placer Dome’s hedgebook, according to Borg. And, he added, the company doesn’t “need to acquire NovaGold to deal with its hedgebook.”
Nevertheless, Borg said Barrick will continue to use gold hedgebooks to finance development of new mines. The company has assigned a 9.8 million ounces hedgebook to two new mining projects, specifically aimed at return of capital, and project financing activities to diminish mining project risk.
Even if Barrick quickly acquired NovaGold, Borg explained NovaGold’s ounces could not impact Barrick’s current hedgebook because Nova will not have mines in production for several years.
Borg said GATA’s allegations that the company wants NovaGold for the purpose of reducing Barrick’s hedgebook “are not based on any facts whatsoever” and strain GATA’s credibility with the investment community.
“Our shareholders call and say ‘What in the world are they (GATA) talking about?’” Borg added.
Instead, Borg suggested that GATA pay “more attention to the facts…rather than rant and rave rhetorically without any basis in fact.”
The Quarterly Hedge book review by Virtual Metals Research & Consulting found that global hedgebooks declined a total of 5.1 million ounces during the second quarter of this year. The cumulative fall for the first half of the year is estimated at 10 million ounces, leaving a total of 43 million ounces held in global hedgebooks. Barrick, AngloGold Ashanti and Newmont, accounted for 82% of the dehedging during the second quarter. Barrick’s decision to close out Placer Dome’s 7.7 million legacy hedge is equivalent, pro rata, to Latin American mine output, according to Mineweb correspondent Rhona O’Connell.
Last month, Barrick made a hostile all-cash bid of $1.3 billion for all the shares of NovaGold, and has also made a friendly all-cash offer for NovaGold’s Galore Creek project neighbor Pioneer Metals.