GATA Chairman Bill Murphy's "Midas" commentary tonight at www.LeMetropoleCafe.com breaks what may prove to be the story of the year in the gold world: Barrick Gold's plan to acquire AngloGold.
"Midas" fits this in with AngloGold CEO Bobby Godsell's promoting the gold price's prospects even as AngloGold was beginning to close its hedges. Ordinarily AngloGold might be expected NOT to talk up the gold price while the company was trying to buy back gold and buy back its promises to sell gold. AngloGold's talking up the gold price when the company was trying to buy might seem as strange as the Bank of England's warning the world about its gold sales and thereby driving the price down, and, with the price, the bank's own receipts.
Of course the Bank of England's behavior made sense if the bank actually wanted a lower gold price for surreptitious political reasons. And AngloGold's announcing its plans to reduce its hedging, driving up the cost of its own plans, may make sense too, as Murphy writes -- in the context of AngloGold's fending off acquisition by the super-hedged Barrick, for whom a higher gold price is death.
Anyway, the relevant excerpt from tonight's "Midas" is appended with permission because its author hopes that readers who do not subscribe to his Internet site will consider taking a free trial subscription. Just go to:
http://www.LeMetropoleCafe.com
Tell them that Bobby G. sent you!
CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc.
* * *
Copyright 2002, www.LeMetropoleCafe.com From "Midas" commentary for May 1, 2002
By BILL MURPHY www.LeMetropoleCafe.com
The big gold news today has to do with Barrick and AngloGold. I was told the following last night by the best of overseas sources:
"Barrick at the moment has a team of 40 people working in Johannesburg. They want to take over AngloGold."
The "Midas" analysis of AngloGold is all falling into place. AngloGold CEO Bobby Godsell has been pounding the table for months and months that Anglo has reduced its hedge book and is going to continue to do so in an aggressive manner.
That is most unusual. Normally a big hedger completes a buyback program and THEN announces what its has done. My colleagues and I have been scratching our heads as to why Anglo would announce its intentions ahead of time, which would surely result in higher buyback prices. Now we have our answer.
Anglogold wants the gold price to go much higher to stave off Barrick. Barrick remains heavily hedged. A soaring gold price is no great shakes to Barrick and could even do the company in if their hedge book blows up. In addition, if AngloGold covers its hedges as fast as possible, it will add fuel to the growing gold-buying power and be a factor in moving the gold price higher. The more Anglogold covers forwards and the higher its share price goes, the more difficult it will be for Barrick to take over AngloGold. For Anglogold will get too expensive.
Thus Bobby Godsell wants the world to know that the world's No. 1 gold producer is covering hedges, so as to encourage others to cover hedges, so as to encourage hedge funds and other physical gold buyers to step up to the plate and get long.
Moneyweb produced an interview with Godsell today and one of his comments was unprecedented and sensational:
* * *
BOBBY GODSELL: I think, in fact, the major feature of our quarterly results -- which I would describe as operationally steady -- is that we've indicated again that we think the gold price is firming and that we've got better prospects for the gold price than we've had certainly since 1993, maybe even since 1987. Against that background, we've been trimming back our hedge book. We also have said quite openly that we were taken by surprise, perhaps like a few other people, by the dramatic decline in the rand's value in November and December that left us with a number of rand-denominated forward sales contracts that were seriously out of the money. We've reduced our hedge book by 1.7 million ounces this quarter, or 120 percent of the company's production. We are now significantly less hedged than we were last quarter. That increases our participation in the firmer gold prices and, in particular, we've taken out the poorly priced rand contracts. For that we've paid a price of I think $7 in the difference between the received price and the spot price, and I think to have been able to adjust your hedge book in that way at really a comparatively small cost is a great tribute to the people who run our hedge.
MONEYWEB: Now the gold price is flirting with around the $310 level. Where do you see that by year-end?
BOBBY GODSELL: Byron, all we can say is -- and my colleague Kelvin Williams has studied this market for 17 years now -- everything is in place for a firmer price. The only constraint on the price going up is of course physical offtake, and it is so that, if the price rises and rises rapidly, you see a falloff on jewelery demand, and we're seeing that, for example, in India in quite a big way. I think the prospects are for a price between $300 and $350. But we've never predicted prices; we're just not that smart.
* * *
"Better prospects for the gold price than we've had certainly since 1993, maybe even since 1987."
In 1993 gold traded at $400+; in 1987 $500+.
Conservative gold executives like Bobby Godsell do NOT make casual comments such as this. There is a purpose to everything he says in a formal interview. Godsell knows that GATA has been right all along; that the gold price has been rigged and kept at artificially low prices for years. He knows the rig is coming to an end and he knows the gold price is explosive for all the reasons often cited in "Midas" commentary. For those reasons Godsell is not afraid to hint that $400 or $500 gold is possible.
I can't be the only one in Gold Land to understand this. A statement like this has to freak some of the big hedgers and encourage other big spec players to load the gold boat.
I consider Godsell's gold comments to be as significant a development as any since GATA began and the Cafe opened for business.
It is only a matter of time before the gold derivative bomb goes off and sinks the evil cabal forces.
Meanwhile, Barrick Gold continues to stink up the place. From the Globe and Mail in Canada:
* * *
Barrick misses forecasts
Wednesday, May 01, 2002
Barrick Gold Corp. posted weaker first- quarter earnings Wednesday as lower gold sales offset gains from higher average prices and the company put more of its production for sale on the spot market.
For the quarter, Toronto-based Barrick -- the world's second biggest gold producer -- had net income of $46-million (U.S.) or 9 cents a share, down from $87-million or 16 cents in the same period a year earlier.
The latest results came in behind analysts' expectations. Analysts polled by Thomson Financial/First Call had been forecasting earnings of 12 cents a share on average.
During the first three months of the year, total production was 1.37 million ounces at a cash cost of an ounce, compared with 1.49 million ounces at a cost of $161 per ounce in last year's first quarter.
The 8-percent decline in production, Barrick said, was the result of two mine shutdowns in late 2001 as well as another closing in the first quarter and the winding down of four other operations, which are scheduled to close throughout the year.
The higher cash costs in the latest quarter stemmed mainly from higher power costs and lower grades at its Goldstrike property.
* * *
Once again we have more evidence that gold supply is going down and will continue to do so even as the price of gold goes much higher. Many gold producers have been high- grading for years, and that is coming to an end.
Thom Calandra of CBS MarketWatch touched on Barrick in his column today:
"Barrick failed to meet Wall Street earnings expectations Wednesday. In their conference call, Barrick executives fielded numerous analysts' questions about the company's hedged sales of gold, a strategy seen by some as risky if bullion prices rise sharply. Those questions, from JP Morgan, Goldman Sachs, and others, were met by Barrick executives, who assured investors they were monitoring the situation."
Monitoring the situation? What does that mean? The arrogant meatheads at Barrick continue to doubletalk. They are going to get their hat handed to them. AngloGold has outfoxed them and Barrick is stuck sucking up to the Gold Cartel. Hedge book blowups are coming. Will Barrick be one of them?
