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BARRICK GOLD IN THE NEWS 2002-2004
current news

Barrick Gold's Net Falls as Output Drops, Costs Rise
Oct. 26, 2004(Bloomberg) -- Barrick Gold Corp., the world's third- biggest gold producer, said third-quarter profit fell 8.6 percent as declining mine output and higher fuel costs eroded the benefit of a rally in bullion prices.

Net income fell to $32 million, or 6 cents a share, from $34 million, or 7 cents, Toronto-based Barrick said in a statement. Sales fell 8.9 percent to $500 million.

Gold output dropped 17 percent to 1.23 million ounces as the company processed lower-grade ore at mines in Nevada, Peru, Ontario and British Columbia. The cash cost to produce gold rose 22 percent to $205 an ounce, eroding the benefit of sales prices that averaged $395 an ounce, up 8.2 percent.

Higher mining and ``exploration costs means they are earning less than one would hope,'' said Victor Flores, an analyst at HSBC Securities in New York. He has a ``add''rating on the stock and does not own any.

Shares of Barrick rose 3 cents to C$27.57 ($22.50) at 4:05 p.m. on the Toronto Stock Exchange. They have risen 7.7 percent in the past year.

The company expects construction cost at Veladero in Argentina to increase by about 10 percent to 15 percent from $475 million because of higher prices of fuel, concrete and steel, labor and changes to the scope of the project.

Higher Mine Costs

Barrick in July raised the construction cost of the Pascua- Lama mine on the Chile-Argentina border to between $1.4 billion and $1.5 billion, up from $1.18 billion, because of a change in the way ore will be processed to reduce pollution and cut environmental expenses.

``Although the industry has faced significant inflationary pressure, we remain on track to meet our production and total cash-cost guidance for the year,'' Chief Executive Officer Greg Wilkins said in the statement.

Barrick bought 2.2 million barrels (93.5 million gallons) of fuel, or almost half of projected demand in the next three years, at prices that are below current levels, the company said.

``We've got about 93 million gallons of fuel hedged at an average price below $40'' a barrel, Chief Financial Officer Jamie Sokalsky said in an interview. Crude oil surged 83 percent in the past year, reaching a record $55.67 a barrel in New York yesterday.

Production Gain Expected

Barrick plans to produce 4.9 million to 5 million ounces of gold this year at an average cash cost of $205 to $215 an ounce. The company expects production to rise next year, with output totaling between 5.3 million and 5.5 million ounces, Sokalsky said.

Barrick is forecasting production of 6.3 million to 6.5 million in 2006 and 6.8 million to 7 million in 2007, almost matching Newmont Mining Corp., the world's biggest gold producer.

``We're targeting 40 percent growth in production through 2007,'' said Sokalsky.

The company will add a new mine in North America, with the development of the East Archimedes project in Nevada, an old Homestake Mining Co. property, Barrick spokesman Vince Borg said.

Barrick purchased Homestake three years ago. The company won't say how large the Archimedes deposit is. Borg said Barrick expects to mine the property for at least six years. Permitting for the mine will take about a year, Sokalsky said.

``We have a lot of growth in South America,'' Borg said. ``This is a good addition to our North American asset base.''

The company reduced its gold-hedge position by 200,000 ounces in the quarter to 13.7 million ounces, or 16 percent of its reserves.

Barrick's sales in the third quarter of 2003 were $549 million.

AngloGold Ashanti Ltd. is the world's second biggest gold producer by 2003 output.To contact the reporter on this story:
Choy Leng Yeong in Seattle at o clyeong@bloomberg.net

To contact the editor responsible for this story:
Steve Stroth at sstroth@bloomberg.net.
Last Updated: October 26, 2004 16:08 EDT

TORONTO--(BUSINESS WIRE)--Oct. 4, 2004--Barrick Gold Corporation (NYSE:ABX) (TSX:ABX) (LSE:ABX) (PARIS:ABX) (Swiss:ABX) advises that the Tax Court of Peru has decided in favor of Barrick's Peruvian subsidiary in its case with SUNAT, the tax agency. The appeal of the tax assessment was previously announced in January 2003.

Any appeal by SUNAT must be filed within 90 days.

Barrick's shares are traded under the ticker symbol ABX on the Toronto, New York, London and Swiss stock exchanges and the Paris Bourse.

Contacts

Barrick Gold Corporation Investor Contact:
Darren Blasutti
Vice President, Investor Relations
(416) 307-7341

Barrick Gold Corporation Media Contact:
Vincent Borg
Vice President, Corporate Communications
(416) 307-747

The Department of the Interior's Office of Hearings and Appeals (OHA) has granted a Petition For Stay from Western Watersheds Project. The Stay blocks a recent decision for the enormous Squaw Valley and Spanish Ranch Allotments by the Elko Field Office of the Bureau of Land Management (BLM).

The permittees grazing on these public land allotments are Barrick Goldstrike, a foreign-owned mining company, and Ellison Ranches. The vast allotments encompass several hundred thousand acres in the heart of the sagebrush sea in western Elko County, Nevada. These lands provide essential habitat for sage grouse, pygmy rabbit, a wealth of migratory birds, antelope, mule deer and many other important wildlife species including threatened Lahontan cutthroat and redband trout.

OHA Administrative Law Judge James Heffernan's decision blocks a convoluted grazing scheme that relied on construction of over one hundred miles of new fence, mostly at taxpayer's expense. The Stay also prevents the implementation of BLM's proposed herbiciding of large areas of sagebrush to increase forage for Barrick Goldstrike's cattle.

"This court action will prevent a truly bad decision from going into effect," said Katie Fite, WWP's Director of Biodiversity, "BLM never even considered significant reductions in livestock numbers despite its own overwhelming documentation of the harms caused by current livestock grazing to streams, springs and the sagebrush uplands. Fortunately, Judge Heffernan recognized that irreparable harm would occur to the environment if the massive amount of fencing and herbiciding were to go ahead."

"Ironically, part of this BLM decision was supposed mitigation for the massive environmental damage and aquifer depletion caused by Barrick Goldstrike's cyanide heap leach mining, but instead of gaining meaningful protections for public lands, BLM chose to destroy and further fragment sagebrush habitats for the sole benefit of Barrick Goldstrike's cattle" said Jon Marvel, executive director of Western Watersheds Project.

Gold Firm Libelled on Web Sites, Court Rules: www.bothends.org: mfi information centre: dossiers (select english).

The Court of Appeal increased the trial judge's award by quintupling the general damages award to $75,000 and adding $50,000 in punitive damages. The Court also permanently restrained the defendant from disseminating, posting on the Internet or publishing in any manner whatsoever any defamatory statements concerning Barrick. Barrick was also awarded its costs for the appeal.

The Court held that "Internet defamation is distinguished from its less pervasive cousins, in terms of its potential to damage the reputation of individuals and corporationsÝespecially its interactive nature, its potential for being taken at face value, and its absolute and immediate worldwide ubiquity and accessibility."

Read the decision at: http://www.ontariocourts.on.ca/decisions/2004/june/barrickC39837.htm

The class-action lawsuit, in which gold investors Greg McKenzie and A.J. Miller are the lead plaintiffs, will attempt to quantify the financial harm done by Barrick and Morgan Chase to gold investors and devise a remedy for their restitution.

"We expect to obtain compensation for all gold owners, not only for their losses from their gold investments but also for the profits they should have realized," Blanchard CEO Donald W. Doyle Jr. said in an interview with the Gold Anti-Trust Action Committee.

GATA consultant Reginald H. Howe brought a similar federal lawsuit in Boston in 2000. It was dismissed on jurisdictional grounds in 2002. Since then GATA has documented and publicized evidence of manipulation of the gold market by Barrick, Morgan Chase, other bullion banks, and the U.S. government.

"The exact number of gold owners who are members of the class is unknown at this time and can be determined only through appropriate discovery and expert testimony," Doyle told GATA. "But we allege, on information and belief, that the members of the class owned, during the period at issue, about 96.5 million ounces of gold having a market value of $38.58 billion at $400 per ounce. Once a judgment is obtained and the amount of damages suffered by the class members is determined, those damages will automatically be tripled under the mandatory provisions of the federal anti-trust laws.

"In 1983 Barrick Gold Corp. was a start-up company with a single mine in Canada and a founder with no experience in the gold business," Doyle said. "By 2001 Barrick had amassed off-balance-sheet assets that were worth more than the market capitalization of the next five biggest gold-mining companies in the world combined. Barrick made $2.3 billion on its short sales of gold and made a profit on those short sales for 62 consecutive quarters. A short sale is inherently a high-risk speculation. How many true speculations have ever been profitable for 62 consecutive quarters?"

Blanchard's original lawsuit charges essentially that Morgan Chase provided Barrick with so much borrowed gold -- presumably obtained from central banks -- on such favorable terms that Barrick could overwhelm the market and move prices up or down at will and not have to repay the borrowed gold for many years if at all. In some years, Blanchard maintains, Barrick was able to supply to the market more gold than was supplied by all the bullion banks combined.

In an attempt to have Blanchard's lawsuit dismissed, Barrick, according to GATA, seemed to acknowledge the plaintiff's premises. Barrick submitted a motion arguing that in borrowing gold and selling it into the market, the company was acting as the agent of central banks and carrying out their policies in the gold market and thus should share their immunity from lawsuits.

U.S. District Judge Helen Berrigan rejected Barrick's motion and sent the case on for discovery and trial.

"While the price of gold fell by more than 25 percent," Doyle said, "Barrick was able to increase its annual operating cash flow by more than 400 percent. Barrick became the dominant gold mining company in the world through acquisitions made with the profits from its short sales of gold. By suppressing and depressing gold prices, Barrick forced its competitors to sell gold assets and companies at fire-sale prices.

"The measures that Blanchard has taken have already been good for the gold industry and our clients. Since we began discussions with Barrick in this lawsuit, the company has reduced its hedging position by 10 million ounces, adding gold demand and subtracting gold supply. On December 2, 2003, Barrick's president and chief operating officer announced that Barrick had given up hedging for good. By consenting to the termination of its short sales of gold -- assuming that Barrick honors its commitment -- the company took a major remedial step sought by Blanchard's original complaint.

"I believe that the class action will be successful in recovering damages and putting a stop to practices that have suppressed and depressed the price of gold and all tangible assets," Doyle concluded.

Blanchard's Internet site with information about its litigation is: http://www.savegold.org/.

RENO (Mineweb.com) -- Even as Barrick President and CEO Greg Wilkins was extolling his company's "A"-rated balance sheet and its ability to self-finance its projects to a Toronto mining conference on Thursday, Moody's Investors Service said that it is reviewing the company's debt ratings for possible downgrade.

Moody's said its review "is prompted by the fact that the company is embarking on a major mining development program to add production and to lower costs from a platform that currently has higher costs and lower production than was historically the case." Barrick's plans to develop five new mines while reducing its hedging position have prompted lively discussion among investors and analysts.

In his presentation to the 10th Annual Merrill Lynch Mining Conference on Thursday, Wilkins said the strong development project pipeline will result in the lowest total cash costs for Barrick of all major gold producers. Barrick is currently building four open-pit mines, Veladero in the Frontera District of Argentina, Lagunas Norte in Alto Chicama, Peru, Cowal, Australia, and Tulawaka in Tanzania. The combined capex for construction of the four mines totals more than $1.1 billion. Total combined cash cost for the new mines is expected to average $160-170 per ounce, according to Wilkins. Future gold/silver mega-mine Pascua-Lama, also in the Frontera District of Argentina and Chile, has been given the technical go-ahead. However, analysts have expressed concern about Barrick's ability to finance the massive project. Capital costs alone are estimated at US$1.5 billion for Pascua-Lama. Its average total cash cost is estimated at $130-140 per ounce. Meanwhile, Barrick already has 12 operating mines in seven nations, according to Wilkins.

However, Wilkins told analysts on Thursday that Barrick "is capable of self-financing our developments without equity dilution." The total combined capex of all current and future projects now approved is $2.6 billion, according to Vince Borg, Barrick's Vice President of Corporate Communications. However, Moody's said that Barrick reported revenues of $1.9 billion in 2003.

Meanwhile, the company has also adopted a no-hedge policy, which has already exceeded its commitment to reduce hedging by 1.5 million ounces this year.
Barrick's reserves are currently estimated at 86 million proven and probable ounces of gold with measured and indicated resources of 25 million ounces. Wilkins said more than 38 million ounces of reserves are now in development. Unhedged reserves increased 61 percent over the past four years, he added.

Wilkins said Barrick's exploration strategy involves more than 95 projects in nine nations including 2 million ounces of greenfield gold deposits. Six countries, Peru, Chile, Argentina, the US, Tanzania, and Australia, have been designated as high priority exploration targets, he added.

In its review, which usually takes about two weeks, Moody's declared "it will consider the risks inherent in completing all five mines on time and on budget, the impact of the new mines on Barrick's overall cost position, and the impact of the development on the company's overall financial condition."

"The review will also consider Barrick's changing geographic risk profile, as well as the possibility that it will finance a greater portion of its mines at the project level," Moody's said. "Finally, in light of the company's announcement that it is no longer adding to its gold hedge position, the review will consider the impact on Barrick's revenues of various gold price scenarios."

In an interview on Thursday with Mineweb, Barrick's Vince Borg said the company is not surprised that Moody's has placed Barrick's Senior Unsecured Debt Ratings under review. Borg noted that Barrick is the only major gold mining company with an overall "A" bond rating. Even if that rating were downgraded to a "A-", it will still be stronger than other companies, he added.

In an unrelated matter, Borg said Barrick is still considering bidding for a tender for the rights to tap the huge Siberian gold deposit Sukhoi Log although Russia has delayed the auction until 2005. Russian Natural Resources Minister Yuri Trutnev told Reuters that he favors an open cash auction for Sukhoi Log, which has been added into the nation's 2005 privatization plan. However, it still has not been settled as to whether a 25 percent restriction on foreign ownership will be implemented. It is estimated that it could cost as much as $1 billion to develop the deposit.

The Department of the Interior's Office of Hearings and Appeals (OHA) has granted a Petition For Stay from Western Watersheds Project. The Stay blocks a recent decision for the enormous Squaw Valley and Spanish Ranch Allotments by the Elko Field Office of the Bureau of Land Management (BLM).

The permittees grazing on these public land allotments are Barrick Goldstrike, a foreign-owned mining company, and Ellison Ranches. The vast allotments encompass several hundred thousand acres in the heart of the sagebrush sea in western Elko County, Nevada. These lands provide essential habitat for sage grouse, pygmy rabbit, a wealth of migratory birds, antelope, mule deer and many other important wildlife species including threatened Lahontan cutthroat and redband trout.

OHA Administrative Law Judge James Heffernan's decision blocks a convoluted grazing scheme that relied on construction of over one hundred miles of new fence, mostly at taxpayer's expense. The Stay also prevents the implementation of BLM's proposed herbiciding of large areas of sagebrush to increase forage for Barrick Goldstrike's cattle.

"This court action will prevent a truly bad decision from going into effect," said Katie Fite, WWP's Director of Biodiversity, "BLM never even considered significant reductions in livestock numbers despite its own overwhelming documentation of the harms caused by current livestock grazing to streams, springs and the sagebrush uplands. Fortunately, Judge Heffernan recognized that irreparable harm would occur to the environment if the massive amount of fencing and herbiciding were to go ahead."

"Ironically, part of this BLM decision was supposed mitigation for the massive environmental damage and aquifer depletion caused by Barrick Goldstrike's cyanide heap leach mining, but instead of gaining meaningful protections for public lands, BLM chose to destroy and further fragment sagebrush habitats for the sole benefit of Barrick Goldstrike's cattle" said Jon Marvel, executive director of Western Watersheds Project.

Republican U.S. Senate candidate Pete Coors owns a stake in a Canadian gold-mining company that U.S. environmental regulators rank as one of the largest polluters in the country.

Coors' investment in Toronto-based Barrick Gold Corp. - valued at between $50,000 and $115,000 - links him to a company that consistently appears near the top of the U.S. Environmental Protection Agency's toxic-release index.

Last week, environmental issues jumped to the forefront of Coors' hotly contested Senate race against Democratic state Attorney General Ken Salazar.

An out-of-state group began running television ads attacking Salazar's handling of the cleanup of a cyanide spill at the Summitville gold mine.

Salazar's camp and Stuart Sanderson, president of the Colorado Mining Association, called the ad unfair. Coors refused to ask the group - Americans for Job Security of Alexandria, Va. - to pull the ad off the air.

Now, Coors' ownership in Barrick Gold, which successfully sued the EPA to change how toxic waste is calculated, raises another environmental issue.

"Companies like Barrick that have sued to hide their toxic releases from the public are not an environmentally ethical investment," said Alan Septoff, research director for Earthwatch, a Washington, D.C.-based group that monitors the mining industry.

Coors spokeswoman Cinamon Watson said the candidate did not ask Americans for Job Security to begin running the ads, and she defended Coors' stock ownership.

"Barrick is one of a number of investments that Pete has," Watson said. "As to the environment, Pete supports a fair and balanced approach based on sound science."

In this case, the mining association's Sanderson supported Coors.

"If indeed he owns stock in Barrick Gold, he owns stock in a company that has shown its leadership nationally in dedication to environmental protection," Sanderson said.

Barrick Gold stock is one of more than 60 investments that Coors listed in a financial disclosure he submitted to the secretary of the U.S. Senate in May.

Barrick Gold acquired the Goldstrike Mine in Nevada in 1994 for $9,000, under an 1872 law that lets companies stake a claim for $5 an acre. The 1,800-acre claim included an estimated $10 billion worth of gold.

The law remains controversial.

Roger Flynn, managing lawyer for the Western Mining Action Project in Boulder, said Coors is profiting from a company that acquired its large Nevada mine at taxpayers' expense.

"That's a pretty darn good investment at the expense of taxpayers," Flynn said. "If Coors is a friend of taxpayers like he says in his ads, why doesn't he tell the company to give back $10 billion?"

Barrick Gold ranks near the top of the EPA's toxic-release index despite successfully suing the EPA to change the way those substances are reported by mining companies.

In 2003, a federal judge ruled that Barrick Gold and other mining companies were not required to count the material they extract from the ground if it is not processed to extract gold.

Barrick Gold's toxic releases dropped from first place nationally with 426.9 million pounds in 1998 to fifth with 79.4 million pounds in 2002, the most recent year that data are available. The toxic chemicals released include arsenic, cyanide, lead and mercury.

Coors also has other ties with Barrick Gold. In 2003, Adolph Coors Co. added Barrick Gold's former chief executive, Randall Oliphant, to its board of directors.

Staff writer Mark P. Couch can be reached at 303-820-1794 or mcouch@denverpost.com .

Gold Firm Libelled on Web Sites, Court Rules
By Tracey Tyler
Toronto Star
Saturday, June 5, 2004

In a decision legal experts say will "scare the hell" out of Internet users and set back free speech, the Ontario Court of Appeal has ordered a homeless Vancouver man to pay $125,000 in damages for libelling a gold mining corporation on several Web sites. The court also issued a permanent injunction to stop Jorge Lopehandia from defaming the company in cyberspace.

When Barrick Gold Corp. sued Lopehandia for libel last year, the trial judge, Madam Justice Katherine Swinton, concluded his Internet postings amounted to an "emotional, often incoherent" diatribe that no reasonable person would take seriously. She awarded the company a nominal $15,000 for injury to its reputation.

But the appeal court set aside her decision yesterday. In a 2-1 ruling, the court called Lopehandia's campaign of "cyber libel" malicious, high-handed, unremitting,
tenacious, vicious, spiteful, "wide ranging in substance, and worldwide in scope."

Lopehandia claims that he and three others nominally owned a Chilean mine site acquired by Barrick. In messages posted on various cyber bulletin boards, he
accuses the company of, among other things, fraud, money laundering, and pursuing organized crimes against humanity. "Barrick is DEVIL killer," one line said.

Libelling someone on the Internet is different than defaming him in other media, such as newspapers, the court said yesterday. Lopehandia's use of the Internet made his "blizzard" of messages potentially more damaging -- and more believable -- because of the speed, scope, and blunt anonymous nature of statements on the World Wide Web, the court said.

Lopehandia did not have a lawyer representing him at the trial or when the case came before the Court of Appeal.

Mr. Justice Robert Blair, who wrote yesterday's decision, said Lopehandia's writing style might not be taken seriously in more traditional media, such as newspapers, but there's nothing to suggest it would be laughed off on the Internet, where, as one expert put it "anything goes."

The majority increased general damages to $75,000 and ordered Lopehandia to pay $50,000 in punitive damages as punishment for conduct Blair described as falling into the special category of being so outrageous that it offends the court's sense of decency. The use of the Internet helped to push it into that league, he said.

Reached yesterday in North Vancouver, Lopehandia's son, Jordan, 23, said his father is living in a downtown hostel and has no access to a phone. He believes that people are out to get him, his son said.

Libel law experts found yesterday's ruling deeply troubling.

"This is a decision which will send a chill to users of the Internet," said Toronto lawyer and libel law expert Bert Bruser, who represents the Star. "The Court of Appeal has determined that somehow or other, chatter on the Internet is more deadly than other forms of libel and they did this, it seems to me, without any evidence."

Libel law expert Brian Rogers agreed. Rogers said he too found it disturbing that "some very strong and pervasive" findings were made about the Internet without hearing from those who might defend how it was used in this case.

Blanchard & Co., the New Orleans coin and bullion dealer, announced today that it has defeated a motion by Barrick Gold to add about 20 bullion banks and 75 gold producers as defendants in Blanchard’s gold price-fixing lawsuit in federal court in New Orleans.

In a statement to its employees, Blanchard said Barrick had based its motion on a claim that its gold hedging program is similar to programs used by other mining companies. But, Blanchard added, Barrick has long claimed in filings with both the court and the U.S. Securities and Exchange Commission that its hedging program is UNIQUE.

That is, it seems that, to try to delay the lawsuit and its evidence-discovery process by adding dozens of defendants, Barrick has just changed its story completely.

Denying Barrick’s motion, the court didn’t buy the change of stories.

Barrick and its co-defendant and bullion bank, J.P. Morgan Chase & Co., are, GATA has long maintained, the intermediaries through which the U.S. Treasury Department and Federal Reserve have been intervening surreptitiously in the gold market. The U.S. government is entitled by law to sell and buy gold but, GATA has maintained, only to achieve ordinary purchases and sales, not to rig the market, and only in the open, not surreptitiously so that only favored associates of the government, like Barrick and Morgan Chase, can profit by exclusive knowledge of government policy.

Those were the points of GATA consultant Reg Howe’s lawsuit against Morgan Chase, the Treasury Department, the Fed, and others in federal court in Boston several years ago.

The Blanchard lawsuit pursues the same points with a much-narrowed list of defendants, which is why the case is so important.
Blanchard’s statement is appended.

CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc.
* * *
STATEMENT TO BLANCHARD & CO. EMPLOYEES FROM DONALD W. DOYLE JR., CEO

We just received a copy of the court’s order and reasons denying Barrick’s motion to join, as defendants, approximately 20 bullion banks and 75 gold producers. The court said that, without production of the documents requested by Blanchard, it was impossible to determine the status of the absent parties.

According to the court, a dispositive issue in this case is whether or not Barrick’s hedging program is unique. Blanchard says the program IS unique; Barrick claims that it is NOT unique.

The court has placed Barrick on a very slippery slope. Not only is the company now open to its worst nightmare—discovery that will provide even more proof of manipulation and monopolization—but it also finds itself in the unenviable position of claiming that its hedging program is NOT unique even though the company has repeatedly stated the OPPOSITE in filings with the federal district court and in filings with the U.S. Securities and Exchange Commission.

Just two examples:

“Barrick admits, on information and belief, that no other gold producer has available to it the combination of margin-free hedging, 10-15-year terms, and flexible delivery dates that are available to Barrick.” (Answer of defendant Barrick Gold Corp. to plaintiffs’ third supplemental and amended complaint, October 7, 2003, Paragraph 35.)

“The terms of our gold sales contracts provide flexibility and benefits that we believe are unique to us and unavailable to any other gold producer.” (Barrick annual report for 2002, Page 55, incorporated in Barrick’s Form 40-F filing with the U.S. Securities and Exchange Commission in 2003.)

The citations followed an investigation into the death of Ernie Spalding, 38, who was burned by crushed ore and fell from a work level at the plant to the concrete floor below on Nov. 19.

The roaster facility includes two identical roasters that heat carbonaceous ore to 1,000 degrees Fahrenheit to burn off sulfides and impurities.

The hot ore, called calcine, then flows to quench tanks at a roaster through two discharge pipes, called A-leg and B-leg, according to MSHA.

Spalding was killed after he entered a work area where a gasket was being replaced in a discharge pipeline that transferred the hot calcine dust to a quench tank, when the dust was unexpectedly released.

Spalding was alone in the area. Other workers had left to get parts, according to MSHA's investigation.

"The accident occurred because the procedures being used to perform this repair work at the discharge pipeline were inadequate. The roaster had not been emptied of hot calcine dust before the maintenance work was performed," MSHA writes.

"A task analysis identifying all hazards associated with this maintenance task was not conducted," the agency also states, adding that the workers weren't trained in safe procedures for this type of work.

The roaster was shut down until Dec. 2.

Spalding had more than eight years of experience working on roasters, including three years at Goldstrike, and he had been a trainer for nearly a month before the accident, the report states.

One citation against Barrick was over the lack of a mechanical device or other means to prevent injuries created by sliding materials.

"Failure to provide means of controlling the hot calcine material when the 'B' discharge line was disconnected at the slide gate constitutes more than ordinary negligence and is an unwarrantable failure to comply with a mandatory standard," MSHA states.

This citation was terminated on Jan. 13 when the company established a written safe-job procedure and miners were instructed in procedures for working on roaster discharge legs.

The second citation was over the lack of protective clothing and equipment for workers in an area where there could be hot calcine material.

The citation was terminated Jan. 13 when Barrick wrote a safe procedure that includes protective clothing when maintenance is performed on the roaster discharge legs, MSHA wrote.

Spalding's death was the second of two mining fatalities in the state in 2003. James Tanner, 40, was killed at the Eagle-Picher plant near Lovelock Aug. 9 in a fall from the roof, where he was working.

See also http://home.rmci.net/jscoombs/gibbons/votes_against_the_environment.htm

VANCOUVER, British Columbia—Barrick Gold Corp. said Friday it was prepared to lose out on higher gold prices on a third of its output this year as it lives up to a promise to wipe out its bulky hedge book.

The Toronto-based miner, the world’s third-largest bullion producer, owns the gold industry’s biggest hedge book, a thick pile of contracts it entered into over many years to lock in prices for its as yet unmined gold.

Barrick scored when the gold price was weak but the metal’s 65 percent gain in the past three years to over $400 an ounce has overtaken the price it has pre-sold much of 15.5 million ounces of its production.

Hedging has become unpopular with investors, who want to see the full benefit of today’s high gold prices.

Chief executive Greg Wilkins said on Friday the company would deliver at least 1.5 million ounces out of anticipated production of 4.9 million to 5.0 million ounces in 2004 into hedge contracts, even if it means losing money on sales.

“We will accept the opportunity cost of managing the book down,” Wilkins said in a conference call with analysts to discuss Barrick’s fourth quarter and 2003 results.

A total of 1.5 million ounces “is a minimum amount and could perhaps be higher, depending on what happens in the gold market,” said Wilkins, who was appointed Barrick’s head a year ago after his predecessor was sacked.

Asked if Barrick, whose hedge contracts do not have to be closed out this year, would sell its gold into lower-priced contracts even if bullion jumped to $500, Wilkins said:

“We have set a target to manage the book down. But we will then be benefiting substantially from the higher gold prices” on unhedged production. About 82 percent of Barrick’s gold reserves in the ground are not hedged.

Wilkins said Barrick had already reduced its hedge book by 300,000 ounces since Jan. 1, selling the gold at prices about $50 an ounce below the spot market price.

Barrick reported fourth quarter earnings of $77 million, or 14 cents a share, late on Thursday, up from the $54 million or 10 cents per share in the same period a year ago.
But Wilkins said if one-off items such as a derivative and tax gain were stripped out of earnings, the per share figure would have been 8 cents. This was bang-on analysts’ expectations as polled by Reuters Research.

Barrick said its gold reserves, the amount of gold in the ground it can mine profitably, dropped to 86 million ounces at the end of 2003 calculated at a price of $325 per ounce.

This compares with 86.9 million ounces a year ago, when Barrick calculated reserves using a $300 price. At the less economic price of $300 an ounce, current reserves would be 82 million ounces.

Gold miners update their reserve holdings once a year, adding ounces acquired through exploration or acquisition, and subtracting those mined out.

Barrick said its cash cost to produce an ounce of gold was $199 in the December quarter.

Barrick reported fourth quarter production figures last month. The firm, which has gold mines on five continents, said then it had produced 1.3 million ounces of gold in the three months, for a total of 5.51 million ounces in 2003.

In the same release, Barrick said it had reduced its hedge book by 600,000 ounces to 15.5 million ounces.

The firm repeated its expectation to produce between 4.9 million and 5 million ounces of gold this year at a cash cost of between $205 and $215 an ounce.

Citigroup defamation suit to go ahead
From Financial Times, London
By Ken Warn in Toronto Published: February 4 2004 0:36

Veteran Canadian businessman Peter Munk and two property companies he heads have won the right to pursue a C$40m (US$30m) defamation and negligence suit in the Ontario courts against Citigroup and one of its analysts.

The ruling is a setback for Citigroup, which had argued that Ontario did not have jurisdiction over the claim. It comes as companies worldwide are taking an increasingly aggressive stance against what they allege to be unfair comment from analysts.

Last month a Paris court ruled that Morgan Stanley had shown "gross misconduct" by publishing misleading and inaccurate research on luxury goods group MoŒt Hennessy Louis Vuitton.
This suit dates back to an August 2002 conference call by Trizec Properties, a US commercial real estate investment trust, or Reit, controlled by Mr Munk.

During the call Jonathan Litt, Citigroup real estate analyst, attacked Mr Munk's record on corporate governance.

In a note to investors the same day, he said he would forward his research on the company to US regulators and to Eliot Spitzer, the New York State attorney-general, who was then heading an investigation into equities research abuses on Wall Street.

Mr Munk alleges that these actions damaged his reputation, drove down Trizec's share price and led to financial losses.

The suit alleges that the "defamatory statements and imputations had an immediate and dramatic negative impact on Trizec Properties' stock price," driving it down by almost 17 per cent.

The suit is filed on behalf of Mr Munk, listed Canadian holding company Trizec Canada, and Trizec Properties.

It names Citigroup Global Markets - the legal name of its broker-dealer - Citigroup Global Markets Canada, and Mr Litt.

"This decision was procedural and nothing more," a Citigroup spokesman said on Tuesday. Citigroup has said in the past that Trizec's claims are "without merit".

However, an Ontario Superior Court judge has ruled against Citigroup's lawyers.

Justice M.A. Sanderson said in her ruling: "I am of the view that this Court should assume jurisdiction, given the interests of all the plaintiffs in protecting their reputations in Ontario, the publication of allegedly defamatory statements in Ontario, the unfairness to the plaintiffs in not assuming jurisdiction . . . and Citigroup Canada and Citigroup Global's business presence in Ontario."

Mr Munk founded Trizec's predecessor in 1987. He is also the chairman and co-founder of Barrick Gold, Canada's biggest gold producer.

Mine fixing leak from water pond
By Tim Velder, Northern Hills Bureau (Rapid City, South Dakota)
January 10, 2004

LEAD - Subzero temperatures and high winds broke a hole in a containment lining Monday at a defunct gold mine near Terry Peak, causing water stored there to leak into a nearby creek.

The water, from a storm water pond at LAC Minerals Richmond Hill Mine, is still leaking through the lining, officials from the South Dakota Department of Environment and Natural Resources said Thursday.

DENR natural resources engineering director Mike Cepak said the water contains trace amounts of selenium. The pond captures and holds rain and snow runoff from the mine site, which contains capped heap leach pads.

"The water quality in the pond is not that bad," Cepak said. "It is no public health issue for sure. It's just something we need to get fixed."

Barrick Gold Corp. spokesman Vince Borg said Thursday that crews at the mine site discovered the leak Tuesday during a weekly check of the storm water pond.

Borg said a crew from Utah would arrive today to begin its repair work, a job that would take several days depending on the weather. The pond contains about 38 million gallons of water now and is about half full, Borg said. Crews will transfer water from that pond into another pond until the ruptured liner is exposed.

Cepak said a stream of water is running out of the pond and into Rubicon Gulch at about 35 gallons per minute. The stream eventually flows over Bridal Veil Falls in Spearfish Canyon and into Spearfish Creek.

DENR sampled the water at the base of the pond and determined that it has about 38 parts per billion of selenium. Borg said LAC tests showed selenium levels of 32 parts per billion.

Selenium is an essential element to human and animal nutrition in minute concentrations, but prolonged ingestion of higher concentrations over a long period of time could be toxic. Toxic levels of selenium can cause liver damage in humans.

Cepak said the minimum standard for drinking water standards is 50 parts per billion, which means the leaking water is under that limit. The selenium levels are too high, however, for DENR's daily level for groundwater, which is 20 parts per billion.

DENR Mining Program administrator Dave Townshend said the leaking water is diluted by other water as it flows through the gulch. "By the time it gets to Spearfish Creek, there shouldn't be any problem with compliance," Townshend said. "It is a relatively minor problem."

He said this incident is "not in the league" of acid rock drainage or cyanide spills that kill fish or threaten groundwater supplies.

Cepak said LAC officials notified DENR of the leak Tuesday. He said the extreme cold temperatures on Monday, which dipped to about 20 degrees below zero, caused the hard plastic liner to crack under the pressure of the ice. Gusty winds also buffeted the surface, which tore the liner.

LAC's liner is 15 years old and has been exposed to the weather, which might be a contributing factor to its failure, Cepak said.

DENR took water samples Tuesday and Thursday and plans more sampling today. Other samples are being collected from a nearby underground well. DENR will station an inspector at the site to monitor the repair job.

LAC Minerals, a subsidiary of Barrick Gold Corp., manages the mine property. LAC personnel treat water there in the summer and monitor the conditions of the mine. If conditions warrant, LAC crews could treat water in the winter months as well.

LAC Minerals USA, formerly known as St. Joe Gold Corp., started mining at the Richmond Hill site in 1988. It operated an open pit, heap-leach surface mine until 1995. In 1994, LAC posted a $10 million reclamation surety to remedy acid water drainage at the site. LAC covered its waste rock facility in 1995 to curb acid water drainage, and covered its heap-leaching system in 1997.

LAC stopped treating water at the site in 2001 but resumed seasonal water treatment in 2002. DENR officials said water treatment and reclamation activities at the site would continue.

Barrick Gold chairman Peter Munk in 2000 on hedging: "It's not only rock solid, it's an absolutely primitive undertaking of the simplest, most understandable format."
Mr. Munk last month: "The commitment to hedging is gone."

This week, Barrick officially pushed its hedging program down the mine shaft. Yesterday, at a mining conference in London, chief executive officer Greg Wilkins found himself in the unusual position of defending a corporate policy that had helped the company become one of the largest and financially strongest players in the industry.

Barrick's hedge book had been active for about 20 years, had generated about $2-billion (U.S.) in profit that would have otherwise been denied, and was touted as a sure-fire way to make a buck regardless of the gold price. If that weren't enough, the forward sales contracts were highly flexible. This allowed delivery to be deferred -- for years, if the company chose -- so that immediate production could be sold at the higher spot price. To top it off, Barrick, the anti-Christ as far the unhedged miners were concerned, argued forcibly, although not always convincingly, that hedging did not put downward pressure on prices. Au contraire, Mr. Munk would say; the practice "assisted in the evolution of a healthy gold price."

Why did Barrick lose religion so quickly?

First, an example in gold hedging. An investor, say a bank, realizes it can borrow an ounce of gold from a central bank at the bargain rate of 1 per cent a year. Suppose a government bond pays 4 per cent. So the get-rich-slowly plan is to borrow the gold, sell it in the spot market, say at $400, and invest the proceeds. In five years, the investor would have made his 4 per cent, less the 1 per cent he paid to borrow the gold, for net proceeds of $460. At that point, the investor can buy an ounce of gold and hand it back to the central bank. The problem, of course, is that the investor doesn't have a clue what the gold price will be in five years. If it's less than $460, he's in fine shape. If it's more, he's out of luck.

This is where Barrick would enter the scene. It might agree to sell gold to the investor in five years for $450. The investor would have enough money to pay for it, plus make a small profit. Barrick, meanwhile, would sell the gold short in the futures market, knowing it had a buyer at $450 down the road. At that point, everyone would be smiling: Barrick was protected from the low spot price and the investor would be protected from a high spot price when it came time to settle the trade. For Barrick, rising gold prices were the risk. If the price were $500 in five years, it would receive $50 less than it could get in the spot market. This is not an outright loss, per se; it's an opportunity cost. And it might not even be that if Barrick exercised its option to defer the deal for a few years in the hope the spot price would fall.

Given that the system worked so beautifully for so long, Barrick has some explaining to do, and Mr. Wilkins has been doing that. "The problem," he says, "is with financial derivatives," that is investors either don't understand them or, if they do, worry they have the potential to cause a lot of damage. Indeed, stories of about the implosion of Enron and, a few years ago, Long-Term Capital Management, both liberal users of derivatives, have raised anxiety levels among investors.
The unravelling of the hedge book of two lesser gold companies, Cambior and Ashanti Goldfields, didn't help. Neither did Warren Buffett's warning this year that derivatives are "financial weapons of mass destruction."

Okay, but Barrick has never been the victim of a hedge-book disaster and has said one is unlikely because it had hedging down to a fine art. Investors' alleged wariness about derivatives doesn't fully explain why Barrick has substantially underperformed its peer group in the past year or so.

There is the "grassy knoll" theory, which says a nervous creditor read Barrick the riot act. Why would it do that? Because if Barrick were forced to close out all its hedges -- it has 16.1 million ounces sold forward -- it would cost the company $1.2-billion. Worse, every $1 rise in the price of gold puts Barrick another $16.1-million into the hole. (Gold has gone up about $30 an ounce since mid-October.) But Mr. Wilkins says this is nonsense. Creditors are not worried and the company would have absolutely no problem meeting its hedge contract obligations.

So let's ask the question again: What went wrong? The answer, simply, is rising gold prices. Mr. Wilkins will admit the tipping point came with the "flip over in the price of gold. Investors want [full exposure] to the run on gold prices." Barrick, because of its hedge book, can't deliver full exposure. In other words, Barrick was right when it said it could make money at any gold price. That, however, didn't mean investors would stick around when Newmont and other big unhedged mining companies were realizing full value from rising prices, and more. Gold shares are discounting prices well in excess of the current $403. Not Barrick's.

The irony is that Barrick, the industry pariah because of its hedging strategy, is now the industry's best friend. When Barrick hinted it would halt forward sales and wind down its hedge book, gold prices took off. When the biggest short seller of them all called it quits, gold bugs knew their optimism was warranted. Poor Barrick. It might take it years to close and bury the hedge book, and that will put a drag on its shares.

ereguly@globeandmail.ca

Now Barrick hedge will be dropped - http://ls.shapebyforce.com/sbf/350

MineWeb's report on Barrick's reversal on hedging:
By: Ken Gooding
Posted: 2003/11/24 Mon 05:30 ZE2  | © Mineweb 1997-2004

12:24a ET Saturday, November 22, 2003

Dear Friend of GATA and Gold:

Something really strange is going on with Barrick Gold.


Thursday at a financial conference in London, Barrick Chairman Peter Munk made what MineWeb called a “spirited” defense of the company’s policy of selling so much of its gold in advance of its production. But today Munk told news reporters at the same conference that Barrick won’t be doing any more hedging.

Why make such a gold-bullish declaration on the eve of contract expirations on the Comex, where the shorts with whom Barrick long has been allied are struggling desperately to keep gold below $400?

And why (as MineWeb’s Ken Gooding reported) did Barrick President Greg Wilkins have to excuse himself from the London conference to rush off to an urgent meeting in New Orleans?

All this has prompted a lot of speculation: That Barrick’s bankers have pulled the plug on the company because the gold price has increased the debt of Barrick’s hedge book too much; that Barrick heard something Thursday evening about gold’s future and wanted to reposition itself quickly; and that Barrick has realized that its share price is doomed unless it changes its image in the market, among other possibilities.

As for Wilkins’ urgent trip to New Orleans, it’s not Mardi Gras time. Could it have something to do with the price-fixing lawsuit brought against Barrick and Morgan Chase by Blanchard & Co. in federal court there, the lawsuit that has just been allowed to enter discovery and deposition?

It’s all just speculation, but it’s hard to imagine that Barrick would have ARRANGED things to make itself look so scatter-brained. This can be only good for our side.

Meanwhile, you may get a laugh out of MineWeb’s recent interview with South African gold analyst Nick Goodwin (appended in part), who has suddenly noticed that someone is capping the gold price, even if he doesn’t seem to want to know who it is. A trader at Mitsubishi International Corp. quoted in a Reuters story today (also appended) also notes that the gold price is being “capped.”

The word is out; GATA isn’t the only one that has noticed.

One more thing: Don’t miss Jim Sinclair’s commentaries tonight, particularly his “Note to the Community,” here: http://www.jsmineset.com/home.asp

CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc.

The article refers to a campaign started by 2 ex-employees of Barrick Gold denouncing the danger of water pollution and damage to the environment of San Juan province in Argentina if the environmental impact assessment that would allow the company to begin operations is approved.

Marcos Guevara and Favio Barragan (the 2 ex-employees) are taking Barrick to the Local Government's Mining Authority. The have provided the Authority with precise information on location of sites where the company have buried mining waste, which constitutes a breach of the environmental law of the province.

It seems that in a previous occasion Barrick Gold was ordered to stop the entrance of equipment and machinery to another project in the same region ("Pascual Lima" project).

Their accusations and demands come at a critical time as San Juan will hold elections for governor in 10 days.

Guevara and Barragan are attacking the 2 main candidates as they have ignored during their campaigns the demands to stop Barrick. Guevara and Barragan are collecting signatures in the streets to pressure the government and the candidates. The local government is keen to allow Barrick to operate in the region arguing that the project will create jobs. However, Guevara and Barragan explain in the leaflets they distribute in the streets that the number of jobs that the government is attributing to the project is exaggerated and that most of the workers will be foreigners anyway.Guevara says that he is aware of the difficulties and risks involved in his campaign to try to stop a powerful company such as Barrick Gold. He says that he has received threats.

Finally, Guevara ratifies that Greenpeace will come to San Juan to help stop Barrickand its operations in San Juan province and help prevent the environmental damage that the "Veladero project'' will cause. He is also confident that the people of San Juan will join efforts to fight Barrick Gold, as in America alone, this company is being held responsible for water pollution and the deaths of 33 people by cyanide poisoning.

Barrick closing Holt-McDermott mine
The Globe and Mail, Friday, October 17, 2003 - Page B5

Barrick Gold Corp. is winding down operations and cutting the 200 jobs at the Holt-McDermott mine outside Kirkland Lake, Ont. About 40 workers will be let go in January, said spokesman Vince Borg, and the other jobs will disappear as the year progresses. The mine's gold reserves have been exhausted, he told Canadian Press.

Latest on Homestake/Barrick's Lead Mine in South Dakota. (Black Hills Pioneer, October 17, 2003)
http://www.zwire.com/site/news.cfm?BRD=1300&dept_id=156923&newsid=10338617&PAG=461&rfi=9
"Barrick officials took a black eye once in the public relations arena when the company was miscast as attempting to dump the property onto the nation's taxpayers. They have no interest in getting burned again that way."

VANCOUVER -- Canadian gold producer Barrick Gold Corp. has secured a foothold in Russia with an agreement to pay $160-million (U.S.) to acquire close to one-third of London-listed gold producer Highland Gold Mining Ltd., which has one mine and three development projects in Russia.

Analysts said the transaction gives Barrick a relatively low-risk way to enter Russia, where natural resource companies have been on a buying spree in recent months as a result of improved investment conditions and the country's stores of oil, gas and minerals.

"As a major gold producer, Barrick needs to have an interest in any country that has big deposits and where the investment climate is improving," said Kerry Smith, an analyst with Haywood Securities Inc. "This gives them a less complicated entry strategy."

In a statement, Barrick chief executive officer Gregory Wilkins said the deal "provides us with a window into one of the world's most prospective gold mining areas" and that Barrick invested based on the improved investment climate in Russia and the abundance of quality gold targets in the region.

Barrick said yesterday it will pay about $43-million to acquire 10 per cent of Highland Gold from South Africa's Harmony Gold Mining Co. Ltd. The company has also agreed to acquire another 29.6 million new shares of Highland for an additional $116-million. That transaction is subject to due diligence and is expected to take about two months. If that additional share purchase goes ahead as planned, Barrick will own 29 per cent of Highland Gold.

Highland Gold has production of about 194,000 ounces a year, compared with Barrick's 5.5 million ounces. But analysts said the deal was more significant for providing Barrick an entry into Russia than for increasing its production.

Many major mining companies have been hunting for properties or potential partners in Russia, and others will likely follow Barrick's lead in coming months, said Clive Johnson, president and chief executive officer of Bema Gold Corp. Bema runs the Julietta gold mine in Russia and has been operating in the country since 1998.

"A number of major mining companies are looking how to get involved in Russia -- I think the issue has been finding the right partner," Mr. Johnson said.

Even with an improved investment climate under Russian President Vladimir Putin, local contacts and knowledge are crucial when it comes to getting a project through the local bureaucracy and a complicated process of obtaining permits, Mr. Johnson said.

Julietta, for example, is 21-per-cent owned by the two Russian prospectors who discovered the deposit, Mr. Johnson said, who have been invaluable in seeing the project through to production.
Mr. Johnson said the intense interest among mining companies in Russia reflects a gold price that has gained ground over the past two years, the rush by producers to replace dwindling reserves and greater confidence that projects can be completed without political interference or regulatory problems.

In 2000, Vancouver-based Pan American Silver wrote off its $37-million investment in the Dukat silver deposit in Russia's Magadan province after its development became bogged down in legal wrangles with Russian interests. That and other episodes made many companies wary of putting money into Russia, but recent months have seen several major transactions as confidence appears to be growing. Last week, Russia won an investment-grade rating for the first time in its history. Moody's Investors Service Inc. upgraded Russia's rating to Baa3 from Ba2, citing the country's pro-market reforms and rapid economic development in the past five years. Under Moody's classification, Baa3 is a medium investment-grade rating, while the lower Ba2 is a speculative grade. The ratings are a measure of the risk associated with a country's debt.

"In Russia, you're seeing some dramatic changes that are enabling people to feel confident about doing business there," Mr. Johnson said. He added the mining sector is catching up to a trend already evident in the energy sector, where major companies have poured millions into Russia. Exxon Mobil is investing $12-billion in a large oil project in Russia. The company is also in discussions to buy a big minority stake in OAO Yukos, Russia's top oil company.

Barrick shares rose by 0.12 per cent to $24.88 (Canadian) on the Toronto Stock Exchange. Bema shares rose 1.67 per cent to $3.65, while the S&P/TSX Capped Gold Index overall rose 1.5 per cent.

VANCOUVER (Dow Jones) -- Barrick Gold Corp. prefers to take advantage of volatility in the gold price to reduce the size of its hedgebook, rather than use capital to buy its way out of hedge contracts, president and chief executive Greg Wilkins said Wednesday.

At the Denver Gold Forum, Wilkins reiterated that the company's forward selling program, which seeks to protect revenues from a falling gold price, has worked "extremely well" -- and still does in a rising gold-price environment.

His presentation was broadcast over the Internet. Wilkins repeated Barrick's stance that it won't abandon hedging, but said the company doesn't want "too much" production pre-sold. It seeks to reduce its hedgebook to no more than two years' worth of gold production or 20% of reserves.

At the end of June, the hedgebook stood at 16.1 million ounces, or about three years of expected future production. Barrick estimates its output this year will be between 5.4 million and 5.5 million ounces, and the company expects a decline in 2004 production as it mines material with lower gold grades.

The gold price will likely trend higher for fundamental reasons, but the climb will be volatile, not a straight line, enabling the company to use dips and spikes in the gold price to improve the average selling price of its hedged gold, Wilkins noted.

It therefore isn't a good use of shareholders money to buy back hedge contracts to slim down the hedgebook, he said.

"Over the next 10 years, I'm sure the market is going to give us the opportunity to take some of those ounces off the book and make it smaller and more manageable," Wilkins said. If gold weakened over 10 years, "that hedgebook might very well go to zero," he added.

The hedging program allows Barrick to sell gold at the higher of spot or contract prices, depending on market conditions, Wilkins said. Late in the second quarter and into the third quarter, the company has delivered gold into the spot market, Wilkins said. He acknowledged that the company has to reconcile spot market sales with its hedge contracts at some stage, but noted that the the defined life of the contracts are 10 years to 15 years, roughly matching the timeframe it takes to produce gold from deposits.

Wilkins also said Barrick has bought back 8.8 million shares at last count, under a one-year repurchase program announced in May. The company can buy back up to 35 million shares, but is limited to buying no more than 2% of shares outstanding per month.

Blanchard and Co. Inc., the largest retail dealer in physical gold in the United States, received word today from the U.S. District Court for the Eastern
District of Louisiana that its case against Barrick Gold Corp. and J.P. Morgan Chase & Co. may now move into the discovery phase of the lawsuit. The court denied defendants' motions to dismiss Blanchard's complaint that Barrick and Morgan have violated U.S. antitrust laws by unlawfully combining to manipulate the price of gold and to monopolize the market in gold. The antitrust lawsuit was originally brought in December 2002.

In denying defendants' motions, the court stated: "Here, in the extraordinary market for gold and gold derivatives, consumers/investors are readily injured by market participants with sufficient market power to depress price."

Blanchard's CEO, Donald W. Doyle Jr., stated: "The court's decision brings us one step closer to obtaining justice for our clients, and for all gold investors, who have been damaged by Barrick and Morgan."

Having already served J.P. Morgan and Barrick with its requests for production, Blanchard expects to move into the discovery process immediately.
* * *
SOURCE Blanchard and Co. Inc.
Neal R. Ryan of Blanchard and Co. Inc.,
1-800-880-4653

Info from Democracy Now:

Tuesday, May 27th, 2003
Corporate Profiteering: From Congo to Iraq

Greg Palast Discusses the Congo War and Reveals Internal USAID Documents that Outline a Master Plan for Reorganizing the Entire Economy of Iraq
Greg Palast has been called "the greatest investigative reporter of our time"(Tribune Magazine). His book The Best Democracy Money Can Buy exposed the racketeering, swindling and backroom deals that passes for democracy in the new global economy. It became a New York Times bestseller.

Today on Democracy Now!, he talks about internal USAID documents that outline a master plan for reorganizing the entire economy of Iraq. The plans include the elimination of trade protections and the mass privatization of every industry in Iraq, including selling-off the oilfields.

Palast's book also explores the relationship between the Bush family and a Canadian mining company, the Barrick Corporation. Palast explains how as president, George Bush Senior changed a century old mining law that allowed Barrick to "swiftly lay claim to the largest gold find in America". In return, the company named Bush to a senior advisory position after he lost the White House. The company also poured money into the Republican party coffers during the 1997-2000 election cycle, an exceedingly generous gesture for a company based in Canada.

So, what is Barrick? According to Palast- the initial stake came from none other than Adnan Khashoggi- the Saudi arms dealer who arranged the Iran-Contra arms for hostage deal.

One of the companies Barrick owns is Vancouver-based Sutton Resources Ltd. In 1996- Sutton drove out anywhere between 30,000 and 400,000 local miners from the Bulyanhulu mining field in Tanzania. During the process- Sutton's bulldozers allegedly buried 52 people alive.

Barrick steadfastly denies the allegations.

Greg Palast, BBC investigative reporter and author of The Best Democracy Money Can Buy
Joan Kuyek, National Coordinator of MiningWatch Canada, which has called for an independent investigation of the Bulyanhulu mining massacre.
Link: http://www.gregpalast.com/ - Greg Palast Homepage http://www.miningwatch.ca/ - MiningWatch Canada
To purchase an audio or video copy of this entire program, call 1 (800) 881-2359.

CONGO: Companies profit amid genocide
BY JEFF SHANTZ

The death toll from the ongoing war in the Congo, which began in 1998, is higher than in any other since World War II, with an estimated 4.7 million killed in the last four years alone. The International Rescue Committee (IRC), an aid agency based in New York, reports that the mortality rate in the Congo is higher than any other country on the planet.

According to IRC president George Rupp, the crisis in the Congo is "a humanitarian catastrophe of horrid and shocking proportions. The worst mortality projections in the event of a lengthy war in Iraq, and the death toll from all the recent wars in the Balkans, don't even come close."

Despite these horrible facts, the crisis has gone largely unnoticed and unreported upon in the West. As David Johnson, the director of IRC operations in eastern Congo, has stated: "This is the worst calamity in Africa this century, and one which the world has consistently found reasons to overlook."

The war started in August 1998, when an uprising backed by the Ugandan and Rwandan governments (which receive their main support from the US and Britain) was launched in the country's eastern regions against the government of Laurent Kabila. The Ugandan government claimed it was defending its western borders against rebels based in Rwanda, while the Rwandan force claimed to be defending itself against Hutu militias on the Congo border. Apparently this border protection required Rwandan forces to occupy the diamond-rich town of Kisangani, 700 miles inside the Congolese border.

The conflict quickly spread, as combatants from Angola, Namibia and Zimbabwe entered the war, ostensibly in support of Kabila's government. There has been evidence of involvement by mercenary companies, including the US company MPRI, Britain's Sandline and the South African Executive Outcome.

The responses to the crisis, or failures to respond, by Western governments have been motivated by their interests in the vast mineral resources of eastern Congo. Most of the Congo's gold production comes from the northeastern parts of the country that have experienced most of the conflict.

The main gold exploration ventures in Congo are those of Banro, a Canadian company cited for violations by the UN Security Council, and the Anglo-American/Barrick joint venture. Banro, through its 93%-owned subsidiary, SAKIMA SARL, controls 10 mining permits and 47 mining concessions covering an area of 10,271 square kilometres of eastern Congo. After an agreement with the government of Congo, Banro came to hold 100% title to the Twangiza, Kamituga, Lugushwa and Namoya gold deposits.

South Africa's AngloGold, the world's largest gold producer, and Barrick Gold of Canada, the second largest gold producer, joined together on an exploration venture encompassing 57,000 square kilometres of north-eastern Congo in the area along the Ugandan border which has been torn by conflict. Barrick had succeeded, in 1996, in getting the Gold Office of Kilomoto, the government monopoly of the country's former dictator, Mobutu Sese Seko, to transfer mining rights over almost all of its 82,000 square kilometres of land to Barrick. The area holds an estimated 100 tons of gold in reserve. George Bush senior was instrumental in winning the Barrick deal.

Another Canadian outfit, First Quantum Minerals, a firm with copper-mining interests, was cited by a special UN panel for paying government ministers to obtain mining rights. According to the report, First Quantum offered the government a US$100 million down payment. The payment list included the national security minister, the director of the national intelligence agency and the former minister of the presidency.

From Green Left Weekly, July 9, 2003.

Homestake future hangs in balance
Monday, June 02, 2003, http://www.miningnews.net/

THE future of North America’s deepest and most historic mine, the Homestake mine at Lead in South Dakota, hangs in the balance with its current owner wanting to shut down de-watering pumps and a team of scientists wanting it kept open for an advanced research project.

Legal action has started in a local court to force Canada’s Barrick Mines to continue de-watering the mine, which has stopped production after 126 years which took it to a depth of 2400m.

While Barrick wants to undertake an environmental clean-up around the mine and close it down permanently, the National Science Foundation is keen to use it in research into the neutrino, a sub-atomic particle first discovered in a 1966 experiment conducted half-way down the Homestake mine.

The foundation has earmarked Homestake as its preferred site for future research which would include building an underground laboratory the size of a football field to expand its physics research as well as research into deep-earth microbes.

The town of Lead and Barrick are waiting for a final decision from the foundation with the town fearing that an end to de-watering will see the mine flood and rival deep mines replace it as the preferred site.

Blanchard and Co. Reveals Anti-Trust Violation
By Barrick and J.P. Morgan

NEW ORLEANS, May 15, 2003-- Blanchard and Co. Inc., the largest retail dealer in physical gold in the United States, filed today with the U.S. District Court for the Eastern District of Louisiana a motion for leave to supplement and amend their anti-trust complaint to present new information further supporting Blanchard’s claim against Barrick Gold Corp. and J.P. Morgan Chase & Co. These new filings include previously undisclosed information about J.P. Morgan’s ownership interest in Barrick and Morgan’s monopoly position in the in the U.S. market for gold derivative contracts.

After numerous attempts by Barrick to discredit Blanchard’s case in the news media, Blanchard has brought motions to compel information from Barrick and J.P. Morgan about their joint efforts to manipulate gold prices and to share in the spoils of that manipulation.

The TrizecHahn Revelation

TrizecHahn Corp. was formed in 1996 from the merged interests of Argo Partnership L.P. (a J.P. Morgan & Co./J.W. O’Connor fund) and Horsham Corp. This newly formed corporation included several directors present on Barrick’s board as well as its chairman, Peter Munk. Through this combination, TrizecHahn became the controlling shareholder in Barrick Gold.

Also in 1996, according to SEC records, J. P. Morgan Capital Corp.’s managing director, Thomas S. Quinn III, was named to the Board of Directors of TrizecHahn and sat on its audit and executive committees. J.P. Morgan became a beneficial owner of Barrick through its controlling shareholder, TrizecHahn.

Blanchard and Co. CEO Donald W. Doyle, Jr., stated that “Blanchard’s discovery of the Argo Partnership documents linking J.P. Morgan to a beneficial ownership interest in Barrick helps to explain why J.P. Morgan provided Barrick with derivative contracts that virtually guaranteed it a risk-free profit. Even Barrick’s chairman, Peter Munk, recently stated that its ‘hedging program’ with J.P. Morgan ‘was almost too good to be true.’ We believe J.P. Morgan has benefited financially from its ownership of Barrick, and from Barrick’s manipulation of the price of gold.”

TrizecHahn (and its affiliates, including J.P. Morgan) realized more than $1.3 billion in profits from Barrick Gold stock.

-- Neal R. Ryan
Blanchard and Co. Inc.
1-800-880-4653
www.savegold.com

______________________________________________

BARRICK'S UNCOMFORTABLE SEARCHLIGHT
By: Tim Wood
http://www.mips1.net/MGGold.nsf/Current/4225685F0043D1B285256D1A00755952?OpenDocument
Posted: 2003/05/02 Fri 17:00 EDT  | © Mineweb 1997-2003

"Barrick is as Barrick was. That just makes us all the more curious about Oliphant being made a sacrificial lamb. It’s a high price for fashion."

________________________________________________

http://www.webfin.com/en/news/news.html/?id=31666

TORONTO, March 7 (CP) -- Barrick Gold Corp. reassured investors Friday that it won’t face a hedging disaster similar to one unfolding at major competitor Newmont Mining Corp.

A blowup for Newmont, the world’s biggest producer, has sparked fears investors will shy away from other producers that sell gold in forward contracts at locked-in prices.

Unlike the Newmont situation, none of Barrick’s 19 bullion bank counterparties have unilateral and discretionary rights to terminate the forward sales contracts, Canada’s largest gold producer stated Friday.

Barrick also said it has sold forward only 21 percent of its gold reserves, and its contracts give it the right to sell gold at market prices or the hedge price, whichever is higher.

Earlier this week, Standard & Poor’s cut its credit rating on Newmont’s Yandal operations in Australia, acquired in the American company’s 2001 takeover of Normandy Mining, after reviewing the project’s hedging exposure.

Newmont has disclosed that Yandal faces a negative mark-to-market value of US$288 million on its hedge book. This situation could worsen because the mine’s counterparties have the right to require Yandal to settle the contracts in cash before they come due.

“That’s why we thought it was necessary to point out the differences in our case,” said Barrick’s Vincent Borg.

Investors are nervous, and Canadian gold stocks have suffered. Shares in Barrick and Placer Dome Ltd. have lagged the sector’s rally of the past year, largely because many investors and analysts distrust the companies’ derivative portfolios.

END-

________________________________________________

Gold Is on the Rise, So What's Bugging Barrick?
http://www.nytimes.com/2003/03/02/business/worldbusiness/02GOLD.html
By KURT EICHENWALD
New York Time, March 2, 2003

________________________________________________

A hot stock tip for Barrick Gold Chairman Peter Munk:
Why not buy your own company’s shares?
By Fabrice Taylor
The Globe & Mail, Toronto
Thursday, February 20, 2003
http://www.globeandmail.com/servlet/ArticleNews/TPStory/LAC/20030220/RVOXX/TPBusiness/MoneyMarkets

If Peter Munk is really concerned about shareholder value at Barrick Gold, here’s a modest proposal for him: Buy the stock.

Mr. Munk is not a substantial owner of Barrick shares. His direct skin in the business stretches to only about 1 percent (he owns a little more through TrizecHahn). Yet he’s the eminence grise, by virtue of the fact that he founded and built the company into one of the premier gold producers in the world. He now chairs the board, where he’s surrounded by friends.

What the chairman achieved at Barrick was no small accomplishment, and his much-maligned hedge program is the main reason the company was so successful.

Your average gold company is a much more prolific seller of new shares than of bullion bars. Without fail, a rise in gold prices is accompanied by a hurried rush to market by the industry, looking to raise cash for “general corporate purposes.”

Barrick was able to avoid that kind of dilution over the years thanks to low borrowing costs and predictable cash flows which, as it happens, were higher than they would have been had the firm not used futures contracts to sell its metal. Without Barrick’s hedge program either the company would not have grown or its growth would have come at a much higher cost and with higher risk.

But times change, gold rises, and investors freak out about derivatives. The spread between gold lease and interest rates has made hedging less attractive. And the spot price of gold has been rising, partly because of the Iraq factor but also for other reasons, such as what we would argue is a massive deterioration in the health of Washington’s coffers and therefore its currency, gold’s main competitor. Many gold investors share this view and therefore want to be exposed to its imminent rise.

When they look at Barrick, this is what they see: a company producing $360-million (U.S.) in trailing free cash flow yet quoted at almost $9-billion, or a multiple of about 25 times. That seems expensive, unless you think free cash flow is going to rise substantially.

There are problems at Barrick’s mines (at most gold mines, actually). Costs are higher than expected, the gold’s not coming out of the ground quickly enough and the grades are not as rich as might have been hoped. Still, the company is sitting on some of the better deposits in the world, so presumably the operations can produce increasing cash in a climate of rising bullion prices.

That leaves the hedge book. Marked to market, Barrick’s book is in the red to the tune of about $640-million. In the first quarter of 2001, it was positive by roughly the same amount. (That’s not an out-of-pocket expense; rather, it’s more of potential opportunity cost.) Spot gold has risen so fast that it’s leaving Barrick’s contracted prices in the dust.

That’s not necessarily a problem, since Barrick can defer delivery into its contracts and enjoy the full richness of spot prices. It did so in January for the first time. In other words, it seems to have the best of both worlds. But deferring delivery, as the name implies, only postpones it, and in fact can mean lower prices since prevailing lease and interest rates set the futures price. Barrick’s deliveries can be deferred for as long as 15 years, so clearly a long period of rising gold prices and low interest rates make the hedge book look like a ball and chain. If you really like gold long term, you can find better investments.

But still, even with the hedge policy, which Barrick continues to curtail, the stock price might be higher if investors could have complete faith in it and, more importantly, in the ability of Barrick’s mines to cover it. Alas, the only way to achieve that would be to look at every contract in Barrick’s book, which isn’t going to happen.

This is where Mr. Munk comes in. It wouldn’t be a complete remedy to what ails Barrick’s stock, which is cheaper by most metrics than other senior gold producers. But wouldn’t it help if he trumpeted his own conviction by wading into the market and adding substantially to his holdings? If he’s the de facto head of the company and he’s frustrated by the market’s disdain for the shares, that would help. Seymour Schulich and Pierre Lassonde, no fans of hedging, have their money in Newmont. Mr. Munk should do the same.

_______________________________________________________

Barrick's Hedge Book
By Steve Saville
February 18, 2003
http://www.gold-eagle.com/editorials_03/milhouse021803.html

Barrick Gold (ABX) is not one of our stock selections nor is it ever likely to be as long as it has a large hedge book, but its latest financial results (released last week) are worth commenting on.

ABX produced 5.7M ounces of gold in 2002 and made a profit of US$193M. The company forecast that 2003 production would be 5.4M ounces. However, as is usually the case with this company the most interesting aspect of the latest ABX results was the information that was disclosed about its hedge book. This information is particularly interesting because what Barrick does with its enormous hedge book can effect the entire gold industry.

As they have done every quarter for as long as anyone can remember, Barrick's management crowed last week about the fact that their forward sales program had allowed them to sell gold in the latest quarter at a price that was above the average spot price. They also confirmed that during the first several weeks of 2003 they had taken advantage of their ability to defer delivery into forward sales contracts and had, instead, sold 100% of their gold at the spot price. They did this because the spot price was higher than their forward sales price. This might seem like a logical thing to do, but it means that a liability has simply been pushed into the future. Furthermore, regardless of the current spot price it would only make sense for Barrick to defer delivery into forward sales contracts if they were confident that the spot price was going to be lower in the future than it is today. In other words, by their actions Barrick's management is saying that a gold price in the $350-$380 range is an aberration and that the price will fall back to $325 or lower.

At the end of 2002 Barrick's hedge book had a mark-to-market value of negative $639M. At the end of 2001 the mark-to-market value was positive $356M, so there was an unrealised loss of $995M in the hedge book during 2002. Deducting the reported earnings of $193M we get a net loss for 2002, including unrealised losses on derivatives, of $802M. So, during one of the best years for the gold price since the 1970s one of the world's largest gold mining companies lost $802M. If the gold price ends 2003 at $450 then Barrick will, at that time, have a hedge book with a mark-to-market value of negative $2.4B (assuming that all of this year's production is sold at the spot price). In this case it would have taken less than 2 years to wipe out all the gains achieved by the forward sales program over the past 15 years.

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GOLDEN FLEECING?
A New Orleans retailer is accusing a mining giant and one of the biggest names on Wall Street of illegally manipulatin the price of gold
By Stewart Yerton
New Orleans Times-Picayune
Sunday, February 16, 2003
http://www.nola.com/business/t-p/index.ssf?/base/money-0/1045378910214960.xml

In a David-and-Goliath antitrust battle that’s drawing intense interest from the world of avid gold investors, a New Orleans retail gold dealer is going toe-to-toe in an increasingly pitched legal fight against one of Wall Street’s oldest and most prestigious investment banks and a Canadian mining giant. The allegation: that the bank and the mining firm have colluded to drive down the price of gold to the detriment of individual investors.

In the latest volley last week, Blanchard and Co. Inc. of New Orleans updated its complaint against Barrick Gold Corp. of Toronto and J.P. Morgan Chase & Co. of New York.

Like its predecessor suit, the amended complaint filed in U.S. District Court in New Orleans asks the court to order Barrick to stop the alleged price manipulation. In a sign of just how heated the battle has become, each has accused the other of libel. Also last week, Barrick fired Chief Executive Randall Oliphant, who has been credited with devising the company’s gold-hedging strategy, which is at the center of the lawsuit.

Barrick is preparing a detailed response to Blanchard’s complaint and expects to file it in court in New Orleans by month’s end. In the meantime, the mining firm is addressing the allegations broadly, asserting, among other things, that Blanchard’s complaint simply makes no sense.

“Why would a company such as Barrick be interested in depressing the price of the only product it produces?” said Vincent Borg, a Barrick spokesman.

“Why would we be interested in depressing the price of our product?” The answer, said Blanchard spokesman Neal Ryan, is that Barrick, with support from J.P. Morgan, has positioned itself to profit from lower gold prices—and has taken steps to make sure the price goes down. “We believe we have found a specific instance where Barrick and J.P. Morgan have been colluding,” Ryan said. “That’s where we have a point of contention.” A spokesman for J.P. Morgan declined to comment on the case.

The dispute has surfaced as a major development in the world of avid gold investors, the so-called “gold bugs,” who closely watch the precious metal, sometimes weaving elaborate, conspiracy-filled theories to explain price fluctuations.

“In the gold world, the gold universe, the gold cult, it’s a very big event,” said Chris Powell, secretary-treasurer of the Gold Anti-Trust Action Committee Inc., an advocacy group set up to fight what it has alleged to be collusion to manipulate the price and supply of gold. The Blanchard suit, Powell said, “is a very big story.” GATA, as Powell’s group is known, previously brought an antitrust suit against a wide-ranging group of alleged conspirators, including Federal Reserve Chairman Alan Greenspan. That suit was dismissed by a federal judge in Boston, making the Blanchard litigation the best hope for the gold bugs who believe there’s much more affecting the gold price than traditional market forces. “It is probably as promising a vehicle for getting at the truth of what’s happening in the gold market as there is,” said Powell.

Not everyone who watches gold agrees. “It’s totally ludicrous,” said Leonard Kaplan, president of Prospector Asset Management, a commodity brokerage in Evanston, Ill. “The lawsuit is totally silly.” Barrick has taken a particularly aggressive stance toward Blanchard, accusing the company of putting “myths ... out there in the market.”

“We’ll use every recourse available under law to hold people accountable for the lies they spread,” Barrick Chief Financial Officer Jaime Sokalsky said during a conference call with analysts last week.

The ‘ultimate win-win’

Founded by James Blanchard III, an avid gold bug who lobbied national leaders to legalize the once-banned individual ownership of gold for investment purposes, Blanchard & Co. is the nation’s largest retail gold coin and bullion dealer, with more than 90,000 clients. The company employs approximately 100 people locally and has brought thousands of gold investors to town over the years for the annual James Blanchard Investment Conference.
Barrick’s manipulation of the gold market has hurt Blanchard by eroding investor confidence in gold, Ryan claims.

What’s clear amid the two sides’ divergent views is that Barrick has been masterful at trading gold on the commodities market. Whether the company violated antitrust laws in doing so is the central question. One of the world’s largest gold mining companies, Barrick has 82.3 million ounces of gold in its reserves, which are on four continents.

Mining companies routinely hedge their assets by betting at least part of them that the price of the commodity will go down, thus protecting themselves against a price drop. For Barrick, that has involved a form of short selling.

According to an explanation outlined on the company’s Internet site, Barrick takes the hedge positions by leasing gold from a central bank through an intermediary, such as J.P. Morgan Chase. For the sake of simplicity, Barrick poses a hypothetical gold price of $300 an ounce in the explanation.
According to the explanation, Barrick first leases the gold at a rate of 1.5 percent. Then it sells the gold on the spot market. Finally, it deposits the proceeds into an account bearing, say, 5 percent interest.

Barrick benefits by keeping the difference between the lease rate it must pay and the interest rate it receives from the bank.

In addition, Barrick can make money another way. If the price of gold goes down, Barrick can buy it at a cheaper rate and repay the central bank. Thus, if the price drops to, say, $250 an ounce, Barrick can make $50 an ounce, plus the interest rate spread.

Because of its arrangement with J.P. Morgan Chase, Barrick has managed to make it an almost risk-free endeavor. Short sellers typically face the risk that the price of a commodity might go up. In that case, they have to buy the commodity at the higher price to pay back whoever lent it to them. But J.P. Morgan Chase gives Barrick 15 years to pay back the gold, or “cover” its short position in trading parlance. That means Barrick has an extraordinary amount of time to ride out a price spike. At the same time, Barrick can make money by selling the gold it produces while the price is high.

Furthermore, Barrick can pay back the leased gold with metal from its mines, thus paying what its owes in a low-cost way.

The strategy has proved effective. According to the company’s Internet site, the strategy has “generated a premium on Barrick gold sales over and above the spot price for 56 straight quarters.” That premium between 1991 and 2001 amounted to $2 billion. To hear management explain it, Barrick can’t lose—whether the price goes up or down. “By managing risk, Barrick enjoys protection on downside with full participation on upside—the ultimate win-win combination,” Barrick says.

Profiting from price declines

Blanchard, however, says that Barrick is engaging in “far more than mere ‘hedging’ to defend against price fluctuations.”

Ryan, the Blanchard spokesman, notes that the 15-year period Barrick has to maintain its short position is unusually long if not unique in the industry, as is the quantity of gold that Barrick has in a short position, which totals 16.9 million ounces, according to Barrick’s Internet site.

The suit alleges that the process of borrowing gold from the vaults of central banks for extraordinary lengths of time and dumping it into the gold market naturally drives down the price of the commodity. Central banks are government banks, such as the Federal Reserve, which issue and back currency, set monetary policy and hold reserves for other banks. Central banks typically hold large supplies of gold; the Federal Reserve for instance, stores gold at Fort Knox, West Point, and at the Federal Reserve Bank of New York.

The Blanchard suit has not named a central bank as a defendant, but has created an option to do so, Ryan said, by naming “ABC Companies” as defendants in the complaint.

When Barrick began its hedging program in 1987, Blanchard said, the price of gold was $450 an ounce. By 2001, it had dropped to $271. To illustrate its allegations, Blanchard describes a series of steps Barrick took starting in 1997. According to the complaint, Barrick at that time spoke bullishly about the price of gold, saying that demand was 20 percent greater than new supply. At the same time, the suit says, Barrick increased its hedge position from 6.7 million to 18.8 million ounces, “effectively eliminating the purported 20 percent shortfall.” “The average price of gold fell more than $100”—along the way benefiting Barrick’s newly expanded short position—the suit says.

“Over that same 14-year period (from 1987 to 2001),” the suit says, “as other producers struggled to survive the tremendous and unrelenting decline in price, Barrick grew exponentially by acquiring a number of gold mining and exploration firms.”

Essentially, Blanchard alleges that Barrick drove down the price of gold in part so it could buy troubled gold-mining firms cheaply.

Barrick dismisses the assertions. The company is still in the business of “long” gold, meaning it benefits when the price of gold goes up. Its short position represents only a fraction of its reserves, Borg said. As for the arrangement with J.P. Morgan that gives Barrick 15 years to pay back the gold, Borg said Barrick has the highest debt rating and strongest balance sheet in its industry and therefore commands better bank terms than competitors. Just being ‘savvy’?

In a twist, Barrick has begun taking steps to lessen its short position. In a surprise announcement Wednesday, Barrick fired Oliphant, its chief executive, who was the architect of the hedging operation. The firing came as Barrick’s stock price failed to rise, even as gold prices soared. A shaky stock market and fears of war have driven investors to gold as a safe haven. Gold has been trading around $370 an ounce in recent days; six months ago it was about $305. Barrick stock, meanwhile, has remained around $16 a share.

During last week’s conference call, Barrick Chairman Peter Munk said the company had failed to translate higher gold prices into benefits for the company’s shareholders.

“Underperformance,” Munk said, “is not acceptable.” During the call, Barrick’s new chief executive, Gregory Wilkins, acknowledged the company’s hedged position had been a “lightning rod” among investors and gold watchers and said the company would reduce it. “I can say the hedge book is a little larger than what we would like it to be right now,” Wilkins said. In the meantime, Sokalsky said, the hedging program is working precisely as designed. Because Barrick can roll its hedge contracts forward for 15 years, it does not have to cover its short positions immediately but instead can sell the gold it produces on the market while the price is peaking.

So far this year, Sokalsky said, the company has sold 100 percent of the gold it has produced at an average spot price of $360 an ounce. “Barrick is poised to benefit significantly” from rising gold prices, he said.

For example, Kaplan said that Barrick has done nothing worse than fulfill its responsibility to shareholders by effectively managing risk.

“What Blanchard is accusing is that Barrick was smart, was savvy, and made billions of dollars from it,” Kaplan said. “Well gee, I never knew that being smart, that being savvy, was illegal.”

Ryan agrees that Barrick has been smart. “But just because something seems intelligent or smart or savvy from the outside doesn’t make it the right thing to do,” he said. “Five years ago everyone was saying the same thing about Enron.”
_______________________________________________________

Barrick Gold Fires Its Chief as Stock Price and Profits Lag
By BERNARD SIMON
TORONTO, Feb. 12
from The New York Times: http://www.nytimes.com/2003/02/13/business/worldbusiness/13MINE.html

Barrick Gold , one of the world’s largest gold producers, dismissed its chief executive today over missed profit targets and the company’s languishing stock price.

The dismissed executive, Randall Oliphant, 43, is well regarded in the industry and had worked for Barrick for 16 years; he became chief executive in 1999. The company said he would be replaced by Gregory C. Wilkins, 47, a longtime lieutenant of Peter Munk, Barrick’s chairman and controlling shareholder.

“The board made the change to address its concerns over the company’s recent performance and to restore Barrick to the leadership position in the gold industry,” the company said. Vincent Borg, a Barrick spokesman, said, “Business as usual for us is not good enough.”

Mr. Wilkins, an accountant by training, has worked for Mr. Munk for more than two decades and has held a seat on Barrick’s board for the last 12 years. He has a reputation for a more hard-driving style than Mr. Oliphant. Barrick, based in Toronto, operates a dozen gold mines in North and South America, Australia and Africa. But it has differed sharply from peers in the industry, especially in its selling strategy.

For years, Barrick was a vocal user and advocate of hedging ~ using forward sales and other methods to lock in future prices for its gold before it was mined. That strategy paid off handsomely when gold prices were declining, but it took away Barrick’s flexibility to take advantage of rising spot prices.

After 14 years of hedging its entire production, the company changed its strategy a year ago, saying that it would start selling up to half its annual output on the spot market. Most of its major rivals hedge much less than Barrick does.

Ron Coll, a precious metals analyst at Jennings Capital in Toronto, said Barrick was the only major gold producer whose stock price fell last year, when bullion prices rose to $348 an ounce in December from $279 an ounce in January. Shares of Newmont Gold, the world’s biggest producer, rose 52 percent last year; Barrick’s fell 3 percent. Barrick shares fell 4.7 percent today to close at $15.70; gold was trading at about $352 an ounce.

According to Barry Allan, an analyst at Research Capital in Toronto, “Peter Munk has not been a person who takes bad share price performance very well.” Mr. Allan said Barrick had “good potential for future growth” because of projects in Peru and Australia that are expected to begin yielding gold over the next five years.

But he said investors were frustrated with the company’s recent performance. “Over the last few quarters, Barrick has been pulling one-two punches on us,” he said. “Every time we turned around, we were surprised about something.”

In September, just nine days after Barrick unveiled a $2 billion mine development program, the company said that its 2002 earnings would fall short of earlier estimates by one-fourth.

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"Barrick Gold Corp., the world's third-biggest gold producer, fired Chief Executive Randall Oliphant after the company's stock fell as the price of gold surged to a six-year high."

Barrick gives Mr. Hedge the boot
By MATHEW INGRAM

Globe and Mail, Toronto Online Edition
Wednesday, February 12, 2003

http://www.globeandmail.com/servlet/ArticleNews/front/RTGAM/20030212/wmath0212/Front/homeBN/breakingnews

Live by the hedge, die by the hedge. It's not as catchy as "live by the sword, die by the sword," but the point is the same: Once you become identified
with something, if it falls out of favour, chances are that you will too. Barrick Gold's now-departed CEO, Randall Oliphant, is the latest example. Having become synonymous with Barrick's hedging strategy, his star has fallen along with the market's interest in that strategy.

There have been other things that have made life difficult for Mr. Oliphant lately, mind you, including missed production targets and weak results. If nothing else, Mr. Oliphant's sudden departure reinforces the fact that Barrick is joined at the hip with its founder and chairman Peter Munk, and if Mr. Munk sees you as superfluous -- however integral you might have been beforehand -- you might as well polish up your resume. The man Mr. Oliphant replaced, Paul Melnuk, suffered a similar fate.

Certainly, Barrick's stock has been in the doghouse lately, largely because of its hedging program. But, apart from the fact that he is the chief executive, is it fair to give Mr. Oliphant all the blame for that? Not really. For one thing, although he is often given the credit for it, Barrick's hedge program is hardly the work of a single man. In fact, the man who has replaced Mr. Oliphant -- Gregory Wilkins -- was Barrick's chief financial officer in the late 1980s when
the hedge program was created.

Nevertheless, as he rose to become chief financial officer in 1994 (replacing Mr. Wilkins) and then chief executive officer in 1999, Mr. Oliphant became the public face of Barrick's hedging program. When Barrick consistently turned in better results than most of its major competitors, Mr. Oliphant got the
credit, and when critics complained about the company's hedging approach, Mr. Oliphant was there to explain everything.

So is the market's dislike of Barrick's hedging program well-founded? In some ways, yes -- in other ways, no. Much of the criticism comes either from wild-eyed conspiracy theorists who see the company as in cahoots with some sort of global cabal, or from those who don't understand it. At the same time, however, the market correctly sees Barrick as benefiting less from rising prices than some other non-hedged companies.

Hedging is something many commodity companies do, including oil and natural gas producers, because it protects them from swings in pricing. Aggressive hedging, in which large amounts of a company's future production are "sold forward" to lock in a price, makes sense when the price of a commodity is in a downward trend, as gold was for much of the 1990s. During that period, Mr. Oliphant looked like a genius. Just as some oil and gas companies have found themselves underwater on their hedges, however, so some gold producers wound up in serious trouble due to their hedging ~ including Cambior Gold and Ashanti Goldfields. Both were forced to buy gold at high spot prices to fulfill their contracts, and that helped to give gold hedging a black eye.

Barrick has consistently -- and correctly -- pointed out that it is protected from that kind of event because of the way its "spot deferred" hedging program is structured. Since it is one of the globe's largest producers, it has been able to negotiate long-term futures contracts on very favourable terms with "bullion banks." Those banks loan Barrick gold, which it then sells forward, and then the income is invested. These loans are then later repaid with gold produced from Barrick's mines.

Theoretically, if the price of gold rises above the price of these contracts ~ most of which are held at about $350 (U.S.) an ounce -- that creates a liability for Barrick. However, the company has the right to push its obligation forward by up to 15 years, thereby delaying the point at which it has to provide the gold. That allows it to sell more of its production into the spot market to take advantage of price jumps.

Mr. Oliphant has argued that Barrick is just as happy when the price of gold goes up as when it falls ~ since it is not only able to capture some of that increase through spot sales, but also sees the value of the gold it has in the ground increase, boosting the company's value. That glosses over two things, however. One is that Barrick can't defer its contracts forever, and the other is that Barrick's annual production isn't enough to defray all the liabilities that are implied by its hedges.

Are some of the criticisms of Barrick's hedging program valid? Yes. However, it allowed Barrick to make more than $2 billion it would otherwise not have made, cash which it used to make a number of worthwhile acquisitions.

In the end, of course, all that matters is that Mr. Oliphant has become synonymous with both hedging and missed targets ~ and with a declining share price ~ and that is enough to do him in.

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"Barrick Gold's stock fell as the price of gold surged to a six-year high."

By Terry Weber
The Globe and Mail, Toronto
Online Edition
Wednesday, February 12, 2003
http://www.globeandmail.com/servlet/ArticleNews/front/RTGAM/20030212/wbbarrickceo/Front/homeBN/breakingnews

Barrick Gold Corp., stung by production problems and a flagging stock price, said Wednesday it is replacing its top executive in an effort to address "concerns" over its recent performance and restore the firm's previous financial lustre.

The move means Randall Oliphant, among Canada's highest-profile executives, will leave Barrick's chief executive post immediately.

He is being replaced by 47-year-old Gregory Wilkins, who has been with Barrick and related companies for about 20 years.

"The board has made the change to address its concerns over the company's recent performance and to restore Barrick to the leadership position in the gold industry it has consistently maintained throughout much of its existence," Barrick said in a statement.

Barrick, the world's second-biggest gold producer, has been on the business end of several setbacks recently, starting last year with production problems at four mines that triggered a profit warning.

News of the production cuts and the lowered earnings guidance came just weeks after Barrick's September announcement of an ambitious $2-billion (U.S.) mine development program aimed at doubling profits by 2006.

It was subsequently hit with an anti-trust lawsuit in the United States -- Barrick has launched a libel suit over those allegations -- and became involved in an income tax dispute in Peru.

Concerns about Barrick's hedge book had also held back the company's stock early this year despite one of the most impressive gold rallies in recent years. In late January, Mr. Oliphant had said the share price was reacting to misconceptions about gold hedging and would improve as investors grew more familiar with Barrick's growth plans.

Barrick shares were down 73 cents (Canadian) or 1.6 percent to $24.52 in Toronto by 12:51 p.m. EST. The stock's 52-week high sits at $36.05, while the corresponding low is $21.30.

Mr. Oliphant joined Barrick in 1987 and was appointed president and CEO in 1999.

BMO Nesbitt Burns analyst Geoff Stanley said in a research note that the move "may ultimately help repair the market's perception" but it also raises other questions.

"Although the company's release indicated that tonight's earnings release will be in line with previous guidance, we are concerned that this move signals that the turnaround in operations and management that has been necessary has not occurred as rapidly as hoped," he said.

Barrick's fourth-quarter results are due later Wednesday.

"The entire board takes great pleasure in Greg's appointment," Barrick chairman Peter Munk said in a statement announcing Wednesday's executive switch.

"He was a key member of the team, from the very beginning, that built Barrick and we have total confidence in his ability to lead the company at what is a very exciting time for gold producers."

Mr. Wilkins began his career at Barrick in 1981, working closing with founder and chairman Mr. Munk and former president and chief operating officer Bob Smith "throughout the period that Barrick grew to be a leader in the gold industry," the company said.

In 1993, Mr. Wilkins left his post as chief financial officer of Barrick to take over as president and chief operating officer of Horsham Corp., which was then controlling shareholder of Barrick.

Horsham later became TrizecHahn Corp. with Mr. Wilkins remaining as president and chief operating officer until its recent conversion into a real estate investment trust, which resulted in the company relocating to the United States.

"I am pleased to rejoin Barrick in my new capacity and look forward to working with former colleagues and the many new members of the Barrick team who have become integral to its operations," Mr. Wilkins said in a statement.

"It is an exciting time in the gold industry and I intend to refocus the company on the core values which served it so well in the past."

_______________________________________________________

By Joe Schneider
Toronto, Feb. 12 (Bloomberg) -- Barrick Gold Corp., the world's third-biggest gold producer, fired Chief Executive Randall Oliphant after the company's stock fell as the price of gold surged to a six-year high.

Toronto-based Barrick replaced Oliphant with Gregory Wilkins, who worked for Barrick from 1981 to 1993, when he resigned as chief financial officer. The 47-year-old Wilkins has been a director for the past 12 years.

Barrick's strategy of pre-selling some of its gold production to protect against falling prices left it unable to benefit as much as rivals such as Goldcorp Inc. when bullion soared. Oliphant was one of the executives who pioneered the hedging program.

"The big question is whether this signals a change in strategy," said Kevin Nyysola, who runs the C$270 million ($177 million) Investors Canadian Natural Resource Fund at Investors Group Inc., which holds Barrick shares. "Replacing one person with another and not doing anything with the hedge book isn't going to get the stock price moving."

Barrick shares fell 13 percent in the past year, while Goldcorp and Gold Fields Ltd., which don't sell their metal before it's mined, rose 40 percent and 12 percent, respectively.
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Barrick files libel notice against Blanchard
http://biz.yahoo.com/rm/030129/minerals_barrick_libel_3.html
TORONTO, Jan. 29 (Reuters) -- Barrick Gold Corp., the world's No. 2 gold producer, launched libel proceedings in Canada on Wednesday, seeking "substantial damages" against U.S. bullion dealer Blanchard & Co. Inc. for published remarks that Barrick says harmed its reputation and business interests.

Toronto-based Barrick said it served a libel notice on Blanchard, which bills itself as America's biggest physical gold dealer, and its chief executive, Donald Doyle Jr., on Wednesday for a series of statements published since mid-December.

Blanchard spokesman Neal Ryan said the company had received the notice but had not had the chance to review the documents.

Barrick's decision to go after Blanchard for defamation follows an anti-trust lawsuit filed by New Orleans-based Blanchard that alleges Barrick and investment banker J.P Morgan Chase made $2 billion in short-selling profits by suppressing the gold price at the expense of investors.

Barrick has dismissed the allegations in the lawsuit as ludicrous and without merit.

"Blanchard has made statements that have no basis in fact and are totally irresponsible and defamatory," Randall Oliphant, Barrick president and chief executive, said in a statement.

"We value our good name, and we are simply not prepared to tolerate the dissemination of false statements concerning Barrick that are harmful to our reputation, business interests, and stakeholders -- by Blanchard, Doyle, or others."

Barrick said the notice of libel was the first step in legal proceedings for defamation in Canada.

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They fear forwarders too: "Sell Barrick Gold (ABX: news, chart, profile) if you have it," they advise.

PETER BRIMELOW
Foreign stocks OK? If they're gold mines
By Peter Brimelow, CBS.MarketWatch.com
Last Update: 12:02 AM ET Jan. 30, 2003

NEW YORK (CBS.MW) -- No hiding place? The dollar is down but foreign stocks aren't exciting investment letters -- yet.

One case: the extraordinary mental acrobatics performed by one of the leading internationally oriented letters: John Dessauer's Investors World.

After repeatedly arguing that the dollar (and by implication U.S. stocks) would remain strong because foreigners have no better place to go (Read my May 20 column), Dessauer is now arguing that U.S. stocks will be strong because the U.S. dollar is weak.

"A 1995-level dollar is now possible," Dessauer wrote recently, in a remarkable reversal.

But, he says, that's good news.

"At that level, U.S. businesses would have a huge pricing advantage. U.S. corporate profits would once again rise strongly. If the dollar sinks like that again, we can expect a repeat of the profits growth we saw between 1993 and 1997."

Don't dismiss Dessauer. What matters with an investment letter is not its rationale, but its results. And Dessauer has been one of the strongest performers followed by the Hulbert Financial Digest over the past 20 years. Last year was bad for him, but he did rebound in the fourth quarter.

Still, it's interesting that out of Dessauer's list of Top 10 stocks for 2003 -- all of which he says are potential doubles over the next 12, "but I can guarantee you that at least one will go down!" -- only two are foreign. They are: Ahold (AHO: news, chart, profile) and Philips Electronics (PHG: news, chart, profile).

The Aden Forecast, edited by Pamela and Mary-Anne Aden out of Costa Rica, is even more explicit about foreign stock markets despite being very negative on the dollar.

"World stock markets move together and this bear market is an international one," they wrote recently. "...The major trend is down and all of the world's stock indices remain below their moving averages. This means stocks are headed lower. The bottom line is, stay safe and stay on the sidelines. We think you'll be glad you did."

"Seven lean years?" asks Vivian Lewis of Global Investing. She worries: "We need a locomotive soon, a major economy which can pull the rest of the world out of its current funk and malaise." Neither Australia nor Canada is powerful enough, she writes, although both are benefiting from "a regional commodity boom."

Both Lewis and the Aden sisters reach the same conclusion.

"Buy gold stocks," Lewis writes. "South African gold companies like Gold Fields (GFI: news, chart, profile) are now truly global players and unlike some of the other players, they do not go in for forward selling." [i.e. they can profit from a gold price move.]

"Gold finally did it," say the Adens. They like Goldfields, also Anglogold (AU: news, chart, profile), Agnico Eagle (AEM: news, chart, profile), Glamis Gold (GLG: news, chart, profile), Newmont Mining (NEM: news, chart, profile), Harmony (HMY: news, chart, profile), Bema Gold (BGO: news, chart, profile), Meridian Gold (MDG: news, chart, profile), Durban Roodeport Deep (DROOY: news, chart, profile), Kinross (KGC: news, chart, profile), Silver Standard (SSRI: news, chart, profile), Silverado Gold (SLGLF: news, chart, profile), Aurora Platinum, Global World Gold Fund (UNWPX: news, chart, profile) and Tocqueville Gold Fund (TGLDX: news, chart, profile).

They fear forwarders too: "Sell Barrick Gold (ABX: news, chart, profile) if you have it," they advise.

Peter Brimelow is the author of "The Worm In The Apple: How The Teacher Unions Are Destroying American Education." .

________________________________________________________

FROM MININGNEWS.net
Fatality feared at Barrick's Lawlers mine
28 January 2003

A FEMALE pit technician is missing at Barrick Gold's Lawlers gold mine near Leinster in Western Australia following a rock fall in the Fairyland openpit yesterday afternoon.

The WA Department of Mineral and Petroleum Resources said inspectors from the department's mining operations division were at the mine and had commenced an investigation into the causes of the incident.

The WA Police Service and coroner have also been informed.

The last mining fatality in WA occurred on January 15 when Philip Strauss died in a loader runaway in the decline at Western Metal's Kapok mine, near Fitzroy Crossing.

This is the first possible fatality involving a female employee since January 8, 1998 when a woman died after being crushed by the remote-controlled loader she was operating in the underground workings at the Plutonic gold mine, the DMPR said.

________________________________________________________

FROM THE MIAMI HERALD - Posted on Sun, Jan. 26, 2003
Suit says collusion robbed gold of its luster
BY Jane Bussey

Two years ago, a leading New Orleans gold executive, stumped over the low price of gold, stumbled onto what he saw as a scheme to manipulate its price by one of the world's biggest and most politically connected precious-metal producers and an old-line Wall Street investment bank.

In the post-Enron world, hedging, derivatives and off-balance sheet accounting are no longer dry financial numbers but the stuff of collusion and conspiracy, with the result that New Orlean's Blanchard and Co. filed an antitrust lawsuit against Barrick Gold Corp. and J.P. Morgan Chase.

The suits accuses them of suppressing gold prices in the past to profit by short-selling and acquiring mines on the cheap.

Barrick, which runs a far-flung network of gold mines in North and South America, Africa and Asia from its Toronto headquarters, dismissed the complaint as ''ludicrous and totally without merit'' when it was filed on Dec. 18. J.P. Morgan did not return a telephone call.

Many in the mining world dismiss the lawsuit as the stuff of novels.

''I don't think the lawsuit is going very far.'' said Michael Fowler, a mining analyst at Desjardins Securities in Toronto. ``There are so many factors impinging on the gold price, to suggest that hedging is the one factor that caused the gold price to go down is a bit too simple.''

But the latest legal tiff tarnishing the yellow metal bears a resemblance to another lawsuit sprung by dedicated enthusiasts who charged the conspiracy was wider, encompassing central banks and finance officials.

One of the alleged purposes of price suppression was to neutralize gold as an indicator of inflation and keep the lid on long-term bond prices.
That lawsuit, brought on behalf of the Gold Anti-Trust Action Committee, was dismissed last year on the grounds that the people who filed had no legal standing to claim injury from alleged price suppression.

But Blanchard's complaint is more limited, making no mention of the world's central banks or Washington. Its suit also differs because the company is a retail dealer in rare coins and precious metals and any price manipulation hits its bottom line.

Still, it underscores the shared belief of some gold bugs, investors and others that the price of the precious metal has been abnormally low, and the reason lies in price manipulation and not the explanation that gold had lost its luster as a hedge in the ''new economy.'' Until the gold price began rising in 2002, its price had stayed low for more than a decade.

The legal challenge is taking place against a backdrop of convulsive international financial markets, buffeted by war and recession jitters.

The U.S. dollar has been falling steadily against leading world currencies, and the price of gold hit a six-year high of $366 a troy ounce last week, a 44 percent rise over its July 1999 low of $252 an ounce.

The Blanchard lawsuit alleges that Barrick's price manipulation has netted it $2 billion. The gold producer negotiated ''pot-deferred sales contracts,'' derivative contracts through which a bullion bank, acting on Barrick's behalf, borrows gold from a central bank at a lease rate of approximately 1.5 percent and sells that gold into the spot market.

A derivative is a complex financial instrument that derives its value from something else, such as a bet that interest rates will stay low. Companies use derivatives in transactions like currency hedges to guard against an abrupt change in exchange rates.

But derivatives like interest-rate bets are dangerous because they grow exponentially when interest rates rise.

But Barrick also had a hedge in its derivative contracts. If gold prices go down, Barrick has negotiated a higher price.

But if gold prices rise -- always the big danger in such derivative operations -- Barrick's special contracts allowed it to postpone repayment of the borrowed gold, sell its own gold production for the higher spot rice and repay the loan when the gold spot price falls, according to the lawsuit.

So a contract that allows Barrick to postpone judgment day if gold prices go up is quite unusual. Some of Barrick's deferred sales appears as off-balance sheet assets.

Blanchard's lawsuit alleges that this type of derivative contract is illegal, violating anti-trust laws.

''It is an anti-competitive and anti-trust violation,'' said Neal Ryan, Blanchard's spokesman. ``You have one company that is allowed to trade at no risk, never having to cover or lose. It automatically changes the playing field for other gold companies. No other gold company has these advantages.''

Barrick was a bit player in gold when it was incorporated as a Canadian company with one mine in 1983. Twenty years later, after a flurry of acquisitions as other companies dropped out in face of declining prices, it is the second-largest gold producer in the world.

The captains of world power have traipsed through its boardrooms. Former President George Bush, the father of the current president, has been a special advisor. Former Canadian Prime Minister Brian Mulroney sits on the board. Former presidential confident and lawyer Vernon Jordan, former Senate majority leader Howard Baker and former German Bundesbank President Karl Otto Pohl have also been on the international advisory board.

J.P. Morgan has not escaped scrutiny in this. Speculation that the bank had billions of dollars in gold derivative exposure traveled on the Internet, prompting the bank to announce that it had asked the Securities and Exchange Commission to investigate these rumors.

________________________________________________________

"TARNISHED EXPECTATIONS: BARRICK AND JP MORGAN'S EFFORTS TO MANIPULATE THE GOLD MARKET", written by Donald W. Doyle Jr., CEO of Blanchard and Company, Inc., is being presented on the SaveGold.com website as a series over the next several weeks to inform interested parties of the reasons and research involved in bringing the Complaint for Injunctive Relief against Barrick and JP Morgan Chase & Co.

The second section entitled: "Barrick's Intent & Market Manipulation" has just been posted! The first section in that series has just been updated as well.

________________________________________________________

"If upheld on appeal, the 1999 and 2000 assessment would result in US$41 million in income taxes for those years, plus US$100 million in additional taxes over the life of the mine."

BARRICK TO APPEAL US$41 MILLION TAX BILL
15 January 2003

FROM www.miningnews.net

BARRICK Gold plans to appeal a US$41 million income tax assessment by Peru based on an audit of the company's Pierina mine for fiscal 1999 and 2000.

Barrick said it believed the assessment, which excludes interest and penalties, was incorrect and inconsistent and that it had provided for the full impact of income taxes over the life of the mine, so it anticipated minimal impact on 2002 or future earnings.

It said it had requested the Peruvian audit of Pierina "in keeping with its policy of staying as current as possible with its tax obligations under each country's tax laws" in which it operates.

Barrick said it has fully provided for the total income taxes of US$141 million over the life of the mine, as well as other additional payments of about US$15 million due through the end of 2002.

If upheld on appeal, the 1999 and 2000 assessment would result in US$41 million in income taxes for those years, plus US$100 million in additional taxes over the life of the mine.

Payments are not required to be made while the assessment is under appeal, which can take several years.

Interest and penalties now stand at US$51 million, but that figure would increase during the appeal process.

"Even if the income tax assessment is upheld on appeal, Barrick believes it has a strong position because the assessment runs counter to applicable law and previous Peruvian tax audits of Barrick," the company said.

Barrick bought Pierina in 1996 and has taken it from an advanced-stage exploration project to an operation that is expected to have produced more than 885,000 ounces of gold in 2002 at a cash cost of US$78 an ounce.

________________________________________________________

"Investors—and gold investors, in particular—have for months now been smelling trouble where Barrick is concerned, however. Barrick’s share price has been clearly the worst performer among gold majors; and not due solely to the fact that it was jettisoned from the S&P 500 during 2002. At the least, investors are suspicious of its hedges and potential future exposure to a sustained gold bull market; in any case, the more glamorous stocks to own now are those producers who remain unhedged. "

MORE ON THE BLANCHARD SUIT…AND THE DEATH-DEFYING (?) BARRICK HEDGE BOOK
By Chris Temple         
Jan 2, 2003

www.nationalinvestor.com

The Blanchard suit against Barrick and J.P. Morgan-Chase is, of course, a big story. The implications go far beyond what the current price of gold should be, and involve the financial health of banking houses and entire financial market sectors.

As with GATA's earlier suit, Blanchard’s gets little attention in the "mainstream"/financial press. In fact, I have not yet seen a single mention of the Blanchard suit on CNBC, even with all the talk of gold spiking recently, and otherwise having a very good 2002. At least, a couple times in the past, they did have one or more GATA folks (or ones sympathetic to the "conspiracy theory") on if, perhaps, for no other reason than in the hopes they'd be ridiculed for their views.

Just this morning, a Morgan big shot was on CNBC, and talked for a good 15 minutes about all their problems, known suits and UNKNOWN suits. He said that JPM would be establishing a nearly $1 billion separate account for settlements. He also discussed the bank's substantial derivatives exposure. But not a single word was uttered about Blanchard, Barrick or gold.

Interestingly, Morgan put out a press release several months ago attempting to dispel any notion that it was in "trouble" due to gold-related contracts. I never did see any catalyst for this; yet all of a sudden, there was their announcement. No follow-up by the media, though; as with today, most of their interest is about Enron-related stuff. But for Morgan to have issued such a statement seemingly out of the blue, you know there had to be serious enough "scuttlebutt" for them to feel the need to respond.

The important thing to remember about both GATA's and, presumably, Blanchard's actions is that they are motivated by something more than the price of gold, and/or some "gold bugs" just being angry that their favorite investment has been a poor performer for so long. In any case, that point has in the past been articulated to me well by GATA's Bill Murphy.

The real "story" here is how gold has been used as a vehicle for speculators to engage in, ultimately, very risky financial behavior. Far from being an issue solely of gold's "forced" or otherwise contrived underperformance as an asset class/investment, it's one of shenanigans (short selling, arbitrage, derivative trading and the rest) having been engaged in that threaten the health of several financial institutions, and even the whole monetary/financial structure itself.

Much has been written (by me and others) of the "carry trade" that helped gold decline from over $400 per ounce in January, 1996 to lows near $250 per ounce. Most of those who engaged in this activity (generally consisting of borrowing gold from central or bullion banks, selling it and investing the proceeds elsewhere at higher returns than the lease rate cost for the gold) had no feelings for gold one way or another. They simply saw an opportunity to exploit a thin market for short-term financial gain. Some claim, though, that many of these contracts are overextended; and that if everyone short gold had to purchase metal to cover, it would be impossible.

Producer hedging also served to push gold down; but this practice started to come into disrepute in the Fall, 1999 short squeeze. When market prices rose higher than hedge contracts' selling price for forward-sold gold, that meant these contracts became major LIABILITIES to the companies who'd hedged their production. Specifically, two companies--Ashanti and Cambior--were brought to their knees financially when their hedge books plunged under water for a while.

Curiously, Barrick--the biggest and most sophisticated player by far among gold hedgers--escaped this fate; and has continued to, so far. When it has at times been questioned about its own potential losses if gold were to move substantially higher, Barrick has usually stated that it has little or no adverse exposure; in effect, that its hedge contracts are a "win/win" situation.

In short, it has somehow been able to construct hedges that it can wiggle out of for quite a while if the company’s bet on a falling gold price were not to materialize. Following is an explanation of this practice contained in a recent issue of Strategic Investment newsletter:

"Ordinarily, a hedge protects a producer or investor from the downside. Other things being equal, it does so by limiting their upside. Barrick, whose hedge book had assets of $5.5 billion at the end of 2001, however, has managed to construct a hedge that allows it considerable upside if gold rises. And one big bank could be caught very short. Apparently, Barrick has hedged part of its production through a spot deferred forward sale contract. Barrick makes a forward contract with a bank to deliver (unmined) gold at a certain price at a certain date. But what makes these contracts different, and also dangerous, for counter-parties is that Barrick has the right to defer the delivery of the gold for periods ranging from five to 10 years. More recently, Barrick seems even to have entered into contracts that allow it to defer delivery for 15 years. . ."

The piece in S.I. continues, referring to information and opinions apparently obtained from Len Williams, head of fixed income and commodity research at London-based Durlacher. "According to Williams, while deferring or rolling over a contract is not unusual in the financial world, it can usually be done for only a short period and both parties have to agree. But Barrick appears to have pulled off a coup by writing extended-length contracts that allow it to take the decision unilaterally. This can be very lucrative for Barrick. Say gold is trading at $300 an ounce and Barrick agrees to sell Bank X one million ounces of gold at $320 an ounce in 12 months. If gold then trades at $310 an ounce one year later, Barrick will sell the gold to the bank and receive a better price than it would get elsewhere. But if gold has shot up to $350, Barrick can choose to defer the sale to the bank, and sell its gold in the market. This gives it the best of both worlds—little risk and the highest price available.

"If you are Bank X holding the obligation to buy the one million ounces at $320 per ounce, then you need to hedge this position in the market. Standard gold futures contracts have no deferral clauses, so you sell forward the gold that you don’t have, which means, you are now relying on Barrick to deliver the gold so you can fulfill your end of the bargain. If Barrick decides to defer the sale, though, there could be trouble—which is what we hear could happen. Apparently, one sizeable bank active in this market has a gold derivatives book of $41 billion, a significant part of which is attributable to its dealings with Barrick. Barrick’s contract apparently has the option to defer any sale. If the gold price starts to accelerate, Barrick could choose to defer and the bank will have to find some other way to get the gold it needs to fulfill its own obligations. How will it do that? It will have to buy the gold—potentially hundreds of millions of dollars worth—in the market. A forced buyer of that size would send gold rocketing to $400 or even $450 an ounce, prices not seen since the early 1980’s. You may have a question: How could a bank do something so risky? . . ." (Emphasis added.)

That question, of course, is the intriguing part of this. Though not completely out of the realm of possibility, nobody is suggesting that the venerable House of Morgan is so stupid as to have engaged in such a consistently one-sided arrangement without an "outlet" or fail-safe of its own. This is where things could get interesting, if Blanchard succeeds in obtaining this kind of information in a courtroom down the road. About all we can do right now is speculate; but the fact that it was J.P. Morgan that—not coincidentally, in my opinion—acted as the conduit for the New York Federal Reserve Bank to end gold’s short squeeze from September 29-October 5, 1999 provides perhaps the strongest possible clue.

I for one do not believe that Morgan can or will be done in by its gold dealings, though it’s possible that some others Morgan might have offloaded risk on to could be in greater danger. Its exposure to telecommunications and energy bad debts is by all available information substantially larger. Investors—and gold investors, in particular—have for months now been smelling trouble where Barrick is concerned, however. Barrick’s share price has been clearly the worst performer among gold majors; and not due solely to the fact that it was jettisoned from the S&P 500 during 2002. At the least, investors are suspicious of its hedges and potential future exposure to a sustained gold bull market; in any case, the more glamorous stocks to own now are those producers who remain unhedged.

We must go beyond even this, though, to wonder what this mining giant’s fate might be. Last Fall, the company made more than one announcement warning of production shortfalls, earnings woes and more. Many are asking what on Earth is going on. With declining production, can the company keep all its long-term obligations to deliver gold at any price? Now the ugly duckling in the sector, will Barrick have the clout necessary to purchase more and better production? Does its reduced earnings for 2002 mean that—already—the company is having to eat some recent losses on its hedge book; losses it’s tried to tell investors were virtually impossible? Nobody really knows for sure right now. But there are lots of questions; and Barrick’s share performance especially during the second half of 2002 tells us that something may be badly amiss.

The Barrick dealings with Morgan do not involve a huge amount of gold, within the context of the overall short position which is said to exist. Blanchard’s going after these two, though, represents an achievable means of eventually blowing the lid off the entire universe of gold "manipulation." And—given Barrick’s position as a producer in particular—the antitrust case is arguably the easiest to make against them.

Time will tell whether the Blanchard action goes anywhere; but as I wrote recently, it stands a far better chance than did GATA’s action.

________________________________________________________

Business Times - 21 Dec 2002

JP Morgan and Barrick sued for gold pricing

(NEW ORLEANS) Blanchard & Co, a dealer in rare coins and precious metals, has sued Barrick Gold Corp and JP Morgan Chase & Co, accusing them of making a US$2 billion profit by manipulating the price of gold.

Barrick and JP Morgan engaged in an antitrust scheme to suppress the price of gold and sold short to profit from a decline in its price, the suit said. Filed in federal court in New Orleans where Blanchard is based, the suit seeks a court order to end trading agreements between Barrick, JP Morgan Chase and other unnamed bullion banks.

'The gold market has always had the reputation of being quite opaque,' said Jean-Marie Eveillard, who helps manage US$3.5 billion at Societe Generale Asset Management Corp in New York, including a US$100 million gold fund. 'I see it as an attempt to try and see if there's any truth to the rumours' of manipulation.

While the suit said the alleged manipulation depressed the price of gold, its value has risen 22 per cent this year to its highest level since 1997. Concern about a war with Iraq has helped spur buying by investors who consider gold a haven during times of international turmoil.

Toronto-based Barrick called the allegations 'ludicrous and totally without merit'. The company said Blanchard's allegations contained 'numerous factual inaccuracies and defamatory statements'. - Bloomberg

Copyright © 2002 Singapore Press Holdings Ltd. All rights reserved.

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Gold hedge fever
Hedging gold price risk may allow a producer to make greater profits, and may depress the price of gold in the process. Is that any reason to sue?
By Martin Murenbeeld
National Post, Canada
Friday, December 20, 2002
http://www.nationalpost.com/financialpost/story.html?id={BA1DB2D4-7FFA-4454-9D37-89EB65881EFD}

The practice of hedging gold price risk by selling gold "forward," as done by Barrick and other mining firms, generates an extreme amount of controversy. Barrick's hedging contracts have been called "fraudulent ... an invitation to bankruptcy" by no less than a professor emeritus at the Memorial University of Newfoundland, and Barrick's officers "blockheads wrapped up in their own glory who do not understand the very nature of the product they help bring up from the bowels of the earth."

In a legal action brought forward by Reginald Howe on Dec. 7, 2000, an action supported by the Gold Anti-Trust Action group (GATA), Barrick, along with the Federal Reserve and major banks, was charged with suppressing the price of gold. It was claimed "Barrick has material non-public knowledge of [a] gold price-fixing scheme which they have used to their advantage."

The Howe case was thrown out of court, but that hasn't stopped the attacks. On Wednesday, Dec. 18, 2002, Blanchard and Company, a supporter of GATA, filed in a Louisiana court the charge that Barrick and JP Morgan Chase Co. had "unlawfully combined to actively manipulate the price of gold."

Indeed, Barrick's hedging program "involves a unique step whereby Barrick, and the bullion banks with which it operates in combination, can flood the market with central bank gold."

That Blanchard did not also name all gold-lending central banks as co-defendants is a curious oversight!

What is one to make of all this?

For my part, not only is the practice of gold hedging perfectly defensible, but having had a close look at Barrick's hedging program I can say that there is nothing to suggest that the aforementioned attacks are even remotely on the mark.

Hedging is defined as the process of reducing exposure to an event that could be costly to a firm. It is the opposite of speculation, which is generally defined as the process of increasing exposure to an event that could be profitable to a firm. Its origins go back to agricultural economies where farmers would commit to sell their output to a middleman in order to avoid the volatility of future produce prices. (Commodity exchanges -- for grain, hogs, etc. -- are among the oldest exchanges.) These farmers would transfer the risk of a price decline, to which they were "exposed" and which could be ruinous to them, to a middleman -- a "risk-taker" (who could very well be a speculator who hoped to benefit from a future price rise). In the event the price of the farmer's output turned out to be higher than what had been contracted, the farmer would suffer an opportunity loss -- but he would experience no direct cash loss.

Producers who hedge the gold price are transferring the risk of a future price decline to a counter party -- typically a bullion bank. When gold is sold forward, a price on future output is secured today; regardless of what happens to the gold price, the producer will receive the contracted price.

It is not strictly necessary for management to have a view of the future price of gold, furthermore. Management needs to know the degree to which the company (i.e. the board and shareholders) will accept adverse price outcomes. With the help of different gold-price scenarios, management can construct a financial profile for the company and act to mitigate the worst outcomes. Management cannot control the gold price, but management can control the impact of an adverse price outcome on the company. That is the essence of "hedging."

Hedging isn't "costless." If Barrick contracted to deliver gold at $340 per ounce, but the eventual price on delivery day is $375, Barrick will incur an opportunity loss -- the "opportunity" to receive the extra $35 per ounce. An opportunity loss is not a cash loss, however. The company remains in business; it just wasn't as profitable as it might have been.

Of course, were the gold price to fall to $300 by delivery day, Barrick would receive $40 per ounce more than the market would have given it. Indeed, over the last 58 quarters, Barrick has made an extra $2-billion in this fashion. Some of this $2-billion was used to find more gold reserves and purchase gold assets (ergo, Blanchard's claim that by "manipulating" the gold price Barrick was able to make an "[unprecedented] leap from obscurity to dominant global enterprise").

Barrick's hedges are spot-deferred hedges, as are the hedges of some other producers. This means they can be deferred into the future. In the example above, Barrick may choose to postpone delivery for another year(s) when gold rises to $375, and simply sell the gold it was prepared to deliver under the $340 contract directly into the market for $375. No opportunity loss will then be booked.

Will continual deferment lead to problems?

Provided that Barrick will always be able to deliver against its contracts, it can only ever incur an opportunity loss. And it may not incur any opportunity loss if the gold price on final delivery day is below the contract price. If Barrick runs out of gold reserves, however, and it had continually postponed delivery, and the gold price skyrockets, there will be a nasty day of reckoning. But shareholders, seeing Barrick's depleting reserves, will have long abandoned the company to its deserved fate.

Over the last year, the market has "punished" gold hedgers; their share price has not risen to the extent the share price of non-hedgers has. Investors tend to prefer unhedged producers when the price of gold is expected to rise, because of the lower risk of opportunity losses. Barrick's share price outperformed when the gold price was falling, on the other hand. With gold price scenarios more bullish than bearish currently, Barrick and other "hedgers" are scaling back their hedging activities. The perceived risk of a bad gold price outcome has lessened.

Has hedging depressed the gold price? Yes, according to our models of the gold price. We have calculated that all hedging -- of which Barrick hedges are only a small part -- has depressed the average yearly price of gold by US$9.40 per ounce since 1983, when the practice first commenced. This estimate follows from the fact that when a producer hedges the gold price risk, its counter party borrows gold from a central bank and sells the gold in the spot market. (The gold is returned to the central bank when the producer delivers against the contract.) It is this selling in the spot market that lies at the root of the animosity towards "hedgers." Gold companies that do not hedge receive a lower price for their output than otherwise.

However, now that "hedgers" are delivering against past hedge contracts, and not initiating new contracts, the price of gold will be higher on average than otherwise. The knife cuts both ways.

The practice of hedging cannot be stopped. Hedging occurs in all markets where the financial technology has made it feasible to do so. Currency exposure is hedged with great regularity, for example. Should Ford Motor Company of Canada Ltd. file suit against Barrick when Barrick hedges its Canadian dollar exposure, because it raises the price of the Canadian dollar and therefore may hurt Ford's exports to the United States? This line of logic can lead to ridiculous outcomes in a hurry!

Hedging price risk is a normal business practice. In the gold market, it has allowed some "hedgers" to realize greater profit than otherwise in the heretofore-declining gold market. Our economic system would abort quickly if we barred companies from using all legal means to gain profit and potential
advantage over their competitors. My guess is that Blanchard and Company has not profited to the degree it might have hoped these last years in the gold market. Too bad, but that is what a market is all about!
------------------------
Martin Murenbeeld, PhD, is an economist with
M. Murenbeeld & Associates Inc. He can be reached at martin@murenbeeld.com

________________________________________________________

Hot, but still not respectable;
Gold's image problem
By Steve Maich
Financial Post (National Post), Canada
smaich@nationalpost.com
Friday, December 20, 2002
http://www.nationalpost.com/search/site/story.asp?id=9B7B57CE-37AE-49F9-ACD2-19CD922492AA

Gold may be having a great run of late but it still has a serious image problem. To many mutual fund managers and analysts, this week's lawsuit by metals dealer Blanchard & Co. against Barrick Gold Corp. and J.P. Morgan Chase & Co. is just another sign of how far the metal has fallen in the eyes of the investment industry.

The plaintiffs allege that Barrick, J.P. Morgan and other bullion banks have conspired to sink the price of gold for the last 15 years, using complex derivatives trades and a web of off-balance sheet schemes. This, they say, has been the driving force behind gold's 31% slide since 1987.

But others see it differently. They say that the biggest reason for gold's fall from favour is not central banks selling their reserves, nor is it big gold miners selling their production short on the derivatives market. Rather, it is the gold bugs themselves, who feed rumours of vast conspiracies, that are most responsible for the sorry state of the gold market.

"The problem is that there are lots of bizarre people among the gold investors, which has made it difficult to make gold respectable," said Jean-Marie Eveillard, manager of the US$125-million First Eagle SoGen Gold Fund.

"Gold has the opportunity to be a minor but legitimate alternative asset. Pension funds have owned oil, timber and real estate, but they won't own gold as a physical monetary asset."

It wasn't always this way. Gold was once considered a core holding in all serious investment portfolios. Until the 1980s, money managers talked about asset allocation in terms of their weighting of stocks, bonds, cash and gold. But not any more. Over the past 15 years, as gold fell from a high of US$499.75 in 1987 to its 1999 low of US$252.55, many pension fund managers turned their back on the metal for good.

Meanwhile, a select few managed to turn the metal's descent to their advantage, and none more so than Barrick.

In 1987, chief executive Randall Oliphant, then Barrick's treasurer, devised a system of derivatives hedging with several major bank partners that would allow Barrick to generate reliable cash flow even if gold prices tumble. Its hedge book has generated profits of more than US$2-billion since then, and has allowed Barrick to grow into the second-biggest gold miner in the world by snapping up competitors.

Along the way, dozens of other major gold miners, such as Placer dome Ltd., have sought to emulate Barrick's success, hedging some of their own production.

But now, that success is coming back to haunt them. Suspicion about the stability of their derivative exposure continues to hang over Barrick and other hedged producers.

Yesterday, gold rose US$2.42 to US$345.67, but Placer and Barrick shares fell 3.5% and 3%, respectively. The problem, analysts said, is that most of the gold industry's hedging happens in the derivatives market. Those futures and options trades take place over-the-counter, with few disclosure requirements, and the opaque nature of the market has provided fertile ground for rumour, innuendo and suspicion.

That suspicion was the basis for the creation of the Gold Anti-Trust Association, also known as GATA, two years ago. The group's founder, Bill Murphy, is one of the leading voices trying to expose what he considers a massive worldwide scheme to suppress the price of the metal and boost the U.S. dollar
and world stock markets.

Blanchard's lawsuit echoes many of the allegations made in a suit filed by GATA in December, 2000, in Massachusetts, against several bullion banks, the U.S. Federal Reserve and its chairman Alan Greenspan.

Blanchard officials weren't available to discuss their legal action yesterday, but several observers say it will likely succeed only in attracting more ridicule from mainstream money managers.

"Gold, given its nature as a conservative investment, has a huge image problem," said Doug Pollitt, an analyst at Toronto-based Pollitt & Co., who has a negative rating on Barrick. "Suits like this don't help."

It's time, Mr. Pollitt said, to stop talking about central banks and hedging strategies, and start focusing on supply, demand and the flow of capital.

"Another lawsuit is the last thing the gold market needs," he said.

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From globeandmail.com
Friday, December 20, 2002
Sabre-rattling cuts key stock indexes
Wall Street hits five-week lows as jitters about Iraq continue to weigh on markets

Bloomberg NewsSabre-rattling pushed key stock indexes lower again in Toronto and New York as investors fretted about how economic growth would be affected by a U.S. attack against Iraq.Canada's benchmark slid for a third successive day, with Toronto-Dominion Bank and Sun Life Financial Services of Canada Inc. among the losers.

U.S. indexes hit five-week lows on concern higher oil prices caused by war jitters will crimp profits at companies such as Procter & Gamble Co.and E.I. du Pont de Nemours & Co. Losses widened after U.S. Secretary of State Colin Powell said Iraq failed "totally" to account for its weapons of mass destruction as required by the United Nations.

"People think that Iraq could be a messy situation, and they're not sure what it will do to the economy, so that's scaring people off stocks," said Andre Chabotat ChabotPage Investment Counsel Inc. in Montreal.

"You don't want to make any huge bets because of the sabre-rattling over Iraq," said Rick Jandrain of Banc One Investment Advisors in Columbus, Ohio.

"Everybody right now just wants to get the year behind us."

On Bay Street, the Toronto Stock Exchange's Standard & Poor's/TSX composite index slid 23.96 points to 6,536.97. Since reaching a four-year low on Oct. 9, it has gained 15 per cent as investors bet a growing economy would bolster profits. On Wall Street, the Standard & Poor's 500-stock index slipped 6.87 points to 884.25, with all 10 of its industry groups in retreat. The Dow Jones industrial average, a gauge of 30 blue-chip stocks, fell 82.55 points to 8,364.8. On the Nasdaq Stock Market, the technology-laden composite index lost 7.41 points to 1,354.10.Shares of P&G slid $1.67 to $85.70 on the New York Stock Exchange, while E.I. du Pont, which also trades on the NYSE, lost 98 cents to $42.53.The S&P 500 closed at its lowest since Nov. 13, the Dow at its lowest since Nov. 11, and the Nasdaq at its lowest since Nov. 12. All three are headed for a third successive losing year.

In Toronto, financial shares accounted for two-thirds of the S&P/TSX's decline on concern that slower economic growth could dampen loan demand and increase loan defaults. Sun Life fell 80 cents (Canadian) to $26.60, and TD dropped 40 cents to $34.25. Royal Bank of Canada sank 47 cents to $57.10.

Shares of Barrick Gold Corp. lost 75 cents to $23.70 as investors continued to stew about legal action against the company. Blanchard & Co., a dealer in rare coins and precious metals, is suing Barrick and J.P. Morgan Chase & Co., accusing them of making a $2-billion (U.S.) profit by manipulating the price of gold.

"This lawsuit is holding [Barrick] back; otherwise they'd be up with the gold price," said Donald Coxe, chief investment strategist for Harris Investment Management, a Chicago-based unit of Bank of Montreal.

But Kinross Gold Corp., rose 2 cents (Canadian) to $3.64, and TVX Gold Inc. gained 94 cents to $23.63, helped by an increase of $3.80 (U.S.) to $346.50 an ounce in the price of gold bullion.The Canadian Venture Exchange managed to buck the downward trend, its S&P/TSX-VEN index adding 9.9 points to 1,017.96. New York odd lotsOdd-lot trades made Wednesday through the New York Stock Exchange:

Customer purchases 9,297,281 Short sales 849,143
Other sales 12,692,451 Total sales 13,541,594

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Friday, December 20, 2002
Gold lawsuit weak, analysts say believe The American plaintiff has limited risk of being slapped with court costs.
By CP

TORONTO -- A lawsuit brought against Barrick Gold and J. P. Morgan Chase by a U.S. coin dealer alleging the two have been conspiring to manipulate gold prices is based on nothing but conspiracy theories that have been swirling for years, some gold analysts say.

But they say it will bring negative attention to hedging programs used by Barrick and other gold companies to cushion themselves against falling prices but which some believe hurt the gold market by keeping prices low.

Hedging, the practice of selling gold that has yet to be produced at forecast prices, has been bad for the gold market and is Barrick's "Achilles heel," John Ing, a gold analyst with Maison Placements Canada, said in an interview yesterday.

"I don't think the suit will go very far but it will focus attention on derivatives hedging, which has sort of become socially incorrect."

He noted that Barrick recently scaled back its hedging program from 18 million ounces to 12 million by the end of 2003. Some gold companies have been winding down their hedging programs recently to take advantage of the rising price of gold.

The reason Ing said he doesn't expect the lawsuit to get very far in the courts is because a similar allegation launched by an American investor against bullion banks J. P. Morgan, Deustche Bank, Goldman Sachs and others a few years ago was thrown out of court.

The hedging practices that Blanchard and Co., the plaintive in the suit against Barrick and J.P. Morgan Chase, allege are illegal have been common practice in the financial markets for years, Ing said.

Blanchard alleges that financing from J .P. Morgan to Barrick allowed the gold company to short-sell bullion and still make a profit on prices so low that other gold producers were unprofitable or were pushed out of business.

For its part, J. P. Morgan Chase in New York "respectfully declined to comment" on the allegations. Barrick dismissed the suit as "ludicrous" in a statement late Wednesday.

The suit claims J. P. Morgan Chase financed Barrick's repeated short-selling with "remarkably advantageous terms not available to others, including deferred repayments and no margin calls."

Short-selling is a technique used by traders who believe a stock or commodity's price is about to go down. A short-seller sells stock or the commodity borrowed from a broker, intending to buy the shares or commodity at a lower price, return them to the broker and pocket the difference.

Ing chalked the concerns up to conspiracy theory. "Who knows? It's like questioning whether the Americans really walked on the moon."

Others attacked the suit as a publicity stunt.

Rodney Smith, a securities lawyer and a partner at Blaney McMurtry in Toronto, said if the case isn't dismissed out of hand, Barrick could be ordered by the courts to open up all of its files, something that "could turn into a fishing expedition."

In the U.S., where the suit was filed in a Louisiana court, plaintiffs face less risk of being ordered to pay costs for cases that are thrown out, so Blanchard has little to lose in making the allegations, he said.

Still, Smith said Barrick and J.P. Morgan have to take the claim seriously because it has been filed in court and they will have to respond.

If the suit isn't dismissed, it could take a number of years to argue and that could prove costly.

Allegations that there is an international conspiracy to suppress the price of gold through dumping it in large quantities on world markets, and that this conspiracy is managed by a number of central and commercial banks, are nothing new.

A Dallas-based organization called the Gold Anti-Trust Association has been investigating and speaking out about the issue for the past five years.
The group, which rallied around the last lawsuit against J.P. Morgan on the issue, said the new suit shows more people are becoming aware of the alleged conspiracy.

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An article from www.globeandmail.com, Friday, December 20, 2002
Vox: Barrick
By FABRICE TAYLOR
From Friday's Globe and Mail

This just in: ABC Beige Boxes is suing Dell Computer for manipulating the PC market. ABC alleges that Dell lowered the price of PCs to its advantage but to the detriment of its competitors, including ABC. Substantial damages are sought. You're not likely to see such an announcement, at least not one that anyone will take seriously. So why do seemingly dubious lawsuits against Barrick Gold make such a splash?

To recap, a Louisiana outfit called Blanchard & Co., a purveyor of small bars of gold to the libertarian crowd, launched a lawsuit this week against Barrick for "manipulating" the price of gold, causing Blanchard and other retail gold investors untold harm. (In announcing the lawsuit, the plaintiff made references to infamous Enron Corp. without bothering to tie the two together.)

By manipulating, Blanchard seems to mean that Barrick depressed the price of gold by engaging in what is commonly referred to as hedging.

Commodity players of all stripes routinely hedge. Barrick's hedge practice, which it prefers to call its Premium Gold Sales program, earned the company a lot of extra money in the poor gold market of the late 1900s to 2001. It also earned it a lot of enmity from gold enthusiasts who blamed the program for depressing the gold price, and who might have been a little jealous.

That said, not too many observers are taking the legal claim seriously, and for good reason. From an admittedly non-legal point of view, there's a fine line between the meaning of manipulation implied in the lawsuit and smart business. Dell essentially dictates pricing in PCs because of its league-leading efficiency. It uses this pricing power to gain market share and increase profit. Rivals don't particularly enjoy it, but if that's manipulation, how do investors like it? Plenty.

So why does the Barrick lawsuit set tongues wagging? Probably because, in the intriguing world of gold, Barrick's hedging raises suspicion. A lot of investors dislike short sellers, and technically what Barrick and so many other gold miners do when they hedge is to short gold.

It doesn't help that it does so with derivatives and with limited transparency in its financial statements (although that's improving). Or that Barrick came across as boastful when so many others were face down in the mine tailings. Or, for that matter, that Barrick seems to repudiate the role of gold as an investment, preferring to sell it as a consumer commodity best used as a body ornament. For these reasons and more, plenty of investors find much glee in Barrick's poor stock performance this year, even as other gold concerns are up by healthy double-digit margins.

But the hedging program is another matter. Basically, it works like this: An investor, say a bank such as J.P. Morgan (which is named in the Blanchard lawsuit), notices it can borrow an ounce of gold from a central bank at 1-per-cent interest a year. Knowing it also can invest in a T-bill for, say, 5 per cent, it figures it would be on to a good thing if it could borrow the gold, sell it immediately and invest the cash for, say, five years. The net interest cost is 4 per cent a year, so if the investor can sell the ounce into the spot market for $300 (U.S.), in five years, it will have $365. At that point, it can buy an ounce of gold and give it back to the central bank.

The only trouble is that the investor doesn't know what the price of gold will be in five years. The price has to be less than $365 or the investor loses.

Enter Barrick, or any other hedger. If Barrick is worried about today's $300 gold price going down, or not going up, it can agree to sell an ounce of gold to the investor in five years for, say, $360, knowing the investor will have enough to pay this much with a little left over in profit. That's how the futures price is set, although it has little bearing on the actual spot price five years from now.

Barrick (which then would be short gold in the futures market) would protect itself from a weak spot price, and the investor would protect itself from a strong spot price

The risk in this scenario is if the price of gold rises above $360, in which case Barrick would be selling for less than it could get in the spot market. But the company says it can defer its obligation for up to 15 years. In other words, if it doesn't want to deliver the ounce in five years but wants to sell it spot for more, it can extend the agreement for another year or more, using the prevailing lease and interest rates to set the new price. Presumably the investor can extend the gold lease, at least for a while. (Any of these transactions can be done in an equivalent amount of cash in lieu of gold.)

The nightmare scenario for Barrick would be that gold prices keep rising until the company no longer can put off delivering gold as per the contract. But so long as it can produce the metal from its mines, its loss would be an opportunity cost.

It's clear that hedging can depress the gold price. But there's no denying it was a good move for any gold miner when prices were falling and interest rates were high. It's a different story today.

In the margins, Barrick's hedging (which it is curtailing) gets more complicated and draws yet more suspicion. But even Barrick's more vocal critics tend to dismiss the Blanchard lawsuit. Says one, pointing to the company's languishing stock price: "The market has a way to mete out justice better than any court can."

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Risk-takers win big in gold stocks
Reuters, 12.20.02, 12:02 PM ET
By David Brinkerhoff

NEW YORK (Reuters) - Panning for gold in the stock market has paid off this year, and investors willing to try a riskier strategy have really struck the motherlode.

But not every investor in the sector has hit pay dirt. Those investing in unhedged gold mining companies have seen greater gains than others so far this year.

That's because after years of decline, gold prices have soared to five-and-a-half year highs this week, boosting shares of gold miners at a time when major stock indices -- such as the Dow Jones industrial average and S&P 500 -- have suffered double-digit losses.

Shares of companies such as Newmont Mining Corp. and Harmony Gold Mining Co. , that avoid hedging, or locking in prices of future production, are seeing double- and triple-digit gains this year.

But gold producers such as Placer Dome and Barrick Gold Corp. that lock in prices, or hedge, have seen only a fraction of those gains.

"The stocks that are doing best are those that have the least hedging because they provide investors with more upside" in gold, said Caesar Bryan, who manages $123 million in assets for the Gabelli Gold Fund.

For producers, hedging removes risk but passes up opportunities, like this year's 25-percent jump in spot gold prices. After years of being spurned, the precious metal has found favor among investors seeking a safe haven as war fears rise and the U.S. economy remains shaky.

"Gold's something that's physical and it's not going to evaporate the way money can ... no matter what happens with war or pestilence," said Chuck Hill, director of research at Thomson First Call, an earnings tracking firm.

FOOL'S GOLD

Unhedged gold investments have reaped greater rewards than companies following a less risky strategy.

The Gold Bugs index, which tracks unhedged producers and includes Newmont and Harmony Gold, is up about 110 percent year to date. The wider index of Silver and Gold companies, which includes Barrick, is up just 35 percent but has far outpaced other investments.

Joe Foster, portfolio manager for the Van Eck International Investors Gold Fund, which is up about 76 percent so far this year, according to funds tracker Lipper, said he benefited from a group of unhedged companies, singling out Glamis Gold Ltd., with a 181 percent gain, and Meridian Gold , up about 59 percent.

"Frankly, there aren't many heavily hedged companies left. Some smaller companies that saw this trend toward de-hedging actually raised money to buy back hedges to remain hedge-free," said Foster.

Gabelli's Bryan, whose fund is up about 83 percent year to date, understands why some companies keep hedging, but he thinks it's wrong for investors.

"Banks want some sort of revenue guarantee so they ask for some hedging," he said. "Do I like it? No. But is it reasonable? Yes."

During the bull market of the late 1990s, confidence in stocks, bonds, and currencies led investors away from gold. After fetching $800 an ounce in 1980, gold bottomed at $252 in August 1999, the height of the Internet boom.

Those low prices discouraged production, which has fallen off dramatically, according to gold experts. That, in turn, has tightened supply and is underpinning recent gains.

"The fundamentals of gold are good now," Bryan said. "I think we're in a bull market and I expect further gains."

Copyright 2002, Reuters News Service

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An article from www.globeandmail.com, Thursday, December 19, 2002

Ingram: 'Lone gunmen' of gold strike again
MATHEW INGRAM
Globe and Mail Update

There's something about gold that makes otherwise rational people - well, kind of loopy. Gold-rush miners risked life and limb in their quest for the yellow metal, and even though gold mining has become just another vast industrial machine run by globe-spanning corporations, it is still home to those who see deceit and conspiracy theories around every corner. At the center of many theories is Canada's own Barrick Gold.

The latest twist in the gold-price saga is a lawsuit against Barrick Gold and financial giant J.P. Morgan, a suit launched this week by Blanchard & Co. The New Orleans-based gold dealer is alleging the two companies depressed the price of gold through the use of derivative strategies, the true nature of which Blanchard claims is unknown because they involved a variety of "off balance sheet" transactions between the two.

The suit accuses the two firms of "unlawfully combining to actively manipulate the price of gold" and of making $2-billion (U.S.) or more in profits by selling gold short (that is, selling borrowed gold hoping the price will drop, then repaying the debt and pocketing the difference). According to Blanchard CEO Donald Doyle Jr., "the growth of global income and wealth would have lifted the gold price to approximately $740 if the price had been able to respond to the normal laws of supply and demand."

None of the claims has been proven, and Barrick said the suit is "ludicrous" and contains "numerous factual inaccuracies and defamatory statements." The case marks the second gold-plated conspiracy theory to make it to court in the past year - although it isn't quite as ambitious as the one launched last year by the Gold Anti-Trust Action Committee (GATA). That one named Federal Reserve Board chairman Alan Greenspan and the Bank for International Settlements, the central bank of all central banks.

Although they are targeted at different parts of the gold market, both the GATA suit and the Blanchard suit stem from the same source, namely the sense of righteous outrage some gold bugs feel about the fact that the price of bullion has been so low for so long - unjustly, they feel. And if that low price is a wrong that has been done, which they clearly believe it is, someone must be to blame. And who is one of the largest gold miners in the world, one whose name is synonymous with hedging? Barrick.

Barrick's aggressive hedging program - which involves forward contracts and other derivative instruments - made the company millions of dollars that it wouldn't have made otherwise when the price of gold was low. But it also produced some fierce criticism within the gold community. Why? Not just because of good old-fashioned jealousy, but also because hedging was seen as almost an act of treason against the industry, since it was based on the idea that prices would fall (heresy to a gold bug).

Similar sentiments have been expressed in the oil and gas business - in private at least - about companies that hedge their future crude or natural gas production. Despite the fact that such risk-aversion is in many cases a sound business practice, it is often seen as a lack of faith in the business, and many producers silently rejoice when aggressive hedgers get caught on the wrong side of a major price swing. In fact, Barrick is seeing some of that now as the price of gold has climbed higher.

Adding to this perception is the fact that large-scale hedging of gold can help to depress the current price, since a futures contract is effectively a promise to supply a certain amount of gold at a certain price at some point in the future. Depending on what the price is and the amount, that future supply can have a dampening effect on current demand, at least in a small way - although large sales of gold by central banks has also put significant pressure on the price in the past few years.

Part of what gets the conspiracy theorists' blood going is the fact that the use of derivative contracts is poorly understood, particularly in the gold world, and also that the terms "derivatives" and "off balance sheet" are often associated with everything from the multibillion-dollar fall of hedge fund Long-Term Capital Management in 1998 to the scandal-plagued balance sheet of Enron. To add to the scent, J.P. Morgan took an almost $1-billion hit on some of its exposure to Enron's trading book.

Not surprisingly, one of the star exhibits in the gold conspiracy theorists' case is J.P. Morgan's exposure to gold contracts, which have a "notional" or theoretical value of about $45-billion - three times as much as some of its competitors. The implication, of course, is that at some point it will have to eat a big chunk of that exposure. J.P. Morgan, however, maintains that its exposure is not a problem, and that even if gold stays high it will not have to take a major hit to its bottom line.

In the end, the outcome of the lawsuit against Barrick and J.P. Morgan and of the GATA suit is almost irrelevant, because no matter what happens in either case, the real gold bugs will see it as more evidence that they are right, and that a shadowy cabal of politicians and corporate insiders is somehow pulling the strings in the bullion market.

A reader called my attention to an error in a column that appeared on Monday, Dec. 15 about Bombardier Inc. I referred to the controlling shareholders of the company as the Beaudoin family, but of course the family that controls the Montreal firm is the Bombardier family - the four children of founder Joseph-Armand Bombardier. One of those children, his daughter Claire, is married to Bombardier chairman Laurent Beaudoin. My apologies for the error.
E-mail Mathew Ingram at mingram@globeandmail.ca

Look for exclusive Mathew Ingram commentary at GlobeInvestorGold

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Barrick Gold and J.P. Morgan Chase Accused Of Illegal $2B Gold Market Manipulation
NewsMax.com
Thursday Dec. 19, 2002

Barrick Gold Corp. And J.P.Morgan Chase & Co. Accused Of $2 Billion Illegal Gold Market Manipulation

NEW ORLEANS, La. -- An anti-trust lawsuit filed today accuses Barrick Gold Corp., Toronto, and J.P. Morgan Chase & Co., New York City, of "unlawfully combining to actively manipulate the price of gold" and making (US)$2 billion in short-selling profits by suppressing the price of gold at the expense of individual investors.

The suit was filed by Blanchard and Co. Inc. of New Orleans, the largest retail dealer in physical gold in the United States, and by Blanchard clients who bought gold bullion. Blanchard (www.blanchardonline.com) is paying the costs of the suit, which asks the federal court to terminate the trading agreements between Barrick and J.P. Morgan Chase and other, as yet unnamed bullion banks. Blanchard believes its clients have suffered substantial losses as a result of Barrick's and J.P. Morgan Chase's unlawful price manipulation, anti-trust violations and unfair trade practices.

"Since the end of 1987, when the collaboration between Barrick and J.P. Morgan began, the growth of global income and wealth would have lifted the gold price to approximately $740 if the price had been able to respond to the normal laws of supply and demand," stated Blanchard's chief executive officer, Donald W.Doyle Jr. "If gold had kept pace with inflation, the price today would be approximately $760."

The lawsuit claims that in the past five years Barrick and J.P. Morgan Chase injected millions of ounces of additional gold into the market -- additions that were several times as great as the annual production of every gold mine in South Africa, the largest gold producing nation in the world. By using privately negotiated derivative contracts and concealing the addition of billions of dollars worth of (physical) gold with off-balance sheet accounting, Barrick was able to make it virtually impossible for gold analysts and investors to determine the size and the market impact of its trading positions.

"The same type of accounting maze that hid Enron's debts made it possible for Barrick to manipulate the price of gold without the checks and balances that come from public scrutiny. As a percentage of Barrick's total assets, its off-balance sheet assets make Enron look like a champion of full disclosure," said Doyle. "Is Barrick a gold mining company, or is it a hedge fund with a mine out back?"

The suit alleges that J.P. Morgan Chase financed Barrick's repeated short selling with remarkably advantageous terms not available to others, including deferred repayments and no margin calls. Doyle said the short-sales scheme between the bank and Barrick appears to be the proverbial "money for nothing."

"Over the past five years, J.P. Morgan Chase loaned gold to Barrick at approximately 1.5 percent; sold the gold into the market, and invested the dollar proceeds at approximately 6.5 percent; then paid both the proceeds from the sales and the 5 percent interest differential to Barrick whenever it repaid any of the borrowed gold. During a period when the price of gold dropped by more than 25 percent, Barrick's annual operating cash flow increased by more than 400 percent."

"In 1983, Barrick was a start-up with a single mine in Canada, a founder with no experience in the gold business, and principal investors from Saudi Arabia.
Today, through a combination of market manipulation and a 1992 transaction that the U.S. secretary of the interior described as 'the biggest gold heist since the days of Butch Cassidy,' Barrick has amassed off-balance sheet assets that are worth more than the market capitalizations of the next five biggest gold mining companies in the world combined," said Doyle.

Doyle explained that "Blanchard and Co. was founded on the belief that gold and other tangible assets are essential to proper portfolio diversification. However, because of the illegal manipulation of its price, we advised our clients to avoid gold like the plague until such time as the free market laws of supply and demand were allowed to dictate the price. We believe that the anti-trust lawsuit filed today will stop the illegal suppression of the price of gold and other hard assets, and return them to their roles as stores of value and financial insurance."

The suit was filed by the law firm of Jones, Verras & Freiberg LLC of New Orleans in the U.S. District Court for the Eastern District of Louisiana. It is document number 02-3721 Section C, Blanchard and Co. Inc. v. Barrick Gold Corp.; J.P. Morgan Chase & Co.; and ABC Companies.

A web site is being set up to provide ongoing information, www.savegold.com.

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By PAUL WALDIE AND WENDY STUECK
The Globe and Mail, Toronto
Thursday, December 19, 2002
Print Edition, Page B-1
http://www.theglobeandmail.com

TORONTO and VANCOUVER -- Barrick Gold Corp. and J.P. Morgan Chase & Co. illegally depressed the price of gold for years, a $2- billion (U.S.) lawsuit launched by a major U.S. gold retailer alleges.

Toronto-based Barrick and J.P. Morgan are accused of dumping gold onto the world market for years in order to protect hedge positions.

The lawsuit alleges Barrick developed the hedging strategy with New York-based J.P. Morgan to keep the price of gold down so that Barrick could acquire other mining companies.

Barrick's "Premium Gold Sales Program has earned over $1.7-billion for Barrick in the past five years alone, and has enabled the company to attain a dominant position in the market," alleges the lawsuit, which is seeking an injunction to terminate Barrick's hedging program. The suit, filed in a federal court in New Orleans, also alleges Barrick used off-balance-sheet accounting to hide the transactions.

Barrick dismissed the allegations as "ludicrous and totally without merit." The company said it has yet to review the complaint, but "the press release contains numerous factual inaccuracies and defamatory statements." The company added "it would vigorously defend the suit and pursue all its legal rights and remedies."

An official at J.P. Morgan declined comment.

The suit was filed by Blanchard and Co. Inc., a New Orleans-based company that specializes in rare coins and precious metals. Blanchard is the largest gold coin dealer in the United States.

The company was started in 1979 by James Ulysses Blanchard, a colourful gold bug who fought the U.S. government's longstanding ban on owning gold (the law was changed in 1974) and turned his hobby into a $100-million-a-year business. Mr. Blanchard, who died in 1999, sold the gold business in 1988.

In the lawsuit, Blanchard said Barrick's "sustained assault on the price of gold has pointedly reduced market interest in Blanchard's products and resulted in a significant loss of business." The company is seeking triple damages for its alleged losses.

Barrick is one of the world's largest gold producers and a major user of hedging programs to protect the price it gets for gold. The company accounts for between 15 and 20 percent of the 100 million ounces of gold in the global hedging market. In the third quarter of this year, Barrick used its hedging program to realize an average price of $342 an ounce, about $28 higher than the average spot price during the quarter.

However, with the price of gold rising, the company recently announced that it is cutting its hedging program by one-third to 12 million ounces by the end of next year. J.P. Morgan is a major player in gold hedge programs.

The lawsuit drew scorn from many gold watchers who said it is ridiculous, given that the price of gold is at a five-year high of $342 an ounce.

"It's pathetic," said Tim Wood, who edits a mining Web site called Mineweb.com. "If they wanted to make a case for it, why didn't they do it when gold was going to $250? Why do it on the day that it closes at its highest level in 2002?"

Mr. Wood said Barrick's hedging program is complicated and unique, but it is a legitimate business arrangement that has often helped support the gold price.

He added that Blanchard's real motivation may be the fact that it told clients last year to "avoid gold like the plague until such time as the free market laws of supply and demand were allowed to dictate the price."

"Their clients have missed out on the price rise, that's the real reason for this," Mr. Wood said.

"This is more of the same," added gold commentator Martin Murenbeeld of M. Murenbeeld & Associates Inc. in Victoria.

He noted that this is the second time a lawsuit has been launched in the United States alleging a price-fixing strategy.

Two years ago, the Gold Anti-Trust Action Committee, founded by William Murphy -- a former National Football League player turned futures trader -- filed a lawsuit alleging a group of Wall Street investment firms and the U.S. Federal Reserve Board conspired to keep gold prices down.

"Not surprisingly, [the case] was thrown out," Mr. Murenbeeld said.

He called the lawsuit a "highly speculative action.

"But it is causing no end of consternation to many people in the gold market, and it confuses many issues that could lead somebody to conclude that the gold market is rigged -- which it isn't," he said.

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Barrick dismisses anti-trust allegations
http://biz.yahoo.com/rm/021218/minerals_barrick_lawsuit_3.html

TORONTO, Dec 18 (Reuters) -- Blanchard and Co., a U.S. gold and coin dealer, said on Wednesday it had filed an anti-trust lawsuit against Canadian miner Barrick Gold Corp. and J.P. Morgan Chase & Co. for manipulating the gold price, but Barrick dismissed the claims as "ludicrous."

New Orleans-based Blanchard said in a statement distributed by Business Wire that its anti-trust suit accused Barrick, the world's second-largest gold producer, and U.S. financial services firm J.P Morgan Chase of making $2 billion in short-selling profits by suppressing the price at the expense of investors.

Privately held Blanchard said in the statement that it was seeking in legal papers filed to the U.S District Court for the Eastern District of Louisiana to end the trading agreements between Barrick and J.P. Morgan Chase, and other bullion banks. It is also seeking payment to Blanchard's clients for losses caused by the alleged price manipulation.

Toronto-based Barrick said the allegations were "totally without merit" and said it would vigorously defend itself and pursue all of its legal rights.

"Although Barrick has not had an opportunity to review the complaint in detail, the press release contains numerous factual inaccuracies and defamatory statements," a Barrick spokesman said, reading from a prepared statement.

Shares in Barrick, which is expected to produce 5.7 million ounces of gold in 2002, were down as much as 89 Canadian cents after Blanchard's statement, but rebounded to close down 20 Canadian cents at C$24.45 in Toronto.

Blanchard's statement said the lawsuit alleges that in the past five years Barrick and J.P. Morgan Chase injected millions of additional ounces of gold into the market, or several times more than the annual production of every gold mine in South Africa, the world's biggest gold producer.

"Since the end of 1987, when the collaboration between Barrick and J.P Morgan Chase began, the growth of global income and wealth would have lifted the gold price to approximately $740 (an ounce) if the price had been able to respond to the normal laws of supply and demand," Blanchard's chief executive, Donald Doyle, said in the statement.

"If gold had kept pace with inflation, the price today would be approximately $760."

Blanchard said its suit claimed that by using privately negotiated derivative contracts and concealing additional billions of dollars worth of physical gold with off balance sheet accounting, Barrick made it virtually impossible for gold analysts and investors to determine the size and the market impact of its trading position.

The lawsuit further alleges that J.P Morgan Chase financed Barrick's repeated short selling with advantageous terms not available to others, including deferred repayments and no margin calls, Blanchard said.

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Barrick Gold, J.P. Morgan Chase accused of manipulating gold market
Last Updated Wed, 18 Dec 2002 20:51:17

NEW ORLEANS, LA. - The largest retail dealer of gold coins and bullion in the United States filed an anti-trust lawsuit Wednesday against Barrick Gold and investment bank J.P. Morgan Chase, accusing the companies of conspiring to illegally manipulate the gold market.

Barrick is Canada's largest gold producer. The lawsuit was filed by Blanchard and Co. of New Orleans on behalf of its clients who bought gold bullion. A statement from Blanchard said its suit alleges that Barrick and J.P. Morgan injected millions of additional ounces of gold into the market so that the companies made $2-billion US in short-selling profits "by suppressing the price of gold at the expense of individual investors."

"Since the end of 1987, when the collaboration between Barrick and J.P. Morgan began, the growth of global income and wealth would have lifted the gold price to approximately $740 US if the price had been able to respond to the normal laws of supply and demand," Blanchard chief executive Donald Doyle said in a statement.

"If gold had kept pace with inflation, the price today would be approximately $760 US," Doyle said.

Gold was quoted at $342.70 US in afternoon trading Wednesday, up $4.70 US.

Blanchard is alleging that Barrick used private derivative contracts and engaged in off-balance sheet accounting to conceal the addition of billions of dollars worth of gold.

The Blanchard statement says Barrick's actions made it "virtually impossible for gold analysts and investors to determine the size and the market impact of its trading positions."

Blanchard says J.P. Morgan financed Barrick's alleged short selling with "remakably advantageous terms not available to others."

Blanchard is asking the Federal Court in New Orleans to terminate the alleged trading agreement between Barrick and J.P. Morgan.

None of the lawsuit's allegations have been proven in court.

Barrick dismisses lawsuit's allegations as 'ludicrous'

A statement from Barrick Gold called the lawsuit and its allegations "ludicrous and totally without merit" and hinted at legal action.

"Although Barrick has not had an opportunity to review the formal complaint in detail, the company said that the press release contains numerous factual inaccuracies and defamatory statements," Barrick said.

The Barrick statement said it would "vigorously defend the lawsuit and pursue all its legal rights and remedies."

Barrick Gold shares lost 20 cents to close at $24.45; J.P. Morgan shares fell $1.02 US to close at $24 US. Blanchard is a privately-held company.
Written by CBC News Online <http://cbc.ca/bios.html>staff

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Barrick Gold accused of manipulating metal prices
By Ottawa Business Journal Staff
Wed, Dec 18, 2002 4:00 PM EST

Canadian gold miner Barrick Gold Corp. and U.S. investment bank J.P. Morgan Chase are being sued for allegedly conspiring with each other to manipulate gold prices.

The plaintiff is New Orleans-based Blanchard and Co., the largest retail dealer in physical gold in the U.S.

Blanchard's anti-trust suit accuses Barrick and J.P. Morgan Chase of making $2 billion in short-selling profits by suppressing the price at the expense of investors.

The gold and coin dealer wants a court order to end trading agreements between Barrick and J.P Morgan Chase, and other bullion banks. It also wants restitution for clients allegedly victim of price manipulation.

"Since the end of 1987, when the collaboration between Barrick and J.P Morgan Chase began, the growth of global income and wealth would have lifted the gold price to approximately $740 (an ounce) if the price had been able to respond to the normal laws of supply and demand," Blanchard's chief executive, Donald Doyle, said in the statement.

"If gold had kept pace with inflation, the price today would be approximately $760."

The suit alleges that in the past five years Barrick and J.P Morgan Chase injected millions of additional ounces of gold into the market to manipulate prices and engaged in short selling practices not available to other market players.

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Latin America Press
Wednesday, December 18, 2002
CHILE

Mining companies on trial
Pascale Bonnefoy. Dec 18, 2002

Foreign mining companies are accused of increasing the copper supply to drive down prices.

A Santiago court has agreed to hear an unprecedented lawsuit filed by a dozen citizens against 11 foreign mining companies accused of causing "moral harm" and "damage to the patrimony" of Chile. The US$31.9 billion suit on behalf of the state was filed on July 11, the 30th anniversary of the nationalization of the copper industry in 1972 by then-President Salvador Allende (1970-73).

The plaintiffs - a group of professionals represented by economist José Alcayaga Olivares and lawyer Pedro Foncea Navarro - argue that private mining companies, particularly foreign-owned ones, have harmed Chileans by creating an oversupply of 2 million tons of copper on the world market since
1990. According to the suit, the oversupply caused a sharp drop in international prices - and in national copper revenues. In 1989, the price of copper stood at $1,231 a ton; by last year, it had fallen to $84.40.

Chile is home to 37 percent of the world's copper reserves and accounts for 35.4 percent of international production, putting it in first place. After the industry was nationalized, the government retained majority control over production through the National Copper Corporation (CODELCO). This continued under the dictatorship of Gen. Augusto Pinochet (1973-90), when copper represented about 25 percent of government revenue. At the end of the military regime, the government controlled 88 percent of the country's copper production. That figure has now dropped to 30 percent.

Under the current coalition government, the Concertación Democrática, copper represents only 1.8 percent of national revenues, even though production has increased. In 1989, Chile produced 1.6 million tons of fine copper, contributing $2.2 billion to the national coffers. Production in 2001 stood at 4.7 million tons, three times the 1989 rate, but it represented revenues of only $400 million for the government.

The lawsuit accepted by the 7th Civil Court of Santiago demands that the mining companies pay the state $15.9 billion in damages to "national patrimony." That represents "the amount that the Chilean government and people have failed to receive because of the imprudent and negligent manner in which the defendant companies have caused an oversupply of copper, which has resulted in a decrease in prices and the income that this mineral contributes to the nation," according to the suit.

"These companies have been negligent and irresponsible in allowing the price of copper to fall to such an extreme low. At worst, it was done with the
intention of exporting copper from Chile practically for free," Foncea said.The suit also seeks $16 billion in damages for "moral harm" to the country, arguing that the decrease in government revenue has reduced spending on social programs. The plaintiffs have been joined by groups of students, unions, teachers, unemployed Chileans, geologists and mining engineers who have been affected by the slump in the sector.

At the 1989 level, per-ton revenues from copper would be equivalent to 21.8 minimum retiree pensions; at last year's prices, the income from one ton of
copper would barely pay two-thirds of a pension, the plaintiffs say. They also claim that the companies have transferred their profits to subsidiaries outside Chile in order to declare losses in Chile and avoid paying taxes.

INTERNATIONAL OWNERS OF COMPANIES NAMED IN LAWSUIT
Source: Chilean Copper Commission

Such maneuvering, the plaintiffs say, violates tax laws and the Chilean Constitution. "Of the 47 foreign mining companies operating in Chile, only
three have made small profits. The rest show losses and, as a result, do not pay taxes. They transfer their profits by selling their production at
below-market prices to subsidiary companies in tax havens like the Bahamas and Bermuda," said Christian democrat Sen. Jorge Lavandero, who advocates
returning majority control of copper production to the government.

Despite the Chilean government's implied failure to oversee foreign mining interests, the lawsuit is not directed at the state. "The government will
have to assume its responsibility and CODELCO should eventually join the suit. This is a serious situation, and when the lid comes off, it's going to
be frightening," Foncea said.

According to the lawyer, the plaintiffs have documents proving that the companies transferred profits to evade taxes. "The proof is based on reports
from the companies themselves. They're absolutely undeniable," he said.

In an article in the bulletin El Tren Ciudadano, Lavandero attributed the situation to a policy of the coalition government - to which his party
belongs - of "favoring foreign investment in mining, limiting CODELCO's expansion and even privatizing parts of it ... and selling foreign companies more than 300,000 hectares of its mining concessions, without CODELCO having received a dollar for them."

Foncea says the successive Concertación Democrática governments have favored foreign companies. "When these companies start to operate in a country, they weave a spider web that catches political authorities, communications media and other groups," he said.

Since 1958, a portion of CODELCO's copper revenues has been earmarked for the armed forces. The minimum is currently set at $210 million, about 10
percent of this year's $2.3 billion military budget. If revenues from copper sales fall below this amount, the public treasury must make up the difference.

FROM MiningNews.net

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Barrick sees lower production in 2003
27 November 2002

BARRICK Gold has affirmed its 2002 production target of 5.7 million ounces at cash costs of about US$178, but said 2003 output would be slightly lower at similar cash costs.

Speaking at a conference in Toronto, Barrick president and chief executive Randall Oliphant attributed the expected production fall to the closure of five mines in North and South America, three of which were inherited from the Homestake Mining takeover last year.

Production has already been halted at four of the operations - Agua de la Falda and El Indio in Chile, Bousquet in Canada, and McLaughlin in California. The Ruby Hill mine near Eureka, Nevada is expected to cease production this quarter.

Barrick aims to replace the lost production with a development plan that foreshadows 2 million new ounces by 2006 from four new mines.

Oliphant also said a "sea of accounting changes" from regulators over the past 12 months was beginning to show on the company's income statement, but would not affect the performance of Barrick's mines. He did not say how much the changes would affect earnings.

The changes would affect exploration and development costs, for example, he said.

"This year we will expense exploration and development costs related to both our new discovery at Alto Chicama as well as Veladero," he said. "With the strong exploration program we're running, next year we expect to expense the same amount."

"So in accounting terms, along with every new discovery comes an initial 'earnings penalty', although that's a price we think our shareholders are happy to see us pay because it leads to greater reserves and production."

From January 1, new reclamation rules will likely push amortisation and interest-like expenses higher.

"We can't put a number on it now, as our accounting and environmental groups are still working on the issue, but as with depreciation, it will have an impact on earnings but will not have an impact on cash flow," he said.

"We won't be paying any more or less in reclamation costs, it simply represents a change in the accounting recognition of costs over time."

Oliphant also said Barrick, once one of the biggest hedgers in the business, was reducing its forward sales program to 12 million ounces by the end of 2003 from 18Moz at the end of 2002. This would be a reduction to 15% of reserves from 22%.

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