American Barrick Resources Case Study Essay
Case WriteupCase study 2: American Barrick Resources Corporation
FNCE 6909 – Corporate Risk Management
Due November 1, 2012
Presented By: Justin Merow on November 11, 2012
Executive Summary
The following case study reports on a highly successful gold mining company, American Barrick Resource Corporation. We discuss herein the many of the techniques being used in their hedging programs and the variation between such programs.
The company itself was founded by a gentleman named Peter Munk, who was a successful Canadian entrepreneur and had come to American Barrick with no prior experience in the gold-mining business. That being said, the company grew from an equity capitalization of $46 million to about $5 billion, its annual production grew from 34,000 ounces to 1.325 million ounces, and its proven and probable resources grew from 322,000 ounce to nearly 26 million ounces, all between the years of 1983 and 1992.
American Barrick was both fast and profitable, with its profitability coming from many sources, despite a decline in gold prices. The company acquired its gold mines for relatively low prices, and later found reserves in Goldstrike that enabled its scale of economies.
During this case, we determine how …show more content…
SDC was a type f forward sale of gold. The difference from the true forward sale is that there are multiple delivery dates, with the final one being 5 -10 years after the initiation of the contract. American Barrick’s initial SDC trading agreements called for ultimate delivery within 4-4 years, though as a result of its large reserve base and strong financial position, it was able to negotiate subsequent agreements giving the firm 10 years within which to make delivery. American Barrick saw spot-deferred contracts as a way to profit from increases in price of gold and also set a minimum price on its sales of
FNCE 6909 – Corporate Risk Management
Due November 1, 2012
Presented By: Justin Merow on November 11, 2012
Executive Summary
The following case study reports on a highly successful gold mining company, American Barrick Resource Corporation. We discuss herein the many of the techniques being used in their hedging programs and the variation between such programs.
The company itself was founded by a gentleman named Peter Munk, who was a successful Canadian entrepreneur and had come to American Barrick with no prior experience in the gold-mining business. That being said, the company grew from an equity capitalization of $46 million to about $5 billion, its annual production grew from 34,000 ounces to 1.325 million ounces, and its proven and probable resources grew from 322,000 ounce to nearly 26 million ounces, all between the years of 1983 and 1992.
American Barrick was both fast and profitable, with its profitability coming from many sources, despite a decline in gold prices. The company acquired its gold mines for relatively low prices, and later found reserves in Goldstrike that enabled its scale of economies.
During this case, we determine how …show more content…
SDC was a type f forward sale of gold. The difference from the true forward sale is that there are multiple delivery dates, with the final one being 5 -10 years after the initiation of the contract. American Barrick’s initial SDC trading agreements called for ultimate delivery within 4-4 years, though as a result of its large reserve base and strong financial position, it was able to negotiate subsequent agreements giving the firm 10 years within which to make delivery. American Barrick saw spot-deferred contracts as a way to profit from increases in price of gold and also set a minimum price on its sales of