From Kitco's Forum about ABX
Date: Sun Feb 06 2000 10:33 Shadowfax (barrick gold.....borrowed from Gold Eagle Gold Forum) ID#297324: Copyright © 1999 Shadowfax/Kitco Inc. All rights reserved THE FRAUD OF THE CENTURY ( KeyserSoze ) Feb 06, 09:30
Last week Barrick Gold ( ABX ) announced its earnings report for 1999. Barrick's net income was a record $331 million, or 83 cents a share, compared with $301 million, or 79 cents, in 1998.
To the innocent but naïve reader this is seemingly good profits amidst an industry pockmarked by 'red' financial statements due to the pernicious decline in the price of gold. But let's take a jaundiced look at those "earnings."
Conventional thinking holds that a company enjoying good earnings will be reflected in its stock price. WRONG! It is common knowledge that most of Barrick's so-called profits are primarily due to its hedging program. One thing is that the company per se ( i.e. Barrick ) enjoys record "earnings" of $0.83 per share, another is what the Barrick investor has suffered due to its "management's" reckless modus operandi. Specifically, while Barrick's Income Statement demonstrates "earnings" of $0.83/share, its shareholders took a couple of rounds in the shorts in 1999.
Below is a chart of Barrick Gold ( ABX ) showing its price trend during the year of its "Record Earnings." In January 1999 ABX was about $22.50/share, but slid to only $17.50 by December. That's a horrific loss of $5.00/share suffered by the hapless shareholders of ABX. This is pathetically sad. And paradoxically, it is ironic. While the company per se "enjoys" record "earnings" of $0.83/share, ABX's sad shareholders lose 22% of their total investment ( $5.00/share ) . All this while the shareholders in NASDAQ companies revel in stock appreciation amounting on-balance to 86% in 1999. Frankly, I would rather have a poke in the eye with a sharp stick than to be a shareholder of ABX.
This tragic scenario is particularly excruciating since many knowledgeable markt analysts believe most of Barrick's supposed "profits" emanate from its HEDGING PROGRAM. Consequently, what leaps to mind of any objective observer is WHY THE HELL DOES BARRICK HEDGE SO AGGRESSIVELY, if it contributes to the decline of the price of gold? The answer it painfully simple. In most companies, Top-Management's Incentive programs are based upon PROFITS. The more the net earnings, the more Incentive compensation to paid out to Top-management…and the Shareholders Be DAMNED!
Let's sum this up. While Barrick Gold, the company per se, "earned" record net income of $331 million in 1999, its hapless stockholders LOST $2 BILLION IN SHAREHOLDER VALUE. The investment loss suffered by ABX stockholders was nearly SIX TIMES the company's "earnings!" OUTRAGEOUS! Were I stockholder, I would seek the aid of some of those tenaciously predatory New York lawyers to organize a Class-Action Lawsuit against Barrick's Top-Management for reckless incompetence and malfeasance…among other improprieties. |