"To my knowledge, it is the largest derivatives loss in history."

Barrick Gold, which is scheduled to become the largest gold mining company in the world by virtue of its merger with Placer Dome. On December 30, that merger was not consummated, so the figures I will discuss apply to Barrick without Placer, although also being a hedger, the addition of Placer to Barrick will only increase the numbers I quote.

Barrick Gold is the largest gold hedger in the world, holding a short hedge position of almost 13 million ounces. In the last quarter alone, because the price of gold increased by roughly $43, Barrick should record a mark-to-market loss of $560 million on its gold short hedge. The loss for the year and half-year comes to a cool billion dollars. This should increase the total outstanding loss on Barrick hedge book to just shy of $3 billion. With Placer added in, the loss has to be greater than $4 billion.

The almost $3 billion open gold loss on Barrick?s books is greater than their cumulative total profits for the entire existence of the company. To my knowledge, it is the largest derivatives loss in history. I ask you to think about that for a moment. The world was atwitter with the recent $200 million copper loss by China, as well as the $500 million oil loss and bankruptcy by China Aviation Fuel (Singapore) last year. Barrick is set to report a $560 million gold hedge loss for the quarter, $1 billion for six months and almost $3 billion in total, and the financial world looks the other way.

According to Yahoo, of the 20 analysts covering Barrick, 18 rate it as a hold, buy or strong buy and 2 as a sell (there were no strong sale ratings). This, for a company that is holding the largest open trading loss in history. Why is that?

Why indeed is that...

--WP