If you don’t understand why the biggest gold miner in the world needs to hedge prices they you shouldn’t be writing finance. I think that the lower price range of the hedge speaks to how fast prices have shot up from the $500-600USD range (less than two years ago) to the $900-$1000USD (roughly since last summer), or up from ~$300 USD since 9/11. Or maybe that just speaks to how poorly the USD is doing compared to world currencies, give that Barrick is a Canadian company.

In fairness to Barrick, there is a certain logic to hedging what you produce: essentially guaranteeing yourself a specific profit over extraction cost. The problem is that when you use traded instruments, the full hedge is carried at its market price but you only accrue offsetting earnings as you deliver metal. So if the hedge becomes dramatically underwater – ie gold RISES – the negative value is immediately carried onto your balance sheet. Given enough time to produce the gold to match the hedge, you could unwind it, but in the meantime you trip all manner of covenants and risk the firm. You put it off and put it off, but at some point you need to bite the bullet and get rid of the hedge at any price.