Newmont Mining (NYSE) recently took advantage of low gold prices to buy 375,000 oz. of gold on the forward market. The new reserve will be used to pay off the balance of a one million oz. gold loan scheduled to mature in 1993.
At the end of 1991, 500,000 oz. of the loan remained outstanding. Newmont is repaying the balance at a rate of 62,500 oz. per quarter. Because the loan was monetized in 1988 at US$449 per oz. and gold is now trading at less than US$340 per oz., Newmont expects to realize a gain of US$40 million through the repayment.
Analysts view the company’s US$126-million buying spree as a signal that the company is bullish on gold.
Newmont says it will also make US$10 million in the second quarter when it settles a gold-dollar swap on 127,600 oz.
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