Berkshire Makes a Deal with Barrick Gold Corp.
Warren Buffet, business tycoon, investing mogul, and Chairman & CEO of conglomerate Berkshire Hathaway. Goes big on Barrick Gold Corporation in quarter two according to SEC filings. Now, that may not be too big an investment for Berkshire. But, for Barrick and the rest of the precious metal investing world, this is HUGE.
Mr. Buffet has always been strongly outspoken against precious metals investing in the last couple decades. He always state it as a waste of an investment due to it having no physical output. No regular cash flow, no dividends, and just sits there wasting space. To some extent I can understand it from his point-of-view. I guess when your company controls $700+ billion dollars in assets you wouldn't care for hunks of metal being stored for doing nothing for you in the moment. Until my net income is $4 billion dollars I will still be partaking in precious metals investing.
Barrick Gold Coporation got their turn in receiving a large investment within the junior mining sector. Who better for it to have been the Oracle of Omaha himself, Warren Buffet. Buffet is a trend setter and has large influence on the markets today.
Barrick's stock soared 12% the morning after news got out. Mr. Buffet is sure setting them up for long term trust among investors.
A Break Down.
20.1 Million Shares Bought.
1.18% Stake in Barrick Gold Corp. (NYSE: GOLD).
$564 million dollar value.
Below is an except written by Buffet less than a decade ago. Looks like he has no problem investing in the miners that produce the physical metals!
Excerpt from Warren Buffet via the Berkshire Hathaway Inc. Annual Letter, 2011 on investing in physical Gold.
"Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion. Call this cube pile A.
Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?
Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion. Buyers – whether jewelry and industrial users, frightened individuals, or speculators – must continually absorb this additional supply to merely maintain an equilibrium at present prices. A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons).
The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond. Admittedly, when people a century from now are fearful, it’s likely many will still rush to gold. I’m confident, however, that the $9.6 trillion current valuation of pile A will compound over the century at a rate far inferior to that achieved by pile B."