TORONTO -- Barrick Gold Corp., the world's biggest gold producer, said Tuesday it plans to eliminate all of its gold hedges and raise $3 billion in a share offering to help pay for the move.

The Toronto-based company cited the bullish outlook for gold. Its announcement came on a day the price of the metal rose above $1,000 per ounce to its highest level since March 2008.

Gold hedges are futures contracts that commit a company to selling the metal at set prices. While hedges guarantee certain cash flows, they often commit a metals producer to ship the gold at prices lower than the current spot price. Barrick's decision to pay off its hedges amounts to a bet that gold prices will keep rising.

Barrick said it believes holding the hedges hurt its appeal among investors and weighed on its share price.

The company said it will take a $5.6 billion charge to its earnings in the third quarter as a result of a change in the accounting treatment for the contracts.

To raise money for the hedges' payoff, Barrick will issue about 81.2 million shares at $36.95 per share. It will use $1.9 billion to eliminate all of its fixed-priced gold contracts within the next 12 months and another $1 billion to eliminate a portion of its floating spot price gold contracts.

"The gold hedge book has been a particular concern among our shareholders and the broader market which we believe has obscured the many positive developments within the company," said Aaron Regent, the company's president and chief executive officer.

"With the industry's largest production and reserves, Barrick provides exceptional leverage to the gold price, which we expect will be further enhanced as we build our new generation of low-cost mines," he added.

Originally published by ROB GILLIES Associated Press.

(c) 2009 Tulsa World. Provided by ProQuest LLC. All rights Reserved.

A service of YellowBrix, Inc.