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Aug 14, 2020

Buffett makes bet on Barrick in reversal of earlier stance on gold

Barrick soars on Berkshire bet

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Warren Buffett’s Berkshire Hathaway Inc. added Barrick Gold Corp. to its portfolio in the second quarter, sending shares of the the world’s second-largest miner of the metal surging.

Berkshire took a new position in Barrick, buying 20.9 million shares, or 1.2 per cent of the company’s outstanding stock, with a current market value of US$565 million, according to a regulatory filing on Friday. The filing shows moves made by Buffett or his two investing deputies, Todd Combs or Ted Weschler.

Large miners including Barrick and Newmont Corp. have been hoping to woo back generalist investors who fled the sector years ago. In the past, Buffett, the billionaire chairman of Berkshire, cautioned against investing in the metal because it’s not productive like a farm or company. Now, the gold producers are benefiting from surging bullion prices over the last year that are boosting profit margins as costs of production have steadied.

Paulson & Co., run by billionaire hedge-fund manager John Paulson, also added to its holdings in Barrick.

Barrick’s shares rose 7.4 per cent as of 5:32 p.m. in after-hours trading in New York.

The jump in gold prices has boosted investors’ willingness to pump billions into the industry, with precious-metals miners raising US$2.4 billion in secondary equity offerings during the second quarter. Gold has gotten a boost as Federal Reserve interest-rate cuts and a plunge in real government bond yields lifted demand for the metal, which doesn’t offer interest.

Filings released this month don’t include hedge funds’ current position, which may have changed since the end of the quarter. Money managers who oversee more than US$100 million in the U.S. must file a Form 13F within 45 days of each quarter’s end to list those stocks as well as options and convertible bonds. The filings don’t show non-U.S. securities, holdings that aren’t publicly traded, or cash.