Take Home Exam Semiological, Semiotic Or Structural Approaches Essay Sample For College


1- Semiological, semiotic or structural approaches to systems of signification are rooted in linguistic theory. Explain how the analysis of language can help us deconstruct meaning as it inscribes itself in different types of narratives whether verbal or non-verbal.

All human beings create action sequences. They go to school; they drive a car; they read books; they go to movies, sing, play sports and so on. These action sequences have symbolic value, recognized as forms of doing. Sequences of action are made up of singular acts but as they are deemed continuous, they form a spectrum or range.

Although there are differences in approaches to signs, a sign is denotative and specific. It points to something, as smoke may indicate a fire. A reddened face may indicate that the owner is embarrassed or weary from body exertion. The interpretation is usually framed in context.

Signification is indistinguishably attached to human nature. Our expressions of fear, misery, anger, joy, and other feelings are without thought, the same in connotation and denotation. Emotionally, nonverbal communication binds humankind together.

From the facial expressions, gestures and posture to the appearance, body, shape, clothing, and behavior, nonverbal communication can send scores of messages all at once.  The potential of human communication is realized only when body messages and spoken messages work together synchronously and harmoniously. Dysfunction and confusion result when the spoken word is contradicted by body messages.

Signification also tells us that sequences of acts are usually planned in inner conversations with the self. When performed often, they become routine, requiring little pre-thinking.  But of course, human action may operate below the perceptual or sensory threshold.

2- Language is a system of distinct signs which correspond to distinct ideas (Saussure 1966:16). Please explain the nature of signs according to Saussure’s theory of language

Most studies of language take a diachronic approach that emphasised, for instance, a “cause/effect” or sequential view of meaning and communication. Saussure used a synchronic method of study that looked at simultaneous relationships. One result of the synchronic method was Saussure’s insistence on the double nature of language and linguistic elements.

Saussure insisted on the systematic nature of language; “Language is a structure, a functioning whole in which the different parts are determined by one another.” The combined elements of parole and langue form language. Language states Saussure, manifests itself as speech (parole), the actual performance of speakers when they speak or write, also language (langue), which represents the knowledge or competence that all speakers possess of their language.

Speech says Saussure, “has both an individual and social side … always implies both establish system and evolution.” All changes in language occur in parole, in the actual speech act. But only some of these changes become institutionalised in langue. Saussure states that langue, should not be confused with human speech, it is a system or structure of speech codes. He argued that linguistic elements are relational, that it is viewpoint that creates the object of linguistic study. Because so much depends on viewpoint, the nature of the linguistic sign is necessarily arbitrary.

Saussure followed that if we are able to recognise things through mental representations, then the brain also has to recognise words we hear via mental representations, in conjunction with distinguishing what the words mean via representations. From this, Saussure goes on to make the sign the unity of sound-image and concept. Thus like Aristotle he seems to think that there are mental facts (concepts). He does not believe however of the sound as a sign of those concepts, rather that the sound that travels due to the physical disturbance in the air (is associated with a mental representation of the sound) the sound-image.

Another distinct difference between philosophers is when Saussure also states that, “There are no pre-existing ideas, and nothing is distinct before the appearance of language.” This varies from Aristotle’s theory, who considers that individuals have pre-linguistic thoughts that are then coded into language.

3- Baudillard states: “… the entire system is founded on the concept of functionality. Colors, forms, materials, design, space – all are functional. Every object claims to be “functional”… the term evokes all the virtues of modernity, yet it is perfectly ambiguous. With its reference to function it suggests that the object fulfils itself in the relationship to the real world and human needs. But as our analysis has shown, “functional” in no way qualifies what is adapted to a goal, merely what is adapted to an order or system: functionality is the ability to become integrated into an overall scheme” (Baudillard 1996:63). Explain in your own words how Baudillard approaches the analysis of objects as gaining their “functionality” within a “universal system of signs.”

Signs. They’re everywhere. Though this statement is in no way enlightening, it is nonetheless very true. Within our culture, we are so completely surrounded by signs of all types that they become nearly invisible unless they are looked for. Though this likely seems true to you upon some reflection, it is just as likely that you have only considered “signs” in the most basic literal sense, that is, signs such as those that offer directions to the nearest parking lot or those denoting street names. However, semiologists consider signs in a much more broad manner. To semiologists, signs include both verbal and non-verbal communications, as well as objects or phenomenon taken as signs by their viewer. In fact, road signs and their ilk make up only a very small part of what semiologists study. Other signs, non-verbal communications for instance, tend to make for more interesting subjects of study as they are much more dynamic in both their use and perception.

Indeed, every person lives in a world of social encounters, involving him either in face-to-face or mediated contact with other participants. Functionality is not an exemption from the netting realm of meaning-making from the universal system of signs. Creating meaning in conversation is a mutual responsibility. Both sender and receiver are capable of doing so, and should exercise equal responsibility in such “overall scheme” as Baudillard puts it.

4- Basing yourself on first levi-strauss’s and then Barthes’s analyses, describe how myths function as types of narratives that carry a message.

In Levi-strauss’s and Barthes’s analyses, we have seen the importance of myth in giving meaning and understanding to life. In the Beginnings of the Western Mind we read about the importance of myth in the consciousness of the oral societies of pre-classical Greece; in Where the Bluebird Sings to the Lemonade Springs we read about the myth of the “West” in the U.S. and its influence on the thought of many Americans; In Things Fall Apart we see the power if myth and the consequences of the break down of those myths and stories upon which a culture is structured on. I wish to discuss the importance of telling myths and stories in influencing the quality of our culture. Often, Americans look back on older cultures and try to understand them in terms of their myths and stories but, I fear, we do not question our own myths and stories.

Certainly, Levi-strauss and Barthes are correct in saying that a myth is a story with a meaning, but to understand the meaning you cannot take everything the author says literally. If you do you see some miracles and things that sound completely out of the ordinary and fiction. But if you try to see past the seemingly fiction accounts you can see the real meaning to the story.

Throughout the history of human civilization, myths have been an integral part of human society. Myths have no cultural boundaries as they can be found in all cultural societies. The word myth can be referred to the classical Greek and Roman mythology or a contemporary myth. Yet regardless of the type of myth, they are stories used to give meaning to a phenomenon or symbolic manner to the natural cycles that surround humankind. Myths, as Levi-strauss and Barthes put it, are used to explain and understand our existence in our world whether it is something that we can tangibly see or not. Being such an influential message carrier, the saga of a myth is past down from one generation to the next. The reason myths are studied in today’s culture are because the stories are about the human condition, not about time or place. It is this versatility of myths that makes them such an integral part of a people’s culture that relies heavily on language in passing on culture-bound messages across generations.


Littlejohn, Stephen W. (2001). “Theories of Signs and Language.” Theories of Human Communication. Wadsworth Publishing.

Osgood, Charles E., W. H. May and M. S. Miron. (1975). Cross-Cultural Universals of Affective Meaning. Urbana: University of Illinois Press.

Medicalization By The Pharmaceutical Companies

Question one

            The society of today has become one where most problems are treated medically.  The people gaining from this are mostly the pharmaceutical companies.  Some of the doctors’ duties are slowly being replaced by the advertisements on the Internet on how one can know his/her medical condition.  The major reason to this is Medicalization by the pharmaceutical companies.


            Medicalization is the changing of human problems in the society to an illness or a disorder.  There are so many problems in the society that people experience.  Doctors have come to change almost all consistent problems into medical illnesses or disorders.  An example is the Medicalization of sex, where homosexuality is considered a disorder (Wikholm, 1999).  Most abnormal issues in the society are medicalized and treated using medical interventions.  Another definition indicates that Medicalization is the assertion process by doctors over what was previously overseen by morality guardians (Wikholm, 1999).  Other authors also define it as the transformation of human conditions into treatable disorders (Conrad, 2007).

Consumers Contribution to Medicalization

            Not only the doctors cause Medicalization but a conducive environment supports it too.  The consumers in this case are the patients, and the advocacy companies or groups.  It has been shown that consumers want to have power over their medical care.  Consumers choose the health care plans, select health care institutions, and buy health care products and services from the market (Conrad, 2007).

            It is also noted that hospitals compete for patients (Conrad, 2005).  When health care has been transformed into a commodity to this extent, it means the health care institutions will strive to provide solutions even to the slightest problems in the society to get more patients.  This leads to Medicalization.  Not many people would strive to look for a solution when some body somewhere in the health care institution already has the solution.  Consumers believe the solutions in the health care centers are it.  Based on the fact that consumers too strive to take control of their health and have a lot of information about their health, they increase Medicalization (Conrad, 2005).

            There are examples which explain how consumers contribute to Medicalization.  These are as explained by Conrad.  Just as noted before, Medicalization is the transformation of a non-medical problem into a medical problem.  Considering the consumers for example. The reason why they contribute much to Medicalization is the belief they have in the medical intervention procedures used to correct the problems.  The body of a human being is not a problem, but considering factors such as beauty part of the body becomes a problem (Conrad, 2005).

            An example is the breast.  Some women view large breasts as a problem and so would like to reduce them.  Others view small ones as a problem.  The doctors or the physicians for that matter, found out the problem and developed a medical intervention for it.  These consumers (women for that matter) create so much demand for medicalized solutions.  Medical interventions that have since been created to solve breast size problems are such as liposuction and breast augmentation among others (Conrad, 2005).  This is an example of cosmetic surgery, which is an example of how consumers influence Medicalization.

            Other cosmetic surgery examples are such as nose jobs and tummy tack procedures.  The body has been turned into a medical problem.  The body can be a medical problem, but just in the case of an illness.  When the body develops some parts as big, it does not recognize those as a problem yet the medical profession capitalizes on this and makes money out of it.  Conrad notes that breast augmentation costs $ 3, 000 (2005).

            There are other ways in which consumers contribute to Medicalization and not through cosmetic surgery alone.  These are through adult ADHD, hGH therapy and response to pharmaceutical advertisements.  Inability to tolerate benign problems and mild symptoms has lead to frequent visits to physicians to ask for solutions.  Adult ADHD is one of those inabilities.  Due to the information that consumers get from the Internet and book sources, they become more aware of the medicalized situations and seek advice from physicians.  Some of them even ask for specific treatment since they already read it some where (Conrad, 2005).  This creates a large market for medicalized treatments of very mild symptoms and benign problems.

            Pharmaceutical industries play apart in this case by making advertisement to different treatment methods for conditions that are non medical.  The quest for taking control over the people’s health has lead to more Medicalization since consumer groups are formed to fight for the health of the consumers.  These groups for example the National Alliance for the Mentally Ill, CHAAD and the Human Growth Foundation, support medical treatments for human problems.    If medical treatments to human problems are medicalized, then with the many problems in human life, everything will be medicalized with time (Conrad, 2005).

            Conrad indicates that the consumer advocates are always funded by the pharmaceutical industries.  This therefore influences the society’s response to research done by the pharmaceutical industry as the consumer groups will always support them.  More people will believe in the research and more Medicalization will be experienced.  This should not be the case as these corporations are funded by the consumers too and should care about their health and not supporting a pharmaceutical industry without proper research about the effects of medicalizing all small problems.  An example of a very small problem that has been medicalized is the treatment of unhappiness by use of antidepressants (Conrad, 2005).

Examples of Medicalization Driven by Pharmaceutical Companies

            Pharmaceutical companies cause Medicalization if more profit can be gained from such conditions to be medicalized.  More problems of healthy people are being referred to as illnesses due to the need for money by the pharmaceutical companies (Moynihan et al, 2002). Pharmaceutical companies through the consumer groups and many other corporations undermine the coping ability of people by advertising or creating awareness about benign problems.    Pharmaceutical companies cause Medicalization by making advertisement for example about erectile dysfunction in men and trying to offer solutions to it.  Since this is a sensitive issue to men, the men look for those drugs or medical treatments to solve the problem.  The advertisers know very well that the men are not able to tolerate this problem for long an it reduces there confidence.

            The second strategy used to increase Medicalization is the creation of awareness about a disorder before the treatment is released into the market.  This creates a market for an already developed, yet not released treatment, for another benign problem (Moynihan et al, 2002).  Examples of Medicalization driven by pharmaceutical companies are such as Medicalization of menopause, Medicalization of female sexual dysfunction and of obesity.  Distribution of information of such human problems on the interment so that people study and believe they have the problem is the advertisement strategy.  The pharmaceutical companies just do all types of marketing to get money.

            Personally Observed Medicalization:  Medicalization of learning disabilities in children and Medicalization of homosexuality.

How to Teach a Beginning Social Work Student

            For a student to be aware of Medicalization, a framework of determining if the presented symptoms in a person are really a disease or not should be used.  The student should be made aware of the pharmaceutical industries’ aim to sell more and get more money and so will be involved in medicalizing most of the human conditions.  The important part is the introduction to the basic knowledge about Medicalization and the conditions mostly treated as medical yet not.

Question three

Evidence Based Approach

            This is an approach meant to assist in decision making.  It gives a direction through which a practitioner should take in linking application issues, ethics and evidentiary issues.  Evidence Based Practice components are mostly designed to reduce bias as decisions should be fair.  They are meant to promote integration of practice and research which is done by researchers, practitioners, educators and administrators (Gambrill, 2006).

            The description of an EBP by its originators is that it is a practice and educational paradigm meant to reduce the gaps between research and practice with the aim of maximizing opportunities and reducing harm.  According to the originators, professionals need information from which they have a base of making a decision, sure of the effects.  This helps them make decisions appropriate for clients depending on what clients value (Gambrill, 2006).  This is the importance of Evidence Based Practice paradigm.  It is an approach of combining ethical , application and evidentiary issues in decision making to come out with an effective or successful result in any professional practice (Gambrill, 2006).

            This kind of decision making is contrary to the authoritative way of decision making which involves decision making based on the traditions of the organization or other criteria such as anecdotal experience and consensus.  The originators of EBP consider it an evolving process that improves professional judgment on clients based on information about the characteristics, preferences and circumstances of clients (Gambrill, 2006).  Due to the aim of this format (EBP), it has its components designed to reduce bias.  A good decision is that which is not bias for if it is  then the mission may not be accomplished (Gambrill, 2006).

            Evidence Based Practice encourages honesty or rather transparency so that any finding in a research is shared even if it is termed nothing.  Other views of Evidence Based Practice indicate that decisions should be made using practice related research as well as the practice guidelines.  It is similar to Gambrill’s definition where the practice guidelines are included, but in the later,  “the decision should be made based on a practice related research considering the ethical, application and evidentiary issues” is not included (Gambrill, 2006).

Choices to be Made in Adopting an EBP Approach

            There are several choices that need to be made in order for an Evidence Based Practice to be adopted.  These are; practice and policy research questions and the basis on which they are formulated considering who should formulate them, the expected out comes considering the basis of selection and the person responsible for the selection, the types of evidence to be used for service selection and how to determine their effectiveness, the style of EBP to be used, choices on how the clients should be involved, decisions at the coal face and whoever is to make the decisions, the transparency of the EBP and many others (Gambrill, 2006).

a.) Practice and Policy Research Questions

            Since Evidence Based Practice was a replacement to the authoritarian practices, adopting an Evidence Based Practice has to consider how authoritarian practices can be eliminated.  In order to adopt an Evidence Based Practice approach, research question which will be used in the study have to be considered.  Whoever is to make these decisions is as well of concern.  According to the originators,  information gathering is obtained from the line of staff and clients.  From this characteristic, whoever is to select the questions is determined (Gambrill, 2006).  Gambrill notes that it is the clients and the line staff that know the questions that arise in daily practice (2006).

b.) The Basis of Outcome Selection and Who to Select Them

            This is another important factor to consider when adopting an EBP approach.  When conducting a study, researchers always focus on the expected result of the study as already, there are assumptions.  In this case, when adopting the EBP approach, it is important too to focus on the outcomes which are regarded as the indicators of success.  The person  to select the outcomes is also important in this case and whoever to involve as well (Gambrill, 2006).

            An example is when the approach is meant to find a certain treatment to a disorder, then the outcome can be, that 99% of the children got well.  This is a positive outcome and should be the target of the being formulated approach.  It could also be just aimed at reducing the disease prevalence in young children.  The expected outcome would be a reduction in the number of children with the disease (any disease depending on the situation that calls for a decision).

Obstacles to the Integration of EBP

            a.) One of the obstacles to integration of EBP is the choice of many to still use authority based practices and policies.  Most people would not want to be transparent, to be asked questions which will seem like a challenge to them and would prefer a time tested array of strategies.  It is for this reason that this EBP approach is being avoided.  The EBP approach is transparent, not authoritative, involves clients and staff, encourages questions on its effectiveness and therefore is a very big challenge to the authoritative practice.  This is the reason why in EBP, the person to select the research questions and to select the outcomes is important (Gambrill, 2006).

            b.) Self Deception:  This is another barrier to implementation of EBP approach.  This refers to the belief that the service being provided is effective.  It affects the clients, the practitioners and the researchers.  These people due to the belief that an approach is effective, may not know if the quality of services are poor since there is a literature to support the effectiveness, therefore cannot be questioned.  It is therefore not easy to implement this EBP approach.

Hypothetical Scenarios (Role selected is Nursing)

            Based on the requirements of EBP approach according to Gambrill, the research questions should have an outcome, should involve the nurse and the patient, and the expected intervention that can produce an effective outcome.  The following are hypothetical scenarios that show example of Evidence Based Practice.

            Scenario One:  A 55 year old male is brought to the hospital.  His medical history indicates 35 years of chronic smoking.  Would nicotine replacement therapy be better than Bupropion administration to result in long term abstinence from smoking?

            Scenario two:  An old man of 85 years was brought to the emergency room vomiting dark brown colored fluid.  He was suspected to have Parkinson’s disease and other complications.  Considering his age, the severity of the disease and the complications he has, what nursing care and treatment would be appropriate for effective care and treatment?  What effective method of treatment and care should be given in this complicated case?

            Scenario three: A nine year old girl was brought to the emergency room with diffuse abdominal pain and loss of appetite.  She is suspected to be suffering from Appendicitis.  What imaging modality would be appropriate to detect this between Ultrasound and CT for her to be given effective treatment?

            Considering all these questions, there is a patient (client),  what disorder and what intervention to be taken in order to come out with an answer which is the expected outcome.  An example of one outcome is the result of the suspected disease, like in the case of the nine year old girl: Appendicitis.  The aim is to determine if the case is appendicitis and use an appropriate intervention.


Conrad, P. (2005). Shifting Engines of Medicalization. Journal of Health and Social Behavior. 46, 3-14.

Conrad, P. (2007).  The Medicalization of Society: On the Transformation of Human Conditions          Into Treatable Disorders. Baltimore: JHU Press.

Evidence Based Practice. Retrieved on 20th October, 2008 from:


Gambrill, E. (2006). Evidence-Based Practice and Policy: Choices Ahead. University of            Carlifonia: Berkeley.

Moynihan, R., Heath, I. and Henry, D. (2002). Selling Sickness:  The Pharmaceutical Industry and Disease Mongering. 324, 886.

Wikholm, A. (1999). Medicalization. Retrieved on 20th October, 2008 from:


Barrick Case Writeup

In this case study, we explore the strategies employed by American Barrick Resource Corporation, a prosperous gold mining company. The discussion revolves around the diverse hedging programs implemented by the company and the differences observed among these programs. Interestingly, American Barrick was established by Peter Munk, a Canadian entrepreneur who lacked prior involvement in the gold mining industry.

During the years of 1983 and 1992, American Barrick witnessed remarkable growth. Its equity capitalization soared from $46 million to approximately $5 billion, while its annual production skyrocketed from 34,000 ounces to 1.325 million ounces. Moreover, its proven and probable resources surged from 322,000 ounces to almost 26 million ounces. Despite a decline in gold prices, American Barrick remained both fast and profitable. The company achieved profitability through various means, including acquiring gold mines at reasonable prices and discovering reserves in Goldstrike that facilitated economies of scale.

This case examines American Barrick’s approach to managing unexpected production from the Meikle Mine, the evolution of its hedging programs, the financial instruments involved, and the impact of these programs on the company’s outstanding performance. Gold-mining companies, as producers of commodity products, incurred minimal marketing and distribution expenses. The market readily accepted their product at market price after extraction and refining.

The profits of gold producers were determined by the quantity of their production and the difference between the prices at which they sold their output and their costs. Gold producers operated in four main phases: exploration, acquisition, digging, and ore processing. In the exploration phase, gold producers gained a competitive advantage based on the physical features of the ores they found. This advantage could be achieved by finding mines with gold closer to the surface, mines with richer ores, or mines with ores that were easier to recover. If their exploration techniques allowed them to estimate gold quantities before excavation, they had an even greater advantage.

In the acquisition phase, gold mines required significant investments in infrastructure for digging and processing ore. These fixed or sunk costs were necessary due to the geology and economics of gold mining. A gold producer gained a competitive advantage based on the number of ores it owned. Owning more ores increased the likelihood of obtaining one of these natural advantages mentioned earlier.

The mine process is a common practice in the industry, where a large amount of ore must be mined and processed to extract small quantities of gold. American Barrick’s Goldstrike Mine serves as an example, with approximately .127 ounces of gold found per ton of ore. This means that around 16,000 pounds of rock need to undergo mining and processing to obtain one ounce of gold, which can be sold for $300-400. The mining procedure includes crushing, heating, sorting based on density, chemical treatment, and refining to remove impurities.

Using advanced technology in gold mining tools can give a competitive edge. For instance, having a tool that can extract gold more efficiently would be advantageous compared to conventional tools. Furthermore, marketing and distribution costs are not incurred by gold-mining companies since their product is considered a commodity. Once the gold is extracted and refined, there is always a market where it can be sold at prevailing prices. The profitability of a gold mine relies on production quantity and the margin between selling price and expenses.

To gain a competitive advantage, gold producers should focus on the cost of gold production, which is influenced by the quality of the gold deposit and operational efficiency. It’s important to consider input costs and ore features when selling gold to maximize profits, as the selling price is beyond their control. Throughout its history, Barrick has employed various strategies such as gold financings, forward sales, options strategies, and spot deferred contracts under its risk management program known as American Barrick’s hedging program. These measures allowed Barrick to reduce exposure to price fluctuations while remaining flexible to benefit from increasing gold prices. Hedging against gold price risk is crucial for gold producers due to high production costs and frequent price fluctuations. Looking ahead, one-third of mines are projected to be unprofitable at current prices.

Interest, currency, and commodity derivatives were used as alternatives to effectively manage the risk of inflation. However, the practice of discounting inflation was introduced in 1984 through the selling of gold forward, and the discovery of approximately 18 million unexpected ounces of gold reserves at Goldstrike further accelerated hedging activities. This event set a standard for risk management at American Barrick, ensuring protection against price declines for all production up to 3 years and 20-25% protection for the subsequent decade.

The financial team was looking for ways to make money during the fluctuations in rice prices in early 1991. They sold about 1 year’s worth of production in one hour. According to American Barrick’s first annual report, their corporate strategy was to acquire or develop various gold-producing interests only in North America. Another aspect of American Barrick’s strategy was to maintain conservative financial policies, such as issuing minimal debt and mitigating the firm’s gold price risk.

Munk’s objective was not to remove risk entirely (because of the potential benefits), but instead to control it, thus positioning American Barrick as a cost-effective commodity producer that prioritized avoiding future losses over maximizing profits. The board of American Barrick established a risk management guideline with Goldstrike: the company would have complete protection against price declines for production up to three years in the future, and 20-25% protection for the next ten years.

Specific details of the methods and implementation were delegated to the financial team, who submitted regular reports to the firm’s board of directors. We now focus on analyzing the strategies of American Barrick to gain a deeper insight into the advantages of each strategy and the effectiveness of the risk management program at the corporation:

  • Gold financings:
  • In 1983, American Barrick financed the purchase of the Renabie Gold Mine in Ontario, Canada, by issuing common shares. However, an extra $18 million was still needed for capital expenditures to develop the mine.

In 1984, to finance its expansion, American Barrick raised $17 million through the Barrick-Cullaton Gold Trust. Under this trust, investors received 3 percent of the gold mine’s output when the price of gold was $399/ounce or lower, and 10 percent when the price was $1,000/ounce. Investors benefited from both the higher volume and price of gold. American Barrick’s subsequent acquisitions were funded through bullion loans and gold indexed Eurobond offerings.

The Mercur Mine received funding through a loan from Toronto Dominion Bank. In return, they received 77,000 tons of gold, and American Barrick would make installment payments to repay the loan. An advantageous aspect of this arrangement was that the loan was backed by the mine itself, which had a value of over $50 million. Additionally, American Barrick secured funds for the Goldstrike Mine through a bullion loan totaling 1,050,000 ounces, which was the largest gold loan in the world at that time. Moreover, the corporation raised funds by offering $50 million worth of 2% gold indexed notes to Eurobond investors in 1987.

Investors purchased notes at a price of $1,308 and received annual interest payments of $26.16. In a forward sale of gold, a party agrees to deliver a set amount of gold on a specific date for a pre-determined price. No money is exchanged until the contract ends. In many markets, the seller of the forward contract receives a premium (contango) that is higher than the current gold price. Contango is determined by the difference between the interest rate for lending dollars and the interest rate for lending gold.

In 1984 and 1985, gold prices experienced a significant decline, prompting American Barrick to engage in their first explicit forward sales of gold. This was necessary as the declining prices brought the company’s profitability to levels equal to their estimated break-even point, posing a threat to their financial stability. In order to protect themselves, American Barrick sold approximately 20,000 ounces of gold in 1984. However, this strategy was not entirely advantageous, as it meant forfeiting the opportunity to sell at higher market prices, which were more appealing to potential investors or buyers.

Starting in 1987, American Barrick began exploring option-based insurance strategies as a means to mitigate the risk of price declines while still retaining some of the benefits associated with rising prices. They employed a collar strategy, which involved purchasing put options while simultaneously selling call options on gold. By using the premiums obtained from the sale of calls to purchase puts, the collar strategy did not require an initial cash outlay. This aspect made the strategy more acceptable to the firm’s board of directors.

Spot-deferred contracts (SDCs) became a key strategy for the firm in 1990, replacing new options positions. SDCs are a type of forward sale of gold that differ from true forward sales in that they have multiple delivery dates, with the final one occurring 5-10 years after the contract is initiated. Initially, American Barrick’s SDC trading agreements required delivery within 4-4 years, but due to its substantial reserve base and strong financial position, the company was able to negotiate subsequent agreements allowing for a 10-year delivery timeline.

American Barrick utilized spot-deferred contracts to capitalize on rising gold prices and establish a minimum selling price for its gold. Firms were closely monitored for their management of price exposure, with differentiation based on these strategies. Certain major producers opted not to engage in risk management activities, arguing that hedging diminishes shareholder value, thereby enabling shareholders to fully leverage increases in gold prices.

American Barrick recognized the importance of managing gold price risk as a fundamental aspect of their business, forming one of their four primary objectives. Different gold mining companies in North America exhibited a range of risk management policies and practices. Over its ten-year history, American Barrick’s hedging program adapted and employed various tools, including gold financing, forward sales, options strategies, and spot deferred contracts. By implementing these measures, American Barrick mitigated some gold price risk while retaining flexibility to capitalize on increasing prices. This diligent focus on money and company value distinguished American Barrick from similar firms in the industry, propelling them to the forefront of the gold mining sector. Their approach involved exploring different methods, evaluating their efficacy, and adopting alternatives that promised greater value. Notably, they prioritized investor interests in their funding approaches, earning my genuine admiration for the corporation.

The success of American Barrick was not due to luck, but rather to its commitment to risk management and thorough research on derivative transactions. American Barrick’s major positions were established with Goldstrike during a period of high gold prices. This suggests that their hedging practices would have continued to generate extra revenue if the price of gold had consistently risen throughout the company’s history.

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