There is good news which is bad news from India, where in 4 of 5 local elections, the supposedly pro-business BJP wiped out the Congress party. Unfortunately the BJP has a history of Hindu extremism in its major stronghold of Gujarat as well. The polls may not herald a defeat of Congress in next year's national elections, but they proved a tonic for both the rupee and the Bombay stock exchange, both fizzing up today.

It took a car-bomb massacre by the FARC rebels in Colombia to get the guerillas to call a 30-day ceasefire. After it killed 5 soldiers, a policeman, and 3 passers-by in Cauca, the FARC criticized the Juan Manual Santos government for not agreeing to a truce as talks continue in Cuba. The talks are now about what to do about trafficking of narcotics. President Santos is trying to end the 50 year old insurrection for which he is being criticized by his predecessor.

* I tested a BullionVault ad on my website, wwww.global-investing.com. 

BullionVault is the system for buying, selling, and holding physical gold. I started off by trying to send money to the account I created in London, where the World Gold Council-sponsored legitimate gold trading site operates. My Guyana Indian relationship manager and I at the US global bank, where I have my personal account, spent about 90 minutes working on the transfer, which may or may not have gone through. It will take 7 to 10 working days to find out. So now I know why the ad has not produced royalties for my company. Bullion Vault are in the process of streamlining their US operations with a new correspondent bank relationship so things will get easier in 2014. I think we may be coming close to a bottom in gold and want to be able to buy the stuff with low spreads and low insurance fees when and if I want to.

*We are selling the remnant of our Barrick Gold (ABX) shares to buy its 4.4% Yankee bond issued by its Barrick North American Finance LLC sub, running to May 30, 2021. It trades as 06849RAF9 at around $96 on the NYSE. There are $1.35 bn in bonds out and it is widely traded in the US. The yield to maturity is therefore an attractive 5.1%. The bond is rated Baaa2 by Moody's. Here is my reasoning.

Founder Peter Munk has been replaced as chairman of ABX by banker and China hand John Thornton who had served as co-chairman with Munk for 18 months. After he lost out in the race to head Goldman Sachs, Mr. Thornton taught finance in Beijing and got to know top Chinese leaders. It is assumed that he will persuade China to invest in ABX directly or in one or more of its mines. If this occurs, the bond will be re-rated.

Mr. Thornton, as a financier, may use forward (hedged) gold sales to finance expansion of ABX rather than doing more stock and bond issues. Mr Munk bought back forward sold gold expensively when the price rose a decade ago and then stopped forward selling while the price of the yellow metal fell back.

Currently, the bond is considered medium-risk with a bit of negativism. I selected a Yankee bond over the round-number loony-denominated bond maturing in 2023 because the latter market is where Canada institutions play. As the 2023 runs longer it is more risky and at a greater discount and yields 5.475% in C$s. 

Barrick is the world's largest gold miner and also one of the cheapest (in costs of c$1100/ounce). It also owns copper mines. As of the close of last year, it had 10 mines in the US and Canada which accounted for 55% of production but it has very diversified assets. It is bringing on new mines at Pueblo Viejo in Dominican Republic and via a sub, African Barrick, in Tanzania. Under Munk (a Hungarian-born Jew) it avoided investing in unstable or corrupt countries. But as Mr Munk said after the hand-over, Mr. Thornton "is a wasp and less emotional." I doubt he will head for Zimbabwe all the same.

Hanging over ABX are negatives, not confined to the price of gold. ABX's huge $8.5 bn project at Pascua Lama, in the high Andes, has been suspended but not before ABX issued another $3 bn in equity, mostly to repay debt. It also sold Australian assets and wrote down assets and goodwill to reflect rising capital and operating costs of mining. In contrast to its history, ABX has been curtailing costs to retain capital during the co-chairmanship of Mr. Thornton, and while he talks grandly about turning ABX into a multi-metal giant (like its Australian rivals) much of this is merely rhetoric for now. He may even sell the copper mines in a pinch.

The Pascua Lama mine straddles the Argentina-Chile border and the Chilean environmental authorities ordered Barrick to clean up the water supply on the Chile side of the mountain. In Oct., ABX suspended construction except for regulatory compliance and mainetnance spending on both sides of the border. This will delay completion of the mine to about 2017 and keep off the market the c 800,000 ounces of gold Pascua-Lama would produce at a relatively low gold price.

In the interval, Barrick will have less cash flow and output, and may engage in further asset sales and measures to cut costs. I think some copper mines may be sold. There may even be more shares issued. I suspect there will be forward gold sales too, and the hope-for Chinese deal. A senior holding via a bond is likelier to benefit than the common share.

Buy the Yankee!