NGX.t did the opposite of gambling on the POG,...they locked in a set price (US$301 you say) for the gold they would produce in the near future to ensure they would get a revenue that would give them cashflow to pay off their debt and cost requirements. This is not gambling, it is prudent management. No one knows where the price of any commodity is going in the future.
They would be gambling, if they assumed that the price of gold would increase in the future. At the time they hedged, the price of gold was going down, and no one knew where the bottom was, or when it would turn around.
Cambior and Ashanti were not the same. They hedged using derivatives that could be called by the counterparty before they had sufficient production in place to cover the contracts has they were called. If I understand tyke correctly, NGX.t has changed their hedge from one that could be called in a short time frame, to one that comes due at set times over many years. Thus they can match gold production to when the gold contract comes due, so they are now in no danger of a hedgebook blow up ala Ashanti.
Again this is prudent management, and almost all commodity based mining companies (oil and gas and coal, base metal, precious metal, PGM's etc.,) do it to some extent to lock in a revenue stream in the future, and insure they do not get into a temporary cash flow crunch because their commodity price went into the tank for some unforeseen reason. |
