They received $US1,942,500 for selling the call options. At today's price, they owe around $US10m because of this position. If they were to keep rolling this position forward, they would owe an additional $400,000 for every dollar that the POG increased.
A gold producer does not owe money on their hedge position,...they owe gold that they extract for a certain cost. As long as they get more for their gold oz, than their costs to produce that gold oz,...they are a profitable business.
They bought this mine by hedging so the banks would loan them the money. Their only option was, to buy the mine and hedge, or not. They did the recent share offer to diminish the bank loan. Now they only have to deal with the hedge, which will take several years to wind down, given as you say it is 3 years of production. They will spread it out over more years.
Wait until their next quarterlies,... as they say they will get rid of the written calls in this quarter. Then we will see what they did to their hedge. My guess is the longer term leases of gold increase in size and term. |
