< I still don't understand how EPM's hedge gets triggered when they haven't received any money or other payment upfront. How is that possible?>
Presumably there were a number of "hoops" to jump through to get the loan (hiring a company to build the mine, hedging future production, etc. I'm sure there were more), of course companies (and individuals) regularly spend money in order to get the loan. For example getting an appraisal. Why they didn't purchase an "option" to sell their gold @ whatever that number was where they contracted I don't know. But presumbly the company was very happy with the price they got and wanted to lock in in. If gold had gone DOWN 50 or 100 bucks instead up UP, they'd have a nice credit sitting there.
<The management is either unbelievably stupid or incompetent in the extreme.>
We will see... again, with the rally in gold there is no doubt that the company is worth much more than if gold had sat still and they owned nothing on the hedge. In a very linear way... on paper, the hedge seemed prudent, if gold went the other way, they would have 20 million in the bank, BUT no mine OR hope of a mine until the price rebounded... they way things stand now, they owe $20 million, but the mine makes more sense than EVER! AND the $20 million IS NOT lost, when production starts they will make it all up because the new hedge will be at a price that should make that up. Of course, worst case the loan facility doesn't close... and before they can set up a new on the POG tanks. :)
Again, this was discussed on the other thread... what if POG zooms to $1000 and they have to cough up the money???? Sure the mine is worth jabillion, but they could theoretically go into banko. Bottom line for me is, if this turns into a panic as POG rallies and they face a cash crunch, you buy with both hands as it craters. (assuming it's not other news, like politics).
DAK |
