Larry:
Very timely post indeed. I just heard a presentation from
Normandy mining, the largest Australian gold miner, at the Chicago
gold show. They are hedged to a large extent, but as was pointed
out, there is hedging, and there is hedging. In other words,
prudent hedging, such as selling forward in different ways, i.e.spot deferred, allows the company to sell the future
gold at spot, if a major up-move has occurred, instead of selling
it at a fixed price. Obviously, selling future production at $400
price or so, allows plenty of upside participation in the stock
with a move up in gold.
Obviously, outright speculation in naked call options, such as
Cambior has done, is imprudent, to say the least.
Finally, it was pointed out(by the Normandy presenter), that the
Australian companies have refused to get involved in "margin
agreements", so that no one can call in for additional money
vis a vis their hedges, should gold have a sharp move upwards,
such as happened recently. I.e., in effect, Ashanti received
a margin call, just as any commodity trader would, if their trade
is going against them, in a big way. Consequently, from Normandy's
viewpoint, the worst that can happen to those Australian companies
that are reasonably hedged, is that they limit the potential
upside profit to the company, in a major gold move. They are not
exposed, however, to margin calls from banks, or other financial
institutions.
Cheers
Dan |
