More on the Centaur time bomb.
Message 15398069
A look at Centuar's hedge book is in order. But first, I wanted to take a shot at the current crop of dead fish, that call themselves gold "analysts". Only one dead fish that I could find mentioned the Centaur development. She suggested that it might be a challenging work out situation in the market place. Workout? This crap has the same flavor (clueless) seen by tech analysts at the top of the TNT bubble. Well, since they aren't paying attention, the vacuum left by their "work" leaves it to an "amateur" like me to do?
Centuar is a bankrupt (or soon to be) 145,000 oz a year ($199 cash cost) Aussie gold producer that is nothing more than a giant call write on gold. Oh, they have 138,450 oz that they needs to be delivered against this year, and then there's that 450,000 oz gold swap due 2007. So if hedging four years production isn't bad enough, they have taken it upon themselves to write an 1,012,500 oz. naked call (spread out over the next eight years) on gold at $500 AUS, or $265 US. The purpose of that transaction was to buy puts for "downside protection".
Well, I'm not worried about the puts at this point. They will just expire worthless. The calls on the other hand? They are already nearly in the money, so they will be subjected to the delta hedge, and just for good measure, the beta factor as well, as gold move in the money. In other words they will need to buy physical gold as an offset. How does a bankrupt gold miner buy enough physical gold to cover a million ounces. For the answer I suggest asking their bullion bankers. |
