Excerpt from Miningweb on FN and the NDY hedge book. Looks good.
""What's more, Franco gets to share in Normandy's greater fortunes, hustle the other gold producers who're not as well positioned and there's potential to play havoc with gold shorts that are wedded to producer hedging.
Indeed, the most striking aspect of the deal is the interplay between two polar opposite philosophies on gold hedging. Franco disavows hedging in the strongest possible terms, but that didn't stop it taking what amounts to a controlling bloc in one of the largest hedge books owned by a producer steeped in the Australian industry's proclivity to sell forward.
Doug Pollitt of namesake Toronto brokers Pollitt & Co. says he welcomes the deal precisely for the opportunity it affords Franco to take off Normandy's hedgebook. "Franco didn't walk in there with a presumption to hedge."
Dowdall confirmed that there was a commitment to reduce both Normandy's debt and hedge book as fast as possible although no timing and structure had been agreed to. According to the latest data released in February, hedges cover 60% of Normandy's reserves.
While that is a massive proportion, too much so for the liking of increasingly militant gold stockholders, statements by Normandy executive chairman Robert Champion de Crespigny increasingly disfavour hedging. Reading between the lines of recent announcements, there is tacit agreement that hedging is detrimental to gold and the company talks about its "confidence in the gold price". That is demonstrated by a series of hedge reducing measures, including substantial buy-backs.
So Normandy and Franco are not as far apart on hedging as is first perceived.
Further progress in reducing the hedge book will depend on the mood of Normandy's bankers who will be reluctant to lighten the load with such a low gold price. However, it is not improbable to think of a chivalrous Franco helping Normandy restructure its current debt arrangements and remove some of the bankers' influence, or at least blunt it.
Immediate progress was made on that front. The deal reduced Normandy's debt by 6% to $742 million, lowering the gearing to 42% from 55%. As a result, rating agency Moody's offered its stamp of approval with a credit outlook upgrade to stable from negative."" |
