Here is why Sir Auric was writing covered calls against his vast physical stock: "Gold Market Keeps Eye On Australia's Centaur Mining Hedge
2001-05-10 03:45 (New York)
SYDNEY (Dow Jones)--Immediate short covering by Australian gold miner Centaur
Mining & Exploration Ltd. (A.CTR) to close its hedge books could give gold
prices a short boost but wouldn't sustain a rally, dealers told Dow Jones
Newswires Thursday.
Although news of the beleaguered miner's position sent gold prices up by
around US$5 a troy ounce in New York trade Wednesday, the rise petered out in
Asian trade Thursday as the market sat back and took a closer look.
The market now believes Centaur's short position isn't substantial enough to
trigger a sharp ascent and that it would also depend on how soon it chose to
close its positions.
"Who in their right mind would buy 1 million ounces at once?" asked a
Sydney-based dealer.
According to Centaur's report for the quarter ended December 31, 2000, the
company has hedged a total of 1.61 million ounces of gold at an average price
of A$423 a troy ounce from 2000-01 to 2008-09.
"That's not an insignificant amount and could tighten the position in the
market," said John Macdonald, a mining analyst with CIBC World Markets.
But it would depend on the market conditions when the company closes its
books, which in turn depends on who would be responsible for that, he said.
Receivers, for instance, could be less amenable to any exposure, while
counterparty hedges would want to liquidate at better prices, he said.
U.S. bondholders appointed PricewaterhouseCooper receivers in March in a bid
to recover a US$225 million debt from Centaur. Centaur itself appointed
administrators the day before, which in Australia gives an insolvent or
near-insolvent company breathing space to deal with its financial difficulties.
Centaur's creditors are set to meet Monday in Perth, and could put the
company into liquidation.
Despite initial excitement during early Sydney trade Thursday that gold could
test US$272/oz should Centaur liquidate, some other participants said
Wednesday's rally was mainly due to technical factors.
"There was mainly buying from funds between London and New York, and not
related to Centaur, which triggered stops at US$267-US$268/oz," said another
Sydney-based dealer.
A third Sydney-based dealer concurred, adding the talk on Centaur could have
been spread by those trying to tempt funds to cover.
Joseph Gutnick, Centaur's chairman and managing director, couldn't be reached
for a comment. Neither could administrators or receivers.
At 0742 GMT Thursday, spot gold was quoted at US$269.40/oz, down from
US$269.90/oz in New York late Wednesday. |
