<<That should help.>> It does, but not enough. Assume 24,000/oz/yr forward sales <120,000 oz/ 5 years(1997-2002)>, thus
1997: 24,000<forward> x ($408-$235) = $4,152,000 plus 13,000<spot sales> x ($350avg - $235) = $1,495,000 for a grand total in 1997 of $5,647,000. And that's assuming they average $350/oz for spot sales, and that their cash cost of production is, indeed, $235. At 24,000 oz/year forward sales, they've already committed nearly half the expected production of the mine <remember the 5-1/2 year expected life?> and have locked themselves into $408/oz on that committed production. I hope they're smart enough to hedge themselves with calls above $410 so when the gold rally starts they can re-call some of their forward-sale hedge. |
