NORTHGATE EXPL (NGX.TO) Message Board

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Gold/Mining/Energy : NORTHGATE EXPL (NGX.TO)

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To: John Dally who wrote (37)	6/7/2002 2:01:43 PM
From: russet	Read Replies (1) of 158

One of us misunderstands what kind of option they have. They have written call options that they received a premium for according to their notes to their financial statements. If the counterparty exercises these and pays the strike price at the end of the contract, NGX must come up with gold oz to deliver to the options they wrote. They do not say they bought any counterbalancing call options to provide exposure to an increasing price of gold. If they did that purchase would have wiped out the premium they expect to earn when the written contracts expire or are exercised by the counterparty. I repeat, they did not buy call options, they sold them, nor did they short call options...they wrote call options to receive a premium for each oz they wrote! If the counterparty exercises the option, NGX must come up with the gold to deliver to the option contract. "As at March 31, 2002, Kemess Mines Ltd. had outstanding call options of 400,000 ounces of gold exercisable at an average price of $301 per ounce. The total premium received from selling these options was $1,942,500, which will be brought into income during the second quarter of 2002 as the options expire or are exercised."

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