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Gold/Mining/Energy : A to Z Junior Mining Research Site
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To: russet who wrote (251)6/21/2002 1:28:56 PM
From: tyc:>  Read Replies (2) of 5423
 
>>because the juniors (like NGX) leases forward and uses the proceeds to fund capex or operations

You mentioned NGX because you know I'm interested, right ? Well it serves the purpose also of bringing this subject back on track... Junior Mining Research.

IMHO the essential difference between ABX and the juniors (like NGX) is that Barrick has control of the proceeds of hedged (borrowed and sold) gold, while the juniors have no such control. The investment of the proceeds is done by the bullion banks and the junior sees nothing until the hedge is closed.... it cannot use proceeds of the hedge for capex or for operations.

NGX was required to hedge a million ounces of gold to guarantee that future cash flow would be adequate to cover its debt servicing needs. It has since arranged equity financing to reduce its debt significantly, so the hedges are largely to be unwound. Frankly I preferred the hedging to the dilution of equity.

I think the present weakness in the stock price is caused by a belief that there may be trouble because current hedges exceed immediate production, and the Horne Smelter strike might interfere with cash flow. If our view is correct, that there is lots of gold available, then it is a simple matter that current hedges can be rolled forward. This weakness in the stock price could truly be a buying opportunity.
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