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You are right in saying that most majors have sold their gold forward at decent rates. HOWEVER, these rates are at prices per ounce (say $380 U.S. or so) that were expected by shareholders, based upon earnings prior to the gold price meltdown. Investors are scared that gold may not climb above $330-$350 per ounce U.S. in the foreseeable future meaning that future earnings will get killed, as the hedge prices available will eventually drop (i.e. what idiot will continue to buy forward at $380 if gold prospects continue to be weak). Given this, most majors are writing off high cost mines/projects on their balance sheets. Because the balance sheet, by definition, must balance, these asset write downs must be accompanied by a corresponding hit on earnings. Although this does not immediately affect cash flow, it does reduce shareholder value, causing angry calls to IR departments. As well, it doesn't take a genious to see that, longer term, continued gold weakness will shrink revenues, hence cash positions. I'm afraid this creates a "hunker down" mentality right now which prevents majors from expending cash until they see some clear indicators of better days to come. |
