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To: tyc:> who wrote (60440)	11/2/2000 7:36:51 PM
From: lorne	Read Replies (1) \| Respond to of 116767

Russia's Rosbank Ups Gold, Silver Purchases From Producers By Oleg Kirsanov and Sergei Padalko, BridgeNews Moscow--Nov. 2-"-Rosbank, one of the leading Russian banks, increased its gold purchases from domestic producers by 21% on year to about 21 tonnes in January-October. Silver purchases rose 670% on year to 108 tonnes, Deputy Director of the bank's precious metal department Alexander Tikhomirov said Thursday. He said the bank plans to conclude deals for 30-35 tonnes of gold in 2001 and export the larger part of it." Full story >>> futuresource.com

To: tyc:> who wrote (60440)	11/2/2000 8:06:22 PM
From: lorne	Read Replies (2) \| Respond to of 116767

Hi wmchen. In your opinion what would be the effect if any on producers who are hedged in US$ if the US$ should have a lenghty sustained loss of value as compared to other world currencies.? thanks Lorne

To: tyc:> who wrote (60440)	11/2/2000 9:13:37 PM
From: d:oug	Read Replies (1) \| Respond to of 116767

I'm still not seeing the forest because of the trees blocking my view. Your answer to a just asked Lorne question still does not touch upon that element that may be included in a hedge contract, and if so your conclusion for events become false. I'm not in battle here, just trying to undestand this stuff, and the item I have introducted to this thread from that article I read at the Le Metropole Cafe has not yet been talked about. So is it not a valid part to consider? Hi wmchen. In your opinion what would be the effect if any on producers who are hedged in US$ if the US$ should have a lenghty sustained loss of value as compared to other world currencies.? thanks Lorne To: lorne From: wmchen In answer to your question..... wmchen, You still have not addressed the Le Metropole Cafe mention of "locked in the exchange rate" as speculation to explain why the Australian gold producers are in a bad situation rather than a good one. Also, you seem to differ with the author of that article about currency effects on this topic. Follows is an expanded version of your and I posts. Example - Australian Gold Producer ============================== The mine is located in Australian. Revenue from sales of the gold used to pay mining expenses. Mining expenses are in Australian dollars. Mine revenue is in American dollars. a.k.a. The nation Australia sells it gold for USA dollars. Then coverts the USA dollars into Australian dollars. These Australian dollars represent the revenue for this company. The revenue for this company pays expenses. Revenue greater than expenses generates a profit. Revenue less than expenses results in a lost. If this example was about physical gold being mined and sold, then the profit or lost would be determined in real time, now. But this example is about hedging, selling the physical gold that has not yet been mined and receiving payment for it now, with delivery later. If this gold producer mistakens its reserves in the ground, as in they are not there in quanity, or in quality causing extraction costs to be too high, then this company will be seened not as a gold producer but as a hedge company that obtains the physical gold for delivery not from its mining its ore, but buying it on the open market from a gold producer. In this case if the gold producer has sold forward(Hedged) physical gold it does not "already" have, then the company itself will be used as payment, a.k.a. shareholders lose all and the gold producer company awarded in court to pay debts. An extra twist to the above is if the hedge contract has in it terms that can force the gold producer to "pay up" ahead of time. For example, hedged out 5 years sounds as if the gold company can simply receive the cash payed for the physical gold and not worry about obtaining it for 5 years. Yes, but in those 2 recent cases it looked as if in the hedge contract was language that identified certain risks that will put this gold producing company into a present situation that would make it very difficult to execute the hedge contract using today's environment. If so, then this gold producer has to exercise certain terms that have been activated by the hedge agreement which are to protect the other side of the hedge contract from possible loses based on the gold producer having market condition turn against them. Sounds like a bad hedge to me if you hedge has inside of it someone elses hedge against you with you being responsible to cover their hedge inside your hedge. , you said that they hedge their production in Australian dollars to eliminate a currency risk should the US$ fall in value viv-a-vis the A$. Now its time to explore the possibilities available. But first, the following you said. [Australian gold producers] forfeit the benefits that would accrue IF the Australian dollar were to FALL in terms of the American dollar. That has happened and the amount forfeited is being blamed on hedging !! And the following from the Le Metropole Cafe. ... while companies in Australia should be benefiting from the weakness of the Aus $ and aren't. Seems to differ 180 degrees, you say they lose on a weaker A$ via US$ and he says the opposite, but he says the opposite of what he predicted has happened and identifies the reason why. Rumors about several Aus gold producers having problems with their hedge books continue to appear. They also appear to be currency related, not only did they sell forward but they locked in the exchange rate as well, in some cases when the Aus $ was at .65 cents US. Now it is struggling to stay above .52 cents US, a 20% decline..... So, was a "locked in the exchange rate" a dumb thing the Australian producers agreed to ??? If so, and they ain't dumb... well, guess Ken was right all this time. doug