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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: goldsheet who wrote (60452)	11/3/2000 3:15:38 AM
From: d:oug	Respond to of 116764

If..but..Therefore..when..while..really..had..it would have..due to..not.. ... is a mistake (IMHO) in a world where gold is traded in $US. ... protected them against both the commodity and currency risk. Bob, Thanks for your input about hedges and risks. For sure it requires a level of skill very few have. Those days when times were slower and simpler and a farmer could hedge his next years crop to local residents in the same town are light years away from this gold market stuff. Maybe Ken is only 1/2 correct in that the gold producers did not realize how complex and dangerous these legal contracts they entered into were, but now once signed they wished they did not do that, but too late. Eventhought I will defend the GATA line with abandonment, my goal in these posts of mine was only to ask if the following paragraph from that Le Metropole Cafe article was an on topic item worthly of discussion. "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....." doug

To: goldsheet who wrote (60452)	11/3/2000 8:55:21 AM
From: tyc:>	Read Replies (1) \| Respond to of 116764

I suppose it would be more profitable to look ahead rather than backwards.... It would appear that the $A is moving up now. If this is so, what the Aussie miners lost when the A$ fell is now being regained. The losses you refer to would apply equally whether the currency risk was covered by separate hedges on gold and currency, or whether the risk was covered by simply a forward sale of gold in Australian dollars. What it means is that the companies would have been better off without the hedge. They chalk up what their profits would have been without the hedging and then offset it with the loss (or the gain) on the hedge(s). Here, for example, is a brief extract from the annual report of a Canadian base metal mine. "Revenues from copper hedging gains of $0.3million and $3.3million in 1999 and 1998 respectively. Although the average copper price was lower in 1999, copper hedge gains were lower than in 1998 as the company had only 900 tonnes of production hedged in 1999 compared to 8,400 tonnes hedged in 1998. Losses from currency hedges decreased to $1.4 million in 1999 from $2.6 million in 1998 due to smaller differences between the actual exchange rate and the hedged exchange rate. There are no copper or currency hedges in place for the year 2,000"