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

To: tyc:> who wrote (60456)	11/3/2000 1:25:18 PM
From: goldsheet	Respond to of 116764

Companies ought to write hedges in the dominant worldwide currency of a commodity, otherwise they leave themselves exposed to the currency risk between the selected currency and the dominant currency. Australian miner hedge books are going underwater not because they hedged gold, but because they hedged gold in Australian dollars. If you get a chance, look at Normandy's hedge book: biz.yahoo.com The present value of the hedge book, mark-to-market is: $M)(i) Normandy (ii) (459) Normandy Mt Leyshon (iii) (3) Normandy NFM (iii) 10 (i) Spot price at 30 September 2000, $505/oz. Gold is still near $A505, so their hedge book is still as above. Gold has dropped about $US10 ($A19) since September 30th, so if the contracts had been in $US they would have a had $AUS228M positive impact on the market-to-market. (instead of no impact) Australian hedge books only look bad when they are in $A. The TVX-Normandy part of the hedge, denominated in $US, looks great. It appears to be about +$US59M (1moz hedged at $323) It makes me think Iraq might eventually find themselves in a similar situation because they don't want to write oil contracts in the "evil $US", but in the Euro instead. They will open themselves up to $US/Euro fluctuations, and will have to enter into currency contracts ($US/Euro) if they want to more completely control their risk.