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Gold/Mining/Energy : Gold and Silver Mining Stocks -- Ignore unavailable to you. Want to Upgrade?

To: Richard Mazzarella who wrote (586)	2/10/2001 8:03:24 PM
From: russwinter	Read Replies (1) \| Respond to of 4051

No, I understand they bought puts. The problem is they are spending precious capital buying mines with costs (225 or higher)not a heck of a lot less than the put price and put premium (250 or so). This has the effect of keeping mines that should be shut down in production. These mines are dogs, and HGMCY shouldn't even be playing this game. They are betting on the come, that POG will improve significantly thus saving the day and these mines. What happen if production cost spikes higher and gold stays stagnant? Or production drops significantly? It may not be hedging (forward sales and call writing)in the sense that you and I criticize ABX, AU and PDG for, but it has the same effect. I don't like this approach at all. It's a flawed business model and is still a derivative strategy. They should be using their scarce capital to buy a low cost deposit somewhere and then develop new production and not just recycle AU's junk.