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Gold/Mining/Energy : NORTHGATE EXPL (NGX.TO) -- Ignore unavailable to you. Want to Upgrade?

To: russet who wrote (17)	6/6/2002 7:23:09 PM
From: John Dally	Read Replies (2) \| Respond to of 158

Dear russett, Take a look at the very bottom of the page of the May 16 press release: 199.85.7.4 Here's the part that you're referring to: "At March 31, 2002, Kemess Mines Ltd. had forward sale commitments with major financial institutions to deliver 420,000 ounces of gold at an average accumulated price of $298 per ounce. These forward sales commitments are in the form of short dated spot deferred contracts. A portion of the position will be brought into income in 2002 and a potion will eventually be rolled into future years as part of the Corporation's commitments under its $100 million project loan." Here's the part that I'm referring to: "As at March 31, 2002, Kemess Mines Ltd. had outstanding call options of 400,000 ounces of gold exercisable at an average price of $301 per ounce. The total premium received from SELLING these options was $1,942,500, which will be brought into income during the second quarter of 2002 as the options expire or are exercised." I.e., they SOLD 400,000 oz worth of $301 call options for $1,942,500. They are SHORT call options. If gold is at $325, then they have a liability of 400,000 x (325-301) = $9.6m. The higher gold goes, the more they OWE. This is not hedging, this is speculation. If they were hedging, they would have bought puts. This is one reason why they are issuing new shares and diluting current shareholders. One should also note that they have total commitments to deliver 820,000 oz of gold at around $300/oz. This is equal to 3 years of mine production. Most gold bugs would not like this. -g- Best regards, John.