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

To: russet who wrote (30)	6/7/2002 4:21:09 AM
From: peter snowdon	Respond to of 158

There is no way you lose money, unless the bullion banks stop lending you gold, which would force you to buy gold with cash. that's how i see it too. you can lose accounting money you never had by forfeiting exposure to a sudden rise in POG. but you can't lose real money, if you are producing for less than you write the calls for. the major risk in normal (non-Ashanti-type) hedging is not directly related to POG, but is counterparty risk. i think there may be reasons for some companies to take that seriously, but NGX is not one of them. my only concern with the calls was how much short-term cash flow NGX might lose if POG were to suddenly spike higher. still, whatever happens, we still have all that unhedged copper...:-) peter "a dollar a pound" snowdon

To: russet who wrote (30)	6/7/2002 8:27:54 AM
From: John Dally	Read Replies (2) \| Respond to of 158

russett, There is nothing wrong with hedging, however, if gold is in a bull market, then the cos with the hedges will not enjoy the cash flow they could have. Also, your math is wrong: NGX can buy all the gold it wants today at $326, but is obliged to deliver 400,000 oz at $301. The cost to NGX is $25 / oz x 400,000 oz = $10m. They can easily close out the entire position with the $US55m they raise. As I have already said, I would value this co based on reserves & resources. John.