Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Elizabeth Andrews who wrote (46)	6/23/2002 10:02:54 AM
From: tyc:>	Read Replies (2) \| Respond to of 158

In the latest presentation posted on its website, Northgate says that in 2002 a $15 increase in the price of gold increases cash flow by $2.1 million. This is far lower leverage than I "calculated". What's the explanation ? The answer of course is that I failed to take into account "hedging". Their figure indicates that only 140,000 ounces of 2002 production will be unhedged. I surmised that the new financing made NGX-hedging history, but I don't think this is correct. Apparently, hedging will be reduced only to the extent that project debt is reduced; the principle that future cash flows will be guaranteed (by hedging) to the extent that is needed to assure debt repayments seems to be continued. and I love it . To my mind, it is this hedging that gives the lie to EC'c non-sensical rantings, and makes NGX a good investment as opposed to just another speculation on the price of gold.. In principle, the amount of reserves that are needed to repay the debt has already been sold (at spot prices of course) and the proceeds invested in bonds by the counter-party bullion bank to earn interest to offset the debt interest. For those hedged reserves, cash flow will vary only to the extent that cash costs vary, and there are lots of reasons to believe that cash costs will improve even further in the future. I am wondering whether the extra allotment of the new issue will be taken up. I sure hope not. The less dilution the better in my eyes.