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

To: tyc:> who wrote (47)	6/23/2002 10:07:51 AM
From: Elizabeth Andrews	Read Replies (2) \| Respond to of 158

I agree this stronger than ever. Did you look at the NGX-DSR deal? What do you make of that?

To: tyc:> who wrote (47)	6/23/2002 10:39:28 AM
From: E. Charters	Read Replies (1) \| Respond to of 158

Whose rantings? Are we being damned with not too faint epithet? They have to hedge to get money. If the hedges are callable they lose. If they are not, they still lose the money they could make by increase in the price of gold as their cash flow is tied to instruments that pay them a fixed interest or can make money as in gold derivatives. If the instruments are derivatives, it may pay to look at how secure they are. Derivatives may not pay. If they other side reneges you don't collect. That is what happened to LTCM, the Russians and Koreans who were the other side of the trade reneged to the tune of billions. This is the creative financing to be aware of. As with Witte, Northgate had to look at options to get the thing going. They may be able to geologize better than she, and perhaps mill a tad better, despite Margaret's vaunted chemical expertise, but they cannot get blood out of rock, and they cannot change their profitability once tied into long term financial instruments as their only profit. Barrick made the difference between 430 dollar gold and 254 dollar gold by shorting their financing. They sold gold to deliver a lower prices. Now they are locked into 20% of their assets underperforming and they say "no problem". well if Kerr Addison lost 15% of their gold, they were out of business. I won't say Barrick or Northgate will go bust. They can always play the call side too. But that is the point. They only make what they make on calls. They don't make double or better every time they mine an ounce. They mine 40 dollar per ounce gold at Pierina, but on 20% of that they lose 260 dollars an ounce as they have to deliver ounces to repay. They cannot buy gold at 40 dollars an ounce. They may have to end up paying shares. A better strategy might be to buy the bank that finances them. EC<:-}