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Strategies & Market Trends : Strictly: Drilling II -- Ignore unavailable to you. Want to Upgrade?

To: Joan Osland Graffius who wrote (33819)	11/23/2003 3:20:03 PM
From: yard_man	Read Replies (2) \| Respond to of 36161

holding a reserve and not selling current production -- or especially -- deciding to build a reserve -- is the flip side of selling forward. Obviously, I am fairly ignorant of how the commodities markets work -- I have no clue about how much of the gold is sold through the futures, spot markets or through bilateral transactions, but I think I would not call a producer -- who based on projected production makes arrangements to sell the product a month or two or three ahead of time -- a hedger, though in the strictest sense they might be. Now someone who goes beyond what is practically necessary for arranging sales at pts in the future -- that's hedging -- of course it isn't the only way -- an entity could buy the option to sell (put). I am not sure that I would be ecstatic to hold the shares of a company that went too far the other way either -- building reserves in hopes of higher prices -- because of both 1) the chance of being wrong and in a big way and 2) precipitating more volatility in the market for no good reason. After all I can make a levereaged speculation on the commodity -- if that is what I want to do -- investing in a producer is for a different reason.