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Gold/Mining/Energy : Royal Oak-RYO -- Ignore unavailable to you. Want to Upgrade?

To: Elizabeth Andrews who wrote (1485)	11/20/1998 8:40:00 PM
From: Thomas P. Talbot	Read Replies (1) \| Respond to of 1706

The major amount of the liability, I believe, came from currency transactions. As you know, the receipts of the company from gold sales are in US dollars but RYO pays most of its employees in Canadian dollars. In order to hedge against a rise in the Looney the company went long Canadian Dollar to hedge its labor costs. The Canadian dollar has since fallen and of course in the cost of operations this has been a positive and has contributed to lower cash costs at Canadian mines. However, this benefit has been offset by the loss on the Canadian dollar forwards. The company thought originally that these contracts could be rolled forward,however, according to the company representative I spoke with yesterday, when the Trilon deal came through the people on the other side of these forwards wanted payment over 1999 and according to the company representative this amounts to about 26 million US. He stated that with current cash flow they could make the Feb. Trilon payment but to give some leeway they may sell some non core assets as they want to ensure time for the restructuring process. Though this process may be completed before Feb. He further stated that the cash situation has improved and that the company is better off than six months ago.