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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: Ken Benes who wrote (34622)	5/28/1999 1:18:00 PM
From: long-gone	Respond to of 116764

from HM statement of Consolidated Cash flows(page 39) effect of changes in operating capital items inventories 43815 (97% increase over 1997) No borrowed gold exists on balance sheets. All borrowings are $US & $A. From Page 42: "The company uses forward sales contracts and combinations of put and call options to hedge exposure to precious metals prices. The underlying hedged production is designatedat the inception of the hedge. "

To: Ken Benes who wrote (34622)	5/28/1999 11:32:00 PM
From: ahhaha	Read Replies (3) \| Respond to of 116764

Good synopsis. Miners borrow from central banks and sell against in-ground delivery. This works as long as a short squeeze doesn't develop or if macroeconomic factors don't force central banks from calling in the bullion loans or stopping the renewal of leases. Gold that goes out of a central bank disappears into the black hole. The forward selling mining companies have to deliver or go to prison. If a short squeeze causes the price to soar, then hedged mining companies have to spend more than expected recovery cost since they must return the collateral now, but they can't get enough out of the ground now to do so. In a hurry the production cost might soar. It takes time to produce and that may mean even higher prices which they can't realize since they have an unfulfilled commitment to deliver much of the in-ground at recovery costs assumed when incurred to be much less. The persistence of forward selling by mining companies abetted by carefree central banks, could see a scramble by mining companies for bullion which creates the squeeze. That is usually how machinations of clever guys end. See LTCM.