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They should admit it ? They have admitted it, otherwise how do we know, how is that remotely a lie ?
SHG entered into hedging arrangements to reduce risk.
IMO this could've been to secure a better loan rate for some/all of it's debt.
We need volumes to increase dramatically to regain 10p or more again.
Artrader - I would certainly hedge at $1500 and lock in some production at a nice profitable level
Daisan - I might be irritating you, but you can't be hedged and fully exposed at the same time ... I think you know this but choose to argue for the sake of it ... therefore the "lie" was to say they had full exposure to spot price when they didn't
When the final results get published you will see a line item on the P&L saying LOSS on derivatives .... it will be quite a large number ($10-20mm for the year) and it will be the full extent of the lie that we had full exposure to the spot price.
Hedging is sensible, they should admit it and acknowledge that sometimes you lose out, not hide behind corporate doublespeak
Hands up those that would sell forward today? @1500
ArielArrow,
Calling this a lie is not 'a bit steep', it is a lie in itself. I find propogating such viewpoints on these boards really irritating.
Exactly. People think that because the price of gold has gone up somewhat in the last few months that this is the obvious status quo. It was not a case of making money it was a case of guaranteeing survival in the light of debt repayments coming due. The hedge is likely a drag on profitability in the future but the alternative would have been to risk not being able to repay debt.
Less profit than if they had played the market but I am sure that the decision makers are not gambling whilst they have a solid profit at a fixed price. Prudence is a virtue and if the price of gold had dropped and they had lost money who would you blame. They have hedged at a low price in retrospect but if something went wrong and someone wanted to dump gold (not pointing at anyone) ... you would be laughing and it could still happen. Insurance is not a bad thing when you are making money and reducing debt.
Maybe less revenue but still a profit, I'm not sure why people keep going on about it, on hindsight its always easy but they thought it was the safest option at the time, so lie is a bit steep.
'Lie'? Which bit is a lie? The fact that they used 2000 oz of the hedge or the fact that they deferred the rest or the fact that they had full exposure to the gold price during the quarter? I'll give you a clue. None of those is a lie. The fact that the hedge will result in less revenue if gold remains above the hedge value is true but that doesn't make the statements you quote a lie.
"Institutional investors can generally figure these things out - now you're all aware as well." I am sure that you could have made that more condescending if you tried. Or perhaps not.
Generally this is a very positive RNS and that is somewhat reflected in the sp rise today.
However this contains the usual corporate doublespeak designed to obscure hard facts which the BoD would rather unsuspecting private investors stay in the dark about. In particular "The Company has the flexibility to defer settlement of forward sales and, with the exception of delivering into forward sales for 2,000 oz, had full exposure to the spot gold price during the Quarter." ... is a complete lie. Whilst they might have only sold 2000 oz under the forward sales agreements and sold the rest of production in the open market they would have had to compensate the entity with whom they have these futures contracts for rolling them forward. The only way these forwards aren't going to cost us is if Gold drops back to $1250 before next June. Sadly these contracts will cause an $8-10mm reduction in 2019 / 2020 net profit if gold stays around $1500.
Institutional investors can generally figure these things out - now you're all aware as well.