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L3Trader, I have never been one to complain about hedging. It has its place, it works as a guarantee, and helped us build the pox hub. Some people would say, just take the risk, all well and good when the gold price is sky high. But, what if it drops.
I wouldn't hedge all, but if we were going to get a very good hedging price, maybe not a bad thing.
As long as the cost for these does not outweigh the benefits.
Retired Banker, firstly, there is not $125m converted. secondly, where does the conversion price come into it, and what happens with the options that were taken out when the bonds were issued. I do NOT know the answer, but, it has to count for something.
One thing I will guarantee, it is better them converting now, saving the interest over the next 4 years, than converting in 4 years time with the share price at £1, after they have had their interest.
As I have said, I don't know the answer, but, I don't think it is as straight forward as you post, otherwise, we wouldn't have a book, or rules regulations and small print.
RetiredBanker, Your calculations make sense. Nevertheless, more value than the $40M savings in interest was created. With lower debt the risks of financial distress are lower. And in heavily indebted companies like POG such risks are priced in a non-linear way. This is not to say that I disagree with your analysis. In addition, some of the increase in market cap might be linked to other factors, such as the increase of the iron ore prices (suddenly, POG's underwriting of IRC's loan should weigh less on the SP. 1.4Mton every half year sold for an additional $20US would increase the "profit" by $28M. So, one should see IRC's debt coming down fast. If it does not, then one might wonder if there are sales of iron ore being made that involve someone getting a cut... One would think not. IRC should be thriving now.
rusty, there are collar hedges in place for 3.5Koz per month until the end of 2021, w/ a ceiling price of $1822/oz. It is precisely because Hambro was not a sensible person that POG into trouble. When a company is indebted and the commodity it sells has a high price that you need to protect the downside (to lower the risk of financial distress; that helps push the SP up). Thus, now would be the time to get new collar hedges in place for 20Moz, per month until the end of 2021 with a floor price around $2000/oz. That would bring certainty to future revenues and would make it easier to issue new debt at a much lower interest rate than the one the $500M bonds pay. All IMHO
Assuming everything is transparent at POG, b/w yesterday and today POG's operational profit should have gone up by a couple of million USD...
GLA
Rusty - I merely try to add a different perspective for others to consider - whether people agree or disagree, think the comments are useful or a gripe is entirely up to each person.
For my part $125mm bonds plus $40m interest is the saving from the full conversion now ... but that is adding 925mm x 35p = 320m GBP to the market cap .... what has created 200m of extra value ?
Retired Banker, I don't agree with you. Quite simply the company has more shares in issue, BUT, and it is a BIG BUT, It has LESS DEBT, one counteracts the other.
I believe the drop is more to do with the uncertainty of the vote on Monday.
RB, based on my question to Rusty where do you think the share price will be on Monday ? I think if the old board get in it will be a straight move up to 40p plus and I think if the mafia get in, then the share price will move to 28p and then a big bounce upwards...
So it looks from the last Notification of Major Holding that we're up to 3.9bn shares in issue. By my calculations our original capital was going to be diluted from 3.2bn to 4.1bn when ALL the bonds had converted, so it seems as though about 80% have elected to convert ahead of this vote. The reduction in sp is almost certainly just a reflection of the enlarged share capital. Would be nice to see all bonds convert and then that element clouding the share price would be gone.
Thanks Rusty appropriately as ever a gold mine of information
Lawrence 13 Any major shareholder who is above a certain percentage, normally 3% but might be different for insitutions
Thanks Rusty. Is that going to happen for every major share holder ?
Lawrence e13 see other posts. They are NOT purchases or sales, they are just updating there current shareholding in light of increased shares in issue
Are they purchases, sales or bonds ? I cannee make head nor tail of it all. Also how's the vote shaping up as I bow to those with superior knowledge in such things