Change of managment needed now, page-6

Hi Windham14,

Whilst my concern is with the USD debt and not so much the operational mechanisms (which do have a balanced natural hedge) there are ways to effectively and cost efficiently bring some risk protection into the business.

One of the cheapest and least risky is to put in place put and call options that allow you the optionality of buying / selling at certain prices. If the POG goes against you then the option expires and your loss is limited to the cost of the option.

Noah's Rule, a Sydney based risk management firm, works with a number of Australian miners on this form of risk protection. Sean Russo, the principal, I have found to be very good at analysing these markets and advising miners (of all commodity types).

One of the issues I have found, over time, is that management of various companies are drinking their own Kool-Aid and are often-times far too optimistic. Normally, by talking to their industry colleagues a group-think echo-chamber mentality develops where they all confirm their own optimistic bias .... much like a HC forum !! Thus, when commodity prices go against them, they are all 'surprised'.

It doesn't help that to become a CEO of a large mining company your personality is toward the hubris side of the spectrum and you inherently are a risk taker and aggressive.

My failing with investing in this sector is that when I talk to various CEO's I often drink the Kool-Aid too ... still making lots of mistakes investing in this sector - just different mistakes !!

Cheers
John