Ann: Quarterly Activities Report and Cashflow Rep, page-7

re: Ann: Quarterly Activities Report and Cash... If it is normal hedging contracts then they have pre sold/ converted their USD dollars at I believe 90 cents USD/AUD. The problem is that they anticipated having a lot more US dollars than they are actually getting i.e expected 100 US/t versus 60 US/t for example, combine that with lower production than anticipated then you have a huge problem.

I haven't looked closely enough to know what impact but for example only 1 million tonnes estimated revenue 100USD/t 100 million USD hedged at 90 cents

then actual sale is 1 million tonnes at 60USD/t equals revenue of 60 million USD convert at 90 cents approx 66 AUD in revenue. However the 40 million USD shortfall will need to be "washed out" by buying USD at present rates of say 60 cents USD/AUD or at least settle the difference of 30 cents which would mean paying the bank 12 million USD or 20 million AUD.

Final result 66 million AUD sales less loss 20 million equalling to 46 million in the hand after selling 1 million tonnes.

It is absolutley stupid to do hedge currency without fully priced sale contracts.

Banks have been known to bankrupt businesses over these contracts they will not forgive.

Icharus