production funding in june, page-40

Hedging does not need to limit a company's exposure to upside in the gold price.

In a gold bull market with gold having risen each year for the last 8 years the most absurd thing to do is for a company to hedge a significant amount of gold production in such a manner that the upside for that gold production is killed off.

Here is an example in practise of what I mean about not limiting upside potential:

"On January 20th Troy announced it was to recommence mining at Sandstone with a cut back in the Lord Nelson Pit that will add about 30,000 ounces to Troy’s production in calendar 2009. The high Australian dollar gold prices mean that it is now economic to resume mining at Lord Nelson. This decision will see the mine life extended through at least the end of calendar 2009.

As this new production is relatively high cost Troy has purchased put options at A$900 per ounce gold. This minimizes the financial risk while maintaining full upside to rising Australian dollar gold prices.."

From TRY's December quarterly.

In view of the substantial margins that IGR expects, it is possible for IGR to purchase relatively inexpensive puts well out of the money. If so this hedging will NOT limit the upside potential for rising Australian dollar gold prices that IGR produces nor force IGR to deliver a set amount of gold each year into fixed price hedges.