Having looked into it, I also believe that the Hedge is Dead. My understanding is that LBCC was the actual counterparty, that the contract was for forward sales of physical, with the capacity to agree to cash payments of the net amount, only. With LBCC in Chapter 11, it has no capacity to take the physical and pay for it. You wouldn't know without seeing the actual agreement, but I would doubt that LBCC could unilaterally demand a net cash make-up. Instead, it's more likely that in the absence of contrary agreement, the requirement is for delivery of physical gold and payment of $875 for it. LBCC can't pay for it.
NGF said in their Sep 08 quarterly report that, while they will continue making provision for the amounts in respect of the hedge, they are not paying anything (nor providing physical) to LBCC and will not do so, unless LBCC comes out of Chapter 11. Now that Lehman has been let go, with all of the consequent carnage and picking over of the carcass, there is no way it will ever rise back out of the ashes. The consequent unwinding of bets already settled as a result of this event would cause another crisis, in a different place. It won't be allowed to happen.
However, the potential will continue to hang over the share price and reduce profits until it's resolved. The moment there is a resolution, however, with profits released to the bottom line and cash no longer needed to be provisioned, the share price should go ballistic. It wouldn't pay to be out and waiting on the sidelines on the day that happened.
Good luck to holders!
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