RRL are continuing to "unwind" the hedges by delivering gold into them at the contracted price. They have stated that they are progressively eliminating the lowest price hedges first and have increased their rate of delivery (20Koz in the December quarter). This is not a cost to RRL, it is a lessening of revenue that amounts to the difference of the hedge price and what they would otherwise have gained by selling into the open market. Since the POG has been falling since September it makes sense to increase their hedge deliveries and so hold back future production for unhedged sales when the POG has turned upwards again.
As RRL anticipate increased capital expenditure once all the approvals needed for the McPhillamy development are received, it is understandable that they reduce the dividend even though they are well endowed with cash and bullion at present. Provided they retain the bi-annual dividend payments then even reducing it by 50% still gives a reasonable payout (2.75% yield on today's closing price).
RRL is positionng itself for growth in the next few years; not just with McPhillamy's but through development of the Duketon area through exploration and purchase.
RRL Price at posting:
$2.91 Sentiment: None Disclosure: Held
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