I understand and respect that different people will necessarily have different views about hedging. For my part, I see no benefit in hedging voluntarily in an environment where (for a range of reasons) the price of gold is likely to continue to rise significantly.
I set out my concerns about NST’s hedging policy in a number of posts on the thread relating to NST’s most recent quarterly results. I will therefore resist the temptation to repeat them here.
There is one additional concern I have about hedging which I don’t think anyone has mentioned here yet. To the extent that NST is hedging voluntarily, as opposed to hedging as a condition of finance, the hedging will obviously result in NST’s profit being materially less than it would have been had it sold all of its production at a higher spot price. However, if we experience a period of hyper-inflation during the term of the hedging program, it is conceivable that NST’s costs of production will exceed the hedging price. In that event, it will not be a case of NST’s profit being reduced, it will be a case of NST incurring a loss on the sales made under the hedging program. It is very disconcerting to me that a company with NST’s financial strength may have put itself voluntarily in that position.
I have more than a truckload of shares in NST which I have accumulated over the last decade. I am obviously keen to see the company prosper, as I am sure we all are. Unfortunately, I think the company has let itself and its shareholders down badly with its hedging policy.
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No. | Vol. | Price($) |
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1 | 9450 | $13.46 |
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Price($) | Vol. | No. |
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1 | 9466 | 13.440 |
2 | 34418 | 13.430 |
1 | 5457 | 13.420 |
2 | 18654 | 13.410 |
Price($) | Vol. | No. |
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13.470 | 3341 | 1 |
13.490 | 9122 | 1 |
13.500 | 21503 | 1 |
13.540 | 2666 | 3 |
13.550 | 9466 | 1 |
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