Takeover, page-75

The hedging has no downside risk as long as production is more than enough to fulfil the hedge. It's not going to bankrupt us, like it could if production was not enough to fulfil the hedge.

However, the hedge limits the upside of the gold price by 1/3.


- A rise in gold price is a positive. It has no effect on the hedge, and the rise benefits the 2/3 of production that is not hedged.
- A fall in gold is a negative only for the 2/3 production that is unhedged. It does not affect the hedge sale price. If gold fell severely (below the hedge price), then the hedge turns into a positive.
- The hedge is neutral for now, as it's already priced in, and gold price movements will not really effect it. But production number will affect it (making it more or less significant, by changing the unhedged deliveries number).
- The way to reduce the impact of the hedge is to ramp up strongly and successfully. That way, the hedge can go from 1/2 to 1/3 to 1/4 of production, until the hedge finally runs out.