Hey Ralph and others,
Let me try to clarify on the broader topic of how these hedges actually work...
You have mixed up currencies in the analysis. The hedge price is USD2,772, but you hou have compared it to the AUD price in marking it to market. The loss , based on your number hedged should be 224,250 oz x (3,225 - 2,772) = USD 102m and translated to AUD 166m
These are derivatives, meaning cash up on settlement day is the usual means of closing. there is usually a facility to deliver the underlying in a hedging contract, but this is unusual and a pia for finance guys.
You settle / receive the difference between the original trade price and the spot on SD.
They are marked to market in the quarterlies and any financial statements and thus losses have been incorporated in AISC and quarterlies whenever produced based on the reporting date settlement price.
Any with a past settlement date have been cash settled already and extinguished.
Macquarie would have looked for a hedge to lower their risk and have no part to play thereafter in exercising any influence over management at BGL.
BGL have been reluctant to close all open fwd hedge contracts as their cash is limited and you have to cash settle to close and so are letting them expire on the original SD, when BGL have more cash available through gold sales.
Many of the postings here are based on a less than complete understanding on how these hedges operate and are therefore looking at scenarios that are not very likely. ( I'm being generous here guys...)
The shortfall in production still needs to be explained, together with remediation plans, assuming the analysis from the MOM boys from a couple of weeks ago is intact ( ore good, but hasn't been fully extracted by the jumbos thus far).
If this is the case, when the suspension is lifted we will presumably have a SP hit ( less the impact of gold appreciation since suspension), a revised Q4 production estimate and new timeline on when annualised production will be achieved and what that will be.
Though if it turns out to be a lack of precision in drilling and specific direction from the geologists in Q3 , the annualised production should be unchanged and we have a once off hit to FY25 production.
given the lengthy delay, we are likely to have a combination of causality to explain the shortfall and the dreaded mixing of ore with waste may have some part to play. There may well be more afoot.
Finally, if the ore body is intact and the SP is sub $1 when the suspension lifts, then absolutely BGL will be interesting as an investment as ;
1. BGL have learned how to mine it
2. the hedges are finishing
3. the SP has tanked
4. there is an ore body able to produce 200kozpa at USD3,225 per oz
Hope that helps to clarify all,
Good Luck
Wazz
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