kickin' it in the kyrgyz, page-12

Commodore good points buddy. I'm no expert on hedging but from my limited understanding there would be a number of alternatives available to the coy. They could no doubt appoint an investment banker to examine instruments available, costings, strike prices, timeframes etc.

However, if we look at the naked PUT option $10m is being spent to lock in future revenues of $252m i.e. a cost of about 4%. If the gold price keeps motoring north then the coy lets the option lapse and retains the upside benefit. It has in effect given away $55oz to lock in a minimum of $1400oz for 5 years whilst retaining all of the upside.

Now if the coy was of the view that $10m was too expensive then it could employ what i think is called a ''cap and collar'' strategy. It sells a call option and uses that revenue to pay for the cost of buying the put option. This would limit their ability to benefit from future price rises but nonetheless still locks in the $1400oz. for approx. 20% of the existing resource i.e. the other 80% still has full exposure to the future POG.

I have to admit I am a gold bug. My view is gold could hit $5000 oz within the next 5 years BUT, BUT ,BUT if this was my business and i was faced with a once in a lifetime opportunity of securing my future i would hedge.

As my pappy used to say to me ''son, if you protect the downside the upside will take care of itself.''

DYOR.