How gold prices increase could make the liability blow out? Very strange concept to me.
I thought the higher the gold price the better for all parties. Of course if gold price is much higher in 2025 - 2035, say USD $2500-$3000 per oz, then by locking in the reference price now by paying %5 pre-payment, Quantum would be reaping the big reward. And they deserve that reward by taking risk locking in the reference price with 5% pre-payment. By the same token, if gold price is lower than USD $1900 then Quantum still have to pay USD $1900 then deduct 10%. It is the same as hedging gold price for Quantum. They take risk to lock in the price now and if it goes up they deserve to win. In the meantime it is very good for BEZ with pre-payment from QM to advance the gold project to production without much further share dilution. A win-win for both.
If gold price goes higher, of course BEZ would also be printing money too because BEZ would earn around USD $600-$700 per oz after 10% discount by delivering the contracted gold to QM at contracted price (after 10% discount) and also earn USD $1100-$1600 profit margin for the extra gold that Bez sell to other customers assuming ASIC = USD $1000/oz and spot price = USD $2500. The high price the better.
Don't forget the ultimate gold resource will likely be around 7mil oz (half way between 4.9mil and 9.3mil oz as exploration target). 3mil delivery at reference price to QUANTUM leaving 4mil oz for other customers at stunning selling price and profit margin if gold price goes much higher. I don't think it makes sense to worry about gold price goes higher. One should be worried if gold price go significantly down, not up.
BEZ Price at posting:
15.5¢ Sentiment: Buy Disclosure: Held
