Whilst risk management needs to be high on the priority list it can be a wrecking ball and chain when the unexpected happens . Debt funding and hedging with more than a few months pay back is a risk too far in a mining project IMO.
Whilst bankers try to elliminate the risk when funding development projects with take off agreements and sufficient hedging to cover the repayment of their principal and interest, their strategies fail miserably when there is along pay back period and the unexpected happens that blows all the forecasts out of the water.
The world upheaval events that started with the Russian invasion sure threw a spanner in the works. Cost inflation, high interest rates, coupled with supply chain delays that push out the time frame for revenue receipts result in fixed prices that cap revenues turning risk management into a wealth destroying catastrophe, especially for unsecured creditors and equity investors.
The more we learn the more careful we can become.
HGO Price at posting:
6.6¢ Sentiment: None Disclosure: Held
