Matlis, the hedge was put on on 3/5/10 when the gold price was...

Matlis, the hedge was put on on 3/5/10 when the gold price was $1360 AUD via Westpac and BNP Paribas. Within ONE month the price was $1528. Yes, in hindsight its easy to say this, but 1) they didn't need to hedge the entire loan out on that day, especially when they were drawing down the facility progressively and not in one hit, and 2) they didn't even get the benefit of a contango (!) for forward delivery in two years. I'd say they were screwed by the banks, possibly on the back of quite a bit of naivity on behalf of the board. Anyway, that water under the bridge now and weve got about half of the hedge still to be delivered into.

Here's a scary thought. If they wanted to buy their way out of this hedge it would cost them $81 mill, from this point onwards. Otherwise, the banks take this as cream.

Of the 25t oz they produce per quarter, 15t oz of that has been delivered into the hedge. in other words 65% of their production has achieved a price of $1360 vs spot price of $1740. The GOOD news, however, is that from the end of this quarter, they will only be delivering in 7k oz or 28% of their production into the hedge. Hence my reason for buying, amongst other reasons.