It will be interesting to see what strategy MOY is going to take in the short/mid term. Both with regards to M&A and with regards to selling at spot vs. using the hedging. My hope is that management be conservative. The price of gold is too volatile at the moment and I think it is likely it will drop further. But of course, nobody knows where the price of gold goes from here.
On the positive side:
#1: MOY would still be VERY profitable at a gold price of $AUD 1,300 (at that gold price level I think we could see a P/E ratio around 5 - my personal guess/calculation) #2: "hedge contracts provide for puts totalling 10,500 ounces at an option strike price of AUD$1,600 that provide price protection during the ramp up phase, and deliveries of 94,100 ounces at an average forward delivery price of AUD$1,673 over the first 3 years of operations" #3: There should be plenty of cash available to pay investors a generous dividend.
So, I think MOY looks like a pretty safe investment in the short/mid term (1-3 years). And hopefully, in the long term, the price of gold will pick up again and MOY will not only be VERY profitable but EXTREMELY profitable.
MOY Price at posting:
55.0¢ Sentiment: Hold Disclosure: Held
