champion, all clear.thanks to both @sandfire @mrposhman

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MrGriffin

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06/09/23

15:23

Post #: 69756236
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Originally posted by mrposhman: ↑

FEX only use swaps so they are more like forward contracts rather than Options for which they would pay a lot more for them. I'm not sure on FX, but assume its similar, the price of an option is directly proportional to the risk,

Ie. in order to buy an option to fix all IO pricing above say $130 (when the price is $170) would be relatively cheap (as you will never cash in the Option - unless of course something major occurs), however locking in Options at $170 when the price is $170 provides the majority of the benefit to the purchaser of the option so it would become expensive. Its why Options are more expensive,

FEX use swaps, so they aren't buying Options, they are buying forward contracts, so they are essentially swapping the price of IO at the price of sale.

The impact on the I/S is essentially that FEX sell for $180, they make a $10 / tonne loss on the hedge (still shown in Revenue) plus an additional royalty of $1.75 / tonne (the difference between the $170 price and $180 sold at as royalties are on actual sale price).

On the contrary, should the price fall to $160, the P&L still shows $170 / tonne (in Revenue), but essentially FEX make a $10 gain on the hedge, plus they also make a gain on the royalty as $160 / tonne is a lower royalty by $1.50.

Options are designed to provide purely upside to the purchaser which is why they are more expense. Swaps provide upside to both sides so the price of acquiring the swaps is much lower.

Generally you won't find many smaller mining companies delving into Options as they are just too expensive, so they take the lower cost approach towards hedging and lock in a sale price that they are comfortable to sell at.

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champion, all clear.

thanks to both @sandfire @mrposhman

FEX Price at posting: 23.5¢ Sentiment: Buy Disclosure: Held
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(20min delay)
Last 32.0¢		Change 0.000(0.00%)		Mkt cap ! $222.2M

Open	High	Low	Value	Volume
32.0¢	32.0¢	31.5¢	$100.4K	315.0K

Buyers (Bids)

No.	Vol.	Price($)
11	107285	31.5¢

Sellers (Offers)

Price($)	Vol.	No.
32.0¢	500241	9

View Market Depth

No.	Vol.	Price($)
11	107285	0.315
11	245754	0.310
6	308609	0.305
6	257492	0.300
6	165694	0.295

Price($)	Vol.	No.
0.320	500241	9
0.325	293525	11
0.330	454573	8
0.335	307184	6
0.340	236618	4

Last trade - 10.44am 08/05/2024 (20 minute delay)


Last 32.0¢		Change 0.000 ( 1.56 %)
Open	High	Low	Volume
31.5¢	32.0¢	31.5¢	149225
Last updated 11.02am 08/05/2024 ?

FEX (ASX) Chart

champion, all clear.thanks to both @sandfire @mrposhman

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