The debt and hedging obligations have been restated as previously outlined, but with an important new caveat, that had been previously hinted at and revealed by me in a former post - originally the debt repayment schedule for FY'24 was relatively light, to give some latitude in case of further unexpected problems .... this caution is now seen as perhaps unwarranted, and hence if excess cash becomes available, while still leaving a healthy margin for error ( imagine the howls if another CR was even mentioned) the debt will be paid down more quickly, until it gets to the point where it can be converted into a debt facility, which can be repaid at the end of the term, and merely 'rolled over'. Once in place this will give greater latitude for 'other corporate actions' .. yet unspecified.
The hedging on the other hand is not connected to the debt repayment - early debt repayment does NOT automatically extinguish the hedging.
The only way to end hedging early is to buy the hedge back .... average hedge A$2526 which means at A$2926 the hedge is worth A$400/oz.
So, to buy out the hedge now, it would mean RED would have to come up with 313,000 x 400 = A$125m .... nice one Macquarie Bank.
After another year, 200,000oz will remain 'hedged' and the buyout would cost $84.8m, and the next year the cost would = A$42.4m.
The hedging amounts to 40% of estimated production for the next 3yrs .... 313k = 40%, therefore 60% = 470k (sold at spot gold price)
Now assuming the A$POG remains bullish, say A$3000+, then the 470k @ A$3000/oz = A$1,410,000,000m gross
If one subtracts the estimated AISC of say A$2000/oz .... giving a net income of A$1000/oz = A$470m net income for the next 3yrs.
In 2027, after the hedging has expired, RED's income would approximately double ..... all other things remaining constant .... long bow, but painful detail necessary IMHO.
Only by increasing production can the impact of this hedging be diluted till the hedging expires.
The appearance of the new 'substantial shareholder' has heralded RED's rerate is underway ... this is a very strategic asset that will become a major part of the mid tier sector .... or will it be absorbed ?
N.B. RMS has declared its offer on MGV final, and has declared a dividend .... RMS has established itself as a mid-tier benchmark IMHO
Not so with SLR, which is why SLR MC is only 75% of RMS.
RED will not be in position to offer dividends for 5yrs ??
So perhaps these factors will temper some of the premature wild MC predictions for RED ??
(20min delay)