The hedge lets assume 200K oz's will be spread over the first 5 years of peak production. (40K oz's per year). Which would be 26% or there abouts of the annual production. Leaving plenty of unhedged production to benefit from the pog if it goes higher.
Also at this point i would assume the current LOM will increase. Froneman has previously talked about the potential to double the current 8 year LOM.
Thirdly this is not a project facility. If is to cover a potential one off liabilty(that likely won't happen), if the put option is executed the net effect on our debt servicing will be limited. We will be servicing the bank loan but no longer the 8.5% bonds.
Hedging is a standard requirement of banks, and doesn't have to be seen as a deterent to investing in GDO. A sound management would manage risk with a hedge of some production at the higher pog anyway.
GDO Price at posting:
27.0¢ Sentiment: LT Buy Disclosure: Held
