re: re buy a few question for hedging experts?
I did part of the maths on NCM hedging. And it was complicated as half are in AUd adn half in USD at different prices etc etc. Never fully finished but I believe i roughly go the picture
The numbers did not impress me to be honest and as a result I have sold my holding after hanging on for 3yrs.
To summarise half of NCM forcast production is hedged.
So every +ve swing in price has a half benefit in improved cash flow, and half negative benefit on balance sheet as the losses are marked to market.
The problem with this {whilst not as bad as some other companies with greater % hedges} is two fold. One if you dont meet forecast production targets your ferclupped so to speak. Every ounce below forcast is foregone cash and added balance sheet erosion. This is diabolical if you have large debt payments to make [requiring large amounts of cash].
Furthermore, whilst 50% of your production is hedged, I am sure that 50% of costs are not. ie when metals go up so too do operating costs. If your sale price is locked in via hedges, then rising costs [which NCM and all miners are facing] eat into margin.
Does NCM realise this - are they spooked ? The answer is yes. The sale of Boddington was to raise cash to lower debt [and ease a predicted cash squeeze] - Boddington would a be an absolute prime asset for NCM to have meeting all its internal criteria for a resource to exploit. Yet they let it go. Says something.
They are also scrambling to make Telfer work by redeploying assets from their other mine in Orange [the name escapes me now].
Have heard not good things about the metalurgy of Telfer, or maybe the skills of those engaged to do the metalurgy.
Finally the market is speaking as well - gold is soaring but ole NCM seems a bit tired.
In short if you think is going up switch horses. NCM has been good to me, and I think probably a good company but in choppy waters methinks.
As always when I sell something grand happens - so who knows maybe the fabled take over might yet happen.
cheers
greg
NCM Price at posting:
0.0¢ Sentiment: Buy Disclosure: Not Held
