With respect and subject to supeior knowledge,it means they must sell 48,485 oz plus 20,250 oz, and xx,xxx oz at $xxxx, Total 68,735 + xx,xxx oz of gold, no more, no less, irrespective of gold price by the relevant expiry dates.
The gold price simply determines how much extra BDR have to pay the loan’er, or alternatively now much extra BDR could have made if sold on market, dependant on the average price of gold over the period or at the times it is re-payed between now and the relevant expiry date.
Way too many variables to calculate with any degree of accuracy over that period of time but general example given below :
Ie. All using a current gold price of $1,649 oz :
Part 1 :
10 mil loan for 48,485 oz at $1,700 oz = $82,424,500 48,485 oz at $1, 649 oz= $79,951,765 Dif = $2,472,735 (2 mil extra BDR pay for the 10 mil loan at current price).
However if gold goes up and perhaps averages between now and expiry date 31/12/14 : $1,700 and ounce they pay nothing extra for the loan, if gold averages above that say $1,800 oz then they have simply lost the opportunity to gain and extra $100 oz if sold on market.
Part 2 :
$10 mil note : $10,000,000 div $1,649 oz = 6,064 oz (at current price)
If gold goes down obviously it will take more oz of gold to pay for it But if gold goes up eg $1,800 oz it would only take 5,555 oz
But to be paid from gold production end of April 2013, so would be good if price of gold got a wriggle on.
Part 3 :
Call Options 20,250oz gold @ a strike rate of US$1,400per oz = $28,350,000
At current price 20,250 oz at $1,649 oz = $33,392,250 a difference of $5,042,250
$5,042,250 divided by $1,649 = 3,057 oz
Obviously increase, decrease dependant on gold up or down and if/when options taken up between now and expiry of 31/12/2013.
Regardless none of it is a loss in reality just a reduction n profit. eg. If produced at around $600 oz, they are still making a substantial profit, just less profit than they otherwise would would have made.
BDR Price at posting:
88.0¢ Sentiment: Hold Disclosure: Held
