"I liked the following that IGR released in late March,...

"I liked the following that IGR released in late March, guaranteeing IGR a minimum of A$1236 with no limit to the upside:

"Integra Mining Limited (Integra, ASX: IGR) is pleased to announce the purchase of put options at a strike price of A$1,236/A$1,237 covering 28,736 ounces of gold from the first two quarters of production at its 100%-owned Randalls Gold Project development, located 60km south-east of Kalgoorlie.

The total purchase cost of the put options was A$3 million. Of the total put options purchased 13,598 ounces mature on 31 December 2010 and 15,138 ounces mature on 31 March 2011.

With put options in place for approximately 70% of the first two quarters of production, the Company has secured a significantly higher minimum gold price than anticipated in the projects financial model without the risk of committing to delivery of physical metal."

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However I don't like what IGR has done since, capping the upside for 90,000 ounces approx. at A$1359. That's what gold is currently trading at right now!!

In addition, this has introduced an element of risk for IGR that did not previously exist as IGR MUST deliver that gold, whereas by buying puts IGR has the right, but is not forced to deliver the gold at A$1236.

IGR managed to hedge 28,736 ounces of gold by purchasing puts for $3 million, guaranteeing a minimum price with no limit on the upside. As the bank was forcing IGR to hedge -IGR's fault for choosing this type of finance - then IGR should have purchased puts for the additional 90,000 ounces it has just hedged at $1359. The outlay would have been about $10 million, equivalent to about $A100 an ounce.

However, should the gold price take off over the next two years IGR's current strategy could cost the company tens of millions of dollars.

I think it was Jim Sinclair who said the worst gold bears are gold company Management. This should not be the case with IGR, in view of what Chris Cairns has released about supply/demand in the gold market.

But based on the hedging policy, it must be the case that Management are punting that gold will not rise significantly more than A$100 above the hedged A$1359
over the next two years otherwise this will cost IGR a substantial loss of cashflow.

I think their gamble will be wrong and we will be able to work out how costly to IGR's cashflow their hedging, limiting gold upside to A$1359 for approximately 90,000 ounces, has been.