By my very rough calculations ALD is probably better off by about $36m on their hedge so I don’t really see a problem with it.
Allied needed $25m loan (I think equal to about $34m aussie at the time) to ensure the project would go through and hedging was a condition of the loan.
The alternative was to issue shares and at that time they would have been lucky to get 40 cents a share, so 85m shares at 40 cents = $34m aussie.
Now if they wanted to pay out the loan and hedge book they might need $27m aussie for loan and maybe $13.5m to close out the hedge = total say, $40.5m.
If they were to issue the 85m shares now at 90 cents they could raise $76.5 million and therefore have $36m left over.
Now if they do nothing and gold goes down they win and if gold goes up they also win. I say well done to management.
von.
ALD Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
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