Hedging Information, page-16

Hey Auto,
cheers for the reply.
I agree the AUD price for the June Q is not overly bad, when compared to most, but I do wonder why they took on so much for just this one quarter.
Anyway, I agree with your overall view about hedging, great in bad times, poor in good.

As you say, put options do incur a higher upfront cost, but then.. the June Q AUD hedges are out by over $800 AUD, which, as you mention, might have only cost RSG say, $100 AUD max to do the puts. Yes, hindsight is a wonderful thing, but...

btw - In the quarterly, they mention they further added to the hedging - That sort of hedging I am actually fine with, although it will unlikely to be material either way.


I will use a non-gold stock to show how I feel put options should be used.
Back when I was heavily focused on oil stocks, like BPT. I watched their general focus on oil hedging, or, to be more precise, their heavy usage of put options, which incurred them almost zero upfront, because they chose prices that were well below the spot oil price. i.e. buying 1m barrels at $60 AUD, when the oil price was $100AUD or more. This put options were rolled over year after year, and usually out towards two years. It was sometimes up to 50% of their forward production, yet they rarely needed to use the actual puts (except in a few circumstances).

So for example, RSG could potentially buy puts at USD $1500 out 2 years, for far less cost, than getting the spot price (which seems to be what most 'like' to do, so they can announce it as them doing something impressive. I preferred BPTs no-nonsense, no fanfare put options, which they just mandated into their businesses operations. I am not saying RSG alone should do this, it should at least be an option for all producers, instead of just more old hedging.

Perhaps gold producers could do something similar, which I feel is quite a unique undertaking, as to be able to have a guaranteed price for your product.

Lastly, did you happen to see my earlier question about PRU/RSG on the other thread?