i still don't like their hedging

I’m going to be beaten up again for writing this, but here goes…

DOM produced 25,014 oz in the Dec quarter which improved their cash and bullion position by $6.2m, which is a rather mediocre result in my opinion.

Total cost per oz ballooned to $709 (from $595 prior quarter). Add a production royalty of $37 per oz and the true total cost is $746 per oz.

What is planned on the hedging front in the next 6 months? We have 30,500 oz forward sold at $1,035 per oz. Assuming actual total cost remains the same ($746) this will add $8.8m to the cash tin ($289 per oz margin).

If however these 30,500 oz were sold on the spot market at today’s gold price ($1,280) this would provide $16.3m to the cash tin ($534 per oz margin), adding a further $7.5m to the bottom line. This $7.5m is significant compared with the $6.2m net cash result noted above.

DOM is voluntarily p!ssing money down the drain in my opinion. When gold producers the world over continue to de-hedge and the only ones doing so are those forced to by their banker, I don’t understand their logic. However, if they must insist on limiting their revenues received this way, all in the name of so-called good money management, why not hedge their input costs too, a la MDL?

Rowingboat.