*** lhg cash shortage as gold rises

Below are critical (From the half yearly report).

To me in summary LHG represents a BIG risk to the downside. It has no potential to recover for years as all its CURRENTLY achievable production has been hedged at a cost of $US332 average whilst its cash costs are around $US336 approx.

More importantly, it's poor hedge book is based on a annual hedge production of over 2M ounces per annum to an average time out to 2008 whilst its current forecast production for FY2004 is merely 600,000 ounces. Therefore, in layman's terms it has hedged its exposure at a situation where it can't make money for years to come. But more importantly, its current hedge book exposes it to a risk it that it could run out of money SHORTLY.

Asthe gold price further rises, it is at a greater risk to in fact to become INSOLVENT!!!!!!! Check the 2nd half 2004 report, the gold price has risen from US$393 per ounce to approx $US453 per ounce which represents an addtional loss of $60M which is yet to be reported from that date due to its hedging.

Other crucial figures.

Its First Half sales Rev was merely $100M yielding a net loss of $2.2M. It had cash on hand of around $87M. Do you think the above move in the gold price has not hurt them? The hedge loss was $166.5M at that time mark to market but not crysallised, now at this price an additional $60M loss based on US$453 will give their directors sweaty palms. The irony is that it not only can it not benefit from a rise in the gold price but even if the gold price boomed. Say Gold jumped another $US15-20 quickly, it will just about run out of cash based on the above analysis!!!! If gold falls, it will make little difference to them except they are less exposed. You don't have to be a financial genius to work this out. AND that is why the Instos avoid this stock and still SELLING.

I wonder who else has picked up on this other than the BIG Insto Boys. We don't want another Pasminco style collapse and only the big boys being able to clamour out.

Another tip. Last high on LHG was $1.34. Gold was $US$427. GOld is now $US26 higher and it is lower. Hmmm. Brearish divergence to me....