Spender. It actually is not all that technical at all.
There is nothing to be disputed as you said, as it is all there in plain black and white.
I do not deny that hedge commitments are 10% of reserves. Reserves implies total mine life not short term commitments! i.e the mere fact it's mine has 20M ounces, it also take an equal period to realise it, whilst its hedge commitments lead to cash outflows NOW.
The amount LHG chooses to deliver in hedges as comapred to the spot market is entirely up to them, you miss the point. Given that they are running a dervitatives book which is mark to market and given that their total hedge commitment is 2M ounces (spread over about 4 - 5 years). No matter what they produce in the short term they have to meet the differential in price of the spot gold price c.f. the forward price if the spot price is rising. And if there is a difficiency in production c.f the total commitment, then there is a net negative cash outflow.
Re: Citicgroup and their specific rec. I have little comment about the integreity accuracy or reliability of broker research. It is a well known fact that 80% of all Big Broker research says Buy and even when stocks fall, they will HOLD at worst. Why, Retail clients are not as profitbale to them form collecting brokerage as on the institutional side where they can reap investment banking fees by saying what the Cos. want them to say esp on Advising and New issues.
Bris. As above, I never said they need to deliver 2M ounces a year. Whilst I appreciate SGW was in a more dire position, the issue is Cashflow and working capital. The reality is that with Derivative Financial products that are mark to market, a cash outlfow is required when the future/forward or Sold call psoition moves against you and in this case, the total exposure is effectively 2M ounces less any near term production that delivers into this commitment. My analysis is not wrong. It needs to be read very carfefully to be understood.
But thank you both for at least some attempted constructive comments.
P.S. Don't you find it just slightly suspicious that LHG share price 10th Nov $1.34, when Gold was $US423 and now LHG is $1.24 and Gold is US$457. I will let you decide.
LHG
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