*** lhg d/side risk - nos crunched. hedge book ex Thanks for...

*** lhg d/side risk - nos crunched. hedge book ex Thanks for the earlier comments by all which made me inquire further into LHG position. Feel free to check the reports from LHG and crunch some nos. 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 production has been hedged at a cost of $US332 average whilst its cash costs are around $US336 approx. at least and its current hedge book exposes it to a risk it that it could run out of money SHORTLY.

It's hedge book is based on a delta position of over 2M ounces per annum to an average time out to 2008 whilst its current forecast production for FY2004 is 600,000 ounces. Therefore, in layman's terms it has hedged its exposure at a situaiton where it can't make money for years to come. If there is a cost blow out or if there is a production disruption or slump, it would further increase its losses.

Moreover, as the gold price further rises, it is at a greater risk to in fact to become INSOLVENT!!!!!!!
Since the time of the report 2nd hald report, the gold price has risen form US393 per ounce to approx $US443 per ounce which represents an addtional loss of $50M which is yet to be reported.

Other crucial figures.

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 $50M loss based on US$443 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 $US30-35 quickly. It would just about run out of cash!!!! 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.

CHECK it out and comments appreciated.

But do your own analysis. This is not a rec, but I am putting my money where my mouth is.