McPhillamys, page-103

@thecrabpest

The reluctance and lack of action from the board to do anything about the hedges is the reason I abandoned ship a while ago.

The primary reason this company is still operating is because of the price of gold, if the price was lower they would have had to have raised.

Instead of making money hand over fist they still tread somewhat of a financial tightrope, which is a real shame given the potential of the company.

If they had addressed the hedges and were making money they could have self funded the project


You make a somewhat confusing argument. You rightly point out that the board walks a "financial tightrope" and that if the gold price hadn't been this high they would be raising money. Conversely you suggest the board should have magic-ed away the hedge position as if there were no consequences of doing so.

What position do you think the company would have been in if it had closed out its hedge book when it was hundreds of millions of dollars out of the money? The more aggressively they had done this, the more perilous a financial position Regis would have been in. Instead of complaining about the millstone of the hedge book, commentators would have lamenting the manacles of the debt book. You can't have it both ways.

If you "address" the hedge issue by closing it out you add $192M (at today's spot) of Net Debt to the company's balance sheet. You will swap a controlled sell down with an interest-bearing loan. They could pay it off with equity but I don't suppose investors would stomach contributing their money to the cause?

This reponse isn't aimed especially at you @thecrabpest, I'm providing an opposing view to a common sentiment. Regis has value and that value is based on what it's assets can produce and how much it's costs reduce it, the hedge book is just another cost. Anyone who suggests that RRL is uninvestable because they are hedged misses the point. The hedges are there and they are visible. You can readily work out their impact on future cashflow and adjust the NPV accordingly.

It is true that Regis' day to day cash flow will increase when the hedge book is neutralised but that doesn't mean on that day the company suddenly becomes more valuable. However, if you think that it's a sentiment thing I also wouldn't wait until then, unless you think everyone is only going to work it out on the last day (if they are undervalued that is).