ngf luck could change

Norton Gold Fields' luck could change.

Matt Chambers | August 03, 2009
Article from: The Australian.

MID-CAP miner Norton Gold Fields could be worth a look for anyone who thinks they know the ins and outs of US bankruptcy laws.

In 2007, Norton's bankers made the company hedge 70,000 ounces a year of gold production until 2012 at the now unattractive price of $875 an ounce (about $250 below current prices) as it raised cash to buy Barrick's Paddington gold operations near Kalgoorlie.

Luckily for Norton, the counterparty to the hedge was Lehman Brothers, who spectacularly went into Chapter 11 bankruptcy in the US last year.

As a result Norton hasn't had to pay its hedge since.

If Lehman comes out of bankruptcy protection, Norton owes them back pay and the hedge resumes.

If not, best case scenario is the cash is all Norton's. In between, and probably a more likely scenario, is a negotiated settlement to buy out the hedge, but this is expected to be well down the track.

So if prices stay where they are over the next three years, there's about $50 million nobody's sure what will happen to, but those versed in the US court system will have a much better idea than The Dirt.

Managing Director Jon Parker has the money stashed in the bank earning interest until it's sorted out, so even that's a better scenario than if Lehman was still functioning normal.

Apart from the hedge, Norton's main task is reducing costs at its Kalgoorlie mines. A high cost producer now, at $750 an ounce, the plan is to bring costs down to the industry mid-range and boost production to 250,000 ounces a year.

http://www.theaustralian.news.com.au/business/story/0,28124,25874594-15023,00.html