production funding in june, page-16

It also highlights the crazy way in which financiers operate.

No one would doubt the viability of mining Salt Creek - one of the highest grade shallow open pit mines in Australia of its size.

It is economic at all levels of the gold cycle, and a superb investment anywhere near current prices.

And yet, in order to get finance, companies have to hedge...

WHY?

Surely a rational approach is to look at every business case on its merits, and let the robustness of the project underwrite the risk, rather than it being underwritten by hedging.

If it is economic at US$500oz, and the spot price is US$900oz, fund it. What Buffett calls a 'margin of safety'.

Only marginal low grade producers really need hedging to underwrite their projects. And even then they cannot 'forward sell' the costs of that project.

*sigh*