A lot of goldies fell back a bit today, and even the top local goldies RRL, NST and EVN barely moved higher so I am not reading much into what happened with SBM today.
Gold is up AUD34 so I think our local goldies will do better as each quarterly report shows the financial improvements from a lower AUD. Of course in the case of SBM the 2 cent drop in the AUD has added about AUD11m to its borrowings in AUDs. However $34 extra per ounce over say 350k ounces equals $11.9m (less 30% tax comes to $8.3m) per year, and over the life of the mines it means that they are way ahead of what they lose on the higher AUDs loan.
My take on what happened today is that there is market concern about how the USD POG will do once the seasonal effects supporting the POG wear off starting later this month/early March. My expectation is that the AUD could get to USD70 cents this year and I think the USD POG could fall back to as low as USD1050 by mid year. A black swan event would buoy the gold price, but I am not counting on it happening.
With the much lower AUD and improved operational performance by SBM I do not see the share price hitting its low of last year - perhaps a retrace to 12-15 cents could happen if the AUD POG were to get back to around 1400 and they were unhedged.
This is just speculative thinking, of course.
loki
SBM Price at posting:
21.5¢ Sentiment: None Disclosure: Held
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