Hotazel, that is correct. Any suggestion that the hedging is...

Hotazel, that is correct. Any suggestion that the hedging is going to protect SAR is just spin. The fact of the matter is that only 3900oz per month (for FY13) is hedged. Broadly speaking this will also apply for FY14. If SAR only produced 3.9Koz it would be a bank roll, and SAR would be smarting. The reality of the situation is that SAR is now producing over 10Koz per month so its a moot point.

There is no question about it, SAR is a higher cost producer. However the advantage that SAR has is certainty of cash flows. Their assets are stable and predictable. This is what counts in this sort of environment. This is because the board has the option of hedging their entire production at current prices. This is a luxury that most miners do not have as production is erratic and unpredictable.

I don't believe that the quarterly due this coming week will show a surprise to the downside in operating costs. They'll most likely be around the $800-$900 mark. However, even if they are ~$1000, the margins are still quite considerable considering the AUD POG closed at $1405 on Friday. A telling graph is the below, which shows that SAR is hitting the lower end of cost guidance for the FY13.

What is most important for me is that SAR's cash costs are actually pretty close to total costs. Below is Euroz's assessment of total costs for FY13.

This will be proved in the subsequent quarterlies and annual, but the Euroz inputs are way off. As an example, my forecasts are as follows (using equivalent wording):

a) costs (ex royalties): $900/oz
b) Capex: $45M ($320 for 140Koz)
c) Exp & Corp: $10M ($70 for 140Koz)

Total all in (C3 cash) = $1290

My forecasts are closer to the mark as we know (direct from company) that:
1. Production will be closer to 140Koz
2. CDO expansion is closer to $45-50Mill (rather than 65Mill)
3. Exploration is closer to $10Mill.

The point I am trying to make is that SAR will only really be in trouble if LT gold prices trend below $1290. However this isn't strictly true as capex is expected to taper off from CY13 in line with the first graph, implying total costs will actually be lower than $1290. This is a prudent way of looking at things.