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The SINGLE issue with Normandy is its hedge book. If you look at the majority of Oz miners they are heavily indebted on the forward sales ** and the only way to weed these out is to concentrate on the quarterly reports. Normandy actually lost money by meeting lower priced gold hedging contracts during the quarter!

Normandy is now hedging through COMEX with call options.

Hill50 (my personal favourite) has a hedge book and they too are worried about the Price of Gold as they feel that losses may follow if they cannot offset these forward sales by playing the COMEX with puts and calls.


Herein is the problem with that philosophy... you are no longer a mining company! You are entering into even higher risks by playing puts and calls on COMEX in NY. You are playing margins with the really big boyz and can get egg on your face very quickly with one wrong call. Therefore they are no longer miners they are financial margin players. If you think that I speak with forked tongue then read on.

Open interest in this particular market (COMEX) points to a bull or a bear and the watchers have it down to pat, yet I have never seen a call 'in the money' actually having delivery made. It is rolled over! Not only odd and strange sightly bewildering as the physical technically should be delivered! Therefore someone is in default and it is in order to allow that person off the hook so that there is no short price increase whilst they scramble to cover.

This is paper gold. Technically once you stand for delivery the physical has to be delivered. However, the lack of physical means they are issuing more paper!

Commodities technically have to be delivered sooner or later yet COMEX is not forcing the issue. One should ask the US Fed's why? and also this type of manipulation should technically be investigated by the corporate watchdog (CFTC) but they do nothing.

So where does this lead us. To a short position of actual physical in the market. The Ashanti's, Cambiors, Barricks, DROOY, Normandy, Hill50, Sons of Gwalia etal have sold forward thousands of tonnes of gold. This gold is subject to be mined over the next 10 to 12 years. It is estimated that over 12,000 tonnes have been shorted by mining companies and gold leasing bullion banks. This is huge and this is why we are having such an absurdly gyrating gold price. These spikes in gold are causing all sorts of problems with the mining houses - as was witnessed with Ashanti and Cambior. It will not take a Rhodes Scholar to work out that these are not the only two companies in jeopardy and every time the gold price spikes - there are several more companies in deep manure.

Therefore no hedging means bigger and better profits - at the end of the day a non hedging mining company has a 3:1 leverage on and increase in the PoG. Why ... costs are fixed and with a rising gold price means leveraged profits.


** [good example was New Hampton Gold forward sales @ 474 and current spot 490 means they are loosing $16 per ounce - then you have Sons of Gwalia who have hedged 10 years into the future at a fixed price ... hmmm no crystal ball for guessing whether they are right or wrong]
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