“EnviroGold intends to arrange forward sales for around 50% of its forecast gold production from the Dominican project for the first four years of operation commencing January 2011, and expects to lock in a gold price in excess of US$1,000 per oz Au for this proportion of the output, which should underpin profit projections.”
Ubid ---- I tend to agree with your sentiment with regards to the gold price ---- the sky is the limit in many respects ---- what the A$ does is anyones guess, but with our Govt (Federal and State) deficits and trade deficits their must be a limit on how high it can go. The perception that the Aust economy is so robust and strong is I think an illusion.
So that said and done --- I hold great fears as a result of EVG’s decision on forward sales. Forward selling is the Macquarie Bank way --- and it is a very dangerous route to take. If anyone here has any association with management it would be great if you could talk to them.
Buy puts if they must – but forward sales are a no no on every level --- give us a gold price of $2000 an ounce --- a developmental or production issue at Las Lagunas --- and it is curtains for EVG and any other company silly enough to short sell their own product in a bull market. Even if development and production have a dream run ---- it is still a lot of forgone revenue.
EVG has great potential --- let’s hope the gold price moves in advance of management’s decision to sell short --- it would be a shocker to take such action now.
I am not trying to be negative --- if criticism meant some short term pain --- it would be well worth it I the long run --- forward sales have been the downfall of so many companies --- and have recently cost Newcrest, Lihir, Barrick etc a small fortune.
I’m not sure what makes Macquarie tick – but I don’t like it much.
Regards to all --- I still hold EVG.
EVG Price at posting:
7.8¢ Sentiment: None Disclosure: Held
