Ann: Hedging Contracts Locked In , page-6

The hedge price of just US$1075 for about 50% of ADU'S annual gold production over the next 5 years will come back to badly bite ADU imo.

This hedged price will look absolutely ridiculous - it could even do so within 12 months imo.

Imagine delivering thousands of ounces of gold at US$1075 with gold at US$2000 or US$3000. The mark to market loss on the hedge book will be astronomical.

There are a number of calls right now projecting gold at USD$5000 plus - according to shadowstats.com the 1980 US$850 gold spike is over US$6000 today CORRECTLY adjusted for inflation.

Now let's consider another scenario.

Suppose we have some extremely high inflation in a couple of years. The full costs of producing an ounce of gold for ADU are US$2,500 but ADU is getting US$3,500.

With 50% of gold hedged at US$1075 ADU would be running at a loss. Couldn't happen? Nah. Of course not. I'm just an ignorant parrot.