I notice threads on this site where investors actually expect SGX to benefit from an increasing gold price. I can tell you the company will suffer from an increasing gold price. Please refer to p. 10 the 2006 annual report. 539,000oz hedged: 335,000 committed forward and the balance in put options. The management of this company were naive and stupid enough to enter into a deal with a lender who was long the price of gold while the company went SHORT its own produce ! Do you really want to own a company that is short the price of gold during a long term bull market ???!!! This is not a company that will benefit one iota from an increasing gold price. The loss December 2006 was already $62.5m. I assume it went short at something like $570/oz. THIS COMPANY THEREFORE SELLS ITS GOLD AT $570/OZ !!! The report states a "gold hedging program was required by the lender." Well sorry guys (board)you sould have either gone for another lender or for a capital raising. But you got greedy ! I used to own shares in this company, but the sector that needs support are those juniors THAT HAVE NOT HEDGED or entered into deals with predatory lenders. Look at LHR, Barrick (still hedged 9.5m oz at around $300/oz, an UNREALISED loss of over $6B), Sons of Gwalia, Croesus, Bendigo, BMA, Newmont, and a host of others. The covering of hedge books involves HUGE LOSSES. What eventually happens if the POG goes to $1500 which it will ? I will tell you. The lender acquires the company's assets. To buy back its hedges the company has to dilute by offering to the lender the assets at a knock down price.
SGX Price at posting:
0.0¢ Sentiment: LT Sell Disclosure: Not Held
