hedging has already cost the company $11.2m, page-9

walkeiller

You said
"There is probably a line in the loan agreement relating to the hedge loss in relation/proportion to the asset. Once it hits that trigger the company is toast and the asset belongs to the lender. "

Are you aware of any company that has such a provision? It does not seem to make any sense. If the company is meeting its borrowing obligations in making its interest and principal payments then I can not see there being any issue with the loan (even if the price of gold explodes).

The only concern I have (besides that the hedge is for too long and too many ounces) is if the cost of production were to rise too steeply while the gold price also exploded (the sort of improbable scenario that the SParrot mentioned earlier).

Unless you can give concrete examples of where this has occurred I will have to assume that you are scaremongering.

However, the hedge will stunt ADU's profitability for over 5 years unless it can expand production beyond the forecast 100,000 ounces/year. Fortunately ADU is likely to be a low cost producer and its hedge is close to the current POG, so it is not such a constraint as faced by all those producers that hedged long term when gold was $500 - 600/ounce and had to clear their hedges by significant capital injections.

loki