re: LHG / AOR merger. Take care. AOR hedge position is...

re: LHG / AOR merger. Take care. AOR hedge position is considered precarious should POG increase significantly. Copy of E-mail my sent to Co a few days ago seeking clarification. No reply to date.


I have been a shareholder of your Company since 1999 (via Delta Gold and previously Ross Mining) and note your press release yesterday where it was reported that your hedging position was as follows;

Hedging positions

Hedging positions extend out to 2010/11 and amount to 5.95moz or 76% of reserves.
Mark to market of the gold book is negative $392.9m and negative $44.9m for the forex hedge book.


I am rather puzzled with this information given that your Interim report to shareholders dated 13th March 2002, the following statements were made by CEO Terry Burgess;

"Active management of the hedge book has enabled the Company to achieve realised prices well in excess of spot prices. Gold hedge positions outstanding at December 2001 are 5.5 million ounces, extending to 2010/11. The mark to market valuation of the hedge book at 31 December 2001 was negative $287.5 million, of which $233.9 million was provided for."

Mr Burgess went on to say: "Now we are a larger combined company we believe that we need less hedging than we previously had from the combined hedge book of the two companies. As a result, our new hedging policy states a lower maximum level of commitments in relation to our Reserves and lower maximum levels in relation to annual production over the next five years. We will therefore be managing our hedge book with a view to providing greater exposure to a rising gold price."


I am concerned that in an uncertain climate, which is favouring a rising Gold price, Aurion Gold has INCREASED it's Gold hedging position by a further 450,000 ozs and the MTM position of your hedge book has deteriorated by a further $105M. This information seems to contradict your previous guidance where it was intimated that Hedge position would be reduced.

Would you please clarify the above and advise why Aurion Gold is not making a concerted effort to reduce it's hedging exposure by delivering a higher level of Gold into outstanding hedge contracts? Surely this Hedge position is a concern and will restrict the Companies profit growth going forward given that there are still 76% of Gold reserves hedged (despite the 25% increase in Reserves announced 20th July 2002!).

A return E-mail to would be appreciated clarifying Aurion Gold's position on the above matters.