RE:RE:RE:RE:RE:RE:Covid19 is the new "Murphy"Greatdaysahead wrote: Thanks for your comments.
A little note about the production, oz sold and forecast... If we assume they sold the 25J oz produced up to May, it means that by end June, the roof price on the 40'000 oz hedged for 2020 will be gone :-)
At 2260 CAD as per today against the hedge roof price of CAD 1936, this will provide an additional 3.5M CAD per month (assuming 15k prod per month).
As a point of clarification, the company hasn't hedged production per se, where they are required to deliver ounces at a previously agreed price, but instead they sold call options. In reality it is like a side bet on the price of gold. As of the end of May they haven't actually paid off those losing bets as the 2020 call options have terms between June 2020 and December 2020. The 2021 options have terms from March 2021 to December 2021.
They have however have taken mark-to-market losses on the 2019 Y/E and Q1 financials for the 2020 call options and the 2021 call options - totalling $36 million as well as another $10 million for the 20,000oz in call options @ US$1485 that expire in April 2023.
Hindsight is always 20-20 of course and it would have been better had the company not taken out insurance by purchasing offsetting put options, but the good news is that the net gains due to higher gold prices far outweigh the losses on the call options.