RE:POG below 1700$Greatdaysahead wrote: Not a good news for Gold producer short term.
But regarding Victoria, impact depends of the current procution and oz sold.
Indeed, POG below 17000 =
- less revenu from the sales of Gold
- but less amount due for the call sold. As we know, part of the production (15K ou per quarter) has a capted price of C$ 1936
So if they sell exactly 15000 oz in 1st quarter, they get at minima 1936$ net (average price at which they sold the 15000 oz through the quarter less the repayment to Macquarie being POG at maturity of the call less C$1936.
- They have 5000 oz per month protected at 1700 usd.. So with POG below 1700, the open put have a value at maturity.
Actually I'm hoping that this "dip" below $1700 lasts for another day.
I'm pretty sure that the C$1936 call options have end-of-quarter settlement dates and at the current gold price of C$2127, Victoria's Q1 payment to McQuarie would be less than C$3 million.
Q1 production should be heavily skewed to the early part of the quarter as there was more than 14,000 oz of gold in solution at the end of 2020 and most of the remaining recovery from the 1 million tonnes placed on the HLP should also occur in January. The average gold price in January was about C$2350.
Q1 earnings should be pretty good because they are based on end-of-quarter POG which will reduce the mark-to-market derivative costs of the C$1936 call options and the US$1700 put options will be in-the-money.
So while a drop in the gold price is not good news for any gold producer, it affects Victoria in the short term less than other producers.