TSXV:CAV.H - Post by User
Post by
loosechaingeon Nov 10, 2010 6:07pm
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Post# 17689290
Hedging
HedgingI agree that the hedeging price going forward will be instrumental in the first few years for cash flow and valuations methods used. I would lso point out if the company is recently prudent and savvy they could come in way under budget if they play their cards right.
This is a billion dollar capital project ballpark. I believe these costs were USD.
Exchange rates have been moving dramatically in favor of the USD getting cheaper and the Loon soaring. Todays exchange rate close was parity at 1.00. The funds raised are CAD the expenses are USD. A proper hedging program going forward could lock in this rate or better properly put together.
The use of exchange traded options to hedge the currency could net this project at below parity. Each penny differential in the exchange is 10 million to the capital costs for the billion. this assumes all cad borrowed. some would be USD borrowings with the consortium of lenders but to hedge the CAD portion could pay some pretty nice returns on capital cost reductions.
with up to 2 years of time premium to sell on different portions of the requirements you can recieve some decent premium levels. Plus there is always occasion where we can spike up or down dramatically in the currencies which could offer extra hedging straegies if they are looking at it.
Just my 2 cents but these numbers were justified capital numbers done at a different exchange rate then todays value. this thing could be done under budget if they play the cards right.
LC