GREY:RNKLF - Post by User
Post by
goldhunter11on Feb 24, 2020 9:27am
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Post# 30725223
Hedging at 1339/oz
Hedging at 1339/ozPosted in ceo.ca, post here for info:
"Assuming that RNC can pay off the debt (by arranging a bridge loan and pay a higher interest rate, than the current 10%) so that they can get out of the condition imposed by the lenders to hedge 20% of the annual production (~20,000oz, it's just an assumption). But, the next step would be to get rid of the hedge (US $1339/oz). How to do this? Presumably, there is some sort of penalty NRC would have to pay (to whom?). Some napkin math for discussion, assuming 15% interest rate for the bridge loan (half year:32M x (15%-10%)/2 = $0.8M, small); 6-mo loss due to hedging of ~US $300/oz x 20,000oz/2 x 1.25 = $3.75M; 6-mo gain at current PoG: $300/oz x 80,000oz/2 x 1.25 = $15M; penalty for getting out of hedging, say $1M (to be generous). Tally up: -0.8-3.75 + 15 -1 = $8.6M (net gain for the next 6 months). Unless RNC can make additional profits from elsewhere, i.e. a reduction in AISC of another $100/oz (that would bring the excess cash to $11.5M), $8.6M is not enough to pay off the bridge loan in 6 months. Two options: One is to extend the bridge loan to 1 year (the current LoC can be renewed in June with a possible extension of 6 months), to allow the building up of cash for another 6 months; or a 2nd option would be to have a longer-term convertible loan.Just my speculation folks, feel free to weigh in and correct any unreasonable/bad assumptions, or math errors."
GH11
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