RE:RE:RE:RE:Sweet deal, 6% cost of capital, locks in $1682 gold I do not understand why there is such passionate debate about the collar strategies applied when POG was way lower than today. They had to protect the downside at least partially until commercial production. (oil Company having done that - many did - are certainly in a better situation than the others i.e.).
And as with any hedging program, there is an associate cost.. in this case,,, to cap the profit at 1950 cad per oz.
The only issue would be if they were not producing at minima this amount of Gold in 2020... Truly a no brainer.. .
Selling forward at a discounted price.. yes.. another possibility.. But maybe with non-so-attractive terms when you do not have a mine up and running...
Not sure I would buy forward Gold from a Company that has to build the mine...
So in summary,,, a hedge is an insurance with a cost. Depending of your situation, you could just buy the put because you have enough cash for that or prefer a collar strategy because you prefer to give away some future gains and keep more cash short term.
As CFO, I would be very happy to regret having sold calls at 1950 CAD as it means I am making a huge margin compare to 2 years ago.