Gold at $500 per ounce

[thriftybob]

Quote from dhpar:

good posts thriftybob but i guess you are talking to a wall - most people here don't know what "cash costs" mean to start with...

I'm a cost accountant and even I get fooled, but not twice by the same trick.

Suffice to say that things aren't always what they seem, and that "cash cost" is a number they die very quickly and very surely below. Above it they just die more slowly without profit.

 

[infolode]

Quote from scriabinop23:

Yea but did you see my point: they have the right to sell the gold at higher than the ~$435-450 price if market price is higher. I haven't read all the details of this structure, but it just looks like a method they've secured their financing. The way it reads (what I boldfaced), it looks like they are holding 95000 (100 oz denominated) OTC gold put contracts with average maturity about 5-6 yrs out, at strike price of mid 400s...

Why should they book the loss if:

#1) $450 is at or above their cost of production and they have sufficient cash reserves.
#2) In their agreements, they have agreed to never be vulnerable to margin call risk.

Since #2 is the case, there is no cashflow or collateral risk (margin posting not required), so I don't see why they should mark to market. I assume they are already depressing the value of the assets correlated to this hedge loss.

But my point is the hedge loss is in itself at odds with that wording I just boldfaced. So looks just like a source of ambiguity, or perhaps the wording was incorrectly written.

Quote from scriabinop23:

Gold is for sissies.

I thought this is a trader board where you guys look for vol. No vol in gold.

At least lets consider silver...

Or ...

Rhodium is where the action is at.
Only 800oz produced per year annually.

OMG I thought you were a trader, not some wussy annual report sniffer.

Oh the hypocrisy...

 

[scriabinop23]

Quote from infolode:

OMG I thought you were a trader, not some wussy annual report sniffer.

Oh the hypocrisy...

Nice..

I'm buying Rhodium. My time frame is long because I haven't been able to cut it like all of you profitable guys (and believe me, I've tried and lost a lot attempting)... Some of us just aren't cut out to read the tea leaves so well.

But my point stands. Why trade gold on leverage when you can trade Rhodium without and get the same gain potential?

 

[thriftybob]

Quote from scriabinop23:

Yea but did you see my point: they have the right to sell the gold at higher than the ~$435-450 price if market price is higher. I haven't read all the details of this structure, but it just looks like a method they've secured their financing. The way it reads (what I boldfaced), it looks like they are holding 95000 (100 oz denominated) OTC gold put contracts with average maturity about 5-6 yrs out, at strike price of mid 400s...

Why should they book the loss if:

#1) $450 is at or above their cost of production and they have sufficient cash reserves.
#2) In their agreements, they have agreed to never be vulnerable to margin call risk.

Since #2 is the case, there is no cashflow or collateral risk (margin posting not required), so I don't see why they should mark to market. I assume they are already depressing the value of the assets correlated to this hedge loss.

But my point is the hedge loss is in itself at odds with that wording I just boldfaced. So looks just like a source of ambiguity, or perhaps the wording was incorrectly written.

Its like a perpetual hedge option out till 2017. It means they can't sell those projects, I'd guess, but beyond that it means they get away with it having no effect on current earnings that they sold 9.5 mm oz forward well below current prices.

I think they are ADDING to the cost and value of those projects the cost of the hedge. It will eventually mean that when they do mine them, the cost will be that much higher, I think, but of course, that won't be part of "cash cost", LOL.

If it was a few hundred thousand oz, I don't see it would matter, but when its 9.5 mm oz and its a large percentage of the gold in the projects, and the projects are immensely expensive ones (like cost $5 billion just to get the power line), I wonder what the business purpose of it all is, and if the accounting is really honest.

 

[infolode]

Quote from scriabinop23:

Nice..

I'm buying Rhodium. My time frame is long because I haven't been able to cut it like all of you profitable guys (and believe me, I've tried and lost a lot attempting)... Some of us just aren't cut out to read the tea leaves so well.

Good luck with the Rhodium--You'll need it.

 

[scriabinop23]

Quote from thriftybob:

I'm a cost accountant and even I get fooled, but not twice by the same trick.

Suffice to say that things aren't always what they seem, and that "cash cost" is a number they die very quickly and very surely below. Above it they just die more slowly without profit.

I wish Barrick had a straightforward balance sheet, cashflow statement, etc... like a counterpart such as Newmont. Everything is all over the place. They don't like the word depreciation or depletion even (instead they use amortization). It's a real pain in the ass to just find anything in those statements.

 

[scriabinop23]

Quote from infolode:

Good luck with the Rhodium--You'll need it.

heheh... its a small position of a diverse precious metals portfolio. My entry point is at these prices, so let the races begin..

 

[infolode]

Quote from scriabinop23:

heheh... its a small position of a diverse precious metals portfolio. My entry point is at these prices, so let the races begin..

Well, good luck. Lease?

 

[scriabinop23]

Quote from infolode:

Well, good luck. Lease?

Kitco pool, I assume you mean to be asking. So counterparty risk galore. Such is the game eh?

 

[infolode]

Quote from scriabinop23:

Kitco pool, I assume you mean to be asking. So counterparty risk galore. Such is the game eh?

Well one never knows, you may have a wild one on the ropes. Happy trails.