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Coeur Mining, Inc. Message Board

  • edmundaronson edmundaronson Mar 7, 2013 8:39 AM Flag

    hl about to hedge gold

    after cde experience isn;'t this foolish-will they have same accounting problems -nsxt will be furious--why is hl this desperate for aurizon-do they need gold to stabilize company while building out greens creek-building and mining at same time delicate operation i would think-

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    • All depends on the strike of the hedges. About 2 yrs. ago when silver was running up to $49-50, I suggested Coeur hedge part of their silver production somewhere in the $40+ area. All I got where howls of protest by you and your likes. Looks like a pretty good call that Coeur missed and you dissed. Oh well, par for the course.

      Regarding HL hedging gold production, how well are their by-products are doin' ? Hedging is a great tool when you manage near the top of price channels. With miner management seemingly closer to the supply/demand fundamentals than others, it ought to fairly easy to lock in higher price hedges. HL's proposed gold hedge some where in the $1500(see nsxt's post of HL message board)is pure give away and management ought to be run out on a rail for suggesting such a low strike if that is indeed the price level suggested.

    • Ed_ I don't see it as an act of desperation. Hecla has made it abundantly known they are looking for an acquisition and this seems on the surface as good as they will find in producing property. Much as some of us on the board think it is wise for Coeur to pick up cheap properties at this time, so I see it with Hecla. I am not aware of any major build-out at Greens that will interrupt their production which should be improved this year. I do see a need to fill the gap in total production while building out the future of Lucky Friday until at least 2016.

      I am ignorant on what type of arrangements are available be meet the definition of "hedging" in this instance but for sure it would be unpleasant to see them tying up a fixed price/specific ounces of gold for a long period without a buyout clause. When gold makes its big move next time, I expect the mining shares will out pace the metal price by a substantial degree. If so, a paper loss under the GAAP rules would make much difference. If, however it was an agreement that kept HL trapped into today's prices even if gold went to $5,000/oz, I would see some long term pain.

      Snooky makes a good point... if we would have followed his hedging advise with Coeur... But, then again, what if? With hedges, the upside is locked and known but the downside in paper loss is unlimited... as in infinite. In the extreme case where a fixed amount delivery is required and the mine(s) should have problems, one could envision real losses buying in the meet the contract. One could of course hedge the hedge but then when one gets into third tier derivatives it becomes like a bank to me. Just my thoughts. As an owner of HL shares, I am hoping the deal goes through and HL management knows what the heck they are doing with the hedge factor...and by the way, I don't believe for a second that HL has an option if they are to get the loan.

    • why hug gold when you can hug more silver

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