a chance of hitting US$1,500 at some point in 2010, I'm scratching my head big time as to why they haven't scrapped the US$541 per ounce prepaid gold sales financing deal with the bank. I would prefer to see Finskiy and Scola use their connections and credibility to arrange for say a $20M credit line for now. Then they can exercise their cheap $.30 warrants down the road as additional funds are required. The $20M credit line plus $15.75M from the warrants is $36.75M, which would be more than enough to compensate for the $33M we would have gotten from the bank for the prepaid gold sales, but we wouldn't have to give up 61,000 ounces @ $541 gold price. Right now, the deal with the bank represents lost revenues of $42M (using the current gold price of US1,225).
The $36.75M plus the $21M from the PP would be plenty enough.
Century can even pay an extremely high interest rate on the credit line, say 10% if necessary. It's far better than the market is paying right now. It's better than automatically losing $42M (+) in revenues.
I guess any deal is better than no deal. It's just odd that Finskiy is willing to accept this when he likely has the connections to do something about it. At the very least, Finskiy should renegotiate the deal with the bank, to make it more balanced. Hopefully the delay in closing the deal is related to Peggy and Finskiy trying to firm up a more balanced deal with the bank. Don't get me wrong, I am extremely grateful that the bank has stepped up to the plate for us. I'm just very uncomfortable with this one sided (shark) approach.
I posted an article a few weeks ago about a company that did a deal for a US1,500 hedge price. There is a major difference between US$1,500 and US$541. It's hard to stomach that. I'll try posting it again in the comment area.
3 comments:
Here is my original post (I originally posted it on Oct. 27th, when the gold was obviously even a lot lower than right now):
A US$1,500 hedge means that there is at least one hedge company willing to bet millions of dollars that the gold price is going well above US1,500 dollars for an extended period of time. This US$1,500 hedge means that someone fully expects to see a sustainable US$2,000 price - they are not betting all this money to just break even.
I know absolutely nothing about this Australian company called Catalpa Resources, but they were able to hedge 352,316 ounces of production for a price around US$1,500. That represents a gross revenue of US$500,000,000 when the ounces get delivered.
I don't think Century's share price will be $.155 per share when Century is producing 145,000 ounces (Lamaque and San Juan combined) @ US$1,500 gross revenue per oz.
Here is part of the article about Catalpa:
Neil Dowling
October 27, 2009 01:00pm
PERTH gold miner Catalpa Resources today announced it planned to pour its first gold in June next year.
In its activity statement for the September quarter, Catalpa says the timetable was based on rapid infrastructure progress at its Edna May gold project near Southern Cross.
It is buoyed by the successful raising of more than $106 million in debt and equity to advance the $92 million Edna May open-pit gold operation to production.
As part of the finance facility, Catalpa says it has sold forward 352,316 ounces of gold at an ``exceptional'' price of A$1557 an ounce.
Perhaps this is where the hold up is? All the moves lately point to this deal closing, but how long does it really take to close the deal that has been on the table since Sept.? Some renegotiation may be holding everything up, and I can't see the renegotiation happening with Finskiy and Scola.
It's all a guessing game until we are told the money is in the bank.
I was thinking the same thing and wondering if anyone would say anything about it. Hopefully they are renegotiating with the bank. Scrapping the deal would throw us back again - something I think we can't afford, but yeah - Finsky can use his influence to do better for a company he has so much stake in. Guess we still have play the old wait-and-see game.
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