LEHMAN’S HEDGE BLAMED FOR NORTON DIVE
Written on the 15 October 2010
A GOLD price hedge with embattled firm Lehman Brothers in the US has led Brisbane-based Norton Gold Fields Limited (NGF) to record a net loss of $32.8 million for FY10.
Norton managing director Andre Labuschagne (pictured) says the company does not plan to hedge prices again after the litigation case with Lehman, but is content with a result that has boosted the company’s cash levels for FY2011.
“The financial adjustment came due to the hedge we had on the mark-to-market with Lehman in 2007 when the gold price was around AUD$875 an ounce, while in June this year it went up to around $1300 an ounce,” he told brisbanebusinessnews.com.au.
“Lehman had a litigation case against us, but because they were in administration we had a legal view that we didn’t need to pay anything, so for the last six months we have been negotiating a deal.”
Norton was able to reach an agreement with Lehman for a discount and that the hedge would be turned into debt, which has increased the company’s cash position, along with the recent partial conversion of $38 million in convertible notes.
“The company finished with $68.5 million cash at the bank and gearing of around 67 per cent,” says Labuschagne.
He says the company plans to produce consistent levels of gold while also reducing costs, highlighting that debt has been reduced from $135 million to $97 million.
“In 2010 gold production was a record 140,436 ounces, Norton raised capital at a premium to the market, two new mines were established and the company is now unhedged,” he says.
“I would like to think we will look back over the second half of FY2010 and view it as a watershed for the company. The positive outcome is we are now much better structured and fully focused on the sharper efficiency required to achieve our goals.”
The result is almost double last year’s loss after tax of $16.8 million, but Labuschagne thinks 2011 will be a better year.
“2011 will see a renewed focus on improving production and reducing cash operating costs, and as seen by the redemption and conversion of the convertible notes earlier this week, we will continue to seek opportunities to reduce our debt position,” he says.
NGF shares fell 2.4 per cent today to $0.20.