more thoughts on the gold certificates and the financing.
they stated in their press release that the gold certificates we're supposed to supplement the comex, that is, create a future buying opportunity that the purchaser can rely on. you're buying delivery later on at a certain price.
500,000 certificates at $500 a pop. let's say that aoag only requires 10% upfront, or $50. if they sold 50,000 certificates, that would generate $2,500,000 upfront, probably plenty to get this mining stuff going for 2009. therefore, getting the financing rolling upfront may not be as difficult as it appears.
now to the question of price. there has been a lot of speculation about how much money these certificates would generate. yes, if they sold them at par, "only" $500 per certificate. however, they could be sold at a discount or at a premium depending likely on two things. first, the belief of the purchaser that aoag could deliver. that would be a purchase point discounting mechanism as would a low price of gold at the time the certificate were purchased.
but a premium purchase impact would be if the price of gold were high at the time the certificate were purchased. for instance, if the price of gold were $1,000 when the certificate is sold, don't you think that aoag would sell it at a premium to the par $500 face value of the certificate? of course they would. and the premium amount would depend on the countervailing discount related to aoag's ability to deliver the gold later.
starting to get the picture? we don't give up the upside and the amount of the upside depends on the spot price of gold when we sell the certificate and the discount of delivery risk. also, if the gold price is steadily moving up and the market is hot, the premium paid should be very close to the spot price, not the certificate price.
heck, the first certificates sold might even be sold at a premium.
what do you think, blue?
AI
