GBN.V's Handicap

GBN.V's handicap will be that its share price is held against an option on treasury prices.

The Black-Scholes model in its simplest terms means completely eliminating the risk between a share price change and an option price change. As long as your share price on the gold mine does not advance against gold, and does not pay a dividend, then this eliminates the risk to leverage up 20X against options on treasuries.

It doesn't take three Phd's to figure out that if you pay a dividend, then this completely changes the Black-Scholes model, because you have to account for dividends paid by the equity held against the treasury option. So if you paid out, for example, a mere 5% yield, this would elminate any possibilty of making a profit on a 20X leveraged position, because the risk management did not account for dividends. (hypothetically)

The biggest drop in treasury options is the 30-year US interest rate swap on friday. We didn't see a response in the GBN.V share price immediately, though it will come on the basis that treasury bond prices will decline and GBN.V share prices will rise since they are strongly inversely correlated.

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