Caledonia inks zero-cost contract to hedge 25% of gold output for five months

Caledonia Mining has entered into a zero-cost contract to hedge about 25% of 2022 target gold production at Blanket in Zimbabwe through a cap and collar hedging contract for 20,000 ounces of gold over five months from March to July 2022.
It said that the hedging contract has a cap of $1,940 and a collar of $1,825, meaning that, for the 4,000 ounces of gold per month for the period, Caledonia will receive an effective gold price per ounce of not less than $1,825 or greater than $1,940.
It will also receive an effective spot gold price between these two levels.
"Hedging gold production is not an easy decision for a gold miner as investors usually wish to maximise exposure to gold price upside,” said Caledonia chief executive Steve Curtis.
“However, given the fact that our capital expenditure phasing is heavily weighted towards the first half of 2022 as we ramp up gold production, the board considered it prudent to take advantage of the current strong gold price to protect the balance sheet during this phase of higher capital investment with a five-month hedging arrangement over a portion of our production."

Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished