Australian gold producer Capricorn Metals (ASX:CMM) has reduced its gold hedge book by 51,000 ounces to provide further exposure to any increase in gold prices over the next 15 months.
The company reports it cost $36.78 million to close its gold hedging contracts, which was paid out of its cash and bullion holdings of $120 million. The closure spot price was $2,860 per ounce, and the costs included the purchase of gold put options. As a result, Capricorn has no gold hedging delivery obligations until 30 September 2024.
These put options will allow Capricorn to sell previously hedged ounces at $2,810 per ounce, which allows the company full participation if the gold price is higher than the strike price on the date of maturity of each option put.
Due to closing 51,000 ounces of hedging at a spot price of $2,860 per ounce, Capricorn reports every $50-per-ounce increase in the gold price above $2,860 per ounce enhances revenue on the previously hedged production by $2.55 million.
Meanwhile, the revenue downside on these ounces is limited to a maximum of $2.55 million through the purchase of the $2,810 per ounce put options.
Capricorn reports its gold forward sales commitments have been reduced to 107,000 ounces at an average delivery price of $2,327 per ounce, maturing from September 2023 to December 2026. This represents less than 8% of gold reserves at the operating Karlawinda Gold Project and less than 4% of the company’s total gold reserves.
Capricorn Metals is a Perth-based gold producer focused on its Karlawinda Gold and Mt Gibson Gold projects in Western Australia. The Karlawinda Project features a processing plant, which has a long-term production range of between 110,000 and 125,000 ounces per annum. In Q3 2023, the plant produced 30,841 ounces of gold.
Write to Harry Mulholland at Mining.com.au
Images: Capricorn Metals Ltd
