TSXV:CAV.H - Post by User
Post by
member321on May 10, 2011 9:38pm
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Post# 18557346
Annual Report
Annual Reportpage 27 outlines the hedge program. Here it is:
"Baja completed a zero cost collar copper hedge program, which was a significant component of the conditions for the debt financing.
"MMB purchased put options with a strike price of US$5,291/tonne (US$2.40.lb) and sold call options with an average strike price of US$8,760/tonne (US$3.97/lb) for 50% of the estimated copper production for the three-year period January 2014 to December 2016, inclusive, totallying 87,360 tonnes of copper. This program did not require any upfront outlay of cash by MMB.
"These contracts ar financially settled, monthly, based upon the London Metal Exchange monthly average copper cash price ("Copper Price") at the time of copper sales from Boleo. The effect for revenues from copper sales will be as follows:
- If the Copper Price is less than or equal to US$5,291/tonne (US$2.40/lb) MMB will receive the put strike price. This establishes a price floor at US$5,291/tonne (US$2.40/lb), in accordance with the project financial model.
- If the Copper Price is between US$5,291/tonne (US$2.40/lb) and US$8,760/tonne (US$3.97/lb): MMB will receive the actual copper spot price.
- If the Copper Price is greater than or equal to the US$8,760/tonne (US$3.97/lb): MMB will receive the call strike price.
"The remainder of Boleo's copper production over its anticipated 23 year mine life will be sold at spot copper prices. Boleo's cobalt and zinc sulphate production will be sold a prevailing market prices."