Should Capstone hedge their copper sales?I have a question for all of you. Do you think Capstone should hedge some of their future copper production by pre-selling a portion of it at a fixed price? And if so, what would you consider the minimum acceptable price for such an arrangement? $3.50/lb.? $4.00/lb.?
Obviously, the advantage to such a hedge is protection from downside risk - from possibly lower copper prices in the future. The disadvantage is not being able to participate in potentially higher copper prices in the future (to the extent of the percentage of production hedged.) One solution is to make the hedge on only part of Capstone's future copper production and not on all of it.
I have no preconcieved idea on this issue and am simply curious what others think, so fire away!