Hedging 25% through 2021 was probably a mistake I fully support hedging when there is too much risk in not hedging. In the case of Trevali, hedging through Q1-21 made sense because they do not establish the new treatment costs until the end of Q1. They are retroactive for Q1, but still, hedging would eliminate uncertainty until the treatment cost is established. After the new treatment cost is established, Trevali will likely save $.10 per pound of zinc. This makes hedging after Q1-21 totally unnecessary. With the new treatment cost, Trevali will do just fine as long as zinc is over $1.10, and the chance of it dropping below that in 2021 is very low.
Because of this, I rate hedging in Q2-21 through Q4-21 as yet another bone headed management decision. We are just lucky it was only 25%.
Now if they do reopen Caribou, then I have no problem at all with hedging all of Caribou’s production, but it needs to be at a higher level. Selling Caribou zinc at $1.30 is just not even worth the trouble.