Hedging summary With zinc blasting through $1.30, it is time to look at the hedging program again. There is a good summary of the hedging program in the Corporate Presentation:
- Q3 2020 - Executed on a hedging program covering ~ 50% of forecasted zinc payable production (72.5Mlbs) over a six-month period - October 2020 to March 2021 through put options and forward swaps.
- Q4 2020 - Extended the hedging program by fixing the price of zinc at $1.23 lb for ~25% of the forecasted zinc payable production (59.5Mlbs) over the period April 2021 to end of December 2021.
- January 2021 - As part of the business plan to restart Caribou we fixed the price of 80% of the forecasted zinc payable production (115.0Mlbs) at $1.25 per pound from April 2021 to end of December 2022.
I agree with the hedging shown in green. I disagree with the hedging shown in red. Zinc is in a bull market, and treatment costs were coming down. There was no reason to hedge from April to December. As of today, the 59.5M lb hedge shows a loss of 59.5 x (1.23-1.31) = -$4.8M. Yes, -$4.8M is not the end of the world, but it is still a lot of money to lose for no reason. Thank goodness they only hedged 25%. This could have been a lot worse.
Have I mentioned that zinc is headed to $1.50? Mark my words!