Capricorn Metals (ASX: CMM)
Advised that it has used the recent pull back in the A$ gold price to reduce its gold hedge book by 52,000 ounces to provide further exposure to any increase in the A$ gold price over the next 18 months.
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Capricorn Metals Karlawinda Mine
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| Capricorn Metals | ASX: CMM |
| Stage | Production, development, exploration |
| Metals | Gold |
| Market cap | A$1.83 B @A$4.86 |
| Location | Western Australia |
| Website | www.capmetals.com.au |
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Capricorn Metals – PARTIAL CLOSURE OF GOLD HEDGE BOOK GIVES CAPRICORN ADDITIONAL GOLD PRICE UPSIDE
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Capricorn Metals Limited (ASX: CMM) (Capricorn or the Company) is pleased to advise that it has used the recent pull back in the A$ gold price to reduce its gold hedge book by 52,000 ounces to provide further exposure to any increase in the A$ gold price over the next 18 months.
The gold hedging contracts closed were as follows:
Gold Hedging Contracts Closed
Maturity / Ounces / Price (A$/oz)
30/09/2024 12,000 2,327
31/12/2024 12,000 2,327
31/03/2025 10,000 2,327
30/06/2025 10,000 2,327
30/09/2025 8,000 2,327
52,000 2,327
The closure results in Capricorn having no current gold forward sale delivery obligations until 31 December 2025.
As part of the closure Capricorn also purchased gold put options (for the same volume and maturity as the closed hedge contracts) as follows:
Gold Put Options Purchased
Maturity / Ounces / Strike Price (A$/oz)
30/09/2024 12,000 3,432
31/12/2024 12,000 3,432
31/03/2025 10,000 3,432
30/06/2025 10,000 3,432
30/09/2025 8,000 3,432
52,000
The purchased put options give Capricorn the right (but not the obligation) to sell the previously hedged ounces at a price of A$3,432 per ounce.
This allows Capricorn full participation if the gold price is higher than the strike price on the date of maturity of each put option.
The cost of closure and purchase of put options (at a spot price of A$3,482 per ounce) was $69.6 million, paid out of Capricorn’s cash and bullion holdings of $177.8 million (31 March 2024).
Having closed 52,000 ounces of hedging at a spot price of A$3,482 per ounce, every A$50 per ounce increase in the gold price above A$3,482/oz enhances revenue on the previously hedged production by $2.6 million.
The revenue downside on these ounces (relative to A$3,482/oz) is limited to a maximum of $2.6 million by the purchase of the A$3,432/oz put options.
This closure follows execution of a similar strategy in June 2023 under which 51,000 ounces of gold hedging was closed, leading to revenue enhancement in FY24 of approximately $13 million after closure costs as Capricorn increased its exposure to the rising gold price over that period.
Capricorn’s gold forward sales commitments have been reduced to 55,000 ounces at an average delivery price of A$2,327 per ounce, maturing from December 2025 to December 2026.
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“This represents less than 5% of gold reserves at the operating Karlawinda Gold Project and less than 2% of Capricorn total gold reserves*.
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To View Capricorn Metals’ historical news releases, please click here
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To read the full news release please click HERE
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Disclosure
At the time of writing the author holds shares in Capricorn Metals.
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