23rd Feb 2016 08:08
LONDON (Alliance News) - Acacia Mining PLC Tuesday said it has mitigated the risks associated with gold prices at its short-life Buzwagi mine in Tanzania after it hedged the majority of its production from the mine this year.
"We are taking a prudent step in locking in a gold price in excess of our planning price at Buzwagi, our shortest life asset which is in harvest mode," said Chief Executive Brad Gordon.
Acacia has entered into zero cost collars that guarantee a floor price of USD1,150 per ounce of gold from the mine and provides exposure to a gold price of up to USD1,290 per ounce.
To put that into perspective, spot gold was trading at USD1,217 per ounce on Tuesday morning.
The agreements cover 136,000 ounces of gold from Buzwagi in 2016, as Acacia takes measures in case gold prices come back under pressure and begin to fall. Acacia said its board has also "granted management authority" to make similar agreements for 120,000 ounces of gold from Buzwagi in 2017.
"The maximum gold production covered by the hedges represents around 15% to 20% of our planned group production in both 2016 and 2017. We are, and plan to remain, fully unhedged at our long-life assets, Bulyanhulu and North Mara," said Gordon.
Acacia said it will provide an update in its next set of quarterly results.
"The mine generates the majority of its future cash flows over the next two years, and by putting in place these zero cost collars we reduce the gold price risk associated with this cash flow, while maintaining some exposure to future upside," said Gordon.
Acacia shares were down 2.5% to 229.65 pence per share on Tuesday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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