10th Feb 2016 12:45
LONDON (Alliance News) - Caledonia Mining Corp on Wednesday said it has entered into hedging agreements in relation to the price of gold, in a move to offer it greater certainty over its cash flows up until July, when it expects to generate more cash from a projected increase in production from the Blanket gold mine in Zimbabwe.
Caledonia said it intends to maintain its existing dividend policy of paying 1.125 US cents per quarter.
The company entered into a six-month "cap and collar" hedge over 15,000 ounces of production using a "collar" value of USD1,050 per ounce and a cap value of USD1,080 per ounce. The hedge comprises a series of weekly contracts.
"If the gold price at the end of each contract falls below the collar value, Caledonia will receive the value of the shortfall below the collar multiplied by the hedged ounces. If the gold price at the end of each contract falls between the cap and the collar value, Caledonia will pay to the hedge counterparty the excess over the collar value multiplied by the hedged ounces," the company said.
"If the gold price at the end of each contract exceeds the cap value, Caledonia will pay to the hedge counterparty the difference between the cap and the collar multiplied by the hedged ounces. There are no other fees or expenses arising in terms of the hedge," the company added.
The hedge arrangement is a financial instrument between Caledonia and a financial counterparty. Blanket will continue to sell all of its gold to Fidelity Printers and Refiners in Zimbabwe.
Meanwhile, Caledonia said it has completed the first year of a six-year investment programme, under which it will invest USD70.0 million from 2015 to 2021 with the aim of increasing production to approximately 80,000 ounces of gold by the end of the programme.
Now, the expected level of capital investment between 2015 and 2017 is expected to fall to USD45.0 million from USD50.0 million anticipated at the time of a revision to the company's investment plan in October 2014.
Shares in Caledonia were down 3.3% at 44.00 pence Wednesday.
By Samuel Agini; [email protected]; @samuelagini
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