THE BOURSE WHISPERER: Evolution Mining (ASX: EVN) announced a new hedging deal, under which the company has sold forward 300,000 ounces of gold at an average price of $1,638 per ounce with scheduled deliveries out to 31 December 2019.
According to Evolution the new hedging deal includes 100,000 ounces of gold for delivery in FY16 with the remaining 200,000 ounces scheduled for delivery during the January 2018 to December 2019 period.
The hedge contracts have been entered into with Evolution’s banking syndicate.
The company’s total gold hedge book now stands at 821,311 ounces of gold at an average price of $1,590 per ounce.
Evolution outlined the objective of the additional gold hedge, explaining it is to take advantage of the recent rally in the Australian dollar gold price to further protect the company balance sheet.
Evolution is now finalising the Cowal and Mungari acquisitions, after which it anticipates to have a gearing ratio of approximately 27 to 28 per cent.
The company believes the additional hedging underpins cash generation from its production portfolio to ensure its gearing levels remain well controlled.
“We saw this as an opportune time to lock in additional hedging with the Australian Dollar gold price trading close to three year highs,” Evolution Mining finance director and CFO Lawrie Conway said in the company’s announcement to the Australian Securities Exchange.
“Evolution remains strongly leveraged to any potential upside in the gold price with the hedge book accounting for less than 25 per cent of the company’s expected production over the next five years.
“The additional hedging for FY16 locks in a higher level of near term cash flow which will be used to pay down debt at an accelerated rate.”