Sumatra Copper & Gold completes Tembang hedging
THE BOURSE WHISPERER: Sumatra Copper & Gold (ASX: SUM) has finalised a hedging program for the Tembang gold project in Indonesia.
In October 2014 Sumatra Copper & Gold announced its wholly-owned subsidiary, PT Dwinad Nusa Sejahtera, had signed a senior secured debt facility of up to US$45 million with Nomura Singapore Limited and Indonesia Eximbank for the purpose of developing the Tembang gold project.
The Facility required Sumatra Copper & Gold to enter into hedging equivalent to 50 per cent of gold and silver production during the first two years of operation.
The program has now been completed and was arranged using a capped forward structure as follows:
42,000 ounces of gold were hedged at a strike price of US$1,108.50 per ounce. Where the gold price at the time of delivery is below US$1,428.50 per ounce the company will receive a gold price of US$1,108.50 per ounce. Where the gold price is above US$1,428.50 per ounce it will receive a gold price equivalent to the prevailing gold price less US$320.00 per ounce.
343,200 ounces of silver were hedged at a strike price of US$14.47 per ounce. Where the silver price at the time of delivery is below US$21.77 per ounce Sumatra Copper & Gold will receive a silver price of US$14.47 per ounce. Where the silver price is a bove US$21.77 per ounce the company will receive a silver price equivalent to the prevailing price less US$7.30 per ounce.
The company anticipates deliveries under the hedge program will commence in November 2015 with equal monthly deliveries of gold and silver.
Sumatra Copper & Gold will pay a premium of US$300,000 for entering into the hedging program.
“The hedge program represents approximately 23 per cent and 16 per cent respectively of the company’s gold and silver Ore Reserves,” Sumatra Copper & Gold said in its ASX announcement.
“The Tembang gold project has low cash costs and considerable potential for expansion of mine life.
“The company expects that the remaining conditions precedent to drawdown of the Facility will be completed in the near term and drawdown of the initial US$40 million of financing will occur during the first half of November 2014.”