Pan American Silver to stop metals hedging
TORONTO (miningweekly.com) – Precious metals miner Pan American Silver would back away from its outstanding silver and gold hedges announced in August, before the end of the year, saying hedging was not part of its fundamental philosophy.
President and CEO Geoff Burns said the company took advantage of hedging as a short-term tactical response to reduce risk during a time of “extreme price volatility”.
"We decided to put the hedges in place. However, our action may have inadvertently sent the wrong message to the market and to our shareholders about our hedging philosophy and our view of the long-term prospects for silver and gold,” he said in a statement on Tuesday.
Burns noted that the company had now become more comfortable that it would realise the benefits of its cost-reduction initiatives and was “considerably” more optimistic about the short-term prospects for both silver and gold; therefore, negating the conditions that initially led it to enter into the hedges.
The company now planned to close out the outstanding hedges through accelerated physical metal delivery and straight repurchasing.
Spot gold prices hit a near three-year low at about $1 180/oz in late June, and spot silver prices hit a low of $18.19/oz in the same month, prompting miners across the globe to cut spending, adjust plans and defer or divest projects, as they struggle to adapt to a low-price environment.
Pan American Silver in August said it had started to hedge part of its production to offset the risk of further price declines and that it had entered into forward contracts of up to a year, which cover up to a quarter of its expected precious metal output.
The company operates seven mines in Mexico, Peru, Argentina and Bolivia and has several development projects in the US, Mexico, Peru and Argentina.
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