Caledonia Mining enters cap-and-collar gold hedge contract

Caledonia Mining Corporation has entered into a zero-cost contract to hedge around 25% of its 2022 target gold production at Blanket, it announced on Thursday, via a cap-and-collar hedging contract for 20,000 ounces of gold over a period of five months from March to July.

The AIM-traded firm said the hedging contract had a cap of $1,940 and a collar of $1,825.

That meant that for the 4,000 ounces of gold per month for the period, it would receive an effective gold price per ounce of at least $1,825 and less than $1,940.

It would receive an effective spot gold price between those two levels.

“Hedging gold production is not an easy decision for a gold miner as investors usually wish to maximise exposure to gold price upside,” said chief executive officer Steve Curtis.

“However, given the fact that our capital expenditure phasing is heavily weighted towards the first half of 2022 as we ramp up gold production, the board considered it prudent to take advantage of the current strong gold price to protect the balance sheet during this phase of higher capital investment with a five-month hedging arrangement over a portion of our production.”

At 1451 GMT, shares in Caledonia Mining Corporation were down 0.55% at 910p.