[miningmx.com] – IN the Nineties, AngloGold set aside time in its quarterly presentations for an update of its hedge book, then managed by the late Kelvin Williams to whom the idea of not fixing a price for gold was anathema.
That was when the gold price tended to head down rather than up, and price volatility was to be avoided. These days, hedging is something of a dirty word even though gold is in a bear market again.
Finn Behnken, head of corporate development (Africa) for precious metal specialist company Auramet International, thinks there is a strong case for miners to actively manage the price that they receive for their precious metals and this may include hedging, or as he calls “de risking price downside’.
He certainly doesn’t believe that just accepting the sales price of gold or platinum on the fix to be the ideal solution.
“What if mining companies didn’t price the gold when you delivered the gold, but a bit before, or afterwards’ he said in an interview. “Auramet can offer these solutions to gold and platinum companies despite where the physical metal ends up’.
In the case of Royal Bafokeng Platinum (RBPlat), its sales agreement with Anglo American Platinum, which refines the platinum group metal (PGM) concentrate supplied to it by RBPlat, means it can’t determine the price, and hence immediate profitability, for several months until the metal is sold by the refinery.
When it publishes accounts, it has to provide a revaluation of the pipeline to take account of the basket of PGMs several months after concentrate delivery. In the current market, where metal prices are falling, that’s quite a negative.
Few companies are as perversely affected as RBPlat, but Behnken believes gold companies could benefit by selling gold to his company up to 30 days before delivery depending on how advantageous the market looks.
“Gold producers drop the metal off at Rand Refinery and just take the AM or PM fix,’ he said. “Auramet, however, can price the gold before its delivered to Rand Refinery, and actively work markets to take advantage of any runs.’ Auramet takes a commission.
The company was founded 11 years ago by members of Standard Bank’s New York offices and transacted 2 million ounces of PGM and 5 million ounces of gold in 2014.
It doesn’t speculate on the preciouses metals it receives from gold producers, so remains unconflicted, but sells the metal on to consumers including the automotive, jewellery and dental sectors.
It also provides merchant banking providing bridging capital, pre-production financing and working capital which in the current straitened times is much in demand.
Behnken was previously with Nedbank Capital’s mining team, but from 2010 he worked as an executive for Pallinghurst Resources where he was CEO for Tshipi e Ntle Manganese Mining which developed the 2.4 million tonne/year Tshipi Borwa mine in South Africa’s Northern Cape province.
