Resolute extends hedge to half of 2019 production as gold scales fresh highs

RESOLUTE Mining today extended its hedging program after it sold 30,000 ounces of gold for delivery between January and June next year at $1,519/oz.

The outcome is that Resolute has hedged about 48% of total production equal to some 214,000 oz assuming annualised guidance for its 2019 financial year. This includes output from Mako Gold Mines, the 156,926 oz/year mine bought in its takeout of Toro Gold in a $274m cash and shares transaction announced on July 31.

Resolute said “… the objective of this hedging is to secure price certainty for a portion of the US dollar revenues generated from Resolute’s African gold mines: the Syama Gold Mine in Mali and the Mako Gold Mine in Senegal”.

Resolute has an existing US dollar forward gold sales program which consists of 50,000 oz  sold at an average price of $1,337/oz in monthly deliveries scheduled to December 2019. The total book previously consisted of 190,000 oz in monthly deliveries out to June 2020 representing less than 3% of Resolute’s ore reserves.

“We continue to actively manage our gold sales and undertake near term hedging to take advantage of gold price volatility, maximise revenues, and protect the company’s balance sheet,” said John Welborn, MD of Resolute Mining.

Not everyone is a fan of hedging their gold production.

Kelvin Dushnisky, CEO of AngloGold Ashanti, said today during the firm’s interim results announcement that his company planned to stay fully exposed to the spot price of gold which is some $150/oz stronger year-to-date. The company has a break-even of $1,200/oz and is expected to generate a 33% cash margin at current spot. At more than R720,000 per kilogram, the rand gold price is at an all-time record high.

Welborn, however, said Resolute remained “… strongly leveraged to further upside in gold prices” owing to its “… long mine lives, large gold inventories, and production growth profile”.