[miningmx.com] — MEXICAN billionaire Carlos Slim’s Grupo Carso conglomerate said on Friday it had bought protection from volatile metals prices through 2013 as the company expands its mining business.
Grupo Carso shares have risen 50% to trade at record highs since August after Slim announced plans to publicly list the Grupo Frisco mining unit of his copper wire, retail, construction and real estate conglomerate.
Currently ranked the world’s richest man by Forbes, Slim has been ramping up mining projects this year, taking advantage of China’s appetite for metals and high prices in commodities fueled by cheap money from major central banks.
The hedging strategy on prices would protect the company from a sharp drop in commodities prices, which could happen once major central bank’s like the US Federal Reserve start to raise interest rates.
The company has previously sought such protection through derivatives contracts, which is common in the mining industry.
HEDGED PRICE EXPOSURE
Grupo Carso said in a statement to the local stock exchange that it had hedged price exposure on percentages of estimated production of precious and industrial metals at new mines.
“This decision has been taken due to the strong speculation and volatility in metals markets,” the statement said. “In the case that prices fall significantly, these units would have good results that would justify the work and investments in process.”
Commodities prices have risen sharply since the US Federal Reserve said in August it may take unconventional steps to restore the economy.
The policies, which amount to printing money by buying securities for the Fed’s balance sheet, are widely expected to push commodities prices higher. The Reuters/Jeffries CRB commodities index .CRB has risen more than 16% since Sept 1.
Grupo Carso ramped up production this year at mines it has owned for years, as well as new mines that are producing gold, silver, copper and zinc.
Grupo Carso said it had hedged 43% of its estimated gold production for the next three years at an average price of $1,189 per ounce, and 26% of its silver production over the same period at an average $18.71 per ounce.
The company also hedged 61% of its expected copper production over three years at an average $3.32 per pound. It also hedged some expected zinc and lead production.