Southern Gold advises that a small gold hedge has been put in place with Japan’s Sumitomo Corporation Global Commodities Ltd (SCGC). The hedge relates to production from the company’s Western Australian gold operations.
The hedge is a fixed forward contract to sell 2500 troy ounces of gold at A$1621 per ounce, representing a contract value of A$4,052,500.
The forward sale is to be cash settled on June 30, 2017. However, the contract is also able to be cash settled early at any time prior to that date. Arrangements are also in place with SCGC to enable additional hedging should Southern Gold look to do so.
The current quantum of the hedge is less than Southern Gold’s 50% share of gold currently in stockpile and therefore represents a low delivery risk and as such has been executed on an unsecured basis.
Southern Gold’s managing director Simon Mitchell said, “It is prudent that the company locks in a portion of its future cash flow at current gold prices north of A$1600 per ounce and take some of the volatility out of projected earnings, especially given how material they are compared to Southern Gold’s market capitalisation.
“I acknowledge the good work undertaken by the hedge counterparty, Sumitomo Corporation Global Commodities Ltd, which was assisted locally by Royalty Stream Investments, to put this hedge in place. It is an excellent outcome for a company of our size and points to their confidence in Southern Gold’s immediate future. I look forward to working with them again on our new projects currently in the pipeline.”
Southern Gold is a successful gold explorer and producer listed on the Australian Securities Exchange. The company’s main focus is its Bulong Gold Project 30km east of the world-renowned gold district of Kalgoorlie in Western Australia with the flagship Cannon Gold Mine projected to produce around 50,000 ounces. Mining at Cannon has commenced with Westgold Resources mining the deposit under a 50/50 profit share arrangement.
In addition to its cornerstone position in Kalgoorlie, Southern Gold has recently acquired a portfolio of high grade gold projects in South Korea.