Capricorn Metals reduces gold hedge book

Capricorn Metals Limited (ASX: $CMM) has announced the partial closure of its gold hedge book, reducing it by 52,000 ounces to gain further exposure to any potential increase in the A$ gold price over the next 18 months. The closure has resulted in Capricorn having no current gold forward sale delivery obligations until 31 December 2025. The company also purchased gold put options for the same volume and maturity as the closed hedge contracts, providing the right to sell the previously hedged ounces at a price of A$3,432 per ounce.

Executive Commentary

The closure of 52,000 ounces of gold hedging at a spot price of A$3,482 per ounce allows Capricorn Metals to fully participate in any increase in the gold price above the strike price on the date of maturity of each put option. The cost of closure and purchase of put options was $69.6 million, paid out of Capricorn's cash and bullion holdings of $177.8 million as of 31 March 2024. This strategic move follows a similar strategy executed in June 2023, resulting in revenue enhancement of approximately $13 million after closure costs as Capricorn increased its exposure to the rising gold price over that period.

Summary

Capricorn Metals' decision to reduce its gold hedge book by 52,000 ounces and purchase gold put options reflects its confidence in the potential increase in the A$ gold price over the next 18 months. The company's gold forward sales commitments have been reduced to 55,000 ounces at an average delivery price of A$2,327 per ounce, maturing from December 2025 to December 2026. This move represents less than 5% of gold reserves at the operating Karlawinda Gold Project and less than 2% of Capricorn's total gold reserves. The company's proactive approach to managing its gold hedge book demonstrates its commitment to maximizing revenue potential while mitigating downside risks. Capricorn Metals' forward-looking strategy positions it to benefit from any potential increase in the gold price, aligning with its long-term corporate goals and financial objectives.