- Fixed forward contract of 2,500 troy ounces of gold
- Price of gold sold A$1,621/Toz on 30 June 2017
- Executed by Sumitomo Corporation Global Commodities Ltd
- Additional hedging capability in place
Southern Gold Ltd (“Southern Gold”, ASX: SAU) Directors are pleased to advise that a small gold hedge has been put in place with Japan’s Sumitomo Corporation Global Commodities Ltd (“SCGC Ltd”).
The hedge is a fixed forward contract to sell 2,500 Toz of gold at A$1,621/Toz. This represents a contract value of A$4,052,500. The forward sale is to be cash settled on 30 June, 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 Ltd 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.
Managing Director’s Comment
Southern Gold’s Managing Director, Mr Simon Mitchell: “It is prudent that the Company locks in a portion of its future cash flow at current gold prices north of A$1,600/oz 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.”