Sumatra completes hedging program for Tembang gold project
Monday, November 3 2014 - 02:49 AM WIB
ASX-listed Sumatra Copper & Gold plc announced Monday it has completed a hedging program required by lenders for the financing of its Tembang gold project in southern Sumatra.
As has been previously reported by this portal, Sumatra Copper & Gold?s wholly owned subsidiary, PT Dwinad Nusa Sejahtera, signed in October a senior secured debt facility of up to US$45 million with Nomura Singapore Limited and Indonesia Eximbank for the purpose of developing the Tembang gold project.
?The (loan) facility required that the company enter into hedging equivalent to 50 percent of gold and silver production during the first two years of operation. On October 31, 2014, the company completed this hedging program,? Sumatra Copper & Gold said in a statement.
The program was arranged using a capped forward structure as follows, the statement said.
? 42,000 ounces of gold were hedged at a strike price of US$1,108.50 per ounce. Where the gold price at the time of delivery is below $1,428.50 per ounce, the company will receive a gold price of $1,108.50 per ounce. Where the gold price is above $1,428.50 per ounce the company will receive a gold price equivalent to the prevailing gold price less $320.00 per ounce.
? 343,200 ounces of silver were hedged at a strike price of $14.47 per ounce. Where the silver price at the time of delivery is below $21.77 per ounce the company will receive a silver price of $14.47 per ounce. Where the silver price is above $21.77 per ounce the company will receive a silver price equivalent to the prevailing price less $7.30 per ounce.
?Deliveries under the hedge program will commence in November 2015 with equal monthly deliveries of gold and silver. The company will pay a premium of $300,000 for entering into the hedging program,? Sumatra Copper & Gold said.
The hedge program represents approximately 23 percent and 16 percent respectively of the company?s gold and silver ore reserves. The Tembang gold project has low cash costs and considerable potential for expansion of mine life.
The company expects that the remaining conditions precedent to drawdown of the facility will be completed in the near term and drawdown of the initial $40 million of financing will occur during the first half of November 2014.
Editing by Reiner Simanjuntak