The lotus effect explained
The first part includes forward contracts at fixed prices, which appear to be a traditional and conventional instrument, though not typical for a large-scale producer like Polyus.
The company intends to sell 310,000 ounces of gold at a price of 1,321 per ounce starting from July 1, 2014 to June 30, 2016.
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When prices were high, gold producers did not enter into hedge contracts, resorting to them only for project financing.The second tranche will see 120,000 ounces sold annually in the course of three years and 360,000 ounces during the last year.In fact, the company has deliberately rejected the possibility of a sharp rise in gold prices and took care to maximize its revenues in a market situation considered most likely.The commissioning of the first stage of the Natalka Mining Division, initially scheduled for the end of 2013, was postponed to the summer of 2015 due to poor market prices.Within the first tranche, Polyus will sell 300,000 ounces of gold annually during the first three years of the programme, whereas in the fourth and the last year the company will sell as much as 900,000 ounces.It was in February of 2013 that gold peaked and started to decline on the background of a possible QE3 phasing-out by the United States, slower growth in China and the sale by Cyprus of some of its gold reserves.
Polyus is pursuing a strategy consisting of two parts.
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In the first 9 months of 2014, the hedging programme brought Polyus 11 million of additional income: the company sold 144,000 ounces of gold at a price of 1, 371, while the weighted average price for gold in this period reached 1,293 per ounce.
He said that the company resorted to hedging, if the forecast for gold prices in the budget did not allow servicing the current debt or current activity.
When using any material from the site reference to is obligatory.Petropavlovsk was prudent to enter into the first contract in February 2013, after a long break, putting in about 47 of annual production (399,000 ounces) at an average price of 1,663 per ounce.In 2004 to 2007, Polimetall (later turned into Polymetal once Russia's largest producer of silver, used to sell large amounts of this precious metal at fixed prices to Standard Bank London (subsequently succeeded by ABN amro which organized a syndicated loan for this company.Aspect Ratio:.33 : 1, see full technical specs edit, did You Know?Polyuss other operations have lower production costs and they will not be subject to hedging, the company said.A negative outlook for gold prices and capital-intensive projects make the largest Russian gold miners increasingly resort to hedge contracts.Polyus will need 320 million to finance capex at Natalka, while the overall level of capital expenditures totaled.3 billion.The second part of the program is a series of options, called zero cost Asian gold collars or revenue stabilizers, under which Polyus Gold may sell up.52 million ounces of gold (surpassing the level of production in 2013.5 times).Currently, Nordgold is implementing two development projects: one is Gross in Yakutia (requiring 300 million in capex and awaiting the decision to be launched after the company will obtain a construction permit depending on market conditions) and the other is Bouly in Burkina Faso (wh.If gold will be traded in the range of per ounce, Polyus Gold will again sell its goods at market prices.Let us describe how it works taking the mentioned tranche as an example in which there is a possibility to sell maximum amounts of gold.Petropavlovsk set the price at 1 200 per ounce for 2014 and therefore this year it was reasonable to have hedge contracts at a price not lower than this level.