- Mid-tier silver producer with significant revenues from lead and zinc production.
- Fortuna wanted to insure a portion of future cash flow funding for certain asset development plans and general corporate needs by hedging a portion of its by-product metal output.
- Client targeted firm floor prices for its lead and zinc production, and sought advice on the percentage of production to be sold forward, over what duration and with what instruments.
- Client hedged a portion of its lead and zinc output using a Min/Max or Collar structure.
- This strategy allowed the client to hedge a large percentage of its lead and zinc at a profitable floor while still participating in market prices up to historically high levels.
CPM Group’s Involvement
- Discussed production with management to formulate optimal hedge ratio and tenor.
- Recommended a hedge ratio and tenor followed by indicative trades.
- Introduced the client to suitable trading counterparties.
- Guided the client through the credit approval process with the counterparties.
- Discussed risk management of each position with management.
- Created a live competitive quoting process where financial institutions compete for best prices.
- Provide ongoing hedge management, market intelligence and advice.