Capricorn Metals Limited (ASX:CMM) Closes Gold Hedging to Boost Cash Flow
Hedging Strategy Closure
Capricorn Metals Limited has closed all remaining 55,000 ounces of its gold forward sale hedge contracts through a bilateral transaction with Macquarie Bank Limited. This strategic move increases the company’s direct exposure to potential gold price upside and preserves cash reserves for developing the Karlawinda Expansion Project and the Mt Gibson Gold Project.
Financial Impact
The closure and purchase of gold put options cost $147 million, funded by issuing approximately 17.7 million new ordinary shares at an issue price of A$7.90 per share, resulting in a 4.3% dilution. The purchased put options cover 50% of the hedged volume, allowing Capricorn to cap the downside risk while fully participating in gold price increases.
Revenue Enhancement
Every A$50 per ounce increase in gold price above the spot price enhances revenue by $2.75 million, expected to significantly accrete FY26 and FY27 free cash flow. The strategy has previously delivered approximately $36 million in revenue enhancements after closure costs.
Future Outlook
Following the closure, Capricorn’s only remaining gold derivative is a 16,700 ounce call option at a strike price of A$2,260 per ounce, representing about 1% of gold reserves at the Karlawinda project. The company’s cash position remains fully available for project developments without further debt or mandatory hedging.
Executive Comments
Executive Chair Mark Clark noted, “This closure of gold hedging is a continuation of the active hedging management strategy Capricorn has successfully used to enhance revenue and cashflow in a rising gold price environment over the last 2 years. The bilateral transaction to issue equity to Macquarie to close the hedging has given Capricorn the potential to further enhance future operating cashflow and preserve existing cash holdings for the development of our exciting growth projects at a very modest dilution to current shareholders.”
Motley Fool contributor Kiarra Jackson has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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