(Ecofin Agency) - Caledonia Mining announced it has sold forward 15,000 ounces of its gold production under a six-month collar and cap arrangement. Collar price is $US1,050 per ounce and cap price is $US1,080 per ounce. With this insurance, the mining firm will deliver the gold within the timeframe of contract, six months, with a weekly payment.

Upon each payment, the range will serve as reference. If the price of gold falls below the set collar ($US1,050), Caledonia will receive the difference from the collar multiplied by the hedged ounces. If the price falls within the range, Caledonia will pay the hedge counterparty, the excess over the collar value, multiplied by the hedged ounces. If the price exceeds the cap value ($US1,080), Caledonia will pay the difference between collar and cap values, multiplied by hedged ounces.  

The London-Toronto listed mining company said this arrangement gave it more clarity over cash flows until July 2016, where production at its Blanket mine is expected to increase. This projection is based on the 6-year investment programme which the firm is carrying out at the Blanket mine. This programme involves a $US70 million investment to add about 80,000 ounces to the mine’s annual output. Initial results are expected in July.

Production of Blanket mine will always go to the gold refiner and security printer, Fidelity Printers and Refinery, property of Central Bank of Zimbabwe.

Stéphanie C. TOHON