Acacia Mining Buzwagi
Acacia Mining, the LSE-listed African gold miner, has entered into zero cost collars in relation to the majority of its gold production from the short life Buzwagi mine.

The agreements provide a guaranteed floor price of US$1 150/oz and also provide exposure to the gold price up to an average of US$1 290/oz covering 136 000 oz of production in 2016.

Acacia Mining's Buzwagi processing plant
Acacia Mining’s Buzwagi processing plant

This has been done in order to mitigate cash flow risk associated with a potential fall in the gold price.

The board of Acacia Mining has also granted management authority to put in place similar agreements for around 120 000 oz of Buzwagi production in 2017.

“We are taking a prudent step in locking in a gold price in excess of our planning price at Buzwagi, our shortest life asset which is in harvest mode, says Acacia Mining CEO Brad Gordon.

“The mine generates the majority of its future cash flows over the next two years, and by putting in place these zero cost collars we reduce the gold price risk associated with this cash flow, while maintaining some exposure to future upside,” he adds.

Gordon explains that the maximum gold production covered by the hedges represents around 15 % to 20% of the company’s planned group production in both 2016 and 2017. “We are, and plan to remain, fully unhedged at our long-life assets, Bulyanhulu and North Mara,” he said.

[quote]Bulyanhulu and North Mara, also located in Tanzania, are expected to help alleviate the company’s financial difficulties by generating strong cash flow for the company in a time when as gold prices remain low and costs remain high.

The Buzwagi mine in Tanzania is a low grade bulk deposit with a single open pit. Since commencing commercial production in 2009, the mine has produced over 900 000 oz of doré and copper/gold date.

Acacia Mining said that it would provide further updates with respect to the hedging position in its quarterly results releases.