LONDON (Dow Jones)--Albidon said Thursday that it has forward hedged 9,020 tonnes (164 tonnes per month) which represents less than 15% of the Munali project's expected payable nickel production and no more than 26% of payable nickel from production in any one year.
The hedging commences in June 2009 which allows for full production ramp up from mid 2008 and provides exposure to the spot price of nickel for the first 12 months of production. The hedge prices commence at $30,831 per tonne in mid 2009, stepping down in line with the forward curve to average $19,146 per tonne in 2013, for an average hedge price of $23,606 per tonne, the company said. These prices are substantially higher than those assumed in the Munali bankable feasibility study and the market consensus nickel price forecasts for the hedge period. It is also noted that research by Barclays Capital indicates that only 5% of cash nickel prices observed since 1990 have been higher than D$20,750 tonne and only 10% have been above $15,022 tonne. The company said it has completed the hedging agreements on very favourable terms. This level of hedging is modest and ensures the project is robust by locking in strong operating margins, while at the same time providing a high degree of exposure to upside in cash nickel prices. The production of the other payable metals from Munali is unhedged (copper, cobalt, platinum and palladium). (END) Dow Jones Newswires May 31, 2007 04:03 ET (08:03 GMT) Copyright (c) 2007 Dow Jones & Company, Inc.
