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New Gold Inc. (TSX:NGD,NYSEMKT:NGD) announced that it’s entered into gold price option contracts that cover the remaining 270,000 ounces of its 2016 production.
New Gold Inc. (TSX:NGD,NYSEMKT:NGD) announced that it’s entered into gold price option contracts that cover the remaining 270,000 ounces of its 2016 production.
As quoted in the press release:
New Gold purchased put options with a strike price of $1,200 per ounce covering 270,000 ounces of gold and simultaneously sold call options with a strike price of $1,400 per ounce covering an equivalent 270,000 ounces. The contracts will cover 30,000 ounces of gold per month for nine months beginning in April 2016. The net cost of entering into the option contracts was $2 million. In aggregate, the option contracts provide the company a guaranteed floor price of $1,200 per ounce while also providing exposure to further increases in the gold price up to $1,400 per ounce. New Gold entered into the contracts in order to further increase cash flow certainty as the company invests in the continued construction of its Rainy River project, which is expected to begin production in mid-2017.
Brian Penny, executive vice president and CFO at New Gold, commented:
We continue to have a positive view on the gold market. Given the meaningful increase in the gold price, we are taking a prudent step to establish a floor price for our revenues through the balance of 2016 while maintaining significant exposure to higher prices. Our unique decision to enter into the option contracts is solely a function of 2016 being our most significant year of investment at our Rainy River project. We do not have any plans to enter into any similar contracts beyond this brief nine-month period.
Click here to read the full New Gold Inc. (TSX:NGD,NYSEMKT:NGD) press release.