Capitalizing on record copper prices, Yamana Gold (YRI-T, AUY-X, YAU-L) has locked in prices on production from its Chapada copper-gold project in Goias state, Brazil.
Yamana reported the forward sale of 90 million lb. (41,000 tonnes) of copper at an average US$2.75 per lb. (US$6,060 per tonne). Chapada, scheduled to start production by year-end, is slated to produce 134,000 oz. gold and 60,000 tonnes copper annually. The forward sale represents about half of 2008 production.
The hedge book includes long call options with strike prices at an average US$3.25 per lb., which Yamana says provide upside for the hedged production should prices go higher than that.
The effect of the sale is to shrink Chapada’s payback period to one year from the two years estimated in the project’s feasibility study. That study had assumed a copper price of US$1 per lb. (US$2,200 per tonne).
London Metal Exchange (LME) prices for 27-month (August 2008) copper were US$6,150 per tonne on May 26, while New York Mercantile Exchange (Comex) prices were US$3.025 per lb. for March 2008 delivery and US$3.125 per lb. for December 2007. Current spot prices on the LME were US$8,301 per tonne (US$3.77 per lb.).
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