Buenaventura works at its hedge book

Compania de Minas Buenaventura‘s (BVN-N) updated gold hedge book is another attempt by a company to free itself from previous hedging policies and expose investors to gold prices directly.

On Mar. 3 Buenaventura announced it had marginally decreased its yearly commitment of gold oz. As of March 1 with a gold price at or higher than US$451 an oz., the comapny had roughly 2.3 million oz. of gold committed at a price of US$369 an oz. on average from 2006 to 2012.

Those numbers are slightly better than its postion as of Jan. 17 2005, when Buenaventura had roughly 2.6 million oz. of gold hedged at an average price of US $366 an oz. from 2005 to 2012.

The move is in line with the companies 2004 directive to discontinue the hedging introduced in 1998. Hedging was used then to finance some of the company’s more marginal projects. Those projects would otherwise have been funded by profits from the Newmont Mining (NMC-T, NEM-N) operated Yanacocha mine.

Buenaventura holds 43.65% interest in Yanacocha and recognizing investors wanted to benefit directly from the renowned projects profits it structured a long-term hedge book.

That hedge book secured prices of US$350 an oz. for gold and US$6.00 oz for silver and those prices gave the company a surplus that helped cut operating costs at its Uchucchacua and Orcopampa projects.

With costs cut at those two projects the company turned its attention to starting operations at its currently producing Antapite project.

Buenaventura’s recent hedge book restructuring has resulted in annual commitmenets matching annual production from all of its fully owned operations meaning Yanacocaha’s equity is untouched.

Buenaventura is Peru’s largest, publicly-traded precious metals company and a major holder of mining rights in Peru. The Company has mining, processing, development and exploration projects for gold and silver and other metals via wholly owned mines as well as through its participation in joint exploration projects.

It has three wholly owned mines in Peru, controlling interests in four mining companies, and a minority interest in several other mining companies.