Metorex, the midtier multicommodity mining group, has taken advantage of the recent strength in the rand/dollar exchange rate.
At the time of its acquisition of the Barberton gold operation, Metorex entered into forward gold sale contracts to provide security for the repayment of a six-year loan raised from a consortium of bankers.
The contracts for the forward sales of gold during the financial years ending June 2007, 2008 and 2009 contained sufficient “unrealised” profit for the company to close and realise these contracts and repay the outstanding debt for the corresponding period.
This will effectively reduce the company’s debt equity ratio and provide an unhedged position from July 2006, at which time Barberton will be debt free.
The closure of these contracts provides an added advantage of reducing the finance charges on the debt by about R5-million a year for the ensuing two years.
Until July 2006, Barberton has 70% of its gold sales hedged at a price of R103 000 rand per kilogram (current price about R79 000 per kilogram). — I-Net Bridge