**Alamos Gold Agrees to Prepayment Gold Sale**
Alamos Gold (NYSE: AGI) recently announced that it has entered into a prepayment gold sale agreement worth $116 million. This agreement involves the delivery of 49,384 ounces of gold in 2025. The company plans to use the proceeds from this sale to settle gold forward purchase contracts from 2024-25 that were originally made by Argonaut Gold for a total of 179,417 ounces.
**Reducing Hedge Book Exposure**
By agreeing to this prepayment gold sale, Alamos Gold has effectively reduced more than half of Argonaut’s hedge book and the associated mark-to-market liability. This strategic move not only eliminates risk but also increases the company’s exposure to potential gains from rising gold prices.
**Impact of Acquisition on Hedge Book**
Following the recent acquisition of Argonaut Gold, Alamos Gold inherited Argonaut’s hedge book, which included gold forward purchase contracts totaling 329,417 ounces between 2024-27 at average forward prices ranging from $1,821 to $1,860 per ounce. The company now faces the task of managing the remaining hedge book, which includes forward purchase contracts for 150,000 ounces in 2026-27.
**Continued Evaluation of Opportunities**
Despite reducing a significant portion of the hedge book through the prepayment gold sale, Alamos Gold remains committed to evaluating opportunities to unwind the remaining forward purchase contracts for 2026-27. This proactive approach reflects the company’s focus on optimizing its position in the fluctuating gold market and maximizing potential returns for its shareholders.
Adding insight:
In a volatile market like precious metals, managing hedge books effectively can make a significant difference in a company’s financial performance. By strategically utilizing prepayment gold sales and continuously evaluating opportunities to unwind contracts, Alamos Gold demonstrates a proactive approach to risk management and financial optimization. This not only mitigates potential downsides but also positions the company to benefit from any positive movements in gold prices, allowing for enhanced profitability and shareholder value.
