ACG Metals Ltd (LSE:ACG, OTC:ACGAF) chief financial officer, Patrick Henze, talked with Proactive about the company’s recently announced gold hedging strategy and its importance during ACG’s transition phase from precious to base metals.
Henze explained that while ACG Metals is ultimately targeting copper production from its Gediktepe mine in Turkey by 2026, the mine currently generates strong cash flow from gold and silver.
The company has moved to hedge 50% of its gold production at USD 2,875 per ounce through January 2026, helping secure revenue in a volatile pricing environment.
The hedge programme, executed with Alpha, involves no cash outlay and allows ACG to retain upside exposure above $3,065 per ounce on the hedged portion.
Henze emphasised this strategy helps ACG provide more certainty to bondholders and equity investors by de-risking key financial metrics for 2025.
The company remains unhedged on silver and copper, maintaining exposure for future upside.
Proactive: Patrick, very good to speak with you. ACG Metals has announced a hedging strategy. Why are you going that route?
Patrick Henze: Yes, thanks Stephen, thanks for having me. ACG’s strategy is to become a significant copper producer in the market. Our focus is really copper, with our first mine acquisition, the Gediktepe mine in Turkey. We were able to start the ACG story with a highly cash-generative asset which benefits from the current market environment to the fullest.
And by that, I mean we are currently producing gold and silver, which is a perfect transition for us to become a copper producer in 2026. But we're benefiting now from the gold and silver environment. So we are building our fully funded expansion into the copper-bearing sulfide ore body, which we are on budget and on schedule. But right now, we felt in this transition zone, we actually can benefit and protect a bit the cash flows by hedging the gold.
We see the highest central bank demand for gold. The geopolitical situation, the weakened dollar in the past few weeks, have led gold to go above $3,000. And this is why we felt this is a good time to actually secure some of the cash flows. And by the way, we are not really looking to hedge any of the copper or zinc in the future. It is really something that is now beneficial to us in the current environment.
Proactive: Patrick, can you explain how the hedge will work?
Patrick Henze: Yes. Technically it's actually simpler than it looks. We have worked out a strategy, a structure that requires no cash out from ACG. It provides a very limited risk exposure covered by our hedge provider, Alpha. And we benefit from the current volatility and the really high forward curve pricing environment in the current market. And therefore, we can protect the cash flows and maintain the upside.
So the program starts in April and runs to January 2026. January we really included only for the benefit of the current steep forward curve so we could gain a little bit from January. But basically, we hedged 50% of our gold production at USD 2,875 per ounce. That's 15% above our budget price — $2,500 at the moment — and also 24% above the consensus prices that we presented to bond investors when we raised the bond.
So on the other side, we remain unhedged on 50% of the gold production. We remain unhedged on 100% of our silver production. But we also benefit on the 50% that we hedged above $3,065 per ounce of gold. At the moment, we're looking at USD 3,100 on the screens. So that means we are currently already benefiting again from the upside under the current structure.
We see gold trading higher and that may continue. But actually, to foresee the gold prices in this volatile market for the next 10 to 12 months, that is something that is obviously difficult for everybody. So we felt that actually hedging for that period, de-risking the risk on the cash flows is actually really beneficial to everybody.
Proactive: So, Patrick, can you just tell us then again? So apart from obviously the upside to the gold price, what are the benefits to ACG Metals and the project itself?
Patrick Henze: ACG Metals really benefits that we have more certainty on the financials in 2025. Ultimately, you know, that is really important to the bond, but also to the equity holders. The one thing that we as a management cannot really influence in the financials are the market prices, right? We have a strong team locally. We have a high-grade open pit mine. We have a first-quarter cost position. But usually the market prices you cannot influence as a management team. So hence, actually with this hedging strategy in this current favourable market environment, we were able to also de-risk the market prices.
So with the levels, we are really happy. We are happy to execute a zero-cost structure. You know, that's also important for our balance sheet. But most important is that all the bond and the equity holders will benefit from that de-risking. We are de-risking our bond coupon payments this year. We are de-risking the cash flow risk. And we are actually creating a cash buffer for the further upside generation in the mine itself, but also for ACG as a growth platform.
Proactive: Well, Patrick, thank you very much for explaining that. And thank you for taking the time today.