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Nyrstar hedged nearly 100,000 tonnes of zinc using futures and options late last month as the zinc price hit its highest level in about a year, brokers and industry sources told Hotline.
The strategic hedge guarantees the zinc producer a selling price between $2,050-70 per tonne through to June, in a deal that covers 9.5% of its annual metal output, sources said.
The company carried out the trade over three days starting on January 21, when three-month zinc prices closed at $2,089 per tonne, matching ten-month highs seen in December, sources said.
Nyrstar opened a 180,000-tonne options hedge in the first quarter of last year, as prices traded around what would be their highs for the year, netting the company a rumoured $50 million and considerable cachet among brokers and analysts.
The trade partially shielded the zinc producer from the 18% drop in prices that followed, though the weaker market conditions still left the company nursing a $120 million overall loss for the first half of the year.
As the market dropped again in the days after its second strategic hedge, sources (again) praised the prescience of the move to lock in prices.
“It’s not as large as last time but the volume is still pretty chunky, and they’ve definitely got the timing right,” a category I trader told Metal Bulletin as zinc prices slid on the London Metal Exchange.
On Tuesday, three-month zinc hit a low of $1,944 per tonne, down as much as 6.1% on the price Nyrstar is set to achieve on its hedge.
The company publishes its full-year results on Thursday February 6.
Nyrstar declined to comment.
Mark Burton mburton@metalbulletin.com Twitter: @mburtonmb