Fortuna Silver Mines Inc.



Background
  • Mid-tier silver producer with significant revenues from lead and zinc production.
  • Fortuna wanted to insure a portion of future cash flow funding for certain asset development plans and general corporate needs by hedging a portion of its by-product metal output.
  • Client targeted firm floor prices for its lead and zinc production, and sought advice on the percentage of production to be sold forward, over what duration and with what instruments.
Outcome
  • Client hedged a portion of its lead and zinc output using a Min/Max or Collar structure.
  • This strategy allowed the client to hedge a large percentage of its lead and zinc at a profitable floor while still participating in market prices up to historically high levels.
CPM Group’s Involvement
  • Discussed production with management to formulate optimal hedge ratio and tenor.
  • Recommended a hedge ratio and tenor followed by indicative trades.
  • Introduced the client to suitable trading counterparties.
  • Guided the client through the credit approval process with the counterparties.
  • Discussed risk management of each position with management.
  • Created a live competitive quoting process where financial institutions compete for best prices.
  • Provide ongoing hedge management, market intelligence and advice.