Corporate hedging news

Guidance for hedging in the mining industry

TORONTO, ONT.–Mining companies have at their disposal an array of complicated derivative instruments to manage exposure to a variety of risks. Hedging activities require management to properly understand, design, control, communicate and account for their hedging strategy.

There have been a variety of recent hedging programs that have ended in failure and have caused mining companies unexpected losses and regulatory concerns. In some cases, companies have failed to clearly explain to stakeholders how and why their hedge strategies will produce stakeholder value. Furthermore, inconsistencies in accounting guidance around the world have created diverse accounting practices for derivatives and hedging activities.

PricewaterhouseCoopers (PwC) has recently published a guide that provides direction and perspective to mining companies and their directors on certain elements of their hedging strategy development. To help companies avoid the potential pitfalls, the guide clarifies the risks, identifies the tools and highlights the key issues for mining companies.

PwC’s Hedging in the Mining Industry guide responds to the essential questions that all mining companies need to answer:

To hedge or not to hedge?

What are the tools available?

How do we control and monitor a hedging program?

How, why and to whom do we communicate the strategy?

What are the accounting implications?

PwC professionals from around the world have considered these questions and contributed their expertise to this new guide, which will give mining companies a set of tools to use when considering a hedging strategy.