After entering into forward hedging contracts for 5.3 million ounces of silver and 24,000 ounces of gold, at average prices of $20.43 an ounce for silver and $1,323 per ounce of gold spread over a 12-month time period, Pan American Silver (NASDAQ: PAAS ) announced today it is closing out its hedging positions.
There were several reasons for initiating the hedging strategy, according to Pan American Silver President and CEO Geoff Burns, including to guard against short-term market volatility. However, in today's press release, Burns admitted there were negative, unforeseen consequences.
"Our action may have inadvertently sent the wrong message to the market and to our shareholders about our hedging philosophy and our view of the long term prospects for silver and gold," Burns is quoted as saying.
Burns added, "we need to unequivocally reassure our shareholders that the Company's fundamental philosophy is still that of not hedging our precious metal production, thereby providing maximum exposure to the price of silver."
The hedging positions represented approximately 20% of Pan American's forecasted silver production over the next 12 months, and 18% of its expected gold production in the next year, the company said.