Abstract
The volatility in metal prices affects negatively the financial structure of mining companies. The management of mining companies needs an effective tool to overcome the adverse effects of the price changes in order to stabilise the cash flow of the company. In this respect, hedging is an effective tool in dealing with, and managing, the price risk in the contemporary business environment. The main purpose of this article is to introduce information about hedging and its applications for mining companies and recommend an analytical tool based on statistics for developing sound hedging strategies for the producers of the metals and metal concentrates. An analytical model based on statistics is recommended in order to develop a sound hedging programme. This model will help managers, whether they are familiar with the hedging concept or not, to develop effective hedging strategies for their companies by statistically inferring the parameters of hedging instruments, such as forward sales, put and call options.
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