Mexican Billionaire Hedges Gold, Silver and Copper

Source: Reuters, Michael O'Boyle (10/18/10)

"Slim has been ramping up mining projects this year. . ."

Mexican billionaire Carlos Slim's Grupo Carso (GC) conglomerate said Friday it had bought protection from volatile metals prices through 2013 as the company expands its mining business.

GC shares have risen 50% to trade at record highs since August, after Slim announced plans to publicly list the Grupo Frisco mining unit of his copper wire, retail, construction and real estate conglomerate.

Slim has been ramping up mining projects this year, taking advantage of China's appetite for metals and high prices in commodities fueled by cheap money from major central banks (CBs).

Hedging prices would protect GC from a sharp drop in commodities prices, which could happen once major CBs like the U.S. Fed start to raise interest rates. GC had previously sought such protection through derivatives contracts, which is common in the mining industry.

GC said told the local stock exchange it had hedged price exposure on percentages of estimated new mines' production of precious and industrial metals.

"This decision has been taken due to the strong speculation and volatility in metals markets," the statement said. "In the case that prices fall significantly, these units would have good results that would justify the work and investments in process."

GC ramped up production at older mines and new mines producing gold, silver, copper and zinc. The company said it had hedged 43% of its estimated gold production for the next three years at an average price of $1,189/oz., 26% of its silver production at ~$18.71/oz., 61% of its expected copper production over three years at an average $3.32/lb. It also hedged some expected zinc and lead production.

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