How the mining company might use futures markets for hedging

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Reference no: EM131964371

It is July 2011. A mining company has just discovered a small deposit of gold. It will take six months to construct the mine. The gold will then be extracted on a more or less continuous basis for one year.

Futures contracts on gold are available with delivery months every two months from August 2011 to December 2012. Each contract is for the delivery of 100 ounces. Discuss how the mining company might use futures markets for hedging.

Reference no: EM131964371

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