Q: Hello 5i
ARTG reported earnings last night and it appeared decent except I was surprised at the hedging of about 50% of sales at approximately $2800/oz and another 25% at approximately $3300/oz. When did these hedges come into effect? I think they last for the rest of 2026 and the $3300 hedges go into 2027? Even with the low AISC they are leaving a lot of money on the table it appears. Is that why it is down 5% today? Also they have a dividend planned to start in 2nd half of 2026. This would be a positive I would have thought. Would you consider this stock to be a buy, hold or sell at this point?
Thanks for your advice.
Regards,
Brendan
ARTG reported earnings last night and it appeared decent except I was surprised at the hedging of about 50% of sales at approximately $2800/oz and another 25% at approximately $3300/oz. When did these hedges come into effect? I think they last for the rest of 2026 and the $3300 hedges go into 2027? Even with the low AISC they are leaving a lot of money on the table it appears. Is that why it is down 5% today? Also they have a dividend planned to start in 2nd half of 2026. This would be a positive I would have thought. Would you consider this stock to be a buy, hold or sell at this point?
Thanks for your advice.
Regards,
Brendan
5i Research Answer:
ARTG's main hedge is a forward-sale program on 100,000 ounces from Blackwater. The company locked in a weighted average price of C$2,836/oz for deliveries between March 2025 and December 2027. There are always risks when a mine starts up, and the hedge helps reduce risk in the early years. Although not stated explicitly, we imagine the hedge was a requirement from the banks on its nearly $600M in debt. The stock is still higher than where it was a week ago, and is up 65% in the past year. Valuation is quite cheap, and we would expect the roll-off of the hedge and the dividend to help improve valuation, but this will happen over time. We would consider it a BUY.