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Curum Metals Limited ( CM ) is a Pakistan - based company located in the province of Balochistan. CM is in the metallic mining industry
Curum Metals Limited CM is a Pakistanbased company located in the province of Balochistan. CM is in the metallic mining industry and currently has two mines in operation.
Copper metal ore is the primary deposit, though the company has also been successful in retrieving gold, silver, iron and sulphur deposits from these mines.
The price of copper fluctuates depending on market demand and supply for the metal, along with the availability of copper substitute metals.
CM is in the final stages of negotiations with Akum Build Limited AB a company based in Argentina. AB requires pounds of copper in six months' time on December
AB wants that the contract price is set at the prevailing market rate when delivery takes place at the end of December.
CMs Finance Director, Maryam Ghafoor, is proposing that CM should hedge against a likely fall in the value of copper. She has obtained relevant financial information included below and would like your help in evaluating if a futures contract hedge on the price of copper is worthwhile.
Copper prices are quoted in the global commodity market as US dollars USD per pound.
Relevant financial information for copper hedge
Financial information
June
Estimated December
USDpound
USDpound
Spot price
Futures contracts December dated
Contract size
pounds
Tick size
USDpound
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