Auckland-based New Zealand Mint has implemented a hedging strategy to manage the volatile price swings of silver, which have posed challenges for its Agoro business. The company, which produces gold and silver collectibles, recently completed its first silver hedge with the help of BNZ. This move comes amid significant fluctuations in silver prices, including a 50% increase in January followed by a 25% drop over two days.
Vedran Babic, chief executive of New Zealand Mint and Agoro, explained that the company often spends months developing collectibles for brands like Star Wars and Marvel. However, the unpredictable movements in precious metal prices have made it difficult to set product designs, pricing, and manufacturing plans well in advance. Hedging provides the company with greater certainty over a major input cost, allowing them to focus on creating products for collectors.
The hedging arrangement was developed over several months in collaboration with BNZ and PwC advisers. Cameron Waugh, BNZ's general manager of markets, noted that New Zealand Mint's unique combination of global commodity exposure and consumer products sold to collectors around the world required a tailored solution. Hedging both silver and gold will give the company more stability in managing production costs and planning ahead.
Babic highlighted that the volatility in precious metals is likely to continue due to geopolitical and economic uncertainty, as well as high inflation and interest rates. Silver's dual role as both an investment metal and an industrial commodity adds to the complexity. Penny Ford, BNZ executive for corporate and institutional banking, mentioned that silver hedging is not common in New Zealand but is part of a global suite of products that can help customers manage their exposure.