You can only hedge the zinc price in USD. You need to have a...

You can only hedge the zinc price in USD. You need to have a second hedge on the AUD as well if you want to cover both.

I gather they only hedged the zinc price because they didn't want to become another Pasminco. They hedged both but only put small hedges on the zinc price and concentrated their hedge book on the AUD and guessed wrong. When the zinc price collapsed, it stuffed them. Their hostile takeover of Savage which had their own hedge book complicated matters as well.

History will tell you if the base metal prices drop, so will the AUD. But Biden plans to produce a $1.9B stimulus package with more to come. A lot will depend on how the financial markets treat the USD when all this stimulus flushes through the economy. It needs to create inflation so the Fed lifts interest rates which in turn will strengthen the USD against the AUD.

ATM, for the zinc price in AUD to remain stable, the spot zinc price in US dollars needs to increase twice as fast as the AUD.