This is a general misconception of what hedging is.
Hedging is not gambling, its not an attempt to maximise profits.
Its designed for 2 reasons.
1 - To protect against short term volatility in commodity prices - This is particularly important for smaller companies
2 - To protect and provide time to reassess mine operations (restructure etc) in the event of a more prolonged commodity price decrease. Ie. it provides time to make decisions)
Hedging is a defensive act, its not gambling and its not profiteering. Far from it. Its why most hedges actually don't end up in the money, they aren't supposed to as companies want a strong price market, but in the event of either short term volatility in prices or a longer term downtime in prices, it provides security of pricing.
SELL, page-24
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