Markets

Metals & Mining

 

Your Challenges

Accurately modelling forward prices of infrequently traded metals markets or metals products that are indexed-linked to an underlying market

Accurately modelling and quantifying the effects of changes to metal inventories, production/consumption constraints and hedged volumes

Understanding, valuing and maximising the full optionality that can exist within a locational diverse metals and mining portfolio

Analysing different hedging strategies to determine the best way to manage your metals exposure

Accurately forecasting cash-flow to senior management and stress testing main drivers that could cause forecasts to differ like changes in market metals prices, quantity of metal mined, currency risks or warehousing costs or constraints

Obtaining an accurate position report of your whole portfolio even if some metals trade in different quantities (e.g. gold in ounces and coal in metric tonnes)

We Understand Your Market

Metals producers and traders, as well as consumers (like car manufacturers and electric battery producers) who use metals in manufacturing processes all have complex risks to consider. Metals markets are typically characterised into two categories: precious metals (such as gold) and base metals (such as copper, lead, nickel, zinc, tin and aluminium), with each category having unique supply/demand characteristics that drive forward and spot prices.

Limited price liquidity, quality and location spreads, complex contract terms and warehousing costs create challenges in capturing and assessing metal portfolio risks. Metals market players need to adhere to sound risk management principles to ensure that their cashflows are stable while optimising their profitability.

These players require tools that can capture both the financial and physical movements across all facets of mining, storage and sale. Lacima understands the specific requirements of companies exposed to mining and metals risks and works with them to ensure they can optimise their portfolio while maximising profits.

Our Solution

Lacima offers two solutions for mining and metals market participants: Lacima Trader and Lacima Analytics – providing a complete solution from metals trading and valuation to risk management and cash flow forecasting.

Lacima’s solutions use the same consistent models and methodologies to capture the unique market characteristics whilst providing the comfort of stress testing and scenario analysis tools to analyse future uncertainty.

Whether you are in Trading, Structuring & Origination or Risk Management, use Lacima’s solutions to accurately value both financial and physical contracts as well as support key decision making by leveraging Lacima’s risk solutions to gain deep insights into the drivers of risk and how they change through time. Lacima calculates the full range of market and credit risk metrics including Earnings-at-Risk (EaR) and Revenue-at-Risk (RaR), as well as more standard risk management metrics such as Value-at-Risk (VaR) and Potential Future Exposure (PFE), for superior trading and risk management results.

Metals Traders and Risk Managers can enjoy a range of benefits including:

  • Assess the relevant at-risk metrics (like parametric, historical or Monte Carlo VaR) for metals and mining players
  • Analyse different hedging strategies to best manage your metals exposure
  • Understand the most relevant models to capture the unique characteristics of metals prices
  • Assess valuation frameworks that accurately value long-term metals trades for production, offtake warehousing, and transportation, so that you don’t leave profit on the table
  • Capture all the parameters of complex derivative contracts such as indexation, spreads, accumulators and locational spreads
  • Value and optimise the warehousing of base and precious metals
  • Value and optimise the flexibility of transporting metals via truck, rail, vessel or barge
  • Analyse large books of metals derivative deals
  • Undertake scenario analysis such as “what-if” deals, and stress testing on prices or volumes, and other model parameters
  • Understand your VaR drivers and the effect that trades within your portfolio have on your overall VaR and changes with VaR attribution
  • Report company-wide risks across your assets and drill down to individual regions, products, trading desks, traders and deals to fully understand your risks and sources of value
  • Produce an accurate position report of your whole metals portfolio even if some metals trade in different quantities (e.g. gold in ounces and coal in metric tonnes)