Hedging & Price Risk Advisory
Mettallo provides independent, decision-grade hedging and price risk advisory for metals producers, asset owners, and decision-makers. We help clients design and govern hedging frameworks that are proportionate, resilient, and defensible across market cycles.
We do not trade, execute, or distribute products. We advise.
Our work sits at the intersection of market structure, operational reality, and governance discipline, where poor decisions are most costly and good decisions must survive volatility, scrutiny, and hindsight.
Base Metals
The Base Metals Practice represents the core of Mettallo Advisory’s technical and experiential differentiation. Its purpose is to provide LME-native hedging and price risk advisory for producers and asset owners exposed to base metals traded on the London Metal Exchange. This practice is grounded in the recognition that base metals markets are structurally distinct from other metals complexes and demand a dedicated, mechanics-first approach.
Unlike precious metals or financial commodities, LME base metals are governed by discrete prompt dates, spread-driven economics, inventory dynamics, and episodic liquidity stress. Effective hedging in these markets requires fluency not only in instruments, but in how the exchange actually functions under normal and stressed conditions.
Scope of Coverage
Mettallo’s Base Metals Practice typically covers: - Copper - Aluminium - Zinc - Nickel - Lead - Tin
Advisory is tailored to the specific market structure, liquidity profile, and operational realities of each metal.
Core Advisory Focus Areas
1) Prompt-Date Exposure and Timing Alignment
Identification of true exposure by prompt date rather than calendar period.
Alignment of hedge settlement dates with production, shipment, and pricing schedules.
Avoidance of implicit assumptions that continuous pricing applies to discrete delivery markets.
2) Spread and Roll Economics
Analysis of cash–3M, TOM/NEXT, and longer-dated spread behavior.
Assessment of carry costs or benefits under contango and backwardation regimes.
Explicit incorporation of roll economics into hedge performance evaluation.
3) Liquidity and Market Stress Behaviour
Evaluation of liquidity by tenor and metal under normal market conditions.
Stress testing of hedge feasibility during episodes of volatility, dislocation, or market intervention.
·Avoidance of hedging strategies that rely on liquidity that may evaporate under stress.
4) Inventory, Warrants, and Structural Signals
Interpretation of LME inventory and warrant data as structural inputs, not directional signals.
Understanding of how warehouse congestion, location, and warrant cancellation affect spreads and pricing.
Differentiation between genuine supply-demand signals and technical distortions.
5) Integration with Physical and Commercial Realities
Alignment of hedging strategies with concentrate supply, treatment and refining charges, and sales terms.
Consideration of logistics, shipping delays, and quality adjustments.
Avoidance of hedging volumes or tenors that exceed physical deliverability.
Hedging Strategy Characteristics
Within base metals, Mettallo typically emphasizes: - Partial hedging, rather than full coverage, to manage volume and timing risk. - Layered implementation, reducing concentration of decision risk. - Tenor discipline, reflecting limited operational visibility. - Governable structures, prioritizing simplicity and resilience over theoretical efficiency.
The objective is not to eliminate price risk, but to contain downside outcomes while preserving operational and strategic flexibility.
Common Failure Modes Addressed
The Base Metals Practice explicitly addresses failure modes that recur in LME hedging: - Over-hedging volumes relative to deliverable metal - Misalignment between hedge prompts and physical pricing - Underestimation of roll and spread costs - Liquidity assumptions that fail under stress - Governance breakdown during price spikes or collapses
Mettallo’s advisory is designed to prevent these issues from arising, rather than responding after the fact.
Deliverables
Base Metals engagements typically produce: - A Base Metals Hedging Framework aligned to LME structure and operational reality. - A Prompt-Date and Spread Exposure Map linking physical flows to hedge instruments. - Scenario Analysis reflecting both flat price and spread-driven stress states. - Inputs to board-level hedge policy specific to LME metals.
Why This Matters
LME base metals markets reward participants who understand their structure and punish those who apply generic metals models. Misunderstanding prompt dates, spreads, liquidity, or inventory dynamics can convert a well-intentioned hedge into a source of material loss or governance failure.
The Base Metals Practice ensures that price risk management is executed with full awareness of the exchange’s mechanics, preserving hedge integrity and supporting sustainable decision-making in complex markets.
Precious Metals
The Precious Metals Practice provides disciplined price risk advisory for gold and silver producers where hedging decisions are often shaped as much by psychology and narrative as by economics. Its purpose is to design governable, defensible hedging frameworks that protect downside outcomes without undermining strategic optionality or organizational cohesion.
Precious metals occupy a unique position within commodities. Unlike base metals, gold and silver are not only industrial inputs but also monetary and political assets. As a result, hedging decisions in precious metals carry heightened emotional, reputational, and governance sensitivity. Mettallo’s role is to bring structure, restraint, and clarity to these decisions.
Scope of Coverage
The Precious Metals Practice primarily covers: - Gold - Silver
Advisory is tailored to the producer’s scale, cost structure, balance sheet, and governance maturity.
Core Advisory Focus Areas
1) Downside Risk Definition and Survival Economics
Identification of price levels that threaten operating continuity, liquidity, or covenant compliance.
Differentiation between economic stress thresholds and psychological price anchors.
Framing of hedging objectives around survival and stability rather than price optimisation.
2) Partial Hedging and Optionality Preservation
Design of hedge ratios that provide meaningful downside protection while preserving upside participation.
Avoidance of full hedging structures that amplify hedge regret in rising price environments.
Recognition that optionality has strategic value for precious metals producers beyond its financial payoff.
3) Instrument Trade-Off Transparency
Clear explanation of the economics embedded in floors, collars, participating structures, and other option-based approaches.
Identification of where upside is implicitly sold, even in “zero-cost” or low-premium structures.
Avoidance of structures that obscure risk through complexity or leverage.
4) Volatility and Stress Behaviour
Assessment of how hedging structures perform under volatility spikes and rapid price moves.
Evaluation of margining, liquidity, and unwind risks where relevant.
Explicit consideration of scenarios where hedging may exacerbate organizational stress rather than reduce it.
5) Narrative and Governance Sensitivity
Recognition of investor, board, and stakeholder perceptions associated with precious metals hedging.
Design of frameworks that are defensible to external audiences, including lenders and equity investors.
Protection of management teams from hindsight-driven criticism.
Hedging Strategy Characteristics
Within precious metals, Mettallo typically emphasizes: - Conservative hedge ratios, scaled to balance-sheet resilience and cost position. - Option-based protection, prioritizing downside floors over fixed-price certainty. - Staged and layered implementation, reducing timing risk and decision concentration. - Explicit acceptance of opportunity cost as the price of downside insurance.
The objective is to stabilize cash flow without converting the hedge program into a proxy market view.
Common Failure Modes Addressed
The Precious Metals Practice explicitly addresses recurring failure modes: - Over-hedging during periods of strong prices - Judging hedges solely on P&L rather than decision quality - Unwinding protection emotionally during rallies - Accepting complex structures without understanding embedded optionality - Allowing investor narrative to override economic rationale
Mettallo’s advisory anticipates these dynamics and designs governance accordingly.
Deliverables
Precious Metals engagements typically produce: - A Precious Metals Hedging Framework aligned with survival economics and governance constraints. - Scenario Analysis illustrating cash flow outcomes across adverse and favorable price states. - A Structure Trade-Off Summary that makes implicit value transfer explicit. - Board- and lender-ready materials explaining hedging rationale and limits.
Why This Matters
In precious metals, poor hedging decisions rarely destroy value in quiet markets; they do so during extremes. price collapses, parabolic rallies, or periods of heightened political and monetary uncertainty. In these moments, governance fragility and narrative pressure can overwhelm technical logic.
The Precious Metals Practice ensures that hedging decisions remain anchored to economic reality and governance discipline, enabling producers to navigate volatility without compromising strategic flexibility or institutional credibility.
Platinum Group Metals
The Platinum Group Metals (PGMs) Practice addresses price risk in markets that are structurally thin, volatile, and highly sensitive to operational, geopolitical, and technological shifts. Its purpose is to design robust, conservative, and survivable hedging frameworks for producers exposed to platinum, palladium, rhodium, and related PGMs, where traditional hedging assumptions frequently fail.
PGM markets differ materially from both base metals and precious metals. Liquidity is episodic, forward markets are shallow, and price behaviour is often discontinuous. As a result, hedging errors in PGMs tend to be magnified, and governance failures can have outsized consequences. Mettallo’s approach reflects these realities.
Scope of Coverage
The PGMs Practice typically covers: - Platinum - Palladium - Rhodium (where hedgeable instruments or proxy strategies exist)
Advisory is adapted to the specific liquidity, tenor availability, and market conventions of each metal.
Core Advisory Focus Areas
1) Liquidity and Market Depth Constraints
Assessment of true executable liquidity across tenors and instruments.
Identification of periods where hedging activity itself can move the market.
Avoidance of strategies that rely on continuous liquidity or tight bid–offer spreads.
2) Tenor Discipline and Exposure Prioritisation
Emphasis on short-dated hedging aligned with near-term operational visibility.
Explicit prioritisation of which exposures warrant protection and which should remain unhedged.
Recognition that partial protection is often superior to fragile full coverage.
3) Volatility and Discontinuity Risk
Analysis of price behaviour during supply disruptions, regulatory shifts, or demand shocks.
Stress testing of hedging structures against gap risk and rapid repricing.
Avoidance of leverage or path-dependent structures that fail under discontinuous moves.
4) Instrument Selection and Proxy Considerations
Evaluation of available hedging instruments, including forwards, swaps, and options where liquidity permits.
Consideration of proxy hedging approaches only where economically justified and transparently governed.
Explicit documentation of basis risk introduced by proxy strategies.
5) Operational and Geographic Concentration Risk
Integration of operational concentration (e.g., single-region supply) into hedge design.
Consideration of geopolitical and regulatory risk as inputs to scenario analysis.
Hedging Strategy Characteristics
Within PGMs, Mettallo typically emphasizes: - Highly conservative hedge ratios, reflecting liquidity and execution risk. - Short-tenor protection, matched tightly to operational certainty. - Simple, explainable structures, prioritising resilience over theoretical efficiency. - Explicit acceptance of residual risk, where hedging is impractical or counterproductive.
The objective is to reduce tail risk without introducing fragility or unintended market exposure.
Common Failure Modes Addressed
The PGMs Practice explicitly addresses failure modes that recur in thin markets: - Over-reliance on theoretical liquidity - Use of complex structures that cannot be exited under stress - Proxy hedging without governance or transparency - Over-hedging volumes in illiquid markets - Underestimating gap risk and price discontinuities
Mettallo’s advisory is designed to prevent these issues by imposing discipline and realism.
Deliverables
PGM engagements typically produce: - A PGMs Hedging Framework reflecting liquidity and operational constraints. - A Liquidity and Tenor Feasibility Assessment identifying what is realistically hedgeable. - Scenario Analysis focused on gap risk and discontinuous price behaviour. - Governance documentation addressing proxy risk and execution limitations.
Why This Matters
PGM markets are unforgiving of overconfidence. Thin liquidity, episodic trading, and structural concentration mean that hedging errors can quickly become irreversible. Applying base or precious metals logic to PGMs without adjustment exposes producers to outsized financial and governance risk.
The Platinum Group Metals Practice ensures that price risk management in these markets is grounded in realism, restraint, and governance discipline. preserving capital and institutional credibility in some of the most challenging metals markets.