Commodity-Hedge Book Transaction Diligence Director

The mandate

A buyer is diligencing a copper producer whose derivative portfolio mixes cathode and concentrate sales hedges, fuel protection, freight instruments, currency overlays and trades placed against production plans that have since changed. Margin calls are funded through shared treasury, provisional pricing sits in commercial contracts, and hedge-accounting files do not explain several redesignations. The purchase agreement could transfer both liquidity volatility and undocumented trading intent.

The twelve-week deliverable will be an instrument-to-physical exposure book, collateral liquidity model and transaction risk memorandum. The first milestone establishes trade, contract and forecast populations in week three; the second validates purpose and physical linkage in week six; the third quantifies close-out, novation and downside cash in week nine; the fourth presents price-adjustment inputs, control gaps and Day One actions.

The client will provide confirmations, trade tickets, broker and bank statements, master agreements, collateral terms, valuation curves, forecast mine output, concentrate contracts, provisional invoices, fuel and freight commitments, designation files and counterparty limits. Acceptance requires every material instrument to reconcile to confirmation and ledger, sampled physical links to be evidenced, and liquidity scenarios to reproduce independently from supplied curves and contract rules.

The assignment excludes issuing valuation, accounting, tax or legal opinions; predicting commodity prices; negotiating acquisition terms; executing or unwinding trades; certifying reserves; and approving hedge strategy. Specialists may quantify alternative treatments and identify missing support, but buyer officers determine transaction implications and target management remains responsible for all representations and ongoing market activity.

Workbooks must preserve instrument identifiers, economic purpose, referenced volume, tenor, basis, pricing source, collateral mechanics, accounting designation, counterparty and transaction treatment. Buyer treasury will reperform two portfolio days and one mine-disruption scenario before sign-off. Further work on actual novation, close execution or post-acquisition remediation is outside this engagement and requires fresh authority.

Why this is external work

The apparent mark-to-market does not reveal the book’s relationship to physical production, funding or buyer risk appetite. Internal deal teams lack time to rebuild years of trading intent under live bid deadlines. Independent commodity specialists can expose basis, liquidity and novation consequences without taking a market view or assuming dealing authority. The committee needs that separation before price and financing decisions harden.

What you will own

• Reconcile derivatives, embedded pricing and physical commitments by metal, grade, location, currency, volume, tenor and legal entity.
• Establish the evidenced purpose of each position, separating production protection, provisional pricing, fuel or freight risk and unsupported exposure.
• Test hedge volume against mine plans, shipment schedules, treatment charges, quotational periods and customer or smelter contract terms.
• Rebuild fair-value, realised cash and accounting movement bridges using independent curves, confirmations, settlements and designation history.
• Quantify margin, collateral, credit-limit and liquidity demands under price, basis, production, shipment and counterparty shocks.
• Assess change-of-control consent, close-out, novation, break-cost and security consequences across master agreements and facilities.
• Deliver a controlled hedge register, physical-link sample, scenario engine, issue memorandum and Day One risk-control sequence.

Candidate qualifications

• Led buy-side commodity and derivative diligence for mining, metals, energy trading or another physical merchant business.
• Reconstructed hedge purpose across derivatives, provisional pricing, physical contracts and changing production or shipment forecasts.
• Modelled collateral and liquidity pressure from market movement, basis risk, credit terms and counterparty concentration.
• Examined designation and valuation evidence with accounting specialists while avoiding unauthorised audit or policy conclusions.
• Assessed master-agreement novation, termination and change-of-control economics alongside qualified counsel and treasury officers.
• Delivered instrument-level evidence and scenarios that investment committees and acquisition lenders could independently reproduce.

Non-negotiables

• Can complete the Santiago, Antofagasta, London and Geneva evidence programme within twelve weeks.
• Will disclose interests involving the target, buyer, trading houses, banks, brokers, smelters, advisers and competing bidders.
• Brings physical commodity and hedge-book transaction diligence; corporate treasury review by itself is insufficient.
• Accepts no mandate to predict prices, execute trades, certify reserves, issue opinions or negotiate the acquisition.

1. 49 words maximum. Describe a hedge book where physical-volume evidence contradicted the stated risk-management purpose.
2. 49 words maximum. Which scenario best reveals a commodity portfolio’s hidden collateral or liquidity demand?
3. 49 words maximum. Identify any bank, broker, merchant or mining relationship relevant to this mandate.