Optimal Hedge Ratio - Initial Margin Requirement - Risk Management Assignment Help

Assignment Task :

Suppose you are a risk management professional working for Top-Knotch RM - a firm which is located in the Redlands, Queensland. Top-Knotch RM provides consulting services to firms such as airline companies and mining companies on their risk management. Mr. Richard Dolan, the treasurer of IMine Corporation, approaches you today (assume it is now March 2020) to ask you for advice on the financial risk management of his company. 
IMine Corporation is an Australian gold mining company producing gold from Australia's highest-grade major goldfield in north eastern Australia, with plans to increase its size and valuation over the next few years. IMine is a growth company that aims to a growing cash flow from expanding gold mining operations and the huge capital growth upside of an exploration company seeking to define up to 15 million troy ounces of gold. The company has invested in developing the goldfield, and commenced extracting gold and gold production from its underground mines. 
The company's profit and loss is subject to the price change of gold. The company will benefit US$8,000 for each 1 cent increase in the price per troy ounce of gold sometime in late July 2020. As the market price of gold is quite volatile, the company is considering using some strategies to manage its risk exposure. One way to hedge these exposures is to use futures contracts. There are futures contracts traded in the COMEX division of the Chicago Mercantile Exchange (CME) Group. In your report, please devise a hedging strategy for IMine. 
 

(1) What kind of futures should IMine use and what position should it take if IMine Gold wants to use gold futures to hedge the exposure? Why? 

(2) What is the optimal hedge ratio? 
(3) What is the company's exposure measured in ounces of gold?

(4) How many gold futures contracts should be traded?

(5) What is the initial margin requirement in March 2020? 

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