Repurchase Contracts
Repurchase contracts (also known as a 'repos' or repurchase agreements) are used when a company raises money by 'selling' material to a bank and then repurchasing the material from the bank as funds become available.
A repurchase contract has a single open action for the full quantity. You can allocate packaged material to the open action. These packages are 'in repo' until you allocate them to a buyback action. You can create one or more buyback actions on different dates for the packages that you repurchase.
Packages that are bought with the intention of being resold can only be allocated to the open action after control has passed on the purchase despatch order.
The packages do not have to be physically delivered to the bank, but may instead be stored in a warehouse. While the packages are 'in repo', the packages can be moved, but cannot be sold. In MineMarket, this means that the packages that are allocated to the open action but not yet with a buyback action cannot be associated with a despatch order. Packages 'in repo' can be split, merged or repacked, and the new packages are automatically allocated to the same repurchase actions. After a package has been allocated to a buyback action, the bank no longer owns the package and the package can be resold.
The pricing of a repurchase contract can be a fixed price or based on the average of a price series over a quotation period. The contract pricing can be overridden for individual repurchase actions if required.
You can enter costs for a repurchase contract. These costs can be limited to the open action or to buyback actions if required. Typical costs may include interest, commission, insurance, warehousing and transport.
A snapshot of the latest state of each repurchase action is calculated by the MineMarket Marketing Service.
Hedging Repurchase Actions
You can hedge repurchase actions. The market commodity (which is used as a template for the hedge position) must have a contract type of futures or options, and be for a commodity that matches the product of the repurchase contract. Hedging a repurchase action creates a hedge position and allocates the repurchase action to the hedge position. You can view these hedge positions in the Repurchase Contract, or via the Hedging Explorer.
If you hedge the open action at the same time as creating the repurchase contract, the following properties of the hedge position are assumed:
- Hedge Date—The start date of the repurchase contract
- Maturity Date—The maturity date of the repurchase contract
- Price Type—Always fixed, which means that the settlement exercise price of the hedge position is based on the strike price
- Owner Organisation—The bank of the repurchase contract
- District—The district of the repurchase contract
- Number Of Contracts—A value that is sufficient for the quantity of the hedge position to be greater than or equal to the quantity of the open position
Invoicing Repurchase Actions
You can invoice repurchase actions via the Repurchase Contract or Invoice Explorer. See Invoice a Repurchase Action, Include a Repurchase Open Action in a Sales Invoice and Include a Repurchase Buyback Action in a Purchase Invoice.
Only the Final invoice iteration type is applicable to invoices of repurchase actions. The settings specified in the Invoice Types screen apply.
The invoice uses the default payment terms of the bank. See Specify Default Payment Terms for an Organisation or Company.
Journal Creation for Repurchase Action Invoices
If a chart of accounts for the relevant document type (Sales Invoice or Purchase Invoice) is configured, when the invoice is locked, journal entries can be created automatically or manually for the invoice. See Journal Creation for Invoices for more information.
