This case evaluated how Galaxy Resources should manage interest rate risk for the Eagle Creek nickel project, which was financed with floating rate debt and exposed to significant cash flow volatility. The analysis assessed hedging alternatives including swaps, caps, collars, and leaving exposure unhedged, while also considering the interaction between interest rates, nickel prices, and foreign exchange. The recommendation concluded that hedging interest rates alone was insufficient and that Galaxy should lock in interest rates, nickel prices, and FX for the early years of the project to stabilize cash flows during the most vulnerable phase of operations.
