* Hedging more appealing for miners after 26 pct price fall
* Locking in future prices still a 'tough decision'
* Barrick says may consider hedging future output
By Jan Harvey
LONDON, Dec 5 (Reuters) - Selling gold that has yet to be mined to lock in a fixed price - a practice used by mining firms that went out of vogue as prices surged - may make sense for them again after a more than 20 percent drop in prices this year.
Hedging, or selling production forward, shields mining companies from falling prices but stops them benefiting from gains. It fell out of favour during gold's 12-year bull run, which peaked in 2011 with prices near $2,000 an ounce.
In an interview on Thursday with the Reuters Global Gold Forum, metals consultancy Thomson Reuters GFMS analyst William Tankard said this year's 26 percent drop in gold prices to around $1,230 an ounce makes such a move a much more pressing consideration for miners.
"For some years now, GFMS have been suggesting that as the price cycle turns ... we would see a return to hedging," he said. "This call has at times tested our conviction as we would have expected to see a bit more activity than we have to date."
John Thornton, the incoming chairman of top global gold producer Barrick Gold, said on Wednesday that he would consider a hedging strategy once more, given the volatility in the gold price.
"I do like his comment and would argue that, shareholder resistance or not, mining companies should be looking at this and aware of the opportunities that might be out there," Tankard said.
He added, however, that the high cost of closing out past hedges would make it a tough sell to previously bruised shareholders.
Barrick, along with other miners such as AngloGold Ashanti and Newcrest Mining, spent billions of dollars in the late 2000s closing out hedges that were forcing them to sell gold below spot prices, capping revenues even as costs were rising.
Miners' openness to hedging is likely to depend on their operating costs, Tankard said. Barrick, a relatively low-cost producer, is well placed to hedge, while others may find it a tougher path, he said.
"Interest rates remain exceptionally lean, and gold liquidity is not great. There aren't many central banks looking to lend over long tenures at the moment," he said. "Coupled with that, options hedging will not be especially cheap right now. So it is a tough decision."
Some miners have already tentatively moved back to hedging this year. Russian-focused miner Petropavlovsk said in February it would hedge almost half its output to March 2014.
Tankard said that although hedging may now look appealing, mining companies that had considered such a move a year ago, when prices were above $1,700 an ounce, would have faced extremely heavy criticism for doing so.
"I don't think that I'm being dramatic to suggest that a move like that would have made management's interactions with investors extremely strained, and it is easy to imagine shareholder interventions to replace management," he said.
"Fast forward a year, and they would have looked like geniuses, but only post-April (when prices crashed)," he added.
"I think the question has to be, what should producers be doing in the current market? In terms of the way forward, unless you can categorically state that the price is not going down further, and I can't, why not take a look at the opportunities out there?"