* Polyus announces two-year programme to sell gold forward
By Jan Harvey
LONDON, July 4 Gold producers will return to net
hedging for the first time since 2011 this year, GFMS analysts
at Thomson Reuters said on Friday, after Polyus Gold this week
announced a two-year progamme to sell gold forward.
Hedging, or selling future gold production, allows miners of
the metal to lock in prices for their output. While it can
protect producers when prices are falling, it can also stop them
capitalising on a rising market.
It had become hugely unpopular over the last decade after
some miners lost millions of dollars closing out hedged
positions as the gold price rallied during the financial crisis.
A drop in gold prices last year for the first time
since 2000 led to increased speculation among analysts that gold
producers would once again move to protect revenue streams.
Russia's largest gold producer, Polyus Gold, said
on Thursday that it had entered into financing contracts to sell
310,000 ounces of gold over two years to boost the certainty in
its cash flow and operating margins.
"The Polyus announcement means that net hedging for 2014 is
now a foregone conclusion," William Tankard, manager of precious
metals mining at GFMS Research & Forecasts, said. "There is no
scope in my view to see the activity announced outweighed by the
ongoing run rate of hedging coming off."
The Global Hedge Book Analysis released by Societe Generale
and Thomson Reuters GFMS on Friday showed gold producers
increased their hedged positions for the first time since 2012
in the first quarter.
At end-March the hedge book volume stood at 87 tonnes, the
report said, up 9 tonnes or 11 percent from the previous
quarter. The hedge book peaked at over 3,000 tonnes in the third
quarter of 1999, according to GFMS, the last year of net hedging
"Fresh hedging of both options and forwards by a small group
of emerging producers fractionally outweighed the compensating
factors of ongoing deliveries and option delta effects," the
New Zealand-focused OceanaGold Corp made the
largest hedge of the quarter, hedging 6 tonnes of production
from its Macraes mine over the next two years via a collar
structure, it said.
(Editing by Mark Potter)