* Polyus announces two-year programme to sell gold forward
By Jan Harvey
LONDON, July 4 (Reuters) - 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 before 2011.
"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 report said.
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)