7/27/2019 Gold-Hedging Talk Creeps In, but Miners Prefer Exposure
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Gold-Hedging Talk Creeps In, butMiners Prefer ExposureTANA GOLDFIELDS Articles
7/27/2019 Gold-Hedging Talk Creeps In, but Miners Prefer Exposure
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Gold-Hedging Talk Creeps In, butMiners Prefer ExposureThe recent slump in gold prices may
have spurred some miners to consider
hedging their gold sales, but the vastmajority has so far resisted doing so
because they expect gold prices will
recover and they want full exposure tothese gains.
7/27/2019 Gold-Hedging Talk Creeps In, but Miners Prefer Exposure
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Gold-Hedging Talk Creeps In, butMiners Prefer ExposureSpot gold has fallen 21% since the year began,
prompting gold miners such as Russia-focused
Petropavlovsk PLC (POG.LN) and Tanzania
gold explorer Shanta Gold Ltd. (SHG.LN) to
hedge, locking in a portion of their future gold
sales at a fixed price to manage their cashflows
amid a weaker gold price environment.
7/27/2019 Gold-Hedging Talk Creeps In, but Miners Prefer Exposure
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Gold-Hedging Talk Creeps In, butMiners Prefer ExposureFor Petropavlovsk, which locked in prices for
about half of its production until June 2014, the
move is aimed at managing its debt burden.
Shanta Gold has hedged gold sales equivalent to
nearly half of this years forecast gold output
until March 2014, to help cover its debt and
capital expenditure requirements as it carries outa five-year plan for gold production growth.
7/27/2019 Gold-Hedging Talk Creeps In, but Miners Prefer Exposure
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Gold-Hedging Talk Creeps In, butMiners Prefer ExposureSuch moves may make sense for those
companies, but investors generally prefer to hold
shares in gold companies with full exposure to
any potential rise in the price of gold.
7/27/2019 Gold-Hedging Talk Creeps In, but Miners Prefer Exposure
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Gold-Hedging Talk Creeps In, butMiners Prefer ExposureIn principle, were anti-hedging, said
Catherine Raw, co-manager of BlackRocks
natural resources team, which has $5.9 billion
invested primarily in gold-mining equity fund.
We own gold shares because we want exposure
to the gold price.
7/27/2019 Gold-Hedging Talk Creeps In, but Miners Prefer Exposure
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Gold-Hedging Talk Creeps In, butMiners Prefer ExposureGold miners risk losing money on hedges if they
lock in their revenues for the long term at a fixed
rate, but fail to control their costs in a similar
fashion, Ms. Raw said.
7/27/2019 Gold-Hedging Talk Creeps In, but Miners Prefer Exposure
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Gold-Hedging Talk Creeps In, butMiners Prefer ExposureThe gold industry suffered heavily over the past decade
when many large gold miners hedged their sales
following a prolonged period of low gold prices only to
see the prices take off and mining costs rise. Severallarge gold miners spent billions of dollars trying to
unwind hedges that became a drag on profits over that
period. Barrick Gold Corp. (ABX), the worlds largest
gold producer, was the last large gold producer tounwind its hedges when it raised $5.1 billion in 2009 to
buy them back.
7/27/2019 Gold-Hedging Talk Creeps In, but Miners Prefer Exposure
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Gold-Hedging Talk Creeps In, butMiners Prefer ExposureGold miners would have to be certain that the
industry has entered a structural price decline
before they broadly return to gold hedging, said
Ms. Raw, but that is not our view. Thedownside risk to the current gold price is limited,
as jewelry demand is robust and gold supplies
are scarce, she added.
7/27/2019 Gold-Hedging Talk Creeps In, but Miners Prefer Exposure
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Gold-Hedging Talk Creeps In, butMiners Prefer ExposureGold producers are also reacting to the low gold
price by shutting down unprofitable mines. Mark
Bristow, chief executive of West African gold
producer Randgold Resources Ltd. (GOLD), saidlast week he reckons that more than half of the
industrys gold output is unprofitable at the
current gold price.
7/27/2019 Gold-Hedging Talk Creeps In, but Miners Prefer Exposure
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Gold-Hedging Talk Creeps In, butMiners Prefer ExposureThat said, Angelos Damaskos, CEO of Sector
Investment Managers Ltd., which advises the
Junior Gold Fund on $25 million worth of
investment in 38 gold companies, said hebelieves the gold price has hit a floor and will
rebound in the second half of this year. The gold
price could even reach its previous record highof $1,920.94 a troy ounce, set in September
2011, by sometime next year, he said.
7/27/2019 Gold-Hedging Talk Creeps In, but Miners Prefer Exposure
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Gold-Hedging Talk Creeps In, butMiners Prefer ExposureAlthough talk about hedging is creeping in
among small to medium-size gold miners,
investors and miners say it hasnt yet become
pervasive. On the contrary, a recent J.P. MorganChase survey found 61% of investors were still
against miners hedging gold prices.
7/27/2019 Gold-Hedging Talk Creeps In, but Miners Prefer Exposure
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Gold-Hedging Talk Creeps In, butMiners Prefer ExposureGold producers continued to unwind their hedges
in the second quarter following net dehedging in
the first quarter, said precious metals consultant
Thomson ReutersGFMS and Societe Generalebank in a jointly produced report.
7/27/2019 Gold-Hedging Talk Creeps In, but Miners Prefer Exposure
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Gold-Hedging Talk Creeps In, butMiners Prefer ExposureGFMS and Societe Generale expect net de-
hedging to prevail over the rest of the year, since
gold producers may believe they have missed the
opportunity to hedge at a lower price.
7/27/2019 Gold-Hedging Talk Creeps In, but Miners Prefer Exposure
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Gold-Hedging Talk Creeps In, butMiners Prefer ExposureGold sank to nearly a three-year low of
$1,180.20 an ounce in June, but has since
rebounded to $1,324.70/oz.
7/27/2019 Gold-Hedging Talk Creeps In, but Miners Prefer Exposure
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