By Liam Denning
The Wall Street Journal — The Australian
On Newmont Mining’s recent earnings call, one analyst even owned up to having published a report on hedging and felt the need to add that he had “not heard a death threat yet”. Hedging gets a bad rap for two reasons. First, locking in a price for gold limits potential profit gains. Second, the sector’s history with hedging hasn’t been happy. Once the bull market in gold got going in 1999, many hedge books became a drag on profits. Investors cheered in 2009 when Barrick Gold, the world’s largest gold miner by output and one of the last hedging holdouts, said it would unwind its remaining positions.
Now, there are signs of hedging creeping back, and not merely from that risqué analyst report. Robin Bhar, who runs metals research at Société Générale, says his firm has been talking to midsize gold miners about hedging strategies. London-listed miner Petropavlovsk has locked in prices on nearly half its expected gold output in the second half of 2013.