gold-hedging talk creeps in, but miners prefer exposure

7/27/2019 Gold-Hedging Talk Creeps In, but Miners Prefer Exposure

1/17

Gold-Hedging Talk Creeps In, butMiners Prefer ExposureTANA GOLDFIELDS Articles


2/17

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.


3/17

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.


4/17

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.


5/17

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.


6/17

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.


7/17

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.


8/17

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.


9/17

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.


10/17

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.


11/17

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.


12/17

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.


13/17

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.


14/17

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.


15/17

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.


16/17

Gold-Hedging Talk Creeps In, butMiners Prefer ExposureSource:

http://www.openfaves.com/environment/TANA_GO

LDFIELDS_Articles_10_Tips_How_to_Avoid_Gold

_Investment_Scams/

http://tanagoldfieldsarticles.quora.com/TANA-

GOLDFIELDS-Articles-10-Tips-How-to-Avoid-Gold-Investment-Scams
http://www.openfaves.com/environment/TANA_GOLDFIELDS_Articles_10_Tips_How_to_Avoid_Gold_Investment_Scams/http://www.openfaves.com/environment/TANA_GOLDFIELDS_Articles_10_Tips_How_to_Avoid_Gold_Investment_Scams/http://www.openfaves.com/environment/TANA_GOLDFIELDS_Articles_10_Tips_How_to_Avoid_Gold_Investment_Scams/http://tanagoldfieldsarticles.quora.com/TANA-GOLDFIELDS-Articles-10-Tips-How-to-Avoid-Gold-Investment-Scamshttp://tanagoldfieldsarticles.quora.com/TANA-GOLDFIELDS-Articles-10-Tips-How-to-Avoid-Gold-Investment-Scamshttp://tanagoldfieldsarticles.quora.com/TANA-GOLDFIELDS-Articles-10-Tips-How-to-Avoid-Gold-Investment-Scamshttp://tanagoldfieldsarticles.quora.com/TANA-GOLDFIELDS-Articles-10-Tips-How-to-Avoid-Gold-Investment-Scamshttp://tanagoldfieldsarticles.quora.com/TANA-GOLDFIELDS-Articles-10-Tips-How-to-Avoid-Gold-Investment-Scamshttp://tanagoldfieldsarticles.quora.com/TANA-GOLDFIELDS-Articles-10-Tips-How-to-Avoid-Gold-Investment-Scamshttp://tanagoldfieldsarticles.quora.com/TANA-GOLDFIELDS-Articles-10-Tips-How-to-Avoid-Gold-Investment-Scamshttp://tanagoldfieldsarticles.quora.com/TANA-GOLDFIELDS-Articles-10-Tips-How-to-Avoid-Gold-Investment-Scamshttp://tanagoldfieldsarticles.quora.com/TANA-GOLDFIELDS-Articles-10-Tips-How-to-Avoid-Gold-Investment-Scamshttp://tanagoldfieldsarticles.quora.com/TANA-GOLDFIELDS-Articles-10-Tips-How-to-Avoid-Gold-Investment-Scamshttp://tanagoldfieldsarticles.quora.com/TANA-GOLDFIELDS-Articles-10-Tips-How-to-Avoid-Gold-Investment-Scamshttp://tanagoldfieldsarticles.quora.com/TANA-GOLDFIELDS-Articles-10-Tips-How-to-Avoid-Gold-Investment-Scamshttp://tanagoldfieldsarticles.quora.com/TANA-GOLDFIELDS-Articles-10-Tips-How-to-Avoid-Gold-Investment-Scamshttp://tanagoldfieldsarticles.quora.com/TANA-GOLDFIELDS-Articles-10-Tips-How-to-Avoid-Gold-Investment-Scamshttp://tanagoldfieldsarticles.quora.com/TANA-GOLDFIELDS-Articles-10-Tips-How-to-Avoid-Gold-Investment-Scamshttp://tanagoldfieldsarticles.quora.com/TANA-GOLDFIELDS-Articles-10-Tips-How-to-Avoid-Gold-Investment-Scamshttp://tanagoldfieldsarticles.quora.com/TANA-GOLDFIELDS-Articles-10-Tips-How-to-Avoid-Gold-Investment-Scamshttp://tanagoldfieldsarticles.quora.com/TANA-GOLDFIELDS-Articles-10-Tips-How-to-Avoid-Gold-Investment-Scamshttp://tanagoldfieldsarticles.quora.com/TANA-GOLDFIELDS-Articles-10-Tips-How-to-Avoid-Gold-Investment-Scamshttp://tanagoldfieldsarticles.quora.com/TANA-GOLDFIELDS-Articles-10-Tips-How-to-Avoid-Gold-Investment-Scamshttp://tanagoldfieldsarticles.quora.com/TANA-GOLDFIELDS-Articles-10-Tips-How-to-Avoid-Gold-Investment-Scamshttp://tanagoldfieldsarticles.quora.com/TANA-GOLDFIELDS-Articles-10-Tips-How-to-Avoid-Gold-Investment-Scamshttp://tanagoldfieldsarticles.quora.com/TANA-GOLDFIELDS-Articles-10-Tips-How-to-Avoid-Gold-Investment-Scamshttp://tanagoldfieldsarticles.quora.com/TANA-GOLDFIELDS-Articles-10-Tips-How-to-Avoid-Gold-Investment-Scamshttp://www.openfaves.com/environment/TANA_GOLDFIELDS_Articles_10_Tips_How_to_Avoid_Gold_Investment_Scams/http://www.openfaves.com/environment/TANA_GOLDFIELDS_Articles_10_Tips_How_to_Avoid_Gold_Investment_Scams/http://www.openfaves.com/environment/TANA_GOLDFIELDS_Articles_10_Tips_How_to_Avoid_Gold_Investment_Scams/


17/17

Thank You

TANA GOLDFIELDS Articles

gold-hedging talk creeps in, but miners prefer exposure

Documents