Getting back into the hedge
ANALYSIS: What SA gold miners are doing to mitigate risk
SA gold-mining companies are taking risk-mitigation steps at a time of flat gold prices and operating uncertainty
Limited hedging activities are creeping back into the gold sector, but miners are taking a more cautious position than they did 15 years ago. In the early 2000s, after a lengthy period of depressed gold prices, producers — including Barrick Gold and AngloGold Ashanti — sold forward a significant portion of future production at prices that turned out to be overly pessimistic. As a result, their shareholders missed some of the upside when gold prices surged and the two miners had to buy back their hedge books at great cost. In the past decade, gold hedging across global producers has been minimal. The latest financial reports from three of SA’s biggest producers — AngloGold, Harmony Gold and Gold Fields — show that while AngloGold is still unhedged, Harmony and Gold Fields have been hedging certain risks, such as currency, oil and gold prices, for short periods. Pan African started short-term hedging for part of Barberton Mines’ production in mid-2015. Harmony’s gold hedging allowed i...
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