Newcrest Returns to Gold Hedging on Precious Metal’s 2016 Surge

Newcrest Mining Ltd., Australia’s largest gold producer, added its first metal hedges in eight years, joining competitors in a...

Newcrest Mining Ltd., Australia’s largest gold producer, added its first metal hedges in eight years, joining competitors in a renewed push to lock in profits amid the precious metal’s rally this year.

The Melbourne-based company agreed forward sales covering 530,749 ounces of output at its Telfer mine in Western Australia over the three years to July 2018, at an average price of A$1,737 an ounce ($1,308), Newcrest said Thursday in a statement.

“With the Australian dollar gold price trading close to 10-year highs, we saw this as an appropriate moment to lock in the price on a portion of Telfer’s future production by hedging,” Chief Financial Officer Gerard Bond said in the statement.

Bullion for immediate delivery in dollars has jumped about 15 percent this year on expectations that the Federal Reserve won’t raise interest rates further in 2016 and on haven demand. Producers outside the U.S. are also benefiting from weaker currencies that reduced their costs of production. Gold in Australian dollar terms rose 0.2 percent to A$1,622.82 an ounce at 10:48 a.m. in Melbourne and in February touched the highest since September 2011.

Evolution Mining Ltd., Australia’s second-biggest producer, South Africa’s Harmony Gold Mining Co. and St Barbara Ltd., the biggest gainer on the 44-member Bloomberg Intelligence Gold Mining Competitive Peers Index in the past year, are among suppliers to have put in hedges this year as prices have soared.

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Newcrest in 2008 completed the closure of its gold hedge book for A$1.7 billion after it sold shares to fund the buyout of forward contracts. Global producers, including Newmont Mining Corp., spent at least $10 billion to unwind hedges around the end of the last decade, amid pressure from investors who urged companies to take full advantage of a price surge that pushed the metal towards then-record highs.

The producer said in August it would retain the Telfer mine and was studying a lower-cost expansion plan for the asset after previously considering options including a sale.

To contact the reporter on this story: David Stringer in Melbourne at dstringer3@bloomberg.net. To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net, Keith Gosman, Jake Lloyd-Smith

By: David Stringer

©2016 Bloomberg News

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