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Gold miners return to hedging, FT reports

  • Some gold miners (GDX, GDXJ) have returned to hedging to protect themselves against further drops in the price of the metal, several senior precious metals bankers tell FT.
  • Although major gold miners have yet to return to the long-shunned practice, small and medium-sized gold companies are said to have rushed to hedge in recent months.
  • The shift in philosophy reflects mining executives’ fear that the past month’s rebound in gold prices may be short-lived, as well as the recognition that more falls in prices could push them into losses.
Comments (9)
  • The Prof
    , contributor
    Comments (63) | Send Message
     
    Thanks, guys. FT won't let us read the article.
    5 Aug 2013, 07:00 PM Reply Like
  • RS055
    , contributor
    Comments (1884) | Send Message
     
    A hedged gold miner - is like .. a fluffy toys business .... you get no exposure to the price of gold - you are simply betting on the amazing operating skill, high ROE and nicely growing dividend stream!! dream on! There is a reason why this is the worst managed industry.
    5 Aug 2013, 07:02 PM Reply Like
  • The Prof
    , contributor
    Comments (63) | Send Message
     
    The good news is, the more hedging, the more likely we are to be forming a good, long-term bottom. Tell me the companies that ARE NOT hedging since they will have greater leverage to gold as it advances, other things being equal.
    5 Aug 2013, 07:04 PM Reply Like
  • RS055
    , contributor
    Comments (1884) | Send Message
     
    At least with an unhedged gold miner - we and the hapless "management team" have a small chance of getting lucky and get out-sized returns from a skyrocketing price of gold - a very small chance - but at least there is a glimmer of hope. With a hedged miner? Fuggetaboutit. Its just a scheme to allow the managers to keep their jobs and get paid salaries.
    5 Aug 2013, 07:06 PM Reply Like
  • Russ Winter
    , contributor
    Comments (648) | Send Message
     
    This hedging story is complete hogwash. This story is a hedge fund plant and disinformation that the financial publications are failing to verify. Same story ran at Bloomberg last week. These reporters are at peak laziness. Producers are down to only 4,413 futures contracts short at Comex, the lowest ever. Comex is getting no new gold delivered to it.

     

    Hedging is often used in the mine construction phase as a requirement of financing. There is none of that getting underway. In fact the higher cost production that typically encourages hedging is fast being shut in.

     

    more: http://bit.ly/15BZMEl
    5 Aug 2013, 08:23 PM Reply Like
  • FLR
    , contributor
    Comments (37) | Send Message
     
    I agree with Russ. I unfortunately have a subscription to the FT so that I can see how the enemy is thinking. There is nothing concrete whatsoever in the article. Which miners are hedging? NGD even took the opportunity to recently close its legacy hedge book, which it obtained via one of its acquistions/merger. NGD is one of the better run miners with among the lowest all-in cost ($875) operations even though it is a growth company, which requires capital.

     

    There is just one mid-sized miner Petrapavlovsk, which happens to be London listed, that established some hedges and extended them during the recent gold bloodbath. There was a splash about this several months ago, probably in the FT or maybe it was Bloomberg. The evil twins of financial media.

     

    The company (Petropavlovsk) is unique in that they are developing a new technology, pressure oxidation, to extract gold. And developing this technology is costly. I think that they have large untapped gold resources that require this technology. So the company is in a different situation than most miners. Other miners are not running a mining technology venture on the side to unlock their resources.
    5 Aug 2013, 10:31 PM Reply Like
  • Investor Talkroom
    , contributor
    Comments (473) | Send Message
     
    Most likely the bankers are trying to pressure some of the miners with higher debt to purchase hedges so that the bankers can earn fees and capture the upside in rising gold prices.
    Or may be one more scheme to suppress gold prices.
    5 Aug 2013, 11:04 PM Reply Like
  • vector2
    , contributor
    Comments (4) | Send Message
     
    Can read the full FT article here: http://bit.ly/1b9dFJJ
    6 Aug 2013, 11:10 AM Reply Like
  • Russ Winter
    , contributor
    Comments (648) | Send Message
     
    Financial News Reports Misled on Gold Hedges:

     

    http://seekingalpha.co...
    6 Aug 2013, 07:00 PM Reply Like
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