Gold Fields closes hedges

Denver — In accordance with its belief that hedging gold at low prices is counterproductive, South Africa’s Gold Fields (GOLD-Q) has closed out its remaining gold hedge positions.

The company bought back 160,000 oz. of gold forward sales at an average spot price of US$256.10 per oz., at a time when the precious metal hit its lowest level in 16 months. The transaction generated a net profit of US$4.5 million.

Gold Fields held the hedge position through its 71%-owned subsidiary, Gold Fields Ghana, which operates the Tarkwa mine. The company’s lenders required the position as potential debt covenant obligations.

By closing out the hedges and using additional cash on hand, Gold Fields Ghana has been able to retire most of the remaining US$25-million project loan.

“We thought this was an opportune time to close out the last of our hedges, given the current weakness in the gold price, which we believe is not sustainable,” says Gold Fields Chairman Christopher Thompson.