Hedge book slides by 2.74M oz

A recent report by London-based Gold Fields Mineral Services (GFMS) says de-hedging gained momentum in the June quarter with 2.74 million ounces (85.1 tonnes) coming off the delta-adjusted hedge book, a four-fold increase from the previous quarter.

The 11th edition of the quarterly publication Global Hedge Book Analysis was prepared by GFMS on behalf of South African specialty banker Investec.

According to the report, and in contrast to the first quarter when the options book expanded, the total second quarter decline was roughly evenly split between maturing option positions and forward sales. The latter contracted by 1.41 million ounces (43.7 tonnes) quarter-on-quarter, while the delta hedge options position was cut by 1.33 million ounces (41.4 tonnes). The decline was largely achieved through scheduled deliveries, roughly 45% of which was attributed to Barrick, AngloGold Ashanti, Placer Dome and Newcrest, whose combined hedge position (in nominal terms) accounts for roughly two-thirds of the global hedge book.

In terms of the average sales price realized by producers in the second quarter, the figure was measured at US$419 per ounce, a shortfall of roughly US$8 per ounce from the average period spot price and a 2% decline from the US$426 per ounce received in the quarter ended March 30.

Commenting on the outlook for de-hedging for the balance of the year, senior metals analyst at GFMS, Bruce Alway, stated that the levels of de-hedging witnessed in the June quarter should be broadly sustainable and that based on the outstanding book at end-June and assuming no new hedging, buy backs or book restructures, de-hedging for the full-year could amount to roughly 9 million ounces (280 tonnes), or 35% less than the 13.76-million-ounce (428 tonnes) cut measured in 2004.