JOHANNESBURG (miningweekly.com) – During the second quarter of 2013, the global delta-adjusted hedge book fell by 529 000 oz, as the majority of producers either delivered into contracts as they matured or took advantage of plummeting gold prices to close out existing “in-the-money” contracts, Societe Generale and Thomson Reuters GFMS said on Tuesday.
This brought the remaining global gold hedge book to 3.09-million ounces at the end of June, which reflected a quarter-on-quarter decline of 15% and was the lowest amount since the start of the Global Hedge Book Analysis in 2002.
Most of the decline was attributable to a 25% reduction in outstanding forwards, whereas the delta-adjusted position of producers’ outstanding options increased by 66%, the report said.
The report indicated that 29 companies saw reductions to their delta-adjusted positions during the quarter, with the most notable being Crocodile Gold with a 270 000 oz reduction, while 15 companies saw increases to their positions.
“The most notable dehedging in the second quarter came from Australian producers, which found their contracts in-the-money towards the end of the quarter, owing to the fall in the spot gold price,” the report added.
Meanwhile, two-thirds of new delta-adjusted hedging was attributable to increases at B2Gold Corp, Minera Frisco and OceanaGold, with B2 Gold being the most significant hedger during the period, entering into a combination of forwards and collar option structures, which amounted to a delta-adjusted hedge of 173 000 oz.
Meanwhile, the marked-to-market value of the global producer hedge-book swung from a $417-million net liability in the first quarter to a $529-million net asset in the second quarter, making this the first time the global hedge book had ceased to be a liability since 2002, the report said.
Further, according to the Global Hedge Book, evidence of new hedging activity subsequent to the end of the second quarter had been limited, with producers rather seeking to protect margins through cost containment measures.
“Consequently, we expect the overall trend of global net-dehedging to persist throughout the remainder of 2013,” the report stated.