Investors urge caution as miners consider return to gold hedging

Thu Dec 12, 2013 7:36am EST
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* Locking in prices appeals after gold drops 25 pct

* Incoming Barrick Gold chairman revives hedging debate

* Investors still wary of missing out on potential rebound

By Jan Harvey and Clara Ferreira-Marques

LONDON, Dec 12 (Reuters) - Investors in major gold miners say a return to hedging future production after a slump in gold prices would be a sign of financial weakness in companies and could rob them of the chance to reap the rewards of any price rebound.

The incoming chairman of Barrick Gold, the world's largest gold miner, last week rekindled the debate over the practice of selling production forward. John Thornton, a former senior executive at Goldman Sachs, said he would seriously consider hedging.

Money managers say hedging could play a limited role, particularly for smaller producers, but would raise concerns about players such as Barrick.

"The act of hedging is a sign of balance sheet weakness," said portfolio manager Catherine Raw at BlackRock, the world's largest asset manager and a major gold investor.

"It's a sign that debt-holders are requiring them to protect themselves from the downside, because their existing balance sheet and projects are not robust enough to cope with any further fall in the gold price."   Continued...