Placer Dome reduces gold hedging by 20%

Canadian metals mining company Placer Dome is reducing its gold hedging by 20%, from 8.5 million ounces to 6.8 million ounces, in a bid to profit from the strength of current gold prices.

The Vancouver-based company aims to complete the 1.7 million ounce reduction in its forward hedge book by the end of the year, taking its total hedging to less than 40% of average expected production over the next five years. It expects to have more than 90% of next year’s production unhedged.

“We are positive in our outlook for gold, and reducing our committed [hedged] ounces will increase the already significant upside for our shareholders,” said Rex McLennan, Placer Dome’s chief financial officer.

Gold spot offer rates went up by $1 following the announcement to around $3.145 per ounce, but some analysts said this was not justified. John Reade, precious metals analyst at UBS Warburg in London, said most of Placer Dome’s hedge book reduction has already taken place. But he added that further evidence that producers are willing to buy gold “serves to reinforce the view that the metal will be supported by opportunistic producer buying”.

Placer Dome produced 2.75 million ounces of gold last year.