NEW YORK (Reuters) - Gold miners cut hedging positions by 11 percent to 16.92 million ounces in the third quarter of 2008 from the previous three months, and the financial position of the producers will determine dehedging activity in the future, an industry report said.
The quarterly report by Societe Generale and metals consultancy GFMS said that the 2.03 million ounces removed from the global hedge book was the smallest cut since late 2006 as dehedging slowed because of a lower average price during the third quarter.
Hedging allows producers to lock in prices for future output, but it can backfire if metals prices rise above the hedged price. High gold prices in past years have prompted producers to lower their hedging positions.
The report said net activity for the quarter was dominated by owners of the world's two largest hedge books, AngloGold Ashanti's (ANGJ.J: Quote, Profile, Research, Stock Buzz) and Barrick's (ABX.TO: Quote, Profile, Research, Stock Buzz), which generated 1.76 million ounces of hedge reduction.
The report said the fourth quarter was expected to be a period of comparatively restrained activity on a net basis, as the diminishing size of the book was limiting the scope of further widespread cuts.
"In the current environment it is equally pertinent to consider the financial positions of companies which could possibly be looking to reduce their hedge cover," it said.
"A company with a weak cash position or little spare credit will find it difficult to reduce cover further by any means other than delivery of mine production," the report said.
(Reporting by Frank Tang; editing by Jim Marshall)
