New Gold hedges nearly all remaining 2016 gold output

NEW YORK, March 9 (Reuters) - New Gold Inc NGD.TO has
hedged nearly all of its remaining 2016 gold production to
ensure cash flow for its Rainy River project, the company said,
an unusually large amount for a miner after bullion made its
biggest rally in 4-1/2 years.
The miner said on Tuesday that it hedged 270,000 oz of gold
for the remaining nine months of the year through options
contracts at a cost of $2 million, starting in April, giving
them a minimum price of $1,200 an ounce and maximum at $1,400 an
ounce.
That breaks down to 30,000 ounces each month and accounts
for 90-100 percent of New Gold's production forecast.
Hedging, which can be put in place through options contracts
as well as forward or deferred sales, allows miners of the metal
to lock in prices for their output.
Spot gold XAU= was trading around $1,250 an ounce on
Wednesday, up around 18 percent from the end of 2015 after
global economic uncertainty caused investors to buy gold as a
safe haven asset.
"Given the meaningful increase in the gold price, we are
taking a prudent step to establish a floor price for our
revenues through the balance of 2016 while maintaining
significant exposure to higher prices," said Brian Penny,
executive vice president and chief financial officer for New
Gold.
"Our unique decision to enter into the option contracts is
solely a function of 2016 being our most significant year of
investment at our Rainy River project."
Penny added that the company did not have any plans to enter
into any similar contracts after 2016.
This is the biggest hedge by a gold miner since Evolution
Mining EVN.AX said last month that it sold forward 150,000
ounces of gold with scheduled deliveries out to 2020.

Gold mining companies have been increasing the amount they
hedge recently. In the third quarter of 2015, they increased
their outstanding global hedge book by 16 tonnes, the first
switch back to net hedging since the fourth quarter of 2014.