S.A. Gold Miners “Hedge” – But With A Difference

There is no dirtier, ‘four-letter word’ in the vocabulary of the world’s gold miners than “hedging”. With those readers for whom this term is no longer familiar, an introduction from Bloomberg:

Harmony Gold Mining Co.  (HMY) and Acacia Mining Plc (ABGLF) agreed to lock in profit margins at some of their African operations in a return to hedging strategies that undermined the industry during the metal’s bull run in the 2000s.

Yes, 20 years ago, the One Bank coerced most if not all of the world’s largest gold miners to “hedge” their gold production, meaning hedging the (U.S. dollar) PRICE OF GOLD. By “hedging”, those miners agreed to FORWARD SELL a portion of their production onto the market, at guaranteed price parameters.

In other words, no matter how much the price changes during the term of the hedging arrangement, the miner is locked in at that price. Doing this, shortly before a ten-year bull run, cost these miners $BILLIONS and $BILLIONS — in either lost profits, or penaltiesfor buying their way out of those contracts.

Because of that reality, I’ve warned readers that due to the current, extended price-suppression of gold, that we would see the banksters trying to goad the big gold miners into returning to that form of financial suicide and financial slavery. But note that there is a key difference in the nature of this hedging.

Harmony, which gets 95 percent of its production from South Africa, hedged its local currency at between 15.59 rand ($1.03) and 18.60 rand per dollar for a third of its annual production, it said in a statement Tuesday. Acacia took out contracts known as zero-cost collars on 136,000 ounces of gold from Buzwagi, a Tanzanian mine, at $1,150 an ounce to $1,290 an ounce, it said in a separate statement.

Two gold miners. Two slightly different hedges. Harmony Gold is actually not hedging its gold production at all. It is hedging its currency, versus a decline in the value of that currency versus the USD. Because this is a currency hedge, and not a gold hedge, there is no “forward selling” of gold taking place. Furthermore…