As gold price falls, miners pick derivatives to protect income
* Options make up 46 pct of hedge book vs 16 pct a year ago
* Producers use collar structures to protect revenues
By Jan Harvey
LONDON, July 30 (Reuters) - Gold mining companies are turning increasingly to derivatives to lock in future revenues, as an industry still smarting from losing out on a 12-year bull run gets creative over protecting its income during the metal's current downturn.
While miners overall remain wary of hedging -- the outstanding global hedge book stood at just 6.2 million ounces at end March compared with 57.2 million a decade earlier -- those who do favour the strategy are leaning more strongly towards options.
Data released this month from Societe Generale and GFMS analysts at Thomson Reuters showed options structures made up 46 percent of the global hedge book by the end of the first quarter of 2015, compared with just 16 percent in the same period a year before and 11 percent in 2013.
Hedging allows miners to lock in the price of their output, usually by selling future production forward. This offers protection from falling gold prices, but means they can lose out if prices rise sharply.
Big mining companies lost billions closing out hedges during a 12-year rally that took gold prices to record highs in 2011 just shy of $2,000 per ounce.
Since then, hedging has been heavily out of favour with most of the biggest miners, and prices have continued to decline, with last week's slump to 5-1/2 year lows seen opening the way to further losses. Continuación...