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LONDON, March 27 (Reuters) - The volume of gold sold forward by mining companies rose by 103 tonnes last year, the biggest annual increase since 1999, an industry report showed on Friday.
That far outstrips an estimate given late last year of 42-52 tonnes, after Mexican gold and silver miner Fresnillo said it was hedging 47 tonnes of output over five years.
In their quarterly Global Hedge Book Analysis, Societe Generale and GFMS analysts at Thomson Reuters said the bulk of the rise in the global gold hedge book last year was driven by Fresnillo and Russia's Polyus Gold, which announced a major hedging deal in July.
"Of the growth in the book in 2014, the majority (85 tonnes) came from these two companies. Together they now account for half of the outstanding global hedging," the report said.
"What was also notable in the fourth quarter, and to a greater extent the year as a whole, was the rebalancing of the hedge book towards option contracts, rather than being dominated by forward sales," the report added. "The two largest hedgers, Polyus Gold International and Fresnillo, were two examples to employ such structures."
Hedging, or selling future gold production, allows miners of the metal to lock in prices for their output. While it can protect producers when prices are falling, it can also stop them capitalising on a rising market.
It fell out of favour during the 12-year bull run in gold prices that began in 2001, as mining companies spent billions of dollar closing out hedged positions.
GFMS and Societe Generale said that while evidence of a return to broad-based producer hedging was "thin on the ground", they expect the uptrend in hedged volumes to continue.
"Modest net hedging in the first quarter of 2015 (continued) to offset ongoing deliveries," their report said. (Reporting by Jan Harvey; Editing by Mark Potter)