Northern Star to hedge gold production

Northern Star Resources has confirmed it will enter into a hedging program for almost a third of its forecast gold production over the next 12 months as concerns over price volatility linger across the sector.

The Perth-based miner will hedge 100,000 ounces, or about 28 per cent, of its forecast gold production at an average price of $1,462/oz.

"The board believes that entering into the hedge program is a prudent strategy for Northern Star in light of the recent volatility of the gold price, and the establishment of a $50 million revolving credit facility with Investec," the company said.

Northern Star flagged last week that it would consider hedging production for the first time in light of its $75 million acquisition of Barrick Gold's majority stake in the East Kundana joint venture and the Kanowna Belle mine.

The deal followed Northern Star's $25 million acquisition last month of Barrick's Plutonic gold mine, a deal widely seen as a bargain for Northern Star.

Northern Star had boasted in the past that its unhedged status left it ideally placed to generate cash flow and capitalise on high gold prices.

Several other WA gold miners have turned to hedging in recent times as a defence mechanism against volatility in the gold price, which was this morning trading at $US1,243/oz.

Saracen Mineral Holdings last month increased its hedging program with Macquarie Bank to 180,000oz at an average price of $1,627.

The program provides flexibility to deliver up to 100 per cent of production into hedging for the next eight months, but could leave Saracen worse off if gold prices unexpectedly soar.

Other gold miners including Norton Gold Fields, Doray Minerals, and Beadell Resources have also partially hedged production over the past year.

Shares in Northern Star closed the day's trade 2.5 cents lower at 88 cents.