Newcrest Completes A$1.7 Billion Hedge Book Closure

By Jesse Riseborough

July 3 (Bloomberg) -- Newcrest Mining Ltd., the largest Australian gold mining company, completed the closure of its gold hedge book for A$1.7 billion ($1.6 billion), 11 percent higher than estimated.

The increased cost was offset by the higher price of gold, the Melbourne-based company said today in a statement. The company closed out forward sales contracts by buying 4 million ounces at an average price of A$868 an ounce, it said.

Chief Executive Officer Ian Smith last year completed a A$2 billion share sale to help fund a buyout of the forward sales contracts. Global gold mining companies such as Newmont Mining Corp. have been closing hedge books to take advantage of record prices for the precious metal.

Higher prices meant the company did not need to use any debt to fund the closure as initially forecast, it said.

Newcrest rose A$1.18, or 4 percent, to A$31.01 yesterday on the Australian stock exchange, giving it a market value of A$14 billion.

Mining companies can agree to sell future production at current prices to protect against losses caused by sudden declines, a strategy known as hedging.

To contact the reporter on this story: Jesse Riseborough in Melbourne at jriseborough@bloomberg.net