Gold Fields says hedging not "best for business"

LONDON (Reuters) - The production of forward gold sales can not be guaranteed higher profitability of a mining company, but this does not mean that the practice now out of fashion coverage does not make a comeback, says South Africa's Gold Fields.
With the doubling of the price of gold in the last five years, major gold mining companies, but all his books have been removed to maximize coverage for record gold prices above $ 1,400 an ounce.
Nick Holland, CEO of Gold Fields, the world gold mining are the fourth largest, told Reuters on Tuesday as bets on the future price of gold could be profitable, but they were too risky a way to do business in the long term.
"Our experience is that in the long term, has shown that one can not predict who can beat spot (prices) and could do well for two or three years, then I'll give it all away in one year , "he told the Reuters Global Mining and Steel Summit.
Coverage - the futures market to offset the risk of price changes in the physical metal - was common a decade ago when the price of gold was struggling under $ 300 and central banks were unloading their stocks gold.
Now central banks are expected to be net buyers of gold for the second consecutive year, according to research firm GFMS, and this has been a key positive for the demand for gold and the miners, who are not under such pressure to earn higher returns per ounce.
"I'm not a believer that coverage will be fantastic place in the long term. But that does not mean that people are not going to do it anyway, "Holland said.
"At some point, prices will rise to a level, and company executives will be seduced coverage of its production forward, and I think over time they will find it will be very difficult to handle these positions, because ... you're at the mercy of the markets, and do not think that's the best way to manage your business. "
"$ 1400 NO EVIL"
Holland did not give a forecast for the price of gold, which some top executives this week said it could reach as high as $ 1,750 an ounce, especially throughout the Middle East turmoil and worries about damage to the Japanese economy Earthquake initiative to strong demand for safe-haven metal.
input costs including energy costs and in some cases unfavorable exchange rates have driven up production costs about $ 1,000 an ounce for some miners, Holland said.
Inflation can stimulate investor demand for gold, which can help offset some of the damage to a portfolio of price pressures rising, but may also limit the purchasing power of consumers, particularly in major consuming countries gold-like India and China.
"$ 1,400 is not a bad price. It is very difficult to say how gold will react in these markets," said Holland.
"If we are to have higher inflation begins to show its head in the second half of the year in the form of a bubble may cost? ... That should be good for gold, but also deprives us of the demand," he said, adding: "Gold can be pulled in different directions by different factors and is difficult to know what the outcome will be."