GOLD MINERS are unlikely to hedge their future production at current prices, analysts say, but not because they don't want to.

With costs rising and the gold price now 25% below its peak of 2011, “We think producers are under pressure to put on hedging," says Robin Bhar, chief of metals research at London bullion market-maker Societe Generale, speaking to International Financing Review.

Noting the gold industry's "very steep cost curve and high production costs," Bhar says the problem "needs a cultural change at the board level after a decade of de-hedging. But shareholders can’t always have it both ways in terms of exposure to the gold price and a profitable company."

A rising gold price isn't reflected in the share price of a company which has already sold its future production at lower levels. The major miners were blamed for helping depress prices during the 1990s' bear market, borrowing gold to sell against future production and – as a whole – building a "hedge book" equal to well over an entire year's global production by 2001.

Several miners then lost heavily as gold prices turned higher, forcing them to "close their hedges" at ever-rising prices. The global hedge book was effectively shut by 2011 – the year gold prices hit their record highs to date.

So now "it is almost politically impossible," agrees David Jollie, strategist at Japanese trading conglomerate Mitsui, "for major gold producers to hedge their production without a backlash from investors." Silver miners, in contrast, began "hedging en masse" more than two years ago, the Financial Times reports, taking advantage of the surge from $18 per ounce which peaked in April 2011 at $49.

"During that time," says the FT, quoting Thomson Reuters GFMS data, "the total amount of metal hedged more than quadrupled."

Jan. and Feb. 2011 saw around 100 million ounces of futures silver production hedged by the mining industry, according to Deutsche Bank. That was 5 times the size of the silver producers' entire hedge-book only a few months earlier, and equaled around one-seventh of the world's annual mine output.

For gold mining companies today, "the price has already fallen a long way from its all-time highs," notes Mitsui's Jollie. Because prices have come down so fast in 2013 – losing 18% so far since New Year – higher-cost miners may find that "hedging would lock in losses rather than profits."

Mid-sized Russian gold miner Petropavlovsk, listed in London as POG, this week announced its second round of hedging since February. The former million-ounce miner's share price has lost 65% so far in 2013, with the board now slashing costs and waiving bonuses.

Out of the next 12 months' likely output of 21 tonnes, Petropavlovsk has now hedged 70% at a price of $1663 and now $1408 per ounce.

More efficient mines – which could also benefit from hedging at current prices, still well above cost – "tend to be larger and less keen on hedging" Mitsui goes on, again pointing to shareholder activism against hedges. But if the gold price rallies to $1500 per ounce, the report warns, "the recent experience could make miners keener to lock in profits at that level to avoid future risk."