South Island gold miner OceanaGold is being required by its banks to buy a form of insurance to protect the price it receives for a substantial portion of the gold it produces.

It is a reversal of OceanaGold's decision more than two years ago to drop these ''hedges'' - a form of price protection  - so it could exploit the rapidly rising price of gold then.

OceanaGold has two big gold mining operations in the South Island, in central Otago and one in Reefton.

Today OceanaGold announced it had sewn up a deal for a $277.5 million credit facility from a multinational banking syndicate to cover bonds that must be paid back over the next 15 months.

The credit has come from Citibank, BNP Paribas, HSBC, Barclays, Nedbank Capital and Investec Bank (Australia) and expires at the end of June 2015.

As a condition of the credit, OceanaGold has agreed to buy ''out-of-the-money put options'' on about 40 per cent of its gold production at US$1400 an ounce.

That means if the price of gold falls below US$1400, the company will make money rather than lose profitability.

Hamilton Hindin Greene sharebroker Grant Williamson said it was a cheap way of ''hedging'' the price of gold, while still allowing the company to benefit from any rise in the price.

Forty per cent of gold production was significant, he said.

Williamson said the put option was a more flexible form gold price protection.

''It's a completely different way of hedging because you can still take advantage of all the upside (rise) in the price of gold.''

The Melbourne-based company has recently announced it made a net loss of $3.9m in the half year to June, compared to a net profit of $23.3m a year earlier.

The company is also being offered an additional $25m by the banks with the option to repay any funds it draws from this with either cash or shares.

OceanaGold managing director Mick Wilkes said he was pleased to finalise the agreement which had been discussed for a while.

''The company appreciates the strong vote of confidence our new banking partners have shown in us and look forward to working with them well into the future as we grow our business with a focus on delivering value to our stakeholders.'

- © Fairfax NZ News

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