NEW YORK, March 9 (Reuters) - New Gold Inc has hedged nearly all of its remaining 2016 gold production to ensure cash flow for its Rainy River project, the company said, an unusually large amount for a miner after bullion made its biggest rally in 4-1/2 years.
The miner said on Tuesday that it hedged 270,000 oz of gold for the remaining nine months of the year through options contracts at a cost of $2 million, starting in April, giving them a minimum price of $1,200 an ounce and maximum at $1,400 an ounce.
That breaks down to 30,000 ounces each month and accounts for 90-100 percent of New Gold's production forecast.
Hedging, which can be put in place through options contracts as well as forward or deferred sales, allows miners of the metal to lock in prices for their output.
Spot gold was trading around $1,250 an ounce on Wednesday, up around 18 percent from the end of 2015 after global economic uncertainty caused investors to buy gold as a safe haven asset.
"Given the meaningful increase in the gold price, we are taking a prudent step to establish a floor price for our revenues through the balance of 2016 while maintaining significant exposure to higher prices," said Brian Penny, executive vice president and chief financial officer for New Gold.
"Our unique decision to enter into the option contracts is solely a function of 2016 being our most significant year of investment at our Rainy River project."
Penny added that the company did not have any plans to enter into any similar contracts after 2016.
This is the biggest hedge by a gold miner since Evolution Mining said last month that it sold forward 150,000 ounces of gold with scheduled deliveries out to 2020.
Gold mining companies have been increasing the amount they hedge recently. In the third quarter of 2015, they increased their outstanding global hedge book by 16 tonnes, the first switch back to net hedging since the fourth quarter of 2014. (Reporting by Marcy Nicholson; Editing by Bernard Orr)