The move to becoming an unhedged producer, and which followed a successful capital raising of $119 million for the buy-back, was welcomed by the markets.
Oceana's shares were up almost 7%, or 20c, to trade about $3.20 after the announcement on Thursday morning.
Oceana chief executive Paul Bibby said the elimination of the hedge contracts would generate "considerable cashflow" from spot sales and he estimated cash operating margins would increase about 200%.
"The robust margins that will now be generated from our New Zealand operations' annual production base of 270,000 ounces to 290,000 ounces will be substantially improved," Mr Bibby said.
Craigs Investment Partners broker Peter McIntyre said Oceana Gold had completed two major achievements during the recession - it had kept its production cash costs per ounce of gold down and now it had bought back its hedge book.
The increase to Oceana's cash operating margin "would be a big boost to cash-flows . . . making their net cash position so much stronger", he said.
"The fundamentals for gold remain strong and should provide Oceana with a good injection into its earnings for the next 12-18 months," Mr McIntyre said.
Twenty-year-old triple-listed East Otago-based Oceana is New Zealand's largest gold producer and follows in the footsteps of major Australian producers, such as Newcrest Mining (in 2007) and Lihir Gold (2009), going unhedged to make the most of buoyant gold prices during the past two years.
Oceana spent $US71.6 million ($NZ102 million) buying back its fixed forward hedge book at an average cost of $NZ773 an ounce and call options at $NZ1062 an ounce.
Spot gold was selling at $NZ1567 an ounce at the time of the announcement.
Mr Bibby said Oceana had "successfully closed out all remaining hedge facilities, resulting in the company immediately becoming a 100% unhedged gold producer".
Gold pushed through $US1000 per ounce in February last year for the first time and $US1200 in early December. It has been trading about $US1113 an ounce in recent days.
Last year, Oceana produced a record 300,391 ounces from its open pit and Frasers underground mine at Macraes in East Otago and its open pit at Reefton.
It has forecast a slight decline in production this calendar year as it works through less productive ore bodies.
Cash costs for gold production in 2009 had been forecast at $US455-$US495 an ounce, but came in at $US411, 28% down on cash costs in 2008.
Oceana had said earlier any remaining money from the $119 million capital raising would be used for other capital working requirements, but on Thursday gave no indication what the $17 million balance would be used for.
• Port Moresby-based Lihir Gold rejected a surprise $A9.2 billion takeover offer of $A3.87 a share from Newcrest Mining on Thursday, saying the offer undervalued its assets. At the time, Lihir was trading at $A3.03; a market capitalisation of $A7.2 billion.
