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Fund blasts AngloGold 'meddling' Posted: Wed, 18 Oct 2006 [miningmx.com] -- ANGLOGOLD Ashanti's share price has underperformed its South African rivals all year. The trend can be identified from when parent company Anglo American announced on 20 April that it had sold some of its shares in AngloGold Ashanti and would consider doing so again once a 270-day moratorium ended. Since April, AngloGold’s share price has declined 7.3% – whereas Gold Fields and Harmony Gold are 1.5% and 15% up respectively. But it’s over the past month that AngloGold has underperformed most markedly. “It’s as cheap as chips,” said Steve Shepherd, an analyst at JP Morgan, of AngloGold Ashanti. The moratorium falls due on 20 January. Apart from the threat of more AngloGold shares coming on to the market, there’s the compounding issue of the company’s hedge book. Generally speaking, the decline in the gold price is supportive of AngloGold’s hedge book. In fact, the end-September quarter should show an improvement in its value. However, a decision to buy 29.5 tons (around 995,000 oz) at an average price of approximately $687/oz – a fact disclosed in the group’s June quarter results announcement – is looking increasingly unfortunate as the gold price slides. AngloGold Ashanti bought the ounces to close existing contracts, a strategy it wants to undertake incrementally in order to increase total production to the spot price of gold, which it believes will improve. As Goldman Sachs analyst Oscar Cabrera explained in a note dated 10 October: “The company is proactively managing its hedge book, looking to track spot within 5% to 10%.” Cabrera added: “Management stressed that it will not lower its hedge book at any cost, looking to participate opportunistically in a volatile gold market.” That must mean AngloGold will now be actively buying more gold ounces, as the 995,000 oz it bought earlier this year is well out of the money, said Nigel Suliaman, head of specialist equities at Metropolitan Asset Managers. According to reports, those were bought at $80 to $100/oz more than the current gold price. At the time of writing, the ounces were at a negative R800m value. Peter Major, an analyst at Cadiz, was withering: “Why did they mess with their hedge book? Whenever companies meddle with their hedge books they get into trouble. I can’t believe they did it. I’m pissed off.”Free news alerts: click here to subscribe
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