www.miningmx.com | gold_silver AngloGold may sell mines

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Mark Cutifani, CEO, AngloGold Ashanti

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� JSE:ANGLOGOLD ASHANTI LIMITED:
16000c

AngloGold may sell mines
Allan Seccombe
Posted: Thu, 01 Nov 2007

[miningmx.com] -- ANGLOGOLD ASHANTI might sell some of its smaller, underperforming assets and more aggressively reduce its hedge position, which is preventing it from fully realising 28-year high gold prices, said CEO Mark Cutifani.

Cutifani, who has been in charge of AngloGold for exactly a month, said five or six of the company�s 21 mines were demanding a �disproportionate� amount of much management effort in relation to the value they are delivering.

Management has begun a three-month portfolio and strategic review of the 21 mines and a number of exploration projects as well as the hedge book. It will tell investors the new strategy AngloGold will adopt around February or March next year.

one or two things may come out of the portfolio

�You can expect to see adjustment, some tightening. The objective is not to be the number one producer, but to be the most profitable producer,� Cutifani said.

AngloGold wants to put a specific focus on Obuasi in Ghana and Geita in Tanzania, which have been inconsistent and have been the main reasons for the company not achieving its guidance numbers. AngloGold wants to improve performances from these mines.

�These are two key assets in Africa and we need to get them right. It�s important for the longer term,� Cutifani said.

The smaller, shorter life assets, possibly those in Mali, might fall into the disposal category, but Cutifani declined to name any mines.

The structure of the company, which is geographically diverse, makes it difficult to get quick action at mine level and this would form part of the review, he said.

If any assets are sold, cash raised could be used towards reducing the hedge book. Cutifani, a veteran of Australian gold producer Sons of Gwalia, which was sunk by a disastrous hedging foray, is no major supporter of forward sales.

�I�m not a fan of hedging,� he said. �In dealing with the hedge, I�m cautious about saying we�ll do something in a single transaction. That�s unlikely.�

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The hedge position knocked the received price in the September quarter nine percent or $59 below the average spot price of $680/oz for the period and will knock a further 10-12% off in the December quarter if gold averages $700 to $760.

At end-October the hedge had a negative marked-to-market value of $3.8bn and at end-September stood at a net delta of 10.58 million oz.

Part of the strategy in reducing the hedge could be through mergers and acquisitions to bring in unhedged ounces, the team could find opportunities to manage the hedge positions by delaying or reducing positions.

More reserves can be brought onto AngloGold�s books through extensions to existing operations and through greenfield projects, something Cutifani said will be done this year.

�We will look at the portfolio and in all likelihood there are one or two things that may come out of the portfolio. We will look at how we deploy capital in the business and the hedge book is one of the opportunities we�ll take to lighten the load there,� he said.

�We�d look at a financial transaction as others have done, but maybe not to the same degree. It will be part of the equation in reducing the opportunity loss there,� he said.

Cutifani sounded a bullish note on gold, which on Thursday reached a fresh 28-year high and psychologically important level of near $800/oz.

�I voted with my feet on the gold price by joining AngloGold Ashanti,� he said. �The $800 mark, well it�s run there a bit quicker than I thought it would. We are seeing some volatility. Beyond that I�m not sure where it goes.�

He said the fundamentals for gold, including the diminishing reserves that aren�t being replaced in any meaningful way, would continue to exert upward pressure on the gold price.

He highlighted the Tropicana exploration project in Australia and Colombia as two key growth areas for AngloGold. The company will also run the rule over its other exploration joint ventures and their risk profiles to decide where best to spend exploration dollars.

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