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Pamodzi Gold sets 5-month hedge deadline Posted: Mon, 12 Nov 2007 [miningmx.com] -- PAMODZI Gold, the Johannesburg-listed marginal gold producer, said it may consider closing its hedge book after March if it had concluded "a major transaction". "To remove the hedge would be very expensive now," said Peter Steenkamp, CEO of Pamodzi Gold. "There's a chance to announce a transaction in about five months and then we'll make a call." Pamodzi Gold, which listed almost 12 months ago, reported a R111m loss in the nine months to end September of which all but R18m was attributable to the financial effects of its hedge book. This includes a non-cash R67m re-evaluation of its hedge book liability in the September quarter alone. As of September 30, the hedge book would cost R415m to close out. Pamodzi Gold sells about a third of total output at $350/oz. The spot price of gold is currently $817/oz, more than double. As a result, Pamodzi Gold has rolled its hedge commitments forward until end March, enough time to develop a hedging strategy, it said. "We don't want to close the hedge out at all costs," said Pamodzi Gold financial director, Martin Schermers referring to the prospect of using shares to remove the hedge book. "We believe our shares are undervalued." Steenkamp said the strategy was to jack up the company’s share price with a headline grabbing transaction that would also offer the benefit of diluting the effects of the hedged gold with extra production. Where such transactions are to be found is anyone’s guess. Assets adjacent to Pamodzi Gold's Orkney or President Steyn mines in the North West and Free State provinces respectively were possible, said Steenkamp. The word, however, is that another Harmony related transaction is being considered. It's also thought that a proposed R550m share placing, arranged by Pamodzi Gold to pay for the Orkney and President Steyn mines, would create additional liquidity, and stimulate Pamodzi Gold's share price, currently down 18% from its R19/share listing price. A share placement programme, arranged by RBC Capital Markets, will take place in January which will take Pamodzi Gold's freefloat to 36% from about 22%, Steenkamp said. Steenkamp said RBC had assured it of foreign buyers. Another means of boosting liquidity and raising money would be an offshore listing which Steenkamp said was part of the company's strategic plans next year. "It's definitely on the cards next year, probably in North America." Pamodzi Gold has a presence in two of South Africa's gold mining provinces so it could take advantage of AngloGold Ashanti's indication is might sell less profitable mines. Or it could deal again with Harmony. A bid for Beatrix, a gold mine owned by Gold Fields which is south of President Steyn, was ruled out however. "That's too large a deal," said Steenkamp. "The asset will want will add between 250,000 to 300,000 oz/year." Click Here to subscribe to our daily newsletter
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