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Gold de-hedging to top 12.9 million oz in 2007
Allan Seccombe
Posted: Wed, 28 Nov 2007
[miningmx.com] -- THE global gold hedge book is now at its lowest level since 1992 after nearly a million more ounces were closed out in the third quarter of the year, and the full 2007 hedge reduction should top 12.86 million oz, according to the Société Générale Gold Hedge Book Analysis.
In the final quarter of this year, 1.75 million oz are scheduled to expire. If Newcrest’s 0.51 million oz and Red Back Mining’s retirement of its Chirano hedge position are taken into account, the full year’s hedge book reduction will “comfortably exceed 400 tonnes,” the report said.
“Going beyond the present year, the ‘run rate’ of ongoing de-hedging implied from the delivery profile suggests and annual volume of roughly four million oz per annum over the next three years,” the report said.
“However, we retain the view that the scope for further de-hedging of the intensity recorded in
the first half of 2007 is very limited.”
AngloGold Ashanti is not likely to have a “forceful cut” in its hedge book because a capital raising strategy and share dilution would not be favourable so soon after Anglo American downsized its holding in the company, the report argued.
Recent announcements from Barrick, one of the leading companies in reducing hedge positions, suggest that the hedge
books for its Pascua Lama and Pueblo Viejo projects are likely to remain in place for some time, it said.
The global hedge book stood at 32.6 million oz, with a negative marked-to-market value of $9.1bn at the end of the third quarter, deepening by $1.1bn, the report said.
A surge in the gold price of $92.50/oz in the quarter meant there were more contracts that were under water than in the second quarter.
The gold price was driven higher mainly in September by dollar weakness against the euro, rising oil prices and increased investor activity as seen in increased Comex long positions and 138 tonnes more metal held in eight gold-backed exchange-traded funds and two Canadian closed-ended funds.
GFMS, the metals consultancy, estimates mine output in the third quarter stood at 630 tonnes, slightly down year-on-year.
Newcrest and a couple of smaller players led the way in the quarter’s hedge reduction, which relatively small compared to
the high levels of closures in the first half of the year.
Newcrest eliminated Australian and US dollar hedge contracts up to 2011 by pre-buying 2.3 million oz. Part of those ounces will close out the company’s gold loan.
Newcrest has indicated it will close out the remaining 1.7 million ounces of its US and Australian denominated Gold Bullion Sales Contracts by September next year.
AngloGold Ashanti’s position expanded by 1.83 million oz in delta-adjusted terms to 10.58 million oz, offsetting reductions other companies’ hedge reductions.
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