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AngloGold to substantially reduce hedge by end-2008
Allan Seccombe
Posted: Fri, 21 Dec 2007
[miningmx.com] -- ANGLOGOLD ASHANTI wants to make “substantial progress” is closing its hedge book by the end of 2008 to more fully benefit from the high gold price, CEO Mark Cutifani said.
In a report carried by the Australian Associated Press, Cutifani said the strategy will be made clear early in 2008.
"We'll make a strategy statement in February about our long term approach ... and will be careful with what we say," he is quoted by AAP as saying.
"It will be done through three or four different strategies but by the end of 2008, I would like to see substantial progress. The problem is, the market generally sets against you. It’s seen as opportunistic."
AngloGold is undergoing a three-month review of its portfolio of 21 mines, a number of exploration plays and a hedge book, which hacked $59/oz out of the average price of $680/oz it would have received if it were unhedged in the three months to end-September.
Cutifani says at his maiden quarterly results presentation for the world’s third-largest gold producer in November he’s no fan of hedging, having been at Australia’s Sons of Gwalia, which was sunk by an unfavourable hedge book.
AngloGold has one of the largest hedgebooks of the gold companies, which prevents it from fully realising
the benefits of the high spot gold price its unhedged peers enjoy.
Investors in gold shares have not benefited much from the high gold price because of rising input costs for gold companies and many taking advantage of the bullion price to invest in their operations to extend the life of mines.
By the end of the September quarter, AngloGold’s net delta hedge position was 10.58 million oz, up1.83 million oz compared to the end of the June quarter.
The increase was primarily due to the closing spot gold price in September of $745/oz, which was $96/oz higher than the quarter’s opening price of $649/oz.
AngloGold warned it would earn between 10% and 12% below the spot price in the coming quarter on prices between $700 and $760/oz.
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