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Ian [Cockerill] looks like a genius - Peter Major, Cadiz
In an interview on Radio 2000 @ 16:00 on Friday, 2 November 2007
[miningmx.com] -- GOLD Fields' executives Ian Cockerill (CEO) and chief financial officer, Nick Holland, looked like geniuses after deciding earlier this year to buy out a hedge book inherited from Western Areas.
So said Peter Major, a hedge fund manager for Cadiz, a South African firm. Major believes that Gold Fields took a positive bet on the gold price while AngloGold Ashanti remained too bearish and is now suffering the effects.
AngloGold Ashanti said last week that it was considering improving its exposure to the spot price of gold which has raised speculation the company could buy out its 10 million oz hedge book.
"I think AngloGold maybe waited too long to do it, and now it's really hurting them; and it's always scary buying something back at two, three times the price you sold it at," said Major. He was speaking on Moneyweb's Power Hour.
In January, Gold Fields
announced it had closed out about one million oz of forward gold sales at Western Areas at a cost of $528m – an average price of $622,14/oz. The gold price was last quoted at $807/oz.
AngloGold Ashanti is also selling its uranium by-product at $20 to $25/lb in terms of long standing contracts its signed with buyers. "I suppose if you're used to doing that with your gold, buying gold on the open market at double what you sold it forward at, then it's not so difficult to do it for uranium," said Major.
It's not all bad for the South African gold sector. Major said DRDGOLD's new management team, led by CEO John Sayers, had acted boldly in selling its offshore mines in favour of South African surface mining. The move had lowered risk for the group, he said.
"I think these guys have taken the most radical steps to change their operation, and they are probably are going to receive the best positive boost," he said of DRDGOLD. "When you get out of some of these
millstones around your neck, often you can see great opportunities that you didn't see before."
DRDGOLD has said that in addition to focusing on surface mining, it would also investigate mining uranium from a large dump its owns at Blyvoor. But the uranium market is a volatile place following news last week Uranium One would produce less uranium in 2008 than it initially expected.
Major said the selling on Uranium One, which was down 17% in one day last week, was overdone. "I was surprised by the market reaction," said Major.
"And some of the good analysts, I thought, marked these guys down too hard and made it sound a lot worse."
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