AngloGold Ashanti to eliminate hedge book

[] — ANGLOGOLD Ashanti is to raise around US$1.5bn through the issue of shares and convertible bonds to help eliminate the group’s remaining hedge book.

AngloGold has already reduced its hedge book from 11.3 million ounces (moz) at the end of 2007 to 2.72moz currently but the negative marked-to-market value of the book at end-June was still around $2.41bn.

The remaining hedges – agreements to sell gold forward – have committed prices of less than $450/oz on average compared with the current gold price which is hitting all-time record levels around $1,270/oz.

The group said in a statement released early on Wednesday that it would use the net proceeds of the share and bond issue along with its own cash reserves and existing credit facilities to “accelerate the elimination of its residual gold hedging position.’

CEO Mark Cutifani commented, “Removing the hedge book represents the last phase of the balance sheet restructuring and, once completed, is expected to give us full exposure to the gold price, widening profit margins and improving cash flow.’

He added that, “it will also enhance our ability to fund an exciting pipeline of organic expansion projects at a time many of our peers are forced to make expensive acquisitions to secure growth.’

The statement added the strategy to remove the hedge had the support of New York-based Paulson & Co which is the largest shareholder in AngloGold holding 12.1% as well as Cape Town-based Allan Gray whose clients are the second largest shareholder in the group holding 9.5%.

Paulson & Co president John Paulson commented, “we are steadfast supporters of AngloGold Ashanti’s management team, its growth plans and its strategy of increasing its exposure to the gold price.’

The pricing of the share and bond offerings has not yet been announced and will be made known only after completion of parallel book-building exercises.

Estimates are that the two offerings are looking to raise some $1.5bn before expenses.