HomeGoldAngloGold cuts forward contracts by 39%

AngloGold cuts forward contracts by 39%

The shaft infrastructure
at AngloGold Ashanti’s
Tau Lekoa gold mine
Johannesburg, South Africa — MININGREVIEW.COM — 15 July 2008 – Leading international gold producer AngloGold Ashanti Limited says it has cut its forward gold contracts by 39% in the first half of the year in a bid to benefit from the metal’s spot price.

Making the announcement here, the company also revealed that its second quarter gold production was 3% above its previous guidance at 1.25 million oz, and at a lower total cash cost per ounce.

The world’s third biggest gold producer, AngloGold said it had slashed its gold hedge by 4.4 million oz from 11.3 million oz at the start of the year to 6.9 million oz as at 1 July 2008. The aim is to trim the hedge book by 46 % this year, the company statement added.

Reuters reports that the gold producer raised US$1.7 billion (R13.6 billion) through a recent rights issue, partly to help it trim its gold hedging position. AngloGold has been losing out on the surging gold price owing to its hedge book of forward sales.

The company said it had capitalised on a weaker gold market during the second quarter to execute a combination of delivery into and early settlement of non-hedge derivative contracts.

AngloGold CEO Mark Cutifani – who has come out against the company’s hedge book strategy saying he was ‘not a fan’ of the forward contracts since he took over last year – saw greater spot price participation in future. “Reduction in our gold hedge book is particularly significant in allowing us to benefit from a strong gold price environment going forward,” Cutifani said.

AngloGold had previously estimated output of 1.22 million oz of gold for the second quarter, but ended up mining more. Analysts said the company might have been conservative in its forecast owing to a power crisis in South Africa, which had left mines operating below capacity.

AngloGold has forecast 2008 output of between 4.9 million and 5.1 million oz.