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AngloGold Ashanti Closes Gold Mining Hedgebook

Wednesday, 9/15/2010 13:43

AFRICA's No.1 Gold Mining producer – AngloGold Ashanti – today announced a $1.37bn shares and bond issue so that it can close the remainder of its "hedge book", built up by forward sales during the long bear market in gold which ended a decade ago.

As a whole, the Gold Mining industry built up a hedge-book worth more than 3,100 tonnes of metal at its peak, borrowing metal from central banks and selling it into the market, for fear of yet-lower prices to come.

AngloGold is the last of the major producers to buy back its hedges, with 100 tonnes still outstanding by end-June according to VM Group analysis.

"[This will] give us full exposure to the Gold Price," said Mark Cutifani, CEO of Anglo – the world's fourth-largest listed gold miner – in a statement on Wednesday.

AngloGold Ashanti's stock has dramatically underperformed world No.1 Barrick Mining since November last year, when Barrick announced it had closed the last of its hedges.

Rising 12% against Barrick's 24% gain, Anglo has also underperformed the 17% rise in US Dollar Gold Prices over that 10-month period.

"Miner dehedging has been a big story for gold demand over the last decade, but it's now as good as finished," said GFMS chairman Philip Klapwijk on Tuesday, launching the metals-market consultancy's latest update to its 2010 data and forecasts.

"The risk at these record-high prices – although not in the near to medium term – is for some reconstruction of the [forward sales] hedgebook."

Forecasting 2.4% full-year growth in Gold Mining output worldwide, "Limited growth [in mining supply] is perhaps the new paradigm," Klapwijk told the analysts, journalists and market professionals attending the twice-annual event.

But there's still a "drought in new discoveries" said his colleague, GFMS Mine Economics managing director Mark Fellows. "World-class ore bodies just aren't being found, despite very high levels of exploration spending."

Start your Gold Investing with this free gram of physical bullion in Zurich, Switzerland, courtesy of BullionVault now...

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