# Normandy trims hedging book as Newmont closes in

Normandy has quietly been reducing its minimum hedge ratio from 60% to 45% of reserves using 12 to 13 dealer during the past few weeks, said one gold trader.

The company issued a statement yesterday confirming its minimum hedge ratio had hit 45%. This led to a jump in the price of gold. The spot price broke $280 per ounce, rising to$290 before falling back to \$287, said one South African dealer.

A London-based dealer added that the volatility ocurred as hedge fund managers with short gold positions tried to take advantage of expected price increases resulting from Normandy’s sell-off. “But then the market realised that the sell-off had actually already taken place, probably over the last two weeks, so the price fell back again,” said the dealer.

Explaining its position, Normany said; “Lower Australian and US interest rates and higher gold interest rates [the cost of borrowing gold] have significantly reduced the gold forward price compared to the spot price, making long-term hedging less attractive.” It added that 70% of its gold reserves are now exposed to movements in the spot price.

The development came just one day before a declared deadline for bids to be in for Normandy. AngloGold, part of the London-listed Anglo American group, and a keen hedger, today conceded defeat in the takeover, clearing the way for Denver-based Newmont, a strong anti-hedger, to win control of Normandy.

Earlier in the bid battle, Newmont said it would unwind Normandy’s entire forwards book should it gain control of the Australian group.

Bobby Godsell, chairman and chief executive of AngloGold, today hinted that he is still on the lookout for acquisitions: “AngloGold’s long-term strategy formulation will continue to be informed by our belief in the importance of value-creating consolidation."

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