AngloGold cuts hedging by 12%

South Africa’s largest gold producer, AngloGold, reduced its hedge book by 12% in the first quarter, as it moved to gain exposure to a rising spot price.

The 1.7 million ounce fall in hedging represents 120% of the firm’s first quarter production, leaving AngloGold with a hedge book of 12.9 million ounces.

Bobby Godsell, AngloGold’s chief executive officer, said the firm has eliminated low-price rand gold forward contracts for the remainder of the year. “On December 31 we had 60% of our forecast 2002 gold production sold forward, today we have only 32% of the remainder of this year’s anticipated production sold forward,” said Godsell.

But AngloGold admitted that the mark-to-market value of all its hedge transactions is minus $495 million as at March 31, based on a gold price of $301.4 per ounce. “Our position at AngloGold continues to be informed by our resolve to manage our revenue risk to ensure that we are not at the mercy of the gold price, while at the same time ensuring we are reasonably leveraged to a rising price,” said Godsell.

John Reade, precious metals analyst at UBS Warburg in London, said the move confirms the view that gold producers look set to reduce their aggregate hedge books this year. "This is one of the major positive factors in the gold market at the moment,” claimed Reade.