AngloGold can ride out gold storms - Godsell
By DARREN SCHUETTLER
Johannesburg (Reuters) - AngloGold chief executive Bobby Godsell said on Friday that the world's biggest gold company was preparing for a deeper slide in bullion prices, but was strong enough to ride out the storm battering gold markets.
A more than 10 percent drop in prices since May, when Britain announced a controversial gold sale programme, would affect the company's results for the June quarter, he said. "Clearly we will be affected by lower spot gold prices and it's going to be tough, but our aim is to run this company profitably in good times and bad and the results will show whether we have succeeded," Godsell, 46, told Reuters.
But Friday's $257-an-ounce gold price would not force the seven-million-ounce a year miner to take drastic action such as cutting production, trimming capital budgets or retrenchments.
"As things currently stand we don't envisage in the foreseeable future - the next three, six or nine months - any closures or changes of scale of our operations," Godsell said. "We are looking at a lower playing field scenario for gold. What if gold goes to $150, $100 or $200 an ounce, obviously then we would have to very significantly contract, but we would still be around producing gold," he added.
SA's gold industry is under intense pressure with prices at fresh two-decade lows after Tuesday's auction by Britain of 25 tons of its gold reserves under a programme which will eventually see the disposal of more than half of them.
At least six marginal gold mines have responded to low prices with plans to retrench over 11 000 workers. Another mine, ERPM, passed into liquidation earlier this week, threatening 5 000 workers with unemployment.
If gold falls further to around $250 an ounce, it would put 40 percent of SA's gold production and about 80 000 mining jobs at risk, Godsell said. AngloGold, which employs 82 500 workers and has average production costs under $250 an ounce, may see jobs lost due to attrition.
But Godsell said no new retrenchments were planned as a result of current low prices. He also did not foresee any major changes to the company's hedging programme, which has 12.9 million ounces spread over 10 years - equivalent to a year and nine months of production.
"We have built a substantial hedgebook and there is a lot of flexibility, but hedging is not a long-term rescue for the gold industry," Godsell said. "In the end, the gold industry will flourish or perish depending on whether real live people want the product or not," he said, adding the SA gold industry must work harder to build consumer demand for their product.
Godsell will join a high-powered delegation to Europe next week to seek a moratorium on UK central bank sales and plans to sell 10 million ounces of International Monetary Fund (IMF) gold to finance Third World debt relief.
The group, which includes high-ranking government, industry and labour leaders, will visit London on Monday.
"If we can take away the spectre of IMF sales and stop the British sales, we'll get a far better picture of economic fundamentals (for gold)," he said, adding that the price could rebound to $300 an ounce if the uncertainty about central bank sales were removed from the market.
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