INTERVIEW-AngloGold continues to wind down hedging
By Belinda Goldsmith
CANBERRA, March 16 (Reuters) - The world's biggest gold miner, South Africa's AngloGold Ltd , said on Thursday it would continue to unravel its gold hedge book in a bid to further unshackle world bullion prices.
Chief Executive Bobby Godsell said AngloGold had changed its hedging programme as an instruments of risk management in mid-1999 on a bet that at $250 an ounce gold was oversold and ready to rocket.
Bullion jumped to $340 an ounce last September after Western European central banks gave assurances they would limit sales of their gold reserves for at least five years, but has since retreated to around $290 an ounce.
The company plans to further reduce its forward-selling position on the view that gold still has more upside, Godsell said.
``I think it is extremely unlikely that you would run a company of this size without a degree of hedging,' Godsell said.
"What we are thinking at the moment is that our extent of hedging is likely to decline rather than grow or stay where it is.
``But we are bullish about the gold price prospects and if you are bullish you don't want to remove all the upside of price increases for your shareholders.'
DOES NOT PICK A PRICE
Godsell said AngloGold did its long term planning on conservative gold prices projections, with modest adjustments for factors like U.S. inflation, but shied away from picking a gold price.
When AngloGold announced in February it was cutting its hedging significantly this year, entering 2000 with less than 50 percent of its output uncovered, bullion prices rose $6 an ounce.
AngloGold is not the only big gold digger to do a U-turn on its forward-selling policy.
Canada's Placer Dome Inc (Toronto:PDG.TO - news), the world's fifth largest gold miner, announced it was suspending its hedging programme in February. This triggered a rise in the spot gold to $319.
Hedging of future gold production is a way of locking in fixed revenue in anticipation of gold prices going down but this system is under review after well-publicised debacles by some miners who actually lost money when bullion prices soared if only briefly, last year.
Australian mining houses are among the most hedged, with some 1,500 tonnes of gold still in the ground -- about five year's total production -- sold forward at fixed prices.
AngloGold expects to mine 7.6 million ounces in 2000, up from 6.92 million ounces in 1999, thanks in part to the acquisition of Acacia Resources Ltd, a half-million ounce a year Australian miner.
HOPES TO EXPAND IN AUSTRALIA
Godsell said Acacia was the first move in a drive to expand in Australia and in the Asia-Pacific region.
``We have not done any further transactions (in Australia) although we certainly would hope to,' he said.
"We are looking at a number of things in Australia. We also are looking to develop a fully fledged exploration programme which is well established in Acacia in Australia but is not well established in the region outside Australia.
``Our industry is awash with rumours ... but I will not comment on any rumours,' said Godsell who refused to be drawn on possible targets.
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