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AnGold warns about gold price
07/08/2002 08:57 - (SA)
Kalgoorlie, Australia - AngloGold Limited said on Wednesday suggestions that gold prices would trade higher were "over-optimistic".
AngloGold executive officer Steve Lenahan said there was little evidence to support some forecasts of a rising bullion market.
Gold leapt to a high of around US$339 an ounce earlier this year from $279 at the end of December.
Since then the precious metal has re-coiled and is currently fetching about $306 an ounce.
"We are cautious about planning our business on a price that is substantially higher than the current spot (price)," Lenahan said at the Diggers and Dealers mining conference.
The warning follows a move by AngloGold to cut 4.1 million ounces from its hedge book in the half-year to June 30 to gain more exposure to bullion market prices.
AngloGold aims to spend on average around $150 an ounce to dig 5.8 million ounces this year, making it the world's third largest producer of the precious metal.
Gold miners sometimes hedge gold by agreeing to sell yet unmined nuggets at fixed prices to protect against a falling market.
However, this strategy can backfire when bullion prices rise, forcing mining companies to sell gold below market value.
Gold tumbled on Tuesday as the dollar strengthened.
December COMEX gold fell $2.30 to settle at $307.30 an ounce, trading between $310.40-$306.50, and ending a two-day rebound from last week's four-month low of $300.30.
Spot gold fell to $305.65/6.15 an ounce, down from $307.80/8.30 at Monday's close.
A need to hedge gold was a lynchpin of AngloGold's failed bid last year to acquire Australia's Normandy Mining.
Normandy was acquired by US-based Newmont Mining Corporation, vowing to unwind some 10 million ounces worth of hedges.
Newmont president Pierre Lassonde earlier this week sounded a more optimistic tone for bullion, predicting the metal would trade as high as $350 an ounce this year if the US dollar weakens.
Australia's AurionGold Limited plans to reduce its gold hedges to below 50% of reserves from around 60%.
The current level of hedges held by AurionGold, the subject of a hostile takeover bid by Canada's Placer Dome Inclusion, is around 4.7 million ounces.
- Reuters
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