Financial Daily from THE HINDU group of publications
Tuesday, Dec 16, 2003
Financial Daily from THE HINDU group of publications Tuesday, Dec 16, 2003 |
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Agri-Biz & Commodities
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Precious Metals AngloGold to cut forward sales further M.R. Subramani
Chennai , Dec. 15 ANGLOGOLD Ltd, the world's third largest miner, plans to cut forward sales of gold by 34 tonnes next year. It also plans to considerably cut the hedge book of Ashanti Goldfields, which is to be merged with AngloGold. "About 20 per cent of our total production of six million ounces (170 tonnes) that has been hedged in the market will be taken back in 2004,' Mr Kelvin H. Williams, Executive Director, AngloGold Ltd, told Business Line. He was here in connection with different initiatives of the World Gold Council to promote the yellow metal. "We plan to cut our hedge in the coming years but not as quickly as in the last two years," he said. "We also plan to cut the hedges of Ashanti Goldfields once we take over as that company also has hedged in the market in a big way," the South African firm's official said. The Ashanti takeover by AngloGold has been finalised with the latter saying on Monday that a "definite support" agreement has been entered into with the Ghana Government. As per this, Anglogold will pay a flat three per cent royalty to Ghana for the next three years and also get lease on Obuasi mine till 2054. Gold companies hedge their production to guard against fall in prices. Usually, these companies sell in the forward market and make physical delivery by borrowing gold for interest from banks. The interest depends on the amount of gold available for borrowing with the banks. But since the fourth quarter of 2002, gold mining firms have begun to cut their hedges, leading to the firming up of the prices. When companies cut their exposure in the hedge market, it signals that there could be price rise. Gold prices, which had been hovering around $250 per ounce during 2002, are now ruling above $400. While AngloGold has been consistently cutting its hedges, the mining companies have received a shot in the arm with Barrick Gold, the number two miner in the world, saying it would also cut its 453.5-tonne hedge book. In the last two years, about 270 tonnes of gold hedged in the forward market have been withdrawn. "We expect the prices to stay firm in the medium term. The situation is healthy for gold," Mr Williams said. Referring to Gold Bullion Listing on London Stock Exchange, he said it would help offset lower physical demand. "There is a strong gold investment demand and this will help in overcoming the fall in physical demand." "The circumstances are good for investing in gold for some more time," Mr Williams said. "It will also cause demand for gold."
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