South African gold major AngloGold Ashanti has reduced its gold hedge position by 39%, or 4,4-million ounces in the first half of this year, and achieved better-than-expected production and cash costs in the second quarter, the company said on Monday.

The miner said it had made substantial progress ahead of schedule in the reduction of its hedge book, following the successful completion of a rights offer that had raised $1,7-billion.

The hedgebook now stood at 6,9-million ounces on July 1, compared with 11,3-million ounces on January 1. This would enable the company to have greater participation in the spot gold price going forward, it said in a media statement.

However, the combination of delivery into and early settlement of contracts that was currently reflected on the company’s balance sheet would result in a materially lower received gold price during the second quarter, than would otherwise have been the case, the miner added.

“I am delighted with our achievements across a number of our core strategic objectives. The completion of our landmark rights issue has given us the flexibility to restructure our forward commitments in gold and facilitate much greater spot price participation going forward. The accelerated execution of a 39% reduction in our gold hedge book is particularly significant in allowing us to benefit from a strong gold price environment going forward,” commented AngloGold CEO Mark Cutifani.

AngloGold Ashanti said it would continue to deliver into outstanding contracts of about 0,8-million ounces in the second half of the year, to effect a reduction of about 46% of committed ounces in total during the year.

Assuming a prevailing gold price of $900/oz, the company expected that the realised price would be at a discount of about 17% in the second half of the year, compared with a previous guidance of about 47%.

Further, the company expected the realised price would be at about 6% in 2009, assuming a prevailing spot gold price of about $900/oz.

Meanwhile, gold production at 1,25-million ounces was about 3% higher than previously expected, and at a total cash cost of about $434/oz, which was 6,5%, or $30/oz, higher than previously expected.

In addition, the company cancelled £1-million of outstanding uranium contracts during the first half of the year, which together with the deliveries effected since the start of the year, represented a reduction of 30% of uranium contracts that were outstanding on January 1.

A once-off pre-tax charge of $32-million against the second-quarter’s adjusted headline earnings on this cancellation, would result in the company beginning to participate in the uranium spot market from next year.

CORPORATE ACTIVITY

In the mean time, AngloGold Ashanti had concluded its corporate transactions with B2Gold Corporation and Golden Cycle Corporation, as well as sold its 50% stake in Nufcor International.

Golden Cycle Corporation shareholders approved of the merger with an AngloGold Ashanti subsidiary on July 1. The miner now owned 100% of the Cripple Creek & Victor Gold Mining company thereby allowing AngloGold Ashanti to simplify the ownership structure of the North American gold asset.

The company also completed the sale of a number of exploration interests in Colombia to B2Gold Corporation in May.

In turn, it received 25-million common shares in B2Gold, and 21,4-million share purchase warrants in B2Gold with an exercise price of C$3,34 with respect to 11-million purchase warrants and C$4,25 with respect to the balance of 10,4-million purchase warrants.

This would result in a fully diluted interest in B2Gold of about 26%. The transaction would allow AngloGold Ashanti to build on its strategy in Colombia of continuing to leverage its first-mover advantage and developing its exploration portfolio in the most efficient and cost-effective manner, which included its 100% owned La Colosa project, where it declared an inferred mineral resource of 12,9-million ounces in May.

Also, the producer had sold its 50% interest in Nufcor International to Constellation Energy Commodities Group for net proceeds of $50-million. The sale of this London-based uranium marketing, trading and advisory business would enable the company to better focus on its core gold and uranium mining business.

However, AngloGold Ashanti retained its 100% interest in its local uranium calcining business, Nuclear Fuels Corporation of South Africa.

“Our corporate transactions involving Golden Cycle, B2Gold and the disposal of Nufcor International demonstrate our commitment to maintaining focus and efficiency across our portfolio. Meanwhile, the actions that we have taken elsewhere across the asset base have helped us to deliver ahead of our production and cash cost guidance and I am confident that we now have the team in place to deliver on our long-term commitments,” commented Cutifani.

- with reporting by Christy van der Merwe

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