JOHANNESBURG (miningweekly.com) – Gold was having a rebirth and its price would rise above the $1 000/oz mark next year, AngloGold Ashanti CEO Mark Cutifani said on Friday.

After presenting “milestone” first-quarter (Q1) 2009 results, Cutifani said that “strong earnings leverage” was beginning to emerge operationally, despite the slow South African start and a "disastrous" Q1 performance at Geita, and he told Mining Weekly Online that the world was starting to realise that a new gold era was upon it.

AngloGold Ashanti CFO Srinivasan Venkatakrishnan reported that AngloGold Ashanti achieved an “all-time US dollar earnings high” of $150-million; reflecting the restructuring of the AngloGold hedge, which Cutifani would like to see reduced to below four-million ounces by year-end.

“We’re going to be opportunistic and look to taking a bit more of a lump out of the hedge book, because we are very bullish on the gold price going forward,” he added.

The company said it would produce between 4,9-million and five-million ounces in 2009, acknowledging that the second half of the year would need to be a strong half in order to deliver on the full-year result. Q1 production was a disappointing 1,1-million ounces.

His view was that the gold price would be above $1 000/oz next year because of the “unlimited spending spree of governments,” and the “potential impact of inflation”.

“Certainly, we think that gold’s having a rebirth,” he enthused to Mining Weekly Online.

He saw gold as a logical part of any investment portfolio and said that the bailout of large economic sectors had put enormous pressure on the US Treasury’s borrowing needs, with net borrowings likely to quadruple to $2,4-trillion this year, and even higher in 2010.

Inflation was going to be difficult to prevent in those circumstances.

“One of the cornerstones of our bullish rationale is an outcome in which gold’s inflation hedge will come to the fore,” Cutifani said.

The beginning of the new era in gold markets was being marked by the steep decline in the net gold sales of central banks, accentuated last month when China came close to doubling its gold reserve to more than 1 000 t.

Slowing central bank sales were taking a significant source of gold supply out of the market, made more acute by declining gold-mining grade across the industry, the dearth of new discoveries, and general difficulties and delays in getting new mines developed.

It was not hard to see that there was not a lot of new gold coming on to the market, Cutifani added.

On the demand side, the uptake of the exchange-traded funds among mainstream investors remained robust.

“When we see physical and investment demand working together, then gold prices have real potential to start making concerted moves upwards. With this in mind, we will continue to restructure our hedge so as to continue to provide our investors with improving leverage to gold," he said.

Venkatakrishnan said that the leverage in the “all-time US dollar earnings high” earnings had come on the back of higher spot prices, a much lower hedge discount compared to the previous year and, to a lesser extent, weaker operating local currencies.

The leverage to spot prices supported by hedge book reduction resulted in the average spot gold price for the quarter rising 14%, or $114/oz, as compared to the previous quarter.

With a much lower hedge discount, the received price rose sharply by 25%, or $171/oz quarter-on-quarter as compared to the $114/oz rise in the spot price. The adjusted headline earnings of $150-million was after providing for $6-million for the receivable from Pamodzi Gold, for which a $6-million claim had been lodged with the provisional liquidators of the Orkney gold mine in the North West province.

Adjusted headline earnings per share were US42c, or US414c/share, on 358-million shares that qualified of earnings per share on a fully diluted basis.

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