Here’s the full announcement:
AngloGold Ashanti has completed the elimination of its gold hedge book, providing the company and its shareholders with full exposure to the prevailing gold price. The company will now sell the gold it produces at market prices and therefore expects to enhance cash flow and profit margins as a result of removing hedge contracts with low committed gold prices.
“We’ve moved decisively to eliminate the hedge book,” Chief Executive Officer Mark Cutifani said. “The completion of the hedge book restructure over the last three years has created about US$4.0 billion of value for our shareholders and represents one of the major building blocks for the new AngloGold Ashanti. We remain bullish on the outlook for gold and will now benefit from full exposure to the price as we go forward.”
The cost of scheduled hedge book maturities during the third quarter of 2010 was approximately US$98 million. The additional cost of closing out all future hedge contracts amounted to approximately US$2.63 billion, representing an average buy-back price of US$1,300 per ounce for this final tranche of the hedge restructure. The cost will be reflected in adjusted headline earnings for the last two quarters of 2010.
This final phase of hedge restructuring has been funded with proceeds from the issue of new equity and the mandatory convertible bonds completed in September, as well as cash from internal sources and debt facilities.
AngloGold Ashanti has consistently executed a strategy to reduce its outstanding gold hedging position in recent years. A number of initiatives have been undertaken to accelerate this reduction of the hedge book from 11.3 million ounces at the beginning of 2008, to 3.22 million ounces in June 2010.
In September 2010 AngloGold Ashanti successfully completed a concurrent offering of equity and mandatory convertible bonds, raising gross proceeds of approximately US$1.6 billion in order to help fund an elimination of its residual gold hedge book. This has now been achieved.