AngloGold stumbles over hedges

The cost of betting on the gold price is now all too clear, writes Jim Jones.

Back in the mid-’90s, when Anglo American’s gold division (AngloGold, as it came to be called) was more or less happy to be a South African company, management strategy was simple. The idea was to hedge about 10% to 20% of annual gold production forward for each of the coming five years. Annual revenues would be protected from a fall in the gold price and, should gold rise, the company would benefit from the rise on 80% to 90% of its output.

The company’s hedge book was then in the region of 100 tons of gold against annual production of about 200 tons.

But international expansion entered the picture. Under Bobby Godsell, AngloGold started heading out of South Africa. (more)