Aussie gold miner Normandy, now living under the banner of Newmont Mining (NEM-N), the world’s biggest gold miner, says its subsidiary, Newmont NFM, plans to eliminate its hedge book by early next year.
Since the end of 2001, the company has reduced its hedge book by 1.1 million ounces to 600,000 ounces by buying back 700,000 ounces on break-even terms, and delivering 400,000 ounces into existing contracts.
The accelerated delivery into contracts during the first half of 2002 resulted in an average realized gold price of A$540 per oz., off the period’s average spot price of A$563.
The 600,000 ounces remaining on the books includes 300,000 ounces inherited via the recent acquisition of Otter Gold Mines. At the end of August, the book had a market value of minus A$37.1 million.
Newmont NFM plans to deliver the remaining 300,000 ounces into its contracts over the next six months. The Otter Gold Mines’ hedge commitments will be reduced as opportunities arise, says Normandy. The gold interest rate on all remaining contracts is now fixed to maturity.
The company said in a press release, “The amendment to the hedging policy was considered appropriate in light of the company’s improved balance sheet and the improved outlook for the gold price. It is unlikely that additional hedging will be undertaken in the near future.”
The elimination of Newmont NFM’s hedge book is part of a grander scheme by Newmont to unravel millions of ounces of gold sold forward at fixed prices. The plan includes buying back positions with cash.
Newmont acquired much of its hedge book via its acquisition of Normandy earlier this year. By the end of the recent second quarter, the hedge book had been trimmed to cover 6.6 million ounces, as the company delivered into or closed out a total of 724,000 oz.
For the balance of 2002, deliveries tally to 827,000 oz. and, for 2003, 1.43 million ounces.
Newmont expects to produce about 7.5 million equity ounces during 2002.
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