Newmont to axe Aussie hedge

Australian gold miner Normandy Mining, now living under the banner of Newmont Mining (NEM-N), reports that subsidiary Newmont NFM will have eliminated its hedge book by early 2003.

Since the end of 2001, the company has reduced its hedge book by 1.1 million oz. to 600,000 oz. by buying back 700,000 oz. on break-even terms, and delivering 400,000 oz. 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., below the period’s average spot price of A$563.

The 600,000 oz. remaining on the books include 300,000 oz. inherited via Newmont NFM’s recent acquisition of Otter Gold Mines. At the end of August, Newmont NFM’s book had a market value of minus A$37.1 million.

Newmont NFM plans to deliver the remaining 300,000 oz. on its book 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 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,” Newmont NFM states in a release. “It is unlikely that additional hedging will be undertaken in the near future.”

During the three months ended June 30, Newmont NFM’s attributable gold production totalled 164,560 oz. Total cash cost rose 15% to A$360 per oz. on higher maintenance and mining costs, and major scheduled plant shutdowns during the quarter.

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 oz., as the company delivered into, or closed out, a total of 724,000 oz.

For the balance of 2002, deliveries amount to 827,000 oz. For 2003, they are projected to be 1.4 million ounces. Newmont expects to produce 7.5 million equity ounces of gold in 2002.