Gold hedgeing...Winding up

  1. 963 Posts.
    Follow the gold leader - to $350
    By Jane Counsel
    August 6 2002




    Gold ready to run...Newmont's Pierre Lassonde tips a period of higher and sustainable prices.


    Newmont Mining, the world's biggest gold producer, has reasserted the metal's role as the world's reserve currency and set a target price of up to $US350 a troy ounce.

    It says it will use its muscle to push for greater producer discipline as part of its vision for a new bull market for gold.

    Newmont president Pierre Lassonde gave an upbeat introduction to the 10th annual Diggers and Dealers conference in Kalgoorlie yesterday by predicting that the gold price would rise to between $US325 and $US350 an ounce in the next 12 to 18 months.

    He said this would occur as a result of a continued wind-down of gold hedging positions of which the Denver goldminer would actively encourage and play a leading role.

    "We take our role of number one in the industry very seriously - we are always a leader," Mr Lassonde said. "I think we have to show the way not only in terms of capital allocation and producer discipline but it goes all the way down the line to environmental and employment issue.

    Another justification behind Mr Lassonde's bullish prediction is the perceived "dislocation" in the US economy and the corresponding impact it will have on the gold price due to a weaker US dollar. "Gold is the ultimate reserve currency," he said.

    Part of the justification for Newmont's $4.5 million bid for Normandy Mining this year was the argument that the gold industry was entering a new phase of higher and sustainable prices.

    Mr Lassonde said he believed that over the next five years the industry was going to see a big reduction of hedging positions at the rate of between 200 and 500 tonnes of gold a year.

    Australia alone produced 281 tonnes of gold in 2001.

    "I don't think that they [producers] have any choice in that," he said, adding that it was necessary if they wanted to maintain a higher gold price.

    He said that much of world gold production was not sustainable at a $US300 an ounce gold price. It traded yesterday at $US307 an ounce. Hence it was in the best interests of major producers like Newmont to encourage a reduction of hedging positions.

    On the production front, Mr Lassonde said he believed his fellow goldminers had learnt from the mistakes of the 1990s where too much capital was invested in uneconomic goldmines. It's an issue Newmont is confronting as it examines ways to improve the competitiveness of many of the Normandy assets.

    One of those targeted under its "go or grow" plan is the Boddington joint venture in south-west Western Australia, where the joint venture partners - Newmont, Newcrest and AngloGold - are still assessing the merits of developing the low-grade Wandoo deposit.

    Meanwhile, Macquarie Bank and the Australian Gold Council have launched a new gold index to replace the ASX index scrapped in July. It will comprise 19 companies each with a market value of more than $50 million, or production in excess of 50,000 ounces a year.

    Cheers Ralph
 
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