Bugs and hedges

15 September 2010 By Martin Hutchinson

The gold miner is diluting shareholders to remove the last of its hedges. Hedging protects operations in down markets for the metal. But most investors are betting on the gold price and hedging as well as muddying financial results deprives them of the exposure.

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AngloGold Ashanti on Sept. 15 announced the sale of at least 15.8 million shares for at least $686 million, and an additional minimum $686 million of mandatory convertible subordinated bonds. The proceeds will be used to eliminate its gold hedging position, which it has been reducing in recent years.

AngloGold made a pretax loss of $121 million in 2009, as it lost money on its hedges with the rise in the gold price. AngloGold produced 4.6 million ounces of gold in 2009, at an average cost of $514 per ounce.

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