AngloGold Ashanti (NYSE: AU) has eliminated its gold hedge book, providing itself and its shareholders with full exposure to the prevailing gold market price, it said Thursday.
The company will now sell the gold it produces at market prices and therefore expects to enhance cash flow and profit margins, as the company has removed hedge contracts with low committed gold prices.
"The completion of the hedge book restructure over the last three years has created about US$4.0 billion of value for our shareholders and represents one of the major building blocks for the new AngloGold Ashanti," said CEO Mark Cutifani.
"We remain bullish on the outlook for gold and will now benefit from full exposure to the price as we go forward."
The cost of scheduled hedge book maturities during the third quarter of 2010 was approximately US$98 million. The additional cost of closing out all future hedge contracts amounted to approximately US$2.63 billion, representing an average buy-back price of US$1,300 per ounce for the final tranche of the hedge restructure.
The cost will be reflected in adjusted headline earnings for the last two quarters of 2010, the company said.
The final phase of hedge restructuring was funded with proceeds from the issue of new equity and the mandatory convertible bonds completed in September, which raised $1.6 billion, as well as cash from internal sources and debt facilities.
AngloGold is engaged in the mining, extraction and production of gold in South Africa and internationally. The company was down almost 3% on Thursday, trading at $46.2 as of 11:08pm ET.