LONDON (Commodity Online): There are some interesting revelations in the latest quarterly hedge book analysis from Société Générale, using figures compiled by independent research house GFMS Ltd in conjunction with Brady plc and its risk management software.

The gold hedge book shows that the outstanding delta-adjusted global mining hedge book contracted by just 33 tonnes over the first half of the year, and a similar volume is expected for the second half.

Here is an excerpt from the Global Hedge Book Analysis:

2009 has, thus far, seen a much more limited amount of net de-hedging than that observed in prior years. The diminishing size of the book limits possible cuts by producers, and many of the smaller hedge book holders are content to simply
run down existing positions as they mature.

With the majority of the global hedge book still under the control of two main players, namely Barrick Gold and AngloGold Ashanti, there remains signifi cant scope for the two companies’ actions to act as a swing factor.

For AngloGold Ashanti, although the company intimated recently a run rate of approximately 0.80 Moz (25 t) per year coming off the hedge book, we believe the company will continue to reduce hedge cover at an accelerated rate, sometimes opportunistically on perceived price dips, as has been the case in the last twelve months.

Regarding Barrick’s aggregate position, its actions remain somewhat more unpredictable, partly given the very long time periods before expiry on the majority of contracts.

Hedging for the purposes of project fi nancing continues, but we have not yet seen a move by gold-focused producers to strategically hedge for price protection purposes and do not believe in the near term that such a move will take place.

Although the delivery profi le, charted above, indicates that there are 0.33 Moz (10 t) of contracts due to mature in 2009, this includes the signifi cant long position accrued by AngloGold Ashanti. The volume of forward sales due to mature in 2009 is
actually net long overall because of this position.

Hence we have just presented the delta-adjusted options position, net of the long forward sales position. This fi gure does not include unscheduled buy backs, fresh hedging or the additional AngloGold Ashanti reduction made in July.

Taking all this information into consideration, coupled with our assumptions for continued accelerated cuts to the hedge book, we anticipate levels of net de-hedging in the second half of the year to be broadly comparable to the first half.

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