ANGLOGOLD Ashanti has cut 330000oz from its forward sales of gold and anticipates stabilising its hedge book below 3-million ounces by the end of the year, as its South African mines report strong results.

AngloGold has cut its hedge book from 12-million ounces in 2005 to 3,22-million ounces, by throwing money at it and pouring gold into it as deliveries fell due.

It has issued shares, sold its stake in Australia's Boddington project for R1bn and issued a R700m convertible bond to cut the hedge book, which a few years ago was by far the largest of any gold mining company.

AngloGold had told the market it would reduce its hedge book by 800000oz a year. It has already cut it by 680000oz in the first six months of the year, using dips in the gold price to close out positions, shutting out a "couple of hundred thousand ounces".

"We'll continue to be aggressive through the rest of the year. At this stage I would not forecast another 700000oz , but we'll try to put an appreciable gap between us and the 3-million ounces," CEO Mark Cutifani said yesterday.

The hedge book threatened to be particularly onerous if Anglo- Gold had not spent nearly R1,9bn - R13,9bn at today's exchange rate - in 2008 and last year, to cut its exposure to forward sales.

If AngloGold had done nothing, it would be selling gold now at a 23% discount to the spot price or 275/oz less than the average 1198/oz in the quarter, rather than the 103 discount achieved .

The aggressive hedge book reduction has meant its gold sales achieve between 90% and 92% of the high spot gold price now and will continue to do so over the next four years, said Mr Cutifani.

If AngloGold did not have these contracts to sell gold at a future date at fixed prices, its adjusted headline earnings would have been 100m higher at 229m for the three months to end-June, said chief financial officer Srinivasan Venkatakrishnan.

Headline earnings for the June quarter rose 111% to 129m from the previous quarter. AngloGold's interim dividend is 65c per share, an 8% increase from last year.

The South African mines were the star performers in the quarter, with production up 16% off a low base to 447000oz as total cash costs fell 11% to 560/oz. Costs are expected to be higher in the September quarter, with two months of high winter tariffs on electricity adding to costs .

AngloGold plans to add 1-million ounces to its production over the next five years, bringing output to about 5,5-million ounces. Beyond that, projects in the Americas and the rest of Africa could add between 900000oz and 1,8- million ounces.

The market can expect news on its exploration activities in Eritrea, Saudi Arabia and Solomon Islands soon , Mr Cutifani said.

The South African operations lost nearly 27500oz of gold output in the quarter due to safety shutdowns. There were eight deaths at AngloGold operations.

The government temporarily shuts working areas where fatal accidents have occurred.

seccombea@bdfm.co.za