| Mon 30 Apr 2001, 0:00 | | Anglogold's Results For The Quarter Ended 31 March |
|
ANGLOGOLD LIMITED
Registration No. 1944/017354/06
Incorporated in the Republic of South Africa
REPORT TO SHAREHOLDERS FOR THE QUARTER ENDED 31 MARCH 2001
A SOLID OPERATING PERFORMANCE AND INCREASED RECEIVED GOLD PRICE
PUSH EARNINGS UP
Group results for the quarter
* Headline earnings up 2% to R4.08 ($0.52) per share.
* Operating profit steady at R894 million ($114 million).
* Received gold price 5% higher due to an established hedging programme.
* Hedge book reduced by 800,000 ounces over the quarter.
Regional operating results for the quarter
SOUTH AFRICA
* An 11% improvement in operating profit to R584 million.
* Gold production on target, down by 10% to 1.2 million ounces,
due to the sale of unprofitable assets and continued downsizing.
* Rand denominated cash costs steady, as predicted,
despite production decrease.
* Bambanani improving with R21 million operating profit and most other
operations steady or better than last quarter.
* Approval for revisions to capital projects at Mponeng and TauTona
with good returns.
AFRICA
* Production increases 47% to 194,000 ounces, quarter on quarter,
with the inclusion of Geita production.
* Operating profit up 6%.
* The region produced 21% of AngloGold's cash earnings from 11% of
the company's gold production.
NORTH AMERICA
* Gold production down 13% on record December quarter.
* Operating profit down with reduced production and lower gold price.
* Cash costs marginally down to $211 per ounce.
* Approval for the CC&V expansion plan, giving 2.8 million additional
ounces over the life of mine.
SOUTH AMERICA
* Gold production down 13% to 107,000 ounces following high recovery in the
December quarter.
* Total cash costs 8% lower at $147 per ounce.
AUSTRALASIA
* Production down 6% to 132,000 ounces following usual seasonal rain problems.
* Cash costs increased only 1% with 56% of production coming from
Sunrise Dam at $132 per ounce.
* Corporate office restructured and relocated to Perth with
A$4.3 million saving this year.
Quarter Quarter Year
ended ended ended
Mar Dec Dec
2001 2000 2000
Rand/Metric
Gold
Produced - kg/oz 000 54,377 57,906 225,295
Revenue - R/kg/$/oz sold 74,133 70,819 67,158
Total cash costs - R/kg/$/oz produced 48,457 48,255 46,404
Total production costs - R/kg/$/oz produced 57,537 55,454 53,334
Operating profit - R/$ million 894 889 3,272
Net capital expenditure - R/$ million 535 938 2,009
Net profit / (loss) - R/$ million 336 (132) 1,116
Net earnings / (loss) - cents per share 314 (123) 1,043
Headline earnings - cents per share 408 402 1,658
Dividends - cents per share 1,400
Quarter Quarter Year
ended ended ended
Mar Dec Dec
2001 2000 2000
Dollar/Imperial
Gold
Produced - kg/oz 000 1,749 1,862 7,243
Revenue - R/kg/$/oz sold 295 289 308
Total cash costs - R/kg/$/oz produced 193 197 213
Total production costs - R/kg/$/oz produced 229 226 245
Operating profit - R/$ million 114 116 469
Net capital expenditure - R/$ million 68 123 281
Net profit / (loss) - R/$ million 43 (18) 166
Net earnings / (loss) - cents per share 40 (16) 155
Headline earnings - cents per share 52 52 237
Dividends - cents per share 196
Certain forward-looking statements
Certain statements contained in this document, including without limitation,
those concerning the economic outlook for the gold mining industry,
expectations regarding gold prices and production, the completion and
commencement of commercial operations of certain of AngloGold's exploration and
production projects, and its liquidity and capital resources and expenditure,
contain certain forward-looking statements regarding AngloGold's
operations, economic performance and financial condition.
Although AngloGold believes that the expectations reflected in such
forward-looking statements are reasonable, no assurance can be given that such
expectations will prove to have been correct. Accordingly, results could differ
materially from those set out in the forward-looking statements as a result of,
among other factors, changes in economic and market conditions, success of
business and operating initiatives, changes in the regulatory environment and
other government actions, fluctuations in gold prices and exchange rates, and
business and operational risk management.
Throughout this document, $ refers to US dollars, unless otherwise stated.
Published by AngloGold
PO Box 62117
Marshalltown
2107
South Africa
Telephone: +27 11 637 6000
Fax: +27 11 637 6399/6400
E-mail: investors@anglogold.com
CONTENTS
Letter from the Chairman and Deputy Chairman
Operating and Financial Review
Gold Market Report
Gold Market - Net Delta Open Hedge Position
AngloGold Hedge Position
Notes
Financial Results
Directorate and Administration
Contacts
LETTER FROM THE CHAIRMAN AND DEPUTY CHAIRMAN
Dear Shareholder
Overall performance
The results reported for the March quarter reflect a solid operating
performance. In the context of a weak spot gold price, and in a quarter that
seasonally has been difficult for this company's operations in South Africa,
Australia and North America, operating profit has matched that of the December
2000 quarter and exceeded the performance in the first three months of 2000 by
19%. Management is targeting operational performance which trends up
marginally from this level over the course of the year.
The improvement in the South African operations is particularly pleasing.
Here operating profit was up 11% and headline earnings increase by 17% from the
December quarter. Critically, in comparison with last quarter, cash costs held
constant in rand terms, despite a 10% reduction in gold production, and have
declined 3% in dollar terms to $202 per ounce.
Of particular note is Bambanani, which improved its operating performance
from a R7 million loss in December last year to a R21 million profit this
quarter.
Another pleasing feature of these results is the performance of the Africa
region. Here production grew 47% to 194,000 ounces. This results from the
full inclusion of the attributable ounces from Geita mine in Tanzania.
Operating profit was up 6% on the December 2000 quarter. During this last
quarter Africa produced 11% of the company's ounces, 15% of the operating
profit, 19% of EBITDA and 21% of cash earnings.
The Africa region's performance confirms the benefits AngloGold increasingly
enjoys from the geographic and orebody diversity strategy we have pursued over
the last three years. This strategy has seen gold production from outside
South Africa, principally from low-cost, surface and shallow mines, grow to
32%, operating profits to 35%, EBITDA to 49% and cash earnings to 54%.
Revenue protection
The first quarter's performance also needs to be seen against the background of
AngloGold's hedging programme. Despite the fact that the average spot price
for gold for the quarter at $263 per ounce was some 2% lower than in the last
quarter of 2000, the gold price received by AngloGold in the March quarter
increased by some 5%, underlining the benefits of a responsible hedging
programme.
At the end of 2000, we reported that, with some 17.8 million ounces sold
forward, we were fully hedged in terms of our mandated hedge limit. Given the
sustained lower price levels this quarter and the absence of further price
protection required by loan financing, we have reduced the hedge book by some
800,000 ounces over the quarter. At the end of the March quarter, 22% of the
AngloGold gold reserve was hedged.
Growth
At today's Board meeting, we approved a major expansion at the Cripple Creek &
Victor mine, in Colorado, in the United States. This project, requiring some
$194 million, will see an additional 2.8 million ounces of gold production over
the life of the mine, which this expansion will extend at least until 2012. The
project has a expected internal rate of return (IRR) of 27%.
The Board also approved the rationalisation of the Mponeng (formerly, the
Western Deep Levels South mine) Shaft Deepening Project into two projects, with
the prospect of a third. The life of TauTona will be extended to 2011,
requiring a further R404 million in capital. The deepening of the Mponeng
sub-shaft will be stopped at the 123 level and the available reserves will be
developed and mined at a capital cost of R842 million. The Mponeng resource
below 120 level is not sterilised by this change and could be accessed in the
future as a possible third stand-alone project. The TauTona and Mponeng
projects have projected IRRs of 35% and 20% respectively and significantly
improve the NPV of both assets. The decision to make this additional combined
investment of R1.2 billion in the South African operations is further evidence
of AngloGold's continued confidence in its South Africa region and the
country's gold economy.
The Board placed on hold the planned R817 million Joel North project, pending
some additional drilling to confirm grade. This information should be
available by December of this year.
The major expansion at Australia's Sunrise Dam, and the new Yatela mine in
Mali are both progressing well.
These projects will be undertaken while maintaining a modest earnings growth
and a high dividend payout over the next two years. From 2003, earnings rise
more sharply and large amounts of cash are generated, from which we will replay
debt. This, together with a sharpened focus on cost control and operational
efficiencies in the existing operations, should ensure that the company remains
both a significant and profitable producer of gold into the future.
BOBBY GODSELL
Chairman and Chief Executive Officer
RUSSELL EDEY
Deputy Chairman
26 April 2001
OVERVIEW
OPERATING AND FINANCIAL REVIEW
Headline earnings increased by 2% to R437 million or R4.08 cents per share. In
dollar terms, earnings held steady at $56 million or $0.52 per share. This was
due to a solid operational performance and a 5% rise in the received price of
gold. Operating profit in rand terms increased by 1% to R894 million but
reduced in dollar terms by 2% to $114 million due to the devaluation of the
rand.
Returns on shareholder equity and capital employed were both steady at 12%
and 11% respectively.
Gold produced by AngloGold's operations during the quarter decreased by 6%
(113,000 ounces) to 1.7 million ounces. Some 91,000 ounces of this reduction
is explained by the sale of Elandsrand and Deelkraal to Harmony Gold Mining
Company, with effect from 1 February 2001.
Despite the drop in gold production, total cash costs decreased by 2% to $193
per ounce. There will be an ongoing focus on cost reductions this year.
In respect of price, production, earnings and profit, AngloGold outperformed
its own forecasts for the first three months of the year - traditionally the
industry's weakest quarter.
The board of directors approved the expansion of the Cripple Creek & Victor
mine in North America. This expansion costing $194 million will increase
average annual gold production by 40% with a life of mine cash cost of $174 per
ounce until at least 2012. Construction will be completed in May 2002 with
full production forecast for July 2002.
There was also agreement on a revision to the Mponeng Shaft Deepening
Project. The previous strategy for the West Wits area (formerly known as
Western Deep Levels) was to mine all remaining TauTona ore reserves after 2005
from Mponeng. However, as a result of the acquisition of additional reserves
at TauTona by an exchange of ground with Gold Fields' Driefontein mine and a
revision of the shaft pillar extraction plan, it has been decided to extend the
life of this mine to 2011. Secondly, this deepening of Mponeng is to be stopped
at the 123 level (3,461 metres below surface) and the VCR reef on the 113, 116
and 120 levels will be developed and mined. The mineral resource in the VCR and
Carbon Leader reef below the 120 level is not sterilised by this decision.
Sinking of the shaft to access this resource will be treated as a separate
stand-alone project. This change together with the TauTona extension has
resulted in a reduction in capital expenditure from R2.6 billion to R1.3
billion and an increase in the net present value of the project. These
revisions were factored into the reserve and resource statement for Mponeng and
TauTona, reflected in the supplementary information released in conjunction
with the AngloGold Annual Report for 2000 which was published in March.
However, the change in the scope of the project and associated changes to the
mineral inventory will lead to a further reduction in the combined Mponeng and
TauTona reserve of 2.3 million ounces. The combined mineral resource will not
be affected by this change.
The sinking of the Joel North shaft has been suspended pending the outcome of
further drilling results.
These changes were included in the previously published capital expenditure
forecast of R2.4 billion ($311 million) for 2001.
SOUTH AFRICA
Overall performance
Headline earnings for the South African region at R397 million reflected a 17%
improvement (from R339 million) on the previous quarter. The received gold
price increased by 5%, due to both a falling exchange rate and AngloGold's
hedging programme. As expected, gold production decreased by 10% to 1.19
million ounces (37 tonnes). This was as a result of the sale of Elandsrand and
Deelkraal and continuing downsizing at Matjhabeng. Total cash costs at R50,715
per kilogram ($202 per ounce) improved marginally over the previous quarter's
R50,785 per kilogram ($208 per ounce).
Mine performance
The performance of most of the South African operations in the March quarter
was excellent. Gold production at Kopanang was 3% higher than the previous
quarter and operating profit for the quarter, at R83 million ($11 million) was
38% up on the previous quarter. Unit cash costs were slightly lower. At
Bambanani, gold production remained at the lower levels of the previous
quarter, but in line with the planned build-up over the year. Significant
savings were achieved on costs to offset the reduced production. This resulted
in an 8% improvement in total unit cash costs and assisted in lifting operating
profit to R21 million ($2.5 million) this quarter from a R7 million ($1
million) loss in the December quarter. Gold production at Tshepong rose by 19%
on the previous quarter as the identified problems were overcome. Total cash
costs were reduced by 20% to R50,301 per kilogram ($200 per ounce) with a
continued focus on cost control in all areas. The mine made a R49 million ($6
million) contribution to operating profit, compared with a R4 million ($0.5
million) loss last quarter. Operating profit at Great Noligwa increased by 2%
for the quarter to R270 million ($34 million), despite a reduction in gold
produced and higher cash operating costs, arising from the replacement of major
hoisting equipment. At Ergo, gold production rose 16% by 13,000 ounces and
operating profit went up from R6 million ($1 million) to R30 million ($4
million). Higher head grades from increased clean-up activities and improved
metallurgical efficiencies resulted in an 8% improvement in recovered grade.
The higher gold production led to a decrease in total cash costs of 9% to
R52,415 per kilogram ($208 per ounce), despite annual wage increases, which
came into effect this quarter.
Several other operations had solid performances. Seismicity had an impact on
the mining volumes at TauTona, where winder and power problems in the lower
Carbon Leader sections also affected production. Nevertheless, a focus on
releasing gold inventory from underground resulted in a 7% improvement in grade
and the mine made a R113 million ($14 million) contribution to operating
profit. The volume mined at Tau Lekoa was 8% below the previous quarter's
record-breaking performance. Gold produced declined by 209 kilograms due to a
planned yield decrease and a lower volume. Gold production was down at
Matjhabeng because of the planned downscaling at Eland and Nyala shafts and
concentrated clean-up operations at Sable shaft. Production targets are in
line with the current life of mine plan. As expected with a project that is
being downsized, costs were lower, but the effects of this were partially
offset by an increase in expenditure arising from retrenchments.
AngloGold continues to face problems at three of the South African
operations. Savuka could not maintain the high levels of production of the
previous quarters. The mine had a slow start after the ten-day December break
due to orepass problems and the need to address safety issues. Two seismic
events in the shaft pillar resulted in crews being moved to areas with much
lower grades. This impacted negatively on the average grade, which was down by
9%. Additionally, an orepass blockage affected mining volume, which decreased
by 19%. Lack of available face length at Mponeng continues to have an impact
on mining volume. The shortfall, together with the lower than expected face
values, has had an effect on the recovered gold which remained at the low
levels of the previous quarter. However, the planned developments to improve
face length availability is on track and four additional raise lines will come
into production in the second half of the year. These measures will restore
production flexibility and result in increased gold production.
At Joel, mining values continued to drop with the average grade declining by
9%. This, together with the lower mining volumes, impacted negatively on gold
production, which was down by 27%. The mine has been scaled back to 20,000
square metres per month and full calendar operations (FULCO) have been
discontinued, with a consequent reduction in the number of employees by 1,200.
The impact of the resultant cost savings will only be evident in the next
quarter. The performance of this mine will be closely monitored, and if the
anticipated rise in grade does not materialise, its future will be reviewed at
the end of next quarter. In the light of the grade variability at the South
shaft and the low gold price, sinking of the North shaft has been suspended
pending the results from four boreholes which are to be drilled from surface to
verify the existing grade projections.
Tragically, 13 people lost their lives in ten separate mine accidents in
AngloGold's South Africa region during this quarter. This compares with ten
deaths in the previous quarter and 17 during the corresponding quarter last
year. Savuka experienced an increase in seismic activity, and five people died
in two seismically-related accidents during the first three months of 2001.
In the South African region, 431 lost-time injuries were recorded - a 23%
improvement on the previous quarter and the lowest number of lost-time injuries
occurring in any quarter on record. This represents a lost-time injury
frequency rate (LTIFR) of 11.23 injuries per million hours worked.
AFRICA
Overall performance
The African region had an excellent start to the year with the inclusion of the
Geita mine for the first time. The impact is significant, with the Africa
region producing 194,000 attributable ounces for the quarter, an increase of
47% on the previous quarter. Total cash costs, at $124 per ounce, increased by
18% over the previous quarter, largely as a result of the inclusion of Geita
and planned decreased ore production at Sadiola. Safety showed a marked
improvement in the region, achieving a LTIFR of 0.8 with three accidents
recorded for the five operations.
Mine performance
At Sadiola (38% attributable) lower planned mill throughput (5%), coupled with
a decline in the recovered grade of 3%, reduced attributable gold production by
8% to 50,000 ounces for the quarter. The decrease in production, together with
increased waste mining to obtain additional oxide ore reserves, resulted in
unit total cash costs rising by 7% to $130 per ounce. The mine was accident
free for the quarter.
Although in the process of commissioning its sulphide metallurgical plant
circuit, Morila (40% attributable) increased production by 13% to 64,000
attributable ounces. Total cash costs, at $90 per ounce, increased by 2% on
the previous quarter. A marked turnaround in safety has been recorded on the
mine.
At Geita (50% attributable) expectations were exceeded during the quarter,
with 60,000 attributable ounces being produced, at a creditable total cash cost
of $141 per ounce. Safety performance has improved on the AngloGold benchmarks
Navachab had a steady quarter with production of 21,000 ounces, 4% down on
the previous quarter. Total cash costs were $174 per ounce, a 7% increase on
the previous quarter. There was a slope failure on the eastern wall which is
not expected to affect production. The mine's outstanding safety record
continues resulting in the mine receiving the Namibian Chamber of Mines award
for safety.
Construction and mining are progressing at Yatela which is due to produce its
first gold in June 2001. The ore treatment plant is in the process of being
commissioned with the first ore having been stacked out on the leach pads and
treated. Mining production is ahead of schedule with full production output
stockpiled during February 2001.
NORTH AMERICA
Overall performance
Gold production in the North American region decreased by 13% in this quarter
compared with the record levels for the fourth quarter of 2000. This was due
to lower production, primarily at Cripple Creek & Victor (CC&V). Operating
profit fell by 30% during the same period as a result of decreased production
and a lower realised gold price. Reduced volumes of ore purchased from Cortez
for custom processing at the Jerritt Canyon operations and improved ounce
placements at CC&V led to a decrease in total cash costs. Gold production was
below forecast levels primarily because of fourth quarter ore placement issues
at CC&V which impacted on first quarter production levels. CC&V is expected to
exceed budgeted production levels by the end of the year. Total cash costs for
the region were $211 per ounce.
Mine performance
At Jerritt Canyon (70% attributable), the first quarter's production of 75,000
ounces was 6% lower than the previous quarter as a result of the batch milling
of Cortez ore. Total tonnage processed was approximately 1% higher; however,
lower purchased ore grades resulted in the decreased gold production. Total
cash costs for the quarter were $232 per ounce, 5% down on the previous
quarter, due to the lower volumes (12% less) of Cortez ore purchased.
Production at CC&V (66.7% attributable -effectively 100% attributable - see
Note 5 on page 12) was 51,000 ounces, 22% lower than the fourth quarter of
2000. Reduced crusher availability during the previous quarter adversely
affected crushed ore placement and the effects on gold production were felt in
the current period. Total cash costs were $169 per ounce, some 3% lower than
the previous quarter due to a change in mine plans. Significantly higher ounce
placement will enable a return to expected production levels by mid-year.
SOUTH AMERICA
Overall performance
Gold production at the South American operations was 13% lower than the
previous quarter at 107,000 ounces. This was due to a high recovery from a
plant clean-up in the last three months of 2000. Total cash costs for the
quarter were 8% lower at $147 per ounce following cost cutting initiatives at
all operations and the devaluation of the Real being greater than anticipated.
Mine performance
The 26% reduction in gold production at Morro Velho was responsible for the
quarter on quarter decrease in production for the region. This decrease was
partially offset by a higher gold production (up by 6%) at Cerro Vanguardia
(46.25% attributable) owing to better grades and an increase in production
capacity. Higher recovered grade enabled Serra Grande (50% attributable) to
post a 2% improvement in production.
The South American operations achieved a LTIFR just over the Ontario
benchmark for the first quarter. Cerro Vanguardia recorded two accidents in the
first quarter compared with four for the whole of last year. Morro Velho
recorded eight accidents in the first two months. The situation had improved
by the end of the quarter with only one accident occurring in March. It should
be noted that while the accident rates have increased, the severity rate has
decreased significantly.
AUSTRALASIA
Overall performance
Production for the quarter of 132,000 ounces was 6% below the level for the
previous period. However, with 56% of the total production now coming from the
low-cost Sunrise Dam operation, total cash costs increased by only 1% to $201
(A$380) per ounce.
During the quarter, the corporate office was restructured and relocated from
Melbourne to Perth. The reduced staffing levels and greater proximity to the
mining operations will yield savings of some A$4.3 million this year. In
addition, a refocusing of the Australasian exploration effort has resulted in
further savings.
Heavy seasonal rains over the northern half of the country have created
problems for particular mines and curtailed exploration field activities.
Mine performance
Sunrise Dam has continued its strong performance with production increasing a
further 13% over the level achieved in the previous quarter, while total cash
costs were reduced by 14%. Production for the quarter increased from 65,000
ounces to 74,000 ounces at an average total cash cost of $132 (A$248) per
ounce. These results were achieved while work on the processing plant
expansion and the further development of the open pit was in progress. The
plant expansion is proceeding within budget and is on schedule for
commissioning during the next quarter as planned. Due to the shutdowns
associated with commissioning, production during the second quarter will be
lower than that achieved during this quarter. The cutback of the "MegaPit"
will continue through to the end of the year.
At Union Reefs, there was a scheduled reduction in mining from the main
Crosscourse pit during the wet season. Production fell by 17% to 31,000
ounces. However, the operation capitalised on the cost reductions recorded in
the previous quarter, to achieve an average total cash cost of $193 (A$364) per
ounce. The figures for the previous quarter were $229 (A$429) per ounce.
Despite the difficulties associated with mining of remnant ore blocks and the
low ore grades, Boddington's (33.3% attributable) performance during the first
quarter was almost identical to that of the previous quarter. Production was
19,000 ounces at a total cash cost of $206 (A$389) per ounce. An intensive
study of the viability of mining the remaining oxide reserves has been
undertaken and it now appears that the current oxide operations will cease in
the third quarter. Agreement has been reached on the principles for
transferring the management of both the Boddington mine and its expansion to
the Boddington Gold Mine Joint Venture partners.
Tanami suffered badly from the heavy rains in the region. Access to a number
of the pits has been restricted and, towards the end of the quarter, road
access to the mine itself was cut off. As a consequence, a critical diesel
fuel shortage has developed and it has been necessary to suspend processing
operations at the mine. With limited remaining reserves available for
processing by the joint venture, future options for the operation are being
reviewed. Production for the quarter was down to 8,000 ounces (34% below the
previous quarter) while total cash costs rose to an unacceptable $423 (A$805)
per ounce.
GOLD MARKET
The first quarter of 2001 produced a lower average spot gold price than in the
past four quarters, but more activity with significant price volatility, and a
price range of over $20 between the traded high and lows of the period. The
average spot price of $263 per ounce was 2% lower than the price in the final
quarter of last year. A similar level of volatility was seen in the currency
market, where a stronger dollar knocked currencies like the euro, the rand and
the Australian dollar lower. Opening at around R7.50 to the US dollar, the
local currency slipped to a low of R8.05 against the dollar and the average
exchange rate of R7.83 for the quarter was some 3% weaker than the average for
last quarter. The South African price of gold touched a record high above
R68,000 per kilogram, and averaged R66,280 for the quarter or almost 8% better
than in the final quarter of 2000. This dollar strength has continued into
April, cushioning non-American gold producers from the worst effects of the
weak US dollar spot price of gold.
The spot gold price during this period was influenced particularly by a sharp
dislocation in short-term gold lease rates in the latter part of the quarter,
and by the unexpected strength of the US dollar in the face of economic
uncertainty and stock market losses in the United States.
From the middle of the quarter, short-term gold lease rates, and particularly
one month lending rates, rose very sharply from around 0.5% per annum at which
they have traded for the past year, to a spike just over 6% early in March,
putting gold futures into backwardation in this time period. Since this early
March peak, the short term rates have retraced to trade mostly between 2% and
3% per annum. During this period, gold lending rates for one year and beyond
have remained relatively unchanged.
GRAPHIC: GOLD LEASE RATES 2001
When short term lease rates peaked, speculative shorts in the gold market
were squeezed by the increased carrying costs of such trades, and a certain
amount of buying back by speculators was seen in the market. This buying was
sufficient to lift the gold price from its low of $254 early in the quarter to
a high of almost $275 at the time of the highest lease rates. There was
considerable speculation during the quarter over the reasons for this lease
rate increase, and for the tightness in short- and medium- term gold lending.
Whatever the exact trigger might have been for this move in lending rates, we
believe that there is no doubt that this increase signals the reality that
there are finite boundaries to gold lending liquidity. Because of the lack of
transparency in the gold market - and particularly so in the lending market -
it is impossible to quantify the ceiling to gold lending to the last 100 or 500
tons; however, that a ceiling exists is clear from this experience. We believe
that this ceiling will contribute in time to a further beneficial tightening of
our market.
The other major influence on the gold price during this quarter flowed from
the strong dollar, which provided speculators with encouragement to sell gold
short. This position is reflected in the growing net short position on COMEX,
which reached a high point of some 66,000 contracts just before the rise in
gold lease rates; this position is equivalent to a net short position of over
200 tons of gold. This ongoing strength in the US currency contradicts the
widespread forecasts at the beginning of this year of a weaker US dollar. The
majority of forecasters today still anticipate dollar weakness later in the
year, as the US economy continues to slow and US interest rates fall, and a
weaker dollar becomes necessary to correct or at least moderate the growing US
trade deficits of recent years. Should these forecasts prove correct, and the
US currency does weaken, this should remove a source of downward pressure on
gold. US dollar weakness, however, will not necessarily trigger the wholesale
reversal of the lower gold prices of recent years. To turn the tide on current
low spot gold prices in US dollars would require a revival of positive investor
interest in gold, and would require sustained long positions in the metal by
speculators in the developed markets such as were seen in the gold market
DE BEERS CENTENARY AG
(Incorporated under the laws of Switzerland)
ADVICE OF AN ANNOUNCEMENT BY DB INVESTMENTS
26 April 2001
De Beers Linked Unit holders' attention is drawn to the announcement set out
below just made by DB Investments (DBI) in relation to its offer for De Beers.
Linked Unit holders are advised to exercise caution when dealing in De Beers
Linked Units until a further announcement is made.
Not for release, publication or distribution in or into Canada, Japan and the
United States of America Announcement
Recommended Final Offer for De Beers.
Proposed increase in offer terms of US$2.00 per linked unit
The Chairman of DBI announces that subject to financing, DBI intends to
increase its offer to De Beers linked unit holders by US$2.00 per linked unit.
Such an increase once made should be considered final. A detailed announcement
will follow.
UBS Warburg Ltd., which is regulated in the UK by The Securities and Futures
Authority Limited, is acting for DBI and no one else in connection with the
Transaction, and will not be responsible to anyone other than DBI for providing
the protections afforded to customers of UBS Warburg Ltd., nor for providing
advice in relation to the Transaction.
This announcement does not constitute an offer or an invitation to acquire
shares or securities.
Issued by DBI. Approved by UBS Warburg Ltd., a subsidiary of UBS AG, for the
purposes of section 57 of the Financial Services Act 1986. UBS Warburg Ltd. is
regulated in the UK by The Securities and Futures Authority Limited. This does
not constitute a recommendation regarding the De Beers Linked Units. The value
of an investment may go up as well as down. De Beers Linked Unit holders
should seek advice from an independent financial adviser as to the suitability
for the individual concerned.
ENQUIRIES:
MEDIA: INVESTOR RELATIONS:
TRACEY PETERSON MARK IRVINE
Tel: +27 11 374-7388 Tel: +27 11 374-7174
Cell: 083 408 7173 Cell: 083 380 2988
Andrew Lamont (UK Media)
+44 20 7430 3515
RICHARD CHETWODE (International IR)
+44 20 7430 3102
