Ashanti says hedge book in the black

Troubled African gold miner Ashanti Goldfields Ltd said on Monday its hedge book, source of immense financial grief, was showing a gain for the first time in a year and that production costs had hit a four-year low.

Ashanti, which in October sold a half stake in its prized Geita mine in Tanzania to shore up its balance sheet, also reported record quarterly production of 448,208 ounces for the three months ended September 30, up from 379,543 a year earlier.

The Ghanaian company reported group cash production costs of $181 per ounce, down 17 percent from a year earlier, and total productions costs, including non-cash expenses like depreciation, of $254 per ounce, Ashanti's lowest since 1996.

The spot gold price averaged about $278 in the quarter.

Ashanti's old mother lode, the Obuasi in Ghana, led the way in cutting costs, reporting cash operating costs of $195 per ounce -- it's best performance since 1995.

The fall in costs helped lift pre-tax earnings to $9.8 million, up from $8 million in the same 1999 quarter.

"This increase in earnings has been achieved, despite a fall in the realised gold price, due to sustained efforts at lowering cash costs, which were eight percent below the previous quarter," Ashanti said in its results statement.

Mining analyst Charles Kernot of BNP Paribas said the results looked broadly positive for shareholders.

"It's a relatively good situation," he told Reuters, citing the state of the hedge book and cut in operating costs.

"It's something they have been striving towards."

Last month, Ashanti won approval from its lenders to sell half of its new Geita gold mine to AngloGold Ltd in a deal worth $335 million.

Ashanti, Ghana's largest and among Africa's top gold miners, planned the sale after suffering devastating losses on its hedge book last year.

The company had lost heavily in its attempts to protect itself against market fluctuations when the gold price unexpectedly spiked higher a year ago.

But its banks took time to approve the deal, having delayed the deadline for finalisation by a month to October 31.