AngloGold Ashanti weighed into its hedge book lopping 5.2% off its forward sales or 570,000 oz amid confidence the world's gold producers would remain net dehedgers.

"While some new gold hedging is being undertaken by producers in association with debt financing obligations, it seems likely that producers will remain net de-hedgers in 2007, which should at least be supportive of the gold price," AngloGold Ashanti said in its March quarter presentation notes.

Physical gold demand was also expected to improve. "Looking at the remainder of 2007, gold demand is expected to strengthen as consumers grow accustomed to higher price levels," it said.

The average spot price of gold during the March quarter was 6% higher over the previous quarter and a 17% increase over the average price in the same quarter of 2006. The rand gold price was 5% higher quarter-on-quarter.

AngloGold Ashanti's forward sales contracts, however, meant the company averaged a price of $602/oz for its own gold sales, 7.4% less than unhedged gold producers would have received.

The company, whose shares are to be sold by parent firm, Anglo American, over the next two years, could have done with a higher price received. Production in the March quarter was about 10% mostly as only one South African-based mine – Moab Khotsong – produced the same or more gold production quarter-on-quarter.

The mines AngloGold Ashanti bought from Ashanti Goldfields in 2003 also produced variable results. The large Obuasi mine in Ghana produced 3% more gold production but there were continued problems at Geita in Tanzania. AngloGold said the mine was "on track" to produce 400,000 oz of gold in the 2007 financial year, but a new mine plan was being developed after "... the partial slope failure at Geita's Nyankanga pit in late January 2007.

AngloGold Ashanti also expressed concern by the deaths of 14 employees at its mines during the March quarter. "In response to this unacceptable outcome, a full safety review has yielded a range of new outcome-based initiatives focused on key areas," it said. These areas were fatigue management, skills retention and "culture surveys". The poor safety record of South African mines remains a major deterrant to international investors.

The outcome was AngloGold Ashanti reported a halving in gross profit of R808m. Gross profit adjusted for losses on unrealised non-hedge derivatives was marginally down quarter-on-quarter.

AngloGold Ashanti said it hoped to produce 5.7 million oz of gold for its financial year which ends in December.

The endemic increase in costs across the mining sector was also expected to weigh on AngloGold Ashanti. It said total cash costs in the financial year would be about $320/oz representing an increase of $11/oz from previous market guidance.

"[This] is mainly due to stronger local currency assumptions and higher royalty assumptions, both arising from an improved gold price outlook for the remainder of the year," AngloGold said.