Fortis hedging and financial gold report - Kitco · 4 | Fortis hedging and financial gold report |...

Fortis hedging and financial gold report August 2008

Merchant Banking INVESTMENT RESEARCH

The quarterly survey of global gold hedging and financial gold movements.

VM Group

Tel. +44 20 7487 [email protected]

Fortis/VM Group August 2008 | Fortis hedging and financial gold report | 1

Contents

Executive summary 3

Focus � the return of the put? 4

Global hedging roundup Q2 08 6

Regional and company focus 9

Financial & investment gold 13

Gold price, exchange rates & lease rates 15

Footnotes to appendices 16

Appendix 1: Company hedge commitments 18

Appendix 2: Detail of company hedge positions in Q2 08 20

Disclaimer and copyright 28

About the report and methodology 29

About VM Group and Haliburton Mineral Services 30

Fortis hedging and financial gold report is an exclusive precious metals research joint venture between Fortis Bank SA/NV, the VM Group (incorporating Virtual Metals Research and Consulting, and Haliburton Mineral Services).


Executive summary Global gold hedging in Q2 08 falls 3.5 Moz to 18.7 Moz

Quarterly change in global hedging, Moz (delta-adjusted)

-6

-5

-4

-3

-2

-1

0

Q12005

Q2 Q3 Q4 Q12006

Q2 Q3 Q4 Q12007 2008

Q2 Q3 Q4 Q1 Q2

<0.1

Source: VM Group/Haliburton Mineral Services

� Global gold hedging continues to decline with Q2 08 seeing a 3.5 Moz fall on our delta-adjusted measure. This was the 25th successive quarterly decline and means the global book is now just 18.7 Moz. In terms of committed ounces the fall was a larger 4.2 Moz, taking that measure of hedging to 19.0 Moz.

� AngloGold Ashanti accounted for the majority of the fall as they

accelerated their dehedging programme announced in Q2 08. On a delta-adjusted measure their book was reduced by 2.7 Moz, on a committed ounces basis by 3.1 Moz. This leaves just 0.8 Moz of their dehedging programme to be completed. Sino Mining, Barrick, Newcrest Mining and Lihir/Equigold also each cut their positions by more than 0.1 Moz.

� New hedging picked up slightly from the previous two quarters, with

nearly 0.25 Moz being added in the period under review. Foremost was Wega Mining who continued to put in place a project finance hedge. A number of other companies put in place put options for price protection.

� Given AngloGold Ashanti�s Q2 08 dehedge, most of the planned

dehedging for 2008 has now been done and as such the pace of dehedging is likely to slow sharply over the rest of the year and into 2009. In H1 08 8.1 Moz was cut from the global book, in H2 08 it is likely to be 2-4 Moz.

� The mark-to-market valuation of the global book has improved to stand

at a negative $9.0bn at the end of Q1 08, $1.7bn better than at the end of Q1 01 and the best figure since Q3 05.

� Exchange-traded funds recovered strongly in May, June and July in the

wake of April�s outflows. The 14 funds we track added 20t, 43t and 64t, taking their collective holdings to 1,015t at the end of July 08.

� Official sector sales in this Central Bank Gold Agreement year are

unlikely to hit 400t, let alone the maximum of 500t. Next year sales are likely to be lower still unless the IMF gets permission to sell.

Analyst: Matthew Turner VM Group Tel: +44 20 7487 3600 Email: [email protected]

Analyst: Ted Reeve Haliburton Mineral ServicesTel: +1 416 447 7524 Email: [email protected]

4 | Fortis hedging and financial gold report | August 2008 Fortis/VM Group

Focus � the return of the put? In Q2 08 net puts bought - the amount of put options bought by the mining industry less the amount sold � reached 6.1 Moz, its highest since Q4 05. Compared with the 22.2 Moz of net puts bought, seen at the end of Q4 01, this is hardly a flood. But given the overall decline in hedging it means net puts bought as a percentage of total commitments and puts is now 24%, the highest it has ever been. Are we perhaps seeing the return of the put?

On the face of it put options make a lot of sense in a market like this. Puts give the buyer an option but not an obligation to sell gold at a predetermined price on a predetermined date in the future. Thus they protect against the downside whilst allowing the buyer to profit from any upside � and right now that seems quite attractive. Gold prices are obviously high historically, with the nominal dollar price near its all-time high and even in real terms (adjusted for inflation) higher than they have been 90% of the time since the gold price was freed in the early 1970s. But � with the current feverish trends in the financial markets together with rising inflation and teetering economies, few can say with certainty that the gold price won�t go much higher. So selling forward, which locks in the current forward price (which is similar to the current spot price), is a risk and one that since 2002 has been a bad bet. The following chart compares the spot gold price on any date with the three year forward gold price from three years previously, and as such provides a guide to whether a mining company would have achieved a higher realised price by selling forward or by waiting and selling at the spot price. As the spot line has been higher than the forward line for any date since 2002, any mining company selling three years forward since then would have foregone income and shareholder happiness.

The costs of selling forward gold by three years ($/oz)

0

200

400

600

800

1,000

1,200

1994 1997 2000 2003 2006 2009

3yr forward Spot

Source: VM Group

In this light, puts can be seen as an insurance policy against the bad times without risking the good times and some mostly Australian companies are taking advantage of this means of price-protection. Last quarter, Avoca Resources put in place 438,933 oz of put options at $830/oz, and Resolute added 100,000 oz at A$1,000/oz. In Q3 07 St.Barbara added Z. Indeed although put options continued to get delivered into or closed out in the same way as other hedge products, the amount of net puts has risen from a low of 2.8 Moz in Q1 07 to 6.1 Moz at the end of Q2 08.

However like most insurance policies puts have one major drawback and that is: they cost money. When a mining company buys a put option it pays a premium up front, and hence that is a cost that has to be paid even if the put option is not exercised. Furthermore when we last examined this in June 2006, we noted that the cost of buying puts had been rising significantly because one of the factors that determines the price of a put � price volatility � had increased. Two years later this analysis remains much the same. Using the Black-Scholes formula to value options, as the chart below shows, the cost of buying an at-the-money put


(i.e. one where the strike price is the same as the current gold price, thus protecting the buyer against ALL the downside) fell after Q2 06 but from Q3 07 has risen sharply, and now costs about $120/oz.

The rising cost of a 5yr at-the-money put option ($/oz)

0

20

40

60

80

100

120

140

Mar-05 Jul-05 Nov-05 Mar-06 Jul-06 Nov-06 Mar-07 Jul-07 Nov-07 Mar-08

Source: VM Group

Furthermore not only has price volatility increased in the last few quarters but another factor in the cost of a put - US dollar interest rates - have fallen. Lower interest rates increase the cost of a put as they reduce the opportunity cost of holding the put option. So between higher volatility and lower interest rates, the price of the at-the-money put has rocketed.

Yet so has the gold price, and as the following chart shows a miner who bought at-the-money puts as price-protection at the end of Q2 08 would still be guaranteeing a floor price of $800/oz if the put was exercised, even taking into account its purchase cost. This seems a reasonable amount, but many mining companies appear to prefer to take the risk.

The spot gold price less the cost of a put - what floor price can be obtained? ($/oz)

400

500

600

700

800

900

1,000

Mar-05 Jul-05 Nov-05 Mar-06 Jul-06 Nov-06 Mar-07 Jul-07 Nov-07 Mar-08

Spot price Spot price less cost of put

Source: VM Group


Global hedging roundup Q2 08 The delta-adjusted global gold hedgebook fell 3.5 Moz (110t) in Q2 08, another huge decline and one that leaves outstanding hedging at just 18.7 Moz (583t), 8.1 Moz (252t) lower than at the end of 2007 and just over half the size it was as recently as Q1 07.

The reduction on a committed ounces basis was a larger 4.2 Moz, taking that measure to 19.0 Moz. The main reason for the difference in the two measures was an increase in net puts (of 0.3 Moz), which are counted in the delta-adjusted total but not in the committed ounces total as they are not commitments.

Global hedging (Moz), end-quarter

2006 2007 2008 Change Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q2/Q1

Net delta Net Forwards 38.3 33.6 31.3 29.7 26.9 22.7 20.0 18.0 14.3 13.3 (1.0) Net Calls 9.1 8.7 9.2 9.4 8.5 7.9 8.4 8.1 7.6 4.8 (2.8) Other Products 1.2 1.2 1.2 1.1 0.9 0.4 0.1 0.1 0.1 0.1 0.0 Net Puts 0.2 0.2 -0.1 0.2 0.1 0.1 0.5 0.5 0.3 0.6 0.3 Total Hedge Impact (Delta) 48.8 43.7 41.5 40.4 36.4 31.1 29.1 26.8 22.3 18.7 (3.5) Quarterly change (4.7) (5.2) (2.1) (1.2) (3.9) (5.3) (2.0) (2.3) (4.6) (3.5) 1.0 Committed Ounces Net Forwards 39.1 34.3 31.8 30.1 27.4 23.6 20.4 18.4 14.6 13.5 (1.1) Net Calls Sold 10.6 10.2 12.1 11.6 10.4 10.4 9.8 9.2 8.4 5.4 (3.1) Other Products 1.3 1.2 1.2 1.2 0.9 0.4 0.1 0.1 0.1 0.1 0.0 Total Committed 50.9 45.7 45.0 42.8 38.7 34.5 30.3 27.8 23.2 19.0 (4.2) Quarterly change (4.8) (5.2) (0.7) (2.3) (4.1) (4.2) (4.1) (2.5) (4.6) (4.2) 0.4 Puts Bought 6.6 6.5 6.8 6.3 5.0 4.8 7.2 6.5 6.4 6.4 0.0 Puts Sold 1.1 1.0 1.8 1.6 2.2 1.7 1.7 1.5 1.2 0.3 (0.9)

Source: VM Group, Haliburton Mineral Services

Global gold hedging, committed and delta-adjusted, Moz

0

10

20

30

40

50

60

70

1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08

Delta-adjusted ounces Committed Ounces


Yet although the quarterly reduction was again huge, both in absolute terms and as a percentage of the remaining book (15.9%) it in fact points to a sharp slowdown in dehedging in coming quarters. The vast majority of the reduction, 2.7 Moz of the 3.5 Moz decline on the delta-adjusted measure, and 3.1 Moz of the 4.2 Moz on the committed ounces measure, was due to the acceleration of AngloGold Ashanti�s dehedging programmes, announced in Q1 08. Excluding AngloGold Ashanti, the other companies in our survey cut their positions by just a net 0.8 Moz in delta-adjusted terms.

This then gives an indication to the underlying rate of dehedging going forward. As ever the exact total will depend on three factors � how much hedging is due


to be delivered over the rest of 2008, how much pro-active dehedging is done above and beyond that, less how much new hedging we have. T

The delivery schedule (the amount of hedging that is due to mature in 2008) suggests H2 08 will see just another 1.5 Moz (this includes the remaining 0.8 Moz of AngloGold Ashanti�s programme). As for pro-active dehedging, the closing out of contracts before their maturity date, in the current economic climate there will always be some surprises, not forgetting whatever Barrick (who through conversion of fixed-price contracts into floating-price contracts continue to dehedge) happens to do along the way, but the potential for this on a large scale has diminished due to the smaller size of the global book (only AngloGold, Barrick and Kinross have over 0.5 Moz of hedge commitments left, while all the other companies collectively have just 4.7 Moz left). Finally new hedging, which in Q4 07 and Q1 08 almost disappeared, returned to some extent this quarter, but only at a rate of 0.25 Moz, and as yet there are no sign of any major price protection programmes on the horizon. Taking all these together suggests 8.2 Moz of dehedging so far, 1.5 Moz to be delivered, perhaps another 1.0 Moz of pro-active dehedging and another 0.5 Moz of new hedging, which nets to 10.2 Moz.

Therefore despite the astounding start to 2008 of 8.1 Moz in the first half, our full year forecast of 10-12 Moz made last quarter still holds, indeed dehedging could be at the lower end of this range. Although this is still a fast annual rate, it implies a sharp slowdown in dehedging over the next six months, with Q3 08 and Q4 08 seeing a rate of 1-2 Moz per quarter. Furthermore this rate is likely to continue in 2009 as well.

Delivery schedule by region, 2008 - 2011 (Moz), adjusted for AngloGold Ashanti dehedging

programme

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2008 2009 2010 2011

Milli

ons

Americas Africa Australasia Eurasia


The unusual nature of global dehedging in Q2 08 in terms of products � 2.8 Moz of the 3.5 Moz delta decline was in the net calls sold rather than the more important net forwards � and also that Africa was the largest dehedging region � is also due to AngloGold Ashanti�s dehedging programmes, which are fully documented in the regional and company focus section on p.9 of this hedge report.

Mark-to-market valuation With AngloGold Ashanti spending the best part of $1.2bn to reduce its hedge book, and the gold price falling (albeit by $3/oz) it comes as no surprise that the mark-to-market valuation of the global gold hedge book � which represents the cost to mining companies of closing out their hedge books today� continued to improve. At end of Q2 08 we estimate the valuation to be a negative $9.0bn, $1.7bn better than it was at the end of Q1 08 and the best figure since Q3 05 when the gold price was $470/oz. Nevertheless with outstanding hedging now just 18.7 Moz this means the average loss per ounce stands at $480/oz.

Largest remaining hedge books (oz)

Ounces committed Q1 08

AngloGold Ashanti 6,893,860 Barrick Gold 6,400,000 Kinross Gold 873,600 Western Goldfields 429,000 Orsu Metals 428,500 OceanaGold 423,812 Xstrata 350,775

Source: VM Group/Haliburton Mineral Services


MTM valuation

-14

-12

-10

-8

-6

-4

-2

0

Q1 2004 Q4 2004 Q3 2005 Q2 2006 Q1 2007 Q4 2007

3504004505005506006507007508008509009501,000

MTM valuation Gold price

Gold price ($/oz, inversed)MTM position, $bn



Regional and company focus In total in Q2 08 thirty-one of the thirty-seven mining companies who had hedge positions made reductions to those position, totalling 4.44 Moz. Four companies increased their positions, adding 0.24 Moz.

The headlines in hedging were made by AngloGold Ashanti. On 8th July the company announced it had completed its $1.7bn rights issue, an exercise designed mainly to fund major reductions in the company�s hedge book, the industry�s largest. On 14th July they announced that in the first six months of the year they (�capitalis[ing] on the weak gold market�) had already reduced that hedge book in anticipation of raising the funds by 4.4 Moz (through a mixture of deliveries of mined gold and buybacks), leaving their outstanding positions at end Q2 08 at 6.9 Moz. As the reduction in Q1 08 was 1.24 Moz, this meant that the Q2 08 reduction was an enormous 3.14 Moz on a committed basis. The reduction on a net delta basis was a smaller 2.7 Moz, but on that measure hedging is now down to 6.54 Moz.

As the chart below shows, the reduction in hedge commitments was concentrated on the nearer maturity contracts, with 2008 and 2009 seeing reductions of 0.9 Moz and 1.6 Moz respectively. Contracts maturing in 2010 and 2011 also declined, by 0.4 and 0.2 Moz respectively.

AngloGold Ashanti�s hedge book, Q1 08 and Q2 08, committed ounces

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1

1

2

2

3

2008 2009 2010 2011 2012 2013-2016

Moz

Q1 08 Q2 08


In terms of products, the major reduction was in US$ denominated calls sold, which were reduced by 2.6 Moz, followed by US$ denominated forwards, down 0.6 Moz. The reduction in the long forward sales (which were in the book in Q1 08 to aid the restructuring) and the bought calls position add to the hedge position as the following table records.

Largest change in hedging by company

(000 oz)

Moz (Committed) Q1 08 Q2 08 Change

AngloGold Ashanti 10,035 6,894 (3,141) Sino Mining 285 0 (285) Barrick Gold 6,660 6,400 (260) Newcrest Mining 209 0 (209) Lihir (Equigold) 338 147 (192) Xstrata 395 351 (45) Penoles 135 108 (27) Crescent Gold 25 0 (25) Kinross Gold 895 874 (21) Vale 62 41 (21) Resolute 345 325 (20) Aurizon Mines 211 191 (20) IAMGOLD 102 83 (19) Inmet Mining 60 42 (18) Norton Goldfields 298 280 (18) Randgold Resources 190 172 (17) Ok Tedi 73 57 (15) Teck Cominco 76 65 (11) Etruscan Resources 221 210 (11) Intrepid Mines 33 22 (11) Yukon-Nevada Gold 42 31 (10) Pamodzi Gold 125 116 (9) EURO Ressources 31 23 (8) Allied Gold 92 85 (7) Sherwood Copper 54 47 (7) GBS Gold International 5 0 (5) Central African Gold 86 81 (5) Dominion Mining 38 34 (5) Metorex 12 9 (3) SEMAFO 32 29 (3) Dragon Mining 9 8 (2) Alamos Gold 2 9 7 Focus Minerals 0 32 32 Boliden 170 256 86 Wega Mining 165 286 115



This accelerated dehedging means that the company has little of its planned dehedging programme left � their 14th July statement confirmed that it had another 0.8 Moz of contracts which it planned to deliver into over the rest of 2008. This would leave the hedgebook at about 6.1 Moz, slightly less than when the plans were made known in Q1 2008, when it declared that it would reduce the hedgebook to 6.25 Moz. For 2009, when the programme will be completed, the delivery schedule suggests only about 0.3 Moz will be delivered into remaining hedge positions. In practice the deliveries are likely to be slightly higher than this, although still less than 0.5 Moz for the year, based on the company�s stated estimate that dehedging in 2009 will reduce the gold price they realise by 6%.

Four other companies reduced their hedge positions by more than 0.1 Moz.

After AngloGold Ashanti, the next largest dehedger was Sino Gold, who after raising A$204m used A$125m to close out all of its 0.28 Moz of forwards, leaving it with no hedge commitments at all. Sino Gold, which has its headquarters in Australia but operates in China, says it has no plans to hedge in future.

This was a relatively quiet quarter (by their standards) for Barrick Gold, but they continue to reduce their hedge positions, cutting 0.26 Moz through the conversion of fixed price contracts into floating spot-price contracts. We do not consider these to be hedges as they perform no hedging function � the contract price from the date of conversion is the spot price of gold less a fixed amount (currently $498/oz on the 3.1 Moz of floating spot-price contracts outstanding) and so it fluctuates with the spot price. The company can elect to refix the contracts at any time, a process that we (and we believe they too) would count as increasing their hedge position.

Newcrest Mining, as expected, completed their dehedging programme, removing the final 0.21 Moz of its hedge commitments that stood at 4.0 Moz when the programme began in September 2007. Newcrest said the programme, which has been finished ahead of schedule, cost A$1,672m, A$172m more than the original estimate, but was achieved at a gold price of A$70/oz lower than the average spot price over the period. The company still has 2.0 Moz of put options.

Finally of the large dehedgers, Equigold cut their hedgebook by 0.19 Moz, leaving it at 0.15 Moz, just before their merger with Lihir was completed. The two companies� merger was completed on 17th June 2008 but the hedge closure had been done by 6th June 2008, �taking advantage of a recent pull back in the gold price� and at a cost of A$61m, funded in part by a loan from Lihir.

Change in AngloGold Ashanti�s hedge book by product between Q1 08 and Q2 08

Total Committed Change Q2/Q1

Shorts US$ Calls-sold (2,554,956) US$ Forward sales (642,790) Aus$ Forward sales (349,961) Rand Calls-sold (288,006) Aus$ Calls-sold (49,994) Rand Forward sales (44,979) Longs US$ Forward sales (long) (651,181) US$ Calls-bought (88,865) Aus$ Calls-bought (49,962) Net (3,140,678)



Twenty-six other companies made reductions in their hedgebook positions totalling 0.36 Moz.

In Q4 07 and Q1 08 the amount of new hedging which took place was minimal, with just 20,000 oz being added to the hedgebook. Although one could not describe Q2 08�s new hedging as an avalanche, that 0.25 Moz of commitments were added by four companies does suggest hedging is not dead yet. The largest of these four companies was Wega Mining, a Norwegian company which began operations this year in Canada and which has another operation planned to begin later this year in Burkino Faso. Wega Mining added 115,000 oz of forwards to the 165,000 oz of forwards they put in place in Q1 08. Their hedging programme is connected to a $65m loan from Macquarie Bank which required 20% of their reserve base to be hedged. In addition Swedish miner Boliden increased its hedge exposure by 86,390 oz by adding hedges due to mature in 2010, part of a long-running programme. Australian Focus Minerals put in place 32,000oz of forwards at A$990/oz as part of a A$18.65m financing facility (as well as 17,000 oz of puts).

A number of other companies put in place new put options, which are not counted as commitments but do provide some hedging function (and are included in our delta-adjusted totals). In this respect three Australian companies are worth noting: Avoca Resources purchased put options of 438,933 oz at $830/oz, Resolute added 100,000 oz of puts at A$1,000/oz (although its commitments were reduced), and we calculate that North Queensland Metals made a small addition.

Hedging by region, delta-adjusted (Moz)

0

5

10

15

20

25

1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08

Americas Africa Australia Eurasia


In terms of regional trends, the AngloGold Ashanti dehedging programme means the Africa�s region (of which all but 0.3 Moz is accounted for by AngloGold Ashanti) now has a smaller hedge book than the Americas again, at 6.7 Moz compared with 8.3 Moz. The Australia�s hedge book is now just 2.2 Moz, down an astonishing 5.3 Moz over the past year. The Eurasia hedge book increased last quarter due to the hedging carried out by Wega Mining, and now stands at 1.4 Moz. However even this is lower than it was this time last year.

In terms of months� production committed, the largest change is unsurprisingly in Africa, which has declined from 10.1 in Q1 08 to 7.4 in Q2 08. Australia, long the most hedged region as a proportion of production, has now just 3.5 months� production hedged, down from 21 in Q1 07, a remarkable decline.


Hedging by region, delta-adjusted (Moz)

2006 2007 2008 Change Q2 08 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q on Q Y on Y

Americas 22.78 19.58 18.91 17.38 15.16 12.97 11.58 11.04 8.69 8.30 (0.39) (4.68)Africa 13.08 11.98 11.22 11.50 10.26 9.13 10.95 10.67 9.54 6.82 (2.72) (2.31)Australia 11.19 10.38 9.67 9.55 9.22 7.45 5.12 3.97 2.79 2.21 (0.58) (5.23)Eurasia 1.78 1.71 1.75 1.95 1.79 1.59 1.45 1.15 1.26 1.41 0.15 (0.18)Total 48.83 43.66 41.54 40.38 36.44 31.14 29.10 26.83 22.28 18.74 (3.54) (12.40)



Financial & investment gold Exchange Traded Funds (ETFs) The gold ETFs recovered in May, June and July after the record outflows suffered in April. Total holdings at end-July 2008 went over 1,000t for the first time. As ever the StreetTRACKs SPDR led the way, adding nearly 93t in those three months and taking its holdings to 673.4t. The Australian ETF, the first to be launched, lost nearly half its holdings (10t) in one day during May.

Exchange Traded Fund holdings (tonnes) � part I

US UK Swiss Australia S.Africa Street TRACKS BGI Gold Bullion Securities ETF Securities ZKB

2003 0.0 0.0 23.5 8.4 0.0 2004 94.9 0.0 51.1 7.5 3.0 2005 263.3 22.2 63.0 8.4 7.7 2006 453.2 44.5 85.4 13.1 10.5 10.2 2007 627.9 55.2 97.5 19.8 25.8 16.4 23.7 Jul-07 496.5 46.5 94.6 2.3 22.2 12.5 14.3 Aug-07 515.4 47.3 88.1 10.2 23.3 12.7 16.4 Sep-07 578.0 50.0 95.5 10.8 24.0 14.3 17.7 Oct-07 597.5 52.3 97.9 17.0 24.5 15.1 18.3 Nov-07 601.7 54.1 96.9 19.2 26.0 15.9 19.2 Dec-07 627.9 55.2 97.5 19.8 27.5 16.4 23.7 Jan-08 632.0 59.9 105.2 21.5 30.3 17.6 27.2 Feb-08 639.4 59.9 107.9 25.4 31.3 19.0 27.0 Mar-08 642.0 64.1 113.9 30.9 32.8 20.6 29.0 Apr-08 580.5 62.8 114.0 35.8 35.5 20.9 27.0 May-08 597.7 61.2 113.5 36.6 37.3 20.9 28.1 Jun-08 644.2 61.2 114.6 41.1 38.0 10.9 28.1 Jul-08 673.4 61.2 119.7 55.5 49.5 10.9 30.2

Source: Fortis

Exchange Traded Fund holdings (tonnes) � part II

India Turkey Germany Part I+II Benchmark UTI Kotak Reliance Capital Goldas Xetra-Gold Total* Change

2003 32 32 2004 156 125 2005 365 208 2006 1.3 618 254 2007 1.3 1.3 0.4 1.4 1.3 0.3 872 254 Jul-07 1.4 1.6 0.5 1.3 689 37 Aug-07 1.4 1.6 0.5 1.3 714 24 Sep-07 1.4 1.5 0.6 1.3 792 78 Oct-07 1.4 1.5 0.6 1.3 825 33 Nov-07 1.3 1.4 0.5 1.5 1.3 836 11 Dec-07 1.3 1.3 0.4 1.4 1.3 0.3 874 35 Jan-08 1.2 1.3 0.3 1.2 1.3 3.5 902 28 Feb-08 1.1 1.2 0.3 1.1 1.3 4.8 920 18 Mar-08 1.3 1.3 0.3 1.1 1.3 6.0 945 25 Apr-08 1.2 1.2 0.3 1.1 1.3 6.9 888 (56)

May-08 1.4 1.3 0.3 1.2 1.3 7.4 908 20 Jun-08 1.6 1.3 0.3 1.3 1.3 7.5 951 43 Jul-08 1.8 1.4 0.3 1.5 1.3 8.5 1,015 64

Source: VM Group * Total includes Quantum gold ETF in India which currently has 0.04t.


Central Banks and other official gold holders Central bank gold sales continue to be markedly below trend, with just 134t sold from the CBGA signatories in the first seven months of this year and a net 5t of purchases from countries outside the CBGA. In the CBGA year IV, which started at the end of September 20007, sales in ten months have totalled an estimated 315t, far short of the 417t that would mean the signatories were on �target� for the maximum permitted 500t in the full year. Instead our best estimate is that sales will be about 368t, the lowest total not just in this CBGA but also in the previous one, when the sales limit was a 100t lower.

Central Banks (part I) (tonnes) � Old industrialised countries

CBGA Eurozone Other CBGA US& Canada Other industrialised

2003 12,248 1,819 8,138 1,2632004 12,138 1,540 8,140 1,2262005 11,696 1,458 8,139 1,2242006 11,364 1,449 8,137 1,2242007 11,001 1,294 8,137 1,224Jul-07 11,119 1,395 8,137 1,224Aug-07 11,111 1,359 8,137 1,224Sep-07 11,102 1,328 8,137 1,224Oct-07 11,065 1,317 8,137 1,224Nov-07 11,051 1,304 8,137 1,224Dec-07 11,001 1,294 8,137 1,224Jan-08 11,000 1,282 8,137 1,224Feb-08 10,988 1,270 8,137 1,224Mar-08 10,981 1,260 8,137 1,224Apr-08 10,975 1,246 8,137 1,224May-08 10,970 1,234 8,137 1,224Jun-08 10,958 1,221 8,137 1,224Jul-08 10,952 1,208 8,137 1,224

Source: VM Group from IMF, and individual central bank websites

Central Banks (part II) (tonnes) � Developing economies and institutions

Asia Eastern Middle Latin Africa Institutions World Part I+II Europe East America Change Change CBGA

2003 2,123 930 1,071 539 418 3,411 31,960 (527) (454)2004 2,092 933 949 590 412 3,426 31,444 (516) (389)2005 2,024 953 948 586 413 3,403 30,844 (600) (523)2006 1,998 979 948 580 413 3,389 30,481 (364) (341)2007 1,985 1,021 961 580 413 3,352 29,968 (512) (518)Jul-07 1,993 967 959 580 413 3,363 30,164 (77) (75)Aug-07 1,997 971 960 581 414 3,362 30,130 (34) (44)Sep-07 1,980 978 958 581 413 3,360 30,075 (56) (41)Oct-07 1,983 987 960 581 413 3,356 30,036 (25) (48)Nov-07 1,986 1,001 961 580 413 3,352 30,011 (25) (26)Dec-07 1,987 1,008 961 580 413 3,355 29,975 (50) (60)Jan-08 1,985 1,006 961 580 413 3,354 29,956 (20) (13)Feb-08 1,985 1,010 963 580 411 3,352 29,918 (22) (23)Mar-08 1,982 1,015 963 580 411 3,352 29,906 (12) (17)Apr-08 1,982 1,019 963 580 411 3,344 29,884 (22) (20)May-08 1,982 1,022 963 580 411 3,344 29,869 (15) (17)Jun-08 1,982 1,025 963 580 411 3,344 29,844 (22) (25)Jul-08 1,982 1,025 963 580 411 3,344 29,825 (16) (19)

Source: VM Group from IMF and individual central bank websites


Gold price, exchange rates & lease rates

End-quarter

2006 2007 2008 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

Gold price, $/oz 599 636 663 649 743 837 934 930Exchange Rates per $ Canadian Dollar 1.12 1.17 1.16 1.06 1.00 1.01 1.03 1.02Euro 0.79 0.76 0.75 0.74 0.70 0.68 0.63 0.63South African Rand 7.65 7.05 7.31 7.13 6.92 6.81 8.11 7.83Australian Dollar 1.34 1.27 1.23 1.18 1.13 1.13 1.09 1.04Lease Rates 5-yr 0.44 0.48 0.51 0.45 0.40 0.34 0.43 0.4210-yr 0.75 0.68 0.71 0.62 0.54 0.49 0.89 0.76

Source: Fortis, VM Group, Haliburton Mineral Services


Footnotes to appendices Hedge positions shown are based on a calendar year basis unless otherwise noted. All hedge positions are presented in the currency in which they were disclosed or denominated. These tables constitute summaries of hedge positions reported by individual producers. Such reports often provide additional data and detail such as the duration of hedge positions, information on whether interest rates are fixed or floating, on floor prices on some contracts, on knock-ins and knock-outs etc. For companies where quarterly data is not available, or detail is not provided, the data have either been projected, interpolated, adjusted or repeated from adjacent quarters. In some cases aggregated positions have been allocated over a number of years. Thus we strongly refer the reader to the websites of the various companies for a more complete picture than is presented here. For this report the reader should be aware that in the interests of publishing in a timely fashion we have estimated the June 30, 2008 hedge positions for a number of companies who have not yet reported as we went to press (see notes below).

Americas � For Alamos Gold, Anaconda Mining, Aurizon Mines, Campbell Resources,

Capital Gold, Central Sun Mining, Century Mining, Claude Resources, Coeur d�Alene, Crystallex, Etruscan Resources, Franco-Nevada, Gammon Gold, GBS Gold International, Gold-Ore Resources, High River Gold, IAMGOLD, Imperial Metals, Jaguar Mining, Jinshan Gold Mines, Kinross Gold, Kirkland Lake Gold, La Mancha Resources, Nevsun Resources, New Gold, Orvana, Pacific Rim, Penoles, Red Back Mining, Royal Gold, Rusoro Mining, SEMAFO, Sherwood Copper, Uruguay Mineral Exploration, Vale, Wesdome Gold Mines, Western Goldfields and Yukon-Nevada Gold: The June 30, 2008 position if any is adjusted from or repeated from March 31, 2008, or prior disclosure.

� Anaconda Gold and Uruguay Mineral Exploration: Companies have a May

31 year-end but positions shown if any are based on a calendar year. � Capital Gold: Company has a July 31 year-end but positions shown if any are

based on a calendar year. � Etruscan Resources and Gold-Ore Resources: Companies have a November

30 year-end but positions shown if any are based on a calendar year. � Kirkland Lake Gold and Pacific Rim: Companies have an April 30 year-end

but positions shown if any are based on a calendar year. � Orvana: Company has a September 30 year-end but positions shown if any

are based on a calendar year basis.

� Red Back Mining and Royal Gold: Companies have June 30 year-ends but positions shown if any are based on a calendar year.

Africa � For Central African Gold, DRD, Harmony, Metorex and Simmer and Jack:

The June 30 2008 position if any is adjusted from or repeated from March 31, 2008 or prior disclosure.

� DRD, Gold Fields, Harmony and Metorex: Companies have June 30 year-

ends. � Simmer and Jack: Company has a March 31 year-end


Australia � For Lion Selection: The June 30, 2008 position if any is adjusted from or

repeated from March 31, 2008 or prior disclosure. � For Allied Gold, Avoca Resources, Beaconsfield Gold, Crescent Gold,

Dominion Mining, Dragon Mining, Equigold, Focus Minerals, Kingsgate Consolidated, Newcrest Mining, Norseman Gold, North Queensland Metals, Norton Gold Fields, Perseverance, Resolute, St. Barbara, Tanami Gold, Troy Resources: Companies have June 30 year-ends.

� Dragon Mining, Focus Minerals and North Queensland Metals: Companies

have a June 30 year-end but positions shown if any are based on a calendar year.

� Heemskirk Consolidated: Company has a September 30 year-end but

positions shown if any are based on a calendar year. � Lion Selection Trust: Company has a July 31 year-end but positions shown if

any are based on a June 30 year-end. � Ok Tedi: Positions shown are calculated from Inmet�s disclosed or estimated

Ok Tedi hedge position and are based on a calendar year. Eurasia � For Avocet Mining, Crew Gold, Highland Gold, Hochschild, KazakhGold,

Kazakhmys, Orsu Metals, Oxus Gold, Peter Hambro Mining, Polymetal, Polyus, Rio Tinto, Serabi Mining, Wega Mining, Xstrata and Zijin Mining: The June 30, 2008 position if any is adjusted from or repeated from March 31, 2008 or previous disclosure.

� Avocet Mining: Company has a March 31 year-end. � Crew Gold and Oxus Gold: Companies have June 30 year-ends.


Appendix 1: Company hedge commitments

Hedging by company by quarter (ozs)

Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Change over quarter Change over year

Americas Agnico-Eagle 0 0 0 0 0 0 0 Alamos Gold 2,700 8,000 0 2,000 9,000 7,000 6,300 Anaconda Mining 0 0 0 0 0 0 Aurizon Mines 259,631 243,971 227,962 210,851 190,786 (20,065) (68,845)Barrick Gold 9,500,000 8,000,000 7,800,000 6,660,000 6,400,000 (260,000) (3,100,000)Breakwater 0 0 0 0 0 0 0 Buenaventura 922,000 922,000 922,000 0 0 0 (922,000)Campbell Resources 0 0 0 0 0 0 0 Capital Gold 0 0 0 0 0 0 0 Centerra Gold 0 0 0 0 0 0 0 Central Sun Mining 0 0 0 0 0 0 0 Century Mining 0 30,000 24,000 17,000 24,000 0 24,000 Claude Resources 0 0 0 0 0 0 0 Coeur d'Alene 0 0 0 0 0 0 0 Crystallex Mining 0 0 0 0 0 0 0 Dundee Precious Metals 0 0 0 0 0 0 0 Eldorado 0 0 0 0 0 0 0 Etruscan Resources 246,296 242,778 235,740 221,213 210,232 (10,981) (36,064)EURO Ressources 57,000 51,300 37,600 31,200 22,800 (8,400) (34,200)Freeport Copper & Gold 0 0 0 0 0 0 0 Franco-Nevada 0 0 0 0 0 0 0Gammon Gold 0 0 0 0 0 0 0 GBS Gold International 0 0 20,000 5,000 0 (5,000) 0 Goldcorp 0 0 0 0 0 0 0 Golden Star Resources 0 0 0 0 0 0 0 Gold-Ore Resources 0 0 0 0 0 0 0 Hecla Mining 0 0 0 0 0 0 0 High River Gold 0 0 0 0 0 0 0 HudBay Minerals 0 0 0 0 0 0 0 IAMGOLD 182,863 145,450 121,664 102,220 82,776 (19,444) (100,087)Imperial Metals 0 0 0 0 0 0 0 Inmet Mining 116,750 98,900 77,600 59,700 41,700 (18,000) (75,050)Jaguar Mining 64,500 55,654 48,556 0 0 0 (64,500)Jinshan Gold Mines 0 0 0 0 0 0 0 Kinross Gold 963,900 927,650 912,900 894,700 873,600 (21,100) (90,300)Kirkland Lake Gold 0 0 0 0 0 0 0 La Mancha Resources 0 0 0 0 0 0 0 Nevsun Resources 0 0 0 0 0 0 0 New Gold 0 0 0 0 0 0 0 Newmont Mining 0 0 0 0 0 0 0 Northgate Minerals 30,000 18,000 0 0 0 0 (30,000)Orvana 0 0 0 0 0 0 0 Pacific Rim 0 0 1,000 0 0 0 0 Penoles 213,150 187,725 162,300 135,225 108,150 (27,075) (105,000)Red Back Mining 267,500 245,500 0 0 0 0 (267,500)Richmont 0 0 0 0 0 0 0 Royal Gold 0 0 0 0 0 0 0 Rusoro 0 0 0 0 SEMAFO 96,000 92,000 79,000 32,000 29,000 (3,000) (67,000)Sherwood Copper 55,600 54,590 54,095 54,095 47,426 (6,669) (8,174)Silver Wheaton 0 0 0 0 0 0 Teck Cominco 113,000 102,000 87,000 76,000 65,000 (11,000) (48,000)Uruguay Mineral Exploration 0 0 0 0 0 0 0 Vale 140,990 111,865 82,740 62,055 41,370 (20,685) (99,620)Wesdome 0 0 0 0 0 0 0 Western Goldfields 429,000 429,000 429,000 429,000 429,000 0 0 Yamana Gold 0 0 0 0 0 0 0 Yukon-Nevada Gold 0 0 48,800 41,600 31,200 (10,400) 31,200 Total 13,752,045 12,043,722 11,453,184 8,992,259 8,561,840 (430,419) (5,190,205)

Continued overleaf


Hedging by company by quarter (ozs)

Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Change over quarter Change over year

Africa AngloGold Ashanti 11,132,422 11,660,788 11,277,711 10,034,538 6,893,860 (3,140,678) (4,238,562)Central African Gold 0 0 55,660 86,207 81,380 (4,827) 81,3800 DRDGOLD 0 0 0 0 0 0 0 Gold Fields 0 0 0 0 0 0 0 Harmony 0 0 0 0 0 0 0 Metorex 19,950 15,963 15,432 12,215 9,000 (3,215) (10,950)Pamodzi Gold 151,500 142,500 133,500 124,500 116,000 (8,500) (35,500)Randgold Resources 245,747 226,493 207,240 189,741 172,242 (17,499) (73,505)Simmer and Jack 0 0 0 0 0 0 0Total 11,549,619 12,045,744 11,689,547 10,447,201 7,272,482 (3,174,719) (4,277,137) Australia Allied Gold 102,000 102,000 92,178 84,792 (7,386) 84,792 Antam 0 0 0 0 0 0 0 Arc Exploration 157,998 157,998 0 0 Avoca Resources 0 0 0 Beaconsfield Gold 10,613 45,494 0 0 0 0 (10,613)Crescent Gold 120,478 110,453 102,053 25,478 0 (25,478) (120,478)Dominion Mining 36,238 41,000 32,863 38,000 33,500 (4,500) (2,738)Dragon Mining 81,849 11,150 9,950 9,250 7,750 (1,500) (74,099)Focus Minerals 0 0 0 32,000 32,000 32,000 Heemskirk Consolidated 0 0 0 0 0 0 0 Intrepid Mines 69,270 55,214 43,971 33,310 22,448 (10,862) (46,822)Kingsgate Consolidated 0 0 0 0 0 0 0 Lihir Gold (Equigold) 359,896 345,886 359,976 338,454 146,624 (191,830) (213,272)Lion Selection Trust 66,300 0 0 0 0 0 (66,300)Newcrest Mining 4,200,000 1,656,932 921,577 209,000 0 (209,000) (4,200,000)Norseman Gold 0 0 0 0 0 0 0 North Queensland Metals 0 0 0 0 0 0 Norton Goldfields 330,000 315,000 297,500 280,000 (17,500) 280,000 OceanaGold 454,399 441,271 424,024 423,812 423,812 0 (30,587)Ok Tedi 134,151 118,900 88,378 72,889 57,400 (15,489) (76,751)OZ Minerals (Oxiana Gold) 0 0 0 0 0 0 0 Pan Australian Resources 0 70,000 70,000 0 0 0 0 Resolute 480,603 432,667 381,334 284,786 0 (284,786) (335,000)Sino Mining 335,000 319,925 303,173 0 0 0 0 St. Barbara 0 0 0 0 0 0 0 Tanami Gold 0 0 0 0 0 0 0 Troy Resources 0 0 0 338,454 146,624 (191,830) (213,272)Total 7,216,616 4,733,938 3,430,202 2,397,789 1,641,314 (756,475) (7,812,628) Eurasia Avocet Mining 210,000 190,000 190,000 190,000 190,000 0 (20,000)Boliden 256,056 209,077 181,500 170,060 256,450 86,390 394 Crew Gold 0 0 0 0 0 0 0 Highland Gold 0 0 0 0 0 0 0 Hochschild 0 0 0 0 0 0 0 KazakhGold 0 0 0 0 0 0 0 Kazakhmys 0 0 0 Orsu Metals (European Min.) 443,000 443,000 443,000 428,500 428,500 0 (14,500)Oxus Gold 0 0 0 0 0 0 0 Peter Hambro Mining 0 0 0 0 0 0 0 PolyMetal 0 0 0 0 0 0 0 Polyus Gold 0 0 0 0 0 0 0 Rio Tinto 0 0 0 0 0 0 0 Seribi Mining 0 0 0 0 0 0 0 Wega Mining 0 0 0 165,000 280,000 115,000 280,000 Xstrata 605,750 526,876 416,500 350,775 (44,675) (254,975) 350,775Zijin Mining 137,600 134,100 0 0 0 (137,600) 0Total 1,932,406 1,503,053 1,262,500 1,349,010 1,505,725 156,715 (426,681) Global Total 34,450,686 30,326,457 27,776,400 23,186,259 18,981,361 (4,204,898) (15,469,325)



Appendix 2: Detail of company hedge positions in Q2 08

Q2 08 breakdown by maturity, Americas (oz)

2008 $/oz 2009 $/oz 2010 $/oz 2011 $/oz 2012+ $/oz

Agnico-Eagle Commitments - - - - - - - - - -

Alamos Gold Forward sales 9,000 905 - - - - - - - -Total Committed 9,000 - - - - - - - - -

Anaconda Mining Forward sales 10,000 684 - - - - - - - -Calls - bought 10,000 750 - - - - - - - -Total Committed 0

Aurizon Mines

Calls - sold 40,130 852 84,842 882 65,814 908 - - - -Total Committed 40,130 84,842 0 65,814 0 - - - -Puts - bought 40,130 500 84,842 500 65,814 500

Barrick Gold Project Forward Sales 6,400,000 334 - - - - - - -Floating Spot Priced Contracts* 3,100,000 (Spot-$498) - - - - - - -Total Committed 6,400,000

Breakwater Commitments - - - - - - - - - -

Buenaventura Commitments - - - - - - - - - -

Campbell Resources Commitments - - - - - - - - - -

Capital Gold Forward sales 16,811 500 33,200 500 25,033 500 - - - -Calls-bought 16,811 535 33,200 535 25,033 535 - - - -Total Committed 0 0 0

Centerra Gold Commitments - - - - - - - - - -

Central Sun Mining Commitments - - - - - - - - - -

Century Mining Calls - sold 11,000 720 - - - - - - - -Total Committed 11,000

Claude Resources Commitments - - - - - - - - - -

Coeur d'Alene Commitments - - - - - - - - - -

Crystallex Mining Commitments - - - - - - - - - -

Continued overleaf * We do not consider these hedges hence they are not included in our totals



2008 $/oz 2009 $/oz 2010 $/oz 2011 $/oz 2012+ $/oz

Dundee Precious Metals Commitments - - - - - - - - - -

Eldorado Commitments - - - - - - - - - -

Etruscan Resources Calls � sold 19,810 700 59,142 700 50,682 700 48,750 700 31,848 1,771Total Committed 19,810 59,142 50,682 48,750 31,848Puts � bought 36,684 629 109,512 629 93,846 629 90,276 629 58,974 1,592

EURO Ressources Forward sales 22,800 459 - - - - - -Total Committed 22,800

Freeport Copper & Gold Commitments - - - - - - - - - -

Franco-Nevada Commitments - - - - - - - - - - Freeport Copper & Gold Commitments Gammon Gold Commitments - - - - - - - - - -

GBS Gold International Commitments - - - - - - - - - -

Gold-Ore Resources Commitments - - - - - - - - - -

Goldcorp Commitments - - - - - - - - - -

Golden Star Resources Commitments - - - - - - - - - -

Hecla Mining Commitments - - - - - - - - - -

High River Gold Commitments - - - - - - - - - -

HudBay Minerals Commitments - - - - - - - - - -

IAMGOLD Flat Forward sales 38,888 402 38,888 402 - - - - - -Flat Forward sales - - 5,000 442 - - - - - -Calls - sold - - - - - - - - - -Total Committed 38,888 43,888

Imperial Metals Commitments - - - - - - - - - -

Inmet Mining Forward sales 29,100 352 - - - - - - - -Forward sales - - 3,600 748 3,600 775 5,400 1,327Total Committed 29,100 3,600 3,600 5,400

Jaguar Mining Commitments - - - - - - - - - -

Continued overleaf



2008 $/oz 2009 $/oz 2010 $/oz 2011 $/oz 2012+ $/oz

Jinshan Gold Mines

Commitments - - - - - - - - - -

Kinross Gold

Forward sales 30,000 511 218,600 641 219,000 642 319,700 621 74,100 3,353

Calls-sold 12,200 470 - - - - - - - -

Total Committed 42,200 218,600 219,000 319,700 74,100Puts - bought 14,500 404 - - - - - - - -

Kirkland Lake Gold

Commitments - - - - - - - - - -

La Mancha Resources

Commitments - - - - - - - - - -

Metallica Resources

Commitments - - - - - - - - - -

New Gold

Commitments - - - - - - - - - -

Nevsun Resources

Commitments - - - - - - - - - -

Newmont Mining

Commitments - - - - - - - - - -

Northgate Minerals

Commitments - - - - - - - - - -

Orvana

Commitments - - - - - - - - - -

Pacific Rim

Commitments - - - - - - - - - -

Peak Gold

Commitments - - - - - - - - - -

Penoles

Forward sales 4,950 652 - - - - - - - -

Contingent forwards 27,000 355 54,000 355 - - - - - -

Calls - sold 22,200 913 - - - - - - - -

Total Committed 54,150 54,000

Puts - bought 22,200 514 - - - - - - - -

Red Back Mining

Total Committed - - - - - - - - - -

Richmont

Commitments - - - - - - - - - -

Royal Gold

Commitments - - - - - - - - - -

Rusoro Mining Commitments - - - - - - - - - -

SEMAFO

Fixed Forward 24,000 375 35,000 375 - - - - - -

Forward purchases 18,000 942 12,000 1,035


Puts - bought 5,000 600 5,000 600 45,000 600

Sherwood Copper Flat Forward 5,457 653 14,424 653 14,025 653 13,520 718 - -

Total Committed 5,457 14,424 14,025 13,520

Silver Wheaton

Commitments - - - - - - - - -

Continued overleaf



2008 $/oz 2009 $/oz 2010 $/oz 2011 $/oz 2012+ $/oz

Teck Cominco

Forward sales 22,000 350 43,000 350 - - - - - -


Uruguay Mineral Exploration

Commitments - - - - - - - - - -

Vale

Calls � sold 41,370 390 - - - - - - - -

Total Committed 41,370

Puts � bought 38,850 325 - - - - - - - -

Wesdome Gold Mines Commitments - - - - - - - - - -

Western Goldfields

Forward sales 33,000 801 66,000 801 66,000 801 66,000 801 198,000 801

Total Committed 33,000 66,000 66,000 66,000 198,000

Yamana Gold Commitments - - - - - - - - - -

Yukon-Nevada Gold

Forward sales 31,200 814 - - - - - - - -


COMMITTED BREAKDOWN

Total Forwards

6,595,206 464,912 327,658 402,820 277,500 Total Calls sold 156,710 143,984 116,496 48,750 31,848 Total Calls bought 26,811 33,200 25,033 - -Total Other Products 27,000 54,000 - - -Total Committed 6,752,105 629,696 419,121 451,570 9,348 Total Puts bought 152,364 199,354 164,660 135,276 58,974 Total Puts sold - - - - -



Q2 08 breakdown by maturity, Africa (oz)

2008 $/oz 2009 $/oz 2010 $/oz 2011 $/oz 2012+ $/oz

AngloGold Ashanti

US Dollar Gold

Forward sales 251,515 104 415,291 218 404,456 327 415,741 397 781,520 418

Calls-sold 195,991 348 376,003 357 937773 498 1,194,272 521 2,070,026 611

Calls-bought 137,734 428

Total 309,772 791294 1,342,230 1,610,013 2,851,546

Puts-sold 29,997 660 60,508 420 181,491 440

Rand Gold

Forward sales 29,997 3,980 (59,993) 4,890

Total 29,997 (59,993)

Australian Dollar Gold

Forward sales 49,994 591 58,997 569 100,021 685

Calls-bought 49,994 682

Total Committed 309,772 791,294 1,342,230 1,610,013 2,851,546

Central African Gold

Forward sales 10,307 735 30,920 735 5,153 735

Calls-sold 17,500 1,115 17,500 1,115

Total Committed 10,307 30,920 22,653 17,500 - - -Puts-bought 17,500 600 17,500 600

DRDGold

Commitments - - - - - - - - - -

Gold Fields

Commitments - - - - - - - - - -

Harmony

Commitments - - - - - - - - - -

Metorex

Rand gold

Flat forwards 9,000 3,452 - - - - - -


Pamodzi Gold

Contingent forwards 17,000 350 30,000 350 30,000 350 27,000 350 12,000 350

Total Committed 17,000 30,000 30,000 27,000 12,000Puts - bought 19,323 290 - - - - - - - -

Randgold Resources

US Dollar Gold

Forward sales 45,498 429 84,996 435 41,748 500 - - - -

Total Committed 45,498 84,996 41,748

Simmer & Jack Mines

Commitments - - - - - - - - - -

COMMITTED BREAKDOWN Total Forwards 404,311 569,211 581,378 442,741 396,009Total Calls sold 195,991 376,003 955,273 1,211,772 786,439Total Calls bought 187,728 39,996 100,021 Total Other Products Total Committed 412,574 905,218 1,436,631 1,654,513 1,182,448Total Puts bought 19,323 17,500 17,500 Total Puts sold 29,997 60,508 60,508



Q2 08 breakdown by maturity, Australia (oz)

2008 $/oz 2009 $/oz 2010 $/oz 2011 $/oz 2012+ $/oz

Allied Gold AU Dollar Gold Calls sold 27,270 700 23,850 700 22,764 700 10,908 700Total Committed 27,270 23,850 22,764 10,908Puts - bought 18,532 700 15,898 700 15,170 700 7,272 700

Antam Commitments - - - - - - - - - -

Arc Exploration AU Dollar Gold Forward Sales 17,173 651 48,615 651 48,615 651 43,595 658 Total Committed 17,173 48,615 48,615 43,595 Avoca Resources Commitments Puts - bought 129,097 830 154,918 830 154,918 830

Beaconsfield Gold Commitments - - - - - - - - - -

Crescent Gold AU Dollar Gold Forward sales 38,050 860 12,683 860 - - - -Calls � bought 38,050 860 12,683 860 Total Committed 0 0 Puts - bought 25,074 850 8,358 850 - - - -

Dominion Mining AU Dollar Gold Forward sales 7,750 413 33,500 935 - - - - - -Total committed 7,750 33,500

Dragon Mining Forward sales 7,750 413 - - - - - - - -Total committed 7,750

Focus Minerals AU Dollar Gold Forward sales 5,333 990 26,667 990 Total Committed 5,333 26,667 Puts � bought 2,833 850 14,167 850 Heemskirk Consolidated AU Dollar Gold Puts � bought 8,000 900 4,000 900 - - - - - -

Intrepid Mines

AU Dollar Gold

Forward sales 22,448 626 - - - - - - - -

Total Committed 22,448 - - - - - - - -

Kingsgate Consolidated Total Committed - - - - - - - - - -

Lihir Gold Forward Sales 15,488 600 61,356 600 56,596 600 13,184 600 Commitments 15,488 - 61,356 - 56,596 - 13,184 - - -

Lion Selection Trust AU Dollar Gold - - - - - - - - - -Commitments - - - - - - - - - -Puts - bought 13,200 664 26,700 684 - - - - - -

Newcrest Mining Commitments Puts - bought 500,000 800 500,000 800 500,000 800 500,000 800

Continued overleaf


Q2 08 breakdown by maturity, Australia (oz)

2008 $/oz 2009 $/oz 2010 $/oz 2011 $/oz 2012+ $/oz

Norseman Gold

Commitments - - - - - - - - - -

North Queensland Metals Commitments - - - - - - - - - -Puts - bought 21,000 850

Norton Goldfields AU Dollar Gold Forward sales 70,000 875 70,000 875 70,000 875 70,000 875Total Committed 70,000 70,000 70,000 70,000Puts - bought 60,000 760 60,000 760 - - - -

OceanaGold NZ Dollar Gold Forward sales 113,712 773 106,236 773 99,840 773 - - - -Calls - sold - - - - 104,024 1,062 - - - -Total Committed 113,712 106,236 203,864 Puts - bought 40,893 1,000 85,416 1,000 82,080 1,000 - - - -

Ok Tedi US Dollar Gold Forward sales 16,400 748 16,400 775 16,400 803Total Committed 16,400 16,400 16,400

Oxiana Gold Commitments - - - - - - - - - -Puts - bought 31,350 370 29,500 370 - - - - - -

Pan Australian Resources AU Dollar Gold Forward sales - - 14,000 749 14,000 775 14,000 802 14,000 829Total Committed 14,000 14,000 14,000 14,000Puts - bought 10,283 700 20,566 700 20,566 700 20,566 700 41,134 700

Resolute AU Dollar Gold Forward sales 4,310 732 77,361 726 108,061 726 27,015 726Puts - bought 55,000 - - 52,800 1,000 57,200 1,000US Dollar Gold Forward sales 71,178 530 37,065 522 - - - -Puts - bought 30,000 446 - - - - - -Total Committed 75,488 114,426 - 108,061 - 27,015 -

Sino Mining Fixed forwards Total Committed Puts - bought 37,092 400 74,178 400 - - - - - -

St. Barbara Commitments - - - - - - - - - -Puts - bought 121,090 700 100,910 700 Puts - bought 93,333 800 93,333 800 93,334 800 Puts - bought 163,911 700 942,489

Tanami Gold

Commitments - - - - - - - - - -

Troy Resources

Commitments - - - - - - - - - -

COMMITTED BREAKDOWN Total Forwards 181,904 501,182 456,410 288,004 138,323Total Calls sold - 104,024 Total Calls bought - 38,050 12,683 - -Total Other Products - - - - -Total Committed 181,904 463,132 547,751 288,004 138,323Total Puts bought 143,651 1,307,653 1,036,063 1,000,699 748,949Total Puts sold - - - - -



Q2 08 breakdown by maturity, Eurasia (oz)

2008 $/oz 2009 $/oz 2010 $/oz 2011 $/oz 2012+ $/oz

Avocet Mining Calls Sold - - - - 120,000 755 70,000 755 - -Total Committed 120,000 70,000 Puts - bought 60,000 600 120,000 600 120,000 600 70,000 600 - -

Boliden Forward sales 48,600 753 102,000 702 105,850 961 - - - -Total Committed 48,600 102,000 105,850

Crew Gold

Commitments - - - - - - - - - -

Highland Gold

Commitments - - - - - - - - - -

Hochschild

Commitments - - - - - - - - - -

KazakhGold

Commitments - - - - - - - - - -

Kazakhmys

Commitments - - - - - - - - - -

Orsu Metals Flat Forward 43,500 574 68,000 574 71,000 574 61,000 574 82,000 574Total Commitments 43,500 68,000 71,000 61,000 82,000 Oxus Gold

Commitments - - - - - - - - - -

Peter Hambro Mining

Commitments - - - - - - - - - -

Polymetal

Commitments - - - - - - - - - -

Polyus Gold

Commitments - - - - - - - - - -

Rio Tinto

Commitments - - - - - - - - - -

Serabi Mining

Commitments - - - - - - - - - -

Wega Mining Flat Forward 56,000 962 56,000 962 56,000 962 56,000 962Total Commitments 56,000 56,000 56,000 56,000

Xstrata US Dollar Gold Calls sold 70,875 594 - - - - - -Total 70,875 - 150,000 - - - - - - -Puts - bought 63,000 475 150,000 495 - - - - - AU Denominated stated in US$ Forward sales 30,850 648 87,800 655 - - - - -Forward Sales 11,250 631 Total 42,100 87,800 Total Committed 112,975 237,800 Zijin Mining Yuan Gold ($) C it t

COMMITTED BREAKDOWN Total Forwards 134,200 313,800 232,850 117,000 138,000Total Calls sold 70,875 150,000 120,000 70,000 Total Calls bought Total Other Products Total Committed 205,075 463,800 352,850 187,000 138,000Total Puts bought 123,000 270,000 120,000 70,000 Total Puts sold - - - - -



Disclaimer and copyright The information and opinions in this report were prepared by Virtual Metals Research and Consulting, a subsidiary of VM Group, and Haliburton Mineral Services (hereafter �Virtual Metals/Haliburton Mineral Services�). Virtual Metals/Haliburton Mineral Services have made all reasonable efforts to ensure that all information provided in this report is accurate and reliable at the time of inclusion, however, there may be inadvertent and occasional errors and lack of accuracy or correctness, for which Virtual Metals/Haliburton Mineral Services cannot be held responsible. Virtual Metals/Haliburton Mineral Services and its employees have no obligation to inform the reader when opinions and information contained in this report change.

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About the report and methodology About the report Dehedging has been an important positive feature of the gold market over the last six years. Global gold mining companies, which had sold forward more than 100 Moz of their output by 2001, have steadily reduced that to less than 30 Moz today.

The VM Group and Haliburton Mineral Services, whose collective experience in hedging research goes back almost twenty years, have tracked these developments in detail since 2003. We aim to be both comprehensive � the report contains full details of the hedging programmes of 113 companies� and insightful into the trends in global gold hedging.

The gold bull market has reminded participants of gold�s unique status among commodities as a financial asset, and the Fortis Hedging and Financial Gold report will also provide detailed analysis of other financial gold transactions, such as central bank activity, investment, speculation and lending.

The results and details of this quarterly research will be made available to all interested parties on a complimentary basis in the hope that our readers will not only enjoy the read but will benefit from our shared gathering of intelligence. We will also make the data available in Microsoft Excel format.

Methodology There are two distinct measures of gold hedge books used in this document, committed ounces and delta-adjusted. Committed Ounces is a simple summation of all mining company hedge commitments, which include forwards and call options (but not put options, which are not a commitment). For example, if a mining company has sold 200,000 ounces of call options, bought 100,000 oz of put options, and sold 150,000 ounces of forward then their commitments total 350,000 ounces. This is a good guide to the extent and size of company and global hedging.

One of the important features of gold hedging, however, is its impact on the spot market. Bullion banks hedge their transactions with mining companies by using borrowed central bank gold which is sold into the spot market.

The market impact of a forward sale is straightforwardly the number of ounces involved, i.e. a 100,000 forward sale will see 100,000 oz gold sold into the spot market.

The market impact of options, however depend on their likelihood of being exercised, which in turn depends on the gold price (and other factors such as time to maturity, price volatility, and interest and lease rates). The delta-adjustment essentially adjusts for the probability an option will be exercised.

To understand the delta concept in a practical example consider the following: A mining company at December 31, 2007 sells 100,000 ounces of one year call option exercisable on December 31, 2008 at $900. This gives the buyer the right (but not the obligation) to purchase 100,000 oz of gold from the mining company at $900/oz at year end 2008. Given that the price of gold was only $836/oz when the contract was sold the probability of its being exercised was certainly less than one. In fact based on volatility, time to expiry etc, the delta-adjustment suggests there is a 47% chance of exercise. Thus our delta-adjusted total would include 47,000 oz of calls. Now carry the example forward to say June 30, 2008 and hypothesize that gold is trading at $750. The time to expiry is now only six months and the market price is well below the option exercise price. The calculated delta is 14%, and so our delta-adjusted total would include just 14,000 oz of calls.


About VM Group and Haliburton Mineral Services VM Group 85 Albany Street London NW1 4BT

Tel: +44 20 7487 3600 Fax: +44 (0) 870 051 2261

VM Group is a commodities research consultancy. The VM Group, which through its subsidiary Virtual Metals covers precious and base metals, comprises a uniquely skilled team, highly experienced in the analysis of the fundamentals of commodities and their geopolitical impact and contexts.

VM Group work excels in macro-economic analysis, the generation of supply and demand scenarios, costs analysis, derivative research and price forecasting. Confidentiality, experience and independence are key elements of such advisory roles. Our aim is to assist those in need of external expertise, as well as those who wish to supplement their own in-house resources. With our extensive international contacts, we are able to broaden our services through links with experienced associates in related fields worldwide.

To see further how we can meet your research and consulting requirements, please email [email protected] or call or fax on the numbers above.

Haliburton Mineral Services 46 Hemford Crescent Toronto, Ontario Canada M3B 2S5 Tel: +1 416 447 7524 Fax: +1 416 447 7750

Founded in 2002 Haliburton Mineral Services is a private mining research and advisory business based in Toronto, Canada. The company�s President, Ted Reeve, has a background as a mining analyst and has published quarterly gold producer hedge research since 1990.


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