Newmont increases offer for Normandy

10:28p ET Tuesday, December 4, 2001

Dear Friend of GATA and Gold:

AngloGold Chairman and CEO Bobby Godsell has told a
GATA supporter that his company is reducing its gold
hedges and that its acquisition target in Australia,
Normandy Mining, is quot;substantially overhedged.quot;

Further, Godsell sees the controversial proposal by
some gold producers to spend $200 million promoting
gold jewelry as also promoting the purchase of gold for
investment purposes.

Godsell commented in e-mail correspondence with the
GATA supporter, an Australian shareholder in Normandy,
as AngloGold and the Newmont Mining/Franco-Nevada
combine duel for that company.

The AngloGold CEO gave permission for publication of
his comments here.

Apart from indicating a gradual turn away from hedging,
Godsell's comments may interest GATA supporters for his
belief in gold as money and as an investment, and for
his courtesy and conscientiousness. Indeed, I
frequently hear that Godsell has personally answered
inquiries about AngloGold policy from ordinary
shareholders and others he has never met or heard of.
He always has been cordial and helpful to GATA, even as
he is often reviled on Internet bulletin boards over
AngloGold's hedging practices.

One might construe Godsell's comments as an effort to
meet his company's critics halfway.

Here's what Godsell wrote, beginning with his
explanation of his recently published comment that
gold's price seems to have been disconnected from
international disasters and that gold may no longer be
an investment quot;safe havenquot; from such events:

quot;1. On 'safe haven': Clearly I got this very wrong. I
have always believed and will continue always to
believe that gold is money, that any wise person should
keep some of his wealth in gold, and that gold is the
only asset that is no one else's liability.

quot;I clearly expressed myself very badly. The interviewer
asked me if I was disappointed in the performance of
gold after the terrible events in the United States on
11 September. I said that the very brief and modest
rise of the gold price after these events suggested to
me that gold was now firmly disaster-delinked. I also
said and believe that this was no bad thing.

quot;For I want a good gold price in a good world. I would
not lightly exchange the world of the high gold prices
of the 1980s, which came with double-digit inflation,
very high unemployment (8 percent in the United States,
as I recall), very high oil prices, and a world
recession for what we have now. We need to build a
better gold price in the context of prosperity and not
misery. How this gets turned into the 'safe haven'
quote I just do not know. This company sells its gold
in 10-tola bars, bars designed to fit into a waistcoat
pocket. What could be more 'safe haven' than that?

quot;2. Hedging. We continue to believe in responsible
levels of hedging derived from responsible levels of
new mine production. Part (probably the largest part)
of the weak gold price comes from producer
overproduction. New mine ounces have risen by a
staggering 54 percent in the last 15 years. In contrast
we have sold or closed 4 million annual ounces of
production over the last three years.

quot;Our company has followed a policy of hedging up to
five years of production. We're at about 45 percent
now, but for a variety of market-related reasons we
want to be less hedged. We are running down our hedge
currently.

quot;We believe Normandy is substantially overhedged. In
contrast to our 45 percent of five years, they are
closer to 85 percent. Whereas we have some 20 percent
of our reserves covered, they have one third.

quot;3. In comparing Newmont and AngloGold, please be aware
that we currently have as many unhedged production
ounces as Newmont -- indeed, a bit more -- and likewise
with reserves. In considering the combined effects of
Newmont/Normandy vs. AngloGold/Normandy, both companies
are committed to reducing hedging levels. Both have
indicated that they could not do so immediately and
would have to unwind positions over time.

quot;We have been in this hedging business for more than 13
years and are confident that we can reduce hedging
significantly over time. We will continue to keep a
proportion of our production hedged, but will not put
forward more gold, either in the form of new mine
ounces or ounces sold forward, than we think the market
can profitably absorb.

quot;4. Lastly, on the jewelry campaign, this is an
interesting debate, but not a point of difference
between Newmont and AngloGold, unless you have
information on Newmont I am not aware of. Newmont is
absolutely as committed to the McKinsey jewelry study
as is AngloGold. Indeed, they have played a very
prominent role in encouraging U.S. producers to support
this, and paid their share of the costs of the study
(as did we). Neither of us (at least not AngloGold) is
committed to a levy of $4 per ounce for jewelry
promotion.

quot;For AngloGold, we'll support work in gold jewelry in
the West only to the extent that it creates a 'value
jewelry' industry such as exists in the East, where
gold jewelry is both sold and repurchased for its gold
content. We're certainly a long way from signing any
$4-an-ounce cheques.

quot;Currently we are reviewing World Gold Council
activities, where, incidentally, Newmont CEO Wayne
Murdy from Newmont and I serve constructively together
as chairman and vice chairman. We have already swung
more resources into investment gold. There is clearly
an urgent need to rebuild investment gold channels of
distribution in the West. In the East the very same
gold shops that sell gold jewelry (and religious
objects) also sell investment gold in the form of coins
and bars.

quot;Newmont, AngloGold, and other major producers agreed
last year to raise the World Gold Council subscription
from $1 to $2. Through this body (which we are
critically examining now) we're seeking to find a way
for gold producers to co-operate in the interests of
all of their shareholders.

quot;Therefore, if jewelry promotion is a major concern,
please direct the same questions to Newmont as you do
to us. My own response is that high caratage (22- and
24-carat jewelry) sold at reasonable margins, where the
gold content is apparent and where the seller
guarantees the right to repurchase at the same discount
to the spot gold price (normally 3 percent) as the
premium (this is the Eastern market model) is one of
the ways to move our product, and can only enhance
investment gold and not diminish it.

quot;Anyway, both companies have similar levels of
commitment to both the new proposed programme
(McKinsey) and the World Gold Council.quot;

Yes, very interesting and thoughtful observations
by Bobby Godsell.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.