Forbes article features gold/commodities bull


By Barry FitzGerald and David McKay
July 11, 2000

South Africa's AngloGold is being tipped as the most
likely suitor for Normandy Mining, the Australian gold
miner that has recently seen its share price strike a
five-month high on takeover speculation.

Despite suggestions that AngloGold is not so hot on
Normandy and a recent fallback in Normandy's price,
there is a growing sense that the world's largest gold
producer is ready to dip into its pocket again as it
tightens its grip on the world's gold production.
AngloGold produces 5.5 million ounces of gold a year,
of which 2.1 million is derived from shallow open pit
operations, similar to those operated by Normandy.

Anglogold has declined to comment on what it terms
market speculation. But investors should remember that
it was similarly tight-lipped before its $546 million
bid for another Australian miner, Acacia Resources, at
the end of last year.

While Anglogold would cement its position as the
world's largest gold producer by taking control of
Normandy, a number of dissenting voices believe the
deal would be ill-advised.

Firstly, analysts observe that Normandy does not have
mines with long operating lives. In fact, of Normandy's
15 producing assets, only a couple have more than a 10-
year life. Secondly, two of Normandy's best growth
assets are located in Ghana and Greece. "Do you want
more exposure to Africa as well as Greece?" asks one
analyst. Another reservation is that Normandy has many
operational problems.

At $A1.8 billion, Normandy would represent significant
expenditure for AngloGold only months after buying into
Randgold's Morila project in Mali and buying half of
the Geita project with Ashanti Goldfields. These deals
cost the group $470 million which includes capital to
be spent on the Geita project.

The reasons for buying Normandy

Normandy's shares hit $A1.05 on heavy volumes last
week, continuing the recovery from the low of $A0.82
cents seen earlier in the year. A number of factors are
at play, but the standout issue is the takeover talk
surrounding the stock. Investors have taken up
positions in the expectation that Normandy would soon
get caught up in the gold industry's global

Other analysts believe Normandy would be a worthwhile
catch. Annual production is now running at about 2
million ounces and profits are strong. A good part of
the strong profitability -- between $A110 million and
$A130 million is the consensus for the June year -- is
a result of the group's extensive hedging operations.

The extent of that hedging would be an issue for the
likes of AngloGold and could be expected to be wound
back on either group seizing control of Normandy. The
starting point in any bid for Normandy will be the fate
of the 11 percent stake held by Julian Robertson's
Tiger hedge fund.

The fund is in the process of being closed, with the
Normandy interest comprising one of the last strategic
holdings to be sold off. Recent sales of similar
strategic stakes by Tiger in United Asset Management
Corp. and USAirways have triggered takeover bids for
both groups.

Whether that happens in the case of Normandy remains to
be seen. What is known is that Normandy itself has made
itself more attractive for a takeover by tidying its
corporate structure.

It recently moved to full ownership of gold mining
assets in the Yandal region of western Australia and is
in the process of selling its magnesium metal and
industrial minerals interests. The magnesium metal sale
is by way of a free distribution to shareholders of
shares in Queensland Metals Corp. (QMC). Based on QMC's
current share price, the distribution is worth about 10
Australian cents per Normandy share.

An announcement on the sale of the $A150 million
industrial minerals business is also expected soon.
Despite the simplification of the corporate structure,
analysts' opinion on the value of Normandy continues to
vary from as low as $A0.60 cents to more than $A1.35 a