AngloGold Ashanti, as it conducts business today, was formed on April 26, 2004 following the Business Combinationbusiness combination of
AngloGold Limited (AngloGold) with Ashanti Goldfields Company Limited (Ashanti). AngloGold, formerly Vaal Reefs
Exploration and Mining Company Limited, which was incorporated in South Africa in 1944.Ghana on
August 19, 1974.
AngloGold Ashanti, headquartered in Johannesburg, South Africa, is a global gold company with a portfolio of long-life,
relatively low-cost assets and differing orebody types in key gold producing regions. The company’s 2221 operations
comprising
open-pit and underground mines and surface reclamationmetallurgical plants are located in ten countries (Argentina,
Australia, Brazil,
Ghana, Guinea, Mali, Namibia, South Africa, Tanzania and the United States of America), and are
supported by extensive
exploration activities. The combined proven and probable ore reservesOre Reserves of the group amounted to 79
66.0 million ounces as at
December 31, 2004.
2006.
AngloGold Ashanti is listed on the following securities exchanges under the respective trading symbols:
AngloGold Ashanti Limited (formerly AngloGold Limited) (Registration number 1944/017354/06) was incorporated in the
Republic of South Africa in 1944 under the name of Vaal Reefs Exploration and Mining Company Limited (Vaal Reefs) and
operates under
the South African Companies Act, 61 of 1973, as amended. Its principal executive office is located at 11 Diagonal
76 Jeppe Street,
Newton, Johannesburg, 2001 (P.O. Box 62117, Marshalltown, 2107) South Africa (Telephone +27
+27 11 637-6000). AngloGold Ashanti’s
US office is locatedoffices are at 509 Madison Avenue,the offices of AngloGold Ashanti North America Incorporated,
7400 East Orchard Road, Suite 1914, New York, NY 10022, USA (Tel. +1 212 750 5626).
350, Greenwood Village, CO 80111.
AngloGold was formed in June 1998 through the consolidation of the gold interests of Anglo American Corporation of
South
Africa Limited (AAC) and its associated companies into a single, focused, independent, global gold company. Vaal
Reefs,
Exploration and Mining Company Limited (Vaal Reefs), the vehicle for the consolidation, changed its name to AngloGold
Limited and increased its authorized share
capital, effective March 30, 1998.
AngloGold then acquired, in share-for-share exchanges in terms of South African schemes of arrangement and following
shareholder approval, all of the issued share capital of the following participating companies:
(collectively the “participating companies”). A total of 51,038,968 ordinary shares were issued to AAC and
66,010,118 ordinary
shares to other shareholders in exchange for their shares in these companies.
In addition, AngloGold acquired in private transactions with AAC and minority shareholders certain share interests in gold
mining companies, including:
46
Cripple Creek & VictorWest Wits – Summary of metallurgical operations
Mponeng Savuka
Gold plants
Capacity (000 tonnes/month)
160
280
-
crushed ore production
1,512
-
total ore production
1,512
- solutionprocessed
2,235
Technology
crushers,ROM mills (3),
valley heap-leach,cyanide,
gold adsorption by carbon in solution,CIL,
elution,
electro-winning
crushers,
tube mills,
ball mills,
cyanide,
Pumpcell
70
Cripple Creek & Victor (attributable 67 percent with 100 percent interest in production)
Description: AngloGold Ashanti holds a 67 percent stake in CC&V, with the remaining 33 percent held by Golden Cycle Gold
Corporation (Golden Cycle). AngloGold Ashanti is the manager of the operation and is entitled to receive 100 percent of the
cash flow from the operation until loans extended to the joint venture are repaid. CC&V is a low-cost, low-grade open-pit
operation.
Location: CC&V is located south-west of Colorado Springs in the state of Colorado in the USA.
Geology: The Cripple Creek District is centered on a Tertiary-aged diatreme-intrusive complex, approximately circular in shape
covering 18.4 square kilometers, surrounded by older Precambrian rocks. The Precambrian rocks consist of biotite gneiss and
granodiorite which occur within a larger quartz monzonite intrusion which is in turn intruded by granite. The intersection of
these four units and major faults formed an area of weakness which subsequently facilitated the formation of the Tertiary
complex. The Tertiary intrusives range from syenite to phonolite/ phonotephrite to lamprophyre. Fault structures are generally
near vertical and strike north-north-west to north-east. These structures are commonly intruded by phonolite dykes and appear
to have acted as primary conduits for the mineralizing solutions. The north-east structures are more subtle, but appear to
control the locations of higher-grade pods of mineraliza tion which occur at their intersection with the north-north-west system.
High-grade gold mineralization is primarily associated with potassic and pyritic alteration and occurs adjacent to the major
structural zones. The broader zones of disseminated mineralization occur primarily as halos around the stronger alteration in
permeable wall rocks. The average depth of oxidation is 120 meters and is best developed along major structural zones.
Individual orebodies can be tabular, irregular or massive. Individual gold particles are generally less than 20 microns in size
and occur as native gold with pyrite or hydrous iron and manganese oxides and as gold-silver tellurides, often in quartz-fluorite
veins. Silver is present but is economically unimportant.
Operating and production data for Cripple Creek & VictorWest Wits operations
2004 20032002Mponeng
TauTona
Savuka
2006
Pay limit (oz/t)
0.01 0.01 0.010.23
0.53
0.31
Pay limit (g/t)
0.34 0.34 0.347.74
18.25
10.75
Recovered grade (oz/t)
0.0180.290
0.0200.297
0.0240.224
Recovered grade (g/t)
0.619.93
0.6710.18
0.827.68
Gold production (000 oz)
329596
283474
22589
Total cash costs ($/oz)
(1)
220
199
187238 270 337
Total production costs ($/oz)
(1)
365
389
391374 411 359
Capital expenditure ($ million)
1648
2470
662
Employees
(2)
313 326 3144,760
4,164
975
Outside contractors
(2)
524
1,002
65
2005
Pay limit (oz/t)
0.34
0.72
0.45
Pay limit (g/t)
11.53
24.43
15.18
Recovered grade (oz/t)
0.267
0.281
0.198
Recovered grade (g/t)
9.15
9.62
6.80
Gold production (000 oz)
512
502
126
Total cash costs ($/oz)
(1)
279 256 430
Total production costs ($/oz)
(1)
383 388 524
Capital expenditure ($ million)
47
74 121 258
6
Employees
(2)
4,897 4,459 2,178
Outside contractors
(2)
677 996 147
2004
Pay limit (oz/t)
0.41
0.73
0.44
Pay limit (g/t)
13.71
24.47
14.89
Recovered grade (oz/t)
0.237
0.317
0.181
Recovered grade (g/t)
8.14
10.88
6.19
Gold production (000 oz)
438
568
158
Total cash costs ($/oz)
(1)
322 245 455
Total production costs ($/oz)
(1)
393 319 639
Capital expenditure ($ million)
62
65
8
Employees
(2)
5,164 4,673 3,001
Outside contractors
(2)
712 825 228
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.:
Operatingresults – Total cash costs and total production costs”.
(2)
Average for the year.
47
Operating performanceperformance:
Mponeng:: Production During 2006, yield rose to 9.93g/t from 9.15g/t in 2005 (2004: 8.14g/t). As a result of the higher volumes and
improved yield, gold production increased by 16 percent from 283,000512,000 ounces in 20032005 to 329,000596,000 ounces in 2004 due2006
(2004: 438,000 ounces). Consequently, total cash costs declined by 15 percent to $238 per ounce from $279 per ounce in
improved mine and crusher performance, which resulted in more ounces placed2005 (2004: $322 per ounce). In local currency terms, total cash costs were at R51,666 per kilogram, 9 percent down on
2005 total cash costs of R57,084 per kilogram as a result of the higher volumes and improved leach pad performance. Theyield aided by the benefit of
mine and crusher reached and exceeded design capacity duringthe cost savings initiatives undertaken in the beginning of the year. This was despiteCapital expenditure increased marginally from
$47 million in 2005 to $48 million in 2006 (2004: $62 million).
TauTona: During 2006, production declined by 6 percent to 474,000 ounces from 502,000 ounces produced in 2005, due
to planned lower volumes mined and seismicity concerns in the fact that the gyratory crusher
lost 10 operating days in December for major repairs.
first and fourth quarters of 2006 (2004: 568,000 ounces).
Total cash costs rose by 5 percent to $270 per ounce from $256 per ounce in 2005 (2004: $245 per ounce). In rand terms,
total cash costs increased by 12 percent to R58,631 per kilogram. Capital expenditure at $70 million was 5 percent lower
than the spend in 2005 of $74 million (2004: $65 million).
Savuka: While it had been reported in 2005 that Savuka had entered an accelerated closure mode, the strength of the
gold price in 2006 instead resulted in the implementation of a restructuring plan and the operation’s life has been extended
at a lower production rate.
Management of Savuka is now included under that of the neighboring Mponeng mine. Production for 2006 totaled
89,000 ounces which, although 29 percent less than the 126,000 ounces produced in 2005, was 535 percent more than
had been planned (2004: 158,000). The overall grade for the year increased from 6.80g/t achieved in 2005 to 7.68g/t
achieved in 2006 (2004: 6.19g/t).
In local currency, total cash costs decreased 16 percent from R87,200 per kilogram in 2005, to R73,055 per kilogram in
2006, while in dollar terms, cash costs were down 22 percent to $337 per ounce from $430 per ounce in 2005
(2004: $455 per ounce). Capital expenditure for 2006 was minimal at $2 million compared with 2005’s capital expenditure
of $6 million (2004: $8 million).
Growth prospects:
Mponeng VCR below 120 project: This project consists of four parallel declines sunk from the 120 level to gain access
to the VCR reef on levels 123 and 126. The declines will be equipped with a conveyor belt, monorail and chairlift to service
the new mining areas. The project, from which production is expected to commence in 2013, is expected to produce
2.5 million ounces of gold over a period of ten years, at a capital cost of $252 million, and is expected to extend the life of
the mine by approximately eight years. Construction will begin in early 2007.
TauTona CLR below 120 level project: The CLR reserve block below 120 level is being accessed via a twin decline
system into its geographical centre, down to 128 level. The project, from which production is expected to commence in
2008, is expected to produce 2.6 million ounces of gold over a period of nine years (2009 to 2017), at a capital cost of
$168 million. Of this, $56 million has been spent to date.
TauTona CLR shaft pillar extraction project: This project allows for stoping operations up to the infrastructural zone of
influence. The project, from which production commenced in 2004, is expected to $220 per ounce (2003: $199 per ounce)produce 534,000 ounces of gold over a
period of six years (2004 to 2009), dueat a capital cost of $45 million (converted at the 2005 closing exchange rate), most of
which has been committed.
VCR pillar project: This project aims to higher fuelaccess the VCR pillar area situated outside the zone of influence (top and mine maintenance (hydraulic
shovel and haul truck) costs. Phase 4C eastern block). The project, from which production commenced in 2005, is expected to produce 200,000 ounces of gold
over a period of eight years (2005 to 2012), at a capital cost of $19 million (at the 2005 closing exchange rate). Of this,
$11 million has been spent to date.
48
ARGENTINA
AngloGold Ashanti has a single operation in Argentina, the Cerro Vanguardia mine. This operation was acquired as part
of the leach pad construction Minorco transaction effective March 31, 1999, at which time AngloGold held a 46.25 percent stake. AngloGold
Ashanti has a 92.5 percent interest in the Cerro
Vanguardia mine following the acquisition of an
additional 46.25 percent in July 2002, while the Santa
Cruz Province has a 7.5 percent interest.
Description: Cerro Vanguardia consists of multiple
small open-pits with high stripping ratios. The
orebodies comprise a series of hydrothermal vein
deposits containing vast quantities of silver, which is
produced as a by-product.
Throughput has increased steadily since the first gold
was completedpoured in September 1998, from an original
design capability of 1,800 tpd to the present level of
2,700 tpd. Cerro Vanguardia’s lease area is 514 square
kilometers.
Location: The Cerro Vanguardia operation is located
to the north-west of Puerto San Julian in the Province
of Santa Cruz, Argentina. The company owns the
right to exploit the deposit for 40 years based on the
Usufruct Agreement signed in December 1996. The
operation, which was constructed at a total cost of
$270 million, was commissioned in the fourth quarter
of 2004, bringing1998.
Geology: The oldest rocks in this part of Patagonia
are metamorphics of the Precambrian-Cambrian age.
These are overlain by Permian and Triassic
continental clastic rocks which have been faulted into
a series of horsts and grabens and are associated
with both limited basaltic sills and dykes and with
calc-alkaline granite and granodiorite intrusions.
Thick andesite flows of Lower Jurassic age occur
above these sedimentary units. A large volume of
rhyolitic ignimbrites was emplaced during the Middle
and Upper Jurassic age over an area of
approximately 100,000 square kilometers. These
volcanic rocks include the Chon Aike formation
ignimbrite units that host the gold bearing veins at
Cerro Vanguardia. Post-mineral units include
Cretaceous and Tertiary rocks of both marine and
continental origin, the Quaternary La Avenida
formation, the Patagonia gravel and the overlying
La Angelita basalt flows. These flows do not cover the area of the Cerro Vanguardia veins.
Gold and silver mineralization at Cerro Vanguardia occurs within a vertical range of about 150 to 200 meters in a series of
conclusionnarrow, banded quartz veins that occupy structures within the expansion project, while capital expenditure at $16 million fell by 33 percent when comparedChon Aike ignimbrites. These veins form a typical structural
pattern related to major north-south (Concepcion) and east-west (Vanguardia) shears. Two sets of veins have formed in
response to this shearing - one set strikes about N40W and generally dips 65 to 90 degrees to the previous
year.
Production at CC&V improved towardseast; while the year-endother set
strikes about N75W and the veins dip 60 to reach 283,000 ounces for 2003, compared with 225,000 ounces80 degrees to the south.
49
The veins are typical of epithermal, low-temperature, adularia-sericite character and consist primarily of quartz in several
2002. Leach solution chemistry problemsforms: as massive quartz, banded chalcedonic quartz, and lower irrigation flows (caused by drought) improved during the second half of
2003. Total cash costs rose to $199 per ounce (2002: $187 per ounce) due to higher reagent consumption to correct leach
pad chemistry. Processing facility and haulage fleet production achieved budgeted levels by year-end, while Phase 4B of the
leach pad construction was completed ahead of schedule with stacking having commencedquartz-cemented breccias. Dark bands in the second quarterquartz are due to
finely disseminated pyrite, now oxidized to limonite. The veins show sharp contacts with the surrounding ignimbrite which
hosts narrow stockwork zones that are weakly mineralized and appear to have been cut by a sequence of 2003.
north-east-trending faults that have southerly movement with no appreciable lateral displacement.71Cerro Vanguardia – Summary of metallurgical operations
Growth prospects: The recently completed expansion project has increased average annual gold production by 40 percent
and extended the life-of-mine from 2008 to at least 2013, thereby yielding an additional 2.8 million ounces of production over
the life-of-mine.
Outlook: Gold production in 2005 is forecast to mirror 2004 levels at about 330,000 ounces, at expected average total cash
costs of $219 per ounce. Decreased levels of capital expenditure are planned at $10 million for 2005.
• Jerritt Canyon Joint Venture
plants
Description: AngloGold Ashanti (Nevada) Corp, formerly known as AngloGold (Jerritt Canyon) Corp., and its partner Meridian
Capacity (000 tonnes/month)
82
Technology
Crushers,
Gold, sold its stakescrubber,
ball mill,
CCD,
leach in the Jerritt Canyon operation to Queenstake Resources with effect from June 30, 2003. Under thiscyanide,
agreement, Queenstake paid the Jerritt Canyon Joint Venture partners $1.5 million in cash and 32 million shares issued by aCIL,
subsidiary, Queenstake Resources Limited, with $6 million in deferred payments and $4 million in future royalties. Queenstakeelution,
accepted full closure and rehabilitation and other liabilities. Ore production was drawn from four underground mines, Murray,zinc-precipitation,
SSX, Smith and MCE.
In 2004, Queenstake approached the Jerritt Canyon joint venture partners about the possibility of monetizing all or the majority
of the $6 million in deferred payments and $4 million in future royalty payments. On August 25, 2004 and based on an
agreement reached between the parties, AngloGold Ashanti was paid approximately $7 million for its portion of the deferred
payments and future royalties, thereby monetizing all outstanding obligations, except for minor potential royalties interest that
AngloGold Ashanti retained.
Location: The Jerritt Canyon district is located in the north central Independence Mountains, north-west of Elko, Nevada in the
USA.electro-winning
Operating and production data for Jerritt Canyon operationsCerro Vanguardia
20042006 20032005
(1)
20022004
Pay limit (oz/t) (open-pit)
–
Depleted
Depleted0.13 0.12 0.12
Pay limit (g/t) (open-pit)
–
Depleted
Depleted
Pay limit (oz/t) (underground) average
–
0.22
0.22
Pay limit (g/t) (underground) average
–
7.55
7.554.56 4.02 4.05
Recovered grade (oz/t) milled
–0.213
0.2090.225
0.2310.222
Recovered grade (g/t) milled
–7.29
7.157.70
7.917.60
Gold production (000 oz) – 100%100 percent
–232
153228
338229
Gold production (000 oz) -70%92.50 percent
–215
107211
237211
Total cash costs ($/oz)
(2)(1)
223
– 270 249171
156
Total production costs ($/oz)
(2)(1)
372
– 364 346270
284
Capital expenditure ($ million) – 100%100 percent
–19
415
1113
Capital expenditure ($ million) – 70%92.50 percent
–18
214
812
Employees
(3)(2)
– 291 291623 487 389
Outside contractors
(3)(2)
283
– 4 6459
402
(1)
The operation was sold with effect from June 30, 2003.
(2)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(3)(2)
Average for the year.
Operating performanceperformance: At Cerro Vanguardia attributable gold production in 2006 increased by 2 percent to
215,000 ounces from 211,000 ounce produced in 2005 (2004: 211,000 ounces). While the yield varied over the course of
the year as anticipated, the average grade in 2006 was 7.29g/t compared with an average grade of 7.7g/t in 2005
(2004: 7.60g/t). Ore throughput increased 8 percent to 1 million tonnes in 2006. Total cash costs rose by 30 percent to
$223 per ounce from $171 per ounce in 2005 (2004: $156 per ounce), mainly as a result of higher local inflation and outlook:
increases in both commodity prices and mine maintenance costs. The operationhigher mine maintenance costs were associated
with a programme undertaken in 2006 to improve the availability of mine equipment.
Capital expenditure for the year amounted to $18 million, 29 percent higher than the $14 million spent in 2005
(2004: $12 million). The increase in expenditure was soldmainly due to the purchase of new and replacement mine equipment
and expenditures related to the heap leaching project currently underway.
Growth prospects: During 2006, Cerro Vanguardia began an accelerated four-year brownfields exploration programme,
the focus of which is shallow, high grade mineral resources. Results have so far been encouraging, with effect from June 30, 2003.39,000 meters of
reverse circulation drilling and 14,000 meters of diamond drilling completed in 2006. Since 1998, Cerro Vanguardia has
been stockpiling low-grade material with the intention of treating it through an industrial-size heap-leach operation. As of
December 2006, 9.5 million tonnes of this material had been stockpiled and a study to confirm the viability of the heap-
leach pad was also initiated in 2006 and is ongoing.
7250
ZIMBABWEAUSTRALIA
Following the Business Combination with Ashanti which was effective on April 26, 2004, the operation in Zimbabwe, forms part
of the AngloGold Ashanti group. This operation was sold effective September 1, 2004has two mines in Australia, Sunrise Dam and thereforeBoddington, both located in the effective reportingwestern part of the
period for this formercountry. The Sunrise Dam mine is 100 percent owned by AngloGold Ashanti, operationwhile the Boddington project, which is the four months from May 2004 to August 2004.
currently under construction and in which AngloGold Ashanti holds 33.33 percent equity, is a joint venture with Newmont
Mining Corporation.
Australia – Summary of metallurgical operations
Sunrise Dam
Boddington
Gold plants
Under construction
Capacity (000 tonnes/month)
300
3,000
Technology
crushers,
ball mill,
gravity concentrate,
CIL,
elution,
electro-winning
crushers,
HBDI, ball mill, floatation gravity
concentrate, CIL, elution, electro-winning
• Sunrise Dam
Description: AngloGold Ashanti hadSunrise Dam comprises a 100 percent interestlarge open-pit and an underground project. Mining is carried out by contractors
and ore is treated in the Freda-Rebecca underground mine, which it sold to South
Africa-based Mwana Africa Holdings for a consideration of $2 million with effect from September 1, 2004.
conventional gravity and leach process plant.
Location: TheSunrise Dam gold mine lies some 220 kilometers north-northeast of Kalgoorlie and 55 kilometers south of
Laverton in Western Australia.
Geology: Gold ore at Sunrise Dam is located at Bindura, north of Harare, in Zimbabwe.structurally and lithologically controlled within gently dipping high strain shear zones
(for example, Sunrise Shear) and steeply dipping brittleductile low strain shear zones (for example, Western Shear). Host
rocks include andesitic volcanic rocks, volcanogenic sediments and magnetic shales.
51
Operating and production data for Freda-RebeccaSunrise Dam
2006 2005 2004
(1)
2003 2002
Pay limit (oz/t)
– –0.050.070.07
Pay limit (g/t)
– –1.642.272.14
Recovered grade (oz/t)
0.048(2)
–0.099
–0.107
0.110
Recovered grade (g/t)
1.66(2)
3.39
3.68
3.46
Gold production (000 oz)
465
455
410
Total cash costs ($/oz)
(1)
333
269
260
Total production costs ($/oz)
(1)
406
367
337
Capital expenditure ($ million)
24
34
25
Employees
(3)
99 95 88
Outside contractors
(3)
283
280
268
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(2) Open-pit operations
(3)
Average for the year.
Operating performance: Production increased slightly in 2006 to 465,000 ounces from 455,000 ounces in 2005
(2004: 410,000 ounces) primarily due to the operation’s highest-ever quarterly production of 153,000 ounces in the final
quarter, when mining concentrated, as planned, on the high-grade GQ lode in the open pit. Mining from the known
underground reserves increased, especially in the Sunrise and Western Shear zones. Gold production from the
underground mine was 67,000 ounces. Record throughput was achieved in the process plant as a result of additional
crushing and grinding circuit optimization. Recovered grade from open-pit operations declined marginally to 3.39g/t
compared with 3.68g/t recovered in 2005 (2004: 3.46g/t). Total cash costs increased to $333 per ounce from
$269 per ounce in 2005 primaril y as a result of increased diesel fuel prices and mining contractor rates
(2004: $260 per ounce).
Progress continued on the Sunrise Dam underground development. Capital expenditure amounted to $24 million
compared with $34 million in 2005 (2004: $25 million)
Growth prospects: The underground mining project involves the development of two declines and 125,000 meters of
drilling from surface and underground. These declines have been developed in the vicinity of defined underground
reserves, which are now being mined. They have also provided access for underground drilling.
• Boddington (attributable 33.33 percent)
Description: The former dominantly oxide open-pit operation closed at the end of 2001. Following Newmont’s purchase
of Newcrest’s share of the project in March of 2006, Newmont holds a 66.66 percent share in the project and AngloGold
Ashanti a 33.33 percent share.
Location: The operation is located approximately 100 kilometers south-east of Perth.
Geology: Boddington is located in the Saddleback Greenstone Belt, a northwest-trending fault-bounded silver of
greenstones about 50 kilometers long and eight kilometers wide within the Archaean Yilgarn Craton. The Boddington
resource is located within a six kilometer strike length and consists of felsic to intermediate volcanics and related
intrusives. The resource is subdivided into Wandoo South and Wandoo North. Wandoo South is centered on a composite
diorite stock with five recognizable intrusions. Wandoo North is dominated by diorites with lesser fragmental volcanic
rocks.
52
Operating and production data for Boddington
2006 2005 2004
Pay limit (oz/t)
–––
Pay limit (g/t)
–––
Recovered grade (oz/t)
–– –
Recovered grade (g/t)
– ––
Gold production (000 oz) 100 percent
–
–
–
Gold production (000 oz) 33.33 percent
9–
–
–
Total cash costs ($/oz)
(2)(1)
417–
–
–
Total production costs ($/oz)
(2)(1)
556–
–
–
Capital expenditure ($ million) 100 percent
1180
–12
8
Capital expenditure ($ million) 33.33 percent
60
4
3
Employees
(2)
12 18 12
Outside contractors
(2)
85 48 33
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(2)
Average for the year.
Operating performance and Growth prospects: In March 2006 the Boddington expansion project was approved. On a
100 percent project basis, approximately $669 million of a total budget of $1.35 billion to $1.5 billion had been committed
by the end of 2006. Based on the current mine plan, mine life is estimated to be approximately 17 years, with attributable
life of mine gold production totaling 4.7 million ounces of gold.
Capital expenditure for 2007 is expected to be approximately $312 million for the project. At the end of 2006, engineering
was approximately 42 percent complete, and site construction had begun. The project is on schedule to start up early
2009
.
BRAZIL
AngloGold Ashanti’s operations in Brazil were acquired as part of the Minorco transaction effective March 31, 1999 and
comprise the wholly-owned AngloGold Ashanti Brasil Mineração and a 50 percent interest in Serra Grande. In 2006, these
mines together produced 339,000 attributable ounces of gold at total cash costs of $207 per ounce and $196 per ounce,
respectively.
Brazil – Summary of metallurgical operations
AngloGold
Ashanti
Mineração
Serra
Grande
Cuiabá
Raposos
Gold plants
Capacity (000 tonnes/month)
70
24
66
Technology
crushers,
ball mill,
gravity concentration,
flotation,
roaster;
acid plant,
calcine leach,
Gold CCD,
CIP,
elution,
zinc-precipitation,
refinery.
crushers,
ball mill,
gravity concentration,
cyanideleach,
CIP,
zinc-precipitation
refinery
crushers,
ball mill,
gravity concentration,
cyanide,
rotary filters,
zinc-precipitation,
53
AngloGold Ashanti Brasil Mineração
Description: Since the closing of the Mina Velha underground mine in 2003 and the Engenho D’Água open-pit in 2004,
ore is now sourced from the Cuiabá underground mine, (this ore is treated at the Queiroz plant) and from the Córrego do
Sítio heap-leach operation. In January 2005, the board approved a major expansion at Cuiabá.
Location: AngloGold Ashanti Brasil
Mineração has mining rights over
30,698 hectares in the state of Minas
Gerais, in south-eastern Brazil. The
AngloGold Ashanti Brasil Mineração
complex is located in the
municipalities of Nova Lima, Sabará
and Santa Bárbara, near the city of
Belo Horizonte in the State of Minas
Gerais in south-eastern Brazil.
Geology: The area in which
AngloGold Ashanti Brasil Mineração
is located is known as the Iron
Quadrangle and is host to historic
and current gold mining operations,
as well as a number of open-pit
limestone and iron ore operations.
The geology of the Iron Quadrangle
is composed of Proterozoic and
Archaean volcano-sedimentary
sequences and Pre-Cambrian
granitic complexes. The host to the
gold mineralization is the volcano-sedimentary Nova Lima Group (NLG) that occurs at the base of the Rio das Velhas
SuperGroup (RDVS). The upper sequence of the RDVS is the meta-sedimentary Maquiné Group. Cuiabá mine, located at
Sabara Municipality, has gold mineralization associated with sulphides and quartz veins in Banded Ironstone Formation
(BIF) and volcanic sequences. At this mine, structural control and fluids flow ascension are the most important factors for
gold mineralization with a common association between large-scale shear zones and their associated structures. Where
BIF is mineralized the ore appears strongly stratiform due to the selective sulphidation of the iron rich layers. Steeply
plunging shear zones tend to control the ore shoots, which commonly plunge parallel to intersections between the shears
and other structures.
The controlling mineralization structures are the apparent intersection of thrust faults with tight isoclinal folds in a ductile
environment. The host rocks at AngloGold Ashanti Brasil Mineração are BIF, Lapa Seca and mafic volcanics (principally
basaltic). Mineralization is due to the interaction of low salinity carbon dioxide rich fluids with the high-iron BIF, basalts and
carbonaceous graphitic schists. Sulphide mineralization consists of pyrrhotite and pyrite with subordinate pyrite and
chalcopyrite; the latter tends to occur as a late-stage fracture fill and is not associated with gold mineralization. Wallrock
alteration is typically carbonate, potassic and silicic.
Operating performance: Production declined at AngloGold Ashanti Brasil Mineração in 2006 to 242,000 ounces from
250,000 ounces in 2005, when production included some trial mining projects as well as the gold remnants from the clean-
up of the old Morro Velho facilities. Total cash costs increased by 22 percent from $169 per ounce in 2005 to
$207 per ounce in 2006 (2004: $133 per ounce) due to inflation and the strong real.
54
Operating and production data for AngloGold Ashanti Brasil Mineração
2006 2005 2004
Pay limit (oz/t)
0.09 0.11 0.11
Pay limit (g/t)
3.10 3.863.85
Recovered grade (oz/t)
(1)
0.222
0.212
0.229
Recovered grade (g/t)
(1)
7.60
7.27
7.85
Gold production (000 oz)
242
250
240
Total cash costs ($/oz)
(2)
207
169
133
Total production costs ($/oz)
(2)
301
260
200
Capital expenditure ($ million)
168
71
32
Employees
(3)
687 – –1,546
1,363
1,222
Outside contractors
(3)
582,065
–1,234
–1,021
(1)
For the four months from May 2004 through August 2004. The mine was sold effective September 1, 2004.Recovered grade represents underground operations
(2)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(3)
Average for the year.
Growth prospects:
Cuiabá expansion project: This project seeks to increase production at the Cuiabá mine from 830,000 tonnes per annum
to 1.3 million tonnes and includes the construction of new treatment and tailings storage facilities, roaster, and acid plant
at an estimated total capital cost of $180 million. The Cuiabá expansion project is expected to involve the deepening of the
mine from 11 level to 21 level and is expected to result in an annual average production increase from 190,000 ounces to
260,000 ounces from the beginning of 2007; in this first operational year of the expansion, production is expected to reach
around 300,000 ounces. The project is anticipated to add six years to the life of mine.
Corrego do Sitio underground sulphides project: This relates to the potential sulphide ore of the Córrego do Sítio
underground orebodies, which consist of Cachorro Bravo, Laranjeira and Carvoaria. This project is expected to produce
1.4 million ounces of gold over 14 years from 6.8 million tonnes of milled ore. Development of a ramp and the exposure of
the Cachorro Bravo orebody are underway, as is the development of drives to access the Laranjeira and Carvoaria
orebodies.
Serra Grande (attributable 50 percent)
Description: Serra Grande is co-owned with Kinross Gold Corporation. In terms of the Serra Grande agreement,
AngloGold Ashanti manages the operation and has the right to access a maximum of 50 percent of the earnings accrued
and dividends paid by Serra Grande. The operation comprises two underground mines, Mina III and Mina Nova, and one
open pit at Mina III, which will begin operation in 2007.
Location: The Serra Grande operations are located 5 kilometers from the city of Crixás in the north-western areas of the
Goiás State in central Brazil. Serra Grande controls, or has an interest in, approximately 21,096 hectares in and around
the Crixás mining district. .
Geology: The deposits occur in the Rio Vermelho and Ribeirão das Antes Formations of the Archaean Pilar de Goia’s
Group which together account for a large proportion of the Crixás Greenstone Belt in central Brazil.
55
The stratigraphy of the belt is dominated by basics and ultrabasics in the lower sequences with volcano sedimentary units
forming the upper successions.
The gold deposits are hosted in a sequence of schists, volcanics and carbonates occurring in a typical greenstone belt
structural setting. The host rocks are of the Pilar de Goiás Group of the Upper Archaean. Gold mineralization is associated
with massive sulphides and vein quartz material associated with graphitic and sericitic schists and dolomites. The
oreshoots plunge to the north-west with dips of between 6 and 35 degrees. The stratigraphy is overturned and thrusts
towards the east.
The greenstone belt lithologies are surrounded by Archaean tonalitic gneiss and granodiorite. The metamorphosed
sediments are primarily composed of quartz, chlorite, sericite, graphitic and garnetiferous schists. The carbonates have
been metamorphosed to ferroan dolomite marble with development of siderite and ankerite veining in the surrounding
wallrock, usually associated with quartz veining. The basalts are relatively unaltered but do show pronounced stretching
with elongation of pillow structures evident.
The Crixás greenstone belt comprises a series of Ardhaean to Palaeoproterozoic metavulcanics, metasediments and
basement granitoids stacked within a series of north to north-east transported thrust sheet. Thrusting (d1) was
accompanied by significant F1 folding/foliation development and progressive alteration in a brittle-ductile regime.
D1 thrusting developed with irregular thrust ramp geometry, in part controlled by concealed early basin faults. The main
Crixás orebodies are adjacent to a major north-north-west structural corridor, and up the main fault ramp/corner, to
become dispersed to the east and north in zones of foreland thrust flats. Fluid alteration also diminished to the west away
from the main fault corner. A series of concealed east-west to north-west-south-east basement block faults may have
provided secondary fluid migration, and development of early anti-formal warps in the t hrust sheets; these structures
probably define the quasi-regular spacing of significant mineralization within the belt. The D1 thrust stack was gently
folded by non-cylindrical folds. Gold mineralizing fluids probably migrated during this event, with similar south-south-west
to north-north-east migration, and focusing on bedding slip during folding. Gold mineralization became minor and
dispersed to the north and east along the formal thrust flat zone. Concentrations of gold along the case of quartz vein may
be due to the damming of fluids migrating upward along layering.
Operating and production data for Serra Grande
2006 2005 2004
Pay limit (oz/t)
0.090.090.09
Pay limit (g/t)
3.24 3.023.17
Recovered grade (oz/t)
0.219
0.231
0.228
Recovered grade (g/t)
7.51
7.93
7.80
Gold production (000 oz) 100 percent
194
192
187
Gold production (000 oz) 50 percent
97
96
94
Total cash costs ($/oz)
(1)
196
158
134
Total production costs ($/oz)
(1)
278
229
223
Capital expenditure ($ million) 100 percent
17
13
7
Capital expenditure ($ million) 50 percent
8
7
4
Employees
(2)
609566514
Outside contractors
(2)
208
209
196
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(2)
Average for the year.
Operating performance: Attributable production at Serra Grande rose from 96,000 ounces in 2005 to 97,000 ounces in
2006 (2004: 94,000 ounces) The steady appreciation of the Brazilian real, combined with lower grades, resulted in a
24 percent total cash cost increase to $196 per ounce from $158 per ounce in 2005 (2004: $134 per ounce) in spite of
stable production.
Growth prospects: The Serra Grande brownfields exploration programme is focused on increasing reserves and
resources in areas around Mina III, Mina Nova, and the Palmeiras project by means of underground and surface diamond
drilling. A study was carried out in 2006 proving the viability of mining the Mina III open pit, with production expected to
begin in mid-2007. Exploration campaigns at the nearby Palmeiras orebody are underway, with results justifying the
construction of an exploratory ramp and an underground conceptual study, which is also expected to begin in mid-2007.
56
GHANA
AngloGold Ashanti’s operations in Ghana together produced 592,000 ounces of attributable gold in 2006, at a total cash
cost of $404 per ounce.
Description: AngloGold Ashanti has two operations in
Ghana: the Obuasi mine (which comprises both surface
and underground operations) and the Iduapriem mine
(open-pit). The Bibiani mine (open-pit with underground
development) was sold effective December 28, 2006.
Obuasi
Description: Obuasi is primarily an underground
operation, although some surface mining still takes
place. Ore is processed by two main treatment plants:
the sulphide plant (for underground ore) and the tailings
plant (for tailings reclamation operations). A third plant,
the oxide plant, is used to batch-treat remnant open-pit
ore and stockpiles, of which there are adequate
tonnages to keep the plant operational until 2008.
Location: The Obuasi mine is located in the Ashanti
region in the south of Ghana.
Geology: The gold deposits at Obuasi are part of a
prominent gold belt of Proterozoic (Birimian) volcano-
sedimentary and igneous formations which extend for a
distance of approximately 300 kilometers in a
north-east/south-west trend in south-western Ghana.
Obuasi mineralization is shear-zone related and there
are three main structural trends hosting gold
mineralization: the Obuasi trend, the Gyabunsu trend
and the Binsere trend.
Two main ore types are mined:
· quartz veins which consist mainly of quartz with free gold in association with lesser amounts of various metal
sulphides such as iron, zinc, lead and copper. The gold particles are generally fine-grained and occasionally are
visible to the naked eye. This ore type is generally non-refractory; and
·sulphide ore which is characterized by the inclusion of gold in the crystal structure of a sulphide material. The gold in
these ores is fine-grained and often locked in arsenopyrite. Higher gold grades tend to be associated with finer
grained arsenopyrite crystals. Other prominent minerals include quartz, chlorite and sericite. Sulphide ore is generally
refractory.
Ghana – Summary of metallurgical operations
Obuasi
Bibiani
Iduapriem
Sulphide
Treatment
Plant
Tailings
Treatment Plant
Oxide
Treatment Plant
Gold plants
Capacity
(000 tonnes/month)
200 200
150
225
375
Technology
BIOX
process,
cyanide leaching,
CIL,
electro-winning
CIL,
ball mills,
cyanide leaching,
electro-winning
CIL,
mill,
cyanide
leaching,
electro-winning
CIL,
Crushing, SAG
milling, ball
milling, cyanide
leach,
CIP,
elution,
Electro-winning
57
Operating and production data for Obuasi
2006 2005
(1)
2004
Pay limit (oz/t)
(2)
0.2290.1770.188
Pay limit (g/t)
7.136.06 6.43
Recovered grade (oz/t)
(2)
0.128
0.139
0.154
Recovered grade (g/t)
4.39
4.77
5.27
Gold production (000 oz)
387
391
255
Total cash costs ($/oz)
(3)
397 345 305
Total production costs ($/oz)
(3)
638 532 443
Capital expenditure ($ million)
91
78
32
Employees
(4)
5,629 5,852 6,029
Outside contractors
(4)
2,210
2,443
718
(1)
For the eight months from May.
(2)
Pay limits and recovered grade refer to underground ore resources
(3)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.:
Operating results – Total cash costs and total production costs”.
(4)
Average for the period.
Operating performance: After three quarters of declining yields, Obuasi reported higher grades in the fourth quarter and
ended the year with production of 387,000 ounces slightly below the production in 2005 of 391,000 ounces
(2004: 255,000 ounces). Increased treatment of lower-grade ore throughout the year meant that yield in 2006 was 4.39g/t
compared with 4.77g/t in 2005 (2004: 5.27g/t), pushing up total cash costs by 15 percent to $397 per ounce from $345 per
ounce in 2005 (2004: $305 per ounce).
Growth prospects: The full development of the deep-level ore deposits at the Obuasi mine has the potential to extend the
life of mine by 35 years.
Bibiani
Bibiani in Ghana produced less than 1 percent of AngloGold Ashanti’s production in 2006. This tailings only operation was
sold to Central African Gold plc effective December 28, 2006. AngloGold Ashanti expects to replace Bibiani’s production
from its other Ghanaian operations.
Operating and production data for Bibiani
(5)
20062005
(1)
2004
Pay limit (oz/t)
0.0300.0200.020
Pay limit (g/t)
0.830.70 0.70
Recovered grade (oz/t)
(2)
0.016
0.042
0.056
Recovered grade (g/t)
(2)
0.55 1.55 1.93
Gold production (000 oz)
37
115
105
Total cash costs ($/oz)
(3)
432 305 251
Total production costs ($/oz)
(3)
594 522 400
Capital expenditure ($ million)
-
7
7
Employees
(4)
211 462 479
Outside contractors
(4)
142 140 392
(1)
For the eight months from May 2004.
(2)
Recovered grade represents open pit operations in 2004 and 2005 and surface and dump reclamation in 2006.
(3)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.:
Operating results – Total cash costs and total production costs”.
(4)
Average for the periodperiod.
(5)
For the eleven months from January 2006 to November 2006.
Iduapriem (attributable 85 percent)
Description: AngloGold Ashanti has an 80 percent interest in the Iduapriem gold mine (the remaining 20 percent is owned
by the International Finance Corporation) and a 90 percent interest in the Teberebie gold mine (the government of Ghana
has the remaining 10 percent interest in Teberebie). The combined AngloGold Ashanti interest is 85 percent. The
Iduapriem and Teberebie properties are adjacent to each other and are part of the Tarkwaian goldfields.
58
Location: Iduapriem mine is located in the western region of Ghana, some 70 kilometers north of the coastal city of
Takoradi, and 10 kilometers south-west of Tarkwa.
Geology: The Iduapriem and Teberebie gold mines are located along the southern end of the Tarkwa basin. The
mineralization is contained in the Banket Series of rocks within the Tarkwaian System of Proterozoic age. The outcropping
Banket Series of rocks in the mine area form prominent, arcuate ridges extending southwards from Tarkwa, westwards
through Iduapriem and northwards towards Teberebie.
Operating and production data for Iduapriem
2006 2005
(1)
2004
Pay limit (oz/t)
0.05 0.0230.022
Pay limit (g/t)
1.60 0.720.76
Recovered grade (oz/t)
(2)
0.051
0.050
0.050
Recovered grade (g/t)
(2)
1.74 1.71 1.72
Gold production (000 oz) 100 percent
196
205
147
Gold production (000 oz) 85 percent
167
174
125
Total cash costs ($/oz)
(3)
413 348303
Total production costs ($/oz)
(3)
544 477448
Capital expenditure ($ million) 100 percent
6
5
4
Capital expenditure ($ million) 85 percent
5
4
3
Employees
(4)
668698 709
Outside contractors
(4)
583 585 597
(1)
For the eight months from May 2004.
(2)
Recovered grade represents open pit operations.
(3)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.:
Operating results – Total cash costs and total production costs”.
(4)
Average for the period.
Operating performance: In 2006, attributable gold production at Iduapriem decreased by 4 percent to 167,000 ounces
from the 174,000 ounces produced during 2005 (May to December 2004: 125,000 ounces). Recovered grade increased to
1.74g/t in 2006 from 1.71g/t in 2005 (2004: 1.72g/t). The decline in production was 9,000as a result of a series of mill and
crusher breakdowns that affected the operation during the first two quarters of the year. Total cash costs increased by
19 percent from $348 per ounce in 2005 to $413 per ounce in 2006 (2004: $303 per ounce) due to the decline in
production and inflation-drive increases in operation costs.
Attributable capital expenditure at $5 million was marginally higher than the $4 million spend in 2005 (2004: $3 million) and
was spent mainly on the commencement of a plant expansion project and general stay-in-business expenditure.
Growth prospects: A plant expansion project to increase treatment capacity from 3.7 to 4.3 million tonnes a year began
in the fourth quarter of 2006. The expansion is expected to be commissioned in the third quarter of 2008 at a capital cost
of $48 million.
During 2007, a scoping study will be undertaken to evaluate the economics of exploiting the considerable low-grade
mineral resources of the other properties that lie in the Tarkwaian conglomerates extending below the economic limit of
the pits.
GUINEA
The Siguiri mine, an open pit operation, is AngloGold Ashanti’s only operation in the Republic of Guinea in West Africa. In
2006, the mine produced 256,000 attributable ounces of gold at a total cash cost of $417$398 per ounce. Mining
operations were severely hampered by the unavailability of trackless mining equipment and material resources. Capital
expenditure was $1 million.
OutlookSiguiri (attributable 85 percent)
Description: The mine was sold effective September 1, 2004.
73
Rights to mine and title to properties
Rights to mine and title to properties AngloGold Ashanti’s rights to own and exploit mineral reserves and deposits are governed
by the laws and regulations of the jurisdictions in which the mineral properties are located. In a number of countries in which
AngloGold Ashanti operates there are,has an 85 percent interest in some cases, certain restrictions in terms of the company’s ability to independently
move assets out of that country and/or transfer the assets within the group, without the prior consent of the local government or
minority shareholders involved.
Argentina
According to Argentinean mining legislation, mines are the private property of the nation or a province, depending on where
they are located. Individuals are empowered to explore for, exploit and dispose of mines as owners by means of a legal license
granted by competent authority under the provisions of the Argentine Mining Code. The legal licenses granted for the
exploitation of mines are valid for an undetermined period, provided that the mining title holder compliesSiguiri mine, with the obligations
settled in the Argentine Mining Code. In Argentina, the usual waysbalance of transferring rights over mining licenses are: to sell the15 percent being held
license; to lease it; or to assign the rights under such a license by a beneficial interest or Usufruct Agreement. In the case of
Cerro Vanguardia – AngloGold Ashanti’s operation in Argentina – the mining title holder is its partner, Fomicruz, and due to the
Usufruct Agreement signed between them and Cerro Vanguardia SA on December 27 , 1996, the latter has the irrevocable
right to the exploitation of the deposit for a period of 40 years. This agreement expires on December 27, 2036.
Australia
In Australia, with few exceptions, all onshore mineral rights are reserved by the government of the relevant State or Territory.
Exploration for, and mining of, mineralsGuinea.
Location: The Siguiri gold mine is regulated by the general mining legislation and controlled by the mining ministry of
each respective State or Territory.
Where native title has not been extinguished, native title legislation may apply to the grant of tenure and some subsequent
administrative processes. Federal and State Aboriginal heritage legislation also operates to protect special sites and areas
from disturbance although to date there has not been any adverse impact on any of AngloGold Ashanti’s operating properties.
AngloGold Ashanti’s operating properties are located in the StateSiguiri District in the north-east of Western Australia.the Republic of Guinea, West Africa,
approximately 850 kilometers from the capital city of Conakry. The most common formsnearest major town is Siguiri (approximately
50,000 inhabitants), located on the banks of tenure the Niger River.
59
Geology: This concession is dominated by Proterozoic Birimian rocks which consist of turbidite facies sedimentary
sequences. The two main types of gold
deposits which occur in the Siguiri basin and
are mined, are:
· laterite or CAP mineralization which
explorationoccurs as aprons of colluvial or as
palaeo-channels of alluvial lateritic gravel
adjacent to, and prospecting licenses, mining leasesimmediately above; and general purpose leases. In most Australian states, if the holder of an
· in situ quartz-vein related mineralization
exploration license establishes indications of an economic mineral deposit and complieshosted in meta-sediments with the conditionsbetter
mineralization associated with vein
stockworks that occurs preferentially in
the coarser, brittle siltstones and
sandstones
The mineralized rocks have been deeply
weathered to below 100 meters in places to
form saprolite or SAP mineralization. The
practice at Siguiri has been to blend the CAP
and SAP ore types and to process these
using the heap-leach method. With the
percentage of available CAP ore decreasing,
however, a new carbon-in-pulp (CIP) plant
was brought on stream during 2005 to treat predominantly SAP ore.
Siguiri – Summary of metallurgical operations
Gold plants
Capacity (000 tonnes/month)
800
Technology
mineral sizing,
scrubbing, ball milling, CIP,
elution,
electro-winning
Operating and production data for Siguiri
2006 2005
(1)
2004
Pay limit (oz/t)
0.03 0.017 0.017
Pay limit (g/t)
0.94 0.55 0.59
Recovered grade (oz/t)
(2)
0.032
0.035
0.032
Recovered grade (g/t)
(2)
1.08 1.21 1.10
Gold production (000 oz) – 100 percent
301
289
98
Gold production (000 oz) – 85 percent
256
246
83
Total cash costs ($/oz)
(3)
398 301 443
Total production costs ($/oz)
(3)
593 451 578
Capital expenditure ($ million) – 100 percent
19
36
57
Capital expenditure ($ million) – 85 percent
14
31
48
Employees
(4)
1,5411,170 1,194
Outside contractors
(4)
1,167
808
1,412
(1)
For the eight months from May 2004.
(2)
Recovered grade represents heap leach operations in 2004 and open pit operations in 2005 and 2006
(3)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.:
Operating results – Total cash costs and total production costs”.
(4)
Average for the period.
Operating performance: Production at Siguiri rose by 4 percent from 246,000 ounces in 2005 to 256,000 ounces
in 2006 after the resolution of the grant,ball mill problems in the first quarter of 2006 (May to December 2004: 83,000 ounces).
holderRecovered grade decreased from 1.21g/t in 2005 to 1.08g/t in 2006 (2004: 1.10g/t).
60
Total cash costs increased from $301 per ounce in 2005 to $398 per ounce (2004: $443 per ounce) due to maintenance
shut-downs and post-commissioning plant modifications, as well as rising fuel costs and higher royalty payments as a
result of the increased gold price.
Growth prospects: The new CIP project has transformed this operation. Whereas Siguiri was previously a heap-leach
operation, constrained by limited economically treatable Mineral Resources, the mine is now able to economically exploit
the saprolitic ores that extend below the base of the existing pits. There is still considerable exploration licensepotential adjacent
to the existing mine infrastructure.
MALI
AngloGold Ashanti has interests in three
operations in Mali in partnership with
other parties. These operations are
Sadiola, Yatela and Morila, which are all
operated by AngloGold Ashanti.
In 2006, the Malian operations
produced 538,000 ounces of
attributable gold production at a total
cash cost of $268 per ounce (Sadiola),
$241 per ounce (Yatela), and $266 per
ounce (Morila).
Sadiola (attributable 38 percent)
Description: AngloGold has a priority right against all others to apply for a mining lease which gives
38 percent interest in, and manages,
the holder
exclusive mining rights with respect to minerals onSadiola mine within the property.Sadiola
It is possible for an individual or entity person to own the surface of the property and for another to own the mineral rights.
Typically the maximum initial term of a mining lease is 21 years, and the holder has the right to renew the lease for a further
period of 21 years. Subsequent renewals are subject to the discretion of the respective State or Territory’s minister responsible
for mining rights. Mining leases can only be assigned with the consent of the relevant minister.
Government royalties are payable as specifiedexploitation area in the relevant legislation in each State or Territory. A general purpose leasewestern Mali. The
may also be granted for one or more of a number of permitted purposes. These purposes include erecting, placing and
operating machinery and plant in connection with mining operations, depositing or treating minerals or tailings and using the
land for any other specified purpose directly connected with mining operations.
AngloGold Ashanti owns the mineral rights and has 21-year term mining leases with rights of renewal to all of its mining areas
in Australia, including its proportionate share of joint venture operations, and both it and its joint venture partners are fullyIAMGOLD, a
authorizedCanadian listed company (38 percent),
the government of Mali (18 percent),
and the International Finance
Corporation (IFC) (6 percent).
Location: The mine is situated 77 kilometers south of the regional capital of Kayes
Geology: The Sadiola deposit occurs within an inlier of greenschist facies metamorphosed Birimian rocks known as the
Kenieba Window. The specific rocks which host the mineralization are marbles and greywackes which have been
intensely weathered to conducta maximum depth of 200 meters. A series of north-south trending faults occur that are the feeders
to the Sadiola mineralization. As a result of an east-west regional compression event, deformation occurs along a north-
south striking marble-greywacke contact, increasing the porosity of this zone. North-east striking structures which intersect
the north-south contact, have introduced mineralization, mainly with the marble where the porosity was greatest. The
Sadiola Hill deposit generally consists of two zones, an upper oxidized cap and an underlying sulphide zone. From
1996 until 2002, shallow saprolite oxide ore from the Sadiola Hill pit was the primar y ore source. Since 2002, the deeper
saprolitic sulphide ore has been mined and in future will progressively replace the depleting oxide reserves.
61
Mali – Summary of metallurgical operations
Sadiola
Yatela
Morila
Gold plants
Capacity (000 tonnes/month)
435
250
350
Technology
mineral
sizing,
SAG milling,
ball milling,
cyanide leach,
CIP,
elution,
electro-winning
crushing,
agglomeration,
heap-leaching,
carbon adsorption (CIS)
crushing,
SAG milling,
ball milling,
gravity concentration,
cyanide leach,
CIP.
elution,
electro-winning
Operating and production data for Sadiola
2006 20052004
Pay limit (oz/t)
0.06 0.05 0.06
Pay limit (g/t)
1.98 1.80 1.76
Recovered grade (oz/t)
0.094
0.080
0.081
Recovered grade (g/t)
3.22
2.73
2.77
Gold production (000 oz) 100 percent
500
442
459
Gold production (000 oz) 38 percent
190
168
174
Total cash costs ($/oz)
(1)
268 265 242
Total production costs ($/oz)
(1)
363 440 448
Capital expenditure ($ million) 100 percent
11
18
16
Capital expenditure ($ million) 38 percent
4
7
6
Employees
(2)
589 584 550
Outside contractors
(2)
705 661 609
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.:
Operating results – Total cash costs and total production costs”.
(2)
Average for the year.
Operating performance: In 2006 attributable production at Sadiola increased by 13 percent to 190,000 ounces from
168,000 ounces in accordance with relevant laws2005 (2004: 174,000 ounces) in spite of a tailings pipeline replacement that negatively affected
tonnage throughput in the first quarter. Most of the production improvement was related to steady treatment plant
operations and regulations.the higher yields achieved as a result of improved metallurgical recovery on oxide ore and the increased
treatment of higher grade sulphide ore. The yield increased from 2.73g/t recovered in 2005 to 3.22g/t recovered in 2006
(2004: 2.77g/t). Total cash costs rose by 1 percent to $268 per ounce in 2006 from $265 per ounce in 2005, mainly due to
higher royalties arising from the increased gold price (2004: $242 per ounce). Capital expenditure decreased by
43 percent from $7 million in 2005 to $4 million in 2006 (2004: $6 million). The main areas of expenditure were additional
fleet mobilization charges, brownfields exploration and mining leases covercontract renewal costs.
Growth prospects: A recently completed study showed that the hard sulphide ore below the current life-of-mining horizon
(“deep sulphides”) can be mined economically at proven metallurgical recoveries. Additional test work is being conducted
to enhance recoveries.
Yatela (attributable 40 percent)
Description: The Yatela mine atis owned by Société d’Exploitation des Mines d’Or de Yatela S.A., in which AngloGold Ashanti’s operations
Ashanti and IAMGOLD each hold an effective 40 percent interest, with the government of Mali holding 20 percent.
Location: Yatela is located some 25 kilometers north of Sadiola and approximately 50 kilometers south-south-west of
Kayes, the regional capital.
Geology: Yatela mineralization occurs as a keel-shaped body in Australia.Birimian metacarbonates. The ‘keel’ is centered on a
fault which was the feeder for the original mesothermal mineralization, with an associated weakly mineralized diorite
intrusion. Mineralization occurs as a layer along the sides and in the bottom of the ‘keel’. The ore dips almost vertically on
the west limb and more gently towards the west on the east limb, with tight closure to the south.
7462
Operating and production data for Yatela
2006 20052004
Pay limit (oz/t)
0.060.050.06
Pay limit (g/t)
1.79 1.66 1.96
Stacked grade (oz/t)
0.120
0.087
0.099
Stacked grade (g/t)
4.12
2.99
3.41
Gold production (000 oz) 100 percent
352
246
242
Gold production (000 oz) 40 percent
141
98
97
Total cash costs ($/oz)
(1)
241
263
255
Total production costs ($/oz)
(1)
326
347
320
Capital expenditure ($ million) 100 percent
3
5
7
Capital expenditure ($ million) 40 percent
1
2
3
Employees
(2)
203 210 208
Outside contractors
(2)
675
700
825
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(2)
Average for the year.
Brazil
Operating performance: In Brazil, Mine Manifests (mining titles granted2006, attributable production at Yatela rose by 44 percent to 141,000 ounces from
98,000 ounces in 1936) and Mining concessions (mining titles presently granted via an order2005 (2004: 97,000 ounces) due to a 38 percent increase in grade, from 2.99g/t in 2005 to 4.12g/t in
signed2006 (2004: 3.41g/t). Total cash costs declined by 8 percent to $241 per ounce from $263 per ounce in 2005
(2004: $255 per ounce) due a favorable grade which was partially offset by higher operating costs as a result of a change
in the Secretary of Minesbeginning of the Ministryyear from top-lift stacking of Minesthe heap-leach pad to bottom-lift stacking, which necessitated
increased cement consumption.
Capital expenditure of $1 million was 50 percent lower than the $2 million spent in 2005 (2004: $3 million) and Energy) are valid forwas
incurred mainly on the construction of an undetermined period – until depletion of
reserves – provided that the mining title holder complies with current Brazilian mining legislation, as well as with those
requirements set out by the DNPM who acts as inspecting entity for mining activities.
additional leach pad.
Growth prospects: The difference between a Mine Manifest and a Mining Concession lies in the legal nature of these two mining titles, since it is
much more difficult and complicated for the public administration to withdraw a Mine Manifest than a Mining Concession,
although, in practice, it is possiblepotential for a manifestsmall amount of sulphide ore below the existing Alamoutala deposit to be cancelled or to become extinct if the abandonment of the miningtreated
operationat Sadiola is formally proven. All ofbeing investigated.
Morila (attributable 40 percent)
Description: AngloGold Ashanti’s operations in Brazil have indefinite mining licenses.
Ghana
Mining activities in Ghana are primarily regulated by the MineralsAshanti and Mining Law 1986 (PNDCL 153) or the Mining Law. Under
the Constitution and the Mining Law, all minerals in Ghana in their natural state are the property of the state and title to them is
vested in the President on behalf of and in trust for the people of Ghana, with rights of prospecting, recovery and associated
land usage being granted under license or lease.
A license is required for the export or disposal of such minerals and the government has a right of pre-emption over all such
minerals. The government of Ghana shall acquire, without payment, a 10Randgold Resources Limited each hold an effective 40 percent interest in the rights and obligations ofMorila
Joint Venture, with the
mineral operations in relation to a mineral right to reconnaissance, prospecting or mining, and shall have the option to acquire
a further other 20 percent interest where any mineralheld by the Malian government. Under the joint venture agreement, AngloGold
Ashanti is discovered in commercial quantities, on terms agreed between the
government and the holderoperator of the mining lease subjectmine.
Location: This mine is situated some 180 kilometers, south-east of Bamako, the capital city of Mali.
Geology: Morila is a mesothermal flat lying shear-zone hosted deposit which, apart from rising to arbitration if the parties failsurface in the west
against steep faulting lies, flat. The deposit occurs within a sequence Birimian metal-arkoses of amphibolite metamorphic
grade. Mineralization is characterized by silica-feldspar alteration and sulphide mineralization consists of arsenopyrite,
pyrrhotite, pyrite and chalcopyrite.
63
Operating and production data for Morila
2006 2005 2004
Pay limit (oz/t)
0.080.070.09
Pay limit (g/t)
2.41 2.272.81
Recovered grade (oz/t)
0.113
0.158
0.130
Recovered grade (g/t)
3.88
5.41
4.57
Gold production (000 oz) 100 percent
517
655
510
Gold production (000 oz) 40 percent
207
262
204
Total cash costs ($/oz)
(1)
266 191 196
Total production costs ($/oz)
(1)
367 298 270
Capital expenditure ($ million) 100 percent
3
5
5
Capital expenditure ($ million) 40 percent
1
2
2
Employees
(2)
500 478 479
Outside contractors
(2)
1,075 705 919
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(2)
Average for the year.
Operating performance: Gold production at Morila declined from 262,000attributable ounces in 2005, to agree.
A license or lease granting207,000 attributable ounces in 2006 (2004: 204,000 attributable ounces). This was as a mineral right is required to prospect for or mine a mineral in Ghana and the Minister of Energy
and Mines has the power to negotiate, grant, revoke, suspend or renew any mineral right, subject to a power of disallowance
exercisable within 30 days of such grant, revocation, suspension or renewal by the Cabinet. The powers of the Minister of
Mines are to be exercised on the advice of the Minerals Commission, which is responsible for regulating and managing the
utilization of natural resources and coordinating policies relating to them.
The grantresult of a mining leasegeneral decrease in
grade to 3.88g/t from 5.41g/t achieved in 2005 (2004: 4.57g/t), together with a major mill re-lining in the second quarter,
that negatively affected tonnage throughput. Consequently, total cash costs increased by 39 percent from $191 per ounce
in 2005 to $266 per ounce in 2006 (2004: $196 per ounce). Capital expenditure of $1 million was 50 percent lower than
the Ministercapital expenditure of Mines is normally subject to parliamentary ratification unless the mining lease
falls into2005 of $2 million (2004: $2 million) and was spent on various small projects, including a class of transactions exempted by parliament. A mineral right is deemed a requisite and sufficient authority over theminor
land in respect of which the right is granted, although a separate license is required for some other activities, including the
diversion of water, and additional consents may be required for certain developments. A mineral right or interest therein may
not be transferred, assigned or otherwise dealt with in any other manner without the Minister of Mines’ prior written approval.plant upgrade.
Control of mining companiesGrowth prospects: The Minister of Mines has the power to object to a person becoming or remaining a
‘‘shareholder controller’’, a ‘‘majority shareholder controller’’ or an ‘‘indirect controller’’ of a company which has been granted a
mining lease if he considers that the public interest would be prejudiced by the person concerned becoming or remaining such
a controller. In this context:
• shareholder controller means a person who, either alone or with certain others, is entitled to exercise or control the
exercise of 20 percent or more of the voting power at any general meeting of a mining company or of any other company
of which it is a subsidiary;
• majority shareholder controller means a shareholder controller in whose case the percentage referred to above also
exceeds 50 percent; and
• indirect controller means a person in accordance with whose directions or instructions the director of a mining company, or
of another company of which it is a subsidiary, or the shareholder controllers of that mining company, are accustomed to
act.
A person may not become a shareholder controller, a majority shareholder controller or an indirect controller of a mining
company unless he has served written notice on the Minister of Mines of his intention to that effect and the Minister of Mines
consents to his becoming such a controller or does not object within a period of six months.
75
Where a person becomes or continues to be a controller of the relevant description after a notice of objection has been served
on him, or is otherwise in contravention of the procedures prescribed by the Mining Law, the Minister of Mines may notify the
controller that, until further notice, any specified shares are subject to restrictions. The relevant restrictions include restrictions
on transfer, voting rights, receipt of further shares and distributions. The Minister of Mines may apply to the High Court to order
the sale of any shares which are the subject of such a restriction. There is no legal restriction on the foreign ownership of a
mining company.
Where a person, either alone or with others, acquires an interest in 5 percent or more of the voting power of a mining company
he is required to notify the Minister of Mines. A person who is a controller of a mining company must give notice of his ceasing
to be such a controller before he disposes of his interest. In addition, the mining company itself has to give notice to the
Minister of Mines of the fact that any person has become or ceased to be a controller.
Violation of these provisions of the Mining Law is a criminal offence. The law also gives the Minister of Mines power to
investigate and report on the ownership and control of any mining company.
The Mining Law also gives the government the right to acquire a special share (Golden Share) in a mining company in order to
protect the assets of the relevant company and to reflect and further the intentions of the provisions of the Mining Law relating
to control of a mining company. The government has retained its Golden Share in relation to the assets and operations in
Ghana.
Prior to the Business Combination between AngloGold and Ashanti, AngloGold and the government of Ghana agreed the
terms of a Stability Agreement to govern certain aspects of the fiscal and regulatory framework under which AngloGold Ashanti
will operate in Ghana following the implementation of the Business Combination. For details of the Stability Agreement as well
as AngloGold Ashanti’s commitments, see ‘‘Item 4A.: History and development of the company – Business Combination
between AngloGold and Ashanti”.
Payments and allowances: The Mining Law provides that royalties are payable by the holder of a mining lease to the State at
rates of between 3 percent and 12 percent of total minerals revenue, depending on a formula set out in mineral royalty
regulations. The formula is determined by calculating the ratio of revenue minus operating costs, interest and capital
allowances to total revenue. A ratio of 30 percent or lower will attract a royalty of 3 percent. For every 1 percent that the ratio
exceeds 30 percent, the amount of the royalty will increase by 0.0225 percent up to a maximum of 12 percent. The laws of
Ghana currently provide for income tax at a rate of 30 percent. The Mining Law provides for an entitlement to certain specified
capital allowances and various additional fiscal and other benefits. However, AngloGold Ashanti and the government of Ghana
have entered into the Stability Agreement with respect to the payment of royalties and taxes as detailed previously.
In 2002, the Ghanaian tax legislation was changed so that unutilized losses and capital allowances existing at January 1, 2001
can only be carried forwards for five years. If not used by that time they will be lost. Losses and capital allowances incurred
after 1 January 2001 can be carried forward without limit.
Retention of foreign earnings: Holders of mining leases have certain limited rights to retain foreign exchange earnings
overseas and to use such earnings for the acquisition of machinery and equipment as well as for certain other payments such
as debt service payments and dividends.
Where the net earnings of a holder of a mining lease are in foreign currency, the holder is permitted to retain not less than
25 percent of foreign exchange earnings in an external account for acquiring machinery and equipment, spare parts and raw
materials as well as for certain other payments, such as dividend and debt service payments.
AngloGold Ashanti’s operations in Ghana are permitted to retain 80 percent of its foreign exchange earnings in such an
account. In addition, the company has permission from the Bank of Ghana to retain and use outside Ghana dollars required to
meet payments to our hedge counterparties which cannot be met from the cash resources of our treasury company.
76
Leases: Mining leases may be applied for either by a prospecting license holder who has established the existence of minerals
in commercial quantities or by others who do not hold such licenses, who establish the same to the satisfaction of the Minister
of Mines. Mining leases are normally granted for a period not exceeding 30 years and the holder may apply to the Minister of
Mines for renewal, on such conditions as the Minister of Mines may determine, for up to another 30 years. This period has
been extended in terms of the Stability Agreement. They are to have a maximum size (subject to derogation by the President
where it is considered to be in the national interest) of 50 square kilometers for any grant and 150 square kilometers in
aggregate.
A holder may apply for an enlargement of the mining area, which, subject to the Mining Law, the Minister of Mines may grant if
satisfied that such approval is in the national interest. The rights conferred by mining leases include those to take all
reasonable measures on or under the surface to mine the mineral to which the mining lease relates, to erect necessary
equipment, plant and buildings, to prospect within the mining area and to stack or dump mineral waste in an approved manner.
Reconnaissance and prospecting licenses are normally granted for up to 12 months and three years respectively, subject to
renewal. A detailed program must be submitted for the recruitment and training of Ghanaiansregional drilling programme, with a view to achieving
‘localization’,finding another significant orebody, is being conducted
over the replacementnext two years.
64
NAMIBIA
The Navachab mine is AngloGold
Ashanti’s only operation in Namibia.
Description: AngloGold Ashanti holds a
100 percent interest in the Navachab
open-pit gold mine after having obtained
an additional 30 percent interest in 1999.
The mine has been in production since
1990.
Location: Navachab is located near
Karibib in Namibia, on the southern west
coast of expatriate personnelAfrica.
Geology: The Navachab deposit is
hosted by Ghanaian personnel. In addition, the holder must giveDamaran greenschistam-
preference to Ghanaian products phibolite facies, calc-silicates, marbles
and personnel,volcanoclastics. The rocks have
been intruded by granites, pegmatites
and (quartz-porphyry dykes) aplite and
have also been deformed into a series of
alternating dome and basin structures.
The mineralized zone forms a sheet-like
body which plunges at an angle of
approximately 20 degree to the maximum extent possible, consistentnorth-
west. The mineralization is predominantly
hosted in a sheeted vein set (±60 percent) and a replacement skarn body (±40 percent). The gold is very fine-grained and
associated with safety, efficiencypyrrhotite, and
economy.
Prior notification minor to the Ministertrace amounts of Mines is required for ceasing, suspending or curtailing production. Approval to such actionspyrite, chalcopyrite, maldonite and bismuthinite. Approximately
may be given, subject to conditions determined on the advice80 percent of the Minerals Commission.gold is free milling.
Navachab – Summary of metallurgical operations
Gold plants
Capacity (000 tonnes/month)
110
Technology
crushing,
ThereSAG milling,
cyanide leach,
CIP,
elution,
electro-winning
Operating and production data for Navachab
2006 �� 20052004
Pay limit (oz/t)
0.04 0.05 0.05
Pay limit (g/t)
1.29 1.65 1.46
Recovered grade (oz/t)
0.053
0.060
0.046
Recovered grade (g/t)
1.81
2.05
1.59
Gold production (000 oz) 100 percent
86
81
66
Total cash costs ($/oz)
(1)
349
321
348
Total production costs ($/oz)
(1)
407
333
424
Capital expenditure ($ million) 100 percent
5
5
21
Employees
(2)(3)
313 315251
Outside contractors
(2)
– – –
(1)
Total cash costs and total production costs are also provisions relatingnon-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(2)
Average for the year.
(3)
No mining labor, contract or otherwise, was on site during the first half of 2004.
65
Operating performance: In 2006, gold production rose by 6 percent to surrender, suspension and cancellation of mineral rights86,000 ounces from 81,000 ounces in certain circumstances. The2005
Minister of Mines may suspend or cancel a mineral right if, among other things, the holder:
• fails to make payments under the Mining Law when due;
• is in breach of any provisions of the Mining Law or the conditions of the mineral right or the provisions of any other
enactment relating to mines and minerals;
• becomes insolvent or bankrupt;
• makes a statement to the Minister of Mines in relation to the mineral right which he knows, or ought to have known to be
false; or
• for any reason becomes ineligible to apply for a mineral right under the provision of the Mining Law.
Except(2004: 66,000 ounces) as otherwise provided in a specific mining lease, all immovable assets of the holder under the mining lease vest in the
State on termination, as does all moveable property that is fully depreciated for tax purposes. Moveable property that is not
fully depreciated is to be offered to the State at the depreciated cost. The holder must exercise his rights subject to such
limitations relating to surface rights as the Minister of Mines may prescribe. Subject to the proper conduct of the mining
operations, the holder must affect as little as possible the interest of any lawful occupier, whose grazing rights are retained but
who is precluded from erecting any building without the consent of the holder (or, if such consent is unreasonably withheld,
without the consent of the Minister).
An owner or occupier of any land subject to a mineral right may apply to the holder of the mineral right for compensation and
the amount of the compensation shall, subject to the approval of the land valuation board, be determined by agreement
between the parties concerned (or, if they are unable to reach agreement, by the Minister of Mines in consultation with the land
valuation board). The Land Valuation Board has in the past increased amounts of compensation payable to owners and
occupiers. The holder, in the exercise of his rights, is required to have due regard totonnage throughout offset the effect of the mineral operationsdecline in grade to 1.81g/t from 2.05g/t in
2005 (2004: 1.59g/t). Total cash costs increased to $349 per ounce from $321 per ounce in 2005 (2004: $348 per ounce)
due to the lower recovered grade. Capital expenditure of $5 million was unchanged from that of 2005 (2004: $21 million)
and was incurred mainly on preparation for mining the
environment Grid A satellite orebody and treatment plant optimization.
Growth prospects: Historical studies on a further potential pit expansion which was previously considered uneconomical,
are being reconsidered given the current outlook for the gold price. Several brownfields prospects located within trucking
distance are currently under investigation.
TANZANIA
The Geita mine is AngloGold Ashanti’s only operation in Tanzania.
Description: The Geita mine is a multi-pit operation with a CIL plant that has the capacity to take such steps as may be necessarytreat 6 million tones a year.
Prior to prevent pollution ofApril 2004, Ashanti and AngloGold each held a 50 percent share in Geita, which was managed under the environment asjoint
venture agreement entered into between the companies. As a result of suchthe business combination, Geita is now a wholly-
operations.
A range of activities and breachesowned subsidiary.
Location: The Geita mine is located 80 kilometers south-west of the Mining Law, including obstructing the government from exercising its pre-emptiontown of Mwanza.
Geology: Geita is an Archaean mesothermal mainly BIF-hosted deposit. Mineralization is located where auriferous fluids,
right and conducting mining, prospecting or related activities otherwise than in accordancewhich are interpreted to have moved along shears often on BIF-diorite contacts, reacted with the Mining Law, constituteBIF. Some lower-grade
offences punishable by fine or imprisonment. The maximum fine is 500,000 cedis (at the current exchange rate, equivalent to
approximately $50) and the maximum term of imprisonment is two years.
77
Mining properties: The current mining lease for the Obuasi area was granted by the government of Ghana on March 5, 1994.
It grants mining rights to land with an area of approximately 334 square kilometersmineralization can occur in the Amansie East and Adansi West
districts of the Ashanti region for a term of 30 years from the date of the agreement. In addition, the application for a mining
lease over the adjacent 140 square kilometers has also been granted resulting in the total area under mining lease conditions
increasing to 474 square kilometers, the Lease Area. The company is required to pay to the government of Ghana rent (subject
to review every five years, when the rent may be increased by up to 20 percent) at a rate of approximately $5 per square
kilometers and such royalties as are prescribed by legislation, including royalties on timber felled within the Lease Area.
Bibiani had title to a 50 square kilometers mining lease for a period of 30 years to May 18, 2027. The terms and conditions of
the lease are consistent with similar leases granted in respect of Obuasi. With effect from October 1, 2001, the Bibiani mining
lease was transferred to Ashanti Goldfields Company Limited from Ashanti Goldfields (Bibiani) Limited.
Iduapriem Mining Lease: The company has title to the 33 square kilometers Iduapriem mining lease granted on April 19, 1989
for a period of 30 years. The terms and conditions of the lease are consistent with similar leases granted in respect of the
Obuasi mining lease.
Teberebie has two leases, one granted in February 1998 for a term of 30 years, and another granted in June 1992 for a term of
26 years. The terms and conditions of these leases are consistent with similar leases granted in respect of the Obuasi mining
lease.
Proposed amendment to mining law: A bill has been drafted which, if enacted, will replace and repeal the existing Minerals
and Mining Law 1986 and all other regulations under it. The bill may never be enacted or, if enacted, might be enacted with
substantial modifications. For the most part the bill consolidates with modifications the existing law.
The key material modifications to the current regime proposed in the current draft are:
• the right of the government to acquire a 10 percent ‘free-carried’ interest in a mining company is to be amended so that in
future it will be acquired on terms prescribed or on terms to be agreed; the bill does not currently prescribe any terms. In
addition, the right of the government to acquire a further 20 percent interest in the rights and obligations of the mineral
operations in relation to mineral rights is to be deleted;
• provisions for stability agreements to be entered into by the Minister of Mines, on behalf of the Republic, with approval of
parliament to ensure that the holders of mining rights are not adversely affected by changes in law for a period of 15 years
and for development agreements to be entered into, with the approval of parliament between the Minister of Mines, on
behalf of the Republic, and a mining company where the proposed investment is greater than $500 million to deal with, in
addition to matters relating to environmental liabilities the exercise of discretion and settlement of disputes;
•compensation principles for disturbance of an owner’s surface rights;
• proposals that royalties are payable by the holder of a mining lease at a rate of 4 percent to replace the existing sliding
scale of 3-12 percent for gold produced from its mining operations; and
• although the right of the government to be issued with a special share in a mining company still exists, the consent of the
special shareholder will only be required for the disposal of a mining lease and/or material assets, which are situated in
Ghana.
Guinea
In Guinea, all mineral substances are the property of the state. Mining activities are primarily regulated by the Mining Code,
1995. The right to undertake mining operations can only be acquired by virtue of one of the following mining titles: surveying
permit, small-scale mining license, mining prospecting license, mining license or mining concession.
The holders of mining titles are guaranteed the right to dispose freely of their assets and to organize their enterprises as they
wish, the freedom to engage and discharge staff in accordance with the regulations in force, free movement of their staff and
their products throughout Guinea and freedom to dispose of their products in international markets.
The group’s Guinea subsidiary, Société Ashanti Goldfields de Guiné (SAG), has title to the Siguiri mining concession area
which was granted on November 11, 1993 for a period of 25 years. The agreement provides for an eventual
extension/renegotiation after 23 years for such periods as may be required to exhaust economic ore reserves.
78
The original area granted encompassed 8,384 square kilometers which the subsidiary was required to reduce to five or fewer
single blocks of not less than 250 square kilometers per block totaling not more than 1,500 square kilometers by November 11,
1996. The retrocession reduced the Siguiri concession area to four blocks totaling 1,495 square kilometers.
SAG has the exclusive right to explore and mine in the remaining Siguiri concession area for a further 22-year period from
November 11, 1996 under conditions detailed in a Convention de Base predating the new Guinea Mining Code.
Key elements of the Convention de Base are:
• the government of Guinea holds a 15 percent free-carried or non-contributory interest; a royalty of 3 percent is payable on
the value of gold exported; a local development tax of 0.4 percent is payable on the gross sales revenues; salaries of
expatriate employees are subject to a 10 percent income tax; mining goods imported into Guinea are exempt from all
import taxes and duties for the first two years of commercial production; and
• SAG is committed to adopt and progressively implement a plan for the effective rehabilitation of the mining areas disturbed
or affected by operations.
The Convention de Base is subject to early termination if both parties formally and expressly agree to do so, if all project
activities are voluntarily suspended for a continuous period of eight months or are permanently abandoned by our subsidiary or
if SAG goes into voluntary liquidation or is placed into liquidation by a court of competent jurisdiction.
In addition to the export tax payable to the government of Guinea, a royalty on production may be payable to the International
Finance Corporation (IFC) and to Umicore SA, formerly Union Miniere (UM). Pursuant to the option agreement between the
UM and Golden Shamrock Mines Limited (GSM), a royalty on production may be payable to UM by Chevaning Mining
Company Limited (CMC) or GSM, which payment obligation has been assigned to AngloGold Ashanti (Ghana) Limited, on a
sliding scale between 2.5 percent and 7.5 percent, based on the spot gold price per ounce between $350 and $475, subject to
indexation from January 1, 1995, to a cumulative maximum of $60 million. In addition, under the terms of the restructuring
agreement with the IFC, a sliding scale royalty on production may be payable to the IFC calculated on the same basis but at
half the rate payable to UM, to a maximum of $7.8 million.
Mali
Mineral rights in Mali are governed by the Mining Act and Regulations promulgated in 1991. Exploration is carried out under
permits granted by Ministerial Decree following application to the National Director of Geology and Mines from the Ministry of
Mines, Energy and Water conveying exclusive title to conduct exploration. The permit is valid for a three-year period and is
renewable twice. A company applying (in an area it selected) for such a permit must provide proof of technical and financial
capabilities.
An exploitation permit is required to mine a deposit located within the exploration area. This permit grants exclusive title to
mine for a maximum period of 30 years (inclusive of renewals) and is granted by the council of ministers following application
to the national director of mines.
Both permits referred to above include a Mining Convention (convention d’établissement) covering exploration, mining,
treatment and marketing in a comprehensive document. This outlines the general conditions with regard to exploration (work
program, fiscal and customs regime) and exploitation (formation of a local limited liability company and mining company, State
shareholdings, the fiscal and customs regime during construction and exploitation phases, exchange controls, marketing of the
product, accounting regime, training programs for local labor, protection of the environment, reclamation, safety, hygiene, and
settlement of disputes).
Application for an exploration permit is submitted to the national director of mines based on various documents, including
applicant identification, locations, receipts for payment of fixed rights and surface fees, and articles of association, together with
a draft mining convention. An inter-ministerial committee examines the applications and one company is retained to do the
exploration. This company then negotiates a draft of the Mining Convention and the Minister of Mines grants the exploration
permit by an in-house decree published in the Malian Gazette.
79
Once an economically viable deposit has been identified, an application for an exploitation permit is submitted to the national
director of mines. This application must be made prior to the expiry of the exploration permit. The application document must
contain a map and coordinates, a receipt for payment of fixed rights and surface fees and a summary of technical and financial
capabilities. The exploitation title is granted following a thorough investigation.
AngloGold Ashanti has complied with all applicable requirements and the relevant permits have been issued. Morila, Sadiola
and Yatela have 30-year permits which expire in 2029, 2024 and 2030, respectively.
Namibia
Mineral rights in Namibia vest in the State. In order to prospect or mine, the Ministry of Mines and Energy initially grants a
prospecting license and on presentation of a feasibility study, a mining license is then granted taking into account the abilities
of the company, including mining, financial and technical capabilities, rehabilitation programs and payment of royalties. The
relevant license has been granted to AngloGold Namibia (Pty) Ltd in respect of its mining and prospecting activities in Namibia.
The current 15-year license which was to expire in 2003 has been renewed and extended for another 15 years to 2018.
South Africa
The Mineral and Petroleum Resources Development Act: In October 2002, the president of South Africa assented to the
Mineral and Petroleum Resources Development Act (MPRDA), which was passed by the parliament of South Africa in June
2002 and came into effect on May 1, 2004. The MPRDA vests custodianship of South Africa’s mineral rights in the State, which
will issue prospecting rights or mining rights to applicants in the future. Additionally, for details relating to the MPRDA and
associated broad-based socio-economic empowerment charter and related scorecard,diorite as well as AngloGold Ashanti’s
progress(usually in converting existing rights in terms of the new legislation, see “Item 3D.: Risk Factors”.
Tanzania
Mineral rights in the United Republic of Tanzania are governed by the Mining Act of 1998,association with BIF-hosted mineralization), and property and control overapproximately
minerals are vested in the United Republic of Tanzania. Prospecting for the mining of minerals, except petroleum, may only be
conducted under authority of a mineral right granted by the Ministry of Energy and Minerals under this Act.
The three types of mineral rights most often encountered, which are also those applicable to AngloGold Ashanti, are:
• prospecting licenses;
• retention licenses; and
• mining licenses.
A prospecting license grants the holder thereof the exclusive right to prospect in the area covered by the license for all
minerals, other than building and gemstones, for a period of three years. Thereafter, the license is renewable for two further
periods of two years each. On each renewal of a prospecting license, 5020 percent of the area covered bygold is hosted in the license must be
relinquished. Before applying for a prospecting license a prospecting reconnaissance with a maximum of 5,000 square
kilometers is issued for a period of two years after which a three-year prospecting license is applied for. A company applying
for a prospecting license must, inter alia, state the financial and technical resources available to it. A retention license can also
be requested from the Minister, after the expiration of the 3-2-2 year prospecting license period, for reasons ranging from funds
to technical.
Mining is carried out through either a mining license or a special mining license, both of which confer on the holder thereof the
exclusive right to conduct mining operations in or on the area covered by the license. A mining license is granted for a period of
10 years and is renewable for a further period of 10 years. A special mining license is granted for a period of 25 years and is
renewable for a further period of 25 years. If the holder of a prospecting license has identified a mineral deposit within the
prospecting area which is potentially of commercial significance, but it cannot be developed immediately by reason of technical
constraints, adverse market conditions or other economic factors of a temporary character, it can apply for a retention license
which will entitle the holder thereof to apply for a special mining license when it sees fit to proceed with mining operations.
A retention license is valid for a period of five years and is thereafter renewable for a single period of five years. A mineral right
may be freely assigned by the holder thereof to another person, except for a mining license, which must have the approval of
the Ministry to be assigned.diorite.
8066
However, this approval requirement for the assignmentGeita – Summary of a mining license will not apply if the mining license is assigned to an
affiliate company of the holder or to a financial institution or bank as security for any loan or guarantee in respect of mining
operations.
A holder of a mineral right may enter into a development agreement with the Ministry to guarantee the fiscal stability of a long-
term mining project and make special provision for the payment of royalties, taxes, fees and other fiscal imposts.
AngloGold Ashanti has complied with all applicable requirements and the relevant licenses have been issued for 25 years and
expire in 2024.
United States of America
Mineral rights, as well as surface rights, in the United States of America are owned by private parties, state governments and
the federal government. Most land prospective for precious metals exploration, development and mining are owned by the
federal government and are obtained through a system of self-initiated mining claim location pursuant to the General Mining
Law of 1872, as amended.
Individual states typically follow a lease system for state-owned minerals. Private parties have the right to sell, lease or enter
into other agreements, such as joint ventures, with respect to minerals that they own or control. All mining activities, regardless
of whether they are situated on privately- or publicly-owned lands, are regulated by a myriad of federal, state and local laws,
regulations, rules and ordinances, which address various matters including environmental protection, mitigation and
rehabilitation.
Authorizations and permits setting forth the activities and restrictions pertaining thereto are issued by the responsible
governmental agencies at all phases of mining activities.
The Cripple Creek & Victor Gold Mining Company joint venture is almost entirely comprised of owned patented mining claims
from public lands, with a small percentage of private and state lands being leased. The total area of control is approximately
7,100 acres. Patented claims vest ownership in the holder, including the right to mine for an indefinite tenure. All life-of-mine
reserves are within these property controls. The mining and rehabilitation permits issued by the State of Colorado are life-of-
mine permits.
An agreement was announced on February 27, 2003 wherein AngloGold entered into a purchase and sale agreement with
Queenstake for its interest in the Jerritt Canyon Joint Venture. The agreement included, inter alia that Queenstake accept full
closure and rehabilitation and other liabilities. The transaction was concluded effective June 30, 2003. When held prior to this
date, the Jerritt Canyon Joint Venture property control consisted of owned or leased unpatented mining claims covering
58,000 acres of public lands, and owned or leased property covering 21,000 acres of private lands. Ownership of unpatented
mining claims for public lands and ownership of private lands provided the joint venture with the right to mine for an indefinite
tenure. Leases of public or private property rights to the joint venture also conveyed full mining rights and included terms,
which were indefinitely extended so long asmetallurgical operations continued. All life-of-mine reserves were within those property controls .
The mining and rehabilitation permits issued by the State of Nevada and the US Forest Service were life-of-mine permits.
Ore Reserves
The tables below set out the group’s proven and probable ore reserves as of December 31, 2004 and 2003, in both imperial
and metric units.
Ore reserve estimates in this annual report on Form 20-F are reported in accordance with the requirements of the SEC’s
Industry Guide 7. Accordingly, as of the date of reporting, all reserves are planned to be mined out under the life-of-mine plans
within the period of AngloGold Ashanti’s existing rights to mine, or within the time period of assured renewal periods of
AngloGold Ashanti’s rights to mine. In addition, as of the date of reporting, all reserves are covered by required permits and
governmental approvals. See “Item 4B.: Business overview — Rights to mine and title to properties”, “— Safety and Health”,
and “Item 4D.: Property, plant and equipment".
81
AngloGold Ashanti has standard procedures for the estimation of ore reserves. These standard procedures are performed by
technical personnel at the mining operations and reviewed by regional and corporate competent persons. In the case of its
underground mines, the procedure is as follows: Firstly, gold content and tonnage are estimated for in-situ mineralized
material at a mining operation. This mineralized material is not necessarily economically viable. Exclusions on the grounds of
safety (for example, stability pillars, shaft pillars) are then defined. Grade and tonnage curves specific for each of the deposits,
in conjunction with the cost structure, yield, mine call factor and ore reserves of the operation and gold price estimates are
used to determine an optimal mining mix. This process facilitates the determination of the average grade to be mined by each
operation. This grade is then appli ed to the grade-tonnage curves, which in turn facilitates the determination of the cut-off
grade and ore reserve tonnage for the operation. A full mine design is carried out on the blocks of mineralized material,
excluding large mining areas that do not meet the cut-off grade criterion. This mining plan is reviewed to ensure that it satisfies
the economic criterion and practical limitations of access and timing. If the review process is positive then the mineralized
material (with dilution) included in the mining plan is declared and published as the ore reserve for that operation.
In the case of open-pit mines the procedure is as follows: revenue and costs are calculated for each mining block within a three-
dimensional model of the orebody using assumed values for gold price, operating costs, metallurgical recoveries and slope angles. An
optimization process is then applied to determine all the blocks combined within the model that makes a positive contribution under
these assumptions. Within this process, a cut-off grade is applied which determines the ore blocks to be treated and included in the ore
reserves. These blocks are scheduled with consideration being given to practical mining considerations and limitations. Scheduled ore
blocks that are classified as proven or probable constitute the ore reserve.
For 2004, ore reserves (with the exception of Boddington), were determined assuming a gold price of $375 per ounce and exchange
rates of ZAR7.86 = $1 and A$1.43 = $1.
This compares with the 2003 prices used as follows:
• AngloGold Ashanti’s South African assets, ore reserves were determined assuming a gold price of $350 per ounce and an
exchange rate of ZAR7.00 = $1.
• in respect of assets in Mali, Namibia and Tanzania, ore reserves were determined assuming a gold price of $350 per ounce.
•in respect of assets in Argentina and Brazil, ore reserves were determined assuming a gold price of $350 per ounce, with theGold plants
exceptions of Cerro Vanguardia, as well as certain parts of Morro Velho, namely Engenho D’Agua and Córrego do Sítio. The ore
reserves for Cerro Vanguardia, Engenho D’Agua and Córrego do Sítio were determined at $325 per ounce.
Capacity (000 tonnes/month)
• ore reserves for Cripple Creek & Victor in the USA were determined assuming a gold price of $325 per ounce.490
Technology
• ore oeserves for the Australian assets were determined assuming a gold price of $234 per ounce and at an exchange rate ofcrushing,
A$1 = $0.55 for Boddington (based upon the gold price and exchange rate assumed for the 2000 feasibility study) and at $350 perSAG milling,
ounce and an exchange rate of A$1 = $0.63 for Sunrise Dam.ball milling,
gravity concentration,
CIL,
elution,
electro-winning
Sensitivities, conducted using the three-year historical average gold price in local currencies, where applicable, indicate that
there is no material difference to the ore reserves as stated below. These prices are ZAR90,000 per kilogram in South Africa,
A$550 per ounce in Australia and $325 per ounce elsewhere.
The ore reserve estimates in this document include ore reserves below current infrastructure in the case of certain South African mines.
However, these ore reserves have been determined based upon completed pre-feasibility studies.
It should be noted that in Australia and South Africa, AngloGold Ashanti is legally required to publicly report Ore Reserves and Mineral
Resources according to the Australasian Code for Reporting of Mineral Resources and Ore Reserves (JORC 2004) and the South
African Code for Reporting of Mineral Resources and Ore Reserves (SAMREC 2000). The SEC’s Industry Guide 7 does not recognize
Mineral Resources. Accordingly, AngloGold does not report estimates of Mineral Resources in this annual report on Form 20-F.
As with the 2003 report, tonnage and grades are reflected on a delivered-to-mill basis. The gold content estimate will be
affected by losses (and gains) in three main areas: differences arising out of statistical and sampling variation; dilution in the
mining and transport processes and metallurgical recovery process losses. These factors operate independently of one
another.
82
AngloGold Ashanti’s ore reserves as at December 31, 2004 were 78.9 million ounces. Depletion during the year totaled
7.6 million ounces. The ore reserves in respect of the AngloGold assets alone decreased from 63.1 million ounces as at
December 31, 2003 to 60.9 million ounces as at December 31, 2004. The effect of the Business Combination of AngloGold
with Ashanti was therefore to increase ore reserves by 20.3 million ounces.
Ore reserves have been determined at a gold price of $375 per ounce, with sensitivities at $350 per ounce and $400 per
ounce. In determining the economic parameters to be used, AngloGold Ashanti has been guided by the preferred position of
the SEC, whereby the economic parameters used are based on a three-year historical average. In respect of AngloGold
Ashanti’s South African and Australian assets, exchange rates of ZAR7.86 = $1 and A$1.43 = $1 respectively have been
assumed. The ore reserves are relatively insensitive to changes in gold price and exchange rates of up to 10 percent, positive
or negative.
The principal changes in AngloGold Ashanti’s ore reserves as at December 31, 2004 compared with those published as at
December 31, 2003, for reasons other than depletion, are as follows:
• an increase of 1.2 million ounces at Kopanang with Edom now being included;
• an increase of 1.1 million ounces at Geita due to extensions to the Nyankanga, Lone Cone and Geita Hill orebodies
resulting from additional drilling. A planned relocation of the Nyankanga storm water diversion channel has allowed for an
additional cutback;
• an increase of 0.9 million ounces at AngloGold Ashanti Mineração due to new drilling information which resulted in the
reclassification of the ore reserves at Cuiabá down to 15 level;
• an increase of 0.8 million ounces at Great Noligwa due to the inclusion of the SV2 pillars;
• an increase of 0.6 million ounces at Moab Khotsong due to increased area to be mined and values;
• an increase of 0.4 million ounces at CC&V due to the inclusion of the Wildhorse Extension;
•an increase of 0.2 million ounces at Siguiri due to additions of the Kami North and Eureka North pits, and the planned
treatment of low grade stockpiles;
• an increase of 0.2 million ounces at Savuka due to ground being transferred from TauTona;
•a decrease of 1.2 million ounces at Obuasi due to the removal of remnant blocks, the Anyankyriem surface reserves and
additional drilling information;
• a decrease of 0.6 million ounces at Tau Lekoa due to the exclusion of the Above 800 Project;
• a decrease of 0.6 million ounces at Iduapriem/Teberebie due to the removal of the A Zone;
• a decrease of 0.4 million ounces at TauTona due to reserves transferred to Savuka and a lower Mine Call Factor; and
• a decrease of 0.3 million ounces due to the sale of Freda-Rebecca.
AngloGold Ashanti will continue to pursue a strategy of increasing value-adding reserves through expansion projects,
brownfields and greenfields exploration and acquisition of new assets.
Audit of 2003 mineral resource and ore reserve statement
During the course of the year, the AngloGold Ashanti 2003 mineral resource and ore reserve statement were submitted to
independent consultants for review. The mineral resources and ore reserves from eight of AngloGold Ashanti’s global
operations were randomly selected and subjected to review. The company has been informed that the audit identified no
material shortcomings in the process by which AngloGold Ashanti’s reserves and resources were evaluated. It is the
company’s intention to repeat this process so that all its operations will be audited over a three-year period. The audit of those
operations selected for review during 2005 is currently in progress.
AngloGold Ashanti’s ore reserve statements have been prepared by the competent persons who manage AngloGold Ashanti’s
ore reserves. See “Item 6.: Directors, senior management and employees”.
83
Ore Reserves: Imperial
At December 31, 2004
Proven Ore Reserves
(1)
Probable Ore Reserves
(1)
Metallurgical
Gold
Gold
Recovery
Tons Grade
Content
(1)
Tons Grade
content
(1)
Factor
(mill)
(oz/ton)
(mill oz)
(mill)
(oz/ton)
(mill oz)
%
South Africa
West Wits
Mponeng
(2)
2.8
0.267
0.8
22.8
0.262
6.0
98.5
Savuka
0.1
0.191
0.0
1.9
0.214
0.4
97.6
TauTona
(2)
1.1
0.353
0.4
16.5
0.318
5.2
97.8
Vaal River
Great Noligwa
9.92.4
0.2452.3
2.4
12.08.08
0.2629.30
3.110.38
97.2615
693
795
260
264
231
Kopanang
(6)2.0
3.22.0
0.2122.0
0.77.01
25.37.38
0.2107.37
5.3446
97.9482
486
Moab Khotsong291
(2) (3)277
0.1
0.198
0.0
21.9
0.412
9.0
97.8
281
Tau Lekoa
5.81.5
0.1282.1
0.72.4
19.43.76
0.1123.96
2.23.87
96.7176
265
Surface293
438
410
370
Surface sourcesoperations
7.2
5.8
6.1
0.0180.49
0.10.51
163.50.60
0.017113
2.895
74.3119
283
Ergo287
5.0250
0.011
0.1
–
–
–
55.5
Argentina
Cerro Vanguardia (92.5%)
(4)
0.7
0.291
0.2
6.9
0.200
1.4
95.2
Australia
Boddington (33.33%)
(4)
45.7
0.027
1.3
97.5
0.024
2.4
83-92
(5)
Sunrise Dam
4.8
0.112
0.5
15.6
0.127
2.0
82-90
(5)
Brazil
AngloGold Ashanti Mineraçáo
(formerly Morro Velho)
2.1 0.202
0.4 8.8 0.222 1.9 87-92.9
Serra Grande (50%)
(4)
1.5
0.179
0.3
0.8
0.211
0.2
92.9-96.1
(5)
Ghana
Bibiani
6.2
0.036
0.2
2.4
0.100
0.2
85-95
Iduapriem (85%)
(4)
27.8
0.053
1.5
5.9
0.054
0.3
94.5
Obuasi
15.7
0.086
1.3
40.0
0.206
8.2
75-85
Guinea
Siguiri (85%)
(4)
23.9
0.022
0.5
36.0
0.032
1.2
77-93
Mali
Morila (40%)
(4)
5.3
0.099
0.5
6.1
0.084
0.5
91
Sadiola (38%)
(4)
2.7
0.052
0.1
7.9
0.098
0.8
76-95
(5)
Yatela (40%)
(4)
0.9
0.054
0.0
2.5
0.122
0.3
75-85
(5)
Namibia
Navachab
1.0
0.032
0.0
7.6
0.060
0.5
81-95
(5)
Tanzania
Geita
26.9
0.088
2.4
50.9
0.131
6.7
47-95
(5)
United States of America
Cripple Creek & Victor
52.8
0.031
1.6
81.5
0.027
2.2
61
Total252.0
0.064
16.2
653.4
0.096
62.7
(1)
Ore reserves include marginally economic and diluting materials delivered for treatment and allow for losses that may occur during mining.
(2)
Probable ore reserves include reserves below infrastructure. See table below.
(3)
Negligible proven ore reserves as the mine is still in the development stage.
(4)
Ore reserves attributable to AngloGold Ashanti’s percentage interest shown.
(5)
Recovery factor varies according to ore type.
(6)
Edom has been included, pending approval of a mining license.
The 2004 probable ore reserves include reserves below infrastructure in the case of the following South African mines:
Mine
Tons (millions)
Grade (ounces/ton)
Gold (million ounces)
Mponeng 5.5
0.265
1.5
TauTona 4.8
0.309
1.5
Moab Khotsong
11.2
0.362
4.1
Total 21.5
0.325
7.1
The ore reserves in respect of the remaining AngloGold Ashanti mines do not include any undeveloped ore reserves.
84
Ore Reserves: Imperial
At December 31, 2003
ProvenOreReserves
(1)
ProbableOreReserves
(1)
Metallurgical
Gold
Gold
Recovery
Tons
Grade
Content
(1)
TonsGrade
content
(1)
Factor
(mill) (oz/ton)(mill
oz)(mill)
(oz/ton)(mill
oz)
%
South Africa
West Wits
Mponeng
(2)
3.1
0.255
0.8
25.1
0.263
6.6
98.2%
Savuka
0.4
0.198
0.1
1.2
0.197
0.3
97.7%
TauTona
(2)
1.8
0.382
0.7
18.0
0.327
5.9
97.8%
Vaal River
Great Noligwa
4.4
0.276
1.2
16.4
0.267
4.4
96.5%
Kopanang
(7)
3.7
0.202
0.8
21.8
0.210
4.6
96.9%
Moab Khotsong
(2) (3)
–
0.455
–
17.2
0.438
7.5
97.7%
Tau Lekoa
8.2
0.147
1.2
22.7
0.116
2.6
96.4%
Surface
Surface sources (including Ergo)
38.7
0.012
0.5
169.3
0.016
2.8
53.2-74.3%
(5)
Argentina
Cerro Vanguardia (92.5%)
(4)
7.4
0.214
1.6
0.6
0.296
0.2
95.8%
Australia
Boddington (33.33%)
(4)
45.7
0.027
1.3
97.4
0.024
2.4
83-92%
(6)
Sunrise Dam
6.0
0.121
0.7
18.6
0.126
2.3
80 - 85%
(6)
Brazil
AngloGold Ashanti Mineraçáo
(formerly Morro Velho)
2.5
0.229
0.6
5.7
0.205
1.2
92.8%
Serra Grande (50%)
(4)
1.8
0.180
0.3
0.7
0.221
0.1
93.2 – 96.6%
(6)
Mali
Morila (40%)
(4)
4.9
0.104
0.5
6.5
0.113
0.7
92%
Sadiola (38%)
(4)
2.8
0.056
0.2
8.5
0.103
0.9
82 - 95%
(6)
Yatela (40%)
(4)
1.0
0.033
–
3.7
0.112
0.4
75-85%
(6)
Namibia
Navachab
1.4
0.040
0.1
11.1
0.053
0.6
87-92%
(6)
Tanzania
Geita (50%)
(4)
15.7
0.096
1.5
23.3
0.122
2.8
47.1–95.3%
(6)
United States of America
Cripple Creek & Victor
59.4
0.037
2.2
71.3
0.025
1.8
64%
Total
208.9
0.067
14.1
542.8
0.090
49.0
(1)
Ore reserves include marginally economic and diluting materials delivered for treatment and allow for losses that may occur during mining.
(2)
Probable ore reserves include reserves below infrastructure. See table below.
(3)
Negligible proven ore reserves as the mine is still in the development stage.
(4)
Ore reserves attributable to AngloGold’s percentage interest shown.
(5)
Varies between Ergo (53 percent) and other surface sources (74 percent).
(6)
Recovery factor varies according to ore type.
(7)
Edom has been included, pending approval of a mining license.
The 2003 probable ore reserves include reserves below infrastructure in the case of the following South African mines:
Mine
Tons (millions)
Grade (ounces/ton)
Gold (million ounces)
Mponeng
8.0
0.275
2.2
TauTona
4.9
0.306
1.5
Moab Khotsong
8.8
0.394
3.5
Total 21.7
0.328
7.2
The ore reserves in respect of the remaining AngloGold mines do not include any undeveloped ore reserves.
85
Ore Reserves: Metric
At December 31, 2004
ProvenOreReserves
(1)
ProbableOreReserves
(1)
Metallurgical
Gold
Gold
Recovery
TonnesGrade Content
Tonnes
Grade
Content
Factor
(mill)
(g/t)
(tonnes)
(mill)
(g/t)
(tonnes)
%
South Africa
West Wits
Mponeng
(2)
2.6
9.16
23.4
20.7
8.98
185.4
98.5
Savuka
0.1
6.56
0.6
1.7
7.35
12.3
97.6
TauTona
(2)
1.0
12.10
12.0
14.9
10.89
162.6
97.8
Vaal River
Great Noligwa
9.0
8.39
75.2
10.8
8.97
97.3
97.2
Kopanang
(6)
2.9
7.27
21.0
22.9
7.21
165.6
97.9
Moab Khotsong
(2) (3)
0.1
6.80
0.6
19.8
14.13
280.1
97.8
Tau Lekoa
5.2
4.40
23.0
17.6
3.86
67.9
96.7
Surface
Surface sources
5.6
0.61
3.4
148.3
0.58
85.6
74.3
Ergo
4.5
0.36
1.6
–
–
–
55.5
Argentina
Cerro Vanguardia (92.5%)
(4)
0.6
9.99
6.0
6.2
6.87
42.9
95.2
Australia
Boddington (33.33%)
(4)
41.5
0.94
39.0
88.4
0.84
74.3
83-92
(5)
Sunrise Dam
4.3
3.83
16.6
14.1
4.36
61.6
82-90
(5)
Brazil
AngloGold Ashanti Mineraçáo
(formerly Morro Velho)
1.9
6.92
12.9
8.0
7.62
60.6
87-92.9
Serra Grande (50%)
(4)
1.4
6.13
8.5
0.7
7.22
4.9
92.9-96.1
(5)
Ghana
Bibiani
5.6
1.23
6.9
2.2
3.43
7.5
85-95
Iduapriem (85%)
(4)
25.2
1.81
45.5
5.4
1.85
9.9
94.5
Obuasi
14.2
2.95
41.9
36.3
7.05
255.6
75-85
Guinea
Siguiri (85%)
(4)
21.6
0.77
16.6
32.7
1.10
35.9
77-93
Mali
Morila (40%)
(4)
4.8
3.39
16.1
5.5
2.87
15.9
91
Sadiola (38%)
(4)
2.5
1.80
4.5
7.2
3.37
24.2
76-95
(5)
Yatela (40%)
(4)
0.8
1.86
1.5
2.3
4.18
9.6
75-85
(5)
Namibia
Navachab
0.9
1.09
1.0
6.9
2.06
14.2
81-95
(5)
Tanzania
Geita
24.4
3.01
73.7
46.2
4.49
207.4
47-95
(5)
United States of America
Cripple Creek & Victor
47.9
1.07
51.2
73.9
0.94
69.4
61
Total 228.6
2.20
502.7
592.8
3.29
1,950.8
(1)
Ore reserves include marginally economic and diluting materials delivered for treatment and allow for losses that may occur during mining.
(2)
Probable ore reserves include reserves below infrastructure. See table below.
(3)
Negligible proven ore reserves as the mine is still in the development stage.
(4)
Ore reserves attributable to AngloGold Ashanti’s percentage interest shown.
(5)
Recovery factor varies according to ore type.
(6)
Edom has been included, pending approval of a mining license.
The 2004 probable ore reserves include reserves below infrastructure in the case of the following South African mines:
Mine
Tons (millions)
Grade (ounces/ton)
Gold (million ounces)
Mponeng 5.0
9.09
45.6
TauTona 4.4
10.61
46.6
Moab Khotsong
10.2
12.40
126.6
Total 19.6
11.15
218.8
The ore reserves in respect of the remaining AngloGold Ashanti mines do not include any undeveloped ore reserves.
86
Ore Reserves: Metric
At December 31, 2003
Proven Ore Reserves
(1)
ProbableOreReserves
(1)
Metallurgical
Gold
Gold
Recovery
Tonnes
Grade
Content
Tonnes
Grade
Content
Factor
(mill)
(g/t)
(tonnes)
(mill)
(g/t)
(tonnes)
%
South African operations
South Africa
West Wits
Mponeng
(2)
2.8
8.74
24.5
22.8
9.01
205.3
98.2%
Savuka
0.4
6.79
2.7
1.1
6.76
7.8
97.7%
TauTona
(2)
1.6
13.11
21.3
16.3
11.21
182.3
97.8%
Vaal River
Great Noligwa
4.0
9.46
37.6
14.9
9.16
136.1
96.5%
Kopanang
(7)
3.4
6.94
23.8
19.8
7.19
142.3
96.9%
Moab Khotsong
(2) (3)
–
15.59
0.4
15.6
15.03
234.5
97.7%
Tau Lekoa
7.4
5.05
37.2
20.6
3.99
82.2
96.4%
Surface
Surface sources (including Ergo)
35.1
0.41
14.5
153.6
0.56
86.0
53.2-74.3%
(5)
Argentina
Cerro Vanguardia (92.5%)
(4)
6.7
7.34
49.1
0.5
10.16
5.6
95.8%
Australia
Boddington (33.33%)
(4)
41.5
0.94
39.0
88.4
0.84
74.3
83-92%
(6)
Sunrise Dam
5.4
4.16
22.3
16.9
4.33
72.9
80-85%
(6)
Brazil
AngloGold Ashanti Mineraçáo
(formerly Morro Velho)
2.3
7.84
18.1
5.2
7.01
36.2
87-92.8%
Serra Grande (50%)
(4)
1.6
6.17
10.2
0.6
7.59
4.6
93.2-96.6%
(6)
Mali
Morila (40%)
(4)
4.4
3.55
15.6
5.9
3.88
22.9
92%
Sadiola (38%)
(4)
2.5
1.93
4.8
7.7
3.53
27.3
82-95%
(6)
Yatela (40%)
(4)
0.9
1.12
1.0
3.4
3.84
12.9
75-85%
(6)
Namibia
Navachab
1.3
1.38
1.8
10.1
1.81
18.2
87-92%
(6)
Tanzania
Geita (50%)
(4)
14.2
3.30
46.8
21.1
4.17
88.1
47.1-95.3%
(6)
United States of America
Cripple Creek & Victor
53.9
1.26
67.7
64.7
0.87
56.1
64%
Total
189.5
2.31
438.5
492.4
3.09
1,523.5
(1)
Ore reserves include marginally economic and diluting materials delivered for treatment and allow for losses that may occur during mining.
(2)
Probable ore reserves include reserves below infrastructure. See table below.
(3)
Negligible proven ore reserves as the mine is still in the development stage.
(4)
Ore reserves attributable to AngloGold’s percentage interest shown.
(5)
Varies between Ergo (53 percent) and other surface sources (74 percent).
(6)
Recovery factor varies according to ore type.
(7)
Edom has been included, pending approval of a mining license.
The 2003 probable ore reserves include reserves below infrastructure in the case of the following South African mines:
Mine
Tonnes (millions)
Grade (grams/tonne)
Gold content (tonnes million)
Mponeng
7.3
9.21
67.2
TauTona
4.4
10.61
46.7
Moab Khotsong
8.0(1)
13.50
107.40.2 – –
6.35 – – 44 – –
659 – –
West Wits
Mponeng
1.9
1.7
1.7
9.93
9.15
8.14
596
512
438
238
279
322
Savuka
0.4
0.6
0.8
7.68
6.80
6.19
89
126
158
337
430
455
TauTona
2.0
1.6
1.6
10.18
9.62
10.88
474
502
568
270
256
245
ARGENTINA
Cerro Vanguardia (92.5 percent)
0.9
0.9
0.9
7.29
7.70
7.60
215
211
211
223
171
156
AUSTRALIA
Sunrise Dam
4.0
3.6
3.7
3.39
3.68
3.46
465
455
410
333
269
260
BRAZIL
AngloGold Ashanti Brasil
Mineraçáo
(2)
1.1 1.3 1.0
7.60 7.27 7.85 242 250 240 207 169 133
Serra Grande (50 percent)
0.4
0.4
0.4
7.51
7.93
7.80
97
96
94
196
158
134
GHANA
Bibiani
(3) (5)
2.1
2.4
1.7
0.55
1.46
1.93
37
115
105
432
305
251
Iduapriem
(3) (5)
3.0 3.2 2.2
1.74 1.71 1.72 167 174 125 413 348 303
Obuasi
(2) (5)
6.2 4.7 2.6
4.39 4.77 3.08 387 391 255 397 345 305
GUINEA
Siguiri (85 percent)
(4) (5)
7.0 5.8 2.6
1.08 1.21 1.10 256 246 83 398 301 443
MALI
Morila (40 percent)
1.7
1.5
1.4
3.88
5.41
4.57
207
262
204
266
191
196
Sadiola (38 percent)
1.8
1.9
2.0
3.22
2.73
2.77
190
168
174
268
265
242
Yatela (40 percent)
(6)
1.3 1.3 1.1
4.12 2.99 3.41 141 98 97 241 263 255
NAMIBIA
Navachab
1.5
1.2
1.3
1.81
2.05
1.59
86
81
66
349
321
348
TANZANIA
Geita
(7)
5.7 6.1 4.8
1.68 3.14 3.74 308 613 570 630 298 250
UNITED STATES OF AMERICA
Cripple Creek & Victor
(6)
21.8
19.2 18.2
0.54 0.62 0.61 283 330 329 248 230 220
ZIMBABWE
Freda-Rebecca
(5)(8)
–
–
0.1
-
–
1.66
–
–
9
–
–
417
Table includes equity accounted joint ventures.
(1) Attributable production at Moab Khotsong yielded 29,862 ounces which was capitalized against pre-production costs.
(2) The yield of AngloGold Ashanti Brasil Mineraçáo and Obuasi represents underground operations.
(3) The yield of Bibiani and Iduapriem represents open-pit operations.
(4) The yield at Siguiri arises from the open-pit operations in 2006 and 2005 and the heap leach operation in 2004.
(5) Interest acquired April 26, 2004 with reporting from May 1, 2004.
(6) The yield at Yatela and Cripple Creek & Victor Joint Venture reflects recoverable gold placed/tonnes placed.
(7) 50 percent holding to April 26, 2004 and 100 percent from this date.
(8Freda-Rebecca was sold effective September 1, 2004.
42
SOUTH AFRICA
Location: AngloGold Ashanti’s South Africa region includes seven underground operations located in two geographic
areas on the Witwatersrand Basin. These are:
º theVaal River area, near Klerksdorp and Orkney, in the North West Province and Free State, where the Great
Noligwa, Kopanang, Tau Lekoa and Moab Khotsong (which remains under development) mines are located; and
º theWest Wits area, near Carletonville, straddling the North West Province and Gauteng, where the Mponeng,
TauTona and Savuka mines are located.
The group’s surface metallurgical reclamation operation, Ergo, located near Johannesburg in the province of Gauteng
ceased production in 2005, and is currently being closed in terms of environmental legislation, a process that is expected
to take some years to complete.
Geology: The Witwatersrand Basin comprises a six-kilometer thick sequence of interbedded argillaceous and arenaceous
sediments that extend laterally for some 300 kilometers north-east/south-west and 100 kilometers north-west/south-east
on the Kaapvaal Craton. The upper portion of the basin, which contains the orebodies, crops out at its northern extent
near Johannesburg. Further west, south and east the basin is overlain by up to four kilometers of Archaean, Proterozoic
and Mesozoic volcanic and sedimentary rocks. The Witwatersrand Basin is late Archaean in age and is considered to be
in the order of 2.7 to 2.8 billion years old.
Gold occurs in laterally extensive quartz pebble conglomerate horizons or reefs, generally less than two meters thick, and
are widely considered to represent laterally extensive braided fluvial deposits. Separate fan systems were developed at
different entry points and these are preserved as distinct goldfields. There is still much debate about the origin of the gold
mineralization in the Witwatersrand Basin. Gold was generally considered to have been deposited syngenetically with the
conglomerates, but increasingly an epigenetic origin theory is being supported. Nonetheless, the most fundamental control
to the gold distribution in the Basin remains the sedimentary features, such as facies variations and channel directions.
Gold generally occurs in native form often associated with pyrite and carbon, with quartz being the main gangue mineral.
43
Operating performance: Production declined 5 percent from 2.676 million ounces in 2005 to 2.554 million ounces in
2006, (2004: 2.857 million ounces). Total cash costs improved from $291 per ounce in 2005 to $286 per ounce in 2006, as
a result of a weakening of the rand and cost savings initiatives in the region (2004: $284 per ounce).
Cost savings of $50 million were recorded for the year, primarily as a result of operational efficiencies, improved
procurement practices and restructuring of both the Savuka and Tau Lekoa. The restructuring involved the combining of
the management of the mine Savuka with Mponeng and Tau Lekoa with Kopanang and with both mines being optimized
from a production point of view where volumes were reduced to support the cost saving initiatives.
Great Noligwa and Moab Khotsong together produced 1.38 million pounds of uranium oxide in 2006.
Capital expenditure in 2006 amounted to $321 million, 7 percent lower than that of 2005 at $347
(2004: $333 million), with ore reserve development representing 58 percent of this amount, expansion capital
representing 21 percent and stay-in-business capital representing 21 percent. Major components of the expansion capital
included the completion and commissioning of the Moab Khotsong mine, the deepening project at Mponeng and the
acceleration of the uranium plant upgrade in Vaal River.
• Vaal River operations
Description: AngloGold Ashanti’s Vaal River operations are located in the original Vaal Reefs mining area of the
Witwatersrand Basin and comprise four operating mines, Great Noligwa, Kopanang, Tau Lekoa and Moab Khotsong.
The Vaal River complex also has four gold plants, one uranium plant and one sulphuric acid plant. The Vaal River
processing plants include crushers, mills, CIP and electro-winning facilities and are able to treat between 180,000 and
420,000 tonnes of ore per month.
Although the Vaal River operations produce uranium oxide as a by-product of the production of gold, the value is not
significant relative to the value of gold produced.
Location: The Vaal River operations are located near the towns of Klerksdorp and Orkney in North West and Free State
Provinces.
Geology: In order of importance, the reefs mined at the Vaal River operations are the Vaal Reef, the VCR and the
“C” Reef:
º The Vaal Reef contains approximately 85 percent of the reserve tonnage with mining grades between 10 and 20g/t
and comprises a series of oligomictic conglomerates and quartzite packages developed on successive
unconformities. Several distinct facies have been identified, each with its unique gold distribution and grade
characteristic.
º The VCR has a lower grade than the Vaal Reef, and contains approximately 15 percent of the estimated reserves.
The economic portion is mainly concentrated in the western part of the lease area and can take the form of a massive
conglomerate, a pyritic sand unit with intermittent pebble layers or a thin conglomerate horizon. The reef is located at
the contact between the overlying Kliprivierberg Lavas of the Ventersdorp SuperGroup and the underlying sediments
of the Witwatersrand SuperGroup which creates a distinctive seismic reflector. The VCR is locate d up to one
kilometer above the Vaal Reef.
º The “C” Reef is a thin, small pebble conglomerate with a carbon-rich basal contact, located approximately 270 meters
above the Vaal Reef. It has less than 1 percent of the estimated reserves with grades similar to the Vaal Reef, but
more erratic. The most significant structural features are the north-east striking normal faults which dip to the north-
west and south-east, resulting in zones of fault loss.
44
Vaal River – Summary of metallurgical operations
West GP
East Gold Acid
and Float Plant
Noligwa GP
Mispah GP
Kopanang GP
Gold plants
Capacity (000 tonnes/month)
180
309
263
140
420
Technology
ROM mills (2),
ball mill,
cyanide,
CIL,
elution,
electro-winning
cyanide,
Pumpcell,
elution,
electro-winning
ROM (2), cyanide,
CIP,
elution, electro-
winning
ROM,
Cyanide,
CIP, elution,
electro-winning
ROM mills (6),
cyanide,
CIP,
elution, electro-
winning
Uranium plants
Capacity (000 tonnes/month)
–
–
263
Pyrite flotation plants
Capacity (000 tonnes/month)
–
250
145
Sulphuric acid plants
Production(tonnes/month)
–
7,500
–
Operating and production data for Vaal River operations
Great Noligwa
Kopanang
Tau Lekoa
Moab Khotsong
(3)
2006
Pay limit (oz/t)
0.28
0.32
0.14
1.50
Pay limit (g/t)
9.57
10.92
4.85
51.44
Recovered grade (oz/t)
0.236
0.204
0.110
0.185
Recovered grade (g/t)
8.08
7.01
3.76
6.35
Gold production (000 oz)
615
446
176
44
Total 19.7cash costs ($/oz)
11.25(1)
221.3260
291
438
659
Total production costs ($/oz)
(1)
374
377
693
1,136
Capital expenditure ($ million)
49
41
11
83
Employees
(2)
5,883
5,360
2,514
1,539
Outside contractors
(2)
696
455
379
1,365
2005
Pay limit (oz/t)
0.39
0.39
0.19
-
Pay limit (g/t)
13.24
13.25
6.23
-
Recovered grade (oz/t)
0.271
0.215
0.116
-
Recovered grade (g/t)
9.30
7.38
3.96
-
Gold production (000 oz)
693
482
265
-
Total cash costs ($/oz)
(1)
264
277
410
-
Total production costs ($/oz)
(1)
354
363
555
-
Capital expenditure ($ million)
43
41
15
94
Employees
(2)
5,704
5,506
3,021
1,320
Outside contractors
(2)
1,152
524
1,084
1,201
2004
Pay limit (oz/t)
0.48
0.43
0.20
-
Pay limit (g/t)
14.36
14.52
6.81
-
Recovered grade (oz/t)
0.303
0.215
0.113
-
Recovered grade (g/t)
10.38
7.37
3.87
-
Gold production (000 oz)
795
486
293
-
Total cash costs ($/oz)
(1)
231
281
370
-
Total production costs ($/oz)
(1)
268
325
444
-
Capital expenditure ($ million)
36
38
25
80
Employees
(2)
6,192
5,758
3,398
1,066
Outside contractors
(2)
908
554
854
808
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.:
Operating results – Total cash costs and total production costs”.
(2)
Average for the year.
(3)
Commercial production commenced on January 1, 2006.
45
Operating performance:
Great Noligwa: In 2006, production declined by 11 percent to 615,000 ounces from 693,000 produced in 2005
(2004: 795,000) due primarily to a 13 percent yield decline, from 9.3g/t in 2005 to 8.08g/t in 2006 (2004: 10.38g/t). Total
cash costs rose by 5 percent in rand terms to R56,390 per kilogram from R53,868 per kilogram in 2005, due to lower gold
production (2004: R47,820 per kilogram). The continued focus on cost savings helped to limit the effect of reduced
production on the operation’s costs. In dollar terms, total cash costs improved by 1 percent to $260 per ounce in 2006
from $264 per ounce in 2005 (2004: $231 per ounce). Capital expenditure at $49 million was 14 percent higher than the
$43 million spent in 2005 (2004: $36 million), mainly as a consequence of the acceleration of a plan to upgrade the
operation’s uranium plant.
Kopanang: In 2006, production declined by 7 percent to 446,000 ounces from 482,000 ounces produced in 2005
(2004: 486,000 ounces) as a result of a lower mine call factor and a 5 percent decline in yield from 7.38g/t in 2005 to
7.01g/t in 2006 (2004: 7.37g/t). Consequently, total cash costs increased by 6 percent to $291 per ounce in 2006, from
$277 per ounce in 2005 (2004: $281 per ounce). Total cash costs, in rand terms, rose by 11 percent to R62,908 per
kilogram from R56,427 per kilogram in 2005. Capital expenditure of $41 million was unchanged from that of 2005
(2004: $38 million).
Tau Lekoa: Tau Lekoa was downscaled in 2006 in order to return the operation to profitability in a rising gold price
environment. As a result, production in 2006 declined by 34 percent from 265,000 ounces produced in 2005 to
176,000 ounces produced in 2006 (2004: 293,000 ounces).
Consequently, total cash costs increased by 7 percent from $410 per ounce in 2005 to $438 per ounce in 2006
(2004: $370 per ounce) and in rand terms, total cash costs, increased by 12 percent to R94,365 per kilogram in 2006 from
R83,885 per kilogram in 2005 (2004: R76,428 per kilogram). Capital expenditure at $11 million declined by 27 percent on
2005’s spend of $15 million (2004: $25 million).
Moab Khotsong commenced commercial production in January 2006 and the operation was marked by the high total
cash costs and low volumes typical of a deep-level underground operation’s start-up phase. In 2006, production was
44,000 ounces and total cash costs were $659 per ounce or R142,364 per kilogram. Capital expenditure of $83 million in
2006 was 12 percent lower than the spend in 2005 of $94 million (2004: $80 million).
Growth prospects: In 2007, production at Moab Khotsong is expected to increase to some 80,000 ounces and total
cash costs should decline accordingly as this operation builds up to full production, likely in 2012.
•
West Wits operations
Description: The West Wits operations comprise Mponeng, Savuka and TauTona mines. Savuka and TauTona share a
processing plant, whereas Mponeng has its own individual processing plant. These plants comprise crushers, mills,
CIP and zinc precipitation and smelting facilities.
Location: The West Wits operations are located near the town of Carletonville in North West Province, south-west of
Johannesburg, straddling the boundary with Gauteng.
Geology: Two reef horizons are exploited at the West Wits operations, the Ventersdorp Contact Reef (VCR) located at the
top of the Central Rand Group and the Carbon Leader Reef (CLR) near the base. The separation between the two reefs
increases from east to west from 400 to 900 meters, owing to unconformity in the VCR. TauTona and Savuka exploit both
reefs whereas Mponeng only mines the VCR. The structure is relatively simple; faults of greater than 70 meters are rare.
The CLR consists of one or more conglomerate units and varies from several centimeters to more than three meters in
thickness. Regionally, the VCR dips at approximately 21 degrees but may vary between 5 and 50 degrees, accompanied
by changes in thickness of the conglomerate units. Where the conglomerate has the attitude of the regional dip, it tends to
be thick, well-developed and accompanied by higher gold accumulations. Where th e attitude departs significantly from the
regional dip, the reef is thin, varying from several centimeters to more than three meters in thickness.
46
West Wits – Summary of metallurgical operations
Mponeng Savuka
Gold plants
Capacity (000 tonnes/month)
160
280
Technology
ROM mills (3),
cyanide,
CIL,
elution,
electro-winning
crushers,
tube mills,
ball mills,
cyanide,
Pumpcell
Operating and production data for West Wits operations
Mponeng
TauTona
Savuka
2006
Pay limit (oz/t)
0.23
0.53
0.31
Pay limit (g/t)
7.74
18.25
10.75
Recovered grade (oz/t)
0.290
0.297
0.224
Recovered grade (g/t)
9.93
10.18
7.68
Gold production (000 oz)
596
474
89
Total cash costs ($/oz)
(1)
238 270 337
Total production costs ($/oz)
(1)
374 411 359
Capital expenditure ($ million)
48
70
2
Employees
(2)
4,760
4,164
975
Outside contractors
(2)
524
1,002
65
2005
Pay limit (oz/t)
0.34
0.72
0.45
Pay limit (g/t)
11.53
24.43
15.18
Recovered grade (oz/t)
0.267
0.281
0.198
Recovered grade (g/t)
9.15
9.62
6.80
Gold production (000 oz)
512
502
126
Total cash costs ($/oz)
(1)
279 256 430
Total production costs ($/oz)
(1)
383 388 524
Capital expenditure ($ million)
47
74
6
Employees
(2)
4,897 4,459 2,178
Outside contractors
(2)
677 996 147
2004
Pay limit (oz/t)
0.41
0.73
0.44
Pay limit (g/t)
13.71
24.47
14.89
Recovered grade (oz/t)
0.237
0.317
0.181
Recovered grade (g/t)
8.14
10.88
6.19
Gold production (000 oz)
438
568
158
Total cash costs ($/oz)
(1)
322 245 455
Total production costs ($/oz)
(1)
393 319 639
Capital expenditure ($ million)
62
65
8
Employees
(2)
5,164 4,673 3,001
Outside contractors
(2)
712 825 228
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.:
Operating results – Total cash costs and total production costs”.
(2)
Average for the year.
47
Operating performance:
Mponeng: During 2006, yield rose to 9.93g/t from 9.15g/t in 2005 (2004: 8.14g/t). As a result of the higher volumes and
improved yield, gold production increased by 16 percent from 512,000 ounces in 2005 to 596,000 ounces in 2006
(2004: 438,000 ounces). Consequently, total cash costs declined by 15 percent to $238 per ounce from $279 per ounce in
2005 (2004: $322 per ounce). In local currency terms, total cash costs were at R51,666 per kilogram, 9 percent down on
2005 total cash costs of R57,084 per kilogram as a result of the higher volumes and improved yield aided by the benefit of
the cost savings initiatives undertaken in the beginning of the year. Capital expenditure increased marginally from
$47 million in 2005 to $48 million in 2006 (2004: $62 million).
TauTona: During 2006, production declined by 6 percent to 474,000 ounces from 502,000 ounces produced in 2005, due
to planned lower volumes mined and seismicity concerns in the first and fourth quarters of 2006 (2004: 568,000 ounces).
Total cash costs rose by 5 percent to $270 per ounce from $256 per ounce in 2005 (2004: $245 per ounce). In rand terms,
total cash costs increased by 12 percent to R58,631 per kilogram. Capital expenditure at $70 million was 5 percent lower
than the spend in 2005 of $74 million (2004: $65 million).
Savuka: While it had been reported in 2005 that Savuka had entered an accelerated closure mode, the strength of the
gold price in 2006 instead resulted in the implementation of a restructuring plan and the operation’s life has been extended
at a lower production rate.
Management of Savuka is now included under that of the neighboring Mponeng mine. Production for 2006 totaled
89,000 ounces which, although 29 percent less than the 126,000 ounces produced in 2005, was 535 percent more than
had been planned (2004: 158,000). The overall grade for the year increased from 6.80g/t achieved in 2005 to 7.68g/t
achieved in 2006 (2004: 6.19g/t).
In local currency, total cash costs decreased 16 percent from R87,200 per kilogram in 2005, to R73,055 per kilogram in
2006, while in dollar terms, cash costs were down 22 percent to $337 per ounce from $430 per ounce in 2005
(2004: $455 per ounce). Capital expenditure for 2006 was minimal at $2 million compared with 2005’s capital expenditure
of $6 million (2004: $8 million).
Growth prospects:
Mponeng VCR below 120 project: This project consists of four parallel declines sunk from the 120 level to gain access
to the VCR reef on levels 123 and 126. The declines will be equipped with a conveyor belt, monorail and chairlift to service
the new mining areas. The project, from which production is expected to commence in 2013, is expected to produce
2.5 million ounces of gold over a period of ten years, at a capital cost of $252 million, and is expected to extend the life of
the mine by approximately eight years. Construction will begin in early 2007.
TauTona CLR below 120 level project: The CLR reserve block below 120 level is being accessed via a twin decline
system into its geographical centre, down to 128 level. The project, from which production is expected to commence in
2008, is expected to produce 2.6 million ounces of gold over a period of nine years (2009 to 2017), at a capital cost of
$168 million. Of this, $56 million has been spent to date.
TauTona CLR shaft pillar extraction project: This project allows for stoping operations up to the infrastructural zone of
influence. The project, from which production commenced in 2004, is expected to produce 534,000 ounces of gold over a
period of six years (2004 to 2009), at a capital cost of $45 million (converted at the 2005 closing exchange rate), most of
which has been committed.
VCR pillar project: This project aims to access the VCR pillar area situated outside the zone of influence (top and
eastern block). The project, from which production commenced in 2005, is expected to produce 200,000 ounces of gold
over a period of eight years (2005 to 2012), at a capital cost of $19 million (at the 2005 closing exchange rate). Of this,
$11 million has been spent to date.
48
ARGENTINA
AngloGold Ashanti has a single operation in Argentina, the Cerro Vanguardia mine. This operation was acquired as part
of the Minorco transaction effective March 31, 1999, at which time AngloGold held a 46.25 percent stake. AngloGold
Ashanti has a 92.5 percent interest in the Cerro
Vanguardia mine following the acquisition of an
additional 46.25 percent in July 2002, while the Santa
Cruz Province has a 7.5 percent interest.
Description: Cerro Vanguardia consists of multiple
small open-pits with high stripping ratios. The
orebodies comprise a series of hydrothermal vein
deposits containing vast quantities of silver, which is
produced as a by-product.
Throughput has increased steadily since the first gold
was poured in September 1998, from an original
design capability of 1,800 tpd to the present level of
2,700 tpd. Cerro Vanguardia’s lease area is 514 square
kilometers.
Location: The Cerro Vanguardia operation is located
to the north-west of Puerto San Julian in the Province
of Santa Cruz, Argentina. The company owns the
right to exploit the deposit for 40 years based on the
Usufruct Agreement signed in December 1996. The
operation, which was constructed at a total cost of
$270 million, was commissioned in the fourth quarter
of 1998.
Geology: The oldest rocks in this part of Patagonia
are metamorphics of the Precambrian-Cambrian age.
These are overlain by Permian and Triassic
continental clastic rocks which have been faulted into
a series of horsts and grabens and are associated
with both limited basaltic sills and dykes and with
calc-alkaline granite and granodiorite intrusions.
Thick andesite flows of Lower Jurassic age occur
above these sedimentary units. A large volume of
rhyolitic ignimbrites was emplaced during the Middle
and Upper Jurassic age over an area of
approximately 100,000 square kilometers. These
volcanic rocks include the Chon Aike formation
ignimbrite units that host the gold bearing veins at
Cerro Vanguardia. Post-mineral units include
Cretaceous and Tertiary rocks of both marine and
continental origin, the Quaternary La Avenida
formation, the Patagonia gravel and the overlying
La Angelita basalt flows. These flows do not cover the area of the Cerro Vanguardia veins.
Gold and silver mineralization at Cerro Vanguardia occurs within a vertical range of about 150 to 200 meters in a series of
narrow, banded quartz veins that occupy structures within the Chon Aike ignimbrites. These veins form a typical structural
pattern related to major north-south (Concepcion) and east-west (Vanguardia) shears. Two sets of veins have formed in
response to this shearing - one set strikes about N40W and generally dips 65 to 90 degrees to the east; while the other set
strikes about N75W and the veins dip 60 to 80 degrees to the south.
49
The veins are typical of epithermal, low-temperature, adularia-sericite character and consist primarily of quartz in several
forms: as massive quartz, banded chalcedonic quartz, and quartz-cemented breccias. Dark bands in the quartz are due to
finely disseminated pyrite, now oxidized to limonite. The veins show sharp contacts with the surrounding ignimbrite which
hosts narrow stockwork zones that are weakly mineralized and appear to have been cut by a sequence of north-east-
trending faults that have southerly movement with no appreciable lateral displacement.
Cerro Vanguardia – Summary of metallurgical operations
Gold plants
Capacity (000 tonnes/month)
82
Technology
Crushers,
scrubber,
ball mill,
CCD,
leach in cyanide,
CIL,
elution,
zinc-precipitation,
electro-winning
Operating and production data for Cerro Vanguardia
2006 20052004
Pay limit (oz/t)
0.13 0.12 0.12
Pay limit (g/t)
4.56 4.02 4.05
Recovered grade (oz/t)
0.213
0.225
0.222
Recovered grade (g/t)
7.29
7.70
7.60
Gold production (000 oz) 100 percent
232
228
229
Gold production (000 oz) 92.50 percent
215
211
211
Total cash costs ($/oz)
(1)
223
171
156
Total production costs ($/oz)
(1)
372
270
284
Capital expenditure ($ million) 100 percent
19
15
13
Capital expenditure ($ million) 92.50 percent
18
14
12
Employees
(2)
623 487 389
Outside contractors
(2)
283
459
402
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(2)
Average for the year.
Operating performance: At Cerro Vanguardia attributable gold production in 2006 increased by 2 percent to
215,000 ounces from 211,000 ounce produced in 2005 (2004: 211,000 ounces). While the yield varied over the course of
the year as anticipated, the average grade in 2006 was 7.29g/t compared with an average grade of 7.7g/t in 2005
(2004: 7.60g/t). Ore throughput increased 8 percent to 1 million tonnes in 2006. Total cash costs rose by 30 percent to
$223 per ounce from $171 per ounce in 2005 (2004: $156 per ounce), mainly as a result of higher local inflation and
increases in both commodity prices and mine maintenance costs. The higher mine maintenance costs were associated
with a programme undertaken in 2006 to improve the availability of mine equipment.
Capital expenditure for the year amounted to $18 million, 29 percent higher than the $14 million spent in 2005
(2004: $12 million). The increase in expenditure was mainly due to the purchase of new and replacement mine equipment
and expenditures related to the heap leaching project currently underway.
Growth prospects: During 2006, Cerro Vanguardia began an accelerated four-year brownfields exploration programme,
the focus of which is shallow, high grade mineral resources. Results have so far been encouraging, with 39,000 meters of
reverse circulation drilling and 14,000 meters of diamond drilling completed in 2006. Since 1998, Cerro Vanguardia has
been stockpiling low-grade material with the intention of treating it through an industrial-size heap-leach operation. As of
December 2006, 9.5 million tonnes of this material had been stockpiled and a study to confirm the viability of the heap-
leach pad was also initiated in 2006 and is ongoing.
50
AUSTRALIA
AngloGold Ashanti has two mines in Australia, Sunrise Dam and Boddington, both located in the western part of the
country. The Sunrise Dam mine is 100 percent owned by AngloGold Ashanti, while the Boddington project, which is
currently under construction and in which AngloGold Ashanti holds 33.33 percent equity, is a joint venture with Newmont
Mining Corporation.
Australia – Summary of metallurgical operations
Sunrise Dam
Boddington
Gold plants
Under construction
Capacity (000 tonnes/month)
300
3,000
Technology
crushers,
ball mill,
gravity concentrate,
CIL,
elution,
electro-winning
crushers,
HBDI, ball mill, floatation gravity
concentrate, CIL, elution, electro-winning
• Sunrise Dam
Description: Sunrise Dam comprises a large open-pit and an underground project. Mining is carried out by contractors
and ore is treated in a conventional gravity and leach process plant.
Location: Sunrise Dam gold mine lies some 220 kilometers north-northeast of Kalgoorlie and 55 kilometers south of
Laverton in Western Australia.
Geology: Gold ore at Sunrise Dam is structurally and lithologically controlled within gently dipping high strain shear zones
(for example, Sunrise Shear) and steeply dipping brittleductile low strain shear zones (for example, Western Shear). Host
rocks include andesitic volcanic rocks, volcanogenic sediments and magnetic shales.
51
Operating and production data for Sunrise Dam
2006 2005 2004
Pay limit (oz/t)
0.050.070.07
Pay limit (g/t)
1.642.272.14
Recovered grade (oz/t)
(2)
0.099
0.107
0.110
Recovered grade (g/t)
(2)
3.39
3.68
3.46
Gold production (000 oz)
465
455
410
Total cash costs ($/oz)
(1)
333
269
260
Total production costs ($/oz)
(1)
406
367
337
Capital expenditure ($ million)
24
34
25
Employees
(3)
99 95 88
Outside contractors
(3)
283
280
268
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(2) Open-pit operations
(3)
Average for the year.
Operating performance: Production increased slightly in 2006 to 465,000 ounces from 455,000 ounces in 2005
(2004: 410,000 ounces) primarily due to the operation’s highest-ever quarterly production of 153,000 ounces in the final
quarter, when mining concentrated, as planned, on the high-grade GQ lode in the open pit. Mining from the known
underground reserves increased, especially in the Sunrise and Western Shear zones. Gold production from the
underground mine was 67,000 ounces. Record throughput was achieved in the process plant as a result of additional
crushing and grinding circuit optimization. Recovered grade from open-pit operations declined marginally to 3.39g/t
compared with 3.68g/t recovered in 2005 (2004: 3.46g/t). Total cash costs increased to $333 per ounce from
$269 per ounce in 2005 primaril y as a result of increased diesel fuel prices and mining contractor rates
(2004: $260 per ounce).
Progress continued on the Sunrise Dam underground development. Capital expenditure amounted to $24 million
compared with $34 million in 2005 (2004: $25 million)
Growth prospects: The underground mining project involves the development of two declines and 125,000 meters of
drilling from surface and underground. These declines have been developed in the vicinity of defined underground
reserves, which are now being mined. They have also provided access for underground drilling.
• Boddington (attributable 33.33 percent)
Description: The former dominantly oxide open-pit operation closed at the end of 2001. Following Newmont’s purchase
of Newcrest’s share of the project in March of 2006, Newmont holds a 66.66 percent share in the project and AngloGold
Ashanti a 33.33 percent share.
Location: The operation is located approximately 100 kilometers south-east of Perth.
Geology: Boddington is located in the Saddleback Greenstone Belt, a northwest-trending fault-bounded silver of
greenstones about 50 kilometers long and eight kilometers wide within the Archaean Yilgarn Craton. The Boddington
resource is located within a six kilometer strike length and consists of felsic to intermediate volcanics and related
intrusives. The resource is subdivided into Wandoo South and Wandoo North. Wandoo South is centered on a composite
diorite stock with five recognizable intrusions. Wandoo North is dominated by diorites with lesser fragmental volcanic
rocks.
52
Operating and production data for Boddington
2006 2005 2004
Pay limit (oz/t)
–––
Pay limit (g/t)
–––
Recovered grade (oz/t)
–– –
Recovered grade (g/t)
– ––
Gold production (000 oz) 100 percent
–
–
–
Gold production (000 oz) 33.33 percent
–
–
–
Total cash costs ($/oz)
(1)
–
–
–
Total production costs ($/oz)
(1)
–
–
–
Capital expenditure ($ million) 100 percent
180
12
8
Capital expenditure ($ million) 33.33 percent
60
4
3
Employees
(2)
12 18 12
Outside contractors
(2)
85 48 33
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(2)
Average for the year.
Operating performance and Growth prospects: In March 2006 the Boddington expansion project was approved. On a
100 percent project basis, approximately $669 million of a total budget of $1.35 billion to $1.5 billion had been committed
by the end of 2006. Based on the current mine plan, mine life is estimated to be approximately 17 years, with attributable
life of mine gold production totaling 4.7 million ounces of gold.
Capital expenditure for 2007 is expected to be approximately $312 million for the project. At the end of 2006, engineering
was approximately 42 percent complete, and site construction had begun. The project is on schedule to start up early
2009
.
BRAZIL
AngloGold Ashanti’s operations in Brazil were acquired as part of the Minorco transaction effective March 31, 1999 and
comprise the wholly-owned AngloGold Ashanti Brasil Mineração and a 50 percent interest in Serra Grande. In 2006, these
mines together produced 339,000 attributable ounces of gold at total cash costs of $207 per ounce and $196 per ounce,
respectively.
Brazil – Summary of metallurgical operations
AngloGold
Ashanti
Mineração
Serra
Grande
Cuiabá
Raposos
Gold plants
Capacity (000 tonnes/month)
70
24
66
Technology
crushers,
ball mill,
gravity concentration,
flotation,
roaster;
acid plant,
calcine leach,
Gold CCD,
CIP,
elution,
zinc-precipitation,
refinery.
crushers,
ball mill,
gravity concentration,
cyanideleach,
CIP,
zinc-precipitation
refinery
crushers,
ball mill,
gravity concentration,
cyanide,
rotary filters,
zinc-precipitation,
53
AngloGold Ashanti Brasil Mineração
Description: Since the closing of the Mina Velha underground mine in 2003 and the Engenho D’Água open-pit in 2004,
ore is now sourced from the Cuiabá underground mine, (this ore is treated at the Queiroz plant) and from the Córrego do
Sítio heap-leach operation. In January 2005, the board approved a major expansion at Cuiabá.
Location: AngloGold Ashanti Brasil
Mineração has mining rights over
30,698 hectares in the state of Minas
Gerais, in south-eastern Brazil. The
AngloGold Ashanti Brasil Mineração
complex is located in the
municipalities of Nova Lima, Sabará
and Santa Bárbara, near the city of
Belo Horizonte in the State of Minas
Gerais in south-eastern Brazil.
Geology: The area in which
AngloGold Ashanti Brasil Mineração
is located is known as the Iron
Quadrangle and is host to historic
and current gold mining operations,
as well as a number of open-pit
limestone and iron ore operations.
The geology of the Iron Quadrangle
is composed of Proterozoic and
Archaean volcano-sedimentary
sequences and Pre-Cambrian
granitic complexes. The host to the
gold mineralization is the volcano-sedimentary Nova Lima Group (NLG) that occurs at the base of the Rio das Velhas
SuperGroup (RDVS). The upper sequence of the RDVS is the meta-sedimentary Maquiné Group. Cuiabá mine, located at
Sabara Municipality, has gold mineralization associated with sulphides and quartz veins in Banded Ironstone Formation
(BIF) and volcanic sequences. At this mine, structural control and fluids flow ascension are the most important factors for
gold mineralization with a common association between large-scale shear zones and their associated structures. Where
BIF is mineralized the ore appears strongly stratiform due to the selective sulphidation of the iron rich layers. Steeply
plunging shear zones tend to control the ore shoots, which commonly plunge parallel to intersections between the shears
and other structures.
The controlling mineralization structures are the apparent intersection of thrust faults with tight isoclinal folds in a ductile
environment. The host rocks at AngloGold Ashanti Brasil Mineração are BIF, Lapa Seca and mafic volcanics (principally
basaltic). Mineralization is due to the interaction of low salinity carbon dioxide rich fluids with the high-iron BIF, basalts and
carbonaceous graphitic schists. Sulphide mineralization consists of pyrrhotite and pyrite with subordinate pyrite and
chalcopyrite; the latter tends to occur as a late-stage fracture fill and is not associated with gold mineralization. Wallrock
alteration is typically carbonate, potassic and silicic.
Operating performance: Production declined at AngloGold Ashanti Brasil Mineração in 2006 to 242,000 ounces from
250,000 ounces in 2005, when production included some trial mining projects as well as the gold remnants from the clean-
up of the old Morro Velho facilities. Total cash costs increased by 22 percent from $169 per ounce in 2005 to
$207 per ounce in 2006 (2004: $133 per ounce) due to inflation and the strong real.
54
Operating and production data for AngloGold Ashanti Brasil Mineração
2006 2005 2004
Pay limit (oz/t)
0.09 0.11 0.11
Pay limit (g/t)
3.10 3.863.85
Recovered grade (oz/t)
(1)
0.222
0.212
0.229
Recovered grade (g/t)
(1)
7.60
7.27
7.85
Gold production (000 oz)
242
250
240
Total cash costs ($/oz)
(2)
207
169
133
Total production costs ($/oz)
(2)
301
260
200
Capital expenditure ($ million)
168
71
32
Employees
(3)
1,546
1,363
1,222
Outside contractors
(3)
2,065
1,234
1,021
(1)
Recovered grade represents underground operations
(2)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(3)
Average for the year.
Growth prospects:
Cuiabá expansion project: This project seeks to increase production at the Cuiabá mine from 830,000 tonnes per annum
to 1.3 million tonnes and includes the construction of new treatment and tailings storage facilities, roaster, and acid plant
at an estimated total capital cost of $180 million. The Cuiabá expansion project is expected to involve the deepening of the
mine from 11 level to 21 level and is expected to result in an annual average production increase from 190,000 ounces to
260,000 ounces from the beginning of 2007; in this first operational year of the expansion, production is expected to reach
around 300,000 ounces. The project is anticipated to add six years to the life of mine.
Corrego do Sitio underground sulphides project: This relates to the potential sulphide ore of the Córrego do Sítio
underground orebodies, which consist of Cachorro Bravo, Laranjeira and Carvoaria. This project is expected to produce
1.4 million ounces of gold over 14 years from 6.8 million tonnes of milled ore. Development of a ramp and the exposure of
the Cachorro Bravo orebody are underway, as is the development of drives to access the Laranjeira and Carvoaria
orebodies.
Serra Grande (attributable 50 percent)
Description: Serra Grande is co-owned with Kinross Gold Corporation. In terms of the Serra Grande agreement,
AngloGold Ashanti manages the operation and has the right to access a maximum of 50 percent of the earnings accrued
and dividends paid by Serra Grande. The operation comprises two underground mines, Mina III and Mina Nova, and one
open pit at Mina III, which will begin operation in 2007.
Location: The Serra Grande operations are located 5 kilometers from the city of Crixás in the north-western areas of the
Goiás State in central Brazil. Serra Grande controls, or has an interest in, approximately 21,096 hectares in and around
the Crixás mining district. .
Geology: The deposits occur in the Rio Vermelho and Ribeirão das Antes Formations of the Archaean Pilar de Goia’s
Group which together account for a large proportion of the Crixás Greenstone Belt in central Brazil.
55
The stratigraphy of the belt is dominated by basics and ultrabasics in the lower sequences with volcano sedimentary units
forming the upper successions.
The gold deposits are hosted in a sequence of schists, volcanics and carbonates occurring in a typical greenstone belt
structural setting. The host rocks are of the Pilar de Goiás Group of the Upper Archaean. Gold mineralization is associated
with massive sulphides and vein quartz material associated with graphitic and sericitic schists and dolomites. The
oreshoots plunge to the north-west with dips of between 6 and 35 degrees. The stratigraphy is overturned and thrusts
towards the east.
The greenstone belt lithologies are surrounded by Archaean tonalitic gneiss and granodiorite. The metamorphosed
sediments are primarily composed of quartz, chlorite, sericite, graphitic and garnetiferous schists. The carbonates have
been metamorphosed to ferroan dolomite marble with development of siderite and ankerite veining in the surrounding
wallrock, usually associated with quartz veining. The basalts are relatively unaltered but do show pronounced stretching
with elongation of pillow structures evident.
The Crixás greenstone belt comprises a series of Ardhaean to Palaeoproterozoic metavulcanics, metasediments and
basement granitoids stacked within a series of north to north-east transported thrust sheet. Thrusting (d1) was
accompanied by significant F1 folding/foliation development and progressive alteration in a brittle-ductile regime.
D1 thrusting developed with irregular thrust ramp geometry, in part controlled by concealed early basin faults. The main
Crixás orebodies are adjacent to a major north-north-west structural corridor, and up the main fault ramp/corner, to
become dispersed to the east and north in zones of foreland thrust flats. Fluid alteration also diminished to the west away
from the main fault corner. A series of concealed east-west to north-west-south-east basement block faults may have
provided secondary fluid migration, and development of early anti-formal warps in the t hrust sheets; these structures
probably define the quasi-regular spacing of significant mineralization within the belt. The D1 thrust stack was gently
folded by non-cylindrical folds. Gold mineralizing fluids probably migrated during this event, with similar south-south-west
to north-north-east migration, and focusing on bedding slip during folding. Gold mineralization became minor and
dispersed to the north and east along the formal thrust flat zone. Concentrations of gold along the case of quartz vein may
be due to the damming of fluids migrating upward along layering.
Operating and production data for Serra Grande
2006 2005 2004
Pay limit (oz/t)
0.090.090.09
Pay limit (g/t)
3.24 3.023.17
Recovered grade (oz/t)
0.219
0.231
0.228
Recovered grade (g/t)
7.51
7.93
7.80
Gold production (000 oz) 100 percent
194
192
187
Gold production (000 oz) 50 percent
97
96
94
Total cash costs ($/oz)
(1)
196
158
134
Total production costs ($/oz)
(1)
278
229
223
Capital expenditure ($ million) 100 percent
17
13
7
Capital expenditure ($ million) 50 percent
8
7
4
Employees
(2)
609566514
Outside contractors
(2)
208
209
196
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(2)
Average for the year.
Operating performance: Attributable production at Serra Grande rose from 96,000 ounces in 2005 to 97,000 ounces in
2006 (2004: 94,000 ounces) The steady appreciation of the Brazilian real, combined with lower grades, resulted in a
24 percent total cash cost increase to $196 per ounce from $158 per ounce in 2005 (2004: $134 per ounce) in spite of
stable production.
Growth prospects: The Serra Grande brownfields exploration programme is focused on increasing reserves and
resources in areas around Mina III, Mina Nova, and the Palmeiras project by means of underground and surface diamond
drilling. A study was carried out in 2006 proving the viability of mining the Mina III open pit, with production expected to
begin in mid-2007. Exploration campaigns at the nearby Palmeiras orebody are underway, with results justifying the
construction of an exploratory ramp and an underground conceptual study, which is also expected to begin in mid-2007.
56
GHANA
AngloGold Ashanti’s operations in Ghana together produced 592,000 ounces of attributable gold in 2006, at a total cash
cost of $404 per ounce.
Description: AngloGold Ashanti has two operations in
Ghana: the Obuasi mine (which comprises both surface
and underground operations) and the Iduapriem mine
(open-pit). The Bibiani mine (open-pit with underground
development) was sold effective December 28, 2006.
Obuasi
Description: Obuasi is primarily an underground
operation, although some surface mining still takes
place. Ore is processed by two main treatment plants:
the sulphide plant (for underground ore) and the tailings
plant (for tailings reclamation operations). A third plant,
the oxide plant, is used to batch-treat remnant open-pit
ore and stockpiles, of which there are adequate
tonnages to keep the plant operational until 2008.
Location: The Obuasi mine is located in the Ashanti
region in the south of Ghana.
Geology: The gold deposits at Obuasi are part of a
prominent gold belt of Proterozoic (Birimian) volcano-
sedimentary and igneous formations which extend for a
distance of approximately 300 kilometers in a
north-east/south-west trend in south-western Ghana.
Obuasi mineralization is shear-zone related and there
are three main structural trends hosting gold
mineralization: the Obuasi trend, the Gyabunsu trend
and the Binsere trend.
Two main ore types are mined:
· quartz veins which consist mainly of quartz with free gold in association with lesser amounts of various metal
sulphides such as iron, zinc, lead and copper. The gold particles are generally fine-grained and occasionally are
visible to the naked eye. This ore type is generally non-refractory; and
·sulphide ore which is characterized by the inclusion of gold in the crystal structure of a sulphide material. The gold in
these ores is fine-grained and often locked in arsenopyrite. Higher gold grades tend to be associated with finer
grained arsenopyrite crystals. Other prominent minerals include quartz, chlorite and sericite. Sulphide ore is generally
refractory.
Ghana – Summary of metallurgical operations
Obuasi
Bibiani
Iduapriem
Sulphide
Treatment
Plant
Tailings
Treatment Plant
Oxide
Treatment Plant
Gold plants
Capacity
(000 tonnes/month)
200 200
150
225
375
Technology
BIOX
process,
cyanide leaching,
CIL,
electro-winning
CIL,
ball mills,
cyanide leaching,
electro-winning
CIL,
mill,
cyanide
leaching,
electro-winning
CIL,
Crushing, SAG
milling, ball
milling, cyanide
leach,
CIP,
elution,
Electro-winning
57
Operating and production data for Obuasi
2006 2005
(1)
2004
Pay limit (oz/t)
(2)
0.2290.1770.188
Pay limit (g/t)
7.136.06 6.43
Recovered grade (oz/t)
(2)
0.128
0.139
0.154
Recovered grade (g/t)
4.39
4.77
5.27
Gold production (000 oz)
387
391
255
Total cash costs ($/oz)
(3)
397 345 305
Total production costs ($/oz)
(3)
638 532 443
Capital expenditure ($ million)
91
78
32
Employees
(4)
5,629 5,852 6,029
Outside contractors
(4)
2,210
2,443
718
(1)
For the eight months from May.
(2)
Pay limits and recovered grade refer to underground ore resources
(3)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.:
Operating results – Total cash costs and total production costs”.
(4)
Average for the period.
Operating performance: After three quarters of declining yields, Obuasi reported higher grades in the fourth quarter and
ended the year with production of 387,000 ounces slightly below the production in 2005 of 391,000 ounces
(2004: 255,000 ounces). Increased treatment of lower-grade ore throughout the year meant that yield in 2006 was 4.39g/t
compared with 4.77g/t in 2005 (2004: 5.27g/t), pushing up total cash costs by 15 percent to $397 per ounce from $345 per
ounce in 2005 (2004: $305 per ounce).
Growth prospects: The full development of the deep-level ore deposits at the Obuasi mine has the potential to extend the
life of mine by 35 years.
Bibiani
Bibiani in Ghana produced less than 1 percent of AngloGold Ashanti’s production in 2006. This tailings only operation was
sold to Central African Gold plc effective December 28, 2006. AngloGold Ashanti expects to replace Bibiani’s production
from its other Ghanaian operations.
Operating and production data for Bibiani
(5)
20062005
(1)
2004
Pay limit (oz/t)
0.0300.0200.020
Pay limit (g/t)
0.830.70 0.70
Recovered grade (oz/t)
(2)
0.016
0.042
0.056
Recovered grade (g/t)
(2)
0.55 1.55 1.93
Gold production (000 oz)
37
115
105
Total cash costs ($/oz)
(3)
432 305 251
Total production costs ($/oz)
(3)
594 522 400
Capital expenditure ($ million)
-
7
7
Employees
(4)
211 462 479
Outside contractors
(4)
142 140 392
(1)
For the eight months from May 2004.
(2)
Recovered grade represents open pit operations in 2004 and 2005 and surface and dump reclamation in 2006.
(3)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.:
Operating results – Total cash costs and total production costs”.
(4)
Average for the period.
(5)
For the eleven months from January 2006 to November 2006.
Iduapriem (attributable 85 percent)
Description: AngloGold Ashanti has an 80 percent interest in the Iduapriem gold mine (the remaining 20 percent is owned
by the International Finance Corporation) and a 90 percent interest in the Teberebie gold mine (the government of Ghana
has the remaining 10 percent interest in Teberebie). The combined AngloGold Ashanti interest is 85 percent. The
Iduapriem and Teberebie properties are adjacent to each other and are part of the Tarkwaian goldfields.
58
Location: Iduapriem mine is located in the western region of Ghana, some 70 kilometers north of the coastal city of
Takoradi, and 10 kilometers south-west of Tarkwa.
Geology: The Iduapriem and Teberebie gold mines are located along the southern end of the Tarkwa basin. The
mineralization is contained in the Banket Series of rocks within the Tarkwaian System of Proterozoic age. The outcropping
Banket Series of rocks in the mine area form prominent, arcuate ridges extending southwards from Tarkwa, westwards
through Iduapriem and northwards towards Teberebie.
Operating and production data for Iduapriem
2006 2005
(1)
2004
Pay limit (oz/t)
0.05 0.0230.022
Pay limit (g/t)
1.60 0.720.76
Recovered grade (oz/t)
(2)
0.051
0.050
0.050
Recovered grade (g/t)
(2)
1.74 1.71 1.72
Gold production (000 oz) 100 percent
196
205
147
Gold production (000 oz) 85 percent
167
174
125
Total cash costs ($/oz)
(3)
413 348303
Total production costs ($/oz)
(3)
544 477448
Capital expenditure ($ million) 100 percent
6
5
4
Capital expenditure ($ million) 85 percent
5
4
3
Employees
(4)
668698 709
Outside contractors
(4)
583 585 597
(1)
For the eight months from May 2004.
(2)
Recovered grade represents open pit operations.
(3)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.:
Operating results – Total cash costs and total production costs”.
(4)
Average for the period.
Operating performance: In 2006, attributable gold production at Iduapriem decreased by 4 percent to 167,000 ounces
from the 174,000 ounces produced during 2005 (May to December 2004: 125,000 ounces). Recovered grade increased to
1.74g/t in 2006 from 1.71g/t in 2005 (2004: 1.72g/t). The decline in production was as a result of a series of mill and
crusher breakdowns that affected the operation during the first two quarters of the year. Total cash costs increased by
19 percent from $348 per ounce in 2005 to $413 per ounce in 2006 (2004: $303 per ounce) due to the decline in
production and inflation-drive increases in operation costs.
Attributable capital expenditure at $5 million was marginally higher than the $4 million spend in 2005 (2004: $3 million) and
was spent mainly on the commencement of a plant expansion project and general stay-in-business expenditure.
Growth prospects: A plant expansion project to increase treatment capacity from 3.7 to 4.3 million tonnes a year began
in the fourth quarter of 2006. The expansion is expected to be commissioned in the third quarter of 2008 at a capital cost
of $48 million.
During 2007, a scoping study will be undertaken to evaluate the economics of exploiting the considerable low-grade
mineral resources of the other properties that lie in the Tarkwaian conglomerates extending below the economic limit of
the pits.
GUINEA
The Siguiri mine, an open pit operation, is AngloGold Ashanti’s only operation in the Republic of Guinea in West Africa. In
2006, the mine produced 256,000 attributable ounces of gold at a total cash cost of $398 per ounce.
Siguiri (attributable 85 percent)
Description: AngloGold Ashanti has an 85 percent interest in the Siguiri mine, with the balance of 15 percent being held
by the government of Guinea.
Location: The Siguiri gold mine is located in the Siguiri District in the north-east of the Republic of Guinea, West Africa,
approximately 850 kilometers from the capital city of Conakry. The nearest major town is Siguiri (approximately
50,000 inhabitants), located on the banks of the Niger River.
59
Geology: This concession is dominated by Proterozoic Birimian rocks which consist of turbidite facies sedimentary
sequences. The two main types of gold
deposits which occur in the Siguiri basin and
are mined, are:
· laterite or CAP mineralization which
occurs as aprons of colluvial or as
palaeo-channels of alluvial lateritic gravel
adjacent to, and immediately above; and
· in situ quartz-vein related mineralization
hosted in meta-sediments with the better
mineralization associated with vein
stockworks that occurs preferentially in
the coarser, brittle siltstones and
sandstones
The mineralized rocks have been deeply
weathered to below 100 meters in places to
form saprolite or SAP mineralization. The
practice at Siguiri has been to blend the CAP
and SAP ore types and to process these
using the heap-leach method. With the
percentage of available CAP ore decreasing,
however, a new carbon-in-pulp (CIP) plant
was brought on stream during 2005 to treat predominantly SAP ore.
Siguiri – Summary of metallurgical operations
Gold plants
Capacity (000 tonnes/month)
800
Technology
mineral sizing,
scrubbing, ball milling, CIP,
elution,
electro-winning
Operating and production data for Siguiri
2006 2005
(1)
2004
Pay limit (oz/t)
0.03 0.017 0.017
Pay limit (g/t)
0.94 0.55 0.59
Recovered grade (oz/t)
(2)
0.032
0.035
0.032
Recovered grade (g/t)
(2)
1.08 1.21 1.10
Gold production (000 oz) – 100 percent
301
289
98
Gold production (000 oz) – 85 percent
256
246
83
Total cash costs ($/oz)
(3)
398 301 443
Total production costs ($/oz)
(3)
593 451 578
Capital expenditure ($ million) – 100 percent
19
36
57
Capital expenditure ($ million) – 85 percent
14
31
48
Employees
(4)
1,5411,170 1,194
Outside contractors
(4)
1,167
808
1,412
(1)
For the eight months from May 2004.
(2)
Recovered grade represents heap leach operations in 2004 and open pit operations in 2005 and 2006
(3)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.:
Operating results – Total cash costs and total production costs”.
(4)
Average for the period.
Operating performance: Production at Siguiri rose by 4 percent from 246,000 ounces in 2005 to 256,000 ounces
in 2006 after the resolution of the ball mill problems in the first quarter of 2006 (May to December 2004: 83,000 ounces).
Recovered grade decreased from 1.21g/t in 2005 to 1.08g/t in 2006 (2004: 1.10g/t).
60
Total cash costs increased from $301 per ounce in 2005 to $398 per ounce (2004: $443 per ounce) due to maintenance
shut-downs and post-commissioning plant modifications, as well as rising fuel costs and higher royalty payments as a
result of the increased gold price.
Growth prospects: The new CIP project has transformed this operation. Whereas Siguiri was previously a heap-leach
operation, constrained by limited economically treatable Mineral Resources, the mine is now able to economically exploit
the saprolitic ores that extend below the base of the existing pits. There is still considerable exploration potential adjacent
to the existing mine infrastructure.
MALI
AngloGold Ashanti has interests in three
operations in Mali in partnership with
other parties. These operations are
Sadiola, Yatela and Morila, which are all
operated by AngloGold Ashanti.
In 2006, the Malian operations
produced 538,000 ounces of
attributable gold production at a total
cash cost of $268 per ounce (Sadiola),
$241 per ounce (Yatela), and $266 per
ounce (Morila).
Sadiola (attributable 38 percent)
Description: AngloGold has a
38 percent interest in, and manages,
the Sadiola mine within the Sadiola
exploitation area in western Mali. The
joint venture partners are IAMGOLD, a
Canadian listed company (38 percent),
the government of Mali (18 percent),
and the International Finance
Corporation (IFC) (6 percent).
Location: The mine is situated 77 kilometers south of the regional capital of Kayes
Geology: The Sadiola deposit occurs within an inlier of greenschist facies metamorphosed Birimian rocks known as the
Kenieba Window. The specific rocks which host the mineralization are marbles and greywackes which have been
intensely weathered to a maximum depth of 200 meters. A series of north-south trending faults occur that are the feeders
to the Sadiola mineralization. As a result of an east-west regional compression event, deformation occurs along a north-
south striking marble-greywacke contact, increasing the porosity of this zone. North-east striking structures which intersect
the north-south contact, have introduced mineralization, mainly with the marble where the porosity was greatest. The
Sadiola Hill deposit generally consists of two zones, an upper oxidized cap and an underlying sulphide zone. From
1996 until 2002, shallow saprolite oxide ore from the Sadiola Hill pit was the primar y ore source. Since 2002, the deeper
saprolitic sulphide ore has been mined and in future will progressively replace the depleting oxide reserves.
61
Mali – Summary of metallurgical operations
Sadiola
Yatela
Morila
Gold plants
Capacity (000 tonnes/month)
435
250
350
Technology
mineral
sizing,
SAG milling,
ball milling,
cyanide leach,
CIP,
elution,
electro-winning
crushing,
agglomeration,
heap-leaching,
carbon adsorption (CIS)
crushing,
SAG milling,
ball milling,
gravity concentration,
cyanide leach,
CIP.
elution,
electro-winning
Operating and production data for Sadiola
2006 20052004
Pay limit (oz/t)
0.06 0.05 0.06
Pay limit (g/t)
1.98 1.80 1.76
Recovered grade (oz/t)
0.094
0.080
0.081
Recovered grade (g/t)
3.22
2.73
2.77
Gold production (000 oz) 100 percent
500
442
459
Gold production (000 oz) 38 percent
190
168
174
Total cash costs ($/oz)
(1)
268 265 242
Total production costs ($/oz)
(1)
363 440 448
Capital expenditure ($ million) 100 percent
11
18
16
Capital expenditure ($ million) 38 percent
4
7
6
Employees
(2)
589 584 550
Outside contractors
(2)
705 661 609
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.:
Operating results – Total cash costs and total production costs”.
(2)
Average for the year.
Operating performance: In 2006 attributable production at Sadiola increased by 13 percent to 190,000 ounces from
168,000 ounces in 2005 (2004: 174,000 ounces) in spite of a tailings pipeline replacement that negatively affected
tonnage throughput in the first quarter. Most of the production improvement was related to steady treatment plant
operations and the higher yields achieved as a result of improved metallurgical recovery on oxide ore and the increased
treatment of higher grade sulphide ore. The yield increased from 2.73g/t recovered in 2005 to 3.22g/t recovered in 2006
(2004: 2.77g/t). Total cash costs rose by 1 percent to $268 per ounce in 2006 from $265 per ounce in 2005, mainly due to
higher royalties arising from the increased gold price (2004: $242 per ounce). Capital expenditure decreased by
43 percent from $7 million in 2005 to $4 million in 2006 (2004: $6 million). The main areas of expenditure were additional
fleet mobilization charges, brownfields exploration and mining contract renewal costs.
Growth prospects: A recently completed study showed that the hard sulphide ore below the current mining horizon
(“deep sulphides”) can be mined economically at proven metallurgical recoveries. Additional test work is being conducted
to enhance recoveries.
Yatela (attributable 40 percent)
Description: The Yatela mine is owned by Société d’Exploitation des Mines d’Or de Yatela S.A., in which AngloGold
Ashanti and IAMGOLD each hold an effective 40 percent interest, with the government of Mali holding 20 percent.
Location: Yatela is located some 25 kilometers north of Sadiola and approximately 50 kilometers south-south-west of
Kayes, the regional capital.
Geology: Yatela mineralization occurs as a keel-shaped body in Birimian metacarbonates. The ‘keel’ is centered on a
fault which was the feeder for the original mesothermal mineralization, with an associated weakly mineralized diorite
intrusion. Mineralization occurs as a layer along the sides and in the bottom of the ‘keel’. The ore dips almost vertically on
the west limb and more gently towards the west on the east limb, with tight closure to the south.
62
Operating and production data for Yatela
2006 20052004
Pay limit (oz/t)
0.060.050.06
Pay limit (g/t)
1.79 1.66 1.96
Stacked grade (oz/t)
0.120
0.087
0.099
Stacked grade (g/t)
4.12
2.99
3.41
Gold production (000 oz) 100 percent
352
246
242
Gold production (000 oz) 40 percent
141
98
97
Total cash costs ($/oz)
(1)
241
263
255
Total production costs ($/oz)
(1)
326
347
320
Capital expenditure ($ million) 100 percent
3
5
7
Capital expenditure ($ million) 40 percent
1
2
3
Employees
(2)
203 210 208
Outside contractors
(2)
675
700
825
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(2)
Average for the year.
Operating performance: In 2006, attributable production at Yatela rose by 44 percent to 141,000 ounces from
98,000 ounces in 2005 (2004: 97,000 ounces) due to a 38 percent increase in grade, from 2.99g/t in 2005 to 4.12g/t in
2006 (2004: 3.41g/t). Total cash costs declined by 8 percent to $241 per ounce from $263 per ounce in 2005
(2004: $255 per ounce) due a favorable grade which was partially offset by higher operating costs as a result of a change
in the beginning of the year from top-lift stacking of the heap-leach pad to bottom-lift stacking, which necessitated
increased cement consumption.
Capital expenditure of $1 million was 50 percent lower than the $2 million spent in 2005 (2004: $3 million) and was
incurred mainly on the construction of an additional leach pad.
Growth prospects: The potential for a small amount of sulphide ore below the existing Alamoutala deposit to be treated
at Sadiola is being investigated.
Morila (attributable 40 percent)
Description: AngloGold Ashanti and Randgold Resources Limited each hold an effective 40 percent interest in the Morila
Joint Venture, with the other 20 percent held by the Malian government. Under the joint venture agreement, AngloGold
Ashanti is the operator of the mine.
Location: This mine is situated some 180 kilometers, south-east of Bamako, the capital city of Mali.
Geology: Morila is a mesothermal flat lying shear-zone hosted deposit which, apart from rising to the surface in the west
against steep faulting lies, flat. The deposit occurs within a sequence Birimian metal-arkoses of amphibolite metamorphic
grade. Mineralization is characterized by silica-feldspar alteration and sulphide mineralization consists of arsenopyrite,
pyrrhotite, pyrite and chalcopyrite.
63
Operating and production data for Morila
2006 2005 2004
Pay limit (oz/t)
0.080.070.09
Pay limit (g/t)
2.41 2.272.81
Recovered grade (oz/t)
0.113
0.158
0.130
Recovered grade (g/t)
3.88
5.41
4.57
Gold production (000 oz) 100 percent
517
655
510
Gold production (000 oz) 40 percent
207
262
204
Total cash costs ($/oz)
(1)
266 191 196
Total production costs ($/oz)
(1)
367 298 270
Capital expenditure ($ million) 100 percent
3
5
5
Capital expenditure ($ million) 40 percent
1
2
2
Employees
(2)
500 478 479
Outside contractors
(2)
1,075 705 919
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(2)
Average for the year.
Operating performance: Gold production at Morila declined from 262,000attributable ounces in 2005, to
207,000 attributable ounces in 2006 (2004: 204,000 attributable ounces). This was as a result of a general decrease in
grade to 3.88g/t from 5.41g/t achieved in 2005 (2004: 4.57g/t), together with a major mill re-lining in the second quarter,
that negatively affected tonnage throughput. Consequently, total cash costs increased by 39 percent from $191 per ounce
in 2005 to $266 per ounce in 2006 (2004: $196 per ounce). Capital expenditure of $1 million was 50 percent lower than
the capital expenditure of 2005 of $2 million (2004: $2 million) and was spent on various small projects, including a minor
plant upgrade.
Growth prospects: A regional drilling programme, with a view to finding another significant orebody, is being conducted
over the next two years.
64
NAMIBIA
The Navachab mine is AngloGold
Ashanti’s only operation in Namibia.
Description: AngloGold Ashanti holds a
100 percent interest in the Navachab
open-pit gold mine after having obtained
an additional 30 percent interest in 1999.
The mine has been in production since
1990.
Location: Navachab is located near
Karibib in Namibia, on the southern west
coast of Africa.
Geology: The Navachab deposit is
hosted by Damaran greenschistam-
phibolite facies, calc-silicates, marbles
and volcanoclastics. The rocks have
been intruded by granites, pegmatites
and (quartz-porphyry dykes) aplite and
have also been deformed into a series of
alternating dome and basin structures.
The mineralized zone forms a sheet-like
body which plunges at an angle of
approximately 20 degree to the north-
west. The mineralization is predominantly
hosted in a sheeted vein set (±60 percent) and a replacement skarn body (±40 percent). The gold is very fine-grained and
associated with pyrrhotite, and minor to trace amounts of pyrite, chalcopyrite, maldonite and bismuthinite. Approximately
80 percent of the gold is free milling.
Navachab – Summary of metallurgical operations
Gold plants
Capacity (000 tonnes/month)
110
Technology
crushing,
SAG milling,
cyanide leach,
CIP,
elution,
electro-winning
Operating and production data for Navachab
2006 �� 20052004
Pay limit (oz/t)
0.04 0.05 0.05
Pay limit (g/t)
1.29 1.65 1.46
Recovered grade (oz/t)
0.053
0.060
0.046
Recovered grade (g/t)
1.81
2.05
1.59
Gold production (000 oz) 100 percent
86
81
66
Total cash costs ($/oz)
(1)
349
321
348
Total production costs ($/oz)
(1)
407
333
424
Capital expenditure ($ million) 100 percent
5
5
21
Employees
(2)(3)
313 315251
Outside contractors
(2)
– – –
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(2)
Average for the year.
(3)
No mining labor, contract or otherwise, was on site during the first half of 2004.
65
Operating performance: In 2006, gold production rose by 6 percent to 86,000 ounces from 81,000 ounces in 2005
(2004: 66,000 ounces) as increased tonnage throughout offset the effect of the decline in grade to 1.81g/t from 2.05g/t in
2005 (2004: 1.59g/t). Total cash costs increased to $349 per ounce from $321 per ounce in 2005 (2004: $348 per ounce)
due to the lower recovered grade. Capital expenditure of $5 million was unchanged from that of 2005 (2004: $21 million)
and was incurred mainly on preparation for mining the Grid A satellite orebody and treatment plant optimization.
Growth prospects: Historical studies on a further potential pit expansion which was previously considered uneconomical,
are being reconsidered given the current outlook for the gold price. Several brownfields prospects located within trucking
distance are currently under investigation.
TANZANIA
The Geita mine is AngloGold Ashanti’s only operation in Tanzania.
Description: The Geita mine is a multi-pit operation with a CIL plant that has the capacity to treat 6 million tones a year.
Prior to April 2004, Ashanti and AngloGold each held a 50 percent share in Geita, which was managed under the joint
venture agreement entered into between the companies. As a result of the business combination, Geita is now a wholly-
owned subsidiary.
Location: The Geita mine is located 80 kilometers south-west of the town of Mwanza.
Geology: Geita is an Archaean mesothermal mainly BIF-hosted deposit. Mineralization is located where auriferous fluids,
which are interpreted to have moved along shears often on BIF-diorite contacts, reacted with the BIF. Some lower-grade
mineralization can occur in the diorite as well (usually in association with BIF-hosted mineralization), and approximately
20 percent of the gold is hosted in the diorite.
66
Geita – Summary of metallurgical operations
Gold plants
Capacity (000 tonnes/month)
490
Technology
crushing,
SAG milling,
ball milling,
gravity concentration,
CIL,
elution,
electro-winning
Operating and production data for Geita
2006 2005
2004
(1)
Pay limit (oz/t)
0.13 0.07 0.09
Pay limit (g/t)
4.16 2.27 2.81
Recovered grade (oz/t)
0.049
0.092
0.109
Recovered grade (g/t)
1.68
3.14
3.74
Gold production (000 oz) 100 percent
308
613
692
Gold production (000 oz) 100 percent attributable from May 2004
308
613
570
Total cash costs ($/oz)
(2)
630
298
250
Total production costs ($/oz)
(2)
766
419
335
Capital expenditure ($ million) 100 percent
67
78
14
Capital expenditure ($ million) 100 percent attributable from May 2004
67
78
13
Employees
(3)
2,043 1,066 661
Outside contractors
(3)
1,177
1,214
1,595
(1)
Prior to April 26, 2004, AngloGold held a 50 percent stake.
(2)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(3)
Average for the year.
Operating performance: In 2006, total gold production decreased by 50 percent to 308,000 ounces from 613,000 ounces
in 2005 (2004: 692,000 ounces) due to a combination of factors. In the first quarter, a drought reduced water supply to the
processing plant and subsequent heavy rains resulted in hauling constraints. This, combined with a slower-than-
anticipated cut-back of the Nyankanga pit, resulted in a 46 percent drop in the grade for 2006 to 1.68g/t from 3.14g/t in
2005 (2004: 3.74g/t ).
These factors also contributed to the 111 percent increase in total cash costs from $298 per ounce in 2005 to $630 per
ounce in 2006 (2004: $250 per ounce). Capital expenditure of $67 million (2005: $78 million – 2004: $13 million) included
the cost of infrastructure associated with the change from contractor mining to owner mining, together with the purchase of
larger trucks and a shovel.
Growth prospects: Exploration to identify and generate resources to the inferred category, as well as the conversion of
resources into reserves, will continue. Current inferred resources are expected to add four years to life of mine reserves
and significant additional surface and underground potential is anticipated.
Outlook: A partial slope in the Nyankanga pit in February 2007 has changed the mining sequence of the pit’s high-grade
area, reducing the 2007 Geita production outlook from a planned doubling to a 30 percent increase to 400,000 ounces.
67
UNITED STATES OF AMERICA
AngloGold Ashanti acquired its operations in the United States of America from Minorco, effective March 31, 1999 and
comprise the wholly-owned AngloGold Ashanti (Colorado) Corp., which holds a 67 percent interest in the Cripple Creek &
Victor Gold Mining Company (CC&V) in Colorado with a 100 percent interest in gold produced until certain conditions are
met (as explained below). AngloGold Ashanti owns 100 percent of Big Springs in Nevada, which is currently in the final
stages of rehabilitation and closure.
Cripple Creek & Victor (attributable 67 percent with 100 percent interest in production)
Description: AngloGold Ashanti holds a 67 percent stake in CC&V, with the remaining 33 percent held by Golden Cycle
Gold Corporation (Golden Cycle). AngloGold Ashanti is the manager of the operation and is entitled to receive 100 percent
of the cash flow from the operation until loans extended to the joint venture are repaid and the initial phase ends. CC&V is
a low-cost, low-grade open-pit operation.
Location: CC&V is located south-west of Colorado Springs in the state of Colorado in the USA.
Geology: The district of Cripple Creek is centered on an intensely altered alkaline, Tertiary-aged, diatreme-volcanic,
intrusive complex, approximately circular in shape covering 18.4 square kilometers and surrounded by Precambrian rocks.
The Precambrian rocks consist of biotite gneiss, granodiorite and quartz monzonite and granite.
The intersection of these four units and regional tectonic events formed an area of regional dilation which subsequently
facilitated the formation of the volcanic complex. The majority of the complex then in-filled with the eruptive phase Cripple
Creek Breccia host rock. This complex was subsequently intruded by a series of intrusive dykes and sills that include
syenites, phonolites, phonotephrites and lamprophyres. These intrusive occupy all of the dominant district structural
orientations. District structures are generally near vertical and strike north-north-west to north-east. These structures acted
as primary conduits for the late-stage gold mineralizing solutions. Higher grade pods of mineralization occur at structural
intersections and/or as sheeted vein along zones of strike deflection. High-grade gold mineralization is associated with
K-feldspar + pyrite +/- carbonate alteration and occurs adja cent to the major structural and intrusive dyke zones. The
broader zones of disseminated mineralization occur primarily as micro-fracture halos around the stronger alteration zones
in the more permeable Cripple Creek Breccia wall rocks.
68
The average depth of oxidation is 120 meters and is also developed along major structural zones to even greater depths.
Individual orebodies can be tabular, pipe-like, irregular or massive. Individual gold particles are generally less than
20 microns in size and occur as native gold with pyrite or native gold after gold-silver tellurides. Gold occurs within hydrous
iron and manganese oxides and as gold-silver tellurides. Silver is present but is economically unimportant. Gold
mineralization can be encapsulated by iron and manganese oxides, pyrite, K-feldspar alteration and quartz.
Cripple Creek & Victor – Summary of metallurgical operations
Gold plants
Capacity (000 tonnes/month)
-
crushed ore production
1,512
-
total ore production
1,512
- solution processed
2,235
Technology
crushers,
valley heap-leach,
gold adsorption by carbon in solution,
elution,
electro-winning
Operating and production data for Cripple Creek & Victor operations
2006 20052004
Pay limit (oz/t)
0.01 0.01 0.01
Pay limit (g/t)
0.34 0.34 0.34
Recovered grade (oz/t)
0.016
0.018
0.018
Recovered grade (g/t)
0.54
0.62
0.61
Gold production (000 oz)
283
330
329
Total cash costs ($/oz)
(1)
248 230 220
Total production costs ($/oz)
(1)
498 418 365
Capital expenditure ($ million)
13
8
16
Employees
(2)
325 313 313
Outside contractors
(2)
44 44 74
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(2)
Average for the year.
Operating performance: In 2006, gold production at CC&V declined by 14 percent to 283,00 ounces from
330,000 ounces produced in 2005 (2004: 329,000 ounces) primarily as a result of reduced rainfall in the region and the
consequent reduction in irrigation of the heap-leach pad. Yield was 0.54g/t compared with the 0.62g/t achieved in 2005
(2004: 0.61g/t). Total cash costs of $248 per ounce were 8 percent higher than the $230 per ounce achieved in 2005
(2004: $220 per ounce), primarily as a result of higher prices for consumables and greater mining activity, that resulted in
the placement of 14 percent more ore tonnes on the leach pad. The impact of the higher costs, however, was partially
offset by the associated increase in recoverable ounces placed on the leach pad. By the end of 2006, the water shortage
issue had been addressed and gold production had returned to normal leve ls.
Capital expenditure of $13 million was 63 percent higher than the $8 million spent in 2005 (2004: $16 million) and was
incurred on increased brownfields exploration and upgrading the operation’s water delivery systems.
Growth prospects: An extension of mine life is currently underway at CC&V which would involve the staged expansion of
the heap leach facility together with the development of new ore sources within the existing claims.
69
ZIMBABWE
The Freda-Rebecca, a former Ashanti operation, was owned by AngloGold Ashanti for only four months in 2004. The
operation was sold with effect from September 1, 2004 to South African-based Mwana Africa Holdings for $2 million.
Operating and production data for Freda-Rebecca
2006 2005
2004
(1)
Pay limit (oz/t)
– ––
Pay limit (g/t)
–––
Recovered grade (oz/t)
–
–
0.048
Recovered grade (g/t)
–
–
1.66
Gold production (000 oz)
–
–
9
Total cash costs ($/oz)
(2)
–
–
417
Total production costs ($/oz)
(2)
–
–
556
Capital expenditure ($ million)
–
–
1
Employees
(3)
– –
687
Outside contractors
(3)
–
–
58
(1)
For the four months from May 2004 through August 2004. The mine was sold effective September 1, 2004.
(2)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.:
Operating results – Total cash costs and total production costs”.
(3)
Average for the period.
Rights to mine and title to properties
AngloGold Ashanti’s rights to own and exploit mineral reserves and deposits are governed by the laws and regulations of
the jurisdictions in which the mineral properties are located. In a number of countries in which AngloGold Ashanti operates
there are, in some cases, certain restrictions in terms of the group’s ability to independently move assets out of that
country and/or transfer the assets within the group, without the prior consent of the local government or minority
shareholders involved.
Argentina
According to Argentinean mining legislation, mines are the private property of the nation or a province, depending on
where they are located. Individuals are empowered to explore for, exploit and dispose of mines as owners by means of a
legal license granted by a competent authority under the provisions of the Argentine Mining Code. The legal licenses
granted for the exploitation of mines are valid for an undetermined period, provided that the mining title holder complies
with the obligations settled in the Argentine Mining Code.
In Argentina, the usual ways of transferring rights over mining licenses are: to sell the license; to lease such license; or to
assign the rights under such a license by a beneficial interest or Usufruct Agreement. In the case of Cerro
Vanguardia - AngloGold Ashanti’s operation in Argentina - the mining title holder is its partner, Fomicruz, and due to the
Usufruct Agreement signed between them and Cerro Vanguardia SA on December 27, 1996, the latter has the irrevocable
right to the exploitation of the deposit for a period of 40 years. This agreement expires on December 27, 2036.
Australia
In Australia, with few exceptions, all onshore mineral rights are reserved by the government of the relevant state or
territory. Exploration for, and mining of, minerals is regulated by the general mining legislation and controlled by the
mining ministry of each respective State or Territory.
Where native title has not been extinguished, native title legislation may apply to the grant of tenure and some subsequent
administrative processes. Federal and State Aboriginal heritage legislation also operates to protect special sites and
areas from disturbance although to date there has not been any adverse impact on any of AngloGold Ashanti’s operating
properties.
AngloGold Ashanti’s operating properties are located in the state of Western Australia. The most common forms of tenure
are exploration and prospecting licenses, mining leases, miscellaneous licenses and general purpose leases.
70
In most Australian states, if the holder of an exploration license establishes indications of an economic mineral deposit and
complies with the conditions of the grant, the holder of the exploration license has a priority right against all others to apply
for a mining lease which gives the holder exclusive mining rights with respect to minerals on the property.
It is possible for an individual or entity to own the surface of the property and for another individual or entity to own the
mineral rights. Typically the maximum initial term of a mining lease is 21 years, and the holder has the right to renew the
lease for a further period of 21 years. Subsequent renewals are subject to the discretion of the respective State or
Territory’s minister responsible for mining rights. Mining leases can only be assigned with the consent of the relevant
minister.
Government royalties are payable as specified in the relevant legislation in each State or Territory. A general purpose
lease may also be granted for one or more of a number of permitted purposes. These purposes include erecting, placing
and operating machinery and plant in connection with mining operations, depositing or treating minerals or tailings and
using the land for any other specified purpose directly connected with mining operations. Similarly, a Miscellaneous
License may be granted for a number of permitted purposes including road and water access.
AngloGold Ashanti owns the mineral rights and has 21-year term mining leases with rights of renewal to all of its mining
areas in Australia, including its proportionate share of joint venture operations, and both the group and its joint venture
partners are fully authorized to conduct operations in accordance with relevant laws and regulations. The mining leases
and rights of renewal cover the current life-of-mine at AngloGold Ashanti’s operations in Australia.
Brazil
In Brazil, there are two basic mining rights: a license for the exploration stage, valid up to three years, renewable once;
and a Mining Concession or Mine Manifest, valid for the life of the deposit. In general, exploration licenses are granted on
a first-come, first-served basis. Mining concessions are granted to the holders of exploration licenses that manage to
prove the existence of a Mineral Resource and have been licensed by the environmental competent authority.
Mine Manifests (mining titles granted in 1936) and Mining Concessions (mining titles presently granted through an order
signed by the Secretary of Mines of the Ministry of Mines and Energy) are valid for an undetermined period until depletion
of reserves, provided that the mining title holder complies with current Brazilian mining and environmental legislation, as
well as with those requirements set out by the National Department of Mineral Production (DNPM) who acts as inspecting
entity for mining activities.
Obligations of the titleholder include:
•
the start of construction, as per an approved development plan, within six months of the issuance of the concession;
•
extracting solely the substances indicated in the concession;
•
communicating to the DNPM the discovery of a mineral substance not included in the concession title;
• complyingwithenvironmentalrequirements;
•
restoring the areas degraded by mining; refrain from interrupting exploitation for more than six months; and
•
reporting annually on operations.
The difference between a Mine Manifest and a Mining Concession lies in the legal nature of these two mining titles, since
it is much more difficult and complicated for the public administration to withdraw a Mine Manifest than a Mining
Concession although, in practice, it is possible for a Manifest to be cancelled or to become extinct if the abandonment of
the mining operation is formally proven. All of AngloGold Ashanti’s operations in Brazil have indefinite mining licenses.
Ghana
Mining activities in Ghana are primarily regulated by the new Minerals and Mining Act, 2006 (the Mining Act). The Mining
Act replaces the repealed Minerals and Mining Law, 1986 (PNDCL 153). The Mining Act replicates many of the provisions
of the old Law. Under the Constitution and the Mining Act, all minerals in Ghana in their natural state are the property of
the State and title to them is vested in the President on behalf of and in trust for the people of Ghana, with rights of
prospecting, recovery and associated land usage being granted under license or lease.
71
The key material modifications to the previous mining regime affected by the Mining Act are:
•
the right of the government to acquire a 10 percent ‘free-carried’ interest in a mining company continues, but any
further interest in the mining company shall be acquired on terms to be agreed with the holder of the mining right. The
Act does not prescribe any terms;
•
compensation principles for disturbance of an owner’s surface rights; and
•
although the right of the government to be issued with a special share in a mining company still exists, the consent of
the special shareholder will only be required for the disposal of a mining lease and/or material assets, which are
situated in Ghana.
A license is required for the export or disposal of such minerals and the government has a right of pre-emption over all
such minerals. The government of Ghana shall acquire, without payment, a 10 percent interest in the rights and
obligations of the mineral operations in relation to a mineral right to reconnaissance, prospecting or mining, and shall have
the option to acquire a further 20 percent interest where any mineral is discovered in commercial quantities, on terms
agreed between the government and the holder of the mining lease subject to arbitration if the parties fail to agree.
A license or lease granting a mineral right is required to prospect for or mine a mineral in Ghana and the Minister of
Energy and Mines has the power to negotiate, grant, revoke, suspend or renew any mineral right, subject to a power of
disallowance exercisable within 30 days of such grant, revocation, suspension or renewal by the Cabinet. The powers of
the Minister of Mines are to be exercised on the advice of the Minerals Commission, which is responsible for regulating
and managing the utilization of natural resources and coordinating policies relating to them.
The grant of a mining lease by the Minister of Mines is normally subject to parliamentary ratification unless the mining
lease falls into a class of transactions exempted by parliament. A mineral right is deemed a requisite and sufficient
authority over the land in respect of which the right is granted, although a separate license is required for some other
activities, including the diversion of water, and additional consents may be required for certain developments. A mineral
right or interest therein may not be transferred, assigned or otherwise dealt with in any other manner without prior written
approval of the Minister of Mines.
Control of mining companies: The Minister of Mines has the power to object to a person becoming or remaining a
‘‘shareholder controller’’, a ‘‘majority shareholder controller’’ or an ‘‘indirect controller’’ of a company which has been
granted a mining lease if he considers that the public interest would be prejudiced by the person concerned becoming or
remaining such a controller.
In this context:
•
shareholder controller means a person who, either alone or with certain others, is entitled to exercise or control the
exercise of 20 percent or more of the voting power at any general meeting of a mining company or of any other
company of which it is a subsidiary;
•
majority shareholder controller means a shareholder controller in whose case the percentage referred to above also
exceeds 50 percent; and
•
indirect controller means a person in accordance with whose directions or instructions the director of a mining
company, or of another company of which it is a subsidiary, or the shareholder controllers of that mining company,
are accustomed to act.
A person may not become a shareholder controller, a majority shareholder controller or an indirect controller of a mining
company unless he has served written notice on the Minister of Mines of his intention to that effect and the Minister of
Mines consents to his becoming such a controller or does not object within a period of six months.
Where a person becomes or continues to be a controller of the relevant description after a notice of objection has been
served on him, or is otherwise in contravention of the procedures prescribed by the Mining Act, the Minister of Mines may
notify the controller that, until further notice, any specified shares are subject to restrictions. The relevant restrictions
include restrictions on transfer, voting rights, receipt of further shares and distributions. The Minister of Mines may apply to
the High Court to order the sale of any shares which are the subject of such a restriction. There is no legal restriction on
the foreign ownership of a mining company.
72
Where a person, either alone or with others, acquires an interest in 5 percent or more of the voting power of a mining
company he is required to notify the Minister of Mines. A person who is a controller of a mining company must give notice
of his ceasing to be such a controller before he disposes of his interest. In addition, the mining company itself has to give
notice to the Minister of Mines of the fact that any person has become or ceased to be a controller.
Violation of these provisions of the Mining Act is a criminal offence. The Mining Act also gives the Minister of Mines power
to investigate and report on the ownership and control of any mining company.
The Act provides for stability agreements, as a mechanism to ensure that the incentives and protection afforded by laws in
force at the time of the Stability Agreement are guaranteed for 15 years. A stability agreement is subject to ratification by
Parliament.
Under the Act, the Minister may enter into a Development Agreement under a mining lease where the proposed
investment by the holder will exceed $500 million.
A development agreement may contain provisions relating to the mineral right or operations to be conducted, the
circumstances or manner in which the Minister may exercise discretion conferred by the Act, stability terms, and in relation
to environmental issues and obligations of the holder of the mineral right. A Development agreement is also subject to
ratification by Parliament.
Prior to the business combination between AngloGold and Ashanti, AngloGold and the government of Ghana agreed the
terms of a Stability Agreement to govern certain aspects of the fiscal and regulatory framework under which AngloGold
Ashanti would operate in Ghana following the implementation of the business combination. The terms of the Stability
Agreement have not been altered by the new Mining Act.
Payments and allowances
The Mining Act provides that royalties are payable by the holder of a mining lease to the State at rates of between
3 percent and 6 percent of total minerals revenue, depending on a formula set out in mineral royalty regulations. The laws
of Ghana currently provide for income tax at a rate of 25 percent. The Mining Act provides for an entitlement to certain
specified capital allowances and various additional fiscal and other benefits. AngloGold Ashanti and the government of
Ghana have entered into the Stability Agreement with respect to the payment of royalties and taxes.
Under the Stability Agreement, the government of Ghana agreed:
•
to extend the term of the mining lease relating to the Obuasi mine until 2054 on terms existing prior to the business
combination;
•
to maintain for a period of 15 years, the royalties payable by AngloGold Ashanti with respect to its mining operations
in Ghana at a rate of 3 percent per annum of the total revenue from minerals obtained by AngloGold Ashanti from
such mining operations;
•
to ensure that the income tax rate would be 30 percent for a period of 15 years. The agreement was amended in
December 2006 to a tax rate equal to the prevailing corporate rate and shall not be higher than 30 percent;
•
that a sale of AngloGold Ashanti’s or any of its subsidiaries' assets located in Ghana remain subject to the
government's approval;
•
to permit AngloGold Ashanti and any or all of its subsidiaries in Ghana to retain up to 80 percent of their exportation
proceeds in foreign currencies offshore, or if such foreign currency is held in Ghana, to guarantee the availability of
such foreign currency; and
•
to retain its special rights (Golden Share) under the provisions of the Mining Act pertaining to the control of a mining
company, in respect of the assets and operations in Ghana.
The government of Ghana also agreed that AngloGold Ashanti's Ghanaian operations will not be adversely affected by
any new enactments or orders or by changes to the level of payments of any customs or other duties relating to mining
operations, taxes, fees and other fiscal imports or laws relating to exchange control, transfer of capital and dividend
remittance for a period of 15 years after the completion of the business combination.
73
In consideration of these agreements and undertakings, AngloGold Ashanti issued to the government of Ghana
2,658,000 ordinary shares and paid to the government of Ghana $5 million in cash, promptly after the implementation of
the business combination. AngloGold Ashanti also paid to the government of Ghana, on the date of the completion of the
business combination, an additional $5 million in cash towards the transaction costs incurred by the government of Ghana
in its role as regulator.
Retention of foreign earnings: Holders of mining leases have certain limited rights to retain foreign exchange earnings
overseas and to use such earnings for the acquisition of machinery and equipment as well as for certain other payments,
such as debt service payments and dividends.
Where the net earnings of a holder of a mining lease are in foreign currency, the holder is permitted to retain not less than
25 percent of foreign exchange earnings in an external bank account for acquiring machinery and equipment, spare parts
and raw materials as well as for certain other payments, such as dividend and debt service payments.
AngloGold Ashanti’s operations in Ghana are permitted to retain 80 percent of its foreign exchange earnings in such an
account. In addition, the company has permission from the Bank of Ghana to retain and use, outside of Ghana, dollars
required to meet payments to the company’s hedge counterparts which cannot be met from the cash resources of its
treasury company.
Leases: Mining leases may be applied for either by a prospecting license holder who has established the existence of
minerals in commercial quantities or by others who do not hold such licenses, who establish the same to the satisfaction of
the Minister of Mines.
Mining leases are normally granted for a period not exceeding 30 years and the holder may apply to the Minister of Mines
for renewal, on such conditions as the Minister of Mines may determine, for up to another 30 years. This period has been
extended in terms of the Stability Agreement. They are to have a maximum size (subject to derogation by the President
where it is considered to be in the national interest) of 50 square kilometers for any grant and 150 square kilometers in
aggregate.
A holder may apply for an enlargement of the mining area, which, subject to the Mining Law, the Minister of Mines may
grant if satisfied that such approval is in the national interest.
The rights conferred by mining leases include those to take all reasonable measures on or under the surface to mine the
mineral to which the mining lease relates, to erect necessary equipment, plant and buildings, to prospect within the mining
area and to stack or dump mineral waste in an approved manner.
Reconnaissance and prospecting licenses are normally granted for up to 12 months and three years respectively, subject
to renewal. A detailed programme must be submitted for the recruitment and training of Ghanaians with a view to
achieving ‘localization’, being the replacement of expatriate personnel by Ghanaian personnel. In addition, the holder must
give preference to Ghanaian products and personnel, to the maximum extent possible, consistent with safety, efficiency
and economies.
Prior notification to the Minister of Mines is required for ceasing, suspending or curtailing production. Approval to such
actions may be given, subject to conditions determined on the advice of the Minerals Commission.
There are also provisions relating to surrender, suspension and cancellation of mineral rights in certain circumstances.
The Minister of Mines may suspend or cancel a mineral right if, among other things, the holder:
•
fails to make payments under the Mining Act when due;
•
is in breach of any provisions of the Mining Actor the conditions of the mineral right or the provisions of any other
enactment relating to mines and minerals;
•
becomes insolvent or bankrupt;
•
makes a statement to the Minister of Mines in relation to the mineral right which he knows, or ought to have known, to
be false; or
•
for any reason becomes ineligible to apply for a mineral right under the provision of the Mining Law.
74
Except as otherwise provided in a specific mining lease, all immovable assets of the holder under the mining lease vest in
the State on termination, as does all moveable property that is fully depreciated for tax purposes. Moveable property that
is not fully depreciated is to be offered to the State at the depreciated cost. The holder must exercise his rights subject to
such limitations relating to surface rights as the Minister of Mines may prescribe. Subject to the proper conduct of the
mining operations, the holder must affect as little as possible the interest of any lawful occupier, whose grazing rights are
retained but who is precluded from erecting any building without the consent of the holder (or, if such consent is
unreasonably withheld, without the consent of the Minister).
An owner or occupier of any land subject to a mineral right may apply to the holder of the mineral right for compensation
and the amount of the compensation shall, subject to the approval of the Land Valuation Board, be determined by
agreement between the parties concerned (or, if they are unable to reach agreement, by the Minister of Mines in
consultation with the Land Valuation Board). The Land Valuation Board has in the past increased amounts of
compensation payable to owners and occupiers. The holder, in the exercise of his rights, is required to have due regard to
the effect of the mineral operations on the environment and is to take such steps as may be necessary to prevent pollution
of the environment as a result of such operations.
A range of activities and breaches of the Mining Law, including obstructing the government from exercising its pre-emption
right and conducting mining, prospecting or related activities other than in accordance with the Mining Law, constitute
offences punishable by fine or imprisonment. The maximum fine is 500,000 cedis (at the current exchange rate, equivalent
to approximately $50) and the maximum term of imprisonment is two years.
Mining properties: The current mining lease for the Obuasi area was granted by the government of Ghana on
March 5, 1994. It grants mining rights to land with an area of approximately 334 square kilometers in the Amansie East
and Adansi West districts of the Ashanti region for a term of 30 years from the date of the agreement. In addition, the
application for a mining lease over the adjacent 140 square kilometers has also been granted resulting in the total area
under mining lease conditions increasing to 474 square kilometers, “the Lease Area”.
The company is required to pay to the government of Ghana rent (subject to review every five years, when the rent may
be increased by up to 20 percent) at a rate of approximately $5 per square kilometers and such royalties as are prescribed
by legislation, including royalties on timber felled within the Lease Area. Under the Stability Agreement the Government
of Ghana has agreed to extend the term of the Obuasi lease until 2054.
Bibiani had title to a 50 square kilometers mining lease for a period of 30 years to May 18, 2027. The terms and conditions
of the lease are consistent with similar leases granted in respect of Obuasi. With effect from October 1, 2001, the Bibiani
mining lease was transferred to Ashanti Goldfields Company Limited from Ashanti Goldfields (Bibiani) Limited. The
Bibiani Mine and its assets were sold to Central African Gold Limited, effective December 1, 2006.
Iduapriem has title to a 33 square kilometer mining lease granted on April 19, 1989 for a period of 30 years. The terms and
conditions of the lease are consistent with similar leases granted in respect of the Obuasi mining lease.
Teberebie has two leases, one granted in February 1998 for a term of 30 years, and another granted in June 1992 for a
term of 26 years. The terms and conditions of these leases are consistent with similar leases granted in respect of the
Obuasi mining lease.
Guinea
In Guinea, all mineral substances are the property of the State. Mining activities are primarily regulated by the Mining
Code, 1995. The right to undertake mining operations can only be acquired by virtue of one of the following mining titles:
surveying permit, small-scale mining license, mining prospecting license, mining license or mining concession.
The holders of mining titles are guaranteed the right to dispose freely of their assets and to organize their enterprises as
they wish, the freedom to engage and discharge staff in accordance with the regulations in force, free movement of their
staff and their products throughout Guinea and freedom to dispose of their products in international markets.
75
The group’s Guinea subsidiary, Société Ashanti Goldfields de Guinée SA (SAG), has title to the Siguiri mining concession
area which was granted on November 11, 1993 for a period of 25 years. The agreement provides for an eventual
extension/renegotiation after 23 years for such periods as may be required to exhaust economic Ore Reserves.
The original area granted encompassed 8,384 square kilometers which the subsidiary was required to reduce to five or
fewer single blocks of not less than 250 square kilometers per block totaling not more than 1,500 square kilometers by
November 11, 1996. The retrocession reduced the Siguiri concession area to four blocks totaling 1,495 square kilometers.
SAG has the exclusive right to explore and mine in the remaining Siguiri concession area for a further 22-year period from
November 11, 1996 under conditions detailed in a Convention de Base predating the new Guinea Mining Code.
Key elements of the Convention de Base are:
•
the government of Guinea holds a 15 percent free-carried or non-contributory interest; a royalty of 3 percent based
on a spot gold price of less than $475, and 5 percent based on a spot gold price above $475, as fixed on the London
Gold Bullion Market, is payable on the value of gold exported; a local development tax of 0.4 percent is payable on
the gross sales revenues; salaries of expatriate employees are subject to a 10 percent income tax; mining goods
imported into Guinea are exempt from all import taxes and duties for the first two years of commercial production;
and
•
SAG is committed to adopt and progressively implement a plan for the effective rehabilitation of the mining areas
disturbed or affected by operations.
The Convention de Base is subject to early termination if both parties formally and expressly agree to do so, if all project
activities are voluntarily suspended for a continuous period of eight months or are permanently abandoned by our
subsidiary or if SAG goes into voluntary liquidation or is placed into liquidation by a court of competent jurisdiction.
In addition to the export tax payable to the government of Guinea, a royalty on production may be payable to the
International Finance Corporation (IFC) and to Umicore SA, formerly Union Miniere (UM). Pursuant to the option
agreement between UM and Golden Shamrock Mines Limited (GSM), a royalty on production may be payable to UM by
Chevaning Mining Company Limited (CMC) or GSM, which payment obligation has been assigned to AngloGold Ashanti
(Ghana) Limited, on a sliding scale of between 2.5 percent and 7.5 percent, based on the spot gold price per ounce
between $350 and $475, subject to indexing from January 1, 1995, to a cumulative maximum of $60 million. In addition,
under the terms of the restructuring agreement with the IFC, a sliding scale royalty on production may be payable to the
IFC calculated on the same basis but at half the rate payable to UM, to a maximum of $7.8 million.
Mali
Mineral rights in Mali are governed by the Mining Act and Regulations promulgated in 1991. Exploration is carried out
under permits granted by Ministerial Decree following application to the National Director of Geology and Mines from the
Ministry of Mines, Energy and Water conveying exclusive title to conduct exploration. The permit is valid for a three-year
period and is renewable twice. A company applying (in an area it selected) for such a permit must provide proof of
technical and financial capabilities.
An exploitation permit is required to mine a deposit located within the exploration area. This permit grants exclusive title to
mine for a maximum period of 30 years (inclusive of renewals) and is granted by the Council of Ministers following
application to the National Director of Mines.
Both permits referred to above include a Mining Convention (Convention d’Etablissement) covering exploration, mining,
treatment and marketing in a comprehensive document. This outlines the general conditions with regard to exploration
(work programme, fiscal and customs regime) and exploitation (formation of a local limited liability company and mining
company, state shareholdings, the fiscal and customs regime during construction and exploitation phases, exchange
controls, marketing of the product, accounting regime, training programmes for local labor, protection of the environment,
reclamation, safety, hygiene and settlement of disputes).
76
Application for an exploration permit is submitted to the National Director of Mines based on various documents, including
applicant identification, locations, receipts for payment of fixed rights and surface fees, and articles of association, together
with a draft mining convention. An inter-ministerial committee examines the applications and one company is retained to
do the exploration. This company then negotiates a draft of the Mining Convention and the Minister of Mines grants the
exploration permit by an in-house decree published in the Malian Gazette. Once an economically viable deposit has been
identified, an application for an exploitation permit is submitted to the National Director of Mines. This application must be
made prior to the expiry of the exploration permit. The application document must contain a map and co-ordinates, a
receipt for payment of fixed rights and surface fees and a s ummary of technical and financial capabilities.
The exploitation title is granted following a thorough investigation. AngloGold Ashanti has complied with all applicable
requirements and the relevant permits have been issued. Morila, Sadiola and Yatela have 30-year permits which expire in
2029, 2024 and 2030, respectively.
Namibia
Mineral rights in Namibia vest in the State. In order to prospect or mine, the Ministry of Mines and Energy initially grants a
prospecting license and on presentation of a feasibility study, a mining license is then granted taking into account the
abilities of the company, including mining, financial and technical capabilities, rehabilitation programmes and payment of
royalties. The relevant license has been granted to AngloGold Namibia (Pty) Ltd in respect of its mining and prospecting
activities in Namibia. The current 15-year license expires in 2018.
South Africa
The Mineral and Petroleum Resources Development Act: In October 2002, the President of South Africa assented to
the Mineral and Petroleum Resources Development Act (MPRDA), which was passed by the Parliament of South Africa in
June 2002 and came into effect on May 1 2004. The MPRDA vests custodianship of South Africa’s mineral rights in the
State, which will issue prospecting rights or mining rights to applicants in the future. For further details relating to the
MPRDA and the associated broad-based socio-economic empowerment charter and related scorecard, as well as
AngloGold Ashanti’s progress in converting existing rights in terms of the new legislation, see Item 3D.: Risk factors –
AngloGold Ashanti’s new order mineral rights in South Africa could be suspended or cancelled should the company
breach, and fail to remedy such breach of, its obligations in respect o f the acquisition of these rights.
Tanzania
Mineral rights in the United Republic of Tanzania are governed by the Mining Act of 1998, and property and control over
minerals are vested in the United Republic of Tanzania. Prospecting for the mining of minerals, except petroleum, may
only be conducted under authority of a mineral right granted by the Ministry of Energy and Minerals under this Act. The
three types of mineral rights most often encountered, which are also those applicable to AngloGold Ashanti, are:
prospecting licenses; retention licenses; and mining licenses.
A prospecting license grants the holder thereof the exclusive right to prospect in the area covered by the license for all
minerals, other than building and gemstones, for a period of three years. Thereafter, the license is renewable for two
further periods of two years each. On each renewal of a prospecting license, 50 percent of the area covered by the license
must be relinquished. Before application is made for a prospecting license, a prospecting reconnaissance for a maximum
area of 5,000 square kilometers is issued for a period of two years after which a three-year prospecting license is applied
for. A company applying for a prospecting license must, inter alia, state the financial and technical resources available to
it. A retention license can also be requested from the Minister, after the expiry of the 3-2-2-year prospecting license period,
for reasons ranging from funds to technical considera tions.
Mining is carried out through either a mining license or a special mining license, both of which confer on the holder thereof
the exclusive right to conduct mining operations in or on the area covered by the license. A mining license is granted for a
period of 10 years and is renewable for a further period of 10 years. A special mining license is granted for a period of
25 years and is renewable for a further period of 25 years.
77
If the holder of a prospecting license has identified a mineral deposit within the prospecting area which is potentially of
commercial significance, but it cannot be developed immediately by reason of technical constraints, adverse market
conditions or other economic factors of a temporary character, it can apply for a retention license which will entitle the
holder thereof to apply for a special mining license when it sees fit to proceed with mining operations.
A retention license is valid for a period of five years and is thereafter renewable for a single period of five years. A mineral
right may be freely assigned by the holder thereof to another person, except for a mining license, which must have the
approval of the Ministry to be assigned.
However, this approval requirement for the assignment of a mining license will not apply if the mining license is assigned
to an affiliate company of the holder or to a financial institution or bank as security for any loan or guarantee in respect of
mining operations.
A holder of a mineral right may enter into a development agreement with the Ministry to guarantee the fiscal stability of a
long-term mining project and make special provision for the payment of royalties, taxes, fees and other fiscal imposts.
AngloGold Ashanti has complied with all applicable requirements and the relevant licenses have been issued for 25 years
and expire in 2024.
United States of America
Mineral rights, as well as surface rights, in the United States are owned by private parties, state governments and the
federal government. Most land prospective for precious metals exploration, development and mining are owned by the
federal government and are obtained through a system of self-initiated mining claim location pursuant to the General
Mining Law of 1872, as amended. Individual states typically follow a lease system for state-owned minerals. Private
parties have the right to sell, lease or enter into other agreements, such as joint ventures, with respect to minerals that
they own or control. All mining activities, regardless of whether they are situated on privately- or publicly-owned lands, are
regulated by a myriad of federal, state and local laws, regulations, rules and ordinances, which address various matters
including environmental protection, mitigation and rehabilitation.
Authorizations and permits setting forth the activities and restrictions pertaining thereto are issued by the responsible
governmental agencies for all phases of mining activities.
The Cripple Creek & Victor Gold Mining Company joint venture consists almost entirely of owned patented mining claims
from public lands, with a small percentage of private and state lands being leased. The total area of control is
approximately 7,100 acres. Patented claims vest ownership in the holder, including the right to mine for an indefinite
tenure. All life-of-mine reserves are within these property controls. The mining and rehabilitation permits issued by the
State of Colorado are life-of-mine permits.
Ore Reserves
Ore reserve estimates are reported in accordance with the requirements of the SEC’s Industry Guide 7. Accordingly, as of
the date of reporting, all reserves are planned to be mined out under the life-of-mine plans within the period of AngloGold
Ashanti’s existing rights to mine, or within the renewal periods of AngloGold Ashanti’s rights to mine. In addition, as of the
date of reporting, all reserves are covered by required permits and governmental approvals. See “Item 4B.: Business
overview — Rights to mine and title to properties”, “— Safety and Health”, and “Item 4D.: Property, plant and equipment”.
AngloGold Ashanti has standard procedures for the estimation of ore reserves. These standard procedures are performed by
technical personnel at the mining operations and reviewed by regional and corporate competent persons.
78
In the case of its underground mines, the procedure is as follows: Firstly, gold content and tonnage are estimated for in-
situ mineralized material at a mining operation. This mineralized material is not necessarily economically viable.
Exclusions on the grounds of safety (for example, stability pillars, shaft pillars) are then defined. Grade and tonnage
curves specific for each of the deposits, in conjunction with the cost structure, yield, mine call factor, gold price estimates
are used to determine an optimal mining mix. This process facilitates the determination of the average grade to be mined
by each operation. This grade is then applied to the grade-tonnage curves, which in turn facilitates the determination of the
cut-off grade and ore reserve tonnage for the operation. A full mine design is carried out on the blocks of mineralized
material, excluding large mining areas that do not meet the cu t-off grade criterion. This mining plan is reviewed to ensure
that it satisfies the economic criterion and practical limitations of access and timing. If the review process is positive then
the mineralized material (with dilution) included in the mining plan is declared and published as the ore reserve for that
operation.
In the case of open-pit mines the procedure is as follows: revenue and costs are calculated for each mining block within a
three-dimensional model of the orebody using assumed values for gold price, operating costs and metallurgical
recoveries. An optimization process is then applied to determine the combination of blocks within the model that make a
positive contribution under these assumptions. Block selection is within a shell whose limits are defined by the planned
slope angles of the pit. Within this process, a cut-off grade is applied which determines the ore blocks to be treated and
included in the ore reserves. These blocks are scheduled with consideration being given to practical mining considerations
and limitations. Scheduled ore blocks that are classified as proven or probable constitute the ore reserve.
The gold price and exchange rate used for 2006 and 2005 Reserves are outlined in the following table.
2005
( 3 Year Average)
2006
(Business Plan)
2006
(3 Year Average)
Units
Reserve Gold Price
400
550
486 US$/oz
Exchange Rate – South Africa
6.75 6.50 6.53
ZAR/US$
Exchange Rate – Australia
0.72
0.73 0.75
US$/Aus$
Given the sustained increase in the gold price since 2002 and the positive gold price outlook, AngloGold Ashanti prepared
its life of mine business plans using a gold price of $550 per ounce. The ore reserves determined from the planning
process were then tested for economic viability at the three-year historical average gold price and currency exchange
rates shown in the above table for determining SEC compliant reserves. The resultant SEC compliant proven and
probable reserves are shown in the following pages.
In Australia and South Africa, AngloGold Ashanti is legally required to publicly report Ore Reserves and Mineral
Resources according to the Australasian Code for Reporting of Mineral Resources and Ore Reserves (JORC 2004) and
the South African Code for Reporting of Mineral Resources and Ore Reserves (SAMREC 2000). The SEC’s Industry
Guide 7 does not recognize Mineral Resources. Accordingly, AngloGold Ashanti does not report estimates of Mineral
Resources in this annual report on Form 20-F.
79
The total AngloGold Ashanti Ore Reserves increased from 63.3 million ounces in 2005 to 66.0 million ounces in
December 2006. The principal changes in AngloGold Ashanti’s ore reserves as at December 31, 2006 compared with
those published as at December 31, 2005 are as follows:
Moz
December 2005 Ore Reserves
63.3
Principal Reductions
2006 Total Depletion
-6.5
Tau Lekoa, due to lower grade and Mine Call Factor
-0.4
Moab Khotsong, due to drop in values as a result of drilling
-0.4
Bibiani, due to sale of property
-0.1
Other
-0.4
Principal Additions
Mponeng, due to inclusion of the VCR below 120 level project and higher gold price
2.9
Cripple Creek and Victor, due to planned extension of life
1.1
Sadiola, due to the inclusion of the deep sulphides
1.0
Boddington, due to upgrade of Inferred material in pit and increase in gold and copper prices
0.7
Sunrise Dam, due to inclusion of North-Wall Cutback and Cosmo
0.7
Iduapriem, due to increased gold price
0.5
AngloGold Ashanti Brasil Mineração, due to Cuiaba development and Corrego do Sitio Sulphide
0.5
Cerro Vanguardia, due to successful exploration programme and increased gold price
0.4
Siguiri, additional pit included
0.4
Navachab, due to a larger economic pit
0.3
Savuka, due to increased gold price
0.3
Yatela, due to the inclusion of an additional cutback
0.2
Serra Grande, due to incorporation of an open pit and development of levels with higher tons than expected
0.2
Morila, due to the increased gold price
0.1
Other
1.4
December 2006 Ore Reserves*
66.0
* rounding may result in computational diifferences
AngloGold Ashanti will continue to pursue a strategy of increasing value-adding reserves through expansion projects,
brownfields and greenfields exploration and acquisition of new assets.
The ore reserve estimates in this document include ore reserves below current infrastructure in the case of certain South African
and Ghanaian underground mines which are in production. These ore reserves have been determined based upon completed
economic studies.
Audit of 2005 Mineral Resource and Ore Reserve statement
During the course of the year, the AngloGold Ashanti 2005 Mineral Resource and Ore Reserve statements were submitted
to independent consultants for review. The Mineral Resources and Ore Reserves from six of AngloGold Ashanti’s global
operations were selected and subjected to review. The six operations that were reviewed were Moab Khotsong,
Tau Lekoa, Vaal River Surface, Navachab, Siguiri and Serra Grande.
The company has been informed that the audit identified no material shortcomings in the process by which AngloGold
Ashanti’s Reserves were evaluated. It is the company’s intention to repeat this process so that all its operations will be
audited over a three-year period. The audit of those operations selected for review during 2006 is currently in progress.
AngloGold Ashanti’s ore reserve statements have been prepared by the competent persons who manage AngloGold
Ashanti’s ore reserves. See “Item 6.: Directors, senior management and employees”.
80
Ore Reserves: Imperial
At December 31, 2006
Proven Ore Reserves
(1)
Probable
Ore
Reserves
(1)
Metallurgical
Gold
Gold
Recovery
Tons
(5)
Grade Content
(1)
Tons
(5)
Grade Content
(1)
Factor
(mill)
(oz/ton)
(mill oz)
(mill)
(oz/ton)
(mill oz)
percent
South Africa
Vaal River
Great Noligwa
9.7
0.222
2.2
9.1
0.207
1.9
96.9
Kopanang 1.6
0.259
0.4
18.2
0.242
4.4
97.8
Moab Khotsong
0.2
0.260
0.1
9.0
0.346
3.1
97.6
Tau Lekoa
0.7
0.145
0.1
2.6
0.119
0.3
97.0
West Wits
Mponeng
(2)
2.0
0.327
0.6
24.6
0.250
6.1
98.5
Savuka
0.6
0.174
0.1
0.4
0.154
0.1
97.2
TauTona
(2)
0.6
0.332
0.2
14.5
0.329
4.8
98.1
Surface
Surface sources
0.0
0.000
0.0
115.5
0.017
1.9
44 – 88
(4)
Argentina
Cerro Vanguardia (92.5 percent)
(3)
0.9
0.207 0.2
7.6
0.181
1.4 95.2
Australia
Boddington (33.33 percent)
(3)
50.4
0.027
1.4
138.4
0.023
3.2
82.2
Sunrise Dam
10.1
0.070
0.7
8.1
0.147
1.2
83.5-85
(4)
Brazil
AngloGold Ashanti Brasil Mineraçáo
2.3 0.187
0.4 10.3 0.22 2.3 87-94
(4)
Serra Grande (50 percent)
(3)
1.8
0.133
0.2
1.1
0.173
0.2
91-96
(4)
Ghana
Bibiani
(6)
0.0
0.000
0.0
0.0
0.000
0.0
-
Iduapriem (85 percent)
(3)
35.9
0.045
1.6
12.9
0.048
0.6
94.5
Obuasi
20.1
0.094
1.9
69.3
0.098
6.8
80-81.0
(4)
Guinea
Siguiri (85 percent)
(3)
20.1
0.017
0.3
58.1
0.025
1.4
93-97.5
Mali
Morila (40 percent)
(3)
6.8
0.073
0.5
5.0
0.072
0.4
89-91.5
(4)
Sadiola (38 percent)
(3)
8.2
0.042
0.3
16.3
0.081
1.3
80-94
(4)
Yatela (40 percent)
(3)
2.3
0.027
0.1
1.6
0.135
0.2
85
(4)
Namibia
Navachab
5.9
0.032
0.2
11.2
0.048
0.5
92
(4)
Tanzania
Geita
4.5
0.028
0.1
82.6
0.101
8.3
66.4-92.8
(4)
United States of America
Cripple Creek & Victor
103
0.027
2.8
39.2
0.027
1.0
60
Total 287.7
0.050
14.479
655.6
0.079
51.491
(1)
Ore reserves include marginally economic and diluting materials delivered for treatment and allow for losses that may occur during mining.
(2)
Probable ore reserves include reserves below infrastructure. See table below.
(3)
Ore reserves attributable to AngloGold Ashanti’s percentage interest shown.
(4)
Recovery factor varies according to ore type.
(5)
Tons refers to a short ton, which is equivalent to 2000lbs avoirdupois
(6)
Bibiani was sold on December 1, 2006.
(7)
The Vaal Reef Ore Reserves include 26.10 million pounds of Uranium by-products; this can not be accounted for by mine as Great Noligwa,
Kopanang and Moab Khotsong feed to a combination of plants.
(8)
The Ore Reserve contains 24.5 million ounces of silver to be recovered as a by-product.
(9)
The Ore Reserve contains 418 million pounds of copper.
(10)
0.55 million tons of sulphure will be recovered from processing the Ore Reserve.
The 2006 probable ore reserves include reserves below infrastructure in the case of the following underground mines
currently in production:
Mine
Tons (millions)
Grade (ounces/ton)
Gold Content (million ounces)
Tau Tona
5.0
0.40
2.0
Mponeng 8.8
0.27
2.4
Obuasi 4.4
0.27
1.2
Total 18.2
0.31
5.6
81
Ore Reserves: Imperial
At December 31, 2005
Proven Ore Reserves
(1)
Probable
Ore
Reserves
(1)
Metallurgical
Gold
Gold
Recovery
Tons
(8)
Grade Content
(1)
Tons
(8)
Grade Content
(1)
Factor
(mill)
(oz/ton)
(mill oz)
(mill)
(oz/ton)
(mill oz)
percent
South Africa
Vaal River
Great Noligwa
6.6
0.252
1.7
12.2
0.240
2.9
97.1
Kopanang
(6)
1.2
0.282
0.4
21.7
0.237
5.2
97.7
Moab Khotsong
0.7
0.274
0.2
9.4
0.364
3.4
97.6
Tau Lekoa
4.3
0.122
0.5
4.2
0.118
0.5
96.7
West Wits
Mponeng
2.1
0.204
0.4
18.1
0.227
4.1
98.4
Savuka
(3)
0.0
0.241
0.0
0.0
0.263
0.0
97.6
TauTona
(2)
1.0
0.340
0.3
15.5
0.318
4.9
97.7
Surface
Surface sources
0.0
0.000
0.0
126.9
0.018
2.3
73.1
Ergo
(7)
-
-
-
-
-
-
-
Argentina
Cerro Vanguardia (92.5 percent)
(4)
1.7
0.233
0.4
4.9
0.190
0.9 95.2
Australia
Boddington (33.33 percent)
(4)
45.4
0.029
1.3
102.6
0.025
2.5
n/a
Sunrise Dam
7.2
0.062
0.4
10.4
0.128
1.3
82-90
(5)
Brazil
AngloGold Ashanti Brasil Mineraçáo
2.3
0.187
0.4
9.5
0.219
2.1
87-92.5
(5)
Serra Grande (50 percent)
(4)
0.7
0.138
0.1
1.4
0.208
0.3
92.8-96.1
(5)
Ghana
Bibiani
4.4
0.030
0.1
0.4
0.027
0.0
60
Iduapriem (85 percent)
(4)
27.4
0.052
1.4
8.1
0.053
0.4
94
Obuasi
11.8
0.078
0.9
42.9
0.180
7.7
75-81.9
(5)
Guinea
Siguiri (85 percent)
(4)
26.0
0.018
0.5
40.5
0.029
1.2
93.5
Mali
Morila (40 percent)
(4)
7.0
0.094
0.7
2.7
0.106
0.3
89-91.5
(5)
Sadiola (38 percent)
(4)
3.0
0.057
0.2
5.8
0.119
0.7
75-93
(5)
Yatela (40 percent)
(4)
0.6
0.039
0.0
1.7
0.116
0.2
75-85
(5)
Namibia
Navachab
1.3
0.054
0.1
9.8
0.048
0.5
87-92
(5)
Tanzania
Geita
24.3
0.099
2.4
44.5
0.137
6.1
66-95
(5)
United States of America
Cripple Creek & Victor
96.3
0.025
2.4
35.0
0.025
0.9
62
Total 275.3
0.054
14.9
528.2
0.092
48.4
(1)
Ore reserves include marginally economic and diluting materials delivered for treatment and allow for losses that may occur during mining.
(2)
Probable ore reserves include reserves below infrastructure. See table below.
(3)
Negligible proven and probable ore reserves as the mine is closing.
(4)
Ore reserves attributable to AngloGold Ashanti’s percentage interest shown.
(5)
Recovery factor varies according to ore type.
(6)
A mining license for Edom has been approved.
(7)
Ergo was closed in March 2005.
(8)
Tons refers to a short ton, which is equivalent to 2000lbs avoirdupois.
The 2005 probable ore reserves include reserves below infrastructure in the case of the following South African mine:
Mine
Tons (millions)
Grade (ounces/ton)
Gold Content (million ounces)
Tau Tona
4.8
0.342
1.7
Total 4.8
0.342
1.7
`
The ore reserves in respect of the remaining AngloGold Ashanti underground mines do not include any undeveloped reserves.ore reserves
below infrastructure
.
82
Ore Reserves: Metric
At December 31, 2006
Proven
Ore
Reserves
(1)
Probable Ore Reserves
(1)
Metallurgical
Gold
Gold
Recovery
Tonnes Grade Content
Tonnes
Grade
Content
Factor
(mill)
(g/t)
(tonnes)
(mill)
(g/t)
(tonnes)
percent
South Africa
Vaal River
Great Noligwa
8.8
7.61
67.0
8.2
7.10
58.5
96.9
Kopanang
1.5
8.87
13.2
16.5
8.31
137.2
97.8
Moab Khotsong
0.2
8.93
1.9
8.2
11.86
96.7
97.6
Tau Lekoa
0.6
4.97
3.1
2.4
4.07
9.7
97.0
West Wits
Mponeng
(2)
1.8
11.22
19.9
22.3
8.56
191.0
98.5
Savuka
0.6
5.97
3.3
0.4
5.29
2.1
97.2
TauTona
(2)
0.6
11.4
6.7
13.2
11.27
148.4
98.1
Surface
Surface sources
0.0
0.00
0.0
104.8
0.57
59.5
44-88
(4)
Argentina
Cerro Vanguardia (92.5 percent)
(3)
0.9
7.09
6.1
6.9
6.22
42.7 95.2
Australia
Boddington (33.33 percent)
(3)
45.8
0.94
42.8
125.6
0.78
98.5
82.2
Sunrise Dam
9.1
2.39
21.8
7.6
4.87
36.9
83.5-85
Brazil
AngloGold Ashanti Brasil Mineraçáo
2.1
6.42
13.2
9.3
7.56
70.4
87-94
(4)
Serra Grande (50 percent)
(3)
1.6
4.57
7.5
1
5.92
5.9
91-96
(4)
Ghana
Bibiani
(5)
0.0
0.00
0.0
0.0
0.00
0.0
-
Iduapriem (85 percent)
(3)
32.5
1.53
49.7
11.7
1.63
19.0
94.5
Obuasi
18.2
3.21
58.5
62.9
3.38
212.3
80-81.0
(4)
Guinea
Siguiri (85 percent)
(3)
18.2
0.60
10.8
52.7
0.85
45.0
93-97.5
Mali
Morila (40 percent)
(3)
6.1
2.50
15.3
4.5
2.47
11.2
89-91.5
(4)
Sadiola (38 percent)
(3)
7.5
1.45
10.8
14.8
2.79
41.3
80-94
(4)
Yatela (40 percent)
(3)
2.1
0.94
1.9
1.4
4.63
6.6
85
(4)
Namibia
Navachab
5.3
1.08
5.8
10.1
1.63
16.5
92
(4)
Tanzania
Geita
4.0
0.97
3.9
74.9
3.47
259.6
66.4-92.8
(4)
United States of America
Cripple Creek & Victor
93.4
0.93
87
35.6
0.91
32.5
60
Total260.9
1.73
450.2
594.7
2.69
1601.5
(1)
Ore reserves include marginally economic and diluting materials delivered for treatment and allow for losses that may occur during mining.
(2)
Probable ore reserves include reserves below infrastructure. See table below.
(3)
Ore reserves attributable to AngloGold Ashanti’s percentage interest shown.
(4)
Recovery factor varies according to ore type.
(5)
Bibiani Mine was sold on December 1, 2006.
(6)
The Vaal Reef Ore Reserves include 11.8 thousand tons of Uranium by-products; this can not be accounted for by mine as Great Noligwa, Kopanang
and Moab Khotsong feed to a combination of plants.
(8)
The Ore Reserve contains 0.76 million tons of silver to be recovered as a by-product.
(9)
The Ore Reserve contains 0.19 million tons of copper.
(10)
0.50 million tons of sulphure will be recovered from processing the Ore Reserve.
The 2006 probable ore reserves include reserves below infrastructure in the case of the following underground mines
currently in production:
Mine
Tonnes (millions)
Grade (grams/tonne)
Gold Content (tonnes)
TauTona 4.5
13.71
62.3
Mponeng 7.9
9.26
73.6
Obuasi 4.0
9.43
37.6
Total 16.4
32.4
173.5
83
Ore Reserves: Metric
At December 31, 2005
Proven
Ore
Reserves
(1)
Probable Ore Reserves
(1)
Metallurgical
Gold
Gold
Recovery
Tonnes Grade Content
Tonnes
Grade
Content
Factor
(mill)
(g/t)
(tonnes)
(mill)
(g/t)
(tonnes)
percent
South Africa
Vaal River
Great Noligwa
6.0
8.65
52.2
11.1
8.23
91.2
97.1
Kopanang
(6)
1.1
9.66
10.9
19.7
8.13
160.4
97.7
Moab Khotsong
0.6
9.39
6.0
8.5
12.46
106.4
97.6
Tau Lekoa
3.9
4.17
16.1
3.8
4.05
15.3
96.7
West Wits
Mponeng
1.9
7.01
13.1
16.4
7.79
127.6
98.4
Savuka
0.0
8.27
0.2
0.0
9.02
0.3
97.6
TauTona
(2)
0.9
11.66
10.5
14.1
10.92
153.5
97.7
Surface
Surface sources
0.0
0.00
0.0
115.1
0.61
70.3
73.1
Ergo
(7)
-
-
-
-
-
-
-
Argentina
Cerro Vanguardia (92.5 percent)
(4)
1.6
7.99
12.6
4.5
6.53
29.295.2
Australia
Boddington (33.33 percent)
(4)
41.2
1.01
41.4
93.1
0.85
78.8
n/a
Sunrise Dam
6.5
2.11
13.7
9.4
4.39
41.4
82.90
Brazil
AngloGold Ashanti Brasil Mineraçáo
2.1
6.4
13.2
8.6
7.5
64.4
87-92.5
(5)
Serra Grande (50 percent)
(4)
0.6
4.72
3.0
1.2
7.14
8.8
92.8-96.1
(5)
Ghana
Bibiani
4.0
1.03
4.1
0.4
0.93
0.3
60
Iduapriem (85 percent)
(4)
24.8
1.78
44.1
7.3
1.81
13.3
94
Obuasi
10.7
2.67
28.5
39.0
6.17
240.4
75-81.9
(5)
Guinea
Siguiri (85 percent)
(4)
23.6
0.62
14.5
36.7
1.00
36.6
93.5
Mali
Morila (40 percent)
(4)
6.4
3.21
20.5
2.5
3.63
9.0
89-91.5
(5)
Sadiola (38 percent)
(4)
2.8
1.95
5.4
5.3
4.09
21.5
75-93
(5)
Yatela (40 percent)
(4)
0.5
1.33
0.7
1.5
3.97
6.1
75-85
(5)
Namibia
Navachab
1.2
1.85
2.2
8.9
1.65
14.7
87-92
(5)
Tanzania
Geita
22.1
3.40
75.1
40.4
4.69
189.2
66-95
(5)
United States of America
Cripple Creek & Victor
87.4
0.86
75.4
31.8
0.86
27.4
62
Total 249.8
1.86
463.4
479.2
3.14
1506.0
(1)
Ore reserves include marginally economic and diluting materials delivered for treatment and allow for losses that may occur during mining.
(2)
Probable ore reserves include reserves below infrastructure. See table below.
(3)
Negligible proven and probable ore reserves as the mine is closing.
(4)
Ore reserves attributable to AngloGold Ashanti’s percentage interest shown.
(5)
Recovery factor varies according to ore type.
(6)
A mining license for Edom has been approved.
(7)
Ergo was closed in March 2005.
The 2005 probable ore reserves include reserves below infrastructure in the case of the following South African mine:
Mine
Tonnes (millions)
Grade (grams/tonne)
Gold Content (tonnes)
TauTona 4.4
11.73
51.4
Total 4.4
11.73
51.4
The ore reserves in respect of the remaining AngloGold Ashanti underground mines do not include any ore reserves
below infrastructure
.
84
Stockpiles: Imperial
Stockpiles are previously mined ore scheduled for future process plant feed. The proven and probable ore reserves
include
the following stockpile material:
Stockpiles
(1)
At December 31, 20042006
Tons (million)
Grade (ounces/ton)
Gold content (million
ounces)
South Africa
West Wits
Mponeng
0.000
– 0.000
Savuka
0.000
– 0.000
TauTona
0.000
– 0.000
Surface
(2)
0.000
– 0.000
Vaal River
Great Noligwa
0.000
– 0.000
Kopanang
0.000
– 0.000
Moab Khotsong
0.000
– 0.000
Tau Lekoa
0.000
– 0.000
West Wits
Mponeng
0.000
– 0.000
Savuka
0.000
– 0.000
TauTona
0.000
– 0.000
Surface
Surface sources
(2)
169.634115.481
0.017 2.861
Ergo
(2)
4.973
0.011 0.0530.02 1.912
Argentina
Cerro Vanguardia (92.5%)(92.5 percent)
0.0230.020
0.490 0.0110.58 0.012
Australia
Boddington (33.33%)(33.33 percent)
0.1800.165
0.0240.02 0.004
Sunrise Dam
1.7067.455
0.100 0.1710.05 0.399
Brazil
AngloGold Ashanti Brasil Mineraçáo
(formerly Morro Velho)
0.0480.051
0.235 0.0110.23 0.012
Serra Grande (50%)(50 percent)
0.0290.073
0.273 0.0080.23 0.017
Ghana
BibianiIduapriem (85 percent)
1.3791.373
0.052 0.071
Iduapriem (85%)
0.546
0.046 0.0250.04 0.049
Obuasi
(3)
51.647
0.04 2.133
Guinea
Siguiri (85 percent)
20.052
0.02 0.348
Mali
Morila
(3)
(40 percent)
6.561
0.05 0.347
Sadiola (38 percent)
8.057
0.04 0.327
Yatela (40 percent)
2.278
0.03 0.062
Namibia
Navachab
4.600
0.02 0.102
Tanzania
Geita
4.457
0.03 0.126
United States of America
Cripple Creek & Victor
0.000
– 0.000
Note: The rounding of figures and converting from metric to imperial units may result in minor computational discrepancies.
(1)
Attributable to AngloGold Ashanti.
(2)
Centralized operations treating material on surface that was previously generated by several underground operations.
(3)Includes Tailing Storage Facilities.
85
Stockpiles: Imperial
Stockpiles are previously mined ore scheduled for future process plant feed. The proven and probable ore reserves
include the following stockpile material:
Stockpiles
(1)
At December 31, 2005
Tons (million)
Grade (ounces/ton)
Gold content (million
ounces)
South Africa
Vaal River
Great Noligwa
0.000
– 0.000
Kopanang
0.000
– 0.000
Moab Khotsong
0.000
– 0.000
Tau Lekoa
0.000
– 0.000
West Wits
Mponeng
0.000
– 0.000
Savuka
0.000
– 0.000
TauTona
0.000
– 0.000
Surface
(2)
0.000
– 0.000
Surface
Surface sources
(2)
0.000
– 0.000
Argentina
Cerro Vanguardia (92.5 percent)
0.077
0.205 0.016
Australia
Boddington (33.33 percent)
0.000
– 0.000
Sunrise Dam
5.310
0.050 0.263
Brazil
AngloGold Ashanti Brasil Mineraçáo
0.044
0.226 0.010
Serra Grande (50 percent)
0.047
0.203 0.010
Ghana
Iduapriem (85 percent)
0.536
0.048 0.026
Obuasi
3.307
0.018 0.058
Guinea
Siguiri (85%)(85 percent)
17.51423.982
0.017 0.2960.016 0.378
Mali
Morila (40%)(40 percent)
3.3403.536
0.061 0.2030.069 0.243
Sadiola (38%)(38 percent)
2.7483.039
0.052 0.1440.057 0.173
Yatela (40%)(40 percent)
0.8820.569
0.054 0.0480.039 0.022
Namibia
Navachab
1.0451.286
0.032 0.0330.054 0.069
Tanzania
Geita
1.3710.826
0.036 0.0500.084 0.069
United States of America
Cripple Creek & Victor
0.000
– 0.000
Note: The rounding of figures and converting from metric to imperial units may result in minor computational discrepancies.
(1)
Attributable to AngloGold Ashanti.
(2)
Centralized operations treating material on surface that was previously generated by several underground operations.
88
Stockpiles: Imperial
Stockpiles are previously mined ore scheduled for future process plant feed. The proven and probable ore reserves include
the following stockpile material:
Stockpiles
(1)
At December 31, 2003
Tons (million)
Grade (ounces/ton)
Gold content (million
ounces)
South Africa
West Wits
Mponeng
0.000
–
0.000
Savuka
0.000
–
0.000
TauTona
0.000
–
0.000
Surface
(2)
0.000
–
0.000
Vaal River
Great Noligwa
0.000
–
0.000
Kopanang
0.000
–
0.000
Moab Khotsong
0.000
–
0.000
Tau Lekoa
0.000
–
0.000
Surface
Surface sources
(2)
175.641
0.016 2.875
Ergo
(2)
32.384
0.011 0.358
Argentina
Cerro Vanguardia (92.5%)
0.054
0.167 0.009
Australia
Boddington (33.33%)
–
–
–
Sunrise Dam
0.667
0.056 0.038
Brazil
AngloGold Ashanti Mineraçáo
(formerly Morro Velho)
0.000
– 0.000
Serra Grande (50%)
0.025
0.284 0.007
Mali
Morila (40%)
1.182
0.059 0.070
Sadiola (38%)
2.728
0.056 0.153
Yatela (40%)
1.014
0.033 0.033
Namibia
Navachab
1.450
0.040 0.058
Tanzania
Geita
0.600
0.060 0.036
United States of America
Cripple Creek & Victor
0.000
– 0.000
Note: The rounding of figures and converting from metric to imperial units may result in minor computational discrepancies.
(1)
Attributable to AngloGold.
(2)
Centralized operations treating material on surface that was previously generated by several underground operations.
8986
Stockpiles: Metric
Stockpiles are previously mined ore scheduled for future process plant feed. The proven and probable ore reserves
include
the following stockpile material:
Stockpiles
(1)
At December 31, 20042006
Tonnes (million)
Grade (grams/tonne) Gold content (tonnes)
South Africa
West Wits
Mponeng
0.000
– 0.000
Savuka
0.000
– 0.000
TauTona
0.000
– 0.000
Surface
(2)
0.000
– 0.000
Vaal River
Great Noligwa
0.000
– 0.000
Kopanang
0.000
– 0.000
Moab Khotsong
0.000
– 0.000
Tau Lekoa
0.000
– 0.000
West Wits
Mponeng
0.000
– 0.000
Savuka
0.000
– 0.000
TauTona
0.000
– 0.000
Surface
Surface sources
(2)
153.889104.763
0.580 88.983
Ergo
(2)
4.511
0.360 1.6440.57 59.475
Argentina
Cerro Vanguardia (92.5%)(92.5 percent)
0.0210.018
16.81 0.35120.00 0.369
Australia
Boddington (33.33%)(33.33 percent)
0.0000.150
– 0.0000.80 0.120
Sunrise Dam
1.5486.763
3.44 5.3261.82 12.325
Brazil
AngloGold Ashanti Brasil Mineraçáo
(formerly Morro Velho)
0.0440.046
8.07 0.3517.95 0.368
Serra Grande (50%)(50 percent)
0.0270.066
9.37 0.2497.87 0.522
Ghana
BibianiIduapriem (85 percent)
1.2511.246
1.77 2.216
Iduapriem (85%)
0.496
1.57 0.7781.23 1.531
Obuasi
0.000(3)
– 0.00046.853
1.42 66.353
Guinea
Siguiri (85%)(85 percent)
15.88818.191
0.58 9.2170.60 10.828
Mali
Morila (40%)
3.030(3)
2.08 6.315(40 percent)
5.951
1.82 10.815
Sadiola (38%)(38 percent)
2.4937.309
1.80 4.4831.39 10.160
Yatela (40%)(40 percent)
0.8002.066
1.86 1.4850.94 1.940
Namibia
Navachab
0.9484.173
1.09 1.0290.76 3.181
Tanzania
Geita
1.2444.044
1.25 1.5490.97 3.924
United States of America
Cripple Creek & Victor
0.000
– 0.000
(1)
Attributable to AngloGold.
(2)
Centralized operations treating material on surface that was previously generated by several underground operations.
(3)
9087
Stockpiles: Metric
Stockpiles are previously mined ore scheduled for future process plant feed. The proven and probable ore reserves
include
the following stockpile material:
Stockpiles
(1)
At December 31, 20032005
Tonnes (million)
Grade (grams/tonne) Gold content (tonnes)
South Africa
Vaal River
Great Noligwa
0.000
– 0.000
Kopanang
0.000
– 0.000
Moab Khotsong
0.000
– 0.000
Tau Lekoa
0.000
– 0.000
West Wits
Mponeng
0.000
– 0.000
Savuka
0.000
– 0.000
TauTona
0.000
– 0.000
Surface
(2)
0.000
– 0.000
Vaal River
Great Noligwa
0.000
– 0.000
Kopanang
0.000
– 0.000
Moab Khotsong
0.000
– 0.000
Tau Lekoa
0.000
– 0.000
Surface
Surface sources
(2)
159.3390.000
0.56 89.423
Ergo
(2)
29.378
0.38 11.134– 0.000
Argentina
Cerro Vanguardia (92.5%)(92.5 percent)
0.0490.070
5.73
0.2817.010.492
Australia
Boddington (33.33%)(33.33 percent)
0.000
–0.000
Sunrise Dam
0.6054.817
1.93
1.1701.708.178
Brazil
AngloGold Ashanti Brasil Mineraçáo
(formerly Morro Velho)
0.0000.040
– 0.0007.76 0.311
Serra Grande (50%)(50 percent)
0.0230.043
9.756.970.296
0.224Ghana
Iduapriem (85 percent)
0.486
1.660.807
Obuasi
3.000
0.60 1.800
Guinea
Siguiri (85 percent)
21.756
0.54 11.744
Mali
Morila (40%)(40 percent)
1.0723.208
2.03
2.1752.36 7.555
Sadiola (38%)(38 percent)
2.4752.757
1.93
4.7731.955.373
Yatela (40%)(40 percent)
0.9200.517
1.12
1.0261.330.688
Namibia
Navachab
1.3151.167
1.38
1.8101.85 2.160
Tanzania
Geita
0.5440.750
2.06
1.1212.88 2.159
United States of America
Cripple Creek & Victor
0.000
– 0.000
(1)
Attributable to AngloGold.
(2)
Centralized operations treating material on surface that was previously generated by several underground operations.
9188
Drill hole spacing: Imperial
In determining the proven and probable ore reserves, AngloGold Ashanti applied the following drill hole spacings:
Drill Hole Spacings
Proven Ore Reserves
Probable Ore Reserves
South Africa
Underground sources
Ore body opened up, developed and sampled on a
7 –
10 feetfoot spacing on raise lines and on a 16 x 16
grid
thereafter
From a 130 x 130 foot spacing up to
3200 x 3200 feetfoot spacing
Surface sources
Variable sampling strategies: Belt samplers, cross
stream residue samplers and bulk sampling
campaigns
Variable sampling strategies: Belt
samplers, cross stream residue
samplers
Argentina
Great Noligwa
2.4
2.3
2.4
8.08
9.30
10.38
615
693
795
260
264
231
Kopanang
2.0
2.0
2.0
7.01
7.38
7.37
446
482
486
291
277
281
Tau Lekoa
1.5
2.1
2.4
3.76
3.96
3.87
176
265
293
438
410
370
Surface operations
7.2
5.8
6.1
0.49
0.51
0.60
113
95
119
283
287
250
Moab Khotsong
(1)
0.2 – –
6.35 – – 44 – –
659 – –
West Wits
Mponeng
1.9
1.7
1.7
9.93
9.15
8.14
596
512
438
238
279
322
Savuka
0.4
0.6
0.8
7.68
6.80
6.19
89
126
158
337
430
455
TauTona
2.0
1.6
1.6
10.18
9.62
10.88
474
502
568
270
256
245
ARGENTINA
Cerro Vanguardia (92.5 percent)
0.9
0.9
0.9
7.29
7.70
7.60
215
211
211
223
171
156
AUSTRALIA
Sunrise Dam
4.0
3.6
3.7
3.39
3.68
3.46
465
455
410
333
269
260
BRAZIL
AngloGold Ashanti Brasil
Mineraçáo
(2)
1.1 1.3 1.0
7.60 7.27 7.85 242 250 240 207 169 133
Serra Grande (50 percent)
0.4
0.4
0.4
7.51
7.93
7.80
97
96
94
196
158
134
GHANA
Bibiani
(3) (5)
2.1
2.4
1.7
0.55
1.46
1.93
37
115
105
432
305
251
Iduapriem
(3) (5)
3.0 3.2 2.2
1.74 1.71 1.72 167 174 125 413 348 303
Obuasi
(2) (5)
6.2 4.7 2.6
4.39 4.77 3.08 387 391 255 397 345 305
GUINEA
Siguiri (85 percent)
(4) (5)
7.0 5.8 2.6
1.08 1.21 1.10 256 246 83 398 301 443
MALI
Morila (40 percent)
1.7
1.5
1.4
3.88
5.41
4.57
207
262
204
266
191
196
Sadiola (38 percent)
1.8
1.9
2.0
3.22
2.73
2.77
190
168
174
268
265
242
Yatela (40 percent)
(6)
1.3 1.3 1.1
4.12 2.99 3.41 141 98 97 241 263 255
NAMIBIA
Navachab
1.5
1.2
1.3
1.81
2.05
1.59
86
81
66
349
321
348
TANZANIA
Geita
(7)
5.7 6.1 4.8
1.68 3.14 3.74 308 613 570 630 298 250
UNITED STATES OF AMERICA
Cripple Creek & Victor
(6)
21.8
19.2 18.2
0.54 0.62 0.61 283 330 329 248 230 220
ZIMBABWE
Freda-Rebecca
(5)(8)
–
–
0.1
-
–
1.66
–
–
9
–
–
417
Table includes equity accounted joint ventures.
(1) Attributable production at Moab Khotsong yielded 29,862 ounces which was capitalized against pre-production costs.
(2) The yield of AngloGold Ashanti Brasil Mineraçáo and Obuasi represents underground operations.
(3) The yield of Bibiani and Iduapriem represents open-pit operations.
(4) The yield at Siguiri arises from the open-pit operations in 2006 and 2005 and the heap leach operation in 2004.
(5) Interest acquired April 26, 2004 with reporting from May 1, 2004.
(6) The yield at Yatela and Cripple Creek & Victor Joint Venture reflects recoverable gold placed/tonnes placed.
(7) 50 percent holding to April 26, 2004 and 100 percent from this date.
(8Freda-Rebecca was sold effective September 1, 2004.
42
SOUTH AFRICA
Location: AngloGold Ashanti’s South Africa region includes seven underground operations located in two geographic
areas on the Witwatersrand Basin. These are:
º theVaal River area, near Klerksdorp and Orkney, in the North West Province and Free State, where the Great
Noligwa, Kopanang, Tau Lekoa and Moab Khotsong (which remains under development) mines are located; and
º theWest Wits area, near Carletonville, straddling the North West Province and Gauteng, where the Mponeng,
TauTona and Savuka mines are located.
The group’s surface metallurgical reclamation operation, Ergo, located near Johannesburg in the province of Gauteng
ceased production in 2005, and is currently being closed in terms of environmental legislation, a process that is expected
to take some years to complete.
Geology: The Witwatersrand Basin comprises a six-kilometer thick sequence of interbedded argillaceous and arenaceous
sediments that extend laterally for some 300 kilometers north-east/south-west and 100 kilometers north-west/south-east
on the Kaapvaal Craton. The upper portion of the basin, which contains the orebodies, crops out at its northern extent
near Johannesburg. Further west, south and east the basin is overlain by up to four kilometers of Archaean, Proterozoic
and Mesozoic volcanic and sedimentary rocks. The Witwatersrand Basin is late Archaean in age and is considered to be
in the order of 2.7 to 2.8 billion years old.
Gold occurs in laterally extensive quartz pebble conglomerate horizons or reefs, generally less than two meters thick, and
are widely considered to represent laterally extensive braided fluvial deposits. Separate fan systems were developed at
different entry points and these are preserved as distinct goldfields. There is still much debate about the origin of the gold
mineralization in the Witwatersrand Basin. Gold was generally considered to have been deposited syngenetically with the
conglomerates, but increasingly an epigenetic origin theory is being supported. Nonetheless, the most fundamental control
to the gold distribution in the Basin remains the sedimentary features, such as facies variations and channel directions.
Gold generally occurs in native form often associated with pyrite and carbon, with quartz being the main gangue mineral.
43
Operating performance: Production declined 5 percent from 2.676 million ounces in 2005 to 2.554 million ounces in
2006, (2004: 2.857 million ounces). Total cash costs improved from $291 per ounce in 2005 to $286 per ounce in 2006, as
a result of a weakening of the rand and cost savings initiatives in the region (2004: $284 per ounce).
Cost savings of $50 million were recorded for the year, primarily as a result of operational efficiencies, improved
procurement practices and restructuring of both the Savuka and Tau Lekoa. The restructuring involved the combining of
the management of the mine Savuka with Mponeng and Tau Lekoa with Kopanang and with both mines being optimized
from a production point of view where volumes were reduced to support the cost saving initiatives.
Great Noligwa and Moab Khotsong together produced 1.38 million pounds of uranium oxide in 2006.
Capital expenditure in 2006 amounted to $321 million, 7 percent lower than that of 2005 at $347
(2004: $333 million), with ore reserve development representing 58 percent of this amount, expansion capital
representing 21 percent and stay-in-business capital representing 21 percent. Major components of the expansion capital
included the completion and commissioning of the Moab Khotsong mine, the deepening project at Mponeng and the
acceleration of the uranium plant upgrade in Vaal River.
• Vaal River operations
Description: AngloGold Ashanti’s Vaal River operations are located in the original Vaal Reefs mining area of the
Witwatersrand Basin and comprise four operating mines, Great Noligwa, Kopanang, Tau Lekoa and Moab Khotsong.
The Vaal River complex also has four gold plants, one uranium plant and one sulphuric acid plant. The Vaal River
processing plants include crushers, mills, CIP and electro-winning facilities and are able to treat between 180,000 and
420,000 tonnes of ore per month.
Although the Vaal River operations produce uranium oxide as a by-product of the production of gold, the value is not
significant relative to the value of gold produced.
Location: The Vaal River operations are located near the towns of Klerksdorp and Orkney in North West and Free State
Provinces.
Geology: In order of importance, the reefs mined at the Vaal River operations are the Vaal Reef, the VCR and the
“C” Reef:
º The Vaal Reef contains approximately 85 percent of the reserve tonnage with mining grades between 10 and 20g/t
and comprises a series of oligomictic conglomerates and quartzite packages developed on successive
unconformities. Several distinct facies have been identified, each with its unique gold distribution and grade
characteristic.
º The VCR has a lower grade than the Vaal Reef, and contains approximately 15 percent of the estimated reserves.
The economic portion is mainly concentrated in the western part of the lease area and can take the form of a massive
conglomerate, a pyritic sand unit with intermittent pebble layers or a thin conglomerate horizon. The reef is located at
the contact between the overlying Kliprivierberg Lavas of the Ventersdorp SuperGroup and the underlying sediments
of the Witwatersrand SuperGroup which creates a distinctive seismic reflector. The VCR is locate d up to one
kilometer above the Vaal Reef.
º The “C” Reef is a thin, small pebble conglomerate with a carbon-rich basal contact, located approximately 270 meters
above the Vaal Reef. It has less than 1 percent of the estimated reserves with grades similar to the Vaal Reef, but
more erratic. The most significant structural features are the north-east striking normal faults which dip to the north-
west and south-east, resulting in zones of fault loss.
44
Vaal River – Summary of metallurgical operations
West GP
East Gold Acid
and Float Plant
Noligwa GP
Mispah GP
Kopanang GP
Gold plants
Capacity (000 tonnes/month)
180
309
263
140
420
Technology
ROM mills (2),
ball mill,
cyanide,
CIL,
elution,
electro-winning
cyanide,
Pumpcell,
elution,
electro-winning
ROM (2), cyanide,
CIP,
elution, electro-
winning
ROM,
Cyanide,
CIP, elution,
electro-winning
ROM mills (6),
cyanide,
CIP,
elution, electro-
winning
Uranium plants
Capacity (000 tonnes/month)
–
–
263
Pyrite flotation plants
Capacity (000 tonnes/month)
–
250
145
Sulphuric acid plants
Production(tonnes/month)
–
7,500
–
Operating and production data for Vaal River operations
Great Noligwa
Kopanang
Tau Lekoa
Moab Khotsong
(3)
2006
Pay limit (oz/t)
0.28
0.32
0.14
1.50
Pay limit (g/t)
9.57
10.92
4.85
51.44
Recovered grade (oz/t)
0.236
0.204
0.110
0.185
Recovered grade (g/t)
8.08
7.01
3.76
6.35
Gold production (000 oz)
615
446
176
44
Total cash costs ($/oz)
(1)
260
291
438
659
Total production costs ($/oz)
(1)
374
377
693
1,136
Capital expenditure ($ million)
49
41
11
83
Employees
(2)
5,883
5,360
2,514
1,539
Outside contractors
(2)
696
455
379
1,365
2005
Pay limit (oz/t)
0.39
0.39
0.19
-
Pay limit (g/t)
13.24
13.25
6.23
-
Recovered grade (oz/t)
0.271
0.215
0.116
-
Recovered grade (g/t)
9.30
7.38
3.96
-
Gold production (000 oz)
693
482
265
-
Total cash costs ($/oz)
(1)
264
277
410
-
Total production costs ($/oz)
(1)
354
363
555
-
Capital expenditure ($ million)
43
41
15
94
Employees
(2)
5,704
5,506
3,021
1,320
Outside contractors
(2)
1,152
524
1,084
1,201
2004
Pay limit (oz/t)
0.48
0.43
0.20
-
Pay limit (g/t)
14.36
14.52
6.81
-
Recovered grade (oz/t)
0.303
0.215
0.113
-
Recovered grade (g/t)
10.38
7.37
3.87
-
Gold production (000 oz)
795
486
293
-
Total cash costs ($/oz)
(1)
231
281
370
-
Total production costs ($/oz)
(1)
268
325
444
-
Capital expenditure ($ million)
36
38
25
80
Employees
(2)
6,192
5,758
3,398
1,066
Outside contractors
(2)
908
554
854
808
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.:
Operating results – Total cash costs and total production costs”.
(2)
Average for the year.
(3)
Commercial production commenced on January 1, 2006.
45
Operating performance:
Great Noligwa: In 2006, production declined by 11 percent to 615,000 ounces from 693,000 produced in 2005
(2004: 795,000) due primarily to a 13 percent yield decline, from 9.3g/t in 2005 to 8.08g/t in 2006 (2004: 10.38g/t). Total
cash costs rose by 5 percent in rand terms to R56,390 per kilogram from R53,868 per kilogram in 2005, due to lower gold
production (2004: R47,820 per kilogram). The continued focus on cost savings helped to limit the effect of reduced
production on the operation’s costs. In dollar terms, total cash costs improved by 1 percent to $260 per ounce in 2006
from $264 per ounce in 2005 (2004: $231 per ounce). Capital expenditure at $49 million was 14 percent higher than the
$43 million spent in 2005 (2004: $36 million), mainly as a consequence of the acceleration of a plan to upgrade the
operation’s uranium plant.
Kopanang: In 2006, production declined by 7 percent to 446,000 ounces from 482,000 ounces produced in 2005
(2004: 486,000 ounces) as a result of a lower mine call factor and a 5 percent decline in yield from 7.38g/t in 2005 to
7.01g/t in 2006 (2004: 7.37g/t). Consequently, total cash costs increased by 6 percent to $291 per ounce in 2006, from
$277 per ounce in 2005 (2004: $281 per ounce). Total cash costs, in rand terms, rose by 11 percent to R62,908 per
kilogram from R56,427 per kilogram in 2005. Capital expenditure of $41 million was unchanged from that of 2005
(2004: $38 million).
Tau Lekoa: Tau Lekoa was downscaled in 2006 in order to return the operation to profitability in a rising gold price
environment. As a result, production in 2006 declined by 34 percent from 265,000 ounces produced in 2005 to
176,000 ounces produced in 2006 (2004: 293,000 ounces).
Consequently, total cash costs increased by 7 percent from $410 per ounce in 2005 to $438 per ounce in 2006
(2004: $370 per ounce) and in rand terms, total cash costs, increased by 12 percent to R94,365 per kilogram in 2006 from
R83,885 per kilogram in 2005 (2004: R76,428 per kilogram). Capital expenditure at $11 million declined by 27 percent on
2005’s spend of $15 million (2004: $25 million).
Moab Khotsong commenced commercial production in January 2006 and the operation was marked by the high total
cash costs and low volumes typical of a deep-level underground operation’s start-up phase. In 2006, production was
44,000 ounces and total cash costs were $659 per ounce or R142,364 per kilogram. Capital expenditure of $83 million in
2006 was 12 percent lower than the spend in 2005 of $94 million (2004: $80 million).
Growth prospects: In 2007, production at Moab Khotsong is expected to increase to some 80,000 ounces and total
cash costs should decline accordingly as this operation builds up to full production, likely in 2012.
•
West Wits operations
Description: The West Wits operations comprise Mponeng, Savuka and TauTona mines. Savuka and TauTona share a
processing plant, whereas Mponeng has its own individual processing plant. These plants comprise crushers, mills,
CIP and zinc precipitation and smelting facilities.
Location: The West Wits operations are located near the town of Carletonville in North West Province, south-west of
Johannesburg, straddling the boundary with Gauteng.
Geology: Two reef horizons are exploited at the West Wits operations, the Ventersdorp Contact Reef (VCR) located at the
top of the Central Rand Group and the Carbon Leader Reef (CLR) near the base. The separation between the two reefs
increases from east to west from 400 to 900 meters, owing to unconformity in the VCR. TauTona and Savuka exploit both
reefs whereas Mponeng only mines the VCR. The structure is relatively simple; faults of greater than 70 meters are rare.
The CLR consists of one or more conglomerate units and varies from several centimeters to more than three meters in
thickness. Regionally, the VCR dips at approximately 21 degrees but may vary between 5 and 50 degrees, accompanied
by changes in thickness of the conglomerate units. Where the conglomerate has the attitude of the regional dip, it tends to
be thick, well-developed and accompanied by higher gold accumulations. Where th e attitude departs significantly from the
regional dip, the reef is thin, varying from several centimeters to more than three meters in thickness.
46
West Wits – Summary of metallurgical operations
Mponeng Savuka
Gold plants
Capacity (000 tonnes/month)
160
280
Technology
ROM mills (3),
cyanide,
CIL,
elution,
electro-winning
crushers,
tube mills,
ball mills,
cyanide,
Pumpcell
Operating and production data for West Wits operations
Mponeng
TauTona
Savuka
2006
Pay limit (oz/t)
0.23
0.53
0.31
Pay limit (g/t)
7.74
18.25
10.75
Recovered grade (oz/t)
0.290
0.297
0.224
Recovered grade (g/t)
9.93
10.18
7.68
Gold production (000 oz)
596
474
89
Total cash costs ($/oz)
(1)
238 270 337
Total production costs ($/oz)
(1)
374 411 359
Capital expenditure ($ million)
48
70
2
Employees
(2)
4,760
4,164
975
Outside contractors
(2)
524
1,002
65
2005
Pay limit (oz/t)
0.34
0.72
0.45
Pay limit (g/t)
11.53
24.43
15.18
Recovered grade (oz/t)
0.267
0.281
0.198
Recovered grade (g/t)
9.15
9.62
6.80
Gold production (000 oz)
512
502
126
Total cash costs ($/oz)
(1)
279 256 430
Total production costs ($/oz)
(1)
383 388 524
Capital expenditure ($ million)
47
74
6
Employees
(2)
4,897 4,459 2,178
Outside contractors
(2)
677 996 147
2004
Pay limit (oz/t)
0.41
0.73
0.44
Pay limit (g/t)
13.71
24.47
14.89
Recovered grade (oz/t)
0.237
0.317
0.181
Recovered grade (g/t)
8.14
10.88
6.19
Gold production (000 oz)
438
568
158
Total cash costs ($/oz)
(1)
322 245 455
Total production costs ($/oz)
(1)
393 319 639
Capital expenditure ($ million)
62
65
8
Employees
(2)
5,164 4,673 3,001
Outside contractors
(2)
712 825 228
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.:
Operating results – Total cash costs and total production costs”.
(2)
Average for the year.
47
Operating performance:
Mponeng: During 2006, yield rose to 9.93g/t from 9.15g/t in 2005 (2004: 8.14g/t). As a result of the higher volumes and
improved yield, gold production increased by 16 percent from 512,000 ounces in 2005 to 596,000 ounces in 2006
(2004: 438,000 ounces). Consequently, total cash costs declined by 15 percent to $238 per ounce from $279 per ounce in
2005 (2004: $322 per ounce). In local currency terms, total cash costs were at R51,666 per kilogram, 9 percent down on
2005 total cash costs of R57,084 per kilogram as a result of the higher volumes and improved yield aided by the benefit of
the cost savings initiatives undertaken in the beginning of the year. Capital expenditure increased marginally from
$47 million in 2005 to $48 million in 2006 (2004: $62 million).
TauTona: During 2006, production declined by 6 percent to 474,000 ounces from 502,000 ounces produced in 2005, due
to planned lower volumes mined and seismicity concerns in the first and fourth quarters of 2006 (2004: 568,000 ounces).
Total cash costs rose by 5 percent to $270 per ounce from $256 per ounce in 2005 (2004: $245 per ounce). In rand terms,
total cash costs increased by 12 percent to R58,631 per kilogram. Capital expenditure at $70 million was 5 percent lower
than the spend in 2005 of $74 million (2004: $65 million).
Savuka: While it had been reported in 2005 that Savuka had entered an accelerated closure mode, the strength of the
gold price in 2006 instead resulted in the implementation of a restructuring plan and the operation’s life has been extended
at a lower production rate.
Management of Savuka is now included under that of the neighboring Mponeng mine. Production for 2006 totaled
89,000 ounces which, although 29 percent less than the 126,000 ounces produced in 2005, was 535 percent more than
had been planned (2004: 158,000). The overall grade for the year increased from 6.80g/t achieved in 2005 to 7.68g/t
achieved in 2006 (2004: 6.19g/t).
In local currency, total cash costs decreased 16 percent from R87,200 per kilogram in 2005, to R73,055 per kilogram in
2006, while in dollar terms, cash costs were down 22 percent to $337 per ounce from $430 per ounce in 2005
(2004: $455 per ounce). Capital expenditure for 2006 was minimal at $2 million compared with 2005’s capital expenditure
of $6 million (2004: $8 million).
Growth prospects:
Mponeng VCR below 120 project: This project consists of four parallel declines sunk from the 120 level to gain access
to the VCR reef on levels 123 and 126. The declines will be equipped with a conveyor belt, monorail and chairlift to service
the new mining areas. The project, from which production is expected to commence in 2013, is expected to produce
2.5 million ounces of gold over a period of ten years, at a capital cost of $252 million, and is expected to extend the life of
the mine by approximately eight years. Construction will begin in early 2007.
TauTona CLR below 120 level project: The CLR reserve block below 120 level is being accessed via a twin decline
system into its geographical centre, down to 128 level. The project, from which production is expected to commence in
2008, is expected to produce 2.6 million ounces of gold over a period of nine years (2009 to 2017), at a capital cost of
$168 million. Of this, $56 million has been spent to date.
TauTona CLR shaft pillar extraction project: This project allows for stoping operations up to the infrastructural zone of
influence. The project, from which production commenced in 2004, is expected to produce 534,000 ounces of gold over a
period of six years (2004 to 2009), at a capital cost of $45 million (converted at the 2005 closing exchange rate), most of
which has been committed.
VCR pillar project: This project aims to access the VCR pillar area situated outside the zone of influence (top and
eastern block). The project, from which production commenced in 2005, is expected to produce 200,000 ounces of gold
over a period of eight years (2005 to 2012), at a capital cost of $19 million (at the 2005 closing exchange rate). Of this,
$11 million has been spent to date.
48
ARGENTINA
AngloGold Ashanti has a single operation in Argentina, the Cerro Vanguardia mine. This operation was acquired as part
of the Minorco transaction effective March 31, 1999, at which time AngloGold held a 46.25 percent stake. AngloGold
Ashanti has a 92.5 percent interest in the Cerro
Vanguardia mine following the acquisition of an
additional 46.25 percent in July 2002, while the Santa
Cruz Province has a 7.5 percent interest.
Description: Cerro Vanguardia consists of multiple
small open-pits with high stripping ratios. The
orebodies comprise a series of hydrothermal vein
deposits containing vast quantities of silver, which is
produced as a by-product.
Throughput has increased steadily since the first gold
was poured in September 1998, from an original
design capability of 1,800 tpd to the present level of
2,700 tpd. Cerro Vanguardia’s lease area is 514 square
kilometers.
Location: The Cerro Vanguardia operation is located
to the north-west of Puerto San Julian in the Province
of Santa Cruz, Argentina. The company owns the
right to exploit the deposit for 40 years based on the
Usufruct Agreement signed in December 1996. The
operation, which was constructed at a total cost of
$270 million, was commissioned in the fourth quarter
of 1998.
Geology: The oldest rocks in this part of Patagonia
are metamorphics of the Precambrian-Cambrian age.
These are overlain by Permian and Triassic
continental clastic rocks which have been faulted into
a series of horsts and grabens and are associated
with both limited basaltic sills and dykes and with
calc-alkaline granite and granodiorite intrusions.
Thick andesite flows of Lower Jurassic age occur
above these sedimentary units. A large volume of
rhyolitic ignimbrites was emplaced during the Middle
and Upper Jurassic age over an area of
approximately 100,000 square kilometers. These
volcanic rocks include the Chon Aike formation
ignimbrite units that host the gold bearing veins at
Cerro Vanguardia. Post-mineral units include
Cretaceous and Tertiary rocks of both marine and
continental origin, the Quaternary La Avenida
formation, the Patagonia gravel and the overlying
La Angelita basalt flows. These flows do not cover the area of the Cerro Vanguardia veins.
Gold and silver mineralization at Cerro Vanguardia occurs within a vertical range of about 150 to 200 meters in a series of
narrow, banded quartz veins that occupy structures within the Chon Aike ignimbrites. These veins form a typical structural
pattern related to major north-south (Concepcion) and east-west (Vanguardia) shears. Two sets of veins have formed in
response to this shearing - one set strikes about N40W and generally dips 65 to 90 degrees to the east; while the other set
strikes about N75W and the veins dip 60 to 80 degrees to the south.
49
The veins are typical of epithermal, low-temperature, adularia-sericite character and consist primarily of quartz in several
forms: as massive quartz, banded chalcedonic quartz, and quartz-cemented breccias. Dark bands in the quartz are due to
finely disseminated pyrite, now oxidized to limonite. The veins show sharp contacts with the surrounding ignimbrite which
hosts narrow stockwork zones that are weakly mineralized and appear to have been cut by a sequence of north-east-
trending faults that have southerly movement with no appreciable lateral displacement.
Cerro Vanguardia – Summary of metallurgical operations
Gold plants
Capacity (000 tonnes/month)
82
Technology
Crushers,
scrubber,
ball mill,
CCD,
leach in cyanide,
CIL,
elution,
zinc-precipitation,
electro-winning
Operating and production data for Cerro Vanguardia
2006 20052004
Pay limit (oz/t)
0.13 0.12 0.12
Pay limit (g/t)
4.56 4.02 4.05
Recovered grade (oz/t)
0.213
0.225
0.222
Recovered grade (g/t)
7.29
7.70
7.60
Gold production (000 oz) 100 percent
232
228
229
Gold production (000 oz) 92.50 percent
215
211
211
Total cash costs ($/oz)
(1)
223
171
156
Total production costs ($/oz)
(1)
372
270
284
Capital expenditure ($ million) 100 percent
19
15
13
Capital expenditure ($ million) 92.50 percent
18
14
12
Employees
(2)
623 487 389
Outside contractors
(2)
283
459
402
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(2)
Average for the year.
Operating performance: At Cerro Vanguardia attributable gold production in 2006 increased by 2 percent to
215,000 ounces from 211,000 ounce produced in 2005 (2004: 211,000 ounces). While the yield varied over the course of
the year as anticipated, the average grade in 2006 was 7.29g/t compared with an average grade of 7.7g/t in 2005
(2004: 7.60g/t). Ore throughput increased 8 percent to 1 million tonnes in 2006. Total cash costs rose by 30 percent to
$223 per ounce from $171 per ounce in 2005 (2004: $156 per ounce), mainly as a result of higher local inflation and
increases in both commodity prices and mine maintenance costs. The higher mine maintenance costs were associated
with a programme undertaken in 2006 to improve the availability of mine equipment.
Capital expenditure for the year amounted to $18 million, 29 percent higher than the $14 million spent in 2005
(2004: $12 million). The increase in expenditure was mainly due to the purchase of new and replacement mine equipment
and expenditures related to the heap leaching project currently underway.
Growth prospects: During 2006, Cerro Vanguardia began an accelerated four-year brownfields exploration programme,
the focus of which is shallow, high grade mineral resources. Results have so far been encouraging, with 39,000 meters of
reverse circulation drilling and 14,000 meters of diamond drilling completed in 2006. Since 1998, Cerro Vanguardia has
been stockpiling low-grade material with the intention of treating it through an industrial-size heap-leach operation. As of
December 2006, 9.5 million tonnes of this material had been stockpiled and a study to confirm the viability of the heap-
leach pad was also initiated in 2006 and is ongoing.
50
AUSTRALIA
AngloGold Ashanti has two mines in Australia, Sunrise Dam and Boddington, both located in the western part of the
country. The Sunrise Dam mine is 100 percent owned by AngloGold Ashanti, while the Boddington project, which is
currently under construction and in which AngloGold Ashanti holds 33.33 percent equity, is a joint venture with Newmont
Mining Corporation.
Australia – Summary of metallurgical operations
Sunrise Dam
Boddington
Gold plants
Under construction
Capacity (000 tonnes/month)
300
3,000
Technology
crushers,
ball mill,
gravity concentrate,
CIL,
elution,
electro-winning
crushers,
HBDI, ball mill, floatation gravity
concentrate, CIL, elution, electro-winning
• Sunrise Dam
Description: Sunrise Dam comprises a large open-pit and an underground project. Mining is carried out by contractors
and ore is treated in a conventional gravity and leach process plant.
Location: Sunrise Dam gold mine lies some 220 kilometers north-northeast of Kalgoorlie and 55 kilometers south of
Laverton in Western Australia.
Geology: Gold ore at Sunrise Dam is structurally and lithologically controlled within gently dipping high strain shear zones
(for example, Sunrise Shear) and steeply dipping brittleductile low strain shear zones (for example, Western Shear). Host
rocks include andesitic volcanic rocks, volcanogenic sediments and magnetic shales.
51
Operating and production data for Sunrise Dam
2006 2005 2004
Pay limit (oz/t)
0.050.070.07
Pay limit (g/t)
1.642.272.14
Recovered grade (oz/t)
(2)
0.099
0.107
0.110
Recovered grade (g/t)
(2)
3.39
3.68
3.46
Gold production (000 oz)
465
455
410
Total cash costs ($/oz)
(1)
333
269
260
Total production costs ($/oz)
(1)
406
367
337
Capital expenditure ($ million)
24
34
25
Employees
(3)
99 95 88
Outside contractors
(3)
283
280
268
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(2) Open-pit operations
(3)
Average for the year.
Operating performance: Production increased slightly in 2006 to 465,000 ounces from 455,000 ounces in 2005
(2004: 410,000 ounces) primarily due to the operation’s highest-ever quarterly production of 153,000 ounces in the final
quarter, when mining concentrated, as planned, on the high-grade GQ lode in the open pit. Mining from the known
underground reserves increased, especially in the Sunrise and Western Shear zones. Gold production from the
underground mine was 67,000 ounces. Record throughput was achieved in the process plant as a result of additional
crushing and grinding circuit optimization. Recovered grade from open-pit operations declined marginally to 3.39g/t
compared with 3.68g/t recovered in 2005 (2004: 3.46g/t). Total cash costs increased to $333 per ounce from
$269 per ounce in 2005 primaril y as a result of increased diesel fuel prices and mining contractor rates
(2004: $260 per ounce).
Progress continued on the Sunrise Dam underground development. Capital expenditure amounted to $24 million
compared with $34 million in 2005 (2004: $25 million)
Growth prospects: The underground mining project involves the development of two declines and 125,000 meters of
drilling from surface and underground. These declines have been developed in the vicinity of defined underground
reserves, which are now being mined. They have also provided access for underground drilling.
• Boddington (attributable 33.33 percent)
Description: The former dominantly oxide open-pit operation closed at the end of 2001. Following Newmont’s purchase
of Newcrest’s share of the project in March of 2006, Newmont holds a 66.66 percent share in the project and AngloGold
Ashanti a 33.33 percent share.
Location: The operation is located approximately 100 kilometers south-east of Perth.
Geology: Boddington is located in the Saddleback Greenstone Belt, a northwest-trending fault-bounded silver of
greenstones about 50 kilometers long and eight kilometers wide within the Archaean Yilgarn Craton. The Boddington
resource is located within a six kilometer strike length and consists of felsic to intermediate volcanics and related
intrusives. The resource is subdivided into Wandoo South and Wandoo North. Wandoo South is centered on a composite
diorite stock with five recognizable intrusions. Wandoo North is dominated by diorites with lesser fragmental volcanic
rocks.
52
Operating and production data for Boddington
2006 2005 2004
Pay limit (oz/t)
–––
Pay limit (g/t)
–––
Recovered grade (oz/t)
–– –
Recovered grade (g/t)
– ––
Gold production (000 oz) 100 percent
–
–
–
Gold production (000 oz) 33.33 percent
–
–
–
Total cash costs ($/oz)
(1)
–
–
–
Total production costs ($/oz)
(1)
–
–
–
Capital expenditure ($ million) 100 percent
180
12
8
Capital expenditure ($ million) 33.33 percent
60
4
3
Employees
(2)
12 18 12
Outside contractors
(2)
85 48 33
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(2)
Average for the year.
Operating performance and Growth prospects: In March 2006 the Boddington expansion project was approved. On a
100 percent project basis, approximately $669 million of a total budget of $1.35 billion to $1.5 billion had been committed
by the end of 2006. Based on the current mine plan, mine life is estimated to be approximately 17 years, with attributable
life of mine gold production totaling 4.7 million ounces of gold.
Capital expenditure for 2007 is expected to be approximately $312 million for the project. At the end of 2006, engineering
was approximately 42 percent complete, and site construction had begun. The project is on schedule to start up early
2009
.
BRAZIL
AngloGold Ashanti’s operations in Brazil were acquired as part of the Minorco transaction effective March 31, 1999 and
comprise the wholly-owned AngloGold Ashanti Brasil Mineração and a 50 percent interest in Serra Grande. In 2006, these
mines together produced 339,000 attributable ounces of gold at total cash costs of $207 per ounce and $196 per ounce,
respectively.
Brazil – Summary of metallurgical operations
AngloGold
Ashanti
Mineração
Serra
Grande
Cuiabá
Raposos
Gold plants
Capacity (000 tonnes/month)
70
24
66
Technology
crushers,
ball mill,
gravity concentration,
flotation,
roaster;
acid plant,
calcine leach,
Gold CCD,
CIP,
elution,
zinc-precipitation,
refinery.
crushers,
ball mill,
gravity concentration,
cyanideleach,
CIP,
zinc-precipitation
refinery
crushers,
ball mill,
gravity concentration,
cyanide,
rotary filters,
zinc-precipitation,
53
AngloGold Ashanti Brasil Mineração
Description: Since the closing of the Mina Velha underground mine in 2003 and the Engenho D’Água open-pit in 2004,
ore is now sourced from the Cuiabá underground mine, (this ore is treated at the Queiroz plant) and from the Córrego do
Sítio heap-leach operation. In January 2005, the board approved a major expansion at Cuiabá.
Location: AngloGold Ashanti Brasil
Mineração has mining rights over
30,698 hectares in the state of Minas
Gerais, in south-eastern Brazil. The
AngloGold Ashanti Brasil Mineração
complex is located in the
municipalities of Nova Lima, Sabará
and Santa Bárbara, near the city of
Belo Horizonte in the State of Minas
Gerais in south-eastern Brazil.
Geology: The area in which
AngloGold Ashanti Brasil Mineração
is located is known as the Iron
Quadrangle and is host to historic
and current gold mining operations,
as well as a number of open-pit
limestone and iron ore operations.
The geology of the Iron Quadrangle
is composed of Proterozoic and
Archaean volcano-sedimentary
sequences and Pre-Cambrian
granitic complexes. The host to the
gold mineralization is the volcano-sedimentary Nova Lima Group (NLG) that occurs at the base of the Rio das Velhas
SuperGroup (RDVS). The upper sequence of the RDVS is the meta-sedimentary Maquiné Group. Cuiabá mine, located at
Sabara Municipality, has gold mineralization associated with sulphides and quartz veins in Banded Ironstone Formation
(BIF) and volcanic sequences. At this mine, structural control and fluids flow ascension are the most important factors for
gold mineralization with a common association between large-scale shear zones and their associated structures. Where
BIF is mineralized the ore appears strongly stratiform due to the selective sulphidation of the iron rich layers. Steeply
plunging shear zones tend to control the ore shoots, which commonly plunge parallel to intersections between the shears
and other structures.
The controlling mineralization structures are the apparent intersection of thrust faults with tight isoclinal folds in a ductile
environment. The host rocks at AngloGold Ashanti Brasil Mineração are BIF, Lapa Seca and mafic volcanics (principally
basaltic). Mineralization is due to the interaction of low salinity carbon dioxide rich fluids with the high-iron BIF, basalts and
carbonaceous graphitic schists. Sulphide mineralization consists of pyrrhotite and pyrite with subordinate pyrite and
chalcopyrite; the latter tends to occur as a late-stage fracture fill and is not associated with gold mineralization. Wallrock
alteration is typically carbonate, potassic and silicic.
Operating performance: Production declined at AngloGold Ashanti Brasil Mineração in 2006 to 242,000 ounces from
250,000 ounces in 2005, when production included some trial mining projects as well as the gold remnants from the clean-
up of the old Morro Velho facilities. Total cash costs increased by 22 percent from $169 per ounce in 2005 to
$207 per ounce in 2006 (2004: $133 per ounce) due to inflation and the strong real.
54
Operating and production data for AngloGold Ashanti Brasil Mineração
2006 2005 2004
Pay limit (oz/t)
0.09 0.11 0.11
Pay limit (g/t)
3.10 3.863.85
Recovered grade (oz/t)
(1)
0.222
0.212
0.229
Recovered grade (g/t)
(1)
7.60
7.27
7.85
Gold production (000 oz)
242
250
240
Total cash costs ($/oz)
(2)
207
169
133
Total production costs ($/oz)
(2)
301
260
200
Capital expenditure ($ million)
168
71
32
Employees
(3)
1,546
1,363
1,222
Outside contractors
(3)
2,065
1,234
1,021
(1)
Recovered grade represents underground operations
(2)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(3)
Average for the year.
Growth prospects:
Cuiabá expansion project: This project seeks to increase production at the Cuiabá mine from 830,000 tonnes per annum
to 1.3 million tonnes and includes the construction of new treatment and tailings storage facilities, roaster, and acid plant
at an estimated total capital cost of $180 million. The Cuiabá expansion project is expected to involve the deepening of the
mine from 11 level to 21 level and is expected to result in an annual average production increase from 190,000 ounces to
260,000 ounces from the beginning of 2007; in this first operational year of the expansion, production is expected to reach
around 300,000 ounces. The project is anticipated to add six years to the life of mine.
Corrego do Sitio underground sulphides project: This relates to the potential sulphide ore of the Córrego do Sítio
underground orebodies, which consist of Cachorro Bravo, Laranjeira and Carvoaria. This project is expected to produce
1.4 million ounces of gold over 14 years from 6.8 million tonnes of milled ore. Development of a ramp and the exposure of
the Cachorro Bravo orebody are underway, as is the development of drives to access the Laranjeira and Carvoaria
orebodies.
Serra Grande (attributable 50 percent)
Description: Serra Grande is co-owned with Kinross Gold Corporation. In terms of the Serra Grande agreement,
AngloGold Ashanti manages the operation and has the right to access a maximum of 50 percent of the earnings accrued
and dividends paid by Serra Grande. The operation comprises two underground mines, Mina III and Mina Nova, and one
open pit at Mina III, which will begin operation in 2007.
Location: The Serra Grande operations are located 5 kilometers from the city of Crixás in the north-western areas of the
Goiás State in central Brazil. Serra Grande controls, or has an interest in, approximately 21,096 hectares in and around
the Crixás mining district. .
Geology: The deposits occur in the Rio Vermelho and Ribeirão das Antes Formations of the Archaean Pilar de Goia’s
Group which together account for a large proportion of the Crixás Greenstone Belt in central Brazil.
55
The stratigraphy of the belt is dominated by basics and ultrabasics in the lower sequences with volcano sedimentary units
forming the upper successions.
The gold deposits are hosted in a sequence of schists, volcanics and carbonates occurring in a typical greenstone belt
structural setting. The host rocks are of the Pilar de Goiás Group of the Upper Archaean. Gold mineralization is associated
with massive sulphides and vein quartz material associated with graphitic and sericitic schists and dolomites. The
oreshoots plunge to the north-west with dips of between 6 and 35 degrees. The stratigraphy is overturned and thrusts
towards the east.
The greenstone belt lithologies are surrounded by Archaean tonalitic gneiss and granodiorite. The metamorphosed
sediments are primarily composed of quartz, chlorite, sericite, graphitic and garnetiferous schists. The carbonates have
been metamorphosed to ferroan dolomite marble with development of siderite and ankerite veining in the surrounding
wallrock, usually associated with quartz veining. The basalts are relatively unaltered but do show pronounced stretching
with elongation of pillow structures evident.
The Crixás greenstone belt comprises a series of Ardhaean to Palaeoproterozoic metavulcanics, metasediments and
basement granitoids stacked within a series of north to north-east transported thrust sheet. Thrusting (d1) was
accompanied by significant F1 folding/foliation development and progressive alteration in a brittle-ductile regime.
D1 thrusting developed with irregular thrust ramp geometry, in part controlled by concealed early basin faults. The main
Crixás orebodies are adjacent to a major north-north-west structural corridor, and up the main fault ramp/corner, to
become dispersed to the east and north in zones of foreland thrust flats. Fluid alteration also diminished to the west away
from the main fault corner. A series of concealed east-west to north-west-south-east basement block faults may have
provided secondary fluid migration, and development of early anti-formal warps in the t hrust sheets; these structures
probably define the quasi-regular spacing of significant mineralization within the belt. The D1 thrust stack was gently
folded by non-cylindrical folds. Gold mineralizing fluids probably migrated during this event, with similar south-south-west
to north-north-east migration, and focusing on bedding slip during folding. Gold mineralization became minor and
dispersed to the north and east along the formal thrust flat zone. Concentrations of gold along the case of quartz vein may
be due to the damming of fluids migrating upward along layering.
Operating and production data for Serra Grande
2006 2005 2004
Pay limit (oz/t)
0.090.090.09
Pay limit (g/t)
3.24 3.023.17
Recovered grade (oz/t)
0.219
0.231
0.228
Recovered grade (g/t)
7.51
7.93
7.80
Gold production (000 oz) 100 percent
194
192
187
Gold production (000 oz) 50 percent
97
96
94
Total cash costs ($/oz)
(1)
196
158
134
Total production costs ($/oz)
(1)
278
229
223
Capital expenditure ($ million) 100 percent
17
13
7
Capital expenditure ($ million) 50 percent
8
7
4
Employees
(2)
609566514
Outside contractors
(2)
208
209
196
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(2)
Average for the year.
Operating performance: Attributable production at Serra Grande rose from 96,000 ounces in 2005 to 97,000 ounces in
2006 (2004: 94,000 ounces) The steady appreciation of the Brazilian real, combined with lower grades, resulted in a
24 percent total cash cost increase to $196 per ounce from $158 per ounce in 2005 (2004: $134 per ounce) in spite of
stable production.
Growth prospects: The Serra Grande brownfields exploration programme is focused on increasing reserves and
resources in areas around Mina III, Mina Nova, and the Palmeiras project by means of underground and surface diamond
drilling. A study was carried out in 2006 proving the viability of mining the Mina III open pit, with production expected to
begin in mid-2007. Exploration campaigns at the nearby Palmeiras orebody are underway, with results justifying the
construction of an exploratory ramp and an underground conceptual study, which is also expected to begin in mid-2007.
56
GHANA
AngloGold Ashanti’s operations in Ghana together produced 592,000 ounces of attributable gold in 2006, at a total cash
cost of $404 per ounce.
Description: AngloGold Ashanti has two operations in
Ghana: the Obuasi mine (which comprises both surface
and underground operations) and the Iduapriem mine
(open-pit). The Bibiani mine (open-pit with underground
development) was sold effective December 28, 2006.
Obuasi
Description: Obuasi is primarily an underground
operation, although some surface mining still takes
place. Ore is processed by two main treatment plants:
the sulphide plant (for underground ore) and the tailings
plant (for tailings reclamation operations). A third plant,
the oxide plant, is used to batch-treat remnant open-pit
ore and stockpiles, of which there are adequate
tonnages to keep the plant operational until 2008.
Location: The Obuasi mine is located in the Ashanti
region in the south of Ghana.
Geology: The gold deposits at Obuasi are part of a
prominent gold belt of Proterozoic (Birimian) volcano-
sedimentary and igneous formations which extend for a
distance of approximately 300 kilometers in a
north-east/south-west trend in south-western Ghana.
Obuasi mineralization is shear-zone related and there
are three main structural trends hosting gold
mineralization: the Obuasi trend, the Gyabunsu trend
and the Binsere trend.
Two main ore types are mined:
· quartz veins which consist mainly of quartz with free gold in association with lesser amounts of various metal
sulphides such as iron, zinc, lead and copper. The gold particles are generally fine-grained and occasionally are
visible to the naked eye. This ore type is generally non-refractory; and
·sulphide ore which is characterized by the inclusion of gold in the crystal structure of a sulphide material. The gold in
these ores is fine-grained and often locked in arsenopyrite. Higher gold grades tend to be associated with finer
grained arsenopyrite crystals. Other prominent minerals include quartz, chlorite and sericite. Sulphide ore is generally
refractory.
Ghana – Summary of metallurgical operations
Obuasi
Bibiani
Iduapriem
Sulphide
Treatment
Plant
Tailings
Treatment Plant
Oxide
Treatment Plant
Gold plants
Capacity
(000 tonnes/month)
200 200
150
225
375
Technology
BIOX
process,
cyanide leaching,
CIL,
electro-winning
CIL,
ball mills,
cyanide leaching,
electro-winning
CIL,
mill,
cyanide
leaching,
electro-winning
CIL,
Crushing, SAG
milling, ball
milling, cyanide
leach,
CIP,
elution,
Electro-winning
57
Operating and production data for Obuasi
2006 2005
(1)
2004
Pay limit (oz/t)
(2)
0.2290.1770.188
Pay limit (g/t)
7.136.06 6.43
Recovered grade (oz/t)
(2)
0.128
0.139
0.154
Recovered grade (g/t)
4.39
4.77
5.27
Gold production (000 oz)
387
391
255
Total cash costs ($/oz)
(3)
397 345 305
Total production costs ($/oz)
(3)
638 532 443
Capital expenditure ($ million)
91
78
32
Employees
(4)
5,629 5,852 6,029
Outside contractors
(4)
2,210
2,443
718
(1)
For the eight months from May.
(2)
Pay limits and recovered grade refer to underground ore resources
(3)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.:
Operating results – Total cash costs and total production costs”.
(4)
Average for the period.
Operating performance: After three quarters of declining yields, Obuasi reported higher grades in the fourth quarter and
ended the year with production of 387,000 ounces slightly below the production in 2005 of 391,000 ounces
(2004: 255,000 ounces). Increased treatment of lower-grade ore throughout the year meant that yield in 2006 was 4.39g/t
compared with 4.77g/t in 2005 (2004: 5.27g/t), pushing up total cash costs by 15 percent to $397 per ounce from $345 per
ounce in 2005 (2004: $305 per ounce).
Growth prospects: The full development of the deep-level ore deposits at the Obuasi mine has the potential to extend the
life of mine by 35 years.
Bibiani
Bibiani in Ghana produced less than 1 percent of AngloGold Ashanti’s production in 2006. This tailings only operation was
sold to Central African Gold plc effective December 28, 2006. AngloGold Ashanti expects to replace Bibiani’s production
from its other Ghanaian operations.
Operating and production data for Bibiani
(5)
20062005
(1)
2004
Pay limit (oz/t)
0.0300.0200.020
Pay limit (g/t)
0.830.70 0.70
Recovered grade (oz/t)
(2)
0.016
0.042
0.056
Recovered grade (g/t)
(2)
0.55 1.55 1.93
Gold production (000 oz)
37
115
105
Total cash costs ($/oz)
(3)
432 305 251
Total production costs ($/oz)
(3)
594 522 400
Capital expenditure ($ million)
-
7
7
Employees
(4)
211 462 479
Outside contractors
(4)
142 140 392
(1)
For the eight months from May 2004.
(2)
Recovered grade represents open pit operations in 2004 and 2005 and surface and dump reclamation in 2006.
(3)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.:
Operating results – Total cash costs and total production costs”.
(4)
Average for the period.
(5)
For the eleven months from January 2006 to November 2006.
Iduapriem (attributable 85 percent)
Description: AngloGold Ashanti has an 80 percent interest in the Iduapriem gold mine (the remaining 20 percent is owned
by the International Finance Corporation) and a 90 percent interest in the Teberebie gold mine (the government of Ghana
has the remaining 10 percent interest in Teberebie). The combined AngloGold Ashanti interest is 85 percent. The
Iduapriem and Teberebie properties are adjacent to each other and are part of the Tarkwaian goldfields.
58
Location: Iduapriem mine is located in the western region of Ghana, some 70 kilometers north of the coastal city of
Takoradi, and 10 kilometers south-west of Tarkwa.
Geology: The Iduapriem and Teberebie gold mines are located along the southern end of the Tarkwa basin. The
mineralization is contained in the Banket Series of rocks within the Tarkwaian System of Proterozoic age. The outcropping
Banket Series of rocks in the mine area form prominent, arcuate ridges extending southwards from Tarkwa, westwards
through Iduapriem and northwards towards Teberebie.
Operating and production data for Iduapriem
2006 2005
(1)
2004
Pay limit (oz/t)
0.05 0.0230.022
Pay limit (g/t)
1.60 0.720.76
Recovered grade (oz/t)
(2)
0.051
0.050
0.050
Recovered grade (g/t)
(2)
1.74 1.71 1.72
Gold production (000 oz) 100 percent
196
205
147
Gold production (000 oz) 85 percent
167
174
125
Total cash costs ($/oz)
(3)
413 348303
Total production costs ($/oz)
(3)
544 477448
Capital expenditure ($ million) 100 percent
6
5
4
Capital expenditure ($ million) 85 percent
5
4
3
Employees
(4)
668698 709
Outside contractors
(4)
583 585 597
(1)
For the eight months from May 2004.
(2)
Recovered grade represents open pit operations.
(3)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.:
Operating results – Total cash costs and total production costs”.
(4)
Average for the period.
Operating performance: In 2006, attributable gold production at Iduapriem decreased by 4 percent to 167,000 ounces
from the 174,000 ounces produced during 2005 (May to December 2004: 125,000 ounces). Recovered grade increased to
1.74g/t in 2006 from 1.71g/t in 2005 (2004: 1.72g/t). The decline in production was as a result of a series of mill and
crusher breakdowns that affected the operation during the first two quarters of the year. Total cash costs increased by
19 percent from $348 per ounce in 2005 to $413 per ounce in 2006 (2004: $303 per ounce) due to the decline in
production and inflation-drive increases in operation costs.
Attributable capital expenditure at $5 million was marginally higher than the $4 million spend in 2005 (2004: $3 million) and
was spent mainly on the commencement of a plant expansion project and general stay-in-business expenditure.
Growth prospects: A plant expansion project to increase treatment capacity from 3.7 to 4.3 million tonnes a year began
in the fourth quarter of 2006. The expansion is expected to be commissioned in the third quarter of 2008 at a capital cost
of $48 million.
During 2007, a scoping study will be undertaken to evaluate the economics of exploiting the considerable low-grade
mineral resources of the other properties that lie in the Tarkwaian conglomerates extending below the economic limit of
the pits.
GUINEA
The Siguiri mine, an open pit operation, is AngloGold Ashanti’s only operation in the Republic of Guinea in West Africa. In
2006, the mine produced 256,000 attributable ounces of gold at a total cash cost of $398 per ounce.
Siguiri (attributable 85 percent)
Description: AngloGold Ashanti has an 85 percent interest in the Siguiri mine, with the balance of 15 percent being held
by the government of Guinea.
Location: The Siguiri gold mine is located in the Siguiri District in the north-east of the Republic of Guinea, West Africa,
approximately 850 kilometers from the capital city of Conakry. The nearest major town is Siguiri (approximately
50,000 inhabitants), located on the banks of the Niger River.
59
Geology: This concession is dominated by Proterozoic Birimian rocks which consist of turbidite facies sedimentary
sequences. The two main types of gold
deposits which occur in the Siguiri basin and
are mined, are:
· laterite or CAP mineralization which
occurs as aprons of colluvial or as
palaeo-channels of alluvial lateritic gravel
adjacent to, and immediately above; and
· in situ quartz-vein related mineralization
hosted in meta-sediments with the better
mineralization associated with vein
stockworks that occurs preferentially in
the coarser, brittle siltstones and
sandstones
The mineralized rocks have been deeply
weathered to below 100 meters in places to
form saprolite or SAP mineralization. The
practice at Siguiri has been to blend the CAP
and SAP ore types and to process these
using the heap-leach method. With the
percentage of available CAP ore decreasing,
however, a new carbon-in-pulp (CIP) plant
was brought on stream during 2005 to treat predominantly SAP ore.
Siguiri – Summary of metallurgical operations
Gold plants
Capacity (000 tonnes/month)
800
Technology
mineral sizing,
scrubbing, ball milling, CIP,
elution,
electro-winning
Operating and production data for Siguiri
2006 2005
(1)
2004
Pay limit (oz/t)
0.03 0.017 0.017
Pay limit (g/t)
0.94 0.55 0.59
Recovered grade (oz/t)
(2)
0.032
0.035
0.032
Recovered grade (g/t)
(2)
1.08 1.21 1.10
Gold production (000 oz) – 100 percent
301
289
98
Gold production (000 oz) – 85 percent
256
246
83
Total cash costs ($/oz)
(3)
398 301 443
Total production costs ($/oz)
(3)
593 451 578
Capital expenditure ($ million) – 100 percent
19
36
57
Capital expenditure ($ million) – 85 percent
14
31
48
Employees
(4)
1,5411,170 1,194
Outside contractors
(4)
1,167
808
1,412
(1)
For the eight months from May 2004.
(2)
Recovered grade represents heap leach operations in 2004 and open pit operations in 2005 and 2006
(3)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.:
Operating results – Total cash costs and total production costs”.
(4)
Average for the period.
Operating performance: Production at Siguiri rose by 4 percent from 246,000 ounces in 2005 to 256,000 ounces
in 2006 after the resolution of the ball mill problems in the first quarter of 2006 (May to December 2004: 83,000 ounces).
Recovered grade decreased from 1.21g/t in 2005 to 1.08g/t in 2006 (2004: 1.10g/t).
60
Total cash costs increased from $301 per ounce in 2005 to $398 per ounce (2004: $443 per ounce) due to maintenance
shut-downs and post-commissioning plant modifications, as well as rising fuel costs and higher royalty payments as a
result of the increased gold price.
Growth prospects: The new CIP project has transformed this operation. Whereas Siguiri was previously a heap-leach
operation, constrained by limited economically treatable Mineral Resources, the mine is now able to economically exploit
the saprolitic ores that extend below the base of the existing pits. There is still considerable exploration potential adjacent
to the existing mine infrastructure.
MALI
AngloGold Ashanti has interests in three
operations in Mali in partnership with
other parties. These operations are
Sadiola, Yatela and Morila, which are all
operated by AngloGold Ashanti.
In 2006, the Malian operations
produced 538,000 ounces of
attributable gold production at a total
cash cost of $268 per ounce (Sadiola),
$241 per ounce (Yatela), and $266 per
ounce (Morila).
Sadiola (attributable 38 percent)
Description: AngloGold has a
38 percent interest in, and manages,
the Sadiola mine within the Sadiola
exploitation area in western Mali. The
joint venture partners are IAMGOLD, a
Canadian listed company (38 percent),
the government of Mali (18 percent),
and the International Finance
Corporation (IFC) (6 percent).
Location: The mine is situated 77 kilometers south of the regional capital of Kayes
Geology: The Sadiola deposit occurs within an inlier of greenschist facies metamorphosed Birimian rocks known as the
Kenieba Window. The specific rocks which host the mineralization are marbles and greywackes which have been
intensely weathered to a maximum depth of 200 meters. A series of north-south trending faults occur that are the feeders
to the Sadiola mineralization. As a result of an east-west regional compression event, deformation occurs along a north-
south striking marble-greywacke contact, increasing the porosity of this zone. North-east striking structures which intersect
the north-south contact, have introduced mineralization, mainly with the marble where the porosity was greatest. The
Sadiola Hill deposit generally consists of two zones, an upper oxidized cap and an underlying sulphide zone. From
1996 until 2002, shallow saprolite oxide ore from the Sadiola Hill pit was the primar y ore source. Since 2002, the deeper
saprolitic sulphide ore has been mined and in future will progressively replace the depleting oxide reserves.
61
Mali – Summary of metallurgical operations
Sadiola
Yatela
Morila
Gold plants
Capacity (000 tonnes/month)
435
250
350
Technology
mineral
sizing,
SAG milling,
ball milling,
cyanide leach,
CIP,
elution,
electro-winning
crushing,
agglomeration,
heap-leaching,
carbon adsorption (CIS)
crushing,
SAG milling,
ball milling,
gravity concentration,
cyanide leach,
CIP.
elution,
electro-winning
Operating and production data for Sadiola
2006 20052004
Pay limit (oz/t)
0.06 0.05 0.06
Pay limit (g/t)
1.98 1.80 1.76
Recovered grade (oz/t)
0.094
0.080
0.081
Recovered grade (g/t)
3.22
2.73
2.77
Gold production (000 oz) 100 percent
500
442
459
Gold production (000 oz) 38 percent
190
168
174
Total cash costs ($/oz)
(1)
268 265 242
Total production costs ($/oz)
(1)
363 440 448
Capital expenditure ($ million) 100 percent
11
18
16 x 41 feet
Capital expenditure ($ million) 38 percent
4
7
6
Employees
(2)
589 584 550
Outside contractors
(2)
705 661 609
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.:
Operating results – Total cash costs and total production costs”.
(2)
Average for the year.
Operating performance: In 2006 attributable production at Sadiola increased by 13 percent to 190,000 ounces from
168,000 ounces in 2005 (2004: 174,000 ounces) in spite of a tailings pipeline replacement that negatively affected
tonnage throughput in the first quarter. Most of the production improvement was related to steady treatment plant
operations and the higher yields achieved as a result of improved metallurgical recovery on oxide ore and the increased
treatment of higher grade sulphide ore. The yield increased from 2.73g/t recovered in 2005 to 3.22g/t recovered in 2006
(2004: 2.77g/t). Total cash costs rose by 1 percent to $268 per ounce in 2006 from $265 per ounce in 2005, mainly due to
higher royalties arising from the increased gold price (2004: $242 per ounce). Capital expenditure decreased by
43 percent from $7 million in 2005 to $4 million in 2006 (2004: $6 million). The main areas of expenditure were additional
fleet mobilization charges, brownfields exploration and mining contract renewal costs.
Growth prospects: A recently completed study showed that the hard sulphide ore below the current mining horizon
(“deep sulphides”) can be mined economically at proven metallurgical recoveries. Additional test work is being conducted
to enhance recoveries.
Yatela (attributable 40 percent)
Description: The Yatela mine is owned by Société d’Exploitation des Mines d’Or de Yatela S.A., in which AngloGold
Ashanti and IAMGOLD each hold an effective 40 percent interest, with the government of Mali holding 20 percent.
Location: Yatela is located some 25 kilometers north of Sadiola and approximately 50 kilometers south-south-west of
Kayes, the regional capital.
Geology: Yatela mineralization occurs as a keel-shaped body in Birimian metacarbonates. The ‘keel’ is centered on a
fault which was the feeder for the original mesothermal mineralization, with an associated weakly mineralized diorite
intrusion. Mineralization occurs as a layer along the sides and in the bottom of the ‘keel’. The ore dips almost vertically on
the west limb and more gently towards the west on the east limb, with tight closure to the south.
62
Operating and production data for Yatela
2006 20052004
Pay limit (oz/t)
0.060.050.06
Pay limit (g/t)
1.79 1.66 1.96
Stacked grade (oz/t)
0.120
0.087
0.099
Stacked grade (g/t)
4.12
2.99
3.41
Gold production (000 oz) 100 percent
352
246
242
Gold production (000 oz) 40 percent
141
98
97
Total cash costs ($/oz)
(1)
241
263
255
Total production costs ($/oz)
(1)
326
347
320
Capital expenditure ($ million) 100 percent
3
5
7
Capital expenditure ($ million) 40 percent
1
2
3
Employees
(2)
203 210 208
Outside contractors
(2)
675
700
825
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(2)
Average for the year.
Operating performance: In 2006, attributable production at Yatela rose by 44 percent to 141,000 ounces from
98,000 ounces in 2005 (2004: 97,000 ounces) due to a 38 percent increase in grade, from 2.99g/t in 2005 to 4.12g/t in
2006 (2004: 3.41g/t). Total cash costs declined by 8 percent to $241 per ounce from $263 per ounce in 2005
(2004: $255 per ounce) due a favorable grade which was partially offset by higher operating costs as a result of a change
in the beginning of the year from top-lift stacking of the heap-leach pad to bottom-lift stacking, which necessitated
increased cement consumption.
Capital expenditure of $1 million was 50 percent lower than the $2 million spent in 2005 (2004: $3 million) and was
incurred mainly on the construction of an additional leach pad.
Growth prospects: The potential for a small amount of sulphide ore below the existing Alamoutala deposit to be treated
at Sadiola is being investigated.
Morila (attributable 40 percent)
Description: AngloGold Ashanti and Randgold Resources Limited each hold an effective 40 percent interest in the Morila
Joint Venture, with the other 20 percent held by the Malian government. Under the joint venture agreement, AngloGold
Ashanti is the operator of the mine.
Location: This mine is situated some 180 kilometers, south-east of Bamako, the capital city of Mali.
Geology: Morila is a mesothermal flat lying shear-zone hosted deposit which, apart from rising to the surface in the west
against steep faulting lies, flat. The deposit occurs within a sequence Birimian metal-arkoses of amphibolite metamorphic
grade. Mineralization is characterized by silica-feldspar alteration and sulphide mineralization consists of arsenopyrite,
pyrrhotite, pyrite and chalcopyrite.
63
Operating and production data for Morila
2006 2005 2004
Pay limit (oz/t)
0.080.070.09
Pay limit (g/t)
2.41 2.272.81
Recovered grade (oz/t)
0.113
0.158
0.130
Recovered grade (g/t)
3.88
5.41
4.57
Gold production (000 oz) 100 percent
517
655
510
Gold production (000 oz) 40 percent
207
262
204
Total cash costs ($/oz)
(1)
266 191 196
Total production costs ($/oz)
(1)
367 298 270
Capital expenditure ($ million) 100 percent
3
5
5
Capital expenditure ($ million) 40 percent
1
2
2
Employees
(2)
500 478 479
Outside contractors
(2)
1,075 705 919
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(2)
Average for the year.
Operating performance: Gold production at Morila declined from 262,000attributable ounces in 2005, to
207,000 attributable ounces in 2006 (2004: 204,000 attributable ounces). This was as a result of a general decrease in
grade to 3.88g/t from 5.41g/t achieved in 2005 (2004: 4.57g/t), together with a major mill re-lining in the second quarter,
that negatively affected tonnage throughput. Consequently, total cash costs increased by 39 percent from $191 per ounce
in 2005 to $266 per ounce in 2006 (2004: $196 per ounce). Capital expenditure of $1 million was 50 percent lower than
the capital expenditure of 2005 of $2 million (2004: $2 million) and was spent on various small projects, including a minor
plant upgrade.
Growth prospects: A regional drilling programme, with a view to finding another significant orebody, is being conducted
over the next two years.
64
NAMIBIA
The Navachab mine is AngloGold
Ashanti’s only operation in Namibia.
Description: AngloGold Ashanti holds a
100 percent interest in the Navachab
open-pit gold mine after having obtained
an additional 30 percent interest in 1999.
The mine has been in production since
1990.
Location: Navachab is located near
Karibib in Namibia, on the southern west
coast of Africa.
Geology: The Navachab deposit is
hosted by Damaran greenschistam-
phibolite facies, calc-silicates, marbles
and volcanoclastics. The rocks have
been intruded by granites, pegmatites
and (quartz-porphyry dykes) aplite and
have also been deformed into a series of
alternating dome and basin structures.
The mineralized zone forms a sheet-like
body which plunges at an angle of
approximately 20 degree to the north-
west. The mineralization is predominantly
hosted in a sheeted vein set (±60 percent) and a replacement skarn body (±40 percent). The gold is very fine-grained and
associated with pyrrhotite, and minor to trace amounts of pyrite, chalcopyrite, maldonite and bismuthinite. Approximately
80 percent of the gold is free milling.
Navachab – Summary of metallurgical operations
Gold plants
Capacity (000 tonnes/month)
110
Technology
crushing,
SAG milling,
cyanide leach,
CIP,
elution,
electro-winning
Operating and production data for Navachab
2006 �� 20052004
Pay limit (oz/t)
0.04 0.05 0.05
Pay limit (g/t)
1.29 1.65 1.46
Recovered grade (oz/t)
0.053
0.060
0.046
Recovered grade (g/t)
1.81
2.05
1.59
Gold production (000 oz) 100 percent
86
81
66
Total cash costs ($/oz)
(1)
349
321
348
Total production costs ($/oz)
(1)
407
333
424
Capital expenditure ($ million) 100 percent
5
5
21
Employees
(2)(3)
313 315251
Outside contractors
(2)
– – –
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(2)
Average for the year.
(3)
No mining labor, contract or otherwise, was on site during the first half of 2004.
65
Operating performance: In 2006, gold production rose by 6 percent to 86,000 ounces from 81,000 ounces in 2005
(2004: 66,000 ounces) as increased tonnage throughout offset the effect of the decline in grade to 1.81g/t from 2.05g/t in
2005 (2004: 1.59g/t). Total cash costs increased to $349 per ounce from $321 per ounce in 2005 (2004: $348 per ounce)
due to the lower recovered grade. Capital expenditure of $5 million was unchanged from that of 2005 (2004: $21 million)
and was incurred mainly on preparation for mining the Grid A satellite orebody and treatment plant optimization.
Growth prospects: Historical studies on a further potential pit expansion which was previously considered uneconomical,
are being reconsidered given the current outlook for the gold price. Several brownfields prospects located within trucking
distance are currently under investigation.
TANZANIA
The Geita mine is AngloGold Ashanti’s only operation in Tanzania.
Description: The Geita mine is a multi-pit operation with a CIL plant that has the capacity to treat 6 million tones a year.
Prior to April 2004, Ashanti and AngloGold each held a 50 percent share in Geita, which was managed under the joint
venture agreement entered into between the companies. As a result of the business combination, Geita is now a wholly-
owned subsidiary.
Location: The Geita mine is located 80 kilometers south-west of the town of Mwanza.
Geology: Geita is an Archaean mesothermal mainly BIF-hosted deposit. Mineralization is located where auriferous fluids,
which are interpreted to have moved along shears often on BIF-diorite contacts, reacted with the BIF. Some lower-grade
mineralization can occur in the diorite as well (usually in association with BIF-hosted mineralization), and approximately
20 percent of the gold is hosted in the diorite.
66
Geita – Summary of metallurgical operations
Gold plants
Capacity (000 tonnes/month)
490
Technology
crushing,
SAG milling,
ball milling,
gravity concentration,
CIL,
elution,
electro-winning
Operating and production data for Geita
2006 2005
2004
(1)
Pay limit (oz/t)
0.13 0.07 0.09
Pay limit (g/t)
4.16 2.27 2.81
Recovered grade (oz/t)
0.049
0.092
0.109
Recovered grade (g/t)
1.68
3.14
3.74
Gold production (000 oz) 100 percent
308
613
692
Gold production (000 oz) 100 percent attributable from May 2004
308
613
570
Total cash costs ($/oz)
(2)
630
298
250
Total production costs ($/oz)
(2)
766
419
335
Capital expenditure ($ million) 100 percent
67
78
14
Capital expenditure ($ million) 100 percent attributable from May 2004
67
78
13
Employees
(3)
2,043 1,066 661
Outside contractors
(3)
1,177
1,214
1,595
(1)
Prior to April 26, 2004, AngloGold held a 50 percent stake.
(2)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(3)
Average for the year.
Operating performance: In 2006, total gold production decreased by 50 percent to 308,000 ounces from 613,000 ounces
in 2005 (2004: 692,000 ounces) due to a combination of factors. In the first quarter, a drought reduced water supply to the
processing plant and subsequent heavy rains resulted in hauling constraints. This, combined with a slower-than-
anticipated cut-back of the Nyankanga pit, resulted in a 46 percent drop in the grade for 2006 to 1.68g/t from 3.14g/t in
2005 (2004: 3.74g/t ).
These factors also contributed to the 111 percent increase in total cash costs from $298 per ounce in 2005 to $630 per
ounce in 2006 (2004: $250 per ounce). Capital expenditure of $67 million (2005: $78 million – 2004: $13 million) included
the cost of infrastructure associated with the change from contractor mining to owner mining, together with the purchase of
larger trucks and a shovel.
Growth prospects: Exploration to identify and generate resources to the inferred category, as well as the conversion of
resources into reserves, will continue. Current inferred resources are expected to add four years to life of mine reserves
and significant additional surface and underground potential is anticipated.
Outlook: A partial slope in the Nyankanga pit in February 2007 has changed the mining sequence of the pit’s high-grade
area, reducing the 2007 Geita production outlook from a planned doubling to a 30 percent increase to 400,000 ounces.
67
UNITED STATES OF AMERICA
AngloGold Ashanti acquired its operations in the United States of America from Minorco, effective March 31, 1999 and
comprise the wholly-owned AngloGold Ashanti (Colorado) Corp., which holds a 67 percent interest in the Cripple Creek &
Victor Gold Mining Company (CC&V) in Colorado with a 100 percent interest in gold produced until certain conditions are
met (as explained below). AngloGold Ashanti owns 100 percent of Big Springs in Nevada, which is currently in the final
stages of rehabilitation and closure.
Cripple Creek & Victor (attributable 67 percent with 100 percent interest in production)
Description: AngloGold Ashanti holds a 67 percent stake in CC&V, with the remaining 33 x 82 feetpercent held by Golden Cycle
Gold Corporation (Golden Cycle). AngloGold Ashanti is the manager of the operation and is entitled to receive 100 percent
of the cash flow from the operation until loans extended to the joint venture are repaid and the initial phase ends. CC&V is
a low-cost, low-grade open-pit operation.
Location: CC&V is located south-west of Colorado Springs in the state of Colorado in the USA.
Geology: The district of Cripple Creek is centered on an intensely altered alkaline, Tertiary-aged, diatreme-volcanic,
intrusive complex, approximately circular in shape covering 18.4 square kilometers and surrounded by Precambrian rocks.
The Precambrian rocks consist of biotite gneiss, granodiorite and quartz monzonite and granite.
The intersection of these four units and regional tectonic events formed an area of regional dilation which subsequently
facilitated the formation of the volcanic complex. The majority of the complex then in-filled with the eruptive phase Cripple
Creek Breccia host rock. This complex was subsequently intruded by a series of intrusive dykes and sills that include
syenites, phonolites, phonotephrites and lamprophyres. These intrusive occupy all of the dominant district structural
orientations. District structures are generally near vertical and strike north-north-west to north-east. These structures acted
as primary conduits for the late-stage gold mineralizing solutions. Higher grade pods of mineralization occur at structural
intersections and/or as sheeted vein along zones of strike deflection. High-grade gold mineralization is associated with
K-feldspar + pyrite +/- carbonate alteration and occurs adja cent to the major structural and intrusive dyke zones. The
broader zones of disseminated mineralization occur primarily as micro-fracture halos around the stronger alteration zones
in the more permeable Cripple Creek Breccia wall rocks.
68
The average depth of oxidation is 120 meters and is also developed along major structural zones to even greater depths.
Individual orebodies can be tabular, pipe-like, irregular or massive. Individual gold particles are generally less than
20 microns in size and occur as native gold with pyrite or native gold after gold-silver tellurides. Gold occurs within hydrous
iron and manganese oxides and as gold-silver tellurides. Silver is present but is economically unimportant. Gold
mineralization can be encapsulated by iron and manganese oxides, pyrite, K-feldspar alteration and quartz.
Cripple Creek & Victor – Summary of metallurgical operations
Gold plants
Capacity (000 tonnes/month)
-
crushed ore production
1,512
-
total ore production
1,512
- solution processed
2,235
Technology
crushers,
valley heap-leach,
gold adsorption by carbon in solution,
elution,
electro-winning
Operating and production data for Cripple Creek & Victor operations
2006 20052004
Pay limit (oz/t)
0.01 0.01 0.01
Pay limit (g/t)
0.34 0.34 0.34
Recovered grade (oz/t)
0.016
0.018
0.018
Recovered grade (g/t)
0.54
0.62
0.61
Gold production (000 oz)
283
330
329
Total cash costs ($/oz)
(1)
248 230 220
Total production costs ($/oz)
(1)
498 418 365
Capital expenditure ($ million)
13
8
16
Employees
(2)
325 313 313
Outside contractors
(2)
44 44 74
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(2)
Average for the year.
Operating performance: In 2006, gold production at CC&V declined by 14 percent to 283,00 ounces from
330,000 ounces produced in 2005 (2004: 329,000 ounces) primarily as a result of reduced rainfall in the region and the
consequent reduction in irrigation of the heap-leach pad. Yield was 0.54g/t compared with the 0.62g/t achieved in 2005
(2004: 0.61g/t). Total cash costs of $248 per ounce were 8 percent higher than the $230 per ounce achieved in 2005
(2004: $220 per ounce), primarily as a result of higher prices for consumables and greater mining activity, that resulted in
the placement of 14 percent more ore tonnes on the leach pad. The impact of the higher costs, however, was partially
offset by the associated increase in recoverable ounces placed on the leach pad. By the end of 2006, the water shortage
issue had been addressed and gold production had returned to normal leve ls.
Capital expenditure of $13 million was 63 percent higher than the $8 million spent in 2005 (2004: $16 million) and was
incurred on increased brownfields exploration and upgrading the operation’s water delivery systems.
Growth prospects: An extension of mine life is currently underway at CC&V which would involve the staged expansion of
the heap leach facility together with the development of new ore sources within the existing claims.
69
ZIMBABWE
The Freda-Rebecca, a former Ashanti operation, was owned by AngloGold Ashanti for only four months in 2004. The
operation was sold with effect from September 1, 2004 to South African-based Mwana Africa Holdings for $2 million.
Operating and production data for Freda-Rebecca
2006 2005
2004
(1)
Pay limit (oz/t)
– ––
Pay limit (g/t)
–––
Recovered grade (oz/t)
–
–
0.048
Recovered grade (g/t)
–
–
1.66
Gold production (000 oz)
–
–
9
Total cash costs ($/oz)
(2)
–
–
417
Total production costs ($/oz)
(2)
–
–
556
Capital expenditure ($ million)
–
–
1
Employees
(3)
– –
687
Outside contractors
(3)
–
–
58
(1)
For the four months from May 2004 through August 2004. The mine was sold effective September 1, 2004.
(2)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.:
Operating results – Total cash costs and total production costs”.
(3)
Average for the period.
Rights to mine and title to properties
AngloGold Ashanti’s rights to own and exploit mineral reserves and deposits are governed by the laws and regulations of
the jurisdictions in which the mineral properties are located. In a number of countries in which AngloGold Ashanti operates
there are, in some cases, certain restrictions in terms of the group’s ability to independently move assets out of that
country and/or transfer the assets within the group, without the prior consent of the local government or minority
shareholders involved.
Argentina
According to Argentinean mining legislation, mines are the private property of the nation or a province, depending on
where they are located. Individuals are empowered to explore for, exploit and dispose of mines as owners by means of a
legal license granted by a competent authority under the provisions of the Argentine Mining Code. The legal licenses
granted for the exploitation of mines are valid for an undetermined period, provided that the mining title holder complies
with the obligations settled in the Argentine Mining Code.
In Argentina, the usual ways of transferring rights over mining licenses are: to sell the license; to lease such license; or to
assign the rights under such a license by a beneficial interest or Usufruct Agreement. In the case of Cerro
Vanguardia - AngloGold Ashanti’s operation in Argentina - the mining title holder is its partner, Fomicruz, and due to the
Usufruct Agreement signed between them and Cerro Vanguardia SA on December 27, 1996, the latter has the irrevocable
right to the exploitation of the deposit for a period of 40 years. This agreement expires on December 27, 2036.
Australia
In Australia, with few exceptions, all onshore mineral rights are reserved by the government of the relevant state or
territory. Exploration for, and mining of, minerals is regulated by the general mining legislation and controlled by the
mining ministry of each respective State or Territory.
Where native title has not been extinguished, native title legislation may apply to the grant of tenure and some subsequent
administrative processes. Federal and State Aboriginal heritage legislation also operates to protect special sites and
areas from disturbance although to date there has not been any adverse impact on any of AngloGold Ashanti’s operating
properties.
AngloGold Ashanti’s operating properties are located in the state of Western Australia. The most common forms of tenure
are exploration and prospecting licenses, mining leases, miscellaneous licenses and general purpose leases.
70
In most Australian states, if the holder of an exploration license establishes indications of an economic mineral deposit and
complies with the conditions of the grant, the holder of the exploration license has a priority right against all others to apply
for a mining lease which gives the holder exclusive mining rights with respect to minerals on the property.
It is possible for an individual or entity to own the surface of the property and for another individual or entity to own the
mineral rights. Typically the maximum initial term of a mining lease is 21 years, and the holder has the right to renew the
lease for a further period of 21 years. Subsequent renewals are subject to the discretion of the respective State or
Territory’s minister responsible for mining rights. Mining leases can only be assigned with the consent of the relevant
minister.
Government royalties are payable as specified in the relevant legislation in each State or Territory. A general purpose
lease may also be granted for one or more of a number of permitted purposes. These purposes include erecting, placing
and operating machinery and plant in connection with mining operations, depositing or treating minerals or tailings and
using the land for any other specified purpose directly connected with mining operations. Similarly, a Miscellaneous
License may be granted for a number of permitted purposes including road and water access.
AngloGold Ashanti owns the mineral rights and has 21-year term mining leases with rights of renewal to all of its mining
areas in Australia, including its proportionate share of joint venture operations, and both the group and its joint venture
partners are fully authorized to conduct operations in accordance with relevant laws and regulations. The mining leases
and rights of renewal cover the current life-of-mine at AngloGold Ashanti’s operations in Australia.
Brazil
In Brazil, there are two basic mining rights: a license for the exploration stage, valid up to three years, renewable once;
and a Mining Concession or Mine Manifest, valid for the life of the deposit. In general, exploration licenses are granted on
a first-come, first-served basis. Mining concessions are granted to the holders of exploration licenses that manage to
prove the existence of a Mineral Resource and have been licensed by the environmental competent authority.
Mine Manifests (mining titles granted in 1936) and Mining Concessions (mining titles presently granted through an order
signed by the Secretary of Mines of the Ministry of Mines and Energy) are valid for an undetermined period until depletion
of reserves, provided that the mining title holder complies with current Brazilian mining and environmental legislation, as
well as with those requirements set out by the National Department of Mineral Production (DNPM) who acts as inspecting
entity for mining activities.
Obligations of the titleholder include:
•
the start of construction, as per an approved development plan, within six months of the issuance of the concession;
•
extracting solely the substances indicated in the concession;
•
communicating to the DNPM the discovery of a mineral substance not included in the concession title;
• complyingwithenvironmentalrequirements;
•
restoring the areas degraded by mining; refrain from interrupting exploitation for more than six months; and
•
reporting annually on operations.
The difference between a Mine Manifest and a Mining Concession lies in the legal nature of these two mining titles, since
it is much more difficult and complicated for the public administration to withdraw a Mine Manifest than a Mining
Concession although, in practice, it is possible for a Manifest to be cancelled or to become extinct if the abandonment of
the mining operation is formally proven. All of AngloGold Ashanti’s operations in Brazil have indefinite mining licenses.
Ghana
Mining activities in Ghana are primarily regulated by the new Minerals and Mining Act, 2006 (the Mining Act). The Mining
Act replaces the repealed Minerals and Mining Law, 1986 (PNDCL 153). The Mining Act replicates many of the provisions
of the old Law. Under the Constitution and the Mining Act, all minerals in Ghana in their natural state are the property of
the State and title to them is vested in the President on behalf of and in trust for the people of Ghana, with rights of
prospecting, recovery and associated land usage being granted under license or lease.
71
The key material modifications to the previous mining regime affected by the Mining Act are:
•
the right of the government to acquire a 10 percent ‘free-carried’ interest in a mining company continues, but any
further interest in the mining company shall be acquired on terms to be agreed with the holder of the mining right. The
Act does not prescribe any terms;
•
compensation principles for disturbance of an owner’s surface rights; and
•
although the right of the government to be issued with a special share in a mining company still exists, the consent of
the special shareholder will only be required for the disposal of a mining lease and/or material assets, which are
situated in Ghana.
A license is required for the export or disposal of such minerals and the government has a right of pre-emption over all
such minerals. The government of Ghana shall acquire, without payment, a 10 percent interest in the rights and
obligations of the mineral operations in relation to a mineral right to reconnaissance, prospecting or mining, and shall have
the option to acquire a further 20 percent interest where any mineral is discovered in commercial quantities, on terms
agreed between the government and the holder of the mining lease subject to arbitration if the parties fail to agree.
A license or lease granting a mineral right is required to prospect for or mine a mineral in Ghana and the Minister of
Energy and Mines has the power to negotiate, grant, revoke, suspend or renew any mineral right, subject to a power of
disallowance exercisable within 30 days of such grant, revocation, suspension or renewal by the Cabinet. The powers of
the Minister of Mines are to be exercised on the advice of the Minerals Commission, which is responsible for regulating
and managing the utilization of natural resources and coordinating policies relating to them.
The grant of a mining lease by the Minister of Mines is normally subject to parliamentary ratification unless the mining
lease falls into a class of transactions exempted by parliament. A mineral right is deemed a requisite and sufficient
authority over the land in respect of which the right is granted, although a separate license is required for some other
activities, including the diversion of water, and additional consents may be required for certain developments. A mineral
right or interest therein may not be transferred, assigned or otherwise dealt with in any other manner without prior written
approval of the Minister of Mines.
Control of mining companies: The Minister of Mines has the power to object to a person becoming or remaining a
‘‘shareholder controller’’, a ‘‘majority shareholder controller’’ or an ‘‘indirect controller’’ of a company which has been
granted a mining lease if he considers that the public interest would be prejudiced by the person concerned becoming or
remaining such a controller.
In this context:
•
shareholder controller means a person who, either alone or with certain others, is entitled to exercise or control the
exercise of 20 percent or more of the voting power at any general meeting of a mining company or of any other
company of which it is a subsidiary;
•
majority shareholder controller means a shareholder controller in whose case the percentage referred to above also
exceeds 50 percent; and
•
indirect controller means a person in accordance with whose directions or instructions the director of a mining
company, or of another company of which it is a subsidiary, or the shareholder controllers of that mining company,
are accustomed to act.
A person may not become a shareholder controller, a majority shareholder controller or an indirect controller of a mining
company unless he has served written notice on the Minister of Mines of his intention to that effect and the Minister of
Mines consents to his becoming such a controller or does not object within a period of six months.
Where a person becomes or continues to be a controller of the relevant description after a notice of objection has been
served on him, or is otherwise in contravention of the procedures prescribed by the Mining Act, the Minister of Mines may
notify the controller that, until further notice, any specified shares are subject to restrictions. The relevant restrictions
include restrictions on transfer, voting rights, receipt of further shares and distributions. The Minister of Mines may apply to
the High Court to order the sale of any shares which are the subject of such a restriction. There is no legal restriction on
the foreign ownership of a mining company.
72
Where a person, either alone or with others, acquires an interest in 5 percent or more of the voting power of a mining
company he is required to notify the Minister of Mines. A person who is a controller of a mining company must give notice
of his ceasing to be such a controller before he disposes of his interest. In addition, the mining company itself has to give
notice to the Minister of Mines of the fact that any person has become or ceased to be a controller.
Violation of these provisions of the Mining Act is a criminal offence. The Mining Act also gives the Minister of Mines power
to investigate and report on the ownership and control of any mining company.
The Act provides for stability agreements, as a mechanism to ensure that the incentives and protection afforded by laws in
force at the time of the Stability Agreement are guaranteed for 15 years. A stability agreement is subject to ratification by
Parliament.
Under the Act, the Minister may enter into a Development Agreement under a mining lease where the proposed
investment by the holder will exceed $500 million.
A development agreement may contain provisions relating to the mineral right or operations to be conducted, the
circumstances or manner in which the Minister may exercise discretion conferred by the Act, stability terms, and in relation
to environmental issues and obligations of the holder of the mineral right. A Development agreement is also subject to
ratification by Parliament.
Prior to the business combination between AngloGold and Ashanti, AngloGold and the government of Ghana agreed the
terms of a Stability Agreement to govern certain aspects of the fiscal and regulatory framework under which AngloGold
Ashanti would operate in Ghana following the implementation of the business combination. The terms of the Stability
Agreement have not been altered by the new Mining Act.
Payments and allowances
The Mining Act provides that royalties are payable by the holder of a mining lease to the State at rates of between
3 percent and 6 percent of total minerals revenue, depending on a formula set out in mineral royalty regulations. The laws
of Ghana currently provide for income tax at a rate of 25 percent. The Mining Act provides for an entitlement to certain
specified capital allowances and various additional fiscal and other benefits. AngloGold Ashanti and the government of
Ghana have entered into the Stability Agreement with respect to the payment of royalties and taxes.
Under the Stability Agreement, the government of Ghana agreed:
•
to extend the term of the mining lease relating to the Obuasi mine until 2054 on terms existing prior to the business
combination;
•
to maintain for a period of 15 years, the royalties payable by AngloGold Ashanti with respect to its mining operations
in Ghana at a rate of 3 percent per annum of the total revenue from minerals obtained by AngloGold Ashanti from
such mining operations;
•
to ensure that the income tax rate would be 30 percent for a period of 15 years. The agreement was amended in
December 2006 to a tax rate equal to the prevailing corporate rate and shall not be higher than 30 percent;
•
that a sale of AngloGold Ashanti’s or any of its subsidiaries' assets located in Ghana remain subject to the
government's approval;
•
to permit AngloGold Ashanti and any or all of its subsidiaries in Ghana to retain up to 80 percent of their exportation
proceeds in foreign currencies offshore, or if such foreign currency is held in Ghana, to guarantee the availability of
such foreign currency; and
•
to retain its special rights (Golden Share) under the provisions of the Mining Act pertaining to the control of a mining
company, in respect of the assets and operations in Ghana.
The government of Ghana also agreed that AngloGold Ashanti's Ghanaian operations will not be adversely affected by
any new enactments or orders or by changes to the level of payments of any customs or other duties relating to mining
operations, taxes, fees and other fiscal imports or laws relating to exchange control, transfer of capital and dividend
remittance for a period of 15 years after the completion of the business combination.
73
In consideration of these agreements and undertakings, AngloGold Ashanti issued to the government of Ghana
2,658,000 ordinary shares and paid to the government of Ghana $5 million in cash, promptly after the implementation of
the business combination. AngloGold Ashanti also paid to the government of Ghana, on the date of the completion of the
business combination, an additional $5 million in cash towards the transaction costs incurred by the government of Ghana
in its role as regulator.
Retention of foreign earnings: Holders of mining leases have certain limited rights to retain foreign exchange earnings
overseas and to use such earnings for the acquisition of machinery and equipment as well as for certain other payments,
such as debt service payments and dividends.
Where the net earnings of a holder of a mining lease are in foreign currency, the holder is permitted to retain not less than
25 percent of foreign exchange earnings in an external bank account for acquiring machinery and equipment, spare parts
and raw materials as well as for certain other payments, such as dividend and debt service payments.
AngloGold Ashanti’s operations in Ghana are permitted to retain 80 percent of its foreign exchange earnings in such an
account. In addition, the company has permission from the Bank of Ghana to retain and use, outside of Ghana, dollars
required to meet payments to the company’s hedge counterparts which cannot be met from the cash resources of its
treasury company.
Leases: Mining leases may be applied for either by a prospecting license holder who has established the existence of
minerals in commercial quantities or by others who do not hold such licenses, who establish the same to the satisfaction of
the Minister of Mines.
Mining leases are normally granted for a period not exceeding 30 years and the holder may apply to the Minister of Mines
for renewal, on such conditions as the Minister of Mines may determine, for up to another 30 years. This period has been
extended in terms of the Stability Agreement. They are to have a maximum size (subject to derogation by the President
where it is considered to be in the national interest) of 50 square kilometers for any grant and 150 square kilometers in
aggregate.
A holder may apply for an enlargement of the mining area, which, subject to the Mining Law, the Minister of Mines may
grant if satisfied that such approval is in the national interest.
The rights conferred by mining leases include those to take all reasonable measures on or under the surface to mine the
mineral to which the mining lease relates, to erect necessary equipment, plant and buildings, to prospect within the mining
area and to stack or dump mineral waste in an approved manner.
Reconnaissance and prospecting licenses are normally granted for up to 12 months and three years respectively, subject
to renewal. A detailed programme must be submitted for the recruitment and training of Ghanaians with a view to
achieving ‘localization’, being the replacement of expatriate personnel by Ghanaian personnel. In addition, the holder must
give preference to Ghanaian products and personnel, to the maximum extent possible, consistent with safety, efficiency
and economies.
Prior notification to the Minister of Mines is required for ceasing, suspending or curtailing production. Approval to such
actions may be given, subject to conditions determined on the advice of the Minerals Commission.
There are also provisions relating to surrender, suspension and cancellation of mineral rights in certain circumstances.
The Minister of Mines may suspend or cancel a mineral right if, among other things, the holder:
•
fails to make payments under the Mining Act when due;
•
is in breach of any provisions of the Mining Actor the conditions of the mineral right or the provisions of any other
enactment relating to mines and minerals;
•
becomes insolvent or bankrupt;
•
makes a statement to the Minister of Mines in relation to the mineral right which he knows, or ought to have known, to
be false; or
•
for any reason becomes ineligible to apply for a mineral right under the provision of the Mining Law.
74
Except as otherwise provided in a specific mining lease, all immovable assets of the holder under the mining lease vest in
the State on termination, as does all moveable property that is fully depreciated for tax purposes. Moveable property that
is not fully depreciated is to be offered to the State at the depreciated cost. The holder must exercise his rights subject to
such limitations relating to surface rights as the Minister of Mines may prescribe. Subject to the proper conduct of the
mining operations, the holder must affect as little as possible the interest of any lawful occupier, whose grazing rights are
retained but who is precluded from erecting any building without the consent of the holder (or, if such consent is
unreasonably withheld, without the consent of the Minister).
An owner or occupier of any land subject to a mineral right may apply to the holder of the mineral right for compensation
and the amount of the compensation shall, subject to the approval of the Land Valuation Board, be determined by
agreement between the parties concerned (or, if they are unable to reach agreement, by the Minister of Mines in
consultation with the Land Valuation Board). The Land Valuation Board has in the past increased amounts of
compensation payable to owners and occupiers. The holder, in the exercise of his rights, is required to have due regard to
the effect of the mineral operations on the environment and is to take such steps as may be necessary to prevent pollution
of the environment as a result of such operations.
A range of activities and breaches of the Mining Law, including obstructing the government from exercising its pre-emption
right and conducting mining, prospecting or related activities other than in accordance with the Mining Law, constitute
offences punishable by fine or imprisonment. The maximum fine is 500,000 cedis (at the current exchange rate, equivalent
to approximately $50) and the maximum term of imprisonment is two years.
Mining properties: The current mining lease for the Obuasi area was granted by the government of Ghana on
March 5, 1994. It grants mining rights to land with an area of approximately 334 square kilometers in the Amansie East
and Adansi West districts of the Ashanti region for a term of 30 years from the date of the agreement. In addition, the
application for a mining lease over the adjacent 140 square kilometers has also been granted resulting in the total area
under mining lease conditions increasing to 474 square kilometers, “the Lease Area”.
The company is required to pay to the government of Ghana rent (subject to review every five years, when the rent may
be increased by up to 20 percent) at a rate of approximately $5 per square kilometers and such royalties as are prescribed
by legislation, including royalties on timber felled within the Lease Area. Under the Stability Agreement the Government
of Ghana has agreed to extend the term of the Obuasi lease until 2054.
Bibiani had title to a 50 square kilometers mining lease for a period of 30 years to May 18, 2027. The terms and conditions
of the lease are consistent with similar leases granted in respect of Obuasi. With effect from October 1, 2001, the Bibiani
mining lease was transferred to Ashanti Goldfields Company Limited from Ashanti Goldfields (Bibiani) Limited. The
Bibiani Mine and its assets were sold to Central African Gold Limited, effective December 1, 2006.
Iduapriem has title to a 33 square kilometer mining lease granted on April 19, 1989 for a period of 30 years. The terms and
conditions of the lease are consistent with similar leases granted in respect of the Obuasi mining lease.
Teberebie has two leases, one granted in February 1998 for a term of 30 years, and another granted in June 1992 for a
term of 26 years. The terms and conditions of these leases are consistent with similar leases granted in respect of the
Obuasi mining lease.
Guinea
In Guinea, all mineral substances are the property of the State. Mining activities are primarily regulated by the Mining
Code, 1995. The right to undertake mining operations can only be acquired by virtue of one of the following mining titles:
surveying permit, small-scale mining license, mining prospecting license, mining license or mining concession.
The holders of mining titles are guaranteed the right to dispose freely of their assets and to organize their enterprises as
they wish, the freedom to engage and discharge staff in accordance with the regulations in force, free movement of their
staff and their products throughout Guinea and freedom to dispose of their products in international markets.
75
The group’s Guinea subsidiary, Société Ashanti Goldfields de Guinée SA (SAG), has title to the Siguiri mining concession
area which was granted on November 11, 1993 for a period of 25 years. The agreement provides for an eventual
extension/renegotiation after 23 years for such periods as may be required to exhaust economic Ore Reserves.
The original area granted encompassed 8,384 square kilometers which the subsidiary was required to reduce to five or
fewer single blocks of not less than 250 square kilometers per block totaling not more than 1,500 square kilometers by
November 11, 1996. The retrocession reduced the Siguiri concession area to four blocks totaling 1,495 square kilometers.
SAG has the exclusive right to explore and mine in the remaining Siguiri concession area for a further 22-year period from
November 11, 1996 under conditions detailed in a Convention de Base predating the new Guinea Mining Code.
Key elements of the Convention de Base are:
•
the government of Guinea holds a 15 percent free-carried or non-contributory interest; a royalty of 3 percent based
on a spot gold price of less than $475, and 5 percent based on a spot gold price above $475, as fixed on the London
Gold Bullion Market, is payable on the value of gold exported; a local development tax of 0.4 percent is payable on
the gross sales revenues; salaries of expatriate employees are subject to a 10 percent income tax; mining goods
imported into Guinea are exempt from all import taxes and duties for the first two years of commercial production;
and
•
SAG is committed to adopt and progressively implement a plan for the effective rehabilitation of the mining areas
disturbed or affected by operations.
The Convention de Base is subject to early termination if both parties formally and expressly agree to do so, if all project
activities are voluntarily suspended for a continuous period of eight months or are permanently abandoned by our
subsidiary or if SAG goes into voluntary liquidation or is placed into liquidation by a court of competent jurisdiction.
In addition to the export tax payable to the government of Guinea, a royalty on production may be payable to the
International Finance Corporation (IFC) and to Umicore SA, formerly Union Miniere (UM). Pursuant to the option
agreement between UM and Golden Shamrock Mines Limited (GSM), a royalty on production may be payable to UM by
Chevaning Mining Company Limited (CMC) or GSM, which payment obligation has been assigned to AngloGold Ashanti
(Ghana) Limited, on a sliding scale of between 2.5 percent and 7.5 percent, based on the spot gold price per ounce
between $350 and $475, subject to indexing from January 1, 1995, to a cumulative maximum of $60 million. In addition,
under the terms of the restructuring agreement with the IFC, a sliding scale royalty on production may be payable to the
IFC calculated on the same basis but at half the rate payable to UM, to a maximum of $7.8 million.
Mali
Mineral rights in Mali are governed by the Mining Act and Regulations promulgated in 1991. Exploration is carried out
under permits granted by Ministerial Decree following application to the National Director of Geology and Mines from the
Ministry of Mines, Energy and Water conveying exclusive title to conduct exploration. The permit is valid for a three-year
period and is renewable twice. A company applying (in an area it selected) for such a permit must provide proof of
technical and financial capabilities.
An exploitation permit is required to mine a deposit located within the exploration area. This permit grants exclusive title to
mine for a maximum period of 30 years (inclusive of renewals) and is granted by the Council of Ministers following
application to the National Director of Mines.
Both permits referred to above include a Mining Convention (Convention d’Etablissement) covering exploration, mining,
treatment and marketing in a comprehensive document. This outlines the general conditions with regard to exploration
(work programme, fiscal and customs regime) and exploitation (formation of a local limited liability company and mining
company, state shareholdings, the fiscal and customs regime during construction and exploitation phases, exchange
controls, marketing of the product, accounting regime, training programmes for local labor, protection of the environment,
reclamation, safety, hygiene and settlement of disputes).
76
Application for an exploration permit is submitted to the National Director of Mines based on various documents, including
applicant identification, locations, receipts for payment of fixed rights and surface fees, and articles of association, together
with a draft mining convention. An inter-ministerial committee examines the applications and one company is retained to
do the exploration. This company then negotiates a draft of the Mining Convention and the Minister of Mines grants the
exploration permit by an in-house decree published in the Malian Gazette. Once an economically viable deposit has been
identified, an application for an exploitation permit is submitted to the National Director of Mines. This application must be
made prior to the expiry of the exploration permit. The application document must contain a map and co-ordinates, a
receipt for payment of fixed rights and surface fees and a s ummary of technical and financial capabilities.
The exploitation title is granted following a thorough investigation. AngloGold Ashanti has complied with all applicable
requirements and the relevant permits have been issued. Morila, Sadiola and Yatela have 30-year permits which expire in
2029, 2024 and 2030, respectively.
Namibia
Mineral rights in Namibia vest in the State. In order to prospect or mine, the Ministry of Mines and Energy initially grants a
prospecting license and on presentation of a feasibility study, a mining license is then granted taking into account the
abilities of the company, including mining, financial and technical capabilities, rehabilitation programmes and payment of
royalties. The relevant license has been granted to AngloGold Namibia (Pty) Ltd in respect of its mining and prospecting
activities in Namibia. The current 15-year license expires in 2018.
South Africa
The Mineral and Petroleum Resources Development Act: In October 2002, the President of South Africa assented to
the Mineral and Petroleum Resources Development Act (MPRDA), which was passed by the Parliament of South Africa in
June 2002 and came into effect on May 1 2004. The MPRDA vests custodianship of South Africa’s mineral rights in the
State, which will issue prospecting rights or mining rights to applicants in the future. For further details relating to the
MPRDA and the associated broad-based socio-economic empowerment charter and related scorecard, as well as
AngloGold Ashanti’s progress in converting existing rights in terms of the new legislation, see Item 3D.: Risk factors –
AngloGold Ashanti’s new order mineral rights in South Africa could be suspended or cancelled should the company
breach, and fail to remedy such breach of, its obligations in respect o f the acquisition of these rights.
Tanzania
Mineral rights in the United Republic of Tanzania are governed by the Mining Act of 1998, and property and control over
minerals are vested in the United Republic of Tanzania. Prospecting for the mining of minerals, except petroleum, may
only be conducted under authority of a mineral right granted by the Ministry of Energy and Minerals under this Act. The
three types of mineral rights most often encountered, which are also those applicable to AngloGold Ashanti, are:
prospecting licenses; retention licenses; and mining licenses.
A prospecting license grants the holder thereof the exclusive right to prospect in the area covered by the license for all
minerals, other than building and gemstones, for a period of three years. Thereafter, the license is renewable for two
further periods of two years each. On each renewal of a prospecting license, 50 percent of the area covered by the license
must be relinquished. Before application is made for a prospecting license, a prospecting reconnaissance for a maximum
area of 5,000 square kilometers is issued for a period of two years after which a three-year prospecting license is applied
for. A company applying for a prospecting license must, inter alia, state the financial and technical resources available to
it. A retention license can also be requested from the Minister, after the expiry of the 3-2-2-year prospecting license period,
for reasons ranging from funds to technical considera tions.
Mining is carried out through either a mining license or a special mining license, both of which confer on the holder thereof
the exclusive right to conduct mining operations in or on the area covered by the license. A mining license is granted for a
period of 10 years and is renewable for a further period of 10 years. A special mining license is granted for a period of
25 years and is renewable for a further period of 25 years.
77
If the holder of a prospecting license has identified a mineral deposit within the prospecting area which is potentially of
commercial significance, but it cannot be developed immediately by reason of technical constraints, adverse market
conditions or other economic factors of a temporary character, it can apply for a retention license which will entitle the
holder thereof to apply for a special mining license when it sees fit to proceed with mining operations.
A retention license is valid for a period of five years and is thereafter renewable for a single period of five years. A mineral
right may be freely assigned by the holder thereof to another person, except for a mining license, which must have the
approval of the Ministry to be assigned.
However, this approval requirement for the assignment of a mining license will not apply if the mining license is assigned
to an affiliate company of the holder or to a financial institution or bank as security for any loan or guarantee in respect of
mining operations.
A holder of a mineral right may enter into a development agreement with the Ministry to guarantee the fiscal stability of a
long-term mining project and make special provision for the payment of royalties, taxes, fees and other fiscal imposts.
AngloGold Ashanti has complied with all applicable requirements and the relevant licenses have been issued for 25 years
and expire in 2024.
United States of America
Mineral rights, as well as surface rights, in the United States are owned by private parties, state governments and the
federal government. Most land prospective for precious metals exploration, development and mining are owned by the
federal government and are obtained through a system of self-initiated mining claim location pursuant to the General
Mining Law of 1872, as amended. Individual states typically follow a lease system for state-owned minerals. Private
parties have the right to sell, lease or enter into other agreements, such as joint ventures, with respect to minerals that
they own or control. All mining activities, regardless of whether they are situated on privately- or publicly-owned lands, are
regulated by a myriad of federal, state and local laws, regulations, rules and ordinances, which address various matters
including environmental protection, mitigation and rehabilitation.
Authorizations and permits setting forth the activities and restrictions pertaining thereto are issued by the responsible
governmental agencies for all phases of mining activities.
The Cripple Creek & Victor Gold Mining Company joint venture consists almost entirely of owned patented mining claims
from public lands, with a small percentage of private and state lands being leased. The total area of control is
approximately 7,100 acres. Patented claims vest ownership in the holder, including the right to mine for an indefinite
tenure. All life-of-mine reserves are within these property controls. The mining and rehabilitation permits issued by the
State of Colorado are life-of-mine permits.
Ore Reserves
Ore reserve estimates are reported in accordance with the requirements of the SEC’s Industry Guide 7. Accordingly, as of
the date of reporting, all reserves are planned to be mined out under the life-of-mine plans within the period of AngloGold
Ashanti’s existing rights to mine, or within the renewal periods of AngloGold Ashanti’s rights to mine. In addition, as of the
date of reporting, all reserves are covered by required permits and governmental approvals. See “Item 4B.: Business
overview — Rights to mine and title to properties”, “— Safety and Health”, and “Item 4D.: Property, plant and equipment”.
AngloGold Ashanti has standard procedures for the estimation of ore reserves. These standard procedures are performed by
technical personnel at the mining operations and reviewed by regional and corporate competent persons.
78
In the case of its underground mines, the procedure is as follows: Firstly, gold content and tonnage are estimated for in-
situ mineralized material at a mining operation. This mineralized material is not necessarily economically viable.
Exclusions on the grounds of safety (for example, stability pillars, shaft pillars) are then defined. Grade and tonnage
curves specific for each of the deposits, in conjunction with the cost structure, yield, mine call factor, gold price estimates
are used to determine an optimal mining mix. This process facilitates the determination of the average grade to be mined
by each operation. This grade is then applied to the grade-tonnage curves, which in turn facilitates the determination of the
cut-off grade and ore reserve tonnage for the operation. A full mine design is carried out on the blocks of mineralized
material, excluding large mining areas that do not meet the cu t-off grade criterion. This mining plan is reviewed to ensure
that it satisfies the economic criterion and practical limitations of access and timing. If the review process is positive then
the mineralized material (with dilution) included in the mining plan is declared and published as the ore reserve for that
operation.
In the case of open-pit mines the procedure is as follows: revenue and costs are calculated for each mining block within a
three-dimensional model of the orebody using assumed values for gold price, operating costs and metallurgical
recoveries. An optimization process is then applied to determine the combination of blocks within the model that make a
positive contribution under these assumptions. Block selection is within a shell whose limits are defined by the planned
slope angles of the pit. Within this process, a cut-off grade is applied which determines the ore blocks to be treated and
included in the ore reserves. These blocks are scheduled with consideration being given to practical mining considerations
and limitations. Scheduled ore blocks that are classified as proven or probable constitute the ore reserve.
The gold price and exchange rate used for 2006 and 2005 Reserves are outlined in the following table.
2005
( 3 Year Average)
2006
(Business Plan)
2006
(3 Year Average)
Units
Reserve Gold Price
400
550
486 US$/oz
Exchange Rate – South Africa
6.75 6.50 6.53
ZAR/US$
Exchange Rate – Australia
0.72
0.73 0.75
US$/Aus$
Given the sustained increase in the gold price since 2002 and the positive gold price outlook, AngloGold Ashanti prepared
its life of mine business plans using a gold price of $550 per ounce. The ore reserves determined from the planning
process were then tested for economic viability at the three-year historical average gold price and currency exchange
rates shown in the above table for determining SEC compliant reserves. The resultant SEC compliant proven and
probable reserves are shown in the following pages.
In Australia and South Africa, AngloGold Ashanti is legally required to publicly report Ore Reserves and Mineral
Resources according to the Australasian Code for Reporting of Mineral Resources and Ore Reserves (JORC 2004) and
the South African Code for Reporting of Mineral Resources and Ore Reserves (SAMREC 2000). The SEC’s Industry
Guide 7 does not recognize Mineral Resources. Accordingly, AngloGold Ashanti does not report estimates of Mineral
Resources in this annual report on Form 20-F.
79
The total AngloGold Ashanti Ore Reserves increased from 63.3 million ounces in 2005 to 66.0 million ounces in
December 2006. The principal changes in AngloGold Ashanti’s ore reserves as at December 31, 2006 compared with
those published as at December 31, 2005 are as follows:
Moz
December 2005 Ore Reserves
63.3
Principal Reductions
2006 Total Depletion
-6.5
Tau Lekoa, due to lower grade and Mine Call Factor
-0.4
Moab Khotsong, due to drop in values as a result of drilling
-0.4
Bibiani, due to sale of property
-0.1
Other
-0.4
Principal Additions
Mponeng, due to inclusion of the VCR below 120 level project and higher gold price
2.9
Cripple Creek and Victor, due to planned extension of life
1.1
Sadiola, due to the inclusion of the deep sulphides
1.0
Boddington, due to upgrade of Inferred material in pit and increase in gold and copper prices
0.7
Sunrise Dam, due to inclusion of North-Wall Cutback and Cosmo
0.7
Iduapriem, due to increased gold price
0.5
AngloGold Ashanti Brasil Mineração, due to Cuiaba development and Corrego do Sitio Sulphide
0.5
Cerro Vanguardia, due to successful exploration programme and increased gold price
0.4
Siguiri, additional pit included
0.4
Navachab, due to a larger economic pit
0.3
Savuka, due to increased gold price
0.3
Yatela, due to the inclusion of an additional cutback
0.2
Serra Grande, due to incorporation of an open pit and development of levels with higher tons than expected
0.2
Morila, due to the increased gold price
0.1
Other
1.4
December 2006 Ore Reserves*
66.0
* rounding may result in computational diifferences
AngloGold Ashanti will continue to pursue a strategy of increasing value-adding reserves through expansion projects,
brownfields and greenfields exploration and acquisition of new assets.
The ore reserve estimates in this document include ore reserves below current infrastructure in the case of certain South African
and Ghanaian underground mines which are in production. These ore reserves have been determined based upon completed
economic studies.
Audit of 2005 Mineral Resource and Ore Reserve statement
During the course of the year, the AngloGold Ashanti 2005 Mineral Resource and Ore Reserve statements were submitted
to independent consultants for review. The Mineral Resources and Ore Reserves from six of AngloGold Ashanti’s global
operations were selected and subjected to review. The six operations that were reviewed were Moab Khotsong,
Tau Lekoa, Vaal River Surface, Navachab, Siguiri and Serra Grande.
The company has been informed that the audit identified no material shortcomings in the process by which AngloGold
Ashanti’s Reserves were evaluated. It is the company’s intention to repeat this process so that all its operations will be
audited over a three-year period. The audit of those operations selected for review during 2006 is currently in progress.
AngloGold Ashanti’s ore reserve statements have been prepared by the competent persons who manage AngloGold
Ashanti’s ore reserves. See “Item 6.: Directors, senior management and employees”.
80
Ore Reserves: Imperial
At December 31, 2006
Proven Ore Reserves
(1)
Probable
Ore
Reserves
(1)
Metallurgical
Gold
Gold
Recovery
Tons
(5)
Grade Content
(1)
Tons
(5)
Grade Content
(1)
Factor
(mill)
(oz/ton)
(mill oz)
(mill)
(oz/ton)
(mill oz)
percent
South Africa
Vaal River
Great Noligwa
9.7
0.222
2.2
9.1
0.207
1.9
96.9
Kopanang 1.6
0.259
0.4
18.2
0.242
4.4
97.8
Moab Khotsong
0.2
0.260
0.1
9.0
0.346
3.1
97.6
Tau Lekoa
0.7
0.145
0.1
2.6
0.119
0.3
97.0
West Wits
Mponeng
(2)
2.0
0.327
0.6
24.6
0.250
6.1
98.5
Savuka
0.6
0.174
0.1
0.4
0.154
0.1
97.2
TauTona
(2)
0.6
0.332
0.2
14.5
0.329
4.8
98.1
Surface
Surface sources
0.0
0.000
0.0
115.5
0.017
1.9
44 – 88
(4)
Argentina
Cerro Vanguardia (92.5 percent)
(3)
0.9
0.207 0.2
7.6
0.181
1.4 95.2
Australia
Boddington
Must lie within the A$425 shell and have a borehole
within 56 feet of block centroid
Must lie within the A$425 shell and
have a borehole within 110 feet of block
centroid
Boddington (33.33 percent)
(3)
50.4
0.027
1.4
138.4
0.023
3.2
82.2
Sunrise Dam
82 x 82 feet10.1
131 x 131 feet0.070
0.7
8.1
0.147
1.2
83.5-85
(4)
Brazil
AngloGold Ashanti
Brasil Mineraçáo
(formerly Morro Velho)
Two adjacent levels of ore body opened up, developed
and sampled on a 217 x 7 feet interval. Drilling pattern of
196 x 65 feet for Cuiaba Expansion Project.2.3 0.187
Two adjacent levels of ore body opened
up, developed and sampled on a 217 x
7 feet interval. Drilling pattern of 196 x
65 feet for Cuiaba Expansion Project.0.4 10.3 0.22 2.3 87-94
(4)
Serra Grande (50%)(50 percent)
49 x 98 feet(3)
164 x 328 feet1.8
0.133
0.2
1.1
0.173
0.2
91-96
(4)
Ghana
Bibiani
98 x 98 feet(6)
197 x 197 feet0.0
0.000
0.0
0.0
0.000
0.0
-
Iduapriem (85 percent)
164 x 164 feet(3)
164 x 246 feet35.9
0.045
1.6
12.9
0.048
0.6
94.5
Obuasi
20.1
0.094
1.9
69.3
0.098
6.8
80-81.0
(4)
Guinea
Siguiri (85 percent)
(3)
20.1
0.017
0.3
58.1
0.025
1.4
93-97.5
Mali
Morila (40 percent)
(3)
6.8
0.073
0.5
5.0
0.072
0.4
89-91.5
(4)
Sadiola (38 percent)
(3)
8.2
0.042
0.3
16.3
0.081
1.3
80-94
(4)
Yatela (40 percent)
(3)
2.3
0.027
0.1
1.6
0.135
0.2
85
(4)
Namibia
Navachab
5.9
0.032
0.2
11.2
0.048
0.5
92
(4)
Tanzania
Geita
4.5
0.028
0.1
82.6
0.101
8.3
66.4-92.8
(4)
United States of America
Cripple Creek & Victor
103
0.027
2.8
39.2
0.027
1.0
60
Total 287.7
0.050
14.479
655.6
0.079
51.491
(1)
Ore reserves include marginally economic and diluting materials delivered for treatment and allow for losses that may occur during mining.
(2)
Probable ore reserves include reserves below infrastructure. See table below.
(3)
Ore reserves attributable to AngloGold Ashanti’s percentage interest shown.
(4)
Recovery factor varies according to ore type.
(5)
Tons refers to a short ton, which is equivalent to 2000lbs avoirdupois
(6)
Bibiani was sold on December 1, 2006.
(7)
The Vaal Reef Ore Reserves include 26.10 million pounds of Uranium by-products; this can not be accounted for by mine as Great Noligwa,
Kopanang and Moab Khotsong feed to a combination of plants.
(8)
The Ore Reserve contains 24.5 million ounces of silver to be recovered as a by-product.
(9)
The Ore Reserve contains 418 million pounds of copper.
(10)
0.55 million tons of sulphure will be recovered from processing the Ore Reserve.
The 2006 probable ore reserves include reserves below infrastructure in the case of the following underground mines
currently in production:
Mine
Tons (millions)
Grade (ounces/ton)
Gold Content (million ounces)
Tau Tona
5.0
0.40
2.0
Mponeng 8.8
0.27
2.4
Obuasi - Surface4.4
66 x 66 feet0.27
98 x 98 feet1.2
Total 18.2
0.31
5.6
81
Ore Reserves: Imperial
At December 31, 2005
Proven Ore Reserves
(1)
Probable
Ore
Reserves
(1)
Metallurgical
Gold
Gold
Recovery
Tons
(8)
Grade Content
(1)
Tons
(8)
Grade Content
(1)
Factor
(mill)
(oz/ton)
(mill oz)
(mill)
(oz/ton)
(mill oz)
percent
South Africa
Vaal River
Great Noligwa
6.6
0.252
1.7
12.2
0.240
2.9
97.1
Kopanang
(6)
1.2
0.282
0.4
21.7
0.237
5.2
97.7
Moab Khotsong
0.7
0.274
0.2
9.4
0.364
3.4
97.6
Tau Lekoa
4.3
0.122
0.5
4.2
0.118
0.5
96.7
West Wits
Mponeng
2.1
0.204
0.4
18.1
0.227
4.1
98.4
Savuka
(3)
0.0
0.241
0.0
0.0
0.263
0.0
97.6
TauTona
(2)
1.0
0.340
0.3
15.5
0.318
4.9
97.7
Surface
Surface sources
0.0
0.000
0.0
126.9
0.018
2.3
73.1
Ergo
(7)
-
-
-
-
-
-
-
Argentina
Cerro Vanguardia (92.5 percent)
(4)
1.7
0.233
0.4
4.9
0.190
0.9 95.2
Australia
Boddington (33.33 percent)
(4)
45.4
0.029
1.3
102.6
0.025
2.5
n/a
Sunrise Dam
7.2
0.062
0.4
10.4
0.128
1.3
82-90
(5)
Brazil
AngloGold Ashanti Brasil Mineraçáo
2.3
0.187
0.4
9.5
0.219
2.1
87-92.5
(5)
Serra Grande (50 percent)
(4)
0.7
0.138
0.1
1.4
0.208
0.3
92.8-96.1
(5)
Ghana
Bibiani
4.4
0.030
0.1
0.4
0.027
0.0
60
Iduapriem (85 percent)
(4)
27.4
0.052
1.4
8.1
0.053
0.4
94
Obuasi
11.8
0.078
0.9
42.9
0.180
7.7
75-81.9
(5)
Guinea
Siguiri (85 percent)
(4)
26.0
0.018
0.5
40.5
0.029
1.2
93.5
Mali
Morila (40 percent)
(4)
7.0
0.094
0.7
2.7
0.106
0.3
89-91.5
(5)
Sadiola (38 percent)
(4)
3.0
0.057
0.2
5.8
0.119
0.7
75-93
(5)
Yatela (40 percent)
(4)
0.6
0.039
0.0
1.7
0.116
0.2
75-85
(5)
Namibia
Navachab
1.3
0.054
0.1
9.8
0.048
0.5
87-92
(5)
Tanzania
Geita
24.3
0.099
2.4
44.5
0.137
6.1
66-95
(5)
United States of America
Cripple Creek & Victor
96.3
0.025
2.4
35.0
0.025
0.9
62
Total 275.3
0.054
14.9
528.2
0.092
48.4
(1)
Ore reserves include marginally economic and diluting materials delivered for treatment and allow for losses that may occur during mining.
(2)
Probable ore reserves include reserves below infrastructure. See table below.
(3)
Negligible proven and probable ore reserves as the mine is closing.
(4)
Ore reserves attributable to AngloGold Ashanti’s percentage interest shown.
(5)
Recovery factor varies according to ore type.
(6)
A mining license for Edom has been approved.
(7)
Ergo was closed in March 2005.
(8)
Tons refers to a short ton, which is equivalent to 2000lbs avoirdupois.
The 2005 probable ore reserves include reserves below infrastructure in the case of the following South African mine:
Mine
Tons (millions)
Grade (ounces/ton)
Gold Content (million ounces)
Tau Tona
4.8
0.342
1.7
Total 4.8
0.342
1.7
`
The ore reserves in respect of the remaining AngloGold Ashanti underground mines do not include any ore reserves
below infrastructure
.
82
Ore Reserves: Metric
At December 31, 2006
Proven
Ore
Reserves
(1)
Probable Ore Reserves
(1)
Metallurgical
Gold
Gold
Recovery
Tonnes Grade Content
Tonnes
Grade
Content
Factor
(mill)
(g/t)
(tonnes)
(mill)
(g/t)
(tonnes)
percent
South Africa
Vaal River
Great Noligwa
8.8
7.61
67.0
8.2
7.10
58.5
96.9
Kopanang
1.5
8.87
13.2
16.5
8.31
137.2
97.8
Moab Khotsong
0.2
8.93
1.9
8.2
11.86
96.7
97.6
Tau Lekoa
0.6
4.97
3.1
2.4
4.07
9.7
97.0
West Wits
Mponeng
(2)
1.8
11.22
19.9
22.3
8.56
191.0
98.5
Savuka
0.6
5.97
3.3
0.4
5.29
2.1
97.2
TauTona
(2)
0.6
11.4
6.7
13.2
11.27
148.4
98.1
Surface
Surface sources
0.0
0.00
0.0
104.8
0.57
59.5
44-88
(4)
Argentina
Cerro Vanguardia (92.5 percent)
(3)
0.9
7.09
6.1
6.9
6.22
42.7 95.2
Australia
Boddington (33.33 percent)
(3)
45.8
0.94
42.8
125.6
0.78
98.5
82.2
Sunrise Dam
9.1
2.39
21.8
7.6
4.87
36.9
83.5-85
Brazil
AngloGold Ashanti Brasil Mineraçáo
2.1
6.42
13.2
9.3
7.56
70.4
87-94
(4)
Serra Grande (50 percent)
(3)
1.6
4.57
7.5
1
5.92
5.9
91-96
(4)
Ghana
Bibiani
(5)
0.0
0.00
0.0
0.0
0.00
0.0
-
Iduapriem (85 percent)
(3)
32.5
1.53
49.7
11.7
1.63
19.0
94.5
Obuasi
18.2
3.21
58.5
62.9
3.38
212.3
80-81.0
(4)
Guinea
Siguiri (85 percent)
(3)
18.2
0.60
10.8
52.7
0.85
45.0
93-97.5
Mali
Morila (40 percent)
(3)
6.1
2.50
15.3
4.5
2.47
11.2
89-91.5
(4)
Sadiola (38 percent)
(3)
7.5
1.45
10.8
14.8
2.79
41.3
80-94
(4)
Yatela (40 percent)
(3)
2.1
0.94
1.9
1.4
4.63
6.6
85
(4)
Namibia
Navachab
5.3
1.08
5.8
10.1
1.63
16.5
92
(4)
Tanzania
Geita
4.0
0.97
3.9
74.9
3.47
259.6
66.4-92.8
(4)
United States of America
Cripple Creek & Victor
93.4
0.93
87
35.6
0.91
32.5
60
Total260.9
1.73
450.2
594.7
2.69
1601.5
(1)
Ore reserves include marginally economic and diluting materials delivered for treatment and allow for losses that may occur during mining.
(2)
Probable ore reserves include reserves below infrastructure. See table below.
(3)
Ore reserves attributable to AngloGold Ashanti’s percentage interest shown.
(4)
Recovery factor varies according to ore type.
(5)
Bibiani Mine was sold on December 1, 2006.
(6)
The Vaal Reef Ore Reserves include 11.8 thousand tons of Uranium by-products; this can not be accounted for by mine as Great Noligwa, Kopanang
and Moab Khotsong feed to a combination of plants.
(8)
The Ore Reserve contains 0.76 million tons of silver to be recovered as a by-product.
(9)
The Ore Reserve contains 0.19 million tons of copper.
(10)
0.50 million tons of sulphure will be recovered from processing the Ore Reserve.
The 2006 probable ore reserves include reserves below infrastructure in the case of the following underground mines
currently in production:
Mine
Tonnes (millions)
Grade (grams/tonne)
Gold Content (tonnes)
TauTona 4.5
13.71
62.3
Mponeng 7.9
9.26
73.6
Obuasi - Underground4.0
66 x 66 feet9.43
197 x 197 feet37.6
Total 16.4
32.4
173.5
83
Ore Reserves: Metric
At December 31, 2005
Proven
Ore
Reserves
(1)
Probable Ore Reserves
(1)
Metallurgical
Gold
Gold
Recovery
Tonnes Grade Content
Tonnes
Grade
Content
Factor
(mill)
(g/t)
(tonnes)
(mill)
(g/t)
(tonnes)
percent
South Africa
Vaal River
Great Noligwa
6.0
8.65
52.2
11.1
8.23
91.2
97.1
Kopanang
(6)
1.1
9.66
10.9
19.7
8.13
160.4
97.7
Moab Khotsong
0.6
9.39
6.0
8.5
12.46
106.4
97.6
Tau Lekoa
3.9
4.17
16.1
3.8
4.05
15.3
96.7
West Wits
Mponeng
1.9
7.01
13.1
16.4
7.79
127.6
98.4
Savuka
0.0
8.27
0.2
0.0
9.02
0.3
97.6
TauTona
(2)
0.9
11.66
10.5
14.1
10.92
153.5
97.7
Surface
Surface sources
0.0
0.00
0.0
115.1
0.61
70.3
73.1
Ergo
(7)
-
-
-
-
-
-
-
Argentina
Cerro Vanguardia (92.5 percent)
(4)
1.6
7.99
12.6
4.5
6.53
29.295.2
Australia
Boddington (33.33 percent)
(4)
41.2
1.01
41.4
93.1
0.85
78.8
n/a
Sunrise Dam
6.5
2.11
13.7
9.4
4.39
41.4
82.90
Brazil
AngloGold Ashanti Brasil Mineraçáo
2.1
6.4
13.2
8.6
7.5
64.4
87-92.5
(5)
Serra Grande (50 percent)
(4)
0.6
4.72
3.0
1.2
7.14
8.8
92.8-96.1
(5)
Ghana
Bibiani
4.0
1.03
4.1
0.4
0.93
0.3
60
Iduapriem (85 percent)
(4)
24.8
1.78
44.1
7.3
1.81
13.3
94
Obuasi
10.7
2.67
28.5
39.0
6.17
240.4
75-81.9
(5)
Guinea
Siguiri (85 percent)
(4)
23.6
0.62
14.5
36.7
1.00
36.6
93.5
Mali
Morila (40 percent)
(4)
6.4
3.21
20.5
2.5
3.63
9.0
89-91.5
(5)
Sadiola (38 percent)
(4)
2.8
1.95
5.4
5.3
4.09
21.5
75-93
(5)
Yatela (40 percent)
(4)
0.5
1.33
0.7
1.5
3.97
6.1
75-85
(5)
Namibia
Navachab
1.2
1.85
2.2
8.9
1.65
14.7
87-92
(5)
Tanzania
Geita
22.1
3.40
75.1
40.4
4.69
189.2
66-95
(5)
United States of America
Cripple Creek & Victor
87.4
0.86
75.4
31.8
0.86
27.4
62
Total 249.8
1.86
463.4
479.2
3.14
1506.0
(1)
Ore reserves include marginally economic and diluting materials delivered for treatment and allow for losses that may occur during mining.
(2)
Probable ore reserves include reserves below infrastructure. See table below.
(3)
Negligible proven and probable ore reserves as the mine is closing.
(4)
Ore reserves attributable to AngloGold Ashanti’s percentage interest shown.
(5)
Recovery factor varies according to ore type.
(6)
A mining license for Edom has been approved.
(7)
Ergo was closed in March 2005.
The 2005 probable ore reserves include reserves below infrastructure in the case of the following South African mine:
Mine
Tonnes (millions)
Grade (grams/tonne)
Gold Content (tonnes)
TauTona 4.4
11.73
51.4
Total 4.4
11.73
51.4
The ore reserves in respect of the remaining AngloGold Ashanti underground mines do not include any ore reserves
below infrastructure
.
84
Stockpiles: Imperial
Stockpiles are previously mined ore scheduled for future process plant feed. The proven and probable ore reserves
include the following stockpile material:
Stockpiles
(1)
At December 31, 2006
Tons (million)
Grade (ounces/ton)
Gold content (million
ounces)
South Africa
Vaal River
Great Noligwa
0.000
– 0.000
Kopanang
0.000
– 0.000
Moab Khotsong
0.000
– 0.000
Tau Lekoa
0.000
– 0.000
West Wits
Mponeng
0.000
– 0.000
Savuka
0.000
– 0.000
TauTona
0.000
– 0.000
Surface
Surface sources
(2)
115.481
0.02 1.912
Argentina
Cerro Vanguardia (92.5 percent)
0.020
0.58 0.012
Australia
Boddington (33.33 percent)
0.165
0.02 0.004
Sunrise Dam
7.455
0.05 0.399
Brazil
AngloGold Ashanti Brasil Mineraçáo
0.051
0.23 0.012
Serra Grande (50 percent)
0.073
0.23 0.017
Ghana
Iduapriem (85 percent)
1.373
0.04 0.049
Obuasi
(3)
51.647
0.04 2.133
Guinea
Siguiri (85 percent)
82 x 82 feet20.052
82 x 82 feet0.02 0.348
Mali
Morila
66 x 66 feet(3)
131 x 131 feet(40 percent)
6.561
0.05 0.347
Sadiola (38 percent)
82 x 82 feet8.057
82 x 164 feet0.04 0.327
Yatela (40 percent)
82 x 82 feet2.278
115 x 148 feet0.03 0.062
Namibia
Navachab
41 x 41 feet4.600
82 x 82 feet0.02 0.102
Tanzania
Geita
66 x 66 feet4.457
131 x 131 feet0.03 0.126
USAUnited States of America
Cripple Creek & Victor
100 x 150 feet0.000
100 x 100 feet– 0.000
Note: The rounding of figures and converting from metric to imperial units may result in minor computational discrepancies.
(1)
Attributable to AngloGold Ashanti.
(2)
Centralized operations treating material on surface that was previously generated by several underground operations.
(3)Includes Tailing Storage Facilities.
9285
Stockpiles: Imperial
Stockpiles are previously mined ore scheduled for future process plant feed. The proven and probable ore reserves
include the following stockpile material:
Stockpiles
(1)
At December 31, 2005
Tons (million)
Grade (ounces/ton)
Gold content (million
ounces)
South Africa
Vaal River
Great Noligwa
0.000
– 0.000
Kopanang
0.000
– 0.000
Moab Khotsong
0.000
– 0.000
Tau Lekoa
0.000
– 0.000
West Wits
Mponeng
0.000
– 0.000
Savuka
0.000
– 0.000
TauTona
0.000
– 0.000
Surface
(2)
0.000
– 0.000
Surface
Surface sources
(2)
0.000
– 0.000
Argentina
Cerro Vanguardia (92.5 percent)
0.077
0.205 0.016
Australia
Boddington (33.33 percent)
0.000
– 0.000
Sunrise Dam
5.310
0.050 0.263
Brazil
AngloGold Ashanti Brasil Mineraçáo
0.044
0.226 0.010
Serra Grande (50 percent)
0.047
0.203 0.010
Ghana
Iduapriem (85 percent)
0.536
0.048 0.026
Obuasi
3.307
0.018 0.058
Guinea
Siguiri (85 percent)
23.982
0.016 0.378
Mali
Morila (40 percent)
3.536
0.069 0.243
Sadiola (38 percent)
3.039
0.057 0.173
Yatela (40 percent)
0.569
0.039 0.022
Namibia
Navachab
1.286
0.054 0.069
Tanzania
Geita
0.826
0.084 0.069
United States of America
Cripple Creek & Victor
0.000
– 0.000
Note: The rounding of figures and converting from metric to imperial units may result in minor computational discrepancies.
(1)
Attributable to AngloGold Ashanti.
(2)
Centralized operations treating material on surface that was previously generated by several underground operations.
86
Stockpiles: Metric
Stockpiles are previously mined ore scheduled for future process plant feed. The proven and probable ore reserves
include the following stockpile material:
Stockpiles
(1)
At December 31, 2006
Tonnes (million)
Grade (grams/tonne) Gold content (tonnes)
South Africa
Vaal River
Great Noligwa
0.000
– 0.000
Kopanang
0.000
– 0.000
Moab Khotsong
0.000
– 0.000
Tau Lekoa
0.000
– 0.000
West Wits
Mponeng
0.000
– 0.000
Savuka
0.000
– 0.000
TauTona
0.000
– 0.000
Surface
Surface sources
(2)
104.763
0.57 59.475
Argentina
Cerro Vanguardia (92.5 percent)
0.018
20.00 0.369
Australia
Boddington (33.33 percent)
0.150
0.80 0.120
Sunrise Dam
6.763
1.82 12.325
Brazil
AngloGold Ashanti Brasil Mineraçáo
0.046
7.95 0.368
Serra Grande (50 percent)
0.066
7.87 0.522
Ghana
Iduapriem (85 percent)
1.246
1.23 1.531
Obuasi
(3)
46.853
1.42 66.353
Guinea
Siguiri (85 percent)
18.191
0.60 10.828
Mali
Morila
(3)
(40 percent)
5.951
1.82 10.815
Sadiola (38 percent)
7.309
1.39 10.160
Yatela (40 percent)
2.066
0.94 1.940
Namibia
Navachab
4.173
0.76 3.181
Tanzania
Geita
4.044
0.97 3.924
United States of America
Cripple Creek & Victor
0.000
– 0.000
(1)
Attributable to AngloGold.
(2)
Centralized operations treating material on surface that was previously generated by several underground operations.
(3)
Includes Tailing Storage Facilities.
87
Stockpiles: Metric
Stockpiles are previously mined ore scheduled for future process plant feed. The proven and probable ore reserves
include the following stockpile material:
Stockpiles
(1)
At December 31, 2005
Tonnes (million)
Grade (grams/tonne) Gold content (tonnes)
South Africa
Vaal River
Great Noligwa
0.000
– 0.000
Kopanang
0.000
– 0.000
Moab Khotsong
0.000
– 0.000
Tau Lekoa
0.000
– 0.000
West Wits
Mponeng
0.000
– 0.000
Savuka
0.000
– 0.000
TauTona
0.000
– 0.000
Surface
(2)
0.000
– 0.000
Surface
Surface sources
(2)
0.000
– 0.000
Argentina
Cerro Vanguardia (92.5 percent)
0.070
7.010.492
Australia
Boddington (33.33 percent)
0.000
–0.000
Sunrise Dam
4.817
1.708.178
Brazil
AngloGold Ashanti Brasil Mineraçáo
0.040
7.76 0.311
Serra Grande (50 percent)
0.043
6.970.296
Ghana
Iduapriem (85 percent)
0.486
1.660.807
Obuasi
3.000
0.60 1.800
Guinea
Siguiri (85 percent)
21.756
0.54 11.744
Mali
Morila (40 percent)
3.208
2.36 7.555
Sadiola (38 percent)
2.757
1.955.373
Yatela (40 percent)
0.517
1.330.688
Namibia
Navachab
1.167
1.85 2.160
Tanzania
Geita
0.750
2.88 2.159
United States of America
Cripple Creek & Victor
0.000
– 0.000
(1)
Attributable to AngloGold.
(2)
Centralized operations treating material on surface that was previously generated by several underground operations.
88
Drill hole spacing: MetricImperial
In determining the proven and probable ore reserves, AngloGold Ashanti applied the following drill hole spacings:
Drill Hole Spacings
Proven Ore Reserves
Probable Ore Reserves
South Africa
Underground sources
Ore body opened up, developed and sampled on a 2
7 – 3
meter10 foot spacing on raise lines and on a 516 x 5 16
grid
thereafter
From a 40130 x 40 meter130 foot spacing up to
10003200 x 1000 meter3200 foot spacing
Surface sources
Variable sampling strategies: Belt samplers, cross
stream residue samplers and bulk sampling
campaigns
Variable sampling strategies: Belt
samplers, cross stream residue
samplers
Argentina
Cerro Vanguardia
5 x 12.5 meter
10 x 25 meter
Australia
Boddington
Must lie within the A$425 shell and have a borehole
within 17 meter of block centroid
Must lie within the A$425 shell and
have a borehole within 34 meter of
block centroid
Sunrise Dam
25 x 25 meter
40 x 40 meter
Brazil
AngloGold Ashanti
Mineraçáo
(formerly Morro Velho)
Two adjacent levels of ore body opened up, developed
and sampled on a 66 x 2 meter interval. Drilling pattern
of 60 x 20 for Cuiaba Expansion Project.
Two adjacent levels of ore body opened
up, developed and sampled on a 66 x 2
meter interval
Serra Grande (50%)
15 x 30 meter
50 x 100 meter
Ghana
Bibiani
30 X 30 meter
60 x 60 meter
Iduapriem
50 x 50 meter
50 x 75 meter
Obuasi – Surface
20 x 20 meter
30 x 30 meter
Obuasi - Underground
20 x 20 meter
60 x 60 meter
Guinea
Siguiri
25 x 25 meter
25 x 25 meter
Mali
Morila
20 x 20 meter
40 x 40 meter
Sadiola
25 x 25 meter
25 x 50 meter
Yatela
25 x 25 meter
35 x 45 meter
Namibia
Navachab
12.5 x 12.5 meter
25 x 25 meter
Tanzania
Geita
20 x 20 meter
40 x 40 meter
USA
Cripple Creek & Victor
30.5 x 30.5 meter
30.5 x 30.5 meter
93
Research and development
AngloGold Ashanti’s approach to research and development is a combination of external private and collaborative research
and in-house research based at the operations.
The prime external collaborative research programs include:
• electric drilling: progress was made towards the end of the final quarter of 2004 in several key performance areas. As
drilling and blasting is the fundamental rock-breaking process in deep-level, narrow vein hard-rock mining, the overall
objective of a more energy-efficient stope will need to rely on moving away from compressed air as the primary energy
source for this and several other in-stope activities;
• the AMIRA projects:
–
P9N which is essentially research into increasing efficiency comminution;
– P420c which is essentially research into the gravity and leaching characteristics of gold extraction from both free
milling ores and refractory ores; and
–
P266d which is essentially research into improving the performance of thickeners.
• a University of British Columbia Canada project researching the use of thiosulphate as an alternative lixiviant to cyanide;
and
• the Mintek, Johannesburg, research project AuTEK, commissioned to develop new industrial uses for gold. The principal
fields being catalysts, medical, biological and nanoparticle.
The primary in-house research programs being carried out in conjunction with private external technology suppliers are:
•open-pit wall stability design aspects (including risk analysis design) and continuous slope stability measurement;
• use of GPS systems for drill blast hole location, truck monitoring and management of ore placement on heaps;
• the engineering design enhancement to the New Era Loco, an operational energy modeling system;
• a chiller performance software program is being completed as the final outstanding research project within the FutureMine
Program;
• AngloGold Ashanti’s wholly-owned subsidiary, ISS International Ltd, (ISSI), remains a world leader in seismic monitoring
of mines, engineering structures and earthquakes. The company initiates and undertakes both broad-based and focused
research and development in a continuing quest to enhance the safety of those working in mining by developing effective
monitoring and warning technology systems. ISSI functions on the international stage and its involvement in seismic
matters extends well beyond the mining environment;
• the mine-to-mill and variations of that theme to improve blasting efficiencies and effectiveness, monitor fragmentation and
improve energy efficiencies in process comminution practices. The objective is to reduce energy and costs and improve
material-handling efficiencies; and
• expert control systems in both the comminution circuits and leaching/gold recovery circuits.
A company-wide decision has been taken to comply with the International Cyanide Code. To this end, extensive cyanide
speciation studies have been conducted at the various plants in the South Africa region in conjunction with Mintek (a South
African metallurgical research centre) to determine, on both a macro- and a micro-scale, the environmental impacts of cyanide
in the residue material. This has facilitated a clearer understanding of the environmental impacts of cyanide and has led to the
implementation of a strategy to ensure compliance with the requirements of the International Cyanide Code.
Cyanide management covers the areas of:
–
consumption by installation of continuous cyanide and cyanide WAD measuring devices with process control base on
a forward control loop;
–
cyanide recovery using the Hannah process system;
–
cyanide destruction using a number of proprietary processes; and
–
cyanide destruction based on bacteria destruction of cyanide compound.
94
Global exploration
In 2004, AngloGold Ashanti’s exploration activities continued to support the group’s growth strategy, primarily to extend and
replace existing production ounces by sustaining or growing existing operations (through brownfields exploration) and to
discover new mines in new areas (through greenfields exploration). Activities are focused on finding long-life, economic
orebodies by utilizing multi-disciplinary teams and appropriate state-of-the-art technology.
Exploration continued to focus around the group’s operations in Argentina, Australia, Brazil, Ghana, Guinea, Tanzania, Mali,
Namibia, South Africa and the USA. In the more mature exploration areas in Africa, Australia and Canada, the group's
exploration activities were rationalized, however, there was increased emphasis on the group’s new frontiers exploration
strategy with exploration teams active in the Democratic Republic of Congo (DRC), Colombia, Alaska, South East Asia, China
and Russia. During the year, efforts were also focused on the rationalization of the Ashanti and AngloGold exploration
portfolios in Africa.
The outcome is a more balanced exploration portfolio consisting of mature and established areas and new prospective areas in
underexplored regions. In line with this strategy, the following initiatives were concluded during the year:
•an equity investment in Trans-Siberian Gold in Russia;
• an equity investment and conclusion of a strategic alliance in the Philippines with Red 5 Ltd; and
•the conclusion of an exploration alliance with Oxiana Ltd in Laos.
These initiatives demonstrate the group’s commitment to engaging junior exploration companies and are aimed at unlocking
the gold potential by combining AngloGold Ashanti’s technical expertise with the partner’s in-depth country knowledge and
operating experience.
During the year, $37 million of exploration expenditure was incurred in greenfields exploration in Colombia, Peru, Alaska,
Mongolia, Ghana and the DRC. Total exploration expenditure amounted to $81 million, of which $44 million was spent on
brownfields exploration. Exploration expenditure for 2005 is expected to reach some $90 million.
Argentina
At Cerro Vanguardia in Argentina exploration continued to focus on the delineation of additional mineralized zones. Drilling of
the Zorro, Gabriela and Liliana veins highlighted continued upside in under-explored veins within the greater license area.
A number of properties held by Cerro Vanguardia in Patagonia were farmed out to Exeter Resources. The properties cover a
total area of 1,047 square kilometers in 39 individual tenements.
Australia
Drilling at Sunrise Dam focused on underground targets that are accessible from the Daniel decline. Near-mine activities
concentrated on delineating oxide mineralization to the north of the pit. The Jasper Hills tenements situated 60 kilometers east
of Sunrise Dam were acquired from Crescent Gold Limited, formerly Apollo Gold. Strike extensions to the Lord Byron deposit
were drill tested with moderate results. Further regional targets were also drill tested and require further follow-up.
At the Yamarna greenfields project in Western Australia (a joint venture with Terra Gold Mining, formerly Aurex), diamond
drilling tested various targets in the southern area, intersecting extensive alteration with low gold values. Aircore drilling in the
northern area defined a large geochemical anomaly requiring further testing.
At the Tropicana East project (a joint venture with Independence Group NL) diamond drilling was in progress at the end of
2004 testing the depth potential of previously identified mineralization. Wide-spaced geochemical sampling identified further
targets that require follow up. In the Northern Territory, AngloGold Ashanti and Newmont Australia have agreed that AngloGold
Ashanti will exit the Tanami Mine JV and the Central Desert JV, which includes the Tanami Mill and associated infrastructure
and tenements.
A number of projects in Western Australia were divested in 2004 as they did not meet AngloGold Ashanti’s target criteria.
95
Brazil
Brownfields activities in Brazil focused on properties in the Iron Quadrangle. At Córrego do Sítio underground exploration
access development and surface and underground drilling at Cachorro Bravo has identified a target with sample grades
averaging 9g/t. Drilling two kilometers to the north of Cachorro Bravo at Carvoronia/Velha Bocaina confirmed the extension of
previously identified oxide mineralization below the base of weathering, over a down-plunge length of approximately
900 meters.
At the Lamego project near the Cuiabá mine, an exploration ramp is being developed to access and explore the Carruagem
(PA zone), which is situated at the northern extremity of the Lamego fold structure. Drilling confirmed multiple mineralized
horizons at the southern extremity of the Lamego structure at Cabecá da Pedra. Potential ore from Lamego is planned to be
added to the Cuiabá expansion project, which was approved by the board in January 2005.
Three surface boreholes drilled in the Gandarela Project (joint venture with IAMGOLD) in the Iron Quadrangle for conglomerate
hosted gold mineralization failed to intersect the target horizon.
At the Tocantins project (a joint venture with IAMGOLD), situated approximately 500 kilometers north-east of Crixás, follow up
reverse circulation (RC) and diamond drilling of three targets failed to generate economic drill intercepts. AngloGold Ashanti is
negotiating with IAMGOLD to withdraw from the Gandarela joint venture and dilute its participation at Tocantins.
At the Crixás mine (a joint venture with Kinross), surface drilling focused on the delineation of potential open-pittable Mineral
Resources within the lease area. Mineralization within the Forquilha Sul (Corpo IV) ore shoot was established over a down-
plunge length of over 1,100 meters at grades of up to 7g/t.
Canada
Limited exploration was conducted at the West End project within the Red Lake area of Canada and the project will be farmed
out.
China
A representative office has been established in Beijing to seek exploration and business opportunities in China.
Colombia
Greenfields exploration in Colombia focused on several regional reconnaissance programs and has thus far generated a
number of targets for detailed follow-up and drilling in 2005.
Democratic Republic of Congo (DRC)
A field camp was established at Mongbwalu in the eastern DRC. However, due to logistical issues the planned drilling program
at the Kilo project was delayed, with drilling commencing in early 2005.
Ghana
In Ghana at Obuasi, underground exploration focused on the below 50 Level Deeps project where results from drilling remain
encouraging. Drilling of the West Lode sulphide orebody on the 32 Level project also yielded positive results. A drilling
contractor was selected to drill two 3,000 meter-deep surface holes in the Deeps project, with a further six holes planned to
complete the initial phase. Drilling is planned to commence in the third quarter of 2005.
At Bibiani, exploration focused on locating additional underground targets along the main Bibiani structure. Results appear to
be encouraging on the northern extension of the deposit.
Limited greenfields work was completed in Ghana in the Hebron, Subriso and Sefwi project areas, each within 60 kilometers of
the Bibiani mine. No exploration work was undertaken at Iduapriem.
Limited greenfields work was completed in Ghana in the Hebron, Subriso and Sefwi project areas, each within 60 kilometers of
the Bibiani mine.
96
Guinea
At Siguiri, exploration focused on the delineation of additional surface targets at Kosise South and Kozan South. In 2005, target
generation will be directed both locally around the mine site and regionally within the four blocks that make up the 1,500 square
kilometers concession.
Laos
An exploration alliance was established with Oxiana Limited targeting new mineralization in Laos.
Mali
Phase VII of the deep sulphide infill drilling program at Sadiola was completed. A pre-feasibility study to assess the economic
potential of the deep sulphides is planned to be completed by the end of 2005.
Satellite oxide exploration continued to produce positive results from extension drilling between the FE3 and FE4 pits. At FE3
resource modeling is in progress on the southern extension. Further target generation within the Sadiola lease area has
identified additional oxide targets that require follow-up drilling in 2005.
At Yatela, satellite oxide drilling on two geophysical targets situated to the south of the pit produced negative results. Infill
drilling at KW18, situated 2 kilometers to the south-west of the pit identified some additional targets.
At Morila, a target has been identified at Domba, situated 8 kilometers north of the pit. Pit contiguous drilling of the Morila
Shear zone extension identified some additional targets. Drilling of the Samacline target to the north-west of the pit intersected
encouraging gold grades at depths between 300 and 500 meters below surface which will be followed up by drilling. Drill
testing of stratigraphic targets generated from regional target generation in the lease area yielded negative results.
Follow-up rotary airblast and reverse circulation drilling was completed in southern Mali at the Garalo, Kola and Kalaka
properties, with further follow-up drilling required at Kalaka in 2005. Initial soil sampling programs were completed on new
permits situated 120 kilometers north of Sadiola and at Bassala in southern Mali, immediately west of the Kordieran and
Kalana properties.
Mongolia
Two projects in the southern Gobi were drill tested with negative results on the porphyry target at Ikh Shank, however, initial
reverse circulation and diamond drill hole results from Altan Uul are promising and will require further testing. At the Tsagaan
Tolgoi prospect in north western Mongolia, reverse circulation drilling was conducted on a mesothermal quartz vein system
with results pending. Further target generation and third party property appraisals are continuing.
Namibia
Drilling commenced at Anomaly 16, situated 5 kilometers southwest from the Navachab pit. Further drilling is required to
delineate the strike and down dip potential. Drilling of the previously identified mineralization at Grid A, situated 5 kilometers
north of the pit, yielded positive results.
Peru
Three prospects were drilled in Peru in 2004 and exploration continued on further multi-disciplinary target generation, ground
truthing and third party property-scale investigations in several parts of the country. Metallurgical studies and a scoping study
were completed at the La Rescatada project in southern Peru. A 50 percent operational interest in La Rescatada was divested
to a local mining company Minera Aruntani. AngloGold Ashanti signed a letter of intent with Absolut Resources, whereby
Absolut acquired all the rights to AngloGold Ashanti’s exploration projects and a geochemical database in Northern Peru.
Under the agreement, AngloGold Ashanti was issued shares and share warrants in the company. The Pichacani property in
southern Peru was optioned to Bear Creek, which also acquired the Ninobamba silver project from AngloGold Ashanti in 2003.
Philippines
In the Philippines, AngloGold Ashanti has taken an investment in Red 5 Limited and formed a strategic alliance to explore their
ground holdings in the vicinity of the Siana project.
97
Russia
In Russia AngloGold Ashanti provided Trans-Siberian Gold plc with geological input at both the Veduga and Asacha projects.
Drilling is in progress at both these projects in an effort to increase the Mineral Resource.
South Africa
A scoping study of the Goedgenoeg project contiguous to Tau Lekoa has indicated that the project will not be viable. Surface
drilling at Moab Khotsong intersected encouraging grades, confirming the existing geological model. Further surface drilling is
in progress to evaluate the Vaal Reef to the south-west of Kopanang.
Tanzania
Diamond drilling of the Geita Hill down dip extension mineralization continued in order to optimize the open-pit and potential
underground interphase. Step-out drilling continued to the northeast at Geita Hill, tracing gold mineralization along strike and
down dip to define areas for infill drilling.
An exploration alliance was established with Tan Range Exploration at the Kigosi North prospect located 150 kilometers south-
west of Geita.
United States
In the United States at CC&V in Colorado, drilling focused on brownfields expansion at the Wild Horse Extension (WHEX)
project. Drill testing of a new exploration target in the Hosier Pass area has identified a sheeted-vein system which will be
followed up in 2005.
After the cessation of Nevada greenfields activities in 2003, the exploration office in the USA was relocated to Denver,
Colorado. Greenfield activities have expanded in the Alaska frontier region with a major increase in land holdings and the
drilling of three new district-scale targets. Activities are focused in the Tintina Gold Belt with an integrated target generation and
evaluation program. 2004 drill projects included the ER and Eagle targets (JV with Rimfire Minerals) and the Livengood target
areas. The ER and Eagle results however, did not meet the initial AngloGold Ashanti economic hurdle rates and will be farmed
out to third parties with claw-back options. Reconnaissance work identified three new gold targets in the Pogo Region which
will be drill tested in 2005.
Drilling at Livengood defined a large sub-economic gold system which requires follow-up drilling in 2005.
Gold market development
The challenge for marketing gold is significant. This is especially so given the fall in recent years in physical demand for gold,
in part a result of the rise in price and market volatility. Demand for gold jewellery in many markets has declined materially in
the past four years, with gold jewellery sales losing ground against other luxury consumer goods, particularly in developed
markets.
AngloGold Ashanti is committed to developing the market for gold. The group’s marketing program aims to increase the
desirability of its product, to sustain and grow demand, and to support the deregulation of the market in key economies.
During 2004, AngloGold Ashanti spent some $15 million on gold marketing initiatives, of which 66 percent was spent through
the World Gold Council (WGC). Gold marketing expenditure by AngloGold Ashanti in 2003 and 2002 amounted to $19 million
and $17 million, respectively.
Independently of its support for the WGC, AngloGold Ashanti is active in a number of other marketing projects that support
gold. It remains the only gold group in the world to have committed this level of resources to the marketing of the metal it
produces.
Downstream initiatives have included GoldAvenue, an internet venture, established between AngloGold Ashanti, JP Morgan
Chase and Pamp MKS of Geneva in 2000. This venture continued to sell gold jewellery by catalogue and website until early
2004, after which it was wound up.
98
AngloGold Ashanti holds a 26.6 percent stake in OroAfrica, the largest manufacturer of gold jewellery in South Africa, as an
investment in the downstream beneficiation of gold in South Africa. AngloGold Ashanti and OroAfrica have co-operated in a
number of projects, including OroAfrica’s development and launch of an African gold jewellery brand.
An important strategic step has been the establishment of a Jewellery Design Centre at OroAfrica at a cost of $250,000. The
purpose of the centre is to generate new gold jewellery designs, and to improve product standards through technology, design
and innovation. The centre has been used during the past year to develop a new range of gold jewellery with an African theme.
The Design Centre was commissioned by the South African Parliament in 2003 to manage the fabrication of the new
Parliamentary mace to celebrate the tenth year of democracy in South Africa. The mace was successfully completed and
presented to Parliament in 2003.
Also in the area of design innovation, AngloGold Ashanti’s Riches of Africa Gold Jewellery Design Competition was established
in 1998 to showcase South African jewellery designers, to enhance jewellery manufacturing technical skills in South Africa and
to support the local gold jewellery industry. Training workshops for competition entrants are held each year, while the award-
winning works are exhibited and used in fashion shows and other events both locally and abroad. The 2004 competition
attracted a record total of 459 entrants and a record number of student and professional jewellers attended training workshops
held by AngloGold Ashanti in Johannesburg, Cape Town and Durban.
A bi-annual gold jewellery design competition in Brazil, the Designers Forum, was launched by the group in South America in
2002. It was the first such competition in that country. The competition generated unprecedented interest in 2004, with a high
quality of design and craftsmanship and some 650 projects involved. From these, 33 pieces were selected for the collection.
The Gold of Africa Museum was inaugurated in 2001 in Cape Town with the permanent endowment of the Barbier Mueller
collection of West African gold objects purchased by the company in 1998. The Museum also serves as a training facility in the
jewellery industry in Cape Town. The Museum continues to attract a growing number of visitors, and to provide special visits
for school groups in the Cape Town area.
AngloGold Ashanti and Mintek, South Africa’s national metallurgical research organization, launched Project AuTEK in 2002 to
research and develop industrial applications for gold. Project AuTEK has developed a gold-based catalyst for the oxidation of
carbon monoxide at ambient temperature. Mintek has carried out pilot-scale catalyst production tests. Negotiations for the
commercial production of the catalyst have commenced.
An important feature in many of AngloGold Ashanti’s marketing projects has been the beneficiation of gold, particularly in
South Africa. AngloGold Ashanti’s commitment to adding value to gold extends beyond mining and aims to contribute towards
the upliftment of people and the sustainability of communities. AngloGold Ashanti remains a sponsor of the Atteridgeville
Jewellery Project, established in 2000 by the Vukani-Ubuntu Community Development Project to create opportunities in the
jewellery industry in South Africa for the previously disadvantaged through training and development. In 2004, the company
also sponsored the expansion of the Soweto Jewellery School to enable it to double its intake of students from 2005.
Marketing channels
Gold produced by AngloGold Ashanti’s mining operations is processed to saleable form at various precious metals refineries.
Once refined to a saleable product – either a large bar weighing approximately 12.5 kilograms and containing 99.5 percent
gold, or smaller bars weighing 1.0 kilograms or less with a gold content of 99.5 percent and above – the metal is sold directly
by the refineries to bullion banks and the proceeds are paid to the company.
Bullion banks are registered commercial banks that deal in gold. They participate in the gold market by buying and selling gold
and distribute physical gold bullion bought from mining companies and refineries to physical offtake markets worldwide. Bullion
banks hold consignment stocks in all major physical markets such as India or South East Asia and finance such consignment
stocks from the margins charged by them to physical buyers, over and above the amounts paid by such banks to mining
companies for the gold.
99
Where forward sales contracts exist against which AngloGold Ashanti elects to deliver physical product, the same channel of
the refinery is used, with the variation that the refinery does not sell the metal on its behalf, but instead delivers the finished
gold bars to the bullion bank with which the group’s forward contract is held. The physical delivery to the counterparty bank of
the appropriate amount of gold fulfills.
AngloGold Ashanti’s obligations under the forward contract and AngloGold Ashanti is paid by the relevant bullion bank with the
price fixed under the forward contract, rather than at the spot price of the day.
Competition
As gold mining is a mature and regulated industry, and very significant volumes of gold and gold derivatives trade in the world
markets independent of gold mine supply, AngloGold Ashanti does not consider that competition for sales plays any role in its
operations as a gold producer. However, gold producers do compete against each other for acquisition and exploration
opportunities.
Intellectual property
AngloGold Ashanti and its subsidiary companies hold the right to use certain proprietary technology and intellectual property,
including patented technology and other forms of protected intellectual property. These rights relate to various aspects of the
company’s business, from routine software and related computer technology in support of office operations, to intellectual
property contained and/or used in the mining and mineral processing operations. AngloGold Ashanti, as a group, is not
dependent on these various forms of intellectual property for the conduct of its business as a whole.
Sustainable Development: Safety, health, environmental and social development
AngloGold Ashanti published its Report to Society 2004, a copy of which was filed with the SEC on March 30, 2005 under
Form 6-K. A fully-interactive web-based report can be accessed at the company’s website at www.anglogoldashanti.com
.
This report covers issues pertaining to social development in line with AngloGold Ashanti’s values and business principles and
the Global Reporting Initiative Guidelines prepared on a country and operational basis. The information provided below under
the heading “Country / operation report”, has mainly been extracted from this report and provides, where applicable, some
examples of AngloGold Ashanti’s commitment to and involvement in these regions.
• Corporate Governance
The Safety, Health and Sustainable Development Committee of the board has as its brief, the evaluation of social, economic,
environmental and health impacts of the company’s operations on both local and global communities and to achieve a
sustainable balance between economic and social development with due regard to:
•
the safety of its employees, which remains fundamental to the sustainability of AngloGold Ashanti’s business;
•
the health of its employees, and
•
the impact of its operations on the environment.
One of the stated primary objectives of this committee is to strive towards the elimination of all work-related accidents and
diseases, and the committee conducts on-site inspections on matters of serious concern. For details of the Safety, Health and
Sustainable Development Committee, see “Item 6C.: Board practices – Board sub-committees”.
The management of safety and health issues at an operational level falls under the auspices of the chief operating officer, who
is supported by line management. Responsibility for safety and health has been devolved to operational line management,
down to the level of first line supervisor. The actual operational structure varies from operation to operation, however, at each
of the operations, workforce appointed representatives play an essential role in addressing issues of safety and health with
management.
AngloGold Ashanti is committed to complying with all relevant laws, regulations and standards applicable to the countries in
which its operations are located. In the absence of appropriate laws, regulations or standards, or where these are perceived to
be inadequate, the company will adopt standards reflecting best practice. Considerable resources and effort are dedicated to
identifying and implementing best practice across the company, as well as addressing specific problem areas as they arise.
100
• Safety
Regrettably, 32 employees lost their lives in work-related accidents during 2004* (2003: 43); 31 of these employees were
employed at the South African operations where the majority of AngloGold Ashanti’s workforce is employed. The single non-
South African fatal accident was at the Morila mine in Mali. The primary cause of fatal accidents was falls of ground
(60 percent), with seismically-induced falls of ground accounting for 58 percent of these. Other primary causes were:
machinery (13 percent), trucks and tramming (6 percent) and vertical transport (6 percent).
*
Subsequent to year-end, the South African Department of Minerals and Energy (DME) confirmed that one of the fatal accidents which was recorded at the
TauTona mine in South Africa, had been reclassified as not having been a mine accident. As a result, the total number of mine related fatal accidents for the
2004 year reduces to 31 employees.
2004 was AngloGold Ashanti’s best ever safety performance, with all major safety parameters indicating an improving trend.
The group’s Fatal Injury Frequency Rate (“FIFR”) for 2004 was 0.19 per million man hours worked – a 34 percent improvement
on 2003’s rate of 0.29 per million man hours worked. The lost time injury frequency rate (“LTIFR”) showed a 26 percent
improvement year-on-year, from 8.83 per million man hours worked in 2003 to 6.56 per million man hours worked in 2004.
Safety Statistics
• Fatal injury frequency rate (FIFR) (per million man hours)
2004 2003 2002
South Africa
Mponeng
0.37
0.33
0.47
TauTona*
0.86
1.10
0.08
Savuka
0.73
0.47
1.06
Great Noligwa
0.262.4
0.322.3
0.472.4
8.08
9.30
10.38
615
693
795
260
264
231
Kopanang
0.062.0
0.412.0
0.222.0
7.01
7.38
7.37
446
482
486
291
277
281
Tau Lekoa
0.191.5
0.092.1
2.4
3.76
3.96
3.87
176
265
293
438
410
370
Surface operations
7.2
5.8
6.1
0.49
0.51
0.60
113
95
119
283
287
250
Moab Khotsong
0.22(1)
0.00
0.2 – –
6.35 – – 44 – –
659 – –
West Wits
Mponeng
1.9
1.7
1.7
9.93
9.15
8.14
596
512
438
238
279
322
Savuka
0.4
0.6
0.8
7.68
6.80
6.19
89
126
158
337
430
455
TauTona
2.0
1.6
1.6
10.18
9.62
10.88
474
502
568
270
256
245
ARGENTINA
Cerro Vanguardia (92.5 percent)
0.9
0.9
0.9
7.29
7.70
7.60
215
211
211
223
171
156
AUSTRALIA
Sunrise Dam
4.0
3.6
3.7
3.39
3.68
3.46
465
455
410
333
269
260
BRAZIL
AngloGold Ashanti Brasil
Mineraçáo
(2)
1.1 1.3 1.0
7.60 7.27 7.85 242 250 240 207 169 133
Serra Grande (50 percent)
0.4
0.4
0.4
7.51
7.93
7.80
97
96
94
196
158
134
GHANA
Bibiani
(3) (5)
2.1
2.4
1.7
0.55
1.46
1.93
37
115
105
432
305
251
Iduapriem
(3) (5)
3.0 3.2 2.2
1.74 1.71 1.72 167 174 125 413 348 303
Obuasi
(2) (5)
6.2 4.7 2.6
4.39 4.77 3.08 387 391 255 397 345 305
GUINEA
Siguiri (85 percent)
(4) (5)
7.0 5.8 2.6
1.08 1.21 1.10 256 246 83 398 301 443
MALI
Morila (40 percent)
1.7
1.5
1.4
3.88
5.41
4.57
207
262
204
266
191
196
Sadiola (38 percent)
1.8
1.9
2.0
3.22
2.73
2.77
190
168
174
268
265
242
Yatela (40 percent)
(6)
1.3 1.3 1.1
4.12 2.99 3.41 141 98 97 241 263 255
NAMIBIA
Navachab
1.5
1.2
1.3
1.81
2.05
1.59
86
81
66
349
321
348
TANZANIA
Geita
(7)
5.7 6.1 4.8
1.68 3.14 3.74 308 613 570 630 298 250
UNITED STATES OF AMERICA
Cripple Creek & Victor
(6)
21.8
19.2 18.2
0.54 0.62 0.61 283 330 329 248 230 220
ZIMBABWE
Freda-Rebecca
(5)(8)
–
–
0.1
-
–
1.66
–
–
9
–
–
417
Table includes equity accounted joint ventures.
(1) Attributable production at Moab Khotsong yielded 29,862 ounces which was capitalized against pre-production costs.
(2) The yield of AngloGold Ashanti Brasil Mineraçáo and Obuasi represents underground operations.
(3) The yield of Bibiani and Iduapriem represents open-pit operations.
(4) The yield at Siguiri arises from the open-pit operations in 2006 and 2005 and the heap leach operation in 2004.
(5) Interest acquired April 26, 2004 with reporting from May 1, 2004.
(6) The yield at Yatela and Cripple Creek & Victor Joint Venture reflects recoverable gold placed/tonnes placed.
(7) 50 percent holding to April 26, 2004 and 100 percent from this date.
(8Freda-Rebecca was sold effective September 1, 2004.
42
SOUTH AFRICA
Location: AngloGold Ashanti’s South Africa region includes seven underground operations located in two geographic
areas on the Witwatersrand Basin. These are:
º theVaal River area, near Klerksdorp and Orkney, in the North West Province and Free State, where the Great
Noligwa, Kopanang, Tau Lekoa and Moab Khotsong (which remains under development) mines are located; and
º theWest Wits area, near Carletonville, straddling the North West Province and Gauteng, where the Mponeng,
TauTona and Savuka mines are located.
The group’s surface metallurgical reclamation operation, Ergo, located near Johannesburg in the province of Gauteng
ceased production in 2005, and is currently being closed in terms of environmental legislation, a process that is expected
to take some years to complete.
Geology: The Witwatersrand Basin comprises a six-kilometer thick sequence of interbedded argillaceous and arenaceous
sediments that extend laterally for some 300 kilometers north-east/south-west and 100 kilometers north-west/south-east
on the Kaapvaal Craton. The upper portion of the basin, which contains the orebodies, crops out at its northern extent
near Johannesburg. Further west, south and east the basin is overlain by up to four kilometers of Archaean, Proterozoic
and Mesozoic volcanic and sedimentary rocks. The Witwatersrand Basin is late Archaean in age and is considered to be
in the order of 2.7 to 2.8 billion years old.
Gold occurs in laterally extensive quartz pebble conglomerate horizons or reefs, generally less than two meters thick, and
are widely considered to represent laterally extensive braided fluvial deposits. Separate fan systems were developed at
different entry points and these are preserved as distinct goldfields. There is still much debate about the origin of the gold
mineralization in the Witwatersrand Basin. Gold was generally considered to have been deposited syngenetically with the
conglomerates, but increasingly an epigenetic origin theory is being supported. Nonetheless, the most fundamental control
to the gold distribution in the Basin remains the sedimentary features, such as facies variations and channel directions.
Gold generally occurs in native form often associated with pyrite and carbon, with quartz being the main gangue mineral.
43
Operating performance: Production declined 5 percent from 2.676 million ounces in 2005 to 2.554 million ounces in
2006, (2004: 2.857 million ounces). Total cash costs improved from $291 per ounce in 2005 to $286 per ounce in 2006, as
a result of a weakening of the rand and cost savings initiatives in the region (2004: $284 per ounce).
Cost savings of $50 million were recorded for the year, primarily as a result of operational efficiencies, improved
procurement practices and restructuring of both the Savuka and Tau Lekoa. The restructuring involved the combining of
the management of the mine Savuka with Mponeng and Tau Lekoa with Kopanang and with both mines being optimized
from a production point of view where volumes were reduced to support the cost saving initiatives.
Great Noligwa and Moab Khotsong together produced 1.38 million pounds of uranium oxide in 2006.
Capital expenditure in 2006 amounted to $321 million, 7 percent lower than that of 2005 at $347
(2004: $333 million), with ore reserve development representing 58 percent of this amount, expansion capital
representing 21 percent and stay-in-business capital representing 21 percent. Major components of the expansion capital
included the completion and commissioning of the Moab Khotsong mine, the deepening project at Mponeng and the
acceleration of the uranium plant upgrade in Vaal River.
• Vaal River operations
Description: AngloGold Ashanti’s Vaal River operations are located in the original Vaal Reefs mining area of the
Witwatersrand Basin and comprise four operating mines, Great Noligwa, Kopanang, Tau Lekoa and Moab Khotsong.
The Vaal River complex also has four gold plants, one uranium plant and one sulphuric acid plant. The Vaal River
processing plants include crushers, mills, CIP and electro-winning facilities and are able to treat between 180,000 and
420,000 tonnes of ore per month.
Although the Vaal River operations produce uranium oxide as a by-product of the production of gold, the value is not
significant relative to the value of gold produced.
Location: The Vaal River operations are located near the towns of Klerksdorp and Orkney in North West and Free State
Provinces.
Geology: In order of importance, the reefs mined at the Vaal River operations are the Vaal Reef, the VCR and the
“C” Reef:
º The Vaal Reef contains approximately 85 percent of the reserve tonnage with mining grades between 10 and 20g/t
and comprises a series of oligomictic conglomerates and quartzite packages developed on successive
unconformities. Several distinct facies have been identified, each with its unique gold distribution and grade
characteristic.
º The VCR has a lower grade than the Vaal Reef, and contains approximately 15 percent of the estimated reserves.
The economic portion is mainly concentrated in the western part of the lease area and can take the form of a massive
conglomerate, a pyritic sand unit with intermittent pebble layers or a thin conglomerate horizon. The reef is located at
the contact between the overlying Kliprivierberg Lavas of the Ventersdorp SuperGroup and the underlying sediments
of the Witwatersrand SuperGroup which creates a distinctive seismic reflector. The VCR is locate d up to one
kilometer above the Vaal Reef.
º The “C” Reef is a thin, small pebble conglomerate with a carbon-rich basal contact, located approximately 270 meters
above the Vaal Reef. It has less than 1 percent of the estimated reserves with grades similar to the Vaal Reef, but
more erratic. The most significant structural features are the north-east striking normal faults which dip to the north-
west and south-east, resulting in zones of fault loss.
44
Vaal River – Summary of metallurgical operations
West GP
East Gold Acid
and Float Plant
Noligwa GP
Mispah GP
Kopanang GP
Gold plants
Capacity (000 tonnes/month)
180
309
263
140
420
Technology
ROM mills (2),
ball mill,
cyanide,
CIL,
elution,
electro-winning
cyanide,
Pumpcell,
elution,
electro-winning
ROM (2), cyanide,
CIP,
elution, electro-
winning
ROM,
Cyanide,
CIP, elution,
electro-winning
ROM mills (6),
cyanide,
CIP,
elution, electro-
winning
Uranium plants
Capacity (000 tonnes/month)
–
–
263
Pyrite flotation plants
Capacity (000 tonnes/month)
–
250
145
Sulphuric acid plants
Production(tonnes/month)
–
7,500
–
Operating and production data for Vaal River operations
Great Noligwa
Kopanang
Tau Lekoa
Moab Khotsong
(3)
2006
Pay limit (oz/t)
0.28
0.32
0.14
1.50
Pay limit (g/t)
9.57
10.92
4.85
51.44
Recovered grade (oz/t)
0.236
0.204
0.110
0.185
Recovered grade (g/t)
8.08
7.01
3.76
6.35
Gold production (000 oz)
615
446
176
44
Total cash costs ($/oz)
(1)
260
291
438
659
Total production costs ($/oz)
(1)
374
377
693
1,136
Capital expenditure ($ million)
49
41
11
83
Employees
(2)
5,883
5,360
2,514
1,539
Outside contractors
(2)
696
455
379
1,365
2005
Pay limit (oz/t)
0.39
0.39
0.19
-
Pay limit (g/t)
13.24
13.25
6.23
-
Recovered grade (oz/t)
0.271
0.215
0.116
-
Recovered grade (g/t)
9.30
7.38
3.96
-
Gold production (000 oz)
693
482
265
-
Total cash costs ($/oz)
(1)
264
277
410
-
Total production costs ($/oz)
(1)
354
363
555
-
Capital expenditure ($ million)
43
41
15
94
Employees
(2)
5,704
5,506
3,021
1,320
Outside contractors
(2)
1,152
524
1,084
1,201
2004
Pay limit (oz/t)
0.48
0.43
0.20
-
Pay limit (g/t)
14.36
14.52
6.81
-
Recovered grade (oz/t)
0.303
0.215
0.113
-
Recovered grade (g/t)
10.38
7.37
3.87
-
Gold production (000 oz)
795
486
293
-
Total cash costs ($/oz)
(1)
231
281
370
-
Total production costs ($/oz)
(1)
268
325
444
-
Capital expenditure ($ million)
36
38
25
80
Employees
(2)
6,192
5,758
3,398
1,066
Outside contractors
(2)
908
554
854
808
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.:
Operating results – Total cash costs and total production costs”.
(2)
Average for the year.
(3)
Commercial production commenced on January 1, 2006.
45
Operating performance:
Great Noligwa: In 2006, production declined by 11 percent to 615,000 ounces from 693,000 produced in 2005
(2004: 795,000) due primarily to a 13 percent yield decline, from 9.3g/t in 2005 to 8.08g/t in 2006 (2004: 10.38g/t). Total
cash costs rose by 5 percent in rand terms to R56,390 per kilogram from R53,868 per kilogram in 2005, due to lower gold
production (2004: R47,820 per kilogram). The continued focus on cost savings helped to limit the effect of reduced
production on the operation’s costs. In dollar terms, total cash costs improved by 1 percent to $260 per ounce in 2006
from $264 per ounce in 2005 (2004: $231 per ounce). Capital expenditure at $49 million was 14 percent higher than the
$43 million spent in 2005 (2004: $36 million), mainly as a consequence of the acceleration of a plan to upgrade the
operation’s uranium plant.
Kopanang: In 2006, production declined by 7 percent to 446,000 ounces from 482,000 ounces produced in 2005
(2004: 486,000 ounces) as a result of a lower mine call factor and a 5 percent decline in yield from 7.38g/t in 2005 to
7.01g/t in 2006 (2004: 7.37g/t). Consequently, total cash costs increased by 6 percent to $291 per ounce in 2006, from
$277 per ounce in 2005 (2004: $281 per ounce). Total cash costs, in rand terms, rose by 11 percent to R62,908 per
kilogram from R56,427 per kilogram in 2005. Capital expenditure of $41 million was unchanged from that of 2005
(2004: $38 million).
Tau Lekoa: Tau Lekoa was downscaled in 2006 in order to return the operation to profitability in a rising gold price
environment. As a result, production in 2006 declined by 34 percent from 265,000 ounces produced in 2005 to
176,000 ounces produced in 2006 (2004: 293,000 ounces).
Consequently, total cash costs increased by 7 percent from $410 per ounce in 2005 to $438 per ounce in 2006
(2004: $370 per ounce) and in rand terms, total cash costs, increased by 12 percent to R94,365 per kilogram in 2006 from
R83,885 per kilogram in 2005 (2004: R76,428 per kilogram). Capital expenditure at $11 million declined by 27 percent on
2005’s spend of $15 million (2004: $25 million).
Moab Khotsong commenced commercial production in January 2006 and the operation was marked by the high total
cash costs and low volumes typical of a deep-level underground operation’s start-up phase. In 2006, production was
44,000 ounces and total cash costs were $659 per ounce or R142,364 per kilogram. Capital expenditure of $83 million in
2006 was 12 percent lower than the spend in 2005 of $94 million (2004: $80 million).
Growth prospects: In 2007, production at Moab Khotsong is expected to increase to some 80,000 ounces and total
cash costs should decline accordingly as this operation builds up to full production, likely in 2012.
•
West Wits operations
Description: The West Wits operations comprise Mponeng, Savuka and TauTona mines. Savuka and TauTona share a
processing plant, whereas Mponeng has its own individual processing plant. These plants comprise crushers, mills,
CIP and zinc precipitation and smelting facilities.
Location: The West Wits operations are located near the town of Carletonville in North West Province, south-west of
Johannesburg, straddling the boundary with Gauteng.
Geology: Two reef horizons are exploited at the West Wits operations, the Ventersdorp Contact Reef (VCR) located at the
top of the Central Rand Group and the Carbon Leader Reef (CLR) near the base. The separation between the two reefs
increases from east to west from 400 to 900 meters, owing to unconformity in the VCR. TauTona and Savuka exploit both
reefs whereas Mponeng only mines the VCR. The structure is relatively simple; faults of greater than 70 meters are rare.
The CLR consists of one or more conglomerate units and varies from several centimeters to more than three meters in
thickness. Regionally, the VCR dips at approximately 21 degrees but may vary between 5 and 50 degrees, accompanied
by changes in thickness of the conglomerate units. Where the conglomerate has the attitude of the regional dip, it tends to
be thick, well-developed and accompanied by higher gold accumulations. Where th e attitude departs significantly from the
regional dip, the reef is thin, varying from several centimeters to more than three meters in thickness.
46
West Wits – Summary of metallurgical operations
Mponeng Savuka
Gold plants
Capacity (000 tonnes/month)
160
280
Technology
ROM mills (3),
cyanide,
CIL,
elution,
electro-winning
crushers,
tube mills,
ball mills,
cyanide,
Pumpcell
Operating and production data for West Wits operations
Mponeng
TauTona
Savuka
2006
Pay limit (oz/t)
0.23
0.53
0.31
Pay limit (g/t)
7.74
18.25
10.75
Recovered grade (oz/t)
0.290
0.297
0.224
Recovered grade (g/t)
9.93
10.18
7.68
Gold production (000 oz)
596
474
89
Total cash costs ($/oz)
(1)
238 270 337
Total production costs ($/oz)
(1)
374 411 359
Capital expenditure ($ million)
48
70
2
Employees
(2)
4,760
4,164
975
Outside contractors
(2)
524
1,002
65
2005
Pay limit (oz/t)
0.34
0.72
0.45
Pay limit (g/t)
11.53
24.43
15.18
Recovered grade (oz/t)
0.267
0.281
0.198
Recovered grade (g/t)
9.15
9.62
6.80
Gold production (000 oz)
512
502
126
Total cash costs ($/oz)
(1)
279 256 430
Total production costs ($/oz)
(1)
383 388 524
Capital expenditure ($ million)
47
74
6
Employees
(2)
4,897 4,459 2,178
Outside contractors
(2)
677 996 147
2004
Pay limit (oz/t)
0.41
0.73
0.44
Pay limit (g/t)
13.71
24.47
14.89
Recovered grade (oz/t)
0.237
0.317
0.181
Recovered grade (g/t)
8.14
10.88
6.19
Gold production (000 oz)
438
568
158
Total cash costs ($/oz)
(1)
322 245 455
Total production costs ($/oz)
(1)
393 319 639
Capital expenditure ($ million)
62
65
8
Employees
(2)
5,164 4,673 3,001
Outside contractors
(2)
712 825 228
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.:
Operating results – Total cash costs and total production costs”.
(2)
Average for the year.
47
Operating performance:
Mponeng: During 2006, yield rose to 9.93g/t from 9.15g/t in 2005 (2004: 8.14g/t). As a result of the higher volumes and
improved yield, gold production increased by 16 percent from 512,000 ounces in 2005 to 596,000 ounces in 2006
(2004: 438,000 ounces). Consequently, total cash costs declined by 15 percent to $238 per ounce from $279 per ounce in
2005 (2004: $322 per ounce). In local currency terms, total cash costs were at R51,666 per kilogram, 9 percent down on
2005 total cash costs of R57,084 per kilogram as a result of the higher volumes and improved yield aided by the benefit of
the cost savings initiatives undertaken in the beginning of the year. Capital expenditure increased marginally from
$47 million in 2005 to $48 million in 2006 (2004: $62 million).
TauTona: During 2006, production declined by 6 percent to 474,000 ounces from 502,000 ounces produced in 2005, due
to planned lower volumes mined and seismicity concerns in the first and fourth quarters of 2006 (2004: 568,000 ounces).
Total cash costs rose by 5 percent to $270 per ounce from $256 per ounce in 2005 (2004: $245 per ounce). In rand terms,
total cash costs increased by 12 percent to R58,631 per kilogram. Capital expenditure at $70 million was 5 percent lower
than the spend in 2005 of $74 million (2004: $65 million).
Savuka: While it had been reported in 2005 that Savuka had entered an accelerated closure mode, the strength of the
gold price in 2006 instead resulted in the implementation of a restructuring plan and the operation’s life has been extended
at a lower production rate.
Management of Savuka is now included under that of the neighboring Mponeng mine. Production for 2006 totaled
89,000 ounces which, although 29 percent less than the 126,000 ounces produced in 2005, was 535 percent more than
had been planned (2004: 158,000). The overall grade for the year increased from 6.80g/t achieved in 2005 to 7.68g/t
achieved in 2006 (2004: 6.19g/t).
In local currency, total cash costs decreased 16 percent from R87,200 per kilogram in 2005, to R73,055 per kilogram in
2006, while in dollar terms, cash costs were down 22 percent to $337 per ounce from $430 per ounce in 2005
(2004: $455 per ounce). Capital expenditure for 2006 was minimal at $2 million compared with 2005’s capital expenditure
of $6 million (2004: $8 million).
Growth prospects:
Mponeng VCR below 120 project: This project consists of four parallel declines sunk from the 120 level to gain access
to the VCR reef on levels 123 and 126. The declines will be equipped with a conveyor belt, monorail and chairlift to service
the new mining areas. The project, from which production is expected to commence in 2013, is expected to produce
2.5 million ounces of gold over a period of ten years, at a capital cost of $252 million, and is expected to extend the life of
the mine by approximately eight years. Construction will begin in early 2007.
TauTona CLR below 120 level project: The CLR reserve block below 120 level is being accessed via a twin decline
system into its geographical centre, down to 128 level. The project, from which production is expected to commence in
2008, is expected to produce 2.6 million ounces of gold over a period of nine years (2009 to 2017), at a capital cost of
$168 million. Of this, $56 million has been spent to date.
TauTona CLR shaft pillar extraction project: This project allows for stoping operations up to the infrastructural zone of
influence. The project, from which production commenced in 2004, is expected to produce 534,000 ounces of gold over a
period of six years (2004 to 2009), at a capital cost of $45 million (converted at the 2005 closing exchange rate), most of
which has been committed.
VCR pillar project: This project aims to access the VCR pillar area situated outside the zone of influence (top and
eastern block). The project, from which production commenced in 2005, is expected to produce 200,000 ounces of gold
over a period of eight years (2005 to 2012), at a capital cost of $19 million (at the 2005 closing exchange rate). Of this,
$11 million has been spent to date.
48
ARGENTINA
AngloGold Ashanti has a single operation in Argentina, the Cerro Vanguardia mine. This operation was acquired as part
of the Minorco transaction effective March 31, 1999, at which time AngloGold held a 46.25 percent stake. AngloGold
Ashanti has a 92.5 percent interest in the Cerro
Vanguardia mine following the acquisition of an
additional 46.25 percent in July 2002, while the Santa
Cruz Province has a 7.5 percent interest.
Description: Cerro Vanguardia consists of multiple
small open-pits with high stripping ratios. The
orebodies comprise a series of hydrothermal vein
deposits containing vast quantities of silver, which is
produced as a by-product.
Throughput has increased steadily since the first gold
was poured in September 1998, from an original
design capability of 1,800 tpd to the present level of
2,700 tpd. Cerro Vanguardia’s lease area is 514 square
kilometers.
Location: The Cerro Vanguardia operation is located
to the north-west of Puerto San Julian in the Province
of Santa Cruz, Argentina. The company owns the
right to exploit the deposit for 40 years based on the
Usufruct Agreement signed in December 1996. The
operation, which was constructed at a total cost of
$270 million, was commissioned in the fourth quarter
of 1998.
Geology: The oldest rocks in this part of Patagonia
are metamorphics of the Precambrian-Cambrian age.
These are overlain by Permian and Triassic
continental clastic rocks which have been faulted into
a series of horsts and grabens and are associated
with both limited basaltic sills and dykes and with
calc-alkaline granite and granodiorite intrusions.
Thick andesite flows of Lower Jurassic age occur
above these sedimentary units. A large volume of
rhyolitic ignimbrites was emplaced during the Middle
and Upper Jurassic age over an area of
approximately 100,000 square kilometers. These
volcanic rocks include the Chon Aike formation
ignimbrite units that host the gold bearing veins at
Cerro Vanguardia. Post-mineral units include
Cretaceous and Tertiary rocks of both marine and
continental origin, the Quaternary La Avenida
formation, the Patagonia gravel and the overlying
La Angelita basalt flows. These flows do not cover the area of the Cerro Vanguardia veins.
Gold and silver mineralization at Cerro Vanguardia occurs within a vertical range of about 150 to 200 meters in a series of
narrow, banded quartz veins that occupy structures within the Chon Aike ignimbrites. These veins form a typical structural
pattern related to major north-south (Concepcion) and east-west (Vanguardia) shears. Two sets of veins have formed in
response to this shearing - one set strikes about N40W and generally dips 65 to 90 degrees to the east; while the other set
strikes about N75W and the veins dip 60 to 80 degrees to the south.
49
The veins are typical of epithermal, low-temperature, adularia-sericite character and consist primarily of quartz in several
forms: as massive quartz, banded chalcedonic quartz, and quartz-cemented breccias. Dark bands in the quartz are due to
finely disseminated pyrite, now oxidized to limonite. The veins show sharp contacts with the surrounding ignimbrite which
hosts narrow stockwork zones that are weakly mineralized and appear to have been cut by a sequence of north-east-
trending faults that have southerly movement with no appreciable lateral displacement.
Cerro Vanguardia – Summary of metallurgical operations
Gold plants
Capacity (000 tonnes/month)
82
Technology
Crushers,
scrubber,
ball mill,
CCD,
leach in cyanide,
CIL,
elution,
zinc-precipitation,
electro-winning
Operating and production data for Cerro Vanguardia
2006 20052004
Pay limit (oz/t)
0.13 0.12 0.12
Pay limit (g/t)
4.56 4.02 4.05
Recovered grade (oz/t)
0.213
0.225
0.222
Recovered grade (g/t)
7.29
7.70
7.60
Gold production (000 oz) 100 percent
232
228
229
Gold production (000 oz) 92.50 percent
215
211
211
Total cash costs ($/oz)
(1)
223
171
156
Total production costs ($/oz)
(1)
372
270
284
Capital expenditure ($ million) 100 percent
19
15
13
Capital expenditure ($ million) 92.50 percent
18
14
12
Employees
(2)
623 487 389
Outside contractors
(2)
283
459
402
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(2)
Average for the year.
Operating performance: At Cerro Vanguardia attributable gold production in 2006 increased by 2 percent to
215,000 ounces from 211,000 ounce produced in 2005 (2004: 211,000 ounces). While the yield varied over the course of
the year as anticipated, the average grade in 2006 was 7.29g/t compared with an average grade of 7.7g/t in 2005
(2004: 7.60g/t). Ore throughput increased 8 percent to 1 million tonnes in 2006. Total cash costs rose by 30 percent to
$223 per ounce from $171 per ounce in 2005 (2004: $156 per ounce), mainly as a result of higher local inflation and
increases in both commodity prices and mine maintenance costs. The higher mine maintenance costs were associated
with a programme undertaken in 2006 to improve the availability of mine equipment.
Capital expenditure for the year amounted to $18 million, 29 percent higher than the $14 million spent in 2005
(2004: $12 million). The increase in expenditure was mainly due to the purchase of new and replacement mine equipment
and expenditures related to the heap leaching project currently underway.
Growth prospects: During 2006, Cerro Vanguardia began an accelerated four-year brownfields exploration programme,
the focus of which is shallow, high grade mineral resources. Results have so far been encouraging, with 39,000 meters of
reverse circulation drilling and 14,000 meters of diamond drilling completed in 2006. Since 1998, Cerro Vanguardia has
been stockpiling low-grade material with the intention of treating it through an industrial-size heap-leach operation. As of
December 2006, 9.5 million tonnes of this material had been stockpiled and a study to confirm the viability of the heap-
leach pad was also initiated in 2006 and is ongoing.
50
AUSTRALIA
AngloGold Ashanti has two mines in Australia, Sunrise Dam and Boddington, both located in the western part of the
country. The Sunrise Dam mine is 100 percent owned by AngloGold Ashanti, while the Boddington project, which is
currently under construction and in which AngloGold Ashanti holds 33.33 percent equity, is a joint venture with Newmont
Mining Corporation.
Australia – Summary of metallurgical operations
Sunrise Dam
Boddington
Gold plants
Under construction
Capacity (000 tonnes/month)
300
3,000
Technology
crushers,
ball mill,
gravity concentrate,
CIL,
elution,
electro-winning
crushers,
HBDI, ball mill, floatation gravity
concentrate, CIL, elution, electro-winning
• Sunrise Dam
Description: Sunrise Dam comprises a large open-pit and an underground project. Mining is carried out by contractors
and ore is treated in a conventional gravity and leach process plant.
Location: Sunrise Dam gold mine lies some 220 kilometers north-northeast of Kalgoorlie and 55 kilometers south of
Laverton in Western Australia.
Geology: Gold ore at Sunrise Dam is structurally and lithologically controlled within gently dipping high strain shear zones
(for example, Sunrise Shear) and steeply dipping brittleductile low strain shear zones (for example, Western Shear). Host
rocks include andesitic volcanic rocks, volcanogenic sediments and magnetic shales.
51
Operating and production data for Sunrise Dam
2006 2005 2004
Pay limit (oz/t)
0.050.070.07
Pay limit (g/t)
1.642.272.14
Recovered grade (oz/t)
(2)
0.099
0.107
0.110
Recovered grade (g/t)
(2)
3.39
3.68
3.46
Gold production (000 oz)
465
455
410
Total cash costs ($/oz)
(1)
333
269
260
Total production costs ($/oz)
(1)
406
367
337
Capital expenditure ($ million)
24
34
25
Employees
(3)
99 95 88
Outside contractors
(3)
283
280
268
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(2) Open-pit operations
(3)
Average for the year.
Operating performance: Production increased slightly in 2006 to 465,000 ounces from 455,000 ounces in 2005
(2004: 410,000 ounces) primarily due to the operation’s highest-ever quarterly production of 153,000 ounces in the final
quarter, when mining concentrated, as planned, on the high-grade GQ lode in the open pit. Mining from the known
underground reserves increased, especially in the Sunrise and Western Shear zones. Gold production from the
underground mine was 67,000 ounces. Record throughput was achieved in the process plant as a result of additional
crushing and grinding circuit optimization. Recovered grade from open-pit operations declined marginally to 3.39g/t
compared with 3.68g/t recovered in 2005 (2004: 3.46g/t). Total cash costs increased to $333 per ounce from
$269 per ounce in 2005 primaril y as a result of increased diesel fuel prices and mining contractor rates
(2004: $260 per ounce).
Progress continued on the Sunrise Dam underground development. Capital expenditure amounted to $24 million
compared with $34 million in 2005 (2004: $25 million)
Growth prospects: The underground mining project involves the development of two declines and 125,000 meters of
drilling from surface and underground. These declines have been developed in the vicinity of defined underground
reserves, which are now being mined. They have also provided access for underground drilling.
• Boddington (attributable 33.33 percent)
Description: The former dominantly oxide open-pit operation closed at the end of 2001. Following Newmont’s purchase
of Newcrest’s share of the project in March of 2006, Newmont holds a 66.66 percent share in the project and AngloGold
Ashanti a 33.33 percent share.
Location: The operation is located approximately 100 kilometers south-east of Perth.
Geology: Boddington is located in the Saddleback Greenstone Belt, a northwest-trending fault-bounded silver of
greenstones about 50 kilometers long and eight kilometers wide within the Archaean Yilgarn Craton. The Boddington
resource is located within a six kilometer strike length and consists of felsic to intermediate volcanics and related
intrusives. The resource is subdivided into Wandoo South and Wandoo North. Wandoo South is centered on a composite
diorite stock with five recognizable intrusions. Wandoo North is dominated by diorites with lesser fragmental volcanic
rocks.
52
Operating and production data for Boddington
2006 2005 2004
Pay limit (oz/t)
–––
Pay limit (g/t)
–––
Recovered grade (oz/t)
–– –
Recovered grade (g/t)
– ––
Gold production (000 oz) 100 percent
–
–
–
Gold production (000 oz) 33.33 percent
–
–
–
Total cash costs ($/oz)
(1)
–
–
–
Total production costs ($/oz)
(1)
–
–
–
Capital expenditure ($ million) 100 percent
180
12
8
Capital expenditure ($ million) 33.33 percent
60
4
3
Employees
(2)
12 18 12
Outside contractors
(2)
85 48 33
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(2)
Average for the year.
Operating performance and Growth prospects: In March 2006 the Boddington expansion project was approved. On a
100 percent project basis, approximately $669 million of a total budget of $1.35 billion to $1.5 billion had been committed
by the end of 2006. Based on the current mine plan, mine life is estimated to be approximately 17 years, with attributable
life of mine gold production totaling 4.7 million ounces of gold.
Capital expenditure for 2007 is expected to be approximately $312 million for the project. At the end of 2006, engineering
was approximately 42 percent complete, and site construction had begun. The project is on schedule to start up early
2009
.
BRAZIL
AngloGold Ashanti’s operations in Brazil were acquired as part of the Minorco transaction effective March 31, 1999 and
comprise the wholly-owned AngloGold Ashanti Brasil Mineração and a 50 percent interest in Serra Grande. In 2006, these
mines together produced 339,000 attributable ounces of gold at total cash costs of $207 per ounce and $196 per ounce,
respectively.
Brazil – Summary of metallurgical operations
AngloGold
Ashanti
Mineração
Serra
Grande
Cuiabá
Raposos
Gold plants
Capacity (000 tonnes/month)
70
24
66
Technology
crushers,
ball mill,
gravity concentration,
flotation,
roaster;
acid plant,
calcine leach,
Gold CCD,
CIP,
elution,
zinc-precipitation,
refinery.
crushers,
ball mill,
gravity concentration,
cyanideleach,
CIP,
zinc-precipitation
refinery
crushers,
ball mill,
gravity concentration,
cyanide,
rotary filters,
zinc-precipitation,
53
AngloGold Ashanti Brasil Mineração
Description: Since the closing of the Mina Velha underground mine in 2003 and the Engenho D’Água open-pit in 2004,
ore is now sourced from the Cuiabá underground mine, (this ore is treated at the Queiroz plant) and from the Córrego do
Sítio heap-leach operation. In January 2005, the board approved a major expansion at Cuiabá.
Location: AngloGold Ashanti Brasil
Mineração has mining rights over
30,698 hectares in the state of Minas
Gerais, in south-eastern Brazil. The
AngloGold Ashanti Brasil Mineração
complex is located in the
municipalities of Nova Lima, Sabará
and Santa Bárbara, near the city of
Belo Horizonte in the State of Minas
Gerais in south-eastern Brazil.
Geology: The area in which
AngloGold Ashanti Brasil Mineração
is located is known as the Iron
Quadrangle and is host to historic
and current gold mining operations,
as well as a number of open-pit
limestone and iron ore operations.
The geology of the Iron Quadrangle
is composed of Proterozoic and
Archaean volcano-sedimentary
sequences and Pre-Cambrian
granitic complexes. The host to the
gold mineralization is the volcano-sedimentary Nova Lima Group (NLG) that occurs at the base of the Rio das Velhas
SuperGroup (RDVS). The upper sequence of the RDVS is the meta-sedimentary Maquiné Group. Cuiabá mine, located at
Sabara Municipality, has gold mineralization associated with sulphides and quartz veins in Banded Ironstone Formation
(BIF) and volcanic sequences. At this mine, structural control and fluids flow ascension are the most important factors for
gold mineralization with a common association between large-scale shear zones and their associated structures. Where
BIF is mineralized the ore appears strongly stratiform due to the selective sulphidation of the iron rich layers. Steeply
plunging shear zones tend to control the ore shoots, which commonly plunge parallel to intersections between the shears
and other structures.
The controlling mineralization structures are the apparent intersection of thrust faults with tight isoclinal folds in a ductile
environment. The host rocks at AngloGold Ashanti Brasil Mineração are BIF, Lapa Seca and mafic volcanics (principally
basaltic). Mineralization is due to the interaction of low salinity carbon dioxide rich fluids with the high-iron BIF, basalts and
carbonaceous graphitic schists. Sulphide mineralization consists of pyrrhotite and pyrite with subordinate pyrite and
chalcopyrite; the latter tends to occur as a late-stage fracture fill and is not associated with gold mineralization. Wallrock
alteration is typically carbonate, potassic and silicic.
Operating performance: Production declined at AngloGold Ashanti Brasil Mineração in 2006 to 242,000 ounces from
250,000 ounces in 2005, when production included some trial mining projects as well as the gold remnants from the clean-
up of the old Morro Velho facilities. Total cash costs increased by 22 percent from $169 per ounce in 2005 to
$207 per ounce in 2006 (2004: $133 per ounce) due to inflation and the strong real.
54
Operating and production data for AngloGold Ashanti Brasil Mineração
2006 2005 2004
Pay limit (oz/t)
0.09 0.11 0.11
Pay limit (g/t)
3.10 3.863.85
Recovered grade (oz/t)
(1)
0.222
0.212
0.229
Recovered grade (g/t)
(1)
7.60
7.27
7.85
Gold production (000 oz)
242
250
240
Total cash costs ($/oz)
(2)
207
169
133
Total production costs ($/oz)
(2)
301
260
200
Capital expenditure ($ million)
168
71
32
Employees
(3)
1,546
1,363
1,222
Outside contractors
(3)
2,065
1,234
1,021
(1)
Recovered grade represents underground operations
(2)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(3)
Average for the year.
Growth prospects:
Cuiabá expansion project: This project seeks to increase production at the Cuiabá mine from 830,000 tonnes per annum
to 1.3 million tonnes and includes the construction of new treatment and tailings storage facilities, roaster, and acid plant
at an estimated total capital cost of $180 million. The Cuiabá expansion project is expected to involve the deepening of the
mine from 11 level to 21 level and is expected to result in an annual average production increase from 190,000 ounces to
260,000 ounces from the beginning of 2007; in this first operational year of the expansion, production is expected to reach
around 300,000 ounces. The project is anticipated to add six years to the life of mine.
Corrego do Sitio underground sulphides project: This relates to the potential sulphide ore of the Córrego do Sítio
underground orebodies, which consist of Cachorro Bravo, Laranjeira and Carvoaria. This project is expected to produce
1.4 million ounces of gold over 14 years from 6.8 million tonnes of milled ore. Development of a ramp and the exposure of
the Cachorro Bravo orebody are underway, as is the development of drives to access the Laranjeira and Carvoaria
orebodies.
Serra Grande (attributable 50 percent)
Description: Serra Grande is co-owned with Kinross Gold Corporation. In terms of the Serra Grande agreement,
AngloGold Ashanti manages the operation and has the right to access a maximum of 50 percent of the earnings accrued
and dividends paid by Serra Grande. The operation comprises two underground mines, Mina III and Mina Nova, and one
open pit at Mina III, which will begin operation in 2007.
Location: The Serra Grande operations are located 5 kilometers from the city of Crixás in the north-western areas of the
Goiás State in central Brazil. Serra Grande controls, or has an interest in, approximately 21,096 hectares in and around
the Crixás mining district. .
Geology: The deposits occur in the Rio Vermelho and Ribeirão das Antes Formations of the Archaean Pilar de Goia’s
Group which together account for a large proportion of the Crixás Greenstone Belt in central Brazil.
55
The stratigraphy of the belt is dominated by basics and ultrabasics in the lower sequences with volcano sedimentary units
forming the upper successions.
The gold deposits are hosted in a sequence of schists, volcanics and carbonates occurring in a typical greenstone belt
structural setting. The host rocks are of the Pilar de Goiás Group of the Upper Archaean. Gold mineralization is associated
with massive sulphides and vein quartz material associated with graphitic and sericitic schists and dolomites. The
oreshoots plunge to the north-west with dips of between 6 and 35 degrees. The stratigraphy is overturned and thrusts
towards the east.
The greenstone belt lithologies are surrounded by Archaean tonalitic gneiss and granodiorite. The metamorphosed
sediments are primarily composed of quartz, chlorite, sericite, graphitic and garnetiferous schists. The carbonates have
been metamorphosed to ferroan dolomite marble with development of siderite and ankerite veining in the surrounding
wallrock, usually associated with quartz veining. The basalts are relatively unaltered but do show pronounced stretching
with elongation of pillow structures evident.
The Crixás greenstone belt comprises a series of Ardhaean to Palaeoproterozoic metavulcanics, metasediments and
basement granitoids stacked within a series of north to north-east transported thrust sheet. Thrusting (d1) was
accompanied by significant F1 folding/foliation development and progressive alteration in a brittle-ductile regime.
D1 thrusting developed with irregular thrust ramp geometry, in part controlled by concealed early basin faults. The main
Crixás orebodies are adjacent to a major north-north-west structural corridor, and up the main fault ramp/corner, to
become dispersed to the east and north in zones of foreland thrust flats. Fluid alteration also diminished to the west away
from the main fault corner. A series of concealed east-west to north-west-south-east basement block faults may have
provided secondary fluid migration, and development of early anti-formal warps in the t hrust sheets; these structures
probably define the quasi-regular spacing of significant mineralization within the belt. The D1 thrust stack was gently
folded by non-cylindrical folds. Gold mineralizing fluids probably migrated during this event, with similar south-south-west
to north-north-east migration, and focusing on bedding slip during folding. Gold mineralization became minor and
dispersed to the north and east along the formal thrust flat zone. Concentrations of gold along the case of quartz vein may
be due to the damming of fluids migrating upward along layering.
Operating and production data for Serra Grande
2006 2005 2004
Pay limit (oz/t)
0.090.090.09
Pay limit (g/t)
3.24 3.023.17
Recovered grade (oz/t)
0.219
0.231
0.228
Recovered grade (g/t)
7.51
7.93
7.80
Gold production (000 oz) 100 percent
194
192
187
Gold production (000 oz) 50 percent
97
96
94
Total cash costs ($/oz)
(1)
196
158
134
Total production costs ($/oz)
(1)
278
229
223
Capital expenditure ($ million) 100 percent
17
13
7
Capital expenditure ($ million) 50 percent
8
7
4
Employees
(2)
609566514
Outside contractors
(2)
208
209
196
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(2)
Average for the year.
Operating performance: Attributable production at Serra Grande rose from 96,000 ounces in 2005 to 97,000 ounces in
2006 (2004: 94,000 ounces) The steady appreciation of the Brazilian real, combined with lower grades, resulted in a
24 percent total cash cost increase to $196 per ounce from $158 per ounce in 2005 (2004: $134 per ounce) in spite of
stable production.
Growth prospects: The Serra Grande brownfields exploration programme is focused on increasing reserves and
resources in areas around Mina III, Mina Nova, and the Palmeiras project by means of underground and surface diamond
drilling. A study was carried out in 2006 proving the viability of mining the Mina III open pit, with production expected to
begin in mid-2007. Exploration campaigns at the nearby Palmeiras orebody are underway, with results justifying the
construction of an exploratory ramp and an underground conceptual study, which is also expected to begin in mid-2007.
56
GHANA
AngloGold Ashanti’s operations in Ghana together produced 592,000 ounces of attributable gold in 2006, at a total cash
cost of $404 per ounce.
Description: AngloGold Ashanti has two operations in
Ghana: the Obuasi mine (which comprises both surface
and underground operations) and the Iduapriem mine
(open-pit). The Bibiani mine (open-pit with underground
development) was sold effective December 28, 2006.
Obuasi
Description: Obuasi is primarily an underground
operation, although some surface mining still takes
place. Ore is processed by two main treatment plants:
the sulphide plant (for underground ore) and the tailings
plant (for tailings reclamation operations). A third plant,
the oxide plant, is used to batch-treat remnant open-pit
ore and stockpiles, of which there are adequate
tonnages to keep the plant operational until 2008.
Location: The Obuasi mine is located in the Ashanti
region in the south of Ghana.
Geology: The gold deposits at Obuasi are part of a
prominent gold belt of Proterozoic (Birimian) volcano-
sedimentary and igneous formations which extend for a
distance of approximately 300 kilometers in a
north-east/south-west trend in south-western Ghana.
Obuasi mineralization is shear-zone related and there
are three main structural trends hosting gold
mineralization: the Obuasi trend, the Gyabunsu trend
and the Binsere trend.
Two main ore types are mined:
· quartz veins which consist mainly of quartz with free gold in association with lesser amounts of various metal
sulphides such as iron, zinc, lead and copper. The gold particles are generally fine-grained and occasionally are
visible to the naked eye. This ore type is generally non-refractory; and
·sulphide ore which is characterized by the inclusion of gold in the crystal structure of a sulphide material. The gold in
these ores is fine-grained and often locked in arsenopyrite. Higher gold grades tend to be associated with finer
grained arsenopyrite crystals. Other prominent minerals include quartz, chlorite and sericite. Sulphide ore is generally
refractory.
Ghana – Summary of metallurgical operations
Obuasi
Bibiani
Iduapriem
Sulphide
Treatment
Plant
Tailings
Treatment Plant
Oxide
Treatment Plant
Gold plants
Capacity
(000 tonnes/month)
200 200
150
225
375
Technology
BIOX
process,
cyanide leaching,
CIL,
electro-winning
CIL,
ball mills,
cyanide leaching,
electro-winning
CIL,
mill,
cyanide
leaching,
electro-winning
CIL,
Crushing, SAG
milling, ball
milling, cyanide
leach,
CIP,
elution,
Electro-winning
57
Operating and production data for Obuasi
2006 2005
(1)
2004
Pay limit (oz/t)
(2)
0.2290.1770.188
Pay limit (g/t)
7.136.06 6.43
Recovered grade (oz/t)
(2)
0.128
0.139
0.154
Recovered grade (g/t)
4.39
4.77
5.27
Gold production (000 oz)
387
391
255
Total cash costs ($/oz)
(3)
397 345 305
Total production costs ($/oz)
(3)
638 532 443
Capital expenditure ($ million)
91
78
32
Employees
(4)
5,629 5,852 6,029
Outside contractors
(4)
2,210
2,443
718
(1)
For the eight months from May.
(2)
Pay limits and recovered grade refer to underground ore resources
(3)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.:
Operating results – Total cash costs and total production costs”.
(4)
Average for the period.
Operating performance: After three quarters of declining yields, Obuasi reported higher grades in the fourth quarter and
ended the year with production of 387,000 ounces slightly below the production in 2005 of 391,000 ounces
(2004: 255,000 ounces). Increased treatment of lower-grade ore throughout the year meant that yield in 2006 was 4.39g/t
compared with 4.77g/t in 2005 (2004: 5.27g/t), pushing up total cash costs by 15 percent to $397 per ounce from $345 per
ounce in 2005 (2004: $305 per ounce).
Growth prospects: The full development of the deep-level ore deposits at the Obuasi mine has the potential to extend the
life of mine by 35 years.
Bibiani
Bibiani in Ghana produced less than 1 percent of AngloGold Ashanti’s production in 2006. This tailings only operation was
sold to Central African Gold plc effective December 28, 2006. AngloGold Ashanti expects to replace Bibiani’s production
from its other Ghanaian operations.
Operating and production data for Bibiani
(5)
20062005
(1)
2004
Pay limit (oz/t)
0.0300.0200.020
Pay limit (g/t)
0.830.70 0.70
Recovered grade (oz/t)
(2)
0.016
0.042
0.056
Recovered grade (g/t)
(2)
0.55 1.55 1.93
Gold production (000 oz)
37
115
105
Total cash costs ($/oz)
(3)
432 305 251
Total production costs ($/oz)
(3)
594 522 400
Capital expenditure ($ million)
-
7
7
Employees
(4)
211 462 479
Outside contractors
(4)
142 140 392
(1)
For the eight months from May 2004.
(2)
Recovered grade represents open pit operations in 2004 and 2005 and surface and dump reclamation in 2006.
(3)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.:
Operating results – Total cash costs and total production costs”.
(4)
Average for the period.
(5)
For the eleven months from January 2006 to November 2006.
Iduapriem (attributable 85 percent)
Description: AngloGold Ashanti has an 80 percent interest in the Iduapriem gold mine (the remaining 20 percent is owned
by the International Finance Corporation) and a 90 percent interest in the Teberebie gold mine (the government of Ghana
has the remaining 10 percent interest in Teberebie). The combined AngloGold Ashanti interest is 85 percent. The
Iduapriem and Teberebie properties are adjacent to each other and are part of the Tarkwaian goldfields.
58
Location: Iduapriem mine is located in the western region of Ghana, some 70 kilometers north of the coastal city of
Takoradi, and 10 kilometers south-west of Tarkwa.
Geology: The Iduapriem and Teberebie gold mines are located along the southern end of the Tarkwa basin. The
mineralization is contained in the Banket Series of rocks within the Tarkwaian System of Proterozoic age. The outcropping
Banket Series of rocks in the mine area form prominent, arcuate ridges extending southwards from Tarkwa, westwards
through Iduapriem and northwards towards Teberebie.
Operating and production data for Iduapriem
2006 2005
(1)
2004
Pay limit (oz/t)
0.05 0.0230.022
Pay limit (g/t)
1.60 0.720.76
Recovered grade (oz/t)
(2)
0.051
0.050
0.050
Recovered grade (g/t)
(2)
1.74 1.71 1.72
Gold production (000 oz) 100 percent
196
205
147
Gold production (000 oz) 85 percent
167
174
125
Total cash costs ($/oz)
(3)
413 348303
Total production costs ($/oz)
(3)
544 477448
Capital expenditure ($ million) 100 percent
6
5
4
Capital expenditure ($ million) 85 percent
5
4
3
Employees
(4)
668698 709
Outside contractors
(4)
583 585 597
(1)
For the eight months from May 2004.
(2)
Recovered grade represents open pit operations.
(3)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.:
Operating results – Total cash costs and total production costs”.
(4)
Average for the period.
Operating performance: In 2006, attributable gold production at Iduapriem decreased by 4 percent to 167,000 ounces
from the 174,000 ounces produced during 2005 (May to December 2004: 125,000 ounces). Recovered grade increased to
1.74g/t in 2006 from 1.71g/t in 2005 (2004: 1.72g/t). The decline in production was as a result of a series of mill and
crusher breakdowns that affected the operation during the first two quarters of the year. Total cash costs increased by
19 percent from $348 per ounce in 2005 to $413 per ounce in 2006 (2004: $303 per ounce) due to the decline in
production and inflation-drive increases in operation costs.
Attributable capital expenditure at $5 million was marginally higher than the $4 million spend in 2005 (2004: $3 million) and
was spent mainly on the commencement of a plant expansion project and general stay-in-business expenditure.
Growth prospects: A plant expansion project to increase treatment capacity from 3.7 to 4.3 million tonnes a year began
in the fourth quarter of 2006. The expansion is expected to be commissioned in the third quarter of 2008 at a capital cost
of $48 million.
During 2007, a scoping study will be undertaken to evaluate the economics of exploiting the considerable low-grade
mineral resources of the other properties that lie in the Tarkwaian conglomerates extending below the economic limit of
the pits.
GUINEA
The Siguiri mine, an open pit operation, is AngloGold Ashanti’s only operation in the Republic of Guinea in West Africa. In
2006, the mine produced 256,000 attributable ounces of gold at a total cash cost of $398 per ounce.
Siguiri (attributable 85 percent)
Description: AngloGold Ashanti has an 85 percent interest in the Siguiri mine, with the balance of 15 percent being held
by the government of Guinea.
Location: The Siguiri gold mine is located in the Siguiri District in the north-east of the Republic of Guinea, West Africa,
approximately 850 kilometers from the capital city of Conakry. The nearest major town is Siguiri (approximately
50,000 inhabitants), located on the banks of the Niger River.
59
Geology: This concession is dominated by Proterozoic Birimian rocks which consist of turbidite facies sedimentary
sequences. The two main types of gold
deposits which occur in the Siguiri basin and
are mined, are:
· laterite or CAP mineralization which
occurs as aprons of colluvial or as
palaeo-channels of alluvial lateritic gravel
adjacent to, and immediately above; and
· in situ quartz-vein related mineralization
hosted in meta-sediments with the better
mineralization associated with vein
stockworks that occurs preferentially in
the coarser, brittle siltstones and
sandstones
The mineralized rocks have been deeply
weathered to below 100 meters in places to
form saprolite or SAP mineralization. The
practice at Siguiri has been to blend the CAP
and SAP ore types and to process these
using the heap-leach method. With the
percentage of available CAP ore decreasing,
however, a new carbon-in-pulp (CIP) plant
was brought on stream during 2005 to treat predominantly SAP ore.
Siguiri – Summary of metallurgical operations
Gold plants
Capacity (000 tonnes/month)
800
Technology
mineral sizing,
scrubbing, ball milling, CIP,
elution,
electro-winning
Operating and production data for Siguiri
2006 2005
(1)
2004
Pay limit (oz/t)
0.03 0.017 0.017
Pay limit (g/t)
0.94 0.55 0.59
Recovered grade (oz/t)
(2)
0.032
0.035
0.032
Recovered grade (g/t)
(2)
1.08 1.21 1.10
Gold production (000 oz) – 100 percent
301
289
98
Gold production (000 oz) – 85 percent
256
246
83
Total cash costs ($/oz)
(3)
398 301 443
Total production costs ($/oz)
(3)
593 451 578
Capital expenditure ($ million) – 100 percent
19
36
57
Capital expenditure ($ million) – 85 percent
14
31
48
Employees
(4)
1,5411,170 1,194
Outside contractors
(4)
1,167
808
1,412
(1)
For the eight months from May 2004.
(2)
Recovered grade represents heap leach operations in 2004 and open pit operations in 2005 and 2006
(3)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.:
Operating results – Total cash costs and total production costs”.
(4)
Average for the period.
Operating performance: Production at Siguiri rose by 4 percent from 246,000 ounces in 2005 to 256,000 ounces
in 2006 after the resolution of the ball mill problems in the first quarter of 2006 (May to December 2004: 83,000 ounces).
Recovered grade decreased from 1.21g/t in 2005 to 1.08g/t in 2006 (2004: 1.10g/t).
60
Total cash costs increased from $301 per ounce in 2005 to $398 per ounce (2004: $443 per ounce) due to maintenance
shut-downs and post-commissioning plant modifications, as well as rising fuel costs and higher royalty payments as a
result of the increased gold price.
Growth prospects: The new CIP project has transformed this operation. Whereas Siguiri was previously a heap-leach
operation, constrained by limited economically treatable Mineral Resources, the mine is now able to economically exploit
the saprolitic ores that extend below the base of the existing pits. There is still considerable exploration potential adjacent
to the existing mine infrastructure.
MALI
AngloGold Ashanti has interests in three
operations in Mali in partnership with
other parties. These operations are
Sadiola, Yatela and Morila, which are all
operated by AngloGold Ashanti.
In 2006, the Malian operations
produced 538,000 ounces of
attributable gold production at a total
cash cost of $268 per ounce (Sadiola),
$241 per ounce (Yatela), and $266 per
ounce (Morila).
Sadiola (attributable 38 percent)
Description: AngloGold has a
38 percent interest in, and manages,
the Sadiola mine within the Sadiola
exploitation area in western Mali. The
joint venture partners are IAMGOLD, a
Canadian listed company (38 percent),
the government of Mali (18 percent),
and the International Finance
Corporation (IFC) (6 percent).
Location: The mine is situated 77 kilometers south of the regional capital of Kayes
Geology: The Sadiola deposit occurs within an inlier of greenschist facies metamorphosed Birimian rocks known as the
Kenieba Window. The specific rocks which host the mineralization are marbles and greywackes which have been
intensely weathered to a maximum depth of 200 meters. A series of north-south trending faults occur that are the feeders
to the Sadiola mineralization. As a result of an east-west regional compression event, deformation occurs along a north-
south striking marble-greywacke contact, increasing the porosity of this zone. North-east striking structures which intersect
the north-south contact, have introduced mineralization, mainly with the marble where the porosity was greatest. The
Sadiola Hill deposit generally consists of two zones, an upper oxidized cap and an underlying sulphide zone. From
1996 until 2002, shallow saprolite oxide ore from the Sadiola Hill pit was the primar y ore source. Since 2002, the deeper
saprolitic sulphide ore has been mined and in future will progressively replace the depleting oxide reserves.
61
Mali – Summary of metallurgical operations
Sadiola
Yatela
Morila
Gold plants
Capacity (000 tonnes/month)
435
250
350
Technology
mineral
sizing,
SAG milling,
ball milling,
cyanide leach,
CIP,
elution,
electro-winning
crushing,
agglomeration,
heap-leaching,
carbon adsorption (CIS)
crushing,
SAG milling,
ball milling,
gravity concentration,
cyanide leach,
CIP.
elution,
electro-winning
Operating and production data for Sadiola
2006 20052004
Pay limit (oz/t)
0.06 0.05 0.06
Pay limit (g/t)
1.98 1.80 1.76
Recovered grade (oz/t)
0.094
0.080
0.081
Recovered grade (g/t)
3.22
2.73
2.77
Gold production (000 oz) 100 percent
500
442
459
Gold production (000 oz) 38 percent
190
168
174
Total cash costs ($/oz)
(1)
268 265 242
Total production costs ($/oz)
(1)
363 440 448
Capital expenditure ($ million) 100 percent
11
18
16
Capital expenditure ($ million) 38 percent
4
7
6
Employees
(2)
589 584 550
Outside contractors
(2)
705 661 609
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.:
Operating results – Total cash costs and total production costs”.
(2)
Average for the year.
Operating performance: In 2006 attributable production at Sadiola increased by 13 percent to 190,000 ounces from
168,000 ounces in 2005 (2004: 174,000 ounces) in spite of a tailings pipeline replacement that negatively affected
tonnage throughput in the first quarter. Most of the production improvement was related to steady treatment plant
operations and the higher yields achieved as a result of improved metallurgical recovery on oxide ore and the increased
treatment of higher grade sulphide ore. The yield increased from 2.73g/t recovered in 2005 to 3.22g/t recovered in 2006
(2004: 2.77g/t). Total cash costs rose by 1 percent to $268 per ounce in 2006 from $265 per ounce in 2005, mainly due to
higher royalties arising from the increased gold price (2004: $242 per ounce). Capital expenditure decreased by
43 percent from $7 million in 2005 to $4 million in 2006 (2004: $6 million). The main areas of expenditure were additional
fleet mobilization charges, brownfields exploration and mining contract renewal costs.
Growth prospects: A recently completed study showed that the hard sulphide ore below the current mining horizon
(“deep sulphides”) can be mined economically at proven metallurgical recoveries. Additional test work is being conducted
to enhance recoveries.
Yatela (attributable 40 percent)
Description: The Yatela mine is owned by Société d’Exploitation des Mines d’Or de Yatela S.A., in which AngloGold
Ashanti and IAMGOLD each hold an effective 40 percent interest, with the government of Mali holding 20 percent.
Location: Yatela is located some 25 kilometers north of Sadiola and approximately 50 kilometers south-south-west of
Kayes, the regional capital.
Geology: Yatela mineralization occurs as a keel-shaped body in Birimian metacarbonates. The ‘keel’ is centered on a
fault which was the feeder for the original mesothermal mineralization, with an associated weakly mineralized diorite
intrusion. Mineralization occurs as a layer along the sides and in the bottom of the ‘keel’. The ore dips almost vertically on
the west limb and more gently towards the west on the east limb, with tight closure to the south.
62
Operating and production data for Yatela
2006 20052004
Pay limit (oz/t)
0.060.050.06
Pay limit (g/t)
1.79 1.66 1.96
Stacked grade (oz/t)
0.120
0.087
0.099
Stacked grade (g/t)
4.12
2.99
3.41
Gold production (000 oz) 100 percent
352
246
242
Gold production (000 oz) 40 percent
141
98
97
Total cash costs ($/oz)
(1)
241
263
255
Total production costs ($/oz)
(1)
326
347
320
Capital expenditure ($ million) 100 percent
3
5
7
Capital expenditure ($ million) 40 percent
1
2
3
Employees
(2)
203 210 208
Outside contractors
(2)
675
700
825
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(2)
Average for the year.
Operating performance: In 2006, attributable production at Yatela rose by 44 percent to 141,000 ounces from
98,000 ounces in 2005 (2004: 97,000 ounces) due to a 38 percent increase in grade, from 2.99g/t in 2005 to 4.12g/t in
2006 (2004: 3.41g/t). Total cash costs declined by 8 percent to $241 per ounce from $263 per ounce in 2005
(2004: $255 per ounce) due a favorable grade which was partially offset by higher operating costs as a result of a change
in the beginning of the year from top-lift stacking of the heap-leach pad to bottom-lift stacking, which necessitated
increased cement consumption.
Capital expenditure of $1 million was 50 percent lower than the $2 million spent in 2005 (2004: $3 million) and was
incurred mainly on the construction of an additional leach pad.
Growth prospects: The potential for a small amount of sulphide ore below the existing Alamoutala deposit to be treated
at Sadiola is being investigated.
Morila (attributable 40 percent)
Description: AngloGold Ashanti and Randgold Resources Limited each hold an effective 40 percent interest in the Morila
Joint Venture, with the other 20 percent held by the Malian government. Under the joint venture agreement, AngloGold
Ashanti is the operator of the mine.
Location: This mine is situated some 180 kilometers, south-east of Bamako, the capital city of Mali.
Geology: Morila is a mesothermal flat lying shear-zone hosted deposit which, apart from rising to the surface in the west
against steep faulting lies, flat. The deposit occurs within a sequence Birimian metal-arkoses of amphibolite metamorphic
grade. Mineralization is characterized by silica-feldspar alteration and sulphide mineralization consists of arsenopyrite,
pyrrhotite, pyrite and chalcopyrite.
63
Operating and production data for Morila
2006 2005 2004
Pay limit (oz/t)
0.080.070.09
Pay limit (g/t)
2.41 2.272.81
Recovered grade (oz/t)
0.113
0.158
0.130
Recovered grade (g/t)
3.88
5.41
4.57
Gold production (000 oz) 100 percent
517
655
510
Gold production (000 oz) 40 percent
207
262
204
Total cash costs ($/oz)
(1)
266 191 196
Total production costs ($/oz)
(1)
367 298 270
Capital expenditure ($ million) 100 percent
3
5
5
Capital expenditure ($ million) 40 percent
1
2
2
Employees
(2)
500 478 479
Outside contractors
(2)
1,075 705 919
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(2)
Average for the year.
Operating performance: Gold production at Morila declined from 262,000attributable ounces in 2005, to
207,000 attributable ounces in 2006 (2004: 204,000 attributable ounces). This was as a result of a general decrease in
grade to 3.88g/t from 5.41g/t achieved in 2005 (2004: 4.57g/t), together with a major mill re-lining in the second quarter,
that negatively affected tonnage throughput. Consequently, total cash costs increased by 39 percent from $191 per ounce
in 2005 to $266 per ounce in 2006 (2004: $196 per ounce). Capital expenditure of $1 million was 50 percent lower than
the capital expenditure of 2005 of $2 million (2004: $2 million) and was spent on various small projects, including a minor
plant upgrade.
Growth prospects: A regional drilling programme, with a view to finding another significant orebody, is being conducted
over the next two years.
64
NAMIBIA
The Navachab mine is AngloGold
Ashanti’s only operation in Namibia.
Description: AngloGold Ashanti holds a
100 percent interest in the Navachab
open-pit gold mine after having obtained
an additional 30 percent interest in 1999.
The mine has been in production since
1990.
Location: Navachab is located near
Karibib in Namibia, on the southern west
coast of Africa.
Geology: The Navachab deposit is
hosted by Damaran greenschistam-
phibolite facies, calc-silicates, marbles
and volcanoclastics. The rocks have
been intruded by granites, pegmatites
and (quartz-porphyry dykes) aplite and
have also been deformed into a series of
alternating dome and basin structures.
The mineralized zone forms a sheet-like
body which plunges at an angle of
approximately 20 degree to the north-
west. The mineralization is predominantly
hosted in a sheeted vein set (±60 percent) and a replacement skarn body (±40 percent). The gold is very fine-grained and
associated with pyrrhotite, and minor to trace amounts of pyrite, chalcopyrite, maldonite and bismuthinite. Approximately
80 percent of the gold is free milling.
Navachab – Summary of metallurgical operations
Gold plants
Capacity (000 tonnes/month)
110
Technology
crushing,
SAG milling,
cyanide leach,
CIP,
elution,
electro-winning
Operating and production data for Navachab
2006 �� 20052004
Pay limit (oz/t)
0.04 0.05 0.05
Pay limit (g/t)
1.29 1.65 1.46
Recovered grade (oz/t)
0.053
0.060
0.046
Recovered grade (g/t)
1.81
2.05
1.59
Gold production (000 oz) 100 percent
86
81
66
Total cash costs ($/oz)
(1)
349
321
348
Total production costs ($/oz)
(1)
407
333
424
Capital expenditure ($ million) 100 percent
5
5
21
Employees
(2)(3)
313 315251
Outside contractors
(2)
– – –
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(2)
Average for the year.
(3)
No mining labor, contract or otherwise, was on site during the first half of 2004.
65
Operating performance: In 2006, gold production rose by 6 percent to 86,000 ounces from 81,000 ounces in 2005
(2004: 66,000 ounces) as increased tonnage throughout offset the effect of the decline in grade to 1.81g/t from 2.05g/t in
2005 (2004: 1.59g/t). Total cash costs increased to $349 per ounce from $321 per ounce in 2005 (2004: $348 per ounce)
due to the lower recovered grade. Capital expenditure of $5 million was unchanged from that of 2005 (2004: $21 million)
and was incurred mainly on preparation for mining the Grid A satellite orebody and treatment plant optimization.
Growth prospects: Historical studies on a further potential pit expansion which was previously considered uneconomical,
are being reconsidered given the current outlook for the gold price. Several brownfields prospects located within trucking
distance are currently under investigation.
TANZANIA
The Geita mine is AngloGold Ashanti’s only operation in Tanzania.
Description: The Geita mine is a multi-pit operation with a CIL plant that has the capacity to treat 6 million tones a year.
Prior to April 2004, Ashanti and AngloGold each held a 50 percent share in Geita, which was managed under the joint
venture agreement entered into between the companies. As a result of the business combination, Geita is now a wholly-
owned subsidiary.
Location: The Geita mine is located 80 kilometers south-west of the town of Mwanza.
Geology: Geita is an Archaean mesothermal mainly BIF-hosted deposit. Mineralization is located where auriferous fluids,
which are interpreted to have moved along shears often on BIF-diorite contacts, reacted with the BIF. Some lower-grade
mineralization can occur in the diorite as well (usually in association with BIF-hosted mineralization), and approximately
20 percent of the gold is hosted in the diorite.
66
Geita – Summary of metallurgical operations
Gold plants
Capacity (000 tonnes/month)
490
Technology
crushing,
SAG milling,
ball milling,
gravity concentration,
CIL,
elution,
electro-winning
Operating and production data for Geita
2006 2005
2004
(1)
Pay limit (oz/t)
0.13 0.07 0.09
Pay limit (g/t)
4.16 2.27 2.81
Recovered grade (oz/t)
0.049
0.092
0.109
Recovered grade (g/t)
1.68
3.14
3.74
Gold production (000 oz) 100 percent
308
613
692
Gold production (000 oz) 100 percent attributable from May 2004
308
613
570
Total cash costs ($/oz)
(2)
630
298
250
Total production costs ($/oz)
(2)
766
419
335
Capital expenditure ($ million) 100 percent
67
78
14
Capital expenditure ($ million) 100 percent attributable from May 2004
67
78
13
Employees
(3)
2,043 1,066 661
Outside contractors
(3)
1,177
1,214
1,595
(1)
Prior to April 26, 2004, AngloGold held a 50 percent stake.
(2)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(3)
Average for the year.
Operating performance: In 2006, total gold production decreased by 50 percent to 308,000 ounces from 613,000 ounces
in 2005 (2004: 692,000 ounces) due to a combination of factors. In the first quarter, a drought reduced water supply to the
processing plant and subsequent heavy rains resulted in hauling constraints. This, combined with a slower-than-
anticipated cut-back of the Nyankanga pit, resulted in a 46 percent drop in the grade for 2006 to 1.68g/t from 3.14g/t in
2005 (2004: 3.74g/t ).
These factors also contributed to the 111 percent increase in total cash costs from $298 per ounce in 2005 to $630 per
ounce in 2006 (2004: $250 per ounce). Capital expenditure of $67 million (2005: $78 million – 2004: $13 million) included
the cost of infrastructure associated with the change from contractor mining to owner mining, together with the purchase of
larger trucks and a shovel.
Growth prospects: Exploration to identify and generate resources to the inferred category, as well as the conversion of
resources into reserves, will continue. Current inferred resources are expected to add four years to life of mine reserves
and significant additional surface and underground potential is anticipated.
Outlook: A partial slope in the Nyankanga pit in February 2007 has changed the mining sequence of the pit’s high-grade
area, reducing the 2007 Geita production outlook from a planned doubling to a 30 percent increase to 400,000 ounces.
67
UNITED STATES OF AMERICA
AngloGold Ashanti acquired its operations in the United States of America from Minorco, effective March 31, 1999 and
comprise the wholly-owned AngloGold Ashanti (Colorado) Corp., which holds a 67 percent interest in the Cripple Creek &
Victor Gold Mining Company (CC&V) in Colorado with a 100 percent interest in gold produced until certain conditions are
met (as explained below). AngloGold Ashanti owns 100 percent of Big Springs in Nevada, which is currently in the final
stages of rehabilitation and closure.
Cripple Creek & Victor (attributable 67 percent with 100 percent interest in production)
Description: AngloGold Ashanti holds a 67 percent stake in CC&V, with the remaining 33 percent held by Golden Cycle
Gold Corporation (Golden Cycle). AngloGold Ashanti is the manager of the operation and is entitled to receive 100 percent
of the cash flow from the operation until loans extended to the joint venture are repaid and the initial phase ends. CC&V is
a low-cost, low-grade open-pit operation.
Location: CC&V is located south-west of Colorado Springs in the state of Colorado in the USA.
Geology: The district of Cripple Creek is centered on an intensely altered alkaline, Tertiary-aged, diatreme-volcanic,
intrusive complex, approximately circular in shape covering 18.4 square kilometers and surrounded by Precambrian rocks.
The Precambrian rocks consist of biotite gneiss, granodiorite and quartz monzonite and granite.
The intersection of these four units and regional tectonic events formed an area of regional dilation which subsequently
facilitated the formation of the volcanic complex. The majority of the complex then in-filled with the eruptive phase Cripple
Creek Breccia host rock. This complex was subsequently intruded by a series of intrusive dykes and sills that include
syenites, phonolites, phonotephrites and lamprophyres. These intrusive occupy all of the dominant district structural
orientations. District structures are generally near vertical and strike north-north-west to north-east. These structures acted
as primary conduits for the late-stage gold mineralizing solutions. Higher grade pods of mineralization occur at structural
intersections and/or as sheeted vein along zones of strike deflection. High-grade gold mineralization is associated with
K-feldspar + pyrite +/- carbonate alteration and occurs adja cent to the major structural and intrusive dyke zones. The
broader zones of disseminated mineralization occur primarily as micro-fracture halos around the stronger alteration zones
in the more permeable Cripple Creek Breccia wall rocks.
68
The average depth of oxidation is 120 meters and is also developed along major structural zones to even greater depths.
Individual orebodies can be tabular, pipe-like, irregular or massive. Individual gold particles are generally less than
20 microns in size and occur as native gold with pyrite or native gold after gold-silver tellurides. Gold occurs within hydrous
iron and manganese oxides and as gold-silver tellurides. Silver is present but is economically unimportant. Gold
mineralization can be encapsulated by iron and manganese oxides, pyrite, K-feldspar alteration and quartz.
Cripple Creek & Victor – Summary of metallurgical operations
Gold plants
Capacity (000 tonnes/month)
-
crushed ore production
1,512
-
total ore production
1,512
- solution processed
2,235
Technology
crushers,
valley heap-leach,
gold adsorption by carbon in solution,
elution,
electro-winning
Operating and production data for Cripple Creek & Victor operations
2006 20052004
Pay limit (oz/t)
0.01 0.01 0.01
Pay limit (g/t)
0.34 0.34 0.34
Recovered grade (oz/t)
0.016
0.018
0.018
Recovered grade (g/t)
0.54
0.62
0.61
Gold production (000 oz)
283
330
329
Total cash costs ($/oz)
(1)
248 230 220
Total production costs ($/oz)
(1)
498 418 365
Capital expenditure ($ million)
13
8
16
Employees
(2)
325 313 313
Outside contractors
(2)
44 44 74
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
(2)
Average for the year.
Operating performance: In 2006, gold production at CC&V declined by 14 percent to 283,00 ounces from
330,000 ounces produced in 2005 (2004: 329,000 ounces) primarily as a result of reduced rainfall in the region and the
consequent reduction in irrigation of the heap-leach pad. Yield was 0.54g/t compared with the 0.62g/t achieved in 2005
(2004: 0.61g/t). Total cash costs of $248 per ounce were 8 percent higher than the $230 per ounce achieved in 2005
(2004: $220 per ounce), primarily as a result of higher prices for consumables and greater mining activity, that resulted in
the placement of 14 percent more ore tonnes on the leach pad. The impact of the higher costs, however, was partially
offset by the associated increase in recoverable ounces placed on the leach pad. By the end of 2006, the water shortage
issue had been addressed and gold production had returned to normal leve ls.
Capital expenditure of $13 million was 63 percent higher than the $8 million spent in 2005 (2004: $16 million) and was
incurred on increased brownfields exploration and upgrading the operation’s water delivery systems.
Growth prospects: An extension of mine life is currently underway at CC&V which would involve the staged expansion of
the heap leach facility together with the development of new ore sources within the existing claims.
69
ZIMBABWE
The Freda-Rebecca, a former Ashanti operation, was owned by AngloGold Ashanti for only four months in 2004. The
operation was sold with effect from September 1, 2004 to South African-based Mwana Africa Holdings for $2 million.
Operating and production data for Freda-Rebecca
2006 2005
2004
(1)
Pay limit (oz/t)
– ––
Pay limit (g/t)
–––
Recovered grade (oz/t)
–
–
0.048
Recovered grade (g/t)
–
–
1.66
Gold production (000 oz)
–
–
9
Total cash costs ($/oz)
(2)
–
–
417
Total production costs ($/oz)
(2)
–
–
556
Capital expenditure ($ million)
–
–
1
Employees
(3)
– –
687
Outside contractors
(3)
–
–
58
(1)
For the four months from May 2004 through August 2004. The mine was sold effective September 1, 2004.
(2)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.:
Operating results – Total cash costs and total production costs”.
(3)
Average for the period.
Rights to mine and title to properties
AngloGold Ashanti’s rights to own and exploit mineral reserves and deposits are governed by the laws and regulations of
the jurisdictions in which the mineral properties are located. In a number of countries in which AngloGold Ashanti operates
there are, in some cases, certain restrictions in terms of the group’s ability to independently move assets out of that
country and/or transfer the assets within the group, without the prior consent of the local government or minority
shareholders involved.
Argentina
According to Argentinean mining legislation, mines are the private property of the nation or a province, depending on
where they are located. Individuals are empowered to explore for, exploit and dispose of mines as owners by means of a
legal license granted by a competent authority under the provisions of the Argentine Mining Code. The legal licenses
granted for the exploitation of mines are valid for an undetermined period, provided that the mining title holder complies
with the obligations settled in the Argentine Mining Code.
In Argentina, the usual ways of transferring rights over mining licenses are: to sell the license; to lease such license; or to
assign the rights under such a license by a beneficial interest or Usufruct Agreement. In the case of Cerro
Vanguardia - AngloGold Ashanti’s operation in Argentina - the mining title holder is its partner, Fomicruz, and due to the
Usufruct Agreement signed between them and Cerro Vanguardia SA on December 27, 1996, the latter has the irrevocable
right to the exploitation of the deposit for a period of 40 years. This agreement expires on December 27, 2036.
Australia
In Australia, with few exceptions, all onshore mineral rights are reserved by the government of the relevant state or
territory. Exploration for, and mining of, minerals is regulated by the general mining legislation and controlled by the
mining ministry of each respective State or Territory.
Where native title has not been extinguished, native title legislation may apply to the grant of tenure and some subsequent
administrative processes. Federal and State Aboriginal heritage legislation also operates to protect special sites and
areas from disturbance although to date there has not been any adverse impact on any of AngloGold Ashanti’s operating
properties.
AngloGold Ashanti’s operating properties are located in the state of Western Australia. The most common forms of tenure
are exploration and prospecting licenses, mining leases, miscellaneous licenses and general purpose leases.
70
In most Australian states, if the holder of an exploration license establishes indications of an economic mineral deposit and
complies with the conditions of the grant, the holder of the exploration license has a priority right against all others to apply
for a mining lease which gives the holder exclusive mining rights with respect to minerals on the property.
It is possible for an individual or entity to own the surface of the property and for another individual or entity to own the
mineral rights. Typically the maximum initial term of a mining lease is 21 years, and the holder has the right to renew the
lease for a further period of 21 years. Subsequent renewals are subject to the discretion of the respective State or
Territory’s minister responsible for mining rights. Mining leases can only be assigned with the consent of the relevant
minister.
Government royalties are payable as specified in the relevant legislation in each State or Territory. A general purpose
lease may also be granted for one or more of a number of permitted purposes. These purposes include erecting, placing
and operating machinery and plant in connection with mining operations, depositing or treating minerals or tailings and
using the land for any other specified purpose directly connected with mining operations. Similarly, a Miscellaneous
License may be granted for a number of permitted purposes including road and water access.
AngloGold Ashanti owns the mineral rights and has 21-year term mining leases with rights of renewal to all of its mining
areas in Australia, including its proportionate share of joint venture operations, and both the group and its joint venture
partners are fully authorized to conduct operations in accordance with relevant laws and regulations. The mining leases
and rights of renewal cover the current life-of-mine at AngloGold Ashanti’s operations in Australia.
Brazil
In Brazil, there are two basic mining rights: a license for the exploration stage, valid up to three years, renewable once;
and a Mining Concession or Mine Manifest, valid for the life of the deposit. In general, exploration licenses are granted on
a first-come, first-served basis. Mining concessions are granted to the holders of exploration licenses that manage to
prove the existence of a Mineral Resource and have been licensed by the environmental competent authority.
Mine Manifests (mining titles granted in 1936) and Mining Concessions (mining titles presently granted through an order
signed by the Secretary of Mines of the Ministry of Mines and Energy) are valid for an undetermined period until depletion
of reserves, provided that the mining title holder complies with current Brazilian mining and environmental legislation, as
well as with those requirements set out by the National Department of Mineral Production (DNPM) who acts as inspecting
entity for mining activities.
Obligations of the titleholder include:
•
the start of construction, as per an approved development plan, within six months of the issuance of the concession;
•
extracting solely the substances indicated in the concession;
•
communicating to the DNPM the discovery of a mineral substance not included in the concession title;
• complyingwithenvironmentalrequirements;
•
restoring the areas degraded by mining; refrain from interrupting exploitation for more than six months; and
•
reporting annually on operations.
The difference between a Mine Manifest and a Mining Concession lies in the legal nature of these two mining titles, since
it is much more difficult and complicated for the public administration to withdraw a Mine Manifest than a Mining
Concession although, in practice, it is possible for a Manifest to be cancelled or to become extinct if the abandonment of
the mining operation is formally proven. All of AngloGold Ashanti’s operations in Brazil have indefinite mining licenses.
Ghana
Mining activities in Ghana are primarily regulated by the new Minerals and Mining Act, 2006 (the Mining Act). The Mining
Act replaces the repealed Minerals and Mining Law, 1986 (PNDCL 153). The Mining Act replicates many of the provisions
of the old Law. Under the Constitution and the Mining Act, all minerals in Ghana in their natural state are the property of
the State and title to them is vested in the President on behalf of and in trust for the people of Ghana, with rights of
prospecting, recovery and associated land usage being granted under license or lease.
71
The key material modifications to the previous mining regime affected by the Mining Act are:
•
the right of the government to acquire a 10 percent ‘free-carried’ interest in a mining company continues, but any
further interest in the mining company shall be acquired on terms to be agreed with the holder of the mining right. The
Act does not prescribe any terms;
•
compensation principles for disturbance of an owner’s surface rights; and
•
although the right of the government to be issued with a special share in a mining company still exists, the consent of
the special shareholder will only be required for the disposal of a mining lease and/or material assets, which are
situated in Ghana.
A license is required for the export or disposal of such minerals and the government has a right of pre-emption over all
such minerals. The government of Ghana shall acquire, without payment, a 10 percent interest in the rights and
obligations of the mineral operations in relation to a mineral right to reconnaissance, prospecting or mining, and shall have
the option to acquire a further 20 percent interest where any mineral is discovered in commercial quantities, on terms
agreed between the government and the holder of the mining lease subject to arbitration if the parties fail to agree.
A license or lease granting a mineral right is required to prospect for or mine a mineral in Ghana and the Minister of
Energy and Mines has the power to negotiate, grant, revoke, suspend or renew any mineral right, subject to a power of
disallowance exercisable within 30 days of such grant, revocation, suspension or renewal by the Cabinet. The powers of
the Minister of Mines are to be exercised on the advice of the Minerals Commission, which is responsible for regulating
and managing the utilization of natural resources and coordinating policies relating to them.
The grant of a mining lease by the Minister of Mines is normally subject to parliamentary ratification unless the mining
lease falls into a class of transactions exempted by parliament. A mineral right is deemed a requisite and sufficient
authority over the land in respect of which the right is granted, although a separate license is required for some other
activities, including the diversion of water, and additional consents may be required for certain developments. A mineral
right or interest therein may not be transferred, assigned or otherwise dealt with in any other manner without prior written
approval of the Minister of Mines.
Control of mining companies: The Minister of Mines has the power to object to a person becoming or remaining a
‘‘shareholder controller’’, a ‘‘majority shareholder controller’’ or an ‘‘indirect controller’’ of a company which has been
granted a mining lease if he considers that the public interest would be prejudiced by the person concerned becoming or
remaining such a controller.
In this context:
•
shareholder controller means a person who, either alone or with certain others, is entitled to exercise or control the
exercise of 20 percent or more of the voting power at any general meeting of a mining company or of any other
company of which it is a subsidiary;
•
majority shareholder controller means a shareholder controller in whose case the percentage referred to above also
exceeds 50 percent; and
•
indirect controller means a person in accordance with whose directions or instructions the director of a mining
company, or of another company of which it is a subsidiary, or the shareholder controllers of that mining company,
are accustomed to act.
A person may not become a shareholder controller, a majority shareholder controller or an indirect controller of a mining
company unless he has served written notice on the Minister of Mines of his intention to that effect and the Minister of
Mines consents to his becoming such a controller or does not object within a period of six months.
Where a person becomes or continues to be a controller of the relevant description after a notice of objection has been
served on him, or is otherwise in contravention of the procedures prescribed by the Mining Act, the Minister of Mines may
notify the controller that, until further notice, any specified shares are subject to restrictions. The relevant restrictions
include restrictions on transfer, voting rights, receipt of further shares and distributions. The Minister of Mines may apply to
the High Court to order the sale of any shares which are the subject of such a restriction. There is no legal restriction on
the foreign ownership of a mining company.
72
Where a person, either alone or with others, acquires an interest in 5 percent or more of the voting power of a mining
company he is required to notify the Minister of Mines. A person who is a controller of a mining company must give notice
of his ceasing to be such a controller before he disposes of his interest. In addition, the mining company itself has to give
notice to the Minister of Mines of the fact that any person has become or ceased to be a controller.
Violation of these provisions of the Mining Act is a criminal offence. The Mining Act also gives the Minister of Mines power
to investigate and report on the ownership and control of any mining company.
The Act provides for stability agreements, as a mechanism to ensure that the incentives and protection afforded by laws in
force at the time of the Stability Agreement are guaranteed for 15 years. A stability agreement is subject to ratification by
Parliament.
Under the Act, the Minister may enter into a Development Agreement under a mining lease where the proposed
investment by the holder will exceed $500 million.
A development agreement may contain provisions relating to the mineral right or operations to be conducted, the
circumstances or manner in which the Minister may exercise discretion conferred by the Act, stability terms, and in relation
to environmental issues and obligations of the holder of the mineral right. A Development agreement is also subject to
ratification by Parliament.
Prior to the business combination between AngloGold and Ashanti, AngloGold and the government of Ghana agreed the
terms of a Stability Agreement to govern certain aspects of the fiscal and regulatory framework under which AngloGold
Ashanti would operate in Ghana following the implementation of the business combination. The terms of the Stability
Agreement have not been altered by the new Mining Act.
Payments and allowances
The Mining Act provides that royalties are payable by the holder of a mining lease to the State at rates of between
3 percent and 6 percent of total minerals revenue, depending on a formula set out in mineral royalty regulations. The laws
of Ghana currently provide for income tax at a rate of 25 percent. The Mining Act provides for an entitlement to certain
specified capital allowances and various additional fiscal and other benefits. AngloGold Ashanti and the government of
Ghana have entered into the Stability Agreement with respect to the payment of royalties and taxes.
Under the Stability Agreement, the government of Ghana agreed:
•
to extend the term of the mining lease relating to the Obuasi mine until 2054 on terms existing prior to the business
combination;
•
to maintain for a period of 15 years, the royalties payable by AngloGold Ashanti with respect to its mining operations
in Ghana at a rate of 3 percent per annum of the total revenue from minerals obtained by AngloGold Ashanti from
such mining operations;
•
to ensure that the income tax rate would be 30 percent for a period of 15 years. The agreement was amended in
December 2006 to a tax rate equal to the prevailing corporate rate and shall not be higher than 30 percent;
•
that a sale of AngloGold Ashanti’s or any of its subsidiaries' assets located in Ghana remain subject to the
government's approval;
•
to permit AngloGold Ashanti and any or all of its subsidiaries in Ghana to retain up to 80 percent of their exportation
proceeds in foreign currencies offshore, or if such foreign currency is held in Ghana, to guarantee the availability of
such foreign currency; and
•
to retain its special rights (Golden Share) under the provisions of the Mining Act pertaining to the control of a mining
company, in respect of the assets and operations in Ghana.
The government of Ghana also agreed that AngloGold Ashanti's Ghanaian operations will not be adversely affected by
any new enactments or orders or by changes to the level of payments of any customs or other duties relating to mining
operations, taxes, fees and other fiscal imports or laws relating to exchange control, transfer of capital and dividend
remittance for a period of 15 years after the completion of the business combination.
73
In consideration of these agreements and undertakings, AngloGold Ashanti issued to the government of Ghana
2,658,000 ordinary shares and paid to the government of Ghana $5 million in cash, promptly after the implementation of
the business combination. AngloGold Ashanti also paid to the government of Ghana, on the date of the completion of the
business combination, an additional $5 million in cash towards the transaction costs incurred by the government of Ghana
in its role as regulator.
Retention of foreign earnings: Holders of mining leases have certain limited rights to retain foreign exchange earnings
overseas and to use such earnings for the acquisition of machinery and equipment as well as for certain other payments,
such as debt service payments and dividends.
Where the net earnings of a holder of a mining lease are in foreign currency, the holder is permitted to retain not less than
25 percent of foreign exchange earnings in an external bank account for acquiring machinery and equipment, spare parts
and raw materials as well as for certain other payments, such as dividend and debt service payments.
AngloGold Ashanti’s operations in Ghana are permitted to retain 80 percent of its foreign exchange earnings in such an
account. In addition, the company has permission from the Bank of Ghana to retain and use, outside of Ghana, dollars
required to meet payments to the company’s hedge counterparts which cannot be met from the cash resources of its
treasury company.
Leases: Mining leases may be applied for either by a prospecting license holder who has established the existence of
minerals in commercial quantities or by others who do not hold such licenses, who establish the same to the satisfaction of
the Minister of Mines.
Mining leases are normally granted for a period not exceeding 30 years and the holder may apply to the Minister of Mines
for renewal, on such conditions as the Minister of Mines may determine, for up to another 30 years. This period has been
extended in terms of the Stability Agreement. They are to have a maximum size (subject to derogation by the President
where it is considered to be in the national interest) of 50 square kilometers for any grant and 150 square kilometers in
aggregate.
A holder may apply for an enlargement of the mining area, which, subject to the Mining Law, the Minister of Mines may
grant if satisfied that such approval is in the national interest.
The rights conferred by mining leases include those to take all reasonable measures on or under the surface to mine the
mineral to which the mining lease relates, to erect necessary equipment, plant and buildings, to prospect within the mining
area and to stack or dump mineral waste in an approved manner.
Reconnaissance and prospecting licenses are normally granted for up to 12 months and three years respectively, subject
to renewal. A detailed programme must be submitted for the recruitment and training of Ghanaians with a view to
achieving ‘localization’, being the replacement of expatriate personnel by Ghanaian personnel. In addition, the holder must
give preference to Ghanaian products and personnel, to the maximum extent possible, consistent with safety, efficiency
and economies.
Prior notification to the Minister of Mines is required for ceasing, suspending or curtailing production. Approval to such
actions may be given, subject to conditions determined on the advice of the Minerals Commission.
There are also provisions relating to surrender, suspension and cancellation of mineral rights in certain circumstances.
The Minister of Mines may suspend or cancel a mineral right if, among other things, the holder:
•
fails to make payments under the Mining Act when due;
•
is in breach of any provisions of the Mining Actor the conditions of the mineral right or the provisions of any other
enactment relating to mines and minerals;
•
becomes insolvent or bankrupt;
•
makes a statement to the Minister of Mines in relation to the mineral right which he knows, or ought to have known, to
be false; or
•
for any reason becomes ineligible to apply for a mineral right under the provision of the Mining Law.
74
Except as otherwise provided in a specific mining lease, all immovable assets of the holder under the mining lease vest in
the State on termination, as does all moveable property that is fully depreciated for tax purposes. Moveable property that
is not fully depreciated is to be offered to the State at the depreciated cost. The holder must exercise his rights subject to
such limitations relating to surface rights as the Minister of Mines may prescribe. Subject to the proper conduct of the
mining operations, the holder must affect as little as possible the interest of any lawful occupier, whose grazing rights are
retained but who is precluded from erecting any building without the consent of the holder (or, if such consent is
unreasonably withheld, without the consent of the Minister).
An owner or occupier of any land subject to a mineral right may apply to the holder of the mineral right for compensation
and the amount of the compensation shall, subject to the approval of the Land Valuation Board, be determined by
agreement between the parties concerned (or, if they are unable to reach agreement, by the Minister of Mines in
consultation with the Land Valuation Board). The Land Valuation Board has in the past increased amounts of
compensation payable to owners and occupiers. The holder, in the exercise of his rights, is required to have due regard to
the effect of the mineral operations on the environment and is to take such steps as may be necessary to prevent pollution
of the environment as a result of such operations.
A range of activities and breaches of the Mining Law, including obstructing the government from exercising its pre-emption
right and conducting mining, prospecting or related activities other than in accordance with the Mining Law, constitute
offences punishable by fine or imprisonment. The maximum fine is 500,000 cedis (at the current exchange rate, equivalent
to approximately $50) and the maximum term of imprisonment is two years.
Mining properties: The current mining lease for the Obuasi area was granted by the government of Ghana on
March 5, 1994. It grants mining rights to land with an area of approximately 334 square kilometers in the Amansie East
and Adansi West districts of the Ashanti region for a term of 30 years from the date of the agreement. In addition, the
application for a mining lease over the adjacent 140 square kilometers has also been granted resulting in the total area
under mining lease conditions increasing to 474 square kilometers, “the Lease Area”.
The company is required to pay to the government of Ghana rent (subject to review every five years, when the rent may
be increased by up to 20 percent) at a rate of approximately $5 per square kilometers and such royalties as are prescribed
by legislation, including royalties on timber felled within the Lease Area. Under the Stability Agreement the Government
of Ghana has agreed to extend the term of the Obuasi lease until 2054.
Bibiani had title to a 50 square kilometers mining lease for a period of 30 years to May 18, 2027. The terms and conditions
of the lease are consistent with similar leases granted in respect of Obuasi. With effect from October 1, 2001, the Bibiani
mining lease was transferred to Ashanti Goldfields Company Limited from Ashanti Goldfields (Bibiani) Limited. The
Bibiani Mine and its assets were sold to Central African Gold Limited, effective December 1, 2006.
Iduapriem has title to a 33 square kilometer mining lease granted on April 19, 1989 for a period of 30 years. The terms and
conditions of the lease are consistent with similar leases granted in respect of the Obuasi mining lease.
Teberebie has two leases, one granted in February 1998 for a term of 30 years, and another granted in June 1992 for a
term of 26 years. The terms and conditions of these leases are consistent with similar leases granted in respect of the
Obuasi mining lease.
Guinea
In Guinea, all mineral substances are the property of the State. Mining activities are primarily regulated by the Mining
Code, 1995. The right to undertake mining operations can only be acquired by virtue of one of the following mining titles:
surveying permit, small-scale mining license, mining prospecting license, mining license or mining concession.
The holders of mining titles are guaranteed the right to dispose freely of their assets and to organize their enterprises as
they wish, the freedom to engage and discharge staff in accordance with the regulations in force, free movement of their
staff and their products throughout Guinea and freedom to dispose of their products in international markets.
75
The group’s Guinea subsidiary, Société Ashanti Goldfields de Guinée SA (SAG), has title to the Siguiri mining concession
area which was granted on November 11, 1993 for a period of 25 years. The agreement provides for an eventual
extension/renegotiation after 23 years for such periods as may be required to exhaust economic Ore Reserves.
The original area granted encompassed 8,384 square kilometers which the subsidiary was required to reduce to five or
fewer single blocks of not less than 250 square kilometers per block totaling not more than 1,500 square kilometers by
November 11, 1996. The retrocession reduced the Siguiri concession area to four blocks totaling 1,495 square kilometers.
SAG has the exclusive right to explore and mine in the remaining Siguiri concession area for a further 22-year period from
November 11, 1996 under conditions detailed in a Convention de Base predating the new Guinea Mining Code.
Key elements of the Convention de Base are:
•
the government of Guinea holds a 15 percent free-carried or non-contributory interest; a royalty of 3 percent based
on a spot gold price of less than $475, and 5 percent based on a spot gold price above $475, as fixed on the London
Gold Bullion Market, is payable on the value of gold exported; a local development tax of 0.4 percent is payable on
the gross sales revenues; salaries of expatriate employees are subject to a 10 percent income tax; mining goods
imported into Guinea are exempt from all import taxes and duties for the first two years of commercial production;
and
•
SAG is committed to adopt and progressively implement a plan for the effective rehabilitation of the mining areas
disturbed or affected by operations.
The Convention de Base is subject to early termination if both parties formally and expressly agree to do so, if all project
activities are voluntarily suspended for a continuous period of eight months or are permanently abandoned by our
subsidiary or if SAG goes into voluntary liquidation or is placed into liquidation by a court of competent jurisdiction.
In addition to the export tax payable to the government of Guinea, a royalty on production may be payable to the
International Finance Corporation (IFC) and to Umicore SA, formerly Union Miniere (UM). Pursuant to the option
agreement between UM and Golden Shamrock Mines Limited (GSM), a royalty on production may be payable to UM by
Chevaning Mining Company Limited (CMC) or GSM, which payment obligation has been assigned to AngloGold Ashanti
(Ghana) Limited, on a sliding scale of between 2.5 percent and 7.5 percent, based on the spot gold price per ounce
between $350 and $475, subject to indexing from January 1, 1995, to a cumulative maximum of $60 million. In addition,
under the terms of the restructuring agreement with the IFC, a sliding scale royalty on production may be payable to the
IFC calculated on the same basis but at half the rate payable to UM, to a maximum of $7.8 million.
Mali
Mineral rights in Mali are governed by the Mining Act and Regulations promulgated in 1991. Exploration is carried out
under permits granted by Ministerial Decree following application to the National Director of Geology and Mines from the
Ministry of Mines, Energy and Water conveying exclusive title to conduct exploration. The permit is valid for a three-year
period and is renewable twice. A company applying (in an area it selected) for such a permit must provide proof of
technical and financial capabilities.
An exploitation permit is required to mine a deposit located within the exploration area. This permit grants exclusive title to
mine for a maximum period of 30 years (inclusive of renewals) and is granted by the Council of Ministers following
application to the National Director of Mines.
Both permits referred to above include a Mining Convention (Convention d’Etablissement) covering exploration, mining,
treatment and marketing in a comprehensive document. This outlines the general conditions with regard to exploration
(work programme, fiscal and customs regime) and exploitation (formation of a local limited liability company and mining
company, state shareholdings, the fiscal and customs regime during construction and exploitation phases, exchange
controls, marketing of the product, accounting regime, training programmes for local labor, protection of the environment,
reclamation, safety, hygiene and settlement of disputes).
76
Application for an exploration permit is submitted to the National Director of Mines based on various documents, including
applicant identification, locations, receipts for payment of fixed rights and surface fees, and articles of association, together
with a draft mining convention. An inter-ministerial committee examines the applications and one company is retained to
do the exploration. This company then negotiates a draft of the Mining Convention and the Minister of Mines grants the
exploration permit by an in-house decree published in the Malian Gazette. Once an economically viable deposit has been
identified, an application for an exploitation permit is submitted to the National Director of Mines. This application must be
made prior to the expiry of the exploration permit. The application document must contain a map and co-ordinates, a
receipt for payment of fixed rights and surface fees and a s ummary of technical and financial capabilities.
The exploitation title is granted following a thorough investigation. AngloGold Ashanti has complied with all applicable
requirements and the relevant permits have been issued. Morila, Sadiola and Yatela have 30-year permits which expire in
2029, 2024 and 2030, respectively.
Namibia
Mineral rights in Namibia vest in the State. In order to prospect or mine, the Ministry of Mines and Energy initially grants a
prospecting license and on presentation of a feasibility study, a mining license is then granted taking into account the
abilities of the company, including mining, financial and technical capabilities, rehabilitation programmes and payment of
royalties. The relevant license has been granted to AngloGold Namibia (Pty) Ltd in respect of its mining and prospecting
activities in Namibia. The current 15-year license expires in 2018.
South Africa
The Mineral and Petroleum Resources Development Act: In October 2002, the President of South Africa assented to
the Mineral and Petroleum Resources Development Act (MPRDA), which was passed by the Parliament of South Africa in
June 2002 and came into effect on May 1 2004. The MPRDA vests custodianship of South Africa’s mineral rights in the
State, which will issue prospecting rights or mining rights to applicants in the future. For further details relating to the
MPRDA and the associated broad-based socio-economic empowerment charter and related scorecard, as well as
AngloGold Ashanti’s progress in converting existing rights in terms of the new legislation, see Item 3D.: Risk factors –
AngloGold Ashanti’s new order mineral rights in South Africa could be suspended or cancelled should the company
breach, and fail to remedy such breach of, its obligations in respect o f the acquisition of these rights.
Tanzania
Mineral rights in the United Republic of Tanzania are governed by the Mining Act of 1998, and property and control over
minerals are vested in the United Republic of Tanzania. Prospecting for the mining of minerals, except petroleum, may
only be conducted under authority of a mineral right granted by the Ministry of Energy and Minerals under this Act. The
three types of mineral rights most often encountered, which are also those applicable to AngloGold Ashanti, are:
prospecting licenses; retention licenses; and mining licenses.
A prospecting license grants the holder thereof the exclusive right to prospect in the area covered by the license for all
minerals, other than building and gemstones, for a period of three years. Thereafter, the license is renewable for two
further periods of two years each. On each renewal of a prospecting license, 50 percent of the area covered by the license
must be relinquished. Before application is made for a prospecting license, a prospecting reconnaissance for a maximum
area of 5,000 square kilometers is issued for a period of two years after which a three-year prospecting license is applied
for. A company applying for a prospecting license must, inter alia, state the financial and technical resources available to
it. A retention license can also be requested from the Minister, after the expiry of the 3-2-2-year prospecting license period,
for reasons ranging from funds to technical considera tions.
Mining is carried out through either a mining license or a special mining license, both of which confer on the holder thereof
the exclusive right to conduct mining operations in or on the area covered by the license. A mining license is granted for a
period of 10 years and is renewable for a further period of 10 years. A special mining license is granted for a period of
25 years and is renewable for a further period of 25 years.
77
If the holder of a prospecting license has identified a mineral deposit within the prospecting area which is potentially of
commercial significance, but it cannot be developed immediately by reason of technical constraints, adverse market
conditions or other economic factors of a temporary character, it can apply for a retention license which will entitle the
holder thereof to apply for a special mining license when it sees fit to proceed with mining operations.
A retention license is valid for a period of five years and is thereafter renewable for a single period of five years. A mineral
right may be freely assigned by the holder thereof to another person, except for a mining license, which must have the
approval of the Ministry to be assigned.
However, this approval requirement for the assignment of a mining license will not apply if the mining license is assigned
to an affiliate company of the holder or to a financial institution or bank as security for any loan or guarantee in respect of
mining operations.
A holder of a mineral right may enter into a development agreement with the Ministry to guarantee the fiscal stability of a
long-term mining project and make special provision for the payment of royalties, taxes, fees and other fiscal imposts.
AngloGold Ashanti has complied with all applicable requirements and the relevant licenses have been issued for 25 years
and expire in 2024.
United States of America
Mineral rights, as well as surface rights, in the United States are owned by private parties, state governments and the
federal government. Most land prospective for precious metals exploration, development and mining are owned by the
federal government and are obtained through a system of self-initiated mining claim location pursuant to the General
Mining Law of 1872, as amended. Individual states typically follow a lease system for state-owned minerals. Private
parties have the right to sell, lease or enter into other agreements, such as joint ventures, with respect to minerals that
they own or control. All mining activities, regardless of whether they are situated on privately- or publicly-owned lands, are
regulated by a myriad of federal, state and local laws, regulations, rules and ordinances, which address various matters
including environmental protection, mitigation and rehabilitation.
Authorizations and permits setting forth the activities and restrictions pertaining thereto are issued by the responsible
governmental agencies for all phases of mining activities.
The Cripple Creek & Victor Gold Mining Company joint venture consists almost entirely of owned patented mining claims
from public lands, with a small percentage of private and state lands being leased. The total area of control is
approximately 7,100 acres. Patented claims vest ownership in the holder, including the right to mine for an indefinite
tenure. All life-of-mine reserves are within these property controls. The mining and rehabilitation permits issued by the
State of Colorado are life-of-mine permits.
Ore Reserves
Ore reserve estimates are reported in accordance with the requirements of the SEC’s Industry Guide 7. Accordingly, as of
the date of reporting, all reserves are planned to be mined out under the life-of-mine plans within the period of AngloGold
Ashanti’s existing rights to mine, or within the renewal periods of AngloGold Ashanti’s rights to mine. In addition, as of the
date of reporting, all reserves are covered by required permits and governmental approvals. See “Item 4B.: Business
overview — Rights to mine and title to properties”, “— Safety and Health”, and “Item 4D.: Property, plant and equipment”.
AngloGold Ashanti has standard procedures for the estimation of ore reserves. These standard procedures are performed by
technical personnel at the mining operations and reviewed by regional and corporate competent persons.
78
In the case of its underground mines, the procedure is as follows: Firstly, gold content and tonnage are estimated for in-
situ mineralized material at a mining operation. This mineralized material is not necessarily economically viable.
Exclusions on the grounds of safety (for example, stability pillars, shaft pillars) are then defined. Grade and tonnage
curves specific for each of the deposits, in conjunction with the cost structure, yield, mine call factor, gold price estimates
are used to determine an optimal mining mix. This process facilitates the determination of the average grade to be mined
by each operation. This grade is then applied to the grade-tonnage curves, which in turn facilitates the determination of the
cut-off grade and ore reserve tonnage for the operation. A full mine design is carried out on the blocks of mineralized
material, excluding large mining areas that do not meet the cu t-off grade criterion. This mining plan is reviewed to ensure
that it satisfies the economic criterion and practical limitations of access and timing. If the review process is positive then
the mineralized material (with dilution) included in the mining plan is declared and published as the ore reserve for that
operation.
In the case of open-pit mines the procedure is as follows: revenue and costs are calculated for each mining block within a
three-dimensional model of the orebody using assumed values for gold price, operating costs and metallurgical
recoveries. An optimization process is then applied to determine the combination of blocks within the model that make a
positive contribution under these assumptions. Block selection is within a shell whose limits are defined by the planned
slope angles of the pit. Within this process, a cut-off grade is applied which determines the ore blocks to be treated and
included in the ore reserves. These blocks are scheduled with consideration being given to practical mining considerations
and limitations. Scheduled ore blocks that are classified as proven or probable constitute the ore reserve.
The gold price and exchange rate used for 2006 and 2005 Reserves are outlined in the following table.
2005
( 3 Year Average)
2006
(Business Plan)
2006
(3 Year Average)
Units
Reserve Gold Price
400
550
486 US$/oz
Exchange Rate – South Africa
6.75 6.50 6.53
ZAR/US$
Exchange Rate – Australia
0.72
0.73 0.75
US$/Aus$
Given the sustained increase in the gold price since 2002 and the positive gold price outlook, AngloGold Ashanti prepared
its life of mine business plans using a gold price of $550 per ounce. The ore reserves determined from the planning
process were then tested for economic viability at the three-year historical average gold price and currency exchange
rates shown in the above table for determining SEC compliant reserves. The resultant SEC compliant proven and
probable reserves are shown in the following pages.
In Australia and South Africa, AngloGold Ashanti is legally required to publicly report Ore Reserves and Mineral
Resources according to the Australasian Code for Reporting of Mineral Resources and Ore Reserves (JORC 2004) and
the South African Code for Reporting of Mineral Resources and Ore Reserves (SAMREC 2000). The SEC’s Industry
Guide 7 does not recognize Mineral Resources. Accordingly, AngloGold Ashanti does not report estimates of Mineral
Resources in this annual report on Form 20-F.
79
The total AngloGold Ashanti Ore Reserves increased from 63.3 million ounces in 2005 to 66.0 million ounces in
December 2006. The principal changes in AngloGold Ashanti’s ore reserves as at December 31, 2006 compared with
those published as at December 31, 2005 are as follows:
Moz
December 2005 Ore Reserves
63.3
Principal Reductions
2006 Total Depletion
-6.5
Tau Lekoa, due to lower grade and Mine Call Factor
-0.4
Moab Khotsong, due to drop in values as a result of drilling
-0.4
Bibiani, due to sale of property
-0.1
Other
-0.4
Principal Additions
Mponeng, due to inclusion of the VCR below 120 level project and higher gold price
2.9
Cripple Creek and Victor, due to planned extension of life
1.1
Sadiola, due to the inclusion of the deep sulphides
1.0
Boddington, due to upgrade of Inferred material in pit and increase in gold and copper prices
0.7
Sunrise Dam, due to inclusion of North-Wall Cutback and Cosmo
0.7
Iduapriem, due to increased gold price
0.5
AngloGold Ashanti Brasil Mineração, due to Cuiaba development and Corrego do Sitio Sulphide
0.5
Cerro Vanguardia, due to successful exploration programme and increased gold price
0.4
Siguiri, additional pit included
0.4
Navachab, due to a larger economic pit
0.3
Savuka, due to increased gold price
0.3
Yatela, due to the inclusion of an additional cutback
0.2
Serra Grande, due to incorporation of an open pit and development of levels with higher tons than expected
0.2
Morila, due to the increased gold price
0.1
Other
1.4
December 2006 Ore Reserves*
66.0
* rounding may result in computational diifferences
AngloGold Ashanti will continue to pursue a strategy of increasing value-adding reserves through expansion projects,
brownfields and greenfields exploration and acquisition of new assets.
The ore reserve estimates in this document include ore reserves below current infrastructure in the case of certain South African
and Ghanaian underground mines which are in production. These ore reserves have been determined based upon completed
economic studies.
Audit of 2005 Mineral Resource and Ore Reserve statement
During the course of the year, the AngloGold Ashanti 2005 Mineral Resource and Ore Reserve statements were submitted
to independent consultants for review. The Mineral Resources and Ore Reserves from six of AngloGold Ashanti’s global
operations were selected and subjected to review. The six operations that were reviewed were Moab Khotsong,
Tau Lekoa, Vaal River Surface, Navachab, Siguiri and Serra Grande.
The company has been informed that the audit identified no material shortcomings in the process by which AngloGold
Ashanti’s Reserves were evaluated. It is the company’s intention to repeat this process so that all its operations will be
audited over a three-year period. The audit of those operations selected for review during 2006 is currently in progress.
AngloGold Ashanti’s ore reserve statements have been prepared by the competent persons who manage AngloGold
Ashanti’s ore reserves. See “Item 6.: Directors, senior management and employees”.
80
Ore Reserves: Imperial
At December 31, 2006
Proven Ore Reserves
(1)
Probable
Ore
Reserves
(1)
Metallurgical
Gold
Gold
Recovery
Tons
(5)
Grade Content
(1)
Tons
(5)
Grade Content
(1)
Factor
(mill)
(oz/ton)
(mill oz)
(mill)
(oz/ton)
(mill oz)
percent
South Africa
Vaal River
Great Noligwa
9.7
0.222
2.2
9.1
0.207
1.9
96.9
Kopanang 1.6
0.259
0.4
18.2
0.242
4.4
97.8
Moab Khotsong
0.2
0.260
0.1
9.0
0.346
3.1
97.6
Tau Lekoa
0.7
0.145
0.1
2.6
0.119
0.3
97.0
West Wits
Mponeng
(2)
2.0
0.327
0.6
24.6
0.250
6.1
98.5
Savuka
0.6
0.174
0.1
0.4
0.154
0.1
97.2
TauTona
(2)
0.6
0.332
0.2
14.5
0.329
4.8
98.1
Surface
Surface sources
0.0
0.000
0.0
115.5
0.017
1.9
44 – 88
(4)
Argentina
Cerro Vanguardia (92.5 percent)
(3)
0.9
0.207 0.2
7.6
0.181
1.4 95.2
Australia
Boddington (33.33 percent)
(3)
50.4
0.027
1.4
138.4
0.023
3.2
82.2
Sunrise Dam
10.1
0.070
0.7
8.1
0.147
1.2
83.5-85
(4)
Brazil
AngloGold Ashanti Brasil Mineraçáo
2.3 0.187
0.4 10.3 0.22 2.3 87-94
(4)
Serra Grande (50 percent)
(3)
1.8
0.133
0.2
1.1
0.173
0.2
91-96
(4)
Ghana
Bibiani
(6)
0.0
0.000
0.0
0.0
0.000
0.0
-
Iduapriem (85 percent)
(3)
35.9
0.045
1.6
12.9
0.048
0.6
94.5
Obuasi
20.1
0.094
1.9
69.3
0.098
6.8
80-81.0
(4)
Guinea
Siguiri (85 percent)
(3)
20.1
0.017
0.3
58.1
0.025
1.4
93-97.5
Mali
Morila (40 percent)
(3)
6.8
0.073
0.5
5.0
0.072
0.4
89-91.5
(4)
Sadiola (38 percent)
(3)
8.2
0.042
0.3
16.3
0.081
1.3
80-94
(4)
Yatela (40 percent)
(3)
2.3
0.027
0.1
1.6
0.135
0.2
85
(4)
Namibia
Navachab
5.9
0.032
0.2
11.2
0.048
0.5
92
(4)
Tanzania
Geita
4.5
0.028
0.1
82.6
0.101
8.3
66.4-92.8
(4)
United States of America
Cripple Creek & Victor
103
0.027
2.8
39.2
0.027
1.0
60
Total 287.7
0.050
14.479
655.6
0.079
51.491
(1)
Ore reserves include marginally economic and diluting materials delivered for treatment and allow for losses that may occur during mining.
(2)
Probable ore reserves include reserves below infrastructure. See table below.
(3)
Ore reserves attributable to AngloGold Ashanti’s percentage interest shown.
(4)
Recovery factor varies according to ore type.
(5)
Tons refers to a short ton, which is equivalent to 2000lbs avoirdupois
(6)
Bibiani was sold on December 1, 2006.
(7)
The Vaal Reef Ore Reserves include 26.10 million pounds of Uranium by-products; this can not be accounted for by mine as Great Noligwa,
Kopanang and Moab Khotsong feed to a combination of plants.
(8)
The Ore Reserve contains 24.5 million ounces of silver to be recovered as a by-product.
(9)
The Ore Reserve contains 418 million pounds of copper.
(10)
0.55 million tons of sulphure will be recovered from processing the Ore Reserve.
The 2006 probable ore reserves include reserves below infrastructure in the case of the following underground mines
currently in production:
Mine
Tons (millions)
Grade (ounces/ton)
Gold Content (million ounces)
Tau Tona
5.0
0.40
2.0
Mponeng 8.8
0.27
2.4
Obuasi 4.4
0.27
1.2
Total 18.2
0.31
5.6
81
Ore Reserves: Imperial
At December 31, 2005
Proven Ore Reserves
(1)
Probable
Ore
Reserves
(1)
Metallurgical
Gold
Gold
Recovery
Tons
(8)
Grade Content
(1)
Tons
(8)
Grade Content
(1)
Factor
(mill)
(oz/ton)
(mill oz)
(mill)
(oz/ton)
(mill oz)
percent
South Africa
Vaal River
Great Noligwa
6.6
0.252
1.7
12.2
0.240
2.9
97.1
Kopanang
(6)
1.2
0.282
0.4
21.7
0.237
5.2
97.7
Moab Khotsong
0.7
0.274
0.2
9.4
0.364
3.4
97.6
Tau Lekoa
4.3
0.122
0.5
4.2
0.118
0.5
96.7
West Wits
Mponeng
2.1
0.204
0.4
18.1
0.227
4.1
98.4
Savuka
(3)
0.0
0.241
0.0
0.0
0.263
0.0
97.6
TauTona
(2)
1.0
0.340
0.3
15.5
0.318
4.9
97.7
Surface
Surface sources
0.0
0.000
0.0
126.9
0.018
2.3
73.1
Ergo
0.00(7)
0.00-
0.00-
-
-
-
-
-
Argentina
Cerro Vanguardia (92.5 percent)
0.00(4)
0.001.7
0.930.233
0.4
4.9
0.190
0.9 95.2
Australia
Boddington (33.33 percent)
(4)
45.4
0.029
1.3
102.6
0.025
2.5
n/a
Sunrise Dam
0.007.2
0.000.062
0.000.4
10.4
0.128
1.3
82-90
(5)
Brazil
AngloGold Ashanti Brasil Mineraçãáo
0.002.3
0.200.187
0.000.4
9.5
0.219
2.1
87-92.5
(5)
Serra Grande (50 percent)
0.00(4)
0.000.7
0.000.138
0.1
1.4
0.208
0.3
92.8-96.1
(5)
Ghana
Obuasi
0.00
–
–
Bibiani
0.004.4
–0.030
–0.1
0.4
0.027
0.0
60
Iduapriem (85 percent)
0.00(4)
–27.4
–0.052
1.4
8.1
0.053
0.4
94
Obuasi
11.8
0.078
0.9
42.9
0.180
7.7
75-81.9
(5)
Guinea
Siguiri
0.00
–
–
Siguiri (85 percent)
(4)
26.0
0.018
0.5
40.5
0.029
1.2
93.5
Mali
Sadiola
0.00
0.31
0.00
Morila (40 percent)
(4)
7.0
0.094
0.7
2.7
0.106
0.3
89-91.5
(5)
Sadiola (38 percent)
(4)
3.0
0.057
0.2
5.8
0.119
0.7
75-93
(5)
Yatela (40 percent)
0.00(4)
0.000.6
0.000.039
Morila0.0
0.321.7
0.310.116
0.330.2
75-85
(5)
Namibia
Navachab
0.001.3
0.000.054
0.000.1
9.8
0.048
0.5
87-92
(5)
Tanzania
Geita
0.0024.3
0.000.099
0.492.4
44.5
0.137
6.1
66-95
(5)
United States of America
Cripple Creek & Victor
0.00
0.00
0.00
Group 0.19
0.29
0.31
AngloGold Ashanti has a policy of investigating all fatal accidents independently of mine-based and statutory investigations
using a team convened by the corporate office. The group believes that this methodology not only indicates the seriousness
with which the board and executive view fatal accidents, but reveals important risk issues and lessons learnt.
101
• Lost time injury frequency rate (LTIFR) (per million man hours)
2004 2003 2002
South Africa
Mponeng
9.50
9.81
10.91
TauTona
11.40
8.24
7.67
Savuka
12.92
17.57
17.12
Great Noligwa
10.04
9.83
11.06
Kopanang
12.96
14.08
12.91
Tau Lekoa
15.43
25.96
17.84
Moab Khotsong
6.70
7.11
6.82
Ergo
1.90
1.75
1.53
Argentina
Cerro Vanguardia
6.66
7.95
3.72
Australia
Sunrise Dam
3.73
6.05
11.00
Brazil
AngloGold Ashanti Mineração
1.56
4.04
5.73
Serra Grande
1.21
1.94
0.70
Ghana
Obuasi
2.53
–
–
Bibiani
0.00
–
–
Iduapriem
0.00
–
–
Guinea
Siguiri
0.94
–
–
Mali
Sadiola
1.13
0.31
1.54
Yatela
0.76
2.92
2.07
Morila
1.94
3.78
6.27
Namibia
Navachab
0.90
3.60
3.05
Tanzania
Geita
1.00
0.79
2.11
United States of America
Cripple Creek & Victor
0.0096.3
3.220.025
4.362.4
35.0
0.025
0.9
62
GroupTotal 6.56275.3
8.830.054
8.8614.9
528.2
0.092
48.4
(1)
Ore reserves include marginally economic and diluting materials delivered for treatment and allow for losses that may occur during mining.
• (2)
Probable ore reserves include reserves below infrastructure. See table below.
(3)
Negligible proven and probable ore reserves as the mine is closing.
(4)
Ore reserves attributable to AngloGold Ashanti’s percentage interest shown.
(5)
Recovery factor varies according to ore type.
(6)
A mining license for Edom has been approved.
(7)
Ergo was closed in March 2005.
(8)
Tons refers to a short ton, which is equivalent to 2000lbs avoirdupois.
The 2005 probable ore reserves include reserves below infrastructure in the case of the following South African mine:
Mine
Tons (millions)
Grade (ounces/ton)
Gold Content (million ounces)
Tau Tona
4.8
0.342
1.7
Total 4.8
0.342
1.7
`
The ore reserves in respect of the remaining AngloGold Ashanti underground mines do not include any ore reserves
below infrastructure
.
82
Ore Reserves: Metric
At December 31, 2006
Proven
Ore
Reserves
(1)
Probable Ore Reserves
(1)
Metallurgical
Gold
Gold
Recovery
Tonnes Grade Content
Tonnes
Grade
Content
Factor
(mill)
(g/t)
(tonnes)
(mill)
(g/t)
(tonnes)
percent
South Africa
AuditsVaal River
Both internal
Great Noligwa
8.8
7.61
67.0
8.2
7.10
58.5
96.9
Kopanang
1.5
8.87
13.2
16.5
8.31
137.2
97.8
Moab Khotsong
0.2
8.93
1.9
8.2
11.86
96.7
97.6
Tau Lekoa
0.6
4.97
3.1
2.4
4.07
9.7
97.0
West Wits
Mponeng
(2)
1.8
11.22
19.9
22.3
8.56
191.0
98.5
Savuka
0.6
5.97
3.3
0.4
5.29
2.1
97.2
TauTona
(2)
0.6
11.4
6.7
13.2
11.27
148.4
98.1
Surface
Surface sources
0.0
0.00
0.0
104.8
0.57
59.5
44-88
(4)
Argentina
Cerro Vanguardia (92.5 percent)
(3)
0.9
7.09
6.1
6.9
6.22
42.7 95.2
Australia
Boddington (33.33 percent)
(3)
45.8
0.94
42.8
125.6
0.78
98.5
82.2
Sunrise Dam
9.1
2.39
21.8
7.6
4.87
36.9
83.5-85
Brazil
AngloGold Ashanti Brasil Mineraçáo
2.1
6.42
13.2
9.3
7.56
70.4
87-94
(4)
Serra Grande (50 percent)
(3)
1.6
4.57
7.5
1
5.92
5.9
91-96
(4)
Ghana
Bibiani
(5)
0.0
0.00
0.0
0.0
0.00
0.0
-
Iduapriem (85 percent)
(3)
32.5
1.53
49.7
11.7
1.63
19.0
94.5
Obuasi
18.2
3.21
58.5
62.9
3.38
212.3
80-81.0
(4)
Guinea
Siguiri (85 percent)
(3)
18.2
0.60
10.8
52.7
0.85
45.0
93-97.5
Mali
Morila (40 percent)
(3)
6.1
2.50
15.3
4.5
2.47
11.2
89-91.5
(4)
Sadiola (38 percent)
(3)
7.5
1.45
10.8
14.8
2.79
41.3
80-94
(4)
Yatela (40 percent)
(3)
2.1
0.94
1.9
1.4
4.63
6.6
85
(4)
Namibia
Navachab
5.3
1.08
5.8
10.1
1.63
16.5
92
(4)
Tanzania
Geita
4.0
0.97
3.9
74.9
3.47
259.6
66.4-92.8
(4)
United States of America
Cripple Creek & Victor
93.4
0.93
87
35.6
0.91
32.5
60
Total260.9
1.73
450.2
594.7
2.69
1601.5
(1)
Ore reserves include marginally economic and diluting materials delivered for treatment and allow for losses that may occur during mining.
(2)
Probable ore reserves include reserves below infrastructure. See table below.
(3)
Ore reserves attributable to AngloGold Ashanti’s percentage interest shown.
(4)
Recovery factor varies according to ore type.
(5)
Bibiani Mine was sold on December 1, 2006.
(6)
The Vaal Reef Ore Reserves include 11.8 thousand tons of Uranium by-products; this can not be accounted for by mine as Great Noligwa, Kopanang
and Moab Khotsong feed to a combination of plants.
(8)
The Ore Reserve contains 0.76 million tons of silver to be recovered as a by-product.
(9)
The Ore Reserve contains 0.19 million tons of copper.
(10)
0.50 million tons of sulphure will be recovered from processing the Ore Reserve.
The 2006 probable ore reserves include reserves below infrastructure in the case of the following underground mines
currently in production:
Mine
Tonnes (millions)
Grade (grams/tonne)
Gold Content (tonnes)
TauTona 4.5
13.71
62.3
Mponeng 7.9
9.26
73.6
Obuasi 4.0
9.43
37.6
Total 16.4
32.4
173.5
83
Ore Reserves: Metric
At December 31, 2005
Proven
Ore
Reserves
(1)
Probable Ore Reserves
(1)
Metallurgical
Gold
Gold
Recovery
Tonnes Grade Content
Tonnes
Grade
Content
Factor
(mill)
(g/t)
(tonnes)
(mill)
(g/t)
(tonnes)
percent
South Africa
Vaal River
Great Noligwa
6.0
8.65
52.2
11.1
8.23
91.2
97.1
Kopanang
(6)
1.1
9.66
10.9
19.7
8.13
160.4
97.7
Moab Khotsong
0.6
9.39
6.0
8.5
12.46
106.4
97.6
Tau Lekoa
3.9
4.17
16.1
3.8
4.05
15.3
96.7
West Wits
Mponeng
1.9
7.01
13.1
16.4
7.79
127.6
98.4
Savuka
0.0
8.27
0.2
0.0
9.02
0.3
97.6
TauTona
(2)
0.9
11.66
10.5
14.1
10.92
153.5
97.7
Surface
Surface sources
0.0
0.00
0.0
115.1
0.61
70.3
73.1
Ergo
(7)
-
-
-
-
-
-
-
Argentina
Cerro Vanguardia (92.5 percent)
(4)
1.6
7.99
12.6
4.5
6.53
29.295.2
Australia
Boddington (33.33 percent)
(4)
41.2
1.01
41.4
93.1
0.85
78.8
n/a
Sunrise Dam
6.5
2.11
13.7
9.4
4.39
41.4
82.90
Brazil
AngloGold Ashanti Brasil Mineraçáo
2.1
6.4
13.2
8.6
7.5
64.4
87-92.5
(5)
Serra Grande (50 percent)
(4)
0.6
4.72
3.0
1.2
7.14
8.8
92.8-96.1
(5)
Ghana
Bibiani
4.0
1.03
4.1
0.4
0.93
0.3
60
Iduapriem (85 percent)
(4)
24.8
1.78
44.1
7.3
1.81
13.3
94
Obuasi
10.7
2.67
28.5
39.0
6.17
240.4
75-81.9
(5)
Guinea
Siguiri (85 percent)
(4)
23.6
0.62
14.5
36.7
1.00
36.6
93.5
Mali
Morila (40 percent)
(4)
6.4
3.21
20.5
2.5
3.63
9.0
89-91.5
(5)
Sadiola (38 percent)
(4)
2.8
1.95
5.4
5.3
4.09
21.5
75-93
(5)
Yatela (40 percent)
(4)
0.5
1.33
0.7
1.5
3.97
6.1
75-85
(5)
Namibia
Navachab
1.2
1.85
2.2
8.9
1.65
14.7
87-92
(5)
Tanzania
Geita
22.1
3.40
75.1
40.4
4.69
189.2
66-95
(5)
United States of America
Cripple Creek & Victor
87.4
0.86
75.4
31.8
0.86
27.4
62
Total 249.8
1.86
463.4
479.2
3.14
1506.0
(1)
Ore reserves include marginally economic and diluting materials delivered for treatment and allow for losses that may occur during mining.
(2)
Probable ore reserves include reserves below infrastructure. See table below.
(3)
Negligible proven and probable ore reserves as the mine is closing.
(4)
Ore reserves attributable to AngloGold Ashanti’s percentage interest shown.
(5)
Recovery factor varies according to ore type.
(6)
A mining license for Edom has been approved.
(7)
Ergo was closed in March 2005.
The 2005 probable ore reserves include reserves below infrastructure in the case of the following South African mine:
Mine
Tonnes (millions)
Grade (grams/tonne)
Gold Content (tonnes)
TauTona 4.4
11.73
51.4
Total 4.4
11.73
51.4
The ore reserves in respect of the remaining AngloGold Ashanti underground mines do not include any ore reserves
below infrastructure
.
84
Stockpiles: Imperial
Stockpiles are previously mined ore scheduled for future process plant feed. The proven and probable ore reserves
include the following stockpile material:
Stockpiles
(1)
At December 31, 2006
Tons (million)
Grade (ounces/ton)
Gold content (million
ounces)
South Africa
Vaal River
Great Noligwa
0.000
– 0.000
Kopanang
0.000
– 0.000
Moab Khotsong
0.000
– 0.000
Tau Lekoa
0.000
– 0.000
West Wits
Mponeng
0.000
– 0.000
Savuka
0.000
– 0.000
TauTona
0.000
– 0.000
Surface
Surface sources
(2)
115.481
0.02 1.912
Argentina
Cerro Vanguardia (92.5 percent)
0.020
0.58 0.012
Australia
Boddington (33.33 percent)
0.165
0.02 0.004
Sunrise Dam
7.455
0.05 0.399
Brazil
AngloGold Ashanti Brasil Mineraçáo
0.051
0.23 0.012
Serra Grande (50 percent)
0.073
0.23 0.017
Ghana
Iduapriem (85 percent)
1.373
0.04 0.049
Obuasi
(3)
51.647
0.04 2.133
Guinea
Siguiri (85 percent)
20.052
0.02 0.348
Mali
Morila
(3)
(40 percent)
6.561
0.05 0.347
Sadiola (38 percent)
8.057
0.04 0.327
Yatela (40 percent)
2.278
0.03 0.062
Namibia
Navachab
4.600
0.02 0.102
Tanzania
Geita
4.457
0.03 0.126
United States of America
Cripple Creek & Victor
0.000
– 0.000
Note: The rounding of figures and converting from metric to imperial units may result in minor computational discrepancies.
(1)
Attributable to AngloGold Ashanti.
(2)
Centralized operations treating material on surface that was previously generated by several underground operations.
(3)Includes Tailing Storage Facilities.
85
Stockpiles: Imperial
Stockpiles are previously mined ore scheduled for future process plant feed. The proven and probable ore reserves
include the following stockpile material:
Stockpiles
(1)
At December 31, 2005
Tons (million)
Grade (ounces/ton)
Gold content (million
ounces)
South Africa
Vaal River
Great Noligwa
0.000
– 0.000
Kopanang
0.000
– 0.000
Moab Khotsong
0.000
– 0.000
Tau Lekoa
0.000
– 0.000
West Wits
Mponeng
0.000
– 0.000
Savuka
0.000
– 0.000
TauTona
0.000
– 0.000
Surface
(2)
0.000
– 0.000
Surface
Surface sources
(2)
0.000
– 0.000
Argentina
Cerro Vanguardia (92.5 percent)
0.077
0.205 0.016
Australia
Boddington (33.33 percent)
0.000
– 0.000
Sunrise Dam
5.310
0.050 0.263
Brazil
AngloGold Ashanti Brasil Mineraçáo
0.044
0.226 0.010
Serra Grande (50 percent)
0.047
0.203 0.010
Ghana
Iduapriem (85 percent)
0.536
0.048 0.026
Obuasi
3.307
0.018 0.058
Guinea
Siguiri (85 percent)
23.982
0.016 0.378
Mali
Morila (40 percent)
3.536
0.069 0.243
Sadiola (38 percent)
3.039
0.057 0.173
Yatela (40 percent)
0.569
0.039 0.022
Namibia
Navachab
1.286
0.054 0.069
Tanzania
Geita
0.826
0.084 0.069
United States of America
Cripple Creek & Victor
0.000
– 0.000
Note: The rounding of figures and converting from metric to imperial units may result in minor computational discrepancies.
(1)
Attributable to AngloGold Ashanti.
(2)
Centralized operations treating material on surface that was previously generated by several underground operations.
86
Stockpiles: Metric
Stockpiles are previously mined ore scheduled for future process plant feed. The proven and probable ore reserves
include the following stockpile material:
Stockpiles
(1)
At December 31, 2006
Tonnes (million)
Grade (grams/tonne) Gold content (tonnes)
South Africa
Vaal River
Great Noligwa
0.000
– 0.000
Kopanang
0.000
– 0.000
Moab Khotsong
0.000
– 0.000
Tau Lekoa
0.000
– 0.000
West Wits
Mponeng
0.000
– 0.000
Savuka
0.000
– 0.000
TauTona
0.000
– 0.000
Surface
Surface sources
(2)
104.763
0.57 59.475
Argentina
Cerro Vanguardia (92.5 percent)
0.018
20.00 0.369
Australia
Boddington (33.33 percent)
0.150
0.80 0.120
Sunrise Dam
6.763
1.82 12.325
Brazil
AngloGold Ashanti Brasil Mineraçáo
0.046
7.95 0.368
Serra Grande (50 percent)
0.066
7.87 0.522
Ghana
Iduapriem (85 percent)
1.246
1.23 1.531
Obuasi
(3)
46.853
1.42 66.353
Guinea
Siguiri (85 percent)
18.191
0.60 10.828
Mali
Morila
(3)
(40 percent)
5.951
1.82 10.815
Sadiola (38 percent)
7.309
1.39 10.160
Yatela (40 percent)
2.066
0.94 1.940
Namibia
Navachab
4.173
0.76 3.181
Tanzania
Geita
4.044
0.97 3.924
United States of America
Cripple Creek & Victor
0.000
– 0.000
(1)
Attributable to AngloGold.
(2)
Centralized operations treating material on surface that was previously generated by several underground operations.
(3)
Includes Tailing Storage Facilities.
87
Stockpiles: Metric
Stockpiles are previously mined ore scheduled for future process plant feed. The proven and probable ore reserves
include the following stockpile material:
Stockpiles
(1)
At December 31, 2005
Tonnes (million)
Grade (grams/tonne) Gold content (tonnes)
South Africa
Vaal River
Great Noligwa
0.000
– 0.000
Kopanang
0.000
– 0.000
Moab Khotsong
0.000
– 0.000
Tau Lekoa
0.000
– 0.000
West Wits
Mponeng
0.000
– 0.000
Savuka
0.000
– 0.000
TauTona
0.000
– 0.000
Surface
(2)
0.000
– 0.000
Surface
Surface sources
(2)
0.000
– 0.000
Argentina
Cerro Vanguardia (92.5 percent)
0.070
7.010.492
Australia
Boddington (33.33 percent)
0.000
–0.000
Sunrise Dam
4.817
1.708.178
Brazil
AngloGold Ashanti Brasil Mineraçáo
0.040
7.76 0.311
Serra Grande (50 percent)
0.043
6.970.296
Ghana
Iduapriem (85 percent)
0.486
1.660.807
Obuasi
3.000
0.60 1.800
Guinea
Siguiri (85 percent)
21.756
0.54 11.744
Mali
Morila (40 percent)
3.208
2.36 7.555
Sadiola (38 percent)
2.757
1.955.373
Yatela (40 percent)
0.517
1.330.688
Namibia
Navachab
1.167
1.85 2.160
Tanzania
Geita
0.750
2.88 2.159
United States of America
Cripple Creek & Victor
0.000
– 0.000
(1)
Attributable to AngloGold.
(2)
Centralized operations treating material on surface that was previously generated by several underground operations.
88
Drill hole spacing: Imperial
In determining the proven and probable ore reserves, AngloGold Ashanti applied the following drill hole spacings:
Drill Hole Spacings
Proven Ore Reserves
Probable Ore Reserves
South Africa
Underground sources Ore body opened up, developed and sampled on a
7 – 10 foot spacing on raise lines and on a 16 x 16
grid thereafter
From a 130 x 130 foot spacing up to
3200 x 3200 foot spacing
Surface sources
Variable sampling strategies: Belt samplers, cross
stream residue samplers and bulk sampling
campaigns
Variable sampling strategies: Belt
samplers, cross stream residue
samplers
Argentina
Cerro Vanguardia
16 x 41 feet
33 x 82 feet
Australia
Boddington
The average weighted distance to samples must be
less than 131 feet of block centroid and more than
25 samples must have been used in the estimation
The average weighted distance to
samples must be less than 197 feet
of block centroid and more than 15
samples must have been used in
the estimation
Sunrise Dam
82 x 82 feet
131 x 131 feet
Brazil
AngloGold Ashanti
Brasil Mineraçáo
Two adjacent levels of ore body opened up,
developed and sampled on a 217 x 7 foot interval.
Drilling pattern of 196 x 65 feet for Cuiaba
Expansion Project.
Two adjacent levels of ore body
opened up, developed and sampled
on a 217 x 7 foot interval. Drilling
pattern of 196 x 65 feet for Cuiaba
Expansion Project.
Serra Grande
(50 percent)
66 x 33 feet
66 x 164 feet
Ghana
Iduapriem
164 x 164 feet
246 x 164 feet
Obuasi - Surface
66 x 66 feet
98 x 98 feet
Obuasi - Underground 66 x 66 feet
197 x 197 feet
Guinea
Siguiri
16 x 33 feet
164 x 82 feet
Mali
Morila
33 x 33 feet
98 x 98 feet
Sadiola
82 x 82 feet
115 x 115 feet
Yatela
33 x 33 feet and 82 x 82 feet
115 x 148 feet
Namibia
Navachab
33 x 33 feet
82 x 82 feet
Tanzania
Geita
33 x 33 feet
131 x 131 feet
USA
Cripple Creek & Victor <98 x 98 feet
>98 x 98 feet
89
Drill hole spacing: Metric
In determining the proven and probable ore reserves, AngloGold Ashanti applied the following drill hole spacings:
Drill Hole Spacings
Proven Ore Reserves
Probable Ore Reserves
South Africa
Underground sources Ore body opened up, developed and sampled on a 2 –
3 meter spacing on raise lines and on a 5 x 5 grid
thereafter
From a 40 x 40 meter spacing up
to 1000 x 1000 meter spacing
Surface sources
Variable sampling strategies: Belt samplers, cross
stream residue samplers and bulk sampling
campaigns
Variable sampling strategies: Belt
samplers, cross stream residue
samplers
Argentina
Cerro Vanguardia
5 x 12.5 meter
10 x 25 meter
Australia
Boddington
The average weighted distance to samples must be
less than 40 meter of block centroid and more than 25
samples must have been used in the estimation
The average weighted distance to
samples must be less than 60
meter of block centroid and more
than 15 samples must have been
used in the estimation
Sunrise Dam
25 x 25 meter
40 x 40 meter
Brazil
AngloGold Ashanti
Brasil Mineraçáo
Two adjacent levels of ore body opened up, developed
and sampled on a 66 x 2 meter interval. Drilling pattern
of 60 x 20 for Cuiaba Expansion Project.
Two adjacent levels of ore body
opened up, developed and
sampled on a 66 x 2 meter interval
Serra Grande
(50 percent)
20 x 10 meter
20 x 50 meter
Ghana
Iduapriem
50 x 50 meter
75 x 50 meter
Obuasi – Surface
20 x 20 meter
30 x 30 meter
Obuasi - Underground 20 x 20 meter
60 x 60 meter
Guinea
Siguiri
5 x 10 meter
50 x 25 meter
Mali
Morila
10 x 10 meter
30 x 30 meter
Sadiola
25 x 25 meter
35 x 35 and 25 x 25 meter
Yatela
25 x 25 and 10 x 10 meter
35 x 45 meter
Namibia
Navachab
10 x 10 meter
25 x 25 meter
Tanzania
Geita
10 x 10 meter
40 x 40 meter
USA
Cripple Creek & Victor <30 x 30 meter
>30 x 30 meter
90
Research and development
AngloGold Ashanti’s research and development includes a range of initiatives in geology, mining, processing, engineering,
safety, environment, marketing and knowledge management. A combination of collaborative and in-house research is
adopted. Collaborative partners include research organizations, universities, mining companies, mining service providers
and contractors.
In addition, AngloGold Ashanti’s wholly owned subsidiary, ISS International Ltd, (ISSI), is a global company specializing in
seismic monitoring of mines, engineering structures and earthquakes. The company initiates and undertakes both
broad-based and focused research and development to enhance the safety of those working in mining by developing
effective monitoring and warning technology systems. ISSI functions on the international stage and its involvement in
seismic matters extends well beyond the mining environment.
AngloGold Ashanti is a signatory of the International Cyanide Management Institute (ICMI) and is committed to reaching
compliance with the International Cyanide Management Code. All processing operations group-wide were audited by an
in-house audit team, areas of improvement were identified at the operations and a schedule is in place for the operations
to undergo ICMI external audits to demonstrate compliance with the International Cyanide Management Code. Extensive
cyanide speciation studies have been conducted in collaboration with Mintek at the various plants in the South Africa
region to determine, on both a macro and a micro-scale, the environmental impacts of cyanide in residue material.
A project evaluating the impacts of hypersaline water and cyanide on wildlife and the environment is under way in
Australia in collaboration with ACMER. Continuing projects cover cyanide measurement and control, cyanide recovery and
cyanide destruction. These projects have enabled a clearer understanding of the environmental impacts of cyanide and
have led to the implementation of strategies to ensure compliance with the requirements of the International Cyanide
Management Code.
The AuTEK project to develop new industrial uses for gold is based at Mintek in Johannesburg. AngloGold Ashanti
continues to support the catalysis initiative within the programme. This involves gold catalyst development for carbon
monoxide oxidation, for use in fuel cells and in photocatalysis. Current efforts are conductedaimed at improving scale-up and
commercialization of gold catalysts.
Geology initiatives include:
· The development of a pneumatic sampler for underground use
· A digital terrain modeling system for proper representation of 3D data on underground plans, particularly in
steeply dipping areas
· Geometallurgical mapping and mine modeling to systematically produce metallurgical ore body domains
·A hydrothermal project to understand chemical characteristics of ores and their potential impacts on processing
and recovery
Mining initiatives include:
· Improving short-term seismic hazard assessment through improved numerical modeling capability
· Improving tunnel support systems in deep, seismically active mines through a destructive proof-testing approach
· Development of an oscillating disc cutter to be mounted on a four wheel drive vehicle for underground face
sampling
· Development and testing of an underground water cannon system for stope cleaning
· A large open-pit research project to develop a new toolbox for geotechnical design and risk management
· Development of an alternative radar system for radar monitoring of pit slopes
· Development of micro-seismic monitoring for pit wall stability as a backup monitoring system
· Risk-based mine planning using conditional simulation techniques
· Integration of software used for geological mapping and modeling
91
Processing initiatives include:
· Thiosulphate leaching of gold as a development of a non-cyanide gold extraction process
· Use of digital camera technology to measure mill feed size, using this information to improve mill process control
· Establishing uranium leaching conditions for maximum extraction of uranium from the Vaal River operations
· Amira P9N comminution technology project on milling efficiency, steel ball and liner wear
Amira P420 gold processing project looking at refractory ore treatment, thiosulphate leaching, cyanide and the
environment
· Amira P266 thickening project, improving thickener performance using discrete element analysis and modeling
· Evaluation of optical sorting as a method for upgrading ore streams or waste rock dumps
· Thickened tailings beach slope angle modeling to improve tailings facility operation
Other initiatives include:
· Monitoring real-time corrosion rates in uranium plant elution columns
· Void-filling using aerated cement walls for improved management of heat, radiation and ventilation
· Automated in-stope water-blast to reduce silica dust exposure in stopes
Global Exploration
The replacement of production ounces through near-mine (brownfields) exploration continued to remain a high priority for
AngloGold Ashanti in 2006. During the year, brownfields exploration activities continued around all of the group’s present
operations.
In 2006, exploration activities in new areas (greenfields exploration) were primarily focused on the Tropicana Joint Venture
Project in Western Australia, in Colombia, and in the Democratic Republic of Congo (DRC). Joint ventures and
partnerships with other companies facilitated further greenfields exploration activities in Russia, China, Laos and the
Philippines, while the company divested its exploration assets in both Alaska and Mongolia during the year. The discovery
of new long-life, low-cost mines remains the principle objective of the greenfields exploration programme, although
AngloGold Ashanti is also committed to maximizing shareholder value by exiting or selling those exploration assets that do
not meet its internal growth criteria and also by opportunistically investing in prospective junior exploration companies.
During 2006, total expenditure amounted to $103 million (including equity a ccounted joint ventures). Expenditure is
expected to increase to $163 million (including equity accounted joint ventures) in 2007.
Argentina
At Cerro Vanguardia, drilling of over 30 linear kilometers along an extensive array of veins was completed to detect
viable oreshoots.
Australia
Brownfields: At Sunrise Dam, brownfields exploration continues to focus on increasing the underground resource
inventory and increasing the confidence category of the Mineral Resources so that Ore Reserve conversion can occur.
Underground diamond drilling has been successful in identifying extensions to many of the known zones.
At Boddington Gold Mine, six diamond drill rigs were employed by the end of 2006 on drill programmes to convert
Inferred Mineral Resource to Indicated Mineral Resource within the planned pit and on near-pit resource extensions.
Mineral Resource conversion drilling during 2006 primarily focused on the Central Diorite zone of the Wandoo South pit
where, historically, broad zones of mineralization have been intersected.
Greenfields: AngloGold Ashanti holds a 70 percent interest in the Tropicana Joint Venture Project, a 12,260 square
kilometer tenement package located to the east and north-east of Kalgoorlie in Western Australia. Prior to the
commencement of AngloGold Ashanti’s exploration programme at Tropicana in 2002, no significant gold exploration had
been undertaken in the district.
Joint venture partner Independence Group NL holds a free carried interest in the project until the completion of a
pre-feasibility study, at which point Independence Group NL is required to begin to contribute in terms of its 30 percent
interest.
92
Initial drill target generation at Tropicana has been achieved primarily using soil geochemistry, with wide-spaced soil
sampling completed over the majority of the granted tenure. Drilling to date at both the Tropicana zone and recently-
discovered Havana zone has confirmed the potential of the project to host a multi-million ounce gold resource. Additional
early-stage targets requiring closer-spaced follow-up soil sampling and drill testing have also been identified regionally.
Gold mineralization at the Tropicana prospect (including the Havana zone), which is located 200 km east-south-east of
AngloGold Ashanti’s Sunrise Dam operation, has been defined by both reverse circulation and diamond drilling to extend
over a strike length of approximately four kilometers. The mineralization is open to both the south and down-dip, and
drilling is currently testing a potential block of fault-offset mineralization to the north. The company is currently undertaking
an intensive exploration and resource development drilling programme at Tropicana, and a pre-feasibility study is
expected to commence in mid-2007.
First-pass aircore drilling at the Beachcomber 1 prospect, located 220 km south of the Tropicana prospect in the southern
portion of the tenement package, has intersected 4 meters at 43.5 grams per tonne from a depth of 24 meters. Additional
drilling is currently underway to understand the dimensions and significance of the result.
Brazil
Brownfields: At Corrego do Sitio, prospecting for both open pit and underground ore continued. Conversion of open-
pittable Mineral Resources to Ore Reserves by in-fill drilling added 540,000 ounces to Reserves. Some 7,000 meters have
been drilled during 2006 to delineate ore shoots amenable to underground mining, although the orebodies are
geometrically complex and will require detailed geological control during the exploitation phase. Planned drilling for 2007
will continue to concentrate on the Laranjeiras orebody. Drilling has indicated an additional, probable economic orebody
located south of Cachorro Bravo. Also at Corrego do Sitio, a new deposit (Paiol) is being delineated after three initial
intersections returned encouraging results in the third quarter of 2006.
In March of 2006, Serra Grande acquired the mining rights to property adjacent to its current operations, permitting full
access to the Palmeiras orebody, as well as to the potential upside in surrounding mineralized structures. Growth in
Mineral Resources and Ore Reserves in 2006 amounted to net gains of 400,000 and 300,000 ounces, respectively. This
was mainly due to successful drilling and model interpretation for the open-pittable portions of the main orebodies and
drilling in the vicinity of Corpo IV. Drilling in 2007 will focus on structurally controlled targets in a zone below Palmeiras and
above Corpo IV.
China
In February 2006, AngloGold Ashanti announced the acquisition of an effective 8.7 percent stake in Dynasty Gold
Corporation through a $2 million private placement. Dynasty Gold, a Vancouver-based company with exploration activities
in China, holds 70 percent interests in the Red Valley project in Qinghai, the Wild Horse project in Gansu, and the Hatu
project in Xinjiang. The proceeds of the AngloGold Ashanti placement are currently being used to fund further exploration
at the Red Valley and Wild Horse projects, both of which are located in the prospective Qilian metallogenic belt. In addition
to its equity investment, AngloGold Ashanti retains the right to enter into joint ventures at either or both of the Red Valley
and Wild Horse projects, and may earn-in to a total 55 percent interest by investing $5 million in exploration over three
years. Results from a recently completed 5,397 meter diamond dri ll programme at Red Valley are currently under
evaluation.
Complementing the company’s equity investment in Dynasty Gold Corporation, AngloGold Ashanti also signed two
separate co-operative joint ventures (CJV) in 2006 with local partners at Yili-Yunlong (in the Xinjiang province) and
Jinchanngou (in the Gansu province). These prospects possess the potential for epithermal gold and porphyry copper-
gold deposits, and orogenic gold deposits, respectively. Assuming final business registration approval is received from the
Chinese regulatory authorities by early 2007, these projects are expected to form part of AngloGold Ashanti’s 2007
greenfields exploration drilling programme.
93
Colombia
AngloGold Ashanti made significant progress in 2006 in the exploration of its extensive tenement position in Colombia,
both through its own exploration activities and through its preferred joint venture partner strategy. AngloGold Ashanti has
been active in Colombia since 1999.
In terms of its own projects, AngloGold Ashanti in 2006 completed first-pass drilling on the bulk-tonnage targets at
Quinchia and Gramalote in central Colombia. Initial results included 255 meters at 1.16 grams per tonne and 275 meters
at 1.2 grams per tonne at Gramalote, and 265 meters at 0.8 grams per tonne and 242 meters at 0.85 grams per tonne at
Quinchia. Follow-up diamond drilling is underway at both Gramalote and Quinchia.
In order to capitalize on its first-mover advantage in Colombia and to optimize its resources in the process of exploring the
country, AngloGold Ashanti also announced two exploration partnerships in Colombia during 2006.
On June 1. 2006, AngloGold Ashanti announced the signing of a Heads of Agreement with Bema Gold Corporation in
order to form a new company to explore eight of AngloGold Ashanti’s mineral opportunities located in northern Colombia.
Under the terms of this agreement, the new company will have the right to earn-in to a 51 percent interest on any property
that AngloGold Ashanti elects to farm-out within the area of interest by carrying out a minimum of 3,000 meters of
exploration drilling and by matching AngloGold Ashanti’s prior exploration expenditure. Bema Gold Corporation will
provide a minimum of $5 million in exploration funding.
On July 14, 2006, AngloGold Ashanti announced the signing of a second Heads of Agreement with Antofagasta plc to
jointly explore for new copper and gold deposits in the La Vega - Mocoa belt in southern Colombia. All of AngloGold
Ashanti’s mineral applications and contracts in the area of interest were included in the agreement and Antofagasta plc
has committed to funding a minimum of $1.3 million of exploration within 12 months of signing the agreement.
Democratic Republic of Congo (DRC)
Greenfields exploration activities in the DRC continued to focus on a 10 x 15 km block surrounding the town of Mongbwalu
in the north-eastern part of the country. Diamond drilling in 2006 remained concentrated on defining the resource potential
of the mineralized mylonite zones at Adidi-Kanga at Nzebi-Senzere, together with following up on the significant new gold
intercepts returned from the adjacent Pluto area. The mineralized mylonite zones in all three areas are shallow-dipping
and occur at the contact between a granodiorite intrusive and volcano-sedimentary rocks of the Kilo greenstone belt. Two
reverse circulation drill rigs and one diamond drill rig will be used in 2007 to accelerate the exploration programme in the
area.
Regional drill target generation and evaluation programmes in the Kilo greenstone belt will also be accelerated in 2007. An
airborne geophysical survey, to be centered on Mongbwalu and extended to cover the highest priority targets in the
region, is scheduled to be flown in early 2007. First-pass drill testing of targets will then be undertaken on a priority basis.
Ghana
Surface drilling continued throughout the year at Obuasi, with the deep surface borehole UDSDD 3 intersecting the main
reef fissure at 1697.38 meters to 1766.20 meters. Both the UDSDD 2 and UDSDD 3 holes are currently experiencing
technical problems that have curtailed progress.
Guinea
Drilling at Siguiri in 2006 focused on identifying and then following up known mineralization at the Kintinian, Eureka North,
Kosan North and Sintroko West prospects. Reconnaissance drilling was also undertaken at the Foulata and Saraya
anomalies. Reverse circulation drilling of selected portions of the spent heap leach commenced with the intention of
defining a Mineral Resource.
Laos
Regional reconnaissance exploration activities continued in Laos during 2006 as part of AngloGold Ashanti’s exploration
alliance with Oxiana Limited. A number of new target areas were defined and follow-up field review is underway.
AngloGold Ashanti also extended its Laos exploration alliance agreement with Oxiana for a further one year and amended
the alliance to include the Sanakham Project area, which is still under application.
94
Mali
At Morila, regional drilling on the grant defined sub-economic mineralization in the vicinity of the open-pit. The additional
knowledge generated drilling this campaign will be used in updating the regional geological model and in further defining
drill targets in 2007. Infill drilling campaigns around the pit margin continued to upgrade the confidence of the Mineral
Resource, while a drilling programme targeting underground potential was initiated at the near-pit Samacline anomaly.
At Sadiola, exploration in 2006 primarily focused on further defining the hard sulphide orebody that lies below the main pit.
This orebody is currently the focus of an economic study and is expected to extend the mine’s life. Infill drilling also
occurred at the Tambali South and FE4 prospects, while reconnaissance drilling was undertaken at the smaller anomalies
of Lakanfla East and Sekokoto South East.
Mongolia
Exploration activities in Mongolia were terminated in early 2006 and the tenements and related data packages were
subsequently sold to a third party.
Namibia
At Navachab, infill drilling was undertaken north of the main pit, with the intention of converting Inferred Mineral
Resources to Indicated Mineral Resources. A high-resolution magnetic survey over the mining license was completed
during the year and used to define further targets. Drilling focused on the Gecko central and north prospects with
1,000 meters of reverse circulation drilling returning positive results. Infill drilling was also undertaken at Anomaly 16,
located about five kilometers west of the main pit.
Philippines
In 2006, AngloGold Ashanti elected to exercise its right to proceed to a second joint venture with Red 5 Limited on the
Outer Siana area. This area comprises two tenements which surround, but do not include, Red 5’s proposed Siana open
pit development. AngloGold Ashanti and Red 5 have also entered into a joint venture to explore the Mapawa area, which
is located 20 kilometers north of Siana and contains potential for both epithermal style gold and porphyry style copper-gold
deposits. The commencement of detailed exploration at Mapawa currently awaits the granting of a Mineral Production
Sharing Agreement by the Mines and Geosciences Bureau in Manila.
Russia
On September 21, 2006, AngloGold Ashanti announced its intention to enter into a 50:50 strategic alliance with Russian
gold and silver producer Polymetal, in which the two companies would co-operate in the exploration, acquisition and
development of gold mining assets within the Russian Federation. Simultaneously, AngloGold Ashanti agreed to acquire
Trans-Siberian Gold’s interests in the Veduga and Bogunay projects in Krasnoyarsk for a consideration of $40 million and
to contribute these assets to the strategic alliance with Polymetal. In return, Polymetal agreed to contribute two projects –
Imitzoloto and Eniseevskaya –located in Krasnoyarsk and Chita respectively - and valued at $16 million to the new
alliance, as well as to make an initial payment of $12 million to AngloGold Ashanti. The strategic alliance is expected to be
finalized by the end of the first quarter, 2007.
As a direct result of the new strategic alliance with Polymetal, AngloGold Ashanti also announced the termination of its
exploration alliance with Eurasia Mining plc in respect of the Chita and Buryat regions of eastern Russia.
South Africa
At Moab Khotsong, the drilling of two surface boreholes continued and a third hole was initiated during the year, which
together are intended to further define the geological model of the mine. Borehole MZA9 deflected on reef that averaged
5.13 grams per tonne over 82.2 centimeters (giving 422 cm.g/t) at 3204.29 meters in three acceptable intersections. The
Vaal Reef was intersected at 3108.10 meters in the long deflection, and short deflection drilling is in progress. Borehole
MGR 7 successfully intersected the Vaal Reef. A short deflection programme on the Vaal Reef gave: 12.73 grams per
tonne over 43.9 centimeters (giving 559 cm.g/t) at 3424.11 meters. Long deflection drilling is still in progress. Borehole
MMB5 was collared during the year and has advanced to 2733.95 meters in Witwatersrand Quartzites (Elsburg
Formation).
95
Tanzania
At Geita, drilling programmes showed extensions to known orebodies at the Ridge 8 – Star & Comet gap as well as in the
Nyankanga South area. Infill drilling programmes aimed at generating open-pit Mineral Resources were undertaken at the
Lone Cone and Area 3 West prospects. An airborne electromagnetic geophysical survey was completed over a portion of
the grant during the year.
United States
Brownfields: At Cripple Creek & Victor in Colorado, infill and step-out development drilling focused on the South Cresson
Deposit in 2006, and the final location of the west high wall and step-out drilling between the Main Cresson and the South
Cresson pits has now been prioritized. Infill drilling at 60 meter spacing was also carried out within the Life of Mine
Extension Project area to determine geological potential for additional ore.
Greenfields: The divestiture of AngloGold Ashanti’s Alaskan exploration assets to TSX-listed International Tower Hill
Mines Limited (ITH) was completed in August 2006. The company vended to ITH a 100 percent interest in six existing
exploration properties and associated databases. In addition, ITH retained an exclusive option to earn-in to 60 percent in
each of the LMS and Terra properties in return by incurring $3 million in exploration expenditure on each project (total of
$6 million) within four years. AngloGold Ashanti received an initial 19.98 percent equity stake in ITH in consideration for
the divestiture.
Competition
As gold mining is a mature and regulated industry, and very significant volumes of gold and gold derivatives trade in the
world markets independent of gold mine supply, AngloGold Ashanti does not consider that competition for sales plays any
role in its operations as a gold producer. However, gold producers do compete against each other for acquisition and
exploration opportunities.
Intellectual property
AngloGold Ashanti and its subsidiary companies hold the right to use certain proprietary technology and intellectual
property, including patented technology and other forms of protected intellectual property. These rights relate to various
aspects of the company’s business, from routine software and related computer technology in support of office operations,
to intellectual property contained and/or used in the mining and mineral processing operations. AngloGold Ashanti, as a
group, is not dependent on these various forms of intellectual property for the conduct of its business as a whole.
Sustainable Development: Safety, Health, environmental and social development.
AngloGold Ashanti published its Report to Society 2006 on March 29, 2007. A copy has been furnished to the SEC under
Form 6-K. This report covers issues pertaining to social development in line with AngloGold Ashanti’s values and business
principles and the Global Reporting Initiative Guidelines prepared on a country and operational basis. Many ofThe information
below is extracted from the operations outside of South
Africa have adopted the National Occupational Safety Association (NOSA) systemsReport to Society 2006.
Ethics and were audited during the year. It has
beengovernance
The company’s ethical performance is guided by AngloGold Ashanti’s practicebusiness principles as they are set out in the
Company’s Report to engageSociety.
AngloGold Ashanti is committed to upholding high standards of ethics and corporate governance. Corporate governance
is addressed at the serviceshighest level by the Board of recognized safety experts to undertake high-level safety audits
Directors, the Board’s Audit and make recommendations toCorporate Governance Committee and
ethics, inter alia, by the board committee.Board’s Safety, Health and Sustainable Development Committee.
• HealthThe company participates in a number of institutions whose focus is voluntary self-regulation through the setting of robust
standards and the monitoring of performance against such standards.
96
AngloGold Ashanti continuessupports the Universal Declaration of Human Rights and the Fundamental Rights Conventions of the
International Labour Organization (ILO). AngloGold Ashanti became a signatory to provide comprehensive health care services to employees either through its subsidiary,the United Nations Global Compact, a
United Nations initiative supporting universal environmental and social principles and promoting responsible corporate
citizenship, following the business combination with Ashanti in 2004. AngloGold Health Service (“AHS”),Ashanti is an active supporter of the
United Nations Global Compact.
AngloGold Ashanti is a founding member of the International Council of Mining and Metals (ICMM) and actively
participates in South Africa or overseen by AHS elsewhere in Africa or through mine-based and
external health care service providers elsewhere in the world. The two South African Occupational Health Centers were
audited during 2004 by external auditors with achievements at both centers being more than 95 percent in all audit elements.
Aurum Health Research, previously a wholly-owned subsidiary of AHS, was granted $14 million (over a five year period) by the
Bill and Melinda Gates Foundation, for a major HIV-TB research project. The grant isinternational debate as part of this organization. AngloGold Ashanti is also a larger awardmember of the Council for
Responsible Jewellery Practices, established to promote responsible social, ethical, human rights and environmental
practice throughout the Internationalgold and diamond jewellery chain.
Furthermore, AngloGold Ashanti became an organizational stakeholder of the Global Reporting Initiative (GRI) in 2004.
ConsortiumThe GRI is a multi-stakeholder process and independent institution whose mission is to Respond Effectively todevelop and disseminate globally
applicable Sustainability Reporting Guidelines. These guidelines are for voluntary use by organizations in their reporting
on the AIDS/TB Epidemic (CREATE) to research strategies for TB control. On February 1,economic, environmental, and social dimensions of their activities, products, and services.
Occupational safety and health
Although, the group’s safety and health performance has improved significantly since the formation of AngloGold in 1998,
2005, Aurum Health converted to an associationAngloGold Ashanti has not for gainachieved its long-term target of eliminating fatal accidents and accordingly, ceased to beoccupational illness.
In 2006, the group’s Fatal Injury Frequency Rate (FIFR) was 0.22 per million man-hours, representing a subsidiary.57 percent year-
on-year increase, although it remains a 44 percent improvement on the rate in 1998. The Lost Time Injury Frequency Rate
(LTIFR) – at 7.70 per million man hours in 2006 – rose by 14 percent year-on-year, and has declined by 47 percent since
1998.
Noise InducedNoise-induced Hearing Loss (NIHL) andrates have decreased significantly in 2006 to 2 per 1,000 employees from 5 per
1,000 employees in 2005. With respect to Occupational Lung Disease (OLD), including silicosis – new cases reported
have increased from 7 per 1,000 employees in 2005 to 10 per 1,000 employees during 2006. The incidence of pulmonary
tuberculosis (TB) has also increased in 2006 to 31 per 1,000 from that of 25 per 1,000 recorded in 2005, but is still lower
than the figure of 35 per 1,000 recorded in 2004.
Safety
Fatal accidents
Regrettably, there were 29 accidents within the group in 2006 in which 37 employees and contractors lost their lives.
Thirty-two of these occupational fatalities occurred at South African mines. Fatalities or illnesses which occur during the
course of work is an area of considerable concern to the management and Board of AngloGold Ashanti, and a great deal
of attention and focus has been placed on returning the company to the improving safety trend established in past years.
Safety rates
The FIFR increased from a rate of 0.14 per million man-hours in 2005 to 0.22 per million man-hours in 2006, a regression
of some 57 percent. Out of our 21 operations, 13 operations ended the year having not experienced any occupational
fatalities, while a further four operations either maintained or improved their rates.
In 2006, the LTIFR rose by 14 percent to 7.70 per million man-hours, from 6.77 in 2005 but improved at 10 operations,
with Cripple Creek & Victor (CC&V) in the United States having achieved a LTIFR of zero.
Health
Noise-induced hearing loss (NIHL)
Sixty-seven new cases of NIHL were identified in South Africa during 2006, which is a rate of 2 per 1,000 employees,
representing a decrease from 2005. Comprehensive hearing conservation programmes are in place at all operations and
include, among other aspects, noise control engineering (silencing), the provision of hearing protection devices, education
and communication programmes, and annual audiometry examinations of employees.
97
Occupational Lung Disease (OLD)
Exposure to silica dust remains one of the major contributing factors to the development of OLD. (In this context OLD
includes TB, TB silicosis and obstructive airways disease). Of these, TB is the most pervasive and is compounded by a
high HIV prevalence in the mining population (approximately 30 percent) which greatly increases the risk of TB. It is
estimated that about 85 percent of employees diagnosed with TB are HIV-positive.
During 2006, 348 cases of OLD were identified in South Africa, which reflects a rate of 10 per 1,000 employees, an
increase on that reported in 2005 (9 per 1,000 employees) and 2004 (7 per 1,000 employees). An additional factor
contributing to the incidence of OLD (including high TB and HIV rates) is the increasing average age of the South African
workforce which has had a longer, cumulative exposure to silica dust underground.
Dust control
In South Africa, initiatives to eradicate dust and improve methods of dust control have continued, although the industry
target, for which 95 percent of all individual samples must be below the legal limit of 0.1mg/m
3
by 2008, has not yet been
achieved. In 2006, the average silica dust concentration was 0.03mg/m
3
(2005: 0.04mg/m
3
), with the 95th percentile at
0.129mg/m
3
(2005: 0.12mg/m
3
).
TB control
TB control programmes in South Africa were boosted during the year with the roll-out of a second mobile digital diagnostic
radiography unit. The two mobile units in service move from shaft to shaft to facilitate more frequent x-raying of
employees.
The objective is to detect and treat TB at an earlier stage, thereby preventing the spread of the disease and reducing its
impact on the individual and the community. World Health Organization (WHO) -aligned TB treatment programmes are
made available free of charge to employees and contractors alike by the group’s medical services. The TB control
programme results exceed the WHO targets.
Silicosis
Silicosis is caused by the inhalation of free silica dust present particularly in deeper level mining areas with high quartz
concentrations, such as well as TB in South Africa and MalariaBrazil. Efforts to eradicate silicosis at the AngloGold Ashanti operations in
Brazil have largely been successful with no new cases of silicosis having been identified in the past five years. In addition
to successful dust mitigation programmes and intensive monitoring, Brazilian legislation limiting the number of years that
employees may work underground has played a major role in this achievement.
The legacy of silicosis in South Africa remains a significant issue for the company. This is so for a number of reasons. The
current state-led compensation systems are cumbersome and inefficient and, because of this, many silicosis-affected
former employees of the mining industry may not have had access to regular medical examination, substantial medical
care or compensation, if found to be due. AngloGold Ashanti, together with other South African mining companies, is
working with the state and unions to identify affected ex-employees in need of care, and to improve access to and use of
follow-up treatment and compensation systems. At the same time the company is participating constructively in the debate
surrounding the possible combination of the current compensation mechanisms.
Regional health
The major public health threats facing AngloGold Ashanti operations – HIV/AIDS and malaria – are found primarily at the
group’s African operations. HIV/AIDS poses the biggest challenge at its operations in South Africa, but is also a concern in
Namibia and Tanzania, where prevalence levels are higher than at the group’s operations in Ghana, Guinea and Mali.
Malaria represents a significant risk at the operations in Ghana, Guinea, Mali and Tanzania. In Guinea, where cholera is
endemic, a campaign is being implemented to overcome the disease at AngloGold Ashanti’s operation there.
HIV/AIDS
Under South African legislative circumstances, an accurate survey of prevalence levels cannot be conducted, however it is
estimated that prevalence levels of HIV/AIDS have remained stable at around 30 percent of the workforce in recent years
at the South African operations (2005: 30.0 percent; 2004: 30.24 percent).
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These estimates are based on the most significant occupational health threats faced best available information that includes regional antenatal data and extrapolations from
comparable reference groups. The provision of anti-retroviral therapy (ART) – which was introduced in November 2002 –
will, over time, logically lead to a higher prevalence rate than would otherwise be the case as infected individuals live
longer than they would without ART.
The overall aims of the HIV/AIDS programme are to prevent the spread of infection, to care for those infected or affected
by the disease and to provide support to both employees and communities. The programme, which is an integral part of
the ‘wellness in the workplace’ initiative under way at the South African operations, aims to reduce the number of new
infections and efficiently manage those already infected. In 2006, the focus remained on the continued implementation of
the programme.
The most notable achievement of 2006 was the increase in the uptake of Voluntary Counseling and Testing (VCT). In
2006, 23,389 encounters were recorded at VCT centers which, assuming single annual testing, is equivalent to 75 percent
of the South African employee base. This was an increase of 129 percent on the 10,219 encounters recorded in 2005, and
exceeded the target of 40 percent set for the year.
Corresponding with the increased uptake of VCT, there was an increase in attendance at the wellness clinics and in
enrolment for anti-retroviral therapy (ART). A total of 4,513 patients were registered on the wellness programme as at the
end of December 2006, with 1,467 (33 percent) of these on ART. In total 1,252 employees enrolled for the first time at the
wellness clinic during 2006, and 617 new patients began ART during the year. This compares with new enrolment at
wellness clinics of 1,267 and 630 on ART in 2005.
In terms of support, the focus is on providing palliative and home-based care for the AIDS-ill who retire from the
employment of AngloGold Ashanti. This support extends to families and includes counseling and support groups,
assistance with home-based palliative care and, where appropriate, the care of orphans in households headed by children
or grandparents. AngloGold Ashanti has formed partnerships with several home-based care programmes in the areas
around its operations in South Africa.
Expenditure related to the chronic disease management of HIV-infected employees (including the provision of ART), VCT,
home-based care for terminally ill ex-employees, and certain programme related research, monitoring and evaluation,
amounted to R21.5 million in 2006 (2005: R16.45 million). This included R2.6 million which the AngloGold Ashanti Fund
contributed to HIV/AIDS-related community projects.
Malaria
Malaria remains a significant risk for the operations in Ghana, Guinea, Mali and Tanzania. Despite the active intervention
of international NGOs, the disease has assumed epidemic proportions in these countries, largely a result of ineffective
national control measures. The disease is a major cause of death in young children and pregnant women, and also gives
rise to morbidity and absenteeism in adult men. AngloGold Ashanti is in the process of implementing integrated malaria
control programmes at each of the operations in these countries.
In Ghana, by way of example, the incidence of malaria in 2006 has declined significantly to below 50 percent of 2005
rates. Implementation of the integrated malaria programme at Obuasi began during the course of 2006.
Human resources
AngloGold Ashanti is a significant employer in the global gold mining industryindustry. Many of its operations are situated in
countries and regions where, in terms of the local economy, the company is a significant employer, such as in South
Africa, Ghana and Tanzania. AngloGold Ashanti employed 61,453 people in 2006 (calculated on a monthly average
basis), made up of 46,407 (75.5 percent) permanent employees and 15,047 (24.5 percent) contractors and joint venture
employees. In 2005, the group employed 63,993 people, comprising 47,848 employees and 16,145 contractors.
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By virtue of its South African domicile, AngloGold Ashanti is subject to certain conventions signed by the South African
government, including the human rights and social conventions of the ILO (ILO 29, 87, 98, 100, 105, 111, 128 and 138).
South Africa’s Constitution, together with its associated laws, guarantees non-discrimination on the basis of race and other
unfair grounds, freedom of association and the rights of children, among other basic human rights.
Certain ILO conventions (such as ILO Convention 128, dealing with child labor, and ILO Convention No 29, dealing with
forced and compulsory labor) are also governed by law in South Africa, Argentina, Brazil, Australia, Namibia, Tanzania
and the United States, and by law and various operations have programscodes such as the Labour Code and Collective Agreement in Mali.
A wide range of agreements and policies are also in place at an operational level to address these. ensure that human rights are
protected. These include recognition and collective bargaining agreements, disciplinary, grievance and appeal procedures
and non-discrimination agreements. No breaches of fundamental rights conventions of the ILO were alleged or charges
brought against the company in connection with these during 2006.
Employment equity
Racial and sexual harassment and other forms of discrimination are prohibited by the company’s business principles as
well as by legislation in most of the countries where the operations are situated.
In addition, deep-level miningSouth Africa the employment of historically disadvantaged South Africans (HDSAs) remains a particular priority.
Employment targets and achievements are reported annually to the South African Department of Labor, and reporting will
also be provided in terms of the South African Mining Charter from 2007.
Where possible, it is often accompanied by exposure
to heat; the deeper the mine, the hotter the rock temperatures.standard practice for AngloGold Ashanti employsto employ indigenous people.
Training
AngloGold Ashanti’s training philosophy encompasses a heat stress managementwide range of training initiatives. In 2006, the company spent
program$26.37 million on employee training and development, of which $21.12 million – or 4.6 percent of payroll – was spent in
the South Africa operations. In 2005, the employee training and development costs for South African-based operations
amounted to promote$23.2 million. It is the healthcompany’s policy to provide Adult Basic Education and well-beingTraining (ABET) to ensure that
all employees are able to become literate and numerate.
Environment
Implementing ISO14001
In March 2005, AngloGold Ashanti took a decision that all its operating mines should, by December 2006, hold certification
to the ISO14001 International Environmental Management System standard. By the end of December 2006, AngloGold
Ashanti had achieved ISO14001 certification for 19 of its employees and to meet the requirements of legislation.
102
• Environment21 operations.
AngloGold Ashanti recognizes that certification does not necessarily guarantee good operational performance and that the
challenge will now be to ensure that the long-term sustainabilitysystem helps deliver the required on-the-ground results.
Implementing the Cyanide Code
AngloGold Ashanti was party to the development of the International Cyanide Management Code for the Manufacture,
Transport and Use of Cyanide in the Production of Gold and was one of the first signatories to the code in November
2005. Companies that are signatories to the code must have their operations audited by an independent third party to
demonstrate their compliance with the code.
The International Cyanide Management Institute (ICMI), which will guide and manage the implementation of the code, was
formed during 2005. AngloGold Ashanti is represented both on the organization’s board and on its Industry Advisory
Group.
Environmental risk management and incident reporting
AngloGold Ashanti’s environmental professionals participate in incident investigation and risk management processes at a
group and operational level. Key environmental risks are identified as part of the company’s overall risk profile and are
reported accordingly.
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Closure and rehabilitation
In line with its business principles and in terms of host country legislation, AngloGold Ashanti provides for rehabilitation
and final closure of its business is dependent upon good stewardship in bothoperations during the
protection operating life of the environmentmine.
All of the company’s operations have closure plans which are reviewed and updated on a regular basis to take cognizance
of operational conditions and developments, legislative requirements, international protocols and technological
developments and advances in good practices.
Efficient use of resources, including water and energy
The mining industry is a significant user of natural resources and commodities and the consumption of fuel, electricity and
water can significantly affect the total cost of mining. AngloGold Ashanti has plans in place to improve the efficient use of
resources and its over-arching philosophy is that this optimization is best managed at site level where staff understand the
requirements of the operation and can identify needs and reduce wastage.
Greenhouse gas emissions and global warming
Climate change has become an increasingly contentious issue globally. A position has been rigorously debated within the
ICMM and by virtue of its membership, AngloGold Ashanti is party to and supportive of this position. The issue continues
to be discussed at the highest levels within the company, while at the same time operations are seeking to improve energy
efficiencies to curb the group’s contribution to carbon emissions. The company has also participated in discussions around
the development of an international market for the trading of carbon credits and is considering ways in which it could
meaningfully participate.
Biodiversity
The threat to biodiversity as a result of habitat destruction and other human related causes has been a high profile
international environmental issue for many years. Through the ICMM we have been engaged in a formal dialogue with the
IUCN (World Conservation Union). A significant output from this dialogue has been the recent publication of ‘Good
Practice Guidance for Mining and Biodiversity’. The best practice guidance is designed to integrate biodiversity
considerations through all stages of the mining lifecycle, from exploration, through environmental impact assessments
(EIAs), to operations and eventually rehabilitation and closure.
Community
AngloGold Ashanti and the community
As exploration and mining activities frequently occur in areas that are remote or regions where there is very little other
economic activity, their relative impact is often heightened. The potential impact of exploration and mining activities needs
therefore to be considered at the exploration stage, before any activities begin, right through the operations’ operating
lives, to eventual closure and thereafter.
The necessity for, and the process of, informing communities in advance of any developments and maintaining their
involvement throughout the operational life cycle, are enshrined in the law of many of the countries in which the group
operates. This communication becomes especially important as operations, or portions of operations either gear up to full
production or approach the end of their economic lives. These processes have now been formalized with the rollout by the
company of the Stakeholder Engagement Action Plan guidance note and accompanying resources and tools. An example
of this is the public consultation and disclosure programme developed at Sadiola and Yatela in accordance with
International Finance Corporation guidelines, which is being implemented to good effect.
Artisanal and small-scale mining
Artisanal and small-scale mining remains a significant challenge for the company with the key issues being that of legal
title over the properties being mined, as well as health, safety and environmental considerations. AngloGold Ashanti’s
overall objective is to promote the regulation of small-scale mining. Currently action plans are being put in place at all
mines and exploration sites where this is a material issue and interventions are most advanced at Geita in Tanzania.
Other sites that are materially affected are Obuasi, Siguiri and exploration areas in the DRC and Colombia.
101
Indigenous people
AngloGold Ashanti is mindful that there are specific considerations that need to be taken into account regarding interaction
with indigenous peoples. The company is also involved in this dialogue via the International Council on Mining and Metals
and supports the Council’s draft position statement on indigenous peoples.
Corporate social investment
The group spent $7.75 million on corporate social investment in 2006 (2005: $8.19 million). Corporate social investment
expenditure is defined as the voluntary investment of funds in the broader community, through programmes, which span a
range of development and maintenance activities seeking to complement the work of government, non-government
(NGOs) and community-based organizations (CBOs), where the target beneficiaries are external to the company.
Corporate social investment specifically excludes those activities which the company is legally obliged to undertake or
where the purpose is primarily commercial, for example marketing, employee benefits or marketing activities.
4C. Organizationalstructure
Head office structure and operations
AngloGold Ashanti’s operations are organized on a country basis. Management of AngloGold Ashanti is entrusted to the
executive committee, comprising the four executive directors and two executive officers. This executive committee is
supported by the remaining executive officers. See "Item 6.: Directors, senior management and employees". Day-to-day
management of the operations vests with executive teams based in South Africa (Johannesburg), United States (Denver),
Brazil (Nova Lima), Ghana (Accra) and Australia (Perth).
Corporate activities
Activities provided in the corporate area fall into three categories. First, support is provided to the executive officers in
managing AngloGold Ashanti as a whole. Second, certain activities are managed centrally, including strategic and
business planning, marketing, corporate finance, treasury, exploration, technology and extractioninnovation, corporate secretarial
and corporate affairs. Third, certain specialized services are directed from the center although they are managed by
operations. These include mining, engineering, metallurgy, mineral resource management, safety and health, the
environment and human resources.
AngloGold Ashanti has investments in numerous principal subsidiaries and joint venture interests, see "Item 19.: Exhibits
Exhibit 19.8 List of mineral resources. AngloGold Ashanti Limited subsidiaries" for details.
4D.
Property, plants and equipment
For a discussion on AngloGold Ashanti’s mining properties, plant and equipment, see “Item 4B.: Business Overview”.
Item 4A: Unresolved staff comments
Not applicable.
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Item 5: Operating and financial review and prospects
The following operating and financial review and prospects are based on the US GAAP financial statements of AngloGold
company’sAshanti for the years ended and as at December 31, 2006, 2005 and 2004 which are included under Item 18 of this annual
report.
Overview
For the year ended December 31, 2006, AngloGold Ashanti had an attributable production of approximately 5.6 million
ounces (including joint ventures) of gold. Headquartered in Johannesburg, South Africa, AngloGold Ashanti has a global
presence with 21 operations comprising open-pit and underground mines and surface metallurgical plants in ten countries
(Argentina, Australia, Brazil, Ghana, Guinea, Mali, Namibia, South Africa, Tanzania and the United States of America)
which are supported by extensive, yet focused, exploration activities. As at December 31, 2006, AngloGold Ashanti had
Proven and Probable Ore Reserves of approximately 66 million ounces (including joint ventures) on an attributable basis.
AngloGold Ashanti’s main product is gold. An insignificant portion of its revenue is currently derived from the sales of
silver, uranium oxide and sulphuric acid. AngloGold Ashanti sells its products on world markets.
AngloGold Ashanti’s world-wide operations, divided into countries are: South Africa (which comprises seven operations),
Argentina (which encompasses one operation), Australia (which encompasses one operation), Brazil (which encompasses
two operations), Ghana (which encompasses two operations), Guinea (which encompasses one operation), Mali (which
encompasses three operations), Namibia (which encompasses one operation), Tanzania (which encompasses one
operation) and the United States of America (which encompasses one operation). For more information on AngloGold
Ashanti’s business and operations, see “Item 4B.: Business overview — Products, operations and geographical locations”.
5A. Operating results
Introduction
AngloGold Ashanti’s revenues are derived primarily from the sale of gold produced at its mines. An insignificant portion of
its revenue is currently derived from the sales of silver, uranium oxide and sulphuric acid. As a result, AngloGold Ashanti’s
operating results are directly related to the price of gold which can fluctuate widely and is affected by numerous factors
beyond its control, including industrial and jewellery demand, expectations with respect to the rate of inflation, the strength
of the US dollar (the currency in which the price of gold is generally quoted) and of other currencies, interest rates, actual
or expected gold sales by central banks and the IMF, forward sales by producers, global or regional political or economic
events, and production and cost levels in major gold-producing regions such as South Africa. In addition, the price of gold
sometimes is subject to rapi d short-term changes because of speculative activities.
The current demand for and supply of gold may affect gold prices, but not necessarily in the applicable environmental laws, rulessame manner as current
supply and regulationsdemand affect the prices of other commodities. The supply of gold consists of a combination of new production
from mining and existing stocks of bullion and fabricated gold held by governments, public and private financial institutions,
industrial organizations and private individuals.
As the amounts produced in any single year constitute a very small portion of the various countries andtotal potential supply of gold, normal
jurisdictions within which they are conducted. Except as set out elsewhere herein,variations in current production do not necessarily have a significant impact on the supply of gold or on its price. If revenue
from gold sales falls for a substantial period below AngloGold Ashanti’s cost of production at its operations, AngloGold
Ashanti believescould determine that it is not economically feasible to continue commercial production at any or all of its operations
are in substantial compliance with all material environmental laws, rules and regulations which are applicableor to it. In some of
continue the jurisdictions within which AngloGold Ashanti operates, it is required to provide financial assurance in a form prescribed by
law to cover the costdevelopment of some or all of its projects.
On June 25, 2007, the afternoon fixing price for gold on the London Bullion Market was $650.75 per ounce.
AngloGold Ashanti’s costs and expenses consist primarily of production costs, royalties and depreciation, depletion and
amortization. Production costs are incurred on labor, fuel, lubricants, power, consumable stores which include explosives,
timber, other consumables and utilities incurred in the production of gold. Labor is a significant component of production
costs as AngloGold Ashanti’s mining operations consist mainly of deep-level underground mining methods as well as
open-pit operations, both of which are labor intensive.
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With operations in ten countries on four continents, AngloGold Ashanti is exposed to a number of factors that could affect
its profitability, including exchange rate fluctuations, inflation and other risks relating to these specific countries. These
factors are inherent in conducting mining operations on a global basis, and AngloGold Ashanti applies measures wherever
appropriate and feasible, such as hedging instruments, intended to reduce its exposure to these factors.
In conducting mining operations, AngloGold Ashanti recognizes the inherent risks and uncertainties of the industry, and the
wasting nature of assets. The costs and expenses relating to the production of gold are either expensed or capitalized to
mining assets. Recoverability of capitalized amounts is reviewed on a regular basis.
Effect of exchange rate fluctuations
Currently, a significant portion of AngloGold Ashanti’s revenues are generated in South Africa, and to a lesser extent in
Brazil, Argentina and Australia, and most of its production costs, therefore, are denominated in local currencies, such as
the South African rand, the Brazilian real, the Argentinean peso and the Australian dollar. In 2006, AngloGold Ashanti
derived 73 percent (66 percent including joint venture arrangements) of its revenues from these countries and incurred
61 percent (58 percent including joint venture arrangements) of its production costs in these local currencies. In 2006, the
total increase in total cash costs from 2005 was only partially offset by favorable exchange variances of $7 per ounce or
18 percent. As the price of gold is denominated in US dollars and AngloGold Ashanti realizes the majority of its revenues
in US dollars, devaluation of these local currencies ag ainst the US dollar improves AngloGold Ashanti’s profitability in the
short-term. Conversely strengthening of these local currencies against the US dollar adversely impacts AngloGold
Ashanti’s profitability in the short term. Mainly as a result of its hedging instruments, only a small portion of AngloGold
Ashanti’s revenues are denominated in South African rand and Australian dollar, which partially offsets the effect of the
US dollar’s strength or weakness on AngloGold Ashanti’s profitability. Based upon average rates during the respective
years, the rand weakened and the real strengthened by approximately 6 percent and 11 percent respectively, against the
US dollar in 2006 compared to 2005. The Argentinean peso traded freely against the US dollar from January 1, 2002 and
had devalued to 3.06: 1 against the US dollar by December 31, 2006. The Australian dollar, based on the average rates
during the respective years, weakened by 1 percent aga inst the US dollar in 2006 compared to 2005.
To fund local operations, AngloGold Ashanti holds funds in local currencies. The US dollar value of these currencies may
be affected by exchange rate fluctuations and, as a result, AngloGold Ashanti’s cash and cash equivalents reported in
US dollars could change. At December 31, 2006, approximately 60 percent of AngloGold Ashanti’s cash and cash
equivalents were held in local currencies.
Certain exchange controls are currently in force in South Africa. Although the exchange rate of the rand is primarily market
determined, its value at any time may not be considered a true reflection of the underlying value of the rand while
exchange controls exist. The government has indicated its intention to lift exchange controls over time and recently
increased the limits of offshore investments for individuals. As exchange controls are relaxed, rand exchange rates will be
more closely tied to market forces. It is not possible to predict whether or when this will occur or the future value of the
rand. For a detailed discussion of these exchange controls, see “Item 10D.: Exchange controls”.
Effect of inflation
AngloGold Ashanti’s operations have not been materially adversely affected by inflation in recent years given that it has
benefited from sustained period of rising gold prices. However, AngloGold Ashanti is unable to control the prices at which
it sells its gold (except to the limited extent that it utilizes commodity instruments) and it is possible, therefore, that if there
is to be significant inflation in South Africa, and to a lesser extent in Brazil, Argentina and Australia, without a concurrent
devaluation of the local currency or an increase in the price of gold, there could be a material adverse effect upon
AngloGold Ashanti’s results and financial condition.
The percentage change in the rand/US dollar exchange rate, based upon average rates during the respective years, and
the local annual inflation rate, as measured by the South African Producer Price Index (PPI), are set out in the table below:
Year ended December 31
2006
percent
2005
percent
2004
percent
The average South African rand/US$ exchange rate weakened/(strengthened) by:
6.3
(1.1)
(14.7)
PPI (inflation rate) increase:
7.7
3.1
0.6
Net effect
1.4 (4.2)
(15.3)
(1)
(1)
The decrease in the inflation rate is outweighed by the impact of the strengthening of the rand relative to the US dollar.
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Effect of commodity instruments
AngloGold Ashanti has utilized commodity instruments to protect the selling price of some of its anticipated production.
The use of such instruments prevents full participation in subsequent increases in the market price for the commodity with
respect to covered production. Since 2001 the company has been reducing its hedge commitments through hedge buy-
backs, deliveries into contracts and restructurings in order to provide greater participation in a rising gold price
environment, the effect of which may be that only limited price protection is available at lower gold prices. For a discussion
of AngloGold Ashanti's commodity instruments see "Item 11: Quantitative and qualitative disclosures about market risk".
Acquisitions and dispositions
The global gold mining industry has experienced active consolidation and rationalization activities in recent years.
Accordingly, AngloGold Ashanti has been, and expects to continue to be, involved in a number of acquisitions and
dispositions as part of this global trend and to identify value-adding business combination and acquisition opportunities.
In January 2004, AngloGold sold its Western Tanami Project in Australia to Tanami Gold NL in Australia, for a cash
payment of A$4 million ($3 million) and 25 million fully paid ordinary shares in Tanami Gold NL. This followed an initial
payment of A$0.3 million ($0.2 million) made on November 24, 2003. In February 2006, AngloGold Ashanti disposed of its
entire remaining investment in Tanami Gold.
The business combination between AngloGold and Ashanti Goldfields Company Limited was completed with effect from
Monday, April 26, 2004, following the confirmation by the High Court in Ghana on Friday, April 23, 2004, of the scheme of
arrangement, in terms of which AngloGold acquired the entire issued share capital of Ashanti. AngloGold changed its
name to AngloGold Ashanti Limited on April 26, 2004. For a detailed discussion of the AngloGold Ashanti business
combination, see “Item 5A.: Operating results – business combination between AngloGold and Ashanti”.
In July 2004, AngloGold Ashanti agreed to acquire a 29.9 percent stake in Trans-Siberian Gold plc (TSG) through an
equity investment of approximately £18 million ($32 million) in two subscriptions for ordinary shares. The first tranche of
ordinary shares of 17.5 percent was acquired during July 2004. TSG is listed on the London Stock Exchange’s Alternative
Investment Market (AIM). This first move into Russia allows AngloGold Ashanti the opportunity of establishing a
meaningful interest in a company with Russian assets and activities, thereby allowing AngloGold Ashanti to gain exposure
to, and familiarity with, the operating and business environment in Russia, as well as to being able to establish a business
within this prospective new frontier. In April 2005, the company announced that agreement had been reached with TSG
on revised terms for the second subscription of shares in TSG, and a revised subscription price of £1.30 per share,
compared to £1.494 per share. In May 2005, the second subscription was completed.
In August 2004, AngloGold Ashanti sold its Union Reefs assets to the Burnside Joint Venture, comprising subsidiaries of
Northern Gold NL (50 percent) and Harmony Gold Mining Company Limited (50 percent), for a total consideration of
A$4 million ($2 million). The Burnside Joint Venture is responsible for all future obligations associated with the assets,
including remaining site rehabilitation and reclamation.
In 2004, Queenstake approached the Jerritt Canyon Joint Venture partners, AngloGold and Meridian Gold, about the
possibility of monetizing all or at least a majority of the $6 million in deferred payments and $4 million in future royalties,
payable in the concluded sale of AngloGold’s interest in the Jerritt Canyon Joint Venture to Queenstake Resources USA
Inc., effective June 30, 2003. Based on an agreement reached between the parties, AngloGold Ashanti was paid on
August 25, 2004, approximately $7 million for its portion of the deferred payments and future royalties, thereby monetizing
all outstanding obligations, except for a minor potential royalty interest that AngloGold Ashanti retained.
In September 2004, AngloGold Ashanti sold its entire interest in Ashanti Goldfields Zimbabwe Limited to Mwana Africa
Holdings (Pty) Limited (Mwana) for a deferred consideration of $2 million, which was settled part in cash ($1.75 million)
and part on the issue of 600,000 Mwana plc shares. The sole operating asset of Ashanti Goldfields Zimbabwe Limited is
the Freda-Rebecca Gold Mine.
105
In September 2004, agreement was reached to sell AngloGold Ashanti’s 40 percent equity interest in Tameng Mining and
Exploration (Pty) Limited of South Africa (Tameng) to Mahube Mining (Pty) Limited for a cash consideration of R20 million
($3 million). Tameng owns certain mineral rights to platinum group metals (PGMs) on the farm Locatie Van M’Phatlele
KS 457, on the northern limb of the Bushveld Complex in the Limpopo Province in South Africa.
In October 2004, AngloGold Ashanti signed an agreement with Philippines explorer Red 5 Limited to subscribe for a
12.3 percent stake in the expanded issued capital of Red 5 Limited for a cash consideration of A$5 million ($4 million).
This placement was to be used to fund the exploration activities along strike from current mineral resources at the Siana
Project, and to test the nearby porphyry gold-copper targets in the Surigao region of the Republic of the Philippines. For a
period of 2 years commencing in October 2004, AngloGold Ashanti had the right to enter into Joint Venture
arrangements on Red 5's tenements (excluding their Siana project) with the potential to earn up to a 67.5 percent interest
in areas of interest through further investment in exploration in these Joint Venture areas. On August 26, 2005, AngloGold
Ashanti subscribed for additional shares in Red 5 Limited, for a cash considerat ion of A$0.8 million ($0.6 million), thereby
increasing its holding to 14.1 percent. As at December 31, 2006, AngloGold Ashanti holds 13 percent in Red 5 Limited,
with the dilution of shareholding (from 14.1 percent) being the result of the increase in issued share capital. On
September 18, 2006, AngloGold Ashanti elected to exercise a second Joint Venture option with Red 5 Limited – the Outer
Siena Joint Venture, located to the south-east of Boyongan - in terms of which the Company will spend a minimum of
A$1.5 million ($1.2 million) in the first year with no interest.
In April 2005, AngloGold Ashanti agreed to the conditional sale of exploration assets in the Laverton area, comprising the
Sickle royalty of $30 per ounce, the Child Harold prospect, various 100 percent AngloGold Ashanti Australia-owned
interests including the Lord Byron and Fish projects as well as its interests in the Jubilee, Black Swan and Jasper Hills
Joint Ventures to Crescent Gold Limited (Crescent). The sale is dependent upon Crescent meeting a staged payments
schedule. Following the announcements, a decision was taken to accept a cash consideration of A$1 million in lieu of
shares in Crescent.
In July 2005, Aflease Gold and Uranium Resources Limited (Aflease) announced that it had purchased from AngloGold
Ashanti, its Weltevreden mine in exchange for Aflease shares in a transaction valued at R75 million ($11 million). On
December 19, 2005, Aflease was acquired by SXR Uranium One Incorporated (formerly Southern Cross Incorporated)
(SXR Uranium One). As certain conditions precedent to the agreement with regards to mining rights conversion were not
fulfilled for that property as of December 31, 2006, the Company has separately classified assets and liabilities for
Weltevreden presented in the consolidated balance sheet, as held for sale.
On February 27, 2006, AngloGold Ashanti announced that it had signed an agreement with Dynasty Gold Corporation, a
company with exploration activities in China, to acquire an effective 8.7 percent stake in that company through a purchase
of 5.75 million Dynasty units at a price of C$0.40 each. Each unit consists of one common share and one-half common
share purchase warrant exercisable at a price of C$0.60 per unit for two years.
On June 1, 2006, AngloGold Ashanti and Bema Gold Corporation (Bema) announced that they would jointly explore a
select group of AngloGold Ashanti’s mineral opportunities located in Northern Colombia, with initial work focused on the
La Mina and El Pino targets. As part of the agreement, AngloGold Ashanti has initially agreed to provide a minimum of
eight exploration properties. It is the intent of the parties to ultimately list a new company which will hold Bema's interest in
the joint venture and in which AngloGold Ashanti has the right to subscribe for a 20 percent shareholding. In November
2006, certain members of Bema’s management formed a company, B2 Gold, which company would acquire certain rights
held by Bema following the acquisition by Kinross Gold of Bema in December 2006. On February 14, 2007, AngloGold
Ashanti consented to the ultimate assignment of Bema’s rights and resp onsibilities to B2 Gold in terms of the joint venture
agreement entered into between AngloGold Ashanti and Bema.
On June 30, 2006, AngloGold Ashanti (U.S.A.) Exploration Inc. (AngloGold Ashanti), International Tower Hill Mines Ltd
(ITH) and Talon Gold Alaska, Inc. (Talon), a wholly-owned subsidiary of ITH, entered into an Asset Purchase and Sale and
Indemnity Agreement whereby AngloGold Ashanti sold to Talon a 100 percent interest in six Alaska mineral exploration
properties and associated databases in return for 5,997,295 common shares of ITH stock, representing an approximate
19.99 percent interest in ITH (June 15, 2007; 15.68 percent). The sales transaction closed on August 4, 2006. AngloGold
Ashanti also granted to ITH the exclusive option to acquire a 60 percent interest in each of its LMS and Terra projects by
106
incurring $3 million of exploration expenditure on each project (total of $6 million) within four years of the grant date of the
options. As part of the two option agreements, AngloGold Ashanti will have the option to increase or dilute its stake in
these projects, subject to certain conditions.
On July 14, 2006, AngloGold Ashanti announced the signing of a Heads of Agreement with Antofagasta plc to jointly
explore in Southern Colombia for new gold and copper deposits. AngloGold Ashanti will include all of its mineral
applications, contracts and third party contracts within the area of interest in the new joint venture, while Antofagasta will
commit to fund a minimum of $1 million of exploration within 12 months of the signing of the agreement, with an option to
invest an additional $7 million within four years in order to earn-in to 50 percent of the joint venture. Both AngloGold
Ashanti and Antofagasta will have the right to increase their interests by 20 percent in copper-dominant and gold-dominant
properties subject to certain conditions.
On August 23, 2006, AngloGold Ashanti announced that it had entered into a conditional agreement with Central African
Gold plc (CAG) to sell the assets, related to Bibiani and Bibiani North prospecting permit, including all of Bibiani’s
employees, fixed mining and non-mining assets, inventory, trade receivables and intellectual property as well as the
Bibiani mining lease and the Bibiani North prospecting license, and procure the cessation and delegation of all contracts
related to Bibiani to CAG for a total consideration of $40 million. The conditions precedent to the sale of Bibiani were
satisfied effective December 28, 2006. The Bibiani North prospecting license was assigned to CAG on May 17, 2007 by
the Ghanaian Land Commission and Registry.
Arising from the sale of Bibiani assets, AngloGold Ashanti decided to apply $3 million of the partial proceeds to an
investment of 15,825,902 Central African Gold plc (CAG) shares. Subsequent to this decision, local regulators required
that the shares in CAG be sold within 90 days of December 28, 2006. The Company has classified the shares as held for
sale. On February 14, 2007, the Company disposed of 7,000,000 CAG shares yielding total proceeds of
£768,845 ($1.5 million) and during April 2007, disposed of the remaining 8,825,902 CAG shares yielding total proceeds of
£894,833 ($1.8 million).
On September 21, 2006, AngloGold Ashanti announced that it had entered into a 50:50 strategic alliance with Russian
gold and silver producer, OAO Inter-Regional Research and Production Association Polymetal (Polymetal) in terms of
which, Polymetal and AngloGold Ashanti would cooperate in exploration, acquisition and development of gold mining
opportunities within the Russian Federation. At the same time, AngloGold Ashanti announced that it had submitted an offer
to the board of Trans-Siberian Gold plc (TSG) to acquire all of TSG’s interest in its Krasnoyarsk based subsidiaries,
OOO GRK Amikan and OOO Artel Staratelei Angarskaya Proizvodstvennaya Kompania for a total consideration of
$40 million. TSG announced on February 12, 2007, that the agreements for the sale of its Krasnoyarsk based subsidiaries
to AngloGold Ashanti have been signed. The South African Reserve Bank has approved the transacti on. These
companies to be acquired from TSG by AngloGold Ashanti, together with two greenfields exploration companies held by
Polymetal, hold the initial operating assets of the strategic alliance. The Company’s aggregate shareholding in TSG at
December 31, 2006 was 12,263,170 ordinary shares (29.9 percent interest held).
Acquisitions have been accounted for as purchase business combinations under US GAAP. The consolidated financial
statements reflect the operations and financial condition of AngloGold Ashanti, assuming that acquisitions and dispositions
took place on the effective date of these transactions. Therefore, the consolidated financial statements are not necessarily
indicative of AngloGold Ashanti’s financial condition or results of operations for future periods. For a more detailed
discussion of these transactions, see “Item 4A.: History and development of the company”.
Business combination between AngloGold and Ashanti
In connection with the business combination between AngloGold and Ashanti, AngloGold and the government of Ghana
agreed the terms of a Stability Agreement, approved by the parliament of Ghana, to govern certain aspects of the fiscal
and regulatory framework under which AngloGold Ashanti would operate in Ghana following the implementation of the
business combination.
Under the Stability Agreement, the government of Ghana retained its special rights (“Golden Share”) under the provisions
of the mining law pertaining to the control of a mining company, in respect of the assets and operations in Ghana.
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· In terms of the Golden Share, the following requires, and will not be effective without, the written consent of the
government of Ghana as the holder of the Golden Share - any disposal by Ashanti (other than any disposal in the
ordinary course of business of Ashanti) which, alone or when aggregated with any disposal or disposals forming part
of, or connected with, the same or a connected transaction, constitutes a disposal of the whole or a material part of
the assets of the Ashanti Group taken as a whole. For this purpose, a part of the Ashanti Group’s assets will be
considered material if either (a) its book value (calculated by reference to the then latest audited consolidated
accounts), or the total consideration to be received on its disposal, is not less than 25 percent of the book value of the
net assets of the Ashanti Group or (b) the average profits attributable to it represent at least 25 percent of the
average profits of the Ashanti Group for the last three years for which audited accounts are available (before
deducting all charges, except taxation and extraordinary items).
The Golden Share does not carry any right to vote at any general meeting of AngloGold Ashanti.
The government of Ghana has also agreed that Ashanti's Ghanaian operations will not be adversely affected by any new
enactments or orders or by changes to the level of payments of any customs or other duties relating to mining operations,
taxes, fees and other fiscal imports or laws relating to exchange control, transfer of capital and dividend remittance for a
period of 15 years after the completion of the business combination.
The market value of the shares issued for Ashanti was approximately $1,544 million, net of share issue expenses of
$3 million, based on the average quoted value of the shares of $37.62 two days before and after October 15, 2003, the
date the terms of the transaction were announced. The market value of the issued shares, together with the cash
consideration paid to the government of Ghana as part of the Stability Agreement, cash consideration paid for outstanding
options over Ashanti ordinary shares and transaction costs and funding of $227 million, gave rise to a total purchase price
of approximately $1,771 million.
AngloGold Ashanti completed the purchase price allocation based on independent appraisals and valuations. The
transaction was accounted for as a purchase business combination under US GAAP whereby identifiable assets acquired
and liabilities assumed were recorded at their fair market values as of the date of acquisition. The excess of the purchase
price over such fair value was recorded as goodwill and as such, the acquisition resulted in goodwill of $182 million being
recorded, relating mainly to the extended life of AngloGold Ashanti by the Obuasi project in Ghana and enlarged
negotiation base and presence in Africa by Ashanti operations. In accordance with the provisions of SFAS142, goodwill
was assigned to specific reporting units.
The company’s reporting units are generally consistent with the operating mines underlying the segments identified in
note 29 to the consolidated financial statements “Segment and geographical information”. Goodwill related to the
acquisition is non-deductible for tax purposes.
The gold prices used to value the Ashanti acquired mineral rights and reserves were determined in accordance with
EITF 04-3 “Mining Assets Impairment and Business Combinations” (EITF 04-3) which was effective from March 31, 2004.
In accordance with EITF 04-3, AngloGold Ashanti’s determination of the gold price assumptions to be used included a
detailed consideration of the historic, current and future prices of gold and other data that a market participant would
consider. This was important because the EITF states, “Generally, an entity should consider all available information
including current prices, historical averages, and forward pricing curves. The Task force observed that it generally would
be inappropriate for an entity to use a single factor, such as the current price or a historical average, as a surrogate for
estimating future prices without considering other infor mation that a market participant would consider”.
AngloGold Ashanti considered among other things, the following factors when considering historic, current and future
prices of gold:
1.
Historical and current gold prices (both adjusted and unadjusted for inflation to acquisition date);
2.
The forward pricing curve for gold;
3.
Portfolio diversification and increased investment holdings in gold;
4.
A favorable macro-environment;
5.
Increased jewellery demand;
6.
Shifting official sector sentiment;
7.
Declining gold mine supply;
108
8.
Producer dehedging; and
9.
Gold asset and company valuation multiples
Having considered the above factors, AngloGold Ashanti concluded that the forward curve price points were consistent
with the other factors which a market participant would consider and were, in its judgment, the best indicator of fair value at
acquisition. AngloGold Ashanti therefore used the forward gold price curve existing on April 23, 2004 (value dated
April 27, 2004) for the 10-year period where there is a forward gold market and quoted forward prices for gold. For periods
thereafter, the estimated gold price has been adjusted for inflation by 2.25 percent per year for the anticipated closureremaining
life of the mineral rights and final reserves acquired.
Specifically AngloGold Ashanti noted that the forward curve:
1.
Is based on quoted market prices, which represents the best evidence of fair value according to FASB literature;
2.
Is consistent with other market information about the price; and
3.
Is available to other market participants.
As a result of this approach, AngloGold Ashanti utilized a range of gold prices in estimating the value of the acquired
mineral rights and reserves, the low end of the estimated price received range was nominal $402 per ounce in 2005 and
the high end of the estimated price received range was nominal $999 per ounce in 2039 with an overall average estimated
received price of $673 per ounce in nominal terms. In addition, costs for the first six years were estimated based on
operational requirements adjusted by inflation, and escalated by 2.25 percent per year for periods thereafter. Future cash
flows have been discounted using compound pre-tax rates adjusted for country and other risks, on a mine by mine basis.
In particular, these rates vary between 6.5 – 8.5 percent for Ghana, 9.75 – 11.75 percent for Guinea, and 6.25 –
8.25 percent for Tanzania.
During the year ended December 31, 2005, the Company recorded an impairment of $4 million, relating to goodwill
formerly assigned to operations situated in Ghana (at Bibiani) as part of the Business Combination, resulting from a
reduction in the life of mine following re-assessments at this operation. No impairments relating to goodwill were recorded
during the year ended December 31, 2006.
The finalization of the purchase price allocation at the individual mines during 2005 in respect of fixed assets resulted in a
reallocation between mine development and mine infrastructure of $214 million included in property, plants and equipment.
The allocation of goodwill assigned to reporting units was not affected.
The operations and financial condition of the companies and assets acquired are included in the financial statements from
April 26, 2004, the effective date of the business combination.
Projects and growth opportunities
In addition to continuously monitoring and evaluating prospective acquisitions including the business combination,
AngloGold Ashanti’s management has identified a number of medium- to long-term organic growth opportunities for the
company. For a discussion of these projects and opportunities, see “Item 5D.: Trend information – Growth opportunities”.
South African political, economic and other factors
AngloGold Ashanti is a company domiciled in South Africa, with a number of operations in South Africa. As a result,
AngloGold Ashanti is subject to various economic, fiscal, monetary and political factors that affect South African
companies generally.
South African companies are subject to exchange control regulations. Governmental officials have from time to time
stated their intentions to lift South Africa’s exchange control regulations when economic conditions permit such action.
From 1998, certain aspects of exchange controls for financial institutions and individuals have been incrementally relaxed.
It is, however, impossible to predict whether or when the South African government will remove exchange controls in their
entirety. South African companies remain subject to restrictions on their ability to export and deploy capital outside of the
Southern African Common Monetary Area, unless dispensation has been granted by the South African Reserve Bank. For
a detailed discussion of exchange controls, see “Item 10D.: Exchange controls”.
109
On May 1, 2004, the Minerals and Petroleum Resources Development Act, Act 28 of 2002 (MPRDA) came into effect and
operation. The MPRDA vests custodianship of South Africa’s mineral rights in the State. The State issues prospecting
rights or mining rights to applicants. The former common law prospecting, mining and mineral rights are now known as old
order mining rights and the transitional arrangements provided in the MPRDA give holders of such old order mining rights
the opportunity to convert their old order mining rights into new order mining rights. Applicants have five years from
May 1, 2004, in which to apply to convert old order mining rights into new order mining rights. In August 2005, the Director
General of Minerals and Energy notified that the AngloGold Ashanti application for new order mineral rights had been
granted.
The South African government has announced the details of the proposed new legislation, whereby the new order rights
will be subject to a State royalty. The Mineral and Petroleum Resources Royalty Bill was published on October 11, 2006,
and provides for the payment of a royalty of 1.5 percent of gross revenue attributable to refined gold per year, payable
quarterly. The royalty is tax deductible and the cost after tax amounts to a rate of 0.825 percent at the prevailing marginal
tax rate applicable to the Company. The payment of royalties will commence on May 1, 2009, if the Bill is passed by
Parliament in its current form.
Gold market in 2006
Continued strong levels of investor and speculator interest combined with exceptional volatility in the first half of the year to
push the gold price to 26-year highs during the course of 2006. After reaching a $725 per ounce peak in the second
quarter, gold pulled back to $562 per ounce in June, followed by a renewed bout of investor interest that drove the price
back to the mid-$600s in July. Price volatility peaked in the second quarter, with relative stability returning to the gold
market in the latter part of August and continuing through to the end of the year. In 2006 there was again good correlation
between the dollar exchange rate against the euro and the gold price. From an opening exchange rate of $/€1.18 for the
year, the dollar closed the year at $/€1.33, thus providing strong support for a higher gold price. During 2006, the South
African rand did not appreciate in line with t he weaker US currency. The rand opened the year at $/R6.34 and closed the
year weaker at $/R7.00. This weakening helped push the rand gold price to new highs of R157,000 per kilogram in July
2006 and to an average of R131,335 per kilogram for the year, or some 45 percent higher than the average rand gold price
for 2005.
The wholesale market of exchange traded funds (ETFs), commodity exchange activity and over-the-counter purchases
was generally strong in 2006, with particularly robust interest evident in the gold ETF market, which saw the launch of
several new funds. The total net number of ounces held by ETFs almost doubled over the course of 2006, from 11 million
ounces in January to 20 million ounces at year-end with the ETFs only experiencing small net disinvestment during periods
of weakening gold prices. Another key development in 2006 was the rise in investor interest in physical gold, especially
among high net worth individuals seeking wealth preservation instruments in the face of continued geopolitical and
economic uncertainty.
The decline in physical offtake that began in the last quarter of 2005 continued through the first half of the year and into the
early part of the third quarter. Although some recovery was seen in the last months of the year, total global demand for
2006 ended 5 percent lower year-on-year, or 3,866 tonnes compared with 4,070 tonnes in 2005.
The decline was due chiefly to a considerable decrease in jewellery offtake, particularly apparent in the first two quarters of
the year, when jewellery demand dipped below total mine production in the face of a high spot price and considerable
volatility in the market. Scrap supplies of gold onto the market increased significantly during this period, and gold jewellery
manufacturers were further adversely affected as banks made margin calls to cover the higher value of gold inventory
loans. In response, manufacturers were generally forced to increase their loan collateral or repay loans by cutting
production or liquidating stock.
A marked change in trend was evident in the third quarter when the gold price began to stabilise, albeit at relatively
elevated levels. This appeared to denote a move amongst consumers, particularly in Asia and the Middle East, towards
accepting gold prices closer to $600 per ounce. Consumption increases in the second half of the year were evident in key
markets such as India, when declining price volatility coincided with the Diwali period, which resulted in record gold imports
for the fourth quarter even as the spot price steadied above $600 per ounce. To a lesser extent, a late-year recovery in
consumption was also evident in most parts of the Middle East, and Chinese jewellery fabrication had actually increased
110
by the end of December, supported primarily by local consumption, with 18-carat gold taking a rising share of the market.
North America saw some of the most significant retail price increases in recent years, with gold jewellery consumption in
the United States down significantly in tonnage terms in 2006, despite the industry’s shift to lighter carat and mixed-
material products in response to the year’s price volatility. Despite the recovery in the fortunes of the physical market
during the second half of the year, the significant May price rise and the related volatility that was the hallmark of the first
six months of the year had a sustained impact on jewellery exports to price sensitive markets, including India and the
Middle East. The result of a year of relatively high and volatile gold prices was a 16 percent, or 437-tonne, decline in global
gold jewellery fabrication for the year. Ind ustrial demand grew healthily through the year, posting a 7 percent increase, due
to robust demand from the electronics industry, which set a new quarterly record of 79 tonnes in the third quarter. The
importance of a strong physical market to provide offtake and floor price support remains.
Official sector sales for the year approximated 330 tonnes, some 50 percent lower than in 2005. The main cause of this
decline was the 34 percent drop in gold sales by the Central Bank Gold Agreement (CBGA) signatories, selling only 104 of
their 500 permissible tonnes for the year.
Gold producers continued to reduce their hedging positions during the year through deliveries into hedges and through
buybacks. It is estimated that this added some 403 tonnes of demand during 2006.
Comparison of operating performance in 2006, 2005 and 2004
The following table presents operating data for the AngloGold Ashanti group for the three year period ended
December 31, 2006:
Operating data for AngloGold Ashanti
Year ended December 31
2006 2005
2004
(1)
Total attributable gold production (thousand ounces)
5,635
6,166
5,829
Total cash costs ($/oz)
321
281
264
Total production costs ($/oz)
452
398
353
Production costs (million US dollars)
1,525
1,638
1,340
Capital expenditure (million US dollars)
817
722
583
- Consolidated entities
811
710
571
- Equity accounted joint ventures
6
12
12
(1)
Adjusted to exclude Ergo, which has been discontinued.
AttributableGoldproduction
For the year ended December 31, 2006, AngloGold Ashanti’s total attributable gold production from continuing operations
decreased by 531,000 ounces, or 8.6 percent, to 5.6 million ounces from 6.2 million ounces produced in 2005. Gold
production from the Geita mine in Tanzania decreased from 613,000 ounces in 2005 to 308,000 ounces in 2006 and mines
in Ghana and Guinea reported decreases from 926,000 ounces to 848,000 ounces, mainly due to lower yields. Marginal
declines in gold production were recorded from operations located in Brazil where gold production fell from
346,000 ounces to 339,000 ounces. Gold production from operations situated in South Africa decreased by 5 percent from
2,676,000 ounces produced in 2005 to 2,554,000 ounces in 2006 mainly due to both lower mining volumes and grade.
Gold production from operations situated in the USA declined from 330,000 ounces produced in 2005 to 28 3,000 ounces in
2006. The Australian operations produced 465,000 ounces of gold during 2006, compared with 455,000 ounces in 2005.
Gold production in Mali increased by 2 percent from 528,000 ounces in 2005 to 537,000 ounces in 2006. Navachab, the
Namibian operation, produced 86,000 ounces of gold in 2006 compared with 81,000 ounces in 2005, mainly as a result of
increased milled tonnages offset by reductions in recovered grade. Operations in Argentina produced 215,000 ounces in
2006, a marginal increase over the 211,000 ounces produced in 2005.
For the year ended December 31, 2005, AngloGold Ashanti’s total attributable gold production from continuing operations
increased by 337,000 ounces, or 6 percent, to 6.2 million ounces from 5.8 million ounces produced in 2004. Gold
production from the Geita mine in Tanzania increased from 570,000 ounces in 2004 to 613,000 ounces in 2005 and mines
acquired in the completed Ashanti business combination in Ghana and Guinea reported increases from 568,000 to
926,000, mainly as a result of reporting for a complete year in 2005 whereas they were reported for only eight months in
2004. The Guinean operations were also effected positively from a change in processing method. Marginal increases in
gold production were recorded from operations located in Brazil where gold production rose from 334,000 ounces to
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346,000 ounces. Gold production from operations situated in South Africa decreased by 6 percent from 2,857,000 ounces
produced in 2004 to 2,676,000 ounces in 2005 mainly due to both lower mining volumes and grade. Gold production from
operations situated in the USA increased from 329,000 ounces produced in 2004 to 330,000 ounces in 2005. The
Australian operations produced 455,000 ounces of gold during 2005, compared with 410,000 ounces in 2004. Gold
production in Mali increased by 11 percent from 475,000 ounces in 2004 to 528,000 ounces in 2005, mainly as a result of
improved grades. Navachab, the Namibian operation, produced 81,000 ounces of gold in 2005 compared with 66,000
ounces in 2004, mainly as a result of increased milled tonnages and recovered grade. Operations in Argentina produced
211,000 ounces both in 2005 and 2004.
A more detailed review of gold production at each of AngloGold Ashanti’s operations is provided under “Item 4B.: Business
overview”.
Total cash costs and total production costs
Total cash costs for the year ended December 31, 2006 was $321 per ounce, $40 per ounce, or 14 percent, higher than
the total cash costs of $281 per ounce recorded in 2005. Of this increase $13 per ounce was a consequence of the
adoption of EITF 04-06 “Accounting for Stripping Costs in the Mining Industry”. Cash costs in the South African operations
improved from $295 per ounce to $286 per ounce, primarily due to the weakening of the rand and as a result of cost
savings initiatives, which contributed a $50 million saving of which 57 percent arose from operational efficiencies, 9 percent
from improved procurement practices and 34 percent from the restructuring implemented at the Savuka and Tau Lekoa
mines.
Cero Vanguardia, the Argentinean mine, recorded an increase in cash costs of 30 percent from $171 per ounce in 2005 to
$223 per ounce in 2006, mainly as a result of higher local inflation and increases in commodity and maintenance costs and
the effects of the adoption of EITF 04-06. The Australian mine, Sunrise Dam, reported cash costs of $333 per ounce for
2006 compared to $269 per ounce for 2005, a 24 percent increase mainly from commodity and contractor costs and the
adoption of EITF 04-06, which increased cash costs by $37 per ounce.
The Brazilian mines, Cuiaba and Serra Grande, reported cash costs of $207 per ounce in 2006 compared to $169 per
ounce in 2005 and $196 per ounce in 2006 compared to $158 per ounce in 2005, respectively. This increase in cash costs
at both mines is mainly attributable to higher local inflation and reduced grade recovered and the adoption of EITF 04-06.
Obuasi in Ghana reported increased cash costs of $52 per ounce increasing to $397 per ounce in 2006 as a result of
processing increased tonnages with lower grade ore, whilst at Iduapriem cash costs increased to $413 per ounce mainly
due to local inflation and the adoption of EITF 04-06 which increased cash costs by $42 per ounce. The operations at
Siguri, in Guinea, reported a $97 per ounce increase in cash costs to $398 per ounce, mainly as result of commodity price
increases, higher royalties, which are linked to spot prices, maintenance shutdowns and plant modifications post
commissioning.
The Malian operations had a mixed year. Yatela reported a decrease in cash costs to $241 per ounce in 2006 compared to
$263 per ounce in 2005 mainly due to process changes in the heap leach operations. At Morila cash costs increased in
2006 to $266 per ounce compared to $191 per ounce in 2005 mainly due to reduced grade recovered and the major mill
relining that took place in the second half of the year which affected tonnage. Sadiola reported a $3 per ounce increase in
cash costs to $268 per ounce in 2006 mainly due to increased royalty payments linked to the higher gold price. All the
Malian operations were affected by the adoption of EITF 04-06.
Navachab reported an increase in cash costs of 19 percent to $349 per ounce as a result of increased gold production and
the effects of the US dollar on costs in the second half of the year and the adoption of EITF 04-06, which affected cash
costs by $84 per ounce. Geita in Tanzania was impacted by a combination of factors during the year including a drought
early in the year, followed by floods impacting haulage rates. These impacted the cut back of the Nyankanga pit which
resulted in a 46 percent drop in grade and ultimately impacting cash costs by 111 percent, increasing cash costs from
$298 per ounce in 2005 to $630 per ounce in 2006. The adoption of EITF 04-06 increased cash costs at Geita by $140 per
ounce. In North America, Cripple Creek reported a $18 per ounce increase to $248 per ounce in 2006 mainly due to
higher commodity prices.
Overall, total cash costs for 2006 increased by $40 per ounce of which $14 per ounce related to inflation, and
$36 per ounce to lower grades and $13 per ounce for the adoption of EITF 04-06. Cost savings initiatives helped to offset
these increases by $10 per ounce, favourable exchange variances by $7 per ounce, higher-by-product effects by
$3 per ounce and other variances by $3 per ounce.
112
Total cash costs for the year ended December 31, 2005 was $281 per ounce, $17 per ounce, or 6 percent, higher than the
cash costs of $264 per ounce recorded in 2004. This change was mainly due to marginally higher cash costs for the
South African, Australian, and Malian and USA operations in 2005, which increased by 3 percent, 3 percent, 4 percent and
5 percent respectively, and substantially higher cash costs for the Argentinean, Brazilian, Ghanaian and the Tanzanian
operations in 2005, which increased by 11 percent, 42 percent, 16 percent and 19 percent respectively, when compared to
2004. The increase in Brazil was a principally the effects of the stronger currency compared to the US dollar. Declines in
cash costs were achieved by the Guinean and Namibian operations of 33 percent and 8 percent respectively.
The increase in total cash costs at the South African operations was mainly due to the strengthening of the South African
rand relative to the US dollar (based on the average exchange rates of the rand against the US dollar of R6.37 and R6.44
during the year ended December 31, 2005 and 2004, respectively) offset by the impact of the implemented cost cutting
drives set at the beginning of the year. The Australian operations recorded higher cash costs in 2005, mainly due to the
strengthening of the Australian dollar relative to the US dollar (based on the average exchange rates of the Australian
dollar against the US dollar of A$1.31 and A$1.36 during the year ended December 31, 2005 and 2004, respectively).
Overall, total cash costs for 2005 increased by $17 per ounce from 2004 of which $4 per ounce related to stronger
operating currencies relative to the dollar, $19 per ounce to inflation, and $8 per ounce to lower grades. Cost savings
initiatives helped to partially offset these increases by $14 per ounce.
Total production costs per ounce increased from $398 per ounce in 2005 to $452 per ounce in 2006 and from $353 per
ounce in 2004 to $398 per ounce in 2005.
A more detailed review of total cash costs and total production costs at each of AngloGold Ashanti’s operations is provided
under “Item 4B.: Business overview”.
Reconciliation of total cash costs and total production costs to financial statements
Total cash costs and total production costs are calculated in accordance with the guidelines of the Gold Institute industry
standard and are not US GAAP measures. The Gold Institute was a non-profit international association of miners, refiners,
bullion suppliers and manufacturers of gold products, this institute has now been incorporated into the National Mining
Association, which has developed a uniform format for reporting total production costs on a per ounce basis. The
guidance was first adopted in 1996 and revised in November 1999.
Total cash costs, as defined in the Gold Institute industry guidelines are production costs as recorded in the statement of
operations, less offsite (i.e. central), general and administrative expenses (including head office costs charged to the
mines, central training expenses, industry association fees, refinery charges and social development costs) and
rehabilitation costs, plus royalties and employee termination costs.
Total cash costs as calculated and reported by AngloGold Ashanti include costs for its operations. The form, amountall mining, processing, administration,
royalties and production taxes, as well as contributions from by-products, but exclusive of depreciation, depletion and
amortization, rehabilitation, employment severance costs, corporate administration costs, capital costs and exploration
costs. Total cash costs per ounce are calculated by dividing attributable total cash costs by attributable ounces of gold
produced.
Total production costs, as defined in the Gold Institute industry guidelines, are total cash costs, as calculated using the
Gold Institute industry guidelines, plus amortization, depreciation and rehabilitation costs.
Total production costs as calculated and reported by AngloGold Ashanti include total cash costs, plus depreciation,
depletion and amortization, employee severance costs and rehabilitation and other requirements ass ociatednon-cash costs. Total production costs
per ounce are calculated by dividing attributable total production costs by attributable ounces of gold produced.
Prior to January 1, 2006 stripping costs incurred in open-pit operations during the production phase to remove additional
waste were charged to operating costs on the basis of the average life of mine stripping ratio and the average life of mine
costs per tonne and resulted in capitalization of such stripping costs (deferred stripping). EITF Issue 04-6 prohibits
capitalization of post production stripping costs effective from January 1, 2006. Except for this impact on total cash costs
and total production costs, total cash costs and total production costs have been calculated on a consistent basis for all
periods presented.
113
Total cash costs and total production costs should not be considered by investors in isolation or as alternatives to
production costs, net income/(loss) applicable to common stockholders, income/(loss) before income tax provision, net
cash provided by operating activities or any other measure of financial performance presented in accordance with this
US GAAP or as an indicator of the company’s performance. While the Gold Institute has provided definitions for the
calculation of total cash costs and total production costs, the calculation of total cash costs, total cash costs per ounce,
total production costs and total production costs per ounce may vary significantly among gold mining companies, and by
themselves do not necessarily provide a basis for comparison with other gold mining companies. However, AngloGold
Ashanti believes that total cash costs and total production costs in total by mine and per ounce by mine are useful
indicators to investors and management as they provide:
· an indication of profitability, efficiency and cash flows;
· the trend in costs as the mining operations mature over time on a consistent basis; and
· an internal benchmark of performance to allow for comparison against other mining companies.
A reconciliation of production costs as included in the company’s audited financial assurancestatements to total cash costs and to
total production costs for each of the jurisdictionsthree years in the period ended December 31, 2006 is prescribed inpresented below. In addition
the company has also provided below detail of the attributable ounces of gold produced by mine for each of those periods.
For the
applicable laws, rules year ended December 31, 2006
Operations in South Africa
(7)
(in $ millions, except as otherwise noted)
Production
costs
134 125 28 158 126 77 29 31 (39)
Plus:
Production costs of equity accounted joint ventures
(1)
-- - ---- -
(28)
Less:
Rehabilitation costs & other non-cash costs
1
(2)
1
(1)
-
(1)
(1)
-
6
Plus:
Inventory movement
5
3
1
1
3
-
1
-
1
Royalties
-- - - --- - -
Related party transactions
(2)
2 2-2 11 -1-
Adjusted for:
Minority interests
(3)
---- - - -- (2)
Non-gold producing companies and regulations.adjustments
The International Cyanide Code has been adopted-
-
-
-
-
-
-
-
66
Total
cash
costs
142 128 30 160 130 77 29 32 4
Plus:
Depreciation, depletion and amortization
81
64
3
67
37
43
20
4
9
Employee severance costs
1
1
-
2
1
1
-
-
-
Rehabilitation and other non-cash costs
(1)
2
(1)
1
-
1
1
-
(6)
Adjusted for:
Minority interests
(3)
--- ----- -
Non-gold producing companies and adjustments
-
-
-
-
-
-
-
(3)
Total
production
costs
223 195 32 230 168 122 50 36 4
Gold produced (000’ ounces)
(4)
596 474 89 615 446 176 44 113 -
Total cash costs per ounce
(5)
238 270 337 260 291 438 659 283 -
Total production costs per ounce
(5)
374 411 359 374 377 693 1,136 318 -
114
For the year ended December 31, 2006
Operations in Argentina, Australia, Brazil, Ghana, Guinea, Mali, Namibia, Tanzania, USA and Zimbabwe
(in $ millions, except as otherwise noted)
Production
costs
37
140 1 - 53 36 142 11 68
91
- - -
25
190
60
-
Plus:
Production costs of equity accounted
joint ventures
(1)
-
--- - ----
- 41
21
46 -
-
-
-
Less:
Rehabilitation costs & other non-cash
costs
-
4 (1)- (3)-13 4
(3)23 (2)
2
7
(2)
-
Plus:
Inventory movement
3
4
-
-
-
2
4
1
3
11
2
3
3
3
(8)
40
-
Royalties
11
7 -- -- 7 14
21
6 5 7
-
5
2
-
Related party transactions
(2)
-
-- -- - - - -
-
- 21
-
-
-
-
Adjusted
for:
-
Minority interests
(3)
(3)
-- - - (19)- - (10) (18)
-- -
-
-
-
-
Total cash costs
48
155
-
-
50
19
154
16
69
102
51
34
55
30
194
100
-
Plus:
Depreciation, depletion and
amortization
35
38- - 20 14 79 9 27
52
19 15 17
7
49
39
-
Employee
severance
costs
-
- - - - - 15 - -
-
- - -
-
-
-
-
Rehabilitation and other non-cash
costs
-
(4) 1 - 3 - (1) (3) (4)
3
(1) (3) 4
(2)
(7)
2
-
Adjusted
for:
Minority interests
(3)
(3)
-- - - (6) - - (1) (5)
-- -
-
-
-
-
Total
production
costs
80
189 1 - 73 27 247 22 91
152 69 46 76
35
236
141
-
Gold produced (000’ ounces)
(4)
215
465- - 242 97 3837167
256 190 141 207
86
308
283
-
Total cash costs per ounce
(5)
223
333-
- 207 196 397 432 413
398
268241 266
349
630
(8)
248 -
Total production costs per ounce
(5)
372
406-
- 301278638 594 544
593
363326 367
407
766
498
-
115
116
For the standard for cyanide management within year ended December 31, 2006
AngloGold Ashanti operations - Total
(in $ millions, except as otherwise noted)
Total
Production costs per financial statements
1,525
Plus:
Production costs of equity accounted joint ventures
(1)
80
Less:
Rehabilitation costs & other non-cash costs
17
Plus:
Inventory movement
84
Royalties
78
Related party transactions
(2)
12
Adjusted for:
Minority interests
(3)
(54)
Non-gold producing companies and adjustments
68
Total cash costs
1,810
Plus:
substantial progressDepreciation, depletion and amortization
749
Employee severance costs
22
Rehabilitation and other non-cash costs
(17)
Adjusted for:
Minority interests
(3)
(15)
Non-gold producing companies and adjustments
(3)
Total production costs
2,546
Gold produced (000’ ounces)
(4)
5,635
Total cash costs per ounce
(5)
321
Total production costs per ounce
(5)
452
(1)
Production costs and related expenses of equity accounted joint ventures are included in the calculation of total cash costs per ounce and total
production costs per ounce.
(2)
Relates solely to production costs as included in the company’s consolidated financial statements and has, accordingly, been made with its implementation acrossincluded in total
production costs and total cash costs.
(3)
Adjusting for minority interest of items included in calculation, to disclose the group. The assessmentattributable portions only.
(4)
Attributable production only.
(5)
In addition to the operational performances of the group’s adherence tomines, total cash costs per ounce and total production costs per ounce are affected by fluctuations in
the International Cyanide Code Protocol usescurrency exchange rate. AngloGold Ashanti reports total cash costs per ounce and total production costs per ounce calculated to the nearest US
dollar amount and gold produced in ounces.
(6)
Corporate includes non-gold producing subsidiaries.
(7)
Adjusted to exclude Ergo.
(8)
Total cash costs per ounce calculation includes inventory change.
(9)
There was no production attributable to AngloGold Ashanti in 2006.
(10)
Operations acquired from Ashanti (including 50 percent in Geita).
(11)
Bibiani was sold effective December 28, 2006.
(12)
Freda-Rebecca mine was sold effective September 1, 2004.
For the year ended December 31, 2005
Operations in South Africa
(7)
(in $ millions, except as otherwise noted)
Production
costs
137 123 51 178 134 105 26 58
Plus:
Production costs of equity accounted joint ventures
(1)
-- - - - - - (7)
Less:
Rehabilitation costs & other non-cash costs
(2)
(1)
1
(6)
(7)
(1)
-
(2)
Plus:
Inventory movement
1
-
-
1
-
1
-
-
Royalties
- - - - -- - -
Related party transactions
(2)
772 10 7 4 1 1
Adjusted for:
Minority interests
(3)
-- - - - - - -
Non-gold producing companies and adjustments
-
-
-
-
-
-
-
(41)
Total
cash
costs
143 129 54 183 134 109 27 9
Plus:
Depreciation, depletion and amortization
48
62
7
50
30
34
4
13
Employee severance costs
3
3
6
6
4
3
-
1
Rehabilitation and other non-cash costs
2
1
(1)
6
7
1
-
2
Adjusted for:
Minority interests
(3)
--- - - - - -
Non-gold producing companies and adjustments
-
-
-
-
-
-
-
(5)
Total
production
costs
196 195 66 245 175 147 31 20
Gold produced (000’ ounces)
(4)
512 502 126 693 482 265 95 -
Total cash costs per ounce
(5)
279 256 430 264 277 410 287 -
Total production costs per ounce
(5)
383 388 524 354 363 555 326 -
117
For the year ended December 31, 2005
Operations in Argentina, Australia, Brazil, Ghana, Guinea, Mali, Namibia, Tanzania, USA and Zimbabwe
(in $ millions, except as otherwise noted)
Production
costs
31 127
- - 40
27
127
45
77 76 - - - 20
189 67
-
Plus:
Production costs of equity
accounted joint ventures
(1)
-
- --------42
25
48-
-
-
-
Less:
Rehabilitation costs & other non-
cash
costs
-
(10) --(1)-(1)(7)(2)(1)(2)(1)(2)
6
(18)
(3)
-
Plus:
Inventory movement
(1)
-
-
-
3
2
3
(5)
(4)
6
-
(1)
(1)
-
5
27
-
Royalties
8
5- - - - 5 2 3 5 5 3 7
-
7
4
-
Related party transactions
(2)
-
-- - - -1 - 1 - - - (2) -
-
-
-
Adjusted
for:
Minority interests
(3)
(2)
- - - - (14)- - (14)(12) - - -
-
-
-
-
Total cash costs
36
122
-
-
42
15
135
35
61
74
45
26
50
26
183
95
-
Plus:
Depreciation, depletion and
amortization
22
35 - -221172 18 23 39 277 26
7
56
40
-
Employee
severance
costs
-
- - - - - - - - - - - - -
-
-
-
Rehabilitation and other non-
cash
costs
-
10 - - 1 - 1 7 2 1 2 1 2 (6)
18
3
-
Adjusted
for:
Minority interests
(3)
(1)
- - - -(4) - - (3)(3) - - -
-
-
-
-
Total production costs
57
167
-
-
65
22
208
60
83
111
74
34
78
27
257
138
-
Gold produced (000’ ounces)
(4)
211
455
-
-
250
96
391
115
174
246
168
98
262
81 613
330
-
Total cash costs per ounce
(5)
171
269 -
- 169 158 345 305 348 301 265 263 191
321
298
(8)
230 -
Total production costs per
ounce
(5)
270
367 -
- 260 229 532 522 477 451 440 347 298
333
419
418
-
118
119
For the year ended December 31, 2005
AngloGold Ashanti operations - Total
(in $ millions, except as otherwise noted)
Total
Production costs per financial statements
1,638
Plus:
Production costs of equity accounted joint ventures
(1)
108
Less:
Rehabilitation costs & other non-cash costs
(60)
Plus:
Inventory movement
37
Royalties
54
Related party transactions
(2)
39
Adjusted for:
Minority interests
(3)
(42)
Non-gold producing companies and adjustments
(41)
Total cash costs
1,733
Plus:
Depreciation, depletion and amortization
653
Employee severance costs
26
Rehabilitation and other non-cash costs
60
Adjusted for:
Minority interests
(3)
(11)
Non-gold producing companies and adjustments
(5)
Total production costs
2,456
Gold produced (000’ ounces)
(4)
6,166
Total cash costs per ounce
(5)
281
Total production costs per ounce
(5)
398
(1)
Production costs and related expenses of equity accounted joint ventures are included in the calculation of total cash costs per ounce and total
production costs per ounce.
(2)
Relates solely to production costs as included in the company’s consolidated financial statements and has, accordingly, been included in total
production costs and total cash costs.
(3)
Adjusting for minority interest of items included in calculation, to disclose the attributable portions only.
(4)
Attributable
production
only.
(5)
In addition to the operational performances of the mines, total cash costs per ounce and total production costs per ounce are affected by fluctuations in
the currency exchange rate. AngloGold Ashanti reports total cash costs per ounce and total production costs per ounce calculated to the nearest US
dollar amount and gold produced in ounces.
(6)
Corporate includes non-gold producing subsidiaries.
(7)
Adjusted to exclude Ergo.
(8)
Total cash costs per ounce calculation includes inventory change.
(9)
There was no production attributable to AngloGold Ashanti in 2005.
(10)
Operations acquired from Ashanti (including 50 percent in Geita).
(11)
Freda-Rebecca mine was sold effective September 1, 2004.
For the year ended December 31, 2004
Operations in South Africa
(7)
(in $ millions, except as otherwise noted)
Production costs
138
133
71
180
134
107
25
-
Plus:
Production costs of equity accounted joint ventures
(1)
- - - - - - - -
Less:
Rehabilitation costs & other non-cash costs
(2)
(2)
(1)
(4)
(3)
(2)
-
(3)
Plus:
Inventory movement
(1)
-
-
(3)
(1)
(1)
-
-
Royalties
- - - - - - - -
Related party transactions
(2)
6 8 2 11 7 4 5 -
Adjusted for:
Minority interests
(3)
- - - - - - - -
Non-gold producing companies and adjustments
-
-
-
-
-
-
-
3
Total
cash
costs
141 1397218413710830-
Plus:
Depreciation, depletion and amortization
29
39
26
22
17
20
29
10
Employee severance costs
-
1
2
3
1
-
-
-
Rehabilitation and other non-cash costs
2
2
1
4
3
2
-
3
Adjusted for:
Minority interests
(3)
- - - - - - - -
Non-gold producing companies and adjustments
-
-
-
-
-
-
-
(4)
Total
production
costs
172 181101213158130599
Gold produced (000’ ounces)
(4)
438 568 158795486293119-
Total cash costs per ounce
(5)
322 245455231281370250-
Total production costs per ounce
(5)
393319639 268325444496-
120
(8)
For the year ended December 31, 2004
Operations in Argentina, Australia, Brazil, Ghana, Guinea, Mali, Namibia, Tanzania, USA and Zimbabwe
(in $ millions, except as otherwise noted)
Production
costs
31 87--31267327 43
42---
23
10956
4
Plus:
Production costs of equity accounted joint
Ventures
(1)
- --------
-
39
21
36
-
23 -
-
Less:
Rehabilitation costs & other non-cash costs
(1)
(1)
-
-
(1)
-
-
-
(1)
(2)
-
-
-
-
(1)
4
-
Plus:
Inventory movement
(2)
17
-
-
2
-
1
(2)
1
-
(2)
-
-
-
5
21
-
Royalties
8 4 ----312
1435
-
73
-
Related party transactions
(2)
------1-1
- 11
(1)
-
- -
-
Adjusted
for:
Minority interests
(3)
(3) ----
(13)--
(8)
(4)---
-
--
-
Total
cash
costs
33 107--3213782638
37 422540
23
14384
4
Plus:
Depreciation, depletion and amortization
28
30
-
-
15
12
35
16
19
10
36
6
15
5
47
40
1
Employee
severance
costs
- --------
- ---
-
--
-
Rehabilitation and other non-cash costs
1
1
-
-
1
-
-
-
1
2
-
-
-
-
1
(4)
-
Adjusted
for:
Minority interests
(3)
(2) - ---
(4)--
(2)
(1)---
-
- -
-
Total
production
costs
60 138--48 211134256
487831 55
28
191120
5
Gold produced (000’ ounces)
(4)
211410
-
- 240 94255105 125
83 17497204
66
570329
9
Total cash costs per ounce
(5)
156260
-
- 133134305251303
443242255196
348
250
220
417
Total production costs per ounce
(5)
284337
-
-200223443400448
578448320 270
424
335365
556
121
122
For the year ended December 31, 2004
AngloGold Ashanti operations - Total
(in $ millions, except as otherwise noted)
Total
Production costs per financial statements
1,340
Plus:
Production costs of equity accounted joint ventures
(1)
119
Less:
Rehabilitation costs & other non-cash costs
(20)
Plus:
Inventory movement
35
Royalties
41
Related party transactions
(2)
46
Adjusted for:
Minority interests
(3)
(28)
Non-gold producing companies and adjustments
3
Total cash costs
1,536
Plus:
Depreciation, depletion and amortization
507
Employee severance costs
7
Rehabilitation and other non-cash costs
20
Adjusted for:
Minority interests
(3)
(9)
Non-gold producing companies and adjustments
(4)
Total production costs
2,057
Gold produced (000’ ounces)
(4)
5,829
Total cash costs per ounce
(5)
264
Total production costs per ounce
(5)
353
(1)
Production costs and related expenses of equity accounted joint ventures are included in the calculation of total cash costs per ounce and total
production costs per ounce.
(2)
Relates solely to production costs as included in the company’s consolidated financial statements and has, accordingly, been included in total
production costs and total cash costs.
(3)
Adjusting for minority interest of items included in calculation, to disclose the attributable portions only.
(4)
Attributable
production
only.
(5)
In addition to the operational performances of the mines, total cash costs per ounce and total production costs per ounce are affected by fluctuations in
the currency exchange rate. AngloGold Ashanti reports total cash costs per ounce and total production costs per ounce calculated to the nearest US
dollar amount and gold produced in ounces.
(6)
Corporate includes non-gold producing subsidiaries.
(7)
Adjusted to exclude Ergo.
(8)
Total cash costs per ounce calculation includes inventory change.
(9)
There was no production attributable to AngloGold Ashanti in 2004.
(10)
Operations acquired from Ashanti (including 50 percent in Geita). Results are included for the eight months from May 2004 through December 2004.
(11)
Freda-Rebecca mine was sold effective September 1, 2004. Results are included for the four months from May 2004 through August 2004.
123
Capital expenditure
Total capital expenditure during the year ended December 31, 2006 was $817 million compared to $722 million in 2005
being a novel approach of creating expert teams drawn from different regions to work
with a local team in undertaking what is essentially a detailed risk assessment and audit. During 2004, internal audits of
compliance were completed in Mali, Tanzania, Namibia,13 percent increase. In South Africa, capital expenditure decreased from $347 million in 2005 to $321 million in
2006, mainly due to reduced expenditure as Moab Khotsong began commercial production in 2006 and the weakening of
the rand. Capital projects in Ghana and Guinea amounted to $97 million and $16 million, respectively, in 2006, compared
to $90 million and $36 million, respectively, in 2005, as operations at Obuasi in Ghana increased and the CIP plant in
Guinea was commissioned. Expenditure in Brazil increased from $85 million in 2005 to $186 million in 2006 as a result of
the Cuiabá expansion project. In Australia, capital expenditure increased from $38 million in 2005 to $86 million in 2006
mainly as a result of the continuing underground mining project at Sunrise Da m and the commencement of expansion at
the Boddington mine. Capital expenditure in the USA Brazil and Argentina. The auditincreased from $8 million in 2005 to $13 million in 2006.
Total capital expenditure during the year ended December 31, 2005 was $722 million, compared to $583 million in 2004,
which represents a $139 million, or 24 percent increase. In South Africa, capital expenditure increased from $333 million in
2004 to $347 million in 2005, mainly due to the impact of the strengthening of the South African rand against the US dollar.
AustralianCapital projects in Ghana and Guinea amounted to $90 million and $36 million, respectively, in 2005, compared to
$42 million and $57 million, respectively, in 2004, as part of AngloGold Ashanti’s investment strategy following the
AngloGold Ashanti business combination completed in April 2004. Expenditure in Brazil increased from $40 million in
2004 to $85 million in 2005 as a result of the Cuiabá expansion project. Capital expenditure in Namibia decreased from
$21 million in 2004 to $5 million in 2005 as a result of reduced infra structure spend resulting from the previous year
transition from contract mining to owner-mining. In Australia, capital expenditure increased from $28 million in 2004 to
$38 million in 2005 mainly as a result of the continuing underground mining project. Capital expenditure in the USA
decreased from $16 million in 2004 to $8 million in 2005 due to reduced pit development and mine equipment rebuilds.
A more detailed review of capital expenditure at each of AngloGold Ashanti’s operations is provided under “Item 4B.:
Business overview”.
Establishment of a Black Economic Empowerment (BEE) transaction in South Africa
On December 12, 2006, AngloGold Ashanti announced the finalisation of the Bokamoso employee share ownership plan
(Bokamoso ESOP) with the National Union of Mineworkers, Solidarity and United Association. The Bokamoso ESOP
creates an opportunity for AngloGold Ashanti and the unions to ensure a closer alignment of the interest between
employees and the company. Participation is restricted to those employees not eligible for participation in any other South
African Share Incentive Plan.
The company also undertook an empowerment transaction with a BEE investment vehicle, Izingwe Holdings (Proprietary)
Limited (Izingwe).
The transaction gave effect to undertakings made to the Department of Minerals and Energy at the time that the company
gained its new order mining rights in August 2005. The company undertook to establish an ESOP and a BEE transaction
equivalent to at least 6 percent of the value of the company’s South African operations
In order to facilitate this transaction the Company established a trust to acquire and administer the ESOP shares.
AngloGold Ashanti allotted and issued free ordinary shares to the trust and also created, allotted and issued E ordinary
shares to the trust for the benefit of employees.
The Company also created, allotted and issued E ordinary shares to Izingwe.
The key terms of the E ordinary share are:
·
AngloGold Ashanti will have the right to cancel the E ordinary shares, or a portion of them, in accordance with the
ESOP and Izingwe cancellation formulae, respectively;
·
the E ordinary shares will not be listed;
·
the E ordinary shares which are not cancelled will be converted into ordinary shares in accordance with the
prescribed formula; and
124
·
the E ordinary shares will each be entitled to receive a dividend equal to one-half of the dividend per ordinary share
declared by the Company from time to time and a further one half is included in the strike price calculation formula.
The average fair value of the E ordinary shares granted to employees on December 13, 2006 was completedR105 per share.
Dividends declared in respect of the E ordinary shares will firstly be allocated to cover administration expenses of the trust,
where after it will accrue and be paid to ESOP members, pro rata to the number of shares allocated to them. At each
anniversary of a five year period commencing on the third anniversary over the award, the company will cancel the
relevant number of E ordinary shares as stipulated by a cancellation formula. Any E ordinary shares remaining in that
tranche will be converted to ordinary shares for the benefit of the employees. All unexercised awards will be cancelled on
May 1, 2014.
The average fair value of the E ordinary shares granted to Izingwe on December 13, 2006 was R90 per share. Dividends
declared in respect of the E ordinary shares will accrue and be paid to Izingwe, pro rata to the number of shares allocated
to them. At each anniversary of a five year period commencing on the third anniversary over the award, Izingwe has a six
month period to instruct the company to cancel the relevant number of E ordinary shares as stipulated by a cancellation
formula. Any E ordinary shares remaining in that tranche will be converted to ordinary shares for the benefit of Izingwe. If
no instruction is received at the end of Januarythe six month period the cancellation formula will be applied automatically.
Comparison of financial performance on a segment basis for 2006, 2005 while Ghana and Guinea were audited in April 2005.2004
The board of directors has determined in the company’s Environmental Policy that AngloGold Ashanti will, at a minimum,produces gold as its primary product and does not have distinct divisional segments in terms of
comply with all applicable legal requirements. In addition,principal business activity, but manages its business on the policy commits AngloGold Ashanti to operating in an
environmentally responsible manner through effective communications, establishmentbasis of management systems, provision ofdifferent geographic segments. This information is
adequate financial resources, training and awareness programs for employees and contractors, public participation processes,
conducting environmental audits, and continually improving its environmental performance.
Environmental management systems (EMSs) form the backbone of environmental management at an operational level. Each
of the operations has an audit process in place, both internal and external. These audits are generally conducted on an annual
or bi-annual basis. The company is considering the merits of obtaining the certification of its operations group-wide to the
ISO14001 standard – standards which focus specifically on environmental management systems. As part of these
deliberations, each operation has carried out a gap analysis to determine the degree of complianceconsistent with the standard. A
information used by AngloGold Ashanti’s chief operating decision will be taken during the coursemakers in evaluating operating
performance of, 2005 after internal debate about the merits of the proposal. Currently a number of
operations are either ISO14001 certified, or comply with these standards.and making resource allocation decisions among operations.
In all jurisdictions in which the group operates, the company is required to provide financial assurance – in a form prescribed by
law – to cover some, or all of the costs of the anticipated closure and rehabilitation costs for the operations. These amounts
are derived from the mine closure plans, which are also regulated by law. Closure plans are devised prior to the
commencement of operations and are regularly updated based on the life of mine projections. Although the final cost that will
be incurred at closure is not definite, provision is made during mine life. Total estimated environmental liability (rehabilitation
and mine closure costs) atRevenues
Year ended December 31
(in millions)
2006
$
percent
2005
$
percent
2004 amounted to $350.1 million compared with the 2003 estimation
$
percent
Category of
$248.6 million. The increase principally relates to the Business Combination with Ashanti activity
Total revenues
Product sales
2,683
2,453
2,096
Interest, dividends and additional assessed liabilities in
South Africa.other
The total undiscounted estimated environmental liability attributable to AngloGold Ashanti as at December 31, 2004 is made up
as follows:32
Country
32
55
Total estimatedrevenues
liability2,715
($ millions)2,485
Form of financial assurance2,151
Geographical area data
Total revenues
South Africa
(1)
133.2
Trust Fund – Balance at December 31, 2004 was $78.7 million
(2)
.
Argentina
14.2
Obligations funded from existing cash resources and future cash flows.
Australia
(3)
38.3
Unconditional guarantee from a bank or financial institution.
Brazil
(3)
24.7
Obligations funded from existing cash resources and future cash flows.
Ghana
31.8
10 percent cash deposit
(5)
or such other amount as agreed with regulators.
Guinea
7.7
10 percent cash deposit
(5)
or such other amount as agreed with regulators.
Mali
(3)
14.7
Obligations funded from existing cash resources and future cash flows.
Namibia
(3)
2.7
Obligations funded from existing cash resources and future cash flows.
Tanzania
(3)
27.8
Obligations funded from existing cash resources and future cash flows.
United States of America
(4)
55.0
Reclamation bonds lodged, or ultimate amount agreed, with regulators.
Total 350.1
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(1)
All calculations are based on the 2005 business plan. Under South African law, AngloGold Ashanti is required to estimate its environmental closure and final rehabilitation costs and to use this estimate to make periodic cash contributions to an environmental trust fund, created in accordance with rehabilitation obligations of those operations.
(2)
Includes growth in the Trust Fund of $11.24 million.
(3)
For operations in Argentina, Australia, Brazil, Mali, Namibia and Tanzania, the obligations are based upon the company’s net interest. The obligations will be funded from existing cash resources and future cash flows.
(4)
The total estimated liability is based on the amounts agreed with various federal and state governmental agencies, and AngloGold Ashanti North America Inc. has posted reclamation bonds and letters of credit aggregating approximately $49 million to cover these potential rehabilitation obligations. As allowed under State of Colorado law, amounts posted are based on rehabilitation obligations incurred to date and will be increased as additional rehabilitation obligations are incurred until full build-out of Amendment No. 8, as approved, is achieved. AngloGold Ashanti has provided a guarantee for these obligations.
(5)
The cash deposit is calculated on the anticipated closure and rehabilitation costs.
Major environmental incidents are reported to regional management, as well as the corporate environmental office, within
24 hours of the time that the operational management becomes aware of the incident. An environmental incident is defined as
“an event, action or non-conformance with a procedure that results, or has the potential to result, in an adverse impact on the
surrounding environment; or any event action or occurrence which is contrary to the AngloGold Ashanti business principles”.
Different regions may have slightly different definitions for these levels of reporting. However what they have in common is that
a “major” incident is one which is likely to attract public (or media) attention; or result in a cost to the company exceeding
$500,000, including fines, compensation, clean-up, loss of production, anticipated litigation costs, etc.
In line with this, 16 high-level incidents were reported to the board committee during 2004. These reported environmental high-
level or major incidents are:
Country
Operation
Nature of incident
Date of incident
Brazil
Serra Grande
Community complaints drew attention to contamination of groundwater at Crixas by drilling fluids
November 12
Ghana
Obuasi
Arsenic trioxide contamination of the Nyam River. A 10,000 tons arsenic trioxide store is being moved from the PTP Plant to a lined storage facility at the old heap leach site at the south end of the mine. .
June 3
Ghana
Obuasi
The containment wall of the Kokotesua south sump failed, resulting in
spillage of slurry materials downstream of the dam and the inundation of several residential houses.
October 12
Ghana
Obuasi
A rupture in the Sansu STP pipeline to the Dokyiwa Tailings Dam
resulted in a slimes spill affecting vegetation and water bodies. It was
suspected that this was caused by illegal miners.
December 20
Mali
Morila
An imbalance in the plant water following industrial action and high
rainfall led to overflow of cyanide-bearing water from the Morila pollution control dam.
June 25
Mali
Sadiola
About 100 bird fatalities recorded in the return water dam area were
attributed to high sodium levels in the water. Sodium metabisulphate is
used to detoxify cyanide.
May 23
Mali
Sadiola
Small tailings spill (containing cyanide) due to pipeline leak.
November 17
Mali
Yatela
Two dead birds found adjacent to water pond on heap-leach pads.
November 20
South Africa
TauTona
Refrigerant gasses were released into the atmosphere during pump
maintenance.
April 28
South Africa
TauTona
Oil and waste spilled into stream just off the boundary of TauTona.
April 30
South Africa
Metallurgy
Bokkamp return water dam overflowed its containment.
March 12 - 21
South Africa
Vaal River
Tailings spillage due to pipeline failure.
October 10
South Africa
Ergo
A pipeline burst resulted in 1,800m
3
of slurry spilling into Elsburgspruit.
March 9
South Africa
Ergo
A pipeline burst resulted in the spillage of 300m
3
of slurry, with about
50m
3
flowing into the Cinderella Dam.
August 13
South Africa
Ergo
Complaint received about excessive dust from rehabilitation work at
7L15 tailings dam.
October 7
South Africa
Ergo
Pipeline burst resulted in spillage of slurry next to N17 highway.
November 26
All the above incidents were investigated and remedial actions taken where necessary.
104
• Community and social development
AngloGold Ashanti’s aim is to have a positive impact on the people, cultures and communities in which it operates. Formal
social investment/community development programs are in place at all operations. AngloGold Ashanti has adopted the
International Finance Corporation (IFC) Resettlement Policies, Guidelines and Standards for implementation at all managed
operations and joint ventures. It is the company’s aim to avoid involuntary resettlement to the extent feasible, or to minimize
and mitigate its adverse social and economic impacts, where no other options exist. The objective of the policy is to provide
good practice operational guidance with regard to the resettlement of involuntary displaced communities in line with existing
business principles. Social investment is focused on three areas: education, health, and sustainable livelihoods. During 2004,
social investment and community exp enditure amounted to $7.429 million. Since social investment and community initiatives
often also form part of the operating budgets, expenditure may be under-reported. Expenditure on social investment is made
up as follows:
Country
$ 000
South Africa
Corporate office
1,143
AngloGold Ashanti Fund
2,519
Operationalexpenditure
146
Argentina and Brazil
727
Australia
128
Ghana
635
Guinea
199
Mali
622
Namibia
257
Tanzania
808
United States of America
245
Total
7,429
• Country / operation report
South Africa
Laws, regulations and standards: The mines in South Africa, which employs 66 percent of the workforce, are
governed by numerous laws, regulations and standards applicable to safety and health, including the Mine Health and
Safety Act 26 of 1999 and regulations and the Occupational Health & Safety Act No. 85 of 1993.
Safety: The FIFR at 0.29 per million man hours, reflects a 16 percent improvement on 2003 while the LTIFR reduced
by 16 percent to 9.11 in 2004. Safety achievements during 2004 for the region include:
•
the shaft mine overseer section at Tau Lekoa mine achieved one million fatality-free shifts on June 21, 2004. It
took the section, comprising about 250 people, 12 years and 10 months of safe operations to reach this
milestone.
•
Great Noligwa reached one million fatality-free shifts on March 31, 2004, after 5.5 months.
• Savuka mine won the South African Safety Shield Competition for 2004. The mine showed an 8.34 percent
improvement in its Serious Injury Frequency Rate, compared to its best performance over the previous four
years.
•
on July 10, 2004, Kopanang mine achieved one million fatality-free shifts. It took 4,900 employees 8.5 months to
attain this.
Health: Medical surveillance at the South African operations is conducted in line with the Mine Health and Safety Act.
The primary areas of focus in respect of occupational health within AngloGold Ashanti’s South African operations are
noise-induced hearing loss (NIHL), occupational lung diseases (OLD) and tuberculosis (TB). AngloGold Ashanti
provides occupational health services to its employees at two fully-equipped regional occupational health centers that
conduct risk-based medical surveillance programs. These are staffed by occupational medical practitioners,
professional nurses, audiologists and other support staff. In addition, each mine has an occupational health nurse on
site.
105
During 2004:
•
51,084 occupational medical surveillance examinations (initial, periodical, transfer and exit), were performed in
the South Africa region in accordance with the requirements of the Mine Health and Safety Act. Medical
surveillance is also undertaken at other operations.
•
285 new cases of NIHL were compensated in the South Africa region, which equates to 7 per 1,000 employees.
This is a decrease of 61 percent on the 2003 rate of 18 per 1,000 employees.
•
in South Africa, 319 cases of OLD were compensated which is a rate of 8 per 1,000 employees, double the rate
of 4 per 1,000 employees reported in 2003. HIV, silica exposure, TB and an ageing workforce all play a role in
OLD.
• 1,386 new cases of TB were detected and treated, which is a rate of 35 per 1,000 employees, up from the
2003 rate of 33 per 1,000 employees. These rates are increasing despite intensive efforts to both detect and
treat TB. The increasing incidence of HIV and AIDS is amongst a silica-exposed workforce. It is estimated that
over 80 percent of individuals detected with pulmonary TB are HIV-positive. TB in silica-exposed employees,
who do not have concomitant silicosis, is not classified as an occupational disease outside of South Africa and is
therefore not reported.
•
dust (silica) control on the South African mines has improved. No Homogenous Exposure Group (HEG) above
the Occupational Exposure Limit (OEL) of 0.1mg/m
3
was recorded in 2004.
•
100 percent of underground rockdrills and 98 percent of all critical fans have now been silenced.
Environment: All operations have approved Environmental Management Programs (EMPs) in place and, in line with
this, applications for conversion to new order mining rights in line with the Mineral and Petroleum Resources
Development Act have been submitted. Ergo ceased operations during March 2005 and closure plans were
implemented. In its efforts to conserve energy, the South African operations have implemented means of ensuring
the efficient use of energy and on developing and implementing renewable energy sources. At Tau Lekoa, hydro-
power is used to generate sufficient energy for rockdrills and other equipment. This is one of the few gold mines in
the country to operate on this system. Moab Khotsong is participating in the National Electricity Regulator’s demand
side management program, with significant cost savings expected.
Community and social development: Social investment initiatives are undertaken in the areas of need, where the
group can make a practical and meaningful contribution at two levels: first, the AngloGold Ashanti Fund and Trust
distributed funds to about 100 projects across southern Africa. The fund which is managed by Tshikululu Social
Investments, studies and makes recommendations to a board of Trustees on social giving. Second, the various
operations have their own social investment budgets to respond to more immediate local community needs that are
spent independently of the Fund. The Small and Medium Enterprise Initiative has facilitated the creation of
172 businesses and some 3,000 jobs since its inception in 1998. In addition to funding a number of initiatives and
organizations by the corporate office, the “Hearts of Gold” scheme was launched whereby corporate office employees
are encouraged to donate money or volunteer their time for the benefit of non-profit, charitable organizations.
Argentina
Laws, regulations and standards: Argentinean Constitution, Law 19587/72 – National Conditions of Hygiene and
Safety for Organizations and Mining, Law 24557/95 – Work Risk Law.
Safety: Annual Hazard Identification and Risk Assessments (HIRAs) are undertaken by company teams, and these
are subject to internal and external audits. The HIRA is conducted for each activity, identifying risk factors,
consequences, existing and proposed risk measures. The final result is a matrix indicating a Residual Risk Profile
and respective controls, which has brought about a significant reduction in the number of lost-time accidents.
Health: During 2004, there were no major health issues to manage.
106
Environment: Cerro Vanguardia is ISO14001 certified. AngloGold Ashanti is committed to the prevention of
pollution, particularly of the air and water resources. A technical report concerning water management at the Cerro
Vanguardia mine was presented to the mining authorities of the Santa Cruz Province. The document includes
different alternatives for the final placement of excess water. A final report was issued in mid 2004. A detailed ground
magnetometer survey (GMAG) was conducted by the AngloGold Ashanti geophysical team in South America,
covering the West side of the Tailings Storage Facility (TSF). The survey was designed to map bedrock structures to
facilitate the monitoring of preferential flow paths to groundwater movement.
Community and social development: Social investment initiatives are undertaken in the communities surrounding
current and past operations and include such initiatives as providing annual scholarships for intermediate level
schooling to underprivileged students.
Australia
Laws, regulations and standards: Mines Safety and Inspection Act (WA) 1994 (MSI Act); Mines Safety and
Inspection Regulations (WA) 1995 (MSI Regs).
Safety: The Sunrise Dam mine won the Mineral Council of Australia’s Minex award for excellence in health and
safety. In addition, the mine performed well in the Australian Chamber of Minerals and Energy’s Surface Mine
Emergency Response Competition and took top honors in the vehicle extraction scenario. The competition tests
teams with realistic scenarios to evaluate knowledge and skills in fire fighting, first aid, vehicle extraction, hazardous
chemicals, rope rescue, breathing apparatus, team skills and theory. The Australian region attained second place in
the Western Australian Chamber of Minerals and Energy’s Safety and Health Innovation awards for the Hori Board,
an innovation designed to reduce hand injuries in core yards. The ACTSAFE program was successfully implemented
at Sunrise Dam during the year and has resulted in improved employee acceptance of responsibility for personal
health and safety within the workplace.
Health: Lifestyle choice is a health challenge and programs are in place to assist employees in improving their
personal health. Fatigue education programs are being implemented.
Environment: In recognition of significant achievement, best practice and innovation in the Northern Territory Mining
and Petroleum Industries and Associated Supply and Service Sectors, Union Reefs Gold mine received the
2003 Minister’s Recognition Award in Resource Development for Environmental Management.
Community and social development: Sunrise Dam has received numerous certificates of appreciation for its
support of fund raising activities. Of note was an award received from the Western Australia Art Gallery for its support
of the Laverton Outback Art Gallery. During 2004, Sunrise Dam commenced an indigenous supply initiative, aimed at
encouraging indigenous business from the local area to tender for services associated with the mine.
Brazil
Laws, regulations and standards: Constitution and labor legislation, Regulatory Norm 22 – Occupational Health
and Safety in Mining; Regulatory Norm 7 – Occupational Health Medical Control Program; Mining Decree 237;
October 2001 Regulatory Norm – National Department of Mineral Production (NDMP).
Safety: AngloGold Ashanti Mineração was awarded the Dick Fisher Global Safety Award for excellence in safety in
2004 – an AngloGold Ashanti Group award. The award was made in recognition of a 23 percent improvement when
compared to the operation’s best ever previous performance since 2002. This operation (comprising the Cuiabá
mine, the Queiroz plant and surface insfrastructure) recorded only eight lost-time injuries per 1.56 per million man
hours worked in 2004. In addition they were awarded the Civil Defense Medal by the governor’s office of the Minas
Gerais state in recognition of the company’s partnership with State’s Civil Defense Unit and Fire Department after the
company’s fire and emergency brigades were called upon to help extinguish forest fires and assist with chemical
spillage clean-ups on local roads.
107
Health: Brazil had no major health issues to manage.
Environment: Both Serra Grande and AngloGold Ashanti Mineração are ISO14001 certified – certification is being
sought for the Córrego do Sitio project. The Federal Mining Department issued a partial closure certificate for surface
infrastructure and the mining operations at Mina Velha following a technical visit in May 2004. Environmental
operating licenses were granted for the Lamego mine in December 2004 and for the Carvoaria mine (part of Córrego
do Sitio) in June 2004. The availability of water dictates to a large degree, the use of water and the level of efficiency
achieved. At AngloGold Ashanti Mineração, a program to recycle water from the Cocoruto Dam in the Queiroz Plant
was approved by the State Water Agency. This initiative will see a reduction in the fresh water intake of 38 percent
(some 1.4 million liters of water per annum).
Community and social development: In line with AngloGold Ashanti’s policy on sustainable development, the
Brazilian operations are actively involved in forming partnerships with local municipalities and their communities to
diversify developing economies by generating jobs. An employee volunteering program was launched at AngloGold
Ashanti Mineração during 2004.
Ghana
Laws, regulations and standards: Mining and Explosives Regulators, 1970 (Legislative Instruments 665 and 666);
Radiation Protection Regulations, 1993 (Legislative Instrument 1559); Environmental Protection Agency (EPA)
Regulations.
Safety: Obuasi mine achieved one million fatality-free shifts on June 17, 2004 and two million fatality-free shifts on
October 30, 2004. On September 25, 2004, the Iduapriem mine was recognized by NOSA for achieving four million
hours without a disabling injury. Both Bibiani and Iduapriem were acknowledged with NOSA 5 star ratings during
2004.
Health: AngloGold Ashanti has budgeted $1.2 million for facilities and equipment upgrading at the Edwin Cade
Memorial Hospital in Obuasi. Malaria remains a major threat.
Environment: Bibiani and Iduapriem are ISO14001 certified. Obuasi is in the initial stages of implementing the
ISO14001 standards.
Community and social development: A four-day workshop was held in Ghana during the fourth quarter of 2004, to
review community development activities, to work towards alignment of policy and practice and to establish
benchmarks for new initiatives in the region. Social activities and interventions are focused on education, health
care/sanitation and sustainable livelihood projects.
Guinea
Laws, regulations and standards: Code Minier of June 1995 (Mining Code); Code des Activities Economiques of
December 8, 1992 (Company Code); Code des Assurances of June 12, 1995 (Insurance Code); Codes des Douanes
(Customs Code); Code des Impots of 1991 (Tax Code); Code du Travail of January 28, 1988 (Labour Law);
Convention Collective of 1995 (Mining Industrial Award); and Code de l’Environnement of May 28, 1987 (Environment
Code).
Safety: Despite intensified safety awareness and training programs at Siguiri, substantially all of the LTIs which
occurred during 2004 involved contractor employees on the construction site at the CIP project.
Health: The major health issues remain Malaria and HIV/AIDS. The company continues its focus of reducing the
number of Malaria cases and to combat the spread of HIV/AIDS through education and health support initiatives.
Environment: Siguiri has started developing an environmental management system and is committed to maintaining
ISO14001 standards.
108
Community and social development: In addition to the 0.4 percent of annual revenue payable in terms of its
Convention de Base to a community development tax, the company is involved in a number of community initiatives,
including the financing of a community FM radio station for the local community which is nearing completion. The
station will be used to support the company’s drive to create awareness about HIV/AIDS and Malaria control.
Contribution toward the Siguiri football stadium construction and several cemetery improvements within Siguiri, as
well as providing funds to several important cultural/customary occasions and recognized festivities, were made
during 2004.
Mali
Laws, regulations and standards: The primary laws governing safety and health are the Code de la Sécurité
Sociale du Mali (Social Security Code), Convention Collective (Collective Agreement) and Code du Travail du Mali
(Mali Labor Code). The International Finance Corporation (IFC) is a partner in the SEMOS SA (Sadiola mine) joint
venture and as a partner, the IFC requires that SEMOS SA adhere to IFC and World Bank guidelines, including those
guidelines covering health and safety. Additional applicable IFC guidelines include the Environmental Guidelines for
Health Care Facilities, May 2003; IFC Environmental Guidelines for Occupational Health and Safety, June 24, 2003;
World Bank Environmental, Health and Safety Guidelines – Mining and Milling – Open Pit, August 1995; and
Environmental, Health and Safety Guidelines for Precious Metal Mining, Draft July 2004; IFC Operational Directive
4.30 on Invol untary Resettlement.
Safety: The Morila mine’s power plant shared the “Best Overseas Operation” award for Rolls Royce Power Ventures
Limited with respect to Health, Safety and Environmental management. The $1,000 prize money was donated to a
charity in the local village of Sanso. At the Sadiola and Yatela operations, the further development of full-time safety
and health representatives continues.
Health: At Sadiola and Yatela, a major epidemiological baseline study has been initiated, along with the yellow fever
inoculation program. A program to reduce and manage worker fatigue, along with a vitamin A distribution is
underway. Malaria remains a major threat.
Environment: A detailed closure plan, including quality surveys, was undertaken for the Alamoutala Pit at Yatela in
the first quarter of 2004. Mining of the pit is expected to cease early in 2005 to be followed immediately by the
implementation of the plan. Most of the environmental incidents reported at Sadiola are related to animal life.
Surrounding the mine, the shallow waters and natural bush are ideal wildlife habitat. However, during the dry
summers when temperatures are above 45 degrees centigrade and the natural environment is affected, wildlife and
livestock force their way into the mining area in search of water, despite fencing and other deterrents. The autopsies
carried out on the birds discovered around the dam adjacent to the tailings storage facility concluded that these
deaths were the result of a high concentration of sodium and not caused by cyanide. The mine remains committed to
put in place measures that will prevent re-occurrence of th ese incidents.
Community and social development: All operations in Mali are involved in community development initiatives, such
as the planting of mangos on more than 8 hectares in 8 villages around the Sadiola Mine, as well as 2 hectares in
Diamou, which are showing encouraging results. The HIV/AIDS awareness campaigns organized by Sadiola and
Yatela received extensive National Television coverage. Programs have also been put in place to support local
procurement as far as this is possible.
Namibia
Laws, regulations and standards: Health & Safety Regulations Act 6 of 1992; Hazardous Substance Act 15 of
1973; Mineral and Ordinance Act; Environmental Act 10 of 1998 and Namibia Water Corporation Act 12 of 1997.
Safety: The Navachab mine maintained its NOSA four star status, achieving an 84 percent audit result, an
improvement on 2003.
109
Health: Antiretroviral therapy (ART) roll-out for employees at the Navachab mine commenced in April 2004, to
support the Voluntary Counseling and Testing (VCT) and wellness program already in place.
Environment: The Navachab mine spent some N$2.5 million for rock storage facilities and top soil cladding during
the decommissioning of the old TSF. Indigenous plants are grown at the mine’s nursery and used for rock storage
facilities’ re-vegetation programs.
Community and social development: The Navachab mine strives, where possible, to employ people from the
surrounding communities. Job creation as well as business development is encouraged through donations and other
initiatives.
Tanzania
Laws, regulations and standards: The United Republic of Tanzania Mining Act 1998; The United Republic of
Tanzania Mining Regulation 1999; The Industrial and Consumer Chemicals (Management and Control) Act 2003; The
Employment and Labor Relations Act 2004 and The National Environmental Management Bill (currently before
Parliament).
Safety: An annual NOSA audit was conducted at Geita in June 2004, covering all areas of health, safety and
environment. The site retained its four-star rating, achieving an increased percentage score of 83.4 percent. The
development and training of safety representatives remains a priority.
Health: Malaria remains a major threat.
Environment: The Geita mine is ISO14001 certified. At Geita, the mine’s rehabilitation program was expanded to
match the growth in the waste rock storage facilities, to plant 120,000 tree seedlings and rehabilitate 90 hectares of
land. Tree seedlings were sourced from the local nurseries, each supplying 40,000 trees. This has given local
species an economic value over and above that of charcoal and timber, promoting conservation and creating a viable
economic activity for host communities.
Community and social development: When the Geita mine was granted its mining license, artisinal miners and
their local communities were affected. In 2001, the Nyakabale Agro Project was established to educate and assist
members of the local communities with alternative livelihood skills, primarily in agriculture. The project has been very
successful and these former miners and the communities sell agricultural products to various markets, including the
mine’s canteens.
United States of America
Laws, regulations and standards: Mine safety and health is administered via the Mine Safety and Health
Administration (“MSHA”), under a program, separate of safety and health requirements, that are applicable to other
industries in the United States as addressed under Occupational Safety and Health Administration.
Safety: At the CC&V mine, the Dupont STOP for Supervisors and Employees programs continue to yield significant
improvements in reported injuries and equipment damage incidents. The STOP programs promote safety
observations and positive remedial measures for observed unsafe acts and conditions on all levels of the workforce.
CC&V went the entire calendar year of 2004 without incurring a lost time injury. An insurance underwriters risk
assessment was performed in 2004 by International Mining Insurance Limited (“IMIU”) wherein CC&V attained a risk
management score of 79 percent, which betters the world average of 73 percent as observed by IMIU.
Health: CC&V continued throughout 2004 with no major health issues to manage.
110
Environment: The US operations were subject to environmental inspections by major environmental federal and
state regulatory authorities during 2004 and were in substantial compliance with permit requirements with the possible
exception of a water quality issue at the CC&V operation. CC&V completed construction of Phase 4C of the valley
leach facility in a timely and cost effective manner. All construction-related activities were carried out in compliance
with the approvals obtained from various governmental agencies in 2000, to expand the Cresson Project operations.
In Nevada, final rehabilitation activities continued at the Big Springs mine and mill with the necessary financial
assurances being posted with the State of Nevada. The final rehabilitation activities that have been undertaken have
progressed to a stage that release of a majority of the posted financial assurance will be pursued in 2005.
Anti-mining activist groups continue to pursue anti-mining legislation in the State of Colorado that would eliminate the
use of cyanide heap leaching technologies associated with gold and silver surface mining. There have been previous
unsuccessful attempts to change the legislation by activists, and no bill has yet been introduced in 2005, with the
legislative session ending on May 11, 2005
Both the Denver office and the CC&V mine received Pollution Prevention awards in February 2004.
Community and social development: In the USA, AngloGold Ashanti’s operations make a positive contribution to
the communities in which they operate, by supporting projects with potential social, economic or environmental
benefits. Some examples of such projects include continued support towards the construction of a regional medical
center in a community near CC&V, financial assistance for the restoration of the City Hall in another community near
CC&V, and voluntary rehabilitation of an abandoned mine site in conjunction with the State of Colorado. The region
continues to run one of the most successful employee volunteering programs in the group, with employees donating
some 2,500 hours to the community during the year.
4C. Organizational structure
Head office structure and operations
AngloGold Ashanti’s operations are organized on a country basis, and are controlled from its Johannesburg office.
Management of AngloGold Ashanti is entrusted to the executive committee, comprising the five executive directors and three
executive officers. This executive committee is supported by the executive officers. See "Item 6.: Directors, senior
management and employees". Day-to-day management of the operations vests with executive teams based in South Africa
(Johannesburg), United States (Denver), Brazil (Nova Lima), Ghana (Accra) and Australia (Perth).Corporate activities
Activities provided in the corporate area fall into three categories. First, support is provided to the executive officers in
managing AngloGold Ashanti as a whole. Second, certain activities are managed centrally, including strategic and business
planning, marketing, corporate finance, treasury, exploration, technology and innovation, corporate secretarial and corporate
affairs. Third, certain specialized services are directed from the center although they are managed by operations. These
include mining, engineering, metallurgy, mineral resource management, safety and health, the environment and human
resources.
AngloGold Ashanti has investments in numerous principal subsidiaries and joint venture interests, see "Item 19.: Exhibits" for
details.
4D.Property, plant and equipment
For a discussion on AngloGold Ashanti’s mining properties, plant and equipment, see “Item 4B.: Business Overview”.
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Item 5: Operating and financial review and prospects
The following operating and financial review and prospects are based on the US GAAP financial statements of AngloGold
Ashanti for the years ended and as at December 31, 2004, 2003 and 2002 which are included under Item 18 of this annual
report.
Overview
For the year ended December 31, 2004, AngloGold Ashanti produced approximately 6.05 million ounces (including joint
ventures) of gold. Headquartered in Johannesburg, South Africa, AngloGold Ashanti has a global presence with 22 operations
comprising open-pit and underground mines and surface metallurgical plants in ten countries (Argentina, Australia, Brazil,
Ghana, Guinea, Mali, Namibia, South Africa, Tanzania and the United States of America) and which are supported by
extensive, yet focused, exploration activities. As at December 31, 2004, AngloGold Ashanti had Proven and Probable Ore
Reserves of approximately 78.9 million ounces (including joint ventures) on an attributable basis.
AngloGold Ashanti’s main product is gold. An insignificant portion of its revenue is derived from the sales of silver, uranium
oxide and sulphuric acid. AngloGold Ashanti sells its products on world markets.
AngloGold Ashanti’s world-wide operations, divided into countries are: South Africa (which comprises eight operations),
Argentina (which encompasses one operation), Australia (which encompasses one operation), Brazil (which encompasses two
operations), Ghana (which encompasses three operations), Guinea (which encompasses one operation), Mali (which
encompasses three operations), Namibia (which encompasses one operation), Tanzania (which encompasses one operation)
and the United States of America (which encompasses one operation). The operation in Zimbabwe acquired in April 2004 as
part of the AngloGold Ashanti Business Combination, was sold effective September 1, 2004. For more information on
AngloGold Ashanti’s business and operations, see “Item 4B.: Business overview — Products, operations and geographical
locations”.
Restatement of financial statements
The financial statements contained herein for the two fiscal years ended December 31, 2003 and other financial information
contained herein for the four fiscal years ended December 31, 2003 have been restated to correct AngloGold Ashanti’s
historical accounting practices for certain joint venture arrangements. Historically, interests in certain incorporated mining joint
ventures in which AngloGold Ashanti has joint control were reported using the proportionate consolidation method. This
accounting treatment represents a departure from US GAAP which requires the equity method of accounting for such joint
venture arrangements. These joint venture arrangements consist of operating entities situated in Mali (the Sadiola, Yatela and
Morila Joint Ventures) and Tanzania (the Geita Joint Venture), of which the significant financial operating policies are, by
contractual arrangement, jointly controlled.
As a result, AngloGold Ashanti has restated the consolidated balance sheet as of December 31, 2003, and the consolidated
statements of income and consolidated statements of cash flows for the years ended December 31, 2003 and 2002 included in
this Annual Report on Form 20-F as described in note 2 to the consolidated financial statements and other financial information
contained herein for the four fiscal years ended December 31, 2003. The restatement corrects the company’s historical
accounting for interests in mining joint ventures and has no impact on net income or total stockholders’ equity.
5A. Operating results
Introduction
AngloGold Ashanti’s revenues are derived primarily from the sale of gold produced at its mines. An insignificant portion of its
revenue is derived from the sales of silver, uranium oxide and sulphuric acid. As a result, AngloGold Ashanti’s operating
results are directly related to the price of gold which can fluctuate widely and are affected by numerous factors beyond its
control, including industrial and jewellery demand, expectations with respect to the rate of inflation, the strength of the US dollar
(the currency in which the price of gold is generally quoted) and of other currencies, interest rates, actual or expected gold
sales by central banks and the IMF, forward sales by producers, global or regional political or economic events, and production
and cost levels in major gold-producing regions such as South Africa. In addition, the price of gold sometimes is subject to
rapid short-term changes because of speculative activit ies.
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The current demand for and supply of gold may affect gold prices, but not necessarily in the same manner as current supply
and demand affect the prices of other commodities. The supply of gold consists of a combination of new production from
mining and existing stocks of bullion and fabricated gold held by governments, public and private financial institutions, industrial
organizations and private individuals.
As the amounts produced in any single year constitute a very small portion of the total potential supply of gold, normal
variations in current production do not necessarily have a significant impact on the supply of gold or on its price. If revenue
from gold sales falls for a substantial period below AngloGold Ashanti’s cost of production at its operations, AngloGold Ashanti
could determine that it is not economically feasible to continue commercial production at any or all of its operations or to
continue the development of some or all of its projects.
On July 7, 2005, the afternoon fixing price for gold on the London Bullion Market was $425.20 per ounce.
AngloGold Ashanti’s costs and expenses consist primarily of production costs, royalties and depreciation, depletion and
amortization. Production costs are incurred on labor, consumable stores which include explosives, timber, other consumables
and utilities incurred in the production of gold. Labor is the largest component of production costs as AngloGold Ashanti’s
mining operations consist mainly of a combination of the use of both deep level underground mining methods as well as open-
pit operations, both of which are labor intensive.With operations in several countries on several continents, AngloGold Ashanti is exposed to a number of factors that could
impact on its profitability, including exchange rate fluctuations, inflation and other risks relating to these specific countries.
These factors are inherent in conducting mining operations on a global basis, and AngloGold Ashanti applies measures, such
as hedging instruments, intended to reduce its exposure to these factors.
In conducting mining operations, AngloGold Ashanti recognizes the inherent risks and uncertainties of the industry, and the
wasting nature of assets. The costs and expenses relating to the production of gold are either expensed or capitalized to
mining assets. Recoverability of capitalized amounts is reviewed on a regular basis.
Effect of exchange rate fluctuations
Currently, the majority of AngloGold Ashanti’s revenues are generated in South Africa, and to a lesser extent in Brazil,
Argentina and Australia, and most of its production costs, therefore, are denominated in local currencies, such as the South
African rand, the Brazilian real, the Argentinean peso and the Australian dollar. In 2004, AngloGold Ashanti derived 75 percent
(68 percent including joint venture arrangements) of its revenues from these countries and incurred 74 percent (68 percent
including joint venture arrangements) of its production costs in these local currencies. In 2004, the weakening of the US dollar
against these local currencies accounted for nearly $28 per ounce, or 52 percent of the total increase in total cash costs per
ounce from 2003. As the price of gold is denominated in US dollars and AngloGold Ashanti realizes the majority of its
revenues in US dollars, devaluation of these local currencies against the US dol lar improves AngloGold Ashanti’s profitability in
the short-term. Mainly as a result of its hedging instruments, a small portion of AngloGold Ashanti’s revenues are denominated
in South African rand and Australian dollar, which partially offsets the effect of the US dollar’s strength or weakness on
AngloGold Ashanti’s profitability. Based upon average rates during the respective years, the rand and the real strengthened by
approximately 15 percent and 5 percent respectively, against the US dollar in 2004 compared to 2003. The Argentinean peso
traded freely against the US dollar from January 1, 2002 and had devalued to 2.9:1 against the US dollar by June 30, 2005.
The Australian dollar, based on the average rates during the respective years, strengthened by 12 percent against the
US dollar in 2004 compared to 2003.
To fund local operations, AngloGold Ashanti holds funds in local currencies. The US dollar value of these currencies may be
affected by exchange rate fluctuations and, as a result, AngloGold Ashanti’s cash and cash equivalents reported in US dollars
could change. At December 31, 2004, approximately 48 percent of AngloGold Ashanti’s cash and cash equivalents were held
in local currencies.
Certain exchange controls are currently in force in South Africa. Although the exchange rate of the rand is primarily market
determined, its value at any time may not be considered a true reflection of the underlying value of the rand while exchange
controls exist. The government has indicated its intention to lift exchange controls over time. When this occurs, rand
exchange rates will be more closely tied to market forces. It is not possible to predict when this will occur or the future value of
the rand. For a detailed discussion of these exchange controls, see “Item 10D.: Exchange controls”.
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Effect of inflationAngloGold Ashanti’s operations have not been materially adversely affected by inflation in recent years. However, AngloGold
Ashanti is unable to control the prices at which it sells its gold (except to the limited extent that it utilizes commodity
instruments) and it is possible, therefore, that if there is to be significant inflation in South Africa, and to a lesser extent in
Brazil, Argentina and Australia, without a concurrent devaluation of the local currency or an increase in the price of gold, there
could be a material adverse effect upon AngloGold Ashanti’s results and financial condition.
The percentage change in the rand/US dollar exchange rate, based upon average rates during the respective years, and the
local annual inflation rate, as measured by the South African Producer Price Index (PPI), are set out in the table below:
Year ended December 31
2004
%
2003
%
2002
%
The average South African rand/US$ exchange rate (strengthened)/weakened by:
(14.7)
(28.0)
21.6
PPI (inflation rate) increase:
0.6
1.7
14.2
Net effect
(15.3)
(1)
(29.7)
(1)
7.4
(1)
The decrease in the inflation rate is outweighed by the impact of the strengthening of the rand relative to the US dollar.
Effect of commodity instrumentsAngloGold Ashanti has utilized commodity instruments to protect the selling price of some of its anticipated gold production.
Although the use of these instruments may protect a company against low gold prices, it will only do so for a limited period and
only to the extent the hedge book can be sustained. The use of such instruments may also prevent full participation in
subsequent increases in the market price for gold with respect to covered production. During 2003, AngloGold Ashanti took
the decision to lower its mandate for hedging from 50 percent to 30 percent of the next five years of production spread over ten
years. In addition, AngloGold Ashanti in 2004, restructured its hedge book. The effect of this was to increase the proportion of
the company’s anticipated 6.5 million ounces of gold production that is exposed to the spot price to 90 percent in 2005 and
83 percent in 2006 and to improve the value of remaining forward sales c ontracts in future years. For a discussion of
AngloGold Ashanti’s commodity instruments, see “Item 11.: Quantitative and qualitative disclosures about market risk”.
Acquisitions and dispositions
The global gold mining industry has experienced active consolidation and rationalization activities in recent years. Accordingly,
AngloGold Ashanti has been, and expects to continue to be, involved in a number of acquisitions and dispositions as part of
this global trend and to identify value-adding business combination and acquisition opportunities.
In November 2001, AngloGold announced the sale of its Free State operations in South Africa effective January 1, 2002. The
sale closed in April 2002. AngloGold also announced the sale of its Normandy shares in January 2002 after its offer to
purchase all of the outstanding share capital of Normandy Mining Limited in Australia expired without it obtaining control of
Normandy.
During July 2002, AngloGold acquired an additional 46.25 percent interest in the Cerro Vanguardia mine in Argentina doubling
its interest in this operation to 92.5 percent. The transaction was effective from July 1, 2002. With effect from October 1, 2002
AngloGold disposed of its wholly-owned subsidiary, Stone and Allied Industries, to a joint venture of that company’s existing
management and a group of black entrepreneurs.
On May 23, 2003, AngloGold announced that it had signed an agreement to sell its wholly-owned Amapari Project to
Mineração Pedra Branca do Amapari. The effective date of the transaction was May 19, 2003. The Amapari project is located
in the State of Amapá, North Brazil. Since acquiring the property as part of the Minorco transaction, the company had sought
to prove up additional reserve ounces in order to get it to a size and life that would justify the management resources needed
to run it effectively. This was not achieved and AngloGold, on receiving an offer from a purchaser who could constructively
turn this orebody to account, agreed to sell.
On June 6, 2003, AngloGold announced that it had finalized the sale of its 49 percent stake in the Gawler Craton Joint Venture,
including the Tunkillia project located in South Australia, to Helix Resources Limited. Helix’s proposed acquisition of
AngloGold’s rights to the Tarcoola Project, 60 kilometers to the south, was excluded from the final agreement. This resulted in
a restructure of the original agreement terms, as announced on April 8, 2003.
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On July 2, 2003, AngloGold announced that it had concluded the sale of its interest in the Jerritt Canyon Joint Venture to
Queenstake Resources USA Inc. effective June 30, 2003. This followed negotiations originally announced on February 27,
2003. Queenstake accepted full closure and reclamation liabilities. The shares acquired by AngloGold in this transaction were
issued by Queenstake Resources Limited, a subsidiary of Queenstake, and represented approximately 9.2 percent of that
company’s issued share capital. AngloGold disposed of its entire interest in Queenstake during November 2003.On July 8, 2003 AngloGold disposed of its entire investment of 8,348,600 shares held in East African Gold Mines Limited and
in the second half of 2003 AngloGold disposed of 952,481 shares in Randgold Resources Limited.
On September 18, 2003 AngloGold and Gold Fields Limited jointly announced that agreement had been reached on the sale
by Gold Fields Limited of a portion of the Driefontein mining area in South Africa to AngloGold.
On January 20, 2004 AngloGold announced that it had received a cash payment of A$4 million ($3 million) and 25 million fully
paid ordinary shares from Tanami Gold NL in Australia, as consideration for Tanami Gold’s purchase of the Western Tanami
Project. This follows an initial payment of A$0.3 million ($0.2 million) made on November 24, 2003, when the Heads of
Agreement was signed by the companies.
The Business Combination between AngloGold and Ashanti Goldfields Company Limited which was originally announced on
May 16, 2003 was completed with effect from Monday, April 26, 2004, following the confirmation by the High Court in Ghana
on Friday, April 23, 2004, of the scheme of arrangement, in terms of which AngloGold acquired the entire issued share capital
of Ashanti. AngloGold changed its name to AngloGold Ashanti Limited on April 26, 2004, the effective date of the transaction.
For a detailed discussion of the AngloGold Ashanti Business Combination, see “Item 5A.: Operating results – Business
Combination between AngloGold and Ashanti”.On July 1, 2004, AngloGold Ashanti announced that it had entered into an agreement with Trans-Siberian Gold plc (TSG) for
the acquisition of a 29.9 percent stake in the company through an equity investment of approximately £18 million ($32 million)
in two subscriptions for ordinary shares. The first tranche of ordinary shares of 17.5 percent was acquired during July 2004.
TSG is listed on the London Stock Exchange’s Alternative Investment Market (AIM). This first move into Russia allows
AngloGold Ashanti the opportunity of establishing a meaningful interest in a company with Russian assets and activities,
thereby allowing AngloGold Ashanti to gain exposure to, and familiarity with, the operating and business environment in
Russia, as well as to being able to establish a business within this prospective New Frontier. On December 23, 2004, it was
announced that the second subscription had been delayed to April 15, 2005 while on Apr il 18, 2005, the second subscription
date was extended by a further two weeks to April 29, 2005. On April 28, 2005, the company announced that agreement had
been reached with TSG on revised terms for the second subscription of shares in TSG, and a revised subscription price of
£1.30 per share, compared to £1.494 per share agreed between the parties on June 30, 2004. The revised terms of the
subscription was approved by TSG shareholders on May 27, 2005 and AngloGold Ashanti’s 17.5 percent equity interest in
TSG increased to 29.9 percent on May 31, 2005, the date on which the second subscription was completed.
On August 5, 2004, AngloGold Ashanti announced the sale of its Union Reefs assets to the Burnside Joint Venture, comprising
subsidiaries of Northern Gold NL (50 percent) and Harmony Gold Mining Company Limited (50 percent), for a total
consideration of A$4 million ($2 million). The Burnside Joint Venture is responsible for all future obligations associated with the
assets, including remaining site rehabilitation and reclamation.
In 2004, Queenstake approached the Jerritt Canyon Joint Venture partners, AngloGold and Meridian Gold, about the possibility
of monetizing all or at least a majority of the $6 million in deferred payments and $4 million in future royalties, payable in the
concluded sale of AngloGold’s interest in the Jerritt Canyon Joint Venture to Queenstake Resources USA Inc., effective
June 30, 2003. Based on an agreement reached between the parties, AngloGold Ashanti was paid on August 25, 2004
approximately $7 million for its portion of the deferred payments and future royalties, thereby monetizing all outstanding
obligations, except for a minor potential royalty interest that AngloGold Ashanti retained.
In a joint announcement made on September 10, 2004, AngloGold Ashanti confirmed its agreement to sell its entire interest in
Ashanti Goldfields Zimbabwe Limited to Mwana Africa Holdings (Pty) Limited for a deferred consideration of $2 million. The
sole operating asset of Ashanti Goldfields Zimbabwe Limited is the Freda-Rebecca Gold Mine. The sale was effective on
September 1, 2004.
Agreement was reached to sell AngloGold Ashanti’s 40 percent equity interest in Tameng Mining and Exploration (Pty) Limited
of South Africa (Tameng) to Mahube Mining (Pty) Limited for a cash consideration of R20 million ($3 million). Tameng owns
certain mineral rights to platinum group metals (PGMs) on the farm Locatie Van M’Phatlele KS 457, on the northern limb of the
Bushveld Complex in the Limpopo Province in South Africa. The sale was effective on September 1, 2004.
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In an announcement made on October 11, 2004, AngloGold Ashanti advised that it had signed an agreement with Philippines
explorer Red 5 Limited to subscribe for a 12.3 percent stake in the expanded issued capital of Red 5 for a cash consideration
of A$5 million ($4 million). This placement will be used to fund the exploration activities along strike from current mineral
resources at the Siana Project, and to test the nearby porphyry gold-copper targets in the Surigao region of the Republic of the
Philippines.
On April 29, 2005, AngloGold Ashanti announced the conditional sale of exploration assets in the Laverton area, comprising
the Sickle royalty of $30 per ounce, the Child Harold prospect, various 100 percent AngloGold Ashanti Australia-owned
interests including the Lord Byron and Fish projects as well as its interests in the Jubilee, Black Swan and Jasper Hills Joint
Ventures to Crescent Gold Limited. The sale is dependent upon Crescent Gold Limited meeting a staged payments schedule.
See note 31 to the consolidated financial statements “Subsequent events”. AngloGold Ashanti does not expect that the sale
will have a material impact on its earnings and financial position.
Acquisitions have been accounted for as purchase business combinations under US GAAP. The consolidated financial
statements reflect the operations and financial condition of AngloGold Ashanti, assuming that acquisitions and dispositions
took place on the effective date of these transactions. Therefore, the consolidated financial statements are not necessarily
indicative of AngloGold Ashanti’s financial condition or results of operations for future periods. For a more detailed discussion
of these transactions, see “Item 4A.: History and development of the company”.
Business Combination between AngloGold and Ashanti
On August 4, 2003, AngloGold and Ashanti announced that they had agreed the terms of a recommended Business
Combination. The Business Combination was effective by a scheme of arrangement under Ghanaian law and was completed
on April 26, 2004.
In connection with the Business Combination, AngloGold and the government of Ghana agreed the terms of a Stability
Agreement, approved by the parliament of Ghana, to govern certain aspects of the fiscal and regulatory framework under
which AngloGold Ashanti will operate in Ghana following the implementation of the Business Combination.
Under the Stability Agreement, the government of Ghana retained its special rights (“Golden Share”) under the provisions of
the mining law pertaining to the control of a mining company, in respect of the assets and operations in Ghana.
In terms of the Golden Share, the following requires, and will not be effective without, the written consent of the government of
Ghana as the holder of the Golden Share:
•
any disposal by Ashanti (other than any disposal in the ordinary course of business of Ashanti) which, alone or when
aggregated with any disposal or disposals forming part of, or connected with, the same or a connected transaction,
constitutes a disposal of the whole or a material part of the assets of the Ashanti Group taken as a whole. For this
purpose, a part of the Ashanti Group’s assets will be considered material if either (a) its book value (calculated by
reference to the then latest audited consolidated accounts), or the total consideration to be received on its disposal, is
not less than 25 percent of the book value of the net assets of the Ashanti Group or (b) the average profits attributable to
it represent at least 25 percent of the average profits of the Ashanti Group for the last three years for which audited
accounts are available (before deducting all charges, except taxation and extraordinary items).
The Golden Share does not carry any right to vote at any general meeting of Ashanti.
The government of Ghana has also agreed that Ashanti's Ghanaian operations will not be adversely affected by any new
enactments or orders or by changes to the level of payments of any customs or other duties relating to mining operations,
taxes, fees and other fiscal imports or laws relating to exchange control, transfer of capital and dividend remittance for a
period of 15 years after the completion of the Business Combination. In consideration of these agreements and undertakings,
AngloGold agreed to issue to the government of Ghana 2,658,000 new AngloGold ordinary shares and to pay to the
government of Ghana $5 million in cash, promptly after the implementation of the Business Combination. AngloGold also
agreed to pay to the government of Ghana, on the date of the completion of the Business Combination, an additional
$5 million in cash towards the transaction costs incurred by the government of Ghana in its role as regulator of Ashanti.
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On April 26, 2004, AngloGold issued 38,400,021 ordinary shares to former Ashanti shareholders and 2,658,000 ordinary
shares under the Stability Agreement to the government of Ghana. On June 29, 2004, AngloGold issued a total of
75,731 ordinary shares to former Ashanti warrant holders pursuant to the Business Combination.
The market value of the shares issued for Ashanti was approximately $1,544 million, net of share issue expenses of
$3 million, based on the average quoted value of the shares of $37.62 two days before and after October 15, 2003, the date
the terms of the transaction were announced. The market value of the issued shares, together with the cash consideration
paid to the government of Ghana as part of the Stability Agreement, cash consideration paid for outstanding options over
Ashanti ordinary shares and transaction costs and funding of $227 million, gave rise to a total purchase price of approximately
$1,771 million.
AngloGold Ashanti has performed a preliminary purchase price allocation based on independent appraisals and valuations.
The transaction was accounted for as a purchase business combination under US GAAP whereby identifiable assets acquired
and liabilities assumed were recorded at their fair market values as of the date of acquisition. The excess of the purchase
price over such fair value was recorded as goodwill and as such, the acquisition resulted in goodwill of $182 million being
recorded, relating mainly to the extended life of AngloGold Ashanti by the Obuasi project in Ghana and enlarged negotiation
base and presence in Africa by Ashanti operations. In accordance with the provisions of SFAS142, goodwill was assigned to
specific reporting units. The company’s reporting units are generally consistent with the operating mines underlying the
segments identified in note 26 to the consolidated financial statements “Segment and geographical information”. Goodwill
related to the acquisition is non-deductible for tax purposes.
The combination of AngloGold and Ashanti was designed to combine the two companies into a long-life, low-cost, high-
margin investment opportunity, bringing together the best that both had to offer, by way of ore bodies, capital and human
resources.
In valuing the acquired mineral rights and reserves, AngloGold Ashanti has considered various aspects of historical, spot and
forward prices of gold. AngloGold Ashanti does not believe that the gold price over the last few years is a strong or sole
indicator of future gold prices. In valuing the mineral rights and reserves acquired, AngloGold Ashanti estimated future gold
prices for the next ten years based on the forward gold price curve at April 26, 2004 having established that this was the best
indicator, for periods thereafter the estimated gold price has been based on the ten year forward gold price derived from the
forward curve adjusted upward by 2.25 percent per year for the anticipated life of the mineral rights and reserves acquired.
As a result of this approach, AngloGold Ashanti has utilized a range of gold prices in estimating the value of the acquired
mineral rights and reserves, the low end of the estimated price received range is nominal $402 per ounce in 2005 a nd the
high end of the estimated price received range is nominal $999 per ounce in 2039 with an overall average estimated received
price of $673 per ounce in nominal terms. In addition, costs for the first six years have been estimated based on operational
requirements adjusted by inflation, and escalated by 2.25 percent per year for periods thereafter. Future cash flows have
been discounted using compound pre-tax rates adjusted for country and other risks, on a mine by mine basis. In particular,
these rates vary between 6.5 – 8.5 percent for Ghana, 9.75 – 11.75 percent for Guinea, and 6.25 – 8.25 percent for Tanzania.
Due to the size and nature of the acquisition and the geographical spread and remote locations of some of the properties
acquired and the associated assets, AngloGold Ashanti is in the process of finalizing the purchase price allocation of fixed
assets. However, the final purchase price allocation is not expected to vary significantly from the preliminary allocation.
The operations and financial condition of the companies and assets acquired are included in the financial statements from
April 26, 2004, the effective date of the Business Combination.
For a detailed discussion of AngloGold’s Business Combination with Ashanti, including a description of the contractual
arrangements in connection with the Business Combination and an overview of Ashanti’s business, see “Item 4A.: History and
development of the company–Ashanti Goldfields Company Limited and–Business Combination between AngloGold and
Ashanti”.
Projects and growth opportunities
In addition to continuously monitoring and evaluating prospective acquisitions including the Business Combination, AngloGold
Ashanti’s management has identified a number of medium- to long-term organic growth opportunities for the company. For a
discussion of these projects and opportunities, see “Item 5D.: Trend information – Growth opportunities”.
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South African political, economic and other factors
AngloGold Ashanti is a company domiciled in South Africa, with a number of operations in South Africa. As a result, AngloGold
Ashanti is subject to various economic, fiscal, monetary and political factors that affect South African companies generally.
South African companies are subject to exchange control regulations. Governmental officials have from time to time stated
their intentions to lift South Africa’s exchange control regulations when economic conditions permit such action. From 1998,
certain aspects of exchange controls for financial institutions and individuals have been incrementally relaxed. It is, however,
impossible to predict when the South African government will remove exchange controls in their entirety. South African
companies remain subject to restrictions on their ability to export and deploy capital outside of the Southern African Common
Monetary Area, unless dispensation has been granted by the South African Reserve Bank. For a detailed discussion of
exchange controls, see “Item 10D.: Exchange controls”.
In October 2002, the President of South Africa assented to the Mineral and Petroleum Resources Development Act, Act 28 of
2002 (MPRDA), which was passed by the parliament of South Africa in June 2002 . On May 1, 2004, the MPRDA came into
effect and operation. The MPRDA vests custodianship of South Africa’s mineral rights in the State. The State issues
prospecting rights or mining rights to applicants. The former common law prospecting, mining and mineral rights are now
known as old order rights and the transitional arrangements provided in the MPRDA give holders of such old order rights the
opportunity to convert their old order rights into new order rights. Applicants have five years from May 1, 2004, in which to
apply to convert old order mining rights into new order mining rights. The South Africa government has announced that it is
giving consideration to new legislation, in terms of which the new rights will be subject to a State royalty. The extent and basis
of that royalty is unknown at present. The draft Mineral and Petroleum Royalty Bill, 2003, was released in March 2003 for
comment and proposed a royalty payment of three percent of gross revenue per annum, payable quarterly, in the case of gold.
Had the proposal become law, royalty payments would have commenced upon the conversion and granting of a new mining
right. The introduction of the proposed royalty would, all else being equal, have an adverse impact upon AngloGold Ashanti’s
profitability, as currently no royalty is payable to the State. However, the Finance Minister announced also that due to the new
regulatory system for the mining rights in terms of the MPRDA and accompanying royalty dispensation under the draft Mineral
and Petroleum Royalty Bill, it has become imperative to holistically reassess the current fiscal regime as applicable to the
mining and petroleum industries in South Africa, including tax, depreciation, rate differentiation for mining sectors, all owable
deductions and exemptions from secondary tax on companies in terms of South Africa’s income tax laws. Also due for review
is the gold mining tax formula, which provides income tax exemption and relief from secondary tax on companies for gold
mines, despite the existence of profit. The impact of these proposed reviews is unknown at this stage but may have an adverse
effect on AngloGold Ashanti’s financial condition or results of operations. For a detailed discussion of the MPRDA see
“Item 4B.: Business Overview – Rights to mine and titles to properties – Mineral and Petroleum Resources Development Act”.
Gold market in 2004
In 2004, the spot price of gold opened at $415 per ounce in January and closed at $435 per ounce in December 2004, an
increase of 5 percent, compared with $346 per ounce in January 2003 and $415 per ounce in December 2003. The average
spot price of gold was $409 per ounce during 2004, $46 per ounce, or 13 percent, higher than $363 per ounce, the average
spot price of gold in 2003. During 2004, the highest spot price of gold was $457 per ounce compared to a high of $417 per
ounce for 2003. The lowest spot price of gold was $371 per ounce during 2004, 16 percent higher than $319 per ounce, the
lowest spot price of gold for 2003.
The driving influence on investor sentiment was the weakening dollar, particularly against the euro, but also against the
Japanese yen. This has been the case also for the past three and a half years and the correlation between the rising dollar
spot price of gold and the weakening dollar against the euro reached 97 percent over the three months to December 2004.
While this does not mean that other factors do not influence the gold market and the price of gold from time to time, it does
underline the primary influence of the health of the US currency on the gold price in the current market cycle.
In this respect, the gold market differs from the parallel cycle of rising base metal and commodity prices, which has also been
influenced to some extent by investor buying on the back of a weakening US currency. However, prices of industrial metals are
being driven mainly by Chinese demand at present. The correlation between the gold price and the weak dollar is an important
one for the year ahead.
118
Investment demand remains the instrument through which this influence on the gold price is manifested. The role played by
investors and speculators in gold on the New York Comex has been supplemented by the launch in the USA of the gold
exchange-traded fund, the streetTRACKS Gold Shares. The fund was created by the World Gold Council in partnership with
State Street Global Markets and by early 2005 this fund had purchased on behalf of its investors over 140 tons of physical gold
in the market. This level of investment is equal to over 25 percent of the net long position in gold on the New York Comex. On
the Comex itself, during the year the total open position in gold reached a record high of over 22 million ounces, or 685 tons.
The net long position remained consistently strong throughout the final quarter of 2004, although it failed to reach the record
high levels seen in early April 2004.
Comparison of operating performance in 2004, 2003 and 2002
The following table presents operating data for the AngloGold Ashanti group for the three year period ended December 31,
2004:
Operating data for AngloGold Ashanti
Year ended December 31
2004 2003 2002
Total gold production (thousand ounces)
6,052
5,616
5,939
Total cash costs ($/oz)
268
229
161
Total production costs ($/oz)
356
288
218
Production costs (million US dollars)
(1)
1,436
1,068
792
Capital expenditure (million US dollars)
583
363
271
- Consolidated entities
571
339
246
- Equity accounted joint ventures
12
24
25
(1)
Production costs for 2003 and 2002 have been restated for the equity method of accounting of joint ventures. See note 2 to the
consolidated financial statements.
Gold production
For the year ended December 31, 2004, AngloGold Ashanti’s total gold production increased by 436,000 ounces, or 8 percent,
to 6.05 million ounces from 5.62 million ounces produced in 2003. Gold production from the Geita mine in Tanzania increased
from 331,000 ounces in 2003 to 570,000 ounces in 2004 mainly due to the impact of the additional 50 percent interest acquired
in the mine, as part of the completed AngloGold Ashanti Business Combination during April 2004, on production of 2004 when
compared with 2003. Similarly, former Ashanti operations acquired as part of the completed AngloGold Ashanti Business
Combination situated in Ghana, Guinea and Zimbabwe contributed 577,000 ounces of gold produced in 2004. Marginal
increases in gold production were recorded from operations located in Argentina and Brazil where gold production rose from
209,000 ounces and 323,000 ounces, respectively, in 2003 to 211,000 ounces and 334,000 ounces, re spectively, in 2004.
Gold production from operations situated in South Africa decreased by 6 percent from 3,281,000 ounces produced in 2003 to
3,079,000 ounces in 2004 mainly due to both lower mining volumes and grade. Gold production from operations situated in the
USA decreased from 390,000 ounces produced in 2003 to 329,000 ounces in 2004 mainly due to the impact of the sale of the
Jerritt Canyon Joint Venture of North America effective June 30, 2003 on production of 2004. The Australian operations
produced 410,000 ounces of gold during 2004, compared with 432,000 ounces in 2003, as a result of the impact on
2004 production of the closure of Union Reefs mine in October 2003. Gold production in Mali decreased by 18 percent from
577,000 ounces in 2003 to 475,000 ounces in 2004, mainly as a result of lower grade mining blocks encountered on the
periphery of the pit at Morila. Navachab, the Namibian operation, produced 67,000 ounces of gold in 2004 compared with
73,000 ounc es in 2003, mainly as a result of milled tonnages and recovered grade which dropped in the first half of 2004 as no
ore was mined (only stockpiles were treated), while the operation made the transition to owner-mining.
For the year ended December 31, 2003, AngloGold Ashanti's total gold production decreased by 323,000 ounces or 5 percent,
to 5.62 million ounces from 5.94 million ounces produced in 2002. Gold production from operations located in South Africa
decreased by 4 percent from 3,412,000 ounces produced in 2002 to 3,281,000 ounces in 2003. This was attributable to lower
stoping widths, lower reef development, lower vamping and lower grades at Great Noligwa, lower volumes at Savuka, and at
Ergo, a dwindling reserve tonnage base. Gold production in Mali decreased by 19 percent from 710,000 ounces in 2002 to
577,000 ounces in 2003, mainly due to the reduction in gold grade primarily at Morila.
119
At Geita, in Tanzania, gold produced increased by 14 percent from 290,000 ounces in 2002 to 331,000 ounces in 2003, mainly
due to a 15 percent increase in tonnage throughput as a result of the successful implementation of the plant expansion project.
Gold production in the USA decreased by 16 percent from 462,000 ounces in 2002 to 390,000 ounces in 2003, primarily due to
the disposal of AngloGold's 70 percent interest in the Jerritt Canyon Joint Venture with effect from June 30, 2003. Production
at Cripple Creek & Victor increased by 58,000 ounces in 2003, due to additional product from expanded processing facilities,
as a result of the completion of the expansion project at the Cresson Mine in the third quarter of 2002. Argentina’s production
increased from 179,000 ounces in 2002 to 209,000 ounces in 2003, due to the additional 46.25 percent interest acquired by
AngloGold in Cerro Vanguardia i n July 2002. Gold production from operations situated in Brazil increased from
299,000 ounces in 2002 to 323,000 ounces in 2003, mainly due to increased production from the Cuiabá mine, at AngloGold
Ashanti Mineração (formerly Morro Velho). The Australian operations produced 432,000 ounces of gold during 2003,
compared with 502,000 ounces in 2002, as a result of the closure of Union Reefs and lower production at Sunrise Dam due to
lower grades. Namibia’s gold production decreased from 85,000 ounces in 2002 to 73,000 ounces in 2003.
A more detailed review of gold production at each of AngloGold Ashanti’s operations is provided under “Item 4B.: Business
overview”.
Ore Reserve development expenditure
AngloGold Ashanti has reassessed the useful life of on-reef Ore Reserve development expenditure with effect from January 1,
2004. The impact of the reassessment is that costs are expensed over a longer period than was previously estimated. This
has been accounted for prospectively as a change in estimate.
The effect of this change in estimate on the results for 2004 is as follows:
Year ended December 31, 2004
(in millions, except per share data)
Impact
$
Per basic
common
share
(cents)
Per diluted
common
share
(1)
(cents)
Income before income tax provision
54
21
21
Deferred income and mining tax
(19)
(8)
(8)
Net income
35
13
13
(1)
The calculation of diluted earnings per common share for 2004 did not assume the effect of 15,384,615 shares issuable upon the exercise of
Convertible Bonds as their effects are anti-dilutive for this period. See note 8 and note 16 to the consolidated financial statements “Earnings per
common share” and “Long-term debt”.
Total cash costs and total production costs
Total cash costs for the year ended December 31, 2004 was $268 per ounce, $39 per ounce, or 17 percent, higher than the
cash costs of $229 per ounce recorded in 2003. This change was mainly due to substantially higher cash costs for the South
African, Australian, Malian and Namibian operations in 2004, which increased by 15 percent, 12 percent, 34 percent and
27 percent respectively, when compared to 2003. The increase in total cash costs at the South African operations was mainly
due to the strengthening of the South African rand relative to the US dollar (based on the average exchange rates of the rand
against the US dollar of R6.44 and R7.55 during the year ended December 31, 2004 and 2003, respectively) being offset by
the impact of the change in estimate of on-reef Ore Reserve development expenditure during 2004. The Australian operations
recorded higher cash costs in 2004, mainly due to the stre ngthening of the Australian dollar relative to the US dollar (based on
the average exchange rates of the Australian dollar against the US dollar of A$1.36 and A$1.54 during the year ended
December 31, 2004 and 2003, respectively). Overall, total cash costs for 2004 were increased by nearly $28 per ounce
(relating to US dollar weakness against all local currencies) and reduced by nearly $15 per ounce (due to the change in
estimate of on-reef Ore Reserve development during 2004), when compared to 2003. The operations in Mali and Namibia
recorded higher total cash costs per ounce in 2004 mainly due to increased mining costs and lower grades, when compared
with 2003. Overall, lower ore grade increased total cash costs by nearly $6 per ounce in 2004 when compared to 2003. Former
Ashanti operations acquired as part of the completed AngloGold Ashanti Business Combination situated in Ghana, Guinea,
Zimbabwe and Tanzania (Geita – 50 percent) increased total cash costs by $9 per ounce in 2004 when compared to 2003.
120
The total cash costs for the year ended December 31, 2003 was $229 per ounce, $68 per ounce, or 42 percent higher than
cash costs of $161 per ounce recorded in 2002. This change was mainly due to a combination of stronger local currencies
against the US dollar in most operating countries and lower ore grade in several of these countries. Stronger currencies
increased total cash costs by $47 per ounce and lower ore grade by a further $17 per ounce. Total cash costs for the South
African, Australian, Malian and Namibian operations increased by 60 percent, 26 percent, 38 percent and 86 percent,
respectively, in 2003, compared to 2002. The increases in total cash costs at the South African and Australian operations were
mainly due to the strengthening of the South African rand and the Australian dollar against the US dollar (based on the average
exchange rates of the rand against the US dollar of R7.55 and R10.48 and the Australian dollar against the US dollar of
A$1.54 and A$1.84, during the year ended December 31, 2003 and 2002, respectively). Operations in Mali and Namibia
recorded higher total cash costs in 2003 mainly due to lower recovered grades achieved when compared with 2002.
Total production costs per ounce increased from $288 per ounce to $356 per ounce over 2004 and from $218 per ounce to
$288 per ounce over 2003.
A more detailed review of total cash costs and total production costs at each of AngloGold Ashanti’s operations is provided
under “Item 4B.: Business overview”.
Reconciliation of total cash costs and total production costs to financial statements
Total cash costs and total production costs are calculated in accordance with the guidelines of the Gold Institute industry
standard and are not US GAAP measures. The Gold Institute is a non-profit international association of miners, refiners,
bullion suppliers and manufacturers of gold products, which has developed a uniform format for reporting total production costs
on a per ounce basis. The standard was first adopted in 1996 and revised in November 1999.
Total cash costs, as defined in the Gold Institute industry standard are production costs as recorded in the statement of
operations, less offsite (i.e. central), general and administrative expenses (including head office costs charged to the mines,
central training expenses, industry association fees, refinery charges and social development costs) and rehabilitation costs,
plus royalties and employee termination costs.
Total cash costs as calculated and reported by AngloGold Ashanti include costs for all mining, processing, administration,
royalties and production taxes, as well as contributions from by-products, but exclusive of depreciation, depletion and
amortization, rehabilitation, employment severance costs, corporate administration costs, capital costs and exploration costs.
Total cash costs per ounce are calculated by dividing attributable total cash costs by attributable ounces of gold produced.
Total cash costs have been calculated on a consistent basis for all periods presented.
Total production costs, as defined in the Gold Institute industry standard, are total cash costs, as calculated using the Gold
Institute industry standard, plus amortization, depreciation and rehabilitation costs.
Total production costs as calculated and reported by AngloGold Ashanti include total cash costs, plus depreciation, depletion
and amortization, employee severance costs and rehabilitation and other non-cash costs. Total production costs per ounce
are calculated by dividing attributable total production costs by attributable ounces of gold produced. Total production costs
have been calculated on a consistent basis for all periods presented.
Total cash costs and total production costs should not be considered by investors in isolation or as alternatives to production
costs, net income/(loss) applicable to common stockholders, income/(loss) before income tax provision, net cash provided by
operating activities or any other measure of financial performance presented in accordance with US GAAP or as an indicator of
the company’s performance. While the Gold Institute has provided definitions for the calculation of total cash costs and total
production costs, the calculation of total cash costs, total cash costs per ounce, total production costs and total production
costs per ounce may vary significantly among gold mining companies, and by themselves do not necessarily provide a basis
for comparison with other gold mining companies. However, the company believes that total cash costs and total production
costs in total by mine and per ounce by mine are useful indicators to investors and management as they provide:
•
an indication of profitability, efficiency and cash flows;
•
the trend in costs as the mining operations mature over time on a consistent basis; and
•
an internal benchmark of performance to allow for comparison against other mining companies.
A reconciliation of production costs as included in the company’s audited financial statements to total cash costs and to total
production costs for each of the three years in the period ended December 31, 2004 is presented below. In addition the
company has also provided below detail of the attributable ounces of gold produced by mine for each of those periods.
For the year ended December 31, 2004
Operations in South Africa
(6)
(in $ millions, except as otherwise noted)
Production costs
138
133
71
180
134
107
93
28
-
Plus:
Production costs of equity accounted joint ventures
-
-
-
-
-
-
-
-
-
Less:
Rehabilitation costs & other non-cash costs
(2)
(2)
(1)
(4)
(3)
(2)
(10)
-
(3)
Plus:
Inventory movement
(1)
-
-
(3)
(1)
(1)
-
-
-
Royalties
- - - - - - - - -
Related party transactions
(1)
6 8 2 11 7 4 3 2 -
Adjusted for:
Minority interests
(2)
- - - - - - - - -
Non-gold producing companies and adjustments
-
-
-
-
-
-
-
-
3
Total
cash
costs
14113972184137108 8630-
Plus:
Depreciation, depletion and amortization
29
39
26
22
17
20
27
2
10
Employee severance costs
-
1
2
3
1
-
2
-
-
Rehabilitation and other non-cash costs
2
2
1
4
3
2
10
-
3
Adjusted for:
Minority interests
(2)
- - - - - - - - -
Non-gold producing companies and adjustments
-
-
-
-
-
-
-
-
(4)
Total
production
costs
172181101213158130125329
Gold produced (000’ ounces)
(3)
438568158795486293222119-
Total cash costs per ounce
(4)
322245455231281370389250-
Total production costs per ounce
(4)
393319639268325444563269-
121
(7)
For the year ended December 31, 2004
Operations in Argentina, Australia, Brazil, Ghana, Guinea, Mali, Namibia, Tanzania, USA and Zimbabwe
(in $ millions, except as otherwise noted)
a
Production costs
31
87
-
-
31
26
73
27
43
42
-
-
-
23
109
56
-
4
Plus
:
Production costs of equity
accounted joint ventures
-
-
-
-
-
-
-
-
-
-
38
20
35
-
23
-
-
-
Less:
Rehabilitation costs & other non-cash costs
(1)
(1)
-
-
(1)
-
-
-
(1)
(2)
-
-
-
-
(1)
4
-
-
Plus:
Inventory movement
(2)
17
-
-
2
-
1
(2)
1
-
(2)
-
-
-
5
21
-
-
Royalties
8
4 - - - - 3 1 2
1
4 3 5
-
7
3 -
-
Related party transactions
(1)
-
- - - - - 1 - 1
-
2 2 -
-
-
- -
-
Adjusted for:
Minority interests
(2)
(3)
- - - - (13) - - (8) (4)
- - -
-
-
- -
-
Total
cash
costs
33
107--32 13782638
37
422540
23
143
84-
4
Plus:
Depreciation, depletion and amortization
28
30
-
-
15
12
35
16
19
10
36
6
15
5
47
40
-
1
Employee severance costs
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Rehabilitation and other non-cash costs
1
1
-
-
1
-
-
-
1
2
-
-
-
-
1
(4)
-
-
Adjusted for:
Minority interests
(2)
(2)
- - - - (4) - - (2) (1)
- - -
-
-
- -
-
Total
production
costs
60
138--48211134256
48
78 3155
28
191
120
5
Gold produced (000’ ounces)
(3)
211
410--24094255105 125
83
174 97 204
67
570
329-
9
Total cash costs per ounce
(4)
156
260--133134305251303
443
242 255 196
348
250
220 -
417
Total production costs per ounce
(4)
284
337--200223443400448
578
448320270
418
335
365-
556
122
123
For the year ended December 31, 2004
AngloGold Ashanti operations - Total
(in $ millions, except as otherwise noted)
Total
Production costs per financial statements
1,436
Plus:
Production costs of equity accounted joint ventures
116
Less:
Rehabilitation costs & other non-cash costs
(30)
Plus:
Inventory movement
35
Royalties
41
Related party transactions
(1)
49
Adjusted for:
Minority interests
(2)
(28)
Non-gold producing companies and adjustments
3
Total cash costs
1,622
Plus:
Depreciation, depletion and amortization
507
Employee severance costs
9
Rehabilitation and other non-cash costs
30
Adjusted for:
Minority interests
(2)
(9)
Non-gold producing companies and adjustments
(4)
Total production costs
2,155
Gold produced (000’ ounces)
(3)
6,052
Total cash costs per ounce
(4)
268
Total production costs per ounce
(4)
356
(1)
Relates solely to production costs as included in the company’s consolidated financial statements and has, accordingly, been included in
total production costs and total cash costs.
(2)
Adjusting for minority interest of items included in calculation, to disclose the attributable portions only.
(3)
Attributable production only.
(4)
In addition to the operational performances of the mines, total cash costs per ounce and total production costs per ounce are affected by
fluctuations in the currency exchange rate. AngloGold Ashanti reports total cash costs per ounce and total production costs per ounce
calculated to the nearest US dollar amount and gold produced in ounces.
(5)
Corporate includes non-gold producing subsidiaries.
(6)
Excludes the Free State mines which were sold effective January 1, 2002.
(7)
Total cash costs per ounce calculation includes inventory change.
(8)
Jerritt Canyon Joint Venture was sold effective June 30, 2003.
(9)
There was no production attributable to AngloGold Ashanti in 2004.
(10)
Operations acquired from Ashanti (including 50 percent in Geita). Results are included for the eight months from May 2004 through
December 2004.
(11)
Freda-Rebecca mine was sold effective September 1, 2004. Results are included for the four months from May 2004 through
August 2004.
For the year ended December 31, 2003
Operations in South Africa
(6)
(in $ millions, except as otherwise noted)
Production costs
117
122
85
168
129
91
73
22
(22)
Plus:
Production costs of equity accounted joint ventures
-
-
-
-
-
-
-
-
-
Less:
Rehabilitation costs & other non-cash costs
-
(1)
(2)
(2)
(1)
-
(4)
-
-
Plus:
Inventory movement
-
(3)
(1)
2
(2)
-
-
-
-
Royalties
-
-
-
-
-
-
-
-
-
Related party transactions
(1)
6 7 2 9 6 4 2 1 -
Adjusted for:
Minority interests
(2)
-
-
-
-
-
-
-
-
-
Non-gold producing companies and adjustments
-
-
-
-
-
-
-
-
28
Total
cash
costs
123
125
84
177
132
95
71
23
6
Plus:
Depreciation, depletion and amortization
21
15
5
18
13
15
17
3
4
Employee severance costs
1
-
2
-
-
1
-
-
-
Rehabilitation and other non-cash costs
-
1
2
2
1
-
4
-
-
Adjusted for:
Minority interests
(2)
-
-
-
-
-
-
-
-
-
Non-gold producing companies and adjustments
-
-
-
-
-
-
-
-
(2)
Total
production
costs
145
141
93
197
146
111
92
26
8
Gold produced (000’ ounces)
(3)
499
646
187
812
497
322
203
115
-
Total cash costs per ounce
(4)
247
194
448
218
266
294
349
200
-
Total production costs per ounce
(4)
291
218
497
243
294
345
453
226
-
124
(7)
For the year ended December 31, 2003
Operations in Argentina, Australia, Brazil, Ghana, Guinea, Mali, Namibia, Tanzania, USA and Zimbabwe
(in $ millions, except as otherwise noted)
Productioncosts
26
81 - 233320 - - -
-
---
20
-
5030
-
Plus:
Production costs of equity accounted joint
ventures
-
- - - - - - - -
-
29 19 27
-
59
-
-
-
Less:
Rehabilitation costs & other non-cash costs
(1)
(1)
-
(1)
(1)
-
-
-
-
-
-
(1)
(1)
(1)
(1)
5
-
-
Plus:
Inventory movement
2
(1)
-
(2)
-
-
-
-
-
-
1
-
-
1
-
21
(1)
-
Royalties
6
3
-
-
-
-
-
-
-
-
4
2
7
-
3
2
-
-
Related party transactions
(1)
-
-
-
-
-
-
-
-
-
-
2
-
1
-
-
-
-
-
Adjusted for:
Minority interests
(2)
(3)
-
-
-
-
(10)
-
-
-
-
-
-
-
-
-
-
-
-
Total cash costs
30
82
-
20
32
10
-
-
-
-
36
20
34
20
61
78
29
-
Plus:
Depreciation, depletion and amortization
28
24
-
6
14
14
-
-
-
-
33
8
21
3
12
37
10
-
Employee severance costs
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Rehabilitation and other non-cash costs
1
1
-
1
1
-
-
-
-
-
-
1
1
1
1
(5)
-
-
Adjusted for:
Minority interests
(2)
(2)
-
-
-
-
(5)
-
-
-
-
-
-
-
-
-
-
-
-
Total
production
costs
57
107-27 4719---
-
692956
24
74
11039
-
Gold produced (000’ ounces)
(3)
209
358-74228 95---
-
172 87318
73
331
283 107
-
Total cash costs per ounce
(4)
143
228
-
272
141
109
-
-
-
-
210
235
108
274
183
199
270
-
Total production costs per ounce
(4)
273
299
-
365
206
200
-
-
-
-
401
333
176
329
224
389
364
-
125
126
For the year ended December 31, 2003
AngloGold Ashanti operations - Total
(in $ millions, except as otherwise noted)
Total
Production costs per financial statements
1,068
Plus:
Production costs of equity accounted joint ventures
134
Less:
Rehabilitation costs & other non-cash costs
(13)
Plus:
Inventory movement
17
Royalties
27
Related party transactions
(1)
40
Adjusted for:
Minority interests
(2)
(13)
Non-gold producing companies and adjustments
28
Total cash costs
1,288
Plus:
Depreciation, depletion and amortization
321
Employee severance costs
4
Rehabilitation and other non-cash costs
13
Adjusted for:
Minority interests
(2)
(7)
Non-gold producing companies and adjustments
(2)
Total production costs
1,617
Gold produced (000’ ounces)
(3)
5,616
Total cash costs per ounce
(4)
229
Total production costs per ounce
(4)
288
(1)
Relates solely to production costs as included in the company’s consolidated financial statements and has, accordingly, been included in
total production costs and total cash costs.
(2)
Adjusting for minority interest of items included in calculation, to disclose the attributable portions only.
(3)
Attributable production only.
(4)
In addition to the operational performances of the mines, total cash costs per ounce and total production costs per ounce are affected by
fluctuations in the currency exchange rate. AngloGold Ashanti reports total cash costs per ounce and total production costs per ounce
calculated to the nearest US dollar amount and gold produced in ounces.
(5)
Corporate includes non-gold producing subsidiaries.
(6)
Excludes the Free State mines which were sold effective January 1, 2002.
(7)
Total cash costs per ounce calculation includes inventory change.
(8)
Jerritt Canyon Joint Venture was sold effective June 30, 2003. Results are included for the six months ended June 30, 2003.
(9)
There was no production attributable to AngloGold in 2003.
For the year ended December 31, 2002
Operations in South Africa
(6)
(in $ millions, except as otherwise noted)
Productioncosts
77
78
56
100
83
57
53
15
13
Plus:
Production costs of equity accounted joint ventures
-
-
-
-
-
-
-
-
-
Less:
Rehabilitation costs & other non-cash costs
-
(1)
-
(1)
(2)
(1)
(7)
(1)
-
Plus:
Inventory movement
1
1
-
2
(1)
1
-
-
-
Royalties
-
-
-
-
-
-
-
-
-
-
Related party transactions
(1)
5
7
2
8
4
3
3
-
-
Adjusted for:
Minority interests
(2)
-
-
-
-
-
-
-
-
-
Non-gold producing companies and adjustments
-
-
-
-
-
-
-
-
(12)
Total
cash
costs
83
85
58
109
84
60
49
14
1
Plus:
Depreciation, depletion and amortization
29
11
12
15
12
14
16
3
4
Employee severance costs
-
1
-
-
1
1
-
-
-
Rehabilitation and other non-cash costs
-
1
-
1
2
1
7
1
-
Adjusted for:
Minority interests
(2)
-
-
-
-
-
-
-
-
-
Non-gold producing companies and adjustments
-
-
-
-
-
-
-
-
(3)
Totalproductioncosts
112
98
70
125
99
76
72
18
2
Gold produced (000’ ounces)
(3)
466
643
236
880
511
311
264
101
-
-
-
Total cash costs per ounce
(4)
178
132
245
12
165
192
184
139
Total production costs per ounce
(4)
240
152
297
142
194
244
273
178
127
For the year ended December 31, 2002
Operations in Argentina, Australia, Brazil, Ghana, Guinea, Mali, Namibia, Tanzania, USA and Zimbabwe
(in $ millions, except as otherwise noted)
Production costs
18 65
-
292718 - - -
-
---12
-
30 61
-
Plus:
Production costs of equity accounted joint
ventures
- -
-
-
-
-
- - -
-
26 17 23
-
49
-
-
-
Less:
Rehabilitation costs & other non-cash costs
(1) (1)
-
(3)
-
-
- - -
-
- (1) -
-
(1)
10 (2)
-
Plus:
Inventory movement
(1) 1
-
-
-
(1)
- - -
-
- 1 -
-
-
19 -
-
Royalties
4 3
-
-
-
-
- - -
-
3 2 8
-
3
2 -
-
Related party transactions
(1)
-
-
-
-
- -
- - -
-
1 - -
-
-
- -
-
Adjusted for:
Minority interests
(2)
(1) -
-
-
-
(8)
- - -
-
-
-
-
-
- -
- -
Total cash costs
1968
-26279 - - -
-
301931
12
51
6159
-
Plus:
-
Depreciation, depletion and amortization
19 19
-
14
15
15
- - -
-
29 5 29
1
13
37 21
Employee severance costs
- -
-
-
-
-
- - -
-
- - -
-
-
- -
-
Rehabilitation and other non-cash costs
1 1
-
3
-
-
- - -
-
- 1 -
-
1
(10) 2
-
Adjusted for:
-
Minority interests
(2)
- -
-
-
-
(6)
- - -
-
-
-
-
-
- -
- -
Total production costs
3988
-
43
42
18
- - -
-
592560
13
65
8882
-
- - -
-
-
Gold produced (000’ ounces)
(3)
179382
2
118
205
94
---
-
182107 421
85
290
225237
-
Total cash costs per ounce
(4)
104177
- 224131100---
-
16317574
147
175
187 249
-
Total production costs per ounce
(4)
218230
-364 205 191 - - -
-
324234143
153
224
391 346
-
128
(7)
129
For the year ended December 31, 2002
AngloGold Ashanti operations - Total
(in $ millions, except as otherwise noted)
Total
Production costs per financial statements
792
Plus:
Production costs of equity accounted joint ventures
115
Less:
Rehabilitation costs & other non-cash costs
(12)
Plus:
Inventory movement
23
Royalties
25
Related party transactions
(1)
33
Adjusted for:
Minority interests
(2)
(9)
Non-gold producing companies and adjustments
(12)
Total cash costs
955
Plus:
Depreciation, depletion and amortization
333
Employee severance costs
3
Rehabilitation and other non-cash costs
12
Adjusted for:
Minority interests
(2)
(6)
Non-gold producing companies and adjustments
(3)
Total production costs
1,294
Gold produced (000’ ounces)
(3)
5,939
Total cash costs per ounce
(4)
161
Total production costs per ounce
(4)
218
(1)
Relates solely to production costs as included in the company’s consolidated financial statements and has, accordingly, been included in
total production costs and total cash costs.
(2)
Adjusting for minority interest of items included in calculation, to disclose the attributable portions only.
(3)
Attributable production only.
(4)
In addition to the operational performances of the mines, total cash costs per ounce and total production costs per ounce are affected by
fluctuations in the currency exchange rate. AngloGold Ashanti reports total cash costs per ounce and total production costs per ounce
calculated to the nearest US dollar amount and gold produced in ounces.
(5)
Corporate includes non-gold producing subsidiaries.
(6)
Excludes the Free State mines which were sold effective January 1, 2002.
(7)
Total cash costs per ounce calculation includes inventory change.
130
Capital expenditure
Total capital expenditure during the year ended December 31, 2004 was $583 million, compared to $363 million in 2003, which
represents a $220 million, or 61 percent, increase in capital expenditure on a group level. In South Africa, capital expenditure
increased from $242 million spent in 2003 to $333 million in 2004, mainly due to the impact of the strengthening of the South
African rand against the US dollar and the impact of the change in estimate of on-reef Ore Reserve development expenditure
($85 million), during 2004. Capital projects in Ghana and Guinea amounted to $42 million and $57 million, respectively, in
2004, as part of AngloGold Ashanti’s investment strategy following the AngloGold Ashanti Business Combination completed in
April 2004. Capital expenditure in Namibia increased from $2 million spent in 2003 to $21 million in 2004, with the conversion
of Navachab from contractor mining to owner-mining. In Australia, capital expenditure increased from $21 million to $28 million,
mainly as a result of the Sunrise Dam underground feasibility study and trial mining project. Capital expenditure in the USA
decreased from $27 million spent in 2003 to $16 million in 2004 due to the completion of the expansion project at Cripple
Creek & Victor during 2004 and the impact of the sale of the Jerritt Canyon Joint Venture, effective June 30, 2003, on spending
in 2004.
Total capital expenditure during the year ended December 31, 2003 was $363 million, compared to $271 million in 2002, which
represents a $92 million, or 34 percent, increase in capital expenditure on a group level. In South Africa, capital expenditure
increased from $106 million spent in 2002 to $242 million in 2003, mainly due to the Moab Khotsong and Mponeng shaft
deepening projects, the acquisition of a portion of the Driefontein mining area, known as 1C11, from Gold Fields Limited during
September 2003 and the strengthening of the South African rand against the US dollar. Capital expenditure in the USA and
Australia, decreased from $74 million and $31 million, respectively, spent in 2002 to $27 million and $21 million, respectively, in
2003. The decrease in the USA was mainly due to the completion of the Cresson Mine expansion at Cripple Creek & Victor in
the third quarter of 2002 and Australia recorded lower capital expenditure in 2003 (mainly at Sunrise Dam).
A more detailed review of capital expenditure at each of AngloGold Ashanti’s operations is provided under “Item 4B.: Business
overview”.
Comparison of financial performance on a segment basis for 2004, 2003 and 2002
AngloGold Ashanti produces gold as its primary product and does not have distinct divisional segments in terms of principal
business activity, but manages its business on the basis of different geographic segments. In 2004, AngloGold Ashanti
changed its presentation of segment information from a regional basis to operating segments by country. Following the change
in the composition of reportable segments and where applicable, AngloGold Ashanti has restated the corresponding items of
segment information for all earlier periods presented. This information is consistent with the information used by AngloGold
Ashanti’s chief operating decision makers in evaluating operating performance of, and making resource allocation decisions
among operations.
131
Revenues
Year ended December 31
(in millions)
2004
$
%
2003
(As restated)
$
%
2002
(As restated)
$
%
Category of activity
Total revenues
Product sales
2,183
1,714
1,458
Interest, dividends and other
55
29
35
Total revenues
2,238
1,743
1,493
Geographical area data
Total revenues
South Africa
1,230
55
1,201
69
966
65
Argentina
100
4
76
4
63
4
Australia
172
8
157
9
155
10
Brazil
173
8
151
9
129
9
Ghana
209
9
-
-
-
-
Guinea
44
2
-
-
-
-
Mali
181
8
207
12
222
15
Namibia
28
1
28
2
27
2
Tanzania
208
9
107
6
84
6
USA
106
5
129
7
153
10
Zimbabwe
4
-
-
-
-
-
Other, including Corporate and Non-gold producing
subsidiaries
6
-
1
-
-
-
Total revenues
2,461
2,057
1,799
Less : Equity method investments included in above
(223)
(9)
(314) (18)
(306) (21)
Total consolidated
2,238
100
1,743
100
1,493
100
In 2004, 55 percent of AngloGold Ashanti’s total revenues were derived from its operations in South Africa, compared to
69 percent in 2003, mainly as a result of a 6 percent decrease in gold production in 2004 from 2003, as well as the impact of
additional revenues generated arising from the Business Combination with Ashanti. Former Ashanti operations acquired as
part of the completed AngloGold Ashanti Business Combination in Ghana, Guinea and Zimbabwe accounted for 9 percent,
2 percent and nil percent, respectively, of AngloGold Ashanti’s total revenue in 2004. Similarly, Tanzania contributed 9 percent
of AngloGold Ashanti’s total revenues during 2004 compared to 6 percent in 2003, mainly due to the additional 50 percent
interest acquired in Geita as part of this transaction. Operations in Mali and the USA contributed 8 percent and 5 percent of
AngloGold Ashanti’s total revenues during 2004, compared to 12 percent and 7 percent, respectively, in 2003. This decrease in
Malian and USA revenues as a percentage of total revenues was mainly due to lower gold production during 2004 and the
impact of the sale of the Jerritt Canyon Joint Venture of North America with effect from June 30, 2003 on revenue of 2004.
Other operations, including those situated in Argentina, Australia, Brazil and Namibia and corporate, collectively accounted for
approximately 21 percent of AngloGold Ashanti’s total revenue in 2004, compared to 24 percent in 2003.
In 2003, 69 percent of AngloGold Ashanti’s total revenues were derived from its operations in South Africa, compared to
65 percent in 2002, mainly as a result of a higher unit price of gold during 2003. Operations in Mali and the USA contributed
12 percent and 7 percent of AngloGold Ashanti’s total revenues during 2003, compared to 15 percent and 10 percent,
respectively, in 2002. This decrease in Malian and USA revenues as a percentage of total revenues was mainly due to lower
gold production during 2003 and the disposal of AngloGold's 70 percent interest in the Jerritt Canyon Joint Venture in North
America with effect from June 30, 2003. Other operations, including those situated in Argentina, Australia, Brazil, Namibia and
Tanzania and corporate, collectively accounted for approximately 30 percent of AngloGold Ashanti’s total revenue in 2003,
compared to 31 percent in 2002.
132
Assets
Year ended December 31
(in millions)
2004
$
%
2003
(As restated)
$
%
2002
(As restated)
$
%
Geographical area data
Total segment assets
South Africa
3,450
37
3,057
57
2,185
50
Argentina
260
3
264
5
286
7
Australia
711
8
649
12
485
11
Brazil
340
4
286
5
276
6
Ghana
2,126
22
-
-
-
-
Guinea
325
3
-
-
-
-
Mali
344
(1)
4 332
(1)
6
343
(1)
8
Namibia
38
-
30
1
20
-
Tanzania
1,065
11
171
(1)
3
167
(1)
4
USA
408
4
416
8
432
10
Other, including Corporate and Non-gold
producing
subsidiaries
329 4
138 3
156
4
Total segment assets
9,396
100
5,343
100
4,350
100
(1)
Investment
held.
At December 31, 2004, 37 percent of AngloGold Ashanti’s total assets were located in South Africa compared with 57 percent
at the end of 2003. In addition, operations in Argentina, Australia, Brazil, Mali, Namibia, USA and corporate, collectively
accounted for approximately 27 percent of AngloGold Ashanti’s total assets at December 31, 2004 compared to 40 percent at
the end of the same period in 2003, reflecting the impact of the addition of assets primarily in Ghana and Guinea, arising from
the Business Combination with Ashanti. These assets held in Ghana and Guinea accounted for 22 percent and 3 percent,
respectively, of AngloGold Ashanti’s total assets as at December 31, 2004. Similarly, Tanzanian assets of AngloGold Ashanti
represented 11 percent of AngloGold Ashanti’s total assets at December 31, 2004 while at the end of the same period in 2003
this share was 3 percent, main ly due to the additional 50 percent interest acquired in Geita as part of this transaction.
At December 31, 2003, 57 percent of AngloGold Ashanti’s total assets were located in South Africa, compared with 50 percent
at the end of 2002. The increase in the value of the South African assets as a percentage of total assets was mainly due to the
strengthening of the South African rand relative to the US dollar in 2003 by 22 percent (based on the exchange rates of R8.58
and R6.67 per US dollar on January 1, 2003 and December 31, 2003, respectively). Assets in the USA accounted for
8 percent of total assets at December 31, 2003 compared with 10 percent at December 31, 2002. The decrease in the value of
USA assets relative to the total assets was largely due to the disposal of AngloGold's 70 percent interest in the Jerritt Canyon
Joint Venture with effect from June 30, 2003. Other operations, including those in Argentina, Australia, Brazil, Mali, Namibia
and Tanzania and corporate, collectively accounted for approximately 35 percent of AngloGold Ashanti’s total assets at
December 31, 2003 compared to 40 percent at the end of the same period in 2002.
Comparison of financial performance in 2004 with 2003
Revenues
Revenues from product sales and other income increased by $495 million from $1,743 million in 2003 to $2,238 million in
2004, representing a 28 percent increase over the period. This increase was primarily due to the increase in the spot price of
gold in 2004 as well as the contribution to revenue during 2004, from operations acquired during April 2004 as part of the
completed AngloGold Ashanti Business Combination. The average spot price of gold was $409 per ounce during 2004,
$46 per ounce, or 13 percent, higher than $363 per ounce, the average spot price of gold in 2003. The majority of product
sales consisted of US dollar-denominated gold sales. Total revenues from the South African operations increased by
$29 million to $1,230 million from $1,201 million realized in 2003, a 2 percent increase, mainly as a result of the higher gold
price. The increase in revenues was partly offset by reduced gold p roduction at the South African operations (6 percent lower
in 2004 compared with 2003).
133
Total revenues generated from operations situated in Ghana, Guinea and Zimbabwe acquired since April 2004 as part of the
AngloGold Ashanti Business Combination amounted to $257 million in 2004. Tanzania recorded total revenues of $166 million
in 2004, as a result of the additional 50 percent interest acquired in Geita as part of the AngloGold Ashanti Business
Combination.
Production costs
Production costs increased from $1,068 million in 2003 to $1,436 million in 2004, which represents a $368 million, or
34 percent increase. In South Africa, production costs increased by $99 million to $884 million in 2004 from $785 million in
2003 primarily due to the strengthening of the South African rand relative to the US dollar. About 62 percent of AngloGold
Ashanti’s production costs were denominated in South African rands in 2004. Production costs recorded by operations situated
in Ghana, Guinea and Zimbabwe acquired since April 2004 as part of the AngloGold Ashanti Business Combination amounted
to $189 million in 2004. As a result of the additional 50 percent interest acquired in Geita as part of the AngloGold Ashanti
Business Combination, Tanzania recorded production costs of $109 million in 2004.
Exploration costs
Exploration costs increased from $40 million in 2003 to $44 million in 2004. During 2004, exploration continued to focus
around the operations in the countries in which AngloGold Ashanti has operations namely, Argentina, Australia, Brazil, Ghana,
Guinea, Tanzania, Mali, Namibia, South Africa and the USA. In addition, exploration activities were pursued in areas in the
Democratic Republic of Congo, Colombia, Peru, Alaska, China, Mongolia and Russia. For a discussion of AngloGold Ashanti’s
exploration activities in 2004, see “Item 4B.: Business overview – Global exploration”.
Related party transactions
Related party transactions in 2004 amounted to $45 million compared with $37 million in 2003 mainly due to higher contract
work generated by development activities. For a detailed discussion of related party transactions, see “Item 5B.: Liquidity and
capital resources – Related party transactions”.
General and administrative
General and administrative expenses increased from $43 million in 2003 to $58 million in 2004, mainly due to costs associated
with the AngloGold Ashanti launch, integration activities and the strengthening of the South African rand relative to the
US dollar. The incorporation of the former Ashanti corporate offices in total amounted to $10 million.
Royalties
Royalties paid by AngloGold Ashanti increased from $11 million in 2003 to $27 million paid in 2004, with royalties in Australia,
Argentina, Tanzania and the USA amounting to $4 million, $8 million, $5 million and $3 million, respectively, in 2004 compared
with $3 million, $6 million, $nil million and $2 million, respectively, in 2003. Royalties paid in Ghana and Guinea amounted to
$7 million in 2004. Australian royalties are payable to the government as specified in the relevant legislation in each State or
Territory based on ounces produced. In Argentina, royalties are payable to Fomicruz, a State owned company in the Santa
Cruz Province, being the minority shareholder of the Cerro Vanguardia operation calculated as a percentage of revenues. In
Tanzania, royalties are payable to the Tanzanian (for Geita) government calculated as a percentage of revenues. In the USA,
royalties are payable to a small numbe r of private claim holders based on ounces produced and percentage ownership of the
specific claim being mined. In Ghana, royalties are payable to the government at a fixed rate of 3 percent per annum based on
revenue, as agreed to under the Stability Agreement entered into with AngloGold as part of the AngloGold Ashanti Business
Combination. In Guinea, royalties are paid to the government calculated as a percentage of revenues.
Market development costs
Market development costs decreased from $19 million in 2003 to $15 million in 2004. During 2004, approximately 66 percent
(2003: 55 percent) of these costs were spent through the World Gold Council (WGC). For a detailed discussion on market
development see “Item 4B.: Business overview – Gold market development”.
134
Depreciation, depletion and amortization
Depreciation, depletion and amortization expense increased by $198 million or 80 percent, to $445 million in 2004 when
compared to $247 million recorded in 2003. In South Africa, depreciation, depletion and amortization expense increased from
$111 million in 2003 to $192 million in 2004, mainly due to AngloGold Ashanti’s reassessment of the useful life of on-reef Ore
Reserve development expenditure with effect from January 1, 2004 and amortization charges included for the full year, relating
to the acquisition of a portion of the Driefontein mining area from Gold Fields Limited during September 2003. Depreciation,
depletion and amortization expense from operations situated in Ghana, Guinea and Zimbabwe acquired since April 2004 as
part of the AngloGold Ashanti Business Combination amounted to $81 million in 2004. Tanzania recorded depreciation,
depletion and amortization expense of $42 million in 2004, mainly as a result of the additional 50 percent interest acquired in
Geita as part of the AngloGold Ashanti Business Combination. In the USA, depreciation, depletion and amortization expense
decreased from $47 million in 2003 to $40 million in 2004, mainly due to the impact of the disposal of AngloGold’s 70 percent
interest in the Jerritt Canyon Joint Venture with effect from June 30, 2003.
Impairment of assets
In 2004, AngloGold Ashanti recorded an impairment of assets of $3 million relating mainly to goodwill held in its subsidiary,
GoldAvenue and mining assets and mineral rights in Australia. An impairment of assets of $78 million was recorded in 2003
relating mainly to the Savuka operations in South Africa, mining equipment in Brazil and the abandonment of exploration
activities in the Australian region.
Interest expense
Interest expense increased by $39 million from $28 million recorded in 2003 to $67 million in 2004. The increase in interest
expense from 2003 was mainly due to finance charges paid on the senior unsecured bonds issued in August 2003 (the
corporate bond) and finance charges on the issuance of the $1,000,000,000 2.375 percent convertible bonds in
February 2004. All of AngloGold Ashanti’s debt (exclusive of the rand denominated corporate bond) was denominated in US
dollars in 2004.
Accretion expense
Accretion expense of $8 million was recorded in 2004 compared with $2 million in 2003, relating to the adoption of SFAS 143
“Accounting for Asset Retirement Obligations (ARO’s)”, with effect from January 1, 2003. Accretion relates to the unwinding of
discounted future reclamation obligations to present values and increases the reclamation obligations to its future estimated
payout.
Employment severance cost
Employment severance costs increased to $9 million in 2004 from $4 million in 2003. The 2004 expense related to
retrenchments in the South African region reflecting mainly rationalization of operations at Great Noligwa and TauTona and at
Savuka and Ergo which are both nearing the end of their lives.
Profit on sale of assets
The profit on sale of assets of $14 million recorded in 2004 relates mainly to the sale of the Western Tanami assets, Tanami
Gold Mine and Union Reefs mine in Australia and various mineral rights and exploration properties in South America. The profit
on sale of assets of $55 million recorded in 2003 related to the sale by AngloGold of its 70 percent interest in the Jerritt Canyon
Joint Venture and Queenstake investment in North America, its wholly owned Amapari Project in North Brazil and shares held
in East African Gold Mines Limited and Randgold Resources Limited.
Non-hedge derivative loss/gain
A loss on non-hedge derivatives of $131 million was recorded in 2004 compared to a gain of $119 million in 2003 relating to
the use of commodity instruments that are not classified as hedging instruments for financial reporting purposes.
135
Loss/income before equity income and income tax
For the foregoing reasons, in 2004, loss before equity income and income tax amounted to $36 million compared to a profit of
$340 million in 2003.
Equity income in affiliates
Equity income in affiliates decreased from $74 million in 2003 to $23 million in 2004, mainly as a result of the additional
50 percent interest acquired in Geita as part of the AngloGold Ashanti Business Combination, which resulted in Geita being
accounted for as a subsidiary of AngloGold Ashanti from April 26, 2004.
Deferred income and mining tax benefit/expense
Deferred income and mining tax expense decreased by $279 million from a net tax charge of $147 million recorded in 2003, to
a net tax benefit of $132 million in 2004. Charges for current tax in 2004 amounted to $63 million compared to $62 million in
2003. Charges for current tax in 2004 included an under provision of $40 million in estimated tax payable. Charges for deferred
tax in 2004 amounted to a net tax benefit of $195 million compared to a net tax charge of $85 million in 2003. Deferred tax
charges in 2004 include a tax benefit of $158 million as a result of a change to the estimated deferred tax rate, mainly in South
Africa, reflecting the impact of the South African mining tax formula to the decrease in the earnings of the operations in that
country. In addition, deferred tax charges in 2004 included tax benefits of $38 million and $nil million related to non-hedge
derivatives and asset impairments , respectively, compared with tax charges of $40 million related to non-hedge derivatives and
tax benefits of $26 million related to asset impairments, respectively, during 2003.
Cumulative effect of accounting change
AngloGold Ashanti adopted SFAS 143 “Accounting for Asset Retirement Obligations (ARO’s)” with effect from January 1, 2003.
This resulted in a cumulative change in accounting policy effect of $3 million (net of provision for deferred taxation) reflected in
2003.
Net income/loss
As a result of the factors discussed above, net income decreased by $150 million from $247 million earned in 2003 to
$97 million in 2004.
Comparison of financial performance in 2003 with 2002
Revenues
Revenues from product sales and other income increased from $1,493 million in 2002 to $1,743 million in 2003 representing a
17 percent increase over the period. This increase was mainly the result of a higher unit price of gold during 2003, as the
average spot price of gold was $363 per ounce, $53 per ounce, or 17 percent, higher than $310 per ounce, the average spot
price in 2002. The increase in revenue was partly offset by a 5 percent decrease in gold production from 2002. The majority of
product sales consisted of US dollar-denominated gold sales. Total revenues from the South African operations increased by
$235 million to $1,201 million from $966 million realized in 2002, a 24 percent increase, mainly as a result of the higher gold
price. The increase in revenues was partly offset by reduced gold production at the South African operations (4 percent lower
in 2003 compared with 2002). Total reven ues from the USA operations decreased by $24 million or 16 percent from
$153 million in 2002 to $129 million in 2003, primarily due to the disposal of AngloGold's 70 percent interest in the Jerritt
Canyon Joint Venture with effect from June 30, 2003. The Argentinean and Brazilian operations recorded total revenues of
$76 million and $151 million, respectively, in 2003, compared to $63 million and $129 million, respectively, in 2002. The
increase in total revenues from Argentina and Brazil over 2002 was mainly due to the impact of the additional 46.25 percent
interest acquired during July 2002 in the Cerro Vanguardia mine in Argentina as well as
an increase in production at AngloGold
Ashanti Mineração (formerly Morro Velho) (11 percent) and Serra Grande (1 percent) in Brazil.
136
Production
costs
Production costs increased by $276 million or 35 percent from $792 million in 2002 to $1,068 million in 2003. This increase
was a result of the strengthening of local currencies against the US dollar in most of the countries in which AngloGold Ashanti
operates and lower gold grade ore mined or recovered at certain operations. Production costs in AngloGold Ashanti’s South
African operations, increased by $253 million to $785 million in 2003 from $532 million in 2002, primarily due to the
strengthening of the South African rand relative to the US dollar. About 74 percent of AngloGold Ashanti’s total production
costs were denominated in South African rands in 2003. Production costs at Ergo in the South African operations were
negatively impacted by an increased loss on acid by-products from the lower-than-planned sulphur grades and the impact of
lower production (23 percent). Production costs relating to the USA operations decreased from $91 million in 2002 to
$80 million in 2003, mainly as a result of the disposal of AngloGold's 70 percent interest in the Jerritt Canyon Joint Venture with
effect from June 30, 2003.
Exploration
costs
Exploration costs increased from $28 million in 2002 to $40 million in 2003. During 2003, the exploration focus continued in
countries in which AngloGold Ashanti already had operations, namely in Argentina, Australia, Brazil, Namibia, South Africa and
the United States. In addition, exploration was pursued in highly prospective areas in Alaska, Canada and Peru. Exploration
commenced within the “frontier” area of Mongolia, while exploration activities were terminated in Nevada and Tanzania and
curtailed within Australia, where further exploration expenditure was considered to have reached the point of diminishing
returns.
For a discussion of AngloGold Ashanti’s exploration activities in 2003, see “Item 4B.: Business overview – Global
exploration”.
Related
party
transactions
Related party transactions in 2003 amounted to $37 million compared with $42 million recorded in 2002. Changes recorded in
2002, included $10 million related to the settlement by AngloGold of a claim in respect of an alleged breach of contract. For a
detailed discussion of related party transactions, see “Item 5B.: Liquidity and capital resources – Related party transactions”.
General and administrative
General and administrative expenses increased from $29 million in 2002 to $43 million in 2003, mainly as a result of the
strengthening of the South African rand relative to the US dollar, which negatively impacted on general and administrative
expenses as approximately 86 percent of these costs were South African rand denominated.
Royalties
Royalties paid by AngloGold Ashanti increased from $9 million in 2002 to $11 million paid in 2003, with royalties in Australia,
Argentina and the USA amounting to $3 million, $6 million and $2 million, respectively, in 2003 compared with $3 million,
$4 million and $2 million, respectively, in 2002. Australian royalties are payable to the government as specified in the relevant
legislation in each State or Territory based on ounces produced. In Argentina, royalties are payable to Fomicruz, a State
owned company in the Santa Cruz Province, being the minority shareholder of the Cerro Vanguardia operation calculated as a
percentage of revenues. In the USA, royalties are payable to a small number of private claim holders based on ounces
produced and percentage ownership of the specific claim being mined.
Market development costs
Market development costs increased from $17 million in 2002 to $19 million in 2003. During 2003, approximately 55 percent
(2002: 73 percent) of these costs were spent through the World Gold Council (WGC). For a detailed discussion on market
development, see “Item 4B.: Business overview – Gold market development”.
Research and development
Research and development decreased from $1 million in 2002 to $nil million in 2003. For a detailed discussion on research
and development, see “Item 4B.: Business overview – Research and development”.
137
Depreciation,
depletion and amortization
Depreciation, depletion and amortization expense decreased by 4 percent from $257 million in 2002 to $247 million in 2003.
Depreciation, depletion and amortization charges recorded in the South African and Australian operations ($111 million and
$30 million, respectively, in 2003 compared with $111 million and $33 million, respectively, in 2002) were in line with
production. In the USA, depreciation, depletion and amortization expense decreased by 19 percent from $58 million in 2002 to
$47 million in 2003, principally due to the disposal of AngloGold's 70 percent interest in the Jerritt Canyon Joint Venture with
effect from June 30, 2003. The Argentinean operations recorded an increase in depreciation, depletion and amortization
expense during 2003 to $28 million compared to $19 million in 2002. This was mainly due to the full year impact of the
additional 46.25 percent interest acquired during July 200 2 in the Cerro Vanguardia mine.
Impairment of assets
An impairment of assets of $78 million was recorded in 2003 which consisted of: the Savuka assets in South Africa
($59 million), various exploration assets in the Australian region ($9 million), mining equipment in South America ($1 million)
and $9 million relating to investments. The Savuka assets were impaired as a result of the lower rand gold price achieved by
the South African operations during 2003 when compared with 2002. No impairment of assets was recorded in 2002.
Interest expense
Interest expense increased by $6 million or 27 percent from $22 million in 2002 to $28 million in 2003. Interest expense in
2003 included finance charges paid on the senior unsecured bonds issued in August 2003 (the corporate bond), partly offset
by lower prevailing LIBOR rates to which most of AngloGold Ashanti’s debt was pegged. Approximately 99 percent
(2002: 99 percent) of AngloGold Ashanti’s debt (exclusive of the rand denominated corporate bond) was denominated in
US dollars in 2003.
Accretion
expense
Accretion expense of $2 million was recorded in 2003 relating to the adoption of SFAS 143 “Accounting for Asset Retirement
Obligations (ARO’s)”, with effect from January 1, 2003. Accretion relates to the unwinding of discounted future reclamation
obligations to present values and increases the reclamation obligations to its future estimated payout.
Employment severance cost
Employment severance costs increased to $4 million in 2003 from $3 million in 2002. The 2003 expense related to
retrenchments in the South African region reflecting mainly downsizing at Savuka mine.
Profit/loss on sale of assets
The profit on sale of assets of $55 million recorded in 2003 comprises: a profit on the sale by AngloGold of its 70 percent
interest in the Jerritt Canyon Joint Venture in North America to Queenstake Resources USA Inc. ($10 million), a profit on the
sale of the Queenstake investment held by North America ($3 million), a profit on the sale of shares held in East African Gold
Mines Limited ($25 million), a gain on the sale of shares held in Randgold Resources Limited ($17 million), a profit on sale of a
helicopter at Vaal River ($3 million) and a loss of $3 million on the sale of its wholly owned Amapari Project to Mineração Pedra
Branca do Amapari located in the State of Amapá, North Brazil. The loss on the sale of assets of $11 million recorded in 2002
related to the sale of the investment in Normandy, during January 2002. See note 5 to the consolidated financial statements
“Costs and expenses – (Profit)/loss on sale of assets”.
Non-hedge derivative gain
A gain on non-hedge derivatives of $119 million was recorded in 2003 compared to a gain of $74 million in 2002 relating to the
use of commodity instruments that are not classified as hedging instruments for financial reporting purposes.
138
Income before equity income and income tax
For the foregoing reasons, in 2003, income before equity income and income tax amounted to $340 million compared to
income of $356 million in 2002.
Equity income in affiliates
Equity income in affiliates decreased from $80 million in 2002 to $74 million in 2003.
Deferred income and mining tax expense
Deferred income and mining tax expense increased by $83 million from a net tax charge of $64 million recorded in 2002 to a
net tax charge of $147 million in 2003. Deferred income and mining tax expense includes both charges for current tax and
deferred tax. Charges for current tax decreased from $121 million in 2002 to $62 million in 2003 owing to the reduced earnings
for the year and a lower mining tax formula in South Africa. Charges for deferred tax in 2003 amounted to a net tax charge of
$85 million compared to a net tax benefit of $57 million in 2002. Deferred tax charges in 2003 included tax charges of
$40 million related to non-hedge derivatives and tax benefits of $26 million related to asset impairments compared with tax
benefits related to non-hedge derivatives of $5 million and $nil million related to asset impairments, respectively, during 2002.
Cumulative effect of accounting change
The cumulative effect of a change in accounting policy on adoption of SFAS 143 “Accounting for Asset Retirement Obligations
(ARO’s)” with effect from January 1, 2003 amounted to $3 million (net of provision for deferred taxation).
Net
income
As a result of the factors discussed above, net income decreased by $109 million to $247 million in 2003 from $356 million
recorded in 2002.
5B.
Liquidity and capital resources
Operating activities
2004
Net cash provided by operating activities was $506 million in 2004, 23 percent higher than the 2003 amount of $411 million.
The increase in net cash provided by operating activities over 2003 is mainly the result of an increase in AngloGold Ashanti’s
profitability due to higher unit prices of gold during 2004, being offset by higher unit cash costs per ounce when compared with
2003. A reduction in taxation paid over 2003, positively impacted on cash provided by operating activities in 2004.
Net cash inflow from operating working capital items amounted to $7 million in 2004, compared with an outflow of $98 million in
2003. The decrease in cash outflow from operating working capital items over 2003 is mainly due to working capital acquired
from Ashanti in the AngloGold Ashanti Business Combination.
A detailed discussion of the movement in net income is included in the comparison of 2004 with 2003 under
“Item 5A.: Operating results”.
2003
Net cash provided by operating activities was $411 million in 2003, 22 percent lower than the 2002 amount of $529 million.
The decrease in net cash provided by operating activities over 2002 was mainly the result of a decrease in AngloGold
Ashanti’s profitability due to higher unit cash costs per ounce, being offset by higher unit prices of gold during 2003 when
compared with 2002.
Net cash outflow from operating working capital items amounted to $98 million in 2003, compared with $nil million in 2002.
The increase in cash outflow from operating working capital items over 2002 was mainly due to the impact of exchange rate
fluctuations in South Africa and Australia relative to the US dollar, as well as inventory build-up at Cripple Creek & Victor.
A detailed discussion of the movement in net income is included in the comparison of 2003 with 2002 under “Item 5A.:
Operating results”.
139
Investing activities
2004
Investing activities in 2004 resulted in a net cash outflow of $979 million compared with a net cash outflow of $268 million in
2003. This increase in cash outflows was the net result of additions to property, plant and equipment which included capital
expenditure of $571 million, compared to $339 million in 2003, as a result of major capital projects in Ghana and Guinea, the
purchase of a new mining fleet in Namibia and the Sunrise Dam underground feasibility study and trial mining project in
Australia. Investments acquired included a 17.5 percent stake in Trans-Siberian Gold plc at a cost of $16 million and a
12.3 percent interest in Red 5 Limited at a cost of $4 million. AngloGold Ashanti received cash of $10 million related to the
disposal of its interest in the Western Tanami Project and Union Reefs mine in Australia and paid a net cash consideration of
$171 million related to the acquisition of Ashanti’s assets. Cash effects resulting from the restructuring of the AngloGold
Ashanti hedge book amounted to $310 million in 2004.
2003
Investing activities in 2003 resulted in a net cash outflow of $268 million compared with a net cash outflow of $66 million in
2002. This increase in cash outflows was the net result of additions to property, plant and equipment which included capital
expenditure of $339 million, compared to $246 million in 2002, as a result of major capital projects, including Moab Khotsong,
the Mponeng deepening project and four projects at TauTona mine including the purchase of the mining area of Gold Fields
Limited's Driefontein mine known as 1C11 during September 2003. The proceeds of $56 million on sale of investments were
the result of the sale of the investment in East African Gold Mines Limited, Randgold Resources Limited and the shares held in
Queenstake Resources USA Inc. The disposal of subsidiaries included the sale of a 70 percent interest in the Jerritt Canyon
Joint Venture, which was sold to Queenstak e Resources USA Inc. effective June 30, 2003. The consideration of $12 million
received for the sale was paid in the form of $1 million in cash and 32 million shares of Queenstake Resources USA Inc.
common stock valued at $5 million and $6 million in deferred payments.
Financing activities
2004
Net cash generated in financing activities increased by $355 million from an outflow of $79 million in 2003 to an inflow of
$276 million in 2004. This net increase in cash generated in financing activities was the result of higher borrowings raised,
partly offset by higher borrowings repaid. Repayments comprised normal scheduled loan repayments in terms of loan facilities
of $146 million, the repayment of the $400 million unsecured syndicated loan facility (which was repayable in May 2004)
amounting to $232 million, the repayment of $200 million under the $600 million unsecured syndicated loan facility (repayable
in February 2005), the repayment of $92 million syndicated project finance loans and the repayment of $139 million under a
revolving credit facility acquired as part of the AngloGold Ashanti Business Combination. Proceeds from loans during 2004
included $991 million raised through the issuan ce of $1,000,000,000 2.375 percent convertible bonds in February 2004. The
bonds, due in 2009, are convertible into AngloGold Ashanti American Depositary Shares (ADSs) and are guaranteed by
AngloGold Ashanti. The proceeds, after payment of expenses, were utilized by AngloGold Ashanti to refinance amounts
outstanding under credit facilities, to meet transaction costs in connection with the Business Combination with Ashanti and for
general corporate purposes, including planned capital expenditure.
Cash effects resulting from the restructuring of the AngloGold Ashanti hedge book amounted to $227 million in 2004. During
2004, the loan facility of A$50 million arranged with the Australia and New Zealand Banking Group Limited, at 0.35 percent
over the Bank Bill Swap Reference Rate on October 14, 2002, and originally repayable by September 2003, was extended to
September 2005. At December 31, 2004, no amount had been drawn under this facility.
During 2004, AngloGold Ashanti issued 41,326,552 ordinary shares, of which 41,133,752 ordinary shares were issued in terms
of the Ashanti acquisition and 192,800 ordinary shares were issued pursuant to the AngloGold Share Incentive Scheme.
Proceeds from the latter issuance amounted to $3 million in 2004.
Dividends paid decreased from $314 million (133 US cents or 1,050 South African cents per share) in 2003 to $198 million
(76 US cents or 505 South African cents per share) in 2004. AngloGold Ashanti declares interim dividends at the time of
announcing its interim results and declares and pays final dividends in the following year based on the previous year's results.
140
2003
Net cash used in financing activities decreased by $254 million from an outflow of $333 million in 2002 to an outflow of
$79 million in 2003. This net decrease in cash used in financing activities was the result of lower borrowings repaid, partly
offset by lower borrowings drawn. Repayments comprised normal scheduled payments in terms of loan facilities of
$107 million and the repayment of $30 million under the $400 million unsecured syndicated loan facility (repayable in
May 2004). No further drawings or repayments were made under the $600 million unsecured syndicated loan facility which
AngloGold Ashanti entered into in 2002. In addition, on August 21, 2003, AngloGold Ashanti issued a senior unsecured fixed
rate corporate bond in an aggregate principal amount of R2 billion ($300 million), with semi-annual coupons payable at a rate
of 10.5 percent per annum. The corporate bond will be repayable on August 28, 2008. The corporate bond is listed on the
Bond Exchange of South Africa. During 2003, the loan facility of A$50 million arranged with the Australia and New Zealand
Banking Group Limited, at 0.35 percent over the Bank Bill Swap Reference Rate on October 14, 2002, and originally repayable
by September 2003, was extended to September 2004. At December 31, 2003, A$10 million ($7 million) had been drawn
under this facility.
During 2003, AngloGold Ashanti issued 514,320 ordinary shares, of which 508,020 ordinary shares were issued pursuant to
the AngloGold Share Incentive Scheme and 6,300 ordinary shares were issued in terms of the Acacia Employee Option Plan.
Proceeds from the above issuances amounted to $10 million in 2003.
Dividends paid increased from $260 million (113 US cents or 1,225 South African cents per share) in 2002 to $314 million
(133 US cents or 1,050 South African cents per share) in 2003. AngloGold Ashanti declares interim dividends at the time of
announcing its interim results and declares and pays final dividends in the following year based on the previous year's results.
Liquidity
AngloGold Ashanti’s revenues are derived primarily from the sale of gold produced at its mines. Cash generated by operating
activities is therefore the function of gold produced sold at a specific price. As the market price of gold can fluctuate widely,
this may negatively impact on the profitability of AngloGold Ashanti’s operations and the cash flows generated by these
operations. AngloGold Ashanti uses a number of products, including derivatives to manage gold price and foreign exchange
risks that arise out of the group’s core business activities to limit the impact on the profitability of AngloGold Ashanti’s
operations and generated cash flows.
AngloGold Ashanti’s cash and cash equivalents decreased to $299 million at December 31, 2004 compared with $479 million
at December 31, 2003. In accordance with South African Reserve Bank regulations, cash generated by South African
operations is held in rands. At December 31, 2004, approximately 52 percent of AngloGold Ashanti’s cash and cash
equivalents were held in US dollars, 10 percent were held in South African rands, 7 percent were held in Australian dollars and
31 percent were held in other currencies.
AngloGold Ashanti’s short-term debt decreased to $315 million at December 31, 2004 from $331 million at
December 31, 2003. The amount of short-term debt is the portion of long-term debt that falls due in 2005. Included in the
short-term debt at December 31, 2004, was:
•
the drawn portion of a $600 million US dollar-based syndicated loan facility, repayable in February 2005;
•
the fixed semi-annual coupon of 2.375 percent payable on a US dollar-based convertible bond; and
•
the fixed semi-annual coupon of 10.50 percent payable on a rand-based corporate bond.
AngloGold Ashanti’s long-term debt increased to $1,371 million at December 31, 2004 compared with $778 million at
December 31, 2003. As at December 31, 2004, AngloGold Ashanti had the following attributable borrowings outstanding:
141
Unsecured loans:
•
$1,008 million is outstanding on the convertible bond (fixed semi-annual coupon of 2.375 percent per annum; the
convertible bond is convertible into ADSs up to February 2009 and is US dollar-based);
•
$367 million is outstanding on the corporate bond (fixed semi-annual coupon of 10.5 percent per annum; the corporate
bond is repayable on August 28, 2008 and is rand-based);
•
$265 million is repayable under the $600 million syndicated loan facility (interest charged at LIBOR plus 0.7 percent per
annum; the loan is repayable in February 2005 and is US dollar-based);
•
A loan of $16 million from RMB International (Dublin) Limited (interest charged at LIBOR plus 0.82 percent per annum;
the loan is of a short-term nature and has no fixed repayment date and is US dollar-based);
•
$10 million is repayable under the Iduapriem syndicated loan facility (interest charged at LIBOR plus 2 percent per
annum; the loan is repayable semi-annually and is US dollar-based);
•
A loan of $5 million from Bank Belgolaise (interest charged at LIBOR plus 1.5 percent per annum; the loan is repayable in
24 equal monthly installments commencing October 2005 and is US dollar-based); and
•
A loan of $1 million from Precious Fields Estate Company Limited (annuity based repayments expiring October 2006 and
is US dollar-based).
Secured loans:
•
$13 million is repayable under the Senstar Capital Corporation loans (interest charged at an average rate of 6.91 percent
per annum, the loans are repayable in monthly installments terminating in November 2009, are US dollar-based and the
equipment financed is used as security for these loans); and
•
$1 million is repayable under the Geita syndicated project finance loan (interest charged at LIBOR plus 1.95 percent per
annum, the loan is repayable by June 2005, is US dollar-based and the loan is secured by a fixed and floating charge
over the project assets and a pledge over the shares of the project company).
On February 27, 2004, AngloGold Holdings plc, a wholly-owned subsidiary of AngloGold Ashanti, issued $1,000,000,000
2.375 percent guaranteed Convertible Bonds due 2009, (the “Convertible Bonds”), convertible into ADSs and guaranteed by
AngloGold Ashanti. Subject to certain restrictions, holders of Convertible Bonds are entitled to convert each Convertible Bond
into one AngloGold Ashanti ADS at the then applicable conversion price, at any time from April 8, 2004 to February 20, 2009,
or, if the Convertible Bonds are called for redemption earlier than February 27, 2009, the seventh business day prior to the
date of early redemption. If the Convertible Bonds have not been converted by February 20, 2009, they will be redeemed at par
on February 27, 2009. AngloGold Holdings plc has the option of calling an early redemption of all the Convertible Bonds
3 years after their issuance, if the price o f the ADSs exceeds 130 percent of the conversion price for more than 20 days during
any period of 30 consecutive trading days. The initial conversion price for the Convertible Bonds is $65.00 per ADS. The
conversion premium to the reference volume weighted average price of the ADSs on the New York stock exchange of
$40.625 on February 19, 2004, when the issue of the Convertible Bonds was announced, was 60 percent. If all holders of
Convertible Bonds exercise the option to convert their Convertible Bonds into ADSs and assuming no adjustments are made to
the initial conversion price, up to 15,384,615 new ADSs will be issued. The conversion ratio is subject to adjustment for
various corporate events, including share splits and capital distributions. The proceeds of the issue, after payment of expenses,
were utilized by AngloGold Ashanti to refinance amounts outstanding under credit facilities, to meet transaction costs in
connection with the Business Combination and for general corporate purposes, including planned capital expenditure.
As at December 31, 2004, AngloGold Ashanti’s total long-term debt, including the short-term portion maturing within 2005, was
made up as follows:
$ (million)
Unsecured loans
1,672
Secured loans
14
Total
1,686
Less: Short-term maturities
315
Long-term debt
1,371
142
Debt repayments are scheduled as follows:
$ (million)
2005
315
2006
6
2007
9
2008
355
2009
1,000
2010
1
Total
1,686
AngloGold Ashanti currently expects to repay debt maturing in 2005 from existing cash resources, cash generated by
operations and other debt facilities, with the $600 million facility which matures in February 2005 to be repaid with the proceeds
of the $700 million three year facility as entered into in January 2005 and, potentially, future debt facilities and debt
instruments.
At December 31, 2004 the currencies in which the borrowings were denominated were as follows:
$ (million)
United States dollars
1,319
South African rands
367
Australian dollars
-
Total
1,686
Repayments of short-term and long-term borrowings amounted to $547 million and $200 million, respectively, in 2004.
At December 31, 2004 and June 30, 2005, AngloGold Ashanti had the following undrawn borrowing facilities:
at December 31, 2004
at June 30, 2005
$ (million)
$ (million)
Syndicated loan ($600 million) – US dollar
(1)
335 -
Australia and New Zealand Banking Group Limited – Australian dollar
39
38
Syndicated loan ($700 million) – US dollar
(2)
- 370
Total
374 408
(1)
Expired February 2005.
(2)
Expires January 2008.
AngloGold Ashanti had no other committed lines of credit as of December 31, 2004 or June 30, 2005.
On October 14, 2002, AngloGold Ashanti arranged a loan facility of A$50 million with the Australia and New Zealand Banking
Group Limited, at 0.35 percent over the Bank Bill Swap Reference Rate. This facility, originally repayable by September 2003,
was extended to September 2005. There was $nil million drawn under this facility as at December 31, 2004 and the undrawn
portion of the facility as at June 30, 2005 was $38 million which is reflected in the table above.
AngloGold Ashanti’s acquisitions during the past three years, including the acquisition of an additional 46.25 percent interest in
Cerro Vanguardia in 2002, were financed with debt. As a result of the decrease in cash from $479 million as at
December 31, 2003 to $299 million as at December 31, 2004 resulting from operating, investing and financing activities,
AngloGold Ashanti reported total net indebtedness of $1,387 million (net of cash) at December 31, 2004, compared to
$630 million as at December 31, 2003.
143
On January 27, 2005 AngloGold Ashanti announced the signing of a new three year loan facility agreement for $700 million to
replace the existing $600 million facility that matured in February 2005. The facility was used to repay the maturing facility of
$600 million ($265 million drawn as at December 31, 2004) and is available for general corporate purposes. The new facility
reduces the group's cost of borrowing, as the borrowing margin over LIBOR reduced from 70 basis points to 40 basis points.
The facility was arranged with a number of AngloGold Ashanti's relationship banks.
Capital expenditure is expected to be $655 million in 2005, mainly at the South African, South American and former Ashanti
operations.
As at December 31, 2004 AngloGold Ashanti estimated its total cash on December 31, 2005 to be as follows:
Cash balance
(in millions)
At
December 31, 2004
$
Operating
activities
$
Investing
activities
$
Financing
activities
$
Translation
(1)
$
Forecast balance at
December 31, 2005
(2)
$
South Africa
351,365
21250
(280)1,165
47
1,143
53
Argentina
126
5
103
4
100
5
Australia
272
10
215
9
172
8
Brazil
230
8
178
7
173
8
Ghana
281
10
314
13
209
10
Guinea
145
5
127
5
44
2
Mali
321
12
236
10
181
8
Namibia
51
2
36
1
28
1
Tanzania
137
5
233
9
208
10
USA
95
4
106
4
106
5
Zimbabwe
-
-
4
-
Other, including Corporate and Non-gold producing
subsidiaries
13
-
8
-
6
-
3,036
2,721
2,374
Less : Equity method investments included in above
(321)
(11)
(236)
(9)
(223)
(10)
Total revenues
2,715
100
2,485
100
2,151
100
125
In 2006, 50 percent of AngloGold Ashanti’s total consolidated revenues were derived from its operations in South Africa,
compared to 47 percent in 2005, mainly as a result of the increase in the rand gold price and the effect of hedging on the
South African operations. South Africa produced 45 percent of the global production and had hedges in place that were not
as affected by the increased gold price as other locations.
In 2005, 47 percent of AngloGold Ashanti’s total consolidated revenues were derived from its operations in South Africa,
compared to 53 percent in 2004, mainly as a result of a 6 percent decrease in gold production in South Africa from 2004 to
2005, as well as the full year impact of additional revenues generated arising from the business combination with Ashanti.
Assets
As at December 31
(in millions)
2006
$
percent
2005
$
percent
2004
$
percent
Geographical area data
Total segment assets
South Africa
3,093
33
3,019
33
3,431
37
Argentina 254
3
248
3
260
3
Australia 805
8
737
8
711
8
Brazil 544
6
371
4
340
4
Ghana 2,058
21
2,104
23
2,126
22
Guinea 357
4
349
4
325
3
Mali 280
(1)
(44)3 309
Argentina(1)
364 344
55(1)
(5)4
(25)Namibia 64
1
51
-
6138
Australia
21
25
(48)
-
(1)Tanzania 1,382
(3)
Brazil15
491,281
90
(86)14
(26)1,065
11
USA 507
5
429
5
408
4
Other, including Corporate, Assets held for
sale and Non-gold producing subsidiaries
169
1
215
2
348
4
Total segment assets
9,513
100
9,113
100
9,396
100
(1)
Investment held.
At December 31, 2006, 33 percent of AngloGold Ashanti’s total assets were located in South Africa compared with
33 percent at the end of 2005. Operations outside of South Africa collectively accounted for approximately 67 percent of
AngloGold Ashanti’s total assets at December 31, 2006 compared to 67 percent at the end of the same period in 2005.
At December 31, 2005, 33 percent of AngloGold Ashanti’s total assets were located in South Africa compared with
37 percent at the end of 2004. Operations outside of South Africa collectively accounted for approximately 67 percent of
AngloGold Ashanti’s total assets at December 31, 2005 compared to 63 percent at the end of the same period in 2004.
126
Comparison of financial performance in 2006 with 2005
Revenues
Revenues from product sales and other income increased by $230 million from $2,485 million in 2005 to $2,715 million in
2006, representing a 10 percent increase over the period. This increase was primarily due to the increase in the spot price
of gold in 2006. The average spot price of gold was $604 per ounce during 2006, $159 per ounce, or 36 percent, higher
than $445 per ounce, the average spot price of gold in 2005. The majority of product sales consisted of US dollar-
denominated gold sales.
Total revenues from the South African operations increased by $200 million to $1,365 million from $1,165 million realized
in 2005, a 17 percent increase, mainly as a result of the higher gold price. The increase in revenues was partly offset by
the reduced gold production at the South African operations as both volumes (2,554,000 ounces in 2006 compared to
2,676,000 ounces in 2005) and grade decreased.
Total revenues generated by Cerro Vanguardia, the Argentinean operation increased marginally from $103 million in 2005
to $126 million in 2006 on flat volumes. Volumes of ore processed increased, but gold produced only increased marginally
by 4,000 ounces due to grade yield declines from 7.7 grammes per tonne to 7.29 grammes per tonne.
The Australian operation at Sunrise Dam increased production to 465,000 ounces from 455,000 ounces in 2005. Average
recovered grade declined by 8 percent which was offset by increased tonnage processed from the underground operation.
Total revenues increased from $215 million in 2005 to $272 million in 2006.
The two operations in Brazil produced 339,000 attributable ounces. Year-on-year volumes of ore processed increased
with an increase in average grades recovered resulting in total revenues of $230 million in 2006 compared to $178 million
in 2005.
Total revenues generated from operations situated in Ghana amounted to $281 million in 2006, compared to $314 million
in 2005.
Total revenues generated in Guinea amounted to $145 million in 2006 compared to $127 million in 2005.
Tanzania recorded total revenues of $137 million in 2006 compared to $233 million in 2005 due to the reduction in
production of nearly 50 percent due to delays in the cutback at the Nyankanga pit and weather related issues.
Production costs
Production costs decreased from $1,638 million in 2005 to $1,525 million in 2006, which represents a $113 million, or
7 percent decrease. In South Africa, production costs decreased by $143 million to $669 million in 2006 from $812 million
in 2005 primarily due to a continued focus on cost saving initiatives assisted by the weakening of the South African rand
relative to the US dollar. About 44 percent of AngloGold Ashanti’s production costs were denominated in South African
rands in 2006.
Production costs recorded from operations situated in Brazil increased from $87 million in 2005 to $101 million in 2006
primarily due to the strengthening of the Brazilian real relative to the US dollar.
Exploration costs
Exploration costs increased to $58 million in 2006 from $44 million in 2005. During 2006, exploration activities in new
areas were primarily focused on the Tropicana joint venture in Western Australia, in Colombia and the Democratic
Republic of Congo. Joint ventures and partnerships with other companies facilitated additional exploration activities in
Russia, China, Laos and the Philippines. For a discussion of AngloGold Ashanti’s exploration activities in 2006, see
“Item 4B.: Business overview – Global exploration”.
Related party transactions
Related party transactions in 2006 amounted to $8 million compared with $41 million in 2005 mainly due to the change in
shareholding by Anglo American plc, which divested of approximately 20 percent of its holding in April 2006, resulting in
fewer entities fulfilling the related party definition due to the relationship changing from a subsidiary of Anglo American plc
127
to an associate of Anglo American plc. The Company continues to transact with Anglo American entities when price,
service and quality factors support this. For a detailed discussion of related party transactions, see “Item 5B.: Liquidity and
capital resources – Related party transactions”.
General and administrative
General and administrative expenses increased from $71 million in 2005 to $140 million in 2006, mainly due to $60 million
share based payment expense included in 2006 compared to $2 million in 2005.
Royalties
Royalties paid by AngloGold Ashanti increased from $39 million in 2005 to $59 million paid in 2006 primarily due to higher
spot prices, with royalties in Australia, Argentina, Tanzania and the USA amounting to $7 million, $11 million, $6 million
and $2 million, respectively, in 2006 compared with $5 million, $8 million, $7 million and $4 million, respectively, in 2005.
Royalties paid in Ghana and Guinea amounted to $32 million in 2006 compared to $15 million in 2005. Australian royalties
are payable to the government as specified in the relevant legislation in each State or Territory based on ounces produced.
In Argentina, royalties are payable to Fomicruz, a State owned company in the Santa Cruz Province, being the minority
shareholder of the Cerro Vanguardia operation calculated as a percentage of revenues. In Ghana, royalties are payable to
the government at a fixed rate of 3 percent per annum base d on revenue, as agreed to under the Stability Agreement
entered into with AngloGold as part of the AngloGold Ashanti business combination. In Guinea, royalties are paid to the
government, Union Miniere and the International Finance Corporation calculated as a percentage of revenues. In
Tanzania, royalties for Geita, are payable to the Tanzanian government calculated as a percentage of revenues. In the
USA, royalties are payable to a small number of private claim holders based on ounces produced and percentage
ownership of the specific claim being mined.
Market development costs
Market development costs increased from $13 million in 2005 to $16 million in 2006. AngloGold Ashanti remains a member
of the World Gold Council (WGC) and through its membership receives assistance in all its marketing endeavours. For a
detailed discussion on market development see “Item 4B.: Business overview – Gold market development”.
Depreciation, depletion and amortization
Depreciation, depletion and amortization expense increased by $106 million or 18 percent, to $699 million in 2006 when
compared to $593 million recorded in 2005. In South Africa, depreciation, depletion and amortization expense increased
from $248 million in 2005 to $324 million in 2006, mainly due to the impact of Moab Khotsong mine coming into
commercial production from January 1, 2006.
Impairment of assets
In 2006, AngloGold Ashanti recorded impairments amounting to $6 million. These related to the impairment and write-off of
various minor tangible assets and equipment.
In 2005, AngloGold Ashanti recorded impairments amounting to $141 million. These related to Bibiani in Ghana of
$41 million; in South Africa – mine development costs of $6 million were impaired as a review of certain properties and
access development identified that they will not generate future cash flows. The tax rate concession which was granted by
the government of Ghana at a rate of 30 percent in negotiations for the Ashanti business combination in 2004 amounting to
$20 million was fully impaired during 2005 as the corporate tax rate in Ghana was revised down to 25 percent. Due to a
change in intention to exploit certain properties in South Africa, acquired at the formation of AngloGold, AngloGold Ashanti
recorded an impairment of $74 million in 2005.
Interest expense
Interest expense decreased by $3 million from $80 million recorded in 2005 to $77 million in 2006. The decrease in
interest expense from 2005 was mainly due to higher cash resources available as a result of the higher average gold price
in the year and the effects of the equity raising completed in April 2006. Mostly all of AngloGold Ashanti’s debt (exclusive
of the rand denominated corporate bond and local South African borrowings) was denominated in US dollars in 2006.
128
Accretion expense
Accretion expense of $13 million was recorded in 2006 compared with $5 million in 2005. Accretion relates to the
unwinding of discounted future reclamation obligations to present values and increases the reclamation obligations to its
future estimated payout.
Employment severance cost
Employment severance costs decreased to $22 million in 2006 from $26 million in 2005. The 2006 expense included
retrenchment costs of $7 million in the South African region (at Great Noligwa, Kopanang, Tau Lekoa, TauTona and
Mponeng) and $15 million in Ghana (at Obuasi) due to a planned reduction in workforce.
Profit on sale of assets, loans and indirect taxes
A profit on sale of assets of $36 million recorded in 2006 compared to a profit of $3 million recorded in 2005. This consists
mainly of profit on the disposal of land, mineral rights and exploration properties, the recovery of loans previously written off
and the reassessment of indirect taxes payable in Tanzania.
Non-hedge derivative loss
A loss on non-hedge derivatives of $208 million was recorded in 2006 compared to a loss of $142 million in 2005 as a
direct result of increase in the gold price. This relates to the use of commodity instruments that are not classified as
hedging instruments for financial reporting purposes. Non-hedge derivatives recorded for the year ended
December 31, 2006 and 2005 included:
Year ended December 31,
2006 2005
(in US Dollars, millions)
Gains on realized non-hedge derivatives
(383)
(148)
Loss on unrealized non-hedge derivatives
591
277
Interest rate swap
-
2713
GhanaNet loss
208
142
Other operating costs and expenses
Other operating costs and expenses, consisting of provision for loss on future deliveries of other commodities and
unrealized loss on other commodity physical borrowings increased from $9 million in 2005 to $16 million in 2006, mainly
due to an increase in the price of other commodities.
Loss from continuing operations before income tax, equity income, minority interest and cumulative effect
of accounting change
For the foregoing reasons, in 2006, loss before equity income and income tax amounted to $96 million compared to a loss
of $363 million in 2005.
Equity income in affiliates
Equity income in equity method investments increased from $39 million in 2005 to $99 million in 2006, mainly as a result of
an increase in the operations at Yatela and Sadiola mines in Mali, which reported attributable results of $26 million and
$28 million, respectively, in 2006 compared to $5 million and $(1) million, respectively, in 2005.
Taxation expense/benefit
A net taxation expense of $122 million was recorded in 2006 compared to a net tax benefit of $121 million recorded in
2005. Charges for current tax in 2006 amounted to $156 million compared to $70 million in 2005. Charges for deferred tax
in 2006 amounted to a net tax benefit of $34 million compared to a net tax benefit of $191 million in 2005. The increase in
the current taxation change over 2005 is mainly as a result of a reduced net loss, an increase in the effective taxation
rates, the effect of non-allowable deductions mainly related to hedge losses in non-taxable jurisdictions, BEE transactions
129
and the effect of certain foreign entities exiting their tax holidays. Deferred tax in 2006 include a tax benefit of $21 million
resulting from an extension of tax losses granted by the Ghanaian Taxation Authorities which would have been forfeited
during the current year as well as a tax expense at $65 million as a result of a change to the estimated deferred tax rate in
South Africa, reflecting the impact of the South African mining tax formula to the decrease in the earnings at the operations
in that country.
Cumulative effect of accounting change
Cumulative effect of accounting change was $nil in 2006 compared to $22 million in 2005.
Net loss
As a result of the factors discussed above, net loss decreased by $150 million from $292 million net loss recorded in 2005
to a net loss of $142 million in 2006.
Cut-off adjustments
On September 13, 2006, the SEC staff published Staff Accounting Bulletin (SAB) No. 108, “Considering the Effects of
Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108
(SAB Topic 1.N) addresses quantifying the financial statement effects of misstatements, specifically, how the effects of
prior year uncorrected errors must be considered in quantifying misstatements in the current year financial statements.
As part of the 2006 year end financial statement close process the Company quantified the balance sheet impact and
determined that it would only have a material effect in the reporting of “Payroll and related benefits”, which is separately
identified on the face of the balance sheet for all years presented. The other accounts that were affected are Tangible
Assets – Mine development costs; Inventories – Gold in process; Deferred taxation; Cash and cash equivalents; Trade
accounts payable and Payroll and related benefits.
The Company previously considered the above errors to be immaterial under the rollover method and evaluated the
misstatement against the current year financial statements under both the rollover and iron curtain methods.
In accordance with the transition provisions provided in SAB 108 the cumulative effect of applying SAB 108 was recorded
as an adjustment to opening retained earnings and is summarized below:
(in millions)
$
Assets
Tangible Assets – Mine development costs
3 (increase)
Inventories – Gold in process
1 (increase)
Deferred taxation
5
(increase)
Trade receivables
5
(decrease)
Liabilities
Trade accounts payable
3
72(increase)
(108)Payroll and related benefits
(2)10
-(increase)
(35)
GuineaOther creditors
2
(increase)
Retained earnings
11
(decrease)
130
Comparison of financial performance in 2005 with 2004
Revenues
Revenues from product sales and other income increased by $334 million from $2,151 million in 2004 to $2,485 million in
2005, representing a 16 percent increase over the period. This increase was primarily due to the increase in the spot price
of gold in 2005 as well as the contribution to revenue for the full twelve month period from operations acquired as part of
the completed AngloGold Ashanti business combination, whereas only eight months were recorded in 2004. The average
spot price of gold was $445 per ounce during 2005, $36 per ounce, or 9 percent, higher than $409 per ounce, the average
spot price of gold in 2004. The majority of product sales consisted of US dollar-denominated gold sales.
Total revenues from the South African operations increased by $22 million to $1,165 million from $1,143 million realized in
2004, a 2 percent increase, mainly as a result of the higher gold price. The increase in revenues was partly offset by the
anticipated reduced gold production at the South African operations as both volumes (6 percent lower in 2005 compared
with 2004) and grade decreased.
Total revenues generated by Cerro Vanguardia, the Argentinean operation increased marginally from $100 million in 2004
to $103 million in 2005 on flat volumes. Although volumes of ore processed declined, gold produced remained unchanged
due to an increase in grade yield.
The Australian operation at Sunrise Dam increased production to 455,000 ounces from 410,000 ounces in 2004. In
addition, average grade increased marginally as surface grades were supplemented by increasing tonnage from the
underground operation and as a result, total revenues increased from $172 million in 2004 to $215 million in 2005.
The two operations in Brazil produced 346,000 attributable ounces. Year-on-year volumes of ore processed increased
which was offset by a reduction in average grades resulting in total revenues of $178 million in 2005 compared to
$173 million in 2004.
Total revenues generated from operations situated in Ghana acquired as part of the AngloGold Ashanti business
combination amounted to $314 million in 2005, compared to $209 million in 2004. The three mines produced
680,000 ounces of attributable gold. Production only improved modestly during the year and was hampered by
inadequately drilled and developed reserves. Processes have been put in place to improve this situation over the coming
years.
Total revenues generated in Guinea acquired as part of the AngloGold Ashanti business combination amounted to
$127 million in 2005 compared to $44 million in 2004. The mine at Siguiri produced 246,000 ounces of attributable gold.
The operations transitioned from heap leach processing to carbon-in-pulp operation allowing the mine to exploit previously
untreatable ore.
Tanzania recorded total revenues of $233 million in 2005 compared to $208 million in 2004. Production decreased to
613,000 ounces, as ore exposed in previous stripping activities was depleted.
Production costs
Production costs increased from $1,340 million in 2004 to $1,638 million in 2005, which represents a $298 million, or
22 percent increase. In South Africa, production costs increased by $24 million to $812 million in 2005 from $788 million in
2004 primarily due to the strengthening of the South African rand relative to the US dollar. About 50 percent of AngloGold
Ashanti’s production costs were denominated in South African rands in 2005. Production costs recorded from operations
situated in Ghana, Guinea and Zimbabwe acquired as part of the AngloGold Ashanti business combination contributed
$325 million to production costs in 2005 compared to $189 million in 2004.
Production costs recorded by Geita in Tanzania increased from $109 million in 2004 to $189 million in 2005 mainly due to
the impact of the additional 50 percent acquired in Geita as part the AngloGold Ashanti business combination, which
resulted in Geita being accounted for as a subsidiary of AngloGold Ashanti from April 26, 2004.
131
Exploration costs
Exploration costs remained unchanged at $44 million in 2005. During 2005, exploration continued to focus around the
operations in the countries in which AngloGold Ashanti has operations namely, Argentina, Australia, Brazil, Ghana,
Guinea, Tanzania, Mali, Namibia, South Africa and the USA. In addition, exploration activities were pursued in areas in the
Democratic Republic of Congo, Colombia, Alaska, China, Philippines, Mongolia and Russia. During 2005 exploration
activities in Peru were terminated and the Canadian prospects were converted to a royalty basis. For a discussion of
AngloGold Ashanti’s exploration activities in 2005, see “Item 4B.: Business overview – Global exploration”.
Related party transactions
Related party transactions in 2005 amounted to $41 million compared with $45 million in 2004 mainly due to lower contract
work generated by development activities. For a detailed discussion of related party transactions, see “Item 5B.: Liquidity
and capital resources – Related party transactions”.
General and administrative
General and administrative expenses increased from $58 million in 2004 to $71 million in 2005, mainly due to the full year
impact of the Ashanti business combination, integration costs in connection with the AngloGold Ashanti business
combination and the strengthening of the South African rand relative to the US dollar.
Royalties
Royalties paid by AngloGold Ashanti increased from $27 million in 2004 to $39 million paid in 2005, with royalties in
Australia, Argentina, Tanzania and the USA amounting to $5 million, $8 million, $7 million and $4 million, respectively, in
2005 compared with $4 million, $8 million, $5 million and $3 million, respectively, in 2004. Royalties paid in Ghana and
Guinea amounted to $15 million in 2005 compared to $7 million in 2004. Australian royalties are payable to the
government as specified in the relevant legislation in each State or Territory based on ounces produced. In Argentina,
royalties are payable to Fomicruz, a State owned company in the Santa Cruz Province, being the minority shareholder of
the Cerro Vanguardia operation calculated as a percentage of revenues. In Ghana, royalties are payable to the
government at a fixed rate of 3 percent per annum based on revenue, as agreed to under the S tability Agreement entered
into with AngloGold as part of the AngloGold Ashanti business combination. In Guinea, royalties are paid to the
government, Union Miniere and the International Finance Corporation calculated as a percentage of revenues. In
Tanzania, royalties for Geita, are payable to the Tanzanian government calculated as a percentage of revenues. In the
USA, royalties are payable to a small number of private claim holders based on ounces produced and percentage
ownership of the specific claim being mined.
Market development costs
Market development costs decreased from $15 million in 2004 to $13 million in 2005. During 2005, approximately
66 percent (2004: 66 percent) of these costs were spent through the World Gold Council (WGC). For a detailed discussion
on market development see “Item 4B.: Business overview – Gold market development”.
Depreciation, depletion and amortization
Depreciation, depletion and amortization expense increased by $148 million or 33 percent, to $593 million in 2005 when
compared to $445 million recorded in 2004. In South Africa, depreciation, depletion and amortization expense increased
from $192 million in 2004 to $248 million in 2005, mainly due to the impact of currency movements. Depreciation,
depletion and amortization expense from operations situated in Ghana and Guinea acquired since April 2004 as part of the
AngloGold Ashanti business combination amounted to $152 million in 2005 compared to $80 million in 2004 mainly as a
result of a full year’s costs. Tanzania recorded depreciation, depletion and amortization expense of $56 million in 2005
compared to $47 million in 2004. Other operating units’ depreciation, depletion and amortization expense was generally in
line with that of the prior year.
132
Impairment of assets
In 2005, AngloGold Ashanti recorded impairments amounting to $141 million. These related to the Bibiani mine in Ghana
of $41 million; in South Africa – mine development costs of $6 million were impaired as a review of certain properties and
access development identified that they will not generate future cash flows. The tax rate concession which was granted by
the government of Ghana at a rate of 30 percent in negotiations for the Ashanti business combination in 2004 amounting to
$20 million was fully impaired during 2005 as the corporate tax rate in Ghana was revised down to 25 percent. Due to a
change in intention to exploit certain properties in South Africa, acquired at the formation of AngloGold, AngloGold Ashanti
recorded an impairment of $74 million in 2005.
In 2004, AngloGold Ashanti recorded an impairment of assets of $3 million relating mainly to goodwill held in its subsidiary,
Gold Avenue and mining assets and mineral rights in Australia.
Interest expense
Interest expense increased by $13 million from $67 million recorded in 2004 to $80 million in 2005. The increase in
interest expense from 2004 was mainly due to finance charges paid on the issuance of the $1,000,000,000 2.375 percent
convertible bonds in February 2004 and increased bank borrowings during 2005. All of AngloGold Ashanti’s debt
(exclusive of the rand denominated corporate bond and local South African borrowings) was denominated in US dollars in
2005.
Accretion expense
Accretion expense of $5 million was recorded in 2005 compared with $8 million in 2004. Accretion relates to the unwinding
of discounted future reclamation obligations to present values and increases the reclamation obligations to its future
estimated payout.
Employment severance cost
Employment severance costs increased to $26 million in 2005 from $7 million in 2004. The 2005 expense generally related
to retrenchments in the South African region reflecting mainly rationalization of operations.
Profit on sale of assets, loans and indirect taxes
The profit on sale of assets of $3 million recorded in 2005 relates to the disposal of various exploration properties. The
profit on sale of assets of $14 million recorded in 2004 relates mainly to the sale of the Western Tanami assets, Tanami
Gold Mine and Union Reefs mine in Australia and various mineral rights and exploration properties in South America.
Mining contractor termination costs
During 2005, the operations at Geita in Tanzania transitioned from contractor mining to owner-mining. The company
incurred cancellation costs of $9 million in this regard.
Non-hedge derivative loss
A loss on non-hedge derivatives of $142 million was recorded in 2005 compared to a loss of $123 million in 2004 relating
to the use of commodity instruments that are not classified as hedging instruments for financial reporting purposes. Non-
hedge derivatives recorded for the year ended December 31, 2005 and 2004 included:
Year ended December 31,
2005 2004
(in US Dollars, millions)
Gains on realized non-hedge derivatives
(148)
(58)
Loss on unrealized non-hedge derivatives
277
191
Interest rate swap
13
(10)
-Net loss
-142
5123
Namibia133
Other operating costs and expenses
Other operating costs and expenses, consisting of provision for loss on future deliveries of other commodities and
unrealized loss on other commodity physical borrowings increased from $8 million in 2004 to $9 million in 2005.
Loss from continuing operations before income tax, equity income, minority interest and cumulative effect
of accounting change
For the foregoing reasons, in 2005, loss before equity income and income tax amounted to $363 million compared to a
loss of $25 million in 2004.
Equity income in affiliates
Equity income in equity method investments increased from $23 million in 2004 to $39 million in 2005, mainly as a result of
the increased earnings of operations in Mali during 2005.
Taxation benefit
Taxation decreased by $11 million from a net tax benefit of $132 million recorded in 2004, to a net tax benefit of
$121 million in 2005. Charges for current tax in 2005 amounted to $70 million compared to $68 million in 2004. Charges for
current tax in 2005 included an under provision of $53 million in estimated tax payable. Charges for deferred tax in 2005
amounted to a net tax benefit of $191 million compared to a net tax benefit of $200 million in 2004. Deferred tax in 2005
include a tax benefit of $20 million as a result of a change to the estimated deferred tax rate, in South Africa, reflecting the
impact of the South African mining tax formula to the decrease in the earnings of the operations in that country and a
change in the corporate tax rate in Ghana from 28 percent to 25 percent.
Cumulative effect of accounting change
AngloGold Ashanti adopted the provisions of SFAS 87, “Employers’ Accounting for Pensions” and SFAS 106, “Employers’
Accounting for Postretirement Benefits Other Than Pensions”, with effect from January 1, 2004. This resulted in a
cumulative change in accounting policy effect of $22 million (net of provision for deferred taxation) reflected in 2005. This
change was made as AngloGold Ashanti believes that elimination of the permitted pension and post-retirement benefit
corridor, as allowed by SFAS 87 and SFAS 106 will result in more accurate financial information.
Net income/loss
As a result of the factors discussed above, net income decreased by $389 million from $97 million of net income earned in
2004 to a net loss of $292 million in 2005.
5B.
Liquidity and capital resources
Operating activities
2006
Net cash provided by operating activities was $770 million in 2006, 122 percent higher than the 2005 amount of
$347 million. The increase in net cash provided by operations over that achieved in 2005 is mainly due to the higher
profitability achieved as a result of the increased average gold price in 2006, compared to that in 2005, partially offset by
costs increases.
Net cash outflow from operating working capital items amounted to $32 million in 2006, compared with an outflow of
$13 million in 2005.
A detailed discussion of the movement in net income/loss is included in the comparison of 2006 with 2005 under
“Item 5A: Operating results”.
134
2005
Net cash provided by operating activities was $347 million in 2005, 32 percent lower than the 2004 amount of $513 million.
The decrease in net cash provided by operating activities over 2004 is mainly the result of the decrease in AngloGold
Ashanti’s profitability due to higher costs and expenses offset by the higher unit prices of gold during 2005. A reduction in
taxation paid over 2004, positively impacted cash provided by operating activities in 2005.
Net cash outflow from operating working capital items amounted to $13 million in 2005, compared with an outflow of
$7 million in 2004.
A detailed discussion of the movement in net income/loss is included in the comparison of 2005 with 2004 under
“Item 5A.: Operating results”.
Investing activities
2006
Investing activities in 2006 resulted in a net cash outflow of $611 million compared with a net cash outflow of $624 million
in 2005. The major component of cash outflows was in additions to property, plants and equipment which included capital
expenditure of $811 million, compared to $710 million in 2005, with the major capital projects at the Cuiba mine in Brazil,
the Sunrise Dam and Boddington mines in Australia.
2005
Investing activities in 2005 resulted in a net cash outflow of $624 million compared with a net cash outflow of $995 million
in 2004. This decrease in cash outflows was the net result of additions to property, plants and equipment which included
capital expenditure of $710 million, compared to $571 million in 2004, as a result of major capital projects in Ghana and
Guinea, the purchase of a new mining fleet in Tanzania and the Sunrise Dam underground mining project in Australia.
Investments acquired included a further stake in Trans-Siberian Gold plc at a cost of $15 million, increasing the percentage
holding in the company to 29.9 percent. Cash effects resulting from the restructuring of the AngloGold Ashanti hedge book
amounted to $84 million in 2005.
Financing activities
2006
Net cash generated in financing activities decreased by $81 million from an inflow of $200 million in 2005 to an inflow of
$119 million in 2006. During the year equity issues resulted in an inflow of $512 million, drawdown’s on existing facilities
raised $158 million and during the year debt repayments totaled $552 million.
Dividends paid decreased from $169 million (56 US cents or 350 South African cents per share) in 2005 to $132 million
(39 US cents or 272 South African cents per share) in 2006. AngloGold Ashanti declares interim dividends at the time of
announcing its interim results and declares and pays final dividends in the following year based on the previous year's
results.
2005
Net cash generated in financing activities decreased by $76 million from an inflow of $276 million in 2004 to an inflow of
$200 million in 2005. This net decrease in cash generated in financing activities was the result of reduced borrowings
raised, partly offset by borrowings repaid. Repayments comprised normal scheduled loan repayments in terms of loan
facilities of $23 million, the repayment of the $600 million unsecured syndicated loan facility (which was repayable in
February 2005) amounting to $265 million, the repayment of $15 million under the $700 million unsecured syndicated loan
facility (obtained in February 2005). Proceeds from loans during 2005 included $470 million raised through the new
unsecured syndicated loan facility of $700 million obtained in February 2005. The proceeds, after payment of expenses,
were utilized by AngloGold Ashanti to refinance amounts outstanding under credit f acilities for general corporate purposes,
including planned capital expenditure.
135
Cash effects resulting from the restructuring of the AngloGold Ashanti hedge book amounted to $55 million in 2004. During
2005, the loan facility of A$50 million arranged with the Australia and New Zealand Banking Group Limited, at 0.35 percent
over the Bank Bill Swap Reference Rate on October 14, 2002, and originally repayable by September 2003, was further
extended to September 2006. At December 31, 2005, no amount had been drawn under this facility.
During 2005, AngloGold Ashanti issued 475,538 ordinary shares pursuant to the AngloGold Share Incentive Scheme.
Proceeds from the issuance amounted to $9 million in 2005.
Dividends paid decreased from $198 million (76 US cents or 505 South African cents per share) in 2004 to $169 million
(56 US cents or 350 South African cents per share) in 2005. AngloGold Ashanti declares interim dividends at the time of
announcing its interim results and declares and pays final dividends in the following year based on the previous year's
results.
Liquidity
AngloGold Ashanti’s revenues are derived primarily from the sale of gold produced at its mines. Cash generated by
operating activities is therefore the function of gold produced sold at a specific price. As the market price of gold can
fluctuate widely, this may negatively impact on the profitability of AngloGold Ashanti’s operations and the cash flows
generated by these operations. AngloGold Ashanti uses a number of products, including derivatives, to manage gold price
and foreign exchange risks that arise out of the group’s core business activities to limit the impact on the profitability of
AngloGold Ashanti’s operations and generated cash flows.
AngloGold Ashanti’s cash and cash equivalents increased to $471 million at December 31, 2006 compared with
$196 million at December 31, 2005. In accordance with South African Reserve Bank regulations, cash generated by South
African operations is held in rands. At December 31, 2006, approximately 41 percent of AngloGold Ashanti’s cash and
cash equivalents were held in US dollars, 41 percent were held in South African rands, 9 percent were held in Australian
dollars and 9 percent were held in other currencies.
AngloGold Ashanti’s short-term debt decreased to $33million at December31, 2006 from $160million at
December 31, 2005. The amount of short-term debt is the portion of long-term debt that falls due in 2007. Included in the
short-term debt at December 31, 2006, was:
·
the fixed semi-annual coupon of 2.375 percent payable on a US dollar-based convertible bond; and
·
the fixed semi-annual coupon of 10.50 percent payable on a rand-based corporate bond.
AngloGold Ashanti’s long-term debt decreased to $1,472 million at December 31, 2006 compared with $1,779 million at
December 31, 2005. As at December 31, 2006, AngloGold Ashanti had the following attributable borrowings outstanding:
Unsecured loans:
·
$1,008 million is outstanding on the convertible bond (fixed semi-annual coupon of 2.375 percent per annum; the
convertible bond is convertible into ADSs up to February 2009 and is US dollar-based);
·
$296 million is outstanding on the corporate bond (fixed semi-annual coupon of 10.5 percent per annum; the
corporate bond is repayable on August 28, 2008 and is rand-based);
·
$181 million is repayable under the $700 million syndicated loan facility (interest charged at LIBOR plus 0.4 percent
per annum; the loan is repayable in January 2008 and is US dollar-based);
·
A loan of $2 million from Bank Belgolaise (interest charged at LIBOR plus 1.5 percent per annum; the loan is
repayable in 24 equal monthly installments commencing October 2005 and is US dollar-based); and
·
Bank overdraft of $8 million bearing interest at variable rates and is Ghanaian cedi based.
Secured loans:
·
$8 million is repayable under the Senstar Capital Corporation loans (interest charged at an average rate of
6.77 percent per annum, the loans are repayable in monthly installments terminating in November 2009, are
US dollar-based and the equipment financed is used as security for these loans);
136
·
$2 million is repayable to Terex Africa for equipment financed (interest charged at an average rate of 9 percent per
annum, the loan is repayable in January 2008 and is US dollar-based and the equipment financed is used as security
for this loans).
As at December 31, 2006, AngloGold Ashanti’s total long-term debt, including the short-term portion maturing within 2007,
was made up as follows:
$ (million)
Unsecured loans
1,495
Secured loans
10
Total
1,505
Less: Short-term maturities
33
Long-term debt
1,472
Debt repayments are scheduled as follows:
$ (million)
2007
33
2008
471
2009
1,001
Total
1,505
AngloGold Ashanti currently expects to repay debt maturing in 2007 from existing cash resources, cash generated by
operations and other debt facilities, future debt facilities and debt instruments.
At December 31, 2006 the currencies in which the borrowings were denominated were as follows:
$ (million)
United States dollars
1,201
South African rands
296
Ghanaian cedi
8
Total
1,505
Repayments of short-term and long-term borrowings amounted to $134 million and $418 million, respectively, in 2006.
At December 31, 2006, AngloGold Ashanti had the following undrawn under its borrowing facilities:
$ (million)
Syndicated loan ($700 million) – US dollar
(1)
520
FirstRand Bank Limited – US dollar
50
ABSA Bank Limited – US Dollar
42
Nedbank Limited – US Dollar
2
Standard Bank of South Africa Limited – Rand
37
FirstRand Bank Limited – Rand
31
Nedbank Limited – Rand
7
ABSA Bank Limited – Rand
4
8
(1)
(8)
-Commerzbank AG – Rand
3
TanzaniaABN Amro Bank N.V. – Rand
251
30Australia and New Zealand Banking Group Limited – Australian dollar
(29)79
(22)ABN Amro Bank N.V. – Euro
-7
4Total undrawn
USA
14
10
(10)
(2)
-
12
Other
110
(6)
(36)
(24)
-
44
Total
299
509
(613)
(119)
(2)
74783
(1)
Represents effect on exchange rate changes on cash.
(2)Expires January 2008.
Does not include the full impact of the three year loan facility agreement for $700 million signed in January 2005.137
The management of AngloGold Ashanti believes that workinghad no other committed lines of credit as of December 31, 2006.
Capital expenditure is expected to be around $1,070 million in 2007. AngloGold Ashanti intends to finance these capital is sufficient
expenditures and scheduled debt repayments in 2007 from cash on hand, cash flow from operations and existing credit
facilities.
AngloGold Ashanti, through its executive, management and treasury committees, reviews its short-, medium- and long-
term funding, treasury and liquidity requirements and positions monthly. The board of directors also reviews these on a
quarterly basis at its meetings.
Cash and cash equivalents at December 31, 2006 amounted to $471 million, together with cash budgeted to be generated
from operations in 2007 and the net incremental borrowing facilities available are, in management’s view, considered
adequate to fund operating, mine development and capital expenditure and financing obligations as they fall due for at
least the company’s present requirements.next twelve months.
Capital commitments and contingencies
The following significant capital commitments and contingencies are applicable to AngloGold Ashanti over the periods
shown
below:
•·
Capital commitments and contingent liabilities of AngloGold Ashanti include total contracted capital expenditure of
approximately $148$354 million and total authorized capital expenditure not yet contracted of approximately $658$731 million.
The
expenditure is expected to be financed from existing cash resources, cash generated by operations and debt
facilities.
•·
The Company is involved in a legal dispute regarding the responsibility for water pumping of the Margaret shaft which
belongs to Stilfontein. Following an attempt by DRDGold Limited to liquidate its North West operations and avoid
incurring pumping cost, the Company launched an urgent application against DRDGold Limited and government
departments requesting the court to order the continued pumping of water at the Stilfontein Mines. The cessation of
water pumping is likely to cause flooding in several of the Company’s Vaal River operations. The Department of
Water Affairs and Forestry responded by issuing directives to the mining companies directing that they share the
costs of pumping at the Margaret Shaft. The three mining companies, Simmer and Jack Mines Limited, Harmony
Gold Mining Company Limited and AngloGold Ashanti Limited, are finalizing an arrangement in which responsibility
for the water pumping will be transferred to an independent newly formed company. The Company’s responsibility will
be limited to providing one-third of the start-up capital on loan account and the three mining companies will be
members of the newly formed company. Should the proposed arrangement not be acceptable to the courts and/or the
regulatory authorities, the proposal may have to be amended. Due to this uncertainty, no estimate is made of any
potential liabilities.
·
The Company has given collateralidentified a number of groundwater pollution sites at its current operations in South Africa and has
investigated a number of different technologies and methodologies that could possibly be used to certain bankers for satisfactory contract performanceremediate the
pollution plumes. The viability of the suggested remediation techniques in relation to explorationthe local geologic formation in South Africa
is however unknown. No sites have been remediated and present research and development tenementswork is focused on
several pilot projects to find a solution that will in fact yield satisfactory results in South African conditions. Subject to
the technology being developed as a remediation technique, no reliable estimate can be made for the obligation.
·
Mineração Serra Grande S.A. (MSG), the operator of the Crixas mine in Brazil, has received two tax assessments
from the State of Goiás related to payments of sales taxes on gold deliveries for export namely, one assessment for
the period between February 2004 and mining operationsJune 2005 and the other for the period between July 2005 to May 2006. The
tax authorities maintain that whenever a taxpayer exports gold mined in Australia amountingthe State of Goiás through a branch located
in a different Brazilian state, it must obtain an authorization from the Goiás State Treasury by means of a Special
Regime Agreement (Termo de Acordo re Regime Especial – TARE). The Serra Grande operation is co-owned with
Kinross Gold Corporation. The Company’s attributable share of the first assessment is approximately $29 million. In
May 2006 MSG signed the TARE, which authorized the remittance of gold to $16the Company&# 8217;s branch in Minas Gerais
specifically for export purposes. In November 2006 the administrative council’s second chamber ruled in favor of
Serra Grande and fully canceled the tax liability related to the first period. The State of Goiás may still appeal to the
full board of the State of Goiás tax administrative council. The second assessment was issued by the State of Goiás
in October 2006 on the same grounds as the first assessment, and the Company’s attributable share of the
138
assessment is approximately $18 million. The Company believes both assessments are in violation of federal
legislation on sales taxes.
· Morro Velho is involved in a dispute with tax authorities, as a result of an erroneous duplication of a shipping invoice
between two states in Brazil, tax authorities are claiming that VAT is payable on the second invoice to the amount of
$5 million.
•
· Mineração Serra Grande S.A. received a tax assessment in October 2003 from the State of Minas Gerais related to
sales taxes of $6 million, on gold allegedly returned from the branch in Minas Gerais to the company head office in
the State of Goiás. The tax administrators rejected the Company’s appeal against the assessment. The Company is
now dismissing the case at the judicial sphere.
· AngloGold AshantiOffshore Investments Limited, a wholly owned subsidiary of the Company, has signed asguaranteed 50 percent
($40 million) of the Nufcor International Limited loan facility with FirstRand (Ireland) plc (formerly RMB International
(Dublin) Limited). Nufcor International Limited is accounted for under the equity method.
· The Company has provided surety in favor of the bankerslender in respect of gold loan facilities to wholly-owned subsidiaries
of Oro Group (Proprietary) Limited an affiliate of the Company. The Company has a total maximum liability, in terms
of the suretyships, of R100 million ($14 million). The suretyship agreements have a termination notice period of
90 days. The probability of the non-performance under the suretyships is considered minimal, based on factors of no
prior defaults, being well-established companies and recourse via general notarial bonds over the Yatela loangold stocks of the
subsidiaries of the Oro Group. These bonds should enable the Company to recover the majority of the guaranteed
amount. The Company receives a fee from the associate for $4 million. The Yatela Jointproviding the surety and has assessed the possibility of
Venture is equity accounted. a claim for non-performance.
•
· Pursuant to US environmental regulations, gold mining companies are obligedobligated to close their operations and
rehabilitate
the lands that they mine in accordance with these regulations. AngloGold Ashanti USA has posted rehabilitation
reclamation bonds
aggregating approximately $49 million with various federal and state governmental agencies to cover potential environmental
rehabilitation obligations. AngloGold Ashantiobligations in
amounts aggregating approximately $49 million. The Company has provided a guarantee for these obligations which
would be payable in
the event of AngloGold Ashanti USA not being able to meet their rehabilitation obligations. As at
December 31, 2006 the carrying value of these obligations relating to AngloGold Ashanti USA amounted to
$26 million and is included in the Provision for environmental rehabilitation obligations.in the Company's consolidated balance
sheet. The
environmental obligations will expire upon completion of such rehabilitation. There areis no recourse provisions that would
enable AngloGold Ashanti to recover from third parties any of the amounts paid under the guarantee.
•
Pursuant· The Company has guaranteed all payments and other obligations of AngloGold Ashanti Holdings plc regarding the
issued $1,000,000,000 2.375 percent convertible bonds due 2009. The Company’s obligations regarding the
guarantee are direct, unconditional and unsubordinated.
· A guarantee is provided for Syndicated loan facility amounting to $181 million. AngloGold Ashanti Limited, AngloGold
Offshore Investments Limited and AngloGold American Investments Limited have guaranteed all payments and other
obligations of the assignmentwholly-owned subsidiaries AngloGold Ashanti Holdings plc and AngloGold Ashanti USA Inc.
regarding the $700 million Syndicated loan facility.
· The Company has issued gold delivery guarantees to several counterparty banks in which it guarantees the due
performance of equipment leases to Queenstake Resourcesits subsidiaries AngloGold Ashanti USA Inc., as a result of the sale of JerrittAngloGold South America Limited and Cerro Vanguardia
Canyon effective June 30, 2003, S.A. under their respective gold hedging agreements.
· The Company together with its wholly-owned subsidiary AngloGold Ashanti USA has become secondarily liable inHoldings plc have provided guarantees to
several counterpart banks for the eventhedging commitments of a default byits wholly-owned subsidiary Ashanti Treasury Services
Queenstake Resources USA Inc. in the performance of any of the lessee’s obligations arising under the lease. These
agreements have an approximate term of 3 years and theLimited (ATS). The maximum potential amount of future payments amountsis all moneys due, owing or incurred by ATS under
or pursuant to the hedging agreements. At December 31, 2006 the marked-to-market valuation of the ATS hedge
$1 book was negative $1,047 million.
144
•
· The Company and its wholly-owned subsidiary AngloGold Ashanti Holdings plc have issued hedging guarantees to
several counterpart banks in which they have guaranteed the due performance by Geita Management Company
(GMC), of its obligations under or pursuant to the hedging agreements entered into by GMC, and to the payment of
all money owing or incurred by GMC as and when due. The guarantee shall remain in force until no sum remains to
be paid under the hedging agreements and the Bank has provided a letterirrevocably recovered or received all sums payable to it
; under the Hedging Agreements. The maximum potential amount of credit for $19 million, in favorfuture payments is all moneys due, owing or
incurred by GMC under or pursuant to the Hedging Agreements. At December 31, 2006 the marked-to-market
valuation of the Geita project finance lenders. The letter of
credit may be called if Geita Gold Mining Limited fails to perform under the relevant project finance agreement. See
note 16 to the consolidated financial statements – “Long-term debt – Geita Project Finance”. In this event, Geita Gold
Mining Limited would be liable to AngloGold Ashanti. AngloGold Ashanti acquired an additional 50 percent in Geita as
part of the AngloGold Ashanti Business Combination in April 2004.GMC hedge book was negative $290 million.
•
139
AngloGold Ashanti USA has a potential liability of $2 million in respect of preference claims of a third party for gold
shipments returned by the third party to AngloGold Ashanti USA, which the bankruptcy trustee is claiming should not have
been returned and final shipments that should not have been paid as the third party had filed for protection under
Chapter 11 of the U.S. Bankruptcy Code.
•
During September 2003, AngloGold Offshore Investments Limited, a wholly-owned subsidiary of AngloGold Ashanti,
increased its existing guarantee of 50 percent of the Nufcor International Limited loan facility with RMB Semos
International (Dublin) Limited from $25 million to $40 million. This loan is included in Long-term debt in AngloGold
Ashanti’s consolidated balance sheet as at December 31, 2004.
•
Discussions are continuing with the Malian government as to the validity of tax claims including interest and penalties.
The claims have arisen due to new legislation that is in conflict with AngloGold Ashanti’s prior mining convention stability
agreements and different interpretations of the legislation. The Malian minister of finance has ruled in favor of Sadiola
and Yatela and the amount of claims has been reduced from $6.5 million to $3.2 million. The Sadiola and Yatela Joint
Ventures are equity accounted.
•
Various equipment tax claims in South America amounting to $3 million.
•
AngloGold Ashanti has undertaken to re-export certain gold artefacts temporarily imported into South Africa and whose
custom and value added tax was waived. The company will be required to pay $1 million if it fails to comply with the re-
export arrangements agreed with the South African Revenue Service.
•
AngloGold Ashanti has a potential liability of $10 million relating to certain Value Added Tax (VAT) claims made by the
Tanzanian Revenue Authority. AngloGold Ashanti is contesting these claims and believes the likelihood of a loss to be
remote.
•
The Tanzanian Revenue Authority is claiming $9 million from AngloGold Ashanti relating to stamp duty on the transfer of
property in Tanzania, even though ownership is held by a company registered in another country. AngloGold Ashanti
believes the likelihood of this claim succeeding to be remote.
•
Discussions are underway in respect of a US class action brought against the former Ashanti Goldfields Company Limited
under United States Federal Securities laws in the United States District Court for the Eastern District of New York. The
complaint alleges non-disclosures and misstatements regarding Ashanti Goldfields Company Limited’s hedging position
and hedging program. The plaintiffs contend that the company and the individual defendants’ actions violated Sections
10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated under that Act. Although AngloGold
Ashanti cannot make any assurances regarding the ultimate result of this litigation, it is anticipated that the outcome will
have no material financial effect on the company.
•·
With operations in several countries on several continents, many of which are emerging markets, AngloGold Ashanti
is subject to, and pays annual income
taxes under the various income tax regimes where it operates. Some of these tax regimes are
defined by contractual
agreements with the local government, but others are defined by the general corporate income tax
laws of the country.
The companyCompany has historically filed, and continues to file, all required income tax returns and to pay the
taxes reasonably
determined to be due. In some jurisdictions, tax authorities are yet to complete their assessments
for previous years. The tax rules and regulations in many countries are complex and subject to interpretation. From
time to time the companyCompany is subject to a review of its historic income tax filings and in connection with such reviews, disputes
disputes can arise with the taxing authorities over the interpretation or application of certain rules to the company’sCompany’s business
business conducted within the country involved. Management believes based on information currently to hand, that such tax c ontingencies
contingencies have been adequately
provided for, and as assessments are completed, the companyCompany will make
appropriate adjustments to those estimates
used in determining amounts due.
·
145On March 23, 2006 the Company entered into a Registration Rights Agreement with Anglo South Africa Capital
(Proprietary) Limited (Anglo South Africa) under which the Company has agreed to file U.S. registration statements
for Anglo South Africa’s offer and sale of shares it holds in the Company (each a Demand Registration) if Anglo South
Africa requests the Company to do so. The Company is required to use all reasonable efforts to file a Demand
Registration within 30 days after such a request and to keep it effective for 90 days unless the shares offered
pursuant to it are sold earlier. Further, the Company may not offer, sell, allot or issue any shares or other securities
that are convertible into or exchangeable for, or that represent the right to receive, shares, whether pursuant to U.S.
registration or otherwise, for a 90-day period immediately following the first closing of an offering pursu ant to a
Demand Registration or a shorter period as may be imposed by underwriters in the Demand Registration; except:
(i) in consideration for shares or assets of a company as part of a merger, acquisition, corporate reorganization or
similar transaction, (ii) as required pursuant to the terms governing the 2.375 percent guaranteed convertible bonds
due 2009, issued by AngloGold Ashanti Holdings plc and guaranteed by the Company, and (iii) in connection with any
option, employee bonus, profit sharing, pension, retirement, incentive, savings or similar plan, agreement or award.
The Registration Rights Agreement may be terminated at any time by written consent by each of the parties thereto.
The Registration Rights Agreement shall terminate automatically on the first date on which Anglo South Africa is no
longer an “affiliate” within the meaning of Rule 144 under the United States Securities Act of 1933, as amended.
These capitalIn addition to the above, AngloGold Ashanti has contingent liabilities in respect of certain claims, disputes and guarantees
which are not considered to be material.
Capital commitments
(1)
and contingencies can be summarized as follows:
Expiration per Period
Commitment
(in millions)
Total
amount
$
Less than 1
year
$
1 - 3
years
$
4 - 5
years
$
Over
5
years
$
Capital expenditure
(contracted and not yet contracted)
8061,085
453785
300
-
-
Guarantees
1,351
513
108
499
189
56
Guarantees
110
48
12
10
40231
Standby letters of credit
19-
19-
–-
–-
–-
Other commercial commitments
2863
2163
7-
–-
–-
Line of credit
–
–
–
–
–
Total
9632,499
5411,361
127408
199499
96231
(1)
Including commitments through contractual arrangements with equity accounted joint ventures.
Derivatives accounted for at fair value
In the normal course of its operations, the group is exposed to gold price, currency, interest rate, liquidity and credit risks.
In order to manage these risks, the group may enter into transactions that make use of both on- and off-balance sheet
derivatives. The group does not acquire, hold or issue derivatives for economic trading purposes. A number of products, derivatives,
including
derivatives, forward sales contracts and call and put options, are used to manage gold price and foreign exchange risks that
arise out of the group’s core business activities.
140
The estimated fair values of financial instruments are determined at discrete points in time based on relevant market
information. These estimates involve uncertainties and cannot be determined with precision. The following table
represents
the change in fair value of all derivatives used as a financial instrument:
$ (million)
Fair value of derivatives at January 1, 20042006
(578)(1,941)
Derivatives realized or otherwise settled during the year
111
Fair value of attributable portion of Geita hedge book to April 26, 2004 the effective date of the
AngloGold Ashanti Business Combination
(74)
Fair value of Ashanti instruments acquired in the AngloGold Ashanti Business Combination
(432)152
Fair value of other new contracts entered into during the year
(91)11
Change in fair value of derivatives during the year
(1)
(97)(1,125)
Fair value of derivatives at December 31, 20042006
(1,161)(2,903)
(1)
Net losses on revaluation of derivatives.
The fair value of the on-balance sheet derivatives at December 31, 20042006 included:
$ (million)
Derivatives – current assets
491649
Derivatives – long term assets
1876
Derivatives – current liabilities
(606)(1,782)
Derivatives – long term liabilities
(734)(397)
Derivatives – net liabilities
(662)(1,524)
The difference between the fair value of all derivatives and the fair value of on-balance sheet derivatives represents the fair
value of off-balance sheet derivatives totallingtotaling negative $499$1,379 million.
The maturity of the fair value of derivatives as at December 31, 20042006 was as follows:
Fair value of derivatives at December 31
Source of fair value
(in millions)
Maturity
less than
1 year
$
Maturity
1 – 3 years
years$
$Maturity
Maturity
4 – 5 years
years$
$Maturity
Maturity
excess of
5 years
$
Total Fair
value
$
Prices
actively
quoted
–
–
–
–
–
Prices provided by other external sources
–
–
–
–
–
Prices based on models and other valuation methods
(1)
(197)(1,486) (324) (919) (174)
(307)
(331)
(326)
(1,161)(2,903)
(1)
Fair value is calculated using the Black-Scholes option formula and other formulae, using ruling market prices and interest rates which are obtained from
international banks and are liquid and actively quoted across the full time horizon of the tenor of the hedging contracts.
146
•Sensitivity analysis
The following table shows the approximate sensitivities of the $ marked-to-market value of the hedge book at
December 31,
2004 2006 (actual changes in the timing and amount of the following variables may differ from the assumed
changes below):
Sensitivity analysis
Variables
Change in
Rate(+)
Change in
Fair value
(1)
Change in
Rate (-)
Change in
Fair value
(1)
Currency (R/$)
1
(16.50)
1
10.68
Currency (A$/$)
0.05
1.61
0.05
(1.70)
Gold price ($/oz)
10
(100.80)
10
99.10
US Interest Rate (percent)
0.1
(9.09)
0.1
9.11
ZAR Interest Rate (percent)
0.1
(0.17)
0.1
0.17
Aus Interest Rate (percent)
0.1
(0.09)
0.1
0.09
Gold Interest Rate (percent)
0.1
14.80
0.1
(14.89)
(1)
In $ million.
141
Related party transactions
During April 2006, AA plc reduced its shareholding in the Company to less than 50 percent interest held, as the result of
the sale in a public offering, of some of its shares held in the Company. As at December 31, 2006 AA plc and its
subsidiaries held an effective 41.67 percent (2005: 50.88 percent) interest in AngloGold Ashanti.
The Company had the following transactions with related parties during the years ended December 31, 2006 and 2005:
December 31, 2006
December 31, 2005
(in millions)
Purchases
(by)/from
related party
$
Amounts owed
to/(by) related
party
$
Purchases
(by)/from
related party
$
Amounts
owed to/(by)
related party
$
Related party transactions with significant shareholder AA plc
1
- 5 1
Related party transactions with subsidiaries of AA plc
(1)
Boart Longyear Limited – mining services
(2)
-
- 5 -
Mondi Limited – forestry
5
- 16 2
Scaw Metals – A division of Anglo Operations Limited – steel and
engineering 1
- 6 1
Haggie Steel Wire Rope Operations
(3)
1
- 8 1
Anglo Coal – a division of Anglo Operations Limited
-
- 1 -
8
- 41 5
Related party transactions of equity accounted joint ventures
Societe d'Exploitation des Mines d'Or de Sadiola S.A.
(2)
(1)
-
-
Societe d'Exploitation des Mines d'Or de Yatela S.A.
(1)
-
-
-
Societe des Mines de Morila S.A.
(2)
-
(2)
-
(1)
Transactions to April 2006.
(2)
AA plc sold their interest in Boart Longyear Limited with effect from July 29, 2005
.
(3)
Previously included in Scaw Metals – A division of Anglo Operations Limited
.
These related party transactions were concluded in the ordinary course of business of AngloGold Ashanti. Transaction
prices are agreed upon, predetermined and stipulated in agreements with related parties. These agreements are the
responsibility of AngloGold Ashanti’s procurement department, which is tasked with ensuring that contractual obligations,
as per agreements concluded, are fulfilled. Renewals and discontinuation of existing contracts, as well as new contracts,
are handled by the procurement department. Contractual and any other commitments are stipulated in the agreements,
and expire/cease upon conclusion/discontinuation of a service/contract.
Since January 1, 2006, other than as described in the following two paragraphs, AngloGold Ashanti has not been, and as
of the date of this annual report is not, a party to any material transaction or proposed transaction by which any director,
any other executive officer, any spouse or relative of any of the foregoing or any relative of such spouse had or was to
have direct or indirect material interest.
In connection with the relocation of Roberto Carvalho Silva, an executive director of the Company since 2005, to
Nova Lima, Brazil, in 2000, Mr. Carvalho Silva commenced renting a house in Nova Lima from a Brazilian subsidiary of the
Company. Mr. Carvalho Silva purchased the house from the Company’s subsidiary in January 2005. The total purchase
price of the house was BRL1,150,000 ($429,923). Mr. Carvalho agreed to pay the purchase price of the house in
60 installments, the first being BRL19,167.70 and 59 installments of BRL19,166.65 each, starting on January 28, 2005.
Such monthly installments were adjusted annually by the cumulative INPC (a Consumer Price Index in Brazil) in lieu of
interest. As at December 31, 2006, BRL728,580 ($340,458) of the purchase price remained to be paid to the Company’s
subsidiary, with BRL657,717 ($341,352) remaining to be paid as at June 20, 20 07. At present, the installment payments
are up-to-date. Mr Carvalho Silva and the Company have agreed that the remaining balance of the purchase price of the
house will be paid by Mr Carvalho Silva as soon as reasonably practicable and in any event no later than August 31, 2007.
A Brazilian subsidiary of the Company received marketing, communications and corporate affairs services from a Brazilian
company in which a son of Roberto Carvalho Silva owns a one-third interest. The total amount paid by the Company’s
subsidiary to this company in respect of such services during the years were: 2006: BRL903,465 ($414,433);
2004: BRL3,944 ($1,351); 2005: BRL311,923 ($127,837); and BRL634,023 ($329,055) has been paid to date in 2007. The
142
Company is currently reviewing its relationship with this service provider and the contracts under which such services are
provided.
Recently adopted accounting policies and pending adoption of new accounting standards
AngloGold Ashanti’s accounting policies are described in note 4 to the consolidated financial statements “Significant
accounting policies”. New accounting policies and recent pronouncements are described in note 4.27 to the consolidated
financial statements “Recent pronouncements”.
Recent pronouncements
On July 13, 2006 the Financial Accounting Standards Board (FASB) issued FASB interpretation No. 48, “Accounting
for Uncertainty in Income Taxes” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes
recognized in an enterprise’s financial statements in accordance with SFAS109, “Accounting for Income Taxes”. It
prescribes a recognition threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition and classification, recognition of interest and penalties, accounting in interim periods and disclosure
rules relating to tax positions in the financial statements.
This interpretation is effective for fiscal years beginning after December 15, 2006, and the Company has adopted this
interpretation in the first quarter of 2007. The Company is in the process of assessing the impact of adopting FIN 48
on the results of operations and financial position. The cumulative effect, if any, will be reported as an adjustment to
the opening balance of retained earnings for the 2007 fiscal year.
On September 8, 2006, the FASB has issued FASB Staff Position (FSP) No. AUG AIR-1, "Accounting for Planned
Major Maintenance Activities" (“FSPAIR-1”). FSPAIR-1 eliminates the accrue-in-advance method of accounting for
planned major maintenance activities from the AICPA Audit and Accounting Guide, Audits of Airlines and the
guidance is applicable to entities in all industries. As a result of the elimination of the accrue-in-advance method, the
Airline Guide currently permits the use of one of the following three remaining methods: (1) direct expensing, (2) built-
in overhaul, and (3) deferral.
The effective date of FSPAIR-1 is an entity's first fiscal year beginning after December 15, 2006, with early adoption
permitted so long as it is as of the beginning of the entity's fiscal year. The guidance in FSPAIR-1 should be applied
retrospectively, unless it is impracticable to do so. FSPAIR-1 provides additional details on the subject of transition
and the disclosures required upon adoption of the FSP. Of the three methods of accounting for planned major
maintenance allowed by FSPAIR-1, the Company will adopt the built-in overhaul method from January 1, 2007. The
built-in overhaul method is based on segregation of plant and equipment costs into those that should be depreciated
over the useful life of the asset and those that require overhaul at periodic intervals. Thus, the estimated cost of the
overhaul component included in the purchase price of an asset is set up separately from the cost of t he asset and is
amortized to the date of the initial overhaul. The cost of the initial overhaul is then capitalized and amortized to the
next overhaul, at which time the process is repeated. The Company does not expect the adoption of this standard to
have a material impact on its earnings and financial position.
On September 13, 2006, the SEC staff published Staff Accounting Bulletin (SAB) No. 108, “Considering the Effects of
Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”).
SAB 108 (SAB Topic 1.N) addresses quantifying the financial statement effects of misstatements, specifically, how
the effects of prior year uncorrected errors must be considered in quantifying misstatements in the current year
financial statements. In addition, SAB 108 offers a special “one-time” transition provision for correcting certain prior
year misstatements that were uncorrected as of the beginning of the fiscal year of adoption. SAB 108 is effective for
fiscal years ending after November 15, 2006. During 2006, the Company quantified and adjusted for certain errors
previously considered not to be material. Refer to note 2 in the consolidated financial statements.
143
On September 15, 2006 the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value
Measurements” (“SFAS157”). SFAS157 provides enhanced guidance for using fair value to measure assets and
liabilities. Under SFAS157, fair value refers to the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants in the market in which the reporting entity transacts.
SFAS157 clarifies the principle that fair value should be based on the assumptions market participants would use
when pricing the asset or liability and establishes a fair value hierarchy that prioritizes the information used to
develop those assumptions. SFAS157 also requires that fair value measurements be separately disclosed by level
within the fair value hierarchy. SFAS157 is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. The Company is currently reviewing the guidance
issued in SFAS157 and has not yet determined the impact of this on the financial statements.
On September 29, 2006 the FASB issued Statement of Financial Accounting Standards No. 158, “Employers’
Accounting for Defined Benefit Pension and Other Post-retirement Plans, an amendment of FASB Statements No.
87, 88, 106 and 132(R)” (“SFAS158”).
SFAS158 represents the completion of the first phase in the FASB's post-retirement benefits accounting project and
requires an entity to:
· recognize in its statement of financial position an asset for a defined benefit post-retirement plan's overfunded
status or a liability for a plan's underfunded status;
· measure a defined benefit post-retirement plan's assets and obligations that determine its funded status as of
the same day of the employer's fiscal year-end statement of financial position;
·
recognize as a component of accumulated other comprehensive income, net of tax, amounts accumulated at the
date of adoption due to delayed recognition of actuarial gains and losses, prior service costs and credits, and
transition assets and obligations; and
·
expand the disclosure requirements of SFAS132(R) to include disclosure of additional information in the notes to
financial statements about certain effects on net periodic benefit cost in the next fiscal year that arise from
delayed recognition of actuarial gains or losses, prior service costs or credits and unrecognized transition asset
and obligations.
SFAS158 does not change the amount of net periodic benefit cost included in net income or address the various
measurement issues associated with post-retirement benefit plan accounting. The requirement to recognize the
funded status of a defined benefit post-retirement plan and the disclosure requirements are effective for fiscal years
ending after December 15, 2006, for public entities, and at the end of the fiscal year ending after June 15, 2007, for
all other entities. The requirement to measure plan assets and benefit obligations as of the date of the employer's
fiscal year-end statement of financial position is effective for fiscal years ending after December 15, 2008. The
adoption of the recognition and disclosure requirements of SFAS158 which are effective for fiscal years ending after
December 15, 2006, did not have a material impact on the Company’s earnings and financial position as the
Company changed its accounting policy during the second quarter of 2005, retroactive to January 1, 2005, with
respect to accounting for employee benefit plans to recognize the effects of actuarial gains and losses in income,
rather than amortizing over the expected average remaining service period of employees participating in the plan.
The Company is currently considering processes to meet the measurement requirements of SFAS158.
On February 15, 2007 the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value
Option for Financial Assets and Financial Liabilities Including an amendment of FASB Statement No. 115”
(“SFAS159”). SFAS159 permits entities to choose to measure many financial instruments and certain other items at
fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility
in reported earnings caused by measuring related assets and liabilities differently without having to apply complex
hedge accounting provisions.
The fair value option permits all entities to choose to measure eligible items at fair value at specified election dates. A
business entity shall report unrealized gains and losses on items for which the fair value option has been elected in
earnings at each subsequent reporting date.
144
The fair value option:
·
may be applied instrument by instrument, with a few exceptions, such as investments otherwise accounted for by
the equity method;
·
is irrevocable (unless a new election date occurs); and
·
is applied only to entire instruments and not to portions of instruments.
SFAS159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early
adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the
entity also elects to apply the provisions of SFAS 157, “Fair Value Measurements”. No entity is permitted to apply
SFAS159 retrospectively to fiscal years preceding the effective date unless the entity chooses early adoption. The
choice to adopt early should be made after issuance of SFAS159 but within 120 days of the beginning of the fiscal
year of adoption, provided the entity has not yet issued financial statements, including required notes to those
financial statements, for any interim period of the fiscal year of adoption. SFAS159 permits application to eligible
items existing at the effective date (or early adoption date). The Company is currently re viewing the guidance issued
in SFAS159 and has not yet determined the impact of this on the financial statements.
Critical accounting policies
AngloGold Ashanti’s accounting policies are described in note 4 to the consolidated financial statements “Significant
accounting policies”. The preparation of AngloGold Ashanti’s financial statements in conformity with accounting principles
generally accepted in the United States of America require management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the year. The following are considered to be the
accounting policies that are most critical to AngloGold Ashanti’s results of operations, financial condition and cash flows.
Using of estimates and making of assumptions
The most critical accounting estimates upon which AngloGold Ashanti’s financial reporting depends are those requiring
estimates of Proven and Probable Reserves, recoverable ounces therefrom, and/or assumptions of future gold prices.
Such estimates and assumptions affect the value of inventories (which are stated at the lower of average cost or net
realizable value) and the potential impairment of long-lived assets and intangibles as detailed below. These estimates and
assumptions also affect the rate at which depreciation and amortization are charged to earnings. Commodity prices
significantly affect AngloGold Ashanti’s profitability and cash flow. On an ongoing basis, management evaluates its
estimates and assumptions; however, actual amounts could differ significantly due to the ultimate conclusion of
uncertainties.
Ore reserves and life-of-mines
AngloGold Ashanti estimates on an annual basis its Ore Reserves at its mining operations. There are a number of
uncertainties inherent in estimating quantities of reserves, including many factors beyond AngloGold Ashanti’s control. Ore
reserve estimates are based upon engineering evaluations of assay values derived from samplings of drill holes and other
openings. Additionally, declines in the market price of gold may render certain reserves containing relatively lower grades
of mineralization uneconomic to mine. Further, availability of permits, changes in operating and capital costs, and other
factors could materially and adversely affect Ore Reserves. AngloGold Ashanti uses its ore reserve estimates in
determining the unit basis for mine depreciation and closure rates, as well as in evaluating mine asset impairments.
Changes in ore reserve estimates could significantly affect these items. At least annually, AngloGold Ashanti reviews
mining schedules, production levels and asset lives in AngloGold Ashanti’s life-of-mine planning for all of AngloGold
Ashanti’s operating and development properties. Significant changes in the life-of-mine plans may occur as a result of
mining experience, new ore discoveries, changes in mining methods and rates, process changes, investment in new
equipment and technology and gold prices. Based on the life-of-mine analysis AngloGold Ashanti reviews its accounting
estimates and adjusts depreciation, amortization, reclamation costs and evaluation of each mine for impairment where
necessary. Accordingly, this analysis and the estimates made therein have a significant impact on AngloGold Ashanti’s
operating results.
145
Drilling and related costs
Drilling and related costs incurred on sites without an existing mine and on areas outside the boundary of a known mineral
deposit that contain proven and probable reserves are exploration expenditures and are expensed as incurred.
Drilling and related costs incurred to define and delineate a residual mineral deposit that has not been classified as proven
and probable reserves at a development stage or production stage mine are capitalized when management determines
that there is sufficient evidence that the expenditure will result in a future economic benefit to the company in the
accounting period when the expenditure is made. Management evaluates whether or not there is sufficient geologic and
economic certainty of being able to convert a residual mineral deposit into a proven and probable reserve at a
development stage or production stage mine, based on the known geologic and metallurgy, existing mining and processing
facilities, operating permits and environmental programmes. Therefore prior to capitalizing such costs, management
determines that the following conditions have been met:
a.
There is a probable future benefit;
b.
AngloGold Ashanti can obtain the benefit and control access to it; and
c.
The transaction or event giving rise to it has already occurred.
We understand that there is diversity in practice within the mining industry, in that some companies expense the drilling
and related costs incurred to define and delineate residual mineral deposits that have not been classified as proven and
probable reserves at a development stage or production stage mine. Had AngloGold Ashanti expensed such costs as
incurred, net income, earnings per share and retained earnings would have been lower by approximately the following
amounts:
2004 2005 2006
Net income (US$ millions)
7
13
12
Earnings per share
(1)
(US$ cents)
3
5
5
Retained income – January 1 (US$ millions)
27
34
47
Retained income – December 31 (US$ millions)
34
47
59
(1)
Impact per basic and diluted earnings per common share.
Accounting for derivatives
The company accounts for derivative contracts in accordance with Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS133") as amended.
SFAS133 requires all contracts, which meet the definition of a derivative to be recognized on the balance sheet as either
assets or liabilities and recorded at fair value. Gains or losses arising from remeasuring derivatives to fair value each
period are to be accounted for either in the income statement or in other comprehensive income, depending on the use of
the derivative and whether it qualifies for hedge accounting. The key criterion, which must be met in order to qualify for
hedge accounting, is that the derivative must be highly effective in offsetting the change in the fair value or cash flows of
the hedged item.
Contracts that meet the criteria for hedge accounting are designated as the hedging instruments hedging the variability of
forecasted cash flows from the sale of AngloGold Ashanti’s production into the spot market, and are classified as cash flow
hedges under SFAS133. Where a derivative qualifies as the hedging instrument in a cash flow hedge under SFAS133,
gains and losses on the derivative, to the extent effective, are deferred in other comprehensive income and reclassified to
earnings as product sales when the hedged transaction occurs. The ineffective portion of changes in fair value is reported
in earnings as gains or losses on derivatives in the period in which they occur.
All other contracts not meeting the criteria for the normal purchases and sales or hedge accounting, as defined in
SFAS133, are recorded at their fair market value, with changes in value at each reporting period being re corded in
earnings as gains and losses on derivatives.
146
The estimated fair values of derivatives are determined at discrete points in time based on the relevant market information.
These estimates are calculated with reference to the ruling market prices, interest rates and volatilities using the Black -
Scholes option formula.
AngloGold Ashanti does not acquire, hold or issue derivative instruments for economic trading purposes. A number of
products, including derivatives, are used to manage gold price and foreign exchange risks that arise out of the group’s core
business activities. Forward sales contracts and call and put options are used by the group to manage its exposure to gold
price and currency fluctuations.
Revenue recognition
AngloGold Ashanti’s revenues are derived primarily from the sale of gold produced at its mines. Revenue from product
sales is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been
rendered, the seller’s price to the buyer is fixed or determinable and collectability is reasonably assured. Gold is a liquid
commodity that is dealt with on the international markets, and gold produced by AngloGold Ashanti’s mining operations is
processed to saleable form at various precious metals refineries.
Contingencies
AngloGold Ashanti accounts for contingencies in accordance with SFAS No. 5, “Accounting for Contingencies”. SFAS 5
requires the recording of an estimated loss for a loss contingency when information available indicates that it is probable
that an asset has been impaired or a liability has been incurred, and the amount of the loss can be reasonably estimated.
Accounting for contingencies such as legal and income tax matters requires the use of judgments to determine the amount
to be recorded in the financial statements. By their nature, contingencies will only be resolved when one or more future
events occur or fail to occur and typically, those events will occur a number of years into the future. AngloGold Ashanti
assess such contingent liabilities, which inherently involves the exercise of significant management judgment and
estimates of the outcome of future events. Also, see “T axation” discussed below.
Mining joint ventures
As described in note 4.2 to the consolidated financial statements interests in incorporated mining joint ventures in which
AngloGold Ashanti has joint control are accounted for by the equity method and are included in other long-term assets.
Impairment of long-lived assets
AngloGold Ashanti’s long-lived assets include property, plant and equipment, acquired properties, goodwill and other
tangible assets. Subsequent to January 1, 2002, goodwill is analyzed for impairment in accordance with SFAS142 as
discussed below. In assessing, the potential impairment of its long-lived assets held for use AngloGold Ashanti must make
assumptions regarding estimated future cash flows and other factors relating to the respective assets. To the extent that
the carrying value of the long-lived asset as recorded in the consolidated financial statements exceeds the undiscounted
cash flows, an impairment charge is recognized in the consolidated financial statements based on the fair value of the
asset.
Impairment of goodwill and other intangible assets
Beginning January 1, 2002, SFAS142 requires goodwill to be reviewed for impairment rather than amortized and that
intangible assets with finite useful lives other than goodwill be amortized over their useful lives. In accordance with the
provisions of SFAS142 AngloGold Ashanti performed a transitional impairment test for each reporting unit and performed
its annual impairment review during the fourth quarter of 2002. AngloGold Ashanti performs impairment tests at least
annually during the fourth quarter and whenever certain indicators of impairment exist. AngloGold Ashanti’s reporting units
are generally consistent with the operating mines underlying the segments identified in note 29 to the consolidated
financial statements “Segment and Geographical Information”.
147
Taxation
AngloGold Ashanti follows the liability method of accounting for taxation whereby the company recognizes the tax
consequences of temporary differences by applying current statutory tax rates applicable to future years to differences
between financial statement amounts and the tax bases of certain assets and liabilities. Changes in deferred tax assets
and liabilities include the impact of any tax rate changes enacted during the year. Deferred tax is estimated at the future
average anticipated taxation rates at which temporary differences are expected to reverse. Future average anticipated
taxation rates are determined from revenue and expenditure outlined in life-of-mine business plans that are revised
annually. When a deferred tax asset arises AngloGold Ashanti reviews the asset for recoverability and establishes a
valuation allowance where AngloGold Ashanti determines it is more likely than not that such an asset will not be realized.
These determinations are based on the projected realization of tax allowances and tax losses. If these tax assets are not
to be realized, an adjustment to the valuation allowance would be required, which would be charged to income in the
period that the determination was made. If AngloGold Ashanti determines that it would be able to realize tax assets in the
future, in excess of the recorded amount thereof, an adjustment to reduce the valuation allowance would be recorded as a
credit to income in the period that the determination is made.
Provision
for environmental rehabilitation
The group’s mining and exploration activities are subject to various laws and regulations governing the protection of the
environment. The group recognizes management’s best estimate for asset retirement obligations in the period in which
they are incurred. Actual costs incurred in future periods could differ materially from the estimates. Additionally, future
changes to environmental laws and regulations, life of mine estimates and discount rates could affect the carrying amount
of this provision. Such changes in Mineral Reserves could similarly affect the useful lives of assets depreciated on a
straight-line-basis, where those lives are limited to the life of mine.
Share-based payments
The group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are
measured at fair value (excluding the effect of non-market based vesting conditions) at the date of grant. The fair value
determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the
vesting period, based on the group’s estimate of the shares that will eventually vest and adjusted for the effect of non
market-based vesting conditions.
Fair value is measured using the Black-Scholes pricing model. The expected life used in the model has been adjusted,
based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioural
considerations.
Pension plans and post-retirement medical aid obligations
The determination of AngloGold Ashanti’s obligation and expense for pension and provident funds, as well as post-
retirement health care liabilities, depends on the selection of certain assumptions used by actuaries to calculate amounts.
These assumptions are described in note 28 to the consolidated financial statements “Employee benefit plans” and
include, among others, the discount rate, the expected long-term rate of return of plan assets, health care inflation costs
and rates of increase in compensation costs. While AngloGold Ashanti believes that these assumptions are appropriate,
significant changes in the assumptions may materially affect pension and other post-retirement obligations as well as
future expenses, which may result in an impact on earnings in the periods that the changes in the assumptions occur.
The main assumptions for 2006 relating to the most significant defined benefit plan were the discount rate, the expected
return on plan assets and the compensation and pension plan inflation rates. The discount rate was determined using the
South African bond yield rate (on the "benchmark" R153 bond) as a guide and adjusted for the taxation effects on pension
plans.
The assumed level of salary increases relative to inflation were advised by the AngloGold Ashanti directors as well as the
AngloGold Ashanti Human Resources department. The expected return on plan assets were based on the market
performance of the underlying assets. For inflation targets the published Consumer Price Index (CPI) by the Department
148
of Statistics as well as the South African Reserve Bank inflation target were used as a guide. Pension increases were
assumed to be at 90 percent of the assumed inflation rate, based on the respective Fund's pension increase policy.
· Effects on results of operations
Company and plan participants’ contributions to the defined benefit funds are disclosed in note 28 to the consolidated
financial statements “Employee benefit plans”. The total Company contributions to defined contribution plans for the years
ended December 31, 2006, 2005 and 2004 amounted to $40 million, $31 million and $40 million, respectively.
· Change in pension trends
The trend of the expected return on the plan assets is higher (3.55 percent) for the year ended December 31, 2006 when
compared to 2005. Based on the 2005 estimated return of 10.14 percent on the defined benefit plan assets, the return for
2006 would amount to $23 million compared to the actual 2006 return of $62 million due to improved market conditions.
The long-term compensation and pension inflation increases estimated in 2005 at 5.0 percent and 4.05 percent
respectively have increased for compensation increases to 5.5 percent and increased for pension increases to
4.28 percent respectively, which is in line with current economic indicators.
Sensitivity analysis
It is not the policy of AngloGold Ashanti to consider the sensitivity of the accounting figures to different assumptions. The
actual short-term salary inflation rate used for the 2006 valuation was a rate of 6 percent and the long-term salary inflation
rate was 5.5 percent, which is in line with the actual average increases granted and the target Consumer Price Index
indicated by the South African Reserve Bank. For each 1 percent point variance in the actual return on the plan assets,
the value in growth will vary by $2 million.
Ore on Leach Pads
The recovery of gold from certain oxide ores is achieved through the heap leaching process. Under this method, ore is
placed on leach pads where it is permeated with a chemical solution, which dissolves the gold contained in the ore. The
resulting “pregnant” solution is further processed in a process plant where the gold is recovered. For accounting purposes,
costs are added to leach pads based on current mining costs, including applicable depreciation, depletion and amortization
relating to mining operations. Costs are removed from the leach pad as ounces are recovered in circuit at the leach plant
based on the average cost per recoverable ounce of gold on the leach pad.
The engineering estimates of recoverable gold on the leach pads are calculated from the quantities of ore placed on the
pads (measured tons added to the leach pads), the grade of ore placed on the leach pads (based on assay data) and a
recovery percentage (based on metallurgical testing and ore type). Leach pad production cycles vary from several months
to multiple years. In operations with multiple year leach cycles, the majority (greater than 65 percent) of the placed
recoverable ounces are recovered in the first year of leaching, with declining amounts each year thereafter until the
leaching process is complete.
Although the quantities of recoverable gold placed on the leach pads are reconciled by comparing the grades of ore placed
on pads to the quantities of gold actually recovered (metallurgical balancing), the nature of the leaching process inherently
limits the ability to precisely monitor recoverability levels. As a result, the metallurgical balancing process is constantly
monitored and the engineering estimates are refined based on actual results over time. Historically, AngloGold Ashanti’s
operating results have not been materially impacted by variations between the estimated and actual recoverable quantities
of gold on its leach pads. For operations with long-term leach production cycles, variations in recovery estimates from new
metallurgical data or production variances would be accounted for as an adjustment to the recoverable ounces and the
average cost per recoverable ounce of gold on the le ach pad. Variations between actual and estimated quantities resulting
from changes in assumptions and estimates that do not result in write-downs to net realizable value are accounted for on a
prospective basis. The ultimate recovery of gold from a pad will not be known until the leaching process has been
concluded. Based on current mine plans, AngloGold Ashanti expects that current leaching operations will terminate at
dates ranging from 2011 to 2020.
149
The costs of materials currently contained on the leach pad are reported as a separate line item apart from inventory. As
at December 31, 2006, $46 million was classified as short term compared with $37 million as at December 31, 2005 as the
Company expects the related gold to be recovered within twelve months. The short term portion of materials on the leach
pad is determined by multiplying the average cost per ounce in inventory, by the expected production ounces for the next
twelve months. Based on data gathered and analyzed from heap leach pad drilling results, and other studies and analysis
completed, short-term heap leach pad inventory occurs in two forms: (1) gold recoverable but yet to be dissolved (i.e. gold
still in the ore), and (2) gold recoverable from gold dissolved in solution within the leach pad (i.e. pore water). This
estimate calculation was used in determining the short term port ion of materials on the leach pad as at
December 31, 2006. As at December 31, 2006, $149 million was classified as long term compared with $116 million as at
December 31, 2005.
Funding and treasury policies
For discussion on the funding and treasury policies of AngloGold Ashanti, See “Item 11.: Quantitative and qualitative
disclosures about market risk – Gold price risk management activities”.
5C.
Research and development, patents and licenses, etc.
For a detailed discussion, see “Item 4B.: Business overview – Research and development”.
5D.
Trend information
Outlook. During the first quarter of 2007, AngloGold Ashanti produced 1.33 million ounces at an average cash costs of
$332 per ounce before the effects of change in accounting policy for deferred stripping. Gold production for the second
quarter of 2007 is expected to be marginally higher at around 1.35 million ounces at a cash cost, before the effects of
change in accounting policy for deferred stripping, broadly similar to that achieved during the first quarter of 2007.
For the full year 2007, AngloGold Ashanti is targeting gold production of around 5.7 million ounces at a cash cost of
$323 per ounce, before the effects of change in accounting policy for deferred stripping, based on the following exchange
rates assumptions: $/R7.16, A$/$0.81, $/BRL2.00 and $/ARS3.11. AngloGold Ashanti’s ability to meet the full year’s
production target could be impacted by, amongst other factors, siesmicity in South Africa, power shortages in Africa, lower
grades at some of its mines and any setback in clearing the pit wall failure at Geita. AngloGold Ashanti is also subject to
cost pressures and wage negotiations currently facing the mining industry which could adversely impact the cash costs for
2007.
Capital expenditure is expected to be around $1,070 million in 2007 (2006: $817 million).
5E.
Off-balance sheet arrangements
AngloGold Ashanti does not engage in off-balance sheet financing activities, and does not have any off-balance sheet debt
obligations, special purpose entities or unconsolidated affiliates. The most significant off-balance sheet items are normal
purchase and normal sales exempt contracts and unaccrued future rehabilitation obligations, each of which is discussed
below.
Normal purchase and normal sales exempt contracts
A number of derivatives are used to manage gold price risks that arise out of the group’s core business activities. Gold
pricing contracts that meet the SFAS138 exemption for Normal Purchase and Normal Sale do not appear on the balance
sheet. These agreements are accounted for as sales contracts with the proceeds under the contract being recorded in
earnings at the date of settlement by physical delivery. These off-balance sheet contracts are managed as part of
AngloGold Ashanti’s gold price risk management activities and at December 31, 2006 had a marked-to-market value of
negative $1,379 million. All other derivatives are recognized on the balance sheet at fair value. See “Item 11.:
Quantitative and qualitative disclosures about market risk” and note 26 to the consolidated financial statements “Financial
risk management activities”.
150
Future rehabilitation liability
The unaccrued portion of the future rehabilitation liability is an off-balance sheet obligation. See note 21 to the
consolidated financial statements “Provision for environmental rehabilitation”.
5F.
Tabular disclosure of contractual obligations
As at December 31, 2006 AngloGold Ashanti had the following known contractual obligations:
Contractual Obligations
(7)
(in millions)
Total
$
Less
than
1 year
$
1-3 years
$
3-5 years
$
More than
5 years
$
Long-term debt obligations including interest
(1)
1,622
99
1,522
1
-
Capital lease obligations
11
3
8
-
-
Operating lease obligations
24
16
5
2
1
Purchase
obligations
- Contracted capital expenditure
(2)
354
330
24
-
-
- Other purchase obligations
(3)
464
274
130
19
41
Environmental rehabilitation costs
(4)
482
24
55
33
370
Derivatives
(5)
2,903
1,486
324
919
174
Pensions and other post retirement medical
obligations
(6)
176
12
24
26
114
Total
6,036
2,244
2,092
1,000
700
(1)
Interest calculations are at the rate existing at the year end. Actual rates are set at floating rates for come of the debt (Refer Note 20 of Item 18).
(2)
Represents contracted capital expenditure for which contractual obligations exist. Amounts stated include commitments of equity accounted joint
ventures.
(3)
Other purchase obligations represent contractual obligations for mining contract services, purchase of power, supplies, consumables, inventories,
explosives and activated carbon. Amounts stated include purchase obligations of equity accounted joint ventures.
(4)
Operations of gold mining companies are subject to extensive environmental regulations in the various jurisdictions in which they operate. These
regulations establish certain conditions on the conduct of operations by AngloGold Ashanti. Pursuant to environmental regulations, AngloGold Ashanti is
also obligated to close their operations and reclaim and rehabilitate the lands upon which it conducted its mining and gold recovery operations. The
present estimated closure costs at existing operating mines and mines in various stages of closure are reflected in this table. For more information of
environmental rehabilitation obligations, see “Item 4D.: Property, plant and equipment – Sustainable development : Safety, Health, environment and
social development”. Amounts stated include a total estimated liability of $17 million in respect of equity accounted joint ventures.
(5)
Estimated fair value of all derivatives. Also see “Item 5B.: Liquidity and capital resources – Derivatives accounted for at fair value”. Amounts stated
include derivatives of equity accounted joint ventures.
(6)
Represents payments for unfunded plans or plans with insufficient funding.
(7)
The Group is unable to determine the years, if any, that the resolution of its uncertain tax liabilities will result in a cash flow.
151
Item 6: Directors, senior management and employees
6A.
Directors and senior management
Directors
AngloGold Ashanti has a unitary board structure which, at the date of this report, comprises four executive directors and
thirteen non-executive directors, two of whom are alternates. Certain information with respect to AngloGold Ashanti’s
directors as at December 31, 2006 is set forth below:
Year
first
Name Age
Position
appointed
(1)
Robert (Bobby) M. Godsell
(2)
54
Executive director and chief executive officer
1989
(3)
Roberto Carvalho Silva
55
Executive director and chief operating officer - International
2005
(4)
Neville F. Nicolau
47
Executive director and chief operating officer - Africa
2005
(4)
Srinivasan Venkatakrishnan (Venkat)
41
Executive director, finance
2005
Russell P. Edey
(5)(6)
64
Independent non-executive director and chairman
1998
Thokoana J. (James) Motlatsi
(7)
55
Independent non-executive director and deputy chairman
1998
Frank B. Arisman
(5)
62
Independent non-executive director
1998
Reginald E. Bannerman
72
Independent non-executive director
2006
Elisabeth le R. Bradley
(5)
68
Independent non-executive director
1998
Colin B. Brayshaw
(5) (11)
71
Independent non-executive director
1997
(3)
Wiseman L. Nkuhlu
(5)
62
Independent non-executive director
2006
Samuel E. Jonah
(8) (10)
57
Non-executive director and president
2004
Réne Médori
49
Non-executive director
2005
Joseph H. Mensah
78
Non-executive director
2006
William (Bill) A. Nairn
(9)
62
Non-executive
director
2001
Simon R. Thompson
47
Non-executive director
2004
Anthony (Tony) J. Trahar
(11)
57
Non-executive
director
2000
Arthur H. (Harry) Calver
59
Alternate director
2001
Peter G. Whitcutt
41
Alternate director
2001
(1)
Directors serve for a period of three years unless re-elected. At each annual general meeting, directors appointed since the previous annual general
meeting are required to retire, but are eligible for re-election. In addition, one-third of the board of directors must retire according to seniority or by lot
but may be re-elected. At the annual general meeting held on May 5, 2006, Mr F B Arisman, Mrs E l e R Bradley, Mr R P Edey, Mr R M Godsell,
Dr T J Motlasi retired by rotation and were re-elected by the shareholders. Mr R Carvalho Silva, Mr N F Nicolau, Mr R Médori and
Mr S Venkatakrishnan retired as they were appointed after the April 29, 2005 annual general meeting and they were re-elected by the shareholders. At
the annual general meeting held on May 4, 2007, Mr F B Arisman, Mr J H Mensah, Mr W A Nairn, Prof W L Nkuhlu, Mr S M Pityana and
Mr S R Th ompson retired by rotation and were re-elected by the shareholders. Mr C B Brayshaw and Mr A J Trahar retired from board at the annual
general meeting held on May 4, 2007.
(2)
Appointed to the board in 1989, appointed as chief executive officer in April 1998 and chairman in December 2000. Resigned as chairman on
April 30, 2002 but remains chief executive officer and an executive director.
(3)
Date appointed to the board of Vaal Reefs Exploration and Mining Company Limited, prior to the formation of AngloGold Limited.
(4)
The office of chief operating officer is split into International (all countries other than those on the African continent) and Africa.
(5)
Member of the audit and corporate governance committee.
(6)
Appointed as chairman with effect from May 1, 2002.
(7)
Appointed as deputy chairman with effect from May 1, 2002.
(8)
Appointed as an executive director in 2004 which appointment he relinquished in 2005, but retained his appointment as a non-executive director.
(9)
Appointed to board in January 2000, resigned from board and appointed as alternate in October 2000. Re-appointed to the board in May 2001.
(10)Resigned from the board on February 12, 2007.
(11) Retired from board at the annual general meeting held on May 4, 2007.
Executive directors
Mr RM Godsell (54) — BA, MA
Chief Executive Officer
Bobby Godsell was appointed to the AngloGold board as chief executive officer in April 1998 and as chairman in
December 2000. He relinquished his role as chairman of AngloGold in May 2002. He has 29 years of service with
companies associated with the mining industry, and has served as a non-executive director of Anglo American plc since
March 1999. He is also a past chairman of the World Gold Council.
152
Mr R Carvalho Silva (55) — BAcc, BCorp Admin
Chief Operating Officer – International
Roberto Carvalho Silva joined the Anglo American group in Brazil in 1973 and was appointed president and chief executive
officer of AngloGold South America in January 1999. He became executive officer, South America for AngloGold in 2000
and was appointed to the board of AngloGold Ashanti in May 2005 in his current capacity.
Mr N F Nicolau (47) — B Tech (Min. Eng), MBA
Chief Operating Officer – Africa
Neville Nicolau was appointed the executive officer responsible for AngloGold’s South Africa region in November 2001 and
was appointed to the board of AngloGold Ashanti in May 2005 in his current capacity. He has 27 years of experience in the
mining industry.
Mr S Venkatakrishnan (Venkat) (41) — BCom, ACA (ICAI)
Executive Director: Finance (Chief Financial Officer)
Venkat was the finance director of Ashanti Goldfields Company Limited from 2000 until the merger with AngloGold in 2004.
Prior to joining Ashanti, Venkat was a director in the Reorganization Services Division of Deloitte & Touche in London. He
was appointed to the board of AngloGold Ashanti in August 2005.
Non-executive directors
Mr RP Edey (64) — FCA
Chairman and independent non-executive director
Russell Edey was appointed to the AngloGold board in April 1998 and as deputy chairman in December 2000. In
May 2002, he was appointed chairman when Bobby Godsell relinquished this office. Based in the United Kingdom, he is
deputy chairman of NM Rothschild Corporate Finance and a director of a number of other companies.
Dr TJ Motlatsi (55) — Hon D Soc Sc (Lesotho)
Deputy Chairman and independent non-executive director
James Motlatsi was appointed to the AngloGold board in April 1998 and as deputy chairman in May 2002 upon Russell
Edey being appointed chairman. He has been associated with the South African mining industry since 1970, and is a past
president of the National Union of Mineworkers. He is chief executive officer of TEBA Limited.
Mr FB Arisman (62) — MSc (Finance)
Independent non-executive director
Frank Arisman was appointed to the AngloGold board in April 1998. He resides in New York and retired, after 32 years of
service, from JP Morgan Chase, where he held the position of managing director.
Mrs E le R Bradley (68) — BSc, MSc
Independent non-executive director
Elisabeth Bradley was appointed to the AngloGold board in April 1998. She is non-executive chairman of Wesco
Investments Limited and Toyota South Africa (Pty) Limited, and a director of a number of other companies. She is deputy
chairman of the South African Institute of International Affairs.
Mr CB Brayshaw (71) — CA (SA), FCA
Independent non-executive director
Colin Brayshaw was appointed to the AngloGold board in April 1998. He is a retired managing partner and chairman of
Deloitte & Touche and is a non-executive director of a number of other companies including Anglo Platinum Limited and
Datatec Limited.
Dr SE Jonah KBE (57) — Hon D Sc (Exeter), MSc (Mineral Production Management)
President
Sam Jonah worked in various positions, including underground, with Ashanti Goldfields and was appointed to the position
of chief executive officer of Ashanti in 1986. He has been decorated with many awards and honors and in 2003, an
honorary knighthood was conferred on him by Her Majesty, Queen Elizabeth II of Great Britain, in recognition of his
exceptional achievements as an African businessman. Sam was appointed as an executive director to the board of
AngloGold Ashanti in May 2004, a position he relinquished in 2005 but retained his appointment as a non-executive
director.
153
Mr R Médori (49) — Doctorate Economics, Grad (Fin)
Réne Médori was appointed to the AngloGold Ashanti board in August 2005. He is the finance director of Anglo American
plc.
Mr WA Nairn (62) — BSc (Mining Engineering)
Bill Nairn has been a member of the AngloGold board since January 2000. He was re-appointed to the board in May 2001,
having previously been alternate director to Tony Trahar. He was group technical director of Anglo American plc, prior to
his retirement in 2004.
Mr SR Thompson (47) — MA (Geology)
Simon Thompson is a director of Anglo American plc and chairman of the Base Metals Division, the Industrial Minerals
Division and the Exploration Division. Simon was appointed to the AngloGold Ashanti board in 2004.
Mr AJ Trahar (57) — BCom, CA (SA)
Tony Trahar was appointed to the AngloGold board in October 2000. He is chief executive officer of Anglo American plc.
The following appointments to the board were made during 2006 and subsequent to the filing of the previous
annual report:
Mr Reginald E. Bannerman (72) — BSc, MSc, was appointed to the board of directors on February 10, 2006. He has
been in law practice since 1958 and is currently the principal partner at Messrs Bruce-Lyle, Bannerman & Thompson
Attorneys in Ghana. He is a member of the General Legal Council of Ghana and a member of the board of the Valco Trust
Fund, a large privately run trust in Ghana. A former lecturer in law at the Ahmadu Bello University in Nigeria, Reginald was
also formerly the mayor of Accra, the capital of Ghana.
Mrs C Carroll (50) — MBA (Harvard), MSc (Geology) (University of Kansas)
Cynthia Carroll was appointed Chief Executive Officer of Anglo American plc on March 1, 2007. Prior to this appointment,
she spent the last 18 years in the aluminium industry of Alcan. Prior to joining Alcan, Cynthia spent six years in gas and oil
exploration.
Mr Joseph H. Mensah (78) — BSc (Economics), MSc (Economics), was appointed to the board of directors on
August 4, 2006. He has extensive experience in international and local economic management. He is the Chairman of the
National Development Planning Commission in Ghana and a member of the Ghana Parliament representing the Sunyani
constituency.
Professor Wiseman L. Nkuhlu (62) — BCom, CA (SA), MBA, was appointed to the board of directors on August 4, 2006.
He is a past national president of the South African Institute of Chartered Accountants and is a respected South African
academic, professional and business leader.
Mr SM Pityana (47) — BA (Hons) (Essex), MSc (London), was appointed to the AngloGold Ashanti board on
February, 13 2007. He is the executive chairman of Izingwe Holdings (Proprietary) Limited and has occupied strategic
roles in both the public and private sector, including the positions of director general of the national departments of Labor
and Foreign Affairs. He was formally a senior executive of Nedbank and is currently a non-executive director of several
companies including Bytes Technology Group (BTG), African Oxygen (Afrox), Munich Re and Aberdare Cables.
Alternate directors
Mr AH Calver (58) — BSc (Hons) Engineering, MDP (UNISA), PMD (Harvard)
Harry Calver was appointed alternate director to Bill Nairn in May 2001. He is head of engineering at Anglo American plc.
Mr PG Whitcutt (40) — BCom (Hons), CA (SA), MBA
Peter Whitcutt who is head of finance at Anglo American plc, has been an alternate director since October 2001, first to
Tony Lea, and then to Réne Médori who replaced the former on the board of AngloGold Ashanti.
Mr P L Zim together with his alternate Mr D D Barber resigned from the board on August 4, 2006. Mr K H Williams retired
from the board on May 6, 2006. Dr S Jonah resigned from the board on February 12, 2007.
154
In accordance with Article 86 of the articles of association of AngloGold Ashanti, not less than one-third of all directors
must retire by rotation at every annual general meeting and all directors must retire by rotation at least once every three
years and may be re-elected by shareholders.
At the annual general meeting held on May 4, 2007, Messrs F B Arisman, W A Nairn and S R Thompson retired by
rotation and were re-elected by the shareholders. Mr C B Brayshaw and Mr A J Trahar retired from the board at the annual
general meeting held on May 4, 2007. Mrs C Carroll was appointed a non-executive director, effective from May 5, 2007.
In addition, Mr J H Mensah, Prof W Nkuhlu and Mr S M Pityana who were appointed to the board subsequent to the annual
general meeting held on May 5, 2006, retired at the annual general meeting held on May 4, 2007, and were re-elected by
the shareholders. These retirements were in terms of Article 92 of the articles of association whereby all directors
appointed to the board at any period after any annual general meeting, may only hold office until the next annual general
meeting, at which time they may be re-elected by shareholders.
Executive committee
The board of directors of AngloGold Ashanti has delegated authority for overseeing the day-to-day management of the
company’s affairs and for executing the decisions of the board to an executive committee. At the date of this report, the
executive committee comprises the four executive directors as well as the executive officer: business development and the
executive officer: marketing. The executive committee meets generally on a weekly or ad hoc basis under the
chairmanship of the chief executive officer and is mandated to assist in reviewing operations and performance by the
AngloGold Ashanti group, developing strategy and policy proposals for consideration by the board of directors and
implementing the directives of the board. Members of the executive committee at December 31, 2006, were:
Name Age
Position
Year
first
appointed
Robert (Bobby) M. Godsell
54
Executive director and chief executive officer
1989
Roberto Carvalho Silva
55
Chief operating officer – International
2004
Richard N. Duffy
43
Business development
2005
Neville F. Nicolau
47
Chief operating officer – Africa
2004
Thero Setiloane
47
Executive officer: marketing
2006
Srinivasan Venkatakrishnan (Venkat)
41
Chief financial officer
2004
For a description of the business experience and functions of the members of the executive committee, see “Executive
officers” below.
To assist in the execution of certain of its duties and functions, the executive committee has established a management
committee (formerly an operation committee), responsible for overseeing the operational performance of the company, a
treasury committee and a finance committee, all described below.
For information on the other committees established by the board of directors, see “Item 6C.: Board practices”.
155
Executive officers
The executive officers of AngloGold Ashanti at December 31, 2006 were:
Name Age
Position
Year
first
appointed
Charles E. Carter
44
Strategy and Investor relations
2005
David H. Diering
55
Business planning – Africa
2005
Richard N. Duffy
43
Business development
1998
Dawn Earp
45
Finance
2004
Don Ewigleben
53
Law, Safety, Health and Environment
2006
Benjamin W. Guenther
54
International technical
2004
Hester H. Hickey
53
Head of risk
2005
Robert L. Lazare
50
Africa - underground mining
2004
Steven J. Lenahan
51
Corporate affairs
1998
Mark P. Lynam
45
Treasury
2004
Fritz R.L. Neethling
54
Africa – open-pit mining
2005
Peter Rowe
57
Corporate Technical Group
2006
Yedwa Z. Simelane
41
Managing secretary
2004
Thero Setiloane
47
Marketing
2006
Nigel W. Unwin
54
Human resources and information technology
1999
Office of corporate administration
Lynda Eatwell
52
Company secretary
2006
The business experience and functions of the executive officers of AngloGold Ashanti are as follows.
Dr CE Carter— BA (Hons) (UCT), DPhil (Oxford), EDP (Northwestern University – Kellogg School of Management)
Strategy and Investor Relations
Charles Carter joined Anglo American in 1991 and moved to the Gold and Uranium Division in 1996. In May 2005, he was
appointed an executive officer, with responsibility for overseeing the company’s global investor relations programme.
Mr DH Diering — BSc (Mining Engineering), SAIMM, AMP
Business Planning – Africa
Dave Diering joined the Anglo American Gold and Uranium Division in 1975 and worked at several South African
operations as well as for Zimbabwe Nickel Corporation until 2001, when he joined AngloGold as head of mining and
mineral resources. In 2005 he was appointed an executive officer.
Mr RN Duffy — BCom, MBA
Business Development
Richard Duffy joined Anglo American in 1987 and in 1998 was appointed executive officer and managing secretary of
AngloGold. In November 2000 he was appointed head of business planning and in 2004 assumed responsibility for all new
business opportunities globally. In April 2005 this role was expanded to include greenfields exploration. He was appointed
to the executive committee in August 2005.
Ms D Earp — BCom, BAcc, CA (SA)
Finance
Dawn Earp joined AngloGold in July 2000 from Anglo American, where she was vice president, central finance. She was
appointed to the position of executive officer in May 2004.
156
Mr D C Ewigleben — BSc, DJur
Law, Safety, Health and Environment
Don Ewigleben joined the group in 2000 as vice president, general counsel and corporate secretary of AngloGold Ashanti’s
North American operations. In 2003 he was promoted to the position of president and chief administrative officer for North
America, a position which was changed in 2005 to chief executive officer. Prior to joining the group, he served in various
executive positions for Echo Bay Mines (Canada) and AMAX Gold (US). He also held legal, safety and environmental
positions with AMAX Coal Industries (US). He was appointed executive officer – law, safety, health and environment on
January 1, 2006.
Mr BW Guenther — BS Mining Engineering
International Technical
Ben Guenther joined AngloGold as senior vice-president and general manager of Jerritt Canyon mine in Nevada, USA and
in 2000 he was seconded to AngloGold’s Corporate Office in Johannesburg as head of mining. In 2001, he assumed some
responsibilities for safety and health, as well as heading up the corporate technical group. He was appointed an executive
officer in May 2004 and was appointed to his current position in December 2005.
Ms HH Hickey — BCompt (Hons), CA (SA)
Head of Risk
Hester Hickey joined AngloGold in 1999 as group internal audit manager and was appointed an executive officer in
November 2005.
Mr RL Lazare — BA HED (University of Free State), DPLR (UNISA), SMP (Henley Management College)
Africa – Underground Mining
Robbie Lazare joined Anglo American Gold and Uranium Division in 1982 where he worked in a variety of management
posts until 1999 when he was appointed general manager of TauTona mine. In December 2004 he was appointed an
executive officer with responsibility for South African operations. He took up his current position in July 2005.
Mr SJ Lenahan — BSoc Sc, MSc
Corporate Affairs
Steve Lenahan has been working in the mining industry since 1978 when he started his career at De Beers. He was
appointed an executive officer in 1998, responsible for investor relations and assumed responsibility for corporate affairs in
early 2001.
Mr MP Lynam — BEng (Mech)
Treasury
Mark Lynam joined the Anglo American group in 1983 and has been involved in hedging and treasury since 1990. In 1998,
he joined AngloGold as treasurer and was appointed an executive officer in May 2004.
Mr F R L Neethling — B.Sc., B.Ing (Mech), Pr. Eng
Executive Officer – Africa: Open Pit Mining
Fritz Neethling started his career in the mining industry with Iscor in 1976. He joined De Beers in 1980 and the
Anglo American Gold Division in 1992. He was appointed as general manager of the Ergo operation in 1999 and as an
executive officer in July 2005.
Mr P W Rowe — BSc (Chem. Eng)
Corporate Technical Group
Peter Rowe joined AngloGold Ashanti in June 2004 as head of AngloGold Ashanti Australia. Following 20 years with Anglo
American and De Beers, he moved to Australia in the early 1990s where he held a number of senior managerial positions
including project director of the Fimiston expansion, general manager of the Boddington Gold Mine and managing director
and CEO of Bulong Nickel. He was appointed executive officer – corporate technical group on January 1, 2006.
Mr T M L Setiloane — FAE, BSc (Mech.Eng)
Marketing
Thero Setiloane joined AngloGold in May 2003 from Real Africa Holdings, where he was an executive director. He is the
chairman of Rand Refinery. He was appointed an executive officer and a member of the executive committee on
February 24, 2006.
157
Ms YZ Simelane — BA LLB, FILPA, MAP
Managing Secretary
Yedwa Simelane joined AngloGold in November 2000 from the Mineworkers’ Provident Fund where she was the senior
manager of the Fund. She was appointed an executive officer in May 2004.
Mr NW Unwin — BA
Human Resources and Information Technology
Nigel Unwin has had many years of experience in the field of human resources. He has been an executive officer since
1999.
Daniel Owiredu, former deputy chief operating officer – Africa, was an executive officer until September 1, 2006, when he
resigned from the company.
Dawn Earp, former Executive Officer – Finance, has resigned from the company with effect from March 1, 2007.
Office of corporate administration
Ms L Eatwell - FCIS
Lynda Eatwell joined AngloGold Ashanti in August 2000 as an Assistant Company Secretary. She was appointed company
secretary of AngloGold Ashanti in December 2006 following the retirement of Chris Bull. She is responsible for ensuring
compliance with statutory and corporate governance requirements and the regulations of the stock exchanges on which
AngloGold Ashanti is listed.
Competent persons
The schedule below presents the details of those persons who manage AngloGold Ashanti’s Ore Reserves and Mineral
Resources:
Name Age
Position
Year
first
appointed
Carl E Brechtel
56
Manager - underground mining – Australia Region
2001
Vaughan A. Chamberlain
44
Manager - mineral resources and mine geology
1998
Michael (Mike) F. O’Brien
49
Manager – evaluation
1999
Eric Roth
40
Head of exploration - greenfields
2005
Jurgens van Zyl Visser
52
Manager - survey and planning – Africa Underground region
2001
David (Dave) L. Worrall
56
Manager - surface mining
1999
The information in this report that relates to exploration results, Mineral Resources or Ore Reserves is based on
information compiled by the competent persons listed below. They are either members of the Australian Institute of Mining
and Metallurgy (AusIMM) or recognized overseas professional organizations. They are all full-time employees of the
company.
The competent person for AngloGold Ashanti Exploration is:
E Roth — PhD (Economic Geology), BSc (Hons) (Geology), MAusIMM
Eric has 16 years experience in mineral exploration and project evaluation, and holds a Bachelor of Science (Honors)
degree in Geology and Ph.D in Economic Geology from the University of Western Australia. Eric joined AngloGold in 2002
as Project Manager – Peru, subsequently holding the positions of Senior Evaluations Geologist – South America (2003 to
November 2005) and Head of Exploration – Greenfields from December 2005.
The following competent persons take responsibility for the reporting of AngloGold Ashanti’s Mineral Resources,
as defined under JORC 2004:
VA Chamberlain — MSc (Mining Engineering), BSc (Hons) (Geology), MAusIMM
Vaughan has 21 years experience and holds a Bachelor of Science (Honors) degree in Geology from the University of
Natal and a Masters degree in Mining Engineering from the University of the Witwatersrand. He started his career with
Anglo American Corporation in 1987 as a geologist at Western Deep Levels East Mine (now TauTona mine). He joined
AngloGold in 1998 and currently holds the position of manager: mineral resources and mine geology.
158
MF O’Brien — MSc (Mining Economics), BSc (Hons) (Geology), Dip Data, Pr.Sci.Nat., MAusIMM
Mike has 27 years experience and holds a Bachelor of Science (Honors) degree in Geology from the University of Natal, a
Masters degree in engineering from the University of Witwatersrand and a Diploma in Datametrics from UNISA. He joined
Anglo American Corporation in 1981 as a geologist at Vaal Reefs Mine and AngloGold in 1999 as manager: evaluation in
the Corporate Technical Group, the position he currently holds.
The following competent persons take responsibility for the reporting of AngloGold Ashanti’s Ore Reserves:
CE Brechtel — MSc (Mining Engineering), BSc (Geological Engineering), MAusIMM, MSME
Carl has 31 years experience and holds a Bachelor of Science degree in Geological Engineering and a Master of Science
degree in Mining Engineering from the University of Utah, USA. After spending 6 years at AngloGold Ashanti’s Jerritt
Canyon operations, he was appointed Manager of Underground Mining of the Corporate Technical Group (CTG) providing
technical support and corporate governance to international mining operations outside of the South Africa Region. He is
currently manager mining for AngloGold Ashanti Australia. He is a registered Professional Mining Engineer in the states of
Colorado and Nevada, USA.
DL Worrall — ACSM, MAusIMM
Dave has 26 years experience and is an Associate of the Camborne School of Mines in Cornwall, England. He joined
Anglo American Corporation in 1981 as a senior mine planning engineer in the technical director’s office and AngloGold in
1999 as manager, surface mining in the corporate office, the position he currently holds.
J van Zyl Visser — MSc (Mining Engineering), BSc (Mineral Resource Management), PLATO
Jurgens has 20 years experience and holds a Bachelor of Science degree in Mineral Resource Management and a Master
of Science degree in Mining Engineering from the University of the Witwatersrand. He started his career with Anglo
American Corporation in 1975 as a surveyor at President Steyn Mine. He joined AngloGold in 1998 as a divisional valuator
and in 1999 was appointed as manager survey and planning – Africa underground region.
The competent persons consent to the inclusion of the exploration and Ore Reserves information in this report, in the form
and context in which it appears.
159
6B. Compensation
Remuneration report
Policy
The Remuneration Committee sets and monitors executive remuneration for the company. This is achieved through an
Executive Remuneration Policy, which has as its objectives to:
• attract, reward and retain executives of the highest caliber;
• align the behavior and performance of executives with the company’s strategic goals, in the overall interests of
shareholders;
• ensure the appropriate balance between short-, medium- and long-term rewards and incentives, with the latter being
closely linked to structured company performance targets and strategic objectives that are in place; and
• ensure that regional management is competitively rewarded within a global remuneration policy, which recognizes
both local and global market practice.
This policy and its application are reviewed at least annually by the Remuneration Committee. See “Item 6C.: Board
practices – Remuneration Committee”.
Compensation of executive directors
In particular the Remuneration Committee is responsible for:
• the remuneration packages for executive directors of the company including, but not limited to, basic salary,
performance-based short and long-term incentives, pensions, and other benefits; and
• the design and operation of the company’s executive share option and other incentive schemes.
The performances of the executive directors are considered relative to the prevailing business climate and market
conditions as well as annual evaluations to assess the level of achievement of key predetermined objectives. Bonuses paid
to executive directors are a reflection of the performance of each of the directors and the company as a whole. Executive
directors have elected to receive no remuneration as directors of the company.
The fees of non-executive directors are fixed by shareholders at the annual general meeting, and other than the fees they
receive for their participation on board committees and an allowance for traveling internationally to attend board meetings,
non-executive directors receive no further payments from the company.
The following principles are applied in determining executive remuneration:
1. Annual remuneration is a combination of base pay and short-, medium- and long-term incentives, with salary
comprising about 50 percent of annual remuneration.
2. Salary is set at the median for the relevant competitive markets.
3. All incentive plans should align performance targets with shareholder interests.
Bonus Share Plan (BSP) and Long-Term Incentive Plan (LTIP)
Shareholders approved the introduction of two new schemes to replace the old share incentive scheme at the annual
general meeting held on April 29, 2005. The purpose of both schemes is to align the interests of shareholders and the
efforts of executives and managers.
To the extent that structured company performance targets are achieved, the BSP allows for the payment of an annual
bonus, paid in part in cash and part in rights to acquire shares.
The LTIP allows for the granting of rights to acquire shares, based on the achievements of stretched company
performance targets over a three-year period.
These targets are based on the performance of earnings per share (EPS) and relative total shareholder return (TSR),
whereby the company will need to consistently outperform its gold company peers. Additionally, strategic business
objectives will also need to be met.
160
Executive director remuneration currently comprises the following elements:
1. Basic salary, which is subject to annual review by the Remuneration Committee and is set at the median of salaries
in similar companies in the relevant markets both in South Africa and globally. The individual salaries of executive
directors are reviewed annually in accordance with their own performance, experience, responsibility and company
performance.
2. Annual bonus, which is determined by the achievement of a set of stretching company and individual performance
targets. The company targets include earnings per share, cost control and global production. The weighting of the
respective contribution of company and individual targets is 70 percent for company and 30 percent for individual.
Failure to achieve safety improvement targets results in the reduction of bonuses for executive directors and executive
officers. Fifty percent of the bonus is paid in cash and 50 percent in awarding of rights to acquire shares. The awards
have a three-year vesting period.
3. LTIP: Executive directors are granted the right to acquire share of value equivalent to their annual salaries, subject to
the achievement of stretched company performance targets over a three-year period. These targets are based on the
performance of EPS and TSR, whereby the company will need to consistently outperform its gold company peers.
Additionally, strategic business objectives will also need to be met. The first tranche of LTIP awards was made to
executive directors in 2005. See “Item 6E.: Share ownership” for more information on the Long-Term Incentive Plan.
4. Pensions: All executive directors who are South African citizens, are members of the AngloGold Ashanti Pension
Fund, a defined benefit fund which guarantees a pension on retirement equivalent to 2 percent of final salary per year
of service. All executive directors who are not South African citizens have other retirement benefit plans, to which the
company contributes to such plans, to the level required by local practice. Death and disability cover reflects best
practice among comparable employers in South Africa.
5. Other benefits: Executive directors are members of an external medical aid scheme, which covers the director and
his immediate family.
Directors’ service contracts
Service contracts of executive directors are reviewed annually. The contractual notice period in respect of Bobby Godsell,
as chief executive officer, is 12 months, and for the other three executive directors, nine months. The contracts also deal
with compensation if an executive director is dismissed or if there is a material change in role, responsibilities or
remuneration following a new shareholder assuming control of the company. Compensation in these circumstances is
pegged at twice the notice period.
Compensation of executive management
AngloGold Ashanti’s executive management comprises its executive directors and executive officers. Under the Listings
Requirements of the JSE, AngloGold Ashanti is required to disclose compensation paid to its executive directors on an
individual basis while compensation paid to its executive officers is disclosed in aggregate.
161
The following table presents the compensation paid by AngloGold Ashanti to executive management during 2006 and
2005. Executive directors have elected not to receive payment of directors’ fees, committee fees and travel allowances.
All figures in $000
(1)
Salary
Performance
related
payments
(3)
Pension
scheme
contri-
butions
Other
benefits
(4)
Leave
encash-
ment
(5)
Sub-
total
Pre-tax
gain on
share
options
exercised
(6)
Total
Executive directors’ compensation – 2006
R M Godsell
(chief executive officer)
936
354
138
9
-
1,437
324
1,762
R Carvalho Silva
762
172
308
7
64
1,314
-
1,314
N F Nicolau
545
172
83
4
21
825
510
1,335
S Venkatakrishnan
561
172
95
-
-
829
-
829
K H Williams (until May 6, 2006)
(2
175
-
26
13
-
214
-
214
Total2,979
870
650
33
85
4,619
834
5,454
Executive officers’ compensation – 2006
Representing 16 executive officers
(2)
4,344
983
474
210
396,050
1,102
7,152
Total executive directors’ and executive
officers’ compensation – 2006
7,323
1,853
1,124
243
124 10,669
1,936
12,606
Executive directors’ compensation – 2005
R M Godsell
(chief executive officer)
925
294
135
4
97
1,455
563
2,018
J G Best (to July 31, 2005)
285
-
42
26
-
353
273
626
R Carvalho Silva (from May 1, 2005)
478
146
94
19
-
737
-
737
D L Hodgson (to April 30, 2005)
163
-
24
1
-
188
124
312
S E Jonah (to July 31,2005)
426
-
55
-
93
574
-
574
N F Nicolau (from May 1, 2005)
346
146
51
3
2
548
-
548
S Venkatakrishnan (from August 1, 2005)
(5)(6)
252
164
29
-
-
445
-
445
K H Williams
506
149
75
4
339
1,073
91
1,164
Total 3,381
899
505
57
531
5,373
1,051
6,424
Executive officers’ compensation – 2005
Representing 18 executive officers
3,932
724
552
139
415 5,762
224
5,986
Total executive directors’ and executive
officers’ compensation – 2005
7,313
1,623
1,057
196
946
11,135
1,275
12,410
NB: Rounding may result in computational differences
(1)
When directors’ compensation is in South African rands, for the purpose of this annual report, the rand values have been converted to US dollars
using the following yearly average rate of exchange: 2006: $1 = R6.7706 and 2005: $1 = R6.4368.
(2)
Salaries are disclosed only for the period from or to which, office is held.
(3)
In order to more accurately disclose remuneration received/receivable by executive directors and executive officers, the tables above include the
performance related payments calculated on the year’s financial results.
(4)
Includes health care, personal travel and relocation expenses.
(5)
In 2005, AngloGold Ashanti altered its policy regarding the number of leave days that may be accrued. As a result surplus leave days accrued were
compulsorily encashed.
(6)
On exercising the options granted in terms of the AngloGold share incentive scheme, Messrs Godsell and Nicolau applied proceeds from the sale of
the shares to acquire 3,833 and 2,900 AngloGold Ashanti shares, respectively.
162
Compensation of non-executive directors
Non-executive directors receive no compensation from AngloGold Ashanti other than their fees which are determined by
shareholders in general meeting.
No benefits in kind were granted to the non-executive directors during 2006 and 2005.
There are no contracts of service between the non-executive directors and the company or any of its subsidiaries. All
directors are subject to retirement by rotation and re-election by shareholders at least once every three years.
The following table presents the compensation paid by AngloGold Ashanti to each non-executive director during 2006 and
2005.
2006 2005
All figures in $000
(1)
Directors'
fees
(3)
Committee
fees
Travel
allowance
(4)
Total
Directors'
fees
(3)
Committee
fees
Travel
allowance
(4)
Total
R P Edey (chairman)
130
24
16
170
131
31
16
178
Dr T J Motlatsi (deputy chairman)
44
19
-
63
47
25
-
72
F B Arisman
16
21
16
53
16
27
12
55
R E Bannerman
14
4
8
26
-
-
-
-
E le R Bradley
16
22
-
38
17
30
-
47
C B Brayshaw
(5)
16
18
-
34
17
24
-
41
S E Jonah (president)
(6)
(from August 1, 2005)
23
18
-
41
7
7
-
14
A W Lea (to July 31, 2005)
-
-
-
-
9
4
8
21
R Médori (from August 1, 2005)
16
-
-
16
7
3
-
10
J H Mensah (from August 4, 2006)
7
-
4
11
-
-
-
-
W A Nairn
16
19
-
35
17
20
-
37
W L Nkuhlu
7
4
-
11
-
-
-
-
S R Thompson
16
12
-
28
16
13
16
45
A J Trahar
16
6
-
22
17
13
-
30
P L Zim (from April 30, 2004)
12
9
-
21
17
13
-
30
Total – non-executive directors
349
176
44
569
318
210
52
580
Alternates
A H Calver
-
-
-
-
-
-
-
-
P G Whitcutt
(7)
-
5
-
5
-
-
-
-
Total alternate directors
-
-
-
-
-
-
-
-
Grand total
349
181
44
574
318
210
52
580
NB: Rounding may result in computational differences
(1)
Where directors' compensation is in South African rands, for the purpose of this annual report, the rand values have been converted to US dollars
using the following year-to-date average rate of exchange: 2006: S1 = R6.7706 and 2005: $1 = R6.4368.
(2)
Salaries are disclosed only for the period from or to which, office is held.
(3)
At the annual general meeting of shareholders held on April 29, 2004, shareholders approved an increase in directors fees with effect from
May 1 2004. Shareholders approved an increase to directors fees at the annual general meeting of shareholders held on May 4, 2007.
Fees payable in 2005 and 2006
Approved fees for 2007
Chairman
$130,000 per annum
$150,000 per annum
Deputy chairman and president
R300,000 per annum
R360,000 per annum*
South African resident members
R110,000 per annum
R135,000 per annum
Non-resident members
$16,000 per annum
$25,000 per annum
*this figure applies to the position of deputy chairman only as the position of president is no longer filled.
(4)
A payment of a travel allowance of $4,000 per meeting is made to non-executive directors who travel internationally to attend board meetings. In
addition, AngloGold Ashanti is liable for the payment of all travel costs.
(5)
In addition, Mr Brayshaw was paid a fee of $2,659 (R18,000) (2005: $2,827 - R18,000) by AGRe Insurance Company Limited, a wholly-owned
subsidiary, as chairman of its audit committee.
(6)
Dr Jonah resigned as an executive director with effect 31 July 2005, but remained a non-executive director. Dr Jonah resigned from the board with
effect from 12 February 2007.
(7)
Member of the investment committee.
163
6C. Board practices
The board of directors
AngloGold Ashanti board comprises a unitary board structure of currently 16 directors who assume complete responsibility
for the activities of the company, including the total risk management framework of the company. The board has a written
charter that governs its powers, functions and responsibilities. The board contains the mix of skills, experience and
knowledge required of a multinational gold company.
Directors’ retirement follows a staggered process with one-third of the directors retiring every three years at the annual
general meeting (AGM). The curriculum vitae of those directors standing for re-election is placed before shareholders at
the AGM to help inform the process of re-election. The board is authorized by the company’s articles of association to
appoint new directors, provided such appointees retire at the next AGM and stand for election by shareholders.
Appointments to the Board are dealt with by the Board as a whole and nominations are submitted by the Nominations
Committee for consideration.
The executive directors are appointed by the board to oversee the day-to-day running of the company through effective
supervision of management. Executive directors are held accountable by regular reporting to the board, and their
performance is measured against pre-determined criteria as well as the performance of their respective business units.
Only executive directors have contracts of employment with the company. There are no contracts of service between the
directors and the company or any of its subsidiaries that are terminable at periods of notice exceeding one year and
requiring the payment of compensation. See “Item 6B.: Compensation – Executive Directors’ Service Contracts”.
Non-executive directors do not hold service contracts with the company.
Non-executive directors provide the board with invaluable and balanced advice and experience that is independent of
management and the executive. The presence of independent directors on the board, and the critical role they play
through representation on key committees such as the Audit and Corporate Governance, Nominations, Political Donations
and Remuneration committees, together with their caliber, experience and standing within the community, ensures that the
company’s interests are served by impartial views that are separate of management and shareholders.
In April 2006, Anglo American plc sold approximately 9 percent of its shareholding in AngloGold Ashanti, thereby reducing
its shareholding to below 50 percent. As a result AngloGold Ashanti is no longer regarded as a controlled company in
terms of the NYSE rules applicable to AngloGold Ashanti. AngloGold Ashanti, however, remains exempt from the
requirement that it should have a majority of its board as independent directors, since as a foreign private issuer listed on
the NYSE it is permitted to follow home rules in lieu of the provisions in the Corporate Governance Standards contained in
the NYSE Listings Manual. The JSE, on which exchange the company has its primary listing, does not require a majority
independent board. Nevertheless, there are a majority of independent directors on the board of AngloGold Ashanti. In
addition, although the NYSE rules require the nominations and remuneration committe es to comprise only independent
directors, foreign private issuers are permitted to follow home country rules in this regard. AngloGold Ashanti complies with
the relevant JSE Listing Requirements, that require the nominations and remuneration committees to comprise non-
executive directors, the majority of whom should be independent.
In terms of board policy, a director will qualify as being independent provided AngloGold Ashanti has not, over the
preceding year, done business in excess of $10 million or 5 percent of the company’s treasury business with the employer
of that director. Furthermore, in compliance with JSE Listings Requirements, an independent director must not be a
representative of a shareholder who has the ability to control or materially influence management and/or the board; not
have been employed by the company or be the spouse of a person employed by the company in an executive role in the
past three years; not have been an advisor to the company other than in the capacity as a director of the company; not be
a material supplier, customer or have a material contractual relationship with the company; and be free of any relationship
that could be seen to materially interfere with their independence. The inde pendent directors on the board of AngloGold
Ashanti during 2006 complied with these requirements and the board determined that such directors have no material
relationship with AngloGold Ashanti.
The board, its committees and the directors, all completed an evaluation process to review their effectiveness. The
chairman of each committee and the chairman of the board led the process of evaluation of the committees and the board
respectively. Both the managing secretary and the company secretary played a critical role in this process.
164
The evaluation of each non-executive director’s performance was led by the board chairman, while the assessment of the
board chairman’s performance was led by the deputy chairman of the board. The evaluation of the performance of
executive directors is performed by the Remuneration Committee. For full details, see “Remuneration Committee” below.
A managing secretary and company secretary have been appointed to assist the board in its deliberations, informing
members of their legal duties and ensuring, together with the executive directors and senior management that its
resolutions are carried out. Together with the investor relations department, the company secretarial function also provides
a direct communications link with investors and liaises with the company’s share registrars on all issues affecting
shareholders. The company secretarial function, in consultation with other departments, furthermore, provides mandatory
information required by various regulatory bodies and stock exchanges on which the company is listed. The managing
secretary and company secretary are responsible for compliance with all the statutory requirements in regard to the
administration of the Share Incentive Scheme. The managing secretary and company secretar y ensure that minutes of all
meetings of the shareholders, board and board committees are properly recorded in accordance with the South African
Companies Act of 1973. The company secretarial and compliance functions also play a crucial role in the induction of new
directors.
The compliance function has been established to assist the board and the management to determine their statutory duties,
ensure legal compliance and advise on issues of corporate governance.
All members of the board have access to management and the records of the company, as well as to external professional
advisors should the need arise.
The board meets at least on a quarterly basis to discuss and review issues of strategy, planning, operational and financial
performance, acquisitions and disposals, major capital expenditure, stakeholder communications and other material issues
reserved for its decision. Further meetings are held as and when required. Eight board meetings took place during the
course of 2006. All directors or their designated alternates attended the board meetings during their tenure except for
Mr Médori who was unable to attend five meetings, Mr Thompson and Dr Jonah who were unable to attend four,
Messrs Arisman and Bannerman and Dr Motlatsi who were unable to attend three and Messrs Brayshaw, Edey, Nairn,
Trahar and Prof Nkuhlu who were unable to attend two. The non-executive directors met during the year in the absence of
executive directors and management and under the stewardship of the independent chairman of the board.
AngloGold Ashanti does not permit directors and key employees (that is, employees having access to price sensitive
information) to trade in company shares during closed periods. Directors and key employees are required to follow a formal
process before trading in the company’s shares. Closed periods are in effect from the end of the reporting period to and
including the date of publication of the quarterly, half-yearly and year-end results. Where appropriate, a closed period is
also effective during periods where major transactions are being negotiated and a public announcement is imminent.
The articles of association of AngloGold Ashanti provide for the following:
• AngloGold Ashanti may in a general meeting elect any person to be a director to fill a casual vacancy;
• The directors have the power to appoint any person as a director, either to fill a casual vacancy or as an addition to the
board. The articles of association contain no provision for a maximum number of directors;
• The articles of association contain no provision for directors to hold qualification shares;
• The directors are entitled to remuneration as determined by AngloGold Ashanti shareholders, by ordinary resolution in
a general meeting; and
• The directors may, from time to time, borrow or raise sums of money for the purposes of AngloGold Ashanti.
Board Committees
To facilitate the activities and deliberations of the board, the board has established a number of committees, comprising
members of the board, with written terms of reference governing the powers, functions and activities of each committee. A
description of each committee is provided below.
Members of the board committees have access to management and the records of the company, as well as to external
professional advisors should the need arise.
165
The Audit and Corporate Governance Committee
The Audit and Corporate Governance Committee, inclusive of its chairman, comprises five independent non-executive
directors as recommended by the JSE Listings Requirements and the Sarbanes-Oxley Act. The Sarbanes-Oxley Act
requires the board to identify a financial expert from its ranks. The board resolved that Mr Brayshaw, chairman of the
committee, and Prof Nkuhlu, the deputy chairman of the committee, were the board’s financial experts. Following
Mr Brayshaw’s retirement from the board on May 4, 2007, Prof Nkuhlu has become the chairman of the committee and is
the sole financial expert.
All members of the committee have considerable financial knowledge and experience to help oversee and guide the board
and the company in respect of the audit and corporate governance disciplines.
In relation to independent directors’ membership of the committee, AngloGold Ashanti deviates from the guidelines of the
King Code but complies with the requirements of the Sarbanes-Oxley Act as the chief executive officer is not a member of
the committee but, if required, may attend by invitation from the chairman of the committee. In addition, AngloGold Ashanti
deviates from the guidelines of the King Code in that the board chairman is a member of the committee. The board
considers that the board chairman possesses invaluable experience and knowledge warranting his membership of the
committee.
The group internal audit manager has unrestricted access to the chief executive officer and chief financial officer, the board
chairman and the chairman of the committee, and is invited to attend and report on his department’s activities at all
committee meetings. The board is confident that the unfettered access of the group internal audit manager to key board
members, and the direct and regular reporting to the committee, together with his caliber, experience and integrity, enables
him to discharge his duties as required by law and in fulfillment of his obligations to the company. The function, duties and
powers of the internal audit function, for which the group internal audit manager is responsible, are governed by a formal
internal audit charter that has been approved by the committee. In addition, the group internal audit manager meets with
committee members in the absence of management.
The committee meets regularly with the external audit partner, the group’s internal audit manager and the group senior
financial manager, to review the audit plans of the internal and external auditors, to ascertain the scope of the audits and to
review the half-yearly financial results, significant legal matters affecting the company, the preliminary announcement of
the annual results and the annual financial statements, as well as all statutory submissions of a financial nature, prior to
approval by the board.
The committee is furthermore, responsible for:
·
the appointment and dismissal of the external auditors; determining and approving external auditors’ fees; overseeing
the work of the external auditors; determining all non-audit work of the external auditors, and pre-approving non-audit
fees to be paid to the external auditors; and ensuring that the external auditors report regularly to the committee;
· overseeing the internal audit function; receiving regular report back from the group internal audit manager;
appointment and dismissal of the group internal audit manager;
·
assessing and reviewing the company’s risk management framework; and
·
monitoring the group’s corporate governance practices in relation to regulatory requirements and guidelines.
The external auditors also meet with the committee members in the absence of management, the chief executive officer
and chief financial officer.
Members of the committee are:
·
Colin Brayshaw (chairman);
·
Prof Wiseman Nkuhlu (deputy chairman);
· FrankArisman;
· ElisabethBradley;and
· RussellEdey.
166
The committee met on eight occasions during 2006. All members of the committee attended each of the committee
meetings, except for Mr Edey who could not attend one meeting. In addition, three meetings of the Audit and Corporate
Governance sub-committee were held.
The NYSE rules require that the board determine whether a member of the committee’s simultaneous service on more
than three public companies’ audit committees impairs the ability of such a member to effectively serve on a listed
company’s audit committee. Mr Brayshaw, the chairman of the committee, is a member of nine (2005: eight) other public
companies’ audit committees and is chairman of five (2005: four). Mrs Bradley is a member of three (2005: three) other
public companies’ audit committees and is the chairman of one (2005: one). Mr Brayshaw is a retired managing partner
and chairman of Deloitte & Touche, while Mrs Bradley, who is semi-retired, has considerable financial and accounting
experience. The board is confident that the experience, caliber and integrity of both Mr Brayshaw and Mrs Bradley,
together with their regular attendance and active contribution at meetings of the committee, demonstrate their commitment
to the company’s affairs and particularly to the deliberations of the committee. The simultaneous service on other audit
committees by Mr Brayshaw and Mrs Bradley has not impaired their ability to diligently execute their responsibilities to the
committee, the board or the company.
Employment Equity and Development Committee
The committee is responsible for overseeing the company’s performance in respect of employment equity by taking into
account the legal requirements of applicable legislation and monitoring targets set by the company. The committee is also
responsible for skills development of employees in a manner that seeks to retain and develop talent, and to provide
employees with the opportunity to enhance their skills and knowledge.
Members of the committee are:
· Dr James Motlatsi (chairman);
· Frank Arisman;
· Roberto Carvalho Silva;
· Bobby Godsell;
· Bill Nairn; and
· Neville Nicolau.
Lazarus Zim resigned from the committee on his resignation from the board on August 4, 2006.
The committee met on four occasions during 2006. All members of the committee attended each meeting except for
Mr Zim who was unable to attend two meetings and Dr Motlatsi and Messrs Nicolau, Nairn and Carvalho Silva who were
unable to attend one meeting each.
The Executive Committee
The committee is responsible for overseeing the day-to-day management of the company’s affairs and for executing the
decisions of the board. For details of the composition of the committee see “Item 6A.: Directors and senior management –
Executive committee”.
The Management Committee, responsible for overseeing the operational performance of the company, is a subcommittee
of the Executive Committee – see Other committees.
The Investment Committee
The committee is responsible for overseeing and reviewing strategic investments of the company.
Members of the committee are:
· Russell Edey (chairman);
· Elisabeth Bradley;
· RobertoCarvalhoSilva;
· Dr Sam Jonah;
· Bill Nairn;
· Neville Nicolau;
· Simon Thompson;
· Srinivasan Venkatakrishnan; and
· Peter Whitcutt.
167
Kelvin Williams resigned from the committee on retirement from the board on May 6, 2006. Roberto Carvalho Silva and
Neville Nicolau were appointed to the committee on July 27, 2006.
The committee met on two occasions during 2006. All members attended meetings of the committee except Mr Thompson
who was unable to attend two meetings and Dr Jonah and Mr Nairn who were unable to attend one meeting each.
The Market Development Committee
The committee has been established to extend the influence of AngloGold Ashanti as a major global gold company, in the
development of a broader gold business, both nationally and internationally.
Members of the committee are:
· Elisabeth Bradley (chairman);
· Frank Arisman;
· Roberto Carvalho Silva;
· Bobby Godsell;
· Dr Sam Jonah; and
· Dr James Motlatsi.
Kelvin Williams resigned from the committee on retirement from the board on May 6, 2006 and Lazarus Zim resigned from
the committee on his resignation from the board on August 4, 2006.
The committee met on two occasions during 2006. All members attended meetings of the committee except for Dr Jonah
who was unable to attend two meetings and Dr Motlatsi and Mr Zim who were unable to attend one meeting each.
The Nominations Committee
The appointment of directors is a matter for the board as a whole but the committee is responsible for determining and
recommending suitable candidates to the board. The fit and proper standards policy for directors guides this process. The
committee is also responsible for establishing and reviewing succession plans for members of the board, and particularly
that of the chief executive officer and board chairman.
Members of the committee are:
· Russell Edey (chairman);
· Frank Arisman;
· Reginald Bannerman;
· Elisabeth Bradley;
· Colin Brayshaw;
· James Motlatsi; and
· Tony Trahar.
Reginald Bannerman was appointed on the committee on May 5, 2006.
The committee met on one occasion during 2006. All members attended meetings of the committee except for Dr Motlatsi
who was unable to attend the meeting.
The Political Donations Committee
The membership of the Political Donations Committee comprises three independent non-executive directors, and is
chaired by the deputy chairman of the board. The committee determines the funding of political parties in South Africa in
accordance with a formal policy adopted by the board on April 29, 2003, that sets the guiding principles for funding.
Members of the committee are:
· Dr James Motlatsi (chairman);
· Elisabeth Bradley; and
· Colin Brayshaw.
The group’s strategy on political funding is under review, and consequently, the committee did not meet in 2005 or in 2006.
The committee did not meet in 2004, as a decision on funding for both 2003 and 2004 was made in December 2003.
168
The Remuneration Committee
The Remuneration Committee is responsible for evaluating the performance of the executive directors and executive
officers, and setting appropriate remuneration for such officers of the company. See “Item 6B.: Compensation” for full
details of the company’s remuneration philosophy, the committee’s deliberations during 2006, the remuneration payments
for all directors and information on the share incentive scheme.
For 2006, members of the committee comprised the following non-executive directors:
·
Russell Edey (chairman);
· ReginaldBannerman;
· ColinBrayshaw;and
· TonyTrahar.
Reginald Bannerman was appointed on the committee on May 5, 2006.
The committee met on three occasions in 2006. All members of the committee attended meetings of the committee, except
Messrs Brayshaw and Trahar who were unable to attend one meeting each.
All meetings of the committee are attended by the chief executive officer and executive officer: human resources, except
when their own remuneration or benefits are being discussed.
The Safety, Health and Sustainable Development Committee
This committee is tasked with overseeing the company’s performance in respect of safety, health and sustainable
development, and for establishing targets in relation to each of these areas.
Members of the committee are:
· BillNairn(chairman);
· BobbyGodsell;
· DrSamJonah;
· Dr James Motlatsi;
· NevilleNicolau;and
· SimonThompson.
The committee met on four occasions during 2006. All members of the committee attended each committee meeting
except for except for Messrs Godsell, Nicolau and Thompson who were unable to attend one meeting each and Dr Jonah
and Dr Motlatsi who was unable to attend two and three meetings respectively.
Other committees
In addition to the committees of the board mentioned above, the Executive Committee has established a number of
standing committees to oversee the day-to-day management of the company’s affairs.
Management committee
The objective of this sub-committee is to monitor and review the operational performance of the company. The committee
meets on a monthly basis, is chaired by the chief executive officer and comprises all executive officers of the company and
regional heads.
Finance committee
This committee, which meets on a regular basis, is chaired by the chief financial officer and comprises a number of
executive officers and senior management in the financial and legal fields. It is tasked with monitoring all financial, legal
and administrative aspects of the company’s affairs. The company secretary attends meetings of the committee.
Treasury committee
The committee is chaired by an independent director, Mr Brayshaw, and comprises executive officers and senior
management in the financial and marketing disciplines. It is responsible for reviewing and evaluating market conditions,
treasury operations and future hedging strategies.
169
Risk management and internal controls
The board, which has ultimate responsibility for the total risk management process within the group, reviews and approves
the risk strategy and policies that are formulated by the executive directors and senior management. Management is
accountable to the board and has established a group-wide system of internal control to manage significant group risk.
This system assists the board in discharging its responsibility for ensuring that the wide range of risks associated with the
group’s global operations are effectively managed. The risk management policies are communicated to all relevant
employees.
A full review of the risk, control and disclosure processes is undertaken annually to ensure that all additional requirements
are incorporated into the system in the future. The systems are in place and the focus is on ensuring that the requirements
of the King Code and the Sarbanes-Oxley Act are complied with timeously. In conducting its annual review of the
effectiveness of risk management, the board considers the key findings from the ongoing monitoring and reporting
process, management assertions and independent assurance reports. The board also takes account of material changes
and trends in the risk profile, and considers whether the control system, including reporting, adequately supports the board
in achieving its risk management objectives. The board furthermore, receives assurance from the Audit and Corporate
Governance Committee, which derives its information, in part, from regular internal and external audit reports on risk and
internal control throughout the group.
The company has a sound system of internal control, based on the group’s policies and guidelines, in all material
subsidiaries and joint ventures under its control. In respect of those entities in which AngloGold Ashanti does not have a
controlling interest, the directors who represent AngloGold Ashanti on the boards of these entities seek assurance that
significant risks are being managed.
The board is satisfied that there is an ongoing process for identifying, evaluating and managing the significant risks and
internal controls faced by the group and if any weaknesses are identified, these are promptly addressed.
The company’s chief executive and chief financial officers are both required, in terms of the Sarbanes-Oxley Act, to certify
on Form 20-F that its financial statements present a true and fair view, in all material respects, of the company’s financial
position, cash flows and operational results, in accordance with relevant accounting standards. The certificates further
provide that both officers are responsible for establishing and maintaining disclosure and internal controls and procedures
for financial reporting. The certification process is pre-approved by the board of directors prior to filing of the Form 20-F
with the SEC.
The following policies pertaining to directors and senior management are available on the company website:
www.AngloGoldAshanti.com under About -> Corporate Governance -> Guidelines:
· Boardcharter;
·
Policy on political donations;
·
Directors’ induction policy;
·
Fit and proper standards for directors and company secretaries policy;
·
Professional advice for directors policy;
·
Market abuse (Insider trading) policy;
·
Code of ethics;
·
Code of ethics for the chief executive officer, principal financial officer and senior financial officers;
·
Confidential reporting policy; and
· Disclosurespolicy.
170
6D. Employees
AngloGold Ashanti is a significant employer in the global mining industry and:
·
is committed to upholding the Fundamental Rights Conventions of the International Labor Organization. Accordingly,
the company seeks to ensure the implementation of fair employment practices group-wide by prohibiting forced,
compulsory or child labor;
·
is committed to creating workplaces free of harassment and unfair discrimination;
· as an international company, faces different challenges in different countries with regard to, for example, offering
opportunities to citizens who may not have enjoyed equal opportunities in the past. In such cases, the company is
committed to addressing the challenge in a manner appropriate to the local circumstances;
·
will seek to understand the different cultural dynamics in host communities and adapt work practices to accommodate
this where doing so is possible and compatible with the company’s principles;
·
will promote the development of a work force that reflects the international and local diversity of the organization;
·
will provide all employees with the opportunity to participate in training that will improve their workplace competency;
·
is committed to ensuring that every employee has the opportunity to become numerate and functionally literate in the
language of the workplace;
· is committed to developing motivated, competent and experienced teams of employees through appropriate
recruitment, retention and development initiatives. An emphasis is placed on the identification of potential talent,
mentoring and personal development planning;
·
will reward both individual and team effort in a meaningful way;
· will, guided by local circumstances, continue to work together with stakeholders to ensure minimum standards for
company-provided accommodation;
·
assures access to affordable health care for employees and where possible, their families; and
· is committed to prompt and supportive action in response to any major health threat in the regions in which the
company operates.
The average number of attributable employees in the AngloGold Ashanti group over the last 3 financial years was:
2006 2005
2004
South Africa
35,968 40,754
43,282
Argentina
906 946
791
Australia
479 393
371
Brazil
4,4283,371
2,598
Ghana
9,443 10,180
8,712
Guinea
2,708 1,978
2,335
Mali
1,4731,309
1,413
Namibia
313 315
251
Tanzania
3,2202,280
2,258
USA
369 357
387
Zimbabwe
- -745
Other*
2,146 2,110
2,257
Total
61,45363,993
65,400
*including corporate and other non-gold producing subsidiaries
The change in employees numbers from 2005 to 2006 was largely a result of the go-ahead for Boddington project in
Australia and change in shaft arrangements at Sunrise Dam, the expansion at Cuiabá in Brazil; the sale of Bibiani in
Ghana, retrenchments at Obuasi and natural attrition; and the full impact of transition to owner-mining in Tanzania.
The change in employee numbers from 2004 to 2005 was largely as a result of restructuring at the South African
operations, in particular, the closure of Ergo and the beginning of the closure process at Savuka; the transition to owner
maintenance crews resulting in duplication of crews for some months in Argentina, while the Cuiabá Expansion project
resulted in an increase in Brazil; the transition to owner-mining at Geita in Tanzania; and the downscaling of operations at
Iduapriem and Bibiani in Ghana.
171
Employees and other stakeholder engagement
The company has in place a variety of strategies and structures that are designed to promote constructive engagement
with employees and other stakeholders. These strategies and structures are further developed and adapted from time to
time to meet variations in legislation, operational requirements and to accommodate changing circumstances.
Management and employee representatives meet in formal and informal forums at company and operational levels to
share information and to address matters of mutual interest.
Unions and collective bargaining
It is the aim of AngloGold Ashanti to have constructive relations with representative and recognized unions and
associations and industry forums representing employees. Management/Union relationships are governed by negotiated
agreements in respect of most of the group’s workforce, with 85.6 percent (2005: 89.4 percent) of the global workforce
represented by recognized trade unions or catered for through collective bargaining processes.
South African operations
The South African gold mining industry continues to remain labor intensive, with 97.8 percent (2005: 95 percent) of all
employees either represented by unions or catered for by the collective agency shop agreement – an agency shop
agreement exists across the lower level bargaining unit within the company. The Labor Relations Act entrenches the rights
of employees to belong to trade unions and the rights of trade unions to have access to the workplace. It also guarantees
the right to strike and the right to participate in secondary strikes in certain prescribed circumstances. The right to picket
has also been recognized. The Labor Relations Act recognizes the right of employees to participate in the decision-making
of companies by providing for the compulsory establishment of workplace forums to represent the interests of employees
where a company employs more than 100 employees. The range of issu es on which the workplace forum must be
consulted includes restructuring of the workplace, partial or total plant closures, mergers and transfers of ownership,
insofar as these affect employees, and terminations. The effect of the promulgation of amendments to specific labor laws
in 2002 is predominantly visible in the requirement for a more consultative retrenchment process as well as the broadening
of the definition of an “employee” under the legislation. In addition to compliance with a spectrum of labor legislation,
further compliance is necessary with the newly released Mining Charter.
The implementation of the Labor Relations Act’s provisions has not had, and management believes will continue not to
have, a material adverse effect on AngloGold Ashanti’s cost of labor and consequently on its results and financial
condition, although there can be no assurance of this. See “Item 3D.: Risk factors – Labor disruptions could have an
adverse effect on operating results and financial condition”. With the highly regulated South African market, the costs of
employment are substantial and labor costs at AngloGold Ashanti’s South African operations constituted approximately
50 percent of South African production costs in 2006 (2005: approximately 51 percent).
The four unions that are recognized are the National Union of Mineworkers (NUM), the United Associations of South Africa
(UASA), Mineworkers Solidarity and the South African Equity Workers’ Association (SAEWA), representing respectively
75 percent, 9.2 percent, 3 percent and 0.6 percent (2005: 85.4 percent, 11 percent, 2.6 percent and 1 percent) of
employees in the region.
A two-year agreement, effective July 1, 2005, was entered into between AngloGold Ashanti, through the Chamber of
Mines, NUM and Solidarity. The agreement can be summarized as follows:
·
wage increases of between 6 percent and 7 percent, with the highest increase for the lowest job category;
·
a wage increase in the second year of CPIX plus 1 percent, subject to a minimum guaranteed increase of between
5.5 percent and 6 percent, again depending on the job category;
·
increased employer contributions to the risk benefit within the retirement fund;
·
improvements in accommodation subsidies; and
·
recognition of the principle of a Christmas break, with detail to be agreed at mine level.
172
In October 2006, AngloGold Ashanti submitted its sixth annual employment equity report to the Department of Labor on
progress made with the implementation of the company’s employment equity plan in respect of its South African
operations. The 2006 report indicates that some progress has been made year-on-year. The employment equity
governance structures and monitoring processes have been entrenched at company and business unit levels. A Mining
Charter Steering Committee has been established to lead and direct the overall process of compliance with the Charter.
Argentina
During April 2006, the unionized workers at Cerro Vanguardia interrupted operations through strike activity mainly related
to wages which was followed by sabotage to some of the mining equipment in early May. The CVSA Management team
has been quick to react to both of these events and actions have been put in place to mitigate the risk of these events
recurring including actions to strengthen the relationship both with the employees and the union.
Australia
The Australian operations are not unionized and no industrial action took place during 2006.
Brazil
Annual negotiations on salaries and fringe benefits took place in August 2006.
Ghana
During 2006 new rates of pay were negotiated between the company and the Ghana Mine Workers’ Union and the 3 year
collective bargaining on basic conditions took place. As a result of the negotiations employees were awarded a 12 percent
wage increase.
Guinea
At Siguiri all employees are represented by the Guinean National Mining Union. No membership fees are deducted for
union membership. A five day strike took place at Siguiri during 2006 while the negotiating process was ongoing. The
strike related to disagreements between union leadership. The strike was resolved as senior national union representatives
intervened.
Mali
At the Morila, Sadiola and Yatela mines, all employees are represented by the Mining Industry Union (SECNAMI), and
guided by the National Collective Convention which sets out the minimum employment conditions for employees. Whilst no
specific recognition agreements exists at mine level at Morila, Sadiola or Yatela mines, where 95 percent of employees are
represented through SECNAMI, internal agreement provides for adaptation to the National Convention.
No industrial actions were experienced at any of the Malian operations during 2006.
Namibia
At the Navachab mine, a recognition agreement is in place with the Mineworkers Union of Namibia (MUN), and the union
bargains with the company on behalf of all employees in the A2 to C3 Paterson bands. Approximately 75 percent of the
workforce are members of MUN. A 1 year wage agreement was signed in 2006, allowing for a 7 percent wage increase.
During 2006 a 2 day stay away was staged whereby the workforce demanded the removal of two of the mines senior
managers. An investigation by an independent 3rdparty concluded that the allegations against the managers were
unfounded. Aside from the 2 day stay away a positive labor relations climate prevailed at the mine during the year.
Tanzania
Monthly meetings are held between senior and junior staff representative councils and the general manager. In addition,
safety representative committees and joint health and safety structures are in place and a monthly consultative meeting is
held with all senior staff to discuss the mine’s performance and other operational issues. An access agreement has existed
with TAMICO since 2003. Membership figures have varied between 2-5 percent of the workforce.
USA
In the USA, the workforce is not unionized. Communication with and participation by employees in employee meetings with
management is encouraged. No incidences of industrial action were experienced during 2006.
173
6E. Share ownership
Share ownership of directors
Directors held the following number of ordinary shares of the company at December 31, 2006 and 2005, which did not
individually or in the aggregate exceed 1 percent of the company's issued ordinary share capital:
December 31, 2006
December 31, 2005
Beneficial
Beneficial
Beneficial Beneficial
Direct
Indirect
Non-
beneficial
(1)
Direct Indirect
Non-
beneficial
(1)
Executive directors
JG Best (retired August 1, 2005)
–
–
–
–
–
–
R Carvalho Silva (appointed May 1, 2005)
–
–
–
–
–
–
R M Godsell
13 010
–
–
9,177
–
–
DL Hodgson (retired April 29, 2005)
430
SE Jonah (until July 31, 2005)
–
–
–
–
–
–
N F Nicolau (appointed May 1, 2005)
3 000
–
–
100
–
–
S Venkatakrishnan (appointed August 1, 2005)
652
–
–
652
–
–
K H Williams (retired May 6, 2006)
–
–
–
920
–
Total 16
662
–
–
9,929 1,350
–
Non-executive directors
F B Arisman
–
2,000
–
–
2,000
–
R E Bannerman
–
–
–
–
–
–
Mrs E le R Bradley
–
23,423
3,027
–
23,423
3,027*
C B Brayshaw
–
–
–
–
–
–
R P Edey
–
1,000
–
–
1,000
–
Dr S E Jonah (from August 1, 2005)
18,469
–
6,297
–
–
AW Lea (until July 31, 2005)
–
–
–
–
–
–
R Médori (appointed August 1, 2005)
–
–
–
–
–
–
J H Mensah
–
–
–
–
–
–
Dr T J Motlatsi
–
–
–
–
–
–
W A Nairn
–
–
–
–
–
–
W L Nkuhlu
–
–
–
–
–
–
S R Thompson
–
–
–
–
–
–
A J Trahar
–
–
–
–
–
–
P L Zim (resigned August 4, 2006)
–
–
–
–
–
–
Total 16,662
44,892
3,027
6,297
26,423
3,027*
Alternate directors
DD Barber (resigned August 4, 2006)
A H Calver
–
–
–
–
46
–
P G Whitcutt
–
–
–
–
–
–
Total –
–
–
–
46
–
Grand Total
16,662
44,892
3,027
16,226
27,819
3,027*
(1)
The director derives no personal benefit from the ordinary shares declared, for example by holding the ordinary shares in trust for another.
* Restated.
As of June 25, 2007, there have been no changes in the directors’ ownership of ordinary shares, set forth above and
Mrs C Carroll and Mr S M Pityana, who were appointed on March 1, 2007 and February 13, 2007 respectively, hold no
interest in the company’s ordinary shares
.
Share ownership of executive officers
Under the Listings Requirements of the JSE, AngloGold Ashanti is not required to disclose, and it does not otherwise
disclose or ascertain, share ownership of individual executive officers in the share capital of AngloGold Ashanti. However,
to the best of its knowledge, AngloGold Ashanti believes that AngloGold Ashanti ordinary shares held by executive officers,
in aggregate; do not exceed 1 percent of the company's issued ordinary share capital.
174
Share ownership of employees
At a general meeting of shareholders held on December 11, 2006, members approved the creation of 4,280,000 new
E ordinary shares of 25 South African cents pursuant to an employee share ownership plan for the benefit of certain
AngloGold Ashanti employees, of which the majority are historically disadvantaged South Africans as defined in the
Broad-Based Socio-Economic Empowerment Charter for the South African Mining Industry.
On December 15, 2006, 2,785,770 E ordinary shares were issued to the Bokamoso ESOP Trust which holds these shares
on behalf of approximately 31,000 employees.
AngloGold Share Incentive Scheme
AngloGold Ashanti operates a share incentive scheme for the purpose for providing an incentive to executive directors,
executive officers and managers to identify more closely with the fortunes of the group and its continued growth, and to
promote the retention of such employees by giving them an opportunity to acquire ordinary shares in the company.
Non-executive directors are not eligible for participation in the share incentive scheme.
The incentives offered by AngloGold Ashanti are reviewed periodically to ensure that these incentives are globally
competitive, so as to attract, reward and retain management of the highest caliber. As a result, several types of incentives,
each with their own issue and vesting criteria have been granted to employees – collectively known as the AngloGold
share incentive scheme or share incentive scheme.
Under the terms of the AngloGold share incentive scheme, which was approved by the shareholders at the general
meeting held on June 4, 1998, and with the introduction of the Bonus share plan and Long-term incentive plan approved by
the shareholders at the annual general meeting held on April 29, 2005, the maximum number of ordinary shares that may
be allocated for the purposes of the share incentive scheme is equivalent to 2.75 percent of the total number of AngloGold
Ashanti ordinary shares in issue at any time. As of December 31, 2006 and 2005, this equated to 7,596,494 and 7,285,807
ordinary shares, respectively.
At the annual general meeting held on April 29, 2005, shareholders approved the amendment to the maximum aggregate
number of ordinary shares which may be acquired by any one participant from 300,000 to 5 percent of the 2.75 percent
attributable to the share incentive scheme (or 0.1375 percent of the total number of ordinary shares in issue at any one
time).
Employees participate in the scheme to the extent that they are granted options, shares or rights and accept them. All
options or rights which have not been exercised within ten years from the date on which they were granted automatically
expire, unless otherwise stated.
Although the remuneration committee has the discretion to incentivize employees through the issue of shares, only options
or rights have so far been granted. The type and vesting criteria of the options or rights granted are:
Time-related
The granting of time-related options was approved by shareholders at the general meeting held on June 4, 1998 and
amended by shareholders at the annual general meeting held on April 30, 2003, at which time it was agreed that no further
time-related options would be granted. All options granted hereunder will terminate on February 1, 2012, being the date on
which the last options granted under these criteria may be exercised or will expire. Each time-related option entitles the
holder to acquire one ordinary share at a price equal to the closing price of ordinary shares on the JSE on the last business
day prior to the date of grant.
Time-related options vest over a five-year period from date of grant, and may be exercised in tranches of 20 percent each
in years 2, 3 and 4 and 40 percent in year 5.
Performance-related
Performance-related options were approved by shareholders at the annual general meeting held on April 30, 2002 and
amended at the annual general meeting held on April 29, 2005 at which time it was agreed that no further
performance-related options would be granted. All options granted hereunder will terminate on November 1, 2014, being
the date on which the last options granted under these criteria may be exercised or will expire. Each performance-related
option entitles the holder to acquire one ordinary share at a price equal to the closing price of ordinary shares on the JSE
on the last business day prior to the date of grant.
175
Performance-related options may be exercised in full, three years after date of grant, provided that the conditions on which
the options were granted, namely the performance of the company as determined by the directors at date of grant, are
met.
Bonus share plan (BSP)
The granting of rights in terms of the BSP was approved by shareholders at the annual general meeting held on
April 29, 2005. Executive directors, executive officers and other management groups are eligible for participation. Each
award made in respect of the BSP entitles the holder to acquire one ordinary share at “nil” cost. Awards granted vest in full,
three years from date of grant, provided that the participant is still in the employ of the company at the date of vesting,
unless an event occurs which may result in an earlier vesting, such as death.
Long-term incentive plan (LTIP)
The granting of rights in terms of the LTIP was approved by shareholders at the annual general meeting held on
April 29, 2005. Executive directors, executive officers and selected senior management are eligible for participation. Each
award made in respect of the LTIP entitles the holder to acquire one ordinary share at “nil” cost. Options granted vest three
years after date of grant, to the extent that the performance conditions under which the options were granted, are met, and
provided that the participant is still in the employ of the company, or unless an event occurs which may result in an earlier
vesting, such as death.
The AngloGold share incentive scheme is summarized as follows:
The maximum number of ordinary shares that may be allocated for purposes of the scheme, equivalent to 2.75 percent of
the total number of ordinary shares in issue at that date, is:
June 25, 2007
December 31, 2006
December 31, 2005
7,612,932 7,596,494 7,285,807
The maximum aggregate number of ordinary shares which may be acquired by any one participant in the share incentive
scheme at that date is:
June 25, 2007
December 31, 2006
December 31, 2005
380,647 379,825 364,291
The movement in respect of options and rights granted and the ordinary shares issued as a result of the exercise of
options and rights during the period January 1, 2006 to December 31, 2006 was as follows:
Time-
related
Performance-
related
Bonus
share
plan
Long-
term
incentive
plan
Total
Average
exercise
price per
ordinary
share – R
Ordinary
shares
issued
At January 1, 2006
864,710
2,897,000
271,945
363,500
4,397,155
216.71
2,715,678
Movement
during
year
- Granted
-
-
254,110
316,675
570,785
318.32
-
- Exercised
389,850
4,300
4,249
-
398,399
129.97
398,399
- Forfeited (terminations)
1,600
306,900
41,221
20,000
369,721
243.77
At December 31, 2006
473,260
2,585,800
480,585
660,175
4,199,820
236.37
3,114,077
During the period January 1, 2007 to and including June 25, 2007, 618,510 options or rights were granted and 592,247
options or rights at an average price of R236.84 per share were exercised.
Option ownership of directors, executive officers and management
Under the Listings Requirements of the JSE, AngloGold Ashanti is required to disclose the option or rights ownership of
individual directors. Under those requirements, AngloGold Ashanti is not required to, and it does not otherwise, disclose
option or rights ownership of individual executive officers and senior management.
176
The table below shows the movement in respect of options or rights held by executive directors on an individual basis, and
by executive officers and managers, each as a group, during 2006. Non-executive directors are not eligible to participate in
the scheme and therefore own no options:
R M Godsell
(1)
R Carvalho
Silva
N F Nicolau
(1)
S Venkat-
akrishnan
Total
directors
Total Executive
officers
(2)
Total other
(2)
Total scheme
Balance at
January 1, 2006*
Number 239,735
54,815
56,635
14,865
366,050
423,415
3,607,690
4,397,155
Average exercise
price per shares – R
117.58 168.98
139.24
-
123.85
147.84
199.43
188.17
Granted during
year
(3)
Number 29,390
14,345
14,345
14,725
72,805
88,470
409,510
570,785
Average exercise
price per share – R
-
-
-
-
-
-
-
-
Exercised during
year
Number9,200
-
17,600
-
26,800
35,700
335,899
398,399
Average exercise
price per share – R
104.00
-
147.69
-
132.69
131.38
127.73
128.39
Average market
price per share at
date of exercise– R
343.62 -
345.00
-
344.52
341.75
329.82
331.88
Pre-tax gain at date
of exercise – R
value (R000)
2,204,467.20
-
3,472,640.00
-
5,677,107.20
7,510,106.73 67,884,192.29 81,071,406.22
Forfeited
(terminations)
during year
6,306 363,415 369,721
Number
- -
-
-
-
Average exercise
price per share – R
-
-
-
-
-
-
210.22
206.64
Held as at
December 31, 2006
Number 259,925
69,160
53,380
29,590
412,055
469,879
3,317,886
4,199,820
Average exercise
price per share – R
104.76 133.93
99.04
-
101.39
123.24
180.89
166.64
Latest expiry date
July 31, 2016
July 31, 2016
July 31, 2016
July 31, 2016
July 31, 2016 March 8, 2016
(1)
On exercising of options granted in terms of the AngloGold share incentive scheme, Messrs Godsell and Nicolau applied proceeds from the sale
of the shares to acquire 3,833 (2005: 8,717) and 2,900 AngloGold Ashanti shares respectively.
(2)
As a result of the change in status, the following movements to opening balance were made:
Quantity
Average value
Average exercise
-From director status to other management
- From other management to executive officer
- From executive officer to other management
117,230
33,080
12,000
22,050,400.00
4,699,410
3,445,380
188.10
142.06
287.12
(3)
Awards granted in 2005 and 2006 are granted at nil cost to participant
Of the 4,199,820 options or rights granted and outstanding at December 31, 2006 2,147,660 options are fully vested and 911,400 options will vest
on November 1, 2007.
177
Item 7: Major shareholders and related party transactions
Overview
Description of AngloGold Ashanti’s share capital
AngloGold Ashanti’s share capital consists of four classes of stock:
• Ordinary shares, par value 25 cents each (the “ordinary shares”);
• E Ordinary shares, par value 25 cents each (the “E ordinary shares”);
• A redeemable preference shares, par value 50 cents each (the “A preference shares”); and
• B redeemable preference shares, par value 1 cent each (the “B preference shares”).
At a meeting of the shareholders held on December 11, 2006 the shareholders approved the increase in the authorized
share capital of the company by the creation of 4,280,000 E ordinary shares with a par value of 25 cents each.
The authorized and issued share capital of AngloGold at December 31, 2006, is set out below:
Title of class
Authorized
Issued
Ordinary shares
400,000,000
276,236,153
E ordinary shares
4,280,000
4,185,770
A preference shares
2,000,000
2,000,000
B preference shares
5,000,000
778,896
All the issued ordinary shares, E ordinary shares, A redeemable preference shares and B redeemable preference shares
are fully paid and are not subject to further calls or assessment by AngloGold Ashanti.
For a discussion of rights attaching to the ordinary shares, E ordinary shares, A redeemable preference shares and
B redeemable preference shares, see “Item 10B.: Memorandum and Articles of Association”.
The following are the movements in the issued ordinary share capital at December 31.
2006
2005
2004
Issued
Number of
ordinary
shares
Rand
Number of
ordinary
shares
Rand
Number of
ordinary
shares Rand
At January 1,
264,938,432
66,234,608 264,462,894
66,115,724 223,136,342
55,784,086
Issues during year
– Business combination with Ashanti
-
share-swap
–
–
–
–
38,400,021 9,600,005
-
regulatory
shares
–
–
–
– 2,658,000 664,500
-
exercise
of
warrants
–
–
–
–
75,731
18,933
– Equity Raising
9,970,732
2,492,683
–
–
–
–
Exercise of options by participants in the
- AngloGold Share Incentive Scheme
398,399
99,600
475,538
118,884
192,800
48,200
- Employment Share Ownership
Plan/Black Economic empowerment
transaction
928,590
232,147
At December 31,
276,236,153
69,059,038 264,938,432
66,234,608 264,462,894
66,115,724
During the period January 1, 2007 to and including June 25, 2007, 597,730 ordinary shares were issued at an average
issue price of R249 per share, resulting in 276,833,883 ordinary shares being in issue at June 25, 2007.
178
7A.Major shareholders
According to information available to the directors, the following are the only shareholders beneficially holding, directly or
indirectly, more than 5 percent of the ordinary share capital of the company at December 31:
Ordinary shares held at
December 31, 2006
December 31, 2005
December 31, 2004
Shareholder Number
%
voting
rights
Number %
voting
rights
Number %
voting
rights
Anglo American plc
115,102,929
41.67
134,788,099
50.88
134,788,099
50.97
The Bank of New York *
73,559,916
26.63
48,702,313
18.38
45,217,297
17.10
*
Ordinary shares held through various custodians in respect of American Depositary Shares issued by The Bank of New York. At December 31, 2006, the
number of persons who were registered holders of ADSs was reported at 4,186. AngloGold Ashanti is aware that many ADSs are held of record by
brokers and other nominees, and accordingly the above numbers are not necessarily representative of the actual number of persons who are beneficial
holders of ADSs or the number of ADSs beneficially held by these persons.
The company’s major shareholders have the same voting rights as other holders of AngloGold Ashanti ordinary shares and
do not have any different or special voting rights. During April 2006, Anglo American plc sold approximately 9 percent
(19,685,170 ordinary shares) of its shareholding in AngloGold Ashanti.
As at December 31, 2006, there were 19,250 holders of record of AngloGold Ashanti ordinary shares. Of these holders
393 had registered addresses in the United States and held a total of 74,756 ordinary shares, approximately 0.027 percent
of the total outstanding ordinary shares. In addition, certain accounts of record with registered addresses outside the
United States, including The Bank of New York, hold AngloGold Ashanti ordinary shares, in whole or in part, beneficially for
United States persons.
At June 25, 2007, Anglo American plc, through its wholly-owned subsidiary, Anglo South Africa Capital (Pty) Limited held
115,102,929 ordinary shares, representing 41.59 percent of the issued share capital while 69,144,000 ADSs, or
approximately 25 percent of the total issued ordinary share capital, were issued and outstanding and held of record by
approximately 4,000 registered holders.
At December 31, 2006, the Government of Ghana held 9,031,650 shares, representing 3.41 percent of the issued share
capital. These shares were issued pursuant to the Business Combination with Ashanti. At June 25, 2007, the Government
of Ghana’s holding was unchanged at 9,031,650 shares, representing 3.26 percent of the issued share capital.
All the issued A and B preference shares are held by Eastvaal Gold Holdings Limited, AngloGold Ashanti’s wholly-owned
subsidiary. The articles of association of AngloGold Ashanti provide that the A redeemable preference shares and the
B redeemable preference shares are not transferable.
The E Ordinary shares are held by Izingwe Holdings (Proprietary) Limited, an empowerment company and the Bokamoso
ESOP Trust, which holds the shares on behalf of employees who qualify in terms of the BEE transaction as approved by
the AngloGold Ashanti shareholders on December 11, 2006. Neither the Bokamoso ESOP Trust nor Izingwe Holdings
(Proprietary) Limited may sell their shares or any portion of their shares without the written consent of AngloGold Ashanti.
Insofar as is known to AngloGold Ashanti as of December 31, 2006, there was no person who, directly or indirectly, jointly
or severally, exercised or could exercise control over AngloGold Ashanti, nor is AngloGold Ashanti aware of any
arrangements which might result in a change in control of AngloGold Ashanti.
Relationship with Anglo American plc (AA plc) and its subsidiaries
AA plc is the largest shareholder of AngloGold Ashanti with an equity interest and voting rights of 41.67 percent as at
December 31, 2006 (2005: 50.88 percent). Although there is no current agreement between AngloGold Ashanti and AA plc
concerning membership on the AngloGold Ashanti board of directors by AA plc, AA plc indicated, in their 13D filing with the
SEC on May 26, 2006, that the number of members affiliated with AA plc on AngloGold Ashanti’s board of directors may
be reduced as AA plc’s percentage ownership in AngloGold Ashanti declines. In April 2006 AA plc sold approximately
9 percent of its shareholding in AngloGold Ashanti. On February 21, 2007, AA plc stated that it intends to reduce and
ultimately to exit its gold company holdings and that it will continue to explore all available options to exit AngloGold
Ashanti in an orderly manner.
179
Currently, two members of the board of directors of AngloGold Ashanti are affiliated with AA plc. Mr Tony Trahar retired on
May 4, 2007 at the annual general meeting and Mr Lazarus Zim, together with his alternate Mr David Barber resigned from
the board on August 4, 2006 following Mr Zim’s move to a non-executive role in Anglo American. Mrs C Carrollwas
appointed a non-executive director, effective from May 5, 2007
AngloGold Ashanti is an operating gold company independent of AA plc to the extent that:
• The management is remunerated by AngloGold Ashanti and incentivized by an AngloGold Ashanti share incentive
scheme;
• Currently, a majority of AngloGold Ashanti’s board of directors are non-executive directors and, including AngloGold
Ashanti’s non-executive chairman, 50 percent of these non-executive directors are not affiliated with AA plc;
• AngloGold Ashanti has the management, financial capacity and resources to carry out all aspects of its ongoing
business activities independent of AA plc;
• Where appropriate, AngloGold Ashanti may purchase selected specialized services from AA plc on normal commercial
and arm’s length terms. However, any such contract with AA plc is subject to the approval of a board sub-committee
consisting entirely of AngloGold Ashanti directors independent of AA plc; and
• AngloGold Ashanti has no service agreements or other contracts in terms of which any turnover or profit related fees
are payable to AA plc.
At the time of its formation, AngloGold acquired from Anglo American Corporation (AAC), a wholly-owned subsidiary of
AA plc, certain unused mineral rights to which little or no value was attached. In terms of the agreements, AAC had the
right to participate in future profits from these mineral rights at such time as these rights were developed or sold. In South
Africa, the introduction of the MPRDA has resulted in all unused mineral rights, for which application for conversion was
not made by the end of April 2005, being vested under the custodianship of the State.
Consequently, other than in respect of those mineral rights in South Africa which have been sold by AngloGold Ashanti to
third parties prior to end April 2005, neither AAC nor AngloGold Ashanti retain any rights in respect of those mineral rights
in South Africa as originally sold by AAC to AngloGold upon its formation.
7B.
Related party transactions
The company had the following transactions with AA plc, subsidiaries of AA plc and the company’s equity accounted joint
ventures, which transactions are concluded on an arm’s length basis:
December 31, 2006
December 31, 2005
December 31, 2004
(in millions)
Purchases
(by)/from
related
party
$
Amounts
owed
to/(by)
related
party
$
Purchases
(by)/from
related
party
$
Amounts
owed
to/(by)
related
party
$
Purchases
(by)/from
related
party
$
Amounts
owed
to/(by)
related
party
$
Related party transaction with significant shareholder AA plc
1
-
5
1
5
-
Related party transactions with subsidiaries of AA plc
(1)
Boart Longyear Limited – mining services
(2)
-
-
5
-
9
1
Mondi Limited – forestry
5
-
16
2
16
2
Scaw Metals – A division of Anglo Operations Limited –
steel and engineering
1
-
6
1
5
1
Haggie Steel Wire Ropes Operations
(3)
1
-
8
1
9
-
Anglo Coal – a division of Anglo Operations Limited
-
-
1
-
1
-
8
-
41
5
45
4
Related party transactions of equity accounted joint ventures
Société d’Exploitation des Mines d’Or de Sadiola S.A.
(2)
(1)
-
-
1
-
Société d’Exploitation des Mines d’Or de Yatela S.A.
(1)
-
-
-
1
-
Société des Mines de Morila S.A.
(2)
-
(2)
-
(1)
-
(1)
Transactions to April 2006.
(2)
AA plc sold their interest in Boart Longyear Limited with effect from July 29, 2005.
(3)
Previously included in Scaw Metals – A division of Anglo Operations Limited.
180
Since January 1, 2006, other than as described in the following two paragraphs, AngloGold Ashanti has not been, and as
of the date of this annual report is not, a party to any material transaction or proposed transaction by which any director,
any other executive officer, any spouse or relative of any of the foregoing or any relative of such spouse had or was to
have direct or indirect material interest.
In connection with the relocation of Roberto Carvalho Silva, an executive director of the company since 2005, to
Nova Lima, Brazil, in 2000, Mr. Carvalho Silva commenced renting a house in Nova Lima from a Brazilian subsidiary of the
company. Mr Carvalho Silva purchased the house from the company’s subsidiary in January 2005. The total purchase
price of the house was BRL1,150,000 ($429,923). Mr. Carvalho agreed to pay the purchase price of the house in
60 installments, the first being BRL19,167.70 and 59 installments of BRL19,166.65 each, starting on January 28, 2005.
Such monthly installments were adjusted annually by the cumulative INPC (a Consumer Price Index in Brazil) in lieu of
interest. As at December 31, 2006, BRL728,580 ($340,458) of the purchase price remained to be paid to the company’s
subsidiary, with BRL657,717 ($341,352) remaining to be paid as at June 20, 2007. At present, the installment payments
are up-to-date. Mr Carvalho Silva and the company have agreed that the remaining balance of the purchase price of the
house will be paid by Mr Carvalho Silva as soon as reasonably practicable and in any event no later than August 31, 2007.
A Brazilian subsidiary of the company received marketing, communications and corporate affairs services from a Brazilian
company in which a son of Roberto Carvalho Silva owns a one-third interest. The total amount paid by the company’s
subsidiary to this company in respect of such services during the years were: 2006: BRL903,465 ($414,433); 2004:
BRL3,944 ($1,351); 2005: BRL311,923 ($127,837); and BRL634,023 (329,055) has been paid to date in 2007. The
company is currently reviewing its relationship with this service provider and the contracts under which such services are
provided.
Registration rights agreement
On March 23, 2006 the company entered into a Registration Rights Agreement with Anglo South Africa Capital
(Proprietary) Limited (Anglo South Africa) under which the company has agreed to file U.S. registration statements for
Anglo South Africa’s offer and sale of shares it holds in the company (each a Demand Registration) if Anglo South Africa
requests the company to do so. The company is required to use all reasonable efforts to file a Demand Registration within
30 days after such a request and to keep it effective for 90 days unless the shares offered pursuant to it are sold earlier.
Further, the company may not offer, sell, allot or issue any shares or other securities that are convertible into or
exchangeable for, or that represent the right to receive, shares, whether pursuant to U.S. registration or otherwise, for a
90-day period immediately following the first closing of an offering pursu ant to a Demand Registration or a shorter period
as may be imposed by underwriters in the Demand Registration; except: (i) in consideration for shares or assets of a
company as part of a merger, acquisition, corporate reorganization or similar transaction, (ii) as required pursuant to the
terms governing the 2.375 percent guaranteed convertible bonds due 2009, issued by AngloGold Holdings plc and
guaranteed by the company, and (iii) in connection with any option, employee bonus, profit sharing, pension, retirement,
incentive, savings or similar plan, agreement or award. The Registration Rights Agreement may be terminated at any time
by written consent by each of the parties thereto. The Registration Rights Agreement shall terminate automatically on the
first date on which Anglo South Africa is no longer an “affiliate” within the meaning of Rule 144 under the United States
Securities Act of 1933, as amended.
7C.
Interests of experts and counsel
Not applicable.
181
Item 8: Financial information
8A.
Consolidated financial statements and other financial information
See “Item 18: Financial statements”.
Legal proceedings
No director or officer of AngloGold Ashanti has either a direct or indirect position adverse to AngloGold Ashanti.
There are no legal or arbitration proceedings in which any member of the AngloGold Ashanti group is or has been
engaged, including any such proceedings which are pending or threatened of which AngloGold Ashanti is aware, which
may have, or have had during the 2006 fiscal year, a material effect on the group's financial position.
The company is involved in the following cases:
·
In the USA, two civil cases brought against the company and others in 2000 and 2001 by the Sierra Club and the
Minerals Policy Center (SC/MPC) for allegedly exceeding certain permit water quality standards or lack of permits for
certain identified flows (in terms of the federal Clean Water Act) at the CC&V mine have been resolved. A trial was
held in February 2006. In April 2006 judgment was entered in favor of AngloGold Ashanti and the other named
defendants against SC/MPC. In December 2006, the federal district court issued an award ordering SC/MPC to pay a
portion of the attorney fees and costs requested by AngloGold Ashanti and the other named defendants.
SC/MPC appealed the decisions to the federal Tenth Circuit Court of Appeals. The parties subsequently fully
executed a settlement agreement as of June 15, 2007. The agreement provides for retention of the liability decision
and fee d ecision at the district court level, termination of the appeals filed to the Tenth Circuit, and receipt of national
contact information of SC and MPC in the unlikely event those organizations decide to sue or pursue litigation against
AngloGold Ashanti and the other named defendants in the next 15 years. In exchange, AngloGold Ashanti and the
other named defendants agreed to waive receipt of any of the attorney fees and costs imposed by the court against
SC/MPC.
·
In South Africa, in April 2005 AngloGold Ashanti launched an urgent application against various mining companies
and government Ministers claiming that the mines upstream from its Vaal River Operations are responsible and liable
for pumping underground water that arises at their mines. AngloGold Ashanti is in the process of finalizing a
settlement agreement with the mining companies which will result in the mining companies setting up a not-for-profit
water company to manage and operate the Margaret Shaft’s water pumping activities. The settlement agreement
requires the mining companies to contribute towards the upgrading of the Margaret Shaft infrastructure.
·
In South Africa, action has been instituted by 19 plaintiffs, against Anglo American Corporation of South Africa Limited
(AACSA) for damages resulting from lung diseases which the plaintiffs allegedly contracted while employed by mining
companies managed by AACSA. There is a possibility that AACSA may seek to recover a portion of damages which
may be awarded against it from AngloGold Ashanti by either AACSA or the plaintiffs. There is no indication at present
of the merit of any such claim. A separate action was instituted against AngloGold Ashanti in 2006 by a one plaintiff
out of the High Court, Witwatersrand Local Division, for damages allegedly suffered by him as a result of alleged
silicosis allegedly contracted while working on mines now owned by AngloGold Ashanti. An exception has been filed
by AngloGold Ashanti against the claim.
· In Ghana, Westchester / Africore Limited instituted action against Ashanti Goldfields Company Limited in the High
Court in Accra claiming damages for breach of Exploration and Option Agreement. A provision in the Agreement
states that the parties should settle the matter by arbitration under the Arbitration Act of Ghana. The plaintiffs have
applied to pursue the matter through arbitration in Ghana.
· In Brazil, Mineração Serra Grande S.A. (MSG), the operator of the Crixas mine in Brazil, has received two tax
assessments from the State of Goias related to payments of sales taxes on gold deliveries for export: one for the
period between February 2004 and June 2005 and the other for the period between July 2005 and May 2006. The tax
authorities maintain that whenever a taxpayer exports gold through a branch located in a different Brazilian State, it
must obtain an authorization from the Goias State Treasury by means of a Special Regime Agreement (Termo de
Acordo re Regime Especial – TARE). The Serra Grande operation is co-owned with Kinross Gold Corporation. The
company manages the operations and its attributable share of the first assessment is approximately $29 million. In
May 2006 MSG signed the TARE, which authorized the remittance of gold to the company’s branch in Minas Gerais
specifically for export purposes. In November 2006 the administrative council’s second chamber ruled in favor of Serra
182
Grande and fully cancelled the tax liability related to the first period. The State of Goias may still appeal to the full
board of the State of Goias tax administrative council. The second assessment was issued by the State of Goais in
October 2006 on the same grounds as the first one, and the attributable share of the assessment was approximately
$18 million. The company believes that both assessments are in violation of the Federal legislation on sales taxes.
·
In Brazil, Mineração Serra Grande S.A. (MSG) received a tax assessment in October 2003 from the State of Minas
Gerais related to sales taxes on gold allegedly returned from the branch in Minas Gerais to the company head office in
the State of Goais. The company lost the case at the administrative level but is now discussing it at the judicial sphere.
The company believes there is a remote chance of success for the State of Minas Gerais. The company’s attributable
share of the assessment is approximately $6 million.
·
In Brazil, Morro Velho is involved in a dispute with tax authorities. As a result of erroneous duplication of a shipping
invoice between two states in Brazil, tax authorities are claiming that VAT is payable on the second invoice. The
amount involved is approximately $5 million.
·
In Brazil, AngloGold Ashanti Brazil is being accused of failing to pay certain required payments towards the social
security system in Brazil during the period 1997 to 2004. The amount involved is approximately $2 million.
Dividend policy
Dividends are proposed and approved by the board of directors of AngloGold Ashanti, based on the interim and year end
financial performance. Dividends are recognized when declared by the board of AngloGold Ashanti and may be payable in
Australian dollars, South African rands, United Kingdom pounds or Ghanaian cedis.
Dividends declared to foreign shareholders are not subject to the approval by the South African Reserve Bank (SARB) in
terms of South African foreign exchange control regulations. Dividends are freely transferable to foreign shareholders from
both trading and non-trading profits earned in South Africa by publicly listed companies.
Under South African law, the company may declare and pay dividends from any reserves included in total shareholder’s
equity (including share capital and share premium) calculated in accordance with International Financial Reporting
Standards (IFRS), subject to its solvency and liquidity.
A potential restriction on dividends arises from the terms applicable to AngloGold Ashanti’s convertible bond. Legal opinion
is that the size of the dividends declared should be tested against condition 6(b)(iii) of the convertible bond and if triggered
the conversion price should be adjusted, however the condition is not prohibitive.
The limit set by this condition is that it is triggered if the dividend declared in the current year exceeds the lesser of:
·
200 percent of the dividends paid in the previous financial year; or
·
5 percent of the volume weighted average share price over 180 days trading immediately preceding the record date of
the dividend.
AngloGold Ashanti expects to continue to pay dividends, although there can be no assurance that dividends will be paid in
the future or as to the particular amounts that will be paid from year to year. The payment of future dividends will depend
upon the Board’s ongoing assessment of AngloGold Ashanti’s earnings, after providing for capital expenditure and
long-term growth, cash and debt resources, the amount of reserves available for dividend using going concern assessment
and restrictions placed by the conditions of the convertible bond and other factors.
8B. Significantchanges
None.
183
Item 9: The offer and listing
9A.
Offer and listing details
The following table sets out, for the periods indicated, the reported high and low market quotations for AngloGold Ashanti’s
ordinary shares on the JSE and for its sponsored ADSs on the NYSE:
JSE
(1)
NYSE
(2)
High
Low
High
Low
Year ended December 31
(South African cents per ordinary share)
(US dollars per ADS)
Annual information
2002
34,700
20,000
35.33 17.62
2003
33,900
19,100
49.95 27.10
2004
31,900
18,620
48.25 29.91
2005
31,990
18,700
49.88 30.50
2006
38,700
24,700
62.20 35.58
Quarterly information
2005
First quarter
24,500
18,700
39.00
31.27
Second quarter
24,500
19,000
36.60
30.50
Third quarter
28,400
21,951
44.13
34.11
Fourth quarter
31,990
25,750
49.88
38.64
2006
First quarter
38,700
29,005
62.20
46.51
Second quarter
35,621
24,700
58.36
37.17
Third quarter
36,050
27,500
51.07
37.10
Fourth quarter
35,000
28,250
48.91
35.58
2007
First quarter
35,889
30,300
49.34
41.10
Monthly information
November 2006
34,550
30,200
48.23
41.40
December 2006
35,000
31,500
48.91
45.05
January 2007
34,699
31,750
43.37
48.72
February 2007
35,889
31,000
49.34
43.00
March 2007
33,980
30,300
46.26
41.10
April 2007
35,322
31,390
49.42
44.51
May 2007
32,000
28,712
45.42
40.45
(1)
The JSE share price information has been adjusted to give effect to the two-for-one stock split which took effect from the close of business on
December 24, 2002.
(2)
Prior to December 24, 2002, each ADS represented 0.5 of one ordinary share. With effect from the close of business on December 24, 2002, each
ADS represents one ordinary share.
See “Item 7A.: Major shareholders” for number of ADSs outstanding at December 31, 2006.
9B. Plan of distribution
Not applicable.
184
9C. Markets
Nature of trading market
Prior to June 29, 1998, the date on which Anglo American Corporation of South Africa Limited’s gold mining interests were
consolidated into a single, focused, independent, global gold mining company, ordinary shares of AngloGold (formerly Vaal
Reefs) were listed on the Johannesburg Stock Exchange (JSE), the London Stock Exchange (LSE) and the Paris bourse,
were quoted in Brussels in the form of International Depositary Receipts and were listed under grandfathered unsponsored
American Depositary Receipts (ADR) programmes on the Nasdaq SmallCap Market. Shares of Freegold, Western Deep
Levels and Southvaal were also listed under grandfathered unsponsored ADR programmes on the Nasdaq SmallCap
Market. Historically, the principal trading markets for such shares (as well as for shares of Freegold, Western Deep Levels
and Southvaal) had been the JSE and Nasdaq. As part of the consolidation, shares of Ang loGold, Freegold, Western Deep
Levels and Southvaal were delisted from Nasdaq and shares of all participating companies were delisted from the JSE.
With effect from the implementation of the consolidation, the ordinary shares were listed on the JSE, the LSE and the Paris
bourse and were quoted in Brussels in the form of International Depositary Receipts. In addition, American Depositary
Shares (ADSs) each representing half of one ordinary share and evidenced by ADRs issued by The Bank of New York
under a programme sponsored by AngloGold were listed on the New York Stock Exchange (NYSE) on August 5, 1998.
The company was admitted to the official list of the Australian Stock Exchange (ASX) on November 15, 1999. The ordinary
shares of the company issued in connection with the acquisition of the entire issued share capital of Acacia Resources
Limited trade on the ASX. On November 28, 2001, AngloGold implemented a 10-for-1 split of the AngloGold CHESS
Depositary Interests (CDIs), which trade on the Australian Stock Exchange.
Effective at the close of business on December 24, 2002, AngloGold undertook a 2-for-1 stock split and a corresponding
change in the ratio of ordinary shares to ADSs from 0.5 ordinary shares per one ADS to one ordinary share per one ADS.
At the same time, the ratio of ordinary shares to CDIs changed from one ordinary share equivalent to ten CDIs to one
ordinary share equivalent to five CDIs.
On April 26, 2004, the business combination with Ashanti became effective, at which time, AngloGold changed its name to
AngloGold Ashanti. Following the business combination, the company’s ordinary shares were listed on the Ghana Stock
Exchange (GhSE). In addition, Ghanaian Depositary Shares (GhDSs) were listed on the GhSE each representing one-
hundredth of an ordinary share and evidenced by GhDSs issued by NTHC Limited (as Depositary) under a programme
sponsored by AngloGold Ashanti.
9D. Sellingshareholders
None.
9E. Dilution
None.
9F. Expenses of the issue
None.
185
Item 10: Additional information
10A. Share capital
AngloGold Ashanti's Ordinary Shares and Preference Shares
AngloGold Ashanti’s authorized share capital is ZAR102,120,000, consisting of four classes of shares: ordinary shares of
par value ZAR0.25 each, E ordinary shares of par value ZAR0.25 each, A redeemable preference shares of par value
ZAR0.50 each and B redeemable preference shares of par value ZAR0.01 each. The ordinary shares and the
A redeemable preference shares have voting rights, while the B redeemable preference shares have voting rights only
under certain circumstances and, in respect of each of these classes of shares, there is no provision in the Articles of
Association for cumulative voting. There is no limitation imposed by the Articles of Association or by South African law on
the rights of any persons, including non-residents, to own AngloGold Ashanti ordinary shares or to exercise voting rights in
respect of AngloGold Ashanti ordinary shares. AngloGold Ashanti’s authorized and issued share capital as of
December 31, 2006 and June 25, 2007 (being the latest practicable date prior to the publication of this document) is set
out below:
Issued
Title of Class
Authorized
June 25, 2007
December 31, 2006
Ordinary shares
400,000,000
276,833,883
276,236,153
E ordinary shares
4,280,000
4,115,930
4,185,770
A redeemable preference shares
2,000,000
2,000,000
2,000,000
B redeemable preference shares
5,000,000
778,896
778,896
All of the issued ordinary shares, E ordinary, A redeemable preference shares and B redeemable preference shares are
fully paid and are not subject to further calls or assessment by AngloGold Ashanti.
All of the A redeemable preference shares and B redeemable preference shares are held by Eastvaal Gold Holdings
Limited, AngloGold Ashanti’s wholly-owned subsidiary. AngloGold Ashanti’s Articles of Association provide that the
A redeemable preference shares and B redeemable preference shares are not transferable.
In general meeting, shareholders of AngloGold Ashanti have approved, by specific authority, the following authorizations
for the allotment and issue of shares in the capital of the company:
1
At a general meeting of shareholders held on June 4, 1998, members approved the adoption by AngloGold, of the
AngloGold Limited Share Incentive Scheme and at the annual general meeting of shareholders held on
April 29, 2005, members approved the introduction of the Bonus Share Plan and Long-Term Incentive Plan
(collectively the “AngloGold Share Incentive Scheme or share incentive scheme”). The authority granted by
shareholders provides for 2.75 percent of the total number or ordinary shares in issue from time to time, being made
available for purposes of the share incentive scheme. The share incentive scheme shall endure for an indefinite
period until terminated by a resolution of the board of directors or the resolution of AngloGold Ashanti in general
meeting.
2
At the annual general meeting of shareholders held on June 29, 2004, members approved the authorization to allot
and issue a maximum of 15,384,615 ordinary shares of 25 South African cents per share each in the authorized but
unissued capital of the company for purposes of the conversion of the $1,000,000,000, 2.375 percent Guaranteed
Convertible Bonds issued by AngloGold Holdings plc. This authority expires on February 28, 2009 or such earlier time
in the event that all Convertible Bonds are exchanged for ADSs. See “Guaranteed Convertible Bonds” below.
3
At a general meeting of the shareholders held on December 11, 2006, members approved the increase of the
authorized share capital of AngloGold Ashanti by the creation of 4,280,000 new E ordinary shares of 25 South African
cents per share pursuant to an employee share ownership plan and black economic empowerment transaction.
186
The members further approved that the directors allot and issue up to 2,360,000 ordinary shares of 25 South African
cents at a subscription price of 38.88 percent of the 30 day volume weighted average traded price of an ordinary
share of AngloGold Ashanti on the JSE and 960,000 ordinary shares of 25 South African cents at a price per share
equal to the opening price of an ordinary share of AngloGold Ashanti on the JSE, at the day after the changes to the
articles of association as a result of the increase in authorized share capital are registered with the Company and
Intellectual Property Registration Office, to the Bokamoso ESOP Trust (an entity established for the purpose of
acquiring and managing the employment share ownership plan shares for the benefit of the employment share
ownership plan members) and that the directors allot and issue 1,400,000 E ordinary shares of 25 South African cents
a t a price of 25 South African cents each to Izingwe Holdings (Pty) Limited (an empowerment company).
At the annual general meeting of shareholders held on May 4 2007, members approved the following resolutions pertaining
to the ordinary share capital of the company:
4
as a general authority, authorization to the board of directors to allot and issue, at their discretion, and for such
purposes as they may determine, up to 10 percent of the authorized but unissued ordinary shares of 25 South African
cents each in the share capital of the company (subject to the South African Companies Act and the JSE Listings
Requirements), after setting aside so many ordinary shares of 25 South African cents each as may be required to be
allotted and issued by the company pursuant to the AngloGold Share Incentive Scheme, the Long-Term Incentive
Plan, the Bonus Share Plan, the Bokamoso Employee Share Ownership Plan, the Black Economic Empowerment
transaction, the Employee Share Ownership Plan to be implemented in countries other than South Africa and for
purposes of the conversion of the $1,000,000,000, 2.375 percent Guaranteed Convertible Bonds issued by
AngloGold Holdings plc.
The unissued ordinary shares under the control of the directors at May 4, 2007 are as follows:
Number of shares
Authorized ordinary share capital
400,000,000
Shares in issue at May 4, 2007
276,827,589
Unissued shares at May 4, 2007
123,172,411
Shares set aside in terms of:
- the AngloGold Share Incentive Scheme at 2.75 percent of shares in issue at May 4, 2007
7,612,759
- the 2.375 percent Guaranteed Convertible Bonds
15,384,615
Net unissued ordinary shares at May 4, 2007
100,175,037
- the board of directors
10 percent of net unissued shares
10,017,504
Less: shares issued at the discretion of the directors
—
Balance of shares under the control of the directors at May 4, 2007
10,017,504
Shares under the control of shareholder
90 percent of net unissued shares
90,157,534
5
as a general authority, authorization to the board of directors to allot and issue for cash, without restriction to any
public shareholder, as defined by the JSE Listings Requirements, as and when suitable opportunities arise, in their
discretion, the authorized but unissued ordinary shares of 25 South African cents each in the share capital of the
company, which were placed under the control of the directors, subject to the following conditions:
(a) that the authority shall only be valid until the next annual general meeting and in no case shall extend beyond
15 months;
(b) that a paid press announcement giving full details, including the impact on net asset value and earnings per
share, be published after any issue representing, on a cumulative basis within one financial year, 5 percent or
more of the number of shares in issue prior to the issue concerned;
187
(c) that the issues for cash in the aggregate in any one financial year shall not exceed 10 percent of the number of
shares of the company’s unissued ordinary share capital;
(d) that, in determining the price at which an issue of shares for cash will be made in terms of this authority, the
maximum discount permitted shall be 10 percent of the weighted average traded price of the ordinary shares on
the JSE (adjusted for any dividend declared but not yet paid or for any capitalization award made to
shareholders) over the 30 days prior to the date that the price of the issue is determined or agreed by AngloGold
Ashanti’s directors; and
(e) that this authority includes the issue of shares arising from any options or convertible securities issued for cash.
The above authorities (4) and (5) expire at the next annual general meeting of shareholders of the company.
The number of authorized but unissued ordinary shares in the capital of AngloGold Ashanti at December 31, 2006 and
June 25, 2007 is 123,763,847 and 123,166,117 respectively.
The table below details changes in the ordinary issued share capital of AngloGold since December 31, 2003.
Period to
Description
Number of Shares
December 31, 2003
223,136,342
Ordinary shares issued during 2004
AngloGold Share Incentive Scheme
192,800
Business combination – swap shares
38,400,021
Business combination – regulatory shares
2,658,000
Business
combination
–
warrants
75,731
December 31, 2004
264,462,894
Ordinary shares issued during 2005
AngloGold Share Incentive Scheme
475,538
December 31, 2005
264,938,432
Ordinary shares issued during 2006
AngloGold Share Incentive Scheme
398,399
USD500 million equity raise
9,970,732
Employee Share ownership programme
928,590
December 31, 2006
276,236,153
Ordinary shares issued to June 25, 2007
AngloGold Share Incentive Scheme
591,700
Employee Share ownership programme
6,030
276,833,883
The table below details changes in the E ordinary issued share capital of AngloGold Ashanti.
Period to
Description
Number of Shares
January 31, 2006
-
E Ordinary shares issued during 2006
- The Bokamoso ESOP Trust
2,785,770
- Izingwe Holdings (Proprietary) Limited
1,400,000
December 31, 2006
4,185,770
Cancelled and exchanged for ordinary shares
(21,150)
January 31, 2007
4,164,620
Cancelled and exchanged for ordinary shares
(69,840)
4,115,930
There has been no change in the issued preference share capital of AngloGold since December 31, 2001.
At the general meeting of shareholders on December 11, 2006 the authorized share capital was increased by the creation
of a new class of shares, being E ordinary shares and 4,185,770 E ordinary shares were issued on December 15, 2006.
Save as disclosed in this paragraph and under “Item 6.E. Share Ownership - AngloGold Share Incentive Scheme” as well
as “Guaranteed Convertible Bonds” below, no share or loan capital of AngloGold Ashanti or any of its subsidiary
undertakings is under option or is agreed conditionally or unconditionally to be put under option.
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All existing ordinary shares are in registered form. The holding of ordinary shares in uncertificated form is permitted under
AngloGold Ashanti’s articles of association and the transfer of ordinary shares is permitted through STRATE. Ordinary
shares are not eligible for settlement within CREST.
Guaranteed Convertible Bonds:February 27, 2004, AngloGold Holdings plc, a wholly-owned subsidiary of
AngloGold Ashanti, issued $1,000,000,000, 2.375 percent guaranteed Convertible Bonds due 2009, convertible into
AngloGold Ashanti ADSs and guaranteed by AngloGold Ashanti. Subject to certain restrictions, holders of Convertible
Bonds are entitled to convert each Convertible Bond into an AngloGold Ashanti ADS at the then applicable conversion
price at any time from April 8, 2004 to February 20, 2009, or, if the Convertible Bonds are called for redemption earlier than
February 27, 2009, the seventh business day prior to the date of early redemption. If the bonds have not been converted
by February 20, 2009, they will be redeemed at par on February 27, 2009. AngloGold Holdings plc has the option of calling
an early redemption of all the bonds 3 years after their issuance, if the price of the ADSs exceeds 130 percent of the
conversion price for more than 20 days during any period of 30 consecutive trading days.
The initial conversion price for the Convertible Bonds is $65.00 per AngloGold Ashanti ADS. The conversion premium to
the reference volume weighted average price of the ADSs on the New York Stock Exchange of $40.625 on
February 19, 2004, when the issue of the Convertible Bonds was announced, was 60 percent. If all holders of Convertible
Bonds exercise their option to convert their Convertible Bonds into ADSs and assuming no adjustments are made to the
initial conversion price, up to 15,384,615 new ADSs will be issued. The conversion ratio is subject to adjustment in case of
various corporate events including share splits and capital distributions.
10B. Memorandum and Articles of Association
Registration
AngloGold Ashanti is incorporated under the laws of the Republic of South Africa and registered with the Registrar of
Companies under registration number 1944/017354/06. AngloGold Ashanti’s memorandum of association provides that the
company’s main business is to carry on gold exploration, the mining and production of gold, the manufacturing, marketing
and selling of gold products and the development of markets for gold.
AngloGold Ashanti is governed by its articles of association which document is available for inspection as set out in
“Item 10 H.: Documents on Display” and a summary of pertinent provisions, including rights of the holders of shares in
AngloGold Ashanti, are set out below.
This summary does not contain all the information concerning the rights of holders of AngloGold Ashanti’s ordinary shares
and is qualified in its entirety by reference to the law of South Africa and AngloGold Ashanti’s governing corporate
documents. As well as being governed by the provisions of the articles of association, the rights of holders of AngloGold
Ashanti’s ordinary shares are governed by the South African Companies Act 61 of 1973, as amended, the South African
Securities Regulation Code on Take-Overs and Mergers and the JSE Listing Requirements. In addition, rights of holders of
AngloGold Ashanti ADSs are governed by the deposit agreement between AngloGold Ashanti and the Bank of New York.
Directors
The management and control of any business of AngloGold Ashanti is vested in the directors who, in addition to their
powers under the articles of association, may exercise all powers and do all such acts and things as may be exercised or
done by AngloGold Ashanti which are not expressly required to be exercised or done by AngloGold Ashanti’s shareholders
in a general meeting.
Appointment, Retirement and Removal of Directors
The board of directors may appoint any person to be a director and any director so appointed shall hold office only until the
following annual general meeting and shall then be eligible for re-election. The directors who retire at the annual general
meeting in this manner shall not be taken into account in determining the directors who are to retire by rotation at such
meeting.
At every annual general meeting at least one-third of the directors must retire from office, but are eligible for re-election.
The directors so to retire at such annual general meeting shall be those who have been the longest in office since their last
election. Where more than one director has served for an equal length of time, unless they agree between themselves, the
director to resign will be determined by lot.
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A director will no longer act as a director of the company if he becomes insolvent or subject to insolvency procedures, is
found to be of unsound mind, is requested to resign by at least three-quarters of the directors, is removed by a board
resolution of AngloGold Ashanti or is absent from board meetings without leave of the directors for six consecutive months.
A director can resign with one month’s written notice unless he obtains the permission of the directors to shorten his notice
period.
The articles of association contain no provision for directors to hold qualification shares, nor stipulate an age limit
requirement for the retirement or non-retirement of directors.
Board Meetings
The directors may regulate board meetings and determine the quorum necessary for the transaction of business as they
think fit. Unless otherwise determined by the directors, two directors form a quorum. Issues arising at meetings are decided
by majority vote with the chairman having a second or casting vote where there are more than two directors present at the
meeting.
Borrowing Powers
AngloGold Ashanti may create and issue secured or unsecured debentures and the directors may borrow or secure the
payment of such sums as they think fit and may secure the repayment of any indebtedness by bond, mortgage or charge
provided that no special privileges as to allotment of shares, attending and voting at meetings, appointment of directors or
otherwise shall be given to the holders of AngloGold Ashanti’s debentures without the sanction of AngloGold Ashanti
shareholders in a general meeting.
AngloGold Ashanti’s borrowing powers are unlimited. These borrowing powers may be varied by AngloGold Ashanti
shareholders by way of a special resolution in a general meeting.
Remuneration
The directors are entitled to such remuneration as AngloGold Ashanti shareholders may approve by ordinary resolution in
a general meeting. If a director performs services that, in the opinion of the board of directors, are outside the scope of the
ordinary duties of a director, he may be paid such extra remuneration as the directors determine.
Interests of directors and Restriction on voting
A director who is in any way, whether directly or indirectly, interested in a contract or arrangement or proposed contract or
arrangement with AngloGold Ashanti or any of AngloGold Ashanti’s subsidiaries must declare the nature of his interest to
AngloGold Ashanti in accordance with the Companies Act.
A director shall not vote nor be counted in the quorum and if he shall do so his vote shall not be counted on any resolution
for his own appointment to any other office or position under AngloGold Ashanti or in respect of any contract or
arrangement in which he is interested, but this prohibition shall not apply to:
(i)
any arrangement for giving to any director any security or indemnity in respect of money lent by him to, or obligations
undertaken by him for the benefit of, AngloGold Ashanti,
(ii) any arrangement for the giving by AngloGold Ashanti of any security to a third party in respect of a debt or obligation
of AngloGold Ashanti which the director has himself guaranteed or secured,
(iii) any contract by a director to subscribe for or underwrite securities, or
(iv) any contract or arrangement with a company in which he is interested by reason only of being a director, officer,
creditor or member of such company (and note that these prohibitions may at any time be suspended or relaxed to
any extent either generally, or in respect of any particular contract or arrangement, by AngloGold Ashanti in general
meeting).
Where proposals are under consideration concerning the appointment (including fixing or varying the terms of
appointment) of two or more directors to offices or employments with AngloGold Ashanti or any company in which
AngloGold Ashanti is interested, such proposals may be divided and considered in relation to each director separately and
in such cases each of the directors concerned shall be entitled to vote (and be counted in the quorum) in respect of each
resolution except that concerning his own appointment.
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If any question arises at any meeting as to the entitlement of any directors to vote and such question is not resolved by his
voluntarily agreeing to abstain from voting, such question must be referred to the chairman of the meeting and his ruling in
relation to any other director must be final and conclusive except in a case where the nature or extent of the interests of the
director concerned have not been fairly disclosed.
The directors may exercise the voting powers conferred by the shares in any other company held or owned by AngloGold
Ashanti in such manner and in all respects as they think fit, including the exercise thereof in favor of any resolution
appointing themselves or any of them to be directors or officers of such other company or voting or providing for the
payment of remuneration to the directors or officers of such other company.
Share Rights, Preferences and Restrictions
Allotment and Issue of Ordinary Shares
Any unissued ordinary shares can be disposed of or dealt with in such manner as AngloGold Ashanti shareholders may
direct in a general meeting. AngloGold Ashanti shareholders may resolve that all or any of such ordinary shares are at the
disposal of the directors who may allot, grant options over or otherwise deal with or dispose of the ordinary shares to such
persons at such times and on such terms and conditions and for such consideration as the directors may determine.
Any ordinary shares may be issued with such rights or restrictions as AngloGold Ashanti shareholders in a general meeting
may from time to time determine.
No ordinary shares may be issued at a discount except in accordance with section 81 of the South African Companies Act.
Section 81 states that a company can issue shares at a discount to the par value shares of such shares, if such shares are
of a class already in issue, if such issue is authorized by a special resolution, if the company has been trading for at least
one year, if the issue is sanctioned by the court and if the issue occurs within one month of the sanction. If shares are
issued at a discount, every prospectus issued by the company thereafter relating to the issue of any shares, shall contain
particulars of the discount allowed on the issue of those shares, or so much of the discount as has not been written off at
the date of the issue of such prospectus.
Dividends, rights and distributions
The ordinary shares participate fully in all dividends, other distributions and entitlements as and when declared by
AngloGold Ashanti in respect of fully paid ordinary shares. Under South African law, AngloGold Ashanti may declare and
pay dividends from any reserves included in total shareholders’ equity calculated in accordance with International Financial
Reporting Standards, subject to its solvency and liquidity. No larger dividend shall be declared by shareholders in general
meeting than is recommended by the directors. Dividends are payable to shareholders registered at a record date that is
after the date of declaration.
Dividends may be declared in any currency at the discretion of the board of directors. Currently, dividends are declared in
South African rands and paid in Australian dollars, South African rands, Ghanaian cedis or United Kingdom pounds.
Dividends paid to registered holders of AngloGold Ashanti ADSs are paid in US dollars converted from South African rands
by The Bank of New York, as depositary, in accordance with the deposit agreement.
As approved by shareholders in general meeting on December 11, 2006, the company’s authorized share capital was
increased through the creation of a maximum of 4,280,000 E ordinary shares, to be issued for cash, pursuant to an
employee share ownership plan and black economic empowerment transaction. The E ordinary shares will not be listed.
Holders of E ordinary shares are entitled to receive a dividend, equal to one-half of the dividend per ordinary share
declared by AngloGold Ashanti from time to time.
The holder of B preference shares is entitled to an annual dividend amounting to the lesser of five percent of the issue
price of the B preference shares, or an amount equivalent to the balance of the after-tax profits from income from mining
the Moab Lease Area (which is part of the Vaal River operations in South Africa) as determined by the directors in each
financial year. This annual dividend is a first charge on any profit available for distribution from the Moab Lease Area. The
annual dividend is not payable from any of AngloGold Ashanti’s other profits.
The holder of A preference shares is entitled to an annual dividend equivalent to the balance of the after-tax profits from
income from mining the Moab Lease Area as determined by AngloGold Ashanti’s directors in each financial year, only
once the annual dividend on the B preference shares has been paid in full.
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Any dividend may be paid and satisfied, either wholly or in part, by the distribution of specific assets, or in paid-up
securities of AngloGold Ashanti or of any other company, or in cash, or in any one or more of such ways as the directors or
AngloGold Ashanti in general meeting may at the time of declaring the dividend determine and direct.
All dividends remaining unclaimed for a period of not less than three years from the date on which they became payable,
may be forfeited by resolution of the directors for the benefit of the company.
All of the issued ordinary shares, A redeemable preference shares and B redeemable preference shares are fully paid and
are not subject to further calls or assessment by AngloGold Ashanti.
Voting rights
Each ordinary share confers upon the member the right to vote at all general meetings. Each member present in person or,
in the case of a corporate entity, represented, has one vote on a show of hands. If a poll is held, members present or any
duly appointed proxy will have one vote for each ordinary share held. A holder of ordinary shares is entitled to appoint a
proxy to attend, speak and vote at any meeting on his or her behalf and the proxy need not be a shareholder. Holders of
ADSs are not entitled to vote in person at meetings, but may vote by way of proxy through The Bank of New York as the
ADS issuer. Holders of CDIs are not entitled to vote in person at meetings, but may vote by way of proxy.
There are no limitations on the right of non-South African shareholders to hold or exercise voting rights attaching to any of
the ordinary shares.
Holders of E ordinary shares have the right to vote at all general meetings and are entitled to appoint a proxy to attend,
speak and vote at any meeting on his or her behalf and the proxy need not be a shareholder, to the extent that holders of
E ordinary shares will not be entitled to veto any resolution that would otherwise have been capable of being passed, or
not, by the required majority of votes of holders of ordinary shares and subject to the Listings Requirements of the JSE,
holders of E ordinary shares will not be counted for categorization purposes in terms of section 9 of the Listings
Requirements. These limitations on the E ordinary shares are a function of shareholder approval and the JSE Listing
Requirements.
The A redeemable preference shares have voting rights that are similar to those of ordinary shares. The B redeemable
preference shares have limited voting rights, except in the event that a dividend on this class of share has not been paid
and remains unpaid for six months, or in connection with issues directly affecting these preference shares or AngloGold
Ashanti as a whole, such as disposal of substantially all of the company’s assets, winding up AngloGold Ashanti or
reducing the company’s share capital.
The articles of association do not provide for cumulative voting in respect of any of the classes of AngloGold Ashanti’s
shares.
The articles of association specify that if new classes of ordinary or preference shares are issued, the rights relating to any
class of shares may be modified or abrogated either with the consent in writing of the holders of at least three-fourths of
the issued shares of that class, or with the sanction of a resolution passed as if it were a special resolution of the company
at a separate general meeting of the holders of the shares of that class.
Transfer of Ordinary Shares
Dematerialized shares which have been traded on JSE are transferred on the STRATE (Share Transactions Totally
Electronic) settlement system and delivered within five business days after each trade.
The dematerialization of shares is not mandatory and holders of ordinary shares in AngloGold Ashanti may elect to retain
their certificated securities. Subject to any statutory restrictions on transfer any member may transfer all or part of his
certificated securities, to the extent it is not prevented by section 91A of the Companies Act. Every transfer must be in
writing in the usual common form or in such other form as the directors may approve and must be left at the transfer office
where the register of transfers is kept or at such other place as the directors prescribe and must be accompanied by the
share certificate and such other evidence as the directors or registrar may require to prove title and capacity of the
intending transferor or transferee.
The directors may refuse to register any transfer of certificated securities unless the instrument of transfer, duly stamped,
is lodged with AngloGold Ashanti accompanied by the share certificate, the transfer is in respect of only one class of
securities or the transfer is permitted within any of AngloGold Ashanti’s incentive schemes.
192
Conversion of Ordinary Shares into Stock
AngloGold Ashanti may by special resolution convert any paid-up shares into stock and may reconvert any stock into paid-
up shares of any denomination. The holders of stock may transfer their respective interests but the directors may fix the
minimum amount of stock transferable. The holders of stock have the same rights, privileges and advantages as regards
participation in profits and voting at general meetings of AngloGold Ashanti as if they held the shares from which the stock
arose. All of the provisions of the Articles apply equally to stock as to shares.
Increase and Reduction of Capital
AngloGold Ashanti shareholders may by way of special resolution in a general meeting and in accordance with the
provisions of the Companies Act resolve to:
·
increase its capital by any sum divided into shares of any amount;
·
consolidate and divide all or any part of its share capital into shares of larger amounts or consolidate and reduce the
number of any issued no par value shares;
·
increase the number of any issued no par value shares without increasing its stated capital; cancel any shares which
have not been subscribed for;
·
sub-divide its shares or any of them into shares of smaller amounts than fixed by the memorandum of association;
·
vary, modify or amend any rights attached to any shares whether issued or not, including the conversion of any
shares into preference shares; and
·
convert any of its shares whether issued or not into shares of another class.
In addition, AngloGold Ashanti shareholders may by ordinary resolution in a general meeting and subject to the
requirements of the Companies Act and the rules and requirements of the stock exchange on which the securities are
listed, reduce, dispose of, distribute or otherwise deal with in any manner its share capital, share premium, stated capital,
reserves and capital redemption reserve fund.
Share Premium Account and Capital Redemption Reserve Fund
AngloGold Ashanti shareholders may by ordinary resolution in a general meeting authorize the directors to distribute or
deal with, in any way recommended by the directors, all or any part of the amount outstanding to the credit of any share
premium account or capital redemption reserve fund of AngloGold Ashanti.
Rights upon liquidation
In the event of a winding up of AngloGold Ashanti:
·
the B redeemable preference shares confer the right, in priority to any payment in respect of the ordinary shares or
the A preference shares in the capital of AngloGold Ashanti, to receive only so much of the net proceeds from the
disposal of the assets relating to the Moab Lease Area as is available for distribution, but not exceeding a return for
each B redeemable preference share of the capital paid up on that share and any share premium paid on the issue of
the B redeemable preference shares outstanding at that time.
·
the A redeemable preference shares confer the right, in priority to any payment in respect of the ordinary shares but
after any payment in respect of the B preference shares, to receive only so much of the net proceeds from the
disposal of the assets relating to the Moab Lease Area as is then available for distribution.
· The A redeemable and B redeemable shares do not confer the right to participation in the surplus funds of AngloGold
Ashanti arising in any other manner.
·
the ordinary shares and E ordinary shares confer the equal rights to any surplus arising from the liquidation of all
other assets of AngloGold Ashanti.
193
Redemption provisions
The A redeemable preference shares may be redeemed for their nominal value, plus a premium per share of an amount
equal to the net proceeds available from the disposal of the assets relating to the Moab Lease Area, after redemption in full
of the B preference shares and payment of the nominal value of the A preference shares, divided by 2,000,000.
The B redeemable preference shares may be redeemed for their nominal value, plus a premium of up to R249.99 per
share, but limited to an amount equal to the net proceeds available from the disposal of the assets relating to the Moab
Lease Area after payment of the nominal value of the B preference shares.
The ordinary shares are not redeemable.
Description of AngloGold Ashanti ADSs
The Bank of New York issues AngloGold Ashanti’s American Depositary Shares, or ADSs. One ADS represents the
ownership interest of one ordinary share of AngloGold Ashanti.
The Unrestricted ADS Deposit Agreement and Restricted ADS Deposit Agreement
This section provides a summary description of AngloGold Ashanti’s ADSs.
AngloGold Ashanti has entered the following Deposit Agreements with The Bank of New York as depositary and the
owners and beneficial owners of American Depositary Receipts (the “Deposit Agreements”)
1. the Deposit Agreement amended and restated as of August 5, 1998, filed with the SEC as an exhibit to AngloGold
Ashanti’s registration statement on Form F-6 (Registration Statement No. 333-14066) (the “Unrestricted ADS Deposit
Agreement”); and
2. the Deposit Agreement dated February 27, 2004 , filed with the SEC as an exhibit to AngloGold Ashanti’s registration
statement on Form F-6 (Registration Statement No. 333-14066) (the “Restricted ADS Deposit Agreement”),
As this section is a summary, it may not contain all the information that may be important to a holder of ADSs. For more
complete information, see “Item 10.H.: Documents On Display”. Copies of the Deposit Agreements for each Facility are
also available for inspection at the Corporate Trust Office of The Bank of New York currently located at 101 Barclay Street,
New York, New York, 10286.
Under the Unrestricted ADS Deposit Agreement The Bank of New York as depositary issues ADSs which are not subject
to transfer restrictions under the Securities Act and are listed and trade on the New York Stock Exchange (the Unrestricted
ADSs).
Under the Restricted ADS Deposit Agreement The Bank of New York as depositary issues ADSs which are considered
“restricted securities” within the meaning of Rule 144 of the Securities Act (the Restricted ADSs). AngloGold Ashanti has
entered a Registration Rights Agreement pursuant to which it has undertaken to file a registration statement with the SEC
covering resales of Restricted ADSs.
Any holder of Convertible Bonds which were offered and sold in the United States to Qualified Institutional Buyers (QIBs) in
reliance on Rule 144A under the Securities Act exercising its right to convert its Convertible Bonds into ADSs prior to the
later of February 27, 2006 and the date that is two years after the last date on which AngloGold Ashanti or any affiliate of
AngloGold Ashanti was the owner of such Convertible Bonds, will receive Restricted ADSs issued under the Restricted
ADS Facility. Any holder of Convertible Bonds which were offered and sold outside the United States in accordance with
Regulation S under the Securities Act exercising its right to convert its Convertible Bonds into ADSs will receive
Unrestricted ADSs issued under the Unrestricted ADS Facility.
The description below generally applies to the ADSs issued under both the Restricted and the Unrestricted ADS Facility.
The material differences between the two Facilities are:
· prior to the later of February 27, 2006 and the date that is two years after the last date on which AngloGold Ashanti or
any affiliate of AngloGold Ashanti was the owner of such Convertible Bonds, only Restricted ADSs will be issued upon
conversion of Convertible Bonds offered and sold in the United States to QIBs in reliance on Rule 144A under the
Securities Act;
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· holders of Restricted ADSs under the Restricted ADS Facility are required to give certain certifications upon deposit or
withdrawal of the ordinary shares underlying their Restricted ADSs as described generally in “ Description of the
ADSs Deposit, Withdrawal and Cancellation” below;
· Restricted ADSs will carry a transfer restrictions legend; and
·Restricted ADSs generally may be held in book–entry form.
Description of the ADSs
AngloGold Ashanti ordinary shares (or the right to receive AngloGold Ashanti ordinary shares) are deposited with The
Bank of New York’s custodians in South Africa: The Standard Bank of South Africa Limited, Société Générale South Africa
Limited, FirstRand Bank Limited, National Australia Bank Limited and Australia and New Zealand Banking Group Limited
(each, a “custodian”). Each ADS also represents securities, cash or other property deposited with The Bank of New York
but not distributed to AngloGold Ashanti’s ADS holders. The Bank of New York’s Corporate Trust Office is located at
101 Barclay Street, New York, NY 10286. The principal executive office of The Bank of New York is located at
One Wall Street, New York, NY 10286. The Bank of New York, as the depositary in respect of the ADSs, issued new ADSs
following the completion of the Business Combinati on.
ADSs may be held either directly or indirectly through a broker or other financial institution. If ADSs are held indirectly,
such holders must rely on the procedures of their broker or other financial institution to assert the rights of ADS holders
described in this section and should consult with their broker or financial institution in this regard.
The Bank of New York is the actual holder of the AngloGold Ashanti ordinary shares, and therefore holders of ADSs may,
in certain circumstances, not be treated by AngloGold Ashanti as shareholders of AngloGold Ashanti. The rights of ADS
holders and the rights of and obligations of The Bank of New York as depositary are set out in the Deposit Agreements
among The Bank of New York, the registered holders and beneficial owners of ADSs, and AngloGold Ashanti. The Deposit
Agreements and the ADSs are generally governed by the laws of the State of New York.
Dividends and Other Distributions
The Bank of New York has agreed to pay to holders of ADSs the cash dividends or other distributions it or a custodian
receives on AngloGold Ashanti ordinary shares or other deposited securities after deducting any fees and expenses and
any applicable withholding taxes. Holders of ADSs will receive these distributions in proportion to the number of AngloGold
Ashanti’s ordinary shares that their ADSs represent.
Cash
The Bank of New York will convert any cash dividend or other cash distribution AngloGold Ashanti pays on AngloGold
Ashanti’s ordinary shares into US dollars (unless AngloGold Ashanti pays it in US dollars), if it can do so on a reasonable
basis and can transfer the US dollars to the United States. Currently, AngloGold Ashanti pays dividends on ordinary shares
in South African rand. AngloGold Ashanti may declare dividends and distributions on ordinary shares in any currency that
the board of directors or shareholders at a general meeting approve.
In accordance with the Deposit Agreements, The Bank of New York, via its appointed South African bank, will convert the
South African rand it receives from AngloGold Ashanti to US dollars and distribute dividends in US dollars to registered
holders of ADSs. If that is no longer possible or if any approval from any government is needed and cannot be obtained,
The Bank of New York may distribute non-US currency only to those ADS holders to whom it is possible to make this type
of distribution.
The Bank of New York may hold the non-US currency it cannot convert for the account of holders of ADSs who have not
been paid, unless a holder of ADSs requests in writing to receive the non-US currency distribution. It will not invest the
non-US currency, and it will not be liable for the interest. Before making a distribution, any withholding taxes that must be
paid will be deducted. See “Payment of Taxes” below. The Bank of New York will distribute only whole US dollars and
cents and will round fractional cents to the nearest whole cent. If the exchange rates fluctuate during a time when The
Bank of New York cannot convert the non-US currency, holders of ADSs may lose some or all of the value of the
distribution.
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Ordinary shares
The Bank of New York may distribute to holders of ADSs additional ADSs representing ordinary shares that AngloGold
Ashanti distributes as a dividend or free distribution, if AngloGold Ashanti provides it promptly with satisfactory evidence
that it is legal to do so. If The Bank of New York does not distribute additional ADSs, the outstanding ADSs will also
represent the newly distributed AngloGold Ashanti ordinary shares. The Bank of New York will only distribute whole ADSs.
It will sell AngloGold Ashanti ordinary shares that would require it to deliver a fraction of an ADS and distribute the net
proceeds in the same way as it distributes cash.
Rights to subscribe for additional ordinary shares
If AngloGold Ashanti offers holders of its ordinary shares any rights to subscribe for additional AngloGold Ashanti ordinary
shares or any other rights, The Bank of New York, after consultation with AngloGold Ashanti, may make these rights
available to holders of ADSs or sell the rights and distribute the proceeds in the same way as it distributes cash. If The
Bank of New York cannot do either of these things for any reason, it may allow these rights to lapse. In that case, holders
of ADSs will receive no value for them.
If The Bank of New York makes these types of subscription rights available to holders of ADSs upon instruction from
holders of ADSs, it will exercise the rights and purchase AngloGold Ashanti’s ordinary shares on their behalf. The Bank of
New York will then deposit the AngloGold Ashanti ordinary shares and deliver ADSs to the holders of ADSs. It will only
exercise these rights if holders of ADSs pay it the exercise price and any other charges the rights require them to pay.
US securities laws may restrict the sale, deposit, cancellation and transfer of the ADSs issued after exercise of rights. For
example, holders of ADSs may not be able to trade the ADSs freely in the United States. In this case, The Bank of New
York may deliver ADSs which are "restricted securities" within the meaning of Rule 144 (including Restricted ADSs, as
defined herein) which will have the same provisions as the ADSs described here, except for the changes needed to put the
restrictions in place.
Other distributions
The Bank of New York will send to holders of ADSs any other distributions that AngloGold Ashanti makes on deposited
securities by any means it thinks is legal, fair and practical. If it cannot make the distribution in that way, The Bank of New
York may decide to sell what AngloGold Ashanti distributes, and then distribute the net proceeds in the same way as it
distributes cash, or it may decide to hold what AngloGold Ashanti distributes, in which case the outstanding ADSs will also
represent the newly distributed property.
The Bank of New York is not responsible if it decides that it is unlawful or impractical to make a distribution available to any
ADS holders. AngloGold Ashanti has no obligation to register ADSs, AngloGold Ashanti ordinary shares, rights or other
securities under the US Securities Act of 1933. AngloGold Ashanti also has no obligation to take any other action to permit
the distribution of ADSs, AngloGold Ashanti ordinary shares, rights or anything else to ADS holders. This means that the
holders of ADSs may not receive the distribution AngloGold Ashanti makes on its ordinary shares or any value for them if it
is illegal or impractical for AngloGold Ashanti to make them available to the holders of ADSs.
Deposit, Withdrawal and Cancellation
The Bank of New York will deliver ADSs, if a holder of AngloGold Ashanti’s ordinary shares or their broker deposits
AngloGold Ashanti’s ordinary shares or evidence of rights to receive ordinary shares with the custodian. Upon payment of
its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, The Bank of New
York will register the appropriate number of ADSs in the names such holder of AngloGold Ashanti ordinary shares requests
and will deliver the ADSs at its Corporate Trust office to the persons such holders request.
Holders of ADSs may turn in their ADSs at The Bank of New York’s Corporate Trust Office. Upon payment of its fees and
expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, The Bank of New York will
deliver (1) the underlying ordinary shares to an account designated by the relevant holder of ADSs and (2) any other
deposited securities underlying the ADSs at the office of the Custodian. Or, at the request, risk and expense of ADS
holders, The Bank of New York will deliver the deposited securities at its Corporate Trust Office.
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Any deposit of ordinary shares into the Restricted ADS Facility, including a deposit upon conversion of the Convertible
Bonds, must be accompanied by a written certificate and agreement by or on behalf of the person who will be the
beneficial owner of the Restricted ADSs to be issued upon deposit of such ordinary shares to the effect that each such
beneficial owner: (i) understands that the ordinary shares and the Restricted ADSs have not been and will not be
registered under the Securities Act, (ii) is not an affiliate of AngloGold Ashanti or a person acting on behalf of such an
affiliate, (iii) is a QIB and will be the beneficial owner of such Restricted ADSs upon the issuance thereof and (iv) agrees
not to offer, sell, pledge or otherwise transfer such ordinary shares, such Restricted ADSs or the Restricted ADRs
evidencing such Restricted ADSs except: (a)(1) to a person who the beneficial owner reas onably believes is a QIB in a
transaction meeting the requirements of Rule 144A, (2) in an offshore transaction meeting the requirements of
Regulation S, (3) pursuant to the exemption from registration under the Securities Act provided by Rule 144 thereunder (if
available) or (4) pursuant to an effective registration statement under the Securities Act and (b) in accordance with all
applicable securities laws of the United States.
Holders of Restricted ADSs are subject to further requirements as to certification of their status upon surrender of
Restricted ADSs for the purpose of withdrawing the underlying ordinary shares. Those holders must deliver a written
certificate and agreement by or on behalf of the person surrendering such Restricted ADSs who, after withdrawal, will be
the beneficial owner of the ordinary shares to be withdrawn, acknowledging that the ordinary shares underlying the
Restricted ADSs have not been registered under the Securities Act, certifying as to whether or not those ordinary shares
will remain restricted upon withdrawal and, in the case of ordinary shares that will remain restricted, agreeing: (a) not to
offer, sell, pledge or otherwise transfer such ordinary shares except in a transaction that complies with the applicable
transfer restrictions and (b) not to deposit or cause to be deposited such ordi nary shares into any unrestricted depositary
receipt facility established or maintained by a depositary bank (including another facility maintained by The Bank of New
York) unless the ordinary shares are no longer deemed to be restricted securities within the meaning of
Rule 44(a)(3) under the Securities Act.
Voting Rights
Holders of ADSs may instruct The Bank of New York to vote the ordinary shares underlying their ADSs, but only if
AngloGold Ashanti asks, in writing, The Bank of New York to request their instruction. Otherwise, holders of ADSs will not
be able to exercise their right to vote unless they withdraw the AngloGold Ashanti ordinary shares. However, the holders
of ADSs may not know about the meeting enough in advance to withdraw the ordinary shares.
If AngloGold Ashanti asks for the instructions of holders of ADSs, The Bank of New York will notify them of the upcoming
vote and arrange to deliver AngloGold Ashanti voting materials to them. The materials will (1) describe the matters to be
voted on and (2) explain how holders of ADSs, on or before a certain date, may instruct The Bank of New York to vote the
ordinary shares or other deposited securities underlying their ADSs as they direct. For instructions to be valid, The Bank of
New York must receive them on or before the date specified.
The Bank of New York will try, as far as practical, to vote or to have its agents vote the ordinary shares or other deposited
securities as holders of ADSs instruct, but this is subject to South African law, the provisions of AngloGold Ashanti’s
Memorandum and Articles of Association and of the deposited securities and any applicable rule of the JSE. The Bank of
New York will only vote or attempt to vote as such holders of ADSs instruct.
However, if and to the extent that The Bank of New York does not receive their voting instructions, it will give a proxy to
vote the relevant ordinary shares to a person designated by AngloGold Ashanti, unless AngloGold Ashanti does not wish
the proxy to be given, or substantial opposition exists, or the issue at hand materially and adversely affects the rights of
holders of ordinary shares.
AngloGold Ashanti cannot assure the holders of ADSs that they will receive the voting materials in time for them to instruct
The Bank of New York to vote their ordinary shares. In addition, The Bank of New York and its agents are not responsible
for failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that holders of
ADSs may not be able to exercise their right to vote and there may be nothing they can do if their ordinary shares are not
voted as they requested.
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Fees and Expenses
AngloGold Ashanti ADS holders must pay:
For:
$5.00 (or less) per 100 ADSs*
Each issuance of an ADS, including as a result of a distribution
of AngloGold Ashanti ordinary shares or rights or other property
Each cancellation of an ADS, including if the Deposit Agreement
terminates
$0.02 (or less) per ADS
Any cash payment
Registration or transfer fees
Transfer and registration of AngloGold Ashanti ordinary shares
on the AngloGold Ashanti share register to or from the name of
The Bank of New York or its agent when AngloGold Ashanti
ordinary shares are deposited or withdrawn
AngloGold Ashanti ADS holders must pay:
For:
Expenses of The Bank of New York
Conversion of non-US currency to US dollars
Cable, telex and facsimile transmission expenses
Taxes and other governmental charges The Bank of
New York or any custodian has to pay on any ADS or
AngloGold Ashanti ordinary share underlying an ADS,
for example, stock transfer taxes, stamp duty or
withholding taxes
As necessary
A fee equivalent to the fee that would have been
payable if the securities distributed had been ordinary
shares deposited for issuance of ADSs
Distribution of securities distributed to holders of deposited
securities that are distributed by The Bank of New York to ADS
holders
All fees are at the discretion of The Bank of New York, and are subject to change without notice.
* With respect only to the initial issuance of Unrestricted and Restricted ADSs issued upon conversion of the Convertible
Bonds, AngloGold Ashanti will pay the applicable issuance fee of $5.00 (or less) per 100 ADSs.
Payment of Taxes
Holders of ADSs will be responsible for any taxes or other governmental charges payable on their ADSs or on the
deposited securities underlying their ADSs. The Bank of New York may refuse to transfer their ADSs or allow them to
withdraw the deposited securities underlying their ADSs until such taxes or other charges are paid. It may apply payments
owed to holders of ADSs or sell deposited securities underlying their ADSs to pay any taxes they owe, and they will remain
liable for any deficiency. If it sells deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale
and pay to holders of ADSs any proceeds, or send to them any property, remaining after it has paid the taxes.
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Reclassifications
If AngloGold Ashanti:
Then:
Changes the nominal or par value of the ordinary
shares;
Reclassifies, splits up or consolidates any of the
deposited securities;
Distributes securities on the ordinary shares that
are not distributed to holders of ADSs; or
Recapitalizes, reorganizes, merges, liquidates,
sells all or substantially all of AngloGold Ashanti’s
assets, or takes any similar action.
The cash, ordinary shares or other securities received by The Bank
of New York will become deposited securities. Each ADS will
automatically represent its equal share of the new deposited
securities.
The Bank of New York may, and will if AngloGold Ashanti asks it to,
distribute some or all of the cash, AngloGold Ashanti ordinary
shares or other securities it receives. It may also issue new ADSs
or ask holders of ADSs to surrender their outstanding ADSs in
exchange for new ADSs identifying the new deposited securities.
Amendment and Termination
AngloGold Ashanti may agree with The Bank of New York to amend the Deposit Agreement and the ADSs without the
consent of holders for any reason. If the amendment adds or increases fees or charges (except for taxes and other
governmental charges or registration fees, cable, telex or facsimile transmission costs, delivery costs or other such
expenses) or if the amendment prejudices an important right of ADS holders, it will only become effective 30 days after
The Bank of New York notifies holders of ADSs of the amendment. At the time an amendment becomes effective, holders
of ADSs are considered, by continuing to hold their ADSs, to agree to the amendment and to be bound by the ADSs and
the agreement as amended.
The Bank of New York may terminate the Deposit Agreements by mailing notice of termination to ADS holders at least
30 days prior to the date fixed in the notice if AngloGold Ashanti asks it to do so. The Bank of New York may also
terminate the Deposit Agreement if The Bank of New York has told AngloGold Ashanti that it would like to resign and
AngloGold Ashanti has not appointed a new depositary bank within 90 days. In both cases, The Bank of New York must
notify holders of AngloGold Ashanti ADSs at least 30 days before termination.
After termination, The Bank of New York and its agents will be required to do only the following under the Deposit
Agreement: collect distributions on the deposited securities, sell rights, and, upon surrender of ADSs, deliver AngloGold
Ashanti ordinary shares and other deposited securities. One year after the date of termination or later, The Bank of New
York may sell any remaining deposited securities by public or private sale and will hold the proceeds of the sale, as well as
any other cash it is holding under the Deposit Agreement, for the pro rata benefit of the ADS holders who have not
surrendered their ADSs. It will not invest the money and will have no liability for interest. The Bank of New York’s only
obligations will be to account for the proceeds of the sale and other cash. After termination, AngloGold Ashanti’s only
obligations will be with respect to indemnification of, an d payment of certain amounts to, The Bank of New York.
Limitations on Obligations and Liability to ADS Holders
The Deposit Agreements expressly limit AngloGold Ashanti’s obligations and the obligations of The Bank of New York, and
they limit AngloGold Ashanti’s liability and the liability of The Bank of New York. AngloGold Ashanti and The Bank of New
York:
·
are only obligated to take the actions specifically set forth in the applicable Deposit Agreement without negligence or
bad faith;
·
are not liable if either of AngloGold Ashanti or The Bank of New York is prevented or delayed by law or circumstances
beyond AngloGold Ashanti’s control from performing AngloGold Ashanti’s obligations under the applicable Deposit
Agreement;
· are not liable if either of AngloGold Ashanti or The Bank of New York exercises discretion permitted under the
applicable Deposit Agreement;
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· have no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the agreement on
behalf of the holders of ADS holders or on behalf of any other party;
·
may rely on advice of or information from legal counsel, accountants, and any persons presenting AngloGold Ashanti’s
ordinary shares for deposit, any registered holder or any other person believed by AngloGold Ashanti in good faith to
be competent to give such advice or information; and
·
pursuant to the Deposit Agreements, AngloGold Ashanti and The Bank of New York agree to indemnify each other
under certain circumstances.
Requirements for Depositary Action
Before The Bank of New York will issue, transfer or register the transfer of an ADS, make a distribution on an ADS, or
allow withdrawal of AngloGold Ashanti ordinary shares, The Bank of New York may require:
·
payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by
third parties for the transfer of any ordinary shares or other deposited securities;
· production of satisfactory proof of the identity and genuineness of any signature or other information it deems
necessary; and
·
compliance with regulations it may establish, from time to time, consistent with the agreement, including presentation
of transfer documents.
The Bank of New York may refuse to deliver, transfer or register transfers of ADSs generally when the books of The Bank
of New York or AngloGold Ashanti’s books are closed, or at any time if either AngloGold Ashanti or The Bank of New York
thinks it advisable to do so.
Holders of Unrestricted ADSs have the right to cancel their ADSs and withdraw the underlying ordinary shares at any time
except:
·
when temporary delays arise because: (1) either AngloGold Ashanti or The Bank of New York have closed AngloGold
Ashanti’s transfer books; (2) the transfer of the ordinary shares is blocked in connection with voting at a general
meeting of shareholders; or (3) AngloGold Ashanti is paying a dividend on the ordinary shares;
·
when ADS holders seeking to withdraw the ordinary shares owe money to pay fees, taxes and similar charges; or
·
when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to
ADSs or to the withdrawal of the ordinary shares or other deposited securities.
This right of withdrawal may not be limited by any other provision of the Unrestricted Deposit Agreement.
Pre-release of ADSs
In certain circumstances, subject to the provisions of the Deposit Agreement, The Bank of New York may deliver ADSs
before deposit of the underlying ordinary shares. This is called a pre-release of the ADS.
The Bank of New York may also deliver AngloGold Ashanti ordinary shares upon cancellation of pre-released ADSs (even
if the ADSs are cancelled before the pre-release transaction has been closed out). A pre-release is closed out as soon as
the underlying AngloGold Ashanti ordinary shares are delivered to The Bank of New York. The Bank of New York may
receive ADSs instead of ordinary shares to close out a pre-release.
The Bank of New York may pre-release ADSs only under the following conditions:
·
before or at the time of the pre-release, the person to whom the pre-release is being made must represent to The
Bank of New York in writing that it or its customer: (a) owns the ordinary shares or ADSs to be remitted, (b) assigns all
beneficial rights, title and interest in such ADSs or ordinary shares, as the case may be, to The Bank of New York in
its capacity as the depositary and for the benefit of the ADS holders, and (c) will not take any action with respect to
such ADSs or ordinary shares, as the case may be, that is consistent with the transfer of beneficial ownership
(including, without the consent of The Bank of New York, disposing of such ADSs or ordinary shares, as the case may
be) other than satisfaction of such pre-release;
·
the pre-release must be fully collateralized with cash, US government securities, or other collateral that The Bank of
New York considers appropriate; and
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· The Bank of New York must be able to close out the pre-release on not more than five business days’ notice. Each
pre-release will be subject to any further indemnities and credit regulations that The Bank of New York deems
appropriate. The Bank of New York will normally limit the number of AngloGold Ashanti ordinary shares not deposited
but represented by ADSs outstanding at any time as a result of pre-release so that they do not exceed 30 percent of
the ordinary shares deposited, although The Bank of New York may disregard this limit from time to time, if it thinks it
is appropriate to do so.
Shareholders’ meetings
The directors may convene general meetings of AngloGold Ashanti shareholders. Subject to the provisions of the
Companies Act the shareholders may requisition for the convening of a general meeting.
An AngloGold Ashanti annual general meeting and a meeting of AngloGold Ashanti shareholders for the purpose of
passing a special resolution may be called by giving 21 clear days’ notice in writing of that shareholders’ meeting. For any
other meeting of AngloGold Ashanti shareholders, 14 clear days’ notice must be given. “Clear days” means calendar days
excluding the day on which the notice is given and the date of the meeting. All shareholders are entitled to attend.
AngloGold Ashanti’s articles of association provide that a quorum for a general members’ meeting (other than a meeting at
which a special resolution will be passed) consists of three members present personally, or if the member is a corporate
entity, represented and entitled to vote. If a general meeting is not quorate, the meeting is dissolved and a new meeting will
have to be called following the relevant notice provision.
The quorum of a members’ meeting convened for the purpose of passing a special resolution consists of members holding
at least 25 percent of the total member votes and present in person or by proxy. If the meeting is not quorate, it will be
adjourned to a date between seven and 21 days after the adjourned meeting, and the members present at the second
meeting shall constitute a quorum as long as there are at least three of them at the second meeting. A special resolution
must be passed by a vote of 75 percent of the members present, at the meeting, personally or by proxy and entitled to vote
or by a vote of 75 percent of the total votes to which these members are entitled.
If the meeting is not quorate and is convened upon the requisition of members, the meeting is dissolved.
Disclosure of Interest in Shares
Under South African law, a registered holder of AngloGold Ashanti shares who is not the beneficial owner of such shares is
required to disclose every three months to AngloGold Ashanti, the identity of the beneficial owner and the number and
class of securities held on behalf of the beneficial owner. Moreover, AngloGold Ashanti may, by notice in writing, require a
person who is a registered shareholder, or whom AngloGold Ashanti knows or has reasonable cause to believe has a
beneficial interest in AngloGold Ashanti ordinary shares, to confirm or deny whether or not such person holds the ordinary
shares or beneficial interest and, if the ordinary shares are held for another person, to disclose to AngloGold Ashanti the
identity of the person on whose behalf the ordinary shares are held. AngloGold Ashanti may also require the person to give
particulars of the extent of the beneficial interest held during t he three years preceding the date of the notice. AngloGold
Ashanti is obligated to establish and maintain a register of the disclosures described above and to publish in its annual
financial statements a list of the persons who hold beneficial interest equal to or in excess of 5 percent of the total number
of ordinary shares issued by AngloGold Ashanti together with the extent of those beneficial interests.
Rights of Minority Shareholders
Majority shareholders of South African companies have no fiduciary obligations under South African common law to
minority shareholders. However, under the Companies Act, a shareholder may, under certain circumstances, seek relief
from the court if he has been unfairly prejudiced by the company. There may also be common law personal actions
available to a shareholder of a company.
Golden Share
Under the Stability Agreement, the Government of Ghana (Government) has confirmed and agreed that the Government’s
rights with respect to the Golden Share apply only in respect of AngloGold Ashanti’s assets and operations in Ghana. The
rights do not extend to any other assets or operations of AngloGold Ashanti outside Ghana, nor to any assets or operations
of AngloGold Ashanti.
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The Government has also agreed to waive any right it may have under Section 60(I) of the Minerals and Mining Law, 1986,
as amended to acquire a special share in AngloGold Ashanti or any of its direct or indirect subsidiaries or joint ventures.
The Golden Share in AngloGold Ashanti held by the Government does not carry any right to vote but the holder is entitled
to receive notice of and to attend and speak at any general meeting of AngloGold Ashanti or at any separate meeting of
the holders of any class of shares of AngloGold Ashanti.
The Golden Share may only be held by or transferred to a Minister of the Government or any person acting on behalf of
such Government and authorized in writing by such Minister.
The following matters require, and will not be effective without, the written consent of the holder of the Golden Share:
(i) any amendment to or removal of the relevant provisions of the AngloGold Ashanti Regulations setting out the rights
and restrictions attaching to the Golden Share;
(ii) the voluntary winding-up or voluntary liquidation of AngloGold Ashanti;
(iii) the redemption of or purchase by AngloGold Ashanti of the Golden Share;
(iv) the disposal of any mining lease held by AngloGold Ashanti or any subsidiary of AngloGold Ashanti;
(v) any disposal by AngloGold Ashanti (other than any disposal in the ordinary course of business of AngloGold Ashanti)
which, alone or when aggregated with any disposal or disposals forming part of, or connected with, the same or a
connected transaction, constitutes a disposal of the whole or a material part of the assets of the AngloGold Ashanti
Group taken as a whole. For this purpose, a part of the AngloGold Ashanti Group’s assets will be considered material
if either (a) its book value (calculated by reference to the then latest audited consolidated accounts), or the total
consideration to be received on its disposal, is not less than 25 percent of the book value of the net assets of the
AngloGold Ashanti Group or (b) the average profits attributable to it represent at least 25 percent of the average profits
of the AngloGold Ashanti Group for the last three years for which audited accounts are available (before deducting all
charges, except taxation and extraordinary items).
Upon a return of assets in a winding-up or liquidation of AngloGold Ashanti, the holder of the Golden Share is entitled to
the sum of 1,000 cedis (approximately 10 US cents) in priority to any payment to other members, but the Golden Share
confers no further right to participate in the profits or assets of AngloGold Ashanti. The Golden Share carries no right to
any dividend or any right to participate in any offer of securities to existing shareholders or in any capitalization issue.
The holder of the Golden Share may require AngloGold Ashanti to redeem the Golden Share at any time in consideration
of the payment to such holder of 1,000 cedis (approximately 10 US cents).
10C. Material contracts
AngloGold and the Government of Ghana agreed the terms of a Stability Agreement, approved by the parliament of Ghana
on February 18, 2004, (as amended) to govern certain aspects of the fiscal and regulatory framework under which
AngloGold Ashanti will operate in Ghana following the implementation of the Business Combination. AngloGold Ashanti is
not party to any further material contracts other than contracts entered into in the ordinary course of business.
10D.
Exchange controls
Exchange controls and other limitations affecting security holders
The following is a general outline of South African exchange controls and such outline may not apply to former residents of
South Africa. Investors should consult a professional advisor as to the exchange control implications of their particular
investments.
South African law provides for exchange control regulations, which restrict the export of capital from the Common
Monetary Area, which comprises South Africa, the Kingdoms of Lesotho and Swaziland and the Republic of Namibia. The
exchange control regulations, which are administered by the Exchange Control Department of the South African Reserve
Bank, are applied throughout the Common Monetary Area and regulate transactions involving South African residents,
including natural persons and legal entities. Government officials have from time to time stated their intentions to lift South
Africa’s exchange control regulations when economic conditions permit such action. In his budget speech in March 1998,
the Minister of Finance announced that restrictions relating to offshore investments by South African companies and
individuals subject to South African exchange control would, to a limited extent, be lifted.
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Since then, the government has incrementally relaxed aspects of exchange control for financial institutions and individuals.
However, it is impossible to predict with any certainty when the government will remove exchange controls in their entirety.
The comments below relate to exchange controls in force at the date of this annual report.
Investments in South African companies
A foreign investor may invest freely in ordinary shares in a South African company. Any foreign investor may also sell
shares in a South African company and transfer the proceeds out of South Africa without restriction. Acquisitions of shares
or assets of South African companies by non-South African purchasers are not generally subject to review by the SARB
when the consideration is in cash, but may require SARB review in certain circumstances, including when the
consideration is equity in a non-South African company or when the acquisition is financed by a loan from a South African
lender.
Dividends
Dividends declared to foreign stockholders are not subject to the approval by the South African Reserve Bank (SARB).
Dividends are freely transferable to foreign stockholders from both trading and non-trading profits earned in South Africa by
publicly listed companies.
Interest
Interest on foreign loans is freely remittable abroad, provided the loans received prior SARB approval.
Voting rights
There are no limitations imposed by South African law or by the memorandum and articles of association of AngloGold
Ashanti on the rights of non-South African shareholders to vote the ordinary shares.
Overseas financing and investments
AngloGold Ashanti and its South African subsidiaries require SARB approval to raise debt from and repay debt to non-
residents of the Common Monetary Area, mainly in respect of the interest rate and terms of repayment applicable to the
loan.
Debt raised outside the Common Monetary Area by AngloGold Ashanti’s non-South African subsidiaries is not restricted
under South African exchange control regulations and can be used for overseas investment, subject to any conditions
imposed by the SARB in connection with establishing such a subsidiary. AngloGold Ashanti and its South African
subsidiaries would, however, require SARB approval in order to provide guarantees for the obligations of any of its
subsidiaries with regard to funds obtained from non-residents of the Common Monetary Area.
Debt raised outside the Common Monetary Area by AngloGold Ashanti’s non-South African subsidiaries must be repaid or
serviced by AngloGold Ashanti’s foreign subsidiaries.
A listing by a South African company on any stock exchange other than the JSE Securities Exchange in connection with
raising capital requires permission from the SARB.
Under current exchange control regulations, offshore investments by AngloGold Ashanti and its South African subsidiaries
require the approval of the SARB. Subject to approval, there is no limit on the amount of capital that may be invested
offshore.
10E. Taxation
South African taxation
The following discussion summarizes South African tax consequences of the ownership and disposition of shares or ADSs
by a US holder (as defined below). This summary is based upon current South African tax law and South African Inland
Revenue practice, the convention between the Government of the United States of America and the Republic of South
Africa for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital
gains, signed February 17, 1997 (the "Treaty"), and in part upon representations of the depositary, and assumes that each
obligation provided for in, or otherwise contemplated by, a deposit agreement and any related agreement will be performed
in accordance with its respective terms.
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The following summary of South African tax considerations does not address the tax consequences to a US holder that is
resident in South Africa for South African tax purposes, whose holding of shares or ADSs is effectively connected with a
permanent establishment in South Africa through which such US holder carries on business activities or, in the case of an
individual who performs independent personal services, with a fixed base situated therein, or who is otherwise not entitled
to full benefits under the Treaty.
The statements of law set forth below are subject to any changes (which may be applied retroactively) in South African law
or in the interpretation thereof by the South African tax authorities, or in the Treaty, occurring after the date hereof. It
should be expressly noted that South African tax law does not specifically address the treatment of ADSs. However, it is
reasonable to assume (although no assurance can be made) that the tax treatment of US holders of shares is also
applicable to US holders of ADSs.
Holders are strongly urged to consult their own tax advisors as to the consequences under South African, US federal, state
and local, and other applicable laws, of the ownership and disposition of shares or ADSs.
Taxation of dividends
South Africa imposes a corporate tax known as Secondary Tax on Companies (STC) on the distribution of earnings in the
form of dividends. Under the terms of an option granted to gold mining corporations, AngloGold Ashanti has elected not to
be subject to STC. As a result, although AngloGold Ashanti’s dividend payments are not subject to STC, AngloGold
Ashanti pays corporate income tax at a slightly higher rate than would otherwise have been the case. This election resulted
in the overall tax paid by AngloGold Ashanti being lower than the tax payable using the standard corporate tax rate
together with STC. STC will be phased out over the next two years and replaced by a dividend withholding tax.
South Africa does not currently impose any withholding tax or any other form of tax on dividends paid to US holders with
respect to shares, but there has been a recent announcement that this is about to change. In the case of a South African
withholding tax on dividends paid to a US holder with respect to shares, the Treaty would limit the rate of this tax to
5 percent of the gross amount of the dividends if a US holder holds directly at least 10 percent of the voting stock of
AngloGold Ashanti and 15 percent of the gross amount of the dividends in all other cases. The above provisions shall not
apply if the beneficial owner of the dividends is a US resident who carries on business in South Africa through a permanent
establishment situated in South Africa, or performs in South Africa independent personal services from a fixed base
situated in South Africa, and the dividends are attributable to such pe rmanent establishment or fixed base.
On February 21, 2007, the South African Minister of Finance, Mr Trevor Manuel, delivered his 2007 Budget Speech in
which he stated that the STC currently levied at 12.5 percent will be replaced by a withholding tax on shareholders in
respect of dividends distributed at a rate of 10 percent. This change will be implemented in two phases. On
October 1, 2007 the STC rate will reduce from 12.5 percent to 10 percent and in 2008 STC will be phased out and
replaced by the 10 percent withholding tax.
The legislation giving effect to this has not been published, but AngloGold Ashanti expects that the effect of this proposal
will be that in 2008 (the first phase) AngloGold Ashanti’s marginal tax rate for its South African mining operations should
reduce from 45 percent to 43.4 percent and the tax rate on its non-mining income will reduce from 37 percent to
35.4 percent. In the second phase, (expected to take place in 2009), the marginal tax rate for AngloGold Ashanti’s South
African mining operations should reduce from 43.4 percent to 37 percent and the marginal tax rate for non-mining income
should reduce from 35.4 percent to 29 percent. The amending legislation relating to these proposals is due to be published
in July 2007.
Taxation of gains on sale or other disposition
South Africa imposes a tax on capital gains, which only applies to South African residents. The meaning of the word
"residents" is different for individuals and corporations and is governed by the South African Income Tax Act of 1962 and
by the Treaty. In contrast, gains on the disposal of securities which are not capital in nature are usually subject to income
tax. However, even in the latter case, a US holder will not be subject to income tax unless the US holder carries on
business in South Africa through a permanent establishment situated therein.
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United States taxation
The following is a general summary of the material US federal income tax consequences of the ownership and disposition
of shares or ADSs to a US holder (as defined below) that holds its shares or ADSs as a capital asset. This summary is
based on US tax laws including the Internal Revenue Code of 1986, as amended (the Code), Treasury regulations
promulgated thereunder, rulings, judicial decisions, administrative pronouncements, and the Treaty, all as currently in
effect as of the date of this annual report, and all of which are subject to change or changes in interpretation, possibly with
retroactive effect. In addition, this summary is based in part upon the representations of the depositary and the assumption
that each obligation in the deposit agreement relating to the ADSs and any related agreement will be performed in
accordance with its terms.
This summary does not address all aspects of US federal income taxation that may apply to holders that are subject to
special tax rules, including US expatriates, insurance companies, tax-exempt entities, banks, certain financial institutions,
persons subject to the alternative minimum tax, regulated investment companies, securities broker-dealers, traders in
securities who elect to apply a mark-to-market method of accounting, investors that own (directly, indirectly or by
attribution) 10 percent or more of the outstanding share capital or voting stock of AngloGold Ashanti, partnerships, persons
holding their shares or ADSs as part of a straddle, hedging or conversion transaction, persons who acquired their shares
or ADSs pursuant to the exercise of employee stock options or otherwise as compensation, or persons whose functional
currency is not the US dollar. Such holders may be subject to US federal income tax consequences different from those
set forth below.
As used herein, the term “US holder” means a beneficial owner of shares or ADSs that is (a) a citizen or individual resident
of the United States for US federal income tax purposes; (b) a corporation (or other entity taxable as a corporation for US
federal income tax purposes) created or organized in or under the laws of the United States or any state thereof (including
the District of Columbia); (c) an estate the income of which is subject to US federal income taxation regardless of its
source; or (d) a trust if a court within the United States can exercise primary supervision over the administration of the trust
and one or more US persons are authorized to control all substantial decisions of the trust. If a partnership (including for
this purpose any entity treated as a partnership for US federal income tax purposes) holds shares or ADSs, the tax
treatment of a partner generally will dep end upon the status of the partner and the activities of the partnership. If a
US holder is a partner in a partnership that holds shares or ADSs, the holder is urged to consult its own tax advisor
regarding the specific tax consequences of the ownership and disposition of the shares or ADSs.
US holders should consult their own tax advisors regarding the specific South African and US federal, state and local tax
consequences of owning and disposing of shares or ADSs in light of their particular circumstances as well as any
consequences arising under the laws of any other taxing jurisdiction. In particular, US holders are urged to consult their
own tax advisors regarding whether they are eligible for benefits under the Treaty.
For South African and US federal income tax purposes, a US holder of ADSs should be treated as owning the underlying
shares represented by those ADSs. Therefore, deposits or withdrawals by a US holder of shares for ADSs or of ADSs for
shares will not be subject to US federal income tax. The following discussion (except where otherwise expressly noted)
applies equally to US holders of shares and US holders of ADSs.
Taxation of dividends
The gross amount of any distribution (including the amount of any South African withholding tax thereon) paid to a
US holder by AngloGold Ashanti generally will be taxable as dividend income to the US holder for US federal income tax
purposes on the date the distribution is actually or constructively received by the US holder, in the case of shares, or by the
depositary, in the case of ADSs. Corporate US holders will not be eligible for the dividends received deduction in respect of
dividends paid by AngloGold Ashanti. For foreign tax credit limitation purposes, dividends paid by AngloGold Ashanti will
be income from sources outside the United States. At present, South Africa does not impose a withholding tax or any
other form of tax on dividends paid to US holders with respect to shares. The South African government, however, has
recently announced its intent to enact a dividend withholding tax, which is expected to be phased in during 2008 and 2009.
See ‘Taxation – South African Taxation – Taxation of dividends’. Once the dividend withholding tax becomes effective,
US holders who are eligible for benefits under the current Treaty will be subject to a maximum tax of 15 percent on the
gross amount of dividend distributions paid by AngloGold Ashanti.
205
The amount of any distribution paid in foreign currency (including the amount of any South African withholding tax thereon)
generally will be includible in the gross income of a US holder of shares in an amount equal to the US dollar value of the
foreign currency calculated by reference to the spot rate in effect, regardless of whether the foreign currency is converted
into US dollars on such date. If the foreign currency is converted into US dollars on the date of receipt, a US holder of
shares generally should not be required to recognize foreign currency gain or loss in respect of the dividend. If the foreign
currency received in the distribution is not converted into US dollars on the date of receipt, a US holder of shares generally
will have a tax basis in the foreign currency equal to its US dollar value on the date of receipt. Any gain or loss recognized
upon a subsequent conversion or other dis position of the foreign currency generally will be treated as US source ordinary
income or loss. In the case of a US holder of ADSs, the amount of any distribution paid in a foreign currency generally will
be converted into US dollars by the depositary upon its receipt. Accordingly, a US holder of ADSs generally will not be
required to recognize foreign currency gain or loss in respect of the distribution. Special rules govern and specific elections
are available to accrual method taxpayers to determine the US dollar amount includible in income in the case of taxes
withheld in a foreign currency. Accrual basis taxpayers are therefore urged to consult their own tax advisors regarding the
requirements and elections applicable in this regard.
Subject to certain limitations, South African withholding taxes will be treated as foreign taxes eligible for credit against a
US holder’s US federal income tax liability. The limitation on foreign taxes eligible for credit is calculated separately with
respect to specific classes of income. Dividend income generally will constitute ‘passive category’ income, or in the case of
certain US holders, ‘general category’ income. The use of foreign tax credits is subject to complex conditions and
limitations. In lieu of a credit, a US holder who itemizes deductions may elect to deduct all of such holder’s foreign taxes in
the taxable year. A deduction does not reduce US tax on a dollar-for-dollar basis like a tax credit, but the deduction for
foreign taxes is not subject to the same limitations applicable to foreign tax credits. US holders are urged to consult their
own tax advisors regarding the availability of foreign tax credits. US holders whose tax year began prior to
January 1, 2007, should consult their own tax advisors as to the foreign tax credit rules applicable to them.
Certain US holders (including individuals) are eligible for reduced rates of US federal income tax (currently at a maximum
rate of 15 percent) in respect of “qualified dividend income” received in taxable years beginning before January 1, 2011.
For this purpose, qualified dividend income generally includes dividends paid by a non-US corporation if, among other
things, the US holders meet certain minimum holding period and other requirements and the non-US corporation satisfies
certain requirements, including that either (i) the ordinary shares (or ADSs) with respect to which the dividend has been
paid are readily tradable on an established securities market in the United States, or (ii) the non-US corporation is eligible
for the benefits of a comprehensive US income tax treaty (such as the Treaty) which provides for the exchange of
information. AngloGold Ashanti currently believes that divi dends paid with respect to its shares and ADSs should constitute
qualified dividend income for US federal income tax purposes. AngloGold Ashanti anticipates that its dividends will be
reported as qualified dividends on Forms 1099-DIV delivered to US holders. Each individual US holder of AngloGold
Ashanti shares or ADSs is urged to consult his own tax advisor regarding the availability to him of the reduced dividend tax
rate in light of his own particular situation.
The US Treasury has expressed concern that parties to whom ADSs are pre-released may be taking actions that are
inconsistent with the claiming of foreign tax credits for US holders of ADSs. Such actions would also be inconsistent with
the claiming of the reduced rate of tax described above, applicable to dividends received by certain non-corporate holders.
Accordingly, the analysis of the creditability of South African withholding taxes or the availability of qualified dividend
treatment could be affected by future actions that may be taken by the US Treasury with respect to ADSs.
Taxationofcapitalgains
If a US holder is a resident of the United States for purposes of the Treaty, such holder will not be subject to South African
tax on any capital gain if it sells or disposes of its shares or ADSs. Special rules apply to individuals who are residents of
more than one country.
In general, upon a sale, exchange or other disposition of shares, a US holder will recognize capital gain or loss for
US federal income tax purposes in an amount equal to the difference between the US dollar value of the amount realized
on the disposition and the holder's tax basis, determined in US dollars, in the shares or ADSs. Such gain or loss generally
will be US source gain or loss, and will be treated as a long-term capital gain or loss if the holder’s holding period in the
shares exceeds one year at the time of disposition. If the US holder is an individual, any capital gain generally will be
subject to US federal income tax at preferential rates if specified minimum holding periods are met. The deductibility of
capital losses is subject to significant limitations.
206
Deposits or withdrawals by a US holder of shares for ADSs, or of ADSs for shares, will not be subject to US federal income
tax.
Passive foreign investment company considerations
A non-US corporation will be classified a Passive Foreign Investment Company (a PFIC) for any taxable year if at least
75 percent of its gross income consists of passive income (such as dividends, interest, rents or royalties (other than rents
or royalties derived in the active conduct of a trade or business and received from an unrelated person), or gains on the
disposition of certain minority interests), or at least 50 percent of the average value of its assets consists of assets that
produce, or are held for the production of, passive income. AngloGold Ashanti believes that it was not treated as a PFIC for
the taxable year ended December 31, 2006 and does not expect to become a PFIC in the foreseeable future. If AngloGold
Ashanti were characterized as a PFIC for any taxable year, a US holder would suffer adverse tax consequences.
These consequences may include having gains realized on the disposition of shares treated as ordinary income rather
than capital gains and being subject to punitive interest charges on the receipt of certain dividends and on the proceeds of
the sale or other disposition of the shares. Furthermore, dividends paid by AngloGold Ashanti would not be “qualified
dividend income” and would be taxed at the higher rates applicable to other items of ordinary income. US holders should
consult their own tax advisors regarding the potential application of the PFIC rules to their ownership of the shares.
US information reporting and backup withholding
Dividend payments made to a holder and proceeds paid from the sale, exchange, or other disposition of shares may be
subject to information reporting to the Internal Revenue Service (the “IRS”). US federal backup withholding generally is
imposed at a current rate of 28 percent on specified payments to persons who fail to furnish required information. Backup
withholding will not apply to a holder who furnishes a correct taxpayer identification number or certificate of foreign status
and makes any other required certification, or who is otherwise exempt from backup withholding. US persons who are
required to establish their exempt status generally must provide IRS Form W-9 (Request for Taxpayer Identification
Number and Certification). Non-US holders generally will not be subject to US information reporting or backup withholding.
However, these holders may be required to provide certification of non-US status (generally on IRS Form W-8BEN) in
connection with payments received in the United States or through certain US-related financial intermediaries. Backup
withholding is not an additional tax. Amounts withheld as backup withholding may be credited against a holder’s US federal
income tax liability. A holder may obtain a refund of any excess amounts withheld under the backup withholding rules by
filing the appropriate claim for refund with the IRS and furnishing any required information.
10F. Dividends and paying agents
Not applicable.
10G. Statement
by
experts
Not applicable.
10H. Documents
on
display
The documents referred to in this report can be read at the US Securities and Exchange Commission’s public reference
facilities at Room 1580, 100 F Street, N.E., Washington, D.C. 20549.
10I. Subsidiary
information
Not applicable.
207
Item 11: Quantitative and qualitative disclosures about market
risk
Treasury Policy
The board of directors of AngloGold Ashanti has approved a treasury and risk management policy that governs the group’s
treasury activities, including the setting of hedging and dealing limits, approval of hedging instruments and counterpart
approval and limits.
Under the treasury and risk management policy, hedges may be put in place using approved instruments over the group’s
planned gold production and resultant gold sales currency exposures. The tenor of the hedges may extend out to ten
years. The treasury and risk management policy sets limits on the extent to which the hedge position may change for the
various levels of treasury management from dealer, through treasurer, executive management and board.
The board of directors has delegated the approval of hedge instruments to AngloGold Ashanti’s treasury committee. The
treasury committee must approve all hedging instruments, treatment of the instruments in the treasury system, reporting on
the instruments and the accounting treatment for such instruments.
The financial risk management activities objectives of the group are as follows:
·
Safeguarding the group core earnings stream from its major assets through the effective control and management of
gold price risk, foreign exchange risk and interest rate risk;
·
Effective and efficient usage of credit facilities in both the short and long term through the adoption of reliable liquidity
planning and procedures;
·
Ensuring that investment and hedging transactions are undertaken with creditworthy counterparts;
· Ensuring that all contracts and agreements related to risk management activities are coordinated, consistent
throughout the group and comply where necessary with all relevant regulatory and statutory requirements.
Under the treasury and risk management policy, treasury reports that include all open hedging transactions are produced
at the following minimum intervals for review by management and the board of directors.
Daily
Treasurer
Monthly
Management committee
Quarterly
Treasury committee, Audit committee, Board of directors, Quarterly shareholder reports
The Treasury risk manager is responsible for monitoring all reports for completeness and accuracy. The reports include
stress testing of all hedge positions for changes in gold prices, currency exchange rates, interest rates, and gold and
exchange rate volatilities.
At AngloGold Ashanti, all front office (dealing), middle office (risk reporting), back office (deal confirmations) and payment
(treasury settlements) activities are segregated. All treasury transactions are captured on a third party developed treasury
and risk management system that is widely used in corporate treasuries. The internal audit group conducts regular and ad-
hoc reviews of the activities of the treasury and the company’s treasury system.
Gold price risk management activities
The group enters into derivatives to ensure a degree of price certainty and to guarantee a minimum revenue on a portion
of future planned gold sales. AngloGold Ashanti does not acquire, hold or issue derivative instruments for economic trading
purposes. A number of products, including derivatives, are used to manage gold price and foreign exchange risks that
arise out of the group’s core business activities. Forward sales contracts and purchased or sold call and put options are
used by the group to manage its exposure to gold price and currency fluctuations. Gold and currency hedging instruments
are denominated in South African rands, US dollars, Brazilian real and Australian dollars. The hedging instruments utilized
are forward sales and purchase contracts, purchased and sold put options and purchased and sold call options.
208
The mix of hedging of production hedged and the tenor of the hedging book is continuously reviewed in light of changes in
operational forecasts, market conditions and the group’s hedging policy. AngloGold Ashanti’s reserves and financial
strength have allowed it to arrange unmargined credit lines of up to ten years with counterparts.
Forward sales contracts establish the price of future gold sales at a specified price. A number of these contracts are
intended by AngloGold Ashanti for delivery against production in a future period. The volume of outstanding forward sales
contracts at the end of 2006 was 122,133 kg compared with 159,783 kg at the end of 2005.
The company utilizes bought and sold put and call options as part of its active treasury management strategy.
A put option gives the put buyer the right, but not the obligation, to sell gold to the put seller at a predetermined price on a
predetermined date. A call option gives the call buyer the right, but not the obligation, to buy gold from the call seller at a
predetermined price on a predetermined date. The group’s risk in selling call options is unlimited but mitigated by the fact
that the group produce the commodity required by the option and would benefit by the same quantity as the option loss by
selling production in the open market. The group’s risk in selling put options is unlimited but partially mitigated by put
options purchased.
SFAS133 requires that derivative instruments be accounted for as follows:
• Commodity based (“normal purchase or normal sale exempt”) contracts that meet the requirements of SFAS138, and
are designated as such, are recognized in product sales when they are settled by physical delivery.
• Where the conditions in SFAS133 for hedge accounting are met, the derivative is recognized on the balance sheet at
fair value as either a derivative asset or derivative liability. For cash flow hedges the effective portion of changes in fair
value of the hedging instrument are recognized in equity (other comprehensive income) until the underlying transaction
occurs, then the gains or losses are recognized in product sales. The ineffective portion of changes in fair value is
reported in earnings as gains or losses on derivatives in the period in which they occur. Of the contracts accounted for
as a reduction in cash flow hedges, contracts with a carrying value, of $169 million at December 31, 2006, are
expected to be recycled from other comprehensive income and recognized as a reduction in product sales during 2007.
• All other derivatives are measured at their estimated fair value, with the changes in estimated fair value at each
reporting date being reported as gains or losses on derivatives in earnings in the period in which they occur.
Cash flows from derivative instruments accounted for as cash flow hedges are included in net cash provided by operating
activities in the statements of consolidated cash flows for all periods presented. Contracts that contain ‘off-market’ terms
that result in the inflow of cash at inception are analogous to borrowing activities and, as such, are treated as financing
activities. All current and future cash flows associated with such instruments are classified within the financing activities
section of the consolidated cash flow statement. Contracts that contain ‘off-market’ terms that result in the outflow of cash
at inception are analogous to lending activities and, as such, are treated as investing activities. All current and future cash
flows associated with such instruments are classified within the investing activities of the consolidated cash flow statement.
The table below indicates AngloGold Ashanti’s total gold hedge position at a weighted average settlement price as at
December 31, 2006. The total net delta tonnage of the hedge on this date was 10.16 million ounces or 316 tonnes
(December 31, 2005: 10.84 million ounces or 337 tonnes).
The marked-to-market value of all hedge transactions making up the hedge positions was a negative $2.903 billion as at
December 31, 2006 (as at December 31, 2005: negative $1.941 billion). These values were based on a gold price of
$636.30 per ounce, exchange rates of R/$7.001 and A$/$0.7886 and the prevailing market interest rates and volatilities at
the time.
209
Year
2007 2008 2009
2010
2011
2012-2016
Total
DOLLAR GOLD
Forward contracts
Amount (kg)
19,622
22,817
21,738
14,462
12,931
24,308
115,878
$ per oz
$301
$314
$316
$347
$397
$418
$347
Forward contracts
Amount (kg)
12,957
12,957
(Long position)
$ per oz
$639
$639
Put options purchased
Amount (kg)
1,455
1,455
$ per oz
$292
$292
Put options sold
Amount (kg)
19,259
11,555
3,748
1,882
1,882
5,645
43,971
$ per oz
$612
$587
$530
$410
$420
$440
$559
Call options purchased
Amount (kg)
14,252
6,503
20,755
$ per oz
$398
$432
$409
Call options sold
Amount (kg)
47,779
46,776
41,148
32,036
36,188
51,294
255,221
$ per oz
$475
$466
$473
$458
$492
$564
$491
RAND GOLD
Forward contracts
Amount (kg)
2,138
933
3,071
Rand per kg
R91,299
R116,335
R98,769
Put options purchased
Amount (kg)
Rand per kg
Put options sold
Amount (kg)
Rand per kg
Call options sold
Amount (kg)
311
2,986
2,986
2,986
9,269
Rand per kg
R108,123
R202,054
R216,522
R230,990
R212,885
AUD DOLLAR GOLD
Forward contracts
Amount (kg)
7,465
2,177
3,390
3,111
16,143
A$ per oz
A$669
A$656
A$649
A$683
A$666
Put options purchased
Amount (kg)
4,977
4,977
A$ per oz
A$826
A$826
Put options sold
Amount (kg)
5,910
5,910
A$ per oz
A$800
A$800
Call options purchased
Amount (kg)
3,732
3,110
1,244
3,111
11,197
A$ per oz
A$668
A$680
A$694
A$712
A$686
Call options sold
Amount (kg)
6,532
6,532
A$ per oz
A$847
A$847
Delta (kg)
(36,687)
(54,993)
(62,616)
(45,773)
(46,952)
(68,991)
(316,012)
*Total net gold:
Delta (oz)
(1,179,513)(1,768,063) (2,013,148)
(1,471,634)
(1,509,540)
(2,218,109)
(10,160,007)
Hedge delta as a percentage of current
production levels (%) **
21% 31%36%
26%
27%
8%
18%
*
The Delta of the hedge position indicated above, is the equivalent gold position that would have the same marked-to-market sensitivity for a small
change in the gold price. This is calculated using the Black-Scholes option formula with the ruling market prices, interest rates and volatilities as at
December 31, 2006.
** Percentage based on 2006 full year production of 5,635,000 ounces.
At December 31, 2006 the company had 11.6 million committed ounces or 361t (2005: 11.8Moz or 369t).
Gold lease rate swaps
Year
2007 2008 200920102011 2012-2016
Amount (‘000oz)
270,000 100,000 130,000 100,000
-
Gold borrowing cost associated with
forward contracts
(1)
Interest rate %
0.69 0.78 0.89 1.25
-
Amount (‘000oz)
1,334,356
1,168,000 898,000 641,000 423,000
205,000
Gold lease rate swaps
(2)
Interest rate %
1.76 1.75 1.811.831.831.84
(1) Gold borrowing costs relating to Australian dollar gold forwards:
The Australian dollar denominated gold forward contract prices are shown on a net basis where the final price of the contract is determined by the cost of
borrowing gold over the full duration of the contract. The net prices shown in the table above have been adjusted to take account of the total expected
future cost of all accumulated costs incurred to date and the expected future borrowing cost based on ruling market prices at the financial statement date.
The amount shown under “Gold borrowing cost associated with forward contracts” in the table above is the face value of the borrowing amount and the
period in which it matures. The interest rates shown are the future market rates prevailing at the time of the financial statement.
(2) The gold lease rate swaps are contracts where the company receives a fixed percentage of the outstanding amount in gold and pays a floating market
determined percentage in gold, quarterly in arrears. The amount shown in the table above is the number of ounces outstanding at the beginning of each
period. The interest rate shown is the weighted average fixed rate that the company will receive for that period.
210
Year
2007
2008
2009
2010
2011
2012-2016
Total
DOLLAR SILVER
Put options purchased
Amount (kg)
43,545
43,545
87,090
$ per oz
$7.40
$7.66
$7.53
Put options sold
Amount (kg)
43,545
43,545
87,090
$ per oz
$5.93
$6.19
$6.06
Call options sold
Amount (kg)
43,545
43,545
87,090
$ per oz
$8.40
$8.64
$8.52
Certain of the hedging positions reported in the above tables are governed by early termination clauses in favor of certain
counterparts.
Foreign exchange price risk protection agreements
The group periodically enters into forward exchange and currency option contracts to hedge certain anticipated
transactions, firm commitments and other anticipated transactions denominated in foreign currencies. The objective of the
group’s foreign currency hedging activities is to protect the group from the risk that the eventual cash flows resulting from
transactions denominated in US dollars will be adversely affected by changes in exchange rates.
The following table indicates the group’s currency hedge position at December 31, 2006.
Year
2007
2008
2009
2010
2011
2012-2016
Total
RAND DOLLAR (000)
Put options purchased
Amount ($)
15,000
15,000
Rand per $
R7.61
R7.61
Put options sold
Amount ($)
40,000
40,000
Rand per $
R7.08
R7.08
Call options sold
Amount ($)
55,000
55,000
Rand per $
R7.34
R7.34
AUD DOLLAR (000)
Forward contracts
Amount ($)
73,518
20,000
93,518
$ per A$
$0.76
$0.73
$0.75
Put options purchased
Amount ($)
10,000
10,000
$ per A $
$0.76
$0.76
Put options sold
Amount ($)
10,000
10,000
$ per A $
$0.78
$0.78
Call options sold
Amount ($)
10,000
10,000
$ per A$
$0.75
$0.75
For a more detailed presentation of the investment maturity profile, borrowings maturity profile and interest rate risk profile
of these agreements, see note 26 to the consolidated financial statements “Financial risk management activities”.
Credit risk
Realization of all these contracts is dependent upon the counterparts performing in accordance with the terms of the
contracts. AngloGold Ashanti generally does not obtain collateral or other security to support financial instruments subject
to credit risk, but monitors the credit standing of counterparts. AngloGold Ashanti spreads its business over a number of
predominantly international, credit worthy counterparts and believes that no concentration of credit risk exists. Limits for
each counterpart are based on the assessed credit quality of each counterpart. The Treasury Committee makes
recommendations for board approval of all counterparts and the limits to be applied against each counterpart. Where
possible, management tries to ensure that netting agreements are in place.
211
The combined maximum credit exposure at the balance sheet date amounts to $655 million on a contract by contract
basis. Credit risk exposure netted by counterpart amounts to $68 million. No set-off is applied to the balance sheet due to
the different maturity profiles of assets and liabilities.
The table below provides a summary of the number, type and credit quality of AngloGold Ashanti’s hedge counterparts.
Number of Counterparts
Type
Credit Rating (Fitch)
2 International Bank
AAA
4 International Bank
AA+
4 International Bank
AA
9 International Bank
AA-
3 International Bank
A+
3 International Bank
A
1 International Bank
A-
1 International Bank
BBB
1
South African Bank
AAA(zaf) (International BBB+)
1
South African Bank
AA+(zaf) (International BBB+)
1
South African Bank
AA(zaf) (International BBB)
1
South African Bank
AA-(zaf) (International BBB)
1
South African Bank
A+(zaf) (International BBB-)
6 Brazilian Bank
AA(bra)
1 Trade Finance House
Not
rated
AngloGold Ashanti does not anticipate non-performance by any counterparts.
Fair value
The estimated fair values of financial instruments are determined at discrete points in time based on relevant market
information. In certain cases, these estimates involve uncertainties and cannot be determined with precision. The
estimated fair values of AngloGold Ashanti’s financial instruments at December 31, 2006 and 2005, are as follows:
December 31, 2006
December 31, 2005
Carrying
amount
Fair
value
Carrying
amount
Fair
value
(in
millions)
$
$
$
$
Cash and cash equivalents
(1)
471
471
196
196
Restricted cash
(1)
11
11
8
8
Short-term debt
(2)
33
33
160
160
Long-term debt
(2)
1,472
1,484
1,779
1,803
Derivatives
(3) (5)
(1,524)
(2,903)
(935)
(1,941)
Forward sales type agreements
(3)
(499)
1,328
(355)
(909)
Option contracts
(3)
(1,056)
(1,572)
(4)
(612)
(1,058)
(4)
Foreign exchange contracts
(3)
4
4
6
6
Foreign exchange option contracts
(3)
(12)
(12)
(5)
(5)
Interest rate swaps – Gold
(3)
39
5
31
25
Sub total – Hedge derivatives
(1,524)
(2,903)
(935)
(1,941)
Interest rate swaps – Non-gold
(3)
-
-
-
-
(1)
The carrying amounts approximate fair value because of the short-term duration of these instruments.
(2)
Fair value reflects the net present value of the future cash flows, discounted at the prevailing market rate. The fair value of listed fixed rate debt and
the Convertible Bonds are shown at their market value. The remainder of debt re-prices on a short-term floating rate basis, and accordingly the
carrying amount is considered to approximate fair value.
(3)
The fair value of the above instruments is calculated based on market prices, volatilities and interest rates, as at December 31, 2006 and 2005.
(4)
Includes deliverable call options sold. A deliverable option is an option in terms of which the delivery quantity is fixed regardless of the market price
on the exercise date. In the event that the market price is lower than the strike price, gold is sold to the counterpart at the ruling spot price.
(5)
Carrying amount represents on balance sheet derivatives.
212
Sensitivity analysis
The following table shows the approximate sensitivities of the $ marked-to-market value of the hedge book at
December 31, 2006 (actual changes in the timing and amount of the following variables may differ from the assumed
changes below):
Sensitivity analysis
Change in
Rate(+)
Ore on Leach PadsChangeThe recovery of gold from certain oxide ores is achieved through the heap leaching process. Under this method, ore is
placed on leach pads where it is permeated with a chemical solution, which dissolves the gold contained in Fairthe ore. The
resulting “pregnant” solution is further processed in a process plant where the gold is recovered. For accounting purposes,
costs are added to leach pads based on current mining costs, including applicable depreciation, depletion and amortization
relating to mining operations. Costs are removed from the leach pad as ounces are recovered in circuit at the leach plant
based on the average cost per recoverable ounce of gold on the leach pad.
valueThe engineering estimates of recoverable gold on the leach pads are calculated from the quantities of ore placed on the
pads (measured tons added to the leach pads), the grade of ore placed on the leach pads (based on assay data) and a
recovery percentage (based on metallurgical testing and ore type). Leach pad production cycles vary from several months
to multiple years. In operations with multiple year leach cycles, the majority (greater than 65 percent) of the placed
recoverable ounces are recovered in the first year of leaching, with declining amounts each year thereafter until the
leaching process is complete.
(1)Although the quantities of recoverable gold placed on the leach pads are reconciled by comparing the grades of ore placed
on pads to the quantities of gold actually recovered (metallurgical balancing), the nature of the leaching process inherently
limits the ability to precisely monitor recoverability levels. As a result, the metallurgical balancing process is constantly
monitored and the engineering estimates are refined based on actual results over time. Historically, AngloGold Ashanti’s
operating results have not been materially impacted by variations between the estimated and actual recoverable quantities
of gold on its leach pads. For operations with long-term leach production cycles, variations in recovery estimates from new
metallurgical data or production variances would be accounted for as an adjustment to the recoverable ounces and the
average cost per recoverable ounce of gold on the le ach pad. Variations between actual and estimated quantities resulting
from changes in assumptions and estimates that do not result in write-downs to net realizable value are accounted for on a
prospective basis. The ultimate recovery of gold from a pad will not be known until the leaching process has been
concluded. Based on current mine plans, AngloGold Ashanti expects that current leaching operations will terminate at
dates ranging from 2011 to 2020.
Change149
The costs of materials currently contained on the leach pad are reported as a separate line item apart from inventory. As
at December 31, 2006, $46 million was classified as short term compared with $37 million as at December 31, 2005 as the
Company expects the related gold to be recovered within twelve months. The short term portion of materials on the leach
pad is determined by multiplying the average cost per ounce in inventory, by the expected production ounces for the next
twelve months. Based on data gathered and analyzed from heap leach pad drilling results, and other studies and analysis
completed, short-term heap leach pad inventory occurs in two forms: (1) gold recoverable but yet to be dissolved (i.e. gold
still in the ore), and (2) gold recoverable from gold dissolved in solution within the leach pad (i.e. pore water). This
estimate calculation was used in determining the short term port ion of materials on the leach pad as at
December 31, 2006. As at December 31, 2006, $149 million was classified as long term compared with $116 million as at
December 31, 2005.
Rate (-)Funding and treasury policies
Change in Fair
value
(1)
Currency (R/$)
+1.0
(48.0)
-1.0
13.7
Currency (A$/$)
+0.05
26.0
-0.05
(26.0)
For discussion on the funding and treasury policies of AngloGold Ashanti, See “Item 11.: Quantitative and qualitative
disclosures about market risk – Gold price ($/oz)risk management activities”.
+105C.
(104.0)Research and development, patents and licenses, etc.
-10For a detailed discussion, see “Item 4B.: Business overview – Research and development”.
101.35D.
US Interest Rate (%)
+0.1
(11.1)
-0.1
11.1
ZAR Interest Rate (%)
+0.1
(0.2)
-0.1
0.2
Aus Interest Rate (%)
+0.1
(0.9)
-0.1
0.9
Gold Interest Rate (%)
+0.1
13.1
-0.1
(13.3)Trend information
(1)Outlook. During the first quarter of 2007, AngloGold Ashanti produced 1.33 million ounces at an average cash costs of
$332 per ounce before the effects of change in accounting policy for deferred stripping. Gold production for the second
quarter of 2007 is expected to be marginally higher at around 1.35 million ounces at a cash cost, before the effects of
change in accounting policy for deferred stripping, broadly similar to that achieved during the first quarter of 2007.
For the full year 2007, AngloGold Ashanti is targeting gold production of around 5.7 million ounces at a cash cost of
$323 per ounce, before the effects of change in accounting policy for deferred stripping, based on the following exchange
rates assumptions: $/R7.16, A$/$0.81, $/BRL2.00 and $/ARS3.11. AngloGold Ashanti’s ability to meet the full year’s
production target could be impacted by, amongst other factors, siesmicity in South Africa, power shortages in Africa, lower
grades at some of its mines and any setback in clearing the pit wall failure at Geita. AngloGold Ashanti is also subject to
cost pressures and wage negotiations currently facing the mining industry which could adversely impact the cash costs for
2007.
Capital expenditure is expected to be around $1,070 million in 2007 (2006: $817 million).
5E.
Off-balance sheet arrangements
AngloGold Ashanti does not engage in off-balance sheet financing activities, and does not have any off-balance sheet debt
obligations, special purpose entities or unconsolidated affiliates. The most significant off-balance sheet items are normal
purchase and normal sales exempt contracts and unaccrued future rehabilitation obligations, each of which is discussed
below.
In $ million.Normal purchase and normal sales exempt contracts
Related party transactionsA number of derivatives are used to manage gold price risks that arise out of the group’s core business activities. Gold
pricing contracts that meet the SFAS138 exemption for Normal Purchase and Normal Sale do not appear on the balance
sheet. These agreements are accounted for as sales contracts with the proceeds under the contract being recorded in
earnings at the date of settlement by physical delivery. These off-balance sheet contracts are managed as part of
AngloGold Ashanti’s gold price risk management activities and at December 31, 2006 had a marked-to-market value of
negative $1,379 million. All other derivatives are recognized on the balance sheet at fair value. See “Item 11.:
Quantitative and qualitative disclosures about market risk” and note 26 to the consolidated financial statements “Financial
risk management activities”.
150
Future rehabilitation liability
The unaccrued portion of the future rehabilitation liability is an off-balance sheet obligation. See note 21 to the
consolidated financial statements “Provision for environmental rehabilitation”.
5F.
Tabular disclosure of contractual obligations
As at December 31, 2006 AngloGold Ashanti had the following known contractual obligations:
Contractual Obligations
(7)
(in millions)
Total
$
Less
than
1 year
$
1-3 years
$
3-5 years
$
More than
5 years
$
Long-term debt obligations including interest
(1)
1,622
99
1,522
1
-
Capital lease obligations
11
3
8
-
-
Operating lease obligations
24
16
5
2
1
Purchase
obligations
- Contracted capital expenditure
(2)
354
330
24
-
-
- Other purchase obligations
(3)
464
274
130
19
41
Environmental rehabilitation costs
(4)
482
24
55
33
370
Derivatives
(5)
2,903
1,486
324
919
174
Pensions and other post retirement medical
obligations
(6)
176
12
24
26
114
Total
6,036
2,244
2,092
1,000
700
(1)
Interest calculations are at the rate existing at the year end. Actual rates are set at floating rates for come of the debt (Refer Note 20 of Item 18).
(2)
Represents contracted capital expenditure for which contractual obligations exist. Amounts stated include commitments of equity accounted joint
ventures.
(3)
Other purchase obligations represent contractual obligations for mining contract services, purchase of power, supplies, consumables, inventories,
explosives and activated carbon. Amounts stated include purchase obligations of equity accounted joint ventures.
(4)
Operations of gold mining companies are subject to extensive environmental regulations in the various jurisdictions in which they operate. These
regulations establish certain conditions on the conduct of operations by AngloGold Ashanti. Pursuant to environmental regulations, AngloGold Ashanti is
also obligated to close their operations and reclaim and rehabilitate the lands upon which it conducted its mining and gold recovery operations. The
present estimated closure costs at existing operating mines and mines in various stages of closure are reflected in this table. For more information of
environmental rehabilitation obligations, see “Item 4D.: Property, plant and equipment – Sustainable development : Safety, Health, environment and
social development”. Amounts stated include a total estimated liability of $17 million in respect of equity accounted joint ventures.
(5)
Estimated fair value of all derivatives. Also see “Item 5B.: Liquidity and capital resources – Derivatives accounted for at fair value”. Amounts stated
include derivatives of equity accounted joint ventures.
(6)
Represents payments for unfunded plans or plans with insufficient funding.
(7)
The Group is unable to determine the years, if any, that the resolution of its uncertain tax liabilities will result in a cash flow.
151
Item 6: Directors, senior management and employees
6A.
Directors and senior management
Directors
AngloGold Ashanti has a unitary board structure which, at the date of this report, comprises four executive directors and
thirteen non-executive directors, two of whom are alternates. Certain information with respect to AngloGold Ashanti’s
directors as at December 31, 2006 is set forth below:
Year
first
Name Age
Position
appointed
(1)
Robert (Bobby) M. Godsell
(2)
54
Executive director and chief executive officer
1989
(3)
Roberto Carvalho Silva
55
Executive director and chief operating officer - International
2005
(4)
Neville F. Nicolau
47
Executive director and chief operating officer - Africa
2005
(4)
Srinivasan Venkatakrishnan (Venkat)
41
Executive director, finance
2005
Russell P. Edey
(5)(6)
64
Independent non-executive director and chairman
1998
Thokoana J. (James) Motlatsi
(7)
55
Independent non-executive director and deputy chairman
1998
Frank B. Arisman
(5)
62
Independent non-executive director
1998
Reginald E. Bannerman
72
Independent non-executive director
2006
Elisabeth le R. Bradley
(5)
68
Independent non-executive director
1998
Colin B. Brayshaw
(5) (11)
71
Independent non-executive director
1997
(3)
Wiseman L. Nkuhlu
(5)
62
Independent non-executive director
2006
Samuel E. Jonah
(8) (10)
57
Non-executive director and president
2004
Réne Médori
49
Non-executive director
2005
Joseph H. Mensah
78
Non-executive director
2006
William (Bill) A. Nairn
(9)
62
Non-executive
director
2001
Simon R. Thompson
47
Non-executive director
2004
Anthony (Tony) J. Trahar
(11)
57
Non-executive
director
2000
Arthur H. (Harry) Calver
59
Alternate director
2001
Peter G. Whitcutt
41
Alternate director
2001
(1)
Directors serve for a period of three years unless re-elected. At each annual general meeting, directors appointed since the previous annual general
meeting are required to retire, but are eligible for re-election. In addition, one-third of the board of directors must retire according to seniority or by lot
but may be re-elected. At the annual general meeting held on May 5, 2006, Mr F B Arisman, Mrs E l e R Bradley, Mr R P Edey, Mr R M Godsell,
Dr T J Motlasi retired by rotation and were re-elected by the shareholders. Mr R Carvalho Silva, Mr N F Nicolau, Mr R Médori and
Mr S Venkatakrishnan retired as they were appointed after the April 29, 2005 annual general meeting and they were re-elected by the shareholders. At
the annual general meeting held on May 4, 2007, Mr F B Arisman, Mr J H Mensah, Mr W A Nairn, Prof W L Nkuhlu, Mr S M Pityana and
Mr S R Th ompson retired by rotation and were re-elected by the shareholders. Mr C B Brayshaw and Mr A J Trahar retired from board at the annual
general meeting held on May 4, 2007.
(2)
Appointed to the board in 1989, appointed as chief executive officer in April 1998 and chairman in December 2000. Resigned as chairman on
April 30, 2002 but remains chief executive officer and an executive director.
(3)
Date appointed to the board of Vaal Reefs Exploration and Mining Company Limited, prior to the formation of AngloGold Limited.
(4)
The office of chief operating officer is split into International (all countries other than those on the African continent) and Africa.
(5)
Member of the audit and corporate governance committee.
(6)
Appointed as chairman with effect from May 1, 2002.
(7)
Appointed as deputy chairman with effect from May 1, 2002.
(8)
Appointed as an executive director in 2004 which appointment he relinquished in 2005, but retained his appointment as a non-executive director.
(9)
Appointed to board in January 2000, resigned from board and appointed as alternate in October 2000. Re-appointed to the board in May 2001.
(10)Resigned from the board on February 12, 2007.
(11) Retired from board at the annual general meeting held on May 4, 2007.
Executive directors
Mr RM Godsell (54) — BA, MA
Chief Executive Officer
Bobby Godsell was appointed to the AngloGold board as chief executive officer in April 1998 and as chairman in
December 2000. He relinquished his role as chairman of AngloGold in May 2002. He has 29 years of service with
companies associated with the mining industry, and has served as a non-executive director of Anglo American plc since
March 1999. He is also a past chairman of the World Gold Council.
152
Mr R Carvalho Silva (55) — BAcc, BCorp Admin
Chief Operating Officer – International
Roberto Carvalho Silva joined the Anglo American group in Brazil in 1973 and was appointed president and chief executive
officer of AngloGold South America in January 1999. He became executive officer, South America for AngloGold in 2000
and was appointed to the board of AngloGold Ashanti in May 2005 in his current capacity.
Mr N F Nicolau (47) — B Tech (Min. Eng), MBA
Chief Operating Officer – Africa
Neville Nicolau was appointed the executive officer responsible for AngloGold’s South Africa region in November 2001 and
was appointed to the board of AngloGold Ashanti in May 2005 in his current capacity. He has 27 years of experience in the
mining industry.
Mr S Venkatakrishnan (Venkat) (41) — BCom, ACA (ICAI)
Executive Director: Finance (Chief Financial Officer)
Venkat was the finance director of Ashanti Goldfields Company Limited from 2000 until the merger with AngloGold in 2004.
Prior to joining Ashanti, Venkat was a director in the Reorganization Services Division of Deloitte & Touche in London. He
was appointed to the board of AngloGold Ashanti in August 2005.
Non-executive directors
Mr RP Edey (64) — FCA
Chairman and independent non-executive director
Russell Edey was appointed to the AngloGold board in April 1998 and as deputy chairman in December 2000. In
May 2002, he was appointed chairman when Bobby Godsell relinquished this office. Based in the United Kingdom, he is
deputy chairman of NM Rothschild Corporate Finance and a director of a number of other companies.
Dr TJ Motlatsi (55) — Hon D Soc Sc (Lesotho)
Deputy Chairman and independent non-executive director
James Motlatsi was appointed to the AngloGold board in April 1998 and as deputy chairman in May 2002 upon Russell
Edey being appointed chairman. He has been associated with the South African mining industry since 1970, and is a past
president of the National Union of Mineworkers. He is chief executive officer of TEBA Limited.
Mr FB Arisman (62) — MSc (Finance)
Independent non-executive director
Frank Arisman was appointed to the AngloGold board in April 1998. He resides in New York and retired, after 32 years of
service, from JP Morgan Chase, where he held the position of managing director.
Mrs E le R Bradley (68) — BSc, MSc
Independent non-executive director
Elisabeth Bradley was appointed to the AngloGold board in April 1998. She is non-executive chairman of Wesco
Investments Limited and Toyota South Africa (Pty) Limited, and a director of a number of other companies. She is deputy
chairman of the South African Institute of International Affairs.
Mr CB Brayshaw (71) — CA (SA), FCA
Independent non-executive director
Colin Brayshaw was appointed to the AngloGold board in April 1998. He is a retired managing partner and chairman of
Deloitte & Touche and is a non-executive director of a number of other companies including Anglo Platinum Limited and
Datatec Limited.
Dr SE Jonah KBE (57) — Hon D Sc (Exeter), MSc (Mineral Production Management)
President
Sam Jonah worked in various positions, including underground, with Ashanti Goldfields and was appointed to the position
of chief executive officer of Ashanti in 1986. He has been decorated with many awards and honors and in 2003, an
honorary knighthood was conferred on him by Her Majesty, Queen Elizabeth II of Great Britain, in recognition of his
exceptional achievements as an African businessman. Sam was appointed as an executive director to the board of
AngloGold Ashanti in May 2004, a position he relinquished in 2005 but retained his appointment as a non-executive
director.
153
Mr R Médori (49) — Doctorate Economics, Grad (Fin)
Réne Médori was appointed to the AngloGold Ashanti board in August 2005. He is the finance director of Anglo American
plc.
Mr WA Nairn (62) — BSc (Mining Engineering)
Bill Nairn has been a member of the AngloGold board since January 2000. He was re-appointed to the board in May 2001,
having previously been alternate director to Tony Trahar. He was group technical director of Anglo American plc, prior to
his retirement in 2004.
Mr SR Thompson (47) — MA (Geology)
Simon Thompson is a director of Anglo American plc and chairman of the Base Metals Division, the Industrial Minerals
Division and the Exploration Division. Simon was appointed to the AngloGold Ashanti board in 2004.
Mr AJ Trahar (57) — BCom, CA (SA)
Tony Trahar was appointed to the AngloGold board in October 2000. He is chief executive officer of Anglo American plc.
The following appointments to the board were made during 2006 and subsequent to the filing of the previous
annual report:
Mr Reginald E. Bannerman (72) — BSc, MSc, was appointed to the board of directors on February 10, 2006. He has
been in law practice since 1958 and is currently the principal partner at Messrs Bruce-Lyle, Bannerman & Thompson
Attorneys in Ghana. He is a member of the General Legal Council of Ghana and a member of the board of the Valco Trust
Fund, a large privately run trust in Ghana. A former lecturer in law at the Ahmadu Bello University in Nigeria, Reginald was
also formerly the mayor of Accra, the capital of Ghana.
Mrs C Carroll (50) — MBA (Harvard), MSc (Geology) (University of Kansas)
Cynthia Carroll was appointed Chief Executive Officer of Anglo American plc on March 1, 2007. Prior to this appointment,
she spent the last 18 years in the aluminium industry of Alcan. Prior to joining Alcan, Cynthia spent six years in gas and oil
exploration.
Mr Joseph H. Mensah (78) — BSc (Economics), MSc (Economics), was appointed to the board of directors on
August 4, 2006. He has extensive experience in international and local economic management. He is the Chairman of the
National Development Planning Commission in Ghana and a member of the Ghana Parliament representing the Sunyani
constituency.
Professor Wiseman L. Nkuhlu (62) — BCom, CA (SA), MBA, was appointed to the board of directors on August 4, 2006.
He is a past national president of the South African Institute of Chartered Accountants and is a respected South African
academic, professional and business leader.
Mr SM Pityana (47) — BA (Hons) (Essex), MSc (London), was appointed to the AngloGold Ashanti board on
February, 13 2007. He is the executive chairman of Izingwe Holdings (Proprietary) Limited and has occupied strategic
roles in both the public and private sector, including the positions of director general of the national departments of Labor
and Foreign Affairs. He was formally a senior executive of Nedbank and is currently a non-executive director of several
companies including Bytes Technology Group (BTG), African Oxygen (Afrox), Munich Re and Aberdare Cables.
Alternate directors
Mr AH Calver (58) — BSc (Hons) Engineering, MDP (UNISA), PMD (Harvard)
Harry Calver was appointed alternate director to Bill Nairn in May 2001. He is head of engineering at Anglo American plc.
Mr PG Whitcutt (40) — BCom (Hons), CA (SA), MBA
Peter Whitcutt who is head of finance at Anglo American plc, has been an alternate director since October 2001, first to
Tony Lea, and then to Réne Médori who replaced the former on the board of AngloGold Ashanti.
Mr P L Zim together with his alternate Mr D D Barber resigned from the board on August 4, 2006. Mr K H Williams retired
from the board on May 6, 2006. Dr S Jonah resigned from the board on February 12, 2007.
154
In accordance with Article 86 of the articles of association of AngloGold Ashanti, not less than one-third of all directors
must retire by rotation at every annual general meeting and all directors must retire by rotation at least once every three
years and may be re-elected by shareholders.
At the annual general meeting held on May 4, 2007, Messrs F B Arisman, W A Nairn and S R Thompson retired by
rotation and were re-elected by the shareholders. Mr C B Brayshaw and Mr A J Trahar retired from the board at the annual
general meeting held on May 4, 2007. Mrs C Carroll was appointed a non-executive director, effective from May 5, 2007.
In addition, Mr J H Mensah, Prof W Nkuhlu and Mr S M Pityana who were appointed to the board subsequent to the annual
general meeting held on May 5, 2006, retired at the annual general meeting held on May 4, 2007, and were re-elected by
the shareholders. These retirements were in terms of Article 92 of the articles of association whereby all directors
appointed to the board at any period after any annual general meeting, may only hold office until the next annual general
meeting, at which time they may be re-elected by shareholders.
Executive committee
The board of directors of AngloGold Ashanti has delegated authority for overseeing the day-to-day management of the
company’s affairs and for executing the decisions of the board to an executive committee. At the date of this report, the
executive committee comprises the four executive directors as well as the executive officer: business development and the
executive officer: marketing. The executive committee meets generally on a weekly or ad hoc basis under the
chairmanship of the chief executive officer and is mandated to assist in reviewing operations and performance by the
AngloGold Ashanti group, developing strategy and policy proposals for consideration by the board of directors and
implementing the directives of the board. Members of the executive committee at December 31, 2006, were:
Name Age
Position
Year
first
appointed
Robert (Bobby) M. Godsell
54
Executive director and chief executive officer
1989
Roberto Carvalho Silva
55
Chief operating officer – International
2004
Richard N. Duffy
43
Business development
2005
Neville F. Nicolau
47
Chief operating officer – Africa
2004
Thero Setiloane
47
Executive officer: marketing
2006
Srinivasan Venkatakrishnan (Venkat)
41
Chief financial officer
2004
For a description of the business experience and functions of the members of the executive committee, see “Executive
officers” below.
To assist in the execution of certain of its duties and functions, the executive committee has established a management
committee (formerly an operation committee), responsible for overseeing the operational performance of the company, a
treasury committee and a finance committee, all described below.
For information on the other committees established by the board of directors, see “Item 6C.: Board practices”.
155
Executive officers
The executive officers of AngloGold Ashanti at December 31, 2006 were:
Name Age
Position
Year
first
appointed
Charles E. Carter
44
Strategy and Investor relations
2005
David H. Diering
55
Business planning – Africa
2005
Richard N. Duffy
43
Business development
1998
Dawn Earp
45
Finance
2004
Don Ewigleben
53
Law, Safety, Health and Environment
2006
Benjamin W. Guenther
54
International technical
2004
Hester H. Hickey
53
Head of risk
2005
Robert L. Lazare
50
Africa - underground mining
2004
Steven J. Lenahan
51
Corporate affairs
1998
Mark P. Lynam
45
Treasury
2004
Fritz R.L. Neethling
54
Africa – open-pit mining
2005
Peter Rowe
57
Corporate Technical Group
2006
Yedwa Z. Simelane
41
Managing secretary
2004
Thero Setiloane
47
Marketing
2006
Nigel W. Unwin
54
Human resources and information technology
1999
Office of corporate administration
Lynda Eatwell
52
Company secretary
2006
The business experience and functions of the executive officers of AngloGold Ashanti are as follows.
Dr CE Carter— BA (Hons) (UCT), DPhil (Oxford), EDP (Northwestern University – Kellogg School of Management)
Strategy and Investor Relations
Charles Carter joined Anglo American in 1991 and moved to the Gold and Uranium Division in 1996. In May 2005, he was
appointed an executive officer, with responsibility for overseeing the company’s global investor relations programme.
Mr DH Diering — BSc (Mining Engineering), SAIMM, AMP
Business Planning – Africa
Dave Diering joined the Anglo American Gold and Uranium Division in 1975 and worked at several South African
operations as well as for Zimbabwe Nickel Corporation until 2001, when he joined AngloGold as head of mining and
mineral resources. In 2005 he was appointed an executive officer.
Mr RN Duffy — BCom, MBA
Business Development
Richard Duffy joined Anglo American in 1987 and in 1998 was appointed executive officer and managing secretary of
AngloGold. In November 2000 he was appointed head of business planning and in 2004 assumed responsibility for all new
business opportunities globally. In April 2005 this role was expanded to include greenfields exploration. He was appointed
to the executive committee in August 2005.
Ms D Earp — BCom, BAcc, CA (SA)
Finance
Dawn Earp joined AngloGold in July 2000 from Anglo American, where she was vice president, central finance. She was
appointed to the position of executive officer in May 2004.
156
Mr D C Ewigleben — BSc, DJur
Law, Safety, Health and Environment
Don Ewigleben joined the group in 2000 as vice president, general counsel and corporate secretary of AngloGold Ashanti’s
North American operations. In 2003 he was promoted to the position of president and chief administrative officer for North
America, a position which was changed in 2005 to chief executive officer. Prior to joining the group, he served in various
executive positions for Echo Bay Mines (Canada) and AMAX Gold (US). He also held legal, safety and environmental
positions with AMAX Coal Industries (US). He was appointed executive officer – law, safety, health and environment on
January 1, 2006.
Mr BW Guenther — BS Mining Engineering
International Technical
Ben Guenther joined AngloGold as senior vice-president and general manager of Jerritt Canyon mine in Nevada, USA and
in 2000 he was seconded to AngloGold’s Corporate Office in Johannesburg as head of mining. In 2001, he assumed some
responsibilities for safety and health, as well as heading up the corporate technical group. He was appointed an executive
officer in May 2004 and was appointed to his current position in December 2005.
Ms HH Hickey — BCompt (Hons), CA (SA)
Head of Risk
Hester Hickey joined AngloGold in 1999 as group internal audit manager and was appointed an executive officer in
November 2005.
Mr RL Lazare — BA HED (University of Free State), DPLR (UNISA), SMP (Henley Management College)
Africa – Underground Mining
Robbie Lazare joined Anglo American Gold and Uranium Division in 1982 where he worked in a variety of management
posts until 1999 when he was appointed general manager of TauTona mine. In December 2004 he was appointed an
executive officer with responsibility for South African operations. He took up his current position in July 2005.
Mr SJ Lenahan — BSoc Sc, MSc
Corporate Affairs
Steve Lenahan has been working in the mining industry since 1978 when he started his career at De Beers. He was
appointed an executive officer in 1998, responsible for investor relations and assumed responsibility for corporate affairs in
early 2001.
Mr MP Lynam — BEng (Mech)
Treasury
Mark Lynam joined the Anglo American group in 1983 and has been involved in hedging and treasury since 1990. In 1998,
he joined AngloGold as treasurer and was appointed an executive officer in May 2004.
Mr F R L Neethling — B.Sc., B.Ing (Mech), Pr. Eng
Executive Officer – Africa: Open Pit Mining
Fritz Neethling started his career in the mining industry with Iscor in 1976. He joined De Beers in 1980 and the
Anglo American Gold Division in 1992. He was appointed as general manager of the Ergo operation in 1999 and as an
executive officer in July 2005.
Mr P W Rowe — BSc (Chem. Eng)
Corporate Technical Group
Peter Rowe joined AngloGold Ashanti in June 2004 as head of AngloGold Ashanti Australia. Following 20 years with Anglo
American and De Beers, he moved to Australia in the early 1990s where he held a number of senior managerial positions
including project director of the Fimiston expansion, general manager of the Boddington Gold Mine and managing director
and CEO of Bulong Nickel. He was appointed executive officer – corporate technical group on January 1, 2006.
Mr T M L Setiloane — FAE, BSc (Mech.Eng)
Marketing
Thero Setiloane joined AngloGold in May 2003 from Real Africa Holdings, where he was an executive director. He is the
chairman of Rand Refinery. He was appointed an executive officer and a member of the executive committee on
February 24, 2006.
157
Ms YZ Simelane — BA LLB, FILPA, MAP
Managing Secretary
Yedwa Simelane joined AngloGold in November 2000 from the Mineworkers’ Provident Fund where she was the senior
manager of the Fund. She was appointed an executive officer in May 2004.
Mr NW Unwin — BA
Human Resources and Information Technology
Nigel Unwin has had many years of experience in the field of human resources. He has been an executive officer since
1999.
Daniel Owiredu, former deputy chief operating officer – Africa, was an executive officer until September 1, 2006, when he
resigned from the company.
Dawn Earp, former Executive Officer – Finance, has resigned from the company with effect from March 1, 2007.
Office of corporate administration
Ms L Eatwell - FCIS
Lynda Eatwell joined AngloGold Ashanti in August 2000 as an Assistant Company Secretary. She was appointed company
secretary of AngloGold Ashanti in December 2006 following the retirement of Chris Bull. She is responsible for ensuring
compliance with statutory and corporate governance requirements and the regulations of the stock exchanges on which
AngloGold Ashanti is listed.
Competent persons
The schedule below presents the details of those persons who manage AngloGold Ashanti’s Ore Reserves and Mineral
Resources:
Name Age
Position
Year
first
appointed
Carl E Brechtel
56
Manager - underground mining – Australia Region
2001
Vaughan A. Chamberlain
44
Manager - mineral resources and mine geology
1998
Michael (Mike) F. O’Brien
49
Manager – evaluation
1999
Eric Roth
40
Head of exploration - greenfields
2005
Jurgens van Zyl Visser
52
Manager - survey and planning – Africa Underground region
2001
David (Dave) L. Worrall
56
Manager - surface mining
1999
The information in this report that relates to exploration results, Mineral Resources or Ore Reserves is based on
information compiled by the competent persons listed below. They are either members of the Australian Institute of Mining
and Metallurgy (AusIMM) or recognized overseas professional organizations. They are all full-time employees of the
company.
The competent person for AngloGold Ashanti Exploration is:
E Roth — PhD (Economic Geology), BSc (Hons) (Geology), MAusIMM
Eric has 16 years experience in mineral exploration and project evaluation, and holds a Bachelor of Science (Honors)
degree in Geology and Ph.D in Economic Geology from the University of Western Australia. Eric joined AngloGold in 2002
as Project Manager – Peru, subsequently holding the positions of Senior Evaluations Geologist – South America (2003 to
November 2005) and Head of Exploration – Greenfields from December 2005.
The following competent persons take responsibility for the reporting of AngloGold Ashanti’s Mineral Resources,
as defined under JORC 2004:
VA Chamberlain — MSc (Mining Engineering), BSc (Hons) (Geology), MAusIMM
Vaughan has 21 years experience and holds a Bachelor of Science (Honors) degree in Geology from the University of
Natal and a Masters degree in Mining Engineering from the University of the Witwatersrand. He started his career with
Anglo American Corporation in 1987 as a geologist at Western Deep Levels East Mine (now TauTona mine). He joined
AngloGold in 1998 and currently holds the position of manager: mineral resources and mine geology.
158
MF O’Brien — MSc (Mining Economics), BSc (Hons) (Geology), Dip Data, Pr.Sci.Nat., MAusIMM
Mike has 27 years experience and holds a Bachelor of Science (Honors) degree in Geology from the University of Natal, a
Masters degree in engineering from the University of Witwatersrand and a Diploma in Datametrics from UNISA. He joined
Anglo American Corporation in 1981 as a geologist at Vaal Reefs Mine and AngloGold in 1999 as manager: evaluation in
the Corporate Technical Group, the position he currently holds.
The following competent persons take responsibility for the reporting of AngloGold Ashanti’s Ore Reserves:
CE Brechtel — MSc (Mining Engineering), BSc (Geological Engineering), MAusIMM, MSME
Carl has 31 years experience and holds a Bachelor of Science degree in Geological Engineering and a Master of Science
degree in Mining Engineering from the University of Utah, USA. After spending 6 years at AngloGold Ashanti’s Jerritt
Canyon operations, he was appointed Manager of Underground Mining of the Corporate Technical Group (CTG) providing
technical support and corporate governance to international mining operations outside of the South Africa Region. He is
currently manager mining for AngloGold Ashanti Australia. He is a registered Professional Mining Engineer in the states of
Colorado and Nevada, USA.
DL Worrall — ACSM, MAusIMM
Dave has 26 years experience and is an Associate of the Camborne School of Mines in Cornwall, England. He joined
Anglo American Corporation in 1981 as a senior mine planning engineer in the technical director’s office and AngloGold in
1999 as manager, surface mining in the corporate office, the position he currently holds.
J van Zyl Visser — MSc (Mining Engineering), BSc (Mineral Resource Management), PLATO
Jurgens has 20 years experience and holds a Bachelor of Science degree in Mineral Resource Management and a Master
of Science degree in Mining Engineering from the University of the Witwatersrand. He started his career with Anglo
American Corporation in 1975 as a surveyor at President Steyn Mine. He joined AngloGold in 1998 as a divisional valuator
and in 1999 was appointed as manager survey and planning – Africa underground region.
The competent persons consent to the inclusion of the exploration and Ore Reserves information in this report, in the form
and context in which it appears.
159
6B. Compensation
Remuneration report
Policy
The Remuneration Committee sets and monitors executive remuneration for the company. This is achieved through an
Executive Remuneration Policy, which has as its objectives to:
• attract, reward and retain executives of the highest caliber;
• align the behavior and performance of executives with the company’s strategic goals, in the overall interests of
shareholders;
• ensure the appropriate balance between short-, medium- and long-term rewards and incentives, with the latter being
closely linked to structured company performance targets and strategic objectives that are in place; and
• ensure that regional management is competitively rewarded within a global remuneration policy, which recognizes
both local and global market practice.
This policy and its application are reviewed at least annually by the Remuneration Committee. See “Item 6C.: Board
practices – Remuneration Committee”.
Compensation of executive directors
In particular the Remuneration Committee is responsible for:
• the remuneration packages for executive directors of the company including, but not limited to, basic salary,
performance-based short and long-term incentives, pensions, and other benefits; and
• the design and operation of the company’s executive share option and other incentive schemes.
The performances of the executive directors are considered relative to the prevailing business climate and market
conditions as well as annual evaluations to assess the level of achievement of key predetermined objectives. Bonuses paid
to executive directors are a reflection of the performance of each of the directors and the company as a whole. Executive
directors have elected to receive no remuneration as directors of the company.
The fees of non-executive directors are fixed by shareholders at the annual general meeting, and other than the fees they
receive for their participation on board committees and an allowance for traveling internationally to attend board meetings,
non-executive directors receive no further payments from the company.
The following principles are applied in determining executive remuneration:
1. Annual remuneration is a combination of base pay and short-, medium- and long-term incentives, with salary
comprising about 50 percent of annual remuneration.
2. Salary is set at the median for the relevant competitive markets.
3. All incentive plans should align performance targets with shareholder interests.
Bonus Share Plan (BSP) and Long-Term Incentive Plan (LTIP)
Shareholders approved the introduction of two new schemes to replace the old share incentive scheme at the annual
general meeting held on April 29, 2005. The purpose of both schemes is to align the interests of shareholders and the
efforts of executives and managers.
To the extent that structured company performance targets are achieved, the BSP allows for the payment of an annual
bonus, paid in part in cash and part in rights to acquire shares.
The LTIP allows for the granting of rights to acquire shares, based on the achievements of stretched company
performance targets over a three-year period.
These targets are based on the performance of earnings per share (EPS) and relative total shareholder return (TSR),
whereby the company will need to consistently outperform its gold company peers. Additionally, strategic business
objectives will also need to be met.
160
Executive director remuneration currently comprises the following elements:
1. Basic salary, which is subject to annual review by the Remuneration Committee and is set at the median of salaries
in similar companies in the relevant markets both in South Africa and globally. The individual salaries of executive
directors are reviewed annually in accordance with their own performance, experience, responsibility and company
performance.
2. Annual bonus, which is determined by the achievement of a set of stretching company and individual performance
targets. The company targets include earnings per share, cost control and global production. The weighting of the
respective contribution of company and individual targets is 70 percent for company and 30 percent for individual.
Failure to achieve safety improvement targets results in the reduction of bonuses for executive directors and executive
officers. Fifty percent of the bonus is paid in cash and 50 percent in awarding of rights to acquire shares. The awards
have a three-year vesting period.
3. LTIP: Executive directors are granted the right to acquire share of value equivalent to their annual salaries, subject to
the achievement of stretched company performance targets over a three-year period. These targets are based on the
performance of EPS and TSR, whereby the company will need to consistently outperform its gold company peers.
Additionally, strategic business objectives will also need to be met. The first tranche of LTIP awards was made to
executive directors in 2005. See “Item 6E.: Share ownership” for more information on the Long-Term Incentive Plan.
4. Pensions: All executive directors who are South African citizens, are members of the AngloGold Ashanti Pension
Fund, a defined benefit fund which guarantees a pension on retirement equivalent to 2 percent of final salary per year
of service. All executive directors who are not South African citizens have other retirement benefit plans, to which the
company contributes to such plans, to the level required by local practice. Death and disability cover reflects best
practice among comparable employers in South Africa.
5. Other benefits: Executive directors are members of an external medical aid scheme, which covers the director and
his immediate family.
Directors’ service contracts
Service contracts of executive directors are reviewed annually. The contractual notice period in respect of Bobby Godsell,
as chief executive officer, is 12 months, and for the other three executive directors, nine months. The contracts also deal
with compensation if an executive director is dismissed or if there is a material change in role, responsibilities or
remuneration following a new shareholder assuming control of the company. Compensation in these circumstances is
pegged at twice the notice period.
Compensation of executive management
AngloGold Ashanti’s executive management comprises its executive directors and executive officers. Under the Listings
Requirements of the JSE, AngloGold Ashanti is required to disclose compensation paid to its executive directors on an
individual basis while compensation paid to its executive officers is disclosed in aggregate.
161
The following table presents the compensation paid by AngloGold Ashanti to executive management during 2006 and
2005. Executive directors have elected not to receive payment of directors’ fees, committee fees and travel allowances.
All figures in $000
(1)
Salary
Performance
related
payments
(3)
Pension
scheme
contri-
butions
Other
benefits
(4)
Leave
encash-
ment
(5)
Sub-
total
Pre-tax
gain on
share
options
exercised
(6)
Total
Executive directors’ compensation – 2006
R M Godsell
(chief executive officer)
936
354
138
9
-
1,437
324
1,762
R Carvalho Silva
762
172
308
7
64
1,314
-
1,314
N F Nicolau
545
172
83
4
21
825
510
1,335
S Venkatakrishnan
561
172
95
-
-
829
-
829
K H Williams (until May 6, 2006)
(2
175
-
26
13
-
214
-
214
Total2,979
870
650
33
85
4,619
834
5,454
Executive officers’ compensation – 2006
Representing 16 executive officers
(2)
4,344
983
474
210
396,050
1,102
7,152
Total executive directors’ and executive
officers’ compensation – 2006
7,323
1,853
1,124
243
124 10,669
1,936
12,606
Executive directors’ compensation – 2005
R M Godsell
(chief executive officer)
925
294
135
4
97
1,455
563
2,018
J G Best (to July 31, 2005)
285
-
42
26
-
353
273
626
R Carvalho Silva (from May 1, 2005)
478
146
94
19
-
737
-
737
D L Hodgson (to April 30, 2005)
163
-
24
1
-
188
124
312
S E Jonah (to July 31,2005)
426
-
55
-
93
574
-
574
N F Nicolau (from May 1, 2005)
346
146
51
3
2
548
-
548
S Venkatakrishnan (from August 1, 2005)
(5)(6)
252
164
29
-
-
445
-
445
K H Williams
506
149
75
4
339
1,073
91
1,164
Total 3,381
899
505
57
531
5,373
1,051
6,424
Executive officers’ compensation – 2005
Representing 18 executive officers
3,932
724
552
139
415 5,762
224
5,986
Total executive directors’ and executive
officers’ compensation – 2005
7,313
1,623
1,057
196
946
11,135
1,275
12,410
NB: Rounding may result in computational differences
(1)
When directors’ compensation is in South African rands, for the purpose of this annual report, the rand values have been converted to US dollars
using the following yearly average rate of exchange: 2006: $1 = R6.7706 and 2005: $1 = R6.4368.
(2)
Salaries are disclosed only for the period from or to which, office is held.
(3)
In order to more accurately disclose remuneration received/receivable by executive directors and executive officers, the tables above include the
performance related payments calculated on the year’s financial results.
(4)
Includes health care, personal travel and relocation expenses.
(5)
In 2005, AngloGold Ashanti altered its policy regarding the number of leave days that may be accrued. As a result surplus leave days accrued were
compulsorily encashed.
(6)
On exercising the options granted in terms of the AngloGold share incentive scheme, Messrs Godsell and Nicolau applied proceeds from the sale of
the shares to acquire 3,833 and 2,900 AngloGold Ashanti shares, respectively.
162
Compensation of non-executive directors
Non-executive directors receive no compensation from AngloGold Ashanti other than their fees which are determined by
shareholders in general meeting.
No benefits in kind were granted to the non-executive directors during 2006 and 2005.
There are no contracts of service between the non-executive directors and the company or any of its subsidiaries. All
directors are subject to retirement by rotation and re-election by shareholders at least once every three years.
The following table presents the compensation paid by AngloGold Ashanti to each non-executive director during 2006 and
2005.
2006 2005
All figures in $000
(1)
Directors'
fees
(3)
Committee
fees
Travel
allowance
(4)
Total
Directors'
fees
(3)
Committee
fees
Travel
allowance
(4)
Total
R P Edey (chairman)
130
24
16
170
131
31
16
178
Dr T J Motlatsi (deputy chairman)
44
19
-
63
47
25
-
72
F B Arisman
16
21
16
53
16
27
12
55
R E Bannerman
14
4
8
26
-
-
-
-
E le R Bradley
16
22
-
38
17
30
-
47
C B Brayshaw
(5)
16
18
-
34
17
24
-
41
S E Jonah (president)
(6)
(from August 1, 2005)
23
18
-
41
7
7
-
14
A W Lea (to July 31, 2005)
-
-
-
-
9
4
8
21
R Médori (from August 1, 2005)
16
-
-
16
7
3
-
10
J H Mensah (from August 4, 2006)
7
-
4
11
-
-
-
-
W A Nairn
16
19
-
35
17
20
-
37
W L Nkuhlu
7
4
-
11
-
-
-
-
S R Thompson
16
12
-
28
16
13
16
45
A J Trahar
16
6
-
22
17
13
-
30
P L Zim (from April 30, 2004)
12
9
-
21
17
13
-
30
Total – non-executive directors
349
176
44
569
318
210
52
580
Alternates
A H Calver
-
-
-
-
-
-
-
-
P G Whitcutt
(7)
-
5
-
5
-
-
-
-
Total alternate directors
-
-
-
-
-
-
-
-
Grand total
349
181
44
574
318
210
52
580
NB: Rounding may result in computational differences
(1)
Where directors' compensation is in South African rands, for the purpose of this annual report, the rand values have been converted to US dollars
using the following year-to-date average rate of exchange: 2006: S1 = R6.7706 and 2005: $1 = R6.4368.
(2)
Salaries are disclosed only for the period from or to which, office is held.
(3)
At the annual general meeting of shareholders held on April 29, 2004, shareholders approved an increase in directors fees with effect from
May 1 2004. Shareholders approved an increase to directors fees at the annual general meeting of shareholders held on May 4, 2007.
Fees payable in 2005 and 2006
Approved fees for 2007
Chairman
$130,000 per annum
$150,000 per annum
Deputy chairman and president
R300,000 per annum
R360,000 per annum*
South African resident members
R110,000 per annum
R135,000 per annum
Non-resident members
$16,000 per annum
$25,000 per annum
*this figure applies to the position of deputy chairman only as the position of president is no longer filled.
(4)
A payment of a travel allowance of $4,000 per meeting is made to non-executive directors who travel internationally to attend board meetings. In
addition, AngloGold Ashanti is liable for the payment of all travel costs.
(5)
In addition, Mr Brayshaw was paid a fee of $2,659 (R18,000) (2005: $2,827 - R18,000) by AGRe Insurance Company Limited, a wholly-owned
subsidiary, as chairman of its audit committee.
(6)
Dr Jonah resigned as an executive director with effect 31 July 2005, but remained a non-executive director. Dr Jonah resigned from the board with
effect from 12 February 2007.
(7)
Member of the investment committee.
163
6C. Board practices
The board of directors
AngloGold Ashanti board comprises a unitary board structure of currently 16 directors who assume complete responsibility
for the activities of the company, including the total risk management framework of the company. The board has a written
charter that governs its powers, functions and responsibilities. The board contains the mix of skills, experience and
knowledge required of a multinational gold company.
Directors’ retirement follows a staggered process with one-third of the directors retiring every three years at the annual
general meeting (AGM). The curriculum vitae of those directors standing for re-election is placed before shareholders at
the AGM to help inform the process of re-election. The board is authorized by the company’s articles of association to
appoint new directors, provided such appointees retire at the next AGM and stand for election by shareholders.
Appointments to the Board are dealt with by the Board as a whole and nominations are submitted by the Nominations
Committee for consideration.
The executive directors are appointed by the board to oversee the day-to-day running of the company through effective
supervision of management. Executive directors are held accountable by regular reporting to the board, and their
performance is measured against pre-determined criteria as well as the performance of their respective business units.
Only executive directors have contracts of employment with the company. There are no contracts of service between the
directors and the company or any of its subsidiaries that are terminable at periods of notice exceeding one year and
requiring the payment of compensation. See “Item 6B.: Compensation – Executive Directors’ Service Contracts”.
Non-executive directors do not hold service contracts with the company.
Non-executive directors provide the board with invaluable and balanced advice and experience that is independent of
management and the executive. The presence of independent directors on the board, and the critical role they play
through representation on key committees such as the Audit and Corporate Governance, Nominations, Political Donations
and Remuneration committees, together with their caliber, experience and standing within the community, ensures that the
company’s interests are served by impartial views that are separate of management and shareholders.
In April 2006, Anglo American plc sold approximately 9 percent of its shareholding in AngloGold Ashanti, thereby reducing
its shareholding to below 50 percent. As a result AngloGold Ashanti is no longer regarded as a controlled company in
terms of the NYSE rules applicable to AngloGold Ashanti. AngloGold Ashanti, however, remains exempt from the
requirement that it should have a majority of its board as independent directors, since as a foreign private issuer listed on
the NYSE it is permitted to follow home rules in lieu of the provisions in the Corporate Governance Standards contained in
the NYSE Listings Manual. The JSE, on which exchange the company has its primary listing, does not require a majority
independent board. Nevertheless, there are a majority of independent directors on the board of AngloGold Ashanti. In
addition, although the NYSE rules require the nominations and remuneration committe es to comprise only independent
directors, foreign private issuers are permitted to follow home country rules in this regard. AngloGold Ashanti complies with
the relevant JSE Listing Requirements, that require the nominations and remuneration committees to comprise non-
executive directors, the majority of whom should be independent.
In terms of board policy, a director will qualify as being independent provided AngloGold Ashanti has not, over the
preceding year, done business in excess of $10 million or 5 percent of the company’s treasury business with the employer
of that director. Furthermore, in compliance with JSE Listings Requirements, an independent director must not be a
representative of a shareholder who has the ability to control or materially influence management and/or the board; not
have been employed by the company or be the spouse of a person employed by the company in an executive role in the
past three years; not have been an advisor to the company other than in the capacity as a director of the company; not be
a material supplier, customer or have a material contractual relationship with the company; and be free of any relationship
that could be seen to materially interfere with their independence. The inde pendent directors on the board of AngloGold
Ashanti during 2006 complied with these requirements and the board determined that such directors have no material
relationship with AngloGold Ashanti.
The board, its committees and the directors, all completed an evaluation process to review their effectiveness. The
chairman of each committee and the chairman of the board led the process of evaluation of the committees and the board
respectively. Both the managing secretary and the company secretary played a critical role in this process.
164
The evaluation of each non-executive director’s performance was led by the board chairman, while the assessment of the
board chairman’s performance was led by the deputy chairman of the board. The evaluation of the performance of
executive directors is performed by the Remuneration Committee. For full details, see “Remuneration Committee” below.
A managing secretary and company secretary have been appointed to assist the board in its deliberations, informing
members of their legal duties and ensuring, together with the executive directors and senior management that its
resolutions are carried out. Together with the investor relations department, the company secretarial function also provides
a direct communications link with investors and liaises with the company’s share registrars on all issues affecting
shareholders. The company secretarial function, in consultation with other departments, furthermore, provides mandatory
information required by various regulatory bodies and stock exchanges on which the company is listed. The managing
secretary and company secretary are responsible for compliance with all the statutory requirements in regard to the
administration of the Share Incentive Scheme. The managing secretary and company secretar y ensure that minutes of all
meetings of the shareholders, board and board committees are properly recorded in accordance with the South African
Companies Act of 1973. The company secretarial and compliance functions also play a crucial role in the induction of new
directors.
The compliance function has been established to assist the board and the management to determine their statutory duties,
ensure legal compliance and advise on issues of corporate governance.
All members of the board have access to management and the records of the company, as well as to external professional
advisors should the need arise.
The board meets at least on a quarterly basis to discuss and review issues of strategy, planning, operational and financial
performance, acquisitions and disposals, major capital expenditure, stakeholder communications and other material issues
reserved for its decision. Further meetings are held as and when required. Eight board meetings took place during the
course of 2006. All directors or their designated alternates attended the board meetings during their tenure except for
Mr Médori who was unable to attend five meetings, Mr Thompson and Dr Jonah who were unable to attend four,
Messrs Arisman and Bannerman and Dr Motlatsi who were unable to attend three and Messrs Brayshaw, Edey, Nairn,
Trahar and Prof Nkuhlu who were unable to attend two. The non-executive directors met during the year in the absence of
executive directors and management and under the stewardship of the independent chairman of the board.
AngloGold Ashanti does not permit directors and key employees (that is, employees having access to price sensitive
information) to trade in company shares during closed periods. Directors and key employees are required to follow a formal
process before trading in the company’s shares. Closed periods are in effect from the end of the reporting period to and
including the date of publication of the quarterly, half-yearly and year-end results. Where appropriate, a closed period is
also effective during periods where major transactions are being negotiated and a public announcement is imminent.
The articles of association of AngloGold Ashanti provide for the following:
• AngloGold Ashanti may in a general meeting elect any person to be a director to fill a casual vacancy;
• The directors have the power to appoint any person as a director, either to fill a casual vacancy or as an addition to the
board. The articles of association contain no provision for a maximum number of directors;
• The articles of association contain no provision for directors to hold qualification shares;
• The directors are entitled to remuneration as determined by AngloGold Ashanti shareholders, by ordinary resolution in
a general meeting; and
• The directors may, from time to time, borrow or raise sums of money for the purposes of AngloGold Ashanti.
Board Committees
To facilitate the activities and deliberations of the board, the board has established a number of committees, comprising
members of the board, with written terms of reference governing the powers, functions and activities of each committee. A
description of each committee is provided below.
Members of the board committees have access to management and the records of the company, as well as to external
professional advisors should the need arise.
165
The Audit and Corporate Governance Committee
The Audit and Corporate Governance Committee, inclusive of its chairman, comprises five independent non-executive
directors as recommended by the JSE Listings Requirements and the Sarbanes-Oxley Act. The Sarbanes-Oxley Act
requires the board to identify a financial expert from its ranks. The board resolved that Mr Brayshaw, chairman of the
committee, and Prof Nkuhlu, the deputy chairman of the committee, were the board’s financial experts. Following
Mr Brayshaw’s retirement from the board on May 4, 2007, Prof Nkuhlu has become the chairman of the committee and is
the sole financial expert.
All members of the committee have considerable financial knowledge and experience to help oversee and guide the board
and the company in respect of the audit and corporate governance disciplines.
In relation to independent directors’ membership of the committee, AngloGold Ashanti deviates from the guidelines of the
King Code but complies with the requirements of the Sarbanes-Oxley Act as the chief executive officer is not a member of
the committee but, if required, may attend by invitation from the chairman of the committee. In addition, AngloGold Ashanti
deviates from the guidelines of the King Code in that the board chairman is a member of the committee. The board
considers that the board chairman possesses invaluable experience and knowledge warranting his membership of the
committee.
The group internal audit manager has unrestricted access to the chief executive officer and chief financial officer, the board
chairman and the chairman of the committee, and is invited to attend and report on his department’s activities at all
committee meetings. The board is confident that the unfettered access of the group internal audit manager to key board
members, and the direct and regular reporting to the committee, together with his caliber, experience and integrity, enables
him to discharge his duties as required by law and in fulfillment of his obligations to the company. The function, duties and
powers of the internal audit function, for which the group internal audit manager is responsible, are governed by a formal
internal audit charter that has been approved by the committee. In addition, the group internal audit manager meets with
committee members in the absence of management.
The committee meets regularly with the external audit partner, the group’s internal audit manager and the group senior
financial manager, to review the audit plans of the internal and external auditors, to ascertain the scope of the audits and to
review the half-yearly financial results, significant legal matters affecting the company, the preliminary announcement of
the annual results and the annual financial statements, as well as all statutory submissions of a financial nature, prior to
approval by the board.
The committee is furthermore, responsible for:
·
the appointment and dismissal of the external auditors; determining and approving external auditors’ fees; overseeing
the work of the external auditors; determining all non-audit work of the external auditors, and pre-approving non-audit
fees to be paid to the external auditors; and ensuring that the external auditors report regularly to the committee;
· overseeing the internal audit function; receiving regular report back from the group internal audit manager;
appointment and dismissal of the group internal audit manager;
·
assessing and reviewing the company’s risk management framework; and
·
monitoring the group’s corporate governance practices in relation to regulatory requirements and guidelines.
The external auditors also meet with the committee members in the absence of management, the chief executive officer
and chief financial officer.
Members of the committee are:
·
Colin Brayshaw (chairman);
·
Prof Wiseman Nkuhlu (deputy chairman);
· FrankArisman;
· ElisabethBradley;and
· RussellEdey.
166
The committee met on eight occasions during 2006. All members of the committee attended each of the committee
meetings, except for Mr Edey who could not attend one meeting. In addition, three meetings of the Audit and Corporate
Governance sub-committee were held.
The NYSE rules require that the board determine whether a member of the committee’s simultaneous service on more
than three public companies’ audit committees impairs the ability of such a member to effectively serve on a listed
company’s audit committee. Mr Brayshaw, the chairman of the committee, is a member of nine (2005: eight) other public
companies’ audit committees and is chairman of five (2005: four). Mrs Bradley is a member of three (2005: three) other
public companies’ audit committees and is the chairman of one (2005: one). Mr Brayshaw is a retired managing partner
and chairman of Deloitte & Touche, while Mrs Bradley, who is semi-retired, has considerable financial and accounting
experience. The board is confident that the experience, caliber and integrity of both Mr Brayshaw and Mrs Bradley,
together with their regular attendance and active contribution at meetings of the committee, demonstrate their commitment
to the company’s affairs and particularly to the deliberations of the committee. The simultaneous service on other audit
committees by Mr Brayshaw and Mrs Bradley has not impaired their ability to diligently execute their responsibilities to the
committee, the board or the company.
Employment Equity and Development Committee
The committee is responsible for overseeing the company’s performance in respect of employment equity by taking into
account the legal requirements of applicable legislation and monitoring targets set by the company. The committee is also
responsible for skills development of employees in a manner that seeks to retain and develop talent, and to provide
employees with the opportunity to enhance their skills and knowledge.
Members of the committee are:
· Dr James Motlatsi (chairman);
· Frank Arisman;
· Roberto Carvalho Silva;
· Bobby Godsell;
· Bill Nairn; and
· Neville Nicolau.
Lazarus Zim resigned from the committee on his resignation from the board on August 4, 2006.
The committee met on four occasions during 2006. All members of the committee attended each meeting except for
Mr Zim who was unable to attend two meetings and Dr Motlatsi and Messrs Nicolau, Nairn and Carvalho Silva who were
unable to attend one meeting each.
The Executive Committee
The committee is responsible for overseeing the day-to-day management of the company’s affairs and for executing the
decisions of the board. For details of the composition of the committee see “Item 6A.: Directors and senior management –
Executive committee”.
The Management Committee, responsible for overseeing the operational performance of the company, is a subcommittee
of the Executive Committee – see Other committees.
The Investment Committee
The committee is responsible for overseeing and reviewing strategic investments of the company.
Members of the committee are:
· Russell Edey (chairman);
· Elisabeth Bradley;
· RobertoCarvalhoSilva;
· Dr Sam Jonah;
· Bill Nairn;
· Neville Nicolau;
· Simon Thompson;
· Srinivasan Venkatakrishnan; and
· Peter Whitcutt.
167
Kelvin Williams resigned from the committee on retirement from the board on May 6, 2006. Roberto Carvalho Silva and
Neville Nicolau were appointed to the committee on July 27, 2006.
The committee met on two occasions during 2006. All members attended meetings of the committee except Mr Thompson
who was unable to attend two meetings and Dr Jonah and Mr Nairn who were unable to attend one meeting each.
The Market Development Committee
The committee has been established to extend the influence of AngloGold Ashanti as a major global gold company, in the
development of a broader gold business, both nationally and internationally.
Members of the committee are:
· Elisabeth Bradley (chairman);
· Frank Arisman;
· Roberto Carvalho Silva;
· Bobby Godsell;
· Dr Sam Jonah; and
· Dr James Motlatsi.
Kelvin Williams resigned from the committee on retirement from the board on May 6, 2006 and Lazarus Zim resigned from
the committee on his resignation from the board on August 4, 2006.
The committee met on two occasions during 2006. All members attended meetings of the committee except for Dr Jonah
who was unable to attend two meetings and Dr Motlatsi and Mr Zim who were unable to attend one meeting each.
The Nominations Committee
The appointment of directors is a matter for the board as a whole but the committee is responsible for determining and
recommending suitable candidates to the board. The fit and proper standards policy for directors guides this process. The
committee is also responsible for establishing and reviewing succession plans for members of the board, and particularly
that of the chief executive officer and board chairman.
Members of the committee are:
· Russell Edey (chairman);
· Frank Arisman;
· Reginald Bannerman;
· Elisabeth Bradley;
· Colin Brayshaw;
· James Motlatsi; and
· Tony Trahar.
Reginald Bannerman was appointed on the committee on May 5, 2006.
The committee met on one occasion during 2006. All members attended meetings of the committee except for Dr Motlatsi
who was unable to attend the meeting.
The Political Donations Committee
The membership of the Political Donations Committee comprises three independent non-executive directors, and is
chaired by the deputy chairman of the board. The committee determines the funding of political parties in South Africa in
accordance with a formal policy adopted by the board on April 29, 2003, that sets the guiding principles for funding.
Members of the committee are:
· Dr James Motlatsi (chairman);
· Elisabeth Bradley; and
· Colin Brayshaw.
The group’s strategy on political funding is under review, and consequently, the committee did not meet in 2005 or in 2006.
The committee did not meet in 2004, as a decision on funding for both 2003 and 2004 was made in December 2003.
168
The Remuneration Committee
The Remuneration Committee is responsible for evaluating the performance of the executive directors and executive
officers, and setting appropriate remuneration for such officers of the company. See “Item 6B.: Compensation” for full
details of the company’s remuneration philosophy, the committee’s deliberations during 2006, the remuneration payments
for all directors and information on the share incentive scheme.
For 2006, members of the committee comprised the following non-executive directors:
·
Russell Edey (chairman);
· ReginaldBannerman;
· ColinBrayshaw;and
· TonyTrahar.
Reginald Bannerman was appointed on the committee on May 5, 2006.
The committee met on three occasions in 2006. All members of the committee attended meetings of the committee, except
Messrs Brayshaw and Trahar who were unable to attend one meeting each.
All meetings of the committee are attended by the chief executive officer and executive officer: human resources, except
when their own remuneration or benefits are being discussed.
The Safety, Health and Sustainable Development Committee
This committee is tasked with overseeing the company’s performance in respect of safety, health and sustainable
development, and for establishing targets in relation to each of these areas.
Members of the committee are:
· BillNairn(chairman);
· BobbyGodsell;
· DrSamJonah;
· Dr James Motlatsi;
· NevilleNicolau;and
· SimonThompson.
The committee met on four occasions during 2006. All members of the committee attended each committee meeting
except for except for Messrs Godsell, Nicolau and Thompson who were unable to attend one meeting each and Dr Jonah
and Dr Motlatsi who was unable to attend two and three meetings respectively.
Other committees
In addition to the committees of the board mentioned above, the Executive Committee has established a number of
standing committees to oversee the day-to-day management of the company’s affairs.
Management committee
The objective of this sub-committee is to monitor and review the operational performance of the company. The committee
meets on a monthly basis, is chaired by the chief executive officer and comprises all executive officers of the company and
regional heads.
Finance committee
This committee, which meets on a regular basis, is chaired by the chief financial officer and comprises a number of
executive officers and senior management in the financial and legal fields. It is tasked with monitoring all financial, legal
and administrative aspects of the company’s affairs. The company secretary attends meetings of the committee.
Treasury committee
The committee is chaired by an independent director, Mr Brayshaw, and comprises executive officers and senior
management in the financial and marketing disciplines. It is responsible for reviewing and evaluating market conditions,
treasury operations and future hedging strategies.
169
Risk management and internal controls
The board, which has ultimate responsibility for the total risk management process within the group, reviews and approves
the risk strategy and policies that are formulated by the executive directors and senior management. Management is
accountable to the board and has established a group-wide system of internal control to manage significant group risk.
This system assists the board in discharging its responsibility for ensuring that the wide range of risks associated with the
group’s global operations are effectively managed. The risk management policies are communicated to all relevant
employees.
A full review of the risk, control and disclosure processes is undertaken annually to ensure that all additional requirements
are incorporated into the system in the future. The systems are in place and the focus is on ensuring that the requirements
of the King Code and the Sarbanes-Oxley Act are complied with timeously. In conducting its annual review of the
effectiveness of risk management, the board considers the key findings from the ongoing monitoring and reporting
process, management assertions and independent assurance reports. The board also takes account of material changes
and trends in the risk profile, and considers whether the control system, including reporting, adequately supports the board
in achieving its risk management objectives. The board furthermore, receives assurance from the Audit and Corporate
Governance Committee, which derives its information, in part, from regular internal and external audit reports on risk and
internal control throughout the group.
The company has a sound system of internal control, based on the group’s policies and guidelines, in all material
subsidiaries and joint ventures under its control. In respect of those entities in which AngloGold Ashanti does not have a
controlling interest, the directors who represent AngloGold Ashanti on the boards of these entities seek assurance that
significant risks are being managed.
The board is satisfied that there is an ongoing process for identifying, evaluating and managing the significant risks and
internal controls faced by the group and if any weaknesses are identified, these are promptly addressed.
The company’s chief executive and chief financial officers are both required, in terms of the Sarbanes-Oxley Act, to certify
on Form 20-F that its financial statements present a true and fair view, in all material respects, of the company’s financial
position, cash flows and operational results, in accordance with relevant accounting standards. The certificates further
provide that both officers are responsible for establishing and maintaining disclosure and internal controls and procedures
for financial reporting. The certification process is pre-approved by the board of directors prior to filing of the Form 20-F
with the SEC.
The following policies pertaining to directors and senior management are available on the company website:
www.AngloGoldAshanti.com under About -> Corporate Governance -> Guidelines:
· Boardcharter;
·
Policy on political donations;
·
Directors’ induction policy;
·
Fit and proper standards for directors and company secretaries policy;
·
Professional advice for directors policy;
·
Market abuse (Insider trading) policy;
·
Code of ethics;
·
Code of ethics for the chief executive officer, principal financial officer and senior financial officers;
·
Confidential reporting policy; and
· Disclosurespolicy.
170
6D. Employees
AngloGold Ashanti is a significant employer in the global mining industry and:
·
is committed to upholding the Fundamental Rights Conventions of the International Labor Organization. Accordingly,
the company seeks to ensure the implementation of fair employment practices group-wide by prohibiting forced,
compulsory or child labor;
·
is committed to creating workplaces free of harassment and unfair discrimination;
· as an international company, faces different challenges in different countries with regard to, for example, offering
opportunities to citizens who may not have enjoyed equal opportunities in the past. In such cases, the company is
committed to addressing the challenge in a manner appropriate to the local circumstances;
·
will seek to understand the different cultural dynamics in host communities and adapt work practices to accommodate
this where doing so is possible and compatible with the company’s principles;
·
will promote the development of a work force that reflects the international and local diversity of the organization;
·
will provide all employees with the opportunity to participate in training that will improve their workplace competency;
·
is committed to ensuring that every employee has the opportunity to become numerate and functionally literate in the
language of the workplace;
· is committed to developing motivated, competent and experienced teams of employees through appropriate
recruitment, retention and development initiatives. An emphasis is placed on the identification of potential talent,
mentoring and personal development planning;
·
will reward both individual and team effort in a meaningful way;
· will, guided by local circumstances, continue to work together with stakeholders to ensure minimum standards for
company-provided accommodation;
·
assures access to affordable health care for employees and where possible, their families; and
· is committed to prompt and supportive action in response to any major health threat in the regions in which the
company operates.
The average number of attributable employees in the AngloGold Ashanti group over the last 3 financial years was:
2006 2005
2004
South Africa
35,968 40,754
43,282
Argentina
906 946
791
Australia
479 393
371
Brazil
4,4283,371
2,598
Ghana
9,443 10,180
8,712
Guinea
2,708 1,978
2,335
Mali
1,4731,309
1,413
Namibia
313 315
251
Tanzania
3,2202,280
2,258
USA
369 357
387
Zimbabwe
- -745
Other*
2,146 2,110
2,257
Total
61,45363,993
65,400
*including corporate and other non-gold producing subsidiaries
The change in employees numbers from 2005 to 2006 was largely a result of the go-ahead for Boddington project in
Australia and change in shaft arrangements at Sunrise Dam, the expansion at Cuiabá in Brazil; the sale of Bibiani in
Ghana, retrenchments at Obuasi and natural attrition; and the full impact of transition to owner-mining in Tanzania.
The change in employee numbers from 2004 to 2005 was largely as a result of restructuring at the South African
operations, in particular, the closure of Ergo and the beginning of the closure process at Savuka; the transition to owner
maintenance crews resulting in duplication of crews for some months in Argentina, while the Cuiabá Expansion project
resulted in an increase in Brazil; the transition to owner-mining at Geita in Tanzania; and the downscaling of operations at
Iduapriem and Bibiani in Ghana.
171
Employees and other stakeholder engagement
The company has in place a variety of strategies and structures that are designed to promote constructive engagement
with employees and other stakeholders. These strategies and structures are further developed and adapted from time to
time to meet variations in legislation, operational requirements and to accommodate changing circumstances.
Management and employee representatives meet in formal and informal forums at company and operational levels to
share information and to address matters of mutual interest.
Unions and collective bargaining
It is the aim of AngloGold Ashanti to have constructive relations with representative and recognized unions and
associations and industry forums representing employees. Management/Union relationships are governed by negotiated
agreements in respect of most of the group’s workforce, with 85.6 percent (2005: 89.4 percent) of the global workforce
represented by recognized trade unions or catered for through collective bargaining processes.
South African operations
The South African gold mining industry continues to remain labor intensive, with 97.8 percent (2005: 95 percent) of all
employees either represented by unions or catered for by the collective agency shop agreement – an agency shop
agreement exists across the lower level bargaining unit within the company. The Labor Relations Act entrenches the rights
of employees to belong to trade unions and the rights of trade unions to have access to the workplace. It also guarantees
the right to strike and the right to participate in secondary strikes in certain prescribed circumstances. The right to picket
has also been recognized. The Labor Relations Act recognizes the right of employees to participate in the decision-making
of companies by providing for the compulsory establishment of workplace forums to represent the interests of employees
where a company employs more than 100 employees. The range of issu es on which the workplace forum must be
consulted includes restructuring of the workplace, partial or total plant closures, mergers and transfers of ownership,
insofar as these affect employees, and terminations. The effect of the promulgation of amendments to specific labor laws
in 2002 is predominantly visible in the requirement for a more consultative retrenchment process as well as the broadening
of the definition of an “employee” under the legislation. In addition to compliance with a spectrum of labor legislation,
further compliance is necessary with the newly released Mining Charter.
The implementation of the Labor Relations Act’s provisions has not had, and management believes will continue not to
have, a material adverse effect on AngloGold Ashanti’s cost of labor and consequently on its results and financial
condition, although there can be no assurance of this. See “Item 3D.: Risk factors – Labor disruptions could have an
adverse effect on operating results and financial condition”. With the highly regulated South African market, the costs of
employment are substantial and labor costs at AngloGold Ashanti’s South African operations constituted approximately
50 percent of South African production costs in 2006 (2005: approximately 51 percent).
The four unions that are recognized are the National Union of Mineworkers (NUM), the United Associations of South Africa
(UASA), Mineworkers Solidarity and the South African Equity Workers’ Association (SAEWA), representing respectively
75 percent, 9.2 percent, 3 percent and 0.6 percent (2005: 85.4 percent, 11 percent, 2.6 percent and 1 percent) of
employees in the region.
A two-year agreement, effective July 1, 2005, was entered into between AngloGold Ashanti, through the Chamber of
Mines, NUM and Solidarity. The agreement can be summarized as follows:
·
wage increases of between 6 percent and 7 percent, with the highest increase for the lowest job category;
·
a wage increase in the second year of CPIX plus 1 percent, subject to a minimum guaranteed increase of between
5.5 percent and 6 percent, again depending on the job category;
·
increased employer contributions to the risk benefit within the retirement fund;
·
improvements in accommodation subsidies; and
·
recognition of the principle of a Christmas break, with detail to be agreed at mine level.
172
In October 2006, AngloGold Ashanti submitted its sixth annual employment equity report to the Department of Labor on
progress made with the implementation of the company’s employment equity plan in respect of its South African
operations. The 2006 report indicates that some progress has been made year-on-year. The employment equity
governance structures and monitoring processes have been entrenched at company and business unit levels. A Mining
Charter Steering Committee has been established to lead and direct the overall process of compliance with the Charter.
Argentina
During April 2006, the unionized workers at Cerro Vanguardia interrupted operations through strike activity mainly related
to wages which was followed by sabotage to some of the mining equipment in early May. The CVSA Management team
has been quick to react to both of these events and actions have been put in place to mitigate the risk of these events
recurring including actions to strengthen the relationship both with the employees and the union.
Australia
The Australian operations are not unionized and no industrial action took place during 2006.
Brazil
Annual negotiations on salaries and fringe benefits took place in August 2006.
Ghana
During 2006 new rates of pay were negotiated between the company and the Ghana Mine Workers’ Union and the 3 year
collective bargaining on basic conditions took place. As a result of the negotiations employees were awarded a 12 percent
wage increase.
Guinea
At Siguiri all employees are represented by the Guinean National Mining Union. No membership fees are deducted for
union membership. A five day strike took place at Siguiri during 2006 while the negotiating process was ongoing. The
strike related to disagreements between union leadership. The strike was resolved as senior national union representatives
intervened.
Mali
At the Morila, Sadiola and Yatela mines, all employees are represented by the Mining Industry Union (SECNAMI), and
guided by the National Collective Convention which sets out the minimum employment conditions for employees. Whilst no
specific recognition agreements exists at mine level at Morila, Sadiola or Yatela mines, where 95 percent of employees are
represented through SECNAMI, internal agreement provides for adaptation to the National Convention.
No industrial actions were experienced at any of the Malian operations during 2006.
Namibia
At the Navachab mine, a recognition agreement is in place with the Mineworkers Union of Namibia (MUN), and the union
bargains with the company on behalf of all employees in the A2 to C3 Paterson bands. Approximately 75 percent of the
workforce are members of MUN. A 1 year wage agreement was signed in 2006, allowing for a 7 percent wage increase.
During 2006 a 2 day stay away was staged whereby the workforce demanded the removal of two of the mines senior
managers. An investigation by an independent 3rdparty concluded that the allegations against the managers were
unfounded. Aside from the 2 day stay away a positive labor relations climate prevailed at the mine during the year.
Tanzania
Monthly meetings are held between senior and junior staff representative councils and the general manager. In addition,
safety representative committees and joint health and safety structures are in place and a monthly consultative meeting is
held with all senior staff to discuss the mine’s performance and other operational issues. An access agreement has existed
with TAMICO since 2003. Membership figures have varied between 2-5 percent of the workforce.
USA
In the USA, the workforce is not unionized. Communication with and participation by employees in employee meetings with
management is encouraged. No incidences of industrial action were experienced during 2006.
173
6E. Share ownership
Share ownership of directors
Directors held the following number of ordinary shares of the company at December 31, 2006 and 2005, which did not
individually or in the aggregate exceed 1 percent of the company's issued ordinary share capital:
December 31, 2006
December 31, 2005
Beneficial
Beneficial
Beneficial Beneficial
Direct
Indirect
Non-
beneficial
(1)
Direct Indirect
Non-
beneficial
(1)
Executive directors
JG Best (retired August 1, 2005)
–
–
–
–
–
–
R Carvalho Silva (appointed May 1, 2005)
–
–
–
–
–
–
R M Godsell
13 010
–
–
9,177
–
–
DL Hodgson (retired April 29, 2005)
430
SE Jonah (until July 31, 2005)
–
–
–
–
–
–
N F Nicolau (appointed May 1, 2005)
3 000
–
–
100
–
–
S Venkatakrishnan (appointed August 1, 2005)
652
–
–
652
–
–
K H Williams (retired May 6, 2006)
–
–
–
920
–
Total 16
662
–
–
9,929 1,350
–
Non-executive directors
F B Arisman
–
2,000
–
–
2,000
–
R E Bannerman
–
–
–
–
–
–
Mrs E le R Bradley
–
23,423
3,027
–
23,423
3,027*
C B Brayshaw
–
–
–
–
–
–
R P Edey
–
1,000
–
–
1,000
–
Dr S E Jonah (from August 1, 2005)
18,469
–
6,297
–
–
AW Lea (until July 31, 2005)
–
–
–
–
–
–
R Médori (appointed August 1, 2005)
–
–
–
–
–
–
J H Mensah
–
–
–
–
–
–
Dr T J Motlatsi
–
–
–
–
–
–
W A Nairn
–
–
–
–
–
–
W L Nkuhlu
–
–
–
–
–
–
S R Thompson
–
–
–
–
–
–
A J Trahar
–
–
–
–
–
–
P L Zim (resigned August 4, 2006)
–
–
–
–
–
–
Total 16,662
44,892
3,027
6,297
26,423
3,027*
Alternate directors
DD Barber (resigned August 4, 2006)
A H Calver
–
–
–
–
46
–
P G Whitcutt
–
–
–
–
–
–
Total –
–
–
–
46
–
Grand Total
16,662
44,892
3,027
16,226
27,819
3,027*
(1)
The director derives no personal benefit from the ordinary shares declared, for example by holding the ordinary shares in trust for another.
* Restated.
As of June 25, 2007, there have been no changes in the directors’ ownership of ordinary shares, set forth above and
Mrs C Carroll and Mr S M Pityana, who were appointed on March 1, 2007 and February 13, 2007 respectively, hold no
interest in the company’s ordinary shares
.
Share ownership of executive officers
Under the Listings Requirements of the JSE, AngloGold Ashanti is not required to disclose, and it does not otherwise
disclose or ascertain, share ownership of individual executive officers in the share capital of AngloGold Ashanti. However,
to the best of its knowledge, AngloGold Ashanti believes that AngloGold Ashanti ordinary shares held by executive officers,
in aggregate; do not exceed 1 percent of the company's issued ordinary share capital.
174
Share ownership of employees
At a general meeting of shareholders held on December 11, 2006, members approved the creation of 4,280,000 new
E ordinary shares of 25 South African cents pursuant to an employee share ownership plan for the benefit of certain
AngloGold Ashanti employees, of which the majority are historically disadvantaged South Africans as defined in the
Broad-Based Socio-Economic Empowerment Charter for the South African Mining Industry.
On December 15, 2006, 2,785,770 E ordinary shares were issued to the Bokamoso ESOP Trust which holds these shares
on behalf of approximately 31,000 employees.
AngloGold Share Incentive Scheme
AngloGold Ashanti operates a share incentive scheme for the purpose for providing an incentive to executive directors,
executive officers and managers to identify more closely with the fortunes of the group and its continued growth, and to
promote the retention of such employees by giving them an opportunity to acquire ordinary shares in the company.
Non-executive directors are not eligible for participation in the share incentive scheme.
The incentives offered by AngloGold Ashanti are reviewed periodically to ensure that these incentives are globally
competitive, so as to attract, reward and retain management of the highest caliber. As a result, several types of incentives,
each with their own issue and vesting criteria have been granted to employees – collectively known as the AngloGold
share incentive scheme or share incentive scheme.
Under the terms of the AngloGold share incentive scheme, which was approved by the shareholders at the general
meeting held on June 4, 1998, and with the introduction of the Bonus share plan and Long-term incentive plan approved by
the shareholders at the annual general meeting held on April 29, 2005, the maximum number of ordinary shares that may
be allocated for the purposes of the share incentive scheme is equivalent to 2.75 percent of the total number of AngloGold
Ashanti ordinary shares in issue at any time. As of December 31, 2006 and 2005, this equated to 7,596,494 and 7,285,807
ordinary shares, respectively.
At the annual general meeting held on April 29, 2005, shareholders approved the amendment to the maximum aggregate
number of ordinary shares which may be acquired by any one participant from 300,000 to 5 percent of the 2.75 percent
attributable to the share incentive scheme (or 0.1375 percent of the total number of ordinary shares in issue at any one
time).
Employees participate in the scheme to the extent that they are granted options, shares or rights and accept them. All
options or rights which have not been exercised within ten years from the date on which they were granted automatically
expire, unless otherwise stated.
Although the remuneration committee has the discretion to incentivize employees through the issue of shares, only options
or rights have so far been granted. The type and vesting criteria of the options or rights granted are:
Time-related
The granting of time-related options was approved by shareholders at the general meeting held on June 4, 1998 and
amended by shareholders at the annual general meeting held on April 30, 2003, at which time it was agreed that no further
time-related options would be granted. All options granted hereunder will terminate on February 1, 2012, being the date on
which the last options granted under these criteria may be exercised or will expire. Each time-related option entitles the
holder to acquire one ordinary share at a price equal to the closing price of ordinary shares on the JSE on the last business
day prior to the date of grant.
Time-related options vest over a five-year period from date of grant, and may be exercised in tranches of 20 percent each
in years 2, 3 and 4 and 40 percent in year 5.
Performance-related
Performance-related options were approved by shareholders at the annual general meeting held on April 30, 2002 and
amended at the annual general meeting held on April 29, 2005 at which time it was agreed that no further
performance-related options would be granted. All options granted hereunder will terminate on November 1, 2014, being
the date on which the last options granted under these criteria may be exercised or will expire. Each performance-related
option entitles the holder to acquire one ordinary share at a price equal to the closing price of ordinary shares on the JSE
on the last business day prior to the date of grant.
175
Performance-related options may be exercised in full, three years after date of grant, provided that the conditions on which
the options were granted, namely the performance of the company as determined by the directors at date of grant, are
met.
Bonus share plan (BSP)
The granting of rights in terms of the BSP was approved by shareholders at the annual general meeting held on
April 29, 2005. Executive directors, executive officers and other management groups are eligible for participation. Each
award made in respect of the BSP entitles the holder to acquire one ordinary share at “nil” cost. Awards granted vest in full,
three years from date of grant, provided that the participant is still in the employ of the company at the date of vesting,
unless an event occurs which may result in an earlier vesting, such as death.
Long-term incentive plan (LTIP)
The granting of rights in terms of the LTIP was approved by shareholders at the annual general meeting held on
April 29, 2005. Executive directors, executive officers and selected senior management are eligible for participation. Each
award made in respect of the LTIP entitles the holder to acquire one ordinary share at “nil” cost. Options granted vest three
years after date of grant, to the extent that the performance conditions under which the options were granted, are met, and
provided that the participant is still in the employ of the company, or unless an event occurs which may result in an earlier
vesting, such as death.
The AngloGold share incentive scheme is summarized as follows:
The maximum number of ordinary shares that may be allocated for purposes of the scheme, equivalent to 2.75 percent of
the total number of ordinary shares in issue at that date, is:
June 25, 2007
December 31, 2006
December 31, 2005
7,612,932 7,596,494 7,285,807
The maximum aggregate number of ordinary shares which may be acquired by any one participant in the share incentive
scheme at that date is:
June 25, 2007
December 31, 2006
December 31, 2005
380,647 379,825 364,291
The movement in respect of options and rights granted and the ordinary shares issued as a result of the exercise of
options and rights during the period January 1, 2006 to December 31, 2006 was as follows:
Time-
related
Performance-
related
Bonus
share
plan
Long-
term
incentive
plan
Total
Average
exercise
price per
ordinary
share – R
Ordinary
shares
issued
At January 1, 2006
864,710
2,897,000
271,945
363,500
4,397,155
216.71
2,715,678
Movement
during
year
- Granted
-
-
254,110
316,675
570,785
318.32
-
- Exercised
389,850
4,300
4,249
-
398,399
129.97
398,399
- Forfeited (terminations)
1,600
306,900
41,221
20,000
369,721
243.77
At December 31, 2006
473,260
2,585,800
480,585
660,175
4,199,820
236.37
3,114,077
During the period January 1, 2007 to and including June 25, 2007, 618,510 options or rights were granted and 592,247
options or rights at an average price of R236.84 per share were exercised.
Option ownership of directors, executive officers and management
Under the Listings Requirements of the JSE, AngloGold Ashanti is required to disclose the option or rights ownership of
individual directors. Under those requirements, AngloGold Ashanti is not required to, and it does not otherwise, disclose
option or rights ownership of individual executive officers and senior management.
176
The table below shows the movement in respect of options or rights held by executive directors on an individual basis, and
by executive officers and managers, each as a group, during 2006. Non-executive directors are not eligible to participate in
the scheme and therefore own no options:
R M Godsell
(1)
R Carvalho
Silva
N F Nicolau
(1)
S Venkat-
akrishnan
Total
directors
Total Executive
officers
(2)
Total other
(2)
Total scheme
Balance at
January 1, 2006*
Number 239,735
54,815
56,635
14,865
366,050
423,415
3,607,690
4,397,155
Average exercise
price per shares – R
117.58 168.98
139.24
-
123.85
147.84
199.43
188.17
Granted during
year
(3)
Number 29,390
14,345
14,345
14,725
72,805
88,470
409,510
570,785
Average exercise
price per share – R
-
-
-
-
-
-
-
-
Exercised during
year
Number9,200
-
17,600
-
26,800
35,700
335,899
398,399
Average exercise
price per share – R
104.00
-
147.69
-
132.69
131.38
127.73
128.39
Average market
price per share at
date of exercise– R
343.62 -
345.00
-
344.52
341.75
329.82
331.88
Pre-tax gain at date
of exercise – R
value (R000)
2,204,467.20
-
3,472,640.00
-
5,677,107.20
7,510,106.73 67,884,192.29 81,071,406.22
Forfeited
(terminations)
during year
6,306 363,415 369,721
Number
- -
-
-
-
Average exercise
price per share – R
-
-
-
-
-
-
210.22
206.64
Held as at
December 31, 2006
Number 259,925
69,160
53,380
29,590
412,055
469,879
3,317,886
4,199,820
Average exercise
price per share – R
104.76 133.93
99.04
-
101.39
123.24
180.89
166.64
Latest expiry date
July 31, 2016
July 31, 2016
July 31, 2016
July 31, 2016
July 31, 2016 March 8, 2016
(1)
On exercising of options granted in terms of the AngloGold share incentive scheme, Messrs Godsell and Nicolau applied proceeds from the sale
of the shares to acquire 3,833 (2005: 8,717) and 2,900 AngloGold Ashanti shares respectively.
(2)
As a result of the change in status, the following movements to opening balance were made:
Quantity
Average value
Average exercise
-From director status to other management
- From other management to executive officer
- From executive officer to other management
117,230
33,080
12,000
22,050,400.00
4,699,410
3,445,380
188.10
142.06
287.12
(3)
Awards granted in 2005 and 2006 are granted at nil cost to participant
Of the 4,199,820 options or rights granted and outstanding at December 31, 2006 2,147,660 options are fully vested and 911,400 options will vest
on November 1, 2007.
177
Item 7: Major shareholders and related party transactions
Overview
Description of AngloGold Ashanti’s share capital
AngloGold Ashanti’s share capital consists of four classes of stock:
• Ordinary shares, par value 25 cents each (the “ordinary shares”);
• E Ordinary shares, par value 25 cents each (the “E ordinary shares”);
• A redeemable preference shares, par value 50 cents each (the “A preference shares”); and
• B redeemable preference shares, par value 1 cent each (the “B preference shares”).
At a meeting of the shareholders held on December 11, 2006 the shareholders approved the increase in the authorized
share capital of the company by the creation of 4,280,000 E ordinary shares with a par value of 25 cents each.
The authorized and issued share capital of AngloGold at December 31, 2006, is set out below:
Title of class
Authorized
Issued
Ordinary shares
400,000,000
276,236,153
E ordinary shares
4,280,000
4,185,770
A preference shares
2,000,000
2,000,000
B preference shares
5,000,000
778,896
All the issued ordinary shares, E ordinary shares, A redeemable preference shares and B redeemable preference shares
are fully paid and are not subject to further calls or assessment by AngloGold Ashanti.
For a discussion of rights attaching to the ordinary shares, E ordinary shares, A redeemable preference shares and
B redeemable preference shares, see “Item 10B.: Memorandum and Articles of Association”.
The following are the movements in the issued ordinary share capital at December 31.
2006
2005
2004
Issued
Number of
ordinary
shares
Rand
Number of
ordinary
shares
Rand
Number of
ordinary
shares Rand
At January 1,
264,938,432
66,234,608 264,462,894
66,115,724 223,136,342
55,784,086
Issues during year
– Business combination with Ashanti
-
share-swap
–
–
–
–
38,400,021 9,600,005
-
regulatory
shares
–
–
–
– 2,658,000 664,500
-
exercise
of
warrants
–
–
–
–
75,731
18,933
– Equity Raising
9,970,732
2,492,683
–
–
–
–
Exercise of options by participants in the
- AngloGold Share Incentive Scheme
398,399
99,600
475,538
118,884
192,800
48,200
- Employment Share Ownership
Plan/Black Economic empowerment
transaction
928,590
232,147
At December 31,
276,236,153
69,059,038 264,938,432
66,234,608 264,462,894
66,115,724
During the period January 1, 2007 to and including June 25, 2007, 597,730 ordinary shares were issued at an average
issue price of R249 per share, resulting in 276,833,883 ordinary shares being in issue at June 25, 2007.
178
7A.Major shareholders
According to information available to the directors, the following are the only shareholders beneficially holding, directly or
indirectly, more than 5 percent of the ordinary share capital of the company at December 31:
Ordinary shares held at
December 31, 2006
December 31, 2005
December 31, 2004
Shareholder Number
%
voting
rights
Number %
voting
rights
Number %
voting
rights
Anglo American plc
115,102,929
41.67
134,788,099
50.88
134,788,099
50.97
The Bank of New York *
73,559,916
26.63
48,702,313
18.38
45,217,297
17.10
*
Ordinary shares held through various custodians in respect of American Depositary Shares issued by The Bank of New York. At December 31, 2006, the
number of persons who were registered holders of ADSs was reported at 4,186. AngloGold Ashanti is aware that many ADSs are held of record by
brokers and other nominees, and accordingly the above numbers are not necessarily representative of the actual number of persons who are beneficial
holders of ADSs or the number of ADSs beneficially held by these persons.
The company’s major shareholders have the same voting rights as other holders of AngloGold Ashanti ordinary shares and
do not have any different or special voting rights. During April 2006, Anglo American plc sold approximately 9 percent
(19,685,170 ordinary shares) of its shareholding in AngloGold Ashanti.
As at December 31, 2006, there were 19,250 holders of record of AngloGold Ashanti ordinary shares. Of these holders
393 had registered addresses in the United States and held a total of 74,756 ordinary shares, approximately 0.027 percent
of the total outstanding ordinary shares. In addition, certain accounts of record with registered addresses outside the
United States, including The Bank of New York, hold AngloGold Ashanti ordinary shares, in whole or in part, beneficially for
United States persons.
At June 25, 2007, Anglo American plc, through its wholly-owned subsidiary, Anglo South Africa Capital (Pty) Limited held
115,102,929 ordinary shares, representing 41.59 percent of the issued share capital while 69,144,000 ADSs, or
approximately 25 percent of the total issued ordinary share capital, were issued and outstanding and held of record by
approximately 4,000 registered holders.
At December 31, 2006, the Government of Ghana held 9,031,650 shares, representing 3.41 percent of the issued share
capital. These shares were issued pursuant to the Business Combination with Ashanti. At June 25, 2007, the Government
of Ghana’s holding was unchanged at 9,031,650 shares, representing 3.26 percent of the issued share capital.
All the issued A and B preference shares are held by Eastvaal Gold Holdings Limited, AngloGold Ashanti’s wholly-owned
subsidiary. The articles of association of AngloGold Ashanti provide that the A redeemable preference shares and the
B redeemable preference shares are not transferable.
The E Ordinary shares are held by Izingwe Holdings (Proprietary) Limited, an empowerment company and the Bokamoso
ESOP Trust, which holds the shares on behalf of employees who qualify in terms of the BEE transaction as approved by
the AngloGold Ashanti shareholders on December 11, 2006. Neither the Bokamoso ESOP Trust nor Izingwe Holdings
(Proprietary) Limited may sell their shares or any portion of their shares without the written consent of AngloGold Ashanti.
Insofar as is known to AngloGold Ashanti as of December 31, 2006, there was no person who, directly or indirectly, jointly
or severally, exercised or could exercise control over AngloGold Ashanti, nor is AngloGold Ashanti aware of any
arrangements which might result in a change in control of AngloGold Ashanti.
Relationship with Anglo American plc (AA plc) and its subsidiaries held
AA plc is the largest shareholder of AngloGold Ashanti with an effective 50.97equity interest and voting rights of 41.67 percent (2003:as at
54.45December 31, 2006 (2005: 50.88 percent) interest. Although there is no current agreement between AngloGold Ashanti and AA plc
concerning membership on the AngloGold Ashanti board of directors by AA plc, AA plc indicated, in their 13D filing with the
SEC on May 26, 2006, that the number of members affiliated with AA plc on AngloGold Ashanti’s board of directors may
be reduced as AA plc’s percentage ownership in AngloGold Ashanti declines. In April 2006 AA plc sold approximately
9 percent of its shareholding in AngloGold Ashanti. On February 21, 2007, AA plc stated that it intends to reduce and
ultimately to exit its gold company holdings and that it will continue to explore all available options to exit AngloGold
Ashanti in an orderly manner.
179
Currently, two members of the board of directors of AngloGold Ashanti are affiliated with AA plc. Mr Tony Trahar retired on
May 4, 2007 at the annual general meeting and Mr Lazarus Zim, together with his alternate Mr David Barber resigned from
the board on August 4, 2006 following Mr Zim’s move to a non-executive role in Anglo American. Mrs C Carrollwas
appointed a non-executive director, effective from May 5, 2007
AngloGold Ashanti is an operating gold company independent of AA plc to the extent that:
• The management is remunerated by AngloGold Ashanti and incentivized by an AngloGold Ashanti share incentive
scheme;
• Currently, a majority of AngloGold Ashanti’s board of directors are non-executive directors and, including AngloGold
Ashanti’s non-executive chairman, 50 percent of these non-executive directors are not affiliated with AA plc;
• AngloGold Ashanti has the management, financial capacity and resources to carry out all aspects of its ongoing
business activities independent of AA plc;
• Where appropriate, AngloGold Ashanti may purchase selected specialized services from AA plc on normal commercial
and arm’s length terms. However, any such contract with AA plc is subject to the approval of a board sub-committee
consisting entirely of AngloGold Ashanti directors independent of AA plc; and
• AngloGold Ashanti has no service agreements or other contracts in terms of which any turnover or profit related fees
are payable to AA plc.
At the time of its formation, AngloGold acquired from Anglo American Corporation (AAC), a wholly-owned subsidiary of
AA plc, certain unused mineral rights to which little or no value was attached. In terms of the agreements, AAC had the
right to participate in future profits from these mineral rights at such time as these rights were developed or sold. In South
Africa, the introduction of the MPRDA has resulted in all unused mineral rights, for which application for conversion was
not made by the end of April 2005, being vested under the custodianship of the State.
Consequently, other than in respect of those mineral rights in South Africa which have been sold by AngloGold Ashanti to
third parties prior to end April 2005, neither AAC nor AngloGold Ashanti retain any rights in respect of those mineral rights
in South Africa as originally sold by AAC to AngloGold upon its formation.
7B.
Related party transactions
The groupcompany had the following transactions with related parties duringAA plc, subsidiaries of AA plc and the years ended company’s equity accounted joint
ventures, which transactions are concluded on an arm’s length basis:
December 31, 2004 and 2003:2006
December 31, 2005
December 31, 2004
December 31, 2003
(in millions)
Purchases
(by)/from
related
party
$
Amounts
owed
to to/(by)
related
party
$
Purchases
(by)/from
related
party
$
Amounts
owed
to to/(by)
related
party
$
Purchases
(by)/from
related
party
$
Amounts
owed
to/(by)
related
party
$
Related party transactionstransaction with holding companysignificant shareholder AA plc
1
-
5
1
5
-
2 -
Related party transactions with subsidiaries of AA plc
(1)
Boart Longyear Limited – mining services
(2)
-
-
5
-
9
1
10
1
Mondi Limited – forestry
5
-
16
2
1116
12
Scaw Metals – A division of Anglo Operations Limited –
steel
and engineering
141
-
6
1
125
1
Haggie Steel Wire Ropes Operations
(3)
1
-
8
1
9
-
Anglo Coal – a division of Anglo Operations Limited
-
-
1
-
-1
-
Related party transactions with associates
Rand Refinery Limited – gold refinery8
-
-41
2 -5
45
4
37 3
Related party transactions of equity accounted joint
ventures
Societe d'Exploitation
Société d’Exploitation des Mines d'Ord’Or de Sadiola S.A.
2(2)
-
2
-
Societe d'Exploitation des Mines d'Or de Yatela S.A.
2
-
-
-
Societe des Mines de Morila S.A.(1)
-
-
1
-
These related party transactions were concludedSociété d’Exploitation des Mines d’Or de Yatela S.A.
(1)
-
-
-
1
-
Société des Mines de Morila S.A.
(2)
-
(2)
-
(1)
-
(1)
Transactions to April 2006.
(2)
AA plc sold their interest in the ordinary courseBoart Longyear Limited with effect from July 29, 2005.
(3)
Previously included in Scaw Metals – A division of business of AngloGold Ashanti. Transaction prices
are agreed upon, predetermined and stipulated in agreements with related parties. These agreements are the responsibility of
AngloGold Ashanti’s procurement department, which is tasked with ensuring that contractual obligations, as per agreements
concluded, are fulfilled. Renewals and discontinuation of existing contracts, as well as new contracts, are handled by the
procurement department. Contractual and any other commitments are stipulated in the agreements, and expire/cease upon
conclusion/discontinuation of a service/contract.Anglo Operations Limited.
180
Since January 1, 2005,2006, other than as described in the following two paragraphs, AngloGold Ashanti has not been, and as
of the date of this annual report is not, a party to any material
transaction or proposed transaction by which any director,
any other executive officer, any spouse or relative of any of the
foregoing or any relative of such spouse had or was to
have direct or indirect material interest.
In connection with the relocation of Roberto Carvalho Silva, an executive director of the company since 2005, to
Nova Lima, Brazil, in 2000, Mr. Carvalho Silva commenced renting a house in Nova Lima from a Brazilian subsidiary of the
company. Mr Carvalho Silva purchased the house from the company’s subsidiary in January 2005. The total purchase
price of the house was BRL1,150,000 ($429,923). Mr. Carvalho agreed to pay the purchase price of the house in
60 installments, the first being BRL19,167.70 and 59 installments of BRL19,166.65 each, starting on January 28, 2005.
Such monthly installments were adjusted annually by the cumulative INPC (a Consumer Price Index in Brazil) in lieu of
interest. As at December 31, 2006, BRL728,580 ($340,458) of the purchase price remained to be paid to the company’s
subsidiary, with BRL657,717 ($341,352) remaining to be paid as at June 20, 2007. At present, the installment payments
are up-to-date. Mr Carvalho Silva and the company have agreed that the remaining balance of the purchase price of the
house will be paid by Mr Carvalho Silva as soon as reasonably practicable and in any event no later than August 31, 2007.
A Brazilian subsidiary of the company received marketing, communications and corporate affairs services from a Brazilian
company in which a son of Roberto Carvalho Silva owns a one-third interest. The total amount paid by the company’s
subsidiary to this company in respect of such services during the years were: 2006: BRL903,465 ($414,433); 2004:
BRL3,944 ($1,351); 2005: BRL311,923 ($127,837); and BRL634,023 (329,055) has been paid to date in 2007. The
company is currently reviewing its relationship with this service provider and the contracts under which such services are
provided.
Registration rights agreement
On March 23, 2006 the company entered into a Registration Rights Agreement with Anglo South Africa Capital
(Proprietary) Limited (Anglo South Africa) under which the company has agreed to file U.S. registration statements for
Anglo South Africa’s offer and sale of shares it holds in the company (each a Demand Registration) if Anglo South Africa
requests the company to do so. The company is required to use all reasonable efforts to file a Demand Registration within
30 days after such a request and to keep it effective for 90 days unless the shares offered pursuant to it are sold earlier.
Further, the company may not offer, sell, allot or issue any shares or other securities that are convertible into or
exchangeable for, or that represent the right to receive, shares, whether pursuant to U.S. registration or otherwise, for a
90-day period immediately following the first closing of an offering pursu ant to a Demand Registration or a shorter period
as may be imposed by underwriters in the Demand Registration; except: (i) in consideration for shares or assets of a
company as part of a merger, acquisition, corporate reorganization or similar transaction, (ii) as required pursuant to the
terms governing the 2.375 percent guaranteed convertible bonds due 2009, issued by AngloGold Holdings plc and
guaranteed by the company, and (iii) in connection with any option, employee bonus, profit sharing, pension, retirement,
incentive, savings or similar plan, agreement or award. The Registration Rights Agreement may be terminated at any time
by written consent by each of the parties thereto. The Registration Rights Agreement shall terminate automatically on the
first date on which Anglo South Africa is no longer an “affiliate” within the meaning of Rule 144 under the United States
Securities Act of 1933, as amended.
7C.
Interests of experts and counsel
Not applicable.
181
Item 8: Financial information
8A.
Consolidated financial statements and other financial information
See “Item 18: Financial statements”.
Legal proceedings
No director or officer of AngloGold Ashanti has either a direct or indirect position adverse to AngloGold Ashanti.
There are no legal or arbitration proceedings in which any member of the AngloGold Ashanti group is or has been
engaged, including any such proceedings which are pending or threatened of which AngloGold Ashanti is aware, which
may have, or have had during the 2006 fiscal year, a material effect on the group's financial position.
The company is involved in the following cases:
·
In the USA, two civil cases brought against the company and others in 2000 and 2001 by the Sierra Club and the
Minerals Policy Center (SC/MPC) for allegedly exceeding certain permit water quality standards or lack of permits for
certain identified flows (in terms of the federal Clean Water Act) at the CC&V mine have been resolved. A trial was
held in February 2006. In April 2006 judgment was entered in favor of AngloGold Ashanti and the other named
defendants against SC/MPC. In December 2006, the federal district court issued an award ordering SC/MPC to pay a
portion of the attorney fees and costs requested by AngloGold Ashanti and the other named defendants.
SC/MPC appealed the decisions to the federal Tenth Circuit Court of Appeals. The parties subsequently fully
executed a settlement agreement as of June 15, 2007. The agreement provides for retention of the liability decision
and fee d ecision at the district court level, termination of the appeals filed to the Tenth Circuit, and receipt of national
contact information of SC and MPC in the unlikely event those organizations decide to sue or pursue litigation against
AngloGold Ashanti and the other named defendants in the next 15 years. In exchange, AngloGold Ashanti and the
other named defendants agreed to waive receipt of any of the attorney fees and costs imposed by the court against
SC/MPC.
·
In South Africa, in April 2005 AngloGold Ashanti launched an urgent application against various mining companies
and government Ministers claiming that the mines upstream from its Vaal River Operations are responsible and liable
for pumping underground water that arises at their mines. AngloGold Ashanti is in the process of finalizing a
settlement agreement with the mining companies which will result in the mining companies setting up a not-for-profit
water company to manage and operate the Margaret Shaft’s water pumping activities. The settlement agreement
requires the mining companies to contribute towards the upgrading of the Margaret Shaft infrastructure.
·
In South Africa, action has been instituted by 19 plaintiffs, against Anglo American Corporation of South Africa Limited
(AACSA) for damages resulting from lung diseases which the plaintiffs allegedly contracted while employed by mining
companies managed by AACSA. There is a possibility that AACSA may seek to recover a portion of damages which
may be awarded against it from AngloGold Ashanti by either AACSA or the plaintiffs. There is no indication at present
of the merit of any such claim. A separate action was instituted against AngloGold Ashanti in 2006 by a one plaintiff
out of the High Court, Witwatersrand Local Division, for damages allegedly suffered by him as a result of alleged
silicosis allegedly contracted while working on mines now owned by AngloGold Ashanti. An exception has been filed
by AngloGold Ashanti against the claim.
· In Ghana, Westchester / Africore Limited instituted action against Ashanti Goldfields Company Limited in the High
Court in Accra claiming damages for breach of Exploration and Option Agreement. A provision in the Agreement
states that the parties should settle the matter by arbitration under the Arbitration Act of Ghana. The plaintiffs have
applied to pursue the matter through arbitration in Ghana.
· In Brazil, Mineração Serra Grande S.A. (MSG), the operator of the Crixas mine in Brazil, has received two tax
assessments from the State of Goias related to payments of sales taxes on gold deliveries for export: one for the
period between February 2004 and June 2005 and the other for the period between July 2005 and May 2006. The tax
authorities maintain that whenever a taxpayer exports gold through a branch located in a different Brazilian State, it
must obtain an authorization from the Goias State Treasury by means of a Special Regime Agreement (Termo de
Acordo re Regime Especial – TARE). The Serra Grande operation is co-owned with Kinross Gold Corporation. The
company manages the operations and its attributable share of the first assessment is approximately $29 million. In
May 2006 MSG signed the TARE, which authorized the remittance of gold to the company’s branch in Minas Gerais
specifically for export purposes. In November 2006 the administrative council’s second chamber ruled in favor of Serra
182
Grande and fully cancelled the tax liability related to the first period. The State of Goias may still appeal to the full
board of the State of Goias tax administrative council. The second assessment was issued by the State of Goais in
October 2006 on the same grounds as the first one, and the attributable share of the assessment was approximately
$18 million. The company believes that both assessments are in violation of the Federal legislation on sales taxes.
·
In Brazil, Mineração Serra Grande S.A. (MSG) received a tax assessment in October 2003 from the State of Minas
Gerais related to sales taxes on gold allegedly returned from the branch in Minas Gerais to the company head office in
the State of Goais. The company lost the case at the administrative level but is now discussing it at the judicial sphere.
The company believes there is a remote chance of success for the State of Minas Gerais. The company’s attributable
share of the assessment is approximately $6 million.
·
In Brazil, Morro Velho is involved in a dispute with tax authorities. As a result of erroneous duplication of a shipping
invoice between two states in Brazil, tax authorities are claiming that VAT is payable on the second invoice. The
amount involved is approximately $5 million.
·
In Brazil, AngloGold Ashanti Brazil is being accused of failing to pay certain required payments towards the social
security system in Brazil during the period 1997 to 2004. The amount involved is approximately $2 million.
Dividend policy
Dividends are proposed and approved by the board of directors of AngloGold Ashanti, based on the interim and year end
financial performance. Dividends are recognized when declared by the board of AngloGold Ashanti and may be payable in
Australian dollars, South African rands, United Kingdom pounds or Ghanaian cedis.
Dividends declared to foreign shareholders are not subject to the approval by the South African Reserve Bank (SARB) in
terms of South African foreign exchange control regulations. Dividends are freely transferable to foreign shareholders from
both trading and non-trading profits earned in South Africa by publicly listed companies.
Under South African law, the company may declare and pay dividends from any reserves included in total shareholder’s
equity (including share capital and share premium) calculated in accordance with International Financial Reporting
Standards (IFRS), subject to its solvency and liquidity.
A potential restriction on dividends arises from the terms applicable to AngloGold Ashanti’s convertible bond. Legal opinion
is that the size of the dividends declared should be tested against condition 6(b)(iii) of the convertible bond and if triggered
the conversion price should be adjusted, however the condition is not prohibitive.
The limit set by this condition is that it is triggered if the dividend declared in the current year exceeds the lesser of:
·
200 percent of the dividends paid in the previous financial year; or
·
5 percent of the volume weighted average share price over 180 days trading immediately preceding the record date of
the dividend.
AngloGold Ashanti expects to continue to pay dividends, although there can be no assurance that dividends will be paid in
the future or as to the particular amounts that will be paid from year to year. The payment of future dividends will depend
upon the Board’s ongoing assessment of AngloGold Ashanti’s earnings, after providing for capital expenditure and
long-term growth, cash and debt resources, the amount of reserves available for dividend using going concern assessment
and restrictions placed by the conditions of the convertible bond and other factors.
8B. Significantchanges
None.
183
Item 9: The offer and listing
9A.
Offer and listing details
The following table sets out, for the periods indicated, the reported high and low market quotations for AngloGold Ashanti’s
ordinary shares on the JSE and for its sponsored ADSs on the NYSE:
JSE
(1)
NYSE
(2)
High
Low
High
Low
Year ended December 31
(South African cents per ordinary share)
(US dollars per ADS)
Annual information
2002
34,700
20,000
35.33 17.62
2003
33,900
19,100
49.95 27.10
2004
31,900
18,620
48.25 29.91
2005
31,990
18,700
49.88 30.50
2006
38,700
24,700
62.20 35.58
Quarterly information
2005
First quarter
24,500
18,700
39.00
31.27
Second quarter
24,500
19,000
36.60
30.50
Third quarter
28,400
21,951
44.13
34.11
Fourth quarter
31,990
25,750
49.88
38.64
2006
First quarter
38,700
29,005
62.20
46.51
Second quarter
35,621
24,700
58.36
37.17
Third quarter
36,050
27,500
51.07
37.10
Fourth quarter
35,000
28,250
48.91
35.58
2007
First quarter
35,889
30,300
49.34
41.10
Monthly information
November 2006
34,550
30,200
48.23
41.40
December 2006
35,000
31,500
48.91
45.05
January 2007
34,699
31,750
43.37
48.72
February 2007
35,889
31,000
49.34
43.00
March 2007
33,980
30,300
46.26
41.10
April 2007
35,322
31,390
49.42
44.51
May 2007
32,000
28,712
45.42
40.45
(1)
The JSE share price information has been adjusted to give effect to the two-for-one stock split which took effect from the close of business on
December 24, 2002.
(2)
Prior to December 24, 2002, each ADS represented 0.5 of one ordinary share. With effect from the close of business on December 24, 2002, each
ADS represents one ordinary share.
See “Item 7A.: Major shareholders” for number of ADSs outstanding at December 31, 2006.
9B. Plan of distribution
Not applicable.
184
9C. Markets
Nature of trading market
Prior to June 29, 1998, the date on which Anglo American Corporation of South Africa Limited’s gold mining interests were
consolidated into a single, focused, independent, global gold mining company, ordinary shares of AngloGold (formerly Vaal
Reefs) were listed on the Johannesburg Stock Exchange (JSE), the London Stock Exchange (LSE) and the Paris bourse,
were quoted in Brussels in the form of International Depositary Receipts and were listed under grandfathered unsponsored
American Depositary Receipts (ADR) programmes on the Nasdaq SmallCap Market. Shares of Freegold, Western Deep
Levels and Southvaal were also listed under grandfathered unsponsored ADR programmes on the Nasdaq SmallCap
Market. Historically, the principal trading markets for such shares (as well as for shares of Freegold, Western Deep Levels
and Southvaal) had been the JSE and Nasdaq. As part of the consolidation, shares of Ang loGold, Freegold, Western Deep
Levels and Southvaal were delisted from Nasdaq and shares of all participating companies were delisted from the JSE.
With effect from the implementation of the consolidation, the ordinary shares were listed on the JSE, the LSE and the Paris
bourse and were quoted in Brussels in the form of International Depositary Receipts. In addition, American Depositary
Shares (ADSs) each representing half of one ordinary share and evidenced by ADRs issued by The Bank of New York
under a programme sponsored by AngloGold were listed on the New York Stock Exchange (NYSE) on August 5, 1998.
The company was admitted to the official list of the Australian Stock Exchange (ASX) on November 15, 1999. The ordinary
shares of the company issued in connection with the acquisition of the entire issued share capital of Acacia Resources
Limited trade on the ASX. On November 28, 2001, AngloGold implemented a 10-for-1 split of the AngloGold CHESS
Depositary Interests (CDIs), which trade on the Australian Stock Exchange.
Effective at the close of business on December 24, 2002, AngloGold undertook a 2-for-1 stock split and a corresponding
change in the ratio of ordinary shares to ADSs from 0.5 ordinary shares per one ADS to one ordinary share per one ADS.
At the same time, the ratio of ordinary shares to CDIs changed from one ordinary share equivalent to ten CDIs to one
ordinary share equivalent to five CDIs.
On April 26, 2004, the business combination with Ashanti became effective, at which time, AngloGold changed its name to
AngloGold Ashanti. Following the business combination, the company’s ordinary shares were listed on the Ghana Stock
Exchange (GhSE). In addition, Ghanaian Depositary Shares (GhDSs) were listed on the GhSE each representing one-
hundredth of an ordinary share and evidenced by GhDSs issued by NTHC Limited (as Depositary) under a programme
sponsored by AngloGold Ashanti.
9D. Sellingshareholders
None.
9E. Dilution
None.
9F. Expenses of the issue
None.
185
Item 10: Additional information
10A. Share capital
AngloGold Ashanti's Ordinary Shares and Preference Shares
AngloGold Ashanti’s authorized share capital is ZAR102,120,000, consisting of four classes of shares: ordinary shares of
par value ZAR0.25 each, E ordinary shares of par value ZAR0.25 each, A redeemable preference shares of par value
ZAR0.50 each and B redeemable preference shares of par value ZAR0.01 each. The ordinary shares and the
A redeemable preference shares have voting rights, while the B redeemable preference shares have voting rights only
under certain circumstances and, in respect of each of these classes of shares, there is no provision in the Articles of
Association for cumulative voting. There is no limitation imposed by the Articles of Association or by South African law on
the rights of any persons, including non-residents, to own AngloGold Ashanti ordinary shares or to exercise voting rights in
respect of AngloGold Ashanti ordinary shares. AngloGold Ashanti’s authorized and issued share capital as of
December 31, 2006 and June 25, 2007 (being the latest practicable date prior to the publication of this document) is set
out below:
Issued
Title of Class
Authorized
June 25, 2007
December 31, 2006
Ordinary shares
400,000,000
276,833,883
276,236,153
E ordinary shares
4,280,000
4,115,930
4,185,770
A redeemable preference shares
2,000,000
2,000,000
2,000,000
B redeemable preference shares
5,000,000
778,896
778,896
All of the issued ordinary shares, E ordinary, A redeemable preference shares and B redeemable preference shares are
fully paid and are not subject to further calls or assessment by AngloGold Ashanti.
All of the A redeemable preference shares and B redeemable preference shares are held by Eastvaal Gold Holdings
Limited, AngloGold Ashanti’s wholly-owned subsidiary. AngloGold Ashanti’s Articles of Association provide that the
A redeemable preference shares and B redeemable preference shares are not transferable.
In general meeting, shareholders of AngloGold Ashanti have approved, by specific authority, the following authorizations
for the allotment and issue of shares in the capital of the company:
1
At a general meeting of shareholders held on June 4, 1998, members approved the adoption by AngloGold, of the
AngloGold Limited Share Incentive Scheme and at the annual general meeting of shareholders held on
April 29, 2005, members approved the introduction of the Bonus Share Plan and Long-Term Incentive Plan
(collectively the “AngloGold Share Incentive Scheme or share incentive scheme”). The authority granted by
shareholders provides for 2.75 percent of the total number or ordinary shares in issue from time to time, being made
available for purposes of the share incentive scheme. The share incentive scheme shall endure for an indefinite
period until terminated by a resolution of the board of directors or the resolution of AngloGold Ashanti in general
meeting.
2
At the annual general meeting of shareholders held on June 29, 2004, members approved the authorization to allot
and issue a maximum of 15,384,615 ordinary shares of 25 South African cents per share each in the authorized but
unissued capital of the company for purposes of the conversion of the $1,000,000,000, 2.375 percent Guaranteed
Convertible Bonds issued by AngloGold Holdings plc. This authority expires on February 28, 2009 or such personsearlier time
hadin the event that all Convertible Bonds are exchanged for ADSs. See “Guaranteed Convertible Bonds” below.
3
At a general meeting of the shareholders held on December 11, 2006, members approved the increase of the
authorized share capital of AngloGold Ashanti by the creation of 4,280,000 new E ordinary shares of 25 South African
cents per share pursuant to an employee share ownership plan and black economic empowerment transaction.
186
The members further approved that the directors allot and issue up to 2,360,000 ordinary shares of 25 South African
cents at a subscription price of 38.88 percent of the 30 day volume weighted average traded price of an ordinary
share of AngloGold Ashanti on the JSE and 960,000 ordinary shares of 25 South African cents at a price per share
equal to the opening price of an ordinary share of AngloGold Ashanti on the JSE, at the day after the changes to the
articles of association as a result of the increase in authorized share capital are registered with the Company and
Intellectual Property Registration Office, to the Bokamoso ESOP Trust (an entity established for the purpose of
acquiring and managing the employment share ownership plan shares for the benefit of the employment share
ownership plan members) and that the directors allot and issue 1,400,000 E ordinary shares of 25 South African cents
a t a price of 25 South African cents each to Izingwe Holdings (Pty) Limited (an empowerment company).
At the annual general meeting of shareholders held on May 4 2007, members approved the following resolutions pertaining
to the ordinary share capital of the company:
4
as a general authority, authorization to the board of directors to allot and issue, at their discretion, and for such
purposes as they may determine, up to 10 percent of the authorized but unissued ordinary shares of 25 South African
cents each in the share capital of the company (subject to the South African Companies Act and the JSE Listings
Requirements), after setting aside so many ordinary shares of 25 South African cents each as may be required to be
allotted and issued by the company pursuant to the AngloGold Share Incentive Scheme, the Long-Term Incentive
Plan, the Bonus Share Plan, the Bokamoso Employee Share Ownership Plan, the Black Economic Empowerment
transaction, the Employee Share Ownership Plan to be implemented in countries other than South Africa and for
purposes of the conversion of the $1,000,000,000, 2.375 percent Guaranteed Convertible Bonds issued by
AngloGold Holdings plc.
The unissued ordinary shares under the control of the directors at May 4, 2007 are as follows:
Number of shares
Authorized ordinary share capital
400,000,000
Shares in issue at May 4, 2007
276,827,589
Unissued shares at May 4, 2007
123,172,411
Shares set aside in terms of:
- the AngloGold Share Incentive Scheme at 2.75 percent of shares in issue at May 4, 2007
7,612,759
- the 2.375 percent Guaranteed Convertible Bonds
15,384,615
Net unissued ordinary shares at May 4, 2007
100,175,037
- the board of directors
10 percent of net unissued shares
10,017,504
Less: shares issued at the discretion of the directors
—
Balance of shares under the control of the directors at May 4, 2007
10,017,504
Shares under the control of shareholder
90 percent of net unissued shares
90,157,534
5
as a general authority, authorization to the board of directors to allot and issue for cash, without restriction to any
public shareholder, as defined by the JSE Listings Requirements, as and when suitable opportunities arise, in their
discretion, the authorized but unissued ordinary shares of 25 South African cents each in the share capital of the
company, which were placed under the control of the directors, subject to the following conditions:
(a) that the authority shall only be valid until the next annual general meeting and in no case shall extend beyond
15 months;
(b) that a paid press announcement giving full details, including the impact on net asset value and earnings per
share, be published after any issue representing, on a cumulative basis within one financial year, 5 percent or
more of the number of shares in issue prior to the issue concerned;
187
(c) that the issues for cash in the aggregate in any one financial year shall not exceed 10 percent of the number of
shares of the company’s unissued ordinary share capital;
(d) that, in determining the price at which an issue of shares for cash will be made in terms of this authority, the
maximum discount permitted shall be 10 percent of the weighted average traded price of the ordinary shares on
the JSE (adjusted for any dividend declared but not yet paid or for any capitalization award made to
shareholders) over the 30 days prior to the date that the price of the issue is determined or agreed by AngloGold
Ashanti’s directors; and
(e) that this authority includes the issue of shares arising from any options or convertible securities issued for cash.
The above authorities (4) and (5) expire at the next annual general meeting of shareholders of the company.
The number of authorized but unissued ordinary shares in the capital of AngloGold Ashanti at December 31, 2006 and
June 25, 2007 is 123,763,847 and 123,166,117 respectively.
The table below details changes in the ordinary issued share capital of AngloGold since December 31, 2003.
Period to
Description
Number of Shares
December 31, 2003
223,136,342
Ordinary shares issued during 2004
AngloGold Share Incentive Scheme
192,800
Business combination – swap shares
38,400,021
Business combination – regulatory shares
2,658,000
Business
combination
–
warrants
75,731
December 31, 2004
264,462,894
Ordinary shares issued during 2005
AngloGold Share Incentive Scheme
475,538
December 31, 2005
264,938,432
Ordinary shares issued during 2006
AngloGold Share Incentive Scheme
398,399
USD500 million equity raise
9,970,732
Employee Share ownership programme
928,590
December 31, 2006
276,236,153
Ordinary shares issued to June 25, 2007
AngloGold Share Incentive Scheme
591,700
Employee Share ownership programme
6,030
276,833,883
The table below details changes in the E ordinary issued share capital of AngloGold Ashanti.
Period to
Description
Number of Shares
January 31, 2006
-
E Ordinary shares issued during 2006
- The Bokamoso ESOP Trust
2,785,770
- Izingwe Holdings (Proprietary) Limited
1,400,000
December 31, 2006
4,185,770
Cancelled and exchanged for ordinary shares
(21,150)
January 31, 2007
4,164,620
Cancelled and exchanged for ordinary shares
(69,840)
4,115,930
There has been no change in the issued preference share capital of AngloGold since December 31, 2001.
At the general meeting of shareholders on December 11, 2006 the authorized share capital was increased by the creation
of a new class of shares, being E ordinary shares and 4,185,770 E ordinary shares were issued on December 15, 2006.
Save as disclosed in this paragraph and under “Item 6.E. Share Ownership - AngloGold Share Incentive Scheme” as well
as “Guaranteed Convertible Bonds” below, no share or loan capital of AngloGold Ashanti or any of its subsidiary
undertakings is under option or is agreed conditionally or unconditionally to be put under option.
188
All existing ordinary shares are in registered form. The holding of ordinary shares in uncertificated form is permitted under
AngloGold Ashanti’s articles of association and the transfer of ordinary shares is permitted through STRATE. Ordinary
shares are not eligible for settlement within CREST.
Guaranteed Convertible Bonds:February 27, 2004, AngloGold Holdings plc, a wholly-owned subsidiary of
AngloGold Ashanti, issued $1,000,000,000, 2.375 percent guaranteed Convertible Bonds due 2009, convertible into
AngloGold Ashanti ADSs and guaranteed by AngloGold Ashanti. Subject to certain restrictions, holders of Convertible
Bonds are entitled to convert each Convertible Bond into an AngloGold Ashanti ADS at the then applicable conversion
price at any time from April 8, 2004 to February 20, 2009, or, if the Convertible Bonds are called for redemption earlier than
February 27, 2009, the seventh business day prior to the date of early redemption. If the bonds have not been converted
by February 20, 2009, they will be redeemed at par on February 27, 2009. AngloGold Holdings plc has the option of calling
an early redemption of all the bonds 3 years after their issuance, if the price of the ADSs exceeds 130 percent of the
conversion price for more than 20 days during any period of 30 consecutive trading days.
The initial conversion price for the Convertible Bonds is $65.00 per AngloGold Ashanti ADS. The conversion premium to
the reference volume weighted average price of the ADSs on the New York Stock Exchange of $40.625 on
February 19, 2004, when the issue of the Convertible Bonds was announced, was 60 percent. If all holders of Convertible
Bonds exercise their option to convert their Convertible Bonds into ADSs and assuming no adjustments are made to the
initial conversion price, up to 15,384,615 new ADSs will be issued. The conversion ratio is subject to adjustment in case of
various corporate events including share splits and capital distributions.
10B. Memorandum and Articles of Association
Registration
AngloGold Ashanti is incorporated under the laws of the Republic of South Africa and registered with the Registrar of
Companies under registration number 1944/017354/06. AngloGold Ashanti’s memorandum of association provides that the
company’s main business is to carry on gold exploration, the mining and production of gold, the manufacturing, marketing
and selling of gold products and the development of markets for gold.
AngloGold Ashanti is governed by its articles of association which document is available for inspection as set out in
“Item 10 H.: Documents on Display” and a summary of pertinent provisions, including rights of the holders of shares in
AngloGold Ashanti, are set out below.
This summary does not contain all the information concerning the rights of holders of AngloGold Ashanti’s ordinary shares
and is qualified in its entirety by reference to the law of South Africa and AngloGold Ashanti’s governing corporate
documents. As well as being governed by the provisions of the articles of association, the rights of holders of AngloGold
Ashanti’s ordinary shares are governed by the South African Companies Act 61 of 1973, as amended, the South African
Securities Regulation Code on Take-Overs and Mergers and the JSE Listing Requirements. In addition, rights of holders of
AngloGold Ashanti ADSs are governed by the deposit agreement between AngloGold Ashanti and the Bank of New York.
Directors
The management and control of any business of AngloGold Ashanti is vested in the directors who, in addition to their
powers under the articles of association, may exercise all powers and do all such acts and things as may be exercised or
done by AngloGold Ashanti which are not expressly required to be exercised or done by AngloGold Ashanti’s shareholders
in a general meeting.
Appointment, Retirement and Removal of Directors
The board of directors may appoint any person to be a director and any director so appointed shall hold office only until the
following annual general meeting and shall then be eligible for re-election. The directors who retire at the annual general
meeting in this manner shall not be taken into account in determining the directors who are to retire by rotation at such
meeting.
At every annual general meeting at least one-third of the directors must retire from office, but are eligible for re-election.
The directors so to retire at such annual general meeting shall be those who have been the longest in office since their last
election. Where more than one director has served for an equal length of time, unless they agree between themselves, the
director to resign will be determined by lot.
189
A director will no longer act as a director of the company if he becomes insolvent or subject to insolvency procedures, is
found to be of unsound mind, is requested to resign by at least three-quarters of the directors, is removed by a board
resolution of AngloGold Ashanti or is absent from board meetings without leave of the directors for six consecutive months.
A director can resign with one month’s written notice unless he obtains the permission of the directors to shorten his notice
period.
The articles of association contain no provision for directors to hold qualification shares, nor stipulate an age limit
requirement for the retirement or non-retirement of directors.
Board Meetings
The directors may regulate board meetings and determine the quorum necessary for the transaction of business as they
think fit. Unless otherwise determined by the directors, two directors form a quorum. Issues arising at meetings are decided
by majority vote with the chairman having a second or casting vote where there are more than two directors present at the
meeting.
Borrowing Powers
AngloGold Ashanti may create and issue secured or unsecured debentures and the directors may borrow or secure the
payment of such sums as they think fit and may secure the repayment of any indebtedness by bond, mortgage or charge
provided that no special privileges as to allotment of shares, attending and voting at meetings, appointment of directors or
otherwise shall be given to the holders of AngloGold Ashanti’s debentures without the sanction of AngloGold Ashanti
shareholders in a general meeting.
AngloGold Ashanti’s borrowing powers are unlimited. These borrowing powers may be varied by AngloGold Ashanti
shareholders by way of a special resolution in a general meeting.
Remuneration
The directors are entitled to such remuneration as AngloGold Ashanti shareholders may approve by ordinary resolution in
a general meeting. If a director performs services that, in the opinion of the board of directors, are outside the scope of the
ordinary duties of a director, he may be paid such extra remuneration as the directors determine.
Interests of directors and Restriction on voting
A director who is in any way, whether directly or indirectly, interested in a contract or arrangement or proposed contract or
arrangement with AngloGold Ashanti or any of AngloGold Ashanti’s subsidiaries must declare the nature of his interest to
AngloGold Ashanti in accordance with the Companies Act.
A director shall not vote nor be counted in the quorum and if he shall do so his vote shall not be counted on any resolution
for his own appointment to any other office or position under AngloGold Ashanti or in respect of any contract or
arrangement in which he is interested, but this prohibition shall not apply to:
(i)
any arrangement for giving to any director any security or indemnity in respect of money lent by him to, or obligations
undertaken by him for the benefit of, AngloGold Ashanti,
(ii) any arrangement for the giving by AngloGold Ashanti of any security to a third party in respect of a debt or obligation
of AngloGold Ashanti which the director has himself guaranteed or secured,
(iii) any contract by a director to subscribe for or underwrite securities, or
(iv) any contract or arrangement with a company in which he is interested by reason only of being a director, officer,
creditor or member of such company (and note that these prohibitions may at any time be suspended or relaxed to
any extent either generally, or in respect of any particular contract or arrangement, by AngloGold Ashanti in general
meeting).
Where proposals are under consideration concerning the appointment (including fixing or varying the terms of
appointment) of two or more directors to offices or employments with AngloGold Ashanti or any company in which
AngloGold Ashanti is interested, such proposals may be divided and considered in relation to each director separately and
in such cases each of the directors concerned shall be entitled to vote (and be counted in the quorum) in respect of each
resolution except that concerning his own appointment.
190
If any question arises at any meeting as to the entitlement of any directors to vote and such question is not resolved by his
voluntarily agreeing to abstain from voting, such question must be referred to the chairman of the meeting and his ruling in
relation to any other director must be final and conclusive except in a case where the nature or extent of the interests of the
director concerned have not been fairly disclosed.
The directors may exercise the voting powers conferred by the shares in any other company held or owned by AngloGold
Ashanti in such manner and in all respects as they think fit, including the exercise thereof in favor of any resolution
appointing themselves or any of them to be directors or officers of such other company or voting or providing for the
payment of remuneration to the directors or officers of such other company.
Share Rights, Preferences and Restrictions
Allotment and Issue of Ordinary Shares
Any unissued ordinary shares can be disposed of or dealt with in such manner as AngloGold Ashanti shareholders may
direct in a general meeting. AngloGold Ashanti shareholders may resolve that all or any of such ordinary shares are at the
disposal of the directors who may allot, grant options over or otherwise deal with or dispose of the ordinary shares to such
persons at such times and on such terms and conditions and for such consideration as the directors may determine.
Any ordinary shares may be issued with such rights or restrictions as AngloGold Ashanti shareholders in a general meeting
may from time to time determine.
No ordinary shares may be issued at a discount except in accordance with section 81 of the South African Companies Act.
Section 81 states that a company can issue shares at a discount to the par value shares of such shares, if such shares are
of a class already in issue, if such issue is authorized by a special resolution, if the company has been trading for at least
one year, if the issue is sanctioned by the court and if the issue occurs within one month of the sanction. If shares are
issued at a discount, every prospectus issued by the company thereafter relating to the issue of any shares, shall contain
particulars of the discount allowed on the issue of those shares, or so much of the discount as has not been written off at
the date of the issue of such prospectus.
Dividends, rights and distributions
The ordinary shares participate fully in all dividends, other distributions and entitlements as and when declared by
AngloGold Ashanti in respect of fully paid ordinary shares. Under South African law, AngloGold Ashanti may declare and
pay dividends from any reserves included in total shareholders’ equity calculated in accordance with International Financial
Reporting Standards, subject to its solvency and liquidity. No larger dividend shall be declared by shareholders in general
meeting than is recommended by the directors. Dividends are payable to shareholders registered at a record date that is
after the date of declaration.
Dividends may be declared in any currency at the discretion of the board of directors. Currently, dividends are declared in
South African rands and paid in Australian dollars, South African rands, Ghanaian cedis or United Kingdom pounds.
Dividends paid to registered holders of AngloGold Ashanti ADSs are paid in US dollars converted from South African rands
by The Bank of New York, as depositary, in accordance with the deposit agreement.
As approved by shareholders in general meeting on December 11, 2006, the company’s authorized share capital was
increased through the creation of a maximum of 4,280,000 E ordinary shares, to be issued for cash, pursuant to an
employee share ownership plan and black economic empowerment transaction. The E ordinary shares will not be listed.
Holders of E ordinary shares are entitled to receive a dividend, equal to one-half of the dividend per ordinary share
declared by AngloGold Ashanti from time to time.
The holder of B preference shares is entitled to an annual dividend amounting to the lesser of five percent of the issue
price of the B preference shares, or an amount equivalent to the balance of the after-tax profits from income from mining
the Moab Lease Area (which is part of the Vaal River operations in South Africa) as determined by the directors in each
financial year. This annual dividend is a first charge on any profit available for distribution from the Moab Lease Area. The
annual dividend is not payable from any of AngloGold Ashanti’s other profits.
The holder of A preference shares is entitled to an annual dividend equivalent to the balance of the after-tax profits from
income from mining the Moab Lease Area as determined by AngloGold Ashanti’s directors in each financial year, only
once the annual dividend on the B preference shares has been paid in full.
191
Any dividend may be paid and satisfied, either wholly or in part, by the distribution of specific assets, or in paid-up
securities of AngloGold Ashanti or of any other company, or in cash, or in any one or more of such ways as the directors or
AngloGold Ashanti in general meeting may at the time of declaring the dividend determine and direct.
All dividends remaining unclaimed for a period of not less than three years from the date on which they became payable,
may be forfeited by resolution of the directors for the benefit of the company.
All of the issued ordinary shares, A redeemable preference shares and B redeemable preference shares are fully paid and
are not subject to further calls or assessment by AngloGold Ashanti.
Voting rights
Each ordinary share confers upon the member the right to vote at all general meetings. Each member present in person or,
in the case of a corporate entity, represented, has one vote on a show of hands. If a poll is held, members present or any
duly appointed proxy will have one vote for each ordinary share held. A holder of ordinary shares is entitled to appoint a
proxy to attend, speak and vote at any meeting on his or her behalf and the proxy need not be a shareholder. Holders of
ADSs are not entitled to vote in person at meetings, but may vote by way of proxy through The Bank of New York as the
ADS issuer. Holders of CDIs are not entitled to vote in person at meetings, but may vote by way of proxy.
There are no limitations on the right of non-South African shareholders to hold or exercise voting rights attaching to any of
the ordinary shares.
Holders of E ordinary shares have the right to vote at all general meetings and are entitled to appoint a proxy to attend,
speak and vote at any meeting on his or her behalf and the proxy need not be a shareholder, to the extent that holders of
E ordinary shares will not be entitled to veto any resolution that would otherwise have been capable of being passed, or
not, by the required majority of votes of holders of ordinary shares and subject to the Listings Requirements of the JSE,
holders of E ordinary shares will not be counted for categorization purposes in terms of section 9 of the Listings
Requirements. These limitations on the E ordinary shares are a function of shareholder approval and the JSE Listing
Requirements.
The A redeemable preference shares have voting rights that are similar to those of ordinary shares. The B redeemable
preference shares have limited voting rights, except in the event that a dividend on this class of share has not been paid
and remains unpaid for six months, or in connection with issues directly affecting these preference shares or AngloGold
Ashanti as a whole, such as disposal of substantially all of the company’s assets, winding up AngloGold Ashanti or
reducing the company’s share capital.
The articles of association do not provide for cumulative voting in respect of any of the classes of AngloGold Ashanti’s
shares.
The articles of association specify that if new classes of ordinary or preference shares are issued, the rights relating to any
class of shares may be modified or abrogated either with the consent in writing of the holders of at least three-fourths of
the issued shares of that class, or with the sanction of a resolution passed as if it were a special resolution of the company
at a separate general meeting of the holders of the shares of that class.
Transfer of Ordinary Shares
Dematerialized shares which have been traded on JSE are transferred on the STRATE (Share Transactions Totally
Electronic) settlement system and delivered within five business days after each trade.
The dematerialization of shares is not mandatory and holders of ordinary shares in AngloGold Ashanti may elect to retain
their certificated securities. Subject to any statutory restrictions on transfer any member may transfer all or part of his
certificated securities, to the extent it is not prevented by section 91A of the Companies Act. Every transfer must be in
writing in the usual common form or in such other form as the directors may approve and must be left at the transfer office
where the register of transfers is kept or at such other place as the directors prescribe and must be accompanied by the
share certificate and such other evidence as the directors or registrar may require to prove title and capacity of the
intending transferor or transferee.
The directors may refuse to register any transfer of certificated securities unless the instrument of transfer, duly stamped,
is lodged with AngloGold Ashanti accompanied by the share certificate, the transfer is in respect of only one class of
securities or the transfer is permitted within any of AngloGold Ashanti’s incentive schemes.
192
Conversion of Ordinary Shares into Stock
AngloGold Ashanti may by special resolution convert any paid-up shares into stock and may reconvert any stock into paid-
up shares of any denomination. The holders of stock may transfer their respective interests but the directors may fix the
minimum amount of stock transferable. The holders of stock have the same rights, privileges and advantages as regards
participation in profits and voting at general meetings of AngloGold Ashanti as if they held the shares from which the stock
arose. All of the provisions of the Articles apply equally to stock as to shares.
Increase and Reduction of Capital
AngloGold Ashanti shareholders may by way of special resolution in a general meeting and in accordance with the
provisions of the Companies Act resolve to:
·
increase its capital by any sum divided into shares of any amount;
·
consolidate and divide all or any part of its share capital into shares of larger amounts or consolidate and reduce the
number of any issued no par value shares;
·
increase the number of any issued no par value shares without increasing its stated capital; cancel any shares which
have not been subscribed for;
·
sub-divide its shares or any of them into shares of smaller amounts than fixed by the memorandum of association;
·
vary, modify or amend any rights attached to any shares whether issued or not, including the conversion of any
shares into preference shares; and
·
convert any of its shares whether issued or not into shares of another class.
In addition, AngloGold Ashanti shareholders may by ordinary resolution in a general meeting and subject to the
requirements of the Companies Act and the rules and requirements of the stock exchange on which the securities are
listed, reduce, dispose of, distribute or otherwise deal with in any manner its share capital, share premium, stated capital,
reserves and capital redemption reserve fund.
Share Premium Account and Capital Redemption Reserve Fund
AngloGold Ashanti shareholders may by ordinary resolution in a general meeting authorize the directors to distribute or
deal with, in any way recommended by the directors, all or any part of the amount outstanding to the credit of any share
premium account or capital redemption reserve fund of AngloGold Ashanti.
Rights upon liquidation
In the event of a winding up of AngloGold Ashanti:
·
the B redeemable preference shares confer the right, in priority to any payment in respect of the ordinary shares or
the A preference shares in the capital of AngloGold Ashanti, to receive only so much of the net proceeds from the
disposal of the assets relating to the Moab Lease Area as is available for distribution, but not exceeding a return for
each B redeemable preference share of the capital paid up on that share and any share premium paid on the issue of
the B redeemable preference shares outstanding at that time.
·
the A redeemable preference shares confer the right, in priority to any payment in respect of the ordinary shares but
after any payment in respect of the B preference shares, to receive only so much of the net proceeds from the
disposal of the assets relating to the Moab Lease Area as is then available for distribution.
· The A redeemable and B redeemable shares do not confer the right to participation in the surplus funds of AngloGold
Ashanti arising in any other manner.
·
the ordinary shares and E ordinary shares confer the equal rights to any surplus arising from the liquidation of all
other assets of AngloGold Ashanti.
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Redemption provisions
The A redeemable preference shares may be redeemed for their nominal value, plus a premium per share of an amount
equal to the net proceeds available from the disposal of the assets relating to the Moab Lease Area, after redemption in full
of the B preference shares and payment of the nominal value of the A preference shares, divided by 2,000,000.
The B redeemable preference shares may be redeemed for their nominal value, plus a premium of up to R249.99 per
share, but limited to an amount equal to the net proceeds available from the disposal of the assets relating to the Moab
Lease Area after payment of the nominal value of the B preference shares.
The ordinary shares are not redeemable.
Description of AngloGold Ashanti ADSs
The Bank of New York issues AngloGold Ashanti’s American Depositary Shares, or ADSs. One ADS represents the
ownership interest of one ordinary share of AngloGold Ashanti.
The Unrestricted ADS Deposit Agreement and Restricted ADS Deposit Agreement
This section provides a summary description of AngloGold Ashanti’s ADSs.
AngloGold Ashanti has entered the following Deposit Agreements with The Bank of New York as depositary and the
owners and beneficial owners of American Depositary Receipts (the “Deposit Agreements”)
1. the Deposit Agreement amended and restated as of August 5, 1998, filed with the SEC as an exhibit to AngloGold
Ashanti’s registration statement on Form F-6 (Registration Statement No. 333-14066) (the “Unrestricted ADS Deposit
Agreement”); and
2. the Deposit Agreement dated February 27, 2004 , filed with the SEC as an exhibit to AngloGold Ashanti’s registration
statement on Form F-6 (Registration Statement No. 333-14066) (the “Restricted ADS Deposit Agreement”),
As this section is a summary, it may not contain all the information that may be important to a holder of ADSs. For more
complete information, see “Item 10.H.: Documents On Display”. Copies of the Deposit Agreements for each Facility are
also available for inspection at the Corporate Trust Office of The Bank of New York currently located at 101 Barclay Street,
New York, New York, 10286.
Under the Unrestricted ADS Deposit Agreement The Bank of New York as depositary issues ADSs which are not subject
to transfer restrictions under the Securities Act and are listed and trade on the New York Stock Exchange (the Unrestricted
ADSs).
Under the Restricted ADS Deposit Agreement The Bank of New York as depositary issues ADSs which are considered
“restricted securities” within the meaning of Rule 144 of the Securities Act (the Restricted ADSs). AngloGold Ashanti has
entered a Registration Rights Agreement pursuant to which it has undertaken to file a registration statement with the SEC
covering resales of Restricted ADSs.
Any holder of Convertible Bonds which were offered and sold in the United States to Qualified Institutional Buyers (QIBs) in
reliance on Rule 144A under the Securities Act exercising its right to convert its Convertible Bonds into ADSs prior to the
later of February 27, 2006 and the date that is two years after the last date on which AngloGold Ashanti or any affiliate of
AngloGold Ashanti was the owner of such Convertible Bonds, will receive Restricted ADSs issued under the Restricted
ADS Facility. Any holder of Convertible Bonds which were offered and sold outside the United States in accordance with
Regulation S under the Securities Act exercising its right to convert its Convertible Bonds into ADSs will receive
Unrestricted ADSs issued under the Unrestricted ADS Facility.
The description below generally applies to the ADSs issued under both the Restricted and the Unrestricted ADS Facility.
The material differences between the two Facilities are:
· prior to the later of February 27, 2006 and the date that is two years after the last date on which AngloGold Ashanti or
any affiliate of AngloGold Ashanti was the owner of such Convertible Bonds, only Restricted ADSs will be issued upon
conversion of Convertible Bonds offered and sold in the United States to QIBs in reliance on Rule 144A under the
Securities Act;
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· holders of Restricted ADSs under the Restricted ADS Facility are required to give certain certifications upon deposit or
withdrawal of the ordinary shares underlying their Restricted ADSs as described generally in “ Description of the
ADSs Deposit, Withdrawal and Cancellation” below;
· Restricted ADSs will carry a transfer restrictions legend; and
·Restricted ADSs generally may be held in book–entry form.
Description of the ADSs
AngloGold Ashanti ordinary shares (or the right to receive AngloGold Ashanti ordinary shares) are deposited with The
Bank of New York’s custodians in South Africa: The Standard Bank of South Africa Limited, Société Générale South Africa
Limited, FirstRand Bank Limited, National Australia Bank Limited and Australia and New Zealand Banking Group Limited
(each, a “custodian”). Each ADS also represents securities, cash or other property deposited with The Bank of New York
but not distributed to AngloGold Ashanti’s ADS holders. The Bank of New York’s Corporate Trust Office is located at
101 Barclay Street, New York, NY 10286. The principal executive office of The Bank of New York is located at
One Wall Street, New York, NY 10286. The Bank of New York, as the depositary in respect of the ADSs, issued new ADSs
following the completion of the Business Combinati on.
ADSs may be held either directly or indirectly through a broker or other financial institution. If ADSs are held indirectly,
such holders must rely on the procedures of their broker or other financial institution to assert the rights of ADS holders
described in this section and should consult with their broker or financial institution in this regard.
The Bank of New York is the actual holder of the AngloGold Ashanti ordinary shares, and therefore holders of ADSs may,
in certain circumstances, not be treated by AngloGold Ashanti as shareholders of AngloGold Ashanti. The rights of ADS
holders and the rights of and obligations of The Bank of New York as depositary are set out in the Deposit Agreements
among The Bank of New York, the registered holders and beneficial owners of ADSs, and AngloGold Ashanti. The Deposit
Agreements and the ADSs are generally governed by the laws of the State of New York.
Dividends and Other Distributions
The Bank of New York has agreed to pay to holders of ADSs the cash dividends or other distributions it or a custodian
receives on AngloGold Ashanti ordinary shares or other deposited securities after deducting any fees and expenses and
any applicable withholding taxes. Holders of ADSs will receive these distributions in proportion to the number of AngloGold
Ashanti’s ordinary shares that their ADSs represent.
Cash
The Bank of New York will convert any cash dividend or other cash distribution AngloGold Ashanti pays on AngloGold
Ashanti’s ordinary shares into US dollars (unless AngloGold Ashanti pays it in US dollars), if it can do so on a reasonable
basis and can transfer the US dollars to the United States. Currently, AngloGold Ashanti pays dividends on ordinary shares
in South African rand. AngloGold Ashanti may declare dividends and distributions on ordinary shares in any currency that
the board of directors or shareholders at a general meeting approve.
In accordance with the Deposit Agreements, The Bank of New York, via its appointed South African bank, will convert the
South African rand it receives from AngloGold Ashanti to US dollars and distribute dividends in US dollars to registered
holders of ADSs. If that is no longer possible or if any approval from any government is needed and cannot be obtained,
The Bank of New York may distribute non-US currency only to those ADS holders to whom it is possible to make this type
of distribution.
The Bank of New York may hold the non-US currency it cannot convert for the account of holders of ADSs who have not
been paid, unless a holder of ADSs requests in writing to receive the non-US currency distribution. It will not invest the
non-US currency, and it will not be liable for the interest. Before making a distribution, any withholding taxes that must be
paid will be deducted. See “Payment of Taxes” below. The Bank of New York will distribute only whole US dollars and
cents and will round fractional cents to the nearest whole cent. If the exchange rates fluctuate during a time when The
Bank of New York cannot convert the non-US currency, holders of ADSs may lose some or all of the value of the
distribution.
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Ordinary shares
The Bank of New York may distribute to holders of ADSs additional ADSs representing ordinary shares that AngloGold
Ashanti distributes as a dividend or free distribution, if AngloGold Ashanti provides it promptly with satisfactory evidence
that it is legal to do so. If The Bank of New York does not distribute additional ADSs, the outstanding ADSs will also
represent the newly distributed AngloGold Ashanti ordinary shares. The Bank of New York will only distribute whole ADSs.
It will sell AngloGold Ashanti ordinary shares that would require it to deliver a fraction of an ADS and distribute the net
proceeds in the same way as it distributes cash.
Rights to subscribe for additional ordinary shares
If AngloGold Ashanti offers holders of its ordinary shares any rights to subscribe for additional AngloGold Ashanti ordinary
shares or any other rights, The Bank of New York, after consultation with AngloGold Ashanti, may make these rights
available to holders of ADSs or sell the rights and distribute the proceeds in the same way as it distributes cash. If The
Bank of New York cannot do either of these things for any reason, it may allow these rights to lapse. In that case, holders
of ADSs will receive no value for them.
If The Bank of New York makes these types of subscription rights available to holders of ADSs upon instruction from
holders of ADSs, it will exercise the rights and purchase AngloGold Ashanti’s ordinary shares on their behalf. The Bank of
New York will then deposit the AngloGold Ashanti ordinary shares and deliver ADSs to the holders of ADSs. It will only
exercise these rights if holders of ADSs pay it the exercise price and any other charges the rights require them to pay.
US securities laws may restrict the sale, deposit, cancellation and transfer of the ADSs issued after exercise of rights. For
example, holders of ADSs may not be able to trade the ADSs freely in the United States. In this case, The Bank of New
York may deliver ADSs which are "restricted securities" within the meaning of Rule 144 (including Restricted ADSs, as
defined herein) which will have the same provisions as the ADSs described here, except for the changes needed to put the
restrictions in place.
Other distributions
The Bank of New York will send to holders of ADSs any other distributions that AngloGold Ashanti makes on deposited
securities by any means it thinks is legal, fair and practical. If it cannot make the distribution in that way, The Bank of New
York may decide to sell what AngloGold Ashanti distributes, and then distribute the net proceeds in the same way as it
distributes cash, or it may decide to hold what AngloGold Ashanti distributes, in which case the outstanding ADSs will also
represent the newly distributed property.
The Bank of New York is not responsible if it decides that it is unlawful or impractical to make a distribution available to any
ADS holders. AngloGold Ashanti has no obligation to register ADSs, AngloGold Ashanti ordinary shares, rights or other
securities under the US Securities Act of 1933. AngloGold Ashanti also has no obligation to take any other action to permit
the distribution of ADSs, AngloGold Ashanti ordinary shares, rights or anything else to ADS holders. This means that the
holders of ADSs may not receive the distribution AngloGold Ashanti makes on its ordinary shares or any value for them if it
is illegal or impractical for AngloGold Ashanti to make them available to the holders of ADSs.
Deposit, Withdrawal and Cancellation
The Bank of New York will deliver ADSs, if a holder of AngloGold Ashanti’s ordinary shares or their broker deposits
AngloGold Ashanti’s ordinary shares or evidence of rights to receive ordinary shares with the custodian. Upon payment of
its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, The Bank of New
York will register the appropriate number of ADSs in the names such holder of AngloGold Ashanti ordinary shares requests
and will deliver the ADSs at its Corporate Trust office to the persons such holders request.
Holders of ADSs may turn in their ADSs at The Bank of New York’s Corporate Trust Office. Upon payment of its fees and
expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, The Bank of New York will
deliver (1) the underlying ordinary shares to an account designated by the relevant holder of ADSs and (2) any other
deposited securities underlying the ADSs at the office of the Custodian. Or, at the request, risk and expense of ADS
holders, The Bank of New York will deliver the deposited securities at its Corporate Trust Office.
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Any deposit of ordinary shares into the Restricted ADS Facility, including a deposit upon conversion of the Convertible
Bonds, must be accompanied by a written certificate and agreement by or on behalf of the person who will be the
beneficial owner of the Restricted ADSs to be issued upon deposit of such ordinary shares to the effect that each such
beneficial owner: (i) understands that the ordinary shares and the Restricted ADSs have not been and will not be
registered under the Securities Act, (ii) is not an affiliate of AngloGold Ashanti or a person acting on behalf of such an
affiliate, (iii) is a QIB and will be the beneficial owner of such Restricted ADSs upon the issuance thereof and (iv) agrees
not to offer, sell, pledge or otherwise transfer such ordinary shares, such Restricted ADSs or the Restricted ADRs
evidencing such Restricted ADSs except: (a)(1) to a person who the beneficial owner reas onably believes is a QIB in a
transaction meeting the requirements of Rule 144A, (2) in an offshore transaction meeting the requirements of
Regulation S, (3) pursuant to the exemption from registration under the Securities Act provided by Rule 144 thereunder (if
available) or (4) pursuant to an effective registration statement under the Securities Act and (b) in accordance with all
applicable securities laws of the United States.
Holders of Restricted ADSs are subject to further requirements as to certification of their status upon surrender of
Restricted ADSs for the purpose of withdrawing the underlying ordinary shares. Those holders must deliver a written
certificate and agreement by or on behalf of the person surrendering such Restricted ADSs who, after withdrawal, will be
the beneficial owner of the ordinary shares to be withdrawn, acknowledging that the ordinary shares underlying the
Restricted ADSs have not been registered under the Securities Act, certifying as to whether or not those ordinary shares
will remain restricted upon withdrawal and, in the case of ordinary shares that will remain restricted, agreeing: (a) not to
offer, sell, pledge or otherwise transfer such ordinary shares except in a transaction that complies with the applicable
transfer restrictions and (b) not to deposit or cause to be deposited such ordi nary shares into any unrestricted depositary
receipt facility established or maintained by a depositary bank (including another facility maintained by The Bank of New
York) unless the ordinary shares are no longer deemed to be restricted securities within the meaning of
Rule 44(a)(3) under the Securities Act.
Voting Rights
Holders of ADSs may instruct The Bank of New York to vote the ordinary shares underlying their ADSs, but only if
AngloGold Ashanti asks, in writing, The Bank of New York to request their instruction. Otherwise, holders of ADSs will not
be able to exercise their right to vote unless they withdraw the AngloGold Ashanti ordinary shares. However, the holders
of ADSs may not know about the meeting enough in advance to withdraw the ordinary shares.
If AngloGold Ashanti asks for the instructions of holders of ADSs, The Bank of New York will notify them of the upcoming
vote and arrange to deliver AngloGold Ashanti voting materials to them. The materials will (1) describe the matters to be
voted on and (2) explain how holders of ADSs, on or before a certain date, may instruct The Bank of New York to vote the
ordinary shares or other deposited securities underlying their ADSs as they direct. For instructions to be valid, The Bank of
New York must receive them on or before the date specified.
The Bank of New York will try, as far as practical, to vote or to have its agents vote the ordinary shares or other deposited
securities as holders of ADSs instruct, but this is subject to South African law, the provisions of AngloGold Ashanti’s
Memorandum and Articles of Association and of the deposited securities and any applicable rule of the JSE. The Bank of
New York will only vote or attempt to vote as such holders of ADSs instruct.
However, if and to the extent that The Bank of New York does not receive their voting instructions, it will give a proxy to
vote the relevant ordinary shares to a person designated by AngloGold Ashanti, unless AngloGold Ashanti does not wish
the proxy to be given, or substantial opposition exists, or the issue at hand materially and adversely affects the rights of
holders of ordinary shares.
AngloGold Ashanti cannot assure the holders of ADSs that they will receive the voting materials in time for them to instruct
The Bank of New York to vote their ordinary shares. In addition, The Bank of New York and its agents are not responsible
for failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that holders of
ADSs may not be able to exercise their right to vote and there may be nothing they can do if their ordinary shares are not
voted as they requested.
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Fees and Expenses
AngloGold Ashanti ADS holders must pay:
For:
$5.00 (or less) per 100 ADSs*
Each issuance of an ADS, including as a result of a distribution
of AngloGold Ashanti ordinary shares or rights or other property
Each cancellation of an ADS, including if the Deposit Agreement
terminates
$0.02 (or less) per ADS
Any cash payment
Registration or transfer fees
Transfer and registration of AngloGold Ashanti ordinary shares
on the AngloGold Ashanti share register to or from the name of
The Bank of New York or its agent when AngloGold Ashanti
ordinary shares are deposited or withdrawn
AngloGold Ashanti ADS holders must pay:
For:
Expenses of The Bank of New York
Conversion of non-US currency to US dollars
Cable, telex and facsimile transmission expenses
Taxes and other governmental charges The Bank of
New York or any custodian has to pay on any ADS or
AngloGold Ashanti ordinary share underlying an ADS,
for example, stock transfer taxes, stamp duty or
withholding taxes
As necessary
A fee equivalent to the fee that would have been
payable if the securities distributed had been ordinary
shares deposited for issuance of ADSs
Distribution of securities distributed to holders of deposited
securities that are distributed by The Bank of New York to ADS
holders
All fees are at the discretion of The Bank of New York, and are subject to change without notice.
* With respect only to the initial issuance of Unrestricted and Restricted ADSs issued upon conversion of the Convertible
Bonds, AngloGold Ashanti will pay the applicable issuance fee of $5.00 (or less) per 100 ADSs.
Payment of Taxes
Holders of ADSs will be responsible for any taxes or other governmental charges payable on their ADSs or on the
deposited securities underlying their ADSs. The Bank of New York may refuse to transfer their ADSs or allow them to
withdraw the deposited securities underlying their ADSs until such taxes or other charges are paid. It may apply payments
owed to holders of ADSs or sell deposited securities underlying their ADSs to pay any taxes they owe, and they will remain
liable for any deficiency. If it sells deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale
and pay to holders of ADSs any proceeds, or send to them any property, remaining after it has paid the taxes.
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Reclassifications
If AngloGold Ashanti:
Then:
Changes the nominal or par value of the ordinary
shares;
Reclassifies, splits up or consolidates any of the
deposited securities;
Distributes securities on the ordinary shares that
are not distributed to holders of ADSs; or
Recapitalizes, reorganizes, merges, liquidates,
sells all or substantially all of AngloGold Ashanti’s
assets, or takes any similar action.
The cash, ordinary shares or other securities received by The Bank
of New York will become deposited securities. Each ADS will
automatically represent its equal share of the new deposited
securities.
The Bank of New York may, and will if AngloGold Ashanti asks it to,
distribute some or all of the cash, AngloGold Ashanti ordinary
shares or other securities it receives. It may also issue new ADSs
or ask holders of ADSs to surrender their outstanding ADSs in
exchange for new ADSs identifying the new deposited securities.
Amendment and Termination
AngloGold Ashanti may agree with The Bank of New York to amend the Deposit Agreement and the ADSs without the
consent of holders for any reason. If the amendment adds or increases fees or charges (except for taxes and other
governmental charges or registration fees, cable, telex or facsimile transmission costs, delivery costs or other such
expenses) or if the amendment prejudices an important right of ADS holders, it will only become effective 30 days after
The Bank of New York notifies holders of ADSs of the amendment. At the time an amendment becomes effective, holders
of ADSs are considered, by continuing to hold their ADSs, to agree to the amendment and to be bound by the ADSs and
the agreement as amended.
The Bank of New York may terminate the Deposit Agreements by mailing notice of termination to ADS holders at least
30 days prior to the date fixed in the notice if AngloGold Ashanti asks it to do so. The Bank of New York may also
terminate the Deposit Agreement if The Bank of New York has told AngloGold Ashanti that it would like to resign and
AngloGold Ashanti has not appointed a new depositary bank within 90 days. In both cases, The Bank of New York must
notify holders of AngloGold Ashanti ADSs at least 30 days before termination.
After termination, The Bank of New York and its agents will be required to do only the following under the Deposit
Agreement: collect distributions on the deposited securities, sell rights, and, upon surrender of ADSs, deliver AngloGold
Ashanti ordinary shares and other deposited securities. One year after the date of termination or later, The Bank of New
York may sell any remaining deposited securities by public or private sale and will hold the proceeds of the sale, as well as
any other cash it is holding under the Deposit Agreement, for the pro rata benefit of the ADS holders who have not
surrendered their ADSs. It will not invest the money and will have no liability for interest. The Bank of New York’s only
obligations will be to account for the proceeds of the sale and other cash. After termination, AngloGold Ashanti’s only
obligations will be with respect to indemnification of, an d payment of certain amounts to, The Bank of New York.
Limitations on Obligations and Liability to ADS Holders
The Deposit Agreements expressly limit AngloGold Ashanti’s obligations and the obligations of The Bank of New York, and
they limit AngloGold Ashanti’s liability and the liability of The Bank of New York. AngloGold Ashanti and The Bank of New
York:
·
are only obligated to take the actions specifically set forth in the applicable Deposit Agreement without negligence or
bad faith;
·
are not liable if either of AngloGold Ashanti or The Bank of New York is prevented or delayed by law or circumstances
beyond AngloGold Ashanti’s control from performing AngloGold Ashanti’s obligations under the applicable Deposit
Agreement;
· are not liable if either of AngloGold Ashanti or The Bank of New York exercises discretion permitted under the
applicable Deposit Agreement;
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· have no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the agreement on
behalf of the holders of ADS holders or on behalf of any other party;
·
may rely on advice of or information from legal counsel, accountants, and any persons presenting AngloGold Ashanti’s
ordinary shares for deposit, any registered holder or any other person believed by AngloGold Ashanti in good faith to
be competent to give such advice or information; and
·
pursuant to the Deposit Agreements, AngloGold Ashanti and The Bank of New York agree to indemnify each other
under certain circumstances.
Requirements for Depositary Action
Before The Bank of New York will issue, transfer or register the transfer of an ADS, make a distribution on an ADS, or
allow withdrawal of AngloGold Ashanti ordinary shares, The Bank of New York may require:
·
payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by
third parties for the transfer of any ordinary shares or other deposited securities;
· production of satisfactory proof of the identity and genuineness of any signature or other information it deems
necessary; and
·
compliance with regulations it may establish, from time to time, consistent with the agreement, including presentation
of transfer documents.
The Bank of New York may refuse to deliver, transfer or register transfers of ADSs generally when the books of The Bank
of New York or AngloGold Ashanti’s books are closed, or at any time if either AngloGold Ashanti or The Bank of New York
thinks it advisable to do so.
Holders of Unrestricted ADSs have the right to cancel their ADSs and withdraw the underlying ordinary shares at any time
except:
·
when temporary delays arise because: (1) either AngloGold Ashanti or The Bank of New York have closed AngloGold
Ashanti’s transfer books; (2) the transfer of the ordinary shares is blocked in connection with voting at a general
meeting of shareholders; or (3) AngloGold Ashanti is paying a dividend on the ordinary shares;
·
when ADS holders seeking to withdraw the ordinary shares owe money to pay fees, taxes and similar charges; or
·
when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to
ADSs or to the withdrawal of the ordinary shares or other deposited securities.
This right of withdrawal may not be limited by any other provision of the Unrestricted Deposit Agreement.
Pre-release of ADSs
In certain circumstances, subject to the provisions of the Deposit Agreement, The Bank of New York may deliver ADSs
before deposit of the underlying ordinary shares. This is called a pre-release of the ADS.
The Bank of New York may also deliver AngloGold Ashanti ordinary shares upon cancellation of pre-released ADSs (even
if the ADSs are cancelled before the pre-release transaction has been closed out). A pre-release is closed out as soon as
the underlying AngloGold Ashanti ordinary shares are delivered to The Bank of New York. The Bank of New York may
receive ADSs instead of ordinary shares to close out a pre-release.
The Bank of New York may pre-release ADSs only under the following conditions:
·
before or at the time of the pre-release, the person to whom the pre-release is being made must represent to The
Bank of New York in writing that it or its customer: (a) owns the ordinary shares or ADSs to be remitted, (b) assigns all
beneficial rights, title and interest in such ADSs or ordinary shares, as the case may be, to The Bank of New York in
its capacity as the depositary and for the benefit of the ADS holders, and (c) will not take any action with respect to
such ADSs or ordinary shares, as the case may be, that is consistent with the transfer of beneficial ownership
(including, without the consent of The Bank of New York, disposing of such ADSs or ordinary shares, as the case may
be) other than satisfaction of such pre-release;
·
the pre-release must be fully collateralized with cash, US government securities, or other collateral that The Bank of
New York considers appropriate; and
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· The Bank of New York must be able to close out the pre-release on not more than five business days’ notice. Each
pre-release will be subject to any further indemnities and credit regulations that The Bank of New York deems
appropriate. The Bank of New York will normally limit the number of AngloGold Ashanti ordinary shares not deposited
but represented by ADSs outstanding at any time as a result of pre-release so that they do not exceed 30 percent of
the ordinary shares deposited, although The Bank of New York may disregard this limit from time to time, if it thinks it
is appropriate to do so.
Shareholders’ meetings
The directors may convene general meetings of AngloGold Ashanti shareholders. Subject to the provisions of the
Companies Act the shareholders may requisition for the convening of a general meeting.
An AngloGold Ashanti annual general meeting and a meeting of AngloGold Ashanti shareholders for the purpose of
passing a special resolution may be called by giving 21 clear days’ notice in writing of that shareholders’ meeting. For any
other meeting of AngloGold Ashanti shareholders, 14 clear days’ notice must be given. “Clear days” means calendar days
excluding the day on which the notice is given and the date of the meeting. All shareholders are entitled to attend.
AngloGold Ashanti’s articles of association provide that a quorum for a general members’ meeting (other than a meeting at
which a special resolution will be passed) consists of three members present personally, or if the member is a corporate
entity, represented and entitled to vote. If a general meeting is not quorate, the meeting is dissolved and a new meeting will
have to be called following the relevant notice provision.
The quorum of a members’ meeting convened for the purpose of passing a special resolution consists of members holding
at least 25 percent of the total member votes and present in person or by proxy. If the meeting is not quorate, it will be
adjourned to a date between seven and 21 days after the adjourned meeting, and the members present at the second
meeting shall constitute a quorum as long as there are at least three of them at the second meeting. A special resolution
must be passed by a vote of 75 percent of the members present, at the meeting, personally or by proxy and entitled to vote
or by a vote of 75 percent of the total votes to which these members are entitled.
If the meeting is not quorate and is convened upon the requisition of members, the meeting is dissolved.
Disclosure of Interest in Shares
Under South African law, a registered holder of AngloGold Ashanti shares who is not the beneficial owner of such shares is
required to disclose every three months to AngloGold Ashanti, the identity of the beneficial owner and the number and
class of securities held on behalf of the beneficial owner. Moreover, AngloGold Ashanti may, by notice in writing, require a
person who is a registered shareholder, or whom AngloGold Ashanti knows or has reasonable cause to believe has a
beneficial interest in AngloGold Ashanti ordinary shares, to confirm or deny whether or not such person holds the ordinary
shares or beneficial interest and, if the ordinary shares are held for another person, to disclose to AngloGold Ashanti the
identity of the person on whose behalf the ordinary shares are held. AngloGold Ashanti may also require the person to give
particulars of the extent of the beneficial interest held during t he three years preceding the date of the notice. AngloGold
Ashanti is obligated to establish and maintain a register of the disclosures described above and to publish in its annual
financial statements a list of the persons who hold beneficial interest equal to or in excess of 5 percent of the total number
of ordinary shares issued by AngloGold Ashanti together with the extent of those beneficial interests.
Rights of Minority Shareholders
Majority shareholders of South African companies have no fiduciary obligations under South African common law to
minority shareholders. However, under the Companies Act, a shareholder may, under certain circumstances, seek relief
from the court if he has been unfairly prejudiced by the company. There may also be common law personal actions
available to a shareholder of a company.
Golden Share
Under the Stability Agreement, the Government of Ghana (Government) has confirmed and agreed that the Government’s
rights with respect to the Golden Share apply only in respect of AngloGold Ashanti’s assets and operations in Ghana. The
rights do not extend to any other assets or operations of AngloGold Ashanti outside Ghana, nor to any assets or operations
of AngloGold Ashanti.
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The Government has also agreed to waive any right it may have under Section 60(I) of the Minerals and Mining Law, 1986,
as amended to acquire a special share in AngloGold Ashanti or any of its direct or indirect subsidiaries or joint ventures.
The Golden Share in AngloGold Ashanti held by the Government does not carry any right to vote but the holder is entitled
to receive notice of and to attend and speak at any general meeting of AngloGold Ashanti or at any separate meeting of
the holders of any class of shares of AngloGold Ashanti.
The Golden Share may only be held by or transferred to a Minister of the Government or any person acting on behalf of
such Government and authorized in writing by such Minister.
The following matters require, and will not be effective without, the written consent of the holder of the Golden Share:
(i) any amendment to or removal of the relevant provisions of the AngloGold Ashanti Regulations setting out the rights
and restrictions attaching to the Golden Share;
(ii) the voluntary winding-up or voluntary liquidation of AngloGold Ashanti;
(iii) the redemption of or purchase by AngloGold Ashanti of the Golden Share;
(iv) the disposal of any mining lease held by AngloGold Ashanti or any subsidiary of AngloGold Ashanti;
(v) any disposal by AngloGold Ashanti (other than any disposal in the ordinary course of business of AngloGold Ashanti)
which, alone or when aggregated with any disposal or disposals forming part of, or connected with, the same or a
connected transaction, constitutes a disposal of the whole or a material part of the assets of the AngloGold Ashanti
Group taken as a whole. For this period,purpose, a part of the AngloGold Ashanti Group’s assets will be considered material
if either (a) its book value (calculated by reference to the then latest audited consolidated accounts), or the total
consideration to be received on its disposal, is not less than 25 percent of the book value of the net assets of the
AngloGold Ashanti Group or (b) the average profits attributable to it represent at least 25 percent of the average profits
of the AngloGold Ashanti Group for the last three years for which audited accounts are available (before deducting all
charges, except taxation and extraordinary items).
Upon a return of assets in a winding-up or liquidation of AngloGold Ashanti, the holder of the Golden Share is entitled to
the sum of 1,000 cedis (approximately 10 US cents) in priority to any payment to other members, but the Golden Share
confers no further right to participate in the profits or assets of AngloGold Ashanti. The Golden Share carries no right to
any dividend or any right to participate in any offer of securities to existing shareholders or in any capitalization issue.
The holder of the Golden Share may require AngloGold Ashanti to redeem the Golden Share at any time in consideration
of the payment to such holder of 1,000 cedis (approximately 10 US cents).
10C. Material contracts
AngloGold and the Government of Ghana agreed the terms of a Stability Agreement, approved by the parliament of Ghana
on February 18, 2004, (as amended) to govern certain aspects of the fiscal and regulatory framework under which
AngloGold Ashanti will operate in Ghana following the implementation of the Business Combination. AngloGold Ashanti is
not party to any further material contracts other than contracts entered into in the ordinary course of business.
10D.
Exchange controls
Exchange controls and other limitations affecting security holders
The following is a general outline of South African exchange controls and such outline may not apply to former residents of
South Africa. Investors should consult a professional advisor as to the exchange control implications of their particular
investments.
South African law provides for exchange control regulations, which restrict the export of capital from the Common
Monetary Area, which comprises South Africa, the Kingdoms of Lesotho and Swaziland and the Republic of Namibia. The
exchange control regulations, which are administered by the Exchange Control Department of the South African Reserve
Bank, are applied throughout the Common Monetary Area and regulate transactions involving South African residents,
including natural persons and legal entities. Government officials have from time to time stated their intentions to lift South
Africa’s exchange control regulations when economic conditions permit such action. In his budget speech in March 1998,
the Minister of Finance announced that restrictions relating to offshore investments by South African companies and
individuals subject to South African exchange control would, to a limited extent, be lifted.
202
Since then, the government has incrementally relaxed aspects of exchange control for financial institutions and individuals.
However, it is impossible to predict with any certainty when the government will remove exchange controls in their entirety.
The comments below relate to exchange controls in force at the date of this annual report.
Investments in South African companies
A foreign investor may invest freely in ordinary shares in a South African company. Any foreign investor may also sell
shares in a South African company and transfer the proceeds out of South Africa without restriction. Acquisitions of shares
or assets of South African companies by non-South African purchasers are not generally subject to review by the SARB
when the consideration is in cash, but may require SARB review in certain circumstances, including when the
consideration is equity in a non-South African company or when the acquisition is financed by a loan from a South African
lender.
Dividends
Dividends declared to foreign stockholders are not subject to the approval by the South African Reserve Bank (SARB).
Dividends are freely transferable to foreign stockholders from both trading and non-trading profits earned in South Africa by
publicly listed companies.
Interest
Interest on foreign loans is freely remittable abroad, provided the loans received prior SARB approval.
Voting rights
There are no limitations imposed by South African law or by the memorandum and articles of association of AngloGold
Ashanti on the rights of non-South African shareholders to vote the ordinary shares.
Overseas financing and investments
AngloGold Ashanti and its South African subsidiaries require SARB approval to raise debt from and repay debt to non-
residents of the Common Monetary Area, mainly in respect of the interest rate and terms of repayment applicable to the
loan.
Debt raised outside the Common Monetary Area by AngloGold Ashanti’s non-South African subsidiaries is not restricted
under South African exchange control regulations and can be used for overseas investment, subject to any conditions
imposed by the SARB in connection with establishing such a subsidiary. AngloGold Ashanti and its South African
subsidiaries would, however, require SARB approval in order to provide guarantees for the obligations of any of its
subsidiaries with regard to funds obtained from non-residents of the Common Monetary Area.
Debt raised outside the Common Monetary Area by AngloGold Ashanti’s non-South African subsidiaries must be repaid or
serviced by AngloGold Ashanti’s foreign subsidiaries.
A listing by a South African company on any stock exchange other than the JSE Securities Exchange in connection with
raising capital requires permission from the SARB.
Under current exchange control regulations, offshore investments by AngloGold Ashanti and its South African subsidiaries
require the approval of the SARB. Subject to approval, there is no limit on the amount of capital that may be invested
offshore.
10E. Taxation
South African taxation
The following discussion summarizes South African tax consequences of the ownership and disposition of shares or ADSs
by a US holder (as defined below). This summary is based upon current South African tax law and South African Inland
Revenue practice, the convention between the Government of the United States of America and the Republic of South
Africa for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital
gains, signed February 17, 1997 (the "Treaty"), and in part upon representations of the depositary, and assumes that each
obligation provided for in, or otherwise contemplated by, a deposit agreement and any related agreement will be performed
in accordance with its respective terms.
203
The following summary of South African tax considerations does not address the tax consequences to a US holder that is
resident in South Africa for South African tax purposes, whose holding of shares or ADSs is effectively connected with a
permanent establishment in South Africa through which such US holder carries on business activities or, in the case of an
individual who performs independent personal services, with a fixed base situated therein, or who is otherwise not entitled
to full benefits under the Treaty.
The statements of law set forth below are subject to any changes (which may be applied retroactively) in South African law
or in the interpretation thereof by the South African tax authorities, or in the Treaty, occurring after the date hereof. It
should be expressly noted that South African tax law does not specifically address the treatment of ADSs. However, it is
reasonable to assume (although no assurance can be made) that the tax treatment of US holders of shares is also
applicable to US holders of ADSs.
Holders are strongly urged to consult their own tax advisors as to the consequences under South African, US federal, state
and local, and other applicable laws, of the ownership and disposition of shares or ADSs.
Taxation of dividends
South Africa imposes a corporate tax known as Secondary Tax on Companies (STC) on the distribution of earnings in the
form of dividends. Under the terms of an option granted to gold mining corporations, AngloGold Ashanti has elected not to
be subject to STC. As a result, although AngloGold Ashanti’s dividend payments are not subject to STC, AngloGold
Ashanti pays corporate income tax at a slightly higher rate than would otherwise have been the case. This election resulted
in the overall tax paid by AngloGold Ashanti being lower than the tax payable using the standard corporate tax rate
together with STC. STC will be phased out over the next two years and replaced by a dividend withholding tax.
South Africa does not currently impose any withholding tax or any other form of tax on dividends paid to US holders with
respect to shares, but there has been a recent announcement that this is about to change. In the case of a South African
withholding tax on dividends paid to a US holder with respect to shares, the Treaty would limit the rate of this tax to
5 percent of the gross amount of the dividends if a US holder holds directly at least 10 percent of the voting stock of
AngloGold Ashanti and 15 percent of the gross amount of the dividends in all other cases. The above provisions shall not
apply if the beneficial owner of the dividends is a US resident who carries on business in South Africa through a permanent
establishment situated in South Africa, or performs in South Africa independent personal services from a fixed base
situated in South Africa, and the dividends are attributable to such pe rmanent establishment or fixed base.
On February 21, 2007, the South African Minister of Finance, Mr Trevor Manuel, delivered his 2007 Budget Speech in
which he stated that the STC currently levied at 12.5 percent will be replaced by a withholding tax on shareholders in
respect of dividends distributed at a rate of 10 percent. This change will be implemented in two phases. On
October 1, 2007 the STC rate will reduce from 12.5 percent to 10 percent and in 2008 STC will be phased out and
replaced by the 10 percent withholding tax.
The legislation giving effect to this has not been published, but AngloGold Ashanti expects that the effect of this proposal
will be that in 2008 (the first phase) AngloGold Ashanti’s marginal tax rate for its South African mining operations should
reduce from 45 percent to 43.4 percent and the tax rate on its non-mining income will reduce from 37 percent to
35.4 percent. In the second phase, (expected to take place in 2009), the marginal tax rate for AngloGold Ashanti’s South
African mining operations should reduce from 43.4 percent to 37 percent and the marginal tax rate for non-mining income
should reduce from 35.4 percent to 29 percent. The amending legislation relating to these proposals is due to be published
in July 2007.
Taxation of gains on sale or other disposition
South Africa imposes a tax on capital gains, which only applies to South African residents. The meaning of the word
"residents" is different for individuals and corporations and is governed by the South African Income Tax Act of 1962 and
by the Treaty. In contrast, gains on the disposal of securities which are not capital in nature are usually subject to income
tax. However, even in the latter case, a US holder will not be subject to income tax unless the US holder carries on
business in South Africa through a permanent establishment situated therein.
204
United States taxation
The following is a general summary of the material US federal income tax consequences of the ownership and disposition
of shares or ADSs to a US holder (as defined below) that holds its shares or ADSs as a capital asset. This summary is
based on US tax laws including the Internal Revenue Code of 1986, as amended (the Code), Treasury regulations
promulgated thereunder, rulings, judicial decisions, administrative pronouncements, and the Treaty, all as currently in
effect as of the date of this report.
147
Recently adopted accounting policiesannual report, and pending adoptionall of new accounting standards
AngloGold Ashanti’s accounting policieswhich are describedsubject to change or changes in note 4interpretation, possibly with
retroactive effect. In addition, this summary is based in part upon the representations of the depositary and the assumption
that each obligation in the deposit agreement relating to the consolidatedADSs and any related agreement will be performed in
accordance with its terms.
This summary does not address all aspects of US federal income taxation that may apply to holders that are subject to
special tax rules, including US expatriates, insurance companies, tax-exempt entities, banks, certain financial statements “Significantinstitutions,
accounting policies”. New accounting policies and recent pronouncements are described in note 4.19persons subject to the consolidatedalternative minimum tax, regulated investment companies, securities broker-dealers, traders in
financial statements “Recent pronouncements”.
Accounting for Asset Retirement Obligations (AROs)
As described in note 5securities who elect to apply a mark-to-market method of accounting, investors that own (directly, indirectly or by
attribution) 10 percent or more of the outstanding share capital or voting stock of AngloGold Ashanti, partnerships, persons
holding their shares or ADSs as part of a straddle, hedging or conversion transaction, persons who acquired their shares
or ADSs pursuant to the consolidated financial statements “Asset retirement obligations”, AngloGold has adopted
SFAS143, “Accounting for Asset Retirement Obligations (AROs)” with effect from January 1, 2003 as follows:
The statement provides accounting and reporting guidance for legal obligations associated with the retirement of long-lived
assets that result from the acquisition, construction or normal operations of long-lived assets. SFAS143 applies to legal
obligations associated with the retirement of long-lived assets that result from the acquisition, construction and/or the normal
operation of a long-lived asset.
Under SFAS143 the fair value of a liability for an asset retirement obligation is recorded in the period in which it is incurred.
When the liability is initially recorded, the cost is capitalized by increasing the carrying amount of the related long-lived asset.
Over time, the liability is increased to reflect an interest element (accretion) considered in its initial measurement at fair value,
and the capitalized cost is amortized over the useful life of the related asset. Where the obligation is operat ional of nature, and
does not give rise to future economic benefit, the capitalized cost is amortized in the period incurred. Upon settlement of the
liability, a gain or loss will be recorded if the actual cost incurred is different than the liability recorded.
The adoption of SFAS143 on January 1, 2003 resulted in an increase in Property, plant and equipment of $1 million, an
increase in Provision for environmental rehabilitation of $4 million and a cumulative effect of adoption which decreased net
income and stockholders’ equity by $3 million. No increase in Deferred income and mining tax was recorded upon the adoption
of SFAS143.
Recent
pronouncements
In January 2003, the Financial Accounting Standards Board (FASB) issued FASB interpretation No. 46 (“FIN 46”),
“Consolidation of Variable Interest Entities, an interpretation of ARB No. 51”. FIN 46 requires certain variable interest entities
to be consolidated by the primary beneficiary of the entity if the equity investors in the entity do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties.
In December 2003, the FASB revised FIN 46 (“the Revised Interpretation”).
The Revised Interpretation clarifies certain provisions of FIN 46. Based on the FASB’s decisions, all public companies must
apply the provisions of Interpretation or the Revised Interpretation to variable interests in Special Purpose Entities (SPEs)
(created before February 1, 2003) no later than the end of periods ending after December 15, 2003 (December 31, 2003 for
calendar year end companies). Public companies may choose to apply the provisions of the Interpretation or the Revised
Interpretation to interests held in SPEs created prior to February 1, 2003 in financial statements for periods ending after
December 15, 2003 (that is, December 31, 2003 financial statements). However, if a company chooses to report using the
Interpretation’s provisions, it must apply the Revised Interpretation’s provi sions to those variable interests in financial
statements for periods ending after March 15, 2004.
AngloGold adopted the provisions of the Revised Interpretation on February 1, 2003 to the extent that they related to variable
interest entities created on or after that date. For variable interest entities created prior to February 1, 2003, the provisions of
the Revised Interpretation were deferred to the end of the first interim or annual period ending after March 15, 2004. As at
December 31, 2004 the company has adopted the Revised Interpretation and did not identify any variable interest entities that
would be subject to consolidation under the Revised Interpretation.
148
In November 2004 the FASB issued Statement of Financial Accounting Standards No. 151, “Inventory Costs, an amendment of
ARB No. 43, Chapter 4” (“SFAS151”).
SFAS151 amends the guidance in ARB No. 43, Chapter 4, "Inventory Pricing", to clarify the accounting for abnormal amounts
of idle facility expense, freight, handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4, previously
stated that ". . . under some circumstances, items such as idle facility expense, excessive spoilage, double freight, and
rehandling costs may be so abnormal as to require treatment as current period charges. . . ." SFAS151 requires that those
items be recognized as current-period charges regardless of whether they meet the criterion of "so abnormal". In addition,
SFAS151 requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of
the production facilities. SFAS151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005.
Earlier application is permitted for inventory costs incurred during fiscal years beginning after November 24, 2004. The
provisions of SFAS151 should be applied prospectively. The company does not expect the adoption of SFAS151 to have a
material impact on its earnings and financial position.
In December 2004 the FASB issued Statement of Financial Accounting Standards No. 153, “Exchanges of Nonmonetary
Assets, an amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions” (“SFAS153”).
The amendments made by SFAS153 are based on the principle that exchanges of nonmonetary assets should be measured
based on the fair value of the assets exchanged. Further, the amendments eliminate the narrow exception for nonmonetary
exchanges of similar productive assets and replace it with a broader exception for exchanges of nonmonetary assets that do
not have commercial substance. Previously, Opinion 29 required that the accounting for an exchange of a productive asset for
a similar productive asset or an equivalent interest in the same or similar productive asset should be based on the recorded
amount of the asset relinquished. SFAS153 is the result of a broader effor t by the FASB to improve the comparability of cross-
border financial reporting by working with the International Accounting Standards Board (IASB) toward development of a single
set of high-quality accounting standards. SFAS153 is effective for nonmonetary asset exchanges occurring in fiscal periods
beginning after June 15, 2005. Earlier application is permitted for nonmonetary asset exchanges occurring in fiscal periods
beginning after the date of issuance. The provisions of this Statement shall be applied prospectively. The company does not
expect the adoption of SFAS153 to have a material impact on its earnings and financial position.
In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based
Payment” (“SFAS123R”).
SFAS123(R) is a revision of SFAS123, “Accounting for Stock-Based Compensation”. It supersedes APB Opinion No. 25,
“Accounting for Stock Issued to Employees” and amends SFAS95, “Statement of Cash Flows”. Generally, the approach to
accounting for share-based payments in SFAS123(R) is similar to the approach described in SFAS123. However, SFAS123(R)
requires all share-based payments to employees, including grantsexercise of employee stock options or otherwise as compensation, or persons whose functional
currency is not the US dollar. Such holders may be subject to US federal income tax consequences different from those
set forth below.
As used herein, the term “US holder” means a beneficial owner of shares or ADSs that is (a) a citizen or individual resident
of the United States for US federal income tax purposes; (b) a corporation (or other entity taxable as a corporation for US
federal income tax purposes) created or organized in or under the laws of the United States or any state thereof (including
the District of Columbia); (c) an estate the income of which is subject to US federal income taxation regardless of its
source; or (d) a trust if a court within the United States can exercise primary supervision over the administration of the trust
and one or more US persons are authorized to control all substantial decisions of the trust. If a partnership (including for
this purpose any entity treated as a partnership for US federal income tax purposes) holds shares or ADSs, the tax
treatment of a partner generally will dep end upon the status of the partner and the activities of the partnership. If a
US holder is a partner in a partnership that holds shares or ADSs, the holder is urged to consult its own tax advisor
regarding the specific tax consequences of the ownership and disposition of the shares or ADSs.
US holders should consult their own tax advisors regarding the specific South African and US federal, state and local tax
consequences of owning and disposing of shares or ADSs in light of their particular circumstances as well as any
consequences arising under the laws of any other taxing jurisdiction. In particular, US holders are urged to consult their
own tax advisors regarding whether they are eligible for benefits under the Treaty.
For South African and US federal income tax purposes, a US holder of ADSs should be treated as owning the underlying
shares represented by those ADSs. Therefore, deposits or withdrawals by a US holder of shares for ADSs or of ADSs for
shares will not be subject to US federal income tax. The following discussion (except where otherwise expressly noted)
applies equally to US holders of shares and US holders of ADSs.
Taxation of dividends
The gross amount of any distribution (including the amount of any South African withholding tax thereon) paid to a
US holder by AngloGold Ashanti generally will be taxable as dividend income to the US holder for US federal income tax
purposes on the date the distribution is actually or constructively received by the US holder, in the case of shares, or by the
depositary, in the case of ADSs. Corporate US holders will not be eligible for the dividends received deduction in respect of
dividends paid by AngloGold Ashanti. For foreign tax credit limitation purposes, dividends paid by AngloGold Ashanti will
be income from sources outside the United States. At present, South Africa does not impose a withholding tax or any
other form of tax on dividends paid to US holders with respect to shares. The South African government, however, has
recently announced its intent to enact a dividend withholding tax, which is expected to be recognizedphased in during 2008 and 2009.
See ‘Taxation – South African Taxation – Taxation of dividends’. Once the dividend withholding tax becomes effective,
US holders who are eligible for benefits under the current Treaty will be subject to a maximum tax of 15 percent on the
gross amount of dividend distributions paid by AngloGold Ashanti.
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The amount of any distribution paid in foreign currency (including the amount of any South African withholding tax thereon)
generally will be includible in the financialgross income of a US holder of shares in an amount equal to the US dollar value of the
statements basedforeign currency calculated by reference to the spot rate in effect, regardless of whether the foreign currency is converted
into US dollars on such date. If the foreign currency is converted into US dollars on the date of receipt, a US holder of
shares generally should not be required to recognize foreign currency gain or loss in respect of the dividend. If the foreign
currency received in the distribution is not converted into US dollars on the date of receipt, a US holder of shares generally
will have a tax basis in the foreign currency equal to its US dollar value on the date of receipt. Any gain or loss recognized
upon a subsequent conversion or other dis position of the foreign currency generally will be treated as US source ordinary
income or loss. In the case of a US holder of ADSs, the amount of any distribution paid in a foreign currency generally will
be converted into US dollars by the depositary upon its receipt. Accordingly, a US holder of ADSs generally will not be
required to recognize foreign currency gain or loss in respect of the distribution. Special rules govern and specific elections
are available to accrual method taxpayers to determine the US dollar amount includible in income in the case of taxes
withheld in a foreign currency. Accrual basis taxpayers are therefore urged to consult their fair values (i.e., pro forma disclosureown tax advisors regarding the
requirements and elections applicable in this regard.
Subject to certain limitations, South African withholding taxes will be treated as foreign taxes eligible for credit against a
US holder’s US federal income tax liability. The limitation on foreign taxes eligible for credit is no longercalculated separately with
respect to specific classes of income. Dividend income generally will constitute ‘passive category’ income, or in the case of
certain US holders, ‘general category’ income. The use of foreign tax credits is subject to complex conditions and
limitations. In lieu of a credit, a US holder who itemizes deductions may elect to deduct all of such holder’s foreign taxes in
the taxable year. A deduction does not reduce US tax on a dollar-for-dollar basis like a tax credit, but the deduction for
foreign taxes is not subject to the same limitations applicable to foreign tax credits. US holders are urged to consult their
own tax advisors regarding the availability of foreign tax credits. US holders whose tax year began prior to
January 1, 2007, should consult their own tax advisors as to the foreign tax credit rules applicable to them.
Certain US holders (including individuals) are eligible for reduced rates of US federal income tax (currently at a maximum
rate of 15 percent) in respect of “qualified dividend income” received in taxable years beginning before January 1, 2011.
For this purpose, qualified dividend income generally includes dividends paid by a non-US corporation if, among other
things, the US holders meet certain minimum holding period and other requirements and the non-US corporation satisfies
certain requirements, including that either (i) the ordinary shares (or ADSs) with respect to which the dividend has been
paid are readily tradable on an alternativeestablished securities market in the United States, or (ii) the non-US corporation is eligible
for the benefits of a comprehensive US income tax treaty (such as the Treaty) which provides for the exchange of
information. AngloGold Ashanti currently believes that divi dends paid with respect to financial statement recognition).its shares and ADSs should constitute
qualified dividend income for US federal income tax purposes. AngloGold Ashanti anticipates that its dividends will be
reported as qualified dividends on Forms 1099-DIV delivered to US holders. Each individual US holder of AngloGold
Ashanti shares or ADSs is urged to consult his own tax advisor regarding the availability to him of the reduced dividend tax
rate in light of his own particular situation.
SFAS123(R) permits public companiesThe US Treasury has expressed concern that parties to adopt its requirements using one of two methods:
A “modified prospective” method in which compensation cost is recognized beginningwhom ADSs are pre-released may be taking actions that are
inconsistent with the effective date (a) based on the
requirementsclaiming of SFAS123(R)foreign tax credits for all share-based payments granted after US holders of ADSs. Such actions would also be inconsistent with
the effective date and (b) based on the requirements
of SFAS123 for all awards granted to employees prior to the effective date of SFAS123(R) that remain unvested on the
effective date.
A “modified retrospective” method which includes the requirementsclaiming of the modified prospective methodreduced rate of tax described above, but
also permits entitiesapplicable to restate based ondividends received by certain non-corporate holders.
Accordingly, the amounts previously recognized under SFAS123analysis of the creditability of South African withholding taxes or the availability of qualified dividend
treatment could be affected by future actions that may be taken by the US Treasury with respect to ADSs.
Taxationofcapitalgains
If a US holder is a resident of the United States for purposes of pro formathe Treaty, such holder will not be subject to South African
disclosures either (a) all prior periods presentedtax on any capital gain if it sells or (b) prior interim periodsdisposes of its shares or ADSs. Special rules apply to individuals who are residents of
more than one country.
In general, upon a sale, exchange or other disposition of shares, a US holder will recognize capital gain or loss for
US federal income tax purposes in an amount equal to the difference between the US dollar value of the amount realized
on the disposition and the holder's tax basis, determined in US dollars, in the shares or ADSs. Such gain or loss generally
will be US source gain or loss, and will be treated as a long-term capital gain or loss if the holder’s holding period in the
shares exceeds one year of adoption.
SFAS123(R) was originally effective at the beginningtime of disposition. If the US holder is an individual, any capital gain generally will be
subject to US federal income tax at preferential rates if specified minimum holding periods are met. The deductibility of
capital losses is subject to significant limitations.
206
Deposits or withdrawals by a US holder of shares for ADSs, or of ADSs for shares, will not be subject to US federal income
tax.
Passive foreign investment company considerations
A non-US corporation will be classified a Passive Foreign Investment Company (a PFIC) for any taxable year if at least
75 percent of its gross income consists of passive income (such as dividends, interest, rents or royalties (other than rents
or royalties derived in the active conduct of a trade or business and received from an unrelated person), or gains on the
disposition of certain minority interests), or at least 50 percent of the first interimaverage value of its assets consists of assets that
produce, or annual period beginning after June 15, 2005. Onare held for the production of, passive income. AngloGold Ashanti believes that it was not treated as a PFIC for
April 14, 2005the taxable year ended December 31, 2006 and does not expect to become a PFIC in the foreseeable future. If AngloGold
Ashanti were characterized as a PFIC for any taxable year, a US holder would suffer adverse tax consequences.
These consequences may include having gains realized on the disposition of shares treated as ordinary income rather
than capital gains and being subject to punitive interest charges on the receipt of certain dividends and on the proceeds of
the sale or other disposition of the shares. Furthermore, dividends paid by AngloGold Ashanti would not be “qualified
dividend income” and would be taxed at the higher rates applicable to other items of ordinary income. US holders should
consult their own tax advisors regarding the potential application of the PFIC rules to their ownership of the shares.
US information reporting and backup withholding
Dividend payments made to a holder and proceeds paid from the sale, exchange, or other disposition of shares may be
subject to information reporting to the Internal Revenue Service (the “IRS”). US federal backup withholding generally is
imposed at a current rate of 28 percent on specified payments to persons who fail to furnish required information. Backup
withholding will not apply to a holder who furnishes a correct taxpayer identification number or certificate of foreign status
and makes any other required certification, or who is otherwise exempt from backup withholding. US persons who are
required to establish their exempt status generally must provide IRS Form W-9 (Request for Taxpayer Identification
Number and Certification). Non-US holders generally will not be subject to US information reporting or backup withholding.
However, these holders may be required to provide certification of non-US status (generally on IRS Form W-8BEN) in
connection with payments received in the United States or through certain US-related financial intermediaries. Backup
withholding is not an additional tax. Amounts withheld as backup withholding may be credited against a holder’s US federal
income tax liability. A holder may obtain a refund of any excess amounts withheld under the backup withholding rules by
filing the appropriate claim for refund with the IRS and furnishing any required information.
10F. Dividends and paying agents
Not applicable.
10G. Statement
by
experts
Not applicable.
10H. Documents
on
display
The documents referred to in this report can be read at the US Securities and Exchange Commission (SEC) announcedCommission’s public reference
facilities at Room 1580, 100 F Street, N.E., Washington, D.C. 20549.
10I. Subsidiary
information
Not applicable.
207
Item 11: Quantitative and qualitative disclosures about market
risk
Treasury Policy
The board of directors of AngloGold Ashanti has approved a treasury and risk management policy that it would provide for a phased-ingoverns the group’s
implementation processtreasury activities, including the setting of SFAS123(R).hedging and dealing limits, approval of hedging instruments and counterpart
approval and limits.
Under the treasury and risk management policy, hedges may be put in place using approved instruments over the group’s
planned gold production and resultant gold sales currency exposures. The SEC would require that registrants adopt SFAS123(R) no later than the
beginningtenor of the first fiscal year beginning after June 15, 2005.hedges may extend out to ten
years. The treasury and risk management policy sets limits on the extent to which the hedge position may change for the
various levels of treasury management from dealer, through treasurer, executive management and board.
The company plansboard of directors has delegated the approval of hedge instruments to adopt SFAS123(R) usingAngloGold Ashanti’s treasury committee. The
treasury committee must approve all hedging instruments, treatment of the modified-prospective methodinstruments in the treasury system, reporting on January 1, 2006.
the instruments and the accounting treatment for such instruments.
149The financial risk management activities objectives of the group are as follows:
As permitted by SFAS123,·
Safeguarding the company currently accounts for share-based payments to employees using APB Opiniongroup core earnings stream from its major assets through the effective control and management of
No. 25’s intrinsic value method. The impactgold price risk, foreign exchange risk and interest rate risk;
·
Effective and efficient usage of credit facilities in both the short and long term through the adoption of SFAS123(R) cannot be predicted reliable liquidity
planning and procedures;
·
Ensuring that investment and hedging transactions are undertaken with creditworthy counterparts;
· Ensuring that all contracts and agreements related to risk management activities are coordinated, consistent
throughout the group and comply where necessary with all relevant regulatory and statutory requirements.
Under the treasury and risk management policy, treasury reports that include all open hedging transactions are produced
at this time because it will dependthe following minimum intervals for review by management and the board of directors.
Daily
Treasurer
Monthly
Management committee
Quarterly
Treasury committee, Audit committee, Board of directors, Quarterly shareholder reports
The Treasury risk manager is responsible for monitoring all reports for completeness and accuracy. The reports include
stress testing of all hedge positions for changes in gold prices, currency exchange rates, interest rates, and gold and
exchange rate volatilities.
At AngloGold Ashanti, all front office (dealing), middle office (risk reporting), back office (deal confirmations) and payment
(treasury settlements) activities are segregated. All treasury transactions are captured on levelsa third party developed treasury
and risk management system that is widely used in corporate treasuries. The internal audit group conducts regular and ad-
hoc reviews of share-based payments granted in the future. However, hadactivities of the company adopted SFAS123(R) in prior periods, the
impact of that standard would have approximated the impact of SFAS123 as described in the disclosure of pro forma net
incometreasury and earnings per share in Note 4.18 “Stock-based compensation plans”. SFAS123(R) also requires the benefits of tax
deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating
cash flow as required under current literature. This requirement will reduce net operating cash flows and increase net financing
cash flows in periods after adoption. This requ irement will not impact the company’s cash flow disclosure as the companytreasury system.
Gold price risk management activities
The group enters into derivatives to ensure a degree of price certainty and to guarantee a minimum revenue on a portion
of future planned gold sales. AngloGold Ashanti does
not receive the benefitacquire, hold or issue derivative instruments for economic trading
purposes. A number of a tax deduction for compensation cost.
On March 17, 2005, The Emerging Issues Task Force (“EITF”) reached a consensus in Issue 04-6, “Accounting for Stripping
Costs in the Mining Industry”, that post-production stripping costsproducts, including derivatives, are a component of mineral inventory cost subjectused to the
provisions of AICPA Accounting Research Bulletin No. 43, Restatementmanage gold price and Revision of Accounting Research Bulletins,foreign exchange risks that
Chapter 4, “Inventory Pricing” (ARB 43).
Based upon this consensus, post production stripping costs should be considered costsarise out of the extracted minerals under a full
absorption costing systemgroup’s core business activities. Forward sales contracts and recognized as a componentpurchased or sold call and put options are
used by the group to manage its exposure to gold price and currency fluctuations. Gold and currency hedging instruments
are denominated in South African rands, US dollars, Brazilian real and Australian dollars. The hedging instruments utilized
are forward sales and purchase contracts, purchased and sold put options and purchased and sold call options.
208
The mix of inventory to be recognized in costhedging of sales inproduction hedged and the same period as
the revenue from the saletenor of the inventory. Additionally, capitalizationhedging book is continuously reviewed in light of such costs would be appropriate onlychanges in
operational forecasts, market conditions and the group’s hedging policy. AngloGold Ashanti’s reserves and financial
strength have allowed it to arrange unmargined credit lines of up to ten years with counterparts.
Forward sales contracts establish the extentprice of future gold sales at a specified price. A number of these contracts are
inventory existsintended by AngloGold Ashanti for delivery against production in a future period. The volume of outstanding forward sales
contracts at the end of a reporting period.2006 was 122,133 kg compared with 159,783 kg at the end of 2005.
At an EITF meeting held on June 15The company utilizes bought and 16, 2005,sold put and call options as part of its active treasury management strategy.
A put option gives the EITF clarified its intention that "inventory produced" should mean
"inventory extracted." That is, stripping costs incurred during a period should be attributed onlyput buyer the right, but not the obligation, to sell gold to the inventory thatput seller at a predetermined price on a
predetermined date. A call option gives the call buyer the right, but not the obligation, to buy gold from the call seller at a
predetermined price on a predetermined date. The group’s risk in selling call options is extracted
during that period.
The guidance in this consensus will be effective for financial statements issued for fiscal years beginning after December 15,
2005, with early adoption permitted. However, consistent withunlimited but mitigated by the guidance in SFAS154 (see below), the EITF reachedfact
decision that the cumulative effect of adoption ofgroup produce the consensus in Issue 04-6 should be recognizedcommodity required by the option and would benefit by the same quantity as an adjustment to the
beginning balance of retained earnings during the period, and notoption loss by
selling production in the income statement as originally describedopen market. The group’s risk in the
consensus. If a company adopted the consensus prior to FASB ratification of this change, they would not have to change the
accounting for the adoption. The companyselling put options is reviewing the guidance issued in Issue 04-6 and has not yet determined theunlimited but partially mitigated by put
impact of this on the financial statements.options purchased.
In May 2005 the FASB issued Statement of Financial Accounting Standards No. 154, “Accounting Changes and Error
Corrections, a replacement of APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting
Changes in Interim Financial Statements” (“SFAS154”).
SFAS154 applies to all voluntary changes in accounting principle, and changes the requirements for accounting for and
reporting of a change in accounting principle. SFAS154 requires retrospective application to prior periods’ financial statements
of a voluntary change in accounting principle unless it is impracticable. Accounting Principles Board Opinion No. 20,
Accounting Changes (APB 20) previously required that most voluntary changes in accounting principle be recognized by
including in net income of the period of the change the cumulative effect of changing to the new accounting principle. SFAS 154
SFAS133 requires that a change in method of depreciation, amortization, or depletion for long-lived, nonfinancial assetsderivative instruments be accounted for
as a change in accounting estimate that is effected by a change in accounting principle. APB 20 previously required that such a
change be reported as a change in accounting principle. SFAS154 carries forward many provisions of APB 20 without change,
including the provisions related to the reporting of a change in accounting estimate, a change in the reporting entity, and the
correction of an error, as well as the provisions of SFAS3 that govern reporting accounting changes in interim financial
statements. SFAS154 is effective for accounting changes and corrections of errors made in fiscal years beginning after
December 15, 2005. Earlier application is permitted for accounting changes and corrections of errors made occurring in fiscal
years beginning after June 1, 2005. The company does not expect the adoption of SFAS154 to have a material impact on its
earnings and financial position.
150
Critical accounting policies
AngloGold Ashanti’s accounting policies are described in note 4 to the consolidated financial statements “Significant
accounting policies”. The preparation of AngloGold Ashanti’s financial statements in conformity with accounting principles
generally accepted in the United States of America require management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the year. The following are considered to be the
accounting policies that are most critical to AngloGold Ashanti’s results of operations, financial condition and cash flows.
Using of estimates and making of assumptions
The most critical accounting estimates upon which AngloGold Ashanti’s financial reporting depends are those requiring
estimates of Proven and Probable Reserves, recoverable ounces therefrom, and/or assumptions of future gold prices. Such
estimates and assumptions affect the value of inventories (which are stated at the lower of average cost or net realizable
value) and the potential impairment of long-lived assets and intangibles as detailed below. These estimates and assumptions
also affect the rate at which depreciation and amortization are charged to earnings. Commodity prices significantly affect
AngloGold Ashanti’s profitability and cash flow. On an ongoing basis, management evaluates its estimates and assumptions;
however, actual amounts could differ significantly due to the ultimate conclusion of uncertainties.
Ore reserves and life-of-mines
AngloGold Ashanti estimates on an annual basis its ore reserves at its mining operations. There are a number of uncertainties
inherent in estimating quantities of reserves, including many factors beyond AngloGold Ashanti’s control. Ore reserve
estimates are based upon engineering evaluations of assay values derived from samplings of drill holes and other openings.
Additionally, declines in the market price of gold may render certain reserves containing relatively lower grades of
mineralization uneconomic to mine. Further, availability of permits, changes in operating and capital costs, and other factors
could materially and adversely affect ore reserves. AngloGold Ashanti uses its ore reserve estimates in determining the unit
basis for mine depreciation and closure rates, as well as in evaluating mine asset impairments. Changes in ore reserve
estimates could significantly affect these items. At l east annually, AngloGold Ashanti reviews mining schedules, production
levels and asset lives in AngloGold Ashanti’s life-of-mine planning for all of AngloGold Ashanti’s operating and development
properties. Significant changes in the life-of-mine plans may occur as a result of mining experience, new ore discoveries,
changes in mining methods and rates, process changes, investment in new equipment and technology and gold prices. Based
on the life-of-mine analysis AngloGold Ashanti reviews its accounting estimates and adjusts depreciation, amortization,
deferred mining and reclamation costs and evaluation of each mine for impairment where necessary. Accordingly, this analysis
and the estimates made therein have a significant impact on AngloGold Ashanti’s operating results.
Accounting for derivatives
In accordance with the provisions of SFAS133 AngloGold Ashanti accounts for derivatives as follows:
•
Commodity based (“normal purchasespurchase or normal sale”sale exempt”) contracts that meet the requirements of SFAS138, and
are designated as such, are recognized
in earningsproduct sales when they are settled by physical delivery.
•
Where the conditions in SFAS133 for hedge accounting are met, the derivative is recognized on the balance sheet at
fair value as
either a derivative asset or derivative liability, and recorded at fair value.liability. For cash flow hedges the effective portion of changes in fair
value gains or lossesof the hedging instrument are recognized in equity (other comprehensive income) until the underlying transaction
occurs, then
the gains or losses are recognized in earnings.product sales. The ineffective portion of changes in fair value is
reported in earnings as
gains or losses on derivatives in the period in which they occur. Of the contracts accounted for
as a reduction in cash flow hedges, contracts with a carrying value, of $169 million at December 31, 2006, are
expected to be recycled from other comprehensive income and recognized as a reduction in product sales during 2007.
•
All other derivatives are measured at their estimated fair value, with the changes in estimated fair value at each
reporting
date being reported in earnings as gains or losses on derivatives in earnings in the period in which they occur.
Cash flows from derivative instruments accounted for as cash flow hedges are included in net cash provided by operating
activities in the statements of consolidated cash flows for all periods presented. Contracts that contain ‘off-market’ terms
that result in the inflow of cash at inception are analogous to borrowing activities and, as such, are treated as financing
activities. All current and future cash flows associated with such instruments are classified within the financing activities
section of the consolidated cash flow statement. Contracts that contain ‘off-market’ terms that result in the outflow of cash
at inception are analogous to lending activities and, as such, are treated as investing activities. All current and future cash
flows associated with such instruments are classified within the investing activities of the consolidated cash flow statement.
The table below indicates AngloGold Ashanti’s total gold hedge position at a weighted average settlement price as at
December 31, 2006. The total net delta tonnage of the hedge on this date was 10.16 million ounces or 316 tonnes
(December 31, 2005: 10.84 million ounces or 337 tonnes).
The marked-to-market value of all hedge transactions making up the hedge positions was a negative $2.903 billion as at
December 31, 2006 (as at December 31, 2005: negative $1.941 billion). These values were based on a gold price of
$636.30 per ounce, exchange rates of R/$7.001 and A$/$0.7886 and the prevailing market interest rates and volatilities at
the time.
209
Year
2007 2008 2009
2010
2011
2012-2016
Total
DOLLAR GOLD
Forward contracts
Amount (kg)
19,622
22,817
21,738
14,462
12,931
24,308
115,878
$ per oz
$301
$314
$316
$347
$397
$418
$347
Forward contracts
Amount (kg)
12,957
12,957
(Long position)
$ per oz
$639
$639
Put options purchased
Amount (kg)
1,455
1,455
$ per oz
$292
$292
Put options sold
Amount (kg)
19,259
11,555
3,748
1,882
1,882
5,645
43,971
$ per oz
$612
$587
$530
$410
$420
$440
$559
Call options purchased
Amount (kg)
14,252
6,503
20,755
$ per oz
$398
$432
$409
Call options sold
Amount (kg)
47,779
46,776
41,148
32,036
36,188
51,294
255,221
$ per oz
$475
$466
$473
$458
$492
$564
$491
RAND GOLD
Forward contracts
Amount (kg)
2,138
933
3,071
Rand per kg
R91,299
R116,335
R98,769
Put options purchased
Amount (kg)
Rand per kg
Put options sold
Amount (kg)
Rand per kg
Call options sold
Amount (kg)
311
2,986
2,986
2,986
9,269
Rand per kg
R108,123
R202,054
R216,522
R230,990
R212,885
AUD DOLLAR GOLD
Forward contracts
Amount (kg)
7,465
2,177
3,390
3,111
16,143
A$ per oz
A$669
A$656
A$649
A$683
A$666
Put options purchased
Amount (kg)
4,977
4,977
A$ per oz
A$826
A$826
Put options sold
Amount (kg)
5,910
5,910
A$ per oz
A$800
A$800
Call options purchased
Amount (kg)
3,732
3,110
1,244
3,111
11,197
A$ per oz
A$668
A$680
A$694
A$712
A$686
Call options sold
Amount (kg)
6,532
6,532
A$ per oz
A$847
A$847
Delta (kg)
(36,687)
(54,993)
(62,616)
(45,773)
(46,952)
(68,991)
(316,012)
*Total net gold:
Delta (oz)
(1,179,513)(1,768,063) (2,013,148)
(1,471,634)
(1,509,540)
(2,218,109)
(10,160,007)
Hedge delta as a percentage of current
production levels (%) **
21% 31%36%
26%
27%
8%
18%
*
The Delta of the hedge position indicated above, is the equivalent gold position that would have the same marked-to-market sensitivity for a small
change in the gold price. This is calculated using the Black-Scholes option formula with the ruling market prices, interest rates and volatilities as at
December 31, 2006.
** Percentage based on 2006 full year production of 5,635,000 ounces.
At December 31, 2006 the company had 11.6 million committed ounces or 361t (2005: 11.8Moz or 369t).
Gold lease rate swaps
Year
2007 2008 200920102011 2012-2016
Amount (‘000oz)
270,000 100,000 130,000 100,000
-
Gold borrowing cost associated with
forward contracts
(1)
Interest rate %
0.69 0.78 0.89 1.25
-
Amount (‘000oz)
1,334,356
1,168,000 898,000 641,000 423,000
205,000
Gold lease rate swaps
(2)
Interest rate %
1.76 1.75 1.811.831.831.84
(1) Gold borrowing costs relating to Australian dollar gold forwards:
The Australian dollar denominated gold forward contract prices are shown on a net basis where the final price of the contract is determined by the cost of
borrowing gold over the full duration of the contract. The net prices shown in the table above have been adjusted to take account of the total expected
future cost of all accumulated costs incurred to date and the expected future borrowing cost based on ruling market prices at the financial statement date.
The amount shown under “Gold borrowing cost associated with forward contracts” in the table above is the face value of the borrowing amount and the
period in which it matures. The interest rates shown are the future market rates prevailing at the time of the financial statement.
(2) The gold lease rate swaps are contracts where the company receives a fixed percentage of the outstanding amount in gold and pays a floating market
determined percentage in gold, quarterly in arrears. The amount shown in the table above is the number of ounces outstanding at the beginning of each
period. The interest rate shown is the weighted average fixed rate that the company will receive for that period.
210
Year
2007
2008
2009
2010
2011
2012-2016
Total
DOLLAR SILVER
Put options purchased
Amount (kg)
43,545
43,545
87,090
$ per oz
$7.40
$7.66
$7.53
Put options sold
Amount (kg)
43,545
43,545
87,090
$ per oz
$5.93
$6.19
$6.06
Call options sold
Amount (kg)
43,545
43,545
87,090
$ per oz
$8.40
$8.64
$8.52
Certain of the hedging positions reported in the above tables are governed by early termination clauses in favor of certain
counterparts.
Foreign exchange price risk protection agreements
The group periodically enters into forward exchange and currency option contracts to hedge certain anticipated
transactions, firm commitments and other anticipated transactions denominated in foreign currencies. The objective of the
group’s foreign currency hedging activities is to protect the group from the risk that the eventual cash flows resulting from
transactions denominated in US dollars will be adversely affected by changes in exchange rates.
The following table indicates the group’s currency hedge position at December 31, 2006.
Year
2007
2008
2009
2010
2011
2012-2016
Total
RAND DOLLAR (000)
Put options purchased
Amount ($)
15,000
15,000
Rand per $
R7.61
R7.61
Put options sold
Amount ($)
40,000
40,000
Rand per $
R7.08
R7.08
Call options sold
Amount ($)
55,000
55,000
Rand per $
R7.34
R7.34
AUD DOLLAR (000)
Forward contracts
Amount ($)
73,518
20,000
93,518
$ per A$
$0.76
$0.73
$0.75
Put options purchased
Amount ($)
10,000
10,000
$ per A $
$0.76
$0.76
Put options sold
Amount ($)
10,000
10,000
$ per A $
$0.78
$0.78
Call options sold
Amount ($)
10,000
10,000
$ per A$
$0.75
$0.75
For a more detailed presentation of the investment maturity profile, borrowings maturity profile and interest rate risk profile
of these agreements, see note 26 to the consolidated financial statements “Financial risk management activities”.
Credit risk
Realization of all these contracts is dependent upon the counterparts performing in accordance with the terms of the
contracts. AngloGold Ashanti generally does not obtain collateral or other security to support financial instruments subject
to credit risk, but monitors the credit standing of counterparts. AngloGold Ashanti spreads its business over a number of
predominantly international, credit worthy counterparts and believes that no concentration of credit risk exists. Limits for
each counterpart are based on the assessed credit quality of each counterpart. The Treasury Committee makes
recommendations for board approval of all counterparts and the limits to be applied against each counterpart. Where
possible, management tries to ensure that netting agreements are in place.
211
The combined maximum credit exposure at the balance sheet date amounts to $655 million on a contract by contract
basis. Credit risk exposure netted by counterpart amounts to $68 million. No set-off is applied to the balance sheet due to
the different maturity profiles of assets and liabilities.
The table below provides a summary of the number, type and credit quality of AngloGold Ashanti’s hedge counterparts.
Number of Counterparts
Type
Credit Rating (Fitch)
2 International Bank
AAA
4 International Bank
AA+
4 International Bank
AA
9 International Bank
AA-
3 International Bank
A+
3 International Bank
A
1 International Bank
A-
1 International Bank
BBB
1
South African Bank
AAA(zaf) (International BBB+)
1
South African Bank
AA+(zaf) (International BBB+)
1
South African Bank
AA(zaf) (International BBB)
1
South African Bank
AA-(zaf) (International BBB)
1
South African Bank
A+(zaf) (International BBB-)
6 Brazilian Bank
AA(bra)
1 Trade Finance House
Not
rated
AngloGold Ashanti does not anticipate non-performance by any counterparts.
Fair value
The estimated fair values of derivativesfinancial instruments are determined at discrete points in time based on the relevant market
information.
These In certain cases, these estimates are calculatedinvolve uncertainties and cannot be determined with reference to the ruling market prices, interest rates and volatilities using the Black -precision. The
Scholes option formula.
151
AngloGold Ashanti does not acquire, hold or issue derivative instruments for economic trading purposes. A number of
products, including derivatives, are used to manage gold price and foreign exchange risks, that arise out of the group’s core
business activities. Forward sales contracts and call and put options are used by the group to manage its exposure to gold
price and currency fluctuations.
Revenue recognition
AngloGold Ashanti’s revenues are derived primarily from the sale of gold produced at its mines. Revenue from product sales is
recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the
seller’s price to the buyer is fixed or determinable and collectability is reasonably assured. Gold is a liquid commodity that is
dealt with on the international markets, and gold produced by AngloGold Ashanti’s mining operations is processed to saleable
form at various precious metals refineries.
Contingencies
AngloGold Ashanti accounts for contingencies in accordance with SFAS No. 5, “Accounting for Contingencies”. SFAS No. 5
requires the recording of an estimated loss for a loss contingency when information available indicates that it is probable that
an asset has been impaired or a liability has been incurred, and the amount of the loss can be reasonably estimated.
Accounting for contingencies such as legal and income tax matters requires the use of judgement to determine the amount to
be recorded in the financial statements. By their nature, contingencies will only be resolved when one or more future events
occur or fail to occur and typically those events will occur a number of years in the future. AngloGold Ashanti assess such
contingent liabilities, which inherently involves the exercise of significant management judgement and estimates of the
outcome of future events. Also see “D eferred income and mining tax” discussed below.
Mining joint ventures
As described in note 4.1 to the consolidated financial statements interests in incorporated mining joint ventures in which
AngloGold Ashanti has joint control are accounted for by the equity method and are included in other long-term assets. All
significant intercompany balances and transactions have been eliminated.
Impairment of long-lived assets
AngloGold Ashanti’s long-lived assets include property, plant and equipment, acquired properties, goodwill and other tangible
assets. Subsequent to January 1, 2002, goodwill is analyzed for impairment in accordance with SFAS142 as discussed below.
In assessing the potential impairment of its long-lived assets held for use AngloGold Ashanti must make assumptions
regarding estimated future cash flows and other factors relating to the respective assets. To the extent that the carrying value
of the long-lived asset as recorded in the consolidated financial statements exceeds the undiscounted cash flows, an
impairment charge is recognized in the consolidated financial statements based on the fair value of the asset.
When AngloGold Ashanti has assets held for sale, AngloGold Ashanti must record the asset at the lower of the carrying value
or estimated fair value less costs to sell.
During the year ended December 31, 2004 AngloGold Ashanti recorded an impairment charge of $3 million relating to long-
lived assets and goodwill as described in note 5 to the consolidated financial statements “Cost and expenses – Impairment of
assets”.
Impairment of goodwill and other intangible assets
Beginning January 1, 2002, SFAS142 requires goodwill to be reviewed for impairment rather than amortized and that intangible
assets with finite useful lives other than goodwill be amortized over their useful lives. In accordance with the provisions of
SFAS142 AngloGold Ashanti performed a transitional impairment test for each reporting unit and performed its annual
impairment review during the fourth quarter of 2002. AngloGold Ashanti performs impairment tests at least annually during the
fourth quarter and whenever certain indicators of impairment exist. AngloGold Ashanti’s reporting units are generally
consistent with the operating mines underlying the segments identified in note 26 to the consolidated financial statements
“Segment and Geographical Information”.
152
Deferred income and mining tax
AngloGold Ashanti follows the liability method of accounting for deferred income and mining tax whereby the company
recognizes the tax consequences of temporary differences by applying current statutory tax rates applicable to future years to
differences between financial statement amounts and the tax bases of certain assets and liabilities. Changes in deferred tax
assets and liabilities include the impact of any tax rate changes enacted during the year. Deferred tax is estimated at the
future average anticipated taxation rates at which temporary differences are expected to reverse. Future average anticipated
taxation rates are determined from revenue and expenditure outlined in life-of-mine business plans which are revised annually.
When a deferred tax asset arises AngloGold Ashanti reviews the asset for recoverability and establishes a valuation allowance
where AngloGold Ashanti determines it is mor e likely than not that such an asset will not be realized. These determinations are
based on the projected realization of tax allowances and tax losses. If these tax assets are not to be realized, an adjustment to
the valuation allowance would be required, which would be charged to income in the period that the determination was made.
If AngloGold Ashanti determines that it would be able to realize tax assets in the future, in excess of the recorded amount
thereof, an adjustment to reduce the valuation allowance would be recorded as a credit to income in the period that the
determination is made.
Pension plans and post-retirement medical aid obligations
The determinationvalues of AngloGold Ashanti’s obligation and expense for pension and provident funds, as well as post-retirement
health care liabilities, depends on the selection of certain assumptions used by actuaries to calculate amounts. These
assumptions are described in note 24 to the consolidated financial statements “Employee benefit plans” and include, among
others, the discount rate, the expected long term rate of return of plan assets, health care inflation costs and rates of increase
in compensation costs. While AngloGold Ashanti believes that these assumptions are appropriate, significant changes in the
assumptions may materially affect pension and other post-retirement obligations as well as future expenses, which may result
in an impact on earnings in the periods that the changes in the assumptions occur.
AngloGold Ashanti makes the following significant assumptions in respect of its pension plans as disclosed in note 24 to the
consolidated financial statements “Employee benefit plans”.
The main assumptions for 2004 relating to the most significant defined benefit plan, were the discount rate and the
compensation and pension plan inflation rates. The discount rate was determined using the South African bond yield rate (on
the "benchmark" R153 bond) as a guide and adjusted for the taxation effects on pension plans.
The assumed level of salary increases relative to inflation were advised by the AngloGold Ashanti directors as well as the
AngloGold Ashanti Human Resources department. For inflation targets the published Consumer Price Index (CPI) by the
Department of Statistics as well as the South African Reserve Bank inflation target were used as a guide. Pension increases
were assumed to beinstruments at 90 percent of the assumed inflation rate, based on the respective Fund's pension increase policy.
Effects on results of operations
Company and plan participants’ contributions to the defined benefit funds are disclosed in note 24 to the consolidated financial
statements “Employee benefit plans”. The total company contributions to defined contribution plans for the years ended
December 31, 2004, 20032006 and 2002 amounted to $29 million, $25 million and $16 million, respectively.2005, are as follows:
Change in pension trends
The trend of the return on the plan assets is marginally lower (1 percent) for the year ended December 31, 2004 when
compared to 2003. Based on an estimated return of 7.5 percent on the defined benefit plan assets, the return for 2004 would
amount to $12 million compared to the actual return of $16 million due to improved market conditions. The long-term
compensation and pension inflation increases estimated in 2003 at 5.0 percent and 3.6 percent respectively, have been
reduced in 2004 to 4.0 percent and 2.9 percent respectively, which is in line with current economic indicators.2006
Sensitivity analysis
It is not the policy of AngloGold Ashanti to consider the sensitivity of the accounting figures to different assumptions. The actual
short-term salary inflation rate used for the 2004 valuation was a rate of 5.0 percent and the long-term salary inflation rate was
4 percent, which is in line with the actual average increases granted and the target Consumer Price Index indicated by the
South African Reserve Bank. For each 1 percent point variance in the actual return on the plan assets, the value in growth will
vary by $2.0 million.
153
StrippingDecember 31, 2005
costsCarrying
Stripping costs incurred amount
Fair
value
Carrying
amount
Fair
value
(in open-pit operations during the production phase to remove additional waste are charged to
operating costs on the basis of the average life-of-mine stripping ratio
millions)
$
$
$
$
Cash and the average life-of-mine costs per tonne. The
average stripping ratio is calculated as the number of tonnes of waste material expected to be removed during the life-of-mine
per tonne of ore mined. The average life-of-mine cost per tonne is calculated as thecash equivalents
(1)
471
471
196
196
Restricted cash
(1)
11
11
8
8
Short-term debt
(2)
33
33
160
160
Long-term debt
(2)
1,472
1,484
1,779
1,803
Derivatives
(3) (5)
(1,524)
(2,903)
(935)
(1,941)
Forward sales type agreements
(3)
(499)
1,328
(355)
(909)
Option contracts
(3)
(1,056)
(1,572)
(4)
(612)
(1,058)
(4)
Foreign exchange contracts
(3)
4
4
6
6
Foreign exchange option contracts
(3)
(12)
(12)
(5)
(5)
Interest rate swaps – Gold
(3)
39
5
31
25
Sub total expected costs to be incurred to mine
the orebody divided by the number of tonnes expected to be mined. The average life-of-mine stripping ratio and the average
life-of-mine cost per tonne is recalculated annually in the light of additional knowledge and changes in estimates. The cost of
the “excess stripping” is capitalized as mine development costs when the actual mining costs exceed the sum of the adjusted
tonnes mined, being the actual ore tonnes plus the product of the actual ore tonnes multiplied by the average life-of-mine
stripping ratio, multiplied by the life-of-mine cost per tonne. When the actual mining costs are below the sum of the adjusted
tonnes mined, being the actual ore tonnes plus the product of the actual ore tonnes multiplied by the average life-of-mine
stripping ratio, multiplied by the life-of-mine cost per tonne, previously capitalized costs are expensed to increase the cost up to
the average. Thus, the cost of stripping in any period will be reflective of the average stripping rates for the orebody as a
whole. Deferred stripping costs are reported separately in the consolidated balance sheets for all periods presented. As
described in note 4.19 to the consolidated financial statements The Emerging Issues Task Force (“EITF”) reached a consensus
in Issue 04-6, “Accounting for Stripping Costs in the Mining Industry” on March 17, 2005 and a modified consenses on June 15
and 16, 2005, that post production stripping costs should be considered under a full absorption costing system and recognized
as a component of inventory and in cost of sales in the same period as the revenue from the sale of the inventory. AngloGold
Ashanti is reviewing the guidance issued in Issue 04-6 and has not yet determined the impact of this on the financial
statements.– Hedge derivatives
The actual stripping ratio(A) calculated as (total tonnes mined - ore tonnes mined)/ore tonnes mined, and average life-of-mine
stripping ratio(B), for AngloGold Ashanti’s main open-pit operations is as follows, for the years in the period ended
December 31, 2004:(1,524)
)
(2,903)
2004(935)
–(1,941)
(A)Interest rate swaps – Non-gold
15.60 9.40
- 9.18 - 4.60 4.30 1.60 1.76 4.99 4.79 3.98
2.24
8.26 2.06
2004
–
(B)
16.40 9.07
- 15.90 - 2.20 3.80 0.90 2.00 4.50 4.42 4.36
2.50
8.91 2.29
2003 – (A)
18.49
15.92
-
24.36(3)
-
-
-
-
2.25
9.31
6.34
4.77
1.89
9.53
2.06
2003 – (B)
14.79
9.07
-
16.43
-
-
-
-
3.10
6.56
3.10
3.68
2.40
7.79
2.20
2002
–
(A)
13.61 15.58 3.21 9.22 -
-
-
- 1.63 7.25
- 7.15
1.79
7.36 2.31
2002
–
(B)
14.79 9.07 2.68 5.55 -
-
-
- 1.83 5.99
- 3.68
2.16
7.20 2.48
Comments on the actual average life-of-mine stripping ratio as presented in the table above:
As a general comment it should be noted that the stripping ratio each year throughout the life-of-mine will normally differ from
the average life-of-mine stripping ratio as the waste stripping required to expose the ore progressively increases as the ore-
body deepens. It therefore could be expected that during the early life of the mine the stripping ratios will be less than the
average as the ore close to surface is exploited. As the mine expands increasing amounts of waste are removed to expose ore
at greater depths and the stripping ratios during these periods will normally be greater than the average. Waste must always be
mined in advance of associated ore below it and thus when stripping is complete the exposed ore results in a much lower
stripping ratio than the average, for the remaining mine life. Thus the difference between the actual stripping ratio for any year
and the average l ife-of-mine stripping ratio will reflect the position in the mines life cycle. In the case of production scheduled
from multiple pits for example at the Geita and Cerro Vanguardia mines, greater flexibility of scheduling will limit any stripping
ratio variations.
154
With regards to the specific operations:
(1)
There are no material differences betweenThe carrying amounts approximate fair value because of the actual stripping ratio and the life-of-mine ratio due to flexibility obtained from schedulingshort-term duration of multiple pits. Year-
on-year changes reflect the effect of different pits being mined each year.these instruments.
(2)
The actual stripping ratio exceedsFair value reflects the average life-of-mine ratio due to increased stripping as a resultnet present value of the completionfuture cash flows, discounted at the prevailing market rate. The fair value of listed fixed rate debt and
the mine expansion projects in
2002Convertible Bonds are shown at their market value. The remainder of debt re-prices on a short-term floating rate basis, and 2003.accordingly the
carrying amount is considered to approximate fair value.
(3)
Union Reefs stopped producingThe fair value of the above instruments is calculated based on market prices, volatilities and was closed in 2003.interest rates, as at December 31, 2006 and 2005.
(4)
Production for 2002 and 2003 reflectsIncludes deliverable call options sold. A deliverable option is an option in terms of which the operations at Engenho D’agua mine withdelivery quantity is fixed regardless of the actual stripping ratio being highermarket price
on the exercise date. In the event that the market price is lower than the average life-of-mine ratio
duestrike price, gold is sold to re-establishment of old workings. In 2004 production was from the Córrego do Sitio mine.counterpart at the ruling spot price.
(5)
Carrying amount represents on balance sheet derivatives.
212
Sensitivity analysis
The following table shows the approximate sensitivities of the $ marked-to-market value of the hedge book at
December 31, 2006 (actual changes in the timing and amount of the following variables may differ from the assumed
changes below):
Obuasi did not perform stripping activity in 2004.Sensitivity analysis
(6)
Actual stripping ratio is higher than the life-of-mine ratio due to clean-up after the highwall failureChange in the northern portion of the main pit and failure of the
south pit wall, limiting ore production.
(7)Rate(+)
No material difference between actual and life-of-mine ratio. Mining of new cut-back commenced in 2004.
(8)
Reflects the impact of the gold embargo on ore production in the year, and mining of waste was prioritized.
(9)
There are no material differences between the actual stripping ratio and the life-of-mine ratio as the Sadiola deposit in general has a low stripping ratio.
(10)
There are no material differences between the actual stripping ratio and the average life-of-mine ratio. Stripping is reduced year-on-year, as the mine
approaches its end of life.
(11)
Actual stripping ratio in 2004 higher than the life-of-mine ratio due to the accessing of ore at greater depths.
(12)
Actual stripping ratio was progressively higher than the average life-of-mine ratio in 2002 and 2003 due to accessing ore at greater depths. In 2004, the
actual stripping ratio was lower than the life-of-mine ratio due to extensions of the final pit, requiring additional stripping over the remaining life-of-mine.
(13)
Actual stripping ratio is progressively lower than the life-of-mine ratio as stripping in-pit is completed and more ore is exposed.
(14)
Differences in actual stripping ratio compared with the life-of-mine ratio year-on-year, are due to flexibility of scheduling from multiple pits. Actual stripping
ratio in 2004 lower than the life-of-mine ratio due to under performance of contractor stripping.
Ore on Leach Pads
The recovery of gold from certain oxide ores is achieved through the heap leaching process. Under this method, ore is
placed
on leach pads where it is permeated with a chemical solution, which dissolves the gold contained in the ore. The
resulting
“pregnant” “pregnant” solution is further processed in a process plant where the gold is recovered. For accounting purposes,
costs are
added to leach pads based on current mining costs, including applicable depreciation, depletion and amortization
relating to
mining operations. Costs are removed from the leach pad as ounces are recovered in circuit at the leach plant
based on the
average cost per recoverable ounce of gold on the leach pad.
The engineering estimates of recoverable gold on the leach pads are calculated from the quantities of ore placed on the
pads
(measured (measured tons added to the leach pads), the grade of ore placed on the leach pads (based on assay data) and a
recovery
percentage (based on metallurgical testing and ore type). Leach pad production cycles vary from several months
to multiple
years. In operations with multiple year leach cycles, the majority (greater than 65 percent) of the placed
recoverable ounces
are recovered in the first year of leaching, with declining amounts each year thereafter until the
leaching process is complete.
Although the quantities of recoverable gold placed on the leach pads are reconciled by comparing the grades of ore placed
on
pads to the quantities of gold actually recovered (metallurgical balancing), the nature of the leaching process inherently
limits
the ability to precisely monitor recoverability levels. As a result, the metallurgical balancing process is constantly
monitored and
the engineering estimates are refined based on actual results over time. Historically, AngloGold Ashanti’s
operating results
have not been materially impacted by variations between the estimated and actual recoverable quantities
of gold on its leach
pads. For operations with long-term leach production cycles, variations in recovery estimates from new
metallurgical data or
production variances would be accounted for as an adjustment to the recoverable ounces and the
average cost per
recoverable ounce of gold on the le ach pad. Variations between actual and estimated quantities resulting
from changes in
assumptions and estimates that do not result in write-downs to net realizable value are accounted for on a
prospective basis.
The ultimate recovery of gold from a pad will not be known until the leaching process has been
concluded. Based on current
mine plans, AngloGold Ashanti expects that current leaching operations will terminate at
dates ranging from 20052011 to 2016.2020.
149
The costs of materials currently contained on the leach pad are reported as a separate line item apart from inventory. As
at December 31, 2004, AngloGold Ashanti’s materials on leach pads had a carrying value of $127 million of which
$1052006, $46 million was classified as short-termshort term compared with $37 million as AngloGold Ashantiat December 31, 2005 as the
Company expects the related gold to be recovered within twelve months.
The short-termshort term portion of materials on the leach
pad is determined by multiplying the average cost per ounce in inventory, by
the expected production ounces for the next
twelve months. Based on data gathered and analyzed from heap leach pad drilling results, and other studies and analysis
completed, short-term heap leach pad inventory occurs in two forms: (1) gold recoverable but yet to be dissolved (i.e. gold
still in the ore), and (2) gold recoverable from gold dissolved in solution within the leach pad (i.e. pore water). This
estimate calculation was used in determining the short term port ion of materials on the leach pad as at
December 31, 2006. As at December 31, 2004, $222006, $149 million was classified as long-term.long term compared with $116 million as at
December 31, 2005.
Funding and treasury policies
For discussion on the funding and treasury policies of AngloGold Ashanti, See “Item 11.: Quantitative and qualitative
disclosures about market risk – Gold price risk management activities”.
5C.
Research and development, patents and licenses, etcetc.
For a detailed discussion, see “Item 4B.: Business overview – Research and development”.
155
5D. Trend
Trend information
Outlook. ProductionDuring the first quarter of 2007, AngloGold Ashanti produced 1.33 million ounces at an average cash costs of
$332 per ounce before the effects of change in 2005accounting policy for deferred stripping. Gold production for the second
quarter of 2007 is expected to increase to some 6.5be marginally higher at around 1.35 million ounces while capitalat a cash cost, before the effects of
change in accounting policy for deferred stripping, broadly similar to that achieved during the first quarter of 2007.
For the full year 2007, AngloGold Ashanti is targeting gold production of around 5.7 million ounces at a cash cost of
$323 per ounce, before the effects of change in accounting policy for deferred stripping, based on the following exchange
rates assumptions: $/R7.16, A$/$0.81, $/BRL2.00 and $/ARS3.11. AngloGold Ashanti’s ability to meet the full year’s
production target could be impacted by, amongst other factors, siesmicity in South Africa, power shortages in Africa, lower
grades at some of its mines and any setback in clearing the pit wall failure at Geita. AngloGold Ashanti is also subject to
cost pressures and wage negotiations currently facing the mining industry which could adversely impact the cash costs for
2007.
Capital expenditure is expected to be
$655 around $1,070 million (2004: $256in 2007 (2006: $817 million), mainly at the South African, South American and former Ashanti operations.
Growth opportunities. The positive trends in the gold market have led gold companies to extend their efforts to find and turn to
account, future production ounces. In the case of AngloGold Ashanti, this has given rise to a “new frontier” strategy of looking
for exploration and acquisition targets outside of the world’s recognized and mature gold regions and to dispose of properties
which are unlikely to yield real shareholder return. In Russia, AngloGold Ashanti acquired an equity interest in Trans-Siberian
Gold as an entry into this region. AngloGold Ashanti is committed to engaging junior exploration companies and aims to
unlock the gold potential by combining AngloGold Ashanti’s technical expertise with the partner’s in-depth country knowledge
and operating experience. In China, strategic alliances are being sought to allow the company to successfully extract value
from what may well be a prospective region. The company will continue to explore its joint venture alliances in Laos and the
Philippines and will continue to acquire land positions in several prospective areas in Mongolia. Exploration drilling in the
Democratic Republic of Congo commenced in 2005.
Management will continue to monitor approved capital projects:
•
In South Africa, the Mponeng Shaft Deepening Project allows for the deepening of the sub-shaft system and provides
access tunnels to the VCR horizon on 113, 116 and 120 levels (ranging from 3,172 meters to 3,372 meters below
surface). AngloGold Ashanti expects the project to produce 4.8 million ounces of gold over a period of 13 years to 2016.
The total capital expenditure is estimated at $207 million (at closing 2004 exchange rate), with some $8 million (at closing
2004 exchange rate) remaining. The average project cash cost over the life-of-mine is expected to be approximately
$226 per ounce in 2004 real terms.
•
At TauTona, three projects are underway:
•
The CLR shaft pillar project allows for stoping operations up to the infrastructure zone of influence. The project, from
which production commenced in 2004, is expected to produce 550,000 ounces of gold over a period of 10 years, at a
capital cost of $35 million (at closing 2004 exchange rate). Approximately $29 million (at closing 2004 exchange rate)
has been spent to date. The expected average project cash cost is $134 per ounce.
•
The VCR development project aims to access two distinct reserve blocks on the VCR horizon, one situated north-east
of the shaft complex, and the other in the VCR pillar area situated outside the zone of influence. The project will add
some 300,000 ounces to production, with a capital cost of $30 million (at closing 2004 exchange rate).
•
The CLR reserve block below 120 level, known as TauTona below 120 level project is being accessed via a twin
decline system into its geographical center, down to 125 level. The project is expected to produce 2 million ounces of
gold over a period of nine years, with a project capital cost of $152 million (at closing 2004 exchange rate). The
average project cash cost is expected to be $203 per ounce. Progress is on schedule and production is due to start in
January 2007.
•
In Australia, a decision to proceed with the Boddington expansion project is expected towards the end of 2005. A feasibility
study completed in 2000 was based on an operation with a throughput of 25 million tonnes per annum, producing an
average of 600,000 ounces of gold and 22,500 tonnes of copper per annum over a life-of-mine of 15 years, at an
estimated attributable capital cost of $192 million. The update of the study has pointed towards a larger project with
greater throughput, higher annual gold production and a longer mine life. This larger scale will reduce the impact of higher
costs in the region resulting from the current minerals boom. Environmental approvals associated with the expansion as
defined in the 2000 feasibility study were received in June 2002 and will remain valid for a period of five years.
Subsequent changes to the project may require a supplementary approval process, which is planned will be completed
during 2005.
•
The economic feasibility study for the Cuiabá expansion project, in Brazil, was concluded in December 2004 and approved
by the board in January 2005. The project aims to expand current production of 830,000 tonnes to 1.3 million tonnes per
annum at an estimated capital cost of $121 million. The project deepens the shaft from 11 level to 21 level and the
additional infrastructure and ore reserves are expected to increase production from 190,000 ounces to 250,000 ounces
per year within two years of the project’s completion to yield 1.86 million ounces in all over the additional six years of life.
156
•
A key aspect of the rationale for the Business Combination between AngloGold and Ashanti is the development of the
deep-level ore deposits at the Obuasi mine, in Ghana, currently referred to as Obuasi Deeps. This development could
potentially extend the life-of-mine to well beyond 2040. However, this requires an investment of $44 million over the next
five years on further exploration and the necessary feasibility studies. Depending upon the results, the full development of
Obuasi Deeps may proceed at the end of this five-year period but could take several years to complete. Initial scoping
studies have indicated that the development of Obuasi Deeps will require an estimated capital expenditure of $570 million
in real terms over the anticipated life-of-mine.
5E.
Off-balance sheet itemsarrangements
AngloGold Ashanti does not engage in off-balance sheet financing activities, and does not have any off-balance sheet debt
obligations, special purpose entities or unconsolidated affiliates. The most significant off-balance sheet items are normal
purchase and normal sales exempt contracts and unaccrued future rehabilitation obligations, each of which is discussed
below.
Normal purchase and normal sales exempt contracts
A number of derivatives are used to manage gold price risks that arise out of the group’s core business activities. Gold
pricing
contracts that meet the SFAS138 exemption for Normal Purchase and Normal Sale do not appear on the balance
sheet. These
agreements are accounted for as sales contracts with the proceeds under the contract being recorded in
earnings at the date
of settlement by physical delivery. These off-balance sheet contracts are managed as part of
AngloGold Ashanti’s gold price
risk management activities and at December 31, 20042006 had a marked-to-market value of
negative $499$1,379 million. All other
derivatives are recognized on the balance sheet at fair value. See “Item 11.:
Quantitative and qualitative disclosures about
market risk” and note 2226 to the consolidated financial statements “Gold price and currency “Financial
risk management activities”.
150
Future rehabilitation liability
The unaccrued portion of the future rehabilitation liability is an off-balance sheet obligation. See “Item 4D.: Property, plant and
equipment" and note 1721 to the
consolidated financial statements “Provision for environmental rehabilitation”. It is an objective
of AngloGold Ashanti to improve operating procedures at its mines to reduce its ultimate liability. AngloGold Ashanti believes
that the annual review of future obligations is conservative.
5F.
Tabular disclosure of contractual obligations
As at December 31, 20042006 AngloGold Ashanti had the following known contractual obligations:
Payments due by period
Contractual Obligations
(7)
(in millions)
Total
$
Less
than 1
1 year
$
1-3 years
$
3-5 years
$
More than 5
5 years
$
Long-term debt obligations including interest
1,686(1)
3151,622
99
15
1,355
1,522
1
-
Capital lease obligations
-11
-3
-8
-
-
Operating lease obligations
24
16
5
2
1
Purchase
1
-
-
Purchase obligations
- Contracted capital expenditure
(1)(2)
148354
103330
1824
15-
12-
- Other purchase obligations
(2)(3)
253464
220274
18130
1119
441
Reclamation and closureEnvironmental rehabilitation costs
(3)(4)
350482
2324
755
1433
306370
Derivatives
(5)
2,903
1,486
324
919
174
Pensions and other post retirement medical
obligations
(6)
176
12
24
26
114
Total 2,439
6,036
2,244
2,092
1,000
700
(1)
662Interest calculations are at the rate existing at the year end. Actual rates are set at floating rates for come of the debt (Refer Note 20 of Item 18).
(2)
59
1,395
323
(1
)
Represents contracted capital expenditure for which contractual obligations exist. Amounts stated include commitments of equity accounted joint ventures.
(2)ventures.
(3)
Other purchase obligations representsrepresent contractual obligations for mining contract services, purchase of power, supplies, consumables, inventories,
explosives and activated carbon.
Amounts stated include purchase obligations of equity accounted joint ventures.
(3)(4)
Operations of gold mining companies are subject to extensive environmental regulations in the various jurisdictions in which they operate. These regulations
regulations establish certain conditions on the conduct of operations by AngloGold Ashanti. Pursuant to environmental regulations, AngloGold Ashanti is
also obligated to
close their operations and reclaim and rehabilitate the lands upon which it conducted its mining and gold recovery operations. The
present estimated closure
costs at existing operating mines and mines in various stages of closure are reflected in this table. For more information of
environmental rehabilitation
obligations, see “Item 4D.: Property, plant and equipment – Sustainable development : EnvironmentSafety, Health, environment and
social investment”development”. Amounts stated include a total
estimated liability of $15$17 million in respect of equity accounted joint ventures.
(5)
Estimated fair value of all derivatives. Also see “Item 5B.: Liquidity and capital resources – Derivatives accounted for at fair value”. Amounts stated
include derivatives of equity accounted joint ventures.
(6)
Represents payments for unfunded plans or plans with insufficient funding.
(7)
The Group is unable to determine the years, if any, that the resolution of its uncertain tax liabilities will result in a cash flow.
157151
Item 6: Directors, senior management and employees
6A.
Directors and senior management
Directors
AngloGold Ashanti has a unitary board structure which, currentlyat the date of this report, comprises fivefour executive directors and
thirteen non-executive
directors, threetwo of whom are alternates. Certain information with respect to AngloGold Ashanti’s
directors as at December 31,
2004 2006 is set forth below:
Year
first
Name Age
Position
appointed
(1)
Robert (Bobby) M. Godsell
(2)
5254
Executive director and chief executive officer
1989
(3)
Jonathan G. BestRoberto Carvalho Silva
(4)
56
Executive director, finance
1994
(3)
David (Dave) L. Hodgson
(5)
5755
Executive director and chief operating officer - International
20012005
Samuel E. Jonah(4)
55Neville F. Nicolau
47
Executive director and presidentchief operating officer - Africa
20042005
Kelvin H. Williams(4)
(6)Srinivasan Venkatakrishnan (Venkat)
5641
Executive director, marketingfinance
1990
(3)2005
Russell P. Edey
(7)(8)(5)(6)
6264
Independent non-executive director and chairman
1998
Thokoana J. (James) Motlatsi
(9)(7)
5355
Independent non-executive director and deputy chairman
1998
Frank B. Arisman
(7)(5)
6062
Independent non-executive director
1998
Reginald E. Bannerman
72
Independent non-executive director
2006
Elisabeth le R. Bradley
(7)(5)
6668
Independent non-executive director
1998
Colin B. Brayshaw
(7)(5) (11)
6971
Independent non-executive director
1997
(3)
Anthony (Tony) W. LeaWiseman L. Nkuhlu
56(5)
62
Independent non-executive director
2006
Samuel E. Jonah
(8) (10)
57
Non-executive director and president
2004
Réne Médori
49
Non-executive director
20012005
Joseph H. Mensah
78
Non-executive director
2006
William (Bill) A. Nairn
(10)(9)
6062
Non-executive
director
2001
Simon R. Thompson
4547
Non-executive director
2004
Anthony (Tony) J. Trahar
55(11)
57
Non-executive
director
2000
Polelo L. (Lazarus) Zim
44
Non-executive director
2004
David D. Barber
52
Alternate director
2002
Arthur H. (Harry) Calver
5759
Alternate director
2001
Peter G. Whitcutt
3941
Alternate director
2001
(1)
Directors serve for a period of three years unless re-elected. At each annual general meeting, directors appointed since the previous annual general
meeting are required to retire, but are eligible for re-election. In addition, one-third of the board of directors must retire according to seniority or by lot
but
may be re-elected. At the annual general meeting held on May 5, 2006, Mr F B Arisman, Mrs E l e R Bradley, Mr R P Edey, Mr R M Godsell,
Dr T J Motlasi retired by rotation and were re-elected by the shareholders. Mr R Carvalho Silva, Mr N F Nicolau, Mr R Médori and
Mr S Venkatakrishnan retired as they were appointed after the April 29, 2005 annual general meeting and they were re-elected by the shareholders. At
the annual general meeting held on May 4, 2007, Mr F B Arisman, Mr J H Mensah, Mr W A Nairn, Prof W L Nkuhlu, Mr S M Pityana and
Mr S R Th ompson retired by rotation and were re-elected by the shareholders. Mr C B Brayshaw and Mr A J Trahar retired from board at the annual
general meeting held on May 4, 2007.
(2)
Appointed to the board in 1989, appointed as chief executive officer in April 1998 and chairman in December 2000. Resigned as chairman on
April 30, 2002
but remains chief executive officer and an executive director.
(3)
Date appointed to the board of Vaal Reefs Exploration and Mining Company Limited, prior to the formation of AngloGold Limited.
(4)
Appointed as finance director in 1998.The office of chief operating officer is split into International (all countries other than those on the African continent) and Africa.
(5)
Appointed as chief operating officer in 2001.
(6)
Appointed as marketing director in 1998.
(7)
Member of the audit and corporate governance committee.
(8)(6)
Appointed as chairman with effect from May 1, 2002.
(9)(7)
Appointed as deputy chairman with effect from May 1, 2002.
(10)(8)
Appointed as an executive director in 2004 which appointment he relinquished in 2005, but retained his appointment as a non-executive director.
(9)
Appointed to board in January 2000, resigned from board and appointed as alternate in October 2000. Re-appointed to the board in May 2001.
(10)Resigned from the board on February 12, 2007.
(11) Retired from board at the annual general meeting held on May 4, 2007.
Executive directors
Mr RM Godsell (52(54)) — BA, MA
Chief Executive Officer
Bobby Godsell was appointed to the AngloGold board as chief executive officer in April 1998 and as chairman in
December
2000. He relinquished his role as chairman of AngloGold in May 2002. He ishas 29 years of service with
companies associated with the mining industry, and has served as a non-executive director of Anglo American plc.plc since
March 1999. He is also a past chairman of the World Gold Council.
152
Mr JG Best R Carvalho Silva(56) (55) — BAcc, BCorp Admin
Chief Operating Officer – International
ACIS, ACIMA,Roberto Carvalho Silva joined the Anglo American group in Brazil in 1973 and was appointed president and chief executive
officer of AngloGold South America in January 1999. He became executive officer, South America for AngloGold in 2000
and was appointed to the board of AngloGold Ashanti in May 2005 in his current capacity.
Mr N F Nicolau (47) — B Tech (Min. Eng), MBA
Chief Operating Officer – Africa
Neville Nicolau was appointed the executive officer responsible for AngloGold’s South Africa region in November 2001 and
was appointed to the board of AngloGold Ashanti in May 2005 in his current capacity. He has 27 years of experience in the
mining industry.
Mr S Venkatakrishnan (Venkat) (41) — BCom, ACA (ICAI)
Executive Director: Finance (Chief Financial Officer)
Jonathan BestVenkat was appointedthe finance director of Ashanti Goldfields Company Limited from 2000 until the merger with AngloGold in April 1998.2004.
Prior to joining Ashanti, Venkat was a director in the Reorganization Services Division of Deloitte & Touche in London. He has had 36 years
was appointed to the board of service with companies
associated with the mining industry.AngloGold Ashanti in August 2005.
Non-executive directors
Mr DL HodgsonRP Edey (57)(64) — BSc (Mining Engineering), BSc (Civil Engineering), BCom, AMP (Harvard)FCA
Chief Operating OfficerChairman and independent non-executive director
Dave HodgsonRussell Edey was appointed to the AngloGold board in November 2001April 1998 and as deputy chairman in December 2000. In
May 2002, he was appointed chairman when Bobby Godsell relinquished this office. Based in the United Kingdom, he is
deputy chairman of NM Rothschild Corporate Finance and a director of a number of other companies.
Dr TJ Motlatsi (55) — Hon D Soc Sc (Lesotho)
Deputy Chairman and independent non-executive director
James Motlatsi was appointed to the AngloGold board in April 1998 and as deputy chairman in May 2002 upon Russell
Edey being appointed chairman. He has been associated with the South African mining industry since 1970, and is a past
president of the National Union of Mineworkers. He is chief operating officer. He was previously
executive officer responsible for AngloGold’sof TEBA Limited.
Mr FB Arisman (62) — MSc (Finance)
Independent non-executive director
Frank Arisman was appointed to the AngloGold board in April 1998. He resides in New York and retired, after 32 years of
service, from JP Morgan Chase, where he held the position of managing director.
Mrs E le R Bradley (68) — BSc, MSc
Independent non-executive director
Elisabeth Bradley was appointed to the AngloGold board in April 1998. She is non-executive chairman of Wesco
Investments Limited and Toyota South Africa region.(Pty) Limited, and a director of a number of other companies. She is deputy
chairman of the South African Institute of International Affairs.
Mr CB Brayshaw (71) — CA (SA), FCA
Independent non-executive director
Colin Brayshaw was appointed to the AngloGold board in April 1998. He has more than 31 yearsis a retired managing partner and chairman of mining experience.
Deloitte & Touche and is a non-executive director of a number of other companies including Anglo Platinum Limited and
Datatec Limited.
158
Roberto Carvalho Silva
55
Executive director and chief operating officer - International
2005
(4)
Neville F. Nicolau
47
Executive director and chief operating officer - Africa
2005
(4)
Srinivasan Venkatakrishnan (Venkat)
41
Executive director, finance
2005
Russell P. Edey
(5)(6)
64
Independent non-executive director and chairman
1998
Thokoana J. (James) Motlatsi
(7)
55
Independent non-executive director and deputy chairman
1998
Frank B. Arisman
(5)
62
Independent non-executive director
1998
Reginald E. Bannerman
72
Independent non-executive director
2006
Elisabeth le R. Bradley
(5)
68
Independent non-executive director
1998
Colin B. Brayshaw
(5) (11)
71
Independent non-executive director
1997
(3)
Wiseman L. Nkuhlu
(5)
62
Independent non-executive director
2006
Samuel E. Jonah
(8) (10)
57
Non-executive director and president
2004
Réne Médori
49
Non-executive director
2005
Joseph H. Mensah
78
Non-executive director
2006
William (Bill) A. Nairn
(9)
62
Non-executive
director
2001
Simon R. Thompson
47
Non-executive director
2004
Anthony (Tony) J. Trahar
(11)
57
Non-executive
director
2000
Arthur H. (Harry) Calver
59
Alternate director
2001
Peter G. Whitcutt
41
Alternate director
2001
(1)
Directors serve for a period of three years unless re-elected. At each annual general meeting, directors appointed since the previous annual general
meeting are required to retire, but are eligible for re-election. In addition, one-third of the board of directors must retire according to seniority or by lot
but may be re-elected. At the annual general meeting held on May 5, 2006, Mr F B Arisman, Mrs E l e R Bradley, Mr R P Edey, Mr R M Godsell,
Dr SE Jonah KBET J Motlasi retired by rotation and were re-elected by the shareholders. Mr R Carvalho Silva, Mr N F Nicolau, Mr R Médori and
Mr S Venkatakrishnan retired as they were appointed after the April 29, 2005 annual general meeting and they were re-elected by the shareholders. At
the annual general meeting held on May 4, 2007, Mr F B Arisman, Mr J H Mensah, Mr W A Nairn, Prof W L Nkuhlu, Mr S M Pityana and
Mr S R Th ompson retired by rotation and were re-elected by the shareholders. Mr C B Brayshaw and Mr A J Trahar retired from board at the annual
general meeting held on May 4, 2007.
(2)
Appointed to the board in 1989, appointed as chief executive officer in April 1998 and chairman in December 2000. Resigned as chairman on
April 30, 2002 but remains chief executive officer and an executive director.
(3)
Date appointed to the board of Vaal Reefs Exploration and Mining Company Limited, prior to the formation of AngloGold Limited.
(4)
The office of chief operating officer is split into International (all countries other than those on the African continent) and Africa.
(5)
Member of the audit and corporate governance committee.
(6)
Appointed as chairman with effect from May 1, 2002.
(7)
Appointed as deputy chairman with effect from May 1, 2002.
(8)
Appointed as an executive director in 2004 which appointment he relinquished in 2005, but retained his appointment as a non-executive director.
(9)
Appointed to board in January 2000, resigned from board and appointed as alternate in October 2000. Re-appointed to the board in May 2001.
(10)Resigned from the board on February 12, 2007.
(11) Retired from board at the annual general meeting held on May 4, 2007.
Executive directors (55)
Mr RM Godsell (54)— Hon D Sc (Exeter), MSc (Mineral Production Management)BA, MA
PresidentChief Executive Officer
Dr Sam JonahBobby Godsell was appointed to the position ofAngloGold board as chief executive officer of Ashanti Goldfields Company Limited in 1986.April 1998 and as chairman in
Dr Jonah had an honorary knighthood conferred on him by Her Majesty, Queen Elizabeth II of Great Britain, in 2003.December 2000. He
became president of AngloGold Ashanti in May 2004.
Mr KH Williams (56) — BA (Hons)
Executive Director: Marketing
Kelvin Williams was appointed marketing director relinquished his role as chairman of AngloGold in April 1998.May 2002. He has 29 years of service inwith
companies associated with the gold mining industry, and has served as a non-executive director of Anglo American plc since
industry.March 1999. He is also a director and the immediate past chairman of Rand Refinery and is a director of the World Gold Council.
152
Mr R Carvalho Silva (55) — BAcc, BCorp Admin
Chief Operating Officer – International
Roberto Carvalho Silva joined the Anglo American group in Brazil in 1973 and was appointed president and chief executive
officer of AngloGold South America in January 1999. He became executive officer, South America for AngloGold in 2000
and was appointed to the board of AngloGold Ashanti in May 2005 in his current capacity.
Mr N F Nicolau (47) — B Tech (Min. Eng), MBA
Chief Operating Officer – Africa
Neville Nicolau was appointed the executive officer responsible for AngloGold’s South Africa region in November 2001 and
was appointed to the board of AngloGold Ashanti in May 2005 in his current capacity. He has 27 years of experience in the
mining industry.
Mr S Venkatakrishnan (Venkat) (41) — BCom, ACA (ICAI)
Executive Director: Finance (Chief Financial Officer)
Venkat was the finance director of Ashanti Goldfields Company Limited from 2000 until the merger with AngloGold in 2004.
Prior to joining Ashanti, Venkat was a director in the Reorganization Services Division of Deloitte & Touche in London. He
was appointed to the board of AngloGold Ashanti in August 2005.
Non-executive directors
Mr RP Edey (62)(64) — FCA
Chairman and independent non-executive director
Russell Edey was appointed to the AngloGold board in April 1998 and as deputy chairman in December 2000. In
May 2002, he
was appointed chairman when Bobby Godsell relinquished this office. Based in the United Kingdom, he is
deputy chairman of
NM Rothschild Corporate Finance and a director of a number of other companies.
Dr TJ Motlatsi (53)(55) — Hon D Soc Sc (Lesotho)
Deputy Chairman and independent non-executive director
James Motlatsi was appointed to the AngloGold board in April 1998 and as deputy chairman in May 2002 upon Russell
Edey
being appointed chairman. He has been associated with the South African mining industry since 1970, and is a past
president
of the National Union of Mineworkers (NUM).Mineworkers. He is also chief executive officer of TEBA Ltd.Limited.
Mr FB Arisman (60)(62) — MSc (Finance)
Independent non-executive director
Frank Arisman was appointed to the AngloGold board in April 1998. He resides in New York and recently retired, after 32 years of
of service, from JP Morgan Chase, where he held the position of managing director.
Mrs E le R Bradley (66)(68) — BSc, MSc
Independent non-executive director
Elisabeth Bradley was appointed to the AngloGold board in April 1998. She is non-executive chairman of Wesco Investments
Ltd, Metair Investments LtdLimited and Toyota South Africa (Pty) LtdLimited, and a director of a number of other companies. She is alsodeputy
deputy chairman of the South African Institute of International Affairs.
Mr CB Brayshaw (69)(71) — CA(SA)CA (SA), FCA
Independent non-executive director
Colin Brayshaw was appointed to the AngloGold board in April 1998. He is a retired managing partner and chairman of
Deloitte
& Touche and is a non-executive director of a number of other companies including Anglo American Platinum Corporation Ltd,Limited and
Datatec Ltd and Johnnic Holdings Ltd.Limited.
Mr AW Lea (56) — BA (Hons)
Tony Lea was appointed to the AngloGold board in July 2001. He is finance director of Anglo American plc.
Mr WA Nairn (60) — BSc (Mining Engineering)
Bill Nairn has been a member of the AngloGold board since January 2000. He was re-appointed to the board in May 2001,
having previously been alternate director to Tony Trahar. He is a former group technical director of Anglo American plc.
Mr SR Thompson (45) — MA (Geology)
Simon Thompson is the chief executive of Anglo American Base Metals Division. He is also a director of Anglo American
Corporation of South Africa Ltd and a member of the executive board of Anglo American plc. He is chairman of the Exploration
Division and chairman of the executive committee of the Industrial Minerals Division. Simon joined the AngloGold Ashanti
board in 2004.
159
Mr AJ Trahar (55) — BCom, CA(SA)
Tony Trahar was appointed to the AngloGold board in October 2000. He is chief executive officer of Anglo American plc.
Mr PL Zim (44) — MCom
Lazarus Zim is chief executive officer of Anglo American Corporation of South Africa Limited. He is also chairman of Anglo
Operations Limited and serves on a number of boards in the Anglo American Group including Anglo American Platinum
Corporation Ltd. Lazarus joined the AngloGold Ashanti board in 2004.
Alternate directors
Mr DD Barber (52) — FCA, AMP (Harvard)
David Barber was appointed alternate director to Julian Ogilvie Thompson in April 2002 and, following the retirement of
Mr Ogilvie Thompson, was appointed alternate director to Mr Zim in April 2004. He is finance director of Anglo American
Corporation of South Africa Ltd.
Mr AH Calver (57) — BSc (Hons) Engineering, MDP (UNISA), PMD (Harvard)
Harry Calver was appointed alternate director to Bill Nairn in May 2001. He is head of engineering at Anglo American plc.
Mr PG Whitcutt (39) — BCom(Hons), CA(SA), MBA
Peter Whitcutt was appointed alternate director to Tony Lea in October 2001. He is head of finance at Anglo American plc.
In accordance with the articles of association of AngloGold Ashanti, all directors must retire at least once every three years by
rotation and may be re-elected by shareholders. At the annual general meeting held on April 29, 2005, Mr C B Brayshaw,
Mr D L Hodgson, Mr A W Lea, Mr W A Nairn and Mr K H Williams retired by rotation. Other than Mr Hodgson, who retired from
the board on April 29, 2005, all directors offered themselves for re-election and were appointed by shareholders at the annual
general meeting held on April 29, 2005. In addition, Dr S E Jonah, Mr S R Thompson and Mr P L Zim who were appointed to
the board after the annual general meeting held on April 29, 2004, retired from the board and were appointed by shareholders
at the annual general meeting held on April 29, 2005. In terms of Article 92 of the articles of association all directors appointed
to the board at any period after any annual general meeting, may only hold office until the next annual general meeting at
which time, they may be re-elected by shareholders. On March 17, 2005, it was announced that with effect from May 1, 2005,
Mr R Carvalho Silva and Mr N F Nicolau would be appointed executive directors to the board of AngloGold Ashanti. At the
same time, Mr J G Best indicated that he would be retiring from the board with effect from August 1, 2005 and that
Mr S Venkatakrishnan would be appointed to the board. On June 21, 2005, Dr S E Jonah indicated that he wished to move to
a non-executive role on the board of AngloGold Ashanti, with effect July 31, 2005. He will retain the title of President.
Executive committee
The board of directors of AngloGold Ashanti has delegated authority to run the day-to-day affairs of the company to an
executive committee comprising the five executive directors and three executive officers. The executive committee meets
regularly under the chairmanship of the chief executive officer and is mandated to assist in reviewing operations and
performance by the AngloGold Ashanti group, developing strategy and policy proposals for consideration by the board of
directors and implementing the directives of the board. Members of the executive committee at December 31, 2004 were:
Name Age
Position
Year
first
appointed
Robert (Bobby) M. Godsell
52
Executive director and chief executive officer
1989
Jonathan G. Best
56
Executive director, finance
1994
David (Dave) L. Hodgson
57
Executive director and chief operating officer
2001
Samuel E. Jonah
55
Executive director and president
2004
Kelvin H. Williams
56
Executive director, marketing
1990
Roberto Carvalho Silva
53
Deputy chief operating officer - international
2004
Neville F. Nicolau
45
Deputy chief operating officer - Africa
2004
Srinivasan (Venkat) Venkatakrishnan
39
Deputy chief financial officer
2004
For a description of the business experience and functions of the members of the executive committee, see “Directors” above.
160
To assist in the execution of certain of its duties and functions, the executive committee has established an operations sub-
committee, a treasury committee and a finance committee, all described below. For information on the other committees
established by the board of directors, see “Item 6C.: Board practices”.
Executive officers
The executive officers of AngloGold Ashanti at December 31, 2004 were:
Name Age
Position
Year
first
appointed
Merene M. Botsio-Phillips
47
General counsel
2004
Roberto Carvalho Silva
5355
DeputyExecutive director and chief operating officer - internationalInternational
20002005
Richard N. Duffy
41
New business development
1998
Dawn Earp
43
Corporate accounting
2004
Benjamin W. Guenther
52
Corporate technical - group
2004
Robert L. Lazare
48
South Africa region
2004
Steven J. Lenahan
48
Corporate affairs
1998
Mark P. Lynam
43
Treasury
2004(4)
Neville F. Nicolau
4547
DeputyExecutive director and chief operating officer - Africa
20012005
Yedwa Z. Simelane(4)
39Srinivasan Venkatakrishnan (Venkat)
Managing secretary41
Executive director, finance
2005
Russell P. Edey
(5)(6)
64
Independent non-executive director and chairman
1998
Thokoana J. (James) Motlatsi
(7)
55
Independent non-executive director and deputy chairman
1998
Frank B. Arisman
(5)
62
Independent non-executive director
1998
Reginald E. Bannerman
72
Independent non-executive director
2006
Elisabeth le R. Bradley
(5)
68
Independent non-executive director
1998
Colin B. Brayshaw
(5) (11)
71
Independent non-executive director
1997
(3)
Wiseman L. Nkuhlu
(5)
62
Independent non-executive director
2006
Samuel E. Jonah
(8) (10)
57
Non-executive director and president
2004
Nigel W. UnwinRéne Médori
5249
Human resources and information technologyNon-executive director
19992005
Srinivasan (Venkat) VenkatakrishnanJoseph H. Mensah
3978
Deputy chief financial officerNon-executive director
2006
William (Bill) A. Nairn
(9)
62
Non-executive
director
2001
Simon R. Thompson
47
Non-executive director
2004
Gordon F. WylieAnthony (Tony) J. Trahar
52(11)
Exploration57
2004Non-executive
director
2000
Arthur H. (Harry) Calver
59
Alternate director
2001
Peter G. Whitcutt
41
Alternate director
2001
(1)
Directors serve for a period of three years unless re-elected. At each annual general meeting, directors appointed since the previous annual general
meeting are required to retire, but are eligible for re-election. In addition, one-third of the board of directors must retire according to seniority or by lot
but may be re-elected. At the annual general meeting held on May 5, 2006, Mr F B Arisman, Mrs E l e R Bradley, Mr R P Edey, Mr R M Godsell,
Dr T J Motlasi retired by rotation and were re-elected by the shareholders. Mr R Carvalho Silva, Mr N F Nicolau, Mr R Médori and
Mr S Venkatakrishnan retired as they were appointed after the April 29, 2005 annual general meeting and they were re-elected by the shareholders. At
the annual general meeting held on May 4, 2007, Mr F B Arisman, Mr J H Mensah, Mr W A Nairn, Prof W L Nkuhlu, Mr S M Pityana and
Mr S R Th ompson retired by rotation and were re-elected by the shareholders. Mr C B Brayshaw and Mr A J Trahar retired from board at the annual
general meeting held on May 4, 2007.
(2)
Appointed to the board in 1989, appointed as chief executive officer in April 1998 and chairman in December 2000. Resigned as chairman on
April 30, 2002 but remains chief executive officer and an executive director.
(3)
Date appointed to the board of Vaal Reefs Exploration and Mining Company Limited, prior to the formation of AngloGold Limited.
(4)
The office of chief operating officer is split into International (all countries other than those on the African continent) and Africa.
(5)
Member of the audit and corporate governance committee.
(6)
Appointed as chairman with effect from May 1, 2002.
(7)
Appointed as deputy chairman with effect from May 1, 2002.
(8)
Appointed as an executive director in 2004 which appointment he relinquished in 2005, but retained his appointment as a non-executive director.
(9)
Appointed to board in January 2000, resigned from board and appointed as alternate in October 2000. Re-appointed to the board in May 2001.
(10)Resigned from the board on February 12, 2007.
(11) Retired from board at the annual general meeting held on May 4, 2007.
Executive directors
Office of corporate administration
Mr RM Godsell Christopher R. Bull
58
Company secretary
1998
The business experience and functions of the executive officers of AngloGold Ashanti are as follows.
(54)Ms MM Botsio-Phillips (47) — LLB, BLBA, MA
General CounselChief Executive Officer
Merene Botsio-Phillips joined Ashanti Goldfields Company Limited in 1995, andBobby Godsell was appointed to the AngloGold board as chief executive officer in April 1998 and as chairman in
December 2000. He relinquished his role as chairman of AngloGold in May 2002. He has 29 years of service with
companies associated with the mining industry, and has served as a non-executive director – general counsel in 1996. She was admitted toof Anglo American plc since
March 1999. He is also a past chairman of the English Bar in 1979 and is a member of Gray’s Inn, the Ghana Bar
and the International Bar Association.World Gold Council.
152
Mr R Carvalho Silva (53) (55) — BAcc, BCorp Admin
Deputy Chief Operating Officer (International)– International
Roberto Carvalho Silva joined the Anglo American group in Brazil in 1973 and was appointed president and chief executive
officer of AngloGold South America in January 1999. He became executive officer, South America for AngloGold in 2000
and was appointed to the board of AngloGold Ashanti in May 2005 in his current capacity.
Mr N F Nicolau (47) — B Tech (Min. Eng), MBA
Chief Operating Officer – Africa
Neville Nicolau was appointed the executive officer responsible for AngloGold’s South Africa region in November 2001 and
was appointed to the board of AngloGold Ashanti in May 2005 in his current capacity. He has 27 years of experience in the
mining industry.
Mr S Venkatakrishnan (Venkat) (41) — BCom, ACA (ICAI)
Executive Director: Finance (Chief Financial Officer)
Venkat was the finance director of Ashanti Goldfields Company Limited from 2000 until the merger with AngloGold in 2004.
Prior to joining Ashanti, Venkat was a director in the Reorganization Services Division of Deloitte & Touche in London. He
was appointed to the board of AngloGold Ashanti in August 2005.
Non-executive directors
Mr RP Edey (64) — FCA
Chairman and independent non-executive director
Russell Edey was appointed to the AngloGold board in April 1998 and as deputy chairman in December 2000. In
May 2002, he was appointed chairman when Bobby Godsell relinquished this office. Based in the United Kingdom, he is
deputy chairman of NM Rothschild Corporate Finance and a director of a number of other companies.
Dr TJ Motlatsi (55) — Hon D Soc Sc (Lesotho)
Deputy Chairman and independent non-executive director
James Motlatsi was appointed to the AngloGold board in April 1998 and as deputy chairman in May 2002 upon Russell
Edey being appointed chairman. He has been associated with the South African mining industry since 1970, and is a past
president of the National Union of Mineworkers. He is chief executive officer of TEBA Limited.
Mr FB Arisman (62) — MSc (Finance)
Independent non-executive director
Frank Arisman was appointed to the AngloGold board in April 1998. He resides in New York and retired, after 32 years of
service, from JP Morgan Chase, where he held the position of managing director.
Mrs E le R Bradley (68) — BSc, MSc
Independent non-executive director
Elisabeth Bradley was appointed to the AngloGold board in April 1998. She is non-executive chairman of Wesco
Investments Limited and Toyota South Africa (Pty) Limited, and a director of a number of other companies. She is deputy
chairman of the South African Institute of International Affairs.
Mr CB Brayshaw (71) — CA (SA), FCA
Independent non-executive director
Colin Brayshaw was appointed to the AngloGold board in April 1998. He is a retired managing partner and chairman of
Deloitte & Touche and is a non-executive director of a number of other companies including Anglo Platinum Limited and
Datatec Limited.
Dr SE Jonah KBE (57) — Hon D Sc (Exeter), MSc (Mineral Production Management)
President
Sam Jonah worked in various positions, including underground, with Ashanti Goldfields and was appointed to the position
of chief executive officer of Ashanti in 1986. He has been decorated with many awards and honors and in 2003, an
honorary knighthood was conferred on him by Her Majesty, Queen Elizabeth II of Great Britain, in recognition of his
exceptional achievements as an African businessman. Sam was appointed as an executive director to the board of
AngloGold Ashanti in May 2004, a position he relinquished in 2005 but retained his appointment as a non-executive
director.
153
Mr R Médori (49) — Doctorate Economics, Grad (Fin)
Réne Médori was appointed to the AngloGold Ashanti board in August 2005. He is the finance director of Anglo American
plc.
Mr WA Nairn (62) — BSc (Mining Engineering)
Bill Nairn has been a member of the AngloGold board since January 2000. He was re-appointed to the board in May 2001,
having previously been alternate director to Tony Trahar. He was group technical director of Anglo American plc, prior to
his retirement in 2004.
Mr SR Thompson (47) — MA (Geology)
Simon Thompson is a director of Anglo American plc and chairman of the Base Metals Division, the Industrial Minerals
Division and the Exploration Division. Simon was appointed to the AngloGold Ashanti board in 2004.
Mr AJ Trahar (57) — BCom, CA (SA)
Tony Trahar was appointed to the AngloGold board in October 2000. He is chief executive officer of Anglo American plc.
The following appointments to the board were made during 2006 and subsequent to the filing of the previous
annual report:
Mr Reginald E. Bannerman (72) — BSc, MSc, was appointed to the board of directors on February 10, 2006. He has
been in law practice since 1958 and is currently the principal partner at Messrs Bruce-Lyle, Bannerman & Thompson
Attorneys in Ghana. He is a member of the General Legal Council of Ghana and a member of the board of the Valco Trust
Fund, a large privately run trust in Ghana. A former lecturer in law at the Ahmadu Bello University in Nigeria, Reginald was
also formerly the mayor of Accra, the capital of Ghana.
Mrs C Carroll (50) — MBA (Harvard), MSc (Geology) (University of Kansas)
Cynthia Carroll was appointed Chief Executive Officer of Anglo American plc on March 1, 2007. Prior to this appointment,
she spent the last 18 years in the aluminium industry of Alcan. Prior to joining Alcan, Cynthia spent six years in gas and oil
exploration.
Mr Joseph H. Mensah (78) — BSc (Economics), MSc (Economics), was appointed to the board of directors on
August 4, 2006. He has extensive experience in international and local economic management. He is the Chairman of the
National Development Planning Commission in Ghana and a member of the Ghana Parliament representing the Sunyani
constituency.
Professor Wiseman L. Nkuhlu (62) — BCom, CA (SA), MBA, was appointed to the board of directors on August 4, 2006.
He is a past national president of the South African Institute of Chartered Accountants and is a respected South African
academic, professional and business leader.
Mr SM Pityana (47) — BA (Hons) (Essex), MSc (London), was appointed to the AngloGold Ashanti board on
February, 13 2007. He is the executive chairman of Izingwe Holdings (Proprietary) Limited and has occupied strategic
roles in both the public and private sector, including the positions of director general of the national departments of Labor
and Foreign Affairs. He was formally a senior executive of Nedbank and is currently a non-executive director of several
companies including Bytes Technology Group (BTG), African Oxygen (Afrox), Munich Re and Aberdare Cables.
Alternate directors
Mr AH Calver (58) — BSc (Hons) Engineering, MDP (UNISA), PMD (Harvard)
Harry Calver was appointed alternate director to Bill Nairn in May 2001. He is head of engineering at Anglo American plc.
Mr PG Whitcutt (40) — BCom (Hons), CA (SA), MBA
Peter Whitcutt who is head of finance at Anglo American plc, has been an alternate director since October 2001, first to
Tony Lea, and then to Réne Médori who replaced the former on the board of AngloGold Ashanti.
Mr P L Zim together with his alternate Mr D D Barber resigned from the board on August 4, 2006. Mr K H Williams retired
from the board on May 6, 2006. Dr S Jonah resigned from the board on February 12, 2007.
154
In accordance with Article 86 of the articles of association of AngloGold Ashanti, not less than one-third of all directors
must retire by rotation at every annual general meeting and all directors must retire by rotation at least once every three
years and may be re-elected by shareholders.
At the annual general meeting held on May 4, 2007, Messrs F B Arisman, W A Nairn and S R Thompson retired by
rotation and were re-elected by the shareholders. Mr C B Brayshaw and Mr A J Trahar retired from the board at the annual
general meeting held on May 4, 2007. Mrs C Carroll was appointed a non-executive director, effective from May 5, 2007.
In addition, Mr J H Mensah, Prof W Nkuhlu and Mr S M Pityana who were appointed to the board subsequent to the annual
general meeting held on May 5, 2006, retired at the annual general meeting held on May 4, 2007, and were re-elected by
the shareholders. These retirements were in terms of Article 92 of the articles of association whereby all directors
appointed to the board at any period after any annual general meeting, may only hold office until the next annual general
meeting, at which time they may be re-elected by shareholders.
Executive committee
The board of directors of AngloGold Ashanti has delegated authority for overseeing the day-to-day management of the
company’s affairs and for executing the decisions of the board to an executive committee. At the date of this report, the
executive committee comprises the four executive directors as well as the executive officer: business development and the
executive officer: marketing. The executive committee meets generally on a weekly or ad hoc basis under the
chairmanship of the chief executive officer and is mandated to assist in reviewing operations and performance by the
AngloGold Ashanti group, developing strategy and policy proposals for consideration by the board of directors and
implementing the directives of the board. Members of the executive committee at December 31, 2006, were:
Name Age
Position
Year
first
appointed
Robert (Bobby) M. Godsell
54
Executive director and chief executive officer
1989
Roberto Carvalho Silva
55
Chief operating officer – International
2004
Richard N. Duffy
43
Business development
2005
Neville F. Nicolau
47
Chief operating officer – Africa
2004
Thero Setiloane
47
Executive officer: marketing
2006
Srinivasan Venkatakrishnan (Venkat)
41
Chief financial officer
2004
For a description of the business experience and functions of the members of the executive committee, see “Executive
officers” below.
To assist in the execution of certain of its duties and functions, the executive committee has established a management
committee (formerly an operation committee), responsible for overseeing the operational performance of the company, a
treasury committee and a finance committee, all described below.
For information on the other committees established by the board of directors, see “Item 6C.: Board practices”.
155
Executive officers
The executive officers of AngloGold Ashanti at December 31, 2006 were:
Name Age
Position
Year
first
appointed
Charles E. Carter
44
Strategy and Investor relations
2005
David H. Diering
55
Business planning – Africa
2005
Richard N. Duffy
43
Business development
1998
Dawn Earp
45
Finance
2004
Don Ewigleben
53
Law, Safety, Health and Environment
2006
Benjamin W. Guenther
54
International technical
2004
Hester H. Hickey
53
Head of risk
2005
Robert L. Lazare
50
Africa - underground mining
2004
Steven J. Lenahan
51
Corporate affairs
1998
Mark P. Lynam
45
Treasury
2004
Fritz R.L. Neethling
54
Africa – open-pit mining
2005
Peter Rowe
57
Corporate Technical Group
2006
Yedwa Z. Simelane
41
Managing secretary
2004
Thero Setiloane
47
Marketing
2006
Nigel W. Unwin
54
Human resources and information technology
1999
Office of corporate administration
Lynda Eatwell
52
Company secretary
2006
The business experience and functions of the executive officers of AngloGold Ashanti are as follows.
Dr CE Carter— BA (Hons) (UCT), DPhil (Oxford), EDP (Northwestern University – Kellogg School of Management)
Strategy and Investor Relations
Charles Carter joined Anglo American in 1991 and moved to the Gold and Uranium Division in 1996. In May 2005, he was
appointed an executive officer, with responsibility for overseeing the company’s global investor relations programme.
Mr DH Diering — BSc (Mining Engineering), SAIMM, AMP
Business Planning – Africa
Dave Diering joined the Anglo American Gold and Uranium Division in 1975 and worked at several South African
operations as well as for Zimbabwe Nickel Corporation until 2001, when he joined AngloGold as head of AngloGold in February 2000mining and
mineral resources. In 2005 he was
appointed a deputy chief operating officer in January 2005.an executive officer.
Mr RN Duffy (41) — BCom, MBA
New Business Development
Richard Duffy joined Anglo American Corporation 18 years ago. He became an executive officer of AngloGoldin 1987 and in 1998 and was
given the business planning portfolio in November 2000. In 2004, on completion of the business combination of AngloGold and
Ashanti, Richard was appointed executive officer:officer and managing secretary of
AngloGold. In November 2000 he was appointed head of business planning and in 2004 assumed responsibility for all new
business development.opportunities globally. In April 2005 this role was expanded to include greenfields exploration. He was appointed
to the executive committee in August 2005.
Ms D Earp (43) — BCom, BAcc, CA(SA)CA (SA)
Corporate AccountingFinance
Dawn Earp joined AngloGold in July 2000 from Anglo American, where she held the position aswas vice president, central finance. She was
Dawn was appointed to the position of executive officer in May 2004.
156
Mr D C Ewigleben — BSc, DJur
Law, Safety, Health and Environment
Don Ewigleben joined the group in 2000 as vice president, general counsel and corporate secretary of AngloGold Ashanti’s
North American operations. In 2003 he was promoted to the position of president and chief administrative officer for North
America, a position which was changed in 2005 to chief executive officer. Prior to joining the group, he served in various
executive positions for Echo Bay Mines (Canada) and AMAX Gold (US). He also held legal, safety and environmental
positions with AMAX Coal Industries (US). He was appointed executive officer – law, safety, health and environment on
January 1, 2006.
Mr BW Guenther (52) — BS Mining Engineering
CorporateInternational Technical (Group)
Ben Guenther joined AngloGold as senior vice-president and general manager of Jerritt Canyon mine in Nevada. InNevada, USA and
in 2000 he was
seconded to AngloGold’s Corporate Office in Johannesburg as head of mining. In 2001, he assumed some
responsibilities for
safety and health, as well as heading up the Corporate Technical Group. Bencorporate technical group. He was appointed an executive
officer in May 2004 and was appointed to his current position in December 2005.
Ms HH Hickey — BCompt (Hons), CA (SA)
Head of Risk
Hester Hickey joined AngloGold in 1999 as group internal audit manager and was appointed an executive officer in May 2004.
November 2005.
161
Mr RL Lazare (48) — BA HED (University of Free State), DPLR (UNISA), SMP (Henley Management College)
South Africa region– Underground Mining
Robbie Lazare was appointed an executive officerjoined Anglo American Gold and Uranium Division in December 2004. Prior to this1982 where he worked in a variety of management
posts until 1999 when he was theappointed general manager of TauTona
mine. In December 2004 he was appointed an
executive officer with responsibility for South African operations. He has 23 years experiencetook up his current position in the mining industry.July 2005.
Mr SJ Lenahan (49) — BSoc Sc, MSc
Corporate Affairs
Steve Lenahan has been working in the mining industry since 1978 when he started his career at De Beers. He was
appointed
an executive officer in 1998, responsible for investor relations executive for AngloGold in 1998 and assumed responsibility for corporate affairs in
early 2001.
Mr MP Lynam (43) — BEng (Mech)
Treasury
Mark Lynam joined the Anglo American group in 1983 and has been involved in hedging and treasury since 1990. In 1998,
Markhe joined AngloGold as treasurer and was appointed to the position ofan executive officer in May 2004.
Mr NF NicolauF R L Neethling (45) — B-Tech (Min.Eng)B.Sc., MBAB.Ing (Mech), Pr. Eng
Deputy Chief OperatingExecutive Officer (Africa– Africa: Open Pit Mining
)Fritz Neethling started his career in the mining industry with Iscor in 1976. He joined De Beers in 1980 and the
Neville Nicolau becameAnglo American Gold Division in 1992. He was appointed as general manager of the Ergo operation in 1999 and as an
executive officer in July 2005.
Mr P W Rowe — BSc (Chem. Eng)
Corporate Technical Group
Peter Rowe joined AngloGold Ashanti in June 2004 as head of AngloGold Ashanti Australia. Following 20 years with Anglo
American and De Beers, he moved to Australia in the early 1990s where he held a number of senior managerial positions
including project director of the Fimiston expansion, general manager of the Boddington Gold Mine and managing director
and CEO of Bulong Nickel. He was appointed executive officer – corporate technical group on January 1, 2006.
Mr T M L Setiloane — FAE, BSc (Mech.Eng)
Marketing
Thero Setiloane joined AngloGold in May 2003 from Real Africa Holdings, where he was an executive director. He is the
chairman of Rand Refinery. He was appointed an executive officer and a member of the executive officer responsible for AngloGold’s South Africa region in November 2001 and wascommittee on
appointed a deputy chief operating officer in January 2005. He has 26 years of mining experience.February 24, 2006.
157
Ms YZ Simelane (39) — BA LLB, FILPA, MAP
Managing Secretary
Yedwa Simelane joined AngloGold in November 2000 from the Mineworkers’ Provident Fund where she was the senior
manager of the Fund. YedwaShe was appointed to the position ofan executive officer in May 2004.
Mr NW Unwin (52) — BA
Human Resources and Information Technology
Nigel Unwin has had many years of experience in the field of human resources. He has been an executive officer since
1999.
Mr S Venkatakrishnan (39) — BCom, A.C.A (ICAI)
Deputy Chief Financial Officer
Srinivasan Venkatakrishnan (Venkat)Daniel Owiredu, former deputy chief operating officer – Africa, was the finance director of Ashanti Goldfields Company Limited from 2000 until the
Business Combination with AngloGold in 2004. Prior to joining Ashanti, Venkat worked as a director in the Reorganization
Services division of Deloitte & Touche in London.
Mr GF Wylie (52) — MSc (Mining Engineering), BSc (Hons) (Geology), Dip Mgmt, AusIMM (application pending)
Exploration
Gordon Wylie began his career at Iscor in 1976 before moving to Anglo American Corporation. In 1998 he became manager,
Exploration and Geology for AngloGold’s global operations. Gordon was appointed to the position ofan executive officer in Mayuntil September 1, 2006, when he
2004.resigned from the company.
On May 1, 2005 Dave Diering was appointed executive officer: business planning forDawn Earp, former Executive Officer – Finance, has resigned from the South Africa region while
Charles Carter was appointed executive officer: investor relations on June 1, 2005, replacing Steve Lenahan in this regard.
Steve Lenahan retains the portfolio of executive officer: corporate affairs. Withcompany with effect from JulyMarch 1, 2005, Fritz Neethling was
appointed executive officer: East & West Africa region.2007.
Office of corporate administration
Mr CR BullMs L Eatwell - (58) — BComFCIS
Chris Bull has been employed by the Anglo American Corporation group for 39 yearsLynda Eatwell joined AngloGold Ashanti in various company secretarial positions.
HeAugust 2000 as an Assistant Company Secretary. She was appointed company
secretary of AngloGold Ashanti in 1998 andDecember 2006 following the retirement of Chris Bull. She is responsible for ensuring
compliance with statutory and
corporate governance requirements and the regulations of the stock exchanges on which
AngloGold Ashanti is listed.
162
Competent persons
The schedule below presents the details of those persons who manage AngloGold Ashanti’s ore reservesOre Reserves and mineralMineral
resources:Resources:
Name Age
AgePosition
PositionYear
Year first appointed
appointed
Carl E Brechtel
5456
Manager - underground mining – corporate technicalAustralia Region
2001
Vaughan A. Chamberlain
4244
Manager evaluation- mineral resources and mine geology
1998
Ben W. Guenther
52
Executive officer – corporate technical - group
1999
Michael (Mike) F. O’Brien
4749
Manager – evaluation
1999
Eric Roth
40
Head of exploration - greenfields
2005
Jurgens van Zyl Visser
5052
Manager - survey and planning – South Africa Underground region
2001
David (Dave) L. Worrall
5456
Manager - surface mining
1999
Gordon F. Wylie
52
Executive officer - exploration
1998
The information in this report that relates to exploration results, mineral resourcesMineral Resources or ore reservesOre Reserves is based on
information
compiled by the competent persons listed below. They are either members of the Australian Institute of Mining
and Metallurgy
(AusIMM) or recognized overseas professional organizations. They are all full-time employees of the
company.
The competent person for AngloGold Ashanti Exploration is:
GF Wylie E Roth —— MSc (Mining Engineering) PhD (Economic Geology), BSc (Hons) (Geology), Dip Mgmt, AusIMM (application pending)MAusIMM
GordonEric has 2816 years experience. Forexperience in mineral exploration and project evaluation, and holds a biography, see “Executive officers” above.Bachelor of Science (Honors)
degree in Geology and Ph.D in Economic Geology from the University of Western Australia. Eric joined AngloGold in 2002
as Project Manager – Peru, subsequently holding the positions of Senior Evaluations Geologist – South America (2003 to
November 2005) and Head of Exploration – Greenfields from December 2005.
The following competent persons take responsibility for the reporting of AngloGold Ashanti’s mineral resources, Mineral Resources,
as
defined under JORC 2004:
VA Chamberlain — — MSc (Mining Engineering), BSc (Hons) (Geology), — MAusIMM
Vaughan has 1921 years experience and holds a Bachelor of Science (Honors) degree in Geology from the University of
Natal
and a Masters degree in Mining Engineering from the University of the Witwatersrand. He started his career with
Anglo
American Corporation in 1987 as a geologist at Western Deep Levels East Mine (now TauTona mine). He joined
AngloGold in
1998 as manager evaluation in the mineral resource department,and currently holds the position he currently holds.of manager: mineral resources and mine geology.
158
MF O’Brien —— MSc (Mining Economics), BSc (Hons) (Geology), Dip Data, Pr.Sci.Nat., MAusIMM
Mike has 2527 years experience and holds a Bachelor of Science (Honors) degree in Geology from the University of Natal, a
Masters degree in engineering from the University of Witwatersrand and a Dip Data diplomaDiploma in Datametrics from UNISA. He joined
Anglo
American Corporation in 1981 as a geologist at Vaal Reefs Mine and AngloGold in 1999 as managermanager: evaluation in
the mineral
resource department,Corporate Technical Group, the position he currently holds.
The following competent persons take responsibility for the reporting of AngloGold Ashanti’s ore reservesOre Reserves:
CE Brechtel — — MSc (Mining Engineering), BSc (Geological Engineering), MAusIMM, MSAIMM, MSME
Carl has 2931 years experience and holds a Bachelor of Science degree in Geological Engineering and a Master of Science
degree in Mining Engineering from the University of Utah, USA. After spending 6 years at AngloGold Ashanti’s Jerritt
Canyon
operations, he was appointed Manager of Underground Mining of the Corporate Technical Group (CTG) providing
technical
support and corporate governance to international mining operations outside of the South Africa Region. He is
currently manager mining for AngloGold Ashanti Australia. He is a registered
Professional Mining Engineer in the states of
Colorado and Nevada, USA.
BW Guenther — BSc (Mining Engineering), MAusIMM
Ben has 24 years experience. For a biography, see “Executive officers” above.
DL Worrall — — ACSM, MAusIMM
Dave has 2426 years experience and is an Associate of the Camborne School of Mines in Cornwall, England. He joined
Anglo
American Corporation in 1981 as a senior mine planning engineer in the technical director’s office and AngloGold in
1999 as
manager, surface mining in the corporate office, the position he currently holds.
163
J van Zyl Visser — —MSc (Mining Engineering), BSc (Mineral Resource Management), PLATO
Jurgens has 1820 years experience and holds a Bachelor of Science degree in Mineral Resource Management and a Master
of Science degree in Mining Engineering from the
University of the Witwatersrand. He started his career with Anglo
American Corporation in 1975 as a surveyor at President
Steyn Mine (now Bambanani mine).Mine. He joined AngloGold in 1998 as a divisional valuator
and in 1999 was appointed as
manager survey and planning – South Africa underground region.
The competent persons consent to the inclusion of the exploration and ore reservesOre Reserves information in this report, in the form
and
context in which it appears.
159
6B. Compensation
Remuneration report
Policy
The Remuneration Committee determinessets and monitors executive remuneration for the company. This it doesis achieved through an
adherence to the company’s Executive Remuneration Policy, which ishas as its objectives to:
• attract, reward and retain executives of the highest caliber;
• align the behavior and performance of executives with the company’s strategic goals, in the overall interests of
shareholders;
• ensure the appropriate mix of short, mediumbalance between short-, medium- and long-term rewards and incentives, with the latter being
closely linked to
structured company performance targets and strategic objectives;objectives that are in place; and
• ensure that regional management is competitively rewarded within a global remuneration policy, which recognizes both
both local and global markets.market practice.
This policy and its application isare reviewed at least annually by the Remuneration Committee. See “Item 6C.: Board
practices –
Remuneration Committee”.
Compensation of executive directors
In particular the Remuneration Committee is responsible for:
• the remuneration packages for executive directors of the company including, but not limited to, basic salary, performance-
basedperformance-based short and long-term incentives, pensions, and other benefits; and
• the design and operation of the company’s executive share option and other incentive schemes.
The performances of the executive directors are considered relative to the prevailing business climate and market
conditions as well as annual evaluations to assess the level of achievement of key predetermined objectives. Bonuses paid
to executive directors are a reflection of the performance of each of the directors and the company as a whole. Executive
directors have elected to receive no remuneration as directors of the company.
The fees of non-executive directors are fixed by shareholders at the annual general meeting, and other than the fees they
receive for their participation on board committees and an allowance for traveling internationally to attend board meetings,
non-executive directors receive no further payments from the company.
The following principles are applied in determining executive remuneration:
1. Annual remuneration should beis a combination of base pay and short, mediumshort-, medium- and long-term incentives, with salary
comprising not more thanabout 50 percent of annual remuneration.
2. Salary should beis set at the median for the relevant competitive markets.
3. All incentive plans should align performance targets with shareholder interests.
Bonus Share Plan (BSP) and Long-Term Incentive Plan (LTIP)
Shareholders approved the introduction of two new schemes to replace the old share incentive scheme at the annual
general meeting held on April 29, 2005. The purpose of both schemes is to align the interests of shareholders and the
efforts of executives and managers.
To the extent that structured company performance targets are achieved, the BSP allows for the payment of an annual
bonus, paid in part in cash and part in rights to acquire shares.
The LTIP allows for the granting of rights to acquire shares, based on the achievements of stretched company
performance targets over a three-year period.
These targets are based on the performance of earnings per share (EPS) and relative total shareholder return (TSR),
whereby the company will need to consistently outperform its gold company peers. Additionally, strategic business
objectives will also need to be met.
160
Executive director remuneration currently comprises the following elements:
1.
Basic salary, which is subject to annual review by the Remuneration Committee and is set at the median of salaries
in
similar companies in the relevant markets both in South Africa and globally. The individual salaries of executive
directors
are reviewed annually in light ofaccordance with their own performance, experience, responsibility and company
performance.
2.
Annual bonus, which is determined by the achievement of a set of stretching company and individual performance
targets. The company targets include earnings per share, cost control and global production. The weighting of the
respective contribution of company and individual targets is 70 percent for company and 30 percent for individual.
Failure
to achieve safety improvement targets results in the reduction of bonuses for executive directors.
164directors and executive
officers. Fifty percent of the bonus is paid in cash and 50 percent in awarding of rights to acquire shares. The awards
have a three-year vesting period.
3.LTIP: Executive directors are granted the right to acquire share of value equivalent to their annual salaries, subject to
Share incentive scheme and incentive plans, allows for an annual grantthe achievement of AngloGold Ashanti share options and/or
ordinary sharesstretched company performance targets over a three-year period. These targets are based on the achievement
performance of predetermined performance targets similarEPS and TSR, whereby the company will need to those used for the annualconsistently outperform its gold company peers.
bonus. Options and/or shares granted are subjectAdditionally, strategic business objectives will also need to the achievementbe met. The first tranche of a performance condition or fulfillment ofLTIP awards was made to
suspensive conditions set by the Remuneration Committee and is subject to a maximum equivalent to between
100 percent and 200 percent of annual salary for any executive director, depending on the level of seniority.directors in 2005. See “Item
6E.: Share ownership” for more information on the ShareLong-Term Incentive Scheme.Plan.
4.
Pensions: All executive directors who are South African citizens, are members of the AngloGold Ashanti Pension
Fund, a defined benefit fund which
guarantees a pension on retirement equivalent to 2 percent of final salary per year
of service. All executive directors who are not South African citizens have other retirement benefit plans, to which the
company contributes to such plans, to the level required by local practice. Death and disability cover
reflects best
practice among comparable employers in South Africa.
5.
Other benefits: Executive directors are members of Discovery Health,an external medical aid scheme, which covers the director and
his immediate family.
All executive directors hold
Directors’ service contracts that are reviewed and renewed annually. None of the service contracts have
conditions which, on termination, provide for salary or benefit payments, whether in cash or in kind, in excess of one year.
Following additional research conducted by Deloitte & Touche on behalf of AngloGold Ashanti, the committee recommended
the discontinuation of the current share incentive scheme and the introduction of a bonus share plan (BSP) with effect from
2005. The options which have been granted under the scheme will remain subject to the conditions under which they were
granted. An investigation was also conducted into the introduction of a long-term incentive plan (LTIP). The Remuneration
Committee recommended the introduction of a BSP and LTIP, subject to shareholder approval at the annual general meeting
held on April 29, 2005. The main reason for these proposed changes to executive incentive plans is that the current option
scheme does not provide sufficient linkage between the interests of shareholders and the efforts of executives or managers.
There is also little correlation between the efforts of execu tives and the success of the option scheme.
At the annual general meeting held on April 29, 2005, shareholders approved the introduction of the BSP and LTIP and the
discontinuation of the current share incentive scheme. Options which have been granted under the current share incentive
scheme will remain subject to the conditions under which they were originally granted. Grants under BSP and LTIP will be
made in 2005.
Bonus share plan
The BSP seeks to encourage executives to build and maintain meaningful shareholdings in the company and it is intended that
awards will be made to executive directors, executive officers and other management groups. Participants in the BSP will
receive an annual bonus, part of which is paid in cash and part in shares, subject to the performance targets of the company
being achieved. The share element vests after three years, providing the participant is still in the company’s employment at
that time. This will provide senior employees with a real stake in the company, unlike share options, where vesting is
dependent on factors outside of their control. The vesting period of three years should also act as an incentive for employees
to stay with the company.
Long-term incentive plan
Awards in respect of the LTIP will be made to the most senior executives and managers in the company. The scheme will
reward participants through the granting of shares for the achievement of stretched performance targets over a three-year
period. These targets will be based on the performance of earnings per share (EPS) and relative total shareholder return
(TSR), whereby the company will need to outperform its gold company peers consistently. Additionally, strategic business
objectives as set by the Remuneration Committee, such as the successful integration of Ashanti into AngloGold, will have to be
met.
Executive directors’ service contracts: Service contracts of executive directors are reviewed annually. The contractual
notice period in respect of Mr R MBobby Godsell,
as chief executive officer, is 12 months, and for the other fourthree executive directors,
six nine months. The contracts also deal
with compensation if employmentan executive director is terminateddismissed or in the event ofif there is a material change in
role, responsibilities or
remuneration occurs.following a new shareholder assuming control of the company. Compensation in these circumstances is
pegged at twice the notice period.
165
Compensation of executive management
AngloGold Ashanti’s executive management comprises its executive directors and executive officers. Under the Listings
Requirements of the JSE, AngloGold Ashanti is required to disclose compensation paid to its executive directors on an
individual basis while compensation paid to its executive officers is disclosed in aggregate.
161
The following table presents the compensation paid by AngloGold Ashanti to executive management during 20042006 and 2003.
2005. Executive directors have elected not to receive payment of directors’ fees, committee fees and travel allowances.
All figures in $000
(1)
Salary
Performance
related
payments
(2)(3)
Pension
scheme
contri-
butions
Other
benefits
(3)(4)
Sub-totalLeave
encash-
ment
(5)
Sub-
total
Pre-tax gain
gain on
share
options
exercised
(6)
Total
Executive directors’ compensation - 2004– 2006
R M Godsell
(chief executive officer)
876936
311354
128138
25
1,3409
-
1,3401,437
324
1,762
R Carvalho Silva
762
172
308
7
64
1,314
-
1,314
N F Nicolau
545
172
83
4
21
825
510
1,335
S Venkatakrishnan
561
172
95
-
-
829
-
829
K H Williams (until May 6, 2006)
(2
175
-
26
13
-
214
-
214
Total2,979
870
650
33
85
4,619
834
5,454
Executive officers’ compensation – 2006
Representing 16 executive officers
(2)
4,344
983
474
210
396,050
1,102
7,152
Total executive directors’ and executive
officers’ compensation – 2006
7,323
1,853
1,124
243
124 10,669
1,936
12,606
Executive directors’ compensation – 2005
R M Godsell
(chief executive officer)
925
294
135
4
97
1,455
563
2,018
J G Best (to July 31, 2005)
463285
-
42
26
-
353
273
68626
26R Carvalho Silva (from May 1, 2005)
830478
146
94
19
-
830737
-
737
D L Hodgson (to April 30, 2005)
463
149
68
7
687163
-
68724
1
-
188
124
312
S E Jonah
(effective May 2004) (to July 31,2005)
461
143426
-
49
65355
-
65393
574
-
574
N F Nicolau (from May 1, 2005)
346
146
51
3
2
548
-
548
S Venkatakrishnan (from August 1, 2005)
(5)(6)
252
164
29
-
-
445
-
445
K H Williams
480506
130149
7175
164
697339
1,1151,073
1,81291
1,164
Total 2,7433,381
1,006899
335505
12357
4,207531
1,1155,373
5,3221,051
6,424
Executive officers’ compensation - 2004– 2005
Representing 13 executive
officers
(4)
2,506 863
325
214
3,908 338
4,246
Executive directors’ compensation - 2003
R M Godsell
(chief executive officer)
713 217
91
16
1,037
–
1,037
J G Best
379
98
48
7
532
653
1,188
D L Hodgson
379
98
48
8
533
244
777
K H Williams
394
102
50
14
560
39
599
Total 1,865
515
237
45
2,622
936
3,598
Executive officers’ compensation - 2003
Representing 718 executive officers
1,274 3893,932
123724
117552
1,903 838139
2,741415 5,762
224
5,986
Total executive directors’ and executive
officers’ compensation – 2005
7,313
1,623
1,057
196
946
11,135
1,275
12,410
NB: Rounding may result in computational differences
(1)
Directors’When directors’ compensation is paid principally in South African rands. However,rands, for the purpose of this annual report, the rand values have been converted to US dollars
using the following year-to-dateyearly average rate of exchange: 2004:2006: $1 = R6.4368R6.7706 and 2003:2005: $1 = R7.5516.R6.4368.
(2)
Salaries are disclosed only for the period from or to which, office is held.
(3)
In order to more accurately disclose remuneration received/receivable by executive directors and executive officers, the tables above include the
performance related payments calculated on the year’s financial results. The 2003 comparative figures have been restated accordingly.
(3)
Includes health care, leave encashment, reimbursement of travel expenses and relocation expenses.
(4)
Of the 13 executive officers, 5 were promoted effective May 1, 2004; 2 were employed effective July 1, 2004;Includes health care, personal travel and 1 was promoted effective December 1, 2004 – emoluments have only been disclosed from the various effective dates, except for performance related payments to be made in 2005 pertaining to 2004 results, which reflect total amount.relocation expenses.
(5)
In 2005, AngloGold Ashanti altered its policy regarding the number of leave days that may be accrued. As a result surplus leave days accrued were
compulsorily encashed.
(6)
On exercising the options granted in terms of the AngloGold share incentive scheme, Messrs Godsell and Nicolau applied proceeds from the sale of
the shares to acquire 3,833 and 2,900 AngloGold Ashanti shares, respectively.
162
Compensation of non-executive directors
Non-executive directors receive no compensation from AngloGold Ashanti other than their fees which are determined by
shareholders in general meeting. At the annual general meeting of shareholders held on April 29, 2004, shareholders
approved an increase in directors’ fees with effect from May 1, 2004 as follows:
-
Chairman
-
$130,000
(to April 30, 2004: R200,000) per annum;
-
Deputy chairman
-
R300,000
(to April 30, 2004: R150,000) per annum;
-
South African resident directors
-
R110,000
(to April 30, 2004: R100,000) per annum;
-
Non-resident directors
-
$16,000
(to April 30, 2004: R100,000) per annum.
166
In addition, payment of a travel allowance of $4,000 (to April 30, 2004: $2,000) per meeting is made to non-executive directors
who travel internationally to attend board meetings. The company is also liable for the payment of all travel costs.
No benefits in kind were granted to the non-executive directors during 20042006 and 2003.2005.
There are no contracts of service between the non-executive directors and the company or any of its subsidiaries. All
directors
are subject to retirement by rotation and re-election by shareholders at least once every three years.
The following table presents the compensation paid by AngloGold Ashanti to each non-executive director during 20042006 and
2003.2005.
2004 20032006 2005
All figures in $000
(1)
Directors'
fees
Committee(3)
feesCommittee
Travelfees
allowanceTravel
Totalallowance
Directors'(4)
feesTotal
CommitteeDirectors'
fees
Travel(3)
allowanceCommittee
fees
Travel
allowance
(4)
Total
R P Edey
(chairman) 94
23130
1224
12816
26170
17131
631
4916
178
Dr T J Motlatsi
(deputy (deputy chairman)
39 44
19
-
5863
2047
15 225
37-
72
F B Arisman
1516
1921
16
53
16
27
12
55
R E Bannerman
14
4
8
43
13
10
6
29
Mrs E le R Bradley
17
21
-
38
13
15
2
30
C B Brayshaw
(2)
17
18
-
34
13
9
2
24
Dr V K-K Fung
(3)26
-
-
-
-
4E le R Bradley
216
22
-
638
17
30
-
47
C B Brayshaw
(5)
16
18
-
34
17
24
-
41
S E Jonah (president)
(6)
(from August 1, 2005)
23
18
-
41
7
7
-
14
A W Lea (to July 31, 2005)
-
-
-
-
9
4
8
21
R Médori (from August 1, 2005)
16
6-
2-
2316
137
3
-
10
J H Mensah (from August 4, 2006)
7
-
4
11
-
17-
-
-
W A Nairn
1716
19
-
3635
1317
1520
-
2837
N F Oppenheimer
(4)
5
2
-W L Nkuhlu
7
13
4
-
17
J Ogilvie Thompson
(4)
5
211
-
7
13
4 -
17-
-
S R Thompson
(5)16
10
5
4
2012
-
-28
-16
-13
16
45
A J Trahar
1716
6
-
22
1317
413
-
1730
P L Zim (from April 30, 2004)
(5)12
11
59
-
1621
17
13
-
-30
-Total – non-executive directors
-349
Total 263176
14544
26569
432318
154210
9952
18580
271
Alternates
D D Barber
-
-
-
-
-
-
2
2
A H Calver
-
-
-
-
-
-
-
-
P G Whitcutt
(7)
-
5
-
5
-
-
-
-
2Total alternate directors
-
2-
Total-
-
-
2 2-
4-
-
Grand total
263349
145181
2644
432574
154318
101210
2052
275580
NB: Rounding may result in computational differences
(1)
Non-executive directors’Where directors' compensation is paid principally in South African rands. Forrands, for the purpose of this annual report, the rand values have been converted to US dollars
using the following year-to-date average rate of exchange: 2004:2006: S1 = R6.7706 and 2005: $1 = R6.4368 and 2003 $1 = R7.5516.R6.4368.
(2)
Salaries are disclosed only for the period from or to which, office is held.
(3)
At the annual general meeting of shareholders held on April 29, 2004, shareholders approved an increase in directors fees with effect from
May 1 2004. Shareholders approved an increase to directors fees at the annual general meeting of shareholders held on May 4, 2007.
Fees payable in 2005 and 2006
Approved fees for 2007
Chairman
$130,000 per annum
$150,000 per annum
Deputy chairman and president
R300,000 per annum
R360,000 per annum*
South African resident members
R110,000 per annum
R135,000 per annum
Non-resident members
$16,000 per annum
$25,000 per annum
*this figure applies to the position of deputy chairman only as the position of president is no longer filled.
(4)
A payment of a travel allowance of $4,000 per meeting is made to non-executive directors who travel internationally to attend board meetings. In
addition, AngloGold Ashanti is liable for the payment of all travel costs.
(5)
In addition, Mr Brayshaw was paid a fee of $2,330 (R15,000) (2003: $1,986 – R15,000)$2,659 (R18,000) (2005: $2,827 - R18,000) by AGRe Insurance Company Limited, a wholly-owned
subsidiary, as chairman of its audit committee.
(3)(6)
Dr Jonah resigned as an executive director with effect 31 July 2005, but remained a non-executive director. Dr Jonah resigned from the board with
Resigned as a director with effect from April 30, 2003.12 February 2007.
(4)(7)
Resigned as a director with effect from April 29, 2004.
(5)Member of the investment committee.
Appointed as a director with effect from April 30, 2004.163
6C. Board practices
practices
The board of directors
AngloGold Ashanti is a controlled company with its parent company, Anglo American plc, holding more than 50 percent of the
company’s issued share capital and is therefore not subject to the director independence requirements of the New York Stock
Exchange (NYSE). The board comprises a unitary board structure of 15currently 16 directors who assume complete responsibility
for the
activities of the company, including the total risk management framework of the company. The board has a written
charter that
governs its powers, functions and responsibilities. The board contains the mix of skills, experience and
knowledge required of a
multinational gold company.
167
Directors’ retirement follows a staggered process with one-third of the directors retiring every three years at the annual
general
meeting (AGM). AThe curriculum vitae of those directors standing for re-election is placed before shareholders at
the AGM to help
inform the process of re-election. The board is empoweredauthorized by the company’s articles of association to
appoint new directors,
provided such appointees retire at the next AGM and stand for election by shareholders. A Nominations Committee has been
establishedAppointments to the Board are dealt with by the Board as a sub-committee of the board to help identify suitable candidates for appointment to the board.
At the annual general meeting held on April 29, 2004 Mr Ogilvie Thompsonwhole and Mr Oppenheimer both retired and were
replaced by Mr Zim and Mr Thompson. The board also appointed Dr Jonah KBE as an additional member of the board and
president of AngloGold Ashanti effective as from May 1, 2004. All new members were reviewednominations are submitted by the Nominations
Committee
prior to their appointment as directors. for consideration.
The executive directors are appointed by the board to oversee the day-to-day running of the company through effective
supervision of management. Executive directors are held accountable by regular reporting to the board, and their
performance
is measured against pre-determined criteria as well as the performance of their respective business units.
Only executive directors have contracts of employment with the company. There are no contracts of service between the
directors and the company or any of its subsidiaries that are terminable at periods of notice exceeding one year and
requiring
the payment of compensation. See “Item 6B.;: Compensation – Executive Directors’ Service Contracts”.
Non-executive
directors do not hold service contracts with the company.
Non-executive directors provide the board with invaluable and balanced advice and experience that is independent of
management and the executive. The presence of five independent directors on the board, and the critical role they play
through representation on key committees such as the Audit and Corporate Governance, Nominations, Political Donations
and
Remuneration committees, together with their caliber, experience and standing within the company,community, ensures that the
company’s interests are served by impartial views that are separate of management and shareholders.
In April 2006, Anglo American plc sold approximately 9 percent of its shareholding in AngloGold Ashanti, thereby reducing
its shareholding to below 50 percent. As a result AngloGold Ashanti is no longer regarded as a controlled company in
terms of the NYSE rules applicable to AngloGold Ashanti. AngloGold Ashanti, however, remains exempt from the
requirement that it should have a majority of its board as independent directors, since as a foreign private issuer listed on
the NYSE it is permitted to follow home rules in lieu of the provisions in the Corporate Governance Standards contained in
the NYSE Listings Manual. The JSE, on which exchange the company has its primary listing, does not require a majority
independent board. Nevertheless, there are a majority of independent directors on the board of AngloGold Ashanti. In
addition, although the NYSE rules require the nominations and remuneration committe es to comprise only independent
directors, foreign private issuers are permitted to follow home country rules in this regard. AngloGold Ashanti complies with
the relevant JSE Listing Requirements, that require the nominations and remuneration committees to comprise non-
executive directors, the majority of whom should be independent.
In terms of board policy, a director will qualify as being independent provided AngloGold Ashanti has not, over the
preceding
year, done business in excess of $10 million or 5 percent of the company’s treasury business with the employer
of that director.
Furthermore, in compliance with JSE Listings Requirements, an independent director must not be a
representative of a
shareholder who has the ability to control or materially influence management and/or the board; not
have been employed by
the company or be the spouse of a person employed by the company in an executive role in the
past three years; not have been an
advisor to the company other than in the capacity as a director of the company; not be
a material supplier, customer or have a
material contractual relationship with the company; and be free of any relationship
that could be seen to materially interfere
with their independence. The inde pendent directors on the independenceboard of that person. All five independent directorsAngloGold
Ashanti during 2006 complied with these requirements in 2004 and the board
determined that such directors have no material
relationship with AngloGold Ashanti.
The board, its sub-committeescommittees and the directors, all completed an evaluation process to review their effectiveness. The
chairman of each committee and the chairman of the board led the process of evaluation of the committees and the board. Theboard
respectively. Both the managing secretary and the company secretary played a critical role in this process.
164
The evaluation of each non-executive director’s performance was led
by the board chairman, while the assessment of the
board chairman’s performance was led by the deputy chairman of the
board. The evaluation of the performance of
executive directors is performed by the Remuneration Committee. For full details,
see Remuneration Committee“Remuneration Committee” below.
A managing secretary and company secretary have been appointed to assist the board in its deliberations, informing
members
of their legal duties and ensuring, together with the executive directors and senior management that its
resolutions are carried
out. Together with the investor relations department, the company secretarial function also provides
a direct communications
link with investors and liaises with the company’s share registrars on all issues affecting
shareholders. The company
secretarial function, in consultation with other departments, furthermore, provides mandatory
information required by various
regulatory bodies and stock exchanges on which the company is listed. The managing
secretary and company secretary are
responsible for compliance with all the statutory requirements in regard to the
administration of the Share Incentive Scheme.
The managing secretary and company secretar y ensure that minutes of all shareholders’,
meetings of the shareholders, board and board committees’
meetingscommittees are properly recorded in accordance with the South African
Companies Act of 1973. The company secretarial
function and compliance functions also playsplay a crucial role in the induction of new
directors.
The compliance function has been established to assist the board and the management to determine their statutory duties,
ensure legal compliance and advise on issues of corporate governance.
All members of the board have access to management and the records of the company, as well as to external professional
advisors should the need arise.
168
The board meets at least on a quarterly basis to discuss and review issues of strategy, planning, operational and financial
performance, acquisitions and disposals, major capital expenditure, stakeholder communications and other material issues
reserved for its decision. Further meetings are held as and when required. SixEight board meetings took place during the
course of
2004. 2006. All directors or their designated alternates attended four of the board meetings.meetings during their tenure except for
Mr Médori who was unable to attend five meetings, Mr Thompson and Dr Jonah who were unable to attend four,
Messrs Arisman and Bannerman and Dr Motlatsi who were unable to attend three and Messrs Brayshaw, Edey, Nairn,
Trahar and Prof Nkuhlu who were unable to attend two. The non-executive directors met in January 2005during the year in the absence of
executive directors and management.management and under the stewardship of the independent chairman of the board.
AngloGold Ashanti does not permit directors and key employees (that is, employees having access to price sensitive
information) to trade in company shares during closed periods. Directors and key employees are required to follow a formal
process before trading in the company’s shares. Closed periods are in effect priorfrom the end of the reporting period to and
including the date of publication of the quarterly, half-yearly
and year-end results. Where appropriate, a closed period is
also effective during periods where major transactions are being
negotiated and a public announcement is imminent.
The articles of association of AngloGold Ashanti provide for the following:
• AngloGold Ashanti may in a general meeting elect any person to be a director to fill a casual vacancy;
• The directors have the power to appoint any person as a director, either to fill a casual vacancy or as an addition to the
board. The articles of association contain no provision for a maximum number of directors;
• The articles of association contain no provision for directors to hold qualification shares;
• The directors are entitled to remuneration as determined by AngloGold Ashanti shareholders, by ordinary resolution in
a general meeting;
and
• The directors may, from time to time, borrow or raise sums of money for the purposes of AngloGold Ashanti.
Board sub-committeesCommittees
To facilitate the activities and deliberations of the board, the board has established a number of sub-committees,committees, comprising
members of the board, with written terms of reference governing the powers, functions and activities of each sub-committee.committee. A
description of each sub-committeecommittee is provided below.
Members of the board committees have access to management and the records of the company, as well as to external
professional advisors should the need arise.
165
The Audit and Corporate Governance Committee
The Audit and Corporate Governance Committee, inclusive of its chairman, comprises fourfive independent non-executive
directors as recommended by the JSE Listings Requirements and the Sarbanes-Oxley Act.
As required by the The Sarbanes-Oxley Act
requires the board hasto identify a financial expert from its ranks. The board resolved that Mr Brayshaw, is achairman of the
committee, and Prof Nkuhlu, the deputy chairman of the committee, were the board’s financial experts. Following
Mr Brayshaw’s retirement from the board on May 4, 2007, Prof Nkuhlu has become the chairman of the committee and is
the sole financial expert.
All members of the
committee have considerable financial knowledge and experience to help oversee and guide the board
and the company in
respect of the audit and corporate governance disciplines. The board considers it unnecessary for
In relation to independent directors’ membership of the committee, AngloGold Ashanti deviates from the guidelines of the
King Code but complies with the requirements of the Sarbanes-Oxley Act as the chief executive officer tois not a member of
attend meetings of the committee but, should ratherif required, may attend by invitation from the chairman of the committee. In addition, AngloGold Ashanti
deviates from the guidelines of the King Code in that the board chairman is a member of the committee. The board has,
further, consideredconsiders that the board chairman possesses invaluable experience and knowledge warranting his membership of the
committee.
The committee and the Executive Committee consider it unnecessary for the group internal audit manager to report
administratively to the chief executive officer, and that she should rather report administratively to the finance director and
functionally to the committee. The group internal audit manager has unrestricted access to the chief executive officer and chief financial officer, the board
chairman and the chairman of the committee, and is invited to attend and report on herhis department’s activities at all
committee
meetings. The board is confident that the unfettered access of the group internal audit manager to key board
members, and
the direct and regular reporting to the committee, together with herhis caliber, experience and integrity, enables her
him to discharge
her his duties as required by law and in fulfillment of herhis obligations to the company. The function, duties and
powers of the
internal audit function, for which the group int ernalinternal audit manager is responsible, are governed by a formal
internal audit
charter that has been approved by the committee. In addition, the group internal audit manager meets with
committee members in the absence of management.
The committee meets regularly with the external audit partner, the group’s internal audit manager and the executive officer:group senior
corporate accounting,financial manager, to review the audit plans of the internal and external auditors, to ascertain the extent to which the scope
of the audit can be relied upon to detect weaknesses in internal controlsaudits and to
review the quarterly and half-yearly financial
results, significant legal matters affecting the company, the preliminary announcement of
the annual results and the annual
financial statements, as well as all statutory submissions of a financial nature, prior to
approval by the board.
169
The committee is furthermore, responsible for:
•·
the appointment and dismissal of the external auditors; determining and approving external auditors’ fees; overseeing
the
work of the external auditors; determining all non-audit work of the external auditors, including consulting work, and pre-pre-approving non-audit
approving non-audit fees to be paid to the external auditors; and ensuring that the external auditors report regularly to the
committee;
•
· overseeing the internal audit function; receiving regular report back from the group internal audit manager;
appointment
and dismissal of the group internal audit manager;
•·
assessing and reviewing the company’s risk management framework; and
•·
monitoring the group’s corporate governance practices in relation to regulatory requirements and guidelines.
The external auditors also meet with the committee members in the absence of management, and the chief executive officer
and chief financial officer.
Members of the committee are:
•·
Colin Brayshaw (chairman);
•·
Frank Arisman;Prof Wiseman Nkuhlu (deputy chairman);
•· FrankArisman;
Elisabeth Bradley; · ElisabethBradley;and
•· RussellEdey.
Russell Edey.166
The committee which met on seveneight occasions during 2004 was2006. All members of the committee attended by all memberseach of the committee
meetings, except Mrs Bradley andfor Mr Edey who
were each unable to could not attend one meetingmeeting. In addition, three meetings of the committee.Audit and Corporate
Governance sub-committee were held.
The NYSE rules require that the board determine whether a member of the committee’s simultaneous service on more
than
three public companies’ audit committees impairs the ability of such a member to effectively serve on a listed
company’s audit
committee. Mr Brayshaw, the chairman of the committee, is a member of nine (2005: eight) other public
companies’ audit committees and is
chairman of seven of them.five (2005: four). Mrs Bradley is a member of fourthree (2005: three) other
public companies’ audit committees and is the chairman of
one of them.(2005: one). Mr Brayshaw is a retired managing partner
and chairman of Deloitte & Touche, while Mrs Bradley, who is semi-
retired,semi-retired, has considerable financial and accounting
experience. The board is confident that the experience, caliber and integrity
of both Mr Brayshaw and Mrs Bradley,
together with their regular attendance and active contribution at meetings of the
committee, demonstrate their commitment
to the company’s affairs and particularly to the deliberations of the committee. The simultaneous service on other audit
committees by Mr Brayshaw and Mrs Bradley has not impaired their ability to diligently execute their responsibilities to the
committee, the board or the company.
Employment Equity and Development Committee
The committee is responsible for overseeing the company’s performance in respect of employment equity by taking into
account the legal requirements of applicable legislation and monitoring targets set by the company. The committee is also
responsible for skills development of employees in a manner that seeks to retain and develop talent, and to provide
employees with the opportunity to enhance their skills and knowledge.
Members of the committee are:
· Dr James Motlatsi (chairman);
· Frank Arisman;
· Roberto Carvalho Silva;
· Bobby Godsell;
· Bill Nairn; and
· Neville Nicolau.
Lazarus Zim resigned from the committee on his resignation from the board on August 4, 2006.
The committee met on four occasions during 2006. All members of the committee attended each meeting except for
Mr Zim who was unable to attend two meetings and Dr Motlatsi and Messrs Nicolau, Nairn and Carvalho Silva who were
unable to attend one meeting each.
The Executive Committee
The committee is responsible for overseeing the day-to-day management of the company’s affairs and for executing the
decisions of the board. SeeFor details of the composition of the committee see “Item 6A.: Directors and senior management –
Executive committee”.
The OperationsManagement Committee,
responsible for overseeing the operational performance of the company, is a subcommittee
of the Executive Committee – see
Other committees below.committees.
The Investment Committee
The committee is responsible for overseeing and reviewing strategic investments of the company. Mr Thompson and Dr Jonah
were appointed as additional members of the committee with effect from August 1 and July 26, 2004, respectively.
Members of the committee are:
•
· Russell Edey (chairman);
•
Jonathan Best;
•
· Elisabeth Bradley;
•· RobertoCarvalhoSilva;
· Dr Sam Jonah;
•
Tony Lea;
•
· Bill Nairn;
•· Neville Nicolau;
· Simon Thompson;
· Srinivasan Venkatakrishnan; and
•· Peter Whitcutt.
167
Kelvin Williams.Williams resigned from the committee on retirement from the board on May 6, 2006. Roberto Carvalho Silva and
Neville Nicolau were appointed to the committee on July 27, 2006.
The committee met on two occasions during 2004.2006. All members or their designated alternates, attended each meetingmeetings of the
committee except Mr BestThompson
who was unable to attend two meetings and Dr Jonah and Mr WilliamsNairn who were unable to attend one meeting each.
170
The Market Development Committee
The committee has been established to extend the influence of AngloGold Ashanti as a major global gold company, in the
development of a broader gold business, both nationally and internationally.
Members of the committee are:
•
· Elisabeth Bradley (chairman);
•
· Frank Arisman;
•· Roberto Carvalho Silva;
· Bobby Godsell;
•
· Dr Sam Jonah; and
•
· Dr James Motlatsi;
•Motlatsi.
Kelvin Williams; and
•
Lazarus Zim.
Dr Jonah and Mr Zim were both appointed as additional members toWilliams resigned from the committee with effecton retirement from the board on May 6, 2006 and Lazarus Zim resigned from
the committee on his resignation from the board on August 1, 2004. 4, 2006.
The
committee met on fourtwo occasions during 2004.2006. All members attended the meetings of the committee except for Dr Jonah
who was unable to attend two meetings and Dr Motlatsi and Mr Zim who
was were unable to attend one meeting of the committee.each.
The Nominations Committee
The appointment of directors is a matter for the board as a whole but the committee is responsible for determining and
recommending suitable candidates to the board. The fit and proper standards policy for directors guides this process. The
committee is also responsible for establishing and reviewing succession plans for members of the board, and particularly
that
of the chief executive officer and board chairman.
Members of the committee are:
•
· Russell Edey (chairman);
•
· Frank Arisman;
•· Reginald Bannerman;
· Elisabeth Bradley;
•
· Colin Brayshaw;
•
· James Motlatsi; and
•
· Tony Trahar.
Reginald Bannerman was appointed on the committee on May 5, 2006.
The committee met on two occasionsone occasion during 2004. Mr Trahar and Mr Brayshaw were each2006. All members attended meetings of the committee except for Dr Motlatsi
who was unable to attend one meeting of the
committee. meeting.
The Political Donations Committee
The membership of the Political Donations Committee comprises three independent non-executive directors, and is
chaired by the deputy
chairman of the board. The committee determines the company’s contribution to the funding of political parties in South Africa in
in accordance with a formal policy adopted by the board on April 29, 2003, that sets the guiding principles for funding.
Members of the committee are:
•
· Dr James Motlatsi (chairman);
•
· Elisabeth Bradley; and
•
· Colin Brayshaw.
The group’s strategy on political funding is under review, and consequently, the committee did not meet in 2005 or in 2006.
The committee did not meet in 2004, as a decision on funding for both 2003 and 2004 was made in December 2003.
168
The Remuneration Committee
The Remuneration Committee is responsible for evaluating the performance of the executive directors and executive
officers,
and setting appropriate remuneration for such officers of the company.
The performances See “Item 6B.: Compensation” for full
details of the executivecompany’s remuneration philosophy, the committee’s deliberations during 2006, the remuneration payments
for all directors are considered relative toand information on the prevailing business climate, market conditions as
well as annual evaluations to assess the level of achievement of key predetermined objectives. Bonuses paid to executive
directors are a reflectionshare incentive scheme.
For 2006, members of the performance of each of the directors and the company as a whole. Executive directors have
elected to receive no remuneration as directors of the company. The fees of non-executive directors are fixed by shareholders
at the annual general meeting, and other than the fees they receive for their participation on board committees and an
allowance for traveling internationally to attend board meetings, non-executive directors receive no further payments from the
company.
171
At the commencement of 2004,committee comprised the following non-executive directors were members of the committee:directors:
•·
Russell Edey (chairman);
•· ReginaldBannerman;
Colin Brayshaw;
•
Nicky Oppenheimer;
•
Julian Ogilvie Thompson; · ColinBrayshaw;and
•
Tony Trahar.
Messrs Oppenheimer and Ogilvie Thompson retired from· TonyTrahar.
Reginald Bannerman was appointed on the boardcommittee on May 5, 2006.
The committee met on three occasions in 2006. All members of AngloGold Ashanti on April 29, 2004 and from all board
committees.
Fivethe committee attended meetings of the Remuneration Committeecommittee, except
Messrs Brayshaw and Trahar who were held in 2004, all of which were attended by Messrs Edey, Brayshaw and
Trahar. Mr Oppenheimer attended 2 of the 3 meetings held priorunable to his retirement from the committee, while Mr Ogilvie
Thompson attended all three meetings held prior to his retirement from the committee.attend one meeting each.
All meetings of the committee are attended by the chief executive officer and executive officer: human resources, except
when
their own remuneration or benefits are being discussed. The services of Deloitte & Touche are retained to act as independent,
expert advisors on executive remuneration.
The Safety, Health and Sustainable Development Committee
This committee is tasked with overseeing the company’s performance in respect of safety, health and sustainable
development, and for establishing targets in relation to each of these areas. Mr Thompson and Dr Jonah were appointed as
additional members of the committee with effect from August 1, 2004.
Members of the committee are:
•
Bill Nairn (chairman)· BillNairn(chairman);
•· BobbyGodsell;
Bobby Godsell;· DrSamJonah;
•
Sam Jonah;
•
· Dr James Motlatsi;
· NevilleNicolau;and
•
Simon Thompson.· SimonThompson.
The committee met on four occasions during 2004.2006. All members of the committee attended the meetings each committee meeting
except for Mrexcept for Messrs Godsell, Nicolau and Thompson who were unable to attend one meeting each and Dr Jonah
and Dr Motlatsi who was unable to attend one meeting of the committee while Dr Motlatsi was unable to attend two and three meetings of the committee.
Employment Equity and Development Committee
The committee is responsible for overseeing the company’s performance in respect of employment equity by taking into
account the legal requirements of applicable legislation and monitoring targets set by the company. The committee is also
responsible for skills development of employees in a manner that seeks to retain and develop talent, and to provide employees
with the opportunity to enhance their skills and knowledge. Mr Zim was appointed as an additional member of the committee
with effect from August 1, 2004.
Members of the committee are:
•
James Motlatsi (chairman);
•
Frank Arisman;
•
Bobby Godsell;
•
Dave Hodgson;
•
Bill Nairn; and
•
Lazarus Zim.
The committee met on four occasions during 2004. The meetings were attended by all members of the committee except
Mr Godsell, Mr Nairn and Mr Zim who were each unable to attend one meeting of the committee.respectively.
Other committees
In addition to the committees of the board mentioned above, the Executive Committee has established a number of
standing
committees to oversee the day-to-day management of the company’s affairs.
172
Operations sub-committeeManagement committee
The objective of this sub-committee is to overseemonitor and monitorreview the operational performance of AngloGold Ashanti’s operational activities,
implement the strategic objectivescompany. The committee
meets on a monthly basis, is chaired by the chief executive officer and comprises all executive officers of the company and to report to the Executive Committee on important areas of concern.
Members of the sub-committee are appointed by the Executive Committee and include the executive officers responsible for
the various regional operations, together with the Executive Officers as detailed above and any senior managers of the
company as determined by the executive committee. The sub-committee meets under the chairmanship of the chief operating
officer on a regular basis.heads.
Finance committee
This committee, which meets on a regular basis, is chaired by the chief financial officer and comprises a number of
executive
officers and senior management in the financial and legal fields. It is tasked with monitoring all financial, legal
and
administrative aspects of the company’s affairs. The company secretary attends meetings of the committee.
Treasury committee
The committee is chaired by an independent director, Mr Brayshaw, and comprises executive officers and senior
management
in the financial and marketing disciplines. It is responsible for reviewing and evaluating market conditions,
treasury operations
and future hedging strategies.
169
Risk management and internal controls
The board, which has ultimate responsibility for the total risk management process within the group. The boardgroup, reviews and approves
the risk strategy and policies that are formulated by the executive directors and senior management. Management is
accountable to the board and has established a group-wide system of internal control to manage significant group risk.
This
system assists the board in discharging its responsibility for ensuring that the wide range of risks associated with the
group’s
global operations are effectively managed in support of the creation and preservation of shareholder wealth.managed. The risk
management policies are communicated to all relevant
employees.
A full review of the risk, control and disclosure processes is undertaken annually to ensure that all additional requirements
are
incorporated into the system in the future. The systems are in place and the focus is on ensuring that the requirements
of the
King Code and the Sarbanes-Oxley Act are complied with timeously. In conducting its annual review of the
effectiveness of risk
management, the board considers the key findings from the ongoing monitoring and reporting
process, management
assertions and independent assurance reports. The board also takes account of material changes
and trends in the risk profile,
and considers whether the control system, including reporting, adequately supports the board
in achieving its risk management
objectives. The board furthermore, receives assurance from the Audit and Corporate
Governance Committee, which derives its
information, in part, from regular internal an dand external audit reports on risk and
internal control throughout the group.
The company has a sound system of internal control, based on the group’s policies and guidelines, in all material
subsidiaries
and joint ventures under its control. In respect of those entities in which AngloGold Ashanti does not have a
controlling interest,
the directors who represent AngloGold Ashanti on the boards of these entities seek assurance that
significant risks are being
managed.
The board is satisfied that there is an ongoing process for identifying, evaluating and managing the significant risks and
and internal controls faced by the group and if any weaknesses are identified, these are promptly addressed.
The company’s chief executive and chief financial officers are both required, in terms of the Sarbanes-Oxley Act, to certify
on
Form 20-F that its financial statements present a true and fair view, in all material respects, of the company’s financial
position,
cash flows and operational results, in accordance with relevant accounting standards. The certificates further
provide that both
officers are responsible for establishing and maintaining disclosure and internal controls and procedures
for financial reporting.
The certification process is pre-approved by the board of directors prior to filing of the Form 20-F
with the SEC.
The following policies pertaining to directors and senior management are available on the company’scompany website:
www.AngloGoldAshanti.com under About -> Corporate Governance -> Guidelines:
•· Boardcharter;
Board charter;
•·
Policy on political donations;
•·
Directors’ induction policy;
•·
Fit and proper standards for directors and company secretaries policy;
•·
Professional advice for directors policy;
•·
Insider tradingMarket abuse (Insider trading) policy;
•·
Code of ethics;
•·
Code of ethics for the chief executive officer, principal financial officer and senior financial officers;
•·
Confidential reporting policy; and
•
Disclosures policy.· Disclosurespolicy.
173170
6D. Employees
AngloGold Ashanti is a significant employer in the global mining industry and and:
·
is committed to upholding the Fundamental
Rights Conventions of the International Labor Organization. Accordingly,
the company seeks to ensure the implementation of
fair employment practices group-wide.group-wide by prohibiting forced,
compulsory or child labor;
Following·
is committed to creating workplaces free of harassment and unfair discrimination;
· as an international company, faces different challenges in different countries with regard to, for example, offering
opportunities to citizens who may not have enjoyed equal opportunities in the Business Combination between AngloGoldpast. In such cases, the company is
committed to addressing the challenge in a manner appropriate to the local circumstances;
·
will seek to understand the different cultural dynamics in host communities and Ashantiadapt work practices to accommodate
this where doing so is possible and compatible with the company’s principles;
·
will promote the development of a work force that reflects the international and local diversity of the organization;
·
will provide all employees with the opportunity to participate in training that will improve their workplace competency;
·
is committed to ensuring that every employee has the opportunity to become numerate and functionally literate in the
language of the workplace;
· is committed to developing motivated, competent and experienced teams of employees through appropriate
recruitment, retention and development initiatives. An emphasis is placed on April 26, 2004, 65,400 people worked at AngloGoldthe identification of potential talent,
Ashanti (calculated onmentoring and personal development planning;
·
will reward both individual and team effort in a monthly average basis post the Business Combination) in 2004. This figure comprises 50,737
meaningful way;
· will, guided by local circumstances, continue to work together with stakeholders to ensure minimum standards for
company-provided accommodation;
·
assures access to affordable health care for employees and 14,663 contractors. As at December 31, 2003, this number was 55,439. where possible, their families; and
· is committed to prompt and supportive action in response to any major health threat in the regions in which the
company operates.
The average number of attributable
employees in the AngloGold Ashanti group over the last 3 financial years was:
2002 2003 2006 2005
2004
South Africa
47,602 48,078 45,20035,968 40,754
43,282
Argentina
413 690 906 946
791
Australia
599 540 455479 393
371
Brazil
2,243 2,666 2,6864,4283,371
2,598
Ghana
- -9,443 10,180
8,8558,712
Guinea
- -2,708 1,978
2,335
Mali
1,071 1,297 1,4731,309
1,413
Namibia
344 387 313 315
251
Tanzania
861 1,040 3,2202,280
2,258
USA
909 741 411369 357
387
Zimbabwe
- -745
745Other*
2,146 2,110
2,257
Total
54,042 55,439 65,40061,45363,993
South African65,400
*including corporate and other non-gold producing subsidiaries
The change in employees numbers from 2005 to 2006 was largely a result of the go-ahead for Boddington project in
Australia and change in shaft arrangements at Sunrise Dam, the expansion at Cuiabá in Brazil; the sale of Bibiani in
Ghana, retrenchments at Obuasi and natural attrition; and the full impact of transition to owner-mining in Tanzania.
The change in employee numbers includes corporate officefrom 2004 to 2005 was largely as a result of restructuring at the South African
operations, in particular, the closure of Ergo and health services employees.the beginning of the closure process at Savuka; the transition to owner
maintenance crews resulting in duplication of crews for some months in Argentina, while the Cuiabá Expansion project
resulted in an increase in Brazil; the transition to owner-mining at Geita in Tanzania; and the downscaling of operations at
Iduapriem and Bibiani in Ghana.
For details of employees, including outside contractors, by geographical region, see “Item 4B.: Business overview – Products,operations and geographic locations”.171
Employees and other stakeholder engagement
The company has in place a variety of strategies and structures that are designed to promote constructive engagement
with
employees and other stakeholders. These strategies and structures are further developed and adapted from time to
time to
meet variations in legislation, operational requirements and to accommodate changing circumstances.
Management and
employee representatives meet in formal and informal forums at company and operational levels to
share information and to
address matters of mutual interest.
Unions and collective bargaining
It is the aim of AngloGold Ashanti to have constructive relations with representative and recognized unions and
associations
and industry forums representing employees. Management/Union relationships are governed by negotiated
agreements in
respect of most of the group’s workforce, with 83.585.6 percent (2005: 89.4 percent) of the global workforce
represented by recognized trade unions or
catered for through collective bargaining processes.
South African operations
The South African gold mining industry continues to remain labor intensive, with 92.797.8 percent (2005: 95 percent) of all
employees either
represented by unions or catered for by the collective agency shop agreement – an agency shop
agreement exists across the lower level
bargaining unit within the company. The Labor Relations Act entrenches the rights
of employees to belong to trade unions and
the rights of trade unions to have access to the workplace. It also guarantees
the right to strike and the right to participate in
secondary strikes in certain prescribed circumstances. The right to picket
has also been recognized. ThisThe Labor Relations Act recognizes the
right of employees to participate in the decision-making
of companies by providing for the compulsory establishment of
workplace forums to represent the interests of employees
where a company employs more than 100 employees. The range of
issues issu es on which the workplace forum must be
consulted includes restructuring of the workplace, partial or total plant closures,
mergers and transfers of ownership,
insofar as these affect employees, and terminations. The effect of the promulgation of
amendments to specific labor laws
in 2002 is predominantly visible in the requirement for a more consultative retrenchment
process as well as the broadening
of the definition of an “employee” under the legislation. In addition to compliance with a
spectrum of labor legislation,
further compliance is necessary with the newly released Mining Charter.
174
The implementation of the Labor Relations Act’s provisions havehas not had, and management believes will continue not to
have,
a material adverse effect on AngloGold Ashanti’s cost of labor and consequently on its results and financial
condition, although
there can be no assurance of this. See “Item 3D.: Risk factors – Labor disruptions could have an
adverse effect on operating
results and financial condition”. With the highly regulated South African market, the costs of
employment are substantial and
labor costs at AngloGold Ashanti’s South African operations constituted approximately half
50 percent of South African production costs in
2004. 2006 (2005: approximately 51 percent).
The four unions that are recognized are the National Union of Mineworkers (NUM), the United Associations of South Africa
(UASA), Mineworkers Solidarity and the South African Equity Workers’ Association (SAEWA), representing respectively
72.275 percent, 9.2 percent, 3 percent and 0.6 percent (2005: 85.4 percent, 11 percent, 2.6 percent and 0.8 percent1 percent) of
employees in the region.
Two significant agreements were entered into with the National Union of Mineworkers during the year:
on January 30, 2004, a Procedural Agreement relating to the Vaal River operations was concluded. TheA two-year agreement,
which will serve as a guide for the interaction between management and the union, was concluded after a process of
negotiation, and replaces the Vaal River Record of Understanding (the previous Recognition Agreement) which was
concluded on July 3, 1998. A recognition agreement is the highest form of agreement between the union and
management at an operational level;
also on January 30, 2004, agreement was reached on the Constitution of the Board of Governors of the Vaal River
Operations’ Residences, which allows residents to participate in the decision-making at the residences.
The 2003/2004 wage agreements, concluded in 2003 for a two-year period, remained in place during the year. These resulted
in:
the second year’s increase of 7 percent in terms of the 2003/2004 Wage Agreement for Category 3 to 8 employees with
NUM being effective on July 1, 2004. Annual leave also increased from 29 to 30 days, and the company’s contributions to
the Mineworkers’ Provident Fund increased from 13.5 percent to 13.9 percent;
the second year’s increase of 7 percent agreed with NUM, UASA and Solidarity as part of the 2003/2004 Wage
Agreement for Miners and Artisans2005, was effective from June 20, 2004; and
•
•
•
•
•
the 2003/2004 Wage Agreements for Officials entered into between management ,AngloGold Ashanti, through the Chamber of
Mines, NUM and UASASolidarity. The agreement can be summarized as follows:
·
wage increases of between 6 percent and 7 percent, with the highest increase for the lowest job category;
·
a wage increase in termsthe second year of which the
parties agreed that, with effect from JanuaryCPIX plus 1 2004, employees covered by these agreements receivedpercent, subject to a 9 percent
minimum guaranteed increase of which 8between
5.5 percent was guaranteedand 6 percent, again depending on the job category;
·
increased employer contributions to all employeesthe risk benefit within the retirement fund;
·
improvements in accommodation subsidies; and 1 percent distributed based on individual performance
during 2003.
·
recognition of the principle of a Christmas break, with detail to be agreed at mine level.
172
In addition, other agreements are in place which regulates any process of restructuring, namely, a retrenchment agreement
entered into with NUM and UASA, as well as a restructuring/redeployment agreement entered into with Solidarity, UASA and
SAEWA. A social plan framework agreement is currently being negotiated with the NUM.
In South Africa, the industrial relations climate can currently be described as constructive and stable, with no days lost due to
strike action. During the year, disputes have been declared by NUM regarding grading issues pertaining to machine operators
and the introduction of additional screening tests for new recruits. These disputes are being addressed through ongoing
communication and facilitation.
AngloGold Ashanti, NUM and UASA signed a six month agreement on wages and conditions of employment for officials. The
agreement, which was effective from January 1, 2005, provided for a 5 percent salary increment with an additional merit
component of 0.5 percent based on individual performance. This agreement expired on June 30, 2005 and negotiations for
officials are being dealt with at the Chamber of Mines level.
Employment equity and development: In October 2004,2006, AngloGold Ashanti submitted its fourthsixth annual employment equity
report to the Department of Labor on
progress made with the implementation of the company’s employment equity plan in
respect of its South African
operations. The 20042006 report indicates that continuedsome progress has been made year-on-year.
Notably AngloGold Health Services, which has in the past submitted its own report, has now been included in the 2004 figures
in the table below, and will be reported as such from now on. The employment equity
governance structures and monitoring
processes have been entrenched at company and business unit levels. A Mining
Charter Steering Committee has been
established to lead and direct the overall process of compliance with the charter. An external audit on progress of equity issues
was undertaken in 2004. The external employment equity audit noted substantial progress in terms of employment equity.
175
The audit report highlighted the following findings:
61% of the identified risk areas were satisfactorily resolved, the challenge is to ensure that these achievements are
sustained particularly training and career development, talent retention and performance management; and
•
•
35% of the risk areas were in progress, these include performance management for lower levels, underground toilets for
women, mentoring and diversity awareness programs.Charter.
Argentina
In Argentina,During April 2006, the unionized workers at Cerro Vanguardia interrupted operations through strike activity mainly related
to wages which was followed by sabotage to some of the mining equipment in early May. The CVSA Management team
has been quick to react to both of these events and actions have been put in place to mitigate the risk of these events
recurring including actions to strengthen the relationship both with the employees are organized into self-managed groups, with no threat of industrial action
during 2004.and the union.
Australia
The Australian operations are not unionized and no industrial action took place during 2004. Management/worker
communication is encouraged.2006.
Brazil
At AngloGold Ashanti Mineração, programs areAnnual negotiations on salaries and fringe benefits took place in place to provide employees with the opportunity to raise issues with
management on a regular basis. No industrial action was experienced during 2004.August 2006.
Ghana
TheDuring 2006 new rates of pay were negotiated between the company and the Ghana Mineworkers’Mine Workers’ Union represents about 87 percentand the 3 year
collective bargaining on basic conditions took place. As a result of the total labor force and all non-supervisorynegotiations employees in this
region. In addition,were awarded a Mine Standing Negotiations Committee provides a consultative platform for management and branch12 percent
unions to discuss issues of common interest. The union is also represented on the divisional board of the Ashanti company.
No industrial action was experienced in Ghana during 2004, however employee concerns relating to the AngloGold Ashanti
Business Combination and, in particular, payouts to senior employees in terms of share options at that time, have surfaced and
are being dealt with.wage increase.
Guinea
At Siguiri Union recognition, industry collective bargaining arrangements and/or employeeall employees are represented works councilsby the Guinean National Mining Union. No membership fees are indeducted for
union membership. A five day strike took place withat Siguiri during 2006 while the entire workforce being represented.negotiating process was ongoing. The
strike related to disagreements between union leadership. The strike was resolved as senior national union representatives
intervened.
Mali
At the Morila, Sadiola and Yatela mines, all employees are represented by the Mining Industry Union (SECNAMI), and
although there areguided by the National Collective Convention which sets out the minimum employment conditions for employees. Whilst no
specific recognition agreements regular participatory meetings take place. The mining industry is stillexists at mine level at Morila, Sadiola or Yatela mines, where 95 percent of employees are
relatively new in Mali andrepresented through SECNAMI, internal agreement provides for adaptation to the National Convention.
No industrial relations movement is undergoing a natural growth process. The company is currently
contributing towards a commission that is rewriting and modernizing labor legislation, which is likely to assist in the
management of labor relations and building relations with the unions in future. Safety representative committees and joint
health and safety structures exist to manage safety and health on the mines. Communication forums with local management
level employees are held on a monthly basis.
Although no industrial action wasactions were experienced at the Sadiola mine, the Morila mine experienced a three day strike in
March 2004. This was as a result of a two-year dispute regarding the legal obligationany of the company to pay a bonus scheme
(prime de rendement). The dispute was resolved in November 2004. At Yatela,Malian operations were impacted when the mining
contractor, Moolman Brothers, experienced two strikes in 2004. The first strike lasted for three days (a sympathy strike with
employees at Morila) and the other for seven days (as a result of a dispute relating to conditions of employment). Both
disputes were resolved through negotiation.during 2006.
Namibia
At the end of 2003, Navachab mine, terminated its relationship with its mining contractor and transferred to owner mining. This
entailed the employment of approximately 150 employees and the alignment of labor practices with local legislation. A
a recognition agreement is in place signed with the Mineworkers Union of Namibia (MUN), and the union
bargains with the
company on behalf of all employees in the A2 to C1C3 Paterson bands. Approximately 75%75 percent of the
workforce are members of
MUN. A committee1 year wage agreement was signed in 2006, allowing for a 7 percent wage increase.
During 2006 a 2 day stay away was staged whereby the workforce demanded the removal of two of the mines senior
managers. An investigation by an independent 3rdparty concluded that the allegations against the managers were
unfounded. Aside from MUN meets regularly with managementthe 2 day stay away a positive labor relations climate prevailed at the mine during the year.
Tanzania
Monthly meetings are held between senior and during 2004 no industrial action was experienced.junior staff representative councils and the general manager. In addition,
addition, safety representative committees and joint health and safety structures are in place.
176
Tanzania
At Geita, an access agreement and code of conduct has been entered into with the Tanzanian Mining and Construction
Workers Union (TAMICO). To date, 22 percent of employees have joined the union; a formal recognition process will
commence only once the union has sufficient representation. Monthly meetings are held between senior and junior staff
representative councils and the general manager. In addition, safety representative committees and joint health and safety
structures are in place and a monthly consultative meeting is
held with all senior staff to discuss the mine’s performance and
other operational issues. The mining contractor at Geita mine, DTP, experienced a seven day strike relating to unionAn access agreement has existed
recognition. Whilstwith TAMICO since 2003. Membership figures have varied between 2-5 percent of the majority of employees returned to work, 207 employees were dismissed by the contractor.workforce.
USA
In the USA, the workforce is not unionized. Communication with and participation by employees in employee meetings with
management forums is
encouraged. No incidences of industrial action were experienced during 2004.2006.
173
6E. Share ownership
Zimbabwe
The Freda-Rebecca mine was sold with effect from September 1, 2004. At the time of sale, there were 745 people employed
at the mine.
6E. Share
ownership
Share ownership of directors
Directors held the following number of ordinary shares of the company at December 31, 20042006 and 2003,2005, which did not
individually or in the aggregate exceed 1 percent of the company's issued ordinary share capital:
December 31, 20042006
December 31, 2003
Beneficial
Beneficial
Beneficial2005
Beneficial
DirectBeneficial
IndirectBeneficial Beneficial
Non-Direct
Indirect
Non-
beneficial
(1)
Direct
Indirect
Non-
beneficial
(1)
Executive directors
J GJG Best (retired August 1, 2005)
–
–
–
–
–
–
R Carvalho Silva (appointed May 1, 2005)
–
–
–
–
–
–
R M Godsell
46013 010
–
–
4609,177
–
–
D LDL Hodgson
– (retired April 29, 2005)
430
–
–
430
–
Dr S ESE Jonah
6,297 (until July 31, 2005)
–
–
–
–
–
–
N F Nicolau (appointed May 1, 2005)
3 000
–
–
100
–
–
S Venkatakrishnan (appointed August 1, 2005)
652
–
–
652
–
–
K H Williams (retired May 6, 2006)
–
920
–
–
920
–
Total 6,757
1,350
460
460
1,35016
662
–
–
9,929 1,350
–
Non-executive directors
F B Arisman
–
2,000
–
–
2,000
–
R E Bannerman
–
–
–
–
–
–
Mrs E le R Bradley
–
23,423
26,0273,027
–
23,423
33,0273,027*
C B Brayshaw
–
–
–
–
–
–
R P Edey
–
1,000
–
–
1,000
–
A WDr S E Jonah (from August 1, 2005)
18,469
–
6,297
–
–
AW Lea (until July 31, 2005)
–
–
–
–
–
–
R Médori (appointed August 1, 2005)
–
–
–
–
–
–
J H Mensah
–
–
–
–
–
–
Dr T J Motlatsi
–
–
–
–
–
–
W A Nairn
––
–
–
–
–
J Ogilvie Thompson
(2)
– –
–
–
–
478
N F Oppenheimer
(2)
– –
–
–
–
8,726
S R Thompson
– –W L Nkuhlu
–
–
–
–
A J Trahar
– –
–
–
–
–
P L Zim
––
–
–
–
–
Total–
26,423
26,027
–
26,423
42,231
177
December 31, 2004
December 31, 2003
Beneficial
Beneficial
Beneficial
Beneficial
Direct
Indirect
Non-
beneficial
(1)
Direct
Indirect
Non-
beneficial
(1)
Alternate directors
D D BarberS R Thompson
–
–
–
–
–
–
A H CalverJ Trahar
–
46–
–
–
–
–
P L Zim (resigned August 4, 2006)
–
–
–
–
–
–
Total 16,662
44,892
3,027
6,297
26,423
3,027*
Alternate directors
DD Barber (resigned August 4, 2006)
A H Calver
–
–
–
–
46
–
P G Whitcutt
–
–
–
–
–
–
Total –
46
–
–
46–
–46
–
Grand Total
6,75716,662
27,81944,892
26,0273,027
46016,226
27,819
42,2313,027*
(1)
The director derives no personal benefit from the ordinary shares declared, for example by holding the ordinary shares in trust for another.
(2)
Resigned April 29, 2004.* Restated.
As of July 7, 2005,June 25, 2007, there hashave been no changechanges in the directors’ ownership of ordinary shares, set forth above.above and
Mrs C Carroll and Mr S M Pityana, who were appointed on March 1, 2007 and February 13, 2007 respectively, hold no
interest in the company’s ordinary shares
.
Share ownership of executive officers
Under the Listings Requirements of the JSE, AngloGold Ashanti is not required to disclose, and it does not otherwise
disclose
or ascertain, share ownership of individual executive officers in the share capital of AngloGold Ashanti. However,
to the best of
its knowledge, AngloGold Ashanti believes that AngloGold Ashanti ordinary shares held by executive officers,
in aggregate; do
not exceed 1 percent of the company's issued ordinary share capital. See “Item 6E.: Share ownership –
174
Share ownership of employees
At a general meeting of shareholders held on December 11, 2006, members approved the creation of 4,280,000 new
directors” for details ofE ordinary shares held by executive directors.of 25 South African cents pursuant to an employee share ownership plan for the benefit of certain
AngloGold Ashanti employees, of which the majority are historically disadvantaged South Africans as defined in the
Broad-Based Socio-Economic Empowerment Charter for the South African Mining Industry.
On December 15, 2006, 2,785,770 E ordinary shares were issued to the Bokamoso ESOP Trust which holds these shares
on behalf of approximately 31,000 employees.
AngloGold Limited Share Incentive Scheme Bonus Share Plan and Long-Term Incentive Plan
AngloGold Ashanti awards options and/or shares to its employees,operates a share incentive scheme for the purpose of which is to providefor providing an incentive to executive directors,
directors, executive officers and managers to identify more closely with the fortunes of the group and its continued growth, and to
also to promote the retention of such employees by giving them an opportunity to acquire ordinary shares in the company.
Employees participateNon-executive directors are not eligible for participation in the share incentive scheme.
The incentives offered by AngloGold Ashanti are reviewed periodically to ensure that these incentives are globally
competitive, so as to attract, reward and retain management of the highest caliber. As a result, several types of incentives,
each with their own issue and vesting criteria have been granted to employees – collectively known as the AngloGold
share incentive scheme to the extent that they are granted options and/or shares and accept them.share incentive scheme.
Under the terms of the AngloGold share incentive scheme, which was approved by the shareholders at the general
meeting
held on June 4, 1998, and with the introduction of the Bonus share plan and Long-term incentive plan (incentive plans) which were approved by
the
shareholders at the annual general meeting held on April 29, 2005, upthe maximum number of ordinary shares that may
be allocated for the purposes of the share incentive scheme is equivalent to 2.75 percent of the total number of AngloGold Ashanti’s
Ashanti ordinary shares
in issue may be allocated to eligible scheme participants.at any time. As of December 31, 20042006 and 2003,2005, this equated to 7,272,7307,596,494 and 7,285,807
6,136,249 ordinary shares, respectively.
At the annual general meeting held on April 29, 2005, shareholders approved the amendment to the maximum aggregate
number of ordinary shares which may be acquired by any one participant from 300,000 to 5 percent of the 2.75 percent
attributable to all schemes and plans adopted by shareholdersthe share incentive scheme (or 0.1375 percent of the total number of ordinary shares in
issue at any one
time). As of December 31, 2004 and 2003, the number of shares which may be acquired by any one
participant in aggregate, restated to take cognizance of the amendment approved by shareholders, equates to 363,637 and
306,813 ordinary shares, respectively.
Non-executive directors are not eligible for participationEmployees participate in the AngloGold share incentive scheme to the extent that they are granted options, shares or rights and incentive plans.
accept them. All
options or rights which have not been exercised within ten years from the date on which they were granted automatically lapse,
expire, unless otherwise stated.
AngloGold share incentive scheme
Although the remuneration committee has the discretion to incentivize employees through the issue of shares, only options
or rights have so far been granted. The scheme provides fortype and vesting criteria of the vesting of options based on two separate criteria:or rights granted are:
Time relatedTime-related
The granting of time-related options werewas approved by shareholders at the general meeting held on June 4, 1998 and
amended by
shareholders at the annual general meeting held on April 30, 2002. No2003, at which time it was agreed that no further
time-related options would be granted. All options granted hereunder will be granted under this plan which will
terminate on February 1, 2012, being the date on
which the last options granted under these criteria may be exercised or will expire.Each time-related option entitles the
holder to acquire one ordinary share at a price equal to the closing price of ordinary shares on the JSE on the last business
day prior to the date of grant.
178
Time-related options vest over a five-year period from date of grant, and may be exercised in tranches of 20 percent each
in years 2, 3 and 4 and 40 percent in year 5.
Performance-related
Performance-related options were approved by shareholders at the annual general meeting held on April 30, 2002 and
amended at the annual general meeting held on April 29, 2005 at which time it was agreed that no further
performance-related options would be granted. All options granted hereunder will terminate on November 1, 2014, being
the date on which the last options granted under these criteria may be exercised or will expire. Each time relatedperformance-related
option entitles the holder to acquire one ordinary share at a price equal to the closing price of ordinary
shares on the JSE
on the last business day before grantingprior to the date of the option.grant.
175
Time related options vest over a five year period from date of grant, and may be exercised in tranches of 20 percent each in
years 2, 3 and 4 and 40 percent in year five.
Performance related options were approved by shareholders at the annual general meeting held on April 30, 2002.
Each performance related option entitles the holder to acquire one ordinary share at a price equal to the closing price of
ordinary shares on the JSE on the day before granting of the option.
Performance relatedPerformance-related options may be exercised in full, three years after date of grant, provided that the conditions on which
the
options were granted, namely the performance of the company as determined by the directors at date of grant, are
met.
FollowingBonus share plan (BSP)
The granting of rights in terms of the approvalBSP was approved by shareholders at the annual general meeting to be held on
April 29, 2005 to the introduction of the
Long-Term Incentive Plan and the Bonus Share Plan, no further performance related options will be granted and all options
granted hereunder will terminate on November 1, 2014, being the date on which the last options granted under this criteria may
be exercised or will lapse.
AngloGold incentive plans
Bonus share plan (BSP) awards will be made to executive2005. Executive directors, executive officers and other management groups. Thegroups are eligible for participation. Each
first awards, in the form of options, will be made in 2005. Each award made in respect of the BSP entitles the holder to acquire
one ordinary share at “nil” cost. OptionsAwards granted vest in full,
three years from date of grant, provided that the participant is still
in the employ of the company at the date of vesting.vesting,
unless an event occurs which may result in an earlier vesting, such as death.
Long-term incentive plan (LTIP) awards will be made to executive
The granting of rights in terms of the LTIP was approved by shareholders at the annual general meeting held on
April 29, 2005. Executive directors, executive officers and selected senior management are eligible for participation. Each
management. The first awards, in the form of options, will be made in 2005. Each award made in respect of the LTIP entitles
the holder to acquire one ordinary share at “nil” cost. Options granted vest three
years after date of grant, to the extent that the
performance conditions under which the options were granted, are met.met, and
provided that the participant is still in the employ of the company, or unless an event occurs which may result in an earlier
vesting, such as death.
The AngloGold share incentive scheme is summarized as follows:
The maximum number of ordinary shares that may be allocated for purposes of the scheme, equivalent to 2.75 percent of
the total number of ordinary shares in issue at that date, is:
June 25, 2007
December 31, 2006
December 31, 2005
7,612,932 7,596,494 7,285,807
The maximum aggregate number of ordinary shares which may be acquired by any one participant in the share incentive
scheme at that date is:
June 25, 2007
December 31, 2006
December 31, 2005
380,647 379,825 364,291
The movement in respect of options and rights granted and the ordinary shares issued as a result of the exercise of
options and rights during the
period January 1, 20042006 to December 31, 20042006 was as follows:
OptionsTime-
related
Performance-
Timerelated
relatedBonus
Performanceshare
relatedplan
TotalLong-
Average exerciseterm
incentive
plan
Total
Average
exercise
price per ordinary
shareordinary
Ordinary sharesshare – R
Ordinary
shares
issued
At January 1, 20042006
1,603,660864,710
2,316,3002,897,000
3,919,960271,945
R203.96363,500
2,047,3404,397,155
Movements 216.71
2,715,678
Movement
during
year
–- Granted
–-
1,201,000-
1,201,000254,110
R227.01316,675
–570,785
318.32
-
- Exercised
192,800389,850
–4,300
192,8004,249
R115.58-
192,800398,399
– Lapsed – terminations129.97
19,800398,399
91,400- Forfeited (terminations)
111,2001,600
R235.59306,900
41,221
20,000
369,721
243.77
At December 31, 20042006
1,391,060473,260
3,425,9002,585,800
4,816,960480,585
R212.69660,175
2,240,1404,199,820
236.37
3,114,077
During the period January 1, 20052007 to and including July 7, 2005, noJune 25, 2007, 618,510 options or rights were granted; 149,600 granted and 592,247
options at an average price
of R122.38 per share were exercised and 81,000 optionsor rights at an average price of R244.35R236.84 per option lapsed.share were exercised.
Option ownership of directors, executive officers and management
Under the Listings Requirements of the JSE, AngloGold Ashanti is required to disclose the option or rights ownership of
individual
directors. Under those requirements, AngloGold Ashanti is not required to, and it does not otherwise, disclose
option
or rights ownership of individual executive officers and senior management.
179176
The table below shows the movement in respect of options or rights held by executive directors on an individual basis, and
by executive
officers and managers, each as a group, during 2004.2006. Non-executive directors are not eligible to participate in
the scheme and
therefore own no options:
Executive
directors
R M Godsell
Godsell(1)
J G BestR Carvalho
D LSilva
Hodgson N F Nicolau
(1)
S E JonahVenkat-
K Hakrishnan
WilliamsTotal
Totaldirectors
*Total Executive
Executiveofficers
officers(2)
* OtherTotal other
managers(2)
Total scheme
Granted asBalance at
January 1, 20042006*
Number 239,735
54,815
56,635
14,865
Number 210,300366,050
58,800423,415
84,6003,607,690
–
91,100
444,800
287,860
3,187,300
3,919,9604,397,155
Average exercise
price per
shares – R
131.27 171.38117.58 168.98
166.27139.24
–-
141.00123.85
145.22 181.80 214.16147.84
203.96199.43
188.17
Granted during
year
(3)
Number 29,390
14,000 12,00014,345
8,00014,345
50,00014,725
8,00072,805
92,000 57,60088,470
1,051,400409,510
1,201,000570,785
Average exercise
price per
share – R
228.00-
228.00-
228.00-
221.00-
228.00-
224.20-
228.00-
228.00-
227.71
Exercised during
year
Number9,200
-
17,600
-
Number –26,800
–35,700
–335,899
–
40,100
40,100
14,600
138,100
192,800398,399
Average exercise
price per
share – R
–
–
–
–
104.00
104.00-
116.20147.69
118.88-
115.58132.69
131.38
127.73
128.39
Average market
price per share at
at date of exercise –exercise– R
–343.62 -
–345.00
–-
–344.52
283.03341.75
283.03329.82
265.39
272.16
273.91331.88
Pre-tax gain at date
of exercise
– R
value (R000)
–2,204,467.20
–-
–3,472,640.00
–-
7,178,9165,677,107.20
7,178,916 2,178,212 21,168,311 30,525,4397,510,106.73 67,884,192.29 81,071,406.22
– R per share
–
–
–
–
179.03
179.03
149.19
153.28
158.33
Lapsed Forfeited
(terminations)
during year
6,306 363,415 369,721
Number
– –- -
–-
–-
– – –-
111,200
111,200
Average exercise
price per
share – R
– –-
–-
–-
– – –-
235.59-
235.59-
210.22
206.64
Held as at
December 31, 20042006
Number 259,925
69,160
53,380
29,590
Number 224,300412,055
70,800469,879
92,6003,317,886
50,000
59,000
496,700
330,860
3,989,400
4,816,9604,199,820
Average exercise
price per
share –
R
104.76 133.93
137.31 180.9899.04
171.60-
221.00101.39
177.94123.24
163.18 192.74 220.51180.89
212.69166.64
Latest expiry date
Nov.1,July 31, 2016
2014July 31, 2016
Nov.1,July 31, 2016
2014July 31, 2016
Nov.1,July 31, 2016 March 8, 2016
2014(1)
May 1,On exercising of options granted in terms of the AngloGold share incentive scheme, Messrs Godsell and Nicolau applied proceeds from the sale
2014
Nov.1,of the shares to acquire 3,833 (2005: 8,717) and 2,900 AngloGold Ashanti shares respectively.
2014(2)
Nov.1,As a result of the change in status, the following movements to opening balance were made:
2014
Nov.1,Quantity
2014Average value
*Average exercise
During the year, six senior managers were promoted-From director status to other management
- From other management to executive officers resultingofficer
- From executive officer to other management
117,230
33,080
12,000
22,050,400.00
4,699,410
3,445,380
188.10
142.06
287.12
(3)
Awards granted in 112,4602005 and 2006 are granted at nil cost to participant
Of the 4,199,820 options or rights granted and outstanding at an average strike price of R174.64 per option being
transferred from the opening balance under “other manager” to the opening balance under “executive officers”.December 31, 2006 2,147,660 options are fully vested and 911,400 options will vest
on November 1, 2007.
180177
Item 7: Major shareholders and related party transactions
Overview
Description of AngloGold Ashanti’s share capital
AngloGold Ashanti’s share capital consists of threefour classes of stock:
• Ordinary shares, par value 25 cents each (the “ordinary shares”);
• E Ordinary shares, par value 25 cents each (the “E ordinary shares”);
• A redeemable preference shares, par value 50 cents each (the “A preference shares”); and
• B redeemable preference shares, par value 1 cent each (the “B preference shares”).
There was no change toAt a meeting of the shareholders held on December 11, 2006 the shareholders approved the increase in the authorized
share capital of the company during 2004.by the creation of 4,280,000 E ordinary shares with a par value of 25 cents each.
The authorized and issued share capital of AngloGold at December 31, 2004,2006, is set out below:
Title of class
Authorized
Issued
Ordinary shares
400,000,000
264,462,894276,236,153
E ordinary shares
4,280,000
4,185,770
A preference shares
2,000,000
2,000,000
B preference shares
5,000,000
778,896
All the issued ordinary shares, E ordinary shares, A redeemable preference shares and B redeemable preference shares
are fully paid and are
not subject to further calls or assessment by AngloGold Ashanti.
For a discussion of rights attaching to the ordinary shares,
the E ordinary shares, A redeemable preference shares and the
B redeemable preference shares, see “Item 10B.: Memorandum and Articles of
Association”.
The following are the movements in the issued ordinary share capital from the beginning of the accounting period to the date of
this report:at December 31.
2006
2004 2003 20022005
Issued2004
Issued
Number of
ordinary
shares
Rand
Number of
ordinary
shares
Rand
Number of
ordinary
shares
Rand
Number of
ordinary
shares
Rand
Number of
ordinary
shares
Rand
At January 1,
264,938,432
66,234,608 264,462,894
66,115,724 223,136,342
55,784,086222,622,022 56,655,506215,268,116 53,817,029
Issues during year
Issue of shares in terms of
– Business combination with Ashanti
Normandy top-up facility-
(1)share-swap
–
–
–
–
127,15638,400,021 9,600,005
31,789-
Normandyregulatory
share-swapshares
(1)–
–
–
– 2,658,000 664,500
-
exercise
of
warrants
–
–
–
–
6,403,23675,731
1,600,80918,933
AngloGold– Equity Raising
odd-lot9,970,732
offer
(2)
–2,492,683
–
–
–
278,196
69,549
Business Combination with Ashanti
–
share-swap
38,400,021
9,600,005
– regulatory shares
2,658,000
664,500
– exercise of warrants
75,731
18,933
Exercise of options by participants in the
- AngloGold Share Incentive Scheme
398,399
99,600
475,538
118,884
192,800
48,200
- Employment Share Ownership
Plan/Black Economic empowerment
transaction
928,590
232,147
At December 31,
276,236,153
69,059,038 264,938,432
66,234,608 264,462,894
66,115,724
During the period January 1, 2007 to and including June 25, 2007, 597,730 ordinary shares were issued at an average
issue price of R249 per share, resulting in 276,833,883 ordinary shares being in issue at June 25, 2007.
178
7A.Major shareholders
According to information available to the directors, the following are the only shareholders beneficially holding, directly or
indirectly, more than 5 percent of the ordinary share capital of the company at December 31:
Ordinary shares held at
December 31, 2006
December 31, 2005
December 31, 2004
Shareholder Number
%
voting
rights
Number %
voting
rights
Number %
voting
rights
Anglo American plc
115,102,929
41.67
134,788,099
50.88
134,788,099
50.97
The Bank of New York *
73,559,916
26.63
48,702,313
18.38
45,217,297
17.10
*
Ordinary shares held through various custodians in respect of American Depositary Shares issued by The Bank of New York. At December 31, 2006, the
number of persons who were registered holders of ADSs was reported at 4,186. AngloGold Ashanti is aware that many ADSs are held of record by
brokers and other nominees, and accordingly the above numbers are not necessarily representative of the actual number of persons who are beneficial
holders of ADSs or the number of ADSs beneficially held by these persons.
The company’s major shareholders have the same voting rights as other holders of AngloGold Ashanti ordinary shares and
do not have any different or special voting rights. During April 2006, Anglo American plc sold approximately 9 percent
(19,685,170 ordinary shares) of its shareholding in AngloGold Ashanti.
As at December 31, 2006, there were 19,250 holders of record of AngloGold Ashanti ordinary shares. Of these holders
393 had registered addresses in the United States and held a total of 74,756 ordinary shares, approximately 0.027 percent
of the total outstanding ordinary shares. In addition, certain accounts of record with registered addresses outside the
United States, including The Bank of New York, hold AngloGold Ashanti ordinary shares, in whole or in part, beneficially for
United States persons.
At June 25, 2007, Anglo American plc, through its wholly-owned subsidiary, Anglo South Africa Capital (Pty) Limited held
115,102,929 ordinary shares, representing 41.59 percent of the issued share capital while 69,144,000 ADSs, or
approximately 25 percent of the total issued ordinary share capital, were issued and outstanding and held of record by
approximately 4,000 registered holders.
At December 31, 2006, the Government of Ghana held 9,031,650 shares, representing 3.41 percent of the issued share
capital. These shares were issued pursuant to the Business Combination with Ashanti. At June 25, 2007, the Government
of Ghana’s holding was unchanged at 9,031,650 shares, representing 3.26 percent of the issued share capital.
All the issued A and B preference shares are held by Eastvaal Gold Holdings Limited, AngloGold Ashanti’s wholly-owned
subsidiary. The articles of association of AngloGold Ashanti provide that the A redeemable preference shares and the
B redeemable preference shares are not transferable.
The E Ordinary shares are held by Izingwe Holdings (Proprietary) Limited, an empowerment company and the Bokamoso
ESOP Trust, which holds the shares on behalf of employees who qualify in terms of the BEE transaction as approved by
the AngloGold Ashanti shareholders on December 11, 2006. Neither the Bokamoso ESOP Trust nor Izingwe Holdings
(Proprietary) Limited may sell their shares or any portion of their shares without the written consent of AngloGold Ashanti.
Insofar as is known to AngloGold Ashanti as of December 31, 2006, there was no person who, directly or indirectly, jointly
or severally, exercised or could exercise control over AngloGold Ashanti, nor is AngloGold Ashanti aware of any
arrangements which might result in a change in control of AngloGold Ashanti.
Relationship with Anglo American plc (AA plc) and its subsidiaries
AA plc is the largest shareholder of AngloGold Ashanti with an equity interest and voting rights of 41.67 percent as at
December 31, 2006 (2005: 50.88 percent). Although there is no current agreement between AngloGold Ashanti and AA plc
concerning membership on the AngloGold Ashanti board of directors by AA plc, AA plc indicated, in their 13D filing with the
SEC on May 26, 2006, that the number of members affiliated with AA plc on AngloGold Ashanti’s board of directors may
be reduced as AA plc’s percentage ownership in AngloGold Ashanti declines. In April 2006 AA plc sold approximately
9 percent of its shareholding in AngloGold Ashanti. On February 21, 2007, AA plc stated that it intends to reduce and
ultimately to exit its gold company holdings and that it will continue to explore all available options to exit AngloGold
Ashanti in an orderly manner.
179
Currently, two members of the board of directors of AngloGold Ashanti are affiliated with AA plc. Mr Tony Trahar retired on
May 4, 2007 at the annual general meeting and Mr Lazarus Zim, together with his alternate Mr David Barber resigned from
the board on August 4, 2006 following Mr Zim’s move to a non-executive role in Anglo American. Mrs C Carrollwas
appointed a non-executive director, effective from May 5, 2007
AngloGold Ashanti is an operating gold company independent of AA plc to the extent that:
• The management is remunerated by AngloGold Ashanti and incentivized by an AngloGold Ashanti share incentive
scheme;
• Currently, a majority of AngloGold Ashanti’s board of directors are non-executive directors and, including AngloGold
Ashanti’s non-executive chairman, 50 percent of these non-executive directors are not affiliated with AA plc;
• AngloGold Ashanti has the management, financial capacity and resources to carry out all aspects of its ongoing
business activities independent of AA plc;
• Where appropriate, AngloGold Ashanti may purchase selected specialized services from AA plc on normal commercial
and arm’s length terms. However, any such contract with AA plc is subject to the approval of a board sub-committee
consisting entirely of AngloGold Ashanti directors independent of AA plc; and
• AngloGold Ashanti has no service agreements or other contracts in terms of which any turnover or profit related fees
are payable to AA plc.
At the time of its formation, AngloGold acquired from Anglo American Corporation (AAC), a wholly-owned subsidiary of
AA plc, certain unused mineral rights to which little or no value was attached. In terms of the agreements, AAC had the
right to participate in future profits from these mineral rights at such time as these rights were developed or sold. In South
Africa, the introduction of the MPRDA has resulted in all unused mineral rights, for which application for conversion was
not made by the end of April 2005, being vested under the custodianship of the State.
Consequently, other than in respect of those mineral rights in South Africa which have been sold by AngloGold Ashanti to
third parties prior to end April 2005, neither AAC nor AngloGold Ashanti retain any rights in respect of those mineral rights
in South Africa as originally sold by AAC to AngloGold upon its formation.
7B.
Related party transactions
The company had the following transactions with AA plc, subsidiaries of AA plc and the company’s equity accounted joint
ventures, which transactions are concluded on an arm’s length basis:
December 31, 2006
December 31, 2005
December 31, 2004
(in millions)
Purchases
(by)/from
related
party
$
Amounts
owed
to/(by)
related
party
$
Purchases
(by)/from
related
party
$
Amounts
owed
to/(by)
related
party
$
Purchases
(by)/from
related
party
$
Amounts
owed
to/(by)
related
party
$
Related party transaction with significant shareholder AA plc
1
-
5
1
5
-
Related party transactions with subsidiaries of AA plc
(1)
Boart Longyear Limited – mining services
(2)
-
-
5
-
9
1
Mondi Limited – forestry
5
-
16
2
16
2
Scaw Metals – A division of Anglo Operations Limited –
steel and engineering
1
-
6
1
5
1
Haggie Steel Wire Ropes Operations
(3)
1
-
8
1
9
-
Anglo Coal – a division of Anglo Operations Limited
-
-
1
-
1
-
8
-
41
5
45
4
Related party transactions of equity accounted joint ventures
Société d’Exploitation des Mines d’Or de Sadiola S.A.
(2)
(1)
-
-
1
-
Société d’Exploitation des Mines d’Or de Yatela S.A.
(1)
-
-
-
1
-
Société des Mines de Morila S.A.
(2)
-
(2)
-
(1)
-
(1)
Transactions to April 2006.
(2)
AA plc sold their interest in Boart Longyear Limited with effect from July 29, 2005.
(3)
Previously included in Scaw Metals – A division of Anglo Operations Limited.
180
Since January 1, 2006, other than as described in the following two paragraphs, AngloGold Ashanti has not been, and as
of the date of this annual report is not, a party to any material transaction or proposed transaction by which any director,
any other executive officer, any spouse or relative of any of the foregoing or any relative of such spouse had or was to
have direct or indirect material interest.
In connection with the relocation of Roberto Carvalho Silva, an executive director of the company since 2005, to
Nova Lima, Brazil, in 2000, Mr. Carvalho Silva commenced renting a house in Nova Lima from a Brazilian subsidiary of the
company. Mr Carvalho Silva purchased the house from the company’s subsidiary in January 2005. The total purchase
price of the house was BRL1,150,000 ($429,923). Mr. Carvalho agreed to pay the purchase price of the house in
60 installments, the first being BRL19,167.70 and 59 installments of BRL19,166.65 each, starting on January 28, 2005.
Such monthly installments were adjusted annually by the cumulative INPC (a Consumer Price Index in Brazil) in lieu of
interest. As at December 31, 2006, BRL728,580 ($340,458) of the purchase price remained to be paid to the company’s
subsidiary, with BRL657,717 ($341,352) remaining to be paid as at June 20, 2007. At present, the installment payments
are up-to-date. Mr Carvalho Silva and the company have agreed that the remaining balance of the purchase price of the
house will be paid by Mr Carvalho Silva as soon as reasonably practicable and in any event no later than August 31, 2007.
A Brazilian subsidiary of the company received marketing, communications and corporate affairs services from a Brazilian
company in which a son of Roberto Carvalho Silva owns a one-third interest. The total amount paid by the company’s
subsidiary to this company in respect of such services during the years were: 2006: BRL903,465 ($414,433); 2004:
BRL3,944 ($1,351); 2005: BRL311,923 ($127,837); and BRL634,023 (329,055) has been paid to date in 2007. The
company is currently reviewing its relationship with this service provider and the contracts under which such services are
provided.
Registration rights agreement
On March 23, 2006 the company entered into a Registration Rights Agreement with Anglo South Africa Capital
(Proprietary) Limited (Anglo South Africa) under which the company has agreed to file U.S. registration statements for
Anglo South Africa’s offer and sale of shares it holds in the company (each a Demand Registration) if Anglo South Africa
requests the company to do so. The company is required to use all reasonable efforts to file a Demand Registration within
30 days after such a request and to keep it effective for 90 days unless the shares offered pursuant to it are sold earlier.
Further, the company may not offer, sell, allot or issue any shares or other securities that are convertible into or
exchangeable for, or that represent the right to receive, shares, whether pursuant to U.S. registration or otherwise, for a
90-day period immediately following the first closing of an offering pursu ant to a Demand Registration or a shorter period
as may be imposed by underwriters in the Demand Registration; except: (i) in consideration for shares or assets of a
company as part of a merger, acquisition, corporate reorganization or similar transaction, (ii) as required pursuant to the
terms governing the 2.375 percent guaranteed convertible bonds due 2009, issued by AngloGold Holdings plc and
guaranteed by the company, and (iii) in connection with any option, employee bonus, profit sharing, pension, retirement,
incentive, savings or similar plan, agreement or award. The Registration Rights Agreement may be terminated at any time
by written consent by each of the parties thereto. The Registration Rights Agreement shall terminate automatically on the
first date on which Anglo South Africa is no longer an “affiliate” within the meaning of Rule 144 under the United States
Securities Act of 1933, as amended.
7C.
Interests of experts and counsel
Not applicable.
181
Item 8: Financial information
8A.
Consolidated financial statements and other financial information
See “Item 18: Financial statements”.
Legal proceedings
No director or officer of AngloGold Ashanti has either a direct or indirect position adverse to AngloGold Ashanti.
There are no legal or arbitration proceedings in which any member of the AngloGold Ashanti group is or has been
engaged, including any such proceedings which are pending or threatened of which AngloGold Ashanti is aware, which
may have, or have had during the 2006 fiscal year, a material effect on the group's financial position.
The company is involved in the following cases:
·
In the USA, two civil cases brought against the company and others in 2000 and 2001 by the Sierra Club and the
Minerals Policy Center (SC/MPC) for allegedly exceeding certain permit water quality standards or lack of permits for
certain identified flows (in terms of the federal Clean Water Act) at the CC&V mine have been resolved. A trial was
held in February 2006. In April 2006 judgment was entered in favor of AngloGold Ashanti and the other named
defendants against SC/MPC. In December 2006, the federal district court issued an award ordering SC/MPC to pay a
portion of the attorney fees and costs requested by AngloGold Ashanti and the other named defendants.
SC/MPC appealed the decisions to the federal Tenth Circuit Court of Appeals. The parties subsequently fully
executed a settlement agreement as of June 15, 2007. The agreement provides for retention of the liability decision
and fee d ecision at the district court level, termination of the appeals filed to the Tenth Circuit, and receipt of national
contact information of SC and MPC in the unlikely event those organizations decide to sue or pursue litigation against
AngloGold Ashanti and the other named defendants in the next 15 years. In exchange, AngloGold Ashanti and the
other named defendants agreed to waive receipt of any of the attorney fees and costs imposed by the court against
SC/MPC.
·
In South Africa, in April 2005 AngloGold Ashanti launched an urgent application against various mining companies
and government Ministers claiming that the mines upstream from its Vaal River Operations are responsible and liable
for pumping underground water that arises at their mines. AngloGold Ashanti is in the process of finalizing a
settlement agreement with the mining companies which will result in the mining companies setting up a not-for-profit
water company to manage and operate the Margaret Shaft’s water pumping activities. The settlement agreement
requires the mining companies to contribute towards the upgrading of the Margaret Shaft infrastructure.
·
In South Africa, action has been instituted by 19 plaintiffs, against Anglo American Corporation of South Africa Limited
(AACSA) for damages resulting from lung diseases which the plaintiffs allegedly contracted while employed by mining
companies managed by AACSA. There is a possibility that AACSA may seek to recover a portion of damages which
may be awarded against it from AngloGold Ashanti by either AACSA or the plaintiffs. There is no indication at present
of the merit of any such claim. A separate action was instituted against AngloGold Ashanti in 2006 by a one plaintiff
out of the High Court, Witwatersrand Local Division, for damages allegedly suffered by him as a result of alleged
silicosis allegedly contracted while working on mines now owned by AngloGold Ashanti. An exception has been filed
by AngloGold Ashanti against the claim.
· In Ghana, Westchester / Africore Limited instituted action against Ashanti Goldfields Company Limited in the High
Court in Accra claiming damages for breach of Exploration and Option Agreement. A provision in the Agreement
states that the parties should settle the matter by arbitration under the Arbitration Act of Ghana. The plaintiffs have
applied to pursue the matter through arbitration in Ghana.
· In Brazil, Mineração Serra Grande S.A. (MSG), the operator of the Crixas mine in Brazil, has received two tax
assessments from the State of Goias related to payments of sales taxes on gold deliveries for export: one for the
period between February 2004 and June 2005 and the other for the period between July 2005 and May 2006. The tax
authorities maintain that whenever a taxpayer exports gold through a branch located in a different Brazilian State, it
must obtain an authorization from the Goias State Treasury by means of a Special Regime Agreement (Termo de
Acordo re Regime Especial – TARE). The Serra Grande operation is co-owned with Kinross Gold Corporation. The
company manages the operations and its attributable share of the first assessment is approximately $29 million. In
May 2006 MSG signed the TARE, which authorized the remittance of gold to the company’s branch in Minas Gerais
specifically for export purposes. In November 2006 the administrative council’s second chamber ruled in favor of Serra
182
Grande and fully cancelled the tax liability related to the first period. The State of Goias may still appeal to the full
board of the State of Goias tax administrative council. The second assessment was issued by the State of Goais in
October 2006 on the same grounds as the first one, and the attributable share of the assessment was approximately
$18 million. The company believes that both assessments are in violation of the Federal legislation on sales taxes.
·
In Brazil, Mineração Serra Grande S.A. (MSG) received a tax assessment in October 2003 from the State of Minas
Gerais related to sales taxes on gold allegedly returned from the branch in Minas Gerais to the company head office in
the State of Goais. The company lost the case at the administrative level but is now discussing it at the judicial sphere.
The company believes there is a remote chance of success for the State of Minas Gerais. The company’s attributable
share of the assessment is approximately $6 million.
·
In Brazil, Morro Velho is involved in a dispute with tax authorities. As a result of erroneous duplication of a shipping
invoice between two states in Brazil, tax authorities are claiming that VAT is payable on the second invoice. The
amount involved is approximately $5 million.
·
In Brazil, AngloGold Ashanti Brazil is being accused of failing to pay certain required payments towards the social
security system in Brazil during the period 1997 to 2004. The amount involved is approximately $2 million.
Dividend policy
Dividends are proposed and approved by the board of directors of AngloGold Ashanti, based on the interim and year end
financial performance. Dividends are recognized when declared by the board of AngloGold Ashanti and may be payable in
Australian dollars, South African rands, United Kingdom pounds or Ghanaian cedis.
Dividends declared to foreign shareholders are not subject to the approval by the South African Reserve Bank (SARB) in
terms of South African foreign exchange control regulations. Dividends are freely transferable to foreign shareholders from
both trading and non-trading profits earned in South Africa by publicly listed companies.
Under South African law, the company may declare and pay dividends from any reserves included in total shareholder’s
equity (including share capital and share premium) calculated in accordance with International Financial Reporting
Standards (IFRS), subject to its solvency and liquidity.
A potential restriction on dividends arises from the terms applicable to AngloGold Ashanti’s convertible bond. Legal opinion
is that the size of the dividends declared should be tested against condition 6(b)(iii) of the convertible bond and if triggered
the conversion price should be adjusted, however the condition is not prohibitive.
The limit set by this condition is that it is triggered if the dividend declared in the current year exceeds the lesser of:
·
200 percent of the dividends paid in the previous financial year; or
·
5 percent of the volume weighted average share price over 180 days trading immediately preceding the record date of
the dividend.
AngloGold Ashanti expects to continue to pay dividends, although there can be no assurance that dividends will be paid in
the future or as to the particular amounts that will be paid from year to year. The payment of future dividends will depend
upon the Board’s ongoing assessment of AngloGold Ashanti’s earnings, after providing for capital expenditure and
long-term growth, cash and debt resources, the amount of reserves available for dividend using going concern assessment
and restrictions placed by the conditions of the convertible bond and other factors.
8B. Significantchanges
None.
183
Item 9: The offer and listing
9A.
Offer and listing details
The following table sets out, for the periods indicated, the reported high and low market quotations for AngloGold Ashanti’s
ordinary shares on the JSE and for its sponsored ADSs on the NYSE:
JSE
(1)
NYSE
(2)
High
Low
High
Low
Year ended December 31
(South African cents per ordinary share)
(US dollars per ADS)
Annual information
2002
34,700
20,000
35.33 17.62
2003
33,900
19,100
49.95 27.10
2004
31,900
18,620
48.25 29.91
2005
31,990
18,700
49.88 30.50
2006
38,700
24,700
62.20 35.58
Quarterly information
2005
First quarter
24,500
18,700
39.00
31.27
Second quarter
24,500
19,000
36.60
30.50
Third quarter
28,400
21,951
44.13
34.11
Fourth quarter
31,990
25,750
49.88
38.64
2006
First quarter
38,700
29,005
62.20
46.51
Second quarter
35,621
24,700
58.36
37.17
Third quarter
36,050
27,500
51.07
37.10
Fourth quarter
35,000
28,250
48.91
35.58
2007
First quarter
35,889
30,300
49.34
41.10
Monthly information
November 2006
34,550
30,200
48.23
41.40
December 2006
35,000
31,500
48.91
45.05
January 2007
34,699
31,750
43.37
48.72
February 2007
35,889
31,000
49.34
43.00
March 2007
33,980
30,300
46.26
41.10
April 2007
35,322
31,390
49.42
44.51
May 2007
32,000
28,712
45.42
40.45
(1)
The JSE share price information has been adjusted to give effect to the two-for-one stock split which took effect from the close of business on
December 24, 2002.
(2)
Prior to December 24, 2002, each ADS represented 0.5 of one ordinary share. With effect from the close of business on December 24, 2002, each
ADS represents one ordinary share.
See “Item 7A.: Major shareholders” for number of ADSs outstanding at December 31, 2006.
9B. Plan of distribution
Not applicable.
184
9C. Markets
Nature of trading market
Prior to June 29, 1998, the date on which Anglo American Corporation of South Africa Limited’s gold mining interests were
consolidated into a single, focused, independent, global gold mining company, ordinary shares of AngloGold (formerly Vaal
Reefs) were listed on the Johannesburg Stock Exchange (JSE), the London Stock Exchange (LSE) and the Paris bourse,
were quoted in Brussels in the form of International Depositary Receipts and were listed under grandfathered unsponsored
American Depositary Receipts (ADR) programmes on the Nasdaq SmallCap Market. Shares of Freegold, Western Deep
Levels and Southvaal were also listed under grandfathered unsponsored ADR programmes on the Nasdaq SmallCap
Market. Historically, the principal trading markets for such shares (as well as for shares of Freegold, Western Deep Levels
and Southvaal) had been the JSE and Nasdaq. As part of the consolidation, shares of Ang loGold, Freegold, Western Deep
Levels and Southvaal were delisted from Nasdaq and shares of all participating companies were delisted from the JSE.
With effect from the implementation of the consolidation, the ordinary shares were listed on the JSE, the LSE and the Paris
bourse and were quoted in Brussels in the form of International Depositary Receipts. In addition, American Depositary
Shares (ADSs) each representing half of one ordinary share and evidenced by ADRs issued by The Bank of New York
under a programme sponsored by AngloGold were listed on the New York Stock Exchange (NYSE) on August 5, 1998.
The company was admitted to the official list of the Australian Stock Exchange (ASX) on November 15, 1999. The ordinary
shares of the company issued in connection with the acquisition of the entire issued share capital of Acacia Resources
Limited trade on the ASX. On November 28, 2001, AngloGold implemented a 10-for-1 split of the AngloGold CHESS
Depositary Interests (CDIs), which trade on the Australian Stock Exchange.
Effective at the close of business on December 24, 2002, AngloGold undertook a 2-for-1 stock split and a corresponding
change in the ratio of ordinary shares to ADSs from 0.5 ordinary shares per one ADS to one ordinary share per one ADS.
At the same time, the ratio of ordinary shares to CDIs changed from one ordinary share equivalent to ten CDIs to one
ordinary share equivalent to five CDIs.
On April 26, 2004, the business combination with Ashanti became effective, at which time, AngloGold changed its name to
AngloGold Ashanti. Following the business combination, the company’s ordinary shares were listed on the Ghana Stock
Exchange (GhSE). In addition, Ghanaian Depositary Shares (GhDSs) were listed on the GhSE each representing one-
hundredth of an ordinary share and evidenced by GhDSs issued by NTHC Limited (as Depositary) under a programme
sponsored by AngloGold Ashanti.
9D. Sellingshareholders
None.
9E. Dilution
None.
9F. Expenses of the issue
None.
185
Item 10: Additional information
10A. Share capital
AngloGold Ashanti's Ordinary Shares and Preference Shares
AngloGold Ashanti’s authorized share capital is ZAR102,120,000, consisting of four classes of shares: ordinary shares of
par value ZAR0.25 each, E ordinary shares of par value ZAR0.25 each, A redeemable preference shares of par value
ZAR0.50 each and B redeemable preference shares of par value ZAR0.01 each. The ordinary shares and the
A redeemable preference shares have voting rights, while the B redeemable preference shares have voting rights only
under certain circumstances and, in respect of each of these classes of shares, there is no provision in the Articles of
Association for cumulative voting. There is no limitation imposed by the Articles of Association or by South African law on
the rights of any persons, including non-residents, to own AngloGold Ashanti ordinary shares or to exercise voting rights in
respect of AngloGold Ashanti ordinary shares. AngloGold Ashanti’s authorized and issued share capital as of
December 31, 2006 and June 25, 2007 (being the latest practicable date prior to the publication of this document) is set
out below:
Issued
Title of Class
Authorized
June 25, 2007
December 31, 2006
Ordinary shares
400,000,000
276,833,883
276,236,153
E ordinary shares
4,280,000
4,115,930
4,185,770
A redeemable preference shares
2,000,000
2,000,000
2,000,000
B redeemable preference shares
5,000,000
778,896
778,896
All of the issued ordinary shares, E ordinary, A redeemable preference shares and B redeemable preference shares are
fully paid and are not subject to further calls or assessment by AngloGold Ashanti.
All of the A redeemable preference shares and B redeemable preference shares are held by Eastvaal Gold Holdings
Limited, AngloGold Ashanti’s wholly-owned subsidiary. AngloGold Ashanti’s Articles of Association provide that the
A redeemable preference shares and B redeemable preference shares are not transferable.
In general meeting, shareholders of AngloGold Ashanti have approved, by specific authority, the following authorizations
for the allotment and issue of shares in the capital of the company:
1
At a general meeting of shareholders held on June 4, 1998, members approved the adoption by AngloGold, of the
AngloGold Limited Share Incentive Scheme and at the annual general meeting of shareholders held on
April 29, 2005, members approved the introduction of the Bonus Share Plan and Long-Term Incentive Plan
(collectively the “AngloGold Share Incentive Scheme or share incentive scheme”). The authority granted by
shareholders provides for 2.75 percent of the total number or ordinary shares in issue from time to time, being made
available for purposes of the share incentive scheme. The share incentive scheme shall endure for an indefinite
period until terminated by a resolution of the board of directors or the resolution of AngloGold Ashanti in general
meeting.
2
At the annual general meeting of shareholders held on June 29, 2004, members approved the authorization to allot
and issue a maximum of 15,384,615 ordinary shares of 25 South African cents per share each in the authorized but
unissued capital of the company for purposes of the conversion of the $1,000,000,000, 2.375 percent Guaranteed
Convertible Bonds issued by AngloGold Holdings plc. This authority expires on February 28, 2009 or such earlier time
in the event that all Convertible Bonds are exchanged for ADSs. See “Guaranteed Convertible Bonds” below.
3
At a general meeting of the shareholders held on December 11, 2006, members approved the increase of the
authorized share capital of AngloGold Ashanti by the creation of 4,280,000 new E ordinary shares of 25 South African
cents per share pursuant to an employee share ownership plan and black economic empowerment transaction.
186
The members further approved that the directors allot and issue up to 2,360,000 ordinary shares of 25 South African
cents at a subscription price of 38.88 percent of the 30 day volume weighted average traded price of an ordinary
share of AngloGold Ashanti on the JSE and 960,000 ordinary shares of 25 South African cents at a price per share
equal to the opening price of an ordinary share of AngloGold Ashanti on the JSE, at the day after the changes to the
articles of association as a result of the increase in authorized share capital are registered with the Company and
Intellectual Property Registration Office, to the Bokamoso ESOP Trust (an entity established for the purpose of
acquiring and managing the employment share ownership plan shares for the benefit of the employment share
ownership plan members) and that the directors allot and issue 1,400,000 E ordinary shares of 25 South African cents
a t a price of 25 South African cents each to Izingwe Holdings (Pty) Limited (an empowerment company).
At the annual general meeting of shareholders held on May 4 2007, members approved the following resolutions pertaining
to the ordinary share capital of the company:
4
as a general authority, authorization to the board of directors to allot and issue, at their discretion, and for such
purposes as they may determine, up to 10 percent of the authorized but unissued ordinary shares of 25 South African
cents each in the share capital of the company (subject to the South African Companies Act and the JSE Listings
Requirements), after setting aside so many ordinary shares of 25 South African cents each as may be required to be
allotted and issued by the company pursuant to the AngloGold Share Incentive Scheme, the Long-Term Incentive
Plan, the Bonus Share Plan, the Bokamoso Employee Share Ownership Plan, the Black Economic Empowerment
transaction, the Employee Share Ownership Plan to be implemented in countries other than South Africa and for
purposes of the conversion of the $1,000,000,000, 2.375 percent Guaranteed Convertible Bonds issued by
AngloGold Holdings plc.
The unissued ordinary shares under the control of the directors at May 4, 2007 are as follows:
Number of shares
Authorized ordinary share capital
400,000,000
Shares in issue at May 4, 2007
276,827,589
Unissued shares at May 4, 2007
123,172,411
Shares set aside in terms of:
- the AngloGold Share Incentive Scheme at 2.75 percent of shares in issue at May 4, 2007
7,612,759
- the 2.375 percent Guaranteed Convertible Bonds
15,384,615
Net unissued ordinary shares at May 4, 2007
100,175,037
- the board of directors
10 percent of net unissued shares
10,017,504
Less: shares issued at the discretion of the directors
—
Balance of shares under the control of the directors at May 4, 2007
10,017,504
Shares under the control of shareholder
90 percent of net unissued shares
90,157,534
5
as a general authority, authorization to the board of directors to allot and issue for cash, without restriction to any
public shareholder, as defined by the JSE Listings Requirements, as and when suitable opportunities arise, in their
discretion, the authorized but unissued ordinary shares of 25 South African cents each in the share capital of the
company, which were placed under the control of the directors, subject to the following conditions:
(a) that the authority shall only be valid until the next annual general meeting and in no case shall extend beyond
15 months;
(b) that a paid press announcement giving full details, including the impact on net asset value and earnings per
share, be published after any issue representing, on a cumulative basis within one financial year, 5 percent or
more of the number of shares in issue prior to the issue concerned;
187
(c) that the issues for cash in the aggregate in any one financial year shall not exceed 10 percent of the number of
shares of the company’s unissued ordinary share capital;
(d) that, in determining the price at which an issue of shares for cash will be made in terms of this authority, the
maximum discount permitted shall be 10 percent of the weighted average traded price of the ordinary shares on
the JSE (adjusted for any dividend declared but not yet paid or for any capitalization award made to
shareholders) over the 30 days prior to the date that the price of the issue is determined or agreed by AngloGold
Ashanti’s directors; and
(e) that this authority includes the issue of shares arising from any options or convertible securities issued for cash.
The above authorities (4) and (5) expire at the next annual general meeting of shareholders of the company.
The number of authorized but unissued ordinary shares in the capital of AngloGold Ashanti at December 31, 2006 and
June 25, 2007 is 123,763,847 and 123,166,117 respectively.
The table below details changes in the ordinary issued share capital of AngloGold since December 31, 2003.
Period to
Description
Number of Shares
December 31, 2003
223,136,342
Ordinary shares issued during 2004
AngloGold Ashanti's Ordinary Shares and Preference SharesAngloGold Ashanti’s authorized share capital is ZAR102,120,000, consisting of four classes of shares: ordinary shares of
par value ZAR0.25 each, E ordinary shares of par value ZAR0.25 each, A redeemable preference shares of par value
ZAR0.50 each and B redeemable preference shares of par value ZAR0.01 each. The ordinary shares and the
A redeemable preference shares have voting rights, while the B redeemable preference shares have voting rights only
under certain circumstances and, in respect of each of these classes of shares, there is no provision in the Articles of
Association for cumulative voting. There is no limitation imposed by the Articles of Association or by South African law on
the rights of any persons, including non-residents, to own AngloGold Ashanti ordinary shares or to exercise voting rights in
respect of AngloGold Ashanti ordinary shares. AngloGold Ashanti’s authorized and issued share capital as of
December 31, 2006 and June 25, 2007 (being the latest practicable date prior to the publication of this document) is set
out below:
Issued
Title of Class
Authorized
June 25, 2007
December 31, 2006
Ordinary shares
400,000,000
276,833,883
276,236,153
E ordinary shares
4,280,000
4,115,930
4,185,770
A redeemable preference shares
2,000,000
2,000,000
2,000,000
B redeemable preference shares
5,000,000
778,896
778,896
All of the issued ordinary shares, E ordinary, A redeemable preference shares and B redeemable preference shares are
fully paid and are not subject to further calls or assessment by AngloGold Ashanti.
All of the A redeemable preference shares and B redeemable preference shares are held by Eastvaal Gold Holdings
Limited, AngloGold Ashanti’s wholly-owned subsidiary. AngloGold Ashanti’s Articles of Association provide that the
A redeemable preference shares and B redeemable preference shares are not transferable.
In general meeting, shareholders of AngloGold Ashanti have approved, by specific authority, the following authorizations
for the allotment and issue of shares in the capital of the company:
1
At a general meeting of shareholders held on June 4, 1998, members approved the adoption by AngloGold, of the
AngloGold Limited Share Incentive Scheme and at the annual general meeting of shareholders held on
April 29, 2005, members approved the introduction of the Bonus Share Plan and Long-Term Incentive Plan
(collectively the “AngloGold Share Incentive Scheme or share incentive scheme”). The authority granted by
shareholders provides for 2.75 percent of the total number or ordinary shares in issue from time to time, being made
available for purposes of the share incentive scheme. The share incentive scheme shall endure for an indefinite
period until terminated by a resolution of the board of directors or the resolution of AngloGold Ashanti in general
meeting.
192,800
48,200
508,020
127,005
478,720
119,680
Acacia Employee Option Plan
–
–
6,300
1,575
66,598
16,6502
At December 31,
264,462,894 66,115,724 223,136,342 55,784,086 222,622,022 55,655,506
(1)
Arising from an offerthe annual general meeting of shareholders held on June 29, 2004, members approved the authorization to allot
and issue a maximum of 15,384,615 ordinary shares of 25 South African cents per share each in the authorized but
unissued capital of the company for purposes of the conversion of the $1,000,000,000, 2.375 percent Guaranteed
Convertible Bonds issued by AngloGold toHoldings plc. This authority expires on February 28, 2009 or such earlier time
in the event that all Convertible Bonds are exchanged for ADSs. See “Guaranteed Convertible Bonds” below.
3
At a general meeting of the shareholders held on December 11, 2006, members approved the increase of Normandy Mining Limited to acquire the entire issued
authorized share capital of Normandy. As acceptances inAngloGold Ashanti by the creation of 4,280,000 new E ordinary shares of 25 South African
cents per share pursuant to an employee share ownership plan and black economic empowerment transaction.
respect186
The members further approved that the directors allot and issue up to 2,360,000 ordinary shares of this offer constituted only 7.1625 South African
cents at a subscription price of 38.88 percent of Normandy’s issuedthe 30 day volume weighted average traded price of an ordinary
share of AngloGold Ashanti on the JSE and 960,000 ordinary shares of 25 South African cents at a price per share
equal to the opening price of an ordinary share of AngloGold Ashanti on the JSE, at the day after the changes to the
articles of association as a result of the increase in authorized share capital are registered with no possibilitythe Company and
Intellectual Property Registration Office, to the Bokamoso ESOP Trust (an entity established for the purpose of AngloGold obtaining majority control
acquiring and managing the employment share ownership plan shares for the benefit of Normandy,
the offer closed on January 18, 2002. The company’s holding of Normandy shares was disposed of in January 2002employment share
ownership plan members) and that the proceeds applied towards
repaying debt owed by the AngloGold group.
(2)
On November 11, 2002, AngloGold issued a circular to shareholders in which, inter alia, an offer was made to shareholders with holdings of less than 50
directors allot and issue 1,400,000 E ordinary shares (pre sub-division) in AngloGold (“odd-lots”) to either increase their odd-lot holdings to 50 ordinary shares (pre sub-division), retain or sell their
odd-lot holdings. The rationale behind the offer was to reduce the substantial administrative costs connected with the large number of odd-lot shareholders25 South African cents
(approximately 15,555 shareholders) in an equitable manner. The odd-lot offer was not available to holders of AngloGold ADSs and CDIs and to shareholders
whose registered addresses were, or who were located, in the United States or to shareholders who were US persons.
During the period January 1, 2005 to and including July 7, 2005, 149,600 ordinary shares were issued at an average issue
a t a price of R122.38 per share, resulting in 264,612,494 ordinary shares being in issue at July 7, 2005.
25 South African cents each to Izingwe Holdings (Pty) Limited (an empowerment company).181
7A. Major
shareholders
According to information available toAt the directors,annual general meeting of shareholders held on May 4 2007, members approved the following are the only shareholders beneficially holding, directly orresolutions pertaining
indirectly, more than 5 percent ofto the ordinary share capital of the company:
Ordinary shares held at4
December 31, 2004
December 31, 2003
December 31, 2002
Shareholder Number
%
voting
rights
Number %
voting
rights
Number %
voting
rights
Anglo American plc
134,788,099
50.97
121,502,197
54.45
114,457,368
51.41
The Bank of New York*
45,217,297
17.10
36,753,386
16.47
39,879,957
17.91
*
Ordinary shares held through various custodians in respect of American Depositary Shares issued by The Bank of New York. At December 31, 2004 the
number of persons who were registered holders of ADSs was reported at 4,822. AngloGold Ashanti is aware that many ADSs are held of record by brokers
and other nominees, and accordingly the above numbers are not necessarily representative of the actual number of persons who are beneficial holders of
ADSs or the number of ADSs beneficially held by these persons.
The company’s major shareholders have the same voting rights as other holders of AngloGold Ashanti ordinary shares and do
not have any different or special voting rights.
As at December 31, 2004, there were 17,657 holders of record of AngloGold Ashanti ordinary shares. Of these holders 403
had registered addresses in the United States and held a total of 215,853 ordinary shares, approximately 0.0816 percent of the
total outstanding ordinary shares. In addition, certain accounts of record with registered addresses outside the United States,
including The Bank of New York, hold AngloGold Ashanti ordinary shares, in whole or in part, beneficially for United States
persons.
At July 7, 2005, Anglo American plc held 134,788,099 ordinary shares, representing 50.94 per cent of the issued share capital
while 46,119,715 ADSs, or approximately 17.43 percent of the total issued ordinary share capital, were issued and outstanding
and held of record by 4,687 registered holders.
Insofar as is knowngeneral authority, authorization to AngloGold Ashanti, except as described below, as of December 31, 2004 there was no person who,
directly or indirectly, jointly or severally, exercised or could exercise control over AngloGold Ashanti, nor is AngloGold Ashanti
aware of any arrangements which might result in a change in control of AngloGold Ashanti.
All the issued A and B preference shares are held by Eastvaal Gold Holdings Limited, AngloGold Ashanti’s wholly-owned
subsidiary. The articles of association of AngloGold Ashanti provide that the A redeemable preference shares and the
B redeemable preference shares are not transferable.
Relationship with Anglo American plc (AA plc) and its subsidiaries
AA plc is the largest shareholder of AngloGold Ashanti with an equity interest and voting rights of 50.97 percent as at
December 31, 2004 (2003: 54.45 percent). Currently, five members of the board of directors to allot and issue, at their discretion, and for such
purposes as they may determine, up to 10 percent of AngloGold Ashanti are
affiliated with AA plc. AA plc has informed AngloGold Ashanti that it does not currently intend to have more than five members
affiliated with AA plc on the AngloGold Ashanti boardauthorized but unissued ordinary shares of directors at any time. However, currently there is no agreement25 South African
between AngloGold Ashanti and AA plc concerning membership on the AngloGold Ashanti board of directors by AA plc.
AngloGold Ashanti is an important strategic investment for AA plc as it represents AA plc’s principal investmentcents each in the global
gold industry. AngloGold Ashanti is an operating goldshare capital of the company independent of AA plc(subject to the extent that:
• The management is remunerated by AngloGold AshantiSouth African Companies Act and incentivized by an AngloGold Ashanti share incentive scheme;the JSE Listings
• A majorityRequirements), after setting aside so many ordinary shares of AngloGold Ashanti’s board of directors are non-executive directors25 South African cents each as may be required to be
allotted and including AngloGold Ashanti’s non-
executive chairman, 50 percent of these non-executive directors are not affiliated with AA plc;
• AngloGold Ashanti has the management, financial capacity and resources to carry out all aspects of its ongoing business
activities independent of AA plc;
• Where appropriate, AngloGold Ashanti may purchase selected specialized services from AA plc on normal commercial and
arm’s length terms. However, any such contract with AA plc is subject to the approval of a board sub-committee consisting
entirely of AngloGold Ashanti directors independent of AA plc; and
• AngloGold Ashanti has no service agreements or other contracts in terms of which any turnover or profit related fees are
payable to AA plc.
182
Anglo American Corporation (AAC), a wholly-owned subsidiary of AA plc, has the right to participate in future profits of certain
greenfield mineral rights that were transferred by AAC to AngloGold at the time of its formation. No value can be attached to
these greenfield mineral rights, until such time as these rights are developed.
7B. Related
party
transactions
At December 31, 2004, AA plc and its subsidiaries held an effective 50.97 percent interest in AngloGold Ashanti. In 1997, AAC
controlled the board of directors and provided various managerial, technical and administrative services as and when required
issued by the company pursuant to the AngloGold Share Incentive Scheme, the Long-Term Incentive
Plan, the Bonus Share Plan, the Bokamoso Employee Share Ownership Plan, the Black Economic Empowerment
transaction, the Employee Share Ownership Plan to be implemented in countries other than South Africa and for
purposes of the conversion of the $1,000,000,000, 2.375 percent Guaranteed Convertible Bonds issued by
AngloGold Holdings plc.
The unissued ordinary shares under the terms of a service agreement. This service agreement was cancelled at the endcontrol of the first quarter
directors at May 4, 2007 are as follows:
Number of 1998.shares
Related party transactions are concluded on an arm’s length basis. The group had the following transactions with related
parties during the years ended December 31, 2004, 2003 and 2002:Authorized ordinary share capital
December 31, 2004
December 31, 2003400,000,000
December 31, 2002Shares in issue at May 4, 2007
(
276,827,589
Unissued shares at May 4, 2007
123,172,411
Shares set aside in millions)
Purchases
from
related
party
$
Amounts
owed to
related
party
$
Purchases
from
related
party
$
Amounts
owed to
related
party
$
Purchases
from
related
party
$
Amounts
owed to
related
party
$
Related party transaction with holding company AA plc
5
-
2
-
2
-
Related party transactions with subsidiaries of AA plcterms of:
- the AngloGold Share Incentive Scheme at 2.75 percent of shares in issue at May 4, 2007
7,612,759
- the 2.375 percent Guaranteed Convertible Bonds
15,384,615
Net unissued ordinary shares at May 4, 2007
Boart Longyear Limited – mining services
9
1
10
1
9
–
Mondi Limited – forestry
16
2
11
1
18
(1)
1
Scaw Metals – A division of Anglo Operations Limited – steel and
engineering
14
1
12
1
11
1
Anglo Coal – a division of Anglo Operations Limited
1
-
-
-
-
-
Related party transactions with associates
Rand Refinery Limited – gold refinery
-
-
2
-
2
-
45
4
37
3
42
2
Related party transactions of equity accounted joint ventures
Société d’Exploitation des Mines d’Or de Sadiola S.A.
2
-
2
-
-
-
Société d’Exploitation des Mines d’Or de Yatela S.A.
2
-
-
-
-
-
Société des Mines de Morila S.A.
-
-
1
-
-
-
(1)
Includes $10 million as settlement by AngloGold of a claim in respect of an alleged breach of contract.
Since January 1, 2005, AngloGold Ashanti has not been, and as of the date of this annual report is not, a party to any material
transaction or proposed transaction by which any director, any other executive officer, any spouse or relative of any of the
foregoing or any relative of such spouse had or was to have direct or indirect material interest. In addition, no such persons
had any indebtedness to AngloGold Ashanti during this period, and as of the date of this annual report.
7C.
Interests of experts and counsel
Not applicable.
183
Item 8: Financial information
8A. Consolidated
financial statements and other financial information
See “Item 18: Financial statements”.
Legal proceedings
No director or officer of AngloGold Ashanti has either a direct or indirect position adverse to AngloGold Ashanti.
There are no legal or arbitration proceedings, including any such proceedings which are active, pending or threatened against,
or being brought by or against AngloGold Ashanti or any member company of AngloGold Ashanti, of which AngloGold Ashanti
is aware, which may have a significant effect on the financial position, results of operations or liquidity of AngloGold Ashanti, or
which have had such an effect since January 1, 2004.
The company is involved in the following cases:
In South Africa, a claim of approximately R5 million ($780,000) is due to be heard in the Bloemfontein High Court in
May/June 2005, relating to claims brought against the company for allegedly polluting water bodies near Wesselbron in
the Free State Province. The cost of litigation and any settlement will be paid out of an amount set aside by the Harmony
Gold Mining Company Limited in terms of the sale agreement between AngloGold and the former ARMgold and Harmony
in respect of the sale of AngloGold’s Free State assets. AngloGold Ashanti intends to dispute these claims in court;
In the USA, two civil cases brought against the company in 2000 and 2001 by the Sierra Club and the Minerals Policy
Center for allegedly exceeding certain permit water quality standards or lack of permits for certain identified flows (in
terms of the Clean Water Act) at the CC&V mine continues. In 2002, the company reported that it had entered into two
settlements with the US Environmental Protection Agency and the State of Colorado. The federal court has scheduled a
hearing in August 2005 wherein a determination could be made of claims that would be allowed to proceed to trial. No trial
date has been scheduled; and
The former Ashanti Goldfields Company Limited, Sam Jonah (formerly Ashanti’s Chief Executive and Group Managing
Director) and Mark Keatley (Ashanti’s former Chief Financial Officer) have been named as defendants in a consolidated
class action under the United States federal securities laws in the United States District Court for the Eastern District of
New York alleging nondisclosures and misstatements concerning Ashanti’s hedging position and program. The plaintiffs
contend that Ashanti’s and the individual defendants’ actions violated Sections 10(b) and 20(a) of the Securities Exchange
Act and Rule 10b-5 promulgated thereunder. Two of the proposed class actions that were consolidated purported to be
brought on behalf of investors who purchased Ashanti shares during the period July 28, 1999 through October 5, 1999,
while the third purported to be brought on behalf of inv estors who purchased Ashanti shares during the period April 21,
1997 through October 5, 1999. Negotiations are in progress to settle this litigation out of court however, there is no
guarantee that a settlement can be reached in a manner satisfactory to the parties involved.
Dividend policy
Dividends are proposed and approved by the board of directors of AngloGold Ashanti, based on the interim and year-end
financial performance. Dividends are recognized when declared by the board of directors of AngloGold Ashanti. Dividends
declared to foreign stockholders are not subject to the approval by the South African Reserve Bank (SARB). Dividends are
freely transferable to foreign stockholders from both trading and non-trading profits earned in South Africa by publicly listed
companies. In situations where a South African company has a calculated tax loss without a concomitant accounting loss, the
SARB requires that a notional tax charge be deducted from current profits before the profit available for distribution to
stockholders is determined.
AngloGold Ashanti expects to continue to pay dividends, although there can be no assurance that dividends will be paid in the
future or as to the particular amounts that will be paid from year to year. The payments of future dividends will depend upon the
Board’s ongoing assessment of AngloGold Ashanti’s earnings, financial condition, including its cash needs, future earnings
prospects and other factors.
8B. Significant
changes
None.
184
Item 9: The offer and listing
9A.
Offer and listing details
The following table sets out, for the periods indicated, the reported high and low market quotations for AngloGold Ashanti’s
ordinary shares on the JSE and for its sponsored ADSs on the NYSE:
JSE
(1)
NYSE
(2)
High
Low
High
Low
Year ended December 31
(South African cents per ordinary share)
(US dollars per ADS)
Annual information100,175,037
2000
19,250 9,300 28.69 12.25
2001
24,800 10,420 22.34 13.15
2002
34,700 20,000 35.33 17.62
2003
33,900 19,100 49.95 27.10
2004
31,900 18,620 48.25 29.91
Quarterly information
- the board of directors
200310 percent of net unissued shares
10,017,504
Less: shares issued at the discretion of the directors
—
Balance of shares under the control of the directors at May 4, 2007
10,017,504
Shares under the control of shareholder
First90 percent of net unissued shares
quarter90,157,534
33,900 21,200 38.69 27.105
Second
quarter
26,500 19,100 33.56 27.22
Third
quarter
30,700 23,000 41.57 29.89
Fourth
quarter
31,800 24,150 49.95 35.83
2004
First
quarter
31,900 25,701 48.25 38.99
Second
quarter
27,150 19,205 42.69 29.91
Third
quarter
25,400 18,620 38.99 29.97
Fourth
quarter
25,750 19,901 42.40 35.15
Monthly information
January
2005
21,399 18,700 35.76 31.75
February
2005
21,799 19,552 36.82 31.27
March
2005
24,500 20,378 39.00 33.90
April
2005
22,500 19,210 35.48 31.38
May
2005
23,000 19,000 34.39 30.50
June
2005
24,500 22,505 36.60 32.64
(
1)
The JSE share price information has been adjusted to give effectas a general authority, authorization to the two-for-one stock splitboard of directors to allot and issue for cash, without restriction to any
public shareholder, as defined by the JSE Listings Requirements, as and when suitable opportunities arise, in their
discretion, the authorized but unissued ordinary shares of 25 South African cents each in the share capital of the
company, which took effect fromwere placed under the closecontrol of businessthe directors, subject to the following conditions:
(a) that the authority shall only be valid until the next annual general meeting and in no case shall extend beyond
15 months;
(b) that a paid press announcement giving full details, including the impact on December 24,
2002.net asset value and earnings per
(2)
Prior to December 24, 2002, each ADS represented 0.5share, be published after any issue representing, on a cumulative basis within one financial year, 5 percent or
more of one ordinary share. With effect from the close of business on December 24, 2002, each ADS
represents one ordinary share.
See “Item 7A.: Major shareholders” for number of ADSs outstandingshares in issue prior to the issue concerned;
187
(c) that the issues for cash in the aggregate in any one financial year shall not exceed 10 percent of the number of
shares of the company’s unissued ordinary share capital;
(d) that, in determining the price at which an issue of shares for cash will be made in terms of this authority, the
maximum discount permitted shall be 10 percent of the weighted average traded price of the ordinary shares on
the JSE (adjusted for any dividend declared but not yet paid or for any capitalization award made to
shareholders) over the 30 days prior to the date that the price of the issue is determined or agreed by AngloGold
Ashanti’s directors; and
(e) that this authority includes the issue of shares arising from any options or convertible securities issued for cash.
The above authorities (4) and (5) expire at the next annual general meeting of shareholders of the company.
The number of authorized but unissued ordinary shares in the capital of AngloGold Ashanti at December 31, 2004.2006 and
June 25, 2007 is 123,763,847 and 123,166,117 respectively.
9B. Plan
of
distribution
Not applicable.
185
9C. Markets
Nature of trading market
Prior to June 29, 1998, the date on which AAC’s gold mining interests were consolidated into a single, focused, independent,
global gold mining company, ordinary shares of AngloGold (formerly Vaal Reefs) were listed on the Johannesburg Stock
Exchange (JSE), the London Stock Exchange (LSE) and the Paris bourse, were quoted in BrusselsThe table below details changes in the form of International
Depositary Receipts and were listed under grandfathered unsponsored American Depositary Receipts (ADR) programs on the
Nasdaq SmallCap Market. Shares of Freegold, Western Deep Levels and Southvaal were also listed under grandfathered
unsponsored ADR programs on the Nasdaq SmallCap Market. Historically, the principal trading market for such shares (as well
as for shares of Freegold, Western Deep Levels and Southvaal) had been the JSE and Nasdaq. As part of the consolidation,
shares of AngloGold, Freegold, Western Deep Levels and Southvaal w ere delisted from Nasdaq and shares of all participating
companies were delisted from the JSE.
With effect from the implementation of the consolidation, the ordinary shares were listed on the JSE, the LSE and the Paris
bourse and were quoted in Brussels in the form of International Depositary Receipts. In addition, American Depositary Shares
(ADSs) each representing half of one ordinary share and evidenced by ADRs issued by The Bank of New York under a
program sponsored by AngloGold were listed on the New York Stock Exchange (NYSE) on August 5, 1998.
The company was admitted to the official list of the Australian Stock Exchange (ASX) on November 15, 1999. The ordinary
shares of the company issued in connection with the acquisition of the entire issued share capital of Acacia Resources Limited
trade on the ASX. On November 28, 2001, AngloGold implemented a 10-for-1 split of the AngloGold CHESS Depositary
Interests (CDIs), which trade on the Australian Stock Exchange.
Effective at the close of business onsince December 24, 2002, AngloGold undertook a 2-for-1 stock split and a corresponding
change in the ratio of ordinary shares to ADSs from 0.5 ordinary shares per one ADS to one ordinary share per one ADS. At
the same time, the ratio of ordinary shares to CDIs changed from one ordinary share equivalent to ten CDIs to one ordinary
share equivalent to five CDIs.
On April 26, 2004, the Business Combination with Ashanti became effective, at which time, AngloGold changed its name to
AngloGold Ashanti Limited. Following the Business Combination, the company’s ordinary shares were listed on the Ghana
Stock Exchange (GSE). In addition, Ghanaian Depositary Shares (GhDSs) were listed on the GSE each representing one-
hundredth of an ordinary share and evidenced by GhDSs issued by NTHC Limited (as Depositary) under a program sponsored
by AngloGold Ashanti.31, 2003.
9D. SellingPeriod to
shareholders
None.
9E.Dilution
None.
9F.Description
ExpensesNumber of the issueShares
None.
December 31, 2003186
Item 10: Additional information223,136,342
10A. ShareOrdinary shares issued during 2004
capital
AngloGold Ashanti's Ordinary Shares and Preference Shares
AngloGold Ashanti’s authorized share capital is ZAR101,050,000,ZAR102,120,000, consisting of threefour classes of shares: ordinary shares of
par
value ZAR0.25 each, E ordinary shares of par value ZAR0.25 each, A redeemable preference shares of par value
ZAR0.50 each and B redeemable preference shares of par
value ZAR0.01 each. The ordinary shares and the
A redeemable preference shares have voting rights, while the
B redeemable preference shares have voting rights only
under certain circumstances and, in respect of each of these classes
of shares, there is no provision in the Articles of
Association for cumulative voting. There is no limitation imposed by the
Articles of Association or by South African law on
the rights of any persons, including non-residents, to own AngloGold Ashanti
ordinary shares or to exercise voting rights in
respect of AngloGold Ashanti ordinary shares. AngloGold Ashanti’s authorized
and issued share capital as of
December 31, 20 042006 and July 7, 2005June 25, 2007 (being the latest practicable date prior to the publication of
this document) is set
out below:
Issued
Title of Class
Authorized
July 7, 2005June 25, 2007
December 31, 20042006
Ordinary shares
400,000,000
264,612,494276,833,883
264,462,894276,236,153
E ordinary shares
4,280,000
4,115,930
4,185,770
A redeemable preference shares
2,000,000
2,000,000
2,000,000
B redeemable preference shares
5,000,000
778,896
778,896
All of the issued ordinary shares, E ordinary, A redeemable preference shares and B redeemable preference shares are
fully paid and are
not subject to further calls or assessment by AngloGold Ashanti.
All of the A redeemable preference shares and B redeemable preference shares are held by Eastvaal Gold Holdings
Limited,
AngloGold Ashanti’s wholly-owned subsidiary. AngloGold Ashanti’s Articles of Association provide that the
A redeemable
preference shares and B redeemable preference shares are not transferable.
AngloGold Ashanti is incorporated under the laws of South Africa and the rights of its shareholders are governed by the South
African Companies Act 61 of 1973, as amended, the South African Securities Regulation Code on Take-Overs and Mergers
and the Listings Requirements of the JSE, as well as AngloGold Ashanti’s Articles of Association. AngloGold Ashanti is
registered in South Africa with registration number 1944/017354/06.
At the annualIn general meeting, shareholders of AngloGold Ashanti held on April 29, 2004, ordinary resolutions relating tohave approved, by specific authority, the grant of afollowing authorizations
general authority tofor the directors to allotallotment and issue authorized but unissued AngloGold Ashantiof shares and to allot and issue
unissued AngloGold Ashanti shares for cash were withdrawn after certain shareholders had indicated that, in light of increased
concerns about corporate governance, they wished to limit the authoritycapital of the directors to allot and issue authorized but
unissued shares and to issue shares for cash, beyond the limitations which had been customary in the past. At that meeting it
was intimated that a general meeting of shareholders would be convened to consider alternative resolutions relating to the
authority of directors to allot and issue unissued AngloGold Ashanti Shares.company:
1
At a general meeting of shareholders held on June 4, 1998, members approved the adoption by AngloGold, of the
AngloGold Limited Share Incentive Scheme and at the annual general meeting of shareholders held on
April 29, 2005, members approved the introduction of the Bonus Share Plan and Long-Term Incentive Plan
(collectively the “AngloGold Share Incentive Scheme or share incentive scheme”). The authority granted by
shareholders provides for 2.75 percent of the total number or ordinary shares in issue from time to time, being made
available for purposes of the share incentive scheme. The share incentive scheme shall endure for an indefinite
period until terminated by a resolution of the board of directors or the resolution of AngloGold Ashanti in general
meeting.
2
At the annual general meeting of shareholders held on June 29, 2004, its shareholders approved:
1
by specific authority,members approved the authorization to allot
and issue a maximum of 15,384,615 ordinary shares of 25 South African
cents per share each in the authorized but
unissued capital of the company for purposes of the conversion of the
$1,000,000,000, $1,000,000,000, 2.375 percent Guaranteed
Convertible Bonds issued by AngloGold Holdings plc. This authority expires
on February 28, 2009 or such earlier time
in the event that all Convertible Bonds are exchanged for ADSs. See
“Guaranteed “Guaranteed Convertible Bonds” below.
23
At a general meeting of the shareholders held on December 11, 2006, members approved the increase of the
authorized share capital of AngloGold Ashanti by the creation of 4,280,000 new E ordinary shares of 25 South African
cents per share pursuant to an employee share ownership plan and black economic empowerment transaction.
186
The members further approved that the directors allot and issue up to 2,360,000 ordinary shares of 25 South African
cents at a subscription price of 38.88 percent of the 30 day volume weighted average traded price of an ordinary
share of AngloGold Ashanti on the JSE and 960,000 ordinary shares of 25 South African cents at a price per share
equal to the opening price of an ordinary share of AngloGold Ashanti on the JSE, at the day after the changes to the
articles of association as a result of the increase in authorized share capital are registered with the Company and
Intellectual Property Registration Office, to the Bokamoso ESOP Trust (an entity established for the purpose of
acquiring and managing the employment share ownership plan shares for the benefit of the employment share
ownership plan members) and that the directors allot and issue 1,400,000 E ordinary shares of 25 South African cents
a t a price of 25 South African cents each to Izingwe Holdings (Pty) Limited (an empowerment company).
At the annual general meeting of shareholders held on May 4 2007, members approved the following resolutions pertaining
to the ordinary share capital of the company:
4
as a general authority, authorization to the board of directors to allot and issue, at their discretion, and for such
purposes
as they may determine, up to 10 percent of the authorized but unissued ordinary shares of 25 South African
cents each in
the share capital of the company (subject to the South African Companies Act and the JSE Listings
Requirements), after
setting aside so many ordinary shares of 25 South African cents each as may be required to be
allotted and issued by the
company pursuant to the AngloGold Share Incentive Scheme, the Long-Term Incentive
Plan, the Bonus Share Plan, the Bokamoso Employee Share Ownership Plan, the Black Economic Empowerment
transaction, the Employee Share Ownership Plan to be implemented in countries other than South Africa and for
purposes of the conversion of the $1,000,000,000,
2.375 percent Guaranteed Convertible Bonds issued by
AngloGold Holdings plc. This authority expires
The unissued ordinary shares under the control of the directors at May 4, 2007 are as follows:
Number of shares
Authorized ordinary share capital
400,000,000
Shares in issue at May 4, 2007
276,827,589
Unissued shares at May 4, 2007
123,172,411
Shares set aside in terms of:
- the AngloGold Share Incentive Scheme at 2.75 percent of shares in issue at May 4, 2007
7,612,759
- the 2.375 percent Guaranteed Convertible Bonds
15,384,615
Net unissued ordinary shares at May 4, 2007
100,175,037
- the board of directors
10 percent of net unissued shares
10,017,504
Less: shares issued at the next annual
general meeting of shareholdersdiscretion of the company.
directors187—
3Balance of shares under the control of the directors at May 4, 2007
10,017,504
Shares under the control of shareholder
90 percent of net unissued shares
90,157,534
5
as a general authority, authorization to the board of directors to allot and issue for cash, without restriction to any
public
shareholder, as defined by the JSE Listings Requirements, as and when suitable opportunities arise, in their
discretion,
the authorized but unissued ordinary shares of 25 South African cents each in the share capital of the
company, which
were placed under the control of the directors, subject to the following conditions:
(a) that the authority shall only be valid until the next annual general meeting and in no case shall extend beyond
15 months;
(b) that a paid press announcement giving full details, including the impact on net asset value and earnings per share,
share, be published after any issue representing, on a cumulative basis within one financial year, 5 percent or
more of the
number of shares in issue prior to the issue concerned;
187
(c) that the issues for cash in the aggregate in any one financial year shall not exceed 10 percent of the number of
shares of the company’s unissued ordinary share capital;
(d) that, in determining the price at which an issue of shares for cash will be made in terms of this authority, the
maximum discount permitted shall be 10 percent of the weighted average traded price of the ordinary shares on
the
JSE (adjusted for any dividend declared but not yet paid or for any capitalization award made to
shareholders) over
the 30 business days prior to the date that the price of the issue is determined or agreed by AngloGold
Ashanti’s
directors; and
(e) that this authority includes the issue of shares arising from any options or convertible securities issued for cash.
The above authorities (4) and (5) expire at the next annual general meeting of shareholders of the company.
The number of authorized but unissued ordinary shares in the capital of AngloGold Ashanti at December 31, 20042006 and July 7,
2005 (being the latest practicable date prior to the publication of this document)June 25, 2007 is 135,537,106123,763,847 and 135,387,506123,166,117 respectively.
As authorized by shareholders on June 29, 2004, the ordinary shares under the control of the directors are as follows:
Number of shares
Authorized ordinary share capital
400,000,000
Shares in issue at June 29, 2004
264,327,663
Unissued shares at June 29, 2004
135,672,337
Shares set aside in terms of:
- the AngloGold Share Incentive Scheme at 2.75 percent of shares in issue at June 29, 2004
7,269,011
- the 2.375 percent Guaranteed Convertible Bonds
15,384,615
Net unissued ordinary shares at June 29, 2004
113,018,711
Shares under the control of:
- the shareholders
90 percent of net unissued shares
101,716,840
- the board of directors
10 percent of net unissued shares
11,301,871
Less: shares issued pursuant to the Business Combination in terms of warrants exercised
75,731
Balance of shares under the control of the directors at December 31, 2004
11,226,140
By a special resolution passed at a general meeting held on December 5, 2002, all of AngloGold's ordinary shares of ZAR 0.50
each were sub-divided into ordinary shares of ZAR 0.25 each, with effect from close of business on December 24, 2002.
At the annual general meeting held on April 29, 2005, shareholders approved, as a general authority, authorization to the board
of directors to allot and issue, at their discretion, and for such purposes as they may determine, up to 11,281,297 ordinary
shares of 25 South African cents each in the share capital of the company, representing 10 percent of the authorized but
unissued ordinary shares of 25 South African cents each in the share capital of the company (subject to the South African
Companies Act and the JSE Listings Requirements), after setting aside so many ordinary shares of 25 South African cents
each as may be required to be allotted and issued by the company pursuant to the AngloGold Share Incentive Scheme and
Plans and for purposes of the conversion of the $1,000,000,000, 2.375 percent Guaranteed Convertible Bonds issued by
AngloGold Holdings plc. This authority expires at the next annual general meeting of shareholders of the company.
188
The table below details changes in the ordinary issued share capital of AngloGold since December 31, 2001. All references to
ordinary shares in the table below are given as if the sub-division described above had taken place on December 31, 2001.2003.
Period to
Description
Number of Ordinary Shares
December 31, 20012003
215,268,116223,136,342
Ordinary shares issued during 20022004
Normandy bid – swap shares
6,403,236
Normandy bid – top-up shares
127,156
AngloGold
odd-lot
offer 278,196
AngloGold Share Incentive Scheme
478,720
Acacia Employee Option Plan
66,598
December 31, 2002
222,622,022
Ordinary shares issued during 2003
AngloGold Share Incentive Scheme
508,020
Acacia Employee Option Plan
6,300
December 31, 2003
223,136,342
Ordinary shares issued during 2004
AngloGold Share Incentive Scheme
192,800
Business Combinationcombination – swap shares
38,400,021
Business Combinationcombination – regulatory shares
2,658,000
Business
Combinationcombination
–
warrants
75,731
December 31, 2004
264,462,894
Ordinary shares issued to July 7,during 2005
AngloGold Share Incentive Scheme
149,600475,538
December 31, 2005
264,612,494264,938,432
Ordinary shares issued during 2006
AngloGold Share Incentive Scheme
398,399
USD500 million equity raise
9,970,732
Employee Share ownership programme
928,590
December 31, 2006
276,236,153
Ordinary shares issued to June 25, 2007
AngloGold Share Incentive Scheme
591,700
Employee Share ownership programme
6,030
276,833,883
The table below details changes in the E ordinary issued share capital of AngloGold Ashanti.
Period to
Description
Number of Shares
January 31, 2006
-
E Ordinary shares issued during 2006
- The Bokamoso ESOP Trust
2,785,770
- Izingwe Holdings (Proprietary) Limited
1,400,000
December 31, 2006
4,185,770
Cancelled and exchanged for ordinary shares
(21,150)
January 31, 2007
4,164,620
Cancelled and exchanged for ordinary shares
(69,840)
4,115,930
There has been no change in the issued preference share capital of AngloGold since December 31, 2001.
At the general meeting of shareholders on December 11, 2006 the authorized share capital was increased by the creation
of a new class of shares, being E ordinary shares and 4,185,770 E ordinary shares were issued on December 15, 2006.
Save as disclosed in this paragraph and under “AngloGold“Item 6.E. Share Ownership - AngloGold Share Incentive Scheme and Plans”Scheme” as well
as “Guaranteed
Convertible Bonds”, below, no share or loan capital of AngloGold Ashanti or any of its subsidiary
undertakings is under option or is
agreed conditionally or unconditionally to be put under option.
188
All existing ordinary shares are in registered form. The holding of ordinary shares in uncertificated form is permitted under
AngloGold Ashanti’s Articlesarticles of Associationassociation and the transfer of ordinary shares is permitted through STRATE. Ordinary
shares
are not eligible for settlement within CREST.
Guaranteed Convertible Bonds: On February 27, 2004, AngloGold Holdings plc, a wholly-owned subsidiary of
AngloGold
Ashanti, issued $1,000,000,000, 2.375 per centpercent guaranteed Convertible Bonds due 2009, convertible into
AngloGold Ashanti
ADSs and guaranteed by AngloGold Ashanti. Subject to certain restrictions, holders of Convertible
Bonds are entitled to
convert each Convertible Bond into an AngloGold Ashanti ADSsADS at the then applicable conversion
price at any time from
April 8, 2004 to February 20, 2009, or, if the Convertible Bonds are called for redemption earlier than
February 27, 2009, the
seventh business day prior to the date of early redemption. If the bonds have not been converted
by February 20, 2009, they
will be redeemed at par on February 27, 2009. AngloGold Holdings plc has the option of calling
an early redemption of all the
bonds 3 years after their issuance, if the price of the ADSs exceeds 130 percent of the
conversion price for more than 20 days
during any period of 30 consecutive trading days.
The initial conversion price for the Convertible Bonds is $65.00 per AngloGold Ashanti ADS. The conversion premium to
the
reference volume weighted average price of the ADSs on the New York Stock Exchange of $40.625 on
February 19, 2004,
when the issue of the Convertible Bonds was announced, was 60 per cent.percent. If all holders of Convertible
Bonds exercise their
option to convert their Convertible Bonds into ADSs and assuming no adjustments are made to the
initial conversion price, up
to 15,384,615 new ADSs will be issued. The conversion ratio is subject to adjustment in case of
various corporate events
including share splits and capital distributions.
189
10B.
Memorandum and Articles of Association
Registration
AngloGold Ashanti is incorporated under the laws of the Republic of South Africa (registrationand registered with the Registrar of
Companies under registration number 1944/017354/06).
06. AngloGold Ashanti’s memorandum of association provides that the
company’s main business is to carry on gold exploration,
the mining and production of gold, the manufacturing, marketing and selling of gold products and the development of markets
for gold. AngloGold Ashanti’s main object is to engage in all aspects of the business of gold exploration, the mining and
production of gold, the manufacturing, marketing and selling of gold products and the development of markets for gold.
SetAngloGold Ashanti is governed by its articles of association which document is available for inspection as set out below isin
“Item 10 H.: Documents on Display” and a summary of pertinent provisions, including rights of the holders of shares in
AngloGold Ashanti, are set out below.
This summary does not contain all the information concerning the rights of holders of AngloGold Ashanti’s ordinary shares
and is qualified in its entirety by reference to the law of South Africa and AngloGold Ashanti’s governing corporate
documents. As well as being governed by the provisions of the Articlesarticles of Associationassociation, the rights of holders of AngloGold
Ashanti’s ordinary shares are governed by the South African Companies Act 61 of 1973, as amended, the South African
Securities Regulation Code on Take-Overs and Mergers and the JSE Listing Requirements. In addition, rights of holders of
AngloGold Ashanti whichADSs are available for
inspection as set out in “Item 10.H.: Documents On Display”.governed by the deposit agreement between AngloGold Ashanti and the Bank of New York.
Directors
The management and control of any business of AngloGold Ashanti shall beis vested in the directors who, in addition to their
powers under the Articles,articles of association, may exercise all powers and do all such acts and things as may be exercised or
done by AngloGold Ashanti which are not expressly required to be exercised or done by AngloGold Ashanti’s shareholders
Ashanti.in a general meeting.
Appointment, Retirement and Removal of Directors
The board of directors may appoint any person to be a director and any director so appointed shall hold office only until the
following annual general meeting and shall then be eligible for re-election. The directors who retire at the annual general
meeting in this manner shall not be taken into account in determining the directors who are to retire by rotation at such
meeting.
At every annual general meeting at least one-third of the directors must retire from office, but are eligible for re-election.
The directors so to retire at such annual general meeting shall be those who have been the longest in office since their last
election. Where more than one director has served for an equal length of time, unless they agree between themselves, the
director to resign will be determined by lot.
189
A director will no longer act as a director of the company if he becomes insolvent or subject to insolvency procedures, is
found to be of unsound mind, is requested to resign by at least three-quarters of the directors, is removed by a board
resolution of AngloGold Ashanti or is absent from board meetings without leave of the directors for six consecutive months.
A director can resign with one month’s written notice unless he obtains the permission of the directors to shorten his notice
period.
The articles of association contain no provision for directors to hold qualification shares, nor stipulate an age limit
requirement for the retirement or non-retirement of directors.
Board Meetings
The directors may regulate board meetings and determine the quorum necessary for the transaction of business as they
think
fit. Unless otherwise determined by the directors, two directors form a quorum. Issues arising at meetings are decided
by
majority vote with the chairman having a second or casting vote where there are more than two directors present at the
meeting.
A director who is in any way, whether directly or indirectly, interested in a contract or arrangement or proposed contract or
arrangement with AngloGold Ashanti or any of AngloGold Ashanti’s subsidiaries must declare the nature of his interest to
AngloGold Ashanti in accordance with the Companies Act. A director shall not vote nor be counted in the quorum on any
resolution in respect of any contract or arrangement in which he is interested. This provision does not apply in relation to any
contract by a director to subscribe for or underwrite securities and where the contract or arrangement is with a company in
which he is interested by reason only of being a director, officer, creditor or member of such company. These provisions may
be altered or suspended by AngloGold Ashanti in a general meeting.
Borrowing Powers
AngloGold Ashanti may create and issue secured or unsecured debentures and the directors may borrow or secure the
payment of such sums as they think fit and may secure the repayment of any indebtedness by bond, mortgage or charge
provided that no special privileges as to allotment of shares, attending and voting at meetings, appointment of directors or
otherwise shall be given to the holders of AngloGold Ashanti’s debentures without the sanction of AngloGold Ashanti
shareholders in a
general meeting.
Directors’ AngloGold Ashanti’s borrowing powers are unlimited. These borrowing powers may be varied by AngloGold Ashanti
shareholders by way of a special resolution in a general meeting.
Remuneration
The directors are entitled to such remuneration as AngloGold Ashanti shareholders may determineapprove by ordinary resolution in
a general
meeting. If a director performs services that, in the opinion of the board of directors, are outside the scope of the
ordinary
duties of a director, he may be paid such extra remuneration as the directors determine. For more information on the
remuneration
Interests of directors see “Item 6B: Compensation.”
Retirement and Removal of DirectorsRestriction on voting
A director must retire from office if he becomes insolventwho is in any way, whether directly or subject to insolvency procedures, is found to be of unsound mind,
is requested to resign by at least three-quarters of the directors, is removed byindirectly, interested in a resolution ofcontract or arrangement or proposed contract or
arrangement with AngloGold Ashanti or is absentany of AngloGold Ashanti’s subsidiaries must declare the nature of his interest to
from board meetings without representation for six consecutive months. A director can resignAngloGold Ashanti in accordance with one month’s written notice
unless he obtains the permission of the directors to shorten his notice period.
At every annual general meeting at least one-third of the longest serving directors must retire from office but are eligible for re-
election. Where more than one director has served for an equal length of time, unless they agree between themselves, the
director to resign will be determined by lot.
190
Interests of directors/Restriction on voting/Indemnity of officersCompanies Act.
A director shall not vote nor be counted in the quorum and if he shall do so his vote shall not be counted on any resolution
for
his own appointment to any other office or position under AngloGold Ashanti or in respect of any contract or
arrangement in
which he is interested, but this prohibition shall not apply to:
(i)
any arrangement for giving to any director any security or indemnity in respect of money lent by him to, or obligations
undertaken by him for the benefit of, AngloGold Ashanti,
(ii) any arrangement for the giving by AngloGold Ashanti of any security to a third party in respect of a debt or obligation of
of AngloGold Ashanti which the director has himself guaranteed or secured,
(iii) any contract by a director to subscribe for or underwrite securities, or
(iv) any contract or arrangement with a company in which he is interested by reason only of being a director, officer, creditor
creditor or member of such company (and note that these prohibitions may at any time be suspended or relaxed to
any extent
either generally, or in respect of any particular contract or arrangement, by AngloGold Ashanti in general
meeting).
Where proposals are under consideration concerning the appointment (including fixing or varying the terms of
appointment) of
two or more directors to offices or employments with AngloGold Ashanti or any company in which
AngloGold Ashanti is
interested, such proposals may be divided and considered in relation to each director separately and
in such cases each of the
directors concerned shall be entitled to vote (and be counted in the quorum) in respect of each
resolution except that
concerning his own appointment.
190
If any question arises at any meetingsmeeting as to the entitlement of any directors to vote and such question is not resolved by his
voluntarily agreeing to abstain from voting, such question must be referred to the chairman of the meeting and his ruling in
relation to any other director must be final and conclusive except in a case where the nature or extent of the interests of the
director concerned have not been fairly disclosed.
The directors may exercise the voting powers conferred by the shares in any other company held or owned by AngloGold
Ashanti in such manner and in all respects as they think fit, including the exercise thereof in favor of any resolution
appointing
themselves or any of them to be directors or officers of such other company or voting or providing for the
payment of
remuneration to the directors or officers of such other company.
The articles of association contain no provision for directors to hold qualification shares or for an age limit requirement for the
retirement or non-retirement of directors.
Share Rights, Preferences and Restrictions
AngloGold Ashanti is incorporated under the laws of South Africa and rights of holders of AngloGold Ashanti’s ordinary shares
are governed by the South African Companies Act 61 of 1973 as amended, the South African Securities Regulation Code on
Take-Overs and Mergers and the JSE Listings Requirements, as well as AngloGold’s articles of association. In addition, rights
of holders of AngloGold Ashanti ADSs are also governed by the deposit agreement between AngloGold Ashanti and The Bank
of New York which governs the AngloGold Ashanti ADS program.
Rights of holders of AngloGold Ashanti’s ordinary shares are summarized below. The following summary does not contain all
the information concerning rights of holders of ordinary shares and is qualified in its entirety by reference to the laws of South
Africa and AngloGold Ashanti’s governing corporate documents.
Allotment and Issue of Ordinary Shares
Any unissued ordinary shares can be disposed of or dealt with in such manner as AngloGold Ashanti shareholders may
direct in a general
meeting. AngloGold Ashanti shareholders may resolve that all or any of such ordinary shares are at the
disposal of the directors who may
allot, grant options over or otherwise deal with or dispose of the ordinary shares to such
persons at such times and on such
terms and conditions and for such consideration as theythe directors may think proper. No ordinary shares may be issued at a discount
except in accordance with section 81 of the South African Companies Act. Section 81 of the Companies Act states that a
company can issue at a discount to par value shares of a class already in issue, if such issue is authorized by a special
resolution, that company has been trading for at least one year, the issue is sanctioned by the court and occurs within one
month of the sanction and the prospectus contains detail s of the discount.
191determine.
Any ordinary shares may be issued with such rights or restrictions as AngloGold Ashanti shareholders in a general meeting
may from time to
time determine. In addition, AngloGold Ashanti
No ordinary shares may resolve to grantbe issued at a discount except in accordance with section 81 of the South African Companies Act.
Section 81 states that a company can issue shares at a discount to the directorspar value shares of such shares, if such shares are
of a class already in issue, if such issue is authorized by a special resolution, if the powercompany has been trading for at least
one year, if the issue is sanctioned by the court and if the issue occurs within one month of the sanction. If shares are
issued at a discount, every prospectus issued by the company thereafter relating to the issue ordinaryof any shares, shall contain
particulars of the discount allowed on the issue of those shares, or so much of the discount as has not been written off at
the date of the issue of such terms and conditions and with such rights attached as the directors may determine.prospectus.
Dividends, rights and distributions
The ordinary shares participate fully in all dividends, other distributions and entitlements as and when declared by
AngloGold
Ashanti in respect of fully paid ordinary shares. Under South African law, AngloGold Ashanti may declare and
pay dividends
from any reserves included in total shareholders’ equity calculated in accordance with SA GAAP,International Financial
Reporting Standards, subject to its solvency and
liquidity. No larger dividend shall be declared by shareholders in general
meeting than is recommended by the directors.
Dividends are payable to shareholders registered at a record date that is
after the date of declaration.
Under the terms of the articles of association, dividendsDividends may be declared in any currency at the discretion of the board of
directors. Currently, dividends are declared in
South African rands and paid in Australian dollars, South African rands,
Ghanaian cedis or United Kingdom pounds.
Dividends paid to registered holders of AngloGold Ashanti ADSs are paid in US
dollars converted from South African rands
by The Bank of New York, as depositary, in accordance with the deposit
agreement. For details
As approved by shareholders in general meeting on exchange controls applicable to holdersDecember 11, 2006, the company’s authorized share capital was
increased through the creation of a maximum of 4,280,000 E ordinary shares, or ADSs, see "Item 10D.: Exchangeto be issued for cash, pursuant to an
controls".employee share ownership plan and black economic empowerment transaction. The E ordinary shares will not be listed.
Holders of E ordinary shares are entitled to receive a dividend, equal to one-half of the dividend per ordinary share
declared by AngloGold Ashanti from time to time.
The holder of B preference shares is entitled to an annual dividend amounting to the lesser of five percent of the issue
price of
the B preference shares, or an amount equivalent to the balance of the after-tax profits from income from mining
the Moab Lease Area (which is part of the Vaal River
operations in South Africa) as determined by the directors in each
financial year. This annual dividend is a first charge on any
profit available for distribution from the Moab Lease Area butArea. The
annual dividend is not payable from any of AngloGold Ashanti’s other profits.
The holder of A preference shares is not entitled to dividends until after AngloGold Ashanti has paid the annual dividend on the
B preference shares in full. Then, it is entitled to an annual dividend equivalent to the balance of the after-tax profits from
income from mining the Moab Lease Area as determined by AngloGold Ashanti’s directors in each financial year.year, only
once the annual dividend on the B preference shares has been paid in full.
191
Any dividend may be paid and satisfied, either wholly or in part, by the distribution of specific assets, or in paid-up
securities of
AngloGold Ashanti or of any other company, or in cash, or in any one or more of such ways as the directors or
AngloGold
Ashanti in general meeting may at the time of declaring the dividend determine and direct.
The directors may from time to time make such regulations as they may think fit in regard to the payment of dividends to
members having registered addresses outside South Africa, and such regulations may provide for the payment of such
dividends in any foreign currency and the rate of exchange at which such payment shall be made and such other matters as
the directors may think fit.
All dividends remaining unclaimed for a period of not less than three years from the date on which they became payable,
may
be forfeited by resolution of the directors for the benefit of the company.
All of the issued ordinary shares, A redeemable preference shares and B redeemable preference shares are fully paid and
are
not subject to further calls or assessment by AngloGold Ashanti.
Voting rights
Each ordinary share confers upon the member the right to vote at all general meetings. Each member present in person or,
in the case of a
corporate entity, represented, has one vote on a show of hands. If a poll is held, members present or any
duly appointed proxy
will have one vote for each ordinary share held. A holder of ordinary shares is entitled to appoint a
proxy to attend, speak and vote at any meeting on his or her behalf and the proxy need not be a shareholder. Holders of
ADSs are not entitled to vote in person at meetings, but may vote
by way of proxy through The Bank of New York as the
ADS issuer. Holders of CDIs are not entitled to vote in person at
meetings, but may vote by way of proxy.
There are no limitations on the right of non-South African shareholders to hold or exercise voting rights attaching to any of
the
ordinary shares.
192Holders of E ordinary shares have the right to vote at all general meetings and are entitled to appoint a proxy to attend,
speak and vote at any meeting on his or her behalf and the proxy need not be a shareholder, to the extent that holders of
E ordinary shares will not be entitled to veto any resolution that would otherwise have been capable of being passed, or
not, by the required majority of votes of holders of ordinary shares and subject to the Listings Requirements of the JSE,
holders of E ordinary shares will not be counted for categorization purposes in terms of section 9 of the Listings
Requirements. These limitations on the E ordinary shares are a function of shareholder approval and the JSE Listing
Requirements.
The A redeemable preference shares have voting rights that are very similar to those of ordinary shares. The B redeemable
preference shares have limited voting rights, except in the event that a dividend on this class of share has not been paid
and
remains unpaid for six months, or in connection with issues directly affecting these preference shares or AngloGold
Ashanti as
a whole, such as disposal of substantially all of the company’s assets, winding up AngloGold Ashanti or
reducing the
company’s share capital.
The articles of association do not provide for cumulative voting in respect of any of the classes of AngloGold Ashanti’s
shares.
The articles of association specify that one-third of the directors or, if their number is not a multiple of three, then the number
nearest to, but not less than, one-third, must retire from office at each annual general meeting. Any director who has served as
a director for three years since his last election must retire at the next annual general meeting even if, as a result, more than
one-third of the directors retire. Retiring directors are eligible for re-election.
The articles of association specify that if new classes of ordinary or preference shares are issued, the rights relating to any
class of shares may be modified or abrogated either with the consent in writing of the holders of at least three-fourths of
the
issued shares of that class, or with the sanction of a resolution passed as if it were a special resolution of the company
at a
separate general meeting of the holders of the shares of that class.
Transfer of Ordinary Shares
Dematerialized shares which have been traded on JSE are transferred on the STRATE (Share Transactions Totally
Electronic) settlement system and delivered within five business days after each trade.
The dematerialization of shares is not mandatory and holders of ordinary shares in AngloGold Ashanti may elect to retain
their certificated securities. Subject to any statutory restrictions on transfer any member may transfer all or part of his
certificated securities, to the extent it
is not prevented by section 91A of the Companies Act. Every transfer must be in
writing in the usual common form or in such
other form as the directors may approve and must be left at the transfer office
where the register of transfers is kept or at such
other place as the directors prescribe and must be accompanied by the
share certificate and such other evidence as the
directors or registrar may require to prove title and capacity of the
intending transferor or transferee.
The directors may refuse to register any transfer of certificated securities unless the instrument of transfer, duly stamped,
is
lodged with AngloGold Ashanti accompanied by the share certificate, the transfer is in respect of only one class of
securities or
the transfer is permitted within any of AngloGold Ashanti’s incentive schemes.
192
Conversion of Ordinary Shares into Stock
AngloGold Ashanti may by special resolution convert any paid-up shares into stock and may reconvert any stock into paid-uppaid-
up shares of any denomination. The holders of stock may transfer their respective interests but the directors may fix the
minimum
amount of stock transferable. The holders of stock have the same rights, privileges and advantages as regards
participation in
profits and voting at general meetings of AngloGold Ashanti as if they held the shares from which the stock
arose. All of the
provisions of the Articles apply equally to stock as to shares.
Increase and Reduction of Capital
AngloGold Ashanti canshareholders may by way of special resolution in a general meeting and in accordance with the
provisions of the Companies Act resolve to to:
·
increase its capital by any sum divided into shares of any amount.amount;
Subject to the requirements of the Companies Act and the rules and requirements of the stock exchange on which the
securities are listed, AngloGold Ashanti may by ordinary resolution reduce, dispose of, distribute or otherwise deal with in any
manner its share capital, share premium, stated capital, reserves and capital redemption reserve fund.·
By special resolution and in accordance with the provisions of the Companies Act, AngloGold Ashanti can resolve to
consolidate and divide all or any part of its share capital into shares of larger amounts or consolidate and reduce the
number of
any issued no par value shares;
·
increase the number of any issued no par value shares without increasing its stated capital;
cancel any shares which
have not been subscribed for;
·
sub-divide its shares or any of them into shares of smaller amounts
than fixed by the memorandum of association;
·
vary, modify or amend any rights attached to any shares whether issued or not,
including the conversion of any
shares into preference shares; and
·
convert any of its shares whether issued or not into shares
of another class.
In addition, AngloGold Ashanti shareholders may by ordinary resolution in a general meeting and subject to the
requirements of the Companies Act and the rules and requirements of the stock exchange on which the securities are
listed, reduce, dispose of, distribute or otherwise deal with in any manner its share capital, share premium, stated capital,
reserves and capital redemption reserve fund.
Share Premium Account and Capital Redemption Reserve Fund
AngloGold Ashanti shareholders may by ordinary resolution in a general meeting authorize the directors to distribute or
deal with, in any way recommended by
the directors, all or any part of the amount outstanding to the credit of any share
premium account or capital redemption
reserve fund of AngloGold Ashanti.
193
Rights upon liquidation
In the event of a winding up of the company, AngloGold Ashanti:
·
the B redeemable preference shares confer the right, in priority to any payment in
respect of the ordinary shares or
the A preference shares in the capital of AngloGold Ashanti, to receive only so much of the
net proceeds from the
disposal of the assets relating to the Moab Lease Area as is available for distribution, but not exceeding
a return for
each B redeemable preference share of the capital paid up on that share and any share premium paid on the issue of
of the B redeemable preference shares outstanding at that time. The B redeemable preference shares do not confer the right
to participation in the surplus funds of AngloGold Ashanti arising in any other manner.
Upon winding up of AngloGold Ashanti, ·
the A redeemable preference shares confer the right, in priority to any payment in
respect of the ordinary shares but
after any payment in respect of the B preference shares, to receive only so much of the net
proceeds from the
disposal of the assets relating to the Moab Lease Area as is then available for distribution.
· The
A redeemable and B redeemable shares do not confer the right to participation in the surplus funds of AngloGold
Ashanti arising in any other
manner.
The·
the ordinary shares and E ordinary shares confer the rightequal rights to any surplus arising from the liquidation of any all
other assets of AngloGold Ashanti.
193
Redemption provisions
The A redeemable preference shares may be redeemed for their nominal value, plus a premium per share of an amount
equal
to the net proceeds available from the disposal of the assets relating to the Moab Lease Area, after redemption in full
of the
B preference shares and payment of the nominal value of the A preference shares, divided by 2,000,000.
The B redeemable preference shares may be redeemed for their nominal value, plus a premium of up to R249.99 per
share,
but limited to an amount equal to the net proceeds available from the disposal of the assets relating to the Moab
Lease Area
after payment of the nominal value of the B preference shares.
The ordinary shares are not redeemable.
Description of AngloGold Ashanti ADSs
The Bank of New York issues AngloGold Ashanti’s American Depositary Shares, or ADSs. One ADS represents the
ownership interest of one ordinary share of AngloGold Ashanti.
The Unrestricted ADS Deposit Agreement and Restricted ADS Deposit Agreement
This section provides a summary description of AngloGold Ashanti’s ADSs.
AngloGold Ashanti has entered twothe following Deposit Agreements with The Bank of New York as depositary and the
owners and
beneficial owners of American Depositary Receipts (the “Deposit Agreements”):
Under1. the Deposit Agreement amended and restated as of August 5, 1998, filed with the SEC as an exhibit to AngloGold
Ashanti’s registration statement on Form F-6 (Registration Statement No. 333-14066) (the “Unrestricted ADS Deposit
Agreement”) The Bank of New York as depositary issues ADSs which are not subject to transfer restrictions under the
Securities Act; and are listed and trade on the New York Stock Exchange (the “Unrestricted ADSs”). The forms of the
Unrestricted ADS Deposit Agreement and the Unrestricted ADSs, are exhibits to AngloGold Ashanti’s registration statement on
Form F-6 (Registration Statement No. 333-14066).
Under2. the Deposit Agreement dated February 27, 2004 , filed with the SEC as an exhibit to AngloGold Ashanti’s registration
statement on Form F-6 (Registration Statement No. 333-14066) (the “Restricted ADS Deposit Agreement”) The Bank of New York as
depositary issues ADSs which are considered “restricted securities” within the meaning of Rule 144 of the Securities Act (the
“Restricted ADSs”). AngloGold Ashanti has entered a Registration Rights Agreement pursuant to which it has undertaken to
file a registration statement with the SEC covering resales of Restricted ADSs. Any holder of Convertible Bonds which were
offered and sold in the United States to Qualified Institutional Buyers (“QIBs”) in reliance on Rule 144A under the Securities Act
exercising its right to convert its Convertible Bonds into ADSs prior to the later of February 27, 2006 and the date that is two
years after the last date on which AngloGold Ashanti or any affiliate of AngloGold Ashanti was the owner of such Convertible
Bonds, will receive Restricted ADSs issued under the Restricted ADS Facility. Any holder of Convertible Bonds which were
offered and sold outside the United States in accordance with Regulation S under the Securities Act exercising its right to
convert its Convertible Bonds into ADSs will receive Unrestricted ADSs issued under the Unrestricted ADS Facility.
194
The description below generally applies to the ADSs issued under both the Restricted and the Unrestricted ADS Facility. The
material differences between the two Facilities are:
prior to the later of February 27, 2006 and the date that is two years after the last date on which AngloGold Ashanti or any
affiliate of AngloGold Ashanti was the owner of such Convertible Bonds, only Restricted ADSs will be issued upon
conversion of Convertible Bonds offered and sold in the United States to QIBs in reliance on Rule 144A under the
Securities Act;
holders of Restricted ADSs under the Restricted ADS Facility are required to give certain certifications upon deposit or
withdrawal of the ordinary shares underlying their Restricted ADSs as described generally in “ Description of the
ADSs Deposit, Withdrawal and Cancellation” below;
Restricted ADSs will carry a transfer restrictions legend; and
Restricted ADSs generally may be held in book–entry form.,
As this section is a summary, it may not contain all the information that may be important to a holder of ADSs. For more
complete information, see “Item 10.H.: Documents On Display”. Copies of the Deposit Agreements for each Facility are
also
available for inspection at the Corporate Trust Office of The Bank of New York currently located at 101 Barclay Street,
New
York, New York, 10286.
Under the Unrestricted ADS Deposit Agreement The Bank of New York as depositary issues ADSs which are not subject
to transfer restrictions under the Securities Act and are listed and trade on the New York Stock Exchange (the Unrestricted
ADSs).
Under the Restricted ADS Deposit Agreement The Bank of New York as depositary issues ADSs which are considered
“restricted securities” within the meaning of Rule 144 of the Securities Act (the Restricted ADSs). AngloGold Ashanti has
entered a Registration Rights Agreement pursuant to which it has undertaken to file a registration statement with the SEC
covering resales of Restricted ADSs.
Any holder of Convertible Bonds which were offered and sold in the United States to Qualified Institutional Buyers (QIBs) in
reliance on Rule 144A under the Securities Act exercising its right to convert its Convertible Bonds into ADSs prior to the
later of February 27, 2006 and the date that is two years after the last date on which AngloGold Ashanti or any affiliate of
AngloGold Ashanti was the owner of such Convertible Bonds, will receive Restricted ADSs issued under the Restricted
ADS Facility. Any holder of Convertible Bonds which were offered and sold outside the United States in accordance with
Regulation S under the Securities Act exercising its right to convert its Convertible Bonds into ADSs will receive
Unrestricted ADSs issued under the Unrestricted ADS Facility.
The description below generally applies to the ADSs issued under both the Restricted and the Unrestricted ADS Facility.
The material differences between the two Facilities are:
· prior to the later of February 27, 2006 and the date that is two years after the last date on which AngloGold Ashanti or
any affiliate of AngloGold Ashanti was the owner of such Convertible Bonds, only Restricted ADSs will be issued upon
conversion of Convertible Bonds offered and sold in the United States to QIBs in reliance on Rule 144A under the
Securities Act;
194
· holders of Restricted ADSs under the Restricted ADS Facility are required to give certain certifications upon deposit or
withdrawal of the ordinary shares underlying their Restricted ADSs as described generally in “ Description of the
ADSs Deposit, Withdrawal and Cancellation” below;
· Restricted ADSs will carry a transfer restrictions legend; and
·Restricted ADSs generally may be held in book–entry form.
Description of the ADSs
Each ADS represents one ordinary share. It is possible to hold ADSs either directly or indirectly through a broker or other
financial institution.
AngloGold Ashanti ordinary shares (or the right to receive AngloGold Ashanti ordinary shares) are deposited with The
Bank of
New York’s custodians in South Africa: The Standard Bank of South Africa Limited, Société Générale South Africa
Limited,
FirstRand Bank Limited, National Australia Bank Limited and Australia and New Zealand Banking Group Limited (each,
(each, a
“custodian” “custodian”). Each ADS also represents securities, cash or other property deposited with The Bank of New York
but not
distributed to AngloGold Ashanti’s ADS holders. The Bank of New York’s Corporate Trust Office is located at
101 Barclay
Street, New York, NY 10286. The principal executive office of The Bank of New York is located at
One Wall Street, New York,
NY 10286. The Bank of New York, as the depositary in respect of the ADSs, issued new ADSs
following the completion of the
Business Combi nation.Combinati on.
ADSs may be held either directly or indirectly through a broker or other financial institution. If ADSs are held indirectly,
such
holders must rely on the procedures of their broker or other financial institution to assert the rights of ADS holders
described in
this section and should consult with their broker or financial institution in this regard.
Because The Bank of New York actually holdsis the actual holder of the AngloGold Ashanti ordinary shares, and therefore holders of ADSs may,
in certain
circumstances, not be treated by AngloGold Ashanti as shareholders of AngloGold Ashanti. The rights of ADS
holders and the
rights of and obligations of The Bank of New York as depositary are set out in the Deposit Agreements
among The Bank of
New York, the registered holders and beneficial owners of ADSs, and AngloGold Ashanti. The Deposit
Agreements and the
ADSs are generally governed by the laws of the State of New York. As this section is a summary, it may not contain all the
information that may be important to you. For more complete information, you should read the entire text of the Deposit
Agreements and the ADS, the forms of which are exhibits to AngloGold Ashanti’s registration statements on Form F-6
(Registration Statement No. 333-14066) filed with the Securities and Exchang e Commission. Directions on how to obtain
copies of AngloGold Ashanti’s filings with the Securities and Exchange Commission are provided under “Item 10.H.:
Documents On Display”.
Dividends and Other Distributions
The Bank of New York has agreed to pay to holders of ADSs the cash dividends or other distributions it or a custodian
receives
on AngloGold Ashanti ordinary shares or other deposited securities after deducting any fees and expenses and
any applicable
withholding taxes. Holders of ADSs will receive these distributions in proportion to the number of AngloGold
Ashanti’s ordinary
shares that their ADSs represent.
195
Cash
The Bank of New York will convert any cash dividend or other cash distribution AngloGold Ashanti pays on AngloGold
Ashanti’s ordinary shares into US dollars (unless AngloGold Ashanti pays it in US dollars), if it can do so on a reasonable
basis
and can transfer the US dollars to the United States. Currently, AngloGold Ashanti pays dividends on ordinary shares
in South
African rand. AngloGold Ashanti may declare dividends and distributions on ordinary shares in any currency that
the board of
directors or shareholders at a general meeting approve.
In accordance with the Deposit Agreements, The Bank of New York, via its appointed South African bank, will convert the
South African rand it receives from AngloGold Ashanti to US dollars and distribute dividends in US dollars to registered
holders
of ADSs. If that is no longer possible or if any approval from any government is needed and cannot be obtained,
The Bank of
New York may distribute non-US currency only to those ADS holders to whom it is possible to make this type
of distribution.
The Bank of New York may hold the non-US currency it cannot convert for the account of holders of ADSs who have not
been
paid, unless a holder of ADSs requests in writing to receive the non-US currency distribution. It will not invest the
non-US
currency, and it will not be liable for the interest.
Before making a distribution, any withholding taxes that must be
paid will be deducted. See “Payment of Taxes” below. The
Bank of New York will distribute only whole US dollars and
cents and will round fractional cents to the nearest whole cent. If
the exchange rates fluctuate during a time when The
Bank of New York cannot convert the non-US currency, holders of ADSs
may lose some or all of the value of the
distribution.
195
Ordinary shares
The Bank of New York may distribute to holders of ADSs additional ADSs representing ordinary shares that AngloGold
Ashanti
distributes as a dividend or free distribution, if AngloGold Ashanti provides it promptly with satisfactory evidence
that it is legal
to do so. If The Bank of New York does not distribute additional ADSs, the outstanding ADSs will also
represent the newly
distributed AngloGold Ashanti ordinary shares. The Bank of New York will only distribute whole ADSs.
It will sell AngloGold
Ashanti ordinary shares that would require it to deliver a fraction of an ADS and distribute the net
proceeds in the same way as
it distributes cash.
Rights to subscribe for additional ordinary shares
If AngloGold Ashanti offers holders of its ordinary shares any rights to subscribe for additional AngloGold Ashanti ordinary
shares or any other rights, The Bank of New York, after consultation with AngloGold Ashanti, may make these rights
available
to holders of ADSs or sell the rights and distribute the proceeds in the same way as it distributes cash. If The
Bank of New
York cannot do either of these things for any reason, it may allow these rights to lapse. In that case, holders
of ADSs will
receive no value for them.
If The Bank of New York makes these types of subscription rights available to holders of ADSs upon instruction from
holders of
ADSs, it will exercise the rights and purchase AngloGold Ashanti’s ordinary shares on their behalf. The Bank of
New York will
then deposit the AngloGold Ashanti ordinary shares and deliver ADSs to the holders of ADSs. It will only
exercise these rights
if holders of ADSs pay it the exercise price and any other charges the rights require them to pay.
US securities laws may restrict the sale, deposit, cancellation and transfer of the ADSs issued after exercise of rights. For
example, holders of ADSs may not be able to trade the ADSs freely in the United States. In this case, The Bank of New
York
may deliver ADSs which are "restricted securities" within the meaning of Rule 144 (including Restricted ADSs, as
defined
herein) which will have the same provisions as the ADSs described here, except for the changes needed to put the
restrictions
in place.
Other distributions
The Bank of New York will send to holders of ADSs any other distributions that AngloGold Ashanti makes on deposited
securities by any means it thinks is legal, fair and practical. If it cannot make the distribution in that way, The Bank of New
York may decide to sell what AngloGold Ashanti distributes, and then distribute the net proceeds in the same way as it
distributes cash, or it may decide to hold what AngloGold Ashanti distributes, in which case the outstanding ADSs will also
represent the newly distributed property.
196
The Bank of New York is not responsible if it decides that it is unlawful or impractical to make a distribution available to any
ADS holders. AngloGold Ashanti has no obligation to register ADSs, AngloGold Ashanti ordinary shares, rights or other
securities under the US Securities Act of 1933. AngloGold Ashanti also has no obligation to take any other action to permit
the
distribution of ADSs, AngloGold Ashanti ordinary shares, rights or anything else to ADS holders. This means that the
holders
of ADSs may not receive the distribution AngloGold Ashanti makes on its ordinary shares or any value for them if it
is illegal or
impractical for AngloGold Ashanti to make them available to the holders of ADSs.
Deposit, Withdrawal and Cancellation
The Bank of New York will deliver ADSs, if a holder of AngloGold Ashanti’s ordinary shares or their broker deposits
AngloGold
Ashanti’s ordinary shares or evidence of rights to receive ordinary shares with the custodian. Upon payment of
its fees and
expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, The Bank of New
York will register
the appropriate number of ADSs in the names such holder of AngloGold Ashanti ordinary shares requests
and will deliver the
ADSs at its Corporate Trust office to the persons such holders request.
Holders of ADSs may turn in their ADSs at The Bank of New York’s Corporate Trust Office. Upon payment of its fees and
expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, The Bank of New York will
deliver
(1) the underlying ordinary shares to an account designated by the relevant holder of ADSs and (2) any other
deposited
securities underlying the ADSs at the office of the Custodian. Or, at the request, risk and expense of ADS
holders, The Bank
of New York will deliver the deposited securities at its Corporate Trust Office.
196
Any deposit of ordinary shares into the Restricted ADS Facility, including a deposit upon conversion of the Convertible
Bonds,
must be accompanied by a written certificate and agreement by or on behalf of the person who will be the
beneficial owner of
the Restricted ADSs to be issued upon deposit of such ordinary shares to the effect that each such
beneficial owner:
(i) understands that the ordinary shares and the Restricted ADSs have not been and will not be
registered under the Securities
Act, (ii) is not an affiliate of AngloGold Ashanti or a person acting on behalf of such an
affiliate, (iii) is a QIB and will be the
beneficial owner of such Restricted ADSs upon the issuance thereof and (iv) agrees
not to offer, sell, pledge or otherwise
transfer such ordinary shares, such Restricted ADSs or the Restricted ADRs
evidencing such Restricted ADSs except: (a)(1) to
a person who the beneficial owner reaso nablyreas onably believes is a QIB in a
transaction meeting the requirements of Rule 144A, (2) in
an offshore transaction meeting the requirements of
Regulation S, (3) pursuant to the exemption from registration under the
Securities Act provided by Rule 144 thereunder (if
available) or (4) pursuant to an effective registration statement under the
Securities Act and (b) in accordance with all
applicable securities laws of the United States.
Holders of Restricted ADSs are subject to further requirements as to certification of their status upon surrender of
Restricted
ADSs for the purpose of withdrawing the underlying ordinary shares. Those holders must deliver a written
certificate and
agreement by or on behalf of the person surrendering such Restricted ADSs who, after withdrawal, will be
the beneficial owner
of the ordinary shares to be withdrawn, acknowledging that the ordinary shares underlying the
Restricted ADSs have not been
registered under the Securities Act, certifying as to whether or not those ordinary shares
will remain restricted upon withdrawal
and, in the case of ordinary shares that will remain restricted, agreeing: (a) not to
offer, sell, pledge or otherwise transfer such
ordinary shares except in a transaction that complies with the applicable
transfer restrictions and (b) not to deposit or cause to
be deposited such ordin aryordi nary shares into any unrestricted depositary
receipt facility established or maintained by a depositary
bank (including another facility maintained by The Bank of New
York) unless the ordinary shares are no longer deemed to be
restricted securities within the meaning of
Rule 144(a)44(a)(3) under the Securities Act.
Voting Rights
Holders of ADSs may instruct The Bank of New York to vote the ordinary shares underlying their ADSs, but only if
AngloGold
Ashanti asks, in writing, The Bank of New York to request their instruction. Otherwise, holders of ADSs will not
be able to
exercise their right to vote unless they withdraw the AngloGold Ashanti ordinary shares. However, the holders
of ADSs may
not know about the meeting enough in advance to withdraw the ordinary shares.
If AngloGold Ashanti asks for the instructions of holders of ADSs, The Bank of New York will notify them of the upcoming
vote
and arrange to deliver AngloGold Ashanti voting materials to them. The materials will (1) describe the matters to be
voted on
and (2) explain how holders of ADSs, on or before a certain date, may instruct The Bank of New York to vote the
ordinary
shares or other deposited securities underlying their ADSs as they direct. For instructions to be valid, The Bank of
New York
must receive them on or before the date specified.
197
The Bank of New York will try, as far as practical, to vote or to have its agents vote the ordinary shares or other deposited
securities as holders of ADSs instruct, but this is subject to South African law, the provisions of AngloGold Ashanti’s
Memorandum and Articles of Association and of the deposited securities and any applicable rule of the JSE. The Bank of
New
York will only vote or attempt to vote as such holders of ADSs instruct.
However, if and to the extent that The Bank of New York does not receive their voting instructions, it will give a proxy to
vote
the relevant ordinary shares to a person designated by AngloGold Ashanti, unless AngloGold Ashanti does not wish
the proxy
to be given, or substantial opposition exists, or the issue at hand materially and adversely affects the rights of
holders of
ordinary shares.
AngloGold Ashanti cannot assure the holders of ADSs that they will receive the voting materials in time for them to instruct
The
Bank of New York to vote their ordinary shares. In addition, The Bank of New York and its agents are not responsible
for
failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that holders of
ADSs
may not be able to exercise their right to vote and there may be nothing they can do if their ordinary shares are not
voted as
they requested.
197
Fees and Expenses
AngloGold Ashanti ADS holders must pay:
For:
$5.00 (or less) per 100 ADSs*
Each issuance of an ADS, including as a result of a distribution
of
AngloGold Ashanti ordinary shares or rights or other property
Each cancellation of an ADS, including if the Deposit Agreement
terminates
$0.02 (or less) per ADS
Any cash payment
Registration or transfer fees
Transfer and registration of AngloGold Ashanti ordinary shares
on
the AngloGold Ashanti share register to or from the name of
The
Bank of New York or its agent when AngloGold Ashanti
ordinary
shares are deposited or withdrawn
AngloGold Ashanti ADS holders must pay:
For:
Expenses of The Bank of New York
Conversion of non-US currency to US dollars
Cable, telex and facsimile transmission expenses
Taxes and other governmental charges The Bank of
New York or any custodian has to pay on any ADS or
AngloGold Ashanti ordinary share underlying an ADS,
for example, stock transfer taxes, stamp duty or
withholding taxes
As necessary
A fee equivalent to the fee that would have been
payable if the securities distributed had been ordinary
shares deposited for issuance of ADSs
Distribution of securities distributed to holders of deposited
securities that are distributed by The Bank of New York to ADS
holders
All fees are at the discretion of The Bank of New York, and are subject to change without notice.
* With respect only to the initial issuance of Unrestricted and Restricted ADSs issued upon conversion of the Convertible
Bonds, AngloGold Ashanti will pay the applicable issuance fee of $5.00 (or less) per 100 ADSs.
Payment of Taxes
Holders of ADSs will be responsible for any taxes or other governmental charges payable on their ADSs or on the
deposited
securities underlying their ADSs. The Bank of New York may refuse to transfer their ADSs or allow them to
withdraw the
deposited securities underlying their ADSs until such taxes or other charges are paid. It may apply payments
owed to holders
of ADSs or sell deposited securities underlying their ADSs to pay any taxes they owe, and they will remain
liable for any
deficiency. If it sells deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale
and pay to
holders of ADSs any proceeds, or send to them any property, remaining after it has paid the taxes.
198
Reclassifications
If AngloGold Ashanti:
Then:
Changes the nominal or par value of the ordinary
shares;
Reclassifies, splits up or consolidates any of the
deposited securities;
Distributes securities on the ordinary shares that
are
not distributed to holders of ADSs; or
Recapitalizes, reorganizes, merges, liquidates,
sells
all or substantially all of AngloGold Ashanti’s
assets,
or takes any similar action.
The cash, ordinary shares or other securities received by The Bank
of
New York will become deposited securities. Each ADS will
automatically represent its equal share of the new deposited
securities.
The Bank of New York may, and will if AngloGold Ashanti asks it to,
distribute some or all of the cash, AngloGold Ashanti ordinary
shares
or other securities it receives. It may also issue new ADSs
or ask
holders of ADSs to surrender their outstanding ADSs in
exchange for
new ADSs identifying the new deposited securities.
Amendment and Termination
AngloGold Ashanti may agree with The Bank of New York to amend the Deposit Agreement and the ADSs without the
consent
of holders for any reason. If the amendment adds or increases fees or charges (except for taxes and other
governmental
charges or registration fees, cable, telex or facsimile transmission costs, delivery costs or other such
expenses) or if the
amendment prejudices an important right of ADS holders, it will only become effective 30 days after
The Bank of New York
notifies holders of ADSs of the amendment. At the time an amendment becomes effective, holders
of ADSs are considered, by
continuing to hold their ADSs, to agree to the amendment and to be bound by the ADSs and
the agreement as amended.
The Bank of New York may terminate the Deposit Agreements by mailing notice of termination to ADS holders at least
30 days
prior to the date fixed in the notice if AngloGold Ashanti asks it to do so. The Bank of New York may also
terminate the
Deposit Agreement if The Bank of New York has told AngloGold Ashanti that it would like to resign and
AngloGold Ashanti has
not appointed a new depositary bank within 90 days. In both cases, The Bank of New York must
notify holders of AngloGold
Ashanti ADSs at least 30 days before termination.
After termination, The Bank of New York and its agents will be required to do only the following under the Deposit
Agreement:
collect distributions on the deposited securities, sell rights, and, upon surrender of ADSs, deliver AngloGold
Ashanti ordinary
shares and other deposited securities. One year after the date of termination or later, The Bank of New
York may sell any
remaining deposited securities by public or private sale and will hold the proceeds of the sale, as well as
any other cash it is
holding under the Deposit Agreement, for the pro rata benefit of the ADS holders who have not
surrendered their ADSs. It will
not invest the money and will have no liability for interest. The Bank of New York’s only
obligations will be to account for the
proceeds of the sale and other cash. After termination, AngloGold Ashanti’s only
obligations will be with respect to
indemnification of, and pa ymentan d payment of certain amounts to, The Bank of New York.
Limitations on Obligations and Liability to ADS Holders
The Deposit Agreements expressly limit AngloGold Ashanti’s obligations and the obligations of The Bank of New York, and
they limit AngloGold Ashanti’s liability and the liability of The Bank of New York. AngloGold Ashanti and The Bank of New
York:
•·
are only obligated to take the actions specifically set forth in the applicable Deposit Agreement without negligence or
bad
faith;
•·
are not liable if either of AngloGold Ashanti or The Bank of New York is prevented or delayed by law or circumstances
beyond AngloGold Ashanti’s control from performing AngloGold Ashanti’s obligations under the applicable Deposit
Agreement;
•
· are not liable if either of AngloGold Ashanti or The Bank of New York exercises discretion permitted under the
applicable
Deposit Agreement;
•
199
· have no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the agreement on
behalf of
the holders of ADS holders or on behalf of any other party;
199
•·
may rely on advice of or information from legal counsel, accountants, and any persons presenting AngloGold Ashanti’s
ordinary shares for deposit, any registered holder or any other person believed by AngloGold Ashanti in good faith to
be
competent to give such advice or information; and
•·
pursuant to the Deposit Agreements, AngloGold Ashanti and The Bank of New York agree to indemnify each other
under
certain circumstances.
Requirements for Depositary Action
Before The Bank of New York will issue, transfer or register the transfer of an ADS, make a distribution on an ADS, or
allow
withdrawal of AngloGold Ashanti ordinary shares, The Bank of New York may require:
•·
payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by
third
parties for the transfer of any ordinary shares or other deposited securities;
•
· production of satisfactory proof of the identity and genuineness of any signature or other information it deems
necessary;
and
•·
compliance with regulations it may establish, from time to time, consistent with the agreement, including presentation
of
transfer documents.
The Bank of New York may refuse to deliver, transfer or register transfers of ADSs generally when the books of The Bank
of
New York or AngloGold Ashanti’s books are closed, or at any time if either AngloGold Ashanti or The Bank of New York
thinks
it advisable to do so.
Holders of Unrestricted ADSs have the right to cancel their ADSs and withdraw the underlying ordinary shares at any time
except:
•·
when temporary delays arise because: (1) either AngloGold Ashanti or The Bank of New York have closed AngloGold
Ashanti’s transfer books; (2) the transfer of the ordinary shares is blocked in connection with voting at a general
meeting of
shareholders; or (3) AngloGold Ashanti is paying a dividend on the ordinary shares;
•·
when ADS holders seeking to withdraw the ordinary shares owe money to pay fees, taxes and similar charges; or
•·
when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to
ADSs or to the withdrawal of the ordinary shares or other deposited securities.
This right of withdrawal may not be limited by any other provision of the Unrestricted Deposit Agreement.
Pre-release of ADSs
In certain circumstances, subject to the provisions of the Deposit Agreement, The Bank of New York may deliver ADSs
before
deposit of the underlying ordinary shares. This is called a pre-release of the ADS.
The Bank of New York may also deliver
AngloGold Ashanti ordinary shares upon cancellation of pre-released ADSs (even
if the ADSs are cancelled before the pre-
releasepre-release transaction has been closed out). A pre-release is closed out as soon as
the underlying AngloGold Ashanti ordinary
shares are delivered to The Bank of New York. The Bank of New York may
receive ADSs instead of ordinary shares to close
out a pre-release.
The Bank of New York may pre-release ADSs only under the following conditions:
•·
before or at the time of the pre-release, the person to whom the pre-release is being made must represent to The
Bank of
New York in writing that it or its customer: (a) owns the ordinary shares or ADSs to be remitted, (b) assigns all
beneficial
rights, title and interest in such ADSs or ordinary shares, as the case may be, to The Bank of New York in
its capacity as
the depositary and for the benefit of the ADS holders, and (c) will not take any action with respect to
such ADSs or
ordinary shares, as the case may be, that is consistent with the transfer of beneficial ownership (including,
(including, without the
consent of The Bank of New York, disposing of such ADSs or ordinary shares, as the case may
be) other than satisfaction
of such pre-release;
•·
the pre-release must be fully collateralized with cash, US government securities, or other collateral that The Bank of
New
York considers appropriate; and
•
200
· The Bank of New York must be able to close out the pre-release on not more than five business days’ notice. Each pre-
release pre-release will be subject to any further indemnities and credit regulations that The Bank of New York deems
appropriate.
The Bank of New York will normally limit the number of AngloGold Ashanti ordinary shares not deposited
but represented
by ADSs outstanding at any time as a result of pre-release so that they do not exceed 30%30 percent of
the ordinary shares
deposited, although The Bank of New York may disregard this limit from time to time, if it thinks it
is appropriate to do so.
200
Shareholders’ meetings
The directors may convene general meetings of AngloGold Ashanti shareholders. Subject to the provisions of the
Companies Act the shareholders may requisition for the convening of a general meeting.
An AngloGold Ashanti annual general meeting and a meeting of AngloGold Ashanti shareholders for the purpose of
passing a
special resolution may be called by giving 21 clear days’ notice in writing of that shareholders’ meeting. For any
other meeting
of AngloGold Ashanti shareholders, 14 clear days’ notice must be given. “Clear days” means calendar days
excluding the day
on which the notice is given and the date of the meeting. All shareholders are entitled to attend.
AngloGold Ashanti’s articles of association provide that a quorum for a general members’ meeting (other than a meeting at
which a special resolution will be passed) consists of three members present personally, or if the member is a corporate
entity,
represented and entitled to vote. One of the three members present or represented has to be AngloGold Ashanti’s holding
company, which is currently Anglo South Africa Capital (Proprietary) Limited, a wholly-owned subsidiary of Anglo American plc.
If a general meeting is not quorate, the meeting is dissolved and a new meeting will
have to be called following the relevant
notice provision.
The quorum of a members’ meeting convened for the purpose of passing a special resolution consists of members holding
at
least 25 percent of the total member votes and present in person or by proxy. If the meeting is not quorate, it will be
adjourned
to a date between seven and 21 days after the adjourned meeting, and the members present at the second
meeting shall
constitute a quorum as long as there are at least three of them at the second meeting. A special resolution
must be passed by
a vote of 75 percent of the members present, at the meeting, personally or by proxy and entitled to vote
or by a vote of
75 percent of the total votes to which these members are entitled.
If the meeting is not quorate and is convened upon the requisition of members, the meeting is dissolved.
Disclosure of Interest in Shares
Under South African law, a registered holder of AngloGold Ashanti shares who is not the beneficial owner of such shares is
required to disclose every three months to AngloGold Ashanti, the identity of the beneficial owner and the number and
class of securities held on behalf of the beneficial owner. Moreover, AngloGold Ashanti may, by notice in writing, require a
person who is a registered shareholder, or whom AngloGold Ashanti knows or has reasonable cause to believe has a
beneficial interest in AngloGold Ashanti ordinary shares, to confirm or deny whether or not such person holds the ordinary
shares or beneficial interest and, if the ordinary shares are held for another person, to disclose to AngloGold Ashanti the
identity of the person on whose behalf the ordinary shares are held. AngloGold Ashanti may also require the person to give
particulars of the extent of the beneficial interest held during t he three years preceding the date of the notice. AngloGold
Ashanti is obligated to establish and maintain a register of the disclosures described above and to publish in its annual
financial statements a list of the persons who hold beneficial interest equal to or in excess of 5 percent of the total number
of ordinary shares issued by AngloGold Ashanti together with the extent of those beneficial interests.
Rights of Minority Shareholders
Majority shareholders of South African companies have no fiduciary obligations under South African common law to
minority shareholders. However, under the Companies Act, a shareholder may, under certain circumstances, seek relief
from the court if he has been unfairly prejudiced by the company. There may also be common law personal actions
available to a shareholder of a company.
Golden Share
Under the Stability Agreement, the Government of Ghana (Government) has confirmed and agreed that the Government’s
rights with respect to the Golden Share apply only in respect of AngloGold Ashanti’s assets and operations in Ghana. The
rights do not extend to any other assets or operations of AngloGold Ashanti outside Ghana, nor to any assets or operations
of AngloGold Ashanti.
201
The Government has also agreed to waive any right it may have under Section 60(I) of the Minerals and Mining Law, 1986,
as amended to acquire a special share in AngloGold Ashanti or any of its direct or indirect subsidiaries or joint ventures.
The Golden Share in AngloGold Ashanti held by the Government of Ghana (“Government”) does not carry any right to vote but the holder
is entitled
to receive notice of and to attend and speak at any general meeting of AngloGold Ashanti or at any separate meeting of
the
holders of any class of shares of AngloGold Ashanti.
The Golden Share may only be held by or transferred to a Minister of the Government or any person acting on behalf of
such
Government and authorisedauthorized in writing by such Minister.
The following matters require, and will not be effective without, the written consent of the holder of the Golden Share:
(i) any amendment to or removal of the relevant provisions of the AngloGold Ashanti Regulations setting out the rights
and restrictions
attaching to the Golden Share;
(ii) the voluntary winding-up or voluntary liquidation of AngloGold Ashanti;
(iii) the redemption of or purchase by AngloGold Ashanti of the Golden Share;
(iv) the disposal of any mining lease held by AngloGold Ashanti or any subsidiary of AngloGold Ashanti;
(v) any disposal by AngloGold Ashanti (other than any disposal in the ordinary course of business of AngloGold Ashanti)
which, alone or when
aggregated with any disposal or disposals forming part of, or connected with, the same or a
connected transaction,
constitutes a disposal of the whole or a material part of the assets of the AngloGold Ashanti
Group taken as a whole. For this
purpose, a part of the AngloGold Ashanti Group’s assets will be considered material
if either (a) its book value (calculated by
reference to the then latest audited consolidated accounts), or the total
consideration to be received on its disposal, is not
less than 25 per centpercent of the book value of the net assets of the
AngloGold Ashanti Group or (b) the average profits attributable to it
represent at least 25 per centpercent of the average profits
of the AngloGold Ashanti Group for the last three years for which audited
accounts are available (before deducting all
charges, except taxation and extraordinary items).
Upon a return of assets in a winding-up or liquidation of AngloGold Ashanti, the holder of the Golden Share is entitled to
the sum of
1,000 cedis (approximately 10 US cents) in priority to any payment to other members, but the Golden Share
confers no further right to participate in the
profits or assets of AngloGold Ashanti. The Golden Share carries no right to
any dividend or any right to participate in any offer of
securities to existing shareholders or in any capitalization issue.
The holder of the Golden Share may require AngloGold Ashanti to redeem the Golden Share at any time in consideration
of the payment
to such holder of 1,000 cedis.
201
Under the Stability Agreement, the Government has confirmed and agreed that the Government’s rights with respect to the
Golden Share apply only in respect of Ashanti’s assets and operations in Ghana. The rights do not extend to any other assets
or operations of Ashanti outside Ghana, nor to any assets or operations of AngloGold Ashanti. The Government has also
agreed to waive any right it may have under Section 60(I) of the Minerals and Mining Law, 1986, as amended to acquire a
special share in AngloGold Ashanti or any of its direct or indirect subsidiaries or joint ventures.cedis (approximately 10 US cents).
10C. Material
contracts
ForAngloGold and the Government of Ghana agreed the terms of a detailed discussionStability Agreement, approved by the parliament of Ghana
on February 18, 2004, (as amended) to govern certain aspects of the fiscal and regulatory framework under which
AngloGold Ashanti’s contractual arrangementsAshanti will operate in connection withGhana following the implementation of the Business Combination with
Ashanti, see “Item 4A.: History and development of the company - Business Combination between AngloGold and Ashanti”.
Combination. AngloGold Ashanti is
not party to any further material contracts other than contracts entered into in the ordinary course of
business.
10D. Exchange
Exchange controls
Exchange controls and other limitations affecting security holders
The following is a general outline of South African exchange controls and such outline may not apply to former residents of
South Africa. Investors should consult a professional advisor as to the exchange control implications of their particular
investments.
South African law provides for exchange control regulations, which restrict the export of capital from the Common
Monetary
Area, which comprises South Africa, the Kingdoms of Lesotho and Swaziland and the Republic of Namibia. The
exchange
control regulations, which are administered by the Exchange Control Department of the SARB,South African Reserve
Bank, are applied throughout the
Common Monetary Area and regulate transactions involving South African residents,
including natural persons and legal
entities.
Governmental Government officials have from time to time stated their intentions to lift South
Africa’s exchange control regulations when
economic conditions permit such action. In his budget speech in March 1998,
the Minister of Finance announced that
restrictions relating to offshore investments by South African companies and
individuals subject to South African exchange
control would, to a limited extent, be lifted.
202
Since then, the government has incrementally relaxed aspects of exchange control
for financial institutions and individuals.
However, it is impossible to predict with any certainty when the government will
remove exchange controls in their entirety.
The comments below relate to exchange controls in force at the date of this annual report.
Investments in South African companies
A foreign investor may invest freely in ordinary shares in a South African company. Any foreign investor may also sell
shares in a South
African company and transfer the proceeds out of South Africa without restriction. Acquisitions of shares
or assets of South
African companies by non-South African purchasers are not generally subject to review by the SARB
when the consideration is
in cash, but may require SARB review in certain circumstances, including when the
consideration is equity in a non-South
African company or when the acquisition is financed by a loan from a South African
lender.
Dividends
Dividends declared to foreign stockholders are not subject to the approval by the South African Reserve Bank (SARB).
Dividends are freely transferable to foreign stockholders from both trading and non-trading profits earned in South Africa by
publicly listed companies.
Interest
Interest on foreign loans is freely remittable abroad, provided the loans received prior SARB approval.
Voting rights
There are no limitations imposed by South African law or by the memorandum and articles of association of AngloGold
Ashanti
on the rights of non-South African shareholders to vote the ordinary shares.
202
Overseas financing and investments
AngloGold Ashanti and its South African subsidiaries require SARB approval to raise debt from and repay debt to non-
residents of the Common Monetary Area, mainly in respect of the interest rate and terms of repayment applicable to the
loan.
Debt raised outside the Common Monetary Area by AngloGold Ashanti’s non-South African subsidiaries is not restricted
under
South African exchange control regulations and can be used for overseas investment, subject to any conditions
imposed by the
SARB in connection with establishing such a subsidiary. AngloGold Ashanti and its South African
subsidiaries would, however,
require SARB approval in order to provide guarantees for the obligations of any of its
subsidiaries with regard to funds obtained
from non-residents of the Common Monetary Area.
Debt raised outside the Common Monetary Area by AngloGold Ashanti’s non-South African subsidiaries must be repaid or
serviced by AngloGold Ashanti’s foreign subsidiaries.
A listing by a South African company on any stock exchange other than the JSE Securities Exchange in connection with
raising
capital requires permission from the SARB.
Under current exchange control regulations, offshore investments by AngloGold Ashanti and its South African subsidiaries
require the approval of the SARB. On applicationSubject to approval, there is no limit on the SARB, useamount of South African funds for such investmentscapital that may be invested
allowed for up to R2 billion for an investment within the Africa continent and up to R1 billion for investments elsewhere. In
addition, SARB permission may also be requested to utilize total cash holdings to finance up to 10 percent of any excess cost
of a new investment if the total cost of the investment exceeds the above fund export limits. Any amount in excess of the
above limits must be financed overseas.offshore.
10E. Taxation
South African taxation
The following discussion summarizes South African tax consequences of the ownership and disposition of shares or ADSs
by
a US holder (as defined below). This summary is based upon current South African tax law and South African Inland
Revenue
practice, the convention between the Government of the United States of America and the Republic of South
Africa for the
avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital
gains, signed
February 17, 1997 (the "Treaty"), and in part upon representations of the depositary, and assumes that each
obligation
provided for in, or otherwise contemplated by, a deposit agreement and any related agreement will be performed
in
accordance with its respective terms.
203
The following summary of South African tax considerations does not address the tax consequences to a US holder that is
resident in South Africa for South African tax purposes, whose holding of shares or ADSs is effectively connected with a
permanent establishment in South Africa through which such US holder carries on business activities or, in the case of an
individual who performs independent personal services, with a fixed base situated therein, or who is otherwise not entitled
to
full benefits under the Treaty.
The statements of law set forth below are subject to any changes (which may be applied retroactively) in South African law
or
in the interpretation thereof by the South African tax authorities, or in the Treaty, occurring after the date hereof. It
should be
expressly noted that South African tax law does not specifically address the treatment of ADSs. However, it is
reasonable to
assume (although no assurance can be made) that the tax treatment of US holders of shares is also
applicable to US holders
of ADSs.
Holders are strongly urged to consult their own tax advisors as to the consequences under South African, US federal, state
and
local, and other applicable laws, of the ownership and disposition of shares or ADSs.
Taxation of dividends
South Africa imposes a corporate tax known as Secondary Tax on Companies (STC) on the distribution of earnings in the
form
of dividends. Under the terms of an option granted to gold mining corporations, AngloGold Ashanti has elected not to
be
subject to STC. As a result, although AngloGold Ashanti’s dividend payments are not subject to STC, AngloGold
Ashanti pays
corporate income tax at a slightly higher rate than would otherwise have been the case. This election resulted
in the overall tax
paid by AngloGold Ashanti being lower than the tax payable using the standard corporate tax rate
together with STC.
203 STC will be phased out over the next two years and replaced by a dividend withholding tax.
South Africa does not currently impose any withholding tax or any other form of tax on dividends paid to US holders with
respect to
shares.
Should shares, but there has been a recent announcement that this is about to change. In the case of a South Africa decide in the future to impose a African
withholding tax on dividends paid to a US holder with respect to shares,
the Treaty would limit the rate of this tax to
5 percent of the gross amount of the dividends if a US holder holds directly at least
10 percent of the voting stock of
AngloGold Ashanti and 15 percent of the gross amount of the dividends in all other cases.
The above provisions shall not
apply if the beneficial owner of the dividends is a US resident in the US,who carries on business in South
Africa through a permanent
establishment situated in South Africa, or performs in South Africa independent personal services
from a fixed base
situated in South Africa, and the dividends are attributable to such permanentpe rmanent establishment or fixed base.
On February 21, 2007, the South African Minister of Finance, Mr Trevor Manuel, delivered his 2007 Budget Speech in
which he stated that the STC currently levied at 12.5 percent will be replaced by a withholding tax on shareholders in
respect of dividends distributed at a rate of 10 percent. This change will be implemented in two phases. On
October 1, 2007 the STC rate will reduce from 12.5 percent to 10 percent and in 2008 STC will be phased out and
replaced by the 10 percent withholding tax.
The legislation giving effect to this has not been published, but AngloGold Ashanti expects that the effect of this proposal
will be that in 2008 (the first phase) AngloGold Ashanti’s marginal tax rate for its South African mining operations should
reduce from 45 percent to 43.4 percent and the tax rate on its non-mining income will reduce from 37 percent to
35.4 percent. In the second phase, (expected to take place in 2009), the marginal tax rate for AngloGold Ashanti’s South
African mining operations should reduce from 43.4 percent to 37 percent and the marginal tax rate for non-mining income
should reduce from 35.4 percent to 29 percent. The amending legislation relating to these proposals is due to be published
in July 2007.
Taxation of gains on sale or other disposition
Prior to October 1, 2001, gains realized on the sale or other disposition of shares held by a US holder as a capital asset were
not subject to taxation in South Africa. From October 1, 2001, South Africa imposedimposes a tax on capital gains, which only applies
to South African residents. The meaning of the word "residents"
"residents" is different for individuals and corporations and is governed by
the South African Income Tax Act of 1962 and
by the Treaty. In contrast, gains on the disposal of securities which are not
capital in nature are usually subject to income
tax. However, even in the latter case, a US holder will not be subject to income
tax unless the US holder carries on
business in South Africa through a permanent establishment situated therein. In such a
case, this gain may be subject to tax in South Africa, but only so much as is attributable to that permanent establishment.
204
United States taxation
The following is a general summary of the material US federal income tax consequences of the ownership and disposition
of
shares or ADSs to a US holder (as defined below) that holds its shares or ADSs as a capital asset. This summary is
based on
South African and US tax laws as applicable, including the Internal Revenue Code of 1986, as amended (the “Code”)Code),
Treasury regulations
promulgated thereunder, rulings, judicial decisions, administrative pronouncements, and the Treaty, all as
currently in
effect as of the date of this annual report, and all of which are subject to change or changes in interpretation,
possibly with
retroactive effect. In addition, this summary is based in part upon the representations of the depositary and the assumption
assumption that each obligation in the deposit agreement relating to the ADSs and any related agreement will be performed in
accordance with its terms.
This summary does not address all aspects of US federal income taxation that may apply to holders that are subject to
special
tax rules, including US expatriates, insurance companies, tax-exempt entities, banks, certain financial institutions,
persons subject to
the alternative minimum tax, regulated investment companies, securities broker dealers,broker-dealers, traders in
securities who elect to apply
a mark-to-market method of accounting, investors that own (directly, indirectly or by
attribution) 10 percent or more of the
outstanding share capital or voting stock of AngloGold Ashanti, partnerships, persons
holding their shares or ADSs as part of a straddle,
hedging or conversion transaction, persons who acquired their shares
or ADSs pursuant to the exercise of employee stock
options or otherwise as compensation, or persons whose functional
currency is not the US dollar. Such holders may be
subject to US federal income tax consequences d ifferentdifferent from those
set forth below.
As used herein, the term “US holder” means a beneficial owner of shares or ADSs that is (a) a citizen or individual resident
of
the United SatesStates for US federal income tax purposes; (b) a corporation (or other entity taxable as a corporation for US
federal
income tax purposes) created or organized in or under the laws of the United States or any state thereof (including
the District
of Columbia); (c) an estate the income of which is subject to US federal income taxation regardless of its
source; or (d) a trust
if a court within the United States can exercise primary supervision over the administration of the trust
and one or more
US persons are authorized to control all substantial decisions of the trust. If a partnership (including for
this purpose any entity
treated as a partnership for US federal income tax purposes) holds shares or ADSs, the tax
treatment of a partner generally
will depen ddep end upon the status of the partner and the activities of the partnership. If a
US holder is a partner in a partnership that
holds shares or ADSs, the holder is urged to consult its own tax advisor
regarding the specific tax consequences of the
ownership and disposition of the shares or ADSs.
US holders should consult their own tax advisors regarding the specific South African and US federal, state and local tax
consequences of owning and disposing of shares or ADSs in light of their particular circumstances as well as any
consequences arising under the laws of any other taxing jurisdiction. In particular, US holders are urged to consult their
own
tax advisors regarding whether they are eligible for benefits under the Treaty.
204
For South African and US federal income tax purposes, a US holder of ADSs should be treated as owning the underlying
shares represented by those ADSs. Therefore, deposits or withdrawals by a US holder of shares for ADSs or of ADSs for
shares will not be subject to US federal income tax. The following discussion (except where otherwise expressly noted)
applies equally to
US holders of shares and US holders of ADSs.
Taxation
of
dividends
The gross amount of any distribution (including the amount of any South African withholding tax thereon) paid to a
US holder
by AngloGold Ashanti generally will be taxable as dividend income to the US holder for US federal income tax
purposes based
on the US dollar value of the distribution calculated by reference to the spot rate in effect on the date the distribution is actually
or constructively received by the US holder, in the case of shares, or by the
depositary, in the case of ADSs. Corporate US
holders will not be eligible for the dividends received deduction in respect of
dividends paid by AngloGold Ashanti. For foreign
tax credit limitation purposes, dividends paid by AngloGold Ashanti will
be income from sources outside the United States. At
present, South Africa does not impose a withholding tax or any
other form of tax on dividends paid to US holders with respect
to shares. ShouldThe South Africa decide in the futureAfrican government, however, has
recently announced its intent to imposeenact a dividend withholding tax, on dividends paidwhich is expected to a be phased in during 2008 and 2009.
See ‘Taxation – South African Taxation – Taxation of dividends’. Once the dividend withholding tax becomes effective,
US holder with respect to
shares, holders who are eligible for benefits under the current Treaty wouldwill be subject to a maximum tax of 15 percent on the
gross
amount of dividend distributions paid by AngloGold Ashanti.
205
The amount of any distribution paid in foreign currency (including the amount of any South African withholding tax thereon)
generally will be includible in the gross income of a US holder of shares
in an amount equal to the US dollar value of the
foreign currency calculated by reference to the spot rate in effect, on the date
of receipt, regardless of whether the foreign currency is converted
into US dollars.dollars on such date. If the foreign currency is converted into
US dollars on the date of receipt, a US holder of
shares generally should not be required to recognize foreign currency gain or
loss in respect of the dividend. If the foreign
currency received in the distribution is not converted into US dollars on the date of
receipt, a US holder of shares generally
will have a tax basis in the foreign currency equal to its US dollar value on the date of
receipt. Any gain or loss recognized
upon a subsequent conversion or other dispositiondis position of the foreign currency generally will be treated
as US source ord inary ordinary
income or loss. In the case of a US holder of ADSs, the amount of any distribution paid in a foreign
currency generally will
be converted into US dollars by the depositary upon its receipt. Accordingly, a US holder of ADSs generally will
not be
required to recognize foreign currency gain or loss in respect of the distribution. Special rules govern and specific elections
are available to accrual method taxpayers to determine the US dollar amount includible in income in the case of taxes
withheld in a foreign currency. Accrual basis taxpayers are therefore urged to consult their own tax advisors regarding the
requirements and elections applicable in this regard.
Subject to certain limitations, South African withholding taxes will be treated as foreign taxes eligible for credit against a
US holder’s US federal income tax liability. The limitation on foreign taxes eligible for credit is calculated separately with
respect to specific classes of income. Dividend income generally will constitute ‘passive category’ income, or in the case of
certain US holders, ‘general category’ income. The use of foreign tax credits is subject to complex conditions and
limitations. In lieu of a credit, a US holder who itemizes deductions may elect to deduct all of such holder’s foreign taxes in
the taxable year. A deduction does not reduce US tax on a dollar-for-dollar basis like a tax credit, but the deduction for
foreign taxes is not subject to the same limitations applicable to foreign tax credits. US holders are urged to consult their
own tax advisors regarding the availability of foreign tax credits. US holders whose tax year began prior to
January 1, 2007, should consult their own tax advisors as to the foreign tax credit rules applicable to them.
Certain US holders (including individuals) are eligible for reduced rates of US federal income tax (currently at a maximum
rate of
15 percent) in respect of “qualified dividend income” received in taxable years beginning before January 1, 2009. 2011.
For this
purpose, qualified dividend income generally includes dividends paid by a non-US corporation if, among other
things, the US
holders meet certain minimum holding periodsperiod and other requirements and the non-US corporation satisfies
certain
requirements, including that either that (i) the ordinary shares (or ADSs) with respect to which the dividend has been
paid are
readily tradable on an established securities market in the United States, or (ii) the non-US corporation is eligible
for the
benefits of a comprehensive US income tax treaty (such as the Treaty) which provides for the exchange of
information.
AngloGold Ashanti currently believes that dividendsdivi dends paid with respect to its shares and ADSs should constitute
qualified
dividend income for US federal income tax purposes, provided the individual US holders ofpurposes. AngloGold Ashanti anticipates that its shares or ADSs meet certain
requirements. The US Treasury and the IRS have announced their intention to promulgate rules pursuant to which holders of
ADSs and shares, among others,dividends will be permitted to rely on certifications from issuers to establish that dividends are treated
reported as qualified dividend income.dividends on Forms 1099-DIV delivered to US holders. Each individual US holder of AngloGold
Ashanti shares or ADSs is urged to consult his own tax
advisor regarding the availability to him of the reduced dividend tax
rate in light of his own particular situation.
The US Treasury has expressed concern that parties to whom ADSs are pre-released may be taking actions that are
inconsistent with the claiming of foreign tax credits for US holders of ADSs. Such actions would also be inconsistent with
the claiming of the reduced rate of tax described above, applicable to dividends received by certain non-corporate holders.
Accordingly, the analysis of the creditability of South African withholding taxes or the availability of qualified dividend
treatment could be affected by future actions that may be taken by the US Treasury with respect to ADSs.
Taxationofcapitalgains
If a US holder is a resident of the United States for purposes of the Treaty, such holder will not be subject to South African
tax on
any capital gain if it sells or disposes of its shares.shares or ADSs. Special rules apply to individuals who are residents of
more than one
country.
In general, upon a sale, exchange or other disposition of shares, a US holder will recognize capital gain or loss for
US federal
income tax purposes in an amount equal to the difference between the US dollar value of the amount realized
on the
disposition and the holder's tax basis, determined in US dollars, in the shares.shares or ADSs. Such gain or loss generally
will be US source
gain or loss, and will be treated as a long-term capital gain or loss if the holder’s holding period in the
shares exceeds one year
at the time of disposition. The deductibility of capital losses is subject to significant limitations. If the US holder is an individual,
any capital gain generally will be
subject to US federal income tax at preferential rates if specified minimum holding periods are met. The deductibility of
met.capital losses is subject to significant limitations.
206
Deposits or withdrawals of shares by a US holder of shares for ADSs, or of ADSs for shares, will not be subject to US federal income
tax.
205
Passive foreign investment company considerations
A non-US corporation will be classified a Passive Foreign Investment Company (a “PFIC”)PFIC) for any taxable year if at least
75 percent of its gross income consists of passive income (such as dividends, interest, rents or royalties (other than rents
or
royalties derived in the active conduct of a trade or business and received from an unrelated person), or gains on the
disposition of certain minority interests), or at least 50 percent of the average value of its assets consists of assets that
produce, or are held for the production of, passive income. AngloGold Ashanti currently believes that it didwas not classifytreated as a
PFIC for
the taxable year ended December 31, 2004 for US federal income tax purposes.2006 and does not expect to become a PFIC in the foreseeable future. If AngloGold
Ashanti were
characterized as a PFIC for any taxable year, a US holder would suffer adverse tax consequences.
These consequences may
include having gains realized on the disposition o fof shares treated as ordinary income rather
than capital gains and being
subject to punitive interest charges on the receipt of certain dividends and on the proceeds of
the sale or other disposition of the shares.
Furthermore, dividends paid by AngloGold Ashanti would not be “qualified
dividend income” and would be taxed at the higher
rates applicable to other items of ordinary income. US holders should
consult their own tax advisors regarding the potential
application of the PFIC rules to their ownership of the shares.
US information reporting and backup withholding
Dividend payments made to a holder and proceeds paid from the sale, exchange, or other disposition of shares may be
subject
to information reporting to the IRS.Internal Revenue Service (the “IRS”). US federal backup withholding generally is
imposed at a current rate of 28 percent on
specified payments to persons who fail to furnish required information. Backup
withholding will not apply to a holder who
furnishes a correct taxpayer identification number or certificate of foreign status
and makes any other required certification, or
who is otherwise exempt from backup withholding. US persons who are
required to establish their exempt status generally
must provide IRS Form W-9 (Request for Taxpayer Identification
Number and Certification). Non-US holders generally will not
be subject to US information reporting or backup withholding.
However, these holders may be required to provide certification
of non-US status (generally on IRS Form W - -8BEN)W-8BEN) in
connection with payments received in the United States or through
certain US-related financial intermediaries. Backup
withholding is not an additional tax. Amounts withheld as backup
withholding may be credited against a holder’s US federal
income tax liability. A holder may obtain a refund of any excess
amounts withheld under the backup withholding rules by
filing the appropriate claim for refund with the IRS and furnishing any
required information.
10F. Dividends and paying agents
Not applicable.
10G. Statement
by
experts
Not applicable.
10H. Documents
on
display
The documents referred to in this report can be read at the US Securities and Exchange Commission’s public reference
facilities at Room 1024, 4550 Fifth1580, 100 F Street, N.W.N.E., Washington, D.C. 20549.
10I. Subsidiary
information
Not applicable.
206207
Item 11: Quantitative and qualitative disclosures about market
risk
Treasury Policy
The board of directors of AngloGold Ashanti has approved a “treasurytreasury and risk management policy”policy that governs the group’s
treasury activities, including the setting of hedging and dealing limits, approval of hedging instruments and counterpart
approval and limits.
Under the “treasurytreasury and risk management policy”,policy, hedges may be put in place using approved instruments to a target level of
30 percent ofover the next five years group’s
planned gold production and resultant gold sales currency exposures. The tenor of the
hedges may extend out to ten
years. The “treasurytreasury and risk management policy”policy sets limits on the extent to which the hedge
position may change for the
various levels of treasury management from dealer, through treasurer, executive management and
board.
The board of directors has delegated the approval of hedge instruments to AngloGold Ashanti’s treasury committee. The
treasury committee must approve all hedging instruments, treatment of the instruments in the treasury system, reporting on
the
instruments and the accounting treatment for such instruments.
The financial risk management activities objectives of the group are as follows:
·
Safeguarding the group core earnings stream from its major assets through the effective control and management of
gold price risk, foreign exchange risk and interest rate risk;
·
Effective and efficient usage of credit facilities in both the short and long term through the adoption of reliable liquidity
planning and procedures;
·
Ensuring that investment and hedging transactions are undertaken with creditworthy counterparts;
· Ensuring that all contracts and agreements related to risk management activities are coordinated, consistent
throughout the group and comply where necessary with all relevant regulatory and statutory requirements.
Under the “treasurytreasury and risk management policy”,policy, treasury reports that include all open hedging transactions are produced
at
the following minimum intervals for review by management and the board of directors.
Daily
Treasurer
Monthly
Executive
committee
Monthly
Treasury
committee
Quarterly Audit
Management committee
Quarterly
Treasury committee, Audit committee, Board of directors,
Quarterly
Quarterly shareholder reports
The Treasury risk manager is responsible for monitoring all reports for completeness and accuracy. The reports include
stress
testing of all hedge positions for changes in gold prices, currency exchange rates, interest rates, and gold and
exchange rate
volatilities.
At AngloGold Ashanti, all front office (dealing), middle office (risk reporting), back office (deal confirmations) and payment
(treasury settlements) activities are segregated. All treasury transactions are captured on a third party developed treasury
and
risk management system that is widely used in corporate treasuries. The internal audit group conducts regular and ad-hocad-
hoc reviews of the activities of the treasury and the company’s treasury system.
Gold price risk management activities
The group enters into derivatives to ensure a degree of price certainty and to guarantee a minimum revenue on a portion
of future planned gold sales. AngloGold Ashanti does not acquire, hold or issue derivative instruments for economic trading
purposes. A number of
products, including derivatives, are used to manage gold price and foreign exchange risks that
arise out of the group’s core
business activities. Forward sales contracts and purchased or sold call and put options are
used by the group to manage its
exposure to gold price and currency fluctuations. Gold and currency hedging instruments
are denominated in South African
rands, US dollars, Brazilian real and Australian dollars. The hedging instruments utilized
are forward sales and purchase contracts,
purchased and sold put options and purchased and sold call options.
208
The mix of hedging instruments, the volume of
production hedged and the tenor of the hedging book is continuously reviewed in light of changes in
operational forecasts,
market conditions and the group’s hedging policy. Angl oGoldAngloGold Ashanti’s reserves and financial
strength have allowed it to
arrange unmargined credit lines of up to ten years with counterparties.counterparts.
Forward sales contracts establish the price of future gold sales at a specified price. A number of these contracts are
intended
by AngloGold Ashanti for delivery against production in a future period. The amountvolume of outstanding forward sales type
contracts at the end of 20042006 was 256,409kg122,133 kg compared with 180,693kg
(1)
159,783 kg at the end of the previous year for AngloGold2005.
The company utilizes bought and
137,957kg for Ashanti.
207 sold put and call options as part of its active treasury management strategy.
A put option gives the put buyer the right, but not the obligation, to sell gold to the put seller at a predetermined price on a
predetermined date. A call option gives the call buyer the right, but not the obligation, to buy gold from the call seller at a
predetermined price on a predetermined date. The group’s risk in selling call options is unlimited but mitigated by the fact
that the group produce the commodity required by the option and would benefit by the same quantity as the option loss by
selling production in the open market. The group’s risk in selling put options is unlimited but partially mitigated by put
options purchased.
SFAS133 requires that derivative instruments be accounted for as follows:
•
Commodity based (“normal purchase or normal sale”sale exempt”) contracts that meet the requirements of SFAS138, and
are designated as such, are recognized in earningsproduct sales when they are settled by physical delivery.
•
Where the conditions in SFAS133 for hedge accounting are met, the derivative is recognized on the balance sheet at
fair value as either a derivative asset or derivative liability, and recorded at fair value.liability. For cash flow hedges the effective portion of changes in fair
value
gains or losses of the hedging instrument are recognized in equity (other comprehensive income) until the underlying transaction
occurs, then the
gains or losses are recognized in earnings.product sales. The ineffective portion of changes in fair value is
reported in earnings as gains
or losses on derivatives in the period in which they occur. Of the contracts accounted for
as a reduction in cash flow hedges, contracts
with a carrying value, net of tax, of $66$169 million at December 31, 20042006, are
expected to be removedrecycled from other
comprehensive income and the fair value at the time of maturity, includedrecognized as a reduction in incomeproduct sales during 2005.2007.
•
All other derivatives are measured at their estimated fair value, with the changes in estimated fair value at each
reporting date being reported as gains or losses on derivatives in earnings in the period in which they occur.
Cash flows from derivative instruments accounted for as cash flow hedges are included in net cash provided by operating
activities in the statements of consolidated cash flows for all periods presented. Cash inflows from off market derivativeContracts that contain ‘off-market’ terms
transactions entered intothat result in the inflow of cash at inception are included inanalogous to borrowing activities and, as such, are treated as financing
activities. All current and future cash flows fromassociated with such instruments are classified within the financing activities. Cash outflows from off market derivativeactivities
transactionssection of the consolidated cash flow statement. Contracts that contain ‘off-market’ terms that result in the outflow of cash
at inception are included in cash flows fromanalogous to lending activities and, as such, are treated as investing activities. All current and future cash
flows associated with such instruments are classified within the investing activities of the consolidated cash flow statement.
The table below indicates AngloGold Ashanti’s total gold hedge position at a weighted average settlement price as at
December 31, 2004.2006. The total net delta tonnage of the hedge on this date was 10.4910.16 million ounces or 326 tonnes.316 tonnes
(December 31, 2005: 10.84 million ounces or 337 tonnes).
The marked-to-market value of all hedge transactions making up the hedge positions was a negative $1.161$2.903 billion (negative
R6.58 billion) as at
December 31, 20042006 (as at December 31, 2003:2005: negative $578 million – negative R3.85$1.941 billion). These
values were based on a gold price of $434.70
$636.30 per ounce, exchange rates of R/$5.677.001 and A$/$0.77450.7886 and the prevailing market
interest rates and volatilities at
the time.
These marked-to-market valuations are in no way predictive of the future value of the hedge position nor of future impact on
the revenue of the company. The marked-to-market represents the current profit/loss value of the hedge book at market prices
and rates available at that time.
(1) Includes equity accounted joint ventures209
Year 2005 2006
2007 2008 2009
2010-2014 2010
2011
2012-2016
Total
DOLLAR GOLD
Forward contracts
Amount (kg)
34,02119,622
30,42822,817
35,48121,738
29,11114,462
25,32412,931
48,74524,308
203,110115,878
$ per oz
$315301
$338314
$343316
$363347
$377397
$395418
$357347
*Restructure longsForward contracts
Amount (kg)
17,67612,957
17,67612,957
(Long position)
$ per oz
$440639
$440639
Put options purchased
Amount (kg)
3,381
5,481
1,455
10,317
1,455
$ per oz
$347
$355
$292
$344292
Put options sold
Amount (kg)
6,22119,259
4,35411,555
8553,748
1,882
9,4091,882
22,7215,645
43,971
$ per oz
$397612
$339
587
$390530
$400410
$430420
$400440
$559
Call options purchased
Amount (kg)
9,88014,252
3,030
2,0036,503
14,913
20,755
$ per oz
$340398
$353432
$361
$345409
Call options sold
Amount (kg)
29,49047,779
18,01746,776
20,37541,148
26,17932,036
22,85236,188
57,60451,294
174,517255,221
$ per oz
$363475
$386466
$372473
$377458
$399492
$455564
$403
208
Year 2005 2006 2007 2008 2009
2010-2014 Total491
RAND GOLD
Forward contracts
Amount (kg)
2,138
933
933
3,071
Rand per kg
R91,299
R116,335
R98,769
Put options purchased
Amount (kg)
Rand per kg
R116,335
R116,335
Put options purchased
Amount (kg)
1,875
1,875
Rand per kg
R93,602
R93,602
Put options sold
Amount (kg)
8,025
1,400
9,425
Rand per kg
R80,840
R88,414
R81,965
Call options purchased
Amount (kg)
Rand per kg
Call options sold
Amount (kg)
12,657
4,517
311
2,986
5,9722,986
26,4432,986
9,269
Rand per kg
R88,509
R102,447
R108,123
R202,054
R223,756R216,522
R134,486R230,990
R212,885
AUD DOLLAR GOLD
Forward contracts
Amount (kg)
2,9697,465
3,110
8,398
3,1102,177
3,390
3,1103,111
24,087
16,143
A$ per oz
A$560669
A$746656
A$650649
A$673683
A$667
A$692
A$662666
Put options purchased
Amount (kg)
1,2444,977
1,2444,977
A$ per oz
A$585826
A$585826
Put options sold
Amount (kg)
2,6445,910
2,6445,910
A$ per oz
A$565800
A$565800
Call options purchased
Amount (kg)
3,110
6,221
3,732
3,110
1,244
3,1103,111
20,527
11,197
A$ per oz
A$724
A$673
A$668
A$680
A$694
A$712
A$688686
Call options sold
Amount (kg)
1,7116,532
1,7116,532
A$ per oz
A$597847
A$597847
Delta
(kg)
32,280 44,577 57,531 52,221 47,107 92,492 326,208(36,687)
*(54,993)
(62,616)
(45,773)
(46,952)
(68,991)
(316,012)
*Total net gold:
Delta
(oz)
1,037,825 1,433,182 1,849,662 1,678,942 1,514,523 2,973,683 10,487,817(1,179,513)(1,768,063) (2,013,148)
(1,471,634)
(1,509,540)
(2,218,109)
(10,160,007)
Hedge delta as a percentage of current
production levels (%) **
17%21% 31%36%
24%26%
31%27%
28%8%
25%
10%
17%18%
*
At December 31, 2004, the group was in the process of restructuring the hedge book and had acquired a long spot position in gold. This long gold position has
been applied to the hedge restructure subsequent to year-end.
** The Delta of the hedge position indicated above, is the equivalent gold position that would have the same marked-to-market sensitivity for a small
change in
the gold price. This is calculated using the Black-Scholes option formula with the ruling market prices, interest rates and volatilities as at
December 31, 2004.
The Delta positions indicated above includes the attributable portions of equity accounted joint ventures.2006.
** Percentage based on 2006 full year production of 5,635,000 ounces.
At December 31, 2006 the company had 11.6 million committed ounces or 361t (2005: 11.8Moz or 369t).
Gold lease rate swaps
Year
2007 2008 200920102011 2012-2016
Amount
(‘000oz)
200 300 270 100 130 100270,000 100,000 130,000 100,000
-
Gold borrowing cost
associated with
forward
contracts
(1)
Interest rate %
rate
% 0.3% 0.6% 0.7% 0.9% 1.0% 1.5%0.69 0.78 0.89 1.25
-
Amount
(‘000oz)
400 7081,334,356
1,3341,168,000 898,000 641,000 423,000
1,168 898 641
205,000
Gold lease rate swaps
(2)
Interest rate %
rate
% 0.9% 1.2% 1.8% 1.8% 1.8% 1.8%
Amount
(‘000oz)
320 320 280 240 200 160
Interest
rate
% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Gold lease rate swaps
(3)
$ per ounce
302
302
302
302
302
3021.76 1.75 1.811.831.831.84
(1) Gold borrowing costs relating to Australian dollar gold forwards:
The Australian dollar denominated gold forward contract prices are shown on a net basis where the final price of the contract is determined by the cost of
borrowing gold over the full duration of the contract. The net prices shown in the table above have been adjusted to take account of the total expected
future
cost of all accumulated costs incurred to date and the expected future borrowing cost based on ruling market prices at the financial statement date.
The
amount shown under “Gold borrowing cost associated with forward contracts” in the table above is the face value of the borrowing amount and the
period in
which it matures. The interest rates shown are the future market rates prevailing at the time of the financial statement.
(2)
The gold lease rate swaps are contracts where the company receives a fixed percentage of the outstanding amount in gold and pays a floating market
determined percentage in gold, quarterly in arrears. The amount shown in the table above is the number of ounces outstanding at the beginning of each
period. The interest rate shown is the weighted average fixed rate that the company will receive for that period.
210
Year
2007
2008
2009
2010
2011
2012-2016
Total
DOLLAR SILVER
Put options purchased
Amount (kg)
43,545
43,545
87,090
$ per oz
$7.40
$7.66
$7.53
Put options sold
Amount (kg)
43,545
43,545
87,090
$ per oz
$5.93
$6.19
$6.06
Call options sold
Amount (kg)
43,545
43,545
87,090
$ per oz
$8.40
$8.64
$8.52
Certain of the hedging positions reported in the above tables are governed by early termination clauses in favor of certain
counterparts.
Foreign exchange price risk protection agreements
The group periodically enters into forward exchange and currency option contracts to hedge certain anticipated
transactions, firm commitments and other anticipated transactions denominated in foreign currencies. The objective of the
group’s foreign currency hedging activities is to protect the group from the risk that the eventual cash flows resulting from
transactions denominated in US dollars will be adversely affected by changes in exchange rates.
The following table indicates the group’s currency hedge position at December 31, 2006.
Year
2007
2008
2009
2010
2011
2012-2016
Total
RAND DOLLAR (000)
Put options purchased
Amount ($)
15,000
15,000
Rand per $
R7.61
R7.61
Put options sold
Amount ($)
40,000
40,000
Rand per $
R7.08
R7.08
Call options sold
Amount ($)
55,000
55,000
Rand per $
R7.34
R7.34
AUD DOLLAR (000)
Forward contracts
Amount ($)
73,518
20,000
93,518
$ per A$
$0.76
$0.73
$0.75
Put options purchased
Amount ($)
10,000
10,000
$ per A $
$0.76
$0.76
Put options sold
Amount ($)
10,000
10,000
$ per A $
$0.78
$0.78
Call options sold
Amount ($)
10,000
10,000
$ per A$
$0.75
$0.75
For a more detailed presentation of the investment maturity profile, borrowings maturity profile and interest rate risk profile
of these agreements, see note 26 to the consolidated financial statements “Financial risk management activities”.
Credit risk
Realization of all these contracts is dependent upon the counterparts performing in accordance with the terms of the
contracts. AngloGold Ashanti generally does not obtain collateral or other security to support financial instruments subject
to credit risk, but monitors the credit standing of counterparts. AngloGold Ashanti spreads its business over a number of
predominantly international, credit worthy counterparts and believes that no concentration of credit risk exists. Limits for
each counterpart are based on the assessed credit quality of each counterpart. The Treasury Committee makes
recommendations for board approval of all counterparts and the limits to be applied against each counterpart. Where
possible, management tries to ensure that netting agreements are in place.
211
The combined maximum credit exposure at the balance sheet date amounts to $655 million on a contract by contract
basis. Credit risk exposure netted by counterpart amounts to $68 million. No set-off is applied to the balance sheet due to
the different maturity profiles of assets and liabilities.
The table below provides a summary of the number, type and credit quality of AngloGold Ashanti’s hedge counterparts.
Number of Counterparts
Type
Credit Rating (Fitch)
2 International Bank
AAA
4 International Bank
AA+
4 International Bank
AA
9 International Bank
AA-
3 International Bank
A+
3 International Bank
A
1 International Bank
A-
1 International Bank
BBB
1
South African Bank
AAA(zaf) (International BBB+)
1
South African Bank
AA+(zaf) (International BBB+)
1
South African Bank
AA(zaf) (International BBB)
1
South African Bank
AA-(zaf) (International BBB)
1
South African Bank
A+(zaf) (International BBB-)
6 Brazilian Bank
AA(bra)
1 Trade Finance House
Not
rated
AngloGold Ashanti does not anticipate non-performance by any counterparts.
Fair value
The estimated fair values of financial instruments are determined at discrete points in time based on relevant market
information. In certain cases, these estimates involve uncertainties and cannot be determined with precision. The
estimated fair values of AngloGold Ashanti’s financial instruments at December 31, 2006 and 2005, are as follows:
December 31, 2006
December 31, 2005
Carrying
amount
Fair
value
Carrying
amount
Fair
value
(in
millions)
$
$
$
$
Cash and cash equivalents
(1)
471
471
196
196
Restricted cash
(1)
11
11
8
8
Short-term debt
(2)
33
33
160
160
Long-term debt
(2)
1,472
1,484
1,779
1,803
Derivatives
(3) (5)
(1,524)
(2,903)
(935)
(1,941)
Forward sales type agreements
(3)
(499)
1,328
(355)
(909)
Option contracts
(3)
(1,056)
(1,572)
(4)
(612)
(1,058)
(4)
Foreign exchange contracts
(3)
4
4
6
6
Foreign exchange option contracts
(3)
(12)
(12)
(5)
(5)
Interest rate swaps – Gold
(3)
39
5
31
25
Sub total – Hedge derivatives
(1,524)
(2,903)
(935)
(1,941)
Interest rate swaps – Non-gold
(3)
-
-
-
-
(1)
The carrying amounts approximate fair value because of the short-term duration of these instruments.
(2)
Fair value reflects the net present value of the future cash flows, discounted at the prevailing market rate. The fair value of listed fixed rate debt and
the Convertible Bonds are shown at their market value. The remainder of debt re-prices on a short-term floating rate basis, and accordingly the
carrying amount is considered to approximate fair value.
(3)
The fair value of the above instruments is calculated based on market prices, volatilities and interest rates, as at December 31, 2006 and 2005.
(4)
Includes deliverable call options sold. A deliverable option is an option in terms of which the delivery quantity is fixed regardless of the market price
on the exercise date. In the event that the market price is lower than the strike price, gold lease rate swaps are contracts whereis sold to the counterpart at the ruling spot price.
(5)
Carrying amount represents on balance sheet derivatives.
212
Sensitivity analysis
The following table shows the approximate sensitivities of the $ marked-to-market value of the hedge book at
December 31, 2006 (actual changes in the timing and amount of the following variables may differ from the assumed
changes below):
Sensitivity analysis
Change in
Rate(+)
Change in Fair
value
(1)
Change in Rate
(-)
Change in Fair
value
(1)
Currency (R/$)
1
(16.5)
1
10.68
Currency (A$/$)
0.05 1.61 0.05 (1.7)
Gold price ($/oz)
10
(100.8)
10
99.1
US Interest Rate (%)
0.1
(9.09)
0.1
9.11
ZAR Interest Rate (%)
0.1
(0.17)
0.1
0.17
Aus Interest Rate (%)
0.1
(0.09)
0.1
0.09
Gold Interest Rate (%)
0.1
14.80
0.1
(14.89)
(1)
In $ million.
Hedge levels
AngloGold Ashanti employs hedging as an element of its risk management strategy.
A summary of the hedge position as at December 31, 2004, 2005 and 2006 is as follows. The “years of production hedged”
is calculated as the hedge net delta position at year-end divided by the annual production for that year.
As at December 31,
Hedge Net Delta
kg’s
(2)
Annual Production for
Year
kg’s
(2)
Years of Production
Hedge
2004 326,208
188,223
1.73
2005 337,076
191,783
1.76
2006 316,012
175,268
1.80
(2)
Includes equity accounted joint ventures.
While AngloGold Ashanti may reduce its net delta hedge position further in line with a positive price outlook, it will continue
to actively manage the hedge positions.
213
Item 12: Description of securities other than equity securities
Not applicable.
214
PART II
Item 13: Defaults, dividend arrearages and delinquencies
None.
Item 14: Material modifications to the rights of security holders
and use of proceeds
None.
Item 15: Controls and procedures
Management certification
(a) Disclosure Controls and Procedures: As of December 31, 2006, the company, receives a fixed percentageunder the supervision and with the
participation of its management, including the Chief Executive Officer and Chief Financial Officer has evaluated the
effectiveness of the outstanding amount atcompany’s disclosure controls and procedures (as defined in Rules 13a – 15(e) and 15d – 15(e)
under the Securities Exchange Act of 1934, as amended (the Exchange Act). Based on such evaluation, the Chief
Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2006, the company’s
disclosure controls and procedures are effective, and are reasonably designed to ensure that information required to
be disclosed by the company in reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange
Commission. These disclosure controls and procedures include without limitation, controls and procedure s designed
to ensure that information required to be disclosed by the company in reports that it files or submits under the
Exchange Act is accumulated and communicated to the company’s management, including its Chief Executive Officer
and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure.
(b) Management’s Annual Report on Internal Control over Financial Reporting: Management is responsible for establishing
and maintaining adequate internal control over financial reporting for the company, as defined in the Exchange Act
Rule 13a – 15(f) and 15d -15(f). The company’s internal control over financial reporting is a fixed US dollar gold priceprocess designed to
provide reasonable assurance regarding the reliability of financial reporting and paysthe preparation of the company’s
financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Because
of inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
The company’s internal control over financial reporting includes those policies and procedures that:
·
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and
dispositions of the assets of the company;
·
Provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management and the Directors of the
company; and
·
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods is subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with policies and procedures may
deteriorate.
215
The company’s management assessed the effectiveness of the company’s internal control over financial reporting as
of December 31, 2006. In making this assessment, management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework. Based
on this assessment, and using those criteria, management concluded, and hereby reports that the company’s internal
control over financial reporting was effective as of December 31, 2006.
(c) Changes in Internal Control over Financial Reporting: There have been no changes in the company’s internal control
over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rule
13a – 15 during the year ended December 31, 2006 that have materially affected, or are reasonably likely to materially
affect, the company’s internal control over financial reporting.
(d) Attestation Report of the Registered Public Accounting Firm: Management’s assessment of the effectiveness of the
company’s internal control over financial reporting as of December 31, 2006 has been audited by Ernst & Young, an
independent registered public accounting firm, as stated in their report, which appears below.
/s/
R
M
Godsell
/s/
S
Venkatakrishnan
Robert
Michael
Godsell
Srinivasan
Venkatakrishnan
Chief Executive Officer
Chief Financial Officer
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of AngloGold Ashanti Limited
We have audited management’s assessment, included in the accompanying "Management's Annual Report on Internal
Control Over Financial Reporting", that AngloGold Ashanti Limited maintained effective internal control over financial
reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). AngloGold Ashanti Limited’s
management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s
assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our
audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the
design and operating effectiveness of internal control, and performing such other procedures as we considered necessary
in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonabl e assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
216
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, management’s assessment that AngloGold Ashanti Limited maintained effective internal control over
financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on the COSO criteria. Also, in
our opinion, AngloGold Ashanti Limited maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2006, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated balance sheets of AngloGold Ashanti Limited as of December 31, 2006 and 2005 and the related
consolidated statements of income, stockholders’ equity and cash flows for each of the three years in the period ended
December 31, 2006, and our report dated July 6, 2007 expressed an unqualified opinion thereon.
Ernst & Young Inc.
Registered Auditors
Johannesburg, Republic of South Africa
July 6, 2007
217
ITEM 16A: Audit committee financial expert
Mr Colin Brayshaw and Prof Wiseman Nkuhlu have been determined by our board to be audit committee financial experts
within the meaning of the Sarbanes-Oxley Act, in accordance with the Rules of the NYSE and the SEC. Mr Brayshaw and
Prof Nkuhlu as well as each of the other members of the Audit and Corporate Governance Committee
(being Mr F B Arisman, Mrs E le R Bradley and Mr R P Edey) are independent directors. All members of the committee
have considerable financial knowledge and experience to help oversee and guide the board and the company in respect of
the audit and corporate governance disciplines. Following Mr Brayshaw’s retirement from the board on May 4, 2007,
Prof Nkuhlu has become the chairman of the committee and is the sole financial expert.
ITEM 16B: Code of ethics
In order to comply with the company’s obligations in terms of the Sarbanes-Oxley Act and the King Code, and in the
interests of good governance, the company has adopted a code of ethics for employees, senior and executive financial
officers, and a whistle-blowing policy that encourages employees and other stakeholders to confidentially and
anonymously report acts of an unethical or illegal nature affecting the company’s interests. All reports made in terms of the
whistle-blowing policy are fielded by a third party, Tip-Offs Anonymous, who ensures all reports are treated confidentially or
anonymously depending on the preference of the caller. The information is relayed to the group internal audit manager,
and if required, to management for investigation. All reports and the progress of the investigations are conveyed to the
audit and corporate governance committee by the group internal audit manager.
In addition, the company has adopted a Disclosures Policy, the object of which is to ensure compliance with the rules of
the various exchanges on which it is listed and provide timely, accurate and reliable information fairly to all stakeholders,
including investors (and potential investors), regulators and analysts.
The code of ethics, whistle blowing and disclosure policies are available on the company’s website:
www.AngloGoldAshanti.com
under About > Corporate Governance - > Guidelines. The code of ethics and disclosure
policy are also available on request from the company secretary.
ITEM 16C: Principal accountant fees and services
Ernst & Young has served as AngloGold Ashanti’s independent public accountants for each of the financial years in the
three-year period ended December 31, 2006 for which audited financial statements appear in this annual report on
Form 20-F. The Annual General Meeting elects the auditors annually.
The following table presents the aggregate fees for professional services and other services rendered by Ernst & Young to
AngloGold Ashanti in 2006 and 2005.
(in millions)
2006
$
2005
$
Audit Fees
(1)
9.29 4.29
Audit-related Fees
(2)
0.88 1.03
Tax Fees
(3)
0.06 0.10
All Other Fees
(4)
- 0.10
Total
10.23 5.52
floating market determined percentageRounding may result in gold, quarterly in arrears.computational differences.
(1) The amount shownAudit Fees consist of fees billed for the annual audit services engagement and other audit services, which are those services that only the external
auditor reasonably can provide, and include the Company audit; statutory audits; attest services; and assistance with and review of documents filed with
the SEC. Included in the table above isAudit fees, for 2006, are fees paid to the numberexternal auditors in respect of ounces outstanding atSOX compliance.
(2) Audit-related Fees consist of fees billed for assurance and related services and include consultations concerning financial accounting and reporting
standards; and comfort letters; and consents.
(3) Tax Fees include fees billed for tax advice and tax compliance services.
(4) All Other Fees include fees billed for services relating to the
beginning review of each period. The interest rate shown is the average fixed rate that the company will receive during that period. The US$ price is the average rate
at which the fixed interest amount in gold is converted to US dollars.an information technology system.
218
Audit Committee Pre-approval Policies and Procedures
It is the policy of AngloGold Ashanti to maintain compliance with the requirements of the various applicable legislation and
good governance practices when appointing or granting work to the Company’s external auditor. Non-audit services may
not be acquired without an employee of AngloGold Ashanti obtaining the pre-approval of the Audit and Corporate
Governance Committee as is laid out in the procedures relating to the pre-approval process.
The audit committee has delegated the approval authority to the chairman of the Audit and Corporate Governance
Committee, Prof Wiseman Nkuhlu or his designated official. The approval may take the form of a written or verbal
response, and in the case of a verbal instruction these would be ratified at the next audit committee meeting. On a
quarterly basis a summary of all approvals and word to date is tabled at the audit committee.
During 2006, no services were provided to AngloGold Ashanti by Ernst & Young in respect of Audit-related Fees (in the
form of tax fees) paid pursuant to the de minimis exception to the pre-approval requirement provided by
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
No work was performed by persons other than the principal accountant’s employees on the principal accountant’s
engagement to audit AngloGold Ashanti’s financial statements for 2006.
ITEM 16D: Exemptions from the listing standards for audit
committees
Not applicable.
ITEM 16E: Purchases of equity securities by the issuer and
affiliated purchasers
Neither the issuer nor any affiliate of the issuer, purchased any of the company’s shares during 2006.
219
PART III
Item 17: Financial statements
Not applicable.
220
Item 18: Financial statements
Report of the Independent Registered Public Accounting Firm
The board of directors and stockholders of AngloGold Ashanti Limited
We have audited the accompanying consolidated balance sheets of AngloGold Ashanti Limited (the “Company”) as of
December 31, 2006 and 2005 and the related consolidated statements of income, stockholders’ equity and cash flows for
each of the three years in the period ended December 31, 2006. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
The financial statements of Société d'Exploitation des Mines d'Or de Sadiola S.A. (“Sadiola”), a corporation in which the
Company has a 38 percent interest, have been audited by other auditors whose report has been furnished to us, and our
opinion on the consolidated financial statements, insofar as it relates to the amounts included for Sadiola, is based solely on
the report of the other auditors. In the consolidated financial statements, the Company’s investment in Sadiola is stated at
$66 million and $67 million, respectively, at December 31, 2006 and 2005, and the Company’s equity in net income is stated
at $33 million, $8 million and $12 million for each of the three years in the period ended December 31, 2006.
The financial statements of Société d'Exploitation des Mines d'Or de Yatela S.A. (“Yatela”), a corporation in which the
Company has a 40 percent interest, have been audited by other auditors whose report has been furnished to us, and our
opinion on the consolidated financial statements, insofar as it relates to the amounts included for Yatela, is based solely on
the report of the other auditors. In the consolidated financial statements, the Company’s investment in Yatela is stated at
$26 million at December 31, 2006, and the Company’s equity in net income is stated at $34 million for the year then ended.
The financial statements of Société des Mines de Morila S.A. (“Morila”), a corporation in which the Company has a
40 percent interest, have been audited by other auditors at December 31, 2005 and 2004 and for the periods then ended,
whose report has been furnished to us, and our opinion on the consolidated financial statements, insofar as it relates to the
amounts included for Morila, prior to restatement, is based solely on the report of the other auditors. In the consolidated
financial statements, the Company’s investment in Morila is stated at $89 million and $72 million at December 31, 2005 and
2004, respectively, and the Company’s equity in net income is stated at $53 million and $20 million for the years then ended.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits and the reports of the other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of AngloGold Ashanti Limited at December 31, 2006 and
2005, and the consolidated results of its operations and its cash flows for each of the three years in the period ended
December 31, 2006 in conformity with U.S generally accepted accounting principles.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the effectiveness of AngloGold Ashanti Limited’s internal control over financial reporting as of December 31, 2006, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated July 6, 2007 expressed an unqualified opinion thereon.
As discussed in note 2 to the consolidated financial statements, in 2006 the Company changed its method of accounting for
stock-based compensation in accordance with SFAS123(R) Share-Based Payment, its method of accounting for deferred
stripping costs in accordance with EITF Issue 04-6 Accounting for Stripping Costs Incurred during Production in the Mining
Industry, and its method of considering the effects of prior year misstatements in accordance with SAB 108 Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.
As discussed in note 2 to the consolidated financial statements, in 2005 the Company changed its method of accounting for
employee benefit plans in accordance with SFAS87 Employers' Accounting for Pensions and SFAS106 Employers'
Accounting for Postretirement Benefits Other Than Pensions, and in 2006 in accordance with SFAS158 Employers’
Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88,
106 and 132(R).
Ernst & Young Inc.
Registered Auditor
Johannesburg, Republic of South Africa
July 6, 2007
F-1
ANGLOGOLD ASHANTI LIMITED
Consolidated statements of income
FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 and 2004
(In millions, except share and per share information)
Notes
2006
$
2005
$
2004
$
Sales and other income
2,715
2,485
2,151
Product sales
2,683
2,453
2,096
Interest, dividends and other
32
32
55
Costs and expenses
2,811
2,848
2,176
Production costs
1,525
1,638
1,340
Exploration costs
58
44
44
Related party transactions
6
8
41
45
General and administrative
140
71
58
Royalties
59
39
27
Market development costs
16
13
15
Depreciation, depletion and amortization
699
593
445
Impairment of assets
5
6
141
3
Interest expense
5
77
80
67
Accretion expense
5
13
5
8
Employment severance costs
5
22
26
7
Profit on sale of assets, loans and indirect taxes
5
(36)
(3)
(14)
Mining contractor termination costs
5
-
9
-
Non-hedge derivative loss
26
208
142
123
Other operating costs and expenses
5
16
9
8
(Loss)/income from continuing operations before income tax, equity income, minority
interests and cumulative effect of accounting change
(96)
(363)
(25)
Taxation (expense)/benefit
7
(122)
121
132
Minority interest
(29)
(23)
(22)
Equity income in affiliates
99
39
23
(Loss)/income from continuing operations before cumulative effect of accounting
change
(148)
(226)
108
Discontinued operations
8
6
(44)
(11)
(Loss)/income before cumulative effect of accounting change
(142)
(270)
97
Cumulative effect of accounting change, net of taxation of $11 million in 2005
2/5
-
(22)
-
Net (loss)/income – applicable to common stakeholders
(142)
(292)
97
(Loss)/earnings per share : (cents)
From continuing operations
9
Ordinary shares
(54)
(85)
43
E Ordinary shares
(91)
-
-
Ordinary shares - diluted
(54)
(85)
42
E Ordinary shares - diluted
(91)
-
-
Discontinued operations
9
Ordinary shares
2
(17)
(4)
E Ordinary shares
-
-
-
Ordinary shares - diluted
2
(17)
(4)
E Ordinary shares - diluted
-
-
-
Before cumulative effect of accounting change
9
Ordinary shares
(52)
(102)
39
E Ordinary shares
(91)
-
-
Ordinary shares - diluted
(52)
(102)
38
E Ordinary shares - diluted
(91)
-
-
Cumulative effect of accounting change
9
Ordinary shares
-
(8)
-
E Ordinary shares
-
-
-
Ordinary shares - diluted
-
(8)
-
E Ordinary shares - diluted
-
-
-
Net (loss)/income
9
Ordinary shares
(52)
(110)
39
E Ordinary shares
(91)
-
-
Ordinary shares - diluted
(52)
(110)
38
E Ordinary shares - diluted
(91)
-
-
Pro forma amounts assuming change in accounting for employee benefits plans is
applied retroactively:
Income before cumulative effect of accounting change
2
79
Per basic share (cents)
2
32
Net income
2
31
Per basic share (cents)
2
32
Per diluted share (cents)
2
31
Weighted average number of shares used in computation
9
Ordinary shares
272,613,263
264,635,634
251,352,552
E Ordinary shares - basic and diluted
194,954
-
-
Ordinary shares - diluted
272,637,483
264,635,634
252,048,301
Dividend paid per ordinary share (cents)
39
56
76
Dividend paid per E ordinary share (cents)
-
-
-
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-2
ANGLOGOLD ASHANTI LIMITED
Consolidated balance sheets
AT DECEMBER 31, 2006 and 2005
(In millions, except share information)
Notes
2006
$
2005
$
ASSETS
Current Assets
1,876
1,401
Cash and cash equivalents
471
196
Restricted cash
10
11
8
Receivables
160
209
Trade
40
97
Recoverable taxes, rebates, levies and duties
59
45
Related parties
1
-
Other
60
67
Inventories
11
354
260
Materials on the leach pad
11
46
37
Derivatives
26
649
675
Deferred taxation assets
7
167
-
Assets held for sale
16
18
16
Year 2005Property, plant and equipment, net
12
4,977
4,922
Deferred stripping
12
-
105
Acquired properties, net
13
1,289
1,412
Goodwill
14
542
524
Other intangibles, net
14
24
26
Derivatives
26
6
38
Other long-term inventory
11
68
32
Materials on the leach pad
11
149
116
Other long-term assets
15
543
496
Deferred taxation assets
7
39
41
Total assets
9,513
9,113
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
2,467
1,874
Trade accounts payable
278
203
Payroll and related benefits
94
78
Other current liabilities
17
126
199
Derivatives
26
1,782
1,121
Short-term debt
18
33
160
Tax payable
148
107
Liabilities held for sale
16
6
6
Other non-current liabilities
19
24
14
Long-term debt
20
1,472
1,779
Derivatives
26
397
527
Deferred taxation liabilities
7
1,275
1,152
Provision for environmental rehabilitation
5 / 21
310
325
Other accrued liabilities
22
27
19
Provision for pension and other post-retirement medical benefits
23
172
200
Minority interest
61
60
Commitments and contingencies
24
-
-
Stockholders’ equity
25
3,308
3,163
Common stock
400,000,000 (2005 – 400,000,000) authorized common stock of 25 ZAR cents each
Stock issued 2006 2007 2008 2009– 276,236,153 (2005 – 264,938,432)
10
10
Additional paid in capital
5,539
4,972
Accumulated deficit
(1,476)
(1,143)
Accumulated other comprehensive income
(765)
(676)
Total liabilities and stockholders’ equity
9,513
9,113
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-3
ANGLOGOLD ASHANTI LIMITED
2010-2014 Consolidated statements of cash flows
FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 and 2004
(In millions, except share information)
Notes
2006
$
2005
$
2004
$
Net cash provided by operating activities
770
347
513
Net (loss)/income – applicable to common stockholders
(142)
(292)
97
Reconciled to net cash provided by operations:
Cumulative effect of accounting change
-
22
-
Loss/(profit) on sale of assets, loans and indirect taxes
6
(3)
(14)
Depreciation, depletion and amortization
699
593
445
Deferred stripping costs
-
(28)
(28)
Impairment of assets
6
141
3
Deferred taxation
(34)
(191)
(200)
Movement in non-hedge derivatives
339
54
201
Equity income in affiliates
(99)
(39)
(23)
Dividends received from affiliates
85
51
24
Other non cash items
5
31
32
Net (decrease)/increase in provision for environmental
rehabilitation and pension and other post-retirement medical
benefits
(62)
52
(15)
Effect of changes in operating working capital items:
Receivables
11
8
(24)
Inventories
(165)
(58)
(39)
Accounts payable and other current liabilities
122
37
56
Net cash provided by continuing operations
771
378
515
Net cash used in discontinued operations
(1)
(31)
(2)
Net cash used in investing activities
(611)
(624)
(995)
Cash acquired in acquisitions
3
-
-
56
Increase in non-current investments
(20)
(27)
(30)
Additions to property, plant and equipment
(811)
(710)
(571)
Proceeds on sale of mining assets
57
8
10
Proceeds on sale of discontinued assets
9
4
-
Proceeds on sale of available for sale investments
11
1
-
Cash outflows from derivatives purchased
-
(69)
(359)
Cash inflows from derivatives sold
-
-
49
Cash inflows from derivatives with financing
141
153
-
Cash consideration for acquisitions or disposals
3
-
-
(227)
Loans receivable advanced
(1)
(7)
(2)
Loans receivable repaid
6
6
85
Change in restricted cash
(3)
17
(6)
Net cash generated in financing activities
119
200
276
Short-term debt repaid
(134)
(284)
(609)
Short-term debt raised
16
137
88
Issuance of stock
512
9
3
Share issue expenses
(5)
-
-
Long-term debt repaid
(418)
(19)
(200)
Long-term debt raised
142
471
989
Cash outflows from derivatives relating to acquisitions
-
-
(24)
Cash inflows from derivatives with financing
138
55
227
Dividends paid
(132)
(169)
(198)
Net increase/(decrease) in cash and cash equivalents
278
(77)
(206)
Effect of exchange rate changes on cash
(3)
(3)
13
Cash and cash equivalents – January 1,
196
276
469
Cash and cash equivalents – December 31,
471
196
276
The accompanying notes are an integral part of these Consolidated Financial Statements.
ANGLOGOLD ASHANTI LIMITED
Consolidated statements of stockholders’ equity
FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 and 2004
(In millions, except share information)
Common stock
Common
stock
$
Additional paid
in capital
$
Other
comprehensive
income*
$
Accumulated
deficit
$
Total
DOLLAR SILVER$
Balance – January 1, 2004
223,136,342
9
3,415
(740)
(616)
2,068
Net income
97
97
Translation gain
178
178
Net loss on cash flow hedges removed from other comprehensive income and reported in income, net of tax
118
118
Net gain on cash flow hedges, net of tax
19
19
Net gain on available for sale financial assets arising during the period, net of tax
2
2
Comprehensive income
414
Stock issue as part of acquisition
41,133,752
1
1,543
1,544
Stock issues as part of Share Incentive Scheme
192,800
-
3
3
Reversal of variable compensation awards compensation expense
(4)
(4)
Dividends
(179)
(179)
Balance – December 31, 2004
264,462,894
10
4,961
(423)
(702)
3,846
Net loss
(292)
(292)
Translation loss
(132)
(132)
Net loss on cash flow hedges removed from other comprehensive income and reported in income, net of tax
11
11
Net loss on cash flow hedges, net of tax
(134)
(134)
Net gain on available for sale financial assets arising during the period, net of tax
2
2
Comprehensive loss
(545)
Stock issues as part of Share Incentive Scheme
475,538
-
9
9
Unearned stock awards compensation expense
2
2
Dividends
(149)
(149)
Balance – December 31, 2005
264,938,432
10
4,972
(676)
(1,143)
3,163
F-4
Forward
contracts
Amount
($)
$
per
oz
Put options purchased
Amount ($)
43,545
43,545
43,545
130,635
$ per oz
$7.11
$7.11
$7.40Cumulative deferred stripping adjustment. Refer to Note 2.
$7.21
Put options sold
Amount ($)(73)
43,545(73)
43,545
43,545Cumulative cut-off adjustment. Refer to Note 2.
130,635
$ per oz(11)
$6.02(11)
$6.02
$5.93Net loss
$5.99
Call options purchased
Amount ($)(142)
(142)
Translation loss
(108)
(108)
Net loss on cash flow hedges removed from other comprehensive income and reported in income, net of tax
97
97
Net loss on cash flow hedges, net of tax
(86)
(86)
Net gain on available for sale financial assets arising during the period, net of tax
8
8
$
per
oz
Call options sold
Amount ($)
43,545
43,545
43,545
130,635
$ per oz
$8.11
$8.11
$8.40Comprehensive loss
$8.21
(315)
Stock issues as part of equity offering
9,970,732
-
498
498
Stock issues as part of Share Incentive Scheme
398,399
-
9
9
Stock based compensation expense
60
60
Dividends
(107)
(107)
Balance – December 31, 2006
275,307,563
10
5,539
(765)
(1,476)
3,308
* The cumulative translation loss included in other comprehensive income amounted to $581 million (2005: $473 million). The translation loss has no tax effect. The cumulative charge, net of deferred taxation of $96 million
(2005: $71 million), included in other comprehensive income in respect of cash flow hedges amounted to $260 million (2005: $271 million). The cumulative gain, net of deferred taxation of $1 million (2005: $nil million),
included in other comprehensive income in respect of available for sale financial assets amounted to $12 million (2005: $4 million). The cumulative gain included in other comprehensive income in respect of the hedge of a
net investment in foreign entities amounted to $64 million (2005: $64 million). This gain is offset by $64 million (2005: $64 million) arising from translation of a net investment in foreign entities.
As at December 31, 2006, $286 million of retained earnings arising from the Company’s equity accounted joint ventures and certain subsidiaries may not be remitted without third-party shareholder consent.
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-5
ANGLOGOLD ASHANTI LIMITED
Notes to the consolidated financial statements
HedgeFOR THE YEARS ENDED DECEMBER 31, 2006, 2005 and 2004
(In millions, except share information)
1.
NATURE OF OPERATIONS
AngloGold Ashanti Limited (the "Company"), as it conducts business today, was formed on April 26, 2004 following
the Business Combination of AngloGold Limited (AngloGold) with Ashanti Goldfields Company Limited (Ashanti).
AngloGold, formerly Vaal Reefs Exploration and Mining Company Limited, was incorporated in South Africa on
May 29, 1944 and Ashanti was incorporated in Ghana on August 19, 1974. The Company conducts gold-mining
operations in Argentina, Australia, Brazil, Ghana, Guinea, Mali, Namibia, South Africa, Tanzania and the United
States of America (USA). The Company also produces uranium oxide and sulphuric acid.
2.
ACCOUNTING CHANGES
Stock Based Compensation
At December 31, 2006, the Company has five stock-based employee compensation plans consisting of time-based
awards, performance related awards and equity settled compensation plans, which are described more fully in
Note 30 the “AngloGold Limited share incentive scheme and plans”. Prior to January 1, 2006, the Company
accounted for share-based payments under the recognition and measurement provisions of APB Opinion No. 25,
“Accounting for Stock Issued to Employees, and related Interpretations”, as permitted by SFAS123, “Accounting for
Stock-Based Compensation”. In accordance with APB No. 25, no compensation cost was required to be recognized
for options granted that had an exercise price equal to the market value of the underlying common stock on the date
of grant. During the years ended December 31, 2005 and 2004 there was no compensation expense recognized
related to time-based awards as the exercise price of all awards was greater than or equal to the fair market value of
the underlying stock on the date of grants. During the year ended December 31, 2005 the Company recognized a
compensation expense of $2 million related to Bonus Share Plan (BSP) and Long-Term Incentive Plan (LTIP) treated
as equity settled compensation plans under APB No. 25. As of December 31, 2005 no compensation expense was
recognized, related to the performance awards under APB No. 25. The Company recognized compensation credit of
$4 million during 2004, related to the performance awards under APB No. 25, due to a decline in fair market value to
below the exercise price of such awards.
On January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123(R), “Share-Based
Payment”, using the modified prospective transition method. Under this method, compensation cost recognized in
the year ended December 31, 2006 includes: a) compensation cost for all share-based payments granted prior to,
but not yet vested as of January 1, 2006, based on the grant-date fair value estimated in accordance with the original
provisions of SFAS123, and b) compensation cost for all share-based payments granted subsequent to
January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS123(R). The
results for prior periods have not been restated.
As a result of adopting SFAS123(R) on January 1, 2006, the Company’s loss before income taxes and net loss for
the year ended December 31, 2006, are $31 million higher, than if it had continued to account for share-based
compensation under APB No. 25. Basic and diluted loss per share for the year ended December 31, 2006 would
have been $0.40 if the Company had not adopted SFAS123(R), compared to reported basic and diluted loss per
share of $0.51.
F-6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
2.
ACCOUNTING CHANGES (continued)
SFAS123(R) requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a
financing cash flow, rather than as an operating cash flow. This requirement will reduce net operating cash flows
and increase net financing cash flows in periods after adoption. This requirement did not impact the Company’s
cash flow disclosure for the year ended December 31, 2006 as the Company received the benefit of a tax deduction
of less than $1 million for compensation cost settled in equity. No income tax benefit was recognized in 2005 and
2004.
The following table illustrates the effect on net income and earnings per share if the Company had applied the fair
value recognition provisions of SFAS123 to stock-based employee compensation in 2005 and 2004. For purposes of
this pro forma disclosure, the value of the options is estimated using a Black-Scholes option pri cing model and
amortized to expense over the options’ vesting periods.
Year Ended December 31,
(in millions, except per share data)
2005
$
2004
$
Net (loss)/income, as reported
(292)
97
Add: Unearned stock awards compensation expense, calculated under APB No. 25
2
-
(Deduct)/add: Variable compensation awards (credit)/expense, calculated under APB No. 25
-
(4)
Deduct: Total stock-based employee compensation expense determined under fair value
based method for all awards, net of
related tax effects
(2)
(3)
Pro forma net (loss)/income
(292)
90
(Loss)/earnings per share (cents)
Basic – as reported
(110)
39
Basic – pro forma
(110)
36
Diluted – as reported
(1)
(110)
38
Diluted – pro forma
(1)
(110)
36
(1)
The calculation of diluted (loss)/earnings per common share for 2005 and 2004 did not assume the effect of 15,384,615 shares
issuable upon the exercise of Convertible Bonds as their effects are anti-dilutive for these periods. The calculation of diluted
(loss)/earnings per common share for 2005 did not assume the effect of 601,315 shares issuable upon the exercise of stock
incentive options as their effects are anti-dilutive for this period.
Deferred Stripping Costs
On January 1, 2006, the Company adopted Emerging Issues Task Force (“EITF”) Issue 04-6, “Accounting for
Stripping Costs in the Mining Industry”. Issue No. 04-6 addresses the accounting for stripping costs incurred during
the production phase of a mine and that post production stripping costs should be considered costs of the extracted
minerals under a full absorption costing system and recognized as a component of inventory to be recognized in cost
of sales in the same period as the revenue from the sale of the inventory. Additionally, capitalization of such costs
would be appropriate only to the extent inventory exists at the end of a reporting period.
The guidance requires application through recognition of a cumulative effect adjustment to opening retained earnings
in the period of adoption, with no charge to current earnings for prior periods. The results for prior periods have not
been restated. Upon adoption, the cumulative effect of the accounting change reduced opening retained earnings by
$73 million (net of Taxation), increased the value of inventory by $5 million, eliminated the capitalized deferred
stripping balance of $105 million, decreased Deferred taxation by $29 million, reduced Other long-term assets by
$3 million and decreased Minority interest by $1 million. Adoption of the new guidance had no impact on the
Company’s cash position or net cash from operations.
Prior to January 1, 2006, stripping costs incurred in open-pit operations during the production phase to remove
additional waste were charged to operating costs on the basis of the average life of mine stripping ratio and the
average life of mine costs per tonne and resulted in capitalization of such stripping costs (deferred stripping) as part
of mining assets.
F-7
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
2.
ACCOUNTING CHANGES (continued)
As at December 31,
(in millions)
2006
$
2005
$
Movements in the deferred stripping costs balance were as follows:
Opening balance
105
69
Cumulative effect adjustment
(105)
-
Amount deferred
-
28
Translation
-
8
Closing balance
-
105
Cut-off adjustments
Certain subsidiaries within the Company have in prior years consistently determined the year end close process in
respect of certain operating costs at dates immediately preceding the Christmas vacation period. Historically,
management concluded that any resulting adjustment was immaterial to operating results as all entities had twelve
reporting periods and used the same cut-off dates from year to year.
The above errors arose as a combination of the cut-off process being linked to the mine production cycle as well as
utilizing a date not aligned to December 31 each year, although the same dates were utilized from year to year.
On September 13, 2006, the SEC staff published Staff Accounting Bulletin (SAB) No. 108, “Considering the Effects
of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SA B 108”).
SAB 108 (SAB Topic 1.N) addresses quantifying the financial statement effects of misstatements, specifically, how
the effects of prior year uncorrected errors must be considered in quantifying misstatements in the current year
financial statements.
As part of the 2006 year end financial statement close process the Company quantified the balance sheet impact
and determined that it would only have a material effect in the reporting of “Payroll and related benefits”, which is
separately identified on the face of the balance sheet for all years presented. The other accounts that were affected
are Tangible Assets – Mine development costs; Inventories – Gold in process; Deferred taxation; Cash and cash
equivalents; Trade accounts payable and Payroll and related benefits.
The Company previously considered the above errors to be immaterial under the rollover method and evaluated the
misstatement against the current year fina ncial statements under both the rollover and iron curtain methods.
In accordance with the transition provisions provided in SAB 108 the cumulative effect of applying SAB 108 as an
adjustment to opening retained earnings is summarized below:
(in millions)
$
Assets
Tangible Assets – Mine development costs
3 (increase)
Inventories – Gold in process
1 (increase)
Deferred taxation
5 (increase)
Trade receivables
5 (decrease)
Liabilities
Trade accounts payable
3 (increase)
Payroll and related benefits
10 (increase)
Other creditors
2 (increase)
Retained earnings
11 (decrease)
F-8
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
2.
ACCOUNTING CHANGES (continued)
Employee Benefit Plans
On September 29, 2006 the FASB issued SFAS158, “Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R)”. SFAS158 requires an entity
to:
•
recognize in its statement of financial position an asset for a defined benefit post-retirement plan's overfunded
status or a liability for a plan's underfunded status;
•
measure a defined benefit post-retirement plan's assets and obligations that determine its funded status as of
the same day of the employer's fiscal year-end statement of financial position;
•
recognize as a component of accumulated other comprehensive income, net of tax, amounts accumulated at
the date of adoption due to delayed recognition of actuarial gains and losses, prior service costs and credits,
and transition assets and obligations; and
•
expand the disclosure requirements of SFAS132(R) to include disclosure of additional information in the notes
to financial statements about certain effects on net periodic benefit cost in the next fiscal year that arise from
delayed recognition of actuarial gains or losses, prior service costs or credits and unrecognized transition
assets and obligations.
The adoption of the recognition and disclosure requirements of SFAS158 which are effective for fiscal years ending
after December 15, 2006, did not have a material impact on the Company’s earnings and financial position as the
Company changed its accounting policy during the second quarter of 2005, retroactive to January 1, 2005, with
respect to accounting for employee benefit plans to recognize the effects of actuarial gains and losses in income,
rather than amortizing over the expected average remaining service period of employees participating in the plan.
This change was made as the Company believes that elimination of the permitted pension and post-retirement
benefit corridor, as allowed by SFAS87 and SFAS106 will result in more accurate financial information.
The cumulative effect of this change in accounting treatment with respect to actuarial gains and losses recorded in
2005 decreased net income and stockholders’ equity by $22 million (net of taxation of $11 million).
The Company’s employee benefit plans are described more fully in Note 30 the “Employee benefit plans”.
The results for 2004 are presented on a historical basis and do not reflect the change in accounting treatment with
respect to actuarial gains and losses. Had the Company changed its accounting policy, retroactive to January 1, the
historical income before cumulative effect of accounting change, net income and related per share amounts would
have been changed to the adjusted amounts indicated below:
Year ended December 31, 2004
(in US Dollars, millions, except for share data)
Income before
cumulative effect of
accounting change
Per
basic
share
(1)
(cents)
Per
diluted
share
(1)
(cents)
Net
income
Per
basic
share
(1)
(cents)
Per
diluted
share
(1)
(cents)
As reported – historical basis
97
39
38
97
39
38
Impact on earnings net of taxation
(18)
(7)
(7)
(18)
(7)
(7)
Adjusted
79
32
31
79
32
31
(1)
Basic and diluted earnings per common share. The calculation of diluted earnings per common share for 2004 did not
assume the effect of 15,384,615 shares, issuable upon the exercise of Convertible Bonds as their effects are anti-dilutive for
this period.
F-9
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
3.
ACQUISITIONS AND DISPOSALS OF BUSINESSES AND ASSETS
2006 acquisitions
The Company made the following acquisitions during the year:
•
Agreement signed with China explorer Dynasty Gold Corporation
On February 27, 2006, AngloGold Ashanti announced that it had signed an agreement with Dynasty Gold
Corporation, a Vancouver-based company, with exploration activities in China, to acquire an effective 8.7 percent
stake in that company through a purchase of 5.75 million Dynasty units at a price of C$0.40 each. Each unit consists
of one common share and one-half common share purchase warrant exercisable at a price of C$0.60 per unit for two
years.
•
Agreement with International Tower Hill Mines Limited
On June 30, 2006 AngloGold Ashanti (U.S.A.) Exploration Inc. (AngloGold Ashanti), International Tower Hill Mines Ltd
(ITH) and Talon Gold Alaska, Inc. (Talon), a wholly-owned subsidiary of ITH, entered into an Asset Purchase and Sale
and Indemnity Agreement whereby AngloGold Ashanti sold to Talon a 100 percent interest in six Alaska mineral
exploration properties and associated databases in return for 5,997,295 common shares of ITH stock, representing an
approximate 19.99 percent interest in ITH (June 15, 2007: 15.68 percent). The sales transaction closed on
August 4, 2006. AngloGold Ashanti also granted to ITH the exclusive option to acquire a 60 percent interest in each
of its LMS and Terra projects by incurring $3 million of exploration expenditure on each project (total of $6 million)
within four years of the grant date of the opti ons. As part of the two option agreements, AngloGold Ashanti will have
the option to increase or dilute its stake in these projects, subject to certain conditions.
•
Strategic alliance in Russia with Polymetal and agreement to acquire assets from Trans-Siberian Gold plc
On September 21, 2006, AngloGold Ashanti announced that it had entered into a 50:50 strategic alliance with Russian
gold and silver producer, OAO Inter-Regional Research and Production Association Polymetal (Polymetal) in terms of
which, Polymetal and AngloGold Ashanti would cooperate in exploration, acquisition and development of gold mining
opportunities within the Russian Federation. At the same time, AngloGold Ashanti announced that it had submitted an
offer to the board of Trans-Siberian Gold plc (TSG) to acquire all of TSG’s interest in its Krasnoyarsk based
subsidiaries, OOO GRK Amikan and OOO Artel Staratelei Angarskaya Proizvodstvennaya Kompania for a total
consideration of $40 million. TSG announced on February 12, 2007, that the agreements for the sale of its
Krasnoya rsk based subsidiaries to AngloGold Ashanti have been signed. The South African Reserve Bank has
approved the transaction. These companies to be acquired from TSG by AngloGold Ashanti, together with two
greenfields exploration companies held by Polymetal, hold the initial operating assets of the strategic alliance. The
Company’s aggregate shareholding in TSG at December 31, 2006 was 12,263,170 ordinary shares (29.9 percent
interest held).
•
Purchase of Central African Gold Plc (CAG) shares
Arising from the sale of Bibiani assets, AngloGold Ashanti decided to apply $3 million of the partial proceeds to an
investment of 15,825,902 Central African Gold plc (CAG) shares. Subsequent to this decision, local regulators
required that the shares in CAG be sold within 90 days of December 28, 2006. The Company has classified the
shares as held for sale. Refer to Note 16 – Assets and liabilities held for sale. On February 14, 2007, the Company
disposed of 7,000,000 CAG shares yielding total proceeds of £768,845 ($1.5 million) and during April 2007, disposed
of the remaining 8,825,902 CAG shares yielding total proceeds of £894,833 ($1.8 million).
F-10
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
3.
ACQUISITIONS AND DISPOSALS OF BUSINESSES AND ASSETS (continued)
2006 disposals
The Company’s disposals during the year included:
•
Sale of Bibiani
On August 23, 2006, AngloGold Ashanti announced that it had entered into a conditional agreement with Central
African Gold plc (CAG) to sell the assets, related to Bibiani and Bibiani North prospecting permit, including all of
Bibiani’s employees, fixed mining and non-mining assets, inventory, trade receivables and intellectual property as well
as the Bibiani mining lease and the Bibiani North prospecting license, and procure the cessation and delegation of all
contracts related to Bibiani to CAG for a total consideration of $40 million. The conditions precedent to the sale of
Bibiani were satisfied effective December 28, 2006. The Bibiani North prospecting license was assigned to CAG on
May 17, 2007 by the Ghanaian Land Commission and Registry.
2005 acquisitions
On May 31, 2005 the Company acquired an additional 12.4 percent interest in Trans-Siberian Gold plc as further
discussed in this note under 2004 acquisitions “AngloGold Ashanti acquires stake in Trans-Siberian Gold plc”.
2005 disposals
The Company’s disposals during the year included:
•
Conditional sale of Weltevreden mine in exchange for Aflease shares
On July 19, 2005, Aflease Gold and Uranium Resources Limited (Aflease) announced that it had purchased from
AngloGold Ashanti, its Weltevreden mine in an all script deal valued on May 6, 2005 at R75 million ($11 million). On
December 19, 2005, Aflease was acquired by sxr Uranium One Incorporated (formerly Southern Cross Incorporated)
(sxr Uranium One). As certain conditions precedent to the agreement with regards to mining rights conversion were
not fulfilled for that property as of December 31, 2006, the Company has separately classified assets and liabilities for
Weltevreden presented in the consolidated balance sheet, as held for sale. Refer to Note 16 – Assets and liabilities
held for sale.
2004 acquisitions
The Company made the following acquisitions during the year:
•
Business Combination between AngloGold and Ashanti
On August 4, 2003, AngloGold and Ashanti announced that they had agreed the terms of a recommended Business
Combination at an exchange ratio of 0.26 ordinary shares for every Ashanti share. On the same date, AngloGold
entered into the Lonmin Support Deed, pursuant to which Lonmin, which held 27.6 percent of Ashanti's issued share
capital, agreed, among other things, to vote its Ashanti shares in favor of the Business Combination.
After further discussions with AngloGold and careful, detailed consideration of a competitive proposal, and following
the increase by AngloGold in the offer consideration from 0.26 to 0.29 ordinary shares, the Ashanti board announced
on October 15, 2003 that it was recommending the improved final offer from AngloGold.
On October 28, 2003, the government of Ghana, which held 16.8 percent of Ashanti's issued share capital,
announced its support for the AngloGold offer, as well as the principal terms of a Stability Agreement which the
government of Ghana intended to enter into with AngloGold.
AngloGold and the government of Ghana agreed the terms of a Stability Agreement, approved by the parliament of
Ghana, to govern certain aspects of the fiscal and regulatory framework under which AngloGold Ashanti will operate
in Ghana following the implementation of the Business Combination.
F-11
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
3.
ACQUISITIONS AND DISPOSALS OF BUSINESSES AND ASSETS (continued)
Under the Stability Agreement, the government of Ghana retained its special rights (“Golden Share”) under the
provisions of the mining law pertaining to the control of a mining Company, in respect of the assets and operations in
Ghana.
In terms of the Golden Share, the following requires, and will not be effective without, the written consent of the
government of Ghana as the holder of the Golden Share:
•
any disposal of its Ghanaian assets and operations by Ashanti (other than any disposal in the ordinary course of
business of Ashanti) which, alone or when aggregated with any disposal or disposals forming part of, or
connected with, the same or a connected transaction, constitutes a disposal of the whole or a material part of the
assets of the Ashanti Group taken as a whole. For this purpose, a part of the Ashanti Group’s assets will be
considered material if either (a) its book restructurevalue (calculated by reference to the then latest audited consolidated
accounts), or the total consideration to be received on its disposal, is not less than 25 percent of the book value
of the net assets of the Ashanti Group or (b) the average profits attributable to it represent at least 25 percent of
the average profits of the Ashanti Group for the last three years for which audited accounts are available (before
deducting all charges, except taxation and extraordinary items).
The Golden Share does not carry any right to vote at any general meeting of Ashanti.
The government of Ghana has also agreed that Ashanti's Ghanaian operations will not be adversely affected by any
new enactments or orders or by changes to the level of payments of any customs or other duties relating to mining
operations, taxes, fees and other fiscal imports or laws relating to exchange control, transfer of capital and dividend
remittance for a period of 15 years after the completion of the Business Combination. In consideration of these
agreements and undertakings, AngloGold agreed to issue to the government of Ghana 2,658,000 new AngloGold
ordinary shares and to pay to the government of Ghana $5 million in cash, promptly after the implementation of the
Business Combination. AngloGold also agreed to pay to the government of Ghana, on the date of the completion of
the Business Combination, an additional $5 million in cash towards the transaction costs incurred by the government
of Ghana in its role as regulator of Ashanti.
The Business Combination was effected by means of a scheme of arrangement under Ghanaian law, which required
the approval of Ashanti shareholders and the confirmation by the High Court of Ghana. In terms of the Business
Combination, Ashanti shareholders received 0.29 ordinary shares or 0.29 ADSs of AngloGold for every Ashanti share
or Ashanti GDS (Global Depositary Security) held. Each ADS represents one AngloGold ordinary share. The Business
Combination whereby AngloGold acquired 100 percent of Ashanti, became effective on April 26, 2004 after the Court
Order from the High Court of Ghana was lodged with the Ghana Registrar of Companies. From the effective date,
Ashanti became a private Company, and AngloGold changed its name to AngloGold Ashanti Limited, following
approval by its shareholders at a general meeting held on April 8, 2004.
On April 26, 2004, AngloGold issued 38,400,021 ordinary shares to former Ashanti shareholders and
2,658,000 ordinary shares under the Stability Agreement to the government of Ghana. On June 29, 2004, AngloGold
issued a total of 75,731 ordinary shares to former Ashanti warrant holders pursuant to the Business Combination.
The market value of the shares issued for Ashanti was approximately $1,544 million, net of share issue expenses of
$3 million, based on the average quoted value of the shares of $37.62 two days before and after October 15, 2003,
the date the terms of the transaction were announced. The market value of the issued shares, together with the cash
consideration paid to the government of Ghana as part of the Stability Agreement, cash consideration paid for
outstanding options over Ashanti ordinary shares and transaction costs and funding of $227 million, gave rise to a
total purchase price of approximately $1,771 million.
Ashanti Goldfields Company Limited was delisted from the London, New York and Ghana stock exchanges in late
April 2004. During 2005, AngloGold Ashanti finalized the purchase price allocation based on independent appraisals
and valuations. The transaction was accounted for as a purchase business combination under US GAAP whereby
identifiable assets acquired and liabilities assumed were recorded at their fair market values as of the date of
acquisition. The excess of the purchase price over such fair value was recorded as goodwill and as such, the
acquisition resulted in goodwill of $182 million being recorded, relating mainly to the extended life of AngloGold
Ashanti by the Obuasi project in Ghana and enlarged negotiation base and presence in Africa by Ashanti operations.
F-12
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
3.
ACQUISITIONS AND DISPOSALS OF BUSINESSES AND ASSETS (continued)
In accordance with the provisions of SFAS142, goodwill was assigned to specific reporting units. The Company’s
reporting units are generally consistent with the operating mines underlying the segments identified in Note 29 –
Segment and Geographical Information. An individual operating mine is not a typical "going-concern" business
because of the finite life of its reserves. The allocation of goodwill to an individual operating mine likely will result in an
eventual goodwill impairment due to the wasting nature of the primary asset of the reporting unit. The Company
evaluates its held-for-use long lived assets for impairment when events or changes in circumstances indicate that the
related carrying amount likely will not be recoverable over the long term and in accordance with the provisions of
SFAS142 performs its annual impairment review of assigned goodwill during the fourth quarter of each year. Goodwill
related to the acquisition is non-deductible for tax purposes.
During the year ended December 31, 2005, the Company recorded an impairment of $4 million, relating to goodwill
formerly assigned to operations situated in Ghana (at Bibiani) as part of the Business Combination, resulting from a
reduction in the life of mine following re-assessments at this operation. No impairments relating to goodwill were
recorded during the year ended December 31, 2006. Refer to Note 5 – Impairment of assets and to Note 14 –
Goodwill and other intangibles.
The combination of AngloGold and Ashanti was designed to combine the two companies into a long-life, low-cost,
high-margin investment opportunity, bringing together the best that both had to offer, by way of ore bodies, capital and
human resources.
The operations and financial condition of the companies and assets acquired are included in the financial statements
from April 26, 2004, the effective date of the Business Combination.
The carrying amount of goodwill recorded in the AngloGold Ashanti Business Combination by reporting segment, as
of December 31, 2006 and 2005 is summarized as follows:
Ghana
$
Guinea
$
Tanzania
$
Total
$
Balance at January 1, 2004
122
10
50
182
Impairment losses
(4)
-
-
(4)
Balance at December 31, 2005
118
10
50
178
Impairment losses
-
-
-
-
Balance at December 31, 2006
118
10
50
178
The fair value assigned to major assets and liabilities acquired in Ashanti are disclosed in Note 3 – Fair value of
acquisitions and (disposals) of businesses. The finalization of the purchase price allocation during 2005 in respect of
fixed assets resulted in a reallocation within the respective mines, between Mine development and Mine infrastructure
of $214 million included in Property, plant and equipment. The allocation of goodwill assigned to reporting units was
not affected.
For information purposes only, the following unaudited pro forma financial data reflects the consolidated results of
operations of AngloGold Ashanti as if the Business Combination had taken place on January 1, 2004:
Year ended December 31,
2004
$
Total revenue
2,478
$
Per basic and diluted
common share
(1)
(cents)
Net income/(loss) before cumulative effect of accounting change
241
91
Cumulative effect of accounting change
-
-
Net income/(loss) – applicable to common stockholders
241
91
Basic weighted average number of common shares used in computation
264,402,721
Diluted weighted average number of common shares used in computation
265,098,470
(1)
The calculation of diluted earnings/(loss) per common share for 2004 did not assume the effect of 15,384,615 shares issuable
upon the exercise of Convertible Bonds as their effects are anti-dilutive for this period.
F-13
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
3.
ACQUISITIONS AND DISPOSALS OF BUSINESSES AND ASSETS (continued)
The above pro forma financial data for the year ended December 31, 2004 includes mark-to-market gains on
derivative instruments amounting to $169 million. The above pro forma financial data for the year ended
December 31, 2004 does not include the application of hedge accounting prior to the acquisition to significant portions
of acquired derivative instruments as hedge accounting documentation was not in place during this period. The pro
forma information is not indicative of the results of operations that would have occurred had the Business Combination
been consummated on January 1, 2004. The information is not indicative of the group’s future results of operations.
•
AngloGold Ashanti acquires stake in Trans-Siberian Gold plc
On July 1, 2004, AngloGold Ashanti announced that it had entered into an agreement with Trans-Siberian Gold plc
(TSG) for the acquisition of a 29.9 percent stake in the Company through an equity investment of approximately
£18 million ($32 million) in two subscriptions for ordinary shares. TSG is listed on the AIM. The first tranche of
ordinary shares of 17.5 percent was acquired during July 2004. This first move into Russia allowed AngloGold Ashanti
the opportunity of establishing a meaningful interest in a Company with Russian assets and activities, thereby allowing
AngloGold Ashanti to gain exposure to, and familiarity with, the operating and business environment in Russia, as well
as being able to establish a business within this prospective new frontier. On December 23, 2004, it was announced
that the second subscripti on had been delayed to April 15, 2005 while on April 18, 2005, the second subscription date
was extended by a further two weeks to April 29, 2005. On April 28, 2005, the Company announced that agreement
had been reached with TSG on revised terms for the second subscription of shares in TSG, and a revised
subscription price of £1.30 per share, compared to £1.494 per share agreed between the parties on June 30, 2004.
The revised terms of the subscription was approved by TSG shareholders on May 27, 2005 and AngloGold Ashanti’s
17.5 percent equity interest in TSG increased to 29.9 percent on May 31, 2005, the date on which the second
subscription for 6,131,585 ordinary shares in TSG for an aggregate consideration of £8 million ($15 million) was
completed.
•
Agreement with Red 5 Limited
On October 11, 2004, AngloGold Ashanti announced that it had signed an agreement with Philippines explorer
Red 5 Limited to subscribe for a 12.3 percent stake in the expanded issued capital of Red 5 Limited for a cash
consideration of A$5 million ($4 million). The placement was to be used to fund the exploration activities along strike
from current mineral resources at the Siana Project, and to test the nearby porphyry gold-copper targets in the
Surigao region of the Republic of the Philippines. For a period of 2 years commencing in October 2004, AngloGold
Ashanti had the right to enter into Joint Venture arrangements on Red 5's tenements (excluding their Siana project)
with the potential to earn up to a 67.5 percent interest in areas of interest through further investment in exploration in
these Joint Venture areas. On August 26, 2005, AngloGold Ashanti subs cribed for additional shares in Red 5 Limited,
for a cash consideration of A$0.8 million ($0.6 million), thereby increasing its holding to 14.1 percent. As at
December 31, 2006, AngloGold Ashanti held 13 percent in Red 5 Limited, after the dilution of shareholding (from
14.1 percent) resulting from the increase in issued share capital. On September 18, 2006, AngloGold Ashanti elected
to exercise a second Joint Venture option with Red 5 Limited – the Outer Siena Joint Venture, located to the south-
east of Boyongan - in terms of which the Company will spend a minimum of A$1.5 million ($1.2 million) in the first year
with no interest. The Company may earn between 52 percent and 58.5 percent interest in two tenements through an
additional expenditure of A$4 million ($3 million), with a right to increase its holding by 8 percent to 9 percent through
an additional spend of A$5 million ($4 million).
2004 disposals
The Company’s disposals during the year included:
•
Sale of stake in Jerritt Canyon Joint Venture to Queenstake Resources USA Inc.
In 2004, Queenstake approached the Jerritt Canyon Joint Venture partners, AngloGold and Meridian Gold, about the
possibility of monetizing all or at least a majority of the $6 million in deferred payments and $4 million in future
royalties, payable in the concluded sale of AngloGold’s interest in the Jerritt Canyon Joint Venture to Queenstake
Resources USA Inc., effective June 30, 2003. Based on an agreement reached between the parties, AngloGold
Ashanti was paid on August 25, 2004, approximately $7 million for its portion of the deferred payments and future
royalties, thereby monetizing all outstanding obligations, except for a minor potential royalty interest that AngloGold
Ashanti retained.
F-14
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
3.
ACQUISITIONS AND DISPOSALS OF BUSINESSES AND ASSETS (continued)
•
Sale of Western Tanami project
On January 20, 2004, AngloGold announced that it had received a cash payment of A$4 million ($3 million) and
25 million fully paid ordinary shares from Tanami Gold NL in Australia, as consideration for Tanami Gold's purchase of
the Western Tanami Project. This follows an initial payment of A$0.3 million ($0.2 million) made on
November 24, 2003, when the Heads of Agreement was signed by the companies. The Company realized a profit of
$3 million on sale of these assets. Refer to Note 5 – (Profit)/loss on sale of assets, loans and indirect taxes. In
addition, a further 2 million fully paid ordinary shares were received from Tanami Gold in respect of a rights issue in
June 2004. During the period October 10, through October 18, 2005, AngloGold Ashanti Australia reduced it
shareholding in Tanami Gold to 5 percent, through the sale of 8 million fully paid ordinary shares for a cash
consideration of A$1.3 million ($1.0 million) and in February 2006, disposed of the entire investment in Tanami Gold
with the sale of 19 million shares for a cash consideration of A$3.9 million ($3.0 million).
•
Sale of Union Reefs Mine
On August 5, 2004, AngloGold Ashanti announced the sale of its Union Reefs assets to the Burnside Joint Venture,
comprising subsidiaries of Northern Gold NL (50 percent) and Harmony Gold Mining Company Limited (50 percent),
for a total consideration of A$4 million ($2 million). The Burnside Joint Venture is responsible for all future obligations
associated with the assets, including remaining site rehabilitation and reclamation. The Company realized a profit of
$2 million on sale of these assets. Refer to Note 5 – (Profit)/loss on sale of assets, loans and indirect taxes.
•
Sale of Freda-Rebecca Mine
In a joint announcement made on September 10, 2004, AngloGold Ashanti confirmed its agreement to sell its entire
interest in Ashanti Goldfields Zimbabwe Limited to Mwana Africa Holdings (Proprietary) Limited for a total
consideration of $2.255 million, to be settled in two tranches, $0.75 million immediately and the balance
($1.505 million) to be settled within six months of the satisfaction of all conditions to the sale agreement. The sale was
effective on September 1, 2004 and all conditions to the sale agreement were satisfied on April 22, 2005.
Subsequently in August 2005, AngloGold Ashanti and Mwana Africa Holdings (Proprietary) Limited agreed that the
second payment of $1.505 million would be settled by an immediate payment of $1.0 million and the subsequent
issue to AngloGold Ashanti of 600,000 Mwana Africa plc shares, once that company listed on the Lon don Stock
Exchange. Mwana Africa plc is a junior exploration and mining company with assets located in Zimbabwe as well as in
the Democratic Republic of Congo. As at December 31, 2006, AngloGold Ashanti retains its 600,000 shares in
Mwana Africa plc. The sole operating asset of Ashanti Goldfields Zimbabwe Limited as sold to Mwana Africa
Holdings (Proprietary) Limited was the Freda-Rebecca Gold Mine. No (profit)/loss was realized on disposal.
•
Sale of stake inTameng Mining and Exploration
Agreement was reached to sell AngloGold Ashanti’s 40 percent equity interest in Tameng Mining and Exploration
(Proprietary) Limited of South Africa (Tameng) to Mahube Mining (Proprietary) Limited for a cash consideration of
R20 million ($3 million). Tameng owns certain mineral rights to Platinum Group Metals (PGMs) on the farm Locatie
Van M’Phatlele KS 457, on the northern limb of the Bushveld Complex in the Limpopo Province in South Africa. No
(profit)/loss was realized on disposal and the sale was effective on September 1, 2004.
F-15
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
3.
ACQUISITIONS AND DISPOSALS OF BUSINESSES AND ASSETS (continued)
Fair value of acquisitions and (disposals) of businesses
2006
Total
2005
Total
2004
Ashanti
Goldfields
Company
Limited
(1)(3)
2004
Other
(3)
2004
Total
$
$
$
$
$
Cash
-
-
56
-
56
Property, plant and equipment
-
-
2,066
(5)
2,061
Acquired properties
-
-
873
-
873
Goodwill
(1)
-
-
182
-
182
Other intangibles
(2)
-
-
49
-
49
Provision for environmental rehabilitation
-
-
(51)
1
(50)
Long-term liabilities
-
-
(743)
1
(742)
Current assets
-
-
126
(4)
122
Current liabilities
-
-
(155)
3
(152)
Long-term debts
-
-
(197)
2
(195)
Derivatives
-
-
(432)
-
(432)
Minority interest
-
-
(3)
-
(3)
Net value of assets acquired/(disposed)
-
-
1,771
(2)
1,769
Profit on sale of assets
-
-
-
-
-
Purchase/(sale) consideration
-
-
1,771
(2)
1,769
Deferred purchase consideration
-
-
-
2
2
-
-
1,771
-
1,771
Purchase price (paid)/received
-
-
(1,771)
-
(1,771)
- Cash consideration
-
-
(227)
-
(227)
- Issuance of common stock
-
-
(1,544)
-
(1,544)
Gross value
-
-
(1,547)
-
(1,547)
Share issue expenses
-
-
3
-
3
(1)
The AngloGold Ashanti Business Combination was completed effective April 26, 2004. Refer to Note 3 — Acquisitions and
disposals of businesses and assets: Business Combination between AngloGold and Ashanti. The Company has recorded
goodwill, relating to the portion of the purchase price which cannot be attributed to the fair value of assets and liabilities acquired,
of $182 million on acquisition. During the year ended December 31, 2005, the Company recorded an impairment of $4 million,
relating to goodwill formally assigned to operations situated in Ghana (at Bibiani) as part of the Business Combination. No
impairments relating to goodwill were recorded during the year ended December 31, 2006. Refer to Note 5 – Impairment of assets.
(2)
Represents royalty rate and tax rate concession agreements with the government of Ghana. Fair value is based on estimated
future cash flows. During the year ended December 31, 2005, the Company recorded an impairment of $20 million relating to the
tax rate concession agreement with the government of Ghana. No impairments were recorded during the year ended
December 31, 2006. Refer to Note 5 – Impairment of assets.
(3)
Operations and assets acquired from Ashanti in the AngloGold Ashanti Business Combination are situated in Ghana, Guinea,
Tanzania and Zimbabwe and are reported under these respective business segments. During 2004, the Company disposed of its
interest in the Freda-Rebecca Mine in Zimbabwe for a total consideration of $2 million, settled partly in cash and partly in shares.
For more information on the Company’s business segments see Note 29 – Segment and geographical information.
4.
SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation: The accompanying financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America. The Company presents its consolidated financial
statements in United States dollars. The functional currency of a significant portion of the group’s operations is the
South African rand. Other main subsidiaries have functional currencies of US dollars and Australian dollars. The
translation of amounts into US dollars was in accordance with the provisions of SFAS52, “Foreign Currency
Translation”.
Use of estimates: The preparation of the financial statements requires the Company’s management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses
during the reporting period. The determination of estimates requires the exercise of judgment based on various
assumptions and other factors such as historical experience, current and expected economic conditions, and in some
cases actuarial techniques. The Company regularly reviews estimates and assumptions that affect the annual
financial statements, however, actual results could differ from those estimates.
F-16
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
The more significant areas requiring the use of management estimates and assumptions include mineral reserves that
are the basis of future cash flow estimates and unit-of-production depreciation, depletion and amortization
calculations; environmental, reclamation and closure obligations; estimates of recoverable gold and other materials in
heap leach pads; asset impairments (including impairments of goodwill, long-lived assets, and investments); write-
downs of inventory to net realizable value; post employment, post retirement and other employee benefit liabilities;
valuation allowances for deferred taxation assets; reserves for contingencies and litigation; and the fair value and
accounting treatment of financial instruments.
Comparatives: Comparatives have been reclassified, where necessary to comply with the current year’s
presentation.
The following are the accounting policies used by the Company which have been consistently applied except for the
adoption of SFAS123(R), “Share-Based Payment” on January 1, 2006, the adoption of EITF Issue 04-6 “Accounting
for Stripping Costs in the Mining Industry” on January 1, 2006, the adoption of SFAS158, “Employers’ Accounting for
Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and
132(R)” and the Company’s change in accounting policy, retroactive to January 1, 2005, with respect to accounting for
employee pension and post-retirement benefit plans.
4.1 Consolidation
The consolidated financial information includes the financial statements of the Company and its subsidiaries.
Where the Company has a direct or indirect controlling interest in an entity through a subsidiary, the entity is
classified as a subsidiary. Interests in incorporated mining joint ventures in which the Company has joint control
are accounted for by the equity method and are included in other long-term assets.
The financial statements of subsidiaries and the Environmental Trust Fund (a rehabilitation trust under the
Company’s control) are prepared for the same reporting period as the Company, using the same accounting
policies, except for Rand Refinery Limited (a subsidiary of the Company) which reports on a three-month time
lag. Adjustments are made to subsidiary financial results for material transactions and events in the intervening
period.
Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are de-
consolidated from the date on which control ceases.
Intra-group transactions, balances and unrealized gains on transactions between group companies are
eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of
the asset transferred.
4.2 Investments in equity investees (associates and incorporated joint ventures)
Investments in associates
An associate is an entity other than a subsidiary in which the Company has a material long-term interest and in
respect of which the Company has the ability to exercise significant influence over operational and financial
policies, normally owning between 20 percent and 50 percent of the voting equity.
Investments in incorporated joint ventures
A joint venture is an entity in which the Company holds a long-term interest and which is jointly controlled by the
Company and one or more external joint venture partners under a contractual arrangement.
Investments in associates and incorporated joint ventures are accounted for using the equity method. The initial
investment in these entities is recorded at cost. Post acquisition, the Company’s share of profits or losses of
associates and incorporated joint ventures is recognized in the income statement as equity accounted earnings.
The carrying amount of investments in associates and incorporated joint ventures is adjusted to recognize all
cumulative post-acquisition movements in the equity of the investment.
F-17
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.2 Investments in equity investees (associates and incorporated joint ventures) (continued)
Goodwill relating to associates and incorporated joint ventures is included in the carrying value of the Company’s
investment in those entities. The total carrying value of equity accounted investments in associates and
incorporated joint ventures, including goodwill, is evaluated for impairment when conditions indicate that a decline
in fair value below the carrying amount is other than temporary or at least annually. When an indicated
impairment exists, the carrying value of the Company’s investment in those entities is written down to its fair
value. The Company’s share of results of equity accounted investees, that have financial years within three
months of the fiscal year-end of the Company, is included in the consolidated financial statements based on the
results reported by those investees for their financial years. There were no significant adjustments required to be made in respect of equity accounted investees which have financial years that are different to those of the
Company.
4.3 Foreign currency translation
Items included in the financial statements of each of the Company’s entities are measured using the currency of
the primary economic environment in which the entity operates (the ‘functional currency’).
Transactions and balances
Transactions in foreign currencies are converted at the rates of exchange ruling at the date of these transactions.
Monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange ruling at
balance sheet date. Gains, losses and costs associated with foreign currency transactions are recognized in the
income statement in the period to which they relate, except where hedge accounting is applied. These
transactions are included in the determination of other income.
Group companies
The results and financial position of all group entities (none of which has the functional currency of a
hyperinflationary economy) that have a functional currency different from the presentation currency are translated
into the presentation currency as follows:
• equity items other than profit attributable to equity shareholders are translated at the closing rate on each
balance sheet date;
• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that
balance sheet;
• income and expenses for each income statement are translated at average exchange rates (unless this
average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction
dates, in which case income and expenses are translated at the dates of the transactions); and
• all resulting exchange differences are recognized as a separate component of equity and included within other
comprehensive income.
Exchange differences arising from the translation of the net investment in foreign operations, and of borrowings
and other currency instruments designated as hedges of such investments, are taken to stockholders’ equity on
consolidation.
When a foreign operation is sold, such exchange differences are recognized in the income statement as part of
the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and
liabilities of the foreign operation and translated at the ruling closing rate at each balance sheet date.
F-18
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.4 Segment reporting
A business segment is a group of assets and operations engaged in providing products or services that are
subject to risks and returns that are different from those of other business segments and are reported on a
reporting segment basis using a management approach. This approach is based on the way management
organizes segments within the Company for making operating decisions and assessing performance. The Chief
operating decision maker has determined that the Company operates primarily in the delivery of one product,
namely Gold. A geographical segment is engaged in providing products or services within a particular economic
environment that is subject to risks and returns that are different from those of segments operating in other
economic environments.
4.5 Cash and cash equivalents and restricted cash
Cash and cash equivalents consist of all cash balances and highly liquid investments with an original maturity of
three months or less. Due to the short maturity of cash equivalents, their carrying amounts approximate their fair
value. Restricted cash is reported separately in the consolidated balance sheets for all periods presented.
4.6 Non-marketable equity investments and debt securities
Investments in companies in which the Company’s ownership is 20 percent to 50 percent and the Company is
deemed to have significant but not controlling influence are accounted for by the equity method and are included
in other long-term assets. Equity method investments including interests in incorporated mining joint ventures
are reviewed for impairment in accordance with APB18, “The Equity Method of Accounting for Investments in
Common Stock”. Income from such investments net of impairments is included in equity income of affiliated
companies. See Note 4.2.
Investments in non-marketable debt securities that are classified as held to maturity are subsequently measured
at amortized cost. If there is evidence that held to maturity financial assets are impaired the carrying amount of
the assets is reduced and the loss recognized in the income statement.
4.7 Marketable equity investmentsand debt securities
Marketable equity investments and debt securities which are considered available-for-sale, are carried at fair
value, and the net unrealized gains and losses computed in marking these securities to market are reported
within other comprehensive income in the period in which they arise. These amounts are removed from other
comprehensive income and reported in income when the asset is derecognized or when there is evidence that
the asset is impaired in accordance with the provisions of SFAS115, “Accounting for Certain Investments in Debt
and Equity Securities”.
Marketable debt securities that are classified as held to maturity are subsequently measured at amortized cost.
4.8 Inventories
Inventories, including gold in process, gold on hand, uranium oxide, sulphuric acid, ore stockpiles and supplies,
are stated at the lower of cost or market value. Gold in process is valued at the average total production cost at
the relevant stage of production as described below. The cost of gold, uranium oxide and sulphuric acid is
determined principally by the weighted average cost method using related production costs.
Ore stockpiles are valued at the average moving cost of mining the ore. Supplies are valued at the lower of
weighted average cost or market value. Heap leach pad materials are measured on an average total production
cost basis.
F-19
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.8 Inventories (continued)
The cost of inventory is determined using the full absorption costing method for the stage of completed
production. Gold in process and ore stockpile inventory include all costs attributable to the stage of completion.
Costs capitalized to inventory include amortization of property, plant and equipment and capitalized mining costs,
direct and indirect materials, direct labor, shaft overhead expenses, repairs and maintenance, utilities, metallurgy
costs, attributable production taxes and royalties, and directly attributable mine costs. Gold on hand includes all
gold in process and refining costs. Ore is recorded in inventory when blasted underground, or when placed on
surface stockpiles in the case of open-pit operations.
The costs of materials currently contained on the leach pad are reported as a separate line item apart from
inventory. As at December 31, 2006, $46 million was classified as short term compared with $37 million as at
December 31, 2005 as the Company expects the related gold to be recovered within twelve months. The short
term portion of materials on the leach pad is determined by multiplying the average cost per ounce in inventory,
by the expected production ounces for the next twelve months. Based on data gathered and analyzed from heap
leach pad drilling results, and other studies and analysis completed, short-term heap leach pad inventory occurs
in two forms: (1) gold recoverable but yet to be dissolved (i.e. gold still in the ore), and (2) gold recoverable from
gold dissolved in solution within the leach pad (i.e. pore water). This estimate calculation was used in
determining the short term portion of materials on the leach pad as at December 31, 2006. As at
December 31, 2006, $149 million was classified as long term compared with $116 million as at
December 31, 2005.
4.9 Development costs and stripping costs
Development costs relating to major programs at existing mines are capitalized. Development costs consist
primarily of expenditures to initially establish a mine and to expand the capacity of operating mines.
Prior to January 1, 2006, stripping costs incurred in open-pit operations during the production phase to remove
additional waste were charged to operating costs on the basis of the average life of mine stripping ratio and the
average life of mine costs per tonne. The average stripping ratio was calculated as the number of tonnes of
waste material expected to be removed during the life of mine per tonne of ore mined. The average life of mine
cost per tonne was calculated as the total expected costs to be incurred to mine the orebody divided by the
number of tonnes expected to be mined. The average life of mine stripping ratio and the average life of mine
cost per tonne were recalculated annually in the light of additional knowledge and changes in estimates. The
cost of the “excess stripping” was capitalized as mine development costs when the actual mining costs exceed
the sum of the adjusted tonnes mined, being the actual ore tonnes plus the product of the actual ore tonnes
multiplied by the average life of mine stripping ratio, multiplied by the life of mine cost per tonne. When the actual
mining costs were below the sum of the adjusted tonnes mined, being the actual ore tonnes plus the product of
the actual ore tonnes multiplied by the average life of mine stripping ratio, multiplied by the life of mine cost per
tonne, previously capitalized costs were expensed to increase the cost up to the average. Thus, the cost of
stripping in any period was reflective of the average stripping rates for the orebody as a whole.
Prior to January 1, 2006, capitalized stripping costs were included in the calculations of the impairment tests
performed in accordance with the provisions of SFAS144, “Accounting for the Impairment or Disposal of Long-
Lived Assets”. The practice of deferring stripping costs, had the effect of amortizing the cost of waste ore
removal over the expected life of mine rather than reflecting actual waste ore removal cost incurred in each
period presented. Deferred stripping costs deferred and amortized were included in production costs in the
consolidated statements of income for the years ended December 31, 2004 and 2005 and deferred stripping
costs were reported separately in the consolidated balance sheet as at December 31, 2005.
On January 1, 2006, the Company adopted Emerging Issues Task Force (“EITF”) Issue 04-6, “Accounting for
Stripping Costs in the Mining Industry”. In accordance with the guidance of Issue No. 04-6, post production
stripping costs are considered costs of the extracted minerals under a full absorption costing system and
recognized as a component of inventory to be recognized in cost of sales in the same period as the revenue from
the sale of the inventory. Additionally, capitalization of such costs are appropriate only to the extent inventory
exists at the end of a reporting period.
F-20
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.9 Development costs and stripping costs (continued)
The guidance requires application through recognition of a cumulative effect adjustment to opening retained
earnings in the period of adoption, with no charge to current earnings for prior periods. The results for prior
periods have not been restated. Upon adoption, the cumulative effect of accounting change reduced opening
retained earnings by $73 million (net of Taxation), increased the value of inventory by $5 million, eliminated the
capitalized deferred stripping balance of $105 million, decreased Deferred taxation by $29 million, reduced Other
long-term assets by $3 million and decreased Minority interest by $1 million. Adoption of the new guidance had
no impact on the Company’s cash position or net cash from operations.
4.10 Depreciation, depletion and amortization
Mine development costs, mine plant facilities and other fixed assets
Mine development costs, mine plant facilities and other fixed assets are recorded at cost less accumulated
amortization and impairments. Cost includes pre-production expenditure incurred during the development of a
mine and the present value of future decommissioning costs. Cost also includes finance charges capitalized
during the construction period where such expenditure is financed by borrowings.
If there is an indication that the recoverable amount of any of the mine development costs, mine plant facilities
and other fixed assets is less than the carrying value, the recoverable amount is estimated and an allowance is
made for the impairment in value.
Capitalized mine development costs include expenditure incurred to develop new orebodies, to define further
mineralization in existing orebodies, to expand the capacity of a mine and to maintain production. Where funds
have been borrowed specifically to finance a project, the amount of interest capitalized represents the actual
borrowing costs incurred. Mine development costs include acquired proved and probable mineral resources at
cost at acquisition date.
Depreciation, depletion and amortization of mine development costs are computed principally by the units-of-
production method based on estimated proven and probable mineral reserves. Proven and probable mineral
reserves reflect estimated quantities of economically recoverable reserves which can be recovered in the future
from known mineral deposits.
Mine plant facilities are amortized using the lesser of their useful life or units-of-production method based on
estimated proven and probable mineral reserves. Main shafts are depleted using total proven and probable
reserves as the shaft will be used over the life of the mine. Other infrastructure costs including ramps, stopes,
laterals, etc and ore reserve development are depleted using proven and probable reserves applicable to that
specific area. When an area is vacated and there is no longer an intention to mine in that area due to a change
in mine plans, all costs that have not been depleted are written off.
Other fixed assets comprising vehicles and computer equipment, are depreciated by the straight-line method
over their estimated useful lives as follows:
•
vehicles up to five years; and
•
computer equipment up to three years.
F-21
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.10 Depreciation, depletion and amortization (continued)
Acquired properties
Acquired properties are carried at amortized cost. Purchased undeveloped mineral interests are acquired
mineral rights and, in accordance with Financial Accounting Standards Board Staff Position FSP141/142-1, are
recorded as tangible assets as part of acquired properties. The amount capitalized related to a mineral interest
represents its fair value at the time it was acquired, either as an individual asset purchase or as a part of a
business combination. “Brownfield” stage mineral interests represent interests in properties that are believed to
potentially contain other mineralized material, such as measured, indicated or inferred mineral resources with
insufficient drill spacing to qualify as proven and probable mineral reserves, that is in proximity to proven and
probable mineral reserves and within an immediate mine structure. “Greenfield” stage mineral interests
re present interests in properties that are other mine-related or greenfields exploration potential that are not part of
measured or indicated resources and are comprised mainly of material outside of a mine’s infrastructure. The
Company’s mineral rights are enforceable regardless of whether proven and probable mineral reserves have
been established. The Company has the ability and intent to renew mineral rights where the existing term is not
sufficient to recover all identified and valued proven and probable mineral reserves and/or undeveloped mineral
interests.
Brownfield properties are carried at acquired costs until such time as a mineral interest enters the production
stage and are amortized using the unit-of-production method based on estimated proven and probable mineral
reserves.
Greenfield mineral interests are carried at acquired costs until such time as a mineral interest enters the
production stage and are amortized using the unit-of-production method based on estimated proven and
probable mineral reserves.
Both Brownfield properties and Greenfield mineral interests are evaluated for impairment as held for use assets
in accordance with the Company’s asset impairment accounting policy. See Note 4.13.
4.11 Mining costs
Mining costs including repair and maintenance costs incurred in connection with major maintenance activities are
charged to operations as incurred.
4.12 Goodwill and intangible assets
Goodwill
Where an investment in a subsidiary, joint venture or an associate is made, any excess of the purchase price
over the fair value of the attributable mineral reserves including value beyond proven and probable, acquired
properties and other net assets is recognized as goodwill.
Goodwill relating to subsidiaries is tested for impairment at least annually or when indicators of impairment exist
and is carried at cost less accumulated impairment losses.
Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to reporting units for the purpose of impairment testing.
Goodwill in respect of subsidiaries is disclosed as goodwill. Goodwill relating to incorporated joint ventures and
associates is included within the carrying value of the investment in incorporated joint ventures and associates
and tested for impairment when indicators exist. See Note 4.2.
Royalty rate and tax rate concessions
Royalty rate and tax rate concessions with the Government of Ghana were capitalized at fair value at agreement
date. Fair value represents a present value of future royalty rate concessions over 15 years. The royalty rate and
tax rate concessions were assessed to have a finite life and are amortized under a straight-line method over a
period of 15 years, the period over which the concession runs. The related amortization expense is charged
through the income statement. These intangible assets are also tested for impairment where there is an indicator
of impairment.
F-22
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.13 Asset impairment
The Company evaluates its held-for-use long lived assets for impairment when events or changes in
circumstances indicate that the related carrying amount may not be recoverable. If the sum of estimated future
cash flows on an undiscounted basis is less than the carrying amount of the related asset, including goodwill, if
any, an asset impairment is considered to exist. The related impairment loss is measured by comparing
estimated future cash flows on a discounted basis to the carrying amount of the asset. Changes in significant
assumptions underlying future cash flow estimates may have a material effect on the Company’s financial
position and results of operations. Management’s estimate of future cash flows is subject to risk and
uncertainties. It is therefore reasonably possible that changes could occur which may affect the recoverability of
the group’s mining assets. The Compan y records a reduction of a group of assets to fair value as a charge to
earnings if expected future cash flows are less than the carrying amount. The Company estimates fair value by
discounting the expected future cash flows using a discount factor that reflects the risk-free rate of interest for a
term consistent with the period of expected cash flows, adjusted for asset specific and country risks. A low gold
price market, if sustained for an extended period of time, may result in asset impairments. In addition, an asset
impairment is considered to exist where the net selling price of an asset held for sale is below its carrying
amount. Once recognized an impairment loss is never reversed.
An individual operating mine is not a typical "going-concern" business because of the finite life of its reserves.
The allocation of goodwill to an individual operating mine will result in an eventual goodwill impairment due to the
wasting nature of the mine reporting unit. In accordance with the provisions of SFAS142, the Company performs
its annual impairment review of assigned goodwill during the fourth quarter of each year.
4.14 Borrowing costs
Interest on borrowings relating to the financing of major capital projects under construction is capitalized during
the construction phase as part of the cost of the project. Such borrowing costs are capitalized over the period
during which the asset is being acquired or constructed and borrowings have been incurred. Capitalization
ceases when construction is interrupted for an extended period or when the asset is substantially complete.
Other borrowing costs are expensed as incurred.
4.15 Leased assets
Assets subject to finance leases are capitalized at the lower of fair value or present value of minimum lease
payments with the related lease obligation recognized at the same amount. Capitalized leased assets are
depreciated over the shorter of their estimated useful lives and the lease term. Finance lease payments are
allocated using the effective interest rate method, between the lease finance cost, which is included in finance
costs, and the capital repayment, which reduces the liability to the lessor.
Operating lease rentals are charged against operating profits in a systematic manner related to the period the
assets concerned will be used.
4.16 Provisions
Provisions are recognized when the Company has a present obligation, whether legal or constructive, as a result
of a past event for which it is probable that an outflow of resources embodying economic benefits will be required
to settle the obligation and a reliable estimate can be made of the amount of the obligation.
Provisions are measured at the present value of management’s best estimate of the expenditure required to
settle the present obligation at the balance sheet date. The discount rate used to determine the present value
reflects current market assessments of the time value of money and the risks specific to the liability.
F-23
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.17 Taxation
Deferred taxation is provided on all temporary differences at the balance sheet date between the tax bases of
assets and liabilities and their carrying amounts for financial reporting purposes.
The carrying amount of deferred taxation assets is reviewed at each balance sheet date and reduced by a
valuation allowance to the extent that it is more likely than not that sufficient future taxable profit will not be
available to allow all or part of the deferred taxation asset to be utilized.
A deferred taxation liability is recognized for all taxable temporary differences if it is more likely than not that the
temporary difference will reverse in the foreseeable future.
Deferred taxation assets and liabilities are measured at statutory tax rates, which have been enacted at the
balance sheet date. See Note 4.22.
Current and deferred taxation is recognized as income or expense and included in the profit or loss for the period,
except to the extent that the tax arises from a transaction or event which is recognized, in the same or a different
period directly in equity; or a business combination that is an acquisition.
Current taxation is measured on taxable income at the applicable enacted statutory rate.
4.18 Asset retirement obligations and rehabilitation costs
The Company accounts for asset retirement obligations in accordance with Statement of Financial Accounting
Standards No. 143, “Accounting for Asset Retirement Obligations (AROs)” (“SFAS143”).
In accordance with the provisions of SFAS143 the fair value of a liability for an asset retirement obligation is
recorded in the period in which it is incurred. When the liability is initially recorded, the cost is capitalized by
increasing the carrying amount of the related long-lived asset. Over time, the liability is increased to reflect an
interest element (accretion) considered in its initial measurement at fair value, and the capitalized cost is
amortized over the useful life of the related asset. Where the obligation is operational of nature and does not
give rise to future economic benefit, the capitalized cost is amortized in the period incurred. Upon settlement of
the liability, a gain or loss will be recorded if the actual cost incurred is different from the liability recorded.
Rehabilitation costs and related liabilities are based on the Company’s interpretation of current environmental
and regulatory requirements.
Based on current environmental regulations and known rehabilitation requirements, management has included its
best estimate of these obligations in its rehabilitation accrual. However, it is reasonably possible that the
Company’s estimates of its ultimate rehabilitation liabilities could change as a result of changes in regulations or
cost estimates.
Environmental liabilities other than rehabilitation costs which relate to liabilities from specific events are accrued
when they are known, probable and reasonably estimable.
4.19 Product sales
Revenue from product sales is recognized when:
•
persuasive evidence of an arrangement exists;
•
delivery has occurred or services have been rendered;
•
the seller’s price to the buyer is fixed or determinable; and
•
collectability is reasonably assured.
The sales price, net of any taxes, is fixed on either the terms of gold sales contracts or the gold spot price.
Revenue is only recognized once the product has reached the level of refinement specified in the sales contract.
F-24
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.20 Financial instruments
Financial instruments recognized on the balance sheet include investments, loans receivable, trade and other
receivables, cash and cash equivalents, borrowings, derivatives, and trade and other payables. Financial
instruments are initially measured at cost, including transaction costs, when the group becomes a party to the
contractual arrangements. The subsequent measurement of derivative instruments is dealt with below.
Derivatives
The Company accounts for derivative contracts in accordance with Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS133") as amended.
SFAS133 requires all contracts which meet the definition of a derivative to be recognized on the balance sheet as
either assets or liabilities and recorded at fair value. Gains or losses arising from remeasuring derivatives to fair
value each period are to be accounted for either in the income statement or in other comprehensive income,
depending on the use of the derivative and whether it qualifies for hedge accounting. The key criterion which
must be met in order to qualify for hedge accounting, is that the derivative must be highly effective in offsetting
the change in the fair value or cash flows of the hedged item.
Contracts that meet the criteria for hedge accounting are designated as the hedging instruments hedging the
variability of forecasted cash flows from the sale of AngloGold Ashanti’s production into the spot market, and are
classified as cash flow hedges under SFAS133. Where a derivative qualifies as the hedging instrument in a cash
flow hedge under SFAS133, changes in fair value of the hedging instruments, to the extent effective, are deferred
in other comprehensive income and reclassified to earnings as product sales when the hedged transaction
occurs. The ineffective portion of changes in fair value is reported in earnings as gains or losses on derivatives in
the period in which they occur.
All other contracts not meeting the criteria for the normal purchases and sales or hedge accounting, as defined in
SFAS133, are recorded at their fair market value, with changes in value at each reporting period being recorded
in earnings as gains or losses on derivatives.
Cash flows from derivative instruments accounted for as cash flow hedges are included in net cash provided by
operating activities in the statements of consolidated cash flows for all periods presented. Contracts that contain
‘off-market’ terms that result in the inflow of cash at inception are analogous to borrowing activities and, as such,
are treated as financing activities. All current and future cash flows associated with such instruments are
classified within the financing activities section of the consolidated cash flow statement. Contracts that contain
‘off-market’ terms that result in the outflow of cash at inception are analogous to lending activities and, as such,
are treated as investing activities. All current and future cash flows associated with such instruments are
classified within the investing activities of the consolidated cash flow statement.
The estimated fair values of derivatives are determined at discrete points in time based on the relevant market
information. These estimates are calculated with reference to the market rates using industry standard valuation
techniques.
Certain derivative instruments are designated as hedges of foreign currency denominated borrowings and
investments in foreign entities. This designation is reviewed at least quarterly, or as borrowing and investment
levels change. The hedge amounts (to the extent effective) are recorded as an offset to the translation
gains/losses that are being hedged.
4.21 Employee
benefits
Pension obligations
Group companies operate various pension schemes. The schemes are funded through payments to insurance
companies or trustee administered funds, determined by annual actuarial calculations. The Company has both
defined benefit and defined contribution plans. A defined benefit plan is a pension plan that defines an amount of
pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as
age, years of service and compensation.
F-25
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.21 Employee
benefits
(continued)
The current service cost in respect of defined benefit plans is recognized as an expense in the current year. Past
service costs, experience adjustments, the effect of changes in actuarial assumptions and the effects of plan
amendments in respect of existing employees are recognized as an expense or income as and when they arise.
This method is applied consistently in each period end to all gains and losses. See Note 2.
The asset/liability recognized in the balance sheet in respect of defined benefit pension plans is the present value
of the defined benefit obligation at the balance sheet date less the fair value of plan assets, together with
adjustments for past service costs. The defined benefit obligation is calculated annually by independent actuaries
using the projected unit credit method.
A defined contribution plan is a pension plan under which the group pays fixed contributions into a separate
entity. The Company has no legal or constructive obligations to pay further contributions if the fund does not hold
sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.
The contributions are recognized as employee benefit expense when they are due. Prepaid contributions are
recognized as an asset to the extent that a cash refund or a reduction in the future payments is available.
Other post-employment benefit obligations
Some group companies provide post-retirement healthcare benefits to their retirees. The entitlement to these
benefits is usually conditional on the employee remaining in service up to retirement age and the completion of a
minimum service period. The expected costs of these benefits are accrued over the period of employment using
an accounting methodology on the same basis as that used for defined benefit pension plans. These obligations
are valued annually by independent qualified actuaries. Actuarial gains and losses arising in the plan are
recognized as income or expense as and when they arise. See Note 2.
Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date, or when an
employee accepts voluntary redundancy in exchange for these benefits. The Company recognizes termination
benefits when it is demonstrably committed to either: terminating the employment of current employees according
to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer
made to encourage voluntary redundancy based on the number of employees expected to accept the offer.
Benefits falling due more than 12 months after balance sheet date are discounted to present value.
4.22 Deferred taxation
The Company follows the liability method of accounting for deferred taxation whereby the Company recognizes
the tax consequences of temporary differences by applying enacted tax rates applicable to future years to
differences between financial statement amounts and the tax bases of certain assets and liabilities. Changes in
deferred taxation assets and liabilities include the impact of any tax rate changes enacted during the year.
Principal temporary differences arise from depreciation on property, plant and equipment, derivatives, provisions
and tax losses carried forward. A valuation allowance is recorded to reduce the carrying amounts of deferred
taxation assets if it is more likely than not that such assets will not be realized.
4.23 Dividends paid
Dividends paid are recognized when declared by the board of directors. Dividends may be payable in Australian
dollars, South African rands, United Kingdom pounds or Ghanaian cedis. Dividends declared to foreign
stockholders are not subject to approval by the South African Reserve Bank in terms of South African foreign
exchange control regulations. Dividends are freely transferable to foreign stockholders from both trading and
non-trading profits earned in South Africa by publicly listed companies. Under South African law, the Company
may declare and pay dividends from any reserves included in total shareholders’ equity (including share capital
and premium) calculated in accordance with International Financial Reporting Standards (IFRS), subject to its
solvency and liquidity.
F-26
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.24 Earnings per share
Earnings and diluted earnings per share have been calculated, for each class of common stock outstanding, in
accordance with SFAS 128, “Earnings per Share”, using the two class method. Under the provisions of
SFAS 128, basic net income (loss) per share is computed using the weighted average number of shares
outstanding during the period. Diluted net income (loss) per share is computed using the weighted average
number of Ordinary shares and, if dilutive, potential common shares outstanding during the period. The
computation of the diluted income (loss) per share of Ordinary shares assumes the conversion of E Ordinary
shares.
The rights, including the liquidation, voting and dividend rights, of holders of Ordinary shares and E Ordinary
shares are identical. As a result, and in accordance with EITF 03-6, “Participating Securities and the Two-Class
Method under FASB Statement No. 128”, the undistributed earnings for each year are allocated based on the
contractual participation rights of the Ordinary and E Ordinary shares as if the earnings for the year had been
distributed. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a
proportionate basis. Further, as the Company assume the conversion of E Ordinary shares in the computation of
the diluted net income (loss) per share of Ordinary shares, the undistributed earnings are equal to net income
(loss) for the computation.
4.25 Exploration and evaluation costs
The Company expenses all exploration costs until the directors conclude that a future economic benefit is more
likely than not of being realized. In evaluating if expenditures meet this criterion to be capitalized, the directors
utilize several different sources of information depending on the level of exploration. While the criteria for
concluding that expenditure should be capitalized is always probable, the information that the directors use to
make that determination depends on the level of exploration.
•
Costs on greenfields sites, being those where the Company does not have any mineral deposits which are
already being mined or developed, is expensed as incurred until the directors are able to demonstrate that
future economic benefits are probable, which generally will be the establishment of proved and probable
reserves at this location.
•
Costs on brownfields sites, being those adjacent to mineral deposits which are already being mined or
developed, is expensed as incurred until the directors are able to demonstrate that future economic benefits
are probable, which generally will be the establishment of increased proved and probable reserves after
which the expenditure is capitalized as a mine development cost.
•
Costs relating to extensions of mineral deposits, which are already being mined or developed, including
expenditure on the definition of mineralization of such mineral deposits, is capitalized as a mine
development cost.
Costs relating to property acquisitions are capitalized within development costs.
Drilling and related costs incurred on sites without an existing mine and on areas outside the boundary of a
known mineral deposit that contain proven and probable reserves are exploration expenditures and are expensed
as incurred.
Drilling and related costs incurred to define and delineate a residual mineral deposit that has not been classified
as proven and probable reserves at a development stage or production stage mine are capitalized when
management determines that there is sufficient evidence that the expenditure will result in a future economic
benefit to the company in the accounting period when the expenditure is made. Management evaluates whether
or not there is sufficient geologic and economic certainty of being able to convert a residual mineral deposit into a
proven and probable reserve at a development stage or production stage mine, based on the known geologic
and metallurgy, existing mining and processing facilities, operating permits and environmental programs.
Therefore prior to capitalizing such costs, management determines that the following conditions have been met:
F-27
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.25 Exploration and evaluation costs(continued)
a.
There is a probable future benefit;
b.
AngloGold Ashanti can obtain the benefit and control access to it; and
c.
The transaction or event giving rise to it has already occurred.
We understand that there is diversity in practice within the mining industry, in that some companies expense the
drilling and related costs incurred to define and delineate residual mineral deposits that have not been classified
as proven and probable reserves at a development stage or production stage mine. Had AngloGold Ashanti
expensed such costs as incurred, net income, earnings per share and retained earnings would have been lower
by approximately the following amounts:
2004
2005
2006
Net income (US$ millions)
7
13
12
Earnings per share
(1)
(US$ cents)
3
5
5
Retained income – January 1 (US$ millions)
27
34
47
Retained income – December 31 (US$ millions)
34
47
59
(1)
Impact per basic and diluted earnings per common share.
4.26 Stock-based compensation plans
The Company’s management awards certain employees stock options on a discretionary basis.
The fair value of the stock-based payments is calculated at grant date using an appropriate model. For equity
settled stock-based payments, the fair value is determined using a Black-Scholes method and expensed on a
straight-line basis over the vesting period based on the group’s estimate of shares that will eventually vest.
Option schemes which include non-market vesting conditions have been calculated using the Black-Scholes
model. For all other stock-based payments to employees the fair value is determined by reference to the market
value of the underlying stock at grant date adjusted for the effects of the relevant terms and conditions. All other
stock-based payments fair values are determined by reference to the goods or services received.
For schemes with non-market related vesting conditions, the likelihood of vesting has been taken into account
when determining the income statement charge. Vesting assumptions are reviewed during each reporting period
to ensure they reflect current expectations.
Stock options are subject to a three year vesting condition and their fair value is recognized as an employee
benefit expense with a corresponding increase in Additional paid in capital over the vesting period. The proceeds
received, net of any directly attributable transaction costs are credited to common stock (nominal value) and
Additional paid in capital when the options are exercised.
Prior to January 1, 2006, the Company accounted for share-based payments under the recognition and
measurement provisions of APB Opinion No. 25, “Accounting for Stock Issued to Employees, and related
Interpretations”, as permitted by SFAS123.
On January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123(R), “Share-
Based Payment”, using the modified prospective transition method. See Note 2.
F-28
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.27 Recent pronouncements
On July 13, 2006 the Financial Accounting Standards Board (FASB) issued FASB interpretation No. 48,
“Accounting for Uncertainty in Income Taxes” (“FIN 48”).
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements
in accordance with SFAS109, “Accounting for Income Taxes”. It prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on derecognition and classification,
recognition of interest and penalties, accounting in interim periods and disclosure rules relating to tax positions in
the financial statements.
This interpretation is effective for fiscal years beginning after December 15, 2006, and the Company has adopted
this interpretation in the first quarter of 2007. The Company is in the process of assessing the impact of adopting
FIN 48 on the results of operations and financial position. The cumulative effect, if any, will be reported as an
adjustment to the opening balance of retained earnings for the 2007 fiscal year.
On September 8, 2006, the FASB has issued FASB Staff Position (FSP) No. AUG AIR-1, "Accounting for
Planned Major Maintenance Activities" (“FSPAIR-1”).
FSPAIR-1 eliminates the accrue-in-advance method of accounting for planned major maintenance activities from
the AICPA Audit and Accounting Guide, Audits of Airlines and the guidance is applicable to entities in all
industries. As a result of the elimination of the accrue-in-advance method, the Airline Guide currently permits the
use of one of the following three remaining methods: (1) direct expensing, (2) built-in overhaul, and (3) deferral.
The effective date of FSPAIR-1 is an entity's first fiscal year beginning after December 15, 2006, with early
adoption permitted so long as it is as of the beginning of the entity's fiscal year. The guidance in FSPAIR-1
should be applied retrospectively, unless it is impracticable to do so. FSPAIR-1 provides additional details on the
subject of transition and the disclosures required upon adoption of the FSP. Of the three methods of accounting
for planned major maintenance allowed by FSPAIR-1, the Company will adopt the built-in overhaul method from
January 1, 2007. The built-in overhaul method is based on segregation of plant and equipment costs into those
that should be depreciated over the useful life of the asset and those that require overhaul at periodic intervals.
Thus, the estimated cost of the overhaul component included in the purchase price of an asset is set up
separately from the cost of the asset and is amortized to the date of the initial overhaul. The cost of the initial
overhaul is then capitalized and amortized to the next overhaul, at which time the process is repeated. The
Company does not expect the adoption of this standard to have a material impact on its earnings and financial
position.
On September 13, 2006, the SEC staff published Staff Accounting Bulletin (SAB) No. 108, “Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements”
(“SAB 108”).
SAB 108 (SAB Topic 1.N) addresses quantifying the financial statement effects of misstatements, specifically,
how the effects of prior year uncorrected errors must be considered in quantifying misstatements in the current
year financial statements. In addition, SAB 108 offers a special “one-time” transition provision for correcting
certain prior year misstatements that were uncorrected as of the beginning of the fiscal year of adoption.
SAB 108 is effective for fiscal years ending after November 15, 2006. During 2006, the Company quantified and
adjusted for certain errors previously considered not to be material as discussed in Note 2.
F-29
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.27 Recent pronouncements (continued)
On September 15, 2006 the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value
Measurements” (“SFAS157”).
SFAS157 provides enhanced guidance for using fair value to measure assets and liabilities. Under SFAS157, fair
value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants in the market in which the reporting entity transacts. SFAS157 clarifies
the principle that fair value should be based on the assumptions market participants would use when pricing the
asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those
assumptions. SFAS157 also requires that fair value measurements be separately disclosed by level within the
fair value hierarchy. SFAS157 is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. The Company is currently reviewing the
guidance issued in SFAS157 a nd has not yet determined the impact of this on the financial statements.
On September 29, 2006 the FASB issued Statement of Financial Accounting Standards No. 158, “Employers’
Accounting for Defined Benefit Pension and Other Post-retirement Plans, an amendment of FASB Statements
No. 87, 88, 106 and 132(R)” (“SFAS158”).
SFAS158 represents the completion of the first phase in the FASB's post-retirement benefits accounting project
and requires an entity to:
•
recognize in its statement of financial position an asset for a defined benefit post-retirement plan's overfunded
status or a liability for a plan's underfunded status;
•
measure a defined benefit post-retirement plan's assets and obligations that determine its funded status as of
the same day of the employer's fiscal year-end statement of financial position;
•
recognize as a component of accumulated other comprehensive income, net of tax, amounts accumulated at
the date of adoption due to delayed recognition of actuarial gains and losses, prior service costs and credits,
and transition assets and obligations; and
•
expand the disclosure requirements of SFAS132(R) to include disclosure of additional information in the notes
to financial statements about certain effects on net periodic benefit cost in the next fiscal year that arise from
delayed recognition of actuarial gains or losses, prior service costs or credits and unrecognized transition
asset and obligations.
SFAS158 does not change the amount of net periodic benefit cost included in net income or address the various
measurement issues associated with post-retirement benefit plan accounting. The requirement to recognize the
funded status of a defined benefit post-retirement plan and the disclosure requirements are effective for fiscal
years ending after December 15, 2006, for public entities, and at the end of the fiscal year ending after
June 15, 2007, for all other entities. The requirement to measure plan assets and benefit obligations as of the
date of the employer's fiscal year-end statement of financial position is effective for fiscal years ending after
December 15, 2008. The adoption of the recognition and disclosure requirements of SFAS158 which are
effective for fiscal years ending after December 15, 2006, did not have a material impact on the Company’s
earnings and financial p osition as the Company changed its accounting policy during the second quarter of 2005,
retroactive to January 1, 2005, with respect to accounting for employee benefit plans to recognize the effects of
actuarial gains and losses in income, rather than amortizing over the expected average remaining service period
of employees participating in the plan. See Note 2. The Company is currently considering processes to meet the
measurement requirements of SFAS158.
On February 15, 2007 the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value
Option for Financial Assets and Financial Liabilities Including an amendment of FASB Statement No. 115”
(“SFAS159”).
SFAS159 permits entities to choose to measure many financial instruments and certain other items at fair value.
The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in
reported earnings caused by measuring related assets and liabilities differently without having to apply complex
hedge accounting provisions.
F-30
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.27 Recent pronouncements (continued)
The fair value option permits all entities to choose to measure eligible items at fair value at specified election
dates. A business entity shall report unrealized gains and losses on items for which the fair value option has been
elected in earnings at each subsequent reporting date.
The fair value option:
•
may be applied instrument by instrument, with a few exceptions, such as investments otherwise accounted for
by the equity method;
•
is irrevocable (unless a new election date occurs); and
•
is applied only to entire instruments and not to portions of instruments.
SFAS159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early
adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided
the entity also elects to apply the provisions of SFAS 157, “Fair Value Measurements”. No entity is permitted to
apply SFAS159 retrospectively to fiscal years preceding the effective date unless the entity chooses early
adoption. The choice to adopt early should be made after issuance of SFAS159 but within 120 days of the
beginning of the fiscal year of adoption, provided the entity has not yet issued financial statements, including
required notes to those financial statements, for any interim period of the fiscal year of adoption. SFAS159
permits application to eligible items existing at the effective date (or early adoption date). The Company is
currentl y reviewing the guidance issued in SFAS159 and has not yet determined the impact of this on the
financial statements.
5.
COSTS AND EXPENSES
Employment Severance Costs
Total employee severance costs amounted to $22 million for 2006 (2005: $26 million, 2004: $7 million) and were due
to retrenchments in the South Africa region reflecting mainly downsizing and rationalization of operations in 2004
(at Great Noligwa and TauTona) and in 2005 (at Great Noligwa, Kopanang, Savuka, TauTona and Mponeng).
Employee severance costs recorded in 2006 included retrenchment costs of $7 million in the South African region
(at Great Noligwa, Kopanang, Tau Lekoa, TauTona and Mponeng) and $15 million in Ghana (at Obuasi) due to a
planned reduction in workforce.
Interest Expense
2006
$
2005
$
2004
$
Finance costs on bank loans and overdrafts
20
21
11
Finance costs on corporate bond
(1)
32
34
33
Finance costs on convertible bond
(2)
26
27
23
Capital lease charges
2
2
2
Discounting of non-current trade and other debtors
4
-
-
Other
3
12
9
87
96
78
Less : Amounts capitalized
(3)
(10)
(16)
(11)
77
80
67
(1)
On August 21, 2003 AngloGold issued unsecured bonds in the aggregate principal amount of R2 billion ($300 million). Refer to
Note 20.
(2)
On February 27, 2004, AngloGold Ashanti Holdings plc, a wholly-owned subsidiary of the Company, issued $1,000,000,000
2.375 percent guaranteed convertible bonds due 2009, convertible into ADSs and guaranteed by AngloGold Ashanti. Refer to
Note 20.
(3)
Interest capitalized on qualifying assets. Refer to Note 12.
F-31
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
5.
COSTS AND EXPENSES(continued)
Impairment of Assets
The impairment loss in respect of reporting units arose from the declining values of the remaining ore reserves and is
based on the estimated remaining cashflows computed at a discount. The impairment is made up as follows:
2006
$
2005
$
2004
$
Australia
Impairment of various mining assets and mineral rights based on net realizable value
-
-
1
Ghana
Impairment of Bibiani mine following an assessment and reduction in life of mine
based on fair value
-
37
-
Impairment of goodwill held in Bibiani. Refer to Note 3.
-
4
-
Impairment of tax rate concession agreements. Refer to Note 14.
-
20
-
South Africa
Impairment of Goedgenoeg drilling and 1650 level decline drilling based on fair value
-
2
-
Impairment of East of Bank Dyke at TauTona access development based on fair value
-
4
-
Impairment of Western Ultra Deep Levels based on fair value
-
74
-
Impairment of goodwill held in Gold Avenue, a subsidiary.
-
-
2
Other
Impairment and write-off of various minor tangible assets and equipment
6
-
-
6 141
3
The Company evaluates its held-for-use long lived assets for impairment when events or changes in circumstances
indicate that the related carrying amount may not be recoverable. The carrying value of the related asset is compared
to its fair value.
The following estimates and assumptions were used by management when reviewing long-lived assets for
impairments:
º
the forward gold price curve for the first 10 years, where a forward gold market and quoted prices exist (starting
point based on a 30-day average during the fourth-quarter of 2006 - $630/oz; (2005 - $505/oz). Thereafter, the
estimated future gold price has been increased by 2.25% (2005: 2.25%) per annum over the remaining life of the
mines. These prices have been adjusted for the effects of including the normal sale forward contracts to arrive at an
average received price across all of the reporting units. Previously, the normal sale forward contracts were
allocated to each reporting unit, based on the then prevailing contractual relationship with hedge counterparts.
Following the removal of certain hedge counterpart restrictions and the granting of group level guarantees during
2006, the Company has applied an average received gold price across all reporting units. The use of this approach
has had a consequential impact on the fair value of the reporting units.
Annual life of mine plans which take into account the following:
º
Proven and Probable Ore Reserves as well as value beyond proven and probable reserves. For these purposes
Proven and Probable Ore Reserves of approximately 66 million ounces (including joint ventures) as at
December 31, 2006 were determined assuming a three year historical average gold price of $550 per ounce,
A$724 per ounce in Australia and R132,622 per kilogram in South Africa;
º
a real pre-tax discount rate adjusted for country risk and project risk for cash flows relating to mines not yet in
commercial production and deep level mining projects based on the discount rate applicable to the long-term dollar
market rates;
º
foreign currency cash flows are translated at estimated forward exchange rates and then discounted using
appropriate discount rates for that currency;
º
cash flows used in impairment calculations are based on life of mine plans which exceed five years for the majority
of the mines; and
º
variable operating cash flows are increased at local Consumer Price Index (CPI) rates.
F-32
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
5.
COSTS AND EXPENSES(continued)
Real pre-tax discount rates applied in impairment calculations on assets which had impairment indicators or on
reporting units with significant assigned goodwill are as follows:
Percentage
South Africa
(1)
6.3 to 7.4
Ghana
(2)
5.9 to 7.9
Australia
5.4 to 5.9
Tanzania
7.1
(1)
As the Company did not have the intention to mine and no future cash flows were expected from the Western Ultra Deep Levels
area (in South Africa), an impairment loss of $74 million was recorded during 2005.
(2)
Based on a pre-tax discount rate of 6.5 percent in Ghana (at Bibiani) the estimated fair value amount did not support the carrying
values and as a result, an impairment loss of $37 million on mining assets and $4 million on assigned goodwill was recorded
during 2005. Refer to Note 3.
The Company reviews and tests the carrying value of long-lived assets, including goodwill, when events or changes in
circumstances suggest that the carrying amount may not be recoverable. Assets are grouped at the lowest level for
which identifiable cash flows are largely independent of cash flows of other assets. For long-lived assets other than
goodwill, if the sum of estimated future cash flows on an undiscounted basis is less than the carrying amount of the
related asset group, the long-lived asset group is not recoverable and the fair value should be determined. An
impairment loss is measured by comparing estimated future cash flows on a discounted basis to the carrying amount
of the asset. Goodwill is tested for impairment on an annual basis. Expected future cash flows used to determine the
fair value of goodwill and long-lived assets are inherently uncertain and could materially change over ti me. They are
significantly affected by a number of factors including reserves and production estimates, together with economic
factors such as spot and forward gold prices, discount rates, foreign currency exchange rates, estimates of costs to
produce reserves and future capital expenditure.
Should management’s estimate of the future not reflect actual events, further impairments may be identified. The
factors affecting the estimates include:
º
changes in Proved and Probable Ore Reserves as well as value beyond proven and probable reserves;
º
the grade of Ore Reserves as well as value beyond proven and probable reserves may vary significantly from time
to time;
º
differences between actual commodity prices and commodity price assumptions;
º
unforeseen operational issues at mine sites; and
º
changes in capital, operating mining, processing and reclamation costs and foreign exchange rates.
Based on analysis, the carrying value and estimated fair values (on a discounted basis) of reporting units that are
most sensitive to gold price, ounces, costs and discount rate assumptions are:
As at December 31, 2006
Carrying amount
(including goodwill)
$
Estimated fair value
(discounted)
$
South Africa
Tau Lekoa
124
126
Ghana
Obuasi
1,305
1,580
Should any of the assumptions used change adversely and the impact is not mitigated by a change in other factors,
this could result in an impairment of the above assets.
F-33
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
5.
COSTS AND EXPENSES(continued)
It is impracticable to disclose the extent of the possible effects of changes in the assumptions for the future gold price
and hence life of mine plans at December 31, 2006 because these assumptions and others used in impairment testing
of long-lived assets and goodwill are inextricably linked. In addition, for those operations with a functional currency
other than the dollar, movements in the dollar exchange rate will also be a critical factor in determining the life of mine
and production plans.
Therefore it is possible that outcomes within the next financial year that are different from the assumptions used in the
impairment testing process for goodwill and long-lived assets could require a material adjustment to the carrying
amounts disclosed at December 31, 2006.
Asset Retirement Obligations
Long-term environmental obligations comprising decommissioning and restoration are based on the Company’s
environmental management plans, in compliance with the current environmental and regulatory requirements.
(in US Dollars,
millions)
The following is a reconciliation of the total liabilities for asset retirement obligations:
Balance as at December 31, 2005
325
Impact of acquisitions and disposals
(5)
Liabilities settled
(12)
Accretion expense
13
Change in assumptions
-
(1)
Translation
(11)
Balance as at December 31, 2006
310
(1)
Revisions relate to changes in laws and regulations governing the protection of the environment and factors relative to
rehabilitation estimates and a change in the quantities of material in reserves and a corresponding change in the life of mine
plan. These liabilities are anticipated to unwind beyond the end of the life of mine.
These liabilities mainly relate to obligations at the Company’s active and inactive mines to perform reclamation and
remediation activities in order to meet applicable existing environmental laws and regulations.
Certain amounts have been contributed to a rehabilitation trust and environmental protection bond under the
Company's control. The monies in the trust and bond are invested primarily in interest bearing debt securities and are
included in Other long-term assets in the Company’s consolidated balance sheet. Cash balances held in the trust and
bond are classified as restricted cash in the Company’s consolidated balance sheets for all periods presented. As at
December 31, 2006 and 2005 the balances held in the trust and bond (cash and investments) amounted to $91 million
and $93 million, respectively. Besides these assets there were no other assets that were legally restricted for
purposes of settling asset retirement obligations as at December 31, 2006.
Operating Lease Charges
Operating lease rentals are charged against income in a systematic manner related to the period the leased property
will be used. Lease charges relate mainly to the hire of plant and machinery and other land and buildings.
Operating leases for plant and machinery are in terms of contracts entered with mining contractors to undertake mining
at certain operations. The contracts are for specified periods and include escalation clauses. Renewals are at the
discretion of the respective operating mine and allow a right of first refusal on the purchase of the mining equipment in
the case of termination of the contract. Certain contracts include the provision of penalties payable on early exiting or
cancellation.
F-34
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
5.
COSTS AND EXPENSES(continued)
Rental Expense
(1)
2006
$
2005
$
2004
$
Comprising of:
Minimum rentals
40
44
40
Contingent rentals
-
-
-
Sublease rentals
-
-
-
40
44
40
(1)
Included in production costs for each period presented.
Future minimum rental payments are:
2007
16
2008
4
2009
1
2010
1
2011
1
Thereafter
1
24
Profit on Sale of Assets, Loans and Indirect Taxes
2006
$
2005
$
2004
$
Profit on the sale of Mitchell Plateau and Cape Bougainville
-
(1)
-
Profit on disposal of Union Reefs Gold Mine
(1)
-
-
(2)
Profit on disposal of Western Tanami assets
(2)
-
-
(3)
Profit on disposal of Tanami Gold Mine
-
-
(3)
Profit on disposal of land, mineral rights and exploration properties
(5)
(48)
(2)
(6)
Recovery of loans previously written off
(3)
(14)
-
-
Non-recoverable value added state tax
(4)
9
-
-
Reassessment of indirect taxes payable in Guinea
(3)
-
-
Reassessment of indirect taxes payable in Tanzania
20
-
-
(36)
(3)
(14)
(1)
The sale of Union Reefs Mine to the Burnside Joint Venture was announced on August 5, 2004.
(2)
The sale of the Western Tanami Project to Tanami Gold NL was announced on January 20, 2004.
(3)
Relates mainly to loans previously expensed as exploration costs as part of funding provided to the Yatela Joint Venture. The
Yatela Joint Venture is accounted for under the equity method. Refer to Note 15.
(4)
Represents the write-off of value added state tax of $7 million at Serra Grande and $2 million (at AngloGold Ashanti Brasil
Mineração) not expected to be recovered from the Brazilian Government.
(5)
Refers to the disposal of land, mineral rights and exploration properties situated in Brazil, Ghana and North America.
Mining Contractor Termination Costs
Mining contractor termination costs of $9 million (before taxation of $3 million) recorded in 2005 (2004: $nil million)
related to contractor termination costs at Geita, in Tanzania, on the transition to owner mining completed in early
August 2005. No mining contractor termination costs were recorded in 2006.
Other operating costs and expenses
2006
$
2005
$
2004
$
Comprising of:
Provision for loss on future deliveries of other commodities
15
(5)
8
Unrealized loss on other commodity physical borrowings
1
14
-
16
9
8
Ore Reserve Development Expenditure
The Company has reassessed the useful life of on-reef Ore Reserve development expenditure with effect from
January 1, 2004. The effect of this change in estimate on the results for 2004 was as follows:
Year ended December 31, 2004
(in millions, except per share data)
Impact
$
Per basic common
share (cents)
Per diluted common
share
(1)
(cents)
Income before income tax provision
54
21
21
Taxation
(19)
(8)
(8)
Net income
35
13
13
(1)
The calculation of diluted earnings per common share for 2004 did not assume the effect of 15,384,615 shares issuable upon the exercise of
Convertible Bonds as their effects are anti-dilutive for this period.
F-35
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
6.
RELATED PARTY TRANSACTIONS
On October 26, 2005 Anglo American plc (AA plc) announced that it intended to reduce its shareholding in the
Company, while still intending to remain a significant shareholder in the medium term. During April 2006, AA plc
reduced its shareholding in the Company to less than 50 percent interest held, as the result of the sale in a public
offering, of some of its shares held in the Company. Refer to Note 20. As at December 31, 2006 AA plc and its
subsidiaries held an effective 41.67 percent (2005: 50.88 percent) interest in AngloGold Ashanti. The Company had
the following transactions with related parties during the years ended December 31, 2006, 2005 and 2004:
December 31, 2006
December 31, 2005
December 31, 2004
(in millions)
Purchases
(by)/from
related party
$
Amounts owed
to/(by) related
party
$
Purchases
(by)/from
related party
$
Amounts
owed to/(by)
related party
$
Purchases
(by)/from
related party
$
Related party transactions with
significant shareholder AA plc
1
-
5
1
5
Related party transactions with
subsidiaries of AA plc
(1)
Boart Longyear Limited – mining
services
(2)
-
-
5
-
9
Mondi Limited – forestry
5
-
16
2
16
Scaw Metals – A division of Anglo
Operations Limited – steel and
engineering
1
-
6
1
5
Haggie Steel Wire Rope Operations
(3)
1
-
8
1
9
Anglo Coal – a division of Anglo
Operations Limited
-
-
1
-
1
8
-
41
5
45
Related party transactions of equity
accounted joint ventures
Societe d'Exploitation des Mines d'Or
de Sadiola S.A.
(2)
(1)
-
-
1
Societe d'Exploitation des Mines d'Or
de Yatela S.A.
(1)
-
-
-
1
Societe des Mines de Morila S.A.
(2)
-
(2)
-
(1)
(1)
Transactions to April 2006.
(2)
AA plc sold their interest in Boart Longyear Limited with effect from July 29, 2005.
(3)
Previously included in Scaw Metals – A division of Anglo Operations Limited.
Amounts owed to related parties are unsecured, non-interest bearing and normally settled within sixty days.
In connection with the relocation of Roberto Carvalho Silva, an executive director of the Company since 2005, to
Nova Lima, Brazil, in 2000, Mr. Carvalho Silva commenced renting a house in Nova Lima from a Brazilian subsidiary of
the Company. Mr. Carvalho Silva purchased the house from the Company’s subsidiary in January 2005. The total
purchase price of the house was BRL1,150,000 ($429,923). Mr. Carvalho agreed to pay the purchase price of the
house in 60 installments, the first being BRL19,167.70 and 59 installments of BRL19,166.65 each, starting on January
28, 2005. Such monthly installments were adjusted annually by the cumulative INPC (a Consumer Price Index in Brazil)
in lieu of interest. As at December 31, 2006, BRL728,580 ($340,458) of the purchase price remained to be paid to the
Company’s subsidiary, with BRL657,717 ($341,352) remaining to be paid as at June 20, 2007. At present, the
installment payments are up-to-date. Mr Carvalho Silva and the Company have agreed that the remaining balance of
the purchase price of the house will be paid by Mr Carvalho Silva as soon as reasonably practicable and in any event
no later than August 31, 2007.
A Brazilian subsidiary of the Company received marketing, communications and corporate affairs services from a
Brazilian company in which a son of Roberto Carvalho Silva owns a one-third interest. The total amount paid by the
Company’s subsidiary to this company in respect of such services during the years were: 2006: BRL903,465
($414,433); 2004: BRL3,944 ($1,351); 2005: BRL311,923 ($127,837); and BRL634,023 ($329,055) has been paid to
date in 2007. The Company is currently reviewing its relationship with this service provider and the contracts under
which such services are provided.
F-36
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
7.
TAXATION
2006
$
2005
$
2004
$
Income/(loss) from continuing operations before income tax, equity income,
minority interests and cumulative effect of accounting change was derived from
the following jurisdictions:
South Africa
79
(179)
(97)
Argentina
40
30
24
Australia
106
66
39
Brazil
114
81
102
Ghana
(128)
(139)
(39)
Guinea
(53)
(18)
(28)
Mali
6
-
-
Namibia
18
11
2
Tanzania
(213)
(86)
3
USA
(23)
(37)
(8)
Zimbabwe
-
-
-
Other, including Corporate and Non-gold producing subsidiaries
(42)
(92)
(23)
(96)
(363)
(25)
Charge/(benefit) for income taxes attributable to continuing operations is as
follows:
Current:
South Africa
(1)
66
40
44
Argentina
13
-
(1)
Australia
25
6
2
Brazil
(2)
38
23
15
Ghana
5
-
-
Guinea
-
-
-
Mali
2
-
-
Namibia
4
-
-
Tanzania
1
-
2
USA
-
(1)
-
Zimbabwe
-
-
-
Other
2
2
6
Total current
156
70
68
(1)
Charges for current tax in 2006, 2005 and 2004 included an increase in
provision in respect of estimated tax payable amounting to $1 million,
$40 million and $40 million, respectively, as a result of the receipt of tax
assessments for the years ended December 31, 1998, 1999, 2000 and 2001.
(2)
Charges for current tax in 2005 included $13 million relating to tax obligations
as a result of a change in interpretation of legislation made by the Brazilian
Superior Justice Court.
Deferred:
South Africa
(1)
16
(95)
(201)
Argentina
2
10
10
Australia
4
10
5
Brazil
(4)
3
1
Ghana
(2)
(39)
(110)
(11)
Guinea
2
2
(1)
Mali
-
-
-
Namibia
3
4
-
Tanzania
(20)
(12)
-
USA
(3)
-
-
-
Zimbabwe
-
-
-
Other
2
(3)
(3)
Total deferred
(34)
(191)
(200)
Total income and mining tax expense/(benefit)
122
(121)
(132)
F-37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
7.
TAXATION(continued)
(1)
Mining tax on mining income in South Africa is determined according to a
formula which adjusts the tax rate in accordance with the ratio of profit to
revenue from mining operations. This formula also allows an initial portion of
mining income to be free of tax. Non-mining income is taxed at a standard rate.
During 2004, the estimated deferred taxation rate was revised to reflect the
future anticipated taxation rate at the time temporary differences reverse and
deferred taxation was provided at a rate of 38 percent for temporary
differences relating to mining operations. During 2005 and 2006, deferred
taxation was provided at a future anticipated taxation rate of 38 percent and
37 percent, respectively. In addition, charges for deferred taxation in 2005
included tax benefits of $13 million resulting from changes in enacted statutory
tax rates. There were no changes in the statutory tax rates for 2006.
The effect of the change in estimates on the results for 2006, 2005 and 2004
were as follows:
Year ended December 31, 2006
Impact
$
Per basic
common share
(a)
(cents)
Per diluted
common share
(a) (b)
(cents)
Income before extraordinary items
65
24
24
Extraordinary items
-
-
-
Net income
65
24
24
(a)
Per basic and diluted ordinary and E ordinary shares.
(b)
The calculation of diluted earnings per common share for 2006 did not assume
the effect of 15,384,615 shares issuable upon the exercise of Convertible Bonds
and 854,643 shares issuable upon the exercise of stock incentive options as their
effects are anti-dilutive for this period.
Year ended December 31, 2005
Impact
$
Per basic
common share
(cents)
Per diluted
common share
(a)
(cents)
Income before extraordinary items
20
8
8
Extraordinary items
-
-
-
Net income
20
8
8
(a)
The calculation of diluted earnings per common share for 2005 did not assume
the effect of 15,384,615 shares issuable upon the exercise of Convertible Bonds
and 601,315 shares issuable upon the exercise of stock incentive options as their
effects are anti-dilutive for this period.
Year ended December 31, 2004
Impact
$
Per basic
common share
(cents)
Per diluted
common share
(a)
(cents)
Income before extraordinary items
158
63
63
Extraordinary items
-
-
-
Net income
158
63
63
(a)
The calculation of diluted earnings per common share for 2004 did not assume
the effect of 15,384,615 shares issuable upon the exercise of Convertible Bonds
as their effects are anti-dilutive for this period.
2006
$
2005
$
2004
$
(2)
Charges for deferred taxation in 2006 included tax benefits of $21 million
resulting from an extension of tax losses granted by the Ghanaian Taxation
Authorities which would have been forfeited during the current year. During 2005
tax benefits of $94 million resulted from changes in enacted statutory tax rates
and is net of valuation allowances of $4 million (2004: $nil million).
(3)
Net of valuation allowances of $12 million (2005: $2 million, 2004: negative $6 million).
The unutilized tax losses of the North American operations which are available
for offset against future profits earned in the United States of America, amount
to $277 million (2005: $198 million, 2004: $192 million).
F-38
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
7.
TAXATION(continued)
The unutilized tax losses of the Ghanaian operation, acquired as part of the
AngloGold Ashanti Business Combination, which are available for offset against
future profits earned in this country, amount to $nil million (2005: $146 million,
2004: $132 million).
2006
$
Analysis of tax losses
Assessed losses utilized during the year
64
Unutilized tax losses remaining to be used against future profits can be split
into the following periods:
Utilization required within one year
-
Utilization required within one and two years
-
Utilization required within two and five years
-
Utilization in excess of five years
277
277
2006
Amount
%
2005
Amount
%
2004
Amount
%
Reconciliation between corporate income tax and statutory
income tax is as follows:
Corporate income tax at statutory rates
(36)
37
(134)
37
(10)
38
Formula variation in mining taxation rate for current period
(2)
2
(4)
1
(28) 112
Disallowable expenditure
(1)
127 (132)
30
(8)
40 (160)
Effect of income tax rates of other countries
(38)
40
115
(32)
18
(72)
Impact of change in estimated deferred taxation rate
65 (68)
(127)
35
(158) 632
Other, net
6
(6)
(1)
-
6
(22)
Total income and mining tax expense/(benefit)
122 (127)
(121)
33
(132) 528
(1)
Disallowable expenditure includes the impact of different tax rates applied to assets that are impaired.
2006
$
2005
$
Deferred taxation liabilities and assets on the balance sheet as of December 31, 2006
and 2005, relate to the following:
Deferred taxation liabilities:
Depreciation, depletion and amortization
1,638
1,579
Product inventory not taxed
3
18
Derivatives
19
30
Other comprehensive income deferred taxation
72
-
Other
23
38
Total
1,755
1,665
Deferred taxation assets:
Provisions, including rehabilitation accruals
(171)
(140)
Derivatives
(175)
(72)
Other comprehensive income deferred taxation
(155)
(101)
Other
(23)
(17)
Tax loss carry forwards
(257)
(244)
Total
(781)
(574)
Less: Valuation allowances
97
112
Total
(684)
(462)
Disclosed as follows:
Long-term portion deferred taxation assets
39
41
Short-term portion classified as other current assets
167
-
Long-term portion deferred taxation liabilities
1,275
1,152
Short-term portion classified as other current liabilities. Refer to Note 17.
2
92
F-39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
7.
TAXATION(continued)
The classification of deferred taxation assets is based on the related asset or liability
creating the deferred taxation. Deferred taxes not related to a specific asset or liability
are classified based on the estimated period of reversal. As at December 31, 2006,
the Company had unredeemed capital expenditure, in South Africa of $8 million, on
which deferred tax has been provided at the future anticipated tax rate of 37 percent,
which is available for deduction against future taxable mining income. This future
deduction is utilizable against taxable mining income generated only from the
Company’s current mining operations and does not expire unless the Company
ceases to operate for a period of longer than one year.
No provision has been made for South African income tax or foreign tax that may
result from future remittances of undistri buted earnings of foreign subsidiaries or
foreign corporate joint ventures because it is expected that such earnings will not be
distributed as a dividend in the foreseeable future. The distribution of these
undistributed earnings of $955 million (2005: $763 million, 2004: $840 million) by
these entities would result in income and foreign withholding taxes of approximately
$353 million (2005: $282 million, 2004: $319 million).
Analysis of Valuation Allowances
The movement in valuation allowances for the three years in the period ended December 31, is summarized as follows:
Balance at
beginning of
period
$
Charged to
costs and
expenses
$
Deductions
$
Balance at
end of period
$
Year ended December 31, 2006
- Valuation allowance
112
22
(37)
97
Year ended December 31, 2005
- Valuation allowance
113
19
(20)
112
Year ended December 31, 2004
- Valuation allowance
86
45
(18)
113
8.
DISCONTINUED OPERATIONS
The Ergo reclamation surface operation, which forms part of the South African
operations and is included under South Africa for segmental reporting, has been
discontinued as the operation has reached the end of its useful life and the assets are
no longer in use. After a detailed investigation of several options and scenarios, and
based on management’s decision reached on February 1, 2005, mining operations at
Ergo ceased on March 31, 2005 with only site restoration obligations remaining. The
Company has reclassified the income statement results from the historical
presentation to profit/(loss) from discontinued operations in the condensed
consolidated income statement for all periods presented. The condensed
consolidated cash flow statement has been reclassified for discontinued operations
for all periods presented. The results of Ergo for the years ended December 31, 2006,
2005 and 2004, are summarized as follows:
Year ended December 31,
2006
2005
2004
$
Per share
(1)(2)
(cents)
$
Per share
(2)
(cents)
$
Per share
(2)
(cents)
Revenue
4
1
18
7
87
35
Costs, expenses and recoveries
2
1
(62)
(24)
(98)
(39)
Pre-tax profit/(loss)
6
2
(44)
(17)
(11)
(4)
Taxation
-
-
-
-
-
-
Net profit/(loss) attributable to discontinued operations
6
2
(44)
(17)
(11)
(4)
(1)
Per basic and diluted ordinary and E ordinary shares.
(2)
Basic and diluted earnings/(loss) per common share. The calculation of diluted earnings/(loss) per common share for 2006, 2005 and 2004 did not
assume the effect of 15,384,615 shares, issuable upon the exercise of Convertible Bonds as their effects are anti-dilutive for these periods. The
calculation of diluted earnings/(loss) per common share for 2005 and 2006 did not assume the effect of 601,315 and 854,643 shares, respectively,
issuable upon the exercise of stock incentive options as their effects are anti-dilutive for these periods.
F-40
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
2006
$
2005
$
2004
$
9.
(LOSS)/EARNINGS PER COMMON SHARE
The following table sets forth the computation of basic and diluted (loss)/earnings
per share (in millions, except per share data):
Numerator
(Loss)/income before cumulative effect of accounting change
(142)
(270)
97
Cumulative effect of accounting change
-
(22)
-
Net (loss)/income
(142)
(292)
97
Less Dividends:
Ordinary shares
107
149
179
E Ordinary shares
-
-
-
Undistributed losses
(249)
(441)
(82)
Ordinary shares undistributed losses
(249)
(441)
(82)
E Ordinary shares undistributed losses
(1)
-
-
-
Total undistributed losses
(249)
(441)
(82)
Denominator for basic (loss)/earnings per ordinary share
Ordinary shares
272,214,937
264,230,586
251,170,130
Time related options
(2)
398,326
405,048
182,422
Weighted average number of ordinary shares
272,613,263
264,635,634
251,352,552
Effect of dilutive potential ordinary shares
Dilutive potential of stock incentive options
(3)
-
-
695,749
Dilutive potential of convertible bonds
(4)
-
-
-
Dilutive potential of E Ordinary shares
24,220
-
-
Denominator for diluted (loss)/earnings per share – adjusted weighted average
number of ordinary shares and assumed conversions
272,637,483
264,635,634
252,048,301
Weighted average number of E Ordinary shares used in calculation of basic
and diluted earning per E Ordinary share
194,954
-
-
(Loss)/earnings per share (cents)
Before cumulative effect of accounting changes
Ordinary shares
(52)
(102)
39
E Ordinary shares
(91)
-
-
Ordinary shares – diluted
(52)
(102)
38
E Ordinary shares – diluted
(91)
-
-
Cumulative effect of accounting changes
Ordinary shares
-
(8)
-
E Ordinary shares
-
-
-
Ordinary shares – diluted
-
(8)
-
E Ordinary shares – diluted
-
-
-
Net (loss)/income
Ordinary shares
(52)
(110)
39
E Ordinary shares
(91)
-
-
Ordinary shares – diluted
(52)
(110)
38
E Ordinary shares – diluted
(91)
-
-
(1)
Rounded to zero.
(2)
Compensation awards are included in the calculation of basic (loss)/earnings per common share from when the necessary conditions have been
met, and it is virtually certain that shares will be issued as a result of employees exercising their options.
(3)
The calculation of diluted (loss)/earnings per common share for 2005 and 2006 did not assume the effect of 601,315 and 854,643 shares,
respectively, issuable upon the exercise of stock incentive options as their effects are anti-dilutive for these periods.
(4)
The calculation of diluted (loss)/earnings per common share for 2006, 2005 and 2004 did not assume the effect of 15,384,615 shares issuable upon
the exercise of Convertible Bonds as their effects are anti-dilutive for these periods.
F-41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
2006
$
2005
$
10. RESTRICTED CASH
Cash classified as restricted for use comprise of the following:
Cash restricted by the prudential solvency requirements
2
3
Cash balances held by the Environmental Rehabilitation Trust
Fund
5
-
Cash balances held by the Boddington expansion
3
-
The Company was restricted from utilizing available funds in Geita
Management Company Limited, up to a maximum of $25 million in
respect of outstanding hedges
(1)
-
4
Other
1
1
11
8
(1)
Restrictions lifted by counterparts during 2006.
11. INVENTORIES
Short-term:
Gold in process
111
93
Gold on hand
37
10
Ore stockpiles
84
47
Uranium oxide and sulphuric acid
6
14
Supplies
162
133
400
297
Less: Heap leach inventory
(1)
(46)
(37)
354
260
(1)
Short-term portion relating to heap leach inventory classified separate,
as materials on the leach pad.
Long-term:
Gold in process
149
116
Ore stockpiles
66
30
Supplies
2
2
217
148
Less: Heap leach inventory
(1)
(149)
(116)
68
32
(1)
Long-term portion relating to heap leach inventory classified separate,
as materials on the leach pad.
The Company recorded aggregate write-downs of $2 million, $nil million and
$nil million for the years ended December 31, 2006, 2005 and 2004, respectively, to
reduce the carrying value of inventories to net realizable value. Inventory write-
downs for 2006 are included in production costs.
12.
PROPERTY, PLANT AND EQUIPMENT, NET
Mine development
(1)
4,633
4,322
Mine infrastructure
2,293
2,050
Mineral rights and other
1,058
1,095
Land
26
27
8,010
7,494
Accumulated depreciation, depletion and amortization
(3,033)
(2,572)
Net book value December 31,
4,977
4,922
(1)
Includes interest capitalized of $10 million (2005: $16 million). Refer to Note 5.
Mining assets with a net book value of $6 million (2005: $8 million) are encumbered
by project finance. Refer to Note 20.
F-42
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
12. PROPERTY, PLANT AND EQUIPMENT, NET (continued)
DEFERRED STRIPPING
Prior to January 1, 2006, stripping costs incurred in open-pit operations during the
production phase to remove additional waste were charged to operating costs on
the basis of the average life of mine stripping ratio and the average life of mine
costs per tonne and resulted in capitalization of such stripping costs (deferred
stripping) as part of mining assets.
As described in Note 2 the Company adopted EITF Issue 04-6, “Accounting for
Stripping Costs in the Mining Industry” on January 1, 2006.
As at December 31,
(in millions)
2006
$
2005
$
Movements in the deferred stripping costs balance were as follows:
Opening balance
105
69
Cumulative effect adjustment
(105)
-
Amount deferred
-
28
Translation
-
8
Closing balance
-
105
Production costs for the years ended December 31, 2005 and 2004 as disclosed in
the consolidated statements of income, would have increased by $28 million and
$28 million, respectively, if stripping costs were expensed rather than capitalized in
these periods.
Prior to January 1, 2006, the full amount of stripping costs incurred during the
production phase were not expensed until the end of the life of the respective mines.
Total stripping costs (net of amortization) included in production costs in the
consolidated statements of income for the periods ended December 31, 2005 and
2004 amounted to $203 million and $98 million, respectively.
Total stripping costs included in production costs in the consolidated statements of
income for the year ended December 31, 2006 amounts to $227 million.
2006
$
2005
$
13.
ACQUIRED PROPERTIES, NET
Acquired properties, at cost
1,983
2,023
Accumulated amortization
(694)
(611)
Net book value December 31,
1,289
1,412
14. GOODWILL AND OTHER INTANGIBLES
Goodwill
The carrying amount of goodwill by reporting unit as of December 31, 2006 and 2005 and changes in the carrying
amount of goodwill are summarized as follows:
Australia
Ghana
Guinea
Namibia
Tanzania
Total
$
$
$
$
$
$
Balance at January 1, 2005
229
122
10
1
181
543
Impairment losses
(1)
-
(4)
-
-
-
(4)
Translation
(15)
-
-
-
-
(15)
Balance at December 31, 2005
214
118
10
1
181
524
Impairment losses
-
-
-
-
-
-
Translation
18
-
-
-
-
18
Balance at December 31, 2006
232
118
10
1
181
542
(1)
During 2005, the Company recorded impairment losses of $4 million relating to goodwill held
in Bibiani. Refer to Note 5 – Impairment of assets.
F-43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
14. GOODWILL AND OTHER INTANGIBLES (continued)
2006
$
2005
$
Other intangibles, net
Royalty rate and tax rate concession agreements
(1)
Gross carrying value
49
49
Accumulated amortization
(5)
(3)
Impairment losses
(20)
(20)
24
26
(1)
The government of Ghana agreed, as part of the AngloGold Ashanti Business
Combination, to a concession on royalty payments at a fixed rate of 3 percent
per year for a period of fifteen years. The fair value of the royalty rate
concession is amortized on a straight line basis over a period of fifteen years
with nil residual value.
In addition, the government of Ghana also agreed as part of the AngloGold
Ashanti Business Combination, to a concession wherein income tax will not
exceed a rate of 30 percent for a period of fifteen years. During 2005, enacted
statutory tax rates in Ghana were reduced to 25 percent. This indicated an
impairment and the Company fully impaired the tax rate concession and
recorded an impairment loss of $20 million (2004: $nil million). Refer to
Note 5 – Impairment of assets.
Amortization expense included in the consolidated statements of income
amounted to $2 million for 2006 (2005: $2 million, 2004: $1 million).
Based on carrying value at December 31, 2006, the estimated aggregate
amortization expense for each of the next five years is as follows:
2007
2
2008
2
2009
2
2010
2
2011
2
2006
$
2005
$
15.
OTHER LONG-TERM ASSETS
Investments in affiliates – unlisted
5
5
Investments in affiliates – listed
31
29
Investments in equity accounted joint ventures
314
324
Carrying value of equity method investments (see below)
350
358
Investment in marketable equity securities – available for sale
31
15
Investment in marketable debt securities – held to maturity
18
19
Investment in non-marketable assets – held to maturity
3
3
Investment in non-marketable debt securities – held to maturity
61
65
Other non-current assets
80
36
543
496
F-44
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
15.OTHER LONG TERM ASSETS (continued)
Investments in affiliates
Unlisted
The Company holds a 25.0 percent (2005: 25.0 percent) interest in Oro Group
(Proprietary) Limited which is involved in the manufacture and wholesale of
jewellery. The year end of Oro Group (Proprietary) Limited is March. Results are
included for the twelve months ended September 30, 2006. On September 21, 2006, Oro
Group (Proprietary) Limited repaid a shareholders loan of $1 million originally granted in 2000.
Loans granted to Oro Group (Proprietary) Limited are repayable at the discretion of its board of directors.
Listed
The Company holds a 29.9 percent (2005: 29.9 percent) interest in Trans- Siberian Gold plc which is involved in the exploration and development of gold mines. The Company’s initial 17.5 percent equity interest acquired in Trans-Siberian Gold plc during July 2004 was increased to 29.9 percent onMay 31, 2005, the date on which the second subscription was completed. Referto Note 3 – Acquisitions and disposals of businesses and assets. The year end ofTrans-Siberian Gold plc is December. Results are included for the twelve monthsended September 30, 2006. On June 27, 2006, the Company advanced loans of$10 million to Trans-Siberian Gold plc at LIBOR plus 4 percent which may beconverted into equity. The market value of the Company’s share of the listedaffiliate as at December 31, 2006 is $9 million. During the year endedDecember 31, 2006 the Company recorded an impairment loss of $7 million on itsinvestment. The investment (including loans) is carried at carrying value of$31 million.
Investments in equity accounted joint ventures
The Company holds the following interest in incorporated mining joint ventures, of
which the significant financial operating policies are, by contractual arrangement,
jointly controlled:
December 31,
2006
percentage held
December 31,
2005
percentage held
Nufcor International Limited
(1)
50.00
50.00
Sadiola
(2)
38.00
38.00
Morila
(2)
40.00
40.00
Yatela
(2)
40.00
40.00
(1)
Year end is June. Results are included for the twelve months ended
December 31.
(2)
The year ends of these entities are December. Results are included for the
twelve months ended December 31.
2006
$
2005
$
The difference between the carrying value of the investments in affiliates and
joint ventures and the underlying equity in net assets is as follows:
Carrying value of investments
350
358
Cost of investments
380
380
Undistributed loss since acquisition
(1)
(20)
Other than temporary decline in the value of investments
(1)
(10)
(3)
Other comprehensive income
(31)
(2)
Loans advanced
(2)
12
3
(1)
During the year ended December 31, 2006, the Company recorded an impairment
loss of $7 million on its listed investment held in Trans-Siberian Gold plc.
(2)
Movement in loans advanced from 2005 represents the repayment of the Oro Group
(Proprietary) Limited shareholders loan of $1 million on September 21, 2006 and
loans advanced of $10 million to Trans-Siberian Gold plc on June 27, 2006.
F-45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
15.
OTHER LONG-TERM ASSETS(continued)
2006
$
2005
$
Investment in marketable equity securities – available for sale
31
(1)
15
(1)
Increase in investment in marketable equity securities during 2006 mainly
reflects the investment of $14 million (19.99 percent) interest acquired in
International Tower Hill Mines Limited during September 2006. Refer to Note 3 –
Acquisitions and disposals of businesses and assets.
Total gains on marketable equity securities included in other comprehensive income
amounts to $5 million (2005: $1 million). Total losses on marketable equity securities
included in other comprehensive income amounts to $1 million (2005: $nil million).
Investment in marketable debt securities – held to maturity
Investments in marketable securities represent held to maturity government and
corporate bonds. The investment is measured at amortized cost.
18
19
Investment in non-marketable assets – held to maturity
Investments in non-marketable assets represent secured loans and receivables
secured by pledge of assets.
3
3
Investment in non-marketable debt securities – held to maturity
Investments in non-marketable securities represent the held to maturity fixed-term
deposits (corporate bonds and notes) required by legislation for the Environmental
Rehabilitation Trust Fund and Environmental Protection Bond.
61
65
As of December 31, 2006 the contractual maturities of debt securities were as
follows:
Marketable debt securities
Less than one year
1
Two to seven years
7
Seven to twelve years
1
More than twelve years
9
18
Non-marketable debt securities
Less than one year
52
More than twelve years
9
61
Fair values of the held to maturity debt securities at December 31, 2006 and 2005
approximate cost.
Other non-current assets
Unsecured
Other loans and assets
(1)
44
16
44
16
Non-current debtors
Prepayments and accrued income
5
4
Recoverable tax, rebates, levies and duties
25
16
Other trade debtor
(2)
3
-
Other debtors
3
-
36
20
80
36
(1)
Other comprises loans and receivables of $4 million (2005: $6 million) measured at
amortized cost and post retirement assets of $40 million (2005: $10 million) measured
according to the employee benefits accounting policy.
(2)
Bears interest and is repayable over four years.
F-46
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
15.
OTHER LONG-TERM ASSETS(continued)
2006
$
2005
$
Equity accounted joint ventures
Summarized financial statements of the joint ventures which have been equity
accounted are as follows (Geita – only income and expenses for the period ended
April 26, 2004 included, as effective from this date, the Company acquired an
additional 50 percent in Geita as part of the AngloGold Ashanti Business
Combination which resulted in Geita being accounted for as a subsidiary of
AngloGold Ashanti) (100 percent shown):
2006
$
2005
$
2004
$
Statements of income for the period
Sales and other income
817
600
546
Costs and expenses
(465)
(496)
(493)
Taxation
(90)
(6)
(1)
Net income
262
98
52
Balance sheets at December 31,
Non-current assets
720
754
Current assets
438
366
1,158
1,120
Long-term liabilities
(89)
(97)
Loans from shareholders
(19)
(27)
Current liabilities
(268)
(176)
Net assets
782
820
2006
$
2005
$
16.
ASSETS AND LIABILITIES HELD FOR SALE
Effective June 30, 2005, the investment in the Weltevreden mining rights, located in
South Africa, of $15 million, was classified as held for sale. This investment was
previously recognised as a tangible asset. Weltevreden's rights were sold to Aflease Gold
and Uranium Resources Limited on June 15, 2005. On December 19, 2005, Aflease was
acquired by sxr Uranium One (formerly Southern Cross Inc.). In terms of these sale
agreements, the purchase price will be paid in the form of sxr Uranium One shares to be
issued to the Company. This will take place when the conditions precedent to the
agreement have been met. The Weltevreden mining rights form part of an old order
mining rights conversion application, and the conditions precedent are that upon the
government granting the conversion of these to new order mining rights, the Company
will cede the Weltevreden mining rights to sxr Uranium One.
The Director-General of Minerals and Energy notified the Company that the new order
mining rights were granted to the Company. However, the signing of the notarial
agreement and the registration of the converted mining right still has to be completed.
Once these have been completed, the new order mining rights will then be ceded to sxr
Uranium One, and the related sxr Uranium One shares will then be issued to the
Company as full settlement of the purchase price. The fair value of the sxr Uranium One
shares as at December 31, 2006 amounts to $51 million.
9
10
Arising from the sale of the Bibiani assets in Ghana, effective December 28, 2006, to
Central African Gold plc (CAG), the group decided to apply $3 million of the partial
proceeds to an investment of 15,825,902 CAG shares. Subsequent to this decision, local
regulators have required that the 15,825,902 shares in CAG must be sold within 90 days
of December 28, 2006. On February 14, 2007, the Company disposed of 7,000,000 CAG
shares yielding total proceeds of £768,845 ($1.5 million) and during April 2007, disposed
of the remaining 8,825,902 CAG shares yielding total proceeds of £894,833 ($1.8 million).
The investment as at December 31, 2006 is carried at fair value less costs to sell.
3
-
F-47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
16.
ASSETS AND LIABILITIES HELD FOR SALE(continued)
2006
$
2005
$
As at December 31, 2006 and 2005 the carrying amount of major assets and liabilities
relating to Weltevreden and CAG to be disposed of, included:
Property, plant and equipment
15
16
Other long-term assets (marketable equity investment)
3
-
Deferred taxation
(6)
(6)
Net assets
12
10
17.
OTHER CURRENT LIABILITIES
Deferred income
17
6
Deferred taxation. Refer to Note 7.
2
92
Related parties. Refer to Note 6.
-
5
Accrual for power
14
14
Unearned premiums
41
51
Other (including accrued liabilities)
52
31
126
199
18.
SHORT-TERM DEBT
Current maturities of long-term debt. Refer to Note 20.
33
160
19.
OTHER NON-CURRENT LIABILITIES
Deferred income
24
14
20.
LONG-TERM DEBT
Unsecured
Convertible bond
(1)
Fixed semi-annual coupon of 2.375% per annum. The bond is convertible, at the holders’
option, into ADSs up to February 2009 and is US dollar-based. The bond is convertible
at a price of $65.00 per ADS.
1,008
1,008
Corporate bond
(2)
Fixed semi-annual coupon of 10.50% per annum. The bond is repayable on
August 28, 2008 and is ZAR-based.
296
327
Syndicated loan facility ($700 million)
(3)
Interest charged at LIBOR plus 0.4% per annum. Loan is repayable in January 2008 and
is US dollar-based. The loan is subject to certain debt covenant arrangements for which
no default event occurred.
181
460
Bank Belgolaise
Interest charged at LIBOR plus 1.5% per annum. Loan is repayable in 24 equal monthly
installments commencing October 2005 and is US dollar-based.
2
4
Precious Fields Estates Company Ltd
Annuity based repayments expired in October 2006. Loan is US dollar-based.
-
1
Local money-market short-term borrowings
(4)
Short-term borrowings at market related rates and are ZAR-based.
-
129
Bank overdraft
Bank overdraft at market related rates and is Ghanaian Cedi-based.
8
-
Australia and New Zealand Banking Group Limited
(5)
-
-
Total unsecured borrowings
1,495
1,929
Secured
Capital leases
Senstar Capital Corporation
(6)
Interest charged at a weighted average rate of 6.77% per annum. Loans are repayable in
monthly installments terminating in November 2009 and are US dollar-based. The
equipment financed is used as security for these loans. Refer to Note 12.
8
10
Terex Africa (Proprietary) Limited
(7)
Interest charged at a rate of 9.0% per annum. Loan is repayable in January 2008 and is
US dollar-based. The equipment financed is used as security for this loan. Refer to
Note 12.
2
-
Total long-term debt
1,505
1,939
Current maturities included in short-term debt.
33
160
1,472
1,779
F-48
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
20.
LONG-TERM DEBT(continued)
2006
$
2005
$
Scheduled minimum long-term debt repayments are:
2007
33
2008
471
2009
1,001
2010
-
2011
-
1,505
The currencies in which the borrowings are denominated are as follows:
United States dollars
1,201
1,483
South African rands
296
456
Ghanaian Cedi
8
-
1,505
1,939
Undrawn borrowing facilities as at December 31, 2006 are as follows:
Syndicated loan ($700 million) – US dollar
520
245
FirstRand Bank Limited – US dollar
50
-
ABSA Bank Limited – US dollar
42
42
Nedbank Limited – US dollar
2
-
Citibank, N.A. – US dollar
-
8
Standard Bank of South Africa Limited – rands
37
-
FirstRand Bank Limited – rands
31
17
Nedbank Limited – rands
7
7
ABSA Bank Limited – rands
4
5
Commerzbank AG – rands
3
3
ABN Amro Bank N.V. – rands
1
-
Australia and New Zealand Banking Group Limited – Australian dollar
79
37
ABN Amro Bank N.V. – euros
7
-
783
364
(1)
Convertible Bond
Senior unsecured fixed rate bond
1,000
1,000
Add: Accrued interest
8
8
1,008
1,008
On February 27, 2004, AngloGold Ashanti Holdings plc, a wholly-owned subsidiary
of the Company, issued $1,000,000,000 2.375 percent guaranteed convertible
bonds due 2009, convertible into ADSs and guaranteed by AngloGold Ashanti.
Subject to certain restrictions, holders of convertible bonds are entitled to convert
each convertible bond into an AngloGold Ashanti ADS at the then applicable
conversion price at any time from April 8, 2004 to February 20, 2009, or, if the
convertible bonds are called for redemption earlier than February 27, 2009, the
seventh business day prior to the date of early redemption.
If the bonds have not been converted by February 20, 2009, they will be redeemed
at par on February 27, 2009. AngloGold Ashanti Holdings plc has the option of
calling an early redemption of all the bonds 3 years after their issuance, if the price
of the ADSs exceeds 130 percent of the conversion price for more than 20 days
during any period of 30 consecutive trading days.
The initial conversion price for the convertible bonds was $65.00 per ADS. The
conversion premium to the reference volume weighted average price of the ADSs on
the New York stock exchange of $40.625 on February 19, 2004, when the issue of
the convertible bonds was announced, was 60 percent. If all bond holders exercise
their option to convert their bonds into ADSs and assuming no adjustments are
made to the initial conversion price, up to 15,384,615 new ADSs will be issued. The
conversion ratio is subject to adjustment in case of various corporate events
including share splits and capital distributions.
The calculation of diluted (loss)/earnings per common share for 2006, 2005 and
2004 did not assume the effect of 15,384,615 shares issuable upon the exercise of
Convertible Bonds as their effects are anti-dilutive for these periods. Refer to Note 9.
F-49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
20.
LONG-TERM DEBT(continued)
2006
$
2005
$
The proceeds of the issue, after payment of expenses, were utilized by AngloGold
Ashanti to refinance amounts outstanding under credit facilities, to meet transaction
costs in connection with the acquisition of Ashanti and for general corporate
purposes, including planned capital expenditure.
(2)
Corporate Bond
Senior unsecured fixed rate bond
286
315
Add: Accrued interest
10
12
296
327
On August 21, 2003, AngloGold issued unsecured bonds in the aggregate principal
amount of R2 billion ($300 million) at a fixed semi-annual coupon of 10.50% per
annum. The bond is repayable on August 28, 2008, subject to early redemption at the
Company’s option and is listed on the Bond Exchange of South Africa. The net
proceeds of the bond are for general corporate purposes.
(3)
Syndicated loan facility ($700 million)
In January 2005, the Company entered into a new three year $700 million unsecured
syndicated borrowing facility, at a margin of 0.4% over LIBOR. A commitment fee of
0.15% per annum is payable on the undrawn portion of the facility. The three year
$700 million syndicated facility was used to repay a maturing facility of $600 million
(repaid on February 4, 2005) and is available for general corporate purposes. During
the year ended December 31, 2006, the Company repaid $415 million and drew down
$140 million under the $700 million syndicated facility. This amount was funded from
proceeds raised through the public share offering (completed in April 2006) and cash
flow from operations. The amount drawn under this facility was $180 million as at
December 31, 2006. The Company, AngloGold Offshore Investments Limited and
AngloGold American Investments Limited have guaranteed all payments an d other
obligations of the wholly-owned subsidiaries AngloGold Ashanti Holdings plc and
AngloGold Ashanti USA Inc. regarding the $700 million syndicated loan facility.
(4)
Local money-market short-term borrowings
During the year ended December 31, 2006, the Company repaid $129 million in local
short-term money market loans. These amounts were funded from proceeds raised
through the public share offering (completed in April 2006) and cash flow from
operations.
(5)
Australia and New Zealand Banking Group Limited
On October 14, 2002, a new loan facility of A$50 million was arranged with the
Australia and New Zealand Banking Group Limited, at 0.35% over the Bank Bill Swop
Reference Rate. A commitment fee of 0.20% per annum is payable on the undrawn
portion of the facility. The facility, originally repayable by September 2003, has been
increased to A$100 million during 2006, and extended to September 2007. There was
$nil million drawn under this facility as at December 31, 2006.
Capital leases
(6)
Senstar Capital Corporation
Capital leases are for specific periods, with terms of renewal but no purchase options
or escalation clauses. Renewals are at the discretion of the entity that holds the lease.
As of December 31, 2006 and 2005, Property, plant and equipment, allocated to Mine
infrastructure, includes $16 million and $18 million of assets under capital leases and
$11 million and $10 million of related accumulated depreciation, respectively.
Amortization charges relating to capital leases are included in Depreciation, depletion
and amortization expense for all periods presented. The weighted average interest
rate on the leases existing at December 31, 2006 is 6.77%. Payments are made
monthly, including interest, through 2009.
F-50
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
20.
LONG-TERM DEBT(continued)
2006
$
2005
$
Future minimum lease payments under capital leases together with the present value of
minimum lease payments as of December 31, 2006 are:
2007
3
2008
3
2009
3
Total minimum lease payments
9
Less interest
1
Present value of net minimum lease payments
8
Less current portion
3
Long-term capital lease obligation
5
(7)
Terex Africa (Proprietary) Limited
The capital lease is for a specific period, with no terms of renewal and a purchase
option. As of December 31, 2006, Property, plant and equipment, allocated to Mine
infrastructure, includes $2 million of assets under the capital lease and $1 million of
related accumulated depreciation. Amortization charges relating to the capital lease
are included in Depreciation, depletion and amortization expense for the year ended
December 31, 2006. The interest rate on the lease existing at December 31, 2006 is
9%. The lease is to be repaid in January 2008.
Future minimum lease payments under the capital lease together with the present
value of minimum lease payments as of December 31, 2006 are:
2007
-
2008
2
Total minimum lease payments
2
Less interest
-
Present value of net minimum lease payments
2
Less current portion
-
Long-term capital lease obligation
2
21.
PROVISION FOR ENVIRONMENTAL REHABILITATION
Accrued environmental rehabilitation costs
310
325
Long-term environmental obligations comprising decommissioning and restoration are
based on the group’s environmental management plans, in compliance with the current
environmental and regulatory requirements.
Decommissioning costs
The provision for decommissioning represents the cost that will arise from rectifying
damage caused from establishing mining operations.
Decommissioning costs, representing obligations associated with the retirement of long-
lived assets that result from the acquisition, construction or normal operations of long-
lived assets, are accounted for in accordance with the provisions of SFAS143.
Decommissioning costs are further described in Note 5 – Asset retirement obligations.
Restoration costs
The provision for restoration represents the closure cost for restoration of site damage.
Rehabilitation of site damages only commences at the closure stage of the mine. Site
damages are not costs associated with the construction or normal operations of long-lived
assets and do not create probable future economic benefits.
At each reporting balance sheet date, gross restoration costs are estimated at the present
value of the expenditures expected to settle the obligation, using estimated cash flows
based on current prices. The estimates are discounted at a credit adjusted risk free rate.
F-51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
21.
PROVISION FOR ENVIRONMENTAL REHABILITATION(continued)
2006
$
2005
$
While the ultimate amount of rehabilitation cost to be incurred in the future is uncertain,
the Company has estimated that the total cost for mine rehabilitation and closure, on an
undiscounted basis, will be $482 million which includes a total estimated liability of
$17 million in respect of equity accounted joint ventures. Refer to Note 15. Certain
amounts have been contributed to a rehabilitation trust and environmental protection bond
under the Company's control. The monies in the trust and bond are invested primarily in
interest bearing debt securities and are included in Other long-term assets in the
Company’s consolidated balance sheet. Cash balances held in the trust and bond are
classified as restricted cash in the Company’s consolidated balance sheets for all periods
presented. AngloGold Ashanti USA has posted reclamation bonds with various federal
a nd governmental agencies to cover environmental rehabilitation obligations. Refer to Note 24.
The Company intends to finance the ultimate rehabilitation costs from the monies invested
with the rehabilitation trust fund, the environmental protection bond as well as the
proceeds on sale of assets and gold from plant clean-up at the time of mine closure.
22.
OTHER ACCRUED LIABILITIES
Other accrued liabilities
27
19
Other accrued liabilities include the following:
Provisions for labor and civil claim court settlements for South American operations
(1)
26
19
Provision for employee compensation claims in Australia
(2)
1
-
27
19
(1)
Consists of claims filed by former employees in respect of loss of employment, work-related
accident injuries and diseases, government fiscal claims relating to levies and surcharges and
closure costs of old tailings operations. These liabilities are anticipated to unwind over the next two
to five years.
(2)
Comprises workers compensation claims with regard to work related incidents. The liability is
anticipated to unwind over the next three to five years. (Values were less than $0,5 million in
2005).
23.
PROVISION FOR PENSION AND OTHER POST-RETIREMENT MEDICAL BENEFITS
Accrued liability
172
200
The provision for pension and post-retirement medical funding represents the provision for
health care and pension benefits for employees, retired employees and their dependants.
The post-retirement medical liability is assessed in accordance with the advice of
independent professionally qualified actuaries. The actuarial method used is the projected
unit credit actuarial valuation method. Refer to Note 28. The costs of post-retirement
benefits are made up of those obligations which the Company has towards current and
retired employees.
24.
COMMITMENTS AND CONTINGENCIES
Capital expenditure commitments
(1)
Contracts for capital expenditure
354
186
Authorized by the directors but not yet contracted for
731
725
1,085
911
Allocated for:
Project expenditure
- within one year
367
190
- thereafter
265
106
632
296
Stay in business expenditure
- within one year
418
572
- thereafter
35
43
453
615
(1)
Including commitments through contractual arrangements by equity accounted joint ventures.
F-52
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24.
COMMITMENTS AND CONTINGENCIES(continued)
2006
$
2005
$
Other contractual purchase obligations
(2)
- within one year
274
192
- thereafter
190
203
464
395
(2)
Other purchase obligations represent contractual obligations for the purchase of mining
contract services, power, supplies, consumables, inventories, explosives and activated
carbon. Amounts stated include purchase obligations of equity accounted joint ventures.
Contingencies
Water pumping cost – South Africa
The Company is involved in a legal dispute regarding the responsibility for water
pumping of the Margaret shaft which belongs to Stilfontein. Following an attempt by
DRDGold Limited to liquidate its North West operations and avoid incurring pumping
cost, the Company launched an urgent application against DRDGold Limited and
government departments requesting the court to order the continued pumping of water
at the Stilfontein Mines. The cessation of water pumping is likely to cause flooding in
various of the Company’s Vaal River operations. The Department of Water Affairs and
Forestry responded by issuing directives to the mining companies directing that they
share the costs of pumping at the Margaret Shaft.
The three mining companies, Simmer and Jack Mines Limited, Harmony Gold Mining
Company Limited and AngloGold Ashanti Limited, are finalizing an arrangement in
which responsibility for the water pumping will be transferred to an independent newly
formed company. The Company’s responsibility will be limited to providing one-third of
the start-up capital on loan account and the three mining companies will be members
of the newly formed company.
Should the proposed arrangement not be acceptable to the courts and/or the
regulatory authorities, the proposal may have to be amended. Due to this uncertainty,
no estimate is made of any potential liabilities.
Groundwater pollution – South Africa
The Company has identified a number of groundwater pollution sites at its current
operations in South Africa and has investigated a number of different technologies and
methodologies that could possibly be used to remediate the pollution plumes. The
viability of the suggested remediation techniques in the local geologic formation in
South Africa is however unknown. No sites have been remediated and present
research and development work is focused on several pilot projects to find a solution
that will in fact yield satisfactory results in South African conditions. Subject to the
technology being developed as a remediation technique, no reliable estimate can be
made for the obligation.
F-53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24.
COMMITMENTS AND CONTINGENCIES(continued)
2006
$
2005
$
Serra Grande sales tax on gold deliveries
47
29
Mineração Serra Grande S.A. (MSG), the operator of the Crixas mine in Brazil, has
received two tax assessments from the State of Goiás related to payments of sales
taxes on gold deliveries for export namely, one assessment for the period between
February 2004 and June 2005 and the other for the period between July 2005 to
May 2006. The tax authorities maintain that whenever a taxpayer exports gold mined
in the State of Goiás through a branch located in a different Brazilian state, it must
obtain an authorization from the Goiás State Treasury by means of a Special Regime
Agreement (Termo de Acordo re Regime Especial – TARE). The Serra Grande
operation is co-owned with Kinross Gold Corporation. The Company’s attributable
share of the first assessment is approximately $29 million. In May 2006 MSG signed
the TARE, which authorized the remi ttance of gold to the Company’s branch in Minas
Gerais specifically for export purposes. In November 2006 the administrative council’s
second chamber ruled in favor of Serra Grande and fully canceled the tax liability
related to the first period. The State of Goiás may still appeal to the full board of the
State of Goiás tax administrative council. The second assessment was issued by the
State of Goiás in October 2006 on the same grounds as the first assessment, and the
Company’s attributable share of the assessment is approximately $18 million. The
Company believes both assessments are in violation of federal legislation on sales
taxes.
VAT Dispute at Morro Velho
5
-
Morro Velho is involved in a dispute with tax authorities, as a result of an erroneous
duplication of a shipping invoice between two states in Brazil, tax authorities are
claiming that VAT is payable on the second invoice.
VAT Dispute at MSG
6
6
Mineração Serra Grande S.A. received a tax assessment in October 2003 from the
State of Minas Gerais related to sales taxes on gold allegedly returned from the
branch in Minas Gerais to the company head office in the State of Goiás. The tax
administrators rejected the Company’s appeal against the assessment. The
Company is now dismissing the case at the judicial sphere.
Financial guarantees
AngloGold Offshore Investments Limited guarantee of the Nufcor International Limited
loan facility:
40
40
F-54
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24.
COMMITMENTS AND CONTINGENCIES(continued)
2006
$
2005
$
AngloGold Offshore Investments Limited, a wholly owned subsidiary of the Company,
has guaranteed 50 percent of the Nufcor International Limited loan facility with First
Rand (Ireland) plc (formerly RMB International (Dublin) Limited). Nufcor International
Limited is accounted for under the equity method. Refer to Note 15.
Oro Group surety
14
16
The Company has provided surety in favor of the lender in respect of gold loan
facilities to wholly owned subsidiaries of Oro Group (Proprietary) Limited an affiliate of
the Company. The Company has a total maximum liability, in terms of the suretyships,
of R100 million ($14 million). The suretyship agreements have a termination notice
period of 90 days. The probability of the non-performance under the suretyships is
considered minimal, based on factors of no prior defaults, being well-established
companies and recourse via general notarial bonds over the gold stocks of the
subsidiaries of the Oro Group. These bonds should enable the Company to recover
the majority of the guaranteed amount. The Company receives a fee from the
associate for providing the surety and has assessed the possibility of a claim for non-
performance.
Pursuant to US environmental regulations, gold mining companies are obligated to
close their operations and rehabilitate the lands that they mine in accordance with
these regulations. AngloGold Ashanti USA has posted reclamation bonds with various
federal and state governmental agencies to cover potential rehabilitation obligations in
amounts aggregating approximately:
49
49
The Company has provided a guarantee for these obligations which would be payable
in the event of AngloGold Ashanti USA not being able to meet their rehabilitation
obligations. As at December 31, 2006 the carrying value of these obligations relating to
AngloGold Ashanti USA amounted to $26 million and are included in the Provision for
environmental rehabilitation in the Company's consolidated balance sheet. The
obligations will expire upon completion of such rehabilitation. There are no recourse
provisions that would enable AngloGold Ashanti to recover from third parties any of the
amounts paid under the guarantee.
The Company has guaranteed all payments and other obligations of AngloGold
Ashanti Holdings plc regarding the issued $1,000,000,000 2.375 percent convertible
bonds due 2009. Refer to Note 20. The Company’s obligations regarding the
guarantee are direct, unconditional and unsubordinated.
1,000
1,000
Guarantee provided for Syndicated loan facility
181
460
AngloGold Ashanti Limited, AngloGold Offshore Investments Limited and AngloGold
American Investments Limited have guaranteed all payments and other obligations of
the wholly-owned subsidiaries AngloGold Ashanti Holdings plc and AngloGold Ashanti
USA Inc. regarding the $700 million Syndicated loan facility. Refer to Note 20.
Hedging guarantees
The Company has issued gold delivery guarantees to several counterparty banks in
which it guarantees the due performance of its subsidiaries AngloGold Ashanti USA
Inc., AngloGold South America Limited and Cerro Vanguardia S.A. under their
respective gold hedging agreements.
Ashanti Treasury Services guarantees
1,047
723
The Company together with its wholly-owned subsidiary AngloGold Ashanti Holdings
plc have provided guarantees to several counterpart banks for the hedging
commitments of its wholly-owned subsidiary Ashanti Treasury Services Limited (ATS).
The maximum potential amount of future payments is all moneys due, owing or
incurred by ATS under or pursuant to the Hedging Agreements. At December 31, 2006
the marked-to-market valuation of the ATS hedge book was negative $1,047 million.
F-55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24.
COMMITMENTS AND CONTINGENCIES (continued)
2006
$
2005
$
Hedging guarantees of due performance by the Geita Management Company Limited
(GMC)
290
172
The Company and its wholly-owned subsidiary AngloGold Ashanti Holdings plc have
issued hedging guarantees to several counterpart banks in which they have
guaranteed the due performance by the GMC of its obligations under or pursuant to
the hedging agreements entered into by GMC, and to the payment of all money owing
or incurred by GMC as and when due. This guarantee remains in force until no sum
remains to be paid under the Hedging Agreements and the Bank has irrevocably
recovered or received all sums payable to it under the Hedging Agreements. The
maximum potential amount of future payments is all moneys due, owing or incurred by
GMC under or pursuant to the Hedging Agreements. At December 31, 2006 the
marked-to-market valuation of the GMC hedge book was negative $290 million.
In addition to the above, the Company has contingent liabilities in respect of certain
claims, disputes and guarantees which are not considered to be material.
With operations in several countries on several continents, many of which are
emerging markets, AngloGold Ashanti is subject to, and pays annual taxes under the
various tax regimes where it operates. Some of these tax regimes are defined by
contractual agreements with the local government, but others are defined by the
general corporate tax laws of the country. The Company has historically filed, and
continues to file, all required tax returns and to pay the taxes reasonably determined to
be due. In some jurisdictions, tax authorities are yet to complete their assessments for
the previous years. The tax rules and regulations in many countries are complex and
subject to interpretation. From time to time the Company is subject to a review of its
historic tax filings and in connection with such reviews, disputes can arise with the
taxing authorities over the interpretation or application of c ertain rules to the
Company’s business conducted within the country involved. Management believes
based on information currently to hand, that such tax contingencies have been
adequately provided for, and as assessments are completed, the Company will make
appropriate adjustments to those estimates used in determining amounts due.
On March 23, 2006 the Company entered into a Registration Rights Agreement with
Anglo South Africa Capital (Proprietary) Limited (Anglo South Africa) under which the
Company has agreed to file U.S. registration statements for Anglo South Africa’s offer
and sale of shares it holds in the Company (each a Demand Registration) if Anglo
South Africa requests the Company to do so. The Company is required to use all
reasonable efforts to file a Demand Registration within 30 days after such a request
and to keep it effective for 90 days unless the shares offered pursuant to it are sold
earlier. Further, the Company may not offer, sell, allot or issue any shares or other
securities that are convertible into or exchangeable for, or that represent the right to
receive, shares, whether pursuant to U.S. registration or otherwise, for a 90-day period
immediately following the first closing of an of fering pursuant to a Demand Registration
or a shorter period as may be imposed by underwriters in the Demand Registration;
except: (i) in consideration for shares or assets of a company as part of a merger,
acquisition, corporate reorganization or similar transaction, (ii) as required pursuant to
the terms governing the 2.375 percent guaranteed convertible bonds due 2009, issued
by AngloGold Ashanti Holdings plc and guaranteed by the Company, and (iii) in
connection with any option, employee bonus, profit sharing, pension, retirement,
incentive, savings or similar plan, agreement or award. The Registration Rights
Agreement may be terminated at any time by written consent by each of the parties
thereto. The Registration Rights Agreement shall terminate automatically on the first
date on which Anglo South Africa is no longer an “affiliate” within the meaning of Rule
144 under the United States Securities Act of 1933, as amended.
F-56
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24.
COMMITMENTS AND CONTINGENCIES(continued)
2006
$
2005
$
Vulnerability from concentrations
The majority of AngloGold Ashanti’s 61,453 employees (2005: 63,993, 2004: 65,400)
are subject to collective bargaining agreements. These agreements are established in
negotiations between the Chamber of Mines, the body that represents the gold mining
industry in South Africa, and representative groups of labor. The agreements have a
two-year validity period. The most recent settlement negotiation was completed in
August 2005, when the parties reached an agreement covering the period from
July 1, 2005 to June 30, 2007.
There is a concentration of risk in respect of recoverable value added tax and fuel
duties from the Malian government. Recoverable value added tax due from the
Malian government to the Company amounts to $34 million at December 31, 2006
(December 31, 2005: $25 million). The last audited value added tax return was for the
period ended December 31, 2006 and as at that date $19 million was still outstanding
and $15 million is still subject to audit. The accounting processes for the unaudited
amount are in accordance with the processes advised by the Malian government in
terms of the previous audits.
Reimbursable fuel duties from the Malian government to the Company amount to
$11 million at December 31, 2006 (December 31, 2005: $13 million). Fuel duty refund
claims are required to be submitted before January 31 of the following year and are
subject to authorization by, firstly, the Department of Mining, and secondly, the
Customs and Excise authorities. As at December 31, 2006, the Customs and Excise
authorities have approved $5 million which is still outstanding, while $6 million is still
subject to authorization. The accounting processes for the unauthorized amount are in
accordance with the processes advised by the Malian government in terms of the
previous authorizations. With effect from February 2006, fuel duties are no longer
payable to the Malian government.
The Government of Mali is a shareholder in all of the Company’s entities in Mali and
protocol agreements governing repayments of certain of these amounts have been
signed. All payments as scheduled in terms of the protocol agreements have been
recovered up to December 2006. The amounts outstanding have been discounted to
their present value at a rate of 5 percent.
There is a concentration of risk in respect of reimbursable value added tax and fuel
duties from the Tanzanian government. Reimbursable value added tax due from the
Tanzanian government to the Company amounts to $14 million at December 31, 2006
(December 31, 2005: $9 million). The last audited value added tax return was for the
period ended November 30, 2006 and as at December 31, 2006 $9 million was still
outstanding and $5 million is still subject to audit. The accounting processes for the
unaudited amount are in accordance with the processes advised by the Tanzanian
government in terms of the previous audits. The amounts outstanding have been
discounted to their present value at a rate of 5 percent.
Reimbursable fuel duties from the Tanzanian government to the Company amount to
$18 million at December 31, 2006 (December 31, 2005: $6 million). Fuel duty claims
are required to be submitted after consumption of the related fuel and are subject to
authorization by the Customs and Excise authorities. As at December 31, 2006,
claims for refund of fuel duties amounting to $12 million have been lodged with the
Customs and Excise authorities, which are still outstanding, whilst claims for refund of
$6 million have not yet been submitted. The accounting processes for the
unauthorized amount are in accordance with the processes advised by the Tanzanian
government in terms of the previous authorizations. The amounts outstanding have
been discounted to their present value at a rate of 5 percent.
F-57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
25.
STOCKHOLDERS’ EQUITY
The authorized common stock of the Company was increased in 1998 to 400,000,000 shares of common stock of
25 ZAR cents each principally to meet its obligations regarding the proposed merger of AAC gold interests through the
Company. During 2006 AngloGold Ashanti approved the Employee Share Ownership Plan for the employees in the
South African operations and a Black Economic Empowerment transaction (BEE transaction) for which
4,280,000 E shares of common stock of 25 ZAR cents were authorised.
During 2006, 11,297,721 shares of common stock and 4,185,770 E shares of common stock in the Company were
issued as follows:
•
398,399 shares of common stock were issued as part of the share incentive scheme for a consideration of
$9 million.
•
4,185,770 E shares of common stock and 928,590 shares of common stock in the Company were issued as part
of the Employee Share Ownership Plan and the BEE transaction for a consideration of $93 million, which are
eliminated as shares held within the Company.
•
9,970,732 shares of common stock in the Company were issued as part of the public offering which was
completed on April 20, 2006, amounting to $498 million.
During 2005, 475,538 shares of common stock in the Company were issued as part of the share incentive scheme for
a consideration of $9 million.
During 2004, 41,326,552 shares of common stock in the Company were issued as follows:
•
192,800 shares of common stock were issued as part of the share incentive scheme for a consideration of
$3 million.
•
41,133,752 shares of common stock in the Company were issued to facilitate the share swap for the acquisition of
Ashanti Goldfields Company Limited, amounting to $1,544 million.
At a general meeting held on April 10, 2006, ordinary resolutions were passed with the requisite majority, providing
authority to the directors to allot sufficient ordinary shares of the Company to allow it to raise $500 million before
expenses and after underwriters’ fees in a public offering. The offering was completed on April 20, 2006 and resulted
in the issue of 9,970,732 new ordinary shares, along with the simultaneous sale of 19,685,170 AngloGold Ashanti
shares held by Anglo American plc (AA plc), reducing AA plc’s holding in the Company to 41.8 percent. The
combined offering was priced at $51.25 per ADS and R315.19 per ordinary share (a 1 percent discount to the
weighted average traded price of the shares on the Johannesburg Stock Exchange (JSE) over the 30 days prior to
pricing). Net proceeds to AngloGold Ashanti of the primary offering was $498 million, which will be used for project
development capital, capital expenditure and other general corporate purposes. AngloGold Ashanti used the proceeds
to reduce short-term loans and borrowings under its revolving credit facility. Refer to Note 20.
At a general meeting of shareholders held on May 5, 2006, shareholders approved, as a general authority,
authorization to the board of directors to allot and issue, in their discretion, and for such purposes as they may
determine, up to 10 percent of the authorized but unissued common stock of 25 ZAR cents each in the share capital
of the Company (subject to the South African Companies Act and the Listings Requirements of the JSE Securities
Exchange South Africa) after setting aside so many common stock of 25 ZAR cents each as may be required to be
allotted and issued by the Company pursuant to the AngloGold Share Incentive Scheme and for the purposes of the
conversion of the $1,000,000,000, 2.375 percent guaranteed Convertible Bonds issued by AngloGold Ashanti
Holdings plc. Refer to Note 30 and Note 20. As at December 31, 2006 of the total unissued common stock of
123,763,847 of 25 ZAR cents ea ch, 10,195,949 of 25 ZAR cents each was under the control of the directors until the
forthcoming annual general meeting. In terms of the Trust deed the unissued E common stock of 94,230 are under
the control of the trustees. In terms of a specific authority granted at the general meeting of stockholders held on
March 29, 1993, the directors are authorized to issue the 4,221,104 unissued B redeemable preferred stock of 1 ZAR
cent each to Eastvaal Gold Holdings Limited.
26.
FINANCIAL RISK MANAGEMENT ACTIVITIES
In the normal course of its operations, the Company is exposed to gold price, currency, interest rate, liquidity and
credit risks. In order to manage these risks, the Company enters into derivative transactions. The Company does not
acquire, hold or issue derivatives for trading purposes. The Company has developed a comprehensive risk
management process to facilitate, control and monitor these risks. The board has approved and monitors this risk
management process, inclusive of documented treasury policies, counterpart limits, controlling and reporting
structures.
F-58
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
26.
FINANCIAL RISK MANAGEMENT ACTIVITIES (continued)
The financial risk management activities objectives of the Company are as follows:
•
Safeguarding the Company core earnings stream from its major assets through the effective control and
management of gold price risk, foreign exchange risk and interest rate risk;
•
Effective and efficient usage of credit facilities in both the short and long term through the adoption of reliable
liquidity planning and procedures;
•
Ensuring that investment and hedging transactions are undertaken with creditworthy counterparts;
•
Ensuring that all contracts and agreements related to risk management activities are coordinated, consistent
throughout the Company and comply where necessary with all relevant regulatory and statutory requirements.
A number of products, including derivatives are used to satisfy these objectives. Forward sales contracts and call and
put options are used by the Company to manage its exposure to gold price and currency fluctuations.
SFAS133 requires that derivatives be accounted for as follows:
•
Commodity based (“normal purchase or normal sale”) contracts that meet the requirements of SFAS138, and are
designated as such, are recognized in product sales when they are settled by physical delivery.
•
Where the conditions in SFAS133 for hedge accounting are met, the derivative is recognized on the balance
sheet, at fair value as either a derivative asset or derivative liability. For cash flow hedges the effective portion of
changes in fair value of the hedging instruments are recognized in equity (other comprehensive income) until the
underlying transaction occurs, then the gains or losses are recognized in product sales. The ineffective portion of
changes in fair value is reported in earnings as gains or losses on derivatives in the period in which they occur. Of
the contracts accounted for as cash flow hedges, contracts with a carrying value, net of tax, of negative
$169 million at December 31, 2006 are expected to be recycled from other comprehensive income and recognized
as a reduction in product sales during 2007.
•
All other derivatives are measured at their fair value, with the changes in fair value at each reporting date being
reported in earnings as gains or losses on derivatives in the period in which they occur.
Cash flows from derivative instruments accounted for as cash flow hedges are included in net cash provided by
operating activities in the statements of consolidated cash flows for all periods presented. Contracts that contain ‘off-
market’ terms that result in the inflow of cash at inception are analogous to borrowing activities and, as such, are
treated as financing activities. All current and future cash flows associated with such instruments are classified within
the financing activities section of the consolidated cash flow statement. Contracts that contain ‘off-market’ terms that
result in the outflow of cash at inception are analogous to lending activities and, as such, are treated as investing
activities. All current and future cash flows associated with such instruments are classified within the investing
activities of the consolidated cash flow statement.
Loss on non-hedge derivatives of $208 million (2005: $142 million; 2004: $123 million) was included in the current
year income statement.
Gold price and currency risk management activities
Gold and currency hedging instruments are denominated in South African rands, US dollars, Australian dollars and
Brazilian real. The hedging instruments utilized are forward sales contracts, purchased and sold put options, and
purchased and sold call options and gold lease rate swaps. The mix of hedging instruments, the volume of production
hedged and the tenor of the hedging book is continuously reviewed in light of changes in operational forecasts, market
conditions and the Company’s hedging policy as set by the board of directors. The Company’s reserve and financial
strength has allowed it to arrange unmargined credit lines of up to ten years with counterparties.
Some of the instruments described above are designated and accounted for as cash flow hedges. The hedged
forecast transactions are expected to occur over the next 5 years, in line with the maturity dates of the hedging
instruments.
Forward sales contracts establish the price of future gold sales at a specified price. A number of these contracts are
intended by AngloGold Ashanti for delivery against production in a future period. The volume of outstanding forward
sales type contracts at the end of 2006 was 122,133kg (2005: 159,783kg).
A put option gives the put buyer the right, but not the obligation, to sell gold to the put seller at a predetermined price
on a predetermined date. A call option gives the call buyer the right, but not the obligation, to buy gold from the call
seller at a predetermined price on a predetermined date. The Company’s risk in selling call options is unlimited but
mitigated by the fact that the Company produces the commodity required by the option and would benefit by the same
quantity as the option loss by selling production in the open market. The Company’s risk in selling put options is
unlimited but partially mitigated by put options purchased.
F-59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
26.
FINANCIAL RISK MANAGEMENT ACTIVITIES (continued)
Net delta open hedge position as at December 31, 2006
The Company has an established practice of actively managing its hedged commitments under changing market
circumstances.
This is reflected in the reduction of the hedge book from its high of 17.8
(1)
million ounces at December 31, 2000 to
7.01
(1)
million ounces at June 30, 2004. At the level of 7.01 million ounces, the hedge book had been reduced to cover an
average of 22 percent of the annual production from AngloGold assets over the next five years. However, following the
completed AngloGold Ashanti Business Combination, the combined hedge books amounted to 12.7 million ounces as at the
end of September 2004, and the level of cover increased to 40 percent of five years' production of the group.
The group has previously indicated its intention to continue with the reduction in hedging levels. The argument for this
reduction has been further supported by the group’s positive view of the gold price in the current market cycle. The company
believes that the market circumstances favorable for the gold price are likely to remain in place for some time, and that the gold
price will continue to trade in its current range, or higher.
A substantial restructuring of the hedge book was commenced in lateconcluded between December 2004 and completed
January 2005 was followed by a smaller restructuring of the hedging commitments of the Geita Management
Company following the repayment of project finance loans. During 2006, in January 2005. This has
resultedaddition to delivering in and buying back
a reductionnumber of hedge contracts, the Company also restructured a number of hedge contracts maturing in the net deltanear term
into later years.
As of the combined hedge by some 2.2 million ounces or 69 tonnes of gold, down to a net
hedge delta of 10.49 million ounces at December 31, 2004. The restructured hedge now represents cover equal to 31 percent
of five years’ production spread over a ten-year period. The reduction of 2.2 million ounces in the December 2004 quarter is of
the same order of magnitude as the substantial reduction achieved in hedge restructuring by AngloGold through the second
quarter of 2002.
Notwithstanding a spot price at December 31, 2004 of $435 per ounce, $16 per ounce higher than the spot price of gold of
$419 per ounce at September 30, 2004, the marked-to-market valuation of2006, the hedge book at the endreflected a net delta tonnage position of 10.16 million ounces (316 tonnes)
or 32 percent of the year is almost
unchanged quarter-on-quarter at negative $1,161 million, compared with negative $1,139
(1)
million at September 30, 2004. By
comparison, the marked-to-market valuenext 5 years forecast production. As of the restructured book at the same spot price of $419 per ounce at which the
September 30, 2004 valuation was undertaken would result in a value of negative $922 million, reflecting a positive variance of
$217 million.
This improvement was achieved through a combination of the elimination from the hedge of lower-priced contracts and the
cash injection of $83 million (net) into the book in the final quarter of 2004, followed by a further $76 million (net) in January
2005.
(1) Includes equity accounted joint ventures
The steps undertaken in the restructuring included:
•
the effective buy-back of poorly-priced forward and call option contracts in yearsDecember 31, 2005, 2006 and 2007 in order to remove
the concentration of hedging in these years following the incorporation of the Ashanti hedge book, and to increase
exposure to the spot price of gold in this period; and
•
the sale of new forward and call options contracts in the years beyond 2007 at higher gold prices than had been the case
in the previous hedge structure, and spread more evenly than in the previous hedge structure.
210
The cash earnings will reflect the significantly greater exposure of the company to the spot price during 2005 and 2006 in
particular. Beyond these years, the significantly higher contracted prices in the restructured forward positions will provide
further benefit.
It is the intention of management to continue to actively manage the hedge book. This includes delivering into contracts,
continuing to reduce the size of the book, and continuing to seek the maximum economic benefit from the book.
As much of the impact of the restructuring as possible has been taken in the fourth quarter of 2004. What remained to be
concluded of the restructuring after the year-end was the apportionment of the net long position against existing short forward
positions, and the rollout of the balance of the longer-dated new forward and option positions that complete the restructuring.
The shortfall in the received price in relation to the average spot price for the fourth quarter of 2004 was a consequence of both
the bunching of Ashanti hedge contracts at year-end and the restructuring of the hedge book andreflected a gapnet delta
tonnage position of this magnitude, is
not expected to recur in anticipated market conditions.
For the year ahead, it is the company's intention to track the spot price more closely, and to manage the hedge book actively
with the goal of moderating any negative impact on the price received of the remaining lower-priced hedge positions in the
year.
Net delta open hedge position at January 25, 2005
At January 25, 2005, following further restructuring of the hedge book as discussed earlier in this report, AngloGold Ashanti
had outstanding the following forward-pricing commitments against future production. The total net delta tonnage of the hedge
of the company on this date was 10.4910.84 million ounces or 326 tonnes (at December 31, 2004: 10.49 million ounces or
326(337 tonnes). This is calculated using the Black-Scholes option formula with the ruling market prices, interest rates and
volatilities as at January 25, 2005.
The marked-to-market value of all hedge transactions, irrespective of accounting designation, making up the hedge
positions was a negative $993$2,903 million (negative
R5.9 billion)as at January 25, 2005 (at December 31, 2004:2006 (as at December 31, 2005: negative $1,161 million – negative R6.6 billion)$1,941 million).
These values were based on a gold price of $636.30 per ounce, exchange rates of $/R7.001and A$/$0.7886 and the
prevailing market interest rates and volatilities at December 31, 2006. The values as at December 31, 2005 were
based on a gold price of $426.35$517.00 per ounce, exchange rates of R/$5.93$/R6.305 and A$/$0.77100.7342 and the prevailing market
interest
rates and volatilities at that date.
The Company had the time.following net forward pricing commitments outstanding against future production as at
December 31, 2006.
These marked-to-market valuations are not predictive of the future value of the hedge position, or of the future impact on the
revenue, of the company. The valuation represents the cost of buying all hedge contracts at the time of valuation, at market
prices and rates available at the time.
Year 2005
2006
2007
2008
2009
2010-20142010
2011 2012-2016
Total
Number of CounterpartsDOLLAR GOLDType
Credit Rating (Fitch)
2 International Bank
AAA
4 International Bank
AA+
4 International Bank
AA
9 International Bank
AA-
3 International Bank
A+
3 International Bank
A
1 International Bank
A-
1 International Bank
BBB
1
South African Bank
AAA(zaf) (International BBB+)
1
South African Bank
AA+(zaf) (International BBB+)
1
South African Bank
AA(zaf) (International BBB)
1
South African Bank
AA-(zaf) (International BBB)
1
South African Bank
A+(zaf) (International BBB-)
6 Brazilian Bank
AA(bra)
1 Trade Finance House
Not
rated
AngloGold Ashanti does not anticipate non-performance by any counterparts.
Fair value
The estimated fair values of financial instruments are determined at discrete points in time based on relevant market
information. In certain cases, these estimates involve uncertainties and cannot be determined with precision. The
estimated fair values of AngloGold Ashanti’s financial instruments at December 31, 2006 and 2005, are as follows:
Forward contracts
Amount (kg)
8,127
19,510
32,993
30,076
26,288
53,566
170,560
$ per oz
$231
$336
$344
$365
$380
$402
$365
Put options purchased
Amount (kg)
9,135
8,592
1,455
19,182
$ per oz
$334
$345
$292
$336
Put options sold
Amount (kg)
6,221
4,354
855
1,882
9,409
22,721
$ per oz
$386
$339
$390
$400
$430
$397
Call options purchased
Amount (kg)
15,001
3,435
2,003
20,439
$ per oz
$338
$350
$361
$342
Call options sold
Amount (kg)
29,117
20,466
23,330
27,536
26,211
76,155
202,815
$ per oz
$366
$392
$381
$380
$407
$468
$416
211
Year
2005
December 31, 2006
2007
2008
2009
2010-2014
Total
RAND GOLD
Forward contracts
Amount (kg)
933
933
Rand per kg
R116,335
$116,335
Put options purchased
Amount (kg)
1,875
1,875
Rand per kg
R93,602
R93,602
Put options sold
Amount (kg)
8,025
1,400
9,425
Rand per kg
R81,457
R88,414
R82,491
Call options purchased
Amount (kg)
Rand per kg
Call options sold
Amount (kg)
12,657
4,517
311
2,986
5,972
26,443
Rand per kg
R89,054
R102,447
R108,123
R202,054 R223,756
R135,747
AUD DOLLAR GOLD
Forward contracts
Amount (kg)
2,036
3,110
8,398
3,110
3,390
3,110
23,154
A$ per oz
A$573
A$746
A$650
A$673
A$667
A$692
A$667
Put options purchased
Amount (kg)
1,244
1,244
A$ per oz
A$585
A$585
Put options sold
Amount (kg)
3,110
3,110
A$ per oz
A$553
A$553
Call options purchased
Amount (kg)
3,110
6,221
3,732
3,110
1,244
3,110
20,527
A$ per oz
A$724
A$673
A$668
A$680
A$694
A$712
A$688
Call options sold
Amount (kg)
3,110
3,110
A$ per oz
A$577
A$577
Delta
(kg) 22,017 34,937 56,920 54,089 50,034
108,534 326,531
*Total net gold:
Delta
(oz)
707,862 1,123,249 1,830,018 1,738,999 1,608,628
3,489,444 10,498,200
*
The Delta of the hedge position indicated above, is the equivalent gold position that would have the same marked-to-market sensitivity for a small change in the gold price. This is calculated using the Black-Scholes option formula with the ruling market prices, interest rates and volatilities as at January 25, 2005.December 31, 2005
Foreign exchange price risk protection agreementsCarrying
The group periodically enters into forward exchangeamount
Fair
value
Carrying
amount
Fair
value
(in
millions)
$
$
$
$
Cash and currency option contracts to hedge certain recorded transactions, firm
commitments and other anticipated transactions denominated in foreign currencies. The objective of the group’s foreign
currency hedging activities is to protect the group from the risk that the eventual cash flows resulting from transactions
denominated in US dollars will be adversely affected by changes in exchange rates.equivalents
The following table indicates the group’s currency hedge position at December 31, 2004(1)
471
Year 2005 2006 2007 2008 2009471
2010-2014 Total196
RAND DOLLAR (000)196
Restricted cash
(1)
11
11
8
8
Short-term debt
(2)
Forward33
contracts33
Amount160
($)160
130,509Long-term debt
130,509(2)
1,472
Rand1,484
per1,779
$1,803
R5.71Derivatives
R5.71(3) (5)
Put options purchased(1,524)
Amount ($)(2,903)
(935)
Rand
per
$
Put options sold
Amount ($)
Rand
per
$
Call options purchased
Amount ($)
Rand
per
$
Call options sold
Amount ($)
65,000
65,000
Rand
per
$
R5.72
R5.72
212
Year
2005 2006 2007 2008 2009
2010-2014 Total
AUD DOLLAR (000)(1,941)
Forward sales type agreements
(3)
(499)
1,328
(355)
(909)
Option contracts
Amount ($)(3)
55,237(1,056)
39,222(1,572)
(4)
(612)
(1,058)
(4)
94,459Foreign exchange contracts
(3)
$ per A$4
A$0.594
A$0.756
6
Foreign exchange option contracts
(3)
(12)
A$0.65(12)
Put options purchased(5)
Amount ($)(5)
Interest rate swaps – Gold
(3)
39
5
31
25
Sub total – Hedge derivatives
(1,524)
(2,903)
(935)
(1,941)
Interest rate swaps – Non-gold
(3)
-
-
-
-
(1)
The carrying amounts approximate fair value because of the short-term duration of these instruments.
(2)
Fair value reflects the net present value of the future cash flows, discounted at the prevailing market rate. The fair value of listed fixed rate debt and
the Convertible Bonds are shown at their market value. The remainder of debt re-prices on a short-term floating rate basis, and accordingly the
carrying amount is considered to approximate fair value.
(3)
The fair value of the above instruments is calculated based on market prices, volatilities and interest rates, as at December 31, 2006 and 2005.
(4)
Includes deliverable call options sold. A deliverable option is an option in terms of which the delivery quantity is fixed regardless of the market price
on the exercise date. In the event that the market price is lower than the strike price, gold is sold to the counterpart at the ruling spot price.
(5)
Carrying amount represents on balance sheet derivatives.
212
Sensitivity analysis
The following table shows the approximate sensitivities of the $ marked-to-market value of the hedge book at
December 31, 2006 (actual changes in the timing and amount of the following variables may differ from the assumed
changes below):
Sensitivity analysis
Change in
Rate(+)
Change in Fair
value
(1)
Change in Rate
(-)
Change in Fair
value
(1)
Currency (R/$)
1
(16.5)
1
10.68
Currency (A$/$)
0.05 1.61 0.05 (1.7)
Gold price ($/oz)
10
(100.8)
10
99.1
US Interest Rate (%)
0.1
(9.09)
0.1
9.11
ZAR Interest Rate (%)
0.1
(0.17)
0.1
0.17
Aus Interest Rate (%)
0.1
(0.09)
0.1
0.09
Gold Interest Rate (%)
0.1
14.80
0.1
(14.89)
(1)
In $ million.
Hedge levels
AngloGold Ashanti employs hedging as an element of its risk management strategy.
A summary of the hedge position as at December 31, 2004, 2005 and 2006 is as follows. The “years of production hedged”
is calculated as the hedge net delta position at year-end divided by the annual production for that year.
As at December 31,
Hedge Net Delta
kg’s
(2)
Annual Production for
Year
kg’s
(2)
Years of Production
Hedge
2004 326,208
188,223
1.73
2005 337,076
191,783
1.76
2006 316,012
175,268
1.80
(2)
Includes equity accounted joint ventures.
While AngloGold Ashanti may reduce its net delta hedge position further in line with a positive price outlook, it will continue
to actively manage the hedge positions.
213
Item 12: Description of securities other than equity securities
Not applicable.
214
PART II
Item 13: Defaults, dividend arrearages and delinquencies
None.
Item 14: Material modifications to the rights of security holders
and use of proceeds
None.
Item 15: Controls and procedures
Management certification
(a) Disclosure Controls and Procedures: As of December 31, 2006, the company, under the supervision and with the
participation of its management, including the Chief Executive Officer and Chief Financial Officer has evaluated the
effectiveness of the company’s disclosure controls and procedures (as defined in Rules 13a – 15(e) and 15d – 15(e)
under the Securities Exchange Act of 1934, as amended (the Exchange Act). Based on such evaluation, the Chief
Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2006, the company’s
disclosure controls and procedures are effective, and are reasonably designed to ensure that information required to
be disclosed by the company in reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange
Commission. These disclosure controls and procedures include without limitation, controls and procedure s designed
to ensure that information required to be disclosed by the company in reports that it files or submits under the
Exchange Act is accumulated and communicated to the company’s management, including its Chief Executive Officer
and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure.
(b) Management’s Annual Report on Internal Control over Financial Reporting: Management is responsible for establishing
and maintaining adequate internal control over financial reporting for the company, as defined in the Exchange Act
Rule 13a – 15(f) and 15d -15(f). The company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of the company’s
financial statements for external purposes in accordance with U.S. generally accepted accounting principles. Because
of inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
The company’s internal control over financial reporting includes those policies and procedures that:
·
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and
dispositions of the assets of the company;
·
Provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management and the Directors of the
company; and
·
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods is subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with policies and procedures may
deteriorate.
215
The company’s management assessed the effectiveness of the company’s internal control over financial reporting as
of December 31, 2006. In making this assessment, management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework. Based
on this assessment, and using those criteria, management concluded, and hereby reports that the company’s internal
control over financial reporting was effective as of December 31, 2006.
(c) Changes in Internal Control over Financial Reporting: There have been no changes in the company’s internal control
over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rule
13a – 15 during the year ended December 31, 2006 that have materially affected, or are reasonably likely to materially
affect, the company’s internal control over financial reporting.
(d) Attestation Report of the Registered Public Accounting Firm: Management’s assessment of the effectiveness of the
company’s internal control over financial reporting as of December 31, 2006 has been audited by Ernst & Young, an
independent registered public accounting firm, as stated in their report, which appears below.
/s/
R
M
Godsell
/s/
S
Venkatakrishnan
Robert
Michael
Godsell
Srinivasan
Venkatakrishnan
Chief Executive Officer
Chief Financial Officer
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of AngloGold Ashanti Limited
We have audited management’s assessment, included in the accompanying "Management's Annual Report on Internal
Control Over Financial Reporting", that AngloGold Ashanti Limited maintained effective internal control over financial
reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). AngloGold Ashanti Limited’s
management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s
assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our
audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the
design and operating effectiveness of internal control, and performing such other procedures as we considered necessary
in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonabl e assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
216
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, management’s assessment that AngloGold Ashanti Limited maintained effective internal control over
financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on the COSO criteria. Also, in
our opinion, AngloGold Ashanti Limited maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2006, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated balance sheets of AngloGold Ashanti Limited as of December 31, 2006 and 2005 and the related
consolidated statements of income, stockholders’ equity and cash flows for each of the three years in the period ended
December 31, 2006, and our report dated July 6, 2007 expressed an unqualified opinion thereon.
Ernst & Young Inc.
Registered Auditors
Johannesburg, Republic of South Africa
July 6, 2007
217
ITEM 16A: Audit committee financial expert
Mr Colin Brayshaw and Prof Wiseman Nkuhlu have been determined by our board to be audit committee financial experts
within the meaning of the Sarbanes-Oxley Act, in accordance with the Rules of the NYSE and the SEC. Mr Brayshaw and
Prof Nkuhlu as well as each of the other members of the Audit and Corporate Governance Committee
(being Mr F B Arisman, Mrs E le R Bradley and Mr R P Edey) are independent directors. All members of the committee
have considerable financial knowledge and experience to help oversee and guide the board and the company in respect of
the audit and corporate governance disciplines. Following Mr Brayshaw’s retirement from the board on May 4, 2007,
Prof Nkuhlu has become the chairman of the committee and is the sole financial expert.
ITEM 16B: Code of ethics
In order to comply with the company’s obligations in terms of the Sarbanes-Oxley Act and the King Code, and in the
interests of good governance, the company has adopted a code of ethics for employees, senior and executive financial
officers, and a whistle-blowing policy that encourages employees and other stakeholders to confidentially and
anonymously report acts of an unethical or illegal nature affecting the company’s interests. All reports made in terms of the
whistle-blowing policy are fielded by a third party, Tip-Offs Anonymous, who ensures all reports are treated confidentially or
anonymously depending on the preference of the caller. The information is relayed to the group internal audit manager,
and if required, to management for investigation. All reports and the progress of the investigations are conveyed to the
audit and corporate governance committee by the group internal audit manager.
In addition, the company has adopted a Disclosures Policy, the object of which is to ensure compliance with the rules of
the various exchanges on which it is listed and provide timely, accurate and reliable information fairly to all stakeholders,
including investors (and potential investors), regulators and analysts.
The code of ethics, whistle blowing and disclosure policies are available on the company’s website:
www.AngloGoldAshanti.com
under About > Corporate Governance - > Guidelines. The code of ethics and disclosure
policy are also available on request from the company secretary.
ITEM 16C: Principal accountant fees and services
Ernst & Young has served as AngloGold Ashanti’s independent public accountants for each of the financial years in the
three-year period ended December 31, 2006 for which audited financial statements appear in this annual report on
Form 20-F. The Annual General Meeting elects the auditors annually.
The following table presents the aggregate fees for professional services and other services rendered by Ernst & Young to
AngloGold Ashanti in 2006 and 2005.
(in millions)
2006
$
2005
$
Audit Fees
(1)
9.29 4.29
Audit-related Fees
(2)
0.88 1.03
Tax Fees
(3)
0.06 0.10
All Other Fees
(4)
- 0.10
Total
10.23 5.52
Rounding may result in computational differences.
(1) The Audit Fees consist of fees billed for the annual audit services engagement and other audit services, which are those services that only the external
auditor reasonably can provide, and include the Company audit; statutory audits; attest services; and assistance with and review of documents filed with
the SEC. Included in the Audit fees, for 2006, are fees paid to the external auditors in respect of SOX compliance.
(2) Audit-related Fees consist of fees billed for assurance and related services and include consultations concerning financial accounting and reporting
standards; and comfort letters; and consents.
(3) Tax Fees include fees billed for tax advice and tax compliance services.
(4) All Other Fees include fees billed for services relating to the review of an information technology system.
218
Audit Committee Pre-approval Policies and Procedures
It is the policy of AngloGold Ashanti to maintain compliance with the requirements of the various applicable legislation and
good governance practices when appointing or granting work to the Company’s external auditor. Non-audit services may
not be acquired without an employee of AngloGold Ashanti obtaining the pre-approval of the Audit and Corporate
Governance Committee as is laid out in the procedures relating to the pre-approval process.
The audit committee has delegated the approval authority to the chairman of the Audit and Corporate Governance
Committee, Prof Wiseman Nkuhlu or his designated official. The approval may take the form of a written or verbal
response, and in the case of a verbal instruction these would be ratified at the next audit committee meeting. On a
quarterly basis a summary of all approvals and word to date is tabled at the audit committee.
During 2006, no services were provided to AngloGold Ashanti by Ernst & Young in respect of Audit-related Fees (in the
form of tax fees) paid pursuant to the de minimis exception to the pre-approval requirement provided by
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
No work was performed by persons other than the principal accountant’s employees on the principal accountant’s
engagement to audit AngloGold Ashanti’s financial statements for 2006.
ITEM 16D: Exemptions from the listing standards for audit
committees
Not applicable.
ITEM 16E: Purchases of equity securities by the issuer and
affiliated purchasers
Neither the issuer nor any affiliate of the issuer, purchased any of the company’s shares during 2006.
219
PART III
Item 17: Financial statements
Not applicable.
220
Item 18: Financial statements
Report of the Independent Registered Public Accounting Firm
The board of directors and stockholders of AngloGold Ashanti Limited
We have audited the accompanying consolidated balance sheets of AngloGold Ashanti Limited (the “Company”) as of
December 31, 2006 and 2005 and the related consolidated statements of income, stockholders’ equity and cash flows for
each of the three years in the period ended December 31, 2006. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
The financial statements of Société d'Exploitation des Mines d'Or de Sadiola S.A. (“Sadiola”), a corporation in which the
Company has a 38 percent interest, have been audited by other auditors whose report has been furnished to us, and our
opinion on the consolidated financial statements, insofar as it relates to the amounts included for Sadiola, is based solely on
the report of the other auditors. In the consolidated financial statements, the Company’s investment in Sadiola is stated at
$66 million and $67 million, respectively, at December 31, 2006 and 2005, and the Company’s equity in net income is stated
at $33 million, $8 million and $12 million for each of the three years in the period ended December 31, 2006.
The financial statements of Société d'Exploitation des Mines d'Or de Yatela S.A. (“Yatela”), a corporation in which the
Company has a 40 percent interest, have been audited by other auditors whose report has been furnished to us, and our
opinion on the consolidated financial statements, insofar as it relates to the amounts included for Yatela, is based solely on
the report of the other auditors. In the consolidated financial statements, the Company’s investment in Yatela is stated at
$26 million at December 31, 2006, and the Company’s equity in net income is stated at $34 million for the year then ended.
The financial statements of Société des Mines de Morila S.A. (“Morila”), a corporation in which the Company has a
40 percent interest, have been audited by other auditors at December 31, 2005 and 2004 and for the periods then ended,
whose report has been furnished to us, and our opinion on the consolidated financial statements, insofar as it relates to the
amounts included for Morila, prior to restatement, is based solely on the report of the other auditors. In the consolidated
financial statements, the Company’s investment in Morila is stated at $89 million and $72 million at December 31, 2005 and
2004, respectively, and the Company’s equity in net income is stated at $53 million and $20 million for the years then ended.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits and the reports of the other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of AngloGold Ashanti Limited at December 31, 2006 and
2005, and the consolidated results of its operations and its cash flows for each of the three years in the period ended
December 31, 2006 in conformity with U.S generally accepted accounting principles.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the effectiveness of AngloGold Ashanti Limited’s internal control over financial reporting as of December 31, 2006, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated July 6, 2007 expressed an unqualified opinion thereon.
As discussed in note 2 to the consolidated financial statements, in 2006 the Company changed its method of accounting for
stock-based compensation in accordance with SFAS123(R) Share-Based Payment, its method of accounting for deferred
stripping costs in accordance with EITF Issue 04-6 Accounting for Stripping Costs Incurred during Production in the Mining
Industry, and its method of considering the effects of prior year misstatements in accordance with SAB 108 Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.
As discussed in note 2 to the consolidated financial statements, in 2005 the Company changed its method of accounting for
employee benefit plans in accordance with SFAS87 Employers' Accounting for Pensions and SFAS106 Employers'
Accounting for Postretirement Benefits Other Than Pensions, and in 2006 in accordance with SFAS158 Employers’
Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88,
106 and 132(R).
Ernst & Young Inc.
Registered Auditor
Johannesburg, Republic of South Africa
July 6, 2007
F-1
ANGLOGOLD ASHANTI LIMITED
Consolidated statements of income
FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 and 2004
(In millions, except share and per A share information)
Notes
2006
$
2005
$
2004
$
Sales and other income
2,715
2,485
2,151
Put options soldProduct sales
Amount ($)
2,683
2,453
2,096
Interest, dividends and other
32
32
55
Costs and expenses
2,811
2,848
2,176
Production costs
1,525
1,638
1,340
Exploration costs
58
44
44
Related party transactions
6
8
41
45
General and administrative
140
71
58
Royalties
59
39
27
Market development costs
16
13
15
Depreciation, depletion and amortization
699
593
445
Impairment of assets
5
6
141
3
Interest expense
5
77
80
67
Accretion expense
5
13
5
8
Employment severance costs
5
22
26
7
Profit on sale of assets, loans and indirect taxes
5
(36)
(3)
(14)
Mining contractor termination costs
5
-
9
-
Non-hedge derivative loss
26
208
142
123
Other operating costs and expenses
5
16
9
8
(Loss)/income from continuing operations before income tax, equity income, minority
interests and cumulative effect of accounting change
(96)
(363)
(25)
Taxation (expense)/benefit
7
(122)
121
132
Minority interest
(29)
(23)
(22)
Equity income in affiliates
99
39
23
(Loss)/income from continuing operations before cumulative effect of accounting
change
(148)
(226)
108
Discontinued operations
8
6
(44)
(11)
(Loss)/income before cumulative effect of accounting change
(142)
(270)
97
Cumulative effect of accounting change, net of taxation of $11 million in 2005
2/5
-
(22)
-
Net (loss)/income – applicable to common stakeholders
(142)
(292)
97
(Loss)/earnings per share : (cents)
From continuing operations
9
Ordinary shares
(54)
(85)
43
E Ordinary shares
(91)
-
-
Ordinary shares - diluted
(54)
(85)
42
E Ordinary shares - diluted
(91)
-
-
Discontinued operations
9
Ordinary shares
2
(17)
(4)
E Ordinary shares
-
-
-
Ordinary shares - diluted
2
(17)
(4)
E Ordinary shares - diluted
-
-
-
Before cumulative effect of accounting change
9
Ordinary shares
(52)
(102)
39
E Ordinary shares
(91)
-
-
Ordinary shares - diluted
(52)
(102)
38
E Ordinary shares - diluted
(91)
-
-
Cumulative effect of accounting change
9
Ordinary shares
-
(8)
-
E Ordinary shares
-
-
-
Ordinary shares - diluted
-
(8)
-
E Ordinary shares - diluted
-
-
-
Net (loss)/income
9
Ordinary shares
(52)
(110)
39
E Ordinary shares
(91)
-
-
Ordinary shares - diluted
(52)
(110)
38
E Ordinary shares - diluted
(91)
-
-
Pro forma amounts assuming change in accounting for employee benefits plans is
applied retroactively:
Income before cumulative effect of accounting change
2
79
Per basic share (cents)
2
32
Net income
2
31
Per basic share (cents)
2
32
Per diluted share (cents)
2
31
Weighted average number of shares used in computation
9
Ordinary shares
272,613,263
264,635,634
251,352,552
E Ordinary shares - basic and diluted
194,954
-
-
Ordinary shares - diluted
272,637,483
264,635,634
252,048,301
Dividend paid per ordinary share (cents)
39
56
76
Dividend paid per E ordinary share (cents)
-
-
-
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-2
ANGLOGOLD ASHANTI LIMITED
Consolidated balance sheets
AT DECEMBER 31, 2006 and 2005
(In millions, except share information)
Notes
2006
$
2005
$
ASSETS
Current Assets
1,876
1,401
Cash and cash equivalents
471
196
Restricted cash
10
11
8
Receivables
160
209
Trade
40
97
Recoverable taxes, rebates, levies and duties
59
45
Related parties
1
-
Other
60
67
Inventories
11
354
260
Materials on the leach pad
11
46
37
Derivatives
26
649
675
Deferred taxation assets
7
167
-
Assets held for sale
16
18
16
Property, plant and equipment, net
12
4,977
4,922
Deferred stripping
12
-
105
Acquired properties, net
13
1,289
1,412
Goodwill
14
542
524
Other intangibles, net
14
24
26
Derivatives
26
6
38
Other long-term inventory
11
68
32
Materials on the leach pad
11
149
116
Other long-term assets
15
543
496
Deferred taxation assets
7
39
41
Total assets
9,513
9,113
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
2,467
1,874
Trade accounts payable
278
203
Payroll and related benefits
94
78
Other current liabilities
17
126
199
Derivatives
26
1,782
1,121
Short-term debt
18
33
160
Tax payable
148
107
Liabilities held for sale
16
6
6
Other non-current liabilities
19
24
14
Long-term debt
20
1,472
1,779
Derivatives
26
397
527
Deferred taxation liabilities
7
1,275
1,152
Provision for environmental rehabilitation
5 / 21
310
325
Other accrued liabilities
22
27
19
Provision for pension and other post-retirement medical benefits
23
172
200
Minority interest
61
60
Commitments and contingencies
24
-
-
Stockholders’ equity
25
3,308
3,163
Common stock
400,000,000 (2005 – 400,000,000) authorized common stock of 25 ZAR cents each
Stock issued 2006 – 276,236,153 (2005 – 264,938,432)
10
10
Additional paid in capital
5,539
4,972
Accumulated deficit
(1,476)
(1,143)
Accumulated other comprehensive income
(765)
(676)
Total liabilities and stockholders’ equity
9,513
9,113
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-3
ANGLOGOLD ASHANTI LIMITED
Consolidated statements of cash flows
FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 and 2004
(In millions, except share information)
Notes
2006
$
2005
$
2004
$
Net cash provided by operating activities
770
347
513
$ per A $Net (loss)/income – applicable to common stockholders
(142)
(292)
97
Reconciled to net cash provided by operations:
Call options purchasedCumulative effect of accounting change
Amount ($)
-
22
-
Loss/(profit) on sale of assets, loans and indirect taxes
6
(3)
(14)
Depreciation, depletion and amortization
699
593
445
Deferred stripping costs
-
(28)
(28)
Impairment of assets
6
141
3
Deferred taxation
(34)
(191)
(200)
Movement in non-hedge derivatives
339
54
201
Equity income in affiliates
(99)
(39)
(23)
Dividends received from affiliates
85
51
24
Other non cash items
5
31
32
Net (decrease)/increase in provision for environmental
rehabilitation and pension and other post-retirement medical
benefits
(62)
52
(15)
$ per A $
Effect of changes in operating working capital items:
Call options soldReceivables
Amount ($)
20,00011
20,000
8
(24)
Inventories
(165)
(58)
(39)
Accounts payable and other current liabilities
122
37
56
Net cash provided by continuing operations
771
378
515
Net cash used in discontinued operations
(1)
(31)
(2)
40,000
$ per A$
A$0.76
A$0.74
A$0.75Net cash used in investing activities
(611)
(624)
(995)
Cash acquired in acquisitions
3
-
-
56
Increase in non-current investments
(20)
(27)
(30)
Additions to property, plant and equipment
(811)
(710)
(571)
Proceeds on sale of mining assets
57
8
10
Proceeds on sale of discontinued assets
9
4
-
Proceeds on sale of available for sale investments
11
1
-
Cash outflows from derivatives purchased
-
(69)
(359)
Cash inflows from derivatives sold
-
-
49
Cash inflows from derivatives with financing
141
153
-
Cash consideration for acquisitions or disposals
3
-
-
(227)
Loans receivable advanced
(1)
(7)
(2)
Loans receivable repaid
6
6
85
Change in restricted cash
(3)
17
(6)
Net cash generated in financing activities
119
200
276
Short-term debt repaid
(134)
(284)
(609)
Short-term debt raised
16
137
88
Issuance of stock
512
9
3
Share issue expenses
(5)
-
-
Long-term debt repaid
(418)
(19)
(200)
Long-term debt raised
142
471
989
Cash outflows from derivatives relating to acquisitions
-
-
(24)
Cash inflows from derivatives with financing
138
55
227
Dividends paid
(132)
(169)
(198)
Net increase/(decrease) in cash and cash equivalents
278
(77)
(206)
Effect of exchange rate changes on cash
(3)
(3)
13
Cash and cash equivalents – January 1,
196
276
469
Cash and cash equivalents – December 31,
471
196
276
The accompanying notes are an integral part of these Consolidated Financial Statements.
BRAZILIAN REAL
(000)ANGLOGOLD ASHANTI LIMITED
Consolidated statements of stockholders’ equity
FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 and 2004
(In millions, except share information)
Common stock
Common
stock
$
Additional paid
in capital
$
Other
comprehensive
income*
$
Accumulated
deficit
$
Total
$
Balance – January 1, 2004
223,136,342
9
3,415
(740)
(616)
2,068
Net income
97
97
Translation gain
178
178
Net loss on cash flow hedges removed from other comprehensive income and reported in income, net of tax
118
118
Net gain on cash flow hedges, net of tax
19
19
Net gain on available for sale financial assets arising during the period, net of tax
2
2
Comprehensive income
414
Stock issue as part of acquisition
41,133,752
1
1,543
1,544
Stock issues as part of Share Incentive Scheme
192,800
-
3
3
Reversal of variable compensation awards compensation expense
(4)
(4)
Dividends
(179)
(179)
Balance – December 31, 2004
264,462,894
10
4,961
(423)
(702)
3,846
Net loss
(292)
(292)
Translation loss
(132)
(132)
Net loss on cash flow hedges removed from other comprehensive income and reported in income, net of tax
11
11
Net loss on cash flow hedges, net of tax
(134)
(134)
Net gain on available for sale financial assets arising during the period, net of tax
2
2
Comprehensive loss
(545)
Stock issues as part of Share Incentive Scheme
475,538
-
9
9
Unearned stock awards compensation expense
2
2
Dividends
(149)
(149)
Balance – December 31, 2005
264,938,432
10
4,972
(676)
(1,143)
3,163
F-4
Forward
contracts
Amount
($)
BRL
per
$
Put options purchased
Amount ($)
600Cumulative deferred stripping adjustment. Refer to Note 2.
600(73)
(73)
BRL
per
$
BRL3.38
BRL3.38
Put options sold
Amount ($)
600Cumulative cut-off adjustment. Refer to Note 2.
600(11)
(11)
Net loss
BRL
per
$
BRL3.21
BRL3.21(142)
Call options purchased(142)
Amount ($)Translation loss
(108)
(108)
Net loss on cash flow hedges removed from other comprehensive income and reported in income, net of tax
97
97
Net loss on cash flow hedges, net of tax
(86)
(86)
Net gain on available for sale financial assets arising during the period, net of tax
8
8
BRL
per
$
Call options sold
Amount ($)
600
Comprehensive loss
600
(315)
Stock issues as part of equity offering
BRL9,970,732
per-
$498
BRL3.55
BRL3.55
498
Stock issues as part of Share Incentive Scheme
398,399
-
9
9
Stock based compensation expense
60
60
Dividends
(107)
(107)
Balance – December 31, 2006
275,307,563
10
5,539
(765)
(1,476)
3,308
* The cumulative translation loss included in other comprehensive income amounted to $581 million (2005: $473 million). The translation loss has no tax effect. The cumulative charge, net of deferred taxation of $96 million
(2005: $71 million), included in other comprehensive income in respect of cash flow hedges amounted to $260 million (2005: $271 million). The cumulative gain, net of deferred taxation of $1 million (2005: $nil million),
included in other comprehensive income in respect of available for sale financial assets amounted to $12 million (2005: $4 million). The cumulative gain included in other comprehensive income in respect of the hedge of a
net investment in foreign entities amounted to $64 million (2005: $64 million). This gain is offset by $64 million (2005: $64 million) arising from translation of a net investment in foreign entities.
As at December 31, 2006, $286 million of retained earnings arising from the Company’s equity accounted joint ventures and certain subsidiaries may not be remitted without third-party shareholder consent.
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-5
ANGLOGOLD ASHANTI LIMITED
Notes to the consolidated financial statements
FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 and 2004
(In millions, except share information)
1.
NATURE OF OPERATIONS
AngloGold Ashanti Limited (the "Company"), as it conducts business today, was formed on April 26, 2004 following
the Business Combination of AngloGold Limited (AngloGold) with Ashanti Goldfields Company Limited (Ashanti).
AngloGold, formerly Vaal Reefs Exploration and Mining Company Limited, was incorporated in South Africa on
May 29, 1944 and Ashanti was incorporated in Ghana on August 19, 1974. The Company conducts gold-mining
operations in Argentina, Australia, Brazil, Ghana, Guinea, Mali, Namibia, South Africa, Tanzania and the United
States of America (USA). The Company also produces uranium oxide and sulphuric acid.
2.
ACCOUNTING CHANGES
Stock Based Compensation
At December 31, 2006, the Company has five stock-based employee compensation plans consisting of time-based
awards, performance related awards and equity settled compensation plans, which are described more fully in
Note 30 the “AngloGold Limited share incentive scheme and plans”. Prior to January 1, 2006, the Company
accounted for share-based payments under the recognition and measurement provisions of APB Opinion No. 25,
“Accounting for Stock Issued to Employees, and related Interpretations”, as permitted by SFAS123, “Accounting for
Stock-Based Compensation”. In accordance with APB No. 25, no compensation cost was required to be recognized
for options granted that had an exercise price equal to the market value of the underlying common stock on the date
of grant. During the years ended December 31, 2005 and 2004 there was no compensation expense recognized
related to time-based awards as the exercise price of all awards was greater than or equal to the fair market value of
the underlying stock on the date of grants. During the year ended December 31, 2005 the Company recognized a
compensation expense of $2 million related to Bonus Share Plan (BSP) and Long-Term Incentive Plan (LTIP) treated
as equity settled compensation plans under APB No. 25. As of December 31, 2005 no compensation expense was
recognized, related to the performance awards under APB No. 25. The Company recognized compensation credit of
$4 million during 2004, related to the performance awards under APB No. 25, due to a decline in fair market value to
below the exercise price of such awards.
On January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123(R), “Share-Based
Payment”, using the modified prospective transition method. Under this method, compensation cost recognized in
the year ended December 31, 2006 includes: a) compensation cost for all share-based payments granted prior to,
but not yet vested as of January 1, 2006, based on the grant-date fair value estimated in accordance with the original
provisions of SFAS123, and b) compensation cost for all share-based payments granted subsequent to
January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS123(R). The
results for prior periods have not been restated.
As a result of adopting SFAS123(R) on January 1, 2006, the Company’s loss before income taxes and net loss for
the year ended December 31, 2006, are $31 million higher, than if it had continued to account for share-based
compensation under APB No. 25. Basic and diluted loss per share for the year ended December 31, 2006 would
have been $0.40 if the Company had not adopted SFAS123(R), compared to reported basic and diluted loss per
share of $0.51.
F-6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
2.
ACCOUNTING CHANGES (continued)
SFAS123(R) requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a
financing cash flow, rather than as an operating cash flow. This requirement will reduce net operating cash flows
and increase net financing cash flows in periods after adoption. This requirement did not impact the Company’s
cash flow disclosure for the year ended December 31, 2006 as the Company received the benefit of a tax deduction
of less than $1 million for compensation cost settled in equity. No income tax benefit was recognized in 2005 and
2004.
The following table illustrates the effect on net income and earnings per share if the Company had applied the fair
value recognition provisions of SFAS123 to stock-based employee compensation in 2005 and 2004. For purposes of
this pro forma disclosure, the value of the options is estimated using a Black-Scholes option pri cing model and
amortized to expense over the options’ vesting periods.
Year Ended December 31,
(in millions, except per share data)
2005
$
2004
$
Net (loss)/income, as reported
(292)
97
Add: Unearned stock awards compensation expense, calculated under APB No. 25
2
-
(Deduct)/add: Variable compensation awards (credit)/expense, calculated under APB No. 25
-
(4)
Deduct: Total stock-based employee compensation expense determined under fair value
based method for all awards, net of
related tax effects
(2)
(3)
Pro forma net (loss)/income
(292)
90
(Loss)/earnings per share (cents)
Basic – as reported
(110)
39
Basic – pro forma
(110)
36
Diluted – as reported
(1)
(110)
38
Diluted – pro forma
(1)
(110)
36
(1)
The calculation of diluted (loss)/earnings per common share for 2005 and 2004 did not assume the effect of 15,384,615 shares
issuable upon the exercise of Convertible Bonds as their effects are anti-dilutive for these periods. The calculation of diluted
(loss)/earnings per common share for 2005 did not assume the effect of 601,315 shares issuable upon the exercise of stock
incentive options as their effects are anti-dilutive for this period.
Deferred Stripping Costs
On January 1, 2006, the Company adopted Emerging Issues Task Force (“EITF”) Issue 04-6, “Accounting for
Stripping Costs in the Mining Industry”. Issue No. 04-6 addresses the accounting for stripping costs incurred during
the production phase of a mine and that post production stripping costs should be considered costs of the extracted
minerals under a full absorption costing system and recognized as a component of inventory to be recognized in cost
of sales in the same period as the revenue from the sale of the inventory. Additionally, capitalization of such costs
would be appropriate only to the extent inventory exists at the end of a reporting period.
The guidance requires application through recognition of a cumulative effect adjustment to opening retained earnings
in the period of adoption, with no charge to current earnings for prior periods. The results for prior periods have not
been restated. Upon adoption, the cumulative effect of the accounting change reduced opening retained earnings by
$73 million (net of Taxation), increased the value of inventory by $5 million, eliminated the capitalized deferred
stripping balance of $105 million, decreased Deferred taxation by $29 million, reduced Other long-term assets by
$3 million and decreased Minority interest by $1 million. Adoption of the new guidance had no impact on the
Company’s cash position or net cash from operations.
Prior to January 1, 2006, stripping costs incurred in open-pit operations during the production phase to remove
additional waste were charged to operating costs on the basis of the average life of mine stripping ratio and the
average life of mine costs per tonne and resulted in capitalization of such stripping costs (deferred stripping) as part
of mining assets.
F-7
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
2.
ACCOUNTING CHANGES (continued)
As at December 31,
(in millions)
2006
$
2005
$
Movements in the deferred stripping costs balance were as follows:
Opening balance
105
69
Cumulative effect adjustment
(105)
-
Amount deferred
-
28
Translation
-
8
Closing balance
-
105
Cut-off adjustments
Certain subsidiaries within the Company have in prior years consistently determined the year end close process in
respect of certain operating costs at dates immediately preceding the Christmas vacation period. Historically,
management concluded that any resulting adjustment was immaterial to operating results as all entities had twelve
reporting periods and used the same cut-off dates from year to year.
The above errors arose as a combination of the cut-off process being linked to the mine production cycle as well as
utilizing a date not aligned to December 31 each year, although the same dates were utilized from year to year.
On September 13, 2006, the SEC staff published Staff Accounting Bulletin (SAB) No. 108, “Considering the Effects
of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SA B 108”).
SAB 108 (SAB Topic 1.N) addresses quantifying the financial statement effects of misstatements, specifically, how
the effects of prior year uncorrected errors must be considered in quantifying misstatements in the current year
financial statements.
As part of the 2006 year end financial statement close process the Company quantified the balance sheet impact
and determined that it would only have a material effect in the reporting of “Payroll and related benefits”, which is
separately identified on the face of the balance sheet for all years presented. The other accounts that were affected
are Tangible Assets – Mine development costs; Inventories – Gold in process; Deferred taxation; Cash and cash
equivalents; Trade accounts payable and Payroll and related benefits.
The Company previously considered the above errors to be immaterial under the rollover method and evaluated the
misstatement against the current year fina ncial statements under both the rollover and iron curtain methods.
In accordance with the transition provisions provided in SAB 108 the cumulative effect of applying SAB 108 as an
adjustment to opening retained earnings is summarized below:
(in millions)
$
Assets
Tangible Assets – Mine development costs
3 (increase)
Inventories – Gold in process
1 (increase)
Deferred taxation
5 (increase)
Trade receivables
5 (decrease)
Liabilities
Trade accounts payable
3 (increase)
Payroll and related benefits
10 (increase)
Other creditors
2 (increase)
Retained earnings
11 (decrease)
F-8
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
2.
ACCOUNTING CHANGES (continued)
Employee Benefit Plans
On September 29, 2006 the FASB issued SFAS158, “Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R)”. SFAS158 requires an entity
to:
•
recognize in its statement of financial position an asset for a defined benefit post-retirement plan's overfunded
status or a liability for a plan's underfunded status;
•
measure a defined benefit post-retirement plan's assets and obligations that determine its funded status as of
the same day of the employer's fiscal year-end statement of financial position;
•
recognize as a component of accumulated other comprehensive income, net of tax, amounts accumulated at
the date of adoption due to delayed recognition of actuarial gains and losses, prior service costs and credits,
and transition assets and obligations; and
•
expand the disclosure requirements of SFAS132(R) to include disclosure of additional information in the notes
to financial statements about certain effects on net periodic benefit cost in the next fiscal year that arise from
delayed recognition of actuarial gains or losses, prior service costs or credits and unrecognized transition
assets and obligations.
The adoption of the recognition and disclosure requirements of SFAS158 which are effective for fiscal years ending
after December 15, 2006, did not have a material impact on the Company’s earnings and financial position as the
Company changed its accounting policy during the second quarter of 2005, retroactive to January 1, 2005, with
respect to accounting for employee benefit plans to recognize the effects of actuarial gains and losses in income,
rather than amortizing over the expected average remaining service period of employees participating in the plan.
This change was made as the Company believes that elimination of the permitted pension and post-retirement
benefit corridor, as allowed by SFAS87 and SFAS106 will result in more accurate financial information.
The cumulative effect of this change in accounting treatment with respect to actuarial gains and losses recorded in
2005 decreased net income and stockholders’ equity by $22 million (net of taxation of $11 million).
The Company’s employee benefit plans are described more fully in Note 30 the “Employee benefit plans”.
The results for 2004 are presented on a historical basis and do not reflect the change in accounting treatment with
respect to actuarial gains and losses. Had the Company changed its accounting policy, retroactive to January 1, the
historical income before cumulative effect of accounting change, net income and related per share amounts would
have been changed to the adjusted amounts indicated below:
Year ended December 31, 2004
(in US Dollars, millions, except for share data)
Income before
cumulative effect of
accounting change
Per
basic
share
(1)
(cents)
Per
diluted
share
(1)
(cents)
Net
income
Per
basic
share
(1)
(cents)
Per
diluted
share
(1)
(cents)
As reported – historical basis
97
39
38
97
39
38
Impact on earnings net of taxation
(18)
(7)
(7)
(18)
(7)
(7)
Adjusted
79
32
31
79
32
31
(1)
Basic and diluted earnings per common share. The calculation of diluted earnings per common share for 2004 did not
assume the effect of 15,384,615 shares, issuable upon the exercise of Convertible Bonds as their effects are anti-dilutive for
this period.
F-9
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
3.
ACQUISITIONS AND DISPOSALS OF BUSINESSES AND ASSETS
2006 acquisitions
The Company made the following acquisitions during the year:
•
Agreement signed with China explorer Dynasty Gold Corporation
On February 27, 2006, AngloGold Ashanti announced that it had signed an agreement with Dynasty Gold
Corporation, a Vancouver-based company, with exploration activities in China, to acquire an effective 8.7 percent
stake in that company through a purchase of 5.75 million Dynasty units at a price of C$0.40 each. Each unit consists
of one common share and one-half common share purchase warrant exercisable at a price of C$0.60 per unit for two
years.
•
Agreement with International Tower Hill Mines Limited
On June 30, 2006 AngloGold Ashanti (U.S.A.) Exploration Inc. (AngloGold Ashanti), International Tower Hill Mines Ltd
(ITH) and Talon Gold Alaska, Inc. (Talon), a wholly-owned subsidiary of ITH, entered into an Asset Purchase and Sale
and Indemnity Agreement whereby AngloGold Ashanti sold to Talon a 100 percent interest in six Alaska mineral
exploration properties and associated databases in return for 5,997,295 common shares of ITH stock, representing an
approximate 19.99 percent interest in ITH (June 15, 2007: 15.68 percent). The sales transaction closed on
August 4, 2006. AngloGold Ashanti also granted to ITH the exclusive option to acquire a 60 percent interest in each
of its LMS and Terra projects by incurring $3 million of exploration expenditure on each project (total of $6 million)
within four years of the grant date of the opti ons. As part of the two option agreements, AngloGold Ashanti will have
the option to increase or dilute its stake in these projects, subject to certain conditions.
•
Strategic alliance in Russia with Polymetal and agreement to acquire assets from Trans-Siberian Gold plc
On September 21, 2006, AngloGold Ashanti announced that it had entered into a 50:50 strategic alliance with Russian
gold and silver producer, OAO Inter-Regional Research and Production Association Polymetal (Polymetal) in terms of
which, Polymetal and AngloGold Ashanti would cooperate in exploration, acquisition and development of gold mining
opportunities within the Russian Federation. At the same time, AngloGold Ashanti announced that it had submitted an
offer to the board of Trans-Siberian Gold plc (TSG) to acquire all of TSG’s interest in its Krasnoyarsk based
subsidiaries, OOO GRK Amikan and OOO Artel Staratelei Angarskaya Proizvodstvennaya Kompania for a total
consideration of $40 million. TSG announced on February 12, 2007, that the agreements for the sale of its
Krasnoya rsk based subsidiaries to AngloGold Ashanti have been signed. The South African Reserve Bank has
approved the transaction. These companies to be acquired from TSG by AngloGold Ashanti, together with two
greenfields exploration companies held by Polymetal, hold the initial operating assets of the strategic alliance. The
Company’s aggregate shareholding in TSG at December 31, 2006 was 12,263,170 ordinary shares (29.9 percent
interest held).
•
Purchase of Central African Gold Plc (CAG) shares
Arising from the sale of Bibiani assets, AngloGold Ashanti decided to apply $3 million of the partial proceeds to an
investment of 15,825,902 Central African Gold plc (CAG) shares. Subsequent to this decision, local regulators
required that the shares in CAG be sold within 90 days of December 28, 2006. The Company has classified the
shares as held for sale. Refer to Note 16 – Assets and liabilities held for sale. On February 14, 2007, the Company
disposed of 7,000,000 CAG shares yielding total proceeds of £768,845 ($1.5 million) and during April 2007, disposed
of the remaining 8,825,902 CAG shares yielding total proceeds of £894,833 ($1.8 million).
F-10
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
3.
ACQUISITIONS AND DISPOSALS OF BUSINESSES AND ASSETS (continued)
2006 disposals
The Company’s disposals during the year included:
•
Sale of Bibiani
On August 23, 2006, AngloGold Ashanti announced that it had entered into a conditional agreement with Central
African Gold plc (CAG) to sell the assets, related to Bibiani and Bibiani North prospecting permit, including all of
Bibiani’s employees, fixed mining and non-mining assets, inventory, trade receivables and intellectual property as well
as the Bibiani mining lease and the Bibiani North prospecting license, and procure the cessation and delegation of all
contracts related to Bibiani to CAG for a total consideration of $40 million. The conditions precedent to the sale of
Bibiani were satisfied effective December 28, 2006. The Bibiani North prospecting license was assigned to CAG on
May 17, 2007 by the Ghanaian Land Commission and Registry.
2005 acquisitions
On May 31, 2005 the Company acquired an additional 12.4 percent interest in Trans-Siberian Gold plc as further
discussed in this note under 2004 acquisitions “AngloGold Ashanti acquires stake in Trans-Siberian Gold plc”.
2005 disposals
The Company’s disposals during the year included:
•
Conditional sale of Weltevreden mine in exchange for Aflease shares
On July 19, 2005, Aflease Gold and Uranium Resources Limited (Aflease) announced that it had purchased from
AngloGold Ashanti, its Weltevreden mine in an all script deal valued on May 6, 2005 at R75 million ($11 million). On
December 19, 2005, Aflease was acquired by sxr Uranium One Incorporated (formerly Southern Cross Incorporated)
(sxr Uranium One). As certain conditions precedent to the agreement with regards to mining rights conversion were
not fulfilled for that property as of December 31, 2006, the Company has separately classified assets and liabilities for
Weltevreden presented in the consolidated balance sheet, as held for sale. Refer to Note 16 – Assets and liabilities
held for sale.
2004 acquisitions
The Company made the following acquisitions during the year:
•
Business Combination between AngloGold and Ashanti
On August 4, 2003, AngloGold and Ashanti announced that they had agreed the terms of a recommended Business
Combination at an exchange ratio of 0.26 ordinary shares for every Ashanti share. On the same date, AngloGold
entered into the Lonmin Support Deed, pursuant to which Lonmin, which held 27.6 percent of Ashanti's issued share
capital, agreed, among other things, to vote its Ashanti shares in favor of the Business Combination.
After further discussions with AngloGold and careful, detailed consideration of a competitive proposal, and following
the increase by AngloGold in the offer consideration from 0.26 to 0.29 ordinary shares, the Ashanti board announced
on October 15, 2003 that it was recommending the improved final offer from AngloGold.
On October 28, 2003, the government of Ghana, which held 16.8 percent of Ashanti's issued share capital,
announced its support for the AngloGold offer, as well as the principal terms of a Stability Agreement which the
government of Ghana intended to enter into with AngloGold.
AngloGold and the government of Ghana agreed the terms of a Stability Agreement, approved by the parliament of
Ghana, to govern certain aspects of the fiscal and regulatory framework under which AngloGold Ashanti will operate
in Ghana following the implementation of the Business Combination.
F-11
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
3.
ACQUISITIONS AND DISPOSALS OF BUSINESSES AND ASSETS (continued)
Under the Stability Agreement, the government of Ghana retained its special rights (“Golden Share”) under the
provisions of the mining law pertaining to the control of a mining Company, in respect of the assets and operations in
Ghana.
In terms of the Golden Share, the following requires, and will not be effective without, the written consent of the
government of Ghana as the holder of the Golden Share:
•
any disposal of its Ghanaian assets and operations by Ashanti (other than any disposal in the ordinary course of
business of Ashanti) which, alone or when aggregated with any disposal or disposals forming part of, or
connected with, the same or a connected transaction, constitutes a disposal of the whole or a material part of the
assets of the Ashanti Group taken as a whole. For this purpose, a part of the Ashanti Group’s assets will be
considered material if either (a) its book value (calculated by reference to the then latest audited consolidated
accounts), or the total consideration to be received on its disposal, is not less than 25 percent of the book value
of the net assets of the Ashanti Group or (b) the average profits attributable to it represent at least 25 percent of
the average profits of the Ashanti Group for the last three years for which audited accounts are available (before
deducting all charges, except taxation and extraordinary items).
The Golden Share does not carry any right to vote at any general meeting of Ashanti.
The government of Ghana has also agreed that Ashanti's Ghanaian operations will not be adversely affected by any
new enactments or orders or by changes to the level of payments of any customs or other duties relating to mining
operations, taxes, fees and other fiscal imports or laws relating to exchange control, transfer of capital and dividend
remittance for a period of 15 years after the completion of the Business Combination. In consideration of these
agreements and undertakings, AngloGold agreed to issue to the government of Ghana 2,658,000 new AngloGold
ordinary shares and to pay to the government of Ghana $5 million in cash, promptly after the implementation of the
Business Combination. AngloGold also agreed to pay to the government of Ghana, on the date of the completion of
the Business Combination, an additional $5 million in cash towards the transaction costs incurred by the government
of Ghana in its role as regulator of Ashanti.
The Business Combination was effected by means of a scheme of arrangement under Ghanaian law, which required
the approval of Ashanti shareholders and the confirmation by the High Court of Ghana. In terms of the Business
Combination, Ashanti shareholders received 0.29 ordinary shares or 0.29 ADSs of AngloGold for every Ashanti share
or Ashanti GDS (Global Depositary Security) held. Each ADS represents one AngloGold ordinary share. The Business
Combination whereby AngloGold acquired 100 percent of Ashanti, became effective on April 26, 2004 after the Court
Order from the High Court of Ghana was lodged with the Ghana Registrar of Companies. From the effective date,
Ashanti became a private Company, and AngloGold changed its name to AngloGold Ashanti Limited, following
approval by its shareholders at a general meeting held on April 8, 2004.
On April 26, 2004, AngloGold issued 38,400,021 ordinary shares to former Ashanti shareholders and
2,658,000 ordinary shares under the Stability Agreement to the government of Ghana. On June 29, 2004, AngloGold
issued a total of 75,731 ordinary shares to former Ashanti warrant holders pursuant to the Business Combination.
The market value of the shares issued for Ashanti was approximately $1,544 million, net of share issue expenses of
$3 million, based on the average quoted value of the shares of $37.62 two days before and after October 15, 2003,
the date the terms of the transaction were announced. The market value of the issued shares, together with the cash
consideration paid to the government of Ghana as part of the Stability Agreement, cash consideration paid for
outstanding options over Ashanti ordinary shares and transaction costs and funding of $227 million, gave rise to a
total purchase price of approximately $1,771 million.
Ashanti Goldfields Company Limited was delisted from the London, New York and Ghana stock exchanges in late
April 2004. During 2005, AngloGold Ashanti finalized the purchase price allocation based on independent appraisals
and valuations. The transaction was accounted for as a purchase business combination under US GAAP whereby
identifiable assets acquired and liabilities assumed were recorded at their fair market values as of the date of
acquisition. The excess of the purchase price over such fair value was recorded as goodwill and as such, the
acquisition resulted in goodwill of $182 million being recorded, relating mainly to the extended life of AngloGold
Ashanti by the Obuasi project in Ghana and enlarged negotiation base and presence in Africa by Ashanti operations.
F-12
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
3.
ACQUISITIONS AND DISPOSALS OF BUSINESSES AND ASSETS (continued)
In accordance with the provisions of SFAS142, goodwill was assigned to specific reporting units. The Company’s
reporting units are generally consistent with the operating mines underlying the segments identified in Note 29 –
Segment and Geographical Information. An individual operating mine is not a typical "going-concern" business
because of the finite life of its reserves. The allocation of goodwill to an individual operating mine likely will result in an
eventual goodwill impairment due to the wasting nature of the primary asset of the reporting unit. The Company
evaluates its held-for-use long lived assets for impairment when events or changes in circumstances indicate that the
related carrying amount likely will not be recoverable over the long term and in accordance with the provisions of
SFAS142 performs its annual impairment review of assigned goodwill during the fourth quarter of each year. Goodwill
related to the acquisition is non-deductible for tax purposes.
During the year ended December 31, 2005, the Company recorded an impairment of $4 million, relating to goodwill
formerly assigned to operations situated in Ghana (at Bibiani) as part of the Business Combination, resulting from a
reduction in the life of mine following re-assessments at this operation. No impairments relating to goodwill were
recorded during the year ended December 31, 2006. Refer to Note 5 – Impairment of assets and to Note 14 –
Goodwill and other intangibles.
The combination of AngloGold and Ashanti was designed to combine the two companies into a long-life, low-cost,
high-margin investment opportunity, bringing together the best that both had to offer, by way of ore bodies, capital and
human resources.
The operations and financial condition of the companies and assets acquired are included in the financial statements
from April 26, 2004, the effective date of the Business Combination.
The carrying amount of goodwill recorded in the AngloGold Ashanti Business Combination by reporting segment, as
of December 31, 2006 and 2005 is summarized as follows:
Ghana
$
Guinea
$
Tanzania
$
Total
$
Balance at January 1, 2004
122
10
50
182
Impairment losses
(4)
-
-
(4)
Balance at December 31, 2005
118
10
50
178
Impairment losses
-
-
-
-
Balance at December 31, 2006
118
10
50
178
The fair value assigned to major assets and liabilities acquired in Ashanti are disclosed in Note 3 – Fair value of
acquisitions and (disposals) of businesses. The finalization of the purchase price allocation during 2005 in respect of
fixed assets resulted in a reallocation within the respective mines, between Mine development and Mine infrastructure
of $214 million included in Property, plant and equipment. The allocation of goodwill assigned to reporting units was
not affected.
For information purposes only, the following unaudited pro forma financial data reflects the consolidated results of
operations of AngloGold Ashanti as if the Business Combination had taken place on January 1, 2004:
Year ended December 31,
2004
$
Total revenue
2,478
$
Per basic and diluted
common share
(1)
(cents)
Net income/(loss) before cumulative effect of accounting change
241
91
Cumulative effect of accounting change
-
-
Net income/(loss) – applicable to common stockholders
241
91
Basic weighted average number of common shares used in computation
264,402,721
Diluted weighted average number of common shares used in computation
265,098,470
(1)
The calculation of diluted earnings/(loss) per common share for 2004 did not assume the effect of 15,384,615 shares issuable
upon the exercise of Convertible Bonds as their effects are anti-dilutive for this period.
F-13
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
3.
ACQUISITIONS AND DISPOSALS OF BUSINESSES AND ASSETS (continued)
The above pro forma financial data for the year ended December 31, 2004 includes mark-to-market gains on
derivative instruments amounting to $169 million. The above pro forma financial data for the year ended
December 31, 2004 does not include the application of hedge accounting prior to the acquisition to significant portions
of acquired derivative instruments as hedge accounting documentation was not in place during this period. The pro
forma information is not indicative of the results of operations that would have occurred had the Business Combination
been consummated on January 1, 2004. The information is not indicative of the group’s future results of operations.
•
AngloGold Ashanti acquires stake in Trans-Siberian Gold plc
On July 1, 2004, AngloGold Ashanti announced that it had entered into an agreement with Trans-Siberian Gold plc
(TSG) for the acquisition of a 29.9 percent stake in the Company through an equity investment of approximately
£18 million ($32 million) in two subscriptions for ordinary shares. TSG is listed on the AIM. The first tranche of
ordinary shares of 17.5 percent was acquired during July 2004. This first move into Russia allowed AngloGold Ashanti
the opportunity of establishing a meaningful interest in a Company with Russian assets and activities, thereby allowing
AngloGold Ashanti to gain exposure to, and familiarity with, the operating and business environment in Russia, as well
as being able to establish a business within this prospective new frontier. On December 23, 2004, it was announced
that the second subscripti on had been delayed to April 15, 2005 while on April 18, 2005, the second subscription date
was extended by a further two weeks to April 29, 2005. On April 28, 2005, the Company announced that agreement
had been reached with TSG on revised terms for the second subscription of shares in TSG, and a revised
subscription price of £1.30 per share, compared to £1.494 per share agreed between the parties on June 30, 2004.
The revised terms of the subscription was approved by TSG shareholders on May 27, 2005 and AngloGold Ashanti’s
17.5 percent equity interest in TSG increased to 29.9 percent on May 31, 2005, the date on which the second
subscription for 6,131,585 ordinary shares in TSG for an aggregate consideration of £8 million ($15 million) was
completed.
•
Agreement with Red 5 Limited
On October 11, 2004, AngloGold Ashanti announced that it had signed an agreement with Philippines explorer
Red 5 Limited to subscribe for a 12.3 percent stake in the expanded issued capital of Red 5 Limited for a cash
consideration of A$5 million ($4 million). The placement was to be used to fund the exploration activities along strike
from current mineral resources at the Siana Project, and to test the nearby porphyry gold-copper targets in the
Surigao region of the Republic of the Philippines. For a period of 2 years commencing in October 2004, AngloGold
Ashanti had the right to enter into Joint Venture arrangements on Red 5's tenements (excluding their Siana project)
with the potential to earn up to a 67.5 percent interest in areas of interest through further investment in exploration in
these Joint Venture areas. On August 26, 2005, AngloGold Ashanti subs cribed for additional shares in Red 5 Limited,
for a cash consideration of A$0.8 million ($0.6 million), thereby increasing its holding to 14.1 percent. As at
December 31, 2006, AngloGold Ashanti held 13 percent in Red 5 Limited, after the dilution of shareholding (from
14.1 percent) resulting from the increase in issued share capital. On September 18, 2006, AngloGold Ashanti elected
to exercise a second Joint Venture option with Red 5 Limited – the Outer Siena Joint Venture, located to the south-
east of Boyongan - in terms of which the Company will spend a minimum of A$1.5 million ($1.2 million) in the first year
with no interest. The Company may earn between 52 percent and 58.5 percent interest in two tenements through an
additional expenditure of A$4 million ($3 million), with a right to increase its holding by 8 percent to 9 percent through
an additional spend of A$5 million ($4 million).
2004 disposals
The Company’s disposals during the year included:
•
Sale of stake in Jerritt Canyon Joint Venture to Queenstake Resources USA Inc.
In 2004, Queenstake approached the Jerritt Canyon Joint Venture partners, AngloGold and Meridian Gold, about the
possibility of monetizing all or at least a majority of the $6 million in deferred payments and $4 million in future
royalties, payable in the concluded sale of AngloGold’s interest in the Jerritt Canyon Joint Venture to Queenstake
Resources USA Inc., effective June 30, 2003. Based on an agreement reached between the parties, AngloGold
Ashanti was paid on August 25, 2004, approximately $7 million for its portion of the deferred payments and future
royalties, thereby monetizing all outstanding obligations, except for a minor potential royalty interest that AngloGold
Ashanti retained.
F-14
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
3.
ACQUISITIONS AND DISPOSALS OF BUSINESSES AND ASSETS (continued)
•
Sale of Western Tanami project
On January 20, 2004, AngloGold announced that it had received a cash payment of A$4 million ($3 million) and
25 million fully paid ordinary shares from Tanami Gold NL in Australia, as consideration for Tanami Gold's purchase of
the Western Tanami Project. This follows an initial payment of A$0.3 million ($0.2 million) made on
November 24, 2003, when the Heads of Agreement was signed by the companies. The Company realized a profit of
$3 million on sale of these assets. Refer to Note 5 – (Profit)/loss on sale of assets, loans and indirect taxes. In
addition, a further 2 million fully paid ordinary shares were received from Tanami Gold in respect of a rights issue in
June 2004. During the period October 10, through October 18, 2005, AngloGold Ashanti Australia reduced it
shareholding in Tanami Gold to 5 percent, through the sale of 8 million fully paid ordinary shares for a cash
consideration of A$1.3 million ($1.0 million) and in February 2006, disposed of the entire investment in Tanami Gold
with the sale of 19 million shares for a cash consideration of A$3.9 million ($3.0 million).
•
Sale of Union Reefs Mine
On August 5, 2004, AngloGold Ashanti announced the sale of its Union Reefs assets to the Burnside Joint Venture,
comprising subsidiaries of Northern Gold NL (50 percent) and Harmony Gold Mining Company Limited (50 percent),
for a total consideration of A$4 million ($2 million). The Burnside Joint Venture is responsible for all future obligations
associated with the assets, including remaining site rehabilitation and reclamation. The Company realized a profit of
$2 million on sale of these assets. Refer to Note 5 – (Profit)/loss on sale of assets, loans and indirect taxes.
•
Sale of Freda-Rebecca Mine
In a joint announcement made on September 10, 2004, AngloGold Ashanti confirmed its agreement to sell its entire
interest in Ashanti Goldfields Zimbabwe Limited to Mwana Africa Holdings (Proprietary) Limited for a total
consideration of $2.255 million, to be settled in two tranches, $0.75 million immediately and the balance
($1.505 million) to be settled within six months of the satisfaction of all conditions to the sale agreement. The sale was
effective on September 1, 2004 and all conditions to the sale agreement were satisfied on April 22, 2005.
Subsequently in August 2005, AngloGold Ashanti and Mwana Africa Holdings (Proprietary) Limited agreed that the
second payment of $1.505 million would be settled by an immediate payment of $1.0 million and the subsequent
issue to AngloGold Ashanti of 600,000 Mwana Africa plc shares, once that company listed on the Lon don Stock
Exchange. Mwana Africa plc is a junior exploration and mining company with assets located in Zimbabwe as well as in
the Democratic Republic of Congo. As at December 31, 2006, AngloGold Ashanti retains its 600,000 shares in
Mwana Africa plc. The sole operating asset of Ashanti Goldfields Zimbabwe Limited as sold to Mwana Africa
Holdings (Proprietary) Limited was the Freda-Rebecca Gold Mine. No (profit)/loss was realized on disposal.
•
Sale of stake inTameng Mining and Exploration
Agreement was reached to sell AngloGold Ashanti’s 40 percent equity interest in Tameng Mining and Exploration
(Proprietary) Limited of South Africa (Tameng) to Mahube Mining (Proprietary) Limited for a cash consideration of
R20 million ($3 million). Tameng owns certain mineral rights to Platinum Group Metals (PGMs) on the farm Locatie
Van M’Phatlele KS 457, on the northern limb of the Bushveld Complex in the Limpopo Province in South Africa. No
(profit)/loss was realized on disposal and the sale was effective on September 1, 2004.
F-15
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
3.
ACQUISITIONS AND DISPOSALS OF BUSINESSES AND ASSETS (continued)
Fair value of acquisitions and (disposals) of businesses
2006
Total
2005
Total
2004
Ashanti
Goldfields
Company
Limited
(1)(3)
2004
Other
(3)
2004
Total
$
$
$
$
$
Cash
-
-
56
-
56
Property, plant and equipment
-
-
2,066
(5)
2,061
Acquired properties
-
-
873
-
873
Goodwill
(1)
-
-
182
-
182
Other intangibles
(2)
-
-
49
-
49
Provision for environmental rehabilitation
-
-
(51)
1
(50)
Long-term liabilities
-
-
(743)
1
(742)
Current assets
-
-
126
(4)
122
Current liabilities
-
-
(155)
3
(152)
Long-term debts
-
-
(197)
2
(195)
Derivatives
-
-
(432)
-
(432)
Minority interest
-
-
(3)
-
(3)
Net value of assets acquired/(disposed)
-
-
1,771
(2)
1,769
Profit on sale of assets
-
-
-
-
-
Purchase/(sale) consideration
-
-
1,771
(2)
1,769
Deferred purchase consideration
-
-
-
2
2
-
-
1,771
-
1,771
Purchase price (paid)/received
-
-
(1,771)
-
(1,771)
- Cash consideration
-
-
(227)
-
(227)
- Issuance of common stock
-
-
(1,544)
-
(1,544)
Gross value
-
-
(1,547)
-
(1,547)
Share issue expenses
-
-
3
-
3
(1)
The AngloGold Ashanti Business Combination was completed effective April 26, 2004. Refer to Note 3 — Acquisitions and
disposals of businesses and assets: Business Combination between AngloGold and Ashanti. The Company has recorded
goodwill, relating to the portion of the purchase price which cannot be attributed to the fair value of assets and liabilities acquired,
of $182 million on acquisition. During the year ended December 31, 2005, the Company recorded an impairment of $4 million,
relating to goodwill formally assigned to operations situated in Ghana (at Bibiani) as part of the Business Combination. No
impairments relating to goodwill were recorded during the year ended December 31, 2006. Refer to Note 5 – Impairment of assets.
(2)
Represents royalty rate and tax rate concession agreements with the government of Ghana. Fair value is based on estimated
future cash flows. During the year ended December 31, 2005, the Company recorded an impairment of $20 million relating to the
tax rate concession agreement with the government of Ghana. No impairments were recorded during the year ended
December 31, 2006. Refer to Note 5 – Impairment of assets.
(3)
Operations and assets acquired from Ashanti in the AngloGold Ashanti Business Combination are situated in Ghana, Guinea,
Tanzania and Zimbabwe and are reported under these respective business segments. During 2004, the Company disposed of its
interest in the Freda-Rebecca Mine in Zimbabwe for a total consideration of $2 million, settled partly in cash and partly in shares.
For more information on the Company’s business segments see Note 29 – Segment and geographical information.
4.
SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation: The accompanying financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America. The Company presents its consolidated financial
statements in United States dollars. The functional currency of a significant portion of the group’s operations is the
South African rand. Other main subsidiaries have functional currencies of US dollars and Australian dollars. The
translation of amounts into US dollars was in accordance with the provisions of SFAS52, “Foreign Currency
Translation”.
Use of estimates: The preparation of the financial statements requires the Company’s management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses
during the reporting period. The determination of estimates requires the exercise of judgment based on various
assumptions and other factors such as historical experience, current and expected economic conditions, and in some
cases actuarial techniques. The Company regularly reviews estimates and assumptions that affect the annual
financial statements, however, actual results could differ from those estimates.
F-16
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
The more significant areas requiring the use of management estimates and assumptions include mineral reserves that
are the basis of future cash flow estimates and unit-of-production depreciation, depletion and amortization
calculations; environmental, reclamation and closure obligations; estimates of recoverable gold and other materials in
heap leach pads; asset impairments (including impairments of goodwill, long-lived assets, and investments); write-
downs of inventory to net realizable value; post employment, post retirement and other employee benefit liabilities;
valuation allowances for deferred taxation assets; reserves for contingencies and litigation; and the fair value and
accounting treatment of financial instruments.
Comparatives: Comparatives have been reclassified, where necessary to comply with the current year’s
presentation.
The following are the accounting policies used by the Company which have been consistently applied except for the
adoption of SFAS123(R), “Share-Based Payment” on January 1, 2006, the adoption of EITF Issue 04-6 “Accounting
for Stripping Costs in the Mining Industry” on January 1, 2006, the adoption of SFAS158, “Employers’ Accounting for
Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and
132(R)” and the Company’s change in accounting policy, retroactive to January 1, 2005, with respect to accounting for
employee pension and post-retirement benefit plans.
4.1 Consolidation
The consolidated financial information includes the financial statements of the Company and its subsidiaries.
Where the Company has a direct or indirect controlling interest in an entity through a subsidiary, the entity is
classified as a subsidiary. Interests in incorporated mining joint ventures in which the Company has joint control
are accounted for by the equity method and are included in other long-term assets.
The financial statements of subsidiaries and the Environmental Trust Fund (a rehabilitation trust under the
Company’s control) are prepared for the same reporting period as the Company, using the same accounting
policies, except for Rand Refinery Limited (a subsidiary of the Company) which reports on a three-month time
lag. Adjustments are made to subsidiary financial results for material transactions and events in the intervening
period.
Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are de-
consolidated from the date on which control ceases.
Intra-group transactions, balances and unrealized gains on transactions between group companies are
eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of
the asset transferred.
4.2 Investments in equity investees (associates and incorporated joint ventures)
Investments in associates
An associate is an entity other than a subsidiary in which the Company has a material long-term interest and in
respect of which the Company has the ability to exercise significant influence over operational and financial
policies, normally owning between 20 percent and 50 percent of the voting equity.
Investments in incorporated joint ventures
A joint venture is an entity in which the Company holds a long-term interest and which is jointly controlled by the
Company and one or more external joint venture partners under a contractual arrangement.
Investments in associates and incorporated joint ventures are accounted for using the equity method. The initial
investment in these entities is recorded at cost. Post acquisition, the Company’s share of profits or losses of
associates and incorporated joint ventures is recognized in the income statement as equity accounted earnings.
The carrying amount of investments in associates and incorporated joint ventures is adjusted to recognize all
cumulative post-acquisition movements in the equity of the investment.
F-17
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.2 Investments in equity investees (associates and incorporated joint ventures) (continued)
Goodwill relating to associates and incorporated joint ventures is included in the carrying value of the Company’s
investment in those entities. The total carrying value of equity accounted investments in associates and
incorporated joint ventures, including goodwill, is evaluated for impairment when conditions indicate that a decline
in fair value below the carrying amount is other than temporary or at least annually. When an indicated
impairment exists, the carrying value of the Company’s investment in those entities is written down to its fair
value. The Company’s share of results of equity accounted investees, that have financial years within three
months of the fiscal year-end of the Company, is included in the consolidated financial statements based on the
results reported by those investees for their financial years. There were no significant adjustments required to be made in respect of equity accounted investees which have financial years that are different to those of the
Company.
4.3 Foreign currency translation
Items included in the financial statements of each of the Company’s entities are measured using the currency of
the primary economic environment in which the entity operates (the ‘functional currency’).
Transactions and balances
Transactions in foreign currencies are converted at the rates of exchange ruling at the date of these transactions.
Monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange ruling at
balance sheet date. Gains, losses and costs associated with foreign currency transactions are recognized in the
income statement in the period to which they relate, except where hedge accounting is applied. These
transactions are included in the determination of other income.
Group companies
The results and financial position of all group entities (none of which has the functional currency of a
hyperinflationary economy) that have a functional currency different from the presentation currency are translated
into the presentation currency as follows:
• equity items other than profit attributable to equity shareholders are translated at the closing rate on each
balance sheet date;
• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that
balance sheet;
• income and expenses for each income statement are translated at average exchange rates (unless this
average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction
dates, in which case income and expenses are translated at the dates of the transactions); and
• all resulting exchange differences are recognized as a separate component of equity and included within other
comprehensive income.
Exchange differences arising from the translation of the net investment in foreign operations, and of borrowings
and other currency instruments designated as hedges of such investments, are taken to stockholders’ equity on
consolidation.
When a foreign operation is sold, such exchange differences are recognized in the income statement as part of
the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and
liabilities of the foreign operation and translated at the ruling closing rate at each balance sheet date.
F-18
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.4 Segment reporting
A business segment is a group of assets and operations engaged in providing products or services that are
subject to risks and returns that are different from those of other business segments and are reported on a
reporting segment basis using a management approach. This approach is based on the way management
organizes segments within the Company for making operating decisions and assessing performance. The Chief
operating decision maker has determined that the Company operates primarily in the delivery of one product,
namely Gold. A geographical segment is engaged in providing products or services within a particular economic
environment that is subject to risks and returns that are different from those of segments operating in other
economic environments.
4.5 Cash and cash equivalents and restricted cash
Cash and cash equivalents consist of all cash balances and highly liquid investments with an original maturity of
three months or less. Due to the short maturity of cash equivalents, their carrying amounts approximate their fair
value. Restricted cash is reported separately in the consolidated balance sheets for all periods presented.
4.6 Non-marketable equity investments and debt securities
Investments in companies in which the Company’s ownership is 20 percent to 50 percent and the Company is
deemed to have significant but not controlling influence are accounted for by the equity method and are included
in other long-term assets. Equity method investments including interests in incorporated mining joint ventures
are reviewed for impairment in accordance with APB18, “The Equity Method of Accounting for Investments in
Common Stock”. Income from such investments net of impairments is included in equity income of affiliated
companies. See Note 4.2.
Investments in non-marketable debt securities that are classified as held to maturity are subsequently measured
at amortized cost. If there is evidence that held to maturity financial assets are impaired the carrying amount of
the assets is reduced and the loss recognized in the income statement.
4.7 Marketable equity investmentsand debt securities
Marketable equity investments and debt securities which are considered available-for-sale, are carried at fair
value, and the net unrealized gains and losses computed in marking these securities to market are reported
within other comprehensive income in the period in which they arise. These amounts are removed from other
comprehensive income and reported in income when the asset is derecognized or when there is evidence that
the asset is impaired in accordance with the provisions of SFAS115, “Accounting for Certain Investments in Debt
and Equity Securities”.
Marketable debt securities that are classified as held to maturity are subsequently measured at amortized cost.
4.8 Inventories
Inventories, including gold in process, gold on hand, uranium oxide, sulphuric acid, ore stockpiles and supplies,
are stated at the lower of cost or market value. Gold in process is valued at the average total production cost at
the relevant stage of production as described below. The cost of gold, uranium oxide and sulphuric acid is
determined principally by the weighted average cost method using related production costs.
Ore stockpiles are valued at the average moving cost of mining the ore. Supplies are valued at the lower of
weighted average cost or market value. Heap leach pad materials are measured on an average total production
cost basis.
F-19
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.8 Inventories (continued)
The cost of inventory is determined using the full absorption costing method for the stage of completed
production. Gold in process and ore stockpile inventory include all costs attributable to the stage of completion.
Costs capitalized to inventory include amortization of property, plant and equipment and capitalized mining costs,
direct and indirect materials, direct labor, shaft overhead expenses, repairs and maintenance, utilities, metallurgy
costs, attributable production taxes and royalties, and directly attributable mine costs. Gold on hand includes all
gold in process and refining costs. Ore is recorded in inventory when blasted underground, or when placed on
surface stockpiles in the case of open-pit operations.
The costs of materials currently contained on the leach pad are reported as a separate line item apart from
inventory. As at December 31, 2006, $46 million was classified as short term compared with $37 million as at
December 31, 2005 as the Company expects the related gold to be recovered within twelve months. The short
term portion of materials on the leach pad is determined by multiplying the average cost per ounce in inventory,
by the expected production ounces for the next twelve months. Based on data gathered and analyzed from heap
leach pad drilling results, and other studies and analysis completed, short-term heap leach pad inventory occurs
in two forms: (1) gold recoverable but yet to be dissolved (i.e. gold still in the ore), and (2) gold recoverable from
gold dissolved in solution within the leach pad (i.e. pore water). This estimate calculation was used in
determining the short term portion of materials on the leach pad as at December 31, 2006. As at
December 31, 2006, $149 million was classified as long term compared with $116 million as at
December 31, 2005.
4.9 Development costs and stripping costs
Development costs relating to major programs at existing mines are capitalized. Development costs consist
primarily of expenditures to initially establish a mine and to expand the capacity of operating mines.
Prior to January 1, 2006, stripping costs incurred in open-pit operations during the production phase to remove
additional waste were charged to operating costs on the basis of the average life of mine stripping ratio and the
average life of mine costs per tonne. The average stripping ratio was calculated as the number of tonnes of
waste material expected to be removed during the life of mine per tonne of ore mined. The average life of mine
cost per tonne was calculated as the total expected costs to be incurred to mine the orebody divided by the
number of tonnes expected to be mined. The average life of mine stripping ratio and the average life of mine
cost per tonne were recalculated annually in the light of additional knowledge and changes in estimates. The
cost of the “excess stripping” was capitalized as mine development costs when the actual mining costs exceed
the sum of the adjusted tonnes mined, being the actual ore tonnes plus the product of the actual ore tonnes
multiplied by the average life of mine stripping ratio, multiplied by the life of mine cost per tonne. When the actual
mining costs were below the sum of the adjusted tonnes mined, being the actual ore tonnes plus the product of
the actual ore tonnes multiplied by the average life of mine stripping ratio, multiplied by the life of mine cost per
tonne, previously capitalized costs were expensed to increase the cost up to the average. Thus, the cost of
stripping in any period was reflective of the average stripping rates for the orebody as a whole.
Prior to January 1, 2006, capitalized stripping costs were included in the calculations of the impairment tests
performed in accordance with the provisions of SFAS144, “Accounting for the Impairment or Disposal of Long-
Lived Assets”. The practice of deferring stripping costs, had the effect of amortizing the cost of waste ore
removal over the expected life of mine rather than reflecting actual waste ore removal cost incurred in each
period presented. Deferred stripping costs deferred and amortized were included in production costs in the
consolidated statements of income for the years ended December 31, 2004 and 2005 and deferred stripping
costs were reported separately in the consolidated balance sheet as at December 31, 2005.
On January 1, 2006, the Company adopted Emerging Issues Task Force (“EITF”) Issue 04-6, “Accounting for
Stripping Costs in the Mining Industry”. In accordance with the guidance of Issue No. 04-6, post production
stripping costs are considered costs of the extracted minerals under a full absorption costing system and
recognized as a component of inventory to be recognized in cost of sales in the same period as the revenue from
the sale of the inventory. Additionally, capitalization of such costs are appropriate only to the extent inventory
exists at the end of a reporting period.
F-20
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.9 Development costs and stripping costs (continued)
The guidance requires application through recognition of a cumulative effect adjustment to opening retained
earnings in the period of adoption, with no charge to current earnings for prior periods. The results for prior
periods have not been restated. Upon adoption, the cumulative effect of accounting change reduced opening
retained earnings by $73 million (net of Taxation), increased the value of inventory by $5 million, eliminated the
capitalized deferred stripping balance of $105 million, decreased Deferred taxation by $29 million, reduced Other
long-term assets by $3 million and decreased Minority interest by $1 million. Adoption of the new guidance had
no impact on the Company’s cash position or net cash from operations.
4.10 Depreciation, depletion and amortization
Mine development costs, mine plant facilities and other fixed assets
Mine development costs, mine plant facilities and other fixed assets are recorded at cost less accumulated
amortization and impairments. Cost includes pre-production expenditure incurred during the development of a
mine and the present value of future decommissioning costs. Cost also includes finance charges capitalized
during the construction period where such expenditure is financed by borrowings.
If there is an indication that the recoverable amount of any of the mine development costs, mine plant facilities
and other fixed assets is less than the carrying value, the recoverable amount is estimated and an allowance is
made for the impairment in value.
Capitalized mine development costs include expenditure incurred to develop new orebodies, to define further
mineralization in existing orebodies, to expand the capacity of a mine and to maintain production. Where funds
have been borrowed specifically to finance a project, the amount of interest capitalized represents the actual
borrowing costs incurred. Mine development costs include acquired proved and probable mineral resources at
cost at acquisition date.
Depreciation, depletion and amortization of mine development costs are computed principally by the units-of-
production method based on estimated proven and probable mineral reserves. Proven and probable mineral
reserves reflect estimated quantities of economically recoverable reserves which can be recovered in the future
from known mineral deposits.
Mine plant facilities are amortized using the lesser of their useful life or units-of-production method based on
estimated proven and probable mineral reserves. Main shafts are depleted using total proven and probable
reserves as the shaft will be used over the life of the mine. Other infrastructure costs including ramps, stopes,
laterals, etc and ore reserve development are depleted using proven and probable reserves applicable to that
specific area. When an area is vacated and there is no longer an intention to mine in that area due to a change
in mine plans, all costs that have not been depleted are written off.
Other fixed assets comprising vehicles and computer equipment, are depreciated by the straight-line method
over their estimated useful lives as follows:
•
vehicles up to five years; and
•
computer equipment up to three years.
F-21
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.10 Depreciation, depletion and amortization (continued)
Acquired properties
Acquired properties are carried at amortized cost. Purchased undeveloped mineral interests are acquired
mineral rights and, in accordance with Financial Accounting Standards Board Staff Position FSP141/142-1, are
recorded as tangible assets as part of acquired properties. The amount capitalized related to a mineral interest
represents its fair value at the time it was acquired, either as an individual asset purchase or as a part of a
business combination. “Brownfield” stage mineral interests represent interests in properties that are believed to
potentially contain other mineralized material, such as measured, indicated or inferred mineral resources with
insufficient drill spacing to qualify as proven and probable mineral reserves, that is in proximity to proven and
probable mineral reserves and within an immediate mine structure. “Greenfield” stage mineral interests
re present interests in properties that are other mine-related or greenfields exploration potential that are not part of
measured or indicated resources and are comprised mainly of material outside of a mine’s infrastructure. The
Company’s mineral rights are enforceable regardless of whether proven and probable mineral reserves have
been established. The Company has the ability and intent to renew mineral rights where the existing term is not
sufficient to recover all identified and valued proven and probable mineral reserves and/or undeveloped mineral
interests.
Brownfield properties are carried at acquired costs until such time as a mineral interest enters the production
stage and are amortized using the unit-of-production method based on estimated proven and probable mineral
reserves.
Greenfield mineral interests are carried at acquired costs until such time as a mineral interest enters the
production stage and are amortized using the unit-of-production method based on estimated proven and
probable mineral reserves.
Both Brownfield properties and Greenfield mineral interests are evaluated for impairment as held for use assets
in accordance with the Company’s asset impairment accounting policy. See Note 4.13.
4.11 Mining costs
Mining costs including repair and maintenance costs incurred in connection with major maintenance activities are
charged to operations as incurred.
4.12 Goodwill and intangible assets
Goodwill
Where an investment in a subsidiary, joint venture or an associate is made, any excess of the purchase price
over the fair value of the attributable mineral reserves including value beyond proven and probable, acquired
properties and other net assets is recognized as goodwill.
Goodwill relating to subsidiaries is tested for impairment at least annually or when indicators of impairment exist
and is carried at cost less accumulated impairment losses.
Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to reporting units for the purpose of impairment testing.
Goodwill in respect of subsidiaries is disclosed as goodwill. Goodwill relating to incorporated joint ventures and
associates is included within the carrying value of the investment in incorporated joint ventures and associates
and tested for impairment when indicators exist. See Note 4.2.
Royalty rate and tax rate concessions
Royalty rate and tax rate concessions with the Government of Ghana were capitalized at fair value at agreement
date. Fair value represents a present value of future royalty rate concessions over 15 years. The royalty rate and
tax rate concessions were assessed to have a finite life and are amortized under a straight-line method over a
period of 15 years, the period over which the concession runs. The related amortization expense is charged
through the income statement. These intangible assets are also tested for impairment where there is an indicator
of impairment.
F-22
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.13 Asset impairment
The Company evaluates its held-for-use long lived assets for impairment when events or changes in
circumstances indicate that the related carrying amount may not be recoverable. If the sum of estimated future
cash flows on an undiscounted basis is less than the carrying amount of the related asset, including goodwill, if
any, an asset impairment is considered to exist. The related impairment loss is measured by comparing
estimated future cash flows on a discounted basis to the carrying amount of the asset. Changes in significant
assumptions underlying future cash flow estimates may have a material effect on the Company’s financial
position and results of operations. Management’s estimate of future cash flows is subject to risk and
uncertainties. It is therefore reasonably possible that changes could occur which may affect the recoverability of
the group’s mining assets. The Compan y records a reduction of a group of assets to fair value as a charge to
earnings if expected future cash flows are less than the carrying amount. The Company estimates fair value by
discounting the expected future cash flows using a discount factor that reflects the risk-free rate of interest for a
term consistent with the period of expected cash flows, adjusted for asset specific and country risks. A low gold
price market, if sustained for an extended period of time, may result in asset impairments. In addition, an asset
impairment is considered to exist where the net selling price of an asset held for sale is below its carrying
amount. Once recognized an impairment loss is never reversed.
An individual operating mine is not a typical "going-concern" business because of the finite life of its reserves.
The allocation of goodwill to an individual operating mine will result in an eventual goodwill impairment due to the
wasting nature of the mine reporting unit. In accordance with the provisions of SFAS142, the Company performs
its annual impairment review of assigned goodwill during the fourth quarter of each year.
4.14 Borrowing costs
Interest on borrowings relating to the financing of major capital projects under construction is capitalized during
the construction phase as part of the cost of the project. Such borrowing costs are capitalized over the period
during which the asset is being acquired or constructed and borrowings have been incurred. Capitalization
ceases when construction is interrupted for an extended period or when the asset is substantially complete.
Other borrowing costs are expensed as incurred.
4.15 Leased assets
Assets subject to finance leases are capitalized at the lower of fair value or present value of minimum lease
payments with the related lease obligation recognized at the same amount. Capitalized leased assets are
depreciated over the shorter of their estimated useful lives and the lease term. Finance lease payments are
allocated using the effective interest rate method, between the lease finance cost, which is included in finance
costs, and the capital repayment, which reduces the liability to the lessor.
Operating lease rentals are charged against operating profits in a systematic manner related to the period the
assets concerned will be used.
4.16 Provisions
Provisions are recognized when the Company has a present obligation, whether legal or constructive, as a result
of a past event for which it is probable that an outflow of resources embodying economic benefits will be required
to settle the obligation and a reliable estimate can be made of the amount of the obligation.
Provisions are measured at the present value of management’s best estimate of the expenditure required to
settle the present obligation at the balance sheet date. The discount rate used to determine the present value
reflects current market assessments of the time value of money and the risks specific to the liability.
F-23
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.17 Taxation
Deferred taxation is provided on all temporary differences at the balance sheet date between the tax bases of
assets and liabilities and their carrying amounts for financial reporting purposes.
The carrying amount of deferred taxation assets is reviewed at each balance sheet date and reduced by a
valuation allowance to the extent that it is more likely than not that sufficient future taxable profit will not be
available to allow all or part of the deferred taxation asset to be utilized.
A deferred taxation liability is recognized for all taxable temporary differences if it is more likely than not that the
temporary difference will reverse in the foreseeable future.
Deferred taxation assets and liabilities are measured at statutory tax rates, which have been enacted at the
balance sheet date. See Note 4.22.
Current and deferred taxation is recognized as income or expense and included in the profit or loss for the period,
except to the extent that the tax arises from a transaction or event which is recognized, in the same or a different
period directly in equity; or a business combination that is an acquisition.
Current taxation is measured on taxable income at the applicable enacted statutory rate.
4.18 Asset retirement obligations and rehabilitation costs
The Company accounts for asset retirement obligations in accordance with Statement of Financial Accounting
Standards No. 143, “Accounting for Asset Retirement Obligations (AROs)” (“SFAS143”).
In accordance with the provisions of SFAS143 the fair value of a liability for an asset retirement obligation is
recorded in the period in which it is incurred. When the liability is initially recorded, the cost is capitalized by
increasing the carrying amount of the related long-lived asset. Over time, the liability is increased to reflect an
interest element (accretion) considered in its initial measurement at fair value, and the capitalized cost is
amortized over the useful life of the related asset. Where the obligation is operational of nature and does not
give rise to future economic benefit, the capitalized cost is amortized in the period incurred. Upon settlement of
the liability, a gain or loss will be recorded if the actual cost incurred is different from the liability recorded.
Rehabilitation costs and related liabilities are based on the Company’s interpretation of current environmental
and regulatory requirements.
Based on current environmental regulations and known rehabilitation requirements, management has included its
best estimate of these obligations in its rehabilitation accrual. However, it is reasonably possible that the
Company’s estimates of its ultimate rehabilitation liabilities could change as a result of changes in regulations or
cost estimates.
Environmental liabilities other than rehabilitation costs which relate to liabilities from specific events are accrued
when they are known, probable and reasonably estimable.
4.19 Product sales
Revenue from product sales is recognized when:
•
persuasive evidence of an arrangement exists;
•
delivery has occurred or services have been rendered;
•
the seller’s price to the buyer is fixed or determinable; and
•
collectability is reasonably assured.
The sales price, net of any taxes, is fixed on either the terms of gold sales contracts or the gold spot price.
Revenue is only recognized once the product has reached the level of refinement specified in the sales contract.
F-24
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.20 Financial instruments
Financial instruments recognized on the balance sheet include investments, loans receivable, trade and other
receivables, cash and cash equivalents, borrowings, derivatives, and trade and other payables. Financial
instruments are initially measured at cost, including transaction costs, when the group becomes a party to the
contractual arrangements. The subsequent measurement of derivative instruments is dealt with below.
Derivatives
The Company accounts for derivative contracts in accordance with Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS133") as amended.
SFAS133 requires all contracts which meet the definition of a derivative to be recognized on the balance sheet as
either assets or liabilities and recorded at fair value. Gains or losses arising from remeasuring derivatives to fair
value each period are to be accounted for either in the income statement or in other comprehensive income,
depending on the use of the derivative and whether it qualifies for hedge accounting. The key criterion which
must be met in order to qualify for hedge accounting, is that the derivative must be highly effective in offsetting
the change in the fair value or cash flows of the hedged item.
Contracts that meet the criteria for hedge accounting are designated as the hedging instruments hedging the
variability of forecasted cash flows from the sale of AngloGold Ashanti’s production into the spot market, and are
classified as cash flow hedges under SFAS133. Where a derivative qualifies as the hedging instrument in a cash
flow hedge under SFAS133, changes in fair value of the hedging instruments, to the extent effective, are deferred
in other comprehensive income and reclassified to earnings as product sales when the hedged transaction
occurs. The ineffective portion of changes in fair value is reported in earnings as gains or losses on derivatives in
the period in which they occur.
All other contracts not meeting the criteria for the normal purchases and sales or hedge accounting, as defined in
SFAS133, are recorded at their fair market value, with changes in value at each reporting period being recorded
in earnings as gains or losses on derivatives.
Cash flows from derivative instruments accounted for as cash flow hedges are included in net cash provided by
operating activities in the statements of consolidated cash flows for all periods presented. Contracts that contain
‘off-market’ terms that result in the inflow of cash at inception are analogous to borrowing activities and, as such,
are treated as financing activities. All current and future cash flows associated with such instruments are
classified within the financing activities section of the consolidated cash flow statement. Contracts that contain
‘off-market’ terms that result in the outflow of cash at inception are analogous to lending activities and, as such,
are treated as investing activities. All current and future cash flows associated with such instruments are
classified within the investing activities of the consolidated cash flow statement.
The estimated fair values of derivatives are determined at discrete points in time based on the relevant market
information. These estimates are calculated with reference to the market rates using industry standard valuation
techniques.
Certain derivative instruments are designated as hedges of foreign currency denominated borrowings and
investments in foreign entities. This designation is reviewed at least quarterly, or as borrowing and investment
levels change. The hedge amounts (to the extent effective) are recorded as an offset to the translation
gains/losses that are being hedged.
4.21 Employee
benefits
Pension obligations
Group companies operate various pension schemes. The schemes are funded through payments to insurance
companies or trustee administered funds, determined by annual actuarial calculations. The Company has both
defined benefit and defined contribution plans. A defined benefit plan is a pension plan that defines an amount of
pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as
age, years of service and compensation.
F-25
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.21 Employee
benefits
(continued)
The current service cost in respect of defined benefit plans is recognized as an expense in the current year. Past
service costs, experience adjustments, the effect of changes in actuarial assumptions and the effects of plan
amendments in respect of existing employees are recognized as an expense or income as and when they arise.
This method is applied consistently in each period end to all gains and losses. See Note 2.
The asset/liability recognized in the balance sheet in respect of defined benefit pension plans is the present value
of the defined benefit obligation at the balance sheet date less the fair value of plan assets, together with
adjustments for past service costs. The defined benefit obligation is calculated annually by independent actuaries
using the projected unit credit method.
A defined contribution plan is a pension plan under which the group pays fixed contributions into a separate
entity. The Company has no legal or constructive obligations to pay further contributions if the fund does not hold
sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.
The contributions are recognized as employee benefit expense when they are due. Prepaid contributions are
recognized as an asset to the extent that a cash refund or a reduction in the future payments is available.
Other post-employment benefit obligations
Some group companies provide post-retirement healthcare benefits to their retirees. The entitlement to these
benefits is usually conditional on the employee remaining in service up to retirement age and the completion of a
minimum service period. The expected costs of these benefits are accrued over the period of employment using
an accounting methodology on the same basis as that used for defined benefit pension plans. These obligations
are valued annually by independent qualified actuaries. Actuarial gains and losses arising in the plan are
recognized as income or expense as and when they arise. See Note 2.
Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date, or when an
employee accepts voluntary redundancy in exchange for these benefits. The Company recognizes termination
benefits when it is demonstrably committed to either: terminating the employment of current employees according
to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer
made to encourage voluntary redundancy based on the number of employees expected to accept the offer.
Benefits falling due more than 12 months after balance sheet date are discounted to present value.
4.22 Deferred taxation
The Company follows the liability method of accounting for deferred taxation whereby the Company recognizes
the tax consequences of temporary differences by applying enacted tax rates applicable to future years to
differences between financial statement amounts and the tax bases of certain assets and liabilities. Changes in
deferred taxation assets and liabilities include the impact of any tax rate changes enacted during the year.
Principal temporary differences arise from depreciation on property, plant and equipment, derivatives, provisions
and tax losses carried forward. A valuation allowance is recorded to reduce the carrying amounts of deferred
taxation assets if it is more likely than not that such assets will not be realized.
4.23 Dividends paid
Dividends paid are recognized when declared by the board of directors. Dividends may be payable in Australian
dollars, South African rands, United Kingdom pounds or Ghanaian cedis. Dividends declared to foreign
stockholders are not subject to approval by the South African Reserve Bank in terms of South African foreign
exchange control regulations. Dividends are freely transferable to foreign stockholders from both trading and
non-trading profits earned in South Africa by publicly listed companies. Under South African law, the Company
may declare and pay dividends from any reserves included in total shareholders’ equity (including share capital
and premium) calculated in accordance with International Financial Reporting Standards (IFRS), subject to its
solvency and liquidity.
F-26
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.24 Earnings per share
Earnings and diluted earnings per share have been calculated, for each class of common stock outstanding, in
accordance with SFAS 128, “Earnings per Share”, using the two class method. Under the provisions of
SFAS 128, basic net income (loss) per share is computed using the weighted average number of shares
outstanding during the period. Diluted net income (loss) per share is computed using the weighted average
number of Ordinary shares and, if dilutive, potential common shares outstanding during the period. The
computation of the diluted income (loss) per share of Ordinary shares assumes the conversion of E Ordinary
shares.
The rights, including the liquidation, voting and dividend rights, of holders of Ordinary shares and E Ordinary
shares are identical. As a result, and in accordance with EITF 03-6, “Participating Securities and the Two-Class
Method under FASB Statement No. 128”, the undistributed earnings for each year are allocated based on the
contractual participation rights of the Ordinary and E Ordinary shares as if the earnings for the year had been
distributed. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a
proportionate basis. Further, as the Company assume the conversion of E Ordinary shares in the computation of
the diluted net income (loss) per share of Ordinary shares, the undistributed earnings are equal to net income
(loss) for the computation.
4.25 Exploration and evaluation costs
The Company expenses all exploration costs until the directors conclude that a future economic benefit is more
likely than not of being realized. In evaluating if expenditures meet this criterion to be capitalized, the directors
utilize several different sources of information depending on the level of exploration. While the criteria for
concluding that expenditure should be capitalized is always probable, the information that the directors use to
make that determination depends on the level of exploration.
•
Costs on greenfields sites, being those where the Company does not have any mineral deposits which are
already being mined or developed, is expensed as incurred until the directors are able to demonstrate that
future economic benefits are probable, which generally will be the establishment of proved and probable
reserves at this location.
•
Costs on brownfields sites, being those adjacent to mineral deposits which are already being mined or
developed, is expensed as incurred until the directors are able to demonstrate that future economic benefits
are probable, which generally will be the establishment of increased proved and probable reserves after
which the expenditure is capitalized as a mine development cost.
•
Costs relating to extensions of mineral deposits, which are already being mined or developed, including
expenditure on the definition of mineralization of such mineral deposits, is capitalized as a mine
development cost.
Costs relating to property acquisitions are capitalized within development costs.
Drilling and related costs incurred on sites without an existing mine and on areas outside the boundary of a
known mineral deposit that contain proven and probable reserves are exploration expenditures and are expensed
as incurred.
Drilling and related costs incurred to define and delineate a residual mineral deposit that has not been classified
as proven and probable reserves at a development stage or production stage mine are capitalized when
management determines that there is sufficient evidence that the expenditure will result in a future economic
benefit to the company in the accounting period when the expenditure is made. Management evaluates whether
or not there is sufficient geologic and economic certainty of being able to convert a residual mineral deposit into a
proven and probable reserve at a development stage or production stage mine, based on the known geologic
and metallurgy, existing mining and processing facilities, operating permits and environmental programs.
Therefore prior to capitalizing such costs, management determines that the following conditions have been met:
F-27
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.25 Exploration and evaluation costs(continued)
a.
There is a probable future benefit;
b.
AngloGold Ashanti can obtain the benefit and control access to it; and
c.
The transaction or event giving rise to it has already occurred.
We understand that there is diversity in practice within the mining industry, in that some companies expense the
drilling and related costs incurred to define and delineate residual mineral deposits that have not been classified
as proven and probable reserves at a development stage or production stage mine. Had AngloGold Ashanti
expensed such costs as incurred, net income, earnings per share and retained earnings would have been lower
by approximately the following amounts:
2004
2005
2006
Net income (US$ millions)
7
13
12
Earnings per share
(1)
(US$ cents)
3
5
5
Retained income – January 1 (US$ millions)
27
34
47
Retained income – December 31 (US$ millions)
34
47
59
(1)
Impact per basic and diluted earnings per common share.
4.26 Stock-based compensation plans
The Company’s management awards certain employees stock options on a discretionary basis.
The fair value of the stock-based payments is calculated at grant date using an appropriate model. For equity
settled stock-based payments, the fair value is determined using a Black-Scholes method and expensed on a
straight-line basis over the vesting period based on the group’s estimate of shares that will eventually vest.
Option schemes which include non-market vesting conditions have been calculated using the Black-Scholes
model. For all other stock-based payments to employees the fair value is determined by reference to the market
value of the underlying stock at grant date adjusted for the effects of the relevant terms and conditions. All other
stock-based payments fair values are determined by reference to the goods or services received.
For schemes with non-market related vesting conditions, the likelihood of vesting has been taken into account
when determining the income statement charge. Vesting assumptions are reviewed during each reporting period
to ensure they reflect current expectations.
Stock options are subject to a three year vesting condition and their fair value is recognized as an employee
benefit expense with a corresponding increase in Additional paid in capital over the vesting period. The proceeds
received, net of any directly attributable transaction costs are credited to common stock (nominal value) and
Additional paid in capital when the options are exercised.
Prior to January 1, 2006, the Company accounted for share-based payments under the recognition and
measurement provisions of APB Opinion No. 25, “Accounting for Stock Issued to Employees, and related
Interpretations”, as permitted by SFAS123.
On January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123(R), “Share-
Based Payment”, using the modified prospective transition method. See Note 2.
F-28
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.27 Recent pronouncements
On July 13, 2006 the Financial Accounting Standards Board (FASB) issued FASB interpretation No. 48,
“Accounting for Uncertainty in Income Taxes” (“FIN 48”).
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements
in accordance with SFAS109, “Accounting for Income Taxes”. It prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return. FIN 48 also provides guidance on derecognition and classification,
recognition of interest and penalties, accounting in interim periods and disclosure rules relating to tax positions in
the financial statements.
This interpretation is effective for fiscal years beginning after December 15, 2006, and the Company has adopted
this interpretation in the first quarter of 2007. The Company is in the process of assessing the impact of adopting
FIN 48 on the results of operations and financial position. The cumulative effect, if any, will be reported as an
adjustment to the opening balance of retained earnings for the 2007 fiscal year.
On September 8, 2006, the FASB has issued FASB Staff Position (FSP) No. AUG AIR-1, "Accounting for
Planned Major Maintenance Activities" (“FSPAIR-1”).
FSPAIR-1 eliminates the accrue-in-advance method of accounting for planned major maintenance activities from
the AICPA Audit and Accounting Guide, Audits of Airlines and the guidance is applicable to entities in all
industries. As a result of the elimination of the accrue-in-advance method, the Airline Guide currently permits the
use of one of the following three remaining methods: (1) direct expensing, (2) built-in overhaul, and (3) deferral.
The effective date of FSPAIR-1 is an entity's first fiscal year beginning after December 15, 2006, with early
adoption permitted so long as it is as of the beginning of the entity's fiscal year. The guidance in FSPAIR-1
should be applied retrospectively, unless it is impracticable to do so. FSPAIR-1 provides additional details on the
subject of transition and the disclosures required upon adoption of the FSP. Of the three methods of accounting
for planned major maintenance allowed by FSPAIR-1, the Company will adopt the built-in overhaul method from
January 1, 2007. The built-in overhaul method is based on segregation of plant and equipment costs into those
that should be depreciated over the useful life of the asset and those that require overhaul at periodic intervals.
Thus, the estimated cost of the overhaul component included in the purchase price of an asset is set up
separately from the cost of the asset and is amortized to the date of the initial overhaul. The cost of the initial
overhaul is then capitalized and amortized to the next overhaul, at which time the process is repeated. The
Company does not expect the adoption of this standard to have a material impact on its earnings and financial
position.
On September 13, 2006, the SEC staff published Staff Accounting Bulletin (SAB) No. 108, “Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements”
(“SAB 108”).
SAB 108 (SAB Topic 1.N) addresses quantifying the financial statement effects of misstatements, specifically,
how the effects of prior year uncorrected errors must be considered in quantifying misstatements in the current
year financial statements. In addition, SAB 108 offers a special “one-time” transition provision for correcting
certain prior year misstatements that were uncorrected as of the beginning of the fiscal year of adoption.
SAB 108 is effective for fiscal years ending after November 15, 2006. During 2006, the Company quantified and
adjusted for certain errors previously considered not to be material as discussed in Note 2.
F-29
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.27 Recent pronouncements (continued)
On September 15, 2006 the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value
Measurements” (“SFAS157”).
SFAS157 provides enhanced guidance for using fair value to measure assets and liabilities. Under SFAS157, fair
value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants in the market in which the reporting entity transacts. SFAS157 clarifies
the principle that fair value should be based on the assumptions market participants would use when pricing the
asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those
assumptions. SFAS157 also requires that fair value measurements be separately disclosed by level within the
fair value hierarchy. SFAS157 is effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. The Company is currently reviewing the
guidance issued in SFAS157 a nd has not yet determined the impact of this on the financial statements.
On September 29, 2006 the FASB issued Statement of Financial Accounting Standards No. 158, “Employers’
Accounting for Defined Benefit Pension and Other Post-retirement Plans, an amendment of FASB Statements
No. 87, 88, 106 and 132(R)” (“SFAS158”).
SFAS158 represents the completion of the first phase in the FASB's post-retirement benefits accounting project
and requires an entity to:
•
recognize in its statement of financial position an asset for a defined benefit post-retirement plan's overfunded
status or a liability for a plan's underfunded status;
•
measure a defined benefit post-retirement plan's assets and obligations that determine its funded status as of
the same day of the employer's fiscal year-end statement of financial position;
•
recognize as a component of accumulated other comprehensive income, net of tax, amounts accumulated at
the date of adoption due to delayed recognition of actuarial gains and losses, prior service costs and credits,
and transition assets and obligations; and
•
expand the disclosure requirements of SFAS132(R) to include disclosure of additional information in the notes
to financial statements about certain effects on net periodic benefit cost in the next fiscal year that arise from
delayed recognition of actuarial gains or losses, prior service costs or credits and unrecognized transition
asset and obligations.
SFAS158 does not change the amount of net periodic benefit cost included in net income or address the various
measurement issues associated with post-retirement benefit plan accounting. The requirement to recognize the
funded status of a defined benefit post-retirement plan and the disclosure requirements are effective for fiscal
years ending after December 15, 2006, for public entities, and at the end of the fiscal year ending after
June 15, 2007, for all other entities. The requirement to measure plan assets and benefit obligations as of the
date of the employer's fiscal year-end statement of financial position is effective for fiscal years ending after
December 15, 2008. The adoption of the recognition and disclosure requirements of SFAS158 which are
effective for fiscal years ending after December 15, 2006, did not have a material impact on the Company’s
earnings and financial p osition as the Company changed its accounting policy during the second quarter of 2005,
retroactive to January 1, 2005, with respect to accounting for employee benefit plans to recognize the effects of
actuarial gains and losses in income, rather than amortizing over the expected average remaining service period
of employees participating in the plan. See Note 2. The Company is currently considering processes to meet the
measurement requirements of SFAS158.
On February 15, 2007 the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value
Option for Financial Assets and Financial Liabilities Including an amendment of FASB Statement No. 115”
(“SFAS159”).
SFAS159 permits entities to choose to measure many financial instruments and certain other items at fair value.
The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in
reported earnings caused by measuring related assets and liabilities differently without having to apply complex
hedge accounting provisions.
F-30
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.27 Recent pronouncements (continued)
The fair value option permits all entities to choose to measure eligible items at fair value at specified election
dates. A business entity shall report unrealized gains and losses on items for which the fair value option has been
elected in earnings at each subsequent reporting date.
The fair value option:
•
may be applied instrument by instrument, with a few exceptions, such as investments otherwise accounted for
by the equity method;
•
is irrevocable (unless a new election date occurs); and
•
is applied only to entire instruments and not to portions of instruments.
SFAS159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early
adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided
the entity also elects to apply the provisions of SFAS 157, “Fair Value Measurements”. No entity is permitted to
apply SFAS159 retrospectively to fiscal years preceding the effective date unless the entity chooses early
adoption. The choice to adopt early should be made after issuance of SFAS159 but within 120 days of the
beginning of the fiscal year of adoption, provided the entity has not yet issued financial statements, including
required notes to those financial statements, for any interim period of the fiscal year of adoption. SFAS159
permits application to eligible items existing at the effective date (or early adoption date). The Company is
currentl y reviewing the guidance issued in SFAS159 and has not yet determined the impact of this on the
financial statements.
5.
COSTS AND EXPENSES
Employment Severance Costs
Total employee severance costs amounted to $22 million for 2006 (2005: $26 million, 2004: $7 million) and were due
to retrenchments in the South Africa region reflecting mainly downsizing and rationalization of operations in 2004
(at Great Noligwa and TauTona) and in 2005 (at Great Noligwa, Kopanang, Savuka, TauTona and Mponeng).
Employee severance costs recorded in 2006 included retrenchment costs of $7 million in the South African region
(at Great Noligwa, Kopanang, Tau Lekoa, TauTona and Mponeng) and $15 million in Ghana (at Obuasi) due to a
planned reduction in workforce.
Interest Expense
2006
$
2005
$
2004
$
Finance costs on bank loans and overdrafts
20
21
11
Finance costs on corporate bond
(1)
32
34
33
Finance costs on convertible bond
(2)
26
27
23
Capital lease charges
2
2
2
Discounting of non-current trade and other debtors
4
-
-
Other
3
12
9
87
96
78
Less : Amounts capitalized
(3)
(10)
(16)
(11)
77
80
67
(1)
On August 21, 2003 AngloGold issued unsecured bonds in the aggregate principal amount of R2 billion ($300 million). Refer to
Note 20.
(2)
On February 27, 2004, AngloGold Ashanti Holdings plc, a wholly-owned subsidiary of the Company, issued $1,000,000,000
2.375 percent guaranteed convertible bonds due 2009, convertible into ADSs and guaranteed by AngloGold Ashanti. Refer to
Note 20.
(3)
Interest capitalized on qualifying assets. Refer to Note 12.
F-31
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
5.
COSTS AND EXPENSES(continued)
Impairment of Assets
The impairment loss in respect of reporting units arose from the declining values of the remaining ore reserves and is
based on the estimated remaining cashflows computed at a discount. The impairment is made up as follows:
2006
$
2005
$
2004
$
Australia
Impairment of various mining assets and mineral rights based on net realizable value
-
-
1
Ghana
Impairment of Bibiani mine following an assessment and reduction in life of mine
based on fair value
-
37
-
Impairment of goodwill held in Bibiani. Refer to Note 3.
-
4
-
Impairment of tax rate concession agreements. Refer to Note 14.
-
20
-
South Africa
Impairment of Goedgenoeg drilling and 1650 level decline drilling based on fair value
-
2
-
Impairment of East of Bank Dyke at TauTona access development based on fair value
-
4
-
Impairment of Western Ultra Deep Levels based on fair value
-
74
-
Impairment of goodwill held in Gold Avenue, a subsidiary.
-
-
2
Other
Impairment and write-off of various minor tangible assets and equipment
6
-
-
6 141
3
The Company evaluates its held-for-use long lived assets for impairment when events or changes in circumstances
indicate that the related carrying amount may not be recoverable. The carrying value of the related asset is compared
to its fair value.
The following estimates and assumptions were used by management when reviewing long-lived assets for
impairments:
º
the forward gold price curve for the first 10 years, where a forward gold market and quoted prices exist (starting
point based on a 30-day average during the fourth-quarter of 2006 - $630/oz; (2005 - $505/oz). Thereafter, the
estimated future gold price has been increased by 2.25% (2005: 2.25%) per annum over the remaining life of the
mines. These prices have been adjusted for the effects of including the normal sale forward contracts to arrive at an
average received price across all of the reporting units. Previously, the normal sale forward contracts were
allocated to each reporting unit, based on the then prevailing contractual relationship with hedge counterparts.
Following the removal of certain hedge counterpart restrictions and the granting of group level guarantees during
2006, the Company has applied an average received gold price across all reporting units. The use of this approach
has had a consequential impact on the fair value of the reporting units.
Annual life of mine plans which take into account the following:
º
Proven and Probable Ore Reserves as well as value beyond proven and probable reserves. For these purposes
Proven and Probable Ore Reserves of approximately 66 million ounces (including joint ventures) as at
December 31, 2006 were determined assuming a three year historical average gold price of $550 per ounce,
A$724 per ounce in Australia and R132,622 per kilogram in South Africa;
º
a real pre-tax discount rate adjusted for country risk and project risk for cash flows relating to mines not yet in
commercial production and deep level mining projects based on the discount rate applicable to the long-term dollar
market rates;
º
foreign currency cash flows are translated at estimated forward exchange rates and then discounted using
appropriate discount rates for that currency;
º
cash flows used in impairment calculations are based on life of mine plans which exceed five years for the majority
of the mines; and
º
variable operating cash flows are increased at local Consumer Price Index (CPI) rates.
F-32
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
5.
COSTS AND EXPENSES(continued)
Real pre-tax discount rates applied in impairment calculations on assets which had impairment indicators or on
reporting units with significant assigned goodwill are as follows:
Percentage
South Africa
(1)
6.3 to 7.4
Ghana
(2)
5.9 to 7.9
Australia
5.4 to 5.9
Tanzania
7.1
(1)
As the Company did not have the intention to mine and no future cash flows were expected from the Western Ultra Deep Levels
area (in South Africa), an impairment loss of $74 million was recorded during 2005.
(2)
Based on a pre-tax discount rate of 6.5 percent in Ghana (at Bibiani) the estimated fair value amount did not support the carrying
values and as a result, an impairment loss of $37 million on mining assets and $4 million on assigned goodwill was recorded
during 2005. Refer to Note 3.
The Company reviews and tests the carrying value of long-lived assets, including goodwill, when events or changes in
circumstances suggest that the carrying amount may not be recoverable. Assets are grouped at the lowest level for
which identifiable cash flows are largely independent of cash flows of other assets. For long-lived assets other than
goodwill, if the sum of estimated future cash flows on an undiscounted basis is less than the carrying amount of the
related asset group, the long-lived asset group is not recoverable and the fair value should be determined. An
impairment loss is measured by comparing estimated future cash flows on a discounted basis to the carrying amount
of the asset. Goodwill is tested for impairment on an annual basis. Expected future cash flows used to determine the
fair value of goodwill and long-lived assets are inherently uncertain and could materially change over ti me. They are
significantly affected by a number of factors including reserves and production estimates, together with economic
factors such as spot and forward gold prices, discount rates, foreign currency exchange rates, estimates of costs to
produce reserves and future capital expenditure.
Should management’s estimate of the future not reflect actual events, further impairments may be identified. The
factors affecting the estimates include:
º
changes in Proved and Probable Ore Reserves as well as value beyond proven and probable reserves;
º
the grade of Ore Reserves as well as value beyond proven and probable reserves may vary significantly from time
to time;
º
differences between actual commodity prices and commodity price assumptions;
º
unforeseen operational issues at mine sites; and
º
changes in capital, operating mining, processing and reclamation costs and foreign exchange rates.
Based on analysis, the carrying value and estimated fair values (on a discounted basis) of reporting units that are
most sensitive to gold price, ounces, costs and discount rate assumptions are:
As at December 31, 2006
Carrying amount
(including goodwill)
$
Estimated fair value
(discounted)
$
South Africa
Tau Lekoa
124
126
Ghana
Obuasi
1,305
1,580
Should any of the assumptions used change adversely and the impact is not mitigated by a change in other factors,
this could result in an impairment of the above assets.
F-33
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
5.
COSTS AND EXPENSES(continued)
It is impracticable to disclose the extent of the possible effects of changes in the assumptions for the future gold price
and hence life of mine plans at December 31, 2006 because these assumptions and others used in impairment testing
of long-lived assets and goodwill are inextricably linked. In addition, for those operations with a functional currency
other than the dollar, movements in the dollar exchange rate will also be a critical factor in determining the life of mine
and production plans.
Therefore it is possible that outcomes within the next financial year that are different from the assumptions used in the
impairment testing process for goodwill and long-lived assets could require a material adjustment to the carrying
amounts disclosed at December 31, 2006.
Asset Retirement Obligations
Long-term environmental obligations comprising decommissioning and restoration are based on the Company’s
environmental management plans, in compliance with the current environmental and regulatory requirements.
(in US Dollars,
millions)
The following is a reconciliation of the total liabilities for asset retirement obligations:
Balance as at December 31, 2005
325
Impact of acquisitions and disposals
(5)
Liabilities settled
(12)
Accretion expense
13
Change in assumptions
-
(1)
Translation
(11)
Balance as at December 31, 2006
310
(1)
Revisions relate to changes in laws and regulations governing the protection of the environment and factors relative to
rehabilitation estimates and a change in the quantities of material in reserves and a corresponding change in the life of mine
plan. These liabilities are anticipated to unwind beyond the end of the life of mine.
These liabilities mainly relate to obligations at the Company’s active and inactive mines to perform reclamation and
remediation activities in order to meet applicable existing environmental laws and regulations.
Certain amounts have been contributed to a rehabilitation trust and environmental protection bond under the
Company's control. The monies in the trust and bond are invested primarily in interest bearing debt securities and are
included in Other long-term assets in the Company’s consolidated balance sheet. Cash balances held in the trust and
bond are classified as restricted cash in the Company’s consolidated balance sheets for all periods presented. As at
December 31, 2006 and 2005 the balances held in the trust and bond (cash and investments) amounted to $91 million
and $93 million, respectively. Besides these assets there were no other assets that were legally restricted for
purposes of settling asset retirement obligations as at December 31, 2006.
Operating Lease Charges
Operating lease rentals are charged against income in a systematic manner related to the period the leased property
will be used. Lease charges relate mainly to the hire of plant and machinery and other land and buildings.
Operating leases for plant and machinery are in terms of contracts entered with mining contractors to undertake mining
at certain operations. The contracts are for specified periods and include escalation clauses. Renewals are at the
discretion of the respective operating mine and allow a right of first refusal on the purchase of the mining equipment in
the case of termination of the contract. Certain contracts include the provision of penalties payable on early exiting or
cancellation.
F-34
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
5.
COSTS AND EXPENSES(continued)
Rental Expense
(1)
2006
$
2005
$
2004
$
Comprising of:
Minimum rentals
40
44
40
Contingent rentals
-
-
-
Sublease rentals
-
-
-
40
44
40
(1)
Included in production costs for each period presented.
Future minimum rental payments are:
2007
16
2008
4
2009
1
2010
1
2011
1
Thereafter
1
24
Profit on Sale of Assets, Loans and Indirect Taxes
2006
$
2005
$
2004
$
Profit on the sale of Mitchell Plateau and Cape Bougainville
-
(1)
-
Profit on disposal of Union Reefs Gold Mine
(1)
-
-
(2)
Profit on disposal of Western Tanami assets
(2)
-
-
(3)
Profit on disposal of Tanami Gold Mine
-
-
(3)
Profit on disposal of land, mineral rights and exploration properties
(5)
(48)
(2)
(6)
Recovery of loans previously written off
(3)
(14)
-
-
Non-recoverable value added state tax
(4)
9
-
-
Reassessment of indirect taxes payable in Guinea
(3)
-
-
Reassessment of indirect taxes payable in Tanzania
20
-
-
(36)
(3)
(14)
(1)
The sale of Union Reefs Mine to the Burnside Joint Venture was announced on August 5, 2004.
(2)
The sale of the Western Tanami Project to Tanami Gold NL was announced on January 20, 2004.
(3)
Relates mainly to loans previously expensed as exploration costs as part of funding provided to the Yatela Joint Venture. The
Yatela Joint Venture is accounted for under the equity method. Refer to Note 15.
(4)
Represents the write-off of value added state tax of $7 million at Serra Grande and $2 million (at AngloGold Ashanti Brasil
Mineração) not expected to be recovered from the Brazilian Government.
(5)
Refers to the disposal of land, mineral rights and exploration properties situated in Brazil, Ghana and North America.
Mining Contractor Termination Costs
Mining contractor termination costs of $9 million (before taxation of $3 million) recorded in 2005 (2004: $nil million)
related to contractor termination costs at Geita, in Tanzania, on the transition to owner mining completed in early
August 2005. No mining contractor termination costs were recorded in 2006.
Other operating costs and expenses
2006
$
2005
$
2004
$
Comprising of:
Provision for loss on future deliveries of other commodities
15
(5)
8
Unrealized loss on other commodity physical borrowings
1
14
-
16
9
8
Ore Reserve Development Expenditure
The Company has reassessed the useful life of on-reef Ore Reserve development expenditure with effect from
January 1, 2004. The effect of this change in estimate on the results for 2004 was as follows:
Year ended December 31, 2004
(in millions, except per share data)
Impact
$
Per basic common
share (cents)
Per diluted common
share
(1)
(cents)
Income before income tax provision
54
21
21
Taxation
(19)
(8)
(8)
Net income
35
13
13
(1)
The calculation of diluted earnings per common share for 2004 did not assume the effect of 15,384,615 shares issuable upon the exercise of
Convertible Bonds as their effects are anti-dilutive for this period.
F-35
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
6.
RELATED PARTY TRANSACTIONS
On October 26, 2005 Anglo American plc (AA plc) announced that it intended to reduce its shareholding in the
Company, while still intending to remain a significant shareholder in the medium term. During April 2006, AA plc
reduced its shareholding in the Company to less than 50 percent interest held, as the result of the sale in a public
offering, of some of its shares held in the Company. Refer to Note 20. As at December 31, 2006 AA plc and its
subsidiaries held an effective 41.67 percent (2005: 50.88 percent) interest in AngloGold Ashanti. The Company had
the following transactions with related parties during the years ended December 31, 2006, 2005 and 2004:
December 31, 2006
December 31, 2005
December 31, 2004
(in millions)
Purchases
(by)/from
related party
$
Amounts owed
to/(by) related
party
$
Purchases
(by)/from
related party
$
Amounts
owed to/(by)
related party
$
Purchases
(by)/from
related party
$
Related party transactions with
significant shareholder AA plc
1
-
5
1
5
Related party transactions with
subsidiaries of AA plc
(1)
Boart Longyear Limited – mining
services
(2)
-
-
5
-
9
Mondi Limited – forestry
5
-
16
2
16
Scaw Metals – A division of Anglo
Operations Limited – steel and
engineering
1
-
6
1
5
Haggie Steel Wire Rope Operations
(3)
1
-
8
1
9
Anglo Coal – a division of Anglo
Operations Limited
-
-
1
-
1
8
-
41
5
45
Related party transactions of equity
accounted joint ventures
Societe d'Exploitation des Mines d'Or
de Sadiola S.A.
(2)
(1)
-
-
1
Societe d'Exploitation des Mines d'Or
de Yatela S.A.
(1)
-
-
-
1
Societe des Mines de Morila S.A.
(2)
-
(2)
-
(1)
(1)
Transactions to April 2006.
(2)
AA plc sold their interest in Boart Longyear Limited with effect from July 29, 2005.
(3)
Previously included in Scaw Metals – A division of Anglo Operations Limited.
Amounts owed to related parties are unsecured, non-interest bearing and normally settled within sixty days.
In connection with the relocation of Roberto Carvalho Silva, an executive director of the Company since 2005, to
Nova Lima, Brazil, in 2000, Mr. Carvalho Silva commenced renting a house in Nova Lima from a Brazilian subsidiary of
the Company. Mr. Carvalho Silva purchased the house from the Company’s subsidiary in January 2005. The total
purchase price of the house was BRL1,150,000 ($429,923). Mr. Carvalho agreed to pay the purchase price of the
house in 60 installments, the first being BRL19,167.70 and 59 installments of BRL19,166.65 each, starting on January
28, 2005. Such monthly installments were adjusted annually by the cumulative INPC (a Consumer Price Index in Brazil)
in lieu of interest. As at December 31, 2006, BRL728,580 ($340,458) of the purchase price remained to be paid to the
Company’s subsidiary, with BRL657,717 ($341,352) remaining to be paid as at June 20, 2007. At present, the
installment payments are up-to-date. Mr Carvalho Silva and the Company have agreed that the remaining balance of
the purchase price of the house will be paid by Mr Carvalho Silva as soon as reasonably practicable and in any event
no later than August 31, 2007.
A Brazilian subsidiary of the Company received marketing, communications and corporate affairs services from a
Brazilian company in which a son of Roberto Carvalho Silva owns a one-third interest. The total amount paid by the
Company’s subsidiary to this company in respect of such services during the years were: 2006: BRL903,465
($414,433); 2004: BRL3,944 ($1,351); 2005: BRL311,923 ($127,837); and BRL634,023 ($329,055) has been paid to
date in 2007. The Company is currently reviewing its relationship with this service provider and the contracts under
which such services are provided.
F-36
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
7.
TAXATION
2006
$
2005
$
2004
$
Income/(loss) from continuing operations before income tax, equity income,
minority interests and cumulative effect of accounting change was derived from
the following jurisdictions:
South Africa
79
(179)
(97)
Argentina
40
30
24
Australia
106
66
39
Brazil
114
81
102
Ghana
(128)
(139)
(39)
Guinea
(53)
(18)
(28)
Mali
6
-
-
Namibia
18
11
2
Tanzania
(213)
(86)
3
USA
(23)
(37)
(8)
Zimbabwe
-
-
-
Other, including Corporate and Non-gold producing subsidiaries
(42)
(92)
(23)
(96)
(363)
(25)
Charge/(benefit) for income taxes attributable to continuing operations is as
follows:
Current:
South Africa
(1)
66
40
44
Argentina
13
-
(1)
Australia
25
6
2
Brazil
(2)
38
23
15
Ghana
5
-
-
Guinea
-
-
-
Mali
2
-
-
Namibia
4
-
-
Tanzania
1
-
2
USA
-
(1)
-
Zimbabwe
-
-
-
Other
2
2
6
Total current
156
70
68
(1)
Charges for current tax in 2006, 2005 and 2004 included an increase in
provision in respect of estimated tax payable amounting to $1 million,
$40 million and $40 million, respectively, as a result of the receipt of tax
assessments for the years ended December 31, 1998, 1999, 2000 and 2001.
(2)
Charges for current tax in 2005 included $13 million relating to tax obligations
as a result of a change in interpretation of legislation made by the Brazilian
Superior Justice Court.
Deferred:
South Africa
(1)
16
(95)
(201)
Argentina
2
10
10
Australia
4
10
5
Brazil
(4)
3
1
Ghana
(2)
(39)
(110)
(11)
Guinea
2
2
(1)
Mali
-
-
-
Namibia
3
4
-
Tanzania
(20)
(12)
-
USA
(3)
-
-
-
Zimbabwe
-
-
-
Other
2
(3)
(3)
Total deferred
(34)
(191)
(200)
Total income and mining tax expense/(benefit)
122
(121)
(132)
F-37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
7.
TAXATION(continued)
(1)
Mining tax on mining income in South Africa is determined according to a
formula which adjusts the tax rate in accordance with the ratio of profit to
revenue from mining operations. This formula also allows an initial portion of
mining income to be free of tax. Non-mining income is taxed at a standard rate.
During 2004, the estimated deferred taxation rate was revised to reflect the
future anticipated taxation rate at the time temporary differences reverse and
deferred taxation was provided at a rate of 38 percent for temporary
differences relating to mining operations. During 2005 and 2006, deferred
taxation was provided at a future anticipated taxation rate of 38 percent and
37 percent, respectively. In addition, charges for deferred taxation in 2005
included tax benefits of $13 million resulting from changes in enacted statutory
tax rates. There were no changes in the statutory tax rates for 2006.
The effect of the change in estimates on the results for 2006, 2005 and 2004
were as follows:
Year ended December 31, 2006
Impact
$
Per basic
common share
(a)
(cents)
Per diluted
common share
(a) (b)
(cents)
Income before extraordinary items
65
24
24
Extraordinary items
-
-
-
Net income
65
24
24
(a)
Per basic and diluted ordinary and E ordinary shares.
(b)
The calculation of diluted earnings per common share for 2006 did not assume
the effect of 15,384,615 shares issuable upon the exercise of Convertible Bonds
and 854,643 shares issuable upon the exercise of stock incentive options as their
effects are anti-dilutive for this period.
Year ended December 31, 2005
Impact
$
Per basic
common share
(cents)
Per diluted
common share
(a)
(cents)
Income before extraordinary items
20
8
8
Extraordinary items
-
-
-
Net income
20
8
8
(a)
The calculation of diluted earnings per common share for 2005 did not assume
the effect of 15,384,615 shares issuable upon the exercise of Convertible Bonds
and 601,315 shares issuable upon the exercise of stock incentive options as their
effects are anti-dilutive for this period.
Year ended December 31, 2004
Impact
$
Per basic
common share
(cents)
Per diluted
common share
(a)
(cents)
Income before extraordinary items
158
63
63
Extraordinary items
-
-
-
Net income
158
63
63
(a)
The calculation of diluted earnings per common share for 2004 did not assume
the effect of 15,384,615 shares issuable upon the exercise of Convertible Bonds
as their effects are anti-dilutive for this period.
2006
$
2005
$
2004
$
(2)
Charges for deferred taxation in 2006 included tax benefits of $21 million
resulting from an extension of tax losses granted by the Ghanaian Taxation
Authorities which would have been forfeited during the current year. During 2005
tax benefits of $94 million resulted from changes in enacted statutory tax rates
and is net of valuation allowances of $4 million (2004: $nil million).
(3)
Net of valuation allowances of $12 million (2005: $2 million, 2004: negative $6 million).
The unutilized tax losses of the North American operations which are available
for offset against future profits earned in the United States of America, amount
to $277 million (2005: $198 million, 2004: $192 million).
F-38
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
7.
TAXATION(continued)
The unutilized tax losses of the Ghanaian operation, acquired as part of the
AngloGold Ashanti Business Combination, which are available for offset against
future profits earned in this country, amount to $nil million (2005: $146 million,
2004: $132 million).
2006
$
Analysis of tax losses
Assessed losses utilized during the year
64
Unutilized tax losses remaining to be used against future profits can be split
into the following periods:
Utilization required within one year
-
Utilization required within one and two years
-
Utilization required within two and five years
-
Utilization in excess of five years
277
277
2006
Amount
%
2005
Amount
%
2004
Amount
%
Reconciliation between corporate income tax and statutory
income tax is as follows:
Corporate income tax at statutory rates
(36)
37
(134)
37
(10)
38
Formula variation in mining taxation rate for current period
(2)
2
(4)
1
(28) 112
Disallowable expenditure
(1)
127 (132)
30
(8)
40 (160)
Effect of income tax rates of other countries
(38)
40
115
(32)
18
(72)
Impact of change in estimated deferred taxation rate
65 (68)
(127)
35
(158) 632
Other, net
6
(6)
(1)
-
6
(22)
Total income and mining tax expense/(benefit)
122 (127)
(121)
33
(132) 528
(1)
Disallowable expenditure includes the impact of different tax rates applied to assets that are impaired.
2006
$
2005
$
Deferred taxation liabilities and assets on the balance sheet as of December 31, 2006
and 2005, relate to the following:
Deferred taxation liabilities:
Depreciation, depletion and amortization
1,638
1,579
Product inventory not taxed
3
18
Derivatives
19
30
Other comprehensive income deferred taxation
72
-
Other
23
38
Total
1,755
1,665
Deferred taxation assets:
Provisions, including rehabilitation accruals
(171)
(140)
Derivatives
(175)
(72)
Other comprehensive income deferred taxation
(155)
(101)
Other
(23)
(17)
Tax loss carry forwards
(257)
(244)
Total
(781)
(574)
Less: Valuation allowances
97
112
Total
(684)
(462)
Disclosed as follows:
Long-term portion deferred taxation assets
39
41
Short-term portion classified as other current assets
167
-
Long-term portion deferred taxation liabilities
1,275
1,152
Short-term portion classified as other current liabilities. Refer to Note 17.
2
92
F-39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
7.
TAXATION(continued)
The classification of deferred taxation assets is based on the related asset or liability
creating the deferred taxation. Deferred taxes not related to a specific asset or liability
are classified based on the estimated period of reversal. As at December 31, 2006,
the Company had unredeemed capital expenditure, in South Africa of $8 million, on
which deferred tax has been provided at the future anticipated tax rate of 37 percent,
which is available for deduction against future taxable mining income. This future
deduction is utilizable against taxable mining income generated only from the
Company’s current mining operations and does not expire unless the Company
ceases to operate for a period of longer than one year.
No provision has been made for South African income tax or foreign tax that may
result from future remittances of undistri buted earnings of foreign subsidiaries or
foreign corporate joint ventures because it is expected that such earnings will not be
distributed as a dividend in the foreseeable future. The distribution of these
undistributed earnings of $955 million (2005: $763 million, 2004: $840 million) by
these entities would result in income and foreign withholding taxes of approximately
$353 million (2005: $282 million, 2004: $319 million).
Analysis of Valuation Allowances
The movement in valuation allowances for the three years in the period ended December 31, is summarized as follows:
Balance at
beginning of
period
$
Charged to
costs and
expenses
$
Deductions
$
Balance at
end of period
$
Year ended December 31, 2006
- Valuation allowance
112
22
(37)
97
Year ended December 31, 2005
- Valuation allowance
113
19
(20)
112
Year ended December 31, 2004
- Valuation allowance
86
45
(18)
113
8.
DISCONTINUED OPERATIONS
The Ergo reclamation surface operation, which forms part of the South African
operations and is included under South Africa for segmental reporting, has been
discontinued as the operation has reached the end of its useful life and the assets are
no longer in use. After a detailed investigation of several options and scenarios, and
based on management’s decision reached on February 1, 2005, mining operations at
Ergo ceased on March 31, 2005 with only site restoration obligations remaining. The
Company has reclassified the income statement results from the historical
presentation to profit/(loss) from discontinued operations in the condensed
consolidated income statement for all periods presented. The condensed
consolidated cash flow statement has been reclassified for discontinued operations
for all periods presented. The results of Ergo for the years ended December 31, 2006,
2005 and 2004, are summarized as follows:
Year ended December 31,
2006
2005
2004
$
Per share
(1)(2)
(cents)
$
Per share
(2)
(cents)
$
Per share
(2)
(cents)
Revenue
4
1
18
7
87
35
Costs, expenses and recoveries
2
1
(62)
(24)
(98)
(39)
Pre-tax profit/(loss)
6
2
(44)
(17)
(11)
(4)
Taxation
-
-
-
-
-
-
Net profit/(loss) attributable to discontinued operations
6
2
(44)
(17)
(11)
(4)
(1)
Per basic and diluted ordinary and E ordinary shares.
(2)
Basic and diluted earnings/(loss) per common share. The calculation of diluted earnings/(loss) per common share for 2006, 2005 and 2004 did not
assume the effect of 15,384,615 shares, issuable upon the exercise of Convertible Bonds as their effects are anti-dilutive for these periods. The
calculation of diluted earnings/(loss) per common share for 2005 and 2006 did not assume the effect of 601,315 and 854,643 shares, respectively,
issuable upon the exercise of stock incentive options as their effects are anti-dilutive for these periods.
F-40
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
2006
$
2005
$
2004
$
9.
(LOSS)/EARNINGS PER COMMON SHARE
The following table sets forth the computation of basic and diluted (loss)/earnings
per share (in millions, except per share data):
Numerator
(Loss)/income before cumulative effect of accounting change
(142)
(270)
97
Cumulative effect of accounting change
-
(22)
-
Net (loss)/income
(142)
(292)
97
Less Dividends:
Ordinary shares
107
149
179
E Ordinary shares
-
-
-
Undistributed losses
(249)
(441)
(82)
Ordinary shares undistributed losses
(249)
(441)
(82)
E Ordinary shares undistributed losses
(1)
-
-
-
Total undistributed losses
(249)
(441)
(82)
Denominator for basic (loss)/earnings per ordinary share
Ordinary shares
272,214,937
264,230,586
251,170,130
Time related options
(2)
398,326
405,048
182,422
Weighted average number of ordinary shares
272,613,263
264,635,634
251,352,552
Effect of dilutive potential ordinary shares
Dilutive potential of stock incentive options
(3)
-
-
695,749
Dilutive potential of convertible bonds
(4)
-
-
-
Dilutive potential of E Ordinary shares
24,220
-
-
Denominator for diluted (loss)/earnings per share – adjusted weighted average
number of ordinary shares and assumed conversions
272,637,483
264,635,634
252,048,301
Weighted average number of E Ordinary shares used in calculation of basic
and diluted earning per E Ordinary share
194,954
-
-
(Loss)/earnings per share (cents)
Before cumulative effect of accounting changes
Ordinary shares
(52)
(102)
39
E Ordinary shares
(91)
-
-
Ordinary shares – diluted
(52)
(102)
38
E Ordinary shares – diluted
(91)
-
-
Cumulative effect of accounting changes
Ordinary shares
-
(8)
-
E Ordinary shares
-
-
-
Ordinary shares – diluted
-
(8)
-
E Ordinary shares – diluted
-
-
-
Net (loss)/income
Ordinary shares
(52)
(110)
39
E Ordinary shares
(91)
-
-
Ordinary shares – diluted
(52)
(110)
38
E Ordinary shares – diluted
(91)
-
-
(1)
Rounded to zero.
(2)
Compensation awards are included in the calculation of basic (loss)/earnings per common share from when the necessary conditions have been
met, and it is virtually certain that shares will be issued as a result of employees exercising their options.
(3)
The calculation of diluted (loss)/earnings per common share for 2005 and 2006 did not assume the effect of 601,315 and 854,643 shares,
respectively, issuable upon the exercise of stock incentive options as their effects are anti-dilutive for these periods.
(4)
The calculation of diluted (loss)/earnings per common share for 2006, 2005 and 2004 did not assume the effect of 15,384,615 shares issuable upon
the exercise of Convertible Bonds as their effects are anti-dilutive for these periods.
F-41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
2006
$
2005
$
10. RESTRICTED CASH
Cash classified as restricted for use comprise of the following:
Cash restricted by the prudential solvency requirements
2
3
Cash balances held by the Environmental Rehabilitation Trust
Fund
5
-
Cash balances held by the Boddington expansion
3
-
The Company was restricted from utilizing available funds in Geita
Management Company Limited, up to a maximum of $25 million in
respect of outstanding hedges
(1)
-
4
Other
1
1
11
8
(1)
Restrictions lifted by counterparts during 2006.
11. INVENTORIES
Short-term:
Gold in process
111
93
Gold on hand
37
10
Ore stockpiles
84
47
Uranium oxide and sulphuric acid
6
14
Supplies
162
133
400
297
Less: Heap leach inventory
(1)
(46)
(37)
354
260
(1)
Short-term portion relating to heap leach inventory classified separate,
as materials on the leach pad.
Long-term:
Gold in process
149
116
Ore stockpiles
66
30
Supplies
2
2
217
148
Less: Heap leach inventory
(1)
(149)
(116)
68
32
(1)
Long-term portion relating to heap leach inventory classified separate,
as materials on the leach pad.
The Company recorded aggregate write-downs of $2 million, $nil million and
$nil million for the years ended December 31, 2006, 2005 and 2004, respectively, to
reduce the carrying value of inventories to net realizable value. Inventory write-
downs for 2006 are included in production costs.
12.
PROPERTY, PLANT AND EQUIPMENT, NET
Mine development
(1)
4,633
4,322
Mine infrastructure
2,293
2,050
Mineral rights and other
1,058
1,095
Land
26
27
8,010
7,494
Accumulated depreciation, depletion and amortization
(3,033)
(2,572)
Net book value December 31,
4,977
4,922
(1)
Includes interest capitalized of $10 million (2005: $16 million). Refer to Note 5.
Mining assets with a net book value of $6 million (2005: $8 million) are encumbered
by project finance. Refer to Note 20.
F-42
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
12. PROPERTY, PLANT AND EQUIPMENT, NET (continued)
DEFERRED STRIPPING
Prior to January 1, 2006, stripping costs incurred in open-pit operations during the
production phase to remove additional waste were charged to operating costs on
the basis of the average life of mine stripping ratio and the average life of mine
costs per tonne and resulted in capitalization of such stripping costs (deferred
stripping) as part of mining assets.
As described in Note 2 the Company adopted EITF Issue 04-6, “Accounting for
Stripping Costs in the Mining Industry” on January 1, 2006.
As at December 31,
(in millions)
2006
$
2005
$
Movements in the deferred stripping costs balance were as follows:
Opening balance
105
69
Cumulative effect adjustment
(105)
-
Amount deferred
-
28
Translation
-
8
Closing balance
-
105
Production costs for the years ended December 31, 2005 and 2004 as disclosed in
the consolidated statements of income, would have increased by $28 million and
$28 million, respectively, if stripping costs were expensed rather than capitalized in
these periods.
Prior to January 1, 2006, the full amount of stripping costs incurred during the
production phase were not expensed until the end of the life of the respective mines.
Total stripping costs (net of amortization) included in production costs in the
consolidated statements of income for the periods ended December 31, 2005 and
2004 amounted to $203 million and $98 million, respectively.
Total stripping costs included in production costs in the consolidated statements of
income for the year ended December 31, 2006 amounts to $227 million.
2006
$
2005
$
13.
ACQUIRED PROPERTIES, NET
Acquired properties, at cost
1,983
2,023
Accumulated amortization
(694)
(611)
Net book value December 31,
1,289
1,412
14. GOODWILL AND OTHER INTANGIBLES
Goodwill
The carrying amount of goodwill by reporting unit as of December 31, 2006 and 2005 and changes in the carrying
amount of goodwill are summarized as follows:
Australia
Ghana
Guinea
Namibia
Tanzania
Total
$
$
$
$
$
$
Balance at January 1, 2005
229
122
10
1
181
543
Impairment losses
(1)
-
(4)
-
-
-
(4)
Translation
(15)
-
-
-
-
(15)
Balance at December 31, 2005
214
118
10
1
181
524
Impairment losses
-
-
-
-
-
-
Translation
18
-
-
-
-
18
Balance at December 31, 2006
232
118
10
1
181
542
(1)
During 2005, the Company recorded impairment losses of $4 million relating to goodwill held
in Bibiani. Refer to Note 5 – Impairment of assets.
F-43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
14. GOODWILL AND OTHER INTANGIBLES (continued)
2006
$
2005
$
Other intangibles, net
Royalty rate and tax rate concession agreements
(1)
Gross carrying value
49
49
Accumulated amortization
(5)
(3)
Impairment losses
(20)
(20)
24
26
(1)
The government of Ghana agreed, as part of the AngloGold Ashanti Business
Combination, to a concession on royalty payments at a fixed rate of 3 percent
per year for a period of fifteen years. The fair value of the royalty rate
concession is amortized on a straight line basis over a period of fifteen years
with nil residual value.
In addition, the government of Ghana also agreed as part of the AngloGold
Ashanti Business Combination, to a concession wherein income tax will not
exceed a rate of 30 percent for a period of fifteen years. During 2005, enacted
statutory tax rates in Ghana were reduced to 25 percent. This indicated an
impairment and the Company fully impaired the tax rate concession and
recorded an impairment loss of $20 million (2004: $nil million). Refer to
Note 5 – Impairment of assets.
Amortization expense included in the consolidated statements of income
amounted to $2 million for 2006 (2005: $2 million, 2004: $1 million).
Based on carrying value at December 31, 2006, the estimated aggregate
amortization expense for each of the next five years is as follows:
2007
2
2008
2
2009
2
2010
2
2011
2
2006
$
2005
$
15.
OTHER LONG-TERM ASSETS
Investments in affiliates – unlisted
5
5
Investments in affiliates – listed
31
29
Investments in equity accounted joint ventures
314
324
Carrying value of equity method investments (see below)
350
358
Investment in marketable equity securities – available for sale
31
15
Investment in marketable debt securities – held to maturity
18
19
Investment in non-marketable assets – held to maturity
3
3
Investment in non-marketable debt securities – held to maturity
61
65
Other non-current assets
80
36
543
496
F-44
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
15.OTHER LONG TERM ASSETS (continued)
Investments in affiliates
Unlisted
The Company holds a 25.0 percent (2005: 25.0 percent) interest in Oro Group
(Proprietary) Limited which is involved in the manufacture and wholesale of
jewellery. The year end of Oro Group (Proprietary) Limited is March. Results are
included for the twelve months ended September 30, 2006. On September 21, 2006, Oro
Group (Proprietary) Limited repaid a shareholders loan of $1 million originally granted in 2000.
Loans granted to Oro Group (Proprietary) Limited are repayable at the discretion of its board of directors.
Listed
The Company holds a 29.9 percent (2005: 29.9 percent) interest in Trans- Siberian Gold plc which is involved in the exploration and development of gold mines. The Company’s initial 17.5 percent equity interest acquired in Trans-Siberian Gold plc during July 2004 was increased to 29.9 percent onMay 31, 2005, the date on which the second subscription was completed. Referto Note 3 – Acquisitions and disposals of businesses and assets. The year end ofTrans-Siberian Gold plc is December. Results are included for the twelve monthsended September 30, 2006. On June 27, 2006, the Company advanced loans of$10 million to Trans-Siberian Gold plc at LIBOR plus 4 percent which may beconverted into equity. The market value of the Company’s share of the listedaffiliate as at December 31, 2006 is $9 million. During the year endedDecember 31, 2006 the Company recorded an impairment loss of $7 million on itsinvestment. The investment (including loans) is carried at carrying value of$31 million.
Investments in equity accounted joint ventures
The Company holds the following interest in incorporated mining joint ventures, of
which the significant financial operating policies are, by contractual arrangement,
jointly controlled:
December 31,
2006
percentage held
December 31,
2005
percentage held
Nufcor International Limited
(1)
50.00
50.00
Sadiola
(2)
38.00
38.00
Morila
(2)
40.00
40.00
Yatela
(2)
40.00
40.00
(1)
Year end is June. Results are included for the twelve months ended
December 31.
(2)
The year ends of these entities are December. Results are included for the
twelve months ended December 31.
2006
$
2005
$
The difference between the carrying value of the investments in affiliates and
joint ventures and the underlying equity in net assets is as follows:
Carrying value of investments
350
358
Cost of investments
380
380
Undistributed loss since acquisition
(1)
(20)
Other than temporary decline in the value of investments
(1)
(10)
(3)
Other comprehensive income
(31)
(2)
Loans advanced
(2)
12
3
(1)
During the year ended December 31, 2006, the Company recorded an impairment
loss of $7 million on its listed investment held in Trans-Siberian Gold plc.
(2)
Movement in loans advanced from 2005 represents the repayment of the Oro Group
(Proprietary) Limited shareholders loan of $1 million on September 21, 2006 and
loans advanced of $10 million to Trans-Siberian Gold plc on June 27, 2006.
F-45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
15.
OTHER LONG-TERM ASSETS(continued)
2006
$
2005
$
Investment in marketable equity securities – available for sale
31
(1)
15
(1)
Increase in investment in marketable equity securities during 2006 mainly
reflects the investment of $14 million (19.99 percent) interest acquired in
International Tower Hill Mines Limited during September 2006. Refer to Note 3 –
Acquisitions and disposals of businesses and assets.
Total gains on marketable equity securities included in other comprehensive income
amounts to $5 million (2005: $1 million). Total losses on marketable equity securities
included in other comprehensive income amounts to $1 million (2005: $nil million).
Investment in marketable debt securities – held to maturity
Investments in marketable securities represent held to maturity government and
corporate bonds. The investment is measured at amortized cost.
18
19
Investment in non-marketable assets – held to maturity
Investments in non-marketable assets represent secured loans and receivables
secured by pledge of assets.
3
3
Investment in non-marketable debt securities – held to maturity
Investments in non-marketable securities represent the held to maturity fixed-term
deposits (corporate bonds and notes) required by legislation for the Environmental
Rehabilitation Trust Fund and Environmental Protection Bond.
61
65
As of December 31, 2006 the contractual maturities of debt securities were as
follows:
Marketable debt securities
Less than one year
1
Two to seven years
7
Seven to twelve years
1
More than twelve years
9
18
Non-marketable debt securities
Less than one year
52
More than twelve years
9
61
Fair values of the held to maturity debt securities at December 31, 2006 and 2005
approximate cost.
Other non-current assets
Unsecured
Other loans and assets
(1)
44
16
44
16
Non-current debtors
Prepayments and accrued income
5
4
Recoverable tax, rebates, levies and duties
25
16
Other trade debtor
(2)
3
-
Other debtors
3
-
36
20
80
36
(1)
Other comprises loans and receivables of $4 million (2005: $6 million) measured at
amortized cost and post retirement assets of $40 million (2005: $10 million) measured
according to the employee benefits accounting policy.
(2)
Bears interest and is repayable over four years.
F-46
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
15.
OTHER LONG-TERM ASSETS(continued)
2006
$
2005
$
Equity accounted joint ventures
Summarized financial statements of the joint ventures which have been equity
accounted are as follows (Geita – only income and expenses for the period ended
April 26, 2004 included, as effective from this date, the Company acquired an
additional 50 percent in Geita as part of the AngloGold Ashanti Business
Combination which resulted in Geita being accounted for as a subsidiary of
AngloGold Ashanti) (100 percent shown):
2006
$
2005
$
2004
$
Statements of income for the period
Sales and other income
817
600
546
Costs and expenses
(465)
(496)
(493)
Taxation
(90)
(6)
(1)
Net income
262
98
52
Balance sheets at December 31,
Non-current assets
720
754
Current assets
438
366
1,158
1,120
Long-term liabilities
(89)
(97)
Loans from shareholders
(19)
(27)
Current liabilities
(268)
(176)
Net assets
782
820
2006
$
2005
$
16.
ASSETS AND LIABILITIES HELD FOR SALE
Effective June 30, 2005, the investment in the Weltevreden mining rights, located in
South Africa, of $15 million, was classified as held for sale. This investment was
previously recognised as a tangible asset. Weltevreden's rights were sold to Aflease Gold
and Uranium Resources Limited on June 15, 2005. On December 19, 2005, Aflease was
acquired by sxr Uranium One (formerly Southern Cross Inc.). In terms of these sale
agreements, the purchase price will be paid in the form of sxr Uranium One shares to be
issued to the Company. This will take place when the conditions precedent to the
agreement have been met. The Weltevreden mining rights form part of an old order
mining rights conversion application, and the conditions precedent are that upon the
government granting the conversion of these to new order mining rights, the Company
will cede the Weltevreden mining rights to sxr Uranium One.
The Director-General of Minerals and Energy notified the Company that the new order
mining rights were granted to the Company. However, the signing of the notarial
agreement and the registration of the converted mining right still has to be completed.
Once these have been completed, the new order mining rights will then be ceded to sxr
Uranium One, and the related sxr Uranium One shares will then be issued to the
Company as full settlement of the purchase price. The fair value of the sxr Uranium One
shares as at December 31, 2006 amounts to $51 million.
9
10
Arising from the sale of the Bibiani assets in Ghana, effective December 28, 2006, to
Central African Gold plc (CAG), the group decided to apply $3 million of the partial
proceeds to an investment of 15,825,902 CAG shares. Subsequent to this decision, local
regulators have required that the 15,825,902 shares in CAG must be sold within 90 days
of December 28, 2006. On February 14, 2007, the Company disposed of 7,000,000 CAG
shares yielding total proceeds of £768,845 ($1.5 million) and during April 2007, disposed
of the remaining 8,825,902 CAG shares yielding total proceeds of £894,833 ($1.8 million).
The investment as at December 31, 2006 is carried at fair value less costs to sell.
3
-
F-47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
16.
ASSETS AND LIABILITIES HELD FOR SALE(continued)
2006
$
2005
$
As at December 31, 2006 and 2005 the carrying amount of major assets and liabilities
relating to Weltevreden and CAG to be disposed of, included:
Property, plant and equipment
15
16
Other long-term assets (marketable equity investment)
3
-
Deferred taxation
(6)
(6)
Net assets
12
10
17.
OTHER CURRENT LIABILITIES
Deferred income
17
6
Deferred taxation. Refer to Note 7.
2
92
Related parties. Refer to Note 6.
-
5
Accrual for power
14
14
Unearned premiums
41
51
Other (including accrued liabilities)
52
31
126
199
18.
SHORT-TERM DEBT
Current maturities of long-term debt. Refer to Note 20.
33
160
19.
OTHER NON-CURRENT LIABILITIES
Deferred income
24
14
20.
LONG-TERM DEBT
Unsecured
Convertible bond
(1)
Fixed semi-annual coupon of 2.375% per annum. The bond is convertible, at the holders’
option, into ADSs up to February 2009 and is US dollar-based. The bond is convertible
at a price of $65.00 per ADS.
1,008
1,008
Corporate bond
(2)
Fixed semi-annual coupon of 10.50% per annum. The bond is repayable on
August 28, 2008 and is ZAR-based.
296
327
Syndicated loan facility ($700 million)
(3)
Interest charged at LIBOR plus 0.4% per annum. Loan is repayable in January 2008 and
is US dollar-based. The loan is subject to certain debt covenant arrangements for which
no default event occurred.
181
460
Bank Belgolaise
Interest charged at LIBOR plus 1.5% per annum. Loan is repayable in 24 equal monthly
installments commencing October 2005 and is US dollar-based.
2
4
Precious Fields Estates Company Ltd
Annuity based repayments expired in October 2006. Loan is US dollar-based.
-
1
Local money-market short-term borrowings
(4)
Short-term borrowings at market related rates and are ZAR-based.
-
129
Bank overdraft
Bank overdraft at market related rates and is Ghanaian Cedi-based.
8
-
Australia and New Zealand Banking Group Limited
(5)
-
-
Total unsecured borrowings
1,495
1,929
Secured
Capital leases
Senstar Capital Corporation
(6)
Interest charged at a weighted average rate of 6.77% per annum. Loans are repayable in
monthly installments terminating in November 2009 and are US dollar-based. The
equipment financed is used as security for these loans. Refer to Note 12.
8
10
Terex Africa (Proprietary) Limited
(7)
Interest charged at a rate of 9.0% per annum. Loan is repayable in January 2008 and is
US dollar-based. The equipment financed is used as security for this loan. Refer to
Note 12.
2
-
Total long-term debt
1,505
1,939
Current maturities included in short-term debt.
33
160
1,472
1,779
F-48
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
20.
LONG-TERM DEBT(continued)
2006
$
2005
$
Scheduled minimum long-term debt repayments are:
2007
33
2008
471
2009
1,001
2010
-
2011
-
1,505
The currencies in which the borrowings are denominated are as follows:
United States dollars
1,201
1,483
South African rands
296
456
Ghanaian Cedi
8
-
1,505
1,939
Undrawn borrowing facilities as at December 31, 2006 are as follows:
Syndicated loan ($700 million) – US dollar
520
245
FirstRand Bank Limited – US dollar
50
-
ABSA Bank Limited – US dollar
42
42
Nedbank Limited – US dollar
2
-
Citibank, N.A. – US dollar
-
8
Standard Bank of South Africa Limited – rands
37
-
FirstRand Bank Limited – rands
31
17
Nedbank Limited – rands
7
7
ABSA Bank Limited – rands
4
5
Commerzbank AG – rands
3
3
ABN Amro Bank N.V. – rands
1
-
Australia and New Zealand Banking Group Limited – Australian dollar
79
37
ABN Amro Bank N.V. – euros
7
-
783
364
(1)
Convertible Bond
Senior unsecured fixed rate bond
1,000
1,000
Add: Accrued interest
8
8
1,008
1,008
On February 27, 2004, noneAngloGold Ashanti Holdings plc, a wholly-owned subsidiary
of the Company, issued $1,000,000,000 2.375 percent guaranteed convertible
bonds due 2009, convertible into ADSs and guaranteed by AngloGold Ashanti.
Subject to certain restrictions, holders of convertible bonds are entitled to convert
each convertible bond into an AngloGold Ashanti ADS at the then applicable
conversion price at any time from April 8, 2004 to February 20, 2009, or, if the
convertible bonds are called for redemption earlier than February 27, 2009, the
seventh business day prior to the date of early redemption.
If the bonds have not been converted by February 20, 2009, they will be redeemed
at par on February 27, 2009. AngloGold Ashanti Holdings plc has the option of
calling an early redemption of all the bonds 3 years after their issuance, if the price
of the ADSs exceeds 130 percent of the conversion price for more than 20 days
during any period of 30 consecutive trading days.
The initial conversion price for the convertible bonds was $65.00 per ADS. The
conversion premium to the reference volume weighted average price of the ADSs on
the New York stock exchange of $40.625 on February 19, 2004, when the issue of
the convertible bonds was announced, was 60 percent. If all bond holders exercise
their option to convert their bonds into ADSs and assuming no adjustments are
made to the initial conversion price, up to 15,384,615 new ADSs will be issued. The
conversion ratio is subject to adjustment in case of various corporate events
including share splits and capital distributions.
The calculation of diluted (loss)/earnings per common share for 2006, 2005 and
2004 did not assume the effect of 15,384,615 shares issuable upon the exercise of
Convertible Bonds as their effects are anti-dilutive for these periods. Refer to Note 9.
F-49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
20.
LONG-TERM DEBT(continued)
2006
$
2005
$
The proceeds of the issue, after payment of expenses, were utilized by AngloGold
Ashanti to refinance amounts outstanding under credit facilities, to meet transaction
costs in connection with the acquisition of Ashanti and for general corporate
purposes, including planned capital expenditure.
(2)
Corporate Bond
Senior unsecured fixed rate bond
286
315
Add: Accrued interest
10
12
296
327
On August 21, 2003, AngloGold issued unsecured bonds in the aggregate principal
amount of R2 billion ($300 million) at a fixed semi-annual coupon of 10.50% per
annum. The bond is repayable on August 28, 2008, subject to early redemption at the
Company’s option and is listed on the Bond Exchange of South Africa. The net
proceeds of the bond are for general corporate purposes.
(3)
Syndicated loan facility ($700 million)
In January 2005, the Company entered into a new three year $700 million unsecured
syndicated borrowing facility, at a margin of 0.4% over LIBOR. A commitment fee of
0.15% per annum is payable on the undrawn portion of the facility. The three year
$700 million syndicated facility was used to repay a maturing facility of $600 million
(repaid on February 4, 2005) and is available for general corporate purposes. During
the year ended December 31, 2006, the Company repaid $415 million and drew down
$140 million under the $700 million syndicated facility. This amount was funded from
proceeds raised through the public share offering (completed in April 2006) and cash
flow from operations. The amount drawn under this facility was $180 million as at
December 31, 2006. The Company, AngloGold Offshore Investments Limited and
AngloGold American Investments Limited have guaranteed all payments an d other
obligations of the wholly-owned subsidiaries AngloGold Ashanti Holdings plc and
AngloGold Ashanti USA Inc. regarding the $700 million syndicated loan facility.
(4)
Local money-market short-term borrowings
During the year ended December 31, 2006, the Company repaid $129 million in local
short-term money market loans. These amounts were funded from proceeds raised
through the public share offering (completed in April 2006) and cash flow from
operations.
(5)
Australia and New Zealand Banking Group Limited
On October 14, 2002, a new loan facility of A$50 million was arranged with the
Australia and New Zealand Banking Group Limited, at 0.35% over the Bank Bill Swop
Reference Rate. A commitment fee of 0.20% per annum is payable on the undrawn
portion of the facility. The facility, originally repayable by September 2003, has been
increased to A$100 million during 2006, and extended to September 2007. There was
$nil million drawn under this facility as at December 31, 2006.
Capital leases
(6)
Senstar Capital Corporation
Capital leases are for specific periods, with terms of renewal but no purchase options
or escalation clauses. Renewals are at the discretion of the entity that holds the lease.
As of December 31, 2006 and 2005, Property, plant and equipment, allocated to Mine
infrastructure, includes $16 million and $18 million of assets under capital leases and
$11 million and $10 million of related accumulated depreciation, respectively.
Amortization charges relating to capital leases are included in Depreciation, depletion
and amortization expense for all periods presented. The weighted average interest
rate on the leases existing at December 31, 2006 is 6.77%. Payments are made
monthly, including interest, through 2009.
F-50
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
20.
LONG-TERM DEBT(continued)
2006
$
2005
$
Future minimum lease payments under capital leases together with the present value of
minimum lease payments as of December 31, 2006 are:
2007
3
2008
3
2009
3
Total minimum lease payments
9
Less interest
1
Present value of net minimum lease payments
8
Less current portion
3
Long-term capital lease obligation
5
(7)
Terex Africa (Proprietary) Limited
The capital lease is for a specific period, with no terms of renewal and a purchase
option. As of December 31, 2006, Property, plant and equipment, allocated to Mine
infrastructure, includes $2 million of assets under the capital lease and $1 million of
related accumulated depreciation. Amortization charges relating to the capital lease
are included in Depreciation, depletion and amortization expense for the year ended
December 31, 2006. The interest rate on the lease existing at December 31, 2006 is
9%. The lease is to be repaid in January 2008.
Future minimum lease payments under the capital lease together with the present
value of minimum lease payments as of December 31, 2006 are:
2007
-
2008
2
Total minimum lease payments
2
Less interest
-
Present value of net minimum lease payments
2
Less current portion
-
Long-term capital lease obligation
2
21.
PROVISION FOR ENVIRONMENTAL REHABILITATION
Accrued environmental rehabilitation costs
310
325
Long-term environmental obligations comprising decommissioning and restoration are
based on the group’s environmental management plans, in compliance with the current
environmental and regulatory requirements.
Decommissioning costs
The provision for decommissioning represents the cost that will arise from rectifying
damage caused from establishing mining operations.
Decommissioning costs, representing obligations associated with the retirement of long-
lived assets that result from the acquisition, construction or normal operations of long-
lived assets, are accounted for in accordance with the provisions of SFAS143.
Decommissioning costs are further described in Note 5 – Asset retirement obligations.
Restoration costs
The provision for restoration represents the closure cost for restoration of site damage.
Rehabilitation of site damages only commences at the closure stage of the mine. Site
damages are not costs associated with the construction or normal operations of long-lived
assets and do not create probable future economic benefits.
At each reporting balance sheet date, gross restoration costs are estimated at the present
value of the expenditures expected to settle the obligation, using estimated cash flows
based on current prices. The estimates are discounted at a credit adjusted risk free rate.
F-51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
21.
PROVISION FOR ENVIRONMENTAL REHABILITATION(continued)
2006
$
2005
$
While the ultimate amount of rehabilitation cost to be incurred in the future is uncertain,
the Company has estimated that the total cost for mine rehabilitation and closure, on an
undiscounted basis, will be $482 million which includes a total estimated liability of
$17 million in respect of equity accounted joint ventures. Refer to Note 15. Certain
amounts have been contributed to a rehabilitation trust and environmental protection bond
under the Company's control. The monies in the trust and bond are invested primarily in
interest bearing debt securities and are included in Other long-term assets in the
Company’s consolidated balance sheet. Cash balances held in the trust and bond are
classified as restricted cash in the Company’s consolidated balance sheets for all periods
presented. AngloGold Ashanti USA has posted reclamation bonds with various federal
a nd governmental agencies to cover environmental rehabilitation obligations. Refer to Note 24.
The Company intends to finance the ultimate rehabilitation costs from the monies invested
with the rehabilitation trust fund, the environmental protection bond as well as the
proceeds on sale of assets and gold from plant clean-up at the time of mine closure.
22.
OTHER ACCRUED LIABILITIES
Other accrued liabilities
27
19
Other accrued liabilities include the following:
Provisions for labor and civil claim court settlements for South American operations
(1)
26
19
Provision for employee compensation claims in Australia
(2)
1
-
27
19
(1)
Consists of claims filed by former employees in respect of loss of employment, work-related
accident injuries and diseases, government fiscal claims relating to levies and surcharges and
closure costs of old tailings operations. These liabilities are anticipated to unwind over the next two
to five years.
(2)
Comprises workers compensation claims with regard to work related incidents. The liability is
anticipated to unwind over the next three to five years. (Values were less than $0,5 million in
2005).
23.
PROVISION FOR PENSION AND OTHER POST-RETIREMENT MEDICAL BENEFITS
Accrued liability
172
200
The provision for pension and post-retirement medical funding represents the provision for
health care and pension benefits for employees, retired employees and their dependants.
The post-retirement medical liability is assessed in accordance with the advice of
independent professionally qualified actuaries. The actuarial method used is the projected
unit credit actuarial valuation method. Refer to Note 28. The costs of post-retirement
benefits are made up of those obligations which the Company has towards current and
retired employees.
24.
COMMITMENTS AND CONTINGENCIES
Capital expenditure commitments
(1)
Contracts for capital expenditure
354
186
Authorized by the directors but not yet contracted for
731
725
1,085
911
Allocated for:
Project expenditure
- within one year
367
190
- thereafter
265
106
632
296
Stay in business expenditure
- within one year
418
572
- thereafter
35
43
453
615
(1)
Including commitments through contractual arrangements by equity accounted joint ventures.
F-52
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24.
COMMITMENTS AND CONTINGENCIES(continued)
2006
$
2005
$
Other contractual purchase obligations
(2)
- within one year
274
192
- thereafter
190
203
464
395
(2)
Other purchase obligations represent contractual obligations for the purchase of mining
contract services, power, supplies, consumables, inventories, explosives and activated
carbon. Amounts stated include purchase obligations of equity accounted joint ventures.
Contingencies
Water pumping cost – South Africa
The Company is involved in a legal dispute regarding the responsibility for water
pumping of the Margaret shaft which belongs to Stilfontein. Following an attempt by
DRDGold Limited to liquidate its North West operations and avoid incurring pumping
cost, the Company launched an urgent application against DRDGold Limited and
government departments requesting the court to order the continued pumping of water
at the Stilfontein Mines. The cessation of water pumping is likely to cause flooding in
various of the Company’s Vaal River operations. The Department of Water Affairs and
Forestry responded by issuing directives to the mining companies directing that they
share the costs of pumping at the Margaret Shaft.
The three mining companies, Simmer and Jack Mines Limited, Harmony Gold Mining
Company Limited and AngloGold Ashanti Limited, are finalizing an arrangement in
which responsibility for the water pumping will be transferred to an independent newly
formed company. The Company’s responsibility will be limited to providing one-third of
the start-up capital on loan account and the three mining companies will be members
of the newly formed company.
Should the proposed arrangement not be acceptable to the courts and/or the
regulatory authorities, the proposal may have to be amended. Due to this uncertainty,
no estimate is made of any potential liabilities.
Groundwater pollution – South Africa
The Company has identified a number of groundwater pollution sites at its current
operations in South Africa and has investigated a number of different technologies and
methodologies that could possibly be used to remediate the pollution plumes. The
viability of the suggested remediation techniques in the local geologic formation in
South Africa is however unknown. No sites have been remediated and present
research and development work is focused on several pilot projects to find a solution
that will in fact yield satisfactory results in South African conditions. Subject to the
technology being developed as a remediation technique, no reliable estimate can be
made for the obligation.
F-53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24.
COMMITMENTS AND CONTINGENCIES(continued)
2006
$
2005
$
Serra Grande sales tax on gold deliveries
47
29
Mineração Serra Grande S.A. (MSG), the operator of the Crixas mine in Brazil, has
received two tax assessments from the State of Goiás related to payments of sales
taxes on gold deliveries for export namely, one assessment for the period between
February 2004 and June 2005 and the other for the period between July 2005 to
May 2006. The tax authorities maintain that whenever a taxpayer exports gold mined
in the State of Goiás through a branch located in a different Brazilian state, it must
obtain an authorization from the Goiás State Treasury by means of a Special Regime
Agreement (Termo de Acordo re Regime Especial – TARE). The Serra Grande
operation is co-owned with Kinross Gold Corporation. The Company’s attributable
share of the first assessment is approximately $29 million. In May 2006 MSG signed
the TARE, which authorized the remi ttance of gold to the Company’s branch in Minas
Gerais specifically for export purposes. In November 2006 the administrative council’s
second chamber ruled in favor of Serra Grande and fully canceled the tax liability
related to the first period. The State of Goiás may still appeal to the full board of the
State of Goiás tax administrative council. The second assessment was issued by the
State of Goiás in October 2006 on the same grounds as the first assessment, and the
Company’s attributable share of the assessment is approximately $18 million. The
Company believes both assessments are in violation of federal legislation on sales
taxes.
VAT Dispute at Morro Velho
5
-
Morro Velho is involved in a dispute with tax authorities, as a result of an erroneous
duplication of a shipping invoice between two states in Brazil, tax authorities are
claiming that VAT is payable on the second invoice.
VAT Dispute at MSG
6
6
Mineração Serra Grande S.A. received a tax assessment in October 2003 from the
State of Minas Gerais related to sales taxes on gold allegedly returned from the
branch in Minas Gerais to the company head office in the State of Goiás. The tax
administrators rejected the Company’s appeal against the assessment. The
Company is now dismissing the case at the judicial sphere.
Financial guarantees
AngloGold Offshore Investments Limited guarantee of the Nufcor International Limited
loan facility:
40
40
F-54
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24.
COMMITMENTS AND CONTINGENCIES(continued)
2006
$
2005
$
AngloGold Offshore Investments Limited, a wholly owned subsidiary of the Company,
has guaranteed 50 percent of the Nufcor International Limited loan facility with First
Rand (Ireland) plc (formerly RMB International (Dublin) Limited). Nufcor International
Limited is accounted for under the equity method. Refer to Note 15.
Oro Group surety
14
16
The Company has provided surety in favor of the lender in respect of gold loan
facilities to wholly owned subsidiaries of Oro Group (Proprietary) Limited an affiliate of
the Company. The Company has a total maximum liability, in terms of the suretyships,
of R100 million ($14 million). The suretyship agreements have a termination notice
period of 90 days. The probability of the non-performance under the suretyships is
considered minimal, based on factors of no prior defaults, being well-established
companies and recourse via general notarial bonds over the gold stocks of the
subsidiaries of the Oro Group. These bonds should enable the Company to recover
the majority of the guaranteed amount. The Company receives a fee from the
associate for providing the surety and has assessed the possibility of a claim for non-
performance.
Pursuant to US environmental regulations, gold mining companies are obligated to
close their operations and rehabilitate the lands that they mine in accordance with
these regulations. AngloGold Ashanti USA has posted reclamation bonds with various
federal and state governmental agencies to cover potential rehabilitation obligations in
amounts aggregating approximately:
49
49
The Company has provided a guarantee for these obligations which would be payable
in the event of AngloGold Ashanti USA not being able to meet their rehabilitation
obligations. As at December 31, 2006 the carrying value of these obligations relating to
AngloGold Ashanti USA amounted to $26 million and are included in the Provision for
environmental rehabilitation in the Company's consolidated balance sheet. The
obligations will expire upon completion of such rehabilitation. There are no recourse
provisions that would enable AngloGold Ashanti to recover from third parties any of the
amounts paid under the guarantee.
The Company has guaranteed all payments and other obligations of AngloGold
Ashanti Holdings plc regarding the issued $1,000,000,000 2.375 percent convertible
bonds due 2009. Refer to Note 20. The Company’s obligations regarding the
guarantee are direct, unconditional and unsubordinated.
1,000
1,000
Guarantee provided for Syndicated loan facility
181
460
AngloGold Ashanti Limited, AngloGold Offshore Investments Limited and AngloGold
American Investments Limited have guaranteed all payments and other obligations of
the wholly-owned subsidiaries AngloGold Ashanti Holdings plc and AngloGold Ashanti
USA Inc. regarding the $700 million Syndicated loan facility. Refer to Note 20.
Hedging guarantees
The Company has issued gold delivery guarantees to several counterparty banks in
which it guarantees the due performance of its subsidiaries AngloGold Ashanti USA
Inc., AngloGold South America Limited and Cerro Vanguardia S.A. under their
respective gold hedging agreements.
Ashanti Treasury Services guarantees
1,047
723
The Company together with its wholly-owned subsidiary AngloGold Ashanti Holdings
plc have provided guarantees to several counterpart banks for the hedging
commitments of its wholly-owned subsidiary Ashanti Treasury Services Limited (ATS).
The maximum potential amount of future payments is all moneys due, owing or
incurred by ATS under or pursuant to the Hedging Agreements. At December 31, 2006
the marked-to-market valuation of the ATS hedge book was negative $1,047 million.
F-55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24.
COMMITMENTS AND CONTINGENCIES (continued)
2006
$
2005
$
Hedging guarantees of due performance by the Geita Management Company Limited
(GMC)
290
172
The Company and its wholly-owned subsidiary AngloGold Ashanti Holdings plc have
issued hedging guarantees to several counterpart banks in which they have
guaranteed the due performance by the GMC of its obligations under or pursuant to
the hedging agreements entered into by GMC, and to the payment of all money owing
or incurred by GMC as and when due. This guarantee remains in force until no sum
remains to be paid under the Hedging Agreements and the Bank has irrevocably
recovered or received all sums payable to it under the Hedging Agreements. The
maximum potential amount of future payments is all moneys due, owing or incurred by
GMC under or pursuant to the Hedging Agreements. At December 31, 2006 the
marked-to-market valuation of the GMC hedge book was negative $290 million.
In addition to the above, the Company has contingent liabilities in respect of certain
claims, disputes and guarantees which are not considered to be material.
With operations in several countries on several continents, many of which are
emerging markets, AngloGold Ashanti is subject to, and pays annual taxes under the
various tax regimes where it operates. Some of these tax regimes are defined by
contractual agreements with the local government, but others are defined by the
general corporate tax laws of the country. The Company has historically filed, and
continues to file, all required tax returns and to pay the taxes reasonably determined to
be due. In some jurisdictions, tax authorities are yet to complete their assessments for
the previous years. The tax rules and regulations in many countries are complex and
subject to interpretation. From time to time the Company is subject to a review of its
historic tax filings and in connection with such reviews, disputes can arise with the
taxing authorities over the interpretation or application of c ertain rules to the
Company’s business conducted within the country involved. Management believes
based on information currently to hand, that such tax contingencies have been
adequately provided for, and as assessments are completed, the Company will make
appropriate adjustments to those estimates used in determining amounts due.
On March 23, 2006 the Company entered into a Registration Rights Agreement with
Anglo South Africa Capital (Proprietary) Limited (Anglo South Africa) under which the
Company has agreed to file U.S. registration statements for Anglo South Africa’s offer
and sale of shares it holds in the Company (each a Demand Registration) if Anglo
South Africa requests the Company to do so. The Company is required to use all
reasonable efforts to file a Demand Registration within 30 days after such a request
and to keep it effective for 90 days unless the shares offered pursuant to it are sold
earlier. Further, the Company may not offer, sell, allot or issue any shares or other
securities that are convertible into or exchangeable for, or that represent the right to
receive, shares, whether pursuant to U.S. registration or otherwise, for a 90-day period
immediately following the first closing of an of fering pursuant to a Demand Registration
or a shorter period as may be imposed by underwriters in the Demand Registration;
except: (i) in consideration for shares or assets of a company as part of a merger,
acquisition, corporate reorganization or similar transaction, (ii) as required pursuant to
the terms governing the 2.375 percent guaranteed convertible bonds due 2009, issued
by AngloGold Ashanti Holdings plc and guaranteed by the Company, and (iii) in
connection with any option, employee bonus, profit sharing, pension, retirement,
incentive, savings or similar plan, agreement or award. The Registration Rights
Agreement may be terminated at any time by written consent by each of the parties
thereto. The Registration Rights Agreement shall terminate automatically on the first
date on which Anglo South Africa is no longer an “affiliate” within the meaning of Rule
144 under the United States Securities Act of 1933, as amended.
F-56
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24.
COMMITMENTS AND CONTINGENCIES(continued)
2006
$
2005
$
Vulnerability from concentrations
The majority of AngloGold Ashanti’s 61,453 employees (2005: 63,993, 2004: 65,400)
are subject to collective bargaining agreements. These agreements are established in
negotiations between the Chamber of Mines, the body that represents the gold mining
industry in South Africa, and representative groups of labor. The agreements have a
two-year validity period. The most recent settlement negotiation was completed in
August 2005, when the parties reached an agreement covering the period from
July 1, 2005 to June 30, 2007.
There is a concentration of risk in respect of recoverable value added tax and fuel
duties from the Malian government. Recoverable value added tax due from the
Malian government to the Company amounts to $34 million at December 31, 2006
(December 31, 2005: $25 million). The last audited value added tax return was for the
period ended December 31, 2006 and as at that date $19 million was still outstanding
and $15 million is still subject to audit. The accounting processes for the unaudited
amount are in accordance with the processes advised by the Malian government in
terms of the previous audits.
Reimbursable fuel duties from the Malian government to the Company amount to
$11 million at December 31, 2006 (December 31, 2005: $13 million). Fuel duty refund
claims are required to be submitted before January 31 of the following year and are
subject to authorization by, firstly, the Department of Mining, and secondly, the
Customs and Excise authorities. As at December 31, 2006, the Customs and Excise
authorities have approved $5 million which is still outstanding, while $6 million is still
subject to authorization. The accounting processes for the unauthorized amount are in
accordance with the processes advised by the Malian government in terms of the
previous authorizations. With effect from February 2006, fuel duties are no longer
payable to the Malian government.
The Government of Mali is a shareholder in all of the Company’s entities in Mali and
protocol agreements governing repayments of certain of these amounts have been
signed. All payments as scheduled in terms of the protocol agreements have been
recovered up to December 2006. The amounts outstanding have been discounted to
their present value at a rate of 5 percent.
There is a concentration of risk in respect of reimbursable value added tax and fuel
duties from the Tanzanian government. Reimbursable value added tax due from the
Tanzanian government to the Company amounts to $14 million at December 31, 2006
(December 31, 2005: $9 million). The last audited value added tax return was for the
period ended November 30, 2006 and as at December 31, 2006 $9 million was still
outstanding and $5 million is still subject to audit. The accounting processes for the
unaudited amount are in accordance with the processes advised by the Tanzanian
government in terms of the previous audits. The amounts outstanding have been
discounted to their present value at a rate of 5 percent.
Reimbursable fuel duties from the Tanzanian government to the Company amount to
$18 million at December 31, 2006 (December 31, 2005: $6 million). Fuel duty claims
are required to be submitted after consumption of the related fuel and are subject to
authorization by the Customs and Excise authorities. As at December 31, 2006,
claims for refund of fuel duties amounting to $12 million have been lodged with the
Customs and Excise authorities, which are still outstanding, whilst claims for refund of
$6 million have not yet been submitted. The accounting processes for the
unauthorized amount are in accordance with the processes advised by the Tanzanian
government in terms of the previous authorizations. The amounts outstanding have
been discounted to their present value at a rate of 5 percent.
F-57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
25.
STOCKHOLDERS’ EQUITY
The authorized common stock of the Company was increased in 1998 to 400,000,000 shares of common stock of
25 ZAR cents each principally to meet its obligations regarding the proposed merger of AAC gold interests through the
Company. During 2006 AngloGold Ashanti approved the Employee Share Ownership Plan for the employees in the
South African operations and a Black Economic Empowerment transaction (BEE transaction) for which
4,280,000 E shares of common stock of 25 ZAR cents were authorised.
During 2006, 11,297,721 shares of common stock and 4,185,770 E shares of common stock in the Company were
issued as follows:
•
398,399 shares of common stock were issued as part of the share incentive scheme for a consideration of
$9 million.
•
4,185,770 E shares of common stock and 928,590 shares of common stock in the Company were issued as part
of the Employee Share Ownership Plan and the BEE transaction for a consideration of $93 million, which are
eliminated as shares held within the Company.
•
9,970,732 shares of common stock in the Company were issued as part of the public offering which was
completed on April 20, 2006, amounting to $498 million.
During 2005, 475,538 shares of common stock in the Company were issued as part of the share incentive scheme for
a consideration of $9 million.
During 2004, 41,326,552 shares of common stock in the Company were issued as follows:
•
192,800 shares of common stock were issued as part of the share incentive scheme for a consideration of
$3 million.
•
41,133,752 shares of common stock in the Company were issued to facilitate the share swap for the acquisition of
Ashanti Goldfields Company Limited, amounting to $1,544 million.
At a general meeting held on April 10, 2006, ordinary resolutions were passed with the requisite majority, providing
authority to the directors to allot sufficient ordinary shares of the Company to allow it to raise $500 million before
expenses and after underwriters’ fees in a public offering. The offering was completed on April 20, 2006 and resulted
in the issue of 9,970,732 new ordinary shares, along with the simultaneous sale of 19,685,170 AngloGold Ashanti
shares held by Anglo American plc (AA plc), reducing AA plc’s holding in the Company to 41.8 percent. The
combined offering was priced at $51.25 per ADS and R315.19 per ordinary share (a 1 percent discount to the
weighted average traded price of the shares on the Johannesburg Stock Exchange (JSE) over the 30 days prior to
pricing). Net proceeds to AngloGold Ashanti of the primary offering was $498 million, which will be used for project
development capital, capital expenditure and other general corporate purposes. AngloGold Ashanti used the proceeds
to reduce short-term loans and borrowings under its revolving credit facility. Refer to Note 20.
At a general meeting of shareholders held on May 5, 2006, shareholders approved, as a general authority,
authorization to the board of directors to allot and issue, in their discretion, and for such purposes as they may
determine, up to 10 percent of the authorized but unissued common stock of 25 ZAR cents each in the share capital
of the Company (subject to the South African Companies Act and the Listings Requirements of the JSE Securities
Exchange South Africa) after setting aside so many common stock of 25 ZAR cents each as may be required to be
allotted and issued by the Company pursuant to the AngloGold Share Incentive Scheme and for the purposes of the
conversion of the $1,000,000,000, 2.375 percent guaranteed Convertible Bonds issued by AngloGold Ashanti
Holdings plc. Refer to Note 30 and Note 20. As at December 31, 2006 of the total unissued common stock of
123,763,847 of 25 ZAR cents ea ch, 10,195,949 of 25 ZAR cents each was under the control of the directors until the
forthcoming annual general meeting. In terms of the Trust deed the unissued E common stock of 94,230 are under
the control of the trustees. In terms of a specific authority granted at the general meeting of stockholders held on
March 29, 1993, the directors are authorized to issue the 4,221,104 unissued B redeemable preferred stock of 1 ZAR
cent each to Eastvaal Gold Holdings Limited.
26.
FINANCIAL RISK MANAGEMENT ACTIVITIES
In the normal course of its operations, the Company is exposed to gold price, currency, interest rate, liquidity and
credit risks. In order to manage these risks, the Company enters into derivative transactions. The Company does not
acquire, hold or issue derivatives for trading purposes. The Company has developed a comprehensive risk
management process to facilitate, control and monitor these risks. The board has approved and monitors this risk
management process, inclusive of documented treasury policies, counterpart limits, controlling and reporting
structures.
F-58
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
26.
FINANCIAL RISK MANAGEMENT ACTIVITIES (continued)
The financial risk management activities objectives of the Company are as follows:
•
Safeguarding the Company core earnings stream from its major assets through the effective control and
management of gold price risk, foreign exchange risk and interest rate risk;
•
Effective and efficient usage of credit facilities in both the short and long term through the adoption of reliable
liquidity planning and procedures;
•
Ensuring that investment and hedging transactions are undertaken with creditworthy counterparts;
•
Ensuring that all contracts and agreements related to risk management activities are coordinated, consistent
throughout the Company and comply where necessary with all relevant regulatory and statutory requirements.
A number of products, including derivatives are used to satisfy these objectives. Forward sales contracts and call and
put options are used by the Company to manage its exposure to gold price and currency fluctuations.
SFAS133 requires that derivatives be accounted for as follows:
•
Commodity based (“normal purchase or normal sale”) contracts that meet the requirements of SFAS138, and are
designated as such, are recognized in product sales when they are settled by physical delivery.
•
Where the conditions in SFAS133 for hedge accounting are met, the derivative is recognized on the balance
sheet, at fair value as either a derivative asset or derivative liability. For cash flow hedges the effective portion of
changes in fair value of the hedging positionsinstruments are recognized in equity (other comprehensive income) until the
underlying transaction occurs, then the gains or losses are recognized in product sales. The ineffective portion of
changes in fair value is reported in earnings as gains or losses on derivatives in the above tables were governedperiod in which they occur. Of
the contracts accounted for as cash flow hedges, contracts with a carrying value, net of tax, of negative
$169 million at December 31, 2006 are expected to be recycled from other comprehensive income and recognized
as a reduction in product sales during 2007.
•
All other derivatives are measured at their fair value, with the changes in fair value at each reporting date being
reported in earnings as gains or losses on derivatives in the period in which they occur.
Cash flows from derivative instruments accounted for as cash flow hedges are included in net cash provided by “right-to-break”
clauses.
For a more detailed presentationoperating activities in the statements of consolidated cash flows for all periods presented. Contracts that contain ‘off-
market’ terms that result in the inflow of cash at inception are analogous to borrowing activities and, as such, are
treated as financing activities. All current and future cash flows associated with such instruments are classified within
the financing activities section of the investment maturity profile, borrowings maturity profileconsolidated cash flow statement. Contracts that contain ‘off-market’ terms that
result in the outflow of cash at inception are analogous to lending activities and, interest rate risk profileas such, are treated as investing
activities. All current and future cash flows associated with such instruments are classified within the investing
activities of
these agreements, see note 21 to the consolidated financial statements “Goldcash flow statement.
Loss on non-hedge derivatives of $208 million (2005: $142 million; 2004: $123 million) was included in the current
year income statement.
Gold price and currency risk management activities”activities
Gold and currency hedging instruments are denominated in South African rands, US dollars, Australian dollars and
Brazilian real. The hedging instruments utilized are forward sales contracts, purchased and sold put options, and
purchased and sold call options and gold lease rate swaps. The mix of hedging instruments, the volume of production
hedged and the tenor of the hedging book is continuously reviewed in light of changes in operational forecasts, market
conditions and the Company’s hedging policy as set by the board of directors. The Company’s reserve and financial
strength has allowed it to arrange unmargined credit lines of up to ten years with counterparties.
Some of the instruments described above are designated and accounted for as cash flow hedges. The hedged
forecast transactions are expected to occur over the next 5 years, in line with the maturity dates of the hedging
instruments.
Forward sales contracts establish the price of future gold sales at a specified price. A number of these contracts are
intended by AngloGold Ashanti for delivery against production in a future period. The volume of outstanding forward
sales type contracts at the end of 2006 was 122,133kg (2005: 159,783kg).
A put option gives the put buyer the right, but not the obligation, to sell gold to the put seller at a predetermined price
on a predetermined date. A call option gives the call buyer the right, but not the obligation, to buy gold from the call
seller at a predetermined price on a predetermined date. The Company’s risk in selling call options is unlimited but
mitigated by the fact that the Company produces the commodity required by the option and would benefit by the same
quantity as the option loss by selling production in the open market. The Company’s risk in selling put options is
unlimited but partially mitigated by put options purchased.
F-59
Credit riskNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
26.
RealizationFINANCIAL RISK MANAGEMENT ACTIVITIES (continued)
Net delta open hedge position as at December 31, 2006
The Company has an established practice of actively managing its hedged commitments under changing market
circumstances. A substantial restructuring of the hedge book was concluded between December 2004 and
January 2005 was followed by a smaller restructuring of the hedging commitments of the Geita Management
Company following the repayment of project finance loans. During 2006, in addition to delivering in and buying back
a number of hedge contracts, the Company also restructured a number of hedge contracts maturing in the near term
into later years.
As of December 31, 2006, the hedge book reflected a net delta tonnage position of 10.16 million ounces (316 tonnes)
or 32 percent of the next 5 years forecast production. As of December 31, 2005, the hedge book reflected a net delta
tonnage position of 10.84 million ounces (337 tonnes).
The marked-to-market value of all these contracts is dependent uponhedge transactions, irrespective of accounting designation, making up the counterparties performing in accordance with the terms of thehedge
contracts. AngloGold Ashanti generally does not obtain collateral or other security to support financial instruments subject to
credit risk, but monitors the credit standing of counterparties. AngloGold Ashanti spreads its business overpositions was a number ofnegative $2,903 million as at December 31, 2006 (as at December 31, 2005: negative $1,941 million).
predominantly international, credit worthy counterparties and believes that no concentration of credit risk exists. Limits for each
counterpart areThese values were based on the assessed credit qualitya gold price of each counterpart. The Treasury Committee makes recommendations
for board approval$636.30 per ounce, exchange rates of all counterparts$/R7.001and A$/$0.7886 and the limits to be applied against each counterpart.
prevailing market interest rates and volatilities at December 31, 2006. The values as at December 31, 2005 were
based on a gold price of $517.00 per ounce, exchange rates of $/R6.305 and A$/$0.7342 and the prevailing market
interest rates and volatilities at that date.
The table below provides a summary ofCompany had the number, type and credit quality of AngloGold Ashanti’s hedge counterparts.following net forward pricing commitments outstanding against future production as at
December 31, 2006.
Year
2007
2008
2009
2010
2011 2012-2016
Total
Number of CounterpartsType
Credit Rating (Fitch)
1 InternationalBank2 International Bank
AAA
3 InternationalBank4 International Bank
AA+
4 InternationalBank International Bank
AA
9 InternationalBankInternational Bank
AA-
2 InternationalBank 3 International Bank
A+
2 InternationalBank 3 International Bank
A
2 InternationalBank 1 International Bank
A-
1 InternationalBankInternational Bank
BBB
1 InternationalBank
BBB-South African Bank
3AAA(zaf) (International BBB+)
1
South African Bank
AA+(zaf) (International BBB+)
1
South African Bank
AA(zaf) (International BBB)
21
South African Bank
AA-(zaf) (International BBB)
1
South African Bank
A+(zaf) (International BBB-)
1 BrazilianBank6 Brazilian Bank
AA(bra)
1
Trade Finance House
Not rated
213rated
AngloGold Ashanti does not anticipate non-performance by any counterparts.
Fair value
The estimated fair values of financial instruments are determined at discrete points in time based on relevant market
information. TheseIn certain cases, these estimates involve uncertainties and cannot be determined with precision. The
estimated fair values of
AngloGold Ashanti’s financial instruments at December 31, 20042006 and 20032005, are as follows:
December 31, 20042006
December 31, 20032005
Carrying
amount
Fair
value
Carrying
amount
Fair
value
(in
millions)
$
$
$
$
Cash and cash equivalents
(1)
471
299471
299196
479196
479Restricted cash
Receivables(1)
25211
25211
1818
1818
Short-term debt
(2)
33
31533
315160
331
331160
Long-term debt
(2)
1,472
1,3711,484
1,3641,779
778
788
Accounts payable and other current liabilities
479
479
355
3551,803
Derivatives
(3) (5)
(1,524)
(662)(2,903)
(1,161)(935)
(218)
(578)(1,941)
Forward sales type agreements
(3)
(499)
(511)1,328
(647)(355)
(149)
(248)(909)
Option contracts
(3)
(185)(1,056)
(507)(1,572)
(4)
(612)
(85)
(320)(1,058)
(4)
Foreign exchange contracts
(3)
4
174
176
3
36
Foreign exchange option contracts
(3)
(12)
(2)(12)
(2)(5)
2
2(5)
Interest rate swaps – Gold
(3)
39
215
(20)31
6
(20)25
Sub total – Hedge derivatives
(660)(1,524)
(1,159)(2,903)
(223)(935)
(583)(1,941)
Interest rate swaps – Non-gold
(3)
-
(2)-
(2)-
5
5-
(1)(1)
The carrying amounts approximate fair value because of the short-term duration of these instruments.
(2)
Fair value reflects the net present value of the future cash flows, discounted at the prevailing market rate. The fair value of listed fixed rate debt and
the
Convertible Bonds are shown at their market value. The remainder of debt re-prices on a short-term floating rate basis, and accordingly the
carrying amount is
considered to approximate fair value.
(3)
The fair value of the above instruments is calculated based on market prices, volatilities and interest rates, as at December 31, 20042006 and 2003.
2005.
(4)
Includes deliverable call options sold. A deliverable option is an option in terms of which the delivery quantity is fixed regardless of the market price
on the
exercise date. In the event that the market price is lower than the strike price, gold is sold to the counterpart at the ruling spot price.
(5)
Carrying amount represents on balance sheet derivatives.
212
Sensitivity analysis
The following table shows the approximate sensitivities of the $ marked-to-market value of the hedge book at
December 31,
2004 2006 (actual changes in the timing and amount of the following variables may differ from the assumed
changes below):
Sensitivity analysis
Change in
Rate(+)
Change in Fair
value
(1)
Change in Rate
(-)
Change in Fair
value
(1)
Currency (R/$)
+1.01
(48.0)(16.5)
-1.01
13.710.68
Currency (A$/$)
+0.05
26.0
-0.05
(26.0)0.05 1.61 0.05 (1.7)
Gold price ($/oz)
+10
(104.0)(100.8)
-1010
101.399.1
US Interest Rate (%)
+0.1
(11.1)(9.09)
-0.10.1
11.19.11
ZAR Interest Rate (%)
+0.1
(0.2)(0.17)
-0.10.1
0.20.17
Aus Interest Rate (%)
+0.1
(0.9)(0.09)
-0.10.1
0.90.09
Gold Interest Rate (%)
+0.1
13.114.80
-0.10.1
(13.3)(14.89)
(1)
In $ million.
Hedge levels
AngloGold Ashanti employs hedging as an element of its risk management strategy. While AngloGold Ashanti’s hedge policy
has remained unchanged, the absolute level of gold hedges has increased over the last year as a result of the Business
Combination with Ashanti Goldfields.
214
A summary of the hedge position as at December 31, 2002, 20032004, 2005 and 20042006 is as follows. The “years of production hedged”
is
calculated as the hedge net delta position at year-end divided by the annual production for that year.
As at December 31,
Hedge Net Delta
kg’s
(2)
Annual Production for
Year
kg’s
(2)
Years of Production
Hedge
2002 319,722
184,711
1.73
2003 267,131
174,668
1.53
2004 326,208
188,223
1.73
2005 337,076
191,783
1.76
2006 316,012
175,268
1.80
(2)
Includes equity accounted joint ventures.
While AngloGold Ashanti may reduce its net delta hedge position further in line with a positive price outlook, it will continue
to
actively manage the hedge in order to protect margins and to ensure the company’s ability to service debt requirements.positions.
Hedge performance
The following table provides a summary of the average received gold price for AngloGold Ashanti and the average spot gold
price over the last five years. The table provides an indication of past hedge performance.
Sales
Average Price Received
Spot Price
Year Thousandounces
(2)
US dollar per ounce
US dollar per ounce
20007,241 308 285
2001 7,004 286 271
2002 5,941 303 310
2003 5,635 363 363
2004 6,060 394 410
(2)
Includes equity accounted joint ventures213
Item 12: Description of securities other than equity securities
Not applicable.
215214
PART II
Item 13: Defaults, dividend arrearages and delinquencies
None.
Item 14: Material modifications to the rights of security holders and
and use of proceeds
None.
Item 15: Controls and procedures
TheManagement certification
(a) Disclosure Controls and Procedures: As of December 31, 2006, the company, under the supervision and with the
participation of its management, including the Chief Executive Officer and Chief Financial Officer after evaluatinghas evaluated the
effectiveness of the company’s disclosure controls
and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Form 20-F, have
concluded that, as of such date, the company’s disclosure controls and procedures were(as defined in Rules 13a – 15(e) and 15d – 15(e)
under the Securities Exchange Act of 1934, as amended (the Exchange Act). Based on such evaluation, the Chief
Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2006, the company’s
disclosure controls and procedures are effective, subjectand are reasonably designed to ensure that information required to
be disclosed by the following:
The company’s independent registered public accounting firm, Ernst & Young,company in reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange
Commission. These disclosure controls and procedures include without limitation, controls and procedure s designed
to ensure that information required to be disclosed by the company in reports that it files or submits under the
Exchange Act is accumulated and communicated to the company’s Audit management, including its Chief Executive Officer
and Corporate
Governance Committee Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure.
(b) Management’s Annual Report on Internal Control over Financial Reporting: Management is responsible for establishing
and management that Ernst & Young considered certain policies and procedures aroundmaintaining adequate internal control over financial reporting for the
US GAAP accounting and reporting of the Ashanti acquisition and the accounting for joint ventures not to have been sufficiently
well developed. Ernst & Young considered these matters to represent a material weakness (under standards established by
the Public Company Accounting Oversight Board (United States)) company, as defined in the Exchange Act
Rule 13a – 15(f) and 15d -15(f). The company’s internal control over financial reporting.reporting is a process designed to
Ernst & Young has provided an unqualified audit report onprovide reasonable assurance regarding the reliability of financial reporting and the preparation of the company’s
financial statements for fiscal years 2002, 2003external purposes in accordance with U.S. generally accepted accounting principles. Because
of inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
The company’s internal control over financial reporting includes those policies and
2004. procedures that:
Management has addressed these issues by making appropriate changes·
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and
dispositions of the assets of the company;
·
Provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of
the company are being made only in accordance with authorizations of management and the Directors of the
company; and
·
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s documented accountingassets that could have a material effect on the financial statements.
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods is subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with policies
and procedures for these typesmay
deteriorate.
215
The company’s management assessed the effectiveness of transactions. In addition the company has increased the number of employees in the
accounting department, one of whom is a specialist technical accountant, and is experienced in US GAAP. These enhanced
skills and processes will enable management to consider and research the accounting implications of these transactions on a
timely basis.
Except as stated above, there were no changes in the company’s internal control over financial reporting as
of December 31, 2006. In making this assessment, management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework. Based
on this assessment, and using those criteria, management concluded, and hereby reports that occurredthe company’s internal
control over financial reporting was effective as of December 31, 2006.
(c) Changes in Internal Control over Financial Reporting: There have been no changes in the company’s internal control
over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rule
13a – 15 during
the year ended December 31, 20042006 that have materially affected, or are reasonably likely to materially
affect, the company’s
internal control over financial reporting.
(d) Item 16: Corporate GovernanceAttestation Report of the Registered Public Accounting Firm: Management’s assessment of the effectiveness of the
company’s internal control over financial reporting as of December 31, 2006 has been audited by Ernst & Young, an
independent registered public accounting firm, as stated in their report, which appears below.
/s/
R
M
Godsell
/s/
S
Venkatakrishnan
16A. Audit committee financial expertRobert
Michael
Godsell
Srinivasan
Venkatakrishnan
Chief Executive Officer
Chief Financial Officer
Report of Independent Registered Public Accounting Firm
The Board of Directors has determinedand Shareholders of AngloGold Ashanti Limited
We have audited management’s assessment, included in the accompanying "Management's Annual Report on Internal
Control Over Financial Reporting", that AngloGold Ashanti Limited maintained effective internal control over financial
reporting as of December 31, 2006, based on criteria established in Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). AngloGold Ashanti Limited’s
management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s
assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our
audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an
understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the
design and operating effectiveness of internal control, and performing such other procedures as we considered necessary
in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonabl e assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial
statements.
216
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, management’s assessment that AngloGold Ashanti Limited maintained effective internal control over
financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on the COSO criteria. Also, in
our opinion, AngloGold Ashanti Limited maintained, in all material respects, effective internal control over financial
reporting as of December 31, 2006, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States), the consolidated balance sheets of AngloGold Ashanti Limited as of December 31, 2006 and 2005 and the related
consolidated statements of income, stockholders’ equity and cash flows for each of the three years in the period ended
December 31, 2006, and our report dated July 6, 2007 expressed an unqualified opinion thereon.
Ernst & Young Inc.
Registered Auditors
Johannesburg, Republic of South Africa
July 6, 2007
217
ITEM 16A: Audit committee financial expert
Mr Colin Brayshaw is an “auditand Prof Wiseman Nkuhlu have been determined by our board to be audit committee financial expert” as definedexperts
within the meaning of the Sarbanes-Oxley Act, in Item 16A.
accordance with the Rules of Form 20-F.the NYSE and the SEC. Mr Brayshaw and
Prof Nkuhlu as well as each of the other members of the Audit and Corporate Governance Committee
(being Mr F B Arisman, Mrs E le R Bradley and Mr R P Edey) are independent directors. All members of the committee
have considerable financial knowledge and experience to help oversee and guide the board and the company in respect of
the audit and corporate governance disciplines. Following Mr Brayshaw’s retirement from the board on May 4, 2007,
Prof Nkuhlu has become the chairman of the committee and is an “independent director” as defined in the JSE Listings
Requirements and NYSE rules.sole financial expert.
16B. CodesITEM 16B: Code of ethics and whistle-blowing policy
In order to comply with the company’s obligations in terms of the Sarbanes-Oxley Act and the King Code, and in the
interests
of good governance, the company has adopted a code of ethics for employees, senior and a code of ethics that applies to the Chiefexecutive financial
Executive Officer, Executive Director: Financeofficers, and all Financial Officers, as well as a whistle-blowing policy that encourages
employees and other stakeholders to confidentially and
anonymously report acts of an unethical or illegal nature affecting the company’s
interests. Both codes andAll reports made in terms of the
whistle-blowing policy are availablefielded by a third party, Tip-Offs Anonymous, who ensures all reports are treated confidentially or
anonymously depending on the preference of the caller. The information is relayed to the group internal audit manager,
and if required, to management for investigation. All reports and the progress of the investigations are conveyed to the
audit and corporate governance committee by the group internal audit manager.
In addition, the company website, www.anglogoldashanti.com,has adopted a Disclosures Policy, the object of which is to ensure compliance with the rules of
the various exchanges on which it is listed and
may be found as follows:
1. From our main web page, first hold the cursor over the “About” tab.
2. Scroll down provide timely, accurate and highlight the “Corporate Governance” tab.reliable information fairly to all stakeholders,
3. Click on the “Guidelines” tab.
4. Scroll downincluding investors (and potential investors), regulators and double click on “Code of Ethics for the Chief Executive Officer, Principal Financial Officer and Senior
Financial Officers”.analysts.
The code of ethics, iswhistle blowing and disclosure policies are available on the company’s website:
www.AngloGoldAshanti.com
under About > Corporate Governance - > Guidelines. The code of ethics and disclosure
policy are also available on request from the company secretary.
216
16C.ITEM 16C: Principal accountant fees and services
Ernst & Young has served as AngloGold Ashanti’s independent public accountants for each of the financial years in the three-
yearthree-year period ended December 31, 2004,2006 for which audited financial statements appear in this annual report on
Form 20-F. The
Annual General Meeting elects the auditors annually.
The following table presents the aggregate fees for professional services and other services rendered by Ernst & Young to
AngloGold Ashanti in 20042006 and 2003.2005.
(in millions)
20042006
$
20032005
$
Audit Fees
(1)
2.87 1.329.29 4.29
Audit-related Fees
(2)
0.28 0.410.88 1.03
Tax Fees
(3)
0.06 0.140.10
All Other Fees
(4)
0.02 0.14- 0.10
Total
3.23 2.0110.23 5.52
Roun
dingRounding may result in computational differences.
(1)
(1) The Audit Fees consist of fees billed for the annual audit services engagement and other audit services, which are those services that only the external auditor
auditor reasonably can provide, and include the Company audit; statutory audits; comfort letters and consents; attest services; and assistance with and review of
documents filed with
the SEC. Included in the Audit fees, for 2006, are fees paid to the external auditors in respect of SOX compliance.
(2)
Audit-related Fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the
Company’s financial statements or that are traditionally performed by the external auditor, and include consultations concerning financial accounting and
reporting
standards; internal control reviews of new systems, programs and projects; review of security controlscomfort letters; and operational effectiveness of systems;
review of plans and controls for shared service centers; due diligence related to acquisitions; accounting assistance and audits in connection with proposed or
completed acquisitions; and employee benefit plan audits.consents.
(3)
Tax Fees include fees billed for tax advice related to mergers and acquisitions, transfer pricing, and requests for rulings or technical advice from taxing
authorities; tax planning services; and expatriate tax planning andcompliance services.
(4)
All Other Fees include fees billed for services relating to financialthe review of an information technology.technology system.
In addition to the fees set out in the table above, Ernst & Young received a fee of $0.91 million (2003: $0.06 million) for workassociated with and included in the cost of the Business Combination of AngloGold with Ashanti.218
Audit Committee Pre-approval Policies and Procedures
It is the policy of AngloGold Ashanti to maintain compliance with the requirements of the various applicable legislation and
good governance practices when appointing or granting work to the Company’s external auditor. Non-audit services may
not be acquired without an employee of AngloGold Ashanti obtaining the pre-approval of the Audit and Corporate
Governance Committee as is laid out in the procedures relating to the pre-approval process.
The audit committee has delegated the approval authority to the chairman of the Audit and Corporate Governance
Committee, meets regularly with the external audit partner, the group’s internal audit
manager and the executive officer: corporate accounting, to review the audit plans of the internal and external auditors and
pre-approve the external auditor’s audit work, to ascertain the extent to which the scope of the audit can be relied upon to
detect weaknesses in internal controls and to review the quarterly and half-yearly financial results, significant legal matters
affecting the company, the preliminary announcement of the annual results and the annual financial statements, as well as all
statutory submissions of a financial nature, prior toProf Wiseman Nkuhlu or his designated official. The approval by the board.
The committee is furthermore, responsible for:
•
the appointment and dismissal of the external auditors; determining and approving external auditors’ fees; overseeing the work of the external auditors; determining all non-audit work of the external auditors including consulting work, and pre-
approving non-audit fees to be paid to the external auditors; and ensuring that the external auditors report regularly to the
committee;
•
overseeing the internal audit function; receiving regular report back from the group internal audit manager; appointment anddismissal of the group internal audit manager;
• assessing and reviewing the company’s risk management framework; and
• monitoring the group’s corporate governance practices in relation to regulatory requirements and guidelines.
The external auditors also meet with the committee members in the absence of management and the chief executive officer
and chief financial officer.
The committee met on seven occasions during 2004. All members of the committee attended five of the meetings. Mrs Bradley
and Mr Edey were each unable to attend one meeting of the committee.
217
During 2004, $650 of Audit-related Fees (inmay take the form of tax fees) fora written or verbal
response, and in the case of a verbal instruction these would be ratified at the next audit committee meeting. On a
quarterly basis a summary of all approvals and word to date is tabled at the audit committee.
During 2006, no services were provided to AngloGold Ashanti by Ernst & Young in respect of Audit-related Fees (in the
were approved by the Audit and Corporate Governance Committeeform of tax fees) paid pursuant to the de minimis exception to the pre-approval
requirement provided by
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
No work was performed by persons other than the principal accountant’s employees on the principal accountant’s
engagement
to audit AngloGold Ashanti’s financial statements for 2004.2006.
16D.ITEM 16D: Exemptions from the listing standards for audit
committees
Not applicable.
16E.ITEM 16E: Purchases of equity securities by the issuer and affiliated purchasers
Period
Total Number of
Shares Purchased
(1)
Average Price Paid
per Share in $
(1)(2)
Total Number of
Shares Purchased
as Part of Publicly
Announced
Programs
Maximum Number
of Shares that may
yet be Purchased
under the
Programs
01-01-2004 – 01-31-2004
-
–
–
–
02-01-2004 – 02-29-2004
2,436,533
$43.31
–
–
03-01-2004 – 03-31-2004
736,650
$44.96
–
–
04-01-2004 – 04-30-2004
–
–
–
–
05-01-2004 – 05-31-2004
3,252,151
$35.46
–
–
06-01-2004 – 06-30-2004
6,860,568
$32.25
07-01-2004 – 07-31-2004
–
–
–
–
08-01-2004 – 08-31-2004
–
–
–
–
09-01-2004 – 09-30-2004
–
–
–
–
10-01-2004 – 10-31-2004
–
–
–
–
11-01-2004 – 11-30-2004
–
–
–
–
12-01-2004 – 12-31-2004
–
–
–
–
(1)
All of these purchases were made by AngloGold Ashanti’s Affiliate, AA plc, through its wholly-owned subsidiary Anglo South Africa Capital (Proprietary)
Limited on the open market, except for 6.2 million shares purchased in the period from June 1, 2004 to June 30, 2004 which were purchased in a privately
negotiated transaction with a third party and effected through the JSE. The information in respect to the quantity of shares purchased and the period in
which purchases were made, was obtained directly from AA plc.
(2)affiliated purchasers
AA plc disclosedNeither the aggregate values for its purchasesissuer nor any affiliate of the shares above in South African rands. The average prices reflected are based on AngloGold
Ashanti’s translationissuer, purchased any of the rand amounts into US dollars based on the average annual R/$ exchange rate of $1 = R6.4368.company’s shares during 2006.
218219
PART III
Item 17: Financial statements
Not applicable.
220
Item 18: Financial statements
Report of the Independent Registered Public Accounting Firm
The board of directors and stockholders of AngloGold Ashanti Limited
We have audited the accompanying consolidated balance sheets of AngloGold Ashanti Limited (the “Company”) as of
December 31, 20042006 and
2003 2005 and the related consolidated statements of income, stockholders’ equity and cash flows for
each of the three years in
the period ended December 31, 2004.2006. These financial statements are the responsibility of the
Company’s management.
Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the
The financial
statements of Société des Mines de Morila S.A. and Société d'Exploitation des Mines d'Or de Sadiola S.A. included on an
equity basis for(“Sadiola”), a corporation in which AngloGold Ashanti Limited owned 40 percent andthe
Company has a 38 percent respectively. Those financial statements
reflect amounts included in Investment in affiliates of $85 million and $74 million as of December 31, 2004, respectively, and
Equity income/(loss) in affil iates of $25 million and $11 million for the year then ended, respectively, of AngloGold Ashanti
Limited’s related consolidated totals. Those financial statements wereinterest, have been audited by other auditors whose reports havereport has been
furnished to us, and our
opinion on the consolidated financial statements, insofar as it relates to the amounts included for Sadiola, is based solely on
the report of the other auditors. In the consolidated financial statements, the Company’s investment in Sadiola is stated at
$66 million and $67 million, respectively, at December 31, 2006 and 2005, and the Company’s equity in net income is stated
at $33 million, $8 million and $12 million for each of the three years in the period ended December 31, 2006.
The financial statements of Société d'Exploitation des Mines d'Or de Yatela S.A. (“Yatela”), a corporation in which the
Company has a 40 percent interest, have been audited by other auditors whose report has been furnished to us, and our
opinion on the consolidated financial statements, insofar as it relates to the amounts included for Yatela, is based solely on
the report of the other auditors. In the consolidated financial statements, the Company’s investment in Yatela is stated at
$26 million at December 31, 2006, and the Company’s equity in net income is stated at $34 million for the year then ended.
The financial statements of Société des Mines de Morila S.A. (“Morila”), a corporation in which the Company has a
40 percent interest, have been audited by other auditors at December 31, 2005 and 2004 and for the periods then ended,
Société d'Exploitation des Mines d'Or de Sadiola S.A.whose report has been furnished to us, and our opinion on the consolidated financial statements, insofar as it relates to the
amounts included for Morila, prior to restatement, is based solely on the reportsreport of the other auditors. In the consolidated
financial statements, the Company’s investment in Morila is stated at $89 million and $72 million at December 31, 2005 and
2004, respectively, and the Company’s equity in net income is stated at $53 million and $20 million for the years then ended.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal
control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit
also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements,
statements. An audit also includes assessing the accounting principles used and signif icant
significant estimates made by management, andas well as evaluating the overall
financial statement presentation. We believe
that our audits and the reports of the other auditors provide a reasonable basis for
our opinion.
In our opinion, based on our audits and the reports of other auditors, the financial statements referred to above present
fairly,
in all material respects, the consolidated financial position of AngloGold Ashanti Limited at December 31, 20042006 and 2003,
2005, and the consolidated results of its operations and its consolidated cash flows for each of the three years in the period ended
December 31, 20042006 in conformity with accounting principlesU.S generally accepted accounting principles.
We have also audited, in accordance with the United Statesstandards of America.the Public Company Accounting Oversight Board (United States),
the effectiveness of AngloGold Ashanti Limited’s internal control over financial reporting as of December 31, 2006, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated July 6, 2007 expressed an unqualified opinion thereon.
As discussed in note 2 to the consolidated financial statements, the accompanying financial statements for 2003 and 2002
have been restated.
As discussed in note 5 to the consolidated financial statements, in 20032006 the Company changed its method of accounting for
Asset Retirement Obligations (AROs)stock-based compensation in accordance with SFAS143.SFAS123(R) Share-Based Payment, its method of accounting for deferred
stripping costs in accordance with EITF Issue 04-6 Accounting for Stripping Costs Incurred during Production in the Mining
Industry, and its method of considering the effects of prior year misstatements in accordance with SAB 108 Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.
As discussed in note 2 to the consolidated financial statements, in 2005 the Company changed its method of accounting for
employee benefit plans in accordance with SFAS87 Employers' Accounting for Pensions and SFAS106 Employers'
Accounting for Postretirement Benefits Other Than Pensions, and in 2006 in accordance with SFAS158 Employers’
Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88,
106 and 132(R).
Ernst & Young Inc.
Registered Accountants and AuditorsAuditor
Chartered Accountants (S.A.)
Johannesburg, Republic of South Africa
June 30, 2005July 6, 2007
F-1
ANGLOGOLD ASHANTI LIMITED
Consolidated statements of income
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 and 2002
(In millions, except share and per share information)
Notes
2004
$
2003
(As restated)
$
2002
(As restated)
$
Sales and other income
2,238
1,743
1,493
Product sales
2,183
1,714
1,458
Interest, dividends and other
55
29
35
Costs and expenses
2,274
1,403
1,137
Production costs
1,436
1,068
792
Exploration costs
44
40
28
Related party transactions
6
45
37
42
General and administrative
58
43
29
Royalties
27
11
9
Market development costs
15
19
17
Research and development
-
-
1
Depreciation, depletion and amortization
445
247
257
Impairment of assets
5
3
78
-
Interest expense
5
67
28
22
Accretion expense
5
8
2
-
Employment severance costs
5
9
4
3
(Profit)/loss on sale of assets
5
(14)
(55)
11
Non-hedge derivative loss/(gains)
22
131
(119)
(74)
(Loss)/income before equity income and income tax
(36)
340
356
Equity income in affiliates
23
74
80
(Loss)/income before income tax provision
(13)
414
436
Deferred income and mining tax benefit/(expensed)
7
132
(147)
(64)
Income before minority interest
119
267
372
Minority interest
(22)
(17)
(16)
Income before cumulative effect of accounting change
97
250
356
Cumulative effect of accounting change
5
-
(3)
-
Net income applicable to common stockholders
97
247
356
Basic earnings per common share (cents)
Before cumulative effect of accounting change
8
39
112
160
Cumulative effect of accounting change
8
-
(1)
-
Net income – applicable to common stockholders
39
111
160
Diluted earnings per common share (cents)
Before cumulative effect of accounting change
8
38
112
160
Cumulative effect of accounting change
8
-
(1)
-
Net income – applicable to common stockholders
38
111
160
Weighted average number of common shares used in computation
8
251,352,552 222,836,574 221,883,567
Dividend per common share (cents)
76
133
113
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-2
ANGLOGOLD ASHANTI LIMITED
Consolidated balance sheets
AT DECEMBER 31, 2004 and 2003
(In millions, except share information)
Notes
2004
$
2003
(As restated)
$
ASSETS
Current Assets
1,415 1,283
Cash and cash equivalents
299 479
Receivables
743 551
Trade
30
39
Derivatives
22
491
370
Valueaddedtaxes
29
19
Other
193
123
Inventories
9
268 154
Materials on the leach pad
9
105
99
Property, plant and equipment, net
10
4,942 2,263
Deferred stripping
10
69
37
Acquired properties, net
11
1,654 737
Goodwill
12
543 226
Other intangibles, net
12
48
-
Derivatives
22
187 94
Materials on the leach pad
9
22
7
Other long-term assets
13
516 696
Total assets
9,396 5,343
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
1,465 1,116
Trade accounts payable
165
84
Payroll and related benefits
82
62
Other current liabilities
14
232
209
Derivatives
22
606 408
Short-term debt
15
315 331
Income and mining tax payable
65
22
Long-term debt
16
1,371 778
Derivatives
22
734 274
Deferred income and mining tax
7
1,525 789
Provision for environmental rehabilitation
5 / 17
209
124
Other accrued liabilities
18
14
6
Provision for pension and other post-retirement medical benefits
19
173 136
Minority interest
59
52
Commitments and contingencies
20
-
-
Stockholders’ equity
21
3,846 2,068
Common stock
400,000,000 (2003 – 400,000,000) authorized common stock of 25 ZAR cents each
Stock issued 2004 – 264,462,894 (2003 – 223,136,342)
10
9
Additional paid in capital
4,961
3,415
Accumulated deficit
(702) (616)
Accumulated other comprehensive income
(423)
(740)
Total liabilities and stockholders’ equity
9,396 5,343
The accompanying notes are an integral part of these Consolidated Financial Statements
.
F-3
ANGLOGOLD ASHANTI LIMITED
Consolidated statements of cash flows
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 and 2002
(In millions, except share information)
Notes
2004
$
2003
(As restated)
$
2002
(As restated)
$
Net cash provided by operating activities
506
411
529
Income before cumulative effect of accounting change
97
250
356
Reconciled to net cash provided by operations:
Profit on sale of assets
(14)
(55)
-
Depreciation, depletion and amortization
445
247
257
Deferred stripping costs
(28)
(32)
(5)
Impairmentofassets
3
78
-
Deferred income and mining tax
(200)
76
(56)
Movement in non-hedge derivatives
205
(65)
(16)
Equity income in affiliates
(23)
(74)
(80)
Dividends received from affiliates
24
86
65
Other non cash items
16
86
25
Net decrease in provision for environmental rehabilitation and
pension and other post-retirement medical benefits
(26) (88)
(17)
Effect of changes in operating working capital items:
Receivables
(18)
(50)
2
Inventories
(39)
(78)
(46)
Accounts payable and other current liabilities
64
30
44
Net cash used in investing activities
(979)
(268)
(66)
Cash acquired in acquisitions
3
56
9
8
Increase in non-current investments
(20)
(1)
(34)
Additions to property, plant and equipment
(571)
(339)
(246)
Proceeds on sale of mining assets
10
6
1
Proceeds on sale of investments
-
56
158
Cash outflows from derivatives purchased
(359)
-
-
Cash inflows from derivatives sold
49
-
-
Cash effects of acquisitions or disposals
3
(227)
1
35
- Proceeds
(227)
1
59
- Contractual obligations
-
-
(24)
Loans receivable advanced
(2)
(4)
(5)
Loans receivable repaid
85
4
17
Net cash generated/(used) in financing activities
276
(79)
(333)
Short-term debt repaid
(609)
(105)
(630)
Short-term debt raised
88
79
37
Issuance of stock
3
10
18
Long-term debt repaid
(200)
(32)
(258)
Long-term debt raised
989
283
760
Cash outflows from derivatives relating to acquisitions
(24)
-
-
Cash inflows from derivatives with financing
227
-
-
Dividends paid
(198)
(314)
(260)
Net (decrease)/increase in cash and cash equivalents
(197)
64
130
Effect of exchange rate changes on cash
17
53
75
Cash and cash equivalents – January 1,
479
362
157
Cash and cash equivalents – December 31,
299
479
362
The accompanying notes are an integral part of these Consolidated Financial Statements.
ANGLOGOLD ASHANTI LIMITED
Consolidated statements of income
FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 and 2004
(In millions, except share and per share information)
Notes
2006
$
2005
$
2004
$
Sales and other income
2,715
2,485
2,151
Product sales
2,683
2,453
2,096
Interest, dividends and other
32
32
55
Costs and expenses
2,811
2,848
2,176
Production costs
1,525
1,638
1,340
Exploration costs
58
44
44
Related party transactions
6
8
41
45
General and administrative
140
71
58
Royalties
59
39
27
Market development costs
16
13
15
Depreciation, depletion and amortization
699
593
445
Impairment of assets
5
6
141
3
Interest expense
5
77
80
67
Accretion expense
5
13
5
8
Employment severance costs
5
22
26
7
Profit on sale of assets, loans and indirect taxes
5
(36)
(3)
(14)
Mining contractor termination costs
5
-
9
-
Non-hedge derivative loss
26
208
142
123
Other operating costs and expenses
5
16
9
8
(Loss)/income from continuing operations before income tax, equity income, minority
interests and cumulative effect of accounting change
(96)
(363)
(25)
Taxation (expense)/benefit
7
(122)
121
132
Minority interest
(29)
(23)
(22)
Equity income in affiliates
99
39
23
(Loss)/income from continuing operations before cumulative effect of accounting
change
(148)
(226)
108
Discontinued operations
8
6
(44)
(11)
(Loss)/income before cumulative effect of accounting change
(142)
(270)
97
Cumulative effect of accounting change, net of taxation of $11 million in 2005
2/5
-
(22)
-
Net (loss)/income – applicable to common stakeholders
(142)
(292)
97
(Loss)/earnings per share : (cents)
From continuing operations
9
Ordinary shares
(54)
(85)
43
E Ordinary shares
(91)
-
-
Ordinary shares - diluted
(54)
(85)
42
E Ordinary shares - diluted
(91)
-
-
Discontinued operations
9
Ordinary shares
2
(17)
(4)
E Ordinary shares
-
-
-
Ordinary shares - diluted
2
(17)
(4)
E Ordinary shares - diluted
-
-
-
Before cumulative effect of accounting change
9
Ordinary shares
(52)
(102)
39
E Ordinary shares
(91)
-
-
Ordinary shares - diluted
(52)
(102)
38
E Ordinary shares - diluted
(91)
-
-
Cumulative effect of accounting change
9
Ordinary shares
-
(8)
-
E Ordinary shares
-
-
-
Ordinary shares - diluted
-
(8)
-
E Ordinary shares - diluted
-
-
-
Net (loss)/income
9
Ordinary shares
(52)
(110)
39
E Ordinary shares
(91)
-
-
Ordinary shares - diluted
(52)
(110)
38
E Ordinary shares - diluted
(91)
-
-
Pro forma amounts assuming change in accounting for employee benefits plans is
applied retroactively:
Income before cumulative effect of accounting change
2
79
Per basic share (cents)
2
32
Net income
2
31
Per basic share (cents)
2
32
Per diluted share (cents)
2
31
Weighted average number of shares used in computation
9
Ordinary shares
272,613,263
264,635,634
251,352,552
E Ordinary shares - basic and diluted
194,954
-
-
Ordinary shares - diluted
272,637,483
264,635,634
252,048,301
Dividend paid per ordinary share (cents)
39
56
76
Dividend paid per E ordinary share (cents)
-
-
-
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-2
ANGLOGOLD ASHANTI LIMITED
Consolidated balance sheets
AT DECEMBER 31, 2006 and 2005
(In millions, except share information)
Notes
2006
$
2005
$
ASSETS
Current Assets
1,876
1,401
Cash and cash equivalents
471
196
Restricted cash
10
11
8
Receivables
160
209
Trade
40
97
Recoverable taxes, rebates, levies and duties
59
45
Related parties
1
-
Other
60
67
Inventories
11
354
260
Materials on the leach pad
11
46
37
Derivatives
26
649
675
Deferred taxation assets
7
167
-
Assets held for sale
16
18
16
Property, plant and equipment, net
12
4,977
4,922
Deferred stripping
12
-
105
Acquired properties, net
13
1,289
1,412
Goodwill
14
542
524
Other intangibles, net
14
24
26
Derivatives
26
6
38
Other long-term inventory
11
68
32
Materials on the leach pad
11
149
116
Other long-term assets
15
543
496
Deferred taxation assets
7
39
41
Total assets
9,513
9,113
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
2,467
1,874
Trade accounts payable
278
203
Payroll and related benefits
94
78
Other current liabilities
17
126
199
Derivatives
26
1,782
1,121
Short-term debt
18
33
160
Tax payable
148
107
Liabilities held for sale
16
6
6
Other non-current liabilities
19
24
14
Long-term debt
20
1,472
1,779
Derivatives
26
397
527
Deferred taxation liabilities
7
1,275
1,152
Provision for environmental rehabilitation
5 / 21
310
325
Other accrued liabilities
22
27
19
Provision for pension and other post-retirement medical benefits
23
172
200
Minority interest
61
60
Commitments and contingencies
24
-
-
Stockholders’ equity
25
3,308
3,163
Common stock
400,000,000 (2005 – 400,000,000) authorized common stock of 25 ZAR cents each
Stock issued 2006 – 276,236,153 (2005 – 264,938,432)
10
10
Additional paid in capital
5,539
4,972
Accumulated deficit
(1,476)
(1,143)
Accumulated other comprehensive income
(765)
(676)
Total liabilities and stockholders’ equity
9,513
9,113
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-3
ANGLOGOLD ASHANTI LIMITED
Consolidated statements of cash flows
FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 and 2004
(In millions, except share information)
Notes
2006
$
2005
$
2004
$
Net cash provided by operating activities
770
347
513
Net (loss)/income – applicable to common stockholders
(142)
(292)
97
Reconciled to net cash provided by operations:
Cumulative effect of accounting change
-
22
-
Loss/(profit) on sale of assets, loans and indirect taxes
6
(3)
(14)
Depreciation, depletion and amortization
699
593
445
Deferred stripping costs
-
(28)
(28)
Impairment of assets
6
141
3
Deferred taxation
(34)
(191)
(200)
Movement in non-hedge derivatives
339
54
201
Equity income in affiliates
(99)
(39)
(23)
Dividends received from affiliates
85
51
24
Other non cash items
5
31
32
Net (decrease)/increase in provision for environmental
rehabilitation and pension and other post-retirement medical
benefits
(62)
52
(15)
Effect of changes in operating working capital items:
Receivables
11
8
(24)
Inventories
(165)
(58)
(39)
Accounts payable and other current liabilities
122
37
56
Net cash provided by continuing operations
771
378
515
Net cash used in discontinued operations
(1)
(31)
(2)
Net cash used in investing activities
(611)
(624)
(995)
Cash acquired in acquisitions
3
-
-
56
Increase in non-current investments
(20)
(27)
(30)
Additions to property, plant and equipment
(811)
(710)
(571)
Proceeds on sale of mining assets
57
8
10
Proceeds on sale of discontinued assets
9
4
-
Proceeds on sale of available for sale investments
11
1
-
Cash outflows from derivatives purchased
-
(69)
(359)
Cash inflows from derivatives sold
-
-
49
Cash inflows from derivatives with financing
141
153
-
Cash consideration for acquisitions or disposals
3
-
-
(227)
Loans receivable advanced
(1)
(7)
(2)
Loans receivable repaid
6
6
85
Change in restricted cash
(3)
17
(6)
Net cash generated in financing activities
119
200
276
Short-term debt repaid
(134)
(284)
(609)
Short-term debt raised
16
137
88
Issuance of stock
512
9
3
Share issue expenses
(5)
-
-
Long-term debt repaid
(418)
(19)
(200)
Long-term debt raised
142
471
989
Cash outflows from derivatives relating to acquisitions
-
-
(24)
Cash inflows from derivatives with financing
138
55
227
Dividends paid
(132)
(169)
(198)
Net increase/(decrease) in cash and cash equivalents
278
(77)
(206)
Effect of exchange rate changes on cash
(3)
(3)
13
Cash and cash equivalents – January 1,
196
276
469
Cash and cash equivalents – December 31,
471
196
276
The accompanying notes are an integral part of these Consolidated Financial Statements.
ANGLOGOLD ASHANTI LIMITED
Consolidated statements of stockholders’ equity
FOR THE YEARS ENDED DECEMBER 31, 2004, 20032006, 2005 and 20022004
(In millions, except share information)
Common stock
Common
stock
$
Additional paid in
in capital
$
Other
comprehensive
income*
$
Accumulated
deficit
$
Total
$
Balance – January 1, 20022004
215,268,116
9
3,251
(1,234)
(672)
1,354
Net income
356
356
Translation gain
278
278
Net loss on cash flow hedges removed from other comprehensive income and reported in income, net of tax
102
102
Net loss on cash flow hedges, net of tax
(175)
(175)
Net gain on available for sale financial assets arising during the period, net of tax
7
7
Other comprehensive income on acquisition of 46.25% interest in Cerro Vanguardia, in respect of cash flow
hedges, net of tax
(3)
(3)
Comprehensive income
565
Stock issue as part of acquisition
6,530,392
-
138
138
Stock issue as part of odd-lot offer
278,196
-
7
7
Stock issues as part of Share Incentive Scheme
545,318
-
7
7
Dividends
(251)
(251)
Balance – December 31, 2002
222,622,022
9
3,403
(1,025)
(567)
1,820
Net income
247
247
Translation gain
378
378
Net loss on cash flow hedges removed from other comprehensive income and reported in income, net of tax
45
45
Net loss on cash flow hedges, net of tax
(131)
(131)
Net gain on available for sale financial assets arising during the period, net of tax
15
15
Net gain on available for sale financial assets removed from other comprehensive income and reported in
income, net of tax
(22)
(22)
Comprehensive income
532
Stock issues as part of Share Incentive Scheme
514,320
-
8
8
Variable compensation awards compensation expense
4
4
Dividends
(296)
(296)
F-4
Balance – December 31, 2003
223,136,342
9
3,415
(740)
(616)
2,068
Net income
97
97
Translation gain
178
178
Net loss on cash flow hedges removed from other comprehensive income and reported in income, net of tax
118
118
Net gain on cash flow hedges, net of tax
19
19
Net gain on available for sale financial assets arising during the period, net of tax
2
2
Comprehensive income
414
Stock issue as part of acquisition
41,133,752
1
1,543
1,544
Stock issues as part of Share Incentive Scheme
192,800
-
3
3
Reversal of variable compensation awards compensation expense
(4)
(4)
Dividends
(179)
(179)
Balance – December 31, 2004
264,462,894
10
4,961
(423)
(702)
3,846
Net loss
(292)
(292)
Translation loss
(132)
(132)
Net loss on cash flow hedges removed from other comprehensive income and reported in income, net of tax
11
11
Net loss on cash flow hedges, net of tax
(134)
(134)
Net gain on available for sale financial assets arising during the period, net of tax
2
2
Comprehensive loss
(545)
Stock issues as part of Share Incentive Scheme
475,538
-
9
9
Unearned stock awards compensation expense
2
2
Dividends
(149)
(149)
Balance – December 31, 2005
264,938,432
10
4,972
(676)
(1,143)
3,163
F-4
Cumulative deferred stripping adjustment. Refer to Note 2.
(73)
(73)
Cumulative cut-off adjustment. Refer to Note 2.
(11)
(11)
Net loss
(142)
(142)
Translation loss
(108)
(108)
Net loss on cash flow hedges removed from other comprehensive income and reported in income, net of tax
97
97
Net loss on cash flow hedges, net of tax
(86)
(86)
Net gain on available for sale financial assets arising during the period, net of tax
8
8
Comprehensive loss
(315)
Stock issues as part of equity offering
9,970,732
-
498
498
Stock issues as part of Share Incentive Scheme
398,399
-
9
9
Stock based compensation expense
60
60
Dividends
(107)
(107)
Balance – December 31, 2006
275,307,563
10
5,539
(765)
(1,476)
3,308
* The cumulative translation loss included in other comprehensive income amounted to $341$581 million (2003: $519(2005: $473 million). The translation loss has no tax effect. The cumulative charge, net of deferred taxation of $14$96 million (2003: $56
(2005: $71 million),
included in other comprehensive income in respect of cash flow hedges amounted to $148$260 million (2003: $285(2005: $271 million). The cumulative gain, net of deferred taxation of $1 million (2005: $nil million),
included in other comprehensive income in respect of available for sale financial assets amounted to
$2 $12 million (2003: $nil(2005: $4 million). This gain has no tax effect. The cumulative gain included in other comprehensive income in respect of the hedge of a
net investment in foreign entities amounted to $64 million (2003:(2005: $64 million). This gain is offset by $64 million (2003:(2005: $64 million) arising from translation of a net investment in foreign entities.
As at December 31, 2006, $286 million of retained earnings arising from the Company’s equity accounted joint ventures and certain subsidiaries may not be remitted without third-party shareholder consent.
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-5
ANGLOGOLD ASHANTI LIMITED
Notes to the consolidated financial statements
FOR THE YEARS ENDED DECEMBER 31, 2004, 20032006, 2005 and 20022004
(In millions, except share information)
1.
NATURE OF OPERATIONS
AngloGold Ashanti Limited (the “company”"Company"), as it conducts business today, was formed on April 26, 2004 following
the completed AngloGold Ashanti
Business Combination betweenof AngloGold Limited and(AngloGold) with Ashanti Goldfields Company Limited. Limited (Ashanti).
AngloGold, Limited
(AngloGold) formerly Vaal Reefs Exploration and Mining Company Limited, (Vaal Reefs), was incorporated in South
Africa on
May 29, 1944.1944 and Ashanti Goldfields Company Limited (Ashanti) was incorporated in Ghana on August 19,
1974. The companyCompany conducts gold-mining
operations in Argentina, Australia, Brazil, Ghana, Guinea, Mali, Namibia,
South Africa, Tanzania and the United
States of America (USA). The companyCompany also produces uranium oxide and
sulphuric acid.
2.
RESTATEMENT OF FINANCIAL STATEMENTS FOR ACCOUNTING FOR INTERESTS IN MINING JOINT
VENTURESCHANGES
The company has restated previously issued financial statements for the fiscal years ended
Stock Based Compensation
At December 31, 20022006, the Company has five stock-based employee compensation plans consisting of time-based
awards, performance related awards and equity settled compensation plans, which are described more fully in
December 31, 2003Note 30 the “AngloGold Limited share incentive scheme and plans”. Prior to correctJanuary 1, 2006, the company’s historical accounting practicesCompany
accounted for certain joint venture arrangements.
Historically, interests in certain incorporated mining joint ventures in whichshare-based payments under the company has joint control wererecognition and measurement provisions of APB Opinion No. 25,
reported using“Accounting for Stock Issued to Employees, and related Interpretations”, as permitted by SFAS123, “Accounting for
Stock-Based Compensation”. In accordance with APB No. 25, no compensation cost was required to be recognized
for options granted that had an exercise price equal to the proportionate consolidation method. This accounting treatment represents a departure from
US GAAP which requiresmarket value of the equity method underlying common stock on the date
of accounting for such joint venture arrangements. These joint venture
arrangements consist of operating entities situated in Mali (the Sadiola, Yatela and Morila Joint Ventures) and
Tanzania (the Geita Joint Venture), of which the significant financial operating policies are, by contractual
arrangement, jointly controlled.
As a result, the company has restated the consolidated balance sheet as of December 31, 2003, and the consolidated
statements of income and consolidated statements of cash flows forgrant. During the years ended December 31, 20032005 and 20022004 there was no compensation expense recognized
included in this Annual Report on Form 20-F. The restatement correctsrelated to time-based awards as the company’s historical accounting for
interests in mining joint ventures and has no impact on Net incomeexercise price of all awards was greater than or Total stockholders’ equity inequal to the accompanyingfair market value of
consolidated statements.
The following is a summary of the effects of the corrections in joint venture accountingunderlying stock on the company’s consolidated
statementsdate of income and consolidated statements of cash flows forgrants. During the yearsyear ended December 31, 20032005 the Company recognized a
compensation expense of $2 million related to Bonus Share Plan (BSP) and 2002Long-Term Incentive Plan (LTIP) treated
as well as the effectequity settled compensation plans under APB No. 25. As of these changes on the consolidated balance sheet as at December 31, 2003.2005 no compensation expense was
recognized, related to the performance awards under APB No. 25. The Company recognized compensation credit of
$4 million during 2004, related to the performance awards under APB No. 25, due to a decline in fair market value to
below the exercise price of such awards.
Condensed consolidated income statement
YearOn January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123(R), “Share-Based
Payment”, using the modified prospective transition method. Under this method, compensation cost recognized in
the year ended December 31, 20032006 includes: a) compensation cost for all share-based payments granted prior to,
but not yet vested as of January 1, 2006, based on the grant-date fair value estimated in accordance with the original
provisions of SFAS123, and b) compensation cost for all share-based payments granted subsequent to
January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS123(R). The
results for prior periods have not been restated.
(In millions)
As previously
reported Adjustments As restated
Sales and other income
2,057
(314)
1,743
Costs and expenses
1,646
(243)
1,403
Income before equity income and income tax
411
(71)
340
Equity income in affiliates
2
72
74
Incomea result of adopting SFAS123(R) on January 1, 2006, the Company’s loss before income tax provision
413
1
414
Deferred incometaxes and mining tax expensed
(146)
(1)
(147)
Minority interest
(17)
-
(17)
Net income before cumulative effect of accounting change
250
-
250
Net income
247
-
247
Condensed consolidated income statement
Yearnet loss for
the year ended December 31, 2002
(In millions)
As previously
reported
Adjustments As
restated
Sales2006, are $31 million higher, than if it had continued to account for share-based
compensation under APB No. 25. Basic and other income
1,799
(306)
1,493
Costsdiluted loss per share for the year ended December 31, 2006 would
have been $0.40 if the Company had not adopted SFAS123(R), compared to reported basic and expenses
1,369
(232)
1,137
Income before equity income and income tax
430
(74)
356
Equity income in affiliates
4
76
80
Income before income tax provision
434
2
436
Deferred income and mining tax expensed
(62)
(2)
(64)
Minority interest
(16)
-
(16)
Net income before cumulative effectdiluted loss per
share of accounting change
356
-
356
Net income
356
-
356
$0.51.
F-6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
2.
ACCOUNTING CHANGES (continued)
SFAS123(R) requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a
financing cash flow, rather than as an operating cash flow. This requirement will reduce net operating cash flows
and increase net financing cash flows in periods after adoption. This requirement did not impact the Company’s
cash flow disclosure for the year ended December 31, 2006 as the Company received the benefit of a tax deduction
of less than $1 million for compensation cost settled in equity. No income tax benefit was recognized in 2005 and
2004.
The following table illustrates the effect on net income and earnings per share if the Company had applied the fair
value recognition provisions of SFAS123 to stock-based employee compensation in 2005 and 2004. For purposes of
this pro forma disclosure, the value of the options is estimated using a Black-Scholes option pri cing model and
amortized to expense over the options’ vesting periods.
Year Ended December 31,
(in millions, except per share data)
2005
$
2004
$
Net (loss)/income, as reported
(292)
97
Add: Unearned stock awards compensation expense, calculated under APB No. 25
2
-
(Deduct)/add: Variable compensation awards (credit)/expense, calculated under APB No. 25
-
(4)
Deduct: Total stock-based employee compensation expense determined under fair value
based method for all awards, net of
related tax effects
(2)
(3)
Pro forma net (loss)/income
(292)
90
(Loss)/earnings per share (cents)
Basic – as reported
(110)
39
Basic – pro forma
(110)
36
Diluted – as reported
(1)
(110)
38
Diluted – pro forma
(1)
(110)
36
(1)
The calculation of diluted (loss)/earnings per common share for 2005 and 2004 did not assume the effect of 15,384,615 shares
issuable upon the exercise of Convertible Bonds as their effects are anti-dilutive for these periods. The calculation of diluted
(loss)/earnings per common share for 2005 did not assume the effect of 601,315 shares issuable upon the exercise of stock
incentive options as their effects are anti-dilutive for this period.
Deferred Stripping Costs
On January 1, 2006, the Company adopted Emerging Issues Task Force (“EITF”) Issue 04-6, “Accounting for
Stripping Costs in the Mining Industry”. Issue No. 04-6 addresses the accounting for stripping costs incurred during
the production phase of a mine and that post production stripping costs should be considered costs of the extracted
minerals under a full absorption costing system and recognized as a component of inventory to be recognized in cost
of sales in the same period as the revenue from the sale of the inventory. Additionally, capitalization of such costs
would be appropriate only to the extent inventory exists at the end of a reporting period.
The guidance requires application through recognition of a cumulative effect adjustment to opening retained earnings
in the period of adoption, with no charge to current earnings for prior periods. The results for prior periods have not
been restated. Upon adoption, the cumulative effect of the accounting change reduced opening retained earnings by
$73 million (net of Taxation), increased the value of inventory by $5 million, eliminated the capitalized deferred
stripping balance of $105 million, decreased Deferred taxation by $29 million, reduced Other long-term assets by
$3 million and decreased Minority interest by $1 million. Adoption of the new guidance had no impact on the
Company’s cash position or net cash from operations.
Prior to January 1, 2006, stripping costs incurred in open-pit operations during the production phase to remove
additional waste were charged to operating costs on the basis of the average life of mine stripping ratio and the
average life of mine costs per tonne and resulted in capitalization of such stripping costs (deferred stripping) as part
of mining assets.
F-7
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
2.
RESTATEMENT OFACCOUNTING CHANGES (continued)
As at December 31,
(in millions)
2006
$
2005
$
Movements in the deferred stripping costs balance were as follows:
Opening balance
105
69
Cumulative effect adjustment
(105)
-
Amount deferred
-
28
Translation
-
8
Closing balance
-
105
Cut-off adjustments
Certain subsidiaries within the Company have in prior years consistently determined the year end close process in
respect of certain operating costs at dates immediately preceding the Christmas vacation period. Historically,
management concluded that any resulting adjustment was immaterial to operating results as all entities had twelve
reporting periods and used the same cut-off dates from year to year.
The above errors arose as a combination of the cut-off process being linked to the mine production cycle as well as
utilizing a date not aligned to December 31 each year, although the same dates were utilized from year to year.
On September 13, 2006, the SEC staff published Staff Accounting Bulletin (SAB) No. 108, “Considering the Effects
of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SA B 108”).
SAB 108 (SAB Topic 1.N) addresses quantifying the financial statement effects of misstatements, specifically, how
the effects of prior year uncorrected errors must be considered in quantifying misstatements in the current year
financial statements.
As part of the 2006 year end financial statement close process the Company quantified the balance sheet impact
and determined that it would only have a material effect in the reporting of “Payroll and related benefits”, which is
separately identified on the face of the balance sheet for all years presented. The other accounts that were affected
are Tangible Assets – Mine development costs; Inventories – Gold in process; Deferred taxation; Cash and cash
equivalents; Trade accounts payable and Payroll and related benefits.
The Company previously considered the above errors to be immaterial under the rollover method and evaluated the
misstatement against the current year fina ncial statements under both the rollover and iron curtain methods.
In accordance with the transition provisions provided in SAB 108 the cumulative effect of applying SAB 108 as an
adjustment to opening retained earnings is summarized below:
(in millions)
$
Assets
Tangible Assets – Mine development costs
3 (increase)
Inventories – Gold in process
1 (increase)
Deferred taxation
5 (increase)
Trade receivables
5 (decrease)
Liabilities
Trade accounts payable
3 (increase)
Payroll and related benefits
10 (increase)
Other creditors
2 (increase)
Retained earnings
11 (decrease)
F-8
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR (continued)
2.
ACCOUNTING FOR INTERESTS IN MINING JOINT
VENTURESCHANGES (continued)
Condensed consolidated cash flow
Employee Benefit Plans
On September 29, 2006 the FASB issued SFAS158, “Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R)”. SFAS158 requires an entity
to:
•
recognize in its statement of financial position an asset for a defined benefit post-retirement plan's overfunded
status or a liability for a plan's underfunded status;
•
measure a defined benefit post-retirement plan's assets and obligations that determine its funded status as of
the same day of the employer's fiscal year-end statement of financial position;
•
recognize as a component of accumulated other comprehensive income, net of tax, amounts accumulated at
the date of adoption due to delayed recognition of actuarial gains and losses, prior service costs and credits,
and transition assets and obligations; and
•
expand the disclosure requirements of SFAS132(R) to include disclosure of additional information in the notes
to financial statements about certain effects on net periodic benefit cost in the next fiscal year that arise from
delayed recognition of actuarial gains or losses, prior service costs or credits and unrecognized transition
assets and obligations.
The adoption of the recognition and disclosure requirements of SFAS158 which are effective for fiscal years ending
after December 15, 2006, did not have a material impact on the Company’s earnings and financial position as the
Company changed its accounting policy during the second quarter of 2005, retroactive to January 1, 2005, with
respect to accounting for employee benefit plans to recognize the effects of actuarial gains and losses in income,
rather than amortizing over the expected average remaining service period of employees participating in the plan.
This change was made as the Company believes that elimination of the permitted pension and post-retirement
benefit corridor, as allowed by SFAS87 and SFAS106 will result in more accurate financial information.
The cumulative effect of this change in accounting treatment with respect to actuarial gains and losses recorded in
2005 decreased net income and stockholders’ equity by $22 million (net of taxation of $11 million).
The Company’s employee benefit plans are described more fully in Note 30 the “Employee benefit plans”.
The results for 2004 are presented on a historical basis and do not reflect the change in accounting treatment with
respect to actuarial gains and losses. Had the Company changed its accounting policy, retroactive to January 1, the
historical income before cumulative effect of accounting change, net income and related per share amounts would
have been changed to the adjusted amounts indicated below:
Year ended December 31, 20032004
(In millions)
As previously
reported Adjustments As
restated
Net cash provided by operating activities
453
(42)
411
Net cash used (in investing activities
(307)
39
(268)
Net cash used in financing activities
(107)
28
(79)
Effect of exchange rate changes on cash
53
-
53
Cash and cash equivalents – beginning of year
413
(51)
362
Cash and cash equivalents – end of year
505
(26)
479US Dollars, millions, except for share data)
Condensed consolidated cash flow statementIncome before
Year ended December 31, 2002cumulative effect of
(In millions)accounting change
As previouslyPer
reportedbasic
Adjustments Asshare
restated(1)
Net cash provided by operating activities
594(cents)
(65)Per
529diluted
Net cash used in investing activitiesshare
(91)(1)
25
(66)(cents)
Net cash used in financing activities
(356)income
23Per
(333)basic
Effect of exchange rate changes on cashshare
75(1)
-
75(cents)
Cash and cash equivalents – beginning of yearPer
191diluted
(34)share
157(1)
Cash and cash equivalents – end of year
413
(51)
362(cents)
Condensed consolidated balance sheet
At December 31, 2003
(In millions)
As previously
reported
Adjustments As
restated
Cash and cash equivalents
505
(26)
479
Other current assets
905
(101)
804
Equity method investments
(1)
5 503
508
Non current assets
4,164
(612)
3,552
Total assets
5,579
(236)
5,343
Current liabilities
1,202
(86)
1,116
Non current liabilities
2,257
(150)
2,107
Minority interests
52
-
52
Stockholders’ equity
2,068
-
2,068
Total liabilities and stockholders’ equity
5,579
(236)
5,343
As reported – historical basis
97
39
38
97
39
38
Impact on earnings net of taxation
(18)
(7)
(7)
(18)
(7)
(7)
Adjusted
79
32
31
79
32
31
(1)
(1)Basic and diluted earnings per common share. The calculation of diluted earnings per common share for 2004 did not
assume the effect of 15,384,615 shares, issuable upon the exercise of Convertible Bonds as their effects are anti-dilutive for
this period.
F-9
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Included in other long-term assets.(continued)
3.
ACQUISITIONS AND DISPOSALS OF BUSINESSES AND ASSETS
20042006 acquisitions
The companyCompany made the following acquisitions during the year:
•
Agreement signed with China explorer Dynasty Gold Corporation
On February 27, 2006, AngloGold Ashanti announced that it had signed an agreement with Dynasty Gold
Corporation, a Vancouver-based company, with exploration activities in China, to acquire an effective 8.7 percent
stake in that company through a purchase of 5.75 million Dynasty units at a price of C$0.40 each. Each unit consists
of one common share and one-half common share purchase warrant exercisable at a price of C$0.60 per unit for two
years.
•
Agreement with International Tower Hill Mines Limited
On June 30, 2006 AngloGold Ashanti (U.S.A.) Exploration Inc. (AngloGold Ashanti), International Tower Hill Mines Ltd
(ITH) and Talon Gold Alaska, Inc. (Talon), a wholly-owned subsidiary of ITH, entered into an Asset Purchase and Sale
and Indemnity Agreement whereby AngloGold Ashanti sold to Talon a 100 percent interest in six Alaska mineral
exploration properties and associated databases in return for 5,997,295 common shares of ITH stock, representing an
approximate 19.99 percent interest in ITH (June 15, 2007: 15.68 percent). The sales transaction closed on
August 4, 2006. AngloGold Ashanti also granted to ITH the exclusive option to acquire a 60 percent interest in each
of its LMS and Terra projects by incurring $3 million of exploration expenditure on each project (total of $6 million)
within four years of the grant date of the opti ons. As part of the two option agreements, AngloGold Ashanti will have
the option to increase or dilute its stake in these projects, subject to certain conditions.
•
Strategic alliance in Russia with Polymetal and agreement to acquire assets from Trans-Siberian Gold plc
On September 21, 2006, AngloGold Ashanti announced that it had entered into a 50:50 strategic alliance with Russian
gold and silver producer, OAO Inter-Regional Research and Production Association Polymetal (Polymetal) in terms of
which, Polymetal and AngloGold Ashanti would cooperate in exploration, acquisition and development of gold mining
opportunities within the Russian Federation. At the same time, AngloGold Ashanti announced that it had submitted an
offer to the board of Trans-Siberian Gold plc (TSG) to acquire all of TSG’s interest in its Krasnoyarsk based
subsidiaries, OOO GRK Amikan and OOO Artel Staratelei Angarskaya Proizvodstvennaya Kompania for a total
consideration of $40 million. TSG announced on February 12, 2007, that the agreements for the sale of its
Krasnoya rsk based subsidiaries to AngloGold Ashanti have been signed. The South African Reserve Bank has
approved the transaction. These companies to be acquired from TSG by AngloGold Ashanti, together with two
greenfields exploration companies held by Polymetal, hold the initial operating assets of the strategic alliance. The
Company’s aggregate shareholding in TSG at December 31, 2006 was 12,263,170 ordinary shares (29.9 percent
interest held).
•
Purchase of Central African Gold Plc (CAG) shares
Arising from the sale of Bibiani assets, AngloGold Ashanti decided to apply $3 million of the partial proceeds to an
investment of 15,825,902 Central African Gold plc (CAG) shares. Subsequent to this decision, local regulators
required that the shares in CAG be sold within 90 days of December 28, 2006. The Company has classified the
shares as held for sale. Refer to Note 16 – Assets and liabilities held for sale. On February 14, 2007, the Company
disposed of 7,000,000 CAG shares yielding total proceeds of £768,845 ($1.5 million) and during April 2007, disposed
of the remaining 8,825,902 CAG shares yielding total proceeds of £894,833 ($1.8 million).
F-10
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
3.
ACQUISITIONS AND DISPOSALS OF BUSINESSES AND ASSETS (continued)
2006 disposals
The Company’s disposals during the year included:
•
Sale of Bibiani
On August 23, 2006, AngloGold Ashanti announced that it had entered into a conditional agreement with Central
African Gold plc (CAG) to sell the assets, related to Bibiani and Bibiani North prospecting permit, including all of
Bibiani’s employees, fixed mining and non-mining assets, inventory, trade receivables and intellectual property as well
as the Bibiani mining lease and the Bibiani North prospecting license, and procure the cessation and delegation of all
contracts related to Bibiani to CAG for a total consideration of $40 million. The conditions precedent to the sale of
Bibiani were satisfied effective December 28, 2006. The Bibiani North prospecting license was assigned to CAG on
May 17, 2007 by the Ghanaian Land Commission and Registry.
2005 acquisitions
On May 31, 2005 the Company acquired an additional 12.4 percent interest in Trans-Siberian Gold plc as further
discussed in this note under 2004 acquisitions “AngloGold Ashanti acquires stake in Trans-Siberian Gold plc”.
2005 disposals
The Company’s disposals during the year included:
•
Conditional sale of Weltevreden mine in exchange for Aflease shares
On July 19, 2005, Aflease Gold and Uranium Resources Limited (Aflease) announced that it had purchased from
AngloGold Ashanti, its Weltevreden mine in an all script deal valued on May 6, 2005 at R75 million ($11 million). On
December 19, 2005, Aflease was acquired by sxr Uranium One Incorporated (formerly Southern Cross Incorporated)
(sxr Uranium One). As certain conditions precedent to the agreement with regards to mining rights conversion were
not fulfilled for that property as of December 31, 2006, the Company has separately classified assets and liabilities for
Weltevreden presented in the consolidated balance sheet, as held for sale. Refer to Note 16 – Assets and liabilities
held for sale.
2004 acquisitions
The Company made the following acquisitions during the year:
•
Business Combination between AngloGold and Ashanti
On August 4, 2003, AngloGold and Ashanti announced that they had agreed the terms of a recommended Business
Combination at an exchange ratio of 0.26 ordinary shares for every Ashanti share. On the same date, AngloGold
entered into the Lonmin Support Deed, pursuant to which Lonmin, which held 27.6 percent of Ashanti's issued share
capital, agreed, among other things, to vote its Ashanti shares in favor of the Business Combination.
After further discussions with AngloGold and careful, detailed consideration of a competitive proposal, and following
the increase by AngloGold in the offer consideration from 0.26 to 0.29 ordinary shares, the Ashanti board announced
on October 15, 2003 that it was recommending the improved final offer from AngloGold.
On October 28, 2003, the government of Ghana, which held 16.8 percent of Ashanti's issued share capital,
announced its support for the AngloGold offer, as well as the principal terms of a Stability Agreement which the
government of Ghana intended to enter into with AngloGold.
AngloGold and the government of Ghana agreed the terms of a Stability Agreement, approved by the parliament of
Ghana, to govern certain aspects of the fiscal and regulatory framework under which AngloGold Ashanti will operate
in Ghana following the implementation of the Business Combination.
F-11
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
3.
ACQUISITIONS AND DISPOSALS OF BUSINESSES AND ASSETS (continued)
Under the Stability Agreement, the government of Ghana retained its special rights (“Golden Share”) under the
provisions of the mining law pertaining to the control of a mining company,Company, in respect of the assets and operations in
Ghana.
F-7
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
3.
ACQUISITIONS AND DISPOSALS OF BUSINESSES AND ASSETS (continued)
In terms of the Golden Share, the following requires, and will not be effective without, the written consent of the
government of Ghana as the holder of the Golden Share:
•
any disposal of its Ghanaian assets and operations by Ashanti (other than any disposal in the ordinary course of
business of Ashanti) which, alone or
when aggregated with any disposal or disposals forming part of, or
connected with, the same or a connected
transaction, constitutes a disposal of the whole or a material part of the
assets of the Ashanti Group taken as a
whole. For this purpose, a part of the Ashanti Group’s assets will be
considered material if either (a) its book
value (calculated by reference to the then latest audited consolidated
accounts), or the total consideration to be
received on its disposal, is not less than 25 percent of the book value
of the net assets of the Ashanti Group or
(b) the average profits attributable to it represent at least 25 percent of
the average profits of the Ashanti Group
for the last three years for which audited accounts are available (before
deducting all charges, except taxation
and extraordinary items).
The Golden Share does not carry any right to vote at any general meeting of Ashanti.
The government of Ghana has also agreed that Ashanti's Ghanaian operations will not be adversely affected by any
new enactments or orders or by changes to the level of payments of any customs or other duties relating to mining
operations, taxes, fees and other fiscal imports or laws relating to exchange control, transfer of capital and dividend
remittance for a period of 15 years after the completion of the Business Combination. In consideration of these
agreements and undertakings, AngloGold agreed to issue to the government of Ghana 2,658,000 new AngloGold
ordinary shares and to pay to the government of Ghana $5 million in cash, promptly after the implementation of the
Business Combination. AngloGold also agreed to pay to the government of Ghana, on the date of the completion of
the Business Combination, an additional $5 million in cash towards the transaction costs incurred by the government
of Ghana in its role as regulator of Ashanti.
The Business Combination was effected by means of a scheme of arrangement under Ghanaian law, which required
the approval of Ashanti shareholders and the confirmation by the High Court of Ghana. In terms of the Business
Combination, Ashanti shareholders received 0.29 ordinary shares or 0.29 ADSs of AngloGold for every Ashanti share
or Ashanti GDS (Global Depositary Security) held. Each ADS represents one AngloGold ordinary share. The Business
Combination whereby AngloGold acquired 100 percent of Ashanti, became effective on April 26, 2004 after the Court
Order from the High Court of Ghana was lodged with the Ghana Registrar of Companies. From the effective date,
Ashanti became a private company,Company, and AngloGold changed its name to AngloGold Ashanti Limited, following
approval by its shareholders at a general meeting held on April 8, 2004.
On April 26, 2004, AngloGold issued 38,400,021 ordinary shares to former Ashanti shareholders and
2,658,000
ordinary shares under the Stability Agreement to the government of Ghana. On June 29, 2004, AngloGold
issued a
total of 75,731 ordinary shares to former Ashanti warrant holders pursuant to the Business Combination.
The market value of the shares issued for Ashanti was approximately $1,544 million, net of share issue expenses of
$3 million, based on the average quoted value of the shares of $37.62 two days before and after October 15, 2003,
the date the terms of the transaction were announced. The market value of the issued shares, together with the cash
consideration paid to the government of Ghana as part of the Stability Agreement, cash consideration paid for
outstanding options over Ashanti ordinary shares and transaction costs and funding of $227 million, gave rise to a
total purchase price of approximately $1,771 million.
Ashanti Goldfields Company Limited was delisted from the London, New York and Ghana stock exchanges in late
April 2004. During 2005, AngloGold Ashanti has performed a preliminaryfinalized the purchase price allocation based on independent appraisals
appraisals and valuations. The transaction was accounted for as a purchase business combination under US GAAP whereby
whereby identifiable assets acquired and liabilities assumed were recorded at their fair market values as of the date of
acquisition. The excess of the purchase price over such fair value was recorded as goodwill and as such, the
acquisition resulted in goodwill of $182 million being recorded, relating mainly to the extended life of AngloGold
Ashanti by the Obuasi project in Ghana and enlarged negotiation base and presence in Africa by Ashanti operations.
F-12
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
3.
ACQUISITIONS AND DISPOSALS OF BUSINESSES AND ASSETS (continued)
In accordance with the provisions of SFAS142, goodwill was assigned to specific reporting units. The company’sCompany’s
reporting units are generally consistent with the operating mines underlying the segments identified in Note 2629 –
Segment and Geographical Information. An individual operating mine is not a typical "going-concern" business
because of the finite life of its reserves. The allocation of goodwill to an individual operating mine likely will result in an
eventual goodwill impairment due to the wasting nature of the primary asset of the reporting unit. The Company
evaluates its held-for-use long lived assets for impairment when events or changes in circumstances indicate that the
related carrying amount likely will not be recoverable over the long term and in accordance with the provisions of
SFAS142 performs its annual impairment review of assigned goodwill during the fourth quarter of each year. Goodwill
related to the acquisition is non-deductible for tax purposes.
During the year ended December 31, 2005, the Company recorded an impairment of $4 million, relating to goodwill
formerly assigned to operations situated in Ghana (at Bibiani) as part of the Business Combination, resulting from a
reduction in the life of mine following re-assessments at this operation. No impairments relating to goodwill were
recorded during the year ended December 31, 2006. Refer to Note 5 – Impairment of assets and to Note 14 –
Goodwill and other intangibles.
The combination of AngloGold and Ashanti was designed to combine the two companies into a long-life, low-cost,
high-margin investment opportunity, bringing together the best that both had to offer, by way of ore bodies, capital and
human resources.
F-8
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
3.
ACQUISITIONS AND DISPOSALS OF BUSINESSES AND ASSETS (continued)
Due to the size and nature of the acquisition and the geographical spread and remote locations of some of the
properties acquired and the associated assets, AngloGold Ashanti is in the process of finalizing the purchase price
allocation of fixed assets. However, the final purchase price allocation is not expected to vary significantly from the
preliminary allocation.
The operations and financial condition of the companies and assets acquired are included in the financial statements
from April 26, 2004, the effective date of the Business Combination.
The carrying amount of goodwill recorded in the AngloGold Ashanti Business Combination by reporting segment, as
of December 31, 20042006 and 20032005 is summarized as follows:
Ghana
$
Guinea
$
Tanzania
$
Total
$
Balance at January 1, 2003
-
-
-
-
Purchase price allocation for Ashanti Business Combination2004
122
10
50
182
182Impairment losses
(4)
-
-
(4)
Balance at December 31, 2005
118
10
50
178
Impairment losses
-
-
-
-
Balance at December 31, 20042006
122118
10
50
178
182
The fair value assigned to major assets and liabilities acquired in Ashanti are disclosed in Note 3 – Fair value of
acquisitions and (disposals) of businesses. The finalization of the purchase price allocation during 2005 in respect of
fixed assets resulted in a reallocation within the respective mines, between Mine development and Mine infrastructure
of $214 million included in Property, plant and equipment. The allocation of goodwill assigned to reporting units was
not affected.
For information purposes only, the following unaudited pro forma financial data reflects the consolidated results of
operations of AngloGold Ashanti as if the Business Combination had taken place on January 1, 2004 and on
January 1, 2003:2004:
Year ended December 31,
2004
$
2003
(As restated)
$
Total revenue
2,478
2,429
$
Per basic and diluted
diluted common
share
(1)
(cents)
$
Per basic and
diluted common
share
(1)
(cents)
Net income/(loss) before cumulative effect of accounting change
241
91
(227)
(86)
Cumulative effect of accounting change
-
-
1
-
Net income/(loss) – applicable to common stockholders
241
91
(226)
(86)
Basic weighted average number of common shares used in
computation
264,402,721
263,970,326
Diluted weighted average number of common shares used in
computation
265,098,470
264,851,327
(1)
The calculation of diluted earnings/(loss) per common share for 2004 and 2003 did not assume the effect of 15,384,615 shares issuable
issuable upon the exercise of Convertible Bonds as their effects are anti-dilutive for these periods.this period.
F-13
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
3.
ACQUISITIONS AND DISPOSALS OF BUSINESSES AND ASSETS (continued)
The above pro forma financial data for the year ended December 31, 2004 includes mark-to-market gains on
derivative instruments amounting to $169 million and for the year ended December 31, 2003 includes mark-to-market
losses on derivative instruments amounting to $437 million. The above pro forma financial data for the yearsyear ended
December 31, 2004 and 2003 dodoes not include the application of hedge accounting prior to the acquisition to significant portions
portions of acquired derivative instruments as hedge accounting documentation was not in place during these periods.
this period. The pro forma net loss for the year ended December 31, 2003 assumes the effects of the Convertible Bonds issue
which was raised primarily to finance the acquisition costs, debt repayment commitments, working capital and capital
expenditure requirements of Ashanti Goldfields Company Limited. The pro forma information is not indicative of the results of operations that would have occurred had the Business Combination
been consummated on January 1, 2004
and 2003, respectively.2004. The information is not indicative of the group’s future results of operations.
F-9
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
3.
ACQUISITIONS AND DISPOSALS OF BUSINESSES AND ASSETS (continued)
•
AngloGold Ashanti acquires stake in Trans-Siberian Gold plc
On July 1, 2004, AngloGold Ashanti announced that it had entered into an agreement with Trans-Siberian Gold plc
(TSG) for the acquisition of a 29.9 percent stake in the companyCompany through an equity investment of approximately
£18 million ($32 million) in two subscriptions for ordinary shares. TSG is listed on the AIM. The first tranche of
ordinary shares of 17.5 percent
was acquired during July 2004. TSG is listed on the London Stock Exchange’s Alternative Investment Market (AIM).
This first move into Russia allowsallowed AngloGold Ashanti
the opportunity of establishing a meaningful interest in a
company Company with Russian assets and activities, thereby allowing
AngloGold Ashanti to gain exposure to, and familiarity
with, the operating and business environment in Russia, as well
as being able to establish a business within this
prospective New Frontier.new frontier. On D ecemberDecember 23, 2004, it was announced
that the second subscriptionsubscripti on had been delayed
to April 15, 2005 while on April 18, 2005, the second subscription date
was extended by a further two weeks to
April 29, 2005. On April 28, 2005, the companyCompany announced that agreement
had been reached with TSG on revised
terms for the second subscription of shares in TSG, and a revised
subscription price of £1.30 per share, compared to
£1.494 £1.494 per share agreed between the parties on June 30, 2004.
The revised terms of the subscription was approved
by TSG shareholders on May 27, 2005 and AngloGold Ashanti’s
17.5 percent equity interest in TSG increased to 29.9
percent on May 31, 2005, the date on which the second
subscription for 6,131,585 ordinary shares in TSG for an aggregate consideration of £8 million ($15 million) was
completed.
•
Agreement with Red 5 Limited
On October 11, 2004, AngloGold Ashanti announced that it had signed an agreement with Philippines explorer
Red 5
Limited to subscribe for a 12.3 percent stake in the expanded issued capital of Red 5 Limited for a cash
consideration
of A$5 million ($4 million). The placement willwas to be used to fund the exploration activities along strike
from current
mineral resources at the Siana Project, and to test the nearby porphyry gold-copper targets in the
Surigao region of
the Republic of the Philippines.
For a period of 2 years commencing in October 2004, AngloGold
Ashanti had the right to enter into Joint Venture arrangements on Red 5's tenements (excluding their Siana project)
with the potential to earn up to a 67.5 percent interest in areas of interest through further investment in exploration in
these Joint Venture areas. On August 26, 2005, AngloGold Ashanti subs cribed for additional shares in Red 5 Limited,
for a cash consideration of A$0.8 million ($0.6 million), thereby increasing its holding to 14.1 percent. As at
December 31, 2006, AngloGold Ashanti held 13 percent in Red 5 Limited, after the dilution of shareholding (from
14.1 percent) resulting from the increase in issued share capital. On September 18, 2006, AngloGold Ashanti elected
to exercise a second Joint Venture option with Red 5 Limited – the Outer Siena Joint Venture, located to the south-
east of Boyongan - in terms of which the Company will spend a minimum of A$1.5 million ($1.2 million) in the first year
with no interest. The Company may earn between 52 percent and 58.5 percent interest in two tenements through an
additional expenditure of A$4 million ($3 million), with a right to increase its holding by 8 percent to 9 percent through
an additional spend of A$5 million ($4 million).
2004 disposals
The company’sCompany’s disposals during the year included:
•
Sale of stake in Jerritt Canyon Joint Venture to Queenstake Resources USA Inc.
In 2004, Queenstake approached the Jerritt Canyon Joint Venture partners, AngloGold and Meridian Gold, about the
possibility of monetizing all or at least a majority of the $6 million in deferred payments and $4 million in future
royalties, payable in the concluded sale of AngloGold’s interest in the Jerritt Canyon Joint Venture to Queenstake
Resources USA Inc., effective June 30, 2003. Based on an agreement reached between the parties, AngloGold
Ashanti was paid on August 25, 2004, approximately $7 million for its portion of the deferred payments and future
royalties, thereby monetizing all outstanding obligations, except for a minor potential royalty interest that AngloGold
Ashanti retained.
F-14
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
3.
ACQUISITIONS AND DISPOSALS OF BUSINESSES AND ASSETS (continued)
•
Sale of Western Tanami project
On January 20, 2004, AngloGold announced that it had received a cash payment of A$4 million ($3 million) and
25 million fully paid ordinary shares from Tanami Gold NL in Australia, as consideration for Tanami Gold's purchase of
the Western Tanami Project. This follows an initial payment of A$0.3 million ($0.2 million) made on
November 24,
2003, when the Heads of Agreement was signed by the companies. The companyCompany realized a profit of $3
$3 million on
sale of these assets. Refer to Note 5 – (Profit)/loss on sale of assets.assets, loans and indirect taxes. In
addition, a further 2 million fully paid ordinary shares were received from Tanami Gold in respect of a rights issue in
June 2004. During the period October 10, through October 18, 2005, AngloGold Ashanti Australia reduced it
shareholding in Tanami Gold to 5 percent, through the sale of 8 million fully paid ordinary shares for a cash
consideration of A$1.3 million ($1.0 million) and in February 2006, disposed of the entire investment in Tanami Gold
with the sale of 19 million shares for a cash consideration of A$3.9 million ($3.0 million).
•
Sale of Union Reefs Mine
On August 5, 2004, AngloGold Ashanti announced the sale of its Union Reefs assets to the Burnside Joint Venture,
comprising subsidiaries of Northern Gold NL (50 percent) and Harmony Gold Mining Company Limited (50 percent),
for a total consideration of A$4 million ($2 million). The Burnside Joint Venture is responsible for all future obligations
associated with the assets, including remaining site rehabilitation and reclamation. The companyCompany realized a profit of
$2 million on sale of these assets. Refer to Note 5 – (Profit)/loss on sale of assets.assets, loans and indirect taxes.
•
Sale of Freda-Rebecca Mine
In a joint announcement made on September 10, 2004, AngloGold Ashanti confirmed its agreement to sell its entire
interest
in Ashanti Goldfields Zimbabwe Limited to Mwana Africa Holdings (Proprietary) Limited for a deferred total
consideration of $2.255 million, to be settled in two tranches, $0.75 million immediately and the balance
($2 million.1.505 million) to be settled within six months of the satisfaction of all conditions to the sale agreement. The sale was
effective on September 1, 2004 and all conditions to the sale agreement were satisfied on April 22, 2005.
Subsequently in August 2005, AngloGold Ashanti and Mwana Africa Holdings (Proprietary) Limited agreed that the
second payment of $1.505 million would be settled by an immediate payment of $1.0 million and the subsequent
issue to AngloGold Ashanti of 600,000 Mwana Africa plc shares, once that company listed on the Lon don Stock
Exchange. Mwana Africa plc is a junior exploration and mining company with assets located in Zimbabwe as well as in
the Democratic Republic of Congo. As at December 31, 2006, AngloGold Ashanti retains its 600,000 shares in
Mwana Africa plc. The sole operating asset of Ashanti Goldfields Zimbabwe Limited isas sold to Mwana Africa
Holdings (Proprietary) Limited was the Freda-Rebecca Gold Mine. No
(profit)/loss was realized on disposal and the sale was effective on September 1, 2004.disposal.
•
Sale of stake inTameng Mining and Exploration
Agreement was reached to sell AngloGold Ashanti’s 40 percent equity interest in Tameng Mining and Exploration
(Proprietary) Limited of South Africa (Tameng) to Mahube Mining (Proprietary) Limited for a cash consideration of
R20 million ($3 million). Tameng owns certain mineral rights to platinum group metalsPlatinum Group Metals (PGMs) on the farm Locatie
Van M’Phatlele KS 457, on the northern limb of the Bushveld Complex in the Limpopo Province in South Africa. No
(profit)/loss was realized on disposal and the sale was effective on September 1, 2004.
F-10
F-15
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
3.
ACQUISITIONS AND DISPOSALS OF BUSINESSES AND ASSETS (continued)
2003 acquisitions
AngloGold made the following acquisition during the year:
•
Purchase of a portion of the Driefontein mining area from Gold Fields Limited
On September 18, 2003, AngloGold and Gold Fields Limited jointly announced that agreement had been reached on
the sale by Gold Fields Limited of a portion of the Driefontein mining area in South Africa to AngloGold for a cash
consideration of R315 million ($48 million). The purchase price including the related deferred taxation thereon, has
been capitalized as mining assets.
2003 disposals
AngloGold’s disposals during the year included:
•
Sale of Amapari project located in the State of Amapá, North Brazil
On May 23, 2003, AngloGold announced that it had signed an agreement to sell its wholly-owned Amapari Project to
Mineração Pedra Branca do Amapari, for the total consideration of $18 million. The effective date of the transaction
was May 19, 2003. The Amapari project is located in the State of Amapá, North Brazil. Since acquiring the property
as part of the Minorco transaction, the company had sought to prove up additional reserve ounces in order to get it to
a size and life that would justify the management resources needed to run it effectively. This was not achieved and
AngloGold, on receiving an offer from a purchaser who could constructively turn this orebody to account, agreed to
sell. AngloGold realized a loss of $3 million on the disposal of the Amapari project. Refer to Note 5 – (Profit)/lo ss on
sale of assets.
•
Sale of stake in the Gawler Craton Joint Venture to Helix Resources Limited
On June 6, 2003, AngloGold announced that it had finalized the sale of its 49 percent stake in the Gawler Craton Joint
Venture, including the Tunkillia project located in South Australia to Helix Resources Limited. Consideration for the
sale comprised cash of $500,000 (A$750,000), 1.25 million fully-paid Helix shares issued at A$0.20 per share and
1.25 million Helix options exercisable at A$0.25 per option before November 30, 2005 with an additional payment of
$335,000 (A$500,000) deferred to the delineation of a mineable resource of 350,000 ounces. Helix’s proposed
acquisition of AngloGold’s rights to the Tarcoola Project, 60 kilometers to the south, was excluded from the final
agreement. This resulted in a restructure of the original agreement terms, as announced on April 8, 2003.
•
Sale of stake in Jerritt Canyon Joint Venture to Queenstake Resources USA Inc.
On July 2, 2003, AngloGold announced that it had concluded the sale of its interest in the Jerritt Canyon Joint Venture
to Queenstake Resources USA Inc. effective June 30, 2003. This followed negotiations originally announced on
February 27, 2003. Queenstake paid the Jerritt Canyon Joint Venture partners, AngloGold and Meridian Gold,
$1.5 million in cash and 32 million shares of Queenstake stock, with $6 million in deferred payments and $4 million in
future royalty payments. Queenstake accepted full closure and reclamation liabilities. The shares acquired by
AngloGold in this transaction were issued by Queenstake Resources Limited, a subsidiary of Queenstake, and
represents approximately 9.2 percent of that company’s issued share capital. AngloGold disposed of its entire interest
in Queenstake during No vember 2003. AngloGold realized a profit of $10 million and $3 million, respectively, on sale
of the Jerritt Canyon Joint Venture and the investment held in Queenstake. Refer to Note 5 – (Profit)/loss on sale of
assets. In 2004, Queenstake approached the Jerritt Canyon Joint Venture partners, AngloGold and Meridian Gold,
about the possibility of monetizing all or at least a majority of the $6 million in deferred payments and $4 million in
future royalties, payable in the concluded sale of AngloGold’s interest in the Jerritt Canyon Joint Venture to
Queenstake Resources USA Inc., effective June 30 2003. Based on an agreement reached between the parties,
AngloGold Ashanti was paid on August 25, 2004 approximately $7 million for its portion of the deferred payments and
future royalties, thereby monetizing all outstanding obligations, except for a minor potential royalty interest that
AngloGold Ashanti retained.
•
Sale of investments held in East African Gold Mines Limited and Randgold Resources Limited
On July 8, 2003 AngloGold disposed of its entire investment of 8,348,600 shares held in East African Gold Mines
Limited for a consideration of $25 million and in the second half of 2003 AngloGold disposed of 952,481 shares in
Randgold Resources Limited, for a consideration of $23 million. AngloGold realized a profit of $42 million on sale of
these investments. Refer to Note 5 – (Profit)/loss on sale of assets.
F-11
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
3.
ACQUISITIONS AND DISPOSALS OF BUSINESSES AND ASSETS (continued)
2002 acquisitions
AngloGold made one acquisition during the year.
•
Acquisition of 46.25% interest in Cerro Vanguardia S.A. (“CVSA”)
During July, 2002 an agreement was reached with Pérez Companc International SA (“Pérez Companc”) to acquire its
entire 46.25% equity interest in Cerro Vanguardia S.A. (“CVSA”), including a loan, for a net cash consideration of
$97 million, which was paid from AngloGold’s existing but undrawn debt facilities. The transaction was effective from
July 1, 2002.
Pérez Companc and AngloGold each owned a 46.25% equity interest in CVSA prior to the transaction. CVSA owns
the exclusive right to exploit the Cerro Vanguardia mine, which is located in Patagonia in the Santa Cruz Province of
Argentina. AngloGold acquired its initial interest in CVSA from Minorco in 1999 and participated in the completion of
the development and the commissioning of the Cerro Vanguardia mine, as well as its operation since that time.
AngloGold is the sole operator of the Cerro Vanguardia mine.
2002 disposals
•
Sale of investment in Normandy
On September 5, 2001, AngloGold announced that it was to make a takeover offer for Normandy Mining Limited
(Normandy), Australia’s largest listed gold mining company. The offer was to be settled in AngloGold shares in the
ratio of 4.30 AngloGold shares for every 100 Normandy shares. The final offer to Normandy shareholders comprised
4.30 AngloGold shares plus a cash consideration of A$30 for every 100 Normandy shares. At the close of the offer on
January 18, 2002, AngloGold had received acceptances totaling 159,703,481 Normandy shares (7.16 percent of the
Normandy issued share capital). Arising out of the offer, a total of 6,869,602 AngloGold ordinary shares were issued.
This excludes 143,630 AngloGold ordinary shares issued under the top-up facility to Normandy shareholders. The
Normandy shares acquired were sold on the market on January 21, 2002 realizing a total of $158 million. AngloGold
realized a loss of $11 million on the disposal of the investment in Normandy. Refer to Note 5 – (Profit)/loss on sale of
assets.
•
Saleofwholly-ownedsubsidiary
The company disposed of its wholly-owned subsidiary, Stone and Allied Industries (O.F.S.) Limited, to a joint venture
of that company’s existing management and a group of black entrepreneurs, with effect from October 1, 2002, for a
consideration of R5 million, comprising R1.4 million in respect of the equity interest and R3.6 million, a loan claim. In
respect of the equity interest R450,000 was paid in cash and the outstanding balance of R950,000 together with the
loan of R3.6 million is payable in five equal annual instalments together with interest commencing on October 1, 2003.
The agreement of sale provides for a 10% interest in Stone and Allied Industries (O.F.S.) Limited to be held by
Masakhisane Investment Limited, a wholly-owned subsidiary established by AngloGold in terms of its Small and
Medium Enterprises Development Initiative, which company will render technical and administrative assistance to the
purchasers until the total amount of the consideration has been settled.
•
Saleofshafts
For a description of sale of shafts during 2002, refer to Note 25.
F-12
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
3.
ACQUISITIONS AND DISPOSALS OF BUSINESSES AND ASSETS (continued)
Fair value of acquisitions and (disposals) of businesses
2004
Ashanti
Goldfields
Company
Limited
(1)(4)
2004
Other
(4)
2004
Total
20032006
Total
Jerritt Canyon
Joint Venture
and other
$2005
$Total
$
2004
Ashanti
Goldfields
Company
Limited
(1)(3)
2004
Other
(3)
2004
Total
$
$
$
$
$
Cash
-
-
56
-
56
9
Property, plant and equipment
(2)
-
-
2,066
(5)
2,061
(3)
Acquired properties
-
-
873
-
873
-
Goodwill
(1)
-
-
182
-
182
-
Other intangibles
(3)(2)
-
-
49
-
49
-
Provision for environmental rehabilitation
-
-
(51)
1
(50)
25
Long-term liabilities
-
-
(743)
1
(742)
(2)
Current assets
-
-
126
(4)
122
6
Current liabilities
-
-
(155)
3
(152)
(7)
Long-term debts
-
-
(197)
2
(195)
2Derivatives
Derivatives (432)-
-
(432)
-
(432)
Minority interest
-
-
(3)
-
(3)
(15)
Net value of assets acquired/(disposed)
-
-
1,771
(2)
1,769
15
Profit on sale of assets
-
-
-
(10)
Purchase/(sale) consideration
1,771
(2)
1,769
5
Investment in affiliates
-
-
-
(17)-
Shares acquired in Queenstake Resources
USA Inc.
(5)Purchase/(sale) consideration
-
-
-
51,771
(2)
1,769
Deferred purchase consideration
-
-
-
2
2
6
-
-
1,771
-
1,771
(1)
Purchase price (paid)/received
-
-
(1,771)
-
(1,771)
1
- Cash consideration
-
-
(227)
-
(227)
1(227)
- Issuance of common stock
(1,544)-
-
(1,544)
-
(1,544)
Gross value
-
-
(1,547)
-
(1,547)
-
Share issue expenses
-
-
3
-
3
-
(1)
The AngloGold Ashanti Business Combination was completed effective April 26, 2004. Refer to Note 3 — Acquisitions and
disposals of businesses and assets: Business Combination between AngloGold and Ashanti. The companyCompany has recorded
goodwill, relating to the portion of the purchase price which cannot be attributed to the fair value of assets and liabilities acquired,
of $182 million on acquisition. During the year ended December 31, 2005, the Company recorded an impairment of $4 million,
relating to goodwill formally assigned to operations situated in Ghana (at Bibiani) as part of the Business Combination. No
impairments relating to goodwill were recorded during the year ended December 31, 2006. Refer to Note 5 – Impairment of assets.
(2)
Due to the size and nature of the acquisition and the geographical spread and remote locations of some of the properties
acquired and the associated assets, AngloGold Ashanti is in the process of finalizing the purchase price allocation of fixed assets.
(3)
Represents royalty rate and tax rate concession agreements with the government of Ghana. Fair value is based on estimated
future cash flows. During the year ended December 31, 2005, the Company recorded an impairment of $20 million relating to the
tax rate concession agreement with the government of Ghana. No impairments were recorded during the year ended
December 31, 2006. Refer to Note 5 – Impairment of assets.
(4)(3)
Operations and assets acquired from Ashanti in the AngloGold Ashanti Business Combination are situated in Ghana, Guinea,
Tanzania and Zimbabwe and are reported under these respective business segments. During 2004, the year, the companyCompany disposed of its
interest in the Freda-Rebecca Mine in Zimbabwe for a deferred cashtotal consideration of $2 million. million, settled partly in cash and partly in shares.
For more information on the company’sCompany’s business segments see Note 2629 – Segment and geographical information.
(5)
AngloGold disposed of its entire interest in Queenstake Resources USA Inc. as part of the Jerritt Canyon Joint Venture disposal during November 2003. Refer to Note 5 – (Profit)/loss on sale of assets. The Jerritt Canyon Joint Venture was situated in Nevada, North America and it was reported under USA operations in 2003. For more information on the company's business segments see Note 26 – Segment and geographical information.
F-13
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation: The accompanying financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America. The companyCompany presents its consolidated financial
statements in United States dollars. The functional currency of the majoritya significant portion of the group’s operations is the
South
African rand. Other main subsidiaries have functional currencies of US dollars and Australian dollars. The
translation
of amounts into US dollars was in accordance with the provisions of SFAS52, “Foreign Currency
Translation”.
Use of estimates: The preparation of the financial statements requires the company’sCompany’s management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities
at the date of the financial statements, and the reported amounts of revenues and expenses
during the reporting
period. ActualThe determination of estimates requires the exercise of judgment based on various
assumptions and other factors such as historical experience, current and expected economic conditions, and in some
cases actuarial techniques. The Company regularly reviews estimates and assumptions that affect the annual
financial statements, however, actual results could differ from those estimates.
F-16
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
The more significant areas requiring the use of management estimates and assumptions include mineral reserves that
are the basis of future cash flow estimates and unit-of-production depreciation, depletion and amortization
calculations; environmental, reclamation and closure obligations; estimates of recoverable gold and other materials in
heap leach pads; asset impairments (including impairments of goodwill, long-lived assets, and investments); write-
downs of inventory to net realizable value; post employment, post retirement and other employee benefit liabilities;
valuation allowances for deferred taxation assets; reserves for contingencies and litigation; and the fair value and
accounting treatment of financial instruments.
Comparatives: Comparatives have been reclassified, where necessary to comply with the current year’s
presentation. The company has restated the consolidated balance sheet as of December 31, 2003, and the
consolidated statements of income and consolidated statements of cash flows for the years ended December 31,
2003 and 2002 included in this Annual Report on Form 20-F. See Note 2.
The following are the accounting policies used by the companyCompany which have been consistently applied except for the
adoption of SFAS143, “Accounting for Asset Retirement Obligations (AROs)”SFAS123(R), “Share-Based Payment” on January 1, 2003.2006, the adoption of EITF Issue 04-6 “Accounting
for Stripping Costs in the Mining Industry” on January 1, 2006, the adoption of SFAS158, “Employers’ Accounting for
Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and
132(R)” and the Company’s change in accounting policy, retroactive to January 1, 2005, with respect to accounting for
employee pension and post-retirement benefit plans.
4.1 Consolidation
The consolidated financial information includes the financial statements of the companyCompany and its subsidiaries.
Where the companyCompany has a direct or indirect through its subsidiary, controlling interest in an entity through a subsidiary, the entity is
classified as a subsidiary. Interests in incorporated in mining joint ventures in which the companyCompany has joint control
are accounted for by the equity method and are included in other long-term assets. See Note 2.
Where
The financial statements of subsidiaries and the excess purchase priceEnvironmental Trust Fund (a rehabilitation trust under the
Company’s control) are prepared for the same reporting period as the Company, using the same accounting
policies, except for Rand Refinery Limited (a subsidiary of the Company) which reports on a businessthree-month time
lag. Adjustments are made to subsidiary financial results for material transactions and events in the intervening
period.
Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are de-
consolidated from the date on which control ceases.
Intra-group transactions, balances and unrealized gains on transactions between group companies are
eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment of
the asset transferred.
4.2 Investments in equity investees (associates and incorporated joint ventures)
Investments in associates
An associate is an entity other than a subsidiary in which the Company has a material long-term interest and in
respect of which the Company has the ability to exercise significant influence over operational and financial
policies, normally owning between 20 percent and 50 percent of the voting equity.
Investments in incorporated joint ventures
A joint venture is an entity in which the Company holds a long-term interest and which is jointly controlled by the
Company and one or more external joint venture partners under a contractual arrangement.
Investments in associates and incorporated joint ventures are accounted for using the equity method. The initial
investment in these entities is recorded at cost. Post acquisition, cannot be attributedthe Company’s share of profits or losses of
associates and incorporated joint ventures is recognized in the income statement as equity accounted earnings.
The carrying amount of investments in associates and incorporated joint ventures is adjusted to assets acquired, includingrecognize all
acquired properties, itcumulative post-acquisition movements in the equity of the investment.
F-17
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.2 Investments in equity investees (associates and incorporated joint ventures) (continued)
Goodwill relating to associates and incorporated joint ventures is included in the carrying value of the Company’s
investment in those entities. The total carrying value of equity accounted investments in associates and
incorporated joint ventures, including goodwill, and reviewedis evaluated for impairment when conditions indicate that a decline
in accordance withfair value below the provisionscarrying amount is other than temporary or at least annually. When an indicated
impairment exists, the carrying value of the Company’s investment in those entities is written down to its fair
SFAS142.value. The Company’s share of results of equity accounted investees, that have financial years within three
months of the fiscal year-end of the Company, is included in the consolidated financial statements based on the
results reported by those investees for their financial years. There were no significant adjustments required to be made in respect of equity accounted investees which have financial years that are different to those of the
Company.
Other intangible4.3 Foreign currency translation
Items included in the financial statements of each of the Company’s entities are measured using the currency of
the primary economic environment in which the entity operates (the ‘functional currency’).
Transactions and balances
Transactions in foreign currencies are converted at the rates of exchange ruling at the date of these transactions.
Monetary assets acquired representing royaltyand liabilities denominated in foreign currencies are translated at rates of exchange ruling at
balance sheet date. Gains, losses and costs associated with foreign currency transactions are recognized in the
income statement in the period to which they relate, except where hedge accounting is applied. These
transactions are included in the determination of other income.
Group companies
The results and financial position of all group entities (none of which has the functional currency of a
hyperinflationary economy) that have a functional currency different from the presentation currency are translated
into the presentation currency as follows:
• equity items other than profit attributable to equity shareholders are translated at the closing rate concessionson each
balance sheet date;
• assets and liabilities for each balance sheet presented are capitalizedtranslated at the closing rate at the date of that
balance sheet;
• income and expenses for each income statement are translated at average exchange rates (unless this
average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction
dates, in which case income and expenses are translated at the dates of the transactions); and
• all resulting exchange differences are recognized as a separate component of equity and included within other
comprehensive income.
Exchange differences arising from the translation of the net investment in foreign operations, and of borrowings
and other currency instruments designated as hedges of such investments, are taken to stockholders’ equity on
consolidation.
When a foreign operation is sold, such exchange differences are recognized in the income statement as part of
the gain or loss on sale.
Goodwill and fair value and amortized
adjustments arising on the acquisition of a straight line basis over a period of fifteen years. Other intangibleforeign operation are treated as assets acquired representing tax rateand
concessions are capitalized at fair value and amortized as the benefitliabilities of the taxforeign operation and translated at the ruling closing rate at each balance sheet date.
F-18
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.4 Segment reporting
A business segment is utilized over a periodgroup of
fifteen years. These assets and operations engaged in providing products or services that are
subject to risks and returns that are revieweddifferent from those of other business segments and are reported on a
reporting segment basis using a management approach. This approach is based on the way management
organizes segments within the Company for impairmentmaking operating decisions and assessing performance. The Chief
operating decision maker has determined that the Company operates primarily in accordance with the provisionsdelivery of SFAS144.one product,
namely Gold. A geographical segment is engaged in providing products or services within a particular economic
environment that is subject to risks and returns that are different from those of segments operating in other
economic environments.
4.2
4.5 Cash and cash equivalents and restricted cash
Cash and cash equivalents consist of all cash balances and highly liquid investments with an original maturity of
three months or less. Due to the short maturity of cash equivalents, their carrying amounts approximate their fair
value. Restricted cash is reported separately in the consolidated balance sheets for all periods presented.
4.3
4.6 Non-marketable equity investments and debt securities
Non-marketable equity investments, in which the company does not have significant influence or a controlling
interest, are carried at acquisition cost. Realized gains and losses are included in net income or loss. Unrealized
losses are included in net income or loss when a significant decline in the value of the investment, which is other
than temporary, has occurred.
Investments in companies in which the company’sCompany’s ownership is 20 percent to 50
percent and the companyCompany is
deemed to have significant but not controlling influence are accounted for by the
equity method and are included
in other long-term assets. Equity method investments including interests in
incorporated mining joint ventures
are reviewed for impairment in accordance with APB18, “The Equity Method of Accounting
for Investments in
Common Stock”. Income from such investments net of amortization of goodwillimpairments is included in
equity income of affiliated
companies. See Note 4.2.
4.4
Investments in non-marketable debt securities that are classified as held to maturity are subsequently measured
at amortized cost. If there is evidence that held to maturity financial assets are impaired the carrying amount of
the assets is reduced and the loss recognized in the income statement.
4.7 Marketable equity investments
and debt securities
Marketable equity investments and debt securities which are considered available-for-sale, are carried at fair
value, and the net unrealized gains and losses computed in marking these securities to market are reported
within other comprehensive income in the period in which they arise. These amounts are removed from other
comprehensive income and reported in income when the asset is derecognized or when there is evidence that
the asset is impaired in accordance with the provisions of SFAS115, “Accounting for Certain Investments in Debt
and Equity Securities”.
F-14Marketable debt securities that are classified as held to maturity are subsequently measured at amortized cost.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
4.8 SIGNIFICANT ACCOUNTING POLICIES Inventories(continued)
4.5 Inventories
Inventories, including gold in process, gold on hand, uranium oxide, sulphuric acid, ore stockpiles and supplies,
are stated at the lower of cost or market value. Gold in process is valued at the average total production cost at
the relevant stage of production.production as described below. The cost of gold, uranium oxide and sulphuric acid is
determined principally by
the weighted average cost method using related production costs. A portion of the related depreciation, depletion
and amortization charge is included in the cost of inventory.
Ore stockpiles are valued at the average moving
cost of treating and processingmining the ore. Supplies are valued at the lower of
weighted average cost or market
value. Heap leach pad materials are measured on an average total production
cost basis.
F-19
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.8 Inventories (continued)
The cost of inventory is determined using the full absorption costing method for the stage of completed
production. Gold in process and ore stockpile inventory include all costs attributable to the stage of completion.
Costs capitalized to inventory include amortization of property, plant and equipment and capitalized mining costs,
direct and indirect materials, direct labor, shaft overhead expenses, repairs and maintenance, utilities, metallurgy
costs, attributable production taxes and royalties, and directly attributable mine costs. Gold on hand includes all
gold in process and refining costs. Ore is recorded in inventory when blasted underground, or when placed on
surface stockpiles in the case of open-pit operations.
The costs of materials currently contained on the leach pad isare reported as a separate line item apart from
inventory. As at December 31, 2004, $1052006, $46 million was classified as short term compared with $99$37 million as at
December 31, 20032005 as the companyCompany expects the related gold to be recovered within twelve months. The short
term portion of materials on the leach pad is determined by multiplying the average cost per ounce in inventory,
by the expected production ounces for the next twelve months. AsBased on data gathered and analyzed from heap
leach pad drilling results, and other studies and analysis completed, short-term heap leach pad inventory occurs
in two forms: (1) gold recoverable but yet to be dissolved (i.e. gold still in the ore), and (2) gold recoverable from
gold dissolved in solution within the leach pad (i.e. pore water). This estimate calculation was used in
determining the short term portion of materials on the leach pad as at December 31, 2004, $222006. As at
December 31, 2006, $149 million was
classified as long term compared with $7$116 million as at
December 31, 2003.2005.
4.6
4.9 Development costs and stripping costs
Development costs relating to major programs at existing mines are capitalized. Development costs consist
primarily of expenditures to initially establish a mine and to expand the capacity of operating mines. Ordinary
mine development costs
Prior to maintain production are expensed as incurred.
StrippingJanuary 1, 2006, stripping costs incurred in open-pit operations during the production phase to remove
additional waste are
were charged to operating costs on the basis of the average life of mine stripping ratio and the
average life of mine
costs per tonne. The average stripping ratio iswas calculated as the number of tonnes of
waste material expected to
be removed during the life of mine per tonne of ore mined. The average life of mine
cost per tonne iswas calculated
as the total expected costs to be incurred to mine the orebody divided by the
number of tonnes expected to be
mined. The average life of mine stripping ratio and the average life of mine
cost per tonne iswere recalculated
annually in the light of additional knowledge and changes in estimates. The
cost of the “excess stripping” is
was capitalized as mine development costs when the actual mining costs exceed
the sum of the adjusted tonnes
mined, being the actual ore tonnes plus the product of the actual ore tonnes multiplied by the average life of
mine stripping ratio, multiplied by the life of mine cost per tonne. When the actual mining costs are below the
sum of the adjusted tonnes mined, being the actual ore tonnes plus the product of the actual ore tonnes
multiplied by the average life of mine stripping ratio, multiplied by the life of mine cost per tonne. When the actual
mining costs were below the sum of the adjusted tonnes mined, being the actual ore tonnes plus the product of
the actual ore tonnes multiplied by the average life of mine stripping ratio, multiplied by the life of mine cost per
tonne, previously
capitalized costs arewere expensed to increase the cost up to the average. Thus, the cost of
stripping in any period
will be was reflective of the average stripping rates for the orebody as a whole.
The deferred
Prior to January 1, 2006, capitalized stripping costs arewere included in the calculations of the impairment tests
performed in accordance
with the provisions of SFAS144, “Accounting for the Impairment or Disposal of Long-LivedLong-
Lived Assets”.
The practice of deferring stripping costs, hashad the effect of smoothingamortizing the cost of waste ore
removal over the
expected life of mine rather than exposingreflecting actual waste ore removal cost incurred in each
period presented.
The current accounting practice of accounting for deferred stripping in the mining industry are mixed and if waste
ore is expensed rather than capitalized, this may result in the reporting of greater volatility in period to period
results of operations.
Deferred stripping costs deferred orand amortized arewere included in production costs in the
consolidated statements of
income for all periods presented.
Deferredthe years ended December 31, 2004 and 2005 and deferred stripping
costs arewere reported separately in the consolidated balance sheets for all periods presented.sheet as at December 31, 2005.
On March 17, 2005 and on June 15 and 16, 2005, TheJanuary 1, 2006, the Company adopted Emerging Issues Task Force (“EITF”) reached a
consensus in Issue 04-6, “Accounting for
Stripping Costs in the Mining Industry”, that. In accordance with the guidance of Issue No. 04-6, post production
stripping
costs should beare considered costs of the extracted minerals under a full absorption costing system and
recognized as a component of inventory
and to be recognized in cost of sales in the same period as the revenue from
the sale of the inventory. See Note 4.19.Additionally, capitalization of such costs are appropriate only to the extent inventory
exists at the end of a reporting period.
4.7
F-20
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.9 Development costs and stripping costs (continued)
The guidance requires application through recognition of a cumulative effect adjustment to opening retained
earnings in the period of adoption, with no charge to current earnings for prior periods. The results for prior
periods have not been restated. Upon adoption, the cumulative effect of accounting change reduced opening
retained earnings by $73 million (net of Taxation), increased the value of inventory by $5 million, eliminated the
capitalized deferred stripping balance of $105 million, decreased Deferred taxation by $29 million, reduced Other
long-term assets by $3 million and decreased Minority interest by $1 million. Adoption of the new guidance had
no impact on the Company’s cash position or net cash from operations.
4.10 Depreciation, depletion and amortization
Mine development costs, mine plant facilities and other fixed assets
Mine development costs, mine plant facilities and other fixed assets are recorded at cost less accumulated
amortization and impairments. Cost includes pre-production expenditure incurred during the development of a
mine and the present value of future decommissioning costs. Cost also includes finance charges capitalized
during the construction period where such expenditure is financed by borrowings.
If there is an indication that the recoverable amount of any of the mine development costs, mine plant facilities
and other fixed assets is less than the carrying value, the recoverable amount is estimated and an allowance is
made for the impairment in value.
Capitalized mine development costs include expenditure incurred to develop new orebodies, to define further
mineralization in existing orebodies, to expand the capacity of a mine and to maintain production. Where funds
have been borrowed specifically to finance a project, the amount of interest capitalized represents the actual
borrowing costs incurred. Mine development costs include acquired proved and probable mineral resources at
cost at acquisition date.
Depreciation, depletion and amortization of mine development costs are computed principally by the units-of-
production method based on estimated proven and probable mineral reserves. Proven and probable mineral
reserves reflect estimated quantities of economically recoverable reserves which can be recovered in the future
from known mineral deposits.
Mine plant facilities are amortized using the lesser of their useful life or units-of-
productionunits-of-production method based on
estimated proven and probable mineral reserves. Main shafts are depleted using total proven and probable
reserves as the shaft will be used over the life of the mine. Other infrastructure costs including ramps, stopes,
laterals, etc and ore reserve development are depleted using proven and probable reserves applicable to that
specific area. When an area is vacated and there is no longer an intention to mine in that area due to a change
in mine plans, all costs that have not been depleted are written off.
Other fixed assets comprising
vehicles and computer equipment, are depreciated by the straight-line method
over their estimated useful lives.lives as follows:
•
vehicles up to five years; and
•
computer equipment up to three years.
F-15
F-21
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.7
4.10 Depreciation, depletion and amortization (continued(continued))
Acquired properties
Acquired properties are carried at amortized cost. Purchased undeveloped mineral interests are acquired
mineral rights and, in accordance with Financial Accounting Standards Board Staff Position FSP141/142-1, are
recorded as tangible assets as part of acquired properties. The amount capitalized related to a mineral interest
represents its fair value at the time it was acquired, either as an individual asset purchase or as a part of a
business combination. “Brownfield” stage mineral interests represent interests in properties that are believed to
potentially contain other mineralized material, such as measured, indicated or inferred mineral resources with
insufficient drill spacing to qualify as proven and probable mineral reserves, that is in proximity to proven and
probable mineral reserves and within an immediate mine structure. “Greenfield” s tagestage mineral interests
representre present interests in properties that are other mine-related or greenfields exploration potential that are not part of
of measured or indicated resources and are comprised mainly of material outside of a mine’s infrastructure. The
company’sCompany’s mineral rights generally are enforceable regardless of whether proven and probable mineral reserves have
have been established. The companyCompany has the ability and intent to renew mineral rights where the existing term is not
not sufficient to recover all identified and valued proven and probable mineral reserves and/or undeveloped mineral
mineral interests.
Brownfield properties are carried at acquired costs until such time as a mineral interest enters the production
stage and are amortized using the unit-of-production method based on estimated proven and probable mineral
reserves.
Greenfield mineral interests are carried at acquired costs until such time as a mineral interest enters the
production stage and are amortized using the unit-of-production method based on estimated proven and
probable mineral reserves.
Both Brownfield properties and Greenfield propertiesmineral interests are evaluated for impairment as held for use assets
in
accordance with the company’sCompany’s asset impairment accounting policy. See Note 4.9.4.13.
4.8
4.11 Mining costs
In general, mining
Mining costs including repair and maintenance costs incurred in connection with major maintenance
activities are
charged to operations as incurred. However, certain
4.12 Goodwill and intangible assets
Goodwill
Where an investment in a subsidiary, joint venture or an associate is made, any excess of the company’s deposits have diversepurchase price
grades over the mine’s life. Mining costsfair value of the attributable mineral reserves including value beyond proven and probable, acquired
properties and other net assets is recognized as goodwill.
Goodwill relating to subsidiaries is tested for these deposits,impairment at least annually or when indicators of impairment exist
and is carried at cost less accumulated impairment losses.
Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the extent that they do not relateentity sold.
Goodwill is allocated to current goldreporting units for the purpose of impairment testing.
Goodwill in respect of subsidiaries is disclosed as goodwill. Goodwill relating to incorporated joint ventures and
production,associates is included within the carrying value of the investment in incorporated joint ventures and associates
and tested for impairment when indicators exist. See Note 4.2.
Royalty rate and tax rate concessions
Royalty rate and tax rate concessions with the Government of Ghana were capitalized at fair value at agreement
date. Fair value represents a present value of future royalty rate concessions over 15 years. The royalty rate and
tax rate concessions were assessed to have a finite life and are capitalized and thenamortized under a straight-line method over a
period of 15 years, the period over which the concession runs. The related amortization expense is charged to operations when
through the applicable goldincome statement. These intangible assets are also tested for impairment where there is produced, see Note 4.6.an indicator
of impairment.
4.9
F-22
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.13 Asset
impairment
The companyCompany evaluates its held-for-use long lived assets for impairment when events or changes in
circumstances indicate that the related carrying amount may not be recoverable. If the sum of estimated future
cash flows on an undiscounted basis is less than the carrying amount of the related asset, including goodwill, if
any, an asset impairment
is considered to exist. The related impairment loss is measured by comparing
estimated future cash flows on a
discounted basis to the carrying amount of the asset. Changes in significant
assumptions underlying future cash
flow estimates may have a material effect on the company’sCompany’s financial
position and results of operations. Management’s estimate of future cash flows is subject to risk and
uncertainties. It is therefore reasonably possible that changes could occur which may affect the recoverability of
the group’s mining assets. The Compan y records a reduction of a group of assets to fair value as a charge to
earnings if expected future cash flows are less than the carrying amount. The Company estimates fair value by
discounting the expected future cash flows using a discount factor that reflects the risk-free rate of interest for a
term consistent with the period of expected cash flows, adjusted for asset specific and country risks. A low gold
gold price market, if sustained for an extended period of time, may result in asset impairments. In addition, an asset
asset impairment is considered to exist where the net selling price of an asset held for sale is below its carrying
amount. Once recognized an impairment loss is never reversed.
4.10
An individual operating mine is not a typical "going-concern" business because of the finite life of its reserves.
The allocation of goodwill to an individual operating mine will result in an eventual goodwill impairment due to the
wasting nature of the mine reporting unit. In accordance with the provisions of SFAS142, the Company performs
its annual impairment review of assigned goodwill during the fourth quarter of each year.
4.14 Borrowing costs
Interest on borrowings relating to the financing of major capital projects under construction is capitalized during
the construction phase as part of the cost of the project. Such borrowing costs are capitalized over the period
during which the asset is being acquired or constructed and borrowings have been incurred. Capitalization
ceases when construction is interrupted for an extended period or when the asset is substantially complete.
Other borrowing costs are expensed as incurred.
4.15 Leased assets
Assets subject to finance leases are capitalized at the lower of fair value or present value of minimum lease
payments with the related lease obligation recognized at the same amount. Capitalized leased assets are
depreciated over the shorter of their estimated useful lives and the lease term. Finance lease payments are
allocated using the effective interest rate method, between the lease finance cost, which is included in finance
costs, and the capital repayment, which reduces the liability to the lessor.
Operating lease rentals are charged against operating profits in a systematic manner related to the period the
assets concerned will be used.
4.16 Provisions
Provisions are recognized when the Company has a present obligation, whether legal or constructive, as a result
of a past event for which it is probable that an outflow of resources embodying economic benefits will be required
to settle the obligation and a reliable estimate can be made of the amount of the obligation.
Provisions are measured at the present value of management’s best estimate of the expenditure required to
settle the present obligation at the balance sheet date. The discount rate used to determine the present value
reflects current market assessments of the time value of money and the risks specific to the liability.
F-23
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.17 Taxation
Deferred taxation is provided on all temporary differences at the balance sheet date between the tax bases of
assets and liabilities and their carrying amounts for financial reporting purposes.
The carrying amount of deferred taxation assets is reviewed at each balance sheet date and reduced by a
valuation allowance to the extent that it is more likely than not that sufficient future taxable profit will not be
available to allow all or part of the deferred taxation asset to be utilized.
A deferred taxation liability is recognized for all taxable temporary differences if it is more likely than not that the
temporary difference will reverse in the foreseeable future.
Deferred taxation assets and liabilities are measured at statutory tax rates, which have been enacted at the
balance sheet date. See Note 4.22.
Current and deferred taxation is recognized as income or expense and included in the profit or loss for the period,
except to the extent that the tax arises from a transaction or event which is recognized, in the same or a different
period directly in equity; or a business combination that is an acquisition.
Current taxation is measured on taxable income at the applicable enacted statutory rate.
4.18 Asset retirement obligations and rehabilitation costs
AngloGold adopted SFAS143,
The Company accounts for asset retirement obligations in accordance with Statement of Financial Accounting
Standards No. 143, “Accounting for Asset Retirement Obligations (AROs)” (“SFAS143”).
In accordance with effect from
January 1, 2003 as follows:
Underthe provisions of SFAS143 the fair value of a liability for an asset retirement obligation is
recorded in the period in which it
is incurred. When the liability is initially recorded, the cost is capitalized by
increasing the carrying amount of the
related long-lived asset. Over time, the liability is increased to reflect an
interest element (accretion) considered
in its initial measurement at fair value, and the capitalized cost is
amortized over the useful life of the related
asset. Where the obligation is operational of nature and does not
give rise to future economic benefit, the
capitalized cost is amortized in the period incurred. Upon settlement of
the liability, a gain or loss will be
recorded if the actual cost incurred is different thanfrom the liability recorded.
The adoption of SFAS143 on January 1, 2003 resulted in an increase in Property, plant and equipment of
$1 million, an increase in Provision for environmental rehabilitation of $4 million and a cumulative effect of
adoption which decreased net income and stockholders’ equity by $3 million. No increase in Deferred income
and mining tax was recorded upon the adoption of SFAS143. Refer to Note 5 – Asset retirement obligations and
to Note 17.
F-16
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
Rehabilitation costs and related liabilities are based on the company’sCompany’s interpretation of current environmental
and
regulatory requirements.
Based on current environmental regulations and known rehabilitation requirements, management has included its
its best estimate of these obligations in its rehabilitation accrual. However, it is reasonably possible that the
company’sCompany’s estimates of its ultimate rehabilitation liabilities could change as a result of changes in regulations or
cost estimates.
Environmental liabilities other than rehabilitation costs which relate to liabilities from specific events are accrued
when they are known, probable and reasonably estimable.
4.11
4.19 Product sales
Revenue from product sales is recognized when when:
•
persuasive evidence of an arrangement exists, exists;
•
delivery has
occurred or services have been rendered, rendered;
•
the seller’s price to the buyer is fixed or determinabledeterminable; and
•
collectability
is reasonably assured.
4.12
The sales price, net of any taxes, is fixed on either the terms of gold sales contracts or the gold spot price.
Revenue is only recognized once the product has reached the level of refinement specified in the sales contract.
F-24
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.20 Financial instruments
Financial instruments recognized on the balance sheet include investments, loans receivable, trade and other
receivables, cash and cash equivalents, borrowings, derivatives, and trade and other payables. Financial
instruments are initially measured at cost, including transaction costs, when the group becomes a party to the
contractual arrangements. The subsequent measurement of financialderivative instruments is dealt with below.
Derivatives
The companyCompany accounts for derivative contracts in accordance with Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS133") as amended.
SFAS133 requires all contracts which meet the definition of a derivative to be recognized on the balance sheet as
as either assets or liabilities and recorded at fair value. Gains or losses arising from remeasuring derivatives to fair
fair value each period are to be accounted for either in the income statement or in other comprehensive income,
depending on the use of the derivative and whether it qualifies for hedge accounting. The key criterion which
must be met in order to qualify for hedge accounting, is that the derivative must be highly effective in offsetting
the change in the fair value or cash flows of the hedged item.
Contracts that meet the criteria for hedge accounting are designated as the hedging instruments hedging the
variability of forecasted cash flows from the sale of AngloGold Ashanti’s production into the spot market, and are
classified as cash flow hedges under SFAS133. Where a derivative qualifies as the hedging instrument in a cash
cash flow hedge under SFAS133, gains and losses onchanges in fair value of the derivative,hedging instruments, to the extent effective, are deferred
in other
comprehensive income and reclassified to incomeearnings as product sales when the hedged transaction is recorded in income.
occurs. The
ineffective portion of changes in fair value is reported in earnings as gains or losses on derivatives in
the period
in which they occur.
All other contracts not meeting the criteria for the normal purchases and sales or hedge accounting, as defined in
SFAS133, are recorded
at their fair market value, with changes in value at each reporting period being recorded
in income.earnings as gains or losses on derivatives.
Cash flows from derivative instruments accounted for as cash flow hedges are included in net cash provided by
operating activities in the statements of consolidated cash flows for all periods presented. Cash inflows from offContracts that contain
market derivative transactions entered into‘off-market’ terms that result in the inflow of cash at inception are included inanalogous to borrowing activities and, as such,
are treated as financing activities. All current and future cash flows fromassociated with such instruments are
classified within the financing activities section of the consolidated cash flow statement. Contracts that contain
‘off-market’ terms that result in the outflow of cash at inception are analogous to lending activities and, as such,
are treated as investing activities. Cash outflows
from off market derivative transactions are included inAll current and future cash flows fromassociated with such instruments are
classified within the investing activities.activities of the consolidated cash flow statement.
The estimated fair values of derivatives are determined at discrete points in time based on the relevant market
information. These estimates are calculated with reference to the market rates using industry standard valuation
techniques.
Certain derivative instruments are designated as hedges of foreign currency denominated borrowings and
investments in foreign entities. This designation is reviewed at least quarterly, or as borrowing and investment
levels change. The hedge amounts (to the extent effective) are recorded as an offset to the translation
gains/losses that are being hedged.
4.13
4.21 Post-retirement benefitsEmployee
benefits
Pension obligations
Group companies operate various pension schemes. The costsschemes are funded through payments to insurance
companies or trustee administered funds, determined by annual actuarial calculations. The Company has both
defined benefit and defined contribution plans. A defined benefit plan is a pension plan that defines an amount of post-retirement benefits are made up
pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as
age, years of those obligations which the group has towards currentservice and
retired employees. These obligations can be separated into the following categories, and are determined as
follows: compensation.
F-17
F-25
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.21 Employee
4.13 Post-retirement benefits(continued)
Defined contribution plans
Pensionandprovident funds(continued)
Contributions to defined contribution plans in respect of services during a current year are recognized as an
expense in that year.
Defined benefit plans
Pension funds
The current service cost in respect of defined benefit plans is recognized as an expense in the current year. Past
service costs, experience adjustments, the effect of changes in actuarial assumptions and the effects of plan
amendments in respect of existing employees are recognized as an expense or income systematically over theas and when they arise.
expected remaining serviceThis method is applied consistently in each period of those employees.end to all gains and losses. See Note 2.
Post-retirement medical aid obligation
The costasset/liability recognized in the balance sheet in respect of providing benefits todefined benefit pension plans is the post-retirement medicalpresent value
of the defined benefit obligation at the balance sheet date less the fair value of plan assets, together with
adjustments for past service costs. The defined benefit obligation is determined calculated annually by independent actuaries
using the projected unit
credit actuarial valuation method.
A defined contribution plan is a pension plan under which the group pays fixed contributions into a separate
entity. The Company has no legal or constructive obligations to pay further contributions if the fund does not hold
sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.
The contributions are recognized as employee benefit expense when they are due. Prepaid contributions are
recognized as an asset to the extent that a cash refund or a reduction in the future payments is available.
Other post-employment benefit obligations
Some group companies provide post-retirement healthcare benefits to their retirees. The entitlement to these
benefits is usually conditional on the employee remaining in service up to retirement age and the completion of a
minimum service period. The expected costs of these benefits are accrued over the period of employment using
an accounting methodology on the same basis as that used for defined benefit pension plans. These obligations
are valued annually by independent qualified actuaries. Actuarial gains and losses arising in the plan are
recognized as income or
expense overas and when they arise. See Note 2.
Termination benefits
Termination benefits are payable when employment is terminated before the expected average remaining service livesnormal retirement date, or when an
employee accepts voluntary redundancy in exchange for these benefits. The Company recognizes termination
benefits when it is demonstrably committed to either: terminating the employment of current employees according
to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer
made to encourage voluntary redundancy based on the number of employees participating inexpected to accept the plan.offer.
Benefits falling due more than 12 months after balance sheet date are discounted to present value.
4.14
4.22 Deferred income and mining taxtaxation
The companyCompany follows the liability method of accounting for deferred income and mining taxtaxation whereby the companyCompany recognizes
recognizes the tax consequences of temporary differences by applying anticipatedenacted tax rates applicable to future
years to
differences between financial statement amounts and the tax bases of certain assets and liabilities.
Changes in
deferred taxtaxation assets and liabilities include the impact of any tax rate changes enacted during the year.
Principal temporary differences arise from depreciation on property, plant and equipment, derivatives, provisions
and tax losses carried forward. A valuation allowance is recorded to reduce the carrying amounts of deferred tax
taxation assets if it is more likely than not that such assets will not be realized.
4.15
4.23 Dividends paid
Dividends paid are recognized when declared by the board of directors. Dividends aremay be payable in Australian
dollars, South African rands, United Kingdom pounds or Ghanaian cedis. Dividends declared to foreign
stockholders are not subject to approval by the South African Reserve Bank in terms of South African foreign
exchange control regulations. Dividends are freely transferable to foreign stockholders from both trading and
non-trading profits earned in South Africa by publicly listed companies. Under South African law, the companyCompany
may declare and pay dividends from any reserves included in total shareholders’ equity calculated in accordance
with South African Statements of Generally Accepted Accounting Practice (SA GAAP), subject to its solvency(including share capital
and liquidity. As at December 31, 2004 the company’s total shareholders’ equity as calculated under SA GAAP
amounted to R17,551 mill ion ($3,109 million).
4.16 Earnings per common share
Earnings and diluted earnings per common share have beenpremium) calculated in accordance with SFAS128, “EarningsInternational Financial Reporting Standards (IFRS), subject to its
per Share”.
4.17 Exploration expenditures
Mineral exploration costs are expensed as incurred. When it has been determined that a mineral property can
be economically developed as a result of establishing provensolvency and probable reserves, future costs incurred to
develop such property are capitalized. Capitalization of pre-production costs ceases when the mining property is
capable of commercial production.
4.18 Stock-based compensation plans
The company has adopted the disclosure-only provisions of SFAS123, “Accounting for Stock-Based
Compensation” and applies Accounting Principles Board Opinion No. 25 (APB No. 25) and related interpretations
in accounting for its employee stock-based compensation plans.
At December 31, 2004, the company has two stock-based employee compensation plans, which are described
more fully in Note 27 the “AngloGold Limited share incentive scheme and plans”. During the years ended
December 31, 2004, 2003 and 2002 there was no compensation expense recognized related to time-based
awards as the exercise price of all awards was greater than or equal to the fair market value of the underlying
stock on the date of grants. As of December 31, 2004 compensation credit of $4 million was recognized, related
to the performance awards under APB No. 25, due to a decline in fair market value to below the exercise price of
such awards. The performance related options are accounted for as variable compensation awards, accordingly
the compensation expense is calculated at the end of each reporting period until the performance obligation has
been met or waived. Compensation expense will vary based on the fluctuations of the underlying stock price in
excess of the exercise price. The following table illustrates the effect on net income and earnings per share if the
company had applied the fair value recognition provisions of SFAS123 to stock-based employee compensation.liquidity.
F-18
F-26
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.18 Stock-based compensation plans (continued(continued)
4.24 Earnings per share
Earnings and diluted earnings per share have been calculated, for each class of common stock outstanding, in
accordance with SFAS 128, “Earnings per Share”, using the two class method. Under the provisions of
SFAS 128, basic net income (loss) per share is computed using the weighted average number of shares
outstanding during the period. Diluted net income (loss) per share is computed using the weighted average
number of Ordinary shares and, if dilutive, potential common shares outstanding during the period. The
computation of the diluted income (loss) per share of Ordinary shares assumes the conversion of E Ordinary
shares.
The rights, including the liquidation, voting and dividend rights, of holders of Ordinary shares and E Ordinary
shares are identical. As a result, and in accordance with EITF 03-6, “Participating Securities and the Two-Class
Method under FASB Statement No. 128”, the undistributed earnings for each year are allocated based on the
contractual participation rights of the Ordinary and E Ordinary shares as if the earnings for the year had been
distributed. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a
proportionate basis. Further, as the Company assume the conversion of E Ordinary shares in the computation of
the diluted net income (loss) per share of Ordinary shares, the undistributed earnings are equal to net income
(loss) for the computation.
4.25 Exploration and evaluation costs
The Company expenses all exploration costs until the directors conclude that a future economic benefit is more
likely than not of being realized. In evaluating if expenditures meet this criterion to be capitalized, the directors
utilize several different sources of information depending on the level of exploration. While the criteria for
concluding that expenditure should be capitalized is always probable, the information that the directors use to
make that determination depends on the level of exploration.
•
Costs on greenfields sites, being those where the Company does not have any mineral deposits which are
already being mined or developed, is expensed as incurred until the directors are able to demonstrate that
future economic benefits are probable, which generally will be the establishment of proved and probable
reserves at this location.
•
Costs on brownfields sites, being those adjacent to mineral deposits which are already being mined or
developed, is expensed as incurred until the directors are able to demonstrate that future economic benefits
are probable, which generally will be the establishment of increased proved and probable reserves after
which the expenditure is capitalized as a mine development cost.
•
Costs relating to extensions of mineral deposits, which are already being mined or developed, including
expenditure on the definition of mineralization of such mineral deposits, is capitalized as a mine
development cost.
Costs relating to property acquisitions are capitalized within development costs.
Drilling and related costs incurred on sites without an existing mine and on areas outside the boundary of a
known mineral deposit that contain proven and probable reserves are exploration expenditures and are expensed
as incurred.
Drilling and related costs incurred to define and delineate a residual mineral deposit that has not been classified
as proven and probable reserves at a development stage or production stage mine are capitalized when
management determines that there is sufficient evidence that the expenditure will result in a future economic
benefit to the company in the accounting period when the expenditure is made. Management evaluates whether
or not there is sufficient geologic and economic certainty of being able to convert a residual mineral deposit into a
proven and probable reserve at a development stage or production stage mine, based on the known geologic
and metallurgy, existing mining and processing facilities, operating permits and environmental programs.
Therefore prior to capitalizing such costs, management determines that the following conditions have been met:
F-27
Year Ended December 31,NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
(SIGNIFICANT ACCOUNTING POLICIES (continued)
4.25 Exploration and evaluation costs(continued)
a.
There is a probable future benefit;
b.
AngloGold Ashanti can obtain the benefit and control access to it; and
c.
The transaction or event giving rise to it has already occurred.
We understand that there is diversity in millions, exceptpractice within the mining industry, in that some companies expense the
drilling and related costs incurred to define and delineate residual mineral deposits that have not been classified
as proven and probable reserves at a development stage or production stage mine. Had AngloGold Ashanti
expensed such costs as incurred, net income, earnings per share data)and retained earnings would have been lower
by approximately the following amounts:
2004
$
20032004
$2005
20022006
$Net income (US$ millions)
7
13
12
Earnings per share
(1)
(US$ cents)
3
5
5
Net
Retained income as reported– January 1 (US$ millions)
9727
24734
35647
(Deduct)/add: Variable compensation awards (credit)/expense,
calculated under APB No. 25Retained income – December 31 (US$ millions)
(4)34
447
-
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards, net of
related tax effects
(3)
(12)
(7)
Pro forma net income
90
239
349
Earnings per share (cents)
Basic – as reported
39
111
160
Basic – pro forma
36
107
157
Diluted – as reported59
(1)
38
111
160
Diluted – pro forma
(1)
36
107
157
(1)
The calculation ofImpact per basic and diluted earnings per common shareshare.
4.26 Stock-based compensation plans
The Company’s management awards certain employees stock options on a discretionary basis.
The fair value of the stock-based payments is calculated at grant date using an appropriate model. For equity
settled stock-based payments, the fair value is determined using a Black-Scholes method and expensed on a
straight-line basis over the vesting period based on the group’s estimate of shares that will eventually vest.
Option schemes which include non-market vesting conditions have been calculated using the Black-Scholes
model. For all other stock-based payments to employees the fair value is determined by reference to the market
value of the underlying stock at grant date adjusted for 2004 did not assume the effecteffects of 15,384,615the relevant terms and conditions. All other
stock-based payments fair values are determined by reference to the goods or services received.
shares issuable upon
For schemes with non-market related vesting conditions, the exerciselikelihood of Convertible Bondsvesting has been taken into account
when determining the income statement charge. Vesting assumptions are reviewed during each reporting period
to ensure they reflect current expectations.
Stock options are subject to a three year vesting condition and their fair value is recognized as their effectsan employee
benefit expense with a corresponding increase in Additional paid in capital over the vesting period. The proceeds
received, net of any directly attributable transaction costs are anti-dilutivecredited to common stock (nominal value) and
Additional paid in capital when the options are exercised.
Prior to January 1, 2006, the Company accounted for this period.share-based payments under the recognition and
measurement provisions of APB Opinion No. 25, “Accounting for Stock Issued to Employees, and related
Interpretations”, as permitted by SFAS123.
4.19
On January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123(R), “Share-
Based Payment”, using the modified prospective transition method. See Note 2.
F-28
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.27 Recent pronouncements
In January 2003,
On July 13, 2006 the Financial Accounting Standards Board (FASB) issued FASB interpretation No. 4648,
(“Accounting for Uncertainty in Income Taxes” (“FIN 46”48”), “Consolidation.
FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements
in accordance with SFAS109, “Accounting for Income Taxes”. It prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of Variable Interest Entities, an interpretation of ARB No. 51”. FIN 46 requires certaina tax position taken or
variable interest entitiesexpected to be consolidated by the primary beneficiarytaken in a tax return. FIN 48 also provides guidance on derecognition and classification,
recognition of the entity if the equity investorsinterest and penalties, accounting in the
entity do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk forinterim periods and disclosure rules relating to tax positions in
the entity to finance its activities without additional subordinated financial support from other parties.statements.
In December 2003, the FASB revised FIN 46 (“the Revised Interpretation”).
The Revised Interpretation clarifies certain provisions of FIN 46. Based on the FASB’s decisions, all public
companies must apply the provisions of Interpretation or the Revised Interpretation to variable interests in
Special Purpose Entities (SPEs) (created before February 1, 2003) no later than the end of periods ending after
December 15, 2003 (December 31, 2003
This interpretation is effective for calendar year end companies). Public companies may choose to
apply the provisions of the Interpretation or the Revised Interpretation to interests held in SPEs created prior to
February 1, 2003 in financial statements for periods endingfiscal years beginning after December 15, 2003 (that2006, and the Company has adopted
this interpretation in the first quarter of 2007. The Company is in the process of assessing the impact of adopting
FIN 48 on the results of operations and financial position. The cumulative effect, if any, will be reported as an
adjustment to the opening balance of retained earnings for the 2007 fiscal year.
On September 8, 2006, the FASB has issued FASB Staff Position (FSP) No. AUG AIR-1, "Accounting for
Planned Major Maintenance Activities" (“FSPAIR-1”).
FSPAIR-1 eliminates the accrue-in-advance method of accounting for planned major maintenance activities from
the AICPA Audit and Accounting Guide, Audits of Airlines and the guidance is applicable to entities in all
industries. As a result of the elimination of the accrue-in-advance method, the Airline Guide currently permits the
use of one of the following three remaining methods: (1) direct expensing, (2) built-in overhaul, and (3) deferral.
The effective date of FSPAIR-1 is an entity's first fiscal year beginning after December 31, 2003 financial statements). However, if a company chooses15, 2006, with early
adoption permitted so long as it is as of the beginning of the entity's fiscal year. The guidance in FSPAIR-1
should be applied retrospectively, unless it is impracticable to report usingdo so. FSPAIR-1 provides additional details on the Interpretation’s
provisions, it must applysubject of transition and the Revised Interpretation’s provisions to those variable interests in financial statementsdisclosures required upon adoption of the FSP. Of the three methods of accounting
for periodsplanned major maintenance allowed by FSPAIR-1, the Company will adopt the built-in overhaul method from
January 1, 2007. The built-in overhaul method is based on segregation of plant and equipment costs into those
that should be depreciated over the useful life of the asset and those that require overhaul at periodic intervals.
Thus, the estimated cost of the overhaul component included in the purchase price of an asset is set up
separately from the cost of the asset and is amortized to the date of the initial overhaul. The cost of the initial
overhaul is then capitalized and amortized to the next overhaul, at which time the process is repeated. The
Company does not expect the adoption of this standard to have a material impact on its earnings and financial
position.
On September 13, 2006, the SEC staff published Staff Accounting Bulletin (SAB) No. 108, “Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements”
(“SAB 108”).
SAB 108 (SAB Topic 1.N) addresses quantifying the financial statement effects of misstatements, specifically,
how the effects of prior year uncorrected errors must be considered in quantifying misstatements in the current
year financial statements. In addition, SAB 108 offers a special “one-time” transition provision for correcting
certain prior year misstatements that were uncorrected as of the beginning of the fiscal year of adoption.
SAB 108 is effective for fiscal years ending after MarchNovember 15, 2004.2006. During 2006, the Company quantified and
adjusted for certain errors previously considered not to be material as discussed in Note 2.
F-29
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
AngloGold adopted the provisions of the Revised Interpretation on February 1, 2003 to the extent that theySIGNIFICANT ACCOUNTING POLICIES (continued)
related to variable interest entities created on or after that date. For variable interest entities created prior to
February 1, 2003, the provisions of the Revised Interpretation were deferred to the end of the first interim or
annual period ending after March4.27 Recent pronouncements (continued)
On September 15, 2004. As at December 31, 2004 the company has adopted the Revised
Interpretation and did not identify any variable interest entities that would be subject to consolidation under the
Revised Interpretation.
In November 20042006 the FASB issued Statement of Financial Accounting Standards No. 151, “Inventory Costs, an157, “Fair Value
amendment of ARB No. 43, Chapter 4”Measurements” (“SFAS151”SFAS157”).
SFAS151 amends the
SFAS157 provides enhanced guidance in ARB No. 43, Chapter 4, "Inventory Pricing",for using fair value to clarify the accounting for
abnormal amounts of idle facility expense, freight, handling costs,measure assets and wasted material (spoilage). Paragraph 5 ofliabilities. Under SFAS157, fair
ARB 43, Chapter 4, previously stated that ". . . under some circumstances, items such as idle facility expense,
excessive spoilage, double freight, and rehandling costs may be so abnormal as to require treatment as current
period charges. . . ." SFAS151 requires that those items be recognized as current-period charges regardless of
whether they meet the criterion of "so abnormal". In addition, SFAS151 requires that allocation of fixed
production overheadsvalue refers to the costs of conv ersionprice that would be based onreceived to sell an asset or paid to transfer a liability in an orderly
transaction between market participants in the normal capacity ofmarket in which the production facilities.reporting entity transacts. SFAS157 clarifies
SFAS151 is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Earlier
application is permitted for inventory costs incurred during fiscal years beginning after November 24, 2004. The
provisions of SFAS151 should be applied prospectively. The company does not expect the adoption of SFAS151
to have a material impact on its earnings and financial position.
F-19
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.19 Recent pronouncements (continued)
In December 2004 the FASB issued Statement of Financial Accounting Standards No. 153, “Exchanges of
Nonmonetary Assets, an amendment of APB Opinion No. 29, Accounting for Nonmonetary Transactions”
(“SFAS153”).
The amendments made by SFAS153 are based on the principle that exchanges of nonmonetary assets should
be measured based on the fair value of the assets exchanged. Further, the amendments eliminate the narrow
exception for nonmonetary exchanges of similar productive assets and replace it with a broader exception for
exchanges of nonmonetary assets that do not have commercial substance. Previously, Opinion 29 required that
the accounting for an exchange of a productive asset for a similar productive asset or an equivalent interest in
the same or similar productive asset should be based on the recorded amount ofassumptions market participants would use when pricing the
asset relinquished.
SFAS153 isor liability and establishes a fair value hierarchy that prioritizes the result of a broa der effort by the FASBinformation used to improve the comparability of cross-border financialdevelop those
reporting by working with the International Accounting Standards Board (IASB) toward development of a single
set of high-quality accounting standards. SFAS153 is effective for nonmonetary asset exchanges occurring in
fiscal periods beginning after June 15, 2005. Earlier application is permitted for nonmonetary asset exchanges
occurring in fiscal periods beginning after the date of issuance. The provisions of this Statement shall be applied
prospectively. The company does not expect the adoption of SFAS153 to have a material impact on its earnings
and financial position.
In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004),
“Share-Based Payment” (“SFAS123R”).
SFAS123(R) is a revision of SFAS123, “Accounting for Stock-Based Compensation”. It supersedes APB Opinion
No. 25, “Accounting for Stock Issued to Employees” and amends SFAS95, “Statement of Cash Flows”.
Generally, the approach to accounting for share-based payments in SFAS123(R) is similar to the approach
described in SFAS123. However, SFAS123(R) requires all share-based payments to employees, including
grants of employee stock options, to be recognized in the financial statements based on their fair values (i.e., pro
forma disclosure is no longer an alternative to financial statement recognition).
SFAS123(R) permits public companies to adopt its requirements using one of two methods:
A “modified prospective” method in which compensation cost is recognized beginning with the effective date (a)
based on the requirements of SFAS123(R) for all share-based payments granted after the effective date and (b)
based on the requirements of SFAS123 for all awards granted to employees prior to the effective date of
SFAS123(R) that remain unvested on the effective date.
A “modified retrospective” method which includes the requirements of the modified prospective method
described above, but also permits entities to restate based on the amounts previously recognized under
SFAS123 for purposes of pro forma disclosures either (a) all prior periods presented or (b) prior interim periods
of the year of adoption.
SFAS123(R) was originally effective at the beginning of the first interim or annual period beginning after June 15,
2005. On April 14, 2005 the United States Securities and Exchange Commission (SEC) announced that it would
provide for a phased-in implementation process of SFAS123(R). The SEC would require that registrants adopt
SFAS123(R) no later than the beginning of the first fiscal year beginning after June 15, 2005.
The company plans to adopt SFAS123(R) using the modified-prospective method on January 1, 2006.
As permitted by SFAS123, the company currently accounts for share-based payments to employees using APB
Opinion No. 25’s intrinsic value method. The impact of adoption of SFAS123(R) cannot be predicted at this time
because it will depend on levels of share-based payments granted in the future. However, had the company
adopted SFAS123(R) in prior periods, the impact of that standard would have approximated the impact of
SFAS123 as described in the disclosure of pro forma net income and earnings per share in Note 4.18 “Stock-
based compensation plans”. SFAS123(R)assumptions. SFAS157 also requires the benefits of tax deductions in excess of recognized
compensation cost tothat fair value measurements be reported as a financing cash flow, rather than as an operating cash flow as required
under current literature. This requirement will reduce net operating cash flows and increase net financing cash
flows in periods after adoption. This requirement will not impact the company’s cash flow disclosure asseparately disclosed by level within the
company does not receive the benefit of a tax deduction for compensation cost.
F-20
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.19 Recent pronouncements (continued)
On March 17, 2005, The Emerging Issues Task Force (“EITF”) reached a consensus in Issue 04-6, “Accounting
for Stripping Costs in the Mining Industry”, that post-production stripping costs are a component of mineral
inventory cost subject to the provisions of AICPA Accounting Research Bulletin No. 43, Restatement and
Revision of Accounting Research Bulletins, Chapter 4, “Inventory Pricing” (ARB 43).
Based upon this consensus, post production stripping costs should be considered costs of the extracted minerals
under a full absorption costing system and recognized as a component of inventory to be recognized in cost of
sales in the same period as the revenue from the sale of the inventory. Additionally, capitalization of such costs
would be appropriate only to the extent inventory exists at the end of a reporting period.
At an EITF meeting held on June 15 and 16, 2005, the EITF clarified its intention that "inventory produced"
should mean "inventory extracted." Thatfair value hierarchy. SFAS157 is stripping costs incurred during a period should be attributed only to
the inventory that is extracted during that period.
The guidance in this consensus will be effective for financial statements issued for fiscal years beginning after
November 15, 2007, and interim periods within those fiscal years. The Company is currently reviewing the
guidance issued in SFAS157 a nd has not yet determined the impact of this on the financial statements.
On September 29, 2006 the FASB issued Statement of Financial Accounting Standards No. 158, “Employers’
Accounting for Defined Benefit Pension and Other Post-retirement Plans, an amendment of FASB Statements
No. 87, 88, 106 and 132(R)” (“SFAS158”).
SFAS158 represents the completion of the first phase in the FASB's post-retirement benefits accounting project
and requires an entity to:
•
recognize in its statement of financial position an asset for a defined benefit post-retirement plan's overfunded
status or a liability for a plan's underfunded status;
•
measure a defined benefit post-retirement plan's assets and obligations that determine its funded status as of
the same day of the employer's fiscal year-end statement of financial position;
•
recognize as a component of accumulated other comprehensive income, net of tax, amounts accumulated at
the date of adoption due to delayed recognition of actuarial gains and losses, prior service costs and credits,
and transition assets and obligations; and
•
expand the disclosure requirements of SFAS132(R) to include disclosure of additional information in the notes
to financial statements about certain effects on net periodic benefit cost in the next fiscal year that arise from
delayed recognition of actuarial gains or losses, prior service costs or credits and unrecognized transition
asset and obligations.
SFAS158 does not change the amount of net periodic benefit cost included in net income or address the various
measurement issues associated with post-retirement benefit plan accounting. The requirement to recognize the
funded status of a defined benefit post-retirement plan and the disclosure requirements are effective for fiscal
years ending after December 15, 2005, with early adoption permitted. However, consistent with2006, for public entities, and at the guidance in SFAS154 (see
below),end of the EITF reached decision thatfiscal year ending after
June 15, 2007, for all other entities. The requirement to measure plan assets and benefit obligations as of the cumulative effect
date of the employer's fiscal year-end statement of financial position is effective for fiscal years ending after
December 15, 2008. The adoption of the consensusrecognition and disclosure requirements of SFAS158 which are
effective for fiscal years ending after December 15, 2006, did not have a material impact on the Company’s
earnings and financial p osition as the Company changed its accounting policy during the second quarter of 2005,
retroactive to January 1, 2005, with respect to accounting for employee benefit plans to recognize the effects of
actuarial gains and losses in Issue 04-6 shouldincome, rather than amortizing over the expected average remaining service period
of employees participating in the plan. See Note 2. The Company is currently considering processes to meet the
measurement requirements of SFAS158.
On February 15, 2007 the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value
Option for Financial Assets and Financial Liabilities Including an amendment of FASB Statement No. 115”
(“SFAS159”).
SFAS159 permits entities to choose to measure many financial instruments and certain other items at fair value.
The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in
reported earnings caused by measuring related assets and liabilities differently without having to apply complex
hedge accounting provisions.
F-30
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.27 Recent pronouncements (continued)
The fair value option permits all entities to choose to measure eligible items at fair value at specified election
dates. A business entity shall report unrealized gains and losses on items for which the fair value option has been
elected in earnings at each subsequent reporting date.
The fair value option:
•
may be recognizedapplied instrument by instrument, with a few exceptions, such as an adjustmentinvestments otherwise accounted for
by the equity method;
•
is irrevocable (unless a new election date occurs); and
•
is applied only to entire instruments and not to portions of instruments.
SFAS159 is effective as of the beginning balance of retained earnings duringan entity’s first fiscal year that begins after November 15, 2007. Early
adoption is permitted as of the period, and not in thebeginning of a fiscal year that begins on or before November 15, 2007, provided
income statement as originally described in the consensus. If a company adoptedentity also elects to apply the consensus priorprovisions of SFAS 157, “Fair Value Measurements”. No entity is permitted to FASB
ratification of this change, they would not haveapply SFAS159 retrospectively to changefiscal years preceding the accounting foreffective date unless the entity chooses early
adoption. The companychoice to adopt early should be made after issuance of SFAS159 but within 120 days of the
beginning of the fiscal year of adoption, provided the entity has not yet issued financial statements, including
required notes to those financial statements, for any interim period of the fiscal year of adoption. SFAS159
permits application to eligible items existing at the effective date (or early adoption date). The Company is
currentl y reviewing the guidance issued in Issue 04-6SFAS159 and has not yet determined the impact of this on the financial
statements.
In May 2005 the FASB issued Statement of Financial Accounting Standards No. 154, “Accounting Changes and
Error Corrections, a replacement of APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3,
Reporting Accounting Changes in Interim Financial Statements” (“SFAS154”).
SFAS154 applies to all voluntary changes in accounting principle, and changes the requirements for accounting
for and reporting of a change in accounting principle. SFAS154 requires retrospective application to prior periods’
financial statements of a voluntary change in accounting principle unless it is impracticable. Accounting
Principles Board Opinion No. 20, Accounting Changes (APB 20) previously required that most voluntary changes
in accounting principle be recognized by including in net income of the period of the change the cumulative effect
of changing to the new accounting principle. SFAS154 requires that a change in method of depreciation,
amortization, or depletion for long-lived, nonfinancial assets be accounted for as a change in accounting estimate
that is effected by a change in accounting principle. APB 20 previously required that such a change be reported
as a change in accounting principle. SFAS154 carries forward many provisions of APB 20 without change,
including the provisions related to the reporting of a change in accounting estimate, a change in the reporting
entity, and the correction of an error, as well as the provisions of SFAS3 that govern reporting accounting
changes in interim financial statements. SFAS154 is effective for accounting changes and corrections of errors
made in fiscal years beginning after December 15, 2005. Earlier application is permitted for accounting changes
and corrections of errors made occurring in fiscal years beginning after June 1, 2005. The company does not
expect the adoption of SFAS154 to have a material impact on its earnings and financial position.
5.
COSTS AND EXPENSES
Ore Reserve development expenditure
The company has reassessed the useful life of on-reef Ore Reserve development expenditure with effect from
January 1, 2004. The impact of the reassessment is that costs are expensed over a longer period than was previously
estimated. The effect of this change in estimate on the results for 2004 is as follows:
Year ended December 31, 2004
(in millions, except per share data)
Impact
$
Per basic
common
share
(cents)
Per diluted
common
share
(1)
(cents)
Income before income tax provision
54
21
21
Deferred income and mining tax
(19)
(8)
(8)
Net income
35 13 13
(1)
The calculation of diluted earnings per common share for 2004 did not assume the effect of 15,384,615 shares issuable upon the exercise of Convertible Bonds as their effects are anti-dilutive for this period.
F-21
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
5.
COSTS AND EXPENSES (continued)
Employment Severance Costs
Total employee severance costs amounted to $9$22 million for 2004 (2003: $42006 (2005: $26 million, 2002: $32004: $7 million) and were due
to
retrenchments in the South Africa region reflecting mainly downsizing and rationalization of operations in 2002, downsizing at Savuka2004
in 2003 and rationalization of operations (at Great Noligwa and TauTona) and in 2005 (at Great Noligwa, Kopanang, Savuka, TauTona and ErgoMponeng).
Employee severance costs recorded in 2004.2006 included retrenchment costs of $7 million in the South African region
(at Great Noligwa, Kopanang, Tau Lekoa, TauTona and Mponeng) and $15 million in Ghana (at Obuasi) due to a
planned reduction in workforce.
Interest Expense
2004
$2006
2003$
(As restated)2005
$
2002
(As restated)2004
$
Finance costs on bank loans and overdrafts
1120
1721
18
11
Finance costs on corporate bond
(1)
3332
1134
-
33
Finance costs on convertible bond
(2)
26
27
23
Capital lease charges
2
2
2
Discounting of non-current trade and other debtors
4
-
-
Other
113
-12
4
9
87
96
78
28
22
Less : Amounts capitalized
(3)
(10)
(16)
(11)
-
-77
80
67
28
22
(1)
On August 21, 2003 AngloGold issued unsecured bonds in the aggregate principal amount of R2 billion ($300 million). Refer to
Note 16.20.
(2)
On February 27, 2004, AngloGold Ashanti Holdings plc, a wholly-owned subsidiary of the company,Company, issued $1,000,000,000 2.375 percent
2.375 percent guaranteed convertible bonds due 2009, convertible into ADSs and guaranteed by AngloGold Ashanti. Refer to
Note 16.20.
(3)
Interest capitalized on qualifying assets. Refer to Note 10.12.
F-31
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
5.
COSTS AND EXPENSES(continued)
Impairment of Assets
The impairment loss in respect of the cash generatingreporting units arose from the declining values of the remaining ore
reserves and is
based on the estimated remaining cashflows computed at a discount. The impairment is made up as
follows:
2006
$
2005
$
2004
$
2003Australia
$
2002
$
Australia
Impairment of various mining assets and mineral rights based on net realizable
value
-
-
1
9
-
BrazilGhana
Impairment of equipment Bibiani mine following an assessment and reduction in life of mine
based on fair value in use
-
137
-
Impairment of goodwill held in Bibiani. Refer to Note 3.
-
4
-
Impairment of tax rate concession agreements. Refer to Note 14.
-
20
-
South Africa
Impairment of SavukaGoedgenoeg drilling and 1650 level decline drilling based on thefair value in use and at the relevant discount rate
-
592
-
Decline inImpairment of East of Bank Dyke at TauTona access development based on fair value of non-marketable equity investments. Refer to Note 13.
-
64
-
Other than temporary decline in theImpairment of Western Ultra Deep Levels based on fair value of investments in affiliates
-
374
-
Impairment of goodwill held in Gold Avenue, a subsidiary. Refer to Note 12.
2
-
-
32
78Other
Impairment and write-off of various minor tangible assets and equipment
6
-
Asset retirement obligations-
6 141
3
The adoptionCompany evaluates its held-for-use long lived assets for impairment when events or changes in circumstances
indicate that the related carrying amount may not be recoverable. The carrying value of SFAS143the related asset is compared
to its fair value.
The following estimates and assumptions were used by management when reviewing long-lived assets for
impairments:
º
the forward gold price curve for the first 10 years, where a forward gold market and quoted prices exist (starting
point based on January 1, 2003 resulteda 30-day average during the fourth-quarter of 2006 - $630/oz; (2005 - $505/oz). Thereafter, the
estimated future gold price has been increased by 2.25% (2005: 2.25%) per annum over the remaining life of the
mines. These prices have been adjusted for the effects of including the normal sale forward contracts to arrive at an
average received price across all of the reporting units. Previously, the normal sale forward contracts were
allocated to each reporting unit, based on the then prevailing contractual relationship with hedge counterparts.
Following the removal of certain hedge counterpart restrictions and the granting of group level guarantees during
2006, the Company has applied an average received gold price across all reporting units. The use of this approach
has had a consequential impact on the fair value of the reporting units.
Annual life of mine plans which take into account the following:
º
Proven and Probable Ore Reserves as well as value beyond proven and probable reserves. For these purposes
Proven and Probable Ore Reserves of approximately 66 million ounces (including joint ventures) as at
December 31, 2006 were determined assuming a three year historical average gold price of $550 per ounce,
A$724 per ounce in Australia and R132,622 per kilogram in South Africa;
º
a real pre-tax discount rate adjusted for country risk and project risk for cash flows relating to mines not yet in
commercial production and deep level mining projects based on the discount rate applicable to the long-term dollar
market rates;
º
foreign currency cash flows are translated at estimated forward exchange rates and then discounted using
appropriate discount rates for that currency;
º
cash flows used in impairment calculations are based on life of mine plans which exceed five years for the majority
of the mines; and
º
variable operating cash flows are increased at local Consumer Price Index (CPI) rates.
F-32
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
5.
COSTS AND EXPENSES(continued)
Real pre-tax discount rates applied in impairment calculations on assets which had impairment indicators or on
reporting units with significant assigned goodwill are as follows:
Percentage
South Africa
(1)
6.3 to 7.4
Ghana
(2)
5.9 to 7.9
Australia
5.4 to 5.9
Tanzania
7.1
(1)
As the Company did not have the intention to mine and no future cash flows were expected from the Western Ultra Deep Levels
area (in South Africa), an impairment loss of $74 million was recorded during 2005.
(2)
Based on a pre-tax discount rate of 6.5 percent in Ghana (at Bibiani) the estimated fair value amount did not support the carrying
values and as a result, an impairment loss of $37 million on mining assets and $4 million on assigned goodwill was recorded
during 2005. Refer to Note 3.
The Company reviews and tests the carrying value of long-lived assets, including goodwill, when events or changes in
circumstances suggest that the carrying amount may not be recoverable. Assets are grouped at the lowest level for
which identifiable cash flows are largely independent of cash flows of other assets. For long-lived assets other than
goodwill, if the sum of estimated future cash flows on an undiscounted basis is less than the carrying amount of the
related asset group, the long-lived asset group is not recoverable and the fair value should be determined. An
impairment loss is measured by comparing estimated future cash flows on a discounted basis to the carrying amount
of the asset. Goodwill is tested for impairment on an annual basis. Expected future cash flows used to determine the
fair value of goodwill and long-lived assets are inherently uncertain and could materially change over ti me. They are
significantly affected by a number of factors including reserves and production estimates, together with economic
factors such as spot and forward gold prices, discount rates, foreign currency exchange rates, estimates of costs to
produce reserves and future capital expenditure.
Should management’s estimate of the future not reflect actual events, further impairments may be identified. The
factors affecting the estimates include:
º
changes in Proved and Probable Ore Reserves as well as value beyond proven and probable reserves;
º
the grade of Ore Reserves as well as value beyond proven and probable reserves may vary significantly from time
to time;
º
differences between actual commodity prices and commodity price assumptions;
º
unforeseen operational issues at mine sites; and
º
changes in capital, operating mining, processing and reclamation costs and foreign exchange rates.
Based on analysis, the carrying value and estimated fair values (on a discounted basis) of reporting units that are
most sensitive to gold price, ounces, costs and discount rate assumptions are:
As at December 31, 2006
Carrying amount
(including goodwill)
$
Estimated fair value
(discounted)
$
South Africa
Tau Lekoa
124
126
Ghana
Obuasi
1,305
1,580
Should any of the assumptions used change adversely and the impact is not mitigated by a change in other factors,
this could result in an increaseimpairment of the above assets.
F-33
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
5.
COSTS AND EXPENSES(continued)
It is impracticable to disclose the extent of the possible effects of changes in Property, plant the assumptions for the future gold price
and equipmenthence life of $1 million,
an increasemine plans at December 31, 2006 because these assumptions and others used in Provisionimpairment testing
of long-lived assets and goodwill are inextricably linked. In addition, for those operations with a functional currency
other than the dollar, movements in the dollar exchange rate will also be a critical factor in determining the life of mine
and production plans.
Therefore it is possible that outcomes within the next financial year that are different from the assumptions used in the
impairment testing process for goodwill and long-lived assets could require a material adjustment to the carrying
amounts disclosed at December 31, 2006.
Asset Retirement Obligations
Long-term environmental rehabilitation of $4 millionobligations comprising decommissioning and a cumulative effect of adoption whichrestoration are based on the Company’s
decreased net incomeenvironmental management plans, in compliance with the current environmental and stockholders’ equity by $3 million. No increase in Deferred income and mining tax was
recorded upon the adoption of SFAS143.regulatory requirements.
(in US Dollars,
millions)
The following is a reconciliation of the total liabilities for asset retirement obligations:
millions)
Balance as at December 31, 2003 (as restated, refer to Note 2).2005
124325
Impact of acquisitions and disposals
(1)
50
Additions to liabilities
22(5)
Liabilities settled
(14)
(12)
Accretion expense
8
Revisions13
Change in assumptions
-
5
(2)(1)
Translation
14
(11)
Balance as at December 31, 20042006
209310
(1)
ReferRevisions relate to Note 3 – Fair valuechanges in laws and regulations governing the protection of acquisitionsthe environment and (disposals)factors relative to
rehabilitation estimates and a change in the quantities of businesses.material in reserves and a corresponding change in the life of mine
plan. These liabilities are anticipated to unwind beyond the end of the life of mine.
(2)
Represents changes in estimates and timing of cash flows.
F-22
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
5.
COSTS AND EXPENSES (continued)
Upon adoption of SFAS143, the total amount of recognized liabilities for asset retirement obligations was $137 million.
These liabilities mainly relate to obligations at the group’sCompany’s active and inactive mines to perform reclamation and
remediation activities in order to meet applicable existing environmental laws and regulations.
Certain amounts have been contributed to an irrevocablea rehabilitation trust and environmental protection bond under the company's
Company's control. The monies
in the trust and bond are invested primarily in interest bearing debt securities.securities and are
included in Other long-term assets in the Company’s consolidated balance sheet. Cash balances held in the trust and
bond are classified as restricted cash in the Company’s consolidated balance sheets for all periods presented. As at
December 31, 20042006 and 20032005 the monies
balances held in thisthe trust and bond (cash and investments) amounted to $78$91 million
and $53$93 million, respectively. Besides these assets there were no other
assets that were legally restricted for
purposes of settling asset retirement obligations as at December 31, 2004.
The results for the year ended December 31, 2002 on an historical basis, do not reflect the provisions of SFAS143.
Had the company adopted SFAS143 on January 1, 2002, the historical net income/(loss) and basic and diluted net
income/(loss) per common share before cumulative effect of accounting change, would have been changed to the
adjusted amounts indicated below:
Year ended December 31, 2002
(in US Dollars, millions, except for share data)
Net income/
(loss) before
cumulative
effect of
accounting
change
Pro forma
Net income/
(loss) per
basic
common
share (cents)
Pro forma
Net income/
(loss) per
diluted
common
share (cents)
As reported – historical basis
356 160
160
Less: Impact on earnings before tax
- -
-
Income tax impact
- -
-
Adjusted
356 160
160
2006.
Operating lease chargesLease Charges
Operating lease rentals are charged against income in a systematic manner related to the period the leased property
will be used. Lease charges relate mainly to the hire of plant and machinery and other land and buildings.
Operating leases for plant and machinery are in terms of contracts entered with mining contractors to undertake mining
at certain operations. The contracts are for specified periods with renewalsand include escalation clauses. Renewals are at the
discretion of the respective operating
mine and allow a right of first refusal on the purchase of the mining equipment in
the case of termination of the contract.
Certain contracts include the provision of penalties payable on early exiting or
cancellation.
F-34
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
5.
COSTS AND EXPENSES(continued)
Rental expenseExpense
(1)
2004
$
20032006
$
20022005
$
2004
$
Comprising of:
Minimum rentals
6
640
544
40
Contingent rentals
-
-
-
-
Sublease rentals
-
-
-
6
6-
540
44
40
(1)
Included in production costs for each period presented.
Future minimum rental payments are:
2005 1
20061
2007
-
2007
16
2008
-4
2009
-1
2
2010F-232011
1
Thereafter
1
24
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
5.Profit on Sale of Assets, Loans and Indirect Taxes
COSTS AND EXPENSES (continued)
(Profit)/loss2006
$
2005
$
2004
$
Profit on the sale of assetsMitchell Plateau and Cape Bougainville
2004-
$(1)
2003-
$
2002
$
Profit on disposal of Union Reefs Gold Mine
(1)
(2)
-
-
-(2)
Profit on disposal of Western Tanami assets
(2)
(3)-
-
-(3)
Profit on disposal of Tanami Gold Mine
(3)-
-
-(3)
Profit on disposal of land, mineral rights and exploration properties
(5)
(48)
(2)
(6)
Recovery of loans previously written off
(3)
(14)
-
-
Loss on sale of Amapari project in Northern Brazil
(3)
-
3
-
Sale of Jerritt Canyon Joint VentureNon-recoverable value added state tax
(4)
-
(10)
-
Profit on sale of Queenstake Resources USA Inc. shares
(4)
-
(3)
-
Profit on sale of shares held in East African Gold Mines Limited
(5)
-
(25)
-
Gain on disposal of available-for-sale financial assets – Randgold
Resources Limited
(6)
-
(17)
-
Profit on sale of helicopter at Vaal River operations
-
(3)
-
Loss on sale of Normandy shares
(7)9
-
-
11Reassessment of indirect taxes payable in Guinea
(3)
-
-
Reassessment of indirect taxes payable in Tanzania
20
-
-
(36)
(3)
(14)
(55)
11
(1)
The sale of Union Reefs Mine to the Burnside Joint Venture was announced on August 5, 2004.
(2)
The sale of the Western Tanami Project to Tanami Gold NL was announced on January 20, 2004.
(3)
The sale of the Amapari project in Northern Brazil was announced on May 23, 2003.
(4)
Jerritt Canyon Joint Venture was disposed of effective June 30, 2003 and the shares acquired by AngloGold in
Queenstake Resources USA Inc.,Relates mainly to loans previously expensed as exploration costs as part of this transaction,funding provided to the Yatela Joint Venture. The
Yatela Joint Venture is accounted for under the equity method. Refer to Note 15.
(4)
Represents the write-off of value added state tax of $7 million at Serra Grande and $2 million (at AngloGold Ashanti Brasil
Mineração) not expected to be recovered from the Brazilian Government.
(5)
Refers to the disposal of land, mineral rights and exploration properties situated in Brazil, Ghana and North America.
Mining Contractor Termination Costs
Mining contractor termination costs of $9 million (before taxation of $3 million) recorded in 2005 (2004: $nil million)
related to contractor termination costs at Geita, in Tanzania, on the transition to owner mining completed in early
August 2005. No mining contractor termination costs were disposedrecorded in 2006.
Other operating costs and expenses
2006
$
2005
$
2004
$
Comprising of:
Provision for loss on future deliveries of during November 2003.other commodities
15
(5)
8
On July 8, 2003 AngloGold disposed of its investment of 8,348,600 shares held in East African Gold Mines Limited
for a consideration of $25 million.
(6)
In the second half of 2003, AngloGold disposed of 952,481 shares in Randgold Resources Limited, for a
consideration of $23 million.
(7)
As described in Note 3 – Acquisitions and disposals of businesses and assets, the company disposed of its
holding of 159,703,481 Normandy shares during January 2002, for a gross amount of $158 million. The carrying
amount was $158 million and costs related to the transaction amounted to $11 million, resulting in a loss of
$11 million. The company exchanged $147 million of its own stock for Normandy shares.
Results of operations for Union Reefs Gold Mine (assets disposed of):
2004
$
2003
$
2002
$
Revenue -
27
36
Net income before tax
-
3
4
The Union Reefs Gold Mine was disposed of as per Note 5 – (Profit)/Unrealized loss on sale of assets.other commodity physical borrowings
Results of operations for the Western Tanami Project (assets disposed of):1
2004
$
2003
$
2002
$
Revenue -14
-
-16
9
8
Ore Reserve Development Expenditure
The Company has reassessed the useful life of on-reef Ore Reserve development expenditure with effect from
January 1, 2004. The effect of this change in estimate on the results for 2004 was as follows:
Year ended December 31, 2004
(in millions, except per share data)
Impact
$
Per basic common
share (cents)
Per diluted common
share
(1)
(cents)
Income before income tax provision
54
21
21
Taxation
(19)
(8)
(8)
Net income before tax
-
535
-
The Western Tanami Project was disposed of as per Note 5 – (Profit)/loss on sale of assets.
Results of operations for Tanami Gold Mine (assets disposed of):
2004
$
2003
$
2002
$
Revenue -
-13
-
Net income before tax
-
-13
-
(1)
The Tanami Gold Mine was disposedcalculation of diluted earnings per common share for 2004 did not assume the effect of 15,384,615 shares issuable upon the exercise of
Convertible Bonds as per Note 5 – (Profit)/loss on sale of assets.their effects are anti-dilutive for this period.
F-24
F-35
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
5.
COSTS AND EXPENSES (continued)
Results of operations for Jerritt Canyon Joint Venture (assets disposed of):
2004
$
2003
$
2002
$
Revenue
-
35
(1)
78
Net (loss)/income before tax
-
(5)
(1)
(5)
(1)
The Jerritt Canyon Joint Venture was disposed of effective June 30, 2003. Refer to Note 5 – (Profit)/loss on sale of assets.
Figures for 2003 are for the six months ended June 30, 2003.
6.
RELATED PARTY TRANSACTIONS
As at December 31, 2004On October 26, 2005 Anglo American plc (AA plc) announced that it intended to reduce its shareholding in the
Company, while still intending to remain a significant shareholder in the medium term. During April 2006, AA plc
reduced its shareholding in the Company to less than 50 percent interest held, as the result of the sale in a public
offering, of some of its shares held in the Company. Refer to Note 20. As at December 31, 2006 AA plc and its
subsidiaries held an effective 50.9741.67 percent (2003:
54.45(2005: 50.88 percent) interest in AngloGold Ashanti. The groupCompany had
the following transactions with related parties during the
years ended December 31, 2004, 20032006, 2005 and 2002:2004:
December 31, 2006
December 31, 2005
December 31, 2004
December 31, 2003
December 31, 2002
(in millions)
Purchases
(by)/from related
party
$
Amounts
owed to
related party
$
PurchasesAmounts owed
fromto/(by) related
party
$
Amounts
owed toPurchases
(by)/from
related party
$
PurchasesAmounts
from relatedowed to/(by)
related party
$
Purchases
(by)/from
related party
$
Related party transactions with
holding companysignificant shareholder AA plc
51
-
25
-1
2
5
Related party transactions with
subsidiaries of AA plc
(1)
Boart Longyear Limited – mining
services
(2)
-
-
5
-
9
1
10
1
9
Mondi Limited – forestry
5
-
16
2
11
116
18
(1)
Scaw Metals – A division of Anglo
Operations Limited – steel and
engineering 14
1
12-
6
1
5
11Haggie Steel Wire Rope Operations
(3)
1
-
8
1
9
Anglo Coal – a division of Anglo
Operations Limited
-
-
1
-
-1
8
-
41
-
Related party transactions with
associates
Rand Refinery Limited – gold refinery
-
-
2
-
2
5
45
4
37
3
42
Related party transactions of equity
accounted joint ventures
Societe d'Exploitation des Mines d'Or de
Sadiola S.A.
2
-
2
-
1
Societe d'Exploitation des Mines d'Or
de Sadiola S.A.
(2)
(1)
-
-
1
Societe d'Exploitation des Mines d'Or
de Yatela S.A.
2(1)
-
-
-
-
1
Societe des Mines de Morila S.A.
-(2)
-
1(2)
-
-(1)
(1)
Includes $10 millionTransactions to April 2006.
(2)
AA plc sold their interest in Boart Longyear Limited with effect from July 29, 2005.
(3)
Previously included in Scaw Metals – A division of Anglo Operations Limited.
Amounts owed to related parties are unsecured, non-interest bearing and normally settled within sixty days.
In connection with the relocation of Roberto Carvalho Silva, an executive director of the Company since 2005, to
Nova Lima, Brazil, in 2000, Mr. Carvalho Silva commenced renting a house in Nova Lima from a Brazilian subsidiary of
the Company. Mr. Carvalho Silva purchased the house from the Company’s subsidiary in January 2005. The total
purchase price of the house was BRL1,150,000 ($429,923). Mr. Carvalho agreed to pay the purchase price of the
house in 60 installments, the first being BRL19,167.70 and 59 installments of BRL19,166.65 each, starting on January
28, 2005. Such monthly installments were adjusted annually by the cumulative INPC (a Consumer Price Index in Brazil)
in lieu of interest. As at December 31, 2006, BRL728,580 ($340,458) of the purchase price remained to be paid to the
Company’s subsidiary, with BRL657,717 ($341,352) remaining to be paid as settlementat June 20, 2007. At present, the
installment payments are up-to-date. Mr Carvalho Silva and the Company have agreed that the remaining balance of
the purchase price of the house will be paid by AngloGoldMr Carvalho Silva as soon as reasonably practicable and in any event
no later than August 31, 2007.
A Brazilian subsidiary of the Company received marketing, communications and corporate affairs services from a
Brazilian company in which a claimson of Roberto Carvalho Silva owns a one-third interest. The total amount paid by the
Company’s subsidiary to this company in respect of an alleged breach of contract.such services during the years were: 2006: BRL903,465
($414,433); 2004: BRL3,944 ($1,351); 2005: BRL311,923 ($127,837); and BRL634,023 ($329,055) has been paid to
date in 2007. The Company is currently reviewing its relationship with this service provider and the contracts under
which such services are provided.
F-36
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
7.
DEFERRED INCOME AND MINING TAXTAXATION
2004
$
2003
(As restated)2006
$
20022005
(As restated)$
$2004
Pretax $
Income/(loss)/income from continuing operations before income tax, equity income,
minority interests and cumulative effect of accounting change was derived from
the
following jurisdictions:
South Africa
(108)
198
241
Argentina
24
12
26
Australia
39
16
33
Brazil
102 71
59
South Africa
79
(179)
(97)
Argentina
40
30
24
Australia
106
66
39
Brazil
114
81
102
Ghana
(128)
(139)
(39)
Guinea
(53)
(18)
(28)
Mali
6
-
-
GuineaNamibia
(28)18
11
2
Tanzania
(213)
(86)
3
USA
(23)
(37)
(8)
Zimbabwe
-
-
Mali
14 49
70
Namibia
2 8
13
Tanzania
12
23
6
USA
(8)
1
-
Zimbabwe
- -
-
Other, including Corporate and Non-gold producing subsidiaries
(42)
(92)
(23)
36
(96)
(363)
(25)
Charge/(benefit) for income taxes attributable to continuing operations is as
follows:
Current:
South Africa
(1)
66
40
44
Argentina
13
-
(1)
Australia
25
6
2
Brazil
(2)
38
23
15
Ghana
5
-
-
Guinea
-
-
-
Mali
2
-
-
Namibia
4
-
-
Tanzania
1
-
2
USA
-
(1)
-
Zimbabwe
-
-
-
Other
2
2
6
Total current
156
70
68
(1)
Charges for current tax in 2006, 2005 and 2004 included an increase in
provision in respect of estimated tax payable amounting to $1 million,
$40 million and $40 million, respectively, as a result of the receipt of tax
assessments for the years ended December 31, 1998, 1999, 2000 and 2001.
(2)
Charges for current tax in 2005 included $13 million relating to tax obligations
as a result of a change in interpretation of legislation made by the Brazilian
Superior Justice Court.
Deferred:
South Africa
(1)
16
(95)
(201)
Argentina
2
10
10
Australia
4
10
5
Brazil
(4)
3
1
Ghana
(2)
(39)
(110)
(11)
Guinea
2
2
(1)
Mali
-
-
-
Namibia
3
4
-
Tanzania
(20)
(12)
(13)-
414USA
436(3)
-
-
-
Zimbabwe
-
-
-
Other
2
(3)
(3)
Total deferred
(34)
(191)
(200)
Total income and mining tax expense/(benefit)
122
(121)
(132)
F-25
F-37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
7.
DEFERRED INCOME AND MINING TAX TAXATION(continued)
2004
$
2003
(As restated)
$
2002
(As restated)
$
Charge for income taxes attributable to continuing operations is as
follows:
Current:
South Africa
(1)
44 43
110
Argentina
(1)
-
-
Australia
2 -
(1)
Brazil
15 17
6
Ghana
- -
-
Guinea
- -
-
Mali
- -
-
Namibia
- 2
5
Tanzania
2 -
-
USA
- -
-
Zimbabwe
- -
-
Other
1 -
1
Total current
63
62
121
(1)
Charges for current tax in 2004 includes an under provision in respect
of estimated tax payable amounting to $40 million.
Deferred:
South Africa
(1)
(201)
89
(65)
Argentina
(2)
10
(8)
(1)
Australia
5 3
9
Brazil
1 (1)
-
Ghana
(11)
-
-
Guinea
(1)
-
-
Mali
-
-
-
Namibia
- -
-
Tanzania
- -
-
USA
(3)
- -
-
Zimbabwe
- -
-
Other
2 2
-
Total deferred
(195)
85
(57)
Total income and mining tax (benefit)/expensed
(132)
147
64
(1)
Mining tax on mining income in South Africa is determined according
to a
formula which adjusts the tax rate in accordance with the ratio of
profit to
revenue from mining operations. This formula also allows an
initial portion of
mining income to be free of tax. Non-mining income
is taxed at a standard rate.
During 2004, the estimated deferred taxtaxation rate was revised to reflect the
the future anticipated taxation rate at the time temporary differences reverse and
reverses and deferred taxtaxation was provided at a rate of 38 percent
(2003: 46 percent and 2002: 46 percent) for temporary
differences
relating to mining operations. During 2005 and 2006, deferred
taxation was provided at a future anticipated taxation rate of 38 percent and
37 percent, respectively. In addition, charges for deferred taxation in 2005
included tax benefits of $13 million resulting from changes in enacted statutory
tax rates. There were no changes in the statutory tax rates for 2006.
The effect of thisthe change in estimateestimates on the results for 2006, 2005 and 2004 is
were as
follows:
Year ended December 31, 20042006
Impact
$
Per basic
common share
(a)
(cents)
Per diluted
common share
(a) (b)
(cents)
Income before extraordinary items
65
24
24
Extraordinary items
-
-
-
Net income
65
24
24
(a)
Per basic and diluted ordinary and E ordinary shares.
(b)
The calculation of diluted earnings per common share for 2006 did not assume
the effect of 15,384,615 shares issuable upon the exercise of Convertible Bonds
and 854,643 shares issuable upon the exercise of stock incentive options as their
effects are anti-dilutive for this period.
Year ended December 31, 2005
Impact
$
Per basic
common share
(cents)
Per diluted
common
share
(a)
(cents)
Income before extraordinary items
20
8
8
Extraordinary items
-
-
-
Net income
20
8
8
(a)
The calculation of diluted earnings per common share for 2005 did not assume
the effect of 15,384,615 shares issuable upon the exercise of Convertible Bonds
and 601,315 shares issuable upon the exercise of stock incentive options as their
effects are anti-dilutive for this period.
Year ended December 31, 2004
Impact
$
Per basic
common share
(cents)
Per diluted
common share
(a)
(cents)
Income before extraordinary items
158
63
63
Extraordinary items
-
-
-
Net income
158
63
63
(a)
The calculation of diluted earnings per common share for 2004 did not assume
assume the effect of 15,384,615 shares issuable upon the exercise of
Convertible Bonds
as their effects are anti-dilutive for this period.
F-26
2006
$
2005
$
2004
$
(2)
Charges for deferred taxation in 2006 included tax benefits of $21 million
resulting from an extension of tax losses granted by the Ghanaian Taxation
Authorities which would have been forfeited during the current year. During 2005
tax benefits of $94 million resulted from changes in enacted statutory tax rates
and is net of valuation allowances of $4 million (2004: $nil million).
(3)
Net of valuation allowances of $12 million (2005: $2 million, 2004: negative $6 million).
The unutilized tax losses of the North American operations which are available
for offset against future profits earned in the United States of America, amount
to $277 million (2005: $198 million, 2004: $192 million).
F-38
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
7.
DEFERRED INCOME AND MINING TAX TAXATION(continued)
2004
$
2003
(As restated)
$
2002
(As restated)
$
(2)
Figures as stated for 2003, includes a change in estimate
resulting in a reversal of a valuation allowance of $16 million.
This related to mining operations in Argentina where deferred
tax assets were considered to be recoverable due to an
improved gold price achieved and the stabilization of the local
economy during 2003. Figures stated for 2002 are net of
valuation allowances of $12 million.
(3)
Net of valuation allowances of negative $6 million (2003:
$8 million, 2002: $2 million).
The unutilized tax losses of the North American operations
which are available for offset against future profits earned in
the United States of America, amount to $192 million (2003:
$209 million, 2002: $182 million).
The unutilized tax losses of the South American operations
which are available for offset against future profits earned in
these countries, amount to $nil million (2003: $67 million,
2002: $86 million).
The unutilized tax losses of the Ghanaian and Guinean
operations,operation, acquired as part of the
AngloGold Ashanti
Business Combination, which are available for offset against
future profits earned in these countries,this country, amount to $nil million (2005: $146 million,
2004: $132 million
in 2004.million).
2004
$
2006
$
Analysis of tax losses
Assessed losses utilized during the year
1664
Unutilized tax losses remaining to be used against future
profits can be split
into the following periods:
Utilization required within one year
-
Utilization required within one and two years
132-
Utilization required within two and five years
-
Utilization in excess of five years
192277
324
277
2004
Amount%
20032006
(As restated)Amount
Amount%
%2005
2002Amount
(As restated)%
2004
Amount
%
Reconciliation between corporate income tax and statutory
statutory income tax is as follows:
Corporate income tax at statutory rates
(5)(36)
4237
174(134)
4237
183(10)
4238
Formula variation in mining taxation rate for
current period
(32)(2)
2462
(5)(4)
(1)1
(103)
(24)(28) 112
Disallowable expenditure
(1)
40 (308)127 (132)
24
6
55
13
Non-taxable income
-
-
(32)30
(8)
(23)
(5)40 (160)
Effect of income tax rates of other countries 14
(108)(38)
(22)40
(5)115
(32)
(71)18
(16)(72)
Impact of change in estimated deferred taxtaxation rate
65 (68)
(127)
35
(158) 1,215
-
-
-
-632
Other, net
96
(72)(6)
8(1)
2-
236
5(22)
Total income and mining tax expense/(benefit)/expense
122 (127)
(121)
33
(132) 1,015528
147
36(1)
64
15
(1)
Disallowable expenditure includes the impact of different tax rates applied to assets that are impaired.
2006
$
2005
$
Deferred taxation liabilities and assets on the balance sheet as of December 31, 2006
and 2005, relate to the following:
Deferred taxation liabilities:
Depreciation, depletion and amortization
1,638
1,579
Product inventory not taxed
3
18
Derivatives
19
30
Other comprehensive income deferred taxation
72
-
Other
23
38
Total
1,755
1,665
Deferred taxation assets:
Provisions, including rehabilitation accruals
(171)
(140)
Derivatives
(175)
(72)
Other comprehensive income deferred taxation
(155)
(101)
Other
(23)
(17)
Tax loss carry forwards
(257)
(244)
Total
(781)
(574)
Less: Valuation allowances
97
112
Total
(684)
(462)
Disclosed as follows:
Long-term portion deferred taxation assets
39
41
Short-term portion classified as other current assets
167
-
Long-term portion deferred taxation liabilities
1,275
1,152
Short-term portion classified as other current liabilities. Refer to Note 17.
2
92
F-27
F-39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
7.
DEFERRED INCOME AND MINING TAXTAXATION(continued)
2004
$
2003
(As restated)
$
Deferred income and mining tax liabilities and assets on the balance sheet as of
December 31, 2004 and 2003, relate to the following:
Deferred tax liabilities:
Depreciation, depletion and amortization
1,782
931
Product inventory not taxed
17
15
Derivatives
73
23
Other comprehensive income deferred tax
6
-
Other
28
18
Total
1,906
987
Deferred tax assets:
Provisions, including rehabilitation accruals
(91)
(99)
Derivatives
(47)
(6)
Other comprehensive income deferred tax
(16)
(52)
Other
(9)
(6)
Tax loss carry forwards
(297)
(86)
Total
(460)
(249)
Less: Valuation allowances
113
86
Total
(347)
(163)
Net deferred income and mining tax liabilities
1,559
824
Short-term portion classified as other current liabilities
34
35
1,525
789
The classification of deferred income and mining taxtaxation assets is based on the related
asset or liability
creating the deferred tax.taxation. Deferred taxes not related to a specific
asset or liability
are classified based on the estimated period of reversal. As at
December 31, 2004, 2006,
the companyCompany had unredeemed capital expenditure, in South
Africa of $85$8 million, on
which deferred tax has been provided at the future
anticipated tax rate of 3837 percent,
which is available for deduction against future
taxable mining income. This future
deduction is utilizable against taxable mining
income generated only from the company’s
Company’s current mining operations and does not
expire unless the company ceasedCompany
ceases to operate for a period of longer than one year.
No provision has been made for South African income tax or foreign tax that may
result from future remittances of undistri buted earnings of foreign subsidiaries or
foreign corporate joint ventures because it is expected that such earnings will not be
distributed as a dividend in the foreseeable future. The distribution of these
undistributed earnings of $955 million (2005: $763 million, 2004: $840 million) by
these entities would result in income and foreign withholding taxes of approximately
$353 million (2005: $282 million, 2004: $319 million).
Analysis of Valuation Allowances
The movement in valuation allowances for the three years in the period ended December 31, is summarized as follows:
Balance at
beginning of
period
$
Charged to
costs and
expenses
$
Deductions
$
Balance at
end of period
$
Year ended December 31, 2006
- Valuation allowance
112
22
(37)
97
Year ended December 31, 2005
- Valuation allowance
113
19
(20)
112
Year ended December 31, 2004
- Valuation allowance
86
45
(18)
113
8.
DISCONTINUED OPERATIONS
The Ergo reclamation surface operation, which forms part of the South African
operations and is included under South Africa for segmental reporting, has been
discontinued as the operation has reached the end of its useful life and the assets are
no longer in use. After a detailed investigation of several options and scenarios, and
based on management’s decision reached on February 1, 2005, mining operations at
Ergo ceased on March 31, 2005 with only site restoration obligations remaining. The
Company has reclassified the income statement results from the historical
presentation to profit/(loss) from discontinued operations in the condensed
consolidated income statement for all periods presented. The condensed
consolidated cash flow statement has been reclassified for discontinued operations
for all periods presented. The results of Ergo for the years ended December 31, 2006,
2005 and 2004, are summarized as follows:
Year ended December 31,
2006
2005
2004
$
Per share
(1)(2)
(cents)
$
Per share
(2)
(cents)
$
Per share
(2)
(cents)
Revenue
4
1
18
7
87
35
Costs, expenses and recoveries
2
1
(62)
(24)
(98)
(39)
Pre-tax profit/(loss)
6
2
(44)
(17)
(11)
(4)
Taxation
-
-
-
-
-
-
Net profit/(loss) attributable to discontinued operations
6
2
(44)
(17)
(11)
(4)
(1)
Per basic and diluted ordinary and E ordinary shares.
(2)
Basic and diluted earnings/(loss) per common share. The calculation of diluted earnings/(loss) per common share for 2006, 2005 and 2004 did not
assume the effect of 15,384,615 shares, issuable upon the exercise of Convertible Bonds as their effects are anti-dilutive for these periods. The
calculation of diluted earnings/(loss) per common share for 2005 and 2006 did not assume the effect of 601,315 and 854,643 shares, respectively,
issuable upon the exercise of stock incentive options as their effects are anti-dilutive for these periods.
F-28
F-40
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
2004
$
2003
$
20022006
$
8.2005
$
2004
$
9.
(LOSS)/EARNINGS PER COMMON SHARE
The following table sets forth the computation of basic and
diluted (loss)/earnings
per common share (in millions, except per
share data):
Numerator
Income(Loss)/income before cumulative effect of accounting change
97(142)
250(270)
35697
Cumulative effect of accounting change
-
(3)
(22)
-
Net (loss)/income – applicable to common stockholders
(142)
(292)
97
247
Less Dividends:
356
Ordinary shares
107
149
179
E Ordinary shares
-
-
-
Undistributed losses
(249)
(441)
(82)
Ordinary shares undistributed losses
(249)
(441)
(82)
E Ordinary shares undistributed losses
(1)
-
-
-
Total undistributed losses
(249)
(441)
(82)
Denominator for basic (loss)/earnings per commonordinary share
Ordinary shares
272,214,937
264,230,586
251,170,130
Time related options
(2)
398,326
405,048
182,422
Weighted average number of commonordinary shares
272,613,263
264,635,634
251,352,552
222,836,574
221,883,567
Basic
Effect of dilutive potential ordinary shares
Dilutive potential of stock incentive options
(3)
-
-
695,749
Dilutive potential of convertible bonds
(4)
-
-
-
Dilutive potential of E Ordinary shares
24,220
-
-
Denominator for diluted (loss)/earnings per commonshare – adjusted weighted average
number of ordinary shares and assumed conversions
272,637,483
264,635,634
252,048,301
Weighted average number of E Ordinary shares used in calculation of basic
and diluted earning per E Ordinary share
194,954
-
-
(Loss)/earnings per share (cents)
Before cumulative effect of accounting changechanges
Ordinary shares
(52)
(102)
39
112
E Ordinary shares
(91)
-
-
160Ordinary shares – diluted
(52)
(102)
38
E Ordinary shares – diluted
(91)
-
-
Cumulative effect of accounting change
-
(1)
-
39 111changes
160
Dilutive potential common shares
Weighted average number of common shares
251,352,552
222,836,574
221,883,567
Dilutive potential of stock incentive options
695,749
881,001
1,016,359
Dilutive potential of Convertible BondsOrdinary shares
-
(1)(8)
-
E Ordinary shares
-
-
-
Denominator forOrdinary shares – diluted earnings per common share
Adjusted weighted average number of common
shares and assumed conversions
252,048,301-
223,717,575(8)
-
222,899,926E Ordinary shares – diluted
-
-
-
Diluted
Net (loss)/income
Ordinary shares
(52)
(110)
39
E Ordinary shares
(91)
-
-
Ordinary shares – diluted
(52)
(110)
38
E Ordinary shares – diluted
(91)
-
-
(1)
Rounded to zero.
(2)
Compensation awards are included in the calculation of basic (loss)/earnings per common share (cents)from when the necessary conditions have been
met, and it is virtually certain that shares will be issued as a result of employees exercising their options.
Before cumulative effect of accounting change
38
112
160
Cumulative effect of accounting change
-
(1)
-
38 111
160
(1)(3)
The calculation of diluted (loss)/earnings per common share for 2005 and 2006 did not assume the effect of 601,315 and 854,643 shares,
respectively, issuable upon the exercise of stock incentive options as their effects are anti-dilutive for these periods.
(4)
The calculation of diluted (loss)/earnings per common share for 2006, 2005 and 2004 did not assume the effect of 15,384,615 shares
issuable upon
the exercise of Convertible Bonds as their
effects are anti-dilutive for this period.these periods.
2003F-41
(As restated)
$
9.
INVENTORIES
Gold in process
179
143
Gold on hand
15
12
Ore stockpiles
52
9
Uranium oxide and sulphuric acid
23
49
Supplies
126
47
395 260
Less: Heap leach inventory
(1)
(127)
(106)
268 154
(1)
Long-term and short-term portions relating to heap leach
inventory classified separate, as materials on the leach
pad.
F-29
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
2004
$
2003
(As restated)
$2006
10.$
2005
$
10. RESTRICTED CASH
Cash classified as restricted for use comprise of the following:
Cash restricted by the prudential solvency requirements
2
3
Cash balances held by the Environmental Rehabilitation Trust
Fund
5
-
Cash balances held by the Boddington expansion
3
-
The Company was restricted from utilizing available funds in Geita
Management Company Limited, up to a maximum of $25 million in
respect of outstanding hedges
(1)
-
4
Other
1
1
11
8
(1)
Restrictions lifted by counterparts during 2006.
11. INVENTORIES
Short-term:
Gold in process
111
93
Gold on hand
37
10
Ore stockpiles
84
47
Uranium oxide and sulphuric acid
6
14
Supplies
162
133
400
297
Less: Heap leach inventory
(1)
(46)
(37)
354
260
(1)
Short-term portion relating to heap leach inventory classified separate,
as materials on the leach pad.
Long-term:
Gold in process
149
116
Ore stockpiles
66
30
Supplies
2
2
217
148
Less: Heap leach inventory
(1)
(149)
(116)
68
32
(1)
Long-term portion relating to heap leach inventory classified separate,
as materials on the leach pad.
The Company recorded aggregate write-downs of $2 million, $nil million and
$nil million for the years ended December 31, 2006, 2005 and 2004, respectively, to
reduce the carrying value of inventories to net realizable value. Inventory write-
downs for 2006 are included in production costs.
12.
PROPERTY, PLANT AND EQUIPMENT, NET
Mine development
(1)
4,7864,633
1,9664,322
Mine infrastructure
1,5622,293
1,1642,050
Mineral rights and other
2251,058
1,095
176
Land
1626
1527
6,589
3,321
8,010
7,494
Accumulated depreciation, depletion amortization and impairmentamortization
(1,647)(3,033)
(1,058)(2,572)
Net book value December 31,
4,9424,977
4,922
2,263
(1)
Includes interest capitalized of $11$10 million (2003: $nil(2005: $16 million). Refer to Note 5.
Mining assets with a net book value of $204$6 million (2003: $154(2005: $8 million) are encumbered
encumbered by project finance. Refer to Note 16.20.
F-42
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
12. PROPERTY, PLANT AND EQUIPMENT, NET (continued)
DEFERRED STRIPPING
Stripping
Prior to January 1, 2006, stripping costs incurred in open-pit operations during the
production phase to remove additional waste
ore are deferred and were charged to operating costs on
the basis of the average life of
mine stripping ratio. Refer toratio and the average life of mine
costs per tonne and resulted in capitalization of such stripping costs (deferred
stripping) as part of mining assets.
As described in Note 4.6.2 the Company adopted EITF Issue 04-6, “Accounting for
Stripping Costs in the Mining Industry” on January 1, 2006.
As at December 31,
(in millions)
2006
$
2005
$
Movements in the deferred stripping costs balance were as follows:
Opening balance
105
3769
Cumulative effect adjustment
(105)
-
Net amountAmount deferred
-
28
32
Translation
4-
58
Closing balance
-
69
37
105
Production costs for the years endingended December 31, 2005 and 2004 2003 and 2002 as
disclosed in
the consolidated statements of income, would have increased by $28 million and
$28 million, $32 million and $5 million, respectively, if stripping costs were
expensed rather than capitalized in
these periods.
ThePrior to January 1, 2006, the full amount of stripping costs incurred during the
production phase willwere not be
expensed until the end of the life of the respective mines.
Under the current assumptions used, the following is an indication when the
cumulative deferred stripping balance is expected to be fully amortized:
Open-pit operations
Year
Argentina
- Cerro Vanguardia
2013
Australia
- Sunrise Dam
2009
Brazil
- AngloGold Ashanti Mineração (formerly Morro Velho)
2007
Ghana
- Bibiani
2007
- Iduapriem
2015
Guinea
- Siguiri
2009
Namibia
- Navachab
2016
Tanzania
- Geita
2018
USA
- Cripple Creek & Victor
2013
Total stripping costs net(net of amortizationamortization) included in production costs in the
consolidated statements of income for the periods ended December 31, 2005 and
2004 2003
and 2002 amounted to $102 million, $51$203 million and $55$98 million, respectively.
F-30
Total stripping costs included in production costs in the consolidated statements of
income for the year ended December 31, 2006 amounts to $227 million.
2006
$
2005
$
13.
ACQUIRED PROPERTIES, NET
Acquired properties, at cost
1,983
2,023
Accumulated amortization
(694)
(611)
Net book value December 31,
1,289
1,412
14. GOODWILL AND OTHER INTANGIBLES
Goodwill
The carrying amount of goodwill by reporting unit as of December 31, 2006 and 2005 and changes in the carrying
amount of goodwill are summarized as follows:
Australia
Ghana
Guinea
Namibia
Tanzania
Total
$
$
$
$
$
$
Balance at January 1, 2005
229
122
10
1
181
543
Impairment losses
(1)
-
(4)
-
-
-
(4)
Translation
(15)
-
-
-
-
(15)
Balance at December 31, 2005
214
118
10
1
181
524
Impairment losses
-
-
-
-
-
-
Translation
18
-
-
-
-
18
Balance at December 31, 2006
232
118
10
1
181
542
(1)
During 2005, the Company recorded impairment losses of $4 million relating to goodwill held
in Bibiani. Refer to Note 5 – Impairment of assets.
F-43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
14. GOODWILL AND OTHER INTANGIBLES (continued)
20042006
$
2003
(As restated)2005
$
11.
ACQUIRED PROPERTIES, NET
Acquired properties, at cost
3,204
1,969
Accumulated amortization and impairment
(1,550)
(1,232)
Net book value December 31
1,654
737
12
GOODWILL AND OTHER INTANGIBLES
Goodwill
Goodwill arising on consolidation
At acquisition
554
227
Aggregate amount of impairment losses
(1)
(2)
-
Translation
(9)
(1)
543
226
(1)
During 2004, the company recorded an impairment loss of $2 million relating to
goodwill held in its subsidiary, Gold Avenue. Refer to Note 5 – Impairment of
assets.
Other intangibles, net
Royalty rate and tax rate concession agreements
(1)
Grosscarryingvalue
Gross carrying value
49
-49
Accumulatedamortization
Accumulated amortization
(5)
(3)
Impairment losses
(20)
(20)
24
26
(1)
-
48
-
The government of Ghana has agreed, as part of the AngloGold Ashanti Business
Combination, to a concession on royalty payments at a fixed rate of 3 percent
per
year for a period of fifteen years. The fair value of the royalty rate
concession is
amortized on a straight line basis over a period of fifteen years
with nil residual
value.
In addition, the government of Ghana has also agreed as part of the AngloGold
Ashanti Business Combination, to a concession onwherein income tax atwill not
exceed a fixed rate of
30 percent for a period of fifteen years. The fair value ofDuring 2005, enacted
statutory tax rates in Ghana were reduced to 25 percent. This indicated an
impairment and the Company fully impaired the tax rate concession isand
amortized as the benefitrecorded an impairment loss of the tax rate is utilized over a period$20 million (2004: $nil million). Refer to
Note 5 – Impairment of fifteen years with
nil residual value.assets.
Amortization expense included in the consolidated statements of income
amounted to $1$2 million for 2004 (2003: $nil2006 (2005: $2 million, 2002: $nil2004: $1 million).
Based on carrying value at December 31, 2004,2006, the estimated aggregate
amortization expense for each of the next five years is as follows:
2005
2
2006
2
2007
2
2008
2
2009
2
10
13.
2010
2
2011
2
2006
$
2005
$
15.
OTHER LONG-TERM ASSETS
Investmentsinaffiliates
6
Investments in affiliates – unlisted
5
5
Investments in affiliates – listed
31
29
Investments in equity accounted joint ventures
344314
503324
Carrying value of equity method investments (see below)
350
508358
Investment in marketable equity securities – available for sale
2931
315
Investment in marketable debt securities – held to maturity
18
19
Investment in non-marketable equity securitiesassets – held to maturity
113
93
Investment in non-marketable debt securities – held to maturity
61
65
Other non-current assets
12680
17636
516
696
543
496
F-31
F-44
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
13.15.OTHER LONG TERM ASSETS (continued)LONG-TERM ASSETS (continued)
Investments in affiliates
Unlisted
The companyCompany holds a 26.625.0 percent (2003: 26.6(2005: 25.0 percent) interest in Oro Group
(Proprietary) Limited which is involved in the manufacture and wholesale of
jewellery. The year end of Oro Group (Proprietary) Limited is March. Results are
are included for the twelve months ended September 30, 2004.2006. On September 21, 2006, Oro
Group (Proprietary) Limited repaid a shareholders loan of $1 million originally granted in 2000.
Loans granted to Oro Group (Proprietary) Limited are repayable at the discretion of its board of directors.
Listed
The Company holds a 29.9 percent (2005: 29.9 percent) interest in Trans- Siberian Gold plc which is involved in the exploration and development of gold mines. The Company’s initial 17.5 percent equity interest acquired in Trans-Siberian Gold plc during July 2004 was increased to 29.9 percent onMay 31, 2005, the date on which the second subscription was completed. Referto Note 3 – Acquisitions and disposals of businesses and assets. The year end ofTrans-Siberian Gold plc is December. Results are included for the twelve monthsended September 30, 2006. On June 27, 2006, the Company advanced loans of$10 million to Trans-Siberian Gold plc at LIBOR plus 4 percent which may beconverted into equity. The market value of the Company’s share of the listedaffiliate as at December 31, 2006 is $9 million. During the year endedDecember 31, 2006 the Company recorded an impairment loss of $7 million on itsinvestment. The investment (including loans) is carried at carrying value of$31 million.
Investments in equity accounted joint ventures
The companyCompany holds the following interest in incorporated mining joint ventures, of
of which the significant financial operating policies are, by contractual arrangement,
arrangement, jointly controlled:
December 31,
20042006
percentage held
held
December 31,
20032005
percentage held
held
Sadiola
38.00 38.00
Geita
-Nufcor International Limited
(1)
50.00
50.00
Sadiola
(2)
38.00
38.00
Morila
(2)
40.00
40.00
Yatela
(2)
40.00
40.00
(1)
No longer accounted for as a joint venture, as the company acquired an
additional 50 percent in Geita as part of the AngloGold Ashanti Business
Combination, effective April 26, 2004. Equity income from GeitaYear end is June. Results are included
for the periodtwelve months ended April 26, 2004.
December 31.
(2)
The year ends of these entities are December. Results are included for the
twelve months ended December 31.
2004
$
2003
(As restated)
2006
$
2005
$
The difference between the carrying value of the investments in affiliates and
joint ventures and the underlying equity in net assets is as follows:
Carrying value of investments
350
508358
Cost of investments
373380
578380
Undistributed (loss)/earningsloss since acquisition
(16)(1)
31(20)
Other than temporary decline in the value of investments
(3)(1)
(10)
(3)
Other comprehensive income
(4)(31)
(2)
(98)Loans advanced
Investment in marketable equity securities(2)
2912
3
(1)
3
(1)
Includes an initial investment of $16 million representing 17.5 percent
interest acquired in Trans-Siberian Gold plc during July 2004. Refer to
Note 3 – Acquisitions and disposals of businesses and assets.
Investment in non-marketable equity securities
Investments in unlisted common stock comprise investments in various
companies in South Africa for which a fair value is not readily determinable. The
directors of the company perform independent valuations of the investments on
an annual basis to ensure that no decline other than a temporary diminution in
the value of the investment has occurred. ForDuring the year ended December 31, 2006, the Company recorded an impairment
2004 a declineloss of $nil$7 million was recorded (2003: $6on its listed investment held in Trans-Siberian Gold plc.
(2)
Movement in loans advanced from 2005 represents the repayment of the Oro Group
(Proprietary) Limited shareholders loan of $1 million 2002: $nil million)on September 21, 2006 and
and chargedloans advanced of $10 million to income. Refer to Note 5 –Impairment of assets.Trans-Siberian Gold plc on June 27, 2006.
11
9
F-32
F-45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
13.15.
OTHER LONG-TERM ASSETS(continued)
20042006
$
2003
(As restated)2005
$
Other non-current assets
Unsecured
Loans to joint ventures
30
53
Deferred purchase consideration in respect of sale of Jerritt Canyon
(2)
-
3
Other
19
58
49
114
AvailableInvestment in marketable equity securities – available for sale
AngloGold Environmental Rehabilitation Trust Fund
(3)
71
50
Environmental Protection Bond
(3)
6
-
77
50
Secured
Deferred purchase consideration in respect of sale of the Amapari project
(2)
-
8
Other
-
4
-
12
126
17631
(1)
These loans have no fixed terms
15
(1)
Increase in investment in marketable equity securities during 2006 mainly
reflects the investment of repayment, are denominated$14 million (19.99 percent) interest acquired in $ and
accrue interest at LIBOR plus 2 percent per annum.
(2)
See
International Tower Hill Mines Limited during September 2006. Refer to Note 3 –
Acquisitions and disposals of businesses and assets.
(3)
Represents the fair value of fixed-term deposits required by legislation. Total
gains on marketable equity securities included in other comprehensive income
amounts to $5 million (2005: $1 million). Total losses on marketable equity securities
included in other comprehensive income amounts to $2$1 million (2003:
$nil(2005: $nil million).
Investment in marketable debt securities – held to maturity
Investments in marketable securities represent held to maturity government and
corporate bonds. The investment is measured at amortized cost.
18
19
Investment in non-marketable assets – held to maturity
Investments in non-marketable assets represent secured loans and receivables
secured by pledge of assets.
3
3
Investment in non-marketable debt securities – held to maturity
Investments in non-marketable securities represent the held to maturity fixed-term
deposits (corporate bonds and notes) required by legislation for the Environmental
Rehabilitation Trust Fund and Environmental Protection Bond.
61
65
As of December 31, 2006 the contractual maturities of debt securities were as
follows:
Marketable debt securities
Less than one year
1
Two to seven years
7
Seven to twelve years
1
More than twelve years
9
18
Non-marketable debt securities
Less than one year
52
More than twelve years
9
61
Fair values of the held to maturity debt securities at December 31, 2006 and 2005
approximate cost.
Other non-current assets
Unsecured
Other loans and assets
(1)
44
16
44
16
Non-current debtors
Prepayments and accrued income
5
4
Recoverable tax, rebates, levies and duties
25
16
Other trade debtor
(2)
3
-
Other debtors
3
-
36
20
80
36
(1)
Other comprises loans and receivables of $4 million (2005: $6 million) measured at
amortized cost and post retirement assets of $40 million (2005: $10 million) measured
according to the employee benefits accounting policy.
(2)
Bears interest and is repayable over four years.
F-46
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
15.
OTHER LONG-TERM ASSETS(continued)
2006
$
2005
$
Equity accounted joint ventures
Summarized financial statements of the joint ventures which have been equity
accounted are as follows (Geita – only income and expenses for the period ended
April 26, 2004 included, as effective from this date, the Company acquired an
included)additional 50 percent in Geita as part of the AngloGold Ashanti Business
Combination which resulted in Geita being accounted for as a subsidiary of
AngloGold Ashanti) (100 percent shown):
2006
$
2005
$
2004
$
2003
$
2002
$
Statements of income for the period
Sales and other income
817
600
546
740
731
Costs and expenses
493(465)
575(496)
(493)
549
Taxation
(90)
(6)
(1)
3
5
Income from continuing operations
52
168
187
Cumulative effect of accounting change
-
-
-
Net income
52262
16898
52
187
Balance sheets at December 31,
Non-current assets
826720
1,523754
Current assets
308438
315366
1,134 1,838
1,158
1,120
Long-term liabilities
(113)(89)
(269)(97)
Loans from shareholders
(65)(19)
(129)(27)
Current liabilities
(74)(268)
(244)(176)
Net assets
882782
1,196820
14.
2006
$
2005
$
16.
ASSETS AND LIABILITIES HELD FOR SALE
Effective June 30, 2005, the investment in the Weltevreden mining rights, located in
South Africa, of $15 million, was classified as held for sale. This investment was
previously recognised as a tangible asset. Weltevreden's rights were sold to Aflease Gold
and Uranium Resources Limited on June 15, 2005. On December 19, 2005, Aflease was
acquired by sxr Uranium One (formerly Southern Cross Inc.). In terms of these sale
agreements, the purchase price will be paid in the form of sxr Uranium One shares to be
issued to the Company. This will take place when the conditions precedent to the
agreement have been met. The Weltevreden mining rights form part of an old order
mining rights conversion application, and the conditions precedent are that upon the
government granting the conversion of these to new order mining rights, the Company
will cede the Weltevreden mining rights to sxr Uranium One.
The Director-General of Minerals and Energy notified the Company that the new order
mining rights were granted to the Company. However, the signing of the notarial
agreement and the registration of the converted mining right still has to be completed.
Once these have been completed, the new order mining rights will then be ceded to sxr
Uranium One, and the related sxr Uranium One shares will then be issued to the
Company as full settlement of the purchase price. The fair value of the sxr Uranium One
shares as at December 31, 2006 amounts to $51 million.
9
10
Arising from the sale of the Bibiani assets in Ghana, effective December 28, 2006, to
Central African Gold plc (CAG), the group decided to apply $3 million of the partial
proceeds to an investment of 15,825,902 CAG shares. Subsequent to this decision, local
regulators have required that the 15,825,902 shares in CAG must be sold within 90 days
of December 28, 2006. On February 14, 2007, the Company disposed of 7,000,000 CAG
shares yielding total proceeds of £768,845 ($1.5 million) and during April 2007, disposed
of the remaining 8,825,902 CAG shares yielding total proceeds of £894,833 ($1.8 million).
The investment as at December 31, 2006 is carried at fair value less costs to sell.
3
-
F-47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
16.
ASSETS AND LIABILITIES HELD FOR SALE(continued)
2006
$
2005
$
As at December 31, 2006 and 2005 the carrying amount of major assets and liabilities
relating to Weltevreden and CAG to be disposed of, included:
Property, plant and equipment
15
16
Other long-term assets (marketable equity investment)
3
-
Deferred taxation
(6)
(6)
Net assets
12
10
17.
OTHER CURRENT LIABILITIES
Deferred income and mining tax.
17
6
Deferred taxation. Refer to Note 7.
342
3592
Related parties. Refer to Note 6.
4-
3
Accrual for interest
25
-5
Accrual for power
1214
1314
Unearned premiums
5941
5951
Other (including accrued liabilities)
9852
9931
232
209
F-33126
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)199
2004
$
2003
(As restated)
$
15.18.
SHORT-TERM DEBT
Current maturities of long-term debt. Refer to Note 16.20.
31533
331160
16.
19.
OTHER NON-CURRENT LIABILITIES
Deferred income
24
14
20.
LONG-TERM DEBT
Unsecured
Convertible bond
(1)
Fixed semi-annual coupon of 2.375% per annum. The bond is convertible, at the holders’
option, into
ADSs up to February 2009 and is US dollar-based. The bond is convertible
at a price of $65.00 per ADS.
1,008
-1,008
Corporate Bondbond
(2)
Fixed semi-annual coupon of 10.50% per annum. The bond is repayable on
August 28, 2008 and is ZAR-based.
367296
311327
Syndicated loan facility ($600700 million)
(3)
Interest charged at LIBOR plus 0.7%0.4% per annum. Loan is repayable in FebruaryJanuary 2008 and
2005 and is US dollar-based. The loan is subject to certain debt covenant arrangements for which
no default event occurred.
265181
469460
RMB International (Dublin) Limited
Interest charged at LIBOR plus 0.82% per annum. Loan is of a short-term nature,
and has no fixed repayment date and is US dollar-based.
16
40
Iduapriem – Syndicated Project Finance
Interest charged at LIBOR plus 2% per annum. Loan is repayable semi-annually
and is US dollar-based.
10
-
Bank Belgolaise
Interest charged at LIBOR plus 1.5% per annum. Loan is repayable in 24 equal monthly
monthly installments commencing October 2005 and is US dollar-based.
52
-4
Precious Fields Estates Company Ltd
Annuity based repayments expiringexpired in October 2006. Loan is US dollar-based.
-
1
Local money-market short-term borrowings
(4)
Short-term borrowings at market related rates and are ZAR-based.
-
129
Syndicated loan facility ($400 million)Bank overdraft
Bank overdraft at market related rates and is Ghanaian Cedi-based.
8
-
233
Banco Europeu para a América Latina-Brussels
-
10
Australia and New Zealand Banking Group Limited
(4)(5)
-
7-
Total unsecured borrowings
1,6721,495
1,0701,929
Secured
Capital leases
Senstar Capital Corporation
(6)
Interest charged at ana weighted average rate of 6.91%6.77% per annum. Loans are repayable in
monthly installments terminating in November 2009 and are US dollar-based. The
equipment financed is used as security for these loans. Refer to Note 12.
8
10
Terex Africa (Proprietary) Limited
13(7)
15
Geita Syndicated Project finance
Interest charged at LIBOR plus 1.95%a rate of 9.0% per annum. Loan is repayable by June
2005in January 2008 and is
US dollar-based. The loanequipment financed is secured by a fixed and floating chargeused as security for this loan. Refer to
over the project assets (Refer to Note 10) and a pledge over the shares in the
project company.12.
12
-
Cerro Vanguardia Syndicated Project finance
-
24
Total long-term debt
1,6861,505
1,1091,939
Current maturities included in short-term debt. Refer to Note 15.
31533
331160
1,371
778
1,472
1,779
F-34
F-48
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
16.20.
LONG-TERM DEBT(continued)
20042006
$
2003
(As restated)2005
$
Scheduled minimum long-term debt repayments are:
2005
315
2006
6
2007
33
9
2008
471
355
2009
1,0001,001
2010
1-
1,686
2011
-
1,505
The currencies in which the borrowings are denominated are as follows:
United States dollars
1,3191,201
7911,483
South African rands
367296
311456
Australian dollarsGhanaian Cedi
8
-
7
1,686
1,1091,505
1,939
Undrawn borrowing facilities as at December 31, 20042006 are as follows:
Syndicated loan ($600700 million) – US dollar
335520
135245
FirstRand Bank Limited – US dollar
50
-
ABSA Bank Limited – US dollar
42
42
Nedbank Limited – US dollar
2
-
Citibank, N.A. – US dollar
-
8
Standard Bank of South Africa Limited – rands
37
-
FirstRand Bank Limited – rands
31
17
Nedbank Limited – rands
7
7
ABSA Bank Limited – rands
4
5
Commerzbank AG – rands
3
3
ABN Amro Bank N.V. – rands
1
-
Australia and New Zealand Banking Group Limited – Australian dollar
3979
3037
Syndicated loan ($400 million)ABN Amro Bank N.V. – US dollareuros
7
-
168
374
333783
364
(1)
Convertible Bond
Senior unsecured fixed rate bond
1,000
-1,000
Add: Accrued interest
8
-8
1,008
-1,008
On February 27, 2004, AngloGold Ashanti Holdings plc, a wholly-owned subsidiary
of
the company,Company, issued $1,000,000,000 2.375 percent guaranteed convertible
bonds due 2009, convertible into ADSs and guaranteed by AngloGold
Ashanti.
Subject to certain restrictions, holders of convertible bonds are entitled to convert
convert each convertible bond into an AngloGold Ashanti ADSsADS at the then applicable
applicable conversion price at any time from April 8, 2004 to February 20,
2009, or, if the
convertible bonds are called for redemption earlier than
February 27, 2009, the
seventh business day prior to the date of early
redemption.
If the bonds have not been converted by February 20, 2009, they will be redeemed
redeemed at par on February 27, 2009. AngloGold Ashanti Holdings plc has the
option of
calling an early redemption of all the bonds 3 years after their
issuance, if the price
of the ADSs exceeds 130 percent of the conversi on
conversion price for more than 20 days
during any period of 30 consecutive trading days.
The initial conversion price for the convertible bonds was $65.00 per ADS. The
The conversion premium to the reference volume weighted average price of
the ADSs on
the New York stock exchange of $40.625 on February 19, 2004,
when the issue of
the convertible bonds was announced, was 60 percent. If
all bond holders exercise
their option to convert their bonds into ADSs and
assuming no adjustments are
made to the initial conversion price, up to
15,384,615 new ADSs will be issued. The
conversion ratio is subject to
adjustment in case of various corporate events
including share splits and
capital distributions.
The calculation of diluted (loss)/earnings per common share for 2006, 2005 and
2004 did not
assume the effect of 15,384,615 shares issuable upon the exercise of
Convertible Bonds as their effects are anti-dilutive for this period.these periods. Refer to
Note 8.9.
F-35
F-49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
16.20.
LONG-TERM DEBT(continued)
20042006
$
2003
(As restated)2005
$
The proceeds of the issue, after payment of expenses, were utilized by AngloGold
AngloGold Ashanti to refinance amounts outstanding under credit facilities, to
meet transaction
costs in connection with the acquisition of Ashanti and for
general corporate
purposes, including planned capital expenditure.
(2)
Corporate Bond
Senior unsecured fixed rate bond
354286
300315
Add: Accrued interest
1310
1112
367
311
296
327
On August 21, 2003, AngloGold issued unsecured bonds in the aggregate principal
principal amount of R2 billion ($300 million) at a fixed semi-annual coupon of 10.50% per
10.50 percent per annum. The bond is repayable on August 28, 2008,
subject to early redemption at the company’s
Company’s option and is listed on the Bond
Exchange of South Africa. The net
proceeds of the bond are for general
corporate purposes.
(3)
Syndicated loan facility ($600700 million)
On February 7, 2002,
In January 2005, the groupCompany entered into a new three year $600$700 million unsecured
unsecured syndicated borrowing facility, at a margin of 0.7%0.4% over LIBOR, thatLIBOR. A commitment fee of
0.15% per annum is payable on the undrawn portion of the facility. The three year
$700 million syndicated facility was used to repay a maturing facility of $600 million
(repaid on February 4, 2005) and is available for general corporate purposes. During
the year ended December 31, 2006, the Company repaid $415 million and drew down
$140 million under the $700 million syndicated facility. This amount was funded from
proceeds raised through the public share offering (completed in part to refinance near-term maturing debt.April 2006) and cash
flow from operations. The amount drawn
under this facility was $265$180 million as at
December 31, 2004. This facility was2006. The Company, AngloGold Offshore Investments Limited and
repaid on February 4, 2005AngloGold American Investments Limited have guaranteed all payments an d other
obligations of the wholly-owned subsidiaries AngloGold Ashanti Holdings plc and a new three-year
AngloGold Ashanti USA Inc. regarding the $700 million syndicated
facility was signed loan facility.
(4)
Local money-market short-term borrowings
During the year ended December 31, 2006, the Company repaid $129 million in January 2005 with an interest charge of LIBOR pluslocal
0.4% per annum.short-term money market loans. These amounts were funded from proceeds raised
through the public share offering (completed in April 2006) and cash flow from
operations.
(4)
(5)
Australia and New Zealand Banking Group Limited
On October 14, 2002, a new loan facility of A$50 million was arranged with the
the Australia and New Zealand Banking Group Limited, at 0.35% over the
Bank Bill Swop
Reference Rate. A commitment fee of 0.20% per annum is payable on the undrawn
portion of the facility. The facility, originally repayable by
September 2003, has been
increased to A$100 million during 2006, and extended to September 2005.2007. There was
$nil million drawn under this facility as at December 31, 2004.2006.
17.
Capital leases
(6)
Senstar Capital Corporation
Capital leases are for specific periods, with terms of renewal but no purchase options
or escalation clauses. Renewals are at the discretion of the entity that holds the lease.
As of December 31, 2006 and 2005, Property, plant and equipment, allocated to Mine
infrastructure, includes $16 million and $18 million of assets under capital leases and
$11 million and $10 million of related accumulated depreciation, respectively.
Amortization charges relating to capital leases are included in Depreciation, depletion
and amortization expense for all periods presented. The weighted average interest
rate on the leases existing at December 31, 2006 is 6.77%. Payments are made
monthly, including interest, through 2009.
F-50
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
20.
LONG-TERM DEBT(continued)
2006
$
2005
$
Future minimum lease payments under capital leases together with the present value of
minimum lease payments as of December 31, 2006 are:
2007
3
2008
3
2009
3
Total minimum lease payments
9
Less interest
1
Present value of net minimum lease payments
8
Less current portion
3
Long-term capital lease obligation
5
(7)
Terex Africa (Proprietary) Limited
The capital lease is for a specific period, with no terms of renewal and a purchase
option. As of December 31, 2006, Property, plant and equipment, allocated to Mine
infrastructure, includes $2 million of assets under the capital lease and $1 million of
related accumulated depreciation. Amortization charges relating to the capital lease
are included in Depreciation, depletion and amortization expense for the year ended
December 31, 2006. The interest rate on the lease existing at December 31, 2006 is
9%. The lease is to be repaid in January 2008.
Future minimum lease payments under the capital lease together with the present
value of minimum lease payments as of December 31, 2006 are:
2007
-
2008
2
Total minimum lease payments
2
Less interest
-
Present value of net minimum lease payments
2
Less current portion
-
Long-term capital lease obligation
2
21.
PROVISION FOR ENVIRONMENTAL REHABILITATION
Accrued environmental rehabilitation costs
209310
124325
Long-term environmental obligations comprising decommissioning and
restoration are
based on the group’s environmental management plans, in
compliance with the current
environmental and regulatory requirements.
Decommissioning costs
The provision for decommissioning represents the cost that will arise from rectifying
rectifying damage caused from establishing mining operations.
Decommissioning costs, representing obligations associated with the retirement
of long-livedlong-
lived assets that result from the acquisition, construction or normal
operations of long-livedlong-
lived assets, are accounted for in accordance with the
provisions of SFAS143. The effect of adoption of SFAS143 in respect of
decommissioning isDecommissioning costs are further described in Note 5 – Asset retirement obligations.
Restoration costs
The provision for restoration represents the closure cost for restoration of site damage.
damage. Rehabilitation of site damagedamages only commences at the closure stage of
the mine. Site damage
damages are not costs associated with the construction or normal
operations of long-lived
assets and do not create probable future economic
benefits.
F-36
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
17.
PROVISION FOR ENVIRONMENTAL REHABILITATION (continued)
At each reporting balance sheet date, gross restoration costs are estimated at
the present
value of the expenditures expected to settle the obligation, using
estimated cash flows
based on current prices. The estimates are discounted at a
pre-tax rate that reflects current market assessments of the time value of money. credit adjusted risk free rate.
F-51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
21.
PROVISION FOR ENVIRONMENTAL REHABILITATION(continued)
2006
$
2005
$
While the ultimate amount of rehabilitation cost to be incurred in the future is uncertain,
uncertain, the companyCompany has estimated that the total cost for mine rehabilitation
and closure, in current monetary terms,on an
undiscounted basis, will be $350$482 million which includes a
total estimated liability of $15
$17 million in respect of equity accounted joint
ventures. Refer to Note 13.15. Certain
amounts have been contributed to an
irrevocablea rehabilitation trust and environmental protection bond
under the company'sCompany's control. The monies in the
trust and bond are invested primarily in
interest bearing debt securities.securities and are included in Other long-term assets in the
Company’s consolidated balance sheet. Cash balances held in the trust and bond are
classified as restricted cash in the Company’s consolidated balance sheets for all periods
presented. AngloGold Ashanti
USA has posted reclamation bonds with various federal and
a nd governmental
agencies to cover environmental rehabilitation obligations. Refer to Note 20.24.
The companyCompany intends to finance the ultimate rehabilitation costs from the monies invested
invested with the rehabilitation trust fund, the environmental protection bond as well as the
proceeds on sale of
assets and gold from plant clean-up at the time of mine closure.
2004
$22.
2003
$
18.
OTHER ACCRUED LIABILITIES
Otheraccruedliabilities
1427
619
Other accrued liabilities include the following:
Supplemental Employee Retirement Plan (the "SERP") for USA operations Refer
to Note 24.
1
1
Provisions for labourlabor and civil claim court settlements for South American
operations
(1)
13
526
1419
6
(1)Provision for employee compensation claims in Australia
Other provisions consist(2)
1
-
27
19
(1)
Consists of claims filed by former employees in respect of
loss of employment, work-related
accident injuries and diseases, government fiscal claims relating to levies and surcharges and
closure
costs of old tailings operations. These liabilities are anticipated to unwind
over the next two
to five years.
(2)
Comprises workers compensation claims with regard to work related incidents. The liability is
anticipated to unwind over the next three to five years. (Values were less than $0,5 million in
2005).
19.
23.
PROVISION FOR PENSION AND OTHER POST-RETIREMENT MEDICAL
BENEFITS
Accruedliability
173172
136200
The provision for pension and post-retirement medical funding represents the
provision for
health care and pension benefits for employees, retired employees
and their dependants.
The post-retirement medical liability is assessed in
accordance with the advice of
independent professionally qualified actuaries.
The actuarial method used is the projected
unit credit actuarial valuation method.
Refer to Note 24.28. The costs of post-retirement
benefits are made up of those
obligations which the groupCompany has towards current and
retired employees.
2004
$24.
2003
$
20.
COMMITMENTS AND CONTINGENCIES
Capital expenditure commitments
(1)
Contracts for capital expenditure
148354
98186
Authorized by the directors but not yet contracted for
658
627
806731
725
1,085
911
Allocatedfor:
Expansionofoperations
Project expenditure
-withinoneyear
308367
389190
-thereafter
148265
83106
456
472
(1)632
296
Stay in business expenditure
- within one year
418
572
- thereafter
35
43
453
615
(1)
Including commitments through contractual arrangements withby equity
accounted joint ventures.
F-37
F-52
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
20.24.
COMMITMENTS AND CONTINGENCIES(continued)
20042006
$
20032005
$
Maintenance of operationsOther contractual purchase obligations
(2)
- within one year
145274
243192
- thereafter
205190
10203
350
253
The group has given collateral to certain bankers464
395
(2)
Other purchase obligations represent contractual obligations for satisfactory the purchase of mining
contract
performance in relation to exploration services, power, supplies, consumables, inventories, explosives and development tenements andactivated
mining operations in Australia amounting to:carbon. Amounts stated include purchase obligations of equity accounted joint ventures.
16
12
Contingencies
Water pumping cost – South Africa
The Company is involved in a legal dispute regarding the responsibility for water
pumping of the Margaret shaft which belongs to Stilfontein. Following an attempt by
DRDGold Limited to liquidate its North West operations and avoid incurring pumping
cost, the Company launched an urgent application against DRDGold Limited and
government departments requesting the court to order the continued pumping of water
at the Stilfontein Mines. The cessation of water pumping is likely to cause flooding in
various of the Company’s Vaal River operations. The Department of Water Affairs and
Forestry responded by issuing directives to the mining companies directing that they
share the costs of pumping at the Margaret Shaft.
The three mining companies, Simmer and Jack Mines Limited, Harmony Gold Mining
Company Limited and AngloGold Ashanti Limited, are finalizing an arrangement in
which responsibility for the water pumping will be transferred to an independent newly
formed company. The Company’s responsibility will be limited to providing one-third of
the start-up capital on loan account and the three mining companies will be members
of the newly formed company.
Should the proposed arrangement not be acceptable to the courts and/or the
regulatory authorities, the proposal may have to be amended. Due to this uncertainty,
no estimate is made of any potential liabilities.
Groundwater pollution – South Africa
The Company has identified a number of groundwater pollution sites at its current
operations in South Africa and has investigated a number of different technologies and
methodologies that could possibly be used to remediate the pollution plumes. The
viability of the suggested remediation techniques in the local geologic formation in
South Africa is however unknown. No sites have been remediated and present
research and development work is focused on several pilot projects to find a solution
that will in fact yield satisfactory results in South African conditions. Subject to the
technology being developed as a remediation technique, no reliable estimate can be
made for the obligation.
F-53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24.
COMMITMENTS AND CONTINGENCIES(continued)
2006
$
2005
$
Serra Grande sales tax on gold deliveries
47
29
Mineração Serra Grande S.A. (MSG), the operator of the Crixas mine in Brazil, has
received two tax assessments from the State of Goiás related to payments of sales
taxes on gold deliveries for export namely, one assessment for the period between
February 2004 and June 2005 and the other for the period between July 2005 to
May 2006. The tax authorities maintain that whenever a taxpayer exports gold mined
in the State of Goiás through a branch located in a different Brazilian state, it must
obtain an authorization from the Goiás State Treasury by means of a Special Regime
Agreement (Termo de Acordo re Regime Especial – TARE). The Serra Grande
operation is co-owned with Kinross Gold Corporation. The Company’s attributable
share of the first assessment is approximately $29 million. In May 2006 MSG signed
the TARE, which authorized the remi ttance of gold to the Company’s branch in Minas
Gerais specifically for export purposes. In November 2006 the administrative council’s
second chamber ruled in favor of Serra Grande and fully canceled the tax liability
related to the first period. The State of Goiás may still appeal to the full board of the
State of Goiás tax administrative council. The second assessment was issued by the
State of Goiás in October 2006 on the same grounds as the first assessment, and the
Company’s attributable share of the assessment is approximately $18 million. The
Company believes both assessments are in violation of federal legislation on sales
taxes.
VAT Dispute at Morro Velho
5
-
Morro Velho is involved in a dispute with tax authorities, as a result of an erroneous
duplication of a shipping invoice between two states in Brazil, tax authorities are
claiming that VAT is payable on the second invoice.
VAT Dispute at MSG
6
6
Mineração Serra Grande S.A. received a tax assessment in October 2003 from the
State of Minas Gerais related to sales taxes on gold allegedly returned from the
branch in Minas Gerais to the company head office in the State of Goiás. The tax
administrators rejected the Company’s appeal against the assessment. The
Company is now dismissing the case at the judicial sphere.
Financial guarantees
AngloGold Offshore Investments Limited guarantee of the Nufcor International Limited
loan facility:
40
40
F-54
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24.
COMMITMENTS AND CONTINGENCIES(continued)
2006
$
2005
$
AngloGold Offshore Investments Limited, a wholly owned subsidiary of the Company,
has signed asguaranteed 50 percent of the Nufcor International Limited loan facility with First
Rand (Ireland) plc (formerly RMB International (Dublin) Limited). Nufcor International
Limited is accounted for under the equity method. Refer to Note 15.
Oro Group surety
14
16
The Company has provided surety in favor of the bankerslender in respect of gold loan
facilities to wholly owned subsidiaries of Oro Group (Proprietary) Limited an affiliate of
the Company. The Company has a total maximum liability, in terms of the suretyships,
of R100 million ($14 million). The suretyship agreements have a termination notice
period of 90 days. The probability of the non-performance under the suretyships is
considered minimal, based on factors of no prior defaults, being well-established
companies and recourse via general notarial bonds over the Yatela loangold stocks of the
for:
4
6subsidiaries of the Oro Group. These bonds should enable the Company to recover
the majority of the guaranteed amount. The Company receives a fee from the
associate for providing the surety and has assessed the possibility of a claim for non-
performance.
The Yatela Joint Venture is equity accounted. Refer to Note 13.
Pursuant to US environmental regulations, gold mining companies are
obligated to
close their operations and rehabilitate the lands that they mine in
accordance with
these regulations. AngloGold Ashanti USA has posted
reclamation bonds with various
federal and state governmental agencies to cover
potential environmental rehabilitation obligations in
amounts aggregating
approximately:
49
4549
The companyCompany has provided a guarantee for these obligations which would be payable
payable in the event of AngloGold Ashanti USA not being able to meet their rehabilitation
environmental rehabilitation obligations. As at December 31, 20042006 the
carrying value of these environmental obligations relating to
AngloGold
Ashanti USA amounted to $19$26 million and are included in the Provision for
environmental rehabilitation. Refer to Note 17.rehabilitation in the Company's consolidated balance sheet. The environmental
obligations will expire upon completion of such rehabilitation. There are no recourse
recourse provisions that would enable the companyAngloGold Ashanti to recover from third
parties any of the
amounts paid under the guarantee.
Pursuant
The Company has guaranteed all payments and other obligations of AngloGold
Ashanti Holdings plc regarding the issued $1,000,000,000 2.375 percent convertible
bonds due 2009. Refer to Note 20. The Company’s obligations regarding the assignment of equipment leases to Queenstake Resources
USA Inc., as a result of the sale of Jerritt Canyon effective June 30, 2003,guarantee are direct, unconditional and unsubordinated.
1,000
1,000
Guarantee provided for Syndicated loan facility
181
460
AngloGold Ashanti USA has become secondarily liable in Limited, AngloGold Offshore Investments Limited and AngloGold
American Investments Limited have guaranteed all payments and other obligations of
the event of awholly-owned subsidiaries AngloGold Ashanti Holdings plc and AngloGold Ashanti
default by Queenstake Resources USA Inc. regarding the $700 million Syndicated loan facility. Refer to Note 20.
Hedging guarantees
The Company has issued gold delivery guarantees to several counterparty banks in
which it guarantees the due performance of anyits subsidiaries AngloGold Ashanti USA
Inc., AngloGold South America Limited and Cerro Vanguardia S.A. under their
respective gold hedging agreements.
Ashanti Treasury Services guarantees
1,047
723
The Company together with its wholly-owned subsidiary AngloGold Ashanti Holdings
plc have provided guarantees to several counterpart banks for the hedging
commitments of theits wholly-owned subsidiary Ashanti Treasury Services Limited (ATS).
lessee’s obligations arising under the Lease. These agreements have an
approximate term of 3 years and theThe maximum potential amount of future
payments amounted to:
1
1
The company has provided a letter of credit in favouris all moneys due, owing or
incurred by ATS under or pursuant to the Hedging Agreements. At December 31, 2006
the marked-to-market valuation of the Geita project
finance lenders for:ATS hedge book was negative $1,047 million.
19
19
The letter of credit may be called if Geita Gold Mining Limited fails to perform
under their project finance agreement and has a potential maximum tenor in
accordance with this agreement. See Note 16 – Long-term debt – Geita
Project Finance. In this event, Geita Gold Mining Limited would be liable to
the company. The company acquired an additional 50 percent in Geita as
part of the AngloGold Ashanti Business Combination, effective April 26,
2004.
AngloGold Ashanti USA has a potential liability in respect of preference claims
from a third party amounting to:
2
2
The potential liability is in respect of gold shipments returned by the third party
to AngloGold Ashanti USA, which the bankruptcy trustee is claiming should not
have been returned and final shipments that should not have been paid as the
third party had filed for protection under Chapter 11 of the U.S. Bankruptcy
Code.
AngloGold Offshore Investments Limited guarantee of the Nufcor International
Limited loan facility:
40
40
During September 2003, AngloGold Offshore Investments Limited, a wholly-
owned subsidiary of the company, increased its existing guarantee of
50percent of the Nufcor International Limited loan facility with RMB
International (Dublin) Limited from $25 million to $40 million. This loan is
included in Long-term debt in the company’s consolidated balance sheet.
Refer to Note 16.
F-38F-55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
20.24.
COMMITMENTS AND CONTINGENCIES (continued)
20042006
$
20032005
$
Hedging guarantees of due performance by the Geita Management Company Limited
(GMC)
Tax claims290
172
The Company and its wholly-owned subsidiary AngloGold Ashanti Holdings plc have
issued hedging guarantees to several counterpart banks in Mali including interestwhich they have
guaranteed the due performance by the GMC of its obligations under or pursuant to
the hedging agreements entered into by GMC, and penalties of:
3
6
Discussions are continuing with the Malian government as to the validitypayment of taxall money owing
claims including interestor incurred by GMC as and penalties.when due. This guarantee remains in force until no sum
remains to be paid under the Hedging Agreements and the Bank has irrevocably
recovered or received all sums payable to it under the Hedging Agreements. The claims have arisen
maximum potential amount of future payments is all moneys due, owing or incurred by
GMC under or pursuant to newthe Hedging Agreements. At December 31, 2006 the
legislation that is in conflict with AngloGold Ashanti’s prior mining convention
stability agreements and different interpretationsmarked-to-market valuation of the legislation. The Malian
minister of finance has ruled in favor of Sadiola and Yatela and the amount of
claims has been reduced from $6.5 million to $3.2GMC hedge book was negative $290 million. The Sadiola and
Yatela Joint Ventures are equity accounted. Refer to Note 13.
Various equipment tax claim guarantees in South America amounting to:
3
3
Re-export arrangements regarding certain artifacts:
1
-
AngloGold AshantiIn addition to the above, the Company has undertaken to re-export certain gold artifacts
temporarily imported into South Africa and whose custom and value added tax
was waived. The company will be required to pay if it fails to comply with the re-
export arrangements agreed with the South African Revenue Service.
Certain Value Added Tax (VAT) claims in Tanzania amounting to:
10
-
The Tanzanian Revenue Authority is claiming $10 million from the company,
mainly for fuel supplied to a contractor. The company is contesting this claim
on the grounds that the equipment involved is either the property of the
company or of a contractor, and that development agreements with the
Tanzanian government exempted the company and its sub-contractors from
such VAT. The company believes the likelihood of a loss to be remote.
Stamp duty on transfer of property in Tanzania amounting to:
9
-
The Tanzanian Revenue Authority is claiming $9 million from the company in
stamp duty on the transfer of property in Tanzania, even though transfer of
ownership was in the ownership of the holding company, which is registered in
another country. The company believes the likelihood of the claim succeeding
to be remote.
Discussions are underwaycontingent liabilities in respect of a US class action brought against thecertain
former Ashanti Goldfields Company Limited under United States Federal
Securities laws in the United States District Court for the Eastern District of
New York. The complaint alleges non-disclosuresclaims, disputes and misstatements regarding
Ashanti Goldfields Company Limited’s hedging position and hedging program.
The plaintiffs contend that the company and the individual defendants’ actions
violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and
Rule 10b-5 promulgated under that Act. Although the company cannot make
any assurances regarding the ultimate result of this litigation, it is anticipated
that the outcome will have no material financial effect on the company.
guarantees which are not considered to be material.
With operations in several countries on several continents, many of which are
emerging markets, AngloGold Ashanti
is subject to, and pays annual income taxes under the
various income tax
regimes where it operates. Some of these tax regimes are defined by
contractual agreements with the local government, but others are defined by the
the general corporate income tax laws of the country. The companyCompany has
historically filed, and
continues to file, all required income tax returns and to pay
the taxes reasonably determined to
be due. In some jurisdictions, tax authorities are yet to complete their assessments for
the previous years. The tax rules and regulations in
many countries are complex and
subject to interpretation. From time to time the
company Company is subject to a review of its
historic income tax filings and in
connection with such reviews, disputes can arise with the
taxing authorities
over the interpretation or application of certainc ertain rules to the company’s
Company’s business
conducted within the country involved. Management believes
based on information currently to hand, that such tax
contingencies have been
adequately provided for, and as assessments are
completed, the companyCompany will make
appropriate adjustments to those estimates
used in determining amounts due.
On March 23, 2006 the Company entered into a Registration Rights Agreement with
Anglo South Africa Capital (Proprietary) Limited (Anglo South Africa) under which the
Company has agreed to file U.S. registration statements for Anglo South Africa’s offer
and sale of shares it holds in the Company (each a Demand Registration) if Anglo
South Africa requests the Company to do so. The Company is required to use all
reasonable efforts to file a Demand Registration within 30 days after such a request
and to keep it effective for 90 days unless the shares offered pursuant to it are sold
earlier. Further, the Company may not offer, sell, allot or issue any shares or other
securities that are convertible into or exchangeable for, or that represent the right to
receive, shares, whether pursuant to U.S. registration or otherwise, for a 90-day period
immediately following the first closing of an of fering pursuant to a Demand Registration
or a shorter period as may be imposed by underwriters in the Demand Registration;
except: (i) in consideration for shares or assets of a company as part of a merger,
acquisition, corporate reorganization or similar transaction, (ii) as required pursuant to
the terms governing the 2.375 percent guaranteed convertible bonds due 2009, issued
by AngloGold Ashanti Holdings plc and guaranteed by the Company, and (iii) in
connection with any option, employee bonus, profit sharing, pension, retirement,
incentive, savings or similar plan, agreement or award. The Registration Rights
Agreement may be terminated at any time by written consent by each of the parties
thereto. The Registration Rights Agreement shall terminate automatically on the first
date on which Anglo South Africa is no longer an “affiliate” within the meaning of Rule
144 under the United States Securities Act of 1933, as amended.
F-56
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24.
COMMITMENTS AND CONTINGENCIES(continued)
2006
$
2005
$
Vulnerability from concentrations
The majority of AngloGold Ashanti’s 65,40061,453 employees (2003: 55,439, 2002: 54,042) (2005: 63,993, 2004: 65,400)
are subject to collective
bargaining agreements. These agreements are established in
negotiations between the Chamber of Mines, the
body whichthat represents the gold mining
industry in South Africa, and representative groups of labor. The agreements
have a
two-year validity period. The most recent settlement negotiation was completed in July 2003,
August 2005, when the
parties reached an agreement covering the period from
July 1, 20032005 to June 30, 2005.2007.
There is a concentration of risk in respect of recoverable value added tax and fuel
Indirect taxes (fuel duties VATfrom the Malian government. Recoverable value added tax due from the
Malian government to the Company amounts to $34 million at December 31, 2006
(December 31, 2005: $25 million). The last audited value added tax return was for the
period ended December 31, 2006 and other) dueas at that date $19 million was still outstanding
and $15 million is still subject to audit. The accounting processes for the unaudited
amount are in accordance with the processes advised by the Malian government in
terms of the previous audits.
Reimbursable fuel duties from the Malian government to the Company amount to
$11 million at December 31, 2006 (December 31, 2005: $13 million). Fuel duty refund
claims are required to be submitted before January 31 of the following year and are
subject to authorization by, firstly, the Department of Mining, and secondly, the
Customs and Excise authorities. As at December 31, 2006, the Customs and Excise
authorities have approved $5 million which is still outstanding, while $6 million is still
subject to authorization. The accounting processes for the Sadiola, Yatelaunauthorized amount are in
accordance with the processes advised by the Malian government in terms of the
previous authorizations. With effect from February 2006, fuel duties are no longer
payable to the Malian government.
The Government of Mali is a shareholder in all of the Company’s entities in Mali and Morila Joint
Ventures (Referprotocol agreements governing repayments of certain of these amounts have been
signed. All payments as scheduled in terms of the protocol agreements have been
recovered up to Note 13)December 2006. The amounts outstanding have been discounted to
their present value at a rate of 5 percent.
There is a concentration of risk in respect of reimbursable value added tax and fuel
duties from the Tanzanian government. Reimbursable value added tax due from the
Tanzanian government to the Company amounts to $14 million at December 31, 2006
(December 31, 2005: $9 million). The last audited value added tax return was for the
period ended November 30, 2006 and as at December 31, 2006 $9 million was still
outstanding and $5 million is still subject to audit. The accounting processes for the
unaudited amount are in accordance with the processes advised by the Tanzanian
government in terms of the previous audits. The amounts outstanding have been
discounted to their present value at a rate of 5 percent.
Reimbursable fuel duties from the Tanzanian government to the Company amount to $31
$18 million (2003: $21at December 31, 2006 (December 31, 2005: $6 million). Fuel duty claims
are required to be submitted after consumption of the related fuel and are subject to
authorization by the Customs and Excise authorities. As at December 31, 2006,
claims for refund of fuel duties amounting to $12 million have been lodged with the
Customs and Excise authorities, which are still outstanding, whilst claims for refund of
$6 million have not yet been submitted. The accounting processes for the
unauthorized amount are in accordance with the processes advised by the Tanzanian
government in terms of the previous authorizations. The amounts outstanding have
been discounted to their present value at a rate of 5 percent.
F-39
F-57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
21.25.
STOCKHOLDERS’ EQUITY
The authorized common stock of the companyCompany was increased in 1998 to 400,000,000 shares of common stock of
25 ZAR cents each principally to meet its obligations regarding the proposed merger of AAC gold interests through the
company. No changes toCompany. During 2006 AngloGold Ashanti approved the authorizedEmployee Share Ownership Plan for the employees in the
South African operations and a Black Economic Empowerment transaction (BEE transaction) for which
4,280,000 E shares of common stock of AngloGold Ashanti25 ZAR cents were madeauthorised.
During 2006, 11,297,721 shares of common stock and 4,185,770 E shares of common stock in 2004.the Company were
issued as follows:
•
398,399 shares of common stock were issued as part of the share incentive scheme for a consideration of
$9 million.
•
4,185,770 E shares of common stock and 928,590 shares of common stock in the Company were issued as part
of the Employee Share Ownership Plan and the BEE transaction for a consideration of $93 million, which are
eliminated as shares held within the Company.
•
9,970,732 shares of common stock in the Company were issued as part of the public offering which was
completed on April 20, 2006, amounting to $498 million.
During 2005, 475,538 shares of common stock in the Company were issued as part of the share incentive scheme for
a consideration of $9 million.
During 2004, 41,326,552 shares of common stock in AngloGold Ashantithe Company were issued as follows:
•
192,800 shares of common stock were issued as part of the share incentive scheme for a consideration of
$3 million.
•
41,133,752 shares of common stock in the companyCompany were issued to facilitate the share swap for the acquisition of
Ashanti Goldfields Company Limited, amounting to $1,544 million.
•
During 2003, 514,320
At a general meeting held on April 10, 2006, ordinary resolutions were passed with the requisite majority, providing
authority to the directors to allot sufficient ordinary shares of common stock the Company to allow it to raise $500 million before
expenses and after underwriters’ fees in a public offering. The offering was completed on April 20, 2006 and resulted
in the company were issued as follows:
508,020issue of 9,970,732 new ordinary shares, along with the simultaneous sale of common stock were issued as part19,685,170 AngloGold Ashanti
shares held by Anglo American plc (AA plc), reducing AA plc’s holding in the Company to 41.8 percent. The
combined offering was priced at $51.25 per ADS and R315.19 per ordinary share (a 1 percent discount to the
weighted average traded price of the share incentive scheme and 6,300 shares of common
stock were issued in termson the Johannesburg Stock Exchange (JSE) over the 30 days prior to
pricing). Net proceeds to AngloGold Ashanti of the Acacia Employee Option Planprimary offering was $498 million, which will be used for a consideration of $8 million.project
development capital, capital expenditure and other general corporate purposes. AngloGold Ashanti used the proceeds
to reduce short-term loans and borrowings under its revolving credit facility. Refer to Note 20.
•
During 2002, 7,353,906 shares of common stock in the company were issued as follows:
478,720 shares of common stock were issued as part of the share incentive scheme and 66,598 shares of
common stock were issued in terms of the Acacia Employee Option Plan for a consideration of $7 million.
• 278,196 shares of common stock in the company were issued as part of the odd-lot offer by AngloGold (Refer to
Note 30) for a consideration of $7 million.
• 6,530,392 shares of common stock in the company were issued to facilitate the share swap and top-up facility for
the bid for the acquisition of Normandy Mining Limited which closed in 2002, amounting to $138 million.
At a general meeting of shareholders held on June 29, 2004,May 5, 2006, shareholders approved, as a general authority,
authorization to the board of directors to allot and issue, in their discretion, and for such purposes as they may
determine, up to 10 percent of the authorized but unissued common stock of 25 ZAR cents each in the share capital
of
the companyCompany (subject to the South African Companies Act and the Listings Requirements of the JSE Securities
Exchange South Africa) after setting aside so many common stock of 25 ZAR cents each as may be required to be
allotted and issued by the companyCompany pursuant to the AngloGold Share Incentive Scheme and for the purposes of the
conversion of the $1,000,000,000, 2.375 percent guaranteed Convertible Bonds issued by AngloGold Ashanti
Holdings plc.
Refer to Note 2730 and Note 16.20. As at December 31, 20042006 of the total unissued common stock of 135,537,106
123,763,847 of 25 ZAR
cents each, 11,22 6,140ea ch, 10,195,949 of 25 ZAR cents each was under the control of the directors until the
forthcoming annual
general meeting. AtIn terms of the annual general meetingTrust deed the unissued E common stock of shareholders held on April 29, 2005, shareholders reaffirmed this94,230 are under
general authority, and placed up to 11,281,297 ordinary shares, under the control of the directors.trustees. In terms of a specific
authority granted at the general meeting of stockholders held on
March 29, 1993, the directors are authorized to issue
the 4,221,104 unissued B redeemable preferred stock of 1 ZAR
cent each to Eastvaal Gold Holdings Limited.
22.
26.
GOLD PRICE AND CURRENCYFINANCIAL RISK MANAGEMENT ACTIVITIES
In the normal course of its operations, the Company is exposed to gold price, currency, interest rate, liquidity and
credit risks. In order to manage these risks, the Company enters into derivative transactions. The groupCompany does not
acquire, hold or issue derivatives for economic trading purposes. The Company has developed a comprehensive risk
management process to facilitate, control and monitor these risks. The board has approved and monitors this risk
management process, inclusive of documented treasury policies, counterpart limits, controlling and reporting
structures.
F-58
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
26.
FINANCIAL RISK MANAGEMENT ACTIVITIES (continued)
The financial risk management activities objectives of the Company are as follows:
•
Safeguarding the Company core earnings stream from its major assets through the effective control and
management of gold price risk, foreign exchange risk and interest rate risk;
•
Effective and efficient usage of credit facilities in both the short and long term through the adoption of reliable
liquidity planning and procedures;
•
Ensuring that investment and hedging transactions are undertaken with creditworthy counterparts;
•
Ensuring that all contracts and agreements related to risk management activities are coordinated, consistent
throughout the Company and comply where necessary with all relevant regulatory and statutory requirements.
A number of products, including
derivatives are used to manage gold price and foreign exchange risks, that arise out of the group’s core business
activities.satisfy these objectives. Forward sales contracts and call and
put options are used by the companyCompany to manage its exposure to gold
price and currency fluctuations. The board of directors sets limits for the volume of production to be hedged, the nature
of instruments utilized and the maximum tenor of hedging structures.
SFAS133 requires that derivatives be accounted for as follows:
•
Commodity based (“normal purchase or normal sale”) contracts that meet the requirements of SFAS138, and are
designated as such, are recognized in earningsproduct sales when they are settled by physical delivery.
•
Where the conditions in SFAS133 for hedge accounting are met, the derivative is recognized on the balance
sheet,
at fair value as either a derivative asset or derivative liability, and recorded at fair value.liability. For cash flow hedges the effective
portion of
changes in fair value gains or lossesof the hedging instruments are recognized in equity (other comprehensive income) until the
underlying
transaction occurs, then the gains or losses are recognized in earnings.product sales. The ineffective portion of
changes in fair
value is reported in earnings as gains or losses on derivatives in the period in which they occur. Of
the contracts
accounted for as cash flow hedges, contracts with a carrying value, net of tax, of $66negative
$169 million at December 31, 2004
2006 are expected to be removedrecycled from other comprehensive income and includedrecognized
as a reduction in incomeproduct sales during 2005.2007.
•
All other derivatives are measured at their estimated fair value, with the changes in estimated fair value at each
reporting date being
reported in earnings as gains or losses on derivatives in the period in which they occur.
Cash flows from derivative instruments accounted for as cash flow hedges are included in net cash provided by
operating activities in the statements of consolidated cash flows for all periods presented. Cash inflows from off marketContracts that contain ‘off-
derivative transactions entered intomarket’ terms that result in the inflow of cash at inception are included inanalogous to borrowing activities and, as such, are
treated as financing activities. All current and future cash flows fromassociated with such instruments are classified within
the financing activities section of the consolidated cash flow statement. Contracts that contain ‘off-market’ terms that
result in the outflow of cash at inception are analogous to lending activities and, as such, are treated as investing
activities. Cash outflows from off market
derivative transactions are included inAll current and future cash flows fromassociated with such instruments are classified within the investing activities.
activities of the consolidated cash flow statement.F-40
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
22. GOLD PRICE AND CURRENCY RISK MANAGEMENT ACTIVITIES (continued)
Loss on non-hedge derivatives of $131$208 million (2003: $119 million gain) (2002: $74 million gain)(2005: $142 million; 2004: $123 million) was included in the current
current year income statement.
Gold price and currency risk management activities
Gold and currency hedging instruments are denominated in South African rands, US dollars, Australian dollars and
Brazilian Real.real. The hedging instruments utilized are forward sales contracts, purchased and sold put options, and
purchased and sold call options.options and gold lease rate swaps. The mix of hedging instruments, the volume of production
hedged and the tenor of the
hedging book is continuously reviewed in the light of changes in operational forecasts, market
conditions and the
group’s Company’s hedging policy.policy as set by the board of directors. The group’sCompany’s reserve and financial
strength has allowed it to arrange unmargined credit lines of
up to ten years with counterparties.
Some of the instruments described above are designated and accounted for as cash flow hedges. The hedged
forecast transactions are expected to occur over the next 5 years, in line with the maturity dates of the hedging
instruments.
Forward sales contracts establish the price of future gold sales at a specified price. A number of these contracts are
intended by AngloGold Ashanti for delivery against production in a future period. The volume of outstanding forward
sales type contracts at the end of 20042006 was 256,409kg (2003: 180,693122,133kg (2005: 159,783kg).
(1)
kg former AngloGold).
A put option gives the put buyer the right, but not the obligation, to sell gold to the put seller at a predetermined price
on
a predetermined date. A call option gives the call buyer the right, but not the obligation, to buy gold from the call
seller
at a predetermined price on a predetermined date. The group’sCompany’s risk as outlined above in purchasing compoundselling call options
is limited tounlimited but
mitigated by the premium paid. Net cash receipts received underfact that the Company produces the commodity required by the option hedging strategies forand would benefit by the year weresame
$61 million (2003: $33 million).quantity as the option loss by selling production in the open market. The Company’s risk in selling put options is
unlimited but partially mitigated by put options purchased.
(1)Including equity accounted joint ventures. Refer to Note 13.F-59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
26.
Hedge book restructureFINANCIAL RISK MANAGEMENT ACTIVITIES (continued)
Net delta open hedge position as at December 31, 2006
The groupCompany has an established practice of actively managing its hedged commitments under changing market
circumstances. This is reflected in the reduction of the hedge book from its high of 17.8
(1)
million ounces at
December 31, 2000 to 7.01
(1)
million ounces at June 30, 2004. At the level of 7.01 million ounces, the hedge book had
been reduced to cover an average of 22 percent of the annual production from pre-Ashanti acquisition AngloGold
assets over the next five years. However, following the completed AngloGold Ashanti Business Combination, the
combined hedge books amounted to 12.7 million ounces as at the end of September 2004, and the level of cover
increased to 40 percent of five years' production of the group.
The group has previously indicated its intention to continue with the reduction in hedging levels. The argument for this
reduction has been further supported by the group’s positive view of the gold price in the current market cycle. The
company believes that the market circumstances favorable for the gold price are likely to remain in place for some time,
and that the gold price will continue to trade in its current range, or higher.
A substantial restructuring of the hedge book was commenced in lateconcluded between December 2004 and completed
January 2005 was followed by a smaller restructuring of the hedging commitments of the Geita Management
Company following the repayment of project finance loans. During 2006, in January 2005. This
has resultedaddition to delivering in and buying back
a reductionnumber of hedge contracts, the Company also restructured a number of hedge contracts maturing in the net deltanear term
into later years.
As of the combined hedge by some 2.2 million ounces or 69 tonnes of gold,
down to a net hedge delta of 10.49 million ounces at December 31, 2004. The restructured hedge now represents
cover equal to 31 percent of five years’ production spread over a ten-year period. The reduction of 2.2 million ounces in
the December 2004 quarter is of the same order of magnitude as the substantial reduction achieved in hedge
restructuring by AngloGold through the second quarter of 2002.
The cash earnings will reflect the significantly greater exposure of the company to the spot price during 2005 and 2006,
in particular. Beyond these years, the significantly higher contracted prices in the restructured forward positions will
provide further benefit.
It is the intention of management to continue to actively manage the hedge book. This includes delivering into
contracts, continuing to reduce the size of the book and continuing to seek the maximum economic benefit from the
book.
For the year ahead, it is the company's intention to track the spot price more closely, and to manage the hedge book
actively with the goal of moderating any negative impact on the price received of the remaining lower-priced hedge
positions in the year.
The following table indicates the group’s total gold hedge position atreflected a weighted average settlement price as at
December 31, 2004, which includes all hedging instruments irrespective of accounting classification:
(1)
Includes equity accounted joint ventures. Refer to Note 13.
F-41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
22. GOLD PRICE AND CURRENCY RISK MANAGEMENT ACTIVITIES (continued)
The total net delta tonnage position of 10.16 million ounces (316 tonnes)
or 32 percent of the next 5 years forecast production. As of December 31, 2005, the hedge on this date was 10.49book reflected a net delta
tonnage position of 10.84 million ounces or 326 tonnes.(337 tonnes).
The marked-to-market value of all hedge transactions, irrespective of accounting designation, making up the hedge
positions was a negative $1,161$2,903 million as
at December 31, 20042006 (as at December 31, 2003:2005: negative $578$1,941 million).
These values were based on a gold price of
$434.70 $636.30 per ounce, exchange rates of R/$/R7.001and A$/$5.670.7886 and A$/$0.7745 and the
prevailing market interest rates and volatilities
at December 31, 2006. The values as at December 31, 2005 were
based on a gold price of $517.00 per ounce, exchange rates of $/R6.305 and A$/$0.7342 and the time.
These marked-to-market valuations are in no way predictive of the future value of the hedge position nor of futureprevailing market
impact on the revenue of the company. The mark-to-market represents the current profit/loss value of the hedge book
at market pricesinterest rates and rates availablevolatilities at that time.date.
The Company had the following net forward pricing commitments outstanding against future production as at
December 31, 2006.
Year
2005
2006
2007
2008
2009
2010-20142010
2011 2012-2016
Total
DOLLAR GOLD
Forward contracts
Amount (kg)
34,02119,622
30,42822,817
35,48121,738
29,11114,462
25,32412,931
48,74524,308
203,110115,878
$ per oz
$315301
$338314
$343316
$363347
$377397
$395418
$357347
*Restructure longs
Forward contracts (Long) Amount (kg)
17,67612,957
17,676
12,957
$ per oz
$440 639
$440 639
Put options purchased
Amount (kg)
3,381
5,481
1,455
10,317
1,455
$ per oz
$347
$355
$292
$344292
Put options sold
Amount (kg)
6,22119,259
4,35411,555
8553,748
1,882
9,4091,882
22,7215,645
43,971
$ per oz
$397612
$339587
$390530
$400410
$430420
$400440
$559
Call options purchased
Amount (kg)
9,88014,252
3,030
2,0036,503
14,913
20,755
$ per oz
$340398
$353432
$361
$345409
Call options sold
Amount (kg)
29,49047,779
18,01746,776
20,37541,148
26,17932,036
22,85236,188
57,60451,294
174,517255,221
$ per oz
$363475
$386466
$372473
$377458
$399492
$455564
$403491
RAND GOLD
Forward contracts
Amount (kg)
2,138
933
933
3,071
Rand per kg
R91,299
R116,335
R116,335
R98,769
Call options sold
Amount (kg)
311
2,986
2,986
2,986
9,269
Rand per kg
R108,123
R202,054
R216,522
R230,990
R212,885
AUD DOLLAR GOLD
Forward contracts
Amount (kg)
7,465
2,177
3,390
3,111
16,143
A$ per oz
A$ 669
A$ 656
A$ 649
A$ 683
A$ 666
Put options purchased
Amount (kg)
1,8754,977
1,875
Rand per kg
R93,6024,977
R93,602A$ per oz
A$ 826
A$ 826
Put options sold
Amount (kg)
8,025
1,4005,910
9,425
Rand per kg
R80,840
R88,4145,910
R81,965A$ per oz
A$ 800
A$ 800
Call options purchased
Amount (kg)
3,732
3,110
1,244
3,111
11,197
A$ per oz
A$ 668
A$ 680
A$ 694
A$ 712
A$ 686
Call options sold
Amount (kg)
12,657
4,517
311
2,986
5,972
26,4436,532
Rand per kg
R88,509
R102,447
R108,123
R202,054
R223,756
R134,486
Year
2005
2006
2007
2008
2009
2010-2014
Total
AUD DOLLAR GOLD
Forward contracts
Amount (kg)
2,969
3,110
8,398
3,110
3,390
3,110
24,087
A$ per oz
A$560
A$746
A$650
A$673
A$667
A$692
A$662
Put options purchased Amount (kg)
1,244
1,244
A$ per oz
A$5856,532
A$585 per oz
Put options sold
Amount (kg)
2,644A$ 847
2,644
A$ per oz
A$565
A$565
Call options purchased Amount (kg)
3,110
6,221
3,732
3,110
1,244
3,110
20,527
A$ per oz
A$724
A$673
A$668
A$680
A$694
A$712
A$688
Call options sold
Amount (kg)
1,711
1,711
A$ per oz
A$597
A$597 847
Delta (kg)
32,280(36,687)
44,577(54,993)
57,531(62,616)
52,221(45,773)
47,107(46,952)
92,492(68,991)
326,208(316,012)
**Total net gold:
Delta (oz)
1,037,825(1,179,513)
1,433,182
1,849,662
1,678,942
1,514,523
2,973,683
10,487,817(1,768,063) (2,013,148) (1,471,634) (1,509,540) (2,218,109) (10,160,007)
Hedge delta as a percentage of current
production levels (%)***
17%
24%21%
31%
28%36%
25%26%
10%27%
17%8%
18%
*
At December 31, 2004,Indicates a long position from forward purchase contracts. The Company enters into forward purchase contracts as part of its strategy to
manage and reduce the group was in the processsize of restructuring the hedge book and had acquired a long spot position in gold. This
long gold position has been applied to the hedge restructure subsequent to year-end.book.
** The Delta of the hedge position indicated above, is the equivalent gold position that would have the same marked-to-market sensitivity for a
small change in the gold price. This is calculated using the Black-Scholes option formula with the ruling market prices, interest rates and
volatilities as at December 31, 2004. The delta positions indicated above includes positions from equity accounted joint ventures. Refer to
Note 13.2006.
*** Percentage based on 2006 full year production of 5,635,000 ounces.
F-42
F-60
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
22. 26.
GOLD PRICE AND CURRENCYFINANCIAL RISK MANAGEMENT ACTIVITIES(continued)
Year
2005
2006
2007
2008
2009
2010-20142010
2011
2012-2016
GOLD LEASE RATE SWAPS
Amount (‘000oz)
200270,000
300100,000
270130,000
100100,000
130
100
Gold borrowing cost associated with
with forward contracts
(1)
Interest rate %
0.3%0.69
0.6%0.78
0.7%0.89
0.9%1.25
1.0%
1.5%
Amount (‘000oz)
4001,334,356
7081,168,000
1,334898,000
1,168641,000
898423,000
641205,000
Gold lease rate swaps
(2)
Interest rate %
0.9%
1.2%
1.8%
1.8%
1.8%
1.8%
Amount (‘000oz)
320
320
280
240
200
160
Interest rate %
2.0%1.76
2.0%1.75
2.0%1.81
2.0%1.83
2.0%1.83
2.0%1.84
Gold lease rate swaps
(3)
$ per ounce
302
302
302
302
302
302
(1)
Gold borrowing cost relating to Australian dollar gold forwards:
The Australian dollar denominated gold forward contract prices are shown on a net basis where the final price of the contract is determined
by the cost of borrowing gold over the full duration of the contract. The net prices shown in the table above have been adjusted to take
account of the total expected future cost of all accumulated costs incurred to date and the expected future borrowing cost based on ruling
market prices at the financial statement date. The amount shown under “Gold borrowing cost associated with forward contracts” in the
table above is the face value of the borrowing amount and the period in which it matures. The interest rates shown are the future market
rates prevailing at the time of the financial statement.
(2)
The gold lease rate swaps are contracts where the companyCompany receives a fixed percentage of the outstanding amount in gold and pays a
floating market determined percentage in gold, quarterly in arrears. The amount shown in the table above is the number of ounces
outstanding at the beginning of each period. The interest rate shown is the weighted average fixed rate that the companyCompany will receive for
that period.
(3)
The gold lease rate swaps are contracts where the company receives a fixed percentage of the outstanding amount at a fixed US dollar
gold price and pays a floating market determined percentage in gold, quarterly in arrears. The amount shown in the table above is the
number of ounces outstanding at the beginning of each period. The interest rate shown is the average fixed rate that the company will
receive during that period. The US$ price is the average rate at which the fixed interest amount in gold is converted to US dollars.
Year
2005
2006
2007
2008
2009
2010-20142010
2011
2012-2016
Total
DOLLAR SILVER
Put options purchased
Amount ($)(kg)
43,545
43,545
43,545
130,635
$
per
oz
$7.11
$7.11
$7.4087,090
$7.21 per oz
$ 7.40
$ 7.66
$ 7.53
Put options sold
Amount ($)(kg)
43,545
43,545
43,545
130,635
$
per
oz
$6.02
$6.02
$5.9387,090
$5.99 per oz
$ 5.93
$ 6.19
$ 6.06
Call options sold
Amount ($)(kg)
43,545
43,545
43,545
130,635
$
per
oz
$8.11
$8.11
$8.4087,090
$8.21 per oz
Disclosure of the fair value of financial instruments is as follows:$ 8.40
$ 8.64
$ 8.52
Foreign exchange price risk protection agreements
The group periodicallyCompany enters into currency forward exchange and currency option contracts to hedge certain recordedanticipated
transactions, firm commitments and other anticipated transactions denominated in foreign currencies. The objective of
the group’sCompany’s foreign currency hedging activities is to
protect the groupCompany from the risk that the eventual cash flows resulting from
transactions denominated in US dollars
will be adversely affected by changes in exchange rates.
The following table indicates the group’sCompany’s currency hedge position at December 31, 20042006.
Year
2005
2006
2007
2008
2009
2010-20142010
2011 2012-2016
Total
RAND DOLLAR (000)
Forward contracts
Put options purchased
Amount ($)
130,50915,000
130,509
Rand per $
R5.71
R5.71
15,000
Rand per $
R7.61
R7.61
Put options sold
Amount ($)
40,000
40,000
Rand per $
R7.08
R7.08
Call options sold
Amount ($)
65,00055,000
65,000
Rand per $
R5.72
R5.72
55,000
Rand per $
R7.34
R7.34
AUD DOLLAR (000)
Forward contracts
Amount ($)
55,23773,518
39,22220,000
94,459
$ per A$
$0.59
$0.7593,518
$0.65 per A$
$ 0.76
$ 0.73
$ 0.75
Put options purchased
Amount ($)
10,000
10,000
$ per A$
$ 0.76
$ 0.76
Put options sold
Amount ($)
10,000
10,000
$ per A$
$ 0.78
$ 0.78
Call options sold
Amount ($)
20,000
20,00010,000
40,000
$ per A$
$0.76
$0.74
10,000
$0.75 per A$
BRAZILIAN REAL (000)
Put options purchased
Amount ($)
600$ 0.75
600
BRL per $
BRL3.38
BRL3.38
Put options sold
Amount ($)
600
600$ 0.75
BRL per $
BRL3.21
BRL3.21
Call options sold
Amount ($)
600
600
BRL per $
BRL3.55
BRL3.55
As at December 31, 2004 none2006 certain of the hedging positions reported in the above tables were governed by “right-to-break”early
clauses.
termination options in favor of certain counterparts.F-43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
22. GOLD PRICE AND CURRENCY RISK MANAGEMENT ACTIVITIES (continued)
Interest rate and liquidity risk
Fluctuations in interest rates impactimpacts on interest paid and received on the value of short-term cash investments and financing
activities, giving rise to
interest rate risk.
In the ordinary course of business, the groupCompany receives cash from the proceeds of its gold sales and is required to
fund
working capital requirements. This cash is managed to ensure surplus funds are invested in a manner to achieve
market related returns while minimizing risks. The groupCompany is able to actively source financing at competitive rates.
The Syndicated $600 million loan facility was repaid on February 4, 2005,
F-61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
26.
FINANCIAL RISK MANAGEMENT ACTIVITIES (continued)
Cash and a new three-year $700 million
Syndicated loan facility was signed in January 2005, with an interest rate of LIBOR plus 0.4% per annum. The
company has sufficient undrawn borrowing facilities available to fund working capital requirements.
Investmentloans advanced maturity profile
Maturity date
Currency
Fixed rate
investment
amount
(million)
Effective
rate
%
Floating rate
investment
amount
(million)
Effective
rate
%
LessAll less than one year
$
635
1.65.1
64
4.5
ZAR
513
8.5
837
7.8
A$
-
-
52
6.0
BRL
-
-
35
13.2
ARS
-
-
13
9.5
NAD
134
1.98.3
ZAR-
78
6.2
27
5.9
A$
27
3.7
1
5.7
EUR
1
2.4
GHC
23,631
14.0-
REAIS
197
17.8
PESOS
3
1.0
Borrowings maturity profile
Within one year
Between
one and two years
Between
two and five years
AfterGreater than five years
Currency
Borrowings
Amount
(million)
Effective
rateRate
%
Borrowings
Amount
(million)
Effective
rateRate
%
Borrowings
Amount
(million)
Effective
rateRate
%
Borrowings
Amount
(million)
Effective
rateRate
%
Total
Borrowings
amount
(million)
$
30241
3.55.8
4189
5.9
1,005
2.4
1
7.4
1,236
ZAR
73
(1)
-
2,000
10.5
-
-
-
-
2,073
GHC
73,692
19.0
-
-
-
-
-
-
73,692
Interest rate risk
Fixed for less than
one year
Fixed for between
one and three years
Fixed for greater than
three years
Currency
Borrowings
Amount
(million)
Effective
Rate
%
Borrowings
Amount
(million)
Effective
Rate
%
Borrowings
Amount
(million)
Effective
Rate
%
Total
Borrowings
amount
(million)
$
219
6.2
1,013
2.4
-4
-3.4
1,236
ZAR
73
(1)
-
2,000
10.5
Interest rate risk-
Fixed for less than-
one year2,073
Fixed for betweenGHC
one and three years73,692
Fixed for greater than19.0
three years-
Currency-
Borrowings-
Amount-
(million)73,692
Effective rate
%
Borrowings
Amount
(million)
Effective
rate %
Borrowings
Amount
(million)
Effective
rate %
Total
borrowings
amount
(million)
$
308
3.5
9
6.1
1,002
2.4
1,319
ZAR 73
(1)
-
2,000 10.5
2,073
(1)
Represents interestInterest accrual on the Corporate Bondcorporate bond as at December 31, 2004.2006.
Interest rate swaps
The groupCompany previously entered into a convertible interest rate swap. The swap iswas a derivative instrument as defined
by SFAS133.
The swap, done on the back of the $1 billion Convertible Bond, convertsconverted the fixed coupon of 2.375% per
annum into a
LIBOR-based floating rate. The swap like the Bond, matures in February 2009, but has the additional feature that in
the event of early conversion, the swap notional amount reduces in the same proportion. A derivative liability of
$10 million was recorded for the fair market value of the swap. The swap is not designated as a fair value hedge underhedge. The swap was unwound
during September 2005, based on the Company’s view of US GAAP.dollar interest rates.
The group has vanillaCompany previously entered into interest rate swap agreements to convert $133R750 million (R750($133 million) of its $354
R2,000 million
(R2,000 ($354 million) ZAR denominated fixed rate Bond to variable rate debt. The swaps were not designated
as fair value hedges. The interest rate swap runs overswaps were unwound during April 2005, based on the termCompany’s view of ZAR
the Bond and receives interest at a fixed rate of 10.5% and pays floating Johannesburg Interbank Agreed Rate (JIBAR)
(reset quarterly) plus a spread of 0.915%. This transaction matures in August 2008. The swap is subsequently re-
measured at fair value, but is not designated as a fair value hedge. The marked-to-market value of the transaction was
a positive $8 million (R45 million) as at December 31, 2004.
rates.F-44
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
22. GOLD PRICE AND CURRENCY RISK MANAGEMENT ACTIVITIES (continued)
Credit risk
Realization of all these contracts is dependent upon the counterpartiescounterparts performing in accordance with the terms of the
contracts. The companyCompany generally does not obtain collateral or other security to support financial instruments subject
to
credit risk, but monitors the credit standing of counterparties.counterparts. The companyCompany spreads its business over a number of
predominantly international, creditworthy counterpartiesfinancial and banking institutions of good credit quality and believes that no concentration of credit risk exists. Limits for
for each counterpart are based on the assessed credit quality of each counterpart. The AngloGold Ashanti Treasury
Committee makes recommendation for board approval of all counterparts and the limits to be applied against each
counterpart. Where possible, management tries to ensure that netting agreements are in place.
The combined maximum credit exposure at the balance sheet date amounts to $655 million (2005: $713 million) on a
contract by contract basis. Credit risk exposure netted by counterparts amounts to $68 million (2005: $18 million). No
set-off is applied to the balance sheet due to the different maturity profiles of assets and liabilities.
F-62
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
26.
FINANCIAL RISK MANAGEMENT ACTIVITIES (continued)
The table below provides a summary of the number, type and credit quality of AngloGold Ashanti’s hedge counterparts.
Number of Counterparts
Type
Credit Rating (Fitch)
1 International2
International Bank
AAA
3 International4
International Bank
AA+AA +
4 International
International Bank
AA
9 International
International Bank
AA-AA -
2 International3
International Bank
A+A +
2 International3
International Bank
A
2 International1
International Bank
A-A -
1 International
International Bank
BBB
1 International
Bank
BBB-
3
South African Bank
AA(zaf)AAA (zaf) (International BBB)BBB +)
21
South African Bank
AA-AA + (zaf) (International BBB +)
1
South African Bank
AA (zaf) (International BBB)
1
South African Bank
A+AA- (zaf) (International BBB-)BBB)
1 Brazilian
South African Bank
AA(bra)A + (zaf) (International BBB -)
6
Brazilian Bank
AA (bra)
1
Trade Finance House
Not rated
AngloGold Ashanti does not anticipate non-performance by any counterparts.
Fair value of financial instruments
The estimated fair values of financial instruments are determined at discrete points in time based on relevant market
information. TheseIn certain cases these estimates involve uncertainties and cannot be determined with precision. The
estimated fair values
of the company’sCompany’s financial instruments, as measured at December 31, 20042006 and 2003,2005, are as
follows:
December
31,
2003
December 31, 20042006
(As restated)
CarryingDecember 31, 2005
amount
$Carrying
Fairamount
value$
$
CarryingFair
amountvalue
$
Fair
valueCarrying
amount
$
Fair
value
$
Cash and cash equivalents
299
299
479
479
Receivables
252
252
181471
181471
196
196
Restricted cash
11
11
8
8
Short-term debt
315
315
33133
33133
160
160
Long-term debt
1,371
1,364
7781,472
7881,484
Accounts payable and other current liabilities1,779
479
479
355
3551,803
Derivatives
(662)1,524
(1,161)(1)
(218)2,903
935
(1)
1,941
(578)
(1)
Carrying amounts represents on balance sheet derivatives.
The following are the marked-to-market valuations of the hedge book derivative (liabilities)/assets split by
accounting designation
December 31, 2006
Normal
purchase and
sale
exemption
$
Cash flow
hedge
accounted
$
Non hedge
accounted
$
Total
$
Forward sales type agreements
(511)(829)
(647)(375)
(149)(124)
(248)(1,328)
Option contracts
(185)(516)
(507)-
(1)(1,056)
(85)
(320)(1,572)
(1)
Foreign exchange contracts
17-
172
32
34
Foreign exchange option contracts
(2)-
(2)-
2(12)
2(12)
Interest rate swaps – Gold
21(34)
(20)-
6
(20)
Sub total – Hedge derivatives
(660)
(1,159)
(223)
(583)
Interest rate swaps – Non-gold
(2)
(2)39
5
Total
5(1,379)
(373)
(1,151)
(2,903)
(1)
Includes deliverable call options sold. A deliverable option is an option in terms of which the delivery quantity is fixed regardless of
the market price on the exercise date. In the event that the market price is lower than the strike price, gold is sold to the
counterpart at the ruling spot price.
F-45
F-63
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
22. 26.
GOLD PRICE AND CURRENCYFINANCIAL RISK MANAGEMENT ACTIVITIES(continued)
December 31, 2005
Normal
purchase
and sale
exemption
$
Cash flow
hedge
accounted
$
Non hedge
accounted
$
Total
$
Forward sales type agreements
(554)
(342)
(13)
(909)
Option contracts
(446)
(4)
(608)
(1,058)
(1)
Foreign exchange contracts
-
8
(2)
6
Foreign exchange option contracts
-
-
(5)
(5)
Interest rate swaps – Gold
(6)
-
31
25
Total
(1,006)
(338)
(597)
(1,941)
(1)
Includes deliverable call options sold. A deliverable option is an option in terms of which the delivery quantity is fixed regardless of
the market price on the exercise date. In the event that the market price is lower than the strike price, gold is sold to the
counterpart at the ruling spot price.
Derivatives maturity profile
Total
$
20042006
Assets
$
Liabilities
$
Total (662)
678
(1,340)
Less: Amounts to mature within twelve months of balance sheet
date
115(1,133)
(491)649
606(1,782)
Amounts maturing between one and two years
(144)
6
(150)
Amounts maturing between two and five years
(190)
-
(190)
Amounts to mature thereafter
(547)(57)
187-
(734)(57)
Total
(1,524)
655
(2,179)
Total
$
2003
(As restated)2005
Assets
$
Liabilities
$
Total (218)
464
(682)
Less: Amounts to mature within twelve months of balance sheet
date
38(446)
(370)675
408(1,121)
Amounts maturing between one and two years
(162)
30
(192)
Amounts maturing between two and five years
(249)
8
(257)
Amounts to mature thereafter
(180)(78)
94-
(274)(78)
Total
(935)
713
(1,648)
Summary of contracted Uranium sales as at December 31, 2006
The Company had the following forward pricing Uranium commitments against future production:
Year
lbs( '000)
(1)
Average
contracted
price ($/lbs)
(2)
2007
1,503
$ 16.47
2008
1,869
$ 21.99
2009
919
$ 29.91
2010 - 2013
1,976
$ 35.37
(1)
Certain contracts allow the buyer to adjust the purchase quantity within a specified range.
(2)
Certain contracts are subject to market related price adjustment mechanisms. In these cases, the price disclosed indicates the
previous periodic price resets.
F-64
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
26.
FINANCIAL RISK MANAGEMENT ACTIVITIES (continued)
The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
Receivables, cashCash and cash equivalents and other current liabilities
short-term debt
The carrying amounts approximate fair value because of the short-term duration of these instruments.
Long-term debt
The fair value of listed fixed rate debt and the Convertible Bonds are shown at their market value. The remainder of
debt re-prices on a short-term floating rate basis, and accordingly the carrying amount is considered to approximate fair
value.
Derivatives
The fair value of volatility-based instruments are estimated based on market prices, volatilities and interest rates, while
the fair value of forward sales and purchases are estimated based on the quoted market price for the contracts at
December 31, 20042006 and 2003.2005. The amounts include those contracts accounted for as normal purchases and sales.
23.
27. ADDITIONAL CASH FLOW INFORMATION
2006
$
2005
$
2004
$
2003
(As restated)
$
2002
(As restated)
$
Non-cash items
Reported as non-cash items in the statements of consolidated cash flows
flows are the following:
Amortization:
Mining assets, acquired properties and amortized intangibles
351699
165
165
Acquired properties
94
82
92593
445
247
257
Impairment:
Mining assets
16
4443
-1
Acquired properties
-
2574
-
Goodwill, other intangibles and non-marketable equity investments and investment in
affiliates-
24
2
9
-
141
3
78
-
Interest paid during the year
6782
2857
2259
Taxation paid during the year
110
22
28
100
28.EMPLOYEE BENEFIT PLANS
127
F-46
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24. EMPLOYEE
BENEFIT
PLANS
Defined Benefit Plans
The groupCompany has made provision for pension provident and medical schemes covering substantially all employees. The
retirement schemes as at December 31, 2004, 20032006, 2005 and 2002,2004, consists of the following which reflects the following
provision values:
20042006
$
2003
(As restated)2005
$
2002
(As restated)2004
$
AngloGold Ashanti Pension Fund (asset)
(38)
(8)
-
-
South American Fundambrás Pension Plan
8
6
3
UK Ashanti Retired Staff Pension Plan
-
-
-
Obuasi Mines Staff Pension Scheme
11
-
-(8)
Post Retirement medical scheme for AngloGold Ashanti South African
employees
159
188
152
128Other defined benefit plans
12511
Post Retirement medical scheme for Rand Refinery employees (asset)10
(2)
-
-
Retiree Medical Plan for North American employees
2
2
219
Sub Total
163132
136190
130163
Transferred to other non-current assets
AngloGold Ashanti Pension Fund
38
8
-
-8
Post retirement medical scheme for Rand Refinery employees
2
-2
-2
Total Provision
172
200
173
136
130
F-65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
28. EMPLOYEE BENEFIT PLANS(continued)
South Africa Defined Benefit Pension Fund
A statutory valuation of the defined benefit pension fund was performedThe plan is evaluated by independent actuaries on an annual basis as at December 31, 2002, which showed that
the fund was in deficit. The rate of the company contribution was reviewed and increased during theeach year. A formal statutory
additional funding planvaluation is required by legislation every three years. The previous statutory valuation was submitted tocarried out with an effective
date of December 31, 2005, and approved bywas completed in June of 2006. The next statutory valuation will have an effective
date no later than December 31, 2008. The valuation as at December 31, 2006 was completed at the Financial Services Board. According to the plan, thebeginning of
company has funded $5 million in 2004 and a further $30 million in real terms will be funded from 2005 to 2011.2007. In
arriving at their conclusions, the actuaries took into account reasonable long-term estimates of inflation,
increases in
wages, salaries and pension as well as returns on investments. Calculations forThe accumulated benefit obligation at
December 31, 2006 is $188 million.
All South African pension funds are governed by the Pension Fund’s financial position
are carried out in years when a statutory valuation is not performed and events and movements that could impact on
the valuation between the dateFunds Act of the interim valuation performed at September 30, 2004 and the balance sheet date
have been considered.1956 as amended.
Information with respect to the Defined Benefit Fund, which includes benefits for AngloGold Ashanti
employees, for the year ended December 31, is set forth in the table below:
Pension benefits
2004
$2006
2003$
(As restated)2005
$
20022004
(As restated)$
$
Change in benefit obligation
Benefit obligation at January 1,
162222
100216
69162
Service cost
7
6 4 3
6
Interest cost
16
14 13 8
14
Plan participants’ contributions
2
2
1
Plan amendment
-
22
-2
Actuarial (gain)/loss
1012
-31
(1)10
Benefits paid
(13)(14)
(10)(24)
(10)(13)
Translation
(21)
(23)
35 31 30
Benefit obligation at December 31,
216224
162222
100216
Change in plan assets
Fair value of plan assets at January 1,
230
204
137
93
70
Actual return on plan assets
3462
1657
134
Company contributions
126
813
312
Plan participants’ contributions
2
2
12
Benefits paid
(13)(14)
(10)(24)
(10)(13)
Translation
(24)
(22)
32 28 28
Fair value of plan assets at December 31,
262
230
204
137
93
Funded status at end of year
(12)38
(25)8
(7)(12)
Unrecognized net actuarial loss
20
25
7
Unrecognized prior service cost benefit
-
-
-20
Net amount recognized
38
8
-
-
F-47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24. EMPLOYEE BENEFIT PLANS (continued)
Pension benefits
2004
$
2003
(As restated)
$
2002
(As restated)
$
Pension projected and accumulated benefit obligation
Projected benefit obligation
216
162
Accumulated benefit obligation
177
126
Fair value of plan assets
204
1378
Components of net periodic benefit cost
Service cost
7
6 4 3
6
Interest cost
16
14 13 8
14
Actuarial gains and losses
(28)
(10)
10
Expected return on assets
(15)(22)
(12)(16)
(8)(15)
Amortization of prior service cost
-
2
-
Amortization of net loss
1actuarial gains and losses
-
-
1
Net periodic benefit cost
6(27)
7(6)
316
Pension benefits
2006
2005
2004
Assumptions
Assumptions
Weighted-average assumptions used to determine benefit obligations at
December 31,
Discount rate
8.00%
7.75%
7.5%
8.5%
11.5%
Rate of compensation increase
(1)
5.50%
5.00%
5.0% 5.0% 7.75%
Weighted-average assumptions used to determine the net periodic benefit cost
cost for the years ended December 31,
Discount rate
7.5%8.00%
8.5%7.75%
11.5%7.5%
Expected long-term return on plan assets
7.5%10.50%
8.5%10.14%
11.5%7.5%
Rate of compensation increase
(1)
5.0%
5.50%
5.00%
5.0%
7.75%
Pension increase
4.28%
4.05%
2.9%
3.6%
6.1%
(1)
The short-term compensation rate increase is 6% (2005: 5%) and the long-term
compensation rate increase is 4%5.5% (2005: 5%).
The expected long-term return on plan assets is determined using the
after tax return
of RSA Government long bond yields as a guide.
F-66
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
28. EMPLOYEE BENEFIT PLANS(continued)
Pension benefits
2006
2005
Plan assets
AngloGold Ashanti’s pension plan weighted-average asset allocations at
December 31, 2004 2006
and 2003,2005, by asset category are as follows:
Asset Category
Equity securities
65%
68%
69%
Debt securities
32%
25%28%
Real estate
- -30%
Other
3% 7%
4%
1%
100%
100%
Investment Policy
During the course of 2004 the Trustees of the AngloGold Ashanti Pension Fund undertook a major review of the Fund’s
investment strategy. As a result, a new investment structure was put in place towards the end of the year.
The Trustees have adopted a long-term horizon in formulating the Fund’s investment strategy, which is consistent with
the term of the Fund’s liabilities. The investment strategy aims to provide a reasonable return relative to inflation
across a range of market conditions.
The Trustees have adopted different strategic asset allocations for the assets backing pensioner and active member
liabilities. The strategic asset allocation defines what proportion of the Fund’s assets should be invested in each major
asset class. The Trustees have then selected specialist investment managers to manage the assets in each asset
class according to specific performance mandates instituted by the Trustees.
The Trustees have also put in place a detailed Statement of Investment Principles that sets out the Fund’s overall
investment philosophy and strategy.
Fund returns are calculated on a monthly basis, and the performance of the managers and Fund as a whole is formally
reviewed by the Fund’s Investment Sub-Committee at least every six months.
F-48
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24. EMPLOYEE BENEFIT PLANS (continued)
2003
20042006
(As restated)2005
No. of
Shares
Percentage of
total assets
Fair Value
$
Percentage of
total assets
Fair Value
$
$
Related Parties
Investments held in related parties are summarized as follows:
Equity Securities
Equity Securities
With AngloGold Ashanti and fellow
subsidiaries of AA plc
Anglo American Platinum Group
6,000
0.1%
-
0.2%
-
Anglo American plc
187,29540,400
2.2%0.8%
42
5.8%11.9%
827
AngloGold Ashanti
14,76032,960
0.3%0.6%
12
1.0%0.8%
12
With associatesfellow subsidiaries of AA plc group to April
2006Gold Fields Limited
-(1)
-
-
1.0%
1
Anglo American Platinum Group
13.5%
31
Tongaat Hulett Group
1.1%
3
4
63
Bonds
AngloGold Ashanti 2008 10.5%
0.1%
-
0.1%
1
5 11
Other investments exceeding 5% of total
plan assets
Bonds
RSA 2015 Government Bonds 13.5%
-
5.4%
18
RSA 2010 Government Bonds 13%
8.5%
17
5.5%-
77.8%
12
-
30
No investment exceeded 5% of total plan assets in 2006.
(1)
During the year, AngloGold Ashanti Limited launched an equity
offering which reduced Anglo American plc’s interest in
AngloGold Ashanti Limited. At December 31, 2006 Anglo
American plc holds an 41.67% interest in AngloGold Ashanti
Limited.
F-67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
28. EMPLOYEE BENEFIT PLANS(continued)
Cash Flows
Contributions
The companyCompany expects to contribute $11$6 million (2004: $12(2006: $7 million) to its
pension plan in 2005 of which $5 million relates to the additional
contribution in terms of the funding plan to compensate for the funding
shortfall.2007.
20042006
$
Estimated future benefit payments
The following pension benefit payments, which reflect the expected future service, as appropriate, are
expected to be paid:
2005
9
2006
10
2007
10
14
2008
13
2009
13
2010
13
2011
13
Thereafter
158
South Africa post-retirement medical benefits
The provision for post-retirement medical funding represents the provision for health care benefits for employees and
retired employees and their registered dependants. The post-retirement benefit costs are assessed in accordance with
the advice of independent professionally qualified actuaries. The actuarial method used is the projected unit credit
funding method. This scheme is unfunded. The last actuarial valuation was performed at December 31, 2006.
Information with respect to the defined benefit liability, which includes post-retirement medical benefits for
AngloGold Ashanti South Africa employees, for the year ended December 31, is set forth in the table below:
Other benefits
2006
$
2005
$
2004
$
Change in benefit obligation
Benefit obligation at January 1,
188
166
128
Service cost
1
1
1
Interest cost
13
12
13
Plan participants contributions
5
5
10
Benefits paid
(17)
(16)
(24)
Actuarial loss/(gain)
(14)
38
15
Translation
(17)
(18)
23
Benefit obligation at December 31,
159
188
166
Unfunded status of the end of the year
(159)
(188)
(166)
Unrecognized actuarial loss
-
-
14
Net amount recognized
(159)
(188)
(152)
F-68
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
28. EMPLOYEE BENEFIT PLANS(continued)
Other benefits
2006
$
2005
$
2004
$
Components of net periodic benefit cost
Service cost
1
1
1
Interest cost
13
12
13
Actuarial gains and losses
(14)
38
15
Amortization of prior service cost
-
-
1
-
51
30
The assumptions used in calculating the above amounts are:
Discount rate
8.00%
7.75%
9%
Expected increase in health care costs
4.75%
5.00%
5%
Assumed health care cost trend rates at December 31
Health care cost trend assumed for next year
4.75%
5.00%
5.0%
Rate to which the cost trend is assumed to decline (the ultimate trend
rate)
4.75%
5.00%
5.0%
Year that the rate reaches the ultimate trend
N/A
N/A
N/A
Assumed health care cost trend rates have a significant effect on the
amounts reported for health care plans. A one percentage-point
change in assumed health care cost trend rates would have the
following effect:
1-percentage point
increase
1-percentage point
decrease
Effect on total service and interest cost
2
(1)
Effect on post-retirement benefit obligation
17
(14)
Cash flows
Post-retirement medical plan
AngloGold Ashanti expects to contribute $25 million (2006: $13 million) to
the post-retirement medical plan in 2007.
Estimated future benefit payments
$ million
The following benefit payments, which reflect expected future service, as
appropriate, are expected to be paid:
2007
11
2008
11
2009
11
Thereafter
2010
12
1482011
12
Thereafter
102
Other Defined Benefit Plans
Other plans comprise the following and have been aggregated in the tables of change in benefit obligations, change in
plan assets and components of Net Periodic Benefit Cost.
F-69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
28. EMPLOYEE BENEFIT PLANS(continued)
Information with respect to the South American Brasil Fundambrás pension plan, for the year ended
December
31, is set forth in the table below:as follows:
On November 30, 19881998 the defined benefit fund was converted to a defined contribution fund with an actuarial net
liability of
$6 $6 million. This liability is revised annually by Mercer, the plan's actuary.independent actuaries. The transfer of funds requires approval fromhas been
approved by the governmental SPC agency (still in process) and is conditional on the full funding of the actuarial liability.
net liability was transferred to a defined contribution planon September 30, 2005.F-49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24. EMPLOYEE BENEFIT PLANS (continued)
Pension benefits2006
2005
2004
$Assumptions
2003
$
2002
$
Change in benefit obligation
Benefit obligation at January 1,
16
11
15
Service cost
- -
1
Interest cost
2 1
1
Actuarial (gain)/loss
3
2
(1)
Benefits paid
(1) -
-
Translation
2 2
(5)
Benefit obligation at December 31,
22
16
11
Change in plan assets
Fair value of plan assets January 1,
11
8
10
Actual return on plan assets
3
2
2
Benefits paid
(1) -
-
Translation
2 1
(4)
Fair value of plan assets December 31,
15
11
8
Funded status at the end of the year
(7)
(5)
(3)
Unrecognized net actuarial gain
(1)
(1)
-
Unrecognized prior service cost benefit
-
-
-
Net amount recognized
(8)
(6)
(3)
Pension projected and accumulated benefit obligation
Projected benefit obligation
22
16
Accumulated benefit obligation
22
16
Fair value of plan assets
15
12
Components of net periodic benefit cost
Service cost
- -
1
Interest cost
2 1
1
Expected return on plan assets
(1)
(1)
(1)
Amortization of prior service cost
-
-
-
Amortization of actuarial (gain)/loss
(2)
3
(1) 3
1
Assumptions
Weighted-average assumptions used to determine benefit obligations
at
December 31,
Discount rate
11.3%N/A
11.3%N/A
11.3%
Rate of compensation increase
7.1%N/A
N/A
7.1%
7.1%
Weighted-average assumptions used to determine net periodic benefit
cost
at December 31,
Discount rate
11.3%N/A
11.3%N/A
11.3%
Expected long-term return on plan assets
11.3%N/A
11.3%N/A
11.3%
Rate of compensation increase
7.1%N/A
7.1%N/A
7.1%
Pension increase
5.0%N/A
N/A
5.0%
5.0%
No valuation is necessary at December 31, 2006 as the fund was converted
during 2005 to a defined contribution plan.
Information with respect to the Ashanti Retired Staff pension plan, for the year ended December 31, is as
follows:
The pension scheme provides a retirement benefit to former Ashanti employees that were based at the former London
office. The scheme is closed to new members and participants are either retired or deferred members. The plan is
evaluated by actuaries on an annual basis using the projected unit credit funding method. The contributions are made
to the plan and it is funded with a marginal shortfall of $1 million (2005: $0.2 million).
2006
2005
2004
Assumptions
Weighted-average assumptions used to determine benefit obligations
at December 31,
Discount rate
5.00%
5.00%
5.8%
Rate of compensation increase
N/A
N/A
N/A
Weighted-average assumptions used to determine net periodic benefit
cost at December 31,
Discount rate
5.00%
5.00%
5.8%
Expected long-term return on plan assets
6.13%
6.07%
5.8%
Rate of compensation increase
N/A
N/A
N/A
Pension increase
2.50%
2.50%
2.5%
The expected long-term return on plan assets is determined using the after
tax return of domestic bonds, and fixed deposits
Plan assets
The Brasil Fundambrás defined benefit pension plan weighted-average
asset allocations at December 31, 2004 and 2003, by asset category are as
follows:
Asset Category
Equityequity securities
- 10%
Debt securities
95%
85%
Property
4% 4%
Cash
1% 1%
100% �� 100%
Investment policy
The general policy of the fund is to select investments that will achieve a stable return in order to at least maintain as
well as reduce the fund deficit.
No investments are made in related party entities.
F-50
F-70
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24.28. EMPLOYEE BENEFIT PLANS(continued)
Cash Flows2006
Contributions
No contributions are made to this fund since it has been converted to a defined contribution fund and once the local
authorities authorise the transfer, the full liability will be funded on transfer to the contribution fund.
Estimated future benefit payments2005
Until the fund is transferred to the contribution there will be no significant benefit payments.
Information with respect to the UK Ashanti Retired Staff pension plan, for the year ended December 31, is set
forth in the table below:
Pension benefits
2004
$
2003
$
2002
$
Change in benefit obligation
Benefit obligation at January 1,
-
-
-
Acquisition of subsidiary
3
-
-
Service cost
- -
-
Interest cost
- -
-
Actuarial (gain)/loss
-
-
-
Benefit obligation at December 31,
3
-
-
Change in plan assets
Fair value of plan assets January 1,
-
-
-
Acquisition of subsidiary
3
-
-
Actual return on plan assets
-
-
-
Fair value of plan assets December 31,
3
-
-
Funded status at the end of the year
-
-
-
Unrecognized net actuarial loss/(gain)
-
-
-
Unrecognized prior service cost benefit
-
-
-
Net amount recognized
-
-
-
Pension projected and accumulated benefit obligation
Projected benefit obligation
3
Accumulated benefit obligation
3
Fair value of plan assets
3
Components of net periodic benefit cost
Service cost
- -
-
Interest cost
- -
-
Expected return on plan assets
-
-
-
Amortization of prior service cost
-
-
-
Amortization of actuarial (gain)/loss
-
-
-
- -
-
Assumptions
Weighted-average assumptions used to determine benefit obligations at
December 31,
Discount rate
5.8%
-
-
Rate of compensation increase
N/A
-
-
F-51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24. EMPLOYEE BENEFIT PLANS (continued)
Pension benefits
2004
$
2003
$
2002
$
Weighted-average assumptions used to determine net periodic benefit cost
at December 31,
Discount rate
5.8%
-
-
Expected long-term return on plan assets
5.8%
-
-
Rate of compensation increase
N/A
-
-
Pension increase
2.5%
-
-
The expected long-term return on plan assets is determined using the after
tax return of domestic bonds and fixed deposits
Plan assets
The UK Ashanti Retired Staff defined benefit pension plan weighted-
average asset allocations at
December 31, 20042006 and 2003,2005, by asset
category are as follows:
Asset Category
Equity securities
53%55%
-51%
Debt securities
43%40%
-41%
Cash
4% -
100% -6%
Investment policyProperty
1%
2%
The general policy of the fund is to select investments that will achieve an optimal return on the plan assets.100%
100%
No investments are made in related party entities.
Cash Flows
Contributions
No contributions are made to this fund since the fund is closed to new members and the current members are retired or
deferred.
Estimated future benefit payments
The following benefit payments, which reflect the expected future service, as appropriate, are expected to be paid:
2005
-
2006
-
2007
-
2008
-
2009
-
Thereafter
3
F-52
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24. EMPLOYEE BENEFIT (continued)
Information with respect to the Obuasi Mines Staff Pension Scheme, for the year ended December 31, is setas
forth in the table below:follows:
The scheme provides monthly payments in Ghanaian currency (indexed to the US dollar) to retirees until death. The
benefits for the scheme are based on the years of service and the compensation levels of the covered retirees. The
scheme is closed to new members and all the scheme participants are retired. The scheme is unfunded and
accordingly, no assets related to the scheme are recorded.
Pension benefits2006
2005
2004
$Assumptions
2003
$
2002
$
Change in benefit obligation
Benefit obligation at January 1,
-
-
-
Acquisition of subsidiary
11
-
-
Service cost
- -
-
Interest cost
- -
-
Actuarial (gain)/loss
-
-
-
Benefit obligation at December 1,
11
-
-
Funded status at the end of the year
(11)
-
-
Unrecognized net actuarial loss/(gain)
-
-
-
Unrecognized prior service cost benefit
-
-
-
Net amount recognized
(11)
-
-
Pension projected and accumulated benefit obligation
Projected benefit obligation
11
Accumulated benefit obligation
11
Fair value of plan assets
-
Components of net periodic benefit cost
Service cost
- -
-
Interest cost
1 -
-
Expected return on plan assets
-
-
-
Amortization of prior service cost
-
-
-
Amortization of actuarial (gain)/loss
-
-
-
1 -
-
Assumptions
Weighted-average assumptions used to determine benefit obligations at
December 31,
Discount rate
4.0%
-
-
Rate of compensation increase
N/A
-
-
Weighted-average assumptions used to determine net periodic benefit cost
at December 31,
Discount rate
4.0%
-
-
Rate of compensation increase
N/A
-
-
Pension increase
4.5%
-
-
Cash Flows
Contributions
No contributions are made to this fund since the fund is closed to new members and the current members are all
retired.
F-53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24. EMPLOYEE BENEFIT PLANS (continued)
Pension benefits
2004
$
2003
$
2002
$
Estimated future benefit payments
The following pension benefit payments, which reflect the expected future service, as appropriate, are expected to be
paid:
2005
1
2006
1
2007
1
2008
1
2009
-
Thereafter
7
South Africa post-retirement medical benefits
The provision for post-retirement medical funding represents the provision for health care benefits for employees and
retired employees and their registered dependants.
The post-retirement benefit costs are assessed in accordance with the advice of independent professionally qualified
actuaries. The actuarial method used is the projected unit credit funding method. This scheme is unfunded.
Information with respect to the defined benefit liability, which includes post-retirement medical benefits for
AngloGold Ashanti South Africa employees, for the year ended December 31, is set forth in the table below:
Other benefits
2004
$
2003
$
2002
$
Change in benefit obligation
Benefit obligation at January 1,
128
125
93
Service cost
1
1
1
Interest cost
13
12
11
Plan participants contributions
10
10
-
Amendments
-
(28)
(1)
(35)
Benefits paid
(24)
(18)
(7)
Actuarial gains
15
(9)
18
Translation
23
35
44
Benefit obligation at December 31,
166
128
125
Unfunded benefit liability
(166)
(128)
(125)
Unrecognized actuarial loss
14
-
-
Net amount recognized
(152)
(128)
(125)
(1)
Amendments include the reversal of the liability of $44 million which
in prior years represented the excess liability not covered by members’
contributions. With the transfer of the scheme to an outside service
provider, this liability will now be borne by the service provider and not
by AngloGold Ashanti.
F-54
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24. EMPLOYEE BENEFIT PLANS (continued)
Other benefits
2004
$
2003
$
2002
$
Components of net periodic benefit cost
Service cost
1
1
1
Interest cost
13
12
11
Amortization of prior service cost
1
18
-
15
31
12
The assumptions used in calculating the above amounts are:
Discount rate
9%
10.0%
11.5%
Expected increase in health care costs
5%
5.5%*
9.2%
*
The 2003 short-term (1 year) health care inflation costs was 5.5 percent and 5 percent thereafter.
2004 2003
2002
Assumed health care cost trend rates at December 31,
Health care cost trend assumed for next year
5.0%
5.5%
9.2%
Rate to which the cost trend is assumed to decline (the ultimate trend rate)
5.0%
5.0%
5.0%
Year that the rate reaches the ultimate trend
N/A
2005
2006
Assumed health care cost trend rates have a significant effect on the
amounts reported for health care plans. A one percentage-point change in
assumed health care cost trend rates would have the following effect:
1-percentage point
increase
1-percentage point
decrease
Effect on total service and interest cost
2
(1)
Effect on post-retirement benefit obligation
16
(14)
Cash flows
Post-retirement medical plan
AngloGold Ashanti expects to contribute $11 million (2004: $15 million) to
the post-retirement medical plan in 2005.
Estimated future benefit payments
$
The following benefit payments, which reflect expected future service, as
appropriate, are expected to be paid:
2005
11
2006
11
2007
12
2008
12
2009
13
Thereafter
191
F-55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24. EMPLOYEE BENEFIT PLANS (continued)
Information with respect to the Post Retirement Medical Plan and Obligation for the Rand Refinery Ltd
employees, for the year ended December 31, is set forth in the table below:
Other
benefits
2004
$
Other
benefits
2003
$
Other
benefits
2002
$
Change in benefit obligation
Benefit obligations at beginning of year
-
-
-
Transfer in
3 -
-
Service cost
- -
-
Interest cost
- -
-
Plan participants contributions
-
-
-
Amendments
- -
-
Benefits paid
- -
-
Actuarial loss (gain)
-
-
-
Translation
- -
-
Benefit obligation at end of year
3
-
-
Change in plan assets
Fair value of plan assets at beginning of year
-
-
-
Transfers in
5 -
-
Actual return on plan assets
-
-
-
Employer contributions
-
-
-
Plan participants contributions
-
-
-
Benefits paid
- -
-
Translation
- -
-
Fair value of plan assets at end of year
5
-
-
Funded status – unfunded benefit liability
2
-
-
Unrecognized net actuarial loss (gain)
-
-
-
Unrecognized prior service cost benefit
-
-
-
Net amount recognized
2
-
-
Components of Net Periodic Benefit Cost
Service cost
- -
-
Interest cost
1 -
-
Expected return on plan assets
-
-
-
Amortization of prior service cost
-
-
-
Amortization of net (gain) loss
(1)
-
-
Net periodic benefit cost
-
-
-
Assumptions
Weighted-average assumptions used to determine benefit obligations
at December 31,
Discount rate
10.0%5.00%
4.00%
4.0%
Rate of compensation increase
N/A
N/A
ExpectedN/A
Weighted-average assumptions used to determine net periodic benefit
cost at December 31,
Discount rate
5.00%
4.00%
4.0%
Rate of compensation increase in health care costs
8.0%
N/A
N/A
Expected return on plan assets
10.0%
N/A
N/APension increase
Plan Assets
The weighted-average asset allocation of the Rand Refinery post
retirement medical fund at December 31, 2004 by asset category are as
follows:4.50%
Asset Category
Debt securities3.00%
90%4.5%
N/A
N/A
Cash
10% N/A
N/A
100% N/A
N/A
Rand Refinery is a 53 percent held subsidiary of AngloGold Ashanti Limited and its results are consolidated in the
group's financial statements.
F-56F-71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24.28. EMPLOYEE BENEFIT PLANS(continued)
Information with respect to the Retiree Medical Plan, which includes benefits for AngloGold Ashanti USA
employees, for the year ended December 31, is as follows:
BENEFIT
PLANS (continued)
North America Retiree Medical Plan – AngloGold Ashanti USA provides health care and life insurance benefits for
certain retired employees under the AngloGold North America Retiree Medical Plan (the “Retiree Medical Plan”). With
effect December 31, 1999, no additional employees were eligible to receive post-retirement benefits under the Retiree
Medical Plan. Curtailment accounting was applied at December 31, 1999.
The Retiree Medical Plan is a non-contributory defined benefit plan. This plan was last evaluated by independent
actuaries in December 2002September 2006 who took into account reasonable long-term estimates of increases in health care costs
and mortality rates in determining the obligations of AngloGold Ashanti USA under the Retiree Medical Plan. The
evaluation of the Retiree Medical Plan reflected liabilities of $2 million (2003:(2005: $2 million, 2004: $2 million). The Retiree
Medical Plan is
an unfunded plan. The Retiree Medical Plan is evaluated on an annual basis using the projected
benefit method.
Other
benefits
2006
Other
benefits
2005
Other
benefits
2004
The assumptions used in calculating the benefit obligations at
December 31,
Discount rate
5.00%
5.50%
6.0%
Expected return on plan assets
N/A
N/A
N/A
Rate of compensation increase
(1)
N/A
N/A
N/A
(1)
The Company does not share in future cost increases and therefore the rate of providing benefits under the Retirement Plan and the Retiree Medical Plan was insignificant in 2003 andcompensation increase is not applicable.
2002.
Information with respect to the Plan andNufcor South Africa Retiree Medical Plan, which includes benefits for AngloGold Ashantithe
USANufcor South Africa past employees, for the year ended December 31, is set forth in the table below:as follows:
Other
benefits
2006
Other
benefits
2005
Other
benefits
2004
$Assumptions
Weighted-average assumptions used to determine benefit obligations
at December 31,
Discount rate
8.50%
7.75%
11.0%
Expected increase in health care costs
6.50%
5.75%
9.0%
Expected return on plan assets
8.50%
7.75%
11.0%
Plan Assets
The asset allocation of the Nufcor South Africa post retirement medical
fund at December 31, 2006 by asset category are as follows:
Asset Category
Unit Trust Investment Funds
100%
100%
100%
100%
100%
100%
F-72
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
28. EMPLOYEE BENEFIT PLANS(continued)
Information with respect to the Post Retirement Medical Plan and Obligation for the Rand Refinery Ltd
employees, for the year ended December 31, is as follows:
Other
benefits
2006
Other
benefits
2003
$2005
Other
benefits
2002
$2004
ChangeAssumptions
Weighted-average assumptions used to determine benefit obligations at
December 31,
Discount rate
8.50%
7.75%
10.0%
Expected increase in benefit obligation
Benefit obligations at January 1,health care costs
26.50%
25.75%
28.0%
Service cost
- -
-
Interest cost
- -
-
Effect of curtailment
-
-
-
Benefits paid
- -
-
Actuarial gain
- -
-
Translation
- -
-
Benefit obligation at December 31,
2
2
2
Change in plan assets
Fair value of plan assets at January 1,
-
-
-
ActualExpected return on plan assets
-7.77%
-7.26%
-10.0%
Company contribution
-
-
-
BenefitsPlan Assets
- -
-
Translation
- -
-
Fair valueThe asset allocation of plan assetsthe Rand Refinery post retirement medical fund at
December 31, 2006 by asset category are as follows:
-
-
-
Unfunded
Asset Category
Debt securities
76%
75%
Cash
24%
25%
100%
100%
2006
2005
2004
North America Supplemental Employee Retirement Plan (SERP)
Certain former employees of Minorco (USA) Inc. were covered under the Minorco
(USA) Inc. Supplemental Employee Retirement Plan (the SERP), a non-
contributory defined benefit liabilityplan. The SERP was last evaluated by independent
actuaries in September 2006 who took into account long-term estimates of
inflation, mortality rates in determining the obligation of AngloGold Ashanti USA
under the SERP. This evaluation of the SERP reflected plan liabilities of
$1 million (2005: $1 million, 2004: $1 million). The SERP is an unfunded plan
and is evaluated by actuaries on an annual basis using the projected benefit
method.
(2)
(2)
(2)
TheWeighted-average assumptions used in calculating to determine benefit obligations at
the above amounts are:
end of the year are as follows:Discount rate: retired/all others
6.0%
6.25%
6.75%
Rate of compensation increase
N/A
N/A
N/A
Net periodic pension and post-retirement benefit costs include:
Service cost
- -
-
Interest cost
- -
-
Expected return on assets
-
-
-
Curtailment accounting charge
-
-
-
Actuarial gain
- -
-
Translation
- -
-
Net amount recognized
-
-
-
The assumptions used in calculating the above amounts are:
Discount rate
5.00%
5.5%
6.0% 6.25%
6.75%
Expected return on plan assets
N/A
N/A
N/A
Rate of compensation increase
N/A
N/A
N/A
F-57
Weighted-average assumptions used to determine the net periodic benefit
cost of the year:
Discount rate
5.00%
5.50%
6.00%
Expected return on plan assets
N/A
N/A
N/A
Rate of compensation increase
N/A
N/A
N/A
Pension increase
(1)
N/A
N/A
N/A
(1)
Pension benefits are fixed and pension inflation thus not relevant.
Aggregated information in respect of the other defined benefit plans, for the year ended December 31, is set
forth in the table below:
2006
$
2005
$
2004
$
Change in benefit obligations
Balance at January 1,
18
41
18
Acquisition of subsidiary
-
-
14
Transfer in
-
-
3
Interest cost
-
2
2
Actuarial loss
2
-
3
Settlements and Curtailments
-
(25)
-
Benefits paid
(1)
(2)
(1)
Translation
-
2
2
Balance at December 31,
19
18
41
F-73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24.28. EMPLOYEE BENEFIT PLANSPLANS (continued)
2006
$
2005
$
2004
$
Change in plan assets
Fair value of plan assets at January 1,
8
23
14
Transfer in
-
-
5
Actual return on plan assets
-
1
3
Settlements and curtailments
-
(15)
-
Benefit paid
-
(1)
(1)
Translation
-
-
2
Fair value of plan assets at December 31,
8
8
23
Unfunded status at end of year
(11)
(10)
(18)
Unrecognized net actuarial gain
-
-
(1)
Net amount recognized
(11)
(10)
(19)
Components of net periodic benefit cost
Interest cost
-
2
2
Actuarial gains and losses
2
-
3
Expected return on plan assets
-
(1)
(1)
Amortization of actuarial gains and losses
-
-
(2)
2
1
2
Cash flows
The other retirement defined benefit plans are all closed to new members and the current members are either retired
or deferred members. The Company does not make a contribution to these plans.
Estimated Future Benefit Payments
The following future benefit payments, which reflect the expected future service lives, as appropriate, are expected to
be paid:
2007
1
2008
1
2009
1
2010
1
2011
1
Thereafter
14
Defined Contribution Funds
Contributions to the various retirement schemes are fully expensed during the year in which they are funded and the
cost of providingcontributions to retirement benefits for the year amounted to $41$40 million (2003: $25(2005: $31 million, 2004: $40 million).
Australia
The region contributes to the Australian Retirement Fund for the provision of benefits to employees and their
dependants on retirement, disability or death. The fund is a multi-industry national fund with defined contribution
arrangements. Contribution rates by the operation on behalf of employees varies, with minimum contributions, meeting
compliance requirements under the Superannuation Guarantee legislation. Members also have the option of
contributing to approved personal superannuation funds. The contributions by the operation are legally enforceable to
the extent required by the Superannuation Guarantee legislation and relevant employment agreements. The cost to the
Company of all these contributions amounted to $2 million (2005: $2 million, 2004: $2 million).
F-74
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
28. EMPLOYEE BENEFIT PLANS(continued)
Namibia (Navachab)
Navachab employees are members of a defined contribution provident fund. The fund is administered by the Old
Mutual insurance company.Company. Both the companyCompany and the employees make contributions to this fund. AngloGold
Ashanti
seconded employees at Navachab remain members of the applicable pension or retirement fund in terms of
their
conditions of employment with AngloGold Ashanti. The cost of providing retirement benefits for the year
amounted to $1 million (2005: $1 million, 2004: $1 million).
Mali (Sadiola, Yatela and Morila)
The Malian operations do not have retirement schemes for employees. All employees (local and expatriate) contribute
towards the Government social security fund, and the companyCompany also makes a contribution towards this fund. On
retirement, Malian employees are entitled to a retirement benefit from the Malian Government. Expatriate employees
are reimbursed only their contributions to the social security fund. AngloGold Ashanti seconded employees in Mali
remain members of the applicable pension or retirement fund in terms of their conditions of employment with AngloGold
Ashanti. The cost of providing retirement benefits for the year amounted to $1 million (2005: $2 million,
2004: $4 million). The Sadiola, Yatela and Morila Joint Ventures are equity accounted. Refer to Note 13.15.
Tanzania (Geita)
Geita does not have a retirement scheme for employees. Tanzanian nationals contribute towardsto the GovernmentNational Social Security
social security fund,Fund (NSSF) or the Parastatal Provident Fund (PPF), depending on the employee’s choice, and the companyCompany also
makes a contribution towards thison the employee’s behalf to the same fund. On retirement,leaving the Company, employees aremay withdraw
entitled to a retirement benefittheir contribution from the Tanzanian Government.fund. From July 2005, the Company has set up a supplemental provident fund which is
administered by the Parastatal Provident Fund (PPF) with membership available to permanent National employees on
a voluntary basis. The companyCompany makes no contribution towards any
retirement schemes for contracted expatriate
employees. AngloGold Ashanti employees seconded employees in Tanzania remain
members of the applicable pension or
retirement fund in terms of their conditions of employment with AngloGold
Ashanti. The company acquired an additional 50 percent in Geita as partCompany contributes to the
National Social Security Fund (NSSF) on behalf of expatriate employees. On termination of employment the AngloGold Ashanti BusinessCompany
Combination, effective April 26, 2004. Refer to Note 13.may apply for a refund of contributions from the NSSF.
Defined Contribution PlanNorth America –
AngloGold Ashanti USA sponsors a 401(k) savings plan whereby employees may
contribute up to 60 percent of their
salary, of which up to 5 percent is matched at a rate of 150 percent by AngloGold
Ashanti USA. AngloGold Ashanti
USA's contributions were $2 million (2003:(2005: $2 million) during the years ended
December 31, 2004 and 2003.
Supplemental Employee Retirement Plan – Certain former employees of Minorco (USA) Inc. were covered under the
Minorco (USA) Inc. Supplemental Employee Retirement Plan (the “SERP”), a non-contributory defined benefit plan.
The SERP was last evaluated by independent actuaries in 2004 who took into account long-term estimates of inflation,
and mortality rates in determining the obligations of AngloGold Ashanti USA under the SERP. This evaluation of the
SERP reflected Plan liabilities of $1 million, (2003: $12004: $2 million). The SERP is an unfunded plan.
The SERP is evaluated on an annual basis using the projected benefit method. The costs of providing benefits under
the SERP for the year ended December 31, 2004 and 2003 were nominal.
South America
The AngloGold Ashanti South America region operates a number of defined contribution arrangements for their employees in Brazil.
employees. These arrangements are funded by the operations (basic plan) and operations/employees (optional supplementary
supplementary plan) and are embodied in a pension plan entity, Fundambrás Sociedade de Previdéncia Privada, which
is responsible for administering the funds and making arrangements to pay the benefits.
In December 2001, contributions commenced to a new. A PGBL fund, a defined contribution plan similar to the American
401 (k) type of plan, administeredstarted in December 2001. Administered by Bradesco
Previdencia e Seguros. The transfer of funds from Fundambrás to
PGBL requires approval fromSeguros (which assume the governmental SPC agency (whichrisk for any eventual actuarial liabilities), this is stillthe only private pension plan
sponsored by the Company in the process of being finalized) and is
conditionalcountry. Contributions amounted to the full funding of the actuarial liability.
$2 million (2005: $1 million, 2004: $1 million).
F-58
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24.EMPLOYEE BENEFIT PLANS (continued)
Ghana and Guinea
Ghana and Guinea contribute to provident plans for their employees which are defined contribution plans. The funds
are administered by Celestine BaakoBoards of Trustees and invested mainly in Ghana and Guinea governmentgovernments’ treasury instruments, and
other fixed interest deposits.deposits and other projects. The costs of these contributions werefor the year amounted to $3 million
(2005: $3 million, 2004: $2 million during the period of eight months ended
December 31, 2004.million).
South Africa
South Africa contributes to various industry-based pension and provident retirement plans which covers substantially all
employees and are defined contribution plans. These plans are all funded and the assets of the schemes are held in
administrated funds separately from the group'sCompany's assets. The cost of providing these benefits amounted to
$29 million (2005: $20 million, 2004: $29 million
(2003: $20 million) during the year..
25. SALES OF SHAFTS
The Free State assets were disposed of to a joint venture between Harmony Gold Mining Company Limited (Harmony)
and African Rainbow Minerals Gold Limited (ARM) with effect from January 1, 2002 for a net consideration of $229
million including tax payable by AngloGold and net of contractual obligations pursuant to the sale. The final condition
precedent relative to the sale was fulfilled on April 11, 2002 on which date the agreement of sale became unconditional.F-75
26.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
29. SEGMENT AND GEOGRAPHICAL INFORMATION
The companyCompany produces gold as its primary product and does not have distinct divisional segments in terms of principal
business activity, but manages its business on the basis of different geographic segments. Therefore information
regarding separate geographic segments is provided. In 2004, the company changed its presentation of segment
information from a regional basis to operating segments by country. Following the change in the composition of
reportable segments and where applicable, the company has restated the corresponding items of segment information
for all earlier periods presented. This information is consistent with the information used by the company’s
Company’s chief
operating decision makers in evaluating operating performance of, and making resource allocation
decisions among
operations.
Year ended December 31
Business segment data
2006
$
2005
$
2004
$
2003Revenues
(As restated)
$
2002
(As restated)
$
Revenues
Revenues from product sales:
South Africa
1,2051,347
1,1791,153
9301,118
Argentina
97125
77101
6797
Australia
172271
157213
155172
Brazil
158228
147172
128158
Ghana
281
314
206
Guinea
149
127
44
Mali
317
242
182
Namibia
50
36
27
Tanzania
137
233
207
USA
95
104
105
Zimbabwe
-
-
Guinea
44
-
-
Mali
182
205
219
Namibia
27
26
26
Tanzania
207
107
84
USA
105
128
152
Zimbabwe
4
-
-3,000
Total revenues from product sales2,695
2,407
2,026
1,7612,320
Less: Equity method investments included above
(224)(317)
(312)(242)
(303)(224)
Total consolidatedrevenues
2,1832,683
1,7142,453
1,4582,096
Depreciation and amortization expense
South Africa
324
248
192
Argentina
35
22
28
Australia
39
35
30
Brazil
35
33
27
Ghana
119
113
70
Guinea
52
39
10
Mali
50
60
57
Namibia
7
7
5
Tanzania
49
56
47
USA
39
40
40
Zimbabwe
-
-
1
749
653
507
Less: Equity method investments included above
(50)
(60)
(62)
Total depreciation and amortization expense
699
593
445
Segment income/(loss)
South Africa
359
(38)
77
Argentina
43
37
24
Australia
82
39
54
Brazil
92
60
103
Ghana
(65)
(96)
(11)
Guinea
(16)
7
(19)
Mali
126
39
13
Namibia
19
11
2
Tanzania
(132)
(35)
14
USA
(13)
(21)
(7)
Other, including Corporate and Non-gold producing subsidiaries
(54)
(48)
(4)
Total segment income/(loss)
441
(45)
246
F-59
F-76
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
26.29. SEGMENT AND GEOGRAPHICAL INFORMATION(continued)
Year ended December 31
Business segment data
2006
$
2005
$
2004
$
Reconciliation of segment income/(loss) to Net income
Segment total
441
(45)
246
Exploration costs
(58)
(44)
(44)
General and administrative expenses
(140)
(71)
(58)
Market development costs
(16)
(13)
(15)
Non-hedge derivative loss
(208)
(142)
(123)
Other operating costs and expenses
(16)
(9)
(8)
Taxation (expense)/benefit
(122)
121
132
Discontinued operations
6
(44)
(11)
Minority interest
(29)
(23)
(22)
Cumulative effect of accounting change
-
(22)
-
Net (loss)/income
(142)
(292)
97
Segment assets
South Africa
3,093
3,019
3,431
Argentina
254
248
260
Australia
805
737
711
Brazil
544
371
340
Ghana
2,058
2,104
2,126
Guinea
357
349
325
Mali
280
(1)
309
(1)
344
(1)
Namibia
64
51
38
Tanzania
1,382
1,281
1,065
USA
507
429
408
Other, including Corporate, Assets held for sale and Non-gold
producing subsidiaries
169
215
348
Total segment assets
9,513
9,113
9,396
Expenditure for additions to long-lived assets
South Africa
321
347
333
Argentina
19
15
13
Australia
86
38
28
Brazil
186
85
40
Ghana
97
90
42
Guinea
16
36
57
Mali
6
12
11
Namibia
5
5
21
Tanzania
67
78
13
USA
13
8
16
Zimbabwe
-
-
1
Other, including Corporate and Non-gold producing subsidiaries
1
8
8
817
722
583
Less: Equity method investments included above
(6)
(12)
(12)
Total expenditure for additions to long-lived assets
811
710
571
Geographical area data
Total revenues
South Africa
1,365
1,165
1,143
Argentina
126
103
100
Australia
272
215
172
Brazil
230
178
173
Ghana
281
314
209
Guinea
145
127
44
Mali
321
236
181
Namibia
51
36
28
Tanzania
137
233
208
USA
95
106
106
Zimbabwe
-
-
4
Other, including Corporate and Non-gold producing subsidiaries
13
8
6
3,036
2,721
2,374
Less: Equity method investments included above
(321)
(236)
(223)
Total revenues
2,715
2,485
2,151
(1)
Investment held.
F-77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
29. SEGMENT AND GEOGRAPHICAL INFORMATION(continued)
Year ended December 31
Business segment data
20042006
$
2003
(As restated)2005
$
2002
(As restated)
$
Depreciation and amortization expense
South Africa
192
111
116
Argentina
28
28
19
Australia
30
30
33
Brazil
27
28
30
Ghana
70
-
-
Guinea
10
-
-
Mali
57
62
63
Namibia
5
3
1
Tanzania
47
12
13
USA
40
47
58
Zimbabwe
1
-
-
Total depreciation and amortization expense
507
321
333
Less: Equity method investments included above
(62)
(74)
(76)
Total consolidated
445
247
257
Segment income/(loss)
South Africa
66
166
245
Argentina
24
20
27
Australia
54
9
22
Brazil
103
70
57
Ghana
(11)
-
-
Guinea
(19)
-
-
Mali
13
48
71
Namibia
2
8
13
Tanzania
14
23
5
USA
(7)
3
(4)
Other, including Corporate and Non-gold producing
subsidiaries
(4)
50
-
Total segment income/(loss)
235
397
436
Reconciliation of segment income/(loss) to Net income
Segment total
235
397
436
Exploration costs
(44)
(40)
(28)
General and administrative expenses
(58)
(43)
(29)
Market development costs
(15)
(19)
(17)
Non-hedge derivative (loss)/gains
(131)
119
74
Deferred income and mining tax benefit/(expensed)
132
(147)
(64)
Minority interest
(22)
(17)
(16)
Cumulative effect of accounting change
-
(3)
-
Net income
97
247
356
Segment assets
South Africa
3,450
3,057
2,185
Argentina
260
264
286
Australia
711
649
485
Brazil
340
286
276
Ghana
2,126
-
-
Guinea
325
-
-
Mali
344
(1)
332
(1)
343
(1)
Namibia
38
30
20
Tanzania
1,065
171
(1)
167
(1)
USA
408
416
432
Other, including Corporate and Non-gold producing
subsidiaries
329
138
156
Total segment assets
9,396
5,343
4,350
(1)
Investment held.
F-60
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
26. SEGMENT AND GEOGRAPHICAL INFORMATION (continued)
Year ended December 31
Business segment data
2004
$
2003
(As restated)
$
2002
(As restated)
$
Expenditure for additions to long-lived assets
South Africa
333
242
106
Argentina
13
10
3
Australia
28
21
31
Brazil
40
36
24
Ghana
42
-
-
Guinea
57
-
-
Mali
11
14
16
Namibia
21
2
2
Tanzania
13
10
9
USA
16
27
74
Zimbabwe
1
-
-
Other, including Corporate and Non-gold producing subsidiaries
8
1
6
Total expenditure for additions to long-lived assets
583
363
271
Less: Equity method investments included above
(12)
(24)
(25)
Total consolidated
571
339
246
Geographical area data
Total revenues
South Africa
1,230
1,201
966
Argentina
100
76
63
Australia
172
157
155
Brazil
173
151
129
Ghana
209
-
-
Guinea
44
-
-
Mali
181
207
222
Namibia
28
28
27
Tanzania
208
107
84
USA
106
129
153
Zimbabwe
4
-
-
Other, including Corporate and Non-gold producing subsidiaries
6
1
-
Total revenues
2,461
2,057
1,799
Less: Equity method investments included above
(223)
(314)
(306)
Total consolidated
2,238
1,743
1,493
Long-lived assets by area
South Africa
2,8302,370
2,228
1.6132,482
2,789
Argentina
183
200
179
191 207
Australia
616650
568 405
606
629
Brazil
216454
189 192
299
223
Ghana
1,875
2,002
2,036
- -
Guinea
254
286
288
- -
Mali
281
(1)
309
(1)
344
(1)
332
(1)
343
(1)
Namibia
22
25
27
7 5
Tanzania
9791,121
171
(1)1,079
167
(1)979
USA
367
347
286
300 412
Other, including Corporate, Assets held for sale and Non-gold
producing subsidiaries
18060
74 120
77
199
Total long-lived assets
7,9817,637
4,060
3,4647,712
7,979
(1)
Investment held.
F-61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
27.
30. ANGLOGOLD LIMITED SHARE INCENTIVE SCHEME AND PLANS
Employee Share Incentive Scheme
The company has
Prior to January 1, 2006, the Company accounted for share-based payments under the recognition and measurement
provisions of APB Opinion No. 25, “Accounting for Stock Issued to Employees, and related Interpretations”, as
permitted by SFAS123. On January 1, 2006, the Company adopted the disclosure-onlyfair value recognition provisions of SFAS123 and applies Accounting Principles Board Opinion
SFAS No. 25 (APB No. 25) and related interpretations in accounting for its employee stock-based compensation plans.123(R), “Share-Based Payment”, using the modified prospective transition method.
At a general meeting held on June 4, 1998, shareholders approved the introduction of the AngloGold Limited Share
Incentive Scheme (“Share Incentive Scheme”) for the purpose of providing an incentive to executive directors and
senior employees of the
company Company and its subsidiaries to identify themselves more closely with the fortunes of the group
Company and its continued
growth, and also to promote the retention of such employees by giving them an opportunity
to acquire shares in the
company. Company. Employees participate in the scheme to the extent that they are granted options and
accept them.
At a general meeting held on April 30, 2002, it was approved that the rules of the Share Incentive Scheme be amended
to provide for the exercise of options to be based on a condition, related to the performance of the company,Company, as
determined by the directors and which will be objective and specified. An employee would only be able to exercise his
options after the date upon which he has received written notification from the directors that the previously specified
performance condition has been fulfilled or waived. The options which have been granted prior to May 1, 2002
remained subject to the conditions under which they were granted. Although there are no automatically convertible
unsecured debentures
(1)
currently in issue under the rules of the Share Incentive Scheme, consequential amendments
were approved to the rules of the scheme which effectively made the conversion of debentures subject to the same
terms as the exercise of options.
At December 31, 2004,2006, the maximum number of ordinary shares that may be allocated for the purposes of the scheme
is 7,272,7307,596,494 (December 31, 2003: 6,136,249)2005: 7,285,807), equivalent to 2.75 percent of the total number of ordinary shares in issue
at that date.
At the annual general meeting held on April 29, 2005, shareholders approved the amendment to the maximum
aggregate number of ordinary shares which may be acquired by any one participant in the scheme from 300,000 to
5 percent of the 2.75 percent attributable to all schemes and plans adopted by shareholders (or 0.1375 percent of the
total number of ordinary shares in issue at any one time). At December 31, 2006 the maximum aggregate number of
ordinary shares which may be acquired by any one participant in the scheme was 379,825 shares.
F-78
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
30. ANGLOGOLD LIMITED SHARE INCENTIVE SCHEME AND PLANS(continued)
Ordinary shares issued in terms of the Share Incentive Scheme shall, subject to the provisions of the Share Incentive
Scheme, rank pari passu with issued shares in all respects, including participation in dividends declared by the
company.Company.
Non-executive directors are not eligible for participation in the Share Incentive Scheme.
(1)
The debenture incentive options were cancelled on June 30, 2001 in exchange for stock incentive options.
Employee Share Ownership Plan (ESOP)
On December 12, 2006, AngloGold Ashanti announced the finalization of the Bokamoso employee share ownership
plan (Bokamoso ESOP) with the National Union of Mineworkers, Solidarity and United Association for employees of the
South African operations. The Bokamoso ESOP creates an opportunity for AngloGold Ashanti and the unions to
ensure a closer alignment of the interest between employees and the Company, and the seeking of shared growth
solutions to build partnerships in areas of shared interest. Participation is restricted to those employees not eligible for
participation in any other South African share incentive plan.
In order to facilitate these transactions the Company established a trust to acquire and administer the ESOP shares.
AngloGold Ashanti allotted and issued free ordinary shares to the trust and also created, allotted and issued E ordinary
shares to the trust for the benefit of employees. The Company also undertook an empowerment transaction with a
Black Economic Empowerment investment vehicle, Izingwe Holdings (Proprietary) Limited (Izingwe) and recorded a
cost of $19 million during 2006, which is included in general and administrative expenses. The Company also created,
allotted and issued E ordinary shares to Izingwe. The key terms of the E ordinary share are:
•
AngloGold Ashanti will have the right to cancel the E ordinary shares, or a portion of them, in accordance with the
ESOP and Izingwe cancellation formula, respectively;
•
the E ordinary shares will not be listed;
•
the E ordinary shares which are not cancelled will be converted into ordinary shares; and
•
the E ordinary shares will each be entitled to receive a dividend equal to one-half of the dividend per ordinary
share declared by the Company from time to time and a further one-half is included in the calculation of the strike
price.
Total Plan Employee Costs
On December 31, 2006, the Company has five stock-based compensation plans (including the ESOP above), which
are described below. Total compensation cost charged against income for these plans was $42 million, $2 million and
$4 million (credit) for 2006, 2005 and 2004, respectively. During the year ended December 31, 2006, less than
$1 million income tax benefit was recognized in the income statement for share-based compensation arrangements, no
income tax benefit was recognised in 2005 and 2004. The Company did not capitalize compensation cost as part of the
cost of an asset during any of these periods.
At the year end, the unallocated balance of shares subject to the Share Incentive Scheme amounts to 3,522,314
(2005: 3,524,097).
Options
An option may only be granted to an employee to purchase a certain number of shares, specified by the directors, at
the option price payable in accordance with the rules of the Share Incentive Scheme. It is personal to the employee to
whom it is
addressed and may only be accepted by him, or his family, or his company or his family trust.
(1)
The debenture incentive options were cancelled on June 30, 2001 in exchange for stock incentive options.
The Share Incentive Scheme provides for the granting of options based on two separate criteria:
•
l
Time related options
As approved by shareholders at the general meeting held on June 4, 1998 and amended by shareholders at the
general meeting held on April 30, 2002, time related options may be exercised over a five year period from date of
grant, and may be exercised in tranches of 20 percent each in years 2, 3 and 4 and 40 percent in year five.
No further options will be granted under this plan which will terminate on February 1, 2012, being the date on
which the last options granted under this plan, may be exercised or will expire.
F-62
F-79
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
27.30. ANGLOGOLD LIMITED SHARE INCENTIVE SCHEME AND PLANS(continued)
A summary of time related options showing movement from the beginning of the year to the end of the year, is
presented below:
2004
Options2006
(000)Options
2004(000)
Weighted-2006
averageWeighted-
average
exercise price
R
20032006
OptionsWeighted-
(000)average
2003remaining
Weighted-contractual
averageterm (Years)
exercise price
2006
Aggregate
Intrinsic
Value
R (000)
Outstanding at the beginning of the year
1,604865
125127
2,1594.6
125-
Granted
-
-
-
-
Exercised
(390)
128
-
-
Forfeited (terminations)
(2)
211
-
-
-
Exercised (193)
116
(508)
123
Forfeited (20)
131
(47)
128
Outstanding at the end of the year
1,391473
126
1,6043.5
96 625
125
Exercisable at the end of the year
904465
118124
7333.5
95 887
115
During the years ended December 31, 2006, 2005 and 2004 the Company recognized $1 million, $nil million and
$nil million, respectively, compensation expense related to time-based awards.
Weighted-average fair value of options
granted during the yearl
-
-
Performance related options
As approved by shareholders at the general meeting held on April 30, 2002, performance related options granted
vest in full, three years after date of grant, provided that the conditions on which the options were granted, namely
related to the performance of the companyCompany (growth in an adjusted earnings per share) as determined by the
directors, are met. If the performance condition is not met at the end of the first three year period, then
performance is re-tested each year over the ten year life of the option on a rolling three year basis. Options are
normally exercisable, subject to satisfaction of the performance condition, between three and ten years from date
of grant. As none of the performance criteria of the options issued in 2002 and 2003 were met in the initial three
years, the grantor decided to roll the schemes forward on a “roll over reset&# 8221; basis to be reviewed annually. The
performance criteria of the options issued in 2002 and 2003 were achieved during 2006. The performance criteria
of the 2004 options is expected to be met.
The performance related options are accounted for as variable compensation awards, accordingly the
options’ compensation expense is calculatedfixed at the end of each reporting period untilgrant date and recorded when it is probable
that the performance obligation has been
met or waived. Compensation expensecriteria will vary based on the fluctuations of the underlying stock price in excess
of the exercise price.be met.
As approved by shareholders at the annual general meeting held on April 29, 2005 to the introduction of the Long-
Term Incentive Plan (LTIP) and the Bonus Share Plan (BSP) (as discussed below), no
No further performance related
options will be granted and all options granted hereunder will terminate on
November 1, 2014, being the date on
which the last options granted under this criteria may be exercised or will
expire.
A summary of performance related options showing movement from the beginning of the year to the end of the
year, is presented below:
2004
Options
(000)
2004
Weighted-
average
exercise price
R
2003
Options
(000)
20032006
Weighted-Options
average(000)
2006
Weighted-
average
exercise price
R
2006
Weighted-
average
remaining
contractual
term (Years)
2006
Aggregate
Intrinsic
Value
R (000)
Outstanding at the beginning of the year
2,3162,897
259248
1,1797
300-
Granted 1,201
228-
1,240-
-
222-
Exercised
(4)
251
-
-
Forfeited (terminations)
(307)
248
-
-
-
Forfeited
(91)
258
(103)
287
Outstanding at the end of the year
3,4262,586
248
2,3167
212,760
259
Exercisable at the end of the year
-1,674
-258
-7
-
Weighted-average fair value of options
granted during the year
95
78119,803
All options which have not been exercised within ten years from the date on which they were granted automatically
lapse. At the year end, the unallocated balance of shares subject to the Share Incentive Scheme amounts to 2,455,770
(2003: 2,216,289).expire.
F-63
F-80
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
27.30. ANGLOGOLD LIMITED SHARE INCENTIVE SCHEME AND PLANS(continued)
During the years ended December 31, 2006, 2005 and 2004 2003the Company recognized $29 million, $nil million and 2002 there was no
$4 million (credit), respectively, compensation expense recognized related to
time-based awards as the exercise price of all awards was greater than or equal to the fair market value of the
underlying stock on the date of grants. As of December 31, 2004 compensation credit of $4 million was recognized
related to the performance awards under APB No. 25, due to a decline in fair market value to below the exercise price
of suchrelated awards.
During 20042006 a total of 192,800394,150 common shares were issued under the share incentive scheme.scheme in terms of time-based
and performance awards.
As of December 31, 2006, there was $4 million of unrecognized compensation cost related to unvested stock options.
This cost is expected to be recognized over a weighted-average period of approximately 1 year.
The weighted average of all options outstanding as at December 31, 20042006 is as follows:
Range of exercise
Prices
R
Quantity of options within
range
(000)
Weighted average
exercise price
R
Weighted average
contractual life
Years
95 – 143
1,153405
119117.19
4.783.29
144 –- 211
21848
157152.25
6.114.40
212 –- 300
3,4462,606
248247.63
8.546.58
4,817
3,059
(1)
213 7.53228.85
4.76
(1)
Represents a total of 1,391,060473,260 time related options and 3,425,9002,585,800 performance related options outstanding as at
December 31, 2004.2006.
No options expired during the year ended December 31, 2004.2006.
Since December 31, 20042006 to and including July 7, 2005, 149,600May 31, 2007, 582,700 options have been exercised and 81,00044,400 options
have lapsed.
Pro forma information regarding net income and earnings per share is required by SFAS123, and has been determined
as if the company had accounted for its employee stock options under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for 2004, respectively: risk-free interest rates of 8.18 percent (2003: 8.85 percent);
dividend yields of 2.27 percent (2003: 3.34 percent); volatility factors of the expected market price of the company’s
common stock of 0.300 (2003: 0.325) and a weighted-average expected life of the option of 7.0 years (2003: 6.5 years)
in respect of performance based scheme options.
No grants were made with respect to the time related scheme
options and performance related options during 2004.
2005
and 2006. The value of each option granted during 2002, 2003 and 2004 is estimated on the date of grant using the
Black-Scholes option-pricing model. The Black-Scholes option valuationoption-pricing model was developed for use in estimating the fair value of traded options which
have no vesting restrictions and are fully transferable. In addition, option valuation models requirerequires the input of highlysubjective
subjective assumptions, including the expected term of the option award and stock price volatility. BecauseThe expected term of options
granted is derived from historical data on employee exercise and post-vesting employment termination behavior
expected volatility is based on the company’s employee stockhistorical volatility of the Company’s stock. These estimates involve inherent
uncertainties and the application of management judgment. In addition, the Company is required to estimate the
expected forfeiture rate and only recognize expense for those options expected to vest. As a result, if other
assumptions had been used, the Company’s recorded and pro forma stock-based compensation expense could have characteristics significantly
been different from thosethat reported. The Black-Scholes option-pricing model used the following assumption, respectively:
2002
2003
2004
Risk-free interest rate
11.00%
11.00%
8.18%
Dividend yield
4.27%
4.27%
2.27%
Volatility factor of traded options, and because changes in the subjective input
assumptions can materially affect themarket share price
0.390
0.390
0.300
Weighted average expected life
7 years
7 years
7 years
Calculated fair value estimate, in management’s opinion, the existing models do not
R100.20
R77.76
R94.65
necessarily provide a reliable single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options’
vesting period.period in 2005 and 2004. The following table illustrates pro forma option expense in
(2)
information for 2005 and 2004 may not be indicative of pro forma option expense in future
years. The company’s pro forma information follows (in millions
except for earnings per share information):
20042005
$
2003
(As restated)
$
2002
(As restated)2004
$
Pro forma net (loss)/income
90
239(292)
34990
Pro forma (loss)/earnings per common share
Basic (cents)
36
107(110)
15736
Diluted (cents)
(1)
(110)
36
(1)
107
157
(1)
The calculation of diluted (loss)/earnings per common share for 2005 and 2004 did not assume
the effect of 15,384,615 shares
issuable upon the exercise of Convertible Bonds as their effects are anti-dilutive for these periods. The calculation of diluted
(loss)/earnings per common share for 2005 did not assume the effect of 601,315 shares issuable upon the exercise of Convertiblestock
Bondsincentive options as their effects are anti-dilutive for this period.
(2)
F-64FAS 123(R), with effective date January 1, 2006.
F-81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
27.30. ANGLOGOLD LIMITED SHARE INCENTIVE SCHEME AND PLANS(continued)
Acacia Employee Option Plan
The company’s wholly-owned subsidiary, AngloGold Australia Limited (formerly AngloGold Australasia Limited and
originally Acacia Resources Limited) operated the Acacia Employee Option Plan for certain of its employees. In terms
of this plan, on exercising of options, a ratio of 7 AngloGold ordinary shares for every 100 options held was applied.
The issue price of the AngloGold shares was calculated using the A$/R exchange rate ruling on the date of allotment.
As at December 31, 2003, all options granted in terms of the Acacia Employee Option Plan had been exercised or
lapsed and the plan has been terminated.
Bonus Share Plan (BSP) and Long-Term Incentive Plan (LTIP)
At the annual general meeting held on April 29, 2005, shareholders approved the introduction of the BSP and LTIP and
the discontinuation of the currentprevious share incentive scheme.scheme, which had been approved April 30, 2002. Options which
have been granted under the currentprevious share
incentive scheme will remain subject to the conditions under which they
were originally granted. Grants
Bonus Share Plan (BSP)
The BSP is intended to provide effective incentives to eligible employees. An eligible employee is one who devotes
substantially the whole of his working time to the business of the Company, any subsidiary of the Company or a
Company under the control of AngloGold Ashanti, unless the board of directors (the board) excludes such a Company.
An award in terms of the BSP may be made at any date at the discretion of the board. The board is required to
determine a BSP award value and this will be converted to a ‘share’ amount based on the closing price of the Company
shares on the JSE on the last business day prior to the date of grant.
During 2006 a total of 4,249 common shares were issued in terms of the BSP rules.
The AngloGold Ashanti Remuneration Committee has at their discretion, the right to pay dividends, or dividend
equivalents, to the participants of the BSP. The fair value of each BSP awarded in 2006 is R308.00 (awarded in
2005: R197.50) per share, including dividends, or R286.75 (2005: R190.76) per share, excluding dividends. Having no
history of any discretionary dividend payments, the higher fair value was used to determine the income statement
expense. The fair value is equal to the award value determined by the board. The awards vest on March 8, 2009 for
the 2006 award (2005 award: May 4, 2008) and will expire if not exercised by March 7, 2016 for the 2006 award
(2005 award: May 3, 2015).
A summary of time related equity settled compensation scheme showing movement from the beginning of the year to
the end of the year, is presented below:
2006
(000)
2006
Weighted-
average
exercise price
R
2006
Weighted-
average
remaining
contractual
term (Years)
2006
Aggregate
Intrinsic
Value
R (000)
Outstanding at the beginning of the year
272
198
9
-
Granted
254
308
-
-
Exercised
(4)
199
-
-
Forfeited (terminations)
(41)
237
-
-
Outstanding at the end of the year
481
252
9
158 588
Exercisable at the end of the year
-
-
-
-
Long-Term Incentive Plan (LTIP)
The LTIP is an equity settled share-based payment arrangement, intended to provide effective incentives for executives
to earn shares in the Company based on the achievement of stretched Company performance conditions. Participation
in the LTIP will be madeoffered to executive directors, executive officers and selected senior management of participating
companies. Participating companies include AngloGold Ashanti, any subsidiary of AngloGold Ashanti or a Company
under the control of AngloGold Ashanti unless the board excludes such a Company. An award in 2005.terms of the LTIP
may be granted at any date during the year that the board of the Company determine and may even be more than once
a year. The board is required to determine an LTIP award value and this will be converted to a ‘share’ amount based
on the closing price of the Company shares on the JSE on the last business day prior to the date of grant.
The AngloGold Ashanti Remuneration Committee has at their discretion, the right to pay dividends, or dividend
equivalents, to the participants of the LTIP. The fair value of each LTIP awarded in 2006 is R327.00 (awarded in
2005: R197.50) per share, including dividends, or R304.44 (2005: R190.76) per share, excluding dividends. Having no
history of any discretionary dividend payments, the higher fair value was used to determine the income statement
expense. The fair value is equal to the award value determined by the board. The awards vest on July 31, 2009 for the
2006 award (2005 award: May 4, 2008) and will expire if not exercised by July 31, 2016 for the 2006 award
(2005 award: May 3, 2015).
F-82
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
30. ANGLOGOLD LIMITED SHARE INCENTIVE SCHEME AND PLANS(continued)
Participants
The main performance conditions in terms of the LTIP issued in 2005 are:
º
up to 40 percent of an award will be determined by the performance of total shareholder returns (TSR) compared
with that of a group of comparator gold-producing companies;
º
up to 40 percent of an award will be determined by real growth (above US inflation) in an adjusted earnings per
share over the performance period;
º
up to 20 percent of an award will be dependent on the achievement of strategic performance measures which will
be set by the Remuneration Committee; and
º
three-years’ service is required.
The main performance conditions in terms of the LTIP issued in 2006 are:
º
up to 40 percent of an award will be determined by the performance of total shareholder returns (TSR) compared
with that of a group of comparator gold-producing companies;
º
up to 30 percent of an award will be determined by an adjusted earnings per share compared to a planned
adjusted earnings per share over the performance period;
º
up to 30 percent of an award will be dependent on the achievement of strategic performance measures which will
be set by the Remuneration Committee; and
º
three year’s service is required.
A summary of time related equity settled compensation scheme showing movement from the beginning of the year to
the end of the year, is presented below:
2006
(000)
2006
Weighted-
average
exercise price
R
2006
Weighted-
average
remaining
contractual
term (Years)
2006
Aggregate
Intrinsic
Value
R (000)
Outstanding at the beginning of the year
364
198
9
-
Granted
317
327
-
-
Exercised
-
-
-
-
Forfeited (terminations)
(20)
198
-
-
Outstanding at the end of the year
661
260
9
217 851
Exercisable at the end of the year
-
-
-
-
During the years ended December 31, 2006 and 2005 the Company recognized a compensation expense of $9 million
and $2 million, respectively, related to BSP will receive an annual bonus, partand LTIP awards.
As of whichDecember 31, 2006, there was $19 million of unrecognized compensation cost related to unvested awards of the
BSP and LTIP plans. This cost is expected to be recognized over a weighted-average period of approximately 2 years.
Employee Share Ownership Plan (ESOP)
The award of free shares to employees:
The fair value of each free share awarded in 2006 is R320. Dividends declared and paid in cashto the trust will accrue and part inbe
paid to ESOP members, pro rata to the number of shares subjectallocated to
certain performance criteria being met. them. The share elementfair value is equal to the market value
at the date-of-grant. A fifth of the amount vests after three years, provided thatservice in 2009, and a further fifth vests in each subsequent year
and will be cancelled if not exercised on November 1, 2013.
A summary of time related equity settled compensation scheme showing movement from the participantbeginning of the year to
the end of the year, is still inpresented below:
F-83
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
30. ANGLOGOLD LIMITED SHARE INCENTIVE SCHEME AND PLANS(continued)
2006
(000)
2006
Weighted-
average
exercise price
R
2006
Weighted-
average
remaining
contractual
term (Years)
2006
Aggregate
Intrinsic
Value
R (000)
Outstanding at the company’s employmentbeginning of the year
-
-
-
-
Granted
929
320
-
-
Exercised
-
-
-
-
Forfeited (terminations)
-
-
-
-
Outstanding at that time.the end of the year
Awards929
320
5
306 425
Exercisable at the end of the year
7
320
-
-
The award of E ordinary shares to the employees:
The average fair value of the E ordinary shares granted to employees on December 13, 2006 was R105. Dividends
declared in respect of the LTIP E shares will firstly be allocated to cover administration expenses of the trust, where after it
will accrue and be paid to ESOP members, pro rata to the number of shares allocated to them. At each anniversary
over a five year period commencing on the third anniversary of the award, the Company will cancel the relevant
number of E ordinary shares as stipulated by a cancellation formula. Any E ordinary shares remaining in the tranche
will be madeconverted to the most senior executives and managers in the company. The scheme
will reward participants through the granting ofordinary shares for the achievementbenefit of performance criteria overthe employees. All unexercised awards will be cancelled on
May 1, 2014.
The value of each share granted is estimated on the date of grant using the Black-Scholes option-pricing model. The
Black-Scholes option-pricing model requires the input of subjective assumptions, including the expected term of the
option award and stock price volatility. The expected term of awards granted is derived from historical data on
employee exercise behavior. Expected volatility is based on the historical volatility of the Company’s stock. These
estimates involve inherent uncertainties and the application of management judgment. In addition, the Company is
required to estimate the expected forfeiture rate and only recognize expense for those options expected to vest. As a three-year
period, wherebyresult, if other assumptions had been used, the companyCompany’s recorded compensation expense could have been different
from that reported. The Black-Scholes option-pricing model used the following assumpt ions for the year ended
December 31, 2006, weighted-average risk free interest rates of 7%; dividend yield of 2.3% and volatility of 36%.
A summary of E ordinary shares, awarded to employees, showing movement from the beginning of the year to the end
of the year, is presented below:
2006
Options
(000)
2006
Weighted-
average
exercise price
R
2006
Weighted-
average
remaining
contractual
term (Years)
2006
Aggregate
Intrinsic
Value
R (000)
Outstanding at the beginning of the year
-
-
-
-
Granted
2,786
289
-
-
Exercised
-
-
-
-
Forfeited (terminations)
-
-
-
-
Outstanding at the end of the year
2,786
289
5
114 217
Exercisable at the end of the year
21
289
-
-
Weighted average exercise price is calculated as the initial grant price of R288 plus interest factor less dividend
apportionment. This value will needchange on a monthly basis.
During the year ended December 31, 2006, the Company recognized a compensation expense of $3 million related to outperform its gold company peers consistently. Additionally, strategic
business objectives will also needthe ESOP scheme.
As of December 31, 2006, there was $64 million of unrecognized compensation cost related to unvested awards of the
ESOP scheme. This cost is expected to be met, such asrecognized over the successful integrationscheme term of Ashanti into AngloGold.7 years.
28.
F-84
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
31. MINERAL AND PETROLEUM RESOURCES DEVELOPMENT ACT
AngloGold Ashanti'sAshanti’s rights to own and exploit mineral reserves and deposits are governed by the laws and regulations
of the jurisdictions in which the mineral properties are located. Currently, a significant portion of its mineral reserves and
and deposits are located in South Africa.
On May 1, 2004, the
The Mineral and Petroleum Resources Development Act Act 28 of 2002 (MPRDA), came into effect
and operation.
The MPRDA vests custodianship of South Africa'sAfrica’s mineral rights
in the State. The State issues prospecting rights or
mining rights to applicants. The former common law prospecting,Prospecting, mining and mineral rights
formerly regulated under the Minerals Act 50 of 1991 and common law are now known as old
order mining rights and
the transitional arrangements provided in Schedule II to the MPRDA give holders of such old order mining rights the
opportunity to convert their old order rights into new order rights.
Applicants have five years from May 1, 2004, in which to apply to convert old order mining rights into new order mining rights within specified time frames.
The Department of Minerals and Energy (DME) has published, pursuant to the MPRDA, the Broad-Based Socio-
Economic Empowerment Charter for the South African Mining Industry (the Charter). Compliance with the Charter,
measured using a designated Scorecard, requires that every mining company achieve 15 percent ownership by
Historically Disadvantaged South Africans (HDSAs) of its South African mining assets by May 1, 2009, and 26 percent
ownership by May 1, 2014 and achieve participation by HDSAs in various other aspects of management referred to
below. The Company has submitted to the DME two Social and Labor Plans – one for each of its main mining regions
– detailing its specific goals in these areas.
The Scorecard allows for a portion of “offset” against these HDSA’s equity participation requirements insofar as
companies have facilitated downstream, value-adding activities in respect of the products they mine. AngloGold Ashanti
carries out such downstream activities and believes these will be recognized in terms of a framework currently being
devised by the South African government.
AngloGold Ashanti has completed a number of asset sales to companies owned by HDSAs in the past seven years
(estimates to be equivalent to 20 percent of AngloGold Ashanti’s South African production). Furthermore, at the end of
2006 AngloGold Ashanti implemented an Employee Share Ownership Program (ESOP) and Black Economic
Empowerment (BEE) transaction, collectively with a value equivalent to approximately 6 percent of its South African
assets. This is consistent with the Company’s stated strategic intention to develop means of promoting broad based
equity participation in the Company by HDSAs and with an undertaking made to the DME as a condition for the
granting to the Company of its new order mineral rights. AngloGold Ashanti submitted its application for conversion of its rights in July 2004. AngloGold Ashanti
submitted mining work programsbelieves that substantiated the areas and period of the new order mining rights and alsoit has made significant
demonstrated its compliance withprogress towards meeting the requirements of the Charter, as described below. A similar application wasthe Scorecard and its own undertakings in terms of human
submittedresource development, employment equity, mine community and rural development, housing and living conditions, procurement and beneficiation, including the implementation of programs to help achieve the requirement of having
40 percent of management roles being held by HDSAs by 2010. AngloGold Ashanti will incur expenses in giving further
effect to the relevant government department for unused old order prospecting rights. Charter and the Scorecard and the implementation of the ESOP will affect the Company’s results of
operations.
AngloGold Ashanti has one
year from Maywas informed on August 1, 2004 to apply for new prospecting or mining rights for2005, by the unused old order rights. AngloGold Ashanti
will also apply for conversion of the old order prospecting rights that are in use within two years of May 1, 2004. The
DepartmentDirector General of Minerals and Energy is considering AngloGold Ashanti’s various conversion applications.that its
AngloGold Ashanti also submitted twoapplications to convert its old order mining rights to new order mining rights for its West Wits and Vaal River operations,
as well as its applications for new mining rights to extend its mining areas at its TauTona and Kopanang mines, had
been successful. These applications relate to all of its existing operations in South Africa. AngloGold Ashanti has
reviewed certain draft notarial rights agreements, which it received from the Department of Minerals and Energy
relating to the various rights. The notarial agreement for the West Wits operations has subsequently been executed
and registered as has the notarial agreement for Jonkerskraw, which forms a portion of the Vaal River rights. The
notarial agreement for the Vaal River operations are pending. AngloGold Ashanti submitted two applications to DME
for the conversion of two unused old order prospecting rights to new order prospecting rights, one of which it has
subsequently withdrawn. The DME has approved the conversion of the remaining prospecting right which had been
registered.
Kopanang mines.
F-65
F-85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
28.31. MINERAL AND PETROLEUM RESOURCES DEVELOPMENT ACT(continued)
Even where new order mining rights are obtained under the MPRDA, these rights may not be equivalent to the old
order mining rights. The
area covered by the new AngloGold Ashanti rights may be reduced by the State if it finds that the prospecting or mining work programs
submitted by an applicanthave been converted and registered do not substantiatediffer significantly
from the need to retain the area covered by therelevant old order rights. The duration of the
new rights will no longer be perpetual as was the case under old
order mining rights but rather in the case of new mining rights,will be granted for a maximum period of 30 years, with
renewals of up to 30 years each
and, in the case of prospecting rights, up toa maximum period of five years with one renewal of up to three years.
years. The
Furthermore, the MPRDA provides for a retention period after prospecting of up to three years with one renewal of up to
two
years, subject to certain conditions, such as non-concentration of resources, fair competition and non-exclusion of
others. In addition, the new order rights will only be transferable subject to the approval of the Minister of Minerals and
Energy. Mining or prospecting must commence within one year or 120 days, respectively , of the mining right or
prospecting right becoming effective, and must be conducted continuously and actively thereafter.
The new order mining rights can be suspended or cancelled by the Minister of Minerals and Energy on breach or, in the caseif, upon notice of a
mining right, on non-optimal mining in accordance with the mining work program.
The Department of Minerals and Energy has published the Broad-Based Socio-Economic Empowerment Charter for
the South African Mining Industry (the Charter). The objectives of the Charter are to:
-
promote equitable access to the nation’s Mineral Resources to all the people of South Africa;
-
substantially and meaningfully expand opportunities for historically disadvantaged South Africans (HDSAs) (that is,
any person, category of persons or communities, disadvantaged by unfair discrimination before the Constitution of
the Republic of South Africa, 1993 came into operation) including women, to enter the mining and minerals
industry and to benefitbreach from the exploitation ofMinister, the nation’s mineral resources;
-
utilize the existing skills base for the empowerment of HDSAs;
-
expand the skills base of HDSAsentity breaching its obligations in order to serve the community;
-
promote employment and advance the social and economic welfare of mining communities and the major labor
sending areas; and
-
promote beneficiation of South Africa’s mineral commodities.
The Charter and the relevant Scorecard require that every mining company achieve 15 percent ownership by HDSAs of
its South African mining assets within five years of May 1, 2004, and 26 percent ownership within 10 years of May 1,
2004.
It contemplates that this will be achieved by, among other things, disposals of assets by mining companies to HDSAs
on a willing seller – willing buyer basis at fair market value. In addition, the Charter and Scorecard require mining
companies to formulate plans for achieving employment equity at management level with a view to achieving
40 percent participation by HDSAs in management and 10 percent participation by women in the mining industry, each
within five years. The State will evaluate the company’s commitment to the different facets of promoting the objectives
of the Charter against the Scorecard when considering applications for conversion of old order rights to new order
rights.
AngloGold Ashanti has completed a number of asset sales to companies owned by HDSAs in the past five years.
According to AngloGold Ashanti’s estimates based on operating data for the 12 months ended March 31, 2004 – the
period on which the company’s license conversion applications are based – these transactions transfer 20 percent of its
attributable units of production in South Africa to HDSAs. However, the State is currently considering AngloGold
Ashanti’s rights conversion application. In addition, AngloGold Ashanti is continuing to evaluate alternative ways in
which to achieve the objectives of the Charter through, for example, forms of broad-based equity ownership by
historically disadvantaged entities, groups or individuals, including employee share ownership and empowerment unit
trusts. On June 8, 2005 AngloGold Ashanti announced that it was considering establishing an employee share
ownership program (ESOP), which program is consistent with the company’s stated strategic intention to develop
means of promoting broad-based equity participation. The scope and terms of the scheme remain under considerationguidelines issued for converted mining
and, once finalized, an announcement will be made and, if appropriate, the terms will be put forwardrights fails to shareholders for
their consideration and approval.
F-66
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
28.MINERAL AND PETROLEUM RESOURCES DEVELOPMENT ACT (continued)
The Scorecard allows for a portion of “offset” against these HDSA ownership requirements insofar as companies have
facilitated downstream, value-adding activities as regards the products they mine. AngloGold Ashanti carries outremedy such
activities and is confident that these will be recognized in terms of a framework currently devised by government.
AngloGold Ashanti believes that it has made significant progress towards meeting the requirements of the Charter and
the Scorecard in human resource development, employment equity, mine community and rural development, housing
and living conditions, procurement and beneficiation. It reflected these results when it lodged its application for new
mining rights and conversions. Details of the State’s methodology for calculating performance in regard to beneficiation
have, however, not yet been made public. Failure on the part of AngloGold Ashanti to comply with the requirements of
the Charter and the Scorecard could subject it to negative consequences.
AngloGold Ashanti may also incur expenses in giving additional effect to the Charter and the Scorecard, including costs
which it may incur in facilitating the financing of initiatives towards ownership by HDSAs as part of the industry wide
commitment to assist such persons in securing R100 billion of financing during the first five years of the Charter’s life.
There is furthermore no guarantee that any steps AngloGold Ashanti has taken and might take to comply with the
Charter will ensure that it successfully acquires new order rights in place of its old order rights. In addition, the terms of
such new rights may not be as favorable to AngloGold Ashanti as the terms applicable to its existing rights. Based on
present indications, however, AngloGold Ashanti believes that it should acquire the new order rights on reasonable
terms.
breach. The MPRDA also imposes additional responsibilities on mining companies additional responsibilities relating
to environmental management and
to environmental damage, degradation or pollution resulting from their prospecting
or mining activities.
AngloGold
Ashanti has a policy of evaluating, minimizing and addressing the environmental consequences of its
activities and,
consistent with this policy and the MPRDA, conducts an annual review of the environmental costs and
liabilities
associated with itsthe Company’s South African operations in light of the new, as well as existing, environmental
requirements.
AngloGold Ashanti considers the new mineral rights regime in South Africa to be a proper and appropriate method of
dealing with the country’s mineral resources and political legacy. The company believes the new mineral rights regime
is likely to play a significant part in enhancing socio-economic stability and progress by encouraging equitable
participation in the economy and thereby, improving the lives of those citizens previously disadvantaged by apartheid.
A failure on the part of government to have implemented such measures would have endangered prospects for political
and economic stability.
AngloGold Ashanti has made progress in adjusting the ownership structure of its South African mining assets and the
composition of its management consistent with the Charter’s spirit. It believes that it is well placed to meet the
Charter’s targets in accordance with the Scorecard.
The South African government has announced that is giving consideration tothe details of the proposed new legislation, in terms of whichwhereby the new order
rights will be subject to a State royalty. The extent and basis of that royalty is unknown at present. The draft Mineral
and Petroleum Resources Royalty Bill 2003, was released in March 2003published on
October 11, 2006, and provides for comments and proposedthe payment of a royalty payment of
3 1.5 percent of gross revenue attributable to refined gold
per annum,year, payable quarterly, inquarterly. The royalty is tax deductible and the casecost after tax amounts to a rate of gold. Had 0.825 percent at
the proposal become law, royalty
payments would have commenced upon the conversion and granting of a new mining right. AngloGold Ashanti and
other members of the South African mining community have submitted comments on the draft billprevailing marginal tax rate applicable to the relevant
authorities. These comments included recommendations for a profit-based, rather than a revenue-based, royalty and in
order not to delay the conversionCompany. The payment of mineral rights from old into new order rights, it was recommended that the
proposed royalty should only become payable from a fixed date being five years after the MPRDA took effect, that is
royalties will commence on May 1, 2009, which dateif
the Bill is the final date for conversion of the old order into new order mining rights under the MPRDA.
In addition, a reductionpassed by Parliament in the royalty rate from that proposed in the draft Mineral and Petroleum Royalty Bill has been
proposed. On February 18, 2004, in the Budget Speech for the 2004 fiscal year, the South African Minister of Finance
proposed several refinements to the draft Mineral and Petroleum Royalty Bill. These include a delay in the introduction
of the royalty to five years after May 1, 2004, that is the date on which the MPDRA came into operation and
confirmation of the South African government’s preference for a revenue-based royalty. It was further indicated that the
royalty regime would take cognizance of the mining sector’s diverse production and profitability dynamics with a
differential rate to apply to marginal mining operations. The introduction of the proposed royalty would, all else being
equal, have an adverse impact up on AngloGold Ashanti’s profitability, as currently no royalty is payable to the State.
However, the Finance Minister announced also that due to the new regulatory system for the mining rights in terms of
the MPDRA and accompanying royalty dispensation under the draft Mineral and Petroleum Royalty Bill, it has become
imperative to holistically reassess theits current fiscal regime as applicable to the mining and petroleum industries inform.
F-67
F-86
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS(continued)
28. MINERAL AND PETROLEUM RESOURCES DEVELOPMENT ACT (continued)
South Africa, including tax, depreciation, rate differentiation for mining sectors, allowable deductions and exemptions
from secondary tax on companies in terms of South Africa’s income tax laws. Also due for review is the gold mining tax
formula, which provides income tax exemption and relief from secondary tax on companies for gold mines, despite the
existence of profit. The impact of these proposed reviews is unknown at this stage but may have an adverse effect on
AngloGold Ashanti’s financial condition or results of operations.
29.32. CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED
CONSOLIDATING FINANCIAL INFORMATION
These parent-only-financial statements and supplemental condensed consolidating financial information should be read
in conjunction with the company’sCompany’s consolidated financial statements.
Transfer of certain of AngloGold Ashanti’s operations located outside South Africa to wholly-owned subsidiary
With effect from October 1, 2004, AngloGold Ashanti has transferred certain of its operations and assets located
outside South Africa (excluding certain operations and assets in the United States, Australia and Africa) to AngloGold
Ashanti Holdings
plc. plc (originally SMI Holdings Limited and formerly AngloGold Holdings Limited)plc) (“IOMco”), its wholly-owned
subsidiary.
IOMco is an Isle of Man registered company.Company.
IOMco has issued debt securities which are fully and unconditionally guaranteed by AngloGold Ashanti Limited (being
the “Guarantor”). Refer to Note 16.20 and Note 24. The following is condensed financial information of the registrant and
consolidating
financial information for the groupCompany as of December 31, 20042006 and 20032005 and for the years ended
December 31, 2004,
20032006, 2005 and 2002,2004, with a separate column for each of IOMco as Issuer, AngloGold Ashanti Limited
as Guarantor and the
other businesses of the groupCompany combined (the “Non-Guarantor Subsidiaries”). For the
purposes of the condensed
consolidating financial information, the companyCompany carries its investments under the equity
method.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
29.
32. CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
ANGLOGOLD ASHANTI LIMITED
Condensed consolidating statements of income
FOR THE YEAR ENDED DECEMBER 31,
(In millions, except share information)
2006
$
AngloGold Ashanti
2006
$
IOMco
2006
$
Other subsidiaries
2006
$
Cons adjustments
2006
$
Total
(the “Guarantor”)
(the “Issuer”)
(the “Non-Guarantor
subsidiaries”)
Sales and other income
1,370
5
1,355
(15)
2,715
Product sales
1,347
-
1,336
-
2,683
Interest, dividends and other
23
5
19
(15)
32
Costs and expenses
1,297
(61)
1,547
28
2,811
Production costs
669
-
854
2
1,525
Exploration costs
4
-
54
-
58
Related party transactions
8
-
-
-
8
General and administrative
129
(77)
60
28
140
Royalties paid/(received)
-
-
59
-
59
Market development costs
8
-
8
-
16
Depreciation, depletion and amortization
321
-
378
-
699
Impairment of assets
-
-
1
5
6
Interest expense
30
38
9
-
77
Accretion expense
8
-
5
-
13
Employment severance costs
7
-
15
-
22
Profit on sale of assets, loans and indirect taxes
(3)
(22)
(6)
(5)
(36)
Mining contractor termination costs
-
-
-
-
-
Non-hedge derivative loss/(gains) and other commodity contracts
116
-
110
(2)
224
Income/(loss) before income tax provision
73
66
(192)
(43)
(96)
Taxation expense
(78)
(3)
(41)
-
(122)
Minority interest
-
-
(29)
-
(29)
Equity income/(loss) in affiliates
108
(9)
-
-
99
Equity (loss)/income in subsidiaries
(244)
-
-
244
-
(Loss)/income from continuing operations
(141)
54
(262)
201
(148)
Discontinued operations
6
-
-
-
6
(Loss)/income after discontinued operations
(135)
54
(262)
201
(142)
Preferred stock dividends
(7)
-
(8)
15
-
(Loss)/income before cumulative effect of accounting change
(142)
54
(270)
216
(142)
Cumulative effect of accounting change
-
-
-
-
-
Net (loss)/income-applicable to common stockholders
(142)
54
(270)
216
(142)
F-87
The accompanying notes are an integral part of these Consolidated Financial Statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
32. CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
ANGLOGOLD ASHANTI LIMITED
Condensed consolidating statements of income
FOR THE YEAR ENDED DECEMBER 31,
(In millions, except share information)
2005
$
AngloGold Ashanti
2005
$
IOMco
2005
$
Other subsidiaries
2005
$
Cons adjustments
2005
$
Total
(the “Guarantor”)
(the “Issuer”)
(the “Non-Guarantor
subsidiaries”)
Sales and other income
1,170
22
1,318
(25)
2,485
Product sales
1,153
-
1,300
-
2,453
Interest, dividends and other
17
22
18
(25)
32
Costs and expenses
1,292
76
1,512
(32)
2,848
Production costs
785
-
853
-
1,638
Exploration costs
5
-
39
-
44
Related party transactions
39
-
2
-
41
General and administrative
58
39
8
(34)
71
Royalties paid/(received)
-
-
39
-
39
Market development costs
8
-
5
-
13
Depreciation, depletion and amortization
218
-
375
-
593
Impairment of assets
80
-
61
-
141
Interest expense
28
35
17
-
80
Accretion expense
4
-
1
-
5
Employment severance costs
25
-
1
-
26
(Profit)/loss on sale of assets, loans and indirect taxes
-
(10)
7
-
(3)
Mining contractor termination costs
-
-
9
-
9
Non-hedge derivative loss and other commodity contracts
42
12
95
2
151
(Loss)/income before income tax provision
(122)
(54)
(194)
7
(363)
Taxation benefit/(expense)
48
(1)
74
-
121
Minority interest
-
-
(23)
-
(23)
Equity income/(loss) in affiliates
40
(1)
-
-
39
Equity (loss)/income in subsidiaries
(180)
-
-
180
-
(Loss)/income from continuing operations
(214)
(56)
(143)
187
(226)
Discontinued operations
(44)
-
-
-
(44)
(Loss)/income after discontinued operations
(258)
(56)
(143)
187
(270)
Preferred stock dividends
(12)
-
(13)
25
-
(Loss)/income before cumulative effect of accounting change
(270)
(56)
(156)
212
(270)
Cumulative effect of accounting change
(22)
-
-
-
(22)
Net (loss)/income-applicable to common stockholders
(292)
(56)
(156)
212
(292)
F-88
The accompanying notes are an integral part of these Consolidated Financial Statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
32. CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
ANGLOGOLD ASHANTI LIMITED
Condensed consolidating statements of income
FOR THE YEAR ENDED DECEMBER 31,
(In millions, except share information)
2004
$
AngloGold Ashanti
2004
$
IOMco
2004
$
Other subsidiaries
2004
$
Cons adjustments
2004
$
Total
(the “Guarantor”)
(the “Issuer”) (the “Non-Guarantor
subsidiaries”)
Sales and other income
1,153
6
1,013
(21)
2,151
Product sales
1,118
-
978
-
2,096
Interest, dividends and other
35
6
35
(21)
55
Costs and expenses
1,183
17
976
-
2,176
Production costs
783
-
557
-
1,340
Exploration costs
6
-
38
-
44
Related party transactions
43
-
2
-
45
General and administrative
44
1
13
-
58
Royalties paid/(received)
-
-
27
-
27
Market development costs
11
-
4
-
15
Depreciation, depletion and amortization
164
-
281
-
445
Impairment of assets
2
-
1
-
3
Interest expense
24
22
21
-
67
Accretion expense
7
-
1
-
8
Employment severance costs
6
-
1
-
7
Profit on sale of assets, loans and indirect taxes
(1)
-
(13)
-
(14)
Non-hedge derivative loss/(gains) and other commodity contracts
94
(6)
43
-
131
(Loss)/income before income tax provision
(30)
(11)
37
(21)
(25)
Taxation benefit/(expense)
150
-
(18)
-
132
Minority interest
-
-
(22)
-
(22)
Equity income in affiliates
23
-
-
-
23
Equity (loss)/income in subsidiaries
(25)
-
-
25
-
Income/(loss) from continuing operations
118
(11)
(3)
4
108
Discontinued operations
(11)
-
-
-
(11)
Income/(loss) after discontinued operations
107
(11)
(3)
4
97
Preferred stock dividends
(10)
-
(11)
21
-
Income/(loss) before cumulative effect of accounting change
97
(11)
(14)
25
97
Cumulative effect of accounting change
-
-
-
-
-
Net income/(loss) - applicable to common stockholders
97
(11)
(14)
25
97
F-89
The accompanying notes are an integral part of these Consolidated Financial Statements-.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
32. CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
ANGLOGOLD ASHANTI LIMITED
Condensed consolidating balance sheets
AT DECEMBER 31,
(In millions, except share information)
2006
$
AngloGold Ashanti
2006
$
IOMco
2006
$
Other subsidiaries
2006
$
Cons adjustments
2006
$
Total
(the “Guarantor”)
(the “Issuer”)
(the “Non-Guarantor
subsidiaries”)
ASSETS
Current Assets
1,390
2,275
4,733
(6,522)
1,876
Cash and cash equivalents
180
32
259
-
471
Restricted cash
5
-
6
-
11
Receivables and other current assets
1,205
2,243
4,468
(6,522)
1,394
Trade and other receivables and deferred taxation assets
150
6
181
(10)
327
Inter-group balances
756
2,237
3,518
(6,511)
-
Derivatives
225
-
425
(1)
649
Inventories
59
-
295
-
354
Materials on the leach pad
-
-
46
-
46
Assets held for sale
15
-
3
-
18
Property, plant and equipment, net
1,790
-
3,183
4
4,977
Acquired properties, net
273
-
1,016
-
1,289
Goodwill
-
247
562
(267)
542
Other intangibles, net
-
-
24
-
24
Derivatives
5
-
1
-
6
Other long term inventory
-
-
68
-
68
Materials on the leach pad
-
-
149
-
149
Other long-term assets and deferred taxation assets
2,858
2,437
480
(5,193)
582
Total assets
6,316
4,959
10,216
(11,978)
9,513
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
1,769
71
7,047
(6,420)
2,467
Accounts payable and other current liabilities
182
-
310
6
498
Inter-group balances
778
60
5,620
(6,458)
-
Derivatives
712
-
1,037
33
1,782
Short-term debt
11
9
13
-
33
Tax payable
80
2
67
(1)
148
Liabilities held for sale
6
-
-
-
6
Other non-current liabilities
-
-
117
(93)
24
Long-term debt
286
1,080
106
-
1,472
Derivatives
124
-
307
(34)
397
Deferred taxation liabilities
533
-
730
12
1,275
Provision for environmental rehabilitation
137
-
173
-
310
Other accrued liabilities
-
-
27
-
27
Provision for pension and other post-retirement medical benefits
159
-
13
-
172
Minority interest
-
-
61
-
61
Commitments and contingencies
-
-
-
-
-
Stockholders’ equity
3,308
3,808
1,635
(5,443)
3,308
Stock issued
10
3,625
898
(4,523)
10
Additional paid in capital
5,539
1
357
(358)
5,539
Accumulated (deficit)/profit
(1,476)
182
(659)
477
(1,476)
Accumulated other comprehensive income
(765)
-
1,039
(1,039)
(765)
F-90
Total liabilities and stockholders’ equity
6,316
4,959
10,216
(11,978)
9,513
The accompanying notes are an integral part of these Consolidated Financial Statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
32. CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
ANGLOGOLD ASHANTI LIMITED
Condensed consolidating balance sheets
AT DECEMBER 31,
(In millions, except share information)
2005
$
AngloGold Ashanti
2005
$
IOMco
2005
$
Other subsidiaries
2005
$
Cons adjustments
2005
$
Total
(the “Guarantor”)
(the “Issuer”)
(the “Non-Guarantor
subsidiaries”)
ASSETS
Current Assets
897
1,978
4,436
(5,910)
1,401
Cash and cash equivalents
2
36
158
-
196
Restricted cash
1
-
7
-
8
Receivables and other current assets
894
1,942
4,271
(5,910)
1,197
Trade and other receivables and deferred taxation assets
62
15
132
-
209
Inter-group balances
433
1,927
3,550
(5,910)
-
Derivatives
330
-
345
-
675
Inventories
53
-
207
-
260
Materials on the leach pad
-
-
37
-
37
Assets held for sale
16
-
-
-
16
Property, plant and equipment, net
1,897
-
3,130
-
5,027
Acquired properties, net
170
-
1,242
-
1,412
Goodwill
-
247
536
(259)
524
Other intangibles, net
-
-
26
-
26
Derivatives
37
-
1
-
38
Other long term inventory
-
-
32
-
32
Materials on the leach pad
-
-
116
-
116
Other long-term assets and deferred taxation assets
2,835
2,471
294
(5,063)
537
Total assets
5,836
4,696
9,813
(11,232)
9,113
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
1,449
64
6,174
(5,813)
1,874
Accounts payable and other current liabilities
161
-
221
98
480
Inter-group balances
526
50
5,335
(5,911)
-
Derivatives
530
-
591
-
1,121
Short-term debt
138
12
10
-
160
Tax payable
88
2
17
-
107
Liabilities held for sale
6
-
-
-
6
Other non-current liabilities
-
-
14
-
14
Long-term debt
315
1,300
164
-
1,779
Derivatives
122
-
405
-
527
Deferred taxation liabilities
454
-
794
(96)
1,152
Provision for environmental rehabilitation
145
-
180
-
325
Other accrued liabilities
-
-
19
-
19
Provision for pension and other post-retirement medical benefits
188
-
12
-
200
Minority interest
-
-
60
-
60
Commitments and contingencies
-
-
-
-
-
Stockholders’ equity
3,163
3,332
1,991
(5,323)
3,163
Stock issued
10
3,295
315
(3,610)
10
Additional paid in capital
4,972
1
667
(668)
4,972
Accumulated (deficit)/profit
(1,143)
36
7
(43)
(1,143)
Accumulated other comprehensive income
(676)
-
1,002
(1,002)
(676)
F-91
Total liabilities and stockholders’ equity
5,836
4,696
9,813
(11,232)
9,113
The accompanying notes are an integral part of these Consolidated Financial Statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
32.
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
ANGLOGOLD ASHANTI LIMITED
Condensed consolidating statements of cash flows
FOR THE YEAR ENDED DECEMBER 31,
(In millions, except share information)
2006
$
AngloGold Ashanti
2006
$
IOMco
2006
$
Other subsidiaries
2006
$
Cons adjustments
2006
$
Total
(the “Guarantor”) (the “Issuer”)
(the “Non-Guarantor
subsidiaries”)
Net cash provided by/(used) in operating activities
542
(119)
362
(15)
770
Net (loss)/income – applicable to common stockholders
(142)
54
(270)
216
(142)
Reconciled to net cash provided by/(used) in operations:
Cumulative effect of accounting change
-
-
-
-
-
(Profit)/loss on sale of assets, loans and indirect taxes
(3)
(7)
21
(5)
6
Depreciation, depletion and amortization
321
-
378
-
699
Deferred stripping costs
-
-
-
-
-
Impairment of assets
-
-
1
5
6
Deferred taxation
(16)
-
(18)
-
(34)
Other non cash items
394
(29)
196
(231)
330
Net increase in provision for environmental rehabilitation and pension and other
post-retirement medical benefits
(44)
-
(18)
-
(62)
Effect of changes in operating working capital items:
Net movement inter-group receivables and payables
41
(144)
103
-
-
Receivables
15
-
(4)
-
11
Inventories
(25)
-
(140)
-
(165)
Accounts payable and other current liabilities
2
7
113
-
122
Net cash provided by/(used) in continuing operations
543
(119)
362
(15)
771
Net cash used in by discontinued operations
(1)
-
-
-
(1)
Net cash (used)/generated in investing activities
(304)
5
(312)
-
(611)
Increase in non-current investments
(59)
(10)
49
-
(20)
Additions to property, plant and equipment
(317)
-
(494)
-
(811)
Proceeds on sale of mining assets
5
-
52
-
57
Proceeds of sale of discontinued assets
9
-
-
-
9
Proceeds on sale of available for sale investments
-
-
11
-
11
Cash effects from hedge restructuring
58
-
83
-
141
Net loans repaid/(advanced)
-
15
(10)
-
5
Change in restricted cash
-
-
(3)
-
(3)
Net cash (used)/generated in financing activities
(57)
110
51
15
119
Net repayments of short-term debt
(118)
-
-
-
(118)
Insurance of stock
112
330
70
-
512
Share issue expenses
(5)
-
-
-
(5)
Net proceeds of long-term debt
-
(220)
(56)
-
(276)
Cash effects from hedge restructuring
68
-
70
-
138
Dividends paid
(114)
-
(33)
15
(132)
Net increase/(decrease) in cash and cash equivalents
181
(4)
101
-
278
Effect of exchange rate changes on cash
(3)
-
-
-
(3)
Cash and cash equivalents – January 1
2
36
158
-
196
F-92
Cash and cash equivalents – December 31,
180
32
259
-
471
The accompanying notes are an integral part of these Consolidated Financial Statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
32.
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
ANGLOGOLD ASHANTI LIMITED
Condensed consolidating statements of cash flows
FOR THE YEAR ENDED DECEMBER 31,
(In millions, except share information)
2005
$
AngloGold Ashanti
2005
$
IOMco
2005
$
Other subsidiaries
2005
$
Cons adjustments
2005
$
Total
(the “Guarantor”) (the “Issuer”)
(the “Non-Guarantor
subsidiaries”)
Net cash provided by/(used) in operating activities
258
(327)
441
(25)
347
Net (loss)/income – applicable to common stockholders
(292)
(56)
(156)
212
(292)
Reconciled to net cash provided by/(used) in operations:
Cumulative effect of accounting change
22
-
-
-
22
(Profit)/loss on sale of assets, loans and indirect taxes
-
(10)
7
-
(3)
Depreciation, depletion and amortization
218
-
375
-
593
Deferred stripping costs
-
-
(28)
-
(28)
Impairment of assets
80
-
61
-
141
Deferred taxation
(88)
2
(105)
-
(191)
Other non cash items
272
(18)
80
(237)
97
Net increase in provision for environmental rehabilitation and pension and other
post-retirement medical benefits
16
1
35
-
52
Effect of changes in operating working capital items:
Net movement inter-group receivables and payables
75
(265)
190
-
-
Receivables
(1)
(2)
11
-
8
Inventories
20
-
(78)
-
(58)
Accounts payable and other current liabilities
(33)
21
49
-
37
Net cash provided by/(used) in continuing operations
289
(327)
441
(25)
378
Net cash used in by discontinued operations
(31)
-
-
-
(31)
Net cash (used)/generated in investing activities
(295)
10
(339)
-
(624)
Increase in non-current investments
-
(15)
(12)
-
(27)
Additions to property, plant and equipment
(349)
-
(361)
-
(710)
Proceeds on sale of mining assets
-
10
(2)
-
8
Proceeds of sale of discontinued assets
4
-
-
-
4
Proceeds on sale of available for sale investments
-
-
1
-
1
Cash effects from hedge restructuring
55
-
29
-
84
Net loans (advanced)/repaid
(5)
15
(11)
-
(1)
Change in restricted cash
-
-
17
-
17
Net cash generated/(used) in financing activities
6
300
(131)
25
200
Net repayments of short-term debt
126
-
(273)
-
(147)
Insurance of stock
9
-
-
-
9
Share issue expenses
-
-
-
-
-
Net proceeds of long-term debt
1
300
151
-
452
Cash effects from hedge restructuring
31
-
24
-
55
Dividends paid
(161)
-
(33)
25
(169)
Net decrease in cash and cash equivalents
(31)
(17)
(29)
-
(77)
Effect of exchange rate changes on cash
16
-
(19)
-
(3)
Cash and cash equivalents – January 1
17
53
206
-
276
F-93
Cash and cash equivalents – December 31,
2
36
158
-
196
The accompanying notes are an integral part of these Consolidated Financial Statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
32. CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
ANGLOGOLD ASHANTI LIMITED
Condensed consolidating statements of cash flows
FOR THE YEAR ENDED DECEMBER 31,
(In millions, except share information)
2004
$
AngloGold Ashanti
2004
$
IOMco
2004
$
Other subsidiaries
2004
$
Cons adjustments
2004
$
Total
(the “Guarantor”)
(the “Issuer”)
(the “Non-Guarantor
subsidiaries”)
Sales and other incomeNet cash provided by/(used) in operating activities
1,240570
6 1,013(735)
699
(21)
2,238513
Product salesNet income/(loss) – applicable to common stockholders
1,20597
- 978
-
2,183
Interest, dividends and other
35
6 35
(21)
55
Costs and expenses
1,281
17 976
-
2,274
Production costs
879
- 557
-
1,436
Exploration costs
6
-
38
-
44
Related party transactions
43
- 2
-
45
General and administrative
44
1 13
-
58
Royalties paid/(received)
-
-
27
-
27
Market development costs
11
- 4
-
15
Research and development
-
-
-
-
-
Depreciation, depletion and amortization
164
-
281
-
445
Impairment of assets
2
-
1
-
3
Interest expense
24
22 21
-
67
Accretion expense
7
-
1
-
8
Employment severance costs
8
-
1
-
9
Profit on sale of assets
(1)
- (13)
-(11)
(14)
Non-hedge derivative loss
94
(6) 43
-
131
(Loss)/income before equity income and income tax
(41)
(11) 37
(21)
(36)
Equity income in affiliates
23
- -
-
23
Equity (loss)/income in subsidiaries
(25)
-
-
25
-
(Loss)/income before income tax provision
(43)
(11) 37
4
(13)
Deferred income and mining tax benefit/(expensed)
150
-
(18)
-
132
Income/(loss) before minority interest
107
(11) 19
4
119
Minority interest
-
- (22)
-
(22)
Income/(loss) after minority interest
107
(11) (3)
4
97
Preferred stock dividendsReconciled to net cash provided by/(used) in operations:
(10)
- (11) 21
-
Income/(loss) before cumulative effect of accounting change
97
(11) (14)
97
Cumulative effect of accounting change
-
-
-
-
-
Net income/(loss) applicable to common stockholders
97
(11)
(14)
25
97
25
F-68
The accompanying notes are an integral part of these Consolidated Financial Statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
29.
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
ANGLOGOLD ASHANTI LIMITED
Condensed consolidating statements of income
FOR THE YEAR ENDED DECEMBER 31,
(As restated)
(In millions, except share information)
2003
$
AngloGold Ashanti
2003
$
IOMco
2003
$
Other subsidiaries
2003
$
Cons adjustments
2003
$
Total
(the “Guarantor”)
(the “Issuer”)
(the “Non-Guarantor
subsidiaries”)
Sales and other income
1,252
-
551
(60)
1,743
Product sales
1,179
-
535
-
1,714
Interest, dividends and other
73
-
16
(60)
29
Costs and expenses
1,014
-
389
-
1,403
Production costs
780
-
288
-
1,068
Exploration costs
4
-
36
-
40
Related party transactions
37
-
-
-
37
General and administrative
41
-
2
-
43
Royalties paid/(received)
69
-
(58)
-
11
Market development costs
15
-
4
-
19
Research and development
-
-
-
-
-
Depreciation, depletion and amortization
91
-
156
-
247
Impairment of assets
69
-
9
-
78
Interest expense
21
-
7
-
28
Accretion expense
1
-
1
-
2
Employment severance costs
4
-
-
-
4
Profit on sale of assets,
(2)
-
(53)
-
(55)
Non-hedge derivative gains
(116)
-
(3)
-
(119)
Income/(loss) before equity income loans and income tax
238
-
162
(60)
340
Equity income in affiliates
74
-
-
-
74
Equity income/(loss) in subsidiaries
56
-
-
(56)
-
Income/(loss) before income tax provision
368
-
162
(116)
414
Deferred income and mining tax expensed
(113)
-
(34)
-
(147)
Income/(loss) before minority interest
255
-
128
(116)
267
Minority interest
-
-
(17)
-
(17)
Income/(loss) after minority interest
255
-
111
(116)
250
Preferred stock dividends
(8)
-
(52)
60
-
Income/(loss) before cumulative effect of accounting change
247
-
59
(56)
250
Cumulative effect of accounting change
-
-
(3)
-
(3)
Net income/(loss) applicable to common stockholders
247
-
56
(56)
247
F-69
The accompanying notes are an integral part of these Consolidated Financial Statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
29.
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
ANGLOGOLD ASHANTI LIMITED
Condensed consolidating statements of income
FOR THE YEAR ENDED DECEMBER 31,
(As restated)
(In millions, except share information)
2002
$
AngloGold Ashanti
2002
$
IOMco
2002
$
Other subsidiaries
2002
$
Cons adjustments
2002
$
Total
(the “Guarantor”)
(the “Issuer”)
(the “Non-Guarantor
subsidiaries”)
Sales and other income
1,027
-
537
(71)
1,493
Product sales
931
-
527
-
1,458
Interest, dividends and other
96
-
10
(71)
35
Costs and expenses
764
-
373
-
1,137
Production costs
525
-
267
-
792
Exploration costs
3
-
25
-
28
Related party transactions
42
-
-
-
42
General and administrative
24
-
5
-
29
Royalties paid/(received)
83
-
(74)
-
9
Market development costs
17
-
-
-
17
Research and development
1
-
-
-
1
Depreciation, depletion and amortization
96
-
161
-
257
Impairment of assets
-
-
-
-
-
Interest expense
15
-
7
-
22
Accretion expense
-
-
-
-
-
Employment severance costs
3
-
-
-
3
Loss on sale of assets
11
-
-
-
11
Non-hedge derivative gains
(56)
-
(18)
-
(74)
Income/(loss) before equity income and income tax
263
-
164
(71)
356
Equity income in affiliates
80
-
-
-
80
Equity income/(loss) in subsidiaries
40
-
-
(40)
-
Income/(loss) before income tax provision
383
-
164
(111)
436
Deferred income and mining tax expensed
(18)
-
(46)
-
(64)
Income/(loss) before minority interest
365
-
118
(111)
372
Minority interest
-
-
(16)
-
(16)
Income/(loss) after minority interest
365
-
102
(111)
356
Preferred stock dividends
(9)
-
(62)
71
-
Income/(loss) before cumulative effect of accounting change
356
-
40
(40)
356
Cumulative effect of accounting change
-
-
-
-
-
Net income/(loss) applicable to common stockholders
356
-
40
(40)
356
F-70
The accompanying notes are an integral part of these Consolidated Financial Statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
29.
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
ANGLOGOLD ASHANTI LIMITED
Condensed consolidating balance sheets
AT DECEMBER 31,
(In millions, except share information)
2004
$
AngloGold Ashanti
2004
$
IOMco
2004
$
Other subsidiaries
2004
$
Cons adjustments
2004
$
Total
(the “Guarantor”)
(the “Issuer”)
(the “Non-Guarantor
subsidiaries”)
ASSETS
Current Assets
1,006
1,188
4,782
(5,561)
1,415
Cash and cash equivalents
18
53
228
-
299
Receivables
896
1,135
4,273
(5,561)
743
Trade
13
-
17
-
30
Inter-group balances
402
1,101
4,058
(5,561)
-
Derivatives
401
-
90
-
491
Value addedindirect taxes
9
-
20
-
29
Other
71
34
88
-
193
Inventories
92
-
176
-
268
Materials on the leach pad
-
-
105
-
105
Property, plant and equipment, net
1,961
-
3,050
-
5,011
Acquired properties, net
324
-
1,330
-
1,654
Goodwill
(1)
247
556
(259)
543
Other intangibles, net
-
-
48
-
48
Derivatives
171
-
16
-
187
Materials on the leach pad
-
-
22
-
22
Other long-term assets
3,109
2,919
189
(5,701)
516
Total assets
6,570
4,354
9,993
(11,521)
9,396
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
1,257
72
5,657
(5,521)
1,465
Accounts payable and other current liabilities
238
10
195
36
479
Inter-group balances
482
44
5,031
(5,557)
-
Derivatives
456
10
140
-
606
Short-term debt
29
8
278
-
315
Income and mining tax payable
52
-
13
-
65
Long-term debt
354
1,000
17
-
1,371
Derivatives
164
-
570
-
734
Deferred income and mining tax
688
-
871
(34)
1,525
Provision for environmental rehabilitation
93
-
116
-
209
Other accrued liabilities
-
-
14
-
14
Provision for pension and other post-retirement medical benefits
152
-
21
-
173
Minority interest
16
-
43
-
59
Commitments and contingencies
-
-
-
-
-
Stockholders’ equity
3,846
3,282
2,684
(5,966)
3,846
Stock issued
10
3,294
318
(3,612)
10
Additional paid in capital
4,961
1
665
(666)
4,961
Accumulated (deficit)/profit
(702)
(11)
134
(123)
(702)
Accumulated other comprehensive income
(423)
(2)
1,567
(1,565)
(423)
F-
7
1
Total liabilities and stockholders’ equity
6,570
4,354
9,993
(11,521)
9,396
The accompanying notes are an integral part of these Consolidated Financial Statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
29.
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
ANGLOGOLD ASHANTI LIMITED
Condensed consolidating balance sheets
AT DECEMBER 31,
(As restated)
(In millions, except share information)
2003
$
AngloGold Ashanti
2003
$
IOMco
2003
$
Other subsidiaries
2003
$
Cons adjustments
2003
$
Total
(the “Guarantor”)
(the “Issuer”)
(the “Non-Guarantor
subsidiaries”)
ASSETS
Current Assets
1,550
-
1,339
(1,606)
1,283
Cash and cash equivalents
280
-
199
-
479
Receivables
1,160
-
997
(1,606)
551
Trade
23
-
16
-
39
Inter-group balances
746
-
860
(1,606)
-
Derivatives
316
-
54
-
370
Value added taxes
11
-
8
-
19
Other
64
-
59
-
123
Inventories
110
-
44
-
154
Materials on the leach pad
-
-
99
-
99
Property, plant and equipment, net
1,452
-
848
-
2,300
Acquired properties, net
313
-
424
-
737
Goodwill
3
-
482
(259)
226
Other intangibles, net
-
-
-
-
-
Derivatives
85
-
9
-
94
Materials on the leach pad
-
-
7
-
7
Other long-term assets
1,542
-
197
(1,043)
696
Total assets
4,945
-
3,306
(2,908)
5,343
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
1,526
-
1,117
(1,527)
1,116
Accounts payable and other current liabilities
244
-
76
35
355
Inter-group balances
662
-
900
(1,562)
-
Derivatives
328
-
80
-
408
Short-term debt
284
-
47
-
331
Income and mining tax payable
8
-
14
-
22
Long-term debt
300
-
478
-
778
Derivatives
144
-
130
-
274
Deferred income and mining tax
716
-
108
(35)
789
Provision for environmental rehabilitation
49
-
75
-
124
Other accrued liabilities
-
-
6
-
6
Provision for pension and other post-retirement medical benefits
128
-
8
-
136
Minority interest
14
-
38
-
52
Commitments and contingencies
-
-
-
-
-
Stockholders’ equity
2,068
-
1,346
(1,346)
2,068
Stock issued
9
-
192
(192)
9
Additional paid in capital
3,415
-
790
(790)
3,415
Accumulated (deficit)/profit
(616)
-
148
(148)
(616)
Accumulated other comprehensive income
(740)
-
216
(216)
(740)
F-72
Total liabilities and stockholders’ equity
4,945
-
3,306
(2,908)
5,343
The accompanying notes are an integral part of these Consolidated Financial Statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
29.
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
ANGLOGOLD ASHANTI LIMITED
Condensed consolidating statements of cash flows
FOR THE YEAR ENDED DECEMBER 31,
(In millions, except share information)
2004
$
AngloGold Ashanti
2004
$
IOMco
2004
$
Other subsidiaries
2004
$
Cons adjustments
2004
$
Total
(the “Guarantor”)
(the “Issuer”)
(the “Non-Guarantor
subsidiaries”)
Net cash provided by/(used in) operating activities
577
(735) 685
(21)
506
Income/(loss) after minority interest
107
(11)
(3)
4
97
Reconciled to net cash provided by/(used in) operations:
Profit on sale of assets
(1)
-
(13)
-
(14)
Depreciation, depletion and amortization
164
-
281
-
445
Deferred stripping costs
-
-
(28)
-
(28)
Impairment
of
assets
2
-
1
-
3
Deferred income and mining taxtaxation
(193)
-
(7)
-
(200)
Other non cash items
172180
5 7010
(25)90
222(46)
234
Net decreaseincrease/(decrease) in provision for environmental rehabilitation and pension and
other
post-retirement medical benefits
(6)7
-(2)
(20)
-
(26)(15)
Effect of changes in operating working capital items:
Net movement in inter-group receivables and payables
280272
(727)
447455
-
-
Receivables
(11)(16)
(2) (5)
(6)
-
(18)(24)
Inventories
18
-
(57)
-
(39)
Accounts payable and other current liabilities
4542
(3)
17
-
1956
Net cash provided by/(used) in continuing operations
572
(735)
699
(21)
515
Net cash used by discontinued operations
(2)
-
64-
-
(2)
Net cash used in investing activities
(630)
(200) (149)
(165)
-
(979)(995)
Cash acquired in acquisitions
-
-
56
-
56
Increase in non-current investments
-
(16) (4)
(14)
-
(20)(30)
Additions to property, plant and equipment
(340)
-
(231)
-
(571)
Proceeds on sale of mining assets
1
-
9
-
10
Proceeds on sale of investments
-
-
-
-
-
Cash effects from hedge restructuring
(310)
-
-
-
(310)
Cash effects ofconsideration for acquisitions or disposals
(43)
(184)
-
-
(227)
Loans receivable advancedNet loans repaid
62
-
21
-
83
Change in restricted cash
-
-
(2)(6)
-
(2)(6)
Loans receivable repaid
62
- 23
-
85
Net cash (used)/generated in financing activities
(226)
988
(507)
21
276
Short-termNet repayments of short-term debt repaid
(347)
- (262)(267)
-
(609)
Short-term debt raised
80
- 8(254)
-
88(521)
IssuanceInsurance of stock
3
-
-
-
3
Long-term debt repaidShare issue expenses
-
- (200)
-
(200)-
Long-term-
Net proceeds of long-term debt raised
-
988 1
(199)
-
989789
Cash outflows from derivatives relating to acquisitions
-
-
(24)
-
(24)
Cash effects from hedge restructuring
227
-
-
-
227
Dividends paid
(189)
-
(30)
21
(198)
Net (decrease)/increase in cash and cash equivalents
(279)
53 29
-
(197)
Effect of exchange rate changes on cash
17
- -
-
17
Cash and cash equivalents – January 1,
280
- 199
-
479
F-
7
3
Cash and cash equivalents – December 31,
18
53 228
-
299
The accompanying notes are an integral part of these Consolidated Financial Statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
29.
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
ANGLOGOLD ASHANTI LIMITED
Condensed consolidating statements of cash flows
FOR THE YEAR ENDED DECEMBER 31,
(As restated)
(In millions, except share information)
2003
$
AngloGold Ashanti
2003
$
IOMco
2003
$
Other subsidiaries
2003
$
Cons adjustments
2003
$
Total
(the “Guarantor”)
(the “Issuer”)
(the “Non-Guarantor
subsidiaries”)
Net cash provided by/(used in) operating activities
305
-
166
(60)
411
Income/(loss) after minority interest
255
-
111
(116)
250
Reconciled to net cash provided by/(used in) operations:
Profit on sale of assets
(2)
-
(53)
-
(55)
Depreciation, depletion and amortization
91
-
156
-
247
Deferred stripping costs
-
-
(32)
-
(32)
Impairment
of
assets
69
-
9
-
78
Deferred income and mining tax
96
-
(20)
-
76
Other non cash items
(160)
-
137
56
33
Net decrease in provision for environmental rehabilitation and pension and other
post-retirement medical benefits
(76)
-
(12)
-
(88)
Effect of changes in operating working capital items:
Net movement in inter-group receivables and payables
124
-
(124)
-
-
Receivables
(65)
-
15
-
(50)
Inventories
(45)
-
(33)
-
(78)
Accounts payable and other current liabilities
18
-
12
-
30
Net cash used in investing activities
(236)
-
(32)
-
(268)
Cash acquired in acquisitions
9
-
-
-
9
Increase in non-current investments
-
-
(1)
-
(1)
Additions to property, plant and equipment
(246)
-
(93)
-
(339)
Proceeds on sale of mining assets
2
-
4
-
6
Proceeds on sale of investments
-
-
56
-
56
Cash effects from hedge restructuring
-
-
-
-
-
Cash effects of acquisitions or disposals
-
-
1
-
1
Loans receivable advanced
(1)
-
(3)
-
(4)
Loans receivable repaid
-
-
4
-
4
Net cash (used)/generated in financing activities
(14)
-
(125)
60
(79)
Short-term debt repaid
(69)
-
(36)
-
(105)
Short-term debt raised
79
-
-
-
79
Issuance of stock
10
-
-
-
10
Long-term debt repaid
-
-
(32)
-
(32)
Long-term debt raised
270
-
13
-
283
Cash outflows from derivatives relating to acquisitions
-
-
-
-
-
Cash effects from hedge restructuring
-
-
-
-
-
Dividends paid
(304)
-
(70)
60
(314)
Net increase/(decrease) in cash and cash equivalents
55
-
9
-
64
Effect of exchange rate changes on cash
41
-
12
-
53
Cash and cash equivalents – January 1,
184
-
178
-
362
F-74
Cash and cash equivalents – December 31,
280
-
199
-
479
The accompanying notes are an integral part of these Consolidated Financial Statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
29.
CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
ANGLOGOLD ASHANTI LIMITED
Condensed consolidating statements of cash flows
FOR THE YEAR ENDED DECEMBER 31,
(As restated)
(In millions, except share information)
2002
$
AngloGold Ashanti
2002
$
IOMco
2002
$
Other subsidiaries
2002
$
Cons adjustments
2002
$
Total
(the “Guarantor”)
(the “Issuer”)
(the “Non-Guarantor
subsidiaries”)
Net cash provided by/(used in) operating activities
269
-
331
(71)
529
Income/(loss) after minority interest
365
-
102
(111)
356
Reconciled to net cash provided by/(used in) operations:
(Profit)/loss on sale of assets
-
-
-
-
-
Depreciation, depletion and amortization
96
-
161
-
257
Deferred stripping costs
-
-
(5)
-
(5)
Impairment
of
assets
-
-
-
-
-
Deferred income and mining tax
(55)
-
(1)
-
(56)
Other non cash items
(109)
-
63
40
(6)
Net decrease in provision for environmental rehabilitation and pension
and other post-retirement medical benefits
(3)
-
(14)
-
(17)
Effect of changes in operating working capital items:
Net movement in inter-group receivables and payables
(69)
-
69
-
-
Receivables
17
-
(15)
-
2
Inventories
(16)
-
(30)
-
(46)
Accounts payable and other current liabilities
43
-
1
-
44
Net cash generated/(used) in investing activities
161
-
(227)
-
(66)
Cash acquired in acquisitions
-
-
8
-
8
Increase in non-current investments
(28)
-
(6)
-
(34)
Additions to property, plant and equipment
(112)
-
(134)
-
(246)
Proceeds on sale of mining assets
-
-
1
-
1
Proceeds on sale of investments
158
-
-
-
158
Cash effects from hedge restructuring
-
-
-
-
-
Cash effects of acquisitions or disposals
140
-
(105)
-
35
Loans receivable advanced
(1)
-
(4)
-
(5)
Loans receivable repaid
4
-
13
-
17
Net cash (used)/generated in financing activities
(350)
-
(54)
71
(333)
Short-term debt repaid
(141)
-
(489)
-
(630)
Short-term debt raised
-
-
37
-
37
Issuance of stock
18
-
-
-
18
Long-term debt repaid
(138)
-
(120)
-
(258)
Long-term debt raised
180
-
580
-
760
Cash outflows from derivatives relating to acquisitions
-
-
-
-
-
Cash effects from hedge restructuring
-
-
-
-
-
Dividends paid
(269)
-
(62)
71
(260)
Net (decrease)/increase in cash and cash equivalents
80(286)
53
27
-
50
-
130(206)
Effect of exchange rate changes on cash
6317
-
12(4)
-
7513
Cash and cash equivalents – January 1
41286
-
116183
-
157469
F-75F-94
Cash and cash equivalents – December 31,
18417
53
206
-
178276
-
362
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-76
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
30. STOCK SPLIT
Throughout the annual financial statements presented herein, the number of AngloGold Ashanti common
shares and the calculation of basic and diluted earnings/(loss) per share information for AngloGold Ashanti
have been adjusted retroactively to reflect AngloGold's two-for-one stock split and the issuance of a total of
278,196 AngloGold common shares under AngloGold's odd lot offer as approved at the general meeting of
AngloGold’s shareholders held on December 5, 2002.
31. SUBSEQUENT EVENTS
$700 million Syndicated loan facility
AngloGold Ashanti Limited has signed a new three-year loan facility agreement for $700 million to replace
the $600 million Syndicated facility which matured in February 2005. The facility will be used to repay the
maturing $600 million facility and for general corporate purposes. The new facility will reduce the group’s
cost of borrowings, as the borrowing margin over LIBOR will reduce from 70 basis points to 40 basis
points.
New expansion projects
On January 26, 2005, the AngloGold Ashanti board approved the $121 million Cuiabá Deepening Project in
Brazil, which is expected to increase production from that mine from 190,000 ounces per year to 250,000
ounces per year within two years of the project’s completion. The Cuiabá life-of-mine should be extended
by six years and production over this period should increase by 1.86 million ounces.F-95
Discontinuedoperations
The Ergo reclamation surface operation was discontinued during 2005. This operation is included under
South Africa for segmental reporting. Ergo has reached the end of its economic useful life. After a detailed
investigation of several options and scenarios, management decided on February 1, 2005 that closure at
the operation will commence on March 31, 2005. This is expected to be completed before the end of 2005.
The remaining available tonnage will be treated and cleaned through the tailings facility. During 2005 and
until the final date of closure, it is estimated that the operation will report a loss from operating and closure
activities of approximately $31 million.
Water pumping costs
On April 15, 2005, the South African Department of Water Affairs and Forestry issued a directive ordering
three mining groups, DRDGold, Harmony and AngloGold Ashanti to share equally, the costs of pumping
water at some shafts of DRDGold’s North West operations in South Africa. This follows an interdict
application made by AngloGold Ashanti in response to DRDGold’s threat to cease funding the pumping of
water at these shafts, after placing Buffelsfontein, its subsidiary that operated the North West operations,
into liquidation on March 22, 2005. The aggregate monthly cost of pumping is estimated at R8 million
($1.2 million).
Sale of exploration assets to Crescent Gold Limited
On April 29, 2005, AngloGold Ashanti announced the conditional sale of exploration assets in the Laverton
area in Australia, comprising the Sickle royalty of $30 per ounce, the Child Harold prospect, various
100 percent AngloGold Ashanti Australia-owned interests including the Lord Byron and Fish projects as
well as its interests in the Jubilee, Black Swan and Jasper Hills Joint Ventures to Crescent Gold Limited, for
a total consideration of A$4 million ($3 million). A$0.3 million ($0.2 million) was payable on the execution
of a binding sale and purchase agreement, A$1 million ($0.8 million) is payable in Crescent Gold shares
and A$3 million ($2 million) is payable in cash, on or before December 15, 2006.
F-77
SOCIÉTÉ DES MINES DE MORILA S.A.
FINANCIAL STATEMENTS
for the year ended December 31, December 20042006
Registration number: 15430
Incorporated in the Republic of Mali
F-78
F-96
Société des Mines de Morila S.A.
Financial Statements
for the year ended December 31, 2006
Reports of Independent Registered Public Accounting Firms
Income statement
Balance sheet
Statement of changes in shareholders’ equity
Cash flow statement
Notes to the financial statements
F-97
Report of the Independent Registered Public Accounting Firm
The board
To the Board of directorsDirectors and stockholdersShareholders of Société des Mines de Morila S.A.
We have audited the accompanying balance sheetssheet of SocieteSociété des Mines de Morila S.A. (the "Company")Company) as of
December 31, 2006, and the related statement of income, shareholders’ equity, and cash flows for the year then ended.
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal
control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of
Société des Mines de Morila S.A. at December 31, 2006 and the results of its operations and its cash flows for the year then
ended, in conformity with International Financial Reporting Standards.
We also audited the adjustments described in note 2.5 t hat were applied to restate the 2005 and 2004 financial statements.
In our opinion, such adjustments are appropriate and have been properly applied.
As discussed in note 2.5, in 2006 the Company changed its method of accounting for stripping costs incurred during the
production phase of a mine.
Ernst & Young Inc.
Registered Auditor
Johannesburg, Republic of South Africa
June 15, 2007
F-98
Report of the Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of Société des Mines de Morila S.A.
In our opinion, the balance sheet as of December 31,
2004 and 2003, 2005 and the related the related income statements, cash flow
statements and statements of income, cash flows, and changes in shareholders’shareholders equity for each of the three
two years in the period ended December 31, 2004.2005,
before the effects of the adjustments to retrospectively change the method of accounting for stripping costs incurred during
the production phase of a mine as described in Note 2.5, present fairly, in all material respects, the financial position of
Société des Mines de Morila S.A. (the “Company”) at December 31, 2005, and the results of its operations and its cash flows
for each of the two years in the period ended December 31, 2005, in conformity with International Financial Reporting
Standards (the 2005 financial statements before the effects of the adjustments discussed in Note 2.5 are not presented
herein). These financial statements are the responsibility of the Company's
management. Our responsibility is to express
an opinion on these financial statements based on our audit.
audits. We conducted our audits, before the effects of the
adjustments described above, of these statements in accordance with International Standards on Auditing and the standards of the Public Company Accounting
Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosuredisclosures in the financial statements. An audit also includesstatements, assessing the
accounting principles
used and significant estimates made by management, as well asand evaluating the overall financial statement
presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred
We were not engaged to above present fairly, in all material respects, the financial position of the
Company as of December 31, 2004 and 2003, and of the results of its operations and its cash flows for each of the three years
in the period ended December 31, 2004, in conformity with International Financial Reporting Standards.
International Financial Reporting Standards vary in certain significant respects from accounting principles generally accepted in
the United States of America. Information relatingaudit, review, or apply any procedures to the natureadjustments to retrospectively change the method of
ac counting for stripping costs incurred during the production phase of a mine described in Note 2.5 and effectaccordingly, we do
not express an opinion or any other form of assurance about whether such differences is presented in note 23 to theadjustments are appropriate and have properly
financial statements.
applied. Those adjustments were audited by other auditors.
PricewaterhouseCoopers Inc.
Chartered Accountants (SA)Director: Faan Lombard
Registered Accountants and Auditors
Auditor
Sunninghill, South Africa
May 3, 2005March 9, 2006
F-79
F-99
Société des Mines de Morila S.A.
Statement of Operations
Income Statements
for the years ended December 31,
Note
2004
$’000
2003
$’000
2002
$’000
Note
2006
$’000
2005
$’000
Restated
(note 2.5)
2004
$’000
Restated
(note 2.5)
Revenue
1413
314 878
295 909
189 740
273 931
328 652
Operating costs
(119 612)
(101 835)156 552)
(97 784)158 981)
(133 963)
Operating profit
15
70 128
172 096
230 86814
158 326
136 928
55 777
Other expenditure – net
(370)
(4 860)
(6 566)
(10 771)
(4,372)
-
interest received
651
435
92
291-
487
- finance charges
(3 146)
(3 811)
(4 252)
(5 113)-
(6 574)
- other (expenses) / income, net
2 125
(1 484)
(2 406)
(5 949)
1 715
Profit before taxation
63 562
161 325157 956
226 496
132 068
49 211
Taxation 16
-15
-
(57 717)
(267)
-
Net profit
63 562
161 325Net profit attributable to Equity Shareholders
226 496
100 239
131 801
49 211
See
The accompanying notes toare an integral part of the financial statementsstatements.
F-80
F-100
Société des Mines de Morila S.A.
Balance sheetsheets
At December 31,
20042006
2003
Note2005
$’000
$’000
$’000
Note
Restated
(note 2.5)
ASSETS
Non current assets
168202 719
171 508157 945
Mining assets
9
88 427
101 580
Deferred tax asset
8
117 7546 261
7 551
130 505Non-current receivables
Deferred stripping11
912 422
20 830-
26 298
Long-term ore stockpiles
10
30 13595 609
14 70548 814
Current assets
97 11089 803
69 347120 389
Deferred stripping
9 15
925
-
Inventories
10
25 33239 380
21 11756 735
Accounts receivable
11
44 89137 560
24 59949 939
Prepaid expenses
8 922435
1 306
Derivative financial instruments
7
-
2 8689 811
Cash and cash equivalents
2 0404 428
9 752
Restricted cash
12
-
9 7053 904
Total assets
265 829292 522
278 334
240 855
EQUITY AND LIABILITIES
Capital and reserves
Share capital
34
16
16
Distributable reserves
213 647
138 577245 949
221 710
Other reservesShareholder’s equity
-245 965
(18 508)
Retained income
213 647
157 085
Shareholder’s equity
213 663
138 593
221 726
Non-current liabilities
26 81122 044
44 88324 556
Shareholder’s loan
Shareholders’ subordinated loans
45
3 369689
18 9933 525
Environmental rehabilitation provision
56
10 012
9 252889
Interest bearing borrowings
7
8 809343
Long term liabilities
6
14 190
17 081
11 142
Current liabilities
25 35524 513
57 379
32 052
Accounts payable
1312
17 058
22 464160
Taxation payable
18 1234 434
Derivative financial instruments6 844
Short-term portion of interest bearing borrowings
7
-3 021
18 508
Short term portion of long term liabilities
6
2 891
20 7483 048
Total shareholders’ equity and liabilities
265 829292 522
278 334
240 855
See
The accompanying notes toare an integral part of the financial statementsstatements.
F-81
F-101
Société des Mines de Morila S.A.
Statement
Statements of changes in shareholders’ equity
for the years ended December 31,
Share
capital
$’000
Retained
income
$’000
OtherHedging
ReservesReserve
$’000
Total
Total
$’000
Balance at January 1, 20022004 (as previously
reported)
16
85 264157 085
(4 362)18 508)
80 918138 593
Change in accounting policy (see note 2.5)
-
(19 687)
-
(19 687)
Balance at January 1, 2004
16
137 398
(18 508)
118 906
Net profit for the year
-
226 496
-
226 49649 211
Movement in cash flow hedges
-
-
(16 371)
(16 371)
Dividends declared and paid
-
(142 000)
-
(142 000)
Balance at December 31, 2002
16
169 760
(20 733)
149 043
Net profit for the year
-
161 325
-
161 325
Movement in cash flow hedges
-
-
2 225
2 225
Dividends declared and paid
-
(174 000)
-
(174 000)
Balance at December 31, 2003
16
157 085
(18 508)
138 593
Net profit for the year
-
63 562
-
63 56249 211
Movement in cash flow hedges
-
-
18 508
18 508
Dividends declared and paid
-
(7 000)
-
(7 000)
Balance at December 31, 2004
16
213 647179 609
-
213 663179 625
See
Net profit for the year
-
131 801
131 801
Dividends declared and paid
-
(89 700)
(89 700)
Balance at December 31, 2005
16
221 710
-
221 726
Net profit for the year
100 239
100 239
Dividends declared and paid
(76 000)
(76 000)
Balance at December 31, 2006
16
245 949
-
245 965
The accompanying notes toare an integral part of the financial statementsstatements.
F-82
F-102
Société des Mines de Morila S.A.
Cash flow statementstatements
for the years ended December 31,
2006
2005
2004
2004
2003
2002
Note$’000
$’000
$’000
$’000Note
Restated
(note 2.5)
Restated
(note 2.5)
Cash flows from operating activities
Cash generated by operating activities before
changes in working capital
17.1
83 69016.1
177 264764
236,664
160 006
79 796
Cash utilized by changes in working capital
17.216.2
(48 937)56 224)
(8 244)57 636)
(9 949)45 043)
Cash generated from operations
121 540
102 370
34 753
169 020
226 715
Taxation paid
16.3
(36 960)
(974)
-
Interest received
651
435
92
Interest paid -net
(2 982)
(3 451)021)
(4 223)3 543)
(6 088)
Net cash flows generated by operating activities
82 249
98 810
31 302
164 797
220 627
Cash flows from investing activities
Decrease in restricted cash
-
-
9 705
1 610
(131)
Additions to mining assets
(2 900)
(4 355)
(4 640)
(11 907)
(13 715)
Dividends paid
(7 000)
(174 000)
(142 000)
Net cash flows generated from / (utilized in)
utilized in investing activities
(1 935)
(184 297)2 900)
(155 846)4 355)
5 065
Cash flows from financing activities
Long term liabilities repaid
(2 826)
(2 891)
(20 748)
(21 098)
(27 003)
Shareholder loan repaid
-
-
(16 331)
-Dividends paid
-
(76 000)
(89 700)
(7 000)
Net cash flows utilized in financing activities
(3778 826)
(92 591)
(44 079)
(21 098)
(27 003)
Net decreaseincrease/(decrease) in cash and equivalents
524
1 864
(7 712)
(40 598)
37 778
Cash and equivalents at beginning of year
3 904
2 040
9 752
50 350
12 572
Cash and equivalents at end of year
4 428
3 904
2 040
9 752
50 350
See
Cash at bank and in hand
4 428
3 904
2 040
The principal non-cash transactions are the acquisition of mining assets through finance leases (note 7) and the off-set of
income taxes against indirect tax receivables (note 16.3).
The accompanying notes are an integral part of the financial statements.
F-103
Société des Mines de Morila S.A.
Notes to the consolidated financial statements
F-83
for the year ended December 31, 2006
1.
Nature of operations
Société des Mines de Morila S.A. (the “Company”)owns the Morila gold mine in Mali. The Company is owned 80% by
Morila Limited and 20% by the StateGovernment of Mali. Randgold Resources Limited and AngloGold Ashanti Limited (formerly
(formerly AngloGold Limited) each own 50% of Morila Limited. The Company is engaged in gold mining and related
activities,
including exploration, extraction, processing and smelting. Gold bullion, the Company’s principal product, is
currently
produced and sold in Mali.
2.
Significant accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below. These
policies have been consistently applied to all the years presented and are consistent with prior years, except for the
change in accounting policy for development
costs and mine plant facilities. This accounting policy has been changedrelating to clarify the treatment of costs relating to
the definition of mineralization in existing orebodies or the expansion of the productive capacity of existing operating
mines.stripping costs. Refer note 2.5.
2.1
Basis of preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards
(“IFRS”). The financial statements have been prepared under the historical cost convention, as modified by available-certain
for-sale financial assets, and financial assets and financial liabilities (including derivative instruments), which are
carried at fair value. Where there
are significant differences to United States Generally Accepted Accounting Principles (US GAAP), these have been
described in note 22.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting
estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting
policies. The more significant areas requiring the use of management estimates and judgment relate to mineral
reserves that are the basis for future cash flow estimates and units-of-production depreciation calculations,
environmental rehabilitation obligations, estimates of recoverable gold and other materials in gold in process and
stockpiles, and asset impairments.
2.2General
General
The financial statements are measured and presented in US dollars, as it is the primary measurement currency in
which transactions are undertaken. Monetary assets and liabilities in foreign currencies are translated to US dollars at
rates of exchange ruling at the end of the financial period. Translation gains and losses arising at period-end, as well
as those arising on the translation of settled transactions occurring in currencies other than the functional currency,
are included in net income.
2.3
Foreign currency translation
(a) Measurement and presentation currency
The consolidated financial statements are presented in United States Dollars,US dollars, which is the Company’s measurement and
and presentation currency.
(b) Transactions and balances
Foreign currency transactions are translated into the measurement currency using the exchange rates prevailing at
the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions
and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign
currencies are recognized in the income statement.
2.4
Property, plant and equipment
a) Undeveloped properties
Undeveloped properties upon which the Company has not performed sufficient exploration work to determine whether
significant mineralization exists, are carried at original cost. Where the directors consider that there is little likelihood of
the properties being exploited, or the valuevalues of the exploitable rights have diminished below cost, an impairment is
recorded.
F-104
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
2.
Significant accounting policies (continued)
b) Development costs and mine plant facilities
Mine development costs and mine plant facilities are initially recorded at cost, whereafter it isthey are measured at cost
less
accumulated depreciation and impairment. Development costs and mine plant facilities relating to existing and
new
mines are capitalized. Development costs consist primarily of direct expenditure incurred to evaluate and develop
new
orebodies, to define mineralization in existing orebodies and to establish or expand productive capacity, and is
capitalized until commercial levels of productionsaleable minerals are achieved,extracted from the orebody at which point the costs are depreciated over the life
of
the mine. Ongoing costs to maintain production are expensed as incurred.
F-84
2.
Significant accounting policies (continued)
c) Non-mining fixed assetsproperty, plant and equipment
Other non-mining fixed assetsproperty, plant and equipment are shown at cost less accumulated depreciation.
d) Depreciation and amortization
Long life
Long-lived assets include mining properties, mine development costs and mine plant facilities. TheseDepreciation and
amortization in respect of long-lived assets have useful
economic lives which exceed that of the life of the mine. Depreciation and amortization are therefore charged over the
life of the mine based on estimated ore tons
contained in proven and probable reserves. Proven and probable ore
reserves reflect estimated quantities of
economically recoverable reserves, which can be recovered in the future from
known mineral deposits. Short life Short-lived
assets, which include motor vehicles, office equipment and computer equipment,
are depreciated over estimated
useful lives of between two to five years.
years, using the straight-line method but limited to the life of mine.
e) Mining property evaluations
The carrying amountamounts of the long-lived assets of the Company are annually compared to the recoverable amount of the assets
assets, or whenever events or changes in circumstances indicate that the net book value may not be recoverable. The
recoverable amount is the higher of value in use and net selling price.fair value less cost to sell.
In assessing the value in use, the expected future cash flows from the asset is determined by applying a discount rate
to the anticipated pre-tax future cash flows. The discount rate used is derived from the Company’s weighted average costcredit-adjusted
risk-free rate. Revenue for pit optimization assumptions are based on a gold price of $475 (2005: $400) and the
capital.extraction of proven and probable reserves as per the approved mine plan. Working costs and sustaining capital
expenditure are estimated based on the approved mine plan. An impairment is recognized in the income statement to
the extent that the carrying amount exceeds the
assets’ recoverable amount. The revised carrying amounts are
depreciated in line with accounting policies.
A previously recognized impairment loss is reversed if the recoverable amount increases as a result of a reversal of
the conditions that originally resulted in the impairment. This reversal is recognized in the income statement and is
limited to the carrying amount that would have been determined, net of depreciation, had no impairment loss been
recognized in prior years.
The estimates of future discounted cash flows are subject to risks and uncertainties including the future gold price. It is
therefore reasonably possible that changes could occur which may affect the recoverability of mining assets.
F-105
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
2.5
2.5DeferredstrippingStripping costs
The Company changed its accounting policy on stripping costs under IFRS in the current period. Previously, costs of
production stage waste stripping in excess of the expected pit life average stripping ratio arewere deferred and then
charged to
production when the actual stripping ratio iswas below the expected average ratio. The expected pit life average stripping ratio isratio. Under the
calculatedrevised accounting policy , all stripping cost incurred during the production phase of a mine are treated as variable
production costs and as a result are included in the ratiocost of future anticipated waste tons to be mined, to anticipated future ore tons to be mined. This
ratio is recalculated annually in light of additional knowledge and changes in estimates. The expected pit life ratio is
then compared to waste associated with ore minedthe inventory produced during the period sothat the stripping
costs are incurred.
Under accounting principles generally accepted in the United States (“U.S. GAAP”), EITF 04-06 ‘Accounting for
Stripping Costs Incurred during Production in the Mining industry’ is effective for reporting periods beginning after
December 15, 2005. The consensus does not permit the deferral of any waste stripping costs during the production
phase of a mine, but requires instead that they should be treated as variable production costs. The Company has
decided to calculateadopt the same treatment under IFRS to ensure consistent accounting policies are applied under IFRS and
U.S. GAAP. With regard to the conclusions reached by the EITF, the directors believe the revised policy will mean that
the financial statements provide reliable and more relevant information about the Company’s financial position and its
financial performance. In accordance with the requirements of IAS 8 ‘Accounting Policies, Changes in Accounting
Estimates and Errors’, the change in the IFRS policy has been applied retrospectively and hence the 2005 and 2004
comparatives have been restated.
The change in the IFRS accounting policy has resulted in the following adjustments to the amounts reported under
IFRS:
US$000
December 31, 2006
December 31, 2005
December 31, 2004
Decrease in deferred stripping costs to
becost
5 287
9 217
37 210
Decrease/(increase) in ore stockpiles
15 809
20 856
(5 451)
Decrease in gold in process
90
127
2 279
Decrease in deferred or released for the year.taxation liability
1 850
3 067
-
Increase in deferred taxation asset
7 415
7 503
-
Decrease in opening retained earnings
19 630
34 038
19 687
US$000
Year ended
December 31, 2006
Year ended
December 31, 2005
Year ended
December 31, 2004
Increase/(decrease) in net profit
7 709
14 408
(14 351)
2.6
Inventories
Inventories, which include consumable stores, gold in process and ore stockpiled, are stated at the lower of cost or
net realizable value. The cost of ore stockpiles and gold produced is determined principally by the weighted average
cost method using related production costs. Costs of gold inventories include all costs incurred up until production of
an ounce of gold such as milling costs, mining costs and general mine and administration costs but excluding refining
and taxes.
Stockpiles consist of two types of ore, high grade and medium grade ore, which will be processed through the
processing plant. High grade ore is defined as ore above 5g/t and medium grade is defined as ore above 1.4g/t. Both
high and medium grade stockpiles are currently being processed and all ore is expected to be
fully processed within
the life of mine. The processing of ore in stockpiles occurs in accordance with the life of mine
processing plan that has
been optimized based on the known mineral reserves, current plant capacity and mine
design.
Consumable stores are valued at average cost after appropriate provision for redundant and slow moving items have
been made.
F-106
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
2.
Significant accounting policies (continued)
2.7
Financialinstruments
Financial instruments are initially measured at cost, including transaction costs. Subsequent to initial recognition these
instruments are measured as set outindicated below. Financial instruments carried on the balance sheet include
cash and cash
equivalents, receivables, accounts payable, borrowings and derivative financial instruments.
2.8
Derivatives
Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently
remeasured at their fair value, unless they meet the criteria for the normal purchases normal sales exemption.
F-85
2.
Significant accounting policies (continued)
On the date a derivative contract is entered into, the Company designates the derivative for accounting purposes as
either a hedge of the fair value of a recognized asset or liability (fair value hedge) or a hedge of a forecasted
transaction (cash flow hedge). Certain derivative transactions, while providing effective economic hedges under the
Company's risk management policies, do not qualify for hedge accounting.
Changes in the fair value of a derivative that is highly effective, and that is designated and qualifies as a cash flow
hedge, are recognized directly in equity. Amounts deferred in equity are included in the income statement in the same
periods during which the hedged firm commitment or forecasted transaction affects net profit or loss.
Recognition of derivatives which meet the criteria for the normal purchases, normal sales exemption are deferred until
settlement. Under these contracts the groupCompany must physically deliver a specified quantity of gold at a future date at
a
specified price to the contracted counter party..party.
Changes in the fair value of derivatives that do not qualify for hedge accounting are recognized in the income
statement.
The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk
management objective and strategy for undertaking various hedge transactions. This process includes linking
derivatives designed as hedges to specific assets and liabilities or to specific firm commitments forhighly probable forecasted transactions.
transactions. The Company formally assesses, both at the hedge inception and on an ongoing basis, whether the
derivatives that
are used in hedging transactions are highly effective in offsetting changes in the fair value or cash
flows of the hedged
item.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any
cumulative gain or loss existing in equity at that time remains in equity and is recognized when the forecast
transaction is ultimately recognized in the income statement. When a forecast transaction is no longer expected to
occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement.
2.9
Receivables
Receivables are recognized initially at fair value and subsequently measured at amortized cost, less provision for
impairment. A provision for impairment of trade receivables is established when there is objective evidence that the
GroupCompany will not be able to collect all amounts due according to the original terms of receivables. The amount of the
provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows,
discounted at the effective interest rate. The amount of the provision is recognized in the income statement.
2.10 Cash and cash equivalents
Cash and cash equivalents include all highly liquid investments with a maturity of three months or less at the date of
purchase.
F-107
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
2.
Significant accounting policies (continued)
2.11 Rehabilitation
costs
The net present value of estimated future rehabilitation cost estimates is recognized and provided for in the financial
statements and capitalized to mining assets on initial recognition. Initial recognition is at the time of the disturbance
occurring and thereafter as and when additional environmental disturbances are created. The estimates are reviewed
annually to take into account the effects of inflation and changes in estimates and are discounted using rates that
reflect the time value of money.
Annual increases in the provision are charged to income and consist of finance costs relating to the change in present
value of the provision and inflationary increases in the provision estimate. The present value of additional
environmental disturbances created are capitalized to mining assets against an increase in the rehabilitation provision.
The rehabilitation asset is amortizeddepreciated as noted previously. Rehabilitation projects undertaken, included in the
estimates, are charged to the provision as incurred.
Environmental liabilities, other than rehabilitation costs, which relate to liabilities arising from specific events, are
expensed when they are known, probable and may be reasonably estimated.
2.12 Provisions
Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events
where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation,
and a reliable estimate of the amount of the obligation can be made.
F-86
2.
Significant accounting policies (continued)
2.13 Borrowings
Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated
at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is
recognized in the income statement over the period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of
the liability for at least 12 months after the balance sheet date.
2.14 Accounts
payable
Accounts payable are stated at cost adjusted for payments made to reflect the value of the anticipated economic
outflow of resources.
2.15 Employee benefits
benefits
(a) Post retirement employee benefits
The companyCompany has a defined contribution plan. A defined contribution plan is a plan under which the companyCompany pays
fixed contributions. The companyCompany has no legal or constructive obligations to pay further contributions if the fund does
not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prioremployees.
periods.
Retirement benefits for employees of the Company are provided by the Mali stateGovernment social security system to
which the
Company and its employees contribute a fixed percentage of payroll costs each month. The Company has
no further
payment obligations once the contributions have been paid. The contributions are recognized as employee
benefit
expense when they are due.
(b) Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date, or whenever an
employee accepts voluntary redundancy in exchangeexcha nge for these benefits. The Company recognizes termination
benefits when it is demonstrably committed to either: terminating the employment of current employees according to a
detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to
encourage voluntary redundancy. Benefits falling due more than 12 months after balance sheet date are discounted to
present value.
F-108
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
2. Significant accounting policies (continued)
2.16Finance
Leases
Leases of plant and equipment where the Company assumes a significant portion of risks and rewards of ownership
are classified as a finance lease. Finance leases are capitalized at the estimated present value of the underlying lease
payments. Each lease payment is allocated between the liability and the finance charges to achieve a constant rate
on the finance balance outstanding. The interest portion of the finance payment is charged to the income statement
over the lease period. The plant and equipment acquired under the finance lease are depreciated over the useful lives
of the assets.
2.17Revenue
recognition
Revenue is recognized as follows:
a) Gold sales - Revenue arising from gold sales is recognized when the risks and rewards of ownership and title
pass to the buyer under the terms of the applicable contract and the pricing is fixed and determinable.
b) Silver sales - Revenue arising from silver sales is recognized
These are met when the risksgold and rewardssilver leaves the mine’s smelthouse.
As gold sales are subject to customer survey adjustment, sales are initially recorded on a provisional basis using
the Company’s best estimate of ownershipcontained metal. Subsequently adjustments are recorded in turnover to take into
account final assay and titleweight certificates from the refinery, if different from the initial certificates. Historically the
differences between the estimated and actual contained gold have not been significant.
pass to the buyer under the terms of the applicable contract and the pricing is fixed and determinable.
c)b) Interest income - Interest is recognized on a time proportion basis, taking into account the principal outstanding
and the effective rate over the period to maturity.
2.18 Exploration
2.18Exploration costs
The Company expenses all exploration and evaluation expenditures until the directors conclude that a future
economic benefit is more likely than not of being realised, i.e. “probable”. In evaluating if expenditures meet this
criterion to be capitalised, the directors utilise several different sources of information depending on the level of
exploration. While the criteria for concluding that expenditure should be capitalised is always probable, the
information that the directors use to make that determination depends on the level of exploration.
a) Exploration costsand evaluation expenditure on greenfields sites, being those where the Company does not have any
mineral deposits which are already being mined or developed, is expensed as incurred. incurred until the directors are able
to demonstrate that future economic benefits are probable, which generally will be the establishment of proved
and probable reserves at this location.
b) Exploration and evaluation expenditure on brownfields sites, being those adjacent to mineral deposits which are
already being mined or developed, is expensed as incurred until the directors are able to demonstrate that future
economic benefits are probable, which generally will be the establishment of increased proved and probable
reserves after which the expenditure is capitalised as a mine development cost.
c) Exploration and evaluation expenditure relating to extensions of mineral deposits, which are already being mined
or developed, including expenditure on the definition of mineralisation of such mineral deposits, is capitalised as a
mine development
Costs relatedrelating to property acquisitions are capitalized.also capitalized within development costs.
F-87
F-109
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
2.
Significant accounting policies (continued)
2.19 Taxation
Deferred taxation is provided on all temporary differences between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes.
Deferred tax assets are only recognized to the extent it is probable that the deductible temporary differences will
reverse in the foreseeable future and future taxable profit will be available against which the temporary difference can
be utilized.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and if required, reduced to the
extent it is no longer probable that sufficient future taxable profit will be available to allow all or part of the deferred tax
asset to be utilized.
Deferred tax assets and liabilities are measured at tax rates, which have been enacted or substantially enacted at the
balance sheet date.
Current and deferred tax provisions are recognized in th e income statement.
Current taxation is measured on taxable income at the applicable statutory rate enacted or substantially enacted at
the balance sheet date, and includes any adjustment to tax payable in respect of previous years.
Significant judgment is required in determining the provision for income taxes. There are many transactions and
calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The
Company recognizes provisions and impairments respectively for anticipated tax audit issues based on estimates of
whether additional taxes will be due. Where the final tax outcome of these tax audits are different from the amounts
that were initially recorded, such differences will impact the income tax expense and income tax provisions in the
period in which such determination is made.
The Company recognizes the net future tax benefit related to deferred tax assets to the extent that it is probable that
th e deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability of deferred tax
assets requires the Company to make significant estimates related to expectations of future taxable income.
Estimates of future taxable income are based on forecast cash flows from operations and the application of existing
tax laws. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the
Company to realize the deferred tax assets recorded at the balance sheet date could be impacted.
Additionally, future changes in tax laws could limit the ability of the Company to obtain tax deductions in future
periods.
2.20 Recent accounting pronouncements
a) The following standards and interpretations which have been recently issued or revised have not been adopted
early by the Company. Their expected impact is discussed below:
IFRS 7 Financial Instruments Disclosure (effective for annual periods beginning on or after 1 January 2007)
The objective of this IFRS is to require entities to provide disclosures in their financial statements that enable users to
evaluate the significance of financial instruments for the entity’s financial position; and the nature and extent of risks
arising from financial instruments to which the entity is exposed during the period and at the reporting date, and how
the entity manages those risks. The effect of the adoption of the standard is currently being assessed; however a
significant impact on disclosures is expected.
F-110
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
2.20 Recent accounting pronouncements (continued)
IFRIC Interpretation 8 Scope of IFRS 2 (effective for annual periods beginning on or after 1 May 2006)
The interpretation determines whether IFRS 2 applies to transactions in which the entity cannot identify specifically
some or all of the goods or services received. The Company will apply IFRIC 8 from 1 January 2007, but it is not
expected to have any impact on the Company’s accounts.
IFRIC Interpretation 9 Reassessment of Embedded Derivatives (effective for annual periods beginning on or after
1 June 2006)
The interpretation applies to all embedded derivatives under IAS 39 ‘Financial Instruments: Recognition and
Measurement’ and clarifies certain aspects of their treatment. The Company will apply IFRIC 9 from 1 January 2007,
but it is not expected to have any impact on the Company’s accounts.
IFRIC Interpretation 10 Interim Financial Reporting and Imp airment. (effective for annual periods beginning on or after
1 November 2006)
An entity is required to assess goodwill for impairment at every reporting date, to assess investments in equity
instruments and in financial assets carried at cost for impairment at every balance sheet date and, if required, to
recognise an impairment loss at that date in accordance with IAS 36 and IAS 39. However, at a subsequent reporting
or balance sheet date, conditions may have so changed that the impairment loss would have been reduced or
avoided had the impairment assessment been made only at that date. This Interpretation provides guidance on
whether such impairment losses should ever be reversed. The Company will apply IFRIC 10 from 1 January 2007,
but it is not expected to have any impact on the Company’s accounts.
IFRIC Interpretation 11 IFRS 2 Share-based Payment - Group and Treasury Share Transactions. (Effective for annual
periods beginning on or after 1 March 2007 )
This interpretation addresses the classification of a share-based payment transaction (as equity- or cash-settled), in
which equity instruments of the parent or another group entity are transferred, in the financial statements of the entity
receiving the services. The Company will apply IFRIC 11 from 1 January 2008, but it is not expected to have any
impact on the Company’s accounts.
IFRIC Interpretation 12 Service Concession Arrangements (effective for annual periods beginning on or after
1 January 2008)
This interpretation provides guidance to private sector entities on certain recognition and measurement issues that
arise in accounting for public-to-private service concession arrangements. The Company will apply IFRIC 12 from
1 January 2008, but it is not expected to have any impact on the Company’s accounts.
b) The following standards are not relevant to the Company on adoption:
IFRIC Interpretation 6 Liabilities arising from par ticipation in a specific market – waste electrical and electrical
equipment (effective for annual periods beginning on or after 1 December 2005)
IFRIC Interpretation 7 Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary
Economies (effective for annual periods beginning on or after 1 March 2006)
c) The Company has adopted the following standards and interpretations which are effective for the first time this year
without any significant impact:
IAS 1a Amendment – Actuarial gains and losses and disclosures (January 2006)
IFRIC Interpretation 4 – Determining whether an arrangement contains a lease (effective January 1, 2006)
IFRIC Interpretation 5 – Rights to Interests arising from Decommissioning, Restoration and Environmental
Rehabilitation Funds (effective January 1, 2006)
F-111
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
3. Share
Critical accounting estimates and judgements
Some of the accounting policies require the application of significant judgement by management in selecting the
appropriate assumptions for calculating financial estimates. By their nature, these judgements are subject to an
inherent degree of uncertainty and are based on historical experience, terms of existing contracts, management’s
view on trends in the gold mining industry and information from outside sources.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts
of assets and liabilities within the next financial year are discussed below:
Future rehabilitation obligations
The net present value of current rehabilitation estimates have been discounted to their present value at 6% per annum
(2005: 6%), being an estimate of the cost of borrowings. Expendi ture is expected to be incurred at the end of the
respective mine lives.
Determination of ore reserves
There are numerous uncertainties inherent in estimating ore reserves and assumptions that are valid at the time of
estimation may change significantly when new information becomes available. Changes in the forecast prices of
commodities, exchange rates, production costs or recovery rates may change the economic status of reserves and
may, ultimately, result in the reserves being restated.
Gold price assumptions
The gold price used in the mineral reserves optimisation calculation is US$475 (2005: US$425).
Exploration and evaluation expenditure
The Company has to apply judgement in determining whether exploration and evaluation expenditure should be
capitalised or expensed, under the policy described in note 2.
Indirect taxes receivable
Given their slow moving nature, the group has had to apply judgement in determining when amounts will be recovered
with respect to indirect taxes owing by the Mali Government. The amounts reflected in the financial statements are
based on the directors’ best estimate of the timing of the recovery of these amounts.
Depreciation
There are several methods for calculating depreciation, i.e. the straight-line method, the units of production method
using ounces produced and the units of production method using tonnes milled. The directors believe that the tonnes
milled method is the best indication of plant and infrastructure usage.
F-112
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
4.
Share capital
Share capital consists of the following authorized and issued ordinary par value shares with a nominal value of
Communauté Financière Africaine franc (“CFA”) 10 000 ($16.356) each:
Number
of
shares
authorized and
and issued
2004
2006
$’000
2003
2005
$’000
Morila Limited
800
13
13
Government of Mali
200
3
3
1 000
16
16
4. 5.
Shareholder’s loan
loans
20042006
$’000
20032005
$’000
Government of Mali
3 369689
3 248525
Morila Limited
-
15 745
3 369689
18 9933 525
Made up of:
Principal
2 622
13 1082 622
Deferred interest
7471 067
5 885903
3 369689
18 9933 525
The shareholder loans areloan is denominated in US dollars and interest accrues at a LIBOR dollar rate plus 2% per annum.annum
These loans were subject to the conditions set out in the syndicated loan agreements. Under these agreements, these
loans have been subordinated by the shareholders until such time as the Morila project loan (refer note 6) was repaid
in full.and has no fixed terms of repayment. The weighted average interest rate as at December 31, 20042006 on the
shareholders’ subordinated loans was
4.19% 6.2% (December 31, 2003: 3.23%2005: 5.29%). The loan owing to Morila Limited was paid in full during the 2004 financial year.
6.
5. Environmental
rehabilitation
provision
20042006
$’000
20032005
$’000
Opening balance
8 8099 889
5 8509 252
Accretion expense
443593
2 475637
Additions and changesChange in estimate
(470)
-
484
10 012
9 252889
8 809
F-113
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
6.
Environmental rehabilitation provision (continued)
The provisions for close down and restoration costs include estimates for the effect of future inflation and have been
discounted to their present value at 6% per annum, being an estimate of the risk free pre-tax, cost of borrowing.
While the ultimate amount of rehabilitation costs to be incurred in the future is uncertain, the Company has estimated
that the remaining costs for Morila, in current monetary terms, will be $12.2$13.2 million (December 31, 2003:2005:
$12.2 million), the majority of which will only be expended overat the lifeend of mine.the mine life.
Although limited environmental rehabilitation regulations currently exist in Mali to govern the mines, management has
based the environmental rehabilitation provision using the standards as set by the World Bank which require an
environmental management plan, an annual environmental report, a closure plan, an up-to-date register of plans of
the facility, preservation of public safety on closure, carrying out rehabilitation works and ensuring sufficient funds
exist for the closure works. However, it is reasonably possible that the Company’s estimate of its ultimate
rehabilitation liabilities could change as a result of changes in regulations or cost estimates.
The Company is committed to rehabilitation of its properties and to ensure that it is adequately provided to do so it
makes use of independent environmental consultants to advise it. It also uses past experience in similar situations to
ensure that the provisions for rehabilitation are adequate.
F-88
5.
Environmental rehabilitation provision (continued)
There are no unasserted claims reflected in the provision.
While the ultimate closure costs may be uncertain, there are no uncertainties with respect to joint and several liability
that may affect the magnitude of the contingency as these are clearly defined in the Company’s mining convention.
There are no other potentially responsible parties to consider for cost sharing arrangements.
The Company carries insurance against pollution including cost of cleanup. At present, there are no losses and or
claims outstanding.
6.7.
Interest Bearing Borrowings
Long term liabilities
20042006
$’000
20032005
$’000
a) Morila project loan
-
18 000
b) MorilaRolls Royce finance lease
14 4689 569
16 82611 980
c) Morilab) Air Liquide finance lease
1 795
2 613210
3 003
17 081
37 829
11 364
14 190
Less: Current portion of long term liabilities:
a) Morila Project loan
-
18 000
b) MorilaRolls Royce finance lease
2 489593
2 358633
c) Morilab) Air Liquide finance lease
402428
390415
14 190
17 081
3 021
3 048
8 343
11 142
a)
Morila Project LoanRolls Royce finance lease
The loan was the original project finance loan with a consortium of commercial banks and was fully repaid in
June 2004. The loan carried interest at US three month LIBOR plus 2% per annum. The weighted average
interest rate for the year ended December 2004, 31 was 3.44% (2003: 3.29%).
The repayment schedule according to the contract was as follows:
2004
$’000
2003
$’000
Less than one year
-
18 000
Later than one year and not later than five years
-
-
Later than five years
-
-
-
18 000
b)
Finance Leases
Morila financeThis lease relates to five generators leased from Rolls Royce. The lease is repayable over ten years
commencing April 1, 2001 and bears interest at a variable rate of which as at December 31, 20042006 was
approximately 21% (2005: 20%) per annum based on the lease contract.annum. The lease is collateralized by plant and
equipment whose net
book value at December 31, 20042006 amounted to $14.5$10.3 million (2003: $17.0(2005: $12.1 million).
Average lease payment of $3.8
$3.8 million are payable in instalments over the term of the lease. Two of the
Company’s ultimate shareholders, being Randgold Resources Limited and AngloGold Ashanti Limited jointly
guaranteed the
repayment of the lease.
The estimated repayment schedule accordingF-114
Société des Mines de Morila S.A.
Notes to the contract is as follows:financial statements
for the year ended December 31, 2006
7.
2004Interest Bearing Borrowings (continued)
$’000
2003
$’000
Less than one year
2 488
2 358
Later than one year and not later than five years
9 240
11 728
Later than five years
2 740
2 740
14 468b)
16 826
F-89
6.
Long term liabilities (continued)
c)
Morila Air Liquide finance lease
Morila
The Air Liquide finance lease relates to three oxygen generating units leased from Air Liquide for Morila.
Liquide. The lease is
payable over 10 years commencing December 1, December 2000 and bears interest at a variable rate which
as at
December 31, 20042006 was approximately 3.09% (2005: 3.09%) per annum. The lease is collateralized by the
production
units whose net book value at December 31, 20042006 amounted to $2.5$1.6 million (2003: $2.8(2005: $1.9 million).
The estimated repayment schedule according to the contract is as follows:Finance lease liabilities – minimum lease payments:
20042006
$’000
2003
$’000
Less than one year
402
390
Later than one year and not later than five years
1 741
1 688
Later than five years
470
925
2 613
3 003
7. Derivative
financial
instruments
2004
$’000
2003
$’000
Mark to market of speculative financial instruments
-
(2 868)
Mark to market of hedge financial instruments
-
18 508
- 15
640
The hedge book was closed out at 31 December 2004.
7.1 This reflects the mark-to-market adjustment on those derivative financial instruments which do not, under the
Company’s accounting policy, qualify for hedge accounting. These derivative instruments are further discussed
in note 19.
7.2 The financial instrument liability relates to the derivative financial instruments which qualify for hedge
accounting. These derivative instruments are further discussed in note 19.
8. Mining
assets
Year
Cost
$’000
Accumulated
depreciation
$’000
Net book
value2005
$’000
Not later than 1 year
4 939
5 349
Later than 1 year and not later than 5 years
12 315
16 017
Later than 5 years
-
834
Total mining assets17 254
200422 200
194 187Future finance costs of finance leases
76 433(5 890)
117 754(8 010)
Present value of finance lease liabilities
11 364
14 190
The present value of the finance lease liabilities is as follows:
Not later than 1 year
3 021
3 048
Later than 1 year and not later than 5 years
8 343
10 556
Later than 5 years
-
586
11 364
Total mining assets14 190
2003
188 185
57 680
130 505
Long life8.
Deferred taxation
Deferred tax is calculated in full on temporary differences under the liability method using a principal tax rate of
35% (2005: 35%).
The movement on deferred taxation is a follows:
2006
$’000
2005
$’000
(Restated)
At beginning of the year
(7 551)
-
Income statement charge
1 290
(7 551)
At end of year
(6 261)
(7 551)
Deferred taxation assets and liabilities comprise of the following
Decelerated tax depreciation
1 154
-
Deferred taxation liability
1 154
-
Ore stockpiles and gold-in-process
7 415
7 503
Decelerated tax depreciation
-
48
Deferred taxation asset
7 415
7 551
Net deferred taxation asset
6 261
7 551
F-115
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
9.
Mining assets
Long life
2006
$’000
2005
$’000
Opening carrying amount
101 580
117 754
Additions
2 900
4 358
Revision in estimate of rehabilitation costs
(470)
-
Depreciation
(15 583)
(20 532)
Closing carrying amount
88 427
101 580
Cost
200 975
198 545
Accumulated depreciation
(112 548)
(96 965)
Carrying amount
88 427
101 580
Long-lived assets
Long-lived assets are those assets which are amortized over the life of the mine and are comprised of the
metallurgical
plant, tailings and raw water dams, power plant and mine infrastructure. The net book value of these
assets was
$95.7 $83 million as at December 31, 2004 (2003: $107.92006 (2005: $97.8 million).
Short-lived assets
Short life assets
Short lifeShort-lived assets are those assets which are amortized over their useful life but limited to the life of the mine and are
comprised of motor vehicles and
other equipment. The net book value of these assets was $22.1$3.6 million as at
December 31, 2004 (2003:
$22.62006 (2005: $3.8 million).
F-90
9. Deferred
stripping
200410.
Inventories
2006
$’000
2003
$’000
Opening balance
26 298
18 506
Additions during the year
10 457
7 792
Short-term portion
(15 925)
-
20 830
26 298
In terms of the life of mine plan, pre-stripping is performed in the earlier years. This results in the cost associated with
waste stripped at a rate higher than the expected pit life average stripping ratio, being deferred to later years. These
costs will be released in the period where the actual stripping ratio decreases to below such expected pit life ratio.
The expected pit life average stripping ratios used to calculate the deferred stripping were 3.35 in 2004, 3.68 in 2003
and 3.68 in 2002. The change in the average stripping ratio was due to higher grades being accessed during the
current financial year. As a result the change in life-of-mine estimated stripping ratio in December 2004 compared to
December 2003, $1.8 million less mining costs were deferred. These stripping ratios were calculated taking into
account the actual strip ratios achieved of 4.98 for 2004, 4.77 for 2003 and 7,15 in 2 002.
10. Inventories
20042005
$’000
2003(Restated)
$’000
Consumables stores
14 77822 365
13 87224 145
Gold in process
3 6292 073
1 3132 154
Short-term portion of ore stockpiles
6 92518 008
5 93232 440
25 332
21 11742 446
58 739
Provision for obsolescence
(3 066)
(2 004)
39 380
56 735
Long-term portion of ore stockpiles
30 13595 609
14 70548 814
55 467
35 822
Included in ore stockpiles as of December 31, 2004 is an amount $nil (2003: $4.2 million) for the high grade tailings
stock of Morila, which is stated at its net realisable value. The carrying value of this stockpile is $1.3 million (2003 $4.2
million) but has been stated as zero in 2004, due to uncertainty as to whether the material will be used in production.
134 989
105 549
Ore stockpiles have been split between long and short termshort-term based on the current life of mine plan estimates.
F-116
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
11. Accounts
Accounts receivable
20042006
$’000
20032005
$’000
Related party receivables
- Randgold
Resources
AngloGold Ashanti Limited
2
193
- AngloGold
Ashanti
Limited
22
88
-
AngloGold Services Mali S.A.
1118
-
-
Societe d’ Exploitation des Mines d’Or de Sadiola S.A.
951
-
- Societe des Mines de Loulo S.A.
Boart Long Year Mali
296
-
-
AngloGold Mines de SiquiriSiguiri Guinea
17644
-
- Geita Gold Mining
1
-
Gold sales trade receivable
9 886993
10 1358 991
Value added tax receivable
13 29726 487
8024 763
CustomFuel duties receivable
16 69514 005
12 48317 206
MDM receivable
2 522
2 522
Other 6
1653 459
12 047
812
46 451
24 599
Provision for doubtful debts
56 709
55 529
Impairment provision
(1 560)6 727)
(5 590)
49 982
49 939
Less non – current portion
(12 422)
-
44 891
24 599
F-91
12. RestrictedCurrent accounts receivable
Cash37 560
49 939
200412.
Accounts payable
2006
$’000
20032005
$’000
Debt service reserve
-
9 705
The debt service reserve account relates to the NM Rothschild & Son Limited debt service reserve account. This
amount was held in escrow for partial repayment of the Morila Project Loan. The loan was repaid in 2004. Refer to
Note 6(a).
13. Accounts
payable
2004
$’000
2003
$’000
Related party payables
- Randgold
Resources
AngloGold Ashanti Limited
32543
-
- AngloGold
Ashanti
Limited
615
368
-
AngloGold Services Mali S.A.
761332
384-
-
Societe d’Exploitation des Mines d’Or de Sadiola S.A.
236
29
-
Boart Long Year Mali
32149
-
Trade creditors
4 1703 334
4 068968
Payroll cost accruals
5 0031 308
4 959679
Sundry accrualsIndirect taxes payable
11 6151 722
7 818
Accruals
9 670
8 315695
17 058
22 464
18 123
14. Revenue160
200413.
Revenue
2006
$’000
20032005
$’000
20022004
$’000
Gold sales
313 866
295 196
189 287
273 385
328 508
Silver sales
4531 012
546713
144453
314 878
295 909
189 740
273 931
328 652F-117
15.Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
14.
Operating profit
2006
$’000
2005
$’000
2004
$’000
2003
$’000
2002
$’000
Operating profitProfit before tax is arrived at after taking into
account the following:
Depreciation
15 583
20 532
18 753
21 562
17 788
Auditor’s remuneration
- audit
audit fees
141
111
108
70Impairment on accounts receivable
581 137
4 030
1 560
Forex differences - net
(2 124)
1 483
547
Inventory obsolescence provision
1 062
2 004
-
Exploration Expense
6 606
1 105
1 425
Royalties
18 856
15 529
11 584
16 387
19 699
Related party management fee (note 22)21)
3 149
2 605
2 045
2 733
3 263
15.
16. Taxation
The Company benefits from a five year tax holiday in Mali which expires on November 14, 2005. The benefit of the tax
holiday to the Company was to increase its net income by $29.3 million, $56.3 million and $79.3 million, due to not
recording a tax expense for the taxable income generated by the Morila mine for the years ended December 31, 2004,
2003 and 2002, respectively. Under Malian tax law upon expiration of the tax holiday, the Company’s income tax
expense will be based on the greater of 35 per cent of taxable income or 0.75 per cent of gross revenue.
Major items causing the Company’s actual income tax charge to differ from estimates at the standard charge of 35%
of taxable income are as follows:
F-922006
$’000
2005
$’000
(Restated)
2004
$’000
2003(Restated)
$’000
2002
$’000
Current taxation
56 427
7 818
-
Deferred taxation (note 8)
1 290
(7 551)
-
57 717
267
-
The tax on the Company’s profit before tax differs from the
theoretical amount that would arise using the statutory tax
rate as follows:
Profit before tax
157 956
132 068
49 211
Tax calculated at statutorytax rate of 35%
29 30055 285
56 30046 224
79 27417 224
Morila
Expenses not deductible for tax purposes
- Provisions/allowances
2 708
2 526
-
- Other Permanent Differences
(276)
-
-
Tax holiday permanent differences
-
(48 483)
(17 224)
Taxation charge
57 717
267
-
The Company benefited from a five year tax holiday differencesin Mali which expired on November 14, 2005. The benefit of the tax
holiday to the Company was to increase its net income by $38.7 million and $17.2 million, due to not recording a tax
expense for the taxable income generated by the Morila mine for the years ended December 31, 2005 and 2004,
respectively. Under Malian tax law upon expiration of the tax holiday, the Company’s income tax expense will be based
on the greater of 35 per cent of taxable income or 0.75 per cent of gross revenue.
(29 300)
(56 300)
(79 274)
Total income and mining taxes
- - -
The Morila operations have no assessable capital expenditure carry forwards or assessable tax losses, as at
December 31, 20042006, 2005 and 20032004 respectively, for deduction against future mining income.
F-118
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
16.
17. Notes to the cash flow statement
2006
$’000
2005
$’000
(Restated)
2004
$’000
2003(Restated)
$’000
2002
$’000
17.1
16.1 Cash generated by operating activities before
before changes in working capital
Profit beforeafter taxation
63 562100 239
161 325131 801
226 49649 211
Adjustments:
-
Tax expense
57 717
267
-
-
net finance charges
2 495
2 739
4 160
4 822-
6 088depreciation
- depreciation15 583
20 532
18 753
21 562
17 788
- environmental rehabilitation provision
443
2 475
-
- unrealized movements of financial instruments
instruments-
-
2 865
(961)-
(1 100)
- TSF gold in process provision
-
-
4 167
(4 167)
-
- Provisionprovision for bad debt
1 137
4 030
1 560
-
Accretion expense on environmental
rehabilitation provision
593
637
443
-
- deferred stripping costs capitalized
(10 457)
(7 792)
(12 608)
- other non cash movements
(1 363)-
-
-(1 363)
83 690177 764
177 264160 006
236 66479 796
17.2
16.2 Cash utilized by changes in working capital
-
Increase in accounts receivable
(21 680)
(9 967)
(29 467)
(7 584)
(7 433)
-
Increase in inventories
(23 812)29 441)
(10 246)46 910)
(4 354)20 640)
-
Increase(Decrease)/increase in accounts payable
(5 103)
(759)
4 342
9 586
1 838887
(48 937)56 224)
(8 244)57 636)
(9 949)45 220)
16.3 Taxation paid
-
Balance at beginning of year
6 844
-
-
-
Charge to income statement
57 717
267
-
-
Offsets against indirect tax receivables
(21 877)
-
-
-
Movement in deferred taxation
(1 290)
7 551
-
-
Balance at end of year
(4 434)
(6 844)
-
-
Tax paid
36 960
974
-
17.
18. Financial risk management
risk
management
In the normal course of its operations, the Company is exposed to commodity price, currency, interest, liquidity and
credit risk. In order to manage these risks, the Company may enter into transactions which makes use of off-balance
sheet financial instruments. They include mainly gold
forward and gold option contracts.
18.1 17.1 Concentration of credit risk
The Company’s financial instruments do not represent a concentration of credit risk because the Company
sells its gold to and deals with a variety of major financial institutions. Its receivables and loans are regularly
monitored and assessed and a provision for bad debts is maintained.
Gold bullion, the Company’s principal product, is produced in Mali. The gold produced is sold to a reputable
gold
refineries. refinery. Because of the international market for gold the Company believes that no concentration of
credit
risk exists with respect to the selected refineriesrefinery to which the gold is sold.
Included in accounts receivable is $30.0$40.4 million (2003: $12.6(2005: $41.7 million) relating to indirect taxes owing to the
Company by the StateGovernment of Mali, which is denominated in Communauté Financière Africaine franc.
F-119
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
17.
Financial risk management (continued)
17.2 Foreign currency and commodity price risk
In the normal course of business, the Company enters into transactions denominated in foreign currencies
(primarily US$).USD. In addition, the
Company enters into transactions in a number of different currencies (primarily
Communauté Financière
Africaine franc). As a result, the Company is subject to transaction exposure from
fluctuations in foreign
currency exchange rates.
F-93
18.2006
Financial risk management (continued)$’000
2005
$’000
18.2 Foreign currency
Cash and commodity price riskcash equivalents includes balances denominated in
- Communauté Financière Africaine franc (CFA)
788
(2 430)
Accounts receivable includes balances denominated in
- Communauté Financière Africaine franc (CFA)
39 989
40 948
Accounts payable includes balances denominated in
- Communauté Financière Africaine franc (CFA)
(8 046)
(7 477)
- South African Rand (ZAR)
(1 307)
(95)
- Pound Sterling (GBP)
(127)
(3)
- Euro (EUR)
(3 942)
(3 688)
- Australian Dollar (AUD)
(88)
-
- Canadian Dollar (CAD)
(1)
-
Generally the Company does not hedge its exposure to gold price fluctuation risk and sells at market spot
prices. These prices are in US dollars and do not expose the Company to any currency fluctuation risk.
However, in periods of capital expenditure or loan finance, the Company secures a floor price through simple
forward contracts and options whilst maintaining significant exposure to spot prices. Morila’s hedge was
wound up at the end of 2004.
18.317.3 Interest rates and liquidity risk
Fluctuation in variable interest rates impact on the value of income receivable from short-term cash
investments and
interest payment relating to financing activities (including long-term loans), giving rise to
interest rate risk.
In the ordinary course of business, the Company receives cash from its operations and is required to fund
working capital and capital expenditure requirements. This cash is managed to ensure surplus funds are
invested in a manner to achieve maximum returns while minimizing risks. The Company has been able to in
the past actively source financing through shareholders’ and third party loans.
F-120
19.Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
18.
Fair value of financial instruments
The following table presents the carrying amounts and fair values of the Company's financial instruments outstanding
at December 31, 20042006 and 2003.2005. The fair value of a financial instrument is defined as the amount at which the
instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation
sale.
December 31, 20042006
December 31, 20032005
Carrying
amountCarrying
amount
$’000
Fair
value
$’000
Carrying
amount
$’000
Fair
value
$’000
Financial assets
Cash and equivalents
2 0404 428
2 0404 428
9 7523 904
9 752
Restricted cash
-
-
9 705
9 7053 904
Accounts receivable
44 89149 982
44 89149 982
24 59949 939
24 599
Prepaid expenses
8 922
8 922
1 306
1 30649 939
Financial liabilities
Accounts payable
22 46417 058
17 058
22 464160
18 123
18 12322 160
Long-term liabilities (excluding loans from
shareholders)
14 1908 343
14 1908 343
17 08111 142
17 08111 142
Short term portion of long term liabilities
2 8913 021
2 8913 021
20 7483 048
20 748
Derivative financial instruments
-
-
18 508
18 5083 048
Derivative financial instruments
Details of gold derivative contracts as at December 31, 2003:
Hedging instruments
Unmatched instruments
Forward sales
Purchased calls
MATURITY DATES
Ounces US
$/oz
Ounces US
$/oz
December 31, 2004
51 941
275
18 384
360
The total fair value of the above financial instruments as at December 31, 2003 was a net loss of $15.6 million. The
hedge book was fully utilized during 2004.
F-94
19.
Fair value of financial instruments (continued)
Estimation of fair values
Receivables, restricted cash, accounts payable bank overdrafts and cash and equivalents
The carrying amounts are a reasonable estimate of the fair values because of the short maturity of such instruments.
Long term debt
The fair value of market-based floating rate long-term debt is estimated using the expected future payments
discounted at market interest rates.
Gold price contracts
The fair value of gold price forward and option contracts has been determined by reference to quoted market rates at
year-end balance sheet dates.
20.
19.
Post retirement employees benefits
Retirement benefits for employees of the Company are provided by the Mali stateGovernment social security system to
which the
Company and its employees contribute a fixed percentage of payroll costs each month. Fund contributions
by the
Company for the years ended December 31, 20042006, 2005 and December 31, 20032004 amounted to $2.7$2.6 million, $2.5 million and $0.8
$2.7 million
respectively.
21.20.
Commitments -
Capital expenditure for mining assets
20042006
$’000
20032005
$’000
Contracts for capital expenditure
96-
778-
Authorized but not contracted for
2 545141
3 6901 280
2 641
4 468141
1 280
Somadex mining contractor expenditure
22. Related2006
party$’000
transactions2005
$’000
Not later than 1 year
29 050
25 052
Later than 1 year and not later than 5 years
30 014
59 064
Later than 5 years
-
-
Included in accounts payable and accounts receivable as at59 064
84 116
F-121
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2004 are amounts of $1.6 million (2003:2006
$0.8 million) and $0.4 million (2003: $0.09 million) as detailed in notes 11 and 13 above, respectively.
21.
Related party transactions
In terms of the Operator Agreement between Morila SA and AngloGold Services Mali SA, a management fee,
calculated as 1% of the total sales of Morila, is payable to AngloGold Service Mali SA quarterly in arrears.
The
management fees for the year ended December 31, 20042006 amounted to $2.0$3.2 million (2003: $2.7(2005: $2.9 million) (2004: $2.0
million).
23.
Reconciliation
Royalties are payable to US GAAP
the Government of Mali in the form of Ad Valorem taxes and CPS at a total rate of 6% of
total sales. The Company’sroyalties for the year ended December 31, 2006 amounted to $18.9 million (2005: $15.5 million)
(2004: $11.5 million). Refer to the Value added tax receivable and Fuel duty receivable in note 11 to the financial
statements for the balances owed by the Government of Mali to the Company.
Notes 11 and 12 to the financial statements included in this registration statement have been prepared in accordance with
IFRS which differs in certain respects from U.S. GAAP. The effect of applying US GAAP principles to net profit and
shareholders’ equity is set out below, together with an explanation of applicable differencesthe other balances receivable and payable relating to fellow
subsidiaries.
Transactions between IFRS and US
GAAP.fellow subsidiaries can be set out as follows:
Reconciliation of net profit
Year
ended
December, 31
20042006
$’000
Year ended2005
December, 31$’000
Sales/services to related parties
- AngloGold Ashanti Limited
92
645
- AngloGold Services Mali S.A.
63
380
- Societe d’ Exploitation des Mines d’Or de Sadiola S.A.
(2)
24
- YATELA SA
5
2
- Societe des Mines de Loulo S.A.
111
126
- AngloGold Mines de Siguiri Guinea
66
88
- Geita Gold Mining
1
-
Purchases from related parties
- AngloGold Ashanti Limited
(2 884)
(5 383)
- AngloGold Services Mali S.A.
(4 843)
(5 245)
- Societe d’Exploitation des Mines d’Or de Sadiola S.A.
(285)
(444)
- YATELA SA
(2)
(4)
- Randgold Resources Limited
(102)
(7)
Key management remuneration:
20032006
$’000
Year ended2005
December, 31$’000
20022004
$’000
Reconciliation of Net Profit
Net profit under IFRSShort-term employee benefits
63 5621 090
161 325866
226 496749
U.S. GAAP adjustmentsPost-employment benefits
36
Provision for environmental rehabilitation32
-
-
(191)
Change in accounting principle, net of tax
-
535
-
Net profit under U.S. GAAP
63 562
161 860
226 305
Other
comprehensive
income
Change in fair value of cash flow hedges
18 508
2 225
(16 371)
Comprehensive1 126
898
749
22.
Differences between IFRS and U.S. GAAP
The Company’s financial statements have been prepared in accordance with IFRS, which differs in certain respects
from U.S. GAAP. However, for the periods presented, there are no material measurement differences which would
impact the Company's balance sheet, net income or shareholders' equity under U.S GAAP, when compared to the
amounts reported under IFRS.
F-122
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
22.
Differences between IFRS and U.S. GAAP (continued)
Change in accounting policy
As discussed in note 2.5, on January 1, 2006, the Company adopted Emerging Issues Task Force Issue No. 04-06,
Accounting for Stripping Costs Incurred during Production in the Mining Industry (“EITF 04-06”). EITF 04-06
addresses the accounting for stripping costs incurred during the production phase of a mine and refers to these costs
as variable production costs that should be included as a component of inventory to be recognized in operating costs
in the same period as the revenue from the sale of inventory. As a result, capitalization of post-production stripping
costs is appropriate only to the extent product inventory exists at the end of a reporting period.
Previously, deferred stripping costs were charged to operating costs as gold was produced and sold using the units of
production method based on estimated recoverable quantities of proven and probable gold, using a stripping ratio
calculated as the ratio of total tons to be moved to total proven and probable ore reserves, which resulted in the
recognition of the costs of waste removal activities over the life of the mine as gold was produced. The application of
the deferred stripping accounting method previously generally resulted in the recognition of an asset (deferred
stripping costs).
In accordance with Issue No. 04-06, the Company elected to recognise this change in accounting by restatement of its
prior-period financial statements through retrospective application of this consensus. The Company has therefore
adjusted its net income and shareholders’ equity previously reported under U.S. GAAP
82 070
164 085
209 934
F-95
23.
Reconciliation to US GAAP (continued)
Reconciliation of Shareholders’ Equity
Year
ended
December, 31
2004
$’000
Year ended
December, 31
2003
$’000
Total shareholders’ equity as if the revised principles had
always been used, which is consistent with the disclosures under IFRS
213 663
138 593
U.S. GAAP adjustments
Provision for environmental rehabilitation
-
-
Total shareholders’ equity under U.S. GAAP
213 663
138 593
Provision for environmental rehabilitation and change set forth in accounting policy
Under IFRS, full provision for environmental rehabilitation is made based on the net present value of the estimatednote 2.5.
cost of restoring the environmental disturbance that has occurred up to balance sheet date. Annual increases in the
provision relating to the change in the net present value of the provision and inflationary increases are shown
separately in the statement of operations. Previously under US GAAP, expenditure estimated to be incurred on long-
term environmental obligations was provided over the remaining lives of the mines through charges in the statement of
operations. On January 1, 2003 the Company adopted FAS 143 “Accounting for Obligations Associated with the
Retirement of Long-Lived Assets’’ which eliminated this difference.
Recent accounting pronouncements
IFRS
IFRS 2
The June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, ‘Accounting
for Uncertainty in Income Taxes – Shared based payments
IFRS 2 requires an entity to recognize share-based payment transactionsinterpretation of FASB Statement No. 109)’ (“FIN 48”). This Interpretation
clarifies the accounting for uncertainty in itsincome taxes recognized in an enterprise’s financial statements includingin
transactionsaccordance with employees or other parties to be settled in cash, other assets, or equity instruments of the entity.
EffectiveFASB Statement No. 109, Accounting for Income Taxes. This interpretation prescribes a recognition
threshold and measurement attribute for the financial year commencing January 1, 2005
IFRS 3 – Business Combinations
All business combinations within the scopefinancials statements recognition and measurement of IFRS 3 must be accounted for using the purchase method. The poolinga tax position
of interests method is prohibited. Coststaken or expected to be incurred to restructure an acquired entity’s (or the acquirer’s)
activities must be treated as post-combination costs, unless the acquired entity has a pre-existing liability for
restructuring its activities. Intangible items acquiredtaken in a business combination must be recognized as assetstax return. This Interpretation also provides guidance on derecognition,
separately from goodwill if they meet the definition of an asset, are either separable or arise from contractual or other
legal rights,classification, interest and their faire value can be measure reliably. Identifiable assets acquired,penalties, accounting in interim periods, disclosure, and liabilities and contingent
liabilities incurred or assumed, must be initially measured at faire value. Amortisation of goodwill and intangible
assets with indefinite useful l ives is prohibited. Instead they must be tested for impairment annually, or more
frequently if events or changes in circumstances indicate a possible impairment.
Effective for the financial year commencing January 1, 2005
IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations
IFRS 5 requires assets that are expected to be sold and meet specific criteria to be measured at the lower of carrying
amount and fair value less costs to sell. Such assets should not be depreciated and should be presented separately
in the balance sheet. It also requires operations that form a major line of business or area of geographical operations
to be classified as discontinued when the assets in the operations are classified as held for sale. These requirements
relating to assets held for sale and the timing of the classification of discontinued operations are substantially the
same as the equivalent requirements in U.S. GAAP. The type of operation that can be classified as discontinuedtransition. This statement is
narrower than under U.S. GAAP.
Effective for the financial year commencing January 1, 2005
Other developments – IASB
14 IAS standards were improved (1, 2, 8, 10, 16, 17, 21, 24, 27, 28, 31, 33, 36, 40) and IAS 15 withdrawn. The
changes have removed accounting choices and are expected to result in better reporting. New guidelines and
significantly enhanced disclosures have been introduced. Limited revisions were also made to IAS 32 and 39.
The improvements and amendments are effective for periodsyears beginning on or after 1 January 1, 2005. Earlier2007. The Company has eval uated the impact of adoption of FIN
is encouraged.
48 on its financial statements as nil.F-96
All changes to each individual standard must be implemented at a point – selective application is prohibited.
IFRIC Interpretations
IFRIC Interpretation 1 – Changes in Existing Decommissioning, Restoration and Similar Liabilities
This Interpretation addresses how the effect of the following events that change the measurement of an existing
decommissioning, restoration or similar liability should be accounted for:
(a) change in the estimated outflow of resources embodying economic benefits (eg cash flows) required to settle the
obligation;
(b) a change in the current market-based discount rate as defined in paragraph 47 of IAS 37 (this includes changes
in the time value of money and the risks specific to the liability); and
(c) an increase that reflects the passage of time (also referred to as the unwinding of the discount).
Effective for financial periods beginning on or after January 1, 2005.
U.S. GAAP
In November 2004,On September 15, 2006 the FASB issued Statement of Financial Accounting Standards No. 151, “Inventory Cots –157, “Fair Value
Measurements” (“SFAS157”).
SFAS157 provides enhanced guidance for using fair value to measure assets and liabilities. Under SFAS157, fair
value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
amendment of ARB NO. 43, Chapter 4,”between market participants in the market in which the reporting entity transacts. SFAS157 clarifies the accounting for abnormal amounts of idle facility expense,principle that
freight, handling costs and wasted material as current period costs. It also requires that allocations of fixed production
overheads to the costs of conversionfair value should be based on the normal capacityassumptions market participants would use when pricing the asset or liability and
establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. SFAS157 also
requires that fair value measurements be separately disclosed by level within the fair value hierarchy. SFAS157 is
effective for financial statements issued for fisc al years beginning after November 15, 2007, and interim periods within
those fiscal years. The Company is currently reviewing the guidance issued in SFAS157 and has not yet determined
the impact of this on the financial statements.
On February 15, 2007 the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value
Option for Financial Assets and Financial Liabilities Including an amendment of FASB Statement No. 115”
(“SFAS159”).
SFAS159 permits entities to choose to measure many financial instruments and certain other items at fair value. The
objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported
earnings caused by measuring related assets and liabilities differently without having to apply complex hedge
accounting provisions. The fair value option permits all entities to choose to measure eligible items at fair value at
specified election dates. A business entity shall report unrealized gains and losses on items for which the fair value
option has been elected in earnings at each subsequent reporting date.
F-123
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
22.
Differences between IFRS and U.S. GAAP (continued)
SFAS159 is effective as of the production facilities. The Statement
applies to inventory costs incurred in thebeginning of an entity’s first fiscal year that begins after November 15, 2007. Early
adoption is permitted as of the beginning after Juneof a fiscal year that begins on or before November 15, 2005.2007, provided the
entity also elects to apply the provisions of SFAS 157, “Fair Value Measurements”. The choice to adopt early must be
made within 120 days of the beginning of the fiscal year of adoption, provided the entity has not yet issued financial
statements, including required notes to those financial statements, for any interim period of the fiscal year of adoption.
SFAS159 permits application to eligible items existing at the effective date (or early adoption date). The Company is
currently
determining reviewing the impact on its financial positionguidance issued in SFAS159 and results from operations.
During 2004, a committee of the EITF began discussing the accounting treatment for stripping costs incurred during
the production phase of a mine. In March 2005, the EITF reached a consensus (ratified by the FASB) that stripping
costs incurred during the production phase of a mien are variable production costs that should be included in the costs
of inventory produced during the period that the stripping costs are incurred. The EITF consensus is effective for the
first reporting period in fiscal years beginning after December 15, 2005, with early adoption permitted. The Company
is currently evaluatinghas not yet determined the impact of this on the EITF consensus on its financial position and results of operations.
statements.
F-97
F-124
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Financial statements
as of and for the yearsyear ended
December 31, December 2003 and 20042006
F-98
F-125
Société d’Exploitation des Mines d’Or de Sadiola S.A
S.A.
Financial statements and report of the Independent Registered Public Accounting Firm
As of and forFor the yearsyear ended December 31, December 2003 and 20042006
Contents
Report of independent registered public accounting firm
Income statements
Balance sheets
Statements of changes in stockholders’ equity
Cash flow statements
Notes to the financial statements
F-99
F-126
Report of the Independent Registered Public Accounting Firm
The board of directors and stockholders of Société d’Exploitation des Mines d’Or de Sadiola S.A.
We have audited the accompanying balance sheets of Société d’Exploitation des Mines d’Or de Sadiola S.A. as of
December 31, 20042006 and 2003,2005, and the related statements of income, cash flows, and changes in stockholders’ equity and cash flows for
each of the
years then ended.in the three-year period ended December 31, 2006. These financial statements are the responsibility of
the Company’scompany’s management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting
the
amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used
and
significant estimates made by management, as well as evaluating the overall financial statement presentation. We
believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of
Société d’Exploitation des Mines d’Or de Sadiola S.A. as of December 31, 20042006 and 2003,2005, and the results of its operations
and its cash flows for each of the years thenin the three-year period ended December 31, 2006, in conformity with International
Financial Reporting Standards.
International Financial Reporting Standards vary in certain significant respects from accounting principlesUnited States generally accepted
in the United States of America.accounting principles. Information relatingrelat ing to the nature and effect of such differences, as of and for the yearyears ended
December 31, 2006, 2005 and 2004, is presented in note 1820 to the financial statements.
KPMG Inc.
Registered Accountants and Auditors
Johannesburg, South Africa
March 29, 2005June 25, 2007
F-100
F-127
Société d’Exploitation des Mines d’Or de Sadiola S.A
Financial statementsS.A.
Income Statement
As of and for the years ended 31 December 2003 and 2004
Income statements
For the years ended 31 December 2003 and 200431,
The accompanying notes are an integral part of these financial statements.
2006
2005
2004
Notes
2004
2003
US$
Revenue
3
1300,727,005
198,138,374
187,577,578 166,574,925
Cost of sales
(167,004,820)
(148,428,779)
(143,463,414)
(126,022,049)(143,237,187)
Gross profit
133,722,185
49,709,595
44,114,164 40,552,876
Other operating expenses
(1,723,561)
(2,355,077)44,340,391
Exploration costs
(553,347)
(971,110)
(226,227)
Other operating expenses / (income)
692,296
410,115
(1,555,744)
Net foreign exchange gain / (loss)
1,208,733
(7,520,279)
636,876
Special impairments of indirect taxes receivable
and special expenses for indirect taxes payable
5
(4,136,344)
(9,130,667)
-
Operating profit
4
2130,933,523
32,497,654
43,195,296
42,390,603 38,197,799
Interest income
1,004,863
341,515
363,185
348,543Interest expense
Net foreign exchange gain
(748,870)
(3,083,377)
(167,817)
Profit before taxation
131,189,516
29,755,792
43,390,664
636,876 3,298,374
Taxation
6
(40,925,311)
(17,671,661)
(11,796,375)
Profit before taxationfor the year
90,264,205
43,390,664 41,844,716
Income tax expense
3
(11,796,375)
(10,523,433)
Net profit
12,084,131
31,594,289 31,321,283
The accompanying notes are an integral part of the financial statements.
F-101
F-128
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Balance sheetsSheet
As ofat December 31, December 2003 and 2004
2006
2005
Notes
2004
2003
US$
ASSETS
Non-current assets
Property, plant and equipment
Mining assets7
112,447,354
4
140,940,384 150,428,494131,872,377
Inventories
8
528,671,942
17,936,431
10,813,834 13,230,329
Deferred taxation
Trade and other receivables
9
28,335,326
- 2,182,16414,551,010
169,454,622
151,754,218 165,840,987164,359,818
Current assets
Inventories
8
555,843,871
32,542,520 30,718,08143,387,635
Trade and other receivables
9
620,531,375
47,165,352 37,922,990
Income taxation
13
802,383
-
Derivatives
17
- 9,750,00027,527,053
Cash and cash equivalents
10
728,818,654
12,739,760 30,512,15312,185,406
105,193,900
93,250,015 108,903,224
83,100,094
Total assets
274,648,522
245,004,233 274,744,211
247,459,912
EQUITY AND LIABILITIES
Equity
Stockholders' equity
179,293,271
206,944,935 220,350,646
179,029,066
Non-current liabilities
Provisions
11
814,862,531
7,762,218
5,955,66111,655,394
Deferred taxation
12
92,426,353
1,521,628
-5,828,420
17,288,884
9,283,846
5,955,661
17,483,814
Current liabilities
Trade and other payables
10
17,973,452 22,090,584
Income taxation
13
22,022,889
- 4,182,32022,845,390
Taxation
15
33,137,071
8,101,642
Dividends payable
14
1122,906,407
10,802,000 11,000,000
Derivatives
17
- 11,165,00020,000,000
78,066,367
28,775,452 48,437,904
50,947,032
Total liabilities
95,355,251
38,059,298 54,393,565
68,430,846
Total equity and liabilities
274,648,522
247,459,912
245,004,233 274,744,211
The accompanying notes are an integral part of thethese financial statements.
F-102
F-129
Société d’Exploitation des Mines d’Or de Sadiola S.A.
StatementsStatement of changes in stockholders'stockholders’ equity
For the years ended 31 December 2003 and 200431,
Note
Ordinary stock
(note 14)16)
Non-
distributable
reserve
Retained
earnings
Total
stockholders'
equity
Note
US$
Balance at December 31, December 20022003
20,000,000 4,000,000 195,029,363 219,029,363
Net profit4,000,000
196,350,646
220,350,646
Profit for the year
-
- 31,321,283 31,321,283
Dividends declared31,594,289
11
-
-
(30,000,000)
(30,000,000)
Balance at 31 December 2003
20,000,000 4,000,000 196,350,646 220,350,646
Net profit
-
- 31,594,289 31,594,289
Dividends declared
1114
-
-
(45,000,000)
(45,000,000)
Balance at December 31, December 2004
20,000,000
4,000,000
182,944,935
206,944,935
Profit for the year
-
-
12,084,131
12,084,131
Dividends declared
14
-
-
(40,000,000)
(40,000,000)
Balance at December 31, 2005
20,000,000
4,000,000
155,029,066
179,029,066
Profit for the year
-
-
90,264,205
90,264,205
Dividends declared
14
-
-
(90,000,000)
(90,000,000)
Balance at December 31, 2006
20,000,000
4,000,000
155,293,271
179,293,271
The non-distributable reserve is a legal reserve created in 1997 and is a requirement of the commercial law of Mali.
This law
prescribes the transfer of 10% of profits, restricted to a maximum of 20% of ordinary share capital, to a non-distributablenon-
distributable reserve. Such reserve only becomes distributable in the event the company is liquidated.
The accompanying notes are an integral part of thethese financial statements.
F-103
F-130
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Cash flow statements
As of and forFor the years ended 31 December 2003 and 200431,
2006
2005
2004
Notes
2004
2003
US$
Cash flows fromNet cash provided by operating activities
Cash generated from operations
12Profit for the year
59,416,44390,264,205
80,679,43312,084,131
Movement31,594,289
Adjusted for:
Non-cash movements
- taxation charge per income statement
40,925,311
17,671,661
11,796,375
- adjustment for obsolete and slow-moving consumable
stores
432,263
358,681
1,038,105
- net foreign exchange (gains) / losses
(1,208,733)
7,520,279
(636,876)
- present value adjustment of VAT taxes refundable
(81,012)
2,553,510
-
- present value adjustment on refundable tax on fuel
247,119
297,000
-
- ore stockpile valuation adjustment
-
-
5,617,704
- unwinding of non-current provisions
582,763
232,867
167,817
- environmental restoration charge to the income statement
67,261
2,397,330
1,130,731
- employee long service obligation charge to the income
statement
(1,737,418)
373,687
508,009
- reversal of unrealised fair value gain on derivatives
-
-
(1,415,000)
- amortisation of property, plant and equipment
34,039,909
29,661,072
25,563,636
Special impairments of indirect taxes refundable and special
provision for indirect taxes payable
4,136,344
9,130,667
-
Increase in non-current inventories
(10,735,511)
(7,122,597)
(3,201,209)
(13,230,329)
Interest receivedIncrease in non-current VAT refundable
(13,784,316)
363,185(17,519,010)
348,543-
Income tax paid
1315
(19,291,949)
(4,460,844)
(13,077,286)
(2,390,145)Increase in inventories
Net cash inflow from operating activities
(12,888,499)
(11,203,796)
(2,862,544)
Decrease / (increase) in trade and other receivables
2,693,227
12,059,739
(9,242,362)
Increase / (decrease) in trade and other payables
386,231
(4,082,958)
(3,480,256)
43,501,133114,047,195
65,407,50249,951,419
43,501,133
Cash flows fromNet cash used in investing activities
Capital expenditure
4
(10,320,354)
(19,703,773)
(16,075,526)
(10,426,075)Net cash outflow from investing activities
(10,320,354)
(19,703,773)
(16,075,526)
Cash flows fromNet cash used in financing activities
Dividends paid
1114
(87,093,593)
(30,802,000)
(45,198,000)
(41,000,000)Net cash outflow from financing activities
(87,093,593)
(30,802,000)
(45,198,000)
Net increase / (decrease)/increase in cash and cash equivalents
16,633,248
(554,354)
(17,772,393)
13,981,427
Cash and cash equivalents at beginning of year
12,185,406
12,739,760
30,512,153
16,530,726
Cash and cash equivalents at end of year
710
28,818,654
12,185,406
12,739,760
30,512,153
The accompanying notes are an integral part of thethese financial statements.
F-104
F-131
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
As of and forFor the years ended December 31, December 20032004, 2005 and 20042006
1.
BUSINESS ACTIVITIES
Business activities
Société d’Exploitation des Mines d’Or de Sadiola S.A. (Semos) is a company registered in Mali. The company Company
operates
a mine for the commercial exploitation of gold in the Kayes region of Western Mali. Commercial production
commenced
on March 4, March 1997.
At year end the company employed 592 people of which 525 are Malians. Furthermore, there are 581 contractors of
which 544 are Malians.
2.
Accounting policies
PURPOSE OF FINANCIAL STATEMENTS
Statement of compliance
The company financial statements are prepared in compliance with International Financial Reporting Standards
(IFRS) and Interpretations of those standards, as adopted by the International Accounting Standards Board (IASB)
and applicable legislation.
During the current financial year, the following new and revised accounting standards, amendments to standards and
new interpretations were adopted by Société d’Exploitation des Mines d’Or de Sadiola S.A:
IAS 39 and IFRS 4
Amendment – Financial Guarantee Contracts;
IFRS 6
Exploration for and Evaluation of Mineral Resources;
IFRIC 4
Determining whether an Arrangement contains a lease.
IFRIC 6
Liabilities arising from Participating in a Specific market: Waste Electrical and Electronic
Equipment.
In addition, the following interpretation was early adopted by Société d’Exploitation des Mines d’Or de Sadiola S.A.
during previous financial years:
IFRIC 5
Rights to Interests arising from Decommissioning, Restoration and Environmental
Rehabilitation Funds.
In addition, the following interpretations were early adopted by Société d’Exploitation des Mines d’Or de Sadiola S.A
during the current financial year:
IFRIC 7
Applying the Restatement approach under IAS 29, Financial Reporting in Hyperinflationary
Economies;
IFRIC 8
Scope of IFRS 2;
IFRIC 9
Reassessment of Embedded Derivatives;
IFRIC 10
Interim Reporting and Impairment.
The adoption of the above identified accounting standards, amendments to standards and new interpretations had no
financial impact on the annual financial statements.
The following accounting standards, amendments to standards and new interpretations, which are not yet mandatory
for Société d’Exploitation des Mines d’Or de Sadiola S.A, have not been adopted in the current year:
IAS 1
Amendment – Capital Disclosures
Effective years beginning on
or after 1 January 2007
IFRS 7
Financial Instruments and Disclosures
Effective years beginning on
or after 1 January 2007
IFRS 8
Operating Segments
Effective years beginning on
or after 1 January 2009
IFRIC 11
IFRS 2 – Company and Treasury Share Transactions
Effective years beginning on
or after 1 March 2007
IFRIC 12
Service Concession Arrangements
Effective years beginning on
or after 1 January 2008
The company has assessed the significance of these new standards, amendments to standards and new
interpretations, which will be applicable from 1 January 2007 and later years and concluded that they will have no
material financial impact. Both IAS 1 and IFRS 7 may have an impact on certain disclosures.
F-132
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.1
Basis of preparation
The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS). Theseaccording to the historical cost accounting convention, as modified by the
revaluation of certain financial statements are separate from the company’s statutory financial statements and are referredinstruments to as financial
statements.fair value. The statutory financial statements of the company are prepared in accordance with SYSCOA standards
which are applicable in Mali.
ACCOUNTING POLICIES
Basis of preparation and statement of compliance
The financial statements are measured and presented in US dollars. The company’scompany's accounting policies as set out
below are
consistent in all material respects with those applied in the previous year.year, except for the adoption of the above
mentioned new and revised standards. The financial statements complyare presented in US dollars.
with International
2.2
Changes in accounting policies
The changes in accounting policies result from adoption of the following new/revised standards, amendments to
standards and interpretations:
IAS 39 and IFRS 4
Amendment – Financial Guarantee Contracts;
IFRS 6
Exploration for and Evaluation of Mineral Resources;
IFRIC 4
Determining whether an Arrangement contains a Lease;
IFRIC 6
Liabilities arising from Participating in a Specific market: Waste Electrical and Electronic
Equipment;
IFRIC 7
Applying the Restatement approach under IAS 29, Financial Reporting Standards (IFRS) adopted byin Hyperinflationary
Economies;
IFRIC 8
Scope of IFRS 2;
IFRIC 9
Reassessment of Embedded Derivatives;
IFRIC 10
Interim Reporting and Impairment.
The principal effects of these changes in policies are discussed below.
IAS 39 and IFRS 4 “Amendment – Financial Guarantee Contracts”
The main impact of the International Accounting Standards BoardIAS 39 and IFRS 4 Amendment – Financial Guarantee Contracts on the company, is the
(IASB)recognition of an expense and a corresponding entry to liabilities for the fair value of any financial guarantee
contracts in existence. Subsequent measurement is dealt with in the financial instruments accounting policy. A
financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder
for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or
modified terms of a debt instrument. As a result, the company has applied IAS 39 and IFRS 4 Amendment – financial
guarantee contracts to all such issued con tracts that are in existence.
The effect of the revised policy has no effect on the company financial statements and prior or current year profits.
IFRS 6 “Exploration for and Evaluation of Mineral Resources”
The adoption of IFRS 6 has resulted in the company clarifying the accounting policy for Exploration for and evaluation
of Mineral Resources which is described in "Significant accounting policies".
Moreover, assets defined as used in the exploration for and evaluation of Mineral Resources are required to be
separately identified from other property, plant and equipment, which are fully disclosed in Note 7.
The effect of the revised policy had no effect on the company financial statements and prior or current year financial
statements.
IFRIC 4 “Determining whether an arrangement contains a lease”
The company has applied IFRIC 4 in accordance with the transitional provisions of the interpretation.
IFRIC 4 requires an entity to assess its arrangements that do not take the legal form of a lease but convey the right to
use an asset, in order to determine whether such arrangements are, or contain, leases that should be accounted for
in accordance with IAS 17, Leases.
F-133
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.2
Changes in accounting policies (continued)
The effect of the assessment of arrangements that do not take the legal form of a lease but convey the right to use an
asset has no effect on company prior or current year profits however, certain operating expenses presented in note 4
have been reclassified as operating leases for 2005 and 2004 to conform to the 2006 presentation in accordance
with IFRIC 4.
IFRIC 6 “Liabilities arising from Participating in a Specific market: Waste Electrical and Electronic
Equipment;”
This interpretation provides guidance on the recognition in the financial statements of producers, of liabilities for
waste management under the Economic Union Directive on Waste Electrical and Electronic Equipment in respect of
sales of historical household equipment.
The adoption of this IFRIC has no effect on company financial statements and prior or current year financial
statements.
IFRIC 7 “Applying the Restatement approach under IAS 29, Financial reporting in Hyperinflationary
Economies”
This Interpretation provides guidance on how to apply the requirements of IAS 29 in a reporting period in which an
entity identifies the existence of hyperinflation in the economy of its functional currency, when that economy was not
hyperinflationary in the prior period, and the entity therefore restates its financial statements in accordance with
IAS 29.
The adoption of this IFRIC had no effect on the company financial statements and prior or current year financial
statements.
IFRIC 8 “Scope of IFRS 2”
IFRS 2 applies to share-based payment transactions in which the entity receives or acquires goods or services
where the identifiable consideration received is less than the fair value of the equity instruments issued.
The adoption of this IFRIC had no effect on the financial statements and prior or current year financial statements.
IFRIC 9 “Reassessment of Embedded Derivatives"
IAS 39 paragraph 10 describes an embedded derivative as a component of a hybrid (combined) instrument that also
includes a non-derivative host contract - with the effect that some of the cash flows of the combined instrument vary
in a way similar to a stand-alone derivative. IAS 39 paragraph 11 requires an embedded derivative to be separated
from the host contract and accounted for as a derivative under certain presented circumstances.
IFRIC 9 specifies that an entity shall assess whether an embedded derivative is required to be separated from the
host contract and accounted for as a derivative when the entity first becomes a party to the contract. Subsequent
reassessment is prohibited unless there is a change in the terms of the contract that significantly modifies the cash
flows that otherwise would be required under the contract, in which case reassessment is required.
The adoption of this IFRIC has no effect on company financial statements and prior or current year financial
statements.
IFRIC 10 “Interim Reporting and Impairment"
The company is required to assess goodwill for impairment at every reporting date, to assess investments in equity
instruments and in financial assets carried at cost for impairment at every balance sheet date and, if required, to
recognise an impairment loss at that date. This interpretation requires that the company shall not reverse an
impairment loss recognised in a previous interim period in respect of goodwill or an investment in either an equity
instrument or a financial asset carried at cost.
The adoption of this IFRIC had no effect on the financial statements and prior or current year financial statements.
F-134
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.3
Significant accounting judgements and estimates
Use of estimates: The preparation of the financial statements requires the company’s management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses
during the reporting period. The determination of estimates requires the exercise of judgement based on various
assumptions and other factors such as historical experience, current and expected economic conditions, and in some
cases actuarial techniques. Actual results could differ from those estimates.
The more significant areas requiring the use of management estimates and assumptions relate to mineral reserves
that are the basis of future cash flow estimates and unit-of-production depreciation, depletion and amortisation
calculations; environmental, reclamation and closure obligations; asset impairments, write-downs of inventory to net
realisable value; post-employment, post-retirement and other employee benefit liabilities, the fair value and
accounting treatment of financial instruments and deferred taxation.
Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts
of assets and liabilities within the next financial year are discussed below.
Carrying value of property, plant and equipment
All mining assets are amortised using the units-of-production (UOP) method where the mine operating plan calls for
production from well-defined mineral reserves over proved and probable reserves.
For mobile and other equipment, the straight-line method is applied over the estimated useful life of the asset which
does not exceed the estimated mine life based on proved and probable mineral reserves as the useful lives of these
assets are considered to be limited to the life of the mine.
The calculation of the UOP rate of amortisation could be impacted to the extent that actual production in the future is
different from current forecast production based on proved and probable mineral reserves. This would generally result
to the extent that there are significant changes in any of the factors or assumptions used in estimating mineral
reserves.
These factors could include:
•
changes in proved and probable mineral reserves;
•
the grade of mineral reserves may vary significantly from time to time;
•
differences between actual commodity prices and commodity price assumptions;
•
unforeseen operational issues;
•
changes in capital, operating, mining, processing and reclamation costs, discount rates and foreign exchange
rates; and
changes in mineral reserves could similarly impact the useful lives of assets depreciated on a straight-line
basis, where those lives are limited to the life of the mine.
The recoverable amounts of individual assets have been determined based on the higher of value-in-use calculations
and fair values less costs to sell. These calculations require the use of estimates and assumptions. It is reasonably
possible that the gold price assumption may change which may then impact our estimated life of mine determinant
and may then require a material adjustment to the carrying value of property, plant and equipment.
The company reviews and tests the carrying value of assets when events or changes in circumstances suggest that
the carrying amount may not be recoverable. Assets are grouped at the lowest level for which identifiable cash flows
are largely independent of cash flows of other assets. If there are indications that impairment may have occurred,
estimates are prepared of expected future cash flows for each group of assets. Expected future cash flows used to
determine the value in use of property, plant and equipment are inherently uncertain and could materially change
over time. They are significantly affected by a number of factors including published reserves, resources, exploration
potential and production estimates, together with economic factors such as spot and future gold prices, discount
rates, foreign currency exchange rates, estimates of costs to produce reserves and future capital expenditure.
F-135
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.3
Significant accounting judgements and estimates (continued)
Production start date
The company assesses the construction project to determine when it moves into the production stage. The criteria
used to assess the start date are determined based on the unique nature of the construction project such as the
complexity of a plant and its location. The company considers various relevant criteria to assess when the mine is
substantially complete and ready for its intended use and moves into the production stage. Some of the criteria
would include, but, are not limited to, the following:
•
the level of capital expenditure compared to the construction cost estimates;
•
completion of a reasonable period of testing of the mine plant and equipment;
•
ability to produce gold in saleable form (within specifications and insignificant revenue);
•
ability to sustain ongoing production of gold.
When a mine construction project moves into the production stage, the capitalisation of certain mine construction
costs ceases and costs are either regarded as inventory or expensed, except for capitalisable costs related to mining
asset additions or improvements or reserve development.
Income taxes
The company is subject to income tax. Significant judgement is required in determining the provision for income taxes
due to the complexity of legislation. There are many transactions and calculations for which the ultimate tax
determination is uncertain during the ordinary course of business. The company recognises liabilities for anticipated
tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these
matters is different from the amounts that were initially recorded, such differences will impact the income tax and
deferred tax provisions in the period in which such determination is made.
The company recognises the net future tax benefit related to deferred income tax assets to the extent that it is
probable that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability
of deferred income tax assets requires the company to make significant estimates related to expectations of future
taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the
application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ
significantly from estimates, the ability of the company to realise the net deferred tax assets recorded at the balance
sheet date could be impacted.
Additionally, future changes in tax laws in the jurisdiction in which the company operates could limit the ability of the
company to obtain tax deductions in future periods.
Provision for environmental rehabilitation obligations
The company’s mining and exploration activities are subject to various laws and regulations governing the protection
of the environment. The company recognises management’s best estimate for asset retirement obligations in the
period in which they are incurred. Actual costs incurred in future periods could differ materially from the estimates.
Additionally, future changes to environmental laws and regulations, life of mine estimates and discount rates could
affect the carrying amount of this provision. Such changes in mineral reserves could similarly impact the useful lives
of assets depreciated on a straight-line-basis, where those lives are limited to the life of mine.
Stockpiles, gold in process and product inventories
Costs that are incurred in or benefit the production process are accumulated as stockpiles, gold in process and
product inventories. Net realisable value test s are performed at least annually and represent the estimated future
sales price of the product based on prevailing and long-term metals prices, less estimated costs to complete
production and bring the product to sale.
F-136
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.3Significant accounting judgements and estimates (continued)
Stockpiles, gold in process and product inventories (continued)
Stockpiles are measured by estimating the number of tonnes added and removed from the stockpile, the number of
contained gold ounces based on assay data, and the estimated recovery percentage based on the expected
processing method. Stockpile tonnages are verified by periodic surveys.
Although the quantities of recoverable metal are reconciled by comparing the grades of ore to the quantities of gold
actually recovered (metallurgical balancing), the nature of the process inherently limits the ability to precisely monitor
recoverability levels. As a result, the metallurgical balancing process is constantly monitored and the engineering
estimates are refined based on actual results over time.
Recoverable tax, rebates, levies and duties
Société d’Exploitation des Mines d’Or de Sadiola S.A. has unresolved tax disputes. If the outstanding input taxes are
not received and the tax disputes are not resolved in a favourable manner, it could have an adverse effect upon the
carrying value of these assets.
Contingencies
By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. The
assessment of such contingencies inherently involves the exercise of judgement and estimates of the outcome of
future events.
2.4Summary of significant accounting policies
Foreign currency translation
Functional currency
Items included in the financial statements are measured using the currency of the primary economic environment in
which the entity operates (the ‘functional currency’). The functional currency of United States Dollars (US$) is used
as opposed to the currency of the country in which the
enterprise is domiciled, namely Franc de la Communauté
Financière d’Afrique (F CFA). The decision has been taken
on the basis of US$ being the functional currency in
which the enterprise operates asreceives its revenue and majority of costs
are US$-based.
mainly influenced by the US dollar.
Mining assets
Transactions and balances
Mining
Foreign currency transactions are translated into the functional currency using the approximate exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resultin g from the settlement of foreign
currency transactions and from the translation at the year-end exchange rate of monetary assets and liabilities
denominated in foreign currencies are recognised in the income statement, except for derivative balances that are
within the scope of IAS 39. Translation differences on these balances are reported as part of their fair value gain or
loss.
Non monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated
using the exchange rate at the date of the transaction.
Property, plant and equipment
Property, plant and equipment are recorded at cost less accumulated amortisation and impairments. Cost includes mine development
costspre-production expenditure incurred during the development of thea mine and the present value of future
decommissioning costs. Cost also
includes finance charges capitalised during the construction period where such
expenditure wasis financed by borrowin gs.
borrowings.
If there is an indication that the recoverable amount of any of the mining assetsproperty, plant and equipment is less than the carrying
value, the recoverable amount is estimated and an allowance is made for the impairment in value.
Mine development costs
Capitalised mine development costs include expenditure incurred to develop the Sadiola ore body, to define further
mineralisation in the existing ore body, to expand the capacity of the mine and to maintain production.
Mine development costs are amortised using the units-of-production method based on estimated proved and probable
mineral reserves. Amortisation was first charged from the date of commercial production.
Proved and probable mineral reserves reflect estimated economically recoverable quantities which can be recovered in
the future from known mineral deposits. These reserves are amortised from the date on which commercial production
begins.
Mine infrastructure
Plant, equipment and buildings are amortised using the units-of-production method based on estimated proved and
probable mineral reserves, unless the estimated useful life of the asset is shorter than the life of mine in which instance
the estimated useful life is used.
Exploration expenditure
Exploration costs capitalised include acquired proved and probable mineral reserves at cost at acquisition date, as well
as exploration costs capitalised on the basis indicated below.
Research and exploration expenditure is expensed when it is incurred until it can be determined that the mineral
property can be economically developed, at which stage all further exploration expenditure incurred to develop such
property is capitalised.
F-105
F-137
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
As of and forFor the years ended December 31, 2004, 2005 and 2006
2.4Summary of significant accounting policies (continued)
Property, plant and equipment (continued)
Subsequent costs are included in the asset’s carrying amount only when it is probable that future economic benefits
associated with the item will flow to the company, and the cost of the item can be measured reliably. All other repairs
and maintenance are charged to the income statement during the financial period in which they are incurred.
Amortisation of assets is calculated to allocate the cost of each asset to its residual value over its estimated useful life,
for those assets not amortised on the units-of-production method as, follows:
•
buildings up to life of mine;
•
plant and machinery up to life of mine;
•
equipment and motor vehicles up to five years on a straight line basis; and
•
computer equipment up to three years on a straight line basis.
where life of mine is determined as the period up to the end of commercial production or the period up to which
the company has satisfied all its obligations acquired by virtue of the Mining Convention agreed with the
Government of Mali.
Major renovations are depreciated over the remaining useful life of the related asset or to the date of the next major
renovation, whichever is sooner.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
Gains and losses on disposals are determined by comparing net sale proceeds with carrying amount. These are
included in the income statement.
Mine development costs
Capitalised mine development costs include expenditure incurred to develop new orebodies, to define further
mineralisation in existing orebodies, to expand the capacity of the mine and to maintain production. Where funds have
been borrowed specifically to finance a project, the amount of interest capitalised represents the actual borrowing
costs incurred. Mine development costs include acquired proved and probable Mineral Resourc es at cost at
acquisition date.
Depreciation, depletion and amortisation of mine development costs are computed by the units-of-production method
based on estimated proved and probable mineral reserves. Proved and probable mineral reserves reflect estimated
quantities of economically recoverable reserves which can be recovered in the future from known mineral deposits.
These reserves are amortised from the date on which commercial production begins.
Stripping costs incurred in open-pit operations during the production phase to remove additional waste are charged to
operating costs on the basis of the average life of mine stripping ratio and the average life of mine costs per tonne.
The average stripping ratio is calculated as the number of tonnes of waste material expected to be removed during
the life of mine per tonne of ore mined. The average life of mine cost per tonne is calculated as the total expected
costs to be incurred to mine the orebody, divided by the number of tonnes expected to be mined. The average life of
mine stripping ratio and the average life of mine cost per tonne are recalculated annually in the light of additional
knowledge and changes in estimates.
The cost of the “excess stripping” is capitalised as mine development costs when the actual mining costs exceed the
sum of the adjusted tonnes mined, being the actual ore tonnes plus the product of the actual ore tonnes multiplied by
the average life of mine stripping ratio multiplied by the life of mine cost per tonne. When the actual mining costs are
below the sum of the adjusted tonnes mined, being the actual ore tonnes plus the product of the actual ore tonne
multiplied by the average life of mine stripping ratio, multiplied by the life of mine cost per tonnes, previously
capitalised costs are expensed to increase the cost up to the average.
The cost of stripping in any period will be reflective of the average stripping rates for the orebody as a whole. Changes
in the life of mine stripping ratio are accounted for prospectively as a change in estimate.
F-138
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 200331, 2004, 2005 and 20042006
2.4Summary of significant accounting policies (continued)
Mine infrastructure
Mine plant facilities, including decommissioning assets, are amortised using the lesser of their useful life or units-of-
production method based on estimated proved and probable mineral reserves. Other property, plant and equipment
comprising vehicles and computer equipment are depreciated by the straight-line method over their estimated useful
lives.
Exploration and Evaluation assets
All exploration costs are expensed until the directors conclude that a future economic benefit is more likely than not of
being realised. In evaluating if expenditures meet this criterion to be capitalised, the directors utilise several different
sources of information depending on the level of exploration. While the criteria for concluding that expenditure should
be capitalised is always probable, the information that the directors use to make that determination depends on the
level of exploration.
(a) Costs on greenfields sites, being those where the company does not have any mineral deposits which are
already being mined or developed, is expensed as incurred until the directors are able to demonstrate that
future economic benefits are probable, which generally will be the establishment of proved and probable
reserves at this location.
(b) Costs on brownfields sites, being those adjacent to mineral deposits which are already being mined or
developed, is expensed as incurred until the directors are able to demonstrate that future economic benefits
are probable, which generally will be the establishment of increased proved and probable reserves after which
the expenditure is capitalised as a mine development cost.
(c)Costs relating to extensions of mineral deposits, which are already being mined or developed, including
expenditure on the definition of mineralisation of such mineral deposits, is capitalised as a mine development
cost.
Costs relating to property acquisitions are capitalised within mine development costs.
Impairment of assets
Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for
impairment and whenever events or changes in circumstance indicate that the carrying amount may not be
recoverable. Assets that are subject to amortisation are tested for impairment whenever events or changes in
circumstance indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value, less costs to sell and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash flows.
Impairment calculation assumptions include life of mine plans based on published reserves and reso urces,
management’s estimate of the future gold price, based on current market price trends, foreign exchange rates, and a
pre-tax discount rate adjusted for country and project risk. It is therefore reasonably possible that changes could occur
which may affect the recoverability of property, plant and equipment and intangible assets.
F-139
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.4Summary of significant accounting policies (continued)
Borrowing costs
Interest on borrowings relating to the financing of major capital projects under construction is capitalised during the
construction phase as part of the cost of the project. Such borrowing costs are capitalised over the period during
which the asset is being acquired or constructed and borrowings have been incurred. Capitalisation ceases when
construction is interrupted for an extended period or when the asset is substantially complete. Other borrowing costs
are expensed as incurred.
Leased assets
Operating lease rentals are charged against operating profits on a straight line basis unless another systematic
manner related to the period the assets concerned will be used is more representative of the time pattern of the
benefit.
Exploration and research expenditure
Pre – licence costs are recognised in profit or loss as incurred. Exploration and research expenditure is expensed in
the year in which it is incurred. These expenses include: geological and geographical costs, labour, mineral resources
and exploratory drilling.
Inventories
Inventories are valued at the lower of cost and net realisable value after appropriate allowances for redundant and
slow
moving items. Cost is determined on the following bases:
•
gold bullion and gold-in-processin process is valued at the average total production cost at the relevant stage of production;
•
gold on hand is valued on an average total production cost method;
•
ore stockpiles are valued onat the average moving cost of mining and stockpiling the ore. Stockpiles are allocated
as a weighted average of cost method; andnon-current asset where the stockpile exceeds current processing capacity;
•
by-products are valued on an average total production cost method.
•
consumable stores are valued at average cost.
In
A portion of the case of gold on hand, cost includes an appropriate share of overheads based on normal operating capacity. The
related depreciation, depletion and amortisation charge is included in the cost of consumable stores includes expenditure incurred in bringing them to their existing location and condition.inventory.
Ore stockpiles not realisable within the next production cycle are classified as non-current inventories.
Provisions
Provisions are recognised when the company has a present obligation, whether legal or constructive, as a result of a
past event for which it is probable that an outflow of resources embodying economic benefits will be required to settle
the obligation and a reliable estimate can be made of the amount of the obligation.
Environmental expenditure
Long-term environmental obligations comprising decommissioning and restoration
Provisions are based on the company’s
environmental management plans, in compliance with the current environmental and regulatory requirements.
Decommissioning costs
The provision for decommissioning represents the cost that will arise from rectifying damage caused before production
commenced.
Decommissioning costs are provided formeasured at the present value of management’s best estimate of the expenditures expectedexpenditure required to settle the
present obligation using
estimated future cash flows based on current prices. When this provision gives access to future economic benefits, an
asset is recognised and included within mining infrastructure. The unwinding of the decommissioning obligation is
included in the income statement. The estimated future costs of decommissioning obligations are regularly reviewed
and adjusted as appropriate for new circumstances or changes in law or technology. The estimates are discounted at a
pre-tax rate that reflects current market assessments of the time value of money.
Gains from the expected disposal of assets are not taken into account when determining the provision.
Restoration costs
The provision for restoration represents the cost of restoring site damage after the commencement of production.
Increases in the provision are charged to the income statement as a cost of production.
Gross restoration costs are estimated at the balance sheet date. The discount rate used to determine the present value of the expenditures expected to settle the obligation, using
estimated future cash flows based on current prices. The estimates are discounted at a pre-tax rate that reflects current
market assessments of the time value of money.
The present value of restoration costs are accruedmoney and expensed over the operating life of mine. Expenditure on
ongoing restoration costs is expensed when incurred.
Revenue recognition
Revenue is recognisedrisks specific to the extent that it is probable that the economic liability.
Employeebenefits will flow to the company and the
revenue can be reliably measured. There should also be persuasive evidence that:
•
an arrangement exists;
•
delivery has occurred and title has transferred;
•
the seller’s price to the buyer is fixed or determinable; and
•
collectability is reasonably assured.
Interest income
Interest is recognised on a time proportion basis, taking account of the principal outstanding and the effective rate over
the period to maturity, when it is determined that such income will accrue to the company.
F-106
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
As of and for the years ended 31 December 2003 and 2004
Taxation
Deferred taxation is provided on all temporary differences at the balance sheet date between the tax bases of assets
and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax assets are only recognised to the extent it is probable that the deductible temporary differences will
reverse in the foreseeable future and future taxable profit will be available against which the temporary difference can
be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and if required, reduced to the
extent it is no longer probable that sufficient future taxable profit will be available to allow all or part of the deferred tax
asset to be utilised.
Deferred tax assets and liabilities are measured at future anticipated tax rates, which have been enacted or
substantially enacted at the balance sheet date.
Current and deferred tax is recognised in the income statement.
Current taxation is measured on taxable income at the applicable statutory rate enacted or substantially enacted at the
balance sheet date, and includes any adjustment to tax payable in respect of previous years.
Financial instruments
Financial instruments recognised on the balance sheet include trade and other receivables, cash and cash equivalents,
derivatives and trade and other payables.
A financial instrument or a portion of a financial instrument will be derecognised and a gain or loss recognised when the
company loses the contractual rights or extinguishes the obligation associated with such an instrument.
On derecognition of a financial asset, the difference between the proceeds received or receivable and the carrying
amount of the asset is included in income.
On derecognition of a financial liability the difference between the carrying amount of the liability extinguished or
transferred to another party and the amount paid for is included in income.
Financial instruments are initially measured at cost, including transaction costs, when the company becomes a party to
their contractual arrangements. The subsequent measurement of financial instruments is dealt with below.
Derivatives
The company enters into derivatives to ensure a degree of price certainty and to guarantee a minimum revenue on a
portion of the future planned gold production.
Derivatives do not qualify for hedge accounting and are accounted for as trading instruments.
Accordingly all derivatives are measured at their estimated fair value, with the changes in estimated fair value at each
reporting date being reported in earnings in the period to which it relates.
The estimated fair values of derivatives are determined at discrete points in time based on the relevant market
information. These estimates are calculated with reference to the market rates using industry standard valuation
techniques.
Trade and other receivables
Trade and other receivables originated by the company are subsequently measured at amortised cost less any
accumulated impairment losses.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits.
Impairment of financial assets carried at amortised cost
At each balance sheet date an assessment is made of whether there is any objective evidence of impairment of
financial assets. If such evidence exists, the estimated recoverable amount of that asset is determined and any
impairment loss is recognised in income for the difference between the recoverable amount and the carrying amount.
F-107
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
As of and for the years ended 31 December 2003 and 2004
Financial liabilities
Financial liabilities, other than derivatives, are measured at amortised cost. Derivatives are measured at fair value.
Foreign currency
Foreign currency transactions
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction.
Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to US dollar
at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in
the income statement.
Employee benefits
Short termShort-term employee benefits
The cost of all short termshort-term employee benefits is recognised during the period in which the employee renders the related
service.
The provisions for employee entitlements to wages, salaries, annual and sickannual leave represent the amount which the
company has a present obligation to pay as a result of employees’ services provided to the balance sheet date. The
provisions have been calculated at undiscounted amounts based on current wage and salary rates.
F-140
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.4Long termSummary of significant accounting policies (continued)
Long-term employee benefits
A long termlong-term provision for the retrenchmentlong-service obligation costs ofto qualifying employees at the end of the life of mine their contracts
represents the present
value of the estimated future cash outflows resulting from employees’ services provided to the balance sheet date.provided.
In determining this liability for employee benefits, consideration has been given to future increases in wage and salary
rates, and the company’s expected staff turnover.
Liabilities for employee benefits which are not expected to be settled within 12 months are discounted at a pre-tax rate
that reflects current market assessments of the time value of money.
The company and all employees contribute to towards the Malian State social security fund. Accordingly, on retirement,
the Malian employees are entitled to a retirement benefit from the Malian State. Expatriate employees are reimbursed
only their contributions made to the social security fund.
Environmental rehabilitation expenditure
Long-term environmental rehabilitation obligations comprising decommissioning and restoration are based on the
company's environmental management plans, in compliance with the current environmental and regulatory
requirements.
Decommissioning costs
The provision for decommissioning represents the cost that will arise from rectifying damage caused before
production commenced. Accordingly an asset is recognised and included within mine infrastructure.
Decommissioning costs are provided for at the present value of the expenditures expected to settle the obligation,
using estimated cash flows based on current prices. The unwinding of the decommissioning obligation is included in
the income statement. The estimated future costs of decommissioning obligations are regularly reviewed and adjusted
as appropriate for ne w circumstances or changes in law or technology. Changes in estimates are capitalised or
reversed against the relevant asset. The estimates are discounted at a pre-tax rate that reflects current market
assessments of the time value of money.
Gains or losses, from the expected disposal of assets are not taken into account when determining the provision.
F-108Restoration costs
The provision for restoration represents the cost of restoring site damage after the commencement of production.
Increases in the provision are charged to the income statement as a cost of production.
Gross restoration costs are estimated at the present value of the expenditures expected to settle the obligation, using
estimated cash flows based on current prices. The estimates are discounted at a pre-tax rate that reflects current
market assessments of the time value of money and risks specific to the liability.
Revenue recognition
Revenue is recognised at the fair value of the consideration received or receivable to the extent that it is probable that
the economic benefits will flow to the company and the revenue can be reliably measured. The following criteria must
also be present:
•
the sale of mining products is recognised when the significant risks and rewards of ownership of the products are
transferred to the buyer;
•
interest is recognised on a time proportion basis, taking account of the principal outstanding and the effective
rate over the period to maturity, when it is determined that such income will accrue to the company; and
•
where a by-product is not regarded as significant, revenue is credited against cost of sales, when the significant
risks and rewards of ownership of the products are transferred to the buyer.
F-141
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
As of and forFor the years ended December 31, 2004, 2005 and 2006
2.4Summary of significant accounting policies (continued)
Income Tax
Deferred taxation is provided on all qualifying temporary differences at the balance sheet date between the tax bases
of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax assets are only recognised to the extent that it is probable that the deductible temporary differences will
reverse in the foreseeable future and future taxable profit will be available against which the temporary difference can
be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is
no longer probable that sufficient future taxable profit will be available to allow all or part of the deferred tax asset to
be utilised.
A deferred tax liability is recognised for all taxable temporary differences if it is probable that the temporary difference
will reverse in the foreseeable future.
Deferred tax assets and liabilities are measured at future anticipated tax rates, which have been enacted or
substantively enacted at the balance sheet date.
Current and deferred tax is recognised as income or expense and included in the profit or loss for the period, except
to the extent that the tax arises from a transaction or event which is recognised, in the same or a different period
directly in equity; or a business combination that is an acquisition.
Current taxation is measured on taxable income at the applicable statutory rate.
Special items
Items of income and expense that are material and require separate disclosure, in accordance with IAS 1.86, are
classified as “special items” on the face of the income statement. Special items that relate to the underlying
performance of the business are classified as “operating special items” and include impairment charges and reversals.
Special items that do not relate to underlying business performance are classified as “non-operating special itemsR 21;
and are presented below “Operating (loss) profit” on the income statement.
Dividend distribution
Dividend distribution to the company’s shareholders is recognised as a liability in the company’s financial statements
in the period in which the dividends are declared by the board of directors of Société d’Exploitation des Mines d’Or de
Sadiola S.A..
Financial instruments
Financial instruments recognised in the balance sheet include trade and other receivables, cash and cash equivalents
and trade and other payables.
Financial instruments are initially measured at fair value when the company becomes a party to their contractual
arrangements. Transaction costs are included in the initial measurement of financial instruments. The subsequent
measurement of financial instruments is dealt with below.
A financial asset is derecognised when the right to receive cash flows from the asset has expired or the company has
transferred its rights to receive cash and either (a) has transferred substantially all the risks and rewards of the asset,
or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred
control of the assets.
A financial liability is derecognised wh en the obligation under the liability is discharged or cancelled or expires.
F-142
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 200331, 2004, 2005 and 20042006
2.4Summary of significant accounting policies (continued)
Financial instruments (continued)
On derecognition of a financial asset, the difference between the proceeds received or receivable and the carrying
amount of the asset is included in income.
On derecognition of a financial liability, the difference between the carrying amount of the liability extinguished or
transferred to another party and the amount paid is included in income.
Regular way purchases and sales of all financial assets and liabilities are accounted for at settlement date.
Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method, less accumulated impairment. Impairment of trade and other receivables is established
when there is objective evidence as a result of a loss event that the company will not be able to collect all amounts
due according to the original terms of the receivables. The amount of the impairment is the difference between the
asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective
interest rate. The impairment is recognised in the income statement.
Cash and cash equivalents
Cash and cash equivalents are defined as cash on hand, demand deposits and short-term, highly liquid investments
readily convertible to known amounts of cash and subject to insignificant risk of changes in value and are
subsequently measured at cost which is deemed to be fair value as they have a short-term maturity.
Cash which is subject to legal or contractual restrictions on use is classified separately.
Financial liabilities
Financial liabilities are subsequently measured at amortised cost, using the effective interest rate method.
F-143
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
20042006
20032005
2004
US$
SPECIFIC3
NOTESRevenue
1 Revenue
Product sales
300,727,005 198,138,374
187,577,578
166,574,925
2 Operating4
Operating profit
Operating profit is arrived at after taking account of:
Ad Valorem and CPS tax
Royalties
18,027,171
11,874,900
11,172,594
9,950,342
Amortisation of mining assetsproperty, plant and equipment (note 4)7)
34,039,909
29,661,072
25,563,636
27,808,561
Auditors' remuneration
– Statutory audit fees
31,981
77,853
119,948
116,215
– External audit - audit fees
404,681
32,013
67,207
62,130
– External audit - disbursements
-
-
3,800
1,369
Contributions to Malian State social security fund
3,650,222
2,726,692
2,778,639
2,422,890
Exploration and evaluation expenditure
553,347
971,110
226,277
1,779,853
Realised fair value loss on derivatives
-
-
1,102,500
465,000
Reversal of unrealised fair value (gain)/lossgain on derivatives
-
-
(1,415,000)
713,158
Legal fees
65,201
45,636
38,652
34,000
Ore stockpile valuation adjustment
-
-
5,617,704
-
Provision for obsolete and slow-moving consumable stores
432,263
358,681
1,038,105
1,292,080
Remuneration other than to employees
– management fees
3,007,271
1,981,333
1,864,751
1,661,100
– mining contractor's fees
28,080,456
29,362,077
Salaries, wages and benefits
14,900,568
15,164,324
16,612,686
13,530,339
Unwinding of non-current provisionsMining contractor fees
167,81729,057,225
142,59624,706,278
24,818,526
Operating leases
26,214,997
19,054,434
3,261,930
3 Income5
Special impairments of indirect taxes receivable and special
expenses for indirect taxes payable
Impairment of advance on tax dispute (note 5.1)
-
5,184,786
-
Impairment of VAT refundable by Government of Mali (note 5.2)
-
1,947,000
-
2003/2004 tax audit (note 5.3)
4,136,344
1,434,617
-
Impairment of stamp duties refundable by Government of Mali
-
564,264
-
4,136,344
9,130,667
-
5.1 Impairment of advance on tax dispute
During November 2003, the Government of Mali performed a tax audit of the corporate taxation and various indirect
taxes at the company for fiscal years 2000 to 2002. The results of the audit indicated that the company owed the
Government of Mali F CFA 7.9 billion (US$16.4 million as of December 31, 2004) of various taxes and penalties, which
was communicated by way of a formal letter of assessment to the company. According to Government of Mali officials
the main reasons for the additional taxes were:
º
withholding taxes payable;
º
fringe benefits on certain facilities provided to expatriate employees that should have been taxed differently;
º
the application of the incorrect depreciation rates to certain mining assets; and
º
different interpretations of the law with respect to VAT payable on interest paid.
The company was of the opinion that the tax filings and indirect tax submissions by the Company were in compliance
with applicable laws and regulations.
Towards the end of the 2003 financial year the Government of Mali proposed that the company and the Government of
Mali settle their differences on the tax audit findings by way of the Company paying F CFA 2.5 billion (US$5.2 million as
of December 31, 2004) to the Government of Mali. In January 2004, the Government of Mali threatened to close down
the operations of the company if the taxes were not paid and, as a result the Government of Mali requested that an
advance of F CFA 2.5 billion (US$5.2 million as of December 31, 2004) be made to them in order for the company to
continue operations. The agreement with the Government of Mali was that this advance was not an acknowledgement
of any taxes payable and that the advance would allow the company and the Government of Mali time to resolve their
differences in tax interpretation, or to allow the Company the right to arbitration. No cash payment was made as a
transfer was made from the current account held with the Government of Mali. Numerous attempts to resolve the
dispute between the Government of Mali and the company between January and June 2004 failed.
F-144
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
Without admitting that the company filings have been prepared in an incorrect manner in terms of the prevailing laws
and regulations, the directors decided that the advance should be abandoned in order to close this issue and allow
management to concentrate on the company’s core business. Accordingly, the abandonment was recorded as an
special item rather than as an under provision of prior year taxation. Abandonment of this amount enabled the
company to reach an agreement with the Government of Mali on all corporate taxation issues which were in dispute
and to establish a protocol for the indirect taxes that were in dispute for the future.
5.2
Impairment of VAT refundable by Government of Mali
The gross amount of VAT refundable by the Government of Mali amounted to US$29.2 million at December 31, 2005.
Management estimated that only US$27.3 million was recoverable based on previous VAT audits performed by the
authorities. Accordingly, an impairment of VAT refundable of US$1.9 million was made. Management estimates that
the gross amount of VAT refundable by the Government of Mali at December 31, 2006 is recoverable, accordingly no
impairment was made in 2006.
5.3
Payment relating to 2003/2004 tax audit
During the 2005 financial year a tax assessment was received for corporate tax and various indirect taxes by
Government of Mali authorities for the 2003 and 2004 fiscal years. Management objected to the assessment as it did
not reflect the protocol agreement reached between the company and the Government of Mali with regard to the tax
audit of the Company for fiscal years 2000 to 2002 (note 5.1). As discussed in note 5.1 the Government of Mali
required an advance be made which the Company refused. Without admitting guilt the Company decided to pay the
Government of Mali an amount agreed by both parties. The Company and the Government of Mali reached settlement
on the disputes relating to the 2003 and 2004 fiscal year tax assessments in 2006. The additional settlement of $4.1
million has been recorded as an special payment of indirect taxes.
2006
tax2005
2004
US$
6
Taxation
All pre-tax income and income tax expense is related to operations in Mali
Current tax expense (note 13)15)
44,327,378
13,364,869
8,092,583
11,353,204
Deferred tax expense/(income)expense (note 9)12)
(3,402,067)
4,306,792
3,703,792
(829,771)
40,925,311
17,671,661
11,796,375
10,523,433
A reconciliation of the statutory tax rate to that charged in the income statement is
set out in the following table:
%
%
%
StatutoryGovernment of Mali
200
3
3
1 000
16
16
5.
Shareholder’s loan
2006
$’000
2005
$’000
Government of Mali
3 689
3 525
3 689
3 525
Made up of:
Principal
2 622
2 622
Deferred interest
1 067
903
3 689
3 525
The shareholder loan is denominated in US dollars and interest accrues at a LIBOR dollar rate plus 2% per annum
and has no fixed terms of repayment. The weighted average interest rate as at December 31, 2006 on the
shareholders’ subordinated loans was 6.2% (December 31, 2005: 5.29%).
6.
Environmental rehabilitation provision
2006
$’000
2005
$’000
Opening balance
9 889
9 252
Accretion expense
593
637
Change in estimate
(470)
-
10 012
9 889
F-113
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
6.
Environmental rehabilitation provision (continued)
The provisions for close down and restoration costs include estimates for the effect of future inflation and have been
discounted to their present value at 6% per annum, being an estimate of the risk free pre-tax, cost of borrowing.
While the ultimate amount of rehabilitation costs to be incurred in the future is uncertain, the Company has estimated
that the remaining costs for Morila, in current monetary terms, will be $13.2 million (December 31, 2005:
$12.2 million), the majority of which will only be expended at the end of the mine life.
Although limited environmental rehabilitation regulations currently exist in Mali to govern the mines, management has
based the environmental rehabilitation provision using the standards as set by the World Bank which require an
environmental management plan, an annual environmental report, a closure plan, an up-to-date register of plans of
the facility, preservation of public safety on closure, carrying out rehabilitation works and ensuring sufficient funds
exist for the closure works. However, it is reasonably possible that the Company’s estimate of its ultimate
rehabilitation liabilities could change as a result of changes in regulations or cost estimates.
The Company is committed to rehabilitation of its properties and to ensure that it is adequately provided to do so it
makes use of independent environmental consultants to advise it. It also uses past experience in similar situations to
ensure that the provisions for rehabilitation are adequate.
While the ultimate closure costs may be uncertain, there are no uncertainties with respect to joint and several liability
that may affect the magnitude of the contingency as these are clearly defined in the Company’s mining convention.
There are no other potentially responsible parties to consider for cost sharing arrangements.
The Company carries insurance against pollution including cost of cleanup. At present, there are no losses and or
claims outstanding.
7.
Interest Bearing Borrowings
2006
$’000
2005
$’000
a) Rolls Royce finance lease
9 569
11 980
b) Air Liquide finance lease
1 795
2 210
11 364
14 190
Less: Current portion of long term liabilities:
a) Rolls Royce finance lease
2 593
2 633
b) Air Liquide finance lease
428
415
3 021
3 048
8 343
11 142
a)
Rolls Royce finance lease
This lease relates to five generators leased from Rolls Royce. The lease is repayable over ten years
commencing April 1, 2001 and bears interest at a variable rate which as at December 31, 2006 was
approximately 21% (2005: 20%) per annum. The lease is collateralized by plant and equipment whose net
book value at December 31, 2006 amounted to $10.3 million (2005: $12.1 million). Average lease payment of
$3.8 million are payable in instalments over the term of the lease. Randgold Resources Limited guaranteed the
repayment of the lease.
F-114
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
7.
Interest Bearing Borrowings (continued)
b)
Air Liquide finance lease
The Air Liquide finance lease relates to three oxygen generating units leased from Air Liquide. The lease is
payable over 10 years commencing December 1, 2000 and bears interest at a variable rate which as at
December 31, 2006 was approximately 3.09% (2005: 3.09%) per annum. The lease is collateralized by the
production units whose net book value at December 31, 2006 amounted to $1.6 million (2005: $1.9 million).
Finance lease liabilities – minimum lease payments:
2006
$’000
2005
$’000
Not later than 1 year
4 939
5 349
Later than 1 year and not later than 5 years
12 315
16 017
Later than 5 years
-
834
17 254
22 200
Future finance costs of finance leases
(5 890)
(8 010)
Present value of finance lease liabilities
11 364
14 190
The present value of the finance lease liabilities is as follows:
Not later than 1 year
3 021
3 048
Later than 1 year and not later than 5 years
8 343
10 556
Later than 5 years
-
586
11 364
14 190
8.
Deferred taxation
Deferred tax is calculated in full on temporary differences under the liability method using a principal tax rate in Maliof
35% (2005: 35%).
35.0
35.0
Disallowable expensesThe movement on deferred taxation is a follows:
2006
$’000
2005
$’000
(Restated)
At beginning of the year
(7 551)
-
0.1Income statement charge
Non-taxable income1 290
(0.5) (2.8)(7 551)
Translation gain on current
At end of year
(6 261)
(7 551)
Deferred taxation assets and deferredliabilities comprise of the following
Decelerated tax depreciation
(8.8)
(7.2)
Prior year tax expense
1.51 154
-
EffectiveDeferred taxation liability
1 154
-
Ore stockpiles and gold-in-process
7 415
7 503
Decelerated tax ratedepreciation
27.2-
25.148
Deferred taxation asset
7 415
7 551
Net deferred taxation asset
6 261
7 551
F-109
F-115
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
9.
Mining assets
2006
$’000
2005
$’000
Opening carrying amount
101 580
117 754
Additions
2 900
4 358
Revision in estimate of rehabilitation costs
(470)
-
Depreciation
(15 583)
(20 532)
Closing carrying amount
88 427
101 580
Cost
200 975
198 545
Accumulated depreciation
(112 548)
(96 965)
Carrying amount
88 427
101 580
Long-lived assets
Long-lived assets are those assets which are amortized over the life of the mine and are comprised of the
metallurgical plant, tailings and raw water dams, power plant and mine infrastructure. The net book value of these
assets was $83 million as at December 31, 2006 (2005: $97.8 million).
Short-lived assets
Short-lived assets are those assets which are amortized over their useful life but limited to the life of the mine and are
comprised of motor vehicles and other equipment. The net book value of these assets was $3.6 million as at
December 31, 2006 (2005: $3.8 million).
10.
Inventories
2006
$’000
2005
$’000
(Restated)
Consumables stores
22 365
24 145
Gold in process
2 073
2 154
Short-term portion of ore stockpiles
18 008
32 440
42 446
58 739
Provision for obsolescence
(3 066)
(2 004)
39 380
56 735
Long-term portion of ore stockpiles
95 609
48 814
134 989
105 549
Ore stockpiles have been split between long and short-term based on the current life of mine plan estimates.
F-116
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
11.
Accounts receivable
2006
$’000
2005
$’000
Related party receivables
-
AngloGold Ashanti Limited
93
-
-
AngloGold Services Mali S.A.
8
-
-
Societe d’ Exploitation des Mines d’Or de Sadiola S.A.
1
-
- Societe des Mines de Loulo S.A.
96
-
-
AngloGold Mines de Siguiri Guinea
44
-
- Geita Gold Mining
1
-
Gold sales trade receivable
9 993
8 991
Value added tax receivable
26 487
24 763
Fuel duties receivable
14 005
17 206
MDM receivable
2 522
2 522
Other
3 459
2 047
56 709
55 529
Impairment provision
(6 727)
(5 590)
49 982
49 939
Less non – current portion
(12 422)
-
Current accounts receivable
37 560
49 939
12.
Accounts payable
2006
$’000
2005
$’000
Related party payables
-
AngloGold Ashanti Limited
543
-
-
AngloGold Services Mali S.A.
332
-
-
Societe d’Exploitation des Mines d’Or de Sadiola S.A.
149
-
Trade creditors
3 334
4 968
Payroll cost accruals
1 308
679
Indirect taxes payable
1 722
7 818
Accruals
9 670
8 695
17 058
22 160
13.
Revenue
2006
$’000
2005
$’000
2004
$’000
Gold sales
313 866
295 196
189 287
Silver sales
1 012
713
453
314 878
295 909
189 740
F-117
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
14.
Operating profit
2006
$’000
2005
$’000
2004
$’000
Profit before tax is arrived at after taking into account the following:
Depreciation
15 583
20 532
18 753
Auditor’s remuneration
-
audit fees
141
111
108
Impairment on accounts receivable
1 137
4 030
1 560
Forex differences - net
(2 124)
1 483
547
Inventory obsolescence provision
1 062
2 004
-
Exploration Expense
6 606
1 105
1 425
Royalties
18 856
15 529
11 584
Related party management fee (note 21)
3 149
2 605
2 045
15.
Taxation
Major items causing the Company’s actual income tax charge to differ from estimates at the standard charge of 35%
of taxable income are as follows:
2006
$’000
2005
$’000
(Restated)
2004
$’000
(Restated)
Current taxation
56 427
7 818
-
Deferred taxation (note 8)
1 290
(7 551)
-
57 717
267
-
The tax on the Company’s profit before tax differs from the
theoretical amount that would arise using the statutory tax
rate as follows:
Profit before tax
157 956
132 068
49 211
Tax calculated at tax rate of 35%
55 285
46 224
17 224
Expenses not deductible for tax purposes
- Provisions/allowances
2 708
2 526
-
- Other Permanent Differences
(276)
-
-
Tax holiday permanent differences
-
(48 483)
(17 224)
Taxation charge
57 717
267
-
The Company benefited from a five year tax holiday in Mali which expired on November 14, 2005. The benefit of the tax
holiday to the Company was to increase its net income by $38.7 million and $17.2 million, due to not recording a tax
expense for the taxable income generated by the Morila mine for the years ended December 31, 2005 and 2004,
respectively. Under Malian tax law upon expiration of the tax holiday, the Company’s income tax expense will be based
on the greater of 35 per cent of taxable income or 0.75 per cent of gross revenue.
The Morila operations have no assessable capital expenditure carry forwards or assessable tax losses, as at
December 31, 2006, 2005 and 2004 respectively, for deduction against future mining income.
F-118
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
16.
Notes to the cash flow statement
2006
$’000
2005
$’000
(Restated)
2004
$’000
(Restated)
16.1 Cash generated by operating activities before
changes in working capital
Profit after taxation
100 239
131 801
49 211
Adjustments:
-
Tax expense
57 717
267
-
-
net finance charges
2 495
2 739
4 160
-
depreciation
15 583
20 532
18 753
-
unrealized movements of financial instruments
-
-
2 865
-
TSF gold in process provision
-
-
4 167
-
provision for bad debt
1 137
4 030
1 560
-
Accretion expense on environmental
rehabilitation provision
593
637
443
-
other non cash movements
-
-
(1 363)
177 764
160 006
79 796
16.2 Cash utilized by changes in working capital
-
Increase in accounts receivable
(21 680)
(9 967)
(29 467)
-
Increase in inventories
(29 441)
(46 910)
(20 640)
-
(Decrease)/increase in accounts payable
(5 103)
(759)
4 887
(56 224)
(57 636)
(45 220)
16.3 Taxation paid
-
Balance at beginning of year
6 844
-
-
-
Charge to income statement
57 717
267
-
-
Offsets against indirect tax receivables
(21 877)
-
-
-
Movement in deferred taxation
(1 290)
7 551
-
-
Balance at end of year
(4 434)
(6 844)
-
-
Tax paid
36 960
974
-
17.
Financial risk management
In the normal course of its operations, the Company is exposed to commodity price, currency, interest, liquidity and
credit risk. In order to manage these risks, the Company may enter into transactions which include mainly gold
forward and gold option contracts.
17.1 Concentration of credit risk
The Company’s financial instruments do not represent a concentration of credit risk because the Company
sells its gold to and deals with a variety of major financial institutions. Its receivables and loans are regularly
monitored and assessed and a provision for bad debts is maintained.
Gold bullion, the Company’s principal product, is produced in Mali. The gold produced is sold to a reputable
gold refinery. Because of the international market for gold the Company believes that no concentration of
credit risk exists with respect to the selected refinery to which the gold is sold.
Included in accounts receivable is $40.4 million (2005: $41.7 million) relating to indirect taxes owing to the
Company by the Government of Mali, which is denominated in Communauté Financière Africaine franc.
F-119
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
17.
Financial risk management (continued)
17.2 Foreign currency and commodity price risk
In the normal course of business, the Company enters into transactions denominated in USD. In addition, the
Company enters into transactions in a number of different currencies (primarily Communauté Financière
Africaine franc). As a result, the Company is subject to transaction exposure from fluctuations in foreign
currency exchange rates.
2006
$’000
2005
$’000
Cash and cash equivalents includes balances denominated in
- Communauté Financière Africaine franc (CFA)
788
(2 430)
Accounts receivable includes balances denominated in
- Communauté Financière Africaine franc (CFA)
39 989
40 948
Accounts payable includes balances denominated in
- Communauté Financière Africaine franc (CFA)
(8 046)
(7 477)
- South African Rand (ZAR)
(1 307)
(95)
- Pound Sterling (GBP)
(127)
(3)
- Euro (EUR)
(3 942)
(3 688)
- Australian Dollar (AUD)
(88)
-
- Canadian Dollar (CAD)
(1)
-
Generally the Company does not hedge its exposure to gold price fluctuation risk and sells at market spot
prices. These prices are in US dollars and do not expose the Company to any currency fluctuation risk.
However, in periods of capital expenditure or loan finance, the Company secures a floor price through simple
forward contracts and options whilst maintaining significant exposure to spot prices.
17.3 Interest rates and liquidity risk
Fluctuation in variable interest rates impact on the value of income receivable from short-term cash
investments and interest payment relating to financing activities (including long-term loans), giving rise to
interest rate risk.
In the ordinary course of business, the Company receives cash from its operations and is required to fund
working capital and capital expenditure requirements. This cash is managed to ensure surplus funds are
invested in a manner to achieve maximum returns while minimizing risks. The Company has been able to in
the past actively source financing through shareholders’ and third party loans.
F-120
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
18.
Fair value of financial instruments
The following table presents the carrying amounts and fair values of the Company's financial instruments outstanding
at December 31, 2006 and 2005. The fair value of a financial instrument is defined as the amount at which the
instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation
sale.
December 31, 2006
December 31, 2005
Carrying
amount
$’000
Fair
value
$’000
Carrying
amount
$’000
Fair
value
$’000
Financial assets
Cash and equivalents
4 428
4 428
3 904
3 904
Accounts receivable
49 982
49 982
49 939
49 939
Financial liabilities
Accounts payable
17 058
17 058
22 160
22 160
Long-term liabilities (excluding loans from shareholders)
8 343
8 343
11 142
11 142
Short term portion of long term liabilities
3 021
3 021
3 048
3 048
Estimation of fair values
Receivables, restricted cash, accounts payable and cash and equivalents
The carrying amounts are a reasonable estimate of the fair values because of the short maturity of such instruments.
Long term debt
The fair value of market-based floating rate long-term debt is estimated using the expected future payments
discounted at market interest rates.
Gold price contracts
The fair value of gold price forward and option contracts has been determined by reference to quoted market rates at
year-end balance sheet dates.
19.
Post retirement employees benefits
Retirement benefits for employees of the Company are provided by the Mali Government social security system to
which the Company and its employees contribute a fixed percentage of payroll costs each month. Fund contributions
by the Company for the years ended December 31, 2006, 2005 and 2004 amounted to $2.6 million, $2.5 million and
$2.7 million respectively.
20.
Commitments
Capital expenditure for mining assets
2006
$’000
2005
$’000
Contracts for capital expenditure
-
-
Authorized but not contracted for
141
1 280
141
1 280
Somadex mining contractor expenditure
2006
$’000
2005
$’000
Not later than 1 year
29 050
25 052
Later than 1 year and not later than 5 years
30 014
59 064
Later than 5 years
-
-
59 064
84 116
F-121
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
21.
Related party transactions
In terms of the Operator Agreement between Morila SA and AngloGold Services Mali SA, a management fee,
calculated as 1% of the total sales of Morila, is payable to AngloGold Service Mali SA quarterly in arrears. The
management fees for the year ended December 31, 2006 amounted to $3.2 million (2005: $2.9 million) (2004: $2.0
million).
Royalties are payable to the Government of Mali in the form of Ad Valorem taxes and CPS at a total rate of 6% of
total sales. The royalties for the year ended December 31, 2006 amounted to $18.9 million (2005: $15.5 million)
(2004: $11.5 million). Refer to the Value added tax receivable and Fuel duty receivable in note 11 to the financial
statements for the balances owed by the Government of Mali to the Company.
Notes 11 and 12 to the financial statements set out the other balances receivable and payable relating to fellow
subsidiaries.
Transactions between fellow subsidiaries can be set out as follows:
2006
$’000
2005
$’000
Sales/services to related parties
- AngloGold Ashanti Limited
92
645
- AngloGold Services Mali S.A.
63
380
- Societe d’ Exploitation des Mines d’Or de Sadiola S.A.
(2)
24
- YATELA SA
5
2
- Societe des Mines de Loulo S.A.
111
126
- AngloGold Mines de Siguiri Guinea
66
88
- Geita Gold Mining
1
-
Purchases from related parties
- AngloGold Ashanti Limited
(2 884)
(5 383)
- AngloGold Services Mali S.A.
(4 843)
(5 245)
- Societe d’Exploitation des Mines d’Or de Sadiola S.A.
(285)
(444)
- YATELA SA
(2)
(4)
- Randgold Resources Limited
(102)
(7)
Key management remuneration:
2006
$’000
2005
$’000
2004
$’000
Short-term employee benefits
1 090
866
749
Post-employment benefits
36
32
-
1 126
898
749
22.
Differences between IFRS and U.S. GAAP
The Company’s financial statements have been prepared in accordance with IFRS, which differs in certain respects
from U.S. GAAP. However, for the periods presented, there are no material measurement differences which would
impact the Company's balance sheet, net income or shareholders' equity under U.S GAAP, when compared to the
amounts reported under IFRS.
F-122
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
22.
Differences between IFRS and U.S. GAAP (continued)
Change in accounting policy
As discussed in note 2.5, on January 1, 2006, the Company adopted Emerging Issues Task Force Issue No. 04-06,
Accounting for Stripping Costs Incurred during Production in the Mining Industry (“EITF 04-06”). EITF 04-06
addresses the accounting for stripping costs incurred during the production phase of a mine and refers to these costs
as variable production costs that should be included as a component of inventory to be recognized in operating costs
in the same period as the revenue from the sale of inventory. As a result, capitalization of post-production stripping
costs is appropriate only to the extent product inventory exists at the end of a reporting period.
Previously, deferred stripping costs were charged to operating costs as gold was produced and sold using the units of
production method based on estimated recoverable quantities of proven and probable gold, using a stripping ratio
calculated as the ratio of total tons to be moved to total proven and probable ore reserves, which resulted in the
recognition of the costs of waste removal activities over the life of the mine as gold was produced. The application of
the deferred stripping accounting method previously generally resulted in the recognition of an asset (deferred
stripping costs).
In accordance with Issue No. 04-06, the Company elected to recognise this change in accounting by restatement of its
prior-period financial statements through retrospective application of this consensus. The Company has therefore
adjusted its net income and shareholders’ equity previously reported under U.S. GAAP as if the revised principles had
always been used, which is consistent with the disclosures under IFRS set forth in note 2.5.
Recent accounting pronouncements
The June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, ‘Accounting
for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109)’ (“FIN 48”). This Interpretation
clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in
accordance with FASB Statement No. 109, Accounting for Income Taxes. This interpretation prescribes a recognition
threshold and measurement attribute for the financials statements recognition and measurement of a tax position
taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods, disclosure, and transition. This statement is
effective for years beginning on or after 1 January 2007. The Company has eval uated the impact of adoption of FIN
48 on its financial statements as nil.
On September 15, 2006 the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value
Measurements” (“SFAS157”).
SFAS157 provides enhanced guidance for using fair value to measure assets and liabilities. Under SFAS157, fair
value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants in the market in which the reporting entity transacts. SFAS157 clarifies the principle that
fair value should be based on the assumptions market participants would use when pricing the asset or liability and
establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. SFAS157 also
requires that fair value measurements be separately disclosed by level within the fair value hierarchy. SFAS157 is
effective for financial statements issued for fisc al years beginning after November 15, 2007, and interim periods within
those fiscal years. The Company is currently reviewing the guidance issued in SFAS157 and has not yet determined
the impact of this on the financial statements.
On February 15, 2007 the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value
Option for Financial Assets and Financial Liabilities Including an amendment of FASB Statement No. 115”
(“SFAS159”).
SFAS159 permits entities to choose to measure many financial instruments and certain other items at fair value. The
objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported
earnings caused by measuring related assets and liabilities differently without having to apply complex hedge
accounting provisions. The fair value option permits all entities to choose to measure eligible items at fair value at
specified election dates. A business entity shall report unrealized gains and losses on items for which the fair value
option has been elected in earnings at each subsequent reporting date.
F-123
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
22.
Differences between IFRS and U.S. GAAP (continued)
SFAS159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early
adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the
entity also elects to apply the provisions of SFAS 157, “Fair Value Measurements”. The choice to adopt early must be
made within 120 days of the beginning of the fiscal year of adoption, provided the entity has not yet issued financial
statements, including required notes to those financial statements, for any interim period of the fiscal year of adoption.
SFAS159 permits application to eligible items existing at the effective date (or early adoption date). The Company is
currently reviewing the guidance issued in SFAS159 and has not yet determined the impact of this on the financial
statements.
F-124
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Financial statements
as of and for the year ended
December 31, 2006
F-125
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Financial statements and report of the Independent Registered Public Accounting Firm
For the year ended December 31, 2006
Report of independent registered public accounting firm
Income statements
Balance sheets
Statements of changes in stockholders’ equity
Cash flow statements
Notes to the financial statements
F-126
Report of the Independent Registered Public Accounting Firm
The board of directors and stockholders of Société d’Exploitation des Mines d’Or de Sadiola S.A.
We have audited the accompanying balance sheets of Société d’Exploitation des Mines d’Or de Sadiola S.A. as of
December 31, 2006 and 2005, and the related statements of income, changes in stockholders’ equity and cash flows for
each of the years in the three-year period ended December 31, 2006. These financial statements are the responsibility of
the company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of
Société d’Exploitation des Mines d’Or de Sadiola S.A. as of December 31, 2006 and 2005, and the results of its operations
and its cash flows for each of the years in the three-year period ended December 31, 2006, in conformity with International
Financial Reporting Standards.
International Financial Reporting Standards vary in certain significant respects from United States generally accepted
accounting principles. Information relat ing to the nature and effect of such differences, as of and for the years ended
December 31, 2006, 2005 and 2004, is presented in note 20 to the financial statements.
KPMG Inc.
Johannesburg, South Africa
June 25, 2007
F-127
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Income Statement
For the years ended December 31,
The accompanying notes are an integral part of these financial statements.
2006
2005
2004
Notes
US$
Revenue
3
300,727,005
198,138,374
187,577,578
Cost of sales
(167,004,820)
(148,428,779)
(143,237,187)
Gross profit
133,722,185
49,709,595
44,340,391
Exploration costs
(553,347)
(971,110)
(226,227)
Other operating expenses / (income)
692,296
410,115
(1,555,744)
Net foreign exchange gain / (loss)
1,208,733
(7,520,279)
636,876
Special impairments of indirect taxes receivable
and special expenses for indirect taxes payable
5
(4,136,344)
(9,130,667)
-
Operating profit
4
130,933,523
32,497,654
43,195,296
Interest income
1,004,863
341,515
363,185
Interest expense
(748,870)
(3,083,377)
(167,817)
Profit before taxation
131,189,516
29,755,792
43,390,664
Taxation
6
(40,925,311)
(17,671,661)
(11,796,375)
Profit for the year
90,264,205
12,084,131
31,594,289
F-128
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Balance Sheet
As at December 31,
2006
2005
Notes
US$
ASSETS
Non-current assets
Property, plant and equipment
7
112,447,354
131,872,377
Inventories
8
28,671,942
17,936,431
Trade and other receivables
9
28,335,326
14,551,010
169,454,622
164,359,818
Current assets
Inventories
8
55,843,871
43,387,635
Trade and other receivables
9
20,531,375
27,527,053
Cash and cash equivalents
10
28,818,654
12,185,406
105,193,900
83,100,094
Total assets
274,648,522
247,459,912
EQUITY AND LIABILITIES
Equity
Stockholders' equity
179,293,271
179,029,066
Non-current liabilities
Provisions
11
14,862,531
11,655,394
Deferred taxation
12
2,426,353
5,828,420
17,288,884
17,483,814
Current liabilities
Trade and other payables
13
22,022,889
22,845,390
Taxation
15
33,137,071
8,101,642
Dividends payable
14
22,906,407
20,000,000
78,066,367
50,947,032
Total liabilities
95,355,251
68,430,846
Total equity and liabilities
274,648,522
247,459,912
The accompanying notes are an integral part of these financial statements.
F-129
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Statement of changes in stockholders’ equity
For the years ended December 31,
Ordinary stock
(note 16)
Non-
distributable
reserve
Retained
earnings
Total
stockholders'
equity
Note
US$
Balance at December 31, 2003
20,000,000
4,000,000
196,350,646
220,350,646
Profit for the year
-
-
31,594,289
31,594,289
Dividends declared
14
-
-
(45,000,000)
(45,000,000)
Balance at December 31, 2004
20,000,000
4,000,000
182,944,935
206,944,935
Profit for the year
-
-
12,084,131
12,084,131
Dividends declared
14
-
-
(40,000,000)
(40,000,000)
Balance at December 31, 2005
20,000,000
4,000,000
155,029,066
179,029,066
Profit for the year
-
-
90,264,205
90,264,205
Dividends declared
14
-
-
(90,000,000)
(90,000,000)
Balance at December 31, 2006
20,000,000
4,000,000
155,293,271
179,293,271
The non-distributable reserve is a legal reserve created in 1997 and is a requirement of the commercial law of Mali.
This law prescribes the transfer of 10% of profits, restricted to a maximum of 20% of ordinary share capital, to a non-
distributable reserve. Such reserve only becomes distributable in the event the company is liquidated.
The accompanying notes are an integral part of these financial statements.
F-130
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Cash flow statements
For the years ended December 31,
2006
2005
2004
Notes
US$
Net cash provided by operating activities
Profit for the year
90,264,205
12,084,131
31,594,289
Adjusted for:
Non-cash movements
- taxation charge per income statement
40,925,311
17,671,661
11,796,375
- adjustment for obsolete and slow-moving consumable
stores
432,263
358,681
1,038,105
- net foreign exchange (gains) / losses
(1,208,733)
7,520,279
(636,876)
- present value adjustment of VAT taxes refundable
(81,012)
2,553,510
-
- present value adjustment on refundable tax on fuel
247,119
297,000
-
- ore stockpile valuation adjustment
-
-
5,617,704
- unwinding of non-current provisions
582,763
232,867
167,817
- environmental restoration charge to the income statement
67,261
2,397,330
1,130,731
- employee long service obligation charge to the income
statement
(1,737,418)
373,687
508,009
- reversal of unrealised fair value gain on derivatives
-
-
(1,415,000)
- amortisation of property, plant and equipment
34,039,909
29,661,072
25,563,636
Special impairments of indirect taxes refundable and special
provision for indirect taxes payable
4,136,344
9,130,667
-
Increase in non-current inventories
(10,735,511)
(7,122,597)
(3,201,209)
Increase in non-current VAT refundable
(13,784,316)
(17,519,010)
-
Income tax paid
15
(19,291,949)
(4,460,844)
(13,077,286)
Increase in inventories
(12,888,499)
(11,203,796)
(2,862,544)
Decrease / (increase) in trade and other receivables
2,693,227
12,059,739
(9,242,362)
Increase / (decrease) in trade and other payables
386,231
(4,082,958)
(3,480,256)
114,047,195
49,951,419
43,501,133
Net cash used in investing activities
Capital expenditure
(10,320,354)
(19,703,773)
(16,075,526)
Net cash outflow from investing activities
(10,320,354)
(19,703,773)
(16,075,526)
Net cash used in financing activities
Dividends paid
14
(87,093,593)
(30,802,000)
(45,198,000)
Net cash outflow from financing activities
(87,093,593)
(30,802,000)
(45,198,000)
Net increase / (decrease) in cash and cash equivalents
16,633,248
(554,354)
(17,772,393)
Cash and cash equivalents at beginning of year
12,185,406
12,739,760
30,512,153
Cash and cash equivalents at end of year
10
28,818,654
12,185,406
12,739,760
The accompanying notes are an integral part of these financial statements.
F-131
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
As of and forFor the years ended December 31, December 20032004, 2005 and 20042006
1.
Exploration
costs
capitalised
Mine
development
costs
Exploration
costs
acquired
Work in
progress
Decom-
missioning
asset
Mine
infra-
structure
TotalBusiness activities
Société d’Exploitation des Mines d’Or de Sadiola S.A. (Semos) is a company registered in Mali. The Company
operates a mine for the commercial exploitation of gold in the Kayes region of Western Mali. Commercial production
commenced on March 4, 1997.
US$2.
US$Accounting policies
US$
Statement of compliance
US$
US$The company financial statements are prepared in compliance with International Financial Reporting Standards
(IFRS) and Interpretations of those standards, as adopted by the International Accounting Standards Board (IASB)
and applicable legislation.
US$
US$During the current financial year, the following new and revised accounting standards, amendments to standards and
new interpretations were adopted by Société d’Exploitation des Mines d’Or de Sadiola S.A:
4 Mining
assetsIAS 39 and IFRS 4
Amendment – Financial Guarantee Contracts;
IFRS 6
Exploration for and Evaluation of Mineral Resources;
IFRIC 4
Determining whether an Arrangement contains a lease.
IFRIC 6
Liabilities arising from Participating in a Specific market: Waste Electrical and Electronic
Equipment.
In addition, the following interpretation was early adopted by Société d’Exploitation des Mines d’Or de Sadiola S.A.
during previous financial years:
IFRIC 5
Rights to Interests arising from Decommissioning, Restoration and Environmental
Rehabilitation Funds.
In addition, the following interpretations were early adopted by Société d’Exploitation des Mines d’Or de Sadiola S.A
during the current financial year:
IFRIC 7
Applying the Restatement approach under IAS 29, Financial Reporting in Hyperinflationary
Economies;
IFRIC 8
Scope of IFRS 2;
IFRIC 9
Reassessment of Embedded Derivatives;
IFRIC 10
Interim Reporting and Impairment.
The adoption of the above identified accounting standards, amendments to standards and new interpretations had no
financial impact on the annual financial statements.
Cost
Balance at beginning ofThe following accounting standards, amendments to standards and new interpretations, which are not yet mandatory
year
31,828,455
131,758,228
4,542,812
686,350 1,149,545 198,129,091 368,094,481
Additions
-
12,060,485
-
931,902
-
3,083,139
16,075,526
Disposals
-
-
-
-
- (2,854,536)
(2,854,536)
Balance at end of year
31,828,455
143,818,713
4,542,812
1,618,252
1,149,545 198,357,694 381,315,471
Accumulated
amortisation
Balance at beginning of
year
20,718,785
74,743,002
-
- 606,353 121,597,847 217,665,987
Amortisation for the year
1,639,894
11,695,593
-
-
90,532
12,137,617
25,563,636
Disposals
-
-
-
-
- (2,854,536)
(2,854,536)
Balance at end of year
22,358,679
86,438,595
-
-
696,885 130,880,928 240,375,087
Net book value at 31
December 2004
9,469,776
57,380,118
4,542,812
1,618,252
452,660
67,476,766
140,940,384
Net book value at 31
December 2003
11,109,670
57,015,226
4,542,812
686,350
543,192
76,531,244
150,428,494
2004
2003
US$
5
Inventories
Non-current portion of inventories
Ore stockpiles
10,813,834
13,230,329
Current portion of inventories
Ore stockpiles
16,041,803
13,475,934
Gold bullion and gold-in-process
2,845,639
2,364,476
Consumable stores at cost
13,655,078
14,877,671
Consumable stores
15,985,263
16,169,751
Less: provision for obsolete and slow-moving items
(2,330,185)
(1,292,080)
32,542,520
30,718,081
Total inventories
43,356,354
43,948,410
6
Trade and other receivables
Related party receivables
– AngloGold Services Mali S.A.
149,858
169,829
– Société d’Exploitation des Mines d’Or de Morila S.A.Sadiola S.A, have not been adopted in the current year:
315,275
-
IAS 1
Amendment – Société d'Exploitation des Mines d’Or de Yatela S.A.Capital Disclosures
325,196Effective years beginning on
or after 1 January 2007
430,113IFRS 7
Financial Instruments and Disclosures
Effective years beginning on
or after 1 January 2007
IFRS 8
Operating Segments
Effective years beginning on
or after 1 January 2009
IFRIC 11
IFRS 2 – AngloGold Services LimitedCompany and Treasury Share Transactions
33,417Effective years beginning on
or after 1 March 2007
25,205IFRIC 12
– OtherService Concession Arrangements
369,514Effective years beginning on
or after 1 January 2008
157,842
1,193,260
782,989
Trade receivable
4,868,464
6,279,981
Value added tax (VAT) refundable by Malian State
18,378,734
9,381,415
AdvanceThe company has assessed the significance of these new standards, amendments to standards and new
interpretations, which will be applicable from 1 January 2007 and later years and concluded that they will have no
material financial impact. Both IAS 1 and IFRS 7 may have an impact on tax dispute (note 6.1)
5,184,786
-
Stamp duties refundable by Malian State (6.2)
4,479,717
4,158,989
Refundable tax on fuel
9,761,660
15,605,715
Prepaid expenses
279,666
-
Other
3,019,065
1,713,901
47,165,352
37,922,990certain disclosures.
F-110
F-132
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
As of and forFor the years ended December 31, 2004, 2005 and 2006
2.1
Basis of preparation
The financial statements are prepared according to the historical cost accounting convention, as modified by the
revaluation of certain financial instruments to fair value. The company's accounting policies as set out below are
consistent in all material respects with those applied in the previous year, except for the adoption of the above
mentioned new and revised standards. The financial statements are presented in US dollars.
2.2
Changes in accounting policies
The changes in accounting policies result from adoption of the following new/revised standards, amendments to
standards and interpretations:
IAS 39 and IFRS 4
Amendment – Financial Guarantee Contracts;
IFRS 6
Exploration for and Evaluation of Mineral Resources;
IFRIC 4
Determining whether an Arrangement contains a Lease;
IFRIC 6
Liabilities arising from Participating in a Specific market: Waste Electrical and Electronic
Equipment;
IFRIC 7
Applying the Restatement approach under IAS 29, Financial Reporting in Hyperinflationary
Economies;
IFRIC 8
Scope of IFRS 2;
IFRIC 9
Reassessment of Embedded Derivatives;
IFRIC 10
Interim Reporting and Impairment.
The principal effects of these changes in policies are discussed below.
IAS 39 and IFRS 4 “Amendment – Financial Guarantee Contracts”
The main impact of the IAS 39 and IFRS 4 Amendment – Financial Guarantee Contracts on the company, is the
recognition of an expense and a corresponding entry to liabilities for the fair value of any financial guarantee
contracts in existence. Subsequent measurement is dealt with in the financial instruments accounting policy. A
financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder
for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or
modified terms of a debt instrument. As a result, the company has applied IAS 39 and IFRS 4 Amendment – financial
guarantee contracts to all such issued con tracts that are in existence.
The effect of the revised policy has no effect on the company financial statements and prior or current year profits.
IFRS 6 “Exploration for and Evaluation of Mineral Resources”
The adoption of IFRS 6 has resulted in the company clarifying the accounting policy for Exploration for and evaluation
of Mineral Resources which is described in "Significant accounting policies".
Moreover, assets defined as used in the exploration for and evaluation of Mineral Resources are required to be
separately identified from other property, plant and equipment, which are fully disclosed in Note 7.
The effect of the revised policy had no effect on the company financial statements and prior or current year financial
statements.
IFRIC 4 “Determining whether an arrangement contains a lease”
The company has applied IFRIC 4 in accordance with the transitional provisions of the interpretation.
IFRIC 4 requires an entity to assess its arrangements that do not take the legal form of a lease but convey the right to
use an asset, in order to determine whether such arrangements are, or contain, leases that should be accounted for
in accordance with IAS 17, Leases.
F-133
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 200331, 2004, 2005 and 2006
2.2
Changes in accounting policies (continued)
The effect of the assessment of arrangements that do not take the legal form of a lease but convey the right to use an
asset has no effect on company prior or current year profits however, certain operating expenses presented in note 4
have been reclassified as operating leases for 2005 and 2004 to conform to the 2006 presentation in accordance
with IFRIC 4.
IFRIC 6 “Liabilities arising from Participating in a Specific market: Waste Electrical and Electronic
Equipment;”
This interpretation provides guidance on the recognition in the financial statements of producers, of liabilities for
waste management under the Economic Union Directive on Waste Electrical and Electronic Equipment in respect of
sales of historical household equipment.
The adoption of this IFRIC has no effect on company financial statements and prior or current year financial
statements.
IFRIC 7 “Applying the Restatement approach under IAS 29, Financial reporting in Hyperinflationary
Economies”
This Interpretation provides guidance on how to apply the requirements of IAS 29 in a reporting period in which an
entity identifies the existence of hyperinflation in the economy of its functional currency, when that economy was not
hyperinflationary in the prior period, and the entity therefore restates its financial statements in accordance with
IAS 29.
The adoption of this IFRIC had no effect on the company financial statements and prior or current year financial
statements.
IFRIC 8 “Scope of IFRS 2”
IFRS 2 applies to share-based payment transactions in which the entity receives or acquires goods or services
where the identifiable consideration received is less than the fair value of the equity instruments issued.
The adoption of this IFRIC had no effect on the financial statements and prior or current year financial statements.
IFRIC 9 “Reassessment of Embedded Derivatives"
IAS 39 paragraph 10 describes an embedded derivative as a component of a hybrid (combined) instrument that also
includes a non-derivative host contract - with the effect that some of the cash flows of the combined instrument vary
in a way similar to a stand-alone derivative. IAS 39 paragraph 11 requires an embedded derivative to be separated
from the host contract and accounted for as a derivative under certain presented circumstances.
IFRIC 9 specifies that an entity shall assess whether an embedded derivative is required to be separated from the
host contract and accounted for as a derivative when the entity first becomes a party to the contract. Subsequent
reassessment is prohibited unless there is a change in the terms of the contract that significantly modifies the cash
flows that otherwise would be required under the contract, in which case reassessment is required.
The adoption of this IFRIC has no effect on company financial statements and prior or current year financial
statements.
IFRIC 10 “Interim Reporting and Impairment"
The company is required to assess goodwill for impairment at every reporting date, to assess investments in equity
instruments and in financial assets carried at cost for impairment at every balance sheet date and, if required, to
recognise an impairment loss at that date. This interpretation requires that the company shall not reverse an
impairment loss recognised in a previous interim period in respect of goodwill or an investment in either an equity
instrument or a financial asset carried at cost.
The adoption of this IFRIC had no effect on the financial statements and prior or current year financial statements.
F-134
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.3
Significant accounting judgements and estimates
6.1Use of estimates: The preparation of the financial statements requires the company’s management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses
during the reporting period. The determination of estimates requires the exercise of judgement based on various
assumptions and other factors such as historical experience, current and expected economic conditions, and in some
cases actuarial techniques. Actual results could differ from those estimates.
The more significant areas requiring the use of management estimates and assumptions relate to mineral reserves
that are the basis of future cash flow estimates and unit-of-production depreciation, depletion and amortisation
calculations; environmental, reclamation and closure obligations; asset impairments, write-downs of inventory to net
realisable value; post-employment, post-retirement and other employee benefit liabilities, the fair value and
accounting treatment of financial instruments and deferred taxation.
Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts
of assets and liabilities within the next financial year are discussed below.
Carrying value of property, plant and equipment
All mining assets are amortised using the units-of-production (UOP) method where the mine operating plan calls for
production from well-defined mineral reserves over proved and probable reserves.
For mobile and other equipment, the straight-line method is applied over the estimated useful life of the asset which
does not exceed the estimated mine life based on proved and probable mineral reserves as the useful lives of these
assets are considered to be limited to the life of the mine.
The calculation of the UOP rate of amortisation could be impacted to the extent that actual production in the future is
different from current forecast production based on proved and probable mineral reserves. This would generally result
to the extent that there are significant changes in any of the factors or assumptions used in estimating mineral
reserves.
These factors could include:
•
changes in proved and probable mineral reserves;
•
the grade of mineral reserves may vary significantly from time to time;
•
differences between actual commodity prices and commodity price assumptions;
•
unforeseen operational issues;
•
changes in capital, operating, mining, processing and reclamation costs, discount rates and foreign exchange
rates; and
changes in mineral reserves could similarly impact the useful lives of assets depreciated on a straight-line
basis, where those lives are limited to the life of the mine.
The recoverable amounts of individual assets have been determined based on the higher of value-in-use calculations
and fair values less costs to sell. These calculations require the use of estimates and assumptions. It is reasonably
possible that the gold price assumption may change which may then impact our estimated life of mine determinant
and may then require a material adjustment to the carrying value of property, plant and equipment.
The company reviews and tests the carrying value of assets when events or changes in circumstances suggest that
the carrying amount may not be recoverable. Assets are grouped at the lowest level for which identifiable cash flows
are largely independent of cash flows of other assets. If there are indications that impairment may have occurred,
estimates are prepared of expected future cash flows for each group of assets. Expected future cash flows used to
determine the value in use of property, plant and equipment are inherently uncertain and could materially change
over time. They are significantly affected by a number of factors including published reserves, resources, exploration
potential and production estimates, together with economic factors such as spot and future gold prices, discount
rates, foreign currency exchange rates, estimates of costs to produce reserves and future capital expenditure.
F-135
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.3
Significant accounting judgements and estimates (continued)
Production start date
The company assesses the construction project to determine when it moves into the production stage. The criteria
used to assess the start date are determined based on the unique nature of the construction project such as the
complexity of a plant and its location. The company considers various relevant criteria to assess when the mine is
substantially complete and ready for its intended use and moves into the production stage. Some of the criteria
would include, but, are not limited to, the following:
•
the level of capital expenditure compared to the construction cost estimates;
•
completion of a reasonable period of testing of the mine plant and equipment;
•
ability to produce gold in saleable form (within specifications and insignificant revenue);
•
ability to sustain ongoing production of gold.
When a mine construction project moves into the production stage, the capitalisation of certain mine construction
costs ceases and costs are either regarded as inventory or expensed, except for capitalisable costs related to mining
asset additions or improvements or reserve development.
Income taxes
The company is subject to income tax. Significant judgement is required in determining the provision for income taxes
due to the complexity of legislation. There are many transactions and calculations for which the ultimate tax
determination is uncertain during the ordinary course of business. The company recognises liabilities for anticipated
tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these
matters is different from the amounts that were initially recorded, such differences will impact the income tax and
deferred tax provisions in the period in which such determination is made.
The company recognises the net future tax benefit related to deferred income tax assets to the extent that it is
probable that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability
of deferred income tax assets requires the company to make significant estimates related to expectations of future
taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the
application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ
significantly from estimates, the ability of the company to realise the net deferred tax assets recorded at the balance
sheet date could be impacted.
Additionally, future changes in tax laws in the jurisdiction in which the company operates could limit the ability of the
company to obtain tax deductions in future periods.
Provision for environmental rehabilitation obligations
The company’s mining and exploration activities are subject to various laws and regulations governing the protection
of the environment. The company recognises management’s best estimate for asset retirement obligations in the
period in which they are incurred. Actual costs incurred in future periods could differ materially from the estimates.
Additionally, future changes to environmental laws and regulations, life of mine estimates and discount rates could
affect the carrying amount of this provision. Such changes in mineral reserves could similarly impact the useful lives
of assets depreciated on a straight-line-basis, where those lives are limited to the life of mine.
Stockpiles, gold in process and product inventories
Costs that are incurred in or benefit the production process are accumulated as stockpiles, gold in process and
product inventories. Net realisable value test s are performed at least annually and represent the estimated future
sales price of the product based on prevailing and long-term metals prices, less estimated costs to complete
production and bring the product to sale.
F-136
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.3Significant accounting judgements and estimates (continued)
Stockpiles, gold in process and product inventories (continued)
Stockpiles are measured by estimating the number of tonnes added and removed from the stockpile, the number of
contained gold ounces based on assay data, and the estimated recovery percentage based on the expected
processing method. Stockpile tonnages are verified by periodic surveys.
Although the quantities of recoverable metal are reconciled by comparing the grades of ore to the quantities of gold
actually recovered (metallurgical balancing), the nature of the process inherently limits the ability to precisely monitor
recoverability levels. As a result, the metallurgical balancing process is constantly monitored and the engineering
estimates are refined based on actual results over time.
Recoverable tax, rebates, levies and duties
Société d’Exploitation des Mines d’Or de Sadiola S.A. has unresolved tax disputes. If the outstanding input taxes are
not received and the tax disputes are not resolved in a favourable manner, it could have an adverse effect upon the
carrying value of these assets.
Contingencies
By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. The
assessment of such contingencies inherently involves the exercise of judgement and estimates of the outcome of
future events.
2.4Summary of significant accounting policies
Foreign currency translation
Functional currency
Items included in the financial statements are measured using the currency of the primary economic environment in
which the entity operates (the ‘functional currency’). The functional currency of United States Dollars (US$) is used
as opposed to the currency of the country in which the enterprise is domiciled, namely Franc de la Communauté
Financière d’Afrique (F CFA). The decision has been taken on the basis of US$ being the functional currency in
which the enterprise receives its revenue and majority of costs are mainly influenced by the US dollar.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the approximate exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resultin g from the settlement of foreign
currency transactions and from the translation at the year-end exchange rate of monetary assets and liabilities
denominated in foreign currencies are recognised in the income statement, except for derivative balances that are
within the scope of IAS 39. Translation differences on these balances are reported as part of their fair value gain or
loss.
Non monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated
using the exchange rate at the date of the transaction.
Property, plant and equipment
Property, plant and equipment are recorded at cost less accumulated amortisation and impairments. Cost includes
pre-production expenditure incurred during the development of a mine and the present value of future
decommissioning costs. Cost also includes finance charges capitalised during the construction period where such
expenditure is financed by borrowin gs.
If there is an indication that the recoverable amount of any property, plant and equipment is less than the carrying
value, the recoverable amount is estimated and an allowance is made for the impairment in value.
F-137
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.4Summary of significant accounting policies (continued)
Property, plant and equipment (continued)
Subsequent costs are included in the asset’s carrying amount only when it is probable that future economic benefits
associated with the item will flow to the company, and the cost of the item can be measured reliably. All other repairs
and maintenance are charged to the income statement during the financial period in which they are incurred.
Amortisation of assets is calculated to allocate the cost of each asset to its residual value over its estimated useful life,
for those assets not amortised on the units-of-production method as, follows:
•
buildings up to life of mine;
•
plant and machinery up to life of mine;
•
equipment and motor vehicles up to five years on a straight line basis; and
•
computer equipment up to three years on a straight line basis.
where life of mine is determined as the period up to the end of commercial production or the period up to which
the company has satisfied all its obligations acquired by virtue of the Mining Convention agreed with the
Government of Mali.
Major renovations are depreciated over the remaining useful life of the related asset or to the date of the next major
renovation, whichever is sooner.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
Gains and losses on disposals are determined by comparing net sale proceeds with carrying amount. These are
included in the income statement.
Mine development costs
Capitalised mine development costs include expenditure incurred to develop new orebodies, to define further
mineralisation in existing orebodies, to expand the capacity of the mine and to maintain production. Where funds have
been borrowed specifically to finance a project, the amount of interest capitalised represents the actual borrowing
costs incurred. Mine development costs include acquired proved and probable Mineral Resourc es at cost at
acquisition date.
Depreciation, depletion and amortisation of mine development costs are computed by the units-of-production method
based on estimated proved and probable mineral reserves. Proved and probable mineral reserves reflect estimated
quantities of economically recoverable reserves which can be recovered in the future from known mineral deposits.
These reserves are amortised from the date on which commercial production begins.
Stripping costs incurred in open-pit operations during the production phase to remove additional waste are charged to
operating costs on the basis of the average life of mine stripping ratio and the average life of mine costs per tonne.
The average stripping ratio is calculated as the number of tonnes of waste material expected to be removed during
the life of mine per tonne of ore mined. The average life of mine cost per tonne is calculated as the total expected
costs to be incurred to mine the orebody, divided by the number of tonnes expected to be mined. The average life of
mine stripping ratio and the average life of mine cost per tonne are recalculated annually in the light of additional
knowledge and changes in estimates.
The cost of the “excess stripping” is capitalised as mine development costs when the actual mining costs exceed the
sum of the adjusted tonnes mined, being the actual ore tonnes plus the product of the actual ore tonnes multiplied by
the average life of mine stripping ratio multiplied by the life of mine cost per tonne. When the actual mining costs are
below the sum of the adjusted tonnes mined, being the actual ore tonnes plus the product of the actual ore tonne
multiplied by the average life of mine stripping ratio, multiplied by the life of mine cost per tonnes, previously
capitalised costs are expensed to increase the cost up to the average.
The cost of stripping in any period will be reflective of the average stripping rates for the orebody as a whole. Changes
in the life of mine stripping ratio are accounted for prospectively as a change in estimate.
F-138
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.4Summary of significant accounting policies (continued)
Mine infrastructure
Mine plant facilities, including decommissioning assets, are amortised using the lesser of their useful life or units-of-
production method based on estimated proved and probable mineral reserves. Other property, plant and equipment
comprising vehicles and computer equipment are depreciated by the straight-line method over their estimated useful
lives.
Exploration and Evaluation assets
All exploration costs are expensed until the directors conclude that a future economic benefit is more likely than not of
being realised. In evaluating if expenditures meet this criterion to be capitalised, the directors utilise several different
sources of information depending on the level of exploration. While the criteria for concluding that expenditure should
be capitalised is always probable, the information that the directors use to make that determination depends on the
level of exploration.
(a) Costs on greenfields sites, being those where the company does not have any mineral deposits which are
already being mined or developed, is expensed as incurred until the directors are able to demonstrate that
future economic benefits are probable, which generally will be the establishment of proved and probable
reserves at this location.
(b) Costs on brownfields sites, being those adjacent to mineral deposits which are already being mined or
developed, is expensed as incurred until the directors are able to demonstrate that future economic benefits
are probable, which generally will be the establishment of increased proved and probable reserves after which
the expenditure is capitalised as a mine development cost.
(c)Costs relating to extensions of mineral deposits, which are already being mined or developed, including
expenditure on the definition of mineralisation of such mineral deposits, is capitalised as a mine development
cost.
Costs relating to property acquisitions are capitalised within mine development costs.
Impairment of assets
Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for
impairment and whenever events or changes in circumstance indicate that the carrying amount may not be
recoverable. Assets that are subject to amortisation are tested for impairment whenever events or changes in
circumstance indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value, less costs to sell and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash flows.
Impairment calculation assumptions include life of mine plans based on published reserves and reso urces,
management’s estimate of the future gold price, based on current market price trends, foreign exchange rates, and a
pre-tax discount rate adjusted for country and project risk. It is therefore reasonably possible that changes could occur
which may affect the recoverability of property, plant and equipment and intangible assets.
F-139
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.4Summary of significant accounting policies (continued)
Borrowing costs
Interest on borrowings relating to the financing of major capital projects under construction is capitalised during the
construction phase as part of the cost of the project. Such borrowing costs are capitalised over the period during
which the asset is being acquired or constructed and borrowings have been incurred. Capitalisation ceases when
construction is interrupted for an extended period or when the asset is substantially complete. Other borrowing costs
are expensed as incurred.
Leased assets
Operating lease rentals are charged against operating profits on a straight line basis unless another systematic
manner related to the period the assets concerned will be used is more representative of the time pattern of the
benefit.
Exploration and research expenditure
Pre – licence costs are recognised in profit or loss as incurred. Exploration and research expenditure is expensed in
the year in which it is incurred. These expenses include: geological and geographical costs, labour, mineral resources
and exploratory drilling.
Inventories
Inventories are valued at the lower of cost and net realisable value after appropriate allowances for redundant and
slow moving items. Cost is determined on the following bases:
•
gold in process is valued at the average total production cost at the relevant stage of production;
•
gold on hand is valued on an average total production cost method;
•
ore stockpiles are valued at the average moving cost of mining and stockpiling the ore. Stockpiles are allocated
as a non-current asset where the stockpile exceeds current processing capacity;
•
by-products are valued on an average total production cost method.
•
consumable stores are valued at average cost.
A portion of the related depreciation, depletion and amortisation charge is included in the cost of inventory.
Provisions
Provisions are recognised when the company has a present obligation, whether legal or constructive, as a result of a
past event for which it is probable that an outflow of resources embodying economic benefits will be required to settle
the obligation and a reliable estimate can be made of the amount of the obligation.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the
present obligation at the balance sheet date. The discount rate used to determine the present value reflects current
market assessments of the time value of money and the risks specific to the liability.
Employeebenefits
Short-term employee benefits
The cost of all short-term employee benefits is recognised during the period in which the employee renders the related
service.
The provisions for employee entitlements to wages, salaries, and annual leave represent the amount which the
company has a present obligation to pay as a result of employees’ services provided to the balance sheet date. The
provisions have been calculated at undiscounted amounts based on current wage and salary rates.
F-140
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.4Summary of significant accounting policies (continued)
Long-term employee benefits
A long-term provision for the long-service obligation costs to qualifying employees at the end of their contracts
represents the present value of the estimated future cash outflows resulting from employees’ services provided.
In determining this liability for employee benefits, consideration has been given to future increases in wage and salary
rates, and the company’s expected staff turnover.
Liabilities for employee benefits which are not expected to be settled within 12 months are discounted at a pre-tax rate
that reflects current market assessments of the time value of money.
The company and all employees contribute towards the Malian State social security fund. Accordingly, on retirement,
the Malian employees are entitled to a retirement benefit from the Malian State. Expatriate employees are reimbursed
their contributions made to the social security fund.
Environmental rehabilitation expenditure
Long-term environmental rehabilitation obligations comprising decommissioning and restoration are based on the
company's environmental management plans, in compliance with the current environmental and regulatory
requirements.
Decommissioning costs
The provision for decommissioning represents the cost that will arise from rectifying damage caused before
production commenced. Accordingly an asset is recognised and included within mine infrastructure.
Decommissioning costs are provided for at the present value of the expenditures expected to settle the obligation,
using estimated cash flows based on current prices. The unwinding of the decommissioning obligation is included in
the income statement. The estimated future costs of decommissioning obligations are regularly reviewed and adjusted
as appropriate for ne w circumstances or changes in law or technology. Changes in estimates are capitalised or
reversed against the relevant asset. The estimates are discounted at a pre-tax rate that reflects current market
assessments of the time value of money.
Gains or losses, from the expected disposal of assets are not taken into account when determining the provision.
Restoration costs
The provision for restoration represents the cost of restoring site damage after the commencement of production.
Increases in the provision are charged to the income statement as a cost of production.
Gross restoration costs are estimated at the present value of the expenditures expected to settle the obligation, using
estimated cash flows based on current prices. The estimates are discounted at a pre-tax rate that reflects current
market assessments of the time value of money and risks specific to the liability.
Revenue recognition
Revenue is recognised at the fair value of the consideration received or receivable to the extent that it is probable that
the economic benefits will flow to the company and the revenue can be reliably measured. The following criteria must
also be present:
•
the sale of mining products is recognised when the significant risks and rewards of ownership of the products are
transferred to the buyer;
•
interest is recognised on a time proportion basis, taking account of the principal outstanding and the effective
rate over the period to maturity, when it is determined that such income will accrue to the company; and
•
where a by-product is not regarded as significant, revenue is credited against cost of sales, when the significant
risks and rewards of ownership of the products are transferred to the buyer.
F-141
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.4Summary of significant accounting policies (continued)
Income Tax
Deferred taxation is provided on all qualifying temporary differences at the balance sheet date between the tax bases
of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax assets are only recognised to the extent that it is probable that the deductible temporary differences will
reverse in the foreseeable future and future taxable profit will be available against which the temporary difference can
be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is
no longer probable that sufficient future taxable profit will be available to allow all or part of the deferred tax asset to
be utilised.
A deferred tax liability is recognised for all taxable temporary differences if it is probable that the temporary difference
will reverse in the foreseeable future.
Deferred tax assets and liabilities are measured at future anticipated tax rates, which have been enacted or
substantively enacted at the balance sheet date.
Current and deferred tax is recognised as income or expense and included in the profit or loss for the period, except
to the extent that the tax arises from a transaction or event which is recognised, in the same or a different period
directly in equity; or a business combination that is an acquisition.
Current taxation is measured on taxable income at the applicable statutory rate.
Special items
Items of income and expense that are material and require separate disclosure, in accordance with IAS 1.86, are
classified as “special items” on the face of the income statement. Special items that relate to the underlying
performance of the business are classified as “operating special items” and include impairment charges and reversals.
Special items that do not relate to underlying business performance are classified as “non-operating special itemsR 21;
and are presented below “Operating (loss) profit” on the income statement.
Dividend distribution
Dividend distribution to the company’s shareholders is recognised as a liability in the company’s financial statements
in the period in which the dividends are declared by the board of directors of Société d’Exploitation des Mines d’Or de
Sadiola S.A..
Financial instruments
Financial instruments recognised in the balance sheet include trade and other receivables, cash and cash equivalents
and trade and other payables.
Financial instruments are initially measured at fair value when the company becomes a party to their contractual
arrangements. Transaction costs are included in the initial measurement of financial instruments. The subsequent
measurement of financial instruments is dealt with below.
A financial asset is derecognised when the right to receive cash flows from the asset has expired or the company has
transferred its rights to receive cash and either (a) has transferred substantially all the risks and rewards of the asset,
or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred
control of the assets.
A financial liability is derecognised wh en the obligation under the liability is discharged or cancelled or expires.
F-142
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.4Summary of significant accounting policies (continued)
Financial instruments (continued)
On derecognition of a financial asset, the difference between the proceeds received or receivable and the carrying
amount of the asset is included in income.
On derecognition of a financial liability, the difference between the carrying amount of the liability extinguished or
transferred to another party and the amount paid is included in income.
Regular way purchases and sales of all financial assets and liabilities are accounted for at settlement date.
Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method, less accumulated impairment. Impairment of trade and other receivables is established
when there is objective evidence as a result of a loss event that the company will not be able to collect all amounts
due according to the original terms of the receivables. The amount of the impairment is the difference between the
asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective
interest rate. The impairment is recognised in the income statement.
Cash and cash equivalents
Cash and cash equivalents are defined as cash on hand, demand deposits and short-term, highly liquid investments
readily convertible to known amounts of cash and subject to insignificant risk of changes in value and are
subsequently measured at cost which is deemed to be fair value as they have a short-term maturity.
Cash which is subject to legal or contractual restrictions on use is classified separately.
Financial liabilities
Financial liabilities are subsequently measured at amortised cost, using the effective interest rate method.
F-143
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2006
2005
2004
US$
3
Revenue
Product sales
300,727,005 198,138,374
187,577,578
4
Operating profit
Operating profit is arrived at after taking account of:
Royalties
18,027,171
11,874,900
11,172,594
Amortisation of property, plant and equipment (note 7)
34,039,909
29,661,072
25,563,636
Auditors' remuneration
– Statutory audit fees
31,981
77,853
119,948
– External audit - audit fees
404,681
32,013
67,207
– External audit - disbursements
-
-
3,800
Contributions to Malian State social security fund
3,650,222
2,726,692
2,778,639
Exploration and evaluation expenditure
553,347
971,110
226,277
Realised fair value loss on derivatives
-
-
1,102,500
Reversal of unrealised fair value gain on derivatives
-
-
(1,415,000)
Legal fees
65,201
45,636
38,652
Ore stockpile valuation adjustment
-
-
5,617,704
Provision for obsolete and slow-moving consumable stores
432,263
358,681
1,038,105
Remuneration other than to employees
– management fees
3,007,271
1,981,333
1,864,751
Salaries, wages and benefits
14,900,568
15,164,324
16,612,686
Mining contractor fees
29,057,225
24,706,278
24,818,526
Operating leases
26,214,997
19,054,434
3,261,930
5
Special impairments of indirect taxes receivable and special
expenses for indirect taxes payable
Impairment of advance on tax dispute (note 5.1)
-
5,184,786
-
Impairment of VAT refundable by Government of Mali (note 5.2)
-
1,947,000
-
2003/2004 tax audit (note 5.3)
4,136,344
1,434,617
-
Impairment of stamp duties refundable by Government of Mali
-
564,264
-
4,136,344
9,130,667
-
5.1 Impairment of advance on tax dispute
During November 2003, the Malian StateGovernment of Mali performed a tax audit of the corporate taxation and various indirect
taxes at the company for fiscal years 2000 to 2002. The
results of the audit indicated that the company owed the Malian State
Government of Mali F CFA 7.9 billion (US$16.4 million as of
December 31, December 2004) of various taxes and penalties, which
was communicated by way of a formal letter of
assessment to the company. According to Malian StateGovernment of Mali officials
the main reasons for the additional taxes are:
• were:
º
withholding taxes payable;
•
º
fringe benefits on certain facilities provided to expatriate employees that should have been taxed differently;
•
º
the application of the incorrect depreciation rates to certain mining assets; and
•
º
different interpretations of the law with respect to VAT payable on interest paid.
Apart from a possible tax exposure of US$470,000, management do not concur with the reasons for the
additional tax payable, as they believe that their own interpretationThe company was of the opinion that the tax filings and indirect tax submissions by the Company were in compliance
with applicable laws and regulations is more
appropriate. The Malian State had performed tax audits at the company in the past and had not reported on these
issues previously.regulations.
Towards the end of the 2003 financial year the Malian StateGovernment of Mali proposed that the company and the Malian StateGovernment of
Mali settle their differences in opinion on the tax audit findings by way of the companyCompany paying F CFA2.5CFA 2.5 billion
(US$ (US$5.2 million as
of December 31, December 2004) to the Malian State.Government of Mali. In January 2004, the Malian StateGovernment of Mali threatened to
close down
the operations of the company if the taxes were not paid and, as a result the Malian StateGovernment of Mali requested
that an
advance of F CFA2.5CFA 2.5 billion (US$5.2 million as of December 31, December 2004) be made to them in order for the
company to
continue operations. The agreement with the Malian StateGovernment of Mali was that this advance was not an acknowledgement
acknowledgement of any taxes payable and that the advance would allow the company and the Malian StateGovernment of Mali time
to resolve their
differences in tax interpretations,interpretation, or to allow the companyCompany the right to arbitration. No cash payment
was made as a
transfer was made from the current account held with the Malian State.Government of Mali. Numerous attempts to
resolve the
dispute between the Malian StateGovernment of Mali and the company between January and June 2004 failed. The
US$5.2 million is included in trade and other receivables.
In the second part of 2004, a new Minister of Finance (MOF) was appointed, with whom a meeting was held to try
and resolve the dispute. Minutes of the meeting, signed by both parties, indicate that the MOF is essentially in
agreement with the view of the company. Although the MOF in essence agreed with the company's view of the
tax matter, a follow up meeting with the tax authorities and the company on 8 to 10 December 2004 did not
resolve the dispute.
The minutes of the second meeting, however, did indicate that the tax authorities have reduced their assessment
to F CFA2.1 billion (US$4.4 million) in principal, or F CFA3.7 billion (US$7.7 million as of 31 December 2004)
after penalties compared to their original assessment of F CFA 7.9 billion (US$14.2 million as of
31 December 2004).
Subsequent to the year end, discussions with the tax authorities and the MOF have been ongoing. Management
is confident that this matter will be resolved in the company's favour in the next few months. Management's best
estimate of the company's exposure with respect to the taxes dispute, is US$470 000. Accordingly, a provision for
this amount was raised at 31 December 2004 and is included in trade and other payables. Should the matter not
be resolved, management do have the right to enter into arbitration.
6.2
Stamp duties refundable by the Malian State
During 2002, a dispute arose between the company and the Malian State with regards to the payment of stamp
duties on gold exports due to different interpretations of the Convention Agreement and the Mining Code. In
order to ensure the continuation of gold exports, the company started to pay stamp duties raising an amount
receivable from the Malian State.
The company entered into arbitration to resolve the dispute. The Tribunal decision was announced in February
2003, indicating that the company would no longer be obliged to pay stamp duties and that stamp duties to the
value of F CFA2.2 billion would be reimbursed to the company.
During the 2003 and 2004 financial years, management has communicated with the Minister of Finance (MOF),
Minister of Domains (MOD) and the Minister of Mines (MOM) several times in an effort to recover the outstanding
stamp duties. However, at the end of December 2004, the amount of US$4.5 million (2003: US$4.2 million) was
still outstanding and is reflected in trade and other receivables. The difference is as a result of exchange gains
on translation.
The MOD represented the Malian State during the arbitration proceedings. In order for the MOF to be able to
settle with the company the outstanding stamp duties, the MOD is required to officially write a letter to the MOF
advising him that the Malian State lost the arbitration case. This letter has now been written and the MOF has
confirmed to management of the company that he is in receipt of the letter and will settle the long outstanding
stamp duty before 30 June 2005.
F-111F-144
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
As of and forFor the years ended December 31, December 20032004, 2005 and 20042006
2004
2003
US$
7
Cash and cash equivalents
HypoVereinsbank balances
- Short term fixed deposits
- 15,000,000
- Current account
6,949,451 3,978,137
Malian bank balances
3,123,730 242,792
London and South African bank balances
2,622,570 11,258,655
Petty cash
44,009 32,569
12,739,760 30,512,153
8
Provisions
8.1
Environmental rehabilitation obligations
Provision for decommissioning
Balance at beginning of year
1,382,627 1,303,249
ChangeWithout admitting that the company filings have been prepared in estimates
- 26,200
Unwinding of decommissioning obligation
55,305 53,178
Balance at end of year
1,437,932 1,382,627
Provision for restoration
Balance at beginning of year
3,155,393 2,102,064
Unwinding of restoration obligation
77,633
61,698
Charge to income statement
1,130,731 991,631
Balance at end of year
4,363,757 3,155,393
8.2 Employee
retrenchment
obligation
Balance at beginning of year
1,417,641 944,406
Unwinding of employee retrenchment obligation
34,879 27,720
Charge to income statement
508,009 445,515
Balance at end of year
1,960,529 1,417,641
Total
provisions
7,762,218 5,955,661
Assumptions applicable to all provisions
Estimated gross future environmental rehabilitation costs
US$8.6 million
US$8.7 million
Estimated gross future employee retrenchment costs
US$3.4 million
US$2.6 million
Discount rate
4% 4%
Inflation rate
2% 2%
Average discount period from the beginningan incorrect manner in terms of the life of mine
13 years
13 years
The average discount period is basedprevailing laws
and regulations, the directors decided that the advance should be abandoned in order to close this issue and allow
management to concentrate on the current estimatecompany’s core business. Accordingly, the abandonment was recorded as an
special item rather than as an under provision of prior year taxation. Abandonment of this amount enabled the
company to reach an agreement with the lifeGovernment of mine,Mali on all corporate taxation issues which is subjectwere in dispute
and to revisionestablish a protocol for the indirect taxes that were in the
2005 financial year. The estimated gross future costs are based on management's best estimates at 31
December 2004, and are also subject to revision indispute for the 2005 financial year.
8.3
Malian State social security fundfuture.
The company and all employees contribute to towards the Malian State social security fund. Accordingly, on
retirement, the Malian employees are entitled to a retirement benefit from the Malian State. Expatriate employees
are reimbursed only their contributions made to the social security fund. The company's contributions to the
Malian State social security fund are disclosed in note 2.
F-112
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
As of and for the years ended 31 December 2003 and 2004
2004 20035.2
US$Impairment of VAT refundable by Government of Mali
9
Deferred taxationThe gross amount of VAT refundable by the Government of Mali amounted to US$29.2 million at December 31, 2005.
Management estimated that only US$27.3 million was recoverable based on previous VAT audits performed by the
authorities. Accordingly, an impairment of VAT refundable of US$1.9 million was made. Management estimates that
the gross amount of VAT refundable by the Government of Mali at December 31, 2006 is recoverable, accordingly no
impairment was made in 2006.
The deferred taxation (liability)/asset5.3
Payment relating to temporary differences
is made up as follows:
- Mining assets
(5,247,138)
(1,018,172)
- Non-current provisions
2,716,776 2,084,481
- Derivatives
- 495,250
- Inventory
815,565 452,228
- Other
193,169 168,377
(1,521,628) 2,182,1642003/2004 tax audit
The movement onDuring the deferred2005 financial year a tax (liability)/asset is as follows:
Balance at beginningassessment was received for corporate tax and various indirect taxes by
Government of year
2,182,164 1,352,393
Deferred tax expense/(income) (note 3)
(3,703,792) 829,771
Balance at end of year
(1,521,628) 2,182,164
10
Trade and other payables
Related party payables
– AngloGold Services Limited
179,842 155,891
– AngloGold Services Mali S.A.
535,767 1,384,276
– Société d’Exploitation des Mines d’Or de Yatela S.A.
94,525 348,469
– Société des Mines d’Or de Morila S.A.
85,783 66,671
– Other
39,924 131,784
935,841 2,087,091
Accruals
11,569,571 11,983,831
Trade and other payables
5,468,040
5, 8,019,662
17,973,452
22,090,584
11
Dividends paid
Amount outstanding at beginning of year
11,000,000 22,000,000
Dividends declared during the year
45,000,000 30,000,000
Less: amount outstanding at end of year
(10,802,000)
(11,000,000)
Dividends paid
45,198,000 41,000,000
F-113
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
As of andauthorities for the years ended 31 December 2003 and 2004
2004 2003
US$
12
Cash generated from operations
Profit before taxation
43,390,664 41,844,716
Adjusted for:
Non-cash movements
- provision for obsolete and slow-moving consumable stores
1,038,105 1,292,080
- net foreign exchange gains
(636,876)
(3,298,374)
- ore stockpile valuation adjustment
5,617,704
-
- unwinding of non-current provisions
167,817 142,596
- environmental decommissioning and restoration charge fiscal years. Management objected to the assessment as it did
income statement
1,130,731 1,017,831
- employee retrenchment obligation chargednot reflect the protocol agreement reached between the company and the Government of Mali with regard to the income statement
508,009 445,515
Reversaltax
audit of unrealised fair value (gain)/loss the Company for fiscal years 2000 to 2002 (note 5.1). As discussed in note 5.1 the Government of Mali
required an advance be made which the Company refused. Without admitting guilt the Company decided to pay the
Government of Mali an amount agreed by both parties. The Company and the Government of Mali reached settlement
on derivatives
(1,415,000) 713,158
Amortisationthe disputes relating to the 2003 and 2004 fiscal year tax assessments in 2006. The additional settlement of mining assets
25,563,636 27,808,561
Interest income
(363,185)
(348,543)
Movements in working capital
(15,585,162) 11,061,893
59,416,443 80,679,433
Movements in working capital$4.1
(Increase)/decrease in inventories
(2,862,544) 1,113,764
Increase in trade and other receivables
(9,242,362)
(5,914,831)
(Decrease)/increase in trade and other payables
(3,480,256) 15,862,960
(15,585,162) 11,061,893
13
Income tax paid
Amount payable/(receivable) at beginningmillion has been recorded as an special payment of year
4,182,320
(4,780,739)
Current tax expense (note 3)
8,092,583 11,353,204
Amount receivable/(payable) at end of year
802,383
(4,182,320)
Income tax paid
13,077,286 2,390,145
14
Ordinary stockindirect taxes.
Authorised and issued: ordinary par value
stock with a nominal value of2006
2005
2004
US$
6
Taxation
F CFA 109 000 (US$200) each.All pre-tax income and income tax expense is related to operations in Mali
Current tax expense (note 15)
44,327,378
13,364,869
8,092,583
Deferred tax expense (note 12)
(3,402,067)
4,306,792
3,703,792
40,925,311
17,671,661
11,796,375
A reconciliation of the statutory tax rate to that charged in the income statement is set out in the following table:
%
%
%
Held by:
Number of stock
AngloGold Holdings Plc (part of the AngloGold
Ashanti Limited group)
38,000
7,600,000
7,600,000
AGEM Limited (part of the IAMGOLD
Corporation group)
38,000
7,600,000
7,600,000
Government of Mali
200
18,0003
3,600,000
3,600,000
International Finance Corporation
6,000
1,200,000
1,200,0003
100,000
1 000
16
16
5.
Shareholder’s loan
2006
$’000
2005
$’000
Government of Mali
3 689
3 525
3 689
3 525
Made up of:
Principal
2 622
2 622
Deferred interest
1 067
903
3 689
3 525
The shareholder loan is denominated in US dollars and interest accrues at a LIBOR dollar rate plus 2% per annum
and has no fixed terms of repayment. The weighted average interest rate as at December 31, 2006 on the
shareholders’ subordinated loans was 6.2% (December 31, 2005: 5.29%).
6.
Environmental rehabilitation provision
2006
$’000
2005
$’000
Opening balance
9 889
9 252
Accretion expense
593
637
Change in estimate
(470)
-
10 012
9 889
F-113
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
6.
Environmental rehabilitation provision (continued)
The provisions for close down and restoration costs include estimates for the effect of future inflation and have been
discounted to their present value at 6% per annum, being an estimate of the risk free pre-tax, cost of borrowing.
While the ultimate amount of rehabilitation costs to be incurred in the future is uncertain, the Company has estimated
that the remaining costs for Morila, in current monetary terms, will be $13.2 million (December 31, 2005:
$12.2 million), the majority of which will only be expended at the end of the mine life.
Although limited environmental rehabilitation regulations currently exist in Mali to govern the mines, management has
based the environmental rehabilitation provision using the standards as set by the World Bank which require an
environmental management plan, an annual environmental report, a closure plan, an up-to-date register of plans of
the facility, preservation of public safety on closure, carrying out rehabilitation works and ensuring sufficient funds
exist for the closure works. However, it is reasonably possible that the Company’s estimate of its ultimate
rehabilitation liabilities could change as a result of changes in regulations or cost estimates.
The Company is committed to rehabilitation of its properties and to ensure that it is adequately provided to do so it
makes use of independent environmental consultants to advise it. It also uses past experience in similar situations to
ensure that the provisions for rehabilitation are adequate.
While the ultimate closure costs may be uncertain, there are no uncertainties with respect to joint and several liability
that may affect the magnitude of the contingency as these are clearly defined in the Company’s mining convention.
There are no other potentially responsible parties to consider for cost sharing arrangements.
The Company carries insurance against pollution including cost of cleanup. At present, there are no losses and or
claims outstanding.
7.
Interest Bearing Borrowings
2006
$’000
2005
$’000
a) Rolls Royce finance lease
9 569
11 980
b) Air Liquide finance lease
1 795
2 210
11 364
14 190
Less: Current portion of long term liabilities:
a) Rolls Royce finance lease
2 593
2 633
b) Air Liquide finance lease
428
415
3 021
3 048
8 343
11 142
a)
Rolls Royce finance lease
This lease relates to five generators leased from Rolls Royce. The lease is repayable over ten years
commencing April 1, 2001 and bears interest at a variable rate which as at December 31, 2006 was
approximately 21% (2005: 20%) per annum. The lease is collateralized by plant and equipment whose net
book value at December 31, 2006 amounted to $10.3 million (2005: $12.1 million). Average lease payment of
$3.8 million are payable in instalments over the term of the lease. Randgold Resources Limited guaranteed the
repayment of the lease.
F-114
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
7.
Interest Bearing Borrowings (continued)
b)
Air Liquide finance lease
The Air Liquide finance lease relates to three oxygen generating units leased from Air Liquide. The lease is
payable over 10 years commencing December 1, 2000 and bears interest at a variable rate which as at
December 31, 2006 was approximately 3.09% (2005: 3.09%) per annum. The lease is collateralized by the
production units whose net book value at December 31, 2006 amounted to $1.6 million (2005: $1.9 million).
Finance lease liabilities – minimum lease payments:
2006
$’000
2005
$’000
Not later than 1 year
4 939
5 349
Later than 1 year and not later than 5 years
12 315
16 017
Later than 5 years
-
834
17 254
22 200
Future finance costs of finance leases
(5 890)
(8 010)
Present value of finance lease liabilities
11 364
14 190
The present value of the finance lease liabilities is as follows:
Not later than 1 year
3 021
3 048
Later than 1 year and not later than 5 years
8 343
10 556
Later than 5 years
-
586
11 364
14 190
8.
Deferred taxation
Deferred tax is calculated in full on temporary differences under the liability method using a principal tax rate of
35% (2005: 35%).
The movement on deferred taxation is a follows:
2006
$’000
2005
$’000
(Restated)
At beginning of the year
(7 551)
-
Income statement charge
1 290
(7 551)
At end of year
(6 261)
(7 551)
Deferred taxation assets and liabilities comprise of the following
Decelerated tax depreciation
1 154
-
Deferred taxation liability
1 154
-
Ore stockpiles and gold-in-process
7 415
7 503
Decelerated tax depreciation
-
48
Deferred taxation asset
7 415
7 551
Net deferred taxation asset
6 261
7 551
F-115
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
9.
Mining assets
2006
$’000
2005
$’000
Opening carrying amount
101 580
117 754
Additions
2 900
4 358
Revision in estimate of rehabilitation costs
(470)
-
Depreciation
(15 583)
(20 532)
Closing carrying amount
88 427
101 580
Cost
200 975
198 545
Accumulated depreciation
(112 548)
(96 965)
Carrying amount
88 427
101 580
Long-lived assets
Long-lived assets are those assets which are amortized over the life of the mine and are comprised of the
metallurgical plant, tailings and raw water dams, power plant and mine infrastructure. The net book value of these
assets was $83 million as at December 31, 2006 (2005: $97.8 million).
Short-lived assets
Short-lived assets are those assets which are amortized over their useful life but limited to the life of the mine and are
comprised of motor vehicles and other equipment. The net book value of these assets was $3.6 million as at
December 31, 2006 (2005: $3.8 million).
10.
Inventories
2006
$’000
2005
$’000
(Restated)
Consumables stores
22 365
24 145
Gold in process
2 073
2 154
Short-term portion of ore stockpiles
18 008
32 440
42 446
58 739
Provision for obsolescence
(3 066)
(2 004)
39 380
56 735
Long-term portion of ore stockpiles
95 609
48 814
134 989
105 549
Ore stockpiles have been split between long and short-term based on the current life of mine plan estimates.
F-116
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
11.
Accounts receivable
2006
$’000
2005
$’000
Related party receivables
-
AngloGold Ashanti Limited
93
-
-
AngloGold Services Mali S.A.
8
-
-
Societe d’ Exploitation des Mines d’Or de Sadiola S.A.
1
-
- Societe des Mines de Loulo S.A.
96
-
-
AngloGold Mines de Siguiri Guinea
44
-
- Geita Gold Mining
1
-
Gold sales trade receivable
9 993
8 991
Value added tax receivable
26 487
24 763
Fuel duties receivable
14 005
17 206
MDM receivable
2 522
2 522
Other
3 459
2 047
56 709
55 529
Impairment provision
(6 727)
(5 590)
49 982
49 939
Less non – current portion
(12 422)
-
Current accounts receivable
37 560
49 939
12.
Accounts payable
2006
$’000
2005
$’000
Related party payables
-
AngloGold Ashanti Limited
543
-
-
AngloGold Services Mali S.A.
332
-
-
Societe d’Exploitation des Mines d’Or de Sadiola S.A.
149
-
Trade creditors
3 334
4 968
Payroll cost accruals
1 308
679
Indirect taxes payable
1 722
7 818
Accruals
9 670
8 695
17 058
22 160
13.
Revenue
2006
$’000
2005
$’000
2004
$’000
Gold sales
313 866
295 196
189 287
Silver sales
1 012
713
453
314 878
295 909
189 740
F-117
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
14.
Operating profit
2006
$’000
2005
$’000
2004
$’000
Profit before tax is arrived at after taking into account the following:
Depreciation
15 583
20 532
18 753
Auditor’s remuneration
-
audit fees
141
111
108
Impairment on accounts receivable
1 137
4 030
1 560
Forex differences - net
(2 124)
1 483
547
Inventory obsolescence provision
1 062
2 004
-
Exploration Expense
6 606
1 105
1 425
Royalties
18 856
15 529
11 584
Related party management fee (note 21)
3 149
2 605
2 045
15.
Taxation
Major items causing the Company’s actual income tax charge to differ from estimates at the standard charge of 35%
of taxable income are as follows:
2006
$’000
2005
$’000
(Restated)
2004
$’000
(Restated)
Current taxation
56 427
7 818
-
Deferred taxation (note 8)
1 290
(7 551)
-
57 717
267
-
The tax on the Company’s profit before tax differs from the
theoretical amount that would arise using the statutory tax
rate as follows:
Profit before tax
157 956
132 068
49 211
Tax calculated at tax rate of 35%
55 285
46 224
17 224
Expenses not deductible for tax purposes
- Provisions/allowances
2 708
2 526
-
- Other Permanent Differences
(276)
-
-
Tax holiday permanent differences
-
(48 483)
(17 224)
Taxation charge
57 717
267
-
The Company benefited from a five year tax holiday in Mali which expired on November 14, 2005. The benefit of the tax
holiday to the Company was to increase its net income by $38.7 million and $17.2 million, due to not recording a tax
expense for the taxable income generated by the Morila mine for the years ended December 31, 2005 and 2004,
respectively. Under Malian tax law upon expiration of the tax holiday, the Company’s income tax expense will be based
on the greater of 35 per cent of taxable income or 0.75 per cent of gross revenue.
The Morila operations have no assessable capital expenditure carry forwards or assessable tax losses, as at
December 31, 2006, 2005 and 2004 respectively, for deduction against future mining income.
F-118
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
16.
Notes to the cash flow statement
2006
$’000
2005
$’000
(Restated)
2004
$’000
(Restated)
16.1 Cash generated by operating activities before
changes in working capital
Profit after taxation
100 239
131 801
49 211
Adjustments:
-
Tax expense
57 717
267
-
-
net finance charges
2 495
2 739
4 160
-
depreciation
15 583
20 532
18 753
-
unrealized movements of financial instruments
-
-
2 865
-
TSF gold in process provision
-
-
4 167
-
provision for bad debt
1 137
4 030
1 560
-
Accretion expense on environmental
rehabilitation provision
593
637
443
-
other non cash movements
-
-
(1 363)
177 764
160 006
79 796
16.2 Cash utilized by changes in working capital
-
Increase in accounts receivable
(21 680)
(9 967)
(29 467)
-
Increase in inventories
(29 441)
(46 910)
(20 640)
-
(Decrease)/increase in accounts payable
(5 103)
(759)
4 887
(56 224)
(57 636)
(45 220)
16.3 Taxation paid
-
Balance at beginning of year
6 844
-
-
-
Charge to income statement
57 717
267
-
-
Offsets against indirect tax receivables
(21 877)
-
-
-
Movement in deferred taxation
(1 290)
7 551
-
-
Balance at end of year
(4 434)
(6 844)
-
-
Tax paid
36 960
974
-
17.
Financial risk management
In the normal course of its operations, the Company is exposed to commodity price, currency, interest, liquidity and
credit risk. In order to manage these risks, the Company may enter into transactions which include mainly gold
forward and gold option contracts.
17.1 Concentration of credit risk
The Company’s financial instruments do not represent a concentration of credit risk because the Company
sells its gold to and deals with a variety of major financial institutions. Its receivables and loans are regularly
monitored and assessed and a provision for bad debts is maintained.
Gold bullion, the Company’s principal product, is produced in Mali. The gold produced is sold to a reputable
gold refinery. Because of the international market for gold the Company believes that no concentration of
credit risk exists with respect to the selected refinery to which the gold is sold.
Included in accounts receivable is $40.4 million (2005: $41.7 million) relating to indirect taxes owing to the
Company by the Government of Mali, which is denominated in Communauté Financière Africaine franc.
F-119
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
17.
Financial risk management (continued)
17.2 Foreign currency and commodity price risk
In the normal course of business, the Company enters into transactions denominated in USD. In addition, the
Company enters into transactions in a number of different currencies (primarily Communauté Financière
Africaine franc). As a result, the Company is subject to transaction exposure from fluctuations in foreign
currency exchange rates.
2006
$’000
2005
$’000
Cash and cash equivalents includes balances denominated in
- Communauté Financière Africaine franc (CFA)
788
(2 430)
Accounts receivable includes balances denominated in
- Communauté Financière Africaine franc (CFA)
39 989
40 948
Accounts payable includes balances denominated in
- Communauté Financière Africaine franc (CFA)
(8 046)
(7 477)
- South African Rand (ZAR)
(1 307)
(95)
- Pound Sterling (GBP)
(127)
(3)
- Euro (EUR)
(3 942)
(3 688)
- Australian Dollar (AUD)
(88)
-
- Canadian Dollar (CAD)
(1)
-
Generally the Company does not hedge its exposure to gold price fluctuation risk and sells at market spot
prices. These prices are in US dollars and do not expose the Company to any currency fluctuation risk.
However, in periods of capital expenditure or loan finance, the Company secures a floor price through simple
forward contracts and options whilst maintaining significant exposure to spot prices.
17.3 Interest rates and liquidity risk
Fluctuation in variable interest rates impact on the value of income receivable from short-term cash
investments and interest payment relating to financing activities (including long-term loans), giving rise to
interest rate risk.
In the ordinary course of business, the Company receives cash from its operations and is required to fund
working capital and capital expenditure requirements. This cash is managed to ensure surplus funds are
invested in a manner to achieve maximum returns while minimizing risks. The Company has been able to in
the past actively source financing through shareholders’ and third party loans.
F-120
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
18.
Fair value of financial instruments
The following table presents the carrying amounts and fair values of the Company's financial instruments outstanding
at December 31, 2006 and 2005. The fair value of a financial instrument is defined as the amount at which the
instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation
sale.
December 31, 2006
December 31, 2005
Carrying
amount
$’000
Fair
value
$’000
Carrying
amount
$’000
Fair
value
$’000
Financial assets
Cash and equivalents
4 428
4 428
3 904
3 904
Accounts receivable
49 982
49 982
49 939
49 939
Financial liabilities
Accounts payable
17 058
17 058
22 160
22 160
Long-term liabilities (excluding loans from shareholders)
8 343
8 343
11 142
11 142
Short term portion of long term liabilities
3 021
3 021
3 048
3 048
Estimation of fair values
Receivables, restricted cash, accounts payable and cash and equivalents
The carrying amounts are a reasonable estimate of the fair values because of the short maturity of such instruments.
Long term debt
The fair value of market-based floating rate long-term debt is estimated using the expected future payments
discounted at market interest rates.
Gold price contracts
The fair value of gold price forward and option contracts has been determined by reference to quoted market rates at
year-end balance sheet dates.
19.
Post retirement employees benefits
Retirement benefits for employees of the Company are provided by the Mali Government social security system to
which the Company and its employees contribute a fixed percentage of payroll costs each month. Fund contributions
by the Company for the years ended December 31, 2006, 2005 and 2004 amounted to $2.6 million, $2.5 million and
$2.7 million respectively.
20.
Commitments
Capital expenditure for mining assets
2006
$’000
2005
$’000
Contracts for capital expenditure
-
-
Authorized but not contracted for
141
1 280
141
1 280
Somadex mining contractor expenditure
2006
$’000
2005
$’000
Not later than 1 year
29 050
25 052
Later than 1 year and not later than 5 years
30 014
59 064
Later than 5 years
-
-
59 064
84 116
F-121
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
21.
Related party transactions
In terms of the Operator Agreement between Morila SA and AngloGold Services Mali SA, a management fee,
calculated as 1% of the total sales of Morila, is payable to AngloGold Service Mali SA quarterly in arrears. The
management fees for the year ended December 31, 2006 amounted to $3.2 million (2005: $2.9 million) (2004: $2.0
million).
Royalties are payable to the Government of Mali in the form of Ad Valorem taxes and CPS at a total rate of 6% of
total sales. The royalties for the year ended December 31, 2006 amounted to $18.9 million (2005: $15.5 million)
(2004: $11.5 million). Refer to the Value added tax receivable and Fuel duty receivable in note 11 to the financial
statements for the balances owed by the Government of Mali to the Company.
Notes 11 and 12 to the financial statements set out the other balances receivable and payable relating to fellow
subsidiaries.
Transactions between fellow subsidiaries can be set out as follows:
2006
$’000
2005
$’000
Sales/services to related parties
- AngloGold Ashanti Limited
92
645
- AngloGold Services Mali S.A.
63
380
- Societe d’ Exploitation des Mines d’Or de Sadiola S.A.
(2)
24
- YATELA SA
5
2
- Societe des Mines de Loulo S.A.
111
126
- AngloGold Mines de Siguiri Guinea
66
88
- Geita Gold Mining
1
-
Purchases from related parties
- AngloGold Ashanti Limited
(2 884)
(5 383)
- AngloGold Services Mali S.A.
(4 843)
(5 245)
- Societe d’Exploitation des Mines d’Or de Sadiola S.A.
(285)
(444)
- YATELA SA
(2)
(4)
- Randgold Resources Limited
(102)
(7)
Key management remuneration:
2006
$’000
2005
$’000
2004
$’000
Short-term employee benefits
1 090
866
749
Post-employment benefits
36
32
-
1 126
898
749
22.
Differences between IFRS and U.S. GAAP
The Company’s financial statements have been prepared in accordance with IFRS, which differs in certain respects
from U.S. GAAP. However, for the periods presented, there are no material measurement differences which would
impact the Company's balance sheet, net income or shareholders' equity under U.S GAAP, when compared to the
amounts reported under IFRS.
F-122
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
22.
Differences between IFRS and U.S. GAAP (continued)
Change in accounting policy
As discussed in note 2.5, on January 1, 2006, the Company adopted Emerging Issues Task Force Issue No. 04-06,
Accounting for Stripping Costs Incurred during Production in the Mining Industry (“EITF 04-06”). EITF 04-06
addresses the accounting for stripping costs incurred during the production phase of a mine and refers to these costs
as variable production costs that should be included as a component of inventory to be recognized in operating costs
in the same period as the revenue from the sale of inventory. As a result, capitalization of post-production stripping
costs is appropriate only to the extent product inventory exists at the end of a reporting period.
Previously, deferred stripping costs were charged to operating costs as gold was produced and sold using the units of
production method based on estimated recoverable quantities of proven and probable gold, using a stripping ratio
calculated as the ratio of total tons to be moved to total proven and probable ore reserves, which resulted in the
recognition of the costs of waste removal activities over the life of the mine as gold was produced. The application of
the deferred stripping accounting method previously generally resulted in the recognition of an asset (deferred
stripping costs).
In accordance with Issue No. 04-06, the Company elected to recognise this change in accounting by restatement of its
prior-period financial statements through retrospective application of this consensus. The Company has therefore
adjusted its net income and shareholders’ equity previously reported under U.S. GAAP as if the revised principles had
always been used, which is consistent with the disclosures under IFRS set forth in note 2.5.
Recent accounting pronouncements
The June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, ‘Accounting
for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109)’ (“FIN 48”). This Interpretation
clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in
accordance with FASB Statement No. 109, Accounting for Income Taxes. This interpretation prescribes a recognition
threshold and measurement attribute for the financials statements recognition and measurement of a tax position
taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods, disclosure, and transition. This statement is
effective for years beginning on or after 1 January 2007. The Company has eval uated the impact of adoption of FIN
48 on its financial statements as nil.
On September 15, 2006 the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value
Measurements” (“SFAS157”).
SFAS157 provides enhanced guidance for using fair value to measure assets and liabilities. Under SFAS157, fair
value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants in the market in which the reporting entity transacts. SFAS157 clarifies the principle that
fair value should be based on the assumptions market participants would use when pricing the asset or liability and
establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. SFAS157 also
requires that fair value measurements be separately disclosed by level within the fair value hierarchy. SFAS157 is
effective for financial statements issued for fisc al years beginning after November 15, 2007, and interim periods within
those fiscal years. The Company is currently reviewing the guidance issued in SFAS157 and has not yet determined
the impact of this on the financial statements.
On February 15, 2007 the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value
Option for Financial Assets and Financial Liabilities Including an amendment of FASB Statement No. 115”
(“SFAS159”).
SFAS159 permits entities to choose to measure many financial instruments and certain other items at fair value. The
objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported
earnings caused by measuring related assets and liabilities differently without having to apply complex hedge
accounting provisions. The fair value option permits all entities to choose to measure eligible items at fair value at
specified election dates. A business entity shall report unrealized gains and losses on items for which the fair value
option has been elected in earnings at each subsequent reporting date.
F-123
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2006
22.
Differences between IFRS and U.S. GAAP (continued)
SFAS159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early
adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the
entity also elects to apply the provisions of SFAS 157, “Fair Value Measurements”. The choice to adopt early must be
made within 120 days of the beginning of the fiscal year of adoption, provided the entity has not yet issued financial
statements, including required notes to those financial statements, for any interim period of the fiscal year of adoption.
SFAS159 permits application to eligible items existing at the effective date (or early adoption date). The Company is
currently reviewing the guidance issued in SFAS159 and has not yet determined the impact of this on the financial
statements.
F-124
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Financial statements
as of and for the year ended
December 31, 2006
F-125
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Financial statements and report of the Independent Registered Public Accounting Firm
For the year ended December 31, 2006
Report of independent registered public accounting firm
Income statements
Balance sheets
Statements of changes in stockholders’ equity
Cash flow statements
Notes to the financial statements
F-126
Report of the Independent Registered Public Accounting Firm
The board of directors and stockholders of Société d’Exploitation des Mines d’Or de Sadiola S.A.
We have audited the accompanying balance sheets of Société d’Exploitation des Mines d’Or de Sadiola S.A. as of
December 31, 2006 and 2005, and the related statements of income, changes in stockholders’ equity and cash flows for
each of the years in the three-year period ended December 31, 2006. These financial statements are the responsibility of
the company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of
Société d’Exploitation des Mines d’Or de Sadiola S.A. as of December 31, 2006 and 2005, and the results of its operations
and its cash flows for each of the years in the three-year period ended December 31, 2006, in conformity with International
Financial Reporting Standards.
International Financial Reporting Standards vary in certain significant respects from United States generally accepted
accounting principles. Information relat ing to the nature and effect of such differences, as of and for the years ended
December 31, 2006, 2005 and 2004, is presented in note 20 to the financial statements.
KPMG Inc.
Johannesburg, South Africa
June 25, 2007
F-127
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Income Statement
For the years ended December 31,
The accompanying notes are an integral part of these financial statements.
2006
2005
2004
Notes
US$
Revenue
3
300,727,005
198,138,374
187,577,578
Cost of sales
(167,004,820)
(148,428,779)
(143,237,187)
Gross profit
133,722,185
49,709,595
44,340,391
Exploration costs
(553,347)
(971,110)
(226,227)
Other operating expenses / (income)
692,296
410,115
(1,555,744)
Net foreign exchange gain / (loss)
1,208,733
(7,520,279)
636,876
Special impairments of indirect taxes receivable
and special expenses for indirect taxes payable
5
(4,136,344)
(9,130,667)
-
Operating profit
4
130,933,523
32,497,654
43,195,296
Interest income
1,004,863
341,515
363,185
Interest expense
(748,870)
(3,083,377)
(167,817)
Profit before taxation
131,189,516
29,755,792
43,390,664
Taxation
6
(40,925,311)
(17,671,661)
(11,796,375)
Profit for the year
90,264,205
12,084,131
31,594,289
F-128
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Balance Sheet
As at December 31,
2006
2005
Notes
US$
ASSETS
Non-current assets
Property, plant and equipment
7
112,447,354
131,872,377
Inventories
8
28,671,942
17,936,431
Trade and other receivables
9
28,335,326
14,551,010
169,454,622
164,359,818
Current assets
Inventories
8
55,843,871
43,387,635
Trade and other receivables
9
20,531,375
27,527,053
Cash and cash equivalents
10
28,818,654
12,185,406
105,193,900
83,100,094
Total assets
274,648,522
247,459,912
EQUITY AND LIABILITIES
Equity
Stockholders' equity
179,293,271
179,029,066
Non-current liabilities
Provisions
11
14,862,531
11,655,394
Deferred taxation
12
2,426,353
5,828,420
17,288,884
17,483,814
Current liabilities
Trade and other payables
13
22,022,889
22,845,390
Taxation
15
33,137,071
8,101,642
Dividends payable
14
22,906,407
20,000,000
20,000,000
78,066,367
50,947,032
Total liabilities
95,355,251
68,430,846
Total equity and liabilities
274,648,522
247,459,912
The accompanying notes are an integral part of these financial statements.
F-114
F-129
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Statement of changes in stockholders’ equity
For the years ended December 31,
Ordinary stock
(note 16)
Non-
distributable
reserve
Retained
earnings
Total
stockholders'
equity
Note
US$
Balance at December 31, 2003
20,000,000
4,000,000
196,350,646
220,350,646
Profit for the year
-
-
31,594,289
31,594,289
Dividends declared
14
-
-
(45,000,000)
(45,000,000)
Balance at December 31, 2004
20,000,000
4,000,000
182,944,935
206,944,935
Profit for the year
-
-
12,084,131
12,084,131
Dividends declared
14
-
-
(40,000,000)
(40,000,000)
Balance at December 31, 2005
20,000,000
4,000,000
155,029,066
179,029,066
Profit for the year
-
-
90,264,205
90,264,205
Dividends declared
14
-
-
(90,000,000)
(90,000,000)
Balance at December 31, 2006
20,000,000
4,000,000
155,293,271
179,293,271
The non-distributable reserve is a legal reserve created in 1997 and is a requirement of the commercial law of Mali.
This law prescribes the transfer of 10% of profits, restricted to a maximum of 20% of ordinary share capital, to a non-
distributable reserve. Such reserve only becomes distributable in the event the company is liquidated.
The accompanying notes are an integral part of these financial statements.
F-130
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Cash flow statements
For the years ended December 31,
2006
2005
2004
Notes
US$
Net cash provided by operating activities
Profit for the year
90,264,205
12,084,131
31,594,289
Adjusted for:
Non-cash movements
- taxation charge per income statement
40,925,311
17,671,661
11,796,375
- adjustment for obsolete and slow-moving consumable
stores
432,263
358,681
1,038,105
- net foreign exchange (gains) / losses
(1,208,733)
7,520,279
(636,876)
- present value adjustment of VAT taxes refundable
(81,012)
2,553,510
-
- present value adjustment on refundable tax on fuel
247,119
297,000
-
- ore stockpile valuation adjustment
-
-
5,617,704
- unwinding of non-current provisions
582,763
232,867
167,817
- environmental restoration charge to the income statement
67,261
2,397,330
1,130,731
- employee long service obligation charge to the income
statement
(1,737,418)
373,687
508,009
- reversal of unrealised fair value gain on derivatives
-
-
(1,415,000)
- amortisation of property, plant and equipment
34,039,909
29,661,072
25,563,636
Special impairments of indirect taxes refundable and special
provision for indirect taxes payable
4,136,344
9,130,667
-
Increase in non-current inventories
(10,735,511)
(7,122,597)
(3,201,209)
Increase in non-current VAT refundable
(13,784,316)
(17,519,010)
-
Income tax paid
15
(19,291,949)
(4,460,844)
(13,077,286)
Increase in inventories
(12,888,499)
(11,203,796)
(2,862,544)
Decrease / (increase) in trade and other receivables
2,693,227
12,059,739
(9,242,362)
Increase / (decrease) in trade and other payables
386,231
(4,082,958)
(3,480,256)
114,047,195
49,951,419
43,501,133
Net cash used in investing activities
Capital expenditure
(10,320,354)
(19,703,773)
(16,075,526)
Net cash outflow from investing activities
(10,320,354)
(19,703,773)
(16,075,526)
Net cash used in financing activities
Dividends paid
14
(87,093,593)
(30,802,000)
(45,198,000)
Net cash outflow from financing activities
(87,093,593)
(30,802,000)
(45,198,000)
Net increase / (decrease) in cash and cash equivalents
16,633,248
(554,354)
(17,772,393)
Cash and cash equivalents at beginning of year
12,185,406
12,739,760
30,512,153
Cash and cash equivalents at end of year
10
28,818,654
12,185,406
12,739,760
The accompanying notes are an integral part of these financial statements.
F-131
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
As of and forFor the years ended December 31, 2004, 2005 and 2006
1.
Business activities
Société d’Exploitation des Mines d’Or de Sadiola S.A. (Semos) is a company registered in Mali. The Company
operates a mine for the commercial exploitation of gold in the Kayes region of Western Mali. Commercial production
commenced on March 4, 1997.
2.
Accounting policies
Statement of compliance
The company financial statements are prepared in compliance with International Financial Reporting Standards
(IFRS) and Interpretations of those standards, as adopted by the International Accounting Standards Board (IASB)
and applicable legislation.
During the current financial year, the following new and revised accounting standards, amendments to standards and
new interpretations were adopted by Société d’Exploitation des Mines d’Or de Sadiola S.A:
IAS 39 and IFRS 4
Amendment – Financial Guarantee Contracts;
IFRS 6
Exploration for and Evaluation of Mineral Resources;
IFRIC 4
Determining whether an Arrangement contains a lease.
IFRIC 6
Liabilities arising from Participating in a Specific market: Waste Electrical and Electronic
Equipment.
In addition, the following interpretation was early adopted by Société d’Exploitation des Mines d’Or de Sadiola S.A.
during previous financial years:
IFRIC 5
Rights to Interests arising from Decommissioning, Restoration and Environmental
Rehabilitation Funds.
In addition, the following interpretations were early adopted by Société d’Exploitation des Mines d’Or de Sadiola S.A
during the current financial year:
IFRIC 7
Applying the Restatement approach under IAS 29, Financial Reporting in Hyperinflationary
Economies;
IFRIC 8
Scope of IFRS 2;
IFRIC 9
Reassessment of Embedded Derivatives;
IFRIC 10
Interim Reporting and Impairment.
The adoption of the above identified accounting standards, amendments to standards and new interpretations had no
financial impact on the annual financial statements.
The following accounting standards, amendments to standards and new interpretations, which are not yet mandatory
for Société d’Exploitation des Mines d’Or de Sadiola S.A, have not been adopted in the current year:
IAS 1
Amendment – Capital Disclosures
Effective years beginning on
or after 1 January 2007
IFRS 7
Financial Instruments and Disclosures
Effective years beginning on
or after 1 January 2007
IFRS 8
Operating Segments
Effective years beginning on
or after 1 January 2009
IFRIC 11
IFRS 2 – Company and Treasury Share Transactions
Effective years beginning on
or after 1 March 2007
IFRIC 12
Service Concession Arrangements
Effective years beginning on
or after 1 January 2008
The company has assessed the significance of these new standards, amendments to standards and new
interpretations, which will be applicable from 1 January 2007 and later years and concluded that they will have no
material financial impact. Both IAS 1 and IFRS 7 may have an impact on certain disclosures.
F-132
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 200331, 2004, 2005 and 2006
2.1
Basis of preparation
The financial statements are prepared according to the historical cost accounting convention, as modified by the
revaluation of certain financial instruments to fair value. The company's accounting policies as set out below are
consistent in all material respects with those applied in the previous year, except for the adoption of the above
mentioned new and revised standards. The financial statements are presented in US dollars.
2.2
Changes in accounting policies
The changes in accounting policies result from adoption of the following new/revised standards, amendments to
standards and interpretations:
IAS 39 and IFRS 4
Amendment – Financial Guarantee Contracts;
IFRS 6
Exploration for and Evaluation of Mineral Resources;
IFRIC 4
Determining whether an Arrangement contains a Lease;
IFRIC 6
Liabilities arising from Participating in a Specific market: Waste Electrical and Electronic
Equipment;
IFRIC 7
Applying the Restatement approach under IAS 29, Financial Reporting in Hyperinflationary
Economies;
IFRIC 8
Scope of IFRS 2;
IFRIC 9
Reassessment of Embedded Derivatives;
IFRIC 10
Interim Reporting and Impairment.
The principal effects of these changes in policies are discussed below.
IAS 39 and IFRS 4 “Amendment – Financial Guarantee Contracts”
The main impact of the IAS 39 and IFRS 4 Amendment – Financial Guarantee Contracts on the company, is the
recognition of an expense and a corresponding entry to liabilities for the fair value of any financial guarantee
contracts in existence. Subsequent measurement is dealt with in the financial instruments accounting policy. A
financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder
for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or
modified terms of a debt instrument. As a result, the company has applied IAS 39 and IFRS 4 Amendment – financial
guarantee contracts to all such issued con tracts that are in existence.
The effect of the revised policy has no effect on the company financial statements and prior or current year profits.
IFRS 6 “Exploration for and Evaluation of Mineral Resources”
The adoption of IFRS 6 has resulted in the company clarifying the accounting policy for Exploration for and evaluation
of Mineral Resources which is described in "Significant accounting policies".
Moreover, assets defined as used in the exploration for and evaluation of Mineral Resources are required to be
separately identified from other property, plant and equipment, which are fully disclosed in Note 7.
The effect of the revised policy had no effect on the company financial statements and prior or current year financial
statements.
IFRIC 4 “Determining whether an arrangement contains a lease”
The company has applied IFRIC 4 in accordance with the transitional provisions of the interpretation.
IFRIC 4 requires an entity to assess its arrangements that do not take the legal form of a lease but convey the right to
use an asset, in order to determine whether such arrangements are, or contain, leases that should be accounted for
in accordance with IAS 17, Leases.
F-133
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.2
Changes in accounting policies (continued)
The effect of the assessment of arrangements that do not take the legal form of a lease but convey the right to use an
asset has no effect on company prior or current year profits however, certain operating expenses presented in note 4
have been reclassified as operating leases for 2005 and 2004 to conform to the 2006 presentation in accordance
with IFRIC 4.
IFRIC 6 “Liabilities arising from Participating in a Specific market: Waste Electrical and Electronic
Equipment;”
This interpretation provides guidance on the recognition in the financial statements of producers, of liabilities for
waste management under the Economic Union Directive on Waste Electrical and Electronic Equipment in respect of
sales of historical household equipment.
The adoption of this IFRIC has no effect on company financial statements and prior or current year financial
statements.
IFRIC 7 “Applying the Restatement approach under IAS 29, Financial reporting in Hyperinflationary
Economies”
This Interpretation provides guidance on how to apply the requirements of IAS 29 in a reporting period in which an
entity identifies the existence of hyperinflation in the economy of its functional currency, when that economy was not
hyperinflationary in the prior period, and the entity therefore restates its financial statements in accordance with
IAS 29.
The adoption of this IFRIC had no effect on the company financial statements and prior or current year financial
statements.
IFRIC 8 “Scope of IFRS 2”
IFRS 2 applies to share-based payment transactions in which the entity receives or acquires goods or services
where the identifiable consideration received is less than the fair value of the equity instruments issued.
The adoption of this IFRIC had no effect on the financial statements and prior or current year financial statements.
IFRIC 9 “Reassessment of Embedded Derivatives"
IAS 39 paragraph 10 describes an embedded derivative as a component of a hybrid (combined) instrument that also
includes a non-derivative host contract - with the effect that some of the cash flows of the combined instrument vary
in a way similar to a stand-alone derivative. IAS 39 paragraph 11 requires an embedded derivative to be separated
from the host contract and accounted for as a derivative under certain presented circumstances.
IFRIC 9 specifies that an entity shall assess whether an embedded derivative is required to be separated from the
host contract and accounted for as a derivative when the entity first becomes a party to the contract. Subsequent
reassessment is prohibited unless there is a change in the terms of the contract that significantly modifies the cash
flows that otherwise would be required under the contract, in which case reassessment is required.
The adoption of this IFRIC has no effect on company financial statements and prior or current year financial
statements.
IFRIC 10 “Interim Reporting and Impairment"
The company is required to assess goodwill for impairment at every reporting date, to assess investments in equity
instruments and in financial assets carried at cost for impairment at every balance sheet date and, if required, to
recognise an impairment loss at that date. This interpretation requires that the company shall not reverse an
impairment loss recognised in a previous interim period in respect of goodwill or an investment in either an equity
instrument or a financial asset carried at cost.
The adoption of this IFRIC had no effect on the financial statements and prior or current year financial statements.
F-134
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.3
Significant accounting judgements and estimates
Use of estimates: The preparation of the financial statements requires the company’s management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses
during the reporting period. The determination of estimates requires the exercise of judgement based on various
assumptions and other factors such as historical experience, current and expected economic conditions, and in some
cases actuarial techniques. Actual results could differ from those estimates.
The more significant areas requiring the use of management estimates and assumptions relate to mineral reserves
that are the basis of future cash flow estimates and unit-of-production depreciation, depletion and amortisation
calculations; environmental, reclamation and closure obligations; asset impairments, write-downs of inventory to net
realisable value; post-employment, post-retirement and other employee benefit liabilities, the fair value and
accounting treatment of financial instruments and deferred taxation.
Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts
of assets and liabilities within the next financial year are discussed below.
Carrying value of property, plant and equipment
All mining assets are amortised using the units-of-production (UOP) method where the mine operating plan calls for
production from well-defined mineral reserves over proved and probable reserves.
For mobile and other equipment, the straight-line method is applied over the estimated useful life of the asset which
does not exceed the estimated mine life based on proved and probable mineral reserves as the useful lives of these
assets are considered to be limited to the life of the mine.
The calculation of the UOP rate of amortisation could be impacted to the extent that actual production in the future is
different from current forecast production based on proved and probable mineral reserves. This would generally result
to the extent that there are significant changes in any of the factors or assumptions used in estimating mineral
reserves.
These factors could include:
•
changes in proved and probable mineral reserves;
•
the grade of mineral reserves may vary significantly from time to time;
•
differences between actual commodity prices and commodity price assumptions;
•
unforeseen operational issues;
•
changes in capital, operating, mining, processing and reclamation costs, discount rates and foreign exchange
rates; and
changes in mineral reserves could similarly impact the useful lives of assets depreciated on a straight-line
basis, where those lives are limited to the life of the mine.
The recoverable amounts of individual assets have been determined based on the higher of value-in-use calculations
and fair values less costs to sell. These calculations require the use of estimates and assumptions. It is reasonably
possible that the gold price assumption may change which may then impact our estimated life of mine determinant
and may then require a material adjustment to the carrying value of property, plant and equipment.
The company reviews and tests the carrying value of assets when events or changes in circumstances suggest that
the carrying amount may not be recoverable. Assets are grouped at the lowest level for which identifiable cash flows
are largely independent of cash flows of other assets. If there are indications that impairment may have occurred,
estimates are prepared of expected future cash flows for each group of assets. Expected future cash flows used to
determine the value in use of property, plant and equipment are inherently uncertain and could materially change
over time. They are significantly affected by a number of factors including published reserves, resources, exploration
potential and production estimates, together with economic factors such as spot and future gold prices, discount
rates, foreign currency exchange rates, estimates of costs to produce reserves and future capital expenditure.
F-135
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.3
Significant accounting judgements and estimates (continued)
Production start date
The company assesses the construction project to determine when it moves into the production stage. The criteria
used to assess the start date are determined based on the unique nature of the construction project such as the
complexity of a plant and its location. The company considers various relevant criteria to assess when the mine is
substantially complete and ready for its intended use and moves into the production stage. Some of the criteria
would include, but, are not limited to, the following:
•
the level of capital expenditure compared to the construction cost estimates;
•
completion of a reasonable period of testing of the mine plant and equipment;
•
ability to produce gold in saleable form (within specifications and insignificant revenue);
•
ability to sustain ongoing production of gold.
When a mine construction project moves into the production stage, the capitalisation of certain mine construction
costs ceases and costs are either regarded as inventory or expensed, except for capitalisable costs related to mining
asset additions or improvements or reserve development.
Income taxes
The company is subject to income tax. Significant judgement is required in determining the provision for income taxes
due to the complexity of legislation. There are many transactions and calculations for which the ultimate tax
determination is uncertain during the ordinary course of business. The company recognises liabilities for anticipated
tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these
matters is different from the amounts that were initially recorded, such differences will impact the income tax and
deferred tax provisions in the period in which such determination is made.
The company recognises the net future tax benefit related to deferred income tax assets to the extent that it is
probable that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability
of deferred income tax assets requires the company to make significant estimates related to expectations of future
taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the
application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ
significantly from estimates, the ability of the company to realise the net deferred tax assets recorded at the balance
sheet date could be impacted.
Additionally, future changes in tax laws in the jurisdiction in which the company operates could limit the ability of the
company to obtain tax deductions in future periods.
Provision for environmental rehabilitation obligations
The company’s mining and exploration activities are subject to various laws and regulations governing the protection
of the environment. The company recognises management’s best estimate for asset retirement obligations in the
period in which they are incurred. Actual costs incurred in future periods could differ materially from the estimates.
Additionally, future changes to environmental laws and regulations, life of mine estimates and discount rates could
affect the carrying amount of this provision. Such changes in mineral reserves could similarly impact the useful lives
of assets depreciated on a straight-line-basis, where those lives are limited to the life of mine.
Stockpiles, gold in process and product inventories
Costs that are incurred in or benefit the production process are accumulated as stockpiles, gold in process and
product inventories. Net realisable value test s are performed at least annually and represent the estimated future
sales price of the product based on prevailing and long-term metals prices, less estimated costs to complete
production and bring the product to sale.
F-136
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.3Significant accounting judgements and estimates (continued)
Stockpiles, gold in process and product inventories (continued)
Stockpiles are measured by estimating the number of tonnes added and removed from the stockpile, the number of
contained gold ounces based on assay data, and the estimated recovery percentage based on the expected
processing method. Stockpile tonnages are verified by periodic surveys.
Although the quantities of recoverable metal are reconciled by comparing the grades of ore to the quantities of gold
actually recovered (metallurgical balancing), the nature of the process inherently limits the ability to precisely monitor
recoverability levels. As a result, the metallurgical balancing process is constantly monitored and the engineering
estimates are refined based on actual results over time.
Recoverable tax, rebates, levies and duties
Société d’Exploitation des Mines d’Or de Sadiola S.A. has unresolved tax disputes. If the outstanding input taxes are
not received and the tax disputes are not resolved in a favourable manner, it could have an adverse effect upon the
carrying value of these assets.
Contingencies
By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. The
assessment of such contingencies inherently involves the exercise of judgement and estimates of the outcome of
future events.
2.4Summary of significant accounting policies
Foreign currency translation
Functional currency
Items included in the financial statements are measured using the currency of the primary economic environment in
which the entity operates (the ‘functional currency’). The functional currency of United States Dollars (US$) is used
as opposed to the currency of the country in which the enterprise is domiciled, namely Franc de la Communauté
Financière d’Afrique (F CFA). The decision has been taken on the basis of US$ being the functional currency in
which the enterprise receives its revenue and majority of costs are mainly influenced by the US dollar.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the approximate exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resultin g from the settlement of foreign
currency transactions and from the translation at the year-end exchange rate of monetary assets and liabilities
denominated in foreign currencies are recognised in the income statement, except for derivative balances that are
within the scope of IAS 39. Translation differences on these balances are reported as part of their fair value gain or
loss.
Non monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated
using the exchange rate at the date of the transaction.
Property, plant and equipment
Property, plant and equipment are recorded at cost less accumulated amortisation and impairments. Cost includes
pre-production expenditure incurred during the development of a mine and the present value of future
decommissioning costs. Cost also includes finance charges capitalised during the construction period where such
expenditure is financed by borrowin gs.
If there is an indication that the recoverable amount of any property, plant and equipment is less than the carrying
value, the recoverable amount is estimated and an allowance is made for the impairment in value.
F-137
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.4Summary of significant accounting policies (continued)
Property, plant and equipment (continued)
Subsequent costs are included in the asset’s carrying amount only when it is probable that future economic benefits
associated with the item will flow to the company, and the cost of the item can be measured reliably. All other repairs
and maintenance are charged to the income statement during the financial period in which they are incurred.
Amortisation of assets is calculated to allocate the cost of each asset to its residual value over its estimated useful life,
for those assets not amortised on the units-of-production method as, follows:
•
buildings up to life of mine;
•
plant and machinery up to life of mine;
•
equipment and motor vehicles up to five years on a straight line basis; and
•
computer equipment up to three years on a straight line basis.
where life of mine is determined as the period up to the end of commercial production or the period up to which
the company has satisfied all its obligations acquired by virtue of the Mining Convention agreed with the
Government of Mali.
Major renovations are depreciated over the remaining useful life of the related asset or to the date of the next major
renovation, whichever is sooner.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
Gains and losses on disposals are determined by comparing net sale proceeds with carrying amount. These are
included in the income statement.
Mine development costs
Capitalised mine development costs include expenditure incurred to develop new orebodies, to define further
mineralisation in existing orebodies, to expand the capacity of the mine and to maintain production. Where funds have
been borrowed specifically to finance a project, the amount of interest capitalised represents the actual borrowing
costs incurred. Mine development costs include acquired proved and probable Mineral Resourc es at cost at
acquisition date.
Depreciation, depletion and amortisation of mine development costs are computed by the units-of-production method
based on estimated proved and probable mineral reserves. Proved and probable mineral reserves reflect estimated
quantities of economically recoverable reserves which can be recovered in the future from known mineral deposits.
These reserves are amortised from the date on which commercial production begins.
Stripping costs incurred in open-pit operations during the production phase to remove additional waste are charged to
operating costs on the basis of the average life of mine stripping ratio and the average life of mine costs per tonne.
The average stripping ratio is calculated as the number of tonnes of waste material expected to be removed during
the life of mine per tonne of ore mined. The average life of mine cost per tonne is calculated as the total expected
costs to be incurred to mine the orebody, divided by the number of tonnes expected to be mined. The average life of
mine stripping ratio and the average life of mine cost per tonne are recalculated annually in the light of additional
knowledge and changes in estimates.
The cost of the “excess stripping” is capitalised as mine development costs when the actual mining costs exceed the
sum of the adjusted tonnes mined, being the actual ore tonnes plus the product of the actual ore tonnes multiplied by
the average life of mine stripping ratio multiplied by the life of mine cost per tonne. When the actual mining costs are
below the sum of the adjusted tonnes mined, being the actual ore tonnes plus the product of the actual ore tonne
multiplied by the average life of mine stripping ratio, multiplied by the life of mine cost per tonnes, previously
capitalised costs are expensed to increase the cost up to the average.
The cost of stripping in any period will be reflective of the average stripping rates for the orebody as a whole. Changes
in the life of mine stripping ratio are accounted for prospectively as a change in estimate.
F-138
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.4Summary of significant accounting policies (continued)
Mine infrastructure
Mine plant facilities, including decommissioning assets, are amortised using the lesser of their useful life or units-of-
production method based on estimated proved and probable mineral reserves. Other property, plant and equipment
comprising vehicles and computer equipment are depreciated by the straight-line method over their estimated useful
lives.
Exploration and Evaluation assets
All exploration costs are expensed until the directors conclude that a future economic benefit is more likely than not of
being realised. In evaluating if expenditures meet this criterion to be capitalised, the directors utilise several different
sources of information depending on the level of exploration. While the criteria for concluding that expenditure should
be capitalised is always probable, the information that the directors use to make that determination depends on the
level of exploration.
(a) Costs on greenfields sites, being those where the company does not have any mineral deposits which are
already being mined or developed, is expensed as incurred until the directors are able to demonstrate that
future economic benefits are probable, which generally will be the establishment of proved and probable
reserves at this location.
(b) Costs on brownfields sites, being those adjacent to mineral deposits which are already being mined or
developed, is expensed as incurred until the directors are able to demonstrate that future economic benefits
are probable, which generally will be the establishment of increased proved and probable reserves after which
the expenditure is capitalised as a mine development cost.
(c)Costs relating to extensions of mineral deposits, which are already being mined or developed, including
expenditure on the definition of mineralisation of such mineral deposits, is capitalised as a mine development
cost.
Costs relating to property acquisitions are capitalised within mine development costs.
Impairment of assets
Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for
impairment and whenever events or changes in circumstance indicate that the carrying amount may not be
recoverable. Assets that are subject to amortisation are tested for impairment whenever events or changes in
circumstance indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value, less costs to sell and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash flows.
Impairment calculation assumptions include life of mine plans based on published reserves and reso urces,
management’s estimate of the future gold price, based on current market price trends, foreign exchange rates, and a
pre-tax discount rate adjusted for country and project risk. It is therefore reasonably possible that changes could occur
which may affect the recoverability of property, plant and equipment and intangible assets.
F-139
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.4Summary of significant accounting policies (continued)
Borrowing costs
Interest on borrowings relating to the financing of major capital projects under construction is capitalised during the
construction phase as part of the cost of the project. Such borrowing costs are capitalised over the period during
which the asset is being acquired or constructed and borrowings have been incurred. Capitalisation ceases when
construction is interrupted for an extended period or when the asset is substantially complete. Other borrowing costs
are expensed as incurred.
Leased assets
Operating lease rentals are charged against operating profits on a straight line basis unless another systematic
manner related to the period the assets concerned will be used is more representative of the time pattern of the
benefit.
Exploration and research expenditure
Pre – licence costs are recognised in profit or loss as incurred. Exploration and research expenditure is expensed in
the year in which it is incurred. These expenses include: geological and geographical costs, labour, mineral resources
and exploratory drilling.
Inventories
Inventories are valued at the lower of cost and net realisable value after appropriate allowances for redundant and
slow moving items. Cost is determined on the following bases:
•
gold in process is valued at the average total production cost at the relevant stage of production;
•
gold on hand is valued on an average total production cost method;
•
ore stockpiles are valued at the average moving cost of mining and stockpiling the ore. Stockpiles are allocated
as a non-current asset where the stockpile exceeds current processing capacity;
•
by-products are valued on an average total production cost method.
•
consumable stores are valued at average cost.
A portion of the related depreciation, depletion and amortisation charge is included in the cost of inventory.
Provisions
Provisions are recognised when the company has a present obligation, whether legal or constructive, as a result of a
past event for which it is probable that an outflow of resources embodying economic benefits will be required to settle
the obligation and a reliable estimate can be made of the amount of the obligation.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the
present obligation at the balance sheet date. The discount rate used to determine the present value reflects current
market assessments of the time value of money and the risks specific to the liability.
Employeebenefits
Short-term employee benefits
The cost of all short-term employee benefits is recognised during the period in which the employee renders the related
service.
The provisions for employee entitlements to wages, salaries, and annual leave represent the amount which the
company has a present obligation to pay as a result of employees’ services provided to the balance sheet date. The
provisions have been calculated at undiscounted amounts based on current wage and salary rates.
F-140
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.4Summary of significant accounting policies (continued)
Long-term employee benefits
A long-term provision for the long-service obligation costs to qualifying employees at the end of their contracts
represents the present value of the estimated future cash outflows resulting from employees’ services provided.
In determining this liability for employee benefits, consideration has been given to future increases in wage and salary
rates, and the company’s expected staff turnover.
Liabilities for employee benefits which are not expected to be settled within 12 months are discounted at a pre-tax rate
that reflects current market assessments of the time value of money.
The company and all employees contribute towards the Malian State social security fund. Accordingly, on retirement,
the Malian employees are entitled to a retirement benefit from the Malian State. Expatriate employees are reimbursed
their contributions made to the social security fund.
Environmental rehabilitation expenditure
Long-term environmental rehabilitation obligations comprising decommissioning and restoration are based on the
company's environmental management plans, in compliance with the current environmental and regulatory
requirements.
Decommissioning costs
The provision for decommissioning represents the cost that will arise from rectifying damage caused before
production commenced. Accordingly an asset is recognised and included within mine infrastructure.
Decommissioning costs are provided for at the present value of the expenditures expected to settle the obligation,
using estimated cash flows based on current prices. The unwinding of the decommissioning obligation is included in
the income statement. The estimated future costs of decommissioning obligations are regularly reviewed and adjusted
as appropriate for ne w circumstances or changes in law or technology. Changes in estimates are capitalised or
reversed against the relevant asset. The estimates are discounted at a pre-tax rate that reflects current market
assessments of the time value of money.
Gains or losses, from the expected disposal of assets are not taken into account when determining the provision.
Restoration costs
The provision for restoration represents the cost of restoring site damage after the commencement of production.
Increases in the provision are charged to the income statement as a cost of production.
Gross restoration costs are estimated at the present value of the expenditures expected to settle the obligation, using
estimated cash flows based on current prices. The estimates are discounted at a pre-tax rate that reflects current
market assessments of the time value of money and risks specific to the liability.
Revenue recognition
Revenue is recognised at the fair value of the consideration received or receivable to the extent that it is probable that
the economic benefits will flow to the company and the revenue can be reliably measured. The following criteria must
also be present:
•
the sale of mining products is recognised when the significant risks and rewards of ownership of the products are
transferred to the buyer;
•
interest is recognised on a time proportion basis, taking account of the principal outstanding and the effective
rate over the period to maturity, when it is determined that such income will accrue to the company; and
•
where a by-product is not regarded as significant, revenue is credited against cost of sales, when the significant
risks and rewards of ownership of the products are transferred to the buyer.
F-141
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.4Summary of significant accounting policies (continued)
Income Tax
Deferred taxation is provided on all qualifying temporary differences at the balance sheet date between the tax bases
of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax assets are only recognised to the extent that it is probable that the deductible temporary differences will
reverse in the foreseeable future and future taxable profit will be available against which the temporary difference can
be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is
no longer probable that sufficient future taxable profit will be available to allow all or part of the deferred tax asset to
be utilised.
A deferred tax liability is recognised for all taxable temporary differences if it is probable that the temporary difference
will reverse in the foreseeable future.
Deferred tax assets and liabilities are measured at future anticipated tax rates, which have been enacted or
substantively enacted at the balance sheet date.
Current and deferred tax is recognised as income or expense and included in the profit or loss for the period, except
to the extent that the tax arises from a transaction or event which is recognised, in the same or a different period
directly in equity; or a business combination that is an acquisition.
Current taxation is measured on taxable income at the applicable statutory rate.
Special items
Items of income and expense that are material and require separate disclosure, in accordance with IAS 1.86, are
classified as “special items” on the face of the income statement. Special items that relate to the underlying
performance of the business are classified as “operating special items” and include impairment charges and reversals.
Special items that do not relate to underlying business performance are classified as “non-operating special itemsR 21;
and are presented below “Operating (loss) profit” on the income statement.
Dividend distribution
Dividend distribution to the company’s shareholders is recognised as a liability in the company’s financial statements
in the period in which the dividends are declared by the board of directors of Société d’Exploitation des Mines d’Or de
Sadiola S.A..
Financial instruments
Financial instruments recognised in the balance sheet include trade and other receivables, cash and cash equivalents
and trade and other payables.
Financial instruments are initially measured at fair value when the company becomes a party to their contractual
arrangements. Transaction costs are included in the initial measurement of financial instruments. The subsequent
measurement of financial instruments is dealt with below.
A financial asset is derecognised when the right to receive cash flows from the asset has expired or the company has
transferred its rights to receive cash and either (a) has transferred substantially all the risks and rewards of the asset,
or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred
control of the assets.
A financial liability is derecognised wh en the obligation under the liability is discharged or cancelled or expires.
F-142
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.4Summary of significant accounting policies (continued)
Financial instruments (continued)
On derecognition of a financial asset, the difference between the proceeds received or receivable and the carrying
amount of the asset is included in income.
On derecognition of a financial liability, the difference between the carrying amount of the liability extinguished or
transferred to another party and the amount paid is included in income.
Regular way purchases and sales of all financial assets and liabilities are accounted for at settlement date.
Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method, less accumulated impairment. Impairment of trade and other receivables is established
when there is objective evidence as a result of a loss event that the company will not be able to collect all amounts
due according to the original terms of the receivables. The amount of the impairment is the difference between the
asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective
interest rate. The impairment is recognised in the income statement.
Cash and cash equivalents
Cash and cash equivalents are defined as cash on hand, demand deposits and short-term, highly liquid investments
readily convertible to known amounts of cash and subject to insignificant risk of changes in value and are
subsequently measured at cost which is deemed to be fair value as they have a short-term maturity.
Cash which is subject to legal or contractual restrictions on use is classified separately.
Financial liabilities
Financial liabilities are subsequently measured at amortised cost, using the effective interest rate method.
F-143
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2006
2005
2004
US$
3
Revenue
Product sales
300,727,005 198,138,374
187,577,578
4
Operating profit
Operating profit is arrived at after taking account of:
Royalties
18,027,171
11,874,900
11,172,594
Amortisation of property, plant and equipment (note 7)
34,039,909
29,661,072
25,563,636
Auditors' remuneration
– Statutory audit fees
31,981
77,853
119,948
– External audit - audit fees
404,681
32,013
67,207
– External audit - disbursements
-
-
3,800
Contributions to Malian State social security fund
3,650,222
2,726,692
2,778,639
Exploration and evaluation expenditure
553,347
971,110
226,277
Realised fair value loss on derivatives
-
-
1,102,500
Reversal of unrealised fair value gain on derivatives
-
-
(1,415,000)
Legal fees
65,201
45,636
38,652
Ore stockpile valuation adjustment
-
-
5,617,704
Provision for obsolete and slow-moving consumable stores
432,263
358,681
1,038,105
Remuneration other than to employees
– management fees
3,007,271
1,981,333
1,864,751
Salaries, wages and benefits
14,900,568
15,164,324
16,612,686
Mining contractor fees
29,057,225
24,706,278
24,818,526
Operating leases
26,214,997
19,054,434
3,261,930
5
Special impairments of indirect taxes receivable and special
expenses for indirect taxes payable
Impairment of advance on tax dispute (note 5.1)
-
5,184,786
-
Impairment of VAT refundable by Government of Mali (note 5.2)
-
1,947,000
-
2003/2004 tax audit (note 5.3)
4,136,344
1,434,617
-
Impairment of stamp duties refundable by Government of Mali
-
564,264
-
4,136,344
9,130,667
-
5.1 Impairment of advance on tax dispute
During November 2003, the Government of Mali performed a tax audit of the corporate taxation and various indirect
taxes at the company for fiscal years 2000 to 2002. The results of the audit indicated that the company owed the
Government of Mali F CFA 7.9 billion (US$16.4 million as of December 31, 2004) of various taxes and penalties, which
was communicated by way of a formal letter of assessment to the company. According to Government of Mali officials
the main reasons for the additional taxes were:
º
withholding taxes payable;
º
fringe benefits on certain facilities provided to expatriate employees that should have been taxed differently;
º
the application of the incorrect depreciation rates to certain mining assets; and
º
different interpretations of the law with respect to VAT payable on interest paid.
The company was of the opinion that the tax filings and indirect tax submissions by the Company were in compliance
with applicable laws and regulations.
Towards the end of the 2003 financial year the Government of Mali proposed that the company and the Government of
Mali settle their differences on the tax audit findings by way of the Company paying F CFA 2.5 billion (US$5.2 million as
of December 31, 2004) to the Government of Mali. In January 2004, the Government of Mali threatened to close down
the operations of the company if the taxes were not paid and, as a result the Government of Mali requested that an
advance of F CFA 2.5 billion (US$5.2 million as of December 31, 2004) be made to them in order for the company to
continue operations. The agreement with the Government of Mali was that this advance was not an acknowledgement
of any taxes payable and that the advance would allow the company and the Government of Mali time to resolve their
differences in tax interpretation, or to allow the Company the right to arbitration. No cash payment was made as a
transfer was made from the current account held with the Government of Mali. Numerous attempts to resolve the
dispute between the Government of Mali and the company between January and June 2004 failed.
F-144
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
Without admitting that the company filings have been prepared in an incorrect manner in terms of the prevailing laws
and regulations, the directors decided that the advance should be abandoned in order to close this issue and allow
management to concentrate on the company’s core business. Accordingly, the abandonment was recorded as an
special item rather than as an under provision of prior year taxation. Abandonment of this amount enabled the
company to reach an agreement with the Government of Mali on all corporate taxation issues which were in dispute
and to establish a protocol for the indirect taxes that were in dispute for the future.
5.2
Impairment of VAT refundable by Government of Mali
The gross amount of VAT refundable by the Government of Mali amounted to US$29.2 million at December 31, 2005.
Management estimated that only US$27.3 million was recoverable based on previous VAT audits performed by the
authorities. Accordingly, an impairment of VAT refundable of US$1.9 million was made. Management estimates that
the gross amount of VAT refundable by the Government of Mali at December 31, 2006 is recoverable, accordingly no
impairment was made in 2006.
5.3
Payment relating to 2003/2004 tax audit
During the 2005 financial year a tax assessment was received for corporate tax and various indirect taxes by
Government of Mali authorities for the 2003 and 2004 fiscal years. Management objected to the assessment as it did
not reflect the protocol agreement reached between the company and the Government of Mali with regard to the tax
audit of the Company for fiscal years 2000 to 2002 (note 5.1). As discussed in note 5.1 the Government of Mali
required an advance be made which the Company refused. Without admitting guilt the Company decided to pay the
Government of Mali an amount agreed by both parties. The Company and the Government of Mali reached settlement
on the disputes relating to the 2003 and 2004 fiscal year tax assessments in 2006. The additional settlement of $4.1
million has been recorded as an special payment of indirect taxes.
2006
2005
2004
US$
6
Taxation
All pre-tax income and income tax expense is related to operations in Mali
Current tax expense (note 15)
44,327,378
13,364,869
8,092,583
Deferred tax expense (note 12)
(3,402,067)
4,306,792
3,703,792
40,925,311
17,671,661
11,796,375
A reconciliation of the statutory tax rate to that charged in the income statement is set out in the following table:
%
%
%
Statutory tax rate in Mali
35.0
35.0
35.0
Disallowable expenses:
-
- Net foreign exchange (gain) / loss
(0.3)
8.8
-
- Special impairment of indirect taxes receivable and special
expenses for indirect taxes payable
0.7
10.7
-
- Other
-
2.2
-
Non-taxable income
-
(2.1)
(0.5)
Translation (loss) / gain on current and deferred tax
(4.2)
4.8
(8.8)
Prior year tax expense
-
-
1.5
Effective tax rate
31.2
59.4
27.2
F-145
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
Mine
development
costs
Work in
progress
Mine infra-
structure
Total
US$
US$
US$
US$
7 Property, plant and equipment at December 31, 2006
Cost
Balance at January 1, 2006
189,329,641
9,054,637 203,524,258 401,908,536
Additions
7,239,267
-
3,081,087
10,320,354
Transfers and other movements
(664,602) (9,054,637)
14,013,771
4,294,532
Balance at December 31, 2006
195,904,306
- 220,619,116 416,523,422
Accumulated amortisation
Balance at January 1, 2006
128,100,079
- 141,936,080 270,036,159
Amortisation for the year
16,945,012
-
17,094,897
34,039,909
Balance at December 31, 2006
145,045,091
- 159,030,977 304,076,068
Carrying amount at December 31, 2006
50,859,215
-
61,588,139 112,447,354
Mine
development
costs
Work in
progress
Mine infra-
structure
Total
US$
US$
US$
US$
Property, plant and equipment at December 31, 2005
Cost
Balance at January 1, 2005
180,189,980
1,618,252 199,507,239 381,315,471
Additions
9,139,661
7,436,385
3,127,727
19,703,773
Transfers and other movements
-
-
889,292
889,292
Balance at December 31, 2005
189,329,641
9,054,637 203,524,258 401,908,536
Accumulated amortisation
Balance at January 1, 2005
108,797,274
- 131,577,813 240,375,087
Amortisation for the year
19,302,805
-
10,358,267
29,661,072
Balance at December 31, 2005
128,100,079
- 141,936,080 270,036,159
Carrying amount at December 31, 2005
61,229,562
9,054,637
61,588,178 131,872,377
2006
2005
US$
8 Inventories
Non-current portion of inventories
Ore stockpiles
28,671,942
17,936,431
Current portion of inventories
Ore stockpiles
34,693,966
24,920,668
Gold bullion
3,671,881
2,443,994
Gold-in-process
1,115,895
1,758,430
Consumable stores
16,362,129
14,264,543
Consumable stores
19,483,258
16,953,409
Less: adjustment for obsolete and slow-moving items
(3,121,129)
(2,688,866)
Total current inventory
55,843,871
43,387,635
Total inventories
84,515,813
61,324,066
F-146
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2006
2005
US$
9
Trade and other receivables
Related party receivables
– AngloGold Ashanti Mali S.A.
44,932
28,871
– Société des Mines de Morila S.A.
174,937
21,234
– Société d'Exploitation des Mines d’Or de Yatela S.A.
381,698
216,019
– AngloGold Services Limited
-
491
– Rand Refinery
23,892
11,309
– Other
167,303
108,915
792,762
386,839
Special tax account with Government of Mali
558,933
-
VAT refundable by Government of Mali (note 5.2 and 19.2.1)
36,006,997
26,233,829
Stamp duties refundable by Government of Mali (note 9.1)
1,003,899
3,884,667
Refundable tax on fuel by Government of Mali (note 19.2.2)
8,181,697
9,891,270
Prepaid expenses
-
82,912
Other
2,322,413
1,598,546
Total current and non-current trade and other receivables
48,866,701
42,078,063
Less: non-current portion of amounts refundable by Government of Mali
28,335,326
14,551,010
Total current trade and other receivables
20,531,375
27,527,053
9.1 Stamp duties refundable by the Government of Mali
During 2002, a dispute arose between the company and the Government of Mali with regards to the payment of stamp
duties on gold exports due to different interpretations of the Convention Agreement and the Mining Code. In order to
ensure the continuation of gold exports, the company paid stamp duties raising an amount receivable from the
Government of Mali.
The company entered into arbitration to resolve the dispute. The Tribunal decision was announced in February 2003,
indicating that the company would no longer be obliged to pay stamp duties and that stamp duties to the value of F
CFA2.2 billion (US$3.2 million) should be reimbursed to the company.
During the 2004, 2005 and 2006 financial years, management communicated with the Minister of Finance (MOF),
Minister of Domains (MOD) and the Minister of Mines (MOM) several times in an effort to recover the outstanding stamp
duties. However, at the end of December 2006, the amount of US$1.0 million (2005: US$3.9 million) was still
outstanding and is reflected in trade and other receivables.
The MOD represented the Government of Mali during the arbitration proceedings. In order for the MOF to be able to
settle with the company the outstanding stamp duties, the MOD is required to officially notify the MOF advising that the
Government of Mali lost the arbitration case. Subsequently the MOF has confirmed to management of the company that
they will settle the long outstanding stamp duty. F CFA 800 million (US$1.4 million) was reimbursed early in January
2006. An impairment of US$0.6 million was made in December 2005 for the portion of the amount that management did
not expect to recover. Following the settlement of the indirect taxes disputes the company and the Government of Mali
have signed a protocol agreement whereby the government has committed to repay the total amount outstanding by the
end of March 2007. Repayments received in 2006 have been in accordance with the protocol agreement.
2006
2005
US$
10
Cash and cash equivalents
HypoVereinsbank balances - Current account
23,775,497
9,853,940
Malian bank balances
3,855,392
1,949,861
London and South African bank balances
1,140,576
330,214
Petty cash
47,189
51,391
28,818,654
12,185,406
F-147
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2006
2005
US$
11
Provisions
Environmental rehabilitation obligation
Balance at beginning of year
9,262,362
5,801,689
Unwinding of obligation
463,111
174,051
Change in estimate
4,361,792
3,286,622
Balance at end of year
14,087,265
9,262,362,
Employee long service obligation
Balance at beginning of year
2,393,032
1,960,529
Unwinding of obligation
119,652
58,816
Change in estimate
(1,737,418)
373,687
Balance at end of year
775,266
2,393,032
Total provisions
14,862,531
11,655,394
Assumptions applicable to all provisions
Estimated gross future environmental rehabilitation costs
Estimated gross future employee long service costs
US$17.6 million
US$0.8 million
US$12.3 million
US$2.5 million
Discount rate
5%
3%
Inflation rate
2.25%
2.25%
Average discount period from the beginning of the life of mine
20 years
13 years
The average discount period is based on the current estimate of the life of mine, which is subject to revision annually.
The estimated gross future costs are based on management's best estimates at December 31, 2006, and are also
subject to revision annually. The change in estimate arises due to the change in the assumption of the discount rate
applicable and a change in the estimate of the gross future costs.
Malian Government social security fund
The company and all employees contribute to the Malian Government social security fund. On retirement, the Malian
employees are entitled to a retirement benefit from the fund. The fund reimburses expatriate employees only their own
contributions made to the fund. Accordingly, there is no obligation for defined employee benefits. The company's
contributions to the Malian Government social security fund are disclosed in note 4.
12
Deferred taxation
The deferred taxation liability relating to temporary differences is made up as follows:
- Property, plant and equipment
10,696,726
12,027,927
- Non-current provisions
(5,201,886)
(4,079,389)
- Inventory
(1,092,395)
(941,103)
- Present value adjustment on taxes refundable
(1,055,816)
(997,679)
- Other
(920,276)
(181,336)
2,426,353
5,828,420
The movement on the deferred tax liability is as follows:
Balance at beginning of year
5,828,420
1,521,628
Deferred tax charge (note 6)
(3,402,067)
4,306,792
Balance at end of year
2,426,353
5,828,420
F-148
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2006
2005
US$
13
Trade and other payables
Related party payables
– AngloGold Services Limited
156,096
192,562
– AngloGold Ashanti Mali S.A.
538,773
496,914
– Société d’Exploitation des Mines d’Or de Yatela S.A.
262
55,198
– Société des Mines de Morila S.A.
700
-
– Other
10,929
7,604
706,760
752,278
Accruals
1,348,379
13,416,802
Trade and other payables
19,967,750
8,676,310
22,022,889
22,845,390
2006
2005
2004
US$
14
Dividends paid
Amount outstanding at beginning of year
20,000,000
10,802,000
11,000,000
Dividends declared during the year
90,000,000
40,000,000
45,000,000
Less: amount outstanding at end of year
(22,906,407)
(20,000,000) (10,802,000)
Dividends paid
87,093,593
30,802,000
45,198,000
15
Income tax paid
Amount payable / (receivable) at beginning of year
8,101,642
(802,383)
4,182,320
Current tax expense (note 6)
44,327,378
13,364,869
8,092,583
Amount (payable) / receivable at end of year
(33,137,071)
(8,101,642)
802,383
Income tax paid
19,291,949
4,460,844
13,077,286
16
Ordinary stock
Authorised and issued: ordinary par value stock with a nominal value of F CFA 109 000 (US$200) each.
Held by:
Number of
outstanding
stock in
issue
2006
2005
US$
AngloGold Mali Holdings 1 (subsidiary of AngloGold
Ashanti Ltd)
38,000
7,600,000
7,600,000
AGEM Limited (subsidiary of IAMGOLD Corporation)
38,000
7,600,000
7,600,000
Government of Mali
18,000
3,600,000
3,600,000
International Finance Corporation
6,000
1,200,000
1,200,000
100,000
20,000,000
20,000,000
1517
Capital commitmentsContractual Commitments and contingencies
17.1
Operating leases
At December 31, 2006, the company was committed to making the following minimum payments in respect of operating
leases for amongst others, hire of plant and equipment and land and buildings.
Contracted forExpiry within:
20,850,280
1,120,386
- One year
1,495,405
1,576,756
These balances are calculated based on the minimum rentals due in terms of the contract up to and including the expiry
date (December 2009) or minimum notice period (six months), whichever is the lesser. The contract does not provide for
guaranteed escalations. The company has no other restrictions on any of its leasing arrangements.
F-149
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2006
2005
US$
17.2
Capital Commitments
Contracted for:
458,860
20,219,632
Not contracted for
667,22515,811,091
3,361,7119,600,266
Authorised
Total authorised by the directors
21,517,50516,269,951
4,482,09729,819,898
The proposed capital expenditure for mine infrastructure will be financed from cash resources generated by operating
operationsactivities of the company.
17.3
The company is subject to and pays taxes in Mali. Some of these taxes are defined by contractual agreements with the
local government, but others are defined by the general corporate tax laws of the country. The company has historically
filed, and continues to file, all required tax returns and to pay the taxes reasonably determined to be due. The tax rules in
Mali are complex and subject to interpretation. From time to time the company is subject to a review of its historic tax
filings and in connection with such reviews, disputes can arise with the taxing authorities over the interpretation or
application of certain rules to the company’s business conducted in Mali. Management believes based on information
currently to hand that no such tax contingencies exist, and as assessments are completed, the company will make
appropriate adjustments to those estimates used in determining amounts due. The ultimate outcome cannot be presently
determined.
1618
Related parties
16.118.1
Identity of related parties
The stockholders of the company are disclosed in note 14.16. Entities within the AngloGold Ashanti group and with which
which the companyCompany has transacted, are listed in note 16.2.18.2. The directors of the company are listed below:
DL Hodgson
NF Nicolau (Chairman) (South African)
C Barjot (French)
JF Conway (Canadian)
(resigned April 27, 2006)
J McCombe (Canadian)
(appointed April 27, 2006)
Mme HN Cisse (Malian)
(resigned June 7, 2006)
MEH Keita (Malian)
(appointed June 7, 2006)
M Diallo (Malian)
GA Edey (Canadian)
MH SabbaghaFRL Neethling (South African)
AW Mbugua (Kenyan)
T Tanoh (American)
(resigned November 7 ,2006)
A der Hovanessian (American)
(appointed November 7, 2006)
LA Dembele (Malian)
ND Keita (Malian)
S CassimVenkatakrishnan (British)
(resigned 5 May 2004)April 27, 2006)
AW MbuguaDH Diering (South African)
(appointed 5 May 2004)April 27, 2006)
A RaczynskiF-150
(resigned 11 May 2004)
T Tanoh
(appointed 11 May 2004)
HB Sidibé
(resigned 12 August 2004)
LA Dembele
(appointed 12 August 2004)
PJ Louw
(resigned 3 November 2004)
MD Keita
(appointed 3 November 2004)
JG Best
(resigned 3 November 2004)
S Venkatakrishnan
(appointed 3 November 2004)
16.2Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
18.2 Material related party transactions
Material related party transactions are as
follows:
Transactions
with related
parties
Net
amounts
due
by/(owed to)
to) related
parties
(notes 69 & 10)
13)
Transactions
with related
parties
Net
amounts
due by/(owed to)
by/(owed
to) related
parties
(notes 69 & 10)
13)
Transactions
with related
parties
Net
amounts
due
by/(owed
to)
related
parties
Material related party
transactions are as follows:
2006
2005
2004 2003
US$
–
– AngloGold
Services
Ashanti Mali
S.A.
(3,229,746) (385,909)5,105,740
(3,369,078)(493,841)
(1,214,447)4,362,040
(468,043)
3,229,746
(385,909)
– Société des Mines d’Or de Morila
S.A. (Morila)
379,194(476,657)
174,237
(573,185)
21,234
(379,194)
229,492
72,008
(80,184)– Siguiri Gold Mine
(153,345)
153,345
-
-
-
-
– Société d’Exploitation des
Mines d’Or de
Yatela S.A.
(Yatela)
3,400,908(2,865,379)
381,436
(3,100,621)
160,821
(4,649,137)
230,671
4,010,506
81,644
– AngloGold Services Limited
(3,697,971)3,662,857
(156,096)
3,667,155
(192,071)
3,697,971
(146,425)
(1,537,320)
(130,686)– Rand Refinery Limited
(300,178,723)
23,892
(197,691,634)
11,309
(92,241,964)
4,868,464
– Key Management
Personnel remuneration
506,223
-
850,407
-
846,657
-
- Salary
414,803
-
747,754
-
712,240
-
- Performance related
payments
91,420
-
46,805
-
42,961
-
- Pension scheme
contributions
-
-
55,848
-
91,457
-
AngloGold ServicesAshanti Mali S.A. and AngloGold Services Limited are service organisations within the AngloGold
Ashanti group and, accordingly, provide management services to the company. Included in transactions with
AngloGold ServicesAshanti Mali S.A. are management fees paid by the company to the valueCompany of US$1,864,751 (2003:3,007,271 (2005: US$1,981,333
and 2004: US$1,661,100)1,864,751) (refer note 2)4). Morila and Yatela are fellow associatessubsidiaries to the company, also located in
Mali. Semos
Sadiola shares certain employees with Yatela, as well as the end partelution and smelting of the gold production
process. The company incurs
only ad hoc transactions with Morila. All related party transactions occurred at arm's length.
F-115
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to
Rand Refinery Limited is a subsidiary company within the financial statementsAngloGold Ashanti group. The company has entered
As of andinto contractual agreements with Rand Refinery Limited for the years ended 31 December 2003provision of all services required for the collection,
transport, refining and 2004purchase of the doré bars produced by the c ompany. Included in transactions with Rand
Refinery Limited are sales by the company of US$300.7 million (2005: US$198.1 million and 2004:
US$92.5 million) and purchases by the company of US$0.5 million (2005: US$0.4 million and 2004:
US$0.2 million).
1719
Risk management activities
In the normal course of its operations, the company is exposed to, inter alia, gold price, currency and credit risks.
The companyCompany did not acquire, hold or issue derivatives for trading purposes. The company follows the following
risk management processes to manage these risks.
19.1 Gold price risk
Gold price risk arises from the risk of an adverse effect on current or future earnings resulting from fluctuations in
the price of gold.
F-151
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Derivatives were usedNotes to manage well-defined gold price risks that arise out of the company’s gold sales activities.financial statements
CallFor the years ended December 31, 2004, 2005 and put options were used by the company to protect itself from downward fluctuations in the gold price.
These derivatives may established a minimum price for a portion of future production while maintaining the ability
to benefit from increases in the gold price for the majority of future gold production.
As the above gold price risk is no longer considered significant, existing derivatives were wound up, and by year
end all open hedging contracts matured without replacement. It is not expected that new hedging will be entered
into.
Accordingly the marked-to-market value of all hedge transactions making up the hedge position was US$ nil as at
31 December 2004 (as at 31 December 2003: negative US$1.4million).2006
19.2
Credit risk
Credit risk arises from the risk that a counterpartcounterparty may default or not meet its obligations timeously. The company
minimises credit risk by ensuring that credit risk is spread overin a number of counterparts. These counterparts are
financial and banking institutions of good credit quality.
timely manner.
The company does not obtain collateral or other security to support financial instruments subject to credit risk,
but
monitors the credit standing of counterparts.counterparties. Although the company sells gold to only one counterpart,counterparty, the
company does not believe that this concentration of credit results in significant credit risk.risk as the majority of
proceeds are received within two working days of the gold leaving the mine. There is however a concentration
concentration of credit risk with respect to various taxes receivable from the Malian State. These taxes and the measures
measures taken to ensure recoverability thereof are discussed in note 6.5, note 9 and below.
19.2.1
Vulnerability from concentrations of VAT refundable by the Government of Mali
As
Value added taxes receivable from the Government of Mali amounts to US$38.5 million at 31 December 2004,2006
(31 December 2005: US$26.2 million). VAT is refundable from the government in F CFA. The last audited VAT
return was for the period ended March 31, 2006 and at 31 December 2006 US$26.0 million (2005:
US$21.7 million) is still outstanding and US$12.5 million (2005: US$6.8 million) is still subject to audit. The
accounting processes for the unaudited amount are in accordance with the processes advised by the
Government of Mali in terms of the previous audits. The Government of Mali is a shareholder in the company
and protocol agreements have been signed. All payments as scheduled in terms of the protocol agreements
have been recovered up to December 2006. Certain amounts are expected to be received after 12 months of
the balance sheet date and are classified as non-current accordingly. These am ounts provided for have been
discounted to their present value at a rate of 5% per annum.
19.2.2
Vulnerability from concentrations of refundable tax on fuel
Fuel duties receivable from the Government of Mali amounts to US$8.7 million at 31 December 2006
(31 December 2005: US$9.9 million). Fuel duties are paid on receipt of the fuel supply and are refundable in
F CFA, requiring the claim to be submitted before January 31, of the following year, and are subject to
authorisation by firstly the Department of Mining and secondly the Customs and Excise authorities. The
Customs and Excise authorities have approved US$1.5 million (2005: US$6.64 million) which is still
outstanding, whilst US$7.2 million (2005: US$3.56 million) is still subject to authorisation. The accounting
processes for the unauthorised amount are in accordance with the processes advised by the Government of
Mali in terms of the previous authorisations. The Government of Mali is a shareholder in the company and
protocol agreements were signed on July 5, 2006. All payments as schedu led in terms of the protocol
agreements have been recovered up to December 2006. With effect from February 2006, fuel duties are no financial assets were impaired.
longer payable to the Government of Mali. These amounts provided for have been discounted to their present
value at a rate of 5% per annum.
19.3
Currency risk
Since the functional currency of the company is US Dollars, currency risk is incurred primarily as a result of
purchases made in other currencies, such as the Euro, South African Rand and the Central African Franc de la Communauté
Financière d’Afrique (F CFA).
The company does not use derivatives to hedge foreign currency transactions.
19.4
Fair values of financial instruments
The estimated fair values of the current financial instruments are determined at discrete points in time based on relevant market
market information. These estimates involve uncertainties and cannot be determined with precision. The estimated fair
fair values of the company’s current financial instruments as at December 31, December 2004 are2006 approximates the carrying
amount of such financial instruments as follows:
2004 2003
US$ million
Carrying
amount
Fair value
Carrying
Amount
Fair
Valuereflected in the balance sheet.
Trade and other receivables
47.2 47.2 38.0 38.0
Cash and cash equivalents
12.7 12.7 30.5 30.5
Trade and other payables
18.0 18.0 22.1 22.1
Derivative assets (options)
-
- 9.8 9.8
Derivative liabilities (options)
-
-
(11.2)
(11.2)
All derivatives outstanding at 31 December 2003 were classified as current assets and liabilities.
IncludedUS$28.3 million, included in non-current trade and other receivables are:
- an advance maderelates to VAT and fuel duties which are
expected to be refunded during the Malian State with respect to a tax dispute of US$5.2 million (2003: US$ nil); and
- stamp duties refundable by the Malian State of US$4.5 million (2003: US$4.2 million).
These amounts are stated at cost because the fair values could not be determined with sufficient reliability as a reliable
estimate of the timing of the expected cash flows could not be made. Management do however believe that these
receivables will be recoverable within the 20052008 financial year.
The following methods and assumptions were used to estimate the fair value of each class ofthis receivable approximates its
carrying amount. All other amounts are expected to be recoverable or payable within the 2007 financial instrument:year.
Trade and other receivables, cash and cash equivalents and trade and other payables
The carrying amounts approximate fair value because of the short-term duration of these instruments.
Derivatives
The fair values of derivatives at 31 December 2003 were estimated based on the ruling market prices, volatilities and
interest rates at that date, using the Black Scholes option pricing model.
F-116F-152
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
As of and forFor the years ended December 31, December 20032004, 2005 and 20042006
20
18 Reconciliation between IFRS and US GAAP
The following table summarises the effect on net profit and stockholders’ equity of significant differences between
International Financial Reporting Standards (IFRS) and accounting principles generally accepted in the United
States of America (US GAAP) as of and for the yearyears ended December 31 December 2004::
2006
2005
2004
Notes 2004
US$
Income
statement
information
Net profit as per IFRS
31,594,28990,264,205
12,084,131
31,594,289
US GAAP adjustments:
Amortisation for the 2004 year of exploration costs previously capitalised under IFRS
18.120.1
1,578,826
3,152,215
1,639,894
Deferred
tax
thereon
(573,963)(552,589)
(1,103,275)
(573,962)
Deferred tax adjustment relating to translation differences
18.220.2
(4,198,145)
8,126,515
(2,451,704)
Net profit as per US GAAP
30,208,51687,092,297
22,259,586
30,208,517
Balance sheet information
sheet
information
Stockholders' equity as per IFRS
206,944,935179,293,271 179,029,066
206,944,936
US GAAP adjustments:
Exploration costs capitalised under IFRS
18.120.1
(31,828,454) (31,828,454)
(31,828,455)
Deferred
tax
thereon
11,139,959
11,139,959
11,139,959
Amortisation of exploration costs capitalised under IFRS
18.120.1
27,089,720
25,510,894
22,358,679
Deferred
tax
thereon
(9,481,402)
(8,928,813)
(7,825,538)
Deferred tax adjustment relating to translation differences
18.220.2
(3,059,100)
1,139,045
(6,987,470)
Stockholders’ equity as per US GAAP
173,153,994 176,061,697
193,802,110193,802,111
18.1
20.1
Exploration costs capitalised under IFRS and the amortisation thereof
Under IFRS, certain exploration drilling costs were capitalised based on the favourable outlook of future
economical benefits associatedin line with the areas being drilled.accounting policy. Under US GAAP,
similar costs can be capitalised
only once a bankable feasibility study has been obtained to support the probability existence
of the future economical
benefits associated withproved and probable reserves within the area.
Exploration costs capitalised under IFRS are amortised on a units-of-production basis.method. Under US GAAP, the
accumulated amortisation should be reversed.
The application of US GAAP would have resulted in an increase in net profit of US$1.0 million (2005:
US$2.0 million and 2004: US$1.1 millionmillion) and a decrease in
stockholders’ equity of US$3.1 million (2005:
US$4.1 million and 2004: US$6.2 million.million).
18.2
20.2
Deferred tax adjustment relating to translation differences
Under IFRS, all carrying amounts used in the computation of deferred tax are translated from US Dollars into the
local tax paying currency at a closing rate of exchange, while under US GAAP, non-monetary carrying amounts are
are translated at their historical rates of exchange.
The application of US GAAP would have resulted in a decrease in net profit of US$4.2 million (2005: increase of
US$8.1 million and 2004: decrease of US$2.5 million) and a decrease in stockholders’ equity of US$3.1 million
(2005: increase of US$ 1.1 million and 2004: decrease of US$7.0 million).
F-153
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
21.
Change in comparative data
Income statement
The income statement comparative data has been amended to reclassify amounts expensed for exploration,
unwinding of non current provisions and fair value adjustments on refundable VAT and fuel taxes. The effect of the
change on the years 2004 and 2005 is as tabulated below. The net effect on the income statement was nil.
2005
2004
US$
Reduction in cost of sales
1,029,926
226,227
Exploration costs
(971,110)
(226,227)
Reduction in other operating expenses / (income)
3,024,561
167,817
Increase in Interest expense
(3,083,377)
(167,817)
Effect on profit for the year
-
-
F-154
Société d’Exploitation des Mines d’Or de Yatela S.A.
Financial statements
as of and for the year ended
December 31, 2006
F-155
Société d’Exploitation des Mines d’Or de Yatela S.A.
Financial statements and report of the Independent Registered Public Accounting Firm
For the year ended December 31, 2006
Report of independent registered public accounting firm
Income statements
Balance sheets
Statements of changes in stockholders’ equity
Cash flow statements
Notes to the financial statements
F-156
Report of the Independent Registered Public Accounting Firm
The board of directors and stockholders of Société d’Exploitation des Mines d’Or de Yatela S.A.
We have audited the accompanying balance sheet of Société d’Exploitation des Mines d’Or de Yatela S.A. as of
December 31 2006, and the related statements of income, changes in stockholders’ equity and cash flows for the year then
ended. These financial statements are the responsibility of the company’s management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, e vidence supporting
the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of
Société d’Exploitation des Mines d’Or de Yatela S.A. as of December 31 2006, and the results of its operations and its cash
flows for the year then ended, in conformity with International Financial Reporting Standards.
International Financial Reporting Standards vary in certain significant respects from United States generally accepted
accounting principles. Information relating to the nature and effect of such differences, as of and for the year ended
December 31 2006, is presented in note 21 to the financial statements.
KPMG Inc.
Johannesburg, South Africa
June 25, 2007
F-157
Société d’Exploitation des Mines d’Or de Yatela S.A.
Income Statement
For the years ended December 31,
2006
Unaudited
2005
Unaudited
2004
Notes
US$
Revenue
3
214,500,620
110,251,425
98,713,215
Cost of sales
(116,283,590)
(86,557,143)
(88,584,902)
Gross profit
98,217,030
23,694,282
10,128,313
Exploration costs
(27,821)
-
(115,255)
Other operating expenses
(896,162)
-
(112,279)
Net foreign exchange gain / (loss)
297,449
(878,663)
528,886
Special impairments of indirect taxes receivable and special
expenses for indirect taxes payable
5
(531,017)
(2,202,145)
-
Operating profit
4
97,059,479
20,613,474
10,429,665
Interest income
1,218,954
464,026
112,440
Interest expense
(2,996,042)
(4,622,595)
(3,043,989)
Profit before taxation
95,282,391
16,454,905
7,498,116
Taxation (expense) / benefit
6
(12,538,580)
181,096
-
Profit for the year
82,743,811
16,636,001
7,498,116
The accompanying notes are an integral part of these financial statements.
F-158
Société d’Exploitation des Mines d’Or de Yatela S.A.
Balance Sheet
As at December 31,
2006
Unaudited
2005
Notes
US$
ASSETS
Non-current assets
Property, plant and equipment
7
40,790,096
72,250,882
Inventories
8
-
4,138,853
Trade and other receivables
9
15,005,298
3,656,449
55,795,394
80,046,184
Current assets
Inventories
8
26,467,135
16,153,855
Trade and other receivables
9
13,311,818
16,218,342
Deferred taxation
10
925,383
181,096
Cash and cash equivalents
11
27,211,803
12,491,691
67,916,139
45,044,984
Total assets
123,711,533
125,091,168
EQUITY AND LIABILITIES
Equity
Stockholders' equity
78,893,000
47,149,189
Non-current liabilities
Provisions
12
14,506,491
14,739,630
14,506,491
14,739,630
Current liabilities
Trade and other payables
14
16,991,879
10,810,798
Interest-bearing loans
13.1
-
52,391,551
Taxation
16
13,320,163
-
30,312,042
63,202,349
Total liabilities
44,818,533
77,941,979
Total equity and liabilities
123,711,533
125,091,168
The accompanying notes are an integral part of these financial statements.
F-159
Société d’Exploitation des Mines d’Or de Yatela S.A.
Statements of changes in stockholders’ equity
For the years ended December 31,
Ordinary
stock
(note 18)
Non-
distributable
reserve
Retained
earnings
Total
stockholders'
equity
Note
US$
Balance at 31 December 2003
14,513
2,903
22,997,656
23,015,072
Profit for the year
-
-
7,498,116
7,498,116
Balance at 31 December 2004
14,513
2,903
30,495,772
30,513,188
Profit for the year
-
-
16,636,001
16,636,001
Balance at 31 December 2005
14,513
2,903
47,131,773
47,149,189
Profit for the year
-
-
82,743,811
82,743,811
Dividends declared
15
(51,000,000)
(51,000,000)
Balance at 31 December 2006
14,513
2,903
78,875,584
78,893,000
The non-distributable reserve is a legal reserve created in 2000 and is a requirement of the commercial law of Mali. This
law prescribes the transfer of 10% of profits, restricted to a maximum of 20% of ordinary share capital, to a non-
distributable reserve. Such reserve only becomes distributable when the company is liquidated.
The accompanying notes are an integral part of these financial statements.
F-160
Société d’Exploitation des Mines d’Or de Yatela S.A.
Cash flow statements
For the years ended December 31,
2006
Unaudited
2005
Unaudited
2004
Notes
US$
Net cash provided by operating activities
Profit for the year
82,743,811
16,636,001
7,498,116
Adjusted for:
Non-cash movements
- taxation charge per income statement
12,538,580
(181,096)
-
- deferred stripping
13,779,768
800,343
7,652,767
- adjustment for obsolete and slow moving consumable
stores
757,951
-
-
- net foreign exchange (gain) / loss
(297,449)
878,663
(528,886)
- unwinding of non-current provisions
689,997
190,217
164,795
- environmental restoration charge to the income statement
1,688,625
(1,945,491)
165,799
- employee long service obligation charge to the income
statement
(939,691)
232,803
472,065
- present value adjustment on VAT taxes refundable
1,100,081
369,120
-
- present value adjustment on refundable tax on fuel
21,528
167,000
-
- loss on disposal of property, plant and equipment
226,478
797,330
-
- amortisation of property, plant and equipment
39,381,404
22,925,663
25,206,260
- finance charges
1,184,436
3,896,258
2,879,194
Special impairments of indirect taxes refundable and
Special expenses for indirect taxes payable
531,017
845,510
-
Restoration expenditure
(1,626,621)
-
-
Decrease / (increase) in non-current inventories
4,138,853
(4,138,853)
-
Increase in non-current VAT refundable
(11,348,849)
(4,025,569)
-
Interest paid
(1,184,436)
(3,896,258)
(354,836)
Income tax paid
16
(452,463)
-
-
(Increase) / decrease in inventories
(11,071,231)
13,876,356
(13,857,946)
Decrease / (increase) in trade and other receivables
1,253,898
(1,486,756)
(1,559,519)
Increase / (decrease) in trade and other payables
6,597,221
932,265
(477,618)
139,712,908
46,873,506
27,260,191
Net cash used in investing activities
Capital expenditure
(2,586,002)
(7,531,083)
(9,457,677)
Additional waste stripping
(19,015,243)
(17,676,906)
(4,425,549)
Net cash outflow from investing activities
(21,601,245)
(25,207,989)
(13,883,226)
Net cash used in financing activities
Interest-bearing loans repaid
13.2
(52,391,551)
(24,687,602)
(2,387,904)
Dividends paid
15
(51,000,000)
-
-
Net cash outflow from financing activities
(103,391,551)
(24,687,602)
(2,387,904)
Net increase / (decrease) in cash and cash equivalents
14,720,112
(3,022,085)
10,989,061
Cash and cash equivalents at beginning of year
12,491,691
15,513,776
4,524,715
Cash and cash equivalents at end of year
11
27,211,803
12,491,691
15,513,776
The accompanying notes are an integral part of these financial statements.
F-161
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
1
Business Activities
Société d’Exploitation des Mines d’Or de Yatela S.A. (Yatela) is a company registered in Mali. The company
operates a mine for the commercial exploitation of gold in the Kayes region of Western Mali. Commercial
production commenced on July 3, 2001.
2
Accounting policies
Statement of compliance
The company financial statements are prepared in compliance with International Financial Reporting Standards
(IFRS) and Interpretations of those standards, as adopted by the International Accounting Standards Board (IASB)
and applicable legislation.
During the current financial year, the following new and revised accounting standards, amendments to standards and
new interpretations were adopted by Société d’Exploitation des Mines d’Or de Yatela S.A:
IAS 39 and IFRS 4
Amendment – Financial Guarantee Contracts;
IFRS 6
Exploration for and Evaluation of Mineral Resources;
IFRIC 4
Determining whether an Arrangement contains a Lease.
IFRIC 6
Liabilities arising from Participating in a Specific market: Waste Electrical and Electronic
Equipment.
In addition, the following interpretation was early adopted by Société d’Exploitation des Mines d’Or de Yatela S.A.
during previous financial years:
IFRIC 5
Rights to Interests arising from Decommissioning, Restoration and Environmental
Rehabilitation Funds.
In addition, the following interpretations were early adopted by Société d’Exploitation des Mines d’Or de Yatela S.A
during the current financial year:
IFRIC 7
Applying the Restatement approach under IAS 29, Financial Reporting in
Hyperinflationary Economies;
IFRIC 8
Scope of IFRS 2;
IFRIC 9
Reassessment of Embedded Derivatives;
IFRIC 10
Interim Reporting and Impairment.
The adoption of the above identified accounting standards, amendments to standards and new interpretations had no
financial impact on the financial statements.
The following accounting standards, amendments to standards and new interpretations, which are not yet mandatory
for Société d’Exploitation des Mines d’Or de Yatela S.A, have not been adopted in the current year:
IAS 1
Amendment – Capital Disclosures
Effective years beginning on or
after 1 January 2007
IFRS 7
Financial Instruments and Disclosures
Effective years beginning on or
after 1 January 2007
IFRS 8
Operating Segments
Effective years beginning on or
after 1 January 2009
IFRIC 11
IFRS 2 – Company and Treasury Share Transactions Effective years beginning on or
after 1 March 2007
IFRIC 12
Service Concession Arrangements
Effective years beginning on or
after 1 January 2008
The company has assessed the significance of these new standards, amendments to standards and new
interpretations, which will be applicable from 1 January 2007 and later years and concluded that they will have no
material financial impact. Both IAS 1 and IFRS 7 may have an impact on certain disclosures.
F-162
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.1
Basis of preparation
The financial statements are prepared according to the historical cost accounting convention, as modified by the
revaluation of certain financial instruments to fair value. The company's accounting policies as set out below are
consistent in all material respects with those applied in the previous year, except for the adoption of the above
mentioned new and revised standards. The financial statements are presented in US dollars.
2.2
Changes in accounting policies
The changes in accounting policies result from adoption of the following new/revised standards, amendments to
standards and interpretations:
IAS 39 and IFRS 4
Amendment – Financial Guarantee Contracts;
IFRS 6
Exploration for and Evaluation of Mineral Resources;
IFRIC 4
Determining whether an Arrangement contains a Lease;
IFRIC 6
Liabilities arising from Participating in a Specific market: Waste Electrical and Electronic
Equipment;
IFRIC 7
Applying the Restatement approach under IAS 29, Financial Reporting in
Hyperinflationary Economies;
IFRIC 8
Scope of IFRS 2;
IFRIC 9
Reassessment of Embedded Derivatives;
IFRIC 10
Interim Reporting and Impairment.
The principal effects of these changes in policies are discussed below.
IAS 39 and IFRS 4 “Amendment – Financial Guarantee Contracts”
The main impact of the IAS 39 and IFRS 4 Amendment – Financial Guarantee Contracts on the company, is the
recognition of an expense and a corresponding entry to liabilities for the fair value of any financial guarantee
contracts in existence. Subsequent measurement is dealt with in the financial instruments accounting policy. A
financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder
for a loss it incurs because a specified debtor fails to make payment when due in accordance with the original or
modified terms of a debt instrument. As a result, the company has applied IAS 39 and IFRS 4 Amendment – financial
guarantee contracts to all such issued contracts that are in existence.
The effect of the revised policy has no effect on the company financial statements and prior or current year profits.
IFRS 6 “Exploration for and Evaluation of Mineral Resources”
The adoption of IFRS 6 has resulted in the company clarifying the accounting policy for Exploration for and evaluation
of Mineral Resources which is described in "Significant accounting policies".
Moreover, assets defined as used in the exploration for and evaluation of Mineral Resources are required to be
separately identified from other property, plant and equipment, which are fully disclosed in Note 7.
The effect of the revised policy had no effect on the company financial statements and prior or current year financial
statements.
IFRIC 4 “Determining whether an arrangement contains a lease”
The company has applied IFRIC 4 in accordance with the transitional provisions of the interpretation.
IFRIC 4 requires an entity to assess its arrangements that do not take the legal form of a lease but convey the right to
use an asset, in order to determine whether such arrangements are, or contain, leases that should be accounted for
in accordance with IAS 17, Leases.
The effect of the assessment of arrangements that do not take the legal form of a lease but convey the right to use an
asset has no effect on company prior or current year profits however, certain operating expenses presented in note 4
have been reclassified as operating leases for 2005 and 2004 to conform to the 2006 presentation in accordance
with IFRIC 4.
F-163
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.2Changes in accounting policies (continued)
IFRIC 6 “Liabilities arising from Participating in a Specific market: Waste Electrical and Electronic
Equipment;”
This interpretation provides guidance on the recognition in the financial statements of producers, of liabilities for
waste management under the Economic Union Directive on Waste Electrical and Electronic Equipment in respect of
sales of historical household equipment.
The adoption of this IFRIC has no effect on company financial statements and prior or current year financial
statements.
IFRIC 7 “Applying the Restatement approach under IAS 29, Financial reporting in Hyperinflationary
Economies”
This Interpretation provides guidance on how to apply the requirements of IAS 29 in a reporting period in which an
entity identifies the existence of hyperinflation in the economy of its functional currency, when that economy was not
hyperinflationary in the prior period, and the entity therefore restates its financial statements in accordance with IAS
29.
The adoption of this IFRIC had no effect on the financial statements and prior or current year financial statements.
IFRIC 8 “Scope of IFRS 2”
IFRS 2 applies to share-based payment transactions in which the entity receives or acquires goods or services
where the identifiable consideration received is less than the fair value of the equity instruments issued.
The adoption of this IFRIC had no effect on the financial statements and prior or current year financial statements.
IFRIC 9 “Reassessment of Embedded Derivatives"
IAS 39 paragraph 10 describes an embedded derivative as ‘a component of a hybrid (combined) instrument that also
includes a non-derivative host contract - with the effect that some of the cash flows of the combined instrument vary
in a way similar to a stand-alone derivative. IAS 39 paragraph 11 requires an embedded derivative to be separated
from the host contract and accounted for as a derivative under certain presented circumstances.
IFRIC 9 specifies that an entity shall assess whether an embedded derivative is required to be separated from the
host contract and accounted for as a derivative when the entity first becomes a party to the contract. Subsequent
reassessment is prohibited unless there is a change in the terms of the contract that significantly modifies the cash
flows that otherwise would be required under the contract, in which case reassessment is required.
The adoption of this IFRIC has no effect on company financial statements and prior or current year financial
statements.
IFRIC 10 “Interim Reporting and Impairment"
The company is required to assess goodwill for impairment at every reporting date, to assess investments in equity
instruments and in financial assets carried at cost for impairment at every balance sheet date and, if required, to
recognise an impairment loss at that date. This Interpretation requires that the company shall not reverse an
impairment loss recognised in a previous interim period in respect of an investment in either an equity instrument or
a financial asset carried at cost.
The adoption of this IFRIC had no effect on the financial statements and prior or current year financial statements.
F-164
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.3Significant accountingjudgements and estimates
Use of estimates: The preparation of the financial statements requires the company’s management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses
during the reporting period. The determination of estimates requires the exercise of judgement based on various
assumptions and other factors such as historical experience, current and expected economic conditions, and in some
cases actuarial techniques. Actual results could differ from those estimates.
The more significant areas requiring the use of management estimates and assumptions relate to mineral reserves
that are the basis of future cash flow estimates and unit-of-production depreciation, depletion and amortisation
calculations; env ironmental, reclamation and closure obligations; estimates of recoverable gold and other materials in
heap leach pads; asset impairments, write-downs of inventory to net realisable value; post-employment, post-
retirement and other employee benefit liabilities, the fair value and accounting treatment of financial instruments and
deferred taxation.
Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts
of assets and liabilities within the next financial year are discussed below.
Carrying value of property, plant and equipment
All mining assets are amortised using the units-of-production (UOP) method where the mine operating plan calls for
production from well-defined mineral reserves over proved and probable reserves.
For mobile and other equipment, the straight-line method is applied over the estimated useful life of the asset which
does not exceed the estimated mine life based on proved and probable mineral reserves as the useful lives of these
assets are considered to be limited to the life of the mine.
The calculation of the UOP rate of amortisation could be impacted to the extent that actual production in the future is
different from current forecast production based on proved and probable mineral reserves. This would generally result
to the extent that there are significant changes in any of the factors or assumptions used in estimating mineral
reserves.
These factors could include:
•
changes in proved and probable mineral reserves;
•
the grade of mineral reserves may vary significantly from time to time;
•
differences between actual commodity prices and commodity price assumptions;
•
unforeseen operational issues;
•
changes in capital, operating, mining, processing and reclamation costs, discount rates and foreign exchange
rates; and
• changes in mineral reserves could similarly impact the useful lives of assets depreciated on a straight-line basis,
where those lives are limited to the life of the mine.
The recoverable amounts of individual assets have been determined based on the higher of value-in-use calculations
and fair values less costs to sell. These calculations require the use of estimates and assumptions. It is reasonably
possible that the gold price assumption may change which may then impact our estimated life of mine determinant
and may then require a material adjustment to the carrying value of property, plant and equipment.
The company reviews and tests the carrying value of assets when events or changes in circumstances suggest that
the carrying amount may not be recoverable. Assets are grouped at the lowest level for which identifiable cash flows
are largely independent of cash flows of other assets. If there are indications that impairment may have occurred,
estimates are prepared of expected future cash flows for each group of assets. Expected future cash flows used to
determine the value in use of property, plant and equipment are inherently uncertain and could materially change
F-165
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.3Significant accounting judgements and estimates (continued)
Carrying value of property, plant and equipment (continued)
over time. They are significantly affected by a number of factors including published reserves, resources, exploration
potential and production estimates, together with economic factors such as spot and future gold prices, discount
rates, foreign currency exchange rates, estimates of costs to produce reserves and future capital expenditure.
Production start date
The company assesses the construction project to determine when it moves into the production stage. The criteria
used to assess the start date are determined based on the unique nature of the construction project such as the
complexity of a plant and its location. The company considers various relevant criteria to assess when the mine is
substantially complete and ready for its intended use and moves into the production stage. Some of the criteria
would include, but, are not limited to, the following:
•
the level of capital expenditure compared to the construction cost estimates;
•
completion of a reasonable period of testing of the mine plant and equipment;
•
ability to produce gold in saleable form (within specifications and with insignificant revenue);
•
ability to sustain ongoing production of gold.
When a mine construction project moves into the production stage, the capitalisation of certain mine construction
costs ceases and costs are either regarded as inventory or expensed, except for capitalisable costs related to mining
asset additions or improvements or reserve development.
Income taxes
The company is subject to income tax. Significant judgement is required in determining the provision for income taxes
due to the complexity of legislation. There are many transactions and calculations for which the ultimate tax
determination is uncertain during the ordinary course of business. The company recognises liabilities for anticipated
tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these
matters is different from the amounts that were initially recorded, such differences will impact the income tax and
deferred tax provisions in the period in which such determination is made.
The company recognises the net future tax benefit related to deferred income tax assets to the extent that it is
probable that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability
of deferred income tax assets requires the company to make significant estimates related to expectations of future
taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the
application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ
significantly from estimates, the ability of the company to realise the net deferred tax assets recorded at the balance
sheet date could be impacted.
Additionally, future changes in tax laws in the jurisdiction in which the company operates could limit the ability of the
company to obtain tax deductions in future periods.
Provision for environmental rehabilitation obligations
The company’s mining and exploration activities are subject to various laws and regulations governing the protection
of the environment. The company recognises management’s best estimate for asset retirement obligations in the
period in which they are incurred. Actual costs incurred in future periods could differ materially from the estimates.
Additionally, future changes to environmental laws and regulations, life of mine estimates and discount rates could
affect the carrying amount of this provision. Such changes in mineral reserves could similarly impact the useful lives
of assets depreciated on a straight-line-basis, where those lives are limited to the life of mine.
F-166
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.3Significant accounting judgements and estimates (continued)
Stockpiles, gold in process, ore on leach pad and product inventories
Costs that are incurred in or benefit the production process are accumulated as stockpiles, gold in process, ore on
leach pads and product inventories. Net realisable value tests are performed at least annually and represent the
estimated future sales price of the product based on prevailing and long-term metals prices, less estimated costs to
complete production and bring the product to sale.
Stockpiles are measured by estimating the number of tonnes added and removed from the stockpile, the number of
contained gold ounces based on assay data, and the estimated recovery percentage based on the expected
processing method. Stockpile tonnages are verified by periodic surveys.
Although the quantities of recoverable metal are reconciled by comparing the grades of ore to the quantities of gold
actually recovered (metallurgical balancing), the nature of the process inherently limits the ability to precisely monitor
recoverability levels. As a result, the metallurgical balancing process is constantly monitored and the engineering
estimates are refined based on actual results over time.
Recoverable tax, rebates, levies and duties
Société d’Exploitation des Mines d’Or de Yatela S.A. has unresolved tax disputes. If the outstanding input taxes are
not received and the tax disputes are not resolved in a favourable manner, it could have an adverse effect upon the
carrying value of these assets.
Contingencies
By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. The
assessment of such contingencies inherently involves the exercise of judgement and estimates of the outcome of
future events.
2.5Summary of significant accounting policies
Foreign currency translation
Functional currency
Items included in the financial statements are measured using the currency of the primary economic environment in
which the entity operates (the ‘functional currency’). The functional currency of United States Dollars (US$) is used
as opposed to the currency of the country in which the enterprise is domiciled, namely Franc de la Communauté
Financière d’Afrique (F CFA). The decision has been taken on the basis of US$ being the functional currency in
which the enterprise receives its revenue and majority of costs are mainly influenced by the US dollar.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the approximate exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resultin g from the settlement of foreign
currency transactions and from the translation at the year-end exchange rate of monetary assets and liabilities
denominated in foreign currencies are recognised in the income statement, except for derivative balances that are
within the scope of IAS 39. Translation differences on these balances are reported as part of their fair value gain or
loss.
Non monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated
using the exchange rate at the date of the transaction.
F-167
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.5Summary of significant accounting policies (continued)
Property, plant and equipment
Property, plant and equipment are recorded at cost less accumulated amortisation and impairments. Cost includes
pre-production expenditure incurred during the development of a mine and the present value of future
decommissioning costs. Cost also includes finance charges capitalised during the construction period where such
expenditure is financed by borrowings.
If there is an indication that the recoverable amount of any property, plant and equipment is less than the carrying
value, the recoverable amount is estimated and an allowance is made for the impairment in value.
Subsequent costs are included in the asset’s carrying amount only when it is probable that future economic benefits
associated with the item will flow to the company, and the cost of the item can be measured reliably. All other repairs
and maintenance are charged to the income statement during the financial period in which they are incurred.
Amortisation of assets is calculated to allocate the cost of each asset to its residual value over its estimated useful
life, for those assets not amortised on the units-of-production method, as follows:
•
buildings up to life of mine;
•
plant and machinery up to life of mine;
•
equipment and motor vehicles up to five years on a straight line basis; and
•
computer equipment up to three years on a straight line basis.
where life of mine is determined as the period up to the end of commercial production or the period up to which
the company has satisfied all its obligations acquired by virtue of the Mining Convention agreed with the
Government of Mali.
Major renovations are depreciated over the remaining useful life of the related asset or to the date of the next major
renovation, whichever is sooner.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in
the income statement.
Mine development costs
Capitalised mine development costs include expenditure incurred to develop new orebodies, to define further
mineralisation in existing orebodies, to expand the capacity of the mine and to maintain production. Where funds
have been borrowed specifically to finance a project, the amount of interest capitalised represents the actual
borrowing costs incurred. Mine development costs include acquired proved and probable Mineral Resources at cost
at acquisition date.
Depreciation, depletion and amortisation of mine development costs are computed by the units-of-production method
based on estimated proved and probable mineral reserves. Proved and probable mineral reserves reflect estimated
quantities of economically recoverable reserves which can be recovered in the future from known mineral deposits.
These reserves are amortised from the date on which commercial production begins.
Stripping costs incurred in open-pit operations during the production phase to remove additional waste are charged to
operating costs on the basis of the average life of mine stripping ratio and the average life of mine costs per tonne.
The average stripping ratio is calculated as the number of tonnes of waste material expected to be removed during
the life of mine per tonne of ore mined. The average life of mine cost per tonne is calculated as the total expected
costs to be incurred to mine the orebody, divided by the number of tonnes expected to be mined. The average life of
mine stripping ratio and the average life of mine cost per tonne are recalculated annually in the light of additional
knowledge and changes in estimates.
The cost of the “excess stripping” is capitalised as mine development costs when the actual mining costs exceed the
sum of the adjusted tonnes mined, being the actual ore tonnes plus the product of the actual ore tonnes multiplied by
the average life of mine stripping ratio multiplied by the life of mine cost per tonne. When the actual mining costs are
below the sum of the adjusted tonnes mined, being the actual ore tonnes plus the product of the actual ore tonne
multiplied by the average life of mine stripping ratio, multiplied by the life of mine cost per tonnes, previously
capitalised costs are expensed to increase the cost up to the average.
F-168
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.4Summary of significant accounting policies (continued)
Property, plant and equipment (continued)
The cost of stripping in any period will be reflective of the average stripping rates for the orebody as a whole.
Changes in the life of mine stripping ratio are accounted for prospectively as a change in estimate.
Mine infrastructure
Mine plant facilities, including decommissioning assets, are amortised using the lesser of their useful life or units-of-
production method based on estimated proved and probable mineral reserves. Other property, plant and equipment
comprising vehicles and computer equipment are depreciated by the straight-line method over their estimated useful
lives.
Exploration and Evaluation assets
All exploration costs are expensed until the directors conclude that a future economic benefit is more likely than not
of being realised. In evaluating if expenditures meet this criterion to be capitalised, the directors utilise several
different sources of information depending on the level of exploration. While the criteria for concluding that
expenditure should be capitalised is always probable, the information that the directors use to make that
determination depends on the level of exploration.
(a) Costs on greenfields sites, being those where the company does not have any mineral deposits which are
already being mined or developed, is expensed as incurred until the directors are able to demonstrate that
future economic benefits are probable, which generally will be the establishment of proved and probable
reserves at this location.
(b) Costs on brownfields sites, being those adjacent to mineral deposits which are already being mined or
developed, is expensed as incurred until the directors are able to demonstrate that future economic benefits are
probable, which generally will be the establishment of increased proved and probable reserves after which the
expenditure is capitalised as a mine development cost.
(c) Costs relating to extensions of mineral deposits, which are already being mined or developed, including
expenditure on the definition of mineralisation of such mineral deposits, is capitalised as a mine development
cost.
Costs relating to property acquisitions are capitalised within mine development costs.
Impairment of assets
Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for
impairment and whenever events or changes in circumstance indicate that the carrying amount may not be
recoverable. Assets that are subject to amortisation are tested for impairment whenever events or changes in
circumstance indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value, less costs to sell and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash flows.
Impairment calculation assumptions include life of mine plans based on published reserves and resou rces,
management’s estimate of the future gold price, based on current market price trends, foreign exchange rates, and a
pre-tax discount rate adjusted for country and project risk. It is therefore reasonably possible that changes could
occur which may affect the recoverability of property, plant and equipment and intangible assets.
F-169
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.4Summary of significant accounting policies (continued)
Borrowing costs
Interest on borrowings relating to the financing of major capital projects under construction is capitalised during the
construction phase as part of the cost of the project. Such borrowing costs are capitalised over the period during
which the asset is being acquired or constructed and borrowings have been incurred. Capitalisation ceases when
construction is interrupted for an extended period or when the asset is substantially complete. Other borrowing costs
are expensed as incurred.
Leased assets
Operating lease rentals are charged against operating profits on a straight line basis unless another systematic
manner related to the period the assets concerned will be used is more representative.
Exploration and research expenditure
Pre – licence costs are recognised in profit or loss as incurred. Exploration and research expenditure is expensed in
the year in which it is incurred. These expenses include: geological and geographical costs, labour, mineral
resources and exploratory drilling.
Inventories
Inventories are valued at the lower of cost and net realisable value after appropriate allowances for redundant and
slow moving items. Cost is determined on the following bases:
•
gold in process is valued at the average total production cost at the relevant stage of production;
•
gold on hand is valued on an average total production cost method;
•
Ore stockpiles are valued at the average moving cost of mining and stockpiling the ore. Stockpiles are allocated
as a non-current asset where the stockpile exceeds current processing capacity;
•
By-products are valued on an average total production cost method.
•
consumable stores are valued at average cost; and
•
Heap leach pad materials are measured on an average total production cost basis. The cost of materials on the
leach pad from which gold is expected to be recovered in a period greater than 12 months is classified as a non-
current asset.
A portion of the related depreciation, depletion and amortisation charge is included in the cost of inventory.
Provisions
Provisions are recognised when the company has a present obligation, whether legal or constructive, as a result of a
past event for which it is probable that an outflow of resources embodying economic benefits will be required to settle
the obligation and a reliable estimate can be made of the amount of the obligation.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle
the present obligation at the balance sheet date. The discount rate used to determine the present value reflects
current market assessments of the time value of money and the risks specific to the liability.
Employeebenefits
Short-term employee benefits
The cost of all short-term employee benefits is recognised during the period in which the employee renders the
related service.
The provisions for employee entitlements to wages, salaries, and annual leave represent the amount which the
company has a present obligation to pay as a result of employees’ services provided to the balance sheet date. The
provisions have been calculated at undiscounted amounts based on current wage and salary rates.
F-170
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.5Summary of significant accounting policies (continued)
Employee
benefits (continued)
Long-term employee benefits
Liabilities for employee benefits which are not expected to be settled within 12 months are discounted at a pre tax
rate that reflects current market assessments of the time value of money.
The Company and all employees contribute towards the Malian Government social security fund. Accordingly, on
retirement, the Malian employees are entitled to a retirement benefit from the Malian Government. Expatriate
employees are reimbursed their contributions made to the social security fund.
Environmental rehabilitation expenditure
Long-term environmental rehabilitation obligations comprising decommissioning and restoration are based on the
company's environmental management plans, in compliance with the current environmental and regulatory
requirements.
Decommissioning costs
The provision for decommissioning represents the cost that will arise from rectifying damage caused before
production commenced. Accordingly an asset is recognised and included within mine infrastructure.
Decommissioning costs are provided for at the present value of the expenditures expected to settle the obligation,
using estimated cash flows based on current prices. The unwinding of the decommissioning obligation is included in
the income statement. The estimated future costs of decommissioning obligations are regularly reviewed and
adjusted as appropriate for ne w circumstances or changes in law or technology. Changes in estimates are capitalised
or reversed against the relevant asset. The estimates are discounted at a pre-tax rate that reflects current market
assessments of the time value of money.
Gains or losses, from the expected disposal of assets are not taken into account when determining the provision.
Restoration costs
The provision for restoration represents the cost of restoring site damage after the commencement of production.
Increases in the provision are charged to the income statement as a cost of production.
Gross restoration costs are estimated at the present value of the expenditures expected to settle the obligation, using
estimated cash flows based on current prices. The estimates are discounted at a pre-tax rate that reflects current
market assessments of the time value of money and risks specific to the liability.
Revenue recognition
Revenue is recognised at the fair value of the consideration received or receivable to the extent that it is probable
that the economic benefits will flow to the company and the revenue can be reliably measured. The following criteria
must also be present:
•
the sale of mining products is recognised when the significant risks and rewards of ownership of the products
are transferred to the buyer;
•
interest is recognised on a time proportion basis, taking account of the principal outstanding and the effective
rate over the period to maturity, when it is determined that such income will accrue to the company; and
•
Where a by-product is not regarded as significant, revenue is credited against cost of sales, when the significant
risks and rewards of ownership of the products are transferred to the buyer.
F-171
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.5Summary of significant accounting policies (continued)
Income Tax
Deferred taxation is provided on all qualifying temporary differences at the balance sheet date between the tax bases
of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax assets are only recognised to the extent that it is probable that the deductible temporary differences will
reverse in the foreseeable future and future taxable profit will be available against which the temporary difference can
be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it
is no longer probable that sufficient future taxable profit will be available to allow all or part of the deferred tax asset to
be utilised.
A deferred tax liability is recognised for all taxable temporary differences if it is probable that the temporary difference
will reverse in the foreseeable future.
Deferred tax assets and liabilities are measured at future anticipated tax rates, which have been enacted or
substantively enacted at the balance sheet date.
Current and deferred tax is recognised as income or expense and included in the profit or loss for the period, except
to the extent that the tax arises from a transaction or event which is recognised, in the same or a different period
directly in equity; or a business combination that is an acquisition.
Current taxation is measured on taxable income at the applicable statutory rate.
Special items
Items of income and expense that are material and require separate disclosure, in accordance with IAS 1.86, are
classified as “special items” on the face of the income statement. Special items that relate to the underlying
performance of the business are classified as “operating special items” and include impairment charges and
reversals. Special items that do not relate to underlying business performance are classified as “non-operating
special items ” and are presented below “Operating (loss) profit” on the income statement.
Dividend distribution
Dividend distribution to the company’s shareholders is recognised as a liability in the company’s financial statements
in the period in which the dividends are declared by the board of directors of Société d’Exploitation des Mines d’Or
de Yatela S.A..
Financial instruments
Financial instruments recognised in the balance sheet include trade and other receivables, cash and cash
equivalents, borrowings and trade and other payables.
Financial instruments are initially measured at fair value when the company becomes a party to their contractual
arrangements. Transaction costs are included in the initial measurement of financial instruments. The subsequent
measurement of financial instruments is dealt with below.
A financial asset is derecognised when the right to receive cash flows from the asset has expired or the company has
transferred its rights to receive cash and either (a) has transferred substantially all the risks and rewards of the asset,
or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred
control of the assets.
F-172
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2.6Summary of significant accounting policies (continued)
Financial instruments (continued)
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
On derecognition of a financial asset, the difference between the proceeds received or receivable and the carrying
amount of the asset is included in income.
On derecognition of a financial liability, the difference between the carrying amount of the liability extinguished or
transferred to another party and the amount paid is included in income.
Regular way purchases and sales of all financial assets and liabilities are accounted for at settlement date.
Trade and other receivables
Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using
the effective interest method, less accumulated impairment. Impairment of trade and other receivables is established
when there is objective evidence as a result of a loss event that the company will not be able to collect all amounts
due according to the original terms of the receivables. The amount of the impairment is the difference between the
asset’s carrying amount and the present value of estimated future cash flows, d iscounted at the original effective
interest rate. The impairment is recognised in the income statement.
Cash and cash equivalents
Cash and cash equivalents are defined as cash on hand, demand deposits and short-term, highly liquid investments
readily convertible to known amounts of cash and subject to insignificant risk of changes in value and are
subsequently measured at carrying value which is deemed to be fair value as they have a short-term maturity.
Cash which is subject to legal or contractual restrictions on use is classified separately.
Financial liabilities
Financial liabilities are subsequently measured at amortised cost, using the effective interest rate method.
F-173
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2006
Unaudited
2005
Unaudited
2004
US$
3
Revenue
Product sales
214,500,620
110,251,425
98,713,215
4
Operating profit
Operating profit is arrived at after taking account of :
Cost of sales
Royalties
12,995,391
6,608,098
5,914,768
Amortisation of property, plant and equipment (note 7)
39,381,404
22,925,663
25,206,260
Auditors’ remuneration
- Statutory audit fees
32,669
17,891
47,030
- External audit – audit fees
326,558
56,851
62,739
Contributions to Malian State social security fund
936,123
965,783
902,783
Legal fees
15,045
10,505
10,157
Remuneration other that to employees
- operating leases
40,948,998
35,831,851
33,419,089
- management fees
2,145,006
1,102,294
987,133
- other contractors
3,621,338
4,479,024
5,541,676
Salaries, wages and benefits
5,175,254
4,750,700
5,879,176
Provision for obsolete consumable stores
757,951
-
-
Consumable stores
17,904,444
11,747,823
15,248,347
Inventory movement
(6,222,362)
10,774,414
(13,445,612)
Deferred stripping adjustment
(5,235,475)
(16,876,563)
3,227,218
Other cash operating expenses
3,501,246
4,162,809
5,584,138
Other operating expenses
- other
896,162
-
112,279
5
Special impairments of indirect taxes receivable and special
expenses for indirect taxes payable
Payment relating to 2000 to 2002 tax audit (note 5.1)
-
569,135
-
Impairment of VAT refundable by Government of Mali (note 5.2)
531,017
223,510
-
Payment relating to 2003 / 2004 tax audit (note 5.3)
-
787,500
-
Impairment of fuel taxes refundable by Government of Mali (note
5.4)
-
622,000
-
531,017
2,202,145
-
5.1 Payment relating to 2000 to 2002 tax audit
During November 2003, the Malian authorities performed a tax audit of the corporate taxation and various indirect
taxes at the company for fiscal years 2000 to 2002. The results of the audit indicated that the Company owed the
Government of Mali F CFA 790 million (US$1.4 million as of December 31, 2004) of various taxes and penalties, which
was communicated by way of a formal letter of assessment to the company. According to Malian government officials
the main reasons for the additional taxes were:
• withholding taxes payable;
• fringe benefits on certain facilities provided to expatriate employees that should have been taxed differently; and
• different interpretations of the law with respect to VAT payable on interest paid. The company was of the opinion
that the indirect tax submissions by the Company were in compliance with applicable laws and regulations.
Without admitting that the tax submissions had been prepared in an incorrect manner in terms of the prevailing laws
and regulations, the directors decided to make a payment of F CFA 350 million (US$0.6 million) to the Government of
Mali in order to close this issue and allow management to concentrate on the company's core business. Accordingly,
the payment was recorded as a special item rather than as an under provision of prior year taxation. Payment of this
amount enabled the company to reach agreement with the Government of Mali on all taxation issues which were in
dispute and to establish a protocol for the indirect taxes that were in dispute for the future.
F-174
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
5.2
Impairment of VAT refundable by Government of Mali
The gross amount of VAT refundable by the Government of Mali amounted to US$11.7 million at December 31, 2005.
Management estimated that only US$11.5 million was recoverable based on previous VAT audits performed by the
authorities. Accordingly, an impairment of VAT refundable of US$0.2 million was made. In 2006 an additional
impairment of VAT refundable of $0.5 million was made.
5.3
Payment relating to 2003 / 2004 tax audit
During the 2005 financial year, a tax assessment was received for various indirect taxes from the Malian authorities for
the 2003 and 2004 fiscal years. Management objected to the assessment as it did not reflect the legal position for the
years assessed and thus a dispute arose between the Government of Mali and the company. Without admitting guilt
the Company decided to pay the Government of Mali F CFA 446.1 million (US$0.8 million) as agreed by both parties.
5.4
Impairment of fuel taxes refundable by Government of Mali
At 31 December 2005, a gross amount of US$5.7 million relating to fuel taxes was receivable from the Government of
Mali. However, as a result of differences between the company and the Government of Mali, an impairment of
US$0.6 million was made by the Company.
2006
Unaudited
2005
Unaudited
2004
US$
6
Taxation
All pre-tax income and income tax expense is related to operations in Mali. The convention agreement specified that
the company will be taxed at 0% until July 2006.
Current tax expense (note 16)
13,282,867
-
-
Deferred tax expense (income) (note 10)
(744,287)
(181,096)
-
12,538,580
(181,096)
-
A reconciliation of the statutory tax rate to that charged in the income statement is set out in the following table:
%
%
%
Statutory tax rate in Mali
35.0
35.0
35.0
Disallowable expenses:
0.1
6.6
-
-Net foreign exchange loss
(0.1)
1.9
-
-Special impairment of indirect taxes receivable and special
expenses for indirect taxes payable
0.2
4.7
-
Effect of tax holiday
(21.7)
(42.7)
(35.0)
Translation (loss) / gain on current and deferred tax
(0.2)
-
-
Effective tax rate
13.2
(1.1)
-
F-175
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
Mine
development
costs
Work in
progress
Mine infra-
structure
Total
US$
US$
US$
US$
7.1
Property, plant and equipment at
December 31, 2006
Cost
Balance at January 1, 2006
78,759,214
70,083
86,061,999
164,891,296
Additions
705,112
1,038,070
842,820
2,586,002
Disposals
-
-
(708,707)
(708,707)
Transfers & other movements
4,814,534
109,167
936,863
5,860,564
Balance at December 31, 2006
84,278,860
1,217,320
87,132,975
172,629,155
Accumulated amortisation
Balance at January 1, 2006
43,559,660
-
49,080,754
92,640,414
Amortisation for the year
13,084,715
-
26,296,689
39,381,404
Disposals
-
-
(182,759)
(182,759)
Balance at December 31, 2006
56,644,375
-
75,194,684
131,839,059
Carrying amount at December 31, 2006
27,634,485
1,217,320
11,938,291
40,790,096
Mine
development
costs
Work in
progress
Mine infra-
structure
Total
US$
US$
US$
US$
Property, plant and equipment at December
31, 2005 (Unaudited)
Cost
Balance at January 1, 2005
62,679,979
3,289,607
65,389,829
131,359,415
Additions
602,683
683,290
6,245,110
7,531,083
Disposals
-
-
(797,330)
(797,330)
Transfers & other movements
15,476,552
(3,902,814)
15,224,390
26,798,128
Balance at December 31, 2005
78,759,214
70,083
86,061,999
164,891,296
Accumulated amortisation
Balance at January 1, 2005
33,460,010
-
36,254,739
69,714,749
Amortisation for the year
10,099,650
-
12,826,015
22,925,665
Disposals
-
-
-
-
Transfers & other movements
-
-
-
-
Balance at December 31, 2005
43,559,660
-
49,080,754
92,640,414
Carrying amount at December 31, 2005
35,199,554
70,083
36,981,245
72,250,882
Included within the net book value of Mine Development costs is US$23.6 million (2005: US$ 18.4 million) of
capitalised stripping costs.
2006
Unaudited
2005
US$
8
Inventories
Non-current portion of inventories
Ore stockpiles
-
4,138,853
Current portion of inventories
Ore stockpiles
11,479,030
2,072,322
Gold bullion
760,511
1,326,407
Gold-in-process
9,218,478
7,698,074
Consumable stores
5,009,116
5,057,052
Consumable stores
5,767,067
5,057,052
Less: adjustment for obsolete and slow-moving items
(757,951)
-
Total current inventory
26,467,135
16,153,855
Total inventories
26,467,135
20,292,708
F-176
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2006
Unaudited
2005
US$
9
Trade and other receivables
Related party receivables
– AngloGold Ashanti Mali S.A.
-
164
– Société des Mines d’Or de Sadiola S.A.
262
55,198
– Rand Refinery
3,926,803
3,247,206
3,927,065
3,302,568
Vat refundable by Government of Mali (note 5.2 and 20.2.1)
20,204,542
10,787,550
Prepaid expenses
59,790
203,403
Refundable tax on fuel by Government of Mali (note 5.4 and 20.2.2)
3,431,930
4,784,000
Other
693,789
797,270
Total current and non-current trade and other receivables
28,317,116
19,874,791
Less: non-current portion of amounts refundable by Government of Mali
15,005,298
3,656,449
Total current trade and other receivables
13,311,818
16,218,342
10 Deferred taxation
The deferred taxation asset / (liability) relating to temporary differences is made
up as follows:
- Property, plant and equipment
(6,382,235)
(2,501,844)
- Non-current provisions
5,077,272
2,587,443
- Inventory
137,570
94,263
- Present value adjustment on indirect taxes receivable
580,205
1,234
- Current provisions
1,512,571
-
925,383
181,096
The movement on the net deferred tax asset is as follows:
Balance at beginning of year
181,096
-
Deferred tax income (note 6)
744,287
181,096
Balance at end of year
925,383
181,096
11 Cash and cash equivalents
Malian bank balances
1,240,077
439,773
London and South African bank balances
25,959,503
12,043,017
Petty cash
12,223
8,901
27,211,803
12,491,691
12 Provisions
Environmental rehabilitation obligation
Balance at beginning of year
13,799,939
5,654,237
Unwinding of obligation
689,997
169,628
Change in estimate
1,643,176
7,976,074
Utilised during the year
(1,626,621)
-
Balance at end of year
14,506,491
13,799,939
Employee long service obligation
Balance at beginning of year
939,691
686,299
Unwinding of obligation
-
20,589
Change in estimate
(939,691)
232,803
Balance at end of year
-
939,691
Total provisions
14,506,491
14,739,630
Assumptions applicable to all provisions
Estimated gross future environmental rehabilitation costs
US$16.2 million
US$15.2 million
Estimated gross future employee long service costs
-
US$0.9 million
Discount rate
5%
3%
Inflation rate
2.25%
2.25%
Average cash flow period
8 years
8 years
F-177
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
The average cash flow period is based on the current estimate of the time necessary to fulfil all obligations, which is subject
to revision annually. The estimated gross future costs are based on management's best estimates at December 31, 2006,
and are also subject to revision annually. The change in estimate arises due to the change in the assumption of the
discount rate applicable and a change in the estimate of the gross future costs.
Malian Government social security fund
The company and all employees contribute to the Malian Government social security fund. On retirement, the Malian
employees are entitled to a retirement benefit from the fund. The fund reimburses expatriate employees only their own
contributions made to the fund. Accordingly, there is no obligation for defined employee benefits. The company's
contributions to the Malian Government social security fund are disclosed in note 4.
2006
Unaudited
2005
US$
13
Interest-bearing loans
13.1
Summary of interest-bearing loans
Stockholders subordinated loans
-
51,197,599
- Government of Mali
-
1,532,203
- Sadiola Exploration Limited
-
49,665,396
Investec Bank
-
1,193,952
Total interest-bearing loans
-
52,391,551
Less: current portion included in current liabilities
-
(52,391,551)
Non-current portion
-
-
The stockholders subordinated loans were denominated in US dollars and interest accrued at a LIBOR dollar rate
plus 2%. The loans were fully repaid in 2006.
The Investec loan was denominated in US dollars and interest accrued at a nominal annual rate (compounded
semi-annually) of 6.5% calculated on the daily balance of the total outstanding on the basis of a 360-day year. The
loan was fully repaid in 2006.
13.2
Interest-bearing loans repaid
Balance at beginning of year
(52,391,551)
(77,079,153)
Balance at end of year
-
52,391,551
Amount repaid
(52,391,551)
(24,687,602)
14
Trade and other payables
Related party payables
– AngloGold Ashanti Limited
222,632
106,016
– AngloGold Ashanti Mali S.A.
446,404
45,156
– Société d’Exploitation des Mines d’Or de Sadiola S.A.
381,698
216,019
– Anglo American Plc
-
1,698
1,050,734
368,889
Accruals
6,381,889
7,579,117
Trade and other payables
9,559,256
2,862,792
16,991,879
10,810,798
F-178
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
2006
Unaudited
2005
Unaudited
2004
US$
15
Dividend paid
Amount outstanding at beginning of year
-
-
-
Dividends declared during the year
51,000,000
-
-
Less: amount outstanding at end of year
-
-
-
Dividends paid
51,000,000
-
-
16
Income tax paid
Amount payable / (receivable) at beginning of year
-
-
-
Current tax expense (note 6)
13,282,867
-
-
Translation difference
489,759
-
-
Amount receivable / (payable) at end of year
(13,320,163)
-
-
Income tax paid
452,463
-
-
2006
Unaudited
2005
US$
17
Contractual commitments and contingencies
17.1
Operating leases
At December 31, 2006, the company was committed to making the following minimum payments in respect of
operating leases for amongst other, hire of plant and equipment.
Expiry within:
- One year
8,487,894
3,798,799
These balances are calculated based on the minimum rentals due in terms of the contract up to and including the
expiry date (October 2007) or minimum notice period (six months), whichever is the lesser. The contract does not
provide for guaranteed escalations. The company has no other restrictions on any of its leasing arrangements.
17.2
Capital commitments
Contracted for
5,694,800
7,173,397
Not contracted for
3,282,647
-
Total authorised by the directors
8,977,447
7,173,397
The proposed capital expenditure for mine infrastructure will be financed from cash resources generated by
operating activities of the company.
17.3
The company is subject to and pays taxes in Mali. Some of these taxes are defined by contractual agreements with
the local government, but others are defined by the general corporate tax laws of the country. The company has
historically filed, and continues to file, all required tax returns and to pay the taxes reasonably determined to be due.
The tax rules in Mali are complex and subject to interpretation. From time to time the company is subject to a review
of its historic tax filings and in connection with such reviews, disputes can arise with the taxing authorities over the
interpretation or application of certain rules to the company’s business conducted in Mali. Management believes
based on information currently to hand that no such tax contingencies exist, and as assessments are completed, the
company will make appropriate adjustments to those estimates used in determining amounts due. The ultimate
outcome cannot be presently determined.
18
Ordinary stock
Authorised and issued: ordinary par value stock with a nominal value of F CFA 10 000 (US$14.513) each.
Held by:
Number of
outstanding
stock in issue
2006
2005
US$
Sadiola Exploration Ltd
794
11,523
11,523
NF Nicolau
1
14.5
14.5
J McCombe
1
14.5
14.5
M Diallo
1
14.5
14.5
GA Edey
1
14.5
14.5
FRL Neethling
1
14.5
14.5
AW Mbugua
1
14.5
14.5
Government of the Republic of Mali
200
2,903
2,903
1,000
14,513
14,513
F-179
Société d’Exploitation des Mines d’Or de Yatela S.A
.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
19
Related parties
19.1
Identity of related parties
The stockholders of the company are disclosed in note 18. Entities within the AngloGold Ashanti group and with which
the company has transacted, are listed in note 19.2. The directors of the company are listed below:
NF Nicolau (Chairman) (South African)
JF Conway (Canadian)
(resigned April 27, 2006)
J McCombe (Canadian)
(appointed April 27, 2006)
M Diallo (Malian)
GA Edey (Canadian)
FRL Neethling (South African)
AW Mbugua (Kenyan)
S Malé (Malian)
W Diawara (Malian)
19.2
Material related party transactions
Material related party
transactions are as
follow:
Transactions
with related
parties
Net
amounts
due
by/(owed
to) related
parties
(notes 9&
14)
Transactions
with related
parties
Net amounts
due by/(owed
to) related
parties
(notes 9& 14)
Transactions
with related
parties
Net amounts
due by/(owed
to) related
parties
2006
Unaudited 2005
Unaudited 2004
US$
AngloGold Ashanti Mali
S.A
3,447,035
(446,404)
2,150,765
(44,992)
2,106,463
(13,188)
Société des mines de
Morila S.A (Morila)
1,673
-
2,082
(22)
-
1,679
Société d’Exploitation
des Mines d’Or de
Sadiola S.A. Sadiola)
2,865,379
(381,436)
3,100,621
(160,821)
4,649,137
(230,671)
AngloGold Ashanti
Limited
1,089,223
(222,632)
1,201,062
(106,016)
2,039,452
(55,298)
Rand Refinery Limited
(214,136,050)
3,926,803
(110,021,719)
3,247,206
(52,257,185)
2,866,725
Sadiola Exploration
Limited
1,111,147
-
3,587,294
(49,665,396)
2,448,927
(71,301,091)
Key management
personnel remuneration
674,485
-
553,506
-
378,818
-
- Salary
619,860
-
485,779
-
340,575
-
- Performance related
payments
16,995
-
21,343
-
10,880
-
- Pension Scheme
Contributions
26,158
-
46,384
-
27,363
-
-Other Benefits
11,472
-
-
-
-
-
AngloGold Ashanti Mali S.A. is a service organisation within the AngloGold Ashanti company and, accordingly,
provides management services to the company. Included in transactions with AngloGold Ashanti Mali S.A. are
management fees paid by the Company of US$2,145,006 (2005: US$1,102,294 and 2004: US$987 132) (refer note 4).
Morila and Sadiola are fellow subsidiaries to the company, also located in Mali. Yatela shares certain employees with
Sadiola, as well as the elution and smelting of the gold production process. The company incurs only ad hoc
transactions with Morila.
Rand Refinery Limited is a subsidiary company within the AngloGold Ashanti group. The company has entered into
contractual agreements with Rand Refinery Limited for the provision of all services required for the collection, transport,
refining and purchase of the doré bars produced by the company. Included in transactions with Rand Refinery Limited
are sales by the company of US$214.5 million (2005: US$110.3 million and 2004: US$52.4 million) and purchases by
the company of US$0.4 million (2005: US$0.2 million and 2004: US$0.1 million).
20
Risk management activities
In the normal course of its operations, the company is exposed to, inter alia, gold price, currency and credit risks. The
company did not acquire, hold or issue derivatives for trading purposes. The company follows the following risk
management processes to manage these risks.
F-180
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
20.1
Gold price risk
Gold price risk arises from the risk of an adverse effect on current or future earnings resulting from fluctuations in the
price of gold. The company does not hedge against the effects of fluctuations in the gold price.
20.2
Credit risk
Credit risk arises from the risk that a counter party may default or not meet its obligations in a timely manner.
The company does not obtain collateral or other security to support financial instruments subject to credit risk, but
monitors the credit standing of counter parties. Although the company sells gold to only one counter party, the
company does not believe that this concentration of credit results in significant credit risk as the majority of proceeds
are received within two working days of the gold leaving the mine. There is however a concentration of credit risk
with respect to various taxes receivable from the Malian State. These taxes and the measures taken to ensure
recoverability thereof are discussed in note 5, note 9 and below.
20.2.1 Vulnerability from concentrations of VAT refundable by the Government of Mali
Value added taxes receivable from the Government of Mali amounts to US$21.7 million at 31 December 2006
(31 December 2005: US$11.5 million). VAT is refundable from the government in F CFA. The last audited VAT
return was for the period ended March 31, 2006 and at December 31, 2006 US$13.4 million (2005: US$7.5 million) is
still outstanding and US$8.3 million (2005: US$ 4.0 million) is still subject to audit. The accounting processes for the
unaudited amount are in accordance with the processes advised by the Malian government in terms of the previous
audits. The Government of Mali is a shareholder in the company and protocol agreements were signed on July 5,
2006. All payments as scheduled in terms of the protocol agreements have been recovered up to December 2006.
Certain amounts are expected to be received after 12 months of the balance sheet date and are classified as non-
current accordingly . These amounts provided for have been discounted to their present value at a rate of 5% per
annum.
20.2.2 Vulnerability from concentrations of refundable tax on fuel by the Government of Mali
Fuel duties receivable from the Government of Mali amounts to US$3.6 million at 31 December 2006 (31 December
2005: US$4.3 million). Fuel duties are paid on receipt of the fuel supply and are refundable in F CFA, requiring the
claim to be submitted before January 31 of the following year, and are subject to authorisation by firstly the
Department of Mining and secondly the Custom and Excise authorities. The Customs and Excise authorities have
approved US$1.3 million (2005: US$3.2 million) which is still outstanding, whilst US$2.3 million (2005:
US$1.1 million) is still subject to authorisation. The accounting processes for the unauthorised amount are in
accordance with the processes advised by the Malian government in terms of the previous authorisations. The
Government of Mali is a shareholder in the company and protocol agreements have been signed. All payments as
scheduled in terms of the protocol agreements have been recovered up to December 2006. With effect from
February 2006, fuel duties are no longer payable to the Government of Mali. These amounts provided for have been
discounted to their present value at a rate of 5% per annum.
20.3
Currency risk
Since the functional currency of the company is US Dollars, currency risk is incurred primarily as a result of
purchases made in other currencies, such as the Euro, South African Rand and the Franc de la Communauté
Financière d'Afrique (F CFA). The company does not use derivatives to hedge foreign currency transactions.
20.4
Fair values of financial instruments
The estimated fair values of current financial instruments are determined based on relevant market information.
These estimates involve uncertainties and cannot be determined with precision. The estimated fair values of the
company’s current financial instruments as at December 31, 2006 approximates the carrying amount of such
financial instruments as reflected in the balance sheet.
US$15.0 million, included in non-current trade and other receivables, relates to VAT and fuel duties which are
expected to be refunded during the 2008 financial year. The fair value of this receivable approximates its carrying
amount. All other amounts are expected to be recoverable or payable within the 2007 financial year.
F-181
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the year ended December 31, 2004, 2005 and 2006
21.
Reconciliation between IFRS and US GAAP
The following table summarises the effect on net profit and stockholders’ equity of significant differences between
International Financial Reporting Standards (IFRS) and accounting principles generally accepted in the United
States of America (US GAAP) as of and for the years ended December 31 :
Notes
2006
Unaudited
2005
Unaudited
2004
US$
Income statement information
Net profit as per IFRS
82,743,811
16,636,001
7,498,116
US GAAP adjustments:
Deferred tax thereon
21.1
1,549,662
-
-
Amortisation of exploration costs capitalised under IFRS
21.1
5,582,674
3,770,334
4,435,673
Deferred tax thereon
(942,000)
-
-
Deferred tax adjustment relating to translation differences
21.2
(856,756)
-
-
Deferred stripping adjustment
21.3
(4,981,290)
-
-
Deferred tax thereon
1,743,452
-
-
Net profit as per US GAAP
84,839,553
20,406,335
11,933,789
Balance sheet information
Stockholders' equity as per IFRS
78,893,000
47,149,189
30,513,189
US GAAP adjustments:
Exploration costs capitalised under IFRS
21.1
(25,751,336)
(25,751,336)
(25,751,336)
Deferred tax thereon
1,549,662
-
-
Amortisation of exploration costs capitalised under IFRS
21.1
24,015,160
18,432,486
14,662,152
Deferred tax thereon
(942,000)
-
-
Deferred tax adjustment relating to translation differences
21.2
(856,756)
-
-
Deferred stripping adjustment
21.3
(17,360,880)
-
-
Deferred tax thereon
6,076,309
-
-
Stockholders’ equity as per US GAAP
65,623,159
39,830,339
19,424,005
F-182
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the year ended December 31, 2004, 2005 and 2006
21.1
Exploration costs capitalised under IFRS and the amortisation thereof
Under IFRS, certain exploration drilling costs were capitalised in line with the accounting policy. Under US GAAP,
similar costs can be capitalised only once a bankable feasibility study has been obtained to support the existence of
proved and probable reserves within the area.
Exploration costs capitalised under IFRS are amortised on a units-of-production method. Under US GAAP, the
accumulated amortisation should be reversed.
The application of US GAAP would have resulted in an increase in net profit of US$6.2 million (2005: US$3.8 million
and 2004: US$4.4 million) and a decrease in stockholders’ equity of US$1.1 million (2005: US$7.3 million and 2004:
US$11.0 million).
21.2
Deferred tax adjustment relating to translation differences
Under IFRS, all carrying amounts used in the computation of deferred tax are translated from US Dollars into the
local tax paying currency at a closing rate of exchange, while under US GAAP, non-monetary carrying amounts are
translated at their historical rates of exchange.
The application of US GAAP would have resulted in a decrease in net profit of US$2.50.7 million (2005: nil and
2004: nil) and a decrease in
stockholders’ equity of US$7.0 million.0.7 million (2005: nil and 2004: nil).
21.3
Deferred stripping adjustment
Under IFRS stripping costs incurred during the production phase to remove additional waste are charged to
operating costs on the basis of the average life of mine stripping ratio and the average life of mine costs per tonne
and results in capitalization of such stripping costs (deferred stripping) as part of mining assets.
Prior to January 1, 2006, the above policy also applied under US GAAP.
Under US GAAP, as from January 1, 2006, Emerging Issues Task Force (“EITF”) Issue 04-6, “Accounting for
Stripping Costs in the Mining Industry” addresses the accounting for stripping costs incurred during the production
phase of a mine and that post production stripping costs should be considered costs of the extracted minerals
under a full absorption costing system and recognized as a component of inventory to be recognized in cost of
sales in the same period as the revenue from the sale of the inventory. Additionally, capitalization of such costs
would be appropriate only to the extent inventory exists at the end of a reporting period.
The guidance requires application through recognition of a cumulative effect adjustment to opening retained
earnings in the period of adoption, with no charge to current earnings for prior periods. The results for prior periods
have not been restated.
The application of US GAAP would have resulted in a decrease in net profit of US$3.2 million (2005: nil and
2004: nil) and a decrease in stockholders’ equity of US$11.3 million (2005: nil and 2004: nil).
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and
authorized the undersigned to sign this annual report on its behalf.
ANGLOGOLD ASHANTI LIMITED
/s/ Jonathan Gourlay BestSrinivasan Venkatakrishnan
Name:Jonathan Gourlay Best Srinivasan Venkatakrishnan
Title:
Chief Financial Officer
Date: July
14,
2005.
6, 2007.
REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE ACT 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 OR
