As filed with the Securities and Exchange Commission on May 19, 2008
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE ACT OF
1934 OR
1934 OR
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 OR
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FINANCIAL YEAR ENDED DECEMBER 31, 2007
Commission file number: 1-14846
AngloGold Ashanti Limited
(Exact Name of Registrant as Specified in its Charter)
Republic of South Africa
(Jurisdiction of Incorporation or Organization)
76 Jeppe Street
Newtown, Johannesburg, 2001
(P.O. Box 62117, Marshalltown, 2107)
South Africa
(Address of Principal Executive Offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
American Depositary Shares
New York Stock Exchange
Ordinary Shares
New York Stock Exchange*
* Not for trading, but only in connection with the registration of American Depositary Shares pursuant to the requirements of the Securities
and Exchange Commission
Securities registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by
the annual report:
the annual report:
Ordinary Shares of 25 ZAR cents each
277,457,471
E Ordinary Shares of 25 ZAR cents each
4,140,230
A Redeemable Preference Shares of 50 ZAR cents each
2,000,000
B Redeemable Preference Shares of 1 ZAR cent each
778,896
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934.
Yes No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
(2) has been subject to such filing requirements for the past 90 days.
Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
(Check one):Large Accelerated Filer Accelerated Filer Non-Accelerated Filer
Indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 Item 18
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes No
2
Table of contents
Page
Presentation of information
4
Certain forward-looking statements
5
Glossary of selected terms
Mining terms
Mining terms
6
Financial terms
9
` Currency
9
Abbreviations
10
Part I:
Item 1:
Identity of directors, senior management and advisors
11
Item 2:
Offer statistics and expected timetable
11
Item 3: Key information
3A.
Selected financial data
11
3B. Capitalization and indebtedness
15
3C.
Reasons for the offer and the use of proceeds
15
3D. Risk factors
15
Item 4:
Information on the company
4A. History and development of the company
4A. History and development of the company
30
4B. Business overview
35
4C. Organizational structure
104
4D.
Property, plants and equipment
104
Item 4A:
Unresolved staff comments
104
Item 5:
Operating and financial review and prospects
5A. Operating results
106
5B.
Liquidity and capital resources
135
5C.
Research and development, patents and licenses, etc
150
5D. Trend information
150
5E.
Off-balance sheet arrangements
150
5F.
Tabular disclosure of contractual obligations
151
Item 6:
Directors, senior management and employees
6A.
Directors and senior management
152
6B. Compensation
157
6C. Board practices
162
6D. Employees
167
6E. Share ownership
169
Item 7:
Major shareholders and related party transactions
173
7A. Major shareholders
174
7B.
Related party transactions
175
7C.
Interests of experts and counsel
176
3
Item 8: Financial information
8A.
Consolidated financial statements and other financial information
Legal proceedings
177
Dividend policy
178
8B. Significant changes
178
Item 9:
The offer and listing
9A.
9A.
Offer and listing details
179
9B.
Plan of distribution
179
9C. Markets
180
9D. Selling
shareholders
180
9E. Dilution
180
9F.
Expenses of the issue
180
Item 10: Additional information
10A. Share
capital
181
10B. Memorandum and articles of association
182
10C. Material contracts
196
10D. Exchange controls
196
10E. Taxation
197
10F. Dividends and paying agents
201
10G. Statement by experts
201
10H. Documents on display
201
10I. Subsidiary information
201
Item 11:
Quantitative and qualitative disclosures about market risk
202
Item 12:
Description of securities other than equity securities 209
Part II:
Item 13:
Defaults, dividend arrearages and delinquencies
210
Item 14:
Material modifications to the rights of security holders and use of proceeds
211
Item 15: Controls and procedures
212
Item 16A:
Audit committee financial expert
214
Item 16B:
Code of ethics
214
Item 16C:
Principal accountant fees and services
214
Item 16D:
Exemptions from the listing standards for audit committees
215
Item 16E:
Purchases of equity securities by the issuer and affiliated purchasers 215
Part III:
Item 17:
Financial statements
216
Item 18: Financial statements
F- pages
Item 19:
Exhibits
4
Presentation of information
AngloGold Ashanti Limited
In this annual report on Form 20-F, references to AngloGold or AngloGold Ashanti, the company and the group, are references
to AngloGold Ashanti Limited or, as appropriate, subsidiaries and associate companies of AngloGold Ashanti.
to AngloGold Ashanti Limited or, as appropriate, subsidiaries and associate companies of AngloGold Ashanti.
US GAAP financial statements
The audited consolidated financial statements contained in this annual report on Form 20-F for the years ended December 31,
2007, 2006 and 2005 and as at December 31, 2007 and 2006 have been prepared in accordance with U.S. generally accepted
accounting principles (US GAAP).
2007, 2006 and 2005 and as at December 31, 2007 and 2006 have been prepared in accordance with U.S. generally accepted
accounting principles (US GAAP).
IFRS financial statements
As a company incorporated in the Republic of South Africa, AngloGold Ashanti also prepares annual audited consolidated
financial statements and unaudited consolidated quarterly financial statements in accordance with International Financial
Reporting Standards (IFRS). These financial statements (referred to as IFRS statements) are distributed to shareholders and
are submitted to the JSE Limited (JSE), as well as the London, New York, Australian and Ghana stock exchanges and Paris
and Brussels bourses and are submitted to the US Securities and Exchange Commission (SEC) on Form 6-K.
financial statements and unaudited consolidated quarterly financial statements in accordance with International Financial
Reporting Standards (IFRS). These financial statements (referred to as IFRS statements) are distributed to shareholders and
are submitted to the JSE Limited (JSE), as well as the London, New York, Australian and Ghana stock exchanges and Paris
and Brussels bourses and are submitted to the US Securities and Exchange Commission (SEC) on Form 6-K.
Currency
AngloGold Ashanti presents its consolidated financial statements in United States dollars.
In this annual report, references to rands, ZAR and R are to the lawful currency of the Republic of South Africa, references to
US dollars, dollar or $ are to the lawful currency of the United States, references to € are to the lawful currency of the European
Union, references to C$ are to the lawful currency of Canada, references to ARS and peso are to the lawful currency of
Argentina, references to AUD and A$ are to the lawful currency of Australia, references to BRL are to the lawful currency of
Brazil and references to GHC, cedi or ¢ are to the lawful currency of Ghana.
US dollars, dollar or $ are to the lawful currency of the United States, references to € are to the lawful currency of the European
Union, references to C$ are to the lawful currency of Canada, references to ARS and peso are to the lawful currency of
Argentina, references to AUD and A$ are to the lawful currency of Australia, references to BRL are to the lawful currency of
Brazil and references to GHC, cedi or ¢ are to the lawful currency of Ghana.
See “Item 3A.: Selected financial data – Exchange rate information” for historical information regarding the noon buying rate in
the City of New York for cable transfers in rands as certified for customs purposes by the Federal Reserve Bank of New York.
On May 15, 2008 the noon buying rate was R7.5975/$1.00.
the City of New York for cable transfers in rands as certified for customs purposes by the Federal Reserve Bank of New York.
On May 15, 2008 the noon buying rate was R7.5975/$1.00.
Non-GAAP financial measures
In this annual report on Form 20-F, AngloGold Ashanti presents the financial items “total cash costs”, “total cash costs per
ounce”, “total production costs” and “total production costs per ounce” which have been determined using industry guidelines
and practices promulgated by the Gold Institute and are not US GAAP measures. An investor should not consider these items
in isolation or as alternatives to production costs, net income/(loss) applicable to common shareholders, 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. 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 productio n
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. See “Glossary of selected terms – Financial terms – Total cash costs” and –
“Total production costs” and “Item 5A.: Operating results – Total cash costs and total production costs”.
ounce”, “total production costs” and “total production costs per ounce” which have been determined using industry guidelines
and practices promulgated by the Gold Institute and are not US GAAP measures. An investor should not consider these items
in isolation or as alternatives to production costs, net income/(loss) applicable to common shareholders, 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. 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 productio n
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. See “Glossary of selected terms – Financial terms – Total cash costs” and –
“Total production costs” and “Item 5A.: Operating results – Total cash costs and total production costs”.
Shares and shareholders
In this annual report on Form 20-F, references to ordinary shares, ordinary shareholders and shareholders/members, should
be read as common stock, common stockholders and stockholders, respectively, and vice versa.
be read as common stock, common stockholders and stockholders, respectively, and vice versa.
5
Certain forward-looking statements
Certain statements contained in this document, other than statements of historical fact, contain forward-looking statements
regarding AngloGold Ashanti's operations, economic performance or financial condition, including, without limitation, those
concerning: AngloGold Ashanti’s strategy to reduce its gold hedging position including the extent and effect of the hedge
reduction, the economic outlook for the gold mining industry, expectations regarding spot and received gold prices, production,
cash costs and other operating results, growth prospects and outlook of AngloGold Ashanti’s operations individually or in the
aggregate, including the completion and commencement of commercial operations of certain of AngloGold Ashanti’s
exploration and production projects and the completion of acquisitions and dispositions, AngloGold Ashanti's liquidity and
capital resources and expenditure, and the outcome and consequences of any pending litigation proceedings.
regarding AngloGold Ashanti's operations, economic performance or financial condition, including, without limitation, those
concerning: AngloGold Ashanti’s strategy to reduce its gold hedging position including the extent and effect of the hedge
reduction, the economic outlook for the gold mining industry, expectations regarding spot and received gold prices, production,
cash costs and other operating results, growth prospects and outlook of AngloGold Ashanti’s operations individually or in the
aggregate, including the completion and commencement of commercial operations of certain of AngloGold Ashanti’s
exploration and production projects and the completion of acquisitions and dispositions, AngloGold Ashanti's liquidity and
capital resources and expenditure, and the outcome and consequences of any pending litigation proceedings.
These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause AngloGold
Ashanti’s actual results, performance or achievements to differ materially from the anticipated results, performance or
achievements expressed or implied by these forward-looking statements. Although AngloGold Ashanti believes that the
expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations
will prove to be correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a
result of, among other factors, changes in economic and market conditions, success of business and operating initiatives,
changes in the regulatory environment and other government actions, fluctuations in gold prices and exchange rates, business
and operational risk management and other factors as determined in “Item 3D.: Risk factors” and elsewhere in this annual
report. These factors are not necessarily all of the important factors that could cause AngloGold Ashanti’s actual results to
differ materially from those expressed in any forward-looking statements. Other unknown or unpredictable factors could also
have material adverse effects on future results.
Ashanti’s actual results, performance or achievements to differ materially from the anticipated results, performance or
achievements expressed or implied by these forward-looking statements. Although AngloGold Ashanti believes that the
expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations
will prove to be correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a
result of, among other factors, changes in economic and market conditions, success of business and operating initiatives,
changes in the regulatory environment and other government actions, fluctuations in gold prices and exchange rates, business
and operational risk management and other factors as determined in “Item 3D.: Risk factors” and elsewhere in this annual
report. These factors are not necessarily all of the important factors that could cause AngloGold Ashanti’s actual results to
differ materially from those expressed in any forward-looking statements. Other unknown or unpredictable factors could also
have material adverse effects on future results.
AngloGold Ashanti undertakes no obligation to update publicly or release any revisions to these forward-looking statements to
reflect events or circumstances after the date of the annual report or to reflect the occurrence of unanticipated events. All
subsequent written or oral forward-looking statements attributable to AngloGold Ashanti or any person acting on its behalf are
qualified by the cautionary statements herein.
reflect events or circumstances after the date of the annual report or to reflect the occurrence of unanticipated events. All
subsequent written or oral forward-looking statements attributable to AngloGold Ashanti or any person acting on its behalf are
qualified by the cautionary statements herein.
6
Glossary of selected terms
The following explanations are not intended as technical definitions but should assist the reader in understanding terminology
used in this annual report. Unless expressly stated otherwise, all explanations are applicable to both underground and surface
mining operations.
used in this annual report. Unless expressly stated otherwise, all explanations are applicable to both underground and surface
mining operations.
Mining terms
BIF
Banded Ironstone Formation. A chemically formed iron-rich sedimentary rock.
Banded Ironstone Formation. A chemically formed iron-rich sedimentary rock.
By-products
Any products that emanate from the core process of producing gold, including silver, uranium and sulphuric acid.
Any products that emanate from the core process of producing gold, including silver, uranium and sulphuric acid.
Calc-silicate rock
A metamorphic rock consisting mainly of calcium-bearing silicates such as diopside and wollastonite, and formed by
metamorphism of impure limestone or dolomite.
A metamorphic rock consisting mainly of calcium-bearing silicates such as diopside and wollastonite, and formed by
metamorphism of impure limestone or dolomite.
Carbon-in-leach (CIL)
Gold is leached from a slurry of gold ore with cyanide in agitated tanks and adsorbed on to carbon granules in the same circuit.
The carbon granules are separated from the slurry and treated in an elution circuit to remove the gold.
Gold is leached from a slurry of gold ore with cyanide in agitated tanks and adsorbed on to carbon granules in the same circuit.
The carbon granules are separated from the slurry and treated in an elution circuit to remove the gold.
Carbon-in-pulp (CIP)
Gold is leached conventionally from a slurry of gold ore with cyanide in agitated tanks. The leached slurry then passes into the
CIP circuit where carbon granules are mixed with the slurry and gold is adsorbed on to the carbon. The granules are separated
from the slurry and treated in an elution circuit to remove the gold.
Comminution
Comminution is the crushing and grinding of ore to make gold available for treatment. (See also ‘Milling’.)
Gold is leached conventionally from a slurry of gold ore with cyanide in agitated tanks. The leached slurry then passes into the
CIP circuit where carbon granules are mixed with the slurry and gold is adsorbed on to the carbon. The granules are separated
from the slurry and treated in an elution circuit to remove the gold.
Comminution
Comminution is the crushing and grinding of ore to make gold available for treatment. (See also ‘Milling’.)
Contained gold
The total gold content (tons multiplied by grade) of the material being described.
The total gold content (tons multiplied by grade) of the material being described.
Cut-off Grade (Surface Mines)
The minimum grade at which a unit of ore will be mined and treated to achieve a desired economic outcome.
The minimum grade at which a unit of ore will be mined and treated to achieve a desired economic outcome.
Depletion
The decrease in quantity of ore in a deposit or property resulting from extraction or production.
The decrease in quantity of ore in a deposit or property resulting from extraction or production.
Development
The process of accessing an orebody through shafts and/or tunnelling in underground mining operations.
The process of accessing an orebody through shafts and/or tunnelling in underground mining operations.
Diorite
An igneous rock formed by the solidification of molten material (magma).
An igneous rock formed by the solidification of molten material (magma).
Doré
Impure alloy of gold and silver produced at a mine to be refined to a higher purity, usually consisting of 85 percent gold on
average.
Impure alloy of gold and silver produced at a mine to be refined to a higher purity, usually consisting of 85 percent gold on
average.
Electro-winning
A process of recovering gold from solution by means of electrolytic chemical reaction into a form that can be smelted easily
into gold bars.
A process of recovering gold from solution by means of electrolytic chemical reaction into a form that can be smelted easily
into gold bars.
Elution
Recovery of the gold from the activated carbon into solution before zinc precipitation or electro-winning.
Recovery of the gold from the activated carbon into solution before zinc precipitation or electro-winning.
Grade
The quantity of gold contained within a unit weight of gold-bearing material generally expressed in ounces per short ton of ore
(oz/t), or grams per metric tonne (g/t).
Greenschist
A schistose metamorphic rock whose green color is due to the presence of chlorite, epidote or actinolite.
The quantity of gold contained within a unit weight of gold-bearing material generally expressed in ounces per short ton of ore
(oz/t), or grams per metric tonne (g/t).
Greenschist
A schistose metamorphic rock whose green color is due to the presence of chlorite, epidote or actinolite.
Leaching
Dissolution of gold from crushed or milled material, including reclaimed slime, prior to adsorption on to activated carbon.
Dissolution of gold from crushed or milled material, including reclaimed slime, prior to adsorption on to activated carbon.
7
Life-of-mine (LOM)
Number of years that the operation is planning to mine and treat ore, and is taken from the current mine plan.
Number of years that the operation is planning to mine and treat ore, and is taken from the current mine plan.
Metallurgical plant
A processing plant erected to treat ore and extract gold.
A processing plant erected to treat ore and extract gold.
Milling
A process of reducing broken ore to a size at which concentrating can be undertaken. (See also ‘Comminution’).
Mine call factor
The ratio, expressed as a percentage, of the total quantity of recovered and unrecovered mineral product after processing with
the amount estimated in the ore based on sampling. The ratio of contained gold delivered to the metallurgical plant divided by
the estimated contained gold of ore mined based on sampling.
A process of reducing broken ore to a size at which concentrating can be undertaken. (See also ‘Comminution’).
Mine call factor
The ratio, expressed as a percentage, of the total quantity of recovered and unrecovered mineral product after processing with
the amount estimated in the ore based on sampling. The ratio of contained gold delivered to the metallurgical plant divided by
the estimated contained gold of ore mined based on sampling.
Mineral deposit
A mineral deposit is a concentration (or occurrence) of material of possible economic interest in or on the Earth’s crust.
A mineral deposit is a concentration (or occurrence) of material of possible economic interest in or on the Earth’s crust.
Ore Reserve
That part of a mineral deposit which could be economically and legally extracted or produced at the time of the Ore Reserve
determination.
Ounce (oz) (troy)
Used in imperial statistics. A kilogram is equal to 32.1507 ounces. A troy ounce is equal to 31.1035 grams.
That part of a mineral deposit which could be economically and legally extracted or produced at the time of the Ore Reserve
determination.
Ounce (oz) (troy)
Used in imperial statistics. A kilogram is equal to 32.1507 ounces. A troy ounce is equal to 31.1035 grams.
Pay limit
The grade of a unit of ore at which the revenue from the recovered mineral content of the ore is equal to the total cash cost, as
well as Ore Reserve development and stay-in-business capital. This grade is expressed as an in-situ value in grams per tonne
or ounces per short ton (before dilution and mineral losses).
The grade of a unit of ore at which the revenue from the recovered mineral content of the ore is equal to the total cash cost, as
well as Ore Reserve development and stay-in-business capital. This grade is expressed as an in-situ value in grams per tonne
or ounces per short ton (before dilution and mineral losses).
Precipitate
The solid product of chemical reaction by fluids such as the zinc precipitation referred to below.
The solid product of chemical reaction by fluids such as the zinc precipitation referred to below.
Probable Reserve
Ore Reserves for which quantity and grade are computed from information similar to that used for Proven Ore Reserves, but
the sites for inspection, sampling, and measurement are further apart or are otherwise less adequately spaced. The degree of
assurance, although lower than that for Proven Ore Reserves, is high enough to assume continuity between points of
observation.
Ore Reserves for which quantity and grade are computed from information similar to that used for Proven Ore Reserves, but
the sites for inspection, sampling, and measurement are further apart or are otherwise less adequately spaced. The degree of
assurance, although lower than that for Proven Ore Reserves, is high enough to assume continuity between points of
observation.
Productivity
An expression of labor productivity based on the ratio of grams of gold produced per month to the total number of employees
in underground mining operations.
Proven Reserve
Ore Reserves for which the (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes;
grade is computed from the results of detailed sampling and (b) the sites for inspection, sampling and measurement are
spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of the Ore
Reserves are well established.
Project capital
Capital expenditure to either bring a new operation into production; to materially increase production capacity; or to materially
extend the productive life of an asset.
Reclamation
In the South African context, reclamation describes the proc ess of reclaiming slimes (tailings) dumps using high-pressure
water cannons to form a slurry which is pumped back to the metallurgical plants for processing.
An expression of labor productivity based on the ratio of grams of gold produced per month to the total number of employees
in underground mining operations.
Proven Reserve
Ore Reserves for which the (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes;
grade is computed from the results of detailed sampling and (b) the sites for inspection, sampling and measurement are
spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of the Ore
Reserves are well established.
Project capital
Capital expenditure to either bring a new operation into production; to materially increase production capacity; or to materially
extend the productive life of an asset.
Reclamation
In the South African context, reclamation describes the proc ess of reclaiming slimes (tailings) dumps using high-pressure
water cannons to form a slurry which is pumped back to the metallurgical plants for processing.
Recovered grade
The recovered mineral content per unit of ore treated.
The recovered mineral content per unit of ore treated.
Reef
A gold-bearing sedimentary horizon, normally a conglomerate band that may contain economic levels of gold.
A gold-bearing sedimentary horizon, normally a conglomerate band that may contain economic levels of gold.
8
Refining
The final purification process of a metal or mineral.
The final purification process of a metal or mineral.
Rehabilitation
The process of reclaiming land disturbed by mining to allow an appropriate post-mining use. Rehabilitation standards are
defined by country-specific laws including, but not limited to the South African Department of Minerals and Energy, the
US Bureau of Land Management, the US Forest Service, and the relevant Australian mining authorities, and address among
other issues, ground and surface water, topsoil, final slope gradient, waste handling and re-vegetation issues.
Seismic event
A sudden inelastic deformation within a given volume of rock that radiates detectable seismic waves (energy) which results
from mining activities.
The process of reclaiming land disturbed by mining to allow an appropriate post-mining use. Rehabilitation standards are
defined by country-specific laws including, but not limited to the South African Department of Minerals and Energy, the
US Bureau of Land Management, the US Forest Service, and the relevant Australian mining authorities, and address among
other issues, ground and surface water, topsoil, final slope gradient, waste handling and re-vegetation issues.
Seismic event
A sudden inelastic deformation within a given volume of rock that radiates detectable seismic waves (energy) which results
from mining activities.
Shaft
A vertical or sub-vertical excavation used for accessing an underground mine; for transporting personnel, equipment and
supplies; for hoisting ore and waste; for ventilation and utilities; and/or as an auxiliary exit.
Skarn
A rock of complex mineralogical composition, formed by contact metamorphism and metasomatism of carbonate rocks.
A vertical or sub-vertical excavation used for accessing an underground mine; for transporting personnel, equipment and
supplies; for hoisting ore and waste; for ventilation and utilities; and/or as an auxiliary exit.
Skarn
A rock of complex mineralogical composition, formed by contact metamorphism and metasomatism of carbonate rocks.
Smelting
A pyro-metallurgical operation in which gold is further separated from impurities.
A pyro-metallurgical operation in which gold is further separated from impurities.
Stope
Underground excavation where the orebody is extracted.
Underground excavation where the orebody is extracted.
Stoping
The process of excavating ore underground.
The process of excavating ore underground.
Stripping ratio
The ratio of waste tonnes to ore tonnes mined calculated as total tonnes mined less ore tonnes mined divided by ore tonnes
mined.
The ratio of waste tonnes to ore tonnes mined calculated as total tonnes mined less ore tonnes mined divided by ore tonnes
mined.
Syngenetic
Formed contemporaneously with the deposition of the sediment.
Formed contemporaneously with the deposition of the sediment.
Tailings
Finely ground rock of low residual value from which valuable minerals have been extracted.
Finely ground rock of low residual value from which valuable minerals have been extracted.
Tailings dam (slimes dam)
Dam facilities designed to store discarded tailings.
Dam facilities designed to store discarded tailings.
Tonne
Used in metric statistics. Equal to 1,000 kilograms.
Used in metric statistics. Equal to 1,000 kilograms.
Ton
Used in imperial statistics. Equal to 2,000 pounds. Referred to as a short ton.
Used in imperial statistics. Equal to 2,000 pounds. Referred to as a short ton.
Tonnage
Quantity of material measured in tons or tonnes.
Quantity of material measured in tons or tonnes.
Waste
Material that contains insufficient mineralization for consideration for future treatment and, as such, is discarded.
Material that contains insufficient mineralization for consideration for future treatment and, as such, is discarded.
Yield
The amount of valuable mineral or metal recovered from each unit mass of ore expressed as ounces per short ton or grams
per metric tonne.
Zinc precipitation
Zinc precipitation is the chemical reaction using zinc dust that converts gold in solution to a solid form for smelting into
unrefined gold bars.
The amount of valuable mineral or metal recovered from each unit mass of ore expressed as ounces per short ton or grams
per metric tonne.
Zinc precipitation
Zinc precipitation is the chemical reaction using zinc dust that converts gold in solution to a solid form for smelting into
unrefined gold bars.
9
Financial terms
Average number of employees
The monthly average number of production and non-production employees and contractors employed during the year, where
contractors are defined as individuals who have entered into a fixed-term contract of employment with a group company or
subsidiary.
The monthly average number of production and non-production employees and contractors employed during the year, where
contractors are defined as individuals who have entered into a fixed-term contract of employment with a group company or
subsidiary.
Capital expenditure
Total capital expenditure on tangible assets.
Discontinued operations
An operation that, pursuant to single plan, has been disposed of or abandoned or is classified as held-for-sale until conditions
precedent to the sale have been fulfilled.
Total capital expenditure on tangible assets.
Discontinued operations
An operation that, pursuant to single plan, has been disposed of or abandoned or is classified as held-for-sale until conditions
precedent to the sale have been fulfilled.
Effective tax rate
Current and deferred taxation as a percentage of profit before taxation.
Current and deferred taxation as a percentage of profit before taxation.
Monetary asset
An asset which will be settled in a fixed or easily determinable amount of money.
An asset which will be settled in a fixed or easily determinable amount of money.
Region
Defines the operational management divisions within AngloGold Ashanti and these are South Africa, Argentina, Australia,
Brazil, Ghana, Guinea, Mali, Namibia, Tanzania and United States of America.
Related party
Parties are considered related if one party has the ability to control the other party or exercise significant influence over the
other party in making financial and operating decisions.
Significant influence
The ability, directly or indirectly, to participate in, but not exercise control over, the financial and operating policy decision of an
entity so as to obtain economic benefit from its activities.
Total cash costs
Total cash costs include site costs for all mining, processing and onsite administration, reduced by contributions from by-
products and are inclusive of royalties and production taxes. Depreciation, depletion and amortization, rehabilitation, corporate
administration, employee severance costs, capital and exploration costs are excluded. Total cash costs per ounce are the
attributable total cash costs divided by the attributable ounces of gold produced.
Defines the operational management divisions within AngloGold Ashanti and these are South Africa, Argentina, Australia,
Brazil, Ghana, Guinea, Mali, Namibia, Tanzania and United States of America.
Related party
Parties are considered related if one party has the ability to control the other party or exercise significant influence over the
other party in making financial and operating decisions.
Significant influence
The ability, directly or indirectly, to participate in, but not exercise control over, the financial and operating policy decision of an
entity so as to obtain economic benefit from its activities.
Total cash costs
Total cash costs include site costs for all mining, processing and onsite administration, reduced by contributions from by-
products and are inclusive of royalties and production taxes. Depreciation, depletion and amortization, rehabilitation, corporate
administration, employee severance costs, capital and exploration costs are excluded. Total cash costs per ounce are the
attributable total cash costs divided by the attributable ounces of gold produced.
Total production costs
Total cash costs plus depreciation, depletion and amortization, employee severance costs, rehabilitation and other non-cash
costs. Corporate administration and exploration costs are excluded. Total production costs per ounce are the attributable total
production costs divided by the attributable ounces of gold produced.
Total cash costs plus depreciation, depletion and amortization, employee severance costs, rehabilitation and other non-cash
costs. Corporate administration and exploration costs are excluded. Total production costs per ounce are the attributable total
production costs divided by the attributable ounces of gold produced.
Weighted average number of ordinary shares
The number of ordinary shares in issue at the beginning of the year, increased by shares issued during the year, weighted on
a time basis for the period during which they have participated in the income of the group and increased by share options that
are virtually certain to be exercised.
The number of ordinary shares in issue at the beginning of the year, increased by shares issued during the year, weighted on
a time basis for the period during which they have participated in the income of the group and increased by share options that
are virtually certain to be exercised.
Currencies
$, US$ or dollar
United States dollars
ARS Argentinean peso
A$ or AUD
Australian dollars
BRL Brazilian real
€ or Euro
European Euro
C$ Canadian dollars
CHF Swiss francs
GHC, cedi or ¢
Ghanaian cedi
HKD
Hong Kong dollar
N$ or NAD
Namibian dollars
Tsh Tanzanian Shillings
ZAR, R or rand
South African rands
10
Abbreviations
ADS
American Depositary Share
ADR American Depositary Receipt
ASX
Australian Stock Exchange
bn Billion
capex Capital expenditure
capex Capital expenditure
CDI
Chess Depositary Interests
CLR
Carbon Leader Reef
FCFA
Francs Communauté Financiére Africaine
FIFR
Fatal injury frequency rate per million hours worked
g Grams
g/t
g/t
Grams per tonne
g/TEC
Grams per total employee costed
GhDS
Ghanaian Depositary Share
GhSE
Ghana Stock Exchange
JORC
Australasian Code for Reporting Exploration results, Mineral Resources and Ore Reserves
JIBAR
Johannesburg interbank agreed rate
JSE
JSE Limited (the stock exchange in Johannesburg, South Africa)
King Code
the Code of Corporate Practices and Conduct representing the principles of good governance as laid
out in the King Report on Corporate Governance for South Africa 2002
out in the King Report on Corporate Governance for South Africa 2002
kg Kilograms
LSE
LSE
London Stock Exchange
LIBOR
London interbank offer rate
LOM Life-of-mine
LTIFR
LTIFR
Lost-time injury frequency rate per million hours worked
(1)
m²/TEC
Square meters per total employee costed
M or m
Meter or million, depending on the context
Moz Million ounces
Mt
Million tonnes or tons
Mtpa
Million tonnes/tons per annum
NOSA
National Occupational Safety Association
NPSE
Normal Purchase Normal Sales Exemption
NYSE
New York Stock Exchange
oz Ounces (troy)
oz/t
Ounces per ton
RIFR
Reportable injury frequency rate per million hours worked
SAMREC
South African Code for the Reporting of Mineral Resources and Mineral Reserves
SEC
United States Securities and Exchange Commission
SRP
South African Securities Regulation Panel
SOX
Sarbanes-Oxley Act of 2002
t
Tons (short) or tonnes (metric)
tpm
Tonnes/tons per month
tpa
Tonnes/tons per annum
tpd
Tonnes/tons per day
VCR
Ventersdorp Contact Reef
VCT
Voluntary counseling and testing
(1)
Note that AngloGold Ashanti utilizes the strictest definition in reporting Lost-Time Injuries in that it includes all Disabling Injuries (where an individual is
unable to return to his place of regular work the next calendar day after the injury) and Restricted Work Cases (where the individual may be at work, but
unable to perform full or regular duties on the next calendar day after the injury) within this definition.
unable to return to his place of regular work the next calendar day after the injury) and Restricted Work Cases (where the individual may be at work, but
unable to perform full or regular duties on the next calendar day after the injury) within this definition.
Rounding of figures in this report may result in computational discrepancies.
11
PART I
Item 1: Identity of directors, senior management and advisors
Not applicable.
Item 2: Offer statistics and expected timetable
Not applicable.
Item 3: Key information
3A.
Selected financial data
The selected financial information set forth below for the years ended December 31, 2005, 2006 and 2007 has been derived
from, and should be read in conjunction with, the US GAAP financial statements included under Item 18 of this annual report.
The selected financial information for the years ended December 31, 2003 and 2004 and as at December 31, 2003 and 2004
has been derived from the US GAAP financial statements not included in this annual report.
from, and should be read in conjunction with, the US GAAP financial statements included under Item 18 of this annual report.
The selected financial information for the years ended December 31, 2003 and 2004 and as at December 31, 2003 and 2004
has been derived from the US GAAP financial statements not included in this annual report.
12
Year ended December 31,
2003
(1)(2)(3)
2004
(4)(5)
2005
2006 2007
(6)
$ $
$
$
$
(in millions, except share and per share amounts)
Consolidated statement of income
Sales and other income
1,670
2,151
2,485
2,715
3,095
Product sales
(7)
1,641
2,096
2,453
2,683
3,048
Interest, dividends and other
29
55
32
32
47
Costs and expenses
1,329
2,176
2,848
2,811
3,806
Operating costs
(8)
1,135
1,517
1,842
1,785
2,167
Royalties
11
27
39
59
70
Depreciation, depletion and amortization
247
445
593
699
655
Impairment of assets
75
3
141
6
1
Interest expense
28
67
80
77
75
Accretion expense
2
8
5
13
20
(Profit)/loss on sale of assets, realization of loans, indirect taxes
and other
(55)
(14)
(3)
(36)
10
Mining contractor termination costs
-
-
9
-
-
Non-hedge derivative (gain)/loss
(114)
123
142
208
808
Income/(loss) from continuing operations before income tax
equity income, minority interests and cumulative effect of
accounting change
equity income, minority interests and cumulative effect of
accounting change
341
(25)
(363)
(96)
(711)
Taxation (expense)/benefit
(143)
132
121
(122)
(118)
Minority interest
(17)
(22)
(23)
(29)
(28)
Equity income in affiliates
71
23
39
99
41
Income/(loss) from continuing operations before cumulative
effect of accounting change
effect of accounting change
252
108
(226)
(148)
(816)
Discontinued operations
(2)
(11)
(44)
6
2
Income/(loss) before cumulative effect of accounting change
250
97
(270)
(142)
(814)
Cumulative effect of accounting change
(3)
-
(22)
-
-
Net income/(loss) – applicable to common stockholders
247
97
(292)
(142)
(814)
Basic earnings/(loss) per common share (in $)
(9)
From continuing operations
1.13
0.43
(0.85)
(0.54)
(2.93)
Discontinued operations
(0.01)
(0.04)
(0.17)
0.02
0.01
Before cumulative effect of accounting change
1.12
0.39
(1.02)
(0.52)
(2.92)
Cumulative effect of accounting change
(0.01)
-
(0.08)
-
-
Net income/(loss) – applicable to common stockholders
1.11
0.39
(1.10)
(0.52)
(2.92)
Diluted earnings/(loss) per common share (in $)
(9)
From continuing operations
1.13
0.42
(0.85)
(0.54)
(2.93)
Discontinued operations
(0.01)
(0.04)
(0.17)
0.02
0.01
Before cumulative effect of accounting change
1.12
0.38
(1.02)
(0.52)
(2.92)
Cumulative effect of accounting change
(0.01)
-
(0.08)
-
-
Net income/(loss) – applicable to common stockholders
1.11
0.38
(1.10)
(0.52)
(2.92)
Dividend per common share (cents)
133
76
56
39
44
13
As at December 31,
2003
(1)(2)(3)
2004
(4)(5)
2005 2006
2007
(6)
$
$
$
$
$
(in millions, except share and per share amounts)
Consolidated balance sheet data (as at period end)
Cash and cash equivalents and restricted cash
479
302
204
482
514
Other current assets
822
1,115
1,197
1,394
1,599
Property, plants and equipment, deferred stripping, and
acquired properties, net
3,037
6,654
6,439
6,266
6,807
Goodwill and other intangibles, net
226
591
550
566
591
Materials on the leach pad (long-term)
7
22
116
149
190
Other long-term assets, derivatives, deferred taxation
assets and other long-term inventory
772
712
607
656
680
Total assets
5,343
9,396
9,113
9,513
10,381
Current liabilities
1,116
1,469
1,874
2,467
3,795
Provision for environmental rehabilitation
124
209
325
310
394
Deferred taxation liabilities
789
1,518
1,152
1,275
1,345
Other long-term liabilities, and derivatives
1,194
2,295
2,539
2,092
2,232
Minority interest
52
59
60
61
63
Stockholders’ equity
2,068
3,846
3,163
3,308
2,552
Total liabilities and stockholders’ equity
5,343
9,396
9,113
9,513
10,381
Capital stock (exclusive of long-term debt and
redeemable preferred stock)
9
10
10
10
10
Number of common shares as adjusted to reflect
changes in capital stock
223,136,342
264,462,894
264,938,432
276,236,153
277,457,471
Net assets
2,120
3,905
3,223
3,369
2,615
(1)
Excludes the financial condition of the Amapari Project sold with effect from May 19, 2003. See “Item 4A.: History and development of the company”.
(2)
Excludes the Gawler Craton Joint Venture sold with effect from June 6, 2003. See “Item 4A.: History and development of the company”.
(3)
Excludes the results of operations and financial condition of the Jerritt Canyon Joint Venture sold with effect from June 30, 2003. See “Item 4A.: History and
development of the company”.
development of the company”.
(4)
Includes the results of operations and financial condition of Ashanti as of April 26, 2004. See “Item 4A.: History and development of the company”.
(5)
Excludes the results of operations and financial condition of the Freda-Rebecca mine sold with effect from September 1, 2004. See “Item 4A.: History and
development of the company”.
development of the company”.
(6)
Includes the acquisition of 15 percent minority interest acquired in the Iduapriem and Teberebie mine with effect from September 1, 2007. See “Item 4A.:
History and development of the company”.
History and development of the company”.
(7)
Product sales represent revenue from the sale of gold.
(8)
Operating costs include production costs, exploration costs, related party transactions, general and administrative, market development costs, research and
development, employment severance costs and other.
development, employment severance costs and other.
(9)
The calculations of basic and diluted earnings/(loss) per common share are described in note 9 to the consolidated financial statements “(loss)/earnings per
common share”. Amounts reflected exclude E Ordinary shares.
common share”. Amounts reflected exclude E Ordinary shares.
14
Annual dividends
The table below sets forth the amounts of interim, final and total dividends paid in respect of the past five years in cents per
ordinary share. In respect of 2007, AngloGold Ashanti’s board of directors declared an interim dividend of 90 South African
cents per ordinary share on July 30, 2007, with a record date of August 24, 2007, and a payment date of September 10, 2007,
and a final dividend of 53 South African cents per ordinary share on February 6, 2008, with a record date of February 29, 2008
and a payment date of March 17, 2008.
ordinary share. In respect of 2007, AngloGold Ashanti’s board of directors declared an interim dividend of 90 South African
cents per ordinary share on July 30, 2007, with a record date of August 24, 2007, and a payment date of September 10, 2007,
and a final dividend of 53 South African cents per ordinary share on February 6, 2008, with a record date of February 29, 2008
and a payment date of March 17, 2008.
Interim
Final
Total
Interim
Final
Total
Year ended December 31
(South African cents per ordinary share)
(US cents per ordinary share
(1)
)
2003 375
335
710
50.73
49.82
100.55
2004 170
180
350
25.62
30.37
55.99
2005 170
62
232
26.09
9.86
35.95
2006 210
240
450
29.40
32.38
61.78
2007 90
53
143
12.44
6.60
19.04
(1)
Dividends for these periods were declared in South African cents. US dollar cents per share figures have been calculated based on exchange rates
prevailing on each of the respective payment dates.
prevailing on each of the respective payment dates.
Future dividends will be dependent on AngloGold Ashanti’s cash flow, earnings, planned capital expenditures, financial
condition and other factors. Given that AngloGold Ashanti is in its highest-ever capital expenditure phase, it will continue to
manage capital expenditure in line with profitability and cash flow, and its approach to the dividend on the basis of prudent
financial management. Under South African law, AngloGold Ashanti may declare and pay dividends from any capital and
reserves included in total shareholders’ equity calculated in accordance with IFRS, subject to its solvency and liquidity.
Dividends are payable to shareholders registered at a record date that is after the date of declaration.
condition and other factors. Given that AngloGold Ashanti is in its highest-ever capital expenditure phase, it will continue to
manage capital expenditure in line with profitability and cash flow, and its approach to the dividend on the basis of prudent
financial management. Under South African law, AngloGold Ashanti may declare and pay dividends from any capital and
reserves included in total shareholders’ equity calculated in accordance with IFRS, subject to its solvency and liquidity.
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 AngloGold Ashanti board or AngloGold Ashanti
shareholders at a general meeting. Currently, dividends are declared in South African rands and paid in Australian dollars,
South African rands, British pounds and Ghanaian cedis. 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. Exchange rate fluctuations may therefore affect the value of the dividends received by registered shareholders and
distributions paid by the relevant depositary to investors holding AngloGold Ashanti securities.
shareholders at a general meeting. Currently, dividends are declared in South African rands and paid in Australian dollars,
South African rands, British pounds and Ghanaian cedis. 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. Exchange rate fluctuations may therefore affect the value of the dividends received by registered shareholders and
distributions paid by the relevant depositary to investors holding AngloGold Ashanti securities.
Moreover, fluctuations in the exchange rates of the British pound and the US dollar may have affected and are likely to affect
the US dollar price of the ADSs on the NYSE and the US dollar equivalents of the United Kingdom pound price of the ordinary
shares on the London Stock Exchange (LSE). For details on taxation and exchange controls applicable to holders of ordinary
shares or ADSs, see “Item 10D.: Exchange controls” and “Item 10E.: Taxation – Taxation of dividends”.
the US dollar price of the ADSs on the NYSE and the US dollar equivalents of the United Kingdom pound price of the ordinary
shares on the London Stock Exchange (LSE). For details on taxation and exchange controls applicable to holders of ordinary
shares or ADSs, see “Item 10D.: Exchange controls” and “Item 10E.: Taxation – Taxation of dividends”.
Exchange rate information
The following table sets forth for the periods and dates indicated certain information concerning the noon buying rate in New
York City for cable transfers as certified for customs purposes by the Federal Reserve Bank of New York expressed in rands
per $1.00. On May 15, 2008, the noon buying rate between South African rands and US dollars was R7.5975/$1.00.
York City for cable transfers as certified for customs purposes by the Federal Reserve Bank of New York expressed in rands
per $1.00. On May 15, 2008, the noon buying rate between South African rands and US dollars was R7.5975/$1.00.
Year ended December 31
High
Low
Year end
Average
(1)
2003
9.05 6.26 6.70 7.42
2004
7.31 5.62 5.65 6.39
2005
6.92 5.64 6.33 6.35
2006
7.94 5.99 7.04 6.81
2007
7.49 6.45 6.81 7.03
2008
(2)
8.21
6.74
–
7.60
(1)
The average of the noon buying rates on the last business day of each month during the year.
(2)
Through May 15, 2008.
15
Exchange rate information for the months of
High
Low
October 2007
6.91 6.49
November 2007
7.00 6.45
December 2007
7.04 6.66
January 2008
7.45 6.74
February 2008
7.89 7.41
March 2008
8.21 7.76
April 2008
8.02 7.53
May 2008
(1)
7.72 7.51
(1)
Through May 15, 2008.
3B.
Capitalization and indebtedness
Not applicable.
3C.
Reasons for the offer and use of proceeds
Not applicable.
3D.
Risk factors
The risk factors set out in this document have been organized into three categories:
• risks related to the gold mining industry generally;
•
•
risks related to AngloGold Ashanti’s operations; and
•
risks related to AngloGold Ashanti’s ordinary shares and American Depositary Shares (ADSs).
Risks related to the gold mining industry generally
The profitability of AngloGold Ashanti’s operations, and the cash flows generated by these operations, are
significantly affected by changes in the market price for gold.
significantly affected by changes in the market price for gold.
The market price for gold can fluctuate widely. These fluctuations are caused by numerous factors beyond AngloGold Ashanti’s
control, including:
control, including:
• speculative positions taken by investors or traders in gold;
• changes in the demand for gold as an investment;
• changes in the demand for gold used in jewellery and for other industrial uses;
• changes in the supply of gold from production, disinvestment, scrap and hedging;
• financial market expectations regarding the rate of inflation;
• the strength of the dollar (the currency in which the gold price trades internationally) relative to other currencies;
• changes in interest rates;
• actual or expected gold sales by central banks and the International Monetary Fund;
• gold hedging and de-hedging by gold producers;
• global or regional political or economic events; and
• costs of gold production in major gold-producing nations in which the company has operations, such as South Africa, the
United States and Australia.
United States and Australia.
The price of gold is often subject to sharp, short-term changes resulting from speculative activities. While the overall supply of
and demand for gold can affect its market price, because of the considerable size of above-ground stocks of the metal in
comparison to other commodities, these factors typically do not affect the gold price in the same manner or degree that the
supply of and demand for other commodities tends to affect their market price.
and demand for gold can affect its market price, because of the considerable size of above-ground stocks of the metal in
comparison to other commodities, these factors typically do not affect the gold price in the same manner or degree that the
supply of and demand for other commodities tends to affect their market price.
16
The following table presents the annual high, low and average afternoon fixing prices over the past 10 years, expressed in
dollars, for gold per ounce on the London Bullion Market:
dollars, for gold per ounce on the London Bullion Market:
Year High
Low
Average
1998
314 273 287
1999
340 252 278
2000
317 262 279
2001
298 253 271
2002
347 278 310
2003
417 320 364
2004
456 371 410
2005
538 412 445
2006
725 525 604
2007
845 602 697
2008
(1)
1,023
840
913
Source of data: Metals Week, Reuters and London Bullion Market Association
.
(1)
Through May 15, 2008.
On May 15, 2008, the afternoon fixing price of gold on the London Bullion Market was $866.25 per ounce.
In addition to the spot price of gold, a portion of AngloGold Ashanti’s gold sales is determined at prices in accordance with the
various hedging contracts that it has entered into, or may enter into, with various gold hedging counterparts.
various hedging contracts that it has entered into, or may enter into, with various gold hedging counterparts.
If revenue from gold sales falls below the cost of production for an extended period, AngloGold Ashanti may experience losses
and be forced to curtail or suspend some or all of its capital projects or existing operations, particularly those operations having
operating costs that are flexible to such short- to medium-term curtailment or closure, or change its past dividend payment
policies. In addition, it would have to assess the economic impact of low gold prices on its ability to recover any losses that may
be incurred during that period and on its ability to maintain adequate cash reserves.
and be forced to curtail or suspend some or all of its capital projects or existing operations, particularly those operations having
operating costs that are flexible to such short- to medium-term curtailment or closure, or change its past dividend payment
policies. In addition, it would have to assess the economic impact of low gold prices on its ability to recover any losses that may
be incurred during that period and on its ability to maintain adequate cash reserves.
The profitability of AngloGold Ashanti’s operations, and the cash flows generated by these operations, are
significantly affected by the fluctuations in the price of input production factors, many of which are linked to the price
of oil and steel.
significantly affected by the fluctuations in the price of input production factors, many of which are linked to the price
of oil and steel.
Fuel, power and consumables, including diesel, heavy fuel oil, chemical reagents, explosives and tires, which are used in
mining operations form a relatively large part of the operating costs of any mining company. The cost of these consumables is
linked, to a greater or lesser extent, to the price of oil.
mining operations form a relatively large part of the operating costs of any mining company. The cost of these consumables is
linked, to a greater or lesser extent, to the price of oil.
AngloGold Ashanti has estimated that for each $1 per barrel rise in the oil price, the average cash costs of all its operations
increases by approximately $0.61 per ounce with the cash costs of certain of its mines, which are more dependent on fuel,
being more sensitive to changes in the price of oil.
increases by approximately $0.61 per ounce with the cash costs of certain of its mines, which are more dependent on fuel,
being more sensitive to changes in the price of oil.
Furthermore, the cost of steel, which is used in the manufacture of most forms of fixed and mobile mining equipment, is also a
relatively large contributor to the operating costs and capital expenditure of a mining company.
relatively large contributor to the operating costs and capital expenditure of a mining company.
Fluctuations in the price of oil and steel have a significant impact upon operating cost and capital expenditure estimates and, in
the absence of other economic fluctuations, could result in significant changes in the total expenditure estimates for new mining
projects or render certain projects non-viable. AngloGold Ashanti has no influence over the price of fuel, chemical reagents,
explosives, steel and other commodities used in its mining activities.
the absence of other economic fluctuations, could result in significant changes in the total expenditure estimates for new mining
projects or render certain projects non-viable. AngloGold Ashanti has no influence over the price of fuel, chemical reagents,
explosives, steel and other commodities used in its mining activities.
AngloGold Ashanti’s operations and development projects could be adversely affected by shortages of, as well as the
lead times to deliver, strategic spares, critical consumables, heavy mining equipment and metallurgical plant.
lead times to deliver, strategic spares, critical consumables, heavy mining equipment and metallurgical plant.
Due to the significant increase in the world’s demand for commodities, the global mining industry is experiencing an increase in
production capacity both in terms of expansions at existing, as well as the development of new, production facilities.
production capacity both in terms of expansions at existing, as well as the development of new, production facilities.
This increase in expansion capacity has taken place, in certain instances, without a concomitant increase in the capacity for
production of certain strategic spares, critical consumables and mining and processing equipment used to operate and
construct mining operations, resulting in shortages of and an increase in the lead times to deliver these items.
production of certain strategic spares, critical consumables and mining and processing equipment used to operate and
construct mining operations, resulting in shortages of and an increase in the lead times to deliver these items.
17
In particular, AngloGold Ashanti and other gold mining companies have experienced shortages in critical consumables like tires
for mobile mining equipment, underground support, as well as certain critical spares for both mining equipment and processing
plants including, for example, gears for the ball-mills. In addition, the company has experienced an increase in delivery times
for these and other items. These shortages have also resulted in unanticipated increases in the price of certain of these and
other items. Shortages of critical spares, consumables and equipment result in delays and production shortfalls. Increases in
prices result in an increase in both operating costs and the capital expenditure to develop mining operations.
for mobile mining equipment, underground support, as well as certain critical spares for both mining equipment and processing
plants including, for example, gears for the ball-mills. In addition, the company has experienced an increase in delivery times
for these and other items. These shortages have also resulted in unanticipated increases in the price of certain of these and
other items. Shortages of critical spares, consumables and equipment result in delays and production shortfalls. Increases in
prices result in an increase in both operating costs and the capital expenditure to develop mining operations.
While suppliers and equipment manufacturers may increase capacity to meet the increased demand and therefore alleviate
both shortages of, and time to deliver, strategic spares, critical consumables and mining and processing equipment, individually
the companies have limited influence over manufacturers and suppliers. Consequently, shortages and increased lead times in
delivery of strategic spares, critical consumables, heavy mining and certain processing equipment could have an adverse
impact upon AngloGold Ashanti’s results of operations and its financial condition.
both shortages of, and time to deliver, strategic spares, critical consumables and mining and processing equipment, individually
the companies have limited influence over manufacturers and suppliers. Consequently, shortages and increased lead times in
delivery of strategic spares, critical consumables, heavy mining and certain processing equipment could have an adverse
impact upon AngloGold Ashanti’s results of operations and its financial condition.
Gold companies face many risks related to their operations (including their exploration and development activities)
that may adversely affect their cash flows and overall profitability.
that may adversely affect their cash flows and overall profitability.
Uncertainty and cost of mineral exploration and acquisitions
Exploration activities are speculative and are often unproductive. These activities also often require substantial expenditure to
establish the presence, and quantify the extent and grades (metal content) of mineralized material through exploration drilling;
determine appropriate metallurgical recovery processes to extract gold from the ore; estimate Ore Reserves; undertake
feasibility studies and estimate the technical and economic viability of the project; and construct, renovate or expand mining
and processing facilities.
establish the presence, and quantify the extent and grades (metal content) of mineralized material through exploration drilling;
determine appropriate metallurgical recovery processes to extract gold from the ore; estimate Ore Reserves; undertake
feasibility studies and estimate the technical and economic viability of the project; and construct, renovate or expand mining
and processing facilities.
Once gold mineralization is discovered it can take several years to determine whether Ore Reserves exist. During this time the
economic feasibility of production may change owing to fluctuations in factors that affect revenue, as well as cash and other
operating costs.
economic feasibility of production may change owing to fluctuations in factors that affect revenue, as well as cash and other
operating costs.
AngloGold Ashanti evaluates from time to time the acquisition of Ore Reserves, development properties and operating mines,
either as stand-alone assets or as part of companies. Its decisions to acquire these properties have historically been based on
a variety of factors including historical operating results, estimates of and assumptions regarding the extent of Ore Reserves,
cash and other operating costs, gold prices and projected economic returns and evaluations of existing or potential liabilities
associated with the property and its operations and how these may change in the future. Other than historical operating results,
all of these parameters are uncertain and have an impact upon revenue, cash and other operating issues, as well as the
uncertainties related to the process used to estimate Ore Reserves. In addition, there is intense competition for the acquisition
of attractive mining properties.
either as stand-alone assets or as part of companies. Its decisions to acquire these properties have historically been based on
a variety of factors including historical operating results, estimates of and assumptions regarding the extent of Ore Reserves,
cash and other operating costs, gold prices and projected economic returns and evaluations of existing or potential liabilities
associated with the property and its operations and how these may change in the future. Other than historical operating results,
all of these parameters are uncertain and have an impact upon revenue, cash and other operating issues, as well as the
uncertainties related to the process used to estimate Ore Reserves. In addition, there is intense competition for the acquisition
of attractive mining properties.
As a result of these uncertainties, the exploration programs and acquisitions engaged in by AngloGold Ashanti may not result
in the expansion or replacement of the current production with new Ore Reserves or operations. This could adversely affect its
results of operations and its financial condition.
in the expansion or replacement of the current production with new Ore Reserves or operations. This could adversely affect its
results of operations and its financial condition.
Development risks
AngloGold Ashanti’s profitability depends, in part, on the actual economic returns and the actual costs of developing mines,
which may differ significantly from its current estimates. The development of its mining projects may be subject to unexpected
problems and delays.
which may differ significantly from its current estimates. The development of its mining projects may be subject to unexpected
problems and delays.
AngloGold Ashanti’s decision to develop a mineral property is typically based, in the case of an extension or, in the case of a
new development, on the results of a feasibility study. Feasibility studies estimate the expected or anticipated project economic
returns.
new development, on the results of a feasibility study. Feasibility studies estimate the expected or anticipated project economic
returns.
These estimates are based on assumptions regarding: future gold, other metal and uranium prices; anticipated tonnage,
grades and metallurgical characteristics of ore to be mined and processed; anticipated recovery rates of gold, and other metals
and uranium from the ore; anticipated capital expenditure and cash operating costs; and the required return on investment.
grades and metallurgical characteristics of ore to be mined and processed; anticipated recovery rates of gold, and other metals
and uranium from the ore; anticipated capital expenditure and cash operating costs; and the required return on investment.
Actual cash operating costs, production and economic returns may differ significantly from those anticipated by such studies
and estimates. Operating costs and capital expenditure are determined particularly by the costs of the commodity inputs,
including the cost of fuel, chemical reagents, explosives, tires and steel that are consumed in mining activities and credits from
by-products. There are a number of uncertainties inherent in the development and construction of an extension to an existing
mine, or in the development and construction of any new mine.
and estimates. Operating costs and capital expenditure are determined particularly by the costs of the commodity inputs,
including the cost of fuel, chemical reagents, explosives, tires and steel that are consumed in mining activities and credits from
by-products. There are a number of uncertainties inherent in the development and construction of an extension to an existing
mine, or in the development and construction of any new mine.
18
In addition to those discussed above these uncertainties include: the timing and cost, which can be considerable, of the
construction of mining and processing facilities; the availability and cost of skilled labor, power, water and transportation
facilities; the availability and cost of appropriate smelting and refining arrangements; the need to obtain necessary
environmental and other governmental permits and the timing of those permits; and the availability of funds to finance
construction and development activities.
construction of mining and processing facilities; the availability and cost of skilled labor, power, water and transportation
facilities; the availability and cost of appropriate smelting and refining arrangements; the need to obtain necessary
environmental and other governmental permits and the timing of those permits; and the availability of funds to finance
construction and development activities.
The costs, timing and complexities of mine development and construction can increase because of the remote location of many
mining properties. New mining operations could experience unexpected problems and delays during development, construction
and mine start-up. In addition, delays in the commencement of mineral production could occur. Finally, operating cost and
capital expenditure estimates could fluctuate considerably as a result of fluctuations in the prices of commodities consumed in
the construction and operation of mining projects. Accordingly, AngloGold Ashanti’s future development activities may not
result in the expansion or replacement of current production with new production, or one or more of these new production sites
or facilities may be less profitable than currently anticipated or may not be profitable at all. The shortage of skilled labor may
also impede exploration and develo pment projects.
mining properties. New mining operations could experience unexpected problems and delays during development, construction
and mine start-up. In addition, delays in the commencement of mineral production could occur. Finally, operating cost and
capital expenditure estimates could fluctuate considerably as a result of fluctuations in the prices of commodities consumed in
the construction and operation of mining projects. Accordingly, AngloGold Ashanti’s future development activities may not
result in the expansion or replacement of current production with new production, or one or more of these new production sites
or facilities may be less profitable than currently anticipated or may not be profitable at all. The shortage of skilled labor may
also impede exploration and develo pment projects.
Ore Reserve estimation risks
AngloGold Ashanti undertakes annual revisions to its Ore Reserve estimates based upon actual exploration and production
results, depletion, new information on geology and fluctuations in production, operating and other costs and economic
parameters such as gold price and exchange rates. Ore Reserve estimates are not precise calculations and are dependent on
the interpretation of limited information on the location, shape and continuity of the occurrence and on the available sampling
results. These factors may result in reductions in its Ore Reserve estimates, which could adversely affect the life-of-mine plans
and consequently the total value of AngloGold Ashanti’s mining asset base and, as a result, have an adverse effect upon the
market price of AngloGold Ashanti’s ordinary shares and ADSs.
results, depletion, new information on geology and fluctuations in production, operating and other costs and economic
parameters such as gold price and exchange rates. Ore Reserve estimates are not precise calculations and are dependent on
the interpretation of limited information on the location, shape and continuity of the occurrence and on the available sampling
results. These factors may result in reductions in its Ore Reserve estimates, which could adversely affect the life-of-mine plans
and consequently the total value of AngloGold Ashanti’s mining asset base and, as a result, have an adverse effect upon the
market price of AngloGold Ashanti’s ordinary shares and ADSs.
Production or mining industry risks
Gold mining is susceptible to numerous events that may have an adverse impact on a gold mining business, its ability to
produce gold and meet its production targets. These events include, but are not limited to:
produce gold and meet its production targets. These events include, but are not limited to:
· environmental hazards, including discharge of metals, pollutants or hazardous chemicals;
· industrialaccidents;
· undergroundfires;
· labordisputes;
· activities of illegal or artisanal miners;
· electrical power interruptions;
· encountering unexpected geological formations;
· unanticipated ground and water conditions;
· unanticipated increases in gold lock-up and inventory levels at the company’s heap-leach operations;
· fall-of-ground accidents in underground operations;
· failure of mining pit slopes and tailings dam walls;
· legal and regulatory restrictions and changes to such restrictions;
· seismic activity; and
· other natural phenomena, such as floods or inclement weather conditions.
Seismic activity is of particular concern to the gold mining industry in South Africa, in part because of the large percentage of
deep-level gold mines. To understand and manage this risk, AngloGold Ashanti uses sophisticated seismic and rock
mechanics technologies.
deep-level gold mines. To understand and manage this risk, AngloGold Ashanti uses sophisticated seismic and rock
mechanics technologies.
Despite the implementation of this technology and modifications to mine layouts and support technology with a view to
minimizing the incidence and impact of seismic activity, seismic events have in the past, and may in the future, cause the death
of, or personal injury to, miners and other employees, as well as the loss of mining equipment, damage to or destruction of
mineral properties or production facilities, production disruptions, monetary losses, environmental damage and potential legal
liabilities, both within South Africa and elsewhere where seismic activity may be a factor. As a result, these events may have a
material adverse effect on AngloGold Ashanti’s operational results and its financial condition. For example, in the fourth
quarter of 2007, AngloGold Ashanti encountered unanticipated delays and a shortfall in production of approximately
55,000 ounces as a result of these events.
minimizing the incidence and impact of seismic activity, seismic events have in the past, and may in the future, cause the death
of, or personal injury to, miners and other employees, as well as the loss of mining equipment, damage to or destruction of
mineral properties or production facilities, production disruptions, monetary losses, environmental damage and potential legal
liabilities, both within South Africa and elsewhere where seismic activity may be a factor. As a result, these events may have a
material adverse effect on AngloGold Ashanti’s operational results and its financial condition. For example, in the fourth
quarter of 2007, AngloGold Ashanti encountered unanticipated delays and a shortfall in production of approximately
55,000 ounces as a result of these events.
19
Gold mining companies are increasingly required to consider and ensure the sustainable development of, and provide
benefits to, the communities and countries in which they operate.
benefits to, the communities and countries in which they operate.
As a consequence of public concern about the perceived ill effects of economic globalization, business generally and in
particular large multinational corporations such as AngloGold Ashanti, face increasing public scrutiny of their activities.
particular large multinational corporations such as AngloGold Ashanti, face increasing public scrutiny of their activities.
These businesses are under pressure to demonstrate that, as they seek to generate satisfactory returns on investment to
shareholders, other stakeholders – including employees, communities surrounding operations and the countries in which they
operate – benefit, and will continue to benefit from these commercial activities, which are also expected to minimize or
eliminate any damage to the interests of those stakeholders.
shareholders, other stakeholders – including employees, communities surrounding operations and the countries in which they
operate – benefit, and will continue to benefit from these commercial activities, which are also expected to minimize or
eliminate any damage to the interests of those stakeholders.
These pressures tend to be applied most strongly against companies whose activities are perceived to have a high impact on
their social and physical environment. The potential consequences of such pressures, especially if not effectively managed,
include reputational damage, legal suits and social spending obligations. All of these factors could have a material adverse
effect on AngloGold Ashanti’s results of operations and its financial condition.
their social and physical environment. The potential consequences of such pressures, especially if not effectively managed,
include reputational damage, legal suits and social spending obligations. All of these factors could have a material adverse
effect on AngloGold Ashanti’s results of operations and its financial condition.
The South African Department of Minerals and Energy has embarked on an audit strategy with the objective of helping mines
to develop programs to improve health and safety. Audits have been conducted and in a number of working places compliance
stoppages have occurred. These instances have had a short-term adverse impact on gold production. Future stoppages could
have a similar negative impact on production.
to develop programs to improve health and safety. Audits have been conducted and in a number of working places compliance
stoppages have occurred. These instances have had a short-term adverse impact on gold production. Future stoppages could
have a similar negative impact on production.
Gold mining operations are subject to extensive health and safety laws and regulations.
Gold mining operations are subject to a variety of industry-specific health and safety laws and regulations depending upon the
jurisdiction in which they are located. These laws and regulations are formulated to improve and to protect the safety and
health of employees. If these laws and regulations were to change and, if as a result, material additional expenditure were
required to comply with such new laws and regulations, it could adversely affect AngloGold Ashanti’s results of operations and
its financial condition.
jurisdiction in which they are located. These laws and regulations are formulated to improve and to protect the safety and
health of employees. If these laws and regulations were to change and, if as a result, material additional expenditure were
required to comply with such new laws and regulations, it could adversely affect AngloGold Ashanti’s results of operations and
its financial condition.
Gold mining companies are subject to extensive environmental laws and regulations.
Gold mining companies are subject to extensive environmental laws and regulations in the various jurisdictions in which they
operate. These regulations establish limits and conditions on gold producers’ ability to conduct their operations. The cost of
AngloGold Ashanti’s compliance with environmental laws and regulations has been significant and is expected to continue to
be significant.
operate. These regulations establish limits and conditions on gold producers’ ability to conduct their operations. The cost of
AngloGold Ashanti’s compliance with environmental laws and regulations has been significant and is expected to continue to
be significant.
Gold mining companies are required to close their operations and rehabilitate the lands that they mine in accordance with
environmental laws and regulations. Estimates of the total ultimate closure and rehabilitation costs for gold mining operations
are significant and based principally on current legal and regulatory requirements that may change materially. Environmental
liabilities are accrued when they are known, probable and can be reasonably estimated. Increasingly, regulators are seeking
security in the form of cash collateral or bank guarantees in respect of environmental obligations, which could have an adverse
effect on AngloGold Ashanti’s financial condition.
environmental laws and regulations. Estimates of the total ultimate closure and rehabilitation costs for gold mining operations
are significant and based principally on current legal and regulatory requirements that may change materially. Environmental
liabilities are accrued when they are known, probable and can be reasonably estimated. Increasingly, regulators are seeking
security in the form of cash collateral or bank guarantees in respect of environmental obligations, which could have an adverse
effect on AngloGold Ashanti’s financial condition.
Environmental laws and regulations are continually changing and are generally becoming more restrictive. If AngloGold
Ashanti’s environmental compliance obligations were to change as a result of changes in the laws and regulations or in certain
assumptions it makes to estimate liabilities, or if unanticipated conditions were to arise in its operations, its expenses and
provisions would increase to reflect these changes. If material, these expenses and provisions could adversely affect
AngloGold Ashanti’s results of operations and its financial condition.
Ashanti’s environmental compliance obligations were to change as a result of changes in the laws and regulations or in certain
assumptions it makes to estimate liabilities, or if unanticipated conditions were to arise in its operations, its expenses and
provisions would increase to reflect these changes. If material, these expenses and provisions could adversely affect
AngloGold Ashanti’s results of operations and its financial condition.
20
Risks related to AngloGold Ashanti’s operations
AngloGold Ashanti faces many risks related to its operations that may affect its cash flows and overall profitability.
AngloGold Ashanti uses gold hedging instruments and has entered into long term sales contracts, which may prevent
the company from realizing all potential gains resulting from subsequent commodity price increases in the future.
AngloGold Ashanti’s reported financial condition could be adversely affected as a result of the need to fair value all of
its hedge contracts.
the company from realizing all potential gains resulting from subsequent commodity price increases in the future.
AngloGold Ashanti’s reported financial condition could be adversely affected as a result of the need to fair value all of
its hedge contracts.
AngloGold Ashanti currently uses gold hedging instruments to fix the selling price of a portion of its anticipated gold
productionand to protect revenues against unfavorable gold price and exchange rate movements. While the use of these
instruments may protect against a drop in gold prices and exchange rate movements, it will do so for only a limited period of
time and only to the extent that the hedge remains in place. The use of these instruments may also prevent AngloGold Ashanti
from fully realizing the positive impact on income from any subsequent favorable increase in the price of gold on the portion of
production covered by the hedge and of any subsequent favorable exchange rate movements.
productionand to protect revenues against unfavorable gold price and exchange rate movements. While the use of these
instruments may protect against a drop in gold prices and exchange rate movements, it will do so for only a limited period of
time and only to the extent that the hedge remains in place. The use of these instruments may also prevent AngloGold Ashanti
from fully realizing the positive impact on income from any subsequent favorable increase in the price of gold on the portion of
production covered by the hedge and of any subsequent favorable exchange rate movements.
A significant number of AngloGold Ashanti’s forward sales contracts are not treated as derivatives and fair valued on the
financial statements as they fall under the normal purchase normal sales exemption (NPSE). Should AngloGold Ashanti fail to
settle these contracts by physical delivery, then it may be required to account for the fair value of a portion of, or potentially all
of, the existing contracts in the financial statements. This could adversely affect AngloGold Ashanti’s reported financial
condition.
financial statements as they fall under the normal purchase normal sales exemption (NPSE). Should AngloGold Ashanti fail to
settle these contracts by physical delivery, then it may be required to account for the fair value of a portion of, or potentially all
of, the existing contracts in the financial statements. This could adversely affect AngloGold Ashanti’s reported financial
condition.
AngloGold Ashanti intends to significantly reduce its gold hedging position
following a proposed
rights offering,
which will substantially reduce its protection against future declines in the market price of gold.
AngloGold Ashanti has traditionally used gold hedging instruments to protect the selling price of some of its anticipated sales
against declines in the market price of gold. The use of these instruments has prevented AngloGold Ashanti from fully
participating in the significant increase in the market price of gold in recent years. Since 2001 AngloGold Ashanti has has been
reducing its hedge commitments through hedge buy-backs (limited to non-hedge derivatives), physical settlement of maturing
contracts and other restructurings in order to provide greater participation in a rising gold price environment.
against declines in the market price of gold. The use of these instruments has prevented AngloGold Ashanti from fully
participating in the significant increase in the market price of gold in recent years. Since 2001 AngloGold Ashanti has has been
reducing its hedge commitments through hedge buy-backs (limited to non-hedge derivatives), physical settlement of maturing
contracts and other restructurings in order to provide greater participation in a rising gold price environment.
Notwithstanding the steps AngloGold Ashanti has taken to date, its gold hedging position has continued to have a significantly
adverse effect upon its financial performance. In order to address this, AngloGold Ashanti intends to procure early settlement
of certain contracts otherwise due to mature in 2009 and 2010 during the course of 2008. This is to be funded by way of a
proposed rights offering that is subject to shareholder approval at a general meeting to be held on May 22, 2008. In addition to
the settlement of certain contracts during 2008, AngloGold Ashanti intends to restructure some of the remainder of its hedge
book in order to achieve greater participation in the spot price of gold beyond 2009. As a result of these measures, AngloGold
Ashanti expects to have substantially less protection against declines in the market price of gold during 2008 and later years
compared to 2007. For a descri ption of AngloGold Ashanti’s commodity instruments, see “Item 11.: Quantitative and
qualitative disclosures about market risk”.
adverse effect upon its financial performance. In order to address this, AngloGold Ashanti intends to procure early settlement
of certain contracts otherwise due to mature in 2009 and 2010 during the course of 2008. This is to be funded by way of a
proposed rights offering that is subject to shareholder approval at a general meeting to be held on May 22, 2008. In addition to
the settlement of certain contracts during 2008, AngloGold Ashanti intends to restructure some of the remainder of its hedge
book in order to achieve greater participation in the spot price of gold beyond 2009. As a result of these measures, AngloGold
Ashanti expects to have substantially less protection against declines in the market price of gold during 2008 and later years
compared to 2007. For a descri ption of AngloGold Ashanti’s commodity instruments, see “Item 11.: Quantitative and
qualitative disclosures about market risk”.
AngloGold Ashanti faces certain risks and uncertainties in the execution of its planned gold hedge restructuring.
Through the planned gold hedge restructuring, AngloGold Ashanti intends to significantly reduce its gold hedging position by
procuring early settlement of certain contracts otherwise due to mature in 2009 and 2010 during the course of 2008. In
addition to the settlement of certain contracts during 2008, AngloGold Ashanti also intends to restructure some of the
remainder of its hedge book in order to achieve greater participation in the spot price for gold beyond 2009. The exact nature,
extent and execution of these processes will depend upon prevailing and anticipated market conditions at the time of
restructuring, particularly prevailing gold prices and exchange rates and other relevant economic factors. Should these
conditions become unfavorable at any stage during the restructuring, this may delay or frustrate the implementation of the
restructuring. In addition, should the outlook for gold prices , exchange rates and other economic factors materially change, it is
possible that AngloGold Ashanti’s plans for the execution of the gold hedge restructuring may be modified so as to minimize
the adverse impact from such changes or maximize the benefits from them.
procuring early settlement of certain contracts otherwise due to mature in 2009 and 2010 during the course of 2008. In
addition to the settlement of certain contracts during 2008, AngloGold Ashanti also intends to restructure some of the
remainder of its hedge book in order to achieve greater participation in the spot price for gold beyond 2009. The exact nature,
extent and execution of these processes will depend upon prevailing and anticipated market conditions at the time of
restructuring, particularly prevailing gold prices and exchange rates and other relevant economic factors. Should these
conditions become unfavorable at any stage during the restructuring, this may delay or frustrate the implementation of the
restructuring. In addition, should the outlook for gold prices , exchange rates and other economic factors materially change, it is
possible that AngloGold Ashanti’s plans for the execution of the gold hedge restructuring may be modified so as to minimize
the adverse impact from such changes or maximize the benefits from them.
Furthermore, the execution of the gold hedge restructuring may depend on or be affected by AngloGold Ashanti’s ability to
obtain consents from hedge counterparties and its lenders. If AngloGold Ashanti is not able to successfully execute the
planned gold hedge restructuring, then it will be prevented from fully participating in higher gold prices should such prices
continue to prevail.
obtain consents from hedge counterparties and its lenders. If AngloGold Ashanti is not able to successfully execute the
planned gold hedge restructuring, then it will be prevented from fully participating in higher gold prices should such prices
continue to prevail.
21
AngloGold Ashanti also continues to give consideration to the early settlement of contracts not currently recorded on balance
sheet (Normal Purchase Normal Sale Exemption (NPSE)) by means of early physical delivery. Such early physical settlement,
if it were to occur, would result in a significant adverse impact on its 2008 recorded revenues in AngloGold Ashanti’s income
statement, as sales that would have otherwise been executed at the spot price of gold will be replaced with sales based on the
earlier contracted prices of such NPSE contracts that are settled during the year. Furthermore should AngloGold Ashanti
conclude that such early physical settlement of NPSE contracts represents a tainting event, it would be required to recognize
on balance sheet the fair value of a portion of, or potentially all of, the existing NPSE contracts, which would result in a
significant adverse impact on its fi nancial statements. No such conclusion has yet been made by AngloGold Ashanti and it is
still considering the potential impact of any such transaction.
sheet (Normal Purchase Normal Sale Exemption (NPSE)) by means of early physical delivery. Such early physical settlement,
if it were to occur, would result in a significant adverse impact on its 2008 recorded revenues in AngloGold Ashanti’s income
statement, as sales that would have otherwise been executed at the spot price of gold will be replaced with sales based on the
earlier contracted prices of such NPSE contracts that are settled during the year. Furthermore should AngloGold Ashanti
conclude that such early physical settlement of NPSE contracts represents a tainting event, it would be required to recognize
on balance sheet the fair value of a portion of, or potentially all of, the existing NPSE contracts, which would result in a
significant adverse impact on its fi nancial statements. No such conclusion has yet been made by AngloGold Ashanti and it is
still considering the potential impact of any such transaction.
Some of AngloGold Ashanti’s power suppliers have forced it to halt or curtail activities at its mines, due to severe
power disruptions. Power stoppages, fluctuations and power cost increases may adversely affect AngloGold
Ashanti’s results of operations and its financial condition.
power disruptions. Power stoppages, fluctuations and power cost increases may adversely affect AngloGold
Ashanti’s results of operations and its financial condition.
In South Africa, AngloGold Ashanti’s mining operations are dependent upon electrical power generated by the State utility,
Eskom. As a result of an increase in demand exceeding available generating capacity, Eskom has warned that the country
could face disruptions in electrical power supply. At the start of 2008, as a result of substantial unplanned maintenance at
Eskom's power stations, as well as higher than usual seasonal rainfall adversely affecting Eskom's coal stockpiles, Eskom's
generating capacity was constrained and reduced. As a result, the incidence of power outages in South Africa increased
substantially to the point that, on Friday, January 25, 2008, Eskom warned that it could no longer guarantee the availability of
its supply of electrical power to the South African mining industry. Consequently, AngloGold Ashanti, along with other mining
companies with South African operations, were forced temporarily to suspend mining operations at their South African mines.
Following meetings between industry-wide representatives, including AngloGold Ashanti, and Eskom, agreement was reached
whereby mines were able to resume their power consumption at 90 percent of average capacity in return for Eskom
guaranteeing a more normal power supply, including undertakings to more reliably warn companies when power outages may
occur. Mining operations resumed on Wednesday, January 30, 2008 at AngloGold Ashanti’s South African mines, although
operations continue to be constrained by a power capacity limitation imposed by Eskom. By mid-first quarter of 2008, power
supply had increased to approximately 96.5 percent and AngloGold Ashanti’s South African operations were once again able to
operate at full capacity as a result of the various energy efficiency initiatives implemented at its South African operations.
Ongoing and future production levels will depend on an ongo ing stable power supply consistent with Eskom’s undertaking as
well as whether AngloGold Ashanti is able to continue to implement, and increase, its various energy efficiency initiatives. The
extent to which the power capacity limitation will result in lost production will depend on a number of factors, including the
success of the company’s energy efficiency initiatives; accordingly, AngloGold Ashanti is unable to estimate its lost production
as a result of the power capacity limitations. Eskom has also advised AngloGold Ashanti that it intends to increase power tariffs
significantly. Should the power outages continue or should AngloGold Ashanti be unable to achieve its production or cost
targets due to the current constraints, any additional power outages or any power tariff increases, then its future profitability
and financial condition may be adversely impacted.
Eskom. As a result of an increase in demand exceeding available generating capacity, Eskom has warned that the country
could face disruptions in electrical power supply. At the start of 2008, as a result of substantial unplanned maintenance at
Eskom's power stations, as well as higher than usual seasonal rainfall adversely affecting Eskom's coal stockpiles, Eskom's
generating capacity was constrained and reduced. As a result, the incidence of power outages in South Africa increased
substantially to the point that, on Friday, January 25, 2008, Eskom warned that it could no longer guarantee the availability of
its supply of electrical power to the South African mining industry. Consequently, AngloGold Ashanti, along with other mining
companies with South African operations, were forced temporarily to suspend mining operations at their South African mines.
Following meetings between industry-wide representatives, including AngloGold Ashanti, and Eskom, agreement was reached
whereby mines were able to resume their power consumption at 90 percent of average capacity in return for Eskom
guaranteeing a more normal power supply, including undertakings to more reliably warn companies when power outages may
occur. Mining operations resumed on Wednesday, January 30, 2008 at AngloGold Ashanti’s South African mines, although
operations continue to be constrained by a power capacity limitation imposed by Eskom. By mid-first quarter of 2008, power
supply had increased to approximately 96.5 percent and AngloGold Ashanti’s South African operations were once again able to
operate at full capacity as a result of the various energy efficiency initiatives implemented at its South African operations.
Ongoing and future production levels will depend on an ongo ing stable power supply consistent with Eskom’s undertaking as
well as whether AngloGold Ashanti is able to continue to implement, and increase, its various energy efficiency initiatives. The
extent to which the power capacity limitation will result in lost production will depend on a number of factors, including the
success of the company’s energy efficiency initiatives; accordingly, AngloGold Ashanti is unable to estimate its lost production
as a result of the power capacity limitations. Eskom has also advised AngloGold Ashanti that it intends to increase power tariffs
significantly. Should the power outages continue or should AngloGold Ashanti be unable to achieve its production or cost
targets due to the current constraints, any additional power outages or any power tariff increases, then its future profitability
and financial condition may be adversely impacted.
All of AngloGold Ashanti’s mining operations in Ghana are dependent for their electricity supply on hydro-electric power
supplied by the Volta River Authority (VRA) an entity controlled by the government of Ghana. Most of this electrical power is
hydro-generated electricity, although AngloGold Ashanti also has access to VRA electricity supply from a recently constructed
smaller thermal plant. The VRA’s principal electricity generating facility is the Akosombo Dam and during periods of below
average inflows from the Volta reservoir, electricity supplies from the Akosombo Dam may be curtailed, as occurred in 1998,
2006 and the first half of 2007. In addition, during periods of limited electricity availability, the national power system is subject
to system disturbances and voltage fluctuations, which can damage the group’s equipment. The VRA also obtains power from
neighbouring Cote d 217;Ivoire, which has intermittently experienced some political instability and civil unrest. These factors,
including increased power demand from other users in Ghana, may cause interruptions in AngloGold Ashanti’s power supply to
its operations in Ghana or result in increases in the cost of power even if they do not interrupt supply. Consequently, these
factors may adversely affect AngloGold Ashanti’s results of operations and its financial condition. In order to address this
problem and to supplement the power generated by the VRA, AngloGold Ashanti has, together with the other three principal
gold producers in Ghana, acquired (and equally fund) an 85 megawatt, diesel-fired, power plant that could be converted to gas
supply once the anticipated West African Gas Pipeline is developed. To further reduce the dependence on hydro-electric
power, which may be impacted by low rainfall, the VRA is increasing its thermal power generation capacity by constructing a
126 me ga watt thermal plant at Tema.
supplied by the Volta River Authority (VRA) an entity controlled by the government of Ghana. Most of this electrical power is
hydro-generated electricity, although AngloGold Ashanti also has access to VRA electricity supply from a recently constructed
smaller thermal plant. The VRA’s principal electricity generating facility is the Akosombo Dam and during periods of below
average inflows from the Volta reservoir, electricity supplies from the Akosombo Dam may be curtailed, as occurred in 1998,
2006 and the first half of 2007. In addition, during periods of limited electricity availability, the national power system is subject
to system disturbances and voltage fluctuations, which can damage the group’s equipment. The VRA also obtains power from
neighbouring Cote d 217;Ivoire, which has intermittently experienced some political instability and civil unrest. These factors,
including increased power demand from other users in Ghana, may cause interruptions in AngloGold Ashanti’s power supply to
its operations in Ghana or result in increases in the cost of power even if they do not interrupt supply. Consequently, these
factors may adversely affect AngloGold Ashanti’s results of operations and its financial condition. In order to address this
problem and to supplement the power generated by the VRA, AngloGold Ashanti has, together with the other three principal
gold producers in Ghana, acquired (and equally fund) an 85 megawatt, diesel-fired, power plant that could be converted to gas
supply once the anticipated West African Gas Pipeline is developed. To further reduce the dependence on hydro-electric
power, which may be impacted by low rainfall, the VRA is increasing its thermal power generation capacity by constructing a
126 me ga watt thermal plant at Tema.
AngloGold Ashanti’s mining operations in Guinea, Tanzania and Mali are dependent on power supplied by outside contractors
and supplies of fuel being delivered by road. AngloGold Ashanti’s power supply has been disrupted in the past and it has
suffered resulting production losses as a result of equipment failure.
and supplies of fuel being delivered by road. AngloGold Ashanti’s power supply has been disrupted in the past and it has
suffered resulting production losses as a result of equipment failure.
22
Contracts for sale of uranium at fixed prices could affect AngloGold Ashanti’s operating results and financial
condition.
condition.
AngloGold Ashanti has entered into contracts for the sale of uranium produced by some of its South African operations and
may therefore be prevented from realizing all potential gains from an increase in uranium prices to the extent that the
company’s future production is covered by such contracts, or should AngloGold Ashanti not produce sufficient quantities of
uranium to cover such contracts, it may need to procure or borrow uranium in the market to meet any shortfall which could
adversely affect AngloGold Ashanti's results of operations and its financial condition.
may therefore be prevented from realizing all potential gains from an increase in uranium prices to the extent that the
company’s future production is covered by such contracts, or should AngloGold Ashanti not produce sufficient quantities of
uranium to cover such contracts, it may need to procure or borrow uranium in the market to meet any shortfall which could
adversely affect AngloGold Ashanti's results of operations and its financial condition.
Given the uncertainty relating to availability of power, and the impact power constraints may have on uranium production, the
company is in negotiations to reschedule some of its uranium contracts and depending on the outcome of these negotiations,
may have to buy uranium on the open market to fulfill its contractual obligations. For example in 2007, AngloGold Ashanti
purchased 400,000 pounds of uranium at a cost of approximately $31 million.
company is in negotiations to reschedule some of its uranium contracts and depending on the outcome of these negotiations,
may have to buy uranium on the open market to fulfill its contractual obligations. For example in 2007, AngloGold Ashanti
purchased 400,000 pounds of uranium at a cost of approximately $31 million.
Foreign exchange fluctuations could have a material adverse effect on AngloGold Ashanti’s operating results and
financial condition.
financial condition.
Gold is principally a dollar-priced commodity, and most of AngloGold Ashanti’s revenues are realized in or linked to dollars
while production costs are largely incurred in the applicable local currency where the relevant operation is located. The
weakening of the dollar, without a corresponding increase in the dollar price of gold against these local currencies, results in
lower revenues and higher production costs in dollar terms.
while production costs are largely incurred in the applicable local currency where the relevant operation is located. The
weakening of the dollar, without a corresponding increase in the dollar price of gold against these local currencies, results in
lower revenues and higher production costs in dollar terms.
Conversely, the strengthening of the dollar, without a corresponding decrease in the dollar price of gold against these local
currencies yields significantly higher revenues and lower production costs in dollar terms. If material, these exchange rate
movements may have a material effect on AngloGold Ashanti’s operational results.
currencies yields significantly higher revenues and lower production costs in dollar terms. If material, these exchange rate
movements may have a material effect on AngloGold Ashanti’s operational results.
Since June 2002, the weakening of the dollar against the South African rand (up until the second half of 2007 when the South
African rand began to also weaken against the dollar), the Brazilian real, the Argentinean peso and the Australian dollar has
had a negative impact upon AngloGold Ashanti’s profitability. Conversely, in certain prior years, the devaluation of these local
currencies against the dollar has had a significant positive effect on the profitability of AngloGold Ashanti’s operations. In 2007,
2006, and 2005, AngloGold Ashanti derived approximately 71 percent, 73 percent and 67 percent, respectively, of its revenues
from these countries and incurred approximately 62 percent, 61 percent and 63 percent, respectively, of production costs in
these local currencies.
African rand began to also weaken against the dollar), the Brazilian real, the Argentinean peso and the Australian dollar has
had a negative impact upon AngloGold Ashanti’s profitability. Conversely, in certain prior years, the devaluation of these local
currencies against the dollar has had a significant positive effect on the profitability of AngloGold Ashanti’s operations. In 2007,
2006, and 2005, AngloGold Ashanti derived approximately 71 percent, 73 percent and 67 percent, respectively, of its revenues
from these countries and incurred approximately 62 percent, 61 percent and 63 percent, respectively, of production costs in
these local currencies.
In 2007, the weakening of the dollar against these local currencies in which the company operates continued to increase total
cash costs. A one percent strengthening of these local currencies against the dollar will result in an increase of total cash costs
incurred of nearly $3 per ounce, or 1 percent. These impacts were partially offset by the increase in the dollar price of gold,
which increase was to some extent a function of dollar weakness. In addition, production costs in South African rand, Brazilian
real, Argentinean peso and Australian dollar terms were only modestly offset by the effect of exchange rate movements on the
price of imports denominated in dollars, as imported products comprise a small proportion of production costs in each of these
countries.
cash costs. A one percent strengthening of these local currencies against the dollar will result in an increase of total cash costs
incurred of nearly $3 per ounce, or 1 percent. These impacts were partially offset by the increase in the dollar price of gold,
which increase was to some extent a function of dollar weakness. In addition, production costs in South African rand, Brazilian
real, Argentinean peso and Australian dollar terms were only modestly offset by the effect of exchange rate movements on the
price of imports denominated in dollars, as imported products comprise a small proportion of production costs in each of these
countries.
A small proportion of AngloGold Ashanti’s hedges are denominated in South African rands, Australian dollars and Brazilian real
which may partially offset the effect of the US dollar’s strength or weakness on AngloGold Ashanti’s profitability.
which may partially offset the effect of the US dollar’s strength or weakness on AngloGold Ashanti’s profitability.
In addition, due to its global operations and local foreign exchange regulations, some of AngloGold Ashanti’s funds are held in
local currencies, such as the South African rand and the Australian dollar.
local currencies, such as the South African rand and the Australian dollar.
The dollar value of these currencies may be affected by exchange rate fluctuations. If material, exchange rate movements may
adversely affect AngloGold Ashanti’s financial condition.
adversely affect AngloGold Ashanti’s financial condition.
AngloGold Ashanti’s level of indebtedness may adversely affect its business.
As of December 31, 2007, AngloGold Ashanti had gross borrowings of approximately $1.9 billion (including bonds). This level
of indebtedness could have adverse effects on AngloGold Ashanti’s flexibility to do business. Under the terms of AngloGold
Ashanti’s borrowing facilities from its banks it is obliged to meet certain financial and other covenants. AngloGold Ashanti
expects to meet these covenants and to be able to pay principal and interest on its debt by utilizing the cash flows from
operations. Its ability to continue to do so will depend upon its future financial performance which will be affected by its
operating performance as well as by financial and other factors, certain of which are beyond its control. AngloGold Ashanti may
be required to utilize a large portion of its cash flow to pay the principal and interest on its debt which will reduce the amount of
funds available to finan ce existing operations, the development of new organic growth opportunities and further acquisitions.
of indebtedness could have adverse effects on AngloGold Ashanti’s flexibility to do business. Under the terms of AngloGold
Ashanti’s borrowing facilities from its banks it is obliged to meet certain financial and other covenants. AngloGold Ashanti
expects to meet these covenants and to be able to pay principal and interest on its debt by utilizing the cash flows from
operations. Its ability to continue to do so will depend upon its future financial performance which will be affected by its
operating performance as well as by financial and other factors, certain of which are beyond its control. AngloGold Ashanti may
be required to utilize a large portion of its cash flow to pay the principal and interest on its debt which will reduce the amount of
funds available to finan ce existing operations, the development of new organic growth opportunities and further acquisitions.
23
AngloGold Ashanti’s level of indebtedness may make it vulnerable to economic cycle downturns, which are beyond its control,
because during such downturns, it cannot be certain that its future cash flows will be sufficient to allow it to pay principal and
interest on its debt and also to meet its other obligations. Should the cash flow from operations be insufficient, it could breach
its financial and other covenants and may be required to refinance all or part of its existing debt, use existing cash balances,
issue additional equity or sell assets. AngloGold Ashanti cannot be sure that it will be able to do so on commercially reasonable
terms, if at all.
because during such downturns, it cannot be certain that its future cash flows will be sufficient to allow it to pay principal and
interest on its debt and also to meet its other obligations. Should the cash flow from operations be insufficient, it could breach
its financial and other covenants and may be required to refinance all or part of its existing debt, use existing cash balances,
issue additional equity or sell assets. AngloGold Ashanti cannot be sure that it will be able to do so on commercially reasonable
terms, if at all.
AngloGold Ashanti intends to redeem its R2 billion corporate bond (which matures in August 2008) and refinance its $1 billion
convertible bond (which matures in February 2009) before these bonds mature. AngloGold Ashanti cannot give assurance that
it will be able to do so on commercially reasonable terms, if at all.
convertible bond (which matures in February 2009) before these bonds mature. AngloGold Ashanti cannot give assurance that
it will be able to do so on commercially reasonable terms, if at all.
Inflation may have a material adverse effect on AngloGold Ashanti’s results of operations.
Most of AngloGold Ashanti’s operations are located in countries that have experienced high rates of inflation during certain
periods.
periods.
Because it is unable to control the market price at which it sells the gold it produces (except to the extent that it enters into
forward sales and other derivative contracts), it is possible that significantly higher future inflation in the countries in which
AngloGold Ashanti operates may result in an increase in future operational costs in local currencies, without a concurrent
devaluation of the local currency of operations against the dollar or an increase in the dollar price of gold. This could have a
material adverse effect upon AngloGold Ashanti’s results of operations and its financial condition.
forward sales and other derivative contracts), it is possible that significantly higher future inflation in the countries in which
AngloGold Ashanti operates may result in an increase in future operational costs in local currencies, without a concurrent
devaluation of the local currency of operations against the dollar or an increase in the dollar price of gold. This could have a
material adverse effect upon AngloGold Ashanti’s results of operations and its financial condition.
While none of AngloGold Ashanti’s specific operations is currently materially adversely affected by inflation, significantly higher
and sustained inflation in the future, with a consequent increase in operational costs, could result in operations being
discontinued or reduced or rationalized at higher cost mines.
and sustained inflation in the future, with a consequent increase in operational costs, could result in operations being
discontinued or reduced or rationalized at higher cost mines.
AngloGold Ashanti’s new order mining rights in South Africa could be suspended or cancelled should the company
breach, and fail to remedy such breach of, its obligations in respect of the acquisition of these rights.
breach, and fail to remedy such breach of, its obligations in respect of the acquisition of these rights.
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. Currently, a significant portion of its mineral reserves and deposits are
located in South Africa.
jurisdictions in which the mineral properties are located. Currently, a significant portion of its mineral reserves and deposits are
located in South Africa.
The Mineral and Petroleum Resources Development Act (MPRDA) vests custodianship of South Africa’s mineral rights in the
State. The State issues prospecting rights or mining rights to applicants. 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 mining rights into new order mining rights within specified time frames.
State. The State issues prospecting rights or mining rights to applicants. 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 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.
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 the HDSAs 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.
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 (estimated to have been
equivalent to 20 percent of AngloGold Ashanti’s South African production as at August 1, 2005, when its applications for the
conversion of its West Wits and Vaal River mineral rights from old order to new order mineral rights were approved).
Furthermore, at the end of 2006 AngloGold Ashanti implemented an Employee Share Ownership Plan (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 mining rights. AngloGold Ashanti believes that it has made significant progress towards meeting the
requirements of the Charter, the Scorecard and its own undertakings in terms of human resource development, employment
equity, mine community and rural development, housing and living conditions, procurement and beneficiation, including the
equivalent to 20 percent of AngloGold Ashanti’s South African production as at August 1, 2005, when its applications for the
conversion of its West Wits and Vaal River mineral rights from old order to new order mineral rights were approved).
Furthermore, at the end of 2006 AngloGold Ashanti implemented an Employee Share Ownership Plan (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 mining rights. AngloGold Ashanti believes that it has made significant progress towards meeting the
requirements of the Charter, the Scorecard and its own undertakings in terms of human resource development, employment
equity, mine community and rural development, housing and living conditions, procurement and beneficiation, including the
24
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 Charter and the Scorecard and the
implementation of the ESOP will affect the company’s results of operations. See “Item 5.: Operating and financial review and
prospects – Establishment of a Black Economic Empowerment (BEE) transaction in South Africa” for a detailed discussion on
the implementation of an ESOP.
by 2010. AngloGold Ashanti will incur expenses in giving further effect to the Charter and the Scorecard and the
implementation of the ESOP will affect the company’s results of operations. See “Item 5.: Operating and financial review and
prospects – Establishment of a Black Economic Empowerment (BEE) transaction in South Africa” for a detailed discussion on
the implementation of an ESOP.
AngloGold Ashanti was informed on August 1, 2005, by the Director General of Minerals and Energy that its applications 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. The notarial agreements for the converted West Wits mining
right and Block 1C11 new mining rights have been executed and registered as well as the agreements for Jonkerskraal,
Weltevreden, Moab Extension Area and the new right for Edom, all of which form part of the Vaal River operations. Two
notarial agreements relating to the Vaal River operations are pending.
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. The notarial agreements for the converted West Wits mining
right and Block 1C11 new mining rights have been executed and registered as well as the agreements for Jonkerskraal,
Weltevreden, Moab Extension Area and the new right for Edom, all of which form part of the Vaal River operations. Two
notarial agreements relating to the Vaal River operations are pending.
Even where new order mining rights are obtained under the MPRDA, these rights may not be equivalent to the old order mining
rights. The AngloGold Ashanti rights that have been converted and registered do not differ significantly from the relevant 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
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, a
maximum period of five years with one renewal of up to three years. 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.
rights. The AngloGold Ashanti rights that have been converted and registered do not differ significantly from the relevant 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
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, a
maximum period of five years with one renewal of up to three years. 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.
The new order mining rights can be suspended or cancelled by the Minister of Minerals and Energy if, upon notice of a breach
from the Minister, the entity breaching its obligations to comply with the MPRDA or the conditions of the notarial agreement
fails to remedy such breach. The MPRDA also imposes additional responsibilities on mining companies 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 the company’s South African operations in light of the new, as well as existing, environmental requirements.
from the Minister, the entity breaching its obligations to comply with the MPRDA or the conditions of the notarial agreement
fails to remedy such breach. The MPRDA also imposes additional responsibilities on mining companies 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 the company’s South African operations in light of the new, as well as existing, environmental requirements.
The proposed introduction of South African State royalties where a significant portion of AngloGold Ashanti’s mineral
reserves and operations are located could have an adverse effect on its results of operations and its financial
condition.
reserves and operations are located could have an adverse effect on its results of operations and its financial
condition.
The South African government has announced the details of the proposed new legislation whereby new order rights will be
subject to a State royalty. The third draft of the Mineral and Petroleum Resources Royalty Bill was published on December 6,
2007 and provides for the payment of a royalty according to a formula based on earnings before interest, tax and depreciation.
It is estimated that the formula could translate to a royalty rate of more than 4 percent of gross sales in terms of current pricing
assumptions. The latest proposal results in a large increase from the 1.5 percent rate proposed in the second draft in 2006,
and the company is making representations to the government through the South African Chamber of Mines to retain the
proposed 1.5 percent rate. The payment of royalties is currently scheduled to begin on May 1, 2009, if the Bill is passed by
Parliament in its current form.
subject to a State royalty. The third draft of the Mineral and Petroleum Resources Royalty Bill was published on December 6,
2007 and provides for the payment of a royalty according to a formula based on earnings before interest, tax and depreciation.
It is estimated that the formula could translate to a royalty rate of more than 4 percent of gross sales in terms of current pricing
assumptions. The latest proposal results in a large increase from the 1.5 percent rate proposed in the second draft in 2006,
and the company is making representations to the government through the South African Chamber of Mines to retain the
proposed 1.5 percent rate. The payment of royalties is currently scheduled to begin on May 1, 2009, if the Bill is passed by
Parliament in its current form.
Certain factors may affect AngloGold Ashanti’s ability to support the carrying value of its property, plants and
equipment, acquired properties, investments and goodwill on its balance sheet.
equipment, acquired properties, investments and goodwill on its balance sheet.
AngloGold Ashanti reviews and tests the carrying value of its assets when events or changes in circumstances suggest that the
carrying amount may not be recoverable. AngloGold Ashanti values individual mining assets at the lowest level for which
identifiable cash flows are identifiable and independent of cash flows of other mining assets and liabilities.
carrying amount may not be recoverable. AngloGold Ashanti values individual mining assets at the lowest level for which
identifiable cash flows are identifiable and independent of cash flows of other mining assets and liabilities.
If there are indications that impairment may have occurred, AngloGold Ashanti prepares estimates of expected future cash
flows for each group of assets. Expected future cash flows are inherently uncertain, and could materially change over time.
They are significantly affected by reserve and production estimates, together with economic factors such as spot and forward
gold prices, discount rates, currency exchange rates, estimates of costs to produce reserves and future capital expenditure.
flows for each group of assets. Expected future cash flows are inherently uncertain, and could materially change over time.
They are significantly affected by reserve and production estimates, together with economic factors such as spot and forward
gold prices, discount rates, currency exchange rates, estimates of costs to produce reserves and future capital expenditure.
If any of these uncertainties occur either alone or in combination, it could require management to recognize an impairment,
which could adversely affect AngloGold Ashanti’s results of operations and its financial condition.
which could adversely affect AngloGold Ashanti’s results of operations and its financial condition.
25
Diversity in interpretation and application of accounting literature in the mining industry may impact AngloGold
Ashanti’s reported financial results.
Ashanti’s reported financial results.
The mining industry has limited industry specific accounting literature. As a result, diversity exists in the interpretation and
application of accounting literature to mining specific issues. For example, AngloGold Ashanti capitalizes the drilling and related
costs incurred to define and delineate a residual mineral deposit that has not been classified as proved and probable reserves
at a development stage or production stage mine, whereas some companies expense such costs (see “Item 5.: Operating and
financial review and prospects – critical accounting policies”). As and when diversity in interpretation and application is
addressed, it may impact AngloGold Ashanti’s reported results should the adopted interpretation differ from the position
followed by AngloGold Ashanti.
application of accounting literature to mining specific issues. For example, AngloGold Ashanti capitalizes the drilling and related
costs incurred to define and delineate a residual mineral deposit that has not been classified as proved and probable reserves
at a development stage or production stage mine, whereas some companies expense such costs (see “Item 5.: Operating and
financial review and prospects – critical accounting policies”). As and when diversity in interpretation and application is
addressed, it may impact AngloGold Ashanti’s reported results should the adopted interpretation differ from the position
followed by AngloGold Ashanti.
AngloGold Ashanti’s mineral reserves and deposits and mining operations are located in countries that face political,
economic and/or security risks.
economic and/or security risks.
Some of AngloGold Ashanti’s mineral deposits and mining and exploration operations are located in countries that have
experienced political instability and economic uncertainty. In all of the countries where AngloGold Ashanti operates, the
formulation or implementation of government policies may be unpredictable on certain issues including regulations which
impact on its operations and changes in laws relating to issues such as mineral rights and asset ownership, taxation, royalties,
import and export duties, currency transfers, restrictions on foreign currency holdings and repatriation of earnings.
experienced political instability and economic uncertainty. In all of the countries where AngloGold Ashanti operates, the
formulation or implementation of government policies may be unpredictable on certain issues including regulations which
impact on its operations and changes in laws relating to issues such as mineral rights and asset ownership, taxation, royalties,
import and export duties, currency transfers, restrictions on foreign currency holdings and repatriation of earnings.
In 2007, the government of the Democratic Republic of Congo (DRC) announced an industry-wide review of all mining
concessions and related agreements. The agreements related to the ownership and operation of AngloGold Ashanti’s
concessions in the DRC are also subject to this review by a commission as appointed by the DRC government. The
commission has indicated that it is seeking to increase the DRC government’s ownership in AngloGold Ashanti’s concession,
and increase land usage charges. The commission’s review process, the timing and the final outcome of which AngloGold
Ashanti is unable to predict, could result in an adverse change to AngloGold Ashanti in terms of these agreements which could
have adverse impact upon AngloGold Ashanti’s current exploration activities and potential future mining activities in the DRC.
concessions and related agreements. The agreements related to the ownership and operation of AngloGold Ashanti’s
concessions in the DRC are also subject to this review by a commission as appointed by the DRC government. The
commission has indicated that it is seeking to increase the DRC government’s ownership in AngloGold Ashanti’s concession,
and increase land usage charges. The commission’s review process, the timing and the final outcome of which AngloGold
Ashanti is unable to predict, could result in an adverse change to AngloGold Ashanti in terms of these agreements which could
have adverse impact upon AngloGold Ashanti’s current exploration activities and potential future mining activities in the DRC.
Any existing and new mining and exploration operations and projects AngloGold Ashanti carries out in these countries are, and
will be subject to, various national and local laws, policies and regulations governing the ownership, prospecting, development
and mining of mineral reserves, taxation and royalties, exchange controls, import and export duties and restrictions, investment
approvals, employee and social/community relations and other matters.
will be subject to, various national and local laws, policies and regulations governing the ownership, prospecting, development
and mining of mineral reserves, taxation and royalties, exchange controls, import and export duties and restrictions, investment
approvals, employee and social/community relations and other matters.
If, in one or more of these countries, AngloGold Ashanti was not able to obtain or maintain necessary permits, authorizations or
agreements to implement planned projects or continue its operations under conditions or within time frames that make such
plans and operations economic, or if legal, ownership, fiscal (including all royalties and duties), exchange control, employment,
environmental and social laws and regimes, or the governing political authorities change materially, which could result in
changes to such laws and regimes, its results of operations and its financial condition could be adversely affected.
agreements to implement planned projects or continue its operations under conditions or within time frames that make such
plans and operations economic, or if legal, ownership, fiscal (including all royalties and duties), exchange control, employment,
environmental and social laws and regimes, or the governing political authorities change materially, which could result in
changes to such laws and regimes, its results of operations and its financial condition could be adversely affected.
In Mali and Tanzania, AngloGold Ashanti is due refunds of input tax which remain outstanding for periods longer than those
provided for in the respective statutes. In addition, AngloGold Ashanti has outstanding assessments and unresolved tax
disputes in a number of countries. If the outstanding input taxes are not received, the tax disputes are not resolved and
assessments are not made in a manner favorable to AngloGold Ashanti, it could have an adverse effect upon its results of
operations and its financial condition.
provided for in the respective statutes. In addition, AngloGold Ashanti has outstanding assessments and unresolved tax
disputes in a number of countries. If the outstanding input taxes are not received, the tax disputes are not resolved and
assessments are not made in a manner favorable to AngloGold Ashanti, it could have an adverse effect upon its results of
operations and its financial condition.
In Argentina, the government is looking to apply export taxes of 5 percent to mining companies that were exempt therefrom.
AngloGold Ashanti has filed a claim with the courts to prevent payment of an export tax. If the outcome of the tax claim is
unfavorable to AngloGold Ashanti, it could have an adverse effect upon its results and operations and financial condition.
AngloGold Ashanti has filed a claim with the courts to prevent payment of an export tax. If the outcome of the tax claim is
unfavorable to AngloGold Ashanti, it could have an adverse effect upon its results and operations and financial condition.
Certain of the countries in which AngloGold Ashanti has mineral deposits or mining or exploration operations, including the
DRC and Colombia, have in the past experienced and in certain cases continue to experience, a difficult security environment
as well as political instability. In particular, various illegal groups active in regions in which the company is present may pose a
credible threat of terrorism, extortion and kidnapping, which could have an adverse effect on the company’s operations in such
regions. In the event that continued operations in these countries compromise AngloGold Ashanti’s security or business
principles, it may withdraw from these countries on a temporary or permanent basis, which in turn, could have an adverse
impact on its results of operations and its financial condition.
DRC and Colombia, have in the past experienced and in certain cases continue to experience, a difficult security environment
as well as political instability. In particular, various illegal groups active in regions in which the company is present may pose a
credible threat of terrorism, extortion and kidnapping, which could have an adverse effect on the company’s operations in such
regions. In the event that continued operations in these countries compromise AngloGold Ashanti’s security or business
principles, it may withdraw from these countries on a temporary or permanent basis, which in turn, could have an adverse
impact on its results of operations and its financial condition.
26
Labor disruptions and/or increased labor costs could have an adverse effect on AngloGold Ashanti’s operating
results and financial condition.
results and financial condition.
As at December 31, 2007, approximately 77 percent (2006: 69 percent) of AngloGold Ashanti’s workforce excluding
contractors or 63 percent of total workforce was located in South Africa. Approximately 98 percent of the workforce on its South
African operations is unionized, with the National Union of Mineworkers (NUM) representing the majority of unionized workers.
contractors or 63 percent of total workforce was located in South Africa. Approximately 98 percent of the workforce on its South
African operations is unionized, with the National Union of Mineworkers (NUM) representing the majority of unionized workers.
AngloGold Ashanti’s employees in some South American countries and Ghana are also highly unionized. Trade unions have a
significant impact on AngloGold Ashanti’s labor relations climate, as well as on social and political reforms, most notably in
South Africa.
significant impact on AngloGold Ashanti’s labor relations climate, as well as on social and political reforms, most notably in
South Africa.
It has become established practice to negotiate wages and conditions of employment with the unions every two years through
the Chamber of Mines of South Africa. An agreement was signed with the unions in August 2007, following negotiations
between NUM, United Associations of South Africa (UASA) on behalf of some clerical and junior management staff and
Solidarity (on behalf of a small number of miners) and the Chamber of Mines. A two-year deal was reached without resorting to
any industrial action.
the Chamber of Mines of South Africa. An agreement was signed with the unions in August 2007, following negotiations
between NUM, United Associations of South Africa (UASA) on behalf of some clerical and junior management staff and
Solidarity (on behalf of a small number of miners) and the Chamber of Mines. A two-year deal was reached without resorting to
any industrial action.
Labor costs represent a substantial proportion of AngloGold Ashanti’s total operating costs and in many operations, including
South African operations, is the company’s single largest operating cost category. The two-year wage agreement will be
reviewed in June 2009 in negotiation with NUM, UASA, Solidarity and the Chamber of Mines and any increases in labor costs
have to be off-set by greater productivity efforts by all operations and employees.
South African operations, is the company’s single largest operating cost category. The two-year wage agreement will be
reviewed in June 2009 in negotiation with NUM, UASA, Solidarity and the Chamber of Mines and any increases in labor costs
have to be off-set by greater productivity efforts by all operations and employees.
There is a risk that strikes or other types of conflict with unions or employees may occur at any one of AngloGold Ashanti’s
operations. It is uncertain whether labor disruptions will be used to advocate labor, political or social goals in the future. Should
any labor disruptions occur, if material, they could have an adverse effect on AngloGold Ashanti’s results of operations and its
financial condition.
operations. It is uncertain whether labor disruptions will be used to advocate labor, political or social goals in the future. Should
any labor disruptions occur, if material, they could have an adverse effect on AngloGold Ashanti’s results of operations and its
financial condition.
The use of mining contractors at certain of AngloGold Ashanti’s operations may expose it to delays or suspensions in
mining activities and increases in mining costs.
mining activities and increases in mining costs.
Mining contractors are used at certain of AngloGold Ashanti’s mines, including Sadiola, Morila and Yatela in Mali, Siguiri in
Guinea, Iduapriem in Ghana and Sunrise Dam in Australia, to mine and deliver ore to processing plants. Consequently, at
these mines, AngloGold Ashanti does not own all of the mining equipment and may face disruption of operations and incur
costs and liabilities in the event that any of the mining contractors at these mines has financial difficulties, or should there be a
dispute in renegotiating a mining contract, or a delay in replacing an existing contractor. Furthermore, increases in contract
mining rates, in the absence of associated productivity increases, will have an adverse impact on the company’s results of
operations and financial condition.
Guinea, Iduapriem in Ghana and Sunrise Dam in Australia, to mine and deliver ore to processing plants. Consequently, at
these mines, AngloGold Ashanti does not own all of the mining equipment and may face disruption of operations and incur
costs and liabilities in the event that any of the mining contractors at these mines has financial difficulties, or should there be a
dispute in renegotiating a mining contract, or a delay in replacing an existing contractor. Furthermore, increases in contract
mining rates, in the absence of associated productivity increases, will have an adverse impact on the company’s results of
operations and financial condition.
AngloGold Ashanti competes with mining and other companies for key human resources.
AngloGold Ashanti competes with mining and other companies on a global basis to attract and retain key human resources at
all levels with appropriate technical skills and operating and managerial experience necessary to continue to operate its
business. This is further exacerbated in the current environment of increased mining activity across the globe combined with
the global shortage of key mining industry human resource skills, including geologists, mining engineers, metallurgists and
skilled artisans.
all levels with appropriate technical skills and operating and managerial experience necessary to continue to operate its
business. This is further exacerbated in the current environment of increased mining activity across the globe combined with
the global shortage of key mining industry human resource skills, including geologists, mining engineers, metallurgists and
skilled artisans.
The retention of staff is particularly challenging in South Africa, where, in addition to the impacts of the global industry wide
shortages, AngloGold Ashanti is also required to achieve employment equity targets of participation by HDSAs in management
and other positions.
shortages, AngloGold Ashanti is also required to achieve employment equity targets of participation by HDSAs in management
and other positions.
AngloGold Ashanti competes with all companies in South Africa to attract and retain a small but growing pool of HDSAs with
the necessary skills and experience. For further details see the risk factor “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 of the acquisition of these rights”.
the necessary skills and experience. For further details see the risk factor “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 of the acquisition of these rights”.
There can be no assurance that AngloGold Ashanti will attract and retain skilled and experienced employees and, should it fail
to do so or lose any of its key personnel, its business and its financial condition could be adversely affected.
to do so or lose any of its key personnel, its business and its financial condition could be adversely affected.
27
AngloGold Ashanti faces certain risks in dealing with HIV/AIDS which may adversely affect its results of operations
and its financial condition.
and its financial condition.
AIDS remains the major health care challenge faced by AngloGold Ashanti’s South African operations. The South African
workforce prevalence studies indicate that the percentage of AngloGold Ashanti’s South African workforce that may be infected
by HIV may be as high as 30 percent. Accurate prevalence data for AIDS is not available owing to doctor-patient confidentiality.
AngloGold Ashanti is continuing to develop and implement various programs aimed at helping those who have been infected
with HIV and preventing new infections. Since 2001 AngloGold Ashanti has offered a voluntary counseling and HIV testing
program for employees in South Africa. In 2002 AngloGold Ashanti began to offer anti-retroviral therapy (ART) to HIV positive
employees who met the current medical criteria for the initiation of ART. From April 2003, AngloGold Ashanti has treated all
eligible employees desiring it. Currentl y approximately 4,600 employees are on the wellness program and as at December
2007, approximately 2,100 employees were receiving treatment using anti-retroviral drugs.
workforce prevalence studies indicate that the percentage of AngloGold Ashanti’s South African workforce that may be infected
by HIV may be as high as 30 percent. Accurate prevalence data for AIDS is not available owing to doctor-patient confidentiality.
AngloGold Ashanti is continuing to develop and implement various programs aimed at helping those who have been infected
with HIV and preventing new infections. Since 2001 AngloGold Ashanti has offered a voluntary counseling and HIV testing
program for employees in South Africa. In 2002 AngloGold Ashanti began to offer anti-retroviral therapy (ART) to HIV positive
employees who met the current medical criteria for the initiation of ART. From April 2003, AngloGold Ashanti has treated all
eligible employees desiring it. Currentl y approximately 4,600 employees are on the wellness program and as at December
2007, approximately 2,100 employees were receiving treatment using anti-retroviral drugs.
The cost of providing rigorous outcome-focused disease management of employees with AIDS, including the provision of an
anti-retroviral therapy, is on average R1,300 ($185) per employee on treatment per month. It is not yet possible to develop an
accurate cost estimate of the program in its entirety, given uncertainties such as drug prices and the ultimate rate of employee
participation.
anti-retroviral therapy, is on average R1,300 ($185) per employee on treatment per month. It is not yet possible to develop an
accurate cost estimate of the program in its entirety, given uncertainties such as drug prices and the ultimate rate of employee
participation.
AngloGold Ashanti does not expect the cost that it will incur related to the prevention of HIV infection and the treatment of AIDS
to materially and adversely affect its results of operations. Nevertheless, it is not possible to determine with certainty the costs
that AngloGold Ashanti may incur in the future in addressing this issue, and consequently its results of operations and its
financial condition could be adversely affected.
to materially and adversely affect its results of operations. Nevertheless, it is not possible to determine with certainty the costs
that AngloGold Ashanti may incur in the future in addressing this issue, and consequently its results of operations and its
financial condition could be adversely affected.
AngloGold Ashanti faces certain risks in dealing with malaria, particularly at its operations located in Africa, which
may have an adverse effect on its results of operations.
may have an adverse effect on its results of operations.
Malaria is a significant health risk at all of AngloGold Ashanti’s operations in Central, West and East Africa where the disease
assumes epidemic proportions because of ineffective national control programs. The disease is a major cause of death in
young children and pregnant women but also gives rise to fatalities and absenteeism in adult men. Consequently, if
uncontrolled, the disease could have an adverse effect upon productivity and profitability levels of AngloGold Ashanti’s
operations located in these regions.
assumes epidemic proportions because of ineffective national control programs. The disease is a major cause of death in
young children and pregnant women but also gives rise to fatalities and absenteeism in adult men. Consequently, if
uncontrolled, the disease could have an adverse effect upon productivity and profitability levels of AngloGold Ashanti’s
operations located in these regions.
The treatment of occupational health diseases and the potential liabilities related to occupational health diseases may
have an adverse effect upon the results of AngloGold Ashanti’s operations and its financial condition.
have an adverse effect upon the results of AngloGold Ashanti’s operations and its financial condition.
The primary areas of focus in respect of occupational health within AngloGold Ashanti’s operations are noise-induced hearing
loss (NIHL), occupational lung diseases (OLD) and tuberculosis (TB). AngloGold Ashanti provides occupational health services
to its employees at its occupational health centers and it continues to improve preventative occupational hygiene initiatives. If
the costs associated with providing such occupational health services increase, such increase could have an adverse effect on
AngloGold Ashanti’s results of operations and its financial condition.
loss (NIHL), occupational lung diseases (OLD) and tuberculosis (TB). AngloGold Ashanti provides occupational health services
to its employees at its occupational health centers and it continues to improve preventative occupational hygiene initiatives. If
the costs associated with providing such occupational health services increase, such increase could have an adverse effect on
AngloGold Ashanti’s results of operations and its financial condition.
Furthermore, the South African government, by way of a cabinet resolution in 1999, proposed a possible combination and
alignment of benefits of the Occupational Diseases in Mines and Works Act (ODMWA) that provides for compensation to
miners who have OLD, TB and combinations thereof, and the Compensation for Occupational Injuries and Diseases Act
(COIDA) that provides for compensation to non-miners who have OLD.
alignment of benefits of the Occupational Diseases in Mines and Works Act (ODMWA) that provides for compensation to
miners who have OLD, TB and combinations thereof, and the Compensation for Occupational Injuries and Diseases Act
(COIDA) that provides for compensation to non-miners who have OLD.
COIDA provides for compensation payments to workers suffering permanent disabilities from OLD, which are classified as
pension liabilities if the permanent disability is above a certain threshold, or a lump sum compensation payment if the
permanent disability is below a certain threshold. ODMWA only provides for a lump sum compensation payment to workers
suffering from OLD. The capitalized value of a pension liability (in accordance with COIDA) is usually greater than that of a
lump sum compensation payment (under ODMWA). In addition, under COIDA compensation becomes payable at a lower
threshold of permanent disability than under ODMWA. It is estimated that under COIDA about two to three times more of
AngloGold Ashanti’s employees would be compensated as compared with those eligible for compensation under ODMWA.
pension liabilities if the permanent disability is above a certain threshold, or a lump sum compensation payment if the
permanent disability is below a certain threshold. ODMWA only provides for a lump sum compensation payment to workers
suffering from OLD. The capitalized value of a pension liability (in accordance with COIDA) is usually greater than that of a
lump sum compensation payment (under ODMWA). In addition, under COIDA compensation becomes payable at a lower
threshold of permanent disability than under ODMWA. It is estimated that under COIDA about two to three times more of
AngloGold Ashanti’s employees would be compensated as compared with those eligible for compensation under ODMWA.
If the proposed combination of COIDA and ODMWA were to occur, this could further increase the level of compensation claims
AngloGold Ashanti could be subject to and consequently could have an adverse effect on its financial condition.
AngloGold Ashanti could be subject to and consequently could have an adverse effect on its financial condition.
28
Mr Thembekile Mankayi instituted a legal action against AngloGold Ashanti in October 2006 in the High Court, Witwatersrand
Local Division. Mr Mankayi is claiming approximately R2.6 million for damages allegedly suffered by him as a result of silicosis
allegedly contracted whilst working on mines now owned by AngloGold Ashanti. An exception has been filed by AngloGold
Ashanti against the claim and was heard in the High Court early February 2008. AngloGold Ashanti filed the exception on the
basis that mine employers are insured in terms ODMWA and COIDA against compensable diseases and this prevents any
delictual claims by employees against employers. Judgment has been reserved. If AngloGold Ashanti is unsuccessful in
defending this suit, it could be subject to numerous similar claims which could have an adverse effect on its financial condition.
Local Division. Mr Mankayi is claiming approximately R2.6 million for damages allegedly suffered by him as a result of silicosis
allegedly contracted whilst working on mines now owned by AngloGold Ashanti. An exception has been filed by AngloGold
Ashanti against the claim and was heard in the High Court early February 2008. AngloGold Ashanti filed the exception on the
basis that mine employers are insured in terms ODMWA and COIDA against compensable diseases and this prevents any
delictual claims by employees against employers. Judgment has been reserved. If AngloGold Ashanti is unsuccessful in
defending this suit, it could be subject to numerous similar claims which could have an adverse effect on its financial condition.
In response to the effects of silicosis in labor sending communities, a number of mining companies (under the auspices of the
Chamber of Mines), together with the National Union of Mineworkers (NUM) which is the largest union in the mining sector and
the national and regional departments of health have embarked on a project to assist in the delivery of compensation and relief
to communities that have been affected.
Chamber of Mines), together with the National Union of Mineworkers (NUM) which is the largest union in the mining sector and
the national and regional departments of health have embarked on a project to assist in the delivery of compensation and relief
to communities that have been affected.
The costs associated with the pumping of water inflows from closed mines adjacent to AngloGold Ashanti’s
operations could have an adverse effect upon its results of operations.
operations could have an adverse effect upon its results of operations.
Certain of AngloGold Ashanti’s mining operations are located adjacent to the mining operations of other mining companies.
The closure of a mining operation may have an impact upon continued operations at the adjacent mine if appropriate
preventative steps are not taken. In particular, this can include the ingress of underground water where pumping operations at
the adjacent closed mine are suspended. Such ingress could have an adverse effect upon any one of AngloGold Ashanti’s
mining operations as a result of property damage, disruption to operations and additional pumping costs.
The closure of a mining operation may have an impact upon continued operations at the adjacent mine if appropriate
preventative steps are not taken. In particular, this can include the ingress of underground water where pumping operations at
the adjacent closed mine are suspended. Such ingress could have an adverse effect upon any one of AngloGold Ashanti’s
mining operations as a result of property damage, disruption to operations and additional pumping costs.
AngloGold Ashanti has embarked on legal action in South Africa after the owner of an adjacent mine put the company owning
the adjacent mining operation into liquidation, raising questions about its and other companies’ willingness to meet their water
pumping obligations.
the adjacent mining operation into liquidation, raising questions about its and other companies’ willingness to meet their water
pumping obligations.
The relevant mining companies have entered into a settlement agreement. As part of the settlement arrangement the mining
companies have formed and registered a not-for-profit company, known as the Margaret Water Company, to conduct water
pumping activities from the highest lying shaft which is currently owned by Stilfontein Gold Mining Company (in liquidation).
The three mining companies will contribute equally to the cost of establishing and initially running the Margaret Water
Company.
companies have formed and registered a not-for-profit company, known as the Margaret Water Company, to conduct water
pumping activities from the highest lying shaft which is currently owned by Stilfontein Gold Mining Company (in liquidation).
The three mining companies will contribute equally to the cost of establishing and initially running the Margaret Water
Company.
The occurrence of events for which AngloGold Ashanti is not insured or for which its insurance is inadequate may
adversely affect its cash flows and overall profitability.
adversely affect its cash flows and overall profitability.
AngloGold Ashanti maintains insurance to protect only against catastrophic events which could have a significant adverse
effect on its operations and profitability. This insurance is maintained in amounts that are believed to be reasonable depending
upon the circumstances surrounding each identified risk.
effect on its operations and profitability. This insurance is maintained in amounts that are believed to be reasonable depending
upon the circumstances surrounding each identified risk.
However, AngloGold Ashanti’s insurance does not cover all potential risks associated with its business. In addition, AngloGold
Ashanti may elect not to insure certain risks, due to the high premiums associated with insuring those risks or for various other
reasons, including an assessment that the risks are remote. Furthermore, AngloGold Ashanti may not be able to obtain
insurance coverage at acceptable premiums. AngloGold Ashanti has a captive insurance company, namely AGRe Insurance
Company Limited, which participates at various levels in certain of the insurances maintained by AngloGold Ashanti. The
occurrence of events for which it is not insured may adversely affect AngloGold Ashanti’s cash flows, overall profitability and its
financial condition.
Ashanti may elect not to insure certain risks, due to the high premiums associated with insuring those risks or for various other
reasons, including an assessment that the risks are remote. Furthermore, AngloGold Ashanti may not be able to obtain
insurance coverage at acceptable premiums. AngloGold Ashanti has a captive insurance company, namely AGRe Insurance
Company Limited, which participates at various levels in certain of the insurances maintained by AngloGold Ashanti. The
occurrence of events for which it is not insured may adversely affect AngloGold Ashanti’s cash flows, overall profitability and its
financial condition.
Risks related to AngloGold Ashanti’s ordinary shares and American Depositary Shares (ADSs)
Sales of large quantities of AngloGold Ashanti’s ordinary shares and ADSs, or the perception that these sales may
occur, could adversely affect the prevailing market price of such securities, as could future offerings of AngloGold
Ashanti’s ordinary shares, ADSs or securities exchangeable or exercisable for ordinary shares or ADSs..
occur, could adversely affect the prevailing market price of such securities, as could future offerings of AngloGold
Ashanti’s ordinary shares, ADSs or securities exchangeable or exercisable for ordinary shares or ADSs..
The market price of AngloGold Ashanti’s ordinary shares or ADSs could fall if large quantities of ordinary shares or ADSs are
sold in the public market, or there is the perception in the marketplace that such sales could occur. Subject to applicable
securities laws, holders of AngloGold Ashanti’s ordinary shares or ADSs may decide to sell them at any time. The market price
of AngloGold Ashanti’s ordinary shares or ADSs could also fall as a result of any future offerings it makes of ordinary shares,
ADSs, or securities exchangeable or exercisable for its ordinary shares or ADSs, or the perception in the marketplace that
these sales might occur. AngloGold Ashanti may make such offerings, including offerings of additional ADS rights, letters of
allocation or similar securities at any time or from time to time in the future.
sold in the public market, or there is the perception in the marketplace that such sales could occur. Subject to applicable
securities laws, holders of AngloGold Ashanti’s ordinary shares or ADSs may decide to sell them at any time. The market price
of AngloGold Ashanti’s ordinary shares or ADSs could also fall as a result of any future offerings it makes of ordinary shares,
ADSs, or securities exchangeable or exercisable for its ordinary shares or ADSs, or the perception in the marketplace that
these sales might occur. AngloGold Ashanti may make such offerings, including offerings of additional ADS rights, letters of
allocation or similar securities at any time or from time to time in the future.
29
AngloGold Ashanti has entered into a registration rights agreement with Anglo American plc (AA plc) that would facilitate
US registration of additional offers and sales of AngloGold Ashanti shares that AA plc makes in the future, subject to certain
conditions. Sales of AngloGold Ashanti ordinary shares or AngloGold Ashanti ADSs if substantial, or the perception that sales
may occur and be substantial, could exert downward pressure on the prevailing market prices for AngloGold Ashanti ordinary
shares or AngloGold Ashanti ADSs, causing their market prices to decline. In April 2006, AA plc sold 19,685,170 AngloGold
Ashanti ordinary shares and, in October 2007, sold an additional 69,100,000 AngloGold Ashanti ordinary shares. These and
other sales combined with the dilutive effect of AngloGold Ashanti’s issuance of 9,970,732 ordinary shares in April 2006,
reduced AA plc’s shareholding in AngloGol d Ashanti from approximately 51 percent of issued AngloGold Ashanti shares as at
April 19, 2006 to approximately 16.6 percent as at October 9, 2007. AA plc has stated that it intends to reduce and ultimately
exit its gold company holdings and that it will continue to explore all available options to exit AngloGold Ashanti in an orderly
manner. Sales or distributions of substantial amounts of AngloGold Ashanti ordinary shares or AngloGold Ashanti ADSs or the
perception that sales or distributions may occur, could adversely affect the market price for AngloGold Ashanti ordinary shares
or AngloGold Ashanti ADSs.
US registration of additional offers and sales of AngloGold Ashanti shares that AA plc makes in the future, subject to certain
conditions. Sales of AngloGold Ashanti ordinary shares or AngloGold Ashanti ADSs if substantial, or the perception that sales
may occur and be substantial, could exert downward pressure on the prevailing market prices for AngloGold Ashanti ordinary
shares or AngloGold Ashanti ADSs, causing their market prices to decline. In April 2006, AA plc sold 19,685,170 AngloGold
Ashanti ordinary shares and, in October 2007, sold an additional 69,100,000 AngloGold Ashanti ordinary shares. These and
other sales combined with the dilutive effect of AngloGold Ashanti’s issuance of 9,970,732 ordinary shares in April 2006,
reduced AA plc’s shareholding in AngloGol d Ashanti from approximately 51 percent of issued AngloGold Ashanti shares as at
April 19, 2006 to approximately 16.6 percent as at October 9, 2007. AA plc has stated that it intends to reduce and ultimately
exit its gold company holdings and that it will continue to explore all available options to exit AngloGold Ashanti in an orderly
manner. Sales or distributions of substantial amounts of AngloGold Ashanti ordinary shares or AngloGold Ashanti ADSs or the
perception that sales or distributions may occur, could adversely affect the market price for AngloGold Ashanti ordinary shares
or AngloGold Ashanti ADSs.
Fluctuations in the exchange rate of different currencies may reduce the market value of AngloGold Ashanti’s
securities, as well as the market value of any dividends or distributions paid by AngloGold Ashanti.
securities, as well as the market value of any dividends or distributions paid by AngloGold Ashanti.
AngloGold Ashanti has historically declared all dividends in South African rands. As a result, exchange rate movements may
have affected and may continue to affect the Australian dollar, the British pound, the Ghanaian cedi and the US dollar value of
these dividends, as well as of any other distributions paid by the relevant depositary to investors that hold AngloGold Ashanti’s
securities. This may reduce the value of these securities to investors. The Memorandum and Articles of Association of the
company allows for dividends and distributions to be declared in any currency at the discretion of AngloGold Ashanti’s board of
directors, or its shareholders at a general meeting. If and to the extent that AngloGold Ashanti opts to declare dividends and
distributions in dollars, exchange rate movements will not affect the dollar value of any dividends or distributions, nevertheless,
the value of any dividend or distribution in Australian dollars, British pounds, Ghanaian cedis or South African rands will
continue to be affected. If and to the extent that dividends and distributions are declared in South African rands, exchange rate
movements will continue to affect the Australian dollar, British pound, Ghanaian cedi and US dollar value of these dividends
and distributions. Furthermore, the market value of AngloGold Ashanti’s securities as expressed in Australian dollars, British
pounds, Ghanaian cedis, US dollars and South African rands will continue to fluctuate in part as a result of foreign exchange
fluctuations.
have affected and may continue to affect the Australian dollar, the British pound, the Ghanaian cedi and the US dollar value of
these dividends, as well as of any other distributions paid by the relevant depositary to investors that hold AngloGold Ashanti’s
securities. This may reduce the value of these securities to investors. The Memorandum and Articles of Association of the
company allows for dividends and distributions to be declared in any currency at the discretion of AngloGold Ashanti’s board of
directors, or its shareholders at a general meeting. If and to the extent that AngloGold Ashanti opts to declare dividends and
distributions in dollars, exchange rate movements will not affect the dollar value of any dividends or distributions, nevertheless,
the value of any dividend or distribution in Australian dollars, British pounds, Ghanaian cedis or South African rands will
continue to be affected. If and to the extent that dividends and distributions are declared in South African rands, exchange rate
movements will continue to affect the Australian dollar, British pound, Ghanaian cedi and US dollar value of these dividends
and distributions. Furthermore, the market value of AngloGold Ashanti’s securities as expressed in Australian dollars, British
pounds, Ghanaian cedis, US dollars and South African rands will continue to fluctuate in part as a result of foreign exchange
fluctuations.
The recently announced proposal by the South African Government to replace the Secondary Tax on Companies with
a withholding tax on dividends and other distributions may impact on the amount of dividends or other distributions
received by the company’s shareholders.
a withholding tax on dividends and other distributions may impact on the amount of dividends or other distributions
received by the company’s shareholders.
On February 21, 2007, the South African Government announced a proposal to replace Secondary Tax on Companies with a
10 percent withholding tax on dividends and other distributions payable to shareholders. This proposal is expected to be
implemented in phases between 2007 and 2009. Although this may reduce the tax payable by the South African operations of
the company thereby increasing distributable earnings, the withholding tax will generally reduce the amount of dividends or
other distributions received by AngloGold Ashanti shareholders.
10 percent withholding tax on dividends and other distributions payable to shareholders. This proposal is expected to be
implemented in phases between 2007 and 2009. Although this may reduce the tax payable by the South African operations of
the company thereby increasing distributable earnings, the withholding tax will generally reduce the amount of dividends or
other distributions received by AngloGold Ashanti shareholders.
30
Item 4: Information on the company
AngloGold Ashanti, 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) which was incorporated in Ghana on
August 19, 1974.
AngloGold Limited (AngloGold) with Ashanti Goldfields Company Limited (Ashanti) which was incorporated in Ghana on
August 19, 1974.
4A.
History and development of the company
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 20 operations 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 Reserves of the group
amounted to 72.2 million ounces as at December 31, 2007.
relatively low-cost assets and differing orebody types in key gold producing regions. The company's 20 operations 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 Reserves of the group
amounted to 72.2 million ounces as at December 31, 2007.
The primary listing of the company's ordinary shares is on the JSE Limited (JSE) in South Africa. Its ordinary shares are also
listed on stock exchanges in London, Paris and Ghana, as well as being quoted in Brussels in the form of International
Depositary Receipts (IDRs), in New York in the form of American Depositary Shares (ADSs), in Australia, in the form of
Clearing House Electronic Subregister System Depositary Interests (CDIs) and in Ghana, in the form of Ghanaian Depositary
Shares (GhDSs).
listed on stock exchanges in London, Paris and Ghana, as well as being quoted in Brussels in the form of International
Depositary Receipts (IDRs), in New York in the form of American Depositary Shares (ADSs), in Australia, in the form of
Clearing House Electronic Subregister System Depositary Interests (CDIs) and in Ghana, in the form of Ghanaian Depositary
Shares (GhDSs).
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 and operates under
the South African Companies Act 61 of 1973, as amended. Its principal executive office is located at 76 Jeppe Street,
Newtown, Johannesburg, 2001 (P.O. Box 62117, Marshalltown, 2107) South Africa (Telephone +27 11 637 6000), AngloGold
Ashanti's US offices are at the offices of AngloGold Ashanti North America Incorporated, 7400 East Orchard Road, Suite 350,
Greenwood Village, CO 80111.
Republic of South Africa in 1944 under the name of Vaal Reefs Exploration and Mining Company Limited and operates under
the South African Companies Act 61 of 1973, as amended. Its principal executive office is located at 76 Jeppe Street,
Newtown, Johannesburg, 2001 (P.O. Box 62117, Marshalltown, 2107) South Africa (Telephone +27 11 637 6000), AngloGold
Ashanti's US offices are at the offices of AngloGold Ashanti North America Incorporated, 7400 East Orchard Road, Suite 350,
Greenwood Village, CO 80111.
AngloGold Limited 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, namely East Rand Gold and Uranium Company Limited, Eastvaal
Gold Holdings Limited, Southvaal Holdings Limited, Free State Consolidated Gold Mines Limited, Elandsrand Gold Mining
Company Limited, H.J. Joel Gold Mining Company Limited and Western Deep Levels Limited into a single, focused,
independent, 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.
South Africa Limited (AAC) and its associated companies, namely East Rand Gold and Uranium Company Limited, Eastvaal
Gold Holdings Limited, Southvaal Holdings Limited, Free State Consolidated Gold Mines Limited, Elandsrand Gold Mining
Company Limited, H.J. Joel Gold Mining Company Limited and Western Deep Levels Limited into a single, focused,
independent, 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 acquired minority shareholders interests in Driefontein Consolidated Limited (17 percent); Anmercosa Mining (West
Africa) Limited (100 percent); Western Ultra Deep Levels Limited (89 percent); Eastern Gold Holdings Limited (52 percent);
Erongo Mining and Exploration Company Limited (70 percent).
Africa) Limited (100 percent); Western Ultra Deep Levels Limited (89 percent); Eastern Gold Holdings Limited (52 percent);
Erongo Mining and Exploration Company Limited (70 percent).
In 1999, AngloGold purchased Minorco's gold interests in North and South America and acquired Acacia Resources in
Australia.
Australia.
In 2000, AngloGold acquired a 40 percent interest in the Morila mine in Mali from Randgold Resources Limited, acquired a
50 percent interest in the Geita mine in Tanzania from Ashanti Goldfields Company Limited (Ashanti) (in 2004, following the
business combination with Ashanti, AngloGold acquired the remaining 50 percent interest) and in support of its market
development initiatives acquired a 25 percent interest in OroAfrica, South Africa's largest manufacturer of gold jewellery.
50 percent interest in the Geita mine in Tanzania from Ashanti Goldfields Company Limited (Ashanti) (in 2004, following the
business combination with Ashanti, AngloGold acquired the remaining 50 percent interest) and in support of its market
development initiatives acquired a 25 percent interest in OroAfrica, South Africa's largest manufacturer of gold jewellery.
In 2001, AngloGold sold the Elandsrand and Deelkraal mines to Harmony Gold Mining Company Limited (Harmony), disposed
of AngloGold's interests in No. 2 Shaft Vaal River Operations to African Rainbow Minerals (ARM) and made an unsuccessful
take-over bid for Normandy Mining Limited.
of AngloGold's interests in No. 2 Shaft Vaal River Operations to African Rainbow Minerals (ARM) and made an unsuccessful
take-over bid for Normandy Mining Limited.
In 2002, the sale of AngloGold’s Free State assets to ARM and Harmony became effective. Also in 2002, AngloGold acquired
an additional 46.25 percent of the equity, as well as the total loan assignment, of Cerro Vanguardia SA from Pérez Companc
International SA, increasing its interest in Cerro Vanguardia to 92.5 percent and disposed of AngloGold's wholly owned
subsidiary, Stone and Allied Industries (O.F.S.) Limited.
an additional 46.25 percent of the equity, as well as the total loan assignment, of Cerro Vanguardia SA from Pérez Companc
International SA, increasing its interest in Cerro Vanguardia to 92.5 percent and disposed of AngloGold's wholly owned
subsidiary, Stone and Allied Industries (O.F.S.) Limited.
31
In 2003, AngloGold disposed of its wholly owned Amapari project to Mineração Pedra Branca do Amapari, 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, concluded the sale of its interest in the Jerritt Canyon Joint Venture to Queenstake Resources USA Inc,
disposed of its entire investment in East African Gold Mines Limited and in Randgold Resources Limited and purchased a
portion of the Driefontein mining area in South Africa from Gold Fields Limited.
its 49 percent stake in the Gawler Craton Joint Venture, including the Tunkillia project located in South Australia to Helix
Resources Limited, concluded the sale of its interest in the Jerritt Canyon Joint Venture to Queenstake Resources USA Inc,
disposed of its entire investment in East African Gold Mines Limited and in Randgold Resources Limited and purchased a
portion of the Driefontein mining area in South Africa from Gold Fields Limited.
In 2004, AngloGold sold its Western Tanami project to Tanami Gold NL in Australia, the business combination between
AngloGold and Ashanti Goldfields Company Limited was completed, resulting in the company changing its name to AngloGold
Ashanti Limited, AngloGold Holdings plc, a subsidiary of AngloGold, completed an offering of $1 billion principal amount
2.375 percent convertible bonds, due 2009 and guaranteed by AngloGold Ashanti. Also in 2004, AngloGold Ashanti acquired
a 29.8 percent stake in Trans-Siberian Gold plc (TSG), sold its Union Reefs assets to the Burnside Joint Venture, comprising
subsidiaries of Northern Gold NL (50 percent) and Harmony (50 percent), disposed of its entire interest in Ashanti Goldfields
Zimbabwe Limited to Mwana Africa Holdings (Proprietary) Limited, subscribed for a 12.3 percent stake in the expanded issued
capital of Philippines explorer Red 5 Limited and sold its 40 p ercent equity interest in Tameng Mining and Exploration (Pty)
Limited of South Africa (Tameng) to Mahube Mining (Pty) Limited.
AngloGold and Ashanti Goldfields Company Limited was completed, resulting in the company changing its name to AngloGold
Ashanti Limited, AngloGold Holdings plc, a subsidiary of AngloGold, completed an offering of $1 billion principal amount
2.375 percent convertible bonds, due 2009 and guaranteed by AngloGold Ashanti. Also in 2004, AngloGold Ashanti acquired
a 29.8 percent stake in Trans-Siberian Gold plc (TSG), sold its Union Reefs assets to the Burnside Joint Venture, comprising
subsidiaries of Northern Gold NL (50 percent) and Harmony (50 percent), disposed of its entire interest in Ashanti Goldfields
Zimbabwe Limited to Mwana Africa Holdings (Proprietary) Limited, subscribed for a 12.3 percent stake in the expanded issued
capital of Philippines explorer Red 5 Limited and sold its 40 p ercent equity interest in Tameng Mining and Exploration (Pty)
Limited of South Africa (Tameng) to Mahube Mining (Pty) Limited.
In January 2005, AngloGold Ashanti completed a substantial restructuring of its hedge book. Also in 2005, AngloGold Ashanti
signed a three-year $700 million revolving credit facility, sold exploration assets in the Laverton area in Australia, disposed of
its La Rescatada project to ARUNANI SAC, a local Peruvian corporation, with an option to repurchase 60 percent of the project
should economically viable reserves in excess of 2 million ounces be identified within three years. The Director-General of
Minerals and Energy notified AngloGold Ashanti in August 2005 that application for the new order mining rights in terms of the
South African Mineral Resources and Petroleum Development Act had been granted.
signed a three-year $700 million revolving credit facility, sold exploration assets in the Laverton area in Australia, disposed of
its La Rescatada project to ARUNANI SAC, a local Peruvian corporation, with an option to repurchase 60 percent of the project
should economically viable reserves in excess of 2 million ounces be identified within three years. The Director-General of
Minerals and Energy notified AngloGold Ashanti in August 2005 that application for the new order mining rights in terms of the
South African Mineral Resources and Petroleum Development Act had been granted.
In 2006, AngloGold Ashanti raised $500 million in an equity offering, signed a Heads of Agreement with Antofagasta plc to
jointly explore a highly prospective belt in Southern Colombia for new gold and copper deposits which was mutually dissolved
in 2007, disposed of its entire business undertaking, related to the Bibiani mine and Bibiani North prospecting permit to Central
African Gold plc, 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 co-operate in
exploration and the acquisition and development of gold mining opportunities within the Russian Federation and implemented
an empowerment transaction with two components: the development of an employee share ownership plan (ESOP) and the
acquisition by Izingwe Holdings (Proprietary) Limited (an empowerment company) of an equity interest in AngloGold Ashanti
and acquired an effective 8.7 percent stake in China explorer, Dynasty Gold Corporation.
jointly explore a highly prospective belt in Southern Colombia for new gold and copper deposits which was mutually dissolved
in 2007, disposed of its entire business undertaking, related to the Bibiani mine and Bibiani North prospecting permit to Central
African Gold plc, 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 co-operate in
exploration and the acquisition and development of gold mining opportunities within the Russian Federation and implemented
an empowerment transaction with two components: the development of an employee share ownership plan (ESOP) and the
acquisition by Izingwe Holdings (Proprietary) Limited (an empowerment company) of an equity interest in AngloGold Ashanti
and acquired an effective 8.7 percent stake in China explorer, Dynasty Gold Corporation.
Also in 2006, AngloGold Ashanti and B2Gold (formerly Bema Gold) formed a new company to jointly explore a select group of
AngloGold Ashanti’s mineral opportunities located in northern Colombia, South America and AngloGold Ashanti (U.S.A.)
Exploration Inc, 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 Alaskan mineral exploration properties and associated databases in return for a 19.99 percent interest in ITH.
AngloGold Ashanti has the option to increase or dilute its stake in these projects, subject to certain conditions.
AngloGold Ashanti’s mineral opportunities located in northern Colombia, South America and AngloGold Ashanti (U.S.A.)
Exploration Inc, 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 Alaskan mineral exploration properties and associated databases in return for a 19.99 percent interest in ITH.
AngloGold Ashanti has the option to increase or dilute its stake in these projects, subject to certain conditions.
On February 5, 2007, AngloGold Ashanti informed the market that a partial slope failure had occurred in an intermediate
footwall of the Nyankanga pit at Geita Gold Mine on Saturday February 3, 2007. The pit had been monitored by slope stability
radar and was safely evacuated in advance of the failure. No injury to employees or contractors occurred and there was no
damage to equipment.
footwall of the Nyankanga pit at Geita Gold Mine on Saturday February 3, 2007. The pit had been monitored by slope stability
radar and was safely evacuated in advance of the failure. No injury to employees or contractors occurred and there was no
damage to equipment.
On February 13, 2007, the AngloGold Ashanti board approved a project to develop the Mponeng mine below the 120 level,
adding some 2.5 million ounces of gold and 8 years to the mine's life, at a capital cost of $252 million. Production is due to
commence in 2013.
adding some 2.5 million ounces of gold and 8 years to the mine's life, at a capital cost of $252 million. Production is due to
commence in 2013.
On May 4, 2007, AngloGold Ashanti announced that Messrs CB Brayshaw and AJ Trahar retired from the board effective
May 5, 2007. AngloGold Ashanti further announced that Mrs C Carroll had been appointed as a non-executive director with
effect from May 5, 2007.
May 5, 2007. AngloGold Ashanti further announced that Mrs C Carroll had been appointed as a non-executive director with
effect from May 5, 2007.
On June 1, 2007, AngloGold Ashanti Australia Ltd announced the commencement of a pre-feasibility study at the Tropicana
gold project in Western Australia. Tropicana, located 400 kilometers north-east of Kalgoorlie, is a joint venture between
AngloGold Ashanti Australia (70 percent) and Independence Group NL (30 percent free carried to completion of the pre-
feasibility study). The study is expected to be completed in mid-2008 and will focus on the Tropicana and Havana zones and
will only consider open-cut resources.
gold project in Western Australia. Tropicana, located 400 kilometers north-east of Kalgoorlie, is a joint venture between
AngloGold Ashanti Australia (70 percent) and Independence Group NL (30 percent free carried to completion of the pre-
feasibility study). The study is expected to be completed in mid-2008 and will focus on the Tropicana and Havana zones and
will only consider open-cut resources.
32
On June 8, 2007, AngloGold Ashanti announced that it would sell, subject to certain conditions, to a consortium of Mintails
South Africa (Pty) Limited/DRD South African Operations (Pty) Limited Joint Venture most of the remaining moveable and
immovable assets of Ergo, the surface reclamation operation east of Johannesburg, discontinued in March 2005. The site is
currently being rehabilitated by AngloGold Ashanti. The joint venture will operate, for its own account, under the AngloGold
Ashanti authorizations until new order mining rights have been obtained and transferred to the joint venture.
South Africa (Pty) Limited/DRD South African Operations (Pty) Limited Joint Venture most of the remaining moveable and
immovable assets of Ergo, the surface reclamation operation east of Johannesburg, discontinued in March 2005. The site is
currently being rehabilitated by AngloGold Ashanti. The joint venture will operate, for its own account, under the AngloGold
Ashanti authorizations until new order mining rights have been obtained and transferred to the joint venture.
On July 11, 2007, AngloGold Ashanti announced the resignation from the board of Mr AH Calver as Mr WA Nairn's alternate.
On July 31, 2007, the board of directors announced the retirement of Mr RM Godsell, (AngloGold Ashanti's Chief Executive
Officer) and the resignation of Mr R Carvalho Silva (Chief Operating Officer – International) from the company effective
September 30, 2007 and the appointments of Mr M Cutifani as Chief Executive Officer and Mr N Nicolau, (formerly Chief
Operating Officer – Africa) as Chief Operating Officer for all operations as of October 1, 2007. Subsequently, on November 12,
2007, it was announced that due to further operational management restructure, Mr N Nicolau had resigned from the board to
pursue other opportunities.
Officer) and the resignation of Mr R Carvalho Silva (Chief Operating Officer – International) from the company effective
September 30, 2007 and the appointments of Mr M Cutifani as Chief Executive Officer and Mr N Nicolau, (formerly Chief
Operating Officer – Africa) as Chief Operating Officer for all operations as of October 1, 2007. Subsequently, on November 12,
2007, it was announced that due to further operational management restructure, Mr N Nicolau had resigned from the board to
pursue other opportunities.
In August 2007, AngloGold Ashanti through the South African Chamber of Mines signed a two-year wage agreement effective
from July 2007, with the three recognized mining unions. This agreement covers some 29,000 category 3-8 workers, miners,
artisans and officials in the company's South African operations and was achieved through a mediated outcome. In terms of
the agreement: the first year increases from July 2007 range from 10 percent for the lower categories of worker to 8 percent for
officials and include a special dispensation for the benefit of artisans and some skilled occupations. Some improvements to
leave conditions and housing allowances were also agreed. Second year increases from July 2008 will be determined at South
African CPIX plus 1 percent with a minimum of an 8 percent increase.
from July 2007, with the three recognized mining unions. This agreement covers some 29,000 category 3-8 workers, miners,
artisans and officials in the company's South African operations and was achieved through a mediated outcome. In terms of
the agreement: the first year increases from July 2007 range from 10 percent for the lower categories of worker to 8 percent for
officials and include a special dispensation for the benefit of artisans and some skilled occupations. Some improvements to
leave conditions and housing allowances were also agreed. Second year increases from July 2008 will be determined at South
African CPIX plus 1 percent with a minimum of an 8 percent increase.
The company completed the acquisition of minority interests previously held by the Government of Ghana (5 percent) and the
International Finance Corporation (10 percent) in the Iduapriem and Teberebie mine effective September 1, 2007 for a total
cash consideration of $25 million. Iduapriem and Teberebie is now wholly-owned by AngloGold Ashanti. The company is in
the process of finalizing the purchase price allocation of fixed assets. The final purchase price allocation is not expected to
vary significantly from the preliminary allocation.
International Finance Corporation (10 percent) in the Iduapriem and Teberebie mine effective September 1, 2007 for a total
cash consideration of $25 million. Iduapriem and Teberebie is now wholly-owned by AngloGold Ashanti. The company is in
the process of finalizing the purchase price allocation of fixed assets. The final purchase price allocation is not expected to
vary significantly from the preliminary allocation.
On September 18, 2007, AngloGold Ashanti announced that Mr M Cutifani was appointed to the board effective September 17,
2007, as Chief Executive Officer designate. Mr Cutifani succeeded Mr RM Godsell as Chief Executive Officer, on his
retirement with effect from October 1, 2007.
2007, as Chief Executive Officer designate. Mr Cutifani succeeded Mr RM Godsell as Chief Executive Officer, on his
retirement with effect from October 1, 2007.
On October 1, 2007, AngloGold Ashanti noted the announcement by Anglo American plc that it intended to offer for sale,
61 million ordinary shares of AngloGold Ashanti in the form of ordinary shares and American Depositary Shares pursuant to the
registration of such securities under AngloGold Ashanti's automatic shelf registration statement.
61 million ordinary shares of AngloGold Ashanti in the form of ordinary shares and American Depositary Shares pursuant to the
registration of such securities under AngloGold Ashanti's automatic shelf registration statement.
On October 2, 2007, AngloGold Ashanti noted the announcement by Anglo American plc that Anglo American had completed
an offering of 67.1 million ordinary shares of AngloGold Ashanti in the form of ordinary shares and American Depositary Shares
(ADS) priced at US$44.00 per ADS (US$44.11 inclusive of uncertificated securities tax payable by investors in ADSs) and
R300.61 per ordinary share (exclusive of uncertificated securities tax). The offering which was launched on October 1, 2007
was increased from the earlier announced 61 million ordinary shares. The offering price represented discounts of 6.16 percent
and 7.84 percent to the closing prices of the ADSs and ordinary shares in New York and Johannesburg, respectively, on
Friday, September 28, 2007. The offering settled on October 9, 2007. On completion of the offering, Anglo American's holding
in AngloGold Ashanti was 17.3 percent. An additional 2 million shares were sold by Anglo American in a private placement,
further reducing its shareholding to 16.6 percent.
an offering of 67.1 million ordinary shares of AngloGold Ashanti in the form of ordinary shares and American Depositary Shares
(ADS) priced at US$44.00 per ADS (US$44.11 inclusive of uncertificated securities tax payable by investors in ADSs) and
R300.61 per ordinary share (exclusive of uncertificated securities tax). The offering which was launched on October 1, 2007
was increased from the earlier announced 61 million ordinary shares. The offering price represented discounts of 6.16 percent
and 7.84 percent to the closing prices of the ADSs and ordinary shares in New York and Johannesburg, respectively, on
Friday, September 28, 2007. The offering settled on October 9, 2007. On completion of the offering, Anglo American's holding
in AngloGold Ashanti was 17.3 percent. An additional 2 million shares were sold by Anglo American in a private placement,
further reducing its shareholding to 16.6 percent.
Following the settlement of the offering and the consequent reduction in shareholding, all the directors representing Anglo
American plc on the AngloGold Ashanti board, namely Mrs C Carroll and Mr R Médori, together with his alternate
Mr PG Whitcutt resigned from the AngloGold Ashanti board, effective October 9, 2007.
American plc on the AngloGold Ashanti board, namely Mrs C Carroll and Mr R Médori, together with his alternate
Mr PG Whitcutt resigned from the AngloGold Ashanti board, effective October 9, 2007.
On December 12, 2007, AngloGold Ashanti announced the successful closing of a $1.15 billion syndicated revolving loan
facility. The new three-year facility will be used to refinance an existing $700 million revolving credit facility (due January
2008), an A$200 million facility and for general corporate purposes.
facility. The new three-year facility will be used to refinance an existing $700 million revolving credit facility (due January
2008), an A$200 million facility and for general corporate purposes.
On January 14, 2008, AngloGold Ashanti announced that it had agreed to acquire 100 percent of Golden Cycle Gold
Corporation (GCGC) through a transaction in which GCGC's shareholders will receive 29 AngloGold Ashanti ADRs for every
100 shares of GCGC common stock held. GCGC holds a 33 percent shareholding in Cripple Creek & Victor while AngloGold
Ashanti holds the remaining 67 percent. The transaction will result in Cripple Creek & Victor being wholly-owned by AngloGold
Ashanti. The transaction is subject to a number of regulatory and statutory approvals, including approval by GCGC
shareholders. The transaction, at the date of announcement was valued at approximately $149 million.
Corporation (GCGC) through a transaction in which GCGC's shareholders will receive 29 AngloGold Ashanti ADRs for every
100 shares of GCGC common stock held. GCGC holds a 33 percent shareholding in Cripple Creek & Victor while AngloGold
Ashanti holds the remaining 67 percent. The transaction will result in Cripple Creek & Victor being wholly-owned by AngloGold
Ashanti. The transaction is subject to a number of regulatory and statutory approvals, including approval by GCGC
shareholders. The transaction, at the date of announcement was valued at approximately $149 million.
33
On January 18, 2008, AngloGold Ashanti provided operation guidance to its fourth quarter 2007 results, in which it was stated
that the company's South African and Geita operations had experienced production difficulties resulting in the group's
production for the quarter to be of the region of 1.4 million ounces.
that the company's South African and Geita operations had experienced production difficulties resulting in the group's
production for the quarter to be of the region of 1.4 million ounces.
On January 25, 2008, AngloGold Ashanti announced that following notification from Eskom regarding interruptions to power
supplies, it had halted mining and gold recovery operations on all of its South African operations. Only underground
emergency pumping work was being carried out.
supplies, it had halted mining and gold recovery operations on all of its South African operations. Only underground
emergency pumping work was being carried out.
On January 27, 2008, AngloGold Ashanti announced it had agreed a process with Eskom, whereby the supplier would give its
normal guarantees for sufficient power for the company to undertake shifts from that day for the purpose of re-establishing safe
workplaces at each of the deep level underground mines in South Africa. The company was anticipating a ramp up in
additional power later in the week that should enable a phased return to normal mining operations. A protocol had also been
agreed with the electricity supplier whereby Eskom will provide the company with four hours warning, prior to having to reduce
power supply.
normal guarantees for sufficient power for the company to undertake shifts from that day for the purpose of re-establishing safe
workplaces at each of the deep level underground mines in South Africa. The company was anticipating a ramp up in
additional power later in the week that should enable a phased return to normal mining operations. A protocol had also been
agreed with the electricity supplier whereby Eskom will provide the company with four hours warning, prior to having to reduce
power supply.
On January 29, 2008, AngloGold Ashanti announced that following a meeting between Eskom and industrial electricity
consumers, the company had commenced the process of bringing back into production all of its underground mines and their
associated gold treatment plants. On February 7, 2008, AngloGold Ashanti stated that following extensive discussions with
Eskom and government, a power supply of 90 percent had been offered which has resulted in first quarter production from the
South African operations being severely disrupted. Equally important is Eskom's ability to maintain a continuous power supply
at a 90 percent level in order to return to normal production levels and milling rates.
consumers, the company had commenced the process of bringing back into production all of its underground mines and their
associated gold treatment plants. On February 7, 2008, AngloGold Ashanti stated that following extensive discussions with
Eskom and government, a power supply of 90 percent had been offered which has resulted in first quarter production from the
South African operations being severely disrupted. Equally important is Eskom's ability to maintain a continuous power supply
at a 90 percent level in order to return to normal production levels and milling rates.
On February 14, 2008, AngloGold Ashanti announced that it had entered into a binding memorandum of agreement (MOA)
with B2Gold Corp. (B2Gold). The MOA provides for the existing Colombian joint venture agreements between AngloGold
Ashanti and B2Gold to be amended to provide that B2Gold acquire from AngloGold Ashanti additional interest in certain
mineral properties in Colombia. In exchange, B2Gold would issue to AngloGold Ashanti 25 million common shares and
21.4 million common share purchase warrants in B2Gold. Subsequently, the transaction was finalized, as announced by
AngloGold Ashanti on May 16, 2008.
with B2Gold Corp. (B2Gold). The MOA provides for the existing Colombian joint venture agreements between AngloGold
Ashanti and B2Gold to be amended to provide that B2Gold acquire from AngloGold Ashanti additional interest in certain
mineral properties in Colombia. In exchange, B2Gold would issue to AngloGold Ashanti 25 million common shares and
21.4 million common share purchase warrants in B2Gold. Subsequently, the transaction was finalized, as announced by
AngloGold Ashanti on May 16, 2008.
On April 14, 2008 it was announced that, following the stabilization of power provided by Eskom (the South African electricity
supply body) to the South African operations during the quarter, AngloGold Ashanti forecast the first quarter production to be
approximately 1.19 million ounces. The revised production outlook was approximately 8 percent above guidance provided in
the fourth quarter of 2007. AngloGold Ashanti had also fully delivered into maturing hedge contracts during the quarter. On
January 25, 2008, the South African national power supplier, Eskom, had communicated that it could not guarantee power supply to
AngloGold Ashanti’s South African operations. Precautionary steps were taken for the safety of employees, including ceasing
the transportation of employees underground to carry-out mining activities and the cessation of milling activities. Following
extensive discussions with Esk om and the South African government, Eskom agreed to guarantee a power supply equivalent
to 90 percent of previous supply and undertook to more reliably warn companies when power outages may occur. Mining
operations resumed on Wednesday, January 30, 2008 at AngloGold Ashanti’s South African mines and in late March 2008,
Eskom increased power supply to 96.5 percent of previous levels. At these power levels and as a result of the company’s
previously implemented and ongoing initiatives to improve its energy efficiencies, the company has been able to restore
production back to 100 percent of previous capacity. Since 2004, AngloGold Ashanti and Eskom have undertaken and
committed funds and other resources to various initiatives to improve energy efficiencies and reduce power consumption at
AngloGold Ashanti’s South African mines. These combined efforts have resulted in a decline in the use of electricity, fuel and
coal and have to date achieved a 17 percent impr ovement in energy efficiencies at the company’s South African operations.
AngloGold Ashanti views these initiatives as being important not only in the light of power shortages and related disruption to
its mining operations but also in that it anticipates that these initiatives will assist in managing future operating cost increases in the
light of anticipated increases in unit electrical power, fuel and other energy costs. AngloGold Ashanti anticipates that these
ongoing initiatives will allow it to achieve electricity consumption at a level of 90 percent of previous consumption by 2009.
supply body) to the South African operations during the quarter, AngloGold Ashanti forecast the first quarter production to be
approximately 1.19 million ounces. The revised production outlook was approximately 8 percent above guidance provided in
the fourth quarter of 2007. AngloGold Ashanti had also fully delivered into maturing hedge contracts during the quarter. On
January 25, 2008, the South African national power supplier, Eskom, had communicated that it could not guarantee power supply to
AngloGold Ashanti’s South African operations. Precautionary steps were taken for the safety of employees, including ceasing
the transportation of employees underground to carry-out mining activities and the cessation of milling activities. Following
extensive discussions with Esk om and the South African government, Eskom agreed to guarantee a power supply equivalent
to 90 percent of previous supply and undertook to more reliably warn companies when power outages may occur. Mining
operations resumed on Wednesday, January 30, 2008 at AngloGold Ashanti’s South African mines and in late March 2008,
Eskom increased power supply to 96.5 percent of previous levels. At these power levels and as a result of the company’s
previously implemented and ongoing initiatives to improve its energy efficiencies, the company has been able to restore
production back to 100 percent of previous capacity. Since 2004, AngloGold Ashanti and Eskom have undertaken and
committed funds and other resources to various initiatives to improve energy efficiencies and reduce power consumption at
AngloGold Ashanti’s South African mines. These combined efforts have resulted in a decline in the use of electricity, fuel and
coal and have to date achieved a 17 percent impr ovement in energy efficiencies at the company’s South African operations.
AngloGold Ashanti views these initiatives as being important not only in the light of power shortages and related disruption to
its mining operations but also in that it anticipates that these initiatives will assist in managing future operating cost increases in the
light of anticipated increases in unit electrical power, fuel and other energy costs. AngloGold Ashanti anticipates that these
ongoing initiatives will allow it to achieve electricity consumption at a level of 90 percent of previous consumption by 2009.
On May 6, 2008, AngloGold Ashanti announced a significant greenfields discovery at its 100 percent owned La Colosa
exploration site. A conceptual economic study completed during the quarter had defined, with upside potential, 12.9 million
ounces of inferred Mineral Resource at that site.
exploration site. A conceptual economic study completed during the quarter had defined, with upside potential, 12.9 million
ounces of inferred Mineral Resource at that site.
Also on May 6, 2008 AngloGold Ashanti announced that it intends to proceed, subject to certain conditions, with an
approximate one-for-four renounceable rights offer, which would result in AngloGold Ashanti issuing approximately
69.4 million shares at a minimum share price of ZAR172 raising approximately ZAR11.9 billion ($1.6 billion based on an
exchange rate of ZAR7.56/$1.00 on May 5, 2008). The proposed rights offer is being fully underwritten subject to certain
customary conditions. The final rights offer price will be announced at the time of the announcement of the rights offer. The
proposed rights offer will be subject to approval at a general meeting of AngloGold Ashanti shareholders to be held on
May 22, 2008.
approximate one-for-four renounceable rights offer, which would result in AngloGold Ashanti issuing approximately
69.4 million shares at a minimum share price of ZAR172 raising approximately ZAR11.9 billion ($1.6 billion based on an
exchange rate of ZAR7.56/$1.00 on May 5, 2008). The proposed rights offer is being fully underwritten subject to certain
customary conditions. The final rights offer price will be announced at the time of the announcement of the rights offer. The
proposed rights offer will be subject to approval at a general meeting of AngloGold Ashanti shareholders to be held on
May 22, 2008.
34
The principal purpose of the rights offer is to provide AngloGold Ashanti with additional financial resources to improve its
financial flexibility. In particular, the net proceeds from the rights offer will allow AngloGold Ashanti both to significantly
restructure and reduce its existing gold hedging position, which has adversely affected its financial performance in recent
years, while also being able to continue to fund its principal development projects and exploration growth initiatives. Pending
this use of proceeds, the net proceeds of the rights offer may, in the interim, be used by AngloGold Ashanti to reduce its
short-term borrowings and the borrowings outstanding on AngloGold Ashanti’s revolving credit facility or retained as cash and
invested in accordance with AngloGold Ashanti’s cash management policies.
financial flexibility. In particular, the net proceeds from the rights offer will allow AngloGold Ashanti both to significantly
restructure and reduce its existing gold hedging position, which has adversely affected its financial performance in recent
years, while also being able to continue to fund its principal development projects and exploration growth initiatives. Pending
this use of proceeds, the net proceeds of the rights offer may, in the interim, be used by AngloGold Ashanti to reduce its
short-term borrowings and the borrowings outstanding on AngloGold Ashanti’s revolving credit facility or retained as cash and
invested in accordance with AngloGold Ashanti’s cash management policies.
AngloGold Ashanti has traditionally used gold hedging instruments to protect a portion of its anticipated gold sales against
declines in the market price of gold. The use of these instruments has prevented AngloGold Ashanti from fully participating in
the significant increase in the market price for gold in recent years. As at December 31, 2007, the total net delta tonnage of
AngloGold Ashanti’s hedge positions was 10.39 million ounces and the total committed hedge position was 11.28 million
ounces, an increase of 0.16 million ounces and a reduction of 0.34 million ounces against the December 31, 2006, hedge
delta and hedge committed position, respectively. As at December 31, 2007, the marked-to-market value of all hedge
transactions making up the hedge positions was negative $4.27 billion.
declines in the market price of gold. The use of these instruments has prevented AngloGold Ashanti from fully participating in
the significant increase in the market price for gold in recent years. As at December 31, 2007, the total net delta tonnage of
AngloGold Ashanti’s hedge positions was 10.39 million ounces and the total committed hedge position was 11.28 million
ounces, an increase of 0.16 million ounces and a reduction of 0.34 million ounces against the December 31, 2006, hedge
delta and hedge committed position, respectively. As at December 31, 2007, the marked-to-market value of all hedge
transactions making up the hedge positions was negative $4.27 billion.
Since the beginning of 2008, prevailing spot gold prices have been significantly higher than those prevailing during 2007. If
these high prices continue to prevail, AngloGold Ashanti estimates that its gold hedging position will continue to have a
significant adverse affect upon its financial performance. AngloGold Ashanti believes that this has also negatively affected the
market price of its ordinary shares, further constraining its financial flexibility.
these high prices continue to prevail, AngloGold Ashanti estimates that its gold hedging position will continue to have a
significant adverse affect upon its financial performance. AngloGold Ashanti believes that this has also negatively affected the
market price of its ordinary shares, further constraining its financial flexibility.
In order to address this issue, AngloGold Ashanti intends to early settle certain contracts otherwise due to mature in 2009 and
2010 during the course of 2008 in addition to settling contracts due to mature in 2008. Given the low committed prices of these
contracts, AngloGold Ashanti expects that if these measures were implemented it would result in a realization of previously
recognized losses for contracts historically recognized on Balance Sheet on a marked–to–market basis. These losses would be
measured by the difference between the committed price of the contracts and the prevailing gold price at the time that these
contracts are settled. If the restructuring is implemented as anticipated the received price for the remainder of 2008 should be
approximately $475 per ounce assuming a gold price of $900 per ounce and gold production for the last nine months of 2008 of
3.8 million ounces.
2010 during the course of 2008 in addition to settling contracts due to mature in 2008. Given the low committed prices of these
contracts, AngloGold Ashanti expects that if these measures were implemented it would result in a realization of previously
recognized losses for contracts historically recognized on Balance Sheet on a marked–to–market basis. These losses would be
measured by the difference between the committed price of the contracts and the prevailing gold price at the time that these
contracts are settled. If the restructuring is implemented as anticipated the received price for the remainder of 2008 should be
approximately $475 per ounce assuming a gold price of $900 per ounce and gold production for the last nine months of 2008 of
3.8 million ounces.
AngloGold Ashanti also continues to give consideration to the early settlement of contracts not currently recorded on balance
sheet (Normal Purchase Normal Sale Exemption (NPSE)) by means of early physical delivery. Such early physical settlement,
if it were to occur, would result in a significant adverse impact on our 2008 recorded revenues in AngloGold Ashanti’s income
statement, as sales that would have otherwise been executed at the spot price of gold will be replaced with sales based on the
earlier contracted prices of such NPSE contracts that are settled during the year. Furthermore should AngloGold Ashanti
conclude that such early physical settlement of NPSE contracts represents a tainting event, it would be required to recognize
on balance sheet the fair value of a portion of, or potentially all of, the existing NPSE contracts, which would result in a
significant adverse impact on its fi nancial statements. No such conclusion has yet been made by AngloGold Ashanti and it is
still considering the potential impact of any such transaction.
sheet (Normal Purchase Normal Sale Exemption (NPSE)) by means of early physical delivery. Such early physical settlement,
if it were to occur, would result in a significant adverse impact on our 2008 recorded revenues in AngloGold Ashanti’s income
statement, as sales that would have otherwise been executed at the spot price of gold will be replaced with sales based on the
earlier contracted prices of such NPSE contracts that are settled during the year. Furthermore should AngloGold Ashanti
conclude that such early physical settlement of NPSE contracts represents a tainting event, it would be required to recognize
on balance sheet the fair value of a portion of, or potentially all of, the existing NPSE contracts, which would result in a
significant adverse impact on its fi nancial statements. No such conclusion has yet been made by AngloGold Ashanti and it is
still considering the potential impact of any such transaction.
In addition to the settlement of certain contracts during 2008 AngloGold Ashanti also intends to restructure some of the
remainder of its hedge book in order to achieve greater participation in the spot price for gold beyond 2009. The exact nature
and extent of the restructuring will depend upon prevailing and anticipated market conditions at the time, particularly the
prevailing gold price and exchange rates as well as other relevant economic factors.
remainder of its hedge book in order to achieve greater participation in the spot price for gold beyond 2009. The exact nature
and extent of the restructuring will depend upon prevailing and anticipated market conditions at the time, particularly the
prevailing gold price and exchange rates as well as other relevant economic factors.
If the restructuring is executed as currently anticipated, the overall impact would be to reduce the hedge book to approximately
6.25 million ounces, which would represent 8.6 percent of AngloGold Ashanti’s ore reserves as at December 31, 2007. As a
result of this reduction the discount to the spot gold price realized during 2009 is estimated to be approximately 6 percent and
at a similar level thereafter assuming a gold price of $900 per ounce.
On May 15, 2008 AngloGold Ashanti announced that it had terminated the process related to its proposed sale of its interests
in the Morila Gold Mine in Mali, due to the fact that no proposals were received which met the company’s value criteria for such
a sale. AngloGold Ashanti will therefore remain a joint venture partner together with Randgold Resources Limited and the
Government of Mali in the Morila Gold Mine. Randgold Resources will continue as operators of the mine.
6.25 million ounces, which would represent 8.6 percent of AngloGold Ashanti’s ore reserves as at December 31, 2007. As a
result of this reduction the discount to the spot gold price realized during 2009 is estimated to be approximately 6 percent and
at a similar level thereafter assuming a gold price of $900 per ounce.
On May 15, 2008 AngloGold Ashanti announced that it had terminated the process related to its proposed sale of its interests
in the Morila Gold Mine in Mali, due to the fact that no proposals were received which met the company’s value criteria for such
a sale. AngloGold Ashanti will therefore remain a joint venture partner together with Randgold Resources Limited and the
Government of Mali in the Morila Gold Mine. Randgold Resources will continue as operators of the mine.
35
4B. Business overview
The market for gold
Products
AngloGold Ashanti’s main product is gold. Revenue is also derived from the sales of silver and uranium oxide. AngloGold
Ashanti sells its products on world markets.
Ashanti sells its products on world markets.
Gold market
The gold market is relatively liquid compared to many other commodity markets. Physical demand for gold is primarily for
fabrication purposes, including jewellery (which accounts for just less than 80 percent of fabricated demand), electronics,
dentistry, decorations, medals and official coins. In addition, central banks, financial institutions and private individuals buy, sell
and hold gold bullion as an investment and as a store of value.
fabrication purposes, including jewellery (which accounts for just less than 80 percent of fabricated demand), electronics,
dentistry, decorations, medals and official coins. In addition, central banks, financial institutions and private individuals buy, sell
and hold gold bullion as an investment and as a store of value.
The use of gold as a store of value (a consequence of the tendency of gold to retain its value in relative terms against basic
goods, and particularly in times of inflation and monetary crisis) and the large quantities of gold held for this purpose in relation
to annual mine production have meant that, historically, the potential total supply of gold is far greater than demand at any one
time. Thus, while current supply and demand play some part in determining the price of gold, this does not occur to the same
extent as with other commodities. Instead, the gold price has from time to time been significantly affected by macro-economic
factors such as expectations of inflation, interest rate changes, exchange rate changes, changes in reserve policy by central
banks, and by global or regional political and economic events. In times of price inflation and currency devaluation, gold is often
bought as a store of value, leading to increased purchases and support for the price of gold.
goods, and particularly in times of inflation and monetary crisis) and the large quantities of gold held for this purpose in relation
to annual mine production have meant that, historically, the potential total supply of gold is far greater than demand at any one
time. Thus, while current supply and demand play some part in determining the price of gold, this does not occur to the same
extent as with other commodities. Instead, the gold price has from time to time been significantly affected by macro-economic
factors such as expectations of inflation, interest rate changes, exchange rate changes, changes in reserve policy by central
banks, and by global or regional political and economic events. In times of price inflation and currency devaluation, gold is often
bought as a store of value, leading to increased purchases and support for the price of gold.
The market in 2007
Continued strong levels of investor and speculator interest, particularly in the fourth quarter of the year, pushed the gold price
to levels just short of record highs, records which were then surpassed soon after year end in an exceptionally buoyant market.
The average gold spot price for the year, at $697 per ounce, was 15 percent higher than that in 2006.
to levels just short of record highs, records which were then surpassed soon after year end in an exceptionally buoyant market.
The average gold spot price for the year, at $697 per ounce, was 15 percent higher than that in 2006.
Although prices were relatively range-bound during the first half of the year, the end of the third quarter and the fourth quarter
saw a strong surge in the dollar gold price and particularly high levels of investor interest. Fabrication demand followed an
inverse pattern, with the more stable prices of the first half leading the market to record high levels of jewellery consumption in
certain regions, which then fell away in the fourth quarter as price volatility took its toll, particularly in more price-sensitive
markets. The exception to this pattern was the Chinese market, where jewellery demand remained relatively solid in the fourth
quarter despite the high levels of price volatility.
saw a strong surge in the dollar gold price and particularly high levels of investor interest. Fabrication demand followed an
inverse pattern, with the more stable prices of the first half leading the market to record high levels of jewellery consumption in
certain regions, which then fell away in the fourth quarter as price volatility took its toll, particularly in more price-sensitive
markets. The exception to this pattern was the Chinese market, where jewellery demand remained relatively solid in the fourth
quarter despite the high levels of price volatility.
The main contributing factor to the price gains seen in the second half of the year was economic uncertainty relating to credit
concerns and the impact of the sub-prime mortgage crisis in the US. Inflationary concerns driven by higher food, oil and
commodity prices also played a role, as did the escalation in geopolitical tension, particularly at year-end.
concerns and the impact of the sub-prime mortgage crisis in the US. Inflationary concerns driven by higher food, oil and
commodity prices also played a role, as did the escalation in geopolitical tension, particularly at year-end.
Rand gold prices saw new record highs of R187,000 per kilogram during the year and an average spot price for the year of just
over R157,000 per kilogram.
over R157,000 per kilogram.
Investment
Overall, the investment market saw lower levels of demand than in 2006, however, this demand was heavily concentrated in
the last half of 2007, for the aforementioned reasons.
the last half of 2007, for the aforementioned reasons.
Particular strength was exhibited in trade on commodity exchanges and also in the gold Exchange-Traded Funds (ETFs). Total
ETF holdings at year-end stood at close to 28 million ounces, with a total value of over $23 billion. This represents a significant
level of growth over year-end holdings in 2006, even though this itself represented a doubling over levels of funds held the
previous year. The majority of ETF investment occurred in the US-listed fund, StreetTracks.
ETF holdings at year-end stood at close to 28 million ounces, with a total value of over $23 billion. This represents a significant
level of growth over year-end holdings in 2006, even though this itself represented a doubling over levels of funds held the
previous year. The majority of ETF investment occurred in the US-listed fund, StreetTracks.
36
Demand
Over the first half of 2007, physical demand from jewellery fabrication recovered strongly from the low levels of 2006, reaching
record highs in several major markets. In the second half of the year, however, this level of demand could not be sustained in
the face of a more volatile price environment, which impacted heavily on traditional markets, and with the increasingly difficult
consumer and retail environment in developed markets such as the US.
record highs in several major markets. In the second half of the year, however, this level of demand could not be sustained in
the face of a more volatile price environment, which impacted heavily on traditional markets, and with the increasingly difficult
consumer and retail environment in developed markets such as the US.
Overall, fabrication demand for jewellery in 2007 increased by 6 percent in tonnage terms over 2006 levels, with the bulk of that
increase contributed by the larger emerging markets of East Asia, India and the Middle East. European demand is expected to
remain flat, whereas demand from the US market fell in tonnage terms by 14 percent over 2006.
increase contributed by the larger emerging markets of East Asia, India and the Middle East. European demand is expected to
remain flat, whereas demand from the US market fell in tonnage terms by 14 percent over 2006.
It was in the Indian market that the contrast in consumption levels between the two halves of the year was most marked.
Demand reached record levels in rupee and tonnage terms for both jewellery and retail investment in the second quarter of the
year. Together these totaled 317 tonnes, half of global mine output for the quarter and 90 percent higher than the relatively low
level attained in the same quarter in 2006.
Demand reached record levels in rupee and tonnage terms for both jewellery and retail investment in the second quarter of the
year. Together these totaled 317 tonnes, half of global mine output for the quarter and 90 percent higher than the relatively low
level attained in the same quarter in 2006.
Demand in the first half of the year increased by 72 percent over the corresponding period in the previous year. This strong
level of consumption was fuelled in part by economic growth, particularly in the agricultural sector, as well as by a stable rupee
gold price. In the second half of the year, however, the rupee/dollar exchange rate showed significant volatility, and this
combined with a period of volatility in dollar gold prices created a set of circumstances unfavorable to gold consumption. Price
volatility is a significant deterrent to demand in the Indian market, and in the second half of 2007 the periods of most extreme
price volatility coincided with some of the more auspicious gold buying occasions, such as Diwali. Demand in the fourth quarter
was particularly poor and fourth quarter offtake reached the lowest level since the early 1990s. Over the year as a whole, an
increase in jewellery offt ake in tonnage terms of 6 percent was recorded.
level of consumption was fuelled in part by economic growth, particularly in the agricultural sector, as well as by a stable rupee
gold price. In the second half of the year, however, the rupee/dollar exchange rate showed significant volatility, and this
combined with a period of volatility in dollar gold prices created a set of circumstances unfavorable to gold consumption. Price
volatility is a significant deterrent to demand in the Indian market, and in the second half of 2007 the periods of most extreme
price volatility coincided with some of the more auspicious gold buying occasions, such as Diwali. Demand in the fourth quarter
was particularly poor and fourth quarter offtake reached the lowest level since the early 1990s. Over the year as a whole, an
increase in jewellery offt ake in tonnage terms of 6 percent was recorded.
Demand in the Middle East, specifically in the six Gulf markets, was also dented considerably in the second half of the year,
with a sharp shift in consumer sentiment away from gold jewellery consumption brought about by a combination of volatile price
levels, inflationary concerns and significant escalations in rent charges. As the currencies of these markets are pegged against
the dollar, there is no cushioning for consumers against dollar gold price volatility. In the region, Turkey and Egypt experienced
healthier demand, with good tourist seasons and increased economic stability helping to fuel consumption.
with a sharp shift in consumer sentiment away from gold jewellery consumption brought about by a combination of volatile price
levels, inflationary concerns and significant escalations in rent charges. As the currencies of these markets are pegged against
the dollar, there is no cushioning for consumers against dollar gold price volatility. In the region, Turkey and Egypt experienced
healthier demand, with good tourist seasons and increased economic stability helping to fuel consumption.
The Chinese market proved most resilient to the more volatile prices as most retailers maintain a margin of approximately
10 percent over the gold price and therefore tend not to adjust prices on a daily basis according to each and every fluctuation in
the dollar gold price. The Chinese economy also continued to record strong growth.
10 percent over the gold price and therefore tend not to adjust prices on a daily basis according to each and every fluctuation in
the dollar gold price. The Chinese economy also continued to record strong growth.
In the US, gold demand in 2007 reached the lowest level since 1992. Retailers continued to reduce their focus on the category
in the light of rising prices and to seek out product with lower gold content so as to offer a lower-cost range of product to an
increasingly price-sensitive consumer. Only the high end of the market, which typically retails 18 carat product, remained
strong. Margins in this segment are higher than in the mass market segment and consumers are less sensitive to price
increases.
in the light of rising prices and to seek out product with lower gold content so as to offer a lower-cost range of product to an
increasingly price-sensitive consumer. Only the high end of the market, which typically retails 18 carat product, remained
strong. Margins in this segment are higher than in the mass market segment and consumers are less sensitive to price
increases.
Despite high gold prices, supplies of scrap into the market were weaker than in 2006. In part this seems to have been due to
the fact that significant personal gold inventories were liquidated in 2006 and have not been replaced as yet. Another factor
was the price surge which took place towards the end of the year. Consumers were deterred from selling old jewellery by the
expectation that prices might rise further.
the fact that significant personal gold inventories were liquidated in 2006 and have not been replaced as yet. Another factor
was the price surge which took place towards the end of the year. Consumers were deterred from selling old jewellery by the
expectation that prices might rise further.
Industrial demand increased marginally by 2 percent over 2006 levels. A slowdown in the demand for electronic goods over the
second half of the year impacted growth in this sector.
second half of the year impacted growth in this sector.
Official market
Official sector sales for the calendar year were 485 tonnes, some 30 percent higher than in 2006. Gold sales by the Central
Bank Gold Agreement (CBGA) signatories account for the bulk of this increase and in the third year of the second CBGA
agreement (which came to an end on September 26, 2007) 475.8 tonnes of the available quota of 500 tonnes had been
released onto the market.
Bank Gold Agreement (CBGA) signatories account for the bulk of this increase and in the third year of the second CBGA
agreement (which came to an end on September 26, 2007) 475.8 tonnes of the available quota of 500 tonnes had been
released onto the market.
37
Hedging
Gold producers reduced their hedging positions considerably in 2007. Over 400 tonnes were bought in the market in this way,
a figure only slightly below the record level of de-hedging measured in 2004. The majority of this activity took place in the first
half of the year and was driven by the activities of a small number of major players.
a figure only slightly below the record level of de-hedging measured in 2004. The majority of this activity took place in the first
half of the year and was driven by the activities of a small number of major players.
As at December 31, 2007, the net delta hedge position of AngloGold Ashanti was 10.39 million ounces or 323 tonnes, valued
at the spot price of gold on that day of $836 per ounce. The marked-to-market value of the hedge position at this date was
negative $4.27 billion.
at the spot price of gold on that day of $836 per ounce. The marked-to-market value of the hedge position at this date was
negative $4.27 billion.
Marketing channels
Gold produced by AngloGold Ashanti’s mining operations is processed to a 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 kilogram or less with a gold content of 99.5 percent and above – the metal is then sold either
through the refineries’ channels or directly to bullion banks and the proceeds are paid to the company.
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 kilogram or less with a gold content of 99.5 percent and above – the metal is then sold either
through the refineries’ channels or directly 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 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.
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 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.
Where forward sales contracts exist against which AngloGold Ashanti delivers physical product, the same channel of the
refinery is used. In this case, the refinery does not sell the metal on the company’s 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
for this gold by the relevant bullion bank, at the price fixed under the forward contract, rather than at the spot price of the day.
refinery is used. In this case, the refinery does not sell the metal on the company’s 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
for this gold by the relevant bullion bank, at the price fixed under the forward contract, rather than at the spot price of the day.
Gold market development
AngloGold Ashanti has since its inception been committed to growing the market for its product, particularly as gold jewellery
sales in many developed markets have declined materially over the years in favor of other luxury goods. In response, the
company’s marketing programs aim to increase the desirability of gold to sustain and grow demand and to support the
deregulation of the market in key economies.
sales in many developed markets have declined materially over the years in favor of other luxury goods. In response, the
company’s marketing programs aim to increase the desirability of gold to sustain and grow demand and to support the
deregulation of the market in key economies.
AngloGold Ashanti’s market development activities centre on the following areas: Strategic projects undertaken in key and
critical gold jewellery offtake markets (USA, India, China, Italy, Middle East), which aim to develop positive corporate
identification and recognition while achieving, where sensible and possible, financial returns for AngloGold Ashanti; Host
country projects of a downstream development nature; and AuDITIONS, the company’s gold jewellery design competition.
critical gold jewellery offtake markets (USA, India, China, Italy, Middle East), which aim to develop positive corporate
identification and recognition while achieving, where sensible and possible, financial returns for AngloGold Ashanti; Host
country projects of a downstream development nature; and AuDITIONS, the company’s gold jewellery design competition.
AngloGold Ashanti remains a member of the World Gold Council (WGC) and undertakes its own strategic marketing projects in
such a way as to co-operate with and support the WGC’s wider objectives.
such a way as to co-operate with and support the WGC’s wider objectives.
Strategic projects
India
India is the world’s largest consumer market in tonnage terms. Gold demand here is firmly embedded in cultural and religious
traditions and is seen as a symbol of wealth and prosperity. It is considered to be an auspicious metal that is bought and given
as a gift during religious festivals.
traditions and is seen as a symbol of wealth and prosperity. It is considered to be an auspicious metal that is bought and given
as a gift during religious festivals.
With the assistance of a pre-eminent Indian jewellery retailer, AngloGold Ashanti’s projects in India are intended to help bring
about the modernization of the country’s traditional gold jewellery sector. One concept centers on transforming the traditional,
semi-urban jewellery retailing environment into a more modern and efficient one that presents rural consumers with a high-
quality, professional and trusted ‘local’ jewellery store, which can better compete with stores selling such lifestyle items as
electronics and cell phones. Other concepts focus on the development and distribution of branded collections of jewellery into
the market.
about the modernization of the country’s traditional gold jewellery sector. One concept centers on transforming the traditional,
semi-urban jewellery retailing environment into a more modern and efficient one that presents rural consumers with a high-
quality, professional and trusted ‘local’ jewellery store, which can better compete with stores selling such lifestyle items as
electronics and cell phones. Other concepts focus on the development and distribution of branded collections of jewellery into
the market.
38
China
China has been identified as a key strategic market by AngloGold Ashanti both because of its size – it is the third largest
market worldwide for jewellery – and because of its potential for growth. In China, AngloGold Ashanti has partnered with a
Hong Kong-based retailer to develop and roll-out a retail concept that targets independent, high-income earning women
wishing to express their independence and individuality through accessories of gold.
market worldwide for jewellery – and because of its potential for growth. In China, AngloGold Ashanti has partnered with a
Hong Kong-based retailer to develop and roll-out a retail concept that targets independent, high-income earning women
wishing to express their independence and individuality through accessories of gold.
The roll out of this concept has included the co-sponsoring of AuDITIONS China so as to expand the reach of the company’s
jewellery design competition to the China mainland. A collection of jewellery for commercial sale was developed on the basis of
the competition designs. AngloGold Ashanti has also partnered with the retailer to establish concept stores for gold jewellery in
major urban centers in China. The first of these stores will open in Beijing in April 2008.
jewellery design competition to the China mainland. A collection of jewellery for commercial sale was developed on the basis of
the competition designs. AngloGold Ashanti has also partnered with the retailer to establish concept stores for gold jewellery in
major urban centers in China. The first of these stores will open in Beijing in April 2008.
United States
The American gold jewellery market is characterized primarily as an adornment market in which gold jewellery is purchased
mainly as a fashion accessory. During the past ten years, there has been some slippage in gold jewellery consumption in
volume terms in the US market relative to that of other luxury and lifestyle goods.
mainly as a fashion accessory. During the past ten years, there has been some slippage in gold jewellery consumption in
volume terms in the US market relative to that of other luxury and lifestyle goods.
Contributing in part to this decline has been the commoditization of gold jewellery through the mass-market retail channel,
which has tended to sell jewellery on price rather than design style. Consumer research, however, suggests that the
US customer shops in a fashion- and trend-conscious way and is therefore generally receptive to brands and branding.
Furthermore, the US market is viewed by consumers in other important consumption categories as an opinion- and trend-
forming market. Influencing the purchasing motives and buying patterns of the US consumer base can therefore influence other
key consumption regions around the world.
which has tended to sell jewellery on price rather than design style. Consumer research, however, suggests that the
US customer shops in a fashion- and trend-conscious way and is therefore generally receptive to brands and branding.
Furthermore, the US market is viewed by consumers in other important consumption categories as an opinion- and trend-
forming market. Influencing the purchasing motives and buying patterns of the US consumer base can therefore influence other
key consumption regions around the world.
In response to these factors, AngloGold Ashanti, together with the WGC, partnered with a large US jewellery wholesaler and
distributor to develop and promote at retail level selected collections of gold jewellery from the new product ranges of the
Italian-based Gold Expressions (GE) manufacturers. This project is intended to promote the sale of fashionably-designed and
progressively-styled gold jewellery in the US retail market and to lay the foundation for Italian manufacturers to build
themselves or their products into consumer brands.
distributor to develop and promote at retail level selected collections of gold jewellery from the new product ranges of the
Italian-based Gold Expressions (GE) manufacturers. This project is intended to promote the sale of fashionably-designed and
progressively-styled gold jewellery in the US retail market and to lay the foundation for Italian manufacturers to build
themselves or their products into consumer brands.
Middle East
As a region, the Middle East (comprising the United Arab Emirates, Turkey and Saudi Arabia) is the third largest consumer
market for gold in volume terms. The increase in disposable income in this region as a result of both higher oil revenues and
rising numbers of tourists has impacted positively on gold jewellery consumption.
market for gold in volume terms. The increase in disposable income in this region as a result of both higher oil revenues and
rising numbers of tourists has impacted positively on gold jewellery consumption.
While the challenge from increasingly more prominent lifestyle, luxury and branded products is, as it is in other markets, clearly
growing, the gold category in the Middle East has so far sustained its already high rate of gold consumption per capita
compared to the rates of growth in population and per capita disposable income.
growing, the gold category in the Middle East has so far sustained its already high rate of gold consumption per capita
compared to the rates of growth in population and per capita disposable income.
AngloGold Ashanti has partnered with the WGC and a leading jewellery wholesaler in the region to develop a business concept
to launch and promote at the local retail level selected collections of mid- to high-end gold jewellery from the product ranges of
Italian-based manufacturers. The project is intended to improve the gold jewellery product and retailing proposition offered to
both the domestic and the tourist consumer segments in the Middle East.
to launch and promote at the local retail level selected collections of mid- to high-end gold jewellery from the product ranges of
Italian-based manufacturers. The project is intended to improve the gold jewellery product and retailing proposition offered to
both the domestic and the tourist consumer segments in the Middle East.
Host Country Jewellery Sector Development
AngloGold Ashanti’s marketing efforts have historically been directed at the growth and development of the jewellery sector in
countries that host AngloGold Ashanti operations. These projects are intended to bring benefit to the company on several
levels: corporate image-building, supporting host governments’ beneficiation agendas; and providing a platform for strategic
market development projects.
countries that host AngloGold Ashanti operations. These projects are intended to bring benefit to the company on several
levels: corporate image-building, supporting host governments’ beneficiation agendas; and providing a platform for strategic
market development projects.
These projects will continue to be important for jewellery sector development and will be focused primarily in South Africa,
Brazil and Ghana. AngloGold Ashanti continues to hold a 25 percent stake in the Oro Group, the largest gold jewellery
manufacturer in South Africa, with projects in Ghana and Brazil currently under investigation.
Brazil and Ghana. AngloGold Ashanti continues to hold a 25 percent stake in the Oro Group, the largest gold jewellery
manufacturer in South Africa, with projects in Ghana and Brazil currently under investigation.
39
AuDITIONS
In 2004, following the business combination of AngloGold and Ashanti, the AngloGold Ashanti AuDITIONS brand was created
to unite the company’s gold jewellery design competitions and to reinforce the company’s brand in look, feel and character. The
concept of AuDITIONS is premised on the metaphor of the performing arts, with designers auditioning in gold through their
pieces.
to unite the company’s gold jewellery design competitions and to reinforce the company’s brand in look, feel and character. The
concept of AuDITIONS is premised on the metaphor of the performing arts, with designers auditioning in gold through their
pieces.
The overall strategic objective of AuDITIONS is to stimulate innovative design in high-caratage gold around the world in order
to raise the profile of and drive demand for this jewellery category among consumers. AuDITIONS competitions also seek,
through their contacts with the jewellery manufacturing and retail trade, to promote the concept of innovative jewellery design
and expose the trade to new and innovative design and techniques.
to raise the profile of and drive demand for this jewellery category among consumers. AuDITIONS competitions also seek,
through their contacts with the jewellery manufacturing and retail trade, to promote the concept of innovative jewellery design
and expose the trade to new and innovative design and techniques.
It is intended to build AuDITIONS into an independent global competition brand and, with the help of the WGC, the competition
has been extended to the key gold markets of India, China and the Middle East, from its original bases in South Africa and
Brazil.
has been extended to the key gold markets of India, China and the Middle East, from its original bases in South Africa and
Brazil.
Uranium
AngloGold Ashanti remains South Africa’s largest producer of uranium. Several initiatives are under way to boost AngloGold
Ashanti’s uranium production further. In 2007, a new tailings dam was commissioned in order to segregate untreated uranium-
bearing material from material which had previously been treated. Work has begun on an upgrade of the uranium plant at Vaal
River and this will be commissioned in 2009. Nuclear Fuels Corporation of South Africa (Pty) Limited (Nufcor) has also entered
into contracts with several other uranium producers to treat their material. The first deliveries under these contracts started in
late 2007.
Ashanti’s uranium production further. In 2007, a new tailings dam was commissioned in order to segregate untreated uranium-
bearing material from material which had previously been treated. Work has begun on an upgrade of the uranium plant at Vaal
River and this will be commissioned in 2009. Nuclear Fuels Corporation of South Africa (Pty) Limited (Nufcor) has also entered
into contracts with several other uranium producers to treat their material. The first deliveries under these contracts started in
late 2007.
Following a run of price increases lasting more than four years, the spot price of U3O8 reached an all-time high of $136 per
pound in mid-June 2007. The price weakened thereafter due to weak seasonal demand during the summer months. The spot
price dropped to a low of $75 per pound at the start of October before recovering to end the year at $90 per pound.
pound in mid-June 2007. The price weakened thereafter due to weak seasonal demand during the summer months. The spot
price dropped to a low of $75 per pound at the start of October before recovering to end the year at $90 per pound.
Recent spot price volatility has been predominantly demand-driven with utilities backing away from the market in light of the
record prices for uranium. Conversely, term market prices have remained remarkably steady with published prices remaining at
$95 per pound throughout the second half of 2007. Term activity remains the dominant contracting force in the uranium market
with up to 90 percent of utility demand procured via direct multi-year supply agreements with producers.
record prices for uranium. Conversely, term market prices have remained remarkably steady with published prices remaining at
$95 per pound throughout the second half of 2007. Term activity remains the dominant contracting force in the uranium market
with up to 90 percent of utility demand procured via direct multi-year supply agreements with producers.
Forward uranium market fundamentals remain positive with robust demand augmented via an increasing number of new
reactor build projects. Market prices are anticipated to remain robust for several years with the potential for price spikes in the
event of further supply disruption.
reactor build projects. Market prices are anticipated to remain robust for several years with the potential for price spikes in the
event of further supply disruption.
Gold production and mine-site rehabilitation processes
The process of producing gold
The process of producing gold can be divided into six main phases:
The process of producing gold can be divided into six main phases:
•
finding the orebody;
•
creating access to the orebody;
•
removing the ore by mining or breaking the orebody;
•
transporting the broken material from the mining face to the plants for treatment;
• processing; and
• refining.
This basic process applies to both underground and surface operations.
Finding the orebody
AngloGold Ashanti’s global exploration group identifies targets and undertakes exploration, on its own or in conjunction with
joint venture partners.
AngloGold Ashanti’s global exploration group identifies targets and undertakes exploration, on its own or in conjunction with
joint venture partners.
40
Creating access to the orebody
There are two types of mining which take place to access the orebody:
•
underground mining: a vertical or decline shaft (designed to transport people and/or materials) is sunk deep into the
ground, after which horizontal development takes place at various levels of the main shaft or decline. This allows for
further on-reef development of specific mining areas where the orebody has been identified; and
ground, after which horizontal development takes place at various levels of the main shaft or decline. This allows for
further on-reef development of specific mining areas where the orebody has been identified; and
•
open-pit mining: where the top layers of topsoil or rock are removed in a process called ‘stripping’ to uncover the reef.
Removing the ore by mining or breaking the orebody
•
In underground mining, holes are drilled into the orebody, filled with explosives and then blasted. The blasted ‘stopes’
or ‘faces’ are then cleaned and the ore released is then ready to be transported out of the mine.
or ‘faces’ are then cleaned and the ore released is then ready to be transported out of the mine.
•
In open-pit mining, drilling and blasting may also be necessary to release the gold- bearing rock; excavators then load
the material onto the ore transport system.
the material onto the ore transport system.
Transporting the broken material from the mining face to the plants for treatment
•
Underground ore is transported by means of vertical and/or horizontal transport systems. Once on the surface,
conveyor belts usually transport the ore to the treatment plants.
conveyor belts usually transport the ore to the treatment plants.
•
Open-pit mines transport ore to the treatment plants in vehicles capable of hauling large, heavy loads.
Services
Mining activities require extensive services, both on the surface and underground, including:
Mining activities require extensive services, both on the surface and underground, including:
•
mining engineering services;
• mine planning;
• ventilation;
•
•
provision of consumable resources;
• engineering services;
•
financial, administration and human resource services; and
•
environmental/sustainable development services.
Processing
•
Comminution is the process of breaking up ore to make gold available for treatment. Conventionally, this process
occurs in multi-stage crushing and milling circuits. Modern technology is to use large mills fed directly with run-of-mine
material.
occurs in multi-stage crushing and milling circuits. Modern technology is to use large mills fed directly with run-of-mine
material.
•
Gold ores can typically be classified into:
•
refractory ores, where the gold is locked within a sulphide mineral and not readily available for recovery by
the cyanidation process; or
the cyanidation process; or
•
free milling, where the gold is readily available for recovery by the cyanidation process.
•
Refractory ore treatment: after fine grinding, the sulphide materials are separated from the barren gangue material
using flotation to produce a high-grade sulphide concentrate. The sulphide concentrate is oxidized by either roasting
as at Brasil Mineração or bacterial oxidation (BIOX) as at Obuasi. The oxidation process oxidizes the sulphide
minerals, liberating the gold particles and making them amenable to recovery by the cyanidation process.
using flotation to produce a high-grade sulphide concentrate. The sulphide concentrate is oxidized by either roasting
as at Brasil Mineração or bacterial oxidation (BIOX) as at Obuasi. The oxidation process oxidizes the sulphide
minerals, liberating the gold particles and making them amenable to recovery by the cyanidation process.
•
Free milling and oxidized refractory ores are processed for gold recovery by leaching the ore in agitated tanks in an
alkaline cyanide leach solution. This is generally followed by adsorption of the gold cyanide complex onto activated
carbon-in-pulp (CIP).
carbon-in-pulp (CIP).
•
An alternative process is the heap-leach process. This process is generally considered applicable to high-tonnage,
low-grade ore deposits, but it can be successfully applied to medium-grade deposits where the ore deposit tonnage
cannot economically justify constructing a process plant. Run- of-mine ore is crushed and heaped on a leach pad.
Low strength alkaline cyanide solution is applied, generally as a drip, to the top of the heap for periods of up to three
months. The dissolved gold bearing solution is collected from the base of the heap and transferred to carbon-in-
solution (CIS) columns where the gold cyanide complex is adsorbed onto activated carbon. The stripped solution is
recycled to the top of the heaps.
low-grade ore deposits, but it can be successfully applied to medium-grade deposits where the ore deposit tonnage
cannot economically justify constructing a process plant. Run- of-mine ore is crushed and heaped on a leach pad.
Low strength alkaline cyanide solution is applied, generally as a drip, to the top of the heap for periods of up to three
months. The dissolved gold bearing solution is collected from the base of the heap and transferred to carbon-in-
solution (CIS) columns where the gold cyanide complex is adsorbed onto activated carbon. The stripped solution is
recycled to the top of the heaps.
41
•
Gold adsorbed onto activated carbon is recovered by a process of re-dissolving the gold from the activated carbon
(elution), followed by precipitation in electro-winning cells and subsequent smelting of that precipitate into doré bars
that are shipped to the gold refineries.
(elution), followed by precipitation in electro-winning cells and subsequent smelting of that precipitate into doré bars
that are shipped to the gold refineries.
•
Retreatment of tailing stockpile from previous decades’ operations is also practiced by AngloGold Ashanti. The old
tailings are mined by water sluicing followed by agitator leaching in alkaline cyanide solution and recovery of dissolved
gold onto activated carbon.
tailings are mined by water sluicing followed by agitator leaching in alkaline cyanide solution and recovery of dissolved
gold onto activated carbon.
•
At AngloGold Ashanti operations, the main by-products produced are:
•
silver, which is associated with gold in ratios ranging from 0.1:1 to 200:1 silver to gold;
•
sulphuric acid which is produced from the gases generated by the roasting plants; and
•
uranium which is recovered in a process which involves initial acid leaching followed by recovery of the
leached uranium onto resin and subsequent stripping with ammonium hydroxide and precipitation of crude
yellow cake.
leached uranium onto resin and subsequent stripping with ammonium hydroxide and precipitation of crude
yellow cake.
•
The tailings from the process operations are stored in designated tailings storage facilities designed to enhance water
recovery and prevent contaminant seepage into the environment.
recovery and prevent contaminant seepage into the environment.
Refining
The doré bars are transported to a refinery for further refining, to as close to pure gold as possible. This is known as good
delivery status. This gives the assurance that the bar contains the quantity and purity of gold as stamped on the bar.
The doré bars are transported to a refinery for further refining, to as close to pure gold as possible. This is known as good
delivery status. This gives the assurance that the bar contains the quantity and purity of gold as stamped on the bar.
The process of mine-site rehabilitation
In all the jurisdictions in which the company operates, it is required to conduct closure and rehabilitation activities to return the
land to a productive state once mining has been completed. Additionally, 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 operation. Rehabilitation refers to the process of reclaiming mined land to the condition that existed prior to mining or to a
pre-determined post-mining use.
land to a productive state once mining has been completed. Additionally, 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 operation. Rehabilitation refers to the process of reclaiming mined land to the condition that existed prior to mining or to a
pre-determined post-mining use.
Closure plans are devised prior to the commencement of operation and are regularly reviewed to take into account life-of-mine
projections. Although the final cost of closure cannot be fully determined ahead of closure, appropriate provision is made during
the mine’s economic operation.
projections. Although the final cost of closure cannot be fully determined ahead of closure, appropriate provision is made during
the mine’s economic operation.
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.
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.
42
Operating performance
In 2007, gold production totaled 5.5 million ounces compared to 5.6 million ounces in 2006. This decline in production was
largely a result of the reduced volumes mined at the South African operations owing to safety concerns, and at some of the
operations in Mali which are nearing the end of their productive lives. Record production was reported at Sunrise Dam in
Australia and at Siguiri in Guinea, while at Moab Khotsong in South Africa the ramp-up in production continued. Total cash cost
per ounce for the year was $367 compared to $321 in 2006.
largely a result of the reduced volumes mined at the South African operations owing to safety concerns, and at some of the
operations in Mali which are nearing the end of their productive lives. Record production was reported at Sunrise Dam in
Australia and at Siguiri in Guinea, while at Moab Khotsong in South Africa the ramp-up in production continued. Total cash cost
per ounce for the year was $367 compared to $321 in 2006.
AngloGold Ashanti has 20 operations in 10 countries around the world. The 20 operations include Boddington, a joint venture
expansion project with Newmont, which is currently underway in Australia. While these operations are managed on a regional
basis, they are reported on country-by-country basis.
expansion project with Newmont, which is currently underway in Australia. While these operations are managed on a regional
basis, they are reported on country-by-country basis.
The operations and geographical areas in which AngloGold Ashanti currently operates are shown below.
43
OPERATIONS AT A GLANCE for the year ended December 31, 2007
Attributable tonnes
treated/milled (Mt)
Average grade
recovered (g/t)
recovered (g/t)
Attributable gold
production (000oz)
Total cash costs
($/oz)
(1)
2007 2006 2005 2007 2006 2005 2007 2006 2005 2007 2006 2005
SOUTH AFRICA
2,328 2,554 2,676
Vaal River
Great Noligwa
2.0
2.4
2.3
7.54
8.08
9.30
483
615
693
404
260
264
Kopanang
1.8
2.0
2.0
7.24
7.01
7.38
418
446
482
306
291
277
Moab Khotsong
(1)
0.3
0.2
–
7.94
6.35
–
67
44
–
672
659
–
Tau Lekoa
1.4
1.5
2.1
3.62
3.76
3.96
165
176
265
473
438
410
Surface operations
8.0
7.2
5.8
0.49
0.49
0.51
125
113
95
304
283
287
West Wits
Mponeng
1.9
1.9
1.7
9.50
9.93
9.15
587
596
512
264
238
279
Savuka
0.3
0.4
0.6
6.69
7.68
6.80
73
89
126
397
337
430
TauTona
(2)
1.8 2.0 1.6
9.67
10.18 9.62 409 474 502 318 270 256
ARGENTINA
Cerro Vanguardia (92.5 percent)
0.9
0.9
0.9
6.88
7.29
7.70
204
215
211
260
223
171
AUSTRALIA
Sunrise Dam
(3)
3.8 4.0 3.6
4.86 3.39 3.68 600 465 455 262 333 269
BRAZIL
408 339 346
Brasil Mineraçáo
(2)
1.4 1.1 1.3
7.48 7.60 7.27 317 242 250 246 207 169
Serra Grande (50 percent)
(2)
0.4
0.4
0.4
7.21
7.51
7.93
91
97
96
264
196
158
GHANA
527 592 680
Bibiani
(5)
–
2.1
2.4 –
0.55
1.46 –
37
115 –
432
305
Iduapriem
(3)(4)
2.8 3.0 3.2
1.85 1.74 1.71 167 167 174 497 413 348
Obuasi
(2)
6.0 6.2 4.7
4.43 4.39 4.77 360 387 391 464 397 345
GUINEA
Siguiri (85 percent)
(3)
8.3 7.0 5.8
1.05 1.08 1.21 280 256 246 471 398 301
MALI
441 537 528
Morila (40 percent)
1.7
1.7
1.5
3.36
3.88
5.41
180
207
262
333
266
191
Sadiola (38 percent)
1.6
1.8
1.9
2.76
3.22
2.73
140
190
168
414
268
265
Yatela (40 percent)
(6)
1.2 1.3 1.3
3.46 4.12 2.99 120 141 98 300 241 263
NAMIBIA
Navachab
1.6
1.5
1.2
1.56
1.81
2.05
80
86
81
475
349
321
TANZANIA
Geita
5.1
5.7
6.1
2.01
1.68
3.14
327
308
613
627
630
298
UNITED STATES OF AMERICA
Cripple Creek & Victor
(6)
20.9
21.8 19.2
0.53 0.54 0.62 282 283 330 269 248 230
(1)
Attributable production at Moab Khotsong prior to commercial production in 2006 was capitalized against pre-production costs.
(2) The yield of TauTona, Brasil Mineraçáo, Serra Grande and Obuasi represents underground operations.
(3) The yield of Sunrise Dam, Iduapriem and Siguiri represents open-pit operations.
(4)
(3) The yield of Sunrise Dam, Iduapriem and Siguiri represents open-pit operations.
(4)
The minority shareholdings of the International Finance Corporation (10 percent) and Government of Ghana (5 percent) were acquired effective
September 1, 2007 and Iduapriem is now wholly-owned by AngloGold Ashanti.
September 1, 2007 and Iduapriem is now wholly-owned by AngloGold Ashanti.
(5)
The yield of Bibiani represents surface and dump reclamation in 2006 and open-pit operations in 2005. Bibiani was sold effective December 28, 2006.
(6) The yield of Yatela and Cripple Creek & Victor Joint Venture reflects recoverable gold placed/tonnes placed.
44
SOUTH AFRICA
Location: AngloGold Ashanti’s South Africa region includes seven underground operations located in two geographic areas on
the Witwatersrand Basin. These are:
the Witwatersrand Basin. These are:
· the Vaal 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
· the West Wits area, near Carletonville, straddling the North West Province and Gauteng, where the Mponeng, TauTona
and Savuka mines are located.
Rights:
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 objects of the Act
are to allow for state sovereignty over all mineral and petroleum resources in the country, to promote economic growth and the
development of these resources and to expand opportunities for the historically disadvantaged. The object is also to ensure
security of tenure concerning prospecting, exploration, mining and production operations. The state ensures that holders of
mining and prospecting rights contribute to the socio-economic development of the areas in which they are operating.
AngloGold Ashanti was informed on August 1, 2005, by the Director General of Minerals and Energy that its applications 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. The notarial agreements for the converted West Wits mining
right and Block 1C11 new mining rights have been executed and registered as well as the agreements for Jonkerskraal,
Weltevreden, Moab Extension Area and the new right for Edom, all of which form part of the Vaal River operations. Two
notarial agreements relating to the Vaal River operations are in the process of being executed and registered. The deadline for
the conversion process is April 2009. The South African government expects to finalize the Royalty Bill towards the end of
2008.
which was passed by the Parliament of South Africa in June 2002 and came into effect on May 1, 2004. The objects of the Act
are to allow for state sovereignty over all mineral and petroleum resources in the country, to promote economic growth and the
development of these resources and to expand opportunities for the historically disadvantaged. The object is also to ensure
security of tenure concerning prospecting, exploration, mining and production operations. The state ensures that holders of
mining and prospecting rights contribute to the socio-economic development of the areas in which they are operating.
AngloGold Ashanti was informed on August 1, 2005, by the Director General of Minerals and Energy that its applications 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. The notarial agreements for the converted West Wits mining
right and Block 1C11 new mining rights have been executed and registered as well as the agreements for Jonkerskraal,
Weltevreden, Moab Extension Area and the new right for Edom, all of which form part of the Vaal River operations. Two
notarial agreements relating to the Vaal River operations are in the process of being executed and registered. The deadline for
the conversion process is April 2009. The South African government expects to finalize the Royalty Bill towards the end of
2008.
45
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.
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.
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.
Safety: At the South African operations, there were most regrettably 27 fatalities during the course of 2007, five fewer than in
2006. This resulted in a FIFR of 0.29 per million hours worked for the year as opposed to 0.35 in 2006. The LTIFR for the
South African operations as a whole for 2007 was 12.72 per million hours worked (2006: 12.53), indicating a deterioration in
safety levels, although there were improvements in the safety performance at Kopanang, Moab Khotsong and Tau Lekoa.
2006. This resulted in a FIFR of 0.29 per million hours worked for the year as opposed to 0.35 in 2006. The LTIFR for the
South African operations as a whole for 2007 was 12.72 per million hours worked (2006: 12.53), indicating a deterioration in
safety levels, although there were improvements in the safety performance at Kopanang, Moab Khotsong and Tau Lekoa.
The safety of AngloGold Ashanti’s workforce remains a priority and in November 2007, the ‘Safety is our first value’ campaign
was launched at the South African operations. This behavior-based campaign will begin with developing a framework for
managing safety, the template for which will be based on OSHAS 18001 and OSHAS 18002. The safety campaign was
launched in collaboration with the trade unions and government representatives. Simultaneously, various safety interventions
were implemented at the operations to re-emphasize the company’s principles and standards regarding safety. The focus is on
leadership, behavior and on improving compliance with operating standards at all levels.
was launched at the South African operations. This behavior-based campaign will begin with developing a framework for
managing safety, the template for which will be based on OSHAS 18001 and OSHAS 18002. The safety campaign was
launched in collaboration with the trade unions and government representatives. Simultaneously, various safety interventions
were implemented at the operations to re-emphasize the company’s principles and standards regarding safety. The focus is on
leadership, behavior and on improving compliance with operating standards at all levels.
• West Wits operations
Description: The Mponeng, Savuka and TauTona mines are situated on the West Wits Line, near the town of Carletonville,
straddling the border of the province of Gauteng and North West Province. Mponeng has its own gold processing plant while
the Savuka and TauTona operations share a plant.
straddling the border of the province of Gauteng and North West Province. Mponeng has its own gold processing plant while
the Savuka and TauTona operations share a plant.
Together, the West Wits operations collectively produced 33,258 kilograms (1,069,000 ounces) of gold, equivalent to
20 percent of group production.
20 percent of group production.
Mponeng
Description: Mponeng is situated close to the town of Carletonville in North West Province, southwest of Johannesburg,
straddling the border with the province of Gauteng. The mine currently mines the Ventersdorp Contact Reef (VCR) with stoping
taking place at an average depth of 3,054 meters. The deepest operating stope is at a depth of 3,370 meters below surface.
Given the high degree of variability in the grade of the VCR at Mponeng, a sequential grid mining method is used which allows
for selective mining and increased flexibility in dealing with changes in grade ahead of the stope.
straddling the border with the province of Gauteng. The mine currently mines the Ventersdorp Contact Reef (VCR) with stoping
taking place at an average depth of 3,054 meters. The deepest operating stope is at a depth of 3,370 meters below surface.
Given the high degree of variability in the grade of the VCR at Mponeng, a sequential grid mining method is used which allows
for selective mining and increased flexibility in dealing with changes in grade ahead of the stope.
Mponeng comprises a twin-shaft system housing two vertical shafts and two service shafts. Ore mined is treated and smelted
at Mponeng’s gold plant. The ore is initially ground down by means of semi-autogenous milling after which a conventional gold
leach process incorporating liquid oxygen injection is applied. The gold is then extracted by means of carbon-in-pulp
technology. The Mponeng gold plant conducts electrowinning and smelting (induction furnaces) on products from Savuka and
TauTona as well. The Mponeng gold plant has a capacity of 160,000 tonnes per month.
at Mponeng’s gold plant. The ore is initially ground down by means of semi-autogenous milling after which a conventional gold
leach process incorporating liquid oxygen injection is applied. The gold is then extracted by means of carbon-in-pulp
technology. The Mponeng gold plant conducts electrowinning and smelting (induction furnaces) on products from Savuka and
TauTona as well. The Mponeng gold plant has a capacity of 160,000 tonnes per month.
46
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 the attitude departs significantly from the regional dip, the reef is thin,
varying from several centimeters to more than three meters in thickness.
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 the attitude departs significantly from the regional dip, the reef is thin,
varying from several centimeters to more than three meters in thickness.
Safety: Safety at Mponeng deteriorated during the year, with the LTIFR rising from 10.70 in 2006 to 13.08 in 2007. There were
also, most regrettably, six fatalities during the year with the result that FIFR rose to 0.42 (2006: 0.30). Four of these fatalities
were caused by seismic events, one a result of a fall of ground and an accident involving machinery.
also, most regrettably, six fatalities during the year with the result that FIFR rose to 0.42 (2006: 0.30). Four of these fatalities
were caused by seismic events, one a result of a fall of ground and an accident involving machinery.
Operating review: Production declined by 2 percent to 18,260 kilograms (587,000 ounces) in 2007 compared with
18,549 kilograms (596,000 ounces) in 2006. The various planned and unplanned work stoppages and safety initiatives
conducted towards the end of the year, combined with a decline in grade and reduced face advance, contributed to the
decrease in production.
18,549 kilograms (596,000 ounces) in 2006. The various planned and unplanned work stoppages and safety initiatives
conducted towards the end of the year, combined with a decline in grade and reduced face advance, contributed to the
decrease in production.
There was a 4 percent decline in the area mined in 2007, largely as a result of a 3 percent decrease in face length.
Cost-saving initiatives were implemented at Mponeng and cost increases were kept to a minimum during the year. Total cash
costs rose by 11 percent to $264 per ounce, largely a result of the fatal accidents and the resulting loss of production days.
Also affecting costs were the strength in the rand and the increase in expenditure on seismic-related support.
costs rose by 11 percent to $264 per ounce, largely a result of the fatal accidents and the resulting loss of production days.
Also affecting costs were the strength in the rand and the increase in expenditure on seismic-related support.
Capital expenditure (including the amounts spent on below 120 VCR project and purchase of equipment) for the year totaled
R604 million ($86 million) (2006: R325 million ($48 million)). The SS2 shaft, which extends the mining depth to 6,700 meters,
was commissioned in December 2007.
R604 million ($86 million) (2006: R325 million ($48 million)). The SS2 shaft, which extends the mining depth to 6,700 meters,
was commissioned in December 2007.
Growth prospects: There are currently two growth projects at Mponeng.
VCR below 120 project: this entails accessing the mineral reserves below 120 level. It is estimated that this project will add
2.5 million ounces to production at a cost of $252 million (R2.03 billion). This project was approved by the board in February
2007, following which construction began. On-reef development and thus the start of production are scheduled for 2013 with
full production due in 2015.
2.5 million ounces to production at a cost of $252 million (R2.03 billion). This project was approved by the board in February
2007, following which construction began. On-reef development and thus the start of production are scheduled for 2013 with
full production due in 2015.
CLR below 120 project: Work is currently under way on this project aimed at accessing the Carbon Leader Reef which is
located about 900 meters below the VCR. Initial estimates are that it has the potential to contribute up to 7.4 million ounces to
production over the life of the project. Production from this project is estimated to commence in 2018.
located about 900 meters below the VCR. Initial estimates are that it has the potential to contribute up to 7.4 million ounces to
production over the life of the project. Production from this project is estimated to commence in 2018.
Savuka
Description: Savuka is situated on the West Wits line in the province of Gauteng, approximately 70 kilometers south-west of
Johannesburg. Savuka is close to the town of Carletonville in North West Province. The mine currently mines both the Carbon
Leader Reef (CLR) and the Ventersdorp Contact Reef (VCR).
Johannesburg. Savuka is close to the town of Carletonville in North West Province. The mine currently mines both the Carbon
Leader Reef (CLR) and the Ventersdorp Contact Reef (VCR).
This mining operation comprises sub and tertiary shaft systems with the latter reaching a depth of 3,777 meters, making
Savuka the deepest mine in the world. Longwall mining was the preferred extraction method until recently but the operation is
in the process of converting to sequential grid mining. There are 23 panels currently in operation.
Savuka the deepest mine in the world. Longwall mining was the preferred extraction method until recently but the operation is
in the process of converting to sequential grid mining. There are 23 panels currently in operation.
Ore mined at Savuka is processed firstly at TauTona’s processing plant. The plant uses conventional milling to crush the ore
and a carbon-in-pulp circuit to treat the ore further, after which it is sent to the Mponeng gold plant where the gold is extracted
by means of electrowinning and smelting. The Savuka gold plant has a capacity of 280,000 tonnes per month.
and a carbon-in-pulp circuit to treat the ore further, after which it is sent to the Mponeng gold plant where the gold is extracted
by means of electrowinning and smelting. The Savuka gold plant has a capacity of 280,000 tonnes per month.
47
Savuka was scheduled to close in April 2006. However, the strengthening gold price at that time, and a revised business plan
for Savuka based on shared managerial and processing resources, have contributed to a turnaround at this operation which is
now making a positive contribution to AngloGold Ashanti.
for Savuka based on shared managerial and processing resources, have contributed to a turnaround at this operation which is
now making a positive contribution to AngloGold Ashanti.
Safety: There was a deterioration in safety during the year with an overall LTIFR for the year of 25.99 per million hours worked
compared to 19.30 in 2006. There were two fatalities caused by seismic falls of ground to give a FIFR of 0.79 for the year
(2006: 0.0). Steps were taken to address safety including dedicated ‘safety’ days, mass communication and employee
workshops. These were in addition to the launch of the ‘safety is our first value’ campaign.
compared to 19.30 in 2006. There were two fatalities caused by seismic falls of ground to give a FIFR of 0.79 for the year
(2006: 0.0). Steps were taken to address safety including dedicated ‘safety’ days, mass communication and employee
workshops. These were in addition to the launch of the ‘safety is our first value’ campaign.
Operating review: Production was down to 2,284 kilograms (73,000 ounces) in 2007, although output was greater than had
been initially planned. Volumes mined were 9 percent down on 2006 with tonnes milled down by 5 percent. Increased
development for much of the year aimed at improving the stoping widths resulted in reduced grades. However, once this had
been achieved, reduced face advances, work stoppages and safety interventions also had a negative effect on production.
been initially planned. Volumes mined were 9 percent down on 2006 with tonnes milled down by 5 percent. Increased
development for much of the year aimed at improving the stoping widths resulted in reduced grades. However, once this had
been achieved, reduced face advances, work stoppages and safety interventions also had a negative effect on production.
Total cash costs increased by 18 percent to $397 per ounce, largely as a result of the reduced production and lower grades
which were affected by the decline in stoping activity and increase in development waste.
which were affected by the decline in stoping activity and increase in development waste.
Growth prospects: The restructuring program instituted at Savuka over the last two years has increased its expected life of
mine. There is an extensive resource to the west of current mining activities. Exploration and drilling programs are being
undertaken to determine extent and accessibility of this resource and to target potential mining prospects prior to the conduct of
feasibility studies.
mine. There is an extensive resource to the west of current mining activities. Exploration and drilling programs are being
undertaken to determine extent and accessibility of this resource and to target potential mining prospects prior to the conduct of
feasibility studies.
TauTona
Description: TauTona is situated close to Savuka near the town of Carletonville. TauTona exploits the Ventersdorp Contact
Reef (VCR) and the Carbon Leader Reef (CLR). Mining operations are conducted at depths ranging from 1,800 meters to
3,500 meters at which the deepest stoping sections are found.
Reef (VCR) and the Carbon Leader Reef (CLR). Mining operations are conducted at depths ranging from 1,800 meters to
3,500 meters at which the deepest stoping sections are found.
The mine consists of a main shaft system supported by secondary and tertiary shafts. The mining method used here is
primarily longwall mining. TauTona shares a processing plant with Savuka. The plant uses conventional milling to crush the ore
and a carbon-in-pulp plant to treat the ore further. Once the carbon has been added to the ore, it is transported to the gold plant
at Mponeng for electrowinning, smelting and the final recovery of the gold.
primarily longwall mining. TauTona shares a processing plant with Savuka. The plant uses conventional milling to crush the ore
and a carbon-in-pulp plant to treat the ore further. Once the carbon has been added to the ore, it is transported to the gold plant
at Mponeng for electrowinning, smelting and the final recovery of the gold.
Safety: There was deterioration in safety at TauTona during 2007. The LTIFR for the year was 18.14 (2006: 17.09) and there
were five fatalities (2006: 16), the major cause of which was rockfalls and/or falls of ground. The FIFR for the year was 0.40
(2006: 1.23) .
were five fatalities (2006: 16), the major cause of which was rockfalls and/or falls of ground. The FIFR for the year was 0.40
(2006: 1.23) .
Operating review: Gold production declined by 14 percent to 12,714 kilograms (409,000 ounces) (2006: 14,736 kilograms
(474,000 ounces)), owing to a greater-than-scheduled decline in the volume of ore mined. This was a result of increased
seismic activity in the vicinity of the CLR shaft pillar which is being mined, and at several high-grade production panels, where
production was halted for limited periods during the course of the year owing to the fatal accidents caused by seismic activity.
Both face length and face advance were negatively affected by seismicity during the year. The increased geological risk from
this seismic activity necessitated re-planning regarding mine layout and mining methods.
(474,000 ounces)), owing to a greater-than-scheduled decline in the volume of ore mined. This was a result of increased
seismic activity in the vicinity of the CLR shaft pillar which is being mined, and at several high-grade production panels, where
production was halted for limited periods during the course of the year owing to the fatal accidents caused by seismic activity.
Both face length and face advance were negatively affected by seismicity during the year. The increased geological risk from
this seismic activity necessitated re-planning regarding mine layout and mining methods.
The decline in production, together with an increase in input costs, annual wage increases, work stoppages and a stronger
rand contributed to an 18 percent increase in total cash costs to $318 per ounce. The increase in cash costs occurred despite
the implementation of various cost-saving initiatives, which were insufficient to offset the increase in costs associated with the
reduction in production and costs related to the repair of seismic damage. Capital expenditure was R500 million ($71 million),
less than had been planned.
rand contributed to an 18 percent increase in total cash costs to $318 per ounce. The increase in cash costs occurred despite
the implementation of various cost-saving initiatives, which were insufficient to offset the increase in costs associated with the
reduction in production and costs related to the repair of seismic damage. Capital expenditure was R500 million ($71 million),
less than had been planned.
Growth prospects: There are currently three growth projects under way at TauTona:
The CLR below 120 level project is accessed via a twin-decline system down to 128 level. Production is planned to begin in
2009 and the project is scheduled to produce 2.5 million ounces of gold from 2009 to 2019. The project has total budgeted
capital expenditure of $172 million (R1.2 billion) of which $73 million (R512 million) has been spent to date.
2009 and the project is scheduled to produce 2.5 million ounces of gold from 2009 to 2019. The project has total budgeted
capital expenditure of $172 million (R1.2 billion) of which $73 million (R512 million) has been spent to date.
48
The CLR shaft pillar extraction project enables stoping operations to be conducted up to a recently revised infrastructural zone
of influence. Production from this project, which began in 2004 and will continue until 2010, is estimated to total more than
425,000 ounces at an average cash cost of $118 per ounce during this period. Capital expenditure for this project is
R272 million ($40 million) at current exchange rates, most of which has been committed.
of influence. Production from this project, which began in 2004 and will continue until 2010, is estimated to total more than
425,000 ounces at an average cash cost of $118 per ounce during this period. Capital expenditure for this project is
R272 million ($40 million) at current exchange rates, most of which has been committed.
The VCR pillar project, which accesses the VCR pillar area located outside the zone of influence, began production in 2005.
Development is scheduled to be completed by mid-2009. Total production over a nine-year period until 2013 is estimated at
almost 226,000 ounces at a capital cost of R123 million ($18 million). Of this, R95 million ($14 million) has been spent to date.
The average project cash cost is calculated to be $158 per ounce.
Development is scheduled to be completed by mid-2009. Total production over a nine-year period until 2013 is estimated at
almost 226,000 ounces at a capital cost of R123 million ($18 million). Of this, R95 million ($14 million) has been spent to date.
The average project cash cost is calculated to be $158 per ounce.
Operating and production data for West Wits operations
Mponeng TauTona Savuka
2007
Pay limit (oz/t)
0.23
0.4
0.40
Pay limit (g/t)
7.83
16.11
13.72
Recovered grade (oz/t)
0.277
0.282
0.195
Recovered grade (g/t)
9.50
9.67
6.69
Gold production (000 oz)
587
409
73
Total cash costs ($/oz)
(1)
264
318
397
Total production costs ($/oz)
(1)
356
474
466
Capital expenditure ($ million)
86
71
9
Employees
(2)
5,126
4,160
1,063
Outside contractors
(2)
435
832
80
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
(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”.
results – Total cash costs and total production costs”.
(2)
Average for the year.
49
· Vaal River operations
Description: The Great Noligwa, Kopanang, Moab Khotsong and Tau Lekoa mines are situated near the towns of Klerksdorp
and Orkney on the border of North West Province and the Free State. The AngloGold Ashanti Vaal River operations have
among them four gold plants, one uranium plant and one sulphuric acid plant.
and Orkney on the border of North West Province and the Free State. The AngloGold Ashanti Vaal River operations have
among them four gold plants, one uranium plant and one sulphuric acid plant.
Combined, the Vaal River operations (including surface operations) produced 39,171 kilograms (1,259,000 ounces) of gold,
equivalent to 23 percent of group production.
equivalent to 23 percent of group production.
Great Noligwa
Description: Great Noligwa adjoins Kopanang and Moab Khotsong and is located close to the town of Orkney on the Free
State side of the Vaal River. Both the Vaal Reef, the primary reef, and the Crystalkop Reef, a secondary reef, are mined here.
The mining operation here consists of a twin-shaft system and operates over eight main levels at an average depth of
2,400 meters.
State side of the Vaal River. Both the Vaal Reef, the primary reef, and the Crystalkop Reef, a secondary reef, are mined here.
The mining operation here consists of a twin-shaft system and operates over eight main levels at an average depth of
2,400 meters.
Owing to the geological complexity of the orebody, a scattered mining method is employed. Great Noligwa has its own
dedicated milling and treatment plant which applies conventional crushing, screening semi-autogenous grinding and carbon-in-
leach processes to treat the ore and extract the gold.
dedicated milling and treatment plant which applies conventional crushing, screening semi-autogenous grinding and carbon-in-
leach processes to treat the ore and extract the gold.
Geology: In order of importance, the reefs mined at the Vaal River operations are the Vaal Reef, the VCR and the “C” Reef:
· 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.
· 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 located up to one kilometer above
the Vaal Reef.
· 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.
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.
· 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 located up to one kilometer above
the Vaal Reef.
· 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.
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
Uranium plants
Capacity (000 tonnes/month)
–
–
–
–
–
–
263
Pyrite flotation plants
Capacity (000 tonnes/month)
–
–
–
250
145
Sulphuric acid plants
Production (tonnes/month)
–
7,500
–
–
–
50
Operating and production data for Vaal River operations
Great Noligwa
Kopanang
Tau Lekoa
Moab Khotsong
(3)
2007
Pay limit (oz/t)
0.34
0.36
0.16
1.52
Pay limit (g/t)
11.69
12.18
5.39
52.12
Recovered grade (oz/t)
0.220
0.211
0.106
0.232
Recovered grade (g/t)
7.54
7.24
3.62
7.94
Gold production (000 oz)
483
418
165
67
Total cash costs ($/oz)
(1)
404 306 473 672
Total production costs ($/oz)
(1)
513 400 752
1,254
Capital expenditure ($ million)
37
52
16
89
Employees
(2)
5,908 5,470 2,506 1,986
Outside contractors
(2)
726 465 345
1,548
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
(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”.
results – Total cash costs and total production costs”.
(2)
Average for the year.
(3)
Commercial production commenced on January 1, 2006.
Safety: Safety at Great Noligwa as measured by the LTIFR deteriorated year-on-year. The LTIFR for the year was
14.46 (2006: 12.21). There were regrettably two fatalities (2006: seven) caused by falls of ground, to give a FIFR of 0.11, as
compared to 0.36 in 2006.
14.46 (2006: 12.21). There were regrettably two fatalities (2006: seven) caused by falls of ground, to give a FIFR of 0.11, as
compared to 0.36 in 2006.
Operating review: Production declined by 21 percent to 15,036 kilograms (483,000 ounces) in 2007, compared to
19,119 kilograms (615,000 ounces) in 2006. This was a result of poor face advance combined with a lack of mining flexibility
given the geological features encountered, and increased mining of pillars at the boundary limits of the mining lease area. The
decline in production was also affected by safety-related work stoppages and the running of safety training initiatives towards
the end of the year. The overall result was a 16 percent decline in tonnes mined.
19,119 kilograms (615,000 ounces) in 2006. This was a result of poor face advance combined with a lack of mining flexibility
given the geological features encountered, and increased mining of pillars at the boundary limits of the mining lease area. The
decline in production was also affected by safety-related work stoppages and the running of safety training initiatives towards
the end of the year. The overall result was a 16 percent decline in tonnes mined.
Overall, total cash cost for the year rose by 55 percent to $404 per ounce. Increases in costs were the result of lower volumes,
higher input costs, annual wage increases and losses on uranium byproduct. The losses on uranium were caused by firstly,
reduced production and secondly, uranium purchases which had to be made to meet contractual obligations. Capital
expenditure totaled R261 million ($37 million).
higher input costs, annual wage increases and losses on uranium byproduct. The losses on uranium were caused by firstly,
reduced production and secondly, uranium purchases which had to be made to meet contractual obligations. Capital
expenditure totaled R261 million ($37 million).
Growth prospects: As the operation ages, Great Noligwa is in the process of converting from conventional scattered mining to
pillar or remnant mining for the remainder of its operational life. Up until now the Vaal Reef has been the most economically
viable reef to mine. However, as this reef is being mined out, the less economical Crystalkop Reef is being increasingly
exploited as are economically viable pillars within the mine boundaries.
pillar or remnant mining for the remainder of its operational life. Up until now the Vaal Reef has been the most economically
viable reef to mine. However, as this reef is being mined out, the less economical Crystalkop Reef is being increasingly
exploited as are economically viable pillars within the mine boundaries.
51
Kopanang
Description: Kopanang adjoins Great Noligwa and is located close to the town of Orkney on the Free State side of the Vaal
River. The major reef mined at Kopanang is the Vaal Reef, while a secondary reef, the Crystalkop Reef, is mined on a smaller
scale. Mining operations are conducted at depths ranging from 1,350 meters to 2,240 meters.
River. The major reef mined at Kopanang is the Vaal Reef, while a secondary reef, the Crystalkop Reef, is mined on a smaller
scale. Mining operations are conducted at depths ranging from 1,350 meters to 2,240 meters.
The Kopanang operation comprises a single shaft system. Given the geologically complex orebody occurring at Kopanang, a
scattered mining method is used with the orebody being accessed mainly via footwall tunneling, raised on the dip of the reef
and stoped on strike. Kopanang has a gold processing plant that uses both conventional semi-autogenous grinding and
carbon-in-pulp technology. There are two streams of ore into the plant, one of which is fed mainly by Vaal Reef ore while the
other is fed exclusively by Ventersdorp Contact Reef ore from Tau Lekoa.
scattered mining method is used with the orebody being accessed mainly via footwall tunneling, raised on the dip of the reef
and stoped on strike. Kopanang has a gold processing plant that uses both conventional semi-autogenous grinding and
carbon-in-pulp technology. There are two streams of ore into the plant, one of which is fed mainly by Vaal Reef ore while the
other is fed exclusively by Ventersdorp Contact Reef ore from Tau Lekoa.
Safety: Safety as measured by the LTIFR improved year-on-year. The LTIFR for the year was 13.10 (2006: 15.22). There
were regrettably three fatalities (2006: two) caused by accidents involving machinery and explosives. FIFR for the year was
0.22 compared to 0.14 in 2006.
were regrettably three fatalities (2006: two) caused by accidents involving machinery and explosives. FIFR for the year was
0.22 compared to 0.14 in 2006.
Operating review: Gold production declined by 6 percent to 13,013 kilograms (418,000 ounces) (2006: 13,886 kilograms
(446,000 ounces)) with volumes mined decreasing by 5 percent. Although an initial drop in production was made up
subsequently when increased volumes of higher grade material were mined, resulting in an improved yield for the year, this
was insufficient to prevent an overall decline in production year-on-year. Seismic activity was a concern during the year as this
limited access to high-grade areas. In addition, mining face length was restricted by the unexpected geological structures
encountered, the intersection of methane, a lack of mining flexibility and shifts lost owing to safety-related training and work
stoppages.
(446,000 ounces)) with volumes mined decreasing by 5 percent. Although an initial drop in production was made up
subsequently when increased volumes of higher grade material were mined, resulting in an improved yield for the year, this
was insufficient to prevent an overall decline in production year-on-year. Seismic activity was a concern during the year as this
limited access to high-grade areas. In addition, mining face length was restricted by the unexpected geological structures
encountered, the intersection of methane, a lack of mining flexibility and shifts lost owing to safety-related training and work
stoppages.
The decreased production, combined with increased input costs including the implementation of winter power tariffs and annual
wage increases contributed to a 5 percent increase in total cash costs to $306 per ounce.
wage increases contributed to a 5 percent increase in total cash costs to $306 per ounce.
Capital expenditure rose by 29 percent to R362 million ($52 million).
Growth prospects: A new waste washing plant is planned at a cost of R11 million ($1.6 million). The plant will upgrade the
quality of the fines to be added to the Kopanang stream as well as that of the tonnes to be sent to the plant at Great Noligwa
for uranium extraction.
quality of the fines to be added to the Kopanang stream as well as that of the tonnes to be sent to the plant at Great Noligwa
for uranium extraction.
The orebody to the west of Kopanang’s current mining area is being explored which, if it proves viable, will extend the life of
mine.
mine.
Tau Lekoa
Description: Tau Lekoa is one four mining operations in the Vaal River area. It is close to the town of Orkney on the North
West Province side of the Vaal River. Unlike the other Vaal River operations, the major reef mined at Tau Lekoa is the
Ventersdorp Contact Reef. Mining operations are conducted at depths ranging from 800 meters to 1,743 meters, making this
one of the shallower AngloGold Ashanti mines in South Africa. Tau Lekoa has an expected life of mine of nine years.
West Province side of the Vaal River. Unlike the other Vaal River operations, the major reef mined at Tau Lekoa is the
Ventersdorp Contact Reef. Mining operations are conducted at depths ranging from 800 meters to 1,743 meters, making this
one of the shallower AngloGold Ashanti mines in South Africa. Tau Lekoa has an expected life of mine of nine years.
The Tau Lekoa operation comprises a twin-shaft system. Because of the geologically complex orebody occurring at Tau Lekoa,
a scattered mining method is used with the orebody being accessed via footwall tunneling while stoping takes place on strike.
There are currently seven shaft levels with an average of 70 panels in operation. Tau Lekoa employs hydro-electric power as
its primary source of energy.
a scattered mining method is used with the orebody being accessed via footwall tunneling while stoping takes place on strike.
There are currently seven shaft levels with an average of 70 panels in operation. Tau Lekoa employs hydro-electric power as
its primary source of energy.
Ore mined by Tau Lekoa is processed and treated in preparation for gold extraction at the Kopanang gold plant.
Safety: Although safety as measured by the rate of lost-time injuries improved to 19.07 compared to 24.99 in 2006, in terms of
fatalities, safety standards declined. There were regrettably four fatalities at Tau Lekoa to give a FIFR for the year of
0.58 (2006: 0.15).
fatalities, safety standards declined. There were regrettably four fatalities at Tau Lekoa to give a FIFR for the year of
0.58 (2006: 0.15).
52
Operating review: Production declined by 6 percent to 5,137 kilograms (165,000 ounces) in 2007 from 5,473 kilograms
(176,000 ounces) in 2006, despite a marginal improvement in face advance. This was in line with a scheduled down-sizing of
the operation in 2006/7, and a planned decline in yields and inventory depletion. Production was achieved despite work
stoppages, both planned and unplanned, around safety-related matters and the implementation of safety training initiatives.
(176,000 ounces) in 2006, despite a marginal improvement in face advance. This was in line with a scheduled down-sizing of
the operation in 2006/7, and a planned decline in yields and inventory depletion. Production was achieved despite work
stoppages, both planned and unplanned, around safety-related matters and the implementation of safety training initiatives.
While Tau Lekoa has proved that current levels of production are both sustainable and profitable, its primary challenge is to
maintain high levels of output per employee without compromising safety.
maintain high levels of output per employee without compromising safety.
Total cash costs rose by 8 percent to $473 per ounce compared to $438 per ounce the previous year. Capital expenditure for
the year totalled R113 million ($16 million) (2006: R74 million ($11 million)).
the year totalled R113 million ($16 million) (2006: R74 million ($11 million)).
Growth prospects: The current aim of the Tau Lekoa operation is to maintain current levels of production.
Moab Khotsong
Description: Moab Khotsong, the newest of AngloGold Ashanti’s South African operations, began commercial production in
January 2006. Located south and south-east of Great Noligwa and Kopanang in the Free State province, Moab Khotsong was
developed so as to exploit the Vaal Reef. The first phase of this operation included the development of a main shaft system, a
subsidiary ventilation shaft and three main production levels to a depth of between 2,600 meters and 3,054 meters below
surface.
January 2006. Located south and south-east of Great Noligwa and Kopanang in the Free State province, Moab Khotsong was
developed so as to exploit the Vaal Reef. The first phase of this operation included the development of a main shaft system, a
subsidiary ventilation shaft and three main production levels to a depth of between 2,600 meters and 3,054 meters below
surface.
Given the known geological complexity of the Vaal Reef, a scattered mining method has been employed with haulages, cross
cuts and raises pre-developed in a grid system.
cuts and raises pre-developed in a grid system.
Safety: There were most regrettably five fatalities at Moab Khotsong in 2007. The primary cause of the fatal accidents was
seismic events. The FIFR for the year was 0.57 (2006: 0.27). There was, however, an improvement in the LTIFR to
13.48 (2006: 15.75).
seismic events. The FIFR for the year was 0.57 (2006: 0.27). There was, however, an improvement in the LTIFR to
13.48 (2006: 15.75).
Operating review: Production continued to ramp-up with 2,081 kilograms (67,000 ounces) being produced in 2007
(2006: 1,371 kilograms (44,000 ounces)) – 726 kilograms (23,000 ounces) were produced in the fourth quarter of 2007 alone.
Annual production was, however, less than had been budgeted as a result of poor face advance which was 25 percent less
than planned. Consequently, tonnes mined were 21 percent down on expectations.
(2006: 1,371 kilograms (44,000 ounces)) – 726 kilograms (23,000 ounces) were produced in the fourth quarter of 2007 alone.
Annual production was, however, less than had been budgeted as a result of poor face advance which was 25 percent less
than planned. Consequently, tonnes mined were 21 percent down on expectations.
Full annual production of 14,000 kilograms (440,000 ounces) is scheduled for 2013. As at the end of December 2007, the total
cost of developing Moab Khotsong was R4,193 million ($599 million) (at an exchange rate of R7/$).
cost of developing Moab Khotsong was R4,193 million ($599 million) (at an exchange rate of R7/$).
The values mined and volumes treated increased by 25 percent and 21 percent, respectively. This was despite an increase in
dilution owing to an increase in off-reef mining and stoping widths in order to negotiate dip faults.
dilution owing to an increase in off-reef mining and stoping widths in order to negotiate dip faults.
Total cash cost rose by 2 percent to $672 per ounce compared to $659 per ounce the previous year. Costs were negatively
affected by the lower-than-scheduled level of production, the purchase of uranium to meet delivery contracts, and the relative
strength of the rand for the year. Capital expenditure for the year totaled R628 million ($89 million) (2006: R565 million
($83 million)).
affected by the lower-than-scheduled level of production, the purchase of uranium to meet delivery contracts, and the relative
strength of the rand for the year. Capital expenditure for the year totaled R628 million ($89 million) (2006: R565 million
($83 million)).
Growth prospects: A study for Phase 2 of the development at Moab Khotsong which will extend below the Phase 1 workings
was approved by the board and completed during 2007.
was approved by the board and completed during 2007.
53
ARGENTINA
AngloGold Ashanti has one gold mine in Argentina, Cerro Vanguardia, which produced 204,000 attributable ounces of gold in
2007, equivalent to 4 percent of group production. The company owns the right to exploit the deposit up to 2036 based on the
Usufruct Agreement signed in December 1996.
2007, equivalent to 4 percent of group production. The company owns the right to exploit the deposit up to 2036 based on the
Usufruct Agreement signed in December 1996.
Description: AngloGold Ashanti has an interest of 92.5 percent in Cerro
Vanguardia and the province of Santa Cruz, 7.5 percent. Located to the north-
west of Puerto San Julian in the province of Santa Cruz, 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.
Vanguardia and the province of Santa Cruz, 7.5 percent. Located to the north-
west of Puerto San Julian in the province of Santa Cruz, 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.
Ore is processed at a metallurgical plant located at the mine and includes a
cyanide recovery plant. Technology at the plant is based on carbon-in-leach
processes with the tailings dam incorporated in a closed circuit with plant
process so that there is no final discharge. The Cerro Vanguardia gold plant
has a capacity of 82,000 tonnes per month.
cyanide recovery plant. Technology at the plant is based on carbon-in-leach
processes with the tailings dam incorporated in a closed circuit with plant
process so that there is no final discharge. The Cerro Vanguardia gold plant
has a capacity of 82,000 tonnes per month.
Rights: 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, the mining title holder is its partner, Fomicruz, and
due to the Usufruct Agreement signed between t hem 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.
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, the mining title holder is its partner, Fomicruz, and
due to the Usufruct Agreement signed between t hem 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.
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.
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.
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.
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.
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.
54
Safety: There was a deterioration in safety during the year. The LTIFR for 2007 was 3.34 compared to 3.13 in 2006. As in
2006, there were no fatalities in 2007. Corrective action has been taken including safety awareness workshops for the
managers responsible for operational safety, supervisors and contractors.
2006, there were no fatalities in 2007. Corrective action has been taken including safety awareness workshops for the
managers responsible for operational safety, supervisors and contractors.
Operating review: Attributable production decreased in line with expectations to 204,000 ounces for the year, mostly as a
result of the lower grade mined in the first three quarters of the year.
result of the lower grade mined in the first three quarters of the year.
The highlights for the year were the higher stripping ratio achieved with the extraction of 1.5 million tonnes of additional waste
and an increase in silver production to 420,000 ounces.
and an increase in silver production to 420,000 ounces.
The recovered grade decreased year-on-year from 7.29g/t in 2006 to 6.88g/t in 2007 as a result of the lower grade material
supplied to the plant.
supplied to the plant.
Total cash costs increased by 17 percent to $260 per ounce as compared to $223 per ounce in 2006. Increases in the cost of
mining supplies, a function of the inflationary impact of higher commodity prices and higher maintenance costs (due to an
extension on the useful life of some mine equipment), as well as an increase in workforce and contractor costs, were partially
offset by greater silver by-product revenue.
mining supplies, a function of the inflationary impact of higher commodity prices and higher maintenance costs (due to an
extension on the useful life of some mine equipment), as well as an increase in workforce and contractor costs, were partially
offset by greater silver by-product revenue.
Capital expenditure for the year amounted to $18 million, spent largely on mine equipment and mine and plant infrastructure.
Growth prospects: The four-year brownfields exploration program entered its second year in 2007. The focus of the program
is to determine the extent of and to delineate the shallow, high-grade mineral resources.
is to determine the extent of and to delineate the shallow, high-grade mineral resources.
Operating and production data for Cerro Vanguardia
2007 2006 2005
Pay limit (oz/t)
0.18
0.13
0.12
Pay limit (g/t)
3.48
4.56
4.02
Recovered grade (oz/t)
0.201
0.213
0.225
Recovered grade (g/t)
6.88
7.29
7.70
Gold production (000 oz) 100 percent
220
232
228
Gold production (000 oz) 92.50 percent
204
215
211
Total cash costs ($/oz)
(1)
260
223
171
Total production costs ($/oz)
(1)
358
372
270
Capital expenditure ($ million) 100 percent
20
19
15
Capital expenditure ($ million) 92.50 percent
18
18
14
Employees
(2)
708
623
487
Outside contractors
(2)
309
283
459
(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”.
results – Total cash costs and total production costs”.
(2)
Average for the year.
55
AUSTRALIA
AngloGold Ashanti’s three assets in Australia are the
Sunrise Dam gold mine, and the Boddington and
Tropicana joint venture projects. In 2007, production
from Sunrise Dam was a record 600,000 ounces, an
increase of 29 percent and equivalent to 11 percent of
group production for the year.
Sunrise Dam gold mine, and the Boddington and
Tropicana joint venture projects. In 2007, production
from Sunrise Dam was a record 600,000 ounces, an
increase of 29 percent and equivalent to 11 percent of
group production for the year.
Ownership of these assets, all in the state of Western
Australia, is as follows:
Australia, is as follows:
The Sunrise Dam gold mine is 100 percent owned by
AngloGold Ashanti and is currently the only producing
AngloGold Ashanti operation in Australia. The
Sunrise Dam gold plant has a capacity of
300,000 tonnes per month.
AngloGold Ashanti and is currently the only producing
AngloGold Ashanti operation in Australia. The
Sunrise Dam gold plant has a capacity of
300,000 tonnes per month.
The Boddington project is a joint venture between
AngloGold Ashanti and Newmont Mining Corporation,
in which each has interests of 33.33 percent and
66.67 percent, respectively.
AngloGold Ashanti and Newmont Mining Corporation,
in which each has interests of 33.33 percent and
66.67 percent, respectively.
The Tropicana project is a joint venture between AngloGold Ashanti (70 percent) and Independence Group NL (30 percent),
which will contribute in terms of its 30 percent stake on completion of the pre-feasibility study.
which will contribute in terms of its 30 percent stake on completion of the pre-feasibility study.
Rights: 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. 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.
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. 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.
Sunrise Dam
Description: The Sunrise Dam gold mine is located in the northern goldfields of Western Australia, 220 kilometers north-east
of Kalgoorlie and 55 kilometers south of Laverton. The mine consists of a large open-pit, which is now in its eleventh year of
operation, and an underground mine, which began producing in 2003. Mining at both operations is conducted by contractors
and the ore mined is treated in a conventional gravity and CIL processing plant which is owner-managed.
of Kalgoorlie and 55 kilometers south of Laverton. The mine consists of a large open-pit, which is now in its eleventh year of
operation, and an underground mine, which began producing in 2003. Mining at both operations is conducted by contractors
and the ore mined is treated in a conventional gravity and CIL processing plant which is owner-managed.
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.
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.
Safety: While no fatalities were recorded there was a slight deterioration in the rate of lost-time injuries. The LTIFR for the year
was 2.63 (2006: 1.81).
was 2.63 (2006: 1.81).
Operating review: Production increased by 29 percent to a record 600,000 ounces in line with expectations
(2006: 465,000 ounces). The GQ zone in the open pit provided the anticipated large volumes of high grade ore, which
accounted for the increase in annual gold production. Approximately 79,000 ounces of gold production was sourced from the
underground mine. Progress was made in developing access to the Cosmo, Dolly, and Watu lodes and 2,000 meters of
underground capital development and 6,100 meters of operational development were completed. A total of 67,400 meters of
diamond drilling was also completed.
accounted for the increase in annual gold production. Approximately 79,000 ounces of gold production was sourced from the
underground mine. Progress was made in developing access to the Cosmo, Dolly, and Watu lodes and 2,000 meters of
underground capital development and 6,100 meters of operational development were completed. A total of 67,400 meters of
diamond drilling was also completed.
56
Processing plant throughput in 2007 was 3.8 million tonnes, slightly lower than the record throughput of 3.9 million tonnes in
2006.
2006.
Total cash costs fell by 21 percent to $262 per ounce. Despite cost increases in areas such as open-pit mining contractor rates
per unit mined, the greater volume of ore mined, and the appreciation in value of the Australian dollar, the increase in
production, due primarily to the higher grade of ore mined, resulted in the decrease in unit cash costs, year-on-year.
per unit mined, the greater volume of ore mined, and the appreciation in value of the Australian dollar, the increase in
production, due primarily to the higher grade of ore mined, resulted in the decrease in unit cash costs, year-on-year.
The conversion of the mine’s diesel power station to liquefied natural gas (LNG) progressed well and the new LNG facility will
begin operation in the second quarter of 2008. Capital expenditure for the year amounted to A$35 million ($30 million).
begin operation in the second quarter of 2008. Capital expenditure for the year amounted to A$35 million ($30 million).
Growth prospects: The main open pit (the Mega Pit) will be completed in the second quarter of 2008, at a final depth of
440 meters. A cutback of the north wall of the open pit began in October 2007, and is scheduled for completion in mid-2010.
440 meters. A cutback of the north wall of the open pit began in October 2007, and is scheduled for completion in mid-2010.
The underground life of mine study was completed in late 2007 and, following successful exploration, underground reserves
have increased to 552,000 ounces (after depletion).
have increased to 552,000 ounces (after depletion).
Operating and production data for Sunrise Dam
2007 2006 2005
Pay limit (oz/t)
0.06 0.05 0.07
Pay limit (g/t)
1.76 1.64 2.27
Recovered grade (oz/t)
(2)
0.142
0.099
0.107
Recovered grade (g/t)
(2)
4.86
3.39
3.68
Gold production (000 oz)
600
465
455
Total cash costs ($/oz)
(1)
262
333
269
Total production costs ($/oz)
(1)
345
406
367
Capital expenditure ($ million)
30
24
34
Employees
(3)
102 99 95
Outside contractors
(3)
255
283
280
(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”.
results – Total cash costs and total production costs”.
(2) Open-pit operations.
(3)
Average for the year.
Boddington (attributable 33.33 percent)
Description: Boddington is located 130 kilometers south-east of Perth in Western Australia. The original, predominantly oxide
open-pit operation was closed at the end of 2001.
open-pit operation was closed at the end of 2001.
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.
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.
Operating review and growth prospects: The Boddington expansion project, which involves mining the basement reserves
beneath the oxide pits, was approved in March 2006. The project has an attributable capital budget of between A$770 million
and A$900 million ($700 million and $800 million). At year-end, overall project progress was approximately 65 percent
complete, with engineering and procurement activities nearing completion. Construction of the treatment plant was
approximately 32 percent complete. Based on the current mine plan, mine life is estimated to be more than 20 years, with
attributable life-of-mine gold production expected to be greater than 5.7 million ounces of gold.
beneath the oxide pits, was approved in March 2006. The project has an attributable capital budget of between A$770 million
and A$900 million ($700 million and $800 million). At year-end, overall project progress was approximately 65 percent
complete, with engineering and procurement activities nearing completion. Construction of the treatment plant was
approximately 32 percent complete. Based on the current mine plan, mine life is estimated to be more than 20 years, with
attributable life-of-mine gold production expected to be greater than 5.7 million ounces of gold.
57
Operating and production data for Boddington
2007 2006 2005
Pay limit (oz/t)
– – –
Pay limit (g/t)
– – –
Recovered grade (oz/t)
–
–
–
Recovered grade (g/t)
– – –
Gold production (000 oz) 100 percent
–
–
–
Gold production (000 oz) 33.33 percent
–
–
–
Total cash costs ($/oz)
(1)
–
–
–
Total production costs ($/oz)
(1)
–
–
–
Capital expenditure ($ million) 100 percent
747
180
12
Capital expenditure ($ million) 33.33 percent
249
60
4
Employees
(2)
37 12 18
Outside contractors
(2)
387
85
48
(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”.
results – Total cash costs and total production costs”.
(2)
Average for the year.
Tropicana
Description: Tropicana is a 12,500 square kilometers tenement package located 330 kilometers east north-east of Kalgoorlie
in Western Australia. AngloGold Ashanti holds a 70 percent interest in the project and Independence Group NL holds a
30 percent interest (free carried to completion of the pre-feasibility study). Independence has agreed to contribute to certain
project studies to ensure timely development of the project and to contribute to all regional exploration.
in Western Australia. AngloGold Ashanti holds a 70 percent interest in the project and Independence Group NL holds a
30 percent interest (free carried to completion of the pre-feasibility study). Independence has agreed to contribute to certain
project studies to ensure timely development of the project and to contribute to all regional exploration.
Geology: The Tropicana deposit comprises two known mineralized zones, the Tropicana zone to the north and Havana zone
to the south. Together the known mineralized zones define a system that extends over a 4 kilometer strike length. The lenses
have been tested to a vertical depth of 350 meters to 400 meters, and are open down dip. The Tropicana and Havana zones
are grossly “stratiform” within the preferred gneissic host sequence. Havana zone consists of multiple stacked lenses, whereas
Tropicana comprises one main mineralised lens.
to the south. Together the known mineralized zones define a system that extends over a 4 kilometer strike length. The lenses
have been tested to a vertical depth of 350 meters to 400 meters, and are open down dip. The Tropicana and Havana zones
are grossly “stratiform” within the preferred gneissic host sequence. Havana zone consists of multiple stacked lenses, whereas
Tropicana comprises one main mineralised lens.
Operating review and growth prospects: The pre-feasibility study on this project began in June 2007. The study, which is
scheduled to be completed by mid-2008, focuses on the Tropicana and Havana zones.
scheduled to be completed by mid-2008, focuses on the Tropicana and Havana zones.
Metallurgical testwork has determined that the preferred plant configuration is a conventional carbon-in-leach circuit. Tests are
currently underway to assess the optimal crushing and grinding circuit as well as the possible inclusion of energy-efficient high-
pressure grinding rolls.
currently underway to assess the optimal crushing and grinding circuit as well as the possible inclusion of energy-efficient high-
pressure grinding rolls.
With the completion of the resource estimate, pit design and mine scheduling studies are underway to determine the optimal
operating scale, grade and material scheduling strategy, infrastructural requirements, and capital and operating costs. A
potential large-scale water resource has been identified within 50 kilometers of the deposit.
operating scale, grade and material scheduling strategy, infrastructural requirements, and capital and operating costs. A
potential large-scale water resource has been identified within 50 kilometers of the deposit.
AngloGold Ashanti and Independence have agreed to jointly fund ongoing drilling to increase the resource classification to
measured, indicated and inferred by mid-2008 to enable estimation of reserves and to streamline the progression of the project
to feasibility level.
measured, indicated and inferred by mid-2008 to enable estimation of reserves and to streamline the progression of the project
to feasibility level.
Baseline environmental studies for the project have been substantially completed.
Regional exploration continues on the greater tenement package.
58
BRAZIL
AngloGold Ashanti’s two assets in Brazil are Brasil Mineração and Serra Grande. In 2007, these operations together produced
an attributable 408,000 ounces of gold, equivalent to 7 percent of group production.
an attributable 408,000 ounces of gold, equivalent to 7 percent of group production.
Rights: 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.
and a Mining Concession or Mine Manifest, valid for the life of the deposit.
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:
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;
· complying with environmental requirements;
· 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.
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.
59
Brazil – Summary of metallurgical operations
AngloGold Ashanti Mineração
Serra Grande
Cuiabá
Raposos
Gold plants
Capacity (000 tonnes/month)
135
26
66
Current throughput
112
Shut down
AngloGold Ashanti Brasil Mineração
Description: The wholly owned AngloGold Ashanti Brasil Mineração (Brasil Mineração) complex is located in south-eastern
Brazil in the state of Minas Gerais, close to the city of Belo Horizonte, in the municipalities of Nova Lima, Sabará and Santa
Bárbara. Ore is sourced from the Cuiabá underground mine, and then processed at the Cuiabá and Queiroz plants, and from
the Córrego do Sítio heap-leach operation.
Brazil in the state of Minas Gerais, close to the city of Belo Horizonte, in the municipalities of Nova Lima, Sabará and Santa
Bárbara. Ore is sourced from the Cuiabá underground mine, and then processed at the Cuiabá and Queiroz plants, and from
the Córrego do Sítio heap-leach operation.
Geology: The area in which 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.
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 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.
environment. The host rocks at 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.
Safety: Safety levels were maintained during the course of the year with little change in the LTIFR (2007: 2.30; 2006: 2.33).
No fatalities were recorded.
No fatalities were recorded.
Operating review: Production increased by 31 percent to 317,000 ounces in line with expectations (2006: 242,000 ounces),
boosted by the commissioning and start-up of the Cuiabá Expansion Project. Although the rainy season at the start of the year
hampered heap-leach activities and delayed the start up of the Cuiabá Expansion Project, by the end of the year, operating
performance had improved. The Cuiabá Expansion Project includes the deepening of the underground mine, the construction
of new treatment and tailings storage facilities, a roaster and an acid plant. The entire circuit has now been integrated and is
operational from the underground Cuiabá mine crushing area to the Queiroz processing plant. No significant problems were
experienced in increasing mine throughput from 830,000 tonnes to an average of 1.3 million tonnes annually. This project will
add six ye ars to the life of mine of Brasil Mineração.
boosted by the commissioning and start-up of the Cuiabá Expansion Project. Although the rainy season at the start of the year
hampered heap-leach activities and delayed the start up of the Cuiabá Expansion Project, by the end of the year, operating
performance had improved. The Cuiabá Expansion Project includes the deepening of the underground mine, the construction
of new treatment and tailings storage facilities, a roaster and an acid plant. The entire circuit has now been integrated and is
operational from the underground Cuiabá mine crushing area to the Queiroz processing plant. No significant problems were
experienced in increasing mine throughput from 830,000 tonnes to an average of 1.3 million tonnes annually. This project will
add six ye ars to the life of mine of Brasil Mineração.
From an operational perspective, actions such as the setting of new development rates, a new ramp, improvements to mine
infrastructure and layout and improved geotechnical conditions are being implemented to consolidate a sustainable long-term
rate of production. A 7 percent increase in the volume of tonnages treated has been planned to offset a 5 percent decline in
grades for 2008.
infrastructure and layout and improved geotechnical conditions are being implemented to consolidate a sustainable long-term
rate of production. A 7 percent increase in the volume of tonnages treated has been planned to offset a 5 percent decline in
grades for 2008.
Total cash costs rose by 19 percent to $246 per ounce compared to $207 per ounce in 2006. Higher costs were largely a result
of the appreciation in the local Brazilian currency (the real) against the US dollar, lower grades, the reduction in by-product
credits received for sulphuric acid and an increase in the operational cycle of the mine in deeper levels in addition to a new
plant at Cuiabá site.
of the appreciation in the local Brazilian currency (the real) against the US dollar, lower grades, the reduction in by-product
credits received for sulphuric acid and an increase in the operational cycle of the mine in deeper levels in addition to a new
plant at Cuiabá site.
Capital expenditure for the year totaled $117 million, significantly down on that of 2006 ($168 million) as the Cuiabá Expansion
Project was completed.
Project was completed.
60
Growth prospects: The Córrego do Sítio Underground Sulphide Project is investigating the viability of exploiting the potential
sulphide ore resources of the Córrego do Sítio underground orebodies, namely Cachorro Bravo, Laranjeira and Carvoaria. The
results from the study for this project were released in 2007. This project, which is expected to produce 100,000 ounces of gold
annually over 14 years from a total of 6.8 million tonnes of ore milled, is scheduled to begin in mid-2011.
sulphide ore resources of the Córrego do Sítio underground orebodies, namely Cachorro Bravo, Laranjeira and Carvoaria. The
results from the study for this project were released in 2007. This project, which is expected to produce 100,000 ounces of gold
annually over 14 years from a total of 6.8 million tonnes of ore milled, is scheduled to begin in mid-2011.
The development of a ramp and the exposure of the Cachorro Bravo orebody are continuing. The development of access
drives to the Carvoaria orebody is ongoing and exposure of the Laranjeira orebody to increase the extent of the mineable
resource has begun. Trial mining on the Cachorro Bravo orebody is in progress and generating data for the feasibility study.
drives to the Carvoaria orebody is ongoing and exposure of the Laranjeira orebody to increase the extent of the mineable
resource has begun. Trial mining on the Cachorro Bravo orebody is in progress and generating data for the feasibility study.
The Lamego Project explores the orebodies on the Lamego property. This project is expected to produce approximately
450,000 ounces over nine years. However, given the geological similarity of Lamego to that of the nearby Cuiabá mine, and the
lack of information regarding the deeper levels of Lamego, a more aggressive exploration program was budgeted for in 2007
and 2008 so as to evaluate the potential of increasing current expected production at Lamego to levels similar to those of the
Cuiabá operation. During 2007, development totaled 3,274 meters. A pre-feasibility study will be conducted in 2008.
450,000 ounces over nine years. However, given the geological similarity of Lamego to that of the nearby Cuiabá mine, and the
lack of information regarding the deeper levels of Lamego, a more aggressive exploration program was budgeted for in 2007
and 2008 so as to evaluate the potential of increasing current expected production at Lamego to levels similar to those of the
Cuiabá operation. During 2007, development totaled 3,274 meters. A pre-feasibility study will be conducted in 2008.
Operating and production data for Brasil Mineração
2007 2006 2005
Pay limit (oz/t)
0.13
0.09
0.11
Pay limit (g/t)
3.50
3.10
3.86
Recovered grade (oz/t)
(1)
0.218
0.222
0.212
Recovered grade (g/t)
(1)
7.48
7.60
7.27
Gold production (000 oz)
317
242
250
Total cash costs ($/oz)
(2)
246
207
169
Total production costs ($/oz)
(2)
360
301
260
Capital expenditure ($ million)
117
168
71
Employees
(3)
1,814
1,546
1,363
Outside contractors
(3)
1,620
2,065
1,234
(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”.
results – Total cash costs and total production costs”.
(3)
Average for the year.
Serra Grande (attributable 50 percent)
Description: Serra Grande is located in central Brazil, in the state of Goiás, five kilometers from the city of Crixás. AngloGold
Ashanti and the Kinross Gold Corporation are joint partners in this operation. In terms of the shareholders’ 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.
Ashanti and the Kinross Gold Corporation are joint partners in this operation. In terms of the shareholders’ 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.
Serra Grande comprises two underground mines, Mina III and Mina Nova, and an open pit at Mina III which began operation in
2007. The processing circuit, with grinding, leaching, filtration, precipitation and smelting facilities, has a capacity of about
800,000 tonnes of ore a year.
2007. The processing circuit, with grinding, leaching, filtration, precipitation and smelting facilities, has a capacity of about
800,000 tonnes of ore a year.
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.
which together account for a large proportion of the Crixás Greenstone Belt in central Brazil.
The stratigraphy of the belt is dominated by basics and ultrabasics in the lower sequences with volcano sedimentary units
forming the upper successions.
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.
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.
61
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.
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 thru st 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.
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 thru st 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.
Safety: Safety levels deteriorated during the course of the year and there was one fatality due to a rockfall in the second
quarter of the year. This was the first fatality ever involving an employee of Serra Grande. Corrective action has been taken.
The LTIFR for the year was 2.47 (2006: 1.76) while the FIFR was 0.49 (2006: nil).
quarter of the year. This was the first fatality ever involving an employee of Serra Grande. Corrective action has been taken.
The LTIFR for the year was 2.47 (2006: 1.76) while the FIFR was 0.49 (2006: nil).
Operating review: Attributable production at 91,000 ounces (2006: 97,000 ounces) decreased by 6 percent mainly due to the
lower grades mined.
lower grades mined.
Total cash costs increased by 35 percent to $264 per ounce, largely due to the lower grade of the material available for
treatment, an appreciating local currency (the real) and inflation which affected the costs of power, labor, material and services.
treatment, an appreciating local currency (the real) and inflation which affected the costs of power, labor, material and services.
Total capital expenditure amounted to $24 million or $12 million attributable. Capital expenditure was also negatively impacted
by the appreciation in the local currency.
by the appreciation in the local currency.
Growth prospects: An aggressive brownfields exploration campaign at Serra Grande aims to increase reserves and
resources in and around Mina III and Mina Nova. In 2007, there was an increase in reserves at Mina Nova and Mina III
(orebody 4) and a new orebody named Pequizão was discovered between Mina Nova and Mina III. In 2008, the intention is to
re-evaluate resources and reserves including Pequizão and start the main access to the Palmeiras mine. The access ramp
project was finished by the end of 2007 and the development should start in March 2008.
resources in and around Mina III and Mina Nova. In 2007, there was an increase in reserves at Mina Nova and Mina III
(orebody 4) and a new orebody named Pequizão was discovered between Mina Nova and Mina III. In 2008, the intention is to
re-evaluate resources and reserves including Pequizão and start the main access to the Palmeiras mine. The access ramp
project was finished by the end of 2007 and the development should start in March 2008.
Operating and production data for Serra Grande
2007 2006 2005
Pay limit (oz/t)
0.14
0.09
0.09
Pay limit (g/t)
3.90
3.24
3.02
Recovered grade (oz/t)
0.210
0.219
0.231
Recovered grade (g/t)
7.21
7.51
7.93
Gold production (000 oz) 100 percent
182
194
192
Gold production (000 oz) 50 percent
91
97
96
Total cash costs ($/oz)
(1)
264
196
158
Total production costs ($/oz)
(1)
374
278
229
Capital expenditure ($ million) 100 percent
24
17
13
Capital expenditure ($ million) 50 percent
12
8
7
Employees
(2)
654 609 566
Outside contractors
(2)
264
208
209
(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”.
results – Total cash costs and total production costs”.
(2)
Average for the year.
62
GHANA
The two AngloGold Ashanti operations in Ghana are Obuasi
and Iduapriem, which combined had total attributable
production of 527,000 ounces, equivalent to approximately
10 percent of group production, for the year.
and Iduapriem, which combined had total attributable
production of 527,000 ounces, equivalent to approximately
10 percent of group production, for the year.
Rights: Mining activities in Ghana are primarily regulated by
the new Minerals and Mining Act, 2006 (the Mining Act.)
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.
the new Minerals and Mining Act, 2006 (the Mining Act.)
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.
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.
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.
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 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 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.
falls into a class of transactions exempted by Parliament. 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.
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.
and 6 percent of total minerals revenue, depending on a formula set out in mineral royalty regulations.
AngloGold Ashanti and the Government of Ghana have entered into a Stability Agreement with respect to the payment of
royalties and taxes. Under the Stability Agreement, the government of Ghana agreed:
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 fifteen years. The agreement was amended in
December 2006 to a tax rate equal to the prevailing corporate rate for listed companies;
· 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.
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 fifteen years. The agreement was amended in
December 2006 to a tax rate equal to the prevailing corporate rate for listed companies;
· 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.
63
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.
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.
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.
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.
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 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.
renewal. A detailed program 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.
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.
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.
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).
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.
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.
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.
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.
64
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.
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.
26 years. The terms and conditions of these leases are consistent with similar leases granted in respect of the Obuasi mining
lease.
Obuasi
Description: Obuasi, which is wholly owned by AngloGold Ashanti, is located in the Ashanti region of southern Ghana,
approximately 80 kilometers from Kumasi. It is primarily an underground mine operating at depths of 1,500 meters, although
some surface mining does occur. Three treatment plants process the ore: a sulphide plant treats the ore from underground, a
tailings plant for tailings reclamation operations and an oxide plant is used to batch treat remnant open-pit ore and stockpiles.
The mine was established in 1897 and has produced more than 30 million ounces of gold in all.
approximately 80 kilometers from Kumasi. It is primarily an underground mine operating at depths of 1,500 meters, although
some surface mining does occur. Three treatment plants process the ore: a sulphide plant treats the ore from underground, a
tailings plant for tailings reclamation operations and an oxide plant is used to batch treat remnant open-pit ore and stockpiles.
The mine was established in 1897 and has produced more than 30 million ounces of gold in all.
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:
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.
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.
Safety: Regrettably there were four fatalities during the year: two were caused by accidents involving machinery, one a fall of
ground and one involved an employee falling down a rock pass. The LTIFR for the year deteriorated to 2.72 per million hours
worked, from 2.29 in 2006, while the FIFR rose from 0.08 in 2006 to 0.19 per million hours worked in 2007.
ground and one involved an employee falling down a rock pass. The LTIFR for the year deteriorated to 2.72 per million hours
worked, from 2.29 in 2006, while the FIFR rose from 0.08 in 2006 to 0.19 per million hours worked in 2007.
Remedial action has been taken to improve safety at Obuasi, including the conducting of a training program to identify and
address workplace hazards for all employees involved in hazardous tasks. Each work team on the mine will, before it begins,
evaluate the task at hand to determine the risks and to assign and implement a control known as a ‘simplified risk assessment’.
This procedure is to be conducted by every employee prior to the conducting of any hazardous task on the mine.
address workplace hazards for all employees involved in hazardous tasks. Each work team on the mine will, before it begins,
evaluate the task at hand to determine the risks and to assign and implement a control known as a ‘simplified risk assessment’.
This procedure is to be conducted by every employee prior to the conducting of any hazardous task on the mine.
The process to obtain ISO 18001 accreditation for Obuasi began in early 2008.
Operating review: Gold production at Obuasi declined by 7 percent to 360,000 ounces in 2007 (2006: 387,000 ounces). This
decline in production was largely attributable to the decline in volumes mined although the recovered grade improved
marginally. An 11-day plant shut down in the third quarter and power outages during the year also contributed to the reduced
production.
decline in production was largely attributable to the decline in volumes mined although the recovered grade improved
marginally. An 11-day plant shut down in the third quarter and power outages during the year also contributed to the reduced
production.
Total cash costs rose by 17 percent to $464 per ounce (2006: $397 per ounce), largely as a result of the reduced production
and increases in prices of consumables and rates of service contracts.
and increases in prices of consumables and rates of service contracts.
Growth prospects: The Obuasi Deeps project has added 1.3 million ounces to reserves.
Ghana – Summary of metallurgical operations
Obuasi
Bibiani
Iduapriem
Sulphide
Treatment Plant
Tailings
Treatment Plant
Oxide Treatment
Plant
Gold plants
Capacity
(000 tonnes/month)
200 200 150 225 375
65
Operating and production data for Obuasi
2007 2006 2005
Pay limit (oz/t)
(1)
0.28 0.229 0.177
Pay limit (g/t)
8.49 7.13 6.06
Recovered grade (oz/t)
(1)
0.129
0.128
0.139
Recovered grade (g/t)
4.43
4.39
4.77
Gold production (000 oz)
360
387
391
Total cash costs ($/oz)
(2)
464
397
345
Total production costs ($/oz)
(2)
739
638
532
Capital expenditure ($ million)
94
91
78
Employees
(3)
4,672 5,629 5,852
Outside contractors
(3)
1,554
2,210
2,443
(1)
Pay limits and recovered grade refer to underground ore resources.
(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”.
results – Total cash costs and total production costs”.
(3)
Average for the period.
Bibiani
Bibiani in Ghana was sold to Central African Gold plc effective December 28, 2006
Operating and production data for Bibiani
2007 2006
(4)
2005
Pay limit (oz/t)
- 0.030 0.020
Pay limit (g/t)
- 0.83 0.70
Recovered grade (oz/t)
(1)
-
0.016
0.042
Recovered grade (g/t)
(1)
-
0.55
1.55
Gold production (000 oz)
-
37
115
Total cash costs ($/oz)
(2)
-
432
305
Total production costs ($/oz)
(2)
-
594
522
Capital expenditure ($ million)
-
-
7
Employees
(3)
- 211 462
Outside contractors
(3)
-
142
140
(1)
Recovered grade represents open pit operations in 2005 and surface and dump reclamation in 2006.
(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”.
results – Total cash costs and total production costs”.
(3)
Average for the period.
(4)
For the eleven months from January 2006 to November 2006.
Iduapriem
Description: Iduapriem comprises two properties, Iduapriem and Teberebie, in which, prior to September 2007, AngloGold
Ashanti had a combined effective stake of 85 percent. The International Finance Corporation held 10 percent and the
government of Ghana, 5 percent. AngloGold Ashanti acquired these minority shareholdings and, with effect from September 1,
2007, its shareholding in the Iduapriem operation increased to 100 percent.
Ashanti had a combined effective stake of 85 percent. The International Finance Corporation held 10 percent and the
government of Ghana, 5 percent. AngloGold Ashanti acquired these minority shareholdings and, with effect from September 1,
2007, its shareholding in the Iduapriem operation increased to 100 percent.
The Iduapriem mine is situated in the western region of Ghana, some 70 kilometers north of the coastal city of Takoradi and
10 kilometers south-west of Tarkwa. Iduapriem is an open-pit mine and its processing facilities include a carbon-in-pulp (CIP)
plant.
10 kilometers south-west of Tarkwa. Iduapriem is an open-pit mine and its processing facilities include a carbon-in-pulp (CIP)
plant.
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.
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.
66
Safety: With the heightened focus on training and education, safety performance improved consistently throughout the year.
As at year end, the mine achieved 3.57 million hours worked without a lost-time injury. The LTIFR was 0.46 (2006: 1.15). No
fatalities were recorded.
As at year end, the mine achieved 3.57 million hours worked without a lost-time injury. The LTIFR was 0.46 (2006: 1.15). No
fatalities were recorded.
Operating review: After the problems experienced in the first quarter of the year with a mill gearbox failure at the treatment
plant which impacted adversely on production, there was a turnaround in the second and third quarters. Unfortunately, at the
start of the fourth quarter, the mine suffered another setback in production when a fire broke out at the main substation which
affected one of two transformers that supply power to the mine. The problem took about a month to resolve following which a
series of crusher problems further impacted on the mine’s performance for the fourth quarter. Total attributable production for
the year at 167,000 ounces remained unchanged from 2006.
plant which impacted adversely on production, there was a turnaround in the second and third quarters. Unfortunately, at the
start of the fourth quarter, the mine suffered another setback in production when a fire broke out at the main substation which
affected one of two transformers that supply power to the mine. The problem took about a month to resolve following which a
series of crusher problems further impacted on the mine’s performance for the fourth quarter. Total attributable production for
the year at 167,000 ounces remained unchanged from 2006.
Total cash costs for the year was 20 percent higher at $497 per ounce owing to the combined impact of the mill shutdown and
increases in contract mining costs.
increases in contract mining costs.
Attributable capital expenditure for the year amounted to $23 million which was significantly up on the $5 million spent in 2006.
The increased capital expenditure was spent primarily on the plant expansion and other items.
The increased capital expenditure was spent primarily on the plant expansion and other items.
The expansion project, which will increase current plant capacity by about 15 percent, was a highlight of the year with
additional staff being located on site to progress with detailed design work and preparation for the mobilization of the main
contractors. Construction of the expansion project advanced with the appointment of the civil contractor and completion of the
tender for the structural mechanical and process piping component of the project. The electrical and instrumentation contracts
are yet to be tendered. By year-end, good progress had been made with the earthworks and infrastructure for the new crushing
plant, ball mill and thickener areas. Long lead items such as the gyratory crusher, ball mill shell and other relevant equipment
arrived on site before year-end. The project is expected to be commissioned during the fourth quarter of 2008.
additional staff being located on site to progress with detailed design work and preparation for the mobilization of the main
contractors. Construction of the expansion project advanced with the appointment of the civil contractor and completion of the
tender for the structural mechanical and process piping component of the project. The electrical and instrumentation contracts
are yet to be tendered. By year-end, good progress had been made with the earthworks and infrastructure for the new crushing
plant, ball mill and thickener areas. Long lead items such as the gyratory crusher, ball mill shell and other relevant equipment
arrived on site before year-end. The project is expected to be commissioned during the fourth quarter of 2008.
Growth prospects: The mine has limited growth prospects on surface. The scoping study to evaluate the viability of exploiting
the considerable low-grade mineral resources of other properties lying in the Tarkwaian conglomerates that extend below the
economic limits of the existing pits was not pursued during the year. However, the recent surge in the gold price has caused
renewed interest in evaluating this prospect further. Additional drilling is planned to be carried out in 2008 to give more
confidence to existing data and the scoping study will subsequently be progressed to pre-feasibility stage.
the considerable low-grade mineral resources of other properties lying in the Tarkwaian conglomerates that extend below the
economic limits of the existing pits was not pursued during the year. However, the recent surge in the gold price has caused
renewed interest in evaluating this prospect further. Additional drilling is planned to be carried out in 2008 to give more
confidence to existing data and the scoping study will subsequently be progressed to pre-feasibility stage.
Operating and production data for Iduapriem
2007
(4)
2006 2005
Pay limit (oz/t)
0.06 0.05 0.023
Pay limit (g/t)
1.66 1.60 0.72
Recovered grade (oz/t)
(1)
0.054
0.051
0.050
Recovered grade (g/t)
(1)
1.85
1.74
1.71
Gold production (000 oz) 100 percent
185
196
205
Gold production (000 oz) 100 percent
(4)
167
167
174
Total cash costs ($/oz)
(2)
497
413
348
Total production costs ($/oz)
(2)
653
544
477
Capital expenditure ($ million) 100 percent
24
6
5
Capital expenditure ($ million) 100 percent
(4)
23
5
4
Employees
(3)
721 668 698
Outside contractors
(3)
602
583
585
(1)
Recovered grade represents open pit 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”.
results – Total cash costs and total production costs”.
(3)
Average for the period.
(4)
100 percent owned effective September 1, 2007. Prior to this date, the effective holding was 85 percent.
67
GUINEA
AngloGold Ashanti has one gold mining operation,
Siguiri, in the Republic of Guinea. Siguiri produced
280,000 attributable ounces of gold in 2007,
equivalent to 5 percent of group production.
Siguiri, in the Republic of Guinea. Siguiri produced
280,000 attributable ounces of gold in 2007,
equivalent to 5 percent of group production.
Rights: 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.
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 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.
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.
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.
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.
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.
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.
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.
68
Siguiri (attributable 85 percent)
Description: AngloGold Ashanti has an interest of 85 percent in Siguiri and the government of Guinea, 15 percent. The Siguiri
mine is a conventional open-pit operation situated in the Siguiri district in the north-east of the Republic of Guinea, West Africa,
about 850 kilometers from the capital city of Conakry. The nearest major town is Siguiri (some 50,000 inhabitants), located on
the banks of the Niger River. All ore and waste is mined by a mining contractor and the ore is processed using carbon-in-pulp
(CIP) and heap-leach processes. Siguiri mines two types of gold deposits, laterite and in situ quartz-vein related
mineralizations. The Siguiri gold plant has a capacity of 800,000 tonnes per month.
mine is a conventional open-pit operation situated in the Siguiri district in the north-east of the Republic of Guinea, West Africa,
about 850 kilometers from the capital city of Conakry. The nearest major town is Siguiri (some 50,000 inhabitants), located on
the banks of the Niger River. All ore and waste is mined by a mining contractor and the ore is processed using carbon-in-pulp
(CIP) and heap-leach processes. Siguiri mines two types of gold deposits, laterite and in situ quartz-vein related
mineralizations. The Siguiri gold plant has a capacity of 800,000 tonnes per month.
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:
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.
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.
Safety: Overall safety standards improved at Siguiri with an LTIFR for the year of 0.41 per million hours worked (2006: 0.77).
No fatalities were recorded.
No fatalities were recorded.
Operating review: Attributable production increased by 9 percent to a record 280,000 ounces in 2007
(2006: 256,000 ounces), which was more than had been planned.
(2006: 256,000 ounces), which was more than had been planned.
Total cash costs were again considerably higher at $471 per ounce (2006: $398 per ounce), due to higher royalty payments
which are a function of the significantly higher gold price, and higher fuel costs. Siguiri is currently in discussion with the
Guinean government regarding the relationship between fuel prices and the exchange rate. Compounding the problem of
rising costs is that the increase in local labor costs, together with the appreciation of the Guinean franc against the dollar, has
changed the cost profile and labor costs now account for a greater proportion of total costs.
which are a function of the significantly higher gold price, and higher fuel costs. Siguiri is currently in discussion with the
Guinean government regarding the relationship between fuel prices and the exchange rate. Compounding the problem of
rising costs is that the increase in local labor costs, together with the appreciation of the Guinean franc against the dollar, has
changed the cost profile and labor costs now account for a greater proportion of total costs.
The CIP plant had a consistently good operation in 2007. A total of 9.8 million tonnes of ore was processed for the year with
plant availability of 91.6 percent and a recovery rate of 94.2 percent.
plant availability of 91.6 percent and a recovery rate of 94.2 percent.
Attributable capital expenditure for the year amounted to $18 million compared to $14 million in 2006.
Growth prospects: Regarding the CIP plant, the design of a second gravity concentrator and de-gritting facilities are being
finalised and will be installed during 2008; these are expected to improve productivity.
finalised and will be installed during 2008; these are expected to improve productivity.
Operating and production data for Siguiri
2007 2006 2005
Pay limit (oz/t)
0.03 0.03 0.017
Pay limit (g/t)
0.95 0.94 0.55
Recovered grade (oz/t)
(1)
0.031
0.032
0.035
Recovered grade (g/t)
(1)
1.05
1.08
1.21
Gold production (000 oz) – 100 percent
330
301
289
Gold production (000 oz) – 85 percent
280
256
246
Total cash costs ($/oz)
(2)
471
398
301
Total production costs ($/oz)
(2)
629
593
451
Capital expenditure ($ million) – 100 percent
21
19
36
Capital expenditure ($ million) – 85 percent
18
14
31
Employees
(3)
1,537 1,541 1,170
Outside contractors
(3)
1,380
1,167
808
(1)
Recovered grade represents open pit 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”.
results – Total cash costs and total production costs”.
(3)
Average for the period.
69
MALI
AngloGold Ashanti has interests in three gold mining
operations, all of which it manages in Mali. They are
Sadiola, Yatela and Morila. The Malian operations
together produced 441,000 attributable ounces of
gold in 2007 equivalent to 8 percent of group
production.
operations, all of which it manages in Mali. They are
Sadiola, Yatela and Morila. The Malian operations
together produced 441,000 attributable ounces of
gold in 2007 equivalent to 8 percent of group
production.
Ownership of these three operations is as follows:
· Sadiola: AngloGold Ashanti and IAMGOLD each
have a stake of 38 percent while the government
of Mali has a stake of 18 percent and the
International Finance Corporation, 6 percent.
have a stake of 38 percent while the government
of Mali has a stake of 18 percent and the
International Finance Corporation, 6 percent.
· Yatela: this operation is owned by Société
d’Exploration des Mines d’Or de Yatela SA, a
joint venture in which AngloGold Ashanti and
IAMGOLD each have an effective holding of
40 percent and the government of Mali,
20 percent.
d’Exploration des Mines d’Or de Yatela SA, a
joint venture in which AngloGold Ashanti and
IAMGOLD each have an effective holding of
40 percent and the government of Mali,
20 percent.
· Morila: this is a joint venture between AngloGold
Ashanti and Randgold Resources in which each
has a 40 percent interest. The remaining
20 percent is held by the Malian government.
Ashanti and Randgold Resources in which each
has a 40 percent interest. The remaining
20 percent is held by the Malian government.
Rights: Mineral rights in Mali are governed by Ordinance No. 99-32/P-RM of August 19, 1999 enacting the mining code, as
amended by 013/2000/P-RM of February 10, 2000 and ratified by Law No. 00-011 of May 30, 2000 (the "Mining Code"), and
Decree No. 99-255/P-RM of September 15, 1999 implementing the Mining Code.
amended by 013/2000/P-RM of February 10, 2000 and ratified by Law No. 00-011 of May 30, 2000 (the "Mining Code"), and
Decree No. 99-255/P-RM of September 15, 1999 implementing the Mining Code.
Prospecting activities may be carried out under prospecting authorizations (autorisation de prospection) which is an exclusive
right for an individual or corporate entity to carry out prospecting activities over a given area for a period of three (3) years
renewable without a reduction in the area of the authorization. Research activities may be carried out under research permits
(permis de recherche). The latter are granted to corporate entities only by order of the Minister in charge of Mines. Research
permits are granted for a period of three (3) years, renewable twice for additional three-year periods. Each renewal of the
research permit requires a relinquishment of 50 percent of the area covered by such permit. The entity applying for such a
permit must provide proof of technical and financial capabilities.
right for an individual or corporate entity to carry out prospecting activities over a given area for a period of three (3) years
renewable without a reduction in the area of the authorization. Research activities may be carried out under research permits
(permis de recherche). The latter are granted to corporate entities only by order of the Minister in charge of Mines. Research
permits are granted for a period of three (3) years, renewable twice for additional three-year periods. Each renewal of the
research permit requires a relinquishment of 50 percent of the area covered by such permit. The entity applying for such a
permit must provide proof of technical and financial capabilities.
An exploitation permit (permis d'exploitation) is required to mine a deposit located within the area of a prospecting authorization
or a research permit. The exploitation permit grants exclusive title to prospect, research and exploit the named substances for
a maximum period of thirty (30) years renewable three times for an additional 10 years). The exploitation permit is granted only
to the holder of an exploration permit or of a prospecting authorization and covers only the area covered by the exploration
permit or the prospecting authorization. An application must be submitted to the Minister in charge of Mines and to the National
Director of Mines.
or a research permit. The exploitation permit grants exclusive title to prospect, research and exploit the named substances for
a maximum period of thirty (30) years renewable three times for an additional 10 years). The exploitation permit is granted only
to the holder of an exploration permit or of a prospecting authorization and covers only the area covered by the exploration
permit or the prospecting authorization. An application must be submitted to the Minister in charge of Mines and to the National
Director of Mines.
As soon as the exploitation permit is granted, the holder of the exploitation permit must incorporate a company under the law of
Mali. The holder of the permit will assign the permit for free to this company. The State will have a 10 percent free carry
interest. This interest will be converted into priority shares and the State's participation will not be diluted in the case of
increasing the capital.
Mali. The holder of the permit will assign the permit for free to this company. The State will have a 10 percent free carry
interest. This interest will be converted into priority shares and the State's participation will not be diluted in the case of
increasing the capital.
The mining titles mentioned above all require an establishment convention (Convention d’Etablissement) to be signed by the
State and the titleholder defining their rights and obligations. A standard form of such establishment convention has been
approved by decree of the Head of Government.
State and the titleholder defining their rights and obligations. A standard form of such establishment convention has been
approved by decree of the Head of Government.
AngloGold Ashanti has interests at Morila, Sadiola and Yatela, all of which are governed by establishment conventions
(Convention d’Etablissement) covering exploration, mining, treatment and marketing in a comprehensive document. These
documents include 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).
(Convention d’Etablissement) covering exploration, mining, treatment and marketing in a comprehensive document. These
documents include 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).
70
Due to the fact that the establishment conventions contain stabilization clauses, the mining operations carried out by the
AngloGold Ashanti subsidiaries in Mali are subjected to the provisions of the previous mining codes of 1970 and 1991 but also,
for residual matters, to the provisions of the Mining code of 1999.
AngloGold Ashanti subsidiaries in Mali are subjected to the provisions of the previous mining codes of 1970 and 1991 but also,
for residual matters, to the provisions of the Mining code of 1999.
AngloGold Ashanti has complied with all applicable requirements and the relevant permits have been issued. Morila, Sadiola
and Yatela have thirty (30) year permits which expire in 2029, 2024 and 2030, respectively.
and Yatela have thirty (30) year permits which expire in 2029, 2024 and 2030, respectively.
Sadiola (attributable 38 percent)
Description: Sadiola is situated in the far south-west of the country, 77 kilometers to the south of the regional capital of Kayes.
Mining takes place in five open pits and the ore mined is treated and processed in a 435,000 million tonnes per month
(5.2 million tonnes per month) CIP gold plant. The Sadiola gold pant has a capacity of 435,000 tonnes per month.
Mining takes place in five open pits and the ore mined is treated and processed in a 435,000 million tonnes per month
(5.2 million tonnes per month) CIP gold plant. The Sadiola gold pant has a capacity of 435,000 tonnes per month.
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 primary ore source. Since 2002, the deeper saprolitic sulphide ore has been mined and in
future will progressively replace the depleting oxide reserves.
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 primary ore source. Since 2002, the deeper saprolitic sulphide ore has been mined and in
future will progressively replace the depleting oxide reserves.
Safety: Overall safety standards were maintained at Sadiola with an LTIFR for the year of 1.11 (2006: 1.02). No fatalities were
recorded.
recorded.
Operating review: Attributable production at Sadiola declined year-on-year by 26 percent to 140,000 ounces
(2006: 190,000 ounces). While there was a steady increase in production during the course of the year, this failed to make up
for the sharp drop which had occurred during the first quarter of the year. This decline in the throughput of tonnes was a result
of plant optimization to improve recovery of sulphide ores. The decline in the grade of feed to the plant was a result of a
decision to withhold high-grade sulphide feed prior to the commissioning of the gravity circuit at the concentrator in
December 2007. Consequently, total cash costs rose sharply by 54 percent to $414 per ounce (2006: $268 per ounce).
(2006: 190,000 ounces). While there was a steady increase in production during the course of the year, this failed to make up
for the sharp drop which had occurred during the first quarter of the year. This decline in the throughput of tonnes was a result
of plant optimization to improve recovery of sulphide ores. The decline in the grade of feed to the plant was a result of a
decision to withhold high-grade sulphide feed prior to the commissioning of the gravity circuit at the concentrator in
December 2007. Consequently, total cash costs rose sharply by 54 percent to $414 per ounce (2006: $268 per ounce).
Total capital expenditure of $16 million or an attributable $6 million, was spent during the year. A new gravity circuit was
installed at the metallurgical plant to improve the recovery rates for the sulphide ores.
installed at the metallurgical plant to improve the recovery rates for the sulphide ores.
Growth prospects: Various options are to be reviewed in the coming year to improve current assumptions in the Deep
Sulphide Project concerning mining method, scale, energy and metallurgical recovery.
Sulphide Project concerning mining method, scale, energy and metallurgical recovery.
Operating and production data for Sadiola
2007 2006 2005
Pay limit (oz/t)
0.08 0.06 0.05
Pay limit (g/t)
2.46 1.98 1.80
Recovered grade (oz/t)
0.081
0.094
0.080
Recovered grade (g/t)
2.76
3.22
2.73
Gold production (000 oz) 100 percent
369
500
442
Gold production (000 oz) 38 percent
140
190
168
Total cash costs ($/oz)
(1)
414
268
265
Total production costs ($/oz)
(1)
479
363
440
Capital expenditure ($ million) 100 percent
16
11
18
Capital expenditure ($ million) 38 percent
6
4
7
Employees
(2)
618 589 584
Outside contractors
(2)
911
705
661
(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”.
results – Total cash costs and total production costs”.
(2)
Average for the year.
71
Yatela (attributable 40 percent)
Description: Yatela is situated some 25 kilometers north of Sadiola and approximately 50 kilometers south-south-west of
Kayes. This is a single pit operation. The ore mined is treated at a heap-leach pad together with carbon-loading. The carbon
is then eluted and the gold smelted at nearby Sadiola. The Yatela gold plant has a capacity of 250,000 tonnes per month.
Kayes. This is a single pit operation. The ore mined is treated at a heap-leach pad together with carbon-loading. The carbon
is then eluted and the gold smelted at nearby Sadiola. The Yatela gold plant has a capacity of 250,000 tonnes per month.
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.
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.
Safety: Overall safety standards improved at Yatela with an LTIFR for the year of 0.39 (2006: 0.43). No fatalities were
recorded.
recorded.
Operating review: Attributable gold production at Yatela declined by 15 percent to 120,000 ounces (2006: 141,000 ounces).
Mining from the bottom of the main pit was completed in July 2007, after which lower grade ore from the stockpiles was fed to
the heap leach pad.
Mining from the bottom of the main pit was completed in July 2007, after which lower grade ore from the stockpiles was fed to
the heap leach pad.
Total cash costs increased dramatically, to $300 per ounce as a result of the decline in gold production, the appreciation of the
euro and the FCFA against the dollar, and higher fuel prices.
euro and the FCFA against the dollar, and higher fuel prices.
Capital expenditure of $5 million (attributable $2 million) increased in 2007 and was spent mostly on additional leach pads to
accommodate the extension in the life of mine.
accommodate the extension in the life of mine.
Operating and production data for Yatela
2007 2006 2005
Pay limit (oz/t)
0.04 0.06 0.05
Pay limit (g/t)
1.37 1.79 1.66
Recovered grade (oz/t)
0.101
0.120
0.087
Recovered grade (g/t)
3.46
4.12
2.99
Gold production (000 oz) 100 percent
301
352
246
Gold production (000 oz) 40 percent
120
141
98
Total cash costs ($/oz)
(1)
300
241
263
Total production costs ($/oz)
(1)
342
326
347
Capital expenditure ($ million) 100 percent
5
3
5
Capital expenditure ($ million) 40 percent
2
1
2
Employees
(2)
265 203 210
Outside contractors
(2)
638
675
700
(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”.
results – Total cash costs and total production costs”.
(2)
Average for the year.
72
Morila (attributable 40 percent)
Description: The Morila mine is situated some 180 kilometers by road south-east of Bamako, the capital of Mali. Open-pit
mining takes place at five cuts within one pit. The current focus is on cuts 4 and 5. At its peak, the Morila pit will be
approximately 1.4 kilometers by 1 kilometer and up to 240 meters deep. The plant, which comprises a conventional carbon-in-
leach (CIL) process with an upfront gravity section to extract the free gold, has throughput capacity of 350,000 tonnes per
month and 4.2 million tonnes per annum. It has a capacity of 350,000 tonnes per month.
mining takes place at five cuts within one pit. The current focus is on cuts 4 and 5. At its peak, the Morila pit will be
approximately 1.4 kilometers by 1 kilometer and up to 240 meters deep. The plant, which comprises a conventional carbon-in-
leach (CIL) process with an upfront gravity section to extract the free gold, has throughput capacity of 350,000 tonnes per
month and 4.2 million tonnes per annum. It has a capacity of 350,000 tonnes per month.
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.
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.
Safety: Overall, the level of lost-time injuries was maintained at Morila with an LTIFR for the year of 0.57 per million hours
worked (2006: 1.42). The OHSAS 18001 Safety Management certification was achieved by November 2007. Sadly, the Morila
team lost two fellow colleagues on February 9, 2007 during an explosion caused by the inadvertent mixing of two chemicals.
This resulted in a FIFR for the year of 0.57 per million hours worked (2006: 0).
worked (2006: 1.42). The OHSAS 18001 Safety Management certification was achieved by November 2007. Sadly, the Morila
team lost two fellow colleagues on February 9, 2007 during an explosion caused by the inadvertent mixing of two chemicals.
This resulted in a FIFR for the year of 0.57 per million hours worked (2006: 0).
Operating review: Attributable gold production at Morila decreased by 13 percent to 180,000 ounces (2006: 207,000 ounces),
with the significant increase in production in the second half of the year not quite making up for the losses recorded in the first
half of the year. The initial fall in production levels was a result of a decline in the recovered grade which improved markedly
later in the year with the mining and processing of higher grade ore.
with the significant increase in production in the second half of the year not quite making up for the losses recorded in the first
half of the year. The initial fall in production levels was a result of a decline in the recovered grade which improved markedly
later in the year with the mining and processing of higher grade ore.
Mining production efficiencies improved significantly in the second half of 2007 as highlighted by the achievement of
1,001,444 BCMs in September month. The optimal use of in-pit backfill (leaving waste in the pit) resulted in significant savings
and an increase in mining production.
1,001,444 BCMs in September month. The optimal use of in-pit backfill (leaving waste in the pit) resulted in significant savings
and an increase in mining production.
Total cash costs increased by 25 percent to $333 per ounce largely owing to the decline in production and an increase in cash
costs caused by higher fuel costs and a weakening in the dollar against the FCFA and the euro. As a result, fuel, local
salaries, mining contractor and certain reagent costs increased significantly.
costs caused by higher fuel costs and a weakening in the dollar against the FCFA and the euro. As a result, fuel, local
salaries, mining contractor and certain reagent costs increased significantly.
Operating and production data for Morila
2007 2006 2005
Pay limit (oz/t)
0.08 0.08 0.07
Pay limit (g/t)
2.46 2.41 2.27
Recovered grade (oz/t)
0.098
0.113
0.158
Recovered grade (g/t)
3.36
3.88
5.41
Gold production (000 oz) 100 percent
450
517
655
Gold production (000 oz) 40 percent
180
207
262
Total cash costs ($/oz)
(1)
333
266
191
Total production costs ($/oz)
(1)
406
367
298
Capital expenditure ($ million) 100 percent
1.3
3
5
Capital expenditure ($ million) 40 percent
0.5
1
2
Employees
(2)
498 500 478
Outside contractors
(2)
1,188
1,075
705
(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”.
results – Total cash costs and total production costs”.
(2)
Average for the year.
73
NAMIBIA
AngloGold Ashanti has one gold mining operation in
Namibia, namely Navachab, which is wholly owned. In
2007, Navachab produced 80,000 ounces of gold,
equivalent to 1 percent of group production.
Namibia, namely Navachab, which is wholly owned. In
2007, Navachab produced 80,000 ounces of gold,
equivalent to 1 percent of group production.
Description: The Navachab mine is situated near
Karibib and 170 kilometers north-west of Windhoek in
Namibia, on the south western cost of Africa.
Navachab is an open-pit mine and its processing plant,
with a production capacity of 120,000 tonnes per
month, includes mills, carbon-in-pulp (CIP) and
electrowinning facilities. The Navachab gold plant has
a capacity of 110,000 tonnes per month.
Karibib and 170 kilometers north-west of Windhoek in
Namibia, on the south western cost of Africa.
Navachab is an open-pit mine and its processing plant,
with a production capacity of 120,000 tonnes per
month, includes mills, carbon-in-pulp (CIP) and
electrowinning facilities. The Navachab gold plant has
a capacity of 110,000 tonnes per month.
Rights: Mineral rights in Namibia vest in the State. In
order to prospect or mine, the Ministry of Mines and
Energy initially grants an exclusive 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 Mining license expires in October 2018.
order to prospect or mine, the Ministry of Mines and
Energy initially grants an exclusive 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 Mining license expires in October 2018.
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.
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.
Safety: Overall safety standards were maintained at Navachab with an LTIFR for the year of 4.59 (2006: 4.09). No fatalities
were recorded.
were recorded.
Operating review: Production declined in line with expectations to 80,000 ounces in 2007 (2006: 86,000 ounces).
Mining volumes declined mainly due to a lack of drill availability, from 7.8 million tonnes in 2006 to 7.3 million tonnes. Plant-
production went up from 1.5 million tonnes in 2006 to 1.6 million tonnes in 2007 in line with expectations. Feed grade fell by
15 percent between 2006 and 2007.
production went up from 1.5 million tonnes in 2006 to 1.6 million tonnes in 2007 in line with expectations. Feed grade fell by
15 percent between 2006 and 2007.
Drill performance and drill capacity affected mining throughput as did the loss of skills to local and international competitors.
Grades were relatively low as the operation continued to strip the east pushback while metallurgical recovery was lower than
expected.
Grades were relatively low as the operation continued to strip the east pushback while metallurgical recovery was lower than
expected.
Total cash costs rose by 36 percent to $475 per ounce. This increase was caused by an increase in the cost of labor,
explosives and the grade-related decline in gold production.
explosives and the grade-related decline in gold production.
Capital expenditure for the year was $6 million (2006: $5 million).
74
Growth prospects: Work on the west pushback expansion is currently underway. Work on the dense media separation (DMS)
plant is also at an advanced stage. Exploration aimed at increasing geological confidence will continue. Brownfields
exploration projects will also increase the reserve base.
plant is also at an advanced stage. Exploration aimed at increasing geological confidence will continue. Brownfields
exploration projects will also increase the reserve base.
Operating and production data for Navachab
2007 2006 2005
Pay limit (oz/t)
0.04 0.04 0.05
Pay limit (g/t)
1.22 1.29 1.65
Recovered grade (oz/t)
0.046
0.053
0.060
Recovered grade (g/t)
1.56
1.81
2.05
Gold production (000 oz) 100 percent
80
86
81
Total cash costs ($/oz)
(1)
475
349
321
Total production costs ($/oz)
(1)
525
407
333
Capital expenditure ($ million) 100 percent
6
5
5
Employees
(2)
409 313 315
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”.
results – Total cash costs and total production costs”.
(2)
Average for the year.
75
TANZANIA
AngloGold Ashanti has one gold mining operation in Tanzania, Geita, which produced 327,000 ounces of gold in 2007,
equivalent to 6 percent of group production.
equivalent to 6 percent of group production.
Rights: Mineral rights in the United Republic of
Tanzania are governed by the Mining Act of 1998 (the
Act), 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.
Tanzania are governed by the Mining Act of 1998 (the
Act), 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.
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 renewal
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 with an initial prospecting period (“a
Prospecting License”), a prospecting license with a
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 renewal
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 with an initial prospecting period (“a
Prospecting License”), a prospecting license with a
reconnaissance period (“a Prospecting Reconnaissance”) may be applied 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 a Prospecting License period, for reasons ranging from funds to technical
considerations.
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 a Prospecting License period, for reasons ranging from funds to technical
considerations.
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 or for
the estimated life of the orebody, whichever is shorter, 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.
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 or for
the estimated life of the orebody, whichever is shorter, 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 or entity by notifying the Commissioner for Minerals, except for
a mining license, which must have the approval of the Ministry to be assigned.
may be freely assigned by the holder thereof to another person or entity by notifying the Commissioner for Minerals, 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.
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.
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.
expire in 2024.
76
Geita
Description: The Geita gold mine is situated 80 kilometers south-west of the town of Mwanza in the north-west of Tanzania.
The Geita gold deposit is an Archaean mesothermal orebody, largely hosted in a banded ironstone formation. It is a multiple
open-pit operation with further underground potential which is currently serviced by a 6 million tonnes per annum carbon-in-
leach (CIL) processing plant. Standard open-pit mining methods are employed; hard overburden is drilled and blasted hydraulic
excavators are used to load waste material into a fleet of large dump trucks exposing the gold bearing ore material which is
directed to the processing plant. The processing plant has a capacity of 490,000 tonnes per month.
The Geita gold deposit is an Archaean mesothermal orebody, largely hosted in a banded ironstone formation. It is a multiple
open-pit operation with further underground potential which is currently serviced by a 6 million tonnes per annum carbon-in-
leach (CIL) processing plant. Standard open-pit mining methods are employed; hard overburden is drilled and blasted hydraulic
excavators are used to load waste material into a fleet of large dump trucks exposing the gold bearing ore material which is
directed to the processing plant. The processing plant has a capacity of 490,000 tonnes per month.
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.
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.
Safety: Overall safety standards were maintained at Geita with an LTIFR for the year of 0.68 (2006: 0.63). No fatalities were
recorded.
recorded.
Operating review: Production at Geita is gradually improving year on year following the serious decline in production in 2006.
This was exacerbated by the collapse of part of the Nyankanga pit sidewall during the first quarter of 2007, which covered a
portion of the higher grade orebody. Gold production increased from 308,000 ounces in 2006 to 327,000 ounces in 2007, an
increase of 6 percent. The average grade of ore processed increased from 1.68g/t in 2006 to 2.01g/t in 2007. The collapse of
the Nyankanga pit in the first quarter delayed access to the higher grade exposed ore in this area and resulted in the mining
plan for the year being revised. Production and tonnage throughput in particular was further aggravated by wet ore, mill
lubrication problems and a major shutdown of the primary crusher for planned maintenance as well as damage to the ball mill
discharge which led to reduced proc essing plant availability. There was a considerable improvement in the third quarter of
2007 as Nyankanga ore was accessed, however, grades were not sustainable, the material was harder and as a result plant
throughput was reduced and fourth quarter gold production suffered as a result.
This was exacerbated by the collapse of part of the Nyankanga pit sidewall during the first quarter of 2007, which covered a
portion of the higher grade orebody. Gold production increased from 308,000 ounces in 2006 to 327,000 ounces in 2007, an
increase of 6 percent. The average grade of ore processed increased from 1.68g/t in 2006 to 2.01g/t in 2007. The collapse of
the Nyankanga pit in the first quarter delayed access to the higher grade exposed ore in this area and resulted in the mining
plan for the year being revised. Production and tonnage throughput in particular was further aggravated by wet ore, mill
lubrication problems and a major shutdown of the primary crusher for planned maintenance as well as damage to the ball mill
discharge which led to reduced proc essing plant availability. There was a considerable improvement in the third quarter of
2007 as Nyankanga ore was accessed, however, grades were not sustainable, the material was harder and as a result plant
throughput was reduced and fourth quarter gold production suffered as a result.
Total cash costs at $627 per ounce remained effectively unchanged from 2006 ($630 per ounce). Reduced expenditure on
equipment re-builds and contractor services also contributed to the containment of costs. Capital expenditure for 2007 was
$27 million (2006: $67 million).
equipment re-builds and contractor services also contributed to the containment of costs. Capital expenditure for 2007 was
$27 million (2006: $67 million).
Growth prospects: At the end of 2007 advanced grade control drilling had begun at the Star & Comet project in preparation
to start mining in the second quarter of 2008. The adjacent Roberts project will begin mining towards the end of 2008.
Exploration activities during 2007 focused on strike additions at Area 3 and the detection of regolith gold anomalies below
laterite cover via air core drilling. The regolith program identified a 2 kilometers gold in saprolite anomaly that requires follow-
up drilling.
to start mining in the second quarter of 2008. The adjacent Roberts project will begin mining towards the end of 2008.
Exploration activities during 2007 focused on strike additions at Area 3 and the detection of regolith gold anomalies below
laterite cover via air core drilling. The regolith program identified a 2 kilometers gold in saprolite anomaly that requires follow-
up drilling.
Metallurgical testwork continued during 2007 to identify a processing route for refractory ores at Matandani Kukuluma which
still contain significant potential. A scoping study into the underground potential at Nyankanga and Geita Hill began in 2007.
still contain significant potential. A scoping study into the underground potential at Nyankanga and Geita Hill began in 2007.
Operating and production data for Geita
2007 2006 2005
Pay limit (oz/t)
0.09 0.13 0.07
Pay limit (g/t)
3.04 4.16 2.27
Recovered grade (oz/t)
0.059
0.049
0.092
Recovered grade (g/t)
2.01
1.68
3.14
Gold production (000 oz)
327
308
613
Total cash costs ($/oz)
(1)
627
630
298
Total production costs ($/oz)
(1)
817
766
419
Capital expenditure ($ million)
27
67
78
Employees
(2)
2,304 2,043 1,066
Outside contractors
(2)
922
1,177
1,214
(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”.
results – Total cash costs and total production costs”.
(2)
Average for the year.
77
UNITED STATES OF AMERICA
Cripple Creek & Victor is AngloGold Ashanti’s sole
operation in the United States. In 2007, Cripple Creek &
Victor produced 282,000 ounces of gold, 5 percent of
group production.
operation in the United States. In 2007, Cripple Creek &
Victor produced 282,000 ounces of gold, 5 percent of
group production.
Cripple Creek & Victor (CC&V) is a joint venture in which
AngloGold Ashanti has a 67 percent interest and Golden
Cycle Gold Corporation holds the balance of 33 percent.
AngloGold Ashanti is the manager of CC&V and has a
100 percent interest in the gold produced by CC&V until
the loans extended to the joint venture are repaid.
Subsequent to year-end, on January 14, 2008, AngloGold
Ashanti announced the execution of an Agreement and
Plan of Merger in order to acquire 100 percent of Golden
Cycle Gold Corporation, thus owning 100 percent of
CC&V. The closing of that transaction is anticipated to be
completed in the second quarter of 2008 subject to various
matters including approval by Golden Cycle Gold
Corporation’s shareholders, satisfaction of certain closing
conditions, and receipt of all necessary regulatory
approvals.
AngloGold Ashanti has a 67 percent interest and Golden
Cycle Gold Corporation holds the balance of 33 percent.
AngloGold Ashanti is the manager of CC&V and has a
100 percent interest in the gold produced by CC&V until
the loans extended to the joint venture are repaid.
Subsequent to year-end, on January 14, 2008, AngloGold
Ashanti announced the execution of an Agreement and
Plan of Merger in order to acquire 100 percent of Golden
Cycle Gold Corporation, thus owning 100 percent of
CC&V. The closing of that transaction is anticipated to be
completed in the second quarter of 2008 subject to various
matters including approval by Golden Cycle Gold
Corporation’s shareholders, satisfaction of certain closing
conditions, and receipt of all necessary regulatory
approvals.
Rights: 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 rehabilit ation.
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 rehabilit ation.
Authorizations and permits setting forth the activities and restrictions pertaining thereto are issued by the responsible
governmental agencies for all phases of mining activities.
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.
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.
Cripple Creek & Victor (attributable 67 percent with 100 percent interest in production)
Description: Located in the state of Colorado in the United States, CC&V’s Cresson mine is a low-cost, open-pit mining
operation which treats the ore mined by means of a heap-leach pad, which is one of the largest in the world. Production began
here in 1994.
operation which treats the ore mined by means of a heap-leach pad, which is one of the largest in the world. Production began
here in 1994.
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.
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
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
78
and/or as sheeted vein along zones of strike deflection. High-grade gold mineralization is associated with K-feldspar + pyrite
+/- carbonate alteration and occurs adjacent 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.
+/- carbonate alteration and occurs adjacent 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.
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.
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.
Safety: As at March 2007, CC&V had reported 43 months without a single lost-time injury. This record was unfortunately
interrupted in the second quarter of the year when there was one lost-time accident. Consequently, the LTIFR for the year was
3.00 per million hours worked (2006: 0.0). No fatalities were recorded this year.
interrupted in the second quarter of the year when there was one lost-time accident. Consequently, the LTIFR for the year was
3.00 per million hours worked (2006: 0.0). No fatalities were recorded this year.
The DuPont Safety Training (STOP) program implemented in 2003 and the risk-based safety management system
implemented in 2005 continue to have very positive safety results. An extension of the STOP program, called Train the
Trainers, was implemented in 2007 to continue to enhance safety at CC&V. The program is designed to prepare supervisors
for peer training prior to crew training.
implemented in 2005 continue to have very positive safety results. An extension of the STOP program, called Train the
Trainers, was implemented in 2007 to continue to enhance safety at CC&V. The program is designed to prepare supervisors
for peer training prior to crew training.
Operating review: In 2007, production at CC&V fell marginally to 282,000 ounces from 283,000 ounces in 2006. A total of
23 million tonnes were placed on the heap-leach pad. The decline in production was a result of the greater distance over
which the gold-bearing-leach solution had to be transported from the higher stacked ore to the leach-pad liner. This decline
was compounded in the third quarter by delayed production from the leach-pad stacking levels.
23 million tonnes were placed on the heap-leach pad. The decline in production was a result of the greater distance over
which the gold-bearing-leach solution had to be transported from the higher stacked ore to the leach-pad liner. This decline
was compounded in the third quarter by delayed production from the leach-pad stacking levels.
Overall, there was an increase in total cash costs of 8 percent to $269 per ounce from $248 per ounce in 2006, principally as a
result of rising commodity costs, and of diesel fuel in particular. A decrease in costs due to lower contractor costs was more
than made up for by increases in fuel costs as oil prices hit record levels on global markets and creeping inflation in the general
US economy.
result of rising commodity costs, and of diesel fuel in particular. A decrease in costs due to lower contractor costs was more
than made up for by increases in fuel costs as oil prices hit record levels on global markets and creeping inflation in the general
US economy.
Capital expenditure for the year amounted to $23 million (2006: $13 million).
Growth prospects: The proposed mine life extension project is to include the development of new sources of ore and an
extension to the additional heap leach facility.
extension to the additional heap leach facility.
Cripple Creek & Victor – Summary of metallurgical operations
Gold plants
Capacity (000 tonnes/month)
-
crushed ore production
1,739
-
total ore production
1,796
- solution processed
2,371
Operating and production data for Cripple Creek & Victor operations
2007 2006 2005
Pay limit (oz/t)
0.01 0.01 0.01
Pay limit (g/t)
0.34 0.34 0.34
Recovered grade (oz/t)
0.016
0.016
0.018
Recovered grade (g/t)
0.53
0.54
0.62
Gold production (000 oz)
282
283
330
Total cash costs ($/oz)
(1)
269
248
230
Total production costs ($/oz)
(1)
521
498
418
Capital expenditure ($ million)
23
13
8
Employees
(2)
338 325 313
Outside contractors
(2)
67 44 44
(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”.
results – Total cash costs and total production costs”.
(2)
Average for the year.
79
Global Exploration
Total exploration expenditure in 2007 amounted to $167 million (including equity accounted joint ventures). The main aim of
both exploration programs is to identify new ounces of gold that are attributable to AngloGold Ashanti.
both exploration programs is to identify new ounces of gold that are attributable to AngloGold Ashanti.
The main focus of AngloGold Ashanti’s 2007 exploration program was on greenfields exploration, i.e. exploration in new
terrains, notably in Australia, Colombia, and the Democratic Republic of Congo (DRC). Brownfields exploration, which is aimed
at identifying ounces for production at or around existing mines, was undertaken around most current operations, with the most
successful programs being undertaken in Ghana, the United States of America, Australia, and Guinea.
terrains, notably in Australia, Colombia, and the Democratic Republic of Congo (DRC). Brownfields exploration, which is aimed
at identifying ounces for production at or around existing mines, was undertaken around most current operations, with the most
successful programs being undertaken in Ghana, the United States of America, Australia, and Guinea.
Greenfields exploration activities were undertaken in seven countries – Australia, China, Colombia, the DRC, Laos, the
Philippines and Russia – during 2007. A total of 378,014 meters of diamond, reverse circulation and aircore drilling was
completed during the year, drill testing existing priority targets and delineating new targets in Australia, Colombia and the DRC.
Greenfields activities in Russia, China, Laos, and the Philippines were predominantly undertaken through joint ventures and
strategic alliances, with exploration activities in Laos eventually being discontinued in late-2007. While the discovery of new
long-life, low-cost mines remains the principle aim of the greenfields exploration program, AngloGold Ashanti is also committed
to maximizing shareholder value by exiting from or selling those exploration assets that do not meet its internal growth criteria
and by opportunisticall y investing in prospective junior exploration companies.
Philippines and Russia – during 2007. A total of 378,014 meters of diamond, reverse circulation and aircore drilling was
completed during the year, drill testing existing priority targets and delineating new targets in Australia, Colombia and the DRC.
Greenfields activities in Russia, China, Laos, and the Philippines were predominantly undertaken through joint ventures and
strategic alliances, with exploration activities in Laos eventually being discontinued in late-2007. While the discovery of new
long-life, low-cost mines remains the principle aim of the greenfields exploration program, AngloGold Ashanti is also committed
to maximizing shareholder value by exiting from or selling those exploration assets that do not meet its internal growth criteria
and by opportunisticall y investing in prospective junior exploration companies.
A significant drill program and conceptual study are concurrently being undertaken at AngloGold Ashanti’s 100 percent-owned
Colosa project in Colombia. In 2008, exploration expenditure is expected to be some $185 million to $215 million.
Colosa project in Colombia. In 2008, exploration expenditure is expected to be some $185 million to $215 million.
Argentina
At Cerro Vanguardia, reconnaissance drilling continued on veins identified by regional mapping and geophysics. Drilling to
extend some of the current ore shoots was successful.
extend some of the current ore shoots was successful.
80
Australia
At Sunrise Dam, brownfields exploration continues to focus on increasing the underground Mineral Resource inventory and
increasing the confidence category of Mineral Resources so that Ore Reserve conversion can occur.
increasing the confidence category of Mineral Resources so that Ore Reserve conversion can occur.
At Boddington Gold Mine, a maximum of seven diamond drill rigs were employed during the year to complete a total of
121,212 meters of drilling in 151 holes targeting in-pit Mineral Resource conversion and near-pit Resource extensions.
121,212 meters of drilling in 151 holes targeting in-pit Mineral Resource conversion and near-pit Resource extensions.
The Tropicana Joint Venture covers approximately 12,000 kilometers and is located to the east and north-east of Kalgoorlie in
Western Australia. The Joint Venture held by AngloGold Ashanti Australia Limited and Independence Group NL. AngloGold
Ashanti holds a 70 percent managing interest in the joint venture with Independence Group NL free carried until completion of
the pre-feasibility study. However, Independence has agreed to co-fund certain activities prior to the completion of the pre-
feasibility study to ensure timely development of the project.
Western Australia. The Joint Venture held by AngloGold Ashanti Australia Limited and Independence Group NL. AngloGold
Ashanti holds a 70 percent managing interest in the joint venture with Independence Group NL free carried until completion of
the pre-feasibility study. However, Independence has agreed to co-fund certain activities prior to the completion of the pre-
feasibility study to ensure timely development of the project.
Drilling continued at the Tropicana prospect in 2007 with the mineralization identified in the Tropicana-Havana zones moving
into prefeasibility study assessment in May. The study is focused on assessing the viability and options for developing an open
pit gold mining operation.
into prefeasibility study assessment in May. The study is focused on assessing the viability and options for developing an open
pit gold mining operation.
Reconnaissance exploration continues in parallel throughout the Tropicana joint venture tenements with a number of prospects
identified by auger sampling and aircore drilling over a 40 kilometers strike trend north and south of the Tropicana prospect.
Significant results have been obtained from limited aircore and reverse circulation drilling at the Beachcomber prospect,
located approximately 200 kilometers south of the Tropicana prospect.
identified by auger sampling and aircore drilling over a 40 kilometers strike trend north and south of the Tropicana prospect.
Significant results have been obtained from limited aircore and reverse circulation drilling at the Beachcomber prospect,
located approximately 200 kilometers south of the Tropicana prospect.
Brazil
At Córrego do Sítio, drilling of underground deposits continued. A total of 40,500 meters were drilled during 2007 and were
aimed at defining new orebodies and upgrading the level of information of known orebodies. Drilling concentrated on the
Laranjeiras and the Paraiso orebodies. At Lamego, a total of 24,400 meters were drilled. The drilling consisted of a
combination of deep drilling targeted at the depth extension of the Cabeca de Pedra and Arco da Velha orebodies, surface infill
drilling at Arco da Velha and underground infill drilling at Carruagem. Regional geophysics, mapping and sampling continued.
aimed at defining new orebodies and upgrading the level of information of known orebodies. Drilling concentrated on the
Laranjeiras and the Paraiso orebodies. At Lamego, a total of 24,400 meters were drilled. The drilling consisted of a
combination of deep drilling targeted at the depth extension of the Cabeca de Pedra and Arco da Velha orebodies, surface infill
drilling at Arco da Velha and underground infill drilling at Carruagem. Regional geophysics, mapping and sampling continued.
At Serra Grande, in October 2007 a new deposit, Orebody Pequizáo, was identified between Mina Nova and Mina III. Drilling
continues and a significant high-grade deposit is being targeted.
continues and a significant high-grade deposit is being targeted.
China
AngloGold Ashanti has entered into three co-operative joint ventures (CJVs) with local partners at Yili-Yunlong (Xinjiang
province), Jinchanngou (Gansu province), and Pingwu (Sichuan province). Business licenses have now been issued by the
respective local authorities for the Yili-Yunlong and Jinchanggou CJVs (with systematic ground exploration now under way),
whereas the business license for the Pingwu CJV is expected to be issued in early 2008.
province), Jinchanngou (Gansu province), and Pingwu (Sichuan province). Business licenses have now been issued by the
respective local authorities for the Yili-Yunlong and Jinchanggou CJVs (with systematic ground exploration now under way),
whereas the business license for the Pingwu CJV is expected to be issued in early 2008.
A short (1,053 meters) diamond drill program was completed on the Yili-Yunlong CJV in late-2007. The primary objective of this
drill program was to test the vertical continuity of outcropping gold-copper mineralization, however, drilling only succeeded in
intersecting weakly anomalous mineralization at depth. At Red Valley (Qinghai), assay results from the 3,300 meters diamond-
drill program were also reviewed and confirmed the presence of only low-grade gold mineralization within the principal targets.
As a result, AngloGold Ashanti has elected to withdraw from earning into this CJV.
drill program was to test the vertical continuity of outcropping gold-copper mineralization, however, drilling only succeeded in
intersecting weakly anomalous mineralization at depth. At Red Valley (Qinghai), assay results from the 3,300 meters diamond-
drill program were also reviewed and confirmed the presence of only low-grade gold mineralization within the principal targets.
As a result, AngloGold Ashanti has elected to withdraw from earning into this CJV.
Colombia
Regional exploration and target generation activities continued in Colombia during 2007. A conceptual economic study was
also completed on the bulk-tonnage Gramalote prospect (Antioquia Department). On February 14, 2008, AngloGold Ashanti
announced the signing of a binding agreement with B2Gold Corp, in which B2Gold will have the option to earn into 51 percent
of the Gramalote Project. AngloGold Ashanti will be issued 25 million shares and 21.4 million warrants in B2Gold Corp in
exchange for this additional interest in Gramalote and certain other mineral properties in Colombia.
also completed on the bulk-tonnage Gramalote prospect (Antioquia Department). On February 14, 2008, AngloGold Ashanti
announced the signing of a binding agreement with B2Gold Corp, in which B2Gold will have the option to earn into 51 percent
of the Gramalote Project. AngloGold Ashanti will be issued 25 million shares and 21.4 million warrants in B2Gold Corp in
exchange for this additional interest in Gramalote and certain other mineral properties in Colombia.
Resource delineation drilling was also undertaken at AngloGold Ashanti’s 100 percent-owned Colosa porphyry gold prospect
(Tolima Department). To the end of December 2007, approximately 12,000 meters of diamond drilling (42 drill holes) had been
completed at Colosa. Additional drilling and a conceptual study are currently being undertaken at Colosa.
(Tolima Department). To the end of December 2007, approximately 12,000 meters of diamond drilling (42 drill holes) had been
completed at Colosa. Additional drilling and a conceptual study are currently being undertaken at Colosa.
81
Democratic Republic of Congo (DRC)
Exploration activities undertaken in the 10,000 square kilometers Concession 40 tenement (Ituri Province, northeastern DRC)
included the advancement of resource delineation drilling on the known mineralization at Mongbwalu; and the start of regional
target generation and evaluation activities between AngloGold Ashanti (86 percent) and OKIMO (14 percent), in which
AngloGold Ashanti manages all exploration activities and OKIMO retains a free carried interest to production.
included the advancement of resource delineation drilling on the known mineralization at Mongbwalu; and the start of regional
target generation and evaluation activities between AngloGold Ashanti (86 percent) and OKIMO (14 percent), in which
AngloGold Ashanti manages all exploration activities and OKIMO retains a free carried interest to production.
A conceptual economic study for the Mongbwalu deposit was completed by the end of 2007.
High-quality airborne geophysical data (airborne magnetics, radiometrics, and electromagnetics) were acquired over
approximately 2,200 square kilometers (or nearly 25 percent) of Concession 40, using both fixed-wing and helicopter-based
platforms. Interpretation of this geophysical data, in conjunction with compilations of the known geology and available
geochemical data, form the basis of the regional target generation process. Drill testing of the highest priority regional targets
is expected to be undertaken during 2008.
approximately 2,200 square kilometers (or nearly 25 percent) of Concession 40, using both fixed-wing and helicopter-based
platforms. Interpretation of this geophysical data, in conjunction with compilations of the known geology and available
geochemical data, form the basis of the regional target generation process. Drill testing of the highest priority regional targets
is expected to be undertaken during 2008.
Ghana
Drilling for the Obuasi Deeps project below 50 level continued with the areas below KMS and Adansi Shafts being targeted.
Guinea
Drilling at Siguiri in 2007 focused on infill drilling at the following deposits: Sintroko (8 kilometers south of the plant), Kintinian
(4 kilometers north), Foulata (45 kilometers north-west) and the spent heap leach. Mineral Resource extension drilling
continued for the same deposits. Reconnaissance drilling was conducted to follow up on anomalies identified in Block 3
(35 kilometers north-east) and Block 4 (70 kilometers north-east). Surface geochemical sampling began on four new
exploration licenses situated to the north of the mine. An airborne electromagnetic survey was flown in the second quarter and
follow up on the identified targets has started.
(4 kilometers north), Foulata (45 kilometers north-west) and the spent heap leach. Mineral Resource extension drilling
continued for the same deposits. Reconnaissance drilling was conducted to follow up on anomalies identified in Block 3
(35 kilometers north-east) and Block 4 (70 kilometers north-east). Surface geochemical sampling began on four new
exploration licenses situated to the north of the mine. An airborne electromagnetic survey was flown in the second quarter and
follow up on the identified targets has started.
Laos
The strategic exploration alliance in Laos between AngloGold Ashanti and Oxiana Ltd expired in December 2007 and was not
extended by mutual agreement.
extended by mutual agreement.
Mali
At Morila, the regional drilling program of 92 holes was completed during the first quarter and an intensive data integration and
interpretation phase started. Work supported by international researchers continues in order to optimize the exploration
process. During the year, two diamond holes were drilled to the west of the pit to examine the continuity of the orebody
between the main deposit and Samacline. A further four diamond holes were drilled in the fourth quarter to follow up on
potential extensions to mineralization in areas identified as being prospective. Minor geochemical and pitting programs were
also conducted during the year.
interpretation phase started. Work supported by international researchers continues in order to optimize the exploration
process. During the year, two diamond holes were drilled to the west of the pit to examine the continuity of the orebody
between the main deposit and Samacline. A further four diamond holes were drilled in the fourth quarter to follow up on
potential extensions to mineralization in areas identified as being prospective. Minor geochemical and pitting programs were
also conducted during the year.
At Sadiola, Phase 8 drilling, aimed at upgrading the Inferred high-grade zones of the main body and the footwall mineralization,
was completed in the second quarter. A full review of the geological model for the lease was completed and as a result two
fence lines of diamond holes were drilled between the FE3 and FE4 deposits and through the FE4 deposit in order to follow up
on potential mineralization trends. Results are still awaited for this drilling.
was completed in the second quarter. A full review of the geological model for the lease was completed and as a result two
fence lines of diamond holes were drilled between the FE3 and FE4 deposits and through the FE4 deposit in order to follow up
on potential mineralization trends. Results are still awaited for this drilling.
At Yatela, a small satellite to the main deposit was discovered to the north-west of the main pit and the final infill drilling is
currently being completed. Definition drilling of the Dinguilou oxides was completed and modelling is on going. A program to
investigate the deep sulphide breccias developed below the main deposit was started during the year and will continue in 2008.
currently being completed. Definition drilling of the Dinguilou oxides was completed and modelling is on going. A program to
investigate the deep sulphide breccias developed below the main deposit was started during the year and will continue in 2008.
Namibia
At Navachab, drilling concentrated on areas around the main pit particularly to the north-west and the west and in the Gecko
Area. Promising results were obtained from the pit area and further drilling is planned in 2008. At Gecko, the central deposit
was drilled to grade control spacing in order to test the continuity of the mineralization and further drilling was conducted on the
south, north and far north extension. A stream sediment sampling program was conducted, both on and off lease, in order to
follow up on previous work and to target new areas.
Area. Promising results were obtained from the pit area and further drilling is planned in 2008. At Gecko, the central deposit
was drilled to grade control spacing in order to test the continuity of the mineralization and further drilling was conducted on the
south, north and far north extension. A stream sediment sampling program was conducted, both on and off lease, in order to
follow up on previous work and to target new areas.
82
Philippines
Work continued on finalizing the joint venture agreements with the two Red 5 prospects, Mapawa and Outer Siana. The start
of detailed exploration at Mapawa currently awaits granting of a Mineral Production Sharing Agreement (MPSA) by the Mines
and Geosciences Bureau in Manila.
of detailed exploration at Mapawa currently awaits granting of a Mineral Production Sharing Agreement (MPSA) by the Mines
and Geosciences Bureau in Manila.
Russia
Significant efforts were focused on finalizing the formation of the Polymetal/AngloGold Ashanti strategic alliance. In June 2007,
AngloGold Ashanti concluded the purchase of Trans-Siberian Gold’s interests in the Veduga and Bogunay projects in
Krasnoyarsk for a consideration of $40 million, with the objective of contributing these assets to the new strategic alliance. In
return, Polymetal has agreed to contribute two projects to the alliance – Imitzoloto and Eniseevskaya – with a value of
$16 million and to make an initial payment of $12 million to AngloGold Ashanti. The Russian management company for the
strategic alliance, Zoloto Taigi, has now been registered. By end-2007, the joint venture team had assumed management of
exploration activities in the four initial project areas (Bogunay, Anenskoye and Veduga in the Krasnoyarsk region and
Aprelskovkoye in the Chita region). In ad dition, the joint venture had successfully acquired the 390 square kilometer
Sovremenie Prospect in the Krasnoyarsk region at auction.
AngloGold Ashanti concluded the purchase of Trans-Siberian Gold’s interests in the Veduga and Bogunay projects in
Krasnoyarsk for a consideration of $40 million, with the objective of contributing these assets to the new strategic alliance. In
return, Polymetal has agreed to contribute two projects to the alliance – Imitzoloto and Eniseevskaya – with a value of
$16 million and to make an initial payment of $12 million to AngloGold Ashanti. The Russian management company for the
strategic alliance, Zoloto Taigi, has now been registered. By end-2007, the joint venture team had assumed management of
exploration activities in the four initial project areas (Bogunay, Anenskoye and Veduga in the Krasnoyarsk region and
Aprelskovkoye in the Chita region). In ad dition, the joint venture had successfully acquired the 390 square kilometer
Sovremenie Prospect in the Krasnoyarsk region at auction.
AngloGold Ashanti continues to hold a 29.8 percent shareholding in Trans-Siberian Gold (TSG), whose primary asset is the
Asacha gold-silver project in Kamchatka.
Asacha gold-silver project in Kamchatka.
South Africa
At Moab Khotsong, five surface diamond holes were drilled during the year. MZA9 completed its initial deflections on the Vaal
Reef and a long deflection to the east is under way. MGR7 completed its deflection program on the Vaal Reef in the third
quarter. MMB5 continues to drill. MCY4 was reopened in the third quarter and a long deflection to the east is currently being
drilled. MCY5 was also started in the third quarter and continues to drill.
Reef and a long deflection to the east is under way. MGR7 completed its deflection program on the Vaal Reef in the third
quarter. MMB5 continues to drill. MCY4 was reopened in the third quarter and a long deflection to the east is currently being
drilled. MCY5 was also started in the third quarter and continues to drill.
Borehole G54, at Tau Lekoa, was started in the fourth quarter and deflection drilling continues.
Tanzania
At Geita, drilling at various levels continued at Kukuluma/ Matandani, Area 3 (south, central and west), the Lone Cone – the
Nyankanga Gap and the Nyakabale-Prospect 30 area. An intensive phase of reconnaissance drilling was completed on various
parts of the mining lease and will continue into 2008.
Nyankanga Gap and the Nyakabale-Prospect 30 area. An intensive phase of reconnaissance drilling was completed on various
parts of the mining lease and will continue into 2008.
United States
At Cripple Creek & Victor in Colorado, drilling of the mine life extension project area continued during the year and was
concentrated on the Altman, Globe Hill, Schist Island and Control Point areas. Development drilling was focused around
Cresson, South Cresson and Schist Island. A total of 94,996 meters in 452 holes were drilled.
concentrated on the Altman, Globe Hill, Schist Island and Control Point areas. Development drilling was focused around
Cresson, South Cresson and Schist Island. A total of 94,996 meters in 452 holes were drilled.
83
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”.
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”.
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.
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, 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.
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.
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 2007 and 2006 Reserves are outlined in the following table.
2006
( 3 Year Average)
2007
(Business Plan)
2007
(3 Year Average)
Units
Reserve
Gold
Price
486 600 582
US$/oz
Exchange Rate – South Africa
6.53
7.70
6.72
ZAR/US$
Exchange Rate – Australia
0.75
0.71
0.78
Aus$/US$
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 $600 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.
life of mine business plans using a gold price of $600 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.
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.
84
The total AngloGold Ashanti Ore Reserves increased from 66.0 million ounces in 2006 to 72.2 million ounces in
December 2007. The principal changes in AngloGold Ashanti’s ore reserves as at December 31, 2007 compared with those
published as at December 31, 2006 are as follows:
December 2007. The principal changes in AngloGold Ashanti’s ore reserves as at December 31, 2007 compared with those
published as at December 31, 2006 are as follows:
Moz
December 2006 Ore Reserves
66.0
Principal Reductions
(1)
Geita, reconciliation factors (-0.8Moz), flattening of slopes (-0.5Moz), model revisions (-0.2 Moz) and costs
(-0.1Moz)
(-0.1Moz)
-2.0
Sadiola, impact of economic factors on deep sulphides and stockpiles
-1.3
Kopanang, drop in value due to the modeling of new drilling and sampling information
-0.5
Other
-1.7
Principal Additions
(1)
Iduapriem, purchase of an additional 15 percent of the operation from the Ghananian Government and the IFC,
to bring the ownership to 100 percent
to bring the ownership to 100 percent
0.2
Savuka, improved economic factors increased the Life of Mine
0.5
Navachab, improved economics have brought in an additional push back to the west of the main pit
0.8
Siguiri, two new deposits (Kintinian and the spent heap) were proved up by drilling
0.8
Cripple Creek and Victor, extension to mine life
0.9
Boddington, the upgrade of material in the pit shell to Reserve by drilling
1.0
Mponeng, the inclusion of the Carbon Leader Reef project below 120 level
3.4
Moab Khotsong, the inclusion of Project Zaaiplaats – a deepening of Moab Khotsong to access deeper Vaal
Reef blocks to the South West of the current mine
Reef blocks to the South West of the current mine
3.8
Other
0.3
December 2007 Ore Reserves*
72.2
(1)
Principal reductions and principal additions include a total of 6.8 million ounces of depletion for the year 2007.
* rounding may result in computational differences
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.
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.
Ghanaian underground mines which are in production. These ore reserves have been determined based upon completed economic
studies.
Audit of 2006 and 2007 Ore Reserve statement
During the course of the year, the AngloGold Ashanti 2006 Ore Reserve statements were submitted to independent
consultants for review. The Ore Reserves from eight of AngloGold Ashanti’s global operations were selected and subjected to
review. These operations were Mponeng, Geita, Obuasi, Morila, Sadiola, Yatela, Cuiaba and Cripple Creek and Victor. The
company has been informed that the audit identified no material shortcomings in the process by which AngloGold Ashanti’s
Ore Reserves were evaluated.
consultants for review. The Ore Reserves from eight of AngloGold Ashanti’s global operations were selected and subjected to
review. These operations were Mponeng, Geita, Obuasi, Morila, Sadiola, Yatela, Cuiaba and Cripple Creek and Victor. The
company has been informed that the audit identified no material shortcomings in the process by which AngloGold Ashanti’s
Ore Reserves were evaluated.
During 2007, it was decided by management to audit Ore Reserves prior to publication. As a result the 2007 Ore Reserves for
the following operations were audited; Sunrise Dam, Cerro Vanguardia, Great Noligwa, Kopanang and Project Zaaiplaats
(Moab deepening project). The company has been informed that these audits identified no material shortcomings in the
process by which AngloGold Ashanti's Ore 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 following operations were audited; Sunrise Dam, Cerro Vanguardia, Great Noligwa, Kopanang and Project Zaaiplaats
(Moab deepening project). The company has been informed that these audits identified no material shortcomings in the
process by which AngloGold Ashanti's Ore 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.
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”.
ore reserves. See “Item 6.: Directors, senior management and employees”.
85
Ore Reserves: Imperial
At December 31, 2007
Proven
Ore
Reserves
(1)
Probable
Ore
Reserves
(1)(2)
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
(6)
Great Noligwa
10.9
0.217
2.4
7.3
0.209
1.5
96.5
Kopanang
5.9
0.243
1.4
15.1
0.193
2.9
97.6
Moab Khotsong
(2)
1.3 0.229
0.3 22.3 0.300
6.7 96.8-97.3
(4)
Tau Lekoa
7.3
0.036
0.3
6.8
0.022
0.1
97.1
West Wits
Mponeng
(2)
2.3
0.287
0.7
35.6
0.267
9.5
98.1-98.6
(4)
Savuka
0.1
0.221
0.0
3.5
0.193
0.7
97.4
TauTona
(2)
0.6
0.270
0.2
14.0
0.317
4.4
98.0
Surface
Surface sources
-
-
-
130.9
0.015
1.9
44 – 87.9
(4)
Argentina
Cerro Vanguardia (92.5 percent)
(3)(7)
1.2 0.177
0.2 8.7
0.192
1.7
95.2
Australia
Boddington (33.33 percent)
(3)(8)
62.4
0.026 1.6
176.0
0.022 3.9 81.6
Sunrise Dam
13.2
0.068
0.9
5.7
0.128
0.7
83.5
Brazil
Brasil Mineraçáo
(9)
7.3 0.224
1.6 4.7 0.179
0.8
87-92.5
(4)
Serra Grande (50 percent)
(3)
2.5
0.117
0.3
0.7
0.147
0.1
90-97
(4)
Ghana
Iduapriem (100 percent)
(3)
40.3
0.043
1.7
14.5
0.048
0.7
94.0-94.4
(4)
Obuasi
(2)
35.5 0.136
4.8 16.6 0.210
3.5
25-81.0
(4)
Guinea
Siguiri (85 percent)
(3)
23.5
0.017
0.4
98.7
0.023
2.2
93-97.5
(4)
Mali
Morila (40 percent)
(3)
5.8
0.065
0.4
4.4
0.059
0.3
89-91.5
(4)
Sadiola (38 percent)
(3)
2.0
0.080
0.2
2.6
0.091
0.2
78-93
(4)
Yatela (40 percent)
(3)
2.2
0.047
0.1
0.9
0.107
0.1
75
Namibia
Navachab
6.4
0.029
0.2
30.1
0.043
1.3
73-93
(4)
Tanzania
Geita
6.2
0.030
0.2
68.7
0.092
6.3
43.8-92.8
(4)
United States of America
Cripple Creek & Victor
118.9
0.028
3.3
52.5
0.027
1.4
61
Total 355.7
0.060
21.2
720.2
0.071
51.0
(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)
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)
The Vaal Reef Ore Reserves include 42.97 million pounds of Uranium by-products; this can not be accounted for by individual mine as Great
Noligwa, Kopanang and Moab Khotsong feed to a combination of plants.
Noligwa, Kopanang and Moab Khotsong feed to a combination of plants.
(7)
The Ore Reserve contains 31.0 million ounces of silver to be recovered as a by-product.
(8)
The Ore Reserve contains 511 million pounds of copper.
(9)
0.47 million tons of sulphur will be recovered from processing the Ore Reserve
86
The 2007 probable ore reserves include reserves below infrastructure in the case of the following underground mines currently
in production:
in production:
Mine Tons(millions)
Grade(ounces/ton)
Gold Content
(million ounces)
Tau Tona
5.0
0.400
2.0
Mponeng 19.2
0.327
6.3
Moab Khotsong
13.6
0.262
3.6
Obuasi 4.3
0.322
1.4
Total 42.1
0.314
13.3
87
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
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 28, 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.
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 sulphur will be recovered from processing the Ore Reserve.
88
The 2006 probable ore reserves include reserves below infrastructure in the case of the following underground mines currently
in production:
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
89
Ore Reserves: Metric
At December 31, 2007
Proven
Ore
Reserves
(1)
Probable
Ore
Reserves
(1)(2)
Metallurgical
Gold
Gold
Recovery
Tonnes
(6)
Grade Content
Tonnes
Grade
Content
Factor
(mill)
(g/t)
(tonnes)
(mill)
(g/t)
(tonnes)
percent
South Africa
Vaal River
(5)
Great Noligwa
9.9
7.45
73.9
6.6
7.17
47.5
96.9
Kopanang
5.4
8.35
44.8
13.7
6.60
90.2
97.8
Moab Khotsong
(2)
1.2 7.86 9.1
20.2
10.29
207.7
97.6
Tau Lekoa
6.6
1.24
8.2
6.2
0.75
4.6
97.0
West Wits
Mponeng
(2)
2.1
9.85
20.3
32.3
9.15
295.5
98.5
Savuka
0.1
7.57
0.5
3.2
6.62
20.9
97.2
TauTona
(2)
0.6
9.27
5.2
12.7
10.86
138.3
98.1
Surface
Surface sources
-
-
-
118.7
0.50
59.9
44-88
(4)
Argentina
Cerro Vanguardia (92.5 percent)
(3)(7)
1.0
6.08 6.3
7.9
6.58
52.1 95.2
Australia
Boddington (33.33 percent)
(3)(8)
56.6
0.89
50.3
159.6
0.76
122.0
82.2
Sunrise Dam
12.0
2.34
28.2
5.2
4.39
22.7
83.5-85
(4)
Brazil
Brasil Mineraçáo
6.6
7.69
51.0
4.3
6.12
26.1
87-94
(4)
Serra Grande (50 percent)
(3)
2.3
4.02
9.2
0.6
5.04
3.0
91-96
(4)
Ghana
Iduapriem (100 percent)
(3)
36.6
1.46
53.5
13.2
1.65
21.7
94.5
Obuasi
(2)
32.2 4.67 150.2
15.1
7.21
108.8 80-81.0
(4)
Guinea
Siguiri (85 percent)
(3)
21.3
0.59
12.6
89.6
0.77
69.2
93-97.5
Mali
Morila (40 percent)
(3)
5.2
2.21
11.6
4.0
2.01
8.0
89-91.5
(4)
Sadiola (38 percent)
(3)
1.8
2.75
4.9
2.3
3.13
7.3
80-94
(4)
Yatela (40 percent)
(3)
2.0
1.60
3.2
0.8
3.68
3.0
85
(4)
Namibia
Navachab
5.8
1.00
5.8
27.3
1.46
39.9
92
(4)
Tanzania
Geita
5.6
1.01
5.7
62.4
3.14
195.9
66.4-92.8
(4)
United States of America
Cripple Creek & Victor
107.9
0.96
103.8
47.6
0.92
44.0
60
Total 322.7
2.04
658.3
653.4
2.43
1,588.2
(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)
The Vaal Reef Ore Reserves include 19.5 thousand tonnes of Uranium by-products; this can not be accounted for by individual mine as Great
Noligwa, Kopanang and Moab Khotsong feed to a combination of plants.
Noligwa, Kopanang and Moab Khotsong feed to a combination of plants.
(6)
Tonnes refers to a metric tonne which is equivalent to 1000 kilograms.
(7)
The Ore Reserve contains 963 tonnes of silver to be recovered as a by-product.
(8)
The Ore Reserve contains 0.23 million tonnes of copper.
(9)
0.47 million tonnes of sulphur will be recovered from processing the Ore Reserve.
90
The 2007 probable ore reserves include reserves below infrastructure in the case of the following underground mines currently
in production:
in production:
Mine
Tonnes (millions)
Grade (grams/tonne)
Gold Content (tonnes)
TauTona 4.5
13.71
62.3
Mponeng 17.4
11.23
195.1
Moab Khotsong
12.4
8.98
110.9
Obuasi 3.9
11.05
42.9
Total 38.2
10.78
411.2
91
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
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
Total 260.9
1.73
450.2
594.7
2.69
1,601.5
(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 28, 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.
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 sulphur will be recovered from processing the Ore Reserve.
92
The 2006 probable ore reserves include reserves below infrastructure in the case of the following underground mines currently
in production:
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
93
Stockpiles: Imperial
Stockpiles are previously mined ore scheduled for future process plant feed. The proven and probable ore reserves include the
following stockpile material:
following stockpile material:
Stockpiles
At December 31, 2007
Tons (million)
Grade (ounces/ton)
Gold content
(million ounces)
South Africa
Vaal River
Great Noligwa
Vaal River
Great Noligwa
-
-
-
Kopanang
-
-
-
Moab Khotsong
-
-
-
Tau Lekoa
-
-
-
West Wits
Mponeng
Mponeng
-
-
-
Savuka
-
-
-
TauTona
-
-
-
Surface
Vaal River Surface – SA MET
Vaal River Surface – SA MET
(2)
130.861
0.015 1.924
West Wits Surface - SA MET
(2)
-
-
-
Argentina
Cerro Vanguardia (92.5 percent)
Cerro Vanguardia (92.5 percent)
(1)
0.050
0.126 0.006
Australia
Boddington (33.33 percent)
Boddington (33.33 percent)
(1)
0.161
0.024 0.004
Sunrise Dam
10.726
0.060 0.643
Brazil
Brasil Mineraçáo
Brasil Mineraçáo
-
-
-
Serra Grande (50 percent)
(1)
-
-
-
Ghana
Iduapriem (100 percent)
Iduapriem (100 percent)
(1)
2.096
0.038 0.079
Obuasi
(3)
9.901
0.050 0.492
Guinea
Siguiri (85 percent)
Siguiri (85 percent)
(1)(4)
58.724
0.016 0.961
Mali
Morila
Morila
(3)
(40 percent)
(1)
7.685
0.051 0.391
Sadiola (38 percent)
(1)(5)
1.895
0.078 0.148
Yatela (40 percent)
(1)
1.844
0.031 0.057
Namibia
Navachab
Navachab
4.977
0.020 0.102
Tanzania
Geita
Geita
6.196
0.032 0.183
United States of America
Cripple Creek & Victor
Cripple Creek & Victor
-
-
-
Note: The rounding of figures and converting from metric to imperial units may result in minor computational discrepancies.
(1)
Ore Reserves attributable to AngloGold Ashanti’s percentage interest shown.
(2)
Centralized operations treating material on surface that was previously generated by several underground operations.
(3)
Pompora TSF removed due to economic changes.
(4)
Spent heap included in Ore Reserve.
(5)
Sulphide stockpiles removed.
94
Stockpiles: Imperial
Stockpiles are previously mined ore scheduled for future process plant feed. The proven and probable ore reserves include the
following stockpile material:
following stockpile material:
Stockpiles
(1)
At December 31, 2006
Tons (million)
Grade (ounces/ton)
Gold content
(million ounces)
South Africa
Vaal River
Great Noligwa
Vaal River
Great Noligwa
–
– –
Kopanang
–
– –
Moab Khotsong
–
– –
Tau Lekoa
–
– –
West Wits
Mponeng
Mponeng
–
– –
Savuka
–
– –
TauTona
–
– –
Surface
Surface sources
Surface sources
(2)
115.481
0.02 1.912
Argentina
Cerro Vanguardia (92.5 percent)
Cerro Vanguardia (92.5 percent)
0.020
0.58 0.012
Australia
Boddington (33.33 percent)
Boddington (33.33 percent)
0.165
0.02 0.004
Sunrise Dam
7.455
0.05 0.399
Brazil
Brasil Mineraçáo
Brasil Mineraçáo
0.051
0.23 0.012
Serra Grande (50 percent)
0.073
0.23 0.017
Ghana
Iduapriem (85 percent)
Iduapriem (85 percent)
1.373
0.04 0.049
Obuasi
(3)
51.647
0.04 2.133
Guinea
Siguiri (85 percent)
Siguiri (85 percent)
20.052
0.02 0.348
Mali
Morila (40 percent)
Morila (40 percent)
(3)
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
Navachab
4.600
0.02 0.102
Tanzania
Geita
Geita
4.457
0.03 0.126
United States of America
Cripple Creek & Victor
Cripple Creek & Victor
–
– –
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.
95
Stockpiles: Metric
Stockpiles are previously mined ore scheduled for future process plant feed. The proven and probable ore reserves include the
following stockpile material:
following stockpile material:
Stockpiles
At December 31, 2007
Tonnes (million)
Grade (grams/tonne)
Gold content
(tonnes)
South Africa
Vaal River
Great Noligwa
Vaal River
Great Noligwa
-
-
-
Kopanang
-
-
-
Moab Khotsong
-
-
-
Tau Lekoa
-
-
-
West Wits
Mponeng
Mponeng
-
-
-
Savuka
-
-
-
TauTona
-
-
-
Surface
Vaal River Surface - SA MET
Vaal River Surface - SA MET
(2)
118.715
0.50 59.858
West Wits Surface - SA MET
(2)
0.000
- 0.000
Argentina
Cerro Vanguardia (92.5 percent)
Cerro Vanguardia (92.5 percent)
(1)
0.046
4.32 0.197
Australia
Boddington (33.33 percent)
Boddington (33.33 percent)
(1)
0.146
0.81 0.118
Sunrise Dam
9.730
2.05 19.996
Brazil
Brasil Mineraçáo
Brasil Mineraçáo
-
-
-
Serra Grande (50 percent)
(1)
-
-
-
Ghana
Iduapriem (100 percent)
Iduapriem (100 percent)
(1)
1.902
1.30 2.469
Obuasi
(3)
8.982
1.70 15.290
Guinea
Siguiri (85 percent)
Siguiri (85 percent)
(4)(1)
53.274
0.56 29.878
Mali
Morila (40 percent)
Morila (40 percent)
(3) (1)
6.971
1.74 12.158
Sadiola (38 percent)
(5) (1)
1.719
2.67 4.598
Yatela (40 percent)
(1)
1.673
1.05 1.762
Namibia
Navachab
Navachab
4.515
0.70 3.160
Tanzania
Geita
Geita
5.621
1.01 5.701
United States of America
Cripple Creek & Victor
Cripple Creek & Victor
-
-
-
(1)
Ore Reserves attributable to AngloGold Ashanti’s percentage interest shown.
(2)
Centralized operations treating material on surface that was previously generated by several underground operations
(3)
Pompora TSF removed due to economic changes.
(4)
Spent heap included in Ore Reserve.
(5)
Sulphide stockpiles removed.
96
Stockpiles: Metric
Stockpiles are previously mined ore scheduled for future process plant feed. The proven and probable ore reserves include the
following stockpile material:
following stockpile material:
Stockpiles
(1)
At December 31, 2006
Tonnes (million)
Grade (grams/tonne)
Gold content
(tonnes)
South Africa
Vaal River
Great Noligwa
Vaal River
Great Noligwa
–
– –
Kopanang
–
– –
Moab Khotsong
–
– –
Tau Lekoa
–
– –
West Wits
Mponeng
Mponeng
–
– –
Savuka
–
– –
TauTona
–
– –
Surface
Surface sources
Surface sources
(2)
104.763
0.57 59.475
Argentina
Cerro Vanguardia (92.5 percent)
Cerro Vanguardia (92.5 percent)
0.018
20.00 0.369
Australia
Boddington (33.33 percent)
Boddington (33.33 percent)
0.150
0.80 0.120
Sunrise Dam
6.763
1.82 12.325
Brazil
Brasil Mineraçáo
Brasil Mineraçáo
0.046
7.95 0.368
Serra Grande (50 percent)
0.066
7.87 0.522
Ghana
Iduapriem (85 percent)
Iduapriem (85 percent)
1.246
1.23 1.531
Obuasi
(3)
46.853
1.42 66.353
Guinea
Siguiri (85 percent)
Siguiri (85 percent)
18.191
0.60 10.828
Mali
Morila
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
Navachab
4.173
0.76 3.181
Tanzania
Geita
Geita
4.044
0.97 3.924
United States of America
Cripple Creek & Victor
Cripple Creek & Victor
–
– –
(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.
97
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
Underground sources Ore body opened up, developed and sampled on a
7 to 10 foot spacing on raise lines and on a 16 x 16
grid thereafter
grid thereafter
From a 131 x 131 foot spacing up to 3281 x 3281
foot spacing
foot spacing
Surface sources
Variable sampling strategies: Belt samplers, cross
stream residue samplers and bulk sampling
campaigns
stream residue samplers and bulk sampling
campaigns
Variable sampling strategies: Belt samplers,
cross stream residue samplers
cross stream residue samplers
Argentina
Cerro Vanguardia
39 x 39 feet
131 x 131 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
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
be less than 197 feet of block centroid and more
than 15 samples must have been used in the
estimation
Sunrise Dam
33 x 33 feet, 82 x 82 feet
66 x 66 feet, 131 x 131 feet, 164 x 164 feet
Brazil
Brasil Mineraçáo
66 x 66 feet, 82 x 82 feet. Drilling pattern of 197 x
66 feet for Cuiaba Expansion Project.
66 feet for Cuiaba Expansion Project.
66 x 66 feet, 164 x 164 feet.
Serra Grande
(50 percent)
(50 percent)
33 x 33 feet, 66 x 33 feet
33 x 66 feet, 66 x 164 feet
Ghana
Iduapriem
164 x 164 feet, 328 x 164 feet
246 x 164 feet, 328 x 246 feet
Obuasi - Surface
66 x 66 feet
98 x 98 feet
Obuasi - Underground 66 x 66 feet
197 x 197 feet
Guinea
Siguiri
Siguiri
16 x 33 feet
66 x 131 feet, 82 x 82 feet
Mali
Morila
Morila
33 x 33 feet
98 x 98 feet
Sadiola
66 x 66 feet, 82 x 82 feet
82 x 82 feet, 115 x 115 feet
Yatela
33 x 33 feet, 82 x 82 feet
115 x 148 feet
Namibia
Navachab
Navachab
33 x 33 feet
82 x 82 feet
Tanzania
Geita
Geita
16 x 33 feet, 33 x 33 feet
131 x 131 feet
USA
Cripple Creek & Victor <98 x 98 feet
Cripple Creek & Victor <98 x 98 feet
>98 x 98 feet
98
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
Underground sources Ore body opened up, developed and sampled on a
2 to 3 meter spacing on raise lines and on a 5 x 5 grid
thereafter
thereafter
From a 40 x 40 meter spacing up to 1000 x
1000 meter spacing
1000 meter spacing
Surface sources
Variable sampling strategies: Belt samplers, cross
stream residue samplers and bulk sampling
campaigns
stream residue samplers and bulk sampling
campaigns
Variable sampling strategies: Belt samplers,
cross stream residue samplers
cross stream residue samplers
Argentina
Cerro Vanguardia
12 x 12 meter
40 x 40 meter
Australia
Boddington
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
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
must be less than 60 meter of block centroid
and more than 15 samples must have been
used in the estimation
Sunrise Dam
10 x 10 meter, 25 x 25 meter
20 x 20 meter, 40 x 40 meter, 50 x 50 meter
Brazil
Brasil Mineraçáo
20 x 20 meter, 25 x 25 meter. Drilling pattern of 60 x
20 for Cuiaba Expansion Project.
20 for Cuiaba Expansion Project.
20 x 20 meter, 50 x 50 meter.
Serra Grande
(50 percent)
(50 percent)
10 x 10 meter, 20 x 10 meter
10 x 20 meter, 20 x 50 meter
Ghana
Iduapriem
50 x 50 meter, 100 x 50 meter
75 x 50 meter, 100 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
5 x 10 meter
20 x 40 meter, 25 x 25 meter
Mali
Morila
10 x 10 meter
30 x 30 meter
Sadiola
20 x 20 meter, 25 x 25 meter
25 x 25 and 35 x 35 meter
Yatela
10 x 10 meter, 25 x 25 meter
35 x 45 meter
Namibia
Navachab
10 x 10 meter
25 x 25 meter
Tanzania
Geita
Geita
5 x 10 meter, 10 x 10 meter
40 x 40 meter
USA
Cripple Creek & Victor <30 x 30 meter
Cripple Creek & Victor <30 x 30 meter
>30 x 30 meter
99
RESEARCH AND DEVELOPMENT
AngloGold Ashanti’s research and development program includes a range of initiatives in geology, mining, processing,
engineering, safety, environment, marketing and knowledge management.
engineering, safety, environment, marketing and knowledge management.
Research and development expenditure amounted to $10 million, $4 million and $8 million during 2007, 2006 and 2005,
respectively.
respectively.
A combination of collaborative and in-house research is adopted. Collaborative partners include research organizations,
universities, mining companies, mining service providers and contractors.
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.
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 have been audited in-
house. Following external audits during 2007, seven operations were certified by the ICMI to fully comply with the provisions of
the International Cyanide Management Code.
compliance with the International Cyanide Management Code. All processing operations group-wide have been audited in-
house. Following external audits during 2007, seven operations were certified by the ICMI to fully comply with the provisions of
the International Cyanide Management Code.
Extensive cyanide speciation studies have been conducted in collaboration with Mintek in Johannesburg 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. Continuing projects cover cyanide measurement and control, cyanide recovery and cyanide destruction.
in the South Africa region to determine, on both a macro and a micro-scale, the environmental impacts of cyanide in residue
material. Continuing projects cover cyanide measurement and control, cyanide recovery and cyanide destruction.
A project evaluating the impacts of hypersaline water and cyanide on wildlife and the environment is under way in Australia in
collaboration with ACMER. The results of this project have enabled Sunrise Dam to meet the stringent requirements of the
International Cyanide Management Code regarding the management of cyanide in tailings.
collaboration with ACMER. The results of this project have enabled Sunrise Dam to meet the stringent requirements of the
International Cyanide Management Code regarding the management of cyanide in tailings.
The AuTEK project to develop new industrial uses for gold is based at Mintek. AngloGold Ashanti continues to support the
catalysis initiative within the program. This involves gold catalyst development for carbon monoxide oxidation, for use in fuel
cells and in photocatalysis. A pilot plant for the production of gold catalyst is under construction. Close working relationships
have been established with potential end users. Promising applications include gas masks, catalytic converters for diesel
engines and catalysis of a variety of industrial chemical reactions.
catalysis initiative within the program. This involves gold catalyst development for carbon monoxide oxidation, for use in fuel
cells and in photocatalysis. A pilot plant for the production of gold catalyst is under construction. Close working relationships
have been established with potential end users. Promising applications include gas masks, catalytic converters for diesel
engines and catalysis of a variety of industrial chemical reactions.
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;
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; and
· 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; and
· Automated in-stope water-blast to reduce silica dust exposure in stopes.
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 exploration
opportunities and human resources.
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 exploration
opportunities and human resources.
100
INTELLECTUAL PROPERTY
AngloGold Ashanti, as a group, is not dependent on intellectual property for the conduct of its business as a whole.
SUSTAINABLE DEVELOPMENT: SAFETY, HEALTH, ENVIRONMENTAL AND SOCIAL
DEVELOPMENT
DEVELOPMENT
AngloGold Ashanti published its Report to Society 2007 on March 31, 2008. 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. The information below is
extracted from the Report to Society 2007.
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. The information below is
extracted from the Report to Society 2007.
Occupational safety and health
Core business principle
Every manager and employee takes responsibility for health and safety; and together strive to create workplaces that are free
from occupational injury and illness.
from occupational injury and illness.
Performance
The group’s safety performance was disappointing in 2007. While the fatal (FIFR) was 4.5 percent lower year-on-year at
0.21 per million hours worked, the frequency rate (LTIFR) rose by 7 percent in 2007, to 8.24 per million hours worked.
0.21 per million hours worked, the frequency rate (LTIFR) rose by 7 percent in 2007, to 8.24 per million hours worked.
An intensive review of the group’s safety strategy, particularly in South Africa, during the year and the ‘Safety is our first value’
campaign was launched. Details of individual operational performance are reported in Item 4B.: “Business overview”.
campaign was launched. Details of individual operational performance are reported in Item 4B.: “Business overview”.
On the occupational health front, noise-induced hearing loss (NIHL), occupational lung diseases (OLD) (including silicosis) and
in South Africa, pulmonary tuberculosis (TB) remain the most critical. Medical surveillance programs are in place at most of the
group’s operations with plans afoot to intensify efforts at a number of the African operations. No new occupational disease
cases were reported in Brazil, Argentina, the US or Australia.
in South Africa, pulmonary tuberculosis (TB) remain the most critical. Medical surveillance programs are in place at most of the
group’s operations with plans afoot to intensify efforts at a number of the African operations. No new occupational disease
cases were reported in Brazil, Argentina, the US or Australia.
NIHL occurs over a period of time following consistent exposure to high levels of noise. Hearing conservation programs
comprise three features: engineering control to reduce noise at source, the use of hearing protection devices and medial
surveillance. In South Africa, 78 employees were compensated for NIHL in 2007 (2006: 67 employees).
comprise three features: engineering control to reduce noise at source, the use of hearing protection devices and medial
surveillance. In South Africa, 78 employees were compensated for NIHL in 2007 (2006: 67 employees).
Exposure to silica dust is the major contributing factor in the development of OLD and efforts to reduce dust levels, improved
dust monitoring and medical surveillance remain important in the program to eliminate silicosis. During 2007, 207 cases of
OLD were compensated in South Africa. Also in 2007, 462 new cases of silicosis were recorded in South Africa and submitted
for compensation (2006: 367 new cases).
dust monitoring and medical surveillance remain important in the program to eliminate silicosis. During 2007, 207 cases of
OLD were compensated in South Africa. Also in 2007, 462 new cases of silicosis were recorded in South Africa and submitted
for compensation (2006: 367 new cases).
Some success has been achieved in reducing and managing TB in South Africa, where rigorous World Health Organization-
based TB control programs are in place. For the third consecutive year, TB statistics in South Africa declined, with
927 employees diagnosed with the disease. There is a strong relationship between TB and HIV/AIDS.
based TB control programs are in place. For the third consecutive year, TB statistics in South Africa declined, with
927 employees diagnosed with the disease. There is a strong relationship between TB and HIV/AIDS.
Human capital
Employees: core business principle
The company provides its employees with opportunities to develop their skills while sharing risks and rewards in workplaces
that promote innovation, teamwork and freedom with accountability and embraces cultural diversity.
that promote innovation, teamwork and freedom with accountability and embraces cultural diversity.
101
Performance
Certain human rights conventions, including those relating to freedom of association and collective bargaining, are entrenched
within South African labor legislation and the South African constitution as well as in the laws and regulations of many of the
countries in which the company operates. AngloGold Ashanti is committed to upholding the fundamental rights conventions of
the International Labor Organization (ILO) and no breaches of these conventions were alleged or reported during the year. As
the company is a signatory to the Voluntary Principles on Security and Human Rights, human rights training, particularly for
security personnel, is being undertaken.
within South African labor legislation and the South African constitution as well as in the laws and regulations of many of the
countries in which the company operates. AngloGold Ashanti is committed to upholding the fundamental rights conventions of
the International Labor Organization (ILO) and no breaches of these conventions were alleged or reported during the year. As
the company is a signatory to the Voluntary Principles on Security and Human Rights, human rights training, particularly for
security personnel, is being undertaken.
A new global organizational development strategy is being implemented within the group. The strategy recognizes the role of
the individual as being a member of a family and a community and as an employee, and acknowledges the role of the company
in supporting that and assisting the employee to reach his or her full potential. A key goal of this strategy is the promotion of
diversity and localization at all levels and all operations, enabling employees to take advantage of the extensive opportunities
the group can offer.
the individual as being a member of a family and a community and as an employee, and acknowledges the role of the company
in supporting that and assisting the employee to reach his or her full potential. A key goal of this strategy is the promotion of
diversity and localization at all levels and all operations, enabling employees to take advantage of the extensive opportunities
the group can offer.
The group’s Employee Share Ownership Plan (ESOP) in South Africa has been fully implemented with more than
30,000 individuals now having an equity stake in the company. Discussions with the Ghana Mineworkers’ Union in respect of
implementing a similar program in that country are ongoing.
30,000 individuals now having an equity stake in the company. Discussions with the Ghana Mineworkers’ Union in respect of
implementing a similar program in that country are ongoing.
For a number of reasons, including legislation and customs, mining has not been a career easily accessible to women,
AngloGold Ashanti has put plans in place to ensure retention, development and promotion of women. Key statistics related to
women at the end of 2007 are as follows: women at board level – 8.0 percent, permanent employees* who are women –
8.6 percent
AngloGold Ashanti has put plans in place to ensure retention, development and promotion of women. Key statistics related to
women at the end of 2007 are as follows: women at board level – 8.0 percent, permanent employees* who are women –
8.6 percent
* In South Africa, 9.1 percent of permanent employees are women.
Education and training initiatives to alleviate the skills shortage and develop employees to their full potential continued during
the year and included Adult Basic Education and Training (ABET), bursary schemes and learnerships, support for tertiary
education, management development programs and executive development programs.
the year and included Adult Basic Education and Training (ABET), bursary schemes and learnerships, support for tertiary
education, management development programs and executive development programs.
Community
Core business principle
AngloGold Ashanti strives to form partnerships with host communities, sharing their environments, traditions and values and
wants communities to be better off for AngloGold Ashanti having been there. The company is committed to working in an
environmentally friendly way.
wants communities to be better off for AngloGold Ashanti having been there. The company is committed to working in an
environmentally friendly way.
Performance
The group’s relationships with communities are guided by operation- or region-specific community policies, and are
complemented by a company-wide management system which is currently being fully implemented. Several modules in the
community and social development systems, focusing largely on issues such as resettlement and compensation, human rights
and security, and the preservation of cultural and sacred sites, were developed during the year, with further implementation
planned for 2008.
complemented by a company-wide management system which is currently being fully implemented. Several modules in the
community and social development systems, focusing largely on issues such as resettlement and compensation, human rights
and security, and the preservation of cultural and sacred sites, were developed during the year, with further implementation
planned for 2008.
The phenomenon of artisanal and small-scale mining, encountered particularly at the group’s operations and explorations
prospects at Geita (Tanzania), Obuasi (Ghana), Siguiri (Guinea) and in the DRC, has on occasion given rise to conflict. During
the year we continued to participate in the global debate on the matter and on the ground, in consultation with communities and
other parties, we continue to explore sustainable opportunities for alternative livelihoods for small-scale miners. The group is
developing a strategy that promotes cohabitation and mutual respect for each others’ rights, within the legal and regulatory
framework within a country.
prospects at Geita (Tanzania), Obuasi (Ghana), Siguiri (Guinea) and in the DRC, has on occasion given rise to conflict. During
the year we continued to participate in the global debate on the matter and on the ground, in consultation with communities and
other parties, we continue to explore sustainable opportunities for alternative livelihoods for small-scale miners. The group is
developing a strategy that promotes cohabitation and mutual respect for each others’ rights, within the legal and regulatory
framework within a country.
In terms of corporate social investment, AngloGold Ashanti contributed $7.7 million to corporate social investment (using a
strict definition of the term that excludes sponsorships or the infrastructural developments attached to mining operations).
strict definition of the term that excludes sponsorships or the infrastructural developments attached to mining operations).
Group operations are required to play a meaningful role in the development of local economic activity in the interest of
contributing towards the sustainability of host communities.
contributing towards the sustainability of host communities.
102
Regional health
Core business principle
AngloGold Ashanti is committed to prompt and supportive action in response to any major health threats in the regions in which
it operates.
it operates.
Performance
The primary regional health threats identified are HIV/AIDS in southern Africa, and malaria in west and east Africa.
In 2007, AngloGold Ashanti was recognized by a number of independent entities, non-government organizations and
conferences for its work in delivering sustainable healthcare solutions in the communities in which it operates. In June 2007,
the Global Business Coalition on HIV/AIDS, Tuberculosis and Malaria (GBC) identified the AngloGold Ashanti Obuasi Malaria
Control Program as a global example of excellence in the private sector’s response to these three pandemics. AngloGold
Ashanti also won three awards in the second annual ABSA Healthcare Initiative Awards held in August 2007, a part of the Pan
African Health Congress, for its integrated HIV/AIDS and tuberculosis control programs in South Africa, and for the malaria
control programs at its operations in east and west Africa, winning in the category of Listed Company/Multinational
Organisation/Hospital Group, as well as the Most Sustainable Proj ect award and the award for Project with the Biggest Impact.
conferences for its work in delivering sustainable healthcare solutions in the communities in which it operates. In June 2007,
the Global Business Coalition on HIV/AIDS, Tuberculosis and Malaria (GBC) identified the AngloGold Ashanti Obuasi Malaria
Control Program as a global example of excellence in the private sector’s response to these three pandemics. AngloGold
Ashanti also won three awards in the second annual ABSA Healthcare Initiative Awards held in August 2007, a part of the Pan
African Health Congress, for its integrated HIV/AIDS and tuberculosis control programs in South Africa, and for the malaria
control programs at its operations in east and west Africa, winning in the category of Listed Company/Multinational
Organisation/Hospital Group, as well as the Most Sustainable Proj ect award and the award for Project with the Biggest Impact.
The estimated HIV/AIDS prevalence levels at the group’s African operations are in line with similar demographically segmented
portions in the general population. It is estimated that the HIV/AIDS prevalence levels among employees at the South African
operations in 2007 remained stable at approximately 30 percent of the workforce.
portions in the general population. It is estimated that the HIV/AIDS prevalence levels among employees at the South African
operations in 2007 remained stable at approximately 30 percent of the workforce.
Key objectives of the group HIV/AIDS program are to minimize the risk of HIV/AIDS on the company and its employees by
reducing and ultimately eliminating new infections, efficiently managing those infected and supporting those with advanced
AIDS. The program focuses on:
reducing and ultimately eliminating new infections, efficiently managing those infected and supporting those with advanced
AIDS. The program focuses on:
· Prevention of HIV, by means of various workplace initiatives, including voluntary counseling and testing (VCT).
Assuming single testing, approximately 102 percent of the South African workforce were tested in 2007 (2006:
75 percent).
Assuming single testing, approximately 102 percent of the South African workforce were tested in 2007 (2006:
75 percent).
· Treatment programs, which involve the clinical care of those infected by the virus, including the use of antiretroviral
therapy (ART). ART is available to all employees at all our operations in Africa, either directly from company facilities,
through company-sponsored or -funded facilities, or from state facilities.
therapy (ART). ART is available to all employees at all our operations in Africa, either directly from company facilities,
through company-sponsored or -funded facilities, or from state facilities.
· Support for the AIDS-ill requiring separation from the company and palliative care, including support for various
community initiatives.
community initiatives.
Total expenditure on the company’s HIV/AIDS program in South Africa amounted to approximately R25.2 million ($3.6 million)
in 2007 (2006: R21.5 million; $3.2 million).
in 2007 (2006: R21.5 million; $3.2 million).
Malaria remains an area of concern for AngloGold Ashanti’s operations in Ghana, Guinea, Mali and Tanzania. Not only does
the disease result in death, illness and absenteeism among employees, but it is a major cause of death in young children and
pregnant women, with an obvious effect on employees’ families and communities.
the disease result in death, illness and absenteeism among employees, but it is a major cause of death in young children and
pregnant women, with an obvious effect on employees’ families and communities.
An extensive malaria program is in place at Obuasi and the lessons learnt here are being applied elsewhere. A revised
integrated malaria control program began at Geita in Tanzania in September 2007, with indoor residual spraying of the
Mchaura staff village and all mine vehicles. Work began during the year on the development of an integrated campaign at
Siguiri in Guinea, modeled on the program at Obuasi.
integrated malaria control program began at Geita in Tanzania in September 2007, with indoor residual spraying of the
Mchaura staff village and all mine vehicles. Work began during the year on the development of an integrated campaign at
Siguiri in Guinea, modeled on the program at Obuasi.
The incidence of malaria has continued to decline at Obuasi following the third year of the integrated malaria control campaign,
from 164 per 1,000 employees in 2006 to 61 in 2007.
from 164 per 1,000 employees in 2006 to 61 in 2007.
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.
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.
103
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 codes such as the Labour Code and Collective Agreement in Mali.
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 codes 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 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 2007.
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 2007.
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.
by legislation in most of the countries where the operations are situated.
In South 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.
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 standard practice for AngloGold Ashanti to employ indigenous people.
Training
AngloGold Ashanti’s training philosophy encompasses a wide range of training initiatives. In 2007, the company spent
$31.4 million on employee training and development, of which $24.8 million was spent in the South Africa operations. In 2006,
the employee training and development costs for South African-based operations amounted to $21.2 million. It is the
company’s policy to provide Adult Basic Education and Training (ABET) to ensure that all employees are able to become
literate and numerate.
$31.4 million on employee training and development, of which $24.8 million was spent in the South Africa operations. In 2006,
the employee training and development costs for South African-based operations amounted to $21.2 million. It is the
company’s policy to provide Adult Basic Education and Training (ABET) to ensure that all employees are able to become
literate and numerate.
Environment
Core business principle
AngloGold Ashanti strives to form partnerships with host communities, sharing their environments, traditions and values and
want communities to be better off for AngloGold Ashanti having been there.
want communities to be better off for AngloGold Ashanti having been there.
Performance
As a member of the International Council on Mining and Metals, AngloGold Ashanti subscribes to the sustainable development
framework and its principles for sustainable development, and is committed to publicly reporting. During the year, the group
produced a set of five environmental guidelines to be used in conjunction with the group’s environmental policy. These
guidelines cover the management of water, air quality, waste material, chemicals and land. A number of other guidelines are
currently under consideration and will be produced as and when required.
framework and its principles for sustainable development, and is committed to publicly reporting. During the year, the group
produced a set of five environmental guidelines to be used in conjunction with the group’s environmental policy. These
guidelines cover the management of water, air quality, waste material, chemicals and land. A number of other guidelines are
currently under consideration and will be produced as and when required.
All AngloGold Ashanti operations have had their environmental management systems certified in conformance with the
ISO 14001 standard, and all the requisite permits for their current operations are in place. AngloGold Ashanti Health (Pty) Ltd,
a subsidiary of the company that provides healthcare services to employees in South Africa, was also recommended for
certification.
ISO 14001 standard, and all the requisite permits for their current operations are in place. AngloGold Ashanti Health (Pty) Ltd,
a subsidiary of the company that provides healthcare services to employees in South Africa, was also recommended for
certification.
In line with increasingly stringent governance and risk management requirements at a company level, AngloGold Ashanti
initiated a corporate environmental review program during the year. The program reviewed whether all significant
environmental aspects had been identified and whether appropriate monitoring systems had been established to manage these
aspects, including suitable monitoring systems.
initiated a corporate environmental review program during the year. The program reviewed whether all significant
environmental aspects had been identified and whether appropriate monitoring systems had been established to manage these
aspects, including suitable monitoring systems.
Closure plans, which are reviewed and updated annually, are in place at all operations. These take into account operational
conditions, planning and legislative requirements, international protocols, technological developments and advances in good
practice. In addition, an assessment of closure liabilities is undertaken and reviewed on an annual basis and, increasingly
reviewed and assured by independent third parties.
conditions, planning and legislative requirements, international protocols, technological developments and advances in good
practice. In addition, an assessment of closure liabilities is undertaken and reviewed on an annual basis and, increasingly
reviewed and assured by independent third parties.
104
A key performance objective for 2007 was the implementation of the International Cyanide Management Code for the
Manufacture, Transport and Use of Cyanide in the Production of Gold (the Cyanide Code). The code is a voluntary industry
initiative developed under the auspices of the United Nations Environment Program to promote responsible management of
cyanide used in gold mining, to enhance the protection of human health, and reduce the potential for environmental impacts.
AngloGold Ashanti was one of the first signatories to the code in November 2005 and, in line with this, committed to having all
of its operations audited by an independent third party to demonstrate its compliance with the code.
Manufacture, Transport and Use of Cyanide in the Production of Gold (the Cyanide Code). The code is a voluntary industry
initiative developed under the auspices of the United Nations Environment Program to promote responsible management of
cyanide used in gold mining, to enhance the protection of human health, and reduce the potential for environmental impacts.
AngloGold Ashanti was one of the first signatories to the code in November 2005 and, in line with this, committed to having all
of its operations audited by an independent third party to demonstrate its compliance with the code.
In addition to participating in the global debate on climate change and its potential impacts, AngloGold Ashanti has considered
its position, evaluating both risks and opportunities in respect of climate change, and embarking on a process of establishing its
carbon footprint and its greenhouse gas emissions. In 2007, AngloGold Ashanti participated in the global Carbon Disclosure
Project’s, survey of the top 40 companies listed on the JSE. CDP is a global institutional investor collaboration intent on
understanding and quantifying climate change implications for business. AngloGold Ashanti’s response may be found at
www.cdproject.net.
its position, evaluating both risks and opportunities in respect of climate change, and embarking on a process of establishing its
carbon footprint and its greenhouse gas emissions. In 2007, AngloGold Ashanti participated in the global Carbon Disclosure
Project’s, survey of the top 40 companies listed on the JSE. CDP is a global institutional investor collaboration intent on
understanding and quantifying climate change implications for business. AngloGold Ashanti’s response may be found at
www.cdproject.net.
4C. Organizational structure
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 two executive directors, 8 executive vice presidents and two vice presidents. See "Item 6.:
Directors, senior management and employees". Day-to-day management of the operations vests with executive teams based
in South Africa (Johannesburg and Potchefstroom), Ghana (Accra), United States (Denver), Brazil (Nova Lima), and Australia
(Perth).
executive committee, comprising the two executive directors, 8 executive vice presidents and two vice presidents. See "Item 6.:
Directors, senior management and employees". Day-to-day management of the operations vests with executive teams based
in South Africa (Johannesburg and Potchefstroom), Ghana (Accra), United States (Denver), Brazil (Nova Lima), and Australia
(Perth).
Corporate activities
Activities provided in the corporate area fall into three categories. First, support is provided to the executive committee 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.
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
Exhibit 19.8 List of AngloGold Ashanti Limited subsidiaries" for details.
Exhibit 19.8 List of 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.
105
Item 5: Operating and financial review and prospects
The following discussion provides information that management believes is relevant to an assessment and understanding of
the consolidated financial condition and results of operations of AngloGold Ashanti Limited and are based on the US GAAP
financial statements.
the consolidated financial condition and results of operations of AngloGold Ashanti Limited and are based on the US GAAP
financial statements.
This discussion addresses matters we consider important for an understanding of our financial condition and results of
operations as of and for the three years ended and as at December 31, 2007, 2006 and 2005. It consists of the following
subsections:
operations as of and for the three years ended and as at December 31, 2007, 2006 and 2005. It consists of the following
subsections:
• “Overview,” which provides a brief summary of our operations;
• “Operating results,” which includes a discussion of our consolidated financial results for the last three years and those
factors influencing the results;
• “Liquidity and Capital Resources,” an analysis of cash flows, sources and uses of cash, our financial position, capital
commitments and contingencies, financial instruments, recent accounting pronouncements and critical accounting
policies;
policies;
• “Trend information,” a discussion of current and expected future production and the costs thereof;
• “Off-balance sheet arrangements,” a discussion of significant off-balance sheet arrangements; and
• “Contractual obligations,” a disclosure of known contractual obligations.
This item should be read in conjunction with the Company’s consolidated financial statements and the notes thereto which are
included under Item 18 of this annual report.
included under Item 18 of this annual report.
Overview
For the year ended December 31, 2007, AngloGold Ashanti had an attributable production of approximately 5.5 million ounces
(including joint ventures) of gold. Headquartered in Johannesburg, South Africa, the Company has a global presence with
20 operations comprising open-pit and underground mines and surface metallurgical plants in ten countries which are
supported by extensive, yet focused, exploration activities. As at December 31, 2007, the Company had Proven and Probable
Ore Reserves of approximately 72.2 million ounces (including joint ventures) on an attributable basis.
(including joint ventures) of gold. Headquartered in Johannesburg, South Africa, the Company has a global presence with
20 operations comprising open-pit and underground mines and surface metallurgical plants in ten countries which are
supported by extensive, yet focused, exploration activities. As at December 31, 2007, the Company had Proven and Probable
Ore Reserves of approximately 72.2 million ounces (including joint ventures) on an attributable basis.
AngloGold Ashanti’s main product is gold. A portion of its revenue is derived from sales of silver, uranium oxide and sulphuric
acid. The Company sells its products on world markets.
acid. The Company 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 the Company’s business and
operations, see “Item 4B.: Business overview — Products, operations and geographical locations”.
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 the Company’s business and
operations, see “Item 4B.: Business overview — Products, operations and geographical locations”.
106
5A. Operating results
Introduction
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 International Monetary Fund (IMF), forward sales by
producers, global or regional political or economic events, and production and cost levels in major gold-producing regions. In
addition, the price of gold sometimes is subject to rapid short-term changes because of speculative activities.
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 International Monetary Fund (IMF), forward sales by
producers, global or regional political or economic events, and production and cost levels in major gold-producing regions. In
addition, the price of gold sometimes is subject to rapid short-term changes because of speculative activities.
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.
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 the Company’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.
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 the Company’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 May 15, 2008, the afternoon fixing price for gold on the London Bullion Market was $866.25 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 the Company’s mining operations consist mainly of deep-level underground mining methods as well as open-pit operations,
both of which are labor intensive.
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 the Company’s mining operations consist mainly of deep-level underground mining methods as well as open-pit operations,
both of which are labor intensive.
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 the Company applies measures wherever appropriate and
feasible, such as hedging instruments, intended to reduce its exposure to these factors.
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 the Company applies measures wherever appropriate and
feasible, such as hedging instruments, intended to reduce its exposure to these factors.
In conducting mining operations, the Company recognizes the inherent risks and uncertainties of the industry, and the wasting
nature of assets. Recoverability of capitalized amounts is reviewed on a regular basis.
nature of 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, excluding the effect of realized non hedge derivatives, 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 2007, the Company derived 71 percent (65 percent including joint venture arrangements) of its revenues
from these countries and incurred 62 percent (59 percent including joint venture arrangements) of its production costs in these
local currencies. In 2007, the weakening of the dollar against these local currencies in which the company operates continued
to increase total cash costs. A one percent strengthening of these local currencies against the dollar will result in an increase
of total cash costs incurred of nearly $3 per ounce, or 1 percent. As the price of gold is denominated in US dollars and the
Company realizes the majority of its revenues in US dollars, devaluation of these local currencies against the US dollar
improves the Company’s profitability in the short-term. Conversely strengthening of these local currencies against the US
dollar adversely impacts the Company’s profitability in the short term. Based upon average rates during the respective years,
the rand weakened and the real strengthened by approximately 4 percent and 11 percent respectively, against the US dollar in
2007 compared to 2006. The Argentinean peso traded freely against the US dollar from January 1, 2002 and had devalued to
3.15: 1 against the US dollar by December 31, 2007. The Australian dollar, based on the average rates during the respective
years, strengthened by 11 percent against the US dollar in 2007 compared to 2006.
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 2007, the Company derived 71 percent (65 percent including joint venture arrangements) of its revenues
from these countries and incurred 62 percent (59 percent including joint venture arrangements) of its production costs in these
local currencies. In 2007, the weakening of the dollar against these local currencies in which the company operates continued
to increase total cash costs. A one percent strengthening of these local currencies against the dollar will result in an increase
of total cash costs incurred of nearly $3 per ounce, or 1 percent. As the price of gold is denominated in US dollars and the
Company realizes the majority of its revenues in US dollars, devaluation of these local currencies against the US dollar
improves the Company’s profitability in the short-term. Conversely strengthening of these local currencies against the US
dollar adversely impacts the Company’s profitability in the short term. Based upon average rates during the respective years,
the rand weakened and the real strengthened by approximately 4 percent and 11 percent respectively, against the US dollar in
2007 compared to 2006. The Argentinean peso traded freely against the US dollar from January 1, 2002 and had devalued to
3.15: 1 against the US dollar by December 31, 2007. The Australian dollar, based on the average rates during the respective
years, strengthened by 11 percent against the US dollar in 2007 compared to 2006.
107
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, the Company’s cash and cash equivalents reported in US dollars could
change. At December 31, 2007, approximately 66 percent of the Company’s cash and cash equivalents were held in local
currencies.
affected by exchange rate fluctuations and, as a result, the Company’s cash and cash equivalents reported in US dollars could
change. At December 31, 2007, approximately 66 percent of the Company’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. 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”.
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. 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
The mining industry continues to experience price inflation for many commodities and consumables used in the production of
gold which lead to higher production costs reported by many gold producers.
gold which lead to higher production costs reported by many gold producers.
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, the Company 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 the Company’s results and
financial condition.
benefited from sustained period of rising gold prices. However, the Company 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 the Company’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:
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
2007
percent
2006
percent
2005
percent
The average South African rand/US$ exchange rate weakened/(strengthened) by:
3.8
6.3
(1.1)
PPI (inflation rate) increase:
10.0
7.7
3.1
Net effect
6.2 1.4
(4.2)
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 (limited
to non-hedge derivatives), 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 the Company's commodity instruments see "Item 11: Quantitative and qualitative disclosures about market risk".
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 (limited
to non-hedge derivatives), 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 the Company'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.
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.
The following is a description of acquisitions and dispositions completed by AngloGold Ashanti since January 1, 2005:
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).
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).
108
On May 31, 2005 AngloGold Ashanti acquired an additional 12.4 percent interest (6,131,585 ordinary shares) in Trans-Siberian
Gold plc (TSG) for an aggregate consideration of £8 million ($15 million) as a second subscription in a transaction involving two
subscriptions for ordinary shares. The first tranche of ordinary shares of 17.5 percent was acquired during July 2004. The
Company’s aggregate shareholding in TSG at December 31, 2007 was 12,263,170 ordinary shares (29.8 percent interest held,
after the dilution of shareholding resulting from an increase in issued share capital).
Gold plc (TSG) for an aggregate consideration of £8 million ($15 million) as a second subscription in a transaction involving two
subscriptions for ordinary shares. The first tranche of ordinary shares of 17.5 percent was acquired during July 2004. The
Company’s aggregate shareholding in TSG at December 31, 2007 was 12,263,170 ordinary shares (29.8 percent interest held,
after the dilution of shareholding resulting from an increase in issued share capital).
On July 19, 2005, Aflease Gold and Uranium Resources Limited (Aflease) announced that it had purchased from AngloGold
Ashanti, its Weltevreden mine. On December 19, 2005, Aflease was acquired by sxr Uranium One Incorporated (formerly
Southern Cross Incorporated) (sxr Uranium One). The conditions precedent to the agreement with sxr Uranium One were not
fulfilled by the expiry date of December 31, 2007 and a new agreement is being negotiated with Aflease Gold Limited. The
Company has separately classified assets and liabilities for Weltevreden presented in the consolidated balance sheet, as held
for sale. Refer to Note 16 in Item 18 – Assets and liabilities held for sale.
Ashanti, its Weltevreden mine. On December 19, 2005, Aflease was acquired by sxr Uranium One Incorporated (formerly
Southern Cross Incorporated) (sxr Uranium One). The conditions precedent to the agreement with sxr Uranium One were not
fulfilled by the expiry date of December 31, 2007 and a new agreement is being negotiated with Aflease Gold Limited. The
Company has separately classified assets and liabilities for Weltevreden presented in the consolidated balance sheet, as held
for sale. Refer to Note 16 in Item 18 – Assets and liabilities held for sale.
On August 26, 2005, AngloGold Ashanti subscribed 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 from a 12.3 percent stake originally acquired in the
expanded issued capital of Red 5 Limited during 2004. On September 18, 2006, the Company 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).
As at December 31, 2007, the Company held a 10 .2 percent interest in Red 5 Limited.
A$0.8 million ($0.6 million), thereby increasing its holding to 14.1 percent from a 12.3 percent stake originally acquired in the
expanded issued capital of Red 5 Limited during 2004. On September 18, 2006, the Company 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).
As at December 31, 2007, the Company held a 10 .2 percent interest in Red 5 Limited.
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).
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).
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.
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. 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, the Company consented to the ultimate assignment of Bema’s rights and responsibilities to B2 Gold in terms of the
joint venture agreement entered into between the Company and Bema.
group of AngloGold Ashanti’s mineral opportunities located in Northern Colombia, with initial work focused on the La Mina and
El Pino targets. 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, the Company consented to the ultimate assignment of Bema’s rights and responsibilities to B2 Gold in terms of the
joint venture agreement entered into between the Company 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 (December 31, 2007; 15.12 percent). The sales transaction closed on August 4, 2006. The
Company 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
options. As part of the two option agreements, the Company will have the option to increase or dilute its stake in these
projects, subject to certain conditions.
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 (December 31, 2007; 15.12 percent). The sales transaction closed on August 4, 2006. The
Company 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
options. As part of the two option agreements, the Company 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. The Company 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.
This transaction terminated in November 2007 with Antofagasta plc making a minimal payment fulfilling their commitment to
the joint venture.
Southern Colombia for new gold and copper deposits. The Company 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.
This transaction terminated in November 2007 with Antofagasta plc making a minimal payment fulfilling their commitment to
the joint venture.
109
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.
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. 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).
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. 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, the Company 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 (Amikan) and
OOO Artel Staratelei Angarskaya Proizvodstvennaya Kompania (AS APK) for a total consideration of $40 million. In June
2007, the Company concluded the purchase of TSG’s interests in Amikan (which holds the Veduga deposit, related exploration
and mining licenses) and AS APK (which holds the Bogunay deposit, related exploration and mining licenses). These
companies acquired from TSG by AngloGold Ashanti, together with two greenfields exploration companies held by Polymetal,
hold the initial operating assets of the strategic alliance. Of the assets acquired from TSG, assets of $15 million were
subsequently classified as held for sale during 2007. Refer to Note 16 in Item 18 – Assets and liabilities held for sale.
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, the Company 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 (Amikan) and
OOO Artel Staratelei Angarskaya Proizvodstvennaya Kompania (AS APK) for a total consideration of $40 million. In June
2007, the Company concluded the purchase of TSG’s interests in Amikan (which holds the Veduga deposit, related exploration
and mining licenses) and AS APK (which holds the Bogunay deposit, related exploration and mining licenses). These
companies acquired from TSG by AngloGold Ashanti, together with two greenfields exploration companies held by Polymetal,
hold the initial operating assets of the strategic alliance. Of the assets acquired from TSG, assets of $15 million were
subsequently classified as held for sale during 2007. Refer to Note 16 in Item 18 – Assets and liabilities held for sale.
On June 8, 2007, AngloGold Ashanti announced that it had sold, subject to certain conditions, most of the remaining moveable
and immovable assets of Ergo, the surface reclamation operation east of Johannesburg, discontinued in March 2005, to a
consortium of Mintails South Africa (Pty) Limited/DRD South African Operations (Pty) Limited Joint Venture. The site is
currently being rehabilitated by AngloGold Ashanti. The assets and associated liabilities were sold for R42.8 million
(approximately $6 million). The joint venture will operate, for its own account, under the AngloGold Ashanti authorizations until
new order mining rights have been obtained and transferred to the joint venture. Refer to Note 8 in Item 18 – Discontinued
operations.
and immovable assets of Ergo, the surface reclamation operation east of Johannesburg, discontinued in March 2005, to a
consortium of Mintails South Africa (Pty) Limited/DRD South African Operations (Pty) Limited Joint Venture. The site is
currently being rehabilitated by AngloGold Ashanti. The assets and associated liabilities were sold for R42.8 million
(approximately $6 million). The joint venture will operate, for its own account, under the AngloGold Ashanti authorizations until
new order mining rights have been obtained and transferred to the joint venture. Refer to Note 8 in Item 18 – Discontinued
operations.
During July 2007, AngloGold Ashanti disposed of its investment of 600,000 shares previously held in Mwana Africa plc for
$0.8 million. The shares were acquired pursuant to the sale of the Company’s entire interest in Ashanti Goldfields Zimbabwe
Limited to Mwana Africa Holdings (Proprietary) Limited during 2004.
$0.8 million. The shares were acquired pursuant to the sale of the Company’s entire interest in Ashanti Goldfields Zimbabwe
Limited to Mwana Africa Holdings (Proprietary) Limited during 2004.
AngloGold Ashanti completed the acquisition of the minority interests in the Iduapriem and Teberebie mine previously held by
the Government of Ghana (5 percent) and the International Finance Corporation (10 percent) effective September 1, 2007 for a
total cash consideration of $25 million. The Iduapriem and Teberebie mine is now wholly-owned by the Company.
the Government of Ghana (5 percent) and the International Finance Corporation (10 percent) effective September 1, 2007 for a
total cash consideration of $25 million. The Iduapriem and Teberebie mine is now wholly-owned by the Company.
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 the Company’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”.
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 the Company’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”.
110
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, the
Company is subject to various economic, fiscal, monetary and political factors that affect South African companies generally.
Company 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”.
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”.
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.
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 new order rights will be
subject to a State royalty. The third draft of the Mineral and Petroleum Resources Royalty Bill was published on December 6,
2007 and provides for the payment of a royalty according to a formula based on earnings before interest, tax and depreciation.
It is estimated that the formula could translate to a royalty rate of more than 4 percent of gross sales in terms of current pricing
assumptions. The latest proposal results in a large increase from the 1.5 percent rate proposed in the second draft in 2006,
and the company is making representations to the government through the South African Chamber of Mines to retain the
proposed 1.5 percent rate. The payment of royalties is currently scheduled to begin on May 1, 2009, if the Bill is passed by
Parliament in its current form.
subject to a State royalty. The third draft of the Mineral and Petroleum Resources Royalty Bill was published on December 6,
2007 and provides for the payment of a royalty according to a formula based on earnings before interest, tax and depreciation.
It is estimated that the formula could translate to a royalty rate of more than 4 percent of gross sales in terms of current pricing
assumptions. The latest proposal results in a large increase from the 1.5 percent rate proposed in the second draft in 2006,
and the company is making representations to the government through the South African Chamber of Mines to retain the
proposed 1.5 percent rate. The payment of royalties is currently scheduled to begin on May 1, 2009, if the Bill is passed by
Parliament in its current form.
Gold market in 2007
Continued strong levels of investor and speculator interest, particularly in the fourth quarter of the year, pushed the gold price
to levels just short of record highs, records which were then surpassed soon after year end in an exceptionally buoyant market.
The average gold spot price for the year, at $697 per ounce, was 15 percent higher than that in 2006. Although prices were
relatively range-bound during the first half of the year, the end of the third quarter and the fourth quarter saw a strong surge in
the dollar gold price and particularly high levels of investor interest. Fabrication demand followed an inverse pattern, with the
more stable prices of the first half leading the market to record high levels of jewellery consumption in certain regions, which
then fell away in the fourth quarter as price volatility took its toll, particularly in more price-sensitive markets. The exception to
this patter n was the Chinese market, where jewellery demand remained relatively solid in the fourth quarter despite the high
levels of price volatility. The main contributing factor to the price gains seen in the second half of the year was economic
uncertainty relating to credit concerns and the impact of the sub-prime mortgage crisis in the US. Inflationary concerns driven
by higher food, oil and commodity prices also played a role, as did the escalation in geopolitical tension, particularly at year-
end. Rand gold prices saw new record highs of R187,000 per kilogram during the year and an average spot price for the year
of just over R157,000 per kilogram.
to levels just short of record highs, records which were then surpassed soon after year end in an exceptionally buoyant market.
The average gold spot price for the year, at $697 per ounce, was 15 percent higher than that in 2006. Although prices were
relatively range-bound during the first half of the year, the end of the third quarter and the fourth quarter saw a strong surge in
the dollar gold price and particularly high levels of investor interest. Fabrication demand followed an inverse pattern, with the
more stable prices of the first half leading the market to record high levels of jewellery consumption in certain regions, which
then fell away in the fourth quarter as price volatility took its toll, particularly in more price-sensitive markets. The exception to
this patter n was the Chinese market, where jewellery demand remained relatively solid in the fourth quarter despite the high
levels of price volatility. The main contributing factor to the price gains seen in the second half of the year was economic
uncertainty relating to credit concerns and the impact of the sub-prime mortgage crisis in the US. Inflationary concerns driven
by higher food, oil and commodity prices also played a role, as did the escalation in geopolitical tension, particularly at year-
end. Rand gold prices saw new record highs of R187,000 per kilogram during the year and an average spot price for the year
of just over R157,000 per kilogram.
Overall, the investment market saw lower levels of demand than in 2006, however, this demand was heavily concentrated in
the last half of 2007, for the aforementioned reasons. Particular strength was exhibited in trade on commodity exchanges and
also in the gold Exchange-Traded Funds (ETFs). Total ETF holdings at year-end stood at close to 28 million ounces, with a
total value of over $23 billion. This represents a significant level of growth over year-end holdings in 2006, even though this
represented a doubling over levels of funds held the previous year.
the last half of 2007, for the aforementioned reasons. Particular strength was exhibited in trade on commodity exchanges and
also in the gold Exchange-Traded Funds (ETFs). Total ETF holdings at year-end stood at close to 28 million ounces, with a
total value of over $23 billion. This represents a significant level of growth over year-end holdings in 2006, even though this
represented a doubling over levels of funds held the previous year.
Over the first half of 2007, physical demand from jewellery fabrication recovered strongly from the low levels of 2006, reaching
record highs in several major markets. In the second half of the year, however, this level of demand could not be sustained in
the face of a more volatile price environment, which impacted heavily on traditional markets, and with the increasingly difficult
consumer and retail environment in developed markets such as the US.
record highs in several major markets. In the second half of the year, however, this level of demand could not be sustained in
the face of a more volatile price environment, which impacted heavily on traditional markets, and with the increasingly difficult
consumer and retail environment in developed markets such as the US.
111
Overall, fabrication demand for jewellery in 2007 increased by 6 percent in tonnage terms over 2006 levels, with the bulk of that
increase contributed by the larger emerging markets of East Asia, India and the Middle East, whereas demand from the US
market fell in tonnage terms by 14 percent over 2006.
increase contributed by the larger emerging markets of East Asia, India and the Middle East, whereas demand from the US
market fell in tonnage terms by 14 percent over 2006.
It was in the Indian market that the contrast in consumption levels between the two halves of the year was most marked.
Demand reached record levels in rupee and tonnage terms for both jewellery and retail investment in the second quarter of the
year. Together these totalled 317 tonnes, half of global mine output for the quarter and 90 percent higher than the relatively low
level attained in the same quarter in 2006. Demand in the first half of the year increased by 72 percent over the corresponding
period in the previous year. This strong level of consumption was fuelled in part by economic growth, particularly in the
agricultural sector, as well as by a stable rupee gold price. In the second half of the year, however, the rupee/dollar exchange
rate showed significant volatility, and this combined with a period of volatility in dollar gold prices created a set of
circumstances unfavorable to gold consump tion. Price volatility is a significant deterrent to demand in the Indian market, and in
the second half of 2007 the periods of most extreme price volatility coincided with some of the more auspicious gold buying
occasions, such as Diwali. Demand in the fourth quarter was particularly poor, and fourth quarter offtake reached the lowest
level since the early 1990s. Over the year as a whole an increase in jewellery offtake in tonnage terms of 6 percent was
recorded.
Demand reached record levels in rupee and tonnage terms for both jewellery and retail investment in the second quarter of the
year. Together these totalled 317 tonnes, half of global mine output for the quarter and 90 percent higher than the relatively low
level attained in the same quarter in 2006. Demand in the first half of the year increased by 72 percent over the corresponding
period in the previous year. This strong level of consumption was fuelled in part by economic growth, particularly in the
agricultural sector, as well as by a stable rupee gold price. In the second half of the year, however, the rupee/dollar exchange
rate showed significant volatility, and this combined with a period of volatility in dollar gold prices created a set of
circumstances unfavorable to gold consump tion. Price volatility is a significant deterrent to demand in the Indian market, and in
the second half of 2007 the periods of most extreme price volatility coincided with some of the more auspicious gold buying
occasions, such as Diwali. Demand in the fourth quarter was particularly poor, and fourth quarter offtake reached the lowest
level since the early 1990s. Over the year as a whole an increase in jewellery offtake in tonnage terms of 6 percent was
recorded.
Demand in the Middle East, specifically in the six Gulf markets, was also dented considerably in the second half of the year,
with a sharp shift in consumer sentiment away from gold jewellery consumption brought about by a combination of volatile
price levels, inflationary concerns and significant escalations in rent charges. As the currencies of these markets are pegged
against the dollar, there is no cushioning for consumers against dollar gold price volatility. In the region, Turkey and Egypt
experienced healthier demand, with good tourist seasons and increased economic stability helping to fuel consumption.
with a sharp shift in consumer sentiment away from gold jewellery consumption brought about by a combination of volatile
price levels, inflationary concerns and significant escalations in rent charges. As the currencies of these markets are pegged
against the dollar, there is no cushioning for consumers against dollar gold price volatility. In the region, Turkey and Egypt
experienced healthier demand, with good tourist seasons and increased economic stability helping to fuel consumption.
The Chinese market proved most resilient to the more volatile prices as most retailers maintain a margin of approximately
10 percent over the gold price and therefore tend not to adjust prices on a daily basis according to each and every fluctuation
in the dollar gold price. The Chinese economy also continued to record strong growth.
10 percent over the gold price and therefore tend not to adjust prices on a daily basis according to each and every fluctuation
in the dollar gold price. The Chinese economy also continued to record strong growth.
In the US, gold demand in 2007 reached the lowest level since 1992. Retailers continued to reduce their focus on the category
in the light of rising prices and to seek out product with lower gold content so as to offer a lower-cost range of product to an
increasingly price-sensitive consumer. Only the high end of the market, which typically retails 18 carat product, remained
strong. Margins in this segment are higher than in the mass market segment and consumers are less sensitive to price
increases.
in the light of rising prices and to seek out product with lower gold content so as to offer a lower-cost range of product to an
increasingly price-sensitive consumer. Only the high end of the market, which typically retails 18 carat product, remained
strong. Margins in this segment are higher than in the mass market segment and consumers are less sensitive to price
increases.
Despite high gold prices, scrap supplies of gold into the market were weaker than in 2006. In part this seems to have been due
to the fact that significant personal gold inventories were liquidated in 2006 and have not been replaced as yet. Another factor
was the price surge which took place towards the end of the year. Consumers were deterred from selling old jewellery by the
expectation that prices might rise further.
to the fact that significant personal gold inventories were liquidated in 2006 and have not been replaced as yet. Another factor
was the price surge which took place towards the end of the year. Consumers were deterred from selling old jewellery by the
expectation that prices might rise further.
Industrial demand increased marginally by 2 percent over 2006 levels. A slowdown in the demand for electronic goods over the
second half of the year impacted growth in this sector.
second half of the year impacted growth in this sector.
Official sector sales for the calendar year were approximately 485 tonnes, some 30 percent higher than in 2006. Gold sales by
the Central Bank Gold Agreement (CBGA) signatories account for the bulk of this increase and in the third year of the second
CBGA agreement (which came to an end on September 26, 2007) 475.8 tonnes of the available quota of 500 tonnes had been
released onto the market.
the Central Bank Gold Agreement (CBGA) signatories account for the bulk of this increase and in the third year of the second
CBGA agreement (which came to an end on September 26, 2007) 475.8 tonnes of the available quota of 500 tonnes had been
released onto the market.
Gold producers reduced their hedging positions considerably in 2007. Over 400 tonnes were bought in the market in this way,
a figure only slightly below the record level of de-hedging measured in 2004. The majority of this activity took place in the first
half of the year and was driven by the activities of a small number of major players.
a figure only slightly below the record level of de-hedging measured in 2004. The majority of this activity took place in the first
half of the year and was driven by the activities of a small number of major players.
Comparison of operating performance in 2007, 2006 and 2005
The joint venture operations situated in Mali (the Sadiola, Yatela and Morila Joint Ventures) did not meet the significance test
requirements for separate financial statements and disclosures in terms of Regulation S-X Rule 3.09 for the financial year
ended December 31, 2007. Accordingly, the financial statements for these joint ventures included in Item 18 are unaudited for
this period.
The joint venture operations situated in Mali (the Sadiola, Yatela and Morila Joint Ventures) did not meet the significance test
requirements for separate financial statements and disclosures in terms of Regulation S-X Rule 3.09 for the financial year
ended December 31, 2007. Accordingly, the financial statements for these joint ventures included in Item 18 are unaudited for
this period.
112
The following table presents operating data for the AngloGold Ashanti group for the three year period ended
December 31, 2007:
December 31, 2007:
Operating data for AngloGold Ashanti
Year ended December 31
2007 2006
2005
Total attributable gold production (thousand ounces)
5,477
5,635
6,166
Total cash costs ($/oz)
367
321
281
Total production costs ($/oz)
504
452
398
Production costs (million US dollars)
1,917
1,539
1,642
Capital expenditure (million US dollars)
1,059
817
722
- Consolidated entities
1,050
811
710
- Equity accounted joint ventures
9
6
12
Attributable gold production
For the year ended December 31, 2007, AngloGold Ashanti’s total attributable gold production from continuing operations
decreased by 158,000 ounces, or 3 percent, to 5.5 million ounces from 5.6 million ounces produced in 2006. In South Africa,
gold production decreased by 9 percent from 2,554,000 ounces produced in 2006, to 2,328,000 ounces produced in 2007
mainly due to a decline in the volume of ore mined at Great Noligwa as a result of lower face advance and lower volume mined
at TauTona and Kopanang due to seismicity issues. Gold production in Argentina, Ghana and Mali decreased from
215,000 ounces, 592,000 ounces and 537,000 ounces, respectively, produced in 2006, to 204,000 ounces, 527,000 ounces
and 441,000 ounces, respectively, produced in 2007. This was mainly due to lower grades at Cerro Vanguardia (in Argentina);
lower volumes mined due to an eleven day plant shutdown and power outages at Obuasi (in Ghana) and the impact on
production following the sale of Bibiani (in Ghana) concluded in December 2006. In Mali gold production for 2007 was lower
compared to 2006 due to lower recovered grades at Yatela, Morila and Sadiola.
decreased by 158,000 ounces, or 3 percent, to 5.5 million ounces from 5.6 million ounces produced in 2006. In South Africa,
gold production decreased by 9 percent from 2,554,000 ounces produced in 2006, to 2,328,000 ounces produced in 2007
mainly due to a decline in the volume of ore mined at Great Noligwa as a result of lower face advance and lower volume mined
at TauTona and Kopanang due to seismicity issues. Gold production in Argentina, Ghana and Mali decreased from
215,000 ounces, 592,000 ounces and 537,000 ounces, respectively, produced in 2006, to 204,000 ounces, 527,000 ounces
and 441,000 ounces, respectively, produced in 2007. This was mainly due to lower grades at Cerro Vanguardia (in Argentina);
lower volumes mined due to an eleven day plant shutdown and power outages at Obuasi (in Ghana) and the impact on
production following the sale of Bibiani (in Ghana) concluded in December 2006. In Mali gold production for 2007 was lower
compared to 2006 due to lower recovered grades at Yatela, Morila and Sadiola.
The decrease in gold produced over 2007 at most mines was partially offset by an increase in gold production in Australia,
Brazil, Guinea and Tanzania from 465,000 ounces, 339,000 ounces, 256,000 ounces and 308,000 ounces, respectively,
produced in 2006, to 600,000 ounces, 408,000 ounces, 280,000 ounces and 327,000 ounces produced, respectively, in 2007.
This was mainly due to the mining of high grade areas at Sunrise Dam (in Australia); at AngloGold Ashanti Brasil Mineração (in
Brazil) due to Cuiabá mine expansion completed in latter half of 2006; at Siguiri (in Guinea) due to higher volumes treated with
the Carbon-in-pulp (CIP) plant being in full production and at Geita (in Tanzania) due to the impact of adverse weather
conditions, the delay in the Nyankanga pit push-back and lower recovered grade in 2006.
Brazil, Guinea and Tanzania from 465,000 ounces, 339,000 ounces, 256,000 ounces and 308,000 ounces, respectively,
produced in 2006, to 600,000 ounces, 408,000 ounces, 280,000 ounces and 327,000 ounces produced, respectively, in 2007.
This was mainly due to the mining of high grade areas at Sunrise Dam (in Australia); at AngloGold Ashanti Brasil Mineração (in
Brazil) due to Cuiabá mine expansion completed in latter half of 2006; at Siguiri (in Guinea) due to higher volumes treated with
the Carbon-in-pulp (CIP) plant being in full production and at Geita (in Tanzania) due to the impact of adverse weather
conditions, the delay in the Nyankanga pit push-back and lower recovered grade in 2006.
For the year ended December 31, 2006, AngloGold Ashanti’s total attributable gold production from continuing operations
decreased by 531,000 ounces, or 9 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 283, 000 ounces in 2006. The Australian operations produced
465,000 ounces of gold during 2006, compared with 455,000 ounces in 2005.
decreased by 531,000 ounces, or 9 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 283, 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.
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.
A more detailed review of gold production at each of AngloGold Ashanti’s operations is provided under “Item 4B.: Business
overview”.
overview”.
113
Total cash costs and total production costs
Comparison of total cash costs and total production costs in 2007 with 2006
Cash costs in all of the operations situated in South Africa increased in 2007 when compared to 2006. This was largely a result
of the reduced volumes mined, declining grades, safety-related stoppages and wage increases.
of the reduced volumes mined, declining grades, safety-related stoppages and wage increases.
Cerro Vanguardia, the Argentinean mine, recorded an increase in cash costs of 17 percent from $223 per ounce in 2006 to
$260 per ounce in 2007, mainly as a result of higher local inflation, increases in contractor and maintenance costs as well as
an increase in the size of the workforce partially offset by higher silver by-product revenue. The Australian mine, Sunrise Dam,
reported cash costs of $262 per ounce for 2007 compared to $333 per ounce for 2006, a 21 percent decrease mainly due to
record gold production in 2007.
$260 per ounce in 2007, mainly as a result of higher local inflation, increases in contractor and maintenance costs as well as
an increase in the size of the workforce partially offset by higher silver by-product revenue. The Australian mine, Sunrise Dam,
reported cash costs of $262 per ounce for 2007 compared to $333 per ounce for 2006, a 21 percent decrease mainly due to
record gold production in 2007.
The Brazilian mines, Brasil Mineração and Serra Grande, reported cash costs of $246 per ounce in 2007 compared to
$207 per ounce in 2006 and $264 per ounce in 2007 compared to $196 per ounce in 2006, respectively. This increase in cash
costs at both mines is mainly attributable to higher local inflation and reduced grade recovered and the appreciation of the local
currency against the US dollar.
$207 per ounce in 2006 and $264 per ounce in 2007 compared to $196 per ounce in 2006, respectively. This increase in cash
costs at both mines is mainly attributable to higher local inflation and reduced grade recovered and the appreciation of the local
currency against the US dollar.
Obuasi in Ghana reported increased cash costs of $67 per ounce increasing to $464 per ounce in 2007 as a result of reduced
production and increases in prices of consumables and rates of service contracts. Iduapriem reported an increase in cash
costs from $413 per ounce in 2006 to $497 per ounce in 2007 mainly due to the combined impact of the mill shutdown and
increases in contract mining costs. The operations at Siguiri, in Guinea, reported a $73 per ounce increase in cash costs to
$471 per ounce, mainly as result of the appreciation of the Guinean franc against the US dollar, higher royalty payments linked
to the higher gold price and higher fuel and labor costs.
production and increases in prices of consumables and rates of service contracts. Iduapriem reported an increase in cash
costs from $413 per ounce in 2006 to $497 per ounce in 2007 mainly due to the combined impact of the mill shutdown and
increases in contract mining costs. The operations at Siguiri, in Guinea, reported a $73 per ounce increase in cash costs to
$471 per ounce, mainly as result of the appreciation of the Guinean franc against the US dollar, higher royalty payments linked
to the higher gold price and higher fuel and labor costs.
The Malian operations reported increased cash costs. Yatela reported an increase in cash costs to $300 per ounce in 2007
compared to $241 per ounce in 2006 due to the decline in production, appreciation of the euro and FCFA against the dollar and
higher fuel prices. At Morila, cash costs increased in 2007 to $333 per ounce compared to $266 per ounce in 2006 mainly due
to the decline in production, appreciation of the euro and FCFA against the dollar and higher fuel prices. At Sadiola, production
declined 26 percent to 140,000 ounces, consequently cash costs increased from $268 per ounce in 2006 to $414 per ounce in
2007.
compared to $241 per ounce in 2006 due to the decline in production, appreciation of the euro and FCFA against the dollar and
higher fuel prices. At Morila, cash costs increased in 2007 to $333 per ounce compared to $266 per ounce in 2006 mainly due
to the decline in production, appreciation of the euro and FCFA against the dollar and higher fuel prices. At Sadiola, production
declined 26 percent to 140,000 ounces, consequently cash costs increased from $268 per ounce in 2006 to $414 per ounce in
2007.
Navachab in Namibia reported an increase in cash costs of 36 percent to $475 per ounce as a result of an increase in the costs
of labor and explosives whilst a grade-related decline in gold production also had a negative effect. Geita in Tanzania reported
a slight decrease in cash costs from $630 per ounce in 2006 to $627 per ounce in 2007. Reduced expenditure on equipment
re-builds, contractor services and an increased level of production contributed to the containment of costs. In North America,
Cripple Creek reported a $21 per ounce increase to $269 per ounce in 2007 mainly due to higher commodity and diesel fuel
prices.
of labor and explosives whilst a grade-related decline in gold production also had a negative effect. Geita in Tanzania reported
a slight decrease in cash costs from $630 per ounce in 2006 to $627 per ounce in 2007. Reduced expenditure on equipment
re-builds, contractor services and an increased level of production contributed to the containment of costs. In North America,
Cripple Creek reported a $21 per ounce increase to $269 per ounce in 2007 mainly due to higher commodity and diesel fuel
prices.
Overall, total cash costs for 2007 increased by $46 per ounce, or 14 percent, of which $21 per ounce was due to inflation,
$20 per ounce to lower efficiencies, $8 per ounce to decreased by-product sales, $6 per ounce to lower volumes and $5 per
ounce to exchange and royalty effects. These increases were partially offset by higher grades of $2 per ounce and other
variances of $12 per ounce.
$20 per ounce to lower efficiencies, $8 per ounce to decreased by-product sales, $6 per ounce to lower volumes and $5 per
ounce to exchange and royalty effects. These increases were partially offset by higher grades of $2 per ounce and other
variances of $12 per ounce.
Comparison of total cash costs and total production costs in 2006 with 2005
Cerro 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 04-6. 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 04-6, which increased cash costs by $37 per ounce.
$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 04-6. 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 04-6, which increased cash costs by $37 per ounce.
The Brazilian mines, Brasil Mineração 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 04-6.
$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 04-6.
114
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 04-6 which increased cash costs by $42 per ounce. The operations at Siguiri, 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.
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 04-6 which increased cash costs by $42 per ounce. The operations at Siguiri, 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 04-6.
$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 04-6.
Navachab in Namibia reported an increase in cash costs of 9 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 04-6, 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 04-6 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.
production and the effects of the US dollar on costs in the second half of the year and the adoption of EITF 04-6, 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 04-6 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 04-6. Cost savings initiatives helped to offset these increases by
$10 per ounce, favorable exchange variances by $7 per ounce, higher-by-product effects by $3 per ounce and other variances
by $3 per ounce.
lower grades and $13 per ounce for the adoption of EITF 04-6. Cost savings initiatives helped to offset these increases by
$10 per ounce, favorable exchange variances by $7 per ounce, higher-by-product effects by $3 per ounce and other variances
by $3 per ounce.
Total production costs per ounce increased from $452 per ounce in 2006 to $504 per ounce in 2007 and from $398 per ounce
in 2005 to $452 per ounce in 2006.
in 2005 to $452 per ounce in 2006.
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”.
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 Industry practice and are not US GAAP measures. The Gold Institute, which has now been incorporated into the
National Mining Association, was a non-profit international association of miners, refiners, bullion suppliers and manufacturers
of gold products, which 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.
standard and Industry practice and are not US GAAP measures. The Gold Institute, which has now been incorporated into the
National Mining Association, was a non-profit international association of miners, refiners, bullion suppliers and manufacturers
of gold products, which 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.
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, onsite
administration costs, royalties and production taxes, as well as contributions from by-products, but exclusive of depreciation,
depletion and amortization, rehabilitation costs, 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.
administration costs, royalties and production taxes, as well as contributions from by-products, but exclusive of depreciation,
depletion and amortization, rehabilitation costs, 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.
Institute industry guidelines, plus amortization, depreciation and rehabilitation costs.
115
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.
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.
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.
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.
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, AngloGold Ashanti believes that total cash costs and total
production costs in total by mine and pe r ounce by mine are useful indicators to investors and management as they provide:
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, AngloGold Ashanti believes that total cash costs and total
production costs in total by mine and pe r 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 mines, both within the AngloGold Ashanti
group and of other gold mining companies.
group and of other gold 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, 2007 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.
production costs for each of the three years in the period ended December 31, 2007 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, 2007
Operations in South Africa
(7)
(in $ millions, except as otherwise noted)
Mponeng
TauTona
Savuka
Great
Noligwa
Kopanang
Tau Lekoa
Moab
Khotsong
Surface
operations
Corporate
(6)
Production
costs
159 132 30 201 133 80 51 39 49
Plus:
Production costs of equity accounted joint ventures
(1)
- - - - - - - - (8)
Less:
Rehabilitation costs & other non-cash costs
-
1
-
(2)
(1)
-
(5)
-
(23)
Plus:
Inventory movement
(1)
(1)
-
(1)
(1)
(1)
-
-
-
Royalties
- - - - - - - - -
Related party transactions
(2)
(3) (2) (1) (3) (3) (1) (1) (1) -
Adjusted for:
Minority interests
(3)
- - - - - - - - 1
Non-gold
producing
companies
and
adjustments - - - - - - - - (8)
Total
cash
costs
155 130 29 195 128 78 45 38 11
Plus:
Depreciation, depletion and amortization
53
64
5
50
37
45
34
3
15
Employee severance costs
1
1
-
1
1
1
-
-
-
Rehabilitation and other non-cash costs
-
(1)
-
2
1
-
5
-
23
Adjusted for:
Minority interests
(3)
- - - - - - - - -
Non-gold
producing
companies
and
adjustments - - - - - - - - (4)
Total
production
costs
209 194 34 248 167 124 84 41 45
Gold produced (000’ ounces)
(4)
587 409 73 483 418 165 67 125 -
Total cash costs per ounce
(5)
264 318 397 404 306 473 672 304 -
Total production costs per ounce
(5)
356 474 466 513 400 752 1,254 328 -
116
For the year ended December 31, 2007
Operations in Argentina, Australia, Brazil, Ghana, Guinea, Mali, Namibia, Tanzania and USA
(in $ millions, except as otherwise noted)
(in $ millions, except as otherwise noted)
ARGENTINA AUSTRALIA
BRAZIL
GHANA
GUINEA
MALI
NAMIBIA TANZANIA
USA
Cerro
Vanguardia
Sunrise
Dam
Dam
Boddin
gton
gton
(9)
AngloGold
Ashanti
Brasil
Mineração
Ashanti
Brasil
Mineração
Serra
Grande
Grande
Obuasi
Bibiani
(10)
Iduapriem
(11)
Siguiri
Sadiola
Yatela
Morila
Navachab
Geita
Cripple
Creek
& Victor
Creek
& Victor
Production
costs
44 145
1
82
52
176 - 92 136 - - - 36
206 73
Plus:
Production costs of equity accounted joint ventures
(1)
-
- - - - - - -
-
54 30 50
-
-
-
Less:
Rehabilitation costs & other non-cash costs
(4)
3
(1)
(4)
(2)
(18)
-
(7)
(6)
(3)
(1)
-
2
(4)
(4)
Plus:
Inventory movement
6
(2)
-
-
(1)
1
-
2
(3)
-
-
1
(1)
(4)
42
Royalties
11 11 - - - 8 - 4 28 6 5 8 1
7
-
Related party transactions
(2)
-
- - - - - - -
- 1 2 1 -
-
-
Adjusted
for:
Minority interests
(3)
(4) - - -
(25)
- - (8) (23) - - - -
-
-
Total cash costs
53
157
-
78
24
167
-
83
132
58
36
60
38
205
111
Plus:
Depreciation, depletion and amortization
17
53
-
32
18
67
-
21
45
6
4
13
6
58
32
Employee
severance
costs
-
- - - - 14 - -
-
- - -
-
-
-
Rehabilitation and other non-cash costs
4
(3)
1
4
2
18
-
7
6
3
1
-
(2)
4
4
Adjusted
for:
Minority interests
(3)
(1) - - -
(10)
- - (2) (7) - - - -
-
-
Total
production
costs
73
207 1 114 34 266 - 109 176 67 41 73 42
267
147
Gold produced (000’ ounces)
(4)
204
600 - 317 91 360 - 167 280 140 120 180
80
327
282
Total cash costs per ounce
(5)
260
262 - 246 264 464 - 497 471 414 300 333 475
627
(8)
269
Total production costs per ounce
(5)
358
345 - 360 374 739 - 653 629 479 342 406 525
817
521
117
118
For the year ended December 31, 2007
AngloGold Ashanti operations - Total
(in $ millions, except as otherwise noted)
(in $ millions, except as otherwise noted)
Total
Production costs per financial statements
1,917
Plus:
Production costs of equity accounted joint ventures
Production costs of equity accounted joint ventures
(1)
126
Less:
Rehabilitation costs & other non-cash costs
Rehabilitation costs & other non-cash costs
(79)
Plus/(less):
Inventory movement
Inventory movement
36
Royalties
89
Related party transactions
(2)
(11)
Adjusted for:
Minority interests
Minority interests
(3)
(59)
Non-gold producing companies and adjustments
(8)
Total cash costs
2,011
Plus:
Depreciation, depletion and amortization
Depreciation, depletion and amortization
678
Employee severance costs
19
Rehabilitation and other non-cash costs
79
Adjusted for:
Minority interests
Minority interests
(3)
(20)
Non-gold producing companies and adjustments
(4)
Total production costs
2,763
Gold produced (000’ ounces)
(4)
5,477
Total cash costs per ounce
(5)
367
Total production costs per ounce
(5)
504
(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.
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.
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.
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 heap leach inventory change.
(9)
There was no production attributable to AngloGold Ashanti in 2007.
(10)
Bibiani was sold effective December 28, 2006.
(11)
Remaining minority interests of 15 percent were acquired effective September 1, 2007.
For the year ended December 31, 2006
Operations in South Africa
(7)
(in $ millions, except as otherwise noted)
Mponeng
TauTona
Savuka
Great
Noligwa
Kopanang
Tau Lekoa
Moab
Khotsong
Surface
operations
Corporate
(6)
Production
costs
137 128 29 161 128 78 29 32 (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)
(1) (1) (1) (1) (1) - - - -
Adjusted for:
Minority interests
(3)
- - - - - - - - (2)
Non-gold
producing
companies
and
adjustments - - - - - - - - 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 -
119
For the year ended December 31, 2006
Operations in Argentina, Australia, Brazil, Ghana, Guinea, Mali, Namibia, Tanzania and USA
(in $ millions, except as otherwise noted)
(in $ millions, except as otherwise noted)
ARGENTINA AUSTRALIA
BRAZIL
GHANA
GUINEA
MALI
NAMIBIA TANZANIA
USA
Cerro
Vanguardia
Vanguardia
Sunrise
Dam
Dam
Boddin
gton
gton
(9)
AngloGold
Ashanti
Brasil
Mineração
Ashanti
Brasil
Mineração
Serra
Grande
Grande
Obuasi
Bibiani
(10)
Iduapriem
Siguiri
Sadiola
Yatela
Morila
Navachab
Geita
Cripple Creek
& Victor
& Victor
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)
-
1
3
4
(3)
2
3
(2)
2
7
(2)
Plus:
Inventory movement
3
4
-
-
2
4
1
3
11
2
3
3
3
(8)
40
Royalties
11 7 - - - 7 1 4 21 6 5 7 -
5
2
Related party transactions
(2)
-
- - - - - - - - - 2 1 -
-
-
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
387
37
167
256
190
141
207
86
308
283
Total cash costs per ounce
(5)
223
333 - 207 196 397 432 413 398 268 241 266 349
630
(8)
248
Total production costs per ounce
(5)
372
406 - 301 278 638 594 544 593 363 326 367 407
766
498
120
121
For the year ended December 31, 2006
AngloGold Ashanti operations - Total
(in $ millions, except as otherwise noted)
(in $ millions, except as otherwise noted)
Total
Production costs per financial statements
1,539
Plus:
Production costs of equity accounted joint ventures
Production costs of equity accounted joint ventures
(1)
80
Plus:
Rehabilitation costs & other non-cash costs
Rehabilitation costs & other non-cash costs
17
Plus/(less):
Inventory movement
Inventory movement
84
Royalties
78
Related party transactions
(2)
(2)
Adjusted for:
Minority interests
Minority interests
(3)
(54)
Non-gold producing companies and adjustments
68
Total cash costs
1,810
Plus/(less):
Depreciation, depletion and amortization
Depreciation, depletion and amortization
749
Employee severance costs
22
Rehabilitation and other non-cash costs
(17)
Adjusted for:
Minority interests
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.
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.
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.
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 heap leach inventory change.
(9)
There was no production attributable to AngloGold Ashanti in 2006.
(10)
Bibiani was sold effective December 28, 2006.
For the year ended December 31, 2005
Operations in South Africa
(7)
(in $ millions, except as otherwise noted)
Mponeng
TauTona
Savuka
Great
Noligwa
Kopanang
Tau Lekoa
Surface
operations
Corporate
(6)
Production costs
138
124
51
179
135
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)
6 6 2 9 6 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 -
122
For the year ended December 31, 2005
Operations in Argentina, Australia, Brazil, Ghana, Guinea, Mali, Namibia, Tanzania and USA
(in $ millions, except as otherwise noted)
(in $ millions, except as otherwise noted)
ARGENTINA AUSTRALIA
BRAZIL
GHANA
GUINEA
MALI
NAMIBIA TANZANIA
USA
Cerro
Vanguardia
Vanguardia
Sunrise
Dam
Dam
Boddin
gton
gton
(9)
AngloGold
Ashanti
Brasil
Mineração
Ashanti
Brasil
Mineração
Serra
Grande
Grande
Obuasi
Bibiani
Iduapriem
Siguiri
Sadiola
Yatela
Morila
Navachab
Geita
Cripple
Creek
& Victor
Creek
& Victor
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
-
22
11
72
18
23
39
27
7
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
123
124
For the year ended December 31, 2005
AngloGold Ashanti operations - Total
(in $ millions, except as otherwise noted)
(in $ millions, except as otherwise noted)
Total
Production costs per financial statements
1,642
Plus:
Production costs of equity accounted joint ventures
Production costs of equity accounted joint ventures
(1)
108
Less:
Rehabilitation costs & other non-cash costs
Rehabilitation costs & other non-cash costs
(60)
Plus:
Inventory movement
Inventory movement
37
Royalties
54
Related party transactions
(2)
35
Adjusted for:
Minority interests
Minority interests
(3)
(42)
Non-gold producing companies and adjustments
(41)
Total cash costs
1,733
Plus:
Depreciation, depletion and amortization
Depreciation, depletion and amortization
653
Employee severance costs
26
Rehabilitation and other non-cash costs
60
Adjusted for:
Minority interests
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.
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.
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.
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 heap leach inventory change.
(9)
There was no production attributable to AngloGold Ashanti in 2005.
125
Capital expenditure
Total capital expenditure of $1,059 million, which includes $35 million relating to the fifteen-year secured capital leases for the
new corporate office (Turbine Square and Turbine Hall), was recorded in the year ended December 31, 2007 compared to
$817 million in the same period in 2006. This represents a $207 million, or 25 percent, increase from 2006. In South Africa,
capital expenditure increased from $321 million in 2006 to $411 million in 2007, mainly due to expansion projects at Mponeng,
TauTona and the ramping up at Moab Khotsong. Expenditure in Brazil decreased to $141 million in 2007 from $186 million in
2006 as a result of the Cuiabá expansion project nearing completion. In Australia, capital expenditure increased from
$86 million in 2006 to $281 million in 2007, mainly as a result of the expansion at Boddington mine. At year-end, overall project
progress at Boddington mine was approxi mately 65 percent complete, with engineering and procurement activities nearing
completion.
new corporate office (Turbine Square and Turbine Hall), was recorded in the year ended December 31, 2007 compared to
$817 million in the same period in 2006. This represents a $207 million, or 25 percent, increase from 2006. In South Africa,
capital expenditure increased from $321 million in 2006 to $411 million in 2007, mainly due to expansion projects at Mponeng,
TauTona and the ramping up at Moab Khotsong. Expenditure in Brazil decreased to $141 million in 2007 from $186 million in
2006 as a result of the Cuiabá expansion project nearing completion. In Australia, capital expenditure increased from
$86 million in 2006 to $281 million in 2007, mainly as a result of the expansion at Boddington mine. At year-end, overall project
progress at Boddington mine was approxi mately 65 percent complete, with engineering and procurement activities nearing
completion.
Total capital expenditure during the year ended December 31, 2006 was $817 million compared to $722 million in 2005 being a
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
expenditure in Ghana and Guinea amounted to $97 million and $16 million, respectively, in 2006, compared to $90 million and
$36 million, respectively, in 2005, mainly due to capital projects at Obuasi in Ghana and the commissioning of the CIP plant in
Guinea. 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
underground mining project at Sunrise Dam and the commencement of expansion at Boddington mine. Capital expenditure in
the USA increased from $8 million in 2005 to $13 million in 2006.
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
expenditure in Ghana and Guinea amounted to $97 million and $16 million, respectively, in 2006, compared to $90 million and
$36 million, respectively, in 2005, mainly due to capital projects at Obuasi in Ghana and the commissioning of the CIP plant in
Guinea. 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
underground mining project at Sunrise Dam and the commencement of expansion at Boddington mine. Capital expenditure in
the USA increased from $8 million in 2005 to $13 million in 2006.
A more detailed review of capital expenditure at each of AngloGold Ashanti’s operations is provided under “Item 4B.: Business
overview”.
overview”.
Establishment of a Black Economic Empowerment (BEE) transaction in South Africa
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 the Company and the unions to ensure a closer alignment
of the interest between South African based employees and the Company. Participation is restricted to those employees not
eligible for participation in any other South African Share Incentive 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 the Company and the unions to ensure a closer alignment
of the interest between South African based 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).
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.
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.
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;
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; 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 strike price calculation.
declared by the Company from time to time and a further one half is included in the strike price calculation.
126
The average fair value of the E ordinary shares granted to employees in 2007 was R79 (2006: R105) per share. Dividends
declared in respect of the E ordinary shares will firstly be allocated to cover administration expenses of the trust, whereafter 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 original 2006 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 converted to
ordinary shares for the benefit of the employees. All unexercised awards will be cancelled on May 1, 2014.
declared in respect of the E ordinary shares will firstly be allocated to cover administration expenses of the trust, whereafter 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 original 2006 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 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 over a five year period commencing on the third anniversary of 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 the tranche will be converted to ordinary shares for the benefit of Izingwe. If no instruction is
received at the end of the six month period, the cancellation formula will be applied automatically.
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 over a five year period commencing on the third anniversary of 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 the tranche will be converted to ordinary shares for the benefit of Izingwe. If no instruction is
received at the end of the six month period, the cancellation formula will be applied automatically.
Comparison of financial performance on a segment basis for 2007, 2006 and 2005
The Company 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. During 2007, the Company changed the method of allocating hedging to individual
mines. In prior periods, forward contracts were allocated to each reporting segment, based on the then prevailing contractual
relationship with the counterparty. Following the removal of certain counterparty restrictions and the granting of group level
guarantees during 2006, the Company has applied an average received gold price across all reporting segments. The average
received gold price for each mine is thus similar to the Company’s average received gold price which includes realized
gains/losses on non-hedge derivatives. Where applica ble, the corresponding items of segment information for all earlier
periods presented have been restated to reflect this. This information is consistent with the information used by the Company’s
Chief Operating Decision Maker in evaluating operating performance of, and making resource allocation decisions among
operations.
business activity, but manages its business on the basis of different geographic segments. Therefore, information regarding
separate geographic segments is provided. During 2007, the Company changed the method of allocating hedging to individual
mines. In prior periods, forward contracts were allocated to each reporting segment, based on the then prevailing contractual
relationship with the counterparty. Following the removal of certain counterparty restrictions and the granting of group level
guarantees during 2006, the Company has applied an average received gold price across all reporting segments. The average
received gold price for each mine is thus similar to the Company’s average received gold price which includes realized
gains/losses on non-hedge derivatives. Where applica ble, the corresponding items of segment information for all earlier
periods presented have been restated to reflect this. This information is consistent with the information used by the Company’s
Chief Operating Decision Maker in evaluating operating performance of, and making resource allocation decisions among
operations.
Revenues
Year ended December 31
(in millions)
2007
$
percent
2006
$
percent
2005
$
percent
Category
of
activity
Total
revenues
Product sales
3,048
2,683
2,453
Interest, dividends and other
47
32
32
Total
revenues
3,095
2,715
2,485
Geographical area data
Total
revenues
South Africa
1,504
49
1,531
56
1,226
49
Argentina
130
4
118
4
101
4
Australia
379
12
309
11
210
8
Brazil
319
10
260
10
191
8
Ghana
364
12
330
12
338
14
Guinea
224
7
164
6
138
6
Mali
280
9
321
12
236
9
Namibia
54
2
51
2
36
2
Tanzania
224
7
198
7
257
10
USA
180
6
124
5
129
5
Other, including Corporate and Non-gold producing
subsidiaries
8
-
13
-
7
-
3,666
3,419
2,869
Less : Equity method investments included above
(280)
(9)
(321)
(11)
(236)
(9)
Less : Gains on realized non hedge derivatives included
above
(291) (9)
(383) (14)
(148) (6)
Total
revenues
3,095 100
2,715 100
2,485 100
127
In 2007, 49 percent of AngloGold Ashanti’s total consolidated revenues were derived from its operations in South Africa,
compared to 56 percent in 2006, mainly as a result of the 9 percent decrease in production in the South African operations.
South Africa produced 43 percent of the global production in 2007.
compared to 56 percent in 2006, mainly as a result of the 9 percent decrease in production in the South African operations.
South Africa produced 43 percent of the global production in 2007.
In 2006, 56 percent of AngloGold Ashanti’s total consolidated revenues were derived from its operations in South Africa,
compared to 49 percent in 2005, mainly as a result of the increase in the rand gold price over 2005.
compared to 49 percent in 2005, mainly as a result of the increase in the rand gold price over 2005.
Assets
As at December 31
(in millions)
2007
$
percent
2006
$
percent
2005
$
percent
Geographical area data
Total segment assets
South Africa
3,337
32
3,093
33
3,019
33
Argentina 236
2
254
3
248
3
Australia 1,183
11
805
8
737
8
Brazil 674
6
544
6
371
4
Ghana 2,155
21
2,058
21
2,104
23
Guinea 371
4
357
4
349
4
Mali 291
(1)
3 280
(1)
3 309
(1)
4
Namibia 76
1
64
1
51
-
Tanzania 1,343
13
1,382
15
1,281
14
USA 528
5
507
5
429
5
Other, including Corporate, Assets held for
sale and Non-gold producing subsidiaries
sale and Non-gold producing subsidiaries
187
2
169
1 215
2
Total segment assets
10,381
100
9,513
100
9,113
100
(1)
Investment held.
At December 31, 2007, 32 percent of AngloGold Ashanti’s total assets were located in South Africa compared with 33 percent
at the end of 2006. Operations outside of South Africa collectively accounted for approximately 68 percent of AngloGold
Ashanti’s total assets at December 31, 2007 compared to 67 percent at the end of the same period in 2006.
at the end of 2006. Operations outside of South Africa collectively accounted for approximately 68 percent of AngloGold
Ashanti’s total assets at December 31, 2007 compared to 67 percent at the end of the same period in 2006.
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 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.
Comparison of financial performance in 2007, 2006 and 2005
Financial performance of AngloGold Ashanti
Year ended December 31
2007 2006
2005
Revenue
3,095
2,715
2,485
Cost and expenses
(3,806)
(2,811)
(2,848)
Taxation (expense)/benefit
(118)
(122)
121
Minority interest
(28)
(29)
(23)
Equity income in affiliates
41
99
39
Discontinued operations
2
6
(44)
Cumulative effect of accounting change
-
-
(22)
Net loss
(814) (142)
(292)
For more detail discussions on revenue and costs see the following explanations.
128
Comparison of financial performance in 2007 with 2006
Revenues
Revenues from product sales and other income increased by $380 million from $2,715 million in 2006 to $3,095 million in
2007, representing a 14 percent increase over the period. This increase was primarily due to the increase in the spot price of
gold in 2007. The average spot price of gold was $697 per ounce during 2007, $93 per ounce, or 15 percent, higher than $604
per ounce, the average spot price of gold in 2006. The majority of product sales consisted of US dollar-denominated gold
sales.
2007, representing a 14 percent increase over the period. This increase was primarily due to the increase in the spot price of
gold in 2007. The average spot price of gold was $697 per ounce during 2007, $93 per ounce, or 15 percent, higher than $604
per ounce, the average spot price of gold in 2006. The majority of product sales consisted of US dollar-denominated gold
sales.
Total revenues from the South African operations decreased by $41 million to $1,472 million from $1,513 million realized in
2006, mainly as a result of reduced gold production at the South African operations (2,328,000 ounces in 2007 compared to
2,554,000 ounces in 2006) which more than offset the increase in gold price.
2006, mainly as a result of reduced gold production at the South African operations (2,328,000 ounces in 2007 compared to
2,554,000 ounces in 2006) which more than offset the increase in gold price.
Total revenues generated by Cerro Vanguardia, the Argentinean operation increased from $118 million in 2006 to $129 million
in 2007 mainly as a result of the higher gold price. The increase in revenue was partly offset by reduced gold production
(204,000 ounces in 2007 compared to 215,000 ounces in 2006) and a reduction in grade recovered from 7.29 grammes per
tonne in 2006 to 6.88 grammes per tonne in 2007.
in 2007 mainly as a result of the higher gold price. The increase in revenue was partly offset by reduced gold production
(204,000 ounces in 2007 compared to 215,000 ounces in 2006) and a reduction in grade recovered from 7.29 grammes per
tonne in 2006 to 6.88 grammes per tonne in 2007.
The Australian operation at Sunrise Dam increased production to 600,000 ounces from 465,000 ounces in 2006. Average
recovered grade increased from 3.39 grammes per tonne in 2006 to 4.86 grammes per tonne in 2007. Total revenues
increased from $307 million in 2006 to $378 million in 2007.
recovered grade increased from 3.39 grammes per tonne in 2006 to 4.86 grammes per tonne in 2007. Total revenues
increased from $307 million in 2006 to $378 million in 2007.
The two operations in Brazil produced 408,000 attributable ounces compared to 339,000 ounces in 2006. The increase in
production and higher gold price resulted in total revenues of $323 million in 2007 compared to $258 million in 2006.
production and higher gold price resulted in total revenues of $323 million in 2007 compared to $258 million in 2006.
Total revenues generated from operations situated in Ghana amounted to $364 million in 2007, compared to $330 million in
2006. The increase was mainly as a result of the higher gold price. The increase in revenue was partly offset by reduced gold
production from 592,000 ounces in 2006 to 527,000 ounces in 2007.
2006. The increase was mainly as a result of the higher gold price. The increase in revenue was partly offset by reduced gold
production from 592,000 ounces in 2006 to 527,000 ounces in 2007.
Total revenues generated in Guinea amounted to $223 million in 2007 compared to $167 million in 2006. The increase was
due to the higher gold price and an increase in gold production from 256,000 ounces in 2006 to 280,000 ounces in 2007.
due to the higher gold price and an increase in gold production from 256,000 ounces in 2006 to 280,000 ounces in 2007.
Tanzania recorded total revenues of $219 million in 2007 compared to $199 million in 2006. The increase in revenue was a
result of the higher gold price and an increase in gold production from 308,000 ounces in 2006 to 327,000 ounces in 2007.
result of the higher gold price and an increase in gold production from 308,000 ounces in 2006 to 327,000 ounces in 2007.
Production costs
Production costs increased from $1,539 million in 2006 to $1,917 million in 2007, which represents a $378 million, or
25 percent increase. In South Africa, production costs increased by $191 million to $874 million in 2007 from $683 million in
2006 mainly as a result of annual wage increases and higher fuel and power costs. About 46 percent of AngloGold Ashanti’s
production costs were denominated in South African rands in 2007.
25 percent increase. In South Africa, production costs increased by $191 million to $874 million in 2007 from $683 million in
2006 mainly as a result of annual wage increases and higher fuel and power costs. About 46 percent of AngloGold Ashanti’s
production costs were denominated in South African rands in 2007.
Production costs recorded from operations situated in Ghana, Guinea and Brazil increased from $221 million, $91 million and
$89 million, respectively, in 2006 to $268 million, $136 million and $134 million, respectively, in 2007 mainly as a result of an
increase in operational costs including labor, fuel, consumables, power and water costs as well as the strengthening of local
currencies relative to the US dollar.
$89 million, respectively, in 2006 to $268 million, $136 million and $134 million, respectively, in 2007 mainly as a result of an
increase in operational costs including labor, fuel, consumables, power and water costs as well as the strengthening of local
currencies relative to the US dollar.
Exploration costs
Exploration costs increased to $117 million in 2007 from $58 million in 2006. This was mainly due to increased exploration
activities at the Tropicana project in Western Australia, regional and target generation activities in Colombia, continued drilling
in the Mongbwalu region of the Democratic Republic of the Congo as well as mine-based programs in South America, Ghana
and Guinea. 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 2007, see “Item 4B.: Business
overview – Global exploration”.
activities at the Tropicana project in Western Australia, regional and target generation activities in Colombia, continued drilling
in the Mongbwalu region of the Democratic Republic of the Congo as well as mine-based programs in South America, Ghana
and Guinea. 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 2007, see “Item 4B.: Business
overview – Global exploration”.
129
Related party transactions
Related party transactions in 2007 amounted to a credit (representing purchases by related parties) of $16 million compared
with a credit of $6 million in 2006. This was mainly due to lower contract work generated by development activities. The
Company, which holds an equity interest of 29.8 percent in Trans-Siberian Gold plc (TSG), entered into a transaction during
the quarter ended June 30, 2007 with TSG in which two companies were acquired from TSG for a cash consideration of
$40 million. The companies acquired consist of Amikan (which holds the Veduga deposit, related exploration and mining
licenses) and AS APK (which holds the Bogunay deposit, related exploration and mining licenses). For a detailed discussion of
related party transactions, see “Item 7B.: Related party transactions”.
with a credit of $6 million in 2006. This was mainly due to lower contract work generated by development activities. The
Company, which holds an equity interest of 29.8 percent in Trans-Siberian Gold plc (TSG), entered into a transaction during
the quarter ended June 30, 2007 with TSG in which two companies were acquired from TSG for a cash consideration of
$40 million. The companies acquired consist of Amikan (which holds the Veduga deposit, related exploration and mining
licenses) and AS APK (which holds the Bogunay deposit, related exploration and mining licenses). For a detailed discussion of
related party transactions, see “Item 7B.: Related party transactions”.
General and administrative
General and administrative expenses decreased from $140 million in 2006 to $130 million in 2007, mainly due to a decrease of
$28 million in share-based payment expense being offset by an increase in labor and corporate office costs.
$28 million in share-based payment expense being offset by an increase in labor and corporate office costs.
Royalties
Royalties paid by AngloGold Ashanti increased from $59 million in 2006 to $70 million paid in 2007 primarily due to higher spot
prices, with royalties in Australia, Argentina and Tanzania amounting to $11 million, $11 million and $7 million, respectively, in
2007 compared with $7 million, $11 million and $5 million, respectively, in 2006. Royalties paid in Ghana and Guinea
amounted to $40 million in 2007 compared to $33 million in 2006. 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 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.
prices, with royalties in Australia, Argentina and Tanzania amounting to $11 million, $11 million and $7 million, respectively, in
2007 compared with $7 million, $11 million and $5 million, respectively, in 2006. Royalties paid in Ghana and Guinea
amounted to $40 million in 2007 compared to $33 million in 2006. 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 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.
Market development costs
Market development costs remained unchanged at $16 million. AngloGold Ashanti remains a member of the World Gold
Council (WGC) and through its membership receives assistance in all its marketing endeavors. For a detailed discussion on
market development see “Item 4B.: Business overview – Gold market development”.
Council (WGC) and through its membership receives assistance in all its marketing endeavors. For a detailed discussion on
market development see “Item 4B.: Business overview – Gold market development”.
Depreciation, depletion and amortization
Depreciation, depletion and amortization expense decreased by $44 million or 6 percent, to $655 million in 2007 when
compared to $699 million recorded in 2006. This decrease was mainly due to decreases in depreciation, depletion and
amortization expense in South Africa, Ghana and the USA from $324 million, $119 million and $39 million, respectively,
incurred in the year ended December 31, 2006 to $301 million, $91 million and $32 million, respectively, in the same period of
2007 mainly as a result of a decrease in gold production and changes in estimated lives of assets. This was partially offset by
an increase in depreciation, depletion and amortization expense in Australia which increased from $39 million incurred in the
year ended December 31, 2006 to $54 million in the same period in 2007 as a result of the increase in gold production.
compared to $699 million recorded in 2006. This decrease was mainly due to decreases in depreciation, depletion and
amortization expense in South Africa, Ghana and the USA from $324 million, $119 million and $39 million, respectively,
incurred in the year ended December 31, 2006 to $301 million, $91 million and $32 million, respectively, in the same period of
2007 mainly as a result of a decrease in gold production and changes in estimated lives of assets. This was partially offset by
an increase in depreciation, depletion and amortization expense in Australia which increased from $39 million incurred in the
year ended December 31, 2006 to $54 million in the same period in 2007 as a result of the increase in gold production.
Impairment of assets
In 2007, AngloGold Ashanti recorded impairments amounting to $1 million compared to $6 million in 2006 which related to the
impairment and write-off of various minor tangible assets and equipment.
impairment and write-off of various minor tangible assets and equipment.
130
Interest expense
Interest expense decreased by $2 million from $77 million recorded in 2006 to $75 million in 2007 as a result of similar average
borrowing levels in a stable interest rate environment for variable overdrafts and bank loans during 2007. A significant portion
of AngloGold Ashanti’s debt was denominated in US dollars in 2007.
borrowing levels in a stable interest rate environment for variable overdrafts and bank loans during 2007. A significant portion
of AngloGold Ashanti’s debt was denominated in US dollars in 2007.
Accretion expense
Accretion expense of $20 million was recorded in 2007 compared with $13 million in 2006. Accretion relates to the unwinding
of discounted future reclamation obligations to present values and increases in the reclamation obligations to its future
estimated payout.
of discounted future reclamation obligations to present values and increases in the reclamation obligations to its future
estimated payout.
Employment severance cost
Employment severance costs decreased to $19 million in 2007 from $22 million in 2006. The 2007 expense included
retrenchment costs of $5 million in the South African region (at Great Noligwa, Kopanang, Tau Lekoa, TauTona and Mponeng)
and $14 million in Ghana (at Obuasi) due to a planned reduction in workforce.
retrenchment costs of $5 million in the South African region (at Great Noligwa, Kopanang, Tau Lekoa, TauTona and Mponeng)
and $14 million in Ghana (at Obuasi) due to a planned reduction in workforce.
Loss/profit on sale of assets, realization of loans, indirect taxes and other
A loss of $10 million was recorded in 2007 compared to a profit of $36 million recorded in 2006 which consisted mainly of the
reassessment of indirect taxes and royalties in Tanzania and Guinea and profit on disposal and abandonment of land, mineral
rights and exploration properties in 2007.
reassessment of indirect taxes and royalties in Tanzania and Guinea and profit on disposal and abandonment of land, mineral
rights and exploration properties in 2007.
Non-hedge derivative loss
A loss on non-hedge derivatives of $808 million, being derivatives not designated in formal hedge accounting relationships,
was recorded in 2007 compared to a loss of $208 million in 2006 relating to the use of non-hedging instruments. The loss in
2007 is primarily the result of the revaluation of non-hedge derivatives resulting from changes in the prevailing spot gold price,
exchange rates, interest rates and greater volatilities compared to 2006. Non-hedge derivatives recorded for the years ended
December 31, 2007 and 2006 included:
was recorded in 2007 compared to a loss of $208 million in 2006 relating to the use of non-hedging instruments. The loss in
2007 is primarily the result of the revaluation of non-hedge derivatives resulting from changes in the prevailing spot gold price,
exchange rates, interest rates and greater volatilities compared to 2006. Non-hedge derivatives recorded for the years ended
December 31, 2007 and 2006 included:
Year ended December 31,
2007 2006
(in US Dollars, millions)
Gains on realized non-hedge derivatives
(291)
(383)
Loss on unrealized non-hedge derivatives
1,099
591
Net loss
808
208
Other operating items
Other operating items, consisting of provision for loss on future deliveries of other commodities and unrealized gain/loss on
other commodity physical borrowings amounted to a net credit of $16 million in 2007 compared to an expense of $16 million in
2006.
other commodity physical borrowings amounted to a net credit of $16 million in 2007 compared to an expense of $16 million in
2006.
131
Equity income in affiliates
Equity income in equity method investments decreased from $99 million in 2006 to $41 million in 2007, mainly as a result of a
decrease in earnings at Yatela, Sadiola and Morila mines in Mali, which reported attributable earnings of $17 million,
$10 million and $18 million, respectively, in 2007 compared to $26 million, $28 million and $37 million, respectively, in 2006. In
2007, the Company recorded an impairment loss of $14 million on its investment held in TSG.
decrease in earnings at Yatela, Sadiola and Morila mines in Mali, which reported attributable earnings of $17 million,
$10 million and $18 million, respectively, in 2007 compared to $26 million, $28 million and $37 million, respectively, in 2006. In
2007, the Company recorded an impairment loss of $14 million on its investment held in TSG.
Taxation expense/benefit
A net taxation expense of $118 million was recorded in 2007 compared to a net tax expense of $122 million recorded in 2006.
Charges for current tax in 2007 amounted to $191 million compared to $156 million in 2006. Charges for deferred tax in 2007
amounted to a net tax benefit of $73 million compared to a net tax benefit of $34 million in 2006. The increase in the taxation
charge in 2007 partly relates to the higher gold price and a reduction in unredeemed capital expenditure. The increase in the
deferred tax benefit over 2006 is mainly higher unrealized non-hedge derivative losses as a result of the higher gold price.
Deferred tax in 2007 include a tax benefit of $28 million arising from an increase in tax losses in Ghana and a tax expense at
$23 million as a result of a change to the estimated deferred tax rate in South Africa.
Charges for current tax in 2007 amounted to $191 million compared to $156 million in 2006. Charges for deferred tax in 2007
amounted to a net tax benefit of $73 million compared to a net tax benefit of $34 million in 2006. The increase in the taxation
charge in 2007 partly relates to the higher gold price and a reduction in unredeemed capital expenditure. The increase in the
deferred tax benefit over 2006 is mainly higher unrealized non-hedge derivative losses as a result of the higher gold price.
Deferred tax in 2007 include a tax benefit of $28 million arising from an increase in tax losses in Ghana and a tax expense at
$23 million as a result of a change to the estimated deferred tax rate in South Africa.
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 9 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.
2006, representing a 9 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 $298 million to $1,513 million from $1,215 million realized in
2005, a 25 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.
2005, a 25 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 $99 million in 2005 to
$118 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.
$118 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 $208 million in 2005 to $307 million in 2006.
recovered grade declined by 8 percent which was offset by increased tonnage processed from the underground operation.
Total revenues increased from $208 million in 2005 to $307 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 $258 million in 2006 compared to $184 million in 2005.
increase in average grades recovered resulting in total revenues of $258 million in 2006 compared to $184 million in 2005.
Total revenues generated from operations situated in Ghana amounted to $330 million in 2006, compared to $337 million in
2005.
2005.
Total revenues generated in Guinea amounted to $167 million in 2006 compared to $137 million in 2005.
Tanzania recorded total revenues of $199 million in 2006 compared to $258 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.
of nearly 50 percent due to delays in the cutback at the Nyankanga pit and weather related issues.
132
Production costs
Production costs decreased from $1,642 million in 2005 to $1,539 million in 2006, which represents a $103 million, or 6 percent
decrease. In South Africa, production costs decreased by $133 million to $683 million in 2006 from $816 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.
decrease. In South Africa, production costs decreased by $133 million to $683 million in 2006 from $816 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 $67 million in 2005 to $89 million in 2006 primarily
due to the strengthening of the Brazilian real relative to the US dollar.
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 project 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”.
were primarily focused on the Tropicana project 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 a credit (representing purchases by related parties) of $6 million compared
with an expense (representing purchases from related parties) of $37 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 to an associate of
Anglo American plc. The Company continued to transact with Anglo American entities when price, service and quality factors
supported this. For a detailed discussion of related party transactions, see “Item 7B.: Related party transactions”.
with an expense (representing purchases from related parties) of $37 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 to an associate of
Anglo American plc. The Company continued to transact with Anglo American entities when price, service and quality factors
supported this. For a detailed discussion of related party transactions, see “Item 7B.: Related party transactions”.
General and administrative
General and administrative expenses increased from $71 million in 2005 to $140 million in 2006, mainly due to $61 million
share-based payment expense included in 2006 compared to $2 million in 2005.
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, $5 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 $33 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 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, 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.
prices, with royalties in Australia, Argentina, Tanzania and the USA amounting to $7 million, $11 million, $5 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 $33 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 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, 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 endeavors. For a detailed
discussion on market development see “Item 4B.: Business overview – Gold market development”.
the World Gold Council (WGC) and through its membership receives assistance in all its marketing endeavors. For a detailed
discussion on market development see “Item 4B.: Business overview – Gold market development”.
133
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.
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.
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
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.
$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.
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.
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.
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.
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, realization of loans, indirect taxes and other
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 in Tanzania.
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 in Tanzania.
134
Non-hedge derivative loss
A loss on non-hedge derivatives of $208 million, being derivatives not designated in formal hedge accounting relationships,
was recorded in 2006 compared to a loss of $142 million in 2005 relating to the use of non-hedging instruments. Non-hedge
derivatives recorded for the years ended December 31, 2006 and 2005 included:
was recorded in 2006 compared to a loss of $142 million in 2005 relating to the use of non-hedging instruments. Non-hedge
derivatives recorded for the years 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
-
13
Net loss
208
142
Other operating items
Other operating items, 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.
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.
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 earnings at Yatela and Sadiola mines in Mali, which reported attributable earnings of $26 million and $28 million,
respectively, in 2006 compared to $5 million and $(1) million, respectively, in 2005. In 2006, the Company recorded an
impairment loss of $7 million on its investment held in TSG.
increase in earnings at Yatela and Sadiola mines in Mali, which reported attributable earnings of $26 million and $28 million,
respectively, in 2006 compared to $5 million and $(1) million, respectively, in 2005. In 2006, the Company recorded an
impairment loss of $7 million on its investment held in TSG.
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 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 milli on 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.
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 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 milli on 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.
135
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.
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.
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.
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:
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 (increase)
Payroll and related benefits
10 (increase)
Other creditors
2
(increase)
Retained earnings
11 (decrease)
5B.
Liquidity and capital resources
Operating activities
2007
Net cash provided by operating activities was $561 million in 2007, 27 percent lower than the 2006 amount of $770 million. The
decrease in net cash provided by operations was mainly as a result of higher payments to suppliers, partly offset by a higher
average gold price received for the year.
decrease in net cash provided by operations was mainly as a result of higher payments to suppliers, partly offset by a higher
average gold price received for the year.
Net cash outflow from operating working capital items amounted to $170 million in 2007, compared with an outflow of
$32 million in 2006.
$32 million in 2006.
A detailed discussion of the movement in net loss is included in the comparison of 2007 with 2006 under “Item 5A: Operating
results”.
results”.
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.
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.
136
Net cash outflow from operating working capital items amounted to $32 million in 2006, compared with an outflow of $13 million
in 2005.
in 2005.
A detailed discussion of the movement in net loss is included in the comparison of 2006 with 2005 under “Item 5A: Operating
results”.
results”.
Investing activities
2007
Investing activities in 2007 resulted in a net cash outflow of $1,031 million compared with a net cash outflow of $611 million in
2006. The major component of cash outflows was in additions to property, plants and equipment which included capital
expenditure of $1,015 million, compared to $811 million in 2006, with the major capital projects at Mponeng, TauTona, Moab
Khotsong in South Africa, at Boddington mine in Australia and the Cuiabá expansion in Brazil. Cash paid for the two
companies acquired from TSG amounted to $40 million in 2007.
2006. The major component of cash outflows was in additions to property, plants and equipment which included capital
expenditure of $1,015 million, compared to $811 million in 2006, with the major capital projects at Mponeng, TauTona, Moab
Khotsong in South Africa, at Boddington mine in Australia and the Cuiabá expansion in Brazil. Cash paid for the two
companies acquired from TSG amounted to $40 million in 2007.
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 Cuiabá mine in Brazil, the
Sunrise Dam and Boddington mines in Australia.
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 Cuiabá mine in Brazil, the
Sunrise Dam and Boddington mines in Australia.
Financing activities
2007
Net cash generated by financing activities increased by $343 million from an inflow of $119 million in 2006 to an inflow of
$462 million in 2007. In 2007, drawdown’s on existing and the new $1,150 million Syndicated loan facility raised $843 million
and debt repayments, which included $375 million on the $700 million Syndicated loan facility, totaled $520 million.
$462 million in 2007. In 2007, drawdown’s on existing and the new $1,150 million Syndicated loan facility raised $843 million
and debt repayments, which included $375 million on the $700 million Syndicated loan facility, totaled $520 million.
Dividends paid increased from $132 million (39 US cents or 272 South African cents per share) in 2006 to $144 million (44 US
cents or 330 South African cents per share) in 2007. 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.
cents or 330 South African cents per share) in 2007. 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.
2006
Net cash generated by 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.
$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.
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.
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 the Company’s operations and the cash flows generated by these operations.
The Company uses a number of products, including derivatives, to manage gold price and foreign exchange risks that arise out
of the Company’s core business activities to limit the impact on the profitability of the Company’s operations and generated
cash flows.
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 the Company’s operations and the cash flows generated by these operations.
The Company uses a number of products, including derivatives, to manage gold price and foreign exchange risks that arise out
of the Company’s core business activities to limit the impact on the profitability of the Company’s operations and generated
cash flows.
137
AngloGold Ashanti’s cash and cash equivalents increased to $477 million at December 31, 2007 compared with $471 million at
December 31, 2006. In accordance with South African Reserve Bank regulations, cash generated by South African operations
is held in rands. At December 31, 2007, approximately 34 percent of the Company’s cash and cash equivalents were held in
US dollars, 44 percent were held in South African rands, 6 percent were held in Australian dollars and 16 percent were held in
other currencies.
December 31, 2006. In accordance with South African Reserve Bank regulations, cash generated by South African operations
is held in rands. At December 31, 2007, approximately 34 percent of the Company’s cash and cash equivalents were held in
US dollars, 44 percent were held in South African rands, 6 percent were held in Australian dollars and 16 percent were held in
other currencies.
AngloGold Ashanti’s short-term debt increased to $319 million at December 31, 2007 from $33 million at December 31, 2006.
Included in the short-term debt at December 31, 2007, was:
Included in the short-term debt at December 31, 2007, was:
·
the fixed semi-annual coupon of 2.375 percent payable on a US dollar-based convertible bond; and
·
the amount outstanding of $304 million on a rand-based corporate bond due in 2008.
AngloGold Ashanti’s long-term debt increased to $1,564 million at December 31, 2007 compared with $1,472 million at
December 31, 2006. As at December 31, 2007, the Company had the following attributable borrowings outstanding:
December 31, 2006. As at December 31, 2007, the Company 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 its maturity in February 2009 and is US dollar-based);
convertible bond is convertible into ADSs up to its maturity in February 2009 and is US dollar-based);
·
$526 million is outstanding under the $1,150 million syndicated loan facility (interest charged at LIBOR plus 0.4 percent
per annum; the loan is repayable in December 2010 and is US dollar-based); and
per annum; the loan is repayable in December 2010 and is US dollar-based); and
·
$304 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).
bond is repayable on August 28, 2008 and is rand-based).
Secured capital leases:
·
$37 million is repayable to Turbine Square Two (Proprietary) Limited for buildings financed (interest charged at an implied
rate of 9.8 percent per annum, lease payments are payable in monthly installments terminating in March 2022, are rand-
based and the buildings financed are used as security for these loans);
rate of 9.8 percent per annum, lease payments are payable in monthly installments terminating in March 2022, are rand-
based and the buildings financed are used as security for these loans);
·
$5 million is repayable under the Senstar Capital Corporation loans (interest charged at an average rate of 6.9 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
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
·
$2 million is repayable to Terex Africa (Proprietary) Limited for equipment financed (interest charged at an average rate of
9.0 percent per annum, the loan is repayable in January 2008, is US dollar-based and the equipment financed is used as
security for this loan).
9.0 percent per annum, the loan is repayable in January 2008, is US dollar-based and the equipment financed is used as
security for this loan).
Unsecured capital leases:
·
$1 million is repayable to Csilatina Arrendamento Mercantil S.A. (interest charged at an average rate of 5.0 percent per
annum, loans are repayable in monthly installments terminating in October 2010 and are Brazilian real-based).
annum, loans are repayable in monthly installments terminating in October 2010 and are Brazilian real-based).
As at December 31, 2007, AngloGold Ashanti’s total long-term debt, including the short-term portion maturing within 2008, was
made up as follows:
made up as follows:
$ (million)
Unsecured loans (including unsecured capital leases)
1,839
Secured capital leases
44
Total
1,883
Less: Short-term maturities
319
Long-term debt
1,564
138
Debt repayments are scheduled as follows:
$ (million)
2008
319
2009
1,006
2010
528
2011
3
2012
3
Thereafter
24
Total
1,883
AngloGold Ashanti currently expects to repay debt maturing in 2008 from existing cash resources, cash generated by
operations and existing credit facilities.
operations and existing credit facilities.
At December 31, 2007 the currencies in which the borrowings were denominated were as follows:
$ (million)
United States dollars
1,391
South African rands
341
Australian dollars
150
Brazilian real
1
Total
1,883
Repayments of short-term and long-term borrowings amounted to $520 million and $nil million, respectively, in 2007.
At December 31, 2007, AngloGold Ashanti had the following undrawn under its borrowing facilities:
$ (million)
Syndicated loan ($1,150 million) – US dollar
(1)
627
FirstRand Bank Limited – US dollar
50
Absa Bank Limited – US Dollar
42
Nedbank Limited – US Dollar
2
Standard Bank of South Africa Limited – Rands
38
FirstRand Bank Limited – Rands
32
Nedbank Limited – Rands
7
Absa Bank Limited – Rands
4
Commerzbank AG – Rands
3
ABN Amro Bank N.V. – Rands
1
ABN Amro Bank N.V. – Euros
7
Total undrawn
813
(1)
Expires December 2010.
AngloGold Ashanti had no other committed lines of credit as of December 31, 2007.
Capital expenditure is expected to be approximately $1,262 million in 2008. AngloGold Ashanti intends to finance these capital
expenditures and scheduled debt repayments in 2008 from cash on hand, cash flow from operations, existing credit facilities
and, potentially, additional credit facilities or debt instruments. AngloGold Ashanti intends to refinance its convertible bond due
February 2009 with the proceeds of an equity-linked instrument, the principal amount of which may exeed the existing
convertible bond. The structure, size and timing of such an issue will depend upon prevailing market conditions.
expenditures and scheduled debt repayments in 2008 from cash on hand, cash flow from operations, existing credit facilities
and, potentially, additional credit facilities or debt instruments. AngloGold Ashanti intends to refinance its convertible bond due
February 2009 with the proceeds of an equity-linked instrument, the principal amount of which may exeed the existing
convertible bond. The structure, size and timing of such an issue will depend upon prevailing market conditions.
AngloGold Ashanti, through its executive 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.
and liquidity requirements and positions monthly. The board of directors also reviews these on a quarterly basis at its meetings.
139
Capital commitments and contingencies
At December 31, 2007, the following significant capital commitments and contingencies are applicable to AngloGold Ashanti:
·
Capital commitments and contingent liabilities of AngloGold Ashanti include total contracted capital expenditure of
approximately $436 million and total authorized capital expenditure not yet contracted of approximately $809 million. The
expenditure is expected to be financed from existing cash resources, cash generated by operations and debt facilities.
approximately $436 million and total authorized capital expenditure not yet contracted of approximately $809 million. The
expenditure is expected to be financed from existing cash resources, cash generated by operations and debt facilities.
·
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 geology of the area is typified by a dolomite rock formation that is prone to solution cavities. Polluted
process water from the operations has percolated from pollution sources to this rock formation and has been transported
three dimensionally, creating pollution plumes in the dolomite aquifer. Numerous scientific, technical and legal reports
have been produced and the remedying of the polluted soil and groundwater is the subject of a continued research
program between the University of the Witwatersrand and the Company. Subject to the technology being developed as a
proven remediation technique, no reliable estimate can be made for the obligation.
investigated a number of different technologies and methodologies that could possibly be used to remediate the pollution
plumes. The geology of the area is typified by a dolomite rock formation that is prone to solution cavities. Polluted
process water from the operations has percolated from pollution sources to this rock formation and has been transported
three dimensionally, creating pollution plumes in the dolomite aquifer. Numerous scientific, technical and legal reports
have been produced and the remedying of the polluted soil and groundwater is the subject of a continued research
program between the University of the Witwatersrand and the Company. Subject to the technology being developed as a
proven 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 June 2005 and the other for the period between July 2005 and 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 MSG operation is co-owned with Kinross Gold Corporation. The
Company’s attributable share of the first assessment is approximately $39 million. Although MSG requested the TARE in
early 2004, the TARE, which authorized t he remittance of gold to the Company’s branch in Minas Gerais specifically for
export purposes, was only granted and executed in May 2006. In November 2006 the administrative council’s second
chamber ruled in favor of MSG and fully canceled the tax liability related to the first period. The State of Goiás has
appealed 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 $24 million. The Company believes both assessments are in violation of federal legislation
on sales taxes.
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 and 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 MSG operation is co-owned with Kinross Gold Corporation. The
Company’s attributable share of the first assessment is approximately $39 million. Although MSG requested the TARE in
early 2004, the TARE, which authorized t he remittance of gold to the Company’s branch in Minas Gerais specifically for
export purposes, was only granted and executed in May 2006. In November 2006 the administrative council’s second
chamber ruled in favor of MSG and fully canceled the tax liability related to the first period. The State of Goiás has
appealed 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 $24 million. The Company believes both assessments are in violation of federal legislation
on sales taxes.
·
Morro Velho and AngloGold Ashanti Brasil Mineração are involved in disputes with tax authorities. These disputes
involve eleven federal tax assessments including income tax, social contributions and annual property tax based on
ownership of properties outside of urban perimeters (ITR). Tax authorities are claiming that the amount owing is
$8 million.
involve eleven federal tax assessments including income tax, social contributions and annual property tax based on
ownership of properties outside of urban perimeters (ITR). Tax authorities are claiming that the amount owing is
$8 million.
·
MSG received a tax assessment in October 2003 from the State of Minas Gerais related to sales taxes of $8 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 appealing the dismissal of
the case at the judicial sphere.
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 appealing the dismissal of
the case at the judicial sphere.
·
AngloGold Offshore Investments Limited, a wholly owned subsidiary of the Company, has guaranteed 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.
($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 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 ($15 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.
Oro Group (Proprietary) Limited an affiliate of the Company. The Company has a total maximum liability, in terms of the
suretyships, of R100 million ($15 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 and mining requirements, gold mining companies are obligated to close their operations
and rehabilitate the lands that they mine in accordance with these requirements. AngloGold Ashanti USA has posted
reclamation bonds with various federal and state governmental agencies to cover potential rehabilitation obligations in
amounts aggregating approximately $48 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 its rehabilitation obligations. As at
December 31, 2007 the carrying value of these obligations relating to AngloGold Ashanti USA amounted to $31 million
and is included in the Provision for environmental rehabilitation in the Company's consolidated balance sheet. The
obligations will expire upon completion of such rehabilitation and release of such areas by the applicable federal and/or
state agency. There are no recourse provisions that would enable the Company to recover from third parties any of the
amounts paid under the guarantee.
and rehabilitate the lands that they mine in accordance with these requirements. AngloGold Ashanti USA has posted
reclamation bonds with various federal and state governmental agencies to cover potential rehabilitation obligations in
amounts aggregating approximately $48 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 its rehabilitation obligations. As at
December 31, 2007 the carrying value of these obligations relating to AngloGold Ashanti USA amounted to $31 million
and is included in the Provision for environmental rehabilitation in the Company's consolidated balance sheet. The
obligations will expire upon completion of such rehabilitation and release of such areas by the applicable federal and/or
state agency. There are no recourse provisions that would enable the Company to recover from third parties any of the
amounts paid under the guarantee.
140
·
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.
$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 of $526 million is provided for the $1.15 billion Syndicated loan facility. AngloGold Ashanti Limited,
AngloGold Ashanti Holdings plc, AngloGold Ashanti USA Incorporated and AngloGold Ashanti Australia Limited each
have guaranteed all payments and other obligations of AngloGold Ashanti Holdings plc, AngloGold Ashanti USA
Incorporated and AngloGold Ashanti Australia Limited regarding the $1.15 billion Syndicated loan facility dated
December 13, 2007. This Syndicated loan facility replaced in its entirety the $700 million revolving credit facility dated
January 26, 2005, which was repayable in January 2008.
AngloGold Ashanti Holdings plc, AngloGold Ashanti USA Incorporated and AngloGold Ashanti Australia Limited each
have guaranteed all payments and other obligations of AngloGold Ashanti Holdings plc, AngloGold Ashanti USA
Incorporated and AngloGold Ashanti Australia Limited regarding the $1.15 billion Syndicated loan facility dated
December 13, 2007. This Syndicated loan facility replaced in its entirety the $700 million revolving credit facility dated
January 26, 2005, which was repayable in January 2008.
·
The Company has issued gold delivery guarantees of $683 million to several counterpart banks in which it guarantees the
due performance of its subsidiaries AngloGold (USA) Trading Company, AngloGold South America Limited and Cerro
Vanguardia S.A. under their respective gold hedging agreements.
due performance of its subsidiaries AngloGold (USA) Trading Company, AngloGold South America Limited and Cerro
Vanguardia S.A. under their respective gold hedging agreements.
·
The Company together with its 100 percent owned subsidiary AngloGold Ashanti Holdings plc has 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, 2007 the marked-to-market valuation of the ATS hedge book was negative
$1,494 million.
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, 2007 the marked-to-market valuation of the ATS hedge book was negative
$1,494 million.
·
The Company and its 100 percent 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 Limited
(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 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, 2007 the marked-to-market valuation of the GMC hedge
book was negative $520 million.
several counterpart banks in which they have guaranteed the due performance by Geita Management Company Limited
(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 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, 2007 the marked-to-market valuation of the GMC hedge
book was negative $520 million.
·
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 certain 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.
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 certain 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.
In addition to the above, the Company has contingent liabilities in respect of certain tax assessments, claims, disputes and
guarantees which are not considered to be material.
guarantees which are not considered to be material.
As at Decemer 31, 2007, capital commitments
(1)
and contingencies can be summarized over the periods shown below 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)
(contracted and not yet contracted)
1,245
893
206
113
33
Guarantees
4,326
1,834
2,021
310
161
Other commercial commitments
79
79
-
-
-
Total
5,650
2,806
2,227
423
194
(1)
Including commitments through contractual arrangements with equity accounted joint ventures.
141
Derivatives accounted for at fair value
In the normal course of its operations, the Company is exposed to gold and other commodity price, currency, interest rate,
liquidity and credit risks. In order to manage these risks, the Company may enter into transactions that make use of both on-
and off-balance sheet derivatives. The Company does not acquire, hold or issue derivatives for trading purposes. A number of
derivatives, including forward purchase and sale contracts and call and put options, are used to manage gold price and foreign
exchange risks that arise out of the Company’s core business activities.
liquidity and credit risks. In order to manage these risks, the Company may enter into transactions that make use of both on-
and off-balance sheet derivatives. The Company does not acquire, hold or issue derivatives for trading purposes. A number of
derivatives, including forward purchase and sale contracts and call and put options, are used to manage gold price and foreign
exchange risks that arise out of the Company’s core business activities.
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 derivative financial instruments:
information. These estimates involve uncertainties and cannot be determined with precision. The following table represents
the change in fair value of all derivative financial instruments:
$ (million)
Fair value of derivatives at January 1, 2007
(2,954)
Derivatives realized or otherwise settled during the year
418
Fair value of other new contracts entered into during the year
(230)
Change in fair value of derivatives during the year
(1)
(1,576)
Fair value of derivatives at December 31, 2007
(4,342)
(1)
Net losses on revaluation of derivatives.
The fair value of the on-balance sheet derivatives at December 31, 2007 included:
$ (million)
Derivatives – current assets
516
Derivatives – long term assets
-
Derivatives – current liabilities
(2,782)
Derivatives – long term liabilities
(297)
Derivatives – net liabilities
(2,563)
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 totaling negative $1,779 million.
value of off-balance sheet derivatives totaling negative $1,779 million.
The maturity of the fair value of derivatives as at December 31, 2007 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
$
Maturity
4 – 5 years
$
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)
(2,266)
(209) (62) (26)
(2,563)
(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.
obtained from international banks and are liquid and actively quoted across the full time horizon of the tenor of the hedging contracts.
142
Sensitivity analysis
The following table shows the approximate sensitivities of the $ marked-to-market value of the hedge book at December 31,
2007 (actual changes in the timing and amount of the following variables may differ from the assumed changes below):
2007 (actual changes in the timing and amount of the following variables may differ from the assumed changes below):
Sensitivity analysis
Variables
Variables
Change in
Rate(+)
Change in
Fair value
(1)
Change in Rate
(-)
Change in
Fair value
(1)
Currency (R/$)
1
(34.43)
1
28.91
Currency (A$/$)
0.05
35.22
0.05
(40.83)
Currency (BRL/$)
0.10
(3.76)
0.10
3.74
Gold price ($/oz)
10
(102.71)
10
102.04
US Interest Rate (percent)
0.1
(10.27)
0.1
10.29
ZAR Interest Rate (percent)
0.1
(0.31)
0.1
0.31
Aus Interest Rate (percent)
0.1
(0.23)
0.1
0.23
Gold Interest Rate (percent)
0.1
21.76
0.1
(21.88)
(1)
In $ million.
Recent developments
On May 6, 2008 AngloGold Ashanti announced that it intends to proceed, subject to certain conditions, with an approximate
one-for-four renounceable rights offer, which would result in AngloGold Ashanti issuing approximately 69.4 million shares at a
minimum share price of ZAR172 raising approximately ZAR11.9 billion ($1.6 billion based on an exchange rate of
ZAR7.56/$1.00 on May 5, 2008). The proposed rights offer is being fully underwritten subject to certain customary
conditions. The final rights offer price will be announced at the time of the announcement of the rights offer. The proposed
rights offer will be subject to approval at a general meeting of AngloGold Ashanti shareholders to be held on May 22, 2008.
one-for-four renounceable rights offer, which would result in AngloGold Ashanti issuing approximately 69.4 million shares at a
minimum share price of ZAR172 raising approximately ZAR11.9 billion ($1.6 billion based on an exchange rate of
ZAR7.56/$1.00 on May 5, 2008). The proposed rights offer is being fully underwritten subject to certain customary
conditions. The final rights offer price will be announced at the time of the announcement of the rights offer. The proposed
rights offer will be subject to approval at a general meeting of AngloGold Ashanti shareholders to be held on May 22, 2008.
The principal purpose of the rights offer is to provide AngloGold Ashanti with additional financial resources to improve its
financial flexibility. In particular, the net proceeds from the rights offer will allow AngloGold Ashanti both to significantly
restructure and reduce its existing gold hedging position, which has adversely affected its financial performance in recent
years, while also being able to continue to fund its principal development projects and exploration growth initiatives. Pending
this use of proceeds, the net proceeds of the rights offer may, in the interim, be used by AngloGold Ashanti to reduce its
short-term borrowings and the borrowings outstanding on AngloGold Ashanti’s revolving credit facility or retained as cash and
invested in accordance with AngloGold Ashanti’s cash management policies.
financial flexibility. In particular, the net proceeds from the rights offer will allow AngloGold Ashanti both to significantly
restructure and reduce its existing gold hedging position, which has adversely affected its financial performance in recent
years, while also being able to continue to fund its principal development projects and exploration growth initiatives. Pending
this use of proceeds, the net proceeds of the rights offer may, in the interim, be used by AngloGold Ashanti to reduce its
short-term borrowings and the borrowings outstanding on AngloGold Ashanti’s revolving credit facility or retained as cash and
invested in accordance with AngloGold Ashanti’s cash management policies.
AngloGold Ashanti has traditionally used gold hedging instruments to protect a portion of its anticipated gold sales against
declines in the market price of gold. The use of these instruments has prevented AngloGold Ashanti from fully participating in
the significant increase in the market price for gold in recent years. As at December 31, 2007, the total net delta tonnage of
AngloGold Ashanti’s hedge positions was 10.39 million ounces and the total committed hedge position was 11.28 million
ounces, an increase of 0.16 million ounces and a reduction of 0.34 million ounces against the December 31, 2006, hedge
delta and hedge committed position, respectively. As at December 31, 2007, the marked-to-market value of all hedge
transactions making up the hedge positions was negative $4.27 billion.
declines in the market price of gold. The use of these instruments has prevented AngloGold Ashanti from fully participating in
the significant increase in the market price for gold in recent years. As at December 31, 2007, the total net delta tonnage of
AngloGold Ashanti’s hedge positions was 10.39 million ounces and the total committed hedge position was 11.28 million
ounces, an increase of 0.16 million ounces and a reduction of 0.34 million ounces against the December 31, 2006, hedge
delta and hedge committed position, respectively. As at December 31, 2007, the marked-to-market value of all hedge
transactions making up the hedge positions was negative $4.27 billion.
Since the beginning of 2008, prevailing spot gold prices have been significantly higher than those prevailing during 2007. If
these high prices continue to prevail, AngloGold Ashanti estimates that its gold hedging position will continue to have a
significant adverse affect upon its financial performance. AngloGold Ashanti believes that this has also negatively affected the
market price of its ordinary shares, further constraining its financial flexibility.
these high prices continue to prevail, AngloGold Ashanti estimates that its gold hedging position will continue to have a
significant adverse affect upon its financial performance. AngloGold Ashanti believes that this has also negatively affected the
market price of its ordinary shares, further constraining its financial flexibility.
In order to address this issue, AngloGold Ashanti intends to early settle certain contracts otherwise due to mature in 2009 and
2010 during the course of 2008 in addition to settling contracts due to mature in 2008. Given the low committed prices of these
contracts, AngloGold Ashanti expects that if these measures were implemented it would result in a realization of previously
recognized losses for contracts historically recognized on Balance Sheet on a marked–to–market basis. These losses would
be measured by the difference between the committed price of the contracts and the prevailing gold price at the time that these
contracts are settled. If the restructuring is implemented as anticipated the received price for the remainder of 2008 should be
approximately $475 per ounce assuming a gold price of $900 per ounce and gold production for the last nine months of 2008
of 3.8 million ounces.
2010 during the course of 2008 in addition to settling contracts due to mature in 2008. Given the low committed prices of these
contracts, AngloGold Ashanti expects that if these measures were implemented it would result in a realization of previously
recognized losses for contracts historically recognized on Balance Sheet on a marked–to–market basis. These losses would
be measured by the difference between the committed price of the contracts and the prevailing gold price at the time that these
contracts are settled. If the restructuring is implemented as anticipated the received price for the remainder of 2008 should be
approximately $475 per ounce assuming a gold price of $900 per ounce and gold production for the last nine months of 2008
of 3.8 million ounces.
AngloGold Ashanti also continues to give consideration to the early settlement of contracts not currently recorded on balance
sheet (Normal Purchase Normal Sale Exemption (NPSE)) by means of early physical delivery. Such early physical settlement,
if it were to occur, would result in a significant adverse impact on our 2008 recorded revenues in AngloGold Ashanti’s income
statement, as sales that would have otherwise been executed at the spot price of gold will be replaced with sales based on the
earlier contracted prices of such NPSE contracts that are settled during the year. Furthermore should AngloGold Ashanti
sheet (Normal Purchase Normal Sale Exemption (NPSE)) by means of early physical delivery. Such early physical settlement,
if it were to occur, would result in a significant adverse impact on our 2008 recorded revenues in AngloGold Ashanti’s income
statement, as sales that would have otherwise been executed at the spot price of gold will be replaced with sales based on the
earlier contracted prices of such NPSE contracts that are settled during the year. Furthermore should AngloGold Ashanti
143
conclude that such early physical settlement of NPSE contracts represents a tainting event, it would be required to recognize
on balance sheet the fair value of a portion of, or potentially all of, the existing NPSE contracts, which would result in a
significant adverse impact on its financial statements. No such conclusion has yet been made by AngloGold Ashanti and it is
still considering the potential impact of any such transaction.
on balance sheet the fair value of a portion of, or potentially all of, the existing NPSE contracts, which would result in a
significant adverse impact on its financial statements. No such conclusion has yet been made by AngloGold Ashanti and it is
still considering the potential impact of any such transaction.
In addition to the settlement of certain contracts during 2008 AngloGold Ashanti also intends to restructure some of the
remainder of its hedge book in order to achieve greater participation in the spot price for gold beyond 2009. The exact nature
and extent of the restructuring will depend upon prevailing and anticipated market conditions at the time, particularly the
prevailing gold price and exchange rates as well as other relevant economic factors.
remainder of its hedge book in order to achieve greater participation in the spot price for gold beyond 2009. The exact nature
and extent of the restructuring will depend upon prevailing and anticipated market conditions at the time, particularly the
prevailing gold price and exchange rates as well as other relevant economic factors.
If the restructuring is executed as currently anticipated, the overall impact would be to reduce the hedge book to approximately
6.25 million ounces, which would represent 8.6 percent of AngloGold Ashanti’s ore reserves as at December 31, 2007. As a
result of this reduction the discount to the spot gold price realized during 2009 is estimated to be approximately 6 percent and
at a similar level thereafter assuming a gold price of $900 per ounce.
6.25 million ounces, which would represent 8.6 percent of AngloGold Ashanti’s ore reserves as at December 31, 2007. As a
result of this reduction the discount to the spot gold price realized during 2009 is estimated to be approximately 6 percent and
at a similar level thereafter assuming a gold price of $900 per ounce.
Related party transactions
For a detailed discussion of related party transactions, see “Item 7B.: Related party transactions”.
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”.
accounting policies”. New accounting policies and recent pronouncements are described in note 4.27 to the consolidated
financial statements “Recent pronouncements”.
Recent pronouncements
On September 15, 2006 the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value
Measurements” (“SFAS157”).
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. On February 12, 2008, the FASB
issued FASB Staff Position No. FAS157-2, “Effective date of FASB Statement No. 157” (“the FSP”). The FSP provides a
one year deferral until January 1, 2009 for the imp lementation of SFAS157 for certain non-financial assets and non-
financial liabilities, except for those items that are recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually). The Company does not expect the adoption of SFAS157 to have a material impact on
the Company’s financial statements.
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. On February 12, 2008, the FASB
issued FASB Staff Position No. FAS157-2, “Effective date of FASB Statement No. 157” (“the FSP”). The FSP provides a
one year deferral until January 1, 2009 for the imp lementation of SFAS157 for certain non-financial assets and non-
financial liabilities, except for those items that are recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually). The Company does not expect the adoption of SFAS157 to have a material impact on
the Company’s 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”).
for Defined Benefit Pension and Other Post-retirement Plans, an amendment of FASB Statements No. 87, 88, 106 and
132(R)” (“SFAS158”).
144
·
SFAS158 represents the completion of the first phase in the FASB's post-retirement benefits accounting project and
requires an entity to:
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
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.
recognition of actuarial gains or losses, prior service costs or credits and unrecognized transition asset and
obligations.
·
The Company adopted the provisions of SFAS158 in 2006, as required, except for the requirement to measure the plan
assets and benefit obligations at the fiscal year end, which is effective in fiscal years ending after December 15, 2008.
The Company is currently considering processes to meet these measurement requirements of SFAS158.
assets and benefit obligations at the fiscal year end, which is effective in fiscal years ending after December 15, 2008.
The Company is currently considering processes to meet these 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”).
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.
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.
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.
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. The
Company will apply the provisions of SFAS159 from January 1, 2008. The Company does not expect the adoption of
SFAS159 to have a material impact on the Company’s financial statements.
Company will apply the provisions of SFAS159 from January 1, 2008. The Company does not expect the adoption of
SFAS159 to have a material impact on the Company’s financial statements.
In December 2007, the FASB issued FASB Statement No. 141(R), “Business Combinations” (“SFAS141(R)”).
SFAS141(R) requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and
liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all
assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the
information they need to evaluate and understand the nature and financial effect of the business combination.
SFAS141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of
the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date.
SFAS141(R) applies to all transactions or other events in which an entity (the acquirer) obtains control of one or more
businesses (the acquiree), including combinations achieved without the transfer of co nsideration. The Company is
currently evaluating the potential impact of adopting SFAS141(R) on the Company’s financial statements.
liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all
assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the
information they need to evaluate and understand the nature and financial effect of the business combination.
SFAS141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of
the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date.
SFAS141(R) applies to all transactions or other events in which an entity (the acquirer) obtains control of one or more
businesses (the acquiree), including combinations achieved without the transfer of co nsideration. The Company is
currently evaluating the potential impact of adopting SFAS141(R) on the Company’s financial statements.
In December 2007, the FASB issued FASB Statement No. 160, “Noncontrolling Interests in Consolidated Financial
Statements” (“SFAS160”).
Statements” (“SFAS160”).
145
SFAS160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary
and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership
interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS160 is
effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier
adoption is prohibited. It shall be applied prospectively as of the beginning of the fiscal year in which this Statement is
initially adopted, except for the presentation and disclosure requirements. The presentation and disclosure requirements
shall be applied retrospectively for all periods presented. The Company is currently evaluating the potential impact of
adopting SFAS160 on the Company’s financial statements.
and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership
interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS160 is
effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier
adoption is prohibited. It shall be applied prospectively as of the beginning of the fiscal year in which this Statement is
initially adopted, except for the presentation and disclosure requirements. The presentation and disclosure requirements
shall be applied retrospectively for all periods presented. The Company is currently evaluating the potential impact of
adopting SFAS160 on the Company’s financial statements.
In March 2008, the FASB issued FASB statement No. 161, “Disclosures about Derivative Instruments and Hedging
Activities – an amendment of FASB statement No. 133” (“SFAS161”).
Activities – an amendment of FASB statement No. 133” (“SFAS161”).
SFAS161 applies to all derivative instruments and nonderivative instruments that are designated and qualify as hedging
instruments pursuant to paragraphs 37 and 42 of SFAS133 and related hedged items accounted for under SFAS133.
SFAS161 requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the
transparency of financial reporting. Entities are required to provide enhanced disclosures about (a) how and why an
entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under
SFAS133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s
financial position, results of operations and cash flows. SFAS161 is effective for financial statements issued for fiscal
years and interim periods beginning after November 15, 2008, with early application encouraged. Comparative
disclosures for earlier periods at initial adoption are encouraged but not required. The Company does not expect the
adoption of SFAS161 to have a material impact on the Company’s financial statements.
instruments pursuant to paragraphs 37 and 42 of SFAS133 and related hedged items accounted for under SFAS133.
SFAS161 requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the
transparency of financial reporting. Entities are required to provide enhanced disclosures about (a) how and why an
entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under
SFAS133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s
financial position, results of operations and cash flows. SFAS161 is effective for financial statements issued for fiscal
years and interim periods beginning after November 15, 2008, with early application encouraged. Comparative
disclosures for earlier periods at initial adoption are encouraged but not required. The Company does not expect the
adoption of SFAS161 to have a material impact on the Company’s financial statements.
In May 2008, the FASB issued FASB Statement No. 162, “The Hierarchy of Generally Accepted Accounting Principles”
(“SFAS162”).
SFAS162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting
accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally
accepted accounting principles (GAAP) for nongovernmental entities. SFAS162 is effective 60 days following the United
States Securities and Exchange Commission (SEC's) approval of the Public Company Accounting Oversight Board
Auditing amendments to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally Accepted
Accounting Principles”. The Company does not expect the adoption of SFAS162 to have a material impact on the
Company’s financial statements.
(“SFAS162”).
SFAS162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting
accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally
accepted accounting principles (GAAP) for nongovernmental entities. SFAS162 is effective 60 days following the United
States Securities and Exchange Commission (SEC's) approval of the Public Company Accounting Oversight Board
Auditing amendments to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally Accepted
Accounting Principles”. The Company does not expect the adoption of SFAS162 to have a material impact on the
Company’s 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 the Company’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 the Company’s results of operations, financial condition and cash flows.
accounting policies”. The preparation of the Company’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 the Company’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 the
Company’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.
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 the
Company’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 the Company’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. The Company uses its ore reserve
uncertainties inherent in estimating quantities of reserves, including many factors beyond the Company’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. The Company uses its ore reserve
146
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, the Company reviews mining schedules, production levels and asset
lives in the Company’s life-of-mine planning for all of the Company’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
the Company 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 the Company’s operating results .
could significantly affect these items. At least annually, the Company reviews mining schedules, production levels and asset
lives in the Company’s life-of-mine planning for all of the Company’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
the Company 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 the Company’s operating results .
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.
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:
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.
The Company understands 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:
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:
2007 2006 2005
Net income ($ millions)
1
12
13
Earnings per share
(1)
(cents)
-
5
5
Retained income – January 1 ($ millions)
59
47
34
Retained income – December 31 ($ millions)
60
59
47
(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.
"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 and
designation 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.
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 and
designation 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 non-hedge derivatives in the period in which they occur.
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 non-hedge derivatives in the period in which they occur.
146
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, the Company reviews mining schedules, production levels and asset
lives in the Company’s life-of-mine planning for all of the Company’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
the Company 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 the Company’s operating results .
could significantly affect these items. At least annually, the Company reviews mining schedules, production levels and asset
lives in the Company’s life-of-mine planning for all of the Company’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
the Company 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 the Company’s operating results .
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.
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:
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.
The Company understands 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:
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:
2007 2006 2005
Net income ($ millions)
1
12
13
Earnings per share
(1)
(cents)
-
5
5
Retained income – January 1 ($ millions)
59
47
34
Retained income – December 31 ($ millions)
60
59
47
(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.
"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 and
designation 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.
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 and
designation 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 non-hedge derivatives in the period in which they occur.
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 non-hedge derivatives in the period in which they occur.
147
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 recorded in earnings as gains and losses
on non-hedge derivatives.
are recorded at their fair market value, with changes in value at each reporting period recorded in earnings as gains and losses
on non-hedge derivatives.
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.
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 trading purposes. A number of products,
including derivatives, are used to manage gold price and foreign exchange risks that arise out of the Company’s core business
activities. Forward purchase and sale contracts and call and put options are used by the Company to manage its exposure to
gold price and currency fluctuations.
including derivatives, are used to manage gold price and foreign exchange risks that arise out of the Company’s core business
activities. Forward purchase and sale contracts and call and put options are used by the Company to manage its exposure to
gold price and currency fluctuations.
See “Item 5E.: Off-balance sheet arrangements” for a description of the normal purchase and normal sale exempt contracts
accounting treatment.
accounting treatment.
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 the Company’s mining operations is processed to saleable form
at various precious metals refineries.
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 the Company’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. The Company assess such
contingent liabilities, which inherently involves the exercise of significant management judgment and estimates of the outcome
of future events. Also, see “Taxation ” discussed below.
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. The Company assess such
contingent liabilities, which inherently involves the exercise of significant management judgment and estimates of the outcome
of future events. Also, see “Taxation ” discussed below.
Impairment of long-lived assets
AngloGold Ashanti’s long-lived assets include property, plant and equipment, acquired properties, goodwill and other tangible
assets. In assessing, the potential impairment of its long-lived assets held for use the Company 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.
assets. In assessing, the potential impairment of its long-lived assets held for use the Company 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
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. The Company performs impairment tests at least annually during the
fourth quarter and whenever certain indicators of impairment exist. 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”.
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. The Company performs impairment tests at least annually during the
fourth quarter and whenever certain indicators of impairment exist. 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”.
148
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 the Company reviews the asset for recoverability and establishes a valuation allowance where the
Company determines it is more likely than not that such an asse t 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 the
Company 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. Management classifies taxes payable based on the likelihood of the amount required to be settled within twelve
months, which are then reported within current liabilities. All other taxes payable are recorded within non-current assets.
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 the Company reviews the asset for recoverability and establishes a valuation allowance where the
Company determines it is more likely than not that such an asse t 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 the
Company 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. Management classifies taxes payable based on the likelihood of the amount required to be settled within twelve
months, which are then reported within current liabilities. All other taxes payable are recorded within non-current assets.
Provision for environmental rehabilitation
AngloGold Ashanti’s mining and exploration activities are subject to various laws and regulations governing the protection of
the environment. The Company 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.
the environment. The Company 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
AngloGold Ashanti 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 Company’s estimate of the shares that will eventually vest and adjusted for the effect of non market-
based vesting conditions.
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 Company’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 behavioral considerations.
on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioral 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 the Company 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.
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 the Company 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 2007 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" R186 bond) as a guide and adjusted for the taxation effects on pension plans.
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" R186 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 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.
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 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.
149
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, 2007, 2006 and 2005 amounted to $51 million, $40 million and $31 million, respectively.
statements “Employee benefit plans”. The total Company contributions to defined contribution plans for the years ended
December 31, 2007, 2006 and 2005 amounted to $51 million, $40 million and $31 million, respectively.
Change in pension trends
The trend of the expected return on the plan assets is higher (6.10 percent) for the year ended December 31, 2007 when
compared to 2006. Based on the 2006 estimated return of 10.50 percent on the defined benefit plan assets, the return for
2007 would amount to $28 million compared to the actual 2007 return of $27 million. The long-term compensation and pension
inflation increases estimated in 2006 at 5.5 percent and 4.28 percent respectively have increased for compensation increases
to 6.0 percent and increased for pension increases to 4.73 percent respectively, which is in line with current economic
indicators.
compared to 2006. Based on the 2006 estimated return of 10.50 percent on the defined benefit plan assets, the return for
2007 would amount to $28 million compared to the actual 2007 return of $27 million. The long-term compensation and pension
inflation increases estimated in 2006 at 5.5 percent and 4.28 percent respectively have increased for compensation increases
to 6.0 percent and increased for pension increases to 4.73 percent respectively, which is in line with current economic
indicators.
Sensitivity analysis
Ore on Leach Pads
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 2007 valuation was a rate of 8 percent and the long-term salary inflation rate was
6 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 $3 million.
short-term salary inflation rate used for the 2007 valuation was a rate of 8 percent and the long-term salary inflation rate was
6 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 $3 million.
·
·
·
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.
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.
(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
recov erable ounce of gold on the leach 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, the Company expects that current leaching operations will terminate at dates ranging from 2011 to 2020.
Feasibility studies in North America indicate that in terms of the mine life extension project at Cripple Creek leaching activities
could extend to 2030.
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
recov erable ounce of gold on the leach 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, the Company expects that current leaching operations will terminate at dates ranging from 2011 to 2020.
Feasibility studies in North America indicate that in terms of the mine life extension project at Cripple Creek leaching activities
could extend to 2030.