| Mon 14 Jul 2008, 14:45 | | ANG - Anglogold Ashanti - Market Update |
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ANG
ANANO
ANG - Anglogold Ashanti - Market Update
AngloGold Ashanti Limited
Incorporated in the Republic of South Africa
Registration Number: 1944/017354/06)
ISIN Number:ZAE000043485
JSE Share Code: ANG
("AngloGold Ashanti/Company")
ANGLOGOLD ASHANTI MARKET UPDATE
Highlights
Gold hedge position reduced by 4.4 million ounces or 39% in the first
six months of 2008
1.0 million pounds of uranium commodity contracts cancelled
50% interest in Nufcor International Limited sold
Corporate transactions with B2 Gold and Golden Cycle Corporation concluded
Second quarter production and cash costs better than previous guidance
Hedge book restructuring
Following the successful completion of its recent rights offer to raise
US$1.7 billion, AngloGold Ashanti is pleased to announce that it has made
substantial progress ahead of schedule in the reduction of its hedge book,
to benefit from improved participation in the spot gold price earlier than
anticipated.
The company capitalised on a weaker gold market during the second
quarter in order to execute a combination of delivery into and early
settlement of non-hedge derivative contracts. The number of committed
ounces was reduced by 4.4 million ounces (39%) from a total of 11.3 million
ounces as at 1 January 2008 to 6.9 million ounces as at 1 July 2008.
The accelerated execution of the restructuring will mean that the
company will be able to have a significantly greater participation in the
spot gold price going forward. The combination of delivery into and early
settlement of contracts that is currently reflected on the company`s balance
sheet will, however, result in a materially lower received gold price during
the second quarter than would otherwise have been the case.
Prior to the implementation of the hedge restructuring, AngloGold
Ashanti anticipated the received price for the second quarter to be around
US$734 per ounce. The restructuring will however result in the realisation
of an incremental pre-tax loss of approximately US$1.1 billion during the
second quarter and therefore will translate into a negative received price.
This loss was previously recognised in the income statement as unrealised
non-hedge derivatives but the realisation will result in its inclusion in
adjusted headline earnings.
During the second half of the year, AngloGold Ashanti will continue to
deliver into outstanding contracts of approximately 0.8 million ounces to
effect a reduction of approximately 46% of committed ounces in total over
the course of the year. Assuming a prevailing gold price of US$900 per ounce
it is expected that the realised price will be at a discount of
approximately 17% (against previous guidance of approximately 47%) in the
second half of 2008. Subject to the successful implementation of the rest
of the restructuring it is expected that the realised price will be at or
around a discount of approximately 6% in 2009, assuming a prevailing spot
gold price of approximately US$900 per ounce. This represents a significant
improvement to the position prior to the hedge restructuring.
Cancelation of Uranium Contracts
AngloGold Ashanti has also cancelled 1.0 million pounds of its
outstanding uranium contracts, which together with the deliveries effected
since the start of the year, represents a reduction of 30% of uranium
contracts that were outstanding as at 1 January 2008. This cancellation,
which will result in a one-off pre-tax charge of US$32 million against
second quarter`s adjusted headline earnings, will result in the company
beginning to participate in the uranium spot market from 2009.
Corporate activity and asset review update
On 1 July 2008 the company also announced that shareholders of Golden
Cycle Gold Corporation approved the merger with a wholly owned subsidiary of
AngloGold Ashanti at a special meeting of shareholders. As a result of the
transaction the company now owns 100% of Cripple Creek & Victor Gold Mining
Company, thereby allowing AngloGold Ashanti to simplify the ownership
structure of this long-life North American gold asset.
AngloGold Ashanti announced on 16 May 2008 that the sale of various
exploration interests in Colombia to B2Gold Corporation ("B2Gold") had been
completed. As a result of the transaction the company received 25 million
common shares of B2 Gold and 21.4 million share purchase warrants in B2Gold
with an exercise price of Cdn$3.34 with respect to 11 million warrants and
C$4.25 with respect to the balance of 10.4 million warrants, which would
result in a fully diluted interest in B2Gold of approximately 26%. The
transaction allows AngloGold Ashanti to build on its strategy in Colombia of
continuing to leverage its first-mover advantage and developing its
exploration portfolio in the most efficient and cost effective manner, which
includes AngloGold Ashanti`s 100% owned La Colosa project, where the company
declared an Inferred Mineral Resource of 12.9 million ounces on 6 May 2008.
AngloGold Ashanti has sold its 50% interest in Nufcor International
Limited to Constellation Energy Commodities Group for net proceeds of US$50
million. The sale of this London-based uranium marketing, trading and
advisory business enables AngloGold Ashanti to better focus on its core gold
and uranium mining business. AngloGold Ashanti retains its 100% interest in
Nuclear Fuels Corporation of South Africa (Proprietary) Limited ("Nufcor
SA"), its local uranium calcining business.
The profit on disposal of assets will not form part of Adjusted
Headline Earnings.
Second quarter production and cash costs
For the second quarter gold production was some 3% above previous
guidance at 1.25 million ounces at a total cash cost of around US$434 per
ounce, US$30 per ounce or 6.5% better than previous guidance.
Commenting on the latest developments, Mark Cutifani said: "I am
delighted with our achievements across a number of our core strategic
objectives. The completion of our landmark rights issue has given us the
flexibility to restructure our forward commitments in gold and facilitate
much greater spot price participation going forward. The accelerated
execution of a 39% reduction in our gold hedge book is particularly
significant in allowing us to benefit from a strong gold price environment
going forward. By cancelling 1.0 million pounds of contracted uranium
sales we are also opening up earlier access to the uranium spot market.
Similarly, our corporate transactions involving Golden Cycle, B2Gold and the
disposal of Nufcor International demonstrate our commitment to maintaining
focus and efficiency across our portfolio. Meanwhile the actions that we
have taken elsewhere across the asset base have helped us to deliver ahead
of our production and cash cost guidance and I am confident that we now have
the team in place to deliver on our long term commitments."
ENDS
Johannesburg
14 July 2008
JSE SPONSOR: UBS
Certain statements made during this communication, including, without
limitation, those concerning 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 gold prices, production, cash costs and other
operating results, growth prospects and the outlook of AngloGold Ashanti`s
operations including the completion and commencement of commercial
operations of certain of AngloGold Ashanti`s exploration and production
projects, and its liquidity and capital resources and expenditure, contain
certain forward-looking statements regarding AngloGold Ashanti`s operations,
economic performance and financial condition. 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 have been 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, and
business and operational risk management. For a discussion of such factors,
refer to AngloGold Ashanti`s annual report for the year ended 31 December
2007, which was distributed to shareholders on 31 March 2008. AngloGold
Ashanti undertakes no obligation to update publicly or release any revisions
to these forward-looking statements to reflect events or circumstances after
today`s date or to reflect the occurrence of unanticipated events
Contacts
South Africa:
Himesh Persotam (Investor Relations) Tel: +27 (0) 11 637-6647
Mobile: +27 (0) 82 339 3890 E-mail: hpersotam@AngloGoldAshanti.com
Alan Fine (Media) Tel: +27 (0) 11 637-6383 Mobile: +27 (0) 83 250 0757
E-mail: afine@AngloGoldAshanti.com
Joanne Jones (Media) Tel: +27 (0) 11 637- 6813 Mobile : +27 (0)82 896
0306
E-mail: jjones@AngloGoldAshanti.com
Date: 14/07/2008 14:45:53 Produced by the JSE SENS Department.
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