| Wed 31 Oct 2001, 0:00 | | Anglogold Limited - Report To Shareholders For The |
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FOR THE QUARTER AND NINE MONTHS ENDED 30 SEPTEMBER 2001
Another good quarter - the third in succession
Group results for the quarter
* Headline earnings before unrealised hedging activities up 15% to $76
million ($0.71 per share or $0.36 per ADR), or 19% to R637 million (595
cents per share).
* Total cash costs down 5% to $176 per ounce.
* Total production costs down 5% to $211 per ounce.
* Return on capital of 13.6%.
* Sale of the Free State assets is being finalised.
* Offer documents filed in Normandy bid, with approval for the transaction
received from the South African Reserve Bank.
* Continued safety improvements in all regions.
Regional operating results for the quarter
SOUTH AFRICA
* Key operations once again exceed production and cost targets.
* Gold production increases marginally to 36,466 kilograms (1,172,000
ounces).
* Total cash costs 1% lower at R49,648 per kilogram.
* Operating profit increases by 25% through improved operating performance
and lower retrenchment costs.
Great Noligwa produces 268,000 ounces at a total cash cost of $118 per
ounce.
AFRICA
* Another good quarter, with inclusion of Yatela mine for the first time.
* Gold production up 9% (down 4% excluding Yatela).
* Operating profit maintained for the quarter.
* Morila successfully completes its 90-day continuous production and
economic completion testing.
* Excellent safety performance for the region, improving the year-to-date
LTIF rate by 25% to 1.32.
NORTH AMERICA
* Gold production up 4%.
* Total cash costs down 1% to $199 per ounce.
* Total cash costs at Jerritt Canyon down 8% to $200 per ounce, with
production up 1%.
* Production at CC&V up 6% and total cash costs up 9% ($193 per ounce) due
to increased consumables.
SOUTH AMERICA
* Gold production up 6%, with increased production at all operations.
* Total cash costs down 9% to $128 per ounce.
* Total production costs down 9% to $193 per ounce.
AUSTRALIA
* Gold production up 14%.
* Total cash costs increase by 1% to $197 per ounce resulting from Tanami
closure and start of hard ore processing at Sunrise Dam.
* Sunrise Dam throughputs exceed design targets and production up 14%.
* Significant improvement at Union Reefs following implementation of revised
mining plan.
Encouraging exploration results at Sunrise Dam and Coyote in western Tanami.
Nine Nine
Quarter Quarter months
months
ended ended ended ended
Sept Jun Sept Sept
2001 2001 2001 2000
Rand/Metric
Gold
Produced - kg/oz 000 55,440 53,915 163,732
167,389
Revenue - R/kg/$/oz sold 77,635 73,578 75,071
65,901
Total cash costs - R/kg/$/oz produced 47,687 47,663 47,887
45,763
Total production costs - R/kg/$/oz produced 57,046 57,079 57,164
52,601
Operating profit - R/$ million 1,136 966 2,995 2,384
Net capital expenditure - R/$ million 629 576 1,740 1,071
Net profit - R/$ million 439 509 1,285 1,247
Net earnings (basic) - cents per share 410 475 1,200 1,166
Headline earnings - cents per share 459 538 1,405 1,256
Headline earnings
before unrealised
hedging activities - cents per share 595 501 1,504 1,256
Dividends - cents per share 700 750
Nine Nine
Quarter Quarter months months
ended ended ended ended
Sept Jun Sept Sept
2001 2001 2001 2000
Dollar/Imperial
Gold
Produced - kg/oz 000 1,782 1,733 5,264 5,382
Revenue - R/kg/$/oz sold 288 285 289 305
Total cash costs - R/kg/$/oz produced 176 185 184 212
Total production costs - R/kg/$/oz produced 211 221 220 244
Operating profit - R/$ million 135 120 369 352
Net capital expenditure - R/$ million 75 71 215 158
Net profit - R/$ million 53 63 159 184
Net earnings (basic) - cents per share 50 59 149 171
Headline earnings - cents per share 55 67 174 185
Headline earnings
before unrealised
hedging activities - cents per share 71 62 185 185
Dividends - cents per share 85 110
Certain forward-looking statements
Certain statements contained in this document, including, without
limitation, those concerning the economic outlook for the gold mining
industry, expectations regarding gold prices and production, the completion
and commencement of commercial operations of certain of AngloGold's
exploration and production projects, and its liquidity and capital resources
and expenditure, contain certain forward-looking statements regarding
AngloGold's operations, economic performance and financial condition.
Although AngloGold 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.
Throughout this document, $ refers to US dollars, unless otherwise stated.
Published by AngloGold
PO Box 62117, Marshalltown 2107
South Africa
Telephone: +27 11 637 6000
Fax: +27 11 637 6399/6400
E-mail: investors@anglogold.com
LETTER FROM THE CHAIRMAN AND DEPUTY CHAIRMAN
Dear Shareholder,
The market
In both economic and geopolitical terms this third quarter stands in the
shadow of the events in New York and Washington of 11 September. It remains
too early to confidently describe, let alone predict, the medium- to long-
term effects of these events for markets, including the gold market. In the
short term, the gold price went up into the low $290s, rising less and for a
shorter time than many commentaries predicted. It has now returned to its
pre-11 September trading range. On the demand side, the likelihood is that
jewellery demand will be down for the third quarter, reflecting the economic
downturn already in progress; an unusually long period in India that was
regarded as astrologically inauspicious and affected gold sales; and reduced
Asian gold demand after the terror attacks in the United States.
Operating performance
The company has achieved sound operating results, with operating profit
up 13% on the previous quarter, headline earnings before unrealised hedging
activities up 15% and total cash and total production costs both down 5% to
$176 per ounce and $211 per ounce respectively. In the context of a
received gold price which rose by 1% this is a solid performance, with all
regions doing well.
The South African operations reduced their costs in rand terms by 1% to
R49,648 per kilogram, despite the effect of annual wage increases this
quarter, and operating profit rose by 25% to R715 million. With the impact
of the rand/dollar devaluation, cash costs measured in dollar per ounce
terms decreased by $10 an ounce to $184, reflecting a 5% improvement.
Leading the enhanced performance in South Africa this quarter and clearly
showing that deep-level gold mines and high unit costs are not synonymous,
was AngloGold's largest and most profitable mine, Great Noligwa, which
produced 268,000 ounces during the quarter at a cash cost of $118,
contributing $40 million to the quarterly operating profits of the company.
The African region benefited from the inclusion of Yatela, with gold
production rising by 9% to 229,000 attributable ounces. Prospects for
increasing the rate of mining and extending the reserves of the Geita mine
are good.
Our operations in both North and South America achieved higher gold
production while recording lower cash operating costs. In Australia,
production increased by 14% and cash costs held steady.
As always, there are operational challenges. Matjhabeng and Joel in
South Africa, and Union Reefs in Australia are all in close-down mode. Tau
Lekoa's grade problems are receiving our attention and we will be looking
for a slow but steady improvement in performance there.
Against the background of very significant success in South Africa, we
are delighted to confirm that Dave Hodgson will be taking up the role of
AngloGold's Chief Operating Officer. We are confident that he will bring
coherence and wisdom to the co-ordination and leadership of the global
operations as he has done in the South African region.
Possible sale of Free State assets in South Africa
We have received offers for all of AngloGold's Free State mines and are
in the process of finalising the transaction. The primary concern here
must, of course, be the received price. We are, however, aware of the need
to be mindful of the character of the new entity after the sale. Here,
considerations are the imperative to consolidate ownership and management in
the region, the capacity and record of the purchaser in ventures of this
kind and a concern to promote sustainable and viable black economic
empowerment in the mining sector.
Normandy
The Normandy offer is progressing according to plan, although the
regulatory burden involved in a multi-jurisdictional transaction such as
this has delayed the filing process by some two weeks. Nevertheless, we
still anticipate the closing date of the offer period to be 14 December.
The management of Normandy is currently reviewing the Bidder's Statement and
the board will make its recommendation within two weeks of the posting of
the document which is scheduled for this week. We remain confident that the
bid will succeed.
BOBBY GODSELL
Chairman and Chief Executive Officer
RUSSELL EDEY
Deputy Chairman
30 October 2001
OPERATING AND FINANCIAL REVIEW
OVERVIEW
Strong, broadly-based and sustainable operational performances from all
of AngloGold's regions have resulted in operating profit for the quarter
ended 30 September 2001 increasing by 13% to $135 million. Headline
earnings (excluding unrealised losses on hedging activities) improved by 15%
to $76 million ($0.71 per share or $0.36 per ADR).
The price received for gold for the quarter was 1% higher at $288 per
ounce. Gold production increased by 3% to 1.78 million ounces. Total cash
costs and total production costs both decreased by 5% to $176 per ounce and
$211 per ounce respectively, as a result of improved production and lower
operating costs. AngloGold's return on capital for the quarter was 13.6%.
Management continues to focus attention on improving workplace safety and
health in all of its operating regions and reports steady overall progress.
There have also been some notable safety achievements during the quarter at
Jerritt Canyon, Sadiola and in South Africa.
The company has received unsolicited offers from interested parties for
its Free State assets, accounting in this quarter for 16% of AngloGold's
production and 6% of its operating profit. Shareholders will be advised of
the outcome of these discussions in due course.
SOUTH AFRICA
Overall performance
This was another good quarter for the South African region, with
production, total cash costs and operating profit all showing improvements
over the previous quarter. Total cash costs were 1% lower at R49,648 per
kilogram (5% lower in dollar terms to $184 per ounce). Operating profit
increased by 25% because of an enhanced operating performance and lower
retrenchment costs. Productivity indices, expressed in grams per employee
as well as square metres per employee, both showed improvements of 3% and 7%
respectively, over the previous quarter.
Regrettably, seven employees lost their lives during the quarter as a
result of mine accidents. This performance represents the best on record
for the company in respect of the number of occupational deaths occurring in
any quarter. This performance was underpinned by a Lost-Time Injury
Frequency Rate (LTIFR) of 11.59 which is a 7% improvement on the same period
last year. The ongoing process of risk identification and management
continues to yield safety benefits. The Lower Carbon Leader section at
TauTona, the world's deepest working level in a gold mine, has been free of
fatal accidents now for two years, whilst Kopanang has achieved more than
1.5 million fatal accident free shifts.
Mine performance
In the Vaal River region, Great Noligwa, accounting for 23% of
AngloGold's South African production this quarter, performed strongly with
improved productivity, a higher recovered grade (up 9%) and total cash costs
lower at R31,758 per kilogram ($118 per ounce). Operating profit at R336
million (up 28%) mirrored these impressive operating performances. At
Kopanang, an improvement in grade and area mined resulted in gold production
of 4,033 kilograms (130,000 ounces), which exceeded the exceptional
achievement of the first quarter. Total cash costs at R47,030 per kilogram
reflect a 9% improvement with operating profit of R94 million exceeding
target.
Tau Lekoa, after a good first half-year, produced disappointing results.
Gold production decreased by 24% to 1,819 kilograms (58,000 ounces) and
total cash costs increased to R65,845 per kilogram due to a combination of
unexpectedly lower grade, poor environmental conditions and safety concerns.
Management has focused attention on grade improvement and anticipates a slow
but steady return to normal performance levels.
In the West Wits region, gold production at TauTona increased by 3% to
5,021 kilograms (161,000 ounces). Total cash costs decreased slightly (2%)
to R41,583 per kilogram ($154 per ounce). Savuka was unable to sustain its
gold output (down 8%) despite an increase in volume mined. Recovered grade
fell by 3% as a result of lower mining volumes in the shaft pillar. Total
cash costs increased by 9% to R69,087 per kilogram ($256 per ounce). The
significant but expected improvement at Mponeng was mainly owing to the
availability of new panels in the recently holed raise lines. Gold
production at 3,144 kilograms (101,000 ounces) increased by 28% and total
cash costs fell by 19% to R57,009 per kilogram ($211 per ounce). The
operating profit moved from a loss of R38 million to a profit of R11
million.
In the Free State, the level of gold production at Bambanani was not
sustained owing to a slightly lower grade and a reduction in tonnes milled.
Bambanani experienced a fire in the pillar area and this resulted in some
lost production and the unavailability of certain working areas. Total cash
costs were lower in absolute terms but unit costs increased to R63,913
per kilogram ($238 per ounce). Tshepong experienced a drop in recovered
grade (down 4%) although still above target. Total cash costs rose because
a greater area was mined and there was increased development. Matjhabeng
and Joel, whilst both operating in closure mode, have posted improved
operating results.
At Ergo, gold production increased by 8% through improved head grade and
higher metallurgical efficiency as well as through the gold recovered from
the clean-up of the now closed gold elution circuit of the Daggafontein
plant. Operating profit rose by 73% to R31 million.
AFRICA
Overall performance
The Africa region had a good production quarter with the inclusion of
Yatela mine for the first time. This enabled the region to produce 229,000
attributable ounces, an increase of 9% on the previous quarter, at a total
cash cost of $131 per ounce. Operating profit was maintained at $22 million
for the quarter. The region had an excellent safety quarter, recording one
lost-time injury and thereby improving its year-to-date LTIF rate by 25% to
1.32.
Mine performance
Production at Sadiola (38% attributable) decreased by 10% to 47,000
attributable ounces, mainly due to treating lower grade material as planned.
The lower production increased unit total cash costs by 10% to $137 per
ounce. The mine has been accident-free for the year. Yatela (40%
attributable) had an excellent start by producing 25,000 attributable
ounces. This was above expectation, and at a creditable total cash cost of
$146 per ounce. The mine is now fully commissioned and operating at its
designed capacity of 400 tons per hour.
Morila (40% attributable) continued its good performance by producing
65,000 attributable ounces for the quarter - a level similar to the previous
quarter - at a total cash cost of $104 per ounce, an increase of 4%. Morila
successfully completed its 90-day continuous production and economic
completion testing, making the project loan non-recourse to AngloGold.
Production at Geita (50% attributable) was maintained at levels similar
to those of the previous quarter at 72,000 attributable ounces and at a
total cash cost of $150 per ounce, an increase of 13% on the previous
quarter. The increased cost is mainly due to higher power costs as a result
of the hardness of the ore being treated. The mine recorded no accidents
for the quarter.
Production at Navachab decreased by 8% for the quarter to 20,000 ounces
at a total cash cost of $181 per ounce, an increase of 12% on the previous
quarter. The lower production was largely due to recovery problems which
have since been resolved.
NORTH AMERICA
Overall performance
Gold production in North America increased by 4% compared to the previous
quarter due to the realisation of production from second quarter crushed ore
placement at Cripple Creek &Victor (CC&V). Total cash costs per ounce
decreased by $3 per ounce to $199 as a result of improved ounce placement at
CC&V and the benefits realised from ongoing cost-cutting efforts.
Mine performance
At Jerritt Canyon (70% attributable), production of 74,000 ounces was 1%
higher than the second quarter, as a result of increased processing of
Cortez ore tons. Total tonnage processed this quarter was approximately 12%
higher than the second quarter, with a 20% increase in the processing of
Cortez ore. Total cash costs were $200 per ounce, a decrease of 8% on the
previous quarter, as significant savings from cost-cutting initiatives were
realised. Jerritt Canyon's SSX mine was selected for the Mine Safety and
Health Administration's highest award - Sentinels of Safety - as the safest
underground metal group mine in the United States for year 2000.
Production at CC&V (67% attributable - effectively 100% - see Note 4 on
page 8) was 61,000 ounces, 6% higher than levels for the previous quarter.
Crushed ore tons placed for leaching were approximately 2% higher. Reduced
run-of-mine ore tonnage mined during the period resulted in total ore
placement being 11% lower than the second quarter. Production continued to
benefit from prior period ounce placement. Total cash costs were $193 per
ounce, an increase of 9% on the second quarter due partly to higher mobile
maintenance expenditures, increased costs and consumption of commodities.
SOUTH AMERICA
Overall performance
Gold production in the South American region was 6% higher at 112,000
ounces. Total cash costs were down by 9% ($128 per ounce) as a result of
improved production, the continuing cost-cutting programme, adjustments to
the optimised stripping ratio, increased by-products at Cerro Vanguardia and
currency impacts in Brazil.
Mine performance
Gold production for the quarter was up at all operations: by 14% at Cerro
Vanguardia (46.25% attributable) as a result of increased ore treated and
better grades (11%), by 3% at Morro Velho due to a higher volume of ore
treated, and by 3% at Serra Grande (50% attributable) due to improved
production from quartz veins ore with higher grades.
With respect to safety, Cerro Vanguardia was affected by four lost-time
injuries, while Serra Grande remains below the Ontario benchmark, with Morro
Velho showing improvements following the implementation of a new safety
action plan.
AUSTRALIA
Overall performance
Production for the quarter of 134,000 ounces was 14% above the previous
quarter, with strong increases at all mines except Tanami, which has been
processing remnant stockpile ore prior to its closure in early October. At
A$384 ($197) per ounce, total cash costs have been maintained at close to
the level achieved in the previous quarter.
Mine performance
At Sunrise Dam, the benefits from the expansion of the plant have been
quickly realised. Throughputs have exceeded design targets and gold
production during the quarter increased by 14% to 77,000 ounces. Cash
expenditure rose because of an increase in activity levels across the
operation as processing rates were lifted. As anticipated, head grade fell
by 13% and recovery declined from 89% to 83% as full processing of hard ore
commenced. As a consequence, there was an increase in total cash costs of
15% to A$332 ($170) per ounce.
The performance of Union Reefs improved significantly from the previous
quarter. The implementation of a revised mine plan resulted in an increase
in production to 29,000 ounces, an improvement of 25% on the June quarter.
The strong improvement in production flowed through to total cash costs,
which fell by 14% to A$452 ($232) per ounce from A$524 ($269) per ounce in
the previous quarter. No offers were received for Union Reefs' mine assets,
so AngloGold will continue to manage the operation through to closure in
late 2002 or early 2003. Negotiations are proceeding on the disposal of the
Brocks Creek assets.
At the Boddington oxide operation an improvement in production of 10% to
22,000 ounces was achieved. Total cash costs were also reduced
significantly as mining activity wound down, falling to A$343 ($176) per
ounce from A$417 ($215) per ounce in the previous quarter. The current
operations at Boddington are scheduled to cease at the end of November and
the plant will be placed on care and maintenance pending the commencement of
the Boddington Expansion Project.
At Tanami, processing of remnant stockpiled ore continued. Production
for the September quarter was down 8% compared to the previous quarter.
Although all operational mining has ceased, hauling and mining activities
associated with site rehabilitation have contributed to the higher total
cash costs of A$471 ($239) per ounce compared with A$370 ($193) per ounce in
the previous quarter.
EXPLORATION OVERVIEW
Drilling at Sunrise Dam resulted in numerous high-grade intercepts during
the quarter. In the northern area, the Mako and Sunrise Shear zones
returned 19 metres at 12.9 g/t and 3 metres at 36.3 g/t respectively. To
the south, significant results from the Western Shear and the Watu structure
included 20 metres at 8.1 g/t and 6 metres at 27.1 g/t. Preliminary
evaluation of the southern area indicates that a pit cutback to access at
least 250,000 ounces is economically attractive.
At Coyote, located in the Western Tanami, drilling at Buggsy-Gonzalez and
Speedy-Sylvester increased the mineralised strike length to 800 metres.
Drilling is in progress to realise the resource potential on strike and at
depth prior to infill drilling. Significant intercepts were 8 metres at
20.5 g/t at Buggsy-Gonzalez and 5 metres at 10.0 g/t at Speedy-Sylvester.
At Geita Hill, drilling for down plunge mineralisation intersected 39
metres at 7.1 g/t. At Chipaka, 300,000 ounces of indicated resource has
been defined. Reconnaissance drilling at Prospect 30 and Samena returned 5
metres at 16.1 g/t and 5 metres at 13.3 g/t respectively.
GOLD MARKET
For the third quarter in succession, the gold market has been moved by
unforeseen and extraordinary events. During the first quarter and again in
the second quarter, the gold price rose sharply: on the first occasion on
the back of unexpected tightness in the short-term gold lending market, on
the second occasion on fears of a resurgence of inflation in the United
States following a further cut in US interest rates. In both cases, the
price corrected promptly to the comfort zone of $265-$275 per ounce. The
third quarter was different, with the gold price affected by the terrorist
attacks on the USA, a political event quite outside the gold market. This
event saw gold almost immediately priced up by $20 per ounce to a spot price
of over $290. Unlike the rallies of the first two quarters of this year
when the gold price retraced promptly, on this occasion the gold price
traded through to the end of the third quarter at around $290 per ounce.
Only since the end of the quarter have we seen the price retrace to its
earlier trading range in the $270s. The quarter was unusual too in seeing
the South African currency weaken sharply at the beginning of September out
of its long-term trading trend to a low of R9.03 to the US dollar, a low
since eclipsed by further post-quarter-end weakness which saw the currency
trade at R9.54 to the dollar on 22 October 2001.
The impact of these trading circumstances on gold revenues has been
material. Whilst the average US dollar gold price for the quarter was up 2%
on the previous quarter, at its peak the dollar gold spot price was over 9%
higher than the opening price for the quarter. Similarly, whilst the
average value of the rand against the US dollar for the quarter lost only 4%
on the previous quarter's average, at its weakest point it had lost 13% of
its opening value, and the currency has lost a further 6% since the end of
the quarter. These circumstances produced a new high rand gold price of
some R85,300 per kilogram in late September which has since been eclipsed by
the highest rand gold price ever of R88,391 per kilogram on 8 October 2001.
The average rand per kilogram for the quarter was R73,916 per kilogram, up
by 7% on the average for the previous quarter. At its high point, the rand
per kilogram price was over 23% higher than the opening price.
The events of 11 September that triggered the gold price increase were in
all respects a classic extraneous influence eliciting the traditional
response of a move to gold as a safe haven asset. Much has been written
since that event regarding gold's role in uncertain times, and the argument
has been made that the emerging realities of global economic circumstances
provide further support for a new cycle of investment in gold. The
supportive circumstances are several, including expectations of a weaker US
dollar on the back of the certainty of recession in the United States, the
dangers of renewed inflation that arise from lower interest rates and
loosening of monetary policy, and the dangers of banking crises in a global
economic decline.
Whilst many of these circumstances would be supportive of gold in model
circumstances, we are still in a developing environment where not all of
these elements are guaranteed to occur in a conventional fashion, or perhaps
at all. Analysts and market commentators have forecast the decline of the
US dollar for almost two years now, but the global nature of current
economic problems may leave the dollar at current levels with no material
weakening in the near to medium term. Equally, there are strong arguments
that the nature of the economic problems facing the US economy today will
tend to be deflationary, irrespective of Federal monetary policy, and that
inflation is not likely to be a factor. These elements together leave gold
still in a zone of uncertainty, although it has benefited from the renewed
interest of commentators and analysts. A re-rating of the gold price, and a
change of market balance in favour of gold in any event would be unlikely to
occur in a matter of weeks, and we should watch the evolving balances of
interest in this market in the months to come.
Predictably, the sharp price rise saw an equally sharp decline in
physical demand in our largest market, India. Encouragingly, the higher
price did not deter other physical markets, and there has been good buying
for investment purposes in Turkey, Thailand and Indonesia. In the early
stages of the price rally, investor and speculator buying was able to
sustain the price rise. Unfortunately, after the initial price movement,
there was little new investment buying, and volume on the futures market in
gold has been very thin for a number of weeks. The beginning of the rally
saw the New York Comex long position increase to a little over 120 tons net,
but position-squaring in October has seen this long position fall back to
around 75 tons. These levels of interest are within the sort of parameters
of trading that we have seen on the market for some time, and in this
respect the rally does not appear to have lifted investor interest to new
levels.
Regarding currency markets, there has been no material change to the
strength of the dollar in international markets during the period under
review, and the US currency has continued to dominate global markets. The
quarter saw a severe dislocation in our own currency market, as the rand
broke out of an eight-to-nine year trading channel against the US dollar to
reach new lows against the US currency. Since the end of the quarter, an
all-time low of R9.54 to the US dollar has been seen. There are a number of
aspects of the market in our currency which have contributed to weakness and
to its vulnerability, and there is little doubt that the market has seen the
rand as a one-way bet against the dollar. For some time now, this
structural bias has been made worse by a lack of liquidity in the market,
leading to a situation in which the currency can be moved by very small
volumes of business. The current value of the rand is clearly reflective
neither of purchasing power realities in the economy nor of the quality of
economic policy and leadership in the country. Whilst it is difficult to
imagine what steps might be taken to stabilise or correct the position in
the market, there is little doubt that this will be a matter of concern for
both market makers and those responsible for monetary policy for the
foreseeable future.
GOLD MARKET
NET DELTA OPEN HEDGE POSITION AS AT 30 SEPTEMBER 2001
As at 30 September 2001, the group had outstanding the following net forward-
pricing commitments against future production. A portion of these sales
consists of US dollar-priced contracts which have been converted to rand
prices at average annual forward rand values based on a spot rand/dollar
rate of 9.0152 available on 30 September 2001.
Kilograms Forward Price Forward Price Ounces
Sold R per kg $ per oz Sold
'000
12 months ending
31 December 2001 41,134 R83,813 $288 1,322
2002 150,550 R84,416 $281 4,840
2003 90,457 R93,778 $292 2,908
2004 67,321 R100,940 $298 2,164
2005 47,864 R116,087 $326 1,539
January 2006 - December 2010 108,831 R134,481 $325 3,499
506,156 R101,997 $300 16,273
The marked-to-market value of all hedge transactions making up the hedge
positions in the above table was a negative R1,517 million (negative $168
million) as at 30 September 2001. The value was based on a gold price of
$291.65 per ounce, exchange rates of R/$9.0152 and $/A$ 0.4918 and the
prevailing market interest rates and volatilities at the time.
As at 29 October 2001, the marked-to-market value of the hedge book was a
positive R322 million ($34.4 million) based on a gold price of $277.50 per
ounce and exchange rates of $/R9.38 and A$/$0.5024 and the prevailing market
interest rates and volatilities at the time.
Note to AngloGold Hedge Position as at 30 September 2001
*The delta position indicated hereafter reflects the nominal amount of the
option multiplied by the mathematical probability of the option being
exercised. This is calculated using the Black and Scholes option formula
with the ruling market prices, interest rates and volatilities as at 30
September 2001.
ANGLOGOLD HEDGE POSITION
AS AT 30 SEPTEMBER 2001
Year 2001 2002 2003 2004 2005 2006- Total
DOLLAR GOLD 2010
Forward Contracts
Amount (kg) 16,064 74,773 51,652 47,066 30,825 75,708 296,087
$ per oz $303 $299 $311 $310 $323 $342 $316
Put Options Purchased
Amount (kg) 1,747 10,238 5,808 2,662 757 1,291 22,504
$ per oz $385 $312 $352 $390 $291 $291 $336
*Delta (kg) 1,652 4,500 4,187 1,970 252 370 12,931
Put Options Sold
Amount (kg) 4,665 4,665
$ per oz $283 $283
*Delta (kg) 1,437 1,437
Call Options Purchased
Amount (kg) 14,272 5,407 667 572 20,918
$ per oz $297 $297 $350 $360 $301
*Delta (kg) 6,993 2,766 168 166 10,093
Call Options Sold
Amount (kg) 41,778 21,962 10,463 3,303 1,704 2,233 81,444
$ per oz $310 $348 $372 $342 $358 $338 $331
*Delta (kg) 14,219 3,911 2,045 1,261 644 1,210 23,290
RAND GOLD
Forward Contracts
Amount (kg) 11,068 42,167 16,401 10,311 9,700 15,433 105,080
Rand per kg R80,071 R78,261 R82,939 R89,067 R120,396 R130,557 R91,812
Put Options Purchased
Amount (kg) 311 311
Rand per kg R75,555 R75,555
*Delta (kg) 25 25
Put Options Sold
Amount (kg)
Rand per kg
*Delta (kg)
Call Options Purchased
Amount (kg)
Rand per kg
*Delta (kg)
Call Options Sold
Amount (kg) 5,361 14,357 4,519 1,875 3,119 1,875 31,105
Rand per kg R84,469 R87,003 R93,766 R93,603 R125,774 R93,603 R92,232
*Delta (kg) 3,209 9,153 2,783 1,436 1,651 1,652 19,884
AUS DOLLAR (A$) GOLD
Forward Contracts
Amount (kg) 3,694 18,040 13,841 5,443 6,221 31,726 78,965
A$ per oz A$519 A$567 A$521 A$531 A$654 A$617 A$581
Call Options Purchased
Amount (kg) 2,099 6,687 778 3,110 26,282 38,957
A$ per oz A$732 A$728 A$703 A$724 A$687 A$699
*Delta (kg) 367 2,007 285 1,428 17,268 21,355
Call Options Sold
Amount (kg) 3,732 3,732
A$ per oz A$554 A$554
*Delta (kg) 2,779 2,779
RAND DOLLAR (000)
Forward Contracts
Amount ($) 19,839 30,000 49,839
Rand / $ R 4.67 R 7.17 R 6.18
Put Options Purchased
Amount ($) 105,000 105,000
