| Thu 27 Jan 2005, 8:15 | | REPORT FOR THE QUARTER AND YEAR ENDED 31 DEC 2004 |
|
ANGLOGOLD ASHANTI LIMITED
(formerly: AngloGold Limited)
Registration No. 1944/017354/06
Incorporated in the Republic of South Africa
ISIN: ZAE000043485
Share codes:
JSE: ANG
LSE: AGD
NYSE: AU
ASX: AGG
GSE: AGA
Euronext Paris: VA
Euronext Brussels: ANG BB
Report to shareholders
for the quarter and year ended 31 December 2004
Group results for the quarter...
- Hedge book restructured to give greater exposure to spot gold price and
to improve value of future forward sales contracts
- Production increased by 4% to 1.699Moz
- Total cash costs increased by 2% to $278/oz, largely due to a further
weakening in the dollar
- Total cash costs in South Africa reduced by almost 2% in rand terms
to R59,541/kg
- Adjusted headline earnings3 improved from $43m to $110m, $59m of which
is the result of a change to the estimated deferred tax rate
... and for the year
- Gold production increased 8% to 6.052Moz, largely due to the merger
with Ashanti
- Total cash costs2 increased 25% to $268/oz mainly due to stronger
operating currencies
- Adjusted headline earnings3 decreased by 7% to $263m, which includes
the effect of a change to the estimated deferred tax rate
- Final dividend declared at R1.80 per share or 30 US cents per share,
resulting in a total dividend of R3.50 or 56 US cents per share
Quarter Quarter Year Year
ended ended ended ended
Dec Sept Dec Dec
2004 2004 2004 2003
SA rand / Metric
Operating review
Gold
Produced - kg / oz (000) 52,852 50,623 188,223 174,668
Price received1 - R/kg / $/oz 76,802 80,572 81,184 87,826
Total cash costs2 - R/kg / $/oz 54,015 55,744 55,246 51,710
otal production costs2 - R/kg / $/oz 68,703 69,582 69,036 63,541
Financial review
Operating profit - R / $ million 110 602 1,629 4,667
Adjusted
operating profit4 - R / $ million 586 631 2,802 4,229
Net profit - R / $ million 136 253 567 2,331
Headline earnings - R / $ million 165 274 703 2,379
Adjusted headline
earnings3 - R / $ million 642 280 1,644 2,133
Capital expenditure2 - R / $ million 1,181 1,004 3,764 3,396
Earnings per ordinary
share - cents/share
Basic 51 96 226 1,046
Diluted 51 96 225 1,042
Headline 62 104 280 1,068
Adjusted headline3 243 106 654 957
Dividends - cents/share 350 710
Quarter Quarter Year Year
ended ended ended ended
Dec Sept Dec Dec
2004 2004 2004 2003
US dollar / Imperial
Operating review
Gold
Produced - kg / oz (000) 1,699 1,628 6,052 5,616
Price received1 - R/kg / $/oz 396 392 394 363
Total cash costs2 - R/kg / $/oz 278 272 268 214
otal production costs2 - R/kg / $/oz 354 340 336 263
Financial review
Operating profit - R / $ million 2 97 232 622
Adjusted
operating profit4 - R / $ million 97 98 434 559
Net profit - R / $ million 16 40 81 312
Headline earnings - R / $ million 20 44 102 318
Adjusted headline
earnings3 - R / $ million 110 43 263 282
Capital expenditure2 - R / $ million 192 156 585 449
Earnings per ordinary
share - cents/share
Basic 6 15 32 140
Diluted 6 15 32 139
Headline 8 17 41 143
Adjusted headline3 42 16 105 127
Dividends - cents/share 56 101
Notes:
1. Price received including realised non-hedge derivatives.
2. 2003 restated to reflect the change in accounting treatment of ore
reserve development expenditure.
3. Headline earnings before unrealised non-hedge derivatives and
fair value gains on interest rate swaps.
4. Operating profit excluding unrealised non-hedge derivatives.
$ represents US dollar, unless otherwise stated.
Operations at a glance
for the quarter ended 31 December 2004
Price received1 Production Total cash costs
% % %
$/oz Variance4 oz (000) Variance4 $/oz Variance4
Great Noligwa 430 5 203 (2) 234 -
Sunrise Dam 433 4 114 2 282 22
Morila5 416 15 90 143 150 (40)
Geita6 352 (4) 190 28 264 (10)
Cerro Vanguardia5 415 9 68 11 130 (10)
TauTona 428 5 131 (9) 278 10
Kopanang 431 6 123 3 285 (6)
AngloGoldAshanti Brazil 365 (1) 59 (8) 135 4
Mponeng 431 6 112 (5) 334 6
Cripple Creek & Victor 317 (2) 91 1 240 10
Sadiola5 419 6 47 24 255 (4)
Serra Grande5 362 - 24 - 147 8
Yatela5 438 9 28 17 276 18
Tau Lekoa 433 6 75 7 397 (2)
Freda-Rebecca - (100) - (100) - (100)
Navachab 428 11 17 (6) 462 53
Bibiani 310 (22) 4 (26) 283 20
Savuka 427 4 42 (2) 458 2
Iduapriem5 315 (16) 42 (24) 354 40
Ergo 416 2 48 (9) 404 3
Obuasi 314 (17) 90 (4) 320 7
Siguiri5 310 (19) 43 87 434 (14)
Other 28 (20)
AngloGold Ashanti 396 1 1,699 4 278 2
Cash operating Adjusted operating
profit (loss)2 profit (loss)3
% %
$m Variance4 $m Variance4
Great Noligwa 38 15 33 14
Sunrise Dam 28 47 20 54
Morila5 24 700 19 -
Geita6 22 175 5 -
Cerro Vanguardia5 22 38 16 78
TauTona 18 (18) 8 (38)
Kopanang 16 33 12 33
AngloGold Ashanti Brazil 13 (19) 10 (23)
Mponeng 10 - 2 (33)
Cripple Creek & Victor 8 (33) (1) (150)
Sadiola5 6 - 3 -
Serra Grande5 5 (17) 4 (20)
Yatela5 4 - 2 -
Tau Lekoa 2 - (3) 25
Freda-Rebecca - (100) - -
Navachab (1) (200) (2) (300)
Bibiani (1) (114) (4) (300)
Savuka (2) 33 (4) 20
Iduapriem5 (2) (140) (7) (450)
Ergo (4) (100) (4) (100)
Obuasi (4) (233) (12) (200)
Siguiri5 (9) (350) (11) (1,000)
Other 18 29 11 38
AngloGold Ashanti 211 10 97 (1)
1 Price received includes realised non-hedge derivatives.
2 Adjusted operating profit (loss) plus amortisation of mining assets less
non-cash revenues.
3 Operating profit excluding unrealised non-hedge derivatives.
4 Variance Dec ember 2004 quarter on September 2004 quarter - increase
(decrease).
5 Attributable.
6 Attributable 100% from May 2004.
Overview of the quarter and the year
In addition to a generally sound operational performance, this quarter is
characterised by two key issues - the restructuring of the hedge book and the
underperformance of the Ashanti assets.
Regarding the hedge book, and in light of the company's view that the gold
price is likely to trade in the current range or higher in the medium term,
management has taken steps to reduce and improve the hedge position for 2005
and 2006 by delivering into a larger-than-usual number of contracts during the
quarter, together with partially restructuring the hedge book. This has
resulted in a reduction in the net delta of the hedge of some 2.2Moz, to a net
hedge of 10.49Moz at 31 December 2004, down substantially from the 12.7Moz
reported at the end of the last quarter, following the inclusion of the
Ashanti hedge into AngloGold's book.
The restructured hedge now represents cover equal to 31% of five years'
production of AngloGold Ashanti. The 2.2Moz reduction in this one quarter is
of the same magnitude as the substantial reduction achieved in hedge
restructuring by AngloGold through the second quarter of 2002.
The combined effect of these actions has been to increase the proportion of
AngloGold Ashanti's gold production that is exposed to the higher spot price
of gold and to improve the value of forward sales contracts in future years.
The second defining feature of the quarter is the continued underperformance
of the Ashanti assets, although a number of key indicators are improving and
these should lead to better production and lower costs.
Turning to operations, the gold price received, for the reasons referred to,
was 1% higher while gold production increased by 4%. Total cash costs
increased by $6/oz to $278/oz and total production costs increased by $14/oz
to $354/oz. Consequently, adjusted operating profit was virtually unchanged
at $97m.
The leading production gains were: Morila (53,000oz) following the resolution
of the plant expansion problems; Siguiri (20,000oz) which is recovering from
the embargo on gold exports; and Geita (42,000oz) which met its planned
increase in production. These increases in ounces were offset by a reduction
in production in South Africa (27,000oz), as well as at Bibiani (12,000oz) and
Iduapriem (13,000oz). The major reduction in South Africa came from TauTona
(13,000oz) while the other mines, with the exception of Kopanang and Tau
Lekoa, reported slight decreases.
Total cash costs increased by 2% from $272/oz to $278/oz, largely as a result
of the weakening of the dollar, which increased costs by $10/oz. Costs in
South Africa continued to be well controlled, decreasing by 2% in rand terms
to R59,541/kg, while the currency strengthened by 5%. At Morila, costs
declined substantially as a result of the higher production. In Australia,
however, total cash costs increased by A$43/oz ($49/oz) and in Ghana by $50/oz
as a result of lower grade at Obuasi and production problems at Bibiani and
Iduapriem.
Amortisation increased in line with production except at the former Ashanti
operations, where it has been adjusted by $5m after a review of the allocation
of the purchase price.
This quarter, there was an abnormal tax credit of $59m, primarily as a result
of a change to the estimated deferred tax rate. This credit had a
substantial, positive effect on adjusted headline earnings which from $43m to
$110m.
The unrealised loss on non-hedge derivatives, partially offset by the tax
gain, was the primary reason for a decline in net profit for the quarter to
$16m.
The AngloGold Ashanti board approved the $121m Cuiaba deepening project in
Brazil, which will increase production from that mine from 190,000oz per year
to 250,000oz per year within two years of the project's completion. The
Cuiaba life of mine will be extended by six years and production over this
period will increase by 1.86Moz.
The company this week signed a new three year loan facility agreement for
$700m to replace the $600m facility that matures in February. The facility
will be used to repay the maturing facility and for general corporate
purposes. The new facility will reduce the group's cost of borrowing, as the
borrowing margin over Libor will reduce from 70 basis points to 40 basis
points.
AngloGold Ashanti, both for the fourth quarter and the year, saw its best ever
safety performance. For the quarter, lost time injuries declined by 26% to
6.56 per million man hours (1.31 per 200,000 man hours), and for the year, the
number of fatal accidents and the rate of fatal accidents declined by 26% and
34%, respectively. Safety improved in all of the company's operating regions
and an increasing number of mines are achieving significant periods of time
without a lost time injury: Iduapriem (16 months), Cripple Creek & Victor (13
months), Bibiani (9 months), Navachab (8 months), Sunrise Dam (6 months),
Yatela (4 months) and Geita (4 months).
For the year ended 31 December 2004, gold production was 8% higher at 6.05Moz,
attributable largely to the Ashanti merger, as well as to higher production at
Sunrise Dam and Cripple Creek & Victor. This increase was offset to some
degree by the disposal of Jerritt Canyon and the closure of Union Reefs, as
well as reduced production from all of the South African underground
operations.
Total cash costs, at $268/oz, were $54/oz higher than those of the previous
year, mainly due to stronger operating currencies and lower grades. Adjusted
headline earnings for the year decreased by 7% to $263m.
A dividend of 180 South African cents (30 US cents) per share has been
declared for the six months ended 31 December 2004. This has been based on
the adjusted headline earnings, which excludes unrealised non-hedge
derivatives.
Looking ahead, production for the first quarter is estimated to be 1.6Moz at
an average total cash cost of $280/oz, assuming the following exchange rates:
R/$6.05:1, A$/$0.77:1, BRL/$2.7:1 and Argentinean Peso/$3:1. Capital
expenditure for the quarter is estimated at $174m but will be managed in line
with profitability and cash generation.
For the year, production is estimated to be 6.5Moz at an average total cash
cost of $273/oz, assuming the following exchange rates: R/$6.20:1, A$/$0.77:1,
BRL/$2.8:1 and Argentinean Peso/$3:1. Capital expenditure for the year is
estimated at $701m.
Notes:
- All references to price received include the realised non-hedge derivatives.
- All references to adjusted operating profit refer to operating profit
excluding unrealised non-hedge derivatives.
- All references to adjusted headline earnings refer to headline earnings
excluding unrealised non-hedge derivatives and fair value gains on interest
rate swaps.
- In the case of joint venture operations, all production and financial
results are attributable to AngloGold Ashanti.
- Rounding of figures may result in computational discrepancies.
Review of the gold market
The return of investor interest to gold produced a sustained rise in the gold
price during the latter half of 2004. The gold price rose almost
uninterruptedly for three months to early December. The quarter produced a
high spot gold price of $457/oz the highest price seen in almost 17 years.
The price closed the quarter at $435/oz, up by 5% from the beginning of 2004.
The market has corrected further since the end of the year to a low of
$416/oz, but buying interest returned in January 2005 and the price rally of
the past three years still appears intact.
The average spot price of $434/oz for the last quarter of 2004 was $33/oz or
8% stronger than the average price for the previous quarter. However, the
rand strengthened against the dollar by some 13% during this period, and the
South African gold price hardly benefited from the higher dollar prices. The
average local price of R83,983/kg was only 2% higher than the rand price in
the previous quarter. The gold price in rands of R79,442/kg at the end of
2004 was over 10% or R9,000/kg lower than the local gold price at the
beginning of the year.
GOLD
The gold price driver for the quarter was definitively the weakening of the US
dollar, particularly against the euro, but also against the Japanese Yenen. The
weakening of the US currency has been the primary driver of the gold price
rise over the past three and a half years, and the correlation between the
rising US dollar spot price of gold and the weakening of the dollar against
the euro reached a remarkable 97% over a three month period to December 2004.
This does not mean that other factors will not have some effect on the gold
market and the price of gold from time to time. It does, however, underline
the primary influence of the health of the US currency on the gold price in
this current market cycle for gold.
In this respect, the gold market differs from the parallel cycle of rising
base metal and commodity prices. Unlike the industrial metals, the price of
gold is not a bet on Chinese demand, on which many commodity prices depend.
The gold price correlation with the US dollar is an important one for the year
ahead. With market commentators and analysts uniformly forecasting a weaker
US dollar at the end of 2005, these forecasts have translated to a forecast of
higher spot prices of gold as well. Any stabilisation or recovery in the US
currency would have the opposite effect on the gold price in the current
market.
Investment demand remains the vehicle through which this influence on the gold
price is exercised. During the past quarter, the role played by investors and
speculators in gold on the New York Comex was supplemented by the launch in
the USA of the gold exchange-traded fund, the streetTRACKS Gold Shares. The
fund was created by the World Gold Council in partnership with State Street
Global Markets. By early 2005, this fund had purchased on behalf of its
investors over 140t of physical gold in the market. This level of investment
is equal to over 25% of the net long position in gold on the New York Comex.
On the Comex itself, during the quarter the total open position in gold
reached a record high of over 56Moz, or 1,750t. The net long position
remained consistently strong (at around 20Moz) throughout the final quarter of
2004, although it failed to reach the record high levels seen in early April.
PHYSICAL DEMAND
The physical market for gold for the first half of 2004 showed some positive
adjustment, and some acceptance of higher gold prices. The upshot has been a
slight recovery in aggregate demand, and some slippage in supply, and a
physical market more in balance for that.
In the important area of demand for gold in jewellery, latest reports show
improved offtake in the Middle East (particularly in Turkey) and in South East
Asia (particularly in Vietnam), and sustained demand in India. Set against
this demand, the market has seen lower official sales of gold in 2004, due in
part to the process of renegotiation and extension of the Washington Agreement
for a further five years, and lower gold scrap sales, as the temptation of a
higher dollar spot price of gold has been dampened by the weakening of the US
currency and consequently generally lower local prices of gold in many
countries.
A further contribution to an improved supply/demand balance is likely to come
from improving gold offtake in jewellery in China, for the first time in
several years. This improvement has come with the completion in 2003 of the
deregulation of the gold jewellery market in China, and the subsequent
introduction by the World Gold Council of modern, 18 carat gold jewellery to
metropolitan markets in China. This new product is able to compete with
platinum jewellery on price, colour and design and it has been interesting to
see growing sales of this new product and a simultaneous fall in platinum
jewellery sales in the China mainland market during 2004.
CURRENCIES
The recovery in the US dollar which commenced early in the first quarter of
2004 lasted well into the third quarter of the year. For over six months, the
US currency traded most of the time between $1.20 and $1.25 to the euro, and
reached Yen115 during May 2004. The dollar's strength during this time was a
product largely of purchases of US dollar instruments by monetary authorities
of China and Japan. As this Asian intervention ended, so did the recovery in
the US currency. The dollar's devaluation resumed late in the third quarter,
and continued unbroken for four months, to close 2004 at almost $1.36 to the
euro, and Yen102. By the end of the year, the euro had gained 8% and the Yenen
5%
against the US dollar compared with their exchange rates at the beginning of
2004.
The cycle of dollar weakness continued as the market took the view that the
challenge of the US budget deficit was unlikely to be resolved and the US
currency would have to weaken in order to set in train the economic
corrections necessary to reduce the US deficits. This market view was
reinforced by the public announcement in mid-November by Alan Greenspan,
Chairman of the US Federal Reserve Bank, that the current account deficit of
the USA was unsustainable and the willingness of foreign investors to finance
that deficit through investments in the US currency was finite. After that
announcement, the US currency went on to touch a record low of over $1,37 to
the euro, and to lose ground also against the Japanese Yenen. With the weaker
dollar came a stronger gold price, and the behaviour of gold as a currency
trade against the US dollar was reinforced.
Since the end of 2004, the dollar has recovered somewhat against both the Euro
and the Yenen, this time without the support of US Treasury bonds by Japan and
China that triggered and sustained the dollar recovery during the first half
of 2004. Whilst this looks in part like profit-taking by the forex markets,
the dollar's revival does raise the issue of an appropriate exchange rate for
the US currency, given the healthier economic growth rates projected for 2005
for the USA by comparison with the alternative economies of Japan and Europe.
For the moment, the dollar recovery remains intact. However, it is likely to
be only a matter of time before the economic reality of the massive US current
account deficit reasserts itself, and market sentiment again turns against the
US dollar.
Against this background, the turn in the US interest rate policy is likely to
be maintained into 2005. Five rate increases during the second half of 2004
have brought US rates up to 2.25%p.a. The rate increases have been
implemented steadily and with a degree of caution to avoid damaging US
economic growth. The balance is a delicate one, but the Federal Reserve seems
committed to further interest rate increases in 2005 as a means of improving
the ability of the US dollar to attract foreign investment flows to address
the deficits of the US economy.
Turning to the rand, the local currency has strengthened against the US dollar
by significantly more than the dollar has weakened against the euro and the
Yenen. At their peak in 2004, the European and Japanese currencies had
strengthened by 8% and 5% against the opening exchange rates against the US
dollar at the beginning of 2004. By comparison, the rand gained fully 17%
against the US dollar. The local currency also showed significantly higher
volatility during the year than did the two other currencies. The rand
benefited from strong commodity prices and from sustained investor interest in
the South African economy. In addition, sound economic policies in recent
years have translated to sustained growth in the country and to a further
upgrading of the country's sovereign risk rating by international rating
agencies. Whilst the value of the rand remains vulnerable to a recovery in
the US dollar, or to specific event-driven reactions, it is otherwise likely
to sustain its strength against major currencies into 2005.
HEDGING
As at 31 December 2004, the net delta hedge position of AngloGold Ashanti was
10.49Moz or 326t, valued at the spot price of gold on that date of $435/oz.
This net delta position reflects a decrease of just under 2.2Moz or 69t in the
net size of the AngloGold Ashanti hedge compared with the position at the end
of the previous quarter. This decrease has been achieved by the restructuring
of the combined hedge position of AngloGold and Ashanti.
The marked-to-market value of the hedge position as at 31 December 2004 was
negative $1,161m, little changed from the negative value of $1,139m recorded
at the end of 30 September 2004, notwithstanding the fact that the spot gold
price of $435/oz, on which this value is based, was $16/oz higher than the
spot price at 30 September 2004. The company continues to manage its hedged
positions actively, and to reduce overall levels of pricing commitments in
respect of future gold production by the company.
Restructuring the AngloGold Ashanti Hedge Book
This company has an established practice of actively managing its hedged
commitments under changing market circumstances. This is reflected in the
reduction of the book from its high of 17.8Moz at 31 December 2000 to 7.01Moz
at 30 June 2004. At the level of 7.01Moz, the hedge had been reduced to cover
an average of 22% of the annual production from AngloGold assets over the next
five years. Following the merger with Ashanti, the combined hedge books
amounted to 12.7Moz at the end of last quarter, and the level of cover
increased to 40% of five years' production of the combined company.
The company has previously indicated its intention to continue with the
reduction in hedging levels. The argument for this reduction has been further
supported by the company's positive view of the gold price in the current
market cycle. The company believes that the market circumstances favourable
for the gold price are likely to remain in place for some time, and that the
gold price will continue to trade in its current range, or higher.
A substantial restructuring of the hedge was commenced in late December 2004
and completed in January 2005. This has resulted in a reduction in the net
delta of the combined hedge by some 2.2Moz or 69t of gold, down to a net hedge
delta of 10.49Moz at 31 December 2004. The restructured hedge now represents
cover equal to 31% of five years' production spread over a ten-year period.
The reduction of 2.2Moz in this one quarter is of the same order of magnitude
as the substantial reduction achieved in hedge restructuring by AngloGold
through the second quarter of 2002.
Notwithstanding a spot price at 31 December 2004 that was $16/oz higher than
that at 30 September 2004, the marked-to-market valuation of the hedge book at
the end of the year is almost unchanged quarter-on-quarter at negative
$1,161m, compared with negative $1,139m at the end of the third quarter. By
comparison, the marked-to-market value of the now restructured book at the
same spot price of $418.80/oz at which the 30 September valuation was
undertaken, would result in a value of negative $922m, reflecting a positive
variance of $217m.
This improvement was achieved through a combination of the elimination from
the hedge of lower-priced contracts and the cash injection of $83m into the
book in the final quarter of 2004, followed by a further $76m in January 2005.
The level of cover for 2005 is at approximately 10% of projected production
for that year, while in 2006 it is at approximately 17% of projected
production.
In broad terms, the steps undertaken in the restructuring included:
- the effective buy-back of poorly-priced forward and call option contracts in
years 2005, 2006 and 2007 in order to remove the concentration of hedging in
these years following the incorporation of the Ashanti hedge book, and to
increase exposure to the spot price of gold in this period; and
- the sale of new forward and call options contracts in the years beyond 2007
at higher gold prices than had been the case in the previous hedge structure,
and spread more evenly than in the previous hedge structure.
Because of the nature of the current accounting treatment of derivative
contracts, much of the restructuring of the hedge has been effected by
overlaying the existing hedge commitments with new contracts in order to
achieve the effect of buying-back and replacing with new contracts at
different dates and rates. The cash earnings will reflect the significantly
greater exposure of the company to the spot price during 2005 and 2006 in
particular. Beyond these years, the significantly higher contracted prices in
the restructured forward positions will provide further benefit.
It is the intention of management to continue to actively manage the hedge
book. This includes delivering into contracts, continuing to reduce the size
of the book, and continuing to seek the maximum economic benefit from the
book.
As much of the impact of the restructuring as possible has been taken in the
fourth quarter of 2004. What remained to be concluded of the restructuring
after the year-end was the apportionment of the net long position against
existing short forward positions, and the rollout of the balance of the
longer-dated new forward and option positions that complete the restructuring.
The shortfall in the received price in relation to the average spot price for
the fourth quarter of 2004 was a consequence of both the bunching of Ashanti
hedge contracts at year-end and the restructuring of the hedge book, and a gap
of this magnitude, is not expected to recur in anticipated market conditions.
For the year ahead, it is the company's intention to track the spot price more
closely than in this previous quarter, and to manage the hedge book actively
with the goal of moderating any negative impact on the price received of the
remaining lower-priced hedge positions in the year.
Hedge position at year end
As at 31 December 2004, the group had outstanding the following forward-pricing
commitments against future production. The total net delta tonnage of the hedge
of the company on this date was 10.49Moz or 326t (at 30 September 2004:
12.7Moz or 395.2t).
The marked-to-market value of all hedge transactions making up the hedge
positions was a negative $1.161bn (negative R6.583bn) as at 31 December 2004
(as at 30 September 2004: $1.139bn or R7.346bn). This value at 31 December 2004
was based on a gold price of $434.70/oz, exchange rates of R/$5.67 and
A$/$0.7745 and the prevailing market interest rates and volatilities at that
date.
As at 25 January 2005, the marked-to-market value of the hedge book was a
negative $993m (negative R5.869bn), based on a gold price of $426.35/oz and
exchange rates of R/$5.93 and A$/$0.7710 and the prevailing market interest
rates and volatilities at the time.
These marked-to-market valuations are not predictive of the future value of the
hedge position, nor of future impact on the revenue of the company. The
valuation represents the cost of buying all hedge contracts at the time of
valuation, at market prices and rates available at the time.
Year 2005 2006 2007 2008
DOLLAR GOLD
Forward contracts Amount (kg) 34,021 30,428 35,481 29,111
$ per oz $315 $338 $343 $363
*Restructure longs Amount (kg) 17,676
$ per oz $440
Put options purchased Amount (kg) 3,381 5,481 1,455
$ per oz $347 $355 $292
Put options sold Amount (kg) 6,221 4,354 855
$ per oz $397 $339 $390
Call options purchased Amount (kg) 9,880 3,030 2,003
$ per oz $340 $353 $361
Call options sold Amount (kg) 29,490 18,017 20,375 26,179
$ per oz $363 $386 $372 $377
RAND GOLD
Forward contracts Amount (kg)
Rand per kg
Put options purchased Amount (kg) 1,875
Rand per kg R93,602
Put options sold Amount (kg) 8,025 1,400
Rand per kg R80,840 R88,414
Call options purchased Amount (kg)
Rand per kg
Call options sold Amount (kg) 12,657 4,517 311
Rand per kg R88,509 R102,447 R108,123
A DOLLAR GOLD
Forward contracts Amount (kg) 2,969 3,110 8,398 3,110
A$ per oz A$560 A$746 A$650 A$673
Put options purchased Amount (kg) 1,244
A$ per oz A$585
Put options sold Amount (kg) 2,644
A$ per oz A$565
Call options purchased Amount (kg) 3,110 6,221 3,732 3,110
A$ per oz A$724 A$673 A$668 A$680
Call options sold Amount (kg) 1,711
A$ per oz A$597
Delta (kg) 32,280 44,577 57,531 52,221
**Total net gold:
Delta (oz) 1,037,825 ,433,182 ,849,662 1,678,942
Year 2009 2010-2014 Total
DOLLAR GOLD
Forward contracts Amount (kg) 25,324 48,745 203,110
$ per oz $377 $395 $357
*Restructure longs Amount (kg) 17,676
$ per oz $440
Put options purchased Amount (kg) 10,317
$ per oz $344
Put options sold Amount (kg) 1,882 9,409 22,721
$ per oz $400 $430 $400
Call options purchased Amount (kg) 14,913
$ per oz $345
Call options sold Amount (kg) 22,852 57,604 174,517
$ per oz $399 $455 $403
RAND GOLD
Forward contracts Amount (kg) 933 933
Rand per kg R116,335 R116,335
Put options purchased Amount (kg) 1,875
Rand per kg R93,602
Put options sold Amount (kg) 9,425
Rand per kg R81,965
Call options purchased Amount (kg)
Rand per kg
Call options sold Amount (kg) 2,986 5,972 26,443
Rand per kg R202,054 R223,756 R134,486
A DOLLAR GOLD
Forward contracts Amount (kg) 3,390 3,110 24,087
A$ per oz A$667 A$692 A$662
Put options purchased Amount (kg) 1,244
A$ per oz A$585
Put options sold Amount (kg) 2,644
A$ per oz A$565
Call options purchased Amount (kg) 1,244 3,110 20,527
A$ per oz A$694 A$712 A$688
Call options sold Amount (kg) 1,711
A$ per oz A$597
Delta (kg) 47,107 92,492 326,208
**Total net gold:
Delta (oz) 1,514,523 2,973,683 10,487,817
* At 31 December 2004, the group was in the process of restructuring the hedge
book and had acquired a long spot position in gold.
This long gold position will be applied to the restructure during the
first quarter of 2005.
** The Delta of the hedge position indicated above, is the equivalent gold
position that would have the same marked-to-market sensitivity for a small
change in the gold price. This is calculated using the Black-Scholes option
formula with the ruling market prices, interest rates and volatilities as at 31
December 2004.
Year 2005 2006 2007
DOLLAR SILVER
Forward contracts Amount (kg)
$ per oz
Put options purchased Amount (kg) 43,545 43,545 43,545
$ per oz $7.11 $7.11 $7.40
Put options sold Amount (kg) 43,545 43,545 43,545
$ per oz $6.02 $6.02 $5.93
Call options purchased Amount (kg)
$ per oz
Call options sold Amount (kg) 43,545 43,545 43,545
$ per oz $8.11 $8.11 $8.40
Year 2008 2009 2010-2014 Total
DOLLAR SILVER
Forward contracts Amount (kg)
$ per oz
Put options purchased Amount (kg) 130,635
$ per oz $7.21
Put options sold Amount (kg) 130,635
$ per oz $5.99
Call options purchased Amount (kg)
$ per oz
Call options sold Amount (kg) 130,635
$ per oz $8.21
The following table indicates the group's currency hedge position at
31 December 2004
Year 2005 2006 2007
RAND DOLLAR (000)
Forward contracts Amount ($) 130,509
Rand per $ R5.71
Put options purchased Amount ($)
Rand per $
Put options sold Amount ($)
Rand per $
Call options purchased Amount ($)
Rand per $
Call options sold Amount ($) 65,000
Rand per $ R5.72
A DOLLAR (000)
Forward contracts Amount ($) 55,237 39,222
$ per A$ A$0.59 A$0.75
Put options purchased Amount ($)
$ per A$
Put options sold Amount ($)
$ per A$
Call options purchased Amount ($)
$ per A$
Call options sold Amount ($) 20,000 20,000
$ per A$ A$0.76 A$0.74
BRAZILIAN REAL (000)
Forward contracts Amount ($)
$ per BRL
Put options purchased Amount ($) 600
$ per BRL BRL3.38
Put options sold Amount ($) 600
$ per BRL BRL3.21
Call options purchased Amount ($)
$ per BRL
Call options sold Amount ($) 600
$ per BRL BRL3.55
Year 2008 2009 2010-2014 Total
RAND DOLLAR (000)
Forward contracts Amount ($) 130,509
Rand per $ R5.71
Put options purchased Amount ($)
Rand per $
Put options sold Amount ($)
Rand per $
Call options purchased Amount ($)
Rand per $
Call options sold Amount ($) 65,000
Rand per $ R5.72
A DOLLAR (000)
Forward contracts Amount ($) 94,459
$ per A$ A$0.65
Put options purchased Amount ($)
$ per A$
Put options sold Amount ($)
$ per A$
Call options purchased Amount ($)
$ per A$
Call options sold Amount ($) 40,000
$ per A$ A$0.75
BRAZILIAN REAL (000)
Forward contracts Amount ($)
$ per BRL
Put options purchased Amount ($) 600
$ per BRL BRL3.38
Put options sold Amount ($) 600
$ per BRL BRL3.21
Call options purchased Amount ($)
$ per BRL
Call options sold Amount ($) 600
$ per BRL BRL3.55
Current hedge position
As at 25 January 2005, following further restructuring of the hedge book, the
group had outstanding, the following forward-pricing commitments against future
production. The total net delta of the hedge on this date was 10.49Moz or 326t
(at 31 December 2004: 10.49Moz or 326t).
The marked-to-market value of all hedge transactions making up the hedge
positions was a negative $993m (negative R5.869bn) as at 25 January 2005 (as at
31 December 2004: $1.161bn or R6.583bn).
This value was based on a gold price of $426.35/oz, exchange rates of R/$5.93
and A$/$0.7710 and the prevailing market interest rates and volatilities at 25
January 2005.
These marked-to-market valuations are in no way predictive of the future value
of the hedge position, nor of future impact on the revenue of the company.
The valuation represents the cost of buying all hedge contracts at the
time of valuation, at market prices and rates available at the time.
Year 2005 2006 2007 2008
DOLLAR GOLD
Forward contracts Amount (kg) 8,127 19,510 32,993 30,076
$ per oz $231 $336 $344 $365
Put options purchased Amount (kg) 9,135 8,592 1,455
$ per oz $334 $345 $292
Put options sold Amount (kg) 6,221 4,354 855
$ per oz $386 $339 $390
Call options purchasedAmount (kg) 15,001 3,435 2,003
$ per oz $338 $350 $361
Call options sold Amount (kg) 29,117 20,466 23,330 27,536
$ per oz $366 $392 $381 $380
RAND GOLD
Forward contracts Amount (kg)
Rand per kg
Put options purchased Amount (kg) 1,875
Rand per kg R93,602
Put options sold Amount (kg) 8,025 1,400
Rand per kg R81,457 R88,414
Call options purchasedAmount (kg)
Rand per kg
Call options sold Amount (kg) 12,657 4,517 311
Rand per kg R89,054 R102,447 R108,123
A DOLLAR GOLD
Forward contracts Amount (kg) 2,036 3,110 8,398 3,110
A$ per oz A$573 A$746 A$650 A$673
Put options purchased Amount (kg) 1,244
A$ per oz A$585
Put options sold Amount (kg) 3,110
A$ per oz A$553
Call options purchasedAmount (kg) 3,110 6,221 3,732 3,110
A$ per oz A$724 A$673 A$668 A$680
Call options sold Amount (kg) 3,110
A$ per oz A$577
Delta (kg) 22,017 34,937 56,920 54,089
*Total net gold:
Delta (oz) 707,8 1,123,249 1,830,018 1,738,999
Year 2009 2010-2014 Total
DOLLAR GOLD
Forward contracts Amount (kg) 26,288 53,566 170,560
$ per oz $380 $402 $365
Put options purchased Amount (kg) 19,182
$ per oz $336
Put options sold Amount (kg) 1,882 9,409 22,721
$ per oz $400 $430 $397
Call options purchasedAmount (kg) 20,439
$ per oz $342
Call options sold Amount (kg) 26,211 76,155 202,815
$ per oz $407 $468 $416
RAND GOLD
Forward contracts Amount (kg) 933 933
Rand per kg R116,335 $116,335
Put options purchased Amount (kg) 1,875
Rand per kg R93,602
Put options sold Amount (kg) 9,425
Rand per kg R82,491
Call options purchasedAmount (kg)
Rand per kg
Call options sold Amount (kg) 2,986 5,972 26,443
Rand per kg R202,054 R223,756 R134,747
A DOLLAR GOLD
Forward contracts Amount (kg) 3,390 3,110 23,154
A$ per oz A$667 A$692 A$667
Put options purchased Amount (kg) 1,244
A$ per oz A$585
Put options sold Amount (kg) 3,110
A$ per oz A$553
Call options purchasedAmount (kg) 1,244 3,110 20,527
A$ per oz A$694 A$712 A$688
Call options sold Amount (kg) 3,110
A$ per oz A$577
Delta (kg) 50,034 108,534 326,531
*Total net gold:
Delta (oz) 1,608,628 3,489,444 10,498,200
* The Delta of the hedge position indicated above, is the equivalent gold
position that would have the same marked-to-market sensitivity for a small
change in the gold price. This is calculated using the Black-Scholes option
formula with the ruling market prices, interest rates and volatilities as at 25
January 2005.
Exploration
In South Africa, assay results of surface borehole MMB4 drilled at Moab
Khotsong was completed during the quarter. This borehole returned encouraging
grades and confirmed the existing geological model, with an average grade of
32.46g/t over a channel width of 119.68cm for six deflections.
At Geita in Tanzania, diamond drilling of the Geita Hill down-dip extension
continued in order to optimise the open-pit and potential underground
interphase. Step-out drilling continued in the North East Extension area at
Geita Hill, tracing gold mineralisation along strike and down-dip to define
areas for infill drilling in 2005.
At Sadiola in Mali, an additional hole was drilled in the Hard Sulphide
Drilling Project, which verified the mineralisation previously encountered
100m below the exisitng Mineral Resource model. Satellite Mineral Resource
oxide modelling focused on FE3 South and drilling intersected mineralisation
300m further south. Infill drilling was completed over the western edge of
the FE4 pit.
At Yatela, four holes were drilled to investigate the sulphide potential below
the Alamoutala pit. Assay results received from the first two holes
intersected uneconomic mineralisation.
At Morila, drill intercepts at Samacline to the west of the pit remain
encouraging but deep. A regional target generation study within the lease
area identified several targets for follow-up drilling but no significant
mineralisation was intercepted.
At Obuasi in Ghana, underground exploration continues to focus on the below 50
Level Deeps project where results from drilling remain encouraging. The
tender has been awarded for the drilling of two 3,000m holes from surface in
the Deeps project. A further six holes are anticipated during the course of
this exploration project. Drilling of the West Lode sulphide orebody on the
32 Level project also yielded positive results.
At Bibiani North, drilling continued to focus on the delineation of additional
underground Mineral Resources with moderate results.
At Siguiri in Guinea, drilling for depth extensions in the Kami pit has
intersected narrow but relatively high grade zones. Mineral Resource
definition drilling continued south west of the Kozan pit and to the south of
the Kosise pit.
The start of the planned diamond drilling campaign at the Kimin project in
Democratic Republic of Congo is due to commence during January 2005.
In Namibia at Navachab, drilling at Anomaly 16, situated 5km from the current
pit, delineated an Inferred Mineral Resource of 5.4Mt at 1.03g/t for
178,000oz. Further drilling is required to test additional mineralisation
along strike and down-dip.
At Cripple Creek & Victor in the United States, efforts focused on evaluating
the metallurgical character of the Mineral Resource at the Wildhorse Extension
project, where results are pending. Mineral Resource expansion drilling
continued on this project with positive results. Drill testing of the Hoosier
Pass target, a sheeted vein system, continued with drill intersections of 1g/t
to 2g/t.
In Alaska, drilling at Livengood delineated a stratigraphically controlled,
shallow-dipping gold system, and further drilling is warranted. In the Pogo
district, the ER and Eagle projects will be farmed out in 2005, with
exploration focusing on three new targets identified during the 2004 regional
geochemical programme.
In Brazil, Mineral Resource definition drilling continued at Lamego. Drilling
confirmed multiple mineralised horizons at the southern extremity of the
CabeAa da Pedra fold hinge and the Carruagem exploration ramp advanced 227m
during the quarter to 242m.
At CACubedrrego do SA-tio, drilling at Carvoaria Velha-Bocaina (situated 2km
north-
east of Cachorro Bravo) confirmed the presence of multiple narrow, locally
high grade, mineralised sulphide horizons. Drilling at Bocaina at the
northern end of the property has extended the known oxide Mineral Resource to
the north and confirmed the down-plunge continuity of the sulphide
mineralisation. Ongoing underground drilling at Cachorro Bravo continues to
intersect high grade mineralisation within the 300 ore horizon.
Seven holes drilled to test the Biquinha target adjacent to the Cuiaba mine
failed to intersect significant mineralisation.
At Serra Grande, drilling concentrated on potential open-pit targets and
Mineral Resource modeling is in progress.
At Cerro Vanguardia, in Argentina, drilling at the Zorro, Gabriela and Liliana
veins highlighted continued upside in under-explored veins within the licence
area.
Diamond drilling was completed on one target in Peru, with further drilling
planned for early in 2005. A further three targets will be drill tested in
coming year. The Pichacani property in southern Peru was farmed out to Bear
Creek Mining in December.
In Colombia, target definition work continues and fieldwork is in progress.
At Sunrise Dam in Australia, drilling from surface and underground continued
to focus on the underground targets of Astro, Cosmo, GQ and Hammerhead. At
Neville, located 1km north of the underground portal, drilling intersected
narrow, high-grade mineralisation. At Lord Byron, located approximately 60km
east of Sunrise Dam, Reverse Circulation drilling targeted zones of higher-
grade mineralisation within the known mineralised area.
At Yamarna, diamond drilling tested priority targets in the southern portions
of the project area, intersecting extensive alteration with low gold values.
Aircore drilling in the northern portions defined a large geochemical anomaly
requiring further testing.
At Tropicana East, diamond drilling was undertaken to provide detailed
geological controls of the recently discovered gold mineralisation. Extensive
geochemical sampling along strike defined broad anomalous areas, which require
further infill sampling in order to define drill targets.
In the Northern Territory, AngloGold Ashanti and Newmont Australia have agreed
that AngloGold Ashanti will exit the Tanami Mine Joint Venture and the Central
Desert Joint Venture. The Tanami Mine Joint Venture includes the Tanami Mill
and associated infrastructure and tenements.
In December, an exploration alliance was established with Oxiana Resources,
targeting new mineralisation in Laos.
In Mongolia, two new targets were drill tested this quarter. Drill results
are awaited from the Tsagaan Tolgoi and Altan Uul projects.
In China, target generation and project reviews continue.
In Russia, AngloGold Ashanti continues to provide Trans-Siberian Gold with
geological input at both the Veduga and Asacha projects, where drilling is in
progress to increase the Mineral Resource.
Group income statement
Quarter Quarter
ended ended
December September
2004 2004
SA Rand million Notes Unaudited Unaudited
Gold income 4,174 4,171
Cost of sales 2 (3,610) (3,651)
564 520
Non-hedge derivatives (454) 82
Operating profit 110 602
Corporate administration and other
expenses (66) (84)
Market development costs (23) (30)
Exploration costs (77) (75)
Interest receivable 66 63
Other net (expense) income (28) 13
Finance costs (127) (129)
Fair value gains on interest rate
swaps 20 24
Abnormal items - -
(Loss) profit before exceptional items (125) 384
Amortisation of intangible assets (46) (48)
Impairment of tangible assets - (8)
Profit on disposal of assets and
subsidiaries 23 36
Profit on disposal of investments - -
(Loss) profit on ordinary activities
before taxation (148) 364
Taxation 3 307 (72)
Profit on ordinary activities after
taxation 159 292
Minority interest (23) (39)
Minority interest in abnormal items - -
Net profit 136 253
Adjusted operating profit
The operating profit has been
adjusted by the
following to arrive at adjusted
operating profit:
Operating profit 110 602
Unrealised non-hedge derivatives 476 29
Adjusted operating profit 586 631
Headline earnings
The net profit has been adjusted by
the following to
arrive at headline earnings:
Net profit 136 253
Amortisation of intangible assets 46 48
Impairment of tangible assets - 8
Profit on disposal of assets and
subsidiaries (23) (36)
Profit on disposal of investments - -
Current and deferred taxation on
exceptional items 3 6 1
Headline earnings 165 274
Unrealised non-hedge derivatives and
fair value
gains on interest rate swaps 456 5
Deferred tax on unrealised non-hedge
derivatives and fair
value gains on interest rate swaps 3 21 1
Adjusted headline earnings 642 280
Earnings per ordinary share (cents)
- Basic 51 96
- Diluted 51 96
- Headline 62 104
- Adjusted headline 243 106
Dividends ~
- Rm
- cents per share
Quarter Year Year
ended ended ended
December December December
2003 2004 2003
SA Rand million Unaudited Reviewed Audited
Gold income 3,685 15,348 15,264
Cost of sales (2,821) (12,933) (11,458)
864 2,415 3,806
Non-hedge derivatives 196 (786) 861
Operating profit 1,060 1,629 4,667
Corporate administration and other
expenses (60) (331) (273)
Market development costs (46) (100) (139)
Exploration costs (68) (283) (283)
Interest receivable 94 285 285
Other net (expense) income 7 (61) (123)
Finance costs (145) (512) (362)
Fair value gains on interest rate
swaps 32 10 38
Abnormal items (122) - (122)
(Loss) profit before exceptional items 752 637 3,688
Amortisation of intangible assets (52) (200) (221)
Impairment of tangible assets 20 (8) (327)
Profit on disposal of assets and
subsidiaries 19 88 75
Profit on disposal of investments 51 - 331
(Loss) profit on ordinary activities
before taxation 790 517 3,546
Taxation (142) 174 (1,080)
Profit on ordinary activities after
taxation 648 691 2,466
Minority interest (32) (124) (130)
Minority interest in abnormal items (5) - (5)
Net profit 611 567 2,331
Adjusted operating profit
The operating profit has been
adjusted by the
following to arrive at adjusted
operating profit:
Operating profit 1,060 1,629 4,667
Unrealised non-hedge derivatives (134) 1,173 (438)
Adjusted operating profit 926 2,802 4,229
Headline earnings
The net profit has been adjusted by
the following to
arrive at headline earnings:
Net profit 611 567 2,331
Amortisation of intangible assets 52 200 221
Impairment of tangible assets (20) 8 327
Profit on disposal of assets and
subsidiaries (19) (88) (75)
Profit on disposal of investments (51) - (331)
Current and deferred taxation on
exceptional items 12 16 (94)
Headline earnings 585 703 2,379
Unrealised non-hedge derivatives and
fair value
gains on interest rate swaps (166) 1,163 (476)
Deferred tax on unrealised non-hedge
derivatives and fair
value gains on interest rate swaps 87 (222) 230
Adjusted headline earnings 506 1,644 2,133
Earnings per ordinary share (cents)
- Basic 274 226 1,046
- Diluted 273 225 1,042
- Headline 263 280 1,068
- Adjusted headline 227 654 957
Dividends ~
- Rm 926 1,584
- cents per share 350 710
The results have been prepared in accordance with International Financial
Reporting Standards (IFRS).
~ Dividends are translated at actual rates on date of payment.
The current period is only an indicative amount.
Group income statement
Quarter Quarter
