| Wed 22 Feb 2006, 9:12 | | Exchanghe Anglo American plc - Final Results |
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AGL
ANAAL
Exchanghe Anglo American plc - Final Results
Anglo American plc
(Incorporated in the United Kingdom)
Registration number: 3564138
Share code: AGL
ISIN: GB0004901517
(the "Company")
Anglo American announces record earnings of USD3.7 billion, up 39%,
USD1.5 billion capital return and update on Strategic Review
*Record underlying earnings(1) of USD3.7 billion, a 39% increase over 2004.
*Operating profit(2) increased to USD6.4 billion, up 36%, with record production
levels for nickel, zinc, coal, iron ore, vanadium, platinum group metals and
diamonds; highest ever contributions from Base Metals, Ferrous Metals and Coal.
*Cost pressures continue: offset by cost savings and efficiencies of USD730
million.
*Cash generation at a record level: EBITDA(3) of USD9 billion, up USD1.9
billion. Net debt down 39% to USD5 billion.
*USD6.7 billion project pipeline: New projects totalling USD3.8 billion
approved:-
*Coal (USD919 million): Dawson, Lake Lindsay, Mafube
*Platinum (USD1 billion): Mototolo JV, Marikana JV, Potgietersrust
*Diamonds (USD718 million): Snap Lake, Victor, Voorspoed, South African Sea
Areas
*Ferrous Metals (USD559 million): Sishen Expansion
*Gold (USD432 million): Boddington
Normal dividends up 29% to 90 cents. Special dividend of 33 cents per share.
Strategic Review - update
Mondi to be listed on the London Stock Exchange in 2006/7.
Holding in AngloGold Ashanti to be reduced - separate announcement issued today.
Tarmac strategic review underway - first phase completed with businesses in
Germany, Hong Kong and UK concrete paving identified for disposal.
Highveld Steel sale process progressing; Tongaat-Hulett to unbundle and list
Hulett Aluminium.
USD1 billion capital return increased to USD1.5 billion - USD1 billion buyback
in 2006 and USD0.5 billion special dividend.
HIGHLIGHTS FOR THE YEAR TO 31 Year Year %
DECEMBER 2005 ended ended change
USUSD million, except per share 31.12.05 31.12.0
amounts 4
Group revenue including 34,472 31,938 7.9%
associates(4)
Operating profit including 6,376 4,697 35.7%
associates before special items and
remeasurements(2)
Profit for the year attributable to 3,521 3,501 0.6%
equity shareholders
Underlying earnings for the year(1) 3,736 2,684 39.2%
EBITDA(3) 8,959 7,031 27.4%
Net cash inflows from operating 6,781 5,187 30.7%
activities
Earnings per share (USUSD):
Basic earnings per share 2.43 2.44 (0.4)%
Underlying earnings per share 2.58 1.87 38.0%
Interim dividend (US cents per 28 19 47.4%
share)
Recommended final dividend 62 51 21.6%
Recommended special dividend 33 - -
Total dividends 123 70 75.7%
(1) See note 7 to the financial information for basis of
calculation of underlying earnings.
(2) Operating profit includes share of associates" operating profit
(before share of associates" tax and finance charges) and is before
special items and remeasurements, unless otherwise stated. See note
1 to the financial information. For definition of special items and
remeasurements see note 4 to the financial information.
(3) EBITDA is operating profit before special items and
remeasurements plus depreciation and amortisation of subsidiaries
and joint ventures and share of EBITDA of associates. EBITDA is
reconciled to cash inflows from operations and to total profit from
operations and associates in note 11 to the financial information.
(4) Includes the Group"s share of associates" turnover of
USD5,038 million (2004: USD5,670 million). See note 1 to the
financial information.
Tony Trahar, Chief Executive, said:
"The Group achieved record results for 2005, with a 39% increase in underlying
earnings to USD3.7 billion. Many of our businesses achieved record levels of
production as buoyant market conditions continued throughout the year. Coal,
copper, zinc, platinum, iron ore and vanadium prices hit new levels as China
once again proved to be the chief driver of global growth, with the US economy
showing its resilience and signs of a long-awaited recovery emerging in Japan.
It is particularly pleasing to note that, in what was a very challenging cost
environment, we achieved record cost savings and efficiency improvements of
USD730 million, a 32% increase on 2004.
Our continued strong cash generation, with EBITDA at USD9 billion, enables us to
fund internally one of the strongest organic growth pipelines in the industry,
as well as giving us the capacity to return excess cash to shareholders. USD1.5
billion in the form of a USD1 billion buyback and a USD500 million special
dividend will be returned in 2006. The capital structure will be reviewed
regularly in light of market conditions, operating cash flows and progress on
strategic delivery and capital projects.
Across our mining portfolio we have a USD6.7 billion approved project pipeline
underway, and other projects that are being considered, as well as significant
exploration prospects. Some USD3.8 billion worth of new projects, including
major expansions in our coal, iron ore, platinum and diamond businesses have
been approved. The USD516 million Lake Lindsay project in Australia will
contribute substantially to increasing Anglo Coal"s metallurgical coal capacity
by around 50% over the next three years. The USD559 million Sishen iron ore
expansion in South Africa was also approved during the year and will raise
annual production from 31 to 41 million tonnes by 2009, whilst De Beers is
spending USD1.6 billion on expanding diamond production. Having previously
approved the USD230 million Potgietersrust replacement project,
Anglo Platinum is in the final stages of approving the USD692 million
Potgietersrust expansion project. In addition, the Group is considering further
major projects with an estimated potential cost of around USD15 billion.
In terms of our strategic review, we have embarked on a series of initiatives
with the aim of further focusing the business on our core mining portfolio and,
in the process, simplifying the structure and enhancing returns and shareholder
value.
In regard to the main elements of the strategic review, we have made further
progress since our announcement in October last year. In summary, we have
decided to list Mondi on the London Stock Exchange in 2006/7. The first phase of
Tarmac"s strategic review has been completed with businesses in Germany, Hong
Kong and UK concrete paving identified for disposal. As previously announced, we
intend to reduce our shareholding in AngloGold Ashanti and we are progressing
the sale of Highveld. Tongaat-Hulett has recently announced that it intends to
unbundle and list its aluminium business, Hulett Aluminium.
The outlook for the global economy is encouraging, with leading indicators
showing signs of continuing global growth and strong underlying demand for our
products. If prices and demand continue at or near current levels, the Group
should have another strong year.
Every effort will be made to contain cost increases and improve efficiencies
against a background of exceptional inflationary pressures in the mining sector.
The Group has real momentum, as evidenced by its performance in 2005. We expect
to make significant progress on delivering our recently announced strategy while
at the same time pursuing our strong organic project pipeline and looking for
further growth and acquisition opportunities."
Review of 2005
Underlying earnings per share for the year increased to USD2.58 per share, an
increase of 38% compared with 2004. Underlying earnings totalled USD3.7 billion,
with record contributions from Base Metals, Ferrous Metals and Industries and
Coal, as well as a significant increase in contributions from Platinum and De
Beers. Paper and Packaging and Industrial Minerals recorded lower contributions
owing to tough market conditions. AngloGold Ashanti recorded a lower
contribution mainly due to an increase in net interest costs as well as the
impact of stronger operating cost currencies, inflation and lower grades during
2005.
Profit for the year attributable to equity shareholders after special items and
remeasurements, increased by 0.6% to USD3.5 billion. This increase was despite a
reduction in net profit on disposals which, including associates was USD840
million higher in 2004, with the USD464 million profit on the sale of the
Group"s interest in Gold Fields and the USD415 million gain on the deemed
disposal of AngloGold at the time of the merger with Ashanti.
Anglo American"s results are influenced by a variety of currencies owing to the
geographic diversity of the Group. The South African rand on average
strengthened against the US dollar compared with the prior year, with an average
exchange rate of R6.37 compared with R6.44 in 2004. Currency movements
negatively impacted underlying earnings by USD88 million. Operating results were
impacted by stronger average rates for the rand, Chilean peso, Australian dollar
and European currencies, although this was partially offset by the positive
impact on monetary assets and liabilities of the weaker closing rand rate. There
was a positive impact of increased prices amounting to USD2.2 billion.
Base Metals reported record operating profit* of USD1.68 billion (26% of Anglo
American"s total operating profit), an increase of 32% over the prior year, due
to record production of nickel, zinc, niobium and zircon and significantly
higher prices.
Ferrous Metals and Industries operating profit reached a record level of USD1.46
billion (23% of Anglo American"s total), up 64% as a result of higher iron ore
and vanadium prices and generally higher volumes.
Coal recorded its highest ever operating profit contribution of USD1 billion, an
increase of 105% on 2004 (16% of Anglo American"s total) due to improved export
coal prices and increased production.
Platinum reported operating profit of USD854 million, a 59% increase over 2004
(13% of Anglo American"s total), mainly as a result of higher US dollar prices
realised on metals sold and increased sales volumes.
Diamonds recorded attributable operating profit of USD583 million (9% of Anglo
American"s total), 2% higher than 2004, despite the lower effective shareholding
in 2005.
Paper and Packaging reported a 13% decline in operating profit to USD495 million
(8% of Anglo American"s total), reflecting difficult trading conditions in key
markets. Performance was underpinned by USD223 million in cost savings and
profit improvement initiatives.
Industrial Minerals reported operating profit of USD370 million (6% of Anglo
American"s total), 12% lower than 2004, due to challenging UK market conditions,
higher energy costs and currency exchange impact at Copebr|s.
Gold achieved operating profit of USD332 million (5% of Anglo American"s total),
12% higher than 2004, mainly due to the higher average gold price received for
the year - cash costs were well controlled.
Challenging cost environment
2005 was a particularly challenging year for the mining industry with regard to
cost containment. Price escalations in excess of inflation over a range of
inputs from tyres to fuel, to steel and contractors, exerted material pressure
on running costs and capital expenditure.
Despite this, the Group managed to contain overall cost increases with cost and
efficiency savings of USD730 million, up 32% on the prior year.
* All references to operating profit in this section refer to operating profit
including associates" operating profit and is before special items and
remeasurements.
Disposals with enterprise value of USD1.1 billion
As part of the ongoing strategy of optimising the Group"s asset base, a number
of disposals were made during 2005. The sales of Boart Longyear"s subsidiary,
Wendt, and the remaining Boart Longyear Group were concluded in March and July
respectively for a combined enterprise value of USD635 million.
Highveld Steel sold its stainless steel investments, Acerinox and Columbus, for
an attributable enterprise value of USD136 million.
Anglo American and BHP Billiton sold their respective 40% and 60% shareholdings
in Samancor Chrome in June for a combined enterprise value of USD469 million.
In July, Kumba"s local partner in the Hope Downs iron ore project in Australia
exercised an option to acquire Kumba"s interest in the project, resulting in a
USD176 million pre-tax settlement.
Dividends and Capital Returns to Shareholders
The strong financial position of the Group affords it the opportunity to return
USD1.5 billion of cash in 2006 in the form of a USD1 billion buyback and a
USD500 million special dividend, equivalent to 33 cents per share. This is
before taking into account capital proceeds that will arise as a result of the
Group"s decision to dispose of a number of interests, as outlined in its
Strategic Review announcement in October 2005.
In line with the Group"s progressive dividend policy, the final dividend has
been raised 22% to 62 cents per share, plus a special dividend of 33 cents per
share, to be paid together on 3 May 2006. Total dividends for the year,
including the special dividend, amount to 123 cents per share.
The capital structure will be reviewed regularly in light of market conditions,
operating cash flows and progress on strategic delivery and capital projects.
Growth and projects
Anglo American has one of the strongest growth profiles in the mining industry.
Across our mining portfolio we have a broad suite of projects in progress, with
others under consideration, as well as significant exploration prospects.
Recent projects completed
In Chile, the USD47 million Collahuasi molybdenum plant was commissioned ahead
of schedule and under budget and entered production in November. The USD21
million Chagres de-bottlenecking project, which increases production capacity
from 162,000 to 184,000 tonnes per annum, was successfully completed in the
fourth quarter of 2005. The Black Mountain Deeps project in South Africa was
substantially completed during 2005 and production ramp-up is well advanced.
Skorpion Zinc in Namibia has consistently achieved design capacity since May.
The USD65 million Isibonelo coal mine commenced production on time and on budget
and is expected to produce five million tonnes per annum of thermal coal when it
reaches full production during 2006. The Kleinkopje expansion project was also
completed during 2005.
Ramp up of production at the Buxton cement plant exceeded expectations,
averaging 97.5% of design capacity during the year.
The USD174 million upgrade at Mondi Business Paper"s Merebank paper mill in
South Africa was successfully commissioned during October with annual production
of uncoated woodfree paper set to increase by approximately 277,000 tonnes to
536,000 tonnes by 2007.
Projects approved / under review
The group has approved USD3.8 billion of new projects during 2005 and the
beginning of 2006, bringing its total approved project pipeline, net of
completions during the year, to USD6.7 billion.
Anglo Coal has a substantial near-term approved project portfolio spread across
Australia, South Africa and South America. In Australia, the USD516 million Lake
Lindsay metallurgical coal project was approved during the year and construction
commenced on the USD835 million Dawson project. Anglo Coal"s metallurgical coal
capacity will be increased by around 50% over the next three years. Subject to
regulatory clearances, the USD132 million Mafube coal project in South Africa
will increase thermal coal production by 2.5 million tonnes from 2008.
At Cerrej?n in Colombia, a USD280 million two-phase expansion has been approved
to increase production to 32 million tonnes per annum. A pre feasibility
study is currently underway to investigate additional expansion beyond this.
In China, the Group has a 60% interest in the Xiwan open-cut coal mine, where
the feasibility of a large coal-to-chemicals project is being investigated with
a number of partners. In 2005, Anglo American invested USD153 million in the
Initial Public Offering of China Shenhua Energy Company Limited, the largest
coal producer in China and the fifth largest in the world, and looks forward to
a mutually beneficial strategic alliance with the company. In February 2006, it
was announced that Anglo Coal had entered into a joint venture to develop coking
coal properties in British Columbia, Canada. Work continues on the feasibility
study for Monash, a fuel from brown coal project, in Australia.
In Base Metals, the Group has the potential to significantly increase copper
production over the next few years. The USD80 million El Soldado pit extension
project remains on schedule and within budget. The Los Bronces feasibility
study, to examine a possible doubling of production, will be completed early in
2007, while a significant de-bottlenecking opportunity, that has the potential
to increase production at a relatively low capital cost, is currently under
evaluation at Collahuasi.
The feasibility study for the USD1 billion Barro Alto nickel project (33,000
tonnes per annum) in Brazil is well advanced and board approval is likely to be
sought later this year. Namakwa Sands" USD43 million project to increase output
of rutile by 26% and high margin zircon by approximately 20%, commencing from
2008, is under way.
As demand for platinum group metals rises, Anglo Platinum expects to increase
production from 2.45 million ounces in 2005 to between 2.7 and 2.8 million
ounces in 2006. Beyond 2006, the company plans to increase platinum output by
around 5% a year. During 2005, Anglo Platinum announced the USD18 million
Marikana joint venture and the USD100 million Mototolo joint venture. Anglo
Platinum approved mining replacement projects totalling USD770 million including
the USD230 million Potgietersrust replacement project, and is in the final
stages of approving the USD692 million Potgietersrust expansion which will bring
on 230,000 ounces of additional platinum production in 2009.
The USD559 million Sishen iron ore expansion in South Africa was approved in
March and will raise annual production from 31 million tonnes to 41 million
tonnes by 2009. Construction started in mid 2005, with production ramp-up to
commence by mid 2007. The Group has further iron ore expansion opportunities
through projects at Sishen South, where an investment decision is likely in the
first half of 2006, and at Faleme in Senegal. This could see annual iron ore
production more than double from the current level.
De Beers gave the go-ahead for the USD513 million Snap Lake project and in
November approval was given to develop the USD791 million Victor diamond
deposit, both located in Canada. In South Africa, approval has been given for
the re-opening of the USD177 million Voorspoed mine, while USD115 million has
been allocated to the South African Sea Areas marine mining project.
Mondi is considering a one million tonne softwood pulp expansion at Syktyvkar in
north west Russia at a capital cost of around USD1.5 billion, to meet growing
worldwide pulp demand, driven mainly by China.
Tarmac has several growth and expansion programmes under way to enhance market
penetration in key regional markets, mainly in central and eastern Europe.
Strategic Review Update
In October 2005, the Group announced the outcome of its strategic review which
represents a further chapter in Anglo American"s ongoing strategic development
over the past six years. The Group"s aim is to focus further on its core mining
portfolio and in the process simplify its structure and enhance returns and
shareholder value.
*Anglo American has successfully grown Mondi to create one of Europe"s largest
and most successful paper and packaging groups. Anglo American recognises that
there are only limited synergies with its mining portfolio and therefore, a
decision has been taken to list Mondi on the London Stock Exchange in 2006/7.
In the meantime, Anglo American will continue to support Mondi"s growth
opportunities as they arise.
*The decision to reduce the Group"s shareholding in AngloGold Ashanti relates to
the higher relative valuations investors attribute to pure-play gold mining
stocks, rather than as part of the make-up of a diversified mining group. Anglo
American is considering a number of options to effect the reduction. Attention
is drawn to the separate announcement issued today.
*In the case of Tarmac, the considerably strengthened management team is in the
process of undertaking a review of its business with the aim of improving
returns on capital invested by turning around, restructuring or divesting
underperforming parts of the portfolio while continuing to grow its core
businesses. Since the year end, the first phase of the review has been completed
with businesses in Germany, Hong Kong and UK concrete paving identified for
disposal. Tarmac has also made three acquisitions in its aggregates business in
the UK, Poland and, in early 2006, Romania.
*The Group is also progressing well with the remainder of its industries
portfolio. Boart Longyear and Samancor Chrome were sold during 2005 and the
disposal of the Group"s 79% shareholding in Highveld Steel is progressing.
Tongaat-Hulett has recently announced that it intends to unbundle and list its
aluminium business, Hulett Aluminium and simultaneously introduce Black Economic
Empowerment equity participation in both Tongaat-Hulett and Hulett Aluminium.
*The Group has approved significant platinum expansion projects and negotiations
for a further platinum empowerment transaction have commenced.
Outlook
The outlook for the global economy is encouraging, with leading indicators
showing signs of continuing global growth and strong underlying demand for the
Group"s products. If prices and demand continue at or near current levels, the
Group should have another strong year.
Every effort will be made to contain cost increases and improve efficiencies
against a background of exceptional inflationary pressures in the mining sector.
The Group has real momentum, as evidenced by its performance in 2005. Anglo
American expects to make significant progress on delivering its recently
announced strategy while at the same time pursuing its strong organic project
pipeline and looking for further growth and acquisition opportunities.
For further information:
Investor Relations Media Relations
Nick von Schirnding Kate Aindow
Tel: +44 207 968 8540 Tel: +44 207 968 8619
Charles Gordon Daniel Ngwepe
Tel: +44 207 968 8933 Tel: +27 11 638 2267
Anne Dunn
Tel: +27 11 638 4730
Webcast of presentation:
A live webcast of the annual results presentation starting at 10.00am UK time on
22nd February can be accessed through the Anglo American website at
www.angloamerican.co.uk.
View interview with CEO:
An interview with Tony Trahar in video and text is available on:
www.angloamerican.co.uk and on www.cantos.com
Pictures:
High resolution images can be downloaded by the media at www.vismedia.co.uk
Notes to Editors:
Anglo American plc is one of the world"s largest mining and natural resource
groups. With its subsidiaries, joint ventures and associates, it is a global
leader in platinum, gold and diamonds, with significant interests in coal, base
and ferrous metals, industrial minerals and paper and packaging. The group is
geographically diverse, with operations in Africa, Europe, South and North
America, Australia and Asia.
Note: Throughout this press release `USD" denotes United States dollars and
`cents" refers to United States cents; operating profit includes associates"
operating profit and is before special items and remeasurements unless otherwise
stated; special items and remeasurements are defined in note 4 and underlying
earnings are calculated as set out in note 7 to the financial information.
EBITDA is operating profit before special items and remeasurements plus
depreciation and amortisation of subsidiaries and joint ventures and share of
EBITDA of associates. EBITDA is reconciled to cash inflows from operations and
to total profit from operations and associates in note 11 to the financial
information.
Financial review of Group results
Underlying earnings per share for the year increased to USD2.58 per share, an
increase of 38% compared with 2004. Underlying earnings totalled USD3,736
million, with strong contributions from Base Metals, Ferrous Metals and
Industries and Coal as well as a significant increase in contributions from
Platinum and De Beers. Paper and Packaging and Industrial Minerals recorded
lower contributions owing to tough market conditions. AngloGold Ashanti recorded
a lower contribution mainly due to increased net interest costs as well as
higher inflation, stronger operating cost currencies and lower grades.
Underlying earnings Year ended Year ended
USD million 31 Dec 2005 31 Dec 2004
Profit for the financial year 3,521 3,501
attributable to equity shareholders
Operating special items including 323 92
associates
Operating remeasurements including 317 -
associates
Net profit on disposals including (185) (1,025)
associates
Finance remeasurements:
Fair value loss on convertible option 32 -
Exchange (gain)/loss on De Beers (72) 112
preference shares
Unrealised gains on non-hedge (2) -
derivatives including associates
Tax on special items and remeasurements (15) 2
including associates
Related minority interests on special (183) 2
items and remeasurements
Underlying earnings 3,736 2,684
Underlying earnings per share (USD) 2.58 1.87
Profit for the year after special items and remeasurements increased by 0.6% to
USD3,521 million compared with USD3,501 million in the prior year. This increase
was despite a reduction in net profit on disposals which, including associates,
was USD840 million higher in 2004, with the USD464 million profit on the sale of
the Group"s interest in Gold Fields and the USD415 million gain on the deemed
disposal of AngloGold at the time of the merger with Ashanti.
Summary income statement Year ended Year ended
USD million 31 Dec 2005 31 Dec 2004
Operating profit before special items 5,344 3,641
and remeasurements
Special items (186) 25
Operating remeasurements (301) -
Group operating profit before 4,857 3,666
associates
Net profit on disposals 87 1,015
Net income from associates (1) 657 550
Profit before finance costs 5,601 5,231
Net finance costs before remeasurements (428) (255)
Remeasurement finance income/(cost) 35 (112)
Profit before tax 5,208 4,864
Tax (1,275) (923)
Profit after tax 3,933 3,941
Minority interests (412) (440)
Profit for the financial period 3,521 3,501
attributable to equity shareholders
Earnings per share (USD) 2.43 2.44
Group operating profit including 6,376 4,697
associates before special items and
remeasurements
(1) Operating profit from associates 1,032 1,056
Operating special items and (153) (117)
remeasurements(2)
Net profit on disposals(2) 98 10
Other special items and 7 -
remeasurements(2)
Net finance costs (before (51) (100)
remeasurements)
Income tax expense (after special (274) (280)
items and remeasurements)
Underlying minority interest (after (2) (19)
special items and remeasurements)
Net income from associates 657 550
(2) See note 4 to the financial information
The Group"s results are influenced by a variety of currencies owing to the
geographic diversity of the Group. The South African rand on average
strengthened against the US dollar compared with the prior year, with an average
exchange rate of R6.37 compared with R6.44 in 2004. Currency movements
negatively impacted underlying earnings by USD88 million. Operating results were
impacted by stronger average rates for the rand, the Chilean peso, Australian
dollar and European currencies although this was partially offset by the
positive impact on monetary assets and liabilities of the weaker closing rand
rate. There was a significant positive impact of increased prices amounting to
USD2.2 billion.
Special items and remeasurement charges
Operating special items and remeasurements, including associates, amounted to
USD640 million with operating special charges of USD323 million and operating
remeasurements of USD317 million.
Operating special charges in respect of impairments, restructurings and mine and
operation closures amounted to USD210 million, including a USD31 million loss on
the closure of Ergo and a USD38 million impairment of Bibiani in AngloGold
Ashanti and impairment and restructuring of Corrugated assets and goodwill of
USD77 million in Paper and Packaging. Operating special charges also included
USD113 million for the Group"s share of a legal provision in respect of its
associate De Beers.
Operating remeasurements, including associates, of USD317 million includes
USD286 million of unrealised losses on non-hedge commodity derivatives at
AngloGold Ashanti (2004: nil as IAS 39 did not apply). The loss in the current
year relates to the revaluation of non-hedge derivatives resulting from changes
in the prevailing spot gold price, exchange rates and interest rates and impacts
AngloGold Ashanti"s current year earnings due to the full adoption of IAS 32 and
39 in 2005.
Net profit on sale of operations, including associates, amounted to USD185
million. This included a USD52 million profit on sale of Samancor Chrome, USD25
million profit on sale of Acerinox, USD21 million profit on disposal of Boart
Longyear and USD21m profit on disposal of Wendt. There was also a USD27 million
profit on formation of the Marikana joint venture by Anglo Platinum. These were
partially offset by a USD57 million loss on disposal of Hope Downs.
Financing remeasurements, including associates, include a USD32 million fair
value loss on the AngloGold Ashanti convertible bond option, unrealised gains of
USD2 million on non-hedge derivatives and a USD72 million foreign exchange gain
on De Beers dollar preference shares held by a rand denominated entity.
The option component of the AngloGold Ashanti convertible bond is fair valued at
each reporting period and held as a liability. Changes in fair value of the
liability are taken to the income statement.
As a result of the adoption of IAS 21 and 28, the US dollar preference shares
held by De Beers (a Rand functional currency entity) have been reclassified as
"financial asset investments" and are retranslated at each period end. The
resulting Rand:US dollar foreign exchange gains and losses are reported through
the income statement as a remeasurement charge. A currency gain of USD72
million has been recorded for the year ended 31 December 2005 (2004: loss of
USD112 million).
Net finance costs
Net finance costs excluding finance remeasurement income of USD35 million (2004:
loss of USD112 million) increased from USD255 million in 2004 to USD428 million.
The increase reflects lower investment income due to the sale of certain
investments over the last two years.
Taxation
The effective rate of taxation including share of associates" tax before special
items was 26.5 %. This was a decrease from the effective rate including share
of associates" tax of 27.7% in 2004. The reduction in the effective tax rate was
principally due to a reduction in the South African statutory rate from 30% to
29% and a reduction in the Ghanaian tax rate, which resulted in a USD187 million
reduction in deferred tax, most of the benefit of which was taken in the first
half of 2005. Without this one-off benefit the effective tax rate for the period
would have been 29.7%. In future periods it is expected that the effective tax
rate, adjusted for associates" tax, will remain at or above the current levels.
Balance sheet
Total shareholders" equity was USD23,621 million compared with USD23,125 million
as at 31 December 2004.
Net debt was USD4,993 million, a decrease of USD3,250 million from 31 December
2004. The reduction was principally due to reduction of debt using cash flows
from operations and disposals. Net debt at 31 December 2005 comprised USD8,439
million of debt, offset by USD3,446 million of cash, cash equivalents and
current financial asset investments. Net debt to total capital(1) as at 31
December 2005 was 17.0%, compared with 25.4% at 31 December 2004.
Cash flow
Net cash inflows from operating activities were USD6,781 million compared with
USD5,187 million in 2004. EBITDA was USD8,959 million, a substantial increase of
27% from USD7,031 million in 2004. Depreciation increased by USD334 million to
USD2,441 million.
Acquisitions expenditure accounted for an outflow of USD530 million compared
with USD1,243 million in 2004. This included USD153 million in respect of the
Group"s investment in the Initial Public Offering of China Shenhua Energy
Company Limited.
Income from disposals totalled USD677 million, with proceeds on the sale of
Acerinox and Columbus of USD173 million (with a further USD21 million
remitted by associates) and USD445 million on the disposal of Boart and Wendt.
Proceeds remitted by associates in respect of disposals included USD83 million
for the sale of Samancor Chrome.
Repayment of loans and capital from associates amounted to USD370 million.
Purchases of tangible fixed assets amounted to USD3,306 million, an increase of
USD140 million. Increased capital expenditure by AngloGold Ashanti, Coal and
Ferrous Metals and Industries was partially offset by a reduction in capital
expenditure at Platinum, Base Metals, Industrial Minerals and Paper and
Packaging.
(1) Total capital is the sum of net assets and net debt less investment in
associates
Operations Review
In the operations review on the following pages, operating profit includes
associates" operating profit and is before special items and remeasurements
unless otherwise stated. Capital expenditure relates to cash expenditure on
fixed assets.
BASE METALS
USD million Year Year
ended ended
31.12.05 31.12.04
Operating profit 1,678 1,276
Copper 1,381 1,048
Nickel, Niobium, Mineral Sands 249 224
Zinc 102 38
Other (54) (34)
EBITDA 1,990 1,625
Net operating assets 4,785 4,952
Capital expenditure 271 367
Share of Group operating profit (%) 26% 27%
Share of Group net operating assets (%) 13% 13%
Base Metals generated its highest ever operating profit of USD1,678 million
(2004: USD1,276 million) on the back of record production of nickel, zinc,
niobium, zircon and rutile from ongoing operations, with significantly higher
metal prices. Controllable costs were well contained. However, margins at all
operations came under pressure from significant rises in the costs of energy and
most key consumables, as well as higher freight rates, treatment and refining
charges in the copper market and increased zinc smelter price participation.
The strength of the Chilean, South African and Brazilian currencies against the
US dollar also adversely impacted operating profit.
Markets
Average Prices (c/lb) 2005 2004
Copper 167 130
Nickel 668 628
Zinc 63 48
Lead 44 40
Average base metal prices in 2005 exceeded the most optimistic of expectations.
Notwithstanding reasonable GDP growth, notably in China and the US, slower
industrial production and manufacturing growth precipitated destocking which,
when combined with price-induced substitution and increased scrap usage,
resulted in only a modest increase in metal demand. Offsetting this was a muted
mine supply-side response to higher prices, especially in the case of copper
where unexpected supply disruptions led to output being some 1 million tonnes
lower than forecast. Substantial speculative investment inflows were a
significant feature of the market in 2005.
Operating performance
Copper Division 2005 2004
Operating Profit (USD"m) 1,381 1,048
Attributable Production 635 766
(`000 tonnes)
Attributable copper production decreased by 74,300 tonnes due to the disposal of
Hudson Bay. Mantoverde increased output by 3% to 62,000 tonnes, reflecting
higher treatment rates. Production at Mantos Blancos declined by 8% to 87,700
tonnes, as a result of a planned reduction in dump leach treatment rates and
grades. Los Bronces (227,300 tonnes) and El Soldado (66,500 tonnes) also
experienced small reductions in production owing to lower grades. Attributable
production from Collahuasi was 187,900 tonnes (2004: 211,600 tonnes). This was
mainly due to lower sulphide mill throughput following outages of the ore
conveyor and SAG mill No. 3, and lower sulphide ore grades after an earthquake
and pit wall failures necessitated a rescheduling of the mine plan.
The USD80 million El Soldado pit extension project remains on schedule and
within budget. The USD21 million Chagres de-bottlenecking project, which
increases production capacity from 162,000 to 184,000 tonnes per annum (tpa) of
anode/blister from 2006, was successfully completed. The USD47 million
Collahuasi molybdenum plant was completed under budget and ahead of time and
will produce between 5,000 and 8,000 tpa of molybdenum, dependent on grade. It
entered production in November 2005 and is expected to pay back its initial
investment within the first six months. Los Bronces is scheduled to complete a
feasibility study into a possible doubling of production, due for completion in
2007, while a significant de-bottlenecking opportunity is currently under
evaluation at Collahuasi.
In May 2005 the final tranche of the Disputada purchase was paid, bringing the
total acquisition cost to USD1,395 million. In the period from 2003 to 2005
Disputada generated an EBITDA of USD1,648 million.
Nickel, Niobium & Mineral 2005 2004
Sands Division
Operating Profit (USD"m) 249 224
Attributable Nickel Production 27 24
(`000 tonnes)
Production at Loma de Niquel was marginally down for the year, although output
at Codemin rose to 9,600 tonnes (2004: 6,500 tonnes) following the successful
completion, within budget and on time, of the Codemin 2 project. After
successful commissioning of the scalping project, niobium production rose 14% to
4,000 tonnes. Improved mineral recoveries resulted in a 23% increase in rutile
and an 8% rise in zircon production at Namakwa Sands.
The feasibility study for the 33,000 tpa Barro Alto nickel project is well
advanced and board approval is likely to be sought later this year. Namakwa
Sands" USD43 million project to increase output of rutile by 26% and high margin
zircon by approximately 20% commencing from 2008 is underway.
Zinc Division 2005 2004
Operating Profit (USD"m) 102 38
Attributable Zinc Production 324 411
(`000 tonnes)
Attributable Lead Production 63 55
(`000 tonnes)
Attributable zinc production decreased by 107,000 tonnes due to the disposal of
Hudson Bay. Skorpion has consistently achieved design capacity since May,
following a fire in the tankhouse in February that interrupted ramp-up.
Production for the year increased 11% to 132,800 tonnes. Improved performance of
the new backfill plant at Lisheen allowed secondary mining to commence,
resulting in higher head grades and production of zinc (159,300 tonnes) and lead
(20,800 tonnes) (2004: 156,300 tonnes and 17,200 tonnes respectively). The Black
Mountain Deeps project was substantially completed, with finalisation of the
development of the Deeps mine and the ramping up of production now well
advanced. With increased access to the Deeps orebody, mining flexibility began
to improve and zinc and lead grades rose materially, yielding 32,100 tonnes of
zinc and 42,200 tonnes of lead representing increases of 14% and 13%
respectively.
Outlook
The outlook for 2006 is good, with strong demand and constrained production
increases across the industry. Cost pressures are expected to remain intense as
the entire supply chain to the industry operates at, or close to, capacity.
However, the current consensus is one of relatively strong global growth and a
weaker US dollar, as structural issues resurface and US interest rates approach
their peak. Metal inventories are low (in the case of copper and nickel) or
tightening (in respect of zinc). With the possible exception of zinc, however,
and in the absence of further supply-side disruptions, base metal markets seem
likely to move into a small surplus during 2006 on the back of increased primary
production, substitution and scrap usage. Fluctuating levels of fund interest in
the sector may, however, influence short-term price movements to a greater
extent than fundamentals.
FERROUS METALS AND INDUSTRIES
USD million Year Year
ended ended
31.12.05 31.12.0
4
Operating profit 1,456 887
Kumba 568 203
Highveld Steel 436 169
Scaw Metals 121 85
Samancor Group 144 241
Tongaat-Hulett 131 69
Boart Longyear 67 72
Terra - 55
Other (11) (7)
EBITDA 1,779 1,231
Net operating assets 4,439 5,302
Capital expenditure 373 284
Share of Group operating profit (%) 23% 19%
Share of Group net operating assets (%) 12% 14%
Ferrous Metals and Industries" operating profit reached a record USD1,456
million, up 64% on 2004. This was as a result of substantially higher prices for
iron ore and vanadium, generally higher volumes and increased cost savings,
partially offset by the strong rand and lower manganese alloy prices.
Markets
Global crude steel production for 2005 was 1,129 million tonnes (Mt), an
increase of 5.9% over 2004. China"s share of world output increased from 26.3%
in 2004 to 30.9% in 2005, making it the largest global producer. The global iron
ore market continues its very strong trend, with prices forecast to rise further
in 2006. Demand for vanadium weakened in the second half of 2005. Ferrovanadium
prices, although off their mid-2005 record highs, are still averaging over
USD38/kgV. Manganese ore prices softened in the second half in response to
weakening demand as manganese alloy margins came under pressure.
Strategic review
Significant progress in restructuring the division was made during 2005, with
further asset disposals for a total attributable enterprise value for Anglo
American of USD1,029 million. In January and May, Highveld sold its stainless
steel investments in Acerinox and Columbus for an attributable enterprise value
of USD136 million. The sales of Boart Longyear"s subsidiary, Wendt, and the
remaining Boart Longyear group were concluded in March and July respectively for
a combined enterprise value of USD635 million. Anglo American and BHP Billiton
sold their respective 40% and 60% shareholdings in Samancor Chrome in June for a
combined enterprise value of USD469 million. Samancor also disposed of half
its shareholding in Acerinox, as well as other interests, for a combined
enterprise value of USD149 million. The sale of ferrochrome producer Zimbabwe
Alloys for an enterprise value of USD10 million was completed in September. In
October, Anglo American announced its decision to seek to dispose of its
shareholding in Highveld. Tongaat-Hulett recently announced that it intends to
unbundle and separately list its aluminium business, Hulett Aluminium and
simultaneously introduce Black Economic Empowerment participation in both
Tongaat-Hulett and Hulett Aluminium.
Operating performance
Kumba achieved an operating profit of USD568 million (2004: USD203 million). The
impact of stronger commodity prices and higher sales volumes, together with
solid operational performances and the benefits of its business improvement
programme were partially offset by the strong rand. With effect from the second
quarter, Kumba benefited from the international annual dollar-denominated
benchmark price increase of 71.5%. Production of iron ore was 31 Mt, of which
71% was exported. In March, Kumba announced the approval of a major expansion
project at its Sishen iron ore mine in South Africa. This will increase
production by 10 million tonnes per annum (Mtpa) to 41 Mtpa by 2009.
Construction started in mid-2005, with production ramp-up to commence by mid-
2007.
In July, Kumba"s local partner in the Hope Downs iron ore project in Australia
exercised an option to acquire Kumba"s interest in the project, resulting in a
USD176 million pre-tax settlement. Kumba announced a major restructuring of its
operations in October. As part of this black economic empowerment transaction,
Kumba"s iron ore assets are to be partially unbundled to Kumba shareholders and
two separate listed entities - Kumba Iron Ore and Newco - will be established.
Following the transaction, Anglo American will own 66% of Kumba Iron Ore and 17%
of Newco, of which 10% will be a long-term holding.
Highveld Steel had a record year, with an operating profit of USD436 million
(2004: USD169 million). This was largely due to significantly higher vanadium
prices, relatively strong sales into the South African steel market and cost-
saving initiatives. Ferrovanadium prices averaged USD66/kgV in 2005, up
threefold on 2004.
Scaw also produced record results, with operating profit rising to USD121
million (2004: USD85 million). Strong demand for cast and forged products,
particularly in the second half, offset a weaker performance from rolled
products. Cost savings also contributed to the higher earnings.
The attributable share of Samancor"s operating profit amounted to USD144 million
(2004: USD241 million). Samancor"s manganese operations were affected by reduced
sales volumes and substantially lower alloy prices, while Samancor Chrome only
contributed for the first six months.
Boart Longyear"s operating profit was USD67 million (2004: USD72 million),
representing a seven-month contribution until its effective sale date at the end
of July.
Tongaat-Hulett"s operating profit increased to USD131 million (2004: USD69
million). Hulett Aluminium grew its rolled products volumes by 20% to 173,000
tonnes and reduced unit conversion costs. Earnings from Tongaat-Hulett Sugar
increased as a result of higher South African and export sales volumes and a
better world sugar price. African Products continued its profit recovery, with
an increase in sales volumes and lower maize costs. Moreland Properties
continued to accelerate its development pace, with strong contributions across
its portfolios.
Outlook
Global iron ore demand should be maintained in the coming year. Market consensus
is that iron ore prices should rise by 10% to 20% in 2006. The outlook for
vanadium remains positive but the price levels seen in 2005 are not expected to
be repeated in 2006. Manganese alloy markets are expected to strengthen.
Prospects for continued real growth in global steel demand remain positive in
2006, with the strongest growth again expected to come from China. Increasing
raw material and energy costs will, however, present major challenges to steel
producers.
COAL
USD million Year Year
ended ended
31.12.05 31.12.04
Operating profit 1,019 497
South Africa 463 252
Australia 316 78
South America 240 167
EBITDA 1,243 687
Net operating assets 2,244 2,303
Capital expenditure 331 218
Share of Group operating profit (%) 16% 11%
Share of Group net operating assets (%) 6% 6%
Anglo Coal lifted operating profit by 105% to a record USD1,019 million. The
increase was attributable to improved export prices realised during the year and
a 4% rise in production to 93 million tonnes. South Africa, Australia and South
America contributed 45%, 31% and 24%, respectively, to operating profit.
Markets
During the year, global demand and supply fundamentals for coal were reasonably
well balanced, driven by generally strong world economic activity and continued
robust commodity demand from the steel and power sectors, led by China. Domestic
demand in China for thermal coal remained firm and so capped that country"s
export volumes. Indonesian supplies grew sufficiently to make it the largest
thermal coal exporter in the world. However, the impact of supply growth was
moderated to some extent by infrastructure constraints or operating problems in
several other regions of the world.
Metallurgical prices remained firm, particularly for hard coking coals, but
there was a softening of prices towards year end for semi-soft coking and
pulverised coal injection (PCI) coals. Thermal coal prices moved down from 2004
peak levels as the year progressed, but were significantly ahead, on average, of
the previous year"s prices. Thermal coal markets remain volatile, moving quickly
- particularly in Europe - in response to fluctuations in the price of competing
fuels.
The introduction of the European Union Emissions Trading Scheme (EU ETS) had a
tangible effect on the thermal coal market during 2005, as the cost of CO2
emissions now features in the determination of power-generating margins when
using all fossil fuels. Nevertheless, the EU ETS allowance provisions in
individual countries, coupled with high alternative fuel prices, have permitted
coal to maintain a competitive position as a critical power generation fuel.
Operating performance
Operating profit for South African sourced coal, at USD463 million, was 84%
higher than for the previous year. Export prices were 35% up on those for 2004.
Production rose by 4% to 56.9 million tonnes following the start-up of the
Isibonelo mine in July and a general improvement in production at the other
mines. Most notable was the excellent performance of Goedehoop mine, despite its
having to recover from an underground fire. Total sales of 56.8 million tonnes
were also 4% higher, due to the rise in production, supported by improved
performance by the rail utility, Spoornet, and continued growth in local
electricity demand.
Operating profit for the Australian operations climbed by 305% to USD316
million. Higher prices for all types of coal, particularly metallurgical coal,
contributed strongly to the result, as did an overall production volume increase
of 0.5 million tonnes to 26.1 million tonnes. This increase in production was
mainly a result of improved performance at Moranbah North, where a solid
operational perfomance resulted in a 205% increase in production. Production at
Dartbrook was restricted by difficult geological conditions. Strong demand
across the industry for key resouces created contractor and equipment
availability shortfalls that limited production at some sites, and resulted in
increased costs for both directly price linked costs, such as royalties and
fuel, and other key inputs including labour and consumables at all operations.
In South America, operating profit was up by 44% to USD240 million, on the back
of coal price increases and a 5% increase in production volume to 10.1 million
tonnes. These gains were counteracted in part by increases in operating costs
caused by rising fuel prices, royalties, and the strengthening of the Colombian
peso and Venezuelan bolivar against the US dollar. Operations were also affected
by higher than expected rainfall during the year.
In Australia, capital expenditure for the year was 36% higher at USD185 million,
mainly as a result of the ramp-up of the USD835 million Dawson expansion project
and the USD151 million Grasstree project, which is planned to start production
during the second half of 2006. The feasibility study for the USD516 million
Lake Lindsay project was completed and the project started in early 2006.
In South Africa, the Isibonelo and Kleinkopje expansion projects, both of which
were completed during the year, represented the main items of capital
expenditure. Feasibility studies are in progress on a number of other expansion
projects in response to the increased domestic demand for coal.
In South America, Cerrej?n is continuing with the expansion to 28 million tonnes
per annum (Mtpa), which should be completed by the end of 2006. Further
expansion of the operation to 32 Mtpa was approved during the year and has
commenced. A pre-feasibility study is currently under way to investigate
additional expansion beyond 32 Mtpa.
Outlook
Firm hard coking coal prices are anticipated in the coming year, but prices for
semi-soft coking and PCI coals will reflect the downward trend that commenced in
2005. That trend will have an impact on thermal coal prices, particularly in the
Indo-Pacific region. Although thermal coal demand for 2006 appears to be
generally firm, improved supply infrastructure performance, combined with
incremental supply increases, will have a moderating influence. Consequently,
average thermal coal prices in 2006 are expected to be slightly lower than in
2005.
Substantial capital expenditure will continue to be incurred in all regions,
with the resulting increases in production, especially in Australia, coming
through over the next two years. In February 2006, Anglo Coal announced it had
entered into a joint coking coal venture in British Columbia, Canada. In China,
the Group has a 60% interest in the Xiwan open cut coal mine, where the
feasibility of a large coal-to-chemicals project is being investigated with a
number of partners. Work continues on the feasibility study for Monash, a fuel
from brown coal project, in Australia.
PLATINUM
USD million Year Year
ended ended
31.12.0 31.12.0
5 4
Operating profit 854 536
EBITDA 1,282 853
Net operating assets 7,018 7,560
Capital expenditure 616 633
Share of Group operating profit (%) 13% 11%
Share of Group net operating assets (%) 20% 20%
Anglo Platinum"s operating profit rose by 59% to USD854 million, mainly as a
result of higher US dollar prices for metals sold and increased sales volumes.
The cash operating cost per equivalent refined platinum ounce (equivalent ounces
are mine ounces converted to expected refined ounces) increased by 9.4% in rand
terms. Cost initiatives, including supply-chain savings, yielded additional
savings of USD36 million compared with 2004.
Markets
The average dollar price realised for the basket of metals sold was USD1,388 per
platinum ounce sold, 16% higher than in 2004. Firmer platinum, rhodium and
nickel prices made the largest contribution to the increase. The average
realised price for platinum, of USD894 per ounce, was USD52 higher, while
rhodium averaged USD1,966 per ounce compared with USD933. The average realised
price for nickel was USD6.77 per pound, against USD5.92 in 2004.
Operating performance
Whilst refined platinum group metal (PGM) production increased by 5% when
compared to 2004, refined platinum production of 2.5 million ounces was similar
to 2004. This was the result of a shutdown at the Polokwane Smelter from
September through to December, which will see 123,600 ounces of platinum being
refined in 2006 instead of 2005. Equivalent refined platinum production from the
operations managed by Anglo Platinum and its joint venture partners increased by
50,000 ounces, or 2%, primarily as a consequence of the expansion of the
Kroondal Platinum Mine with Aquarius Platinum, and higher output at Modikwa
Platinum Mine, as the mine ramps up further towards steady-state production.
Lower production was recorded at the Rustenburg and Amandelbult mines.
At Rustenburg, the ore-source mix continued to change as the currently available
Merensky reserves diminish, and Merensky ore is replaced with UG2 ore. Operating
performance in the second half of the year improved over the first six months,
as the considerable efforts made to restore production and improve safety and
efficiencies started to take hold. The Amandelbult mine continued with efforts
to reverse the impact of complex geological and ground conditions at the No. 1
and 2 shafts. Again, performance improved in the second half, indicative of
progress made with the planned turnaround.
Changes in the rhodium refining circuit at the Precious Metals Refinery resulted
in a substantial release of metal previously held in the pipeline. Consequently,
refined rhodium production increased by 74,800 ounces. The overall process
recovery of platinum improved by 3% as a result of new technology introduced in
the concentrating and smelting operations.
Projects
During the year Anglo Platinum announced the following ventures:
*The Marikana Pooling and Sharing agreement with Aquarius Platinum, to jointly
mine contiguous properties. Anglo Platinum will share in profits from January
2006 and will treat additional concentrate that arises from the expansion of the
Marikana operation. In addition to sales of concentrate in terms of off-take
agreements, the venture is expected to produce an additional 90,000 ounces of
platinum and 43,000 ounces of palladium in concentrate per annum when it reaches
steady state production in 2007.
*The Mototolo joint venture with Xstrata Alloys, to develop a platinum mine and
concentrator. The mine is expected to reach steady state production in the third
quarter of 2007. The mine will produce approximately 132,000 ounces of platinum
and 82,000 ounces of palladium in concentrate per annum. Anglo Platinum will
purchase Xstrata"s 50% share of PGM concentrate for further smelting, refining
and marketing of finished products.
During 2005, mining replacement projects totalling some USD770 million were
approved. These projects are planned to reach steady state between 2008 and
2012, replacing some 586,000 ounces of platinum production per annum. Included
in these projects is the USD230 million Potgietersrust replacement project which
will produce 200,000 replacement platinum ounces per annum. The Potgietersrust
mine will be further expanded to produce an additional 230,000 platinum ounces
per annum.
Outlook
Increased mined production and a reduction in the level of pipeline inventories
are expected to result in refined platinum production of between 2.7 and 2.8
million ounces in 2006. Management at Anglo Platinum continues to vigorously
address unit costs in conditions of relatively high inflation in the mining
environment. The emphasis on increasing volumes at improved operating
efficiencies remains.
Demand for platinum continues to be strong and remains supportive of firm
platinum prices. The resilience of jewellery demand - particularly in the
Chinese market - at prices over USD900 per ounce adds confidence to this view.
The growth in platinum demand in Europe for diesel autocatalyst systems, both
oxidation and now heavily loaded particulate traps, is strong. Tightening diesel
emission legislation and its early adoption supports this, as well as the
growing popularity of diesel engine powered vehicles. Industrial demand remains
firm, particularly in the glass and petroleum sectors.
Industrial palladium demand continues to grow, encouraged by the relatively low
price. However, as adequate supplies are available, the relative high ruling
prices are the result of investment interest in the metal. It is notable that
palladium demand from Chinese jewellery manufacturers doubled in 2005 and,
should sustainable consumer interest be established, this could beneficially
alter the nature of palladium supply and demand.
While production and sales volumes will increase in 2006, the most significant
variable affecting earnings will be metal prices in rand terms. If the rand
basket price remains at current levels, then earnings for 2006 are likely to be
higher than those in 2005.
DIAMONDS
USD million Year Year
ended ended
31.12.05 31.12.0
4
Share of associates" operating profit 583 573
EBITDA 655 655
Group"s share of De Beers" net assets (1) 2,056 2,208
Share of Group operating profit (%) 9% 12%
The Group"s share of total operating profit from De Beers increased by USD10
million over the 2004 figure to USD583 million.
Markets
Overall, 2005 proved to be quite a good year for the diamond industry.
Preliminary reports point to global retail sales of diamond jewellery for the
year rising by 6-7%. The diamond trade experienced growth in all major regions,
with the exception of Europe, where sales were generally flat. The US, which
accounts for around 50% of world jewellery sales by value had a satisfactory
Christmas season and mirrored the upward world trend. In the Asia-Pacific
region, there was a low single digit increase, with Japan"s steady economic
revival being reflected in a modest increase in growth for the third year
running; China, meanwhile, had a much better second six months. In the Middle
East, the Gulf region experienced growth well in excess of targets.
For most of the year, demand for rough diamonds from the cutting centres was
strong. Sales by The Diamond Trading Company (the DTC), the marketing arm of De
Beers, were a record USD6,539 million, 15% higher than in 2004. During the year
the DTC raised its rough diamond prices on two occasions, the cumulative effect
being that sales were at prices 9.5% higher on average than in 2004. The first
sight of 2006 was slightly down on that of a year earlier, while in February
this year the DTC raised its rough diamond prices by an average of 2% on the
evidence of the continuing underlying demand growth.
Operating performance
De Beers group production, which includes the joint ventures in Botswana and
Namibia, increased by 4% to 49 million carats. The South African operations
lifted output by 10% to 15.2 million carats. However, in future years there will
be no contribution from the Kimberley underground mines or from Koffiefontein as
these loss making operations have been closed. Debswana raised production by 2%
to a record 31.9 million carats, while the combined land and offshore operations
at Namdeb totalled 1.86 million carats, down 5%.
During the year, De Beers announced the approval of the USD513 million Snap Lake
underground project in Canada"s Northwest Territories, which will be the
company"s first mine outside Africa and the first fully underground diamond mine
in Canada. This was followed by the go ahead being given for a second Canadian
project, the USD791 million Victor project in Ontario. Snap Lake is due to enter
production in late 2007, with start up at Victor, which received environmental
approval in October, scheduled to commence in the third quarter of 2008. In
South Africa, approval has been given for the re-opening of the USD177 million
Voorspoed mine, while USD115 million has been allocated to the South African Sea
Areas marine mining project.
Agreement has been reached, and a preliminary order issued, to settle the
majority of civil class action suits filed against De Beers in the United
States. This settlement does not involve any admissibility on the part of De
Beers and, if finally approved, will bring an end to a number of outstanding
disputes. USD250 million has been paid in escrow pending conclusion of the
settlement process.
In 2005, De Beers and Ponahalo Investment Holdings signed a Memorandum of
Understanding relating to the proposed sale of a 26% equity interest in De Beers
Consolidated Mines Limited to Ponahalo, a broad based South African black
economic empowerment company, for approximately USD597 million. The sale is
likely to be completed in April 2006.
Outlook
Demand for rough diamonds continues to be steady, though stocks of both rough
and polished diamonds in the cutting centres are at relatively high levels, as
are aggregate debt levels. Consequently, the price of outside diamonds has
dropped significantly, with a concomitant effect on the DTC"s rough stones. In
spite of the current strain, however, the outlook for diamonds in 2006 is a
positive one, in line with macro-economic forecasts of another good year of
growth for the global economy.
PAPER AND PACKAGING
USD million Year Year
ended ended
31.12.05 31.12.0
4
Operating profit 495 569
Packaging 293 297
Business Paper 163 180
Other 39 92
EBITDA 916 978
Net operating assets 6,365 6,596
Capital expenditure (including bio assets) 746 822
Share of Group operating profit (%) 8% 12%
Share of Group net operating assets (%) 18% 17%
Total operating profit declined 13% from USD569 million to USD495 million,
reflecting the continued difficult trading conditions across Mondi"s key
markets. In response to the tough business environment, the company has
delivered USD223 million in cost savings and profit improvement initiatives,
underpinning the goal of profitability and competitive advantage in all trading
conditions.
Markets and Operating performance
Mondi Packaging"s total operating profit was USD293 million, slightly below that
of the previous year. The marginal impact of acquisitions made in early 2004,
along with benefits of USD103 million from significant cost saving and profit
improvement initiatives, was offset by continued weak trading conditions. These
were brought about mainly by a combination of over capacity and lacklustre
manufacturing growth in western European markets. The most difficult market was
sackpaper, which saw substantial price declines. Notably, a number of paper
machines achieved all time production records. Productivity, measured in output
per employee, improved by 8% across the business. In the latter part of the year
there were signs of improvements in the markets, as a weakening euro, a pick up
in European manufacturing activity and restructuring among key producers in the
corrugated packaging sector led to improved trading conditions.
Management has responded to the structural over capacity in the corrugated
sector by undertaking a significant restructuring. This involved the closure of
four plants in the UK and France, the disposal of a further nine plants in the
UK, and further rationalisation measures across the remaining operations. One
off cash costs associated with these restructurings amounted to USD15 million,
with a further USD62 million in asset and goodwill write downs and provisions.
These costs are defined as operating special items and so are excluded from
operating profit. The restructuring programme is expected to yield annual cash
flow benefits in excess of USD22 million, of which USD12 million has been
realised in 2005. This is in addition to steps taken over the past 18 months to
rationalise the upstream paper business, including the closure of two high cost
recycled containerboard mills with a combined capacity of 100,000 tonnes per
annum, representing around 14% of Mondi Packaging"s total capacity in these
grades.
The acquisition of release liner manufacturer Akrosil, completed in early
January 2006, will result in further expansion into the United States, while
consolidating Mondi Packaging as one of the major players in the global merchant
release liner sector. The acquisition of Paper Factory Stambolijski in Bulgaria
strengthens Mondi Packaging"s position as one of the leading global suppliers of
sack kraftpaper. Completion of the transaction remains subject to competition
clearance. A recently approved project to rebuild the PM1 machine at Swiecie in
Poland, at a cost of _39 million, will increase the company"s exposure to the
fast growing lightweight kraftliner market.
Mondi Business Paper"s total adjusted operating profit declined by 9% to USD163
million. Although demand remained reasonable, pricing was under pressure during
the year owing to a combination of the strong euro, which attracts dollar
denominated imports, as well as over capacity in core European markets. Uncoated
woodfree sales volumes increased by 3.3%. This was mainly as a result of
additional volumes from the successful rebuild of Ruzomberok"s PM18 paper
machine, offset in part by reduced volumes from Merebank during the rebuild of
PM31. A major focus on cost saving and profit improvement initiatives has
yielded benefits of USD104 million. The Richards Bay RB720 expansion project and
the Merebank PM31 rebuild have been commissioned successfully and full
production is expected to be achieved during 2006. Incremental uncoated woodfree
paper volumes coming on to the market as a result of the PM31 rebuild will be
offset by a reduction of around 100,000 tonnes from Hungary. This follows the
sale of the Dunaujvaros paper mill, which will be converted by the new owners to
the production of paper for release liner during 2006.
The remaining businesses in the Mondi portfolio underperformed when compared
with 2004. Rand strength has had a negative impact on local market pricing and
export revenues in the South African based packaging and newsprint businesses,
while difficult trading conditions in key markets are putting pressure on the
European paper merchant, Europapier.
Outlook
The company will continue to focus on attaining operational excellence across
its operations, integrating and optimising the significant new investments in
Richards Bay, Merebank, Akrosil and Stambolijski, and achieving further cost
reductions and profit improvements at existing facilities. Together with the
specific restructuring initiatives undertaken in the corrugated operations in
2005, this will position the business to benefit from any upturn in the markets.
Mondi is considering a one million tonnes per year softwood pulp expansion at a
capital cost of USD1.5 billion at its Syktyvkar plant in north west Russia in
order to meet growing worldwide pulp demand, driven mainly by China.
While it is still to early too call a sustained turnaround in trading
conditions, there are signs of improvement. The recently implemented price
increases in containerboard and uncoated woodfree reflect the benefits of
industry rationalisation and improved demand, although sustained dollar weakness
may undermine any recovery.
INDUSTRIAL MINERALS
USD million Year Year
ended ended
31.12.05 31.12.04
Operating profit 370 421
Tarmac 340 354
Copebr|s 30 67
EBITDA 618 638
Net operating assets 3,982 4,480
Capital expenditure 274 304
Share of Group operating profit (%) 6% 9%
Share of Group net operating assets (%) 11% 12%
Industrial Minerals generated an operating profit of USD370 million. Tarmac"s
profit before special items was 4% lower at USD340 million. Trading conditions
in the UK were challenging, particularly in the second half of 2005, as the
effects of higher energy costs and flat volumes impacted performance. Tarmac"s
contribution from its international businesses was in line with last year,
reflecting strong second half business performance in France, Spain and the
Middle East, offset by weaker demand in Germany. Tarmac"s European portfolio
grew during the year with a number of small bolt on acquisitions in Poland,
France and the UK. The acquisition of a developing business in Romania in early
2006 further strengthened Tarmac"s position in central Europe, identified as a
key focus of the company"s growth strategy. The appreciation of the Brazilian
currency, the real, was almost entirely responsible for profits at Copebr|s
being USD37 million down on 2004.
Markets and operating performance
In the UK, Tarmac realised price increases of between 3% and 7% across various
product groups, though margins were impacted by increased operating and energy
related costs. Volumes were generally flat and leading market positions were
maintained. However, margins in the coated stone and concrete markets were
particularly challenging, reflecting high fuel costs and competitive pressures
in an over supplied marketplace. The Buxton cement plant, which started up in
March 2004, exceeded project appraisal production by 43%. The weak housing
market affected demand for concrete products, particularly Aircrete blocks,
where the market declined by some 11%. This sharp fall in demand contributed to
a significant erosion of margins, exacerbated by fuel costs and ongoing
operational issues.
Operating profits in France were considerably better than in 2004, reflecting
the contribution of new acquisitions, improved prices and good cost control. In
Germany, operating profits were affected by delays and reductions in
infrastructure projects in a significantly over supplied marketplace, which
depressed prices. In the Middle East, Tarmac"s operations continue to benefit
from strong local demand. Trading in Spain, Poland and the Czech Republic was in
line with the previous year.
Copebr|s" underlying business performed well, although the stronger Brazilian
currency resulted in a substantial increase in local costs, in dollar terms.
Selling prices and raw material costs are essentially dollar denominated and
rose in tandem. Copebr|s" fertiliser sales held up well despite a 13% drop in
the overall fertiliser market in Brazil resulting from the effects of the 17%
appreciation of the real on the Brazilian agricultural sector, compounded by low
rainfall.
Adapting to changing market dynamics, Tarmac significantly restructured and
strengthened its management and organisational structure in 2005. The UK
business is now divided into Aggregates Products, with enhanced local presence,
and Building Products, which reflects the more national focus of its customer
base. The structure further facilitates continuous improvement in production and
logistics, and also in sales and back office activities. During 2005, the
division achieved USD86 million of cost savings and efficiency improvements.
The business development resource has been strengthened, with a Frankfurt base,
to better position Tarmac to grow its European business. The company recently
made three acquisitions in its aggregates business in the UK, Poland, and in
early 2006, Romania. Tarmac has also embarked on a strategic portfolio review
designed to increase focus and improve performance and is currently planning to
exit certain non-core businesses in Germany and Hong Kong as well as concrete
paving in the UK.
Outlook
Market conditions in the UK are expected to remain difficult with sluggish
demand and high cost pressures, particularly energy costs. Tarmac announced
price increases across its product range in January 2006, but in a highly
competitive marketplace, margins will be influenced by the degree to which these
hold.
GOLD
USD million Year Year
ended ended
31.12.05 31.12.0
4
Operating profit 332 296
EBITDA 871 694
Net operating assets 6,982 7,124
Capital expenditure 722 585
Share of Group operating profit (%) 5% 6%
Share of Group net operating assets (%) 20% 19%
In 2005, operating profit of USD332 million was 12% higher compared with the
previous year (2004: USD296 million). At the end of 2005, the gold price was
more than 11% higher than at the beginning of 2005, while the average local
price received for the year was 9% higher than for 2004. Total cash costs were
USD13 per ounce higher, at USD281 per ounce, mainly resulting from stronger
operating currencies, inflation and lower grades.
Markets
The return of investor interest in gold continued throughout 2005, with a
sustained rise in the gold price. The average gold price received increased by
USD45 per ounce to USD439. In the final quarter of the year, the spot gold price
broke through USD500 per ounce on a number of occasions. This momentum has
continued into 2006, with the spot gold price currently well above the USD500
per ounce mark.
Operating performance
AngloGold Ashanti"s production in 2005 from ongoing operations was 6.2 million
ounces, 6% higher than the previous year, and was largely attributable to the
inclusion of a full year"s production of the Ashanti assets, in addition to
record performances from Sunrise Dam in the first two quarters of the year and
production improvements at Morila and Mponeng of 28% and 27% respectively. These
increases were offset by a reduction in output from key South African assets,
including Great Noligwa and TauTona.
The optimisation of the Ashanti assets is ongoing, and management has
implemented programmes to ensure that these operations, starved of working
capital for an extended period, realise their ore reserve, profit margin and
growth potential.
Current growth projects will maintain AngloGold Ashanti"s production in excess
of 6 million ounces through to 2013. In addition to that, management is focused
on growing the reserve and resource base, both through exploration and through a
disciplined, value adding mergers and acquisitions programme. In respect of both
of these activities, the company is now looking outside of the world"s mature
gold regions and has announced exploration projects in Africa in the Democratic
Republic of Congo and in South America in Colombia.
In Russia, AngloGold Ashanti has acquired productive capacity with its 30% share
in London based Trans-Siberian Gold as an entry point to this region. In China,
strategic alliances are being pursued to allow the company to successfully
extract value from a region undergoing significant economic and regulatory
change. Exploration partnerships in the Philippines, Laos and in Mongolia have
resulted in land positions being acquired in several prospective areas.
Outlook
The gold price has now risen for five years in succession, a phenomenon not seen
since the deregulation of the gold market in the developed markets in 1971.
Ongoing strong demand from growing economies in China and India as well as
continued investor speculation and official sector activities are seen as
supportive of the gold price.
EXPLORATION
As the prelude to any new mining project, exploration is fundamental to the
Group"s success. And as the world becomes increasingly well prospected, Anglo
American, in addition to a focus on near-mine resources, is searching for new
deposits in more remote regions, such as the Arctic Circle and central Africa.
In 2005, it spent USD150 million on exploration, across 31 different countries.
Anglo Base Metals (which spent USD50 million) has found significant new
resources close to the Chilean copper mines of Los Bronces and El Soldado, and
near Catalao niobium mine in Brazil. Elsewhere work continues on extending the
copper resource discovered by Anglo American at Boyongan in the Philippines,
while greenfields exploration is in progress in Chile, Brazil, Indonesia, Mexico
and Peru. Nickel sulphide mineralisation has been discovered at West Raglan,
Canada and drilling continues for nickel resources at the Mosku project in
Finland and the MAN project in Alaska. Delineation of the nickel laterite
discovery at Jacar , Brazil, is underway.
Anglo Coal (USD13 million) is assessing the viability of methane production in
South Africa"s Waterberg coalfield. It completed scoping studies on China"s
Xiwan Project and began drilling on the Guxian prospect. Coal exploration is
being carried out in Canada.
Anglo Ferrous Metals and Industries (USD21 million) is exploring for iron ore in
South Africa on both greenfield and brownfield sites, and continues to evaluate
opportunities in West Africa.
AngloGold Ashanti (USD45 million) is exploring around many of its existing
operations, as well as in China, Colombia, the Democratic Republic of Congo,
Laos, Mongolia, the Philippines, and Russia.
Anglo Platinum (USD21 million) is exploring near existing operations and in
South Africa"s Bushveld Complex. Early-stage drilling at China"s Danba
project has been encouraging, and programmes continued in Brazil, Canada, Russia
and Zimbabwe.
Exchange rates against the US dollar
Average 2005 2004
South African rand 6.37 6.44
Pound sterling 0.55 0.55
Euro 0.80 0.80
Australian dollar 1.31 1.36
Chilean peso 559 609
Year end
South African rand 6.35 5.65
Pound sterling 0.58 0.52
Euro 0.85 0.74
Australian dollar 1.36 1.28
Chilean peso 512 556
Commodity prices
Average market prices for the period
2005 2004
Gold - USUSD/oz 445 409
Platinum - USUSD/oz 897 847
Palladium - USUSD/oz 201 231
Rhodium - USUSD/oz 2,056 991
Copper - US cents/lb 167 130
Nickel - US cents/lb 668 628
Zinc - US cents/lb 63 48
Lead - US cents/lb 44 40
European eucalyptus pulp price 582 520
USUSD/tonne
Consolidated income statement
for the year ended 31 December 2005
Before Special
special items and
items and re-
re-measurements measurements
USUSD Note 2005 (note 4) 2005
million 2005
Group revenue 1 29,434 - 29,434
Total operating costs (24,090) (487) (24,577)
Operating profit from
subsidiaries and 1 5,344 (487) 4,857
joint ventures
Net profit on 4 - 87 87
disposals
Net income from 1 696 (39) 657
associates
Total profit from
operations and 6,040 (439) 5,601
associates
Investment income 498 72 570
Interest expense (926) (37) (963)
Net finance costs 5 (428) 35 (393)
Profit before tax 5,612 (404) 5,208
Income tax 6 (1,283) 8 (1,275)
(expense)/income
Profit for the 4,329 (396) 3,933
financial year
Attributable to:
Minority interests 593 (181) 412
Equity shareholders 7 3,736 (215) 3,521
of the Company
Earnings per share
(USUSD)
Basic 7 2.43
Diluted 7 2.36
Dividends
62.0
The impact of acquired and discontinued
operations on the results for the year is not
material.
Underlying earnings and underlying earnings per
share are set out in note 7.
Proposed ordinary dividend 903
(USUSD millions)
Proposed special dividend 33.0
per share (US cents)
Proposed special dividend 480
(USUSD millions)
Dividends paid during the period per share (US 79.0
cents)
Dividends paid during the period (USUSD 1,137
millions)
Before Special
special items and
items and remeasurements
remeasurements (note 4)
USUSD Note 2004 2004 2004
million
Group revenue 1 26,268 - 26,268
Total operating (22,627) 25 (22,602)
costs
Operating profit
from subsidiaries 1 3,641 25 3,666
and joint ventures
Net profit on 4 - 1,015 1,015
disposals
Net income from 1 621 (71) 550
associates
Total profit from
operations and 4,262 969 5,231
associates
Investment income 719 - 719
Interest expense (974) (112) 1,086
Net finance costs 5 (255) (112) (367)
Profit before tax 4,007 857 4,864
Income tax 6 (885) (38) (923)
(expense)/income
Profit for the 3,122 819 3,941
financial year
Attributable to:
Minority interests 438 2 440
Equity shareholders 7 2,684 817 3,501
of the Company
Earnings per share
(USUSD)
Basic 7 2.44
Diluted 7
Dividends
70.0
The impact of acquired and discontinued
operations on the results for the year is
not material.
Underlying earnings and underlying earnings
per share are set out in note 7.
Proposed ordinary dividend 1,007
(USUSD millions)
Proposed special dividend -
per share (US cents)
Proposed special dividend -
(USUSD millions)
Dividends paid during the period per share 58.0
(US cents)
Dividends paid during the period (USUSD 827
millions)
Consolidated balance sheet as at 31 December 2005
USUSD million Note 2005 2004
Intangible assets 2,572 2,644
Tangible assets 30,796 33,172
Biological assets 350 374
Environmental rehabilitation trusts 288 237
Investments in associates 3,165 3,486
Fixed asset investments - 1,084
Financial asset investments 899 -
Deferred tax assets 337 128
Other financial assets (derivatives) 183 -
Other non-current assets 153 66
Total non-current assets 38,743 41,191
Inventories 3,569 3,549
Trade and other receivables 5,174 5,534
Current tax assets 211 220
Current asset investments - 2
Current financial asset investments 16 -
Cash and cash equivalents 10 3,430 2,955
Other current financial assets 747 -
(derivatives)
Total current assets 13,147 12,260
Total assets 51,890 53,451
Short term borrowings 10 (2,076) (3,383)
Trade and other payables (5,024) (5,368)
Current tax liabilities (1,145) (831)
Other current financial liabilities (1,286) -
(derivatives)
Total current liabilities (9,531) (9,582)
Medium and long term borrowings 10 (6,363) (7,817)
Retirement benefit obligations (1,258) (1,201)
Other financial liabilities (508) -
(derivatives)
Deferred tax liabilities (5,201) (5,810)
Provisions (1,451) (1,328)
Total non-current liabilities (14,781) (16,156)
Total liabilities (24,312) (25,738)
Net assets 27,578 27,713
Equity
Called-up share capital 9 747 747
Share premium account 9 1,637 1,633
Other reserves 9 1,330 3,074
Retained earnings 9 19,907 17,671
Equity attributable to equity shareholders 23,621 23,125
of the Company
Minority interests 9 3,957 4,588
Total equity 27,578 27,713
Consolidated cash flow statement for the year ended 31 December 2005
USUSD million Note 2005 2004
Cash inflows from operations 10 7,265 5,291
Dividends from associates 461 368
Dividends from financial/fixed asset 9 28
investments
Income tax paid (954) (500)
Net cash inflows from operating activities 6,781 5,187
Cash flows from investing activities
Acquisition of subsidiaries, net of cash and (298) (1,135)
cash equivalents
Disposal of subsidiaries, net of cash and 419 274
cash equivalents
Investment in associates (29) -
Sale of interests in associates 11 1,424
Sale of interests in joint ventures 2 37
Purchases of tangible fixed assets (3,306) (3,166)
Proceeds from disposal of tangible assets 327 151
Investment in biological assets (55) (67)
Purchases of financial asset investments (203) (108)
Proceeds from sale of financial asset 245 263
investments
Loans granted to related parties - 6
Repayment of loans and capital from 370 299
associates
Loan repayments from related parties 1 -
Utilised in hedge restructure (69) -
Other investing activities (18) (4)
Net cash used in investing activities (2,603) (2,026)
Cash flows from financing activities
Issue of shares by subsidiaries to minority 73 146
interests
Sale of treasury shares to employees 240 46
Repayment of short term borrowings (1,356) (1,830)
Repayment of medium and long term borrowings (632) (598)
Issue of convertible bonds - 990
Decrease in minority loans - (2)
Increase in current financial/fixed asset 13 23
investments
Interest received 210 195
Interest paid (547) (601)
Dividends paid to minority interests (421) (178)
Dividends paid to Company shareholders (1,137) (827)
Other financing activity (19) (39)
Net cash used in financing activities (3,576) (2,675)
Net increase in cash and cash equivalents 602 486
Cash and cash equivalents at start of year 2,781 2,186
Cash movements in the year 602 486
Effects of changes in foreign exchange rate (64) 109
Cash and cash equivalents at end of year 10 3,319 2,781
Consolidated statement of recognised income and expense
for the year ended 31 December 2005
USUSD million 2005 2004
Gain on revaluation of available for sale 31 -
investments
Loss on cash flow hedges (316) -
Exchange (losses)/gains on translation of (2,182) 2,617
foreign operations
Actuarial loss on post-retirement benefit (171) (57)
schemes
Actuarial (loss)/gain on post-retirement (24) 31
benefit schemes - associates
Deferred tax 140 6
Other movements 5 (32)
Net (expense)/income recognised directly in (2,517) 2,565
equity
Transfers
Transferred to profit or loss: sale of (32) -
available for sale investments
Transferred to profit or loss: cash flow (8) -
hedges
Transferred to profit or loss: exchange differences - (30)
on disposal of foreign operations
Total transferred from equity (40) (30)
Profit for the year 3,933 3,941
Total recognised income and expense 1,376 6,476
Adoption of IAS 32 and IAS 39 (see note 13) (127) -
Total recognised income and expense for the 1,249 6,476
year
Attributable to:
Minority interests (40) 755
Equity shareholders of the Company 1,289 5,721
1. Segmental information
Based on risks and returns the directors consider the primary reporting format
is by business segment and the secondary reporting format is by geographical
segment.
The analysis of associates" revenue by business segment is provided here for
completeness and consistency.
Primary reporting format - by business segment
Segment result Segment result
before after
Segment special items special items and
revenue(1)(2) and remeasurements
remeasurements(3
)
USUSD million 2005 2004 2005 2004 2005 2004
Subsidiaries and
joint ventures
Platinum 3,64 3,065 835 527 835 527
6
Gold 2,62 2,396 332 296 (50) 295
9
Coal 2,76 1,914 752 321 753 321
6
Base Metals 3,64 3,232 1,678 1,280 1,667 1,160
7
Industrial Minerals 4,04 3,833 366 416 350 407
3
Ferrous Metals and 6,03 5,137 1,308 591 1,312 746
Industries 0
Paper and Packaging 6,67 6,691 484 575 401 575
3
Exploration - - (150) (120) (150) (120)
Corporate Activities - - (261) (245) (261) (245)
Total subsidiaries 29,3 26,268 5,344 3,641 4,857 3,666
and joint ventures 4
Net income from
associates
Platinum 68 55 12 4 12 4
Gold 15 13 - - (2) -
Diamonds 3,31 3,177 386 319 257 329
6
Coal 583 468 192 118 192 118
Base Metals - 88 - (4) - (85)
Industrial Minerals 30 25 3 4 3 4
Ferrous Metals and 743 1,526 96 191 189 191
Industries
Paper and Packaging 283 228 7 (12) 6 (12)
Corporate Activities - 90 - 1 - 1
Total associates 5,03 5,670 696 621 657 550
8
Total Group
operations including 34,4 31,938 6,040 4,262 5,514 4,216
net income from 72
associates
Net profit on 87 1,015
disposals
Total profit from 5,601 5,231
operations and
associates
As further additional information, a segmental analysis of associates" operating
profit is set out below to show operating profit for total Group operations
including associates
Operating profit Operating profit
before after
special items and special items and
remeasurements remeasurements
USUSD million 2005 2004 2005 2004
Total subsidiaries and 5,344 3,641 4,857 3,666
joint ventures
Associates
Platinum 19 9 19 9
Gold - - (2) -
Diamonds 583 573 431 573
Coal 267 176 267 176
Base Metals - (4) - (121)
Industrial Minerals 4 5 4 5
Ferrous Metals and 148 296 149 296
Industries
Paper and Packaging 11 (6) 11 (6)
Corporate Activities - 7 - 7
Total associates 1,032 1,056 879 939
Total Group operations 6,376 4,697 5,736 4,605
including operating
profit from associates
1. Segmental information (continued)
Primary reporting format - by business segment (continued)
(1) Revenue is measured at the fair value of consideration received or
receivable for all significant products. Where a by-product is not regarded
as significant, then revenue may be credited against cost of sales. The amount
credited to cost of sales for the 12 months ended 31 December 2005 was
USD76 million (December 2004: USD81 million) and related principally to
AngloGold Ashanti who credit uranium, silver and acid to cost of sales in
accordance with the Gold Industry Standard on production cost.
(2) Base Metals" turnover is stated net of treatment and refining charges on
concentrate sales to external parties and refining charges on copper anode
sales from Chagres to refineries.
(3) Segment result is defined as being segment revenue less segment expense;
that is operating profit and gains and losses from foreign currency derivatives
that have been recycled in the income statement in cash flow hedges of sales and
purchases. In addition net income from associates is shown by segment. There
are no material inter-segment transfers or transactions that would affect the
segment result. Special items are set out in note 4. Associates" operating
profit is reconciled to `Net income from associates" as follows:
USUSD million 2005 2004
Operating profit from associates 1,032 1,056
before special items and
remeasurements
Operating special items and (153) (117)
remeasurements (see note 4)
Operating profit from associates 879 939
after special items and
remeasurements
Net profit on disposals (see note 98 10
4)
Other special items and 7 -
remeasurements (see note 4)
Net finance costs (before (51) (100)
remeasurements)
Income tax expense (after special (274) (280)
items and remeasurements)
Underlying minority interest (2) (19)
(after special items and
remeasurements)
Net income from associates 657 550
The segment result and associates" operating profit before special items and
remeasurements, as shown above, is reconciled to `Profit for the financial year"
as follows:
USUSD million 2005 2004
Operating profit, including
associates, before special items 6,376 4,697
and remeasurements
Operating special items and
remeasurements (see note 4):
Subsidiaries and joint ventures (487) 25
Gold (382) (1)
Coal 1 -
Base Metals (11) (120)
Industrial Minerals (16) (9)
Ferrous Metals and Industries 4 155
Paper and Packaging (83) -
Associates (153) (117)
Gold (2) -
Diamonds (152) -
Base Metals - (117)
Ferrous Metals and Industries 1 -
Operating profit, including
associates, after special items 5,736 4,605
and remeasurements
Net profit on disposals
Subsidiaries and joint ventures 87 1,015
Associates 98 10
Associates" financing 7 -
remeasurements
Associates" net finance costs (51) (100)
Associates" income tax expense (274) (280)
Associates" underlying minority (2) (19)
interests
Total profit from operations and 5,601 5,231
associates
Financing remeasurements 35 (112)
Net finance costs before (428) (255)
remeasurements
Profit before tax 5,208 4,864
Income tax expense (1,275) (923)
Profit for the financial year 3,933 3,941
1. Segmental information (continued)
Primary reporting format - by business segment (continued)
Primary segment disclosures for segment assets, liabilities and capital
expenditure are as follows:
Segment Segment Net segment Capital
assets(1) liabilities(2) assets expenditure(3)
USUSD 2005 2004 2005 2004 2005 2004 2005 2004
million
Platinum 7,550 7,939 (532) (379) 7,018 7,560 685 910
Gold 7,890 7,693 (908) (569) 6,982 7,124 721 3,653
Coal 3,024 3,087 (780) (784) 2,244 2,303 331 271
Base Metals 5,358 5,415 (573) (463) 4,785 4,952 273 505
Industrial 5,041 5,381 (1,059) (901) 3,982 4,480 312 365
Minerals
Ferrous 5,341 6,364 (902) (1,062) 4,439 5,302 376 432
Metals and
Industries
Paper and 7,400 8,140 (1,035) (1,544) 6,365 6,596 703 1,546
Packaging
Exploration - - (3) - (3) - - -
Corporate 251 177 (310) (272) (59) (95) 27 11
Activities
41,855 44,19 (6,102) (5,974) 35,753 38,222 3,428 7,693
6
Unallocated
Investment in 3,165 3486 - - 3,165 3,486
associates
Financial/fixed 915 1,086 - - 915 1,086
asset
investments
Deferred tax 337 128 (5,201) (5,810) (4,864) (5,682
assets/(liabili )
ties)
Cash and cash 3,430 2,955 - - 3,430 2,955
equivalents
Other financial
assets/(liabili 930 - (1,794) - (864) -
ties) -
(derivatives)
Other non- 1,258
operating 1,600 (2,420) (2,384) (1,162) (784)
assets/
(liabilities)
Provisions - (356) (370) (356) (370)
-
Borrowings - (8,439) (11,200 (8,439) (11,20
- ) 0)
Net assets 51,89 53,451 (24,312) (25,738 27,578 27,713
0 )
Segment assets at 31 December 2005 are operating assets and consist
primarily of tangible assets (USD30,796 million), intangible assets (USD2,572
million), biological assets (USD350 million), environmental rehabilitation
trusts (USD288 million), inventories (USD3,569 million), pension and post-
retirement healthcare assets (USD77 million) and operating receivables (USD4,203
million). Segment assets at 31 December 2004 consist of tangible assets
(USD33,172 million), intangible assets (USD2,644 million), biological assets
(USD374 million), inventories (USD3,549 million), pension and post-retirement
healthcare assets (USD2 million) and operating receivables (USD4,455 million).
(2) Segment liabilities are operating liabilities and consist primarily of non-
interest bearing current liabilities, restoration and decommissioning provisions
and provisions for post-retirement benefits.
(3) Capital expenditure reflects cash payments and accruals in respect of
additions to tangible assets and intangible assets USD3,377 million (2004:
USD3,631 million) and includes additions resulting from acquisitions through
business combinations USD51 million (2004: USD4,062 million).
Other primary segment items included in the income statement are as follows:
Depreciation (Impairments Other non
and )/reversal(1 cash
amortisation ) expense(2)
USUSD million 2005 2004 2005 2004 2005 2004
Platinum 428 313 - - 55 39
Gold 538 398 (96) (1) 50 27
Coal 188 150 - - 14 39
Base Metals 312 339 1 (120) 68 8
Industrial Minerals 248 217 (16) (9) 36 12
Ferrous Metals and 300 274 8 155 56 7
Industries
Paper and 411 400 (83) - 17 25
Packaging
Exploration - - - - 1 1
Corporate 16 16 - - 41 28
Activities
2,44 2,10 (186 25 338 186
1 7 )
(1) See operating special items in note 4.
(2) Other non cash expenses include share-based payments and charges in respect
of environmental, rehabilitation provisions and other provisions.
1. Segmental information (continued)
Secondary reporting format - by geographical segment
The Group"s geographical analysis of revenue, allocated based on the country in
which the customer is located, is as follows. The geographical analysis of the
Group"s attributable revenue from associates is provided for completeness and
consistency.
Revenue
USUSD million 2005 2004
Subsidiaries and
joint ventures
South Africa 5,280 4,768
Rest of Africa 505 485
Europe 13,629 12,610
North America 2,740 3,062
South America 1,723 1,355
Australia and Asia 5,557 3,988
Total subsidiaries and 29,434 26,268
joint ventures
Associates
South Africa 169 340
Rest of Africa 40 21
Europe 1,500 1,476
North America 1,768 2,222
South America 29 66
Australia and Asia 1,532 1,545
Total associates 5,038 5,670
Total Group operations including 34,472 31,938
associates
The Group"s geographical analysis of segment assets, liabilities and capital
expenditure, allocated based on where assets and liabilities are located is:
Segment Segment Net segment Capital
assets liabilities assets expenditure
USUSD 2005 2004 2005 2004 2005 2004 2005 2004
million
South Africa 18,965 19,978 (2,689 (2,550) 1676 17,428 1,890 2,471
)
Rest of 4,142 4,260 (298) (168) 3,84 4,092 261 2,814
Africa 4
Europe 10,048 11,319 (1,926 (2,273) 8,12 9,046 658 1,500
) 2
North America 500 674 (59) (93) 441 581 28 104
South America 5,124 4,819 (543) (423) 4,58 4,396 317 501
1
Australia and 3,076 3,146 (587) (467) 2,48 2,679 274 303
Asia 9
41,855 44,196 (6,102 (5,974) 35,7 38,22 3,428 7,693
) 53
Additional disclosure of secondary segmental information by origin is as
follows:
Operating Operating
Revenue profit profit
before special after special
items items
and and
remeasurements remeasurements
(1)
USUSD million 2005 2004 2005 2004 2005 2004
Subsidiaries and joint
ventures
South Africa 11,981 10,279 2,651 1,217 2,482 1,117
Rest of Africa 1,193 804 63 44 (156) 44
Europe 9,748 9,449 694 783 600 774
North America 531 1,018 27 21 (11) 175
South America 3,873 3,176 1,732 1,418 1,704 1,398
Australia and 2,108 1,542 177 158 238 158
Asia
Total subsidiaries and 29,434 26,268 5,344 3,641 4,857 3,666
joint ventures
Associates
South Africa 1,479 1,565 217 170 193 53
Rest of Africa 2,138 1,972 468 356 356 356
Europe 753 969 47 166 30 166
North America - 461 - 32 - 32
South America 525 447 189 249 189 249
Australia and 143 256 111 83 111 83
Asia
Total 5,038 5,670 1,032 1,056 879 939
associates
Total Group operations 34,472 31,938 6,376 4,697 5,736 4,605
including associates
(1) Special items and remeasurements are set out in note 4.
2. Profit for the financial year
The table below analyses the contribution of each business segment to the
Group"s operating profit including operating profit from associates for the
financial year and its underlying earnings, which the directors consider to be a
useful additional measure of the Group"s performance. A reconciliation from
profit for the financial year to underlying earnings is given in note 7. Group
operating profit including operating profit from associates is reconciled to
`Profit for the financial year" in the table below:
2005
Operating Operating
profit before profit after Special items
special items special items and
USUSD million and and remeasurements
remeasurements( remeasurements :
1) operating(2)
By business segment
Platinum 854 854 -
Gold 332 (52) 384
Diamonds 583 431 152
Coal 1,019 1,020 (1)
Base Metals 1,678 1,667 11
Industrial Minerals 370 354 16
Ferrous Metals and Industries 1,456 1,461 (5)
Paper and Packaging 495 412 83
Exploration (150) (150) -
Corporate Activities (261) (261) -
Total/Underlying earnings 6,376 5,736 640
Underlying earnings
adjustments (640)
(note 7)
Profit for the financial
year(3)
Net
Financing interest,
Net profit remeasurements tax and
USUSD million on and other(2) minority Total
disposals(2) interests
By business segment
Platinum - - (371) 483
Gold - - (227) 105
Diamonds - - (153) 430
Coal - - (295) 724
Base Metals - - (438) 1,240
Industrial Minerals - - (103) 267
Ferrous Metals and - - (699) 757
Industries
Paper and Packaging - - (199) 296
Exploration - - 35 (115)
Corporate Activities - - (190) (451)
Total/Underlying earnings - - (2,640) 3,736
Underlying earnings
adjustments 185 42 198 (215)
(note 7)
Profit for the financial 3,521
year(3)
2004
Operating profit Operating
before profit after Special items
special items and special items and
USUSD million remeasurements(1) and remeasurements:
remeasurements operating(2)
By business segment
Platinum 536 536 -
Gold 296 295 1
Diamonds 573 573 -
Coal 497 497 -
Base Metals 1,276 1,039 237
Industrial Minerals 421 412 9
Ferrous Metals and 887 1,042 (155)
Industries
Paper and Packaging 569 569 -
Exploration (120) (120) -
Corporate Activities (238) (238) -
Total/Underlying 4,697 4,605 92
earnings
Underlying earnings
adjustments (92)
(note 7)
Profit for the
financial year
(1)Operating profit includes associates" operating profit which is reconciled to
`Net income from associates" in note 1.
(2) Special items and remeasurements are set out in note 4.
(3) Profit for the financial year is the amount attributable to equity
shareholders.
3. Exploration expenditure
USUSD million 2005 2004
By business segment
Platinum 21 13
Gold 45 43
Coal 13 9
Base Metals 50 41
Ferrous Metals and Industries 21 14
150 120
4. Special items and remeasurements
`Special items" are those items of financial performance that the Group believes
should be separately disclosed on the face of the income statement to assist in
the understanding of the underlying financial performance achieved by the Group
and its businesses. Such items are material by nature or amount to the period"s
results and require separate disclosure in accordance with IAS 1.86. Special
items that relate to the operating performance of the business are classified as
special operating items and include impairment charges and reversals and other
exceptional items including significant legal provisions. Non-operating special
items include profits and losses on disposals of investments and businesses.
The Group believes that items which were previously referred to as `exceptional
items" under UK GAAP fall within the scope of special items under IFRS.
Remeasurements denominated De Beers" preference shares held by a Rand functional
currency subsidiary of the Group. Remeasurements are defined as operating, non-
operating or financing according to the nature of the underlying
expense.comprise other items which the Group believes should be reported
separately to aid an understanding of the underlying performance of the Group.
This category includes unrealised gains and losses on non-hedge derivative
instruments that are recorded in the income statement, and foreign exchange
gains and losses on dollar
4. Special items and remeasurements (continued)
USUSD million 2005 2004
Subsidiaries and joint ventures
Operating special items
Impairment of Corrugated assets, goodwill and (77) -
restructuring costs
Impairment of Bibiani (38) -
Closure of Ergo (31) -
Reversal of impairment of Terra Industries Inc - 154
Impairment of Black Mountain Mineral - (100)
Development
Other impairments and write downs (40) (29)
Total operating special items (186) 25
Taxation 14 6
Minority interests 38 (1)
Total attributable to equity shareholders (134) 30
Operating remeasurements
Unrealised losses on non-hedge derivatives (301) -
Taxation 22 -
Minority interests 130 -
Total attributable to equity shareholders (149) -
Financing remeasurements
Fair value loss on AngloGold Ashanti (32) -
convertible bond
Foreign exchange gain/(loss) on De Beers" 72 (112)
preference shares
Unrealised gains and losses on non-hedge (5) -
derivatives
Total financing remeasurements 35 (112)
Taxation (2) -
Minority interests 16 -
Total attributable to equity shareholders 49 (112)
Profits and (losses) on disposals
Formation of Marikana JV 27 -
Sale of Acerinox 25 -
Disposal of Wendt 21 -
Disposal of Boart Longyear 21 -
Disposal of Elandsfontein 18 -
Sale of Columbus 14 -
Disposal of Hope Downs (57) -
Part disposal of Mondi Packaging South Africa (12) -
Part disposal of Western Areas 14 45
Disposal of interest in Gold Fields Ltd - 464
Gains on deemed disposal of AngloGold - 415
Disposal of remaining interest in FirstRand - 32
Limited
Disposal of interest in Nkomati - 28
Disposal of interest in Avgold - 25
Other items 16 6
Net profit on disposals 87 1,015
Taxation (26) (44)
Minority interests (3) (1)
Total attributable to equity shareholders 58 970
Total special items and remeasurements before (365) 928
tax and minority interests
Taxation 8 (38)
Minority interests 181 (2)
Total special items and remeasurements (176) 888
attributable to equity shareholders
USUSD million 2005 2004
Associates" special items and remeasurements
Operating impairment charge - Palabora Mining - (117)
Company Limited
Other impairments and restructurings (24) -
Share of De Beers" class action payment (113) -
Unrealised losses on non-hedge derivatives - (16) -
operating
Operating special items and remeasurements (153) (117)
Unrealised gains on non-hedge derivatives - 7 -
financing
Disposal of Samancor Chrome 52 -
Disposal of Wonderkop joint venture interest 20 -
Other items 26 10
Net profit on disposals 98 10
Total associates" special items and (48) (107)
remeasurements
Taxation 7 36
Minority interests 2 -
Net associates" special items and (39) (71)
remeasurements
4. Special items and remeasurements (continued)
Operating special items and remeasurements
USUSD million 2005 2004
Operating special items (186) 25
Operating remeasurements (301) -
(487) 25
Associates" operating special items and (153) (117)
remeasurements
(640) (92)
Operating special charges of USD186 million (2004: gain of USD25 million)
relates principally to impairment and closure costs. Following difficult market
conditions, Paper and Packaging have recorded impairment and restructuring costs
of USD77 million in relation to the Corrugated division. A review of the
expected life of mine at AngloGold Ashanti"s Bibiani operation has led to a
USD38 million special charge to operating profit. One-off costs and charges of
USD31 million were incurred following the decision to close AngloGold Ashanti"s
Ergo operation.
Unrealised losses of USD301 million on non-hedge derivatives (2004: nil) have
been included in operating remeasurements. These unrealised losses were recorded
principally at AngloGold Ashanti.
Associates" operating special items and remeasurements includes USD113 million
for share of De Beers" legal settlement.
Financing remeasurements
AngloGold Ashanti records the option element of its convertible bond at fair
value in the income statement following the adoption of IAS 32 and IAS 39. As a
result, a charge of USD32 million (2004: nil) has been included in financing
remeasurements.
The Group holds US dollar preference shares issued by De Beers which are held in
a Rand functional currency subsidiary of the Group. As a result of the adoption
of IAS 21 and 28, these shares have been reclassified as `non-current
investments" and are retranslated at each period end. As a result, a gain of
USD72 million (2004: loss of USD112 million) has been included in financing
remeasurements.
Profits and losses on disposals
Anglo Platinum has entered into the Marikana Pooling and Sharing agreement with
Aquarius Platinum to jointly mine contiguous properties. A gain of USD27
million arose on transfer of assets to the joint venture.
The sale of Boart Longyear"s subsidiary Wendt was concluded in March 2005 for
proceeds of USD62 million, realising a profit on sale of USD21 million. In July
2005 the remainder of the Boart Longyear Group was sold for USD383 million, with
a profit on sale of USD21 million. In the first half of the year, proceeds of
USD116 million were received on the sale of Acerinox leading to a profit on
disposal of USD25 million.
Under the terms of an agreement between Kumba Resources Ltd (`Kumba") and
Hancock Prospecting Pty Limited (`Hancock"), Hancock purchased Kumba"s interest
in the Hope Downs project on 1 July 2005. The proceeds of USD176 million led to
a loss on sale of USD57 million for the Group owing to value assigned to the
Hope Downs project on the acquisition of Kumba by the Group in 2003.
Net finance costs
Finance costs and foreign exchange gains/(losses) are presented net of effective
cash flow hedges for respective interest bearing and foreign currency
borrowings. Fair value gains/(losses) on derivatives, presented below, include
the mark-to- market value changes of interest rate and currency derivatives
designated as fair value hedges, net of fair value changes in the associated
hedged risk; and fair value changes of non-hedge derivatives of non-operating
items, including the mark-to-market of the conversion option within the
AngloGold Ashanti convertible bond.
Before After Before After
remeasurements remeasurements remeasurements remeasurements
USUSD million 2005 2005 2004 2004
Investment
income
Interest and 227 227 249 249
other
financial
income
Expected 241 241 257 257
return on
defined
benefit
arrangements
Foreign 20 92 120 120
exchange gains
Dividend 10 10 93 93
income from
financial/
fixed asset
investments
Total 498 570 719 719
investment
income
Interest
expense
Amortisation (42) (42) (62) (62)
discount
relating to
provisions
Bank loans and (320) (320) (394) (394)
overdrafts
Other loans (167) (167) (194) (194)
Interest paid (71) (71) (42) (42)
on convertible
bonds
Unwinding of (53) (53) - -
discount on
convertible
bonds
Interest on (270) (270) (298) (298)
defined
benefit
arrangements
Foreign (33) (33) (66) (178)
exchange
losses
Fair value (19) (24) - -
losses on
derivatives
Other fair value losses - (32) - -
(975) (1,012) (1,056) (1,168)
Less: interest 49 49 82 82
capitalised
Total interest expense (926) (963) (974) (1,086)
Net finance cost (428) (393) (255) (367)
The weighted average interest rate applicable to interest on general borrowings
capitalised was 8.7% (2004: 8.4%).
Financing remeasurements are set out in note 4.
6. Tax on profit on ordinary activities
Analysis of charge for the year from continuing operations
USUSD million 2005 2004
United Kingdom corporation tax at 30% 15 61
South Africa taxation 580 253
Other overseas taxation 721 347
Current tax (excluding tax on special 1,316 661
items and remeasurements)
Deferred taxation (33) 224
Total deferred tax (excluding tax on (33) 224
special items and remeasurements)
Total tax on special items and (8) 38
remeasurements
Total tax charge 1,275 923
Factors affecting tax charge for the year
The effective tax rate for the year of 24.5% (2004: 19.0%), after adjusting
profits for the net income from associates, is lower than the standard rate of
corporation tax in the United Kingdom (30%). The differences are explained
below:
2005 2004
including including
special items special items
USUSD million (unless otherwise and and
stated) remeasurements remeasurements
Profit on ordinary activities 5,208 4,864
before tax
Tax on profit on ordinary activities
calculated at United Kingdom corporation tax 1,562 1,459
rate of 30% (2004: 30%)
Tax effect of net income from (197) (165)
associates
Tax effects of:
Expenses not deductible for tax
purposes:
Operating special items and 110 (14)
remeasurements
Exploration costs 45 36
Other non-deductible expenses (3) 9
Non-taxable income:
Profits and losses on disposals and (9) (227)
remeasurements
Temporary difference adjustments:
Changes in tax rates (187) -
Movement in tax losses (30) -
Other temporary differences (23) (72)
Other adjustments:
South African secondary tax on 240 87
companies
Effect of differences between local (257) (174)
and UK rates
Other adjustments 24 (16)
Tax charge for the year 1,275 923
IAS 1 requires income from associates to be presented net of tax on the face of
the income statement. The associates" tax is no longer included within the
Group"s total tax charge. Associates" tax included within `Net income from
associates" for the year ended 31 December 2005 is USD274 million (2004: USD280
million).
The effective rate of taxation before special items and remeasurements including
share of associates" tax before special items and remeasurements was 26.5%. This
was a decrease from the equivalent effective rate of 27.7% in the year ended 31
December 2004. The reduction in the effective tax rate was principally due to a
reduction in the South African statutory rate from 30% to 29% and a reduction in
the Ghanaian tax rate, which resulted in a USD187 million reduction in deferred
tax, the benefit of which was taken in 2005. Without this one off benefit the
effective tax rate for the period would have been 29.7%. In future periods it is
expected the effective tax rate, including associates" tax, will remain at or
above current levels.
7. Earnings per share
USUSD million (unless otherwise stated) 2005 2004
Profit for the financial year attributable
to equity shareholders
Basic earnings per share (USUSD) 2.43 2.44
Diluted earnings per share (USUSD) 2.36 2.35
Headline earnings for the financial year(1):
Basic earnings per share (USUSD) 2.43 1.79
Diluted earnings per share (USUSD) 2.36 1.73
Underlying earnings for the financial
year(1):
Basic earnings per share (USUSD) 2.58 1.87
Diluted earnings per share (USUSD) 2.50 1.81
(1) Basic and diluted earnings per share are shown based on headline and
underlying earnings, which the directors believe to be useful additional
measures of the Group"s performance.
The calculation of the basic and diluted earnings per share is based on the
following data:
USUSD million (unless otherwise stated) 2005 2004
Earnings
Basic earnings, being profit for the financial year 3,521 3,501
attributable to equity shareholders
Effect of dilutive potential ordinary
shares:
Interest on convertible bonds (net of tax) 29 29
Unwinding of discount on convertible bonds 20 -
(net of tax)
Diluted earnings 3,570 3,530
Number of shares (million)
Basic number of ordinary shares 1,447 1,434
outstanding(1)
Effect of dilutive potential ordinary
shares(2): 18 18
Share options 48 48
Convertible bonds
Diluted number of ordinary shares 1,513 1,500
outstanding(1)
(1) Basic and diluted number of ordinary shares outstanding represent the
weighted average for the period. The average number of ordinary shares in issue
excludes the shares held by the employee benefit trust.
(2) Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares in issue on the assumption of conversion of all
potentially dilutive ordinary shares.
`Underlying earnings" is an alternative earnings measure, which the directors
believe provides a clearer picture of the underlying financial performance of
the Group"s operations following the adoption of IAS 32 and IAS 39. Underlying
earnings is presented after minority interest and excludes special items and
remeasurements (see note 4). Underlying earnings is distinct from `headline
earnings", which is a Johannesburg Stock Exchange (`JSE Ltd") defined
performance measure.
The calculation of basic and diluted earnings per share, based on underlying
earnings, uses the following earnings data:
Earnings Basic earnings
(USUSD million) per share
(USUSD)
2005 2004 2005 2004
Profit for the financial year 3,521 3,501 2.43 2.44
attributable to equity shareholders
Special items: operating 186 (25) 0.13 (0.02)
Net loss/(profit) on disposals (87) (1,015) (0.06) (0.71)
Special items: associates (74) 107 (0.05) 0.08
Related tax 6 2 - -
Related minority interest (36) 2 (0.02) -
Headline earnings for the 3,516 2,572 2.43 1.79
financial year
Unrealised losses on non-hedge 315 - 0.22 -
derivatives
Fair value loss on AngloGold 32 - 0.02 -
Ashanti convertible bond
Exchange (gain)/loss on DBI (72) 112 (0.05) 0.08
preference shares
Share of De Beers" legal 113 - 0.08 -
settlement
Related tax (21) - (0.02) -
Related minority interest (147) - (0.10) -
Underlying earnings for the 3,736 2,684 2.58 1.87
financial year
For information underlying earnings for the 6 months to 30 June 2005 and 30 June
2004 is set out in the appendix.
7. Earnings per share (continued)
The following instruments are potentially dilutive but have not been included in
the calculation of diluted earnings per share because they are anti-dilutive for
the periods presented:
2005 2004
Number of shares (million)
Share options - 8
Potentially dilutive shares - 8
8. Capital expenditure on fixed assets and biological assets
USUSD million 2005 2004
Platinum 616 633
Gold 722 585
Coal 331 218
Base Metals 271 367
Industrial Minerals 274 304
Paper and Packaging 691 758
Ferrous Metals and Industries 373 284
Other 28 17
Purchase of tangible fixed assets 3,306 3,166
Investment in biological assets 55 67
3,361 3,233
Capital expenditure shown above comprises cash expenditure on fixed assets and
biological assets. Segmental capital expenditure shown in note 1 also includes
accruals and expenditure on acquisitions and intangible assets, but excludes
expenditure on biological assets.
9. Reconciliation of changes in equity
Share-
Total based
share Retained payment
USUSD million capital(1) earnings(2) reserve
Balance at 1 January 2004 2,022 15,012 25
Total recognised income and - 3,474 -
expense
Dividends paid - (827) -
Shares issued 358 - -
Share-based payments - 12 30
Subsidiary shares issued - - -
Issue of shares to minority - - -
interests
Dividends paid to minority - - -
interests
Deemed disposal of AngloGold - - -
Balance at 31 December 2004 2,380 17,671 55
Adoption of IAS 32 and IAS - (231) -
39 (see note 13)
Balance at 1 January 2005 2,380 17,440 55
Total recognised income and - 3,364 -
expense
Dividends paid - (1,137) -
Shares issued 4 - -
Share-based payments - - 100
Disposal of businesses - - -
Issue of shares to minority - - -
interests
Dividends paid to minority - - -
interests
Exercise of employee share - 240 -
options
Buy out of minority - - -
interests
Balance at 31 December 2005 2,384 19,907 155
Cumulative
translation Fair value
adjustment and
reserve(3) other Minority Total
USUSD million reserves(3) interests equity
Balance at 1 January 2004 - 772 3,365 21,196
Total recognised income 2,247 - 755 6,476
and expense
Dividends paid - - - (827)
Shares issued - - - 358
Share-based payments - - 3 45
Subsidiary shares issued - - 890 890
Issue of shares to - - (402) (402)
minority interests
Dividends paid to - - (178) (178)
minority interests
Deemed disposal of - - 155 155
AngloGold
Balance at 31 December 2,247 772 4,588 27,713
2004
Adoption of IAS 32 and - 226 (122) (127)
IAS 39 (see note 13)
Balance at 1 January 2005 2,247 998 4,466 27,586
Total recognised income (1,908) (162) 82 1,376
and expense
Dividends paid - - - (1,137)
Shares issued - - - 4
Share-based payments - - 6 106
Disposal of businesses - - (3) (3)
Issue of shares to - - 16 16
minority interests
Dividends paid to - - (421) (421)
minority interests
Exercise of employee - - - 240
share options
Buy out of minority - - (189) (189)
interests
Balance at 31 December 339 836 3,957 27,578
2005
(1) Total share capital comprises called-up share capital
USD747 million (2004: USD747 million) and the share premium
account USD1,637 million (2004: USD1,633 million).
(2) Retained earnings is stated after deducting USD456 million
(2004: USD622 million) of treasury shares. Treasury shares
comprise shares of Anglo American plc held in the employee
benefit trust to meet certain of the Group"s employee share
remuneration schemes. 17,516,652 million of shares (USD240
million) (2004: 1,600,926 million (USD12 million)) were issued
from the trust during the year.
(3) Other reserves of USD1,330 million (2004: USD3,074 million)
on the balance sheet comprise share-based payment reserve USD155
million (2004: USD55 million), cumulative translation adjustment
reserve of USD339 million (2004: USD2,247 million) and fair
value and other reserves of USD836 million (2004: USD772
million). Fair value and other reserves are further analysed
below.
Fair value and other reserves comprise:
Cash Total
Convertible Available flow fair
debt for sale hedge Other value
USUSD million reserve reserve reserve reserves and
(1) other
reserve
s
Balance at 1 January - - - 772 772
2004
Balance at 31 - - - 772 772
December 2004
Adoption of IAS 32 128 48 50 - 226
and IAS 39 (see note
13)
Balance at 1 January 128 48 50 772 998
2005
Total recognised 3 6 (171) - (162)
income and expense
Balance at 31 131 54 (121) 772 836
December 2005
(1) Other reserves comprise USD685 million (2004: USD685
million) legal reserve and USD87 million (2004: USD87 million)
capital redemption reserve.
10. Consolidated cash flow analysis
a) Reconciliation of profit before tax to cash inflows from
operations
USUSD million 2005 2004
Profit before tax 5,208 4,864
Depreciation and amortisation 2,441 2,107
Share option expense 92 50
Special items and remeasurements of 365 (928)
subsidiaries and joint ventures
Net finance costs before remeasurements 428 255
Fair value gains before special items (278) -
and remeasurements
Net income from associates (657) (550)
Provisions 113 17
Increase in inventories (453) (279)
Increase in operating debtors (600) (444)
Increase in operating creditors 539 113
Other adjustments 67 86
Cash inflows from operations 7,265 5,291
b) Cash and cash equivalents
USUSD million 2005 2004
Cash and cash equivalents per balance 3,430 2,955
sheet
Bank overdrafts (111) (174)
Net cash and cash equivalents per cash 3,319 2,781
flow statement
c) Movement in net debt
Debt due within Debt due
one year after(4)
one year
USUSD million Cash and
cash Carrying Carrying
equivalent value(2) Hedge value Hedge
(1)(2) (3) (3)
Balance at 1 2,186 (4,143) - (6,997) -
January 2004
Cash flow 486 1,830 - (392) -
Acquisitions
excluding cash - (249) - (314) -
and cash
equivalents
Disposals
excluding cash - 6 - 23 -
and cash
equivalents
Other non-cash - (4) - (15) -
movements
Reclassifications - (309) - 309 -
Currency 109 (340) - (431) -
movements
Balance at 31 2,781 (3,209) - (7,817) -
December 2004
IAS 32 and IAS 39 - (63) 55 (144) 302
adjustments
Balance at 1 2,781 (3,272) 55 (7,961) 302
January 2005
Cash flow 602 1,356 25 632 -
Acquisition/dispo - 2 - 5 -
sal of business
Unwinding of - - - (53) -
discount of
convertible debt
Reclassifications - (300) - 299 -
Movement in fair - - (67) 12 (302)
value
Other non-cash - - - - -
movements
Currency (64) 249 - 703 -
movements
Closing balance 3,319 (1,965) 13 (6,363) -
at 31 December
2005
USUSD million Current
financial Total
asset net debt(5)
investments
Balance at 1 25 (8,929)
January 2004
Cash flow (23) 1,901
Acquisitions
excluding cash and - (563)
cash equivalents
Disposals
excluding cash and - 29
cash equivalents
Other non-cash - (19)
movements
Reclassifications - -
Currency movements - (662)
Balance at 31 2 (8,243)
December 2004
IAS 32 and IAS 39 - 150
adjustments
Balance at 1 2 (8,093)
January 2005
Cash flow (13) 2,602
Acquisition/dispos - 7
al of business
Unwinding of - (53)
discount of
convertible debt
Reclassifications 1 -
Movement in fair - (358)
value
Other non-cash 29 29
movements
Currency movements (3) 885
Closing balance at 16 (4,980)
31 December 2005
(1) The Group operates in certain countries (principally South
Africa and Venezuela) where the existence of exchange controls
may restrict the use of certain cash balances. These
restrictions are not expected to have any material effect on the
Group"s ability to meet its ongoing obligations.
(2) Excludes overdrafts, which are included as cash and cash
equivalents. Short term borrowings on the balance sheet of
USD2,076 million (2004: USD3,383 million) include USD111 million
(2004: USD174 million) of overdrafts.
(3) Derivatives of net debt items that have been designated as
hedged and are effective are included within this table to give
a true reflection of the Group"s net debt position at period
end. These derivatives are classified within other financial
assets/(liabilities) (derivatives).
(4) Debt due after one year includes convertible debt of
USD1,975 million (2004: USD2,081 million).
(5) Net debt as shown on the balance sheet totalling USD4,993
million (2004: USD8,243 million) excludes the effect of hedge
instruments.
11. EBITDA by business segment
USUSD million 2005 2004
By business segment
Platinum 1,282 853
Gold 871 694
Diamonds 655 655
Coal 1,243 687
Base Metals 1,990 1,625
Industrial Minerals 618 638
Ferrous Metals and Industries 1,779 1,231
Paper and Packaging 916 978
Exploration (150) (120)
Corporate Activities (245) (210)
EBITDA 8,959 7,031
EBITDA is stated before special items and is reconciled to
`Total profit from operations and associates" as follows:
USUSD million 2005 2004
Total profit from operations and 5,601 5,231
associates
Special items (including associates) 633 92
Net profit on disposals (including (185) (1,025
associates) )
Depreciation and amortisation: 2,441 2,107
subsidiaries and joint ventures
Share of associates" interest, tax,
depreciation, amortisation and 469 626
underlying minority interest
EBITDA 8,959 7,031
EBITDA is reconciled to cash inflows from operations as follows:
USUSD million 2005 2004
EBITDA(1) 8,959 7,031
Share of operating profit of (1,032) (1,056
associates, before special items )
Underlying depreciation and (142) (227)
amortisation in associates
Share option expense 92 50
Fair value gains before remeasurements (278) -
Provisions 113 17
Increase in inventories (453) (279)
Increase in operating debtors (600) (444)
Increase in operating creditors 539 113
Other adjustments 67 86
Cash inflows from operations 7,265 5,291
(1) EBITDA is operating profit before special items and
remeasurements plus depreciation and amortisation in
subsidiaries and joint ventures and share of EBITDA of
associates:
USUSD million 2005 2004
Operating profit includes
associates" operating profit before 6,376 4,697
special items and remeasurements
Depreciation and amortisation
Subsidiaries and joint ventures 2,441 2,107
Associates 142 227
8,959 7,031
12. Reconciliation between UK GAAP and IFRS
Reconciliation of equity
The Group published financial information in accordance with
IFRS for 2004, as required by IFRS 1, on
9 May 2005 in its news release entitled `International Financial
Reporting Standards (IFRS) restatements for 2004 and update on
adoption of IFRS". The news release is published on the
Company"s website, www.angloamerican.co.uk, and includes
explanations of the significant UK GAAP to IFRS differences and
reconciliations for:
* total equity as at 1 January 2004 (date of transition to
IFRS), 30 June 2004 and 31 December 2004;
* profit attributable to shareholders for the period ended 30
June 2004 and the year ended 31 December 2004; and
* pro forma IAS 32 and IAS 39 information for the period
ended 30 June 2004 and the year ended 31 December 2004.
The news release also included detailed IFRS accounting policies
and supplementary notes to provide more information for
understanding the restatements. A summary of the detailed
information presented in the news release is provided below:
As at As at
USUSD million 01.01.04 31.12.04
Total equity presented under UK 19,772 24,998
GAAP
Reclassification of UK GAAP 3,396 4,620
minority interests within
equity
Proposed dividend adjustment 622 815
Recognition of deferred tax on (1,712) (1,899)
fair value adjustments(1)
Defined benefit pension (576) (628)
obligations
Translation of goodwill arising - 21
post 1 January 2004
Treatment of De Beers" (130) (218)
preference shares
Net impairment of goodwill (214) (214)
Reversal of goodwill - 221
amortisation
Fair value of biological assets 26 14
Share-based payments 6 1
Net impact of other IFRS 6 (18)
adjustments
Total equity and reserves 21,196 27,713
presented under IFRS
Reconciliation of profit attributable to equity shareholders of
the Company
Year ended
USUSD million 31.12.04
Attributable profit under UK 2,913
GAAP
Reclassification of unrealised 427
gains
Deferred tax on fair value 41
adjustments
Defined benefit schemes -
Recycling of currency 30
translation adjustments
Treatment of De Beers" (69)
preference shares
Reversal of goodwill 205
amortisation
Fair value of biological assets (21)
Share-based payments (21)
Net impact of other IFRS (4)
adjustments
Attributable profit under IFRS 3,501
(1) Since the release of the Group"s restated IFRS information
on 9 May 2005, an additional deferred tax liability of USD227
million has been recognised on transition to
IFRS in respect of underlying fair value adjustments. This
adjustment was taken to opening retained earnings in
accordance with IFRS 1.
Reconciliation of cash flows
The material adjustments made to the presentation of the Group"s
consolidated cash flow statement were the inclusion of cash
flows from joint venture entities on a line-by-line basis in
accordance with proportionate consolidation rules set out in IAS
31; and the inclusion of short term cash investments maturing
within 90 days of deposit previously disclosed as current asset
investments as cash equivalents in accordance with IAS 7 Cash
Flow Statements.
Explanation of reconciling items between UK GAAP and IFRS
The more significant areas of accounting change are:
IAS 1 - Reclassification of UK GAAP minority interest within
equity
Minority interests were reclassified from long term liabilities
to equity in accordance with IAS 1. Although this increased
reported net assets by USD4.6 billion at 31 December 2004 and
USD3.4 billion at 1 January 2004, it has no impact on total
shareholders" equity.
IAS 1 - Reclassification of unrealised gains
The international accounting framework provides no distinction
between unrealised and realised gains for financial reporting.
As such, all unrealised gains, with the exception of actuarial
gains or losses on post-retirement schemes and currency
translation differences, are recorded through the income
statement and not through the statement of total recognised
gains and losses, as was required under UK GAAP.
Although this reclassification has increased reported profit for
the year to 31 December 2004 by USD0.4 billion, there is no
change to net assets.
IAS 10 - Proposed dividend adjustment
Dividends proposed are recognised in the period in which they
are formally approved for payment. This is also in accordance
with the Companies Act 1985 (International Accounting Standards
and Other Accounting Amendments) Regulations 2004, which is
effective for financial years commencing on or after 1 January
2005.
The change in timing of recognising proposed dividends and the
related tax thereon increased reported net assets of the Group
as at 31 December 2004 by USD815 million, being the final 2004
proposed dividends to the Group"s shareholders and its minority
interests and by USD622 million as at 1 January 2004, being the
final 2003 proposed dividends.
IAS 12 - Recognition of deferred tax on fair value adjustments
Deferred tax is recognised at acquisition as part of the
assessment of the fair value of assets and liabilities acquired
and is provided on balances previously excluded from provision
under UK GAAP such as revaluations of tangible fixed assets. The
largest temporary difference requiring additional deferred tax
provision on transition arose between the carrying value of
mineral reserves and the respective tax base.
Upon adoption of IFRS, the Group recognised a deferred tax
liability of USD1.7 billion in respect of additional temporary
differences arising on previous acquisitions. In accordance with
IFRS 1 the Group took the exemption from restating acquisitions
prior to 1 January 2004, and as such this adjustment was made to
reserves at 1 January 2004. Deferred tax provided on temporary
differences for acquisitions made after 1 January 2004 either
increases the value attributed to mineral reserves or goodwill,
depending on the nature of the temporary difference giving rise
to it.
Any deferred tax raised will unwind through the consolidated
income statement as the underlying temporary difference is
amortised. The net impact from the recognition of additional
temporary differences on acquisitions was to increase profit
after tax by USD41 million for the year ended 31 December 2004.
IAS 19 - Defined benefit pension obligation
IAS 19 requires companies to recognise the full deficit (or
surplus, subject to restrictions) of post-retirement benefits
under defined benefit arrangements on the balance sheet. The
Group adopted the amendment to IAS 19 and has recognised all
actuarial gains or losses directly through equity.
This accounting change reduced consolidated net assets by
approximately USD0.6 billion (net of deferred tax) as at 31
December 2004 and 1 January 2004, as the full actuarial gains
and losses of defined benefit arrangements are now reflected in
reserves. There is no material impact on net profit for the year
ended 31 December 2004.
IAS 21 - Recycling of currency translation adjustment
IAS 21 requires cumulative currency translation adjustments
(CTA) arising on translation of a foreign operation to be
recycled through the income statement when that entity is
disposed of. Previously, under UK GAAP, the CTA was not included
in the gain or loss calculated if that operation was sold. In
accordance with IFRS 1, the Group took the exemption from
recycling foreign currency gains or losses arising before 1
January 2004.
The accounting policy change increased reported profit on
disposal of non US dollar operations by USD30 million for the
year to 31 December 2004 which represented recycled CTA gains
arising since 1 January 2004.
This accounting change had no impact on consolidated net assets,
as it is effectively recycling gains and losses reported
previously in reserves back through the income statement.
IAS 21 - Translation of goodwill arising post 1 January 2004
In accordance with IFRS 1, the Group translates non US dollar
goodwill arising on acquisitions after 1 January 2004 to the
closing US dollar exchange rate. This accounting adjustment
increased net assets at 31 December 2004 by USD21 million. The
resulting foreign exchange gain arising on consolidation has
been taken to the CTA reserve.
IAS 28 and IAS 21 - Translation of De Beers" preference shares
Previously, under UK GAAP, US dollar preference shares held in
De Beers with a redemption value of USD701 million were
considered part of the Group"s long term equity ownership in the
entity. As such, the preference shares were held at historical
cost and included in the total carrying value of the associate
in the consolidated balance sheet.
Under IFRS, the US dollar preference shares, which are held by a
Rand functional currency entity and are redeemable by 2010, no
longer qualify as quasi-equity and consequently were
reclassified as non-current financial asset investments: equity,
and retranslated at each period end. The resulting Rand:US
dollar foreign exchange gains and losses are reported through
the income statement. Under IAS 21 a currency loss of USD112
million was recorded for the year ended 31 December 2004.
Consequently the 2004 USD44 million exceptional currency loss
recognised on the partial redemption of the preference shares
under UK GAAP reporting was reversed.
The net impact from this accounting policy difference also
reduced net assets by USD130 million as at 1 January 2004.
After the partial redemption in June 2004 of 25% of the shares,
the residual carrying value of the remaining US dollar
preference shares held as at 31 December 2004 was USD526
million.
IAS 36 - Replacement of goodwill amortisation with an annual
impairment test and elimination of centrally held goodwill
IFRS does not permit the amortisation of goodwill, but requires
the carrying amount to be supported by an annual impairment
test.
For the purposes of impairment testing, goodwill is allocated to
cash-generating units (CGUs), or groups of CGUs, that are
expected to benefit from the synergies of the combination. The
group of CGUs to which the goodwill is allocated represents the
lowest level at which the goodwill is monitored for internal
management purposes and is not larger than a geographical or
business segment.
On transition to IFRS as at 1 January 2004, approximately USD260
million of strategic goodwill arising on the formation of Anglo
American plc in 1999 was eliminated. In accordance with FRS 11,
this goodwill reflected the increase in future shareholder value
arising from the merger of the AACSA and Minorco companies and
not the intrinsic value of Minorco assets existing at the date
of restructure and was held centrally. IFRS, however, requires
that all goodwill is allocated to cash generating units. The
cash generating units to which this strategic goodwill would
have been allocated to on formation of the Group did not support
its carrying value, due to disposals or impairments made since
1999 up to IFRS transition date. As a result, the goodwill was
written off through retained earnings at transition date.
In addition, approximately USD50 million of negative goodwill
was written back in accordance with IFRS 3 in the opening
balance sheet. Together these adjustments give rise to a net
reduction to the carrying value of goodwill on transition of
USD0.2 billion.
The replacement of goodwill amortisation with an annual
impairment test has increased reported profits for the Group by
USD0.2 billion for the year to 31 December 2004. This accounting
change does not impact headline earnings, as headline earnings
were stated before goodwill amortisation for UK GAAP.
IAS 32 and IAS 39 - Financial instruments
In accordance with the exemption provided under IFRS 1, the
Group has adopted IAS 32 and IAS 39 prospectively from 1 January
2005. As such, the financial information presented for the year
ended 31 December 2004 excludes any adjustments required from
adoption of these two standards. Details of the restatement and
the more significant changes is set out in note 13 Adoption of
IAS 32 and IAS 39.
IAS 41 - Fair value of biological assets
Afforestation and other agricultural assets, primarily forests
within our Paper and Packaging business, were previously held at
historical cost. These assets are now recorded at fair value in
accordance with IAS 41, with fair value changes reported through
the income statement up until the point at which the assets are
harvested. The historical cost of such assets was previously
classified within fixed assets.
This accounting change has resulted in the reclassification of
afforestation and other agricultural asset costs from tangible
assets to the separate asset category biological assets, and the
resultant fair value has increased net assets by USD14 million
as at 31 December 2004 and USD26 million as at 1 January 2004.
The effect of recognising fair value gains from growing
afforestation and other agricultural assets earlier than under
UK GAAP has reduced reported net profit for the year ended 31
December 2004 by approximately USD21 million.
IFRS 2 - Share-based remuneration schemes
IFRS 2 Share-based payments requires options granted by the
Group to employees, for example under Employee Share Option
Schemes and Save As You Earn schemes, to be fair valued at grant
date using an option pricing model and charged through the
income statement over the vesting period of the options.
UK GAAP required the intrinsic valuation method to be applied
whereby a charge was made if the exercise price of the option at
grant date was below the market price.
This accounting change reduced consolidated net profit by USD21
million for the year to 31 December 2004.
Group employee remuneration schemes have now replaced option
schemes with share schemes. Consequently the impact of this
accounting policy change will diminish.
13. Adoption of IAS 32 and IAS 39
The Group took the exemption not to restate its comparative
information for IAS 32 and IAS 39 and adopted the standards
prospectively from 1 January 2005.
The consolidated balance sheet as at 31 December 2004 has been
adjusted to apply IAS 32 and IAS 39 prospectively from 1 January
2005 as set out below:
Pro forma
Effect of restated
IFRS adoption of IFRS
USUSD Foot 31.12.04 IAS 32 01.01.05
million notes and IAS 39
Intangible assets 2,644 - 2,644
Tangible assets (1) 33,172 (173) 32,999
Biological assets 374 - 374
Environmental 237 - 237
rehabilitation trusts
Investments in associates 3,486 4 3,490
Fixed asset investments (2) 1,084 (1,084) -
Financial asset (2) - 1,142 1,142
investments
Deferred tax assets 128 (1) 127
Other financial assets (3) - 675 675
(derivatives)
Other non-current assets 66 - 66
Total non-current assets 41,191 563 41,754
Inventories 3,549 - 3,549
Trade and other 5,534 (86) 5,448
receivables
Current tax assets 220 - 220
Other current financial (3) - 670 670
assets (derivatives)
Current asset investments (2) 2 (2) -
Current financial asset (2) - 2 2
investments
Cash and cash equivalents 2,955 - 2,955
Total current assets 12,260 584 12,844
Total assets 53,451 1,147 54,598
Short term borrowings (4) (3,383) (63) (3,446)
Trade and other payables (5,368) 78 (5,290)
Current tax liabilities (831) 1 (830)
Other current financial (3) - (628) (628)
liabilities (derivatives)
Total current liabilities (9,582) (612) (10,194)
Medium and long term (4) (7,817) (144) (7,961)
borrowings
Retirement benefit (1,201) - (1,201)
obligations
Other financial (3) - (610) (610)
liabilities (derivatives)
Deferred tax liabilities (5,810) 92 (5,718)
Provisions (1,328) - (1,328)
Total non-current (16,156) (662) (16,818)
liabilities
Total liabilities (25,738) (1,274) (27,012)
Net assets 27,713 (127) 27,586
Equity
Called-up share capital 747 - 747
Share premium account 1,633 - 1,633
Other reserves 3,074 226 3,300
Cash flow hedge (3) - 50 50
reserve
Convertible debt (5) - 128 128
reserve
Available for sale (2) - 48 48
reserve
Other 3,074 - 3,074
Retained earnings (5) 17,671 (231) 17,440
Equity attributable to
equity shareholders of the 23,125 (5) 23,120
Company
Minority interests 4,588 (122) 4,466
Total equity 27,713 (127) 27,586
13. Adoption of IAS 32 and IAS 39 (continued)
The IFRS news release issued on 9 May 2005 set out a detailed
reconciliation by adjustment type on adoption of IAS 32 and IAS
39. The pro forma information presented in the news release
however assumed application of IAS 32 and IAS 39 from 1 January
2004. As such, it is slightly different to the information
restated here, for statutory purposes, which applies the
standards prospectively from 1 January 2005. The detailed
accounting policies for the Group"s financial instruments are
set out in note 14.
The key changes in accounting policy on adoption of IAS 32 and
IAS 39 are:
recognition and fair value of derivatives, including
embedded derivatives;
fair value of investments that were previously cost
accounted; and
the separation of the equity conversion option within
convertible debt instruments.
The following notes explain the material adjustments made at 1
January 2005 to the Group"s balance sheet at 31 December 2004 to
reflect the adoption of IAS 32 and IAS 39.
(1) The reduction in tangible fixed assets was largely due to a
USD171 million impairment triggered by the recognition of an
embedded derivative. The derivative was in a commercial purchase
contract in a Base Metals" operation and the resulting financial
asset increased the carrying value of total assets over their
recoverable amount, being their value in use. The value in use
of the Base Metals operation was calculated using forecast cash
flows discounted using a pre-tax discount rate equivalent to a
real post-tax discount rate of six per cent, adjusted for any
risks that were not reflected in the underlying cash flows. The
resulting impairment provision, net of deferred tax, was taken
through retained earnings as at 1 January 2005 in accordance
with transitional provisions set out in IFRS 1.
(2) On adoption of the two standards, loans and equity
investments that were previously classified as fixed asset
investments were reclassified as financial asset investments and
accounted for as available for sale, fair value through profit
or loss, held to maturity or loans and receivables as defined by
IAS 39. On transition, equity investments meeting the
definition of available for sale were restated to their fair
values. The respective USD58 million adjustment, being the
difference in carrying values between fixed asset investments
and the reclassified financial asset investments, was taken to
the available for sale reserve, net of deferred tax of USD10
million. No items were classified as fair value through profit
or loss or as held to maturity.
The Group"s USD526 million investment in DBI 10% non-
cumulative, redeemable preference shares were reclassified from
equity to loans and receivables as they meet the definition of
debt within IAS 32. No further adjustment was required on
reclassification of all other loans to loans and receivables, as
their carrying value under UK GAAP was equivalent to amortised
cost under IAS 39.
(3) All outstanding derivatives, other than commodity contracts
which meet the normal sale exemption criteria of IAS 39, are now
recognised on the balance sheet at their mark-to-market value
and are disclosed within other financial assets (derivatives) or
other financial liabilities (derivatives). Derivatives
designated as hedges are classified as current or non-current
depending on the maturity of the derivative. Derivatives not
designated as hedges are classified as current in accordance
with IAS 1. Derivative financial instruments that were
designated and effective as hedges of future cash flows as at 1
January 2005 were fair valued through the cash flow hedge
reserve at that date. Derivatives not designated as cash flow
hedges as at 1 January 2005 were fair valued through retained
earnings.
(4) The USD63 million increase in short term borrowings follows
the separate presentation of foreign currency derivatives within
other financial assets/(liabilities) (derivatives). The net
USD144 million increase in medium and long term borrowings is
due to the separate presentation of foreign currency derivatives
and the inclusion of the fair value of the interest rate risk
that is being hedged, in the carrying amount of the debt. This
is partially offset by a USD143 million reduction in liabilities
following the separation of the conversion option from the
Group"s convertible debt instruments.
(5) The conversion option within the convertible bond issued by
the Company was fair valued at the date of issue and is included
in equity, net of deferred tax.
The conversion option within the convertible bond
issued by AngloGold Ashanti is classified as a liability within
other financial liabilities (derivatives). This accounting
treatment follows recent IFRIC guidance.
Notes to financial information
14. Basis of preparation
14.1 The financial information set out herein does not
constitute the Company"s statutory accounts for the year ended
31 December 2005, but is derived from those accounts which
were approved by the board of directors on 21 February 2006.
Statutory accounts for the year ended 31 December 2004 have been
delivered to the Registrar of Companies, and those for 2005
will be delivered following the Company"s annual general meeting
convened for 25 April 2006. The auditors have reported on
these accounts; their reports were unqualified and did not
contain statements under section 237(2) or (3) of the Companies
Act 1985.
14.2 Accounting policies
The financial information has been prepared in accordance with
International Financial Reporting Standards (IFRS) and IFRIC
interpretations for the first time and with those parts of the
Companies Act 1985 applicable to companies reporting under IFRS.
The disclosure required by IFRS 1 First-time adoption of
International Financial Reporting Standards concerning the
transition from UK GAAP to IFRSs is given in notes 12 and 13.
Accordingly the Group complies with all IFRSs including those
adopted for use in the EU. The financial information has been
prepared under the historical cost convention as modified by the
revaluation of biological assets and certain financial
instruments. A summary of the principal Group accounting
policies is set out below, together with an explanation of where
changes have been made to previous IFRS policies on the adoption
of new accounting standards in the year.
The preparation of financial information in conformity with
generally accepted accounting principles requires the use of
estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial information
and the reported amounts of revenues and expenses during the
reporting period. Although these estimates are based on
management"s best knowledge of the amount, event or actions,
actual results ultimately may differ from those estimates.
Early adoption of standards
The Group, as a first-time IFRS reporter, has adopted early with
effect from 1 January 2004 the following standards and
interpretations as at 31 December 2005, the reporting date of
the Group"s first IFRS financial statements.
*IAS 19 Employee Benefits amendments
*IFRS 6 Exploration for and Evaluation of Mineral Resources
*IFRIC 1 Changes in Existing Decommissioning, Restoration and
Similar Liabilities
*IFRIC 2 Members" Shares in Co-operative Entities and Similar
Instruments
*IFRIC 4 Determining Whether an Arrangement Contains a Lease
*IFRIC 5 Rights to Interests Arising from
Decommissioning,Restoration and Environmental Rehabilitation
Funds
We note that IFRS 6 does not impact the Group"s existing policy
for exploration and evaluation expenditure.
Changes in accounting policies
The following IFRS accounting policy changes have been made with
effect from 1 January 2005:
1) Financial instruments; and
2) Held for sale assets and discontinued operations.
1) Financial instruments
The Group has taken the exemption under IFRS 1 to apply IAS 32
Financial Instruments: Disclosure and Presentation and IAS 39
Financial Instruments: Recognition and Measurement prospectively
from 1 January 2005. As such, the financial information
presented for the year ended 31 December 2004 excludes any
adjustments required from adoption of these two standards.
As set out in note 13, the consolidated balance sheet as at 31
December 2004 has been adjusted to apply IAS 32 and IAS 39
prospectively from 1 January 2005. The accounting policies for
financial instruments are set out below.
2) Held for sale assets and discontinued operations
The Group has applied IFRS 5 Non-Current Assets Held for Sale
and Discontinued Operations prospectively from 1 January 2005.
Application of the policy change is in accordance with
transitional provisions set out in the standard.
Previously, the Group applied IAS 35 Discontinuing Operations
which required the restatement of comparative information once
an operation was identified as discontinuing.
Non-current assets (and disposal groups) are classified as held
for sale if their carrying amount will be recovered through a
sale transaction rather than through continuing use. This
condition is regarded as met only when the sale is highly
probable and the asset (or disposal group) is available for
immediate sale in its present condition. Management must be
committed to the sale, which should be expected to qualify for
recognition as a completed sale within one year from the date of
classification.
Non-current assets (and disposal groups) and associated
liabilities held for sale are measured at the lower of carrying
amount and fair value less costs to sell. Any resulting
impairment is reported through the income statement as a special
item. On classification as held for sale, the assets are no
longer depreciated. Comparative amounts are not adjusted.
Discontinued operations are classified as held for sale and are
either a separate major line of business or geographical area of
operations that have been sold or are part of a single co-
ordinated plan to be disposed of, or is a subsidiary acquired
exclusively with a view to sale. Once an operation has been
identified as discontinued, or is reclassified as continuing,
the comparative information is restated.
Notes to financial information (continued)
14. Accounting policies (continued)
USD757 million of assets and USD283 million of liabilities
associated with disposal groups were reclassified as held for
sale during the year. These disposal groups were sold prior to
year end and no new disposal groups were identified as at 31
December 2005. Impairment charges of USD36 million, after tax and
minority assets, were recorded on the reclassification of these
assets.
Basis of consolidation
The financial information incorporates a consolidation of the
financial information of the Company and entities controlled by
the Company (its subsidiaries) made up to 31 December each year.
Control is achieved where the Company has the power to govern the
financial and operating policies of an investee entity so as to
obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the
year are included in the consolidated income statement from the
effective date of acquisition or up to the effective date of
disposal, as appropriate.
Where necessary, adjustments are made to the results of
subsidiaries, joint ventures and associates to bring their
accounting policies into line with those used by the Group. Intra-
group transactions, balances, income and expenses are eliminated
on consolidation, where appropriate.
The interest of minority shareholders is initially stated at the
minority"s proportion of the fair values of the assets and
liabilities recognised on acquisition. Subsequently, any losses
applicable to the minority interest in excess of the minority
interest are allocated against the interests of the parent.
Associates
Associates are investments over which the Group is in a position
to exercise significant influence, but not control or joint
control, through participation in the financial and operating
policy decisions of the investee. Typically the Group owns
between 20% and 50% of the voting equity of its associates.
Investments in associates are accounted for using the equity
method of accounting except when classified as held for sale.
Any excess of the cost of acquisition over the Group"s share of
the fair values of the identifiable net assets of the associate
at the date of acquisition is recognised as goodwill. Where the
Group"s share of the fair values of the identifiable net assets
of the associate at the date of acquisition exceeds the cost of
the acquisition, the surplus, which represents the discount on
the acquisition, is credited to the income statement in the
period of acquisition.
The Group"s share of associates" profit or loss is based on their
most recent audited financial statements or unaudited interim
statements drawn up to the Group"s balance sheet date.
The total carrying values of investments in associates represent
the cost of each investment including the carrying value of
goodwill, the share of post-acquisition retained earnings, any
other movements in reserves and any long term debt interests
which in substance form part of the Group"s net investment. The
carrying values of associates are reviewed on a regular basis and
if an impairment in value has occurred, it is written off in the
period in which those circumstances are identified. The Group"s
share of an associate"s losses in excess of its interest in that
associate is not recognised unless the Group has an obligation to
fund such losses.
Joint venture entities
A joint venture entity is an entity in which the Group holds a
long term interest and shares joint control over the strategic,
financial and operating decisions with one or more other
venturers under a contractual arrangement.
The Group"s share of the assets, liabilities, income, expenditure
and cash flows of jointly controlled entities are accounted for
using proportionate consolidation. Proportionate consolidation
combines the Group"s share of the results of the joint venture
entity on a line by line basis with similar items in the Group"s
financial information.
Joint venture operations
The Group has contractual arrangements with other participants to
engage in joint activities other than through a separate entity.
The Group includes its assets, liabilities, expenditure and its
share of revenue in such joint venture operations with similar
items in the Group"s financial statements.
Revenue recognition
Revenue is derived principally from the sale of goods and is
measured at the fair value of consideration received or
receivable, after deducting discounts, volume rebates, value
added tax and other sales taxes. A sale is recognised when the
significant risks and rewards of ownership have passed. This is
when title and insurance risk has passed to the customer, and the
goods have been delivered to a contractually agreed location.
Revenue from metal mining activities is based on the payable
metal sold. Revenues from the sale of material by-products are
included within revenue.
Where a by-product is not regarded as significant, revenue may be
credited against the cost of sales. The amount credited to cost
of sales for the year ended 31 December 2005 was USD76 million
and USD81 million for the year ended 31 December 2004 and relates
principally to AngloGold Ashanti which credits uranium, silver
and acid to cost of sales in accordance with the Gold Industry
Standard on production costs.
Interest income is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate
applicable.
Dividend income from investments is recognised when the
shareholders" rights to receive payment have been established.
Business combinations and goodwill arising thereon
At the date of acquisition, the identifiable assets, liabilities
and contingent liabilities of a subsidiary, joint venture entity
or an associate which can be measured reliably are recorded at
their provisional fair values at the date of acquisition. Any
excess of the cost of acquisition over the fair values of the
identifiable net assets acquired is attributed to goodwill.
Provisional fair values are finalised within 12 months of the
acquisition date.
Goodwill in respect of subsidiaries and joint ventures is
included within intangible fixed assets. Goodwill relating to
associates is included within the carrying value of the
associate.
Where the fair values of the identifiable net assets acquired
exceeds the cost of the acquisition, the surplus, which
represents the discount on the acquisition, is credited to the
income statement in the period of acquisition.
Goodwill arising on acquisitions before the date of transition to
IFRS has been retained at the previous UK GAAP carrying value
subject to being tested for impairment at that date. Subsequent
impairment tests are performed in accordance with the impairment
policy set out below. Goodwill that was eliminated against
reserves under UK GAAP prior to 1998 has not been reinstated and
will not be included in determining any profit or loss on
disposal.
Negative goodwill arising on acquisitions prior to 31 December
2003 has been eliminated against retained earnings at that date.
Tangible assets
Mining properties and leases include the cost of acquiring and
developing mining properties and mineral rights.
Mining properties are depreciated down to their residual values
using the unit-of-production method based on proven and probable
reserves. Depreciation is charged on new mining ventures from the
date that the mining property is capable of commercial
production. When there is little likelihood of a mineral right
being exploited, or the value of the exploitable mineral right
has diminished below cost, a write-down to the recoverable amount
is charged to the income statement.
Stripping costs incurred during the production phase to remove
additional overburden or waste ore are deferred when they give
access to future economic benefits and charged to operating costs
using the expected average stripping ratio over the average life
of the area being mined. The average stripping ratio is
calculated as the number of tonnes of waste material expected to
be removed during the life of mine, per tonne of ore mined. The
average life of mine cost per tonne is calculated as the total
expected costs to be incurred to mine the orebody divided by the
number of tonnes expected to be mined. The average life of mine
stripping ratio and the average life of mine cost per tonne is
recalculated annually in light of additional knowledge and
changes in estimates. The cost of stripping in any period will
therefore be reflective of the average stripping rates for the
orebody as a whole. Changes in the life of mine stripping ratio
are accounted for prospectively as a change in estimate.
Land and properties in the course of construction are carried at
cost, less any recognised impairment. Depreciation commences when
the assets are ready for their intended use. Buildings and plant
and equipment are depreciated down to their residual values at
varying rates, on the straight-line basis over their estimated
useful lives or the life of mine, whichever is shorter. Estimated
useful lives normally vary from up to 20 years for items of plant
and equipment to a maximum of 50 years for buildings.
Residual values and useful economic lives are reviewed at least
annually.
Assets held under finance leases are depreciated over the shorter
of the lease term and the expected useful lives of the assets.
Licences and other intangibles
Licences and other intangibles are measured initially at purchase
cost and are amortised on a straight line basis over their
estimated useful lives. Estimated useful lives vary between 3 and
5 years.
Impairment of tangible and intangible assets excluding goodwill
At each balance sheet date, the Group reviews the carrying
amounts of its tangible and intangible assets to determine
whether there is any indication that those assets are impaired.
If any such indication exists, the recoverable amount of the
asset is estimated in order to determine the extent of the
impairment (if any). Where the asset does not generate cash flows
that are independent from other assets, the Group estimates the
recoverable amount of the cash-generating unit to which the asset
belongs. An intangible asset with an indefinite useful life is
tested for impairment annually and whenever there is an
indication that the asset may be impaired.
Recoverable amount is the higher of fair value less costs to sell
and value in use. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset for which
estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (or cash-generating unit) is reduced to its
recoverable amount. An impairment is recognised immediately as an
expense.
Where an impairment subsequently reverses, the carrying amount of
the asset (or cash-generating unit) is increased to the revised
estimate of its recoverable amount, but so that the increased
carrying amount does not exceed the carrying amount that would
have been determined had no impairment been recognised for the
asset (or cash-generating unit) in prior years. A reversal of an
impairment is recognised as income immediately.
Impairment of goodwill
Goodwill arising on business combinations is allocated to the
group of cash-generating units that are expected to benefit from
the synergies of the combination and represents the lowest level
at which goodwill is monitored by the Group"s board of drectors
for internal management purposes. The recoverable amount of the
group of cash-generating units to which goodwill has been
allocated is tested for impairment annually on a consistent date
during each financial year, or when such events or changes in
circumstances indicate that it may be impaired.
Notes to financial information (continued)
14. Accounting policies (continued)
Any impairment is recognised immediately in the income statement.
Impairments of goodwill are not subsequently reversed.
Research and exploration expenditure
Research and exploration expenditure is written off in the year
in which it is incurred. When a decision is taken that a mining
property is economically feasible and should be developed for
commercial production, all further directly attributable, pre-
production expenditure is capitalised within tangible assets.
Capitalisation of pre-production expenditure ceases when the
mining property is capable of commercial production.
Capitalised pre-production expenditure prior to commercial
production is assessed for impairment in accordance with the
Group accounting policy stated above.
Biological assets: afforestation and other agricultural activity
Afforestation and other agricultural assets are measured at their
fair values less estimated selling costs during the period of
biological transformation, from initial recognition up to the
point of harvest. The fair values are determined based on current
market prices for the assets in their present location and
condition.
Changes in fair value are recognised in the income statement
within other gains and losses for the period between planting and
harvest. At point of harvest, the carrying value of afforestation
and other agricultural assets is transferred to inventory.
Directly attributable costs incurred during the period of
biological transformation are capitalised and presented within
cash flows from investing activities in the cash flow statement.
Inventory
Inventory and work-in-progress are valued at the lower of cost
and net realisable value. The production cost of inventory
includes an appropriate proportion of depreciation and production
overheads. Cost is determined on the following bases:
raw materials and consumables are valued at cost on a first-in,
first-out (FIFO) basis;
finished products are valued at raw material cost, labour cost
and a proportion of manufacturing overhead expenses;
metal and coal stocks are included within finished products and
are valued at average cost.
Retirement benefits
The Group operates both defined benefit and defined contribution
schemes for its employees as well as post retirement medical
plans. For defined contribution schemes the amount charged to the
income statement is the contributions paid or payable during the
year.
For defined benefit pension and post-retirement medical plans,
full actuarial valuations are carried out every three years using
the projected unit credit method and updates are performed for
each financial year end. The average discount rate for the plans"
liabilities is based on AA rated corporate bonds of a suitable
duration and currency. Pension plans" assets are measured using
period end market values.
The Group has adopted the amendment to IAS 19 and as such
actuarial gains and losses, which can arise from differences
between expected and actual outcomes or changes in actuarial
assumptions, are recognised immediately in the consolidated
statement of recognised income and expense. Any increase in the
present value of plan liabilities expected to arise from employee
service during the period is charged to operating profit. The
expected return on plan assets and the expected increase during
the period in the present value of plan liabilities are included
in investment income and interest expense.
Past service cost is recognised immediately to the extent that
the benefits are already vested and otherwise is amortised on a
straight-line basis over the average period until the benefits
become vested.
The retirement benefit obligation recognised in the balance sheet
represents the present value of the defined benefit obligation as
adjusted for unrecognised past service costs and as reduced by
the fair value of scheme assets. Any asset resulting from this
calculation is limited to past service cost, plus the present
value of available refunds and reductions in future contributions
to the plan.
Taxation
The tax expense represents the sum of the current tax charge and
the movement in deferred tax.
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in the
income statement because it excludes items of income or expense
that are taxable or deductible in other years and it further
excludes items that are not taxable or deductible. The Group"s
liability for current tax is calculated using tax rates that have
been enacted or substantively enacted by the balance sheet date.
Notes to financial information (continued)
14. Accounting policies (continued)
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amount of assets and liabilities
in the financial statements and the corresponding tax basis used
in the computation of taxable profit and is accounted for using
the balance sheet liability method. Deferred tax liabilities are
generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and
liabilities are not recognised if the temporary differences arise
from the initial recognition of goodwill or an asset or liability
in a transaction (other than in a business combination) that
affects neither the tax profit nor accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries, joint
ventures, and associates, except where the Group is able to
control the reversal of the temporary difference and it is
probable that the temporary difference will not reverse in the
foreseeable future.
The carrying amount of deferred tax assets is reviewed at each
balance sheet date and is adjusted to the extent that it is no
longer probable that sufficient taxable profit will be available
to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset is
realised. Deferred tax is charged or credited in the income
statement, except when it relates to items charged or credited
directly to equity, in which case the deferred tax is also taken
directly to equity.
Deferred tax assets and liabilities are offset when they relate
to income taxes levied by the same taxation authority and the
Group intends to settle its current tax assets and liabilities on
a net basis.
Leases
Rental costs under operating leases are charged to the income
statement in equal annual amounts over the lease term.
Assets held under finance leases are recognised as assets of the
Group on inception of the lease at the lower of fair value or the
present value of the minimum lease payments derived by
discounting at the interest rate implicit in the lease. The
interest element of the rental is charged against profit so as to
produce a constant periodic rate of interest on the remaining
balance of the liability, unless it is directly attributable to
qualifying assets, in which case it is capitalised in accordance
with the Group"s general policy on borrowing costs (see below).
Discontinuing operations (pre 1 January 2005)
Discontinuing operations are significant, distinguishable
components of an enterprise that have been sold, abandoned or are
the subject of formal plans for disposal or discontinuance.
Once an operation has been identified as discontinuing, or is
reclassified as continuing, the comparative information is
restated.
Non-current assets held for sale and discontinued operations
(post 1 January 2005)
Non-current assets (and disposal groups) classified as held for
sale are measured at the lower of carrying amount and fair value
less costs to sell.
Non-current assets (and disposal groups) are classified as held
for sale if their carrying amount will be recovered through a
sale transaction rather than through continuing use. This
condition is regarded as met only when it is highly probable and
the asset (or disposal group) is available for immediate sale in
its present condition. Management must be committed to the sale
which should be expected to qualify for recognition as a
completed sale within one year from the date of classification.
Non-current assets are classified as held for sale from the date
these conditions are met and are measured at the lower of
carrying amount and fair value less costs to sell. Any resulting
impairment is reported through the income statement as a special
item. On classification as held for sale the assets are no longer
depreciated. Comparative amounts are not adjusted.
Discontinued operations are classified as held for sale and are
either a separate major line of business or geographical area of
operations that have been sold or are part of a single co-
ordinated plan to be disposed of, or is a subsidiary acquired
exclusively with a view to sale. Once an operation has been
identified as discontinued, or is reclassified as continuing, the
comparative information is restated.
Restoration, rehabilitation and environmental costs
An obligation to incur restoration, rehabilitation and
environmental costs arises when environmental disturbance is
caused by the development or ongoing production of a mining
property. Such costs arising from the installation of plant and
other site preparation work, discounted to their net present
value, are provided for and capitalised at the start of each
project, as soon as the obligation to incur such costs arises.
These costs are charged against profits over the life of the
operation, through the depreciation of the asset and the
unwinding of the discount on the provision. Costs for restoration
of subsequent site damage which is created on an ongoing basis
during production are provided for at their net present values
and charged against profits as extraction progresses.
Changes in the measurement of a liability relating to the
decommissioning of plant or other site preparation work that
result from changes in the estimated timing or amount of the cash
flow, or a change in the discount rate, are added to, or deducted
from, the cost of the related asset in the current period. If a
decrease in the liability exceeds the carrying amount of the
asset, the excess is recognised immediately in the income
statement. If the asset value is increased and there is an
indication that the revised carrying value is not recoverable, an
impairment test is performed in accordance with the accounting
policy above.
For some South African operations annual contributions are made
to dedicated environmental rehabilitation trusts to fund the
estimated cost of rehabilitation during and at the end of the
life of the relevant mine. The Group exercises full control of
these trusts and therefore the trust is consolidated. The trusts"
assets are recognised separately on the balance sheet as non-
current assets at fair value. Interest earned on funds invested
in the environmental rehabilitation trusts are accrued on a time
proportion basis and recognised as interest income.
Foreign currency transactions and translation
Foreign currency transactions by Group companies are booked in
their functional currencies at the exchange rate ruling on the
date of transaction. At each balance sheet date, monetary assets
and liabilities that are denominated in foreign currencies are
retranslated at the rates prevailing on the balance sheet date.
Gains and losses arising on retranslation are included in profit
or loss for the period and are classified as either operating or
financing depending on the nature of the monetary item giving
rise to them.
On consolidation, the assets and liabilities of the Group"s
overseas operations are translated into the presentation currency
of the Group at exchange rates prevailing on the balance sheet
date. Income and expense items are translated at the average
exchange rates for the period where these approximate the rates
at the dates of transactions. Exchange differences arising, if
any, are classified within equity and transferred to the Group"s
currency translation reserve. The Group elected to set the
currency translation reserve to zero at 1 January 2004 in
accordance with IFRS 1. Exchange differences on foreign currency
loans that form part of the Group"s net investment in these
foreign operations are offset in the currency translation
reserve.
Cumulative translation differences arising after the transition
date to IFRS are recognised as income or as expenses in the
period in which the operation they relate to is disposed of.
Goodwill and fair value adjustments arising on the acquisition of
a foreign entity are treated as assets of the foreign entity and
translated at the closing rate. Where applicable, the Group has
elected to treat goodwill arising on acquisitions before the date
of transition to IFRS as US dollar denominated assets.
Borrowing costs
Interest on borrowings directly relating to the financing of
qualifying capital projects under construction is added to the
capitalised cost of those projects during the construction phase,
until such time as the assets are substantially ready for their
intended use or sale which, in the case of mining properties, is
when they are capable of commercial production. Where funds have
been borrowed specifically to finance a project, the amount
capitalised represents the actual borrowing costs incurred. Where
the funds used to finance a project form part of general
borrowings, the amount capitalised is calculated using a weighted
average of rates applicable to relevant general borrowings of the
Group during the period.
All other borrowing costs are recognised in profit or loss in the
period in which they are incurred.
Share-based payments
The Group has applied the requirements of IFRS 2 Share-based
payments. In accordance with the transitional provisions, IFRS 2
has been applied to all grants of equity instruments after 7
November 2002 that had not vested as at 1 January 2005.
The Group makes equity-settled share-based payments to certain
employees, which are measured at fair value at the date of grant.
For those share schemes which do not include non-market vesting
conditions, the fair value is determined using the Monte Carlo
method at the grant date and expensed on a straight-line basis
over the vesting period, based on the Group"s estimate of shares
that will eventually vest. The fair value of share options issued
with non-market vesting conditions has been calculated using the
Black Scholes model. For all other share awards, the fair value
is determined by reference to the market value of the share at
the date of grant. For all share schemes with non-market related
vesting conditions, the likelihood of vesting has been taken into
account when determining the relevant charge. Vesting assumptions
are reviewed during each reporting period to ensure they reflect
current expectations.
Employee benefit trust
The carrying value of shares held by the employee benefit trust
are recorded as treasury shares, shown as a reduction in retained
earnings within shareholders" equity.
Presentation currency
As permitted by UK company law, the Group results are presented
in US dollars, the currency in which most of its business is
conducted.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand
deposits, together with short term, highly liquid investments
that are readily convertible to a known amount of cash and that
are subject to an insignificant risk of changes in value. Bank
overdrafts are also included as a component of cash and cash
equivalents. Bank overdrafts are shown within short term
borrowings in current liabilities on the balance sheet. Cash and
cash equivalents in the cash flow statement are shown net of
overdrafts.
Trade receivables
Trade receivables do not carry any interest and are stated at
their nominal value as reduced by appropriate allowances for
estimated irrecoverable amounts.
Trade payables
Trade payables are not interest bearing and are stated at their
nominal value.
Equity instruments
Equity instruments issued by the Company are recorded at the
proceeds received, net of direct issue costs.
Investments (pre 1 January 2005)
Investments, other than investments in subsidiaries, joint
ventures and associates, are fixed asset investments and are
included at cost less provision for any impairment in value.
Hedging transactions (pre 1 January 2005)
In order to hedge its exposure to foreign exchange, interest rate
and commodity price risks, the Group enters into forward, option
and swap contracts. Gains and losses on these contracts are
recognised in the period to which the gains and losses of the
underlying transactions relate. Net income or expense associated
with interest rate swap agreements is recognised on the accrual
basis over the life of the swap agreements as a component of
interest. Where commodity option contracts hedge anticipated
future production or purchases, the Group amortises the option
premiums paid over the life of the option and recognises any
realised gains and losses on exercise in the period in which the
hedged production is sold or commodity purchases are made.
Convertible debt (pre 1 January 2005)
Convertible bonds are recorded entirely as liabilities,
irrespective of the probability of future conversion, until
either converted or redeemed.
Investments (post 1 January 2005)
Investments, other than investments in subsidiaries, joint
ventures and associates, are financial asset investments and are
initially recorded at fair value. At subsequent reporting dates,
financial assets that the Group has the expressed intention and
ability to hold to maturity (`held-to-maturity") as well as
`loans and receivables" are measured at amortised cost, less any
impairment. The amortisation of any discount or premium on the
acquisition of a held-to-maturity investment is recognised in the
income statement in each period using the effective interest
method.
Investments other than those classified as held-to-maturity or
loans and receivables are classified as either fair value through
profit or loss, which includes investments held for trading, or
available for sale investments. Both sub categories are measured
at each reporting date at fair value. Where investments are held
for trading purposes, unrealised gains and losses for the period
are included in the income statement for the period within other
gains and losses. For available for sale investments, unrealised
gains and losses are recognised in equity until the security is
disposed or impaired, at which time the cumulative gain or loss
previously recognised in equity is included in the income
statement.
Current financial asset investments (post 1 January 2005)
Current financial asset investments consist mainly of bank term
deposits and fixed and floating rate debt securities. Debt
securities that are intended to be held to maturity are recorded
on the amortised cost basis. Debt securities that are not
intended to be held to maturity are recorded at the lower of cost
and market value.
Convertible debt (post 1 January 2005)
Convertible bonds denominated in the functional currency of the
entity issuing the shares are regarded as compound instruments,
consisting of a liability and an equity component. At the date of
issue, the fair value of the liability component is estimated
using the prevailing market interest rate for similar non-
convertible debt and is recorded within borrowings. The
difference between the proceeds of issue of the convertible bond
and the fair value assigned to the liability component,
representing the embedded option to convert the liability into
equity of the Group, is included in equity.
Where the embedded option is in a convertible bond denominated in
a currency other than the functional currency of the entity
issuing the shares, the option is classified as a liability, in
accordance with IFRIC guidance issued in their published update
following their April 2005 meeting. The option is marked to
market with subsequent gains and losses being recorded through
the income statement within net finance costs.
Issue costs are apportioned between the liability and equity
components of the convertible bonds where appropriate based on
their relative carrying amounts at the date of issue. The portion
relating to the equity component is charged directly against
equity.
The interest expense on the liability component is calculated by
applying the effective interest rate for similar non-convertible
debt to the liability component of the instrument. The difference
between this amount and the interest paid is added to the
carrying amount of the convertible bond.
Financial liabilities and equity instruments (post 1 January
2005)
Financial liabilities and equity instruments are classified and
accounted for as debt or equity according to the substance of the
contractual arrangements entered into. An equity instrument is
any contract that evidences a residual interest in the assets of
the group after deducting all of its liabilities.
Bank borrowings
Interest bearing bank loans and overdrafts are recorded at the
proceeds received, net of direct transaction costs. Finance
charges, including premiums payable on settlement or redemption
and direct issue costs, are accounted for on an accruals basis
and charged to the income statement using the effective interest
method. They are added to the carrying amount of the instrument
to the extent that they are not settled in the period in which
they arise.
Notes to financial information (continued)
14. Accounting policies (continued)
Derivative financial instruments and hedge accounting (post 1
January 2005)
In order to hedge its exposure to foreign exchange, interest rate
and commodity price risk, the Group enters into forward, option
and swap contracts. The Group does not use derivative financial
instruments for speculative purposes. Commodity based (normal
purchase or normal sale) contracts that meet the requirements of
IAS 39 are recognised in earnings when they are settled by
physical delivery.
All derivatives are held at fair value in the balance sheet
within other financial assets (derivatives) or other financial
liabilities (derivatives), and, when designated as hedges, are
classified as current or non-current depending on the maturity of
the derivative. Derivatives that are not designated as hedges are
classified as current, in accordance with IAS 1, even when their
actual maturity is expected to be greater than one year.
Changes in the fair value of derivative financial instruments
that are designated and effective as hedges of future cash flows
are recognised directly in equity. The gain or loss relating to
the ineffective portion is recognised immediately in the income
statement. If the cash flow hedge of a firm commitment or
forecasted transaction results in the recognition of a non-
financial asset or a liability, then, at the time the asset or
liability is recognised, the associated gains or losses on the
derivative that had previously been recognised in equity are
included in the initial measurement of the asset or liability.
For hedges that do not result in the recognition of a non-
financial asset or a liability, amounts deferred in equity are
recognised in the income statement in the same period in which
the hedged item affects profit or loss.
For an effective hedge of an exposure to changes in fair value,
the hedged item is adjusted for changes in fair value
attributable to the risk being hedged with the corresponding
entry in profit or loss. Gains or losses from remeasuring the
associated derivative are recognised in profit or loss.
The gain or loss on hedging instruments relating to the effective
portion of a net investment hedge is recognised in equity. The
ineffective portion is recognised immediately in the income
statement. Gains or losses accumulated in equity are included in
the income statement when the foreign operations are disposed of.
Changes in the fair value of any derivative instruments that are
not hedge accounted are recognised immediately in the income
statement and are classified within other gains and losses or net
finance costs or income depending on the type of risk the
derivative relates to.
Hedge accounting is discontinued when the hedging instrument
expires or is sold, terminated, exercised, revoked, or no longer
qualifies for hedge accounting. At that time, any cumulative gain
or loss on the hedging instrument recognised in equity is
retained in equity until the forecast transaction occurs. If a
hedge transaction is no longer expected to occur, the net
cumulative gain or loss previously recognised in equity is
included in the income statement of the period.
Derivatives embedded in other financial instruments or other host
contracts are treated as separate derivatives when their risks
and characteristics are not closely related to those of their
host contracts and the host contracts themselves are not carried
at fair value with unrealised gains or losses reported in the
income statement.
Production statistics
The figures below include the entire output of consolidated
entities and the Group"s share of joint ventures, joint
arrangements and associates where applicable, except for
Collahuasi in Base Metals which is quoted on a 100% basis.
2005 2004
Anglo Platinum (troy
ounces)(1)(2)
Platinum 2,502,000 2,498,200
Palladium 1,376,700 1,331,800
Rhodium 333,500 258,600
Platinum Group Metals 4,212,200 4,088,600
(PGM"s)
Nickel (tonnes) 20,900 22,700
AngloGold Ashanti (gold in
troy ounces)(2)
South Africa 2,676,000 2,857,000(3)
Argentina 211,000 211,000
Australia 455,000 410,000
Brazil 346,000 334,000
Ghana 680,000 485,000
Guinea 246,000 83,000
Mali 528,000 475,000
Namibia 81,000 66,000
Tanzania 613,000 570,000
USA 330,000 329,000
Zimbabwe - 9,000
6,166,000 5,829,000
Gold Fields (gold in troy
ounces)(4)
Gold - 207,000
Anglo Coal (tonnes)
South Africa:
Eskom 34,327,900 33,668,300
Trade - Thermal 20,281,100 18,648,600
Trade - Metallurgical 2,268,800 2,143,700
56,877,800 54,460,600
Australia:
Thermal 16,710,300 17,378,800
Metallurgical 9,390,300 8,203,800
26,100,600 25,582,600
South America:
Thermal 10,066,000 9,589,600
93,044,400 89,632,800
Anglo Coal (tonnes)
South Africa:
Bank 3,202,200 2,733,100
Greenside 2,730,000 2,754,800
Goedehoop 6,298,600 6,462,100
Isibonelo 1,358,300 -
Kriel 12,030,900 11,059,500
Kleinkopje 4,483,500 4,691,600
Landau 3,682,900 3,474,100
New Denmark 4,139,400 4,975,800
New Vaal 17,100,000 17,312,000
Nooitgedacht 794,400 676,600
Mafube 1,057,600 321,000
56,877,800 54,460,600
(1) Includes Anglo Platinum"s share of Northam Platinum Limited, 48,800
ounces (2004: 44,500 ounces).
(2) See the published results of Anglo American Platinum Limited,
Northam Limited, AngloGold Ashanti Limited and Gold Fields Limited for
further analysis of production information.
(3) Excludes production at Ergo which has been closed.
Production statistics (continued)
2005 2004
Anglo Coal (tonnes)
(continued)
Australia:
Callide 9,500,000 9,355,300
Drayton 4,099,000 4,278,800
Dartbrook 1,495,500 2,268,100
German Creek 3,560,000 4,047,600
Jellinbah East 851,100 925,200
Moranbah 3,432,800 1,125,900
Dawson Complex 3,162,200 3,581,700
26,100,600 25,582,600
South America:
Carbones Del Guasare 1,409,700 1,677,600
Carbones Del Cerrejon 8,656,300 7,912,000
10,066,000 9,589,600
Anglo Base Metals
Copper(1)
Collahuasi
100% basis (Anglo
American 44%)
Ore mined tonnes 40,705,000 50,342,000
Ore processed Oxide tonnes 6,461,000 6,610,000
Sulphide tonnes 36,659,000 34,844,000
Ore grade processed Oxide % Cu 0.9 0.9
Sulphide % Cu 1.0 1.3
Production Copper dmt 1,234,000 1,280,400
concentrate
Copper tonnes 60,700 58,200
cathode
Copper in tonnes 366,400 422,800
concentrate
Total copper production tonnes 427,100 481,000
for Collahuasi
Minera Sur Andes
Los Bronces mine
Ore mined tonnes 22,146,000 20,995,000
Marginal ore mined tonnes 27,936,000 29,187,000
Las Tortolas Ore processed tonnes 21,034,000 20,572,000
concentrator
Ore grade % Cu 1.0 1.1
processed
Average % 88.3 89.5
recovery
Production Copper dmt 510,000 549,000
concentrate
Copper tonnes 38,800 31,800
cathode
Copper in tonnes 188,500 199,800
concentrate
Total tonnes 227,300 231,600
El Soldado mine
Ore mined Open pit - tonnes 2,907,000 4,971,000
ore mined
Open pit - tonnes 384,000 1,061,000
marginal ore
mined
Underground tonnes 1,996,000 2,687,000
(sulphide)
Total tonnes 5,287,000 8,719,000
Ore processed Oxide tonnes 665,000 661,000
Sulphide tonnes 7,004,000 6,976,000
Ore grade processed Oxide % Cu 1.3 1.4
Sulphide % Cu 1.1 1.1
Production Copper dmt 210,500 216,700
concentrate
Copper tonnes 6,500 8,100
cathode
Copper in tonnes 60,000 60,700
concentrate
Total tonnes 66,500 68,800
(1) 2005 copper production figures exclude Palabora and Hudson
Bay.
Production statistics (continued)
2005 2004
Anglo Base Metals
(continued)
Chagres Smelter
Copper concentrate tonnes 144,800 170,400
smelted
Production Copper tonnes 138,100 165,000
blister/anodes
Acid tonnes 371,900 440,500
Total copper production 293,800
for tonnes 300,400
Minera Sur Andes group
Mantos Blancos
Mantos Blancos mine
Ore processed Oxide tonnes 4,535,000 4,476,000
Sulphide tonnes 3,954,000 4,103,000
Marginal ore tonnes 5,337,000 9,359,000
mined
Ore grade processed Oxide %Cu 0.8 0.7
(soluble
)
Sulphide %Cu 1.1 1.0
(insolub
le)
Marginal ore %Cu 0.4 0.4
(soluble
)
Production Copper dmt 105,300 94,400
concentrate
Copper cathode tonnes 48,600 58,200
Copper in tonnes 39,100 36,700
concentrate
Total tonnes 87,700 94,900
Mantoverde mine
Ore processed Oxide tonnes 9,439,000 9,017,000
Marginal ore tonnes 3,625,000 7,028,000
Ore grade processed Oxide %Cu 0.7 0.7
(soluble
)
Marginal ore %Cu 0.3 0.3
(soluble
)
Production Copper cathode tonnes 62,000 60,100
Black Mountain and Hudson Bay tonnes 3,200 79,500
Other tonnes - 19,400
Total attributable copper production tonnes 634,600 766,000
Nickel, Niobium and
Mineral Sands
Nickel
Codemin
Ore mined tonnes 528,600 403,000
Ore processed tonnes 521,400 521,300
Ore grade processed % Ni 2.1 1.4
Production tonnes 9,600 6,500
Loma de Niquel
Ore mined tonnes 1,317,000 1,265,000
Ore processed tonnes 1,169,000 1,204,000
Ore grade processed % Ni 1.6 1.7
Production tonnes 16,900 17,400
Other tonnes - 100
Total attributable tonnes 26,500 24,000
nickel production
Niobium
Catalao
Ore mined tonnes 723,100 568,100
Ore processed tonnes 672,300 572,500
Ore grade processed Kg 11.00 11.04
Nb/tonne
Production tonnes 4,000 3,500
Mineral Sands
Namakwa Sands
Ore mined tonnes 18,100,000 18,618,000
Production Ilmenite tonnes 316,100 320,600
Rutile tonnes 29,100 23,700
Zircon tonnes 128,600 119,100
Smelter production Slag tapped tonnes 164,400 169,300
Iron tapped tonnes 105,400 105,900
Production statistics (continued)
2005 2004
Anglo Base Metals
(continued)
Zinc and Lead
Black Mountain
Ore mined tonnes 1,413,000 1,518,000
Ore processed tonnes 1,350,000 1,500,000
Ore grade processed Zinc % Zn 3.3 2.7
Lead % Pb 3.7 3.0
Copper % Cu 0.4 0.5
Production Zinc in tonnes 32,100 28,200
concentrates
Lead in tonnes 42,200 37,500
concentrates
Copper in tonnes 3,200 5,200
concentrates
Hudson Bay
Ore mined tonnes - 2,484,000
Ore processed tonnes - 2,419,000
Ore grade processed Copper % Cu - 2.2
Zinc % Zn - 5.2
Concentrate treated Copper tonnes - 274,900
Zinc tonnes - 216,500
Production (domestic) Copper tonnes - 40,000
Zinc tonnes - 105,200
Production (total) Copper tonnes - 74,300
Zinc tonnes - 107,000
Gold ounces - 73,400
Silver ounces - 1,020,900
Lisheen
Ore mined tonnes 1,527,000 1,475,000
Ore processed tonnes 1,461,000 1,460,000
Ore grade processed Zinc % Zn 12.0 11.7
Lead % Pb 2.0 1.8
Production Zinc in tonnes 159,300 156,300
concentrate
Lead in tonnes 20,800 17,200
concentrate
Skorpion
Ore mined tonnes 1,199,000 1,304,000
Ore processed tonnes 1,280,000 1,187,000
Ore grade processed Zinc % Zn 12.4 12.3
Production Zinc tonnes 132,800 119,200
Total attributable zinc tonnes 324,200 410,700
production
Anglo Industrial
Minerals (tonnes)
Aggregates 83,333,400 70,448,300
Lime products 1,428,100 1,185,700
Concrete (m3) 8,353,200 8,310,800
Sodium tripolyphosphate 106,000 115,700
Phosphates 1,036,200 1,169,300
Production statistics
(continued)
2005 2004
Anglo Paper and Packaging
Mondi Packaging
Packaging papers tonnes 2,705,691 2,600,291
Corrugated board and boxes m m2 2,253 2,103
Paper sacks m units 3,282 3,251
Coating and release liners m m2 1,688 1,661
Pulp - external tonnes 170,420 153,045
Mondi Business Paper
Uncoated wood free paper tonnes 1,890,079 1,881,851
Newsprint tonnes 186,929 182,351
Pulp - external tonnes 127,745 53,142
Wood chips green metric 1,747,290 2,125,858
tonnes
Mondi Packaging South Africa
Packaging papers tonnes 372,992 365,557
Corrugated board and boxes m m2 330 335
Newsprint Joint Ventures
Newsprint (attributable share) tonnes 316,459 368,635
Anglo Ferrous Metals and Industries
(tonnes)
Kumba Resources Limited
Iron ore production
Lump 18,747,00 18,248,000
0
Fines 12,240,00 11,864,000
0
Total iron ore 30,987,00 30,112,000
0
Coal
Power station coal 14,573,00 14,017,000
0
Coking coal 2,273,000 2,409,000
Steam coal 2,993,000 3,018,000
Total coal 19,839,00 19,444,000
0
Zinc metal 119,000 116,000
Heavy minerals(1)
Ilmenite 356,000 498,000
Scaw Metals
Rolled products 386,500 458,000
Cast products 133,900 110,000
Grinding media 461,400 429,000
Highveld Steel
Rolled products 684,000 674,013
Continuous cast blocks 874,900 922,477
Vanadium slag 66,800 67,587
Samancor
Manganese ore (mtu m) 88 106
Manganese alloys 309,000 321,100
Tongaat- Hulett
Sugar 861,000 756,000
Aluminium 192,000 162,000
Starch and glucose 595,000 576,000
Hippo Valley
Sugar 194,000 200,000
(1) Further details of heavy minerals production are available in
Kumba"s annual report.
Reconciliation of subsidiaries" and associates" headline
earnings to the underlying earnings included in the
consolidated financial statements
For the year ended 31 December 2005
Note only key reported lines are reconciled
AngloGold Ashanti Limited 2005
USUSD
million
IFRS adjusted headline earnings (published) 200
Exploration 45
Other adjustments 1
246
Minority interest (121)
Depreciation on assets fair valued on acquisition (20)
(net of tax)
Contribution to Anglo American plc underlying 105
earnings
Anglo Platinum Limited 2005
USUSD
million
IFRS headline earnings (USUSD equivalent of 664
published)
Exploration 21
Other adjustments (2)
683
Minority interest (173)
Depreciation on assets fair valued on acquisition (51)
(net of tax)
Impact of change in South African corporate tax 24
rate on assets fair valued on acquisition
Contribution to Anglo American plc underlying 483
earnings
DB Investments (DBI) 2005
USUSD
million
DBI headline earnings before class action payment 824
(100%)
Adjustments(1) 34
DBI headline earnings before class action payment 858
- AA plc basis (100%)
AA plc"s 45% ordinary share 386
interest
Income from preference shares 44
Contribution to Anglo American plc 430
underlying earnings
(1) Adjustments include the reclassification of the actuarial
gains and losses booked to the income statement by Dbsa under
the corridor mechanism of IAS 19. As AA plc has early adopted
the amended version of IAS 19, this charge has been included in
the deficit booked to reserves in prior years.
Kumba Resources Limited 2005
USUSD
million
IFRS headline earnings (USUSD equivalent of 373
published)
Depreciation on assets fair valued on acquisition (16)
(net of tax)
Impact of change in South African corporate tax 10
rate on assets fair valued on acquisition
Exploration 21
Other adjustments (6)
382
Minority interest (130)
STC credit on special dividends 9
Contribution to Anglo American plc underlying 261
earnings
Reconciliation of subsidiaries" and associates" headline
earnings to the underlying earnings included in the
consolidated financial statements (continued)
Highveld Steel and Vanadium Corporation Limited 2005
USUSD
million
IFRS headline earnings (USUSD equivalent of 270
published)
Other adjustments 4
274
Minority interest (57)
STC credit on special dividends 15
Contribution to Anglo American plc underlying 232
earnings
The Tongaat-Hulett Group Limited 2005
USUSD
million
IFRS headline earnings (USUSD equivalent of 73
published)
Other adjustments 11
84
Minority interest (40)
44
Add AA plc"s share of Hulett Aluminium 5
Contribution to Anglo American plc underlying 49
earnings
Exchange rates and commodity prices
USUSD exchange rates 2005 2004
Average spot prices for the year
South African rand 6.37 6.44
Sterling 0.55 0.55
Euro 0.80 0.80
Australian dollar 1.31 1.36
Chilean peso 559 609
Closing spot prices
South African rand 6.35 5.65
Sterling 0.58 0.52
Euro 0.85 0.74
Australian dollar 1.36 1.28
Chilean peso 512 556
Commodity prices
Average market prices for the year 2005 2004
Gold - USUSD/oz 445 409
Platinum - USUSD/oz 897 847
Palladium - USUSD/oz 201 231
Rhodium - USUSD/oz 2,056 991
Copper - US cents/lb 167 130
Nickel - US cents/lb 668 628
Zinc - US cents/lb 63 48
Lead - US cents/lb 44 40
European eucalyptus pulp price (CIF) - 582 520
USUSD/tonne
Key financial data
USUSD million (unless stated 2005 2004
otherwise)
Group revenue including 34,472 31,938
associates
Less: share of associates" (5,038) (5,670)
revenue
Group revenue 29,434 26,268
Operating profit including associates before special 6,376 4,697
items and remeasurements
Special items and remeasurements (447) 1,030
Net financing, taxation and minority (328) (496)
interests of associates
Total profit from operations 5,601 5,231
and associates
Net finance costs (393) (367)
Profit before tax 5,208 4,864
Income tax expense (1,275) (923)
Profit for the financial year 3,933 3,941
Minority interests (412) (440)
Profit attributable to equity shareholders of 3,521 3,501
the Company
Underlying earnings(1) 3,736 2,684
Earnings per share (USD)
2.43 2.44
Underlying earnings per share
(USD) 2.58 1.87
Ordinary dividend per share (US
cents) 90.0 70.0
Special dividend per share (US
cents) 33.0 -
Weighted average number of shares 1,447 1,434
outstanding (million)
EBITDA(2) 8,959 7,031
EBITDA interest cover(3)
20.0 18.5
Operating margin (before special items
and remeasurements) 18.5% 14.7%
Ordinary dividend cover (based
on underlying earnings) 2.9 2.7
Balance Sheet
Intangible and tangible fixed 33,368 35,816
assets
Other non-current assets and 5,375 5,375
investments
Working capital 3,719 3,715
Other net current liabilities (1,473) (611)
Other non-current liabilities (8,418) (8,339)
and obligations
Net debt (4,993) (8,243)
Net assets 27,578 27,713
Minority interests (3,957) (4,588)
Equity attributable to the equity shareholders of 23,621 23,334
the Company
Total capital(4) 32,571 35,945
Cash inflows from operations 7,265 5,291
Dividends received from associates and 470 396
investments
Return on capital employed(5)
19.2% 14.6%
EBITDA/average total capital
26.0% 21.2%
Net debt to total capital(6)
17.0% 25.4%
(1) Underlying earnings is net profit attributable to equity shareholders,
adjusted for the effect of special items and remeasurements, and any related tax
and minority interests.
(2) EBITDA is operating profit before exceptional items plus depreciation and
amortisation in subsidiaries and share of EBITDA of joint ventures and
associates.
(3) EBITDA interest cover is EBITDA divided by net finance costs, excluding
other net financial income, exchange losses and gains on monetary assets and
liabilities and special items and financial remeasurements but including share
of associates" net interest expense.
(4) Total capital is the sum of net assets and net debt.
(5) Return on capital employed is calculated as total operating profit before
impairments for the year divided by the average total capital less other
investments and adjusted for impairments.
(6) Net debt to total capital is calculated as net debt divided by net assets
plus net debt less investment in associates.
Summary by business segment
Turnover(1) EBITDA(2) Operating Underlying
profit/(loss) earnings/
(3) (loss)
USUSD million 2005 2004 2005 2004 2005 2004 2005 2004
Platinum 3,714 3,12 1,28 853 854 536 483 240
0 2
Gold 2,644 2,40 871 694 332 296 105 139
9
Diamonds 3,316 3,17 655 655 583 573 430 380
7
Coal 3,349 2,38 1,24 687 1,019 497 724 357
2 3
South Africa 1,441 1,10 519 299 463 252 329 163
9
Australia 1,383 840 451 183 316 78 221 78
South America 525 433 273 205 240 167 174 116
Base Metals 3,647 3,32 1,99 1,625 1,678 1,276 1,240 1,036
0 0
Copper 2,597 2,15 1,59 1,252 1,381 1,048 983 855
4 0
Collahuasi 712 611 468 412 397 346 257 280
Minera Sur 1,306 991 824 608 724 512 529 413
Andes
Mantos Blancos 579 464 299 225 261 195 195 163
Palabora and - 88 (1) 7 (1) (5) 2 (1)
other
Nickel,
Niobium, 609 528 296 272 249 224 202 177
Mineral Sands
Catalao 49 44 20 28 18 26 17 29
Codemin 136 89 75 48 69 44 68 27
Loma de Niquel 249 247 153 158 132 137 92 108
Namakwa Sands 175 146 48 37 30 16 25 12
Nkomati and - 2 - 1 - 1 - 1
other
Zinc 441 638 157 131 102 38 100 37
Black Mountain 80 49 12 2 10 (3) 10 3
Hudson Bay - 405 - 78 - 37 - 31
Lisheen 147 111 62 29 50 17 54 15
Skorpion 214 73 83 22 42 (13) 36 (12)
Other - - (53) (30) (54) (34) (45) (33)
Industrial 4,073 3,85 618 638 370 421 267 288
Minerals 8
Tarmac 3,784 3,59 570 556 340 354 256 259
6
Copebr|s 289 262 48 82 30 67 11 29
Ferrous Metals
and Industries 6,773 6,66 1,77 1,231 1,456 887 757 476
3 9
Kumba 1,936 1,41 734 328 568 203 261 80
6
Highveld Steel 1,127 775 472 223 436 169 232 93
Scaw Metals 1,029 910 145 110 121 85 85 59
Samancor Group 634 817 164 265 144 241 103 157
Tongaat-Hulett 1,423 1,26 188 114 131 69 49 25
7
Boart Longyear 618 872 87 103 67 72 35 37
Terra - 598 - 92 - 55 - 29
Other 6 8 (11) (4) (11) (7) (8) (4)
Paper and 6,956 6,91 916 978 495 569 296 367
Packaging 9
Mondi Packaging 3,798 3,75 528 530 293 297 194 193
1
Mondi Business 2,050 2,02 310 320 163 180 100 123
Paper 8
Other 1,108 1,14 78 128 39 92 2 51
0
Exploration - - (150 (120) (150) (120) (115) (91)
)
Corporate(4) - 90 (245 (210) (261) (238) (451) (508)
)
34,47 31,3 8,95 7,031 6,376 4,697 3,736 2,684
2 8 9
(1) Turnover includes share of turnover of joint ventures and associates. Base
Metals" turnover is shown after deduction of treatment charges and refining
charges (TC/RCs).
(2) EBITDA is operating profit before special items plus depreciation and
amortisation in subsidiaries and share of EBITDA of joint ventures and
associates.
(3) Operating profit includes operating profit before special items and
remeasurements from subsidiaries and joint ventures and share of operating
profit (before interest, tax, minority interest, special items and
remeasurements) of associates.
(4) Includes Gold Fields. The Group disposed of its holdings in Gold
Fields in March 2004.
ANGLO AMERICAN plc
(Incorporated in England and Wales - Registered number 3564138)
(the `Company")
Notice of Recommended (including Special) Final Dividend
(Dividend No 14)
The directors have recommended that a dividend on the Company"s
ordinary share capital in respect of the year ended
31 December 2005 will, subject to approval by shareholders at the
Annual General Meeting to be held on Tuesday 25 April 2006, be paid as
follows:
Amount (United States currency) 95 cents per ordinary
share (notes 1 and 2)
Last day to effect removal of shares between Wednesday 22 February
the UK and SA registers 2006
Currency conversion USUSD: Rand rate Thursday 23 February
determined 2006
Last day to trade on the JSE Limited (`JSE") Friday 3 March 2006
to qualify for the dividend
Ex-dividend on the JSE from the commencement Monday 6 March 2006
of trading on
Ex-dividend on the London Stock Exchange Wednesday 8 March 2006
from the commencement of trading on
Record date (applicable to both the United Friday 10 March 2006
Kingdom principal register and South African
branch register)
Currency conversion USUSD: /_ rates Monday 13 March 2006
determined
Removal of shares between the UK and SA Monday 13 March 2006
registers permissible from
Last day for receipt of Dividend
Reinvestment Plan (`DRIP") Mandate Forms by Tuesday 4 April 2006
Central Securities Depository Participants
(`CSDPs") (notes 4 and 5)
Last day for receipt of DRIP Mandate Forms
by the UK Registrars or the Thursday 6 April 2006
South African Transfer Secretaries (notes 4
and 5)
Dividend warrants posted Tuesday 2 May 2006
Payment date of dividend Wednesday 3 May 2006
Notes:
This amount includes a special dividend of 33 cents per ordinary share.
Shareholders on the United Kingdom register of members with an
address in the United Kingdom will be paid in pounds sterling and those
with an address in a country in the European Union which has adopted
the euro, will be paid in euros. Such shareholders may, however, elect
to be paid their dividends in US dollars provided the UK Registrar
receives such election by Friday 10 March 2006. Shareholders with an
address elsewhere will be paid in US dollars except those registered on
the South African branch register who will be paid in South African
rand. The currency conversion rates and the amounts per share in South
African rand and in pounds sterling/euros will be announced on Thursday
23 February and Monday 13 March 2006 respectively.
Dematerialisation and rematerialisation of registered share
certificates in South Africa will not be effected by CSDPs during the
period from Monday 6 March 2006 to Friday 10 March 2006 (both days
inclusive).
Those shareholders who already participate in the DRIP need not
complete a DRIP mandate form for each dividend as such forms provide an
on-going authority to participate in the DRIP until cancelled in
writing. Shareholders who wish to participate in the DRIP should
obtain a mandate form from the UK Registrars, the South African
Transfer Secretaries or, in the case of those who hold their shares
through the STRATE system, their CSDP.
In terms of the DRIP, and subject to the purchase of shares in the open
market, share certificates/Crest notifications are expected to be
mailed and CSDP investor accounts credited/updated on Wednesday 17 May
2006.
Copies of the terms and conditions of the DRIP are available from the
UK Registrars or the South African Transfer Secretaries.
By order of the Board
N Jordan
Secretary
21 February 2006
Registered office UK Registrars South African Transfer
20 Carlton House Lloyds TSB Secretaries
Terrace Registrars Ultra Registrars
London The Causeway (Proprietary) Limited
SW1Y 5AN Worthing 11 Diagonal Street
England West Sussex Johannesburg 2001
BN99 6DA PO Box 4844, Johannesburg
England 2000
South Africa
Appendix 1 Reconciliation of Headline Earnings to Underlying Earnings
In previous reporting periods the Group has reported headline earnings as its
primary earnings measure, using the definition of headline earnings which is
required to be disclosed by the Johannesburg Stock Exchange (`JSE Ltd"),
consistent with that given by the Institute of Investment Management and
Research (`IIMR").
Following the adoption of International Financial Reporting Standards, as well
as consideration of other restrictions of the definition, the Group believes
that an alternative measure would provide a clearer picture of the underlying
performance of the Group.
Consequently, the Group has adopted `Underlying Earnings" as its principal
measure of earnings. Underlying earnings is net profit attributable to equity
shareholders, adjusted for the effect of special items and remeasurements, and
any related tax and minority interests. Special items are those items of
financial performance which the Group believes should be excluded from
performance earnings, and principally relate to impairment and significant
closure costs, exceptional legal provisions and profit or loss on disposals.
Remeasurements include unrealised gains and losses on derivative instruments
that are recorded in the income statement, and foreign exchange gains and losses
on USUSD denominated De Beers preference shares held by a Rand functional
subsidiary of the Group.
The table below reconciles profit attributable to shareholders to headline
earnings and underlying earnings.
Year Year 6 6
ended ended months months
31 Dec 31 Dec ended ended
2005 2004(1) 30 June 30 June
2005 2004(1)
Profit attributable to 3,521 3,501 1,838 2,226
shareholders
Operating special items 186 (25) 55 -
(income)/expense
Special items: (profit)/loss on (87) (1,015) 1 (1,005)
sale of operations
Related tax 12 38 (28) 32
Related minority interest (35) 2 (14) (3)
Share of associates" special (81) 71 (68) (2)
items
Headline earnings(2) 3,516 2,572 1,784 1,248
Unrealised losses on non-hedge 315 - 28 -
derivatives
Fair value changes on the option
component of the AngloGold 32 - (32) -
Ashanti convertible bond
Foreign exchange on De Beers" (72) 112 (91) 49
preference shares
De Beers" special legal provision 113 - - -
Related tax (21) - 6 -
Related minority interest (147) 4 -
Underlying earnings 3,736 2,684 1,699 1,297
(1) IAS 39 was not effective in 2004 and therefore did not result in any
gains/losses on non-hedge derivatives or fair value changes on the AngloGold
Ashanti convertible bond.
(2) Headline EPS is shown in note 7 to the financial information.
For information underlying earnings by business segment for 6 months to 30 June
2005 is given below.
Underlying Earnings by Business Segment to 30 June 2005
6 months 6 months
ended ended
30 June 30 June
2005 2004
USDm USDm
Platinum 256 137
Gold 69 67
Diamonds 188 218
Coal 263 148
Base Metals 525 434
Industrial Minerals 140 120
Ferrous Metals and Industries 413 208
Paper and Packaging 133 223
Exploration (50) (42)
Corporate Activities (238) (216)
1,699 1,297
Sponsor:
J.P.Morgan Equities Limited
Date: 22/02/2006 09:15:01 AM Produced by the JSE SENS Department
