As filed with the Securities and Exchange Commission on May 19, 2008
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934 OR
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 OR SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FINANCIAL YEAR ENDED DECEMBER 31, 2007
Commission file number: 1-14846
AngloGold Ashanti Limited
(Exact Name of Registrant as Specified in its Charter)
Republic of South Africa
(Jurisdiction of Incorporation or Organization)
76 Jeppe Street
Newtown, Johannesburg, 2001
(P.O. Box 62117, Marshalltown, 2107)
South Africa
(Address of Principal Executive Offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
American Depositary Shares
New York Stock Exchange
Ordinary Shares
New York Stock Exchange*
*
Not for trading, but only in connection with the registration of American Depositary Shares pursuant to the requirements of the Securities
and Exchange Commission
Securities registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock as of the close of the period covered by
the annual report:
the annual report:
Ordinary Shares of 25 ZAR cents each
277,457,471
E Ordinary Shares of 25 ZAR cents each
4,140,230
A Redeemable Preference Shares of 50 ZAR cents each
2,000,000
B Redeemable Preference Shares of 1 ZAR cent each
778,896
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
No
No If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934.
Yes
No
No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
(2) has been subject to such filing requirements for the past 90 days.
Yes
No
No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
“accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
(Check one):Large Accelerated Filer
Accelerated Filer
Non-Accelerated Filer
Accelerated Filer
Non-Accelerated Filer Indicate by check mark which financial statement item the registrant has elected to follow.
Item 17
Item 18
Item 18 If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
Yes
No
No
2
Table of contents
Page
Presentation of information
4
Certain forward-looking statements
5
Glossary of selected terms
Mining terms
Mining terms
6
Financial
terms
9
` Currency
9
Abbreviations
10
Part I:
Item 1:
Identity of directors, senior management and advisors
11
Item 2:
Offer statistics and expected timetable
11
Item 3:
Key information
3A.
Selected financial data
11
3B.
Capitalization and
indebtedness
15
3C.
Reasons for the offer and the use of proceeds
15
3D.
Risk factors
15
Item 4:
Information on the company
4A. History and development of the company
4A. History and development of the company
30
4B.
Business overview
35
4C.
Organizational structure
104
4D.
Property, plants and equipment
104
Item 4A:
Unresolved staff comments
104
Item 5:
Operating and financial review and prospects
5A.
Operating results
106
5B.
Liquidity and capital resources
135
5C.
Research and development, patents and licenses, etc
150
5D.
Trend information
150
5E.
Off-balance sheet arrangements
150
5F.
Tabular disclosure of contractual obligations
151
Item 6:
Directors, senior management and employees
6A.
Directors and senior management
152
6B.
Compensation
157
6C.
Board practices
162
6D.
Employees
167
6E.
Share ownership
169
Item 7:
Major shareholders and related party transactions
173
7A.
Major shareholders
174
7B.
Related party transactions
175
7C.
Interests of experts and counsel
176
3
Item 8:
Financial information
8A.
Consolidated financial statements and other financial information
Legal
proceedings
177
Dividend
policy
178
8B.
Significant changes
178
Item 9:
The offer and listing
9A.
9A.
Offer and listing details
179
9B.
Plan of distribution
179
9C.
Markets
180
9D.
Selling
shareholders
180
9E.
Dilution
180
9F.
Expenses of the issue
180
Item 10:
Additional information
10A. Share
capital
181
10B. Memorandum and articles of association
182
10C. Material
contracts
196
10D. Exchange
controls
196
10E. Taxation
197
10F. Dividends and paying agents
201
10G. Statement
by experts
201
10H. Documents
on display
201
10I.
Subsidiary information
201
Item 11:
Quantitative and qualitative disclosures about market risk
202
Item 12:
Description of securities other than equity securities
209
Part II:
Item 13:
Defaults, dividend arrearages and delinquencies
210
Item 14:
Material modifications to the rights of security holders and use of proceeds
211
Item 15:
Controls and procedures
212
Item 16A:
Audit committee financial expert
214
Item 16B:
Code of ethics
214
Item 16C:
Principal accountant fees and services
214
Item 16D:
Exemptions from the listing standards for audit committees
215
Item 16E:
Purchases of equity securities by the issuer and affiliated purchasers
215
Part III:
Item 17:
Financial statements
216
Item 18:
Financial statements
F- pages
Item 19:
Exhibits
4
Presentation of information
AngloGold Ashanti Limited
In this annual report on Form 20-F, references to AngloGold or AngloGold Ashanti, the company and the group, are references
to AngloGold Ashanti Limited or, as appropriate, subsidiaries and associate companies of AngloGold Ashanti.
to AngloGold Ashanti Limited or, as appropriate, subsidiaries and associate companies of AngloGold Ashanti.
US GAAP financial statements
The audited consolidated financial statements contained in this annual report on Form 20-F for the years ended December 31,
2007, 2006 and 2005 and as at December 31, 2007 and 2006 have been prepared in accordance with U.S. generally accepted
accounting principles (US GAAP).
2007, 2006 and 2005 and as at December 31, 2007 and 2006 have been prepared in accordance with U.S. generally accepted
accounting principles (US GAAP).
IFRS financial statements
As a company incorporated in the Republic of South Africa, AngloGold Ashanti also prepares annual audited consolidated
financial statements and unaudited consolidated quarterly financial statements in accordance with International Financial
Reporting Standards (IFRS). These financial statements (referred to as IFRS statements) are distributed to shareholders and
are submitted to the JSE Limited (JSE), as well as the London, New York, Australian and Ghana stock exchanges and Paris
and Brussels bourses and are submitted to the US Securities and Exchange Commission (SEC) on Form 6-K.
financial statements and unaudited consolidated quarterly financial statements in accordance with International Financial
Reporting Standards (IFRS). These financial statements (referred to as IFRS statements) are distributed to shareholders and
are submitted to the JSE Limited (JSE), as well as the London, New York, Australian and Ghana stock exchanges and Paris
and Brussels bourses and are submitted to the US Securities and Exchange Commission (SEC) on Form 6-K.
Currency
AngloGold Ashanti presents its consolidated financial statements in United States dollars.
In this annual report, references to rands, ZAR and R are to the lawful currency of the Republic of South Africa, references to
US dollars, dollar or $ are to the lawful currency of the United States, references to € are to the lawful currency of the European
Union, references to C$ are to the lawful currency of Canada, references to ARS and peso are to the lawful currency of
Argentina, references to AUD and A$ are to the lawful currency of Australia, references to BRL are to the lawful currency of
Brazil and references to GHC, cedi or ¢ are to the lawful currency of Ghana.
US dollars, dollar or $ are to the lawful currency of the United States, references to € are to the lawful currency of the European
Union, references to C$ are to the lawful currency of Canada, references to ARS and peso are to the lawful currency of
Argentina, references to AUD and A$ are to the lawful currency of Australia, references to BRL are to the lawful currency of
Brazil and references to GHC, cedi or ¢ are to the lawful currency of Ghana.
See “Item 3A.: Selected financial data – Exchange rate information” for historical information regarding the noon buying rate in
the City of New York for cable transfers in rands as certified for customs purposes by the Federal Reserve Bank of New York.
On May 15, 2008 the noon buying rate was R7.5975/$1.00.
the City of New York for cable transfers in rands as certified for customs purposes by the Federal Reserve Bank of New York.
On May 15, 2008 the noon buying rate was R7.5975/$1.00.
Non-GAAP financial measures
In this annual report on Form 20-F, AngloGold Ashanti presents the financial items “total cash costs”, “total cash costs per
ounce”, “total production costs” and “total production costs per ounce” which have been determined using industry guidelines
and practices promulgated by the Gold Institute and are not US GAAP measures. An investor should not consider these items
in isolation or as alternatives to production costs, net income/(loss) applicable to common shareholders, income/(loss) before
income tax provision, net cash provided by operating activities or any other measure of financial performance presented in
accordance with US GAAP. While the Gold Institute has provided definitions for the calculation of total cash costs and total
production costs, the calculation of total cash costs, total cash costs per ounce, total production costs and total production
costs per ounce may vary significantly among gold mining companies, and by themselves do not necessarily provide a basis
for comparison with other gold mining companies. See “Glossary of selected terms – Financial terms – Total cash costs” and –
“Total production costs” and “Item 5A.: Operating results – Total cash costs and total production costs”.
ounce”, “total production costs” and “total production costs per ounce” which have been determined using industry guidelines
and practices promulgated by the Gold Institute and are not US GAAP measures. An investor should not consider these items
in isolation or as alternatives to production costs, net income/(loss) applicable to common shareholders, income/(loss) before
income tax provision, net cash provided by operating activities or any other measure of financial performance presented in
accordance with US GAAP. While the Gold Institute has provided definitions for the calculation of total cash costs and total
production costs, the calculation of total cash costs, total cash costs per ounce, total production costs and total production
costs per ounce may vary significantly among gold mining companies, and by themselves do not necessarily provide a basis
for comparison with other gold mining companies. See “Glossary of selected terms – Financial terms – Total cash costs” and –
“Total production costs” and “Item 5A.: Operating results – Total cash costs and total production costs”.
Shares and shareholders
In this annual report on Form 20-F, references to ordinary shares, ordinary shareholders and shareholders/members, should
be read as common stock, common stockholders and stockholders, respectively, and vice versa.
be read as common stock, common stockholders and stockholders, respectively, and vice versa.
5
Certain forward-looking statements
Certain statements contained in this document, other than statements of historical fact, contain forward-looking statements
regarding AngloGold Ashanti's operations, economic performance or financial condition, including, without limitation, those
concerning: AngloGold Ashanti’s strategy to reduce its gold hedging position including the extent and effect of the hedge
reduction, the economic outlook for the gold mining industry, expectations regarding spot and received gold prices, production,
cash costs and other operating results, growth prospects and outlook of AngloGold Ashanti’s operations individually or in the
aggregate, including the completion and commencement of commercial operations of certain of AngloGold Ashanti’s
exploration and production projects and the completion of acquisitions and dispositions, AngloGold Ashanti's liquidity and
capital resources and expenditure, and the outcome and consequences of any pending litigation proceedings.
regarding AngloGold Ashanti's operations, economic performance or financial condition, including, without limitation, those
concerning: AngloGold Ashanti’s strategy to reduce its gold hedging position including the extent and effect of the hedge
reduction, the economic outlook for the gold mining industry, expectations regarding spot and received gold prices, production,
cash costs and other operating results, growth prospects and outlook of AngloGold Ashanti’s operations individually or in the
aggregate, including the completion and commencement of commercial operations of certain of AngloGold Ashanti’s
exploration and production projects and the completion of acquisitions and dispositions, AngloGold Ashanti's liquidity and
capital resources and expenditure, and the outcome and consequences of any pending litigation proceedings.
These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause AngloGold
Ashanti’s actual results, performance or achievements to differ materially from the anticipated results, performance or
achievements expressed or implied by these forward-looking statements. Although AngloGold Ashanti believes that the
expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations
will prove to be correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a
result of, among other factors, changes in economic and market conditions, success of business and operating initiatives,
changes in the regulatory environment and other government actions, fluctuations in gold prices and exchange rates, business
and operational risk management and other factors as determined in “Item 3D.: Risk factors” and elsewhere in this annual
report. These factors are not necessarily all of the important factors that could cause AngloGold Ashanti’s actual results to
differ materially from those expressed in any forward-looking statements. Other unknown or unpredictable factors could also
have material adverse effects on future results.
Ashanti’s actual results, performance or achievements to differ materially from the anticipated results, performance or
achievements expressed or implied by these forward-looking statements. Although AngloGold Ashanti believes that the
expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations
will prove to be correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a
result of, among other factors, changes in economic and market conditions, success of business and operating initiatives,
changes in the regulatory environment and other government actions, fluctuations in gold prices and exchange rates, business
and operational risk management and other factors as determined in “Item 3D.: Risk factors” and elsewhere in this annual
report. These factors are not necessarily all of the important factors that could cause AngloGold Ashanti’s actual results to
differ materially from those expressed in any forward-looking statements. Other unknown or unpredictable factors could also
have material adverse effects on future results.
AngloGold Ashanti undertakes no obligation to update publicly or release any revisions to these forward-looking statements to
reflect events or circumstances after the date of the annual report or to reflect the occurrence of unanticipated events. All
subsequent written or oral forward-looking statements attributable to AngloGold Ashanti or any person acting on its behalf are
qualified by the cautionary statements herein.
reflect events or circumstances after the date of the annual report or to reflect the occurrence of unanticipated events. All
subsequent written or oral forward-looking statements attributable to AngloGold Ashanti or any person acting on its behalf are
qualified by the cautionary statements herein.
6
Glossary of selected terms
The following explanations are not intended as technical definitions but should assist the reader in understanding terminology
used in this annual report. Unless expressly stated otherwise, all explanations are applicable to both underground and surface
mining operations.
used in this annual report. Unless expressly stated otherwise, all explanations are applicable to both underground and surface
mining operations.
Mining terms
BIF
Banded Ironstone Formation. A chemically formed iron-rich sedimentary rock.
Banded Ironstone Formation. A chemically formed iron-rich sedimentary rock.
By-products
Any products that emanate from the core process of producing gold, including silver, uranium and sulphuric acid.
Any products that emanate from the core process of producing gold, including silver, uranium and sulphuric acid.
Calc-silicate rock
A metamorphic rock consisting mainly of calcium-bearing silicates such as diopside and wollastonite, and formed by
metamorphism of impure limestone or dolomite.
A metamorphic rock consisting mainly of calcium-bearing silicates such as diopside and wollastonite, and formed by
metamorphism of impure limestone or dolomite.
Carbon-in-leach (CIL)
Gold is leached from a slurry of gold ore with cyanide in agitated tanks and adsorbed on to carbon granules in the same circuit.
The carbon granules are separated from the slurry and treated in an elution circuit to remove the gold.
Gold is leached from a slurry of gold ore with cyanide in agitated tanks and adsorbed on to carbon granules in the same circuit.
The carbon granules are separated from the slurry and treated in an elution circuit to remove the gold.
Carbon-in-pulp (CIP)
Gold is leached conventionally from a slurry of gold ore with cyanide in agitated tanks. The leached slurry then passes into the
CIP circuit where carbon granules are mixed with the slurry and gold is adsorbed on to the carbon. The granules are separated
from the slurry and treated in an elution circuit to remove the gold.
Comminution
Comminution is the crushing and grinding of ore to make gold available for treatment. (See also ‘Milling’.)
Gold is leached conventionally from a slurry of gold ore with cyanide in agitated tanks. The leached slurry then passes into the
CIP circuit where carbon granules are mixed with the slurry and gold is adsorbed on to the carbon. The granules are separated
from the slurry and treated in an elution circuit to remove the gold.
Comminution
Comminution is the crushing and grinding of ore to make gold available for treatment. (See also ‘Milling’.)
Contained gold
The total gold content (tons multiplied by grade) of the material being described.
The total gold content (tons multiplied by grade) of the material being described.
Cut-off Grade (Surface Mines)
The minimum grade at which a unit of ore will be mined and treated to achieve a desired economic outcome.
The minimum grade at which a unit of ore will be mined and treated to achieve a desired economic outcome.
Depletion
The decrease in quantity of ore in a deposit or property resulting from extraction or production.
The decrease in quantity of ore in a deposit or property resulting from extraction or production.
Development
The process of accessing an orebody through shafts and/or tunnelling in underground mining operations.
The process of accessing an orebody through shafts and/or tunnelling in underground mining operations.
Diorite
An igneous rock formed by the solidification of molten material (magma).
An igneous rock formed by the solidification of molten material (magma).
Doré
Impure alloy of gold and silver produced at a mine to be refined to a higher purity, usually consisting of 85 percent gold on
average.
Impure alloy of gold and silver produced at a mine to be refined to a higher purity, usually consisting of 85 percent gold on
average.
Electro-winning
A process of recovering gold from solution by means of electrolytic chemical reaction into a form that can be smelted easily
into gold bars.
A process of recovering gold from solution by means of electrolytic chemical reaction into a form that can be smelted easily
into gold bars.
Elution
Recovery of the gold from the activated carbon into solution before zinc precipitation or electro-winning.
Recovery of the gold from the activated carbon into solution before zinc precipitation or electro-winning.
Grade
The quantity of gold contained within a unit weight of gold-bearing material generally expressed in ounces per short ton of ore
(oz/t), or grams per metric tonne (g/t).
Greenschist
A schistose metamorphic rock whose green color is due to the presence of chlorite, epidote or actinolite.
The quantity of gold contained within a unit weight of gold-bearing material generally expressed in ounces per short ton of ore
(oz/t), or grams per metric tonne (g/t).
Greenschist
A schistose metamorphic rock whose green color is due to the presence of chlorite, epidote or actinolite.
Leaching
Dissolution of gold from crushed or milled material, including reclaimed slime, prior to adsorption on to activated carbon.
Dissolution of gold from crushed or milled material, including reclaimed slime, prior to adsorption on to activated carbon.
7
Life-of-mine (LOM)
Number of years that the operation is planning to mine and treat ore, and is taken from the current mine plan.
Number of years that the operation is planning to mine and treat ore, and is taken from the current mine plan.
Metallurgical plant
A processing plant erected to treat ore and extract gold.
A processing plant erected to treat ore and extract gold.
Milling
A process of reducing broken ore to a size at which concentrating can be undertaken. (See also ‘Comminution’).
Mine call factor
The ratio, expressed as a percentage, of the total quantity of recovered and unrecovered mineral product after processing with
the amount estimated in the ore based on sampling. The ratio of contained gold delivered to the metallurgical plant divided by
the estimated contained gold of ore mined based on sampling.
A process of reducing broken ore to a size at which concentrating can be undertaken. (See also ‘Comminution’).
Mine call factor
The ratio, expressed as a percentage, of the total quantity of recovered and unrecovered mineral product after processing with
the amount estimated in the ore based on sampling. The ratio of contained gold delivered to the metallurgical plant divided by
the estimated contained gold of ore mined based on sampling.
Mineral deposit
A mineral deposit is a concentration (or occurrence) of material of possible economic interest in or on the Earth’s crust.
A mineral deposit is a concentration (or occurrence) of material of possible economic interest in or on the Earth’s crust.
Ore Reserve
That part of a mineral deposit which could be economically and legally extracted or produced at the time of the Ore Reserve
determination.
Ounce (oz) (troy)
Used in imperial statistics. A kilogram is equal to 32.1507 ounces. A troy ounce is equal to 31.1035 grams.
That part of a mineral deposit which could be economically and legally extracted or produced at the time of the Ore Reserve
determination.
Ounce (oz) (troy)
Used in imperial statistics. A kilogram is equal to 32.1507 ounces. A troy ounce is equal to 31.1035 grams.
Pay limit
The grade of a unit of ore at which the revenue from the recovered mineral content of the ore is equal to the total cash cost, as
well as Ore Reserve development and stay-in-business capital. This grade is expressed as an in-situ value in grams per tonne
or ounces per short ton (before dilution and mineral losses).
The grade of a unit of ore at which the revenue from the recovered mineral content of the ore is equal to the total cash cost, as
well as Ore Reserve development and stay-in-business capital. This grade is expressed as an in-situ value in grams per tonne
or ounces per short ton (before dilution and mineral losses).
Precipitate
The solid product of chemical reaction by fluids such as the zinc precipitation referred to below.
The solid product of chemical reaction by fluids such as the zinc precipitation referred to below.
Probable Reserve
Ore Reserves for which quantity and grade are computed from information similar to that used for Proven Ore Reserves, but
the sites for inspection, sampling, and measurement are further apart or are otherwise less adequately spaced. The degree of
assurance, although lower than that for Proven Ore Reserves, is high enough to assume continuity between points of
observation.
Ore Reserves for which quantity and grade are computed from information similar to that used for Proven Ore Reserves, but
the sites for inspection, sampling, and measurement are further apart or are otherwise less adequately spaced. The degree of
assurance, although lower than that for Proven Ore Reserves, is high enough to assume continuity between points of
observation.
Productivity
An expression of labor productivity based on the ratio of grams of gold produced per month to the total number of employees
in underground mining operations.
Proven Reserve
Ore Reserves for which the (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes;
grade is computed from the results of detailed sampling and (b) the sites for inspection, sampling and measurement are
spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of the Ore
Reserves are well established.
Project capital
Capital expenditure to either bring a new operation into production; to materially increase production capacity; or to materially
extend the productive life of an asset.
Reclamation
In the South African context, reclamation describes the process of reclaiming slimes (tailings) dumps using high-pressure
water cannons to form a slurry which is pumped back to the metallurgical plants for processing.
An expression of labor productivity based on the ratio of grams of gold produced per month to the total number of employees
in underground mining operations.
Proven Reserve
Ore Reserves for which the (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes;
grade is computed from the results of detailed sampling and (b) the sites for inspection, sampling and measurement are
spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of the Ore
Reserves are well established.
Project capital
Capital expenditure to either bring a new operation into production; to materially increase production capacity; or to materially
extend the productive life of an asset.
Reclamation
In the South African context, reclamation describes the process of reclaiming slimes (tailings) dumps using high-pressure
water cannons to form a slurry which is pumped back to the metallurgical plants for processing.
Recovered grade
The recovered mineral content per unit of ore treated.
The recovered mineral content per unit of ore treated.
Reef
A gold-bearing sedimentary horizon, normally a conglomerate band that may contain economic levels of gold.
A gold-bearing sedimentary horizon, normally a conglomerate band that may contain economic levels of gold.
8
Refining
The final purification process of a metal or mineral.
The final purification process of a metal or mineral.
Rehabilitation
The process of reclaiming land disturbed by mining to allow an appropriate post-mining use. Rehabilitation standards are
defined by country-specific laws including, but not limited to the South African Department of Minerals and Energy, the
US Bureau of Land Management, the US Forest Service, and the relevant Australian mining authorities, and address among
other issues, ground and surface water, topsoil, final slope gradient, waste handling and re-vegetation issues.
Seismic event
A sudden inelastic deformation within a given volume of rock that radiates detectable seismic waves (energy) which results
from mining activities.
The process of reclaiming land disturbed by mining to allow an appropriate post-mining use. Rehabilitation standards are
defined by country-specific laws including, but not limited to the South African Department of Minerals and Energy, the
US Bureau of Land Management, the US Forest Service, and the relevant Australian mining authorities, and address among
other issues, ground and surface water, topsoil, final slope gradient, waste handling and re-vegetation issues.
Seismic event
A sudden inelastic deformation within a given volume of rock that radiates detectable seismic waves (energy) which results
from mining activities.
Shaft
A vertical or sub-vertical excavation used for accessing an underground mine; for transporting personnel, equipment and
supplies; for hoisting ore and waste; for ventilation and utilities; and/or as an auxiliary exit.
Skarn
A rock of complex mineralogical composition, formed by contact metamorphism and metasomatism of carbonate rocks.
A vertical or sub-vertical excavation used for accessing an underground mine; for transporting personnel, equipment and
supplies; for hoisting ore and waste; for ventilation and utilities; and/or as an auxiliary exit.
Skarn
A rock of complex mineralogical composition, formed by contact metamorphism and metasomatism of carbonate rocks.
Smelting
A pyro-metallurgical operation in which gold is further separated from impurities.
A pyro-metallurgical operation in which gold is further separated from impurities.
Stope
Underground excavation where the orebody is extracted.
Underground excavation where the orebody is extracted.
Stoping
The process of excavating ore underground.
The process of excavating ore underground.
Stripping ratio
The ratio of waste tonnes to ore tonnes mined calculated as total tonnes mined less ore tonnes mined divided by ore tonnes
mined.
The ratio of waste tonnes to ore tonnes mined calculated as total tonnes mined less ore tonnes mined divided by ore tonnes
mined.
Syngenetic
Formed contemporaneously with the deposition of the sediment.
Formed contemporaneously with the deposition of the sediment.
Tailings
Finely ground rock of low residual value from which valuable minerals have been extracted.
Finely ground rock of low residual value from which valuable minerals have been extracted.
Tailings dam (slimes dam)
Dam facilities designed to store discarded tailings.
Dam facilities designed to store discarded tailings.
Tonne
Used in metric statistics. Equal to 1,000 kilograms.
Used in metric statistics. Equal to 1,000 kilograms.
Ton
Used in imperial statistics. Equal to 2,000 pounds. Referred to as a short ton.
Used in imperial statistics. Equal to 2,000 pounds. Referred to as a short ton.
Tonnage
Quantity of material measured in tons or tonnes.
Quantity of material measured in tons or tonnes.
Waste
Material that contains insufficient mineralization for consideration for future treatment and, as such, is discarded.
Material that contains insufficient mineralization for consideration for future treatment and, as such, is discarded.
Yield
The amount of valuable mineral or metal recovered from each unit mass of ore expressed as ounces per short ton or grams
per metric tonne.
Zinc precipitation
Zinc precipitation is the chemical reaction using zinc dust that converts gold in solution to a solid form for smelting into
unrefined gold bars.
The amount of valuable mineral or metal recovered from each unit mass of ore expressed as ounces per short ton or grams
per metric tonne.
Zinc precipitation
Zinc precipitation is the chemical reaction using zinc dust that converts gold in solution to a solid form for smelting into
unrefined gold bars.
9
Financial terms
Average number of employees
The monthly average number of production and non-production employees and contractors employed during the year, where
contractors are defined as individuals who have entered into a fixed-term contract of employment with a group company or
subsidiary.
The monthly average number of production and non-production employees and contractors employed during the year, where
contractors are defined as individuals who have entered into a fixed-term contract of employment with a group company or
subsidiary.
Capital expenditure
Total capital expenditure on tangible assets.
Discontinued operations
An operation that, pursuant to single plan, has been disposed of or abandoned or is classified as held-for-sale until conditions
precedent to the sale have been fulfilled.
Total capital expenditure on tangible assets.
Discontinued operations
An operation that, pursuant to single plan, has been disposed of or abandoned or is classified as held-for-sale until conditions
precedent to the sale have been fulfilled.
Effective tax rate
Current and deferred taxation as a percentage of profit before taxation.
Current and deferred taxation as a percentage of profit before taxation.
Monetary asset
An asset which will be settled in a fixed or easily determinable amount of money.
An asset which will be settled in a fixed or easily determinable amount of money.
Region
Defines the operational management divisions within AngloGold Ashanti and these are South Africa, Argentina, Australia,
Brazil, Ghana, Guinea, Mali, Namibia, Tanzania and United States of America.
Related party
Parties are considered related if one party has the ability to control the other party or exercise significant influence over the
other party in making financial and operating decisions.
Significant influence
The ability, directly or indirectly, to participate in, but not exercise control over, the financial and operating policy decision of an
entity so as to obtain economic benefit from its activities.
Total cash costs
Total cash costs include site costs for all mining, processing and onsite administration, reduced by contributions from by-
products and are inclusive of royalties and production taxes. Depreciation, depletion and amortization, rehabilitation, corporate
administration, employee severance costs, capital and exploration costs are excluded. Total cash costs per ounce are the
attributable total cash costs divided by the attributable ounces of gold produced.
Defines the operational management divisions within AngloGold Ashanti and these are South Africa, Argentina, Australia,
Brazil, Ghana, Guinea, Mali, Namibia, Tanzania and United States of America.
Related party
Parties are considered related if one party has the ability to control the other party or exercise significant influence over the
other party in making financial and operating decisions.
Significant influence
The ability, directly or indirectly, to participate in, but not exercise control over, the financial and operating policy decision of an
entity so as to obtain economic benefit from its activities.
Total cash costs
Total cash costs include site costs for all mining, processing and onsite administration, reduced by contributions from by-
products and are inclusive of royalties and production taxes. Depreciation, depletion and amortization, rehabilitation, corporate
administration, employee severance costs, capital and exploration costs are excluded. Total cash costs per ounce are the
attributable total cash costs divided by the attributable ounces of gold produced.
Total production costs
Total cash costs plus depreciation, depletion and amortization, employee severance costs, rehabilitation and other non-cash
costs. Corporate administration and exploration costs are excluded. Total production costs per ounce are the attributable total
production costs divided by the attributable ounces of gold produced.
Total cash costs plus depreciation, depletion and amortization, employee severance costs, rehabilitation and other non-cash
costs. Corporate administration and exploration costs are excluded. Total production costs per ounce are the attributable total
production costs divided by the attributable ounces of gold produced.
Weighted average number of ordinary shares
The number of ordinary shares in issue at the beginning of the year, increased by shares issued during the year, weighted on
a time basis for the period during which they have participated in the income of the group and increased by share options that
are virtually certain to be exercised.
The number of ordinary shares in issue at the beginning of the year, increased by shares issued during the year, weighted on
a time basis for the period during which they have participated in the income of the group and increased by share options that
are virtually certain to be exercised.
Currencies
$, US$ or dollar
United States dollars
ARS
Argentinean peso
A$ or AUD
Australian dollars
BRL
Brazilian real
€ or Euro
European Euro
C$
Canadian dollars
CHF
Swiss francs
GHC, cedi or ¢
Ghanaian cedi
HKD
Hong Kong dollar
N$ or NAD
Namibian dollars
Tsh
Tanzanian Shillings
ZAR, R or rand
South African rands
10
Abbreviations
ADS
American Depositary Share
ADR
American Depositary Receipt
ASX
Australian Stock Exchange
bn
Billion
capex Capital expenditure
capex Capital expenditure
CDI
Chess Depositary Interests
CLR
Carbon Leader Reef
FCFA
Francs Communauté Financiére Africaine
FIFR
Fatal injury frequency rate per million hours worked
g
Grams
g/t
g/t
Grams per tonne
g/TEC
Grams per total employee costed
GhDS
Ghanaian Depositary Share
GhSE
Ghana Stock Exchange
JORC
Australasian Code for Reporting Exploration results, Mineral Resources and Ore Reserves
JIBAR
Johannesburg interbank agreed rate
JSE
JSE Limited (the stock exchange in Johannesburg, South Africa)
King Code
the Code of Corporate Practices and Conduct representing the principles of good governance as laid
out in the King Report on Corporate Governance for South Africa 2002
out in the King Report on Corporate Governance for South Africa 2002
kg
Kilograms
LSE
LSE
London Stock Exchange
LIBOR
London interbank offer rate
LOM
Life-of-mine
LTIFR
LTIFR
Lost-time injury frequency rate per million hours worked
(1)
m²/TEC
Square meters per total employee costed
M or m
Meter or million, depending on the context
Moz
Million ounces
Mt
Million tonnes or tons
Mtpa
Million tonnes/tons per annum
NOSA
National Occupational Safety Association
NPSE
Normal Purchase Normal Sales Exemption
NYSE
New York Stock Exchange
oz
Ounces (troy)
oz/t
Ounces per ton
RIFR
Reportable injury frequency rate per million hours worked
SAMREC
South African Code for the Reporting of Mineral Resources and Mineral Reserves
SEC
United States Securities and Exchange Commission
SRP
South African Securities Regulation Panel
SOX
Sarbanes-Oxley Act of 2002
t
Tons (short) or tonnes (metric)
tpm
Tonnes/tons per month
tpa
Tonnes/tons per annum
tpd
Tonnes/tons per day
VCR
Ventersdorp Contact Reef
VCT
Voluntary counseling and testing
(1)
Note that AngloGold Ashanti utilizes the strictest definition in reporting Lost-Time Injuries in that it includes all Disabling Injuries (where an individual is
unable to return to his place of regular work the next calendar day after the injury) and Restricted Work Cases (where the individual may be at work, but
unable to perform full or regular duties on the next calendar day after the injury) within this definition.
unable to return to his place of regular work the next calendar day after the injury) and Restricted Work Cases (where the individual may be at work, but
unable to perform full or regular duties on the next calendar day after the injury) within this definition.
Rounding of figures in this report may result in computational discrepancies.
11
PART I
Item 1: Identity of directors, senior management and advisors
Not applicable.
Item 2: Offer statistics and expected timetable
Not applicable.
Item 3: Key information
3A.
Selected financial data
The selected financial information set forth below for the years ended December 31, 2005, 2006 and 2007 has been derived
from, and should be read in conjunction with, the US GAAP financial statements included under Item 18 of this annual report.
The selected financial information for the years ended December 31, 2003 and 2004 and as at December 31, 2003 and 2004
has been derived from the US GAAP financial statements not included in this annual report.
from, and should be read in conjunction with, the US GAAP financial statements included under Item 18 of this annual report.
The selected financial information for the years ended December 31, 2003 and 2004 and as at December 31, 2003 and 2004
has been derived from the US GAAP financial statements not included in this annual report.
12
Year ended December 31,
2003
(1)(2)(3)
2004
(4)(5)
2005
2006
2007
(6)
$
$
$
$
$
(in millions, except share and per share amounts)
Consolidated statement of income
Sales and other income
1,670
2,151
2,485
2,715
3,095
Product sales
(7)
1,641
2,096
2,453
2,683
3,048
Interest, dividends and other
29
55
32
32
47
Costs and expenses
1,329
2,176
2,848
2,811
3,806
Operating costs
(8)
1,135
1,517
1,842
1,785
2,167
Royalties
11
27
39
59
70
Depreciation, depletion and amortization
247
445
593
699
655
Impairment of assets
75
3
141
6
1
Interest expense
28
67
80
77
75
Accretion expense
2
8
5
13
20
(Profit)/loss on sale of assets, realization of loans, indirect taxes
and other
(55)
(14)
(3)
(36)
10
Mining contractor termination costs
-
-
9
-
-
Non-hedge derivative (gain)/loss
(114)
123
142
208
808
Income/(loss) from continuing operations before income tax
equity income, minority interests and cumulative effect of
accounting change
equity income, minority interests and cumulative effect of
accounting change
341
(25)
(363)
(96)
(711)
Taxation (expense)/benefit
(143)
132
121
(122)
(118)
Minority interest
(17)
(22)
(23)
(29)
(28)
Equity income in affiliates
71
23
39
99
41
Income/(loss) from continuing operations before cumulative
effect of accounting change
effect of accounting change
252
108
(226)
(148)
(816)
Discontinued operations
(2)
(11)
(44)
6
2
Income/(loss) before cumulative effect of accounting change
250
97
(270)
(142)
(814)
Cumulative effect of accounting change
(3)
-
(22)
-
-
Net income/(loss) – applicable to common stockholders
247
97
(292)
(142)
(814)
Basic earnings/(loss) per common share (in $)
(9)
From continuing operations
1.13
0.43
(0.85)
(0.54)
(2.93)
Discontinued operations
(0.01)
(0.04)
(0.17)
0.02
0.01
Before cumulative effect of accounting change
1.12
0.39
(1.02)
(0.52)
(2.92)
Cumulative effect of accounting change
(0.01)
-
(0.08)
-
-
Net income/(loss) – applicable to common stockholders
1.11
0.39
(1.10)
(0.52)
(2.92)
Diluted earnings/(loss) per common share (in $)
(9)
From continuing operations
1.13
0.42
(0.85)
(0.54)
(2.93)
Discontinued operations
(0.01)
(0.04)
(0.17)
0.02
0.01
Before cumulative effect of accounting change
1.12
0.38
(1.02)
(0.52)
(2.92)
Cumulative effect of accounting change
(0.01)
-
(0.08)
-
-
Net income/(loss) – applicable to common stockholders
1.11
0.38
(1.10)
(0.52)
(2.92)
Dividend per common share (cents)
133
76
56
39
44
13
As at December 31,
2003
(1)(2)(3)
2004
(4)(5)
2005
2006
2007
(6)
$
$
$
$
$
(in millions, except share and per share amounts)
Consolidated balance sheet data (as at period end)
Cash and cash equivalents and restricted cash
479
302
204
482
514
Other current assets
822
1,115
1,197
1,394
1,599
Property, plants and equipment, deferred stripping, and
acquired properties, net
3,037
6,654
6,439
6,266
6,807
Goodwill and other intangibles, net
226
591
550
566
591
Materials on the leach pad (long-term)
7
22
116
149
190
Other long-term assets, derivatives, deferred taxation
assets and other long-term inventory
772
712
607
656
680
Total assets
5,343
9,396
9,113
9,513
10,381
Current liabilities
1,116
1,469
1,874
2,467
3,795
Provision for environmental rehabilitation
124
209
325
310
394
Deferred taxation liabilities
789
1,518
1,152
1,275
1,345
Other long-term liabilities, and derivatives
1,194
2,295
2,539
2,092
2,232
Minority interest
52
59
60
61
63
Stockholders’ equity
2,068
3,846
3,163
3,308
2,552
Total liabilities and stockholders’ equity
5,343
9,396
9,113
9,513
10,381
Capital stock (exclusive of long-term debt and
redeemable preferred stock)
9
10
10
10
10
Number of common shares as adjusted to reflect
changes in capital stock
223,136,342
264,462,894
264,938,432
276,236,153
277,457,471
Net assets
2,120
3,905
3,223
3,369
2,615
(1)
Excludes the financial condition of the Amapari Project sold with effect from May 19, 2003. See “Item 4A.: History and development of the company”.
(2)
Excludes the Gawler Craton Joint Venture sold with effect from June 6, 2003. See “Item 4A.: History and development of the company”.
(3)
Excludes the results of operations and financial condition of the Jerritt Canyon Joint Venture sold with effect from June 30, 2003. See “Item 4A.: History and
development of the company”.
development of the company”.
(4)
Includes the results of operations and financial condition of Ashanti as of April 26, 2004. See “Item 4A.: History and development of the company”.
(5)
Excludes the results of operations and financial condition of the Freda-Rebecca mine sold with effect from September 1, 2004. See “Item 4A.: History and
development of the company”.
development of the company”.
(6)
Includes the acquisition of 15 percent minority interest acquired in the Iduapriem and Teberebie mine with effect from September 1, 2007. See “Item 4A.:
History and development of the company”.
History and development of the company”.
(7)
Product sales represent revenue from the sale of gold.
(8)
Operating costs include production costs, exploration costs, related party transactions, general and administrative, market development costs, research and
development, employment severance costs and other.
development, employment severance costs and other.
(9)
The calculations of basic and diluted earnings/(loss) per common share are described in note 9 to the consolidated financial statements “(loss)/earnings per
common share”. Amounts reflected exclude E Ordinary shares.
common share”. Amounts reflected exclude E Ordinary shares.
14
Annual dividends
The table below sets forth the amounts of interim, final and total dividends paid in respect of the past five years in cents per
ordinary share. In respect of 2007, AngloGold Ashanti’s board of directors declared an interim dividend of 90 South African
cents per ordinary share on July 30, 2007, with a record date of August 24, 2007, and a payment date of September 10, 2007,
and a final dividend of 53 South African cents per ordinary share on February 6, 2008, with a record date of February 29, 2008
and a payment date of March 17, 2008.
ordinary share. In respect of 2007, AngloGold Ashanti’s board of directors declared an interim dividend of 90 South African
cents per ordinary share on July 30, 2007, with a record date of August 24, 2007, and a payment date of September 10, 2007,
and a final dividend of 53 South African cents per ordinary share on February 6, 2008, with a record date of February 29, 2008
and a payment date of March 17, 2008.
Interim
Final
Total
Interim
Final
Total
Year ended December 31
(South African cents per ordinary share)
(US cents per ordinary share
(1)
)
2003
375
335
710
50.73
49.82
100.55
2004
170
180
350
25.62
30.37
55.99
2005
170
62
232
26.09
9.86
35.95
2006
210
240
450
29.40
32.38
61.78
2007
90
53
143
12.44
6.60
19.04
(1)
Dividends for these periods were declared in South African cents. US dollar cents per share figures have been calculated based on exchange rates
prevailing on each of the respective payment dates.
prevailing on each of the respective payment dates.
Future dividends will be dependent on AngloGold Ashanti’s cash flow, earnings, planned capital expenditures, financial
condition and other factors. Given that AngloGold Ashanti is in its highest-ever capital expenditure phase, it will continue to
manage capital expenditure in line with profitability and cash flow, and its approach to the dividend on the basis of prudent
financial management. Under South African law, AngloGold Ashanti may declare and pay dividends from any capital and
reserves included in total shareholders’ equity calculated in accordance with IFRS, subject to its solvency and liquidity.
Dividends are payable to shareholders registered at a record date that is after the date of declaration.
condition and other factors. Given that AngloGold Ashanti is in its highest-ever capital expenditure phase, it will continue to
manage capital expenditure in line with profitability and cash flow, and its approach to the dividend on the basis of prudent
financial management. Under South African law, AngloGold Ashanti may declare and pay dividends from any capital and
reserves included in total shareholders’ equity calculated in accordance with IFRS, subject to its solvency and liquidity.
Dividends are payable to shareholders registered at a record date that is after the date of declaration.
Dividends may be declared in any currency at the discretion of the AngloGold Ashanti board or AngloGold Ashanti
shareholders at a general meeting. Currently, dividends are declared in South African rands and paid in Australian dollars,
South African rands, British pounds and Ghanaian cedis. Dividends paid to registered holders of AngloGold Ashanti ADSs are
paid in US dollars converted from South African rands by The Bank of New York, as depositary, in accordance with the deposit
agreement. Exchange rate fluctuations may therefore affect the value of the dividends received by registered shareholders and
distributions paid by the relevant depositary to investors holding AngloGold Ashanti securities.
shareholders at a general meeting. Currently, dividends are declared in South African rands and paid in Australian dollars,
South African rands, British pounds and Ghanaian cedis. Dividends paid to registered holders of AngloGold Ashanti ADSs are
paid in US dollars converted from South African rands by The Bank of New York, as depositary, in accordance with the deposit
agreement. Exchange rate fluctuations may therefore affect the value of the dividends received by registered shareholders and
distributions paid by the relevant depositary to investors holding AngloGold Ashanti securities.
Moreover, fluctuations in the exchange rates of the British pound and the US dollar may have affected and are likely to affect
the US dollar price of the ADSs on the NYSE and the US dollar equivalents of the United Kingdom pound price of the ordinary
shares on the London Stock Exchange (LSE). For details on taxation and exchange controls applicable to holders of ordinary
shares or ADSs, see “Item 10D.: Exchange controls” and “Item 10E.: Taxation – Taxation of dividends”.
the US dollar price of the ADSs on the NYSE and the US dollar equivalents of the United Kingdom pound price of the ordinary
shares on the London Stock Exchange (LSE). For details on taxation and exchange controls applicable to holders of ordinary
shares or ADSs, see “Item 10D.: Exchange controls” and “Item 10E.: Taxation – Taxation of dividends”.
Exchange rate information
The following table sets forth for the periods and dates indicated certain information concerning the noon buying rate in New
York City for cable transfers as certified for customs purposes by the Federal Reserve Bank of New York expressed in rands
per $1.00. On May 15, 2008, the noon buying rate between South African rands and US dollars was R7.5975/$1.00.
York City for cable transfers as certified for customs purposes by the Federal Reserve Bank of New York expressed in rands
per $1.00. On May 15, 2008, the noon buying rate between South African rands and US dollars was R7.5975/$1.00.
Year ended December 31
High
Low
Year end
Average
(1)
2003
9.05
6.26
6.70
7.42
2004
7.31
5.62
5.65
6.39
2005
6.92
5.64
6.33
6.35
2006
7.94
5.99
7.04
6.81
2007
7.49
6.45
6.81
7.03
2008
(2)
8.21
6.74
–
7.60
(1)
The average of the noon buying rates on the last business day of each month during the year.
(2)
Through May 15, 2008.
15
Exchange rate information for the months of
High
Low
October 2007
6.91
6.49
November 2007
7.00
6.45
December 2007
7.04
6.66
January 2008
7.45
6.74
February 2008
7.89
7.41
March 2008
8.21
7.76
April 2008
8.02
7.53
May 2008
(1)
7.72
7.51
(1)
Through May 15, 2008.
3B.
Capitalization and indebtedness
Not applicable.
3C.
Reasons for the offer and use of proceeds
Not applicable.
3D.
Risk factors
The risk factors set out in this document have been organized into three categories:
•
risks related to the gold mining industry generally;
•
•
risks related to AngloGold Ashanti’s operations; and
•
risks related to AngloGold Ashanti’s ordinary shares and American Depositary Shares (ADSs).
Risks related to the gold mining industry generally
The profitability of AngloGold Ashanti’s operations, and the cash flows generated by these operations, are
significantly affected by changes in the market price for gold.
significantly affected by changes in the market price for gold.
The market price for gold can fluctuate widely. These fluctuations are caused by numerous factors beyond AngloGold Ashanti’s
control, including:
control, including:
• speculative positions taken by investors or traders in gold;
• changes in the demand for gold as an investment;
• changes in the demand for gold used in jewellery and for other industrial uses;
• changes in the supply of gold from production, disinvestment, scrap and hedging;
• financial market expectations regarding the rate of inflation;
• the strength of the dollar (the currency in which the gold price trades internationally) relative to other currencies;
• changes in interest rates;
• actual or expected gold sales by central banks and the International Monetary Fund;
• gold hedging and de-hedging by gold producers;
• global or regional political or economic events; and
• costs of gold production in major gold-producing nations in which the company has operations, such as South Africa, the
United States and Australia.
United States and Australia.
The price of gold is often subject to sharp, short-term changes resulting from speculative activities. While the overall supply of
and demand for gold can affect its market price, because of the considerable size of above-ground stocks of the metal in
comparison to other commodities, these factors typically do not affect the gold price in the same manner or degree that the
supply of and demand for other commodities tends to affect their market price.
and demand for gold can affect its market price, because of the considerable size of above-ground stocks of the metal in
comparison to other commodities, these factors typically do not affect the gold price in the same manner or degree that the
supply of and demand for other commodities tends to affect their market price.
16
The following table presents the annual high, low and average afternoon fixing prices over the past 10 years, expressed in
dollars, for gold per ounce on the London Bullion Market:
dollars, for gold per ounce on the London Bullion Market:
Year
High
Low
Average
1998
314
273
287
1999
340
252
278
2000
317
262
279
2001
298
253
271
2002
347
278
310
2003
417
320
364
2004
456
371
410
2005
538
412
445
2006
725
525
604
2007
845
602
697
2008
(1)
1,023
840
913
Source of data: Metals Week, Reuters and London Bullion Market Association
.
(1)
Through May 15, 2008.
On May 15, 2008, the afternoon fixing price of gold on the London Bullion Market was $866.25 per ounce.
In addition to the spot price of gold, a portion of AngloGold Ashanti’s gold sales is determined at prices in accordance with the
various hedging contracts that it has entered into, or may enter into, with various gold hedging counterparts.
various hedging contracts that it has entered into, or may enter into, with various gold hedging counterparts.
If revenue from gold sales falls below the cost of production for an extended period, AngloGold Ashanti may experience losses
and be forced to curtail or suspend some or all of its capital projects or existing operations, particularly those operations having
operating costs that are flexible to such short- to medium-term curtailment or closure, or change its past dividend payment
policies. In addition, it would have to assess the economic impact of low gold prices on its ability to recover any losses that may
be incurred during that period and on its ability to maintain adequate cash reserves.
and be forced to curtail or suspend some or all of its capital projects or existing operations, particularly those operations having
operating costs that are flexible to such short- to medium-term curtailment or closure, or change its past dividend payment
policies. In addition, it would have to assess the economic impact of low gold prices on its ability to recover any losses that may
be incurred during that period and on its ability to maintain adequate cash reserves.
The profitability of AngloGold Ashanti’s operations, and the cash flows generated by these operations, are
significantly affected by the fluctuations in the price of input production factors, many of which are linked to the price
of oil and steel.
significantly affected by the fluctuations in the price of input production factors, many of which are linked to the price
of oil and steel.
Fuel, power and consumables, including diesel, heavy fuel oil, chemical reagents, explosives and tires, which are used in
mining operations form a relatively large part of the operating costs of any mining company. The cost of these consumables is
linked, to a greater or lesser extent, to the price of oil.
mining operations form a relatively large part of the operating costs of any mining company. The cost of these consumables is
linked, to a greater or lesser extent, to the price of oil.
AngloGold Ashanti has estimated that for each $1 per barrel rise in the oil price, the average cash costs of all its operations
increases by approximately $0.61 per ounce with the cash costs of certain of its mines, which are more dependent on fuel,
being more sensitive to changes in the price of oil.
increases by approximately $0.61 per ounce with the cash costs of certain of its mines, which are more dependent on fuel,
being more sensitive to changes in the price of oil.
Furthermore, the cost of steel, which is used in the manufacture of most forms of fixed and mobile mining equipment, is also a
relatively large contributor to the operating costs and capital expenditure of a mining company.
relatively large contributor to the operating costs and capital expenditure of a mining company.
Fluctuations in the price of oil and steel have a significant impact upon operating cost and capital expenditure estimates and, in
the absence of other economic fluctuations, could result in significant changes in the total expenditure estimates for new mining
projects or render certain projects non-viable. AngloGold Ashanti has no influence over the price of fuel, chemical reagents,
explosives, steel and other commodities used in its mining activities.
the absence of other economic fluctuations, could result in significant changes in the total expenditure estimates for new mining
projects or render certain projects non-viable. AngloGold Ashanti has no influence over the price of fuel, chemical reagents,
explosives, steel and other commodities used in its mining activities.
AngloGold Ashanti’s operations and development projects could be adversely affected by shortages of, as well as the
lead times to deliver, strategic spares, critical consumables, heavy mining equipment and metallurgical plant.
lead times to deliver, strategic spares, critical consumables, heavy mining equipment and metallurgical plant.
Due to the significant increase in the world’s demand for commodities, the global mining industry is experiencing an increase in
production capacity both in terms of expansions at existing, as well as the development of new, production facilities.
production capacity both in terms of expansions at existing, as well as the development of new, production facilities.
This increase in expansion capacity has taken place, in certain instances, without a concomitant increase in the capacity for
production of certain strategic spares, critical consumables and mining and processing equipment used to operate and
construct mining operations, resulting in shortages of and an increase in the lead times to deliver these items.
production of certain strategic spares, critical consumables and mining and processing equipment used to operate and
construct mining operations, resulting in shortages of and an increase in the lead times to deliver these items.
17
In particular, AngloGold Ashanti and other gold mining companies have experienced shortages in critical consumables like tires
for mobile mining equipment, underground support, as well as certain critical spares for both mining equipment and processing
plants including, for example, gears for the ball-mills. In addition, the company has experienced an increase in delivery times
for these and other items. These shortages have also resulted in unanticipated increases in the price of certain of these and
other items. Shortages of critical spares, consumables and equipment result in delays and production shortfalls. Increases in
prices result in an increase in both operating costs and the capital expenditure to develop mining operations.
for mobile mining equipment, underground support, as well as certain critical spares for both mining equipment and processing
plants including, for example, gears for the ball-mills. In addition, the company has experienced an increase in delivery times
for these and other items. These shortages have also resulted in unanticipated increases in the price of certain of these and
other items. Shortages of critical spares, consumables and equipment result in delays and production shortfalls. Increases in
prices result in an increase in both operating costs and the capital expenditure to develop mining operations.
While suppliers and equipment manufacturers may increase capacity to meet the increased demand and therefore alleviate
both shortages of, and time to deliver, strategic spares, critical consumables and mining and processing equipment, individually
the companies have limited influence over manufacturers and suppliers. Consequently, shortages and increased lead times in
delivery of strategic spares, critical consumables, heavy mining and certain processing equipment could have an adverse
impact upon AngloGold Ashanti’s results of operations and its financial condition.
both shortages of, and time to deliver, strategic spares, critical consumables and mining and processing equipment, individually
the companies have limited influence over manufacturers and suppliers. Consequently, shortages and increased lead times in
delivery of strategic spares, critical consumables, heavy mining and certain processing equipment could have an adverse
impact upon AngloGold Ashanti’s results of operations and its financial condition.
Gold companies face many risks related to their operations (including their exploration and development activities)
that may adversely affect their cash flows and overall profitability.
that may adversely affect their cash flows and overall profitability.
Uncertainty and cost of mineral exploration and acquisitions
Exploration activities are speculative and are often unproductive. These activities also often require substantial expenditure to
establish the presence, and quantify the extent and grades (metal content) of mineralized material through exploration drilling;
determine appropriate metallurgical recovery processes to extract gold from the ore; estimate Ore Reserves; undertake
feasibility studies and estimate the technical and economic viability of the project; and construct, renovate or expand mining
and processing facilities.
establish the presence, and quantify the extent and grades (metal content) of mineralized material through exploration drilling;
determine appropriate metallurgical recovery processes to extract gold from the ore; estimate Ore Reserves; undertake
feasibility studies and estimate the technical and economic viability of the project; and construct, renovate or expand mining
and processing facilities.
Once gold mineralization is discovered it can take several years to determine whether Ore Reserves exist. During this time the
economic feasibility of production may change owing to fluctuations in factors that affect revenue, as well as cash and other
operating costs.
economic feasibility of production may change owing to fluctuations in factors that affect revenue, as well as cash and other
operating costs.
AngloGold Ashanti evaluates from time to time the acquisition of Ore Reserves, development properties and operating mines,
either as stand-alone assets or as part of companies. Its decisions to acquire these properties have historically been based on
a variety of factors including historical operating results, estimates of and assumptions regarding the extent of Ore Reserves,
cash and other operating costs, gold prices and projected economic returns and evaluations of existing or potential liabilities
associated with the property and its operations and how these may change in the future. Other than historical operating results,
all of these parameters are uncertain and have an impact upon revenue, cash and other operating issues, as well as the
uncertainties related to the process used to estimate Ore Reserves. In addition, there is intense competition for the acquisition
of attractive mining properties.
either as stand-alone assets or as part of companies. Its decisions to acquire these properties have historically been based on
a variety of factors including historical operating results, estimates of and assumptions regarding the extent of Ore Reserves,
cash and other operating costs, gold prices and projected economic returns and evaluations of existing or potential liabilities
associated with the property and its operations and how these may change in the future. Other than historical operating results,
all of these parameters are uncertain and have an impact upon revenue, cash and other operating issues, as well as the
uncertainties related to the process used to estimate Ore Reserves. In addition, there is intense competition for the acquisition
of attractive mining properties.
As a result of these uncertainties, the exploration programs and acquisitions engaged in by AngloGold Ashanti may not result
in the expansion or replacement of the current production with new Ore Reserves or operations. This could adversely affect its
results of operations and its financial condition.
in the expansion or replacement of the current production with new Ore Reserves or operations. This could adversely affect its
results of operations and its financial condition.
Development risks
AngloGold Ashanti’s profitability depends, in part, on the actual economic returns and the actual costs of developing mines,
which may differ significantly from its current estimates. The development of its mining projects may be subject to unexpected
problems and delays.
which may differ significantly from its current estimates. The development of its mining projects may be subject to unexpected
problems and delays.
AngloGold Ashanti’s decision to develop a mineral property is typically based, in the case of an extension or, in the case of a
new development, on the results of a feasibility study. Feasibility studies estimate the expected or anticipated project economic
returns.
new development, on the results of a feasibility study. Feasibility studies estimate the expected or anticipated project economic
returns.
These estimates are based on assumptions regarding: future gold, other metal and uranium prices; anticipated tonnage,
grades and metallurgical characteristics of ore to be mined and processed; anticipated recovery rates of gold, and other metals
and uranium from the ore; anticipated capital expenditure and cash operating costs; and the required return on investment.
grades and metallurgical characteristics of ore to be mined and processed; anticipated recovery rates of gold, and other metals
and uranium from the ore; anticipated capital expenditure and cash operating costs; and the required return on investment.
Actual cash operating costs, production and economic returns may differ significantly from those anticipated by such studies
and estimates. Operating costs and capital expenditure are determined particularly by the costs of the commodity inputs,
including the cost of fuel, chemical reagents, explosives, tires and steel that are consumed in mining activities and credits from
by-products. There are a number of uncertainties inherent in the development and construction of an extension to an existing
mine, or in the development and construction of any new mine.
and estimates. Operating costs and capital expenditure are determined particularly by the costs of the commodity inputs,
including the cost of fuel, chemical reagents, explosives, tires and steel that are consumed in mining activities and credits from
by-products. There are a number of uncertainties inherent in the development and construction of an extension to an existing
mine, or in the development and construction of any new mine.
18
In addition to those discussed above these uncertainties include: the timing and cost, which can be considerable, of the
construction of mining and processing facilities; the availability and cost of skilled labor, power, water and transportation
facilities; the availability and cost of appropriate smelting and refining arrangements; the need to obtain necessary
environmental and other governmental permits and the timing of those permits; and the availability of funds to finance
construction and development activities.
construction of mining and processing facilities; the availability and cost of skilled labor, power, water and transportation
facilities; the availability and cost of appropriate smelting and refining arrangements; the need to obtain necessary
environmental and other governmental permits and the timing of those permits; and the availability of funds to finance
construction and development activities.
The costs, timing and complexities of mine development and construction can increase because of the remote location of many
mining properties. New mining operations could experience unexpected problems and delays during development, construction
and mine start-up. In addition, delays in the commencement of mineral production could occur. Finally, operating cost and
capital expenditure estimates could fluctuate considerably as a result of fluctuations in the prices of commodities consumed in
the construction and operation of mining projects. Accordingly, AngloGold Ashanti’s future development activities may not
result in the expansion or replacement of current production with new production, or one or more of these new production sites
or facilities may be less profitable than currently anticipated or may not be profitable at all. The shortage of skilled labor may
also impede exploration and development projects.
mining properties. New mining operations could experience unexpected problems and delays during development, construction
and mine start-up. In addition, delays in the commencement of mineral production could occur. Finally, operating cost and
capital expenditure estimates could fluctuate considerably as a result of fluctuations in the prices of commodities consumed in
the construction and operation of mining projects. Accordingly, AngloGold Ashanti’s future development activities may not
result in the expansion or replacement of current production with new production, or one or more of these new production sites
or facilities may be less profitable than currently anticipated or may not be profitable at all. The shortage of skilled labor may
also impede exploration and development projects.
Ore Reserve estimation risks
AngloGold Ashanti undertakes annual revisions to its Ore Reserve estimates based upon actual exploration and production
results, depletion, new information on geology and fluctuations in production, operating and other costs and economic
parameters such as gold price and exchange rates. Ore Reserve estimates are not precise calculations and are dependent on
the interpretation of limited information on the location, shape and continuity of the occurrence and on the available sampling
results. These factors may result in reductions in its Ore Reserve estimates, which could adversely affect the life-of-mine plans
and consequently the total value of AngloGold Ashanti’s mining asset base and, as a result, have an adverse effect upon the
market price of AngloGold Ashanti’s ordinary shares and ADSs.
results, depletion, new information on geology and fluctuations in production, operating and other costs and economic
parameters such as gold price and exchange rates. Ore Reserve estimates are not precise calculations and are dependent on
the interpretation of limited information on the location, shape and continuity of the occurrence and on the available sampling
results. These factors may result in reductions in its Ore Reserve estimates, which could adversely affect the life-of-mine plans
and consequently the total value of AngloGold Ashanti’s mining asset base and, as a result, have an adverse effect upon the
market price of AngloGold Ashanti’s ordinary shares and ADSs.
Production or mining industry risks
Gold mining is susceptible to numerous events that may have an adverse impact on a gold mining business, its ability to
produce gold and meet its production targets. These events include, but are not limited to:
produce gold and meet its production targets. These events include, but are not limited to:
·
environmental hazards, including discharge of metals, pollutants or hazardous chemicals;
·
industrial
accidents;
·
underground
fires;
·
labor
disputes;
·
activities of illegal or artisanal miners;
·
electrical power interruptions;
·
encountering unexpected geological formations;
·
unanticipated ground and water conditions;
·
unanticipated increases in gold lock-up and inventory levels at the company’s heap-leach operations;
·
fall-of-ground accidents in underground operations;
·
failure of mining pit slopes and tailings dam walls;
·
legal and regulatory restrictions and changes to such restrictions;
·
seismic activity; and
·
other natural phenomena, such as floods or inclement weather conditions.
Seismic activity is of particular concern to the gold mining industry in South Africa, in part because of the large percentage of
deep-level gold mines. To understand and manage this risk, AngloGold Ashanti uses sophisticated seismic and rock
mechanics technologies.
deep-level gold mines. To understand and manage this risk, AngloGold Ashanti uses sophisticated seismic and rock
mechanics technologies.
Despite the implementation of this technology and modifications to mine layouts and support technology with a view to
minimizing the incidence and impact of seismic activity, seismic events have in the past, and may in the future, cause the death
of, or personal injury to, miners and other employees, as well as the loss of mining equipment, damage to or destruction of
mineral properties or production facilities, production disruptions, monetary losses, environmental damage and potential legal
liabilities, both within South Africa and elsewhere where seismic activity may be a factor. As a result, these events may have a
material adverse effect on AngloGold Ashanti’s operational results and its financial condition. For example, in the fourth
quarter of 2007, AngloGold Ashanti encountered unanticipated delays and a shortfall in production of approximately
55,000 ounces as a result of these events.
minimizing the incidence and impact of seismic activity, seismic events have in the past, and may in the future, cause the death
of, or personal injury to, miners and other employees, as well as the loss of mining equipment, damage to or destruction of
mineral properties or production facilities, production disruptions, monetary losses, environmental damage and potential legal
liabilities, both within South Africa and elsewhere where seismic activity may be a factor. As a result, these events may have a
material adverse effect on AngloGold Ashanti’s operational results and its financial condition. For example, in the fourth
quarter of 2007, AngloGold Ashanti encountered unanticipated delays and a shortfall in production of approximately
55,000 ounces as a result of these events.
19
Gold mining companies are increasingly required to consider and ensure the sustainable development of, and provide
benefits to, the communities and countries in which they operate.
benefits to, the communities and countries in which they operate.
As a consequence of public concern about the perceived ill effects of economic globalization, business generally and in
particular large multinational corporations such as AngloGold Ashanti, face increasing public scrutiny of their activities.
particular large multinational corporations such as AngloGold Ashanti, face increasing public scrutiny of their activities.
These businesses are under pressure to demonstrate that, as they seek to generate satisfactory returns on investment to
shareholders, other stakeholders – including employees, communities surrounding operations and the countries in which they
operate – benefit, and will continue to benefit from these commercial activities, which are also expected to minimize or
eliminate any damage to the interests of those stakeholders.
shareholders, other stakeholders – including employees, communities surrounding operations and the countries in which they
operate – benefit, and will continue to benefit from these commercial activities, which are also expected to minimize or
eliminate any damage to the interests of those stakeholders.
These pressures tend to be applied most strongly against companies whose activities are perceived to have a high impact on
their social and physical environment. The potential consequences of such pressures, especially if not effectively managed,
include reputational damage, legal suits and social spending obligations. All of these factors could have a material adverse
effect on AngloGold Ashanti’s results of operations and its financial condition.
their social and physical environment. The potential consequences of such pressures, especially if not effectively managed,
include reputational damage, legal suits and social spending obligations. All of these factors could have a material adverse
effect on AngloGold Ashanti’s results of operations and its financial condition.
The South African Department of Minerals and Energy has embarked on an audit strategy with the objective of helping mines
to develop programs to improve health and safety. Audits have been conducted and in a number of working places compliance
stoppages have occurred. These instances have had a short-term adverse impact on gold production. Future stoppages could
have a similar negative impact on production.
to develop programs to improve health and safety. Audits have been conducted and in a number of working places compliance
stoppages have occurred. These instances have had a short-term adverse impact on gold production. Future stoppages could
have a similar negative impact on production.
Gold mining operations are subject to extensive health and safety laws and regulations.
Gold mining operations are subject to a variety of industry-specific health and safety laws and regulations depending upon the
jurisdiction in which they are located. These laws and regulations are formulated to improve and to protect the safety and
health of employees. If these laws and regulations were to change and, if as a result, material additional expenditure were
required to comply with such new laws and regulations, it could adversely affect AngloGold Ashanti’s results of operations and
its financial condition.
jurisdiction in which they are located. These laws and regulations are formulated to improve and to protect the safety and
health of employees. If these laws and regulations were to change and, if as a result, material additional expenditure were
required to comply with such new laws and regulations, it could adversely affect AngloGold Ashanti’s results of operations and
its financial condition.
Gold mining companies are subject to extensive environmental laws and regulations.
Gold mining companies are subject to extensive environmental laws and regulations in the various jurisdictions in which they
operate. These regulations establish limits and conditions on gold producers’ ability to conduct their operations. The cost of
AngloGold Ashanti’s compliance with environmental laws and regulations has been significant and is expected to continue to
be significant.
operate. These regulations establish limits and conditions on gold producers’ ability to conduct their operations. The cost of
AngloGold Ashanti’s compliance with environmental laws and regulations has been significant and is expected to continue to
be significant.
Gold mining companies are required to close their operations and rehabilitate the lands that they mine in accordance with
environmental laws and regulations. Estimates of the total ultimate closure and rehabilitation costs for gold mining operations
are significant and based principally on current legal and regulatory requirements that may change materially. Environmental
liabilities are accrued when they are known, probable and can be reasonably estimated. Increasingly, regulators are seeking
security in the form of cash collateral or bank guarantees in respect of environmental obligations, which could have an adverse
effect on AngloGold Ashanti’s financial condition.
environmental laws and regulations. Estimates of the total ultimate closure and rehabilitation costs for gold mining operations
are significant and based principally on current legal and regulatory requirements that may change materially. Environmental
liabilities are accrued when they are known, probable and can be reasonably estimated. Increasingly, regulators are seeking
security in the form of cash collateral or bank guarantees in respect of environmental obligations, which could have an adverse
effect on AngloGold Ashanti’s financial condition.
Environmental laws and regulations are continually changing and are generally becoming more restrictive. If AngloGold
Ashanti’s environmental compliance obligations were to change as a result of changes in the laws and regulations or in certain
assumptions it makes to estimate liabilities, or if unanticipated conditions were to arise in its operations, its expenses and
provisions would increase to reflect these changes. If material, these expenses and provisions could adversely affect
AngloGold Ashanti’s results of operations and its financial condition.
Ashanti’s environmental compliance obligations were to change as a result of changes in the laws and regulations or in certain
assumptions it makes to estimate liabilities, or if unanticipated conditions were to arise in its operations, its expenses and
provisions would increase to reflect these changes. If material, these expenses and provisions could adversely affect
AngloGold Ashanti’s results of operations and its financial condition.
20
Risks related to AngloGold Ashanti’s operations
AngloGold Ashanti faces many risks related to its operations that may affect its cash flows and overall profitability.
AngloGold Ashanti uses gold hedging instruments and has entered into long term sales contracts, which may prevent
the company from realizing all potential gains resulting from subsequent commodity price increases in the future.
AngloGold Ashanti’s reported financial condition could be adversely affected as a result of the need to fair value all of
its hedge contracts.
the company from realizing all potential gains resulting from subsequent commodity price increases in the future.
AngloGold Ashanti’s reported financial condition could be adversely affected as a result of the need to fair value all of
its hedge contracts.
AngloGold Ashanti currently uses gold hedging instruments to fix the selling price of a portion of its anticipated gold
productionand to protect revenues against unfavorable gold price and exchange rate movements. While the use of these
instruments may protect against a drop in gold prices and exchange rate movements, it will do so for only a limited period of
time and only to the extent that the hedge remains in place. The use of these instruments may also prevent AngloGold Ashanti
from fully realizing the positive impact on income from any subsequent favorable increase in the price of gold on the portion of
production covered by the hedge and of any subsequent favorable exchange rate movements.
productionand to protect revenues against unfavorable gold price and exchange rate movements. While the use of these
instruments may protect against a drop in gold prices and exchange rate movements, it will do so for only a limited period of
time and only to the extent that the hedge remains in place. The use of these instruments may also prevent AngloGold Ashanti
from fully realizing the positive impact on income from any subsequent favorable increase in the price of gold on the portion of
production covered by the hedge and of any subsequent favorable exchange rate movements.
A significant number of AngloGold Ashanti’s forward sales contracts are not treated as derivatives and fair valued on the
financial statements as they fall under the normal purchase normal sales exemption (NPSE). Should AngloGold Ashanti fail to
settle these contracts by physical delivery, then it may be required to account for the fair value of a portion of, or potentially all
of, the existing contracts in the financial statements. This could adversely affect AngloGold Ashanti’s reported financial
condition.
financial statements as they fall under the normal purchase normal sales exemption (NPSE). Should AngloGold Ashanti fail to
settle these contracts by physical delivery, then it may be required to account for the fair value of a portion of, or potentially all
of, the existing contracts in the financial statements. This could adversely affect AngloGold Ashanti’s reported financial
condition.
AngloGold Ashanti intends to significantly reduce its gold hedging position
following a proposed
rights offering,
which will substantially reduce its protection against future declines in the market price of gold.
AngloGold Ashanti has traditionally used gold hedging instruments to protect the selling price of some of its anticipated sales
against declines in the market price of gold. The use of these instruments has prevented AngloGold Ashanti from fully
participating in the significant increase in the market price of gold in recent years. Since 2001 AngloGold Ashanti has has been
reducing its hedge commitments through hedge buy-backs (limited to non-hedge derivatives), physical settlement of maturing
contracts and other restructurings in order to provide greater participation in a rising gold price environment.
against declines in the market price of gold. The use of these instruments has prevented AngloGold Ashanti from fully
participating in the significant increase in the market price of gold in recent years. Since 2001 AngloGold Ashanti has has been
reducing its hedge commitments through hedge buy-backs (limited to non-hedge derivatives), physical settlement of maturing
contracts and other restructurings in order to provide greater participation in a rising gold price environment.
Notwithstanding the steps AngloGold Ashanti has taken to date, its gold hedging position has continued to have a significantly
adverse effect upon its financial performance. In order to address this, AngloGold Ashanti intends to procure early settlement
of certain contracts otherwise due to mature in 2009 and 2010 during the course of 2008. This is to be funded by way of a
proposed rights offering that is subject to shareholder approval at a general meeting to be held on May 22, 2008. In addition to
the settlement of certain contracts during 2008, AngloGold Ashanti intends to restructure some of the remainder of its hedge
book in order to achieve greater participation in the spot price of gold beyond 2009. As a result of these measures, AngloGold
Ashanti expects to have substantially less protection against declines in the market price of gold during 2008 and later years
compared to 2007. For a description of AngloGold Ashanti’s commodity instruments, see “Item 11.: Quantitative and
qualitative disclosures about market risk”.
adverse effect upon its financial performance. In order to address this, AngloGold Ashanti intends to procure early settlement
of certain contracts otherwise due to mature in 2009 and 2010 during the course of 2008. This is to be funded by way of a
proposed rights offering that is subject to shareholder approval at a general meeting to be held on May 22, 2008. In addition to
the settlement of certain contracts during 2008, AngloGold Ashanti intends to restructure some of the remainder of its hedge
book in order to achieve greater participation in the spot price of gold beyond 2009. As a result of these measures, AngloGold
Ashanti expects to have substantially less protection against declines in the market price of gold during 2008 and later years
compared to 2007. For a description of AngloGold Ashanti’s commodity instruments, see “Item 11.: Quantitative and
qualitative disclosures about market risk”.
AngloGold Ashanti faces certain risks and uncertainties in the execution of its planned gold hedge restructuring.
Through the planned gold hedge restructuring, AngloGold Ashanti intends to significantly reduce its gold hedging position by
procuring early settlement of certain contracts otherwise due to mature in 2009 and 2010 during the course of 2008. In
addition to the settlement of certain contracts during 2008, AngloGold Ashanti also intends to restructure some of the
remainder of its hedge book in order to achieve greater participation in the spot price for gold beyond 2009. The exact nature,
extent and execution of these processes will depend upon prevailing and anticipated market conditions at the time of
restructuring, particularly prevailing gold prices and exchange rates and other relevant economic factors. Should these
conditions become unfavorable at any stage during the restructuring, this may delay or frustrate the implementation of the
restructuring. In addition, should the outlook for gold prices, exchange rates and other economic factors materially change, it is
possible that AngloGold Ashanti’s plans for the execution of the gold hedge restructuring may be modified so as to minimize
the adverse impact from such changes or maximize the benefits from them.
procuring early settlement of certain contracts otherwise due to mature in 2009 and 2010 during the course of 2008. In
addition to the settlement of certain contracts during 2008, AngloGold Ashanti also intends to restructure some of the
remainder of its hedge book in order to achieve greater participation in the spot price for gold beyond 2009. The exact nature,
extent and execution of these processes will depend upon prevailing and anticipated market conditions at the time of
restructuring, particularly prevailing gold prices and exchange rates and other relevant economic factors. Should these
conditions become unfavorable at any stage during the restructuring, this may delay or frustrate the implementation of the
restructuring. In addition, should the outlook for gold prices, exchange rates and other economic factors materially change, it is
possible that AngloGold Ashanti’s plans for the execution of the gold hedge restructuring may be modified so as to minimize
the adverse impact from such changes or maximize the benefits from them.
Furthermore, the execution of the gold hedge restructuring may depend on or be affected by AngloGold Ashanti’s ability to
obtain consents from hedge counterparties and its lenders. If AngloGold Ashanti is not able to successfully execute the
planned gold hedge restructuring, then it will be prevented from fully participating in higher gold prices should such prices
continue to prevail.
obtain consents from hedge counterparties and its lenders. If AngloGold Ashanti is not able to successfully execute the
planned gold hedge restructuring, then it will be prevented from fully participating in higher gold prices should such prices
continue to prevail.
21
AngloGold Ashanti also continues to give consideration to the early settlement of contracts not currently recorded on balance
sheet (Normal Purchase Normal Sale Exemption (NPSE)) by means of early physical delivery. Such early physical settlement,
if it were to occur, would result in a significant adverse impact on its 2008 recorded revenues in AngloGold Ashanti’s income
statement, as sales that would have otherwise been executed at the spot price of gold will be replaced with sales based on the
earlier contracted prices of such NPSE contracts that are settled during the year. Furthermore should AngloGold Ashanti
conclude that such early physical settlement of NPSE contracts represents a tainting event, it would be required to recognize
on balance sheet the fair value of a portion of, or potentially all of, the existing NPSE contracts, which would result in a
significant adverse impact on its financial statements. No such conclusion has yet been made by AngloGold Ashanti and it is
still considering the potential impact of any such transaction.
sheet (Normal Purchase Normal Sale Exemption (NPSE)) by means of early physical delivery. Such early physical settlement,
if it were to occur, would result in a significant adverse impact on its 2008 recorded revenues in AngloGold Ashanti’s income
statement, as sales that would have otherwise been executed at the spot price of gold will be replaced with sales based on the
earlier contracted prices of such NPSE contracts that are settled during the year. Furthermore should AngloGold Ashanti
conclude that such early physical settlement of NPSE contracts represents a tainting event, it would be required to recognize
on balance sheet the fair value of a portion of, or potentially all of, the existing NPSE contracts, which would result in a
significant adverse impact on its financial statements. No such conclusion has yet been made by AngloGold Ashanti and it is
still considering the potential impact of any such transaction.
Some of AngloGold Ashanti’s power suppliers have forced it to halt or curtail activities at its mines, due to severe
power disruptions. Power stoppages, fluctuations and power cost increases may adversely affect AngloGold
Ashanti’s results of operations and its financial condition.
power disruptions. Power stoppages, fluctuations and power cost increases may adversely affect AngloGold
Ashanti’s results of operations and its financial condition.
In South Africa, AngloGold Ashanti’s mining operations are dependent upon electrical power generated by the State utility,
Eskom. As a result of an increase in demand exceeding available generating capacity, Eskom has warned that the country
could face disruptions in electrical power supply. At the start of 2008, as a result of substantial unplanned maintenance at
Eskom's power stations, as well as higher than usual seasonal rainfall adversely affecting Eskom's coal stockpiles, Eskom's
generating capacity was constrained and reduced. As a result, the incidence of power outages in South Africa increased
substantially to the point that, on Friday, January 25, 2008, Eskom warned that it could no longer guarantee the availability of
its supply of electrical power to the South African mining industry. Consequently, AngloGold Ashanti, along with other mining
companies with South African operations, were forced temporarily to suspend mining operations at their South African mines.
Following meetings between industry-wide representatives, including AngloGold Ashanti, and Eskom, agreement was reached
whereby mines were able to resume their power consumption at 90 percent of average capacity in return for Eskom
guaranteeing a more normal power supply, including undertakings to more reliably warn companies when power outages may
occur. Mining operations resumed on Wednesday, January 30, 2008 at AngloGold Ashanti’s South African mines, although
operations continue to be constrained by a power capacity limitation imposed by Eskom. By mid-first quarter of 2008, power
supply had increased to approximately 96.5 percent and AngloGold Ashanti’s South African operations were once again able to
operate at full capacity as a result of the various energy efficiency initiatives implemented at its South African operations.
Ongoing and future production levels will depend on an ongoing stable power supply consistent with Eskom’s undertaking as
well as whether AngloGold Ashanti is able to continue to implement, and increase, its various energy efficiency initiatives. The
extent to which the power capacity limitation will result in lost production will depend on a number of factors, including the
success of the company’s energy efficiency initiatives; accordingly, AngloGold Ashanti is unable to estimate its lost production
as a result of the power capacity limitations. Eskom has also advised AngloGold Ashanti that it intends to increase power tariffs
significantly. Should the power outages continue or should AngloGold Ashanti be unable to achieve its production or cost
targets due to the current constraints, any additional power outages or any power tariff increases, then its future profitability
and financial condition may be adversely impacted.
Eskom. As a result of an increase in demand exceeding available generating capacity, Eskom has warned that the country
could face disruptions in electrical power supply. At the start of 2008, as a result of substantial unplanned maintenance at
Eskom's power stations, as well as higher than usual seasonal rainfall adversely affecting Eskom's coal stockpiles, Eskom's
generating capacity was constrained and reduced. As a result, the incidence of power outages in South Africa increased
substantially to the point that, on Friday, January 25, 2008, Eskom warned that it could no longer guarantee the availability of
its supply of electrical power to the South African mining industry. Consequently, AngloGold Ashanti, along with other mining
companies with South African operations, were forced temporarily to suspend mining operations at their South African mines.
Following meetings between industry-wide representatives, including AngloGold Ashanti, and Eskom, agreement was reached
whereby mines were able to resume their power consumption at 90 percent of average capacity in return for Eskom
guaranteeing a more normal power supply, including undertakings to more reliably warn companies when power outages may
occur. Mining operations resumed on Wednesday, January 30, 2008 at AngloGold Ashanti’s South African mines, although
operations continue to be constrained by a power capacity limitation imposed by Eskom. By mid-first quarter of 2008, power
supply had increased to approximately 96.5 percent and AngloGold Ashanti’s South African operations were once again able to
operate at full capacity as a result of the various energy efficiency initiatives implemented at its South African operations.
Ongoing and future production levels will depend on an ongoing stable power supply consistent with Eskom’s undertaking as
well as whether AngloGold Ashanti is able to continue to implement, and increase, its various energy efficiency initiatives. The
extent to which the power capacity limitation will result in lost production will depend on a number of factors, including the
success of the company’s energy efficiency initiatives; accordingly, AngloGold Ashanti is unable to estimate its lost production
as a result of the power capacity limitations. Eskom has also advised AngloGold Ashanti that it intends to increase power tariffs
significantly. Should the power outages continue or should AngloGold Ashanti be unable to achieve its production or cost
targets due to the current constraints, any additional power outages or any power tariff increases, then its future profitability
and financial condition may be adversely impacted.
All of AngloGold Ashanti’s mining operations in Ghana are dependent for their electricity supply on hydro-electric power
supplied by the Volta River Authority (VRA) an entity controlled by the government of Ghana. Most of this electrical power is
hydro-generated electricity, although AngloGold Ashanti also has access to VRA electricity supply from a recently constructed
smaller thermal plant. The VRA’s principal electricity generating facility is the Akosombo Dam and during periods of below
average inflows from the Volta reservoir, electricity supplies from the Akosombo Dam may be curtailed, as occurred in 1998,
2006 and the first half of 2007. In addition, during periods of limited electricity availability, the national power system is subject
to system disturbances and voltage fluctuations, which can damage the group’s equipment. The VRA also obtains power from
neighbouring Cote d’Ivoire, which has intermittently experienced some political instability and civil unrest. These factors,
including increased power demand from other users in Ghana, may cause interruptions in AngloGold Ashanti’s power supply to
its operations in Ghana or result in increases in the cost of power even if they do not interrupt supply. Consequently, these
factors may adversely affect AngloGold Ashanti’s results of operations and its financial condition. In order to address this
problem and to supplement the power generated by the VRA, AngloGold Ashanti has, together with the other three principal
gold producers in Ghana, acquired (and equally fund) an 85 megawatt, diesel-fired, power plant that could be converted to gas
supply once the anticipated West African Gas Pipeline is developed. To further reduce the dependence on hydro-electric
power, which may be impacted by low rainfall, the VRA is increasing its thermal power generation capacity by constructing a
126 mega watt thermal plant at Tema.
supplied by the Volta River Authority (VRA) an entity controlled by the government of Ghana. Most of this electrical power is
hydro-generated electricity, although AngloGold Ashanti also has access to VRA electricity supply from a recently constructed
smaller thermal plant. The VRA’s principal electricity generating facility is the Akosombo Dam and during periods of below
average inflows from the Volta reservoir, electricity supplies from the Akosombo Dam may be curtailed, as occurred in 1998,
2006 and the first half of 2007. In addition, during periods of limited electricity availability, the national power system is subject
to system disturbances and voltage fluctuations, which can damage the group’s equipment. The VRA also obtains power from
neighbouring Cote d’Ivoire, which has intermittently experienced some political instability and civil unrest. These factors,
including increased power demand from other users in Ghana, may cause interruptions in AngloGold Ashanti’s power supply to
its operations in Ghana or result in increases in the cost of power even if they do not interrupt supply. Consequently, these
factors may adversely affect AngloGold Ashanti’s results of operations and its financial condition. In order to address this
problem and to supplement the power generated by the VRA, AngloGold Ashanti has, together with the other three principal
gold producers in Ghana, acquired (and equally fund) an 85 megawatt, diesel-fired, power plant that could be converted to gas
supply once the anticipated West African Gas Pipeline is developed. To further reduce the dependence on hydro-electric
power, which may be impacted by low rainfall, the VRA is increasing its thermal power generation capacity by constructing a
126 mega watt thermal plant at Tema.
AngloGold Ashanti’s mining operations in Guinea, Tanzania and Mali are dependent on power supplied by outside contractors
and supplies of fuel being delivered by road. AngloGold Ashanti’s power supply has been disrupted in the past and it has
suffered resulting production losses as a result of equipment failure.
and supplies of fuel being delivered by road. AngloGold Ashanti’s power supply has been disrupted in the past and it has
suffered resulting production losses as a result of equipment failure.
22
Contracts for sale of uranium at fixed prices could affect AngloGold Ashanti’s operating results and financial
condition.
condition.
AngloGold Ashanti has entered into contracts for the sale of uranium produced by some of its South African operations and
may therefore be prevented from realizing all potential gains from an increase in uranium prices to the extent that the
company’s future production is covered by such contracts, or should AngloGold Ashanti not produce sufficient quantities of
uranium to cover such contracts, it may need to procure or borrow uranium in the market to meet any shortfall which could
adversely affect AngloGold Ashanti's results of operations and its financial condition.
may therefore be prevented from realizing all potential gains from an increase in uranium prices to the extent that the
company’s future production is covered by such contracts, or should AngloGold Ashanti not produce sufficient quantities of
uranium to cover such contracts, it may need to procure or borrow uranium in the market to meet any shortfall which could
adversely affect AngloGold Ashanti's results of operations and its financial condition.
Given the uncertainty relating to availability of power, and the impact power constraints may have on uranium production, the
company is in negotiations to reschedule some of its uranium contracts and depending on the outcome of these negotiations,
may have to buy uranium on the open market to fulfill its contractual obligations. For example in 2007, AngloGold Ashanti
purchased 400,000 pounds of uranium at a cost of approximately $31 million.
company is in negotiations to reschedule some of its uranium contracts and depending on the outcome of these negotiations,
may have to buy uranium on the open market to fulfill its contractual obligations. For example in 2007, AngloGold Ashanti
purchased 400,000 pounds of uranium at a cost of approximately $31 million.
Foreign exchange fluctuations could have a material adverse effect on AngloGold Ashanti’s operating results and
financial condition.
financial condition.
Gold is principally a dollar-priced commodity, and most of AngloGold Ashanti’s revenues are realized in or linked to dollars
while production costs are largely incurred in the applicable local currency where the relevant operation is located. The
weakening of the dollar, without a corresponding increase in the dollar price of gold against these local currencies, results in
lower revenues and higher production costs in dollar terms.
while production costs are largely incurred in the applicable local currency where the relevant operation is located. The
weakening of the dollar, without a corresponding increase in the dollar price of gold against these local currencies, results in
lower revenues and higher production costs in dollar terms.
Conversely, the strengthening of the dollar, without a corresponding decrease in the dollar price of gold against these local
currencies yields significantly higher revenues and lower production costs in dollar terms. If material, these exchange rate
movements may have a material effect on AngloGold Ashanti’s operational results.
currencies yields significantly higher revenues and lower production costs in dollar terms. If material, these exchange rate
movements may have a material effect on AngloGold Ashanti’s operational results.
Since June 2002, the weakening of the dollar against the South African rand (up until the second half of 2007 when the South
African rand began to also weaken against the dollar), the Brazilian real, the Argentinean peso and the Australian dollar has
had a negative impact upon AngloGold Ashanti’s profitability. Conversely, in certain prior years, the devaluation of these local
currencies against the dollar has had a significant positive effect on the profitability of AngloGold Ashanti’s operations. In 2007,
2006, and 2005, AngloGold Ashanti derived approximately 71 percent, 73 percent and 67 percent, respectively, of its revenues
from these countries and incurred approximately 62 percent, 61 percent and 63 percent, respectively, of production costs in
these local currencies.
African rand began to also weaken against the dollar), the Brazilian real, the Argentinean peso and the Australian dollar has
had a negative impact upon AngloGold Ashanti’s profitability. Conversely, in certain prior years, the devaluation of these local
currencies against the dollar has had a significant positive effect on the profitability of AngloGold Ashanti’s operations. In 2007,
2006, and 2005, AngloGold Ashanti derived approximately 71 percent, 73 percent and 67 percent, respectively, of its revenues
from these countries and incurred approximately 62 percent, 61 percent and 63 percent, respectively, of production costs in
these local currencies.
In 2007, the weakening of the dollar against these local currencies in which the company operates continued to increase total
cash costs. A one percent strengthening of these local currencies against the dollar will result in an increase of total cash costs
incurred of nearly $3 per ounce, or 1 percent. These impacts were partially offset by the increase in the dollar price of gold,
which increase was to some extent a function of dollar weakness. In addition, production costs in South African rand, Brazilian
real, Argentinean peso and Australian dollar terms were only modestly offset by the effect of exchange rate movements on the
price of imports denominated in dollars, as imported products comprise a small proportion of production costs in each of these
countries.
cash costs. A one percent strengthening of these local currencies against the dollar will result in an increase of total cash costs
incurred of nearly $3 per ounce, or 1 percent. These impacts were partially offset by the increase in the dollar price of gold,
which increase was to some extent a function of dollar weakness. In addition, production costs in South African rand, Brazilian
real, Argentinean peso and Australian dollar terms were only modestly offset by the effect of exchange rate movements on the
price of imports denominated in dollars, as imported products comprise a small proportion of production costs in each of these
countries.
A small proportion of AngloGold Ashanti’s hedges are denominated in South African rands, Australian dollars and Brazilian real
which may partially offset the effect of the US dollar’s strength or weakness on AngloGold Ashanti’s profitability.
which may partially offset the effect of the US dollar’s strength or weakness on AngloGold Ashanti’s profitability.
In addition, due to its global operations and local foreign exchange regulations, some of AngloGold Ashanti’s funds are held in
local currencies, such as the South African rand and the Australian dollar.
local currencies, such as the South African rand and the Australian dollar.
The dollar value of these currencies may be affected by exchange rate fluctuations. If material, exchange rate movements may
adversely affect AngloGold Ashanti’s financial condition.
adversely affect AngloGold Ashanti’s financial condition.
AngloGold Ashanti’s level of indebtedness may adversely affect its business.
As of December 31, 2007, AngloGold Ashanti had gross borrowings of approximately $1.9 billion (including bonds). This level
of indebtedness could have adverse effects on AngloGold Ashanti’s flexibility to do business. Under the terms of AngloGold
Ashanti’s borrowing facilities from its banks it is obliged to meet certain financial and other covenants. AngloGold Ashanti
expects to meet these covenants and to be able to pay principal and interest on its debt by utilizing the cash flows from
operations. Its ability to continue to do so will depend upon its future financial performance which will be affected by its
operating performance as well as by financial and other factors, certain of which are beyond its control. AngloGold Ashanti may
be required to utilize a large portion of its cash flow to pay the principal and interest on its debt which will reduce the amount of
funds available to finance existing operations, the development of new organic growth opportunities and further acquisitions.
of indebtedness could have adverse effects on AngloGold Ashanti’s flexibility to do business. Under the terms of AngloGold
Ashanti’s borrowing facilities from its banks it is obliged to meet certain financial and other covenants. AngloGold Ashanti
expects to meet these covenants and to be able to pay principal and interest on its debt by utilizing the cash flows from
operations. Its ability to continue to do so will depend upon its future financial performance which will be affected by its
operating performance as well as by financial and other factors, certain of which are beyond its control. AngloGold Ashanti may
be required to utilize a large portion of its cash flow to pay the principal and interest on its debt which will reduce the amount of
funds available to finance existing operations, the development of new organic growth opportunities and further acquisitions.
23
AngloGold Ashanti’s level of indebtedness may make it vulnerable to economic cycle downturns, which are beyond its control,
because during such downturns, it cannot be certain that its future cash flows will be sufficient to allow it to pay principal and
interest on its debt and also to meet its other obligations. Should the cash flow from operations be insufficient, it could breach
its financial and other covenants and may be required to refinance all or part of its existing debt, use existing cash balances,
issue additional equity or sell assets. AngloGold Ashanti cannot be sure that it will be able to do so on commercially reasonable
terms, if at all.
because during such downturns, it cannot be certain that its future cash flows will be sufficient to allow it to pay principal and
interest on its debt and also to meet its other obligations. Should the cash flow from operations be insufficient, it could breach
its financial and other covenants and may be required to refinance all or part of its existing debt, use existing cash balances,
issue additional equity or sell assets. AngloGold Ashanti cannot be sure that it will be able to do so on commercially reasonable
terms, if at all.
AngloGold Ashanti intends to redeem its R2 billion corporate bond (which matures in August 2008) and refinance its $1 billion
convertible bond (which matures in February 2009) before these bonds mature. AngloGold Ashanti cannot give assurance that
it will be able to do so on commercially reasonable terms, if at all.
convertible bond (which matures in February 2009) before these bonds mature. AngloGold Ashanti cannot give assurance that
it will be able to do so on commercially reasonable terms, if at all.
Inflation may have a material adverse effect on AngloGold Ashanti’s results of operations.
Most of AngloGold Ashanti’s operations are located in countries that have experienced high rates of inflation during certain
periods.
periods.
Because it is unable to control the market price at which it sells the gold it produces (except to the extent that it enters into
forward sales and other derivative contracts), it is possible that significantly higher future inflation in the countries in which
AngloGold Ashanti operates may result in an increase in future operational costs in local currencies, without a concurrent
devaluation of the local currency of operations against the dollar or an increase in the dollar price of gold. This could have a
material adverse effect upon AngloGold Ashanti’s results of operations and its financial condition.
forward sales and other derivative contracts), it is possible that significantly higher future inflation in the countries in which
AngloGold Ashanti operates may result in an increase in future operational costs in local currencies, without a concurrent
devaluation of the local currency of operations against the dollar or an increase in the dollar price of gold. This could have a
material adverse effect upon AngloGold Ashanti’s results of operations and its financial condition.
While none of AngloGold Ashanti’s specific operations is currently materially adversely affected by inflation, significantly higher
and sustained inflation in the future, with a consequent increase in operational costs, could result in operations being
discontinued or reduced or rationalized at higher cost mines.
and sustained inflation in the future, with a consequent increase in operational costs, could result in operations being
discontinued or reduced or rationalized at higher cost mines.
AngloGold Ashanti’s new order mining rights in South Africa could be suspended or cancelled should the company
breach, and fail to remedy such breach of, its obligations in respect of the acquisition of these rights.
breach, and fail to remedy such breach of, its obligations in respect of the acquisition of these rights.
AngloGold Ashanti’s rights to own and exploit mineral reserves and deposits are governed by the laws and regulations of the
jurisdictions in which the mineral properties are located. Currently, a significant portion of its mineral reserves and deposits are
located in South Africa.
jurisdictions in which the mineral properties are located. Currently, a significant portion of its mineral reserves and deposits are
located in South Africa.
The Mineral and Petroleum Resources Development Act (MPRDA) vests custodianship of South Africa’s mineral rights in the
State. The State issues prospecting rights or mining rights to applicants. Prospecting, mining and mineral rights formerly
regulated under the Minerals Act 50 of 1991 and common law are now known as old order mining rights and the transitional
arrangements provided in Schedule II to the MPRDA give holders of such old order mining rights the opportunity to convert
their old order mining rights into new order mining rights within specified time frames.
State. The State issues prospecting rights or mining rights to applicants. Prospecting, mining and mineral rights formerly
regulated under the Minerals Act 50 of 1991 and common law are now known as old order mining rights and the transitional
arrangements provided in Schedule II to the MPRDA give holders of such old order mining rights the opportunity to convert
their old order mining rights into new order mining rights within specified time frames.
The Department of Minerals and Energy (DME) has published, pursuant to the MPRDA, the Broad-Based Socio-Economic
Empowerment Charter for the South African Mining Industry (the Charter). Compliance with the Charter, measured using a
designated Scorecard, requires that every mining company achieve 15 percent ownership by Historically Disadvantaged South
Africans (HDSAs) of its South African mining assets by May 1, 2009, and 26 percent ownership by May 1, 2014 and achieve
participation by HDSAs in various other aspects of management referred to below. The company has submitted to the DME
two Social and Labor Plans – one for each of its main mining regions – detailing its specific goals in these areas.
Empowerment Charter for the South African Mining Industry (the Charter). Compliance with the Charter, measured using a
designated Scorecard, requires that every mining company achieve 15 percent ownership by Historically Disadvantaged South
Africans (HDSAs) of its South African mining assets by May 1, 2009, and 26 percent ownership by May 1, 2014 and achieve
participation by HDSAs in various other aspects of management referred to below. The company has submitted to the DME
two Social and Labor Plans – one for each of its main mining regions – detailing its specific goals in these areas.
The Scorecard allows for a portion of ‘offset’ against the HDSAs equity participation requirements insofar as companies have
facilitated downstream, value-adding activities in respect of the products they mine. AngloGold Ashanti carries out such
downstream activities and believes these will be recognized in terms of a framework currently being devised by the South
African government.
facilitated downstream, value-adding activities in respect of the products they mine. AngloGold Ashanti carries out such
downstream activities and believes these will be recognized in terms of a framework currently being devised by the South
African government.
AngloGold Ashanti has completed a number of asset sales to companies owned by HDSAs in the past (estimated to have been
equivalent to 20 percent of AngloGold Ashanti’s South African production as at August 1, 2005, when its applications for the
conversion of its West Wits and Vaal River mineral rights from old order to new order mineral rights were approved).
Furthermore, at the end of 2006 AngloGold Ashanti implemented an Employee Share Ownership Plan (ESOP) and Black
Economic Empowerment (BEE) transaction, collectively with a value equivalent to approximately 6 percent of its South African
assets. This is consistent with the company’s stated strategic intention to develop means of promoting broad based equity
participation in the company by HDSAs and with an undertaking made to the DME as a condition for the granting to the
company of its new order mining rights. AngloGold Ashanti believes that it has made significant progress towards meeting the
requirements of the Charter, the Scorecard and its own undertakings in terms of human resource development, employment
equity, mine community and rural development, housing and living conditions, procurement and beneficiation, including the
equivalent to 20 percent of AngloGold Ashanti’s South African production as at August 1, 2005, when its applications for the
conversion of its West Wits and Vaal River mineral rights from old order to new order mineral rights were approved).
Furthermore, at the end of 2006 AngloGold Ashanti implemented an Employee Share Ownership Plan (ESOP) and Black
Economic Empowerment (BEE) transaction, collectively with a value equivalent to approximately 6 percent of its South African
assets. This is consistent with the company’s stated strategic intention to develop means of promoting broad based equity
participation in the company by HDSAs and with an undertaking made to the DME as a condition for the granting to the
company of its new order mining rights. AngloGold Ashanti believes that it has made significant progress towards meeting the
requirements of the Charter, the Scorecard and its own undertakings in terms of human resource development, employment
equity, mine community and rural development, housing and living conditions, procurement and beneficiation, including the
24
implementation of programs to help achieve the requirement of having 40 percent of management roles being held by HDSAs
by 2010. AngloGold Ashanti will incur expenses in giving further effect to the Charter and the Scorecard and the
implementation of the ESOP will affect the company’s results of operations. See “Item 5.: Operating and financial review and
prospects – Establishment of a Black Economic Empowerment (BEE) transaction in South Africa” for a detailed discussion on
the implementation of an ESOP.
by 2010. AngloGold Ashanti will incur expenses in giving further effect to the Charter and the Scorecard and the
implementation of the ESOP will affect the company’s results of operations. See “Item 5.: Operating and financial review and
prospects – Establishment of a Black Economic Empowerment (BEE) transaction in South Africa” for a detailed discussion on
the implementation of an ESOP.
AngloGold Ashanti was informed on August 1, 2005, by the Director General of Minerals and Energy that its applications to
convert its old order mining rights to new order mining rights for its West Wits and Vaal River operations, as well as its
applications for new mining rights to extend its mining areas at its TauTona and Kopanang mines, had been successful. These
applications relate to all of its existing operations in South Africa. The notarial agreements for the converted West Wits mining
right and Block 1C11 new mining rights have been executed and registered as well as the agreements for Jonkerskraal,
Weltevreden, Moab Extension Area and the new right for Edom, all of which form part of the Vaal River operations. Two
notarial agreements relating to the Vaal River operations are pending.
convert its old order mining rights to new order mining rights for its West Wits and Vaal River operations, as well as its
applications for new mining rights to extend its mining areas at its TauTona and Kopanang mines, had been successful. These
applications relate to all of its existing operations in South Africa. The notarial agreements for the converted West Wits mining
right and Block 1C11 new mining rights have been executed and registered as well as the agreements for Jonkerskraal,
Weltevreden, Moab Extension Area and the new right for Edom, all of which form part of the Vaal River operations. Two
notarial agreements relating to the Vaal River operations are pending.
Even where new order mining rights are obtained under the MPRDA, these rights may not be equivalent to the old order mining
rights. The AngloGold Ashanti rights that have been converted and registered do not differ significantly from the relevant old
order rights. The duration of the new rights will no longer be perpetual as was the case under old order mining rights but rather
will be granted for a maximum period of 30 years, with renewals of up to 30 years each and, in the case of prospecting rights, a
maximum period of five years with one renewal of up to three years. Furthermore, the MPRDA provides for a retention period
after prospecting of up to three years with one renewal of up to two years, subject to certain conditions, such as non-
concentration of resources, fair competition and non-exclusion of others. In addition, the new order rights will only be
transferable subject to the approval of the Minister of Minerals and Energy.
rights. The AngloGold Ashanti rights that have been converted and registered do not differ significantly from the relevant old
order rights. The duration of the new rights will no longer be perpetual as was the case under old order mining rights but rather
will be granted for a maximum period of 30 years, with renewals of up to 30 years each and, in the case of prospecting rights, a
maximum period of five years with one renewal of up to three years. Furthermore, the MPRDA provides for a retention period
after prospecting of up to three years with one renewal of up to two years, subject to certain conditions, such as non-
concentration of resources, fair competition and non-exclusion of others. In addition, the new order rights will only be
transferable subject to the approval of the Minister of Minerals and Energy.
The new order mining rights can be suspended or cancelled by the Minister of Minerals and Energy if, upon notice of a breach
from the Minister, the entity breaching its obligations to comply with the MPRDA or the conditions of the notarial agreement
fails to remedy such breach. The MPRDA also imposes additional responsibilities on mining companies relating to
environmental management and to environmental damage, degradation or pollution resulting from their prospecting or mining
activities. AngloGold Ashanti has a policy of evaluating, minimizing and addressing the environmental consequences of its
activities and, consistent with this policy and the MPRDA, conducts an annual review of the environmental costs and liabilities
associated with the company’s South African operations in light of the new, as well as existing, environmental requirements.
from the Minister, the entity breaching its obligations to comply with the MPRDA or the conditions of the notarial agreement
fails to remedy such breach. The MPRDA also imposes additional responsibilities on mining companies relating to
environmental management and to environmental damage, degradation or pollution resulting from their prospecting or mining
activities. AngloGold Ashanti has a policy of evaluating, minimizing and addressing the environmental consequences of its
activities and, consistent with this policy and the MPRDA, conducts an annual review of the environmental costs and liabilities
associated with the company’s South African operations in light of the new, as well as existing, environmental requirements.
The proposed introduction of South African State royalties where a significant portion of AngloGold Ashanti’s mineral
reserves and operations are located could have an adverse effect on its results of operations and its financial
condition.
reserves and operations are located could have an adverse effect on its results of operations and its financial
condition.
The South African government has announced the details of the proposed new legislation whereby new order rights will be
subject to a State royalty. The third draft of the Mineral and Petroleum Resources Royalty Bill was published on December 6,
2007 and provides for the payment of a royalty according to a formula based on earnings before interest, tax and depreciation.
It is estimated that the formula could translate to a royalty rate of more than 4 percent of gross sales in terms of current pricing
assumptions. The latest proposal results in a large increase from the 1.5 percent rate proposed in the second draft in 2006,
and the company is making representations to the government through the South African Chamber of Mines to retain the
proposed 1.5 percent rate. The payment of royalties is currently scheduled to begin on May 1, 2009, if the Bill is passed by
Parliament in its current form.
subject to a State royalty. The third draft of the Mineral and Petroleum Resources Royalty Bill was published on December 6,
2007 and provides for the payment of a royalty according to a formula based on earnings before interest, tax and depreciation.
It is estimated that the formula could translate to a royalty rate of more than 4 percent of gross sales in terms of current pricing
assumptions. The latest proposal results in a large increase from the 1.5 percent rate proposed in the second draft in 2006,
and the company is making representations to the government through the South African Chamber of Mines to retain the
proposed 1.5 percent rate. The payment of royalties is currently scheduled to begin on May 1, 2009, if the Bill is passed by
Parliament in its current form.
Certain factors may affect AngloGold Ashanti’s ability to support the carrying value of its property, plants and
equipment, acquired properties, investments and goodwill on its balance sheet.
equipment, acquired properties, investments and goodwill on its balance sheet.
AngloGold Ashanti reviews and tests the carrying value of its assets when events or changes in circumstances suggest that the
carrying amount may not be recoverable. AngloGold Ashanti values individual mining assets at the lowest level for which
identifiable cash flows are identifiable and independent of cash flows of other mining assets and liabilities.
carrying amount may not be recoverable. AngloGold Ashanti values individual mining assets at the lowest level for which
identifiable cash flows are identifiable and independent of cash flows of other mining assets and liabilities.
If there are indications that impairment may have occurred, AngloGold Ashanti prepares estimates of expected future cash
flows for each group of assets. Expected future cash flows are inherently uncertain, and could materially change over time.
They are significantly affected by reserve and production estimates, together with economic factors such as spot and forward
gold prices, discount rates, currency exchange rates, estimates of costs to produce reserves and future capital expenditure.
flows for each group of assets. Expected future cash flows are inherently uncertain, and could materially change over time.
They are significantly affected by reserve and production estimates, together with economic factors such as spot and forward
gold prices, discount rates, currency exchange rates, estimates of costs to produce reserves and future capital expenditure.
If any of these uncertainties occur either alone or in combination, it could require management to recognize an impairment,
which could adversely affect AngloGold Ashanti’s results of operations and its financial condition.
which could adversely affect AngloGold Ashanti’s results of operations and its financial condition.
25
Diversity in interpretation and application of accounting literature in the mining industry may impact AngloGold
Ashanti’s reported financial results.
Ashanti’s reported financial results.
The mining industry has limited industry specific accounting literature. As a result, diversity exists in the interpretation and
application of accounting literature to mining specific issues. For example, AngloGold Ashanti capitalizes the drilling and related
costs incurred to define and delineate a residual mineral deposit that has not been classified as proved and probable reserves
at a development stage or production stage mine, whereas some companies expense such costs (see “Item 5.: Operating and
financial review and prospects – critical accounting policies”). As and when diversity in interpretation and application is
addressed, it may impact AngloGold Ashanti’s reported results should the adopted interpretation differ from the position
followed by AngloGold Ashanti.
application of accounting literature to mining specific issues. For example, AngloGold Ashanti capitalizes the drilling and related
costs incurred to define and delineate a residual mineral deposit that has not been classified as proved and probable reserves
at a development stage or production stage mine, whereas some companies expense such costs (see “Item 5.: Operating and
financial review and prospects – critical accounting policies”). As and when diversity in interpretation and application is
addressed, it may impact AngloGold Ashanti’s reported results should the adopted interpretation differ from the position
followed by AngloGold Ashanti.
AngloGold Ashanti’s mineral reserves and deposits and mining operations are located in countries that face political,
economic and/or security risks.
economic and/or security risks.
Some of AngloGold Ashanti’s mineral deposits and mining and exploration operations are located in countries that have
experienced political instability and economic uncertainty. In all of the countries where AngloGold Ashanti operates, the
formulation or implementation of government policies may be unpredictable on certain issues including regulations which
impact on its operations and changes in laws relating to issues such as mineral rights and asset ownership, taxation, royalties,
import and export duties, currency transfers, restrictions on foreign currency holdings and repatriation of earnings.
experienced political instability and economic uncertainty. In all of the countries where AngloGold Ashanti operates, the
formulation or implementation of government policies may be unpredictable on certain issues including regulations which
impact on its operations and changes in laws relating to issues such as mineral rights and asset ownership, taxation, royalties,
import and export duties, currency transfers, restrictions on foreign currency holdings and repatriation of earnings.
In 2007, the government of the Democratic Republic of Congo (DRC) announced an industry-wide review of all mining
concessions and related agreements. The agreements related to the ownership and operation of AngloGold Ashanti’s
concessions in the DRC are also subject to this review by a commission as appointed by the DRC government. The
commission has indicated that it is seeking to increase the DRC government’s ownership in AngloGold Ashanti’s concession,
and increase land usage charges. The commission’s review process, the timing and the final outcome of which AngloGold
Ashanti is unable to predict, could result in an adverse change to AngloGold Ashanti in terms of these agreements which could
have adverse impact upon AngloGold Ashanti’s current exploration activities and potential future mining activities in the DRC.
concessions and related agreements. The agreements related to the ownership and operation of AngloGold Ashanti’s
concessions in the DRC are also subject to this review by a commission as appointed by the DRC government. The
commission has indicated that it is seeking to increase the DRC government’s ownership in AngloGold Ashanti’s concession,
and increase land usage charges. The commission’s review process, the timing and the final outcome of which AngloGold
Ashanti is unable to predict, could result in an adverse change to AngloGold Ashanti in terms of these agreements which could
have adverse impact upon AngloGold Ashanti’s current exploration activities and potential future mining activities in the DRC.
Any existing and new mining and exploration operations and projects AngloGold Ashanti carries out in these countries are, and
will be subject to, various national and local laws, policies and regulations governing the ownership, prospecting, development
and mining of mineral reserves, taxation and royalties, exchange controls, import and export duties and restrictions, investment
approvals, employee and social/community relations and other matters.
will be subject to, various national and local laws, policies and regulations governing the ownership, prospecting, development
and mining of mineral reserves, taxation and royalties, exchange controls, import and export duties and restrictions, investment
approvals, employee and social/community relations and other matters.
If, in one or more of these countries, AngloGold Ashanti was not able to obtain or maintain necessary permits, authorizations or
agreements to implement planned projects or continue its operations under conditions or within time frames that make such
plans and operations economic, or if legal, ownership, fiscal (including all royalties and duties), exchange control, employment,
environmental and social laws and regimes, or the governing political authorities change materially, which could result in
changes to such laws and regimes, its results of operations and its financial condition could be adversely affected.
agreements to implement planned projects or continue its operations under conditions or within time frames that make such
plans and operations economic, or if legal, ownership, fiscal (including all royalties and duties), exchange control, employment,
environmental and social laws and regimes, or the governing political authorities change materially, which could result in
changes to such laws and regimes, its results of operations and its financial condition could be adversely affected.
In Mali and Tanzania, AngloGold Ashanti is due refunds of input tax which remain outstanding for periods longer than those
provided for in the respective statutes. In addition, AngloGold Ashanti has outstanding assessments and unresolved tax
disputes in a number of countries. If the outstanding input taxes are not received, the tax disputes are not resolved and
assessments are not made in a manner favorable to AngloGold Ashanti, it could have an adverse effect upon its results of
operations and its financial condition.
provided for in the respective statutes. In addition, AngloGold Ashanti has outstanding assessments and unresolved tax
disputes in a number of countries. If the outstanding input taxes are not received, the tax disputes are not resolved and
assessments are not made in a manner favorable to AngloGold Ashanti, it could have an adverse effect upon its results of
operations and its financial condition.
In Argentina, the government is looking to apply export taxes of 5 percent to mining companies that were exempt therefrom.
AngloGold Ashanti has filed a claim with the courts to prevent payment of an export tax. If the outcome of the tax claim is
unfavorable to AngloGold Ashanti, it could have an adverse effect upon its results and operations and financial condition.
AngloGold Ashanti has filed a claim with the courts to prevent payment of an export tax. If the outcome of the tax claim is
unfavorable to AngloGold Ashanti, it could have an adverse effect upon its results and operations and financial condition.
Certain of the countries in which AngloGold Ashanti has mineral deposits or mining or exploration operations, including the
DRC and Colombia, have in the past experienced and in certain cases continue to experience, a difficult security environment
as well as political instability. In particular, various illegal groups active in regions in which the company is present may pose a
credible threat of terrorism, extortion and kidnapping, which could have an adverse effect on the company’s operations in such
regions. In the event that continued operations in these countries compromise AngloGold Ashanti’s security or business
principles, it may withdraw from these countries on a temporary or permanent basis, which in turn, could have an adverse
impact on its results of operations and its financial condition.
DRC and Colombia, have in the past experienced and in certain cases continue to experience, a difficult security environment
as well as political instability. In particular, various illegal groups active in regions in which the company is present may pose a
credible threat of terrorism, extortion and kidnapping, which could have an adverse effect on the company’s operations in such
regions. In the event that continued operations in these countries compromise AngloGold Ashanti’s security or business
principles, it may withdraw from these countries on a temporary or permanent basis, which in turn, could have an adverse
impact on its results of operations and its financial condition.
26
Labor disruptions and/or increased labor costs could have an adverse effect on AngloGold Ashanti’s operating
results and financial condition.
results and financial condition.
As at December 31, 2007, approximately 77 percent (2006: 69 percent) of AngloGold Ashanti’s workforce excluding
contractors or 63 percent of total workforce was located in South Africa. Approximately 98 percent of the workforce on its South
African operations is unionized, with the National Union of Mineworkers (NUM) representing the majority of unionized workers.
contractors or 63 percent of total workforce was located in South Africa. Approximately 98 percent of the workforce on its South
African operations is unionized, with the National Union of Mineworkers (NUM) representing the majority of unionized workers.
AngloGold Ashanti’s employees in some South American countries and Ghana are also highly unionized. Trade unions have a
significant impact on AngloGold Ashanti’s labor relations climate, as well as on social and political reforms, most notably in
South Africa.
significant impact on AngloGold Ashanti’s labor relations climate, as well as on social and political reforms, most notably in
South Africa.
It has become established practice to negotiate wages and conditions of employment with the unions every two years through
the Chamber of Mines of South Africa. An agreement was signed with the unions in August 2007, following negotiations
between NUM, United Associations of South Africa (UASA) on behalf of some clerical and junior management staff and
Solidarity (on behalf of a small number of miners) and the Chamber of Mines. A two-year deal was reached without resorting to
any industrial action.
the Chamber of Mines of South Africa. An agreement was signed with the unions in August 2007, following negotiations
between NUM, United Associations of South Africa (UASA) on behalf of some clerical and junior management staff and
Solidarity (on behalf of a small number of miners) and the Chamber of Mines. A two-year deal was reached without resorting to
any industrial action.
Labor costs represent a substantial proportion of AngloGold Ashanti’s total operating costs and in many operations, including
South African operations, is the company’s single largest operating cost category. The two-year wage agreement will be
reviewed in June 2009 in negotiation with NUM, UASA, Solidarity and the Chamber of Mines and any increases in labor costs
have to be off-set by greater productivity efforts by all operations and employees.
South African operations, is the company’s single largest operating cost category. The two-year wage agreement will be
reviewed in June 2009 in negotiation with NUM, UASA, Solidarity and the Chamber of Mines and any increases in labor costs
have to be off-set by greater productivity efforts by all operations and employees.
There is a risk that strikes or other types of conflict with unions or employees may occur at any one of AngloGold Ashanti’s
operations. It is uncertain whether labor disruptions will be used to advocate labor, political or social goals in the future. Should
any labor disruptions occur, if material, they could have an adverse effect on AngloGold Ashanti’s results of operations and its
financial condition.
operations. It is uncertain whether labor disruptions will be used to advocate labor, political or social goals in the future. Should
any labor disruptions occur, if material, they could have an adverse effect on AngloGold Ashanti’s results of operations and its
financial condition.
The use of mining contractors at certain of AngloGold Ashanti’s operations may expose it to delays or suspensions in
mining activities and increases in mining costs.
mining activities and increases in mining costs.
Mining contractors are used at certain of AngloGold Ashanti’s mines, including Sadiola, Morila and Yatela in Mali, Siguiri in
Guinea, Iduapriem in Ghana and Sunrise Dam in Australia, to mine and deliver ore to processing plants. Consequently, at
these mines, AngloGold Ashanti does not own all of the mining equipment and may face disruption of operations and incur
costs and liabilities in the event that any of the mining contractors at these mines has financial difficulties, or should there be a
dispute in renegotiating a mining contract, or a delay in replacing an existing contractor. Furthermore, increases in contract
mining rates, in the absence of associated productivity increases, will have an adverse impact on the company’s results of
operations and financial condition.
Guinea, Iduapriem in Ghana and Sunrise Dam in Australia, to mine and deliver ore to processing plants. Consequently, at
these mines, AngloGold Ashanti does not own all of the mining equipment and may face disruption of operations and incur
costs and liabilities in the event that any of the mining contractors at these mines has financial difficulties, or should there be a
dispute in renegotiating a mining contract, or a delay in replacing an existing contractor. Furthermore, increases in contract
mining rates, in the absence of associated productivity increases, will have an adverse impact on the company’s results of
operations and financial condition.
AngloGold Ashanti competes with mining and other companies for key human resources.
AngloGold Ashanti competes with mining and other companies on a global basis to attract and retain key human resources at
all levels with appropriate technical skills and operating and managerial experience necessary to continue to operate its
business. This is further exacerbated in the current environment of increased mining activity across the globe combined with
the global shortage of key mining industry human resource skills, including geologists, mining engineers, metallurgists and
skilled artisans.
all levels with appropriate technical skills and operating and managerial experience necessary to continue to operate its
business. This is further exacerbated in the current environment of increased mining activity across the globe combined with
the global shortage of key mining industry human resource skills, including geologists, mining engineers, metallurgists and
skilled artisans.
The retention of staff is particularly challenging in South Africa, where, in addition to the impacts of the global industry wide
shortages, AngloGold Ashanti is also required to achieve employment equity targets of participation by HDSAs in management
and other positions.
shortages, AngloGold Ashanti is also required to achieve employment equity targets of participation by HDSAs in management
and other positions.
AngloGold Ashanti competes with all companies in South Africa to attract and retain a small but growing pool of HDSAs with
the necessary skills and experience. For further details see the risk factor “AngloGold Ashanti’s new order mineral rights in
South Africa could be suspended or cancelled should the company breach, and fail to remedy such breach of, its obligations in
respect of the acquisition of these rights”.
the necessary skills and experience. For further details see the risk factor “AngloGold Ashanti’s new order mineral rights in
South Africa could be suspended or cancelled should the company breach, and fail to remedy such breach of, its obligations in
respect of the acquisition of these rights”.
There can be no assurance that AngloGold Ashanti will attract and retain skilled and experienced employees and, should it fail
to do so or lose any of its key personnel, its business and its financial condition could be adversely affected.
to do so or lose any of its key personnel, its business and its financial condition could be adversely affected.
27
AngloGold Ashanti faces certain risks in dealing with HIV/AIDS which may adversely affect its results of operations
and its financial condition.
and its financial condition.
AIDS remains the major health care challenge faced by AngloGold Ashanti’s South African operations. The South African
workforce prevalence studies indicate that the percentage of AngloGold Ashanti’s South African workforce that may be infected
by HIV may be as high as 30 percent. Accurate prevalence data for AIDS is not available owing to doctor-patient confidentiality.
AngloGold Ashanti is continuing to develop and implement various programs aimed at helping those who have been infected
with HIV and preventing new infections. Since 2001 AngloGold Ashanti has offered a voluntary counseling and HIV testing
program for employees in South Africa. In 2002 AngloGold Ashanti began to offer anti-retroviral therapy (ART) to HIV positive
employees who met the current medical criteria for the initiation of ART. From April 2003, AngloGold Ashanti has treated all
eligible employees desiring it. Currently approximately 4,600 employees are on the wellness program and as at December
2007, approximately 2,100 employees were receiving treatment using anti-retroviral drugs.
workforce prevalence studies indicate that the percentage of AngloGold Ashanti’s South African workforce that may be infected
by HIV may be as high as 30 percent. Accurate prevalence data for AIDS is not available owing to doctor-patient confidentiality.
AngloGold Ashanti is continuing to develop and implement various programs aimed at helping those who have been infected
with HIV and preventing new infections. Since 2001 AngloGold Ashanti has offered a voluntary counseling and HIV testing
program for employees in South Africa. In 2002 AngloGold Ashanti began to offer anti-retroviral therapy (ART) to HIV positive
employees who met the current medical criteria for the initiation of ART. From April 2003, AngloGold Ashanti has treated all
eligible employees desiring it. Currently approximately 4,600 employees are on the wellness program and as at December
2007, approximately 2,100 employees were receiving treatment using anti-retroviral drugs.
The cost of providing rigorous outcome-focused disease management of employees with AIDS, including the provision of an
anti-retroviral therapy, is on average R1,300 ($185) per employee on treatment per month. It is not yet possible to develop an
accurate cost estimate of the program in its entirety, given uncertainties such as drug prices and the ultimate rate of employee
participation.
anti-retroviral therapy, is on average R1,300 ($185) per employee on treatment per month. It is not yet possible to develop an
accurate cost estimate of the program in its entirety, given uncertainties such as drug prices and the ultimate rate of employee
participation.
AngloGold Ashanti does not expect the cost that it will incur related to the prevention of HIV infection and the treatment of AIDS
to materially and adversely affect its results of operations. Nevertheless, it is not possible to determine with certainty the costs
that AngloGold Ashanti may incur in the future in addressing this issue, and consequently its results of operations and its
financial condition could be adversely affected.
to materially and adversely affect its results of operations. Nevertheless, it is not possible to determine with certainty the costs
that AngloGold Ashanti may incur in the future in addressing this issue, and consequently its results of operations and its
financial condition could be adversely affected.
AngloGold Ashanti faces certain risks in dealing with malaria, particularly at its operations located in Africa, which
may have an adverse effect on its results of operations.
may have an adverse effect on its results of operations.
Malaria is a significant health risk at all of AngloGold Ashanti’s operations in Central, West and East Africa where the disease
assumes epidemic proportions because of ineffective national control programs. The disease is a major cause of death in
young children and pregnant women but also gives rise to fatalities and absenteeism in adult men. Consequently, if
uncontrolled, the disease could have an adverse effect upon productivity and profitability levels of AngloGold Ashanti’s
operations located in these regions.
assumes epidemic proportions because of ineffective national control programs. The disease is a major cause of death in
young children and pregnant women but also gives rise to fatalities and absenteeism in adult men. Consequently, if
uncontrolled, the disease could have an adverse effect upon productivity and profitability levels of AngloGold Ashanti’s
operations located in these regions.
The treatment of occupational health diseases and the potential liabilities related to occupational health diseases may
have an adverse effect upon the results of AngloGold Ashanti’s operations and its financial condition.
have an adverse effect upon the results of AngloGold Ashanti’s operations and its financial condition.
The primary areas of focus in respect of occupational health within AngloGold Ashanti’s operations are noise-induced hearing
loss (NIHL), occupational lung diseases (OLD) and tuberculosis (TB). AngloGold Ashanti provides occupational health services
to its employees at its occupational health centers and it continues to improve preventative occupational hygiene initiatives. If
the costs associated with providing such occupational health services increase, such increase could have an adverse effect on
AngloGold Ashanti’s results of operations and its financial condition.
loss (NIHL), occupational lung diseases (OLD) and tuberculosis (TB). AngloGold Ashanti provides occupational health services
to its employees at its occupational health centers and it continues to improve preventative occupational hygiene initiatives. If
the costs associated with providing such occupational health services increase, such increase could have an adverse effect on
AngloGold Ashanti’s results of operations and its financial condition.
Furthermore, the South African government, by way of a cabinet resolution in 1999, proposed a possible combination and
alignment of benefits of the Occupational Diseases in Mines and Works Act (ODMWA) that provides for compensation to
miners who have OLD, TB and combinations thereof, and the Compensation for Occupational Injuries and Diseases Act
(COIDA) that provides for compensation to non-miners who have OLD.
alignment of benefits of the Occupational Diseases in Mines and Works Act (ODMWA) that provides for compensation to
miners who have OLD, TB and combinations thereof, and the Compensation for Occupational Injuries and Diseases Act
(COIDA) that provides for compensation to non-miners who have OLD.
COIDA provides for compensation payments to workers suffering permanent disabilities from OLD, which are classified as
pension liabilities if the permanent disability is above a certain threshold, or a lump sum compensation payment if the
permanent disability is below a certain threshold. ODMWA only provides for a lump sum compensation payment to workers
suffering from OLD. The capitalized value of a pension liability (in accordance with COIDA) is usually greater than that of a
lump sum compensation payment (under ODMWA). In addition, under COIDA compensation becomes payable at a lower
threshold of permanent disability than under ODMWA. It is estimated that under COIDA about two to three times more of
AngloGold Ashanti’s employees would be compensated as compared with those eligible for compensation under ODMWA.
pension liabilities if the permanent disability is above a certain threshold, or a lump sum compensation payment if the
permanent disability is below a certain threshold. ODMWA only provides for a lump sum compensation payment to workers
suffering from OLD. The capitalized value of a pension liability (in accordance with COIDA) is usually greater than that of a
lump sum compensation payment (under ODMWA). In addition, under COIDA compensation becomes payable at a lower
threshold of permanent disability than under ODMWA. It is estimated that under COIDA about two to three times more of
AngloGold Ashanti’s employees would be compensated as compared with those eligible for compensation under ODMWA.
If the proposed combination of COIDA and ODMWA were to occur, this could further increase the level of compensation claims
AngloGold Ashanti could be subject to and consequently could have an adverse effect on its financial condition.
AngloGold Ashanti could be subject to and consequently could have an adverse effect on its financial condition.
28
Mr Thembekile Mankayi instituted a legal action against AngloGold Ashanti in October 2006 in the High Court, Witwatersrand
Local Division. Mr Mankayi is claiming approximately R2.6 million for damages allegedly suffered by him as a result of silicosis
allegedly contracted whilst working on mines now owned by AngloGold Ashanti. An exception has been filed by AngloGold
Ashanti against the claim and was heard in the High Court early February 2008. AngloGold Ashanti filed the exception on the
basis that mine employers are insured in terms ODMWA and COIDA against compensable diseases and this prevents any
delictual claims by employees against employers. Judgment has been reserved. If AngloGold Ashanti is unsuccessful in
defending this suit, it could be subject to numerous similar claims which could have an adverse effect on its financial condition.
Local Division. Mr Mankayi is claiming approximately R2.6 million for damages allegedly suffered by him as a result of silicosis
allegedly contracted whilst working on mines now owned by AngloGold Ashanti. An exception has been filed by AngloGold
Ashanti against the claim and was heard in the High Court early February 2008. AngloGold Ashanti filed the exception on the
basis that mine employers are insured in terms ODMWA and COIDA against compensable diseases and this prevents any
delictual claims by employees against employers. Judgment has been reserved. If AngloGold Ashanti is unsuccessful in
defending this suit, it could be subject to numerous similar claims which could have an adverse effect on its financial condition.
In response to the effects of silicosis in labor sending communities, a number of mining companies (under the auspices of the
Chamber of Mines), together with the National Union of Mineworkers (NUM) which is the largest union in the mining sector and
the national and regional departments of health have embarked on a project to assist in the delivery of compensation and relief
to communities that have been affected.
Chamber of Mines), together with the National Union of Mineworkers (NUM) which is the largest union in the mining sector and
the national and regional departments of health have embarked on a project to assist in the delivery of compensation and relief
to communities that have been affected.
The costs associated with the pumping of water inflows from closed mines adjacent to AngloGold Ashanti’s
operations could have an adverse effect upon its results of operations.
operations could have an adverse effect upon its results of operations.
Certain of AngloGold Ashanti’s mining operations are located adjacent to the mining operations of other mining companies.
The closure of a mining operation may have an impact upon continued operations at the adjacent mine if appropriate
preventative steps are not taken. In particular, this can include the ingress of underground water where pumping operations at
the adjacent closed mine are suspended. Such ingress could have an adverse effect upon any one of AngloGold Ashanti’s
mining operations as a result of property damage, disruption to operations and additional pumping costs.
The closure of a mining operation may have an impact upon continued operations at the adjacent mine if appropriate
preventative steps are not taken. In particular, this can include the ingress of underground water where pumping operations at
the adjacent closed mine are suspended. Such ingress could have an adverse effect upon any one of AngloGold Ashanti’s
mining operations as a result of property damage, disruption to operations and additional pumping costs.
AngloGold Ashanti has embarked on legal action in South Africa after the owner of an adjacent mine put the company owning
the adjacent mining operation into liquidation, raising questions about its and other companies’ willingness to meet their water
pumping obligations.
the adjacent mining operation into liquidation, raising questions about its and other companies’ willingness to meet their water
pumping obligations.
The relevant mining companies have entered into a settlement agreement. As part of the settlement arrangement the mining
companies have formed and registered a not-for-profit company, known as the Margaret Water Company, to conduct water
pumping activities from the highest lying shaft which is currently owned by Stilfontein Gold Mining Company (in liquidation).
The three mining companies will contribute equally to the cost of establishing and initially running the Margaret Water
Company.
companies have formed and registered a not-for-profit company, known as the Margaret Water Company, to conduct water
pumping activities from the highest lying shaft which is currently owned by Stilfontein Gold Mining Company (in liquidation).
The three mining companies will contribute equally to the cost of establishing and initially running the Margaret Water
Company.
The occurrence of events for which AngloGold Ashanti is not insured or for which its insurance is inadequate may
adversely affect its cash flows and overall profitability.
adversely affect its cash flows and overall profitability.
AngloGold Ashanti maintains insurance to protect only against catastrophic events which could have a significant adverse
effect on its operations and profitability. This insurance is maintained in amounts that are believed to be reasonable depending
upon the circumstances surrounding each identified risk.
effect on its operations and profitability. This insurance is maintained in amounts that are believed to be reasonable depending
upon the circumstances surrounding each identified risk.
However, AngloGold Ashanti’s insurance does not cover all potential risks associated with its business. In addition, AngloGold
Ashanti may elect not to insure certain risks, due to the high premiums associated with insuring those risks or for various other
reasons, including an assessment that the risks are remote. Furthermore, AngloGold Ashanti may not be able to obtain
insurance coverage at acceptable premiums. AngloGold Ashanti has a captive insurance company, namely AGRe Insurance
Company Limited, which participates at various levels in certain of the insurances maintained by AngloGold Ashanti. The
occurrence of events for which it is not insured may adversely affect AngloGold Ashanti’s cash flows, overall profitability and its
financial condition.
Ashanti may elect not to insure certain risks, due to the high premiums associated with insuring those risks or for various other
reasons, including an assessment that the risks are remote. Furthermore, AngloGold Ashanti may not be able to obtain
insurance coverage at acceptable premiums. AngloGold Ashanti has a captive insurance company, namely AGRe Insurance
Company Limited, which participates at various levels in certain of the insurances maintained by AngloGold Ashanti. The
occurrence of events for which it is not insured may adversely affect AngloGold Ashanti’s cash flows, overall profitability and its
financial condition.
Risks related to AngloGold Ashanti’s ordinary shares and American Depositary Shares (ADSs)
Sales of large quantities of AngloGold Ashanti’s ordinary shares and ADSs, or the perception that these sales may
occur, could adversely affect the prevailing market price of such securities, as could future offerings of AngloGold
Ashanti’s ordinary shares, ADSs or securities exchangeable or exercisable for ordinary shares or ADSs..
occur, could adversely affect the prevailing market price of such securities, as could future offerings of AngloGold
Ashanti’s ordinary shares, ADSs or securities exchangeable or exercisable for ordinary shares or ADSs..
The market price of AngloGold Ashanti’s ordinary shares or ADSs could fall if large quantities of ordinary shares or ADSs are
sold in the public market, or there is the perception in the marketplace that such sales could occur. Subject to applicable
securities laws, holders of AngloGold Ashanti’s ordinary shares or ADSs may decide to sell them at any time. The market price
of AngloGold Ashanti’s ordinary shares or ADSs could also fall as a result of any future offerings it makes of ordinary shares,
ADSs, or securities exchangeable or exercisable for its ordinary shares or ADSs, or the perception in the marketplace that
these sales might occur. AngloGold Ashanti may make such offerings, including offerings of additional ADS rights, letters of
allocation or similar securities at any time or from time to time in the future.
sold in the public market, or there is the perception in the marketplace that such sales could occur. Subject to applicable
securities laws, holders of AngloGold Ashanti’s ordinary shares or ADSs may decide to sell them at any time. The market price
of AngloGold Ashanti’s ordinary shares or ADSs could also fall as a result of any future offerings it makes of ordinary shares,
ADSs, or securities exchangeable or exercisable for its ordinary shares or ADSs, or the perception in the marketplace that
these sales might occur. AngloGold Ashanti may make such offerings, including offerings of additional ADS rights, letters of
allocation or similar securities at any time or from time to time in the future.
29
AngloGold Ashanti has entered into a registration rights agreement with Anglo American plc (AA plc) that would facilitate
US registration of additional offers and sales of AngloGold Ashanti shares that AA plc makes in the future, subject to certain
conditions. Sales of AngloGold Ashanti ordinary shares or AngloGold Ashanti ADSs if substantial, or the perception that sales
may occur and be substantial, could exert downward pressure on the prevailing market prices for AngloGold Ashanti ordinary
shares or AngloGold Ashanti ADSs, causing their market prices to decline. In April 2006, AA plc sold 19,685,170 AngloGold
Ashanti ordinary shares and, in October 2007, sold an additional 69,100,000 AngloGold Ashanti ordinary shares. These and
other sales combined with the dilutive effect of AngloGold Ashanti’s issuance of 9,970,732 ordinary shares in April 2006,
reduced AA plc’s shareholding in AngloGold Ashanti from approximately 51 percent of issued AngloGold Ashanti shares as at
April 19, 2006 to approximately 16.6 percent as at October 9, 2007. AA plc has stated that it intends to reduce and ultimately
exit its gold company holdings and that it will continue to explore all available options to exit AngloGold Ashanti in an orderly
manner. Sales or distributions of substantial amounts of AngloGold Ashanti ordinary shares or AngloGold Ashanti ADSs or the
perception that sales or distributions may occur, could adversely affect the market price for AngloGold Ashanti ordinary shares
or AngloGold Ashanti ADSs.
US registration of additional offers and sales of AngloGold Ashanti shares that AA plc makes in the future, subject to certain
conditions. Sales of AngloGold Ashanti ordinary shares or AngloGold Ashanti ADSs if substantial, or the perception that sales
may occur and be substantial, could exert downward pressure on the prevailing market prices for AngloGold Ashanti ordinary
shares or AngloGold Ashanti ADSs, causing their market prices to decline. In April 2006, AA plc sold 19,685,170 AngloGold
Ashanti ordinary shares and, in October 2007, sold an additional 69,100,000 AngloGold Ashanti ordinary shares. These and
other sales combined with the dilutive effect of AngloGold Ashanti’s issuance of 9,970,732 ordinary shares in April 2006,
reduced AA plc’s shareholding in AngloGold Ashanti from approximately 51 percent of issued AngloGold Ashanti shares as at
April 19, 2006 to approximately 16.6 percent as at October 9, 2007. AA plc has stated that it intends to reduce and ultimately
exit its gold company holdings and that it will continue to explore all available options to exit AngloGold Ashanti in an orderly
manner. Sales or distributions of substantial amounts of AngloGold Ashanti ordinary shares or AngloGold Ashanti ADSs or the
perception that sales or distributions may occur, could adversely affect the market price for AngloGold Ashanti ordinary shares
or AngloGold Ashanti ADSs.
Fluctuations in the exchange rate of different currencies may reduce the market value of AngloGold Ashanti’s
securities, as well as the market value of any dividends or distributions paid by AngloGold Ashanti.
securities, as well as the market value of any dividends or distributions paid by AngloGold Ashanti.
AngloGold Ashanti has historically declared all dividends in South African rands. As a result, exchange rate movements may
have affected and may continue to affect the Australian dollar, the British pound, the Ghanaian cedi and the US dollar value of
these dividends, as well as of any other distributions paid by the relevant depositary to investors that hold AngloGold Ashanti’s
securities. This may reduce the value of these securities to investors. The Memorandum and Articles of Association of the
company allows for dividends and distributions to be declared in any currency at the discretion of AngloGold Ashanti’s board of
directors, or its shareholders at a general meeting. If and to the extent that AngloGold Ashanti opts to declare dividends and
distributions in dollars, exchange rate movements will not affect the dollar value of any dividends or distributions, nevertheless,
the value of any dividend or distribution in Australian dollars, British pounds, Ghanaian cedis or South African rands will
continue to be affected. If and to the extent that dividends and distributions are declared in South African rands, exchange rate
movements will continue to affect the Australian dollar, British pound, Ghanaian cedi and US dollar value of these dividends
and distributions. Furthermore, the market value of AngloGold Ashanti’s securities as expressed in Australian dollars, British
pounds, Ghanaian cedis, US dollars and South African rands will continue to fluctuate in part as a result of foreign exchange
fluctuations.
have affected and may continue to affect the Australian dollar, the British pound, the Ghanaian cedi and the US dollar value of
these dividends, as well as of any other distributions paid by the relevant depositary to investors that hold AngloGold Ashanti’s
securities. This may reduce the value of these securities to investors. The Memorandum and Articles of Association of the
company allows for dividends and distributions to be declared in any currency at the discretion of AngloGold Ashanti’s board of
directors, or its shareholders at a general meeting. If and to the extent that AngloGold Ashanti opts to declare dividends and
distributions in dollars, exchange rate movements will not affect the dollar value of any dividends or distributions, nevertheless,
the value of any dividend or distribution in Australian dollars, British pounds, Ghanaian cedis or South African rands will
continue to be affected. If and to the extent that dividends and distributions are declared in South African rands, exchange rate
movements will continue to affect the Australian dollar, British pound, Ghanaian cedi and US dollar value of these dividends
and distributions. Furthermore, the market value of AngloGold Ashanti’s securities as expressed in Australian dollars, British
pounds, Ghanaian cedis, US dollars and South African rands will continue to fluctuate in part as a result of foreign exchange
fluctuations.
The recently announced proposal by the South African Government to replace the Secondary Tax on Companies with
a withholding tax on dividends and other distributions may impact on the amount of dividends or other distributions
received by the company’s shareholders.
a withholding tax on dividends and other distributions may impact on the amount of dividends or other distributions
received by the company’s shareholders.
On February 21, 2007, the South African Government announced a proposal to replace Secondary Tax on Companies with a
10 percent withholding tax on dividends and other distributions payable to shareholders. This proposal is expected to be
implemented in phases between 2007 and 2009. Although this may reduce the tax payable by the South African operations of
the company thereby increasing distributable earnings, the withholding tax will generally reduce the amount of dividends or
other distributions received by AngloGold Ashanti shareholders.
10 percent withholding tax on dividends and other distributions payable to shareholders. This proposal is expected to be
implemented in phases between 2007 and 2009. Although this may reduce the tax payable by the South African operations of
the company thereby increasing distributable earnings, the withholding tax will generally reduce the amount of dividends or
other distributions received by AngloGold Ashanti shareholders.
30
Item 4: Information on the company
AngloGold Ashanti, as it conducts business today, was formed on April 26, 2004 following the business combination of
AngloGold Limited (AngloGold) with Ashanti Goldfields Company Limited (Ashanti) which was incorporated in Ghana on
August 19, 1974.
AngloGold Limited (AngloGold) with Ashanti Goldfields Company Limited (Ashanti) which was incorporated in Ghana on
August 19, 1974.
4A.
History and development of the company
AngloGold Ashanti, headquartered in Johannesburg, South Africa, is a global gold company with a portfolio of long-life,
relatively low-cost assets and differing orebody types in key gold producing regions. The company's 20 operations are located
in ten countries (Argentina, Australia, Brazil, Ghana, Guinea, Mali, Namibia, South Africa, Tanzania and the United States of
America), and are supported by extensive exploration activities. The combined proven and probable Ore Reserves of the group
amounted to 72.2 million ounces as at December 31, 2007.
relatively low-cost assets and differing orebody types in key gold producing regions. The company's 20 operations are located
in ten countries (Argentina, Australia, Brazil, Ghana, Guinea, Mali, Namibia, South Africa, Tanzania and the United States of
America), and are supported by extensive exploration activities. The combined proven and probable Ore Reserves of the group
amounted to 72.2 million ounces as at December 31, 2007.
The primary listing of the company's ordinary shares is on the JSE Limited (JSE) in South Africa. Its ordinary shares are also
listed on stock exchanges in London, Paris and Ghana, as well as being quoted in Brussels in the form of International
Depositary Receipts (IDRs), in New York in the form of American Depositary Shares (ADSs), in Australia, in the form of
Clearing House Electronic Subregister System Depositary Interests (CDIs) and in Ghana, in the form of Ghanaian Depositary
Shares (GhDSs).
listed on stock exchanges in London, Paris and Ghana, as well as being quoted in Brussels in the form of International
Depositary Receipts (IDRs), in New York in the form of American Depositary Shares (ADSs), in Australia, in the form of
Clearing House Electronic Subregister System Depositary Interests (CDIs) and in Ghana, in the form of Ghanaian Depositary
Shares (GhDSs).
AngloGold Ashanti Limited (formerly AngloGold Limited) (Registration number 1944/017354/06) was incorporated in the
Republic of South Africa in 1944 under the name of Vaal Reefs Exploration and Mining Company Limited and operates under
the South African Companies Act 61 of 1973, as amended. Its principal executive office is located at 76 Jeppe Street,
Newtown, Johannesburg, 2001 (P.O. Box 62117, Marshalltown, 2107) South Africa (Telephone +27 11 637 6000), AngloGold
Ashanti's US offices are at the offices of AngloGold Ashanti North America Incorporated, 7400 East Orchard Road, Suite 350,
Greenwood Village, CO 80111.
Republic of South Africa in 1944 under the name of Vaal Reefs Exploration and Mining Company Limited and operates under
the South African Companies Act 61 of 1973, as amended. Its principal executive office is located at 76 Jeppe Street,
Newtown, Johannesburg, 2001 (P.O. Box 62117, Marshalltown, 2107) South Africa (Telephone +27 11 637 6000), AngloGold
Ashanti's US offices are at the offices of AngloGold Ashanti North America Incorporated, 7400 East Orchard Road, Suite 350,
Greenwood Village, CO 80111.
AngloGold Limited was formed in June 1998 through the consolidation of the gold interests of Anglo American Corporation of
South Africa Limited (AAC) and its associated companies, namely East Rand Gold and Uranium Company Limited, Eastvaal
Gold Holdings Limited, Southvaal Holdings Limited, Free State Consolidated Gold Mines Limited, Elandsrand Gold Mining
Company Limited, H.J. Joel Gold Mining Company Limited and Western Deep Levels Limited into a single, focused,
independent, gold company. Vaal Reefs Exploration and Mining Company Limited (Vaal Reefs), the vehicle for the
consolidation, changed its name to AngloGold Limited and increased its authorized share capital, effective March 30, 1998.
South Africa Limited (AAC) and its associated companies, namely East Rand Gold and Uranium Company Limited, Eastvaal
Gold Holdings Limited, Southvaal Holdings Limited, Free State Consolidated Gold Mines Limited, Elandsrand Gold Mining
Company Limited, H.J. Joel Gold Mining Company Limited and Western Deep Levels Limited into a single, focused,
independent, gold company. Vaal Reefs Exploration and Mining Company Limited (Vaal Reefs), the vehicle for the
consolidation, changed its name to AngloGold Limited and increased its authorized share capital, effective March 30, 1998.
AngloGold acquired minority shareholders interests in Driefontein Consolidated Limited (17 percent); Anmercosa Mining (West
Africa) Limited (100 percent); Western Ultra Deep Levels Limited (89 percent); Eastern Gold Holdings Limited (52 percent);
Erongo Mining and Exploration Company Limited (70 percent).
Africa) Limited (100 percent); Western Ultra Deep Levels Limited (89 percent); Eastern Gold Holdings Limited (52 percent);
Erongo Mining and Exploration Company Limited (70 percent).
In 1999, AngloGold purchased Minorco's gold interests in North and South America and acquired Acacia Resources in
Australia.
Australia.
In 2000, AngloGold acquired a 40 percent interest in the Morila mine in Mali from Randgold Resources Limited, acquired a
50 percent interest in the Geita mine in Tanzania from Ashanti Goldfields Company Limited (Ashanti) (in 2004, following the
business combination with Ashanti, AngloGold acquired the remaining 50 percent interest) and in support of its market
development initiatives acquired a 25 percent interest in OroAfrica, South Africa's largest manufacturer of gold jewellery.
50 percent interest in the Geita mine in Tanzania from Ashanti Goldfields Company Limited (Ashanti) (in 2004, following the
business combination with Ashanti, AngloGold acquired the remaining 50 percent interest) and in support of its market
development initiatives acquired a 25 percent interest in OroAfrica, South Africa's largest manufacturer of gold jewellery.
In 2001, AngloGold sold the Elandsrand and Deelkraal mines to Harmony Gold Mining Company Limited (Harmony), disposed
of AngloGold's interests in No. 2 Shaft Vaal River Operations to African Rainbow Minerals (ARM) and made an unsuccessful
take-over bid for Normandy Mining Limited.
of AngloGold's interests in No. 2 Shaft Vaal River Operations to African Rainbow Minerals (ARM) and made an unsuccessful
take-over bid for Normandy Mining Limited.
In 2002, the sale of AngloGold’s Free State assets to ARM and Harmony became effective. Also in 2002, AngloGold acquired
an additional 46.25 percent of the equity, as well as the total loan assignment, of Cerro Vanguardia SA from Pérez Companc
International SA, increasing its interest in Cerro Vanguardia to 92.5 percent and disposed of AngloGold's wholly owned
subsidiary, Stone and Allied Industries (O.F.S.) Limited.
an additional 46.25 percent of the equity, as well as the total loan assignment, of Cerro Vanguardia SA from Pérez Companc
International SA, increasing its interest in Cerro Vanguardia to 92.5 percent and disposed of AngloGold's wholly owned
subsidiary, Stone and Allied Industries (O.F.S.) Limited.
31
In 2003, AngloGold disposed of its wholly owned Amapari project to Mineração Pedra Branca do Amapari, finalized the sale of
its 49 percent stake in the Gawler Craton Joint Venture, including the Tunkillia project located in South Australia to Helix
Resources Limited, concluded the sale of its interest in the Jerritt Canyon Joint Venture to Queenstake Resources USA Inc,
disposed of its entire investment in East African Gold Mines Limited and in Randgold Resources Limited and purchased a
portion of the Driefontein mining area in South Africa from Gold Fields Limited.
its 49 percent stake in the Gawler Craton Joint Venture, including the Tunkillia project located in South Australia to Helix
Resources Limited, concluded the sale of its interest in the Jerritt Canyon Joint Venture to Queenstake Resources USA Inc,
disposed of its entire investment in East African Gold Mines Limited and in Randgold Resources Limited and purchased a
portion of the Driefontein mining area in South Africa from Gold Fields Limited.
In 2004, AngloGold sold its Western Tanami project to Tanami Gold NL in Australia, the business combination between
AngloGold and Ashanti Goldfields Company Limited was completed, resulting in the company changing its name to AngloGold
Ashanti Limited, AngloGold Holdings plc, a subsidiary of AngloGold, completed an offering of $1 billion principal amount
2.375 percent convertible bonds, due 2009 and guaranteed by AngloGold Ashanti. Also in 2004, AngloGold Ashanti acquired
a 29.8 percent stake in Trans-Siberian Gold plc (TSG), sold its Union Reefs assets to the Burnside Joint Venture, comprising
subsidiaries of Northern Gold NL (50 percent) and Harmony (50 percent), disposed of its entire interest in Ashanti Goldfields
Zimbabwe Limited to Mwana Africa Holdings (Proprietary) Limited, subscribed for a 12.3 percent stake in the expanded issued
capital of Philippines explorer Red 5 Limited and sold its 40 percent equity interest in Tameng Mining and Exploration (Pty)
Limited of South Africa (Tameng) to Mahube Mining (Pty) Limited.
AngloGold and Ashanti Goldfields Company Limited was completed, resulting in the company changing its name to AngloGold
Ashanti Limited, AngloGold Holdings plc, a subsidiary of AngloGold, completed an offering of $1 billion principal amount
2.375 percent convertible bonds, due 2009 and guaranteed by AngloGold Ashanti. Also in 2004, AngloGold Ashanti acquired
a 29.8 percent stake in Trans-Siberian Gold plc (TSG), sold its Union Reefs assets to the Burnside Joint Venture, comprising
subsidiaries of Northern Gold NL (50 percent) and Harmony (50 percent), disposed of its entire interest in Ashanti Goldfields
Zimbabwe Limited to Mwana Africa Holdings (Proprietary) Limited, subscribed for a 12.3 percent stake in the expanded issued
capital of Philippines explorer Red 5 Limited and sold its 40 percent equity interest in Tameng Mining and Exploration (Pty)
Limited of South Africa (Tameng) to Mahube Mining (Pty) Limited.
In January 2005, AngloGold Ashanti completed a substantial restructuring of its hedge book. Also in 2005, AngloGold Ashanti
signed a three-year $700 million revolving credit facility, sold exploration assets in the Laverton area in Australia, disposed of
its La Rescatada project to ARUNANI SAC, a local Peruvian corporation, with an option to repurchase 60 percent of the project
should economically viable reserves in excess of 2 million ounces be identified within three years. The Director-General of
Minerals and Energy notified AngloGold Ashanti in August 2005 that application for the new order mining rights in terms of the
South African Mineral Resources and Petroleum Development Act had been granted.
signed a three-year $700 million revolving credit facility, sold exploration assets in the Laverton area in Australia, disposed of
its La Rescatada project to ARUNANI SAC, a local Peruvian corporation, with an option to repurchase 60 percent of the project
should economically viable reserves in excess of 2 million ounces be identified within three years. The Director-General of
Minerals and Energy notified AngloGold Ashanti in August 2005 that application for the new order mining rights in terms of the
South African Mineral Resources and Petroleum Development Act had been granted.
In 2006, AngloGold Ashanti raised $500 million in an equity offering, signed a Heads of Agreement with Antofagasta plc to
jointly explore a highly prospective belt in Southern Colombia for new gold and copper deposits which was mutually dissolved
in 2007, disposed of its entire business undertaking, related to the Bibiani mine and Bibiani North prospecting permit to Central
African Gold plc, entered into a 50:50 strategic alliance with Russian gold and silver producer, OAO Inter-Regional Research
and Production Association Polymetal (Polymetal), in terms of which Polymetal and AngloGold Ashanti would co-operate in
exploration and the acquisition and development of gold mining opportunities within the Russian Federation and implemented
an empowerment transaction with two components: the development of an employee share ownership plan (ESOP) and the
acquisition by Izingwe Holdings (Proprietary) Limited (an empowerment company) of an equity interest in AngloGold Ashanti
and acquired an effective 8.7 percent stake in China explorer, Dynasty Gold Corporation.
jointly explore a highly prospective belt in Southern Colombia for new gold and copper deposits which was mutually dissolved
in 2007, disposed of its entire business undertaking, related to the Bibiani mine and Bibiani North prospecting permit to Central
African Gold plc, entered into a 50:50 strategic alliance with Russian gold and silver producer, OAO Inter-Regional Research
and Production Association Polymetal (Polymetal), in terms of which Polymetal and AngloGold Ashanti would co-operate in
exploration and the acquisition and development of gold mining opportunities within the Russian Federation and implemented
an empowerment transaction with two components: the development of an employee share ownership plan (ESOP) and the
acquisition by Izingwe Holdings (Proprietary) Limited (an empowerment company) of an equity interest in AngloGold Ashanti
and acquired an effective 8.7 percent stake in China explorer, Dynasty Gold Corporation.
Also in 2006, AngloGold Ashanti and B2Gold (formerly Bema Gold) formed a new company to jointly explore a select group of
AngloGold Ashanti’s mineral opportunities located in northern Colombia, South America and AngloGold Ashanti (U.S.A.)
Exploration Inc, International Tower Hill Mines Ltd (ITH) and Talon Gold Alaska, Inc. (Talon), a wholly owned subsidiary of ITH,
entered into an Asset Purchase and Sale and Indemnity Agreement whereby AngloGold Ashanti sold to Talon a 100 percent
interest in six Alaskan mineral exploration properties and associated databases in return for a 19.99 percent interest in ITH.
AngloGold Ashanti has the option to increase or dilute its stake in these projects, subject to certain conditions.
AngloGold Ashanti’s mineral opportunities located in northern Colombia, South America and AngloGold Ashanti (U.S.A.)
Exploration Inc, International Tower Hill Mines Ltd (ITH) and Talon Gold Alaska, Inc. (Talon), a wholly owned subsidiary of ITH,
entered into an Asset Purchase and Sale and Indemnity Agreement whereby AngloGold Ashanti sold to Talon a 100 percent
interest in six Alaskan mineral exploration properties and associated databases in return for a 19.99 percent interest in ITH.
AngloGold Ashanti has the option to increase or dilute its stake in these projects, subject to certain conditions.
On February 5, 2007, AngloGold Ashanti informed the market that a partial slope failure had occurred in an intermediate
footwall of the Nyankanga pit at Geita Gold Mine on Saturday February 3, 2007. The pit had been monitored by slope stability
radar and was safely evacuated in advance of the failure. No injury to employees or contractors occurred and there was no
damage to equipment.
footwall of the Nyankanga pit at Geita Gold Mine on Saturday February 3, 2007. The pit had been monitored by slope stability
radar and was safely evacuated in advance of the failure. No injury to employees or contractors occurred and there was no
damage to equipment.
On February 13, 2007, the AngloGold Ashanti board approved a project to develop the Mponeng mine below the 120 level,
adding some 2.5 million ounces of gold and 8 years to the mine's life, at a capital cost of $252 million. Production is due to
commence in 2013.
adding some 2.5 million ounces of gold and 8 years to the mine's life, at a capital cost of $252 million. Production is due to
commence in 2013.
On May 4, 2007, AngloGold Ashanti announced that Messrs CB Brayshaw and AJ Trahar retired from the board effective
May 5, 2007. AngloGold Ashanti further announced that Mrs C Carroll had been appointed as a non-executive director with
effect from May 5, 2007.
May 5, 2007. AngloGold Ashanti further announced that Mrs C Carroll had been appointed as a non-executive director with
effect from May 5, 2007.
On June 1, 2007, AngloGold Ashanti Australia Ltd announced the commencement of a pre-feasibility study at the Tropicana
gold project in Western Australia. Tropicana, located 400 kilometers north-east of Kalgoorlie, is a joint venture between
AngloGold Ashanti Australia (70 percent) and Independence Group NL (30 percent free carried to completion of the pre-
feasibility study). The study is expected to be completed in mid-2008 and will focus on the Tropicana and Havana zones and
will only consider open-cut resources.
gold project in Western Australia. Tropicana, located 400 kilometers north-east of Kalgoorlie, is a joint venture between
AngloGold Ashanti Australia (70 percent) and Independence Group NL (30 percent free carried to completion of the pre-
feasibility study). The study is expected to be completed in mid-2008 and will focus on the Tropicana and Havana zones and
will only consider open-cut resources.
32
On June 8, 2007, AngloGold Ashanti announced that it would sell, subject to certain conditions, to a consortium of Mintails
South Africa (Pty) Limited/DRD South African Operations (Pty) Limited Joint Venture most of the remaining moveable and
immovable assets of Ergo, the surface reclamation operation east of Johannesburg, discontinued in March 2005. The site is
currently being rehabilitated by AngloGold Ashanti. The joint venture will operate, for its own account, under the AngloGold
Ashanti authorizations until new order mining rights have been obtained and transferred to the joint venture.
South Africa (Pty) Limited/DRD South African Operations (Pty) Limited Joint Venture most of the remaining moveable and
immovable assets of Ergo, the surface reclamation operation east of Johannesburg, discontinued in March 2005. The site is
currently being rehabilitated by AngloGold Ashanti. The joint venture will operate, for its own account, under the AngloGold
Ashanti authorizations until new order mining rights have been obtained and transferred to the joint venture.
On July 11, 2007, AngloGold Ashanti announced the resignation from the board of Mr AH Calver as Mr WA Nairn's alternate.
On July 31, 2007, the board of directors announced the retirement of Mr RM Godsell, (AngloGold Ashanti's Chief Executive
Officer) and the resignation of Mr R Carvalho Silva (Chief Operating Officer – International) from the company effective
September 30, 2007 and the appointments of Mr M Cutifani as Chief Executive Officer and Mr N Nicolau, (formerly Chief
Operating Officer – Africa) as Chief Operating Officer for all operations as of October 1, 2007. Subsequently, on November 12,
2007, it was announced that due to further operational management restructure, Mr N Nicolau had resigned from the board to
pursue other opportunities.
Officer) and the resignation of Mr R Carvalho Silva (Chief Operating Officer – International) from the company effective
September 30, 2007 and the appointments of Mr M Cutifani as Chief Executive Officer and Mr N Nicolau, (formerly Chief
Operating Officer – Africa) as Chief Operating Officer for all operations as of October 1, 2007. Subsequently, on November 12,
2007, it was announced that due to further operational management restructure, Mr N Nicolau had resigned from the board to
pursue other opportunities.
In August 2007, AngloGold Ashanti through the South African Chamber of Mines signed a two-year wage agreement effective
from July 2007, with the three recognized mining unions. This agreement covers some 29,000 category 3-8 workers, miners,
artisans and officials in the company's South African operations and was achieved through a mediated outcome. In terms of
the agreement: the first year increases from July 2007 range from 10 percent for the lower categories of worker to 8 percent for
officials and include a special dispensation for the benefit of artisans and some skilled occupations. Some improvements to
leave conditions and housing allowances were also agreed. Second year increases from July 2008 will be determined at South
African CPIX plus 1 percent with a minimum of an 8 percent increase.
from July 2007, with the three recognized mining unions. This agreement covers some 29,000 category 3-8 workers, miners,
artisans and officials in the company's South African operations and was achieved through a mediated outcome. In terms of
the agreement: the first year increases from July 2007 range from 10 percent for the lower categories of worker to 8 percent for
officials and include a special dispensation for the benefit of artisans and some skilled occupations. Some improvements to
leave conditions and housing allowances were also agreed. Second year increases from July 2008 will be determined at South
African CPIX plus 1 percent with a minimum of an 8 percent increase.
The company completed the acquisition of minority interests previously held by the Government of Ghana (5 percent) and the
International Finance Corporation (10 percent) in the Iduapriem and Teberebie mine effective September 1, 2007 for a total
cash consideration of $25 million. Iduapriem and Teberebie is now wholly-owned by AngloGold Ashanti. The company is in
the process of finalizing the purchase price allocation of fixed assets. The final purchase price allocation is not expected to
vary significantly from the preliminary allocation.
International Finance Corporation (10 percent) in the Iduapriem and Teberebie mine effective September 1, 2007 for a total
cash consideration of $25 million. Iduapriem and Teberebie is now wholly-owned by AngloGold Ashanti. The company is in
the process of finalizing the purchase price allocation of fixed assets. The final purchase price allocation is not expected to
vary significantly from the preliminary allocation.
On September 18, 2007, AngloGold Ashanti announced that Mr M Cutifani was appointed to the board effective September 17,
2007, as Chief Executive Officer designate. Mr Cutifani succeeded Mr RM Godsell as Chief Executive Officer, on his
retirement with effect from October 1, 2007.
2007, as Chief Executive Officer designate. Mr Cutifani succeeded Mr RM Godsell as Chief Executive Officer, on his
retirement with effect from October 1, 2007.
On October 1, 2007, AngloGold Ashanti noted the announcement by Anglo American plc that it intended to offer for sale,
61 million ordinary shares of AngloGold Ashanti in the form of ordinary shares and American Depositary Shares pursuant to the
registration of such securities under AngloGold Ashanti's automatic shelf registration statement.
61 million ordinary shares of AngloGold Ashanti in the form of ordinary shares and American Depositary Shares pursuant to the
registration of such securities under AngloGold Ashanti's automatic shelf registration statement.
On October 2, 2007, AngloGold Ashanti noted the announcement by Anglo American plc that Anglo American had completed
an offering of 67.1 million ordinary shares of AngloGold Ashanti in the form of ordinary shares and American Depositary Shares
(ADS) priced at US$44.00 per ADS (US$44.11 inclusive of uncertificated securities tax payable by investors in ADSs) and
R300.61 per ordinary share (exclusive of uncertificated securities tax). The offering which was launched on October 1, 2007
was increased from the earlier announced 61 million ordinary shares. The offering price represented discounts of 6.16 percent
and 7.84 percent to the closing prices of the ADSs and ordinary shares in New York and Johannesburg, respectively, on
Friday, September 28, 2007. The offering settled on October 9, 2007. On completion of the offering, Anglo American's holding
in AngloGold Ashanti was 17.3 percent. An additional 2 million shares were sold by Anglo American in a private placement,
further reducing its shareholding to 16.6 percent.
an offering of 67.1 million ordinary shares of AngloGold Ashanti in the form of ordinary shares and American Depositary Shares
(ADS) priced at US$44.00 per ADS (US$44.11 inclusive of uncertificated securities tax payable by investors in ADSs) and
R300.61 per ordinary share (exclusive of uncertificated securities tax). The offering which was launched on October 1, 2007
was increased from the earlier announced 61 million ordinary shares. The offering price represented discounts of 6.16 percent
and 7.84 percent to the closing prices of the ADSs and ordinary shares in New York and Johannesburg, respectively, on
Friday, September 28, 2007. The offering settled on October 9, 2007. On completion of the offering, Anglo American's holding
in AngloGold Ashanti was 17.3 percent. An additional 2 million shares were sold by Anglo American in a private placement,
further reducing its shareholding to 16.6 percent.
Following the settlement of the offering and the consequent reduction in shareholding, all the directors representing Anglo
American plc on the AngloGold Ashanti board, namely Mrs C Carroll and Mr R Médori, together with his alternate
Mr PG Whitcutt resigned from the AngloGold Ashanti board, effective October 9, 2007.
American plc on the AngloGold Ashanti board, namely Mrs C Carroll and Mr R Médori, together with his alternate
Mr PG Whitcutt resigned from the AngloGold Ashanti board, effective October 9, 2007.
On December 12, 2007, AngloGold Ashanti announced the successful closing of a $1.15 billion syndicated revolving loan
facility. The new three-year facility will be used to refinance an existing $700 million revolving credit facility (due January
2008), an A$200 million facility and for general corporate purposes.
facility. The new three-year facility will be used to refinance an existing $700 million revolving credit facility (due January
2008), an A$200 million facility and for general corporate purposes.
On January 14, 2008, AngloGold Ashanti announced that it had agreed to acquire 100 percent of Golden Cycle Gold
Corporation (GCGC) through a transaction in which GCGC's shareholders will receive 29 AngloGold Ashanti ADRs for every
100 shares of GCGC common stock held. GCGC holds a 33 percent shareholding in Cripple Creek & Victor while AngloGold
Ashanti holds the remaining 67 percent. The transaction will result in Cripple Creek & Victor being wholly-owned by AngloGold
Ashanti. The transaction is subject to a number of regulatory and statutory approvals, including approval by GCGC
shareholders. The transaction, at the date of announcement was valued at approximately $149 million.
Corporation (GCGC) through a transaction in which GCGC's shareholders will receive 29 AngloGold Ashanti ADRs for every
100 shares of GCGC common stock held. GCGC holds a 33 percent shareholding in Cripple Creek & Victor while AngloGold
Ashanti holds the remaining 67 percent. The transaction will result in Cripple Creek & Victor being wholly-owned by AngloGold
Ashanti. The transaction is subject to a number of regulatory and statutory approvals, including approval by GCGC
shareholders. The transaction, at the date of announcement was valued at approximately $149 million.
33
On January 18, 2008, AngloGold Ashanti provided operation guidance to its fourth quarter 2007 results, in which it was stated
that the company's South African and Geita operations had experienced production difficulties resulting in the group's
production for the quarter to be of the region of 1.4 million ounces.
that the company's South African and Geita operations had experienced production difficulties resulting in the group's
production for the quarter to be of the region of 1.4 million ounces.
On January 25, 2008, AngloGold Ashanti announced that following notification from Eskom regarding interruptions to power
supplies, it had halted mining and gold recovery operations on all of its South African operations. Only underground
emergency pumping work was being carried out.
supplies, it had halted mining and gold recovery operations on all of its South African operations. Only underground
emergency pumping work was being carried out.
On January 27, 2008, AngloGold Ashanti announced it had agreed a process with Eskom, whereby the supplier would give its
normal guarantees for sufficient power for the company to undertake shifts from that day for the purpose of re-establishing safe
workplaces at each of the deep level underground mines in South Africa. The company was anticipating a ramp up in
additional power later in the week that should enable a phased return to normal mining operations. A protocol had also been
agreed with the electricity supplier whereby Eskom will provide the company with four hours warning, prior to having to reduce
power supply.
normal guarantees for sufficient power for the company to undertake shifts from that day for the purpose of re-establishing safe
workplaces at each of the deep level underground mines in South Africa. The company was anticipating a ramp up in
additional power later in the week that should enable a phased return to normal mining operations. A protocol had also been
agreed with the electricity supplier whereby Eskom will provide the company with four hours warning, prior to having to reduce
power supply.
On January 29, 2008, AngloGold Ashanti announced that following a meeting between Eskom and industrial electricity
consumers, the company had commenced the process of bringing back into production all of its underground mines and their
associated gold treatment plants. On February 7, 2008, AngloGold Ashanti stated that following extensive discussions with
Eskom and government, a power supply of 90 percent had been offered which has resulted in first quarter production from the
South African operations being severely disrupted. Equally important is Eskom's ability to maintain a continuous power supply
at a 90 percent level in order to return to normal production levels and milling rates.
consumers, the company had commenced the process of bringing back into production all of its underground mines and their
associated gold treatment plants. On February 7, 2008, AngloGold Ashanti stated that following extensive discussions with
Eskom and government, a power supply of 90 percent had been offered which has resulted in first quarter production from the
South African operations being severely disrupted. Equally important is Eskom's ability to maintain a continuous power supply
at a 90 percent level in order to return to normal production levels and milling rates.
On February 14, 2008, AngloGold Ashanti announced that it had entered into a binding memorandum of agreement (MOA)
with B2Gold Corp. (B2Gold). The MOA provides for the existing Colombian joint venture agreements between AngloGold
Ashanti and B2Gold to be amended to provide that B2Gold acquire from AngloGold Ashanti additional interest in certain
mineral properties in Colombia. In exchange, B2Gold would issue to AngloGold Ashanti 25 million common shares and
21.4 million common share purchase warrants in B2Gold. Subsequently, the transaction was finalized, as announced by
AngloGold Ashanti on May 16, 2008.
with B2Gold Corp. (B2Gold). The MOA provides for the existing Colombian joint venture agreements between AngloGold
Ashanti and B2Gold to be amended to provide that B2Gold acquire from AngloGold Ashanti additional interest in certain
mineral properties in Colombia. In exchange, B2Gold would issue to AngloGold Ashanti 25 million common shares and
21.4 million common share purchase warrants in B2Gold. Subsequently, the transaction was finalized, as announced by
AngloGold Ashanti on May 16, 2008.
On April 14, 2008 it was announced that, following the stabilization of power provided by Eskom (the South African electricity
supply body) to the South African operations during the quarter, AngloGold Ashanti forecast the first quarter production to be
approximately 1.19 million ounces. The revised production outlook was approximately 8 percent above guidance provided in
the fourth quarter of 2007. AngloGold Ashanti had also fully delivered into maturing hedge contracts during the quarter. On
January 25, 2008, the South African national power supplier, Eskom, had communicated that it could not guarantee power supply to
AngloGold Ashanti’s South African operations. Precautionary steps were taken for the safety of employees, including ceasing
the transportation of employees underground to carry-out mining activities and the cessation of milling activities. Following
extensive discussions with Eskom and the South African government, Eskom agreed to guarantee a power supply equivalent
to 90 percent of previous supply and undertook to more reliably warn companies when power outages may occur. Mining
operations resumed on Wednesday, January 30, 2008 at AngloGold Ashanti’s South African mines and in late March 2008,
Eskom increased power supply to 96.5 percent of previous levels. At these power levels and as a result of the company’s
previously implemented and ongoing initiatives to improve its energy efficiencies, the company has been able to restore
production back to 100 percent of previous capacity. Since 2004, AngloGold Ashanti and Eskom have undertaken and
committed funds and other resources to various initiatives to improve energy efficiencies and reduce power consumption at
AngloGold Ashanti’s South African mines. These combined efforts have resulted in a decline in the use of electricity, fuel and
coal and have to date achieved a 17 percent improvement in energy efficiencies at the company’s South African operations.
AngloGold Ashanti views these initiatives as being important not only in the light of power shortages and related disruption to
its mining operations but also in that it anticipates that these initiatives will assist in managing future operating cost increases in the
light of anticipated increases in unit electrical power, fuel and other energy costs. AngloGold Ashanti anticipates that these
ongoing initiatives will allow it to achieve electricity consumption at a level of 90 percent of previous consumption by 2009.
supply body) to the South African operations during the quarter, AngloGold Ashanti forecast the first quarter production to be
approximately 1.19 million ounces. The revised production outlook was approximately 8 percent above guidance provided in
the fourth quarter of 2007. AngloGold Ashanti had also fully delivered into maturing hedge contracts during the quarter. On
January 25, 2008, the South African national power supplier, Eskom, had communicated that it could not guarantee power supply to
AngloGold Ashanti’s South African operations. Precautionary steps were taken for the safety of employees, including ceasing
the transportation of employees underground to carry-out mining activities and the cessation of milling activities. Following
extensive discussions with Eskom and the South African government, Eskom agreed to guarantee a power supply equivalent
to 90 percent of previous supply and undertook to more reliably warn companies when power outages may occur. Mining
operations resumed on Wednesday, January 30, 2008 at AngloGold Ashanti’s South African mines and in late March 2008,
Eskom increased power supply to 96.5 percent of previous levels. At these power levels and as a result of the company’s
previously implemented and ongoing initiatives to improve its energy efficiencies, the company has been able to restore
production back to 100 percent of previous capacity. Since 2004, AngloGold Ashanti and Eskom have undertaken and
committed funds and other resources to various initiatives to improve energy efficiencies and reduce power consumption at
AngloGold Ashanti’s South African mines. These combined efforts have resulted in a decline in the use of electricity, fuel and
coal and have to date achieved a 17 percent improvement in energy efficiencies at the company’s South African operations.
AngloGold Ashanti views these initiatives as being important not only in the light of power shortages and related disruption to
its mining operations but also in that it anticipates that these initiatives will assist in managing future operating cost increases in the
light of anticipated increases in unit electrical power, fuel and other energy costs. AngloGold Ashanti anticipates that these
ongoing initiatives will allow it to achieve electricity consumption at a level of 90 percent of previous consumption by 2009.
On May 6, 2008, AngloGold Ashanti announced a significant greenfields discovery at its 100 percent owned La Colosa
exploration site. A conceptual economic study completed during the quarter had defined, with upside potential, 12.9 million
ounces of inferred Mineral Resource at that site.
exploration site. A conceptual economic study completed during the quarter had defined, with upside potential, 12.9 million
ounces of inferred Mineral Resource at that site.
Also on May 6, 2008 AngloGold Ashanti announced that it intends to proceed, subject to certain conditions, with an
approximate one-for-four renounceable rights offer, which would result in AngloGold Ashanti issuing approximately
69.4 million shares at a minimum share price of ZAR172 raising approximately ZAR11.9 billion ($1.6 billion based on an
exchange rate of ZAR7.56/$1.00 on May 5, 2008). The proposed rights offer is being fully underwritten subject to certain
customary conditions. The final rights offer price will be announced at the time of the announcement of the rights offer. The
proposed rights offer will be subject to approval at a general meeting of AngloGold Ashanti shareholders to be held on
May 22, 2008.
approximate one-for-four renounceable rights offer, which would result in AngloGold Ashanti issuing approximately
69.4 million shares at a minimum share price of ZAR172 raising approximately ZAR11.9 billion ($1.6 billion based on an
exchange rate of ZAR7.56/$1.00 on May 5, 2008). The proposed rights offer is being fully underwritten subject to certain
customary conditions. The final rights offer price will be announced at the time of the announcement of the rights offer. The
proposed rights offer will be subject to approval at a general meeting of AngloGold Ashanti shareholders to be held on
May 22, 2008.
34
The principal purpose of the rights offer is to provide AngloGold Ashanti with additional financial resources to improve its
financial flexibility. In particular, the net proceeds from the rights offer will allow AngloGold Ashanti both to significantly
restructure and reduce its existing gold hedging position, which has adversely affected its financial performance in recent
years, while also being able to continue to fund its principal development projects and exploration growth initiatives. Pending
this use of proceeds, the net proceeds of the rights offer may, in the interim, be used by AngloGold Ashanti to reduce its
short-term borrowings and the borrowings outstanding on AngloGold Ashanti’s revolving credit facility or retained as cash and
invested in accordance with AngloGold Ashanti’s cash management policies.
financial flexibility. In particular, the net proceeds from the rights offer will allow AngloGold Ashanti both to significantly
restructure and reduce its existing gold hedging position, which has adversely affected its financial performance in recent
years, while also being able to continue to fund its principal development projects and exploration growth initiatives. Pending
this use of proceeds, the net proceeds of the rights offer may, in the interim, be used by AngloGold Ashanti to reduce its
short-term borrowings and the borrowings outstanding on AngloGold Ashanti’s revolving credit facility or retained as cash and
invested in accordance with AngloGold Ashanti’s cash management policies.
AngloGold Ashanti has traditionally used gold hedging instruments to protect a portion of its anticipated gold sales against
declines in the market price of gold. The use of these instruments has prevented AngloGold Ashanti from fully participating in
the significant increase in the market price for gold in recent years. As at December 31, 2007, the total net delta tonnage of
AngloGold Ashanti’s hedge positions was 10.39 million ounces and the total committed hedge position was 11.28 million
ounces, an increase of 0.16 million ounces and a reduction of 0.34 million ounces against the December 31, 2006, hedge
delta and hedge committed position, respectively. As at December 31, 2007, the marked-to-market value of all hedge
transactions making up the hedge positions was negative $4.27 billion.
declines in the market price of gold. The use of these instruments has prevented AngloGold Ashanti from fully participating in
the significant increase in the market price for gold in recent years. As at December 31, 2007, the total net delta tonnage of
AngloGold Ashanti’s hedge positions was 10.39 million ounces and the total committed hedge position was 11.28 million
ounces, an increase of 0.16 million ounces and a reduction of 0.34 million ounces against the December 31, 2006, hedge
delta and hedge committed position, respectively. As at December 31, 2007, the marked-to-market value of all hedge
transactions making up the hedge positions was negative $4.27 billion.
Since the beginning of 2008, prevailing spot gold prices have been significantly higher than those prevailing during 2007. If
these high prices continue to prevail, AngloGold Ashanti estimates that its gold hedging position will continue to have a
significant adverse affect upon its financial performance. AngloGold Ashanti believes that this has also negatively affected the
market price of its ordinary shares, further constraining its financial flexibility.
these high prices continue to prevail, AngloGold Ashanti estimates that its gold hedging position will continue to have a
significant adverse affect upon its financial performance. AngloGold Ashanti believes that this has also negatively affected the
market price of its ordinary shares, further constraining its financial flexibility.
In order to address this issue, AngloGold Ashanti intends to early settle certain contracts otherwise due to mature in 2009 and
2010 during the course of 2008 in addition to settling contracts due to mature in 2008. Given the low committed prices of these
contracts, AngloGold Ashanti expects that if these measures were implemented it would result in a realization of previously
recognized losses for contracts historically recognized on Balance Sheet on a marked–to–market basis. These losses would be
measured by the difference between the committed price of the contracts and the prevailing gold price at the time that these
contracts are settled. If the restructuring is implemented as anticipated the received price for the remainder of 2008 should be
approximately $475 per ounce assuming a gold price of $900 per ounce and gold production for the last nine months of 2008 of
3.8 million ounces.
2010 during the course of 2008 in addition to settling contracts due to mature in 2008. Given the low committed prices of these
contracts, AngloGold Ashanti expects that if these measures were implemented it would result in a realization of previously
recognized losses for contracts historically recognized on Balance Sheet on a marked–to–market basis. These losses would be
measured by the difference between the committed price of the contracts and the prevailing gold price at the time that these
contracts are settled. If the restructuring is implemented as anticipated the received price for the remainder of 2008 should be
approximately $475 per ounce assuming a gold price of $900 per ounce and gold production for the last nine months of 2008 of
3.8 million ounces.
AngloGold Ashanti also continues to give consideration to the early settlement of contracts not currently recorded on balance
sheet (Normal Purchase Normal Sale Exemption (NPSE)) by means of early physical delivery. Such early physical settlement,
if it were to occur, would result in a significant adverse impact on our 2008 recorded revenues in AngloGold Ashanti’s income
statement, as sales that would have otherwise been executed at the spot price of gold will be replaced with sales based on the
earlier contracted prices of such NPSE contracts that are settled during the year. Furthermore should AngloGold Ashanti
conclude that such early physical settlement of NPSE contracts represents a tainting event, it would be required to recognize
on balance sheet the fair value of a portion of, or potentially all of, the existing NPSE contracts, which would result in a
significant adverse impact on its financial statements. No such conclusion has yet been made by AngloGold Ashanti and it is
still considering the potential impact of any such transaction.
sheet (Normal Purchase Normal Sale Exemption (NPSE)) by means of early physical delivery. Such early physical settlement,
if it were to occur, would result in a significant adverse impact on our 2008 recorded revenues in AngloGold Ashanti’s income
statement, as sales that would have otherwise been executed at the spot price of gold will be replaced with sales based on the
earlier contracted prices of such NPSE contracts that are settled during the year. Furthermore should AngloGold Ashanti
conclude that such early physical settlement of NPSE contracts represents a tainting event, it would be required to recognize
on balance sheet the fair value of a portion of, or potentially all of, the existing NPSE contracts, which would result in a
significant adverse impact on its financial statements. No such conclusion has yet been made by AngloGold Ashanti and it is
still considering the potential impact of any such transaction.
In addition to the settlement of certain contracts during 2008 AngloGold Ashanti also intends to restructure some of the
remainder of its hedge book in order to achieve greater participation in the spot price for gold beyond 2009. The exact nature
and extent of the restructuring will depend upon prevailing and anticipated market conditions at the time, particularly the
prevailing gold price and exchange rates as well as other relevant economic factors.
remainder of its hedge book in order to achieve greater participation in the spot price for gold beyond 2009. The exact nature
and extent of the restructuring will depend upon prevailing and anticipated market conditions at the time, particularly the
prevailing gold price and exchange rates as well as other relevant economic factors.
If the restructuring is executed as currently anticipated, the overall impact would be to reduce the hedge book to approximately
6.25 million ounces, which would represent 8.6 percent of AngloGold Ashanti’s ore reserves as at December 31, 2007. As a
result of this reduction the discount to the spot gold price realized during 2009 is estimated to be approximately 6 percent and
at a similar level thereafter assuming a gold price of $900 per ounce.
On May 15, 2008 AngloGold Ashanti announced that it had terminated the process related to its proposed sale of its interests
in the Morila Gold Mine in Mali, due to the fact that no proposals were received which met the company’s value criteria for such
a sale. AngloGold Ashanti will therefore remain a joint venture partner together with Randgold Resources Limited and the
Government of Mali in the Morila Gold Mine. Randgold Resources will continue as operators of the mine.
6.25 million ounces, which would represent 8.6 percent of AngloGold Ashanti’s ore reserves as at December 31, 2007. As a
result of this reduction the discount to the spot gold price realized during 2009 is estimated to be approximately 6 percent and
at a similar level thereafter assuming a gold price of $900 per ounce.
On May 15, 2008 AngloGold Ashanti announced that it had terminated the process related to its proposed sale of its interests
in the Morila Gold Mine in Mali, due to the fact that no proposals were received which met the company’s value criteria for such
a sale. AngloGold Ashanti will therefore remain a joint venture partner together with Randgold Resources Limited and the
Government of Mali in the Morila Gold Mine. Randgold Resources will continue as operators of the mine.
35
4B.
Business overview
The market for gold
Products
AngloGold Ashanti’s main product is gold. Revenue is also derived from the sales of silver and uranium oxide. AngloGold
Ashanti sells its products on world markets.
Ashanti sells its products on world markets.
Gold market
The gold market is relatively liquid compared to many other commodity markets. Physical demand for gold is primarily for
fabrication purposes, including jewellery (which accounts for just less than 80 percent of fabricated demand), electronics,
dentistry, decorations, medals and official coins. In addition, central banks, financial institutions and private individuals buy, sell
and hold gold bullion as an investment and as a store of value.
fabrication purposes, including jewellery (which accounts for just less than 80 percent of fabricated demand), electronics,
dentistry, decorations, medals and official coins. In addition, central banks, financial institutions and private individuals buy, sell
and hold gold bullion as an investment and as a store of value.
The use of gold as a store of value (a consequence of the tendency of gold to retain its value in relative terms against basic
goods, and particularly in times of inflation and monetary crisis) and the large quantities of gold held for this purpose in relation
to annual mine production have meant that, historically, the potential total supply of gold is far greater than demand at any one
time. Thus, while current supply and demand play some part in determining the price of gold, this does not occur to the same
extent as with other commodities. Instead, the gold price has from time to time been significantly affected by macro-economic
factors such as expectations of inflation, interest rate changes, exchange rate changes, changes in reserve policy by central
banks, and by global or regional political and economic events. In times of price inflation and currency devaluation, gold is often
bought as a store of value, leading to increased purchases and support for the price of gold.
goods, and particularly in times of inflation and monetary crisis) and the large quantities of gold held for this purpose in relation
to annual mine production have meant that, historically, the potential total supply of gold is far greater than demand at any one
time. Thus, while current supply and demand play some part in determining the price of gold, this does not occur to the same
extent as with other commodities. Instead, the gold price has from time to time been significantly affected by macro-economic
factors such as expectations of inflation, interest rate changes, exchange rate changes, changes in reserve policy by central
banks, and by global or regional political and economic events. In times of price inflation and currency devaluation, gold is often
bought as a store of value, leading to increased purchases and support for the price of gold.
The market in 2007
Continued strong levels of investor and speculator interest, particularly in the fourth quarter of the year, pushed the gold price
to levels just short of record highs, records which were then surpassed soon after year end in an exceptionally buoyant market.
The average gold spot price for the year, at $697 per ounce, was 15 percent higher than that in 2006.
to levels just short of record highs, records which were then surpassed soon after year end in an exceptionally buoyant market.
The average gold spot price for the year, at $697 per ounce, was 15 percent higher than that in 2006.
Although prices were relatively range-bound during the first half of the year, the end of the third quarter and the fourth quarter
saw a strong surge in the dollar gold price and particularly high levels of investor interest. Fabrication demand followed an
inverse pattern, with the more stable prices of the first half leading the market to record high levels of jewellery consumption in
certain regions, which then fell away in the fourth quarter as price volatility took its toll, particularly in more price-sensitive
markets. The exception to this pattern was the Chinese market, where jewellery demand remained relatively solid in the fourth
quarter despite the high levels of price volatility.
saw a strong surge in the dollar gold price and particularly high levels of investor interest. Fabrication demand followed an
inverse pattern, with the more stable prices of the first half leading the market to record high levels of jewellery consumption in
certain regions, which then fell away in the fourth quarter as price volatility took its toll, particularly in more price-sensitive
markets. The exception to this pattern was the Chinese market, where jewellery demand remained relatively solid in the fourth
quarter despite the high levels of price volatility.
The main contributing factor to the price gains seen in the second half of the year was economic uncertainty relating to credit
concerns and the impact of the sub-prime mortgage crisis in the US. Inflationary concerns driven by higher food, oil and
commodity prices also played a role, as did the escalation in geopolitical tension, particularly at year-end.
concerns and the impact of the sub-prime mortgage crisis in the US. Inflationary concerns driven by higher food, oil and
commodity prices also played a role, as did the escalation in geopolitical tension, particularly at year-end.
Rand gold prices saw new record highs of R187,000 per kilogram during the year and an average spot price for the year of just
over R157,000 per kilogram.
over R157,000 per kilogram.
Investment
Overall, the investment market saw lower levels of demand than in 2006, however, this demand was heavily concentrated in
the last half of 2007, for the aforementioned reasons.
the last half of 2007, for the aforementioned reasons.
Particular strength was exhibited in trade on commodity exchanges and also in the gold Exchange-Traded Funds (ETFs). Total
ETF holdings at year-end stood at close to 28 million ounces, with a total value of over $23 billion. This represents a significant
level of growth over year-end holdings in 2006, even though this itself represented a doubling over levels of funds held the
previous year. The majority of ETF investment occurred in the US-listed fund, StreetTracks.
ETF holdings at year-end stood at close to 28 million ounces, with a total value of over $23 billion. This represents a significant
level of growth over year-end holdings in 2006, even though this itself represented a doubling over levels of funds held the
previous year. The majority of ETF investment occurred in the US-listed fund, StreetTracks.
36
Demand
Over the first half of 2007, physical demand from jewellery fabrication recovered strongly from the low levels of 2006, reaching
record highs in several major markets. In the second half of the year, however, this level of demand could not be sustained in
the face of a more volatile price environment, which impacted heavily on traditional markets, and with the increasingly difficult
consumer and retail environment in developed markets such as the US.
record highs in several major markets. In the second half of the year, however, this level of demand could not be sustained in
the face of a more volatile price environment, which impacted heavily on traditional markets, and with the increasingly difficult
consumer and retail environment in developed markets such as the US.
Overall, fabrication demand for jewellery in 2007 increased by 6 percent in tonnage terms over 2006 levels, with the bulk of that
increase contributed by the larger emerging markets of East Asia, India and the Middle East. European demand is expected to
remain flat, whereas demand from the US market fell in tonnage terms by 14 percent over 2006.
increase contributed by the larger emerging markets of East Asia, India and the Middle East. European demand is expected to
remain flat, whereas demand from the US market fell in tonnage terms by 14 percent over 2006.
It was in the Indian market that the contrast in consumption levels between the two halves of the year was most marked.
Demand reached record levels in rupee and tonnage terms for both jewellery and retail investment in the second quarter of the
year. Together these totaled 317 tonnes, half of global mine output for the quarter and 90 percent higher than the relatively low
level attained in the same quarter in 2006.
Demand reached record levels in rupee and tonnage terms for both jewellery and retail investment in the second quarter of the
year. Together these totaled 317 tonnes, half of global mine output for the quarter and 90 percent higher than the relatively low
level attained in the same quarter in 2006.
Demand in the first half of the year increased by 72 percent over the corresponding period in the previous year. This strong
level of consumption was fuelled in part by economic growth, particularly in the agricultural sector, as well as by a stable rupee
gold price. In the second half of the year, however, the rupee/dollar exchange rate showed significant volatility, and this
combined with a period of volatility in dollar gold prices created a set of circumstances unfavorable to gold consumption. Price
volatility is a significant deterrent to demand in the Indian market, and in the second half of 2007 the periods of most extreme
price volatility coincided with some of the more auspicious gold buying occasions, such as Diwali. Demand in the fourth quarter
was particularly poor and fourth quarter offtake reached the lowest level since the early 1990s. Over the year as a whole, an
increase in jewellery offtake in tonnage terms of 6 percent was recorded.
level of consumption was fuelled in part by economic growth, particularly in the agricultural sector, as well as by a stable rupee
gold price. In the second half of the year, however, the rupee/dollar exchange rate showed significant volatility, and this
combined with a period of volatility in dollar gold prices created a set of circumstances unfavorable to gold consumption. Price
volatility is a significant deterrent to demand in the Indian market, and in the second half of 2007 the periods of most extreme
price volatility coincided with some of the more auspicious gold buying occasions, such as Diwali. Demand in the fourth quarter
was particularly poor and fourth quarter offtake reached the lowest level since the early 1990s. Over the year as a whole, an
increase in jewellery offtake in tonnage terms of 6 percent was recorded.
Demand in the Middle East, specifically in the six Gulf markets, was also dented considerably in the second half of the year,
with a sharp shift in consumer sentiment away from gold jewellery consumption brought about by a combination of volatile price
levels, inflationary concerns and significant escalations in rent charges. As the currencies of these markets are pegged against
the dollar, there is no cushioning for consumers against dollar gold price volatility. In the region, Turkey and Egypt experienced
healthier demand, with good tourist seasons and increased economic stability helping to fuel consumption.
with a sharp shift in consumer sentiment away from gold jewellery consumption brought about by a combination of volatile price
levels, inflationary concerns and significant escalations in rent charges. As the currencies of these markets are pegged against
the dollar, there is no cushioning for consumers against dollar gold price volatility. In the region, Turkey and Egypt experienced
healthier demand, with good tourist seasons and increased economic stability helping to fuel consumption.
The Chinese market proved most resilient to the more volatile prices as most retailers maintain a margin of approximately
10 percent over the gold price and therefore tend not to adjust prices on a daily basis according to each and every fluctuation in
the dollar gold price. The Chinese economy also continued to record strong growth.
10 percent over the gold price and therefore tend not to adjust prices on a daily basis according to each and every fluctuation in
the dollar gold price. The Chinese economy also continued to record strong growth.
In the US, gold demand in 2007 reached the lowest level since 1992. Retailers continued to reduce their focus on the category
in the light of rising prices and to seek out product with lower gold content so as to offer a lower-cost range of product to an
increasingly price-sensitive consumer. Only the high end of the market, which typically retails 18 carat product, remained
strong. Margins in this segment are higher than in the mass market segment and consumers are less sensitive to price
increases.
in the light of rising prices and to seek out product with lower gold content so as to offer a lower-cost range of product to an
increasingly price-sensitive consumer. Only the high end of the market, which typically retails 18 carat product, remained
strong. Margins in this segment are higher than in the mass market segment and consumers are less sensitive to price
increases.
Despite high gold prices, supplies of scrap into the market were weaker than in 2006. In part this seems to have been due to
the fact that significant personal gold inventories were liquidated in 2006 and have not been replaced as yet. Another factor
was the price surge which took place towards the end of the year. Consumers were deterred from selling old jewellery by the
expectation that prices might rise further.
the fact that significant personal gold inventories were liquidated in 2006 and have not been replaced as yet. Another factor
was the price surge which took place towards the end of the year. Consumers were deterred from selling old jewellery by the
expectation that prices might rise further.
Industrial demand increased marginally by 2 percent over 2006 levels. A slowdown in the demand for electronic goods over the
second half of the year impacted growth in this sector.
second half of the year impacted growth in this sector.
Official market
Official sector sales for the calendar year were 485 tonnes, some 30 percent higher than in 2006. Gold sales by the Central
Bank Gold Agreement (CBGA) signatories account for the bulk of this increase and in the third year of the second CBGA
agreement (which came to an end on September 26, 2007) 475.8 tonnes of the available quota of 500 tonnes had been
released onto the market.
Bank Gold Agreement (CBGA) signatories account for the bulk of this increase and in the third year of the second CBGA
agreement (which came to an end on September 26, 2007) 475.8 tonnes of the available quota of 500 tonnes had been
released onto the market.
37
Hedging
Gold producers reduced their hedging positions considerably in 2007. Over 400 tonnes were bought in the market in this way,
a figure only slightly below the record level of de-hedging measured in 2004. The majority of this activity took place in the first
half of the year and was driven by the activities of a small number of major players.
a figure only slightly below the record level of de-hedging measured in 2004. The majority of this activity took place in the first
half of the year and was driven by the activities of a small number of major players.
As at December 31, 2007, the net delta hedge position of AngloGold Ashanti was 10.39 million ounces or 323 tonnes, valued
at the spot price of gold on that day of $836 per ounce. The marked-to-market value of the hedge position at this date was
negative $4.27 billion.
at the spot price of gold on that day of $836 per ounce. The marked-to-market value of the hedge position at this date was
negative $4.27 billion.
Marketing channels
Gold produced by AngloGold Ashanti’s mining operations is processed to a saleable form at various precious metals refineries.
Once refined to a saleable product – either a large bar weighing approximately 12.5 kilograms and containing 99.5 percent
gold, or smaller bars weighing 1.0 kilogram or less with a gold content of 99.5 percent and above – the metal is then sold either
through the refineries’ channels or directly to bullion banks and the proceeds are paid to the company.
Once refined to a saleable product – either a large bar weighing approximately 12.5 kilograms and containing 99.5 percent
gold, or smaller bars weighing 1.0 kilogram or less with a gold content of 99.5 percent and above – the metal is then sold either
through the refineries’ channels or directly to bullion banks and the proceeds are paid to the company.
Bullion banks are registered commercial banks that deal in gold. They participate in the gold market by buying and selling gold
and distribute physical gold bullion bought from mining companies and refineries to physical offtake markets worldwide. Bullion
banks hold consignment stocks in all major physical markets and finance such consignment stocks from the margins charged
by them to physical buyers, over and above the amounts paid by such banks to mining companies for the gold.
and distribute physical gold bullion bought from mining companies and refineries to physical offtake markets worldwide. Bullion
banks hold consignment stocks in all major physical markets and finance such consignment stocks from the margins charged
by them to physical buyers, over and above the amounts paid by such banks to mining companies for the gold.
Where forward sales contracts exist against which AngloGold Ashanti delivers physical product, the same channel of the
refinery is used. In this case, the refinery does not sell the metal on the company’s behalf, but instead delivers the finished gold
bars to the bullion bank with which the group’s forward contract is held. The physical delivery to the counterparty bank of the
appropriate amount of gold fulfills AngloGold Ashanti’s obligations under the forward contract, and AngloGold Ashanti is paid
for this gold by the relevant bullion bank, at the price fixed under the forward contract, rather than at the spot price of the day.
refinery is used. In this case, the refinery does not sell the metal on the company’s behalf, but instead delivers the finished gold
bars to the bullion bank with which the group’s forward contract is held. The physical delivery to the counterparty bank of the
appropriate amount of gold fulfills AngloGold Ashanti’s obligations under the forward contract, and AngloGold Ashanti is paid
for this gold by the relevant bullion bank, at the price fixed under the forward contract, rather than at the spot price of the day.
Gold market development
AngloGold Ashanti has since its inception been committed to growing the market for its product, particularly as gold jewellery
sales in many developed markets have declined materially over the years in favor of other luxury goods. In response, the
company’s marketing programs aim to increase the desirability of gold to sustain and grow demand and to support the
deregulation of the market in key economies.
sales in many developed markets have declined materially over the years in favor of other luxury goods. In response, the
company’s marketing programs aim to increase the desirability of gold to sustain and grow demand and to support the
deregulation of the market in key economies.
AngloGold Ashanti’s market development activities centre on the following areas: Strategic projects undertaken in key and
critical gold jewellery offtake markets (USA, India, China, Italy, Middle East), which aim to develop positive corporate
identification and recognition while achieving, where sensible and possible, financial returns for AngloGold Ashanti; Host
country projects of a downstream development nature; and AuDITIONS, the company’s gold jewellery design competition.
critical gold jewellery offtake markets (USA, India, China, Italy, Middle East), which aim to develop positive corporate
identification and recognition while achieving, where sensible and possible, financial returns for AngloGold Ashanti; Host
country projects of a downstream development nature; and AuDITIONS, the company’s gold jewellery design competition.
AngloGold Ashanti remains a member of the World Gold Council (WGC) and undertakes its own strategic marketing projects in
such a way as to co-operate with and support the WGC’s wider objectives.
such a way as to co-operate with and support the WGC’s wider objectives.
Strategic projects
India
India is the world’s largest consumer market in tonnage terms. Gold demand here is firmly embedded in cultural and religious
traditions and is seen as a symbol of wealth and prosperity. It is considered to be an auspicious metal that is bought and given
as a gift during religious festivals.
traditions and is seen as a symbol of wealth and prosperity. It is considered to be an auspicious metal that is bought and given
as a gift during religious festivals.
With the assistance of a pre-eminent Indian jewellery retailer, AngloGold Ashanti’s projects in India are intended to help bring
about the modernization of the country’s traditional gold jewellery sector. One concept centers on transforming the traditional,
semi-urban jewellery retailing environment into a more modern and efficient one that presents rural consumers with a high-
quality, professional and trusted ‘local’ jewellery store, which can better compete with stores selling such lifestyle items as
electronics and cell phones. Other concepts focus on the development and distribution of branded collections of jewellery into
the market.
about the modernization of the country’s traditional gold jewellery sector. One concept centers on transforming the traditional,
semi-urban jewellery retailing environment into a more modern and efficient one that presents rural consumers with a high-
quality, professional and trusted ‘local’ jewellery store, which can better compete with stores selling such lifestyle items as
electronics and cell phones. Other concepts focus on the development and distribution of branded collections of jewellery into
the market.
38
China
China has been identified as a key strategic market by AngloGold Ashanti both because of its size – it is the third largest
market worldwide for jewellery – and because of its potential for growth. In China, AngloGold Ashanti has partnered with a
Hong Kong-based retailer to develop and roll-out a retail concept that targets independent, high-income earning women
wishing to express their independence and individuality through accessories of gold.
market worldwide for jewellery – and because of its potential for growth. In China, AngloGold Ashanti has partnered with a
Hong Kong-based retailer to develop and roll-out a retail concept that targets independent, high-income earning women
wishing to express their independence and individuality through accessories of gold.
The roll out of this concept has included the co-sponsoring of AuDITIONS China so as to expand the reach of the company’s
jewellery design competition to the China mainland. A collection of jewellery for commercial sale was developed on the basis of
the competition designs. AngloGold Ashanti has also partnered with the retailer to establish concept stores for gold jewellery in
major urban centers in China. The first of these stores will open in Beijing in April 2008.
jewellery design competition to the China mainland. A collection of jewellery for commercial sale was developed on the basis of
the competition designs. AngloGold Ashanti has also partnered with the retailer to establish concept stores for gold jewellery in
major urban centers in China. The first of these stores will open in Beijing in April 2008.
United States
The American gold jewellery market is characterized primarily as an adornment market in which gold jewellery is purchased
mainly as a fashion accessory. During the past ten years, there has been some slippage in gold jewellery consumption in
volume terms in the US market relative to that of other luxury and lifestyle goods.
mainly as a fashion accessory. During the past ten years, there has been some slippage in gold jewellery consumption in
volume terms in the US market relative to that of other luxury and lifestyle goods.
Contributing in part to this decline has been the commoditization of gold jewellery through the mass-market retail channel,
which has tended to sell jewellery on price rather than design style. Consumer research, however, suggests that the
US customer shops in a fashion- and trend-conscious way and is therefore generally receptive to brands and branding.
Furthermore, the US market is viewed by consumers in other important consumption categories as an opinion- and trend-
forming market. Influencing the purchasing motives and buying patterns of the US consumer base can therefore influence other
key consumption regions around the world.
which has tended to sell jewellery on price rather than design style. Consumer research, however, suggests that the
US customer shops in a fashion- and trend-conscious way and is therefore generally receptive to brands and branding.
Furthermore, the US market is viewed by consumers in other important consumption categories as an opinion- and trend-
forming market. Influencing the purchasing motives and buying patterns of the US consumer base can therefore influence other
key consumption regions around the world.
In response to these factors, AngloGold Ashanti, together with the WGC, partnered with a large US jewellery wholesaler and
distributor to develop and promote at retail level selected collections of gold jewellery from the new product ranges of the
Italian-based Gold Expressions (GE) manufacturers. This project is intended to promote the sale of fashionably-designed and
progressively-styled gold jewellery in the US retail market and to lay the foundation for Italian manufacturers to build
themselves or their products into consumer brands.
distributor to develop and promote at retail level selected collections of gold jewellery from the new product ranges of the
Italian-based Gold Expressions (GE) manufacturers. This project is intended to promote the sale of fashionably-designed and
progressively-styled gold jewellery in the US retail market and to lay the foundation for Italian manufacturers to build
themselves or their products into consumer brands.
Middle East
As a region, the Middle East (comprising the United Arab Emirates, Turkey and Saudi Arabia) is the third largest consumer
market for gold in volume terms. The increase in disposable income in this region as a result of both higher oil revenues and
rising numbers of tourists has impacted positively on gold jewellery consumption.
market for gold in volume terms. The increase in disposable income in this region as a result of both higher oil revenues and
rising numbers of tourists has impacted positively on gold jewellery consumption.
While the challenge from increasingly more prominent lifestyle, luxury and branded products is, as it is in other markets, clearly
growing, the gold category in the Middle East has so far sustained its already high rate of gold consumption per capita
compared to the rates of growth in population and per capita disposable income.
growing, the gold category in the Middle East has so far sustained its already high rate of gold consumption per capita
compared to the rates of growth in population and per capita disposable income.
AngloGold Ashanti has partnered with the WGC and a leading jewellery wholesaler in the region to develop a business concept
to launch and promote at the local retail level selected collections of mid- to high-end gold jewellery from the product ranges of
Italian-based manufacturers. The project is intended to improve the gold jewellery product and retailing proposition offered to
both the domestic and the tourist consumer segments in the Middle East.
to launch and promote at the local retail level selected collections of mid- to high-end gold jewellery from the product ranges of
Italian-based manufacturers. The project is intended to improve the gold jewellery product and retailing proposition offered to
both the domestic and the tourist consumer segments in the Middle East.
Host Country Jewellery Sector Development
AngloGold Ashanti’s marketing efforts have historically been directed at the growth and development of the jewellery sector in
countries that host AngloGold Ashanti operations. These projects are intended to bring benefit to the company on several
levels: corporate image-building, supporting host governments’ beneficiation agendas; and providing a platform for strategic
market development projects.
countries that host AngloGold Ashanti operations. These projects are intended to bring benefit to the company on several
levels: corporate image-building, supporting host governments’ beneficiation agendas; and providing a platform for strategic
market development projects.
These projects will continue to be important for jewellery sector development and will be focused primarily in South Africa,
Brazil and Ghana. AngloGold Ashanti continues to hold a 25 percent stake in the Oro Group, the largest gold jewellery
manufacturer in South Africa, with projects in Ghana and Brazil currently under investigation.
Brazil and Ghana. AngloGold Ashanti continues to hold a 25 percent stake in the Oro Group, the largest gold jewellery
manufacturer in South Africa, with projects in Ghana and Brazil currently under investigation.
39
AuDITIONS
In 2004, following the business combination of AngloGold and Ashanti, the AngloGold Ashanti AuDITIONS brand was created
to unite the company’s gold jewellery design competitions and to reinforce the company’s brand in look, feel and character. The
concept of AuDITIONS is premised on the metaphor of the performing arts, with designers auditioning in gold through their
pieces.
to unite the company’s gold jewellery design competitions and to reinforce the company’s brand in look, feel and character. The
concept of AuDITIONS is premised on the metaphor of the performing arts, with designers auditioning in gold through their
pieces.
The overall strategic objective of AuDITIONS is to stimulate innovative design in high-caratage gold around the world in order
to raise the profile of and drive demand for this jewellery category among consumers. AuDITIONS competitions also seek,
through their contacts with the jewellery manufacturing and retail trade, to promote the concept of innovative jewellery design
and expose the trade to new and innovative design and techniques.
to raise the profile of and drive demand for this jewellery category among consumers. AuDITIONS competitions also seek,
through their contacts with the jewellery manufacturing and retail trade, to promote the concept of innovative jewellery design
and expose the trade to new and innovative design and techniques.
It is intended to build AuDITIONS into an independent global competition brand and, with the help of the WGC, the competition
has been extended to the key gold markets of India, China and the Middle East, from its original bases in South Africa and
Brazil.
has been extended to the key gold markets of India, China and the Middle East, from its original bases in South Africa and
Brazil.
Uranium
AngloGold Ashanti remains South Africa’s largest producer of uranium. Several initiatives are under way to boost AngloGold
Ashanti’s uranium production further. In 2007, a new tailings dam was commissioned in order to segregate untreated uranium-
bearing material from material which had previously been treated. Work has begun on an upgrade of the uranium plant at Vaal
River and this will be commissioned in 2009. Nuclear Fuels Corporation of South Africa (Pty) Limited (Nufcor) has also entered
into contracts with several other uranium producers to treat their material. The first deliveries under these contracts started in
late 2007.
Ashanti’s uranium production further. In 2007, a new tailings dam was commissioned in order to segregate untreated uranium-
bearing material from material which had previously been treated. Work has begun on an upgrade of the uranium plant at Vaal
River and this will be commissioned in 2009. Nuclear Fuels Corporation of South Africa (Pty) Limited (Nufcor) has also entered
into contracts with several other uranium producers to treat their material. The first deliveries under these contracts started in
late 2007.
Following a run of price increases lasting more than four years, the spot price of U3O8 reached an all-time high of $136 per
pound in mid-June 2007. The price weakened thereafter due to weak seasonal demand during the summer months. The spot
price dropped to a low of $75 per pound at the start of October before recovering to end the year at $90 per pound.
pound in mid-June 2007. The price weakened thereafter due to weak seasonal demand during the summer months. The spot
price dropped to a low of $75 per pound at the start of October before recovering to end the year at $90 per pound.
Recent spot price volatility has been predominantly demand-driven with utilities backing away from the market in light of the
record prices for uranium. Conversely, term market prices have remained remarkably steady with published prices remaining at
$95 per pound throughout the second half of 2007. Term activity remains the dominant contracting force in the uranium market
with up to 90 percent of utility demand procured via direct multi-year supply agreements with producers.
record prices for uranium. Conversely, term market prices have remained remarkably steady with published prices remaining at
$95 per pound throughout the second half of 2007. Term activity remains the dominant contracting force in the uranium market
with up to 90 percent of utility demand procured via direct multi-year supply agreements with producers.
Forward uranium market fundamentals remain positive with robust demand augmented via an increasing number of new
reactor build projects. Market prices are anticipated to remain robust for several years with the potential for price spikes in the
event of further supply disruption.
reactor build projects. Market prices are anticipated to remain robust for several years with the potential for price spikes in the
event of further supply disruption.
Gold production and mine-site rehabilitation processes
The process of producing gold
The process of producing gold can be divided into six main phases:
The process of producing gold can be divided into six main phases:
•
finding the orebody;
•
creating access to the orebody;
•
removing the ore by mining or breaking the orebody;
•
transporting the broken material from the mining face to the plants for treatment;
•
processing; and
•
refining.
This basic process applies to both underground and surface operations.
Finding the orebody
AngloGold Ashanti’s global exploration group identifies targets and undertakes exploration, on its own or in conjunction with
joint venture partners.
AngloGold Ashanti’s global exploration group identifies targets and undertakes exploration, on its own or in conjunction with
joint venture partners.
40
Creating access to the orebody
There are two types of mining which take place to access the orebody:
•
underground mining: a vertical or decline shaft (designed to transport people and/or materials) is sunk deep into the
ground, after which horizontal development takes place at various levels of the main shaft or decline. This allows for
further on-reef development of specific mining areas where the orebody has been identified; and
ground, after which horizontal development takes place at various levels of the main shaft or decline. This allows for
further on-reef development of specific mining areas where the orebody has been identified; and
•
open-pit mining: where the top layers of topsoil or rock are removed in a process called ‘stripping’ to uncover the reef.
Removing the ore by mining or breaking the orebody
•
In underground mining, holes are drilled into the orebody, filled with explosives and then blasted. The blasted ‘stopes’
or ‘faces’ are then cleaned and the ore released is then ready to be transported out of the mine.
or ‘faces’ are then cleaned and the ore released is then ready to be transported out of the mine.
•
In open-pit mining, drilling and blasting may also be necessary to release the gold- bearing rock; excavators then load
the material onto the ore transport system.
the material onto the ore transport system.
Transporting the broken material from the mining face to the plants for treatment
•
Underground ore is transported by means of vertical and/or horizontal transport systems. Once on the surface,
conveyor belts usually transport the ore to the treatment plants.
conveyor belts usually transport the ore to the treatment plants.
•
Open-pit mines transport ore to the treatment plants in vehicles capable of hauling large, heavy loads.
Services
Mining activities require extensive services, both on the surface and underground, including:
Mining activities require extensive services, both on the surface and underground, including:
•
mining engineering services;
•
mine planning;
•
ventilation;
•
•
provision of consumable resources;
•
engineering services;
•
financial, administration and human resource services; and
•
environmental/sustainable development services.
Processing
•
Comminution is the process of breaking up ore to make gold available for treatment. Conventionally, this process
occurs in multi-stage crushing and milling circuits. Modern technology is to use large mills fed directly with run-of-mine
material.
occurs in multi-stage crushing and milling circuits. Modern technology is to use large mills fed directly with run-of-mine
material.
•
Gold ores can typically be classified into:
•
refractory ores, where the gold is locked within a sulphide mineral and not readily available for recovery by
the cyanidation process; or
the cyanidation process; or
•
free milling, where the gold is readily available for recovery by the cyanidation process.
•
Refractory ore treatment: after fine grinding, the sulphide materials are separated from the barren gangue material
using flotation to produce a high-grade sulphide concentrate. The sulphide concentrate is oxidized by either roasting
as at Brasil Mineração or bacterial oxidation (BIOX) as at Obuasi. The oxidation process oxidizes the sulphide
minerals, liberating the gold particles and making them amenable to recovery by the cyanidation process.
using flotation to produce a high-grade sulphide concentrate. The sulphide concentrate is oxidized by either roasting
as at Brasil Mineração or bacterial oxidation (BIOX) as at Obuasi. The oxidation process oxidizes the sulphide
minerals, liberating the gold particles and making them amenable to recovery by the cyanidation process.
•
Free milling and oxidized refractory ores are processed for gold recovery by leaching the ore in agitated tanks in an
alkaline cyanide leach solution. This is generally followed by adsorption of the gold cyanide complex onto activated
carbon-in-pulp (CIP).
carbon-in-pulp (CIP).
•
An alternative process is the heap-leach process. This process is generally considered applicable to high-tonnage,
low-grade ore deposits, but it can be successfully applied to medium-grade deposits where the ore deposit tonnage
cannot economically justify constructing a process plant. Run- of-mine ore is crushed and heaped on a leach pad.
Low strength alkaline cyanide solution is applied, generally as a drip, to the top of the heap for periods of up to three
months. The dissolved gold bearing solution is collected from the base of the heap and transferred to carbon-in-
solution (CIS) columns where the gold cyanide complex is adsorbed onto activated carbon. The stripped solution is
recycled to the top of the heaps.
low-grade ore deposits, but it can be successfully applied to medium-grade deposits where the ore deposit tonnage
cannot economically justify constructing a process plant. Run- of-mine ore is crushed and heaped on a leach pad.
Low strength alkaline cyanide solution is applied, generally as a drip, to the top of the heap for periods of up to three
months. The dissolved gold bearing solution is collected from the base of the heap and transferred to carbon-in-
solution (CIS) columns where the gold cyanide complex is adsorbed onto activated carbon. The stripped solution is
recycled to the top of the heaps.
41
•
Gold adsorbed onto activated carbon is recovered by a process of re-dissolving the gold from the activated carbon
(elution), followed by precipitation in electro-winning cells and subsequent smelting of that precipitate into doré bars
that are shipped to the gold refineries.
(elution), followed by precipitation in electro-winning cells and subsequent smelting of that precipitate into doré bars
that are shipped to the gold refineries.
•
Retreatment of tailing stockpile from previous decades’ operations is also practiced by AngloGold Ashanti. The old
tailings are mined by water sluicing followed by agitator leaching in alkaline cyanide solution and recovery of dissolved
gold onto activated carbon.
tailings are mined by water sluicing followed by agitator leaching in alkaline cyanide solution and recovery of dissolved
gold onto activated carbon.
•
At AngloGold Ashanti operations, the main by-products produced are:
•
silver, which is associated with gold in ratios ranging from 0.1:1 to 200:1 silver to gold;
•
sulphuric acid which is produced from the gases generated by the roasting plants; and
•
uranium which is recovered in a process which involves initial acid leaching followed by recovery of the
leached uranium onto resin and subsequent stripping with ammonium hydroxide and precipitation of crude
yellow cake.
leached uranium onto resin and subsequent stripping with ammonium hydroxide and precipitation of crude
yellow cake.
•
The tailings from the process operations are stored in designated tailings storage facilities designed to enhance water
recovery and prevent contaminant seepage into the environment.
recovery and prevent contaminant seepage into the environment.
Refining
The doré bars are transported to a refinery for further refining, to as close to pure gold as possible. This is known as good
delivery status. This gives the assurance that the bar contains the quantity and purity of gold as stamped on the bar.
The doré bars are transported to a refinery for further refining, to as close to pure gold as possible. This is known as good
delivery status. This gives the assurance that the bar contains the quantity and purity of gold as stamped on the bar.
The process of mine-site rehabilitation
In all the jurisdictions in which the company operates, it is required to conduct closure and rehabilitation activities to return the
land to a productive state once mining has been completed. Additionally, the company is required to provide financial
assurance, in a form prescribed by law, to cover some or all of the costs of the anticipated closure and rehabilitation costs for
the operation. Rehabilitation refers to the process of reclaiming mined land to the condition that existed prior to mining or to a
pre-determined post-mining use.
land to a productive state once mining has been completed. Additionally, the company is required to provide financial
assurance, in a form prescribed by law, to cover some or all of the costs of the anticipated closure and rehabilitation costs for
the operation. Rehabilitation refers to the process of reclaiming mined land to the condition that existed prior to mining or to a
pre-determined post-mining use.
Closure plans are devised prior to the commencement of operation and are regularly reviewed to take into account life-of-mine
projections. Although the final cost of closure cannot be fully determined ahead of closure, appropriate provision is made during
the mine’s economic operation.
projections. Although the final cost of closure cannot be fully determined ahead of closure, appropriate provision is made during
the mine’s economic operation.
Rights to mine and title to properties
AngloGold Ashanti’s rights to own and exploit mineral reserves and deposits are governed by the laws and regulations of the
jurisdictions in which the mineral properties are located. In a number of countries in which AngloGold Ashanti operates there
are, in some cases, certain restrictions in terms of the group’s ability to independently move assets out of that country and/or
transfer the assets within the group, without the prior consent of the local government or minority shareholders involved.
jurisdictions in which the mineral properties are located. In a number of countries in which AngloGold Ashanti operates there
are, in some cases, certain restrictions in terms of the group’s ability to independently move assets out of that country and/or
transfer the assets within the group, without the prior consent of the local government or minority shareholders involved.
42
Operating performance
In 2007, gold production totaled 5.5 million ounces compared to 5.6 million ounces in 2006. This decline in production was
largely a result of the reduced volumes mined at the South African operations owing to safety concerns, and at some of the
operations in Mali which are nearing the end of their productive lives. Record production was reported at Sunrise Dam in
Australia and at Siguiri in Guinea, while at Moab Khotsong in South Africa the ramp-up in production continued. Total cash cost
per ounce for the year was $367 compared to $321 in 2006.
largely a result of the reduced volumes mined at the South African operations owing to safety concerns, and at some of the
operations in Mali which are nearing the end of their productive lives. Record production was reported at Sunrise Dam in
Australia and at Siguiri in Guinea, while at Moab Khotsong in South Africa the ramp-up in production continued. Total cash cost
per ounce for the year was $367 compared to $321 in 2006.
AngloGold Ashanti has 20 operations in 10 countries around the world. The 20 operations include Boddington, a joint venture
expansion project with Newmont, which is currently underway in Australia. While these operations are managed on a regional
basis, they are reported on country-by-country basis.
expansion project with Newmont, which is currently underway in Australia. While these operations are managed on a regional
basis, they are reported on country-by-country basis.
The operations and geographical areas in which AngloGold Ashanti currently operates are shown below.
43
OPERATIONS AT A GLANCE for the year ended December 31, 2007
Attributable tonnes
treated/milled (Mt)
Average grade
recovered (g/t)
recovered (g/t)
Attributable gold
production (000oz)
Total cash costs
($/oz)
(1)
2007
2006
2005 2007
2006 2005
2007 2006
2005
2007
2006 2005
SOUTH AFRICA
2,328
2,554 2,676
Vaal River
Great Noligwa
2.0
2.4
2.3
7.54
8.08
9.30
483
615
693
404
260
264
Kopanang
1.8
2.0
2.0
7.24
7.01
7.38
418
446
482
306
291
277
Moab Khotsong
(1)
0.3
0.2
–
7.94
6.35
–
67
44
–
672
659
–
Tau Lekoa
1.4
1.5
2.1
3.62
3.76
3.96
165
176
265
473
438
410
Surface operations
8.0
7.2
5.8
0.49
0.49
0.51
125
113
95
304
283
287
West Wits
Mponeng
1.9
1.9
1.7
9.50
9.93
9.15
587
596
512
264
238
279
Savuka
0.3
0.4
0.6
6.69
7.68
6.80
73
89
126
397
337
430
TauTona
(2)
1.8
2.0
1.6
9.67
10.18
9.62
409
474
502
318
270
256
ARGENTINA
Cerro Vanguardia (92.5 percent)
0.9
0.9
0.9
6.88
7.29
7.70
204
215
211
260
223
171
AUSTRALIA
Sunrise Dam
(3)
3.8
4.0
3.6
4.86
3.39
3.68
600
465
455
262
333
269
BRAZIL
408
339
346
Brasil Mineraçáo
(2)
1.4
1.1
1.3
7.48
7.60
7.27
317
242
250
246
207
169
Serra Grande (50 percent)
(2)
0.4
0.4
0.4
7.21
7.51
7.93
91
97
96
264
196
158
GHANA
527
592
680
Bibiani
(5)
–
2.1
2.4
–
0.55
1.46
–
37
115
–
432
305
Iduapriem
(3)(4)
2.8
3.0
3.2
1.85
1.74
1.71
167
167
174
497
413 348
Obuasi
(2)
6.0
6.2
4.7
4.43
4.39
4.77
360
387
391
464
397
345
GUINEA
Siguiri (85 percent)
(3)
8.3
7.0
5.8
1.05
1.08
1.21
280
256
246
471
398
301
MALI
441
537
528
Morila (40 percent)
1.7
1.7
1.5
3.36
3.88
5.41
180
207
262
333
266
191
Sadiola (38 percent)
1.6
1.8
1.9
2.76
3.22
2.73
140
190
168
414
268
265
Yatela (40 percent)
(6)
1.2
1.3
1.3
3.46
4.12
2.99
120
141
98
300
241
263
NAMIBIA
Navachab
1.6
1.5
1.2
1.56
1.81
2.05
80
86
81
475
349
321
TANZANIA
Geita
5.1
5.7
6.1
2.01
1.68
3.14
327
308
613
627
630
298
UNITED STATES OF AMERICA
Cripple Creek & Victor
(6)
20.9
21.8
19.2
0.53
0.54
0.62
282
283
330
269
248
230
(1)
Attributable production at Moab Khotsong prior to commercial production in 2006 was capitalized against pre-production costs.
(2)
The yield of TauTona, Brasil Mineraçáo, Serra Grande and Obuasi represents underground operations.
(3) The yield of Sunrise Dam, Iduapriem and Siguiri represents open-pit operations.
(4)
(3) The yield of Sunrise Dam, Iduapriem and Siguiri represents open-pit operations.
(4)
The minority shareholdings of the International Finance Corporation (10 percent) and Government of Ghana (5 percent) were acquired effective
September 1, 2007 and Iduapriem is now wholly-owned by AngloGold Ashanti.
September 1, 2007 and Iduapriem is now wholly-owned by AngloGold Ashanti.
(5)
The yield of Bibiani represents surface and dump reclamation in 2006 and open-pit operations in 2005. Bibiani was sold effective December 28, 2006.
(6)
The yield of Yatela and Cripple Creek & Victor Joint Venture reflects recoverable gold placed/tonnes placed.
44
SOUTH AFRICA
Location: AngloGold Ashanti’s South Africa region includes seven underground operations located in two geographic areas on
the Witwatersrand Basin. These are:
the Witwatersrand Basin. These are:
·
the Vaal River area, near Klerksdorp and Orkney, in the North West Province and Free State, where the Great Noligwa,
Kopanang, Tau Lekoa and Moab Khotsong (which remains under development) mines are located; and
·
the West Wits area, near Carletonville, straddling the North West Province and Gauteng, where the Mponeng, TauTona
and Savuka mines are located.
Rights:
In October 2002, the President of South Africa assented to the Mineral and Petroleum Resources Development Act (MPRDA),
which was passed by the Parliament of South Africa in June 2002 and came into effect on May 1, 2004. The objects of the Act
are to allow for state sovereignty over all mineral and petroleum resources in the country, to promote economic growth and the
development of these resources and to expand opportunities for the historically disadvantaged. The object is also to ensure
security of tenure concerning prospecting, exploration, mining and production operations. The state ensures that holders of
mining and prospecting rights contribute to the socio-economic development of the areas in which they are operating.
AngloGold Ashanti was informed on August 1, 2005, by the Director General of Minerals and Energy that its applications to
convert its old order mining rights to new order mining rights for its West Wits and Vaal River operations, as well as its
applications for new mining rights to extend its mining areas at its TauTona and Kopanang mines, had been successful. These
applications relate to all of its existing operations in South Africa. The notarial agreements for the converted West Wits mining
right and Block 1C11 new mining rights have been executed and registered as well as the agreements for Jonkerskraal,
Weltevreden, Moab Extension Area and the new right for Edom, all of which form part of the Vaal River operations. Two
notarial agreements relating to the Vaal River operations are in the process of being executed and registered. The deadline for
the conversion process is April 2009. The South African government expects to finalize the Royalty Bill towards the end of
2008.
which was passed by the Parliament of South Africa in June 2002 and came into effect on May 1, 2004. The objects of the Act
are to allow for state sovereignty over all mineral and petroleum resources in the country, to promote economic growth and the
development of these resources and to expand opportunities for the historically disadvantaged. The object is also to ensure
security of tenure concerning prospecting, exploration, mining and production operations. The state ensures that holders of
mining and prospecting rights contribute to the socio-economic development of the areas in which they are operating.
AngloGold Ashanti was informed on August 1, 2005, by the Director General of Minerals and Energy that its applications to
convert its old order mining rights to new order mining rights for its West Wits and Vaal River operations, as well as its
applications for new mining rights to extend its mining areas at its TauTona and Kopanang mines, had been successful. These
applications relate to all of its existing operations in South Africa. The notarial agreements for the converted West Wits mining
right and Block 1C11 new mining rights have been executed and registered as well as the agreements for Jonkerskraal,
Weltevreden, Moab Extension Area and the new right for Edom, all of which form part of the Vaal River operations. Two
notarial agreements relating to the Vaal River operations are in the process of being executed and registered. The deadline for
the conversion process is April 2009. The South African government expects to finalize the Royalty Bill towards the end of
2008.
45
Geology: The Witwatersrand Basin comprises a six-kilometer thick sequence of interbedded argillaceous and arenaceous
sediments that extend laterally for some 300 kilometers north-east/south-west and 100 kilometers north-west/south-east on the
Kaapvaal Craton. The upper portion of the basin, which contains the orebodies, crops out at its northern extent near
Johannesburg. Further west, south and east the basin is overlain by up to four kilometers of Archaean, Proterozoic and
Mesozoic volcanic and sedimentary rocks. The Witwatersrand Basin is late Archaean in age and is considered to be in the
order of 2.7 to 2.8 billion years old.
sediments that extend laterally for some 300 kilometers north-east/south-west and 100 kilometers north-west/south-east on the
Kaapvaal Craton. The upper portion of the basin, which contains the orebodies, crops out at its northern extent near
Johannesburg. Further west, south and east the basin is overlain by up to four kilometers of Archaean, Proterozoic and
Mesozoic volcanic and sedimentary rocks. The Witwatersrand Basin is late Archaean in age and is considered to be in the
order of 2.7 to 2.8 billion years old.
Gold occurs in laterally extensive quartz pebble conglomerate horizons or reefs, generally less than two meters thick, and are
widely considered to represent laterally extensive braided fluvial deposits. Separate fan systems were developed at different
entry points and these are preserved as distinct goldfields. There is still much debate about the origin of the gold
mineralization in the Witwatersrand Basin. Gold was generally considered to have been deposited syngenetically with the
conglomerates, but increasingly an epigenetic origin theory is being supported. Nonetheless, the most fundamental control to
the gold distribution in the Basin remains the sedimentary features, such as facies variations and channel directions. Gold
generally occurs in native form often associated with pyrite and carbon, with quartz being the main gangue mineral.
widely considered to represent laterally extensive braided fluvial deposits. Separate fan systems were developed at different
entry points and these are preserved as distinct goldfields. There is still much debate about the origin of the gold
mineralization in the Witwatersrand Basin. Gold was generally considered to have been deposited syngenetically with the
conglomerates, but increasingly an epigenetic origin theory is being supported. Nonetheless, the most fundamental control to
the gold distribution in the Basin remains the sedimentary features, such as facies variations and channel directions. Gold
generally occurs in native form often associated with pyrite and carbon, with quartz being the main gangue mineral.
Safety: At the South African operations, there were most regrettably 27 fatalities during the course of 2007, five fewer than in
2006. This resulted in a FIFR of 0.29 per million hours worked for the year as opposed to 0.35 in 2006. The LTIFR for the
South African operations as a whole for 2007 was 12.72 per million hours worked (2006: 12.53), indicating a deterioration in
safety levels, although there were improvements in the safety performance at Kopanang, Moab Khotsong and Tau Lekoa.
2006. This resulted in a FIFR of 0.29 per million hours worked for the year as opposed to 0.35 in 2006. The LTIFR for the
South African operations as a whole for 2007 was 12.72 per million hours worked (2006: 12.53), indicating a deterioration in
safety levels, although there were improvements in the safety performance at Kopanang, Moab Khotsong and Tau Lekoa.
The safety of AngloGold Ashanti’s workforce remains a priority and in November 2007, the ‘Safety is our first value’ campaign
was launched at the South African operations. This behavior-based campaign will begin with developing a framework for
managing safety, the template for which will be based on OSHAS 18001 and OSHAS 18002. The safety campaign was
launched in collaboration with the trade unions and government representatives. Simultaneously, various safety interventions
were implemented at the operations to re-emphasize the company’s principles and standards regarding safety. The focus is on
leadership, behavior and on improving compliance with operating standards at all levels.
was launched at the South African operations. This behavior-based campaign will begin with developing a framework for
managing safety, the template for which will be based on OSHAS 18001 and OSHAS 18002. The safety campaign was
launched in collaboration with the trade unions and government representatives. Simultaneously, various safety interventions
were implemented at the operations to re-emphasize the company’s principles and standards regarding safety. The focus is on
leadership, behavior and on improving compliance with operating standards at all levels.
•
West Wits operations
Description: The Mponeng, Savuka and TauTona mines are situated on the West Wits Line, near the town of Carletonville,
straddling the border of the province of Gauteng and North West Province. Mponeng has its own gold processing plant while
the Savuka and TauTona operations share a plant.
straddling the border of the province of Gauteng and North West Province. Mponeng has its own gold processing plant while
the Savuka and TauTona operations share a plant.
Together, the West Wits operations collectively produced 33,258 kilograms (1,069,000 ounces) of gold, equivalent to
20 percent of group production.
20 percent of group production.
Mponeng
Description: Mponeng is situated close to the town of Carletonville in North West Province, southwest of Johannesburg,
straddling the border with the province of Gauteng. The mine currently mines the Ventersdorp Contact Reef (VCR) with stoping
taking place at an average depth of 3,054 meters. The deepest operating stope is at a depth of 3,370 meters below surface.
Given the high degree of variability in the grade of the VCR at Mponeng, a sequential grid mining method is used which allows
for selective mining and increased flexibility in dealing with changes in grade ahead of the stope.
straddling the border with the province of Gauteng. The mine currently mines the Ventersdorp Contact Reef (VCR) with stoping
taking place at an average depth of 3,054 meters. The deepest operating stope is at a depth of 3,370 meters below surface.
Given the high degree of variability in the grade of the VCR at Mponeng, a sequential grid mining method is used which allows
for selective mining and increased flexibility in dealing with changes in grade ahead of the stope.
Mponeng comprises a twin-shaft system housing two vertical shafts and two service shafts. Ore mined is treated and smelted
at Mponeng’s gold plant. The ore is initially ground down by means of semi-autogenous milling after which a conventional gold
leach process incorporating liquid oxygen injection is applied. The gold is then extracted by means of carbon-in-pulp
technology. The Mponeng gold plant conducts electrowinning and smelting (induction furnaces) on products from Savuka and
TauTona as well. The Mponeng gold plant has a capacity of 160,000 tonnes per month.
at Mponeng’s gold plant. The ore is initially ground down by means of semi-autogenous milling after which a conventional gold
leach process incorporating liquid oxygen injection is applied. The gold is then extracted by means of carbon-in-pulp
technology. The Mponeng gold plant conducts electrowinning and smelting (induction furnaces) on products from Savuka and
TauTona as well. The Mponeng gold plant has a capacity of 160,000 tonnes per month.
46
Geology: Two reef horizons are exploited at the West Wits operations, the Ventersdorp Contact Reef (VCR) located at the top
of the Central Rand Group and the Carbon Leader Reef (CLR) near the base. The separation between the two reefs increases
from east to west from 400 to 900 meters, owing to unconformity in the VCR. TauTona and Savuka exploit both reefs whereas
Mponeng only mines the VCR. The structure is relatively simple; faults of greater than 70 meters are rare. The CLR consists of
one or more conglomerate units and varies from several centimeters to more than three meters in thickness. Regionally, the
VCR dips at approximately 21 degrees but may vary between 5 and 50 degrees, accompanied by changes in thickness of the
conglomerate units. Where the conglomerate has the attitude of the regional dip, it tends to be thick, well-developed and
accompanied by higher gold accumulations. Where the attitude departs significantly from the regional dip, the reef is thin,
varying from several centimeters to more than three meters in thickness.
of the Central Rand Group and the Carbon Leader Reef (CLR) near the base. The separation between the two reefs increases
from east to west from 400 to 900 meters, owing to unconformity in the VCR. TauTona and Savuka exploit both reefs whereas
Mponeng only mines the VCR. The structure is relatively simple; faults of greater than 70 meters are rare. The CLR consists of
one or more conglomerate units and varies from several centimeters to more than three meters in thickness. Regionally, the
VCR dips at approximately 21 degrees but may vary between 5 and 50 degrees, accompanied by changes in thickness of the
conglomerate units. Where the conglomerate has the attitude of the regional dip, it tends to be thick, well-developed and
accompanied by higher gold accumulations. Where the attitude departs significantly from the regional dip, the reef is thin,
varying from several centimeters to more than three meters in thickness.
Safety: Safety at Mponeng deteriorated during the year, with the LTIFR rising from 10.70 in 2006 to 13.08 in 2007. There were
also, most regrettably, six fatalities during the year with the result that FIFR rose to 0.42 (2006: 0.30). Four of these fatalities
were caused by seismic events, one a result of a fall of ground and an accident involving machinery.
also, most regrettably, six fatalities during the year with the result that FIFR rose to 0.42 (2006: 0.30). Four of these fatalities
were caused by seismic events, one a result of a fall of ground and an accident involving machinery.
Operating review: Production declined by 2 percent to 18,260 kilograms (587,000 ounces) in 2007 compared with
18,549 kilograms (596,000 ounces) in 2006. The various planned and unplanned work stoppages and safety initiatives
conducted towards the end of the year, combined with a decline in grade and reduced face advance, contributed to the
decrease in production.
18,549 kilograms (596,000 ounces) in 2006. The various planned and unplanned work stoppages and safety initiatives
conducted towards the end of the year, combined with a decline in grade and reduced face advance, contributed to the
decrease in production.
There was a 4 percent decline in the area mined in 2007, largely as a result of a 3 percent decrease in face length.
Cost-saving initiatives were implemented at Mponeng and cost increases were kept to a minimum during the year. Total cash
costs rose by 11 percent to $264 per ounce, largely a result of the fatal accidents and the resulting loss of production days.
Also affecting costs were the strength in the rand and the increase in expenditure on seismic-related support.
costs rose by 11 percent to $264 per ounce, largely a result of the fatal accidents and the resulting loss of production days.
Also affecting costs were the strength in the rand and the increase in expenditure on seismic-related support.
Capital expenditure (including the amounts spent on below 120 VCR project and purchase of equipment) for the year totaled
R604 million ($86 million) (2006: R325 million ($48 million)). The SS2 shaft, which extends the mining depth to 6,700 meters,
was commissioned in December 2007.
R604 million ($86 million) (2006: R325 million ($48 million)). The SS2 shaft, which extends the mining depth to 6,700 meters,
was commissioned in December 2007.
Growth prospects: There are currently two growth projects at Mponeng.
VCR below 120 project: this entails accessing the mineral reserves below 120 level. It is estimated that this project will add
2.5 million ounces to production at a cost of $252 million (R2.03 billion). This project was approved by the board in February
2007, following which construction began. On-reef development and thus the start of production are scheduled for 2013 with
full production due in 2015.
2.5 million ounces to production at a cost of $252 million (R2.03 billion). This project was approved by the board in February
2007, following which construction began. On-reef development and thus the start of production are scheduled for 2013 with
full production due in 2015.
CLR below 120 project: Work is currently under way on this project aimed at accessing the Carbon Leader Reef which is
located about 900 meters below the VCR. Initial estimates are that it has the potential to contribute up to 7.4 million ounces to
production over the life of the project. Production from this project is estimated to commence in 2018.
located about 900 meters below the VCR. Initial estimates are that it has the potential to contribute up to 7.4 million ounces to
production over the life of the project. Production from this project is estimated to commence in 2018.
Savuka
Description: Savuka is situated on the West Wits line in the province of Gauteng, approximately 70 kilometers south-west of
Johannesburg. Savuka is close to the town of Carletonville in North West Province. The mine currently mines both the Carbon
Leader Reef (CLR) and the Ventersdorp Contact Reef (VCR).
Johannesburg. Savuka is close to the town of Carletonville in North West Province. The mine currently mines both the Carbon
Leader Reef (CLR) and the Ventersdorp Contact Reef (VCR).
This mining operation comprises sub and tertiary shaft systems with the latter reaching a depth of 3,777 meters, making
Savuka the deepest mine in the world. Longwall mining was the preferred extraction method until recently but the operation is
in the process of converting to sequential grid mining. There are 23 panels currently in operation.
Savuka the deepest mine in the world. Longwall mining was the preferred extraction method until recently but the operation is
in the process of converting to sequential grid mining. There are 23 panels currently in operation.
Ore mined at Savuka is processed firstly at TauTona’s processing plant. The plant uses conventional milling to crush the ore
and a carbon-in-pulp circuit to treat the ore further, after which it is sent to the Mponeng gold plant where the gold is extracted
by means of electrowinning and smelting. The Savuka gold plant has a capacity of 280,000 tonnes per month.
and a carbon-in-pulp circuit to treat the ore further, after which it is sent to the Mponeng gold plant where the gold is extracted
by means of electrowinning and smelting. The Savuka gold plant has a capacity of 280,000 tonnes per month.
47
Savuka was scheduled to close in April 2006. However, the strengthening gold price at that time, and a revised business plan
for Savuka based on shared managerial and processing resources, have contributed to a turnaround at this operation which is
now making a positive contribution to AngloGold Ashanti.
for Savuka based on shared managerial and processing resources, have contributed to a turnaround at this operation which is
now making a positive contribution to AngloGold Ashanti.
Safety: There was a deterioration in safety during the year with an overall LTIFR for the year of 25.99 per million hours worked
compared to 19.30 in 2006. There were two fatalities caused by seismic falls of ground to give a FIFR of 0.79 for the year
(2006: 0.0). Steps were taken to address safety including dedicated ‘safety’ days, mass communication and employee
workshops. These were in addition to the launch of the ‘safety is our first value’ campaign.
compared to 19.30 in 2006. There were two fatalities caused by seismic falls of ground to give a FIFR of 0.79 for the year
(2006: 0.0). Steps were taken to address safety including dedicated ‘safety’ days, mass communication and employee
workshops. These were in addition to the launch of the ‘safety is our first value’ campaign.
Operating review: Production was down to 2,284 kilograms (73,000 ounces) in 2007, although output was greater than had
been initially planned. Volumes mined were 9 percent down on 2006 with tonnes milled down by 5 percent. Increased
development for much of the year aimed at improving the stoping widths resulted in reduced grades. However, once this had
been achieved, reduced face advances, work stoppages and safety interventions also had a negative effect on production.
been initially planned. Volumes mined were 9 percent down on 2006 with tonnes milled down by 5 percent. Increased
development for much of the year aimed at improving the stoping widths resulted in reduced grades. However, once this had
been achieved, reduced face advances, work stoppages and safety interventions also had a negative effect on production.
Total cash costs increased by 18 percent to $397 per ounce, largely as a result of the reduced production and lower grades
which were affected by the decline in stoping activity and increase in development waste.
which were affected by the decline in stoping activity and increase in development waste.
Growth prospects: The restructuring program instituted at Savuka over the last two years has increased its expected life of
mine. There is an extensive resource to the west of current mining activities. Exploration and drilling programs are being
undertaken to determine extent and accessibility of this resource and to target potential mining prospects prior to the conduct of
feasibility studies.
mine. There is an extensive resource to the west of current mining activities. Exploration and drilling programs are being
undertaken to determine extent and accessibility of this resource and to target potential mining prospects prior to the conduct of
feasibility studies.
TauTona
Description: TauTona is situated close to Savuka near the town of Carletonville. TauTona exploits the Ventersdorp Contact
Reef (VCR) and the Carbon Leader Reef (CLR). Mining operations are conducted at depths ranging from 1,800 meters to
3,500 meters at which the deepest stoping sections are found.
Reef (VCR) and the Carbon Leader Reef (CLR). Mining operations are conducted at depths ranging from 1,800 meters to
3,500 meters at which the deepest stoping sections are found.
The mine consists of a main shaft system supported by secondary and tertiary shafts. The mining method used here is
primarily longwall mining. TauTona shares a processing plant with Savuka. The plant uses conventional milling to crush the ore
and a carbon-in-pulp plant to treat the ore further. Once the carbon has been added to the ore, it is transported to the gold plant
at Mponeng for electrowinning, smelting and the final recovery of the gold.
primarily longwall mining. TauTona shares a processing plant with Savuka. The plant uses conventional milling to crush the ore
and a carbon-in-pulp plant to treat the ore further. Once the carbon has been added to the ore, it is transported to the gold plant
at Mponeng for electrowinning, smelting and the final recovery of the gold.
Safety: There was deterioration in safety at TauTona during 2007. The LTIFR for the year was 18.14 (2006: 17.09) and there
were five fatalities (2006: 16), the major cause of which was rockfalls and/or falls of ground. The FIFR for the year was 0.40
(2006: 1.23) .
were five fatalities (2006: 16), the major cause of which was rockfalls and/or falls of ground. The FIFR for the year was 0.40
(2006: 1.23) .
Operating review: Gold production declined by 14 percent to 12,714 kilograms (409,000 ounces) (2006: 14,736 kilograms
(474,000 ounces)), owing to a greater-than-scheduled decline in the volume of ore mined. This was a result of increased
seismic activity in the vicinity of the CLR shaft pillar which is being mined, and at several high-grade production panels, where
production was halted for limited periods during the course of the year owing to the fatal accidents caused by seismic activity.
Both face length and face advance were negatively affected by seismicity during the year. The increased geological risk from
this seismic activity necessitated re-planning regarding mine layout and mining methods.
(474,000 ounces)), owing to a greater-than-scheduled decline in the volume of ore mined. This was a result of increased
seismic activity in the vicinity of the CLR shaft pillar which is being mined, and at several high-grade production panels, where
production was halted for limited periods during the course of the year owing to the fatal accidents caused by seismic activity.
Both face length and face advance were negatively affected by seismicity during the year. The increased geological risk from
this seismic activity necessitated re-planning regarding mine layout and mining methods.
The decline in production, together with an increase in input costs, annual wage increases, work stoppages and a stronger
rand contributed to an 18 percent increase in total cash costs to $318 per ounce. The increase in cash costs occurred despite
the implementation of various cost-saving initiatives, which were insufficient to offset the increase in costs associated with the
reduction in production and costs related to the repair of seismic damage. Capital expenditure was R500 million ($71 million),
less than had been planned.
rand contributed to an 18 percent increase in total cash costs to $318 per ounce. The increase in cash costs occurred despite
the implementation of various cost-saving initiatives, which were insufficient to offset the increase in costs associated with the
reduction in production and costs related to the repair of seismic damage. Capital expenditure was R500 million ($71 million),
less than had been planned.
Growth prospects: There are currently three growth projects under way at TauTona:
The CLR below 120 level project is accessed via a twin-decline system down to 128 level. Production is planned to begin in
2009 and the project is scheduled to produce 2.5 million ounces of gold from 2009 to 2019. The project has total budgeted
capital expenditure of $172 million (R1.2 billion) of which $73 million (R512 million) has been spent to date.
2009 and the project is scheduled to produce 2.5 million ounces of gold from 2009 to 2019. The project has total budgeted
capital expenditure of $172 million (R1.2 billion) of which $73 million (R512 million) has been spent to date.
48
The CLR shaft pillar extraction project enables stoping operations to be conducted up to a recently revised infrastructural zone
of influence. Production from this project, which began in 2004 and will continue until 2010, is estimated to total more than
425,000 ounces at an average cash cost of $118 per ounce during this period. Capital expenditure for this project is
R272 million ($40 million) at current exchange rates, most of which has been committed.
of influence. Production from this project, which began in 2004 and will continue until 2010, is estimated to total more than
425,000 ounces at an average cash cost of $118 per ounce during this period. Capital expenditure for this project is
R272 million ($40 million) at current exchange rates, most of which has been committed.
The VCR pillar project, which accesses the VCR pillar area located outside the zone of influence, began production in 2005.
Development is scheduled to be completed by mid-2009. Total production over a nine-year period until 2013 is estimated at
almost 226,000 ounces at a capital cost of R123 million ($18 million). Of this, R95 million ($14 million) has been spent to date.
The average project cash cost is calculated to be $158 per ounce.
Development is scheduled to be completed by mid-2009. Total production over a nine-year period until 2013 is estimated at
almost 226,000 ounces at a capital cost of R123 million ($18 million). Of this, R95 million ($14 million) has been spent to date.
The average project cash cost is calculated to be $158 per ounce.
Operating and production data for West Wits operations
Mponeng
TauTona
Savuka
2007
Pay limit (oz/t)
0.23
0.4
0.40
Pay limit (g/t)
7.83
16.11
13.72
Recovered grade (oz/t)
0.277
0.282
0.195
Recovered grade (g/t)
9.50
9.67
6.69
Gold production (000 oz)
587
409
73
Total cash costs ($/oz)
(1)
264
318
397
Total production costs ($/oz)
(1)
356
474
466
Capital expenditure ($ million)
86
71
9
Employees
(2)
5,126
4,160
1,063
Outside contractors
(2)
435
832
80
2006
Pay limit (oz/t)
0.23
0.53
0.31
Pay limit (g/t)
7.74
18.25
10.75
Recovered grade (oz/t)
0.290
0.297
0.224
Recovered grade (g/t)
9.93
10.18
7.68
Gold production (000 oz)
596
474
89
Total cash costs ($/oz)
(1)
238
270
337
Total production costs ($/oz)
(1)
374
411
359
Capital expenditure ($ million)
48
70
2
Employees
(2)
4,760
4,164
975
Outside contractors
(2)
524
1,002
65
2005
Pay limit (oz/t)
0.34
0.72
0.45
Pay limit (g/t)
11.53
24.43
15.18
Recovered grade (oz/t)
0.267
0.281
0.198
Recovered grade (g/t)
9.15
9.62
6.80
Gold production (000 oz)
512
502
126
Total cash costs ($/oz)
(1)
279
256
430
Total production costs ($/oz)
(1)
383
388
524
Capital expenditure ($ million)
47
74
6
Employees
(2)
4,897
4,459
2,178
Outside contractors
(2)
677
996
147
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
results – Total cash costs and total production costs”.
(2)
Average for the year.
49
·
Vaal River operations
Description: The Great Noligwa, Kopanang, Moab Khotsong and Tau Lekoa mines are situated near the towns of Klerksdorp
and Orkney on the border of North West Province and the Free State. The AngloGold Ashanti Vaal River operations have
among them four gold plants, one uranium plant and one sulphuric acid plant.
and Orkney on the border of North West Province and the Free State. The AngloGold Ashanti Vaal River operations have
among them four gold plants, one uranium plant and one sulphuric acid plant.
Combined, the Vaal River operations (including surface operations) produced 39,171 kilograms (1,259,000 ounces) of gold,
equivalent to 23 percent of group production.
equivalent to 23 percent of group production.
Great Noligwa
Description: Great Noligwa adjoins Kopanang and Moab Khotsong and is located close to the town of Orkney on the Free
State side of the Vaal River. Both the Vaal Reef, the primary reef, and the Crystalkop Reef, a secondary reef, are mined here.
The mining operation here consists of a twin-shaft system and operates over eight main levels at an average depth of
2,400 meters.
State side of the Vaal River. Both the Vaal Reef, the primary reef, and the Crystalkop Reef, a secondary reef, are mined here.
The mining operation here consists of a twin-shaft system and operates over eight main levels at an average depth of
2,400 meters.
Owing to the geological complexity of the orebody, a scattered mining method is employed. Great Noligwa has its own
dedicated milling and treatment plant which applies conventional crushing, screening semi-autogenous grinding and carbon-in-
leach processes to treat the ore and extract the gold.
dedicated milling and treatment plant which applies conventional crushing, screening semi-autogenous grinding and carbon-in-
leach processes to treat the ore and extract the gold.
Geology: In order of importance, the reefs mined at the Vaal River operations are the Vaal Reef, the VCR and the “C” Reef:
·
The Vaal Reef contains approximately 85 percent of the reserve tonnage with mining grades between 10 and 20g/t and
comprises a series of oligomictic conglomerates and quartzite packages developed on successive unconformities. Several
distinct facies have been identified, each with its unique gold distribution and grade characteristic.
· The VCR has a lower grade than the Vaal Reef, and contains approximately 15 percent of the estimated reserves. The
economic portion is mainly concentrated in the western part of the lease area and can take the form of a massive
conglomerate, a pyritic sand unit with intermittent pebble layers or a thin conglomerate horizon. The reef is located at the
contact between the overlying Kliprivierberg Lavas of the Ventersdorp SuperGroup and the underlying sediments of the
Witwatersrand SuperGroup which creates a distinctive seismic reflector. The VCR is located up to one kilometer above
the Vaal Reef.
· The “C” Reef is a thin, small pebble conglomerate with a carbon-rich basal contact, located approximately 270 meters
above the Vaal Reef. It has less than 1 percent of the estimated reserves with grades similar to the Vaal Reef, but more
erratic. The most significant structural features are the north-east striking normal faults which dip to the north-west and
south-east, resulting in zones of fault loss.
comprises a series of oligomictic conglomerates and quartzite packages developed on successive unconformities. Several
distinct facies have been identified, each with its unique gold distribution and grade characteristic.
· The VCR has a lower grade than the Vaal Reef, and contains approximately 15 percent of the estimated reserves. The
economic portion is mainly concentrated in the western part of the lease area and can take the form of a massive
conglomerate, a pyritic sand unit with intermittent pebble layers or a thin conglomerate horizon. The reef is located at the
contact between the overlying Kliprivierberg Lavas of the Ventersdorp SuperGroup and the underlying sediments of the
Witwatersrand SuperGroup which creates a distinctive seismic reflector. The VCR is located up to one kilometer above
the Vaal Reef.
· The “C” Reef is a thin, small pebble conglomerate with a carbon-rich basal contact, located approximately 270 meters
above the Vaal Reef. It has less than 1 percent of the estimated reserves with grades similar to the Vaal Reef, but more
erratic. The most significant structural features are the north-east striking normal faults which dip to the north-west and
south-east, resulting in zones of fault loss.
Vaal River – Summary of metallurgical operations
West GP
East Gold Acid
and Float Plant
Noligwa GP
Mispah GP
Kopanang GP
Gold plants
Capacity (000 tonnes/month)
180
309
263
140
420
Uranium plants
Capacity (000 tonnes/month)
–
–
–
–
–
–
263
Pyrite flotation plants
Capacity (000 tonnes/month)
–
–
–
250
145
Sulphuric acid plants
Production (tonnes/month)
–
7,500
–
–
–
50
Operating and production data for Vaal River operations
Great Noligwa
Kopanang
Tau Lekoa
Moab Khotsong
(3)
2007
Pay limit (oz/t)
0.34
0.36
0.16
1.52
Pay limit (g/t)
11.69
12.18
5.39
52.12
Recovered grade (oz/t)
0.220
0.211
0.106
0.232
Recovered grade (g/t)
7.54
7.24
3.62
7.94
Gold production (000 oz)
483
418
165
67
Total cash costs ($/oz)
(1)
404
306
473
672
Total production costs ($/oz)
(1)
513
400
752
1,254
Capital expenditure ($ million)
37
52
16
89
Employees
(2)
5,908
5,470
2,506
1,986
Outside contractors
(2)
726
465
345
1,548
2006
Pay limit (oz/t)
0.28
0.32
0.14
1.50
Pay limit (g/t)
9.57
10.92
4.85
51.44
Recovered grade (oz/t)
0.236
0.204
0.110
0.185
Recovered grade (g/t)
8.08
7.01
3.76
6.35
Gold production (000 oz)
615
446
176
44
Total cash costs ($/oz)
(1)
260
291
438
659
Total production costs ($/oz)
(1)
374
377
693
1,136
Capital expenditure ($ million)
49
41
11
83
Employees
(2)
5,883
5,360
2,514
1,539
Outside contractors
(2)
696
455
379
1,365
2005
Pay limit (oz/t)
0.39
0.39
0.19
-
Pay limit (g/t)
13.24
13.25
6.23
-
Recovered grade (oz/t)
0.271
0.215
0.116
-
Recovered grade (g/t)
9.30
7.38
3.96
-
Gold production (000 oz)
693
482
265
-
Total cash costs ($/oz)
(1)
264
277
410
-
Total production costs ($/oz)
(1)
354
363
555
-
Capital expenditure ($ million)
43
41
15
94
Employees
(2)
5,704
5,506
3,021
1,320
Outside contractors
(2)
1,152
524
1,084
1,201
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
results – Total cash costs and total production costs”.
(2)
Average for the year.
(3)
Commercial production commenced on January 1, 2006.
Safety: Safety at Great Noligwa as measured by the LTIFR deteriorated year-on-year. The LTIFR for the year was
14.46 (2006: 12.21). There were regrettably two fatalities (2006: seven) caused by falls of ground, to give a FIFR of 0.11, as
compared to 0.36 in 2006.
14.46 (2006: 12.21). There were regrettably two fatalities (2006: seven) caused by falls of ground, to give a FIFR of 0.11, as
compared to 0.36 in 2006.
Operating review: Production declined by 21 percent to 15,036 kilograms (483,000 ounces) in 2007, compared to
19,119 kilograms (615,000 ounces) in 2006. This was a result of poor face advance combined with a lack of mining flexibility
given the geological features encountered, and increased mining of pillars at the boundary limits of the mining lease area. The
decline in production was also affected by safety-related work stoppages and the running of safety training initiatives towards
the end of the year. The overall result was a 16 percent decline in tonnes mined.
19,119 kilograms (615,000 ounces) in 2006. This was a result of poor face advance combined with a lack of mining flexibility
given the geological features encountered, and increased mining of pillars at the boundary limits of the mining lease area. The
decline in production was also affected by safety-related work stoppages and the running of safety training initiatives towards
the end of the year. The overall result was a 16 percent decline in tonnes mined.
Overall, total cash cost for the year rose by 55 percent to $404 per ounce. Increases in costs were the result of lower volumes,
higher input costs, annual wage increases and losses on uranium byproduct. The losses on uranium were caused by firstly,
reduced production and secondly, uranium purchases which had to be made to meet contractual obligations. Capital
expenditure totaled R261 million ($37 million).
higher input costs, annual wage increases and losses on uranium byproduct. The losses on uranium were caused by firstly,
reduced production and secondly, uranium purchases which had to be made to meet contractual obligations. Capital
expenditure totaled R261 million ($37 million).
Growth prospects: As the operation ages, Great Noligwa is in the process of converting from conventional scattered mining to
pillar or remnant mining for the remainder of its operational life. Up until now the Vaal Reef has been the most economically
viable reef to mine. However, as this reef is being mined out, the less economical Crystalkop Reef is being increasingly
exploited as are economically viable pillars within the mine boundaries.
pillar or remnant mining for the remainder of its operational life. Up until now the Vaal Reef has been the most economically
viable reef to mine. However, as this reef is being mined out, the less economical Crystalkop Reef is being increasingly
exploited as are economically viable pillars within the mine boundaries.
51
Kopanang
Description: Kopanang adjoins Great Noligwa and is located close to the town of Orkney on the Free State side of the Vaal
River. The major reef mined at Kopanang is the Vaal Reef, while a secondary reef, the Crystalkop Reef, is mined on a smaller
scale. Mining operations are conducted at depths ranging from 1,350 meters to 2,240 meters.
River. The major reef mined at Kopanang is the Vaal Reef, while a secondary reef, the Crystalkop Reef, is mined on a smaller
scale. Mining operations are conducted at depths ranging from 1,350 meters to 2,240 meters.
The Kopanang operation comprises a single shaft system. Given the geologically complex orebody occurring at Kopanang, a
scattered mining method is used with the orebody being accessed mainly via footwall tunneling, raised on the dip of the reef
and stoped on strike. Kopanang has a gold processing plant that uses both conventional semi-autogenous grinding and
carbon-in-pulp technology. There are two streams of ore into the plant, one of which is fed mainly by Vaal Reef ore while the
other is fed exclusively by Ventersdorp Contact Reef ore from Tau Lekoa.
scattered mining method is used with the orebody being accessed mainly via footwall tunneling, raised on the dip of the reef
and stoped on strike. Kopanang has a gold processing plant that uses both conventional semi-autogenous grinding and
carbon-in-pulp technology. There are two streams of ore into the plant, one of which is fed mainly by Vaal Reef ore while the
other is fed exclusively by Ventersdorp Contact Reef ore from Tau Lekoa.
Safety: Safety as measured by the LTIFR improved year-on-year. The LTIFR for the year was 13.10 (2006: 15.22). There
were regrettably three fatalities (2006: two) caused by accidents involving machinery and explosives. FIFR for the year was
0.22 compared to 0.14 in 2006.
were regrettably three fatalities (2006: two) caused by accidents involving machinery and explosives. FIFR for the year was
0.22 compared to 0.14 in 2006.
Operating review: Gold production declined by 6 percent to 13,013 kilograms (418,000 ounces) (2006: 13,886 kilograms
(446,000 ounces)) with volumes mined decreasing by 5 percent. Although an initial drop in production was made up
subsequently when increased volumes of higher grade material were mined, resulting in an improved yield for the year, this
was insufficient to prevent an overall decline in production year-on-year. Seismic activity was a concern during the year as this
limited access to high-grade areas. In addition, mining face length was restricted by the unexpected geological structures
encountered, the intersection of methane, a lack of mining flexibility and shifts lost owing to safety-related training and work
stoppages.
(446,000 ounces)) with volumes mined decreasing by 5 percent. Although an initial drop in production was made up
subsequently when increased volumes of higher grade material were mined, resulting in an improved yield for the year, this
was insufficient to prevent an overall decline in production year-on-year. Seismic activity was a concern during the year as this
limited access to high-grade areas. In addition, mining face length was restricted by the unexpected geological structures
encountered, the intersection of methane, a lack of mining flexibility and shifts lost owing to safety-related training and work
stoppages.
The decreased production, combined with increased input costs including the implementation of winter power tariffs and annual
wage increases contributed to a 5 percent increase in total cash costs to $306 per ounce.
wage increases contributed to a 5 percent increase in total cash costs to $306 per ounce.
Capital expenditure rose by 29 percent to R362 million ($52 million).
Growth prospects: A new waste washing plant is planned at a cost of R11 million ($1.6 million). The plant will upgrade the
quality of the fines to be added to the Kopanang stream as well as that of the tonnes to be sent to the plant at Great Noligwa
for uranium extraction.
quality of the fines to be added to the Kopanang stream as well as that of the tonnes to be sent to the plant at Great Noligwa
for uranium extraction.
The orebody to the west of Kopanang’s current mining area is being explored which, if it proves viable, will extend the life of
mine.
mine.
Tau Lekoa
Description: Tau Lekoa is one four mining operations in the Vaal River area. It is close to the town of Orkney on the North
West Province side of the Vaal River. Unlike the other Vaal River operations, the major reef mined at Tau Lekoa is the
Ventersdorp Contact Reef. Mining operations are conducted at depths ranging from 800 meters to 1,743 meters, making this
one of the shallower AngloGold Ashanti mines in South Africa. Tau Lekoa has an expected life of mine of nine years.
West Province side of the Vaal River. Unlike the other Vaal River operations, the major reef mined at Tau Lekoa is the
Ventersdorp Contact Reef. Mining operations are conducted at depths ranging from 800 meters to 1,743 meters, making this
one of the shallower AngloGold Ashanti mines in South Africa. Tau Lekoa has an expected life of mine of nine years.
The Tau Lekoa operation comprises a twin-shaft system. Because of the geologically complex orebody occurring at Tau Lekoa,
a scattered mining method is used with the orebody being accessed via footwall tunneling while stoping takes place on strike.
There are currently seven shaft levels with an average of 70 panels in operation. Tau Lekoa employs hydro-electric power as
its primary source of energy.
a scattered mining method is used with the orebody being accessed via footwall tunneling while stoping takes place on strike.
There are currently seven shaft levels with an average of 70 panels in operation. Tau Lekoa employs hydro-electric power as
its primary source of energy.
Ore mined by Tau Lekoa is processed and treated in preparation for gold extraction at the Kopanang gold plant.
Safety: Although safety as measured by the rate of lost-time injuries improved to 19.07 compared to 24.99 in 2006, in terms of
fatalities, safety standards declined. There were regrettably four fatalities at Tau Lekoa to give a FIFR for the year of
0.58 (2006: 0.15).
fatalities, safety standards declined. There were regrettably four fatalities at Tau Lekoa to give a FIFR for the year of
0.58 (2006: 0.15).
52
Operating review: Production declined by 6 percent to 5,137 kilograms (165,000 ounces) in 2007 from 5,473 kilograms
(176,000 ounces) in 2006, despite a marginal improvement in face advance. This was in line with a scheduled down-sizing of
the operation in 2006/7, and a planned decline in yields and inventory depletion. Production was achieved despite work
stoppages, both planned and unplanned, around safety-related matters and the implementation of safety training initiatives.
(176,000 ounces) in 2006, despite a marginal improvement in face advance. This was in line with a scheduled down-sizing of
the operation in 2006/7, and a planned decline in yields and inventory depletion. Production was achieved despite work
stoppages, both planned and unplanned, around safety-related matters and the implementation of safety training initiatives.
While Tau Lekoa has proved that current levels of production are both sustainable and profitable, its primary challenge is to
maintain high levels of output per employee without compromising safety.
maintain high levels of output per employee without compromising safety.
Total cash costs rose by 8 percent to $473 per ounce compared to $438 per ounce the previous year. Capital expenditure for
the year totalled R113 million ($16 million) (2006: R74 million ($11 million)).
the year totalled R113 million ($16 million) (2006: R74 million ($11 million)).
Growth prospects: The current aim of the Tau Lekoa operation is to maintain current levels of production.
Moab Khotsong
Description: Moab Khotsong, the newest of AngloGold Ashanti’s South African operations, began commercial production in
January 2006. Located south and south-east of Great Noligwa and Kopanang in the Free State province, Moab Khotsong was
developed so as to exploit the Vaal Reef. The first phase of this operation included the development of a main shaft system, a
subsidiary ventilation shaft and three main production levels to a depth of between 2,600 meters and 3,054 meters below
surface.
January 2006. Located south and south-east of Great Noligwa and Kopanang in the Free State province, Moab Khotsong was
developed so as to exploit the Vaal Reef. The first phase of this operation included the development of a main shaft system, a
subsidiary ventilation shaft and three main production levels to a depth of between 2,600 meters and 3,054 meters below
surface.
Given the known geological complexity of the Vaal Reef, a scattered mining method has been employed with haulages, cross
cuts and raises pre-developed in a grid system.
cuts and raises pre-developed in a grid system.
Safety: There were most regrettably five fatalities at Moab Khotsong in 2007. The primary cause of the fatal accidents was
seismic events. The FIFR for the year was 0.57 (2006: 0.27). There was, however, an improvement in the LTIFR to
13.48 (2006: 15.75).
seismic events. The FIFR for the year was 0.57 (2006: 0.27). There was, however, an improvement in the LTIFR to
13.48 (2006: 15.75).
Operating review: Production continued to ramp-up with 2,081 kilograms (67,000 ounces) being produced in 2007
(2006: 1,371 kilograms (44,000 ounces)) – 726 kilograms (23,000 ounces) were produced in the fourth quarter of 2007 alone.
Annual production was, however, less than had been budgeted as a result of poor face advance which was 25 percent less
than planned. Consequently, tonnes mined were 21 percent down on expectations.
(2006: 1,371 kilograms (44,000 ounces)) – 726 kilograms (23,000 ounces) were produced in the fourth quarter of 2007 alone.
Annual production was, however, less than had been budgeted as a result of poor face advance which was 25 percent less
than planned. Consequently, tonnes mined were 21 percent down on expectations.
Full annual production of 14,000 kilograms (440,000 ounces) is scheduled for 2013. As at the end of December 2007, the total
cost of developing Moab Khotsong was R4,193 million ($599 million) (at an exchange rate of R7/$).
cost of developing Moab Khotsong was R4,193 million ($599 million) (at an exchange rate of R7/$).
The values mined and volumes treated increased by 25 percent and 21 percent, respectively. This was despite an increase in
dilution owing to an increase in off-reef mining and stoping widths in order to negotiate dip faults.
dilution owing to an increase in off-reef mining and stoping widths in order to negotiate dip faults.
Total cash cost rose by 2 percent to $672 per ounce compared to $659 per ounce the previous year. Costs were negatively
affected by the lower-than-scheduled level of production, the purchase of uranium to meet delivery contracts, and the relative
strength of the rand for the year. Capital expenditure for the year totaled R628 million ($89 million) (2006: R565 million
($83 million)).
affected by the lower-than-scheduled level of production, the purchase of uranium to meet delivery contracts, and the relative
strength of the rand for the year. Capital expenditure for the year totaled R628 million ($89 million) (2006: R565 million
($83 million)).
Growth prospects: A study for Phase 2 of the development at Moab Khotsong which will extend below the Phase 1 workings
was approved by the board and completed during 2007.
was approved by the board and completed during 2007.
53
ARGENTINA
AngloGold Ashanti has one gold mine in Argentina, Cerro Vanguardia, which produced 204,000 attributable ounces of gold in
2007, equivalent to 4 percent of group production. The company owns the right to exploit the deposit up to 2036 based on the
Usufruct Agreement signed in December 1996.
2007, equivalent to 4 percent of group production. The company owns the right to exploit the deposit up to 2036 based on the
Usufruct Agreement signed in December 1996.
Description: AngloGold Ashanti has an interest of 92.5 percent in Cerro
Vanguardia and the province of Santa Cruz, 7.5 percent. Located to the north-
west of Puerto San Julian in the province of Santa Cruz, Cerro Vanguardia
consists of multiple small open pits with high stripping ratios. The orebodies
comprise a series of hydrothermal vein deposits containing vast quantities of
silver which is produced as a by-product.
Vanguardia and the province of Santa Cruz, 7.5 percent. Located to the north-
west of Puerto San Julian in the province of Santa Cruz, Cerro Vanguardia
consists of multiple small open pits with high stripping ratios. The orebodies
comprise a series of hydrothermal vein deposits containing vast quantities of
silver which is produced as a by-product.
Ore is processed at a metallurgical plant located at the mine and includes a
cyanide recovery plant. Technology at the plant is based on carbon-in-leach
processes with the tailings dam incorporated in a closed circuit with plant
process so that there is no final discharge. The Cerro Vanguardia gold plant
has a capacity of 82,000 tonnes per month.
cyanide recovery plant. Technology at the plant is based on carbon-in-leach
processes with the tailings dam incorporated in a closed circuit with plant
process so that there is no final discharge. The Cerro Vanguardia gold plant
has a capacity of 82,000 tonnes per month.
Rights: According to Argentinean mining legislation, mines are the private
property of the nation or a province, depending on where they are located.
Individuals are empowered to explore for, exploit and dispose of mines as
owners by means of a legal license granted by a competent authority under
the provisions of the Argentine Mining Code. The legal licenses granted for
the exploitation of mines are valid for an undetermined period, provided that
the mining title holder complies with the obligations settled in the Argentine
Mining Code. In Argentina, the usual ways of transferring rights over mining
licenses are: to sell the license; to lease such license; or to assign the rights
under such a license by a beneficial interest or Usufruct Agreement. In the
case of Cerro Vanguardia, the mining title holder is its partner, Fomicruz, and
due to the Usufruct Agreement signed between them and Cerro Vanguardia
SA on December 27, 1996, the latter has the irrevocable right to the
exploitation of the deposit for a period of 40 years. This agreement expires on
December 27, 2036.
property of the nation or a province, depending on where they are located.
Individuals are empowered to explore for, exploit and dispose of mines as
owners by means of a legal license granted by a competent authority under
the provisions of the Argentine Mining Code. The legal licenses granted for
the exploitation of mines are valid for an undetermined period, provided that
the mining title holder complies with the obligations settled in the Argentine
Mining Code. In Argentina, the usual ways of transferring rights over mining
licenses are: to sell the license; to lease such license; or to assign the rights
under such a license by a beneficial interest or Usufruct Agreement. In the
case of Cerro Vanguardia, the mining title holder is its partner, Fomicruz, and
due to the Usufruct Agreement signed between them and Cerro Vanguardia
SA on December 27, 1996, the latter has the irrevocable right to the
exploitation of the deposit for a period of 40 years. This agreement expires on
December 27, 2036.
Geology: The oldest rocks in this part of Patagonia are metamorphics of the Precambrian-Cambrian age. These are overlain
by Permian and Triassic continental clastic rocks which have been faulted into a series of horsts and grabens and are
associated with both limited basaltic sills and dykes and with calc-alkaline granite and granodiorite intrusions. Thick andesite
flows of Lower Jurassic age occur above these sedimentary units. A large volume of rhyolitic ignimbrites was emplaced during
the Middle and Upper Jurassic age over an area of approximately 100,000 square kilometers. These volcanic rocks include
the Chon Aike formation ignimbrite units that host the gold bearing veins at Cerro Vanguardia. Post-mineral units include
Cretaceous and Tertiary rocks of both marine and continental origin, the Quaternary La Avenida formation, the Patagonia
gravel and the overlying La Angelita basalt flows. These flows do not cover the area of the Cerro Vanguardia veins.
by Permian and Triassic continental clastic rocks which have been faulted into a series of horsts and grabens and are
associated with both limited basaltic sills and dykes and with calc-alkaline granite and granodiorite intrusions. Thick andesite
flows of Lower Jurassic age occur above these sedimentary units. A large volume of rhyolitic ignimbrites was emplaced during
the Middle and Upper Jurassic age over an area of approximately 100,000 square kilometers. These volcanic rocks include
the Chon Aike formation ignimbrite units that host the gold bearing veins at Cerro Vanguardia. Post-mineral units include
Cretaceous and Tertiary rocks of both marine and continental origin, the Quaternary La Avenida formation, the Patagonia
gravel and the overlying La Angelita basalt flows. These flows do not cover the area of the Cerro Vanguardia veins.
Gold and silver mineralization at Cerro Vanguardia occurs within a vertical range of about 150 to 200 meters in a series of
narrow, banded quartz veins that occupy structures within the Chon Aike ignimbrites. These veins form a typical structural
pattern related to major north-south (Concepcion) and east-west (Vanguardia) shears. Two sets of veins have formed in
response to this shearing - one set strikes about N40W and generally dips 65 to 90 degrees to the east; while the other set
strikes about N75W and the veins dip 60 to 80 degrees to the south.
narrow, banded quartz veins that occupy structures within the Chon Aike ignimbrites. These veins form a typical structural
pattern related to major north-south (Concepcion) and east-west (Vanguardia) shears. Two sets of veins have formed in
response to this shearing - one set strikes about N40W and generally dips 65 to 90 degrees to the east; while the other set
strikes about N75W and the veins dip 60 to 80 degrees to the south.
The veins are typical of epithermal, low-temperature, adularia-sericite character and consist primarily of quartz in several forms:
as massive quartz, banded chalcedonic quartz, and quartz-cemented breccias. Dark bands in the quartz are due to finely
disseminated pyrite, now oxidized to limonite. The veins show sharp contacts with the surrounding ignimbrite which hosts
narrow stockwork zones that are weakly mineralized and appear to have been cut by a sequence of north-east-trending faults
that have southerly movement with no appreciable lateral displacement.
as massive quartz, banded chalcedonic quartz, and quartz-cemented breccias. Dark bands in the quartz are due to finely
disseminated pyrite, now oxidized to limonite. The veins show sharp contacts with the surrounding ignimbrite which hosts
narrow stockwork zones that are weakly mineralized and appear to have been cut by a sequence of north-east-trending faults
that have southerly movement with no appreciable lateral displacement.
54
Safety: There was a deterioration in safety during the year. The LTIFR for 2007 was 3.34 compared to 3.13 in 2006. As in
2006, there were no fatalities in 2007. Corrective action has been taken including safety awareness workshops for the
managers responsible for operational safety, supervisors and contractors.
2006, there were no fatalities in 2007. Corrective action has been taken including safety awareness workshops for the
managers responsible for operational safety, supervisors and contractors.
Operating review: Attributable production decreased in line with expectations to 204,000 ounces for the year, mostly as a
result of the lower grade mined in the first three quarters of the year.
result of the lower grade mined in the first three quarters of the year.
The highlights for the year were the higher stripping ratio achieved with the extraction of 1.5 million tonnes of additional waste
and an increase in silver production to 420,000 ounces.
and an increase in silver production to 420,000 ounces.
The recovered grade decreased year-on-year from 7.29g/t in 2006 to 6.88g/t in 2007 as a result of the lower grade material
supplied to the plant.
supplied to the plant.
Total cash costs increased by 17 percent to $260 per ounce as compared to $223 per ounce in 2006. Increases in the cost of
mining supplies, a function of the inflationary impact of higher commodity prices and higher maintenance costs (due to an
extension on the useful life of some mine equipment), as well as an increase in workforce and contractor costs, were partially
offset by greater silver by-product revenue.
mining supplies, a function of the inflationary impact of higher commodity prices and higher maintenance costs (due to an
extension on the useful life of some mine equipment), as well as an increase in workforce and contractor costs, were partially
offset by greater silver by-product revenue.
Capital expenditure for the year amounted to $18 million, spent largely on mine equipment and mine and plant infrastructure.
Growth prospects: The four-year brownfields exploration program entered its second year in 2007. The focus of the program
is to determine the extent of and to delineate the shallow, high-grade mineral resources.
is to determine the extent of and to delineate the shallow, high-grade mineral resources.
Operating and production data for Cerro Vanguardia
2007
2006
2005
Pay limit (oz/t)
0.18
0.13
0.12
Pay limit (g/t)
3.48
4.56
4.02
Recovered grade (oz/t)
0.201
0.213
0.225
Recovered grade (g/t)
6.88
7.29
7.70
Gold production (000 oz) 100 percent
220
232
228
Gold production (000 oz) 92.50 percent
204
215
211
Total cash costs ($/oz)
(1)
260
223
171
Total production costs ($/oz)
(1)
358
372
270
Capital expenditure ($ million) 100 percent
20
19
15
Capital expenditure ($ million) 92.50 percent
18
18
14
Employees
(2)
708
623
487
Outside contractors
(2)
309
283
459
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
results – Total cash costs and total production costs”.
(2)
Average for the year.
55
AUSTRALIA
AngloGold Ashanti’s three assets in Australia are the
Sunrise Dam gold mine, and the Boddington and
Tropicana joint venture projects. In 2007, production
from Sunrise Dam was a record 600,000 ounces, an
increase of 29 percent and equivalent to 11 percent of
group production for the year.
Sunrise Dam gold mine, and the Boddington and
Tropicana joint venture projects. In 2007, production
from Sunrise Dam was a record 600,000 ounces, an
increase of 29 percent and equivalent to 11 percent of
group production for the year.
Ownership of these assets, all in the state of Western
Australia, is as follows:
Australia, is as follows:
The Sunrise Dam gold mine is 100 percent owned by
AngloGold Ashanti and is currently the only producing
AngloGold Ashanti operation in Australia. The
Sunrise Dam gold plant has a capacity of
300,000 tonnes per month.
AngloGold Ashanti and is currently the only producing
AngloGold Ashanti operation in Australia. The
Sunrise Dam gold plant has a capacity of
300,000 tonnes per month.
The Boddington project is a joint venture between
AngloGold Ashanti and Newmont Mining Corporation,
in which each has interests of 33.33 percent and
66.67 percent, respectively.
AngloGold Ashanti and Newmont Mining Corporation,
in which each has interests of 33.33 percent and
66.67 percent, respectively.
The Tropicana project is a joint venture between AngloGold Ashanti (70 percent) and Independence Group NL (30 percent),
which will contribute in terms of its 30 percent stake on completion of the pre-feasibility study.
which will contribute in terms of its 30 percent stake on completion of the pre-feasibility study.
Rights: In Australia, with few exceptions, all onshore mineral rights are reserved by the government of the relevant state or
territory. Exploration for, and mining of, minerals is regulated by the general mining legislation and controlled by the mining
ministry of each respective State or Territory. AngloGold Ashanti owns the mineral rights and has 21-year term mining leases
with rights of renewal to all of its mining areas in Australia, including its proportionate share of joint venture operations, and
both the group and its joint venture partners are fully authorized to conduct operations in accordance with relevant laws and
regulations. The mining leases and rights of renewal cover the current life-of-mine at AngloGold Ashanti’s operations in
Australia.
territory. Exploration for, and mining of, minerals is regulated by the general mining legislation and controlled by the mining
ministry of each respective State or Territory. AngloGold Ashanti owns the mineral rights and has 21-year term mining leases
with rights of renewal to all of its mining areas in Australia, including its proportionate share of joint venture operations, and
both the group and its joint venture partners are fully authorized to conduct operations in accordance with relevant laws and
regulations. The mining leases and rights of renewal cover the current life-of-mine at AngloGold Ashanti’s operations in
Australia.
Sunrise Dam
Description: The Sunrise Dam gold mine is located in the northern goldfields of Western Australia, 220 kilometers north-east
of Kalgoorlie and 55 kilometers south of Laverton. The mine consists of a large open-pit, which is now in its eleventh year of
operation, and an underground mine, which began producing in 2003. Mining at both operations is conducted by contractors
and the ore mined is treated in a conventional gravity and CIL processing plant which is owner-managed.
of Kalgoorlie and 55 kilometers south of Laverton. The mine consists of a large open-pit, which is now in its eleventh year of
operation, and an underground mine, which began producing in 2003. Mining at both operations is conducted by contractors
and the ore mined is treated in a conventional gravity and CIL processing plant which is owner-managed.
Geology: Gold ore at Sunrise Dam is structurally and lithologically controlled within gently dipping high strain shear zones (for
example, Sunrise Shear) and steeply dipping brittleductile low strain shear zones (for example, Western Shear). Host rocks
include andesitic volcanic rocks, volcanogenic sediments and magnetic shales.
example, Sunrise Shear) and steeply dipping brittleductile low strain shear zones (for example, Western Shear). Host rocks
include andesitic volcanic rocks, volcanogenic sediments and magnetic shales.
Safety: While no fatalities were recorded there was a slight deterioration in the rate of lost-time injuries. The LTIFR for the year
was 2.63 (2006: 1.81).
was 2.63 (2006: 1.81).
Operating review: Production increased by 29
percent to a record 600,000 ounces in line with expectations
(2006: 465,000 ounces). The GQ zone in the open pit provided the anticipated large volumes of high grade ore, which
accounted for the increase in annual gold production. Approximately 79,000 ounces of gold production was sourced from the
underground mine. Progress was made in developing access to the Cosmo, Dolly, and Watu lodes and 2,000 meters of
underground capital development and 6,100 meters of operational development were completed. A total of 67,400 meters of
diamond drilling was also completed.
accounted for the increase in annual gold production. Approximately 79,000 ounces of gold production was sourced from the
underground mine. Progress was made in developing access to the Cosmo, Dolly, and Watu lodes and 2,000 meters of
underground capital development and 6,100 meters of operational development were completed. A total of 67,400 meters of
diamond drilling was also completed.
56
Processing plant throughput in 2007 was 3.8 million tonnes, slightly lower than the record throughput of 3.9 million tonnes in
2006.
2006.
Total cash costs fell by 21 percent to $262 per ounce. Despite cost increases in areas such as open-pit mining contractor rates
per unit mined, the greater volume of ore mined, and the appreciation in value of the Australian dollar, the increase in
production, due primarily to the higher grade of ore mined, resulted in the decrease in unit cash costs, year-on-year.
per unit mined, the greater volume of ore mined, and the appreciation in value of the Australian dollar, the increase in
production, due primarily to the higher grade of ore mined, resulted in the decrease in unit cash costs, year-on-year.
The conversion of the mine’s diesel power station to liquefied natural gas (LNG) progressed well and the new LNG facility will
begin operation in the second quarter of 2008. Capital expenditure for the year amounted to A$35 million ($30 million).
begin operation in the second quarter of 2008. Capital expenditure for the year amounted to A$35 million ($30 million).
Growth prospects: The main open pit (the Mega Pit) will be completed in the second quarter of 2008, at a final depth of
440 meters. A cutback of the north wall of the open pit began in October 2007, and is scheduled for completion in mid-2010.
440 meters. A cutback of the north wall of the open pit began in October 2007, and is scheduled for completion in mid-2010.
The underground life of mine study was completed in late 2007 and, following successful exploration, underground reserves
have increased to 552,000 ounces (after depletion).
have increased to 552,000 ounces (after depletion).
Operating and production data for Sunrise Dam
2007
2006
2005
Pay limit (oz/t)
0.06
0.05
0.07
Pay limit (g/t)
1.76
1.64
2.27
Recovered grade (oz/t)
(2)
0.142
0.099
0.107
Recovered grade (g/t)
(2)
4.86
3.39
3.68
Gold production (000 oz)
600
465
455
Total cash costs ($/oz)
(1)
262
333
269
Total production costs ($/oz)
(1)
345
406
367
Capital expenditure ($ million)
30
24
34
Employees
(3)
102
99
95
Outside contractors
(3)
255
283
280
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
results – Total cash costs and total production costs”.
(2)
Open-pit operations.
(3)
Average for the year.
Boddington (attributable 33.33 percent)
Description: Boddington is located 130 kilometers south-east of Perth in Western Australia. The original, predominantly oxide
open-pit operation was closed at the end of 2001.
open-pit operation was closed at the end of 2001.
Geology: Boddington is located in the Saddleback Greenstone Belt, a northwest-trending fault-bounded silver of greenstones
about 50 kilometers long and eight kilometers wide within the Archaean Yilgarn Craton. The Boddington resource is located
within a six kilometer strike length and consists of felsic to intermediate volcanics and related intrusives. The resource is
subdivided into Wandoo South and Wandoo North. Wandoo South is centered on a composite diorite stock with five
recognizable intrusions. Wandoo North is dominated by diorites with lesser fragmental volcanic rocks.
about 50 kilometers long and eight kilometers wide within the Archaean Yilgarn Craton. The Boddington resource is located
within a six kilometer strike length and consists of felsic to intermediate volcanics and related intrusives. The resource is
subdivided into Wandoo South and Wandoo North. Wandoo South is centered on a composite diorite stock with five
recognizable intrusions. Wandoo North is dominated by diorites with lesser fragmental volcanic rocks.
Operating review and growth prospects: The Boddington expansion project, which involves mining the basement reserves
beneath the oxide pits, was approved in March 2006. The project has an attributable capital budget of between A$770 million
and A$900 million ($700 million and $800 million). At year-end, overall project progress was approximately 65 percent
complete, with engineering and procurement activities nearing completion. Construction of the treatment plant was
approximately 32 percent complete. Based on the current mine plan, mine life is estimated to be more than 20 years, with
attributable life-of-mine gold production expected to be greater than 5.7 million ounces of gold.
beneath the oxide pits, was approved in March 2006. The project has an attributable capital budget of between A$770 million
and A$900 million ($700 million and $800 million). At year-end, overall project progress was approximately 65 percent
complete, with engineering and procurement activities nearing completion. Construction of the treatment plant was
approximately 32 percent complete. Based on the current mine plan, mine life is estimated to be more than 20 years, with
attributable life-of-mine gold production expected to be greater than 5.7 million ounces of gold.
57
Operating and production data for Boddington
2007
2006
2005
Pay limit (oz/t)
–
–
–
Pay limit (g/t)
–
–
–
Recovered grade (oz/t)
–
–
–
Recovered grade (g/t)
–
–
–
Gold production (000 oz) 100 percent
–
–
–
Gold production (000 oz) 33.33 percent
–
–
–
Total cash costs ($/oz)
(1)
–
–
–
Total production costs ($/oz)
(1)
–
–
–
Capital expenditure ($ million) 100 percent
747
180
12
Capital expenditure ($ million) 33.33 percent
249
60
4
Employees
(2)
37
12
18
Outside contractors
(2)
387
85
48
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
results – Total cash costs and total production costs”.
(2)
Average for the year.
Tropicana
Description: Tropicana is a 12,500 square kilometers tenement package located 330 kilometers east north-east of Kalgoorlie
in Western Australia. AngloGold Ashanti holds a 70 percent interest in the project and Independence Group NL holds a
30 percent interest (free carried to completion of the pre-feasibility study). Independence has agreed to contribute to certain
project studies to ensure timely development of the project and to contribute to all regional exploration.
in Western Australia. AngloGold Ashanti holds a 70 percent interest in the project and Independence Group NL holds a
30 percent interest (free carried to completion of the pre-feasibility study). Independence has agreed to contribute to certain
project studies to ensure timely development of the project and to contribute to all regional exploration.
Geology: The Tropicana deposit comprises two known mineralized zones, the Tropicana zone to the north and Havana zone
to the south. Together the known mineralized zones define a system that extends over a 4 kilometer strike length. The lenses
have been tested to a vertical depth of 350 meters to 400 meters, and are open down dip. The Tropicana and Havana zones
are grossly “stratiform” within the preferred gneissic host sequence. Havana zone consists of multiple stacked lenses, whereas
Tropicana comprises one main mineralised lens.
to the south. Together the known mineralized zones define a system that extends over a 4 kilometer strike length. The lenses
have been tested to a vertical depth of 350 meters to 400 meters, and are open down dip. The Tropicana and Havana zones
are grossly “stratiform” within the preferred gneissic host sequence. Havana zone consists of multiple stacked lenses, whereas
Tropicana comprises one main mineralised lens.
Operating review and growth prospects: The pre-feasibility study on this project began in June 2007. The study, which is
scheduled to be completed by mid-2008, focuses on the Tropicana and Havana zones.
scheduled to be completed by mid-2008, focuses on the Tropicana and Havana zones.
Metallurgical testwork has determined that the preferred plant configuration is a conventional carbon-in-leach circuit. Tests are
currently underway to assess the optimal crushing and grinding circuit as well as the possible inclusion of energy-efficient high-
pressure grinding rolls.
currently underway to assess the optimal crushing and grinding circuit as well as the possible inclusion of energy-efficient high-
pressure grinding rolls.
With the completion of the resource estimate, pit design and mine scheduling studies are underway to determine the optimal
operating scale, grade and material scheduling strategy, infrastructural requirements, and capital and operating costs. A
potential large-scale water resource has been identified within 50 kilometers of the deposit.
operating scale, grade and material scheduling strategy, infrastructural requirements, and capital and operating costs. A
potential large-scale water resource has been identified within 50 kilometers of the deposit.
AngloGold Ashanti and Independence have agreed to jointly fund ongoing drilling to increase the resource classification to
measured, indicated and inferred by mid-2008 to enable estimation of reserves and to streamline the progression of the project
to feasibility level.
measured, indicated and inferred by mid-2008 to enable estimation of reserves and to streamline the progression of the project
to feasibility level.
Baseline environmental studies for the project have been substantially completed.
Regional exploration continues on the greater tenement package.
58
BRAZIL
AngloGold Ashanti’s two assets in Brazil are Brasil Mineração and Serra Grande. In 2007, these operations together produced
an attributable 408,000 ounces of gold, equivalent to 7 percent of group production.
an attributable 408,000 ounces of gold, equivalent to 7 percent of group production.
Rights: In Brazil, there are two basic mining rights: a license for the exploration stage, valid up to three years, renewable once;
and a Mining Concession or Mine Manifest, valid for the life of the deposit.
and a Mining Concession or Mine Manifest, valid for the life of the deposit.
Mine Manifests (mining titles granted in 1936) and Mining Concessions (mining titles presently granted through an order signed
by the Secretary of Mines of the Ministry of Mines and Energy) are valid for an undetermined period until depletion of reserves,
provided that the mining title holder complies with current Brazilian mining and environmental legislation, as well as with those
requirements set out by the National Department of Mineral Production (DNPM) who acts as inspecting entity for mining
activities. Obligations of the titleholder include:
by the Secretary of Mines of the Ministry of Mines and Energy) are valid for an undetermined period until depletion of reserves,
provided that the mining title holder complies with current Brazilian mining and environmental legislation, as well as with those
requirements set out by the National Department of Mineral Production (DNPM) who acts as inspecting entity for mining
activities. Obligations of the titleholder include:
·
the start of construction, as per an approved development plan, within six months of the issuance of the concession;
·
extracting solely the substances indicated in the concession;
·
communicating to the DNPM the discovery of a mineral substance not included in the concession title;
·
complying with environmental requirements;
·
restoring the areas degraded by mining;
·
refrain from interrupting exploitation for more than six months; and
·
reporting annually on operations.
The difference between a Mine Manifest and a Mining Concession lies in the legal nature of these two mining titles, since it is
much more difficult and complicated for the public administration to withdraw a Mine Manifest than a Mining Concession
although, in practice, it is possible for a Manifest to be cancelled or to become extinct if the abandonment of the mining
operation is formally proven. All of AngloGold Ashanti’s operations in Brazil have indefinite mining licenses.
much more difficult and complicated for the public administration to withdraw a Mine Manifest than a Mining Concession
although, in practice, it is possible for a Manifest to be cancelled or to become extinct if the abandonment of the mining
operation is formally proven. All of AngloGold Ashanti’s operations in Brazil have indefinite mining licenses.
59
Brazil – Summary of metallurgical operations
AngloGold Ashanti Mineração
Serra Grande
Cuiabá
Raposos
Gold plants
Capacity (000 tonnes/month)
135
26
66
Current throughput
112
Shut down
AngloGold Ashanti Brasil Mineração
Description: The wholly owned AngloGold Ashanti Brasil Mineração (Brasil Mineração) complex is located in south-eastern
Brazil in the state of Minas Gerais, close to the city of Belo Horizonte, in the municipalities of Nova Lima, Sabará and Santa
Bárbara. Ore is sourced from the Cuiabá underground mine, and then processed at the Cuiabá and Queiroz plants, and from
the Córrego do Sítio heap-leach operation.
Brazil in the state of Minas Gerais, close to the city of Belo Horizonte, in the municipalities of Nova Lima, Sabará and Santa
Bárbara. Ore is sourced from the Cuiabá underground mine, and then processed at the Cuiabá and Queiroz plants, and from
the Córrego do Sítio heap-leach operation.
Geology: The area in which Brasil Mineração is located is known as the Iron Quadrangle and is host to historic and current
gold mining operations, as well as a number of open-pit limestone and iron ore operations. The geology of the Iron Quadrangle
is composed of Proterozoic and Archaean volcano-sedimentary sequences and Pre-Cambrian granitic complexes. The host to
the gold mineralization is the volcano-sedimentary Nova Lima Group (NLG) that occurs at the base of the Rio das Velhas
SuperGroup (RDVS). The upper sequence of the RDVS is the meta-sedimentary Maquiné Group. Cuiabá mine, located at
Sabara Municipality, has gold mineralization associated with sulphides and quartz veins in Banded Ironstone Formation (BIF)
and volcanic sequences. At this mine, structural control and fluids flow ascension are the most important factors for gold
mineralization with a common association between large-scale shear zones and their associated structures. Where BIF is
mineralized the ore appears strongly stratiform due to the selective sulphidation of the iron rich layers. Steeply plunging shear
zones tend to control the ore shoots, which commonly plunge parallel to intersections between the shears and other structures.
gold mining operations, as well as a number of open-pit limestone and iron ore operations. The geology of the Iron Quadrangle
is composed of Proterozoic and Archaean volcano-sedimentary sequences and Pre-Cambrian granitic complexes. The host to
the gold mineralization is the volcano-sedimentary Nova Lima Group (NLG) that occurs at the base of the Rio das Velhas
SuperGroup (RDVS). The upper sequence of the RDVS is the meta-sedimentary Maquiné Group. Cuiabá mine, located at
Sabara Municipality, has gold mineralization associated with sulphides and quartz veins in Banded Ironstone Formation (BIF)
and volcanic sequences. At this mine, structural control and fluids flow ascension are the most important factors for gold
mineralization with a common association between large-scale shear zones and their associated structures. Where BIF is
mineralized the ore appears strongly stratiform due to the selective sulphidation of the iron rich layers. Steeply plunging shear
zones tend to control the ore shoots, which commonly plunge parallel to intersections between the shears and other structures.
The controlling mineralization structures are the apparent intersection of thrust faults with tight isoclinal folds in a ductile
environment. The host rocks at Brasil Mineração are BIF, Lapa Seca and mafic volcanics (principally basaltic). Mineralization is
due to the interaction of low salinity carbon dioxide rich fluids with the high-iron BIF, basalts and carbonaceous graphitic
schists. Sulphide mineralization consists of pyrrhotite and pyrite with subordinate pyrite and chalcopyrite; the latter tends to
occur as a late-stage fracture fill and is not associated with gold mineralization. Wallrock alteration is typically carbonate,
potassic and silicic.
environment. The host rocks at Brasil Mineração are BIF, Lapa Seca and mafic volcanics (principally basaltic). Mineralization is
due to the interaction of low salinity carbon dioxide rich fluids with the high-iron BIF, basalts and carbonaceous graphitic
schists. Sulphide mineralization consists of pyrrhotite and pyrite with subordinate pyrite and chalcopyrite; the latter tends to
occur as a late-stage fracture fill and is not associated with gold mineralization. Wallrock alteration is typically carbonate,
potassic and silicic.
Safety: Safety levels were maintained during the course of the year with little change in the LTIFR (2007: 2.30; 2006: 2.33).
No fatalities were recorded.
No fatalities were recorded.
Operating review: Production increased by 31 percent to 317,000 ounces in line with expectations (2006: 242,000 ounces),
boosted by the commissioning and start-up of the Cuiabá Expansion Project. Although the rainy season at the start of the year
hampered heap-leach activities and delayed the start up of the Cuiabá Expansion Project, by the end of the year, operating
performance had improved. The Cuiabá Expansion Project includes the deepening of the underground mine, the construction
of new treatment and tailings storage facilities, a roaster and an acid plant. The entire circuit has now been integrated and is
operational from the underground Cuiabá mine crushing area to the Queiroz processing plant. No significant problems were
experienced in increasing mine throughput from 830,000 tonnes to an average of 1.3 million tonnes annually. This project will
add six years to the life of mine of Brasil Mineração.
boosted by the commissioning and start-up of the Cuiabá Expansion Project. Although the rainy season at the start of the year
hampered heap-leach activities and delayed the start up of the Cuiabá Expansion Project, by the end of the year, operating
performance had improved. The Cuiabá Expansion Project includes the deepening of the underground mine, the construction
of new treatment and tailings storage facilities, a roaster and an acid plant. The entire circuit has now been integrated and is
operational from the underground Cuiabá mine crushing area to the Queiroz processing plant. No significant problems were
experienced in increasing mine throughput from 830,000 tonnes to an average of 1.3 million tonnes annually. This project will
add six years to the life of mine of Brasil Mineração.
From an operational perspective, actions such as the setting of new development rates, a new ramp, improvements to mine
infrastructure and layout and improved geotechnical conditions are being implemented to consolidate a sustainable long-term
rate of production. A 7 percent increase in the volume of tonnages treated has been planned to offset a 5 percent decline in
grades for 2008.
infrastructure and layout and improved geotechnical conditions are being implemented to consolidate a sustainable long-term
rate of production. A 7 percent increase in the volume of tonnages treated has been planned to offset a 5 percent decline in
grades for 2008.
Total cash costs rose by 19 percent to $246 per ounce compared to $207 per ounce in 2006. Higher costs were largely a result
of the appreciation in the local Brazilian currency (the real) against the US dollar, lower grades, the reduction in by-product
credits received for sulphuric acid and an increase in the operational cycle of the mine in deeper levels in addition to a new
plant at Cuiabá site.
of the appreciation in the local Brazilian currency (the real) against the US dollar, lower grades, the reduction in by-product
credits received for sulphuric acid and an increase in the operational cycle of the mine in deeper levels in addition to a new
plant at Cuiabá site.
Capital expenditure for the year totaled $117 million, significantly down on that of 2006 ($168 million) as the Cuiabá Expansion
Project was completed.
Project was completed.
60
Growth prospects: The Córrego do Sítio Underground Sulphide Project is investigating the viability of exploiting the potential
sulphide ore resources of the Córrego do Sítio underground orebodies, namely Cachorro Bravo, Laranjeira and Carvoaria. The
results from the study for this project were released in 2007. This project, which is expected to produce 100,000 ounces of gold
annually over 14 years from a total of 6.8 million tonnes of ore milled, is scheduled to begin in mid-2011.
sulphide ore resources of the Córrego do Sítio underground orebodies, namely Cachorro Bravo, Laranjeira and Carvoaria. The
results from the study for this project were released in 2007. This project, which is expected to produce 100,000 ounces of gold
annually over 14 years from a total of 6.8 million tonnes of ore milled, is scheduled to begin in mid-2011.
The development of a ramp and the exposure of the Cachorro Bravo orebody are continuing. The development of access
drives to the Carvoaria orebody is ongoing and exposure of the Laranjeira orebody to increase the extent of the mineable
resource has begun. Trial mining on the Cachorro Bravo orebody is in progress and generating data for the feasibility study.
drives to the Carvoaria orebody is ongoing and exposure of the Laranjeira orebody to increase the extent of the mineable
resource has begun. Trial mining on the Cachorro Bravo orebody is in progress and generating data for the feasibility study.
The Lamego Project explores the orebodies on the Lamego property. This project is expected to produce approximately
450,000 ounces over nine years. However, given the geological similarity of Lamego to that of the nearby Cuiabá mine, and the
lack of information regarding the deeper levels of Lamego, a more aggressive exploration program was budgeted for in 2007
and 2008 so as to evaluate the potential of increasing current expected production at Lamego to levels similar to those of the
Cuiabá operation. During 2007, development totaled 3,274 meters. A pre-feasibility study will be conducted in 2008.
450,000 ounces over nine years. However, given the geological similarity of Lamego to that of the nearby Cuiabá mine, and the
lack of information regarding the deeper levels of Lamego, a more aggressive exploration program was budgeted for in 2007
and 2008 so as to evaluate the potential of increasing current expected production at Lamego to levels similar to those of the
Cuiabá operation. During 2007, development totaled 3,274 meters. A pre-feasibility study will be conducted in 2008.
Operating and production data for Brasil Mineração
2007
2006
2005
Pay limit (oz/t)
0.13
0.09
0.11
Pay limit (g/t)
3.50
3.10
3.86
Recovered grade (oz/t)
(1)
0.218
0.222
0.212
Recovered grade (g/t)
(1)
7.48
7.60
7.27
Gold production (000 oz)
317
242
250
Total cash costs ($/oz)
(2)
246
207
169
Total production costs ($/oz)
(2)
360
301
260
Capital expenditure ($ million)
117
168
71
Employees
(3)
1,814
1,546
1,363
Outside contractors
(3)
1,620
2,065
1,234
(1)
Recovered grade represents underground operations.
(2)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
results – Total cash costs and total production costs”.
(3)
Average for the year.
Serra Grande (attributable 50 percent)
Description: Serra Grande is located in central Brazil, in the state of Goiás, five kilometers from the city of Crixás. AngloGold
Ashanti and the Kinross Gold Corporation are joint partners in this operation. In terms of the shareholders’ agreement,
AngloGold Ashanti manages the operation and has the right to access a maximum of 50 percent of the earnings accrued and
dividends paid by Serra Grande.
Ashanti and the Kinross Gold Corporation are joint partners in this operation. In terms of the shareholders’ agreement,
AngloGold Ashanti manages the operation and has the right to access a maximum of 50 percent of the earnings accrued and
dividends paid by Serra Grande.
Serra Grande comprises two underground mines, Mina III and Mina Nova, and an open pit at Mina III which began operation in
2007. The processing circuit, with grinding, leaching, filtration, precipitation and smelting facilities, has a capacity of about
800,000 tonnes of ore a year.
2007. The processing circuit, with grinding, leaching, filtration, precipitation and smelting facilities, has a capacity of about
800,000 tonnes of ore a year.
Geology: The deposits occur in the Rio Vermelho and Ribeirão das Antes Formations of the Archaean Pilar de Goia’s Group
which together account for a large proportion of the Crixás Greenstone Belt in central Brazil.
which together account for a large proportion of the Crixás Greenstone Belt in central Brazil.
The stratigraphy of the belt is dominated by basics and ultrabasics in the lower sequences with volcano sedimentary units
forming the upper successions.
forming the upper successions.
The gold deposits are hosted in a sequence of schists, volcanics and carbonates occurring in a typical greenstone belt
structural setting. The host rocks are of the Pilar de Goiás Group of the Upper Archaean. Gold mineralization is associated
with massive sulphides and vein quartz material associated with graphitic and sericitic schists and dolomites. The oreshoots
plunge to the north-west with dips of between 6 and 35 degrees. The stratigraphy is overturned and thrusts towards the east.
structural setting. The host rocks are of the Pilar de Goiás Group of the Upper Archaean. Gold mineralization is associated
with massive sulphides and vein quartz material associated with graphitic and sericitic schists and dolomites. The oreshoots
plunge to the north-west with dips of between 6 and 35 degrees. The stratigraphy is overturned and thrusts towards the east.
61
The greenstone belt lithologies are surrounded by Archaean tonalitic gneiss and granodiorite. The metamorphosed sediments
are primarily composed of quartz, chlorite, sericite, graphitic and garnetiferous schists. The carbonates have been
metamorphosed to ferroan dolomite marble with development of siderite and ankerite veining in the surrounding wallrock,
usually associated with quartz veining. The basalts are relatively unaltered but do show pronounced stretching with elongation
of pillow structures evident.
are primarily composed of quartz, chlorite, sericite, graphitic and garnetiferous schists. The carbonates have been
metamorphosed to ferroan dolomite marble with development of siderite and ankerite veining in the surrounding wallrock,
usually associated with quartz veining. The basalts are relatively unaltered but do show pronounced stretching with elongation
of pillow structures evident.
The Crixás greenstone belt comprises a series of Ardhaean to Palaeoproterozoic metavulcanics, metasediments and
basement granitoids stacked within a series of north to north-east transported thrust sheet. Thrusting (d1) was accompanied by
significant F1 folding/foliation development and progressive alteration in a brittle-ductile regime. D1 thrusting developed with
irregular thrust ramp geometry, in part controlled by concealed early basin faults. The main Crixás orebodies are adjacent to a
major north-north-west structural corridor, and up the main fault ramp/corner, to become dispersed to the east and north in
zones of foreland thrust flats. Fluid alteration also diminished to the west away from the main fault corner. A series of
concealed east-west to north-west-south-east basement block faults may have provided secondary fluid migration, and
development of early anti-formal warps in the thrust sheets; these structures probably define the quasi-regular spacing of
significant mineralization within the belt. The D1 thrust stack was gently folded by non-cylindrical folds. Gold mineralizing fluids
probably migrated during this event, with similar south-south-west to north-north-east migration, and focusing on bedding slip
during folding. Gold mineralization became minor and dispersed to the north and east along the formal thrust flat zone.
Concentrations of gold along the case of quartz vein may be due to the damming of fluids migrating upward along layering.
basement granitoids stacked within a series of north to north-east transported thrust sheet. Thrusting (d1) was accompanied by
significant F1 folding/foliation development and progressive alteration in a brittle-ductile regime. D1 thrusting developed with
irregular thrust ramp geometry, in part controlled by concealed early basin faults. The main Crixás orebodies are adjacent to a
major north-north-west structural corridor, and up the main fault ramp/corner, to become dispersed to the east and north in
zones of foreland thrust flats. Fluid alteration also diminished to the west away from the main fault corner. A series of
concealed east-west to north-west-south-east basement block faults may have provided secondary fluid migration, and
development of early anti-formal warps in the thrust sheets; these structures probably define the quasi-regular spacing of
significant mineralization within the belt. The D1 thrust stack was gently folded by non-cylindrical folds. Gold mineralizing fluids
probably migrated during this event, with similar south-south-west to north-north-east migration, and focusing on bedding slip
during folding. Gold mineralization became minor and dispersed to the north and east along the formal thrust flat zone.
Concentrations of gold along the case of quartz vein may be due to the damming of fluids migrating upward along layering.
Safety: Safety levels deteriorated during the course of the year and there was one fatality due to a rockfall in the second
quarter of the year. This was the first fatality ever involving an employee of Serra Grande. Corrective action has been taken.
The LTIFR for the year was 2.47 (2006: 1.76) while the FIFR was 0.49 (2006: nil).
quarter of the year. This was the first fatality ever involving an employee of Serra Grande. Corrective action has been taken.
The LTIFR for the year was 2.47 (2006: 1.76) while the FIFR was 0.49 (2006: nil).
Operating review: Attributable production at 91,000 ounces (2006: 97,000 ounces) decreased by 6 percent mainly due to the
lower grades mined.
lower grades mined.
Total cash costs increased by 35 percent to $264 per ounce, largely due to the lower grade of the material available for
treatment, an appreciating local currency (the real) and inflation which affected the costs of power, labor, material and services.
treatment, an appreciating local currency (the real) and inflation which affected the costs of power, labor, material and services.
Total capital expenditure amounted to $24 million or $12 million attributable. Capital expenditure was also negatively impacted
by the appreciation in the local currency.
by the appreciation in the local currency.
Growth prospects: An aggressive brownfields exploration campaign at Serra Grande aims to increase reserves and
resources in and around Mina III and Mina Nova. In 2007, there was an increase in reserves at Mina Nova and Mina III
(orebody 4) and a new orebody named Pequizão was discovered between Mina Nova and Mina III. In 2008, the intention is to
re-evaluate resources and reserves including Pequizão and start the main access to the Palmeiras mine. The access ramp
project was finished by the end of 2007 and the development should start in March 2008.
resources in and around Mina III and Mina Nova. In 2007, there was an increase in reserves at Mina Nova and Mina III
(orebody 4) and a new orebody named Pequizão was discovered between Mina Nova and Mina III. In 2008, the intention is to
re-evaluate resources and reserves including Pequizão and start the main access to the Palmeiras mine. The access ramp
project was finished by the end of 2007 and the development should start in March 2008.
Operating and production data for Serra Grande
2007
2006
2005
Pay limit (oz/t)
0.14
0.09
0.09
Pay limit (g/t)
3.90
3.24
3.02
Recovered grade (oz/t)
0.210
0.219
0.231
Recovered grade (g/t)
7.21
7.51
7.93
Gold production (000 oz) 100 percent
182
194
192
Gold production (000 oz) 50 percent
91
97
96
Total cash costs ($/oz)
(1)
264
196
158
Total production costs ($/oz)
(1)
374
278
229
Capital expenditure ($ million) 100 percent
24
17
13
Capital expenditure ($ million) 50 percent
12
8
7
Employees
(2)
654
609
566
Outside contractors
(2)
264
208
209
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
results – Total cash costs and total production costs”.
(2)
Average for the year.
62
GHANA
The two AngloGold Ashanti operations in Ghana are Obuasi
and Iduapriem, which combined had total attributable
production of 527,000 ounces, equivalent to approximately
10 percent of group production, for the year.
and Iduapriem, which combined had total attributable
production of 527,000 ounces, equivalent to approximately
10 percent of group production, for the year.
Rights: Mining activities in Ghana are primarily regulated by
the new Minerals and Mining Act, 2006 (the Mining Act.)
Under the Constitution and the Mining Act, all minerals in
Ghana in their natural state are the property of the State and
title to them is vested in the President on behalf of and in trust
for the people of Ghana, with rights of prospecting, recovery
and associated land usage being granted under license or
lease.
the new Minerals and Mining Act, 2006 (the Mining Act.)
Under the Constitution and the Mining Act, all minerals in
Ghana in their natural state are the property of the State and
title to them is vested in the President on behalf of and in trust
for the people of Ghana, with rights of prospecting, recovery
and associated land usage being granted under license or
lease.
A license is required for the export or disposal of such
minerals and the government has a right of pre-emption over
all such minerals. The government of Ghana shall acquire,
without payment, a 10 percent interest in the rights and
obligations of the mineral operations in relation to a mineral
right to reconnaissance, prospecting or mining, and shall
have the option to acquire a further 20 percent interest where
any mineral is discovered in commercial quantities, on terms
agreed between the government and the holder of the mining
lease subject to arbitration if the parties fail to agree.
minerals and the government has a right of pre-emption over
all such minerals. The government of Ghana shall acquire,
without payment, a 10 percent interest in the rights and
obligations of the mineral operations in relation to a mineral
right to reconnaissance, prospecting or mining, and shall
have the option to acquire a further 20 percent interest where
any mineral is discovered in commercial quantities, on terms
agreed between the government and the holder of the mining
lease subject to arbitration if the parties fail to agree.
A license or lease granting a mineral right is required to prospect for or mine a mineral in Ghana and the Minister of Energy and
Mines has the power to negotiate, grant, revoke, suspend or renew any mineral right, subject to a power of disallowance
exercisable within 30 days of such grant, revocation, suspension or renewal by the Cabinet.
Mines has the power to negotiate, grant, revoke, suspend or renew any mineral right, subject to a power of disallowance
exercisable within 30 days of such grant, revocation, suspension or renewal by the Cabinet.
The grant of a mining lease by the Minister of Mines is normally subject to parliamentary ratification unless the mining lease
falls into a class of transactions exempted by Parliament. A mineral right or interest therein may not be transferred, assigned
or otherwise dealt with in any other manner without prior written approval of the Minister of Mines.
falls into a class of transactions exempted by Parliament. A mineral right or interest therein may not be transferred, assigned
or otherwise dealt with in any other manner without prior written approval of the Minister of Mines.
Payments and allowances
The Mining Act provides that royalties are payable by the holder of a mining lease to the State at rates of between 3 percent
and 6 percent of total minerals revenue, depending on a formula set out in mineral royalty regulations.
and 6 percent of total minerals revenue, depending on a formula set out in mineral royalty regulations.
AngloGold Ashanti and the Government of Ghana have entered into a Stability Agreement with respect to the payment of
royalties and taxes. Under the Stability Agreement, the government of Ghana agreed:
royalties and taxes. Under the Stability Agreement, the government of Ghana agreed:
·
to extend the term of the mining lease relating to the Obuasi mine until 2054 on terms existing prior to the business
combination;
· to maintain for a period of 15 years, the royalties payable by AngloGold Ashanti with respect to its mining operations in
Ghana at a rate of 3 percent per annum of the total revenue from minerals obtained by AngloGold Ashanti from such
mining operations;
· to ensure that the income tax rate would be 30 percent for a period of fifteen years. The agreement was amended in
December 2006 to a tax rate equal to the prevailing corporate rate for listed companies;
· that a sale of AngloGold Ashanti’s or any of its subsidiaries' assets located in Ghana remain subject to the government's
approval;
· to permit AngloGold Ashanti and any or all of its subsidiaries in Ghana to retain up to 80 percent of their exportation
proceeds in foreign currencies offshore, or if such foreign currency is held in Ghana, to guarantee the availability of such
foreign currency; and
· to retain its special rights (Golden Share) under the provisions of the mining Act pertaining to the control of a mining
company, in respect of the assets and operations in Ghana.
combination;
· to maintain for a period of 15 years, the royalties payable by AngloGold Ashanti with respect to its mining operations in
Ghana at a rate of 3 percent per annum of the total revenue from minerals obtained by AngloGold Ashanti from such
mining operations;
· to ensure that the income tax rate would be 30 percent for a period of fifteen years. The agreement was amended in
December 2006 to a tax rate equal to the prevailing corporate rate for listed companies;
· that a sale of AngloGold Ashanti’s or any of its subsidiaries' assets located in Ghana remain subject to the government's
approval;
· to permit AngloGold Ashanti and any or all of its subsidiaries in Ghana to retain up to 80 percent of their exportation
proceeds in foreign currencies offshore, or if such foreign currency is held in Ghana, to guarantee the availability of such
foreign currency; and
· to retain its special rights (Golden Share) under the provisions of the mining Act pertaining to the control of a mining
company, in respect of the assets and operations in Ghana.
63
The Government of Ghana also agreed that AngloGold Ashanti's Ghanaian operations will not be adversely affected by any
new enactments or orders or by changes to the level of payments of any customs or other duties relating to mining operations,
taxes, fees and other fiscal imports or laws relating to exchange control, transfer of capital and dividend remittance for a period
of 15 years after the completion of the business combination.
new enactments or orders or by changes to the level of payments of any customs or other duties relating to mining operations,
taxes, fees and other fiscal imports or laws relating to exchange control, transfer of capital and dividend remittance for a period
of 15 years after the completion of the business combination.
Mining leases may be applied for either by a prospecting license holder who has established the existence of minerals in
commercial quantities or by others who do not hold such licenses, who establish the same to the satisfaction of the Minister of
Mines. Mining leases are normally granted for a period not exceeding 30 years and the holder may apply to the Minister of
Mines for renewal, on such conditions as the Minister of Mines may determine, for up to another 30 years. This period has
been extended in terms of the Stability Agreement. They are to have a maximum size (subject to derogation by the President
where it is considered to be in the national interest) of 50 square kilometers for any grant and 150 square kilometers in
aggregate.
commercial quantities or by others who do not hold such licenses, who establish the same to the satisfaction of the Minister of
Mines. Mining leases are normally granted for a period not exceeding 30 years and the holder may apply to the Minister of
Mines for renewal, on such conditions as the Minister of Mines may determine, for up to another 30 years. This period has
been extended in terms of the Stability Agreement. They are to have a maximum size (subject to derogation by the President
where it is considered to be in the national interest) of 50 square kilometers for any grant and 150 square kilometers in
aggregate.
Reconnaissance and prospecting licenses are normally granted for up to 12 months and three years respectively, subject to
renewal. A detailed program must be submitted for the recruitment and training of Ghanaians with a view to achieving
‘localization’, being the replacement of expatriate personnel by Ghanaian personnel. In addition, the holder must give
preference to Ghanaian products and personnel, to the maximum extent possible, consistent with safety, efficiency and
economies.
renewal. A detailed program must be submitted for the recruitment and training of Ghanaians with a view to achieving
‘localization’, being the replacement of expatriate personnel by Ghanaian personnel. In addition, the holder must give
preference to Ghanaian products and personnel, to the maximum extent possible, consistent with safety, efficiency and
economies.
Prior notification to the Minister of Mines is required for ceasing, suspending or curtailing production. Approval to such actions
may be given, subject to conditions determined on the advice of the Minerals Commission.
may be given, subject to conditions determined on the advice of the Minerals Commission.
There are also provisions relating to surrender, suspension and cancellation of mineral rights in certain circumstances. The
Minister of Mines may suspend or cancel a mineral right if, among other things, the holder: fails to make payments under the
Mining Act when due; is in breach of any provisions of the Mining Actor the conditions of the mineral right or the provisions of
any other enactment relating to mines and minerals; becomes insolvent or bankrupt; makes a statement to the Minister of
Mines in relation to the mineral right which he knows, or ought to have known, to be false; or for any reason, becomes ineligible
to apply for a mineral right under the provision of the Mining Law.
Minister of Mines may suspend or cancel a mineral right if, among other things, the holder: fails to make payments under the
Mining Act when due; is in breach of any provisions of the Mining Actor the conditions of the mineral right or the provisions of
any other enactment relating to mines and minerals; becomes insolvent or bankrupt; makes a statement to the Minister of
Mines in relation to the mineral right which he knows, or ought to have known, to be false; or for any reason, becomes ineligible
to apply for a mineral right under the provision of the Mining Law.
Except as otherwise provided in a specific mining lease, all immovable assets of the holder under the mining lease vest in the
State on termination, as does all moveable property that is fully depreciated for tax purposes. Moveable property that is not
fully depreciated is to be offered to the State at the depreciated cost. The holder must exercise his rights subject to such
limitations relating to surface rights as the Minister of Mines may prescribe. Subject to the proper conduct of the mining
operations, the holder must affect as little as possible the interest of any lawful occupier, whose grazing rights are retained but
who is precluded from erecting any building without the consent of the holder (or, if such consent is unreasonably withheld,
without the consent of the Minister).
State on termination, as does all moveable property that is fully depreciated for tax purposes. Moveable property that is not
fully depreciated is to be offered to the State at the depreciated cost. The holder must exercise his rights subject to such
limitations relating to surface rights as the Minister of Mines may prescribe. Subject to the proper conduct of the mining
operations, the holder must affect as little as possible the interest of any lawful occupier, whose grazing rights are retained but
who is precluded from erecting any building without the consent of the holder (or, if such consent is unreasonably withheld,
without the consent of the Minister).
An owner or occupier of any land subject to a mineral right may apply to the holder of the mineral right for compensation and
the amount of the compensation shall, subject to the approval of the Land Valuation Board, be determined by agreement
between the parties concerned (or, if they are unable to reach agreement, by the Minister of Mines in consultation with the
Land Valuation Board). The Land Valuation Board has in the past increased amounts of compensation payable to owners and
occupiers. The holder, in the exercise of his rights, is required to have due regard to the effect of the mineral operations on the
environment and is to take such steps as may be necessary to prevent pollution of the environment as a result of such
operations.
the amount of the compensation shall, subject to the approval of the Land Valuation Board, be determined by agreement
between the parties concerned (or, if they are unable to reach agreement, by the Minister of Mines in consultation with the
Land Valuation Board). The Land Valuation Board has in the past increased amounts of compensation payable to owners and
occupiers. The holder, in the exercise of his rights, is required to have due regard to the effect of the mineral operations on the
environment and is to take such steps as may be necessary to prevent pollution of the environment as a result of such
operations.
A range of activities and breaches of the Mining Law, including obstructing the government from exercising its pre-emption right
and conducting mining, prospecting or related activities other than in accordance with the Mining Law, constitute offences
punishable by fine or imprisonment. The maximum fine is 500,000 cedis (at the current exchange rate, equivalent to
approximately $50) and the maximum term of imprisonment is two years.
and conducting mining, prospecting or related activities other than in accordance with the Mining Law, constitute offences
punishable by fine or imprisonment. The maximum fine is 500,000 cedis (at the current exchange rate, equivalent to
approximately $50) and the maximum term of imprisonment is two years.
Mining properties
The current mining lease for the Obuasi area was granted by the government of Ghana on March 5, 1994. It grants mining
rights to land with an area of approximately 334 square kilometers in the Amansie East and Adansi West districts of the Ashanti
region for a term of 30 years from the date of the agreement. In addition, the application for a mining lease over the adjacent
140 square kilometers has also been granted resulting in the total area under mining lease conditions increasing to 474 square
kilometers, “the Lease Area”. The company is required to pay to the government of Ghana rent (subject to review every five
years, when the rent may be increased by up to 20 percent) at a rate of approximately $5 per square kilometers and such
royalties as are prescribed by legislation, including royalties on timber felled within the Lease Area.
rights to land with an area of approximately 334 square kilometers in the Amansie East and Adansi West districts of the Ashanti
region for a term of 30 years from the date of the agreement. In addition, the application for a mining lease over the adjacent
140 square kilometers has also been granted resulting in the total area under mining lease conditions increasing to 474 square
kilometers, “the Lease Area”. The company is required to pay to the government of Ghana rent (subject to review every five
years, when the rent may be increased by up to 20 percent) at a rate of approximately $5 per square kilometers and such
royalties as are prescribed by legislation, including royalties on timber felled within the Lease Area.
64
Iduapriem has title to a 33 square kilometer mining lease granted on April 19, 1989 for a period of 30 years. The terms and
conditions of the lease are consistent with similar leases granted in respect of the Obuasi mining lease.
conditions of the lease are consistent with similar leases granted in respect of the Obuasi mining lease.
Teberebie has two leases, one granted in February 1998 for a term of 30 years, and another granted in June 1992 for a term of
26 years. The terms and conditions of these leases are consistent with similar leases granted in respect of the Obuasi mining
lease.
26 years. The terms and conditions of these leases are consistent with similar leases granted in respect of the Obuasi mining
lease.
Obuasi
Description: Obuasi, which is wholly owned by AngloGold Ashanti, is located in the Ashanti region of southern Ghana,
approximately 80 kilometers from Kumasi. It is primarily an underground mine operating at depths of 1,500 meters, although
some surface mining does occur. Three treatment plants process the ore: a sulphide plant treats the ore from underground, a
tailings plant for tailings reclamation operations and an oxide plant is used to batch treat remnant open-pit ore and stockpiles.
The mine was established in 1897 and has produced more than 30 million ounces of gold in all.
approximately 80 kilometers from Kumasi. It is primarily an underground mine operating at depths of 1,500 meters, although
some surface mining does occur. Three treatment plants process the ore: a sulphide plant treats the ore from underground, a
tailings plant for tailings reclamation operations and an oxide plant is used to batch treat remnant open-pit ore and stockpiles.
The mine was established in 1897 and has produced more than 30 million ounces of gold in all.
Geology: The gold deposits at Obuasi are part of a prominent gold belt of Proterozoic (Birimian) volcano-sedimentary and
igneous formations which extend for a distance of approximately 300 kilometers in a north-east/south-west trend in
south-western Ghana. Obuasi mineralization is shear-zone related and there are three main structural trends hosting gold
mineralization: the Obuasi trend, the Gyabunsu trend and the Binsere trend.
Two main ore types are mined:
igneous formations which extend for a distance of approximately 300 kilometers in a north-east/south-west trend in
south-western Ghana. Obuasi mineralization is shear-zone related and there are three main structural trends hosting gold
mineralization: the Obuasi trend, the Gyabunsu trend and the Binsere trend.
Two main ore types are mined:
·
quartz veins which consist mainly of quartz with free gold in association with lesser amounts of various metal sulphides
such as iron, zinc, lead and copper. The gold particles are generally fine-grained and occasionally are visible to the naked
eye. This ore type is generally non-refractory; and
· sulphide ore which is characterized by the inclusion of gold in the crystal structure of a sulphide material. The gold in
these ores is fine-grained and often locked in arsenopyrite. Higher gold grades tend to be associated with finer grained
arsenopyrite crystals. Other prominent minerals include quartz, chlorite and sericite. Sulphide ore is generally refractory.
such as iron, zinc, lead and copper. The gold particles are generally fine-grained and occasionally are visible to the naked
eye. This ore type is generally non-refractory; and
· sulphide ore which is characterized by the inclusion of gold in the crystal structure of a sulphide material. The gold in
these ores is fine-grained and often locked in arsenopyrite. Higher gold grades tend to be associated with finer grained
arsenopyrite crystals. Other prominent minerals include quartz, chlorite and sericite. Sulphide ore is generally refractory.
Safety: Regrettably there were four fatalities during the year: two were caused by accidents involving machinery, one a fall of
ground and one involved an employee falling down a rock pass. The LTIFR for the year deteriorated to 2.72 per million hours
worked, from 2.29 in 2006, while the FIFR rose from 0.08 in 2006 to 0.19 per million hours worked in 2007.
ground and one involved an employee falling down a rock pass. The LTIFR for the year deteriorated to 2.72 per million hours
worked, from 2.29 in 2006, while the FIFR rose from 0.08 in 2006 to 0.19 per million hours worked in 2007.
Remedial action has been taken to improve safety at Obuasi, including the conducting of a training program to identify and
address workplace hazards for all employees involved in hazardous tasks. Each work team on the mine will, before it begins,
evaluate the task at hand to determine the risks and to assign and implement a control known as a ‘simplified risk assessment’.
This procedure is to be conducted by every employee prior to the conducting of any hazardous task on the mine.
address workplace hazards for all employees involved in hazardous tasks. Each work team on the mine will, before it begins,
evaluate the task at hand to determine the risks and to assign and implement a control known as a ‘simplified risk assessment’.
This procedure is to be conducted by every employee prior to the conducting of any hazardous task on the mine.
The process to obtain ISO 18001 accreditation for Obuasi began in early 2008.
Operating review: Gold production at Obuasi declined by 7 percent to 360,000 ounces in 2007 (2006: 387,000 ounces). This
decline in production was largely attributable to the decline in volumes mined although the recovered grade improved
marginally. An 11-day plant shut down in the third quarter and power outages during the year also contributed to the reduced
production.
decline in production was largely attributable to the decline in volumes mined although the recovered grade improved
marginally. An 11-day plant shut down in the third quarter and power outages during the year also contributed to the reduced
production.
Total cash costs rose by 17 percent to $464 per ounce (2006: $397 per ounce), largely as a result of the reduced production
and increases in prices of consumables and rates of service contracts.
and increases in prices of consumables and rates of service contracts.
Growth prospects: The Obuasi Deeps project has added 1.3 million ounces to reserves.
Ghana – Summary of metallurgical operations
Obuasi
Bibiani
Iduapriem
Sulphide
Treatment Plant
Tailings
Treatment Plant
Oxide Treatment
Plant
Gold plants
Capacity
(000 tonnes/month)
200
200
150
225
375
65
Operating and production data for Obuasi
2007
2006
2005
Pay limit (oz/t)
(1)
0.28
0.229
0.177
Pay limit (g/t)
8.49
7.13
6.06
Recovered grade (oz/t)
(1)
0.129
0.128
0.139
Recovered grade (g/t)
4.43
4.39
4.77
Gold production (000 oz)
360
387
391
Total cash costs ($/oz)
(2)
464
397
345
Total production costs ($/oz)
(2)
739
638
532
Capital expenditure ($ million)
94
91
78
Employees
(3)
4,672
5,629
5,852
Outside contractors
(3)
1,554
2,210
2,443
(1)
Pay limits and recovered grade refer to underground ore resources.
(2)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
results – Total cash costs and total production costs”.
(3)
Average for the period.
Bibiani
Bibiani in Ghana was sold to Central African Gold plc effective December 28, 2006
Operating and production data for Bibiani
2007 2006
(4)
2005
Pay limit (oz/t)
-
0.030
0.020
Pay limit (g/t)
-
0.83
0.70
Recovered grade (oz/t)
(1)
-
0.016
0.042
Recovered grade (g/t)
(1)
-
0.55
1.55
Gold production (000 oz)
-
37
115
Total cash costs ($/oz)
(2)
-
432
305
Total production costs ($/oz)
(2)
-
594
522
Capital expenditure ($ million)
-
-
7
Employees
(3)
-
211
462
Outside contractors
(3)
-
142
140
(1)
Recovered grade represents open pit operations in 2005 and surface and dump reclamation in 2006.
(2)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
results – Total cash costs and total production costs”.
(3)
Average for the period.
(4)
For the eleven months from January 2006 to November 2006.
Iduapriem
Description: Iduapriem comprises two properties, Iduapriem and Teberebie, in which, prior to September 2007, AngloGold
Ashanti had a combined effective stake of 85 percent. The International Finance Corporation held 10 percent and the
government of Ghana, 5 percent. AngloGold Ashanti acquired these minority shareholdings and, with effect from September 1,
2007, its shareholding in the Iduapriem operation increased to 100 percent.
Ashanti had a combined effective stake of 85 percent. The International Finance Corporation held 10 percent and the
government of Ghana, 5 percent. AngloGold Ashanti acquired these minority shareholdings and, with effect from September 1,
2007, its shareholding in the Iduapriem operation increased to 100 percent.
The Iduapriem mine is situated in the western region of Ghana, some 70 kilometers north of the coastal city of Takoradi and
10 kilometers south-west of Tarkwa. Iduapriem is an open-pit mine and its processing facilities include a carbon-in-pulp (CIP)
plant.
10 kilometers south-west of Tarkwa. Iduapriem is an open-pit mine and its processing facilities include a carbon-in-pulp (CIP)
plant.
Geology: The Iduapriem and Teberebie gold mines are located along the southern end of the Tarkwa basin. The
mineralization is contained in the Banket Series of rocks within the Tarkwaian System of Proterozoic age. The outcropping
Banket Series of rocks in the mine area form prominent, arcuate ridges extending southwards from Tarkwa, westwards through
Iduapriem and northwards towards Teberebie.
mineralization is contained in the Banket Series of rocks within the Tarkwaian System of Proterozoic age. The outcropping
Banket Series of rocks in the mine area form prominent, arcuate ridges extending southwards from Tarkwa, westwards through
Iduapriem and northwards towards Teberebie.
66
Safety: With the heightened focus on training and education, safety performance improved consistently throughout the year.
As at year end, the mine achieved 3.57 million hours worked without a lost-time injury. The LTIFR was 0.46 (2006: 1.15). No
fatalities were recorded.
As at year end, the mine achieved 3.57 million hours worked without a lost-time injury. The LTIFR was 0.46 (2006: 1.15). No
fatalities were recorded.
Operating review: After the problems experienced in the first quarter of the year with a mill gearbox failure at the treatment
plant which impacted adversely on production, there was a turnaround in the second and third quarters. Unfortunately, at the
start of the fourth quarter, the mine suffered another setback in production when a fire broke out at the main substation which
affected one of two transformers that supply power to the mine. The problem took about a month to resolve following which a
series of crusher problems further impacted on the mine’s performance for the fourth quarter. Total attributable production for
the year at 167,000 ounces remained unchanged from 2006.
plant which impacted adversely on production, there was a turnaround in the second and third quarters. Unfortunately, at the
start of the fourth quarter, the mine suffered another setback in production when a fire broke out at the main substation which
affected one of two transformers that supply power to the mine. The problem took about a month to resolve following which a
series of crusher problems further impacted on the mine’s performance for the fourth quarter. Total attributable production for
the year at 167,000 ounces remained unchanged from 2006.
Total cash costs for the year was 20 percent higher at $497 per ounce owing to the combined impact of the mill shutdown and
increases in contract mining costs.
increases in contract mining costs.
Attributable capital expenditure for the year amounted to $23 million which was significantly up on the $5 million spent in 2006.
The increased capital expenditure was spent primarily on the plant expansion and other items.
The increased capital expenditure was spent primarily on the plant expansion and other items.
The expansion project, which will increase current plant capacity by about 15 percent, was a highlight of the year with
additional staff being located on site to progress with detailed design work and preparation for the mobilization of the main
contractors. Construction of the expansion project advanced with the appointment of the civil contractor and completion of the
tender for the structural mechanical and process piping component of the project. The electrical and instrumentation contracts
are yet to be tendered. By year-end, good progress had been made with the earthworks and infrastructure for the new crushing
plant, ball mill and thickener areas. Long lead items such as the gyratory crusher, ball mill shell and other relevant equipment
arrived on site before year-end. The project is expected to be commissioned during the fourth quarter of 2008.
additional staff being located on site to progress with detailed design work and preparation for the mobilization of the main
contractors. Construction of the expansion project advanced with the appointment of the civil contractor and completion of the
tender for the structural mechanical and process piping component of the project. The electrical and instrumentation contracts
are yet to be tendered. By year-end, good progress had been made with the earthworks and infrastructure for the new crushing
plant, ball mill and thickener areas. Long lead items such as the gyratory crusher, ball mill shell and other relevant equipment
arrived on site before year-end. The project is expected to be commissioned during the fourth quarter of 2008.
Growth prospects: The mine has limited growth prospects on surface. The scoping study to evaluate the viability of exploiting
the considerable low-grade mineral resources of other properties lying in the Tarkwaian conglomerates that extend below the
economic limits of the existing pits was not pursued during the year. However, the recent surge in the gold price has caused
renewed interest in evaluating this prospect further. Additional drilling is planned to be carried out in 2008 to give more
confidence to existing data and the scoping study will subsequently be progressed to pre-feasibility stage.
the considerable low-grade mineral resources of other properties lying in the Tarkwaian conglomerates that extend below the
economic limits of the existing pits was not pursued during the year. However, the recent surge in the gold price has caused
renewed interest in evaluating this prospect further. Additional drilling is planned to be carried out in 2008 to give more
confidence to existing data and the scoping study will subsequently be progressed to pre-feasibility stage.
Operating and production data for Iduapriem
2007
(4)
2006
2005
Pay limit (oz/t)
0.06
0.05
0.023
Pay limit (g/t)
1.66
1.60
0.72
Recovered grade (oz/t)
(1)
0.054
0.051
0.050
Recovered grade (g/t)
(1)
1.85
1.74
1.71
Gold production (000 oz) 100 percent
185
196
205
Gold production (000 oz) 100 percent
(4)
167
167
174
Total cash costs ($/oz)
(2)
497
413
348
Total production costs ($/oz)
(2)
653
544
477
Capital expenditure ($ million) 100 percent
24
6
5
Capital expenditure ($ million) 100 percent
(4)
23
5
4
Employees
(3)
721
668
698
Outside contractors
(3)
602
583
585
(1)
Recovered grade represents open pit operations.
(2)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
results – Total cash costs and total production costs”.
(3)
Average for the period.
(4)
100 percent owned effective September 1, 2007. Prior to this date, the effective holding was 85 percent.
67
GUINEA
AngloGold Ashanti has one gold mining operation,
Siguiri, in the Republic of Guinea. Siguiri produced
280,000 attributable ounces of gold in 2007,
equivalent to 5 percent of group production.
Siguiri, in the Republic of Guinea. Siguiri produced
280,000 attributable ounces of gold in 2007,
equivalent to 5 percent of group production.
Rights: In Guinea, all mineral substances are the
property of the State. Mining activities are primarily
regulated by the Mining Code, 1995. The right to
undertake mining operations can only be acquired by
virtue of one of the following mining titles: surveying
permit, small-scale mining license, mining prospecting
license, mining license or mining concession.
property of the State. Mining activities are primarily
regulated by the Mining Code, 1995. The right to
undertake mining operations can only be acquired by
virtue of one of the following mining titles: surveying
permit, small-scale mining license, mining prospecting
license, mining license or mining concession.
The group’s Guinea subsidiary, Société Ashanti
Goldfields de Guinée SA (SAG), has title to the Siguiri
mining concession area which was granted on
November 11, 1993 for a period of 25 years. The
agreement provides for an eventual
extension/renegotiation after 23 years for such
periods as may be required to exhaust economic Ore
Reserves.
Goldfields de Guinée SA (SAG), has title to the Siguiri
mining concession area which was granted on
November 11, 1993 for a period of 25 years. The
agreement provides for an eventual
extension/renegotiation after 23 years for such
periods as may be required to exhaust economic Ore
Reserves.
The original area granted encompassed 8,384 square kilometers which the subsidiary was required to reduce to five or fewer
single blocks of not less than 250 square kilometers per block totaling not more than 1,500 square kilometers by November 11,
1996. The retrocession reduced the Siguiri concession area to four blocks totaling 1,495 square kilometers.
single blocks of not less than 250 square kilometers per block totaling not more than 1,500 square kilometers by November 11,
1996. The retrocession reduced the Siguiri concession area to four blocks totaling 1,495 square kilometers.
SAG has the exclusive right to explore and mine in the remaining Siguiri concession area for a further 22-year period from
November 11, 1996 under conditions detailed in a Convention de Base predating the new Guinea Mining Code.
November 11, 1996 under conditions detailed in a Convention de Base predating the new Guinea Mining Code.
Key elements of the Convention de Base are: the government of Guinea holds a 15 percent free-carried or non-contributory
interest; a royalty of 3 percent based on a spot gold price of less than $475, and 5 percent based on a spot gold price above
$475, as fixed on the London Gold Bullion Market, is payable on the value of gold exported; a local development tax of
0.4 percent is payable on the gross sales revenues; salaries of expatriate employees are subject to a 10 percent income tax;
mining goods imported into Guinea are exempt from all import taxes and duties for the first two years of commercial production;
and SAG is committed to adopt and progressively implement a plan for the effective rehabilitation of the mining areas disturbed
or affected by operations.
interest; a royalty of 3 percent based on a spot gold price of less than $475, and 5 percent based on a spot gold price above
$475, as fixed on the London Gold Bullion Market, is payable on the value of gold exported; a local development tax of
0.4 percent is payable on the gross sales revenues; salaries of expatriate employees are subject to a 10 percent income tax;
mining goods imported into Guinea are exempt from all import taxes and duties for the first two years of commercial production;
and SAG is committed to adopt and progressively implement a plan for the effective rehabilitation of the mining areas disturbed
or affected by operations.
The Convention de Base is subject to early termination if both parties formally and expressly agree to do so, if all project
activities are voluntarily suspended for a continuous period of eight months or are permanently abandoned by our subsidiary or
if SAG goes into voluntary liquidation or is placed into liquidation by a court of competent jurisdiction.
activities are voluntarily suspended for a continuous period of eight months or are permanently abandoned by our subsidiary or
if SAG goes into voluntary liquidation or is placed into liquidation by a court of competent jurisdiction.
In addition to the export tax payable to the government of Guinea, a royalty on production may be payable to the International
Finance Corporation (IFC) and to Umicore SA, formerly Union Miniere (UM). Pursuant to the option agreement between
UM and Golden Shamrock Mines Limited (GSM), a royalty on production may be payable to UM by Chevaning Mining
Company Limited (CMC) or GSM, which payment obligation has been assigned to AngloGold Ashanti (Ghana) Limited, on a
sliding scale of between 2.5 percent and 7.5 percent based on the spot gold price per ounce between $350 and $475, subject
to indexing from January 1, 1995, to a cumulative maximum of $60 million. In addition, under the terms of the restructuring
agreement with the IFC, a sliding scale royalty on production may be payable to the IFC calculated on the same basis but at
half the rate payable to UM, to a maximum of $7.8 million.
Finance Corporation (IFC) and to Umicore SA, formerly Union Miniere (UM). Pursuant to the option agreement between
UM and Golden Shamrock Mines Limited (GSM), a royalty on production may be payable to UM by Chevaning Mining
Company Limited (CMC) or GSM, which payment obligation has been assigned to AngloGold Ashanti (Ghana) Limited, on a
sliding scale of between 2.5 percent and 7.5 percent based on the spot gold price per ounce between $350 and $475, subject
to indexing from January 1, 1995, to a cumulative maximum of $60 million. In addition, under the terms of the restructuring
agreement with the IFC, a sliding scale royalty on production may be payable to the IFC calculated on the same basis but at
half the rate payable to UM, to a maximum of $7.8 million.
68
Siguiri (attributable 85 percent)
Description: AngloGold Ashanti has an interest of 85 percent in Siguiri and the government of Guinea, 15 percent. The Siguiri
mine is a conventional open-pit operation situated in the Siguiri district in the north-east of the Republic of Guinea, West Africa,
about 850 kilometers from the capital city of Conakry. The nearest major town is Siguiri (some 50,000 inhabitants), located on
the banks of the Niger River. All ore and waste is mined by a mining contractor and the ore is processed using carbon-in-pulp
(CIP) and heap-leach processes. Siguiri mines two types of gold deposits, laterite and in situ quartz-vein related
mineralizations. The Siguiri gold plant has a capacity of 800,000 tonnes per month.
mine is a conventional open-pit operation situated in the Siguiri district in the north-east of the Republic of Guinea, West Africa,
about 850 kilometers from the capital city of Conakry. The nearest major town is Siguiri (some 50,000 inhabitants), located on
the banks of the Niger River. All ore and waste is mined by a mining contractor and the ore is processed using carbon-in-pulp
(CIP) and heap-leach processes. Siguiri mines two types of gold deposits, laterite and in situ quartz-vein related
mineralizations. The Siguiri gold plant has a capacity of 800,000 tonnes per month.
Geology: This concession is dominated by Proterozoic Birimian rocks which consist of turbidite facies sedimentary sequences.
The two main types of gold deposits which occur in the Siguiri basin and are mined are:
The two main types of gold deposits which occur in the Siguiri basin and are mined are:
·
laterite or CAP mineralization which occurs as aprons of colluvial or as palaeo-channels of alluvial lateritic gravel adjacent
to, and immediately above; and
·
in situ quartz-vein related mineralization hosted in meta-sediments with the better mineralization associated with vein
stockworks that occurs preferentially in the coarser, brittle siltstones and sandstones.
The mineralized rocks have been deeply weathered to below 100 meters in places to form saprolite or SAP mineralization.
The practice at Siguiri has been to blend the CAP and SAP ore types and to process these using the heap-leach method. With
the percentage of available CAP ore decreasing, however, a new carbon-in-pulp (CIP) plant was brought on stream during
2005 to treat predominantly SAP ore.
The practice at Siguiri has been to blend the CAP and SAP ore types and to process these using the heap-leach method. With
the percentage of available CAP ore decreasing, however, a new carbon-in-pulp (CIP) plant was brought on stream during
2005 to treat predominantly SAP ore.
Safety: Overall safety standards improved at Siguiri with an LTIFR for the year of 0.41 per million hours worked (2006: 0.77).
No fatalities were recorded.
No fatalities were recorded.
Operating review: Attributable production increased by 9
percent to a record 280,000 ounces in 2007
(2006: 256,000 ounces), which was more than had been planned.
(2006: 256,000 ounces), which was more than had been planned.
Total cash costs were again considerably higher at $471 per ounce (2006: $398 per ounce), due to higher royalty payments
which are a function of the significantly higher gold price, and higher fuel costs. Siguiri is currently in discussion with the
Guinean government regarding the relationship between fuel prices and the exchange rate. Compounding the problem of
rising costs is that the increase in local labor costs, together with the appreciation of the Guinean franc against the dollar, has
changed the cost profile and labor costs now account for a greater proportion of total costs.
which are a function of the significantly higher gold price, and higher fuel costs. Siguiri is currently in discussion with the
Guinean government regarding the relationship between fuel prices and the exchange rate. Compounding the problem of
rising costs is that the increase in local labor costs, together with the appreciation of the Guinean franc against the dollar, has
changed the cost profile and labor costs now account for a greater proportion of total costs.
The CIP plant had a consistently good operation in 2007. A total of 9.8 million tonnes of ore was processed for the year with
plant availability of 91.6 percent and a recovery rate of 94.2 percent.
plant availability of 91.6 percent and a recovery rate of 94.2 percent.
Attributable capital expenditure for the year amounted to $18 million compared to $14 million in 2006.
Growth prospects: Regarding the CIP plant, the design of a second gravity concentrator and de-gritting facilities are being
finalised and will be installed during 2008; these are expected to improve productivity.
finalised and will be installed during 2008; these are expected to improve productivity.
Operating and production data for Siguiri
2007
2006
2005
Pay limit (oz/t)
0.03
0.03
0.017
Pay limit (g/t)
0.95
0.94
0.55
Recovered grade (oz/t)
(1)
0.031
0.032
0.035
Recovered grade (g/t)
(1)
1.05
1.08
1.21
Gold production (000 oz) – 100 percent
330
301
289
Gold production (000 oz) – 85 percent
280
256
246
Total cash costs ($/oz)
(2)
471
398
301
Total production costs ($/oz)
(2)
629
593
451
Capital expenditure ($ million) – 100 percent
21
19
36
Capital expenditure ($ million) – 85 percent
18
14
31
Employees
(3)
1,537
1,541
1,170
Outside contractors
(3)
1,380
1,167
808
(1)
Recovered grade represents open pit operations.
(2)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
results – Total cash costs and total production costs”.
(3)
Average for the period.
69
MALI
AngloGold Ashanti has interests in three gold mining
operations, all of which it manages in Mali. They are
Sadiola, Yatela and Morila. The Malian operations
together produced 441,000 attributable ounces of
gold in 2007 equivalent to 8 percent of group
production.
operations, all of which it manages in Mali. They are
Sadiola, Yatela and Morila. The Malian operations
together produced 441,000 attributable ounces of
gold in 2007 equivalent to 8 percent of group
production.
Ownership of these three operations is as follows:
·
Sadiola: AngloGold Ashanti and IAMGOLD each
have a stake of 38 percent while the government
of Mali has a stake of 18 percent and the
International Finance Corporation, 6 percent.
have a stake of 38 percent while the government
of Mali has a stake of 18 percent and the
International Finance Corporation, 6 percent.
·
Yatela: this operation is owned by Société
d’Exploration des Mines d’Or de Yatela SA, a
joint venture in which AngloGold Ashanti and
IAMGOLD each have an effective holding of
40 percent and the government of Mali,
20 percent.
d’Exploration des Mines d’Or de Yatela SA, a
joint venture in which AngloGold Ashanti and
IAMGOLD each have an effective holding of
40 percent and the government of Mali,
20 percent.
·
Morila: this is a joint venture between AngloGold
Ashanti and Randgold Resources in which each
has a 40 percent interest. The remaining
20 percent is held by the Malian government.
Ashanti and Randgold Resources in which each
has a 40 percent interest. The remaining
20 percent is held by the Malian government.
Rights: Mineral rights in Mali are governed by Ordinance No. 99-32/P-RM of August 19, 1999 enacting the mining code, as
amended by 013/2000/P-RM of February 10, 2000 and ratified by Law No. 00-011 of May 30, 2000 (the "Mining Code"), and
Decree No. 99-255/P-RM of September 15, 1999 implementing the Mining Code.
amended by 013/2000/P-RM of February 10, 2000 and ratified by Law No. 00-011 of May 30, 2000 (the "Mining Code"), and
Decree No. 99-255/P-RM of September 15, 1999 implementing the Mining Code.
Prospecting activities may be carried out under prospecting authorizations (autorisation de prospection) which is an exclusive
right for an individual or corporate entity to carry out prospecting activities over a given area for a period of three (3) years
renewable without a reduction in the area of the authorization. Research activities may be carried out under research permits
(permis de recherche). The latter are granted to corporate entities only by order of the Minister in charge of Mines. Research
permits are granted for a period of three (3) years, renewable twice for additional three-year periods. Each renewal of the
research permit requires a relinquishment of 50 percent of the area covered by such permit. The entity applying for such a
permit must provide proof of technical and financial capabilities.
right for an individual or corporate entity to carry out prospecting activities over a given area for a period of three (3) years
renewable without a reduction in the area of the authorization. Research activities may be carried out under research permits
(permis de recherche). The latter are granted to corporate entities only by order of the Minister in charge of Mines. Research
permits are granted for a period of three (3) years, renewable twice for additional three-year periods. Each renewal of the
research permit requires a relinquishment of 50 percent of the area covered by such permit. The entity applying for such a
permit must provide proof of technical and financial capabilities.
An exploitation permit (permis d'exploitation) is required to mine a deposit located within the area of a prospecting authorization
or a research permit. The exploitation permit grants exclusive title to prospect, research and exploit the named substances for
a maximum period of thirty (30) years renewable three times for an additional 10 years). The exploitation permit is granted only
to the holder of an exploration permit or of a prospecting authorization and covers only the area covered by the exploration
permit or the prospecting authorization. An application must be submitted to the Minister in charge of Mines and to the National
Director of Mines.
or a research permit. The exploitation permit grants exclusive title to prospect, research and exploit the named substances for
a maximum period of thirty (30) years renewable three times for an additional 10 years). The exploitation permit is granted only
to the holder of an exploration permit or of a prospecting authorization and covers only the area covered by the exploration
permit or the prospecting authorization. An application must be submitted to the Minister in charge of Mines and to the National
Director of Mines.
As soon as the exploitation permit is granted, the holder of the exploitation permit must incorporate a company under the law of
Mali. The holder of the permit will assign the permit for free to this company. The State will have a 10 percent free carry
interest. This interest will be converted into priority shares and the State's participation will not be diluted in the case of
increasing the capital.
Mali. The holder of the permit will assign the permit for free to this company. The State will have a 10 percent free carry
interest. This interest will be converted into priority shares and the State's participation will not be diluted in the case of
increasing the capital.
The mining titles mentioned above all require an establishment convention (Convention d’Etablissement) to be signed by the
State and the titleholder defining their rights and obligations. A standard form of such establishment convention has been
approved by decree of the Head of Government.
State and the titleholder defining their rights and obligations. A standard form of such establishment convention has been
approved by decree of the Head of Government.
AngloGold Ashanti has interests at Morila, Sadiola and Yatela, all of which are governed by establishment conventions
(Convention d’Etablissement) covering exploration, mining, treatment and marketing in a comprehensive document. These
documents include the general conditions with regard to exploration (work program, fiscal and customs regime) and
exploitation (formation of a local limited liability company and mining company, state shareholdings, the fiscal and customs
regime during construction and exploitation phases, exchange controls, marketing of the product, accounting regime, training
programs for local labor, protection of the environment, reclamation, safety, hygiene and settlement of disputes).
(Convention d’Etablissement) covering exploration, mining, treatment and marketing in a comprehensive document. These
documents include the general conditions with regard to exploration (work program, fiscal and customs regime) and
exploitation (formation of a local limited liability company and mining company, state shareholdings, the fiscal and customs
regime during construction and exploitation phases, exchange controls, marketing of the product, accounting regime, training
programs for local labor, protection of the environment, reclamation, safety, hygiene and settlement of disputes).
70
Due to the fact that the establishment conventions contain stabilization clauses, the mining operations carried out by the
AngloGold Ashanti subsidiaries in Mali are subjected to the provisions of the previous mining codes of 1970 and 1991 but also,
for residual matters, to the provisions of the Mining code of 1999.
AngloGold Ashanti subsidiaries in Mali are subjected to the provisions of the previous mining codes of 1970 and 1991 but also,
for residual matters, to the provisions of the Mining code of 1999.
AngloGold Ashanti has complied with all applicable requirements and the relevant permits have been issued. Morila, Sadiola
and Yatela have thirty (30) year permits which expire in 2029, 2024 and 2030, respectively.
and Yatela have thirty (30) year permits which expire in 2029, 2024 and 2030, respectively.
Sadiola (attributable 38 percent)
Description: Sadiola is situated in the far south-west of the country, 77 kilometers to the south of the regional capital of Kayes.
Mining takes place in five open pits and the ore mined is treated and processed in a 435,000 million tonnes per month
(5.2 million tonnes per month) CIP gold plant. The Sadiola gold pant has a capacity of 435,000 tonnes per month.
Mining takes place in five open pits and the ore mined is treated and processed in a 435,000 million tonnes per month
(5.2 million tonnes per month) CIP gold plant. The Sadiola gold pant has a capacity of 435,000 tonnes per month.
Geology: The Sadiola deposit occurs within an inlier of greenschist facies metamorphosed Birimian rocks known as the
Kenieba Window. The specific rocks which host the mineralization are marbles and greywackes which have been intensely
weathered to a maximum depth of 200 meters. A series of north-south trending faults occur that are the feeders to the Sadiola
mineralization. As a result of an east-west regional compression event, deformation occurs along a north-south striking marble-
greywacke contact, increasing the porosity of this zone. North-east striking structures which intersect the north-south contact,
have introduced mineralization, mainly with the marble where the porosity was greatest. The Sadiola Hill deposit generally
consists of two zones, an upper oxidized cap and an underlying sulphide zone. From 1996 until 2002, shallow saprolite oxide
ore from the Sadiola Hill pit was the primary ore source. Since 2002, the deeper saprolitic sulphide ore has been mined and in
future will progressively replace the depleting oxide reserves.
Kenieba Window. The specific rocks which host the mineralization are marbles and greywackes which have been intensely
weathered to a maximum depth of 200 meters. A series of north-south trending faults occur that are the feeders to the Sadiola
mineralization. As a result of an east-west regional compression event, deformation occurs along a north-south striking marble-
greywacke contact, increasing the porosity of this zone. North-east striking structures which intersect the north-south contact,
have introduced mineralization, mainly with the marble where the porosity was greatest. The Sadiola Hill deposit generally
consists of two zones, an upper oxidized cap and an underlying sulphide zone. From 1996 until 2002, shallow saprolite oxide
ore from the Sadiola Hill pit was the primary ore source. Since 2002, the deeper saprolitic sulphide ore has been mined and in
future will progressively replace the depleting oxide reserves.
Safety: Overall safety standards were maintained at Sadiola with an LTIFR for the year of 1.11 (2006: 1.02). No fatalities were
recorded.
recorded.
Operating review: Attributable production at Sadiola declined year-on-year by 26
percent to 140,000 ounces
(2006: 190,000 ounces). While there was a steady increase in production during the course of the year, this failed to make up
for the sharp drop which had occurred during the first quarter of the year. This decline in the throughput of tonnes was a result
of plant optimization to improve recovery of sulphide ores. The decline in the grade of feed to the plant was a result of a
decision to withhold high-grade sulphide feed prior to the commissioning of the gravity circuit at the concentrator in
December 2007. Consequently, total cash costs rose sharply by 54 percent to $414 per ounce (2006: $268 per ounce).
(2006: 190,000 ounces). While there was a steady increase in production during the course of the year, this failed to make up
for the sharp drop which had occurred during the first quarter of the year. This decline in the throughput of tonnes was a result
of plant optimization to improve recovery of sulphide ores. The decline in the grade of feed to the plant was a result of a
decision to withhold high-grade sulphide feed prior to the commissioning of the gravity circuit at the concentrator in
December 2007. Consequently, total cash costs rose sharply by 54 percent to $414 per ounce (2006: $268 per ounce).
Total capital expenditure of $16 million or an attributable $6 million, was spent during the year. A new gravity circuit was
installed at the metallurgical plant to improve the recovery rates for the sulphide ores.
installed at the metallurgical plant to improve the recovery rates for the sulphide ores.
Growth prospects: Various options are to be reviewed in the coming year to improve current assumptions in the Deep
Sulphide Project concerning mining method, scale, energy and metallurgical recovery.
Sulphide Project concerning mining method, scale, energy and metallurgical recovery.
Operating and production data for Sadiola
2007
2006
2005
Pay limit (oz/t)
0.08
0.06
0.05
Pay limit (g/t)
2.46
1.98
1.80
Recovered grade (oz/t)
0.081
0.094
0.080
Recovered grade (g/t)
2.76
3.22
2.73
Gold production (000 oz) 100 percent
369
500
442
Gold production (000 oz) 38 percent
140
190
168
Total cash costs ($/oz)
(1)
414
268
265
Total production costs ($/oz)
(1)
479
363
440
Capital expenditure ($ million) 100 percent
16
11
18
Capital expenditure ($ million) 38 percent
6
4
7
Employees
(2)
618
589
584
Outside contractors
(2)
911
705
661
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
results – Total cash costs and total production costs”.
(2)
Average for the year.
71
Yatela (attributable 40 percent)
Description: Yatela is situated some 25 kilometers north of Sadiola and approximately 50 kilometers south-south-west of
Kayes. This is a single pit operation. The ore mined is treated at a heap-leach pad together with carbon-loading. The carbon
is then eluted and the gold smelted at nearby Sadiola. The Yatela gold plant has a capacity of 250,000 tonnes per month.
Kayes. This is a single pit operation. The ore mined is treated at a heap-leach pad together with carbon-loading. The carbon
is then eluted and the gold smelted at nearby Sadiola. The Yatela gold plant has a capacity of 250,000 tonnes per month.
Geology: Yatela mineralization occurs as a keel-shaped body in Birimian metacarbonates. The ‘keel’ is centered on a fault
which was the feeder for the original mesothermal mineralization, with an associated weakly mineralized diorite intrusion.
Mineralization occurs as a layer along the sides and in the bottom of the ‘keel’. The ore dips almost vertically on the west limb
and more gently towards the west on the east limb, with tight closure to the south.
which was the feeder for the original mesothermal mineralization, with an associated weakly mineralized diorite intrusion.
Mineralization occurs as a layer along the sides and in the bottom of the ‘keel’. The ore dips almost vertically on the west limb
and more gently towards the west on the east limb, with tight closure to the south.
Safety: Overall safety standards improved at Yatela with an LTIFR for the year of 0.39 (2006: 0.43). No fatalities were
recorded.
recorded.
Operating review: Attributable gold production at Yatela declined by 15 percent to 120,000 ounces (2006: 141,000 ounces).
Mining from the bottom of the main pit was completed in July 2007, after which lower grade ore from the stockpiles was fed to
the heap leach pad.
Mining from the bottom of the main pit was completed in July 2007, after which lower grade ore from the stockpiles was fed to
the heap leach pad.
Total cash costs increased dramatically, to $300 per ounce as a result of the decline in gold production, the appreciation of the
euro and the FCFA against the dollar, and higher fuel prices.
euro and the FCFA against the dollar, and higher fuel prices.
Capital expenditure of $5 million (attributable $2 million) increased in 2007 and was spent mostly on additional leach pads to
accommodate the extension in the life of mine.
accommodate the extension in the life of mine.
Operating and production data for Yatela
2007
2006
2005
Pay limit (oz/t)
0.04
0.06
0.05
Pay limit (g/t)
1.37
1.79
1.66
Recovered grade (oz/t)
0.101
0.120
0.087
Recovered grade (g/t)
3.46
4.12
2.99
Gold production (000 oz) 100 percent
301
352
246
Gold production (000 oz) 40 percent
120
141
98
Total cash costs ($/oz)
(1)
300
241
263
Total production costs ($/oz)
(1)
342
326
347
Capital expenditure ($ million) 100 percent
5
3
5
Capital expenditure ($ million) 40 percent
2
1
2
Employees
(2)
265
203
210
Outside contractors
(2)
638
675
700
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
results – Total cash costs and total production costs”.
(2)
Average for the year.
72
Morila (attributable 40 percent)
Description: The Morila mine is situated some 180 kilometers by road south-east of Bamako, the capital of Mali. Open-pit
mining takes place at five cuts within one pit. The current focus is on cuts 4 and 5. At its peak, the Morila pit will be
approximately 1.4 kilometers by 1 kilometer and up to 240 meters deep. The plant, which comprises a conventional carbon-in-
leach (CIL) process with an upfront gravity section to extract the free gold, has throughput capacity of 350,000 tonnes per
month and 4.2 million tonnes per annum. It has a capacity of 350,000 tonnes per month.
mining takes place at five cuts within one pit. The current focus is on cuts 4 and 5. At its peak, the Morila pit will be
approximately 1.4 kilometers by 1 kilometer and up to 240 meters deep. The plant, which comprises a conventional carbon-in-
leach (CIL) process with an upfront gravity section to extract the free gold, has throughput capacity of 350,000 tonnes per
month and 4.2 million tonnes per annum. It has a capacity of 350,000 tonnes per month.
Geology: Morila is a mesothermal flat lying shear-zone hosted deposit which, apart from rising to the surface in the west
against steep faulting lies, flat. The deposit occurs within a sequence Birimian metal-arkoses of amphibolite metamorphic
grade. Mineralization is characterized by silica-feldspar alteration and sulphide mineralization consists of arsenopyrite,
pyrrhotite, pyrite and chalcopyrite.
against steep faulting lies, flat. The deposit occurs within a sequence Birimian metal-arkoses of amphibolite metamorphic
grade. Mineralization is characterized by silica-feldspar alteration and sulphide mineralization consists of arsenopyrite,
pyrrhotite, pyrite and chalcopyrite.
Safety: Overall, the level of lost-time injuries was maintained at Morila with an LTIFR for the year of 0.57 per million hours
worked (2006: 1.42). The OHSAS 18001 Safety Management certification was achieved by November 2007. Sadly, the Morila
team lost two fellow colleagues on February 9, 2007 during an explosion caused by the inadvertent mixing of two chemicals.
This resulted in a FIFR for the year of 0.57 per million hours worked (2006: 0).
worked (2006: 1.42). The OHSAS 18001 Safety Management certification was achieved by November 2007. Sadly, the Morila
team lost two fellow colleagues on February 9, 2007 during an explosion caused by the inadvertent mixing of two chemicals.
This resulted in a FIFR for the year of 0.57 per million hours worked (2006: 0).
Operating review: Attributable gold production at Morila decreased by 13 percent to 180,000 ounces (2006: 207,000 ounces),
with the significant increase in production in the second half of the year not quite making up for the losses recorded in the first
half of the year. The initial fall in production levels was a result of a decline in the recovered grade which improved markedly
later in the year with the mining and processing of higher grade ore.
with the significant increase in production in the second half of the year not quite making up for the losses recorded in the first
half of the year. The initial fall in production levels was a result of a decline in the recovered grade which improved markedly
later in the year with the mining and processing of higher grade ore.
Mining production efficiencies improved significantly in the second half of 2007 as highlighted by the achievement of
1,001,444 BCMs in September month. The optimal use of in-pit backfill (leaving waste in the pit) resulted in significant savings
and an increase in mining production.
1,001,444 BCMs in September month. The optimal use of in-pit backfill (leaving waste in the pit) resulted in significant savings
and an increase in mining production.
Total cash costs increased by 25 percent to $333 per ounce largely owing to the decline in production and an increase in cash
costs caused by higher fuel costs and a weakening in the dollar against the FCFA and the euro. As a result, fuel, local
salaries, mining contractor and certain reagent costs increased significantly.
costs caused by higher fuel costs and a weakening in the dollar against the FCFA and the euro. As a result, fuel, local
salaries, mining contractor and certain reagent costs increased significantly.
Operating and production data for Morila
2007
2006
2005
Pay limit (oz/t)
0.08
0.08
0.07
Pay limit (g/t)
2.46
2.41
2.27
Recovered grade (oz/t)
0.098
0.113
0.158
Recovered grade (g/t)
3.36
3.88
5.41
Gold production (000 oz) 100 percent
450
517
655
Gold production (000 oz) 40 percent
180
207
262
Total cash costs ($/oz)
(1)
333
266
191
Total production costs ($/oz)
(1)
406
367
298
Capital expenditure ($ million) 100 percent
1.3
3
5
Capital expenditure ($ million) 40 percent
0.5
1
2
Employees
(2)
498
500
478
Outside contractors
(2)
1,188
1,075
705
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
results – Total cash costs and total production costs”.
(2)
Average for the year.
73
NAMIBIA
AngloGold Ashanti has one gold mining operation in
Namibia, namely Navachab, which is wholly owned. In
2007, Navachab produced 80,000 ounces of gold,
equivalent to 1 percent of group production.
Namibia, namely Navachab, which is wholly owned. In
2007, Navachab produced 80,000 ounces of gold,
equivalent to 1 percent of group production.
Description: The Navachab mine is situated near
Karibib and 170 kilometers north-west of Windhoek in
Namibia, on the south western cost of Africa.
Navachab is an open-pit mine and its processing plant,
with a production capacity of 120,000 tonnes per
month, includes mills, carbon-in-pulp (CIP) and
electrowinning facilities. The Navachab gold plant has
a capacity of 110,000 tonnes per month.
Karibib and 170 kilometers north-west of Windhoek in
Namibia, on the south western cost of Africa.
Navachab is an open-pit mine and its processing plant,
with a production capacity of 120,000 tonnes per
month, includes mills, carbon-in-pulp (CIP) and
electrowinning facilities. The Navachab gold plant has
a capacity of 110,000 tonnes per month.
Rights: Mineral rights in Namibia vest in the State. In
order to prospect or mine, the Ministry of Mines and
Energy initially grants an exclusive prospecting license
and on presentation of a feasibility study, a mining
license is then granted taking into account the abilities
of the company, including mining, financial and
technical capabilities, rehabilitation programs and
payment of royalties. The relevant license has been granted to AngloGold Namibia (Pty) Ltd in respect of its mining and
prospecting activities in Namibia. The current 15-year Mining license expires in October 2018.
order to prospect or mine, the Ministry of Mines and
Energy initially grants an exclusive prospecting license
and on presentation of a feasibility study, a mining
license is then granted taking into account the abilities
of the company, including mining, financial and
technical capabilities, rehabilitation programs and
payment of royalties. The relevant license has been granted to AngloGold Namibia (Pty) Ltd in respect of its mining and
prospecting activities in Namibia. The current 15-year Mining license expires in October 2018.
Geology: The Navachab deposit is hosted by Damaran greenschistam-phibolite facies, calc-silicates, marbles and
volcanoclastics. The rocks have been intruded by granites, pegmatites and (quartz-porphyry dykes) aplite and have also been
deformed into a series of alternating dome and basin structures. The mineralized zone forms a sheet-like body which plunges
at an angle of approximately 20 degree to the north-west. The mineralization is predominantly hosted in a sheeted vein set
(±60 percent) and a replacement skarn body (±40 percent). The gold is very fine-grained and associated with pyrrhotite, and
minor to trace amounts of pyrite, chalcopyrite, maldonite and bismuthinite. Approximately 80 percent of the gold is free milling.
volcanoclastics. The rocks have been intruded by granites, pegmatites and (quartz-porphyry dykes) aplite and have also been
deformed into a series of alternating dome and basin structures. The mineralized zone forms a sheet-like body which plunges
at an angle of approximately 20 degree to the north-west. The mineralization is predominantly hosted in a sheeted vein set
(±60 percent) and a replacement skarn body (±40 percent). The gold is very fine-grained and associated with pyrrhotite, and
minor to trace amounts of pyrite, chalcopyrite, maldonite and bismuthinite. Approximately 80 percent of the gold is free milling.
Safety: Overall safety standards were maintained at Navachab with an LTIFR for the year of 4.59 (2006: 4.09). No fatalities
were recorded.
were recorded.
Operating review: Production declined in line with expectations to 80,000 ounces in 2007 (2006: 86,000 ounces).
Mining volumes declined mainly due to a lack of drill availability, from 7.8 million tonnes in 2006 to 7.3 million tonnes. Plant-
production went up from 1.5 million tonnes in 2006 to 1.6 million tonnes in 2007 in line with expectations. Feed grade fell by
15 percent between 2006 and 2007.
production went up from 1.5 million tonnes in 2006 to 1.6 million tonnes in 2007 in line with expectations. Feed grade fell by
15 percent between 2006 and 2007.
Drill performance and drill capacity affected mining throughput as did the loss of skills to local and international competitors.
Grades were relatively low as the operation continued to strip the east pushback while metallurgical recovery was lower than
expected.
Grades were relatively low as the operation continued to strip the east pushback while metallurgical recovery was lower than
expected.
Total cash costs rose by 36 percent to $475 per ounce. This increase was caused by an increase in the cost of labor,
explosives and the grade-related decline in gold production.
explosives and the grade-related decline in gold production.
Capital expenditure for the year was $6 million (2006: $5 million).
74
Growth prospects: Work on the west pushback expansion is currently underway. Work on the dense media separation (DMS)
plant is also at an advanced stage. Exploration aimed at increasing geological confidence will continue. Brownfields
exploration projects will also increase the reserve base.
plant is also at an advanced stage. Exploration aimed at increasing geological confidence will continue. Brownfields
exploration projects will also increase the reserve base.
Operating and production data for Navachab
2007
2006
2005
Pay limit (oz/t)
0.04
0.04
0.05
Pay limit (g/t)
1.22
1.29
1.65
Recovered grade (oz/t)
0.046
0.053
0.060
Recovered grade (g/t)
1.56
1.81
2.05
Gold production (000 oz) 100 percent
80
86
81
Total cash costs ($/oz)
(1)
475
349
321
Total production costs ($/oz)
(1)
525
407
333
Capital expenditure ($ million) 100 percent
6
5
5
Employees
(2)
409
313
315
Outside contractors
(2)
–
–
–
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
results – Total cash costs and total production costs”.
(2)
Average for the year.
75
TANZANIA
AngloGold Ashanti has one gold mining operation in Tanzania, Geita, which produced 327,000 ounces of gold in 2007,
equivalent to 6 percent of group production.
equivalent to 6 percent of group production.
Rights: Mineral rights in the United Republic of
Tanzania are governed by the Mining Act of 1998 (the
Act), and property and control over minerals are vested
in the United Republic of Tanzania. Prospecting for the
mining of minerals, except petroleum, may only be
conducted under authority of a mineral right granted by
the Ministry of Energy and Minerals under this Act.
Tanzania are governed by the Mining Act of 1998 (the
Act), and property and control over minerals are vested
in the United Republic of Tanzania. Prospecting for the
mining of minerals, except petroleum, may only be
conducted under authority of a mineral right granted by
the Ministry of Energy and Minerals under this Act.
The three types of mineral rights most often
encountered, which are also those applicable to
AngloGold Ashanti, are: prospecting licenses; retention
licenses; and mining licenses.
encountered, which are also those applicable to
AngloGold Ashanti, are: prospecting licenses; retention
licenses; and mining licenses.
A prospecting license grants the holder thereof the
exclusive right to prospect in the area covered by the
license for all minerals, other than building and
gemstones, for a period of three years. Thereafter, the
license is renewable for two further periods of renewal
of two years each. On each renewal of a prospecting
license, 50 percent of the area covered by the license
must be relinquished. Before application is made for a
prospecting license with an initial prospecting period (“a
Prospecting License”), a prospecting license with a
exclusive right to prospect in the area covered by the
license for all minerals, other than building and
gemstones, for a period of three years. Thereafter, the
license is renewable for two further periods of renewal
of two years each. On each renewal of a prospecting
license, 50 percent of the area covered by the license
must be relinquished. Before application is made for a
prospecting license with an initial prospecting period (“a
Prospecting License”), a prospecting license with a
reconnaissance period (“a Prospecting Reconnaissance”) may be applied for a maximum area of 5,000 square kilometers is
issued for a period of two years after which a three-year Prospecting License is applied for a company applying for a
prospecting license must, inter alia, state the financial and technical resources available to it. A retention license can also be
requested from the Minister, after the expiry of a Prospecting License period, for reasons ranging from funds to technical
considerations.
issued for a period of two years after which a three-year Prospecting License is applied for a company applying for a
prospecting license must, inter alia, state the financial and technical resources available to it. A retention license can also be
requested from the Minister, after the expiry of a Prospecting License period, for reasons ranging from funds to technical
considerations.
Mining is carried out through either a mining license or a special mining license, both of which confer on the holder thereof the
exclusive right to conduct mining operations in or on the area covered by the license. A mining license is granted for a period
of 10 years and is renewable for a further period of 10 years. A special mining license is granted for a period of 25 years or for
the estimated life of the orebody, whichever is shorter, and is renewable for a further period of 25 years. If the holder of a
prospecting license has identified a mineral deposit within the prospecting area which is potentially of commercial significance,
but it cannot be developed immediately by reason of technical constraints, adverse market conditions or other economic factors
of a temporary character, it can apply for a retention license which will entitle the holder thereof to apply for a special mining
license when it sees fit to proceed with mining operations.
exclusive right to conduct mining operations in or on the area covered by the license. A mining license is granted for a period
of 10 years and is renewable for a further period of 10 years. A special mining license is granted for a period of 25 years or for
the estimated life of the orebody, whichever is shorter, and is renewable for a further period of 25 years. If the holder of a
prospecting license has identified a mineral deposit within the prospecting area which is potentially of commercial significance,
but it cannot be developed immediately by reason of technical constraints, adverse market conditions or other economic factors
of a temporary character, it can apply for a retention license which will entitle the holder thereof to apply for a special mining
license when it sees fit to proceed with mining operations.
A retention license is valid for a period of five years and is thereafter renewable for a single period of five years. A mineral right
may be freely assigned by the holder thereof to another person or entity by notifying the Commissioner for Minerals, except for
a mining license, which must have the approval of the Ministry to be assigned.
may be freely assigned by the holder thereof to another person or entity by notifying the Commissioner for Minerals, except for
a mining license, which must have the approval of the Ministry to be assigned.
However, this approval requirement for the assignment of a mining license will not apply if the mining license is assigned to an
affiliate company of the holder or to a financial institution or bank as security for any loan or guarantee in respect of mining
operations.
affiliate company of the holder or to a financial institution or bank as security for any loan or guarantee in respect of mining
operations.
A holder of a mineral right may enter into a development agreement with the Ministry to guarantee the fiscal stability of a long-
term mining project and make special provision for the payment of royalties, taxes, fees and other fiscal imposts.
term mining project and make special provision for the payment of royalties, taxes, fees and other fiscal imposts.
AngloGold Ashanti has complied with all applicable requirements and the relevant licenses have been issued for 25 years and
expire in 2024.
expire in 2024.
76
Geita
Description: The Geita gold mine is situated 80 kilometers south-west of the town of Mwanza in the north-west of Tanzania.
The Geita gold deposit is an Archaean mesothermal orebody, largely hosted in a banded ironstone formation. It is a multiple
open-pit operation with further underground potential which is currently serviced by a 6 million tonnes per annum carbon-in-
leach (CIL) processing plant. Standard open-pit mining methods are employed; hard overburden is drilled and blasted hydraulic
excavators are used to load waste material into a fleet of large dump trucks exposing the gold bearing ore material which is
directed to the processing plant. The processing plant has a capacity of 490,000 tonnes per month.
The Geita gold deposit is an Archaean mesothermal orebody, largely hosted in a banded ironstone formation. It is a multiple
open-pit operation with further underground potential which is currently serviced by a 6 million tonnes per annum carbon-in-
leach (CIL) processing plant. Standard open-pit mining methods are employed; hard overburden is drilled and blasted hydraulic
excavators are used to load waste material into a fleet of large dump trucks exposing the gold bearing ore material which is
directed to the processing plant. The processing plant has a capacity of 490,000 tonnes per month.
Geology: Geita is an Archaean mesothermal mainly BIF-hosted deposit. Mineralization is located where auriferous fluids,
which are interpreted to have moved along shears often on BIF-diorite contacts, reacted with the BIF. Some lower-grade
mineralization can occur in the diorite as well (usually in association with BIF-hosted mineralization), and approximately
20 percent of the gold is hosted in the diorite.
which are interpreted to have moved along shears often on BIF-diorite contacts, reacted with the BIF. Some lower-grade
mineralization can occur in the diorite as well (usually in association with BIF-hosted mineralization), and approximately
20 percent of the gold is hosted in the diorite.
Safety: Overall safety standards were maintained at Geita with an LTIFR for the year of 0.68 (2006: 0.63). No fatalities were
recorded.
recorded.
Operating review: Production at Geita is gradually improving year on year following the serious decline in production in 2006.
This was exacerbated by the collapse of part of the Nyankanga pit sidewall during the first quarter of 2007, which covered a
portion of the higher grade orebody. Gold production increased from 308,000 ounces in 2006 to 327,000 ounces in 2007, an
increase of 6 percent. The average grade of ore processed increased from 1.68g/t in 2006 to 2.01g/t in 2007. The collapse of
the Nyankanga pit in the first quarter delayed access to the higher grade exposed ore in this area and resulted in the mining
plan for the year being revised. Production and tonnage throughput in particular was further aggravated by wet ore, mill
lubrication problems and a major shutdown of the primary crusher for planned maintenance as well as damage to the ball mill
discharge which led to reduced processing plant availability. There was a considerable improvement in the third quarter of
2007 as Nyankanga ore was accessed, however, grades were not sustainable, the material was harder and as a result plant
throughput was reduced and fourth quarter gold production suffered as a result.
This was exacerbated by the collapse of part of the Nyankanga pit sidewall during the first quarter of 2007, which covered a
portion of the higher grade orebody. Gold production increased from 308,000 ounces in 2006 to 327,000 ounces in 2007, an
increase of 6 percent. The average grade of ore processed increased from 1.68g/t in 2006 to 2.01g/t in 2007. The collapse of
the Nyankanga pit in the first quarter delayed access to the higher grade exposed ore in this area and resulted in the mining
plan for the year being revised. Production and tonnage throughput in particular was further aggravated by wet ore, mill
lubrication problems and a major shutdown of the primary crusher for planned maintenance as well as damage to the ball mill
discharge which led to reduced processing plant availability. There was a considerable improvement in the third quarter of
2007 as Nyankanga ore was accessed, however, grades were not sustainable, the material was harder and as a result plant
throughput was reduced and fourth quarter gold production suffered as a result.
Total cash costs at $627 per ounce remained effectively unchanged from 2006 ($630 per ounce). Reduced expenditure on
equipment re-builds and contractor services also contributed to the containment of costs. Capital expenditure for 2007 was
$27 million (2006: $67 million).
equipment re-builds and contractor services also contributed to the containment of costs. Capital expenditure for 2007 was
$27 million (2006: $67 million).
Growth prospects: At the end of 2007 advanced grade control drilling had begun at the Star & Comet project in preparation
to start mining in the second quarter of 2008. The adjacent Roberts project will begin mining towards the end of 2008.
Exploration activities during 2007 focused on strike additions at Area 3 and the detection of regolith gold anomalies below
laterite cover via air core drilling. The regolith program identified a 2 kilometers gold in saprolite anomaly that requires follow-
up drilling.
to start mining in the second quarter of 2008. The adjacent Roberts project will begin mining towards the end of 2008.
Exploration activities during 2007 focused on strike additions at Area 3 and the detection of regolith gold anomalies below
laterite cover via air core drilling. The regolith program identified a 2 kilometers gold in saprolite anomaly that requires follow-
up drilling.
Metallurgical testwork continued during 2007 to identify a processing route for refractory ores at Matandani Kukuluma which
still contain significant potential. A scoping study into the underground potential at Nyankanga and Geita Hill began in 2007.
still contain significant potential. A scoping study into the underground potential at Nyankanga and Geita Hill began in 2007.
Operating and production data for Geita
2007
2006
2005
Pay limit (oz/t)
0.09
0.13
0.07
Pay limit (g/t)
3.04
4.16
2.27
Recovered grade (oz/t)
0.059
0.049
0.092
Recovered grade (g/t)
2.01
1.68
3.14
Gold production (000 oz)
327
308
613
Total cash costs ($/oz)
(1)
627
630
298
Total production costs ($/oz)
(1)
817
766
419
Capital expenditure ($ million)
27
67
78
Employees
(2)
2,304
2,043
1,066
Outside contractors
(2)
922
1,177
1,214
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
results – Total cash costs and total production costs”.
(2)
Average for the year.
77
UNITED STATES OF AMERICA
Cripple Creek & Victor is AngloGold Ashanti’s sole
operation in the United States. In 2007, Cripple Creek &
Victor produced 282,000 ounces of gold, 5 percent of
group production.
operation in the United States. In 2007, Cripple Creek &
Victor produced 282,000 ounces of gold, 5 percent of
group production.
Cripple Creek & Victor (CC&V) is a joint venture in which
AngloGold Ashanti has a 67 percent interest and Golden
Cycle Gold Corporation holds the balance of 33 percent.
AngloGold Ashanti is the manager of CC&V and has a
100 percent interest in the gold produced by CC&V until
the loans extended to the joint venture are repaid.
Subsequent to year-end, on January 14, 2008, AngloGold
Ashanti announced the execution of an Agreement and
Plan of Merger in order to acquire 100 percent of Golden
Cycle Gold Corporation, thus owning 100 percent of
CC&V. The closing of that transaction is anticipated to be
completed in the second quarter of 2008 subject to various
matters including approval by Golden Cycle Gold
Corporation’s shareholders, satisfaction of certain closing
conditions, and receipt of all necessary regulatory
approvals.
AngloGold Ashanti has a 67 percent interest and Golden
Cycle Gold Corporation holds the balance of 33 percent.
AngloGold Ashanti is the manager of CC&V and has a
100 percent interest in the gold produced by CC&V until
the loans extended to the joint venture are repaid.
Subsequent to year-end, on January 14, 2008, AngloGold
Ashanti announced the execution of an Agreement and
Plan of Merger in order to acquire 100 percent of Golden
Cycle Gold Corporation, thus owning 100 percent of
CC&V. The closing of that transaction is anticipated to be
completed in the second quarter of 2008 subject to various
matters including approval by Golden Cycle Gold
Corporation’s shareholders, satisfaction of certain closing
conditions, and receipt of all necessary regulatory
approvals.
Rights: Mineral rights, as well as surface rights, in the United States are owned by private parties, state governments and the
federal government. Most land prospective for precious metals exploration, development and mining are owned by the federal
government and are obtained through a system of self-initiated mining claim location pursuant to the General Mining Law of
1872, as amended. Individual states typically follow a lease system for state-owned minerals. Private parties have the right to
sell, lease or enter into other agreements, such as joint ventures, with respect to minerals that they own or control. All mining
activities, regardless of whether they are situated on privately- or publicly-owned lands, are regulated by a myriad of federal,
state and local laws, regulations, rules and ordinances, which address various matters including environmental protection,
mitigation and rehabilitation.
federal government. Most land prospective for precious metals exploration, development and mining are owned by the federal
government and are obtained through a system of self-initiated mining claim location pursuant to the General Mining Law of
1872, as amended. Individual states typically follow a lease system for state-owned minerals. Private parties have the right to
sell, lease or enter into other agreements, such as joint ventures, with respect to minerals that they own or control. All mining
activities, regardless of whether they are situated on privately- or publicly-owned lands, are regulated by a myriad of federal,
state and local laws, regulations, rules and ordinances, which address various matters including environmental protection,
mitigation and rehabilitation.
Authorizations and permits setting forth the activities and restrictions pertaining thereto are issued by the responsible
governmental agencies for all phases of mining activities.
governmental agencies for all phases of mining activities.
The Cripple Creek & Victor Gold Mining Company joint venture consists almost entirely of owned patented mining claims from
public lands, with a small percentage of private and state lands being leased. The total area of control is approximately
7,100 acres. Patented claims vest ownership in the holder, including the right to mine for an indefinite tenure. All life-of-mine
reserves are within these property controls. The mining and rehabilitation permits issued by the State of Colorado are life-of-
mine permits.
public lands, with a small percentage of private and state lands being leased. The total area of control is approximately
7,100 acres. Patented claims vest ownership in the holder, including the right to mine for an indefinite tenure. All life-of-mine
reserves are within these property controls. The mining and rehabilitation permits issued by the State of Colorado are life-of-
mine permits.
Cripple Creek & Victor (attributable 67 percent with 100 percent interest in production)
Description: Located in the state of Colorado in the United States, CC&V’s Cresson mine is a low-cost, open-pit mining
operation which treats the ore mined by means of a heap-leach pad, which is one of the largest in the world. Production began
here in 1994.
operation which treats the ore mined by means of a heap-leach pad, which is one of the largest in the world. Production began
here in 1994.
Geology: The district of Cripple Creek is centered on an intensely altered alkaline, Tertiary-aged, diatreme-volcanic, intrusive
complex, approximately circular in shape covering 18.4 square kilometers and surrounded by Precambrian rocks. The
Precambrian rocks consist of biotite gneiss, granodiorite and quartz monzonite and granite.
complex, approximately circular in shape covering 18.4 square kilometers and surrounded by Precambrian rocks. The
Precambrian rocks consist of biotite gneiss, granodiorite and quartz monzonite and granite.
The intersection of these four units and regional tectonic events formed an area of regional dilation which subsequently
facilitated the formation of the volcanic complex. The majority of the complex then in-filled with the eruptive phase Cripple
Creek Breccia host rock. This complex was subsequently intruded by a series of intrusive dykes and sills that include syenites,
phonolites, phonotephrites and lamprophyres. These intrusive occupy all of the dominant district structural orientations.
District structures are generally near vertical and strike north-north-west to north-east. These structures acted as primary
conduits for the late-stage gold mineralizing solutions. Higher grade pods of mineralization occur at structural intersections
facilitated the formation of the volcanic complex. The majority of the complex then in-filled with the eruptive phase Cripple
Creek Breccia host rock. This complex was subsequently intruded by a series of intrusive dykes and sills that include syenites,
phonolites, phonotephrites and lamprophyres. These intrusive occupy all of the dominant district structural orientations.
District structures are generally near vertical and strike north-north-west to north-east. These structures acted as primary
conduits for the late-stage gold mineralizing solutions. Higher grade pods of mineralization occur at structural intersections
78
and/or as sheeted vein along zones of strike deflection. High-grade gold mineralization is associated with K-feldspar + pyrite
+/- carbonate alteration and occurs adjacent to the major structural and intrusive dyke zones. The broader zones of
disseminated mineralization occur primarily as micro-fracture halos around the stronger alteration zones in the more permeable
Cripple Creek Breccia wall rocks.
+/- carbonate alteration and occurs adjacent to the major structural and intrusive dyke zones. The broader zones of
disseminated mineralization occur primarily as micro-fracture halos around the stronger alteration zones in the more permeable
Cripple Creek Breccia wall rocks.
The average depth of oxidation is 120 meters and is also developed along major structural zones to even greater depths.
Individual orebodies can be tabular, pipe-like, irregular or massive. Individual gold particles are generally less than 20 microns
in size and occur as native gold with pyrite or native gold after gold-silver tellurides. Gold occurs within hydrous iron and
manganese oxides and as gold-silver tellurides. Silver is present but is economically unimportant. Gold mineralization can be
encapsulated by iron and manganese oxides, pyrite, K-feldspar alteration and quartz.
Individual orebodies can be tabular, pipe-like, irregular or massive. Individual gold particles are generally less than 20 microns
in size and occur as native gold with pyrite or native gold after gold-silver tellurides. Gold occurs within hydrous iron and
manganese oxides and as gold-silver tellurides. Silver is present but is economically unimportant. Gold mineralization can be
encapsulated by iron and manganese oxides, pyrite, K-feldspar alteration and quartz.
Safety: As at March 2007, CC&V had reported 43 months without a single lost-time injury. This record was unfortunately
interrupted in the second quarter of the year when there was one lost-time accident. Consequently, the LTIFR for the year was
3.00 per million hours worked (2006: 0.0). No fatalities were recorded this year.
interrupted in the second quarter of the year when there was one lost-time accident. Consequently, the LTIFR for the year was
3.00 per million hours worked (2006: 0.0). No fatalities were recorded this year.
The DuPont Safety Training (STOP) program implemented in 2003 and the risk-based safety management system
implemented in 2005 continue to have very positive safety results. An extension of the STOP program, called Train the
Trainers, was implemented in 2007 to continue to enhance safety at CC&V. The program is designed to prepare supervisors
for peer training prior to crew training.
implemented in 2005 continue to have very positive safety results. An extension of the STOP program, called Train the
Trainers, was implemented in 2007 to continue to enhance safety at CC&V. The program is designed to prepare supervisors
for peer training prior to crew training.
Operating review: In 2007, production at CC&V fell marginally to 282,000 ounces from 283,000 ounces in 2006. A total of
23 million tonnes were placed on the heap-leach pad. The decline in production was a result of the greater distance over
which the gold-bearing-leach solution had to be transported from the higher stacked ore to the leach-pad liner. This decline
was compounded in the third quarter by delayed production from the leach-pad stacking levels.
23 million tonnes were placed on the heap-leach pad. The decline in production was a result of the greater distance over
which the gold-bearing-leach solution had to be transported from the higher stacked ore to the leach-pad liner. This decline
was compounded in the third quarter by delayed production from the leach-pad stacking levels.
Overall, there was an increase in total cash costs of 8 percent to $269 per ounce from $248 per ounce in 2006, principally as a
result of rising commodity costs, and of diesel fuel in particular. A decrease in costs due to lower contractor costs was more
than made up for by increases in fuel costs as oil prices hit record levels on global markets and creeping inflation in the general
US economy.
result of rising commodity costs, and of diesel fuel in particular. A decrease in costs due to lower contractor costs was more
than made up for by increases in fuel costs as oil prices hit record levels on global markets and creeping inflation in the general
US economy.
Capital expenditure for the year amounted to $23 million (2006: $13 million).
Growth prospects: The proposed mine life extension project is to include the development of new sources of ore and an
extension to the additional heap leach facility.
extension to the additional heap leach facility.
Cripple Creek & Victor – Summary of metallurgical operations
Gold plants
Capacity (000 tonnes/month)
-
crushed ore production
1,739
-
total ore production
1,796
-
solution processed
2,371
Operating and production data for Cripple Creek & Victor operations
2007
2006
2005
Pay limit (oz/t)
0.01
0.01
0.01
Pay limit (g/t)
0.34
0.34
0.34
Recovered grade (oz/t)
0.016
0.016
0.018
Recovered grade (g/t)
0.53
0.54
0.62
Gold production (000 oz)
282
283
330
Total cash costs ($/oz)
(1)
269
248
230
Total production costs ($/oz)
(1)
521
498
418
Capital expenditure ($ million)
23
13
8
Employees
(2)
338
325
313
Outside contractors
(2)
67
44
44
(1)
Total cash costs and total production costs are non-GAAP measures. For further information on these non-GAAP measures, see “Item 5A.: Operating
results – Total cash costs and total production costs”.
results – Total cash costs and total production costs”.
(2)
Average for the year.
79
Global Exploration
Total exploration expenditure in 2007 amounted to $167 million (including equity accounted joint ventures). The main aim of
both exploration programs is to identify new ounces of gold that are attributable to AngloGold Ashanti.
both exploration programs is to identify new ounces of gold that are attributable to AngloGold Ashanti.
The main focus of AngloGold Ashanti’s 2007 exploration program was on greenfields exploration, i.e. exploration in new
terrains, notably in Australia, Colombia, and the Democratic Republic of Congo (DRC). Brownfields exploration, which is aimed
at identifying ounces for production at or around existing mines, was undertaken around most current operations, with the most
successful programs being undertaken in Ghana, the United States of America, Australia, and Guinea.
terrains, notably in Australia, Colombia, and the Democratic Republic of Congo (DRC). Brownfields exploration, which is aimed
at identifying ounces for production at or around existing mines, was undertaken around most current operations, with the most
successful programs being undertaken in Ghana, the United States of America, Australia, and Guinea.
Greenfields exploration activities were undertaken in seven countries – Australia, China, Colombia, the DRC, Laos, the
Philippines and Russia – during 2007. A total of 378,014 meters of diamond, reverse circulation and aircore drilling was
completed during the year, drill testing existing priority targets and delineating new targets in Australia, Colombia and the DRC.
Greenfields activities in Russia, China, Laos, and the Philippines were predominantly undertaken through joint ventures and
strategic alliances, with exploration activities in Laos eventually being discontinued in late-2007. While the discovery of new
long-life, low-cost mines remains the principle aim of the greenfields exploration program, AngloGold Ashanti is also committed
to maximizing shareholder value by exiting from or selling those exploration assets that do not meet its internal growth criteria
and by opportunistically investing in prospective junior exploration companies.
Philippines and Russia – during 2007. A total of 378,014 meters of diamond, reverse circulation and aircore drilling was
completed during the year, drill testing existing priority targets and delineating new targets in Australia, Colombia and the DRC.
Greenfields activities in Russia, China, Laos, and the Philippines were predominantly undertaken through joint ventures and
strategic alliances, with exploration activities in Laos eventually being discontinued in late-2007. While the discovery of new
long-life, low-cost mines remains the principle aim of the greenfields exploration program, AngloGold Ashanti is also committed
to maximizing shareholder value by exiting from or selling those exploration assets that do not meet its internal growth criteria
and by opportunistically investing in prospective junior exploration companies.
A significant drill program and conceptual study are concurrently being undertaken at AngloGold Ashanti’s 100 percent-owned
Colosa project in Colombia. In 2008, exploration expenditure is expected to be some $185 million to $215 million.
Colosa project in Colombia. In 2008, exploration expenditure is expected to be some $185 million to $215 million.
Argentina
At Cerro Vanguardia, reconnaissance drilling continued on veins identified by regional mapping and geophysics. Drilling to
extend some of the current ore shoots was successful.
extend some of the current ore shoots was successful.
80
Australia
At Sunrise Dam, brownfields exploration continues to focus on increasing the underground Mineral Resource inventory and
increasing the confidence category of Mineral Resources so that Ore Reserve conversion can occur.
increasing the confidence category of Mineral Resources so that Ore Reserve conversion can occur.
At Boddington Gold Mine, a maximum of seven diamond drill rigs were employed during the year to complete a total of
121,212 meters of drilling in 151 holes targeting in-pit Mineral Resource conversion and near-pit Resource extensions.
121,212 meters of drilling in 151 holes targeting in-pit Mineral Resource conversion and near-pit Resource extensions.
The Tropicana Joint Venture covers approximately 12,000 kilometers and is located to the east and north-east of Kalgoorlie in
Western Australia. The Joint Venture held by AngloGold Ashanti Australia Limited and Independence Group NL. AngloGold
Ashanti holds a 70 percent managing interest in the joint venture with Independence Group NL free carried until completion of
the pre-feasibility study. However, Independence has agreed to co-fund certain activities prior to the completion of the pre-
feasibility study to ensure timely development of the project.
Western Australia. The Joint Venture held by AngloGold Ashanti Australia Limited and Independence Group NL. AngloGold
Ashanti holds a 70 percent managing interest in the joint venture with Independence Group NL free carried until completion of
the pre-feasibility study. However, Independence has agreed to co-fund certain activities prior to the completion of the pre-
feasibility study to ensure timely development of the project.
Drilling continued at the Tropicana prospect in 2007 with the mineralization identified in the Tropicana-Havana zones moving
into prefeasibility study assessment in May. The study is focused on assessing the viability and options for developing an open
pit gold mining operation.
into prefeasibility study assessment in May. The study is focused on assessing the viability and options for developing an open
pit gold mining operation.
Reconnaissance exploration continues in parallel throughout the Tropicana joint venture tenements with a number of prospects
identified by auger sampling and aircore drilling over a 40 kilometers strike trend north and south of the Tropicana prospect.
Significant results have been obtained from limited aircore and reverse circulation drilling at the Beachcomber prospect,
located approximately 200 kilometers south of the Tropicana prospect.
identified by auger sampling and aircore drilling over a 40 kilometers strike trend north and south of the Tropicana prospect.
Significant results have been obtained from limited aircore and reverse circulation drilling at the Beachcomber prospect,
located approximately 200 kilometers south of the Tropicana prospect.
Brazil
At Córrego do Sítio, drilling of underground deposits continued. A total of 40,500 meters were drilled during 2007 and were
aimed at defining new orebodies and upgrading the level of information of known orebodies. Drilling concentrated on the
Laranjeiras and the Paraiso orebodies. At Lamego, a total of 24,400 meters were drilled. The drilling consisted of a
combination of deep drilling targeted at the depth extension of the Cabeca de Pedra and Arco da Velha orebodies, surface infill
drilling at Arco da Velha and underground infill drilling at Carruagem. Regional geophysics, mapping and sampling continued.
aimed at defining new orebodies and upgrading the level of information of known orebodies. Drilling concentrated on the
Laranjeiras and the Paraiso orebodies. At Lamego, a total of 24,400 meters were drilled. The drilling consisted of a
combination of deep drilling targeted at the depth extension of the Cabeca de Pedra and Arco da Velha orebodies, surface infill
drilling at Arco da Velha and underground infill drilling at Carruagem. Regional geophysics, mapping and sampling continued.
At Serra Grande, in October 2007 a new deposit, Orebody Pequizáo, was identified between Mina Nova and Mina III. Drilling
continues and a significant high-grade deposit is being targeted.
continues and a significant high-grade deposit is being targeted.
China
AngloGold Ashanti has entered into three co-operative joint ventures (CJVs) with local partners at Yili-Yunlong (Xinjiang
province), Jinchanngou (Gansu province), and Pingwu (Sichuan province). Business licenses have now been issued by the
respective local authorities for the Yili-Yunlong and Jinchanggou CJVs (with systematic ground exploration now under way),
whereas the business license for the Pingwu CJV is expected to be issued in early 2008.
province), Jinchanngou (Gansu province), and Pingwu (Sichuan province). Business licenses have now been issued by the
respective local authorities for the Yili-Yunlong and Jinchanggou CJVs (with systematic ground exploration now under way),
whereas the business license for the Pingwu CJV is expected to be issued in early 2008.
A short (1,053 meters) diamond drill program was completed on the Yili-Yunlong CJV in late-2007. The primary objective of this
drill program was to test the vertical continuity of outcropping gold-copper mineralization, however, drilling only succeeded in
intersecting weakly anomalous mineralization at depth. At Red Valley (Qinghai), assay results from the 3,300 meters diamond-
drill program were also reviewed and confirmed the presence of only low-grade gold mineralization within the principal targets.
As a result, AngloGold Ashanti has elected to withdraw from earning into this CJV.
drill program was to test the vertical continuity of outcropping gold-copper mineralization, however, drilling only succeeded in
intersecting weakly anomalous mineralization at depth. At Red Valley (Qinghai), assay results from the 3,300 meters diamond-
drill program were also reviewed and confirmed the presence of only low-grade gold mineralization within the principal targets.
As a result, AngloGold Ashanti has elected to withdraw from earning into this CJV.
Colombia
Regional exploration and target generation activities continued in Colombia during 2007. A conceptual economic study was
also completed on the bulk-tonnage Gramalote prospect (Antioquia Department). On February 14, 2008, AngloGold Ashanti
announced the signing of a binding agreement with B2Gold Corp, in which B2Gold will have the option to earn into 51 percent
of the Gramalote Project. AngloGold Ashanti will be issued 25 million shares and 21.4 million warrants in B2Gold Corp in
exchange for this additional interest in Gramalote and certain other mineral properties in Colombia.
also completed on the bulk-tonnage Gramalote prospect (Antioquia Department). On February 14, 2008, AngloGold Ashanti
announced the signing of a binding agreement with B2Gold Corp, in which B2Gold will have the option to earn into 51 percent
of the Gramalote Project. AngloGold Ashanti will be issued 25 million shares and 21.4 million warrants in B2Gold Corp in
exchange for this additional interest in Gramalote and certain other mineral properties in Colombia.
Resource delineation drilling was also undertaken at AngloGold Ashanti’s 100 percent-owned Colosa porphyry gold prospect
(Tolima Department). To the end of December 2007, approximately 12,000 meters of diamond drilling (42 drill holes) had been
completed at Colosa. Additional drilling and a conceptual study are currently being undertaken at Colosa.
(Tolima Department). To the end of December 2007, approximately 12,000 meters of diamond drilling (42 drill holes) had been
completed at Colosa. Additional drilling and a conceptual study are currently being undertaken at Colosa.
81
Democratic Republic of Congo (DRC)
Exploration activities undertaken in the 10,000 square kilometers Concession 40 tenement (Ituri Province, northeastern DRC)
included the advancement of resource delineation drilling on the known mineralization at Mongbwalu; and the start of regional
target generation and evaluation activities between AngloGold Ashanti (86 percent) and OKIMO (14 percent), in which
AngloGold Ashanti manages all exploration activities and OKIMO retains a free carried interest to production.
included the advancement of resource delineation drilling on the known mineralization at Mongbwalu; and the start of regional
target generation and evaluation activities between AngloGold Ashanti (86 percent) and OKIMO (14 percent), in which
AngloGold Ashanti manages all exploration activities and OKIMO retains a free carried interest to production.
A conceptual economic study for the Mongbwalu deposit was completed by the end of 2007.
High-quality airborne geophysical data (airborne magnetics, radiometrics, and electromagnetics) were acquired over
approximately 2,200 square kilometers (or nearly 25 percent) of Concession 40, using both fixed-wing and helicopter-based
platforms. Interpretation of this geophysical data, in conjunction with compilations of the known geology and available
geochemical data, form the basis of the regional target generation process. Drill testing of the highest priority regional targets
is expected to be undertaken during 2008.
approximately 2,200 square kilometers (or nearly 25 percent) of Concession 40, using both fixed-wing and helicopter-based
platforms. Interpretation of this geophysical data, in conjunction with compilations of the known geology and available
geochemical data, form the basis of the regional target generation process. Drill testing of the highest priority regional targets
is expected to be undertaken during 2008.
Ghana
Drilling for the Obuasi Deeps project below 50 level continued with the areas below KMS and Adansi Shafts being targeted.
Guinea
Drilling at Siguiri in 2007 focused on infill drilling at the following deposits: Sintroko (8 kilometers south of the plant), Kintinian
(4 kilometers north), Foulata (45 kilometers north-west) and the spent heap leach. Mineral Resource extension drilling
continued for the same deposits. Reconnaissance drilling was conducted to follow up on anomalies identified in Block 3
(35 kilometers north-east) and Block 4 (70 kilometers north-east). Surface geochemical sampling began on four new
exploration licenses situated to the north of the mine. An airborne electromagnetic survey was flown in the second quarter and
follow up on the identified targets has started.
(4 kilometers north), Foulata (45 kilometers north-west) and the spent heap leach. Mineral Resource extension drilling
continued for the same deposits. Reconnaissance drilling was conducted to follow up on anomalies identified in Block 3
(35 kilometers north-east) and Block 4 (70 kilometers north-east). Surface geochemical sampling began on four new
exploration licenses situated to the north of the mine. An airborne electromagnetic survey was flown in the second quarter and
follow up on the identified targets has started.
Laos
The strategic exploration alliance in Laos between AngloGold Ashanti and Oxiana Ltd expired in December 2007 and was not
extended by mutual agreement.
extended by mutual agreement.
Mali
At Morila, the regional drilling program of 92 holes was completed during the first quarter and an intensive data integration and
interpretation phase started. Work supported by international researchers continues in order to optimize the exploration
process. During the year, two diamond holes were drilled to the west of the pit to examine the continuity of the orebody
between the main deposit and Samacline. A further four diamond holes were drilled in the fourth quarter to follow up on
potential extensions to mineralization in areas identified as being prospective. Minor geochemical and pitting programs were
also conducted during the year.
interpretation phase started. Work supported by international researchers continues in order to optimize the exploration
process. During the year, two diamond holes were drilled to the west of the pit to examine the continuity of the orebody
between the main deposit and Samacline. A further four diamond holes were drilled in the fourth quarter to follow up on
potential extensions to mineralization in areas identified as being prospective. Minor geochemical and pitting programs were
also conducted during the year.
At Sadiola, Phase 8 drilling, aimed at upgrading the Inferred high-grade zones of the main body and the footwall mineralization,
was completed in the second quarter. A full review of the geological model for the lease was completed and as a result two
fence lines of diamond holes were drilled between the FE3 and FE4 deposits and through the FE4 deposit in order to follow up
on potential mineralization trends. Results are still awaited for this drilling.
was completed in the second quarter. A full review of the geological model for the lease was completed and as a result two
fence lines of diamond holes were drilled between the FE3 and FE4 deposits and through the FE4 deposit in order to follow up
on potential mineralization trends. Results are still awaited for this drilling.
At Yatela, a small satellite to the main deposit was discovered to the north-west of the main pit and the final infill drilling is
currently being completed. Definition drilling of the Dinguilou oxides was completed and modelling is on going. A program to
investigate the deep sulphide breccias developed below the main deposit was started during the year and will continue in 2008.
currently being completed. Definition drilling of the Dinguilou oxides was completed and modelling is on going. A program to
investigate the deep sulphide breccias developed below the main deposit was started during the year and will continue in 2008.
Namibia
At Navachab, drilling concentrated on areas around the main pit particularly to the north-west and the west and in the Gecko
Area. Promising results were obtained from the pit area and further drilling is planned in 2008. At Gecko, the central deposit
was drilled to grade control spacing in order to test the continuity of the mineralization and further drilling was conducted on the
south, north and far north extension. A stream sediment sampling program was conducted, both on and off lease, in order to
follow up on previous work and to target new areas.
Area. Promising results were obtained from the pit area and further drilling is planned in 2008. At Gecko, the central deposit
was drilled to grade control spacing in order to test the continuity of the mineralization and further drilling was conducted on the
south, north and far north extension. A stream sediment sampling program was conducted, both on and off lease, in order to
follow up on previous work and to target new areas.
82
Philippines
Work continued on finalizing the joint venture agreements with the two Red 5 prospects, Mapawa and Outer Siana. The start
of detailed exploration at Mapawa currently awaits granting of a Mineral Production Sharing Agreement (MPSA) by the Mines
and Geosciences Bureau in Manila.
of detailed exploration at Mapawa currently awaits granting of a Mineral Production Sharing Agreement (MPSA) by the Mines
and Geosciences Bureau in Manila.
Russia
Significant efforts were focused on finalizing the formation of the Polymetal/AngloGold Ashanti strategic alliance. In June 2007,
AngloGold Ashanti concluded the purchase of Trans-Siberian Gold’s interests in the Veduga and Bogunay projects in
Krasnoyarsk for a consideration of $40 million, with the objective of contributing these assets to the new strategic alliance. In
return, Polymetal has agreed to contribute two projects to the alliance – Imitzoloto and Eniseevskaya – with a value of
$16 million and to make an initial payment of $12 million to AngloGold Ashanti. The Russian management company for the
strategic alliance, Zoloto Taigi, has now been registered. By end-2007, the joint venture team had assumed management of
exploration activities in the four initial project areas (Bogunay, Anenskoye and Veduga in the Krasnoyarsk region and
Aprelskovkoye in the Chita region). In addition, the joint venture had successfully acquired the 390 square kilometer
Sovremenie Prospect in the Krasnoyarsk region at auction.
AngloGold Ashanti concluded the purchase of Trans-Siberian Gold’s interests in the Veduga and Bogunay projects in
Krasnoyarsk for a consideration of $40 million, with the objective of contributing these assets to the new strategic alliance. In
return, Polymetal has agreed to contribute two projects to the alliance – Imitzoloto and Eniseevskaya – with a value of
$16 million and to make an initial payment of $12 million to AngloGold Ashanti. The Russian management company for the
strategic alliance, Zoloto Taigi, has now been registered. By end-2007, the joint venture team had assumed management of
exploration activities in the four initial project areas (Bogunay, Anenskoye and Veduga in the Krasnoyarsk region and
Aprelskovkoye in the Chita region). In addition, the joint venture had successfully acquired the 390 square kilometer
Sovremenie Prospect in the Krasnoyarsk region at auction.
AngloGold Ashanti continues to hold a 29.8 percent shareholding in Trans-Siberian Gold (TSG), whose primary asset is the
Asacha gold-silver project in Kamchatka.
Asacha gold-silver project in Kamchatka.
South Africa
At Moab Khotsong, five surface diamond holes were drilled during the year. MZA9 completed its initial deflections on the Vaal
Reef and a long deflection to the east is under way. MGR7 completed its deflection program on the Vaal Reef in the third
quarter. MMB5 continues to drill. MCY4 was reopened in the third quarter and a long deflection to the east is currently being
drilled. MCY5 was also started in the third quarter and continues to drill.
Reef and a long deflection to the east is under way. MGR7 completed its deflection program on the Vaal Reef in the third
quarter. MMB5 continues to drill. MCY4 was reopened in the third quarter and a long deflection to the east is currently being
drilled. MCY5 was also started in the third quarter and continues to drill.
Borehole G54, at Tau Lekoa, was started in the fourth quarter and deflection drilling continues.
Tanzania
At Geita, drilling at various levels continued at Kukuluma/ Matandani, Area 3 (south, central and west), the Lone Cone – the
Nyankanga Gap and the Nyakabale-Prospect 30 area. An intensive phase of reconnaissance drilling was completed on various
parts of the mining lease and will continue into 2008.
Nyankanga Gap and the Nyakabale-Prospect 30 area. An intensive phase of reconnaissance drilling was completed on various
parts of the mining lease and will continue into 2008.
United States
At Cripple Creek & Victor in Colorado, drilling of the mine life extension project area continued during the year and was
concentrated on the Altman, Globe Hill, Schist Island and Control Point areas. Development drilling was focused around
Cresson, South Cresson and Schist Island. A total of 94,996 meters in 452 holes were drilled.
concentrated on the Altman, Globe Hill, Schist Island and Control Point areas. Development drilling was focused around
Cresson, South Cresson and Schist Island. A total of 94,996 meters in 452 holes were drilled.
83
ORE RESERVES
Ore reserve estimates are reported in accordance with the requirements of the SEC’s Industry Guide 7. Accordingly, as of the
date of reporting, all reserves are planned to be mined out under the life-of-mine plans within the period of AngloGold Ashanti’s
existing rights to mine, or within the renewal periods of AngloGold Ashanti’s rights to mine. In addition, as of the date of
reporting, all reserves are covered by required permits and governmental approvals. See “Item 4B.: Business overview”.
date of reporting, all reserves are planned to be mined out under the life-of-mine plans within the period of AngloGold Ashanti’s
existing rights to mine, or within the renewal periods of AngloGold Ashanti’s rights to mine. In addition, as of the date of
reporting, all reserves are covered by required permits and governmental approvals. See “Item 4B.: Business overview”.
AngloGold Ashanti has standard procedures for the estimation of ore reserves. These standard procedures are performed by
technical personnel at the mining operations and reviewed by regional and corporate competent persons.
technical personnel at the mining operations and reviewed by regional and corporate competent persons.
In the case of its underground mines, the procedure is as follows: Firstly, gold content and tonnage are estimated for in-situ
mineralized material at a mining operation. This mineralized material is not necessarily economically viable. Exclusions on the
grounds of safety (for example, stability pillars, shaft pillars) are then defined. Grade and tonnage curves specific for each of
the deposits, in conjunction with the cost structure, yield, mine call factor, gold price estimates are used to determine an
optimal mining mix. This process facilitates the determination of the average grade to be mined by each operation. This grade
is then applied to the grade-tonnage curves, which in turn facilitates the determination of the cut-off grade and ore reserve
tonnage for the operation. A full mine design is carried out on the blocks of mineralized material, excluding large mining areas
that do not meet the cut-off grade criterion. This mining plan is reviewed to ensure that it satisfies the economic criterion and
practical limitations of access and timing. If the review process is positive then the mineralized material (with dilution) included
in the mining plan is declared and published as the ore reserve for that operation.
mineralized material at a mining operation. This mineralized material is not necessarily economically viable. Exclusions on the
grounds of safety (for example, stability pillars, shaft pillars) are then defined. Grade and tonnage curves specific for each of
the deposits, in conjunction with the cost structure, yield, mine call factor, gold price estimates are used to determine an
optimal mining mix. This process facilitates the determination of the average grade to be mined by each operation. This grade
is then applied to the grade-tonnage curves, which in turn facilitates the determination of the cut-off grade and ore reserve
tonnage for the operation. A full mine design is carried out on the blocks of mineralized material, excluding large mining areas
that do not meet the cut-off grade criterion. This mining plan is reviewed to ensure that it satisfies the economic criterion and
practical limitations of access and timing. If the review process is positive then the mineralized material (with dilution) included
in the mining plan is declared and published as the ore reserve for that operation.
In the case of open-pit mines the procedure is as follows: revenue and costs are calculated for each mining block within a
three-dimensional model of the orebody using assumed values for gold price, operating costs and metallurgical recoveries. An
optimization process is then applied to determine the combination of blocks within the model that make a positive contribution
under these assumptions. Block selection is within a shell whose limits are defined by the planned slope angles of the pit.
Within this process, a cut-off grade is applied which determines the ore blocks to be treated and included in the ore reserves.
These blocks are scheduled with consideration being given to practical mining considerations and limitations. Scheduled ore
blocks that are classified as proven or probable constitute the ore reserve.
three-dimensional model of the orebody using assumed values for gold price, operating costs and metallurgical recoveries. An
optimization process is then applied to determine the combination of blocks within the model that make a positive contribution
under these assumptions. Block selection is within a shell whose limits are defined by the planned slope angles of the pit.
Within this process, a cut-off grade is applied which determines the ore blocks to be treated and included in the ore reserves.
These blocks are scheduled with consideration being given to practical mining considerations and limitations. Scheduled ore
blocks that are classified as proven or probable constitute the ore reserve.
The gold price and exchange rate used for 2007 and 2006 Reserves are outlined in the following table.
2006
( 3 Year Average)
2007
(Business Plan)
2007
(3 Year Average)
Units
Reserve
Gold
Price
486
600
582
US$/oz
Exchange Rate – South Africa
6.53
7.70
6.72
ZAR/US$
Exchange Rate – Australia
0.75
0.71
0.78
Aus$/US$
Given the sustained increase in the gold price since 2002 and the positive gold price outlook, AngloGold Ashanti prepared its
life of mine business plans using a gold price of $600 per ounce. The ore reserves determined from the planning process were
then tested for economic viability at the three-year historical average gold price and currency exchange rates shown in the
above table for determining SEC compliant reserves. The resultant SEC compliant proven and probable reserves are shown in
the following pages.
life of mine business plans using a gold price of $600 per ounce. The ore reserves determined from the planning process were
then tested for economic viability at the three-year historical average gold price and currency exchange rates shown in the
above table for determining SEC compliant reserves. The resultant SEC compliant proven and probable reserves are shown in
the following pages.
In Australia and South Africa, AngloGold Ashanti is legally required to publicly report Ore Reserves and Mineral Resources
according to the Australasian Code for Reporting of Mineral Resources and Ore Reserves (JORC 2004) and the South African
Code for Reporting of Mineral Resources and Ore Reserves (SAMREC 2000). The SEC’s Industry Guide 7 does not recognize
Mineral Resources. Accordingly, AngloGold Ashanti does not report estimates of Mineral Resources in this annual report on
Form 20-F.
according to the Australasian Code for Reporting of Mineral Resources and Ore Reserves (JORC 2004) and the South African
Code for Reporting of Mineral Resources and Ore Reserves (SAMREC 2000). The SEC’s Industry Guide 7 does not recognize
Mineral Resources. Accordingly, AngloGold Ashanti does not report estimates of Mineral Resources in this annual report on
Form 20-F.
84
The total AngloGold Ashanti Ore Reserves increased from 66.0 million ounces in 2006 to 72.2 million ounces in
December 2007. The principal changes in AngloGold Ashanti’s ore reserves as at December 31, 2007 compared with those
published as at December 31, 2006 are as follows:
December 2007. The principal changes in AngloGold Ashanti’s ore reserves as at December 31, 2007 compared with those
published as at December 31, 2006 are as follows:
Moz
December 2006 Ore Reserves
66.0
Principal Reductions
(1)
Geita, reconciliation factors (-0.8Moz), flattening of slopes (-0.5Moz), model revisions (-0.2 Moz) and costs
(-0.1Moz)
(-0.1Moz)
-2.0
Sadiola, impact of economic factors on deep sulphides and stockpiles
-1.3
Kopanang, drop in value due to the modeling of new drilling and sampling information
-0.5
Other
-1.7
Principal Additions
(1)
Iduapriem, purchase of an additional 15 percent of the operation from the Ghananian Government and the IFC,
to bring the ownership to 100 percent
to bring the ownership to 100 percent
0.2
Savuka, improved economic factors increased the Life of Mine
0.5
Navachab, improved economics have brought in an additional push back to the west of the main pit
0.8
Siguiri, two new deposits (Kintinian and the spent heap) were proved up by drilling
0.8
Cripple Creek and Victor, extension to mine life
0.9
Boddington, the upgrade of material in the pit shell to Reserve by drilling
1.0
Mponeng, the inclusion of the Carbon Leader Reef project below 120 level
3.4
Moab Khotsong, the inclusion of Project Zaaiplaats – a deepening of Moab Khotsong to access deeper Vaal
Reef blocks to the South West of the current mine
Reef blocks to the South West of the current mine
3.8
Other
0.3
December 2007 Ore Reserves*
72.2
(1)
Principal reductions and principal additions include a total of 6.8 million ounces of depletion for the year 2007.
* rounding may result in computational differences
AngloGold Ashanti will continue to pursue a strategy of increasing value-adding reserves through expansion projects,
brownfields and greenfields exploration and acquisition of new assets.
brownfields and greenfields exploration and acquisition of new assets.
The ore reserve estimates in this document include ore reserves below current infrastructure in the case of certain South African and
Ghanaian underground mines which are in production. These ore reserves have been determined based upon completed economic
studies.
Ghanaian underground mines which are in production. These ore reserves have been determined based upon completed economic
studies.
Audit of 2006 and 2007 Ore Reserve statement
During the course of the year, the AngloGold Ashanti 2006 Ore Reserve statements were submitted to independent
consultants for review. The Ore Reserves from eight of AngloGold Ashanti’s global operations were selected and subjected to
review. These operations were Mponeng, Geita, Obuasi, Morila, Sadiola, Yatela, Cuiaba and Cripple Creek and Victor. The
company has been informed that the audit identified no material shortcomings in the process by which AngloGold Ashanti’s
Ore Reserves were evaluated.
consultants for review. The Ore Reserves from eight of AngloGold Ashanti’s global operations were selected and subjected to
review. These operations were Mponeng, Geita, Obuasi, Morila, Sadiola, Yatela, Cuiaba and Cripple Creek and Victor. The
company has been informed that the audit identified no material shortcomings in the process by which AngloGold Ashanti’s
Ore Reserves were evaluated.
During 2007, it was decided by management to audit Ore Reserves prior to publication. As a result the 2007 Ore Reserves for
the following operations were audited; Sunrise Dam, Cerro Vanguardia, Great Noligwa, Kopanang and Project Zaaiplaats
(Moab deepening project). The company has been informed that these audits identified no material shortcomings in the
process by which AngloGold Ashanti's Ore Reserves were evaluated. It is the company's intention to repeat this process so
that all its operations will be audited over a three year period.
the following operations were audited; Sunrise Dam, Cerro Vanguardia, Great Noligwa, Kopanang and Project Zaaiplaats
(Moab deepening project). The company has been informed that these audits identified no material shortcomings in the
process by which AngloGold Ashanti's Ore Reserves were evaluated. It is the company's intention to repeat this process so
that all its operations will be audited over a three year period.
AngloGold Ashanti’s ore reserve statements have been prepared by the competent persons who manage AngloGold Ashanti’s
ore reserves. See “Item 6.: Directors, senior management and employees”.
ore reserves. See “Item 6.: Directors, senior management and employees”.
85
Ore Reserves: Imperial
At December 31, 2007
Proven
Ore
Reserves
(1)
Probable
Ore
Reserves
(1)(2)
Metallurgical
Gold
Gold
Recovery
Tons
(5)
Grade
Content
(1)
Tons
(5)
Grade
Content
(1)
Factor
(mill)
(oz/ton)
(mill oz)
(mill)
(oz/ton)
(mill oz)
percent
South Africa
Vaal River
(6)
Great Noligwa
10.9
0.217
2.4
7.3
0.209
1.5
96.5
Kopanang
5.9
0.243
1.4
15.1
0.193
2.9
97.6
Moab Khotsong
(2)
1.3
0.229
0.3
22.3
0.300
6.7
96.8-97.3
(4)
Tau Lekoa
7.3
0.036
0.3
6.8
0.022
0.1
97.1
West Wits
Mponeng
(2)
2.3
0.287
0.7
35.6
0.267
9.5
98.1-98.6
(4)
Savuka
0.1
0.221
0.0
3.5
0.193
0.7
97.4
TauTona
(2)
0.6
0.270
0.2
14.0
0.317
4.4
98.0
Surface
Surface sources
-
-
-
130.9
0.015
1.9
44 – 87.9
(4)
Argentina
Cerro Vanguardia (92.5 percent)
(3)(7)
1.2
0.177
0.2
8.7
0.192
1.7
95.2
Australia
Boddington (33.33 percent)
(3)(8)
62.4
0.026
1.6
176.0
0.022
3.9
81.6
Sunrise Dam
13.2
0.068
0.9
5.7
0.128
0.7
83.5
Brazil
Brasil Mineraçáo
(9)
7.3
0.224
1.6
4.7
0.179
0.8
87-92.5
(4)
Serra Grande (50 percent)
(3)
2.5
0.117
0.3
0.7
0.147
0.1
90-97
(4)
Ghana
Iduapriem (100 percent)
(3)
40.3
0.043
1.7
14.5
0.048
0.7
94.0-94.4
(4)
Obuasi
(2)
35.5
0.136
4.8
16.6
0.210
3.5
25-81.0
(4)
Guinea
Siguiri (85 percent)
(3)
23.5
0.017
0.4
98.7
0.023
2.2
93-97.5
(4)
Mali
Morila (40 percent)
(3)
5.8
0.065
0.4
4.4
0.059
0.3
89-91.5
(4)
Sadiola (38 percent)
(3)
2.0
0.080
0.2
2.6
0.091
0.2
78-93
(4)
Yatela (40 percent)
(3)
2.2
0.047
0.1
0.9
0.107
0.1
75
Namibia
Navachab
6.4
0.029
0.2
30.1
0.043
1.3
73-93
(4)
Tanzania
Geita
6.2
0.030
0.2
68.7
0.092
6.3
43.8-92.8
(4)
United States of America
Cripple Creek & Victor
118.9
0.028
3.3
52.5
0.027
1.4
61
Total
355.7
0.060
21.2
720.2
0.071
51.0
(1)
Ore reserves include marginally economic and diluting materials delivered for treatment and allow for losses that may occur during mining.
(2)
Probable ore reserves include reserves below infrastructure. See table below.
(3)
Ore reserves attributable to AngloGold Ashanti’s percentage interest shown.
(4)
Recovery factor varies according to ore type.
(5)
Tons refers to a short ton, which is equivalent to 2000lbs avoirdupois.
(6)
The Vaal Reef Ore Reserves include 42.97 million pounds of Uranium by-products; this can not be accounted for by individual mine as Great
Noligwa, Kopanang and Moab Khotsong feed to a combination of plants.
Noligwa, Kopanang and Moab Khotsong feed to a combination of plants.
(7)
The Ore Reserve contains 31.0 million ounces of silver to be recovered as a by-product.
(8)
The Ore Reserve contains 511 million pounds of copper.
(9)
0.47 million tons of sulphur will be recovered from processing the Ore Reserve
86
The 2007 probable ore reserves include reserves below infrastructure in the case of the following underground mines currently
in production:
in production:
Mine Tons
(millions)
Grade
(ounces/ton)
Gold Content
(million ounces)
Tau Tona
5.0
0.400
2.0
Mponeng
19.2
0.327
6.3
Moab Khotsong
13.6
0.262
3.6
Obuasi
4.3
0.322
1.4
Total
42.1
0.314
13.3
87
Ore Reserves: Imperial
At December 31, 2006
Proven Ore Reserves
(1)
Probable Ore Reserves
(1)
Metallurgical
Gold
Gold
Recovery
Tons
(5)
Grade
Content
(1)
Tons
(5)
Grade
Content
(1)
Factor
(mill)
(oz/ton)
(mill oz)
(mill)
(oz/ton)
(mill oz)
percent
South Africa
Vaal River
Great Noligwa
9.7
0.222
2.2
9.1
0.207
1.9
96.9
Kopanang
1.6
0.259
0.4
18.2
0.242
4.4
97.8
Moab Khotsong
0.2
0.260
0.1
9.0
0.346
3.1
97.6
Tau Lekoa
0.7
0.145
0.1
2.6
0.119
0.3
97.0
West Wits
Mponeng
(2)
2.0
0.327
0.6
24.6
0.250
6.1
98.5
Savuka
0.6
0.174
0.1
0.4
0.154
0.1
97.2
TauTona
(2)
0.6
0.332
0.2
14.5
0.329
4.8
98.1
Surface
Surface sources
0.0
0.000
0.0
115.5
0.017
1.9
44 – 88
(4)
Argentina
Cerro Vanguardia (92.5 percent)
(3)
0.9
0.207
0.2
7.6
0.181
1.4
95.2
Australia
Boddington (33.33 percent)
(3)
50.4
0.027
1.4
138.4
0.023
3.2
82.2
Sunrise Dam
10.1
0.070
0.7
8.1
0.147
1.2
83.5-85
(4)
Brazil
Brasil Mineraçáo
2.3
0.187
0.4
10.3
0.22
2.3
87-94
(4)
Serra Grande (50 percent)
(3)
1.8
0.133
0.2
1.1
0.173
0.2
91-96
(4)
Ghana
Bibiani
(6)
0.0
0.000
0.0
0.0
0.000
0.0
-
Iduapriem (85 percent)
(3)
35.9
0.045
1.6
12.9
0.048
0.6
94.5
Obuasi
20.1
0.094
1.9
69.3
0.098
6.8
80-81.0
(4)
Guinea
Siguiri (85 percent)
(3)
20.1
0.017
0.3
58.1
0.025
1.4
93-97.5
Mali
Morila (40 percent)
(3)
6.8
0.073
0.5
5.0
0.072
0.4
89-91.5
(4)
Sadiola (38 percent)
(3)
8.2
0.042
0.3
16.3
0.081
1.3
80-94
(4)
Yatela (40 percent)
(3)
2.3
0.027
0.1
1.6
0.135
0.2
85
(4)
Namibia
Navachab
5.9
0.032
0.2
11.2
0.048
0.5
92
(4)
Tanzania
Geita
4.5
0.028
0.1
82.6
0.101
8.3
66.4-92.8
(4)
United States of America
Cripple Creek & Victor
103
0.027
2.8
39.2
0.027
1.0
60
Total
287.7
0.050
14.479
655.6
0.079
51.491
(1)
Ore reserves include marginally economic and diluting materials delivered for treatment and allow for losses that may occur during mining.
(2)
Probable ore reserves include reserves below infrastructure. See table below.
(3)
Ore reserves attributable to AngloGold Ashanti’s percentage interest shown.
(4)
Recovery factor varies according to ore type.
(5)
Tons refers to a short ton, which is equivalent to 2000lbs avoirdupois.
(6)
Bibiani was sold on December 28, 2006.
(7)
The Vaal Reef Ore Reserves include 26.10 million pounds of Uranium by-products; this can not be accounted for by mine as Great Noligwa,
Kopanang and Moab Khotsong feed to a combination of plants.
Kopanang and Moab Khotsong feed to a combination of plants.
(8)
The Ore Reserve contains 24.5 million ounces of silver to be recovered as a by-product.
(9)
The Ore Reserve contains 418 million pounds of copper.
(10)
0.55 million tons of sulphur will be recovered from processing the Ore Reserve.
88
The 2006 probable ore reserves include reserves below infrastructure in the case of the following underground mines currently
in production:
in production:
Mine Tons
(millions)
Grade
(ounces/ton)
Gold Content
(million ounces)
Tau Tona
5.0
0.40
2.0
Mponeng
8.8
0.27
2.4
Obuasi
4.4
0.27
1.2
Total
18.2
0.31
5.6
89
Ore Reserves: Metric
At December 31, 2007
Proven
Ore
Reserves
(1)
Probable
Ore
Reserves
(1)(2)
Metallurgical
Gold
Gold
Recovery
Tonnes
(6)
Grade
Content
Tonnes
Grade
Content
Factor
(mill)
(g/t)
(tonnes)
(mill)
(g/t)
(tonnes)
percent
South Africa
Vaal River
(5)
Great Noligwa
9.9
7.45
73.9
6.6
7.17
47.5
96.9
Kopanang
5.4
8.35
44.8
13.7
6.60
90.2
97.8
Moab Khotsong
(2)
1.2
7.86
9.1
20.2
10.29
207.7
97.6
Tau Lekoa
6.6
1.24
8.2
6.2
0.75
4.6
97.0
West Wits
Mponeng
(2)
2.1
9.85
20.3
32.3
9.15
295.5
98.5
Savuka
0.1
7.57
0.5
3.2
6.62
20.9
97.2
TauTona
(2)
0.6
9.27
5.2
12.7
10.86
138.3
98.1
Surface
Surface sources
-
-
-
118.7
0.50
59.9
44-88
(4)
Argentina
Cerro Vanguardia (92.5 percent)
(3)(7)
1.0
6.08
6.3
7.9
6.58
52.1
95.2
Australia
Boddington (33.33 percent)
(3)(8)
56.6
0.89
50.3
159.6
0.76
122.0
82.2
Sunrise Dam
12.0
2.34
28.2
5.2
4.39
22.7
83.5-85
(4)
Brazil
Brasil Mineraçáo
6.6
7.69
51.0
4.3
6.12
26.1
87-94
(4)
Serra Grande (50 percent)
(3)
2.3
4.02
9.2
0.6
5.04
3.0
91-96
(4)
Ghana
Iduapriem (100 percent)
(3)
36.6
1.46
53.5
13.2
1.65
21.7
94.5
Obuasi
(2)
32.2
4.67
150.2
15.1
7.21
108.8
80-81.0
(4)
Guinea
Siguiri (85 percent)
(3)
21.3
0.59
12.6
89.6
0.77
69.2
93-97.5
Mali
Morila (40 percent)
(3)
5.2
2.21
11.6
4.0
2.01
8.0
89-91.5
(4)
Sadiola (38 percent)
(3)
1.8
2.75
4.9
2.3
3.13
7.3
80-94
(4)
Yatela (40 percent)
(3)
2.0
1.60
3.2
0.8
3.68
3.0
85
(4)
Namibia
Navachab
5.8
1.00
5.8
27.3
1.46
39.9
92
(4)
Tanzania
Geita
5.6
1.01
5.7
62.4
3.14
195.9
66.4-92.8
(4)
United States of America
Cripple Creek & Victor
107.9
0.96
103.8
47.6
0.92
44.0
60
Total
322.7
2.04
658.3
653.4
2.43
1,588.2
(1)
Ore reserves include marginally economic and diluting materials delivered for treatment and allow for losses that may occur during mining.
(2)
Probable ore reserves include reserves below infrastructure. See table below.
(3)
Ore reserves attributable to AngloGold Ashanti’s percentage interest shown.
(4)
Recovery factor varies according to ore type.
(5)
The Vaal Reef Ore Reserves include 19.5 thousand tonnes of Uranium by-products; this can not be accounted for by individual mine as Great
Noligwa, Kopanang and Moab Khotsong feed to a combination of plants.
Noligwa, Kopanang and Moab Khotsong feed to a combination of plants.
(6)
Tonnes refers to a metric tonne which is equivalent to 1000 kilograms.
(7)
The Ore Reserve contains 963 tonnes of silver to be recovered as a by-product.
(8)
The Ore Reserve contains 0.23 million tonnes of copper.
(9)
0.47 million tonnes of sulphur will be recovered from processing the Ore Reserve.
90
The 2007 probable ore reserves include reserves below infrastructure in the case of the following underground mines currently
in production:
in production:
Mine
Tonnes (millions)
Grade (grams/tonne)
Gold Content (tonnes)
TauTona
4.5
13.71
62.3
Mponeng
17.4
11.23
195.1
Moab Khotsong
12.4
8.98
110.9
Obuasi
3.9
11.05
42.9
Total
38.2
10.78
411.2
91
Ore Reserves: Metric
At December 31, 2006
Proven
Ore
Reserves
(1)
Probable
Ore
Reserves
(1)
Metallurgical
Gold
Gold
Recovery
Tonnes
Grade
Content
Tonnes
Grade
Content
Factor
(mill)
(g/t)
(tonnes)
(mill)
(g/t)
(tonnes)
percent
South Africa
Vaal River
Great Noligwa
8.8
7.61
67.0
8.2
7.10
58.5
96.9
Kopanang
1.5
8.87
13.2
16.5
8.31
137.2
97.8
Moab Khotsong
0.2
8.93
1.9
8.2
11.86
96.7
97.6
Tau Lekoa
0.6
4.97
3.1
2.4
4.07
9.7
97.0
West Wits
Mponeng
(2)
1.8
11.22
19.9
22.3
8.56
191.0
98.5
Savuka
0.6
5.97
3.3
0.4
5.29
2.1
97.2
TauTona
(2)
0.6
11.4
6.7
13.2
11.27
148.4
98.1
Surface
Surface sources
0.0
0.00
0.0
104.8
0.57
59.5
44-88
(4)
Argentina
Cerro Vanguardia (92.5 percent)
(3)
0.9
7.09
6.1
6.9
6.22
42.7
95.2
Australia
Boddington (33.33 percent)
(3)
45.8
0.94
42.8
125.6
0.78
98.5
82.2
Sunrise Dam
9.1
2.39
21.8
7.6
4.87
36.9
83.5-85
Brazil
Brasil Mineraçáo
2.1
6.42
13.2
9.3
7.56
70.4
87-94
(4)
Serra Grande (50 percent)
(3)
1.6
4.57
7.5
1
5.92
5.9
91-96
(4)
Ghana
Bibiani
(5)
0.0
0.00
0.0
0.0
0.00
0.0
-
Iduapriem (85 percent)
(3)
32.5
1.53
49.7
11.7
1.63
19.0
94.5
Obuasi
18.2
3.21
58.5
62.9
3.38
212.3
80-81.0
(4)
Guinea
Siguiri (85 percent)
(3)
18.2
0.60
10.8
52.7
0.85
45.0
93-97.5
Mali
Morila (40 percent)
(3)
6.1
2.50
15.3
4.5
2.47
11.2
89-91.5
(4)
Sadiola (38 percent)
(3)
7.5
1.45
10.8
14.8
2.79
41.3
80-94
(4)
Yatela (40 percent)
(3)
2.1
0.94
1.9
1.4
4.63
6.6
85
(4)
Namibia
Navachab
5.3
1.08
5.8
10.1
1.63
16.5
92
(4)
Tanzania
Geita
4.0
0.97
3.9
74.9
3.47
259.6
66.4-92.8
(4)
United States of America
Cripple Creek & Victor
93.4
0.93
87
35.6
0.91
32.5
60
Total
260.9
1.73
450.2
594.7
2.69
1,601.5
(1)
Ore reserves include marginally economic and diluting materials delivered for treatment and allow for losses that may occur during mining.
(2)
Probable ore reserves include reserves below infrastructure. See table below.
(3)
Ore reserves attributable to AngloGold Ashanti’s percentage interest shown.
(4)
Recovery factor varies according to ore type.
(5)
Bibiani Mine was sold on December 28, 2006.
(6)
The Vaal Reef Ore Reserves include 11.8 thousand tons of Uranium by-products; this can not be accounted for by mine as Great Noligwa,
Kopanang and Moab Khotsong feed to a combination of plants.
Kopanang and Moab Khotsong feed to a combination of plants.
(8)
The Ore Reserve contains 0.76 million tons of silver to be recovered as a by-product.
(9)
The Ore Reserve contains 0.19 million tons of copper.
(10)
0.50 million tons of sulphur will be recovered from processing the Ore Reserve.
92
The 2006 probable ore reserves include reserves below infrastructure in the case of the following underground mines currently
in production:
in production:
Mine
Tonnes (millions)
Grade (grams/tonne)
Gold Content (tonnes)
TauTona
4.5
13.71
62.3
Mponeng
7.9
9.26
73.6
Obuasi
4.0
9.43
37.6
Total
16.4
32.4
173.5
93
Stockpiles: Imperial
Stockpiles are previously mined ore scheduled for future process plant feed. The proven and probable ore reserves include the
following stockpile material:
following stockpile material:
Stockpiles
At December 31, 2007
Tons (million)
Grade (ounces/ton)
Gold content
(million ounces)
South Africa
Vaal River
Great Noligwa
Vaal River
Great Noligwa
-
-
-
Kopanang
-
-
-
Moab Khotsong
-
-
-
Tau Lekoa
-
-
-
West Wits
Mponeng
Mponeng
-
-
-
Savuka
-
-
-
TauTona
-
-
-
Surface
Vaal River Surface – SA MET
Vaal River Surface – SA MET
(2)
130.861
0.015
1.924
West Wits Surface - SA MET
(2)
-
-
-
Argentina
Cerro Vanguardia (92.5 percent)
Cerro Vanguardia (92.5 percent)
(1)
0.050
0.126
0.006
Australia
Boddington (33.33 percent)
Boddington (33.33 percent)
(1)
0.161
0.024
0.004
Sunrise Dam
10.726
0.060
0.643
Brazil
Brasil Mineraçáo
Brasil Mineraçáo
-
-
-
Serra Grande (50 percent)
(1)
-
-
-
Ghana
Iduapriem (100 percent)
Iduapriem (100 percent)
(1)
2.096
0.038
0.079
Obuasi
(3)
9.901
0.050
0.492
Guinea
Siguiri (85 percent)
Siguiri (85 percent)
(1)(4)
58.724
0.016
0.961
Mali
Morila
Morila
(3)
(40 percent)
(1)
7.685
0.051
0.391
Sadiola (38 percent)
(1)(5)
1.895
0.078
0.148
Yatela (40 percent)
(1)
1.844
0.031
0.057
Namibia
Navachab
Navachab
4.977
0.020
0.102
Tanzania
Geita
Geita
6.196
0.032
0.183
United States of America
Cripple Creek & Victor
Cripple Creek & Victor
-
-
-
Note: The rounding of figures and converting from metric to imperial units may result in minor computational discrepancies.
(1)
Ore Reserves attributable to AngloGold Ashanti’s percentage interest shown.
(2)
Centralized operations treating material on surface that was previously generated by several underground operations.
(3)
Pompora TSF removed due to economic changes.
(4)
Spent heap included in Ore Reserve.
(5)
Sulphide stockpiles removed.
94
Stockpiles: Imperial
Stockpiles are previously mined ore scheduled for future process plant feed. The proven and probable ore reserves include the
following stockpile material:
following stockpile material:
Stockpiles
(1)
At December 31, 2006
Tons (million)
Grade (ounces/ton)
Gold content
(million ounces)
South Africa
Vaal River
Great Noligwa
Vaal River
Great Noligwa
–
–
–
Kopanang
–
–
–
Moab Khotsong
–
–
–
Tau Lekoa
–
–
–
West Wits
Mponeng
Mponeng
–
–
–
Savuka
–
–
–
TauTona
–
–
–
Surface
Surface sources
Surface sources
(2)
115.481
0.02
1.912
Argentina
Cerro Vanguardia (92.5 percent)
Cerro Vanguardia (92.5 percent)
0.020
0.58
0.012
Australia
Boddington (33.33 percent)
Boddington (33.33 percent)
0.165
0.02
0.004
Sunrise Dam
7.455
0.05
0.399
Brazil
Brasil Mineraçáo
Brasil Mineraçáo
0.051
0.23
0.012
Serra Grande (50 percent)
0.073
0.23
0.017
Ghana
Iduapriem (85 percent)
Iduapriem (85 percent)
1.373
0.04
0.049
Obuasi
(3)
51.647
0.04
2.133
Guinea
Siguiri (85 percent)
Siguiri (85 percent)
20.052
0.02
0.348
Mali
Morila (40 percent)
Morila (40 percent)
(3)
6.561
0.05
0.347
Sadiola (38 percent)
8.057
0.04
0.327
Yatela (40 percent)
2.278
0.03
0.062
Namibia
Navachab
Navachab
4.600
0.02
0.102
Tanzania
Geita
Geita
4.457
0.03
0.126
United States of America
Cripple Creek & Victor
Cripple Creek & Victor
–
–
–
Note: The rounding of figures and converting from metric to imperial units may result in minor computational discrepancies.
(1)
Attributable to AngloGold Ashanti.
(2)
Centralized operations treating material on surface that was previously generated by several underground operations.
(3)
Includes Tailing Storage Facilities.
95
Stockpiles: Metric
Stockpiles are previously mined ore scheduled for future process plant feed. The proven and probable ore reserves include the
following stockpile material:
following stockpile material:
Stockpiles
At December 31, 2007
Tonnes (million)
Grade (grams/tonne)
Gold content
(tonnes)
South Africa
Vaal River
Great Noligwa
Vaal River
Great Noligwa
-
-
-
Kopanang
-
-
-
Moab Khotsong
-
-
-
Tau Lekoa
-
-
-
West Wits
Mponeng
Mponeng
-
-
-
Savuka
-
-
-
TauTona
-
-
-
Surface
Vaal River Surface - SA MET
Vaal River Surface - SA MET
(2)
118.715
0.50
59.858
West Wits Surface - SA MET
(2)
0.000
-
0.000
Argentina
Cerro Vanguardia (92.5 percent)
Cerro Vanguardia (92.5 percent)
(1)
0.046
4.32
0.197
Australia
Boddington (33.33 percent)
Boddington (33.33 percent)
(1)
0.146
0.81
0.118
Sunrise Dam
9.730
2.05
19.996
Brazil
Brasil Mineraçáo
Brasil Mineraçáo
-
-
-
Serra Grande (50 percent)
(1)
-
-
-
Ghana
Iduapriem (100 percent)
Iduapriem (100 percent)
(1)
1.902
1.30
2.469
Obuasi
(3)
8.982
1.70
15.290
Guinea
Siguiri (85 percent)
Siguiri (85 percent)
(4)(1)
53.274
0.56
29.878
Mali
Morila (40 percent)
Morila (40 percent)
(3) (1)
6.971
1.74
12.158
Sadiola (38 percent)
(5) (1)
1.719
2.67
4.598
Yatela (40 percent)
(1)
1.673
1.05
1.762
Namibia
Navachab
Navachab
4.515
0.70
3.160
Tanzania
Geita
Geita
5.621
1.01
5.701
United States of America
Cripple Creek & Victor
Cripple Creek & Victor
-
-
-
(1)
Ore Reserves attributable to AngloGold Ashanti’s percentage interest shown.
(2)
Centralized operations treating material on surface that was previously generated by several underground operations
(3)
Pompora TSF removed due to economic changes.
(4)
Spent heap included in Ore Reserve.
(5)
Sulphide stockpiles removed.
96
Stockpiles: Metric
Stockpiles are previously mined ore scheduled for future process plant feed. The proven and probable ore reserves include the
following stockpile material:
following stockpile material:
Stockpiles
(1)
At December 31, 2006
Tonnes (million)
Grade (grams/tonne)
Gold content
(tonnes)
South Africa
Vaal River
Great Noligwa
Vaal River
Great Noligwa
–
–
–
Kopanang
–
–
–
Moab Khotsong
–
–
–
Tau Lekoa
–
–
–
West Wits
Mponeng
Mponeng
–
–
–
Savuka
–
–
–
TauTona
–
–
–
Surface
Surface sources
Surface sources
(2)
104.763
0.57
59.475
Argentina
Cerro Vanguardia (92.5 percent)
Cerro Vanguardia (92.5 percent)
0.018
20.00
0.369
Australia
Boddington (33.33 percent)
Boddington (33.33 percent)
0.150
0.80
0.120
Sunrise Dam
6.763
1.82
12.325
Brazil
Brasil Mineraçáo
Brasil Mineraçáo
0.046
7.95
0.368
Serra Grande (50 percent)
0.066
7.87
0.522
Ghana
Iduapriem (85 percent)
Iduapriem (85 percent)
1.246
1.23
1.531
Obuasi
(3)
46.853
1.42
66.353
Guinea
Siguiri (85 percent)
Siguiri (85 percent)
18.191
0.60
10.828
Mali
Morila
Morila
(3)
(40 percent)
5.951
1.82
10.815
Sadiola (38 percent)
7.309
1.39
10.160
Yatela (40 percent)
2.066
0.94
1.940
Namibia
Navachab
Navachab
4.173
0.76
3.181
Tanzania
Geita
Geita
4.044
0.97
3.924
United States of America
Cripple Creek & Victor
Cripple Creek & Victor
–
–
–
(1)
Attributable to AngloGold Ashanti.
(2)
Centralized operations treating material on surface that was previously generated by several underground operations.
(3)
Includes Tailing Storage Facilities.
97
Drill hole spacing: Imperial
In determining the proven and probable ore reserves, AngloGold Ashanti applied the following drill hole spacings:
Drill Hole Spacings
Proven Ore Reserves
Probable Ore Reserves
South Africa
Underground sources Ore body opened up, developed and sampled on a
Underground sources Ore body opened up, developed and sampled on a
7 to 10 foot spacing on raise lines and on a 16 x 16
grid thereafter
grid thereafter
From a 131 x 131 foot spacing up to 3281 x 3281
foot spacing
foot spacing
Surface sources
Variable sampling strategies: Belt samplers, cross
stream residue samplers and bulk sampling
campaigns
stream residue samplers and bulk sampling
campaigns
Variable sampling strategies: Belt samplers,
cross stream residue samplers
cross stream residue samplers
Argentina
Cerro Vanguardia
39 x 39 feet
131 x 131 feet
Australia
Boddington
The average weighted distance to samples must be
less than 131 feet of block centroid and more than
25 samples must have been used in the estimation
less than 131 feet of block centroid and more than
25 samples must have been used in the estimation
The average weighted distance to samples must
be less than 197 feet of block centroid and more
than 15 samples must have been used in the
estimation
be less than 197 feet of block centroid and more
than 15 samples must have been used in the
estimation
Sunrise Dam
33 x 33 feet, 82 x 82 feet
66 x 66 feet, 131 x 131 feet, 164 x 164 feet
Brazil
Brasil Mineraçáo
66 x 66 feet, 82 x 82 feet. Drilling pattern of 197 x
66 feet for Cuiaba Expansion Project.
66 feet for Cuiaba Expansion Project.
66 x 66 feet, 164 x 164 feet.
Serra Grande
(50 percent)
(50 percent)
33 x 33 feet, 66 x 33 feet
33 x 66 feet, 66 x 164 feet
Ghana
Iduapriem
164 x 164 feet, 328 x 164 feet
246 x 164 feet, 328 x 246 feet
Obuasi - Surface
66 x 66 feet
98 x 98 feet
Obuasi - Underground
66 x 66 feet
197 x 197 feet
Guinea
Siguiri
Siguiri
16 x 33 feet
66 x 131 feet, 82 x 82 feet
Mali
Morila
Morila
33 x 33 feet
98 x 98 feet
Sadiola
66 x 66 feet, 82 x 82 feet
82 x 82 feet, 115 x 115 feet
Yatela
33 x 33 feet, 82 x 82 feet
115 x 148 feet
Namibia
Navachab
Navachab
33 x 33 feet
82 x 82 feet
Tanzania
Geita
Geita
16 x 33 feet, 33 x 33 feet
131 x 131 feet
USA
Cripple Creek & Victor <98 x 98 feet
Cripple Creek & Victor <98 x 98 feet
>98 x 98 feet
98
Drill hole spacing: Metric
In determining the proven and probable ore reserves, AngloGold Ashanti applied the following drill hole spacings:
Drill Hole Spacings
Proven Ore Reserves
Probable Ore Reserves
South Africa
Underground sources Ore body opened up, developed and sampled on a
Underground sources Ore body opened up, developed and sampled on a
2 to 3 meter spacing on raise lines and on a 5 x 5 grid
thereafter
thereafter
From a 40 x 40 meter spacing up to 1000 x
1000 meter spacing
1000 meter spacing
Surface sources
Variable sampling strategies: Belt samplers, cross
stream residue samplers and bulk sampling
campaigns
stream residue samplers and bulk sampling
campaigns
Variable sampling strategies: Belt samplers,
cross stream residue samplers
cross stream residue samplers
Argentina
Cerro Vanguardia
12 x 12 meter
40 x 40 meter
Australia
Boddington
Boddington
The average weighted distance to samples must be
less than 40 meter of block centroid and more than 25
samples must have been used in the estimation
less than 40 meter of block centroid and more than 25
samples must have been used in the estimation
The average weighted distance to samples
must be less than 60 meter of block centroid
and more than 15 samples must have been
used in the estimation
must be less than 60 meter of block centroid
and more than 15 samples must have been
used in the estimation
Sunrise Dam
10 x 10 meter, 25 x 25 meter
20 x 20 meter, 40 x 40 meter, 50 x 50 meter
Brazil
Brasil Mineraçáo
20 x 20 meter, 25 x 25 meter. Drilling pattern of 60 x
20 for Cuiaba Expansion Project.
20 for Cuiaba Expansion Project.
20 x 20 meter, 50 x 50 meter.
Serra Grande
(50 percent)
(50 percent)
10 x 10 meter, 20 x 10 meter
10 x 20 meter, 20 x 50 meter
Ghana
Iduapriem
50 x 50 meter, 100 x 50 meter
75 x 50 meter, 100 x 75 meter
Obuasi – Surface
20 x 20 meter
30 x 30 meter
Obuasi - Underground
20 x 20 meter
60 x 60 meter
Guinea
Siguiri
5 x 10 meter
20 x 40 meter, 25 x 25 meter
Mali
Morila
10 x 10 meter
30 x 30 meter
Sadiola
20 x 20 meter, 25 x 25 meter
25 x 25 and 35 x 35 meter
Yatela
10 x 10 meter, 25 x 25 meter
35 x 45 meter
Namibia
Navachab
10 x 10 meter
25 x 25 meter
Tanzania
Geita
Geita
5 x 10 meter, 10 x 10 meter
40 x 40 meter
USA
Cripple Creek & Victor <30 x 30 meter
Cripple Creek & Victor <30 x 30 meter
>30 x 30 meter
99
RESEARCH AND DEVELOPMENT
AngloGold Ashanti’s research and development program includes a range of initiatives in geology, mining, processing,
engineering, safety, environment, marketing and knowledge management.
engineering, safety, environment, marketing and knowledge management.
Research and development expenditure amounted to $10 million, $4 million and $8 million during 2007, 2006 and 2005,
respectively.
respectively.
A combination of collaborative and in-house research is adopted. Collaborative partners include research organizations,
universities, mining companies, mining service providers and contractors.
universities, mining companies, mining service providers and contractors.
In addition, AngloGold Ashanti’s wholly owned subsidiary, ISS International Ltd (ISSI), is a global company specializing in
seismic monitoring of mines, engineering structures and earthquakes. The company initiates and undertakes both broad-based
and focused research and development to enhance the safety of those working in mining by developing effective monitoring
and warning technology systems. ISSI functions on the international stage and its involvement in seismic matters extends well
beyond the mining environment.
seismic monitoring of mines, engineering structures and earthquakes. The company initiates and undertakes both broad-based
and focused research and development to enhance the safety of those working in mining by developing effective monitoring
and warning technology systems. ISSI functions on the international stage and its involvement in seismic matters extends well
beyond the mining environment.
AngloGold Ashanti is a signatory of the International Cyanide Management Institute (ICMI) and is committed to reaching
compliance with the International Cyanide Management Code. All processing operations group-wide have been audited in-
house. Following external audits during 2007, seven operations were certified by the ICMI to fully comply with the provisions of
the International Cyanide Management Code.
compliance with the International Cyanide Management Code. All processing operations group-wide have been audited in-
house. Following external audits during 2007, seven operations were certified by the ICMI to fully comply with the provisions of
the International Cyanide Management Code.
Extensive cyanide speciation studies have been conducted in collaboration with Mintek in Johannesburg at the various plants
in the South Africa region to determine, on both a macro and a micro-scale, the environmental impacts of cyanide in residue
material. Continuing projects cover cyanide measurement and control, cyanide recovery and cyanide destruction.
in the South Africa region to determine, on both a macro and a micro-scale, the environmental impacts of cyanide in residue
material. Continuing projects cover cyanide measurement and control, cyanide recovery and cyanide destruction.
A project evaluating the impacts of hypersaline water and cyanide on wildlife and the environment is under way in Australia in
collaboration with ACMER. The results of this project have enabled Sunrise Dam to meet the stringent requirements of the
International Cyanide Management Code regarding the management of cyanide in tailings.
collaboration with ACMER. The results of this project have enabled Sunrise Dam to meet the stringent requirements of the
International Cyanide Management Code regarding the management of cyanide in tailings.
The AuTEK project to develop new industrial uses for gold is based at Mintek. AngloGold Ashanti continues to support the
catalysis initiative within the program. This involves gold catalyst development for carbon monoxide oxidation, for use in fuel
cells and in photocatalysis. A pilot plant for the production of gold catalyst is under construction. Close working relationships
have been established with potential end users. Promising applications include gas masks, catalytic converters for diesel
engines and catalysis of a variety of industrial chemical reactions.
catalysis initiative within the program. This involves gold catalyst development for carbon monoxide oxidation, for use in fuel
cells and in photocatalysis. A pilot plant for the production of gold catalyst is under construction. Close working relationships
have been established with potential end users. Promising applications include gas masks, catalytic converters for diesel
engines and catalysis of a variety of industrial chemical reactions.
Processing initiatives include:
·
Thiosulphate leaching of gold as a development of a non-cyanide gold extraction process;
· Use of digital camera technology to measure mill feed size, using this information to improve mill process control;
· Establishing uranium leaching conditions for maximum extraction of uranium from the Vaal River operations;
· Amira P9N comminution technology project on milling efficiency, steel ball and liner wear;
·
Amira P420 gold processing project looking at refractory ore treatment, thiosulphate leaching, cyanide and the
environment;
environment;
· Amira P266 thickening project, improving thickener performance using discrete element analysis and modeling;
· Evaluation of optical sorting as a method for upgrading ore streams or waste rock dumps; and
· Thickened tailings beach slope angle modeling to improve tailings facility operation.
Other initiatives include:
· Monitoring real-time corrosion rates in uranium plant elution columns;
· Void-filling using aerated cement walls for improved management of heat, radiation and ventilation; and
· Automated in-stope water-blast to reduce silica dust exposure in stopes.
COMPETITION
As gold mining is a mature and regulated industry, and very significant volumes of gold and gold derivatives trade in the world
markets independent of gold mine supply, AngloGold Ashanti does not consider that competition for sales plays any role in its
operations as a gold producer. However, gold producers do compete against each other for acquisition exploration
opportunities and human resources.
markets independent of gold mine supply, AngloGold Ashanti does not consider that competition for sales plays any role in its
operations as a gold producer. However, gold producers do compete against each other for acquisition exploration
opportunities and human resources.
100
INTELLECTUAL PROPERTY
AngloGold Ashanti, as a group, is not dependent on intellectual property for the conduct of its business as a whole.
SUSTAINABLE DEVELOPMENT: SAFETY, HEALTH, ENVIRONMENTAL AND SOCIAL
DEVELOPMENT
DEVELOPMENT
AngloGold Ashanti published its Report to Society 2007 on March 31, 2008. A copy has been furnished to the SEC under
Form 6-K. This report covers issues pertaining to social development in line with AngloGold Ashanti’s values and business
principles and the Global Reporting Initiative Guidelines prepared on a country and operational basis. The information below is
extracted from the Report to Society 2007.
Form 6-K. This report covers issues pertaining to social development in line with AngloGold Ashanti’s values and business
principles and the Global Reporting Initiative Guidelines prepared on a country and operational basis. The information below is
extracted from the Report to Society 2007.
Occupational safety and health
Core business principle
Every manager and employee takes responsibility for health and safety; and together strive to create workplaces that are free
from occupational injury and illness.
from occupational injury and illness.
Performance
The group’s safety performance was disappointing in 2007. While the fatal (FIFR) was 4.5 percent lower year-on-year at
0.21 per million hours worked, the frequency rate (LTIFR) rose by 7 percent in 2007, to 8.24 per million hours worked.
0.21 per million hours worked, the frequency rate (LTIFR) rose by 7 percent in 2007, to 8.24 per million hours worked.
An intensive review of the group’s safety strategy, particularly in South Africa, during the year and the ‘Safety is our first value’
campaign was launched. Details of individual operational performance are reported in Item 4B.: “Business overview”.
campaign was launched. Details of individual operational performance are reported in Item 4B.: “Business overview”.
On the occupational health front, noise-induced hearing loss (NIHL), occupational lung diseases (OLD) (including silicosis) and
in South Africa, pulmonary tuberculosis (TB) remain the most critical. Medical surveillance programs are in place at most of the
group’s operations with plans afoot to intensify efforts at a number of the African operations. No new occupational disease
cases were reported in Brazil, Argentina, the US or Australia.
in South Africa, pulmonary tuberculosis (TB) remain the most critical. Medical surveillance programs are in place at most of the
group’s operations with plans afoot to intensify efforts at a number of the African operations. No new occupational disease
cases were reported in Brazil, Argentina, the US or Australia.
NIHL occurs over a period of time following consistent exposure to high levels of noise. Hearing conservation programs
comprise three features: engineering control to reduce noise at source, the use of hearing protection devices and medial
surveillance. In South Africa, 78 employees were compensated for NIHL in 2007 (2006: 67 employees).
comprise three features: engineering control to reduce noise at source, the use of hearing protection devices and medial
surveillance. In South Africa, 78 employees were compensated for NIHL in 2007 (2006: 67 employees).
Exposure to silica dust is the major contributing factor in the development of OLD and efforts to reduce dust levels, improved
dust monitoring and medical surveillance remain important in the program to eliminate silicosis. During 2007, 207 cases of
OLD were compensated in South Africa. Also in 2007, 462 new cases of silicosis were recorded in South Africa and submitted
for compensation (2006: 367 new cases).
dust monitoring and medical surveillance remain important in the program to eliminate silicosis. During 2007, 207 cases of
OLD were compensated in South Africa. Also in 2007, 462 new cases of silicosis were recorded in South Africa and submitted
for compensation (2006: 367 new cases).
Some success has been achieved in reducing and managing TB in South Africa, where rigorous World Health Organization-
based TB control programs are in place. For the third consecutive year, TB statistics in South Africa declined, with
927 employees diagnosed with the disease. There is a strong relationship between TB and HIV/AIDS.
based TB control programs are in place. For the third consecutive year, TB statistics in South Africa declined, with
927 employees diagnosed with the disease. There is a strong relationship between TB and HIV/AIDS.
Human capital
Employees: core business principle
The company provides its employees with opportunities to develop their skills while sharing risks and rewards in workplaces
that promote innovation, teamwork and freedom with accountability and embraces cultural diversity.
that promote innovation, teamwork and freedom with accountability and embraces cultural diversity.
101
Performance
Certain human rights conventions, including those relating to freedom of association and collective bargaining, are entrenched
within South African labor legislation and the South African constitution as well as in the laws and regulations of many of the
countries in which the company operates. AngloGold Ashanti is committed to upholding the fundamental rights conventions of
the International Labor Organization (ILO) and no breaches of these conventions were alleged or reported during the year. As
the company is a signatory to the Voluntary Principles on Security and Human Rights, human rights training, particularly for
security personnel, is being undertaken.
within South African labor legislation and the South African constitution as well as in the laws and regulations of many of the
countries in which the company operates. AngloGold Ashanti is committed to upholding the fundamental rights conventions of
the International Labor Organization (ILO) and no breaches of these conventions were alleged or reported during the year. As
the company is a signatory to the Voluntary Principles on Security and Human Rights, human rights training, particularly for
security personnel, is being undertaken.
A new global organizational development strategy is being implemented within the group. The strategy recognizes the role of
the individual as being a member of a family and a community and as an employee, and acknowledges the role of the company
in supporting that and assisting the employee to reach his or her full potential. A key goal of this strategy is the promotion of
diversity and localization at all levels and all operations, enabling employees to take advantage of the extensive opportunities
the group can offer.
the individual as being a member of a family and a community and as an employee, and acknowledges the role of the company
in supporting that and assisting the employee to reach his or her full potential. A key goal of this strategy is the promotion of
diversity and localization at all levels and all operations, enabling employees to take advantage of the extensive opportunities
the group can offer.
The group’s Employee Share Ownership Plan (ESOP) in South Africa has been fully implemented with more than
30,000 individuals now having an equity stake in the company. Discussions with the Ghana Mineworkers’ Union in respect of
implementing a similar program in that country are ongoing.
30,000 individuals now having an equity stake in the company. Discussions with the Ghana Mineworkers’ Union in respect of
implementing a similar program in that country are ongoing.
For a number of reasons, including legislation and customs, mining has not been a career easily accessible to women,
AngloGold Ashanti has put plans in place to ensure retention, development and promotion of women. Key statistics related to
women at the end of 2007 are as follows: women at board level – 8.0 percent, permanent employees* who are women –
8.6 percent
AngloGold Ashanti has put plans in place to ensure retention, development and promotion of women. Key statistics related to
women at the end of 2007 are as follows: women at board level – 8.0 percent, permanent employees* who are women –
8.6 percent
* In South Africa, 9.1 percent of permanent employees are women.
Education and training initiatives to alleviate the skills shortage and develop employees to their full potential continued during
the year and included Adult Basic Education and Training (ABET), bursary schemes and learnerships, support for tertiary
education, management development programs and executive development programs.
the year and included Adult Basic Education and Training (ABET), bursary schemes and learnerships, support for tertiary
education, management development programs and executive development programs.
Community
Core business principle
AngloGold Ashanti strives to form partnerships with host communities, sharing their environments, traditions and values and
wants communities to be better off for AngloGold Ashanti having been there. The company is committed to working in an
environmentally friendly way.
wants communities to be better off for AngloGold Ashanti having been there. The company is committed to working in an
environmentally friendly way.
Performance
The group’s relationships with communities are guided by operation- or region-specific community policies, and are
complemented by a company-wide management system which is currently being fully implemented. Several modules in the
community and social development systems, focusing largely on issues such as resettlement and compensation, human rights
and security, and the preservation of cultural and sacred sites, were developed during the year, with further implementation
planned for 2008.
complemented by a company-wide management system which is currently being fully implemented. Several modules in the
community and social development systems, focusing largely on issues such as resettlement and compensation, human rights
and security, and the preservation of cultural and sacred sites, were developed during the year, with further implementation
planned for 2008.
The phenomenon of artisanal and small-scale mining, encountered particularly at the group’s operations and explorations
prospects at Geita (Tanzania), Obuasi (Ghana), Siguiri (Guinea) and in the DRC, has on occasion given rise to conflict. During
the year we continued to participate in the global debate on the matter and on the ground, in consultation with communities and
other parties, we continue to explore sustainable opportunities for alternative livelihoods for small-scale miners. The group is
developing a strategy that promotes cohabitation and mutual respect for each others’ rights, within the legal and regulatory
framework within a country.
prospects at Geita (Tanzania), Obuasi (Ghana), Siguiri (Guinea) and in the DRC, has on occasion given rise to conflict. During
the year we continued to participate in the global debate on the matter and on the ground, in consultation with communities and
other parties, we continue to explore sustainable opportunities for alternative livelihoods for small-scale miners. The group is
developing a strategy that promotes cohabitation and mutual respect for each others’ rights, within the legal and regulatory
framework within a country.
In terms of corporate social investment, AngloGold Ashanti contributed $7.7 million to corporate social investment (using a
strict definition of the term that excludes sponsorships or the infrastructural developments attached to mining operations).
strict definition of the term that excludes sponsorships or the infrastructural developments attached to mining operations).
Group operations are required to play a meaningful role in the development of local economic activity in the interest of
contributing towards the sustainability of host communities.
contributing towards the sustainability of host communities.
102
Regional health
Core business principle
AngloGold Ashanti is committed to prompt and supportive action in response to any major health threats in the regions in which
it operates.
it operates.
Performance
The primary regional health threats identified are HIV/AIDS in southern Africa, and malaria in west and east Africa.
In 2007, AngloGold Ashanti was recognized by a number of independent entities, non-government organizations and
conferences for its work in delivering sustainable healthcare solutions in the communities in which it operates. In June 2007,
the Global Business Coalition on HIV/AIDS, Tuberculosis and Malaria (GBC) identified the AngloGold Ashanti Obuasi Malaria
Control Program as a global example of excellence in the private sector’s response to these three pandemics. AngloGold
Ashanti also won three awards in the second annual ABSA Healthcare Initiative Awards held in August 2007, a part of the Pan
African Health Congress, for its integrated HIV/AIDS and tuberculosis control programs in South Africa, and for the malaria
control programs at its operations in east and west Africa, winning in the category of Listed Company/Multinational
Organisation/Hospital Group, as well as the Most Sustainable Project award and the award for Project with the Biggest Impact.
conferences for its work in delivering sustainable healthcare solutions in the communities in which it operates. In June 2007,
the Global Business Coalition on HIV/AIDS, Tuberculosis and Malaria (GBC) identified the AngloGold Ashanti Obuasi Malaria
Control Program as a global example of excellence in the private sector’s response to these three pandemics. AngloGold
Ashanti also won three awards in the second annual ABSA Healthcare Initiative Awards held in August 2007, a part of the Pan
African Health Congress, for its integrated HIV/AIDS and tuberculosis control programs in South Africa, and for the malaria
control programs at its operations in east and west Africa, winning in the category of Listed Company/Multinational
Organisation/Hospital Group, as well as the Most Sustainable Project award and the award for Project with the Biggest Impact.
The estimated HIV/AIDS prevalence levels at the group’s African operations are in line with similar demographically segmented
portions in the general population. It is estimated that the HIV/AIDS prevalence levels among employees at the South African
operations in 2007 remained stable at approximately 30 percent of the workforce.
portions in the general population. It is estimated that the HIV/AIDS prevalence levels among employees at the South African
operations in 2007 remained stable at approximately 30 percent of the workforce.
Key objectives of the group HIV/AIDS program are to minimize the risk of HIV/AIDS on the company and its employees by
reducing and ultimately eliminating new infections, efficiently managing those infected and supporting those with advanced
AIDS. The program focuses on:
reducing and ultimately eliminating new infections, efficiently managing those infected and supporting those with advanced
AIDS. The program focuses on:
·
Prevention of HIV, by means of various workplace initiatives, including voluntary counseling and testing (VCT).
Assuming single testing, approximately 102 percent of the South African workforce were tested in 2007 (2006:
75 percent).
Assuming single testing, approximately 102 percent of the South African workforce were tested in 2007 (2006:
75 percent).
·
Treatment programs, which involve the clinical care of those infected by the virus, including the use of antiretroviral
therapy (ART). ART is available to all employees at all our operations in Africa, either directly from company facilities,
through company-sponsored or -funded facilities, or from state facilities.
therapy (ART). ART is available to all employees at all our operations in Africa, either directly from company facilities,
through company-sponsored or -funded facilities, or from state facilities.
·
Support for the AIDS-ill requiring separation from the company and palliative care, including support for various
community initiatives.
community initiatives.
Total expenditure on the company’s HIV/AIDS program in South Africa amounted to approximately R25.2 million ($3.6 million)
in 2007 (2006: R21.5 million; $3.2 million).
in 2007 (2006: R21.5 million; $3.2 million).
Malaria remains an area of concern for AngloGold Ashanti’s operations in Ghana, Guinea, Mali and Tanzania. Not only does
the disease result in death, illness and absenteeism among employees, but it is a major cause of death in young children and
pregnant women, with an obvious effect on employees’ families and communities.
the disease result in death, illness and absenteeism among employees, but it is a major cause of death in young children and
pregnant women, with an obvious effect on employees’ families and communities.
An extensive malaria program is in place at Obuasi and the lessons learnt here are being applied elsewhere. A revised
integrated malaria control program began at Geita in Tanzania in September 2007, with indoor residual spraying of the
Mchaura staff village and all mine vehicles. Work began during the year on the development of an integrated campaign at
Siguiri in Guinea, modeled on the program at Obuasi.
integrated malaria control program began at Geita in Tanzania in September 2007, with indoor residual spraying of the
Mchaura staff village and all mine vehicles. Work began during the year on the development of an integrated campaign at
Siguiri in Guinea, modeled on the program at Obuasi.
The incidence of malaria has continued to decline at Obuasi following the third year of the integrated malaria control campaign,
from 164 per 1,000 employees in 2006 to 61 in 2007.
from 164 per 1,000 employees in 2006 to 61 in 2007.
By virtue of its South African domicile, AngloGold Ashanti is subject to certain conventions signed by the South African
government, including the human rights and social conventions of the ILO (ILO 29, 87, 98, 100, 105, 111, 128 and 138). South
Africa’s Constitution, together with its associated laws, guarantees non-discrimination on the basis of race and other unfair
grounds, freedom of association and the rights of children, among other basic human rights.
government, including the human rights and social conventions of the ILO (ILO 29, 87, 98, 100, 105, 111, 128 and 138). South
Africa’s Constitution, together with its associated laws, guarantees non-discrimination on the basis of race and other unfair
grounds, freedom of association and the rights of children, among other basic human rights.
103
Certain ILO conventions (such as ILO Convention 128, dealing with child labor, and ILO Convention No 29, dealing with forced
and compulsory labor) are also governed by law in South Africa, Argentina, Brazil, Australia, Namibia, Tanzania and the United
States, and by law and various codes such as the Labour Code and Collective Agreement in Mali.
and compulsory labor) are also governed by law in South Africa, Argentina, Brazil, Australia, Namibia, Tanzania and the United
States, and by law and various codes such as the Labour Code and Collective Agreement in Mali.
A wide range of agreements and policies are also in place at an operational level to ensure that human rights are protected.
These include recognition and collective bargaining agreements, disciplinary, grievance and appeal procedures and non-
discrimination agreements. No breaches of fundamental rights conventions of the ILO were alleged or charges brought against
the company in connection with these during 2007.
These include recognition and collective bargaining agreements, disciplinary, grievance and appeal procedures and non-
discrimination agreements. No breaches of fundamental rights conventions of the ILO were alleged or charges brought against
the company in connection with these during 2007.
Employment equity
Racial and sexual harassment and other forms of discrimination are prohibited by the company’s business principles as well as
by legislation in most of the countries where the operations are situated.
by legislation in most of the countries where the operations are situated.
In South Africa the employment of historically disadvantaged South Africans (HDSAs) remains a particular priority. Employment
targets and achievements are reported annually to the South African Department of Labor, and reporting will also be provided
in terms of the South African Mining Charter from 2007.
targets and achievements are reported annually to the South African Department of Labor, and reporting will also be provided
in terms of the South African Mining Charter from 2007.
Where possible, it is standard practice for AngloGold Ashanti to employ indigenous people.
Training
AngloGold Ashanti’s training philosophy encompasses a wide range of training initiatives. In 2007, the company spent
$31.4 million on employee training and development, of which $24.8 million was spent in the South Africa operations. In 2006,
the employee training and development costs for South African-based operations amounted to $21.2 million. It is the
company’s policy to provide Adult Basic Education and Training (ABET) to ensure that all employees are able to become
literate and numerate.
$31.4 million on employee training and development, of which $24.8 million was spent in the South Africa operations. In 2006,
the employee training and development costs for South African-based operations amounted to $21.2 million. It is the
company’s policy to provide Adult Basic Education and Training (ABET) to ensure that all employees are able to become
literate and numerate.
Environment
Core business principle
AngloGold Ashanti strives to form partnerships with host communities, sharing their environments, traditions and values and
want communities to be better off for AngloGold Ashanti having been there.
want communities to be better off for AngloGold Ashanti having been there.
Performance
As a member of the International Council on Mining and Metals, AngloGold Ashanti subscribes to the sustainable development
framework and its principles for sustainable development, and is committed to publicly reporting. During the year, the group
produced a set of five environmental guidelines to be used in conjunction with the group’s environmental policy. These
guidelines cover the management of water, air quality, waste material, chemicals and land. A number of other guidelines are
currently under consideration and will be produced as and when required.
framework and its principles for sustainable development, and is committed to publicly reporting. During the year, the group
produced a set of five environmental guidelines to be used in conjunction with the group’s environmental policy. These
guidelines cover the management of water, air quality, waste material, chemicals and land. A number of other guidelines are
currently under consideration and will be produced as and when required.
All AngloGold Ashanti operations have had their environmental management systems certified in conformance with the
ISO 14001 standard, and all the requisite permits for their current operations are in place. AngloGold Ashanti Health (Pty) Ltd,
a subsidiary of the company that provides healthcare services to employees in South Africa, was also recommended for
certification.
ISO 14001 standard, and all the requisite permits for their current operations are in place. AngloGold Ashanti Health (Pty) Ltd,
a subsidiary of the company that provides healthcare services to employees in South Africa, was also recommended for
certification.
In line with increasingly stringent governance and risk management requirements at a company level, AngloGold Ashanti
initiated a corporate environmental review program during the year. The program reviewed whether all significant
environmental aspects had been identified and whether appropriate monitoring systems had been established to manage these
aspects, including suitable monitoring systems.
initiated a corporate environmental review program during the year. The program reviewed whether all significant
environmental aspects had been identified and whether appropriate monitoring systems had been established to manage these
aspects, including suitable monitoring systems.
Closure plans, which are reviewed and updated annually, are in place at all operations. These take into account operational
conditions, planning and legislative requirements, international protocols, technological developments and advances in good
practice. In addition, an assessment of closure liabilities is undertaken and reviewed on an annual basis and, increasingly
reviewed and assured by independent third parties.
conditions, planning and legislative requirements, international protocols, technological developments and advances in good
practice. In addition, an assessment of closure liabilities is undertaken and reviewed on an annual basis and, increasingly
reviewed and assured by independent third parties.
104
A key performance objective for 2007 was the implementation of the International Cyanide Management Code for the
Manufacture, Transport and Use of Cyanide in the Production of Gold (the Cyanide Code). The code is a voluntary industry
initiative developed under the auspices of the United Nations Environment Program to promote responsible management of
cyanide used in gold mining, to enhance the protection of human health, and reduce the potential for environmental impacts.
AngloGold Ashanti was one of the first signatories to the code in November 2005 and, in line with this, committed to having all
of its operations audited by an independent third party to demonstrate its compliance with the code.
Manufacture, Transport and Use of Cyanide in the Production of Gold (the Cyanide Code). The code is a voluntary industry
initiative developed under the auspices of the United Nations Environment Program to promote responsible management of
cyanide used in gold mining, to enhance the protection of human health, and reduce the potential for environmental impacts.
AngloGold Ashanti was one of the first signatories to the code in November 2005 and, in line with this, committed to having all
of its operations audited by an independent third party to demonstrate its compliance with the code.
In addition to participating in the global debate on climate change and its potential impacts, AngloGold Ashanti has considered
its position, evaluating both risks and opportunities in respect of climate change, and embarking on a process of establishing its
carbon footprint and its greenhouse gas emissions. In 2007, AngloGold Ashanti participated in the global Carbon Disclosure
Project’s, survey of the top 40 companies listed on the JSE. CDP is a global institutional investor collaboration intent on
understanding and quantifying climate change implications for business. AngloGold Ashanti’s response may be found at
www.cdproject.net.
its position, evaluating both risks and opportunities in respect of climate change, and embarking on a process of establishing its
carbon footprint and its greenhouse gas emissions. In 2007, AngloGold Ashanti participated in the global Carbon Disclosure
Project’s, survey of the top 40 companies listed on the JSE. CDP is a global institutional investor collaboration intent on
understanding and quantifying climate change implications for business. AngloGold Ashanti’s response may be found at
www.cdproject.net.
4C.
Organizational structure
Head office structure and operations
AngloGold Ashanti’s operations are organized on a country basis. Management of AngloGold Ashanti is entrusted to the
executive committee, comprising the two executive directors, 8 executive vice presidents and two vice presidents. See "Item 6.:
Directors, senior management and employees". Day-to-day management of the operations vests with executive teams based
in South Africa (Johannesburg and Potchefstroom), Ghana (Accra), United States (Denver), Brazil (Nova Lima), and Australia
(Perth).
executive committee, comprising the two executive directors, 8 executive vice presidents and two vice presidents. See "Item 6.:
Directors, senior management and employees". Day-to-day management of the operations vests with executive teams based
in South Africa (Johannesburg and Potchefstroom), Ghana (Accra), United States (Denver), Brazil (Nova Lima), and Australia
(Perth).
Corporate activities
Activities provided in the corporate area fall into three categories. First, support is provided to the executive committee in
managing AngloGold Ashanti as a whole. Second, certain activities are managed centrally, including strategic and business
planning, marketing, corporate finance, treasury, exploration, technology and innovation, corporate secretarial and corporate
affairs. Third, certain specialized services are directed from the center although they are managed by operations. These
include mining, engineering, metallurgy, mineral resource management, safety and health, the environment and human
resources.
managing AngloGold Ashanti as a whole. Second, certain activities are managed centrally, including strategic and business
planning, marketing, corporate finance, treasury, exploration, technology and innovation, corporate secretarial and corporate
affairs. Third, certain specialized services are directed from the center although they are managed by operations. These
include mining, engineering, metallurgy, mineral resource management, safety and health, the environment and human
resources.
AngloGold Ashanti has investments in numerous principal subsidiaries and joint venture interests, see "Item 19.: Exhibits
Exhibit 19.8 List of AngloGold Ashanti Limited subsidiaries" for details.
Exhibit 19.8 List of AngloGold Ashanti Limited subsidiaries" for details.
4D.
Property, plants and equipment
For a discussion on AngloGold Ashanti’s mining properties, plant and equipment, see “Item 4B.: Business Overview”.
Item 4A: Unresolved staff comments
Not applicable.
105
Item 5: Operating and financial review and prospects
The following discussion provides information that management believes is relevant to an assessment and understanding of
the consolidated financial condition and results of operations of AngloGold Ashanti Limited and are based on the US GAAP
financial statements.
the consolidated financial condition and results of operations of AngloGold Ashanti Limited and are based on the US GAAP
financial statements.
This discussion addresses matters we consider important for an understanding of our financial condition and results of
operations as of and for the three years ended and as at December 31, 2007, 2006 and 2005. It consists of the following
subsections:
operations as of and for the three years ended and as at December 31, 2007, 2006 and 2005. It consists of the following
subsections:
• “Overview,” which provides a brief summary of our operations;
• “Operating results,” which includes a discussion of our consolidated financial results for the last three years and those
factors influencing the results;
• “Liquidity and Capital Resources,” an analysis of cash flows, sources and uses of cash, our financial position, capital
commitments and contingencies, financial instruments, recent accounting pronouncements and critical accounting
policies;
policies;
• “Trend information,” a discussion of current and expected future production and the costs thereof;
• “Off-balance sheet arrangements,” a discussion of significant off-balance sheet arrangements; and
• “Contractual obligations,” a disclosure of known contractual obligations.
This item should be read in conjunction with the Company’s consolidated financial statements and the notes thereto which are
included under Item 18 of this annual report.
included under Item 18 of this annual report.
Overview
For the year ended December 31, 2007, AngloGold Ashanti had an attributable production of approximately 5.5 million ounces
(including joint ventures) of gold. Headquartered in Johannesburg, South Africa, the Company has a global presence with
20 operations comprising open-pit and underground mines and surface metallurgical plants in ten countries which are
supported by extensive, yet focused, exploration activities. As at December 31, 2007, the Company had Proven and Probable
Ore Reserves of approximately 72.2 million ounces (including joint ventures) on an attributable basis.
(including joint ventures) of gold. Headquartered in Johannesburg, South Africa, the Company has a global presence with
20 operations comprising open-pit and underground mines and surface metallurgical plants in ten countries which are
supported by extensive, yet focused, exploration activities. As at December 31, 2007, the Company had Proven and Probable
Ore Reserves of approximately 72.2 million ounces (including joint ventures) on an attributable basis.
AngloGold Ashanti’s main product is gold. A portion of its revenue is derived from sales of silver, uranium oxide and sulphuric
acid. The Company sells its products on world markets.
acid. The Company sells its products on world markets.
AngloGold Ashanti’s world-wide operations, divided into countries are: South Africa (which comprises seven operations),
Argentina (which encompasses one operation), Australia (which encompasses one operation), Brazil (which encompasses two
operations), Ghana (which encompasses two operations), Guinea (which encompasses one operation), Mali (which
encompasses three operations), Namibia (which encompasses one operation), Tanzania (which encompasses one operation)
and the United States of America (which encompasses one operation). For more information on the Company’s business and
operations, see “Item 4B.: Business overview — Products, operations and geographical locations”.
Argentina (which encompasses one operation), Australia (which encompasses one operation), Brazil (which encompasses two
operations), Ghana (which encompasses two operations), Guinea (which encompasses one operation), Mali (which
encompasses three operations), Namibia (which encompasses one operation), Tanzania (which encompasses one operation)
and the United States of America (which encompasses one operation). For more information on the Company’s business and
operations, see “Item 4B.: Business overview — Products, operations and geographical locations”.
106
5A.
Operating results
Introduction
AngloGold Ashanti’s operating results are directly related to the price of gold which can fluctuate widely and is affected by
numerous factors beyond its control, including industrial and jewellery demand, expectations with respect to the rate of
inflation, the strength of the US dollar (the currency in which the price of gold is generally quoted) and of other currencies,
interest rates, actual or expected gold sales by central banks and the International Monetary Fund (IMF), forward sales by
producers, global or regional political or economic events, and production and cost levels in major gold-producing regions. In
addition, the price of gold sometimes is subject to rapid short-term changes because of speculative activities.
numerous factors beyond its control, including industrial and jewellery demand, expectations with respect to the rate of
inflation, the strength of the US dollar (the currency in which the price of gold is generally quoted) and of other currencies,
interest rates, actual or expected gold sales by central banks and the International Monetary Fund (IMF), forward sales by
producers, global or regional political or economic events, and production and cost levels in major gold-producing regions. In
addition, the price of gold sometimes is subject to rapid short-term changes because of speculative activities.
The current demand for and supply of gold may affect gold prices, but not necessarily in the same manner as current supply
and demand affect the prices of other commodities. The supply of gold consists of a combination of new production from
mining and existing stocks of bullion and fabricated gold held by governments, public and private financial institutions, industrial
organizations and private individuals.
and demand affect the prices of other commodities. The supply of gold consists of a combination of new production from
mining and existing stocks of bullion and fabricated gold held by governments, public and private financial institutions, industrial
organizations and private individuals.
As the amounts produced in any single year constitute a very small portion of the total potential supply of gold, normal
variations in current production do not necessarily have a significant impact on the supply of gold or on its price. If revenue
from gold sales falls for a substantial period below the Company’s cost of production at its operations, AngloGold Ashanti could
determine that it is not economically feasible to continue commercial production at any or all of its operations or to continue the
development of some or all of its projects.
variations in current production do not necessarily have a significant impact on the supply of gold or on its price. If revenue
from gold sales falls for a substantial period below the Company’s cost of production at its operations, AngloGold Ashanti could
determine that it is not economically feasible to continue commercial production at any or all of its operations or to continue the
development of some or all of its projects.
On May 15, 2008, the afternoon fixing price for gold on the London Bullion Market was $866.25 per ounce.
AngloGold Ashanti’s costs and expenses consist primarily of production costs, royalties and depreciation, depletion and
amortization. Production costs are incurred on labor, fuel, lubricants, power, consumable stores which include explosives,
timber, other consumables and utilities incurred in the production of gold. Labor is a significant component of production costs
as the Company’s mining operations consist mainly of deep-level underground mining methods as well as open-pit operations,
both of which are labor intensive.
amortization. Production costs are incurred on labor, fuel, lubricants, power, consumable stores which include explosives,
timber, other consumables and utilities incurred in the production of gold. Labor is a significant component of production costs
as the Company’s mining operations consist mainly of deep-level underground mining methods as well as open-pit operations,
both of which are labor intensive.
With operations in ten countries on four continents, AngloGold Ashanti is exposed to a number of factors that could affect its
profitability, including exchange rate fluctuations, inflation and other risks relating to these specific countries. These factors are
inherent in conducting mining operations on a global basis, and the Company applies measures wherever appropriate and
feasible, such as hedging instruments, intended to reduce its exposure to these factors.
profitability, including exchange rate fluctuations, inflation and other risks relating to these specific countries. These factors are
inherent in conducting mining operations on a global basis, and the Company applies measures wherever appropriate and
feasible, such as hedging instruments, intended to reduce its exposure to these factors.
In conducting mining operations, the Company recognizes the inherent risks and uncertainties of the industry, and the wasting
nature of assets. Recoverability of capitalized amounts is reviewed on a regular basis.
nature of assets. Recoverability of capitalized amounts is reviewed on a regular basis.
Effect of exchange rate fluctuations
Currently, a significant portion of AngloGold Ashanti’s revenues, excluding the effect of realized non hedge derivatives, are
generated in South Africa, and to a lesser extent in Brazil, Argentina and Australia, and most of its production costs, therefore,
are denominated in local currencies, such as the South African rand, the Brazilian real, the Argentinean peso and the
Australian dollar. In 2007, the Company derived 71 percent (65 percent including joint venture arrangements) of its revenues
from these countries and incurred 62 percent (59 percent including joint venture arrangements) of its production costs in these
local currencies. In 2007, the weakening of the dollar against these local currencies in which the company operates continued
to increase total cash costs. A one percent strengthening of these local currencies against the dollar will result in an increase
of total cash costs incurred of nearly $3 per ounce, or 1 percent. As the price of gold is denominated in US dollars and the
Company realizes the majority of its revenues in US dollars, devaluation of these local currencies against the US dollar
improves the Company’s profitability in the short-term. Conversely strengthening of these local currencies against the US
dollar adversely impacts the Company’s profitability in the short term. Based upon average rates during the respective years,
the rand weakened and the real strengthened by approximately 4 percent and 11 percent respectively, against the US dollar in
2007 compared to 2006. The Argentinean peso traded freely against the US dollar from January 1, 2002 and had devalued to
3.15: 1 against the US dollar by December 31, 2007. The Australian dollar, based on the average rates during the respective
years, strengthened by 11 percent against the US dollar in 2007 compared to 2006.
generated in South Africa, and to a lesser extent in Brazil, Argentina and Australia, and most of its production costs, therefore,
are denominated in local currencies, such as the South African rand, the Brazilian real, the Argentinean peso and the
Australian dollar. In 2007, the Company derived 71 percent (65 percent including joint venture arrangements) of its revenues
from these countries and incurred 62 percent (59 percent including joint venture arrangements) of its production costs in these
local currencies. In 2007, the weakening of the dollar against these local currencies in which the company operates continued
to increase total cash costs. A one percent strengthening of these local currencies against the dollar will result in an increase
of total cash costs incurred of nearly $3 per ounce, or 1 percent. As the price of gold is denominated in US dollars and the
Company realizes the majority of its revenues in US dollars, devaluation of these local currencies against the US dollar
improves the Company’s profitability in the short-term. Conversely strengthening of these local currencies against the US
dollar adversely impacts the Company’s profitability in the short term. Based upon average rates during the respective years,
the rand weakened and the real strengthened by approximately 4 percent and 11 percent respectively, against the US dollar in
2007 compared to 2006. The Argentinean peso traded freely against the US dollar from January 1, 2002 and had devalued to
3.15: 1 against the US dollar by December 31, 2007. The Australian dollar, based on the average rates during the respective
years, strengthened by 11 percent against the US dollar in 2007 compared to 2006.
107
To fund local operations, AngloGold Ashanti holds funds in local currencies. The US dollar value of these currencies may be
affected by exchange rate fluctuations and, as a result, the Company’s cash and cash equivalents reported in US dollars could
change. At December 31, 2007, approximately 66 percent of the Company’s cash and cash equivalents were held in local
currencies.
affected by exchange rate fluctuations and, as a result, the Company’s cash and cash equivalents reported in US dollars could
change. At December 31, 2007, approximately 66 percent of the Company’s cash and cash equivalents were held in local
currencies.
Certain exchange controls are currently in force in South Africa. Although the exchange rate of the rand is primarily market
determined, its value at any time may not be considered a true reflection of the underlying value of the rand while exchange
controls exist. The government has indicated its intention to lift exchange controls over time. As exchange controls are
relaxed, rand exchange rates will be more closely tied to market forces. It is not possible to predict whether or when this will
occur or the future value of the rand. For a detailed discussion of these exchange controls, see “Item 10D.: Exchange
controls”.
determined, its value at any time may not be considered a true reflection of the underlying value of the rand while exchange
controls exist. The government has indicated its intention to lift exchange controls over time. As exchange controls are
relaxed, rand exchange rates will be more closely tied to market forces. It is not possible to predict whether or when this will
occur or the future value of the rand. For a detailed discussion of these exchange controls, see “Item 10D.: Exchange
controls”.
Effect of inflation
The mining industry continues to experience price inflation for many commodities and consumables used in the production of
gold which lead to higher production costs reported by many gold producers.
gold which lead to higher production costs reported by many gold producers.
AngloGold Ashanti’s operations have not been materially adversely affected by inflation in recent years given that it has
benefited from sustained period of rising gold prices. However, the Company is unable to control the prices at which it sells its
gold (except to the limited extent that it utilizes commodity instruments) and it is possible, therefore, that if there is to be
significant inflation in South Africa, and to a lesser extent in Brazil, Argentina and Australia, without a concurrent devaluation of
the local currency or an increase in the price of gold, there could be a material adverse effect upon the Company’s results and
financial condition.
benefited from sustained period of rising gold prices. However, the Company is unable to control the prices at which it sells its
gold (except to the limited extent that it utilizes commodity instruments) and it is possible, therefore, that if there is to be
significant inflation in South Africa, and to a lesser extent in Brazil, Argentina and Australia, without a concurrent devaluation of
the local currency or an increase in the price of gold, there could be a material adverse effect upon the Company’s results and
financial condition.
The percentage change in the rand/US dollar exchange rate, based upon average rates during the respective years, and the
local annual inflation rate, as measured by the South African Producer Price Index (PPI), are set out in the table below:
local annual inflation rate, as measured by the South African Producer Price Index (PPI), are set out in the table below:
Year ended December 31
2007
percent
2006
percent
2005
percent
The average South African rand/US$ exchange rate weakened/(strengthened) by:
3.8
6.3
(1.1)
PPI (inflation rate) increase:
10.0
7.7
3.1
Net effect
6.2
1.4
(4.2)
Effect of commodity instruments
AngloGold Ashanti has utilized commodity instruments to protect the selling price of some of its anticipated production. The
use of such instruments prevents full participation in subsequent increases in the market price for the commodity with respect
to covered production. Since 2001 the company has been reducing its hedge commitments through hedge buy-backs (limited
to non-hedge derivatives), deliveries into contracts and restructurings in order to provide greater participation in a rising gold
price environment, the effect of which may be that only limited price protection is available at lower gold prices. For a
discussion of the Company's commodity instruments see "Item 11: Quantitative and qualitative disclosures about market risk".
use of such instruments prevents full participation in subsequent increases in the market price for the commodity with respect
to covered production. Since 2001 the company has been reducing its hedge commitments through hedge buy-backs (limited
to non-hedge derivatives), deliveries into contracts and restructurings in order to provide greater participation in a rising gold
price environment, the effect of which may be that only limited price protection is available at lower gold prices. For a
discussion of the Company's commodity instruments see "Item 11: Quantitative and qualitative disclosures about market risk".
Acquisitions and dispositions
The global gold mining industry has experienced active consolidation and rationalization activities in recent years. Accordingly,
AngloGold Ashanti has been, and expects to continue to be, involved in a number of acquisitions and dispositions as part of
this global trend and to identify value-adding business combination and acquisition opportunities.
AngloGold Ashanti has been, and expects to continue to be, involved in a number of acquisitions and dispositions as part of
this global trend and to identify value-adding business combination and acquisition opportunities.
The following is a description of acquisitions and dispositions completed by AngloGold Ashanti since January 1, 2005:
In April 2005, AngloGold Ashanti agreed to the conditional sale of exploration assets in the Laverton area, comprising the
Sickle royalty of $30 per ounce, the Child Harold prospect, various 100 percent AngloGold Ashanti Australia-owned interests
including the Lord Byron and Fish projects as well as its interests in the Jubilee, Black Swan and Jasper Hills Joint Ventures to
Crescent Gold Limited (Crescent).
Sickle royalty of $30 per ounce, the Child Harold prospect, various 100 percent AngloGold Ashanti Australia-owned interests
including the Lord Byron and Fish projects as well as its interests in the Jubilee, Black Swan and Jasper Hills Joint Ventures to
Crescent Gold Limited (Crescent).
108
On May 31, 2005 AngloGold Ashanti acquired an additional 12.4 percent interest (6,131,585 ordinary shares) in Trans-Siberian
Gold plc (TSG) for an aggregate consideration of £8 million ($15 million) as a second subscription in a transaction involving two
subscriptions for ordinary shares. The first tranche of ordinary shares of 17.5 percent was acquired during July 2004. The
Company’s aggregate shareholding in TSG at December 31, 2007 was 12,263,170 ordinary shares (29.8 percent interest held,
after the dilution of shareholding resulting from an increase in issued share capital).
Gold plc (TSG) for an aggregate consideration of £8 million ($15 million) as a second subscription in a transaction involving two
subscriptions for ordinary shares. The first tranche of ordinary shares of 17.5 percent was acquired during July 2004. The
Company’s aggregate shareholding in TSG at December 31, 2007 was 12,263,170 ordinary shares (29.8 percent interest held,
after the dilution of shareholding resulting from an increase in issued share capital).
On July 19, 2005, Aflease Gold and Uranium Resources Limited (Aflease) announced that it had purchased from AngloGold
Ashanti, its Weltevreden mine. On December 19, 2005, Aflease was acquired by sxr Uranium One Incorporated (formerly
Southern Cross Incorporated) (sxr Uranium One). The conditions precedent to the agreement with sxr Uranium One were not
fulfilled by the expiry date of December 31, 2007 and a new agreement is being negotiated with Aflease Gold Limited. The
Company has separately classified assets and liabilities for Weltevreden presented in the consolidated balance sheet, as held
for sale. Refer to Note 16 in Item 18 – Assets and liabilities held for sale.
Ashanti, its Weltevreden mine. On December 19, 2005, Aflease was acquired by sxr Uranium One Incorporated (formerly
Southern Cross Incorporated) (sxr Uranium One). The conditions precedent to the agreement with sxr Uranium One were not
fulfilled by the expiry date of December 31, 2007 and a new agreement is being negotiated with Aflease Gold Limited. The
Company has separately classified assets and liabilities for Weltevreden presented in the consolidated balance sheet, as held
for sale. Refer to Note 16 in Item 18 – Assets and liabilities held for sale.
On August 26, 2005, AngloGold Ashanti subscribed for additional shares in Red 5 Limited, for a cash consideration of
A$0.8 million ($0.6 million), thereby increasing its holding to 14.1 percent from a 12.3 percent stake originally acquired in the
expanded issued capital of Red 5 Limited during 2004. On September 18, 2006, the Company elected to exercise a second
Joint Venture option with Red 5 Limited – the Outer Siena Joint Venture, located to the south-east of Boyongan - in terms of
which the Company will spend a minimum of A$1.5 million ($1.2 million) in the first year with no interest. The Company may
earn between 52 percent and 58.5 percent interest in two tenements through an additional expenditure of A$4 million
($3 million), with a right to increase its holding by 8 percent to 9 percent through an additional spend of A$5 million ($4 million).
As at December 31, 2007, the Company held a 10.2 percent interest in Red 5 Limited.
A$0.8 million ($0.6 million), thereby increasing its holding to 14.1 percent from a 12.3 percent stake originally acquired in the
expanded issued capital of Red 5 Limited during 2004. On September 18, 2006, the Company elected to exercise a second
Joint Venture option with Red 5 Limited – the Outer Siena Joint Venture, located to the south-east of Boyongan - in terms of
which the Company will spend a minimum of A$1.5 million ($1.2 million) in the first year with no interest. The Company may
earn between 52 percent and 58.5 percent interest in two tenements through an additional expenditure of A$4 million
($3 million), with a right to increase its holding by 8 percent to 9 percent through an additional spend of A$5 million ($4 million).
As at December 31, 2007, the Company held a 10.2 percent interest in Red 5 Limited.
During the period October 10 through October 18, 2005, AngloGold Ashanti Australia reduced it shareholding in Tanami Gold
to 5 percent, through the sale of 8 million fully paid ordinary shares for a cash consideration of A$1.3 million ($1.0 million) and
in February 2006, disposed of the entire investment in Tanami Gold with the sale of 19 million shares for a cash consideration
of A$3.9 million ($3.0 million).
to 5 percent, through the sale of 8 million fully paid ordinary shares for a cash consideration of A$1.3 million ($1.0 million) and
in February 2006, disposed of the entire investment in Tanami Gold with the sale of 19 million shares for a cash consideration
of A$3.9 million ($3.0 million).
On February 27, 2006, AngloGold Ashanti announced that it had signed an agreement with Dynasty Gold Corporation, a
company with exploration activities in China, to acquire an effective 8.7 percent stake in that company through a purchase of
5.75 million Dynasty units at a price of C$0.40 each. Each unit consists of one common share and one-half common share
purchase warrant exercisable at a price of C$0.60 per unit for two years.
company with exploration activities in China, to acquire an effective 8.7 percent stake in that company through a purchase of
5.75 million Dynasty units at a price of C$0.40 each. Each unit consists of one common share and one-half common share
purchase warrant exercisable at a price of C$0.60 per unit for two years.
On June 1, 2006, AngloGold Ashanti and Bema Gold Corporation (Bema) announced that they would jointly explore a select
group of AngloGold Ashanti’s mineral opportunities located in Northern Colombia, with initial work focused on the La Mina and
El Pino targets. In November 2006, certain members of Bema’s management formed a company, B2 Gold, which company
would acquire certain rights held by Bema following the acquisition by Kinross Gold of Bema in December 2006. On February
14, 2007, the Company consented to the ultimate assignment of Bema’s rights and responsibilities to B2 Gold in terms of the
joint venture agreement entered into between the Company and Bema.
group of AngloGold Ashanti’s mineral opportunities located in Northern Colombia, with initial work focused on the La Mina and
El Pino targets. In November 2006, certain members of Bema’s management formed a company, B2 Gold, which company
would acquire certain rights held by Bema following the acquisition by Kinross Gold of Bema in December 2006. On February
14, 2007, the Company consented to the ultimate assignment of Bema’s rights and responsibilities to B2 Gold in terms of the
joint venture agreement entered into between the Company and Bema.
On June 30, 2006, AngloGold Ashanti (U.S.A.) Exploration Inc. (AngloGold Ashanti), International Tower Hill Mines Ltd (ITH)
and Talon Gold Alaska, Inc. (Talon), a wholly-owned subsidiary of ITH, entered into an Asset Purchase and Sale and
Indemnity Agreement whereby AngloGold Ashanti sold to Talon a 100 percent interest in six Alaska mineral exploration
properties and associated databases in return for 5,997,295 common shares of ITH stock, representing an approximate
19.99 percent interest in ITH (December 31, 2007; 15.12 percent). The sales transaction closed on August 4, 2006. The
Company also granted to ITH the exclusive option to acquire a 60 percent interest in each of its LMS and Terra projects by
incurring $3 million of exploration expenditure on each project (total of $6 million) within four years of the grant date of the
options. As part of the two option agreements, the Company will have the option to increase or dilute its stake in these
projects, subject to certain conditions.
and Talon Gold Alaska, Inc. (Talon), a wholly-owned subsidiary of ITH, entered into an Asset Purchase and Sale and
Indemnity Agreement whereby AngloGold Ashanti sold to Talon a 100 percent interest in six Alaska mineral exploration
properties and associated databases in return for 5,997,295 common shares of ITH stock, representing an approximate
19.99 percent interest in ITH (December 31, 2007; 15.12 percent). The sales transaction closed on August 4, 2006. The
Company also granted to ITH the exclusive option to acquire a 60 percent interest in each of its LMS and Terra projects by
incurring $3 million of exploration expenditure on each project (total of $6 million) within four years of the grant date of the
options. As part of the two option agreements, the Company will have the option to increase or dilute its stake in these
projects, subject to certain conditions.
On July 14, 2006, AngloGold Ashanti announced the signing of a Heads of Agreement with Antofagasta plc to jointly explore in
Southern Colombia for new gold and copper deposits. The Company will include all of its mineral applications, contracts and
third party contracts within the area of interest in the new joint venture, while Antofagasta will commit to fund a minimum of
$1 million of exploration within 12 months of the signing of the agreement, with an option to invest an additional $7 million
within four years in order to earn-in to 50 percent of the joint venture. Both AngloGold Ashanti and Antofagasta will have the
right to increase their interests by 20 percent in copper-dominant and gold-dominant properties subject to certain conditions.
This transaction terminated in November 2007 with Antofagasta plc making a minimal payment fulfilling their commitment to
the joint venture.
Southern Colombia for new gold and copper deposits. The Company will include all of its mineral applications, contracts and
third party contracts within the area of interest in the new joint venture, while Antofagasta will commit to fund a minimum of
$1 million of exploration within 12 months of the signing of the agreement, with an option to invest an additional $7 million
within four years in order to earn-in to 50 percent of the joint venture. Both AngloGold Ashanti and Antofagasta will have the
right to increase their interests by 20 percent in copper-dominant and gold-dominant properties subject to certain conditions.
This transaction terminated in November 2007 with Antofagasta plc making a minimal payment fulfilling their commitment to
the joint venture.
109
On August 23, 2006, AngloGold Ashanti announced that it had entered into a conditional agreement with Central African Gold
plc (CAG) to sell the assets, related to Bibiani and Bibiani North prospecting permit, including all of Bibiani’s employees, fixed
mining and non-mining assets, inventory, trade receivables and intellectual property as well as the Bibiani mining lease and the
Bibiani North prospecting license, and procure the cessation and delegation of all contracts related to Bibiani to CAG for a total
consideration of $40 million. The conditions precedent to the sale of Bibiani were satisfied effective December 28, 2006. The
Bibiani North prospecting license was assigned to CAG on May 17, 2007 by the Ghanaian Land Commission and Registry.
plc (CAG) to sell the assets, related to Bibiani and Bibiani North prospecting permit, including all of Bibiani’s employees, fixed
mining and non-mining assets, inventory, trade receivables and intellectual property as well as the Bibiani mining lease and the
Bibiani North prospecting license, and procure the cessation and delegation of all contracts related to Bibiani to CAG for a total
consideration of $40 million. The conditions precedent to the sale of Bibiani were satisfied effective December 28, 2006. The
Bibiani North prospecting license was assigned to CAG on May 17, 2007 by the Ghanaian Land Commission and Registry.
Arising from the sale of Bibiani assets, AngloGold Ashanti decided to apply $3 million of the partial proceeds to an investment
of 15,825,902 Central African Gold plc (CAG) shares. Subsequent to this decision, local regulators required that the shares in
CAG be sold within 90 days of December 28, 2006. On February 14, 2007, the Company disposed of 7,000,000 CAG shares
yielding total proceeds of £768,845 ($1.5 million) and during April 2007, disposed of the remaining 8,825,902 CAG shares
yielding total proceeds of £894,833 ($1.8 million).
of 15,825,902 Central African Gold plc (CAG) shares. Subsequent to this decision, local regulators required that the shares in
CAG be sold within 90 days of December 28, 2006. On February 14, 2007, the Company disposed of 7,000,000 CAG shares
yielding total proceeds of £768,845 ($1.5 million) and during April 2007, disposed of the remaining 8,825,902 CAG shares
yielding total proceeds of £894,833 ($1.8 million).
On September 21, 2006, AngloGold Ashanti announced that it had entered into a 50:50 strategic alliance with Russian gold
and silver producer, OAO Inter-Regional Research and Production Association Polymetal (Polymetal) in terms of which,
Polymetal and AngloGold Ashanti would cooperate in exploration, acquisition and development of gold mining opportunities
within the Russian Federation. At the same time, the Company announced that it had submitted an offer to the board of Trans-
Siberian Gold plc (TSG) to acquire all of TSG’s interest in its Krasnoyarsk based subsidiaries, OOO GRK Amikan (Amikan) and
OOO Artel Staratelei Angarskaya Proizvodstvennaya Kompania (AS APK) for a total consideration of $40 million. In June
2007, the Company concluded the purchase of TSG’s interests in Amikan (which holds the Veduga deposit, related exploration
and mining licenses) and AS APK (which holds the Bogunay deposit, related exploration and mining licenses). These
companies acquired from TSG by AngloGold Ashanti, together with two greenfields exploration companies held by Polymetal,
hold the initial operating assets of the strategic alliance. Of the assets acquired from TSG, assets of $15 million were
subsequently classified as held for sale during 2007. Refer to Note 16 in Item 18 – Assets and liabilities held for sale.
and silver producer, OAO Inter-Regional Research and Production Association Polymetal (Polymetal) in terms of which,
Polymetal and AngloGold Ashanti would cooperate in exploration, acquisition and development of gold mining opportunities
within the Russian Federation. At the same time, the Company announced that it had submitted an offer to the board of Trans-
Siberian Gold plc (TSG) to acquire all of TSG’s interest in its Krasnoyarsk based subsidiaries, OOO GRK Amikan (Amikan) and
OOO Artel Staratelei Angarskaya Proizvodstvennaya Kompania (AS APK) for a total consideration of $40 million. In June
2007, the Company concluded the purchase of TSG’s interests in Amikan (which holds the Veduga deposit, related exploration
and mining licenses) and AS APK (which holds the Bogunay deposit, related exploration and mining licenses). These
companies acquired from TSG by AngloGold Ashanti, together with two greenfields exploration companies held by Polymetal,
hold the initial operating assets of the strategic alliance. Of the assets acquired from TSG, assets of $15 million were
subsequently classified as held for sale during 2007. Refer to Note 16 in Item 18 – Assets and liabilities held for sale.
On June 8, 2007, AngloGold Ashanti announced that it had sold, subject to certain conditions, most of the remaining moveable
and immovable assets of Ergo, the surface reclamation operation east of Johannesburg, discontinued in March 2005, to a
consortium of Mintails South Africa (Pty) Limited/DRD South African Operations (Pty) Limited Joint Venture. The site is
currently being rehabilitated by AngloGold Ashanti. The assets and associated liabilities were sold for R42.8 million
(approximately $6 million). The joint venture will operate, for its own account, under the AngloGold Ashanti authorizations until
new order mining rights have been obtained and transferred to the joint venture. Refer to Note 8 in Item 18 – Discontinued
operations.
and immovable assets of Ergo, the surface reclamation operation east of Johannesburg, discontinued in March 2005, to a
consortium of Mintails South Africa (Pty) Limited/DRD South African Operations (Pty) Limited Joint Venture. The site is
currently being rehabilitated by AngloGold Ashanti. The assets and associated liabilities were sold for R42.8 million
(approximately $6 million). The joint venture will operate, for its own account, under the AngloGold Ashanti authorizations until
new order mining rights have been obtained and transferred to the joint venture. Refer to Note 8 in Item 18 – Discontinued
operations.
During July 2007, AngloGold Ashanti disposed of its investment of 600,000 shares previously held in Mwana Africa plc for
$0.8 million. The shares were acquired pursuant to the sale of the Company’s entire interest in Ashanti Goldfields Zimbabwe
Limited to Mwana Africa Holdings (Proprietary) Limited during 2004.
$0.8 million. The shares were acquired pursuant to the sale of the Company’s entire interest in Ashanti Goldfields Zimbabwe
Limited to Mwana Africa Holdings (Proprietary) Limited during 2004.
AngloGold Ashanti completed the acquisition of the minority interests in the Iduapriem and Teberebie mine previously held by
the Government of Ghana (5 percent) and the International Finance Corporation (10 percent) effective September 1, 2007 for a
total cash consideration of $25 million. The Iduapriem and Teberebie mine is now wholly-owned by the Company.
the Government of Ghana (5 percent) and the International Finance Corporation (10 percent) effective September 1, 2007 for a
total cash consideration of $25 million. The Iduapriem and Teberebie mine is now wholly-owned by the Company.
Acquisitions have been accounted for as purchase business combinations under US GAAP. The consolidated financial
statements reflect the operations and financial condition of AngloGold Ashanti, assuming that acquisitions and dispositions
took place on the effective date of these transactions. Therefore, the consolidated financial statements are not necessarily
indicative of the Company’s financial condition or results of operations for future periods. For a more detailed discussion of
these transactions, see “Item 4A.: History and development of the company”.
statements reflect the operations and financial condition of AngloGold Ashanti, assuming that acquisitions and dispositions
took place on the effective date of these transactions. Therefore, the consolidated financial statements are not necessarily
indicative of the Company’s financial condition or results of operations for future periods. For a more detailed discussion of
these transactions, see “Item 4A.: History and development of the company”.
110
South African political, economic and other factors
AngloGold Ashanti is a company domiciled in South Africa, with a number of operations in South Africa. As a result, the
Company is subject to various economic, fiscal, monetary and political factors that affect South African companies generally.
Company is subject to various economic, fiscal, monetary and political factors that affect South African companies generally.
South African companies are subject to exchange control regulations. Governmental officials have from time to time stated
their intentions to lift South Africa’s exchange control regulations when economic conditions permit such action. From 1998,
certain aspects of exchange controls for financial institutions and individuals have been incrementally relaxed. It is, however,
impossible to predict whether or when the South African government will remove exchange controls in their entirety. South
African companies remain subject to restrictions on their ability to export and deploy capital outside of the Southern African
Common Monetary Area, unless dispensation has been granted by the South African Reserve Bank. For a detailed discussion
of exchange controls, see “Item 10D.: Exchange controls”.
their intentions to lift South Africa’s exchange control regulations when economic conditions permit such action. From 1998,
certain aspects of exchange controls for financial institutions and individuals have been incrementally relaxed. It is, however,
impossible to predict whether or when the South African government will remove exchange controls in their entirety. South
African companies remain subject to restrictions on their ability to export and deploy capital outside of the Southern African
Common Monetary Area, unless dispensation has been granted by the South African Reserve Bank. For a detailed discussion
of exchange controls, see “Item 10D.: Exchange controls”.
On May 1, 2004, the Minerals and Petroleum Resources Development Act, Act 28 of 2002 (MPRDA) came into effect and
operation. The MPRDA vests custodianship of South Africa’s mineral rights in the State. The State issues prospecting rights
or mining rights to applicants. The former common law prospecting, mining and mineral rights are now known as old order
mining rights and the transitional arrangements provided in the MPRDA give holders of such old order mining rights the
opportunity to convert their old order mining rights into new order mining rights. Applicants have five years from May 1, 2004,
in which to apply to convert old order mining rights into new order mining rights. In August 2005, the Director General of
Minerals and Energy notified that the AngloGold Ashanti application for new order mineral rights had been granted.
operation. The MPRDA vests custodianship of South Africa’s mineral rights in the State. The State issues prospecting rights
or mining rights to applicants. The former common law prospecting, mining and mineral rights are now known as old order
mining rights and the transitional arrangements provided in the MPRDA give holders of such old order mining rights the
opportunity to convert their old order mining rights into new order mining rights. Applicants have five years from May 1, 2004,
in which to apply to convert old order mining rights into new order mining rights. In August 2005, the Director General of
Minerals and Energy notified that the AngloGold Ashanti application for new order mineral rights had been granted.
The South African government has announced the details of the proposed new legislation whereby new order rights will be
subject to a State royalty. The third draft of the Mineral and Petroleum Resources Royalty Bill was published on December 6,
2007 and provides for the payment of a royalty according to a formula based on earnings before interest, tax and depreciation.
It is estimated that the formula could translate to a royalty rate of more than 4 percent of gross sales in terms of current pricing
assumptions. The latest proposal results in a large increase from the 1.5 percent rate proposed in the second draft in 2006,
and the company is making representations to the government through the South African Chamber of Mines to retain the
proposed 1.5 percent rate. The payment of royalties is currently scheduled to begin on May 1, 2009, if the Bill is passed by
Parliament in its current form.
subject to a State royalty. The third draft of the Mineral and Petroleum Resources Royalty Bill was published on December 6,
2007 and provides for the payment of a royalty according to a formula based on earnings before interest, tax and depreciation.
It is estimated that the formula could translate to a royalty rate of more than 4 percent of gross sales in terms of current pricing
assumptions. The latest proposal results in a large increase from the 1.5 percent rate proposed in the second draft in 2006,
and the company is making representations to the government through the South African Chamber of Mines to retain the
proposed 1.5 percent rate. The payment of royalties is currently scheduled to begin on May 1, 2009, if the Bill is passed by
Parliament in its current form.
Gold market in 2007
Continued strong levels of investor and speculator interest, particularly in the fourth quarter of the year, pushed the gold price
to levels just short of record highs, records which were then surpassed soon after year end in an exceptionally buoyant market.
The average gold spot price for the year, at $697 per ounce, was 15 percent higher than that in 2006. Although prices were
relatively range-bound during the first half of the year, the end of the third quarter and the fourth quarter saw a strong surge in
the dollar gold price and particularly high levels of investor interest. Fabrication demand followed an inverse pattern, with the
more stable prices of the first half leading the market to record high levels of jewellery consumption in certain regions, which
then fell away in the fourth quarter as price volatility took its toll, particularly in more price-sensitive markets. The exception to
this pattern was the Chinese market, where jewellery demand remained relatively solid in the fourth quarter despite the high
levels of price volatility. The main contributing factor to the price gains seen in the second half of the year was economic
uncertainty relating to credit concerns and the impact of the sub-prime mortgage crisis in the US. Inflationary concerns driven
by higher food, oil and commodity prices also played a role, as did the escalation in geopolitical tension, particularly at year-
end. Rand gold prices saw new record highs of R187,000 per kilogram during the year and an average spot price for the year
of just over R157,000 per kilogram.
to levels just short of record highs, records which were then surpassed soon after year end in an exceptionally buoyant market.
The average gold spot price for the year, at $697 per ounce, was 15 percent higher than that in 2006. Although prices were
relatively range-bound during the first half of the year, the end of the third quarter and the fourth quarter saw a strong surge in
the dollar gold price and particularly high levels of investor interest. Fabrication demand followed an inverse pattern, with the
more stable prices of the first half leading the market to record high levels of jewellery consumption in certain regions, which
then fell away in the fourth quarter as price volatility took its toll, particularly in more price-sensitive markets. The exception to
this pattern was the Chinese market, where jewellery demand remained relatively solid in the fourth quarter despite the high
levels of price volatility. The main contributing factor to the price gains seen in the second half of the year was economic
uncertainty relating to credit concerns and the impact of the sub-prime mortgage crisis in the US. Inflationary concerns driven
by higher food, oil and commodity prices also played a role, as did the escalation in geopolitical tension, particularly at year-
end. Rand gold prices saw new record highs of R187,000 per kilogram during the year and an average spot price for the year
of just over R157,000 per kilogram.
Overall, the investment market saw lower levels of demand than in 2006, however, this demand was heavily concentrated in
the last half of 2007, for the aforementioned reasons. Particular strength was exhibited in trade on commodity exchanges and
also in the gold Exchange-Traded Funds (ETFs). Total ETF holdings at year-end stood at close to 28 million ounces, with a
total value of over $23 billion. This represents a significant level of growth over year-end holdings in 2006, even though this
represented a doubling over levels of funds held the previous year.
the last half of 2007, for the aforementioned reasons. Particular strength was exhibited in trade on commodity exchanges and
also in the gold Exchange-Traded Funds (ETFs). Total ETF holdings at year-end stood at close to 28 million ounces, with a
total value of over $23 billion. This represents a significant level of growth over year-end holdings in 2006, even though this
represented a doubling over levels of funds held the previous year.
Over the first half of 2007, physical demand from jewellery fabrication recovered strongly from the low levels of 2006, reaching
record highs in several major markets. In the second half of the year, however, this level of demand could not be sustained in
the face of a more volatile price environment, which impacted heavily on traditional markets, and with the increasingly difficult
consumer and retail environment in developed markets such as the US.
record highs in several major markets. In the second half of the year, however, this level of demand could not be sustained in
the face of a more volatile price environment, which impacted heavily on traditional markets, and with the increasingly difficult
consumer and retail environment in developed markets such as the US.
111
Overall, fabrication demand for jewellery in 2007 increased by 6 percent in tonnage terms over 2006 levels, with the bulk of that
increase contributed by the larger emerging markets of East Asia, India and the Middle East, whereas demand from the US
market fell in tonnage terms by 14 percent over 2006.
increase contributed by the larger emerging markets of East Asia, India and the Middle East, whereas demand from the US
market fell in tonnage terms by 14 percent over 2006.
It was in the Indian market that the contrast in consumption levels between the two halves of the year was most marked.
Demand reached record levels in rupee and tonnage terms for both jewellery and retail investment in the second quarter of the
year. Together these totalled 317 tonnes, half of global mine output for the quarter and 90 percent higher than the relatively low
level attained in the same quarter in 2006. Demand in the first half of the year increased by 72 percent over the corresponding
period in the previous year. This strong level of consumption was fuelled in part by economic growth, particularly in the
agricultural sector, as well as by a stable rupee gold price. In the second half of the year, however, the rupee/dollar exchange
rate showed significant volatility, and this combined with a period of volatility in dollar gold prices created a set of
circumstances unfavorable to gold consumption. Price volatility is a significant deterrent to demand in the Indian market, and in
the second half of 2007 the periods of most extreme price volatility coincided with some of the more auspicious gold buying
occasions, such as Diwali. Demand in the fourth quarter was particularly poor, and fourth quarter offtake reached the lowest
level since the early 1990s. Over the year as a whole an increase in jewellery offtake in tonnage terms of 6 percent was
recorded.
Demand reached record levels in rupee and tonnage terms for both jewellery and retail investment in the second quarter of the
year. Together these totalled 317 tonnes, half of global mine output for the quarter and 90 percent higher than the relatively low
level attained in the same quarter in 2006. Demand in the first half of the year increased by 72 percent over the corresponding
period in the previous year. This strong level of consumption was fuelled in part by economic growth, particularly in the
agricultural sector, as well as by a stable rupee gold price. In the second half of the year, however, the rupee/dollar exchange
rate showed significant volatility, and this combined with a period of volatility in dollar gold prices created a set of
circumstances unfavorable to gold consumption. Price volatility is a significant deterrent to demand in the Indian market, and in
the second half of 2007 the periods of most extreme price volatility coincided with some of the more auspicious gold buying
occasions, such as Diwali. Demand in the fourth quarter was particularly poor, and fourth quarter offtake reached the lowest
level since the early 1990s. Over the year as a whole an increase in jewellery offtake in tonnage terms of 6 percent was
recorded.
Demand in the Middle East, specifically in the six Gulf markets, was also dented considerably in the second half of the year,
with a sharp shift in consumer sentiment away from gold jewellery consumption brought about by a combination of volatile
price levels, inflationary concerns and significant escalations in rent charges. As the currencies of these markets are pegged
against the dollar, there is no cushioning for consumers against dollar gold price volatility. In the region, Turkey and Egypt
experienced healthier demand, with good tourist seasons and increased economic stability helping to fuel consumption.
with a sharp shift in consumer sentiment away from gold jewellery consumption brought about by a combination of volatile
price levels, inflationary concerns and significant escalations in rent charges. As the currencies of these markets are pegged
against the dollar, there is no cushioning for consumers against dollar gold price volatility. In the region, Turkey and Egypt
experienced healthier demand, with good tourist seasons and increased economic stability helping to fuel consumption.
The Chinese market proved most resilient to the more volatile prices as most retailers maintain a margin of approximately
10 percent over the gold price and therefore tend not to adjust prices on a daily basis according to each and every fluctuation
in the dollar gold price. The Chinese economy also continued to record strong growth.
10 percent over the gold price and therefore tend not to adjust prices on a daily basis according to each and every fluctuation
in the dollar gold price. The Chinese economy also continued to record strong growth.
In the US, gold demand in 2007 reached the lowest level since 1992. Retailers continued to reduce their focus on the category
in the light of rising prices and to seek out product with lower gold content so as to offer a lower-cost range of product to an
increasingly price-sensitive consumer. Only the high end of the market, which typically retails 18 carat product, remained
strong. Margins in this segment are higher than in the mass market segment and consumers are less sensitive to price
increases.
in the light of rising prices and to seek out product with lower gold content so as to offer a lower-cost range of product to an
increasingly price-sensitive consumer. Only the high end of the market, which typically retails 18 carat product, remained
strong. Margins in this segment are higher than in the mass market segment and consumers are less sensitive to price
increases.
Despite high gold prices, scrap supplies of gold into the market were weaker than in 2006. In part this seems to have been due
to the fact that significant personal gold inventories were liquidated in 2006 and have not been replaced as yet. Another factor
was the price surge which took place towards the end of the year. Consumers were deterred from selling old jewellery by the
expectation that prices might rise further.
to the fact that significant personal gold inventories were liquidated in 2006 and have not been replaced as yet. Another factor
was the price surge which took place towards the end of the year. Consumers were deterred from selling old jewellery by the
expectation that prices might rise further.
Industrial demand increased marginally by 2 percent over 2006 levels. A slowdown in the demand for electronic goods over the
second half of the year impacted growth in this sector.
second half of the year impacted growth in this sector.
Official sector sales for the calendar year were approximately 485 tonnes, some 30 percent higher than in 2006. Gold sales by
the Central Bank Gold Agreement (CBGA) signatories account for the bulk of this increase and in the third year of the second
CBGA agreement (which came to an end on September 26, 2007) 475.8 tonnes of the available quota of 500 tonnes had been
released onto the market.
the Central Bank Gold Agreement (CBGA) signatories account for the bulk of this increase and in the third year of the second
CBGA agreement (which came to an end on September 26, 2007) 475.8 tonnes of the available quota of 500 tonnes had been
released onto the market.
Gold producers reduced their hedging positions considerably in 2007. Over 400 tonnes were bought in the market in this way,
a figure only slightly below the record level of de-hedging measured in 2004. The majority of this activity took place in the first
half of the year and was driven by the activities of a small number of major players.
a figure only slightly below the record level of de-hedging measured in 2004. The majority of this activity took place in the first
half of the year and was driven by the activities of a small number of major players.
Comparison of operating performance in 2007, 2006 and 2005
The joint venture operations situated in Mali (the Sadiola, Yatela and Morila Joint Ventures) did not meet the significance test
requirements for separate financial statements and disclosures in terms of Regulation S-X Rule 3.09 for the financial year
ended December 31, 2007. Accordingly, the financial statements for these joint ventures included in Item 18 are unaudited for
this period.
The joint venture operations situated in Mali (the Sadiola, Yatela and Morila Joint Ventures) did not meet the significance test
requirements for separate financial statements and disclosures in terms of Regulation S-X Rule 3.09 for the financial year
ended December 31, 2007. Accordingly, the financial statements for these joint ventures included in Item 18 are unaudited for
this period.
112
The following table presents operating data for the AngloGold Ashanti group for the three year period ended
December 31, 2007:
December 31, 2007:
Operating data for AngloGold Ashanti
Year ended December 31
2007
2006
2005
Total attributable gold production (thousand ounces)
5,477
5,635
6,166
Total cash costs ($/oz)
367
321
281
Total production costs ($/oz)
504
452
398
Production costs (million US dollars)
1,917
1,539
1,642
Capital expenditure (million US dollars)
1,059
817
722
- Consolidated entities
1,050
811
710
- Equity accounted joint ventures
9
6
12
Attributable gold production
For the year ended December 31, 2007, AngloGold Ashanti’s total attributable gold production from continuing operations
decreased by 158,000 ounces, or 3 percent, to 5.5 million ounces from 5.6 million ounces produced in 2006. In South Africa,
gold production decreased by 9 percent from 2,554,000 ounces produced in 2006, to 2,328,000 ounces produced in 2007
mainly due to a decline in the volume of ore mined at Great Noligwa as a result of lower face advance and lower volume mined
at TauTona and Kopanang due to seismicity issues. Gold production in Argentina, Ghana and Mali decreased from
215,000 ounces, 592,000 ounces and 537,000 ounces, respectively, produced in 2006, to 204,000 ounces, 527,000 ounces
and 441,000 ounces, respectively, produced in 2007. This was mainly due to lower grades at Cerro Vanguardia (in Argentina);
lower volumes mined due to an eleven day plant shutdown and power outages at Obuasi (in Ghana) and the impact on
production following the sale of Bibiani (in Ghana) concluded in December 2006. In Mali gold production for 2007 was lower
compared to 2006 due to lower recovered grades at Yatela, Morila and Sadiola.
decreased by 158,000 ounces, or 3 percent, to 5.5 million ounces from 5.6 million ounces produced in 2006. In South Africa,
gold production decreased by 9 percent from 2,554,000 ounces produced in 2006, to 2,328,000 ounces produced in 2007
mainly due to a decline in the volume of ore mined at Great Noligwa as a result of lower face advance and lower volume mined
at TauTona and Kopanang due to seismicity issues. Gold production in Argentina, Ghana and Mali decreased from
215,000 ounces, 592,000 ounces and 537,000 ounces, respectively, produced in 2006, to 204,000 ounces, 527,000 ounces
and 441,000 ounces, respectively, produced in 2007. This was mainly due to lower grades at Cerro Vanguardia (in Argentina);
lower volumes mined due to an eleven day plant shutdown and power outages at Obuasi (in Ghana) and the impact on
production following the sale of Bibiani (in Ghana) concluded in December 2006. In Mali gold production for 2007 was lower
compared to 2006 due to lower recovered grades at Yatela, Morila and Sadiola.
The decrease in gold produced over 2007 at most mines was partially offset by an increase in gold production in Australia,
Brazil, Guinea and Tanzania from 465,000 ounces, 339,000 ounces, 256,000 ounces and 308,000 ounces, respectively,
produced in 2006, to 600,000 ounces, 408,000 ounces, 280,000 ounces and 327,000 ounces produced, respectively, in 2007.
This was mainly due to the mining of high grade areas at Sunrise Dam (in Australia); at AngloGold Ashanti Brasil Mineração (in
Brazil) due to Cuiabá mine expansion completed in latter half of 2006; at Siguiri (in Guinea) due to higher volumes treated with
the Carbon-in-pulp (CIP) plant being in full production and at Geita (in Tanzania) due to the impact of adverse weather
conditions, the delay in the Nyankanga pit push-back and lower recovered grade in 2006.
Brazil, Guinea and Tanzania from 465,000 ounces, 339,000 ounces, 256,000 ounces and 308,000 ounces, respectively,
produced in 2006, to 600,000 ounces, 408,000 ounces, 280,000 ounces and 327,000 ounces produced, respectively, in 2007.
This was mainly due to the mining of high grade areas at Sunrise Dam (in Australia); at AngloGold Ashanti Brasil Mineração (in
Brazil) due to Cuiabá mine expansion completed in latter half of 2006; at Siguiri (in Guinea) due to higher volumes treated with
the Carbon-in-pulp (CIP) plant being in full production and at Geita (in Tanzania) due to the impact of adverse weather
conditions, the delay in the Nyankanga pit push-back and lower recovered grade in 2006.
For the year ended December 31, 2006, AngloGold Ashanti’s total attributable gold production from continuing operations
decreased by 531,000 ounces, or 9 percent, to 5.6 million ounces from 6.2 million ounces produced in 2005. Gold production
from the Geita mine in Tanzania decreased from 613,000 ounces in 2005 to 308,000 ounces in 2006 and mines in Ghana and
Guinea reported decreases from 926,000 ounces to 848,000 ounces, mainly due to lower yields. Marginal declines in gold
production were recorded from operations located in Brazil where gold production fell from 346,000 ounces to 339,000 ounces.
Gold production from operations situated in South Africa decreased by 5 percent from 2,676,000 ounces produced in 2005 to
2,554,000 ounces in 2006 mainly due to both lower mining volumes and grade. Gold production from operations situated in the
USA declined from 330,000 ounces produced in 2005 to 283,000 ounces in 2006. The Australian operations produced
465,000 ounces of gold during 2006, compared with 455,000 ounces in 2005.
decreased by 531,000 ounces, or 9 percent, to 5.6 million ounces from 6.2 million ounces produced in 2005. Gold production
from the Geita mine in Tanzania decreased from 613,000 ounces in 2005 to 308,000 ounces in 2006 and mines in Ghana and
Guinea reported decreases from 926,000 ounces to 848,000 ounces, mainly due to lower yields. Marginal declines in gold
production were recorded from operations located in Brazil where gold production fell from 346,000 ounces to 339,000 ounces.
Gold production from operations situated in South Africa decreased by 5 percent from 2,676,000 ounces produced in 2005 to
2,554,000 ounces in 2006 mainly due to both lower mining volumes and grade. Gold production from operations situated in the
USA declined from 330,000 ounces produced in 2005 to 283,000 ounces in 2006. The Australian operations produced
465,000 ounces of gold during 2006, compared with 455,000 ounces in 2005.
Gold production in Mali increased by 2 percent from 528,000 ounces in 2005 to 537,000 ounces in 2006. Navachab, the
Namibian operation, produced 86,000 ounces of gold in 2006 compared with 81,000 ounces in 2005, mainly as a result of
increased milled tonnages offset by reductions in recovered grade. Operations in Argentina produced 215,000 ounces in 2006,
a marginal increase over the 211,000 ounces produced in 2005.
Namibian operation, produced 86,000 ounces of gold in 2006 compared with 81,000 ounces in 2005, mainly as a result of
increased milled tonnages offset by reductions in recovered grade. Operations in Argentina produced 215,000 ounces in 2006,
a marginal increase over the 211,000 ounces produced in 2005.
A more detailed review of gold production at each of AngloGold Ashanti’s operations is provided under “Item 4B.: Business
overview”.
overview”.
113
Total cash costs and total production costs
Comparison of total cash costs and total production costs in 2007 with 2006
Cash costs in all of the operations situated in South Africa increased in 2007 when compared to 2006. This was largely a result
of the reduced volumes mined, declining grades, safety-related stoppages and wage increases.
of the reduced volumes mined, declining grades, safety-related stoppages and wage increases.
Cerro Vanguardia, the Argentinean mine, recorded an increase in cash costs of 17 percent from $223 per ounce in 2006 to
$260 per ounce in 2007, mainly as a result of higher local inflation, increases in contractor and maintenance costs as well as
an increase in the size of the workforce partially offset by higher silver by-product revenue. The Australian mine, Sunrise Dam,
reported cash costs of $262 per ounce for 2007 compared to $333 per ounce for 2006, a 21 percent decrease mainly due to
record gold production in 2007.
$260 per ounce in 2007, mainly as a result of higher local inflation, increases in contractor and maintenance costs as well as
an increase in the size of the workforce partially offset by higher silver by-product revenue. The Australian mine, Sunrise Dam,
reported cash costs of $262 per ounce for 2007 compared to $333 per ounce for 2006, a 21 percent decrease mainly due to
record gold production in 2007.
The Brazilian mines, Brasil Mineração and Serra Grande, reported cash costs of $246 per ounce in 2007 compared to
$207 per ounce in 2006 and $264 per ounce in 2007 compared to $196 per ounce in 2006, respectively. This increase in cash
costs at both mines is mainly attributable to higher local inflation and reduced grade recovered and the appreciation of the local
currency against the US dollar.
$207 per ounce in 2006 and $264 per ounce in 2007 compared to $196 per ounce in 2006, respectively. This increase in cash
costs at both mines is mainly attributable to higher local inflation and reduced grade recovered and the appreciation of the local
currency against the US dollar.
Obuasi in Ghana reported increased cash costs of $67 per ounce increasing to $464 per ounce in 2007 as a result of reduced
production and increases in prices of consumables and rates of service contracts. Iduapriem reported an increase in cash
costs from $413 per ounce in 2006 to $497 per ounce in 2007 mainly due to the combined impact of the mill shutdown and
increases in contract mining costs. The operations at Siguiri, in Guinea, reported a $73 per ounce increase in cash costs to
$471 per ounce, mainly as result of the appreciation of the Guinean franc against the US dollar, higher royalty payments linked
to the higher gold price and higher fuel and labor costs.
production and increases in prices of consumables and rates of service contracts. Iduapriem reported an increase in cash
costs from $413 per ounce in 2006 to $497 per ounce in 2007 mainly due to the combined impact of the mill shutdown and
increases in contract mining costs. The operations at Siguiri, in Guinea, reported a $73 per ounce increase in cash costs to
$471 per ounce, mainly as result of the appreciation of the Guinean franc against the US dollar, higher royalty payments linked
to the higher gold price and higher fuel and labor costs.
The Malian operations reported increased cash costs. Yatela reported an increase in cash costs to $300 per ounce in 2007
compared to $241 per ounce in 2006 due to the decline in production, appreciation of the euro and FCFA against the dollar and
higher fuel prices. At Morila, cash costs increased in 2007 to $333 per ounce compared to $266 per ounce in 2006 mainly due
to the decline in production, appreciation of the euro and FCFA against the dollar and higher fuel prices. At Sadiola, production
declined 26 percent to 140,000 ounces, consequently cash costs increased from $268 per ounce in 2006 to $414 per ounce in
2007.
compared to $241 per ounce in 2006 due to the decline in production, appreciation of the euro and FCFA against the dollar and
higher fuel prices. At Morila, cash costs increased in 2007 to $333 per ounce compared to $266 per ounce in 2006 mainly due
to the decline in production, appreciation of the euro and FCFA against the dollar and higher fuel prices. At Sadiola, production
declined 26 percent to 140,000 ounces, consequently cash costs increased from $268 per ounce in 2006 to $414 per ounce in
2007.
Navachab in Namibia reported an increase in cash costs of 36 percent to $475 per ounce as a result of an increase in the costs
of labor and explosives whilst a grade-related decline in gold production also had a negative effect. Geita in Tanzania reported
a slight decrease in cash costs from $630 per ounce in 2006 to $627 per ounce in 2007. Reduced expenditure on equipment
re-builds, contractor services and an increased level of production contributed to the containment of costs. In North America,
Cripple Creek reported a $21 per ounce increase to $269 per ounce in 2007 mainly due to higher commodity and diesel fuel
prices.
of labor and explosives whilst a grade-related decline in gold production also had a negative effect. Geita in Tanzania reported
a slight decrease in cash costs from $630 per ounce in 2006 to $627 per ounce in 2007. Reduced expenditure on equipment
re-builds, contractor services and an increased level of production contributed to the containment of costs. In North America,
Cripple Creek reported a $21 per ounce increase to $269 per ounce in 2007 mainly due to higher commodity and diesel fuel
prices.
Overall, total cash costs for 2007 increased by $46 per ounce, or 14 percent, of which $21 per ounce was due to inflation,
$20 per ounce to lower efficiencies, $8 per ounce to decreased by-product sales, $6 per ounce to lower volumes and $5 per
ounce to exchange and royalty effects. These increases were partially offset by higher grades of $2 per ounce and other
variances of $12 per ounce.
$20 per ounce to lower efficiencies, $8 per ounce to decreased by-product sales, $6 per ounce to lower volumes and $5 per
ounce to exchange and royalty effects. These increases were partially offset by higher grades of $2 per ounce and other
variances of $12 per ounce.
Comparison of total cash costs and total production costs in 2006 with 2005
Cerro Vanguardia, the Argentinean mine, recorded an increase in cash costs of 30 percent from $171 per ounce in 2005 to
$223 per ounce in 2006, mainly as a result of higher local inflation and increases in commodity and maintenance costs and the
effects of the adoption of EITF 04-6. The Australian mine, Sunrise Dam, reported cash costs of $333 per ounce for 2006
compared to $269 per ounce for 2005, a 24 percent increase mainly from commodity and contractor costs and the adoption of
EITF 04-6, which increased cash costs by $37 per ounce.
$223 per ounce in 2006, mainly as a result of higher local inflation and increases in commodity and maintenance costs and the
effects of the adoption of EITF 04-6. The Australian mine, Sunrise Dam, reported cash costs of $333 per ounce for 2006
compared to $269 per ounce for 2005, a 24 percent increase mainly from commodity and contractor costs and the adoption of
EITF 04-6, which increased cash costs by $37 per ounce.
The Brazilian mines, Brasil Mineração and Serra Grande, reported cash costs of $207 per ounce in 2006 compared to
$169 per ounce in 2005 and $196 per ounce in 2006 compared to $158 per ounce in 2005, respectively. This increase in cash
costs at both mines is mainly attributable to higher local inflation and reduced grade recovered and the adoption of EITF 04-6.
$169 per ounce in 2005 and $196 per ounce in 2006 compared to $158 per ounce in 2005, respectively. This increase in cash
costs at both mines is mainly attributable to higher local inflation and reduced grade recovered and the adoption of EITF 04-6.
114
Obuasi in Ghana reported increased cash costs of $52 per ounce increasing to $397 per ounce in 2006 as a result of
processing increased tonnages with lower grade ore, whilst at Iduapriem cash costs increased to $413 per ounce mainly due to
local inflation and the adoption of EITF 04-6 which increased cash costs by $42 per ounce. The operations at Siguiri, in
Guinea, reported a $97 per ounce increase in cash costs to $398 per ounce, mainly as result of commodity price increases,
higher royalties, which are linked to spot prices, maintenance shutdowns and plant modifications post commissioning.
processing increased tonnages with lower grade ore, whilst at Iduapriem cash costs increased to $413 per ounce mainly due to
local inflation and the adoption of EITF 04-6 which increased cash costs by $42 per ounce. The operations at Siguiri, in
Guinea, reported a $97 per ounce increase in cash costs to $398 per ounce, mainly as result of commodity price increases,
higher royalties, which are linked to spot prices, maintenance shutdowns and plant modifications post commissioning.
The Malian operations had a mixed year. Yatela reported a decrease in cash costs to $241 per ounce in 2006 compared to
$263 per ounce in 2005 mainly due to process changes in the heap leach operations. At Morila, cash costs increased in 2006
to $266 per ounce compared to $191 per ounce in 2005 mainly due to reduced grade recovered and the major mill relining that
took place in the second half of the year which affected tonnage. Sadiola reported a $3 per ounce increase in cash costs to
$268 per ounce in 2006 mainly due to increased royalty payments linked to the higher gold price. All the Malian operations
were affected by the adoption of EITF 04-6.
$263 per ounce in 2005 mainly due to process changes in the heap leach operations. At Morila, cash costs increased in 2006
to $266 per ounce compared to $191 per ounce in 2005 mainly due to reduced grade recovered and the major mill relining that
took place in the second half of the year which affected tonnage. Sadiola reported a $3 per ounce increase in cash costs to
$268 per ounce in 2006 mainly due to increased royalty payments linked to the higher gold price. All the Malian operations
were affected by the adoption of EITF 04-6.
Navachab in Namibia reported an increase in cash costs of 9 percent to $349 per ounce as a result of increased gold
production and the effects of the US dollar on costs in the second half of the year and the adoption of EITF 04-6, which
affected cash costs by $84 per ounce. Geita in Tanzania was impacted by a combination of factors during the year including a
drought early in the year, followed by floods impacting haulage rates. These impacted the cut back of the Nyankanga pit which
resulted in a 46 percent drop in grade and ultimately impacting cash costs by 111 percent, increasing cash costs from $298 per
ounce in 2005 to $630 per ounce in 2006. The adoption of EITF 04-6 increased cash costs at Geita by $140 per ounce. In
North America, Cripple Creek reported a $18 per ounce increase to $248 per ounce in 2006 mainly due to higher commodity
prices.
production and the effects of the US dollar on costs in the second half of the year and the adoption of EITF 04-6, which
affected cash costs by $84 per ounce. Geita in Tanzania was impacted by a combination of factors during the year including a
drought early in the year, followed by floods impacting haulage rates. These impacted the cut back of the Nyankanga pit which
resulted in a 46 percent drop in grade and ultimately impacting cash costs by 111 percent, increasing cash costs from $298 per
ounce in 2005 to $630 per ounce in 2006. The adoption of EITF 04-6 increased cash costs at Geita by $140 per ounce. In
North America, Cripple Creek reported a $18 per ounce increase to $248 per ounce in 2006 mainly due to higher commodity
prices.
Overall, total cash costs for 2006 increased by $40 per ounce of which $14 per ounce related to inflation, and $36 per ounce to
lower grades and $13 per ounce for the adoption of EITF 04-6. Cost savings initiatives helped to offset these increases by
$10 per ounce, favorable exchange variances by $7 per ounce, higher-by-product effects by $3 per ounce and other variances
by $3 per ounce.
lower grades and $13 per ounce for the adoption of EITF 04-6. Cost savings initiatives helped to offset these increases by
$10 per ounce, favorable exchange variances by $7 per ounce, higher-by-product effects by $3 per ounce and other variances
by $3 per ounce.
Total production costs per ounce increased from $452 per ounce in 2006 to $504 per ounce in 2007 and from $398 per ounce
in 2005 to $452 per ounce in 2006.
in 2005 to $452 per ounce in 2006.
A more detailed review of total cash costs and total production costs at each of AngloGold Ashanti’s operations is provided
under “Item 4B.: Business overview”.
under “Item 4B.: Business overview”.
Reconciliation of total cash costs and total production costs to financial statements
Total cash costs and total production costs are calculated in accordance with the guidelines of the Gold Institute industry
standard and Industry practice and are not US GAAP measures. The Gold Institute, which has now been incorporated into the
National Mining Association, was a non-profit international association of miners, refiners, bullion suppliers and manufacturers
of gold products, which developed a uniform format for reporting total production costs on a per ounce basis. The guidance
was first adopted in 1996 and revised in November 1999.
standard and Industry practice and are not US GAAP measures. The Gold Institute, which has now been incorporated into the
National Mining Association, was a non-profit international association of miners, refiners, bullion suppliers and manufacturers
of gold products, which developed a uniform format for reporting total production costs on a per ounce basis. The guidance
was first adopted in 1996 and revised in November 1999.
Total cash costs, as defined in the Gold Institute industry guidelines, are production costs as recorded in the statement of
operations, less offsite (i.e. central), general and administrative expenses (including head office costs charged to the mines,
central training expenses, industry association fees, refinery charges and social development costs) and rehabilitation costs,
plus royalties and employee termination costs.
operations, less offsite (i.e. central), general and administrative expenses (including head office costs charged to the mines,
central training expenses, industry association fees, refinery charges and social development costs) and rehabilitation costs,
plus royalties and employee termination costs.
Total cash costs as calculated and reported by AngloGold Ashanti include costs for all mining, processing, onsite
administration costs, royalties and production taxes, as well as contributions from by-products, but exclusive of depreciation,
depletion and amortization, rehabilitation costs, employment severance costs, corporate administration costs, capital costs and
exploration costs. Total cash costs per ounce are calculated by dividing attributable total cash costs by attributable ounces of
gold produced.
administration costs, royalties and production taxes, as well as contributions from by-products, but exclusive of depreciation,
depletion and amortization, rehabilitation costs, employment severance costs, corporate administration costs, capital costs and
exploration costs. Total cash costs per ounce are calculated by dividing attributable total cash costs by attributable ounces of
gold produced.
Total production costs, as defined in the Gold Institute industry guidelines, are total cash costs, as calculated using the Gold
Institute industry guidelines, plus amortization, depreciation and rehabilitation costs.
Institute industry guidelines, plus amortization, depreciation and rehabilitation costs.
115
Total production costs as calculated and reported by AngloGold Ashanti include total cash costs, plus depreciation, depletion
and amortization, employee severance costs and rehabilitation and other non-cash costs. Total production costs per ounce are
calculated by dividing attributable total production costs by attributable ounces of gold produced.
and amortization, employee severance costs and rehabilitation and other non-cash costs. Total production costs per ounce are
calculated by dividing attributable total production costs by attributable ounces of gold produced.
Prior to January 1, 2006 stripping costs incurred in open-pit operations during the production phase to remove additional waste
were charged to operating costs on the basis of the average life of mine stripping ratio and the average life of mine costs per
tonne and resulted in capitalization of such stripping costs (deferred stripping). EITF Issue 04-6 prohibits capitalization of post
production stripping costs effective from January 1, 2006. Except for this impact on total cash costs and total production costs,
total cash costs and total production costs have been calculated on a consistent basis for all periods presented.
were charged to operating costs on the basis of the average life of mine stripping ratio and the average life of mine costs per
tonne and resulted in capitalization of such stripping costs (deferred stripping). EITF Issue 04-6 prohibits capitalization of post
production stripping costs effective from January 1, 2006. Except for this impact on total cash costs and total production costs,
total cash costs and total production costs have been calculated on a consistent basis for all periods presented.
Total cash costs and total production costs should not be considered by investors in isolation or as alternatives to production
costs, net income/(loss) applicable to common stockholders, income/(loss) before income tax provision, net cash provided by
operating activities or any other measure of financial performance presented in accordance with US GAAP or as an indicator of
the company’s performance. While the Gold Institute has provided definitions for the calculation of total cash costs and total
production costs, the calculation of total cash costs, total cash costs per ounce, total production costs and total production
costs per ounce may vary significantly among gold mining companies, and by themselves do not necessarily provide a basis
for comparison with other gold mining companies. However, AngloGold Ashanti believes that total cash costs and total
production costs in total by mine and per ounce by mine are useful indicators to investors and management as they provide:
costs, net income/(loss) applicable to common stockholders, income/(loss) before income tax provision, net cash provided by
operating activities or any other measure of financial performance presented in accordance with US GAAP or as an indicator of
the company’s performance. While the Gold Institute has provided definitions for the calculation of total cash costs and total
production costs, the calculation of total cash costs, total cash costs per ounce, total production costs and total production
costs per ounce may vary significantly among gold mining companies, and by themselves do not necessarily provide a basis
for comparison with other gold mining companies. However, AngloGold Ashanti believes that total cash costs and total
production costs in total by mine and per ounce by mine are useful indicators to investors and management as they provide:
·
an indication of profitability, efficiency and cash flows;
· the trend in costs as the mining operations mature over time on a consistent basis; and
·
an internal benchmark of performance to allow for comparison against other mines, both within the AngloGold Ashanti
group and of other gold mining companies.
group and of other gold mining companies.
A reconciliation of production costs as included in the company’s audited financial statements to total cash costs and to total
production costs for each of the three years in the period ended December 31, 2007 is presented below. In addition the
Company has also provided below detail of the attributable ounces of gold produced by mine for each of those periods.
production costs for each of the three years in the period ended December 31, 2007 is presented below. In addition the
Company has also provided below detail of the attributable ounces of gold produced by mine for each of those periods.
For the year ended December 31, 2007
Operations in South Africa
(7)
(in $ millions, except as otherwise noted)
Mponeng
TauTona
Savuka
Great
Noligwa
Kopanang
Tau Lekoa
Moab
Khotsong
Surface
operations
Corporate
(6)
Production
costs
159
132
30
201
133
80
51
39
49
Plus:
Production costs of equity accounted joint ventures
(1)
-
-
-
-
-
-
-
-
(8)
Less:
Rehabilitation costs & other non-cash costs
-
1
-
(2)
(1)
-
(5)
-
(23)
Plus:
Inventory movement
(1)
(1)
-
(1)
(1)
(1)
-
-
-
Royalties
-
-
-
-
-
-
-
-
-
Related party transactions
(2)
(3)
(2)
(1)
(3)
(3)
(1)
(1)
(1)
-
Adjusted for:
Minority interests
(3)
-
-
-
-
-
-
-
-
1
Non-gold
producing
companies
and
adjustments
-
-
-
-
-
-
-
-
(8)
Total
cash
costs
155
130
29
195
128
78
45
38
11
Plus:
Depreciation, depletion and amortization
53
64
5
50
37
45
34
3
15
Employee severance costs
1
1
-
1
1
1
-
-
-
Rehabilitation and other non-cash costs
-
(1)
-
2
1
-
5
-
23
Adjusted for:
Minority interests
(3)
-
-
-
-
-
-
-
-
-
Non-gold
producing
companies
and
adjustments
-
-
-
-
-
-
-
-
(4)
Total
production
costs
209
194
34
248
167
124
84
41
45
Gold produced (000’ ounces)
(4)
587
409
73
483
418
165
67
125
-
Total cash costs per ounce
(5)
264
318
397
404
306
473
672
304
-
Total production costs per ounce
(5)
356
474
466
513
400
752
1,254
328
-
116
For the year ended December 31, 2007
Operations in Argentina, Australia, Brazil, Ghana, Guinea, Mali, Namibia, Tanzania and USA
(in $ millions, except as otherwise noted)
(in $ millions, except as otherwise noted)
ARGENTINA
AUSTRALIA
BRAZIL
GHANA
GUINEA
MALI
NAMIBIA
TANZANIA
USA
Cerro
Vanguardia
Sunrise
Dam
Dam
Boddin
gton
gton
(9)
AngloGold
Ashanti
Brasil
Mineração
Ashanti
Brasil
Mineração
Serra
Grande
Grande
Obuasi
Bibiani
(10)
Iduapriem
(11)
Siguiri
Sadiola
Yatela
Morila
Navachab
Geita
Cripple
Creek
& Victor
Creek
& Victor
Production
costs
44 145
1
82
52
176
-
92
136
-
-
-
36
206
73
Plus:
Production costs of equity accounted joint ventures
(1)
-
- -
-
-
-
-
-
-
54
30
50
-
-
-
Less:
Rehabilitation costs & other non-cash costs
(4)
3
(1)
(4)
(2)
(18)
-
(7)
(6)
(3)
(1)
-
2
(4)
(4)
Plus:
Inventory movement
6
(2)
-
-
(1)
1
-
2
(3)
-
-
1
(1)
(4)
42
Royalties
11
11
-
-
-
8
-
4
28
6
5
8
1
7
-
Related party transactions
(2)
-
-
-
-
-
-
-
-
-
1
2
1
-
-
-
Adjusted
for:
Minority interests
(3)
(4)
-
-
-
(25)
-
-
(8)
(23)
-
-
-
-
-
-
Total cash costs
53
157
-
78
24
167
-
83
132
58
36
60
38
205
111
Plus:
Depreciation, depletion and amortization
17
53
-
32
18
67
-
21
45
6
4
13
6
58
32
Employee
severance
costs
-
-
-
-
-
14
-
-
-
-
-
-
-
-
-
Rehabilitation and other non-cash costs
4
(3)
1
4
2
18
-
7
6
3
1
-
(2)
4
4
Adjusted
for:
Minority interests
(3)
(1)
-
-
-
(10)
-
-
(2)
(7)
-
-
-
-
-
-
Total
production
costs
73
207
1
114
34
266
-
109
176
67
41
73
42
267
147
Gold produced (000’ ounces)
(4)
204
600
-
317
91
360
-
167
280
140
120
180
80
327
282
Total cash costs per ounce
(5)
260
262
-
246
264
464
-
497
471
414
300
333
475
627
(8)
269
Total production costs per ounce
(5)
358
345
-
360
374
739
-
653
629
479
342
406
525
817
521
117
118
For the year ended December 31, 2007
AngloGold Ashanti operations - Total
(in $ millions, except as otherwise noted)
(in $ millions, except as otherwise noted)
Total
Production costs per financial statements
1,917
Plus:
Production costs of equity accounted joint ventures
Production costs of equity accounted joint ventures
(1)
126
Less:
Rehabilitation costs & other non-cash costs
Rehabilitation costs & other non-cash costs
(79)
Plus/(less):
Inventory movement
Inventory movement
36
Royalties
89
Related party transactions
(2)
(11)
Adjusted for:
Minority interests
Minority interests
(3)
(59)
Non-gold producing companies and adjustments
(8)
Total cash costs
2,011
Plus:
Depreciation, depletion and amortization
Depreciation, depletion and amortization
678
Employee severance costs
19
Rehabilitation and other non-cash costs
79
Adjusted for:
Minority interests
Minority interests
(3)
(20)
Non-gold producing companies and adjustments
(4)
Total production costs
2,763
Gold produced (000’ ounces)
(4)
5,477
Total cash costs per ounce
(5)
367
Total production costs per ounce
(5)
504
(1)
Production costs and related expenses of equity accounted joint ventures are included in the calculation of total cash costs per ounce and total production
costs per ounce.
costs per ounce.
(2)
Relates solely to production costs as included in the Company’s consolidated financial statements and has, accordingly, been included in total production
costs and total cash costs.
costs and total cash costs.
(3)
Adjusting for minority interest of items included in calculation, to disclose the attributable portions only.
(4)
Attributable
production only.
(5)
In addition to the operational performances of the mines, total cash costs per ounce and total production costs per ounce are affected by fluctuations in the
currency exchange rate. AngloGold Ashanti reports total cash costs per ounce and total production costs per ounce calculated to the nearest US dollar
amount and gold produced in ounces.
currency exchange rate. AngloGold Ashanti reports total cash costs per ounce and total production costs per ounce calculated to the nearest US dollar
amount and gold produced in ounces.
(6)
Corporate includes non-gold producing subsidiaries.
(7)
Adjusted to exclude Ergo.
(8)
Total cash costs per ounce calculation includes heap leach inventory change.
(9)
There was no production attributable to AngloGold Ashanti in 2007.
(10)
Bibiani was sold effective December 28, 2006.
(11)
Remaining minority interests of 15 percent were acquired effective September 1, 2007.
For the year ended December 31, 2006
Operations in South Africa
(7)
(in $ millions, except as otherwise noted)
Mponeng
TauTona
Savuka
Great
Noligwa
Kopanang
Tau Lekoa
Moab
Khotsong
Surface
operations
Corporate
(6)
Production
costs
137
128
29
161
128
78
29
32
(39)
Plus:
Production costs of equity accounted joint ventures
(1)
-
-
-
-
-
-
-
-
(28)
Less:
Rehabilitation costs & other non-cash costs
1
(2)
1
(1)
-
(1)
(1)
-
6
Plus:
Inventory movement
5
3
1
1
3
-
1
-
1
Royalties
-
-
-
-
-
-
-
-
-
Related party transactions
(2)
(1)
(1)
(1)
(1)
(1)
-
-
-
-
Adjusted for:
Minority interests
(3)
-
-
-
-
-
-
-
-
(2)
Non-gold
producing
companies
and
adjustments
-
-
-
-
-
-
-
-
66
Total
cash
costs
142
128
30
160
130
77
29
32
4
Plus:
Depreciation, depletion and amortization
81
64
3
67
37
43
20
4
9
Employee severance costs
1
1
-
2
1
1
-
-
-
Rehabilitation and other non-cash costs
(1)
2
(1)
1
-
1
1
-
(6)
Adjusted for:
Minority interests
(3)
-
-
-
-
-
-
-
-
-
Non-gold producing companies and adjustments
-
-
-
-
-
-
-
(3)
Total
production
costs
223
195
32
230
168
122
50
36
4
Gold produced (000’ ounces)
(4)
596
474
89
615
446
176
44
113
-
Total cash costs per ounce
(5)
238
270
337
260
291
438
659
283
-
Total production costs per ounce
(5)
374
411
359
374
377
693
1,136
318
-
119
For the year ended December 31, 2006
Operations in Argentina, Australia, Brazil, Ghana, Guinea, Mali, Namibia, Tanzania and USA
(in $ millions, except as otherwise noted)
(in $ millions, except as otherwise noted)
ARGENTINA
AUSTRALIA
BRAZIL
GHANA
GUINEA
MALI
NAMIBIA
TANZANIA
USA
Cerro
Vanguardia
Vanguardia
Sunrise
Dam
Dam
Boddin
gton
gton
(9)
AngloGold
Ashanti
Brasil
Mineração
Ashanti
Brasil
Mineração
Serra
Grande
Grande
Obuasi
Bibiani
(10)
Iduapriem
Siguiri
Sadiola
Yatela
Morila
Navachab
Geita
Cripple Creek
& Victor
& Victor
Production costs
37
140
1
53
36
142
11
68
91
-
-
-
25
190
60
Plus:
Production costs of equity accounted joint ventures
(1)
-
-
-
-
-
-
-
-
-
41
21
46
-
-
-
Less:
Rehabilitation costs & other non-cash costs
-
4
(1)
(3)
-
1
3
4
(3)
2
3
(2)
2
7
(2)
Plus:
Inventory movement
3
4
-
-
2
4
1
3
11
2
3
3
3
(8)
40
Royalties
11
7
-
-
-
7
1
4
21
6
5
7
-
5
2
Related party transactions
(2)
-
-
-
-
-
-
-
-
-
-
2
1
-
-
-
Adjusted
for:
Minority interests
(3)
(3)
-
-
-
(19)
-
-
(10)
(18)
-
-
-
-
-
-
Total cash costs
48
155
-
50
19
154
16
69
102
51
34
55
30
194
100
Plus:
Depreciation, depletion and amortization
35
38
-
20
14
79
9
27
52
19
15
17
7
49
39
Employee severance costs
-
-
-
-
-
15
-
-
-
-
-
-
-
-
-
Rehabilitation and other non-cash costs
-
(4)
1
3
-
(1)
(3)
(4)
3
(1)
(3)
4
(2)
(7)
2
Adjusted
for:
Minority interests
(3)
(3)
-
-
-
(6)
-
-
(1)
(5)
-
-
-
-
-
-
Total production costs
80
189
1
73
27
247
22
91
152
69
46
76
35
236
141
Gold produced (000’ ounces)
(4)
215
465
-
242
97
387
37
167
256
190
141
207
86
308
283
Total cash costs per ounce
(5)
223
333
-
207
196
397
432
413
398
268
241
266
349
630
(8)
248
Total production costs per ounce
(5)
372
406
-
301
278
638
594
544
593
363
326
367
407
766
498
120
121
For the year ended December 31, 2006
AngloGold Ashanti operations - Total
(in $ millions, except as otherwise noted)
(in $ millions, except as otherwise noted)
Total
Production costs per financial statements
1,539
Plus:
Production costs of equity accounted joint ventures
Production costs of equity accounted joint ventures
(1)
80
Plus:
Rehabilitation costs & other non-cash costs
Rehabilitation costs & other non-cash costs
17
Plus/(less):
Inventory movement
Inventory movement
84
Royalties
78
Related party transactions
(2)
(2)
Adjusted for:
Minority interests
Minority interests
(3)
(54)
Non-gold producing companies and adjustments
68
Total cash costs
1,810
Plus/(less):
Depreciation, depletion and amortization
Depreciation, depletion and amortization
749
Employee severance costs
22
Rehabilitation and other non-cash costs
(17)
Adjusted for:
Minority interests
Minority interests
(3)
(15)
Non-gold producing companies and adjustments
(3)
Total production costs
2,546
Gold produced (000’ ounces)
(4)
5,635
Total cash costs per ounce
(5)
321
Total production costs per ounce
(5)
452
(1)
Production costs and related expenses of equity accounted joint ventures are included in the calculation of total cash costs per ounce and total production
costs per ounce.
costs per ounce.
(2)
Relates solely to production costs as included in the Company’s consolidated financial statements and has, accordingly, been included in total production
costs and total cash costs.
costs and total cash costs.
(3)
Adjusting for minority interest of items included in calculation, to disclose the attributable portions only.
(4)
Attributable
production only.
(5)
In addition to the operational performances of the mines, total cash costs per ounce and total production costs per ounce are affected by fluctuations in the
currency exchange rate. AngloGold Ashanti reports total cash costs per ounce and total production costs per ounce calculated to the nearest US dollar
amount and gold produced in ounces.
currency exchange rate. AngloGold Ashanti reports total cash costs per ounce and total production costs per ounce calculated to the nearest US dollar
amount and gold produced in ounces.
(6)
Corporate includes non-gold producing subsidiaries.
(7)
Adjusted to exclude Ergo.
(8)
Total cash costs per ounce calculation includes heap leach inventory change.
(9)
There was no production attributable to AngloGold Ashanti in 2006.
(10)
Bibiani was sold effective December 28, 2006.
For the year ended December 31, 2005
Operations in South Africa
(7)
(in $ millions, except as otherwise noted)
Mponeng
TauTona
Savuka
Great
Noligwa
Kopanang
Tau Lekoa
Surface
operations
Corporate
(6)
Production costs
138
124
51
179
135
105
26
58
Plus:
Production costs of equity accounted joint ventures
(1)
-
-
-
-
-
-
-
(7)
Less:
Rehabilitation costs & other non-cash costs
(2)
(1)
1
(6)
(7)
(1)
-
(2)
Plus:
Inventory movement
1
-
-
1
-
1
-
-
Royalties
-
-
-
-
-
-
-
-
Related party transactions
(2)
6
6
2
9
6
4
1
1
Adjusted for:
Minority interests
(3)
-
-
-
-
-
-
-
-
Non-gold producing companies and adjustments
-
-
-
-
-
-
-
(41)
Total
cash
costs
143
129
54
183
134
109
27
9
Plus:
Depreciation, depletion and amortization
48
62
7
50
30
34
4
13
Employee severance costs
3
3
6
6
4
3
-
1
Rehabilitation and other non-cash costs
2
1
(1)
6
7
1
-
2
Adjusted for:
Minority interests
(3)
-
-
-
-
-
-
-
-
Non-gold producing companies and adjustments
-
-
-
-
-
-
-
(5)
Total
production
costs
196
195
66
245
175
147
31
20
Gold produced (000’ ounces)
(4)
512
502
126
693
482
265
95
-
Total cash costs per ounce
(5)
279
256
430
264
277
410
287
-
Total production costs per ounce
(5)
383
388
524
354
363
555
326
-
122
For the year ended December 31, 2005
Operations in Argentina, Australia, Brazil, Ghana, Guinea, Mali, Namibia, Tanzania and USA
(in $ millions, except as otherwise noted)
(in $ millions, except as otherwise noted)
ARGENTINA
AUSTRALIA
BRAZIL
GHANA
GUINEA
MALI
NAMIBIA
TANZANIA
USA
Cerro
Vanguardia
Vanguardia
Sunrise
Dam
Dam
Boddin
gton
gton
(9)
AngloGold
Ashanti
Brasil
Mineração
Ashanti
Brasil
Mineração
Serra
Grande
Grande
Obuasi
Bibiani
Iduapriem
Siguiri
Sadiola
Yatela
Morila
Navachab
Geita
Cripple
Creek
& Victor
Creek
& Victor
Production costs
31
127
-
40
27
127
45
77
76
-
-
-
20
189
67
Plus:
Production costs of equity accounted joint ventures
(1)
-
-
-
-
-
-
-
-
-
42
25
48
-
-
-
Less:
Rehabilitation costs & other non-cash costs
-
(10)
-
(1)
-
(1)
(7)
(2)
(1)
(2)
(1)
(2)
6
(18)
(3)
Plus:
Inventory movement
(1)
-
-
3
2
3
(5)
(4)
6
-
(1)
(1)
-
5
27
Royalties
8
5
-
-
-
5
2
3
5
5
3
7
-
7
4
Related party transactions
(2)
-
-
-
-
-
1
-
1
-
-
-
(2)
-
-
-
Adjusted
for:
Minority interests
(3)
(2)
-
-
-
(14)
-
-
(14)
(12)
-
-
-
-
-
-
Total cash costs
36
122
-
42
15
135
35
61
74
45
26
50
26
183
95
Plus:
Depreciation, depletion and amortization
22
35
-
22
11
72
18
23
39
27
7
26
7
56
40
Employee
severance
costs
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Rehabilitation and other non-cash costs
-
10
-
1
-
1
7
2
1
2
1
2
(6)
18
3
Adjusted
for:
Minority interests
(3)
(1)
-
-
-
(4)
-
-
(3)
(3)
-
-
-
-
-
-
Total
production
costs
57
167
-
65
22
208
60
83
111
74
34
78
27
257
138
Gold produced (000’ ounces)
(4)
211
455
-
250
96
391
115
174
246
168
98
262
81
613
330
Total cash costs per ounce
(5)
171
269
-
169
158
345
305
348
301
265
263
191
321
298
(8)
230
Total production costs per ounce
(5)
270
367
-
260
229
532
522
477
451
440
347
298
333
419
418
123
124
For the year ended December 31, 2005
AngloGold Ashanti operations - Total
(in $ millions, except as otherwise noted)
(in $ millions, except as otherwise noted)
Total
Production costs per financial statements
1,642
Plus:
Production costs of equity accounted joint ventures
Production costs of equity accounted joint ventures
(1)
108
Less:
Rehabilitation costs & other non-cash costs
Rehabilitation costs & other non-cash costs
(60)
Plus:
Inventory movement
Inventory movement
37
Royalties
54
Related party transactions
(2)
35
Adjusted for:
Minority interests
Minority interests
(3)
(42)
Non-gold producing companies and adjustments
(41)
Total cash costs
1,733
Plus:
Depreciation, depletion and amortization
Depreciation, depletion and amortization
653
Employee severance costs
26
Rehabilitation and other non-cash costs
60
Adjusted for:
Minority interests
Minority interests
(3)
(11)
Non-gold producing companies and adjustments
(5)
Total production costs
2,456
Gold produced (000’ ounces)
(4)
6,166
Total cash costs per ounce
(5)
281
Total production costs per ounce
(5)
398
(1)
Production costs and related expenses of equity accounted joint ventures are included in the calculation of total cash costs per ounce and total production
costs per ounce.
costs per ounce.
(2)
Relates solely to production costs as included in the Company’s consolidated financial statements and has, accordingly, been included in total production
costs and total cash costs.
costs and total cash costs.
(3)
Adjusting for minority interest of items included in calculation, to disclose the attributable portions only.
(4)
Attributable
production only.
(5)
In addition to the operational performances of the mines, total cash costs per ounce and total production costs per ounce are affected by fluctuations in the
currency exchange rate. AngloGold Ashanti reports total cash costs per ounce and total production costs per ounce calculated to the nearest US dollar
amount and gold produced in ounces.
currency exchange rate. AngloGold Ashanti reports total cash costs per ounce and total production costs per ounce calculated to the nearest US dollar
amount and gold produced in ounces.
(6)
Corporate includes non-gold producing subsidiaries.
(7)
Adjusted to exclude Ergo.
(8)
Total cash costs per ounce calculation includes heap leach inventory change.
(9)
There was no production attributable to AngloGold Ashanti in 2005.
125
Capital expenditure
Total capital expenditure of $1,059 million, which includes $35 million relating to the fifteen-year secured capital leases for the
new corporate office (Turbine Square and Turbine Hall), was recorded in the year ended December 31, 2007 compared to
$817 million in the same period in 2006. This represents a $207 million, or 25 percent, increase from 2006. In South Africa,
capital expenditure increased from $321 million in 2006 to $411 million in 2007, mainly due to expansion projects at Mponeng,
TauTona and the ramping up at Moab Khotsong. Expenditure in Brazil decreased to $141 million in 2007 from $186 million in
2006 as a result of the Cuiabá expansion project nearing completion. In Australia, capital expenditure increased from
$86 million in 2006 to $281 million in 2007, mainly as a result of the expansion at Boddington mine. At year-end, overall project
progress at Boddington mine was approximately 65 percent complete, with engineering and procurement activities nearing
completion.
new corporate office (Turbine Square and Turbine Hall), was recorded in the year ended December 31, 2007 compared to
$817 million in the same period in 2006. This represents a $207 million, or 25 percent, increase from 2006. In South Africa,
capital expenditure increased from $321 million in 2006 to $411 million in 2007, mainly due to expansion projects at Mponeng,
TauTona and the ramping up at Moab Khotsong. Expenditure in Brazil decreased to $141 million in 2007 from $186 million in
2006 as a result of the Cuiabá expansion project nearing completion. In Australia, capital expenditure increased from
$86 million in 2006 to $281 million in 2007, mainly as a result of the expansion at Boddington mine. At year-end, overall project
progress at Boddington mine was approximately 65 percent complete, with engineering and procurement activities nearing
completion.
Total capital expenditure during the year ended December 31, 2006 was $817 million compared to $722 million in 2005 being a
13 percent increase. In South Africa, capital expenditure decreased from $347 million in 2005 to $321 million in 2006, mainly
due to reduced expenditure as Moab Khotsong began commercial production in 2006 and the weakening of the rand. Capital
expenditure in Ghana and Guinea amounted to $97 million and $16 million, respectively, in 2006, compared to $90 million and
$36 million, respectively, in 2005, mainly due to capital projects at Obuasi in Ghana and the commissioning of the CIP plant in
Guinea. Expenditure in Brazil increased from $85 million in 2005 to $186 million in 2006 as a result of the Cuiabá expansion
project. In Australia, capital expenditure increased from $38 million in 2005 to $86 million in 2006 mainly as a result of the
underground mining project at Sunrise Dam and the commencement of expansion at Boddington mine. Capital expenditure in
the USA increased from $8 million in 2005 to $13 million in 2006.
13 percent increase. In South Africa, capital expenditure decreased from $347 million in 2005 to $321 million in 2006, mainly
due to reduced expenditure as Moab Khotsong began commercial production in 2006 and the weakening of the rand. Capital
expenditure in Ghana and Guinea amounted to $97 million and $16 million, respectively, in 2006, compared to $90 million and
$36 million, respectively, in 2005, mainly due to capital projects at Obuasi in Ghana and the commissioning of the CIP plant in
Guinea. Expenditure in Brazil increased from $85 million in 2005 to $186 million in 2006 as a result of the Cuiabá expansion
project. In Australia, capital expenditure increased from $38 million in 2005 to $86 million in 2006 mainly as a result of the
underground mining project at Sunrise Dam and the commencement of expansion at Boddington mine. Capital expenditure in
the USA increased from $8 million in 2005 to $13 million in 2006.
A more detailed review of capital expenditure at each of AngloGold Ashanti’s operations is provided under “Item 4B.: Business
overview”.
overview”.
Establishment of a Black Economic Empowerment (BEE) transaction in South Africa
On December 12, 2006, AngloGold Ashanti announced the finalization of the Bokamoso employee share ownership plan
(Bokamoso ESOP) with the National Union of Mineworkers, Solidarity and United Association for employees of the South
African operations. The Bokamoso ESOP creates an opportunity for the Company and the unions to ensure a closer alignment
of the interest between South African based employees and the Company. Participation is restricted to those employees not
eligible for participation in any other South African Share Incentive Plan.
(Bokamoso ESOP) with the National Union of Mineworkers, Solidarity and United Association for employees of the South
African operations. The Bokamoso ESOP creates an opportunity for the Company and the unions to ensure a closer alignment
of the interest between South African based employees and the Company. Participation is restricted to those employees not
eligible for participation in any other South African Share Incentive Plan.
The Company also undertook an empowerment transaction with a BEE investment vehicle, Izingwe Holdings (Proprietary)
Limited (Izingwe).
Limited (Izingwe).
The transaction gave effect to undertakings made to the Department of Minerals and Energy at the time that the Company
gained its new order mining rights in August 2005. The Company undertook to establish an ESOP and a BEE transaction
equivalent to at least 6 percent of the value of the Company’s South African operations.
gained its new order mining rights in August 2005. The Company undertook to establish an ESOP and a BEE transaction
equivalent to at least 6 percent of the value of the Company’s South African operations.
In order to facilitate this transaction the Company established a trust to acquire and administer the ESOP shares. AngloGold
Ashanti allotted and issued free ordinary shares to the trust and also created, allotted and issued E ordinary shares to the trust
for the benefit of employees.
Ashanti allotted and issued free ordinary shares to the trust and also created, allotted and issued E ordinary shares to the trust
for the benefit of employees.
The Company also created, allotted and issued E ordinary shares to Izingwe.
The key terms of the E ordinary share are:
·
AngloGold Ashanti will have the right to cancel the E ordinary shares, or a portion of them, in accordance with the ESOP
and Izingwe cancellation formulae, respectively;
and Izingwe cancellation formulae, respectively;
·
the E ordinary shares will not be listed;
·
the E ordinary shares which are not cancelled will be converted into ordinary shares; and
·
the E ordinary shares will each be entitled to receive a dividend equal to one-half of the dividend per ordinary share
declared by the Company from time to time and a further one half is included in the strike price calculation.
declared by the Company from time to time and a further one half is included in the strike price calculation.
126
The average fair value of the E ordinary shares granted to employees in 2007 was R79 (2006: R105) per share. Dividends
declared in respect of the E ordinary shares will firstly be allocated to cover administration expenses of the trust, whereafter it
will accrue and be paid to ESOP members, pro rata to the number of shares allocated to them. At each anniversary over a five
year period commencing on the third anniversary of the original 2006 award, the Company will cancel the relevant number of
E ordinary shares as stipulated by a cancellation formula. Any E ordinary shares remaining in the tranche will be converted to
ordinary shares for the benefit of the employees. All unexercised awards will be cancelled on May 1, 2014.
declared in respect of the E ordinary shares will firstly be allocated to cover administration expenses of the trust, whereafter it
will accrue and be paid to ESOP members, pro rata to the number of shares allocated to them. At each anniversary over a five
year period commencing on the third anniversary of the original 2006 award, the Company will cancel the relevant number of
E ordinary shares as stipulated by a cancellation formula. Any E ordinary shares remaining in the tranche will be converted to
ordinary shares for the benefit of the employees. All unexercised awards will be cancelled on May 1, 2014.
The average fair value of the E ordinary shares granted to Izingwe on December 13, 2006 was R90 per share. Dividends
declared in respect of the E ordinary shares will accrue and be paid to Izingwe, pro rata to the number of shares allocated to
them. At each anniversary over a five year period commencing on the third anniversary of the award, Izingwe has a six month
period to instruct the Company to cancel the relevant number of E ordinary shares as stipulated by a cancellation formula. Any
E ordinary shares remaining in the tranche will be converted to ordinary shares for the benefit of Izingwe. If no instruction is
received at the end of the six month period, the cancellation formula will be applied automatically.
declared in respect of the E ordinary shares will accrue and be paid to Izingwe, pro rata to the number of shares allocated to
them. At each anniversary over a five year period commencing on the third anniversary of the award, Izingwe has a six month
period to instruct the Company to cancel the relevant number of E ordinary shares as stipulated by a cancellation formula. Any
E ordinary shares remaining in the tranche will be converted to ordinary shares for the benefit of Izingwe. If no instruction is
received at the end of the six month period, the cancellation formula will be applied automatically.
Comparison of financial performance on a segment basis for 2007, 2006 and 2005
The Company produces gold as its primary product and does not have distinct divisional segments in terms of principal
business activity, but manages its business on the basis of different geographic segments. Therefore, information regarding
separate geographic segments is provided. During 2007, the Company changed the method of allocating hedging to individual
mines. In prior periods, forward contracts were allocated to each reporting segment, based on the then prevailing contractual
relationship with the counterparty. Following the removal of certain counterparty restrictions and the granting of group level
guarantees during 2006, the Company has applied an average received gold price across all reporting segments. The average
received gold price for each mine is thus similar to the Company’s average received gold price which includes realized
gains/losses on non-hedge derivatives. Where applicable, the corresponding items of segment information for all earlier
periods presented have been restated to reflect this. This information is consistent with the information used by the Company’s
Chief Operating Decision Maker in evaluating operating performance of, and making resource allocation decisions among
operations.
business activity, but manages its business on the basis of different geographic segments. Therefore, information regarding
separate geographic segments is provided. During 2007, the Company changed the method of allocating hedging to individual
mines. In prior periods, forward contracts were allocated to each reporting segment, based on the then prevailing contractual
relationship with the counterparty. Following the removal of certain counterparty restrictions and the granting of group level
guarantees during 2006, the Company has applied an average received gold price across all reporting segments. The average
received gold price for each mine is thus similar to the Company’s average received gold price which includes realized
gains/losses on non-hedge derivatives. Where applicable, the corresponding items of segment information for all earlier
periods presented have been restated to reflect this. This information is consistent with the information used by the Company’s
Chief Operating Decision Maker in evaluating operating performance of, and making resource allocation decisions among
operations.
Revenues
Year ended December 31
(in millions)
2007
$
percent
2006
$
percent
2005
$
percent
Category
of
activity
Total
revenues
Product sales
3,048
2,683
2,453
Interest, dividends and other
47
32
32
Total
revenues
3,095
2,715
2,485
Geographical area data
Total
revenues
South Africa
1,504
49
1,531
56
1,226
49
Argentina
130
4
118
4
101
4
Australia
379
12
309
11
210
8
Brazil
319
10
260
10
191
8
Ghana
364
12
330
12
338
14
Guinea
224
7
164
6
138
6
Mali
280
9
321
12
236
9
Namibia
54
2
51
2
36
2
Tanzania
224
7
198
7
257
10
USA
180
6
124
5
129
5
Other, including Corporate and Non-gold producing
subsidiaries
8
-
13
-
7
-
3,666
3,419
2,869
Less : Equity method investments included above
(280)
(9)
(321)
(11)
(236)
(9)
Less : Gains on realized non hedge derivatives included
above
(291)
(9)
(383)
(14)
(148)
(6)
Total
revenues
3,095
100
2,715
100
2,485
100
127
In 2007, 49 percent of AngloGold Ashanti’s total consolidated revenues were derived from its operations in South Africa,
compared to 56 percent in 2006, mainly as a result of the 9 percent decrease in production in the South African operations.
South Africa produced 43 percent of the global production in 2007.
compared to 56 percent in 2006, mainly as a result of the 9 percent decrease in production in the South African operations.
South Africa produced 43 percent of the global production in 2007.
In 2006, 56 percent of AngloGold Ashanti’s total consolidated revenues were derived from its operations in South Africa,
compared to 49 percent in 2005, mainly as a result of the increase in the rand gold price over 2005.
compared to 49 percent in 2005, mainly as a result of the increase in the rand gold price over 2005.
Assets
As at December 31
(in millions)
2007
$
percent
2006
$
percent
2005
$
percent
Geographical area data
Total segment assets
South Africa
3,337
32
3,093
33
3,019
33
Argentina
236
2
254
3
248
3
Australia
1,183
11
805
8
737
8
Brazil
674
6
544
6
371
4
Ghana
2,155
21
2,058
21
2,104
23
Guinea
371
4
357
4
349
4
Mali
291
(1)
3
280
(1)
3
309
(1)
4
Namibia
76
1
64
1
51
-
Tanzania
1,343
13
1,382
15
1,281
14
USA
528
5
507
5
429
5
Other, including Corporate, Assets held for
sale and Non-gold producing subsidiaries
sale and Non-gold producing subsidiaries
187
2
169
1
215
2
Total segment assets
10,381
100
9,513
100
9,113
100
(1)
Investment
held.
At December 31, 2007, 32 percent of AngloGold Ashanti’s total assets were located in South Africa compared with 33 percent
at the end of 2006. Operations outside of South Africa collectively accounted for approximately 68 percent of AngloGold
Ashanti’s total assets at December 31, 2007 compared to 67 percent at the end of the same period in 2006.
at the end of 2006. Operations outside of South Africa collectively accounted for approximately 68 percent of AngloGold
Ashanti’s total assets at December 31, 2007 compared to 67 percent at the end of the same period in 2006.
At December 31, 2006, 33 percent of AngloGold Ashanti’s total assets were located in South Africa compared with 33 percent
at the end of 2005. Operations outside of South Africa collectively accounted for approximately 67 percent of AngloGold
Ashanti’s total assets at December 31, 2006 compared to 67 percent at the end of the same period in 2005.
at the end of 2005. Operations outside of South Africa collectively accounted for approximately 67 percent of AngloGold
Ashanti’s total assets at December 31, 2006 compared to 67 percent at the end of the same period in 2005.
Comparison of financial performance in 2007, 2006 and 2005
Financial performance of AngloGold Ashanti
Year ended December 31
2007
2006
2005
Revenue
3,095
2,715
2,485
Cost and expenses
(3,806)
(2,811)
(2,848)
Taxation (expense)/benefit
(118)
(122)
121
Minority interest
(28)
(29)
(23)
Equity income in affiliates
41
99
39
Discontinued operations
2
6
(44)
Cumulative effect of accounting change
-
-
(22)
Net loss
(814)
(142)
(292)
For more detail discussions on revenue and costs see the following explanations.
128
Comparison of financial performance in 2007 with 2006
Revenues
Revenues from product sales and other income increased by $380 million from $2,715 million in 2006 to $3,095 million in
2007, representing a 14 percent increase over the period. This increase was primarily due to the increase in the spot price of
gold in 2007. The average spot price of gold was $697 per ounce during 2007, $93 per ounce, or 15 percent, higher than $604
per ounce, the average spot price of gold in 2006. The majority of product sales consisted of US dollar-denominated gold
sales.
2007, representing a 14 percent increase over the period. This increase was primarily due to the increase in the spot price of
gold in 2007. The average spot price of gold was $697 per ounce during 2007, $93 per ounce, or 15 percent, higher than $604
per ounce, the average spot price of gold in 2006. The majority of product sales consisted of US dollar-denominated gold
sales.
Total revenues from the South African operations decreased by $41 million to $1,472 million from $1,513 million realized in
2006, mainly as a result of reduced gold production at the South African operations (2,328,000 ounces in 2007 compared to
2,554,000 ounces in 2006) which more than offset the increase in gold price.
2006, mainly as a result of reduced gold production at the South African operations (2,328,000 ounces in 2007 compared to
2,554,000 ounces in 2006) which more than offset the increase in gold price.
Total revenues generated by Cerro Vanguardia, the Argentinean operation increased from $118 million in 2006 to $129 million
in 2007 mainly as a result of the higher gold price. The increase in revenue was partly offset by reduced gold production
(204,000 ounces in 2007 compared to 215,000 ounces in 2006) and a reduction in grade recovered from 7.29 grammes per
tonne in 2006 to 6.88 grammes per tonne in 2007.
in 2007 mainly as a result of the higher gold price. The increase in revenue was partly offset by reduced gold production
(204,000 ounces in 2007 compared to 215,000 ounces in 2006) and a reduction in grade recovered from 7.29 grammes per
tonne in 2006 to 6.88 grammes per tonne in 2007.
The Australian operation at Sunrise Dam increased production to 600,000 ounces from 465,000 ounces in 2006. Average
recovered grade increased from 3.39 grammes per tonne in 2006 to 4.86 grammes per tonne in 2007. Total revenues
increased from $307 million in 2006 to $378 million in 2007.
recovered grade increased from 3.39 grammes per tonne in 2006 to 4.86 grammes per tonne in 2007. Total revenues
increased from $307 million in 2006 to $378 million in 2007.
The two operations in Brazil produced 408,000 attributable ounces compared to 339,000 ounces in 2006. The increase in
production and higher gold price resulted in total revenues of $323 million in 2007 compared to $258 million in 2006.
production and higher gold price resulted in total revenues of $323 million in 2007 compared to $258 million in 2006.
Total revenues generated from operations situated in Ghana amounted to $364 million in 2007, compared to $330 million in
2006. The increase was mainly as a result of the higher gold price. The increase in revenue was partly offset by reduced gold
production from 592,000 ounces in 2006 to 527,000 ounces in 2007.
2006. The increase was mainly as a result of the higher gold price. The increase in revenue was partly offset by reduced gold
production from 592,000 ounces in 2006 to 527,000 ounces in 2007.
Total revenues generated in Guinea amounted to $223 million in 2007 compared to $167 million in 2006. The increase was
due to the higher gold price and an increase in gold production from 256,000 ounces in 2006 to 280,000 ounces in 2007.
due to the higher gold price and an increase in gold production from 256,000 ounces in 2006 to 280,000 ounces in 2007.
Tanzania recorded total revenues of $219 million in 2007 compared to $199 million in 2006. The increase in revenue was a
result of the higher gold price and an increase in gold production from 308,000 ounces in 2006 to 327,000 ounces in 2007.
result of the higher gold price and an increase in gold production from 308,000 ounces in 2006 to 327,000 ounces in 2007.
Production costs
Production costs increased from $1,539 million in 2006 to $1,917 million in 2007, which represents a $378 million, or
25 percent increase. In South Africa, production costs increased by $191 million to $874 million in 2007 from $683 million in
2006 mainly as a result of annual wage increases and higher fuel and power costs. About 46 percent of AngloGold Ashanti’s
production costs were denominated in South African rands in 2007.
25 percent increase. In South Africa, production costs increased by $191 million to $874 million in 2007 from $683 million in
2006 mainly as a result of annual wage increases and higher fuel and power costs. About 46 percent of AngloGold Ashanti’s
production costs were denominated in South African rands in 2007.
Production costs recorded from operations situated in Ghana, Guinea and Brazil increased from $221 million, $91 million and
$89 million, respectively, in 2006 to $268 million, $136 million and $134 million, respectively, in 2007 mainly as a result of an
increase in operational costs including labor, fuel, consumables, power and water costs as well as the strengthening of local
currencies relative to the US dollar.
$89 million, respectively, in 2006 to $268 million, $136 million and $134 million, respectively, in 2007 mainly as a result of an
increase in operational costs including labor, fuel, consumables, power and water costs as well as the strengthening of local
currencies relative to the US dollar.
Exploration costs
Exploration costs increased to $117 million in 2007 from $58 million in 2006. This was mainly due to increased exploration
activities at the Tropicana project in Western Australia, regional and target generation activities in Colombia, continued drilling
in the Mongbwalu region of the Democratic Republic of the Congo as well as mine-based programs in South America, Ghana
and Guinea. Joint ventures and partnerships with other companies facilitated additional exploration activities in Russia, China,
Laos and the Philippines. For a discussion of AngloGold Ashanti’s exploration activities in 2007, see “Item 4B.: Business
overview – Global exploration”.
activities at the Tropicana project in Western Australia, regional and target generation activities in Colombia, continued drilling
in the Mongbwalu region of the Democratic Republic of the Congo as well as mine-based programs in South America, Ghana
and Guinea. Joint ventures and partnerships with other companies facilitated additional exploration activities in Russia, China,
Laos and the Philippines. For a discussion of AngloGold Ashanti’s exploration activities in 2007, see “Item 4B.: Business
overview – Global exploration”.
129
Related party transactions
Related party transactions in 2007 amounted to a credit (representing purchases by related parties) of $16 million compared
with a credit of $6 million in 2006. This was mainly due to lower contract work generated by development activities. The
Company, which holds an equity interest of 29.8 percent in Trans-Siberian Gold plc (TSG), entered into a transaction during
the quarter ended June 30, 2007 with TSG in which two companies were acquired from TSG for a cash consideration of
$40 million. The companies acquired consist of Amikan (which holds the Veduga deposit, related exploration and mining
licenses) and AS APK (which holds the Bogunay deposit, related exploration and mining licenses). For a detailed discussion of
related party transactions, see “Item 7B.: Related party transactions”.
with a credit of $6 million in 2006. This was mainly due to lower contract work generated by development activities. The
Company, which holds an equity interest of 29.8 percent in Trans-Siberian Gold plc (TSG), entered into a transaction during
the quarter ended June 30, 2007 with TSG in which two companies were acquired from TSG for a cash consideration of
$40 million. The companies acquired consist of Amikan (which holds the Veduga deposit, related exploration and mining
licenses) and AS APK (which holds the Bogunay deposit, related exploration and mining licenses). For a detailed discussion of
related party transactions, see “Item 7B.: Related party transactions”.
General and administrative
General and administrative expenses decreased from $140 million in 2006 to $130 million in 2007, mainly due to a decrease of
$28 million in share-based payment expense being offset by an increase in labor and corporate office costs.
$28 million in share-based payment expense being offset by an increase in labor and corporate office costs.
Royalties
Royalties paid by AngloGold Ashanti increased from $59 million in 2006 to $70 million paid in 2007 primarily due to higher spot
prices, with royalties in Australia, Argentina and Tanzania amounting to $11 million, $11 million and $7 million, respectively, in
2007 compared with $7 million, $11 million and $5 million, respectively, in 2006. Royalties paid in Ghana and Guinea
amounted to $40 million in 2007 compared to $33 million in 2006. Australian royalties are payable to the government as
specified in the relevant legislation in each State or Territory based on ounces produced. In Argentina, royalties are payable to
Fomicruz, a State owned company in the Santa Cruz Province, being the minority shareholder of the Cerro Vanguardia
operation calculated as a percentage of revenues. In Ghana, royalties are payable to the government at a fixed rate of
3 percent per annum based on revenue, as agreed to under the Stability Agreement entered into with AngloGold as part of the
AngloGold Ashanti business combination. In Guinea, royalties are paid to the government, Union Miniere and the International
Finance Corporation calculated as a percentage of revenues. In Tanzania, royalties for Geita, are payable to the Tanzanian
government calculated as a percentage of revenues.
prices, with royalties in Australia, Argentina and Tanzania amounting to $11 million, $11 million and $7 million, respectively, in
2007 compared with $7 million, $11 million and $5 million, respectively, in 2006. Royalties paid in Ghana and Guinea
amounted to $40 million in 2007 compared to $33 million in 2006. Australian royalties are payable to the government as
specified in the relevant legislation in each State or Territory based on ounces produced. In Argentina, royalties are payable to
Fomicruz, a State owned company in the Santa Cruz Province, being the minority shareholder of the Cerro Vanguardia
operation calculated as a percentage of revenues. In Ghana, royalties are payable to the government at a fixed rate of
3 percent per annum based on revenue, as agreed to under the Stability Agreement entered into with AngloGold as part of the
AngloGold Ashanti business combination. In Guinea, royalties are paid to the government, Union Miniere and the International
Finance Corporation calculated as a percentage of revenues. In Tanzania, royalties for Geita, are payable to the Tanzanian
government calculated as a percentage of revenues.
Market development costs
Market development costs remained unchanged at $16 million. AngloGold Ashanti remains a member of the World Gold
Council (WGC) and through its membership receives assistance in all its marketing endeavors. For a detailed discussion on
market development see “Item 4B.: Business overview – Gold market development”.
Council (WGC) and through its membership receives assistance in all its marketing endeavors. For a detailed discussion on
market development see “Item 4B.: Business overview – Gold market development”.
Depreciation, depletion and amortization
Depreciation, depletion and amortization expense decreased by $44 million or 6 percent, to $655 million in 2007 when
compared to $699 million recorded in 2006. This decrease was mainly due to decreases in depreciation, depletion and
amortization expense in South Africa, Ghana and the USA from $324 million, $119 million and $39 million, respectively,
incurred in the year ended December 31, 2006 to $301 million, $91 million and $32 million, respectively, in the same period of
2007 mainly as a result of a decrease in gold production and changes in estimated lives of assets. This was partially offset by
an increase in depreciation, depletion and amortization expense in Australia which increased from $39 million incurred in the
year ended December 31, 2006 to $54 million in the same period in 2007 as a result of the increase in gold production.
compared to $699 million recorded in 2006. This decrease was mainly due to decreases in depreciation, depletion and
amortization expense in South Africa, Ghana and the USA from $324 million, $119 million and $39 million, respectively,
incurred in the year ended December 31, 2006 to $301 million, $91 million and $32 million, respectively, in the same period of
2007 mainly as a result of a decrease in gold production and changes in estimated lives of assets. This was partially offset by
an increase in depreciation, depletion and amortization expense in Australia which increased from $39 million incurred in the
year ended December 31, 2006 to $54 million in the same period in 2007 as a result of the increase in gold production.
Impairment of assets
In 2007, AngloGold Ashanti recorded impairments amounting to $1 million compared to $6 million in 2006 which related to the
impairment and write-off of various minor tangible assets and equipment.
impairment and write-off of various minor tangible assets and equipment.
130
Interest expense
Interest expense decreased by $2 million from $77 million recorded in 2006 to $75 million in 2007 as a result of similar average
borrowing levels in a stable interest rate environment for variable overdrafts and bank loans during 2007. A significant portion
of AngloGold Ashanti’s debt was denominated in US dollars in 2007.
borrowing levels in a stable interest rate environment for variable overdrafts and bank loans during 2007. A significant portion
of AngloGold Ashanti’s debt was denominated in US dollars in 2007.
Accretion expense
Accretion expense of $20 million was recorded in 2007 compared with $13 million in 2006. Accretion relates to the unwinding
of discounted future reclamation obligations to present values and increases in the reclamation obligations to its future
estimated payout.
of discounted future reclamation obligations to present values and increases in the reclamation obligations to its future
estimated payout.
Employment severance cost
Employment severance costs decreased to $19 million in 2007 from $22 million in 2006. The 2007 expense included
retrenchment costs of $5 million in the South African region (at Great Noligwa, Kopanang, Tau Lekoa, TauTona and Mponeng)
and $14 million in Ghana (at Obuasi) due to a planned reduction in workforce.
retrenchment costs of $5 million in the South African region (at Great Noligwa, Kopanang, Tau Lekoa, TauTona and Mponeng)
and $14 million in Ghana (at Obuasi) due to a planned reduction in workforce.
Loss/profit on sale of assets, realization of loans, indirect taxes and other
A loss of $10 million was recorded in 2007 compared to a profit of $36 million recorded in 2006 which consisted mainly of the
reassessment of indirect taxes and royalties in Tanzania and Guinea and profit on disposal and abandonment of land, mineral
rights and exploration properties in 2007.
reassessment of indirect taxes and royalties in Tanzania and Guinea and profit on disposal and abandonment of land, mineral
rights and exploration properties in 2007.
Non-hedge derivative loss
A loss on non-hedge derivatives of $808 million, being derivatives not designated in formal hedge accounting relationships,
was recorded in 2007 compared to a loss of $208 million in 2006 relating to the use of non-hedging instruments. The loss in
2007 is primarily the result of the revaluation of non-hedge derivatives resulting from changes in the prevailing spot gold price,
exchange rates, interest rates and greater volatilities compared to 2006. Non-hedge derivatives recorded for the years ended
December 31, 2007 and 2006 included:
was recorded in 2007 compared to a loss of $208 million in 2006 relating to the use of non-hedging instruments. The loss in
2007 is primarily the result of the revaluation of non-hedge derivatives resulting from changes in the prevailing spot gold price,
exchange rates, interest rates and greater volatilities compared to 2006. Non-hedge derivatives recorded for the years ended
December 31, 2007 and 2006 included:
Year ended December 31,
2007
2006
(in US Dollars, millions)
Gains on realized non-hedge derivatives
(291)
(383)
Loss on unrealized non-hedge derivatives
1,099
591
Net loss
808
208
Other operating items
Other operating items, consisting of provision for loss on future deliveries of other commodities and unrealized gain/loss on
other commodity physical borrowings amounted to a net credit of $16 million in 2007 compared to an expense of $16 million in
2006.
other commodity physical borrowings amounted to a net credit of $16 million in 2007 compared to an expense of $16 million in
2006.
131
Equity income in affiliates
Equity income in equity method investments decreased from $99 million in 2006 to $41 million in 2007, mainly as a result of a
decrease in earnings at Yatela, Sadiola and Morila mines in Mali, which reported attributable earnings of $17 million,
$10 million and $18 million, respectively, in 2007 compared to $26 million, $28 million and $37 million, respectively, in 2006. In
2007, the Company recorded an impairment loss of $14 million on its investment held in TSG.
decrease in earnings at Yatela, Sadiola and Morila mines in Mali, which reported attributable earnings of $17 million,
$10 million and $18 million, respectively, in 2007 compared to $26 million, $28 million and $37 million, respectively, in 2006. In
2007, the Company recorded an impairment loss of $14 million on its investment held in TSG.
Taxation expense/benefit
A net taxation expense of $118 million was recorded in 2007 compared to a net tax expense of $122 million recorded in 2006.
Charges for current tax in 2007 amounted to $191 million compared to $156 million in 2006. Charges for deferred tax in 2007
amounted to a net tax benefit of $73 million compared to a net tax benefit of $34 million in 2006. The increase in the taxation
charge in 2007 partly relates to the higher gold price and a reduction in unredeemed capital expenditure. The increase in the
deferred tax benefit over 2006 is mainly higher unrealized non-hedge derivative losses as a result of the higher gold price.
Deferred tax in 2007 include a tax benefit of $28 million arising from an increase in tax losses in Ghana and a tax expense at
$23 million as a result of a change to the estimated deferred tax rate in South Africa.
Charges for current tax in 2007 amounted to $191 million compared to $156 million in 2006. Charges for deferred tax in 2007
amounted to a net tax benefit of $73 million compared to a net tax benefit of $34 million in 2006. The increase in the taxation
charge in 2007 partly relates to the higher gold price and a reduction in unredeemed capital expenditure. The increase in the
deferred tax benefit over 2006 is mainly higher unrealized non-hedge derivative losses as a result of the higher gold price.
Deferred tax in 2007 include a tax benefit of $28 million arising from an increase in tax losses in Ghana and a tax expense at
$23 million as a result of a change to the estimated deferred tax rate in South Africa.
Comparison of financial performance in 2006 with 2005
Revenues
Revenues from product sales and other income increased by $230 million from $2,485 million in 2005 to $2,715 million in
2006, representing a 9 percent increase over the period. This increase was primarily due to the increase in the spot price of
gold in 2006. The average spot price of gold was $604 per ounce during 2006, $159 per ounce, or 36 percent, higher than
$445 per ounce, the average spot price of gold in 2005. The majority of product sales consisted of US dollar-denominated gold
sales.
2006, representing a 9 percent increase over the period. This increase was primarily due to the increase in the spot price of
gold in 2006. The average spot price of gold was $604 per ounce during 2006, $159 per ounce, or 36 percent, higher than
$445 per ounce, the average spot price of gold in 2005. The majority of product sales consisted of US dollar-denominated gold
sales.
Total revenues from the South African operations increased by $298 million to $1,513 million from $1,215 million realized in
2005, a 25 percent increase, mainly as a result of the higher gold price. The increase in revenues was partly offset by the
reduced gold production at the South African operations as both volumes (2,554,000 ounces in 2006 compared to
2,676,000 ounces in 2005) and grade decreased.
2005, a 25 percent increase, mainly as a result of the higher gold price. The increase in revenues was partly offset by the
reduced gold production at the South African operations as both volumes (2,554,000 ounces in 2006 compared to
2,676,000 ounces in 2005) and grade decreased.
Total revenues generated by Cerro Vanguardia, the Argentinean operation increased marginally from $99 million in 2005 to
$118 million in 2006 on flat volumes. Volumes of ore processed increased, but gold produced only increased marginally by
4,000 ounces due to grade yield declines from 7.7 grammes per tonne to 7.29 grammes per tonne.
$118 million in 2006 on flat volumes. Volumes of ore processed increased, but gold produced only increased marginally by
4,000 ounces due to grade yield declines from 7.7 grammes per tonne to 7.29 grammes per tonne.
The Australian operation at Sunrise Dam increased production to 465,000 ounces from 455,000 ounces in 2005. Average
recovered grade declined by 8 percent which was offset by increased tonnage processed from the underground operation.
Total revenues increased from $208 million in 2005 to $307 million in 2006.
recovered grade declined by 8 percent which was offset by increased tonnage processed from the underground operation.
Total revenues increased from $208 million in 2005 to $307 million in 2006.
The two operations in Brazil produced 339,000 attributable ounces. Year-on-year volumes of ore processed increased with an
increase in average grades recovered resulting in total revenues of $258 million in 2006 compared to $184 million in 2005.
increase in average grades recovered resulting in total revenues of $258 million in 2006 compared to $184 million in 2005.
Total revenues generated from operations situated in Ghana amounted to $330 million in 2006, compared to $337 million in
2005.
2005.
Total revenues generated in Guinea amounted to $167 million in 2006 compared to $137 million in 2005.
Tanzania recorded total revenues of $199 million in 2006 compared to $258 million in 2005 due to the reduction in production
of nearly 50 percent due to delays in the cutback at the Nyankanga pit and weather related issues.
of nearly 50 percent due to delays in the cutback at the Nyankanga pit and weather related issues.
132
Production costs
Production costs decreased from $1,642 million in 2005 to $1,539 million in 2006, which represents a $103 million, or 6 percent
decrease. In South Africa, production costs decreased by $133 million to $683 million in 2006 from $816 million in 2005
primarily due to a continued focus on cost saving initiatives assisted by the weakening of the South African rand relative to the
US dollar. About 44 percent of AngloGold Ashanti’s production costs were denominated in South African rands in 2006.
decrease. In South Africa, production costs decreased by $133 million to $683 million in 2006 from $816 million in 2005
primarily due to a continued focus on cost saving initiatives assisted by the weakening of the South African rand relative to the
US dollar. About 44 percent of AngloGold Ashanti’s production costs were denominated in South African rands in 2006.
Production costs recorded from operations situated in Brazil increased from $67 million in 2005 to $89 million in 2006 primarily
due to the strengthening of the Brazilian real relative to the US dollar.
due to the strengthening of the Brazilian real relative to the US dollar.
Exploration costs
Exploration costs increased to $58 million in 2006 from $44 million in 2005. During 2006, exploration activities in new areas
were primarily focused on the Tropicana project in Western Australia, in Colombia and the Democratic Republic of Congo.
Joint ventures and partnerships with other companies facilitated additional exploration activities in Russia, China, Laos and the
Philippines. For a discussion of AngloGold Ashanti’s exploration activities in 2006, see “Item 4B.: Business overview – Global
exploration”.
were primarily focused on the Tropicana project in Western Australia, in Colombia and the Democratic Republic of Congo.
Joint ventures and partnerships with other companies facilitated additional exploration activities in Russia, China, Laos and the
Philippines. For a discussion of AngloGold Ashanti’s exploration activities in 2006, see “Item 4B.: Business overview – Global
exploration”.
Related party transactions
Related party transactions in 2006 amounted to a credit (representing purchases by related parties) of $6 million compared
with an expense (representing purchases from related parties) of $37 million in 2005 mainly due to the change in shareholding
by Anglo American plc, which divested of approximately 20 percent of its holding in April 2006, resulting in fewer entities
fulfilling the related party definition due to the relationship changing from a subsidiary of Anglo American plc to an associate of
Anglo American plc. The Company continued to transact with Anglo American entities when price, service and quality factors
supported this. For a detailed discussion of related party transactions, see “Item 7B.: Related party transactions”.
with an expense (representing purchases from related parties) of $37 million in 2005 mainly due to the change in shareholding
by Anglo American plc, which divested of approximately 20 percent of its holding in April 2006, resulting in fewer entities
fulfilling the related party definition due to the relationship changing from a subsidiary of Anglo American plc to an associate of
Anglo American plc. The Company continued to transact with Anglo American entities when price, service and quality factors
supported this. For a detailed discussion of related party transactions, see “Item 7B.: Related party transactions”.
General and administrative
General and administrative expenses increased from $71 million in 2005 to $140 million in 2006, mainly due to $61 million
share-based payment expense included in 2006 compared to $2 million in 2005.
share-based payment expense included in 2006 compared to $2 million in 2005.
Royalties
Royalties paid by AngloGold Ashanti increased from $39 million in 2005 to $59 million paid in 2006 primarily due to higher spot
prices, with royalties in Australia, Argentina, Tanzania and the USA amounting to $7 million, $11 million, $5 million and
$2 million, respectively, in 2006 compared with $5 million, $8 million, $7 million and $4 million, respectively, in 2005. Royalties
paid in Ghana and Guinea amounted to $33 million in 2006 compared to $15 million in 2005. Australian royalties are payable to
the government as specified in the relevant legislation in each State or Territory based on ounces produced. In Argentina,
royalties are payable to Fomicruz, a State owned company in the Santa Cruz Province, being the minority shareholder of the
Cerro Vanguardia operation calculated as a percentage of revenues. In Ghana, royalties are payable to the government at a
fixed rate of 3 percent per annum based on revenue, as agreed to under the Stability Agreement entered into with AngloGold
as part of the AngloGold Ashanti business combination. In Guinea, royalties are paid to the government, Union Miniere and the
International Finance Corporation calculated as a percentage of revenues. In Tanzania, royalties for Geita, are payable to the
Tanzanian government calculated as a percentage of revenues. In the USA, royalties are payable to a small number of private
claim holders based on ounces produced and percentage ownership of the specific claim being mined.
prices, with royalties in Australia, Argentina, Tanzania and the USA amounting to $7 million, $11 million, $5 million and
$2 million, respectively, in 2006 compared with $5 million, $8 million, $7 million and $4 million, respectively, in 2005. Royalties
paid in Ghana and Guinea amounted to $33 million in 2006 compared to $15 million in 2005. Australian royalties are payable to
the government as specified in the relevant legislation in each State or Territory based on ounces produced. In Argentina,
royalties are payable to Fomicruz, a State owned company in the Santa Cruz Province, being the minority shareholder of the
Cerro Vanguardia operation calculated as a percentage of revenues. In Ghana, royalties are payable to the government at a
fixed rate of 3 percent per annum based on revenue, as agreed to under the Stability Agreement entered into with AngloGold
as part of the AngloGold Ashanti business combination. In Guinea, royalties are paid to the government, Union Miniere and the
International Finance Corporation calculated as a percentage of revenues. In Tanzania, royalties for Geita, are payable to the
Tanzanian government calculated as a percentage of revenues. In the USA, royalties are payable to a small number of private
claim holders based on ounces produced and percentage ownership of the specific claim being mined.
Market development costs
Market development costs increased from $13 million in 2005 to $16 million in 2006. AngloGold Ashanti remains a member of
the World Gold Council (WGC) and through its membership receives assistance in all its marketing endeavors. For a detailed
discussion on market development see “Item 4B.: Business overview – Gold market development”.
the World Gold Council (WGC) and through its membership receives assistance in all its marketing endeavors. For a detailed
discussion on market development see “Item 4B.: Business overview – Gold market development”.
133
Depreciation, depletion and amortization
Depreciation, depletion and amortization expense increased by $106 million or 18 percent, to $699 million in 2006 when
compared to $593 million recorded in 2005. In South Africa, depreciation, depletion and amortization expense increased from
$248 million in 2005 to $324 million in 2006, mainly due to the impact of Moab Khotsong mine coming into commercial
production from January 1, 2006.
compared to $593 million recorded in 2005. In South Africa, depreciation, depletion and amortization expense increased from
$248 million in 2005 to $324 million in 2006, mainly due to the impact of Moab Khotsong mine coming into commercial
production from January 1, 2006.
Impairment of assets
In 2006, AngloGold Ashanti recorded impairments amounting to $6 million. These related to the impairment and write-off of
various minor tangible assets and equipment.
various minor tangible assets and equipment.
In 2005, AngloGold Ashanti recorded impairments amounting to $141 million. These related to Bibiani in Ghana of $41 million;
in South Africa – mine development costs of $6 million were impaired as a review of certain properties and access
development identified that they will not generate future cash flows. The tax rate concession which was granted by the
in South Africa – mine development costs of $6 million were impaired as a review of certain properties and access
development identified that they will not generate future cash flows. The tax rate concession which was granted by the
government of Ghana at a rate of 30 percent in negotiations for the Ashanti business combination in 2004 amounting to
$20 million was fully impaired during 2005 as the corporate tax rate in Ghana was revised down to 25 percent. Due to a
change in intention to exploit certain properties in South Africa, acquired at the formation of AngloGold, AngloGold Ashanti
recorded an impairment of $74 million in 2005.
$20 million was fully impaired during 2005 as the corporate tax rate in Ghana was revised down to 25 percent. Due to a
change in intention to exploit certain properties in South Africa, acquired at the formation of AngloGold, AngloGold Ashanti
recorded an impairment of $74 million in 2005.
Interest expense
Interest expense decreased by $3 million from $80 million recorded in 2005 to $77 million in 2006. The decrease in interest
expense from 2005 was mainly due to higher cash resources available as a result of the higher average gold price in the year
and the effects of the equity raising completed in April 2006. Mostly all of AngloGold Ashanti’s debt (exclusive of the rand
denominated corporate bond and local South African borrowings) was denominated in US dollars in 2006.
expense from 2005 was mainly due to higher cash resources available as a result of the higher average gold price in the year
and the effects of the equity raising completed in April 2006. Mostly all of AngloGold Ashanti’s debt (exclusive of the rand
denominated corporate bond and local South African borrowings) was denominated in US dollars in 2006.
Accretion expense
Accretion expense of $13 million was recorded in 2006 compared with $5 million in 2005. Accretion relates to the unwinding of
discounted future reclamation obligations to present values and increases the reclamation obligations to its future estimated
payout.
discounted future reclamation obligations to present values and increases the reclamation obligations to its future estimated
payout.
Employment severance cost
Employment severance costs decreased to $22 million in 2006 from $26 million in 2005. The 2006 expense included
retrenchment costs of $7 million in the South African region (at Great Noligwa, Kopanang, Tau Lekoa, TauTona and Mponeng)
and $15 million in Ghana (at Obuasi) due to a planned reduction in workforce.
retrenchment costs of $7 million in the South African region (at Great Noligwa, Kopanang, Tau Lekoa, TauTona and Mponeng)
and $15 million in Ghana (at Obuasi) due to a planned reduction in workforce.
Profit on sale of assets, realization of loans, indirect taxes and other
A profit on sale of assets of $36 million recorded in 2006 compared to a profit of $3 million recorded in 2005. This consists
mainly of profit on the disposal of land, mineral rights and exploration properties, the recovery of loans previously written off
and the reassessment of indirect taxes in Tanzania.
mainly of profit on the disposal of land, mineral rights and exploration properties, the recovery of loans previously written off
and the reassessment of indirect taxes in Tanzania.
134
Non-hedge derivative loss
A loss on non-hedge derivatives of $208 million, being derivatives not designated in formal hedge accounting relationships,
was recorded in 2006 compared to a loss of $142 million in 2005 relating to the use of non-hedging instruments. Non-hedge
derivatives recorded for the years ended December 31, 2006 and 2005 included:
was recorded in 2006 compared to a loss of $142 million in 2005 relating to the use of non-hedging instruments. Non-hedge
derivatives recorded for the years ended December 31, 2006 and 2005 included:
Year ended December 31,
2006
2005
(in US Dollars, millions)
Gains on realized non-hedge derivatives
(383)
(148)
Loss on unrealized non-hedge derivatives
591
277
Interest rate swap
-
13
Net loss
208
142
Other operating items
Other operating items, consisting of provision for loss on future deliveries of other commodities and unrealized loss on other
commodity physical borrowings increased from $9 million in 2005 to $16 million in 2006, mainly due to an increase in the price
of other commodities.
commodity physical borrowings increased from $9 million in 2005 to $16 million in 2006, mainly due to an increase in the price
of other commodities.
Equity income in affiliates
Equity income in equity method investments increased from $39 million in 2005 to $99 million in 2006, mainly as a result of an
increase in earnings at Yatela and Sadiola mines in Mali, which reported attributable earnings of $26 million and $28 million,
respectively, in 2006 compared to $5 million and $(1) million, respectively, in 2005. In 2006, the Company recorded an
impairment loss of $7 million on its investment held in TSG.
increase in earnings at Yatela and Sadiola mines in Mali, which reported attributable earnings of $26 million and $28 million,
respectively, in 2006 compared to $5 million and $(1) million, respectively, in 2005. In 2006, the Company recorded an
impairment loss of $7 million on its investment held in TSG.
Taxation expense/benefit
A net taxation expense of $122 million was recorded in 2006 compared to a net tax benefit of $121 million recorded in 2005.
Charges for current tax in 2006 amounted to $156 million compared to $70 million in 2005. Charges for deferred tax in 2006
amounted to a net tax benefit of $34 million compared to a net tax benefit of $191 million in 2005. The increase in the current
taxation change over 2005 is mainly as a result of a reduced net loss, an increase in the effective taxation rates, the effect of
non-allowable deductions mainly related to hedge losses in non-taxable jurisdictions, BEE transactions and the effect of certain
foreign entities exiting their tax holidays. Deferred tax in 2006 include a tax benefit of $21 million resulting from an extension of
tax losses granted by the Ghanaian Taxation Authorities which would have been forfeited during the current year as well as a
tax expense at $65 million as a result of a change to the estimated deferred tax rate in South Africa, reflecting the impact of the
South African mining tax formula to the decrease in the earnings at the operations in that country.
Charges for current tax in 2006 amounted to $156 million compared to $70 million in 2005. Charges for deferred tax in 2006
amounted to a net tax benefit of $34 million compared to a net tax benefit of $191 million in 2005. The increase in the current
taxation change over 2005 is mainly as a result of a reduced net loss, an increase in the effective taxation rates, the effect of
non-allowable deductions mainly related to hedge losses in non-taxable jurisdictions, BEE transactions and the effect of certain
foreign entities exiting their tax holidays. Deferred tax in 2006 include a tax benefit of $21 million resulting from an extension of
tax losses granted by the Ghanaian Taxation Authorities which would have been forfeited during the current year as well as a
tax expense at $65 million as a result of a change to the estimated deferred tax rate in South Africa, reflecting the impact of the
South African mining tax formula to the decrease in the earnings at the operations in that country.
Cumulative effect of accounting change
Cumulative effect of accounting change was $nil in 2006 compared to $22 million in 2005.
135
Cut-off adjustments
On September 13, 2006, the SEC staff published Staff Accounting Bulletin (SAB) No. 108, “Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 (SAB
Topic 1.N) addresses quantifying the financial statement effects of misstatements, specifically, how the effects of prior year
uncorrected errors must be considered in quantifying misstatements in the current year financial statements.
Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”). SAB 108 (SAB
Topic 1.N) addresses quantifying the financial statement effects of misstatements, specifically, how the effects of prior year
uncorrected errors must be considered in quantifying misstatements in the current year financial statements.
As part of the 2006 year end financial statement close process the Company quantified the balance sheet impact and
determined that it would only have a material effect in the reporting of “Payroll and related benefits”, which is separately
identified on the face of the balance sheet for all years presented. The other accounts that were affected are Tangible Assets
– Mine development costs; Inventories – Gold in process; Deferred taxation; Cash and cash equivalents; Trade accounts
payable and Payroll and related benefits.
determined that it would only have a material effect in the reporting of “Payroll and related benefits”, which is separately
identified on the face of the balance sheet for all years presented. The other accounts that were affected are Tangible Assets
– Mine development costs; Inventories – Gold in process; Deferred taxation; Cash and cash equivalents; Trade accounts
payable and Payroll and related benefits.
The Company previously considered the above errors to be immaterial under the rollover method and evaluated the
misstatement against the current year financial statements under both the rollover and iron curtain methods.
misstatement against the current year financial statements under both the rollover and iron curtain methods.
In accordance with the transition provisions provided in SAB 108 the cumulative effect of applying SAB 108 was recorded as
an adjustment to opening retained earnings and is summarized below:
an adjustment to opening retained earnings and is summarized below:
(in millions)
$
Assets
Tangible Assets – Mine development costs
3 (increase)
Inventories – Gold in process
1
(increase)
Deferred taxation
5 (increase)
Trade receivables
5 (decrease)
Liabilities
Trade accounts payable
3 (increase)
Payroll and related benefits
10 (increase)
Other creditors
2
(increase)
Retained earnings
11 (decrease)
5B.
Liquidity and capital resources
Operating activities
2007
Net cash provided by operating activities was $561 million in 2007, 27 percent lower than the 2006 amount of $770 million. The
decrease in net cash provided by operations was mainly as a result of higher payments to suppliers, partly offset by a higher
average gold price received for the year.
decrease in net cash provided by operations was mainly as a result of higher payments to suppliers, partly offset by a higher
average gold price received for the year.
Net cash outflow from operating working capital items amounted to $170 million in 2007, compared with an outflow of
$32 million in 2006.
$32 million in 2006.
A detailed discussion of the movement in net loss is included in the comparison of 2007 with 2006 under “Item 5A: Operating
results”.
results”.
2006
Net cash provided by operating activities was $770 million in 2006, 122 percent higher than the 2005 amount of $347 million.
The increase in net cash provided by operations over that achieved in 2005 is mainly due to the higher profitability achieved as
a result of the increased average gold price in 2006, compared to that in 2005, partially offset by costs increases.
The increase in net cash provided by operations over that achieved in 2005 is mainly due to the higher profitability achieved as
a result of the increased average gold price in 2006, compared to that in 2005, partially offset by costs increases.
136
Net cash outflow from operating working capital items amounted to $32 million in 2006, compared with an outflow of $13 million
in 2005.
in 2005.
A detailed discussion of the movement in net loss is included in the comparison of 2006 with 2005 under “Item 5A: Operating
results”.
results”.
Investing activities
2007
Investing activities in 2007 resulted in a net cash outflow of $1,031 million compared with a net cash outflow of $611 million in
2006. The major component of cash outflows was in additions to property, plants and equipment which included capital
expenditure of $1,015 million, compared to $811 million in 2006, with the major capital projects at Mponeng, TauTona, Moab
Khotsong in South Africa, at Boddington mine in Australia and the Cuiabá expansion in Brazil. Cash paid for the two
companies acquired from TSG amounted to $40 million in 2007.
2006. The major component of cash outflows was in additions to property, plants and equipment which included capital
expenditure of $1,015 million, compared to $811 million in 2006, with the major capital projects at Mponeng, TauTona, Moab
Khotsong in South Africa, at Boddington mine in Australia and the Cuiabá expansion in Brazil. Cash paid for the two
companies acquired from TSG amounted to $40 million in 2007.
2006
Investing activities in 2006 resulted in a net cash outflow of $611 million compared with a net cash outflow of $624 million in
2005. The major component of cash outflows was in additions to property, plants and equipment which included capital
expenditure of $811 million, compared to $710 million in 2005, with the major capital projects at the Cuiabá mine in Brazil, the
Sunrise Dam and Boddington mines in Australia.
2005. The major component of cash outflows was in additions to property, plants and equipment which included capital
expenditure of $811 million, compared to $710 million in 2005, with the major capital projects at the Cuiabá mine in Brazil, the
Sunrise Dam and Boddington mines in Australia.
Financing activities
2007
Net cash generated by financing activities increased by $343 million from an inflow of $119 million in 2006 to an inflow of
$462 million in 2007. In 2007, drawdown’s on existing and the new $1,150 million Syndicated loan facility raised $843 million
and debt repayments, which included $375 million on the $700 million Syndicated loan facility, totaled $520 million.
$462 million in 2007. In 2007, drawdown’s on existing and the new $1,150 million Syndicated loan facility raised $843 million
and debt repayments, which included $375 million on the $700 million Syndicated loan facility, totaled $520 million.
Dividends paid increased from $132 million (39 US cents or 272 South African cents per share) in 2006 to $144 million (44 US
cents or 330 South African cents per share) in 2007. AngloGold Ashanti declares interim dividends at the time of announcing
its interim results and declares and pays final dividends in the following year based on the previous year's results.
cents or 330 South African cents per share) in 2007. AngloGold Ashanti declares interim dividends at the time of announcing
its interim results and declares and pays final dividends in the following year based on the previous year's results.
2006
Net cash generated by financing activities decreased by $81 million from an inflow of $200 million in 2005 to an inflow of
$119 million in 2006. During the year equity issues resulted in an inflow of $512 million, drawdown’s on existing facilities raised
$158 million and during the year debt repayments totaled $552 million.
$119 million in 2006. During the year equity issues resulted in an inflow of $512 million, drawdown’s on existing facilities raised
$158 million and during the year debt repayments totaled $552 million.
Dividends paid decreased from $169 million (56 US cents or 350 South African cents per share) in 2005 to $132 million (39 US
cents or 272 South African cents per share) in 2006. AngloGold Ashanti declares interim dividends at the time of announcing
its interim results and declares and pays final dividends in the following year based on the previous year's results.
cents or 272 South African cents per share) in 2006. AngloGold Ashanti declares interim dividends at the time of announcing
its interim results and declares and pays final dividends in the following year based on the previous year's results.
Liquidity
AngloGold Ashanti’s revenues are derived primarily from the sale of gold produced at its mines. Cash generated by operating
activities is therefore the function of gold produced sold at a specific price. As the market price of gold can fluctuate widely,
this may negatively impact on the profitability of the Company’s operations and the cash flows generated by these operations.
The Company uses a number of products, including derivatives, to manage gold price and foreign exchange risks that arise out
of the Company’s core business activities to limit the impact on the profitability of the Company’s operations and generated
cash flows.
activities is therefore the function of gold produced sold at a specific price. As the market price of gold can fluctuate widely,
this may negatively impact on the profitability of the Company’s operations and the cash flows generated by these operations.
The Company uses a number of products, including derivatives, to manage gold price and foreign exchange risks that arise out
of the Company’s core business activities to limit the impact on the profitability of the Company’s operations and generated
cash flows.
137
AngloGold Ashanti’s cash and cash equivalents increased to $477 million at December 31, 2007 compared with $471 million at
December 31, 2006. In accordance with South African Reserve Bank regulations, cash generated by South African operations
is held in rands. At December 31, 2007, approximately 34 percent of the Company’s cash and cash equivalents were held in
US dollars, 44 percent were held in South African rands, 6 percent were held in Australian dollars and 16 percent were held in
other currencies.
December 31, 2006. In accordance with South African Reserve Bank regulations, cash generated by South African operations
is held in rands. At December 31, 2007, approximately 34 percent of the Company’s cash and cash equivalents were held in
US dollars, 44 percent were held in South African rands, 6 percent were held in Australian dollars and 16 percent were held in
other currencies.
AngloGold Ashanti’s short-term debt increased to $319 million at December 31, 2007 from $33 million at December 31, 2006.
Included in the short-term debt at December 31, 2007, was:
Included in the short-term debt at December 31, 2007, was:
·
the fixed semi-annual coupon of 2.375 percent payable on a US dollar-based convertible bond; and
·
the amount outstanding of $304 million on a rand-based corporate bond due in 2008.
AngloGold Ashanti’s long-term debt increased to $1,564 million at December 31, 2007 compared with $1,472 million at
December 31, 2006. As at December 31, 2007, the Company had the following attributable borrowings outstanding:
December 31, 2006. As at December 31, 2007, the Company had the following attributable borrowings outstanding:
Unsecured loans:
·
$1,008 million is outstanding on the convertible bond (fixed semi-annual coupon of 2.375 percent per annum; the
convertible bond is convertible into ADSs up to its maturity in February 2009 and is US dollar-based);
convertible bond is convertible into ADSs up to its maturity in February 2009 and is US dollar-based);
·
$526 million is outstanding under the $1,150 million syndicated loan facility (interest charged at LIBOR plus 0.4 percent
per annum; the loan is repayable in December 2010 and is US dollar-based); and
per annum; the loan is repayable in December 2010 and is US dollar-based); and
·
$304 million is outstanding on the corporate bond (fixed semi-annual coupon of 10.5 percent per annum; the corporate
bond is repayable on August 28, 2008 and is rand-based).
bond is repayable on August 28, 2008 and is rand-based).
Secured capital leases:
·
$37 million is repayable to Turbine Square Two (Proprietary) Limited for buildings financed (interest charged at an implied
rate of 9.8 percent per annum, lease payments are payable in monthly installments terminating in March 2022, are rand-
based and the buildings financed are used as security for these loans);
rate of 9.8 percent per annum, lease payments are payable in monthly installments terminating in March 2022, are rand-
based and the buildings financed are used as security for these loans);
·
$5 million is repayable under the Senstar Capital Corporation loans (interest charged at an average rate of 6.9 percent
per annum, the loans are repayable in monthly installments terminating in November 2009, are US dollar-based and the
equipment financed is used as security for these loans); and
per annum, the loans are repayable in monthly installments terminating in November 2009, are US dollar-based and the
equipment financed is used as security for these loans); and
·
$2 million is repayable to Terex Africa (Proprietary) Limited for equipment financed (interest charged at an average rate of
9.0 percent per annum, the loan is repayable in January 2008, is US dollar-based and the equipment financed is used as
security for this loan).
9.0 percent per annum, the loan is repayable in January 2008, is US dollar-based and the equipment financed is used as
security for this loan).
Unsecured capital leases:
·
$1 million is repayable to Csilatina Arrendamento Mercantil S.A. (interest charged at an average rate of 5.0 percent per
annum, loans are repayable in monthly installments terminating in October 2010 and are Brazilian real-based).
annum, loans are repayable in monthly installments terminating in October 2010 and are Brazilian real-based).
As at December 31, 2007, AngloGold Ashanti’s total long-term debt, including the short-term portion maturing within 2008, was
made up as follows:
made up as follows:
$ (million)
Unsecured loans (including unsecured capital leases)
1,839
Secured capital leases
44
Total
1,883
Less: Short-term maturities
319
Long-term debt
1,564
138
Debt repayments are scheduled as follows:
$ (million)
2008
319
2009
1,006
2010
528
2011
3
2012
3
Thereafter
24
Total
1,883
AngloGold Ashanti currently expects to repay debt maturing in 2008 from existing cash resources, cash generated by
operations and existing credit facilities.
operations and existing credit facilities.
At December 31, 2007 the currencies in which the borrowings were denominated were as follows:
$ (million)
United States dollars
1,391
South African rands
341
Australian dollars
150
Brazilian real
1
Total
1,883
Repayments of short-term and long-term borrowings amounted to $520 million and $nil million, respectively, in 2007.
At December 31, 2007, AngloGold Ashanti had the following undrawn under its borrowing facilities:
$ (million)
Syndicated loan ($1,150 million) – US dollar
(1)
627
FirstRand Bank Limited – US dollar
50
Absa Bank Limited – US Dollar
42
Nedbank Limited – US Dollar
2
Standard Bank of South Africa Limited – Rands
38
FirstRand Bank Limited – Rands
32
Nedbank Limited – Rands
7
Absa Bank Limited – Rands
4
Commerzbank AG – Rands
3
ABN Amro Bank N.V. – Rands
1
ABN Amro Bank N.V. – Euros
7
Total undrawn
813
(1)
Expires December 2010.
AngloGold Ashanti had no other committed lines of credit as of December 31, 2007.
Capital expenditure is expected to be approximately $1,262 million in 2008. AngloGold Ashanti intends to finance these capital
expenditures and scheduled debt repayments in 2008 from cash on hand, cash flow from operations, existing credit facilities
and, potentially, additional credit facilities or debt instruments. AngloGold Ashanti intends to refinance its convertible bond due
February 2009 with the proceeds of an equity-linked instrument, the principal amount of which may exeed the existing
convertible bond. The structure, size and timing of such an issue will depend upon prevailing market conditions.
expenditures and scheduled debt repayments in 2008 from cash on hand, cash flow from operations, existing credit facilities
and, potentially, additional credit facilities or debt instruments. AngloGold Ashanti intends to refinance its convertible bond due
February 2009 with the proceeds of an equity-linked instrument, the principal amount of which may exeed the existing
convertible bond. The structure, size and timing of such an issue will depend upon prevailing market conditions.
AngloGold Ashanti, through its executive and treasury committees, reviews its short-, medium- and long-term funding, treasury
and liquidity requirements and positions monthly. The board of directors also reviews these on a quarterly basis at its meetings.
and liquidity requirements and positions monthly. The board of directors also reviews these on a quarterly basis at its meetings.
139
Capital commitments and contingencies
At December 31, 2007, the following significant capital commitments and contingencies are applicable to AngloGold Ashanti:
·
Capital commitments and contingent liabilities of AngloGold Ashanti include total contracted capital expenditure of
approximately $436 million and total authorized capital expenditure not yet contracted of approximately $809 million. The
expenditure is expected to be financed from existing cash resources, cash generated by operations and debt facilities.
approximately $436 million and total authorized capital expenditure not yet contracted of approximately $809 million. The
expenditure is expected to be financed from existing cash resources, cash generated by operations and debt facilities.
·
The Company has identified a number of groundwater pollution sites at its current operations in South Africa and has
investigated a number of different technologies and methodologies that could possibly be used to remediate the pollution
plumes. The geology of the area is typified by a dolomite rock formation that is prone to solution cavities. Polluted
process water from the operations has percolated from pollution sources to this rock formation and has been transported
three dimensionally, creating pollution plumes in the dolomite aquifer. Numerous scientific, technical and legal reports
have been produced and the remedying of the polluted soil and groundwater is the subject of a continued research
program between the University of the Witwatersrand and the Company. Subject to the technology being developed as a
proven remediation technique, no reliable estimate can be made for the obligation.
investigated a number of different technologies and methodologies that could possibly be used to remediate the pollution
plumes. The geology of the area is typified by a dolomite rock formation that is prone to solution cavities. Polluted
process water from the operations has percolated from pollution sources to this rock formation and has been transported
three dimensionally, creating pollution plumes in the dolomite aquifer. Numerous scientific, technical and legal reports
have been produced and the remedying of the polluted soil and groundwater is the subject of a continued research
program between the University of the Witwatersrand and the Company. Subject to the technology being developed as a
proven remediation technique, no reliable estimate can be made for the obligation.
·
Mineração Serra Grande S.A. (MSG), the operator of the Crixas mine in Brazil, has received two tax assessments from
the State of Goiás related to payments of sales taxes on gold deliveries for export namely, one assessment for the period
between February 2004 and June 2005 and the other for the period between July 2005 and May 2006. The tax authorities
maintain that whenever a taxpayer exports gold mined in the State of Goiás through a branch located in a different
Brazilian state, it must obtain an authorization from the Goiás State Treasury by means of a Special Regime Agreement
(Termo de Acordo re Regime Especial – TARE). The MSG operation is co-owned with Kinross Gold Corporation. The
Company’s attributable share of the first assessment is approximately $39 million. Although MSG requested the TARE in
early 2004, the TARE, which authorized the remittance of gold to the Company’s branch in Minas Gerais specifically for
export purposes, was only granted and executed in May 2006. In November 2006 the administrative council’s second
chamber ruled in favor of MSG and fully canceled the tax liability related to the first period. The State of Goiás has
appealed to the full board of the State of Goiás tax administrative council. The second assessment was issued by the
State of Goiás in October 2006 on the same grounds as the first assessment, and the Company’s attributable share of the
assessment is approximately $24 million. The Company believes both assessments are in violation of federal legislation
on sales taxes.
the State of Goiás related to payments of sales taxes on gold deliveries for export namely, one assessment for the period
between February 2004 and June 2005 and the other for the period between July 2005 and May 2006. The tax authorities
maintain that whenever a taxpayer exports gold mined in the State of Goiás through a branch located in a different
Brazilian state, it must obtain an authorization from the Goiás State Treasury by means of a Special Regime Agreement
(Termo de Acordo re Regime Especial – TARE). The MSG operation is co-owned with Kinross Gold Corporation. The
Company’s attributable share of the first assessment is approximately $39 million. Although MSG requested the TARE in
early 2004, the TARE, which authorized the remittance of gold to the Company’s branch in Minas Gerais specifically for
export purposes, was only granted and executed in May 2006. In November 2006 the administrative council’s second
chamber ruled in favor of MSG and fully canceled the tax liability related to the first period. The State of Goiás has
appealed to the full board of the State of Goiás tax administrative council. The second assessment was issued by the
State of Goiás in October 2006 on the same grounds as the first assessment, and the Company’s attributable share of the
assessment is approximately $24 million. The Company believes both assessments are in violation of federal legislation
on sales taxes.
·
Morro Velho and AngloGold Ashanti Brasil Mineração are involved in disputes with tax authorities. These disputes
involve eleven federal tax assessments including income tax, social contributions and annual property tax based on
ownership of properties outside of urban perimeters (ITR). Tax authorities are claiming that the amount owing is
$8 million.
involve eleven federal tax assessments including income tax, social contributions and annual property tax based on
ownership of properties outside of urban perimeters (ITR). Tax authorities are claiming that the amount owing is
$8 million.
·
MSG received a tax assessment in October 2003 from the State of Minas Gerais related to sales taxes of $8 million, on
gold allegedly returned from the branch in Minas Gerais to the company head office in the State of Goiás. The tax
administrators rejected the Company’s appeal against the assessment. The Company is now appealing the dismissal of
the case at the judicial sphere.
gold allegedly returned from the branch in Minas Gerais to the company head office in the State of Goiás. The tax
administrators rejected the Company’s appeal against the assessment. The Company is now appealing the dismissal of
the case at the judicial sphere.
·
AngloGold Offshore Investments Limited, a wholly owned subsidiary of the Company, has guaranteed 50 percent
($40 million) of the Nufcor International Limited loan facility with FirstRand (Ireland) plc (formerly RMB International
(Dublin) Limited). Nufcor International Limited is accounted for under the equity method.
($40 million) of the Nufcor International Limited loan facility with FirstRand (Ireland) plc (formerly RMB International
(Dublin) Limited). Nufcor International Limited is accounted for under the equity method.
·
The Company has provided surety in favor of the lender in respect of gold loan facilities to wholly-owned subsidiaries of
Oro Group (Proprietary) Limited an affiliate of the Company. The Company has a total maximum liability, in terms of the
suretyships, of R100 million ($15 million). The suretyship agreements have a termination notice period of 90 days. The
probability of the non-performance under the suretyships is considered minimal, based on factors of no prior defaults,
being well-established companies and recourse via general notarial bonds over the gold stocks of the subsidiaries of the
Oro Group. These bonds should enable the Company to recover the majority of the guaranteed amount. The Company
receives a fee from the associate for providing the surety and has assessed the possibility of a claim for non-
performance.
Oro Group (Proprietary) Limited an affiliate of the Company. The Company has a total maximum liability, in terms of the
suretyships, of R100 million ($15 million). The suretyship agreements have a termination notice period of 90 days. The
probability of the non-performance under the suretyships is considered minimal, based on factors of no prior defaults,
being well-established companies and recourse via general notarial bonds over the gold stocks of the subsidiaries of the
Oro Group. These bonds should enable the Company to recover the majority of the guaranteed amount. The Company
receives a fee from the associate for providing the surety and has assessed the possibility of a claim for non-
performance.
·
Pursuant to US environmental and mining requirements, gold mining companies are obligated to close their operations
and rehabilitate the lands that they mine in accordance with these requirements. AngloGold Ashanti USA has posted
reclamation bonds with various federal and state governmental agencies to cover potential rehabilitation obligations in
amounts aggregating approximately $48 million. The Company has provided a guarantee for these obligations which
would be payable in the event of AngloGold Ashanti USA not being able to meet its rehabilitation obligations. As at
December 31, 2007 the carrying value of these obligations relating to AngloGold Ashanti USA amounted to $31 million
and is included in the Provision for environmental rehabilitation in the Company's consolidated balance sheet. The
obligations will expire upon completion of such rehabilitation and release of such areas by the applicable federal and/or
state agency. There are no recourse provisions that would enable the Company to recover from third parties any of the
amounts paid under the guarantee.
and rehabilitate the lands that they mine in accordance with these requirements. AngloGold Ashanti USA has posted
reclamation bonds with various federal and state governmental agencies to cover potential rehabilitation obligations in
amounts aggregating approximately $48 million. The Company has provided a guarantee for these obligations which
would be payable in the event of AngloGold Ashanti USA not being able to meet its rehabilitation obligations. As at
December 31, 2007 the carrying value of these obligations relating to AngloGold Ashanti USA amounted to $31 million
and is included in the Provision for environmental rehabilitation in the Company's consolidated balance sheet. The
obligations will expire upon completion of such rehabilitation and release of such areas by the applicable federal and/or
state agency. There are no recourse provisions that would enable the Company to recover from third parties any of the
amounts paid under the guarantee.
140
·
The Company has guaranteed all payments and other obligations of AngloGold Ashanti Holdings plc regarding the issued
$1,000,000,000 2.375 percent convertible bonds due 2009. The Company’s obligations regarding the guarantee are
direct, unconditional and unsubordinated.
$1,000,000,000 2.375 percent convertible bonds due 2009. The Company’s obligations regarding the guarantee are
direct, unconditional and unsubordinated.
·
A guarantee of $526 million is provided for the $1.15 billion Syndicated loan facility. AngloGold Ashanti Limited,
AngloGold Ashanti Holdings plc, AngloGold Ashanti USA Incorporated and AngloGold Ashanti Australia Limited each
have guaranteed all payments and other obligations of AngloGold Ashanti Holdings plc, AngloGold Ashanti USA
Incorporated and AngloGold Ashanti Australia Limited regarding the $1.15 billion Syndicated loan facility dated
December 13, 2007. This Syndicated loan facility replaced in its entirety the $700 million revolving credit facility dated
January 26, 2005, which was repayable in January 2008.
AngloGold Ashanti Holdings plc, AngloGold Ashanti USA Incorporated and AngloGold Ashanti Australia Limited each
have guaranteed all payments and other obligations of AngloGold Ashanti Holdings plc, AngloGold Ashanti USA
Incorporated and AngloGold Ashanti Australia Limited regarding the $1.15 billion Syndicated loan facility dated
December 13, 2007. This Syndicated loan facility replaced in its entirety the $700 million revolving credit facility dated
January 26, 2005, which was repayable in January 2008.
·
The Company has issued gold delivery guarantees of $683 million to several counterpart banks in which it guarantees the
due performance of its subsidiaries AngloGold (USA) Trading Company, AngloGold South America Limited and Cerro
Vanguardia S.A. under their respective gold hedging agreements.
due performance of its subsidiaries AngloGold (USA) Trading Company, AngloGold South America Limited and Cerro
Vanguardia S.A. under their respective gold hedging agreements.
·
The Company together with its 100 percent owned subsidiary AngloGold Ashanti Holdings plc has provided guarantees to
several counterpart banks for the hedging commitments of its wholly-owned subsidiary Ashanti Treasury Services Limited
(ATS). The maximum potential amount of future payments is all moneys due, owing or incurred by ATS under or pursuant
to the hedging agreements. At December 31, 2007 the marked-to-market valuation of the ATS hedge book was negative
$1,494 million.
several counterpart banks for the hedging commitments of its wholly-owned subsidiary Ashanti Treasury Services Limited
(ATS). The maximum potential amount of future payments is all moneys due, owing or incurred by ATS under or pursuant
to the hedging agreements. At December 31, 2007 the marked-to-market valuation of the ATS hedge book was negative
$1,494 million.
·
The Company and its 100 percent owned subsidiary AngloGold Ashanti Holdings plc have issued hedging guarantees to
several counterpart banks in which they have guaranteed the due performance by Geita Management Company Limited
(GMC), of its obligations under or pursuant to the hedging agreements entered into by GMC, and to the payment of all
money owing or incurred by GMC as and when due. The guarantee shall remain in force until no sum remains to be paid
under the hedging agreements and the Bank has irrevocably recovered or received all sums payable to it under the
Hedging Agreements. The maximum potential amount of future payments is all moneys due, owing or incurred by GMC
under or pursuant to the Hedging Agreements. At December 31, 2007 the marked-to-market valuation of the GMC hedge
book was negative $520 million.
several counterpart banks in which they have guaranteed the due performance by Geita Management Company Limited
(GMC), of its obligations under or pursuant to the hedging agreements entered into by GMC, and to the payment of all
money owing or incurred by GMC as and when due. The guarantee shall remain in force until no sum remains to be paid
under the hedging agreements and the Bank has irrevocably recovered or received all sums payable to it under the
Hedging Agreements. The maximum potential amount of future payments is all moneys due, owing or incurred by GMC
under or pursuant to the Hedging Agreements. At December 31, 2007 the marked-to-market valuation of the GMC hedge
book was negative $520 million.
·
With operations in several countries on several continents, many of which are emerging markets, AngloGold Ashanti is
subject to, and pays annual taxes under the various tax regimes where it operates. Some of these tax regimes are
defined by contractual agreements with the local government, but others are defined by the general corporate tax laws of
the country. The Company has historically filed, and continues to file, all required tax returns and to pay the taxes
reasonably determined to be due. In some jurisdictions, tax authorities are yet to complete their assessments for the
previous years. The tax rules and regulations in many countries are complex and subject to interpretation. From time to
time the Company is subject to a review of its historic tax filings and in connection with such reviews, disputes can arise
with the taxing authorities over the interpretation or application of certain rules to the Company’s business conducted
within the country involved. Management believes based on information currently to hand, that such tax contingencies
have been adequately provided for, and as assessments are completed, the Company will make appropriate adjustments
to those estimates used in determining amounts due.
subject to, and pays annual taxes under the various tax regimes where it operates. Some of these tax regimes are
defined by contractual agreements with the local government, but others are defined by the general corporate tax laws of
the country. The Company has historically filed, and continues to file, all required tax returns and to pay the taxes
reasonably determined to be due. In some jurisdictions, tax authorities are yet to complete their assessments for the
previous years. The tax rules and regulations in many countries are complex and subject to interpretation. From time to
time the Company is subject to a review of its historic tax filings and in connection with such reviews, disputes can arise
with the taxing authorities over the interpretation or application of certain rules to the Company’s business conducted
within the country involved. Management believes based on information currently to hand, that such tax contingencies
have been adequately provided for, and as assessments are completed, the Company will make appropriate adjustments
to those estimates used in determining amounts due.
In addition to the above, the Company has contingent liabilities in respect of certain tax assessments, claims, disputes and
guarantees which are not considered to be material.
guarantees which are not considered to be material.
As at Decemer 31, 2007, capital commitments
(1)
and contingencies can be summarized over the periods shown below as
follows:
Expiration per Period
Commitment
(in millions)
Total
amount
$
Less than 1
year
$
1 - 3
years
$
4 - 5
years
$
Over
5
years
$
Capital expenditure
(contracted and not yet contracted)
(contracted and not yet contracted)
1,245
893
206
113
33
Guarantees
4,326
1,834
2,021
310
161
Other commercial commitments
79
79
-
-
-
Total
5,650
2,806
2,227
423
194
(1)
Including commitments through contractual arrangements with equity accounted joint ventures.
141
Derivatives accounted for at fair value
In the normal course of its operations, the Company is exposed to gold and other commodity price, currency, interest rate,
liquidity and credit risks. In order to manage these risks, the Company may enter into transactions that make use of both on-
and off-balance sheet derivatives. The Company does not acquire, hold or issue derivatives for trading purposes. A number of
derivatives, including forward purchase and sale contracts and call and put options, are used to manage gold price and foreign
exchange risks that arise out of the Company’s core business activities.
liquidity and credit risks. In order to manage these risks, the Company may enter into transactions that make use of both on-
and off-balance sheet derivatives. The Company does not acquire, hold or issue derivatives for trading purposes. A number of
derivatives, including forward purchase and sale contracts and call and put options, are used to manage gold price and foreign
exchange risks that arise out of the Company’s core business activities.
The estimated fair values of financial instruments are determined at discrete points in time based on relevant market
information. These estimates involve uncertainties and cannot be determined with precision. The following table represents
the change in fair value of all derivative financial instruments:
information. These estimates involve uncertainties and cannot be determined with precision. The following table represents
the change in fair value of all derivative financial instruments:
$ (million)
Fair value of derivatives at January 1, 2007
(2,954)
Derivatives realized or otherwise settled during the year
418
Fair value of other new contracts entered into during the year
(230)
Change in fair value of derivatives during the year
(1)
(1,576)
Fair value of derivatives at December 31, 2007
(4,342)
(1)
Net losses on revaluation of derivatives.
The fair value of the on-balance sheet derivatives at December 31, 2007 included:
$ (million)
Derivatives – current assets
516
Derivatives – long term assets
-
Derivatives – current liabilities
(2,782)
Derivatives – long term liabilities
(297)
Derivatives – net liabilities
(2,563)
The difference between the fair value of all derivatives and the fair value of on-balance sheet derivatives represents the fair
value of off-balance sheet derivatives totaling negative $1,779 million.
value of off-balance sheet derivatives totaling negative $1,779 million.
The maturity of the fair value of derivatives as at December 31, 2007 was as follows:
Fair value of derivatives at December 31
Source of fair value
(in millions)
Maturity
less than
1 year
$
Maturity
1 – 3 years
$
Maturity
4 – 5 years
$
Maturity
excess of
5 years
$
Total Fair
value
$
Prices
actively
quoted
-
-
-
-
-
Prices provided by other external sources
-
-
-
-
-
Prices based on models and other valuation methods
(1)
(2,266)
(209)
(62)
(26)
(2,563)
(1)
Fair value is calculated using the Black-Scholes option formula and other formulae, using ruling market prices and interest rates which are
obtained from international banks and are liquid and actively quoted across the full time horizon of the tenor of the hedging contracts.
obtained from international banks and are liquid and actively quoted across the full time horizon of the tenor of the hedging contracts.
142
Sensitivity analysis
The following table shows the approximate sensitivities of the $ marked-to-market value of the hedge book at December 31,
2007 (actual changes in the timing and amount of the following variables may differ from the assumed changes below):
2007 (actual changes in the timing and amount of the following variables may differ from the assumed changes below):
Sensitivity analysis
Variables
Variables
Change in
Rate(+)
Change in
Fair value
(1)
Change in Rate
(-)
Change in
Fair value
(1)
Currency (R/$)
1
(34.43)
1
28.91
Currency (A$/$)
0.05
35.22
0.05
(40.83)
Currency (BRL/$)
0.10
(3.76)
0.10
3.74
Gold price ($/oz)
10
(102.71)
10
102.04
US Interest Rate (percent)
0.1
(10.27)
0.1
10.29
ZAR Interest Rate (percent)
0.1
(0.31)
0.1
0.31
Aus Interest Rate (percent)
0.1
(0.23)
0.1
0.23
Gold Interest Rate (percent)
0.1
21.76
0.1
(21.88)
(1)
In $ million.
Recent developments
On May 6, 2008 AngloGold Ashanti announced that it intends to proceed, subject to certain conditions, with an approximate
one-for-four renounceable rights offer, which would result in AngloGold Ashanti issuing approximately 69.4 million shares at a
minimum share price of ZAR172 raising approximately ZAR11.9 billion ($1.6 billion based on an exchange rate of
ZAR7.56/$1.00 on May 5, 2008). The proposed rights offer is being fully underwritten subject to certain customary
conditions. The final rights offer price will be announced at the time of the announcement of the rights offer. The proposed
rights offer will be subject to approval at a general meeting of AngloGold Ashanti shareholders to be held on May 22, 2008.
one-for-four renounceable rights offer, which would result in AngloGold Ashanti issuing approximately 69.4 million shares at a
minimum share price of ZAR172 raising approximately ZAR11.9 billion ($1.6 billion based on an exchange rate of
ZAR7.56/$1.00 on May 5, 2008). The proposed rights offer is being fully underwritten subject to certain customary
conditions. The final rights offer price will be announced at the time of the announcement of the rights offer. The proposed
rights offer will be subject to approval at a general meeting of AngloGold Ashanti shareholders to be held on May 22, 2008.
The principal purpose of the rights offer is to provide AngloGold Ashanti with additional financial resources to improve its
financial flexibility. In particular, the net proceeds from the rights offer will allow AngloGold Ashanti both to significantly
restructure and reduce its existing gold hedging position, which has adversely affected its financial performance in recent
years, while also being able to continue to fund its principal development projects and exploration growth initiatives. Pending
this use of proceeds, the net proceeds of the rights offer may, in the interim, be used by AngloGold Ashanti to reduce its
short-term borrowings and the borrowings outstanding on AngloGold Ashanti’s revolving credit facility or retained as cash and
invested in accordance with AngloGold Ashanti’s cash management policies.
financial flexibility. In particular, the net proceeds from the rights offer will allow AngloGold Ashanti both to significantly
restructure and reduce its existing gold hedging position, which has adversely affected its financial performance in recent
years, while also being able to continue to fund its principal development projects and exploration growth initiatives. Pending
this use of proceeds, the net proceeds of the rights offer may, in the interim, be used by AngloGold Ashanti to reduce its
short-term borrowings and the borrowings outstanding on AngloGold Ashanti’s revolving credit facility or retained as cash and
invested in accordance with AngloGold Ashanti’s cash management policies.
AngloGold Ashanti has traditionally used gold hedging instruments to protect a portion of its anticipated gold sales against
declines in the market price of gold. The use of these instruments has prevented AngloGold Ashanti from fully participating in
the significant increase in the market price for gold in recent years. As at December 31, 2007, the total net delta tonnage of
AngloGold Ashanti’s hedge positions was 10.39 million ounces and the total committed hedge position was 11.28 million
ounces, an increase of 0.16 million ounces and a reduction of 0.34 million ounces against the December 31, 2006, hedge
delta and hedge committed position, respectively. As at December 31, 2007, the marked-to-market value of all hedge
transactions making up the hedge positions was negative $4.27 billion.
declines in the market price of gold. The use of these instruments has prevented AngloGold Ashanti from fully participating in
the significant increase in the market price for gold in recent years. As at December 31, 2007, the total net delta tonnage of
AngloGold Ashanti’s hedge positions was 10.39 million ounces and the total committed hedge position was 11.28 million
ounces, an increase of 0.16 million ounces and a reduction of 0.34 million ounces against the December 31, 2006, hedge
delta and hedge committed position, respectively. As at December 31, 2007, the marked-to-market value of all hedge
transactions making up the hedge positions was negative $4.27 billion.
Since the beginning of 2008, prevailing spot gold prices have been significantly higher than those prevailing during 2007. If
these high prices continue to prevail, AngloGold Ashanti estimates that its gold hedging position will continue to have a
significant adverse affect upon its financial performance. AngloGold Ashanti believes that this has also negatively affected the
market price of its ordinary shares, further constraining its financial flexibility.
these high prices continue to prevail, AngloGold Ashanti estimates that its gold hedging position will continue to have a
significant adverse affect upon its financial performance. AngloGold Ashanti believes that this has also negatively affected the
market price of its ordinary shares, further constraining its financial flexibility.
In order to address this issue, AngloGold Ashanti intends to early settle certain contracts otherwise due to mature in 2009 and
2010 during the course of 2008 in addition to settling contracts due to mature in 2008. Given the low committed prices of these
contracts, AngloGold Ashanti expects that if these measures were implemented it would result in a realization of previously
recognized losses for contracts historically recognized on Balance Sheet on a marked–to–market basis. These losses would
be measured by the difference between the committed price of the contracts and the prevailing gold price at the time that these
contracts are settled. If the restructuring is implemented as anticipated the received price for the remainder of 2008 should be
approximately $475 per ounce assuming a gold price of $900 per ounce and gold production for the last nine months of 2008
of 3.8 million ounces.
2010 during the course of 2008 in addition to settling contracts due to mature in 2008. Given the low committed prices of these
contracts, AngloGold Ashanti expects that if these measures were implemented it would result in a realization of previously
recognized losses for contracts historically recognized on Balance Sheet on a marked–to–market basis. These losses would
be measured by the difference between the committed price of the contracts and the prevailing gold price at the time that these
contracts are settled. If the restructuring is implemented as anticipated the received price for the remainder of 2008 should be
approximately $475 per ounce assuming a gold price of $900 per ounce and gold production for the last nine months of 2008
of 3.8 million ounces.
AngloGold Ashanti also continues to give consideration to the early settlement of contracts not currently recorded on balance
sheet (Normal Purchase Normal Sale Exemption (NPSE)) by means of early physical delivery. Such early physical settlement,
if it were to occur, would result in a significant adverse impact on our 2008 recorded revenues in AngloGold Ashanti’s income
statement, as sales that would have otherwise been executed at the spot price of gold will be replaced with sales based on the
earlier contracted prices of such NPSE contracts that are settled during the year. Furthermore should AngloGold Ashanti
sheet (Normal Purchase Normal Sale Exemption (NPSE)) by means of early physical delivery. Such early physical settlement,
if it were to occur, would result in a significant adverse impact on our 2008 recorded revenues in AngloGold Ashanti’s income
statement, as sales that would have otherwise been executed at the spot price of gold will be replaced with sales based on the
earlier contracted prices of such NPSE contracts that are settled during the year. Furthermore should AngloGold Ashanti
143
conclude that such early physical settlement of NPSE contracts represents a tainting event, it would be required to recognize
on balance sheet the fair value of a portion of, or potentially all of, the existing NPSE contracts, which would result in a
significant adverse impact on its financial statements. No such conclusion has yet been made by AngloGold Ashanti and it is
still considering the potential impact of any such transaction.
on balance sheet the fair value of a portion of, or potentially all of, the existing NPSE contracts, which would result in a
significant adverse impact on its financial statements. No such conclusion has yet been made by AngloGold Ashanti and it is
still considering the potential impact of any such transaction.
In addition to the settlement of certain contracts during 2008 AngloGold Ashanti also intends to restructure some of the
remainder of its hedge book in order to achieve greater participation in the spot price for gold beyond 2009. The exact nature
and extent of the restructuring will depend upon prevailing and anticipated market conditions at the time, particularly the
prevailing gold price and exchange rates as well as other relevant economic factors.
remainder of its hedge book in order to achieve greater participation in the spot price for gold beyond 2009. The exact nature
and extent of the restructuring will depend upon prevailing and anticipated market conditions at the time, particularly the
prevailing gold price and exchange rates as well as other relevant economic factors.
If the restructuring is executed as currently anticipated, the overall impact would be to reduce the hedge book to approximately
6.25 million ounces, which would represent 8.6 percent of AngloGold Ashanti’s ore reserves as at December 31, 2007. As a
result of this reduction the discount to the spot gold price realized during 2009 is estimated to be approximately 6 percent and
at a similar level thereafter assuming a gold price of $900 per ounce.
6.25 million ounces, which would represent 8.6 percent of AngloGold Ashanti’s ore reserves as at December 31, 2007. As a
result of this reduction the discount to the spot gold price realized during 2009 is estimated to be approximately 6 percent and
at a similar level thereafter assuming a gold price of $900 per ounce.
Related party transactions
For a detailed discussion of related party transactions, see “Item 7B.: Related party transactions”.
Recently adopted accounting policies and pending adoption of new accounting standards
AngloGold Ashanti’s accounting policies are described in note 4 to the consolidated financial statements “Significant
accounting policies”. New accounting policies and recent pronouncements are described in note 4.27 to the consolidated
financial statements “Recent pronouncements”.
accounting policies”. New accounting policies and recent pronouncements are described in note 4.27 to the consolidated
financial statements “Recent pronouncements”.
Recent pronouncements
On September 15, 2006 the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value
Measurements” (“SFAS157”).
Measurements” (“SFAS157”).
SFAS157 provides enhanced guidance for using fair value to measure assets and liabilities. Under SFAS157, fair value
refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants in the market in which the reporting entity transacts. SFAS157 clarifies the principle that fair value
should be based on the assumptions market participants would use when pricing the asset or liability and establishes a
fair value hierarchy that prioritizes the information used to develop those assumptions. SFAS157 also requires that fair
value measurements be separately disclosed by level within the fair value hierarchy. On February 12, 2008, the FASB
issued FASB Staff Position No. FAS157-2, “Effective date of FASB Statement No. 157” (“the FSP”). The FSP provides a
one year deferral until January 1, 2009 for the implementation of SFAS157 for certain non-financial assets and non-
financial liabilities, except for those items that are recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually). The Company does not expect the adoption of SFAS157 to have a material impact on
the Company’s financial statements.
refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants in the market in which the reporting entity transacts. SFAS157 clarifies the principle that fair value
should be based on the assumptions market participants would use when pricing the asset or liability and establishes a
fair value hierarchy that prioritizes the information used to develop those assumptions. SFAS157 also requires that fair
value measurements be separately disclosed by level within the fair value hierarchy. On February 12, 2008, the FASB
issued FASB Staff Position No. FAS157-2, “Effective date of FASB Statement No. 157” (“the FSP”). The FSP provides a
one year deferral until January 1, 2009 for the implementation of SFAS157 for certain non-financial assets and non-
financial liabilities, except for those items that are recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually). The Company does not expect the adoption of SFAS157 to have a material impact on
the Company’s financial statements.
On September 29, 2006 the FASB issued Statement of Financial Accounting Standards No. 158, “Employers’ Accounting
for Defined Benefit Pension and Other Post-retirement Plans, an amendment of FASB Statements No. 87, 88, 106 and
132(R)” (“SFAS158”).
for Defined Benefit Pension and Other Post-retirement Plans, an amendment of FASB Statements No. 87, 88, 106 and
132(R)” (“SFAS158”).
144
·
SFAS158 represents the completion of the first phase in the FASB's post-retirement benefits accounting project and
requires an entity to:
requires an entity to:
recognize in its statement of financial position an asset for a defined benefit post-retirement plan's overfunded status
or a liability for a plan's underfunded status;
measure a defined benefit post-retirement plan's assets and obligations that determine its funded status as of the
same day of the employer's fiscal year-end statement of financial position;
recognize as a component of accumulated other comprehensive income, net of tax, amounts accumulated at the
date of adoption due to delayed recognition of actuarial gains and losses, prior service costs and credits, and
transition assets and obligations; and
transition assets and obligations; and
expand the disclosure requirements of SFAS132(R) to include disclosure of additional information in the notes to
financial statements about certain effects on net periodic benefit cost in the next fiscal year that arise from delayed
recognition of actuarial gains or losses, prior service costs or credits and unrecognized transition asset and
obligations.
recognition of actuarial gains or losses, prior service costs or credits and unrecognized transition asset and
obligations.
·
The Company adopted the provisions of SFAS158 in 2006, as required, except for the requirement to measure the plan
assets and benefit obligations at the fiscal year end, which is effective in fiscal years ending after December 15, 2008.
The Company is currently considering processes to meet these measurement requirements of SFAS158.
assets and benefit obligations at the fiscal year end, which is effective in fiscal years ending after December 15, 2008.
The Company is currently considering processes to meet these measurement requirements of SFAS158.
·
On February 15, 2007 the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities Including an amendment of FASB Statement No. 115” (“SFAS159”).
Financial Assets and Financial Liabilities Including an amendment of FASB Statement No. 115” (“SFAS159”).
·
SFAS159 permits entities to choose to measure many financial instruments and certain other items at fair value. The
objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported
earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting
provisions.
objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported
earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting
provisions.
·
The fair value option permits all entities to choose to measure eligible items at fair value at specified election dates. A
business entity shall report unrealized gains and losses on items for which the fair value option has been elected in
earnings at each subsequent reporting date.
business entity shall report unrealized gains and losses on items for which the fair value option has been elected in
earnings at each subsequent reporting date.
·
The fair value option:
may be applied instrument by instrument, with a few exceptions, such as investments otherwise accounted for by the
equity method;
is irrevocable (unless a new election date occurs); and
is applied only to entire instruments and not to portions of instruments.
is applied only to entire instruments and not to portions of instruments.
·
SFAS159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The
Company will apply the provisions of SFAS159 from January 1, 2008. The Company does not expect the adoption of
SFAS159 to have a material impact on the Company’s financial statements.
Company will apply the provisions of SFAS159 from January 1, 2008. The Company does not expect the adoption of
SFAS159 to have a material impact on the Company’s financial statements.
In December 2007, the FASB issued FASB Statement No. 141(R), “Business Combinations” (“SFAS141(R)”).
SFAS141(R) requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and
liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all
assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the
information they need to evaluate and understand the nature and financial effect of the business combination.
SFAS141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of
the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date.
SFAS141(R) applies to all transactions or other events in which an entity (the acquirer) obtains control of one or more
businesses (the acquiree), including combinations achieved without the transfer of consideration. The Company is
currently evaluating the potential impact of adopting SFAS141(R) on the Company’s financial statements.
liabilities assumed in the transaction; establishes the acquisition-date fair value as the measurement objective for all
assets acquired and liabilities assumed; and requires the acquirer to disclose to investors and other users all of the
information they need to evaluate and understand the nature and financial effect of the business combination.
SFAS141(R) applies prospectively to business combinations for which the acquisition date is on or after the beginning of
the first annual reporting period beginning on or after December 15, 2008. An entity may not apply it before that date.
SFAS141(R) applies to all transactions or other events in which an entity (the acquirer) obtains control of one or more
businesses (the acquiree), including combinations achieved without the transfer of consideration. The Company is
currently evaluating the potential impact of adopting SFAS141(R) on the Company’s financial statements.
In December 2007, the FASB issued FASB Statement No. 160, “Noncontrolling Interests in Consolidated Financial
Statements” (“SFAS160”).
Statements” (“SFAS160”).
145
SFAS160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary
and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership
interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS160 is
effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier
adoption is prohibited. It shall be applied prospectively as of the beginning of the fiscal year in which this Statement is
initially adopted, except for the presentation and disclosure requirements. The presentation and disclosure requirements
shall be applied retrospectively for all periods presented. The Company is currently evaluating the potential impact of
adopting SFAS160 on the Company’s financial statements.
and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership
interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS160 is
effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Earlier
adoption is prohibited. It shall be applied prospectively as of the beginning of the fiscal year in which this Statement is
initially adopted, except for the presentation and disclosure requirements. The presentation and disclosure requirements
shall be applied retrospectively for all periods presented. The Company is currently evaluating the potential impact of
adopting SFAS160 on the Company’s financial statements.
In March 2008, the FASB issued FASB statement No. 161, “Disclosures about Derivative Instruments and Hedging
Activities – an amendment of FASB statement No. 133” (“SFAS161”).
Activities – an amendment of FASB statement No. 133” (“SFAS161”).
SFAS161 applies to all derivative instruments and nonderivative instruments that are designated and qualify as hedging
instruments pursuant to paragraphs 37 and 42 of SFAS133 and related hedged items accounted for under SFAS133.
SFAS161 requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the
transparency of financial reporting. Entities are required to provide enhanced disclosures about (a) how and why an
entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under
SFAS133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s
financial position, results of operations and cash flows. SFAS161 is effective for financial statements issued for fiscal
years and interim periods beginning after November 15, 2008, with early application encouraged. Comparative
disclosures for earlier periods at initial adoption are encouraged but not required. The Company does not expect the
adoption of SFAS161 to have a material impact on the Company’s financial statements.
instruments pursuant to paragraphs 37 and 42 of SFAS133 and related hedged items accounted for under SFAS133.
SFAS161 requires enhanced disclosures about an entity’s derivative and hedging activities and thereby improves the
transparency of financial reporting. Entities are required to provide enhanced disclosures about (a) how and why an
entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under
SFAS133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s
financial position, results of operations and cash flows. SFAS161 is effective for financial statements issued for fiscal
years and interim periods beginning after November 15, 2008, with early application encouraged. Comparative
disclosures for earlier periods at initial adoption are encouraged but not required. The Company does not expect the
adoption of SFAS161 to have a material impact on the Company’s financial statements.
In May 2008, the FASB issued FASB Statement No. 162, “The Hierarchy of Generally Accepted Accounting Principles”
(“SFAS162”).
SFAS162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting
accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally
accepted accounting principles (GAAP) for nongovernmental entities. SFAS162 is effective 60 days following the United
States Securities and Exchange Commission (SEC's) approval of the Public Company Accounting Oversight Board
Auditing amendments to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally Accepted
Accounting Principles”. The Company does not expect the adoption of SFAS162 to have a material impact on the
Company’s financial statements.
(“SFAS162”).
SFAS162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting
accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally
accepted accounting principles (GAAP) for nongovernmental entities. SFAS162 is effective 60 days following the United
States Securities and Exchange Commission (SEC's) approval of the Public Company Accounting Oversight Board
Auditing amendments to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally Accepted
Accounting Principles”. The Company does not expect the adoption of SFAS162 to have a material impact on the
Company’s financial statements.
Critical accounting policies
AngloGold Ashanti’s accounting policies are described in note 4 to the consolidated financial statements “Significant
accounting policies”. The preparation of the Company’s financial statements in conformity with accounting principles generally
accepted in the United States of America require management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the year. The following are considered to be the accounting policies
that are most critical to the Company’s results of operations, financial condition and cash flows.
accounting policies”. The preparation of the Company’s financial statements in conformity with accounting principles generally
accepted in the United States of America require management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the year. The following are considered to be the accounting policies
that are most critical to the Company’s results of operations, financial condition and cash flows.
Using of estimates and making of assumptions
The most critical accounting estimates upon which AngloGold Ashanti’s financial reporting depends are those requiring
estimates of Proven and Probable Reserves, recoverable ounces therefrom, and/or assumptions of future gold prices. Such
estimates and assumptions affect the value of inventories (which are stated at the lower of average cost or net realizable
value) and the potential impairment of long-lived assets and intangibles as detailed below. These estimates and assumptions
also affect the rate at which depreciation and amortization are charged to earnings. Commodity prices significantly affect the
Company’s profitability and cash flow. On an ongoing basis, management evaluates its estimates and assumptions; however,
actual amounts could differ significantly due to the ultimate conclusion of uncertainties.
estimates of Proven and Probable Reserves, recoverable ounces therefrom, and/or assumptions of future gold prices. Such
estimates and assumptions affect the value of inventories (which are stated at the lower of average cost or net realizable
value) and the potential impairment of long-lived assets and intangibles as detailed below. These estimates and assumptions
also affect the rate at which depreciation and amortization are charged to earnings. Commodity prices significantly affect the
Company’s profitability and cash flow. On an ongoing basis, management evaluates its estimates and assumptions; however,
actual amounts could differ significantly due to the ultimate conclusion of uncertainties.
Ore reserves and life-of-mines
AngloGold Ashanti estimates on an annual basis its Ore Reserves at its mining operations. There are a number of
uncertainties inherent in estimating quantities of reserves, including many factors beyond the Company’s control. Ore reserve
estimates are based upon engineering evaluations of assay values derived from samplings of drill holes and other openings.
Additionally, declines in the market price of gold may render certain reserves containing relatively lower grades of
mineralization uneconomic to mine. Further, availability of permits, changes in operating and capital costs, and other factors
could materially and adversely affect Ore Reserves. The Company uses its ore reserve
uncertainties inherent in estimating quantities of reserves, including many factors beyond the Company’s control. Ore reserve
estimates are based upon engineering evaluations of assay values derived from samplings of drill holes and other openings.
Additionally, declines in the market price of gold may render certain reserves containing relatively lower grades of
mineralization uneconomic to mine. Further, availability of permits, changes in operating and capital costs, and other factors
could materially and adversely affect Ore Reserves. The Company uses its ore reserve
146
for mine depreciation and closure rates, as well as in evaluating mine asset impairments. Changes in ore reserve estimates
could significantly affect these items. At least annually, the Company reviews mining schedules, production levels and asset
lives in the Company’s life-of-mine planning for all of the Company’s operating and development properties. Significant
changes in the life-of-mine plans may occur as a result of mining experience, new ore discoveries, changes in mining methods
and rates, process changes, investment in new equipment and technology and gold prices. Based on the life-of-mine analysis
the Company reviews its accounting estimates and adjusts depreciation, amortization, reclamation costs and evaluation of
each mine for impairment where necessary. Accordingly, this analysis and the estimates made therein have a significant
impact on the Company’s operating results.
could significantly affect these items. At least annually, the Company reviews mining schedules, production levels and asset
lives in the Company’s life-of-mine planning for all of the Company’s operating and development properties. Significant
changes in the life-of-mine plans may occur as a result of mining experience, new ore discoveries, changes in mining methods
and rates, process changes, investment in new equipment and technology and gold prices. Based on the life-of-mine analysis
the Company reviews its accounting estimates and adjusts depreciation, amortization, reclamation costs and evaluation of
each mine for impairment where necessary. Accordingly, this analysis and the estimates made therein have a significant
impact on the Company’s operating results.
Drilling and related costs
Drilling and related costs incurred on sites without an existing mine and on areas outside the boundary of a known mineral
deposit that contain proven and probable reserves are exploration expenditures and are expensed as incurred.
deposit that contain proven and probable reserves are exploration expenditures and are expensed as incurred.
Drilling and related costs incurred to define and delineate a residual mineral deposit that has not been classified as proven and
probable reserves at a development stage or production stage mine are capitalized when management determines that there is
sufficient evidence that the expenditure will result in a future economic benefit to the company in the accounting period when
the expenditure is made. Management evaluates whether or not there is sufficient geologic and economic certainty of being
able to convert a residual mineral deposit into a proven and probable reserve at a development stage or production stage
mine, based on the known geologic and metallurgy, existing mining and processing facilities, operating permits and
environmental programmes. Therefore prior to capitalizing such costs, management determines that the following conditions
have been met:
probable reserves at a development stage or production stage mine are capitalized when management determines that there is
sufficient evidence that the expenditure will result in a future economic benefit to the company in the accounting period when
the expenditure is made. Management evaluates whether or not there is sufficient geologic and economic certainty of being
able to convert a residual mineral deposit into a proven and probable reserve at a development stage or production stage
mine, based on the known geologic and metallurgy, existing mining and processing facilities, operating permits and
environmental programmes. Therefore prior to capitalizing such costs, management determines that the following conditions
have been met:
a.
There is a probable future benefit;
b.
AngloGold Ashanti can obtain the benefit and control access to it; and
c.
The transaction or event giving rise to it has already occurred.
The Company understands that there is diversity in practice within the mining industry, in that some companies expense the
drilling and related costs incurred to define and delineate residual mineral deposits that have not been classified as proven and
probable reserves at a development stage or production stage mine. Had AngloGold Ashanti expensed such costs as incurred,
net income, earnings per share and retained earnings would have been lower by approximately the following amounts:
drilling and related costs incurred to define and delineate residual mineral deposits that have not been classified as proven and
probable reserves at a development stage or production stage mine. Had AngloGold Ashanti expensed such costs as incurred,
net income, earnings per share and retained earnings would have been lower by approximately the following amounts:
2007
2006
2005
Net income ($ millions)
1
12
13
Earnings per share
(1)
(cents)
-
5
5
Retained income – January 1 ($ millions)
59
47
34
Retained income – December 31 ($ millions)
60
59
47
(1)
Impact per basic and diluted earnings per common share.
Accounting for derivatives
The Company accounts for derivative contracts in accordance with Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS133") as amended.
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS133") as amended.
SFAS133 requires all contracts, which meet the definition of a derivative, to be recognized on the balance sheet as either
assets or liabilities and recorded at fair value. Gains or losses arising from remeasuring derivatives to fair value each period
are to be accounted for either in the income statement or in other comprehensive income, depending on the use and
designation of the derivative and whether it qualifies for hedge accounting. The key criterion, which must be met in order to
qualify for hedge accounting, is that the derivative must be highly effective in offsetting the change in the fair value or cash
flows of the hedged item.
assets or liabilities and recorded at fair value. Gains or losses arising from remeasuring derivatives to fair value each period
are to be accounted for either in the income statement or in other comprehensive income, depending on the use and
designation of the derivative and whether it qualifies for hedge accounting. The key criterion, which must be met in order to
qualify for hedge accounting, is that the derivative must be highly effective in offsetting the change in the fair value or cash
flows of the hedged item.
Contracts that meet the criteria for hedge accounting are designated as the hedging instruments hedging the variability of
forecasted cash flows from the sale of AngloGold Ashanti’s production into the spot market, and are classified as cash flow
hedges under SFAS133. Where a derivative qualifies as the hedging instrument in a cash flow hedge under SFAS133, gains
and losses on the derivative, to the extent effective, are deferred in other comprehensive income and reclassified to earnings
as product sales when the hedged transaction occurs. The ineffective portion of changes in fair value is reported in earnings
as gains or losses on non-hedge derivatives in the period in which they occur.
forecasted cash flows from the sale of AngloGold Ashanti’s production into the spot market, and are classified as cash flow
hedges under SFAS133. Where a derivative qualifies as the hedging instrument in a cash flow hedge under SFAS133, gains
and losses on the derivative, to the extent effective, are deferred in other comprehensive income and reclassified to earnings
as product sales when the hedged transaction occurs. The ineffective portion of changes in fair value is reported in earnings
as gains or losses on non-hedge derivatives in the period in which they occur.
146
for mine depreciation and closure rates, as well as in evaluating mine asset impairments. Changes in ore reserve estimates
could significantly affect these items. At least annually, the Company reviews mining schedules, production levels and asset
lives in the Company’s life-of-mine planning for all of the Company’s operating and development properties. Significant
changes in the life-of-mine plans may occur as a result of mining experience, new ore discoveries, changes in mining methods
and rates, process changes, investment in new equipment and technology and gold prices. Based on the life-of-mine analysis
the Company reviews its accounting estimates and adjusts depreciation, amortization, reclamation costs and evaluation of
each mine for impairment where necessary. Accordingly, this analysis and the estimates made therein have a significant
impact on the Company’s operating results.
could significantly affect these items. At least annually, the Company reviews mining schedules, production levels and asset
lives in the Company’s life-of-mine planning for all of the Company’s operating and development properties. Significant
changes in the life-of-mine plans may occur as a result of mining experience, new ore discoveries, changes in mining methods
and rates, process changes, investment in new equipment and technology and gold prices. Based on the life-of-mine analysis
the Company reviews its accounting estimates and adjusts depreciation, amortization, reclamation costs and evaluation of
each mine for impairment where necessary. Accordingly, this analysis and the estimates made therein have a significant
impact on the Company’s operating results.
Drilling and related costs
Drilling and related costs incurred on sites without an existing mine and on areas outside the boundary of a known mineral
deposit that contain proven and probable reserves are exploration expenditures and are expensed as incurred.
deposit that contain proven and probable reserves are exploration expenditures and are expensed as incurred.
Drilling and related costs incurred to define and delineate a residual mineral deposit that has not been classified as proven and
probable reserves at a development stage or production stage mine are capitalized when management determines that there is
sufficient evidence that the expenditure will result in a future economic benefit to the company in the accounting period when
the expenditure is made. Management evaluates whether or not there is sufficient geologic and economic certainty of being
able to convert a residual mineral deposit into a proven and probable reserve at a development stage or production stage
mine, based on the known geologic and metallurgy, existing mining and processing facilities, operating permits and
environmental programmes. Therefore prior to capitalizing such costs, management determines that the following conditions
have been met:
probable reserves at a development stage or production stage mine are capitalized when management determines that there is
sufficient evidence that the expenditure will result in a future economic benefit to the company in the accounting period when
the expenditure is made. Management evaluates whether or not there is sufficient geologic and economic certainty of being
able to convert a residual mineral deposit into a proven and probable reserve at a development stage or production stage
mine, based on the known geologic and metallurgy, existing mining and processing facilities, operating permits and
environmental programmes. Therefore prior to capitalizing such costs, management determines that the following conditions
have been met:
a.
There is a probable future benefit;
b.
AngloGold Ashanti can obtain the benefit and control access to it; and
c.
The transaction or event giving rise to it has already occurred.
The Company understands that there is diversity in practice within the mining industry, in that some companies expense the
drilling and related costs incurred to define and delineate residual mineral deposits that have not been classified as proven and
probable reserves at a development stage or production stage mine. Had AngloGold Ashanti expensed such costs as incurred,
net income, earnings per share and retained earnings would have been lower by approximately the following amounts:
drilling and related costs incurred to define and delineate residual mineral deposits that have not been classified as proven and
probable reserves at a development stage or production stage mine. Had AngloGold Ashanti expensed such costs as incurred,
net income, earnings per share and retained earnings would have been lower by approximately the following amounts:
2007
2006
2005
Net income ($ millions)
1
12
13
Earnings per share
(1)
(cents)
-
5
5
Retained income – January 1 ($ millions)
59
47
34
Retained income – December 31 ($ millions)
60
59
47
(1)
Impact per basic and diluted earnings per common share.
Accounting for derivatives
The Company accounts for derivative contracts in accordance with Statement of Financial Accounting Standards No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS133") as amended.
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS133") as amended.
SFAS133 requires all contracts, which meet the definition of a derivative, to be recognized on the balance sheet as either
assets or liabilities and recorded at fair value. Gains or losses arising from remeasuring derivatives to fair value each period
are to be accounted for either in the income statement or in other comprehensive income, depending on the use and
designation of the derivative and whether it qualifies for hedge accounting. The key criterion, which must be met in order to
qualify for hedge accounting, is that the derivative must be highly effective in offsetting the change in the fair value or cash
flows of the hedged item.
assets or liabilities and recorded at fair value. Gains or losses arising from remeasuring derivatives to fair value each period
are to be accounted for either in the income statement or in other comprehensive income, depending on the use and
designation of the derivative and whether it qualifies for hedge accounting. The key criterion, which must be met in order to
qualify for hedge accounting, is that the derivative must be highly effective in offsetting the change in the fair value or cash
flows of the hedged item.
Contracts that meet the criteria for hedge accounting are designated as the hedging instruments hedging the variability of
forecasted cash flows from the sale of AngloGold Ashanti’s production into the spot market, and are classified as cash flow
hedges under SFAS133. Where a derivative qualifies as the hedging instrument in a cash flow hedge under SFAS133, gains
and losses on the derivative, to the extent effective, are deferred in other comprehensive income and reclassified to earnings
as product sales when the hedged transaction occurs. The ineffective portion of changes in fair value is reported in earnings
as gains or losses on non-hedge derivatives in the period in which they occur.
forecasted cash flows from the sale of AngloGold Ashanti’s production into the spot market, and are classified as cash flow
hedges under SFAS133. Where a derivative qualifies as the hedging instrument in a cash flow hedge under SFAS133, gains
and losses on the derivative, to the extent effective, are deferred in other comprehensive income and reclassified to earnings
as product sales when the hedged transaction occurs. The ineffective portion of changes in fair value is reported in earnings
as gains or losses on non-hedge derivatives in the period in which they occur.
147
All other contracts not meeting the criteria for the normal purchases and sales or hedge accounting, as defined in SFAS133,
are recorded at their fair market value, with changes in value at each reporting period recorded in earnings as gains and losses
on non-hedge derivatives.
are recorded at their fair market value, with changes in value at each reporting period recorded in earnings as gains and losses
on non-hedge derivatives.
The estimated fair values of derivatives are determined at discrete points in time based on the relevant market information.
These estimates are calculated with reference to the ruling market prices, interest rates and volatilities using the Black -
Scholes option formula.
These estimates are calculated with reference to the ruling market prices, interest rates and volatilities using the Black -
Scholes option formula.
AngloGold Ashanti does not acquire, hold or issue derivative instruments for trading purposes. A number of products,
including derivatives, are used to manage gold price and foreign exchange risks that arise out of the Company’s core business
activities. Forward purchase and sale contracts and call and put options are used by the Company to manage its exposure to
gold price and currency fluctuations.
including derivatives, are used to manage gold price and foreign exchange risks that arise out of the Company’s core business
activities. Forward purchase and sale contracts and call and put options are used by the Company to manage its exposure to
gold price and currency fluctuations.
See “Item 5E.: Off-balance sheet arrangements” for a description of the normal purchase and normal sale exempt contracts
accounting treatment.
accounting treatment.
Revenue recognition
AngloGold Ashanti’s revenues are derived primarily from the sale of gold produced at its mines. Revenue from product sales is
recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the
seller’s price to the buyer is fixed or determinable and collectability is reasonably assured. Gold is a liquid commodity that is
dealt with on the international markets, and gold produced by the Company’s mining operations is processed to saleable form
at various precious metals refineries.
recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the
seller’s price to the buyer is fixed or determinable and collectability is reasonably assured. Gold is a liquid commodity that is
dealt with on the international markets, and gold produced by the Company’s mining operations is processed to saleable form
at various precious metals refineries.
Contingencies
AngloGold Ashanti accounts for contingencies in accordance with SFAS No. 5, “Accounting for Contingencies”. SFAS 5
requires the recording of an estimated loss for a loss contingency when information available indicates that it is probable that
an asset has been impaired or a liability has been incurred, and the amount of the loss can be reasonably estimated.
Accounting for contingencies such as legal and income tax matters requires the use of judgments to determine the amount to
be recorded in the financial statements. By their nature, contingencies will only be resolved when one or more future events
occur or fail to occur and typically, those events will occur a number of years into the future. The Company assess such
contingent liabilities, which inherently involves the exercise of significant management judgment and estimates of the outcome
of future events. Also, see “Taxation” discussed below.
requires the recording of an estimated loss for a loss contingency when information available indicates that it is probable that
an asset has been impaired or a liability has been incurred, and the amount of the loss can be reasonably estimated.
Accounting for contingencies such as legal and income tax matters requires the use of judgments to determine the amount to
be recorded in the financial statements. By their nature, contingencies will only be resolved when one or more future events
occur or fail to occur and typically, those events will occur a number of years into the future. The Company assess such
contingent liabilities, which inherently involves the exercise of significant management judgment and estimates of the outcome
of future events. Also, see “Taxation” discussed below.
Impairment of long-lived assets
AngloGold Ashanti’s long-lived assets include property, plant and equipment, acquired properties, goodwill and other tangible
assets. In assessing, the potential impairment of its long-lived assets held for use the Company must make assumptions
regarding estimated future cash flows and other factors relating to the respective assets. To the extent that the carrying value
of the long-lived asset as recorded in the consolidated financial statements exceeds the undiscounted cash flows, an
impairment charge is recognized in the consolidated financial statements based on the fair value of the asset.
assets. In assessing, the potential impairment of its long-lived assets held for use the Company must make assumptions
regarding estimated future cash flows and other factors relating to the respective assets. To the extent that the carrying value
of the long-lived asset as recorded in the consolidated financial statements exceeds the undiscounted cash flows, an
impairment charge is recognized in the consolidated financial statements based on the fair value of the asset.
Impairment of goodwill
Beginning January 1, 2002, SFAS142 requires goodwill to be reviewed for impairment rather than amortized and that intangible
assets with finite useful lives other than goodwill be amortized over their useful lives. In accordance with the provisions of
SFAS142 AngloGold Ashanti performed a transitional impairment test for each reporting unit and performed its annual
impairment review during the fourth quarter of 2002. The Company performs impairment tests at least annually during the
fourth quarter and whenever certain indicators of impairment exist. The Company’s reporting units are generally consistent
with the operating mines underlying the segments identified in note 29 to the consolidated financial statements “Segment and
Geographical Information”.
assets with finite useful lives other than goodwill be amortized over their useful lives. In accordance with the provisions of
SFAS142 AngloGold Ashanti performed a transitional impairment test for each reporting unit and performed its annual
impairment review during the fourth quarter of 2002. The Company performs impairment tests at least annually during the
fourth quarter and whenever certain indicators of impairment exist. The Company’s reporting units are generally consistent
with the operating mines underlying the segments identified in note 29 to the consolidated financial statements “Segment and
Geographical Information”.
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Taxation
AngloGold Ashanti follows the liability method of accounting for taxation whereby the company recognizes the tax
consequences of temporary differences by applying current statutory tax rates applicable to future years to differences
between financial statement amounts and the tax bases of certain assets and liabilities. Changes in deferred tax assets and
liabilities include the impact of any tax rate changes enacted during the year. Deferred tax is estimated at the future average
anticipated taxation rates at which temporary differences are expected to reverse. Future average anticipated taxation rates
are determined from revenue and expenditure outlined in life-of-mine business plans that are revised annually. When a
deferred tax asset arises the Company reviews the asset for recoverability and establishes a valuation allowance where the
Company determines it is more likely than not that such an asset will not be realized. These determinations are based on the
projected realization of tax allowances and tax losses. If these tax assets are not to be realized, an adjustment to the valuation
allowance would be required, which would be charged to income in the period that the determination was made. If the
Company determines that it would be able to realize tax assets in the future, in excess of the recorded amount thereof, an
adjustment to reduce the valuation allowance would be recorded as a credit to income in the period that the determination is
made. Management classifies taxes payable based on the likelihood of the amount required to be settled within twelve
months, which are then reported within current liabilities. All other taxes payable are recorded within non-current assets.
consequences of temporary differences by applying current statutory tax rates applicable to future years to differences
between financial statement amounts and the tax bases of certain assets and liabilities. Changes in deferred tax assets and
liabilities include the impact of any tax rate changes enacted during the year. Deferred tax is estimated at the future average
anticipated taxation rates at which temporary differences are expected to reverse. Future average anticipated taxation rates
are determined from revenue and expenditure outlined in life-of-mine business plans that are revised annually. When a
deferred tax asset arises the Company reviews the asset for recoverability and establishes a valuation allowance where the
Company determines it is more likely than not that such an asset will not be realized. These determinations are based on the
projected realization of tax allowances and tax losses. If these tax assets are not to be realized, an adjustment to the valuation
allowance would be required, which would be charged to income in the period that the determination was made. If the
Company determines that it would be able to realize tax assets in the future, in excess of the recorded amount thereof, an
adjustment to reduce the valuation allowance would be recorded as a credit to income in the period that the determination is
made. Management classifies taxes payable based on the likelihood of the amount required to be settled within twelve
months, which are then reported within current liabilities. All other taxes payable are recorded within non-current assets.
Provision for environmental rehabilitation
AngloGold Ashanti’s mining and exploration activities are subject to various laws and regulations governing the protection of
the environment. The Company recognizes management’s best estimate for asset retirement obligations in the period in which
they are incurred. Actual costs incurred in future periods could differ materially from the estimates. Additionally, future changes
to environmental laws and regulations, life of mine estimates and discount rates could affect the carrying amount of this
provision. Such changes in Mineral Reserves could similarly affect the useful lives of assets depreciated on a straight-line-
basis, where those lives are limited to the life of mine.
the environment. The Company recognizes management’s best estimate for asset retirement obligations in the period in which
they are incurred. Actual costs incurred in future periods could differ materially from the estimates. Additionally, future changes
to environmental laws and regulations, life of mine estimates and discount rates could affect the carrying amount of this
provision. Such changes in Mineral Reserves could similarly affect the useful lives of assets depreciated on a straight-line-
basis, where those lives are limited to the life of mine.
Share-based payments
AngloGold Ashanti issues equity-settled share-based payments to certain employees. Equity-settled share-based payments
are measured at fair value (excluding the effect of non-market based vesting conditions) at the date of grant. The fair value
determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting
period, based on the Company’s estimate of the shares that will eventually vest and adjusted for the effect of non market-
based vesting conditions.
are measured at fair value (excluding the effect of non-market based vesting conditions) at the date of grant. The fair value
determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting
period, based on the Company’s estimate of the shares that will eventually vest and adjusted for the effect of non market-
based vesting conditions.
Fair value is measured using the Black-Scholes pricing model. The expected life used in the model has been adjusted, based
on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioral considerations.
on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioral considerations.
Pension plans and post-retirement medical aid obligations
The determination of AngloGold Ashanti’s obligation and expense for pension and provident funds, as well as post-retirement
health care liabilities, depends on the selection of certain assumptions used by actuaries to calculate amounts. These
assumptions are described in note 28 to the consolidated financial statements “Employee benefit plans” and include, among
others, the discount rate, the expected long-term rate of return of plan assets, health care inflation costs and rates of increase
in compensation costs. While the Company believes that these assumptions are appropriate, significant changes in the
assumptions may materially affect pension and other post-retirement obligations as well as future expenses, which may result
in an impact on earnings in the periods that the changes in the assumptions occur.
health care liabilities, depends on the selection of certain assumptions used by actuaries to calculate amounts. These
assumptions are described in note 28 to the consolidated financial statements “Employee benefit plans” and include, among
others, the discount rate, the expected long-term rate of return of plan assets, health care inflation costs and rates of increase
in compensation costs. While the Company believes that these assumptions are appropriate, significant changes in the
assumptions may materially affect pension and other post-retirement obligations as well as future expenses, which may result
in an impact on earnings in the periods that the changes in the assumptions occur.
The main assumptions for 2007 relating to the most significant defined benefit plan were the discount rate, the expected return
on plan assets and the compensation and pension plan inflation rates. The discount rate was determined using the South
African bond yield rate (on the "benchmark" R186 bond) as a guide and adjusted for the taxation effects on pension plans.
on plan assets and the compensation and pension plan inflation rates. The discount rate was determined using the South
African bond yield rate (on the "benchmark" R186 bond) as a guide and adjusted for the taxation effects on pension plans.
The assumed level of salary increases relative to inflation were advised by the AngloGold Ashanti directors as well as the
AngloGold Ashanti Human Resources department. The expected return on plan assets were based on the market
performance of the underlying assets. For inflation targets the published Consumer Price Index (CPI) by the Department of
Statistics as well as the South African Reserve Bank inflation target were used as a guide. Pension increases were assumed to
be at 90 percent of the assumed inflation rate, based on the respective Fund's pension increase policy.
AngloGold Ashanti Human Resources department. The expected return on plan assets were based on the market
performance of the underlying assets. For inflation targets the published Consumer Price Index (CPI) by the Department of
Statistics as well as the South African Reserve Bank inflation target were used as a guide. Pension increases were assumed to
be at 90 percent of the assumed inflation rate, based on the respective Fund's pension increase policy.
149
Effects on results of operations
Company and plan participants’ contributions to the defined benefit funds are disclosed in note 28 to the consolidated financial
statements “Employee benefit plans”. The total Company contributions to defined contribution plans for the years ended
December 31, 2007, 2006 and 2005 amounted to $51 million, $40 million and $31 million, respectively.
statements “Employee benefit plans”. The total Company contributions to defined contribution plans for the years ended
December 31, 2007, 2006 and 2005 amounted to $51 million, $40 million and $31 million, respectively.
Change in pension trends
The trend of the expected return on the plan assets is higher (6.10 percent) for the year ended December 31, 2007 when
compared to 2006. Based on the 2006 estimated return of 10.50 percent on the defined benefit plan assets, the return for
2007 would amount to $28 million compared to the actual 2007 return of $27 million. The long-term compensation and pension
inflation increases estimated in 2006 at 5.5 percent and 4.28 percent respectively have increased for compensation increases
to 6.0 percent and increased for pension increases to 4.73 percent respectively, which is in line with current economic
indicators.
compared to 2006. Based on the 2006 estimated return of 10.50 percent on the defined benefit plan assets, the return for
2007 would amount to $28 million compared to the actual 2007 return of $27 million. The long-term compensation and pension
inflation increases estimated in 2006 at 5.5 percent and 4.28 percent respectively have increased for compensation increases
to 6.0 percent and increased for pension increases to 4.73 percent respectively, which is in line with current economic
indicators.
Sensitivity analysis
Ore on Leach Pads
It is not the policy of AngloGold Ashanti to consider the sensitivity of the accounting figures to different assumptions. The actual
short-term salary inflation rate used for the 2007 valuation was a rate of 8 percent and the long-term salary inflation rate was
6 percent, which is in line with the actual average increases granted and the target Consumer Price Index indicated by the
South African Reserve Bank. For each 1 percent point variance in the actual return on the plan assets, the value in growth will
vary by $3 million.
short-term salary inflation rate used for the 2007 valuation was a rate of 8 percent and the long-term salary inflation rate was
6 percent, which is in line with the actual average increases granted and the target Consumer Price Index indicated by the
South African Reserve Bank. For each 1 percent point variance in the actual return on the plan assets, the value in growth will
vary by $3 million.
·
·
·
The recovery of gold from certain oxide ores is achieved through the heap leaching process. Under this method, ore is placed
on leach pads where it is permeated with a chemical solution, which dissolves the gold contained in the ore. The resulting
“pregnant” solution is further processed in a process plant where the gold is recovered. For accounting purposes, costs are
added to leach pads based on current mining costs, including applicable depreciation, depletion and amortization relating to
mining operations. Costs are removed from the leach pad as ounces are recovered in circuit at the leach plant based on the
average cost per recoverable ounce of gold on the leach pad.
on leach pads where it is permeated with a chemical solution, which dissolves the gold contained in the ore. The resulting
“pregnant” solution is further processed in a process plant where the gold is recovered. For accounting purposes, costs are
added to leach pads based on current mining costs, including applicable depreciation, depletion and amortization relating to
mining operations. Costs are removed from the leach pad as ounces are recovered in circuit at the leach plant based on the
average cost per recoverable ounce of gold on the leach pad.
The engineering estimates of recoverable gold on the leach pads are calculated from the quantities of ore placed on the pads
(measured tons added to the leach pads), the grade of ore placed on the leach pads (based on assay data) and a recovery
percentage (based on metallurgical testing and ore type). Leach pad production cycles vary from several months to multiple
years. In operations with multiple year leach cycles, the majority (greater than 65 percent) of the placed recoverable ounces
are recovered in the first year of leaching, with declining amounts each year thereafter until the leaching process is complete.
(measured tons added to the leach pads), the grade of ore placed on the leach pads (based on assay data) and a recovery
percentage (based on metallurgical testing and ore type). Leach pad production cycles vary from several months to multiple
years. In operations with multiple year leach cycles, the majority (greater than 65 percent) of the placed recoverable ounces
are recovered in the first year of leaching, with declining amounts each year thereafter until the leaching process is complete.
Although the quantities of recoverable gold placed on the leach pads are reconciled by comparing the grades of ore placed on
pads to the quantities of gold actually recovered (metallurgical balancing), the nature of the leaching process inherently limits
the ability to precisely monitor recoverability levels. As a result, the metallurgical balancing process is constantly monitored and
the engineering estimates are refined based on actual results over time. Historically, AngloGold Ashanti’s operating results
have not been materially impacted by variations between the estimated and actual recoverable quantities of gold on its leach
pads. For operations with long-term leach production cycles, variations in recovery estimates from new metallurgical data or
production variances would be accounted for as an adjustment to the recoverable ounces and the average cost per
recoverable ounce of gold on the leach pad. Variations between actual and estimated quantities resulting from changes in
assumptions and estimates that do not result in write-downs to net realizable value are accounted for on a prospective basis.
The ultimate recovery of gold from a pad will not be known until the leaching process has been concluded. Based on current
mine plans, the Company expects that current leaching operations will terminate at dates ranging from 2011 to 2020.
Feasibility studies in North America indicate that in terms of the mine life extension project at Cripple Creek leaching activities
could extend to 2030.
pads to the quantities of gold actually recovered (metallurgical balancing), the nature of the leaching process inherently limits
the ability to precisely monitor recoverability levels. As a result, the metallurgical balancing process is constantly monitored and
the engineering estimates are refined based on actual results over time. Historically, AngloGold Ashanti’s operating results
have not been materially impacted by variations between the estimated and actual recoverable quantities of gold on its leach
pads. For operations with long-term leach production cycles, variations in recovery estimates from new metallurgical data or
production variances would be accounted for as an adjustment to the recoverable ounces and the average cost per
recoverable ounce of gold on the leach pad. Variations between actual and estimated quantities resulting from changes in
assumptions and estimates that do not result in write-downs to net realizable value are accounted for on a prospective basis.
The ultimate recovery of gold from a pad will not be known until the leaching process has been concluded. Based on current
mine plans, the Company expects that current leaching operations will terminate at dates ranging from 2011 to 2020.
Feasibility studies in North America indicate that in terms of the mine life extension project at Cripple Creek leaching activities
could extend to 2030.
149
Effects on results of operations
Company and plan participants’ contributions to the defined benefit funds are disclosed in note 28 to the consolidated financial
statements “Employee benefit plans”. The total Company contributions to defined contribution plans for the years ended
December 31, 2007, 2006 and 2005 amounted to $51 million, $40 million and $31 million, respectively.
statements “Employee benefit plans”. The total Company contributions to defined contribution plans for the years ended
December 31, 2007, 2006 and 2005 amounted to $51 million, $40 million and $31 million, respectively.
Change in pension trends
The trend of the expected return on the plan assets is higher (6.10 percent) for the year ended December 31, 2007 when
compared to 2006. Based on the 2006 estimated return of 10.50 percent on the defined benefit plan assets, the return for
2007 would amount to $28 million compared to the actual 2007 return of $27 million. The long-term compensation and pension
inflation increases estimated in 2006 at 5.5 percent and 4.28 percent respectively have increased for compensation increases
to 6.0 percent and increased for pension increases to 4.73 percent respectively, which is in line with current economic
indicators.
compared to 2006. Based on the 2006 estimated return of 10.50 percent on the defined benefit plan assets, the return for
2007 would amount to $28 million compared to the actual 2007 return of $27 million. The long-term compensation and pension
inflation increases estimated in 2006 at 5.5 percent and 4.28 percent respectively have increased for compensation increases
to 6.0 percent and increased for pension increases to 4.73 percent respectively, which is in line with current economic
indicators.
Sensitivity analysis
Ore on Leach Pads
It is not the policy of AngloGold Ashanti to consider the sensitivity of the accounting figures to different assumptions. The actual
short-term salary inflation rate used for the 2007 valuation was a rate of 8 percent and the long-term salary inflation rate was
6 percent, which is in line with the actual average increases granted and the target Consumer Price Index indicated by the
South African Reserve Bank. For each 1 percent point variance in the actual return on the plan assets, the value in growth will
vary by $3 million.
short-term salary inflation rate used for the 2007 valuation was a rate of 8 percent and the long-term salary inflation rate was
6 percent, which is in line with the actual average increases granted and the target Consumer Price Index indicated by the
South African Reserve Bank. For each 1 percent point variance in the actual return on the plan assets, the value in growth will
vary by $3 million.
·
·
·
The recovery of gold from certain oxide ores is achieved through the heap leaching process. Under this method, ore is placed on leach pads where it is permeated with a chemical solution, which dissolves the gold contained in the ore. The resulting
“pregnant” solution is further processed in a process plant where the gold is recovered. For accounting purposes, costs are
added to leach pads based on current mining costs, including applicable depreciation, depletion and amortization relating to
mining operations. Costs are removed from the leach pad as ounces are recovered in circuit at the leach plant based on the
average cost per recoverable ounce of gold on the leach pad.
The engineering estimates of recoverable gold on the leach pads are calculated from the quantities of ore placed on the pads
(measured tons added to the leach pads), the grade of ore placed on the leach pads (based on assay data) and a recovery
percentage (based on metallurgical testing and ore type). Leach pad production cycles vary from several months to multiple
years. In operations with multiple year leach cycles, the majority (greater than 65 percent) of the placed recoverable ounces
are recovered in the first year of leaching, with declining amounts each year thereafter until the leaching process is complete.
(measured tons added to the leach pads), the grade of ore placed on the leach pads (based on assay data) and a recovery
percentage (based on metallurgical testing and ore type). Leach pad production cycles vary from several months to multiple
years. In operations with multiple year leach cycles, the majority (greater than 65 percent) of the placed recoverable ounces
are recovered in the first year of leaching, with declining amounts each year thereafter until the leaching process is complete.
Although the quantities of recoverable gold placed on the leach pads are reconciled by comparing the grades of ore placed on
pads to the quantities of gold actually recovered (metallurgical balancing), the nature of the leaching process inherently limits
the ability to precisely monitor recoverability levels. As a result, the metallurgical balancing process is constantly monitored and
the engineering estimates are refined based on actual results over time. Historically, AngloGold Ashanti’s operating results
have not been materially impacted by variations between the estimated and actual recoverable quantities of gold on its leach
pads. For operations with long-term leach production cycles, variations in recovery estimates from new metallurgical data or
production variances would be accounted for as an adjustment to the recoverable ounces and the average cost per
recoverable ounce of gold on the leach pad. Variations between actual and estimated quantities resulting from changes in
assumptions and estimates that do not result in write-downs to net realizable value are accounted for on a prospective basis.
The ultimate recovery of gold from a pad will not be known until the leaching process has been concluded. Based on current
mine plans, the Company expects that current leaching operations will terminate at dates ranging from 2011 to 2020.
Feasibility studies in North America indicate that in terms of the mine life extension project at Cripple Creek leaching activities
could extend to 2030.
pads to the quantities of gold actually recovered (metallurgical balancing), the nature of the leaching process inherently limits
the ability to precisely monitor recoverability levels. As a result, the metallurgical balancing process is constantly monitored and
the engineering estimates are refined based on actual results over time. Historically, AngloGold Ashanti’s operating results
have not been materially impacted by variations between the estimated and actual recoverable quantities of gold on its leach
pads. For operations with long-term leach production cycles, variations in recovery estimates from new metallurgical data or
production variances would be accounted for as an adjustment to the recoverable ounces and the average cost per
recoverable ounce of gold on the leach pad. Variations between actual and estimated quantities resulting from changes in
assumptions and estimates that do not result in write-downs to net realizable value are accounted for on a prospective basis.
The ultimate recovery of gold from a pad will not be known until the leaching process has been concluded. Based on current
mine plans, the Company expects that current leaching operations will terminate at dates ranging from 2011 to 2020.
Feasibility studies in North America indicate that in terms of the mine life extension project at Cripple Creek leaching activities
could extend to 2030.
150
The costs of materials currently contained on the leach pad are reported as a separate line item apart from inventory. As at
December 31, 2007, $49 million was classified as short term compared with $46 million as at December 31, 2006 as the
Company expects the related gold to be recovered within twelve months. The short term portion of materials on the leach pad
is determined by multiplying the average cost per ounce in inventory, by the expected production ounces for the next twelve
months. Based on data gathered and analyzed from heap leach pad drilling results, and other studies and analysis completed,
short-term heap leach pad inventory occurs in two forms: (1) gold recoverable but yet to be dissolved (i.e. gold still in the ore),
and (2) gold recoverable from gold dissolved in solution within the leach pad (i.e. pore water). This estimate calculation was
used in determining the short term portion of materials on the leach pad as at December 31, 2007. As at December 31, 2007,
$190 million was classified as long term compared with $149 million as at December 31, 2006.
December 31, 2007, $49 million was classified as short term compared with $46 million as at December 31, 2006 as the
Company expects the related gold to be recovered within twelve months. The short term portion of materials on the leach pad
is determined by multiplying the average cost per ounce in inventory, by the expected production ounces for the next twelve
months. Based on data gathered and analyzed from heap leach pad drilling results, and other studies and analysis completed,
short-term heap leach pad inventory occurs in two forms: (1) gold recoverable but yet to be dissolved (i.e. gold still in the ore),
and (2) gold recoverable from gold dissolved in solution within the leach pad (i.e. pore water). This estimate calculation was
used in determining the short term portion of materials on the leach pad as at December 31, 2007. As at December 31, 2007,
$190 million was classified as long term compared with $149 million as at December 31, 2006.
5C.
Research and development, patents and licenses, etc.
For a detailed discussion, see “Item 4B.: Business overview – Research and development”.
5D.
Trend information
Outlook. Gold production for 2008 is forecast to be between 4.9 million and 5.1 million ounces subject to stability and
availability of power in South Africa and other factors.
availability of power in South Africa and other factors.
Capital expenditure is expected to be approximately $1,262 million in 2008 (2007: $1,059 million), of which 34 percent relates
to the Australia region, primarily for the development of Boddington, 26 percent to South Africa, 14 percent to Ghana and
10 percent to Brazil.
to the Australia region, primarily for the development of Boddington, 26 percent to South Africa, 14 percent to Ghana and
10 percent to Brazil.
5E.
Off-balance sheet arrangements
AngloGold Ashanti does not engage in off-balance sheet financing activities, and does not have any off-balance sheet debt
obligations, special purpose entities or unconsolidated affiliates. The most significant off-balance sheet items are normal
purchase and normal sale exempt contracts and unaccrued future rehabilitation obligations, each of which is discussed below.
obligations, special purpose entities or unconsolidated affiliates. The most significant off-balance sheet items are normal
purchase and normal sale exempt contracts and unaccrued future rehabilitation obligations, each of which is discussed below.
Normal purchase and normal sale exempt contracts
A number of derivatives are used to manage gold price risks that arise out of the group’s core business activities. Gold pricing
contracts that meet the SFAS138 exemption for Normal Purchase and Normal Sale do not appear on the balance sheet.
These agreements are accounted for as sales contracts with the proceeds under the contract being recorded in earnings at the
date of settlement by physical delivery. These off-balance sheet contracts are managed as part of AngloGold Ashanti’s gold
price risk management activities and at December 31, 2007 had a marked-to-market value of negative $1,779 million. All other
derivatives are recognized on the balance sheet at fair value. See “Item 11.: Quantitative and qualitative disclosures about
market risk” and note 26 to the consolidated financial statements “Financial risk management activities”.
contracts that meet the SFAS138 exemption for Normal Purchase and Normal Sale do not appear on the balance sheet.
These agreements are accounted for as sales contracts with the proceeds under the contract being recorded in earnings at the
date of settlement by physical delivery. These off-balance sheet contracts are managed as part of AngloGold Ashanti’s gold
price risk management activities and at December 31, 2007 had a marked-to-market value of negative $1,779 million. All other
derivatives are recognized on the balance sheet at fair value. See “Item 11.: Quantitative and qualitative disclosures about
market risk” and note 26 to the consolidated financial statements “Financial risk management activities”.
Future rehabilitation liability
The unaccrued portion of the future rehabilitation liability is an off-balance sheet obligation. See note 21 to the consolidated
financial statements “Provision for environmental rehabilitation”.
financial statements “Provision for environmental rehabilitation”.
151
5F.
Tabular disclosure of contractual obligations
As at December 31, 2007 AngloGold Ashanti had the following known contractual obligations:
Contractual Obligations
(7)
(in millions)
Total
$
Less
than
1 year
$
1-3 years
$
3-5 years
$
More than
5 years
$
Long-term debt obligations including interest
(1)
2,051
373
1,599
8
71
Capital lease obligations
87
8
11
8
60
Operating lease obligations
13
11
2
-
-
Purchase obligations
- Contracted capital expenditure
(2)
436
413
23
-
-
- Other purchase obligations
(3)
807
437
191
139
40
Environmental rehabilitation costs
(4)
1,188
28
59
46
1,055
Derivatives
(5)
4,342
2,745
996
488
113
Pensions and other post retirement medical
obligations
obligations
(6)
185
14
28
30
113
Total
9,109
4,029
2,909
719
1,452
(1)
Interest calculations are at the rate existing at the year end. Actual rates are set at floating rates for some of the debt (Refer Note 20 of
Item 18).
(2)
Represents contracted capital expenditure for which contractual obligations exist. Amounts stated include commitments of equity
accounted joint ventures.
(3)
Other purchase obligations represent contractual obligations for mining contract services, purchase of power, supplies, consumables,
inventories, explosives and activated carbon. Amounts stated include purchase obligations of equity accounted joint ventures.
(4)
Operations of gold mining companies are subject to extensive environmental regulations in the various jurisdictions in which they operate.
These regulations establish certain conditions on the conduct of operations by AngloGold Ashanti. Pursuant to environmental regulations,
AngloGold Ashanti is also obligated to close their operations and reclaim and rehabilitate the lands upon which it conducted its mining and
gold recovery operations. The present estimated closure costs at existing operating mines and mines in various stages of closure are
reflected in this table. For more information of environmental rehabilitation obligations, see “Item 4D.: Property, plants and equipment –
Sustainable development : Safety, Health, environment and social development”. Amounts stated include a total estimated liability of
$29 million in respect of equity accounted joint ventures.
AngloGold Ashanti is also obligated to close their operations and reclaim and rehabilitate the lands upon which it conducted its mining and
gold recovery operations. The present estimated closure costs at existing operating mines and mines in various stages of closure are
reflected in this table. For more information of environmental rehabilitation obligations, see “Item 4D.: Property, plants and equipment –
Sustainable development : Safety, Health, environment and social development”. Amounts stated include a total estimated liability of
$29 million in respect of equity accounted joint ventures.
(5)
Estimated fair value of all derivatives. Also see “Item 5B.: Liquidity and capital resources – Derivatives accounted for at fair value”.
Amounts stated include derivatives of equity accounted joint ventures.
(6)
Represents payments for unfunded plans or plans with insufficient funding.
(7)
The Company is unable to determine the years, if any, that the resolution of its uncertain tax liabilities will result in a cash flow.
152
Item 6: Directors, senior management and employees
6A.
Directors and senior management
Directors
AngloGold Ashanti has a unitary board structure which, at the date of this report, comprises two executive directors and ten
non-executive directors. Certain information with respect to AngloGold Ashanti’s directors as at December 31, 2007 is set forth
below:
non-executive directors. Certain information with respect to AngloGold Ashanti’s directors as at December 31, 2007 is set forth
below:
Year first
Name Age
Position
appointed
(1)
Mark Cutifani
49
Executive director and chief executive officer
2007
Srinivasan Venkatakrishnan (Venkat)
42
Executive director and chief financial officer
2005
Russell P. Edey
(2)(3)
65
Independent non-executive director and chairman
1998
Thokoana J. (James) Motlatsi
(4)
56
Independent non-executive director and deputy chairman
1998
Frank B. Arisman
(2)
63
Independent non-executive director
1998
Reginald E. Bannerman
73
Independent non-executive director
2006
Elisabeth le R. Bradley
(2)
69
Independent non-executive director
1998
Joseph H. Mensah
(2)
79
Independent non-executive director
2006
Wiseman L. Nkuhlu
(2)
63
Independent non-executive director
2006
Sipho M Pityana
48
Independent non-executive director
2007
William (Bill) A. Nairn
(5)(6)
63
Non-independent non-executive director
2001
Simon R. Thompson
(6)
48
Non-independent non-executive director
2004
(1)
Directors serve for a period of three years unless re-elected. At each annual general meeting, directors appointed since the previous annual general meeting are
required to retire, but are eligible for re-election. In addition, one-third of the board of directors must retire according to seniority or by lot but may be re-elected.
required to retire, but are eligible for re-election. In addition, one-third of the board of directors must retire according to seniority or by lot but may be re-elected.
(2)
Member of the audit and corporate governance committee.
(3)
Appointed as chairman with effect from May 1, 2002.
(4)
Appointed as deputy chairman with effect from May 1, 2002.
(5)
Appointed to board in January 2000, resigned from board and appointed as alternate in October 2000. Re-appointed to the board in May 2001.
(6)
Following their departure from Anglo American plc, Messrs Nairn and Thompson were requested to remain on the AngloGold Ashanti board, which request they duly
accepted. Due to their historical relationship with Anglo American plc, they are not considered independent and their independence will be determined after a three-year
cooling-off period as required by both King II and the Sarbanes Oxley Act.
accepted. Due to their historical relationship with Anglo American plc, they are not considered independent and their independence will be determined after a three-year
cooling-off period as required by both King II and the Sarbanes Oxley Act.
The following movements to the board of directors have taken place during the period January 1, 2007 to December 31, 2007:
Executive directors:
Mr RM Godsell (CEO) retired from the board effective September 30, 2007.
Mr M Cutifani was appointed to the board on September 17, 2007 and as CEO effective October 1, 2007.
Mr R Carvalho Silva resigned from the board effective September 30, 2007.
Mr NF Nicolau resigned from the board effective November 12, 2007 and company on January 31, 2008.
Mr RM Godsell (CEO) retired from the board effective September 30, 2007.
Mr M Cutifani was appointed to the board on September 17, 2007 and as CEO effective October 1, 2007.
Mr R Carvalho Silva resigned from the board effective September 30, 2007.
Mr NF Nicolau resigned from the board effective November 12, 2007 and company on January 31, 2008.
Non-executive directors:
Mr SM Pityana was appointed to the board effective February 13, 2007 and was re-elected by shareholders at the annual general
meeting held on May 4, 2007.
Dr SE Jonah resigned from the board effective February 12, 2007.
Mr CB Brayshaw retired from the board effective May 5, 2007.
Mr AJ Trahar retired from the board effective May 5, 2007.
Mrs C Carroll was appointed to the board effective May 5, 2007 and resigned from the board effective October 9, 2007.
Mr R Médori resigned from the board effective October 9, 2007.
Mr SM Pityana was appointed to the board effective February 13, 2007 and was re-elected by shareholders at the annual general
meeting held on May 4, 2007.
Dr SE Jonah resigned from the board effective February 12, 2007.
Mr CB Brayshaw retired from the board effective May 5, 2007.
Mr AJ Trahar retired from the board effective May 5, 2007.
Mrs C Carroll was appointed to the board effective May 5, 2007 and resigned from the board effective October 9, 2007.
Mr R Médori resigned from the board effective October 9, 2007.
Alternate directors:
Mr AH Calver (alternate to Mr WA Nairn) resigned as alternate effective January 1, 2007.
Mr PG Whitcutt (alternate to Mr R Médori) resigned as alternate effective October 9, 2007 following Mr Médori’s resignation.
Mr AH Calver (alternate to Mr WA Nairn) resigned as alternate effective January 1, 2007.
Mr PG Whitcutt (alternate to Mr R Médori) resigned as alternate effective October 9, 2007 following Mr Médori’s resignation.
153
The following directors who retired by rotation at the annual general meeting held on May 6, 2008 in terms of the articles of association
were all re-appointed:
were all re-appointed:
·
Dr TJ Motlatsi, Mr WA Nairn and Mr SM Pityana.
Mrs E Bradley who retired by rotation did not make herself available for re-election and subsequently retired from the board following
the annual general meeting on May 6, 2008.
the annual general meeting on May 6, 2008.
In addition to the abovementioned directors, Mr M Cutifani, who was appointed as a director during the year, was appointed at the
annual general meeting.
annual general meeting.
There has been no change in the offices of the vice president – compliance and corporate administration and the company secretary.
The board of directors
Mr M Cutifani (49) — BE (Min. Eng)
Chief Executive Officer
Mark Cutifani was appointed to the board of AngloGold Ashanti on September 17, 2007. He was appointed Chief Executive
Officer, effective October 1, 2007, following the retirement of Bobby Godsell. Prior to joining AngloGold Ashanti, Mark held the
position of Chief Operating Officer at CVRD Inco where he was responsible for Inco’s global nickel business. He has been
involved in the mining industry since 1976, and has considerable experience in gold mining.
Chief Executive Officer
Mark Cutifani was appointed to the board of AngloGold Ashanti on September 17, 2007. He was appointed Chief Executive
Officer, effective October 1, 2007, following the retirement of Bobby Godsell. Prior to joining AngloGold Ashanti, Mark held the
position of Chief Operating Officer at CVRD Inco where he was responsible for Inco’s global nickel business. He has been
involved in the mining industry since 1976, and has considerable experience in gold mining.
Mr S Venkatakrishnan (Venkat) (42)
BCom, ACA (ICAI)
Chief Financial Officer
Venkat was the finance director of Ashanti Goldfields Company Limited from 2000 until that company’s merger with AngloGold
in 2004. Prior to joining Ashanti, Venkat was a director in the Reorganisation Services Division of Deloitte & Touche in London.
He was appointed to the board in August 2005.
Venkat was the finance director of Ashanti Goldfields Company Limited from 2000 until that company’s merger with AngloGold
in 2004. Prior to joining Ashanti, Venkat was a director in the Reorganisation Services Division of Deloitte & Touche in London.
He was appointed to the board in August 2005.
Mr RP Edey (65)
FCA
Chairman and independent non-executive director
Russell Edey was appointed to the board in April 1998, as deputy chairman in December 2000 and as chairman in May 2002.
Based in the United Kingdom, he is a non-executive director of Old Mutual plc, a member of the Conseil de Surveillance of
Paris Orleans SA and a non-executive director of a number of companies within the N M Rothschild group.
Russell Edey was appointed to the board in April 1998, as deputy chairman in December 2000 and as chairman in May 2002.
Based in the United Kingdom, he is a non-executive director of Old Mutual plc, a member of the Conseil de Surveillance of
Paris Orleans SA and a non-executive director of a number of companies within the N M Rothschild group.
Dr TJ Motlatsi (56) Hon DSoc Sc (Lesotho)
Deputy Chairman and independent non-executive director
James Motlatsi was appointed to the AngloGold board in April 1998 and as deputy chairman in May 2002. He has been
associated with the South African mining industry since 1970 and is a past president of the National Union of Mineworkers. He
is executive chairman of TEBA Limited.
Deputy Chairman and independent non-executive director
James Motlatsi was appointed to the AngloGold board in April 1998 and as deputy chairman in May 2002. He has been
associated with the South African mining industry since 1970 and is a past president of the National Union of Mineworkers. He
is executive chairman of TEBA Limited.
Mr FB Arisman (63)
MSc (Finance)
Independent non-executive director
Frank Arisman was appointed to the board in April 1998. He resides in New York and retired, after 32 years of service, from JP
Morgan Chase, where he held the position of managing director.
Frank Arisman was appointed to the board in April 1998. He resides in New York and retired, after 32 years of service, from JP
Morgan Chase, where he held the position of managing director.
Mr RE Bannerman (73)
MA (Oxon), LLM (Yale)
Independent non-executive director
Reginald Bannerman has been in law practice since 1958 and is currently the principal partner at Messrs Bruce-Lyle,
Bannerman & Thompson Attorneys in Ghana. He is a member of the General Legal Council of Ghana and a member of the
board of the Valco Trust Fund, the largest privately run trust in Ghana. A former lecturer in law at the Ahmadu Bello University
in Nigeria, he was also formerly the mayor of Accra, the capital city of Ghana. Mr Bannerman was appointed to the board in
February 2006.
Reginald Bannerman has been in law practice since 1958 and is currently the principal partner at Messrs Bruce-Lyle,
Bannerman & Thompson Attorneys in Ghana. He is a member of the General Legal Council of Ghana and a member of the
board of the Valco Trust Fund, the largest privately run trust in Ghana. A former lecturer in law at the Ahmadu Bello University
in Nigeria, he was also formerly the mayor of Accra, the capital city of Ghana. Mr Bannerman was appointed to the board in
February 2006.
Mrs E Le R Bradley (69)
BSc, MSc
Independent non-executive director
Elisabeth Bradley was appointed to the board in April 1998. She is non-executive chairman of Wesco Investments Limited and
Toyota South Africa (Proprietary) Limited, and a director of a number of other companies. She is deputy chairman of the South
African Institute of International Affairs. Mrs Bradley retires from the board at the annual general meeting to be held on May 6,
2008. Mrs Bradley retired from the board on May 6, 2008.
Elisabeth Bradley was appointed to the board in April 1998. She is non-executive chairman of Wesco Investments Limited and
Toyota South Africa (Proprietary) Limited, and a director of a number of other companies. She is deputy chairman of the South
African Institute of International Affairs. Mrs Bradley retires from the board at the annual general meeting to be held on May 6,
2008. Mrs Bradley retired from the board on May 6, 2008.
154
Mr JH Mensah (79)
MSc (Economics)
Independent non-executive director
Joseph Mensah, who holds an MSc in Economics from London University, has extensive experience in international and local
economic management. Formerly Minister of Finance and Economic Planning and then Senior Minister in the government of
Ghana, he is now the chairman of the National Development Planning Commission and a member of the Ghana Parliament
representing the Sunyani East constituency. He joined the board with effect from August 4, 2006.
Joseph Mensah, who holds an MSc in Economics from London University, has extensive experience in international and local
economic management. Formerly Minister of Finance and Economic Planning and then Senior Minister in the government of
Ghana, he is now the chairman of the National Development Planning Commission and a member of the Ghana Parliament
representing the Sunyani East constituency. He joined the board with effect from August 4, 2006.
Mr WA Nairn (63) BSc (Mining Engineering)
Non-independent non-executive director
Bill Nairn has been a member of the board since January 2000. He was re-appointed to the board in May 2001, having
previously been alternate director to Tony Trahar. He was group technical director of Anglo American plc, prior to his retirement
in 2004.
Non-independent non-executive director
Bill Nairn has been a member of the board since January 2000. He was re-appointed to the board in May 2001, having
previously been alternate director to Tony Trahar. He was group technical director of Anglo American plc, prior to his retirement
in 2004.
Prof WL Nkuhlu (63)
BCom, CA (SA), MBA
Independent non-executive director
Wiseman Nkuhlu, who holds a BCom degree from the University of Fort Hare, is a Chartered Accountant with the South
African Institute of Chartered Accountants and is a past national president of that institute. He also holds an MBA from the
University of New York and is a respected South African academic, professional and business leader. Professor Nkuhlu was
appointed to the board and deputy chairman of the Audit and Corporate Governance Committee with effect from August 4,
2006, and assumed chairmanship of the committee with effect from May 5, 2007 following the retirement of Mr CB Brayshaw.
Wiseman Nkuhlu, who holds a BCom degree from the University of Fort Hare, is a Chartered Accountant with the South
African Institute of Chartered Accountants and is a past national president of that institute. He also holds an MBA from the
University of New York and is a respected South African academic, professional and business leader. Professor Nkuhlu was
appointed to the board and deputy chairman of the Audit and Corporate Governance Committee with effect from August 4,
2006, and assumed chairmanship of the committee with effect from May 5, 2007 following the retirement of Mr CB Brayshaw.
Mr SM Pityana (48)
BA (Hons) (Essex), MSc (London)
Independent non-executive director
Sipho Pityana was appointed to the board with effect from February 13, 2007. He is the executive chairman of Izingwe
Holdings (Proprietary) Limited and has occupied strategic roles in both the public and private sectors, including the positions of
director general of the national departments of Labour and Foreign Affairs. He was formerly a senior executive of Nedbank and
is currently a non-executive director of several companies.
Sipho Pityana was appointed to the board with effect from February 13, 2007. He is the executive chairman of Izingwe
Holdings (Proprietary) Limited and has occupied strategic roles in both the public and private sectors, including the positions of
director general of the national departments of Labour and Foreign Affairs. He was formerly a senior executive of Nedbank and
is currently a non-executive director of several companies.
Mr SR Thompson (48)
MA (Geology)
Non-independent non-executive director
Simon Thompson was appointed to the board in 2004. He is a non-executive director of UC Rusal and was previously a
director of Anglo American plc, where he was chairman of the Base Metals Division, the Exploration Division and the Tarmac
Group.
Simon Thompson was appointed to the board in 2004. He is a non-executive director of UC Rusal and was previously a
director of Anglo American plc, where he was chairman of the Base Metals Division, the Exploration Division and the Tarmac
Group.
In terms of the company's memorandum and articles of association, there is no mandatory resignation age for directors.
Executive committee
This committee, chaired by Mr Cutifani, the new chief executive officer, since his appointment in October 2007, is responsible
for overseeing the day-to-day management of the company’s affairs and for executing the decisions of the board. The
committee meets at least monthly and is actively involved in the strategic review of the company’s values, safety performance,
operation and exploration profiles and financial status.
for overseeing the day-to-day management of the company’s affairs and for executing the decisions of the board. The
committee meets at least monthly and is actively involved in the strategic review of the company’s values, safety performance,
operation and exploration profiles and financial status.
The business experience and functions of the executive committee members of AngloGold Ashanti, as at December 31, 2007
are as follows.
are as follows.
Executive directors:
Mr M Cutifani (49) — BE (Min. Eng)
Chief Executive Officer
Mark Cutifani was appointed to the board of AngloGold Ashanti on September 17, 2007. He was appointed Chief Executive
Officer, effective October 1, 2007, following the retirement of Bobby Godsell. Prior to joining AngloGold Ashanti, Mark held the
position of Chief Operating Officer at CVRD Inco where he was responsible for Inco’s global nickel business. He has been
involved in the mining industry since 1976, and has considerable experience in gold mining.
Chief Executive Officer
Mark Cutifani was appointed to the board of AngloGold Ashanti on September 17, 2007. He was appointed Chief Executive
Officer, effective October 1, 2007, following the retirement of Bobby Godsell. Prior to joining AngloGold Ashanti, Mark held the
position of Chief Operating Officer at CVRD Inco where he was responsible for Inco’s global nickel business. He has been
involved in the mining industry since 1976, and has considerable experience in gold mining.
Mr S Venkatakrishnan (Venkat) (42)
BCom, ACA (ICAI)
Chief Financial Officer
Venkat was the finance director of Ashanti Goldfields Company Limited from 2000 until that company’s merger with AngloGold
in 2004. Prior to joining Ashanti, Venkat was a director in the Reorganisation Services Division of Deloitte & Touche in London.
He was appointed to the board in August 2005.
Venkat was the finance director of Ashanti Goldfields Company Limited from 2000 until that company’s merger with AngloGold
in 2004. Prior to joining Ashanti, Venkat was a director in the Reorganisation Services Division of Deloitte & Touche in London.
He was appointed to the board in August 2005.
155
Executive management team
Dr CE Carter (45) — BA (Hons), DPhil, EDP
Executive Vice President – Business Strategy
Charles Carter joined Anglo American in 1991 and moved to the Gold and Uranium Division in 1996, and was part of the team
responsible for the formation of AngloGold. In May 2005, he was appointed an executive officer, with responsibility for
overseeing the company’s global investor relations program. He was appointed as executive vice president – business strategy
in December 2007.
Executive Vice President – Business Strategy
Charles Carter joined Anglo American in 1991 and moved to the Gold and Uranium Division in 1996, and was part of the team
responsible for the formation of AngloGold. In May 2005, he was appointed an executive officer, with responsibility for
overseeing the company’s global investor relations program. He was appointed as executive vice president – business strategy
in December 2007.
Mr RN Duffy (44)
BCom, MBA
Executive Vice President – Business Development
Richard Duffy joined Anglo American in 1987 and in 1998 was appointed executive officer and managing secretary of
AngloGold. In November 2000, he was appointed head of business planning and in 2004 assumed responsibility for all new
business opportunities globally. In April 2005, this role was expanded to include greenfields exploration. He was appointed to
the Executive Committee in August 2005. Richard was appointed as executive vice president – business development in
December 2007.
Richard Duffy joined Anglo American in 1987 and in 1998 was appointed executive officer and managing secretary of
AngloGold. In November 2000, he was appointed head of business planning and in 2004 assumed responsibility for all new
business opportunities globally. In April 2005, this role was expanded to include greenfields exploration. He was appointed to
the Executive Committee in August 2005. Richard was appointed as executive vice president – business development in
December 2007.
Mr G Ehm (51)
BSc Hons, MAusIMM, MAICD
Executive Vice President – Australasia
Graham Ehm has 30 years of diverse experience in mine operations and project management, covering the nickel, phosphate,
copper, uranium and gold sectors. He was appointed General Manager Sunrise Dam Gold Mine in 2000, Regional Head –
Australia in 2006 and took up his current role as executive vice president – Australasia in December 2007.
Graham Ehm has 30 years of diverse experience in mine operations and project management, covering the nickel, phosphate,
copper, uranium and gold sectors. He was appointed General Manager Sunrise Dam Gold Mine in 2000, Regional Head –
Australia in 2006 and took up his current role as executive vice president – Australasia in December 2007.
Mr RW Largent (47)
BSc (Min. Eng), MBA
Executive Vice President – Americas
Ron Largent has been with the company since 1994. He is a board member of the Colorado Mining Association in Denver and
has served on the Board of Directors for the California Mining Association and the Nevada Mining Association. In 2001 he was
appointed as General Manager of the Cripple Creek & Victor Gold Mine and took up his current role as executive vice
president – Americas in December 2007.
Ron Largent has been with the company since 1994. He is a board member of the Colorado Mining Association in Denver and
has served on the Board of Directors for the California Mining Association and the Nevada Mining Association. In 2001 he was
appointed as General Manager of the Cripple Creek & Victor Gold Mine and took up his current role as executive vice
president – Americas in December 2007.
Mr RL Lazare (51)
BA, HED, DPLR, SMP
Executive Vice President – Africa
Robbie Lazare joined Anglo American Gold and Uranium Division in 1982, working in a variety of management posts until 1999
when he was appointed general manager of TauTona. In December 2004, he was appointed an executive officer with
responsibility for South African operations. He was appointed executive officer – Africa underground region in July 2005 and
took up his current role as executive vice president – Africa in December 2007.
Robbie Lazare joined Anglo American Gold and Uranium Division in 1982, working in a variety of management posts until 1999
when he was appointed general manager of TauTona. In December 2004, he was appointed an executive officer with
responsibility for South African operations. He was appointed executive officer – Africa underground region in July 2005 and
took up his current role as executive vice president – Africa in December 2007.
Mr MP Lynam (46)
BEng (Mech)
Vice President – Treasurer
Mark Lynam joined the Anglo American group in 1983 and has been involved in the hedging and treasury area since 1990. In
1998 he joined AngloGold as treasurer and was appointed an executive officer in May 2004. He was appointed as Vice
president – treasurer in December 2007.
Mark Lynam joined the Anglo American group in 1983 and has been involved in the hedging and treasury area since 1990. In
1998 he joined AngloGold as treasurer and was appointed an executive officer in May 2004. He was appointed as Vice
president – treasurer in December 2007.
Mr PW Rowe (58)
BSc (Chem. Eng)
Executive Vice President – Business Effectiveness
Peter Rowe joined AngloGold Ashanti in June 2004 as head of AngloGold Ashanti Australia. Following 20 years with Anglo
American and De Beers, he moved to Australia in the early 1990s where he held a number of senior managerial positions
including that of project director of the Fimiston expansion, general manager of the Boddington Gold Mine and managing
director and CEO of Bulong Nickel. He was appointed executive officer with responsibility for the corporate technical group in
January 2006 and took up his current role as executive vice president – business effectiveness in December 2007.
Peter Rowe joined AngloGold Ashanti in June 2004 as head of AngloGold Ashanti Australia. Following 20 years with Anglo
American and De Beers, he moved to Australia in the early 1990s where he held a number of senior managerial positions
including that of project director of the Fimiston expansion, general manager of the Boddington Gold Mine and managing
director and CEO of Bulong Nickel. He was appointed executive officer with responsibility for the corporate technical group in
January 2006 and took up his current role as executive vice president – business effectiveness in December 2007.
Mr TML Setiloane (48)
FAE, BSc (Mech Eng)
Executive Vice President – Sustainability
Thero Setiloane joined AngloGold in May 2003 from Real Africa Holdings, where he had been an executive director. He is the
chairman of Rand Refinery Limited. He was appointed an executive officer and a member of AngloGold Ashanti's executive
committee in February 2006 and as executive vice president – sustainability in December 2007.
Thero Setiloane joined AngloGold in May 2003 from Real Africa Holdings, where he had been an executive director. He is the
chairman of Rand Refinery Limited. He was appointed an executive officer and a member of AngloGold Ashanti's executive
committee in February 2006 and as executive vice president – sustainability in December 2007.
Ms YZ Simelane (42)
BA LLB, FILPA, MAP
Vice President – Compliance and Corporate Administration
Yedwa Simelane joined AngloGold in November 2000 from the Mineworkers' Provident Fund where she was the senior
manager of the Fund. She was appointed an executive officer in May 2004 and took up her current role as vice president –
compliance and corporate administration in December 2007.
Yedwa Simelane joined AngloGold in November 2000 from the Mineworkers' Provident Fund where she was the senior
manager of the Fund. She was appointed an executive officer in May 2004 and took up her current role as vice president –
compliance and corporate administration in December 2007.
156
Mr NW Unwin (55) – BA
Executive Vice President – Organizational Development
Nigel Unwin has many years experience in the field of human resources. He was appointed an executive officer in 1999 and
executive vice president – organisational development in December 2007. Nigel Unwin joined Anglo American as a trainee in
human resources in 1974 and spent 18 years in operations and corporate roles. He then worked in the CFTA retail sector for
seven years before joining AngloGold in 1999 as an executive officer. Following the acquisition of Acacia Resources by
AngloGold at the end of 1999 and managed the integration of the two companies in Australia before taking over the HR and IT
portfolios in 2001. He was appointed to his current role of executive vice president – organizational development in December
2007.
Executive Vice President – Organizational Development
Nigel Unwin has many years experience in the field of human resources. He was appointed an executive officer in 1999 and
executive vice president – organisational development in December 2007. Nigel Unwin joined Anglo American as a trainee in
human resources in 1974 and spent 18 years in operations and corporate roles. He then worked in the CFTA retail sector for
seven years before joining AngloGold in 1999 as an executive officer. Following the acquisition of Acacia Resources by
AngloGold at the end of 1999 and managed the integration of the two companies in Australia before taking over the HR and IT
portfolios in 2001. He was appointed to his current role of executive vice president – organizational development in December
2007.
Prior to the re-organisation of the executive management team, the following represented the ‘executive officers’ team until
November 30, 2007:
November 30, 2007:
Dr
CE Carter
Mr
SJ Lenahan
Mr DH Diering
Mr
MP Lynam
Mr RN Duffy
Mr
FRL Neethling
Mrs D Earp (resigned effective March 1, 2007)
Mr PW Rowe
Mr DC Ewigleben
Mr TML Setiloane
Mr BW Guenther
Ms
YZ Simelane
Mrs HH Hickey
Mr
NW Unwin
Office of company secretary
Ms L Eatwell (53) – FCIS
Lynda Eatwell joined AngloGold in August 2000 as an assistant company secretary. She was appointed company secretary of
AngloGold Ashanti in December 2006. She is responsible for ensuring compliance with statutory and corporate governance
requirements and the regulations of the stock exchanges on which AngloGold Ashanti are listed.
Lynda Eatwell joined AngloGold in August 2000 as an assistant company secretary. She was appointed company secretary of
AngloGold Ashanti in December 2006. She is responsible for ensuring compliance with statutory and corporate governance
requirements and the regulations of the stock exchanges on which AngloGold Ashanti are listed.
Competent persons
The schedule below presents the details of those persons who manage AngloGold Ashanti’s Ore Reserves and Mineral
Resources:
Resources:
Name
Age
Position
Year first appointed
Carl E Brechtel
57
Manager - underground mining – Australia Region
2001
Vaughan A. Chamberlain
45
Manager - mineral resources and mine geology
1998
Michael (Mike) F. O’Brien
50
Manager – evaluation
1999
Eric Roth
41
Head of exploration - greenfields
2005
Jurgens van Zyl Visser
53
Manager - survey and planning – Africa Underground region
2001
David (Dave) L. Worrall
57
Manager - surface mining
1999
The information in this report that relates to exploration results, Mineral Resources or Ore Reserves is based on information
compiled by the competent persons listed below. They are either members of the Australian Institute of Mining and Metallurgy
(AusIMM) or recognized overseas professional organizations. They are all full-time employees of the company.
compiled by the competent persons listed below. They are either members of the Australian Institute of Mining and Metallurgy
(AusIMM) or recognized overseas professional organizations. They are all full-time employees of the company.
The competent person for AngloGold Ashanti Exploration is:
E Roth — PhD (Economic Geology), BSc (Hons) (Geology), MAusIMM
Eric has 17 years experience in mineral exploration and project evaluation, and holds a Bachelor of Science (Honors) degree
in Geology and Ph.D in Economic Geology from the University of Western Australia. Eric joined AngloGold in 2002 as Project
Manager – Peru, subsequently holding the positions of Senior Evaluations Geologist – South America (2003 to November
2005) and Head of Exploration – Greenfields from December 2005.
Eric has 17 years experience in mineral exploration and project evaluation, and holds a Bachelor of Science (Honors) degree
in Geology and Ph.D in Economic Geology from the University of Western Australia. Eric joined AngloGold in 2002 as Project
Manager – Peru, subsequently holding the positions of Senior Evaluations Geologist – South America (2003 to November
2005) and Head of Exploration – Greenfields from December 2005.
157
The following competent persons take responsibility for the reporting of AngloGold Ashanti’s Mineral Resources, as
defined under JORC 2004:
defined under JORC 2004:
VA Chamberlain — MSc (Mining Engineering), BSc (Hons) (Geology), MAusIMM
Vaughan has 22 years experience and holds a Bachelor of Science (Honors) degree in Geology from the University of Natal
and a Masters degree in Mining Engineering from the University of the Witwatersrand. He started his career with Anglo
American Corporation in 1987 as a geologist at Western Deep Levels East Mine (now TauTona mine). He joined AngloGold in
1998 and currently holds the position of Vice President – Geosciences.
Vaughan has 22 years experience and holds a Bachelor of Science (Honors) degree in Geology from the University of Natal
and a Masters degree in Mining Engineering from the University of the Witwatersrand. He started his career with Anglo
American Corporation in 1987 as a geologist at Western Deep Levels East Mine (now TauTona mine). He joined AngloGold in
1998 and currently holds the position of Vice President – Geosciences.
MF O’Brien — MSc (Mining Economics), BSc (Hons) (Geology), Dip Data, Pr.Sci.Nat., MAusIMM
Mike has 28 years experience and holds a Bachelor of Science (Honors) degree in Geology from the University of Natal, a
Masters degree in engineering from the University of Witwatersrand and a Diploma in Datametrics from UNISA. He joined
Anglo American Corporation in 1981 as a geologist at Vaal Reefs Mine and AngloGold in 1999 as manager: evaluation in the
Corporate Technical Group, the position he currently holds.
Mike has 28 years experience and holds a Bachelor of Science (Honors) degree in Geology from the University of Natal, a
Masters degree in engineering from the University of Witwatersrand and a Diploma in Datametrics from UNISA. He joined
Anglo American Corporation in 1981 as a geologist at Vaal Reefs Mine and AngloGold in 1999 as manager: evaluation in the
Corporate Technical Group, the position he currently holds.
The following competent persons take responsibility for the reporting of AngloGold Ashanti’s Ore Reserves:
CE Brechtel — MSc (Mining Engineering), BSc (Geological Engineering), MAusIMM, MSAIM
Carl has 32 years experience and holds a Bachelor of Science degree in Geological Engineering and a Master of Science
degree in Mining Engineering from the University of Utah, USA. After spending 6 years at AngloGold Ashanti’s Jerritt Canyon
operations, he was appointed Manager of Underground Mining of the Corporate Technical Group (CTG) providing technical
support and corporate governance to international mining operations outside of the South Africa Region. He is currently
Manager Underground Mining for AngloGold Ashanti Australia. He is a registered Professional Mining Engineer in the states of
Colorado and Nevada, USA.
Carl has 32 years experience and holds a Bachelor of Science degree in Geological Engineering and a Master of Science
degree in Mining Engineering from the University of Utah, USA. After spending 6 years at AngloGold Ashanti’s Jerritt Canyon
operations, he was appointed Manager of Underground Mining of the Corporate Technical Group (CTG) providing technical
support and corporate governance to international mining operations outside of the South Africa Region. He is currently
Manager Underground Mining for AngloGold Ashanti Australia. He is a registered Professional Mining Engineer in the states of
Colorado and Nevada, USA.
DL Worrall — ACSM, MAusIMM
Dave has vast experience and has been involved, at various levels, in the planning and operation of surface mines since 1975.
He is an Associate of the Camborne School of Mines in Cornwall, England and joined Anglo American Corporation in 1981 as
a senior mine planning engineer in the technical director’s office and AngloGold in 1999 as manager, surface mining in the
corporate office, the position he currently holds.
Dave has vast experience and has been involved, at various levels, in the planning and operation of surface mines since 1975.
He is an Associate of the Camborne School of Mines in Cornwall, England and joined Anglo American Corporation in 1981 as
a senior mine planning engineer in the technical director’s office and AngloGold in 1999 as manager, surface mining in the
corporate office, the position he currently holds.
J van Zyl Visser — MSc (Mining Engineering), BSc (Mineral Resource Management), PLATO
Jurgens has 21 years experience and holds a Bachelor of Science degree in Mineral Resource Management and a Master of
Science degree in Mining Engineering from the University of the Witwatersrand. He started his career with Anglo American
Corporation in 1975 as a surveyor at President Steyn Mine. He joined AngloGold in 1998 as a divisional valuator and in 1999
was appointed as manager survey and planning – Africa underground region.
Jurgens has 21 years experience and holds a Bachelor of Science degree in Mineral Resource Management and a Master of
Science degree in Mining Engineering from the University of the Witwatersrand. He started his career with Anglo American
Corporation in 1975 as a surveyor at President Steyn Mine. He joined AngloGold in 1998 as a divisional valuator and in 1999
was appointed as manager survey and planning – Africa underground region.
The competent persons consent to the inclusion of the exploration and Ore Reserves information in this report, in the form and
context in which it appears.
context in which it appears.
6B.
Compensation
Remuneration report
Policy
The Remuneration Committee sets and monitors executive remuneration for the company, in line with the executive
remuneration policy. This policy has as its objectives to: attract, reward and retain executives of the highest caliber; align the
behavior and performance of executives with the company’s strategic goals, in the overall interests of shareholders; ensure the
appropriate balance between short-, medium- and long-term rewards and incentives, with the latter being closely linked to
structured company performance targets and strategic objectives that are in place from time to time; and ensure that regional
management is competitively rewarded within a global remuneration policy, which recognizes both local and global market
practice.
remuneration policy. This policy has as its objectives to: attract, reward and retain executives of the highest caliber; align the
behavior and performance of executives with the company’s strategic goals, in the overall interests of shareholders; ensure the
appropriate balance between short-, medium- and long-term rewards and incentives, with the latter being closely linked to
structured company performance targets and strategic objectives that are in place from time to time; and ensure that regional
management is competitively rewarded within a global remuneration policy, which recognizes both local and global market
practice.
158
This policy and its application are reviewed at least annually by the Remuneration Committee. See “Item 6C.: Board
practices – Remuneration Committee”.
practices – Remuneration Committee”.
Compensation of executive directors
In particular the Remuneration Committee is responsible for:
•
the remuneration packages for executive directors of the company including, but not limited to, basic salary, performance-
based short and long-term incentives, pensions, and other benefits; and
•
the design and operation of the company’s executive share option and other incentive schemes.
The performances of the executive directors are considered relative to the prevailing business climate and market conditions
as well as annual evaluations to assess the level of achievement of key predetermined objectives. Bonuses paid to executive
directors are a reflection of the performance of each of the directors and the company as a whole. Executive directors have
elected to receive no remuneration as directors of the company.
as well as annual evaluations to assess the level of achievement of key predetermined objectives. Bonuses paid to executive
directors are a reflection of the performance of each of the directors and the company as a whole. Executive directors have
elected to receive no remuneration as directors of the company.
The following principles are applied in determining executive remuneration:
1. Annual remuneration is a combination of base pay and short-, medium- and long-term incentives, with salary comprising
about 50 percent of annual remuneration.
2.
Salary is set at the median for the relevant competitive markets.
3. All incentive plans should align performance targets with shareholder interests.
3. All incentive plans should align performance targets with shareholder interests.
Bonus Share Plan (BSP) and Long-Term Incentive Plan (LTIP)
BSP
Shareholders approved the introduction of two new schemes to replace the old share incentive scheme at the annual general
meeting held on April 29, 2005. The purpose of both schemes is to align the interests of shareholders and the efforts of
executives and managers.
meeting held on April 29, 2005. The purpose of both schemes is to align the interests of shareholders and the efforts of
executives and managers.
To the extent that structured company performance targets are achieved, the BSP allows for the payment of an annual bonus,
paid in part in cash and part in rights to acquire shares.
paid in part in cash and part in rights to acquire shares.
Changes to the BSP as approved by shareholders at the annual general meeting held on May 6, 2008:
The global scramble for skills in the resources sector has had the effect of greatly increasing levels of remuneration for skilled
professionals and managers. Whilst AngloGold Ashanti has been relatively successful in retaining many of its skilled
professionals and managers, its competitive position in respect of remuneration has been significantly eroded. This is
especially true of the awarding of shares and the magnitude of bonuses paid, which compare unfavorably both within South
Africa and globally.
professionals and managers. Whilst AngloGold Ashanti has been relatively successful in retaining many of its skilled
professionals and managers, its competitive position in respect of remuneration has been significantly eroded. This is
especially true of the awarding of shares and the magnitude of bonuses paid, which compare unfavorably both within South
Africa and globally.
At the annual general meeting, the company proposed raising the levels of maximum performance bonus payable and the
maximum levels of bonus share awards, reducing the vesting period of bonus shares from three years to two years, and
altering the split between company and individual performance in determining the bonus, which proposals were approved by
shareholders.
maximum levels of bonus share awards, reducing the vesting period of bonus shares from three years to two years, and
altering the split between company and individual performance in determining the bonus, which proposals were approved by
shareholders.
LTIP
The LTIP allows for the granting of rights to acquire shares, based on the achievements of stretched company performance
targets over a three-year period.
targets over a three-year period.
These targets are based on the performance of earnings per share (EPS) and relative total shareholder return (TSR), whereby
the company will need to consistently outperform its gold company peers. Additionally, certain strategic business objectives,
which the Remuneration Committee will determine from time to time, will also need to be met.
the company will need to consistently outperform its gold company peers. Additionally, certain strategic business objectives,
which the Remuneration Committee will determine from time to time, will also need to be met.
159
Executive director remuneration currently comprises the following elements:
1.
Basic salary, which is subject to annual review by the Remuneration Committee and is set in line with the median of
salaries in similar companies in the relevant markets both in South Africa and globally. The individual salaries of executive
directors are reviewed annually in accordance with their own performance, experience, responsibility and company
performance.
salaries in similar companies in the relevant markets both in South Africa and globally. The individual salaries of executive
directors are reviewed annually in accordance with their own performance, experience, responsibility and company
performance.
2.
Annual bonus, which is determined by the achievement of a set of stretching company and individual performance
targets. The company targets include safety, earnings per share, cost control and global production. The weighting of the
respective contribution of company and individual targets is 70 percent for company and 30 percent for individual. Failure
to achieve safety improvement targets results in the reduction of bonuses for executive directors and executive
management. Fifty percent of the bonus is paid in cash and 50 percent in awarding of rights to acquire shares. The awards
have a three-year vesting period.
targets. The company targets include safety, earnings per share, cost control and global production. The weighting of the
respective contribution of company and individual targets is 70 percent for company and 30 percent for individual. Failure
to achieve safety improvement targets results in the reduction of bonuses for executive directors and executive
management. Fifty percent of the bonus is paid in cash and 50 percent in awarding of rights to acquire shares. The awards
have a three-year vesting period.
3.
LTIP: The chief executive officer and executive director are granted the right to acquire share of value equivalent to 120
percent and 100 percent of their annual salaries, respectively, subject to the achievement of stretched company
performance targets over a three-year period. These targets are based on the performance of EPS and TSR, whereby the
company will need to consistently outperform its gold company peers. Additionally, strategic business objectives will also
need to be met. The first tranche of LTIP awards was made to executive directors in 2005. The performance period in
respect of the 2005 LTIP award ended at the end of 2007. Only one of the performance targets, TSR, was met, which
means that only 40 percent of the award of shares will vest, while the balance will lapse. See “Item 6E.: Share Ownership”
for more information on the Long-Term Incentive Plan.
percent and 100 percent of their annual salaries, respectively, subject to the achievement of stretched company
performance targets over a three-year period. These targets are based on the performance of EPS and TSR, whereby the
company will need to consistently outperform its gold company peers. Additionally, strategic business objectives will also
need to be met. The first tranche of LTIP awards was made to executive directors in 2005. The performance period in
respect of the 2005 LTIP award ended at the end of 2007. Only one of the performance targets, TSR, was met, which
means that only 40 percent of the award of shares will vest, while the balance will lapse. See “Item 6E.: Share Ownership”
for more information on the Long-Term Incentive Plan.
4.
Pensions: All executive directors who are South African citizens, are members of the AngloGold Ashanti Pension Fund, a
defined benefit fund which guarantees a pension on retirement equivalent to 2 percent of final salary per year of service.
All executive directors who are not South African citizens have other retirement benefit plans, to which the company
contributes to the level required by local practice. Death and disability cover reflects best practice among comparable
employers in South Africa.
defined benefit fund which guarantees a pension on retirement equivalent to 2 percent of final salary per year of service.
All executive directors who are not South African citizens have other retirement benefit plans, to which the company
contributes to the level required by local practice. Death and disability cover reflects best practice among comparable
employers in South Africa.
5.
Other benefits: Executive directors are members of an external medical aid scheme, which covers the director and his
immediate family.
immediate family.
Directors’ service contracts
Service contracts of executive directors are reviewed annually. Mark Cutifani, as chief executive officer, has an initial contract
of 24 months, but with a 12-month notice period. The notice period for the chief financial officer and executive director,
Srinivasan Venkatakrishnan, is nine months. The contracts also deal with compensation if an executive director is dismissed or
if there is a material change in role, responsibilities or remuneration following a new shareholder assuming control of the
company. Compensation for these particular circumstances is calculated at twice the notice period earnings.
of 24 months, but with a 12-month notice period. The notice period for the chief financial officer and executive director,
Srinivasan Venkatakrishnan, is nine months. The contracts also deal with compensation if an executive director is dismissed or
if there is a material change in role, responsibilities or remuneration following a new shareholder assuming control of the
company. Compensation for these particular circumstances is calculated at twice the notice period earnings.
Compensation of executive directors, executive officers and executive management
Following the appointment of Mark Cutifani as chief executive officer, AngloGold Ashanti re-organised its executive
management teams with effect from December 1, 2007, in line with the renewed strategic focus of the company. A
decentralised regional operating structure was established with three executive vice presidents for Africa, the Americas and
Australasia reporting directly to the chief executive officer. In addition, the heads of business strategy, business development,
business effectiveness, sustainability and organizational development were made executive vice presidents. These operations
and functional executive vice presidents, together with the vice president – treasurer, the vice president – compliance and
corporate administration, the chief executive officer and the chief financial officer, constitute the company’s executive
management.
management teams with effect from December 1, 2007, in line with the renewed strategic focus of the company. A
decentralised regional operating structure was established with three executive vice presidents for Africa, the Americas and
Australasia reporting directly to the chief executive officer. In addition, the heads of business strategy, business development,
business effectiveness, sustainability and organizational development were made executive vice presidents. These operations
and functional executive vice presidents, together with the vice president – treasurer, the vice president – compliance and
corporate administration, the chief executive officer and the chief financial officer, constitute the company’s executive
management.
Under the Listings Requirements of the JSE, AngloGold Ashanti is required to disclose compensation paid to its executive
directors on an individual basis while compensation paid to its executive officers/executive management is disclosed in
aggregate.
directors on an individual basis while compensation paid to its executive officers/executive management is disclosed in
aggregate.
160
The following table presents the compensation paid by AngloGold Ashanti to executive management during 2007 and 2006.
Executive directors have elected not to receive payment of directors’ fees, committee fees and travel allowances.
Executive directors have elected not to receive payment of directors’ fees, committee fees and travel allowances.
All figures in $000
(1)
Appointed
with effect
with effect
from
(2)
2007
Resigned
or Retired
with
effect
from
(2)
2007
Salary
Compen-
sation
and
recruit-
ment
(3)
Performa
nce
related
pay-
ments
(4)
Pension
scheme
contribu-
tions
Other
benefits
(5)
Encashed
Leave
(6)
Sub-total
Pre-tax
gain on
share
options
exercised
Total
Executive Directors’
remuneration 2007
remuneration 2007
M Cutifani
Sept 17
Sept 17
227
2,162
137
-
100
-
2,627
-
2,627
R Carvalho Silva
(7)
Sept
30
636
2,880
142
302
227
213
4,400
651
5,051
RM Godsell
Sept 30
716
1,394
-
109
13
264
2,495
5,075
7,569
NF Nicolau
Nov 12
(1)
701
2,375
136
111
118
18
3,459
337
3,795
S Venkatakrishnan
649
-
244
110
-
35
1,038
-
1,038
2,929
8,811
659
632
458
530
14,019
6,063
20,080
Executive officers’
remuneration 2007 – up to
November 30, 2007
remuneration 2007 – up to
November 30, 2007
Representing 15
Executive Officers
Executive Officers
4,041
-
885
511
37
95
5,569
1,634
7,203
Executive Managements’
remuneration 2007 – from
December 1, 2007
remuneration 2007 – from
December 1, 2007
Representing 10
Executive
Management
Executive
Management
345
-
73
43
6
51
518
-
518
Total executive directors’,
executive officers’ and
executive management
remuneration – 2007
executive officers’ and
executive management
remuneration – 2007
7,315
8,811
1,617
1,186
501
676
20,106
7,697
27,801
Executive Directors’
remuneration 2006
remuneration 2006
R M Godsell
(chief executive
officer)
(chief executive
officer)
936
354
138
9
-
1,437
324
1,762
R Carvalho Silva
762
172
308
7
64
1,314
-
1,314
N F Nicolau
545
172
83
4
21
825
510
1,335
S Venkatakrishnan
561
172
95
-
-
829
-
829
K H Williams
May 6, 06
175
-
26
13
-
214
-
214
2,979
870
650
33
85
4,619
834
5,454
Executive officers’
remuneration 2006
remuneration 2006
Representing 16
executive officers
executive officers
4,344
983
474
210
39
6,050
1,102
7,152
Total executive directors’ and
executive officers’
remuneration– 2006
executive officers’
remuneration– 2006
7,323
1,853
1,124
243
124
10,669
1,936
12,606
(1)
When directors’ compensation is paid in South African rands, for the purpose of this annual report, the rand values have been converted to US dollars
using the following yearly average rate of exchange: 2007¨$1 = R7.0276 and 2006: $1 = R6.7706.
using the following yearly average rate of exchange: 2007¨$1 = R7.0276 and 2006: $1 = R6.7706.
(2)
Salaries are disclosed only for the period from or to which, office is held except in respect of Messrs Godsell, Carvalho Silva and Nicolau, which amounts
reflect total payments made to the date of this report. Mr Nicolau resigned from the board effective November 12, 2007 and left the company effective
January 31, 2008.
reflect total payments made to the date of this report. Mr Nicolau resigned from the board effective November 12, 2007 and left the company effective
January 31, 2008.
(3)
Compensation and recruitment expenses relate to the once-off payments made to Messrs Godsell, Carvalho Silva and Nicolau on their
retirement/resignation from the board and company, and to Mark Cutifani on his appointment as chief executive officer.
retirement/resignation from the board and company, and to Mark Cutifani on his appointment as chief executive officer.
(4)
In order to move accurately disclose remuneration received/receivable by executive directors, exective officers and executive management, the tables
include the performance related payments calculated on the year’s financial results paid in 2008.
include the performance related payments calculated on the year’s financial results paid in 2008.
(5)
Includes health care, personal travel and relocation expenses, and in the case of Mr Carvalho Silva, a compulsory payment to an unemployment insurance
fund and a medical promise payout paid to Mr Nicolau.
fund and a medical promise payout paid to Mr Nicolau.
(6)
In 2005, AngloGold Ashanti altered its policy regarding the number of leave days that may be accrued. As a result, surplus leave days accrued are
compulsorily encashed.
compulsorily encashed.
(7)
Mr Carvalho Silva’s earnings were paid in Brazilian real and US dollars. For the purposes of this annual report on Form 20-F, values have been converted
using the monthly average rates of exchange.
using the monthly average rates of exchange.
NB: Rounding may result in computational differences
161
Compensation of non-executive directors
The fees of non-executive directors are fixed by shareholders at the annual general meeting, and other than the fees they
receive for their participation on board committees and an allowance for traveling internationally to attend board meetings, non-
executive directors receive no further payments from the company.
receive for their participation on board committees and an allowance for traveling internationally to attend board meetings, non-
executive directors receive no further payments from the company.
There are no contracts of service between the non-executive directors and the company or any of its subsidiaries. All directors
are subject to retirement by rotation and re-election by shareholders at least once every three years.
are subject to retirement by rotation and re-election by shareholders at least once every three years.
The following table presents the compensation paid by AngloGold Ashanti to each non-executive director during 2007 and
2006.
2006.
All figures stated to the
nearest $000
nearest $000
(1)
Appointed
with effect
with effect
from
(2)
Resigned/
Retired
with effect
from
(2)
Directors
fees
(3)
Commit-
tee fees
Travel
(4)
Total
Directors
fees
(3)
Commit-
tee fees
Travel
(4)
Total
R P Edey (chairman)
142
31
18
191
130
24
16
170
T J Motlatsi (deputy
chairman)
chairman)
48
26
–
74
44
19
–
63
F B Arisman
21
30
18
70
16
21
16
53
R E Bannerman
Feb 10, 06
21
15
18
55
14
4
8
26
Mrs E le R Bradley
18
28
–
46
16
22
–
38
C B Brayshaw
(5)
7
11
–
18
16
18
–
34
Mrs C Carroll
May 5, 07
Oct 9, 07
4
–
–
4
–
–
–
–
S E Jonah
(6)
(president)
Aug 1, 05
13
9
–
22
23
18
–
41
R Médori
Aug 1, 05
15
–
–
15
16
–
–
16
J H Mensah
Aug 4, 06
21
11
18
50
7
–
4
11
W A Nairn
18
22
–
40
16
19
–
35
W L Nkuhlu
Aug 4, 06
19
16
–
33
7
4
–
11
S M Pityana
Feb 13, 07
16
16
–
32
–
–
–
–
S R Thompson
21
13
14
48
16
12
–
28
A J Trahar
7
5
–
12
16
6
–
22
P L Zim
Aug 4, 06
–
–
–
–
12
9
–
21
Total – non-executive
directors
directors
389
234
87
710
349
176
44
569
Alternates
D D Barber
D D Barber
Aug 4, 06
–
–
–
–
–
–
–
–
A H Calver
–
–
–
–
–
–
–
–
P G Whitcutt
(7)
–
5
–
5
–
5
–
5
Total alternate directors
–
–
–
–
–
5
–
5
Grand total
389
239
87
715
349
181
44
574
NB: Rounding may result in computational differences
(1)
Where directors' compensation is paid in South African rands, for the purpose of this annual report, the rand values have been converted to US dollars using
the following year-to-date average rate of exchange: 2007: $1=R7.0276 and 2006: $1 = R6.7706.
the following year-to-date average rate of exchange: 2007: $1=R7.0276 and 2006: $1 = R6.7706.
(2)
Salaries are disclosed only for the period from or to which, office is held.
(3)
At the annual general meeting of shareholders held on May 4, 2007, shareholders approved an increase in directors’ fees with effect from May 1, 2007 as
follows:
follows:
Chairman
-$150,000 per annum
Deputy chairman and president
-R360,000 per annum
South African resident directors
-R135,000 per annum
Non-resident directors
-$25,000 per annum
(4)
A payment of a travel allowance of $5,000 per meeting is made to non-executive directors who travel internationally to attend board meetings In addition,
AngloGold Ashanti is liable for the payment of all travel costs.
AngloGold Ashanti is liable for the payment of all travel costs.
(5)
In addition, Mr Brayshaw received fees from AGRe Insurance Company Limited, a wholly-owned subsidiary, for his role as both director and as member of
its audit committee.
its audit committee.
(6)
Dr Jonah resigned as an executive director with effect July 31, 2005, but remained a non-executive director and subsequently resigned from the board with
effect from February 12, 2007.
effect from February 12, 2007.
(7)
Member of the investment committee.
162
6C. Board
practices
The board of directors
The board has a unitary board structure and 12 members who assume complete responsibility for the activities of the company,
including the entire risk management framework and corporate governance of the company. The board has a written charter that
governs its powers, functions and responsibilities and covers the following pertinent areas:
including the entire risk management framework and corporate governance of the company. The board has a written charter that
governs its powers, functions and responsibilities and covers the following pertinent areas:
·
·
·
·
·
Authority of the board
Directors’ appointments
·
Role and responsibility of the board
·
Procedures of the board
Board committees
·
Matters reserved for board decision
·
Management of risks
Corporate governance
Remuneration issues
·
Evaluation of board issues and induction of new directors
·
Declaration of interests
Directors’ retirement follows a staggered process with one-third of directors retiring at least every three years at the annual general
meeting. A curriculum vitae of each director standing for re-election is placed before shareholders at the annual general meeting to
help inform the process of re-election. The board is authorized by the company’s articles of association to appoint new directors,
provided such appointees retire at the next annual general meeting and stand for election by shareholders. A Nominations Committee
has been established as a subcommittee of the board to help identify suitable candidates for appointment to the board.
meeting. A curriculum vitae of each director standing for re-election is placed before shareholders at the annual general meeting to
help inform the process of re-election. The board is authorized by the company’s articles of association to appoint new directors,
provided such appointees retire at the next annual general meeting and stand for election by shareholders. A Nominations Committee
has been established as a subcommittee of the board to help identify suitable candidates for appointment to the board.
Executive directors are appointed by the board to oversee the day-to-day running of the company by the effective supervision of
management. Executive directors are held accountable by regular reporting to the board, and their performance is measured against
pre-determined criteria as well as the performance of their respective business units. Only executive directors have contracts of
employment with the company. There are no contracts of service between the directors and the company, or any of its subsidiaries
that are terminable at periods of notice exceeding one year or that require payment of compensation on termination.
management. Executive directors are held accountable by regular reporting to the board, and their performance is measured against
pre-determined criteria as well as the performance of their respective business units. Only executive directors have contracts of
employment with the company. There are no contracts of service between the directors and the company, or any of its subsidiaries
that are terminable at periods of notice exceeding one year or that require payment of compensation on termination.
Non-executive directors do not hold service contracts with the company. Non-executive directors provide the board with invaluable
and balanced advice and experience that is independent of management and the executive. The presence of independent directors on
the board, and the critical role they play as board representatives on key committees such as the Audit and Corporate Governance,
Nominations, Political Donations and Remuneration committees, together with their calibre, experience and standing within the
community, ensures that the company’s interests are served by impartial views that are separate from those of management and
shareholders.
and balanced advice and experience that is independent of management and the executive. The presence of independent directors on
the board, and the critical role they play as board representatives on key committees such as the Audit and Corporate Governance,
Nominations, Political Donations and Remuneration committees, together with their calibre, experience and standing within the
community, ensures that the company’s interests are served by impartial views that are separate from those of management and
shareholders.
In terms of board policy, a director will qualify as being independent provided AngloGold Ashanti has not, over the preceding year,
done business in excess of $10 million or 5 percent of the company’s treasury business with the employer of that director.
Furthermore, in compliance with JSE Listings Requirements, an independent director must not be a representative of a shareholder
who has the ability to control or materially influence management and/or the board; must not have been employed by the company or
be the spouse of a person employed by the company in an executive role in the past three years; must not have been an adviser to
the company other than in the capacity as a director of the company; must not be a material supplier, customer or have a material
contractual relationship with the company; and must be free of any relationship that could be seen to materially interfere with the
independence of that person. The board has affirmatively determined that all eight independent non-executive directors comply with
these requirements of independence.
done business in excess of $10 million or 5 percent of the company’s treasury business with the employer of that director.
Furthermore, in compliance with JSE Listings Requirements, an independent director must not be a representative of a shareholder
who has the ability to control or materially influence management and/or the board; must not have been employed by the company or
be the spouse of a person employed by the company in an executive role in the past three years; must not have been an adviser to
the company other than in the capacity as a director of the company; must not be a material supplier, customer or have a material
contractual relationship with the company; and must be free of any relationship that could be seen to materially interfere with the
independence of that person. The board has affirmatively determined that all eight independent non-executive directors comply with
these requirements of independence.
The board, its sub-committees, and the directors all completed an annual evaluation process to review their effectiveness. The
chairman of each committee and the chairman of the board led the processes to evaluate the committees and the board respectively.
Each non-executive director completed a self-assessment which was then reviewed by the chairman of the board, and where
necessary a meeting was held between that director and chairman. There was a separate review of the chairman’s performance led by
the deputy chairman of the board whereby each director evaluated his performance during the year. The vice-president – compliance
and corporate administration, company secretary and compliance manager played a critical role in this process. The performance
evaluation of executive directors is conducted by the Remuneration Committee. As an example of the content of an appraisal form,
the board effectiveness evaluation covered the following topics:
chairman of each committee and the chairman of the board led the processes to evaluate the committees and the board respectively.
Each non-executive director completed a self-assessment which was then reviewed by the chairman of the board, and where
necessary a meeting was held between that director and chairman. There was a separate review of the chairman’s performance led by
the deputy chairman of the board whereby each director evaluated his performance during the year. The vice-president – compliance
and corporate administration, company secretary and compliance manager played a critical role in this process. The performance
evaluation of executive directors is conducted by the Remuneration Committee. As an example of the content of an appraisal form,
the board effectiveness evaluation covered the following topics:
·
Setting of performance objectives
·
Board contribution to development of strategy
·
Board response to crisis
·
Board awareness of developments in regulatory environment and market
·
Effectiveness of board committees
·
Evaluation of the relationship between the board and management, shareholders and among members of the board itself
·
Succession plans for senior executive management
·
Definition of independent directors
·
Corporate governance and legal issues facing the board/company
163
The vice-president – compliance and corporate administration and the company secretary have been appointed to assist the board in
its deliberations, informing members of their legal duties and ensuring, together with the executive directors and senior management
that its resolutions are carried out. Together with the investor relations department, the company secretarial function also provides a
direct communications link with investors and liaises with the company’s share registrars on all issues affecting shareholders and in
consultation with other departments, provides mandatory information required by various regulatory bodies and stock exchanges on
which the company is listed. The vice president – compliance and corporate administration and the company secretary are responsible
for compliance with all the statutory requirements related to the administration of the Share Incentive Scheme. They also ensure that
minutes of all shareholders, board and board committee meetings are properly recorded in accordance with the South African
Companies Act 61 of 1973 as amended. The company secretarial and compliance functions also play a crucial role in the induction of
new directors.
its deliberations, informing members of their legal duties and ensuring, together with the executive directors and senior management
that its resolutions are carried out. Together with the investor relations department, the company secretarial function also provides a
direct communications link with investors and liaises with the company’s share registrars on all issues affecting shareholders and in
consultation with other departments, provides mandatory information required by various regulatory bodies and stock exchanges on
which the company is listed. The vice president – compliance and corporate administration and the company secretary are responsible
for compliance with all the statutory requirements related to the administration of the Share Incentive Scheme. They also ensure that
minutes of all shareholders, board and board committee meetings are properly recorded in accordance with the South African
Companies Act 61 of 1973 as amended. The company secretarial and compliance functions also play a crucial role in the induction of
new directors.
A compliance office has been established to assist the board and management to determine their statutory duties, ensure legal
compliance and advise on issues of corporate governance.
compliance and advise on issues of corporate governance.
All members of the board have access to management and the records of the company, as well as to external professional advisers
should the need arise.
should the need arise.
Six board meetings took place during the course of 2007. All directors, or their designated alternates, attended the board meetings
during their tenure except for Mrs Carroll and Mr Médori who did not attend three meetings each, Dr Motlatsi and Mr Mensah who did
not attend two meetings each, and Messrs Bannerman, Godsell, Nairn, Pityana, Thompson, Trahar, Prof Nkuhlu, Dr Jonah and
Mrs Bradley who were each unable to attend one meeting.
during their tenure except for Mrs Carroll and Mr Médori who did not attend three meetings each, Dr Motlatsi and Mr Mensah who did
not attend two meetings each, and Messrs Bannerman, Godsell, Nairn, Pityana, Thompson, Trahar, Prof Nkuhlu, Dr Jonah and
Mrs Bradley who were each unable to attend one meeting.
Directors and employees of AngloGold Ashanti with access to price sensitive information are not permitted to trade in the company’s
shares during closed periods. In addition, they are prohibited from dealing in warrants and derivatives of the company at any time.
Directors and key employees are required to follow a formal process before trading in the company’s shares. Closed periods are in
effect from the end of the reporting period to and including the date of publication of the quarterly, half-yearly and year-end results.
Where appropriate, a closed period is also effective during periods when major transactions are being negotiated and a public
announcement is imminent.
shares during closed periods. In addition, they are prohibited from dealing in warrants and derivatives of the company at any time.
Directors and key employees are required to follow a formal process before trading in the company’s shares. Closed periods are in
effect from the end of the reporting period to and including the date of publication of the quarterly, half-yearly and year-end results.
Where appropriate, a closed period is also effective during periods when major transactions are being negotiated and a public
announcement is imminent.
Significant corporate governance issues faced by the board in 2007
The company looks back proudly at its history as part of Anglo American and looks forward to a future that is rich with promise and
prospect. The company views the reduction of Anglo American’s shareholding in it as a positive move that enables it to make its
strategic choices more freely in a dynamic business environment.
prospect. The company views the reduction of Anglo American’s shareholding in it as a positive move that enables it to make its
strategic choices more freely in a dynamic business environment.
The increase in the free float of its shares up to 83 percent reflects the company’s ability to be independent in determining its strategy
and developmental focus, enhancing its own competitiveness and in empowering shareholders by negating the effect of having a
majority shareholder and increasing the company’s liquidity.
and developmental focus, enhancing its own competitiveness and in empowering shareholders by negating the effect of having a
majority shareholder and increasing the company’s liquidity.
The board’s previous composition, which at one stage numbered 19 directors, was clearly too large. There is now a smaller, more
focused group, with the right credentials in terms of skills, experience, knowledge and demographics which will hold the company in
good stead as it charts its new strategy.
focused group, with the right credentials in terms of skills, experience, knowledge and demographics which will hold the company in
good stead as it charts its new strategy.
The retirement of the chief executive officer, Mr Bobby Godsell, and the resignation of the two chief operating officers (COOs),
Mr Roberto Carvalho Silva and Mr Neville Nicolau, required considerable deliberation by the board in order to ensure a smooth
transition to their respective successors. Succession plans in the case of the two COOs ensured that the operational requirements of
the company continued. In 1998, AngloGold was formed through the consolidation of the gold assets of Anglo American Corporation of
South Africa into an independent, single focused gold company. Mr Bobby Godsell played a pivotal role in establishing AngloGold and
overseeing its evolution as a world-class multinational gold company with mining and exploration activities on five continents and in
more than 10 countries, and the first South African company to list on the New York Stock Exchange. He also oversaw the merger
with Ghanaian gold mining company Ashanti Goldfields Company Limited to form AngloGold Ashanti in 2004. His decision to retire
based on a desire to contribute to the broader South African community in a more direct and meaningful manner was respected by the
board and his significant contribution in nurturing the company through its formative years is appreciated by both staff and the board of
the company.
Mr Roberto Carvalho Silva and Mr Neville Nicolau, required considerable deliberation by the board in order to ensure a smooth
transition to their respective successors. Succession plans in the case of the two COOs ensured that the operational requirements of
the company continued. In 1998, AngloGold was formed through the consolidation of the gold assets of Anglo American Corporation of
South Africa into an independent, single focused gold company. Mr Bobby Godsell played a pivotal role in establishing AngloGold and
overseeing its evolution as a world-class multinational gold company with mining and exploration activities on five continents and in
more than 10 countries, and the first South African company to list on the New York Stock Exchange. He also oversaw the merger
with Ghanaian gold mining company Ashanti Goldfields Company Limited to form AngloGold Ashanti in 2004. His decision to retire
based on a desire to contribute to the broader South African community in a more direct and meaningful manner was respected by the
board and his significant contribution in nurturing the company through its formative years is appreciated by both staff and the board of
the company.
The process for selecting a successor to Mr Godsell was led by the board chairman in consultation with the board as a whole and in
particular with the Nominations and Remuneration committees of the board. The search for an experienced and qualified mining and
business leader considered candidates both internally and externally. The decision to appoint an external candidate, Mr Mark Cutifani,
a mining engineer by training, as the new CEO was based on the need to bring in new and fresh ideas to guide the company’s
strategic future. In particular, Mr Cutifani’s impressive career and experience in both the operational and financial aspects of the
mining industry were regarded by the board as key features in its decision to appoint him as chief executive officer.
particular with the Nominations and Remuneration committees of the board. The search for an experienced and qualified mining and
business leader considered candidates both internally and externally. The decision to appoint an external candidate, Mr Mark Cutifani,
a mining engineer by training, as the new CEO was based on the need to bring in new and fresh ideas to guide the company’s
strategic future. In particular, Mr Cutifani’s impressive career and experience in both the operational and financial aspects of the
mining industry were regarded by the board as key features in its decision to appoint him as chief executive officer.
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Highlights of Mr Cutifani’s career include: Chief operating officer – CVRD INCO (Toronto, Canada); Chief operating officer – INCO Ltd
(Toronto, Canada); Managing director – Sons of Gwalia Ltd (West Perth, Australia); Group executive, mining and development –
Normandy Mining Ltd (Adelaide, Australia); Group manager, project management – Western Mining Corporation Ltd; and Manager,
coal – Rio Tinto Ltd.
(Toronto, Canada); Managing director – Sons of Gwalia Ltd (West Perth, Australia); Group executive, mining and development –
Normandy Mining Ltd (Adelaide, Australia); Group manager, project management – Western Mining Corporation Ltd; and Manager,
coal – Rio Tinto Ltd.
Mr Cutifani is leading a strategic review of the company’s safety performance, its vision, mission and values, and the make-up of its
operation and exploration profiles. This review will be implemented and completed during 2008.
operation and exploration profiles. This review will be implemented and completed during 2008.
The Public Investment Corporation (PIC), which is the company’s third largest shareholder and invests South African public workers’
pension funds, released its policy on corporate governance. The board welcomes such initiatives and applauds the transparency and
engagement provided by the PIC. Many of the standards adopted in the policy already form part of the company’s practices but some
standards will require review and deliberation by the board.
pension funds, released its policy on corporate governance. The board welcomes such initiatives and applauds the transparency and
engagement provided by the PIC. Many of the standards adopted in the policy already form part of the company’s practices but some
standards will require review and deliberation by the board.
Board Committees
To facilitate its activities and deliberations, the board has established a number of sub-committees, comprising members of the
board, with written terms of reference governing the powers, functions and activities of these sub-committees. At the October
2007 meeting of the board, a decision was taken to dissolve the Market Development Committee as its mandate can be met at
management level. There are now eight committees of the board including the Executive Committee.
board, with written terms of reference governing the powers, functions and activities of these sub-committees. At the October
2007 meeting of the board, a decision was taken to dissolve the Market Development Committee as its mandate can be met at
management level. There are now eight committees of the board including the Executive Committee.
Members of board committees have access to management and the records of the company, as well as to external
professional advisers should the need arise. A description of each subcommittee is provided below.
professional advisers should the need arise. A description of each subcommittee is provided below.
Audit and Corporate Governance Committee
The Audit and Corporate Governance Committee, including its chairman, comprises only independent non-executive directors,
in compliance with the Sarbanes-Oxley Act. The members of the Audit and Corporate Governance Committee are
Prof. WL Nkuhlu, Mr FB Arisman, Mr JH Mensah, Mrs E Bradley and Mr RP Edey. The Sarbanes-Oxley Act requires the board
to identify a financial expert from within its ranks. The board has resolved that the committee’s chairman, Prof Wiseman
Nkuhlu, is the board’s financial expert. All five members of the committee have considerable financial knowledge and
experience to help oversee and guide the board and the company in respect of the audit and corporate governance disciplines.
In relation to independent directors’ membership of the committee, AngloGold Ashanti deviates from the guidelines of the King
Code but complies with the requirements of the Sarbanes-Oxley Act as the chief executive officer is not a member of the
committee but, if required, may attend by invitation from the chairman of the committee. In addition, AngloGold Ashanti
deviates from the guidelines of the King Code in that the board chairman is a member of the committee. The board considers
that the board chairman possesses invaluable experience and knowledge warranting his membership of the committee.
AngloGold Ashanti is otherwise compliant with the good governance requirements of the King Code.
in compliance with the Sarbanes-Oxley Act. The members of the Audit and Corporate Governance Committee are
Prof. WL Nkuhlu, Mr FB Arisman, Mr JH Mensah, Mrs E Bradley and Mr RP Edey. The Sarbanes-Oxley Act requires the board
to identify a financial expert from within its ranks. The board has resolved that the committee’s chairman, Prof Wiseman
Nkuhlu, is the board’s financial expert. All five members of the committee have considerable financial knowledge and
experience to help oversee and guide the board and the company in respect of the audit and corporate governance disciplines.
In relation to independent directors’ membership of the committee, AngloGold Ashanti deviates from the guidelines of the King
Code but complies with the requirements of the Sarbanes-Oxley Act as the chief executive officer is not a member of the
committee but, if required, may attend by invitation from the chairman of the committee. In addition, AngloGold Ashanti
deviates from the guidelines of the King Code in that the board chairman is a member of the committee. The board considers
that the board chairman possesses invaluable experience and knowledge warranting his membership of the committee.
AngloGold Ashanti is otherwise compliant with the good governance requirements of the King Code.
The group internal audit manager has unrestricted access to both the chief executive officer and the chief financial officer, the
board chairman and the chairman of this committee, and is invited to attend and report on his department’s activities at all
committee meetings. The board is confident that the unfettered access of the group internal audit manager to key board
members, and the direct and regular reporting to the committee, together with his calibre, experience and integrity, enable him
to discharge his duties as required by law and in fulfillment of his obligations to the company. The function, duties and powers
of internal audit, for which the group internal audit manager is responsible, are governed by a formal internal audit charter that
has been approved by the committee. In addition, the group internal audit manager meets with committee members in the
absence of management.
board chairman and the chairman of this committee, and is invited to attend and report on his department’s activities at all
committee meetings. The board is confident that the unfettered access of the group internal audit manager to key board
members, and the direct and regular reporting to the committee, together with his calibre, experience and integrity, enable him
to discharge his duties as required by law and in fulfillment of his obligations to the company. The function, duties and powers
of internal audit, for which the group internal audit manager is responsible, are governed by a formal internal audit charter that
has been approved by the committee. In addition, the group internal audit manager meets with committee members in the
absence of management.
The committee is tasked to assist the board in discharging its duties relating to the safeguarding of assets, the operation of
adequate systems, control processes and the preparation of accurate financial reporting and statements in compliance with all
applicable legal requirements, stock exchange rules and accounting standards. The committee does not perform any
management functions or assume any managerial responsibilities. The committee provides a forum for discussing business
risk and control issues for development of relevant recommendations for consideration by the Board. The committee is
constituted in terms of the requirements of sound corporate governance practices and operates within that framework. The
committee meets regularly with the external audit partner, the group’s internal audit manager and the chief financial officer to
review the audit plans of the internal and external auditors and ascertain the scope of the audits, and to review the quarterly
financial results, significant legal matters affecting the company, the preliminary announcement of the annual results and the
annual financial statements, as well as all statutory submissions of a financial nature, prior to approval by the board.
adequate systems, control processes and the preparation of accurate financial reporting and statements in compliance with all
applicable legal requirements, stock exchange rules and accounting standards. The committee does not perform any
management functions or assume any managerial responsibilities. The committee provides a forum for discussing business
risk and control issues for development of relevant recommendations for consideration by the Board. The committee is
constituted in terms of the requirements of sound corporate governance practices and operates within that framework. The
committee meets regularly with the external audit partner, the group’s internal audit manager and the chief financial officer to
review the audit plans of the internal and external auditors and ascertain the scope of the audits, and to review the quarterly
financial results, significant legal matters affecting the company, the preliminary announcement of the annual results and the
annual financial statements, as well as all statutory submissions of a financial nature, prior to approval by the board.
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The committee is furthermore responsible for:
·
the appointment and dismissal of the external auditors; determining and approving external auditors’ fees; overseeing the
work of the external auditors; determining all non-audit work of the external auditors including consulting work, and pre-
approving non-audit fees to be paid to the external auditors; and ensuring that the external auditors report regularly to the
committee. The non-audit activities performed by the external auditors during the year were in respect of:
– tax services;
– training services; and
– communications and advisory services regarding annual comment letters received from the US SEC.
work of the external auditors; determining all non-audit work of the external auditors including consulting work, and pre-
approving non-audit fees to be paid to the external auditors; and ensuring that the external auditors report regularly to the
committee. The non-audit activities performed by the external auditors during the year were in respect of:
– tax services;
– training services; and
– communications and advisory services regarding annual comment letters received from the US SEC.
·
total fees expensed to the external auditors for such activities were less than $1 million while total fees expensed for 2007
were approximately $7 million. The percentage of non-audit fees as a portion of total fees paid to the external auditors for
2007 was about 14 percent;
were approximately $7 million. The percentage of non-audit fees as a portion of total fees paid to the external auditors for
2007 was about 14 percent;
overseeing the internal audit function; receiving regular report back from the group internal audit manager; and the
appointment and dismissal of the group internal audit manager;
·
·
assessing and reviewing the company’s risk management framework; and
·
monitoring the group’s corporate governance practices in relation to regulatory requirements and guidelines.
The external auditors also meet with committee members in the absence of management. The Audit and Corporate
Governance Committee, after due consideration, is satisfied that the external auditor is independent of the company and was
so during the financial period under review to and including the date of this report.
Governance Committee, after due consideration, is satisfied that the external auditor is independent of the company and was
so during the financial period under review to and including the date of this report.
The committee met on five occasions during 2007. All members of the committee, except Mrs Bradley who could not attend
two meetings, were present at each of the committee meetings for which they were eligible to attend. In addition, three
meetings of the Audit and Corporate Governance sub-committee were held to approve the annual report on Form 20-F and
other US GAAP filings with the United States’ Securities and Exchange Commission (SEC).
two meetings, were present at each of the committee meetings for which they were eligible to attend. In addition, three
meetings of the Audit and Corporate Governance sub-committee were held to approve the annual report on Form 20-F and
other US GAAP filings with the United States’ Securities and Exchange Commission (SEC).
The NYSE listing rules require that the board determine whether a member of the committee’s simultaneous service on the
audit committees of more than three public companies impairs the ability of such a member to effectively serve on a listed
company’s audit committee. Prof Nkuhlu, the chairman of the committee, is a member of two (2006: two) other public
companies’ audit committees but is the chairman of none of these committees (2006: nil). Mrs Bradley is a member of three
(2006: three) other public companies’ audit committees and is the chairman of one (2006: one).
audit committees of more than three public companies impairs the ability of such a member to effectively serve on a listed
company’s audit committee. Prof Nkuhlu, the chairman of the committee, is a member of two (2006: two) other public
companies’ audit committees but is the chairman of none of these committees (2006: nil). Mrs Bradley is a member of three
(2006: three) other public companies’ audit committees and is the chairman of one (2006: one).
Prof Nkuhlu is a qualified chartered accountant with considerable experience in both accounting and auditing and is a past
president of the South African Institute of Chartered Accountants. Mrs Bradley has considerable financial and accounting
experience. The board is confident that the experience, calibre and integrity of both directors and active contribution at
meetings of the committee and the board, demonstrate their commitment to the company. The simultaneous service on other
audit committees by Prof Nkuhlu and Mrs Bradley has not impaired their ability to diligently execute their responsibilities to the
committee and the board of AngloGold Ashanti. The members of the Audit and Corporate Governance Committee were all re-
appointed to serve as members of the committee by the board and to hold office for the next financial year.
president of the South African Institute of Chartered Accountants. Mrs Bradley has considerable financial and accounting
experience. The board is confident that the experience, calibre and integrity of both directors and active contribution at
meetings of the committee and the board, demonstrate their commitment to the company. The simultaneous service on other
audit committees by Prof Nkuhlu and Mrs Bradley has not impaired their ability to diligently execute their responsibilities to the
committee and the board of AngloGold Ashanti. The members of the Audit and Corporate Governance Committee were all re-
appointed to serve as members of the committee by the board and to hold office for the next financial year.
Employment Equity and Development Committee
The committee is responsible for overseeing the company’s performance in respect of employment equity, transformation and
staff development by taking into account the legal requirements of applicable legislation and the monitoring of targets set by
the company. The committee is also responsible for employee skills development in a manner that seeks to retain and develop
talent, and to provide employees with the opportunity to enhance their skills and knowledge. The committee met on four
occasions during 2007. Details of the company’s employment equity practices and performance during the year are provided
later in this report under “Employment Equity and Development”. All members of the committee attended each meeting for
which they were eligible, except Mr Nairn who was unable to attend one meeting.
staff development by taking into account the legal requirements of applicable legislation and the monitoring of targets set by
the company. The committee is also responsible for employee skills development in a manner that seeks to retain and develop
talent, and to provide employees with the opportunity to enhance their skills and knowledge. The committee met on four
occasions during 2007. Details of the company’s employment equity practices and performance during the year are provided
later in this report under “Employment Equity and Development”. All members of the committee attended each meeting for
which they were eligible, except Mr Nairn who was unable to attend one meeting.
Executive Committee
This committee, chaired by Mr Cutifani, the new chief executive officer, since his appointment in October 2007, is responsible
for overseeing the day-to-day management of the company’s affairs and for executing the decisions of the board. The
committee meets at least monthly and is actively involved in the strategic review of the company’s values, safety performance,
operation and exploration profiles and financial status. The Finance Committee, which is responsible for overseeing the
financial and administrative affairs of the company, is a sub-committee of the Executive Committee.
for overseeing the day-to-day management of the company’s affairs and for executing the decisions of the board. The
committee meets at least monthly and is actively involved in the strategic review of the company’s values, safety performance,
operation and exploration profiles and financial status. The Finance Committee, which is responsible for overseeing the
financial and administrative affairs of the company, is a sub-committee of the Executive Committee.
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Investment Committee
This committee is responsible for overseeing and reviewing AngloGold Ashanti’s strategic investments which includes the
acquisition and disposal of assets, capital expenditure and projects. The committee met on three occasions during 2007. All
members who were eligible to attend meetings of the committee were present except Mrs Bradley and Messrs Pityana, Nairn
and Whitcutt who were unable to attend one meeting each. Dr Jonah who was eligible to attend one meeting of the committee,
prior to his resignation from the board, was unavailable for this meeting.
acquisition and disposal of assets, capital expenditure and projects. The committee met on three occasions during 2007. All
members who were eligible to attend meetings of the committee were present except Mrs Bradley and Messrs Pityana, Nairn
and Whitcutt who were unable to attend one meeting each. Dr Jonah who was eligible to attend one meeting of the committee,
prior to his resignation from the board, was unavailable for this meeting.
Market Development Committee
This committee was established to extend the influence of AngloGold Ashanti as a major global gold mining company in the
development of a broader gold business, both nationally and internationally. The committee met on one occasion during 2007
and each member, except Dr Jonah, was present. In October 2007, the board resolved to dissolve this committee as its
objectives are best met at management level.
development of a broader gold business, both nationally and internationally. The committee met on one occasion during 2007
and each member, except Dr Jonah, was present. In October 2007, the board resolved to dissolve this committee as its
objectives are best met at management level.
Nominations Committee
The appointment of directors is a matter for the board as a whole but the Nominations Committee is responsible for
determining and recommending suitable candidates to the board. The fit and proper standards policy for directors guides this
process. The committee is also responsible for establishing and reviewing succession plans for members of the board,
particularly those of the chief executive officer and board chairman. The committee, chaired by the board chairman, was
actively involved in the selection and recruitment of the company’s new CEO and for recommending him for approval to the
board. The committee met on three occasions during 2007. All members of the committee who were eligible to be present
attended the meetings.
determining and recommending suitable candidates to the board. The fit and proper standards policy for directors guides this
process. The committee is also responsible for establishing and reviewing succession plans for members of the board,
particularly those of the chief executive officer and board chairman. The committee, chaired by the board chairman, was
actively involved in the selection and recruitment of the company’s new CEO and for recommending him for approval to the
board. The committee met on three occasions during 2007. All members of the committee who were eligible to be present
attended the meetings.
Political Donations Committee
The membership of the Political Donations Committee comprises the South African resident independent non-executive
directors, and is chaired by the deputy chairman of the board. The committee determines the funding of political parties in
South Africa in accordance with a formal policy adopted by the board on April 29, 2003 that sets the guiding principles for
funding. No meetings of the committee took place in 2007. Prof Nkuhlu and Mr Pityana were appointed by the board as
additional members to this committee during the year.
directors, and is chaired by the deputy chairman of the board. The committee determines the funding of political parties in
South Africa in accordance with a formal policy adopted by the board on April 29, 2003 that sets the guiding principles for
funding. No meetings of the committee took place in 2007. Prof Nkuhlu and Mr Pityana were appointed by the board as
additional members to this committee during the year.
Remuneration Committee
The Remuneration Committee, whose members consist only of independent non-executive directors, namely Mr RP Edey
(chairman), Mr RE Bannerman, Prof WL Nkuhlu, Mr FB Arisman, Dr TJ Motlatsi and Mr SM Pityana, is responsible for
evaluating the performance of executive directors and executive management, and for setting appropriate remuneration for
such officers of the company. Full details of the company’s remuneration philosophy, the committee’s deliberations during
2007, remuneration payments for all directors and information on the Share Incentive Scheme have been disclosed in
“Item 6B.: Compensation” above.
(chairman), Mr RE Bannerman, Prof WL Nkuhlu, Mr FB Arisman, Dr TJ Motlatsi and Mr SM Pityana, is responsible for
evaluating the performance of executive directors and executive management, and for setting appropriate remuneration for
such officers of the company. Full details of the company’s remuneration philosophy, the committee’s deliberations during
2007, remuneration payments for all directors and information on the Share Incentive Scheme have been disclosed in
“Item 6B.: Compensation” above.
The performances of the executive directors are considered relative to the prevailing business climate and market conditions,
as well as to annual evaluations of the achievement of key predetermined objectives. Bonuses paid to executive directors are a
reflection of the performance of each of the directors and the company as a whole. The committee, chaired by the board
chairman, actively engaged and debated the issues of the retirement package of Mr Godsell and the resignation packages of
Messrs Carvalho Silva and Nicolau, as well as the remuneration package of the new CEO, Mr Cutifani. Executive directors
have elected to receive no remuneration as directors of the company. The fees of non-executive directors are fixed by
shareholders at the annual general meeting and, other than the fees they receive for their participation on board committees
and an allowance for travelling internationally to attend board meetings, non-executive directors receive no further payments
from the company. The committee met on four occasions during 2007. All members of the committee attended meetings of the
committee for which they were eligible to be present except Dr Motlatsi who was unable to attend one meeting. The chairman
of the Remuneration Committee attends the annual general meeting to answer any questions from shareholders.
as well as to annual evaluations of the achievement of key predetermined objectives. Bonuses paid to executive directors are a
reflection of the performance of each of the directors and the company as a whole. The committee, chaired by the board
chairman, actively engaged and debated the issues of the retirement package of Mr Godsell and the resignation packages of
Messrs Carvalho Silva and Nicolau, as well as the remuneration package of the new CEO, Mr Cutifani. Executive directors
have elected to receive no remuneration as directors of the company. The fees of non-executive directors are fixed by
shareholders at the annual general meeting and, other than the fees they receive for their participation on board committees
and an allowance for travelling internationally to attend board meetings, non-executive directors receive no further payments
from the company. The committee met on four occasions during 2007. All members of the committee attended meetings of the
committee for which they were eligible to be present except Dr Motlatsi who was unable to attend one meeting. The chairman
of the Remuneration Committee attends the annual general meeting to answer any questions from shareholders.
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Safety, Health and Sustainable Development Committee
This committee is tasked with overseeing the company’s performance regarding safety, health and sustainable development,
and for establishing targets in relation to each of these areas. The committee, which comprises non-executive directors and
executive management (including the chief executive officer) deliberated on the safety concerns faced by the company’s South
African mines in particular, and on the strategies and methodologies that will enhance the safety and security of all company
employees. The committee also called on management to engage external consultants to review the effectiveness of the
company’s strategy and program to improve safety and health. This review influenced AngloGold Ashanti’s recently
implemented “Safety is our first value” campaign.
and for establishing targets in relation to each of these areas. The committee, which comprises non-executive directors and
executive management (including the chief executive officer) deliberated on the safety concerns faced by the company’s South
African mines in particular, and on the strategies and methodologies that will enhance the safety and security of all company
employees. The committee also called on management to engage external consultants to review the effectiveness of the
company’s strategy and program to improve safety and health. This review influenced AngloGold Ashanti’s recently
implemented “Safety is our first value” campaign.
The committee met on five occasions during 2007. All members of the committee attended each committee meeting that they
were eligible to attend except for Dr Motlatsi and Mr Pityana, who were each unable to attend one meeting, and Mr Mensah,
who did not attend two meetings. Dr Jonah was unable to attend the one meeting which he was entitled to attend.
were eligible to attend except for Dr Motlatsi and Mr Pityana, who were each unable to attend one meeting, and Mr Mensah,
who did not attend two meetings. Dr Jonah was unable to attend the one meeting which he was entitled to attend.
Other committees
In addition to the committees of the board mentioned above, the Executive Committee has established a number of standing
committees to oversee the day-to-day management of the company’s affairs. The Finance Committee, which meets on an ad
hoc basis, is chaired by the chief financial officer and comprises members of senior management in the administrative,
financial and legal fields. It is tasked with monitoring all financial, legal and administrative aspects of the company’s affairs. The
Treasury Committee is chaired by an independent director, Prof Nkuhlu and comprises one other independent director,
Mr Arisman, and senior management in the financial discipline. It is responsible for reviewing and evaluating market conditions,
treasury operations and future hedging strategies.
committees to oversee the day-to-day management of the company’s affairs. The Finance Committee, which meets on an ad
hoc basis, is chaired by the chief financial officer and comprises members of senior management in the administrative,
financial and legal fields. It is tasked with monitoring all financial, legal and administrative aspects of the company’s affairs. The
Treasury Committee is chaired by an independent director, Prof Nkuhlu and comprises one other independent director,
Mr Arisman, and senior management in the financial discipline. It is responsible for reviewing and evaluating market conditions,
treasury operations and future hedging strategies.
6D.
Employees
The average number of attributable employees in the AngloGold Ashanti group over the last 3 financial years was:
2007
2006
2005
South Africa
36,976
35,968
40,426
Argentina
1,017
906
950
Australia
781
479
441
Brazil
4,352
4,428
3,489
Ghana
7,549
9,443
10,304
Guinea
2,917
2,708
1,978
Mali
1,615
1,473
1,309
Namibia
409
313
315
Tanzania
3,226
3,220
2,280
USA
405
369
391
Other*
2,275
2,146
2,110
Total
61,522
61,453
63,993
*including corporate and other non-gold producing subsidiaries
The change in employee numbers from 2006 to 2007 was largely a result of increases in employee complement in Australia
and Namibia owing to staffing up at the Boddington joint venture and the full impact of the revised shift arrangements at
Sunrise Dam, and the full transition to owner-mining at Navachab. In contrast, employee numbers declined in Ghana where
restructuring continued at the Obuasi operation.
and Namibia owing to staffing up at the Boddington joint venture and the full impact of the revised shift arrangements at
Sunrise Dam, and the full transition to owner-mining at Navachab. In contrast, employee numbers declined in Ghana where
restructuring continued at the Obuasi operation.
The change in employees numbers from 2005 to 2006 was largely a result of the go-ahead for Boddington project in Australia
and change in shaft arrangements at Sunrise Dam, the expansion at Cuiabá in Brazil; the sale of Bibiani in Ghana,
retrenchments at Obuasi and natural attrition; and the full impact of transition to owner-mining in Tanzania.
and change in shaft arrangements at Sunrise Dam, the expansion at Cuiabá in Brazil; the sale of Bibiani in Ghana,
retrenchments at Obuasi and natural attrition; and the full impact of transition to owner-mining in Tanzania.
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Employees and other stakeholder engagement
The group has in place a set of core business principles which governs its relationships with employees, employee
associations and trade unions, neighbouring communities, regulatory authorities, suppliers and customers, and supports the
company’s vision, mission and values. AngloGold Ashanti recognizes these groups as stakeholders and business partners in
its activities and seeks to reduce any potentially adverse effects of its operations and business. As a company with extensive
mining and metallurgical processing operations, key areas of focus are the management of occupational health and safety,
regional health, social and environmental impacts. More detailed disclosure on these may be found in the Report to Society
2007, available at www.aga-reports.com.
associations and trade unions, neighbouring communities, regulatory authorities, suppliers and customers, and supports the
company’s vision, mission and values. AngloGold Ashanti recognizes these groups as stakeholders and business partners in
its activities and seeks to reduce any potentially adverse effects of its operations and business. As a company with extensive
mining and metallurgical processing operations, key areas of focus are the management of occupational health and safety,
regional health, social and environmental impacts. More detailed disclosure on these may be found in the Report to Society
2007, available at www.aga-reports.com.
Unions and collective bargaining
Freedom of association, in particular, is recognized as a fundamental right within the group, and collective bargaining is
encouraged in those countries where the relevant structures exist. Management/union relationships are governed by collective
bargaining, recognition and company-negotiated agreements in respect of all of the group’s operations, with 93 percent
(2006: 85.6 percent) of the global workforce represented by recognized trade unions or provided for by way of collective
bargaining processes. AngloGold Ashanti is a strong supporter of collective bargaining.
encouraged in those countries where the relevant structures exist. Management/union relationships are governed by collective
bargaining, recognition and company-negotiated agreements in respect of all of the group’s operations, with 93 percent
(2006: 85.6 percent) of the global workforce represented by recognized trade unions or provided for by way of collective
bargaining processes. AngloGold Ashanti is a strong supporter of collective bargaining.
Although only 87 percent of all South African employees are members of unions, 97.5 percent fall under collective bargaining
agreements, including the agency-shop agreement. The agency shop agreement exists across the lower bargaining unit at the
South African operations. This agreement provides for the contribution by non-union members of 0.75 percent of basic monthly
pay to a fund which is used to address work and social needs of that bargaining group. This has been negotiated because
union members pay 1 percent of their basic pay as union dues. The outcome of wage negotiations with the unions applies to
all employees within that bargaining unit, whether they are union members or not.
agreements, including the agency-shop agreement. The agency shop agreement exists across the lower bargaining unit at the
South African operations. This agreement provides for the contribution by non-union members of 0.75 percent of basic monthly
pay to a fund which is used to address work and social needs of that bargaining group. This has been negotiated because
union members pay 1 percent of their basic pay as union dues. The outcome of wage negotiations with the unions applies to
all employees within that bargaining unit, whether they are union members or not.
The only exceptions to the collective bargaining arrangements are operations in the United States and Australia, where
employees (as is common practice in these countries) are not members of unions, but where a high degree of employee
participation is encouraged.
employees (as is common practice in these countries) are not members of unions, but where a high degree of employee
participation is encouraged.
There were no significant disputes or strikes at any of the group’s operations during the year. The most significant agreements
reached between the company and unions during the year were the review of wages and other conditions of service in both
South Africa and Ghana.
reached between the company and unions during the year were the review of wages and other conditions of service in both
South Africa and Ghana.
In South Africa, a two-year agreement, effective July 2007, was entered into between AngloGold Ashanti, through the Chamber
of Mines, NUM and Solidarity. The agreement provides for:
of Mines, NUM and Solidarity. The agreement provides for:
·
wage increases of between 8 percent and 10 percent, with the highest increase for the lowest job category and for key
skills;
skills;
·
a wage increase in the second year of CPIX plus 1 percent, subject to a minimum guaranteed increase of 8 percent;
·
an increase in medical incapacitation benefits and an increase in funeral cover;
·
improvements in accommodation subsidies; and
·
an increase in family responsibility leave from three days to four days.
In Ghana, the 3-year agreement which was negotiated in 2006 between AngloGold Ashanti and the Ghana Mine Workers’
Union is still current.
Union is still current.
Generally, conditions of service, including minimum notice periods and negotiation practices with employees and employee
representatives, are guided by country legislation, collective bargaining agreements and individual contracts of employment
and therefore vary from region to region.
representatives, are guided by country legislation, collective bargaining agreements and individual contracts of employment
and therefore vary from region to region.
169
6E. Share ownership
Share ownership of directors
Directors held the following number of ordinary shares of the company at December 31, 2007 and 2006, which did not
individually or in the aggregate exceed 1 percent of the company's issued ordinary share capital:
individually or in the aggregate exceed 1 percent of the company's issued ordinary share capital:
December 31, 2007
December 31, 2006
Beneficial
Beneficial
Beneficial
Beneficial
Direct
Indirect
Non-
beneficial
(1)
Direct
Indirect
Non-
beneficial
(1)
Executive directors
M Cutifani
M Cutifani
–
–
–
–
–
–
R Carvalho Silva (resigned September 30, 2007)
–
–
–
–
–
–
R M Godsell (retired September 30, 2007
–
–
–
13,010
–
–
N F Nicolau (resigned November 12, 2007)
–
–
–
3,000
–
–
S Venkatakrishnan
652
–
–
652
–
–
K H Williams
–
–
–
–
–
–
Total
652
–
–
16,662
–
–
Non-executive directors
F B Arisman
F B Arisman
–
2,000
–
–
2,000
–
Mrs E Ie R Bradley
–
23,423
3,027
–
23,423
3,027
CB Brayshaw (retired May 5, 2007)
–
–
–
–
–
–
C Carroll (appointed May 5, 2007, resigned October
9, 2007)
9, 2007)
–
–
–
–
–
–
R P Edey
–
1,000
–
–
1,000
–
Dr S E Jonah (resigned February 12, 2007)
–
–
–
–
18,469
–
R Médori (resigned October 9, 2007)
–
–
–
–
–
–
Dr T J Motlatsi
–
–
–
–
–
–
W A Nairn
–
–
–
–
–
–
W L Nkuhlu
–
–
–
–
–
–
SM Pityana
–
–
–
–
–
–
S R Thompson
–
–
–
–
–
–
A J Trahar (retired May 5, 2007)
–
–
–
–
–
–
P L Zim (retired August 4, 2006)
–
–
–
–
–
–
Total
–
26,423
3,027
– 44,892
3,027
Alternate directors
DD Barber (resigned August 4, 2006)
DD Barber (resigned August 4, 2006)
–
–
–
–
–
–
A H Calver (resigned July 11, 2007)
–
–
–
–
–
–
P G Whitcutt (resigned October 9, 2007)
–
–
–
–
–
–
Total –
–
–
–
–
–
Grand Total
652
26,423
3,027
16,662
44,892
3,027
(1)
The director derives no personal benefit from the ordinary shares declared, for example by holding the ordinary shares in trust for another.
Except for Mr Arisman and Prof Nkuhlu, who, after receiving permission to do so from the chairman of the company, acquired
2,000 AngloGold Ashanti shares (in the form of ADSs) on February 22, 2008 and 800 AngloGold Ashanti shares on May 13,
2008, respectively, there have been no other changes in the above interests since December 31, 2007. A register detailing
directors’ and officers’ interests in contracts is available for inspection at the company’s registered and corporate office.
Share ownership of executive officers/executive management
Under the Listings Requirements of the JSE, AngloGold Ashanti is not required to disclose, and it does not otherwise disclose
or ascertain, share ownership of individual executive officers/executive management in the share capital of AngloGold Ashanti.
However, to the best of its knowledge, AngloGold Ashanti believes that AngloGold Ashanti ordinary shares held by executive
officers, in aggregate; do not exceed 1 percent of the company's issued ordinary share capital.
or ascertain, share ownership of individual executive officers/executive management in the share capital of AngloGold Ashanti.
However, to the best of its knowledge, AngloGold Ashanti believes that AngloGold Ashanti ordinary shares held by executive
officers, in aggregate; do not exceed 1 percent of the company's issued ordinary share capital.
170
Share ownership of employees
At a general meeting of shareholders held on December 11, 2006, members approved the creation of 4,280,000 new
E ordinary shares of 25 South African cents pursuant to an employee share ownership plan for the benefit of certain AngloGold
Ashanti employees, of which the majority are historically disadvantaged South Africans as defined in the Broad-Based Socio-
Economic Empowerment Charter for the South African Mining Industry.
E ordinary shares of 25 South African cents pursuant to an employee share ownership plan for the benefit of certain AngloGold
Ashanti employees, of which the majority are historically disadvantaged South Africans as defined in the Broad-Based Socio-
Economic Empowerment Charter for the South African Mining Industry.
All the authorised E-ordinary shares have been issued, of which, 2,880,000 E ordinary shares were issued to the Bokamoso
ESOP Trust which holds these shares on behalf of approximately 31,000 employees.
ESOP Trust which holds these shares on behalf of approximately 31,000 employees.
AngloGold Share Incentive Scheme
AngloGold Ashanti operates a share incentive scheme for the purpose of providing an incentive to executive directors,
executive officers/executive management and other managers to identify more closely with the fortunes of the group and its
continued growth, and to promote the retention of such employees by giving them an opportunity to acquire ordinary shares in
the company. Non-executive directors are not eligible for participation in the share incentive scheme.
executive officers/executive management and other managers to identify more closely with the fortunes of the group and its
continued growth, and to promote the retention of such employees by giving them an opportunity to acquire ordinary shares in
the company. Non-executive directors are not eligible for participation in the share incentive scheme.
The incentives offered by AngloGold Ashanti are reviewed periodically to ensure that these incentives are globally competitive,
so as to attract, reward and retain management of the highest caliber. As a result, several types of incentives, each with their
own issue and vesting criteria have been granted to employees – collectively known as the AngloGold share incentive scheme
or share incentive scheme.
so as to attract, reward and retain management of the highest caliber. As a result, several types of incentives, each with their
own issue and vesting criteria have been granted to employees – collectively known as the AngloGold share incentive scheme
or share incentive scheme.
Under the terms of the AngloGold share incentive scheme, which was approved by the shareholders at the general meeting
held on June 4, 1998, and with the introduction of the Bonus share plan and Long-term incentive plan approved by the
shareholders at the annual general meeting held on April 29, 2005, the maximum number of ordinary shares that may be
allocated for the purposes of the share incentive scheme is equivalent to 2.75 percent of the total number of AngloGold Ashanti
ordinary shares in issue at any time. As of December 31, 2007 and 2006, this equated to 7,630,080 and 7,641,766 ordinary
shares, respectively were available for purposes of the scheme. As of May 15, 2008, 7,641,099 ordinary shares may be
allocated for the purposes of the share incentive scheme.
held on June 4, 1998, and with the introduction of the Bonus share plan and Long-term incentive plan approved by the
shareholders at the annual general meeting held on April 29, 2005, the maximum number of ordinary shares that may be
allocated for the purposes of the share incentive scheme is equivalent to 2.75 percent of the total number of AngloGold Ashanti
ordinary shares in issue at any time. As of December 31, 2007 and 2006, this equated to 7,630,080 and 7,641,766 ordinary
shares, respectively were available for purposes of the scheme. As of May 15, 2008, 7,641,099 ordinary shares may be
allocated for the purposes of the share incentive scheme.
At the annual general meeting held on April 29, 2005, shareholders approved the amendment to the maximum aggregate
number of ordinary shares which may be acquired by any one participant from 300,000 to 5 percent of the 2.75 percent
attributable to the share incentive scheme (or 0.1375 percent of the total number of ordinary shares in issue at any one time).
As of December 31, 2007 and 2006, this equated to 381,504 and 379,824 ordinary shares, respectively. As of May 15, 2008,
382,055 ordinary shares, in aggregate, may be granted to any one participant.
number of ordinary shares which may be acquired by any one participant from 300,000 to 5 percent of the 2.75 percent
attributable to the share incentive scheme (or 0.1375 percent of the total number of ordinary shares in issue at any one time).
As of December 31, 2007 and 2006, this equated to 381,504 and 379,824 ordinary shares, respectively. As of May 15, 2008,
382,055 ordinary shares, in aggregate, may be granted to any one participant.
Employees participate in the scheme to the extent that they are granted options, shares or rights and accept them. All options
or rights which have not been exercised within ten years from the date on which they were granted automatically expire, unless
otherwise stated.
or rights which have not been exercised within ten years from the date on which they were granted automatically expire, unless
otherwise stated.
Although the remuneration committee has the discretion to incentivize employees through the issue of shares, only options or
rights have so far been granted. The type and vesting criteria of the options or rights granted are:
rights have so far been granted. The type and vesting criteria of the options or rights granted are:
Time-related
The granting of time-related options was approved by shareholders at the general meeting held on June 4, 1998 and amended
by shareholders at the annual general meeting held on April 30, 2003, at which time it was agreed that no further time-related
options would be granted. All options granted hereunder will terminate on February 1, 2012, being the date on which the last
options granted under these criteria may be exercised or will expire. Each time-related option entitles the holder to acquire one
ordinary share at a price equal to the closing price of ordinary shares on the JSE on the last business day prior to the date of
grant.
The granting of time-related options was approved by shareholders at the general meeting held on June 4, 1998 and amended
by shareholders at the annual general meeting held on April 30, 2003, at which time it was agreed that no further time-related
options would be granted. All options granted hereunder will terminate on February 1, 2012, being the date on which the last
options granted under these criteria may be exercised or will expire. Each time-related option entitles the holder to acquire one
ordinary share at a price equal to the closing price of ordinary shares on the JSE on the last business day prior to the date of
grant.
Time-related options vest over a five-year period from date of grant, and may be exercised in tranches of 20 percent each in
years 2, 3 and 4 and 40 percent in year 5. As of December 31, 2007, all options granted and outstanding have vested in full.
years 2, 3 and 4 and 40 percent in year 5. As of December 31, 2007, all options granted and outstanding have vested in full.
171
Performance-related
Performance-related options were approved by shareholders at the annual general meeting held on April 30, 2002 and
amended at the annual general meeting held on April 29, 2005 at which time it was agreed that no further performance-related
options would be granted. All options granted hereunder will terminate on November 1, 2014, being the date on which the last
options granted under these criteria may be exercised or will expire. Each performance-related option entitles the holder to
acquire one ordinary share at a price equal to the closing price of ordinary shares on the JSE on the last business day prior to
the date of grant.
Performance-related options were approved by shareholders at the annual general meeting held on April 30, 2002 and
amended at the annual general meeting held on April 29, 2005 at which time it was agreed that no further performance-related
options would be granted. All options granted hereunder will terminate on November 1, 2014, being the date on which the last
options granted under these criteria may be exercised or will expire. Each performance-related option entitles the holder to
acquire one ordinary share at a price equal to the closing price of ordinary shares on the JSE on the last business day prior to
the date of grant.
Performance-related options may be exercised in full, three years after date of grant, provided that the conditions on which the
options were granted, namely the performance of the company as determined by the directors at date of grant, are met. All
options granted and outstanding vested in full on November 1, 2007.
options were granted, namely the performance of the company as determined by the directors at date of grant, are met. All
options granted and outstanding vested in full on November 1, 2007.
Bonus share plan (BSP)
The granting of rights in terms of the BSP was approved by shareholders at the annual general meeting held on April 29, 2005.
Executive directors, executive officers/executive management and other management groups are eligible for participation.
Each award made in respect of the BSP entitles the holder to acquire one ordinary share at “nil” cost. Awards granted vest in
full, three years from date of grant, provided that the participant is still in the employ of the company at the date of vesting,
unless an event occurs which may result in an earlier vesting, such as death.
The granting of rights in terms of the BSP was approved by shareholders at the annual general meeting held on April 29, 2005.
Executive directors, executive officers/executive management and other management groups are eligible for participation.
Each award made in respect of the BSP entitles the holder to acquire one ordinary share at “nil” cost. Awards granted vest in
full, three years from date of grant, provided that the participant is still in the employ of the company at the date of vesting,
unless an event occurs which may result in an earlier vesting, such as death.
Long-term incentive plan (LTIP)
The granting of rights in terms of the LTIP was approved by shareholders at the annual general meeting held on April 29, 2005.
Executive directors, executive officers and selected senior management are eligible for participation. Each award made in
respect of the LTIP entitles the holder to acquire one ordinary share at “nil” cost. Options granted vest three years after date of
grant, to the extent that the performance conditions under which the options were granted, are met, and provided that the
participant is still in the employ of the company, or unless an event occurs which may result in an earlier vesting, such as
death.
The granting of rights in terms of the LTIP was approved by shareholders at the annual general meeting held on April 29, 2005.
Executive directors, executive officers and selected senior management are eligible for participation. Each award made in
respect of the LTIP entitles the holder to acquire one ordinary share at “nil” cost. Options granted vest three years after date of
grant, to the extent that the performance conditions under which the options were granted, are met, and provided that the
participant is still in the employ of the company, or unless an event occurs which may result in an earlier vesting, such as
death.
The movement in respect of options and rights granted and the ordinary shares issued as a result of the exercise of options
and rights during the period January 1, 2007 to December 31, 2007 was as follows:
and rights during the period January 1, 2007 to December 31, 2007 was as follows:
Time-
related
Performance-
related
Bonus
share
plan
Long-term
incentive
plan
Total
Average
exercise
price per
ordinary
share – R
Ordinary
shares
issued
At January 1, 2007
473,260
2,585,800
480,585
660,175
4,199,820
166.64
3,114,077
Movement during the year
- Granted
-
*12,600
296,495
321,664
630,759
-
- Exercised
266,300
874,874
40,708
-
1,181,882
210.31
1,181,882
- Lapsed (terminations)
-
85,326
50,704
198,414
334,444
62.78
At December 31, 2007
206,960
1,638,200
685,668
783,425
3,314,253
130.74
4,295,959
Average exercise/issue price
per share - R
per share - R
124.68
248.76
-
-
130.74
* Correction of prior year lapsings in error.
During the period January 1, 2008 to and including May 15, 2008, 367,691 BSP awards and 480,584 LTIP awards were
granted at a market price of R267.05 per award and 135,299 options or rights were exercised.
granted at a market price of R267.05 per award and 135,299 options or rights were exercised.
172
Option ownership of directors, executive officers/executive management and other management
Under the Listings Requirements of the JSE, AngloGold Ashanti is required to disclose the option or rights ownership of
individual directors. Under those requirements, AngloGold Ashanti is not required to, and it does not otherwise, disclose option
or rights ownership of individual executive officers/executive management and other management.
individual directors. Under those requirements, AngloGold Ashanti is not required to, and it does not otherwise, disclose option
or rights ownership of individual executive officers/executive management and other management.
The table below shows the movement in respect of options or rights held by executive directors on an individual basis, and by
executive officers and managers, each as a group, to December 31, 2007.
executive officers and managers, each as a group, to December 31, 2007.
M. Cutifani
R M Godsell
R Carvalho
Silva
N F Nicolau
S Venkat-
akrishnan
Total
directors
Total
Executive
officers
Total other
Total scheme
Balance at
January 1, 2007
Number –
January 1, 2007
Number –
259,925
69,160
53,380
29,590
412,055
508,225
3,279,540
4,199,820
Granted during
year
Number –
year
Number –
32,540
15,806
15,806
15,806
79,958
100,391
450,410
630,759
Exercised during
year
Number –
year
Number –
147,728
37,096
23,400
–
208,224
72,552
901,106
1,181,882
Pre-tax gain, after
expenses at date of
exercise – R value
(R000)
expenses at date of
exercise – R value
(R000)
–
35,664
4,574
2,367
–
42,608
11,484
87,538
141,627
Lapsed during the
year
Number –
year
Number –
78,737
41,870
–
–
120,607
12,698
201,139
334,444
Held as at
December 31,
2007
Number –
December 31,
2007
Number –
66,000
6,000
45,786
45,396
163,182
523,366
2,627,705
3,314,253
Latest expiry date
– Sept 30, 2008
Sept 30,
2008
Nov 12, 2008
Mar 15, 2017
Mar 15, 2017
Mar 15, 2017
Of the 3,314,253 options or rights granted and outstanding at December 31, 2007, 1,845,160 options are fully vested and 208,551 options vested on May 4, 2008
in terms of the BSP, while 105,640 options vested on May 4, 2008 with 158,460 options lapsing in terms of the LTIP.
in terms of the BSP, while 105,640 options vested on May 4, 2008 with 158,460 options lapsing in terms of the LTIP.
Non-executive directors are not eligible to participate in the scheme and therefore own no options.
173
Item 7: Major shareholders and related party transactions
Overview
Description of AngloGold Ashanti’s share capital
AngloGold Ashanti’s share capital consists of four classes of stock:
•
Ordinary shares, par value 25 cents each (the “ordinary shares”);
•
E-Ordinary shares, par value 25 cents each (the “E-ordinary shares”);
•
A redeemable preference shares, par value 50 cents each (the “A preference shares”); and
•
B redeemable preference shares, par value 1 cent each (the “B preference shares”).
The authorized and issued share capital of AngloGold at December 31, 2007, is set out below:
Title of class
Authorized
Issued
Ordinary shares
400,000,000
277,457,471
E-ordinary shares
4,280,000
4,140,230
A preference shares
2,000,000
2,000,000
B preference shares
5,000,000
778,896
All the issued ordinary shares, E-ordinary shares, A redeemable preference shares and B redeemable preference shares are
fully paid and are not subject to further calls or assessment by AngloGold Ashanti.
fully paid and are not subject to further calls or assessment by AngloGold Ashanti.
For a discussion of rights attaching to the ordinary shares, E-ordinary shares, A redeemable preference shares and
B redeemable preference shares, see “Item 10B.: Memorandum and Articles of Association”.
B redeemable preference shares, see “Item 10B.: Memorandum and Articles of Association”.
The following are the movements in the issued ordinary share capital at December 31.
2007
2006
2005
Issued
Number of
ordinary
shares
Rand
Number of
ordinary
shares
Rand
Number of
ordinary
shares
Rand
At January 1,
276,236,153
69,059,038
264,938,432
66,234,608
264,462,894
66,115,724
Issues during year
- $500 million Equity Raising
- $500 million Equity Raising
–
–
9,970,732
2,492,683
–
–
-
Bokamoso ESOP and BEE transaction (approved
by shareholders on December 11, 2006)
31,410
7,852
–
–
–
–
-
Bokamoso ESOP on conversion of E-ordinary
shares
8,026
2,007
928,590
232,147
–
–
-
Exercise of options by participants in the
AngloGold Share Incentive Scheme
1,181,882
295,471
398,399
99,600
475,538
118,884
At December 31,
277,457,471
69,364,368
276,236,153
69,059,038
264,938,432
66,234,608
During the period January 1, 2008 to and including May 15, 2008, 400,679 ordinary shares were issued at an average issue
price of R257.84 per share, resulting in 277,858,150 ordinary shares being in issue at May 15, 2008
price of R257.84 per share, resulting in 277,858,150 ordinary shares being in issue at May 15, 2008
174
7A.
Major shareholders
According to information available to the directors, the following are the only shareholders holding, directly or indirectly, more
than 5 percent of the ordinary share capital of the company at December 31:
than 5 percent of the ordinary share capital of the company at December 31:
Ordinary shares held at
December 31, 2007
December 31, 2006
December 31, 2005
Shareholder *
Number
% voting
rights
Number
%
voting
rights
Number
%
voting
·
rights
Anglo American plc (AA plc)
46,002,929
16.58
115,102,929
41.67
134,788,099
50.88
Allan Gray Limited
26,369,033
9.51
Not disclosed
Not disclosed
Tradewinds Global Investors LLC
22,858,453
8.25
Not disclosed
Not disclosed
Public Investment Corporation
26,937,476
9.71
Not disclosed
Not disclosed
·
May not necessarily reflect the beneficial shareholder.
At December 31, 2007, The Bank of New York Mellon held 82,550,854 ordinary shares through various custodians in respect
of American Depositary Shares issued by them pursuant to the AngloGold Ashanti sponsored ADR program. The number of
persons who were registered holders of ADSs was reported at 3,914. AngloGold Ashanti is aware that many ADSs are held off
record by brokers and other nominees, and accordingly the above numbers are not necessarily representative of the actual
number of persons who are beneficial holders of ADSs or the number of ADSs beneficially held by these persons.
of American Depositary Shares issued by them pursuant to the AngloGold Ashanti sponsored ADR program. The number of
persons who were registered holders of ADSs was reported at 3,914. AngloGold Ashanti is aware that many ADSs are held off
record by brokers and other nominees, and accordingly the above numbers are not necessarily representative of the actual
number of persons who are beneficial holders of ADSs or the number of ADSs beneficially held by these persons.
The company’s major shareholders have the same voting rights as other holders of AngloGold Ashanti ordinary shares and do
not have any different or special voting rights.
not have any different or special voting rights.
As at December 31, 2007, there were 19,250 holders of record of AngloGold Ashanti ordinary shares. Of these holders
388 had registered addresses in the United States and held a total of 74,019 ordinary shares, approximately 2.7 percent of the
total outstanding ordinary shares. In addition, certain accounts of record with registered addresses outside the United States,
including The Bank of New York, hold AngloGold Ashanti ordinary shares, in whole or in part, beneficially for United States
persons.
388 had registered addresses in the United States and held a total of 74,019 ordinary shares, approximately 2.7 percent of the
total outstanding ordinary shares. In addition, certain accounts of record with registered addresses outside the United States,
including The Bank of New York, hold AngloGold Ashanti ordinary shares, in whole or in part, beneficially for United States
persons.
All the issued A and B preference shares are held by Eastvaal Gold Holdings Limited, AngloGold Ashanti’s wholly-owned
subsidiary. The articles of association of AngloGold Ashanti provide that the A redeemable preference shares and the
B redeemable preference shares are not transferable.
subsidiary. The articles of association of AngloGold Ashanti provide that the A redeemable preference shares and the
B redeemable preference shares are not transferable.
The E Ordinary shares are held by Izingwe Holdings (Proprietary) Limited, an empowerment company and the Bokamoso
ESOP Trust, which holds the shares on behalf of employees who qualify in terms of the BEE transaction as approved by the
AngloGold Ashanti shareholders on December 11, 2006. Neither the Bokamoso ESOP Trust nor Izingwe Holdings
(Proprietary) Limited may sell their shares or any portion of their shares without the written consent of AngloGold Ashanti.
ESOP Trust, which holds the shares on behalf of employees who qualify in terms of the BEE transaction as approved by the
AngloGold Ashanti shareholders on December 11, 2006. Neither the Bokamoso ESOP Trust nor Izingwe Holdings
(Proprietary) Limited may sell their shares or any portion of their shares without the written consent of AngloGold Ashanti.
Insofar as is known to AngloGold Ashanti as of December 31, 2007, there was no person who, directly or indirectly, jointly or
severally, exercised or could exercise control over AngloGold Ashanti, nor is AngloGold Ashanti aware of any arrangements
which might result in a change in control of AngloGold Ashanti.
severally, exercised or could exercise control over AngloGold Ashanti, nor is AngloGold Ashanti aware of any arrangements
which might result in a change in control of AngloGold Ashanti.
175
7B.
Related party transactions
On October 26, 2005 Anglo American plc (AA plc) announced that it intended to reduce its shareholding in the Company, while
still intending to remain a significant shareholder in the medium term. During April 2006, AA plc reduced its shareholding in the
Company to less than 50 percent interest held, as the result of the sale in a public offering, of some of its shares held in the
Company and during October 2007, further to 16.61 percent interest held. As at December 31, 2007, AA plc and its
subsidiaries held an effective 16.58 percent (2006: 41.67 percent) interest in AngloGold Ashanti. The Company had the
following transactions with related parties during the years ended December 31, 2007, 2006 and 2005:
still intending to remain a significant shareholder in the medium term. During April 2006, AA plc reduced its shareholding in the
Company to less than 50 percent interest held, as the result of the sale in a public offering, of some of its shares held in the
Company and during October 2007, further to 16.61 percent interest held. As at December 31, 2007, AA plc and its
subsidiaries held an effective 16.58 percent (2006: 41.67 percent) interest in AngloGold Ashanti. The Company had the
following transactions with related parties during the years ended December 31, 2007, 2006 and 2005:
December 31, 2007
December 31, 2006
December 31,
2005
(in millions)
Purchases
(by)/from
related party
$
Amounts
owed to/(by)
related party
$
Purchases
(by)/from
related party
$
Amounts
owed to/(by)
related party
$
Purchases
(by)/from
related party
$
Related party transactions with significant
shareholder AA plc
shareholder AA plc
-
-
1
-
5
Related party transactions with subsidiaries of AA
plc
plc
(1)
Boart Longyear Limited – mining services
(2)
-
-
-
-
5
Mondi Limited – forestry
-
-
5
-
16
Scaw Metals – A division of Anglo Operations Limited –
steel and engineering
steel and engineering
-
-
1
-
6
Haggie Steel Wire Rope Operations
(3)
-
-
1
-
8
Anglo Coal – a division of Anglo Operations Limited
-
-
-
-
1
Related party transactions of equity accounted
joint ventures and associates
Oro Group (Proprietary) Limited
joint ventures and associates
Oro Group (Proprietary) Limited
-
(2)
-
(2)
-
Societe d’Exploitation des Mines d’Or de Sadiola S.A.
(7)
(2)
(4)
(1)
-
Societe d’Exploitation des Mines d’Or de Yatela S.A.
(3)
(1)
(6)
(1)
(2)
Societe des Mines de Morila S.A.
(5)
(2)
(4)
-
(2)
Trans-Siberian Gold plc
(1)
(11)
-
(10)
-
(1)
Transactions to April 2006.
(2)
AA plc sold their interest in Boart Longyear Limited with effect from July 29, 2005.
(3)
Previously included in Scaw Metals – A division of Anglo Operations Limited.
Amounts owed to/due by joint venture related parties and the loan balance due to Goldmed Medical Scheme of $1 million
(2006: $nil), are unsecured, non-interest bearing and under terms that are no less favorable than those with third parties.
(2006: $nil), are unsecured, non-interest bearing and under terms that are no less favorable than those with third parties.
The Trans-Siberian Gold plc loan bears interest at LIBOR plus 4 percent and is convertible into equity under certain
circumstances at the option of the borrower.
circumstances at the option of the borrower.
The Oro Group (Proprietary) Limited loan bears interest at a rate determined by the Oro Group (Proprietary) Limited’s board of
directors and is repayable at their discretion.
directors and is repayable at their discretion.
176
The Company, which holds an equity interest of 29.8 percent in Trans-Siberian Gold plc (TSG), entered into a transaction
during the quarter ended June 30, 2007 with TSG in which two companies were acquired from TSG for a cash consideration of
$40 million. The companies acquired consist of Amikan (which holds the Veduga deposit, related exploration and mining
licenses) and AS APK (which holds the Bogunay deposit, related exploration and mining licenses).
during the quarter ended June 30, 2007 with TSG in which two companies were acquired from TSG for a cash consideration of
$40 million. The companies acquired consist of Amikan (which holds the Veduga deposit, related exploration and mining
licenses) and AS APK (which holds the Bogunay deposit, related exploration and mining licenses).
In connection with the relocation of Roberto Carvalho Silva, an executive director of the Company since 2005, to Nova Lima,
Brazil, in 2000, Mr. Carvalho Silva commenced renting a house in Nova Lima from a Brazilian subsidiary of the Company. Mr.
Carvalho Silva purchased the house from the Company’s subsidiary in January 2005. The total purchase price of the house
was BRL1,150,000 ($429,923). Mr. Carvalho agreed to pay the purchase price of the house in 60 installments, the first being
BRL19,167.70 and 59 installments of BRL19,166.65 each, starting on January 28, 2005. Such monthly installments were
adjusted annually by the cumulative INPC (a Consumer Price Index in Brazil) in lieu of interest. As at December 31, 2006,
BRL728,580 ($340,458) of the purchase price remained to be paid to the Company’s subsidiary, with BRL657,717 ($341,352)
remaining to be paid as at June 20, 2007. The remaining balance was repaid on or about August 31, 2007.
Brazil, in 2000, Mr. Carvalho Silva commenced renting a house in Nova Lima from a Brazilian subsidiary of the Company. Mr.
Carvalho Silva purchased the house from the Company’s subsidiary in January 2005. The total purchase price of the house
was BRL1,150,000 ($429,923). Mr. Carvalho agreed to pay the purchase price of the house in 60 installments, the first being
BRL19,167.70 and 59 installments of BRL19,166.65 each, starting on January 28, 2005. Such monthly installments were
adjusted annually by the cumulative INPC (a Consumer Price Index in Brazil) in lieu of interest. As at December 31, 2006,
BRL728,580 ($340,458) of the purchase price remained to be paid to the Company’s subsidiary, with BRL657,717 ($341,352)
remaining to be paid as at June 20, 2007. The remaining balance was repaid on or about August 31, 2007.
A Brazilian subsidiary of the Company received marketing, communications and corporate affairs services from a Brazilian
company in which a son of Roberto Carvalho Silva owns a one-third interest. The amounts paid by the Company’s subsidiary
to this company in respect of such services during the years were: 2007: BRL634,023 ($329,055), in 2006: BRL903,465
($414,433) and in 2005: BRL311,923 ($127,837). The Company terminated the agreement with the Brazilian marketing,
communications and corporate affairs services company with effect July 2007.
company in which a son of Roberto Carvalho Silva owns a one-third interest. The amounts paid by the Company’s subsidiary
to this company in respect of such services during the years were: 2007: BRL634,023 ($329,055), in 2006: BRL903,465
($414,433) and in 2005: BRL311,923 ($127,837). The Company terminated the agreement with the Brazilian marketing,
communications and corporate affairs services company with effect July 2007.
Registration rights agreement
On March 23, 2006 the company entered into a Registration Rights Agreement with Anglo South Africa Capital (Proprietary)
Limited (Anglo South Africa) under which the company has agreed to file U.S. registration statements for Anglo South Africa’s
offer and sale of shares it holds in the company (each a Demand Registration) if Anglo South Africa requests the company to
do so. The company is required to use all reasonable efforts to file a Demand Registration within 30 days after such a request
and to keep it effective for 90 days unless the shares offered pursuant to it are sold earlier. Further, the company may not offer,
sell, allot or issue any shares or other securities that are convertible into or exchangeable for, or that represent the right to
receive, shares, whether pursuant to U.S. registration or otherwise, for a 90-day period immediately following the first closing of
an offering pursuant to a Demand Registration or a shorter period as may be imposed by underwriters in the Demand
Registration; except: (i) in consideration for shares or assets of a company as part of a merger, acquisition, corporate
reorganization or similar transaction, (ii) as required pursuant to the terms governing the 2.375 percent guaranteed convertible
bonds due 2009, issued by AngloGold Holdings plc and guaranteed by the company, and (iii) in connection with any option,
employee bonus, profit sharing, pension, retirement, incentive, savings or similar plan, agreement or award. The Registration
Rights Agreement may be terminated at any time by written consent by each of the parties thereto. The Registration Rights
Agreement shall terminate automatically on the first date on which Anglo South Africa is no longer an “affiliate” within the
meaning of Rule 144 under the United States Securities Act of 1933, as amended.
Limited (Anglo South Africa) under which the company has agreed to file U.S. registration statements for Anglo South Africa’s
offer and sale of shares it holds in the company (each a Demand Registration) if Anglo South Africa requests the company to
do so. The company is required to use all reasonable efforts to file a Demand Registration within 30 days after such a request
and to keep it effective for 90 days unless the shares offered pursuant to it are sold earlier. Further, the company may not offer,
sell, allot or issue any shares or other securities that are convertible into or exchangeable for, or that represent the right to
receive, shares, whether pursuant to U.S. registration or otherwise, for a 90-day period immediately following the first closing of
an offering pursuant to a Demand Registration or a shorter period as may be imposed by underwriters in the Demand
Registration; except: (i) in consideration for shares or assets of a company as part of a merger, acquisition, corporate
reorganization or similar transaction, (ii) as required pursuant to the terms governing the 2.375 percent guaranteed convertible
bonds due 2009, issued by AngloGold Holdings plc and guaranteed by the company, and (iii) in connection with any option,
employee bonus, profit sharing, pension, retirement, incentive, savings or similar plan, agreement or award. The Registration
Rights Agreement may be terminated at any time by written consent by each of the parties thereto. The Registration Rights
Agreement shall terminate automatically on the first date on which Anglo South Africa is no longer an “affiliate” within the
meaning of Rule 144 under the United States Securities Act of 1933, as amended.
7C.
Interests of experts and counsel
Not applicable.
177
Item 8: Financial information
8A.
Consolidated financial statements and other financial information
See “Item 18: Financial statements”.
Legal proceedings
No director or officer of AngloGold Ashanti has either a direct or indirect position adverse to AngloGold Ashanti.
In the previous 12 months, there have been no governmental, legal or arbitration proceedings in which any member of the
AngloGold Ashanti group is or has been engaged, including any such proceedings which are pending or threatened of which
AngloGold Ashanti is aware, which may have, or have had during the recent past, a significant effect on AngloGold Ashanti or
its group’s financial position or profitability.
AngloGold Ashanti group is or has been engaged, including any such proceedings which are pending or threatened of which
AngloGold Ashanti is aware, which may have, or have had during the recent past, a significant effect on AngloGold Ashanti or
its group’s financial position or profitability.
The company is involved in the following cases:
·
In South Africa, action has been instituted by 19 plaintiffs, against Anglo American Corporation of South Africa Limited
(AACSA) for damages resulting from lung diseases which the plaintiffs allegedly contracted while employed by mining
companies managed by AACSA. There is a possibility that AACSA may seek to recover a portion of damages which may
be awarded against it from AngloGold Ashanti by either AACSA or the plaintiffs. Exceptions filed by Anglo American
against 10 actions were upheld. At present, nine actions remain. There is no indication at present of the merit of any such
claim. A separate action was instituted against AngloGold Ashanti in 2006 by one of the plaintiffs out of the High Court,
Witwatersrand Local Division, for damages allegedly suffered by him as a result of alleged silicosis allegedly contracted
while working on mines now owned by AngloGold Ashanti. An exception was filed by AngloGold Ashanti against the claim
which was heard on February 12 and 13, 2008 and AngloGold Ashanti is awaiting the judgement of the High Court.
(AACSA) for damages resulting from lung diseases which the plaintiffs allegedly contracted while employed by mining
companies managed by AACSA. There is a possibility that AACSA may seek to recover a portion of damages which may
be awarded against it from AngloGold Ashanti by either AACSA or the plaintiffs. Exceptions filed by Anglo American
against 10 actions were upheld. At present, nine actions remain. There is no indication at present of the merit of any such
claim. A separate action was instituted against AngloGold Ashanti in 2006 by one of the plaintiffs out of the High Court,
Witwatersrand Local Division, for damages allegedly suffered by him as a result of alleged silicosis allegedly contracted
while working on mines now owned by AngloGold Ashanti. An exception was filed by AngloGold Ashanti against the claim
which was heard on February 12 and 13, 2008 and AngloGold Ashanti is awaiting the judgement of the High Court.
·
In South Africa action has been instituted by a group of AngloGold Ashanti pensioners against the company for introducing
a CPIX cap to post retirement health care contributions by the company. The company maintains that its action is
justifiable and fair given the circumstances and precedent. Summons has been issued by the plaintiffs demanding that
AngloGold Ashanti restore the level of contributions to what pertained before the introduction of the cap. The company
has excepted to the summons on the basis of it being vague and embarrassing. The exception was heard on February 18,
2008 and the exception was dismissed. AngloGold Ashanti is considering taking another exception on other aspects of
the plaintiffs’ particulars of claim.
a CPIX cap to post retirement health care contributions by the company. The company maintains that its action is
justifiable and fair given the circumstances and precedent. Summons has been issued by the plaintiffs demanding that
AngloGold Ashanti restore the level of contributions to what pertained before the introduction of the cap. The company
has excepted to the summons on the basis of it being vague and embarrassing. The exception was heard on February 18,
2008 and the exception was dismissed. AngloGold Ashanti is considering taking another exception on other aspects of
the plaintiffs’ particulars of claim.
·
In Ghana, Westchester / Africore Limited instituted action against Ashanti Goldfields Company Limited in the High Court in
Accra claiming damages for breach of Exploration and Option Agreement. A provision in the Agreement states that the
parties should settle the matter by arbitration under the Arbitration Act of Ghana. The plaintiffs have applied to pursue the
matter through arbitration in Ghana.
Accra claiming damages for breach of Exploration and Option Agreement. A provision in the Agreement states that the
parties should settle the matter by arbitration under the Arbitration Act of Ghana. The plaintiffs have applied to pursue the
matter through arbitration in Ghana.
·
In Ghana, a group calling itself Ashanti Miners’ Club formed by ex-contract workers are claiming that the company should
pay them compensation because their salaries were not aligned to the United States dollar and that they should have
been paid as permanent employees during the subsistence of their contracts with the company. The matter was taken to
arbitration with the Ministry of Manpower Development and Employment in Ghana appointing a sole arbitrator to arbitrate
and make an award. The award by the arbitrator was generally in favour of the company. The plaintiffs took further action,
claiming that they are dissatisfied with the findings and award of the arbitrator.
pay them compensation because their salaries were not aligned to the United States dollar and that they should have
been paid as permanent employees during the subsistence of their contracts with the company. The matter was taken to
arbitration with the Ministry of Manpower Development and Employment in Ghana appointing a sole arbitrator to arbitrate
and make an award. The award by the arbitrator was generally in favour of the company. The plaintiffs took further action,
claiming that they are dissatisfied with the findings and award of the arbitrator.
·
·
In the Democratic Republic of Congo, twenty eight former expatriate employees of AngloGold Ashanti Kilo (AngloGold
Ashanti’s subsidiary in the Democratic Republic of Congo) have made claims for salary arrears, severance pay, damages
and interest jointly and severally against AngloGold Ashanti Kilo and AngloGold Ashanti Ghana, the immediate holding
company. Some of these former expatriates have instituted proceedings in the Brussels Labor Court claiming varying
amounts but these have remained pending for some time now.
Ashanti’s subsidiary in the Democratic Republic of Congo) have made claims for salary arrears, severance pay, damages
and interest jointly and severally against AngloGold Ashanti Kilo and AngloGold Ashanti Ghana, the immediate holding
company. Some of these former expatriates have instituted proceedings in the Brussels Labor Court claiming varying
amounts but these have remained pending for some time now.
In Tanzania Joshua Manyelo and 36 others have instituted action against Geita Gold Mining Company. It is a
representative lawsuit whereby the claimants claim to have received Tshs 185,045,482.00 in compensation but they claim
to be entitled to a payment of Tshs 3.6 billion. They are suing for the balance of Tshs 3.6 billion (approximately US$2.8
million). The case has been set down for mention on May 15, 2008.
to be entitled to a payment of Tshs 3.6 billion. They are suing for the balance of Tshs 3.6 billion (approximately US$2.8
million). The case has been set down for mention on May 15, 2008.
·
In Tanzania Senior Staff members have instituted a claim against Geita Gold Mining Company for overtime hours to the
value of Tshs 3.6 billion (approximately US$2.8 million). Mediation has failed and it is likely that the staff members will file
a case in the Labor Court.
value of Tshs 3.6 billion (approximately US$2.8 million). Mediation has failed and it is likely that the staff members will file
a case in the Labor Court.
178
·
In Brazil, Mineração Serra Grande S.A. (MSG), the operator of the Crixas mine in Brazil, has received two tax
assessments from the State of Goiás related to payments of sales taxes on gold deliveries for export: one for the period
between February 2004 and June 2005 and the other for the period between July 2005 and May 2006. The tax authorities
maintain that whenever a taxpayer exports gold mined in the State of Goiás through a branch located in a different
Brazilian State, it must obtain an authorization from the Goiás State Treasury by means of a Special Regime Agreement
(Termo de Acordo re Regime Especial – TARE). The MSG operation is co-owned with Kinross Gold Corporation. The
company’s attributable share of the first assessment is approximately $39 million. Although MSG requested the TARE in
early 2004, the TARE, which authorized the remittance of gold to the Company’s branch in Minas Gerais specifically for
export purposes, was only granted and executed in May 2006. In November 2006 the administrative council’s second
chamber ruled in favor of MSG and fully canceled the tax liability related to the first period. The State of Goiás has
appealed to the full board of the State of Goiás tax administrative council. The second assessment was issued by the
State of Goiás in October 2006 on the same grounds as the first assessment, and the Company’s attributable share of the
assessment is approximately $24 million. The Company believes both assessments are in violation of federal legislation
on sales taxes.
between February 2004 and June 2005 and the other for the period between July 2005 and May 2006. The tax authorities
maintain that whenever a taxpayer exports gold mined in the State of Goiás through a branch located in a different
Brazilian State, it must obtain an authorization from the Goiás State Treasury by means of a Special Regime Agreement
(Termo de Acordo re Regime Especial – TARE). The MSG operation is co-owned with Kinross Gold Corporation. The
company’s attributable share of the first assessment is approximately $39 million. Although MSG requested the TARE in
early 2004, the TARE, which authorized the remittance of gold to the Company’s branch in Minas Gerais specifically for
export purposes, was only granted and executed in May 2006. In November 2006 the administrative council’s second
chamber ruled in favor of MSG and fully canceled the tax liability related to the first period. The State of Goiás has
appealed to the full board of the State of Goiás tax administrative council. The second assessment was issued by the
State of Goiás in October 2006 on the same grounds as the first assessment, and the Company’s attributable share of the
assessment is approximately $24 million. The Company believes both assessments are in violation of federal legislation
on sales taxes.
·
Morro Velho and AngloGold Ashanti Brasil Mineração are involved in disputes with tax authorities. These disputes involve
eleven federal tax assessments including income tax, social contributions and annual property tax based on ownership of
properties outside of urban perimeters (ITR).
eleven federal tax assessments including income tax, social contributions and annual property tax based on ownership of
properties outside of urban perimeters (ITR).
·
In Brazil, Mineração Serra Grande S.A. (MSG) received a tax assessment in October 2003 from the State of Minas Gerais
related to sales taxes on gold allegedly returned from the branch in Minas Gerais to the company head office in the State
of Goais. The company lost the case at the administrative level but is now discussing it at the judicial sphere. The
company believes there is a remote chance of success for the State of Minas Gerais. The company’s attributable share of
the assessment is approximately $8 million.
related to sales taxes on gold allegedly returned from the branch in Minas Gerais to the company head office in the State
of Goais. The company lost the case at the administrative level but is now discussing it at the judicial sphere. The
company believes there is a remote chance of success for the State of Minas Gerais. The company’s attributable share of
the assessment is approximately $8 million.
Dividend policy
Dividends are proposed and approved by the board of directors of AngloGold Ashanti, based on the interim and year end
financial performance. Dividends are recognized when declared by the board of AngloGold Ashanti and may be payable in
Australian dollars, South African rands, United Kingdom pounds or Ghanaian cedis.
financial performance. Dividends are recognized when declared by the board of AngloGold Ashanti and may be payable in
Australian dollars, South African rands, United Kingdom pounds or Ghanaian cedis.
Dividends declared to foreign shareholders are not subject to the approval by the South African Reserve Bank (SARB) in terms
of South African foreign exchange control regulations. Dividends are freely transferable to foreign shareholders from both
trading and non-trading profits earned in South Africa by publicly listed companies.
of South African foreign exchange control regulations. Dividends are freely transferable to foreign shareholders from both
trading and non-trading profits earned in South Africa by publicly listed companies.
Under South African law, the company may declare and pay dividends from any reserves included in total shareholder’s equity
(including share capital and share premium) calculated in accordance with International Financial Reporting Standards (IFRS),
subject to its solvency and liquidity.
(including share capital and share premium) calculated in accordance with International Financial Reporting Standards (IFRS),
subject to its solvency and liquidity.
A potential restriction on dividends arises from the terms applicable to AngloGold Ashanti’s convertible bond. Legal opinion is
that the size of the dividends declared should be tested against condition 6(b)(iii) of the convertible bond and if triggered the
conversion price should be adjusted, however the condition is not prohibitive.
that the size of the dividends declared should be tested against condition 6(b)(iii) of the convertible bond and if triggered the
conversion price should be adjusted, however the condition is not prohibitive.
The limit set by this condition is that it is triggered if the dividend declared in the current year exceeds the lesser of:
·
200 percent of the dividends paid in the previous financial year; or
·
5 percent of the volume weighted average share price over 180 days trading immediately preceding the record date of the
dividend.
dividend.
AngloGold Ashanti expects to continue to pay dividends, although there can be no assurance that dividends will be paid in the
future or as to the particular amounts that will be paid from year to year. The payment of future dividends will depend upon the
Board’s ongoing assessment of AngloGold Ashanti’s earnings, after providing for capital expenditure and long-term growth
future or as to the particular amounts that will be paid from year to year. The payment of future dividends will depend upon the
Board’s ongoing assessment of AngloGold Ashanti’s earnings, after providing for capital expenditure and long-term growth
,
cash
and
debt resources, the amount of reserves available for dividend using going concern assessment and restrictions
placed by the conditions of the convertible bond and other factors.
8B. Significant changes
None.
179
Item 9: The offer and listing
9A.
Offer and listing details
The following table sets out, for the periods indicated, the reported high and low market quotations for AngloGold Ashanti’s
ordinary shares on the JSE and for its sponsored ADSs on the NYSE:
ordinary shares on the JSE and for its sponsored ADSs on the NYSE:
JSE
NYSE
(1)
High
Low
High
Low
Year ended December 31
(South African cents per ordinary share)
(US dollars per ADS)
Annual information
2003
33,900
19,100
49.95
27.10
2004
31,900
18,620
48.25
29.91
2005
31,990
18,700
49.88
30.50
2006
38,700
24,700
62.20
35.58
2007
35,889
25,400
49.88
33.80
Quarterly information
2006
First quarter
First quarter
38,700
29,005
62.20
46.51
Second quarter
35,621
24,700
58.36
37.17
Third quarter
36,050
27,500
51.07
37.10
Fourth quarter
35,000
28,250
48.91
35.58
2007
First quarter
First quarter
35,889
30,300
49.34
41.10
Second quarter
35,322
26,100
49.42
37.10
Third quarter
33,600
25,400
47.92
33.80
Fourth quarter
34,100
27,781
49.88
40.00
Monthly information
September 2007
September 2007
33,600
26,610
47.92
39.32
October 2007
31,999
29,100
46.68
41.99
November 2007
34,100
27,910
49.88
42.05
December 2007
33,600
27,781
48.64
40.00
January 2008
34,900
28,100
51.35
40.44
February 2008
31,500
25,501
42.29
33.44
March 2008
30,350
24,801
37.75
30.50
April 2008
29,982
25,052
37.96
32.90
May 2008
(2)
31,145
24,700
40.91
32.94
(1)
Each ADS represents one ordinary share.
(2)
Through May 15, 2008.
See “Item 7A.: Major shareholders” for number of ADSs outstanding at December 31, 2007.
9B.
Plan of distribution
Not applicable.
180
9C. Markets
Nature of trading market
Prior to June 29, 1998, the date on which Anglo American Corporation of South Africa Limited’s gold mining interests were
consolidated into a single, focused, independent, global gold mining company, ordinary shares of AngloGold (formerly Vaal
Reefs) were listed on the Johannesburg Stock Exchange (JSE), the London Stock Exchange (LSE) and the Paris bourse, were
quoted in Brussels in the form of International Depositary Receipts and were listed under grandfathered unsponsored
American Depositary Receipts (ADR) programs on the Nasdaq SmallCap Market. Shares of Freegold, Western Deep Levels
and Southvaal were also listed under grandfathered unsponsored ADR programs on the Nasdaq SmallCap Market.
Historically, the principal trading markets for such shares (as well as for shares of Freegold, Western Deep Levels and
Southvaal) had been the JSE and Nasdaq. As part of the consolidation, shares of AngloGold, Freegold, Western Deep Levels
and Southvaal were delisted from Nasdaq and shares of all participating companies were delisted from the JSE.
consolidated into a single, focused, independent, global gold mining company, ordinary shares of AngloGold (formerly Vaal
Reefs) were listed on the Johannesburg Stock Exchange (JSE), the London Stock Exchange (LSE) and the Paris bourse, were
quoted in Brussels in the form of International Depositary Receipts and were listed under grandfathered unsponsored
American Depositary Receipts (ADR) programs on the Nasdaq SmallCap Market. Shares of Freegold, Western Deep Levels
and Southvaal were also listed under grandfathered unsponsored ADR programs on the Nasdaq SmallCap Market.
Historically, the principal trading markets for such shares (as well as for shares of Freegold, Western Deep Levels and
Southvaal) had been the JSE and Nasdaq. As part of the consolidation, shares of AngloGold, Freegold, Western Deep Levels
and Southvaal were delisted from Nasdaq and shares of all participating companies were delisted from the JSE.
With effect from the implementation of the consolidation, the ordinary shares were listed on the JSE, the LSE and the Paris
bourse and were quoted in Brussels in the form of International Depositary Receipts. In addition, American Depositary Shares
(ADSs) each representing half of one ordinary share and evidenced by ADRs issued by The Bank of New York under a
program sponsored by AngloGold were listed on the New York Stock Exchange (NYSE) on August 5, 1998.
bourse and were quoted in Brussels in the form of International Depositary Receipts. In addition, American Depositary Shares
(ADSs) each representing half of one ordinary share and evidenced by ADRs issued by The Bank of New York under a
program sponsored by AngloGold were listed on the New York Stock Exchange (NYSE) on August 5, 1998.
The company was admitted to the official list of the Australian Stock Exchange (ASX) on November 15, 1999. The ordinary
shares of the company issued in connection with the acquisition of the entire issued share capital of Acacia Resources Limited
trade on the ASX. On November 28, 2001, AngloGold implemented a 10-for-1 split of the AngloGold CHESS Depositary
Interests (CDIs), which trade on the Australian Stock Exchange.
shares of the company issued in connection with the acquisition of the entire issued share capital of Acacia Resources Limited
trade on the ASX. On November 28, 2001, AngloGold implemented a 10-for-1 split of the AngloGold CHESS Depositary
Interests (CDIs), which trade on the Australian Stock Exchange.
Effective at the close of business on December 24, 2002, AngloGold undertook a 2-for-1 stock split and a corresponding
change in the ratio of ordinary shares to ADSs from 0.5 ordinary shares per one ADS to one ordinary share per one ADS. At
the same time, the ratio of ordinary shares to CDIs changed from one ordinary share equivalent to ten CDIs to one ordinary
share equivalent to five CDIs.
change in the ratio of ordinary shares to ADSs from 0.5 ordinary shares per one ADS to one ordinary share per one ADS. At
the same time, the ratio of ordinary shares to CDIs changed from one ordinary share equivalent to ten CDIs to one ordinary
share equivalent to five CDIs.
On April 26, 2004, the business combination with Ashanti became effective, at which time, AngloGold changed its name to
AngloGold Ashanti. Following the business combination, the company’s ordinary shares were listed on the Ghana Stock
Exchange (GhSE). In addition, Ghanaian Depositary Shares (GhDSs) were listed on the GhSE each representing one-
hundredth of an ordinary share and evidenced by GhDSs issued by NTHC Limited (as Depositary) under a program sponsored
by AngloGold Ashanti.
AngloGold Ashanti. Following the business combination, the company’s ordinary shares were listed on the Ghana Stock
Exchange (GhSE). In addition, Ghanaian Depositary Shares (GhDSs) were listed on the GhSE each representing one-
hundredth of an ordinary share and evidenced by GhDSs issued by NTHC Limited (as Depositary) under a program sponsored
by AngloGold Ashanti.
9D.
Selling shareholders
None.
9E.
Dilution
None.
9F.
Expenses of the issue
None.
181
Item 10: Additional information
10A. Share
capital
AngloGold Ashanti's Ordinary Shares and Preference Shares
AngloGold Ashanti’s authorized and issued share capital as of December 31, 2007 and May 15, 2008 (being the latest
practicable date prior to the publication of this document) is set out below:
practicable date prior to the publication of this document) is set out below:
Issued
Title of Class
Authorized
May 15, 2008
December 31, 2007
Ordinary shares
400,000,000
277,858,150
277,457,471
E ordinary shares
4,280,000
4,055,870
4,140,230
A redeemable preference shares
2,000,000
2,000,000
2,000,000
B redeemable preference shares
5,000,000
778,896
778,896
All of the issued ordinary shares, E ordinary, A redeemable preference shares and B redeemable preference shares are fully
paid and are not subject to further calls or assessment by AngloGold Ashanti.
paid and are not subject to further calls or assessment by AngloGold Ashanti.
All of the A redeemable preference shares and B redeemable preference shares are held by Eastvaal Gold Holdings Limited,
AngloGold Ashanti’s wholly-owned subsidiary. AngloGold Ashanti’s Articles of Association provide that the A redeemable
preference shares and B redeemable preference shares are not transferable.
AngloGold Ashanti’s wholly-owned subsidiary. AngloGold Ashanti’s Articles of Association provide that the A redeemable
preference shares and B redeemable preference shares are not transferable.
The table below details changes in the ordinary issued share capital of AngloGold since December 31, 2004.
Period to
Description
Number of Shares
December 31, 2004
264,462,894
Ordinary shares issued during 2005
AngloGold Share Incentive Scheme
475,538
December 31, 2005
264,938,432
Ordinary shares issued during 2006
AngloGold Share Incentive Scheme
398,399
USD500 million equity raise
9,970,732
Employee Share ownership program
928,590
December 31, 2006
276,236,153
Ordinary shares issued during 2007
AngloGold Share Incentive Scheme
1,181,882
Employee Share ownership program
31,410
Employee Share ownership program – on
conversion of E ordinary shares
conversion of E ordinary shares
8,026
December 31, 2007
277,457,471
Ordinary shares issued to May 15, 2008
AngloGold Share Incentive Scheme
400,585
Ordinary shares issued to May 15, 2008
Employee Share ownership program
94
Ordinary shares in issue at May 15, 2008
277,858,150
The table below details changes in the E ordinary issued share capital of AngloGold Ashanti.
Period to
Description
Number of Shares
January 31, 2006
-
E Ordinary shares issued during 2006
- The Bokamoso ESOP Trust
2,785,770
- Izingwe Holdings (Proprietary) Limited
1,400,000
December 31, 2006
4,185,770
E Ordinary shares issued during 2007
- The Bokamoso ESOP Trust
94,230
Cancelled and exchanged for ordinary shares
(139,770)
December 31, 2007
4,140,230
Cancelled and exchanged for ordinary shares to
May 15, 2008
May 15, 2008
84,360
E ordinary shares in issue at May 15, 2008
4,055,870
There has been no change in the issued preference share capital of AngloGold since December 31, 2001.
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Guaranteed Convertible Bonds: On February 27, 2004, AngloGold Holdings plc, a wholly-owned subsidiary of AngloGold
Ashanti, issued $1,000,000,000, 2.375 percent guaranteed Convertible Bonds due 2009, convertible into AngloGold Ashanti
ADSs and guaranteed by AngloGold Ashanti. Subject to certain restrictions, holders of Convertible Bonds are entitled to
convert each Convertible Bond into an AngloGold Ashanti ADS at the then applicable conversion price at any time from April 8,
2004 to February 20, 2009, or, if the Convertible Bonds are called for redemption earlier than February 27, 2009, the seventh
business day prior to the date of early redemption. If the bonds have not been converted by February 20, 2009, they will be
redeemed at par on February 27, 2009. AngloGold Holdings plc has the option of calling an early redemption of all the bonds
3 years after their issuance, if the price of the ADSs exceeds 130 percent of the conversion price for more than 20 days during
any period of 30 consecutive trading days.
Ashanti, issued $1,000,000,000, 2.375 percent guaranteed Convertible Bonds due 2009, convertible into AngloGold Ashanti
ADSs and guaranteed by AngloGold Ashanti. Subject to certain restrictions, holders of Convertible Bonds are entitled to
convert each Convertible Bond into an AngloGold Ashanti ADS at the then applicable conversion price at any time from April 8,
2004 to February 20, 2009, or, if the Convertible Bonds are called for redemption earlier than February 27, 2009, the seventh
business day prior to the date of early redemption. If the bonds have not been converted by February 20, 2009, they will be
redeemed at par on February 27, 2009. AngloGold Holdings plc has the option of calling an early redemption of all the bonds
3 years after their issuance, if the price of the ADSs exceeds 130 percent of the conversion price for more than 20 days during
any period of 30 consecutive trading days.
The initial conversion price for the Convertible Bonds is $65.00 per AngloGold Ashanti ADS. The conversion premium to the
reference volume weighted average price of the ADSs on the New York Stock Exchange of $40.625 on February 19, 2004,
when the issue of the Convertible Bonds was announced, was 60 percent. If all holders of Convertible Bonds exercise their
option to convert their Convertible Bonds into ADSs and assuming no adjustments are made to the initial conversion price, up
to 15,384,615 new ADSs will be issued. The conversion ratio is subject to adjustment in case of various corporate events
including share splits and capital distributions.
reference volume weighted average price of the ADSs on the New York Stock Exchange of $40.625 on February 19, 2004,
when the issue of the Convertible Bonds was announced, was 60 percent. If all holders of Convertible Bonds exercise their
option to convert their Convertible Bonds into ADSs and assuming no adjustments are made to the initial conversion price, up
to 15,384,615 new ADSs will be issued. The conversion ratio is subject to adjustment in case of various corporate events
including share splits and capital distributions.
At the annual general meeting of shareholders to be held on May 6, 2008, the directors are seeking authority from
shareholders to undertake a new issue of convertible bonds in order to enable the company to primarily refinance the existing
bonds on the basis that such convertible bonds, when issued, will be convertible into not more than 15,384,615 ordinary
shares, i.e. the same maximum number of ordinary shares into which the existing bonds are convertible. Once the terms and
conditions of the proposed issue of convertible bonds have been finalized, shareholders will be requested to consider granting
a specific authority and approval to the directors authorising them to issue a maximum of 15,384,615 ordinary shares pursuant
to the conversion rights which will attach to such convertible bonds. The resolution is proposed because the price at which the
existing bonds will be convertible into the company’s ordinary shares, currently $65 per share, currently exceeds the market
price of the company’s shares on the New York Stock Exchange and it is accordingly likely that the existing bonds will not be
converted into shares but instead be cash settled. In such circumstances, the specific authority granted to the directors of the
company in 2004 to allot and issue up to 15,384,615 ordinary shares of 25 cents each in the capital of the company will no
longer be required and the authority will therefore lapse.
shareholders to undertake a new issue of convertible bonds in order to enable the company to primarily refinance the existing
bonds on the basis that such convertible bonds, when issued, will be convertible into not more than 15,384,615 ordinary
shares, i.e. the same maximum number of ordinary shares into which the existing bonds are convertible. Once the terms and
conditions of the proposed issue of convertible bonds have been finalized, shareholders will be requested to consider granting
a specific authority and approval to the directors authorising them to issue a maximum of 15,384,615 ordinary shares pursuant
to the conversion rights which will attach to such convertible bonds. The resolution is proposed because the price at which the
existing bonds will be convertible into the company’s ordinary shares, currently $65 per share, currently exceeds the market
price of the company’s shares on the New York Stock Exchange and it is accordingly likely that the existing bonds will not be
converted into shares but instead be cash settled. In such circumstances, the specific authority granted to the directors of the
company in 2004 to allot and issue up to 15,384,615 ordinary shares of 25 cents each in the capital of the company will no
longer be required and the authority will therefore lapse.
10B. Memorandum and Articles of Association
Registration
AngloGold Ashanti is incorporated under the laws of the Republic of South Africa and registered with the Registrar of
Companies under registration number 1944/017354/06. AngloGold Ashanti’s memorandum of association provides that the
company’s main business is to carry on gold exploration, the mining and production of gold, the manufacturing, marketing and
selling of gold products and the development of markets for gold.
Companies under registration number 1944/017354/06. AngloGold Ashanti’s memorandum of association provides that the
company’s main business is to carry on gold exploration, the mining and production of gold, the manufacturing, marketing and
selling of gold products and the development of markets for gold.
AngloGold Ashanti is governed by its articles of association which document is available for inspection as set out in “Item 10H.:
Documents on Display” and a summary of pertinent provisions, including rights of the holders of shares in AngloGold Ashanti,
are set out below.
Documents on Display” and a summary of pertinent provisions, including rights of the holders of shares in AngloGold Ashanti,
are set out below.
This summary does not contain all the information concerning the rights of holders of AngloGold Ashanti’s ordinary shares and
is qualified in its entirety by reference to the law of South Africa and AngloGold Ashanti’s governing corporate documents. As
well as being governed by the provisions of the articles of association, the rights of holders of AngloGold Ashanti’s ordinary
shares are governed by the South African Companies Act 61 of 1973, as amended, the South African Securities Regulation
Code on Take-Overs and Mergers and the JSE Listing Requirements. In addition, rights of holders of AngloGold Ashanti ADSs
are governed by the deposit agreement between AngloGold Ashanti and the Bank of New York.
is qualified in its entirety by reference to the law of South Africa and AngloGold Ashanti’s governing corporate documents. As
well as being governed by the provisions of the articles of association, the rights of holders of AngloGold Ashanti’s ordinary
shares are governed by the South African Companies Act 61 of 1973, as amended, the South African Securities Regulation
Code on Take-Overs and Mergers and the JSE Listing Requirements. In addition, rights of holders of AngloGold Ashanti ADSs
are governed by the deposit agreement between AngloGold Ashanti and the Bank of New York.
Directors
The management and control of any business of AngloGold Ashanti is vested in the directors who, in addition to their powers
under the articles of association, may exercise all powers and do all such acts and things as may be exercised or done by
AngloGold Ashanti which are not expressly required to be exercised or done by AngloGold Ashanti’s shareholders in a general
meeting.
under the articles of association, may exercise all powers and do all such acts and things as may be exercised or done by
AngloGold Ashanti which are not expressly required to be exercised or done by AngloGold Ashanti’s shareholders in a general
meeting.
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Appointment, Retirement and Removal of Directors
The board of directors may appoint any person to be a director and any director so appointed shall hold office only until the
following annual general meeting and shall then be eligible for re-election. The directors who retire at the annual general
meeting in this manner shall not be taken into account in determining the directors who are to retire by rotation at such
meeting.
following annual general meeting and shall then be eligible for re-election. The directors who retire at the annual general
meeting in this manner shall not be taken into account in determining the directors who are to retire by rotation at such
meeting.
At every annual general meeting at least one-third of the directors must retire from office, but are eligible for re-election. The
directors so to retire at such annual general meeting shall be those who have been the longest in office since their last election.
Where more than one director has served for an equal length of time, unless they agree between themselves, the director to
resign will be determined by lot.
directors so to retire at such annual general meeting shall be those who have been the longest in office since their last election.
Where more than one director has served for an equal length of time, unless they agree between themselves, the director to
resign will be determined by lot.
A director will no longer act as a director of the company if he becomes insolvent or subject to insolvency procedures, is found
to be of unsound mind, is requested to resign by at least three-quarters of the directors, is removed by a board resolution of
AngloGold Ashanti or is absent from board meetings without leave of the directors for six consecutive months. A director can
resign with one month’s written notice unless he obtains the permission of the directors to shorten his notice period.
to be of unsound mind, is requested to resign by at least three-quarters of the directors, is removed by a board resolution of
AngloGold Ashanti or is absent from board meetings without leave of the directors for six consecutive months. A director can
resign with one month’s written notice unless he obtains the permission of the directors to shorten his notice period.
The articles of association contain no provision for directors to hold qualification shares, nor stipulate an age limit requirement
for the retirement or non-retirement of directors.
for the retirement or non-retirement of directors.
AngloGold Ashanti is currently seeking amendments to its Articles of Association relating to the retirement of directors to
remove ambiguities in the provisions relating to the determination of those directors who are to retire by rotation.
remove ambiguities in the provisions relating to the determination of those directors who are to retire by rotation.
Board Meetings
The directors may regulate board meetings and determine the quorum necessary for the transaction of business as they think
fit. Unless otherwise determined by the directors, two directors form a quorum. Issues arising at meetings are decided by
majority vote with the chairman having a second or casting vote where there are more than two directors present at the
meeting.
fit. Unless otherwise determined by the directors, two directors form a quorum. Issues arising at meetings are decided by
majority vote with the chairman having a second or casting vote where there are more than two directors present at the
meeting.
Borrowing Powers
AngloGold Ashanti may create and issue secured or unsecured debentures and the directors may borrow or secure the
payment of such sums as they think fit and may secure the repayment of any indebtedness by bond, mortgage or charge
provided that no special privileges as to allotment of shares, attending and voting at meetings, appointment of directors or
otherwise shall be given to the holders of AngloGold Ashanti’s debentures without the sanction of AngloGold Ashanti
shareholders in a general meeting.
payment of such sums as they think fit and may secure the repayment of any indebtedness by bond, mortgage or charge
provided that no special privileges as to allotment of shares, attending and voting at meetings, appointment of directors or
otherwise shall be given to the holders of AngloGold Ashanti’s debentures without the sanction of AngloGold Ashanti
shareholders in a general meeting.
AngloGold Ashanti’s borrowing powers are unlimited. These borrowing powers may be varied by AngloGold Ashanti
shareholders by way of a special resolution in a general meeting.
shareholders by way of a special resolution in a general meeting.
Remuneration
The directors are entitled to such remuneration as AngloGold Ashanti shareholders may approve by ordinary resolution in a
general meeting. If a director performs services that, in the opinion of the board of directors, are outside the scope of the
ordinary duties of a director, he may be paid such extra remuneration as the directors determine.
general meeting. If a director performs services that, in the opinion of the board of directors, are outside the scope of the
ordinary duties of a director, he may be paid such extra remuneration as the directors determine.
Interests of directors and Restriction on voting
A director who is in any way, whether directly or indirectly, interested in a contract or arrangement or proposed contract or
arrangement with AngloGold Ashanti or any of AngloGold Ashanti’s subsidiaries must declare the nature of his interest to
AngloGold Ashanti in accordance with the Companies Act.
arrangement with AngloGold Ashanti or any of AngloGold Ashanti’s subsidiaries must declare the nature of his interest to
AngloGold Ashanti in accordance with the Companies Act.
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A director shall not vote nor be counted in the quorum and if he shall do so his vote shall not be counted on any resolution for
his own appointment to any other office or position under AngloGold Ashanti or in respect of any contract or arrangement in
which he is interested, but this prohibition shall not apply to:
his own appointment to any other office or position under AngloGold Ashanti or in respect of any contract or arrangement in
which he is interested, but this prohibition shall not apply to:
(i) any arrangement for giving to any director any security or indemnity in respect of money lent by him to, or obligations
undertaken by him for the benefit of, AngloGold Ashanti,
(ii) any arrangement for the giving by AngloGold Ashanti of any security to a third party in respect of a debt or obligation of
AngloGold Ashanti which the director has himself guaranteed or secured,
(iii)
any contract by a director to subscribe for or underwrite securities, or
(iv) any contract or arrangement with a company in which he is interested by reason only of being a director, officer, creditor
(iv) any contract or arrangement with a company in which he is interested by reason only of being a director, officer, creditor
or member of such company (and note that these prohibitions may at any time be suspended or relaxed to any extent
either generally, or in respect of any particular contract or arrangement, by AngloGold Ashanti in general meeting).
either generally, or in respect of any particular contract or arrangement, by AngloGold Ashanti in general meeting).
Where proposals are under consideration concerning the appointment (including fixing or varying the terms of appointment) of
two or more directors to offices or employments with AngloGold Ashanti or any company in which AngloGold Ashanti is
interested, such proposals may be divided and considered in relation to each director separately and in such cases each of the
directors concerned shall be entitled to vote (and be counted in the quorum) in respect of each resolution except that
concerning his own appointment.
two or more directors to offices or employments with AngloGold Ashanti or any company in which AngloGold Ashanti is
interested, such proposals may be divided and considered in relation to each director separately and in such cases each of the
directors concerned shall be entitled to vote (and be counted in the quorum) in respect of each resolution except that
concerning his own appointment.
If any question arises at any meeting as to the entitlement of any directors to vote and such question is not resolved by his
voluntarily agreeing to abstain from voting, such question must be referred to the chairman of the meeting and his ruling in
relation to any other director must be final and conclusive except in a case where the nature or extent of the interests of the
director concerned have not been fairly disclosed.
voluntarily agreeing to abstain from voting, such question must be referred to the chairman of the meeting and his ruling in
relation to any other director must be final and conclusive except in a case where the nature or extent of the interests of the
director concerned have not been fairly disclosed.
The directors may exercise the voting powers conferred by the shares in any other company held or owned by AngloGold
Ashanti in such manner and in all respects as they think fit, including the exercise thereof in favor of any resolution appointing
themselves or any of them to be directors or officers of such other company or voting or providing for the payment of
remuneration to the directors or officers of such other company.
Ashanti in such manner and in all respects as they think fit, including the exercise thereof in favor of any resolution appointing
themselves or any of them to be directors or officers of such other company or voting or providing for the payment of
remuneration to the directors or officers of such other company.
Share Rights, Preferences and Restrictions
Allotment and Issue of Ordinary Shares
Any unissued ordinary shares can be disposed of or dealt with in such manner as AngloGold Ashanti shareholders may direct
in a general meeting. AngloGold Ashanti shareholders may resolve that all or any of such ordinary shares are at the disposal of
the directors who may allot, grant options over or otherwise deal with or dispose of the ordinary shares to such persons at such
times and on such terms and conditions and for such consideration as the directors may determine.
in a general meeting. AngloGold Ashanti shareholders may resolve that all or any of such ordinary shares are at the disposal of
the directors who may allot, grant options over or otherwise deal with or dispose of the ordinary shares to such persons at such
times and on such terms and conditions and for such consideration as the directors may determine.
Any ordinary shares may be issued with such rights or restrictions as AngloGold Ashanti shareholders in a general meeting
may from time to time determine.
may from time to time determine.
No ordinary shares may be issued at a discount except in accordance with section 81 of the South African Companies Act.
Section 81 states that a company can issue shares at a discount to the par value shares of such shares, if such shares are of a
class already in issue, if such issue is authorized by a special resolution, if the company has been trading for at least one year,
if the issue is sanctioned by the court and if the issue occurs within one month of the sanction. If shares are issued at a
discount, every prospectus issued by the company thereafter relating to the issue of any shares, shall contain particulars of the
discount allowed on the issue of those shares, or so much of the discount as has not been written off at the date of the issue of
such prospectus.
Section 81 states that a company can issue shares at a discount to the par value shares of such shares, if such shares are of a
class already in issue, if such issue is authorized by a special resolution, if the company has been trading for at least one year,
if the issue is sanctioned by the court and if the issue occurs within one month of the sanction. If shares are issued at a
discount, every prospectus issued by the company thereafter relating to the issue of any shares, shall contain particulars of the
discount allowed on the issue of those shares, or so much of the discount as has not been written off at the date of the issue of
such prospectus.
Dividends, rights and distributions
The ordinary shares participate fully in all dividends, other distributions and entitlements as and when declared by AngloGold
Ashanti in respect of fully paid ordinary shares. Under South African law, AngloGold Ashanti may declare and pay dividends
from any reserves included in total shareholders’ equity calculated in accordance with International Financial Reporting
Standards, subject to its solvency and liquidity. No larger dividend shall be declared by shareholders in general meeting than is
recommended by the directors. Dividends are payable to shareholders registered at a record date that is after the date of
declaration.
Ashanti in respect of fully paid ordinary shares. Under South African law, AngloGold Ashanti may declare and pay dividends
from any reserves included in total shareholders’ equity calculated in accordance with International Financial Reporting
Standards, subject to its solvency and liquidity. No larger dividend shall be declared by shareholders in general meeting than is
recommended by the directors. Dividends are payable to shareholders registered at a record date that is after the date of
declaration.
185
Dividends may be declared in any currency at the discretion of the board of directors. Currently, dividends are declared in
South African rands and paid in Australian dollars, South African rands, Ghanaian cedis or United Kingdom pounds. Dividends
paid to registered holders of AngloGold Ashanti ADSs are paid in US dollars converted from South African rands by The Bank
of New York, as depositary, in accordance with the deposit agreement.
South African rands and paid in Australian dollars, South African rands, Ghanaian cedis or United Kingdom pounds. Dividends
paid to registered holders of AngloGold Ashanti ADSs are paid in US dollars converted from South African rands by The Bank
of New York, as depositary, in accordance with the deposit agreement.
As approved by shareholders in general meeting on December 11, 2006, the company’s authorized share capital was
increased through the creation of a maximum of 4,280,000 E ordinary shares, to be issued for cash, pursuant to an employee
share ownership plan and black economic empowerment transaction. The E ordinary shares will not be listed. Holders of E
ordinary shares are entitled to receive a dividend, equal to one-half of the dividend per ordinary share declared by AngloGold
Ashanti from time to time.
increased through the creation of a maximum of 4,280,000 E ordinary shares, to be issued for cash, pursuant to an employee
share ownership plan and black economic empowerment transaction. The E ordinary shares will not be listed. Holders of E
ordinary shares are entitled to receive a dividend, equal to one-half of the dividend per ordinary share declared by AngloGold
Ashanti from time to time.
The holder of B preference shares is entitled to an annual dividend amounting to the lesser of five percent of the issue price of
the B preference shares, or an amount equivalent to the balance of the after-tax profits from income from mining the Moab
Lease Area (which is part of the Vaal River operations in South Africa) as determined by the directors in each financial year.
This annual dividend is a first charge on any profit available for distribution from the Moab Lease Area. The annual dividend is
not payable from any of AngloGold Ashanti’s other profits.
the B preference shares, or an amount equivalent to the balance of the after-tax profits from income from mining the Moab
Lease Area (which is part of the Vaal River operations in South Africa) as determined by the directors in each financial year.
This annual dividend is a first charge on any profit available for distribution from the Moab Lease Area. The annual dividend is
not payable from any of AngloGold Ashanti’s other profits.
The holder of A preference shares is entitled to an annual dividend equivalent to the balance of the after-tax profits from
income from mining the Moab Lease Area as determined by AngloGold Ashanti’s directors in each financial year, only once the
annual dividend on the B preference shares has been paid in full.
income from mining the Moab Lease Area as determined by AngloGold Ashanti’s directors in each financial year, only once the
annual dividend on the B preference shares has been paid in full.
Any dividend may be paid and satisfied, either wholly or in part, by the distribution of specific assets, or in paid-up securities of
AngloGold Ashanti or of any other company, or in cash, or in any one or more of such ways as the directors or AngloGold
Ashanti in general meeting may at the time of declaring the dividend determine and direct.
AngloGold Ashanti or of any other company, or in cash, or in any one or more of such ways as the directors or AngloGold
Ashanti in general meeting may at the time of declaring the dividend determine and direct.
All dividends remaining unclaimed for a period of not less than three years from the date on which they became payable, may
be forfeited by resolution of the directors for the benefit of the company.
be forfeited by resolution of the directors for the benefit of the company.
All of the issued ordinary shares, A redeemable preference shares and B redeemable preference shares are fully paid and are
not subject to further calls or assessment by AngloGold Ashanti.
not subject to further calls or assessment by AngloGold Ashanti.
Voting rights
Each ordinary share confers upon the member the right to vote at all general meetings. Each member present in person or, in
the case of a corporate entity, represented, has one vote on a show of hands. If a poll is held, members present or any duly
appointed proxy will have one vote for each ordinary share held. A holder of ordinary shares is entitled to appoint a proxy to
attend, speak and vote at any meeting on his or her behalf and the proxy need not be a shareholder. Holders of ADSs are not
entitled to vote in person at meetings, but may vote by way of proxy through The Bank of New York as the ADS issuer. Holders
of CDIs are not entitled to vote in person at meetings, but may vote by way of proxy.
the case of a corporate entity, represented, has one vote on a show of hands. If a poll is held, members present or any duly
appointed proxy will have one vote for each ordinary share held. A holder of ordinary shares is entitled to appoint a proxy to
attend, speak and vote at any meeting on his or her behalf and the proxy need not be a shareholder. Holders of ADSs are not
entitled to vote in person at meetings, but may vote by way of proxy through The Bank of New York as the ADS issuer. Holders
of CDIs are not entitled to vote in person at meetings, but may vote by way of proxy.
There are no limitations on the right of non-South African shareholders to hold or exercise voting rights attaching to any of the
ordinary shares.
ordinary shares.
Holders of E ordinary shares have the right to vote at all general meetings and are entitled to appoint a proxy to attend, speak
and vote at any meeting on his or her behalf and the proxy need not be a shareholder, to the extent that holders of E ordinary
shares will not be entitled to veto any resolution that would otherwise have been capable of being passed, or not, by the
required majority of votes of holders of ordinary shares and subject to the Listings Requirements of the JSE, holders of E
ordinary shares will not be counted for categorization purposes in terms of section 9 of the Listings Requirements. These
limitations on the E ordinary shares are a function of shareholder approval and the JSE Listing Requirements.
and vote at any meeting on his or her behalf and the proxy need not be a shareholder, to the extent that holders of E ordinary
shares will not be entitled to veto any resolution that would otherwise have been capable of being passed, or not, by the
required majority of votes of holders of ordinary shares and subject to the Listings Requirements of the JSE, holders of E
ordinary shares will not be counted for categorization purposes in terms of section 9 of the Listings Requirements. These
limitations on the E ordinary shares are a function of shareholder approval and the JSE Listing Requirements.
The A redeemable preference shares have voting rights that are similar to those of ordinary shares. The B redeemable
preference shares have limited voting rights, except in the event that a dividend on this class of share has not been paid and
remains unpaid for six months, or in connection with issues directly affecting these preference shares or AngloGold Ashanti as
a whole, such as disposal of substantially all of the company’s assets, winding up AngloGold Ashanti or reducing the
company’s share capital.
preference shares have limited voting rights, except in the event that a dividend on this class of share has not been paid and
remains unpaid for six months, or in connection with issues directly affecting these preference shares or AngloGold Ashanti as
a whole, such as disposal of substantially all of the company’s assets, winding up AngloGold Ashanti or reducing the
company’s share capital.
186
The articles of association do not provide for cumulative voting in respect of any of the classes of AngloGold Ashanti’s shares.
The articles of association specify that if new classes of ordinary or preference shares are issued, the rights relating to any
class of shares may be modified or abrogated either with the consent in writing of the holders of at least three-fourths of the
issued shares of that class, or with the sanction of a resolution passed as if it were a special resolution of the company at a
separate general meeting of the holders of the shares of that class.
class of shares may be modified or abrogated either with the consent in writing of the holders of at least three-fourths of the
issued shares of that class, or with the sanction of a resolution passed as if it were a special resolution of the company at a
separate general meeting of the holders of the shares of that class.
Transfer of Ordinary Shares
Dematerialized shares which have been traded on JSE are transferred on the STRATE (Share Transactions Totally Electronic)
settlement system and delivered within five business days after each trade.
settlement system and delivered within five business days after each trade.
The dematerialization of shares is not mandatory and holders of ordinary shares in AngloGold Ashanti may elect to retain their
certificated securities. Subject to any statutory restrictions on transfer any member may transfer all or part of his certificated
securities, to the extent it is not prevented by section 91A of the Companies Act. Every transfer must be in writing in the usual
common form or in such other form as the directors may approve and must be left at the transfer office where the register of
transfers is kept or at such other place as the directors prescribe and must be accompanied by the share certificate and such
other evidence as the directors or registrar may require to prove title and capacity of the intending transferor or transferee.
certificated securities. Subject to any statutory restrictions on transfer any member may transfer all or part of his certificated
securities, to the extent it is not prevented by section 91A of the Companies Act. Every transfer must be in writing in the usual
common form or in such other form as the directors may approve and must be left at the transfer office where the register of
transfers is kept or at such other place as the directors prescribe and must be accompanied by the share certificate and such
other evidence as the directors or registrar may require to prove title and capacity of the intending transferor or transferee.
The directors may refuse to register any transfer of certificated securities unless the instrument of transfer, duly stamped, is
lodged with AngloGold Ashanti accompanied by the share certificate, the transfer is in respect of only one class of securities or
the transfer is permitted within any of AngloGold Ashanti’s incentive schemes.
lodged with AngloGold Ashanti accompanied by the share certificate, the transfer is in respect of only one class of securities or
the transfer is permitted within any of AngloGold Ashanti’s incentive schemes.
Conversion of Ordinary Shares into Stock
AngloGold Ashanti may by special resolution convert any paid-up shares into stock and may reconvert any stock into paid-up
shares of any denomination. The holders of stock may transfer their respective interests but the directors may fix the minimum
amount of stock transferable. The holders of stock have the same rights, privileges and advantages as regards participation in
profits and voting at general meetings of AngloGold Ashanti as if they held the shares from which the stock arose. All of the
provisions of the Articles apply equally to stock as to shares.
shares of any denomination. The holders of stock may transfer their respective interests but the directors may fix the minimum
amount of stock transferable. The holders of stock have the same rights, privileges and advantages as regards participation in
profits and voting at general meetings of AngloGold Ashanti as if they held the shares from which the stock arose. All of the
provisions of the Articles apply equally to stock as to shares.
Increase and Reduction of Capital
AngloGold Ashanti shareholders may by way of special resolution in a general meeting and in accordance with the provisions
of the Companies Act resolve to:
of the Companies Act resolve to:
·
increase its capital by any sum divided into shares of any amount;
·
consolidate and divide all or any part of its share capital into shares of larger amounts or consolidate and reduce the
number of any issued no par value shares;
number of any issued no par value shares;
·
increase the number of any issued no par value shares without increasing its stated capital; cancel any shares which
have not been subscribed for;
have not been subscribed for;
·
sub-divide its shares or any of them into shares of smaller amounts than fixed by the memorandum of association;
·
vary, modify or amend any rights attached to any shares whether issued or not, including the conversion of any shares
into preference shares; and
into preference shares; and
·
convert any of its shares whether issued or not into shares of another class.
In addition, AngloGold Ashanti shareholders may by ordinary resolution in a general meeting and subject to the requirements
of the Companies Act and the rules and requirements of the stock exchange on which the securities are listed, reduce, dispose
of, distribute or otherwise deal with in any manner its share capital, share premium, stated capital, reserves and capital
redemption reserve fund.
of the Companies Act and the rules and requirements of the stock exchange on which the securities are listed, reduce, dispose
of, distribute or otherwise deal with in any manner its share capital, share premium, stated capital, reserves and capital
redemption reserve fund.
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Share Premium Account and Capital Redemption Reserve Fund
AngloGold Ashanti shareholders may by ordinary resolution in a general meeting authorize the directors to distribute or deal
with, in any way recommended by the directors, all or any part of the amount outstanding to the credit of any share premium
account or capital redemption reserve fund of AngloGold Ashanti.
with, in any way recommended by the directors, all or any part of the amount outstanding to the credit of any share premium
account or capital redemption reserve fund of AngloGold Ashanti.
Rights upon liquidation
In the event of a winding up of AngloGold Ashanti:
·
the B redeemable preference shares confer the right, in priority to any payment in respect of the ordinary shares or the
A preference shares in the capital of AngloGold Ashanti, to receive only so much of the net proceeds from the disposal of
the assets relating to the Moab Lease Area as is available for distribution, but not exceeding a return for each
B redeemable preference share of the capital paid up on that share and any share premium paid on the issue of the
B redeemable preference shares outstanding at that time.
A preference shares in the capital of AngloGold Ashanti, to receive only so much of the net proceeds from the disposal of
the assets relating to the Moab Lease Area as is available for distribution, but not exceeding a return for each
B redeemable preference share of the capital paid up on that share and any share premium paid on the issue of the
B redeemable preference shares outstanding at that time.
·
the A redeemable preference shares confer the right, in priority to any payment in respect of the ordinary shares but after
any payment in respect of the B preference shares, to receive only so much of the net proceeds from the disposal of the
assets relating to the Moab Lease Area as is then available for distribution.
any payment in respect of the B preference shares, to receive only so much of the net proceeds from the disposal of the
assets relating to the Moab Lease Area as is then available for distribution.
The A redeemable and B redeemable shares do not confer the right to participation in the surplus funds of AngloGold
Ashanti arising in any other manner.
Ashanti arising in any other manner.
·
the ordinary shares and E ordinary shares confer the equal rights to any surplus arising from the liquidation of all other
assets of AngloGold Ashanti.
assets of AngloGold Ashanti.
Redemption provisions
The A redeemable preference shares may be redeemed for their nominal value, plus a premium per share of an amount equal
to the net proceeds available from the disposal of the assets relating to the Moab Lease Area, after redemption in full of the
B preference shares and payment of the nominal value of the A preference shares, divided by 2,000,000.
to the net proceeds available from the disposal of the assets relating to the Moab Lease Area, after redemption in full of the
B preference shares and payment of the nominal value of the A preference shares, divided by 2,000,000.
The B redeemable preference shares may be redeemed for their nominal value, plus a premium of up to R249.99 per share,
but limited to an amount equal to the net proceeds available from the disposal of the assets relating to the Moab Lease Area
after payment of the nominal value of the B preference shares.
but limited to an amount equal to the net proceeds available from the disposal of the assets relating to the Moab Lease Area
after payment of the nominal value of the B preference shares.
The ordinary shares are not redeemable.
Description of AngloGold Ashanti ADSs
The Bank of New York issues AngloGold Ashanti’s American Depositary Shares, or ADSs. One ADS represents the ownership
interest of one ordinary share of AngloGold Ashanti.
interest of one ordinary share of AngloGold Ashanti.
The Unrestricted ADS Deposit Agreement and Restricted ADS Deposit Agreement
This section provides a summary description of AngloGold Ashanti’s ADSs.
AngloGold Ashanti has entered the following Deposit Agreements with The Bank of New York as depositary and the owners
and beneficial owners of American Depositary Receipts (the “Deposit Agreements”)
and beneficial owners of American Depositary Receipts (the “Deposit Agreements”)
1.
the Deposit Agreement amended and restated as of August 5, 1998, filed with the SEC as an exhibit to AngloGold
Ashanti’s registration statement on Form F-6 (Registration Statement No. 333-14066) (the “Unrestricted ADS Deposit
Agreement”); and
Agreement”); and
2.
the Deposit Agreement dated February 27, 2004 , filed with the SEC as an exhibit to AngloGold Ashanti’s registration
statement on Form F-6 (Registration Statement No. 333-14066) (the “Restricted ADS Deposit Agreement”),
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·
·
·
·
As this section is a summary, it may not contain all the information that may be important to a holder of ADSs. For more
complete information, see “Item 10.H.: Documents On Display”. Copies of the Deposit Agreements for each Facility are also
available for inspection at the Corporate Trust Office of The Bank of New York currently located at 101 Barclay Street, New
York, New York, 10286.
complete information, see “Item 10.H.: Documents On Display”. Copies of the Deposit Agreements for each Facility are also
available for inspection at the Corporate Trust Office of The Bank of New York currently located at 101 Barclay Street, New
York, New York, 10286.
Under the Unrestricted ADS Deposit Agreement The Bank of New York as depositary issues ADSs which are not subject to
transfer restrictions under the Securities Act and are listed and trade on the New York Stock Exchange (the Unrestricted
ADSs).
transfer restrictions under the Securities Act and are listed and trade on the New York Stock Exchange (the Unrestricted
ADSs).
Under the Restricted ADS Deposit Agreement The Bank of New York as depositary issues ADSs which are considered
“restricted securities” within the meaning of Rule 144 of the Securities Act (the Restricted ADSs). AngloGold Ashanti has
entered a Registration Rights Agreement pursuant to which it has undertaken to file a registration statement with the SEC
covering resales of Restricted ADSs.
“restricted securities” within the meaning of Rule 144 of the Securities Act (the Restricted ADSs). AngloGold Ashanti has
entered a Registration Rights Agreement pursuant to which it has undertaken to file a registration statement with the SEC
covering resales of Restricted ADSs.
Any holder of Convertible Bonds which were offered and sold in the United States to Qualified Institutional Buyers (QIBs) in
reliance on Rule 144A under the Securities Act exercising its right to convert its Convertible Bonds into ADSs prior to the later
of February 27, 2006 and the date that is two years after the last date on which AngloGold Ashanti or any affiliate of AngloGold
Ashanti was the owner of such Convertible Bonds, will receive Restricted ADSs issued under the Restricted ADS Facility. Any
holder of Convertible Bonds which were offered and sold outside the United States in accordance with Regulation S under the
Securities Act exercising its right to convert its Convertible Bonds into ADSs will receive Unrestricted ADSs issued under the
Unrestricted ADS Facility.
reliance on Rule 144A under the Securities Act exercising its right to convert its Convertible Bonds into ADSs prior to the later
of February 27, 2006 and the date that is two years after the last date on which AngloGold Ashanti or any affiliate of AngloGold
Ashanti was the owner of such Convertible Bonds, will receive Restricted ADSs issued under the Restricted ADS Facility. Any
holder of Convertible Bonds which were offered and sold outside the United States in accordance with Regulation S under the
Securities Act exercising its right to convert its Convertible Bonds into ADSs will receive Unrestricted ADSs issued under the
Unrestricted ADS Facility.
The description below generally applies to the ADSs issued under both the Restricted and the Unrestricted ADS Facility. The
material differences between the two Facilities are:
material differences between the two Facilities are:
prior to the later of February 27, 2006 and the date that is two years after the last date on which AngloGold Ashanti or any
affiliate of AngloGold Ashanti was the owner of such Convertible Bonds, only Restricted ADSs will be issued upon
conversion of Convertible Bonds offered and sold in the United States to QIBs in reliance on Rule 144A under the
Securities Act;
conversion of Convertible Bonds offered and sold in the United States to QIBs in reliance on Rule 144A under the
Securities Act;
holders of Restricted ADSs under the Restricted ADS Facility are required to give certain certifications upon deposit or
withdrawal of the ordinary shares underlying their Restricted ADSs as described generally in “ Description of the
ADSs Deposit, Withdrawal and Cancellation” below;
ADSs Deposit, Withdrawal and Cancellation” below;
Restricted ADSs will carry a transfer restrictions legend; and
Restricted ADSs generally may be held in book–entry form.
Restricted ADSs generally may be held in book–entry form.
Description of the ADSs
AngloGold Ashanti ordinary shares (or the right to receive AngloGold Ashanti ordinary shares) are deposited with The Bank of
New York’s custodians in South Africa: The Standard Bank of South Africa Limited, Société Générale South Africa Limited,
FirstRand Bank Limited, National Australia Bank Limited and Australia and New Zealand Banking Group Limited (each, a
“custodian”). Each ADS also represents securities, cash or other property deposited with The Bank of New York but not
distributed to AngloGold Ashanti’s ADS holders. The Bank of New York’s Corporate Trust Office is located at 101 Barclay
Street, New York, NY 10286. The principal executive office of The Bank of New York is located at One Wall Street, New York,
NY 10286. The Bank of New York, as the depositary in respect of the ADSs, issued new ADSs following the completion of the
Business Combination with Ashanti.
New York’s custodians in South Africa: The Standard Bank of South Africa Limited, Société Générale South Africa Limited,
FirstRand Bank Limited, National Australia Bank Limited and Australia and New Zealand Banking Group Limited (each, a
“custodian”). Each ADS also represents securities, cash or other property deposited with The Bank of New York but not
distributed to AngloGold Ashanti’s ADS holders. The Bank of New York’s Corporate Trust Office is located at 101 Barclay
Street, New York, NY 10286. The principal executive office of The Bank of New York is located at One Wall Street, New York,
NY 10286. The Bank of New York, as the depositary in respect of the ADSs, issued new ADSs following the completion of the
Business Combination with Ashanti.
ADSs may be held either directly or indirectly through a broker or other financial institution. If ADSs are held indirectly, such
holders must rely on the procedures of their broker or other financial institution to assert the rights of ADS holders described in
this section and should consult with their broker or financial institution in this regard.
holders must rely on the procedures of their broker or other financial institution to assert the rights of ADS holders described in
this section and should consult with their broker or financial institution in this regard.
The Bank of New York is the actual holder of the AngloGold Ashanti ordinary shares, and therefore holders of ADSs may, in
certain circumstances, not be treated by AngloGold Ashanti as shareholders of AngloGold Ashanti. The rights of ADS holders
and the rights of and obligations of The Bank of New York as depositary are set out in the Deposit Agreements among The
Bank of New York, the registered holders and beneficial owners of ADSs, and AngloGold Ashanti. The Deposit Agreements
and the ADSs are generally governed by the laws of the State of New York.
certain circumstances, not be treated by AngloGold Ashanti as shareholders of AngloGold Ashanti. The rights of ADS holders
and the rights of and obligations of The Bank of New York as depositary are set out in the Deposit Agreements among The
Bank of New York, the registered holders and beneficial owners of ADSs, and AngloGold Ashanti. The Deposit Agreements
and the ADSs are generally governed by the laws of the State of New York.
189
Dividends and Other Distributions
The Bank of New York has agreed to pay to holders of ADSs the cash dividends or other distributions it or a custodian receives
on AngloGold Ashanti ordinary shares or other deposited securities after deducting any fees and expenses and any applicable
withholding taxes. Holders of ADSs will receive these distributions in proportion to the number of AngloGold Ashanti’s ordinary
shares that their ADSs represent.
on AngloGold Ashanti ordinary shares or other deposited securities after deducting any fees and expenses and any applicable
withholding taxes. Holders of ADSs will receive these distributions in proportion to the number of AngloGold Ashanti’s ordinary
shares that their ADSs represent.
Cash
The Bank of New York will convert any cash dividend or other cash distribution AngloGold Ashanti pays on AngloGold
Ashanti’s ordinary shares into US dollars (unless AngloGold Ashanti pays it in US dollars), if it can do so on a reasonable basis
and can transfer the US dollars to the United States. Currently, AngloGold Ashanti pays dividends on ordinary shares in South
African rand. AngloGold Ashanti may declare dividends and distributions on ordinary shares in any currency that the board of
directors or shareholders at a general meeting approve.
Ashanti’s ordinary shares into US dollars (unless AngloGold Ashanti pays it in US dollars), if it can do so on a reasonable basis
and can transfer the US dollars to the United States. Currently, AngloGold Ashanti pays dividends on ordinary shares in South
African rand. AngloGold Ashanti may declare dividends and distributions on ordinary shares in any currency that the board of
directors or shareholders at a general meeting approve.
In accordance with the Deposit Agreements, The Bank of New York, via its appointed South African bank, will convert the
South African rand it receives from AngloGold Ashanti to US dollars and distribute dividends in US dollars to registered holders
of ADSs. If that is no longer possible or if any approval from any government is needed and cannot be obtained, The Bank of
New York may distribute non-US currency only to those ADS holders to whom it is possible to make this type of distribution.
South African rand it receives from AngloGold Ashanti to US dollars and distribute dividends in US dollars to registered holders
of ADSs. If that is no longer possible or if any approval from any government is needed and cannot be obtained, The Bank of
New York may distribute non-US currency only to those ADS holders to whom it is possible to make this type of distribution.
The Bank of New York may hold the non-US currency it cannot convert for the account of holders of ADSs who have not been
paid, unless a holder of ADSs requests in writing to receive the non-US currency distribution. It will not invest the non-US
currency, and it will not be liable for the interest. Before making a distribution, any withholding taxes that must be paid will be
deducted. See “Payment of Taxes” below. The Bank of New York will distribute only whole US dollars and cents and will round
fractional cents to the nearest whole cent. If the exchange rates fluctuate during a time when The Bank of New York cannot
convert the non-US currency, holders of ADSs may lose some or all of the value of the distribution.
paid, unless a holder of ADSs requests in writing to receive the non-US currency distribution. It will not invest the non-US
currency, and it will not be liable for the interest. Before making a distribution, any withholding taxes that must be paid will be
deducted. See “Payment of Taxes” below. The Bank of New York will distribute only whole US dollars and cents and will round
fractional cents to the nearest whole cent. If the exchange rates fluctuate during a time when The Bank of New York cannot
convert the non-US currency, holders of ADSs may lose some or all of the value of the distribution.
Ordinary shares
The Bank of New York may distribute to holders of ADSs additional ADSs representing ordinary shares that AngloGold Ashanti
distributes as a dividend or free distribution, if AngloGold Ashanti provides it promptly with satisfactory evidence that it is legal
to do so. If The Bank of New York does not distribute additional ADSs, the outstanding ADSs will also represent the newly
distributed AngloGold Ashanti ordinary shares. The Bank of New York will only distribute whole ADSs. It will sell AngloGold
Ashanti ordinary shares that would require it to deliver a fraction of an ADS and distribute the net proceeds in the same way as
it distributes cash.
distributes as a dividend or free distribution, if AngloGold Ashanti provides it promptly with satisfactory evidence that it is legal
to do so. If The Bank of New York does not distribute additional ADSs, the outstanding ADSs will also represent the newly
distributed AngloGold Ashanti ordinary shares. The Bank of New York will only distribute whole ADSs. It will sell AngloGold
Ashanti ordinary shares that would require it to deliver a fraction of an ADS and distribute the net proceeds in the same way as
it distributes cash.
Rights to subscribe for additional ordinary shares
If AngloGold Ashanti offers holders of its ordinary shares any rights to subscribe for additional AngloGold Ashanti ordinary
shares or any other rights, The Bank of New York, after consultation with AngloGold Ashanti, may make these rights available
to holders of ADSs or sell the rights and distribute the proceeds in the same way as it distributes cash. If The Bank of New
York cannot do either of these things for any reason, it may allow these rights to lapse. In that case, holders of ADSs will
receive no value for them.
shares or any other rights, The Bank of New York, after consultation with AngloGold Ashanti, may make these rights available
to holders of ADSs or sell the rights and distribute the proceeds in the same way as it distributes cash. If The Bank of New
York cannot do either of these things for any reason, it may allow these rights to lapse. In that case, holders of ADSs will
receive no value for them.
If The Bank of New York makes these types of subscription rights available to holders of ADSs upon instruction from holders of
ADSs, it will exercise the rights and purchase AngloGold Ashanti’s ordinary shares on their behalf. The Bank of New York will
then deposit the AngloGold Ashanti ordinary shares and deliver ADSs to the holders of ADSs. It will only exercise these rights
if holders of ADSs pay it the exercise price and any other charges the rights require them to pay.
ADSs, it will exercise the rights and purchase AngloGold Ashanti’s ordinary shares on their behalf. The Bank of New York will
then deposit the AngloGold Ashanti ordinary shares and deliver ADSs to the holders of ADSs. It will only exercise these rights
if holders of ADSs pay it the exercise price and any other charges the rights require them to pay.
US securities laws may restrict the sale, deposit, cancellation and transfer of the ADSs issued after exercise of rights. For
example, holders of ADSs may not be able to trade the ADSs freely in the United States. In this case, The Bank of New York
may deliver ADSs which are "restricted securities" within the meaning of Rule 144 (including Restricted ADSs, as defined
herein) which will have the same provisions as the ADSs described here, except for the changes needed to put the restrictions
in place.
example, holders of ADSs may not be able to trade the ADSs freely in the United States. In this case, The Bank of New York
may deliver ADSs which are "restricted securities" within the meaning of Rule 144 (including Restricted ADSs, as defined
herein) which will have the same provisions as the ADSs described here, except for the changes needed to put the restrictions
in place.
190
Other distributions
The Bank of New York will send to holders of ADSs any other distributions that AngloGold Ashanti makes on deposited
securities by any means it thinks is legal, fair and practical. If it cannot make the distribution in that way, The Bank of New York
may decide to sell what AngloGold Ashanti distributes, and then distribute the net proceeds in the same way as it distributes
cash, or it may decide to hold what AngloGold Ashanti distributes, in which case the outstanding ADSs will also represent the
newly distributed property.
securities by any means it thinks is legal, fair and practical. If it cannot make the distribution in that way, The Bank of New York
may decide to sell what AngloGold Ashanti distributes, and then distribute the net proceeds in the same way as it distributes
cash, or it may decide to hold what AngloGold Ashanti distributes, in which case the outstanding ADSs will also represent the
newly distributed property.
The Bank of New York is not responsible if it decides that it is unlawful or impractical to make a distribution available to any
ADS holders. AngloGold Ashanti has no obligation to register ADSs, AngloGold Ashanti ordinary shares, rights or other
securities under the US Securities Act of 1933. AngloGold Ashanti also has no obligation to take any other action to permit the
distribution of ADSs, AngloGold Ashanti ordinary shares, rights or anything else to ADS holders. This means that the holders of
ADSs may not receive the distribution AngloGold Ashanti makes on its ordinary shares or any value for them if it is illegal or
impractical for AngloGold Ashanti to make them available to the holders of ADSs.
ADS holders. AngloGold Ashanti has no obligation to register ADSs, AngloGold Ashanti ordinary shares, rights or other
securities under the US Securities Act of 1933. AngloGold Ashanti also has no obligation to take any other action to permit the
distribution of ADSs, AngloGold Ashanti ordinary shares, rights or anything else to ADS holders. This means that the holders of
ADSs may not receive the distribution AngloGold Ashanti makes on its ordinary shares or any value for them if it is illegal or
impractical for AngloGold Ashanti to make them available to the holders of ADSs.
Deposit, Withdrawal and Cancellation
The Bank of New York will deliver ADSs, if a holder of AngloGold Ashanti’s ordinary shares or their broker deposits AngloGold
Ashanti’s ordinary shares or evidence of rights to receive ordinary shares with the custodian. Upon payment of its fees and
expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, The Bank of New York will register
the appropriate number of ADSs in the names such holder of AngloGold Ashanti ordinary shares requests and will deliver the
ADSs at its Corporate Trust office to the persons such holders request.
Ashanti’s ordinary shares or evidence of rights to receive ordinary shares with the custodian. Upon payment of its fees and
expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, The Bank of New York will register
the appropriate number of ADSs in the names such holder of AngloGold Ashanti ordinary shares requests and will deliver the
ADSs at its Corporate Trust office to the persons such holders request.
Holders of ADSs may turn in their ADSs at The Bank of New York’s Corporate Trust Office. Upon payment of its fees and
expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, The Bank of New York will deliver
(1) the underlying ordinary shares to an account designated by the relevant holder of ADSs and (2) any other deposited
securities underlying the ADSs at the office of the Custodian. Or, at the request, risk and expense of ADS holders, The Bank of
New York will deliver the deposited securities at its Corporate Trust Office.
expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, The Bank of New York will deliver
(1) the underlying ordinary shares to an account designated by the relevant holder of ADSs and (2) any other deposited
securities underlying the ADSs at the office of the Custodian. Or, at the request, risk and expense of ADS holders, The Bank of
New York will deliver the deposited securities at its Corporate Trust Office.
Any deposit of ordinary shares into the Restricted ADS Facility, including a deposit upon conversion of the Convertible Bonds,
must be accompanied by a written certificate and agreement by or on behalf of the person who will be the beneficial owner of
the Restricted ADSs to be issued upon deposit of such ordinary shares to the effect that each such beneficial owner:
(i) understands that the ordinary shares and the Restricted ADSs have not been and will not be registered under the Securities
Act, (ii) is not an affiliate of AngloGold Ashanti or a person acting on behalf of such an affiliate, (iii) is a QIB and will be the
beneficial owner of such Restricted ADSs upon the issuance thereof and (iv) agrees not to offer, sell, pledge or otherwise
transfer such ordinary shares, such Restricted ADSs or the Restricted ADRs evidencing such Restricted ADSs except: (a)(1) to
a person who the beneficial owner reasonably believes is a QIB in a transaction meeting the requirements of Rule 144A, (2) in
an offshore transaction meeting the requirements of Regulation S, (3) pursuant to the exemption from registration under the
Securities Act provided by Rule 144 thereunder (if available) or (4) pursuant to an effective registration statement under the
Securities Act and (b) in accordance with all applicable securities laws of the United States.
must be accompanied by a written certificate and agreement by or on behalf of the person who will be the beneficial owner of
the Restricted ADSs to be issued upon deposit of such ordinary shares to the effect that each such beneficial owner:
(i) understands that the ordinary shares and the Restricted ADSs have not been and will not be registered under the Securities
Act, (ii) is not an affiliate of AngloGold Ashanti or a person acting on behalf of such an affiliate, (iii) is a QIB and will be the
beneficial owner of such Restricted ADSs upon the issuance thereof and (iv) agrees not to offer, sell, pledge or otherwise
transfer such ordinary shares, such Restricted ADSs or the Restricted ADRs evidencing such Restricted ADSs except: (a)(1) to
a person who the beneficial owner reasonably believes is a QIB in a transaction meeting the requirements of Rule 144A, (2) in
an offshore transaction meeting the requirements of Regulation S, (3) pursuant to the exemption from registration under the
Securities Act provided by Rule 144 thereunder (if available) or (4) pursuant to an effective registration statement under the
Securities Act and (b) in accordance with all applicable securities laws of the United States.
Holders of Restricted ADSs are subject to further requirements as to certification of their status upon surrender of Restricted
ADSs for the purpose of withdrawing the underlying ordinary shares. Those holders must deliver a written certificate and
agreement by or on behalf of the person surrendering such Restricted ADSs who, after withdrawal, will be the beneficial owner
of the ordinary shares to be withdrawn, acknowledging that the ordinary shares underlying the Restricted ADSs have not been
registered under the Securities Act, certifying as to whether or not those ordinary shares will remain restricted upon withdrawal
and, in the case of ordinary shares that will remain restricted, agreeing: (a) not to offer, sell, pledge or otherwise transfer such
ordinary shares except in a transaction that complies with the applicable transfer restrictions and (b) not to deposit or cause to
be deposited such ordinary shares into any unrestricted depositary receipt facility established or maintained by a depositary
bank (including another facility maintained by The Bank of New York) unless the ordinary shares are no longer deemed to be
restricted securities within the meaning of Rule 44(a)(3) under the Securities Act.
ADSs for the purpose of withdrawing the underlying ordinary shares. Those holders must deliver a written certificate and
agreement by or on behalf of the person surrendering such Restricted ADSs who, after withdrawal, will be the beneficial owner
of the ordinary shares to be withdrawn, acknowledging that the ordinary shares underlying the Restricted ADSs have not been
registered under the Securities Act, certifying as to whether or not those ordinary shares will remain restricted upon withdrawal
and, in the case of ordinary shares that will remain restricted, agreeing: (a) not to offer, sell, pledge or otherwise transfer such
ordinary shares except in a transaction that complies with the applicable transfer restrictions and (b) not to deposit or cause to
be deposited such ordinary shares into any unrestricted depositary receipt facility established or maintained by a depositary
bank (including another facility maintained by The Bank of New York) unless the ordinary shares are no longer deemed to be
restricted securities within the meaning of Rule 44(a)(3) under the Securities Act.
Voting Rights
Holders of ADSs may instruct The Bank of New York to vote the ordinary shares underlying their ADSs, but only if AngloGold
Ashanti asks, in writing, The Bank of New York to request their instruction. Otherwise, holders of ADSs will not be able to
exercise their right to vote unless they withdraw the AngloGold Ashanti ordinary shares. However, the holders of ADSs may
not know about the meeting enough in advance to withdraw the ordinary shares.
Ashanti asks, in writing, The Bank of New York to request their instruction. Otherwise, holders of ADSs will not be able to
exercise their right to vote unless they withdraw the AngloGold Ashanti ordinary shares. However, the holders of ADSs may
not know about the meeting enough in advance to withdraw the ordinary shares.
191
If AngloGold Ashanti asks for the instructions of holders of ADSs, The Bank of New York will notify them of the upcoming vote
and arrange to deliver AngloGold Ashanti voting materials to them. The materials will (1) describe the matters to be voted on
and (2) explain how holders of ADSs, on or before a certain date, may instruct The Bank of New York to vote the ordinary
shares or other deposited securities underlying their ADSs as they direct. For instructions to be valid, The Bank of New York
must receive them on or before the date specified.
and arrange to deliver AngloGold Ashanti voting materials to them. The materials will (1) describe the matters to be voted on
and (2) explain how holders of ADSs, on or before a certain date, may instruct The Bank of New York to vote the ordinary
shares or other deposited securities underlying their ADSs as they direct. For instructions to be valid, The Bank of New York
must receive them on or before the date specified.
The Bank of New York will try, as far as practical, to vote or to have its agents vote the ordinary shares or other deposited
securities as holders of ADSs instruct, but this is subject to South African law, the provisions of AngloGold Ashanti’s
Memorandum and Articles of Association and of the deposited securities and any applicable rule of the JSE. The Bank of New
York will only vote or attempt to vote as such holders of ADSs instruct.
securities as holders of ADSs instruct, but this is subject to South African law, the provisions of AngloGold Ashanti’s
Memorandum and Articles of Association and of the deposited securities and any applicable rule of the JSE. The Bank of New
York will only vote or attempt to vote as such holders of ADSs instruct.
However, if and to the extent that The Bank of New York does not receive their voting instructions, it will give a proxy to vote
the relevant ordinary shares to a person designated by AngloGold Ashanti, unless AngloGold Ashanti does not wish the proxy
to be given, or substantial opposition exists, or the issue at hand materially and adversely affects the rights of holders of
ordinary shares.
the relevant ordinary shares to a person designated by AngloGold Ashanti, unless AngloGold Ashanti does not wish the proxy
to be given, or substantial opposition exists, or the issue at hand materially and adversely affects the rights of holders of
ordinary shares.
AngloGold Ashanti cannot assure the holders of ADSs that they will receive the voting materials in time for them to instruct The
Bank of New York to vote their ordinary shares. In addition, The Bank of New York and its agents are not responsible for
failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that holders of ADSs
may not be able to exercise their right to vote and there may be nothing they can do if their ordinary shares are not voted as
they requested.
Bank of New York to vote their ordinary shares. In addition, The Bank of New York and its agents are not responsible for
failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that holders of ADSs
may not be able to exercise their right to vote and there may be nothing they can do if their ordinary shares are not voted as
they requested.
Fees and Expenses
AngloGold Ashanti ADS holders must pay:
For:
$5.00 (or less) per 100 ADSs*
Each issuance of an ADS, including as a result of a distribution of
AngloGold Ashanti ordinary shares or rights or other property
AngloGold Ashanti ordinary shares or rights or other property
Each cancellation of an ADS, including if the Deposit Agreement
terminates
terminates
$0.02 (or less) per ADS
Any cash payment
Registration or transfer fees
Transfer and registration of AngloGold Ashanti ordinary shares on
the AngloGold Ashanti share register to or from the name of The
Bank of New York or its agent when AngloGold Ashanti ordinary
shares are deposited or withdrawn
the AngloGold Ashanti share register to or from the name of The
Bank of New York or its agent when AngloGold Ashanti ordinary
shares are deposited or withdrawn
AngloGold Ashanti ADS holders must pay:
For:
Expenses of The Bank of New York
Conversion of non-US currency to US dollars
Cable, telex and facsimile transmission expenses
Taxes and other governmental charges The Bank of
New York or any custodian has to pay on any ADS or
AngloGold Ashanti ordinary share underlying an ADS,
for example, stock transfer taxes, stamp duty or
withholding taxes
New York or any custodian has to pay on any ADS or
AngloGold Ashanti ordinary share underlying an ADS,
for example, stock transfer taxes, stamp duty or
withholding taxes
As necessary
A fee equivalent to the fee that would have been
payable if the securities distributed had been ordinary
shares deposited for issuance of ADSs
payable if the securities distributed had been ordinary
shares deposited for issuance of ADSs
Distribution of securities distributed to holders of deposited
securities that are distributed by The Bank of New York to ADS
holders
securities that are distributed by The Bank of New York to ADS
holders
All fees are at the discretion of The Bank of New York, and are subject to change without notice.
*
With respect only to the initial issuance of Unrestricted and Restricted ADSs issued upon conversion of the Convertible
Bonds, AngloGold Ashanti will pay the applicable issuance fee of $5.00 (or less) per 100 ADSs.
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Payment of Taxes
Holders of ADSs will be responsible for any taxes or other governmental charges payable on their ADSs or on the deposited
securities underlying their ADSs. The Bank of New York may refuse to transfer their ADSs or allow them to withdraw the
deposited securities underlying their ADSs until such taxes or other charges are paid. It may apply payments owed to holders
of ADSs or sell deposited securities underlying their ADSs to pay any taxes they owe, and they will remain liable for any
deficiency. If it sells deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale and pay to
holders of ADSs any proceeds, or send to them any property, remaining after it has paid the taxes.
securities underlying their ADSs. The Bank of New York may refuse to transfer their ADSs or allow them to withdraw the
deposited securities underlying their ADSs until such taxes or other charges are paid. It may apply payments owed to holders
of ADSs or sell deposited securities underlying their ADSs to pay any taxes they owe, and they will remain liable for any
deficiency. If it sells deposited securities, it will, if appropriate, reduce the number of ADSs to reflect the sale and pay to
holders of ADSs any proceeds, or send to them any property, remaining after it has paid the taxes.
Reclassifications
If AngloGold Ashanti:
Then:
Changes the nominal or par value of the ordinary
shares;
shares;
Reclassifies, splits up or consolidates any of the
deposited securities;
deposited securities;
Distributes securities on the ordinary shares that are
not distributed to holders of ADSs; or
not distributed to holders of ADSs; or
Recapitalizes, reorganizes, mergers, liquidates, sells
all or substantially all of AngloGold Ashanti’s assets,
or takes any similar action.
all or substantially all of AngloGold Ashanti’s assets,
or takes any similar action.
The cash, ordinary shares or other securities received by The Bank of
New York will become deposited securities. Each ADS will
automatically represent its equal share of the new deposited securities.
New York will become deposited securities. Each ADS will
automatically represent its equal share of the new deposited securities.
The Bank of New York may, and will if AngloGold Ashanti asks it to,
distribute some or all of the cash, AngloGold Ashanti ordinary shares
or other securities it receives. It may also issue new ADSs or ask
holders of ADSs to surrender their outstanding ADSs in exchange for
new ADSs identifying the new deposited securities.
distribute some or all of the cash, AngloGold Ashanti ordinary shares
or other securities it receives. It may also issue new ADSs or ask
holders of ADSs to surrender their outstanding ADSs in exchange for
new ADSs identifying the new deposited securities.
Amendment and Termination
AngloGold Ashanti may agree with The Bank of New York to amend the Deposit Agreement and the ADSs without the consent
of holders for any reason. If the amendment adds or increases fees or charges (except for taxes and other governmental
charges or registration fees, cable, telex or facsimile transmission costs, delivery costs or other such expenses) or if the
amendment prejudices an important right of ADS holders, it will only become effective 30 days after The Bank of New York
notifies holders of ADSs of the amendment. At the time an amendment becomes effective, holders of ADSs are considered, by
continuing to hold their ADSs, to agree to the amendment and to be bound by the ADSs and the agreement as amended.
of holders for any reason. If the amendment adds or increases fees or charges (except for taxes and other governmental
charges or registration fees, cable, telex or facsimile transmission costs, delivery costs or other such expenses) or if the
amendment prejudices an important right of ADS holders, it will only become effective 30 days after The Bank of New York
notifies holders of ADSs of the amendment. At the time an amendment becomes effective, holders of ADSs are considered, by
continuing to hold their ADSs, to agree to the amendment and to be bound by the ADSs and the agreement as amended.
The Bank of New York may terminate the Deposit Agreements by mailing notice of termination to ADS holders at least 30 days
prior to the date fixed in the notice if AngloGold Ashanti asks it to do so. The Bank of New York may also terminate the
Deposit Agreement if The Bank of New York has told AngloGold Ashanti that it would like to resign and AngloGold Ashanti has
not appointed a new depositary bank within 90 days. In both cases, The Bank of New York must notify holders of AngloGold
Ashanti ADSs at least 30 days before termination.
prior to the date fixed in the notice if AngloGold Ashanti asks it to do so. The Bank of New York may also terminate the
Deposit Agreement if The Bank of New York has told AngloGold Ashanti that it would like to resign and AngloGold Ashanti has
not appointed a new depositary bank within 90 days. In both cases, The Bank of New York must notify holders of AngloGold
Ashanti ADSs at least 30 days before termination.
After termination, The Bank of New York and its agents will be required to do only the following under the Deposit Agreement:
collect distributions on the deposited securities, sell rights, and, upon surrender of ADSs, deliver AngloGold Ashanti ordinary
shares and other deposited securities. One year after the date of termination or later, The Bank of New York may sell any
remaining deposited securities by public or private sale and will hold the proceeds of the sale, as well as any other cash it is
holding under the Deposit Agreement, for the pro rata benefit of the ADS holders who have not surrendered their ADSs. It will
not invest the money and will have no liability for interest. The Bank of New York’s only obligations will be to account for the
proceeds of the sale and other cash. After termination, AngloGold Ashanti’s only obligations will be with respect to
indemnification of, and payment of certain amounts to, The Bank of New York.
collect distributions on the deposited securities, sell rights, and, upon surrender of ADSs, deliver AngloGold Ashanti ordinary
shares and other deposited securities. One year after the date of termination or later, The Bank of New York may sell any
remaining deposited securities by public or private sale and will hold the proceeds of the sale, as well as any other cash it is
holding under the Deposit Agreement, for the pro rata benefit of the ADS holders who have not surrendered their ADSs. It will
not invest the money and will have no liability for interest. The Bank of New York’s only obligations will be to account for the
proceeds of the sale and other cash. After termination, AngloGold Ashanti’s only obligations will be with respect to
indemnification of, and payment of certain amounts to, The Bank of New York.
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Limitations on Obligations and Liability to ADS Holders
The Deposit Agreements expressly limit AngloGold Ashanti’s obligations and the obligations of The Bank of New York, and
they limit AngloGold Ashanti’s liability and the liability of The Bank of New York. AngloGold Ashanti and The Bank of New
York:
they limit AngloGold Ashanti’s liability and the liability of The Bank of New York. AngloGold Ashanti and The Bank of New
York:
·
are only obligated to take the actions specifically set forth in the applicable Deposit Agreement without negligence or bad
faith;
faith;
·
are not liable if either of AngloGold Ashanti or The Bank of New York is prevented or delayed by law or circumstances
beyond AngloGold Ashanti’s control from performing AngloGold Ashanti’s obligations under the applicable Deposit
Agreement;
beyond AngloGold Ashanti’s control from performing AngloGold Ashanti’s obligations under the applicable Deposit
Agreement;
·
are not liable if either of AngloGold Ashanti or The Bank of New York exercises discretion permitted under the applicable
Deposit Agreement;
Deposit Agreement;
·
have no obligation to become involved in a lawsuit or other proceeding related to the ADSs or the agreement on behalf of
the holders of ADS holders or on behalf of any other party;
the holders of ADS holders or on behalf of any other party;
·
may rely on advice of or information from legal counsel, accountants, and any persons presenting AngloGold Ashanti’s
ordinary shares for deposit, any registered holder or any other person believed by AngloGold Ashanti in good faith to be
competent to give such advice or information; and
ordinary shares for deposit, any registered holder or any other person believed by AngloGold Ashanti in good faith to be
competent to give such advice or information; and
·
pursuant to the Deposit Agreements, AngloGold Ashanti and The Bank of New York agree to indemnify each other under
certain circumstances.
certain circumstances.
Requirements for Depositary Action
Before The Bank of New York will issue, transfer or register the transfer of an ADS, make a distribution on an ADS, or allow
withdrawal of AngloGold Ashanti ordinary shares, The Bank of New York may require:
withdrawal of AngloGold Ashanti ordinary shares, The Bank of New York may require:
·
payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third
parties for the transfer of any ordinary shares or other deposited securities;
parties for the transfer of any ordinary shares or other deposited securities;
·
production of satisfactory proof of the identity and genuineness of any signature or other information it deems necessary;
and
and
·
compliance with regulations it may establish, from time to time, consistent with the agreement, including presentation of
transfer documents.
transfer documents.
The Bank of New York may refuse to deliver, transfer or register transfers of ADSs generally when the books of The Bank of
New York or AngloGold Ashanti’s books are closed, or at any time if either AngloGold Ashanti or The Bank of New York thinks
it advisable to do so.
New York or AngloGold Ashanti’s books are closed, or at any time if either AngloGold Ashanti or The Bank of New York thinks
it advisable to do so.
Holders of Unrestricted ADSs have the right to cancel their ADSs and withdraw the underlying ordinary shares at any time
except:
except:
·
when temporary delays arise because: (1) either AngloGold Ashanti or The Bank of New York have closed AngloGold
Ashanti’s transfer books; (2) the transfer of the ordinary shares is blocked in connection with voting at a general meeting of
shareholders; or (3) AngloGold Ashanti is paying a dividend on the ordinary shares;
Ashanti’s transfer books; (2) the transfer of the ordinary shares is blocked in connection with voting at a general meeting of
shareholders; or (3) AngloGold Ashanti is paying a dividend on the ordinary shares;
·
when ADS holders seeking to withdraw the ordinary shares owe money to pay fees, taxes and similar charges; or
·
when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to
ADSs or to the withdrawal of the ordinary shares or other deposited securities.
ADSs or to the withdrawal of the ordinary shares or other deposited securities.
This right of withdrawal may not be limited by any other provision of the Unrestricted Deposit Agreement.
Pre-release of ADSs
In certain circumstances, subject to the provisions of the Deposit Agreement, The Bank of New York may deliver ADSs before
deposit of the underlying ordinary shares. This is called a pre-release of the ADS.
deposit of the underlying ordinary shares. This is called a pre-release of the ADS.
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The Bank of New York may also deliver AngloGold Ashanti ordinary shares upon cancellation of pre-released ADSs (even if
the ADSs are cancelled before the pre-release transaction has been closed out). A pre-release is closed out as soon as the
underlying AngloGold Ashanti ordinary shares are delivered to The Bank of New York. The Bank of New York may receive
ADSs instead of ordinary shares to close out a pre-release.
the ADSs are cancelled before the pre-release transaction has been closed out). A pre-release is closed out as soon as the
underlying AngloGold Ashanti ordinary shares are delivered to The Bank of New York. The Bank of New York may receive
ADSs instead of ordinary shares to close out a pre-release.
The Bank of New York may pre-release ADSs only under the following conditions:
·
before or at the time of the pre-release, the person to whom the pre-release is being made must represent to The Bank of
New York in writing that it or its customer: (a) owns the ordinary shares or ADSs to be remitted, (b) assigns all beneficial
rights, title and interest in such ADSs or ordinary shares, as the case may be, to The Bank of New York in its capacity as
the depositary and for the benefit of the ADS holders, and (c) will not take any action with respect to such ADSs or
ordinary shares, as the case may be, that is consistent with the transfer of beneficial ownership (including, without the
consent of The Bank of New York, disposing of such ADSs or ordinary shares, as the case may be) other than satisfaction
of such pre-release;
New York in writing that it or its customer: (a) owns the ordinary shares or ADSs to be remitted, (b) assigns all beneficial
rights, title and interest in such ADSs or ordinary shares, as the case may be, to The Bank of New York in its capacity as
the depositary and for the benefit of the ADS holders, and (c) will not take any action with respect to such ADSs or
ordinary shares, as the case may be, that is consistent with the transfer of beneficial ownership (including, without the
consent of The Bank of New York, disposing of such ADSs or ordinary shares, as the case may be) other than satisfaction
of such pre-release;
·
the pre-release must be fully collateralized with cash, US government securities, or other collateral that The Bank of New
York considers appropriate; and
York considers appropriate; and
·
The Bank of New York must be able to close out the pre-release on not more than five business days’ notice. Each pre-
release will be subject to any further indemnities and credit regulations that The Bank of New York deems appropriate.
The Bank of New York will normally limit the number of AngloGold Ashanti ordinary shares not deposited but represented
by ADSs outstanding at any time as a result of pre-release so that they do not exceed 30 percent of the ordinary shares
deposited, although The Bank of New York may disregard this limit from time to time, if it thinks it is appropriate to do so.
release will be subject to any further indemnities and credit regulations that The Bank of New York deems appropriate.
The Bank of New York will normally limit the number of AngloGold Ashanti ordinary shares not deposited but represented
by ADSs outstanding at any time as a result of pre-release so that they do not exceed 30 percent of the ordinary shares
deposited, although The Bank of New York may disregard this limit from time to time, if it thinks it is appropriate to do so.
Shareholders’ meetings
The directors may convene general meetings of AngloGold Ashanti shareholders. Subject to the provisions of the Companies
Act the shareholders may requisition for the convening of a general meeting.
Act the shareholders may requisition for the convening of a general meeting.
An AngloGold Ashanti annual general meeting and a meeting of AngloGold Ashanti shareholders for the purpose of passing a
special resolution may be called by giving 21 clear days’ notice in writing of that shareholders’ meeting. For any other meeting
of AngloGold Ashanti shareholders, 14 clear days’ notice must be given. “Clear days” means calendar days excluding the day
on which the notice is given and the date of the meeting. All shareholders are entitled to attend.
special resolution may be called by giving 21 clear days’ notice in writing of that shareholders’ meeting. For any other meeting
of AngloGold Ashanti shareholders, 14 clear days’ notice must be given. “Clear days” means calendar days excluding the day
on which the notice is given and the date of the meeting. All shareholders are entitled to attend.
AngloGold Ashanti’s articles of association provide that a quorum for a general members’ meeting (other than a meeting at
which a special resolution will be passed) consists of three members present personally, or if the member is a corporate entity,
represented and entitled to vote. If a general meeting is not quorate, the meeting is dissolved and a new meeting will have to
be called following the relevant notice provision.
which a special resolution will be passed) consists of three members present personally, or if the member is a corporate entity,
represented and entitled to vote. If a general meeting is not quorate, the meeting is dissolved and a new meeting will have to
be called following the relevant notice provision.
The quorum of a members’ meeting convened for the purpose of passing a special resolution consists of members holding at
least 25 percent of the total member votes and present in person or by proxy. If the meeting is not quorate, it will be adjourned
to a date between seven and 21 days after the adjourned meeting, and the members present at the second meeting shall
constitute a quorum as long as there are at least three of them at the second meeting. A special resolution must be passed by
a vote of 75 percent of the members present, at the meeting, personally or by proxy and entitled to vote or by a vote of
75 percent of the total votes to which these members are entitled.
least 25 percent of the total member votes and present in person or by proxy. If the meeting is not quorate, it will be adjourned
to a date between seven and 21 days after the adjourned meeting, and the members present at the second meeting shall
constitute a quorum as long as there are at least three of them at the second meeting. A special resolution must be passed by
a vote of 75 percent of the members present, at the meeting, personally or by proxy and entitled to vote or by a vote of
75 percent of the total votes to which these members are entitled.
If the meeting is not quorate and is convened upon the requisition of members, the meeting is dissolved.
Disclosure of Interest in Shares
Under South African law, a registered holder of AngloGold Ashanti shares who is not the beneficial owner of such shares is
required to disclose every three months to AngloGold Ashanti, the identity of the beneficial owner and the number and class of
securities held on behalf of the beneficial owner. Moreover, AngloGold Ashanti may, by notice in writing, require a person who
is a registered shareholder, or whom AngloGold Ashanti knows or has reasonable cause to believe has a beneficial interest in
AngloGold Ashanti ordinary shares, to confirm or deny whether or not such person holds the ordinary shares or beneficial
interest and, if the ordinary shares are held for another person, to disclose to AngloGold Ashanti the identity of the person on
whose behalf the ordinary shares are held. AngloGold Ashanti may also require the person to give particulars of the extent of
the beneficial interest held during the three years preceding the date of the notice.
required to disclose every three months to AngloGold Ashanti, the identity of the beneficial owner and the number and class of
securities held on behalf of the beneficial owner. Moreover, AngloGold Ashanti may, by notice in writing, require a person who
is a registered shareholder, or whom AngloGold Ashanti knows or has reasonable cause to believe has a beneficial interest in
AngloGold Ashanti ordinary shares, to confirm or deny whether or not such person holds the ordinary shares or beneficial
interest and, if the ordinary shares are held for another person, to disclose to AngloGold Ashanti the identity of the person on
whose behalf the ordinary shares are held. AngloGold Ashanti may also require the person to give particulars of the extent of
the beneficial interest held during the three years preceding the date of the notice.
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AngloGold Ashanti is obligated to establish and maintain a register of the disclosures described above and to publish in its
annual financial statements a list of the persons who hold beneficial interest equal to or in excess of 5 percent of the total
number of ordinary shares issued by AngloGold Ashanti together with the extent of those beneficial interests.
annual financial statements a list of the persons who hold beneficial interest equal to or in excess of 5 percent of the total
number of ordinary shares issued by AngloGold Ashanti together with the extent of those beneficial interests.
Rights of Minority Shareholders
Majority shareholders of South African companies have no fiduciary obligations under South African common law to minority
shareholders. However, under the Companies Act, a shareholder may, under certain circumstances, seek relief from the court
if he has been unfairly prejudiced by the company. There may also be common law personal actions available to a shareholder
of a company.
shareholders. However, under the Companies Act, a shareholder may, under certain circumstances, seek relief from the court
if he has been unfairly prejudiced by the company. There may also be common law personal actions available to a shareholder
of a company.
Golden Share
Under the Stability Agreement, the Government of Ghana (Government) has confirmed and agreed that the Government’s
rights with respect to the Golden Share apply only in respect of AngloGold Ashanti’s assets and operations in Ghana. The
rights do not extend to any other assets or operations of AngloGold Ashanti outside Ghana, nor to any assets or operations of
AngloGold Ashanti.
rights with respect to the Golden Share apply only in respect of AngloGold Ashanti’s assets and operations in Ghana. The
rights do not extend to any other assets or operations of AngloGold Ashanti outside Ghana, nor to any assets or operations of
AngloGold Ashanti.
The Government has also agreed to waive any right it may have under Section 60(I) of the Minerals and Mining Law, 1986, as
amended to acquire a special share in AngloGold Ashanti or any of its direct or indirect subsidiaries or joint ventures.
The Golden Share may only be held by or transferred to a Minister of the Government or any person acting on behalf of such
Government and authorized in writing by such Minister.
amended to acquire a special share in AngloGold Ashanti or any of its direct or indirect subsidiaries or joint ventures.
The Golden Share may only be held by or transferred to a Minister of the Government or any person acting on behalf of such
Government and authorized in writing by such Minister.
The following matters require, and will not be effective without, the written consent of the holder of the Golden Share:
(i) any amendment to or removal of the relevant provisions of the AngloGold Ashanti (Ghana) Limited Regulations setting out
the rights and restrictions attaching to the Golden Share;
(ii)
the voluntary winding-up or voluntary liquidation of AngloGold Ashanti (Ghana) Limited;
(iii) the redemption of or purchase by AngloGold Ashanti of the Golden Share;
(iv) the disposal of any mining lease held by AngloGold Ashanti (Ghana) Limited or any subsidiary of AngloGold Ashanti
(iii) the redemption of or purchase by AngloGold Ashanti of the Golden Share;
(iv) the disposal of any mining lease held by AngloGold Ashanti (Ghana) Limited or any subsidiary of AngloGold Ashanti
(Ghana) Limited;
(v) any disposal by AngloGold Ashanti (Ghana) Limited (other than any disposal in the ordinary course of business of
AngloGold Ashanti) which, alone or when aggregated with any disposal or disposals forming part of, or connected with, the
same or a connected transaction, constitutes a disposal of the whole or a material part of the assets of the AngloGold
Ashanti Group taken as a whole. For this purpose, a part of the AngloGold Ashanti Group’s assets will be considered
material if either (a) its book value (calculated by reference to the then latest audited consolidated accounts), or the total
consideration to be received on its disposal, is not less than 25 percent of the book value of the net assets of the
AngloGold Ashanti Group or (b) the average profits attributable to it represent at least 25 percent of the average profits of
the AngloGold Ashanti Group for the last three years for which audited accounts are available (before deducting all
charges, except taxation and extraordinary items).
same or a connected transaction, constitutes a disposal of the whole or a material part of the assets of the AngloGold
Ashanti Group taken as a whole. For this purpose, a part of the AngloGold Ashanti Group’s assets will be considered
material if either (a) its book value (calculated by reference to the then latest audited consolidated accounts), or the total
consideration to be received on its disposal, is not less than 25 percent of the book value of the net assets of the
AngloGold Ashanti Group or (b) the average profits attributable to it represent at least 25 percent of the average profits of
the AngloGold Ashanti Group for the last three years for which audited accounts are available (before deducting all
charges, except taxation and extraordinary items).
Upon a return of assets in a winding-up or liquidation of AngloGold Ashanti (Ghana) Limited, the holder of the Golden Share is
entitled to the sum of 1,000 cedis (approximately 13 US cents) in priority to any payment to other members, but the Golden
Share confers no further right to participate in the profits or assets of AngloGold Ashanti. The Golden Share carries no right to
any dividend or any right to participate in any offer of securities to existing shareholders or in any capitalization issue.
entitled to the sum of 1,000 cedis (approximately 13 US cents) in priority to any payment to other members, but the Golden
Share confers no further right to participate in the profits or assets of AngloGold Ashanti. The Golden Share carries no right to
any dividend or any right to participate in any offer of securities to existing shareholders or in any capitalization issue.
The holder of the Golden Share may require AngloGold Ashanti (Ghana) Limited to redeem the Golden Share at any time in
consideration of the payment to such holder of 1,000 cedis (approximately 13 US cents).
consideration of the payment to such holder of 1,000 cedis (approximately 13 US cents).
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10C. Material
contracts
AngloGold and the Government of Ghana agreed the terms of a Stability Agreement, approved by the parliament of Ghana on
February 18, 2004, (as amended) to govern certain aspects of the fiscal and regulatory framework under which AngloGold
Ashanti will operate in Ghana following the implementation of the Business Combination with Ashanti.
February 18, 2004, (as amended) to govern certain aspects of the fiscal and regulatory framework under which AngloGold
Ashanti will operate in Ghana following the implementation of the Business Combination with Ashanti.
On March 23, 2006 the company entered into a Registration Rights Agreement with Anglo South Africa Capital (Proprietary)
Limited (Anglo South Africa) under which the company has agreed to file U.S. registration statements for Anglo South Africa’s
offer and sale of shares it holds in the company (each a Demand Registration) if Anglo South Africa requests the company to
do so. The company is required to use all reasonable efforts to file a Demand Registration within 30 days after such a request
and to keep it effective for 90 days unless the shares offered pursuant to it are sold earlier. Further, the company may not offer,
sell, allot or issue any shares or other securities that are convertible into or exchangeable for, or that represent the right to
receive, shares, whether pursuant to U.S. registration or otherwise, for a 90-day period immediately following the first closing of
an offering pursuant to a Demand Registration or a shorter period as may be imposed by underwriters in the Demand
Registration; except: (i) in consideration for shares or assets of a company as part of a merger, acquisition, corporate
reorganization or similar transaction, (ii) as required pursuant to the terms governing the 2.375 percent guaranteed convertible
bonds due 2009, issued by AngloGold Holdings plc and guaranteed by the company, and (iii) in connection with any option,
employee bonus, profit sharing, pension, retirement, incentive, savings or similar plan, agreement or award. The Registration
Rights Agreement may be terminated at any time by written consent by each of the parties thereto. The Registration Rights
Agreement shall terminate automatically on the first date on which Anglo South Africa is no longer an “affiliate” within the
meaning of Rule 144 under the United States Securities Act of 1933, as amended.
Limited (Anglo South Africa) under which the company has agreed to file U.S. registration statements for Anglo South Africa’s
offer and sale of shares it holds in the company (each a Demand Registration) if Anglo South Africa requests the company to
do so. The company is required to use all reasonable efforts to file a Demand Registration within 30 days after such a request
and to keep it effective for 90 days unless the shares offered pursuant to it are sold earlier. Further, the company may not offer,
sell, allot or issue any shares or other securities that are convertible into or exchangeable for, or that represent the right to
receive, shares, whether pursuant to U.S. registration or otherwise, for a 90-day period immediately following the first closing of
an offering pursuant to a Demand Registration or a shorter period as may be imposed by underwriters in the Demand
Registration; except: (i) in consideration for shares or assets of a company as part of a merger, acquisition, corporate
reorganization or similar transaction, (ii) as required pursuant to the terms governing the 2.375 percent guaranteed convertible
bonds due 2009, issued by AngloGold Holdings plc and guaranteed by the company, and (iii) in connection with any option,
employee bonus, profit sharing, pension, retirement, incentive, savings or similar plan, agreement or award. The Registration
Rights Agreement may be terminated at any time by written consent by each of the parties thereto. The Registration Rights
Agreement shall terminate automatically on the first date on which Anglo South Africa is no longer an “affiliate” within the
meaning of Rule 144 under the United States Securities Act of 1933, as amended.
AngloGold Ashanti is not party to any further material contracts other than contracts entered into in the ordinary course of
business.
business.
10D. Exchange controls
Exchange controls and other limitations affecting security holders
The following is a general outline of South African exchange controls and such outline may not apply to former residents of
South Africa. Investors should consult a professional advisor as to the exchange control implications of their particular
investments.
South Africa. Investors should consult a professional advisor as to the exchange control implications of their particular
investments.
South African law provides for exchange control regulations, which restrict the export of capital from the Common Monetary
Area, which comprises South Africa, the Kingdoms of Lesotho and Swaziland and the Republic of Namibia. The exchange
control regulations, which are administered by the Exchange Control Department of the South African Reserve Bank, are
applied throughout the Common Monetary Area and regulate transactions involving South African residents, including natural
persons and legal entities. Government officials have from time to time stated their intentions to lift South Africa’s exchange
control regulations when economic conditions permit such action. In his budget speech in March 1998, the Minister of Finance
announced that restrictions relating to offshore investments by South African companies and individuals subject to South
African exchange control would, to a limited extent, be lifted.
Area, which comprises South Africa, the Kingdoms of Lesotho and Swaziland and the Republic of Namibia. The exchange
control regulations, which are administered by the Exchange Control Department of the South African Reserve Bank, are
applied throughout the Common Monetary Area and regulate transactions involving South African residents, including natural
persons and legal entities. Government officials have from time to time stated their intentions to lift South Africa’s exchange
control regulations when economic conditions permit such action. In his budget speech in March 1998, the Minister of Finance
announced that restrictions relating to offshore investments by South African companies and individuals subject to South
African exchange control would, to a limited extent, be lifted.
Since then, the government has incrementally relaxed aspects of exchange control for financial institutions and individuals.
However, it is impossible to predict with any certainty when the government will remove exchange controls in their entirety.
However, it is impossible to predict with any certainty when the government will remove exchange controls in their entirety.
The comments below relate to exchange controls in force at the date of this annual report.
Investments in South African companies
A foreign investor may invest freely in ordinary shares in a South African company. Any foreign investor may also sell shares in
a South African company and transfer the proceeds out of South Africa without restriction. Acquisitions of shares or assets of
South African companies by non-South African purchasers are not generally subject to review by the SARB when the
consideration is in cash, but may require SARB review in certain circumstances, including when the consideration is equity in a
non-South African company or when the acquisition is financed by a loan from a South African lender.
a South African company and transfer the proceeds out of South Africa without restriction. Acquisitions of shares or assets of
South African companies by non-South African purchasers are not generally subject to review by the SARB when the
consideration is in cash, but may require SARB review in certain circumstances, including when the consideration is equity in a
non-South African company or when the acquisition is financed by a loan from a South African lender.
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Dividends
Dividends declared to foreign stockholders are not subject to the approval by the South African Reserve Bank (SARB).
Dividends are freely transferable to foreign stockholders from both trading and non-trading profits earned in South Africa by
publicly listed companies.
Dividends are freely transferable to foreign stockholders from both trading and non-trading profits earned in South Africa by
publicly listed companies.
Interest
Interest on foreign loans is freely remittable abroad, provided the loans received prior SARB approval.
Voting rights
There are no limitations imposed by South African law or by the memorandum and articles of association of AngloGold Ashanti
on the rights of non-South African shareholders to vote the ordinary shares.
on the rights of non-South African shareholders to vote the ordinary shares.
Overseas financing and investments
AngloGold Ashanti and its South African subsidiaries require SARB approval to raise debt from and repay debt to non-
residents of the Common Monetary Area, mainly in respect of the interest rate and terms of repayment applicable to the loan.
residents of the Common Monetary Area, mainly in respect of the interest rate and terms of repayment applicable to the loan.
Debt raised outside the Common Monetary Area by AngloGold Ashanti’s non-South African subsidiaries is not restricted under
South African exchange control regulations and can be used for overseas investment, subject to any conditions imposed by the
SARB in connection with establishing such a subsidiary. AngloGold Ashanti and its South African subsidiaries would, however,
require SARB approval in order to provide guarantees for the obligations of any of its subsidiaries with regard to funds obtained
from non-residents of the Common Monetary Area.
South African exchange control regulations and can be used for overseas investment, subject to any conditions imposed by the
SARB in connection with establishing such a subsidiary. AngloGold Ashanti and its South African subsidiaries would, however,
require SARB approval in order to provide guarantees for the obligations of any of its subsidiaries with regard to funds obtained
from non-residents of the Common Monetary Area.
Debt raised outside the Common Monetary Area by AngloGold Ashanti’s non-South African subsidiaries must be repaid or
serviced by AngloGold Ashanti’s foreign subsidiaries.
serviced by AngloGold Ashanti’s foreign subsidiaries.
A listing by a South African company on any stock exchange other than the JSE Securities Exchange in connection with raising
capital requires permission from the SARB.
capital requires permission from the SARB.
Under current exchange control regulations, offshore investments by AngloGold Ashanti and its South African subsidiaries
require the approval of the SARB. Subject to approval, there is no limit on the amount of capital that may be invested offshore.
require the approval of the SARB. Subject to approval, there is no limit on the amount of capital that may be invested offshore.
10E. Taxation
South African taxation
The following discussion summarizes South African tax consequences of the ownership and disposition of shares or ADSs by
a US holder (as defined below). This summary is based upon current South African tax law and South African Inland Revenue
practice, the convention between the Government of the United States of America and the Republic of South Africa for the
avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains, signed
February 17, 1997 (the "Treaty"), and in part upon representations of the depositary, and assumes that each obligation
provided for in, or otherwise contemplated by, a deposit agreement and any related agreement will be performed in
accordance with its respective terms.
a US holder (as defined below). This summary is based upon current South African tax law and South African Inland Revenue
practice, the convention between the Government of the United States of America and the Republic of South Africa for the
avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains, signed
February 17, 1997 (the "Treaty"), and in part upon representations of the depositary, and assumes that each obligation
provided for in, or otherwise contemplated by, a deposit agreement and any related agreement will be performed in
accordance with its respective terms.
The following summary of South African tax considerations does not address the tax consequences to a US holder that is
resident in South Africa for South African tax purposes, whose holding of shares or ADSs is effectively connected with a
permanent establishment in South Africa through which such US holder carries on business activities or, in the case of an
individual who performs independent personal services, with a fixed base situated therein, or who is otherwise not entitled to
full benefits under the Treaty.
resident in South Africa for South African tax purposes, whose holding of shares or ADSs is effectively connected with a
permanent establishment in South Africa through which such US holder carries on business activities or, in the case of an
individual who performs independent personal services, with a fixed base situated therein, or who is otherwise not entitled to
full benefits under the Treaty.
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The statements of law set forth below are subject to any changes (which may be applied retroactively) in South African law or
in the interpretation thereof by the South African tax authorities, or in the Treaty, occurring after the date hereof. It should be
expressly noted that South African tax law does not specifically address the treatment of ADSs. However, it is reasonable to
assume (although no assurance can be made) that the tax treatment of US holders of shares is also applicable to US holders
of ADSs.
in the interpretation thereof by the South African tax authorities, or in the Treaty, occurring after the date hereof. It should be
expressly noted that South African tax law does not specifically address the treatment of ADSs. However, it is reasonable to
assume (although no assurance can be made) that the tax treatment of US holders of shares is also applicable to US holders
of ADSs.
Holders are strongly urged to consult their own tax advisors as to the consequences under South African, US federal, state and
local, and other applicable laws, of the ownership and disposition of shares or ADSs.
local, and other applicable laws, of the ownership and disposition of shares or ADSs.
Taxation of dividends
South Africa imposes a corporate tax known as Secondary Tax on Companies (STC) on the distribution of earnings in the form
of dividends. Under the terms of an option granted to gold mining corporations, AngloGold Ashanti has elected not to be
subject to STC. As a result, although AngloGold Ashanti’s dividend payments are not subject to STC, AngloGold Ashanti pays
corporate income tax at a slightly higher rate than would otherwise have been the case. This election resulted in the overall tax
paid by AngloGold Ashanti being lower than the tax payable using the standard corporate tax rate together with STC. STC will
be phased out over the next two years and replaced by a dividend withholding tax.
of dividends. Under the terms of an option granted to gold mining corporations, AngloGold Ashanti has elected not to be
subject to STC. As a result, although AngloGold Ashanti’s dividend payments are not subject to STC, AngloGold Ashanti pays
corporate income tax at a slightly higher rate than would otherwise have been the case. This election resulted in the overall tax
paid by AngloGold Ashanti being lower than the tax payable using the standard corporate tax rate together with STC. STC will
be phased out over the next two years and replaced by a dividend withholding tax.
South Africa does not currently impose any withholding tax or any other form of tax on dividends paid to US holders with
respect to shares, but there has been a recent announcement (as set out below) that this is about to change. In the case of a
South African withholding tax on dividends paid to a US holder with respect to shares, the Treaty would limit the rate of this tax
to 5 percent of the gross amount of the dividends if a US holder holds directly at least 10 percent of the voting stock of
AngloGold Ashanti and 15 percent of the gross amount of the dividends in all other cases. The above provisions shall not apply
if the beneficial owner of the dividends is a US resident who carries on business in South Africa through a permanent
establishment situated in South Africa, or performs in South Africa independent personal services from a fixed base situated in
South Africa, and the dividends are attributable to such permanent establishment or fixed base.
respect to shares, but there has been a recent announcement (as set out below) that this is about to change. In the case of a
South African withholding tax on dividends paid to a US holder with respect to shares, the Treaty would limit the rate of this tax
to 5 percent of the gross amount of the dividends if a US holder holds directly at least 10 percent of the voting stock of
AngloGold Ashanti and 15 percent of the gross amount of the dividends in all other cases. The above provisions shall not apply
if the beneficial owner of the dividends is a US resident who carries on business in South Africa through a permanent
establishment situated in South Africa, or performs in South Africa independent personal services from a fixed base situated in
South Africa, and the dividends are attributable to such permanent establishment or fixed base.
On February 21, 2007, the South African Minister of Finance, Mr Trevor Manuel, delivered his 2007 Budget Speech in which
he stated that the STC currently levied at 12.5 percent will be replaced by a withholding tax on shareholders in respect of
dividends distributed at a rate of 10 percent. This change is being implemented in two phases. On October 1, 2007 the STC
rate reduced from 12.5 percent to 10 percent and in 2009 STC will be phased out and replaced by the 10 percent withholding
tax.
he stated that the STC currently levied at 12.5 percent will be replaced by a withholding tax on shareholders in respect of
dividends distributed at a rate of 10 percent. This change is being implemented in two phases. On October 1, 2007 the STC
rate reduced from 12.5 percent to 10 percent and in 2009 STC will be phased out and replaced by the 10 percent withholding
tax.
The draft legislation giving effect to the first phase has been published, and AngloGold Ashanti’s marginal tax rate for its South
African mining operations is being reduced from 45 percent to 43 percent and the tax rate on its non-mining income from
38 percent to 37 percent. These changes will be effective from 2008 tax year which begins on January 1, 2008.
African mining operations is being reduced from 45 percent to 43 percent and the tax rate on its non-mining income from
38 percent to 37 percent. These changes will be effective from 2008 tax year which begins on January 1, 2008.
In the second phase, (expected to take place in 2009), the marginal tax rate for AngloGold Ashanti’s South African mining
operations should reduce from 43 percent to 34 percent and the marginal tax rate for non-mining income should reduce from
37 percent to 28 percent. The amending legislation relating to the second phase proposals is due to be published in 2009. As
stated above, the effect of this change will not materially affect the after tax dividend received by non-resident shareholders
and South African resident individuals because STC is being replaced by a 10 percent withholding tax on dividends declared
for these shareholders.
operations should reduce from 43 percent to 34 percent and the marginal tax rate for non-mining income should reduce from
37 percent to 28 percent. The amending legislation relating to the second phase proposals is due to be published in 2009. As
stated above, the effect of this change will not materially affect the after tax dividend received by non-resident shareholders
and South African resident individuals because STC is being replaced by a 10 percent withholding tax on dividends declared
for these shareholders.
Taxation of gains on sale or other disposition
South Africa imposes a tax on capital gains, which only applies to South African residents. The meaning of the word "residents"
is different for individuals and corporations and is governed by the South African Income Tax Act of 1962 and by the Treaty. In
contrast, gains on the disposal of securities which are not capital in nature are usually subject to income tax. However, even in
the latter case, a US holder will not be subject to income tax unless the US holder carries on business in South Africa through
a permanent establishment situated therein.
is different for individuals and corporations and is governed by the South African Income Tax Act of 1962 and by the Treaty. In
contrast, gains on the disposal of securities which are not capital in nature are usually subject to income tax. However, even in
the latter case, a US holder will not be subject to income tax unless the US holder carries on business in South Africa through
a permanent establishment situated therein.
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United States taxation
The following is a general summary of the material US federal income tax consequences of the ownership and disposition of
shares or ADSs to a US holder (as defined below) that holds its shares or ADSs as a capital asset. This summary is based on
US tax laws including the Internal Revenue Code of 1986, as amended (the Code), Treasury regulations promulgated
thereunder, rulings, judicial decisions, administrative pronouncements, and the Treaty, all as currently in effect as of the date of
this annual report, and all of which are subject to change or changes in interpretation, possibly with retroactive effect. In
addition, this summary is based in part upon the representations of the depositary and the assumption that each obligation in
the deposit agreement relating to the ADSs and any related agreement will be performed in accordance with its terms.
shares or ADSs to a US holder (as defined below) that holds its shares or ADSs as a capital asset. This summary is based on
US tax laws including the Internal Revenue Code of 1986, as amended (the Code), Treasury regulations promulgated
thereunder, rulings, judicial decisions, administrative pronouncements, and the Treaty, all as currently in effect as of the date of
this annual report, and all of which are subject to change or changes in interpretation, possibly with retroactive effect. In
addition, this summary is based in part upon the representations of the depositary and the assumption that each obligation in
the deposit agreement relating to the ADSs and any related agreement will be performed in accordance with its terms.
This summary does not address all aspects of US federal income taxation that may apply to holders that are subject to special
tax rules, including US expatriates, insurance companies, tax-exempt entities, banks, certain financial institutions, persons
subject to the alternative minimum tax, regulated investment companies, securities broker-dealers, traders in securities who
elect to apply a mark-to-market method of accounting, investors that own (directly, indirectly or by attribution) 10 percent or
more of the outstanding share capital or voting stock of AngloGold Ashanti, partnerships, persons holding their shares or ADSs
as part of a straddle, hedging or conversion transaction, persons who acquired their shares or ADSs pursuant to the exercise
of employee stock options or otherwise as compensation, or persons whose functional currency is not the US dollar. Such
holders may be subject to US federal income tax consequences different from those set forth below.
tax rules, including US expatriates, insurance companies, tax-exempt entities, banks, certain financial institutions, persons
subject to the alternative minimum tax, regulated investment companies, securities broker-dealers, traders in securities who
elect to apply a mark-to-market method of accounting, investors that own (directly, indirectly or by attribution) 10 percent or
more of the outstanding share capital or voting stock of AngloGold Ashanti, partnerships, persons holding their shares or ADSs
as part of a straddle, hedging or conversion transaction, persons who acquired their shares or ADSs pursuant to the exercise
of employee stock options or otherwise as compensation, or persons whose functional currency is not the US dollar. Such
holders may be subject to US federal income tax consequences different from those set forth below.
As used herein, the term “US holder” means a beneficial owner of shares or ADSs that is (a) a citizen or individual resident of
the United States for US federal income tax purposes; (b) a corporation (or other entity taxable as a corporation for US federal
income tax purposes) created or organized in or under the laws of the United States or any state thereof (including the District
of Columbia); (c) an estate the income of which is subject to US federal income taxation regardless of its source; or (d) a trust if
a court within the United States can exercise primary supervision over the administration of the trust and one or more
US persons are authorized to control all substantial decisions of the trust. If a partnership (including for this purpose any entity
treated as a partnership for US federal income tax purposes) holds shares or ADSs, the tax treatment of a partner generally
will depend upon the status of the partner and the activities of the partnership. If a US holder is a partner in a partnership that
holds shares or ADSs, the holder is urged to consult its own tax advisor regarding the specific tax consequences of the
ownership and disposition of the shares or ADSs.
the United States for US federal income tax purposes; (b) a corporation (or other entity taxable as a corporation for US federal
income tax purposes) created or organized in or under the laws of the United States or any state thereof (including the District
of Columbia); (c) an estate the income of which is subject to US federal income taxation regardless of its source; or (d) a trust if
a court within the United States can exercise primary supervision over the administration of the trust and one or more
US persons are authorized to control all substantial decisions of the trust. If a partnership (including for this purpose any entity
treated as a partnership for US federal income tax purposes) holds shares or ADSs, the tax treatment of a partner generally
will depend upon the status of the partner and the activities of the partnership. If a US holder is a partner in a partnership that
holds shares or ADSs, the holder is urged to consult its own tax advisor regarding the specific tax consequences of the
ownership and disposition of the shares or ADSs.
US holders should consult their own tax advisors regarding the specific South African and US federal, state and local tax
consequences of owning and disposing of shares or ADSs in light of their particular circumstances as well as any
consequences arising under the laws of any other taxing jurisdiction. In particular, US holders are urged to consult their own
tax advisors regarding whether they are eligible for benefits under the Treaty.
consequences of owning and disposing of shares or ADSs in light of their particular circumstances as well as any
consequences arising under the laws of any other taxing jurisdiction. In particular, US holders are urged to consult their own
tax advisors regarding whether they are eligible for benefits under the Treaty.
For South African and US federal income tax purposes, a US holder of ADSs should be treated as owning the underlying
shares represented by those ADSs. Therefore, deposits or withdrawals by a US holder of shares for ADSs or of ADSs for
shares will not be subject to US federal income tax. The following discussion (except where otherwise expressly noted) applies
equally to US holders of shares and US holders of ADSs.
shares represented by those ADSs. Therefore, deposits or withdrawals by a US holder of shares for ADSs or of ADSs for
shares will not be subject to US federal income tax. The following discussion (except where otherwise expressly noted) applies
equally to US holders of shares and US holders of ADSs.
Taxation
of dividends
The gross amount of any distribution (including the amount of any South African withholding tax thereon) paid to a US holder
by AngloGold Ashanti generally will be taxable as dividend income to the US holder for US federal income tax purposes on the
date the distribution is actually or constructively received by the US holder, in the case of shares, or by the depositary, in the
case of ADSs. Corporate US holders will not be eligible for the dividends received deduction in respect of dividends paid by
AngloGold Ashanti. For foreign tax credit limitation purposes, dividends paid by AngloGold Ashanti will be income from sources
outside the United States. At present, South Africa does not impose a withholding tax or any other form of tax on dividends
paid to US holders with respect to shares. The South African government, however, has recently announced its intent to enact
a dividend withholding tax, which is expected to be phased in during 2008 and 2009. See ‘Taxation – South African Taxation –
Taxation of dividends’. Once the dividend withholding tax becomes effective, US holders who are eligible for benefits under the
current Treaty will be subject to a maximum tax of 15 percent on the gross amount of dividend distributions paid by AngloGold
Ashanti.
by AngloGold Ashanti generally will be taxable as dividend income to the US holder for US federal income tax purposes on the
date the distribution is actually or constructively received by the US holder, in the case of shares, or by the depositary, in the
case of ADSs. Corporate US holders will not be eligible for the dividends received deduction in respect of dividends paid by
AngloGold Ashanti. For foreign tax credit limitation purposes, dividends paid by AngloGold Ashanti will be income from sources
outside the United States. At present, South Africa does not impose a withholding tax or any other form of tax on dividends
paid to US holders with respect to shares. The South African government, however, has recently announced its intent to enact
a dividend withholding tax, which is expected to be phased in during 2008 and 2009. See ‘Taxation – South African Taxation –
Taxation of dividends’. Once the dividend withholding tax becomes effective, US holders who are eligible for benefits under the
current Treaty will be subject to a maximum tax of 15 percent on the gross amount of dividend distributions paid by AngloGold
Ashanti.
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The amount of any distribution paid in foreign currency (including the amount of any South African withholding tax thereon)
generally will be includible in the gross income of a US holder of shares in an amount equal to the US dollar value of the
foreign currency calculated by reference to the spot rate in effect, regardless of whether the foreign currency is converted into
US dollars on such date. If the foreign currency is converted into US dollars on the date of receipt, a US holder of shares
generally should not be required to recognize foreign currency gain or loss in respect of the dividend. If the foreign currency
received in the distribution is not converted into US dollars on the date of receipt, a US holder of shares generally will have a
tax basis in the foreign currency equal to its US dollar value on the date of receipt. Any gain or loss recognized upon a
subsequent conversion or other disposition of the foreign currency generally will be treated as US source ordinary income or
loss. In the case of a US holder of ADSs, the amount of any distribution paid in a foreign currency generally will be converted
into US dollars by the depositary upon its receipt. Accordingly, a US holder of ADSs generally will not be required to recognize
foreign currency gain or loss in respect of the distribution. Special rules govern and specific elections are available to accrual
method taxpayers to determine the US dollar amount includible in income in the case of taxes withheld in a foreign currency.
Accrual basis taxpayers are therefore urged to consult their own tax advisors regarding the requirements and elections
applicable in this regard.
generally will be includible in the gross income of a US holder of shares in an amount equal to the US dollar value of the
foreign currency calculated by reference to the spot rate in effect, regardless of whether the foreign currency is converted into
US dollars on such date. If the foreign currency is converted into US dollars on the date of receipt, a US holder of shares
generally should not be required to recognize foreign currency gain or loss in respect of the dividend. If the foreign currency
received in the distribution is not converted into US dollars on the date of receipt, a US holder of shares generally will have a
tax basis in the foreign currency equal to its US dollar value on the date of receipt. Any gain or loss recognized upon a
subsequent conversion or other disposition of the foreign currency generally will be treated as US source ordinary income or
loss. In the case of a US holder of ADSs, the amount of any distribution paid in a foreign currency generally will be converted
into US dollars by the depositary upon its receipt. Accordingly, a US holder of ADSs generally will not be required to recognize
foreign currency gain or loss in respect of the distribution. Special rules govern and specific elections are available to accrual
method taxpayers to determine the US dollar amount includible in income in the case of taxes withheld in a foreign currency.
Accrual basis taxpayers are therefore urged to consult their own tax advisors regarding the requirements and elections
applicable in this regard.
Subject to certain limitations, South African withholding taxes will be treated as foreign taxes eligible for credit against a
US holder’s US federal income tax liability. The limitation on foreign taxes eligible for credit is calculated separately with
respect to specific classes of income. Dividend income generally will constitute ‘passive category’ income, or in the case of
certain US holders, ‘general category’ income. The use of foreign tax credits is subject to complex conditions and limitations. In
lieu of a credit, a US holder who itemizes deductions may elect to deduct all of such holder’s foreign taxes in the taxable year.
A deduction does not reduce US tax on a dollar-for-dollar basis like a tax credit, but the deduction for foreign taxes is not
subject to the same limitations applicable to foreign tax credits. US holders are urged to consult their own tax advisors
regarding the availability of foreign tax credits.
US holder’s US federal income tax liability. The limitation on foreign taxes eligible for credit is calculated separately with
respect to specific classes of income. Dividend income generally will constitute ‘passive category’ income, or in the case of
certain US holders, ‘general category’ income. The use of foreign tax credits is subject to complex conditions and limitations. In
lieu of a credit, a US holder who itemizes deductions may elect to deduct all of such holder’s foreign taxes in the taxable year.
A deduction does not reduce US tax on a dollar-for-dollar basis like a tax credit, but the deduction for foreign taxes is not
subject to the same limitations applicable to foreign tax credits. US holders are urged to consult their own tax advisors
regarding the availability of foreign tax credits.
Certain US holders (including individuals) are eligible for reduced rates of US federal income tax (currently at a maximum rate
of 15 percent) in respect of “qualified dividend income” received in taxable years beginning before January 1, 2011. For this
purpose, qualified dividend income generally includes dividends paid by a non-US corporation if, among other things, the US
holders meet certain minimum holding period and other requirements and the non-US corporation satisfies certain
requirements, including that either (i) the ordinary shares (or ADSs) with respect to which the dividend has been paid are
readily tradable on an established securities market in the United States, or (ii) the non-US corporation is eligible for the
benefits of a comprehensive US income tax treaty (such as the Treaty) which provides for the exchange of information.
AngloGold Ashanti currently believes that dividends paid with respect to its shares and ADSs should constitute qualified
dividend income for US federal income tax purposes. AngloGold Ashanti anticipates that its dividends will be reported as
qualified dividends on Forms 1099-DIV delivered to US holders. Each individual US holder of AngloGold Ashanti shares or
ADSs is urged to consult his own tax advisor regarding the availability to him of the reduced dividend tax rate in light of his own
particular situation.
of 15 percent) in respect of “qualified dividend income” received in taxable years beginning before January 1, 2011. For this
purpose, qualified dividend income generally includes dividends paid by a non-US corporation if, among other things, the US
holders meet certain minimum holding period and other requirements and the non-US corporation satisfies certain
requirements, including that either (i) the ordinary shares (or ADSs) with respect to which the dividend has been paid are
readily tradable on an established securities market in the United States, or (ii) the non-US corporation is eligible for the
benefits of a comprehensive US income tax treaty (such as the Treaty) which provides for the exchange of information.
AngloGold Ashanti currently believes that dividends paid with respect to its shares and ADSs should constitute qualified
dividend income for US federal income tax purposes. AngloGold Ashanti anticipates that its dividends will be reported as
qualified dividends on Forms 1099-DIV delivered to US holders. Each individual US holder of AngloGold Ashanti shares or
ADSs is urged to consult his own tax advisor regarding the availability to him of the reduced dividend tax rate in light of his own
particular situation.
The US Treasury has expressed concern that parties to whom ADSs are pre-released may be taking actions that are
inconsistent with the claiming of foreign tax credits for US holders of ADSs. Such actions would also be inconsistent with the
claiming of the reduced rate of tax described above, applicable to dividends received by certain non-corporate holders.
Accordingly, the analysis of the creditability of South African withholding taxes or the availability of qualified dividend treatment
could be affected by future actions that may be taken by the US Treasury with respect to ADSs.
inconsistent with the claiming of foreign tax credits for US holders of ADSs. Such actions would also be inconsistent with the
claiming of the reduced rate of tax described above, applicable to dividends received by certain non-corporate holders.
Accordingly, the analysis of the creditability of South African withholding taxes or the availability of qualified dividend treatment
could be affected by future actions that may be taken by the US Treasury with respect to ADSs.
Taxation of capital gains
If a US holder is a resident of the United States for purposes of the Treaty, such holder will not be subject to South African tax
on any capital gain if it sells or disposes of its shares or ADSs. Special rules apply to individuals who are residents of more
than one country.
on any capital gain if it sells or disposes of its shares or ADSs. Special rules apply to individuals who are residents of more
than one country.
In general, upon a sale, exchange or other disposition of shares, a US holder will recognize capital gain or loss for US federal
income tax purposes in an amount equal to the difference between the US dollar value of the amount realized on the
disposition and the holder's tax basis, determined in US dollars, in the shares or ADSs. Such gain or loss generally will be
US source gain or loss, and will be treated as a long-term capital gain or loss if the holder’s holding period in the shares
exceeds one year at the time of disposition. If the US holder is an individual, any capital gain generally will be subject to
US federal income tax at preferential rates if specified minimum holding periods are met. The deductibility of capital losses is
subject to significant limitations.
income tax purposes in an amount equal to the difference between the US dollar value of the amount realized on the
disposition and the holder's tax basis, determined in US dollars, in the shares or ADSs. Such gain or loss generally will be
US source gain or loss, and will be treated as a long-term capital gain or loss if the holder’s holding period in the shares
exceeds one year at the time of disposition. If the US holder is an individual, any capital gain generally will be subject to
US federal income tax at preferential rates if specified minimum holding periods are met. The deductibility of capital losses is
subject to significant limitations.
Deposits or withdrawals by a US holder of shares for ADSs, or of ADSs for shares, will not be subject to US federal income tax.
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Passive foreign investment company considerations
A non-US corporation will be classified a Passive Foreign Investment Company (a “PFIC”) for any taxable year if at least
75 percent of its gross income consists of passive income (such as dividends, interest, rents or royalties (other than rents or
royalties derived in the active conduct of a trade or business and received from an unrelated person), or gains on the
disposition of certain minority interests), or at least 50 percent of the average value of its assets consists of assets that
produce, or are held for the production of, passive income. AngloGold Ashanti believes that it was not treated as a PFIC for the
taxable year ended December 31, 2007 and does not expect to become a PFIC in the foreseeable future. If AngloGold Ashanti
were characterized as a PFIC for any taxable year, a US holder would suffer adverse tax consequences.
75 percent of its gross income consists of passive income (such as dividends, interest, rents or royalties (other than rents or
royalties derived in the active conduct of a trade or business and received from an unrelated person), or gains on the
disposition of certain minority interests), or at least 50 percent of the average value of its assets consists of assets that
produce, or are held for the production of, passive income. AngloGold Ashanti believes that it was not treated as a PFIC for the
taxable year ended December 31, 2007 and does not expect to become a PFIC in the foreseeable future. If AngloGold Ashanti
were characterized as a PFIC for any taxable year, a US holder would suffer adverse tax consequences.
These consequences may include having gains realized on the disposition of shares treated as ordinary income rather than
capital gains and being subject to punitive interest charges on the receipt of certain dividends and on the proceeds of the sale
or other disposition of the shares. Furthermore, dividends paid by AngloGold Ashanti would not be “qualified dividend income”
and would be taxed at the higher rates applicable to other items of ordinary income. US holders should consult their own tax
advisors regarding the potential application of the PFIC rules to their ownership of the shares.
capital gains and being subject to punitive interest charges on the receipt of certain dividends and on the proceeds of the sale
or other disposition of the shares. Furthermore, dividends paid by AngloGold Ashanti would not be “qualified dividend income”
and would be taxed at the higher rates applicable to other items of ordinary income. US holders should consult their own tax
advisors regarding the potential application of the PFIC rules to their ownership of the shares.
US information reporting and backup withholding
Dividend payments made to a holder and proceeds paid from the sale, exchange, or other disposition of shares may be subject
to information reporting to the Internal Revenue Service (the “IRS”). US federal backup withholding generally is imposed at a
current rate of 28 percent on specified payments to persons who fail to furnish required information. Backup withholding will not
apply to a holder who furnishes a correct taxpayer identification number or certificate of foreign status and makes any other
required certification, or who is otherwise exempt from backup withholding. US persons who are required to establish their
exempt status generally must provide IRS Form W-9 (Request for Taxpayer Identification Number and Certification). Non-US
holders generally will not be subject to US information reporting or backup withholding. However, these holders may be
required to provide certification of non-US status (generally on IRS Form W-8BEN) in connection with payments received in the
United States or through certain US-related financial intermediaries. Backup withholding is not an additional tax. Amounts
withheld as backup withholding may be credited against a holder’s US federal income tax liability. A holder may obtain a refund
of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the IRS and
furnishing any required information.
to information reporting to the Internal Revenue Service (the “IRS”). US federal backup withholding generally is imposed at a
current rate of 28 percent on specified payments to persons who fail to furnish required information. Backup withholding will not
apply to a holder who furnishes a correct taxpayer identification number or certificate of foreign status and makes any other
required certification, or who is otherwise exempt from backup withholding. US persons who are required to establish their
exempt status generally must provide IRS Form W-9 (Request for Taxpayer Identification Number and Certification). Non-US
holders generally will not be subject to US information reporting or backup withholding. However, these holders may be
required to provide certification of non-US status (generally on IRS Form W-8BEN) in connection with payments received in the
United States or through certain US-related financial intermediaries. Backup withholding is not an additional tax. Amounts
withheld as backup withholding may be credited against a holder’s US federal income tax liability. A holder may obtain a refund
of any excess amounts withheld under the backup withholding rules by filing the appropriate claim for refund with the IRS and
furnishing any required information.
10F. Dividends and paying agents
Not applicable.
10G. Statement by experts
Not applicable.
10H. Documents on display
The documents referred to in this report can be read at the US Securities and Exchange Commission’s public reference
facilities at Room 1580, 100 F Street, N.E., Washington, D.C. 20549.
facilities at Room 1580, 100 F Street, N.E., Washington, D.C. 20549.
10I. Subsidiary
information
Not applicable.
202
Item 11: Quantitative and qualitative disclosures about market risk
Treasury Policy
The board of directors of AngloGold Ashanti has approved a treasury and risk management policy that governs the group’s
treasury activities, including the setting of hedging and dealing limits, approval of hedging instruments and counterpart
approval and limits.
treasury activities, including the setting of hedging and dealing limits, approval of hedging instruments and counterpart
approval and limits.
Under the treasury and risk management policy, hedges may be put in place using approved instruments over the group’s
planned gold production and resultant gold sales currency exposures. The tenor of the hedges may extend out to ten years.
The treasury and risk management policy sets limits on the extent to which the hedge position may change for the various
levels of treasury management from dealer, through treasurer, executive management and board.
planned gold production and resultant gold sales currency exposures. The tenor of the hedges may extend out to ten years.
The treasury and risk management policy sets limits on the extent to which the hedge position may change for the various
levels of treasury management from dealer, through treasurer, executive management and board.
The board of directors has delegated the approval of hedge instruments to AngloGold Ashanti’s treasury committee. The
treasury committee must approve all hedging instruments, treatment of the instruments in the treasury system, reporting on the
instruments and the accounting treatment for such instruments.
treasury committee must approve all hedging instruments, treatment of the instruments in the treasury system, reporting on the
instruments and the accounting treatment for such instruments.
The financial risk management activities objectives of the group are as follows:
·
Safeguarding the group core earnings stream from its major assets through the effective control and management of gold
price risk, foreign exchange risk and interest rate risk;
price risk, foreign exchange risk and interest rate risk;
·
Effective and efficient usage of credit facilities in both the short and long term through the adoption of reliable liquidity
planning and procedures;
planning and procedures;
·
Ensuring that investment and hedging transactions are undertaken with creditworthy counterparts;
·
Ensuring that all contracts and agreements related to risk management activities are coordinated, consistent throughout
the group and comply where necessary with all relevant regulatory and statutory requirements.
the group and comply where necessary with all relevant regulatory and statutory requirements.
Under the treasury and risk management policy, treasury reports that include all open hedging transactions are produced at the
following minimum intervals for review by management and the board of directors.
following minimum intervals for review by management and the board of directors.
Daily
Treasurer
Monthly
Executive
committee
Quarterly
Treasury committee, Audit committee, Board of directors, Quarterly shareholder reports
The Treasury risk manager is responsible for monitoring all reports for completeness and accuracy. The reports include stress
testing of all hedge positions for changes in gold prices, currency exchange rates, interest rates, and gold and exchange rate
volatilities.
testing of all hedge positions for changes in gold prices, currency exchange rates, interest rates, and gold and exchange rate
volatilities.
At AngloGold Ashanti, all front office (dealing), middle office (risk reporting), back office (deal confirmations) and payment
(treasury settlements) activities are segregated. All treasury transactions are captured on a third party developed treasury and
risk management system that is widely used in corporate treasuries. The internal audit group conducts regular and ad-hoc
reviews of the activities of treasury and the company’s treasury system.
(treasury settlements) activities are segregated. All treasury transactions are captured on a third party developed treasury and
risk management system that is widely used in corporate treasuries. The internal audit group conducts regular and ad-hoc
reviews of the activities of treasury and the company’s treasury system.
Gold price and currency risk management activities
The group enters into derivatives to ensure a degree of price certainty and to guarantee a minimum revenue on a portion of
future planned gold sales. AngloGold Ashanti does not acquire, hold or issue derivative instruments for economic trading
purposes. A number of products, including derivatives, are used to manage the price of gold and other commodities, interest
rate and foreign exchange risks that arise out of the group’s core business activities. Forward purchase and sale contracts and
purchased or sold call and put options are used by the group to manage its exposure to gold price and currency fluctuations.
Gold and currency hedging instruments are denominated in South African rands, US dollars, Brazilian real and Australian
dollars.
future planned gold sales. AngloGold Ashanti does not acquire, hold or issue derivative instruments for economic trading
purposes. A number of products, including derivatives, are used to manage the price of gold and other commodities, interest
rate and foreign exchange risks that arise out of the group’s core business activities. Forward purchase and sale contracts and
purchased or sold call and put options are used by the group to manage its exposure to gold price and currency fluctuations.
Gold and currency hedging instruments are denominated in South African rands, US dollars, Brazilian real and Australian
dollars.
A put option gives the put buyer the right, but not the obligation, to sell the underlying to the put seller at a predetermined price
on a predetermined date. A call option gives the call buyer the right, but not the obligation, to buy the underlying from the call
seller at a predetermined price on a predetermined date. The group’s risk in selling call options is unlimited but mitigated by the
fact that the group produce the commodity required by the option and would benefit by the same quantity as the option loss by
selling production in the open market.
on a predetermined date. A call option gives the call buyer the right, but not the obligation, to buy the underlying from the call
seller at a predetermined price on a predetermined date. The group’s risk in selling call options is unlimited but mitigated by the
fact that the group produce the commodity required by the option and would benefit by the same quantity as the option loss by
selling production in the open market.
203
The mix of hedging instruments, the volume of production hedged and the tenor of the hedge book is continuously reviewed in
light of changes in operational forecasts, market conditions and the group’s hedging policy. AngloGold Ashanti’s reserves and
financial strength have allowed it to arrange unmargined credit lines of up to ten years with counterparts.
light of changes in operational forecasts, market conditions and the group’s hedging policy. AngloGold Ashanti’s reserves and
financial strength have allowed it to arrange unmargined credit lines of up to ten years with counterparts.
Forward sale contracts establish the price of future gold sales at a specified price. A number of these contracts are intended by
AngloGold Ashanti for delivery against production in a future period. The volume of net outstanding forward sales contracts at
the end of 2007 was 108,403 kg compared with 122,133 kg at the end of 2006.
AngloGold Ashanti for delivery against production in a future period. The volume of net outstanding forward sales contracts at
the end of 2007 was 108,403 kg compared with 122,133 kg at the end of 2006.
SFAS133 requires that derivative instruments be accounted for as follows:
• Commodity based (“normal purchase or normal sale exempt”) contracts that meet the requirements of SFAS138, and are
• Commodity based (“normal purchase or normal sale exempt”) contracts that meet the requirements of SFAS138, and are
designated as such, are recognized in product sales when they are settled by physical delivery. They are not recorded in
the financial statements between the dates that they are entered into and settled.
the financial statements between the dates that they are entered into and settled.
•
Where the conditions in SFAS133 for hedge accounting are met, the derivative is recognized on the balance sheet at fair
value as either a derivative asset or derivative liability. For cash flow hedges the effective portion of changes in fair value of
the hedging instrument are recognized in equity (other comprehensive income) until the underlying transaction occurs, then
the gains or losses are recognized in product sales. The ineffective portion of changes in fair value is reported in earnings
as gains or losses on derivatives in the period in which they occur. The ineffective portion of matured and existing cash
flow hedges recognized in losses on non-hedge derivatives in the income statement during the year was $10 million
(2006: $nil). Of the contracts accounted for as cash flow hedges, contracts with a carrying value of $194 million, a liability at
December 31, 2007, are expected to be reclassified from other comprehensive income and recognized as a reduction in
product sales during 2008.
the hedging instrument are recognized in equity (other comprehensive income) until the underlying transaction occurs, then
the gains or losses are recognized in product sales. The ineffective portion of changes in fair value is reported in earnings
as gains or losses on derivatives in the period in which they occur. The ineffective portion of matured and existing cash
flow hedges recognized in losses on non-hedge derivatives in the income statement during the year was $10 million
(2006: $nil). Of the contracts accounted for as cash flow hedges, contracts with a carrying value of $194 million, a liability at
December 31, 2007, are expected to be reclassified from other comprehensive income and recognized as a reduction in
product sales during 2008.
•
All other derivatives are measured at their estimated fair value, with the changes in estimated fair value at each reporting
date reported as gains or losses on derivatives in earnings in the period in which they occur.
Cash flows from derivative instruments accounted for as cash flow hedges are included in net cash provided by operating
activities in the statements of consolidated cash flows for all periods presented. Contracts that contain ‘off-market’ terms that
result in the inflow of cash at inception are analogous to borrowing activities and, as such, are treated as financing activities.
All current and future cash flows associated with such instruments are classified within the financing activities section of the
consolidated cash flow statement. Contracts that contain ‘off-market’ terms that result in the outflow of cash at inception are
analogous to lending activities and, as such, are treated as investing activities. All current and future cash flows associated
with such instruments are classified within the investing activities of the consolidated cash flow statement.
activities in the statements of consolidated cash flows for all periods presented. Contracts that contain ‘off-market’ terms that
result in the inflow of cash at inception are analogous to borrowing activities and, as such, are treated as financing activities.
All current and future cash flows associated with such instruments are classified within the financing activities section of the
consolidated cash flow statement. Contracts that contain ‘off-market’ terms that result in the outflow of cash at inception are
analogous to lending activities and, as such, are treated as investing activities. All current and future cash flows associated
with such instruments are classified within the investing activities of the consolidated cash flow statement.
The table below indicates AngloGold Ashanti’s total gold hedge position at a weighted average settlement price as at
December 31, 2007. The total net delta tonnage of the hedge on this date was 10.39 million ounces (323 tonnes) (December
31, 2006: 10.16 million ounces, 316 tonnes).
December 31, 2007. The total net delta tonnage of the hedge on this date was 10.39 million ounces (323 tonnes) (December
31, 2006: 10.16 million ounces, 316 tonnes).
The marked-to-market value of all hedge transactions making up the hedge positions was a liability of $4,273 billion as at
December 31, 2007 (as at December 31, 2006: a liability of $2.903 billion). These values were based on a gold price of
$836.30 per ounce, exchange rates of R/$6.8104 and A$/$0.8798 and the prevailing market interest rates and volatilities at the
time. Such values include normal purchase normal sale exempt contracts which as discussed above are not recorded in the
financial statements between the dates that they are entered into and settled.
December 31, 2007 (as at December 31, 2006: a liability of $2.903 billion). These values were based on a gold price of
$836.30 per ounce, exchange rates of R/$6.8104 and A$/$0.8798 and the prevailing market interest rates and volatilities at the
time. Such values include normal purchase normal sale exempt contracts which as discussed above are not recorded in the
financial statements between the dates that they are entered into and settled.
204
Year
2008
2009
2010
2011
2012
2013-2015
Total
DOLLAR GOLD
Forward contracts
Amount (kg)
22,817
21,738
14,462
12,931
11,944
12,364
96,256
$ per oz
$314
$316
$347
$397
$404
$432
$357
Forward
contracts
Amount
(kg)
11,304
11,304
*(Long position)
$ per oz
$647
$647
Put options sold
Amount (kg)
25,962
3,748
1,882
1,882
1,882
3,764
39,120
$ per oz
$682
$530
$410
$420
$430
$445
$607
Call options
Amount (kg)
9,813
9,813
purchased
$ per oz
$427
$427
Call options sold
Amount (kg)
58,570
45,950
36,804
39,385
24,460
39,924
245,093
$ per oz
$521
$498
$492
$517
$622
$604
$535
RAND GOLD
Forward contracts
Amount (kg)
933
933
Rand per kg
R116,335
R116,335
Call options sold
Amount (kg)
2,986
2,986
2,986
8,958
Rand per kg
R202,054
R216,522
R230,990
R216,522
AUD DOLLAR
GOLD
GOLD
Forward contracts
Amount (kg)
16,018
3,390
3,110
22,518
A$ per oz
A$848
A$644
A$685
A$795
Put options sold
Amount (kg)
7,465
7,465
A$ per oz
A$882
A$882
Call options
Amount (kg)
3,110
1,244
3,110
7,464
purchased
A$ per oz
A$680
A$694
A$712
A$696
Call options sold
Amount (kg)
5,599
5,599
A$ per oz
A$954
A$954
Delta (kg)
(69,805)
(70,154)
(51,200)
(51,137)
(33,123)
(47,702)
(323,121)
**Total net gold:
Delta (oz)
(2,244,280)
(2,255,500)
(1,646,116)
(1,644,090)
(1,064,928)
(1,533,653)
(10,388,567)
Hedge delta as a percentage of current
production levels (%) ***
production levels (%) ***
41%
41%
30%
30%
19%
9%
24%
*
Indicates a long position from forward purchase contracts. The Company enters into forward purchase contacts as part of its strategy to manage and reduce
the size of the hedge book.
the size of the hedge book.
**
The Delta of the hedge position indicated above, is the equivalent gold position that would have the same marked-to-market sensitivity for a small change in
the gold price. This is calculated using the Black-Scholes option formula with the ruling market prices, interest rates and volatilities as at December 31, 2007.
the gold price. This is calculated using the Black-Scholes option formula with the ruling market prices, interest rates and volatilities as at December 31, 2007.
***
Percentage based on 2007 full year production of 5,477,000 ounces.
At December 31, 2007 the company had 11.3 million committed ounces or 351t (2006: 11.6Moz or 361t).
Gold lease rate swaps
Year
2008
2009
2010
2011
2012
-
2015
Amount
(‘000oz)
(‘000oz)
100,000
130,000
100,000
Gold borrowing cost associated with forward
contracts
contracts
(1)
Interest rate
%
%
1.38
1.58
1.52
Amount
(‘000oz)
(‘000oz)
1,168,000
898,000
641,000
423,000
205,000
Gold lease rate swaps
(2)
Interest rate
%
%
1.75
1.81
1.83
1.83
1.84
(1)
Gold borrowing costs relating to Australian dollar gold forwards:
The Australian dollar denominated gold forward contract prices are shown on a net basis where the final price of the contract is determined by the cost of
borrowing gold over the full duration of the contract. The net prices shown in the table above have been adjusted to take account of the total expected future
cost of all accumulated costs incurred to date and the expected future borrowing cost based on ruling market prices at the financial statement date. The
amount shown under “Gold borrowing cost associated with forward contracts” in the table above is the face value of the borrowing amount and the period in
which it matures. The interest rates shown are the future market rates prevailing at the time of the financial statement.
borrowing gold over the full duration of the contract. The net prices shown in the table above have been adjusted to take account of the total expected future
cost of all accumulated costs incurred to date and the expected future borrowing cost based on ruling market prices at the financial statement date. The
amount shown under “Gold borrowing cost associated with forward contracts” in the table above is the face value of the borrowing amount and the period in
which it matures. The interest rates shown are the future market rates prevailing at the time of the financial statement.
(2)
The gold lease rate swaps are contracts where the company receives a fixed percentage of the outstanding amount in gold and pays a floating market
determined percentage in gold, quarterly in arrears. The amount shown in the table above is the number of ounces outstanding at the beginning of each
period. The interest rate shown is the weighted average fixed rate that the company will receive for that period.
period. The interest rate shown is the weighted average fixed rate that the company will receive for that period.
205
Year
2008
2009
2010
2011
2012
2013-2015
Total
DOLLAR SILVER
Put options purchased
Put options purchased
Amount (kg)
43,545
43,545
$
per
oz
$7.66
$7.66
Put options sold
Amount (kg)
43,545
43,545
$
per
oz
$6.19
$6.19
Call options sold
Amount (kg)
43,545
43,545
$
per
oz
$8.64
$8.64
As at December 31, 2007 certain of the hedging positions reported in the above tables were governed by early termination
options in favor of certain counterparts. No termination clauses were exercised early.
options in favor of certain counterparts. No termination clauses were exercised early.
Foreign exchange price risk protection agreements
The Company enters into currency forward exchange and currency option contracts to hedge certain anticipated transactions
denominated in foreign currencies. The objective of the Company’s foreign currency hedging activities is to protect the
Company from the risk that the eventual cash flows resulting from transactions denominated in US dollars will be adversely
affected by changes in exchange rates.
denominated in foreign currencies. The objective of the Company’s foreign currency hedging activities is to protect the
Company from the risk that the eventual cash flows resulting from transactions denominated in US dollars will be adversely
affected by changes in exchange rates.
The following table indicates the group’s currency hedge position at December 31, 2007.
Year
2008
2009
2010
2011
2012
2013-2015
Total
RAND DOLLAR (000)
Forward contracts
Forward contracts
Amount ($)
35,000
35,000
Rand per $
R6.94
R6.94
Put options purchased
Amount ($)
120,000
120,000
Rand per $
R6.98
R6.98
Put options sold
Amount ($)
120,000
120,000
Rand per $
R6.65
R6.65
Call options sold
Amount ($)
135,000
135,000
Rand per $
R7.35
R7.35
AUD DOLLAR (000)
Forward contracts
Forward contracts
Amount ($)
190,000
190,000
$ per A$
$0.84
$0.84
Put options purchased
Amount ($)
140,000
140,000
$ per A $
$0.83
$0.83
Put options sold
Amount ($)
140,000
140,000
$ per A $
$0.87
$0.87
Call options sold
Amount ($)
140,000
140,000
$ per A$
$0.81
$0.81
BRAZILIAN REAL DOLLAR
(000)
Forward contracts
(000)
Forward contracts
Amount ($)
31,000
31,000
BRL per $
BRL1.99
BRL1.99
Put options purchased
Amount ($)
24,000
24,000
BRL per $
BRL1.87
BRL1.87
Call options sold
Amount ($)
68,000
68,000
BRL per $
BRL1.92
BRL1.92
For a more detailed presentation of the investment maturity profile, borrowings maturity profile and interest rate risk profile of
these agreements, see note 26 to the consolidated financial statements “Financial risk management activities”.
these agreements, see note 26 to the consolidated financial statements “Financial risk management activities”.
206
Credit risk
Realization of all these contracts is dependent upon the counterparts performing in accordance with the terms of the contracts.
AngloGold Ashanti generally does not obtain collateral or other security to support financial instruments subject to credit risk,
but monitors the credit standing of counterparts. AngloGold Ashanti spreads its business over a number of predominantly
international, credit worthy counterparts and believes that no concentration of credit risk exists. Limits for each counterpart are
based on the assessed credit quality of each counterpart. The Treasury Committee makes recommendations for board
approval of all counterparts and the limits to be applied against each counterpart. Where possible, management tries to ensure
that netting agreements are in place.
AngloGold Ashanti generally does not obtain collateral or other security to support financial instruments subject to credit risk,
but monitors the credit standing of counterparts. AngloGold Ashanti spreads its business over a number of predominantly
international, credit worthy counterparts and believes that no concentration of credit risk exists. Limits for each counterpart are
based on the assessed credit quality of each counterpart. The Treasury Committee makes recommendations for board
approval of all counterparts and the limits to be applied against each counterpart. Where possible, management tries to ensure
that netting agreements are in place.
The counterparts are financial and banking institutions of good credit standing.
The combined maximum credit exposure at the balance sheet date amounts to $516 million on a contract by contract basis.
Credit risk exposure netted by counterpart amounts to $123 million. No set-off is applied to the balance sheet due to the
different maturity profiles of assets and liabilities.
Credit risk exposure netted by counterpart amounts to $123 million. No set-off is applied to the balance sheet due to the
different maturity profiles of assets and liabilities.
Interest rate and liquidity risk
Fluctuations in interest rates impact interest paid and interest received on the short-term cash investments and financing
activities, giving rise to interest rate risk.
activities, giving rise to interest rate risk.
In the ordinary course of business, the company receives cash from the proceeds of its gold sales and is required to fund
working capital requirements. This cash is managed to ensure surplus funds are invested in a manner to achieve market
related returns while minimizing risks. The company is able to actively source financing at competitive rates.
working capital requirements. This cash is managed to ensure surplus funds are invested in a manner to achieve market
related returns while minimizing risks. The company is able to actively source financing at competitive rates.
The table below provides a summary of the number, type and credit quality of AngloGold Ashanti’s hedge counterparts.
Number of Counterparts
Type
Credit Rating (Fitch)
1
International Bank
AA+
9
International Bank
AA
8
International Bank
AA-
3
International Bank
A+
1
International Bank
A
5
International Bank
A-
1
South African Bank
AAA(zaf) (International BBB+)
2
South African Bank
AA+(zaf) (International BBB+)
1
South African Bank
AA(zaf) (International BBB)
1
South African Bank
AA-(zaf) (International BBB)
4
Brazilian Bank
AAA(bra)
3
Brazilian Bank
AA+(bra)
2
Brazilian Bank
AA(bra)
1
Brazilian Bank
AA-(bra)
1
Trade Finance House
Not rated
AngloGold Ashanti does not anticipate non-performance by any counterparts.
207
Fair value
The estimated fair values of financial instruments are determined at discrete points in time based on relevant market
information. In certain cases, these estimates involve uncertainties and cannot be determined with precision. The estimated fair
values of AngloGold Ashanti’s financial instruments at December 31, 2007 and 2006, are as follows (assets (liabilities)):
information. In certain cases, these estimates involve uncertainties and cannot be determined with precision. The estimated fair
values of AngloGold Ashanti’s financial instruments at December 31, 2007 and 2006, are as follows (assets (liabilities)):
December 31, 2007
December 31, 2006
Carrying amount
Fair value
Carrying amount
Fair value
(in millions)
$
$
$
$
Cash and cash equivalents
(1)
477
477
471
471
Restricted cash
(1)
37
37
11
11
Short-term debt
(2)
(319)
(319)
(33)
(33)
Long-term debt
(2)
(1,564)
(1,564)
(1,472)
(1,484)
Derivatives
(3) (5)
(2,563)
(4,342)
(1,524)
(2,954)
Forward sales type agreements
(572)
(1,616)
(499)
(1,328)
Option contracts
(2,030)
(2,738)
(4)
(1,056)
(1,623)
(4)
Foreign exchange contracts
11
11
4
4
Foreign exchange option contracts
(6)
(6)
(12)
(12)
Interest rate swaps – Gold
34
7
39
5
(1)
The carrying amounts approximate fair value because of the short-term duration of these instruments.
(2)
Fair value reflects the net present value of the future cash flows, discounted at the prevailing market rate. The fair value of listed fixed rate debt and the
Convertible Bonds are shown at their market value. The remainder of debt re-prices on a short-term floating rate basis, and accordingly the carrying
amount is considered to approximate fair value.
Convertible Bonds are shown at their market value. The remainder of debt re-prices on a short-term floating rate basis, and accordingly the carrying
amount is considered to approximate fair value.
(3)
The fair value of the above instruments is calculated based on market prices, volatilities and interest rates, as at December 31, 2007 and 2006. Fair
value includes off balance sheet normal purchase and sale exempted contracts.
value includes off balance sheet normal purchase and sale exempted contracts.
(4)
Includes deliverable call options sold. A deliverable option is an option in terms of which the delivery quantity is fixed regardless of the market price on
the exercise date. In the event that the market price is lower than the strike price, gold is sold to the counterpart at the ruling spot price.
the exercise date. In the event that the market price is lower than the strike price, gold is sold to the counterpart at the ruling spot price.
(5)
Carrying amount represents derivatives on the balance sheet at each respective date.
Sensitivity analysis
The following table shows the approximate sensitivities of the $ marked-to-market value of the hedge book at December 31,
2007 (actual changes in the timing and amount of the following variables may differ from the assumed changes below):
2007 (actual changes in the timing and amount of the following variables may differ from the assumed changes below):
Sensitivity analysis
Change in
Rate(+)
Change in Fair
value
(1)
Change in Rate
(-)
Change in Fair
value
(1)
Currency (R/$)
1
(34.43)
1
28.91
Currency (A$/$)
0.05
35.22
0.05
(40.83)
Currency (BRL/$)
0.10
(3.76)
0.10
3.74
Gold price ($/oz)
10
(102.71)
10
102.04
US Interest Rate (%)
0.1
(10.27)
0.10
10.29
ZAR Interest Rate (%)
0.1
(0.31)
0.10
0.31
Aus Interest Rate (%)
0.1
(0.23)
0.10
0.23
Gold Interest Rate (%)
0.1
21.76
0.10
(21.88)
(1)
In $ million.
208
Hedge levels
AngloGold Ashanti employs hedging as an element of its risk management strategy.
A summary of the hedge position as at December 31, 2005, 2006 and 2007 is as follows. The “years of production hedged” is
calculated as the hedge net delta position at year-end divided by the annual production for that year.
calculated as the hedge net delta position at year-end divided by the annual production for that year.
As at December 31,
Hedge Net Delta
kg’s
(1)
Annual Production for
Year
kg’s
(1)
Years of Production
Hedged
2005
337,076
191,783
1.76
2006
316,012
175,268
1.80
2007
323,121
170,354
1.90
(1)
Includes equity accounted joint ventures.
On May 6, 2008, AngloGold Ashanti announced its intention to reduce its hedge position. See “Item 5.: Recent
Developments”.
Developments”.
209
Item 12: Description of securities other than equity securities
Not applicable.
210
PART II
Item 13: Defaults, dividend arrearages and delinquencies
None.
211
Item 14: Material modifications to the rights of security holders
and use of proceeds
and use of proceeds
None.
212
Item 15: Controls and procedures
Management certification
(a) Disclosure Controls and Procedures: As of December 31, 2007, the company, under the supervision and with the
participation of its management, including the Chief Executive Officer and Chief Financial Officer has evaluated the
effectiveness of the company’s disclosure controls and procedures (as defined in Rules 13a – 15(e) and 15d – 15(e) under
the Securities Exchange Act of 1934, as amended (the Exchange Act). Based on such evaluation, the Chief Executive
Officer and Chief Financial Officer have concluded that, as of December 31, 2007, the company’s disclosure controls and
procedures are effective, and are reasonably designed to ensure that information required to be disclosed by the company
in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the Securities and Exchange Commission. These disclosure controls and
procedures include without limitation, controls and procedures designed to ensure that information required to be
disclosed by the company in reports that it files or submits under the Exchange Act is accumulated and communicated to
the company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow
timely decisions regarding disclosure.
effectiveness of the company’s disclosure controls and procedures (as defined in Rules 13a – 15(e) and 15d – 15(e) under
the Securities Exchange Act of 1934, as amended (the Exchange Act). Based on such evaluation, the Chief Executive
Officer and Chief Financial Officer have concluded that, as of December 31, 2007, the company’s disclosure controls and
procedures are effective, and are reasonably designed to ensure that information required to be disclosed by the company
in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the Securities and Exchange Commission. These disclosure controls and
procedures include without limitation, controls and procedures designed to ensure that information required to be
disclosed by the company in reports that it files or submits under the Exchange Act is accumulated and communicated to
the company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow
timely decisions regarding disclosure.
(b) Management’s Annual Report on Internal Control over Financial Reporting: Management is responsible for establishing and
maintaining adequate internal control over financial reporting for the company, as defined in the Exchange Act Rule 13a –
15(f) and 15d -15(f). The company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of the company’s financial statements for
external purposes in accordance with U.S. generally accepted accounting principles. Because of inherent limitations,
internal control over financial reporting may not prevent or detect misstatements.
15(f) and 15d -15(f). The company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of the company’s financial statements for
external purposes in accordance with U.S. generally accepted accounting principles. Because of inherent limitations,
internal control over financial reporting may not prevent or detect misstatements.
The company’s internal control over financial reporting includes those policies and procedures that:
·
Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and
dispositions of the assets of the company;
dispositions of the assets of the company;
·
Provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and the Directors of the company;
and
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and the Directors of the company;
and
·
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
disposition of the company’s assets that could have a material effect on the financial statements.
Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Projections of any evaluation of effectiveness to future periods is subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with policies and procedures may deteriorate.
Projections of any evaluation of effectiveness to future periods is subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with policies and procedures may deteriorate.
The company’s management assessed the effectiveness of the company’s internal control over financial reporting as of
December 31, 2007. In making this assessment, management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework. Based on this
assessment, and using those criteria, management concluded, and hereby reports that the company’s internal control over
financial reporting was effective as of December 31, 2007.
December 31, 2007. In making this assessment, management used the criteria set forth by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework. Based on this
assessment, and using those criteria, management concluded, and hereby reports that the company’s internal control over
financial reporting was effective as of December 31, 2007.
(c) Changes in Internal Control over Financial Reporting:
There have been no changes in the company’s internal control over
financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rule 13a – 15
during the year ended December 31, 2007 that have materially affected, or are reasonably likely to materially affect, the
company’s internal control over financial reporting.
during the year ended December 31, 2007 that have materially affected, or are reasonably likely to materially affect, the
company’s internal control over financial reporting.
(d) Attestation Report of the Registered Public Accounting Firm: Our independent registered public accounting firm, Ernst &
Young, has issued an audit report on the effectiveness of our internal control over financial reporting. This report appears
below.
below.
/s/
M
Cutifani
/s/
S
Venkatakrishnan
Mark
Cutifani
Srinivasan Venkatakrishnan
Chief Executive Officer
Chief Financial Officer
213
Report of the Independent Registered Public Accounting Firm
The board of directors and stockholders of AngloGold Ashanti Limited
We have audited AngloGold Ashanti Limited’s internal control over financial reporting as of December 31, 2007, based on
criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (the COSO criteria). AngloGold Ashanti Limited’s management is responsible for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting
included in the accompanying management certification. Our responsibility is to express an opinion on the company’s internal
control over financial reporting based on our audit.
criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (the COSO criteria). AngloGold Ashanti Limited’s management is responsible for maintaining effective
internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting
included in the accompanying management certification. Our responsibility is to express an opinion on the company’s internal
control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design
and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal
control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design
and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, AngloGold Ashanti Limited maintained, in all material respects, effective internal control over financial reporting
as of December 31, 2007, based on the COSO criteria.
as of December 31, 2007, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the 2007 consolidated financial statements of AngloGold Ashanti Limited and our report dated May 16, 2008 expressed an
unqualified opinion thereon.
the 2007 consolidated financial statements of AngloGold Ashanti Limited and our report dated May 16, 2008 expressed an
unqualified opinion thereon.
Ernst & Young Inc.
Johannesburg
Republic of South Africa
May 16, 2008
Johannesburg
Republic of South Africa
May 16, 2008
214
ITEM 16A: Audit committee financial expert
Prof Wiseman Nkuhlu, Chairman of the audit committee, has been determined by our board to be an audit committee financial
expert within the meaning of the Sarbanes-Oxley Act, in accordance with the Rules of the NYSE and the SEC.
Prof
expert within the meaning of the Sarbanes-Oxley Act, in accordance with the Rules of the NYSE and the SEC.
Prof
WL
Nkuhlu as well as each of the other members of the Audit and Corporate Governance Committee
(being Mr FB Arisman, Mrs Bradley, Mr RP Edey and Mr JH Mensah) are independent directors. All members of the committee
have considerable financial knowledge and experience to help oversee and guide the board and the company in respect of the
audit and corporate governance disciplines.
have considerable financial knowledge and experience to help oversee and guide the board and the company in respect of the
audit and corporate governance disciplines.
ITEM 16B: Code of ethics
In order to comply with the company’s obligations in terms of the Sarbanes-Oxley Act and the King Code, and in the interests
of good governance, the company has systems and procedures to introduce, monitor and enforce its ethical codes and has
adopted a code of ethics for employees, a code of ethics for senior financial officers, and a whistle-blowing policy that
encourages employees and other stakeholders to confidentially and anonymously report acts of an unethical or illegal nature
that affect the company’s interests. Senior management oversee compliance with the ethical code by means of several
mechanisms including assessing the integrity of new appointees in the selection and promotion process, adherence to the
policy on the delegation of authority, induction of directors and employees on the company’s values, policies and procedures
and compliance with a strict disciplinary code of conduct. All reports made in terms of the whistle-blowing policy are fielded by
a third party, Tip-Offs Anonymous, which ensures all reports are treated confidentially or anonymously depending on the
preference of the caller. The information is relayed to management and to internal audit for investigation. All reports and the
progress of the investigations are conveyed to the audit and corporate governance committee by the group internal audit
manager on a quarterly basis.
of good governance, the company has systems and procedures to introduce, monitor and enforce its ethical codes and has
adopted a code of ethics for employees, a code of ethics for senior financial officers, and a whistle-blowing policy that
encourages employees and other stakeholders to confidentially and anonymously report acts of an unethical or illegal nature
that affect the company’s interests. Senior management oversee compliance with the ethical code by means of several
mechanisms including assessing the integrity of new appointees in the selection and promotion process, adherence to the
policy on the delegation of authority, induction of directors and employees on the company’s values, policies and procedures
and compliance with a strict disciplinary code of conduct. All reports made in terms of the whistle-blowing policy are fielded by
a third party, Tip-Offs Anonymous, which ensures all reports are treated confidentially or anonymously depending on the
preference of the caller. The information is relayed to management and to internal audit for investigation. All reports and the
progress of the investigations are conveyed to the audit and corporate governance committee by the group internal audit
manager on a quarterly basis.
In addition, the company has adopted a Disclosures Policy, the object of which is to ensure compliance with the rules of the
various exchanges on which it is listed and provide timely, accurate and reliable information fairly to all stakeholders, including
investors (and potential investors), regulators and analysts.
various exchanges on which it is listed and provide timely, accurate and reliable information fairly to all stakeholders, including
investors (and potential investors), regulators and analysts.
Each code of ethics, whistle blowing and disclosure policy is available on the company’s website:
www.AngloGoldAshanti.com
under About > Corporate Governance > Guidelines. Each code of ethics and disclosure policy is also available on request from
the company secretary.
the company secretary.
ITEM 16C: Principal accountant fees and services
Ernst & Young has served as AngloGold Ashanti’s independent public accountants for each of the financial years in the three-
year period ended December 31, 2007 for which audited financial statements appear in this annual report on Form 20-F.
year period ended December 31, 2007 for which audited financial statements appear in this annual report on Form 20-F.
The following table presents the aggregate fees for professional services and other services rendered by Ernst & Young to
AngloGold Ashanti in 2007 and 2006.
AngloGold Ashanti in 2007 and 2006.
(in millions)
2007
$
2006
$
Audit Fees
(1)
7.73
9.29
Audit-related Fees
(2)
0.80
0.88
Tax Fees
(3)
0.05
0.06
All Other Fees
-
-
Total
8.58
10.23
Rounding may result in computational differences.
(1) The Audit Fees consist of fees billed for the annual audit services engagement and other audit services, which are those services that only the external auditor
reasonably can provide, and include the Company audit; statutory audits; attest services; and assistance with and review of documents filed with the SEC.
Included in the Audit fees, for 2007 and 2006, are fees paid to the external auditors in respect of SOX compliance.
Included in the Audit fees, for 2007 and 2006, are fees paid to the external auditors in respect of SOX compliance.
(2) Audit-related Fees consist of fees billed for assurance and related services and include consultations concerning financial accounting and reporting standards;
and comfort letters; and consents.
(3) Tax Fees include fees billed for tax advice and tax compliance services.
215
Audit Committee Pre-approval Policies and Procedures
It is the policy of AngloGold Ashanti to maintain compliance with the requirements of the various applicable legislation and
good governance practices when appointing or granting work to the Company’s external auditor. Non-audit services may not
be acquired without an employee of AngloGold Ashanti obtaining the pre-approval of the Audit and Corporate Governance
Committee as is laid out in the procedures relating to the pre-approval process.
good governance practices when appointing or granting work to the Company’s external auditor. Non-audit services may not
be acquired without an employee of AngloGold Ashanti obtaining the pre-approval of the Audit and Corporate Governance
Committee as is laid out in the procedures relating to the pre-approval process.
The audit committee has delegated the approval authority to the chairman of the Audit and Corporate Governance Committee,
Prof Wiseman Nkuhlu or his designated official. The approval may take the form of a written or verbal response, and in the
case of a verbal instruction these would be ratified at the next audit committee meeting. On a quarterly basis a summary of all
approvals and work to date is tabled at the audit committee.
Prof Wiseman Nkuhlu or his designated official. The approval may take the form of a written or verbal response, and in the
case of a verbal instruction these would be ratified at the next audit committee meeting. On a quarterly basis a summary of all
approvals and work to date is tabled at the audit committee.
During 2007, no services were provided to AngloGold Ashanti by Ernst & Young in respect of Audit-related Fees (in the form of
tax fees) paid pursuant to the de minimis exception to the pre-approval requirement provided by paragraph (c)(7)(i)(C) of Rule
2-01 of Regulation S-X.
tax fees) paid pursuant to the de minimis exception to the pre-approval requirement provided by paragraph (c)(7)(i)(C) of Rule
2-01 of Regulation S-X.
No work was performed by persons other than the principal accountant’s employees on the principal accountant’s engagement
to audit AngloGold Ashanti’s financial statements for 2007.
to audit AngloGold Ashanti’s financial statements for 2007.
ITEM 16D: Exemptions from the listing standards for audit
committees
committees
Not applicable.
ITEM 16E: Purchases of equity securities by the issuer and
affiliated purchasers
affiliated purchasers
Neither the issuer nor any affiliate of the issuer, purchased any of the company’s shares during 2007.
216
PART III
Item 17: Financial statements
Not applicable.
217
Item 18: Financial statements
Report of the Independent Registered Public Accounting Firm
The board of directors and stockholders of AngloGold Ashanti Limited
We have audited the accompanying consolidated balance sheets of AngloGold Ashanti Limited (the “Company”) as of
December 31, 2007 and 2006 and the related consolidated statements of income, stockholders’ equity and cash flows for
each of the three years in the period ended December 31, 2007. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
December 31, 2007 and 2006 and the related consolidated statements of income, stockholders’ equity and cash flows for
each of the three years in the period ended December 31, 2007. These financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
The financial statements of Société d'Exploitation des Mines d'Or de Sadiola S.A. (“Sadiola”), a corporation in which the
Company has a 38 percent interest, have been audited by other auditors for the years ended December 31, 2006 and 2005
and for the periods then ended, whose report has been furnished to us, and our opinion on the consolidated financial
statements, insofar as it relates to the amounts included for Sadiola, is based solely on the report of the other auditors. In the
consolidated financial statements, the Company’s investment in Sadiola is stated at $66 million and $67 million, respectively,
at December 31, 2006 and 2005, and the Company’s equity in net income is stated at $33 million and $8 million for each of
the two years in the period ended December 31, 2006.
Company has a 38 percent interest, have been audited by other auditors for the years ended December 31, 2006 and 2005
and for the periods then ended, whose report has been furnished to us, and our opinion on the consolidated financial
statements, insofar as it relates to the amounts included for Sadiola, is based solely on the report of the other auditors. In the
consolidated financial statements, the Company’s investment in Sadiola is stated at $66 million and $67 million, respectively,
at December 31, 2006 and 2005, and the Company’s equity in net income is stated at $33 million and $8 million for each of
the two years in the period ended December 31, 2006.
The financial statements of Société d'Exploitation des Mines d'Or de Yatela S.A. (“Yatela”), a corporation in which the
Company has a 40 percent interest, have been audited by other auditors for the year ended December 31, 2006 and for the
period then ended, whose report has been furnished to us, and our opinion on the consolidated financial statements, insofar
as it relates to the amounts included for Yatela, is based solely on the report of the other auditors. In the consolidated
financial statements, the Company’s investment in Yatela is stated at $26 million at December 31, 2006, and the Company’s
equity in net income is stated at $34 million for the year then ended.
Company has a 40 percent interest, have been audited by other auditors for the year ended December 31, 2006 and for the
period then ended, whose report has been furnished to us, and our opinion on the consolidated financial statements, insofar
as it relates to the amounts included for Yatela, is based solely on the report of the other auditors. In the consolidated
financial statements, the Company’s investment in Yatela is stated at $26 million at December 31, 2006, and the Company’s
equity in net income is stated at $34 million for the year then ended.
The financial statements of Société des Mines de Morila S.A. (“Morila”), a corporation in which the Company has a
40 percent interest, have been audited by other auditors at December 31, 2005 and for the period then ended, whose report
has been furnished to us, and our opinion on the consolidated financial statements, insofar as it relates to the amounts
included for Morila, prior to restatement, is based solely on the report of the other auditors. In the consolidated financial
statements, the Company’s investment in Morila is stated at $89 million at December 31, 2005 and the Company’s equity in
net income is stated at $53 million for the year then ended.
40 percent interest, have been audited by other auditors at December 31, 2005 and for the period then ended, whose report
has been furnished to us, and our opinion on the consolidated financial statements, insofar as it relates to the amounts
included for Morila, prior to restatement, is based solely on the report of the other auditors. In the consolidated financial
statements, the Company’s investment in Morila is stated at $89 million at December 31, 2005 and the Company’s equity in
net income is stated at $53 million for the year then ended.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits and the reports of the other auditors provide a reasonable basis for our opinion.
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe
that our audits and the reports of the other auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of AngloGold Ashanti Limited at December 31, 2007 and
2006, and the consolidated results of its operations and its cash flows for each of the three years in the period ended
December 31, 2007 in conformity with U.S generally accepted accounting principles.
fairly, in all material respects, the consolidated financial position of AngloGold Ashanti Limited at December 31, 2007 and
2006, and the consolidated results of its operations and its cash flows for each of the three years in the period ended
December 31, 2007 in conformity with U.S generally accepted accounting principles.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
the effectiveness of AngloGold Ashanti Limited’s internal control over financial reporting as of December 31, 2007, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated May 16, 2008 expressed an unqualified opinion thereon.
the effectiveness of AngloGold Ashanti Limited’s internal control over financial reporting as of December 31, 2007, based on
criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission and our report dated May 16, 2008 expressed an unqualified opinion thereon.
As discussed in note 2 to the consolidated financial statements, in 2007 the Company adopted Financial Accounting
Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes, and accordingly has evaluated
all tax positions and has made sufficient provision and disclosure.
Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes, and accordingly has evaluated
all tax positions and has made sufficient provision and disclosure.
As discussed in Note 2 to the consolidated financial statements, in 2006, the Company changed its method of accounting for
stock-based compensation in accordance with SFAS123(R) Share-Based Payment, its method of accounting for deferred
stripping costs in accordance with EITF Issue 04-6 Accounting for Stripping Costs Incurred during Production in the Mining
Industry, and its method of considering the effects of prior year misstatements in accordance with SAB 108 Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.
stock-based compensation in accordance with SFAS123(R) Share-Based Payment, its method of accounting for deferred
stripping costs in accordance with EITF Issue 04-6 Accounting for Stripping Costs Incurred during Production in the Mining
Industry, and its method of considering the effects of prior year misstatements in accordance with SAB 108 Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.
As discussed in note 2 to the consolidated financial statements, in 2005 the Company changed its method of accounting for
employee benefit plans in accordance with SFAS87 Employers' Accounting for Pensions and SFAS106 Employers'
Accounting for Postretirement Benefits Other Than Pensions, and in 2006 in accordance with SFAS158 Employers’
Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88,
106 and 132(R).
employee benefit plans in accordance with SFAS87 Employers' Accounting for Pensions and SFAS106 Employers'
Accounting for Postretirement Benefits Other Than Pensions, and in 2006 in accordance with SFAS158 Employers’
Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88,
106 and 132(R).
Ernst & Young Inc.
Registered Auditor
Registered Auditor
Johannesburg, Republic of South Africa
May 16, 2008
May 16, 2008
F-1
ANGLOGOLD ASHANTI LIMITED
Consolidated statements of income
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 and 2005
(In millions, except share and per share information)
Notes
2007
$
2006
$
2005
$
Sales and other income
3,095
2,715
2,485
Product sales
3,048
2,683
2,453
Interest, dividends and other
47
32
32
Costs and expenses
3,806
2,811
2,848
Production costs
1,917
1,539
1,642
Exploration costs
117
58
44
Related party transactions
6
(16)
(6)
37
General and administrative
130
140
71
Royalties
70
59
39
Market development costs
16
16
13
Depreciation, depletion and amortization
655
699
593
Impairment of assets
5
1
6
141
Interest expense
5
75
77
80
Accretion expense
5
20
13
5
Employment severance costs
5
19
22
26
Loss/(profit) on sale of assets, realization of loans, indirect taxes and other
5
10
(36)
(3)
Mining contractor termination costs
5
-
-
9
Non-hedge derivative loss
26
808
208
142
Other operating items
5
(16)
16
9
Loss from continuing operations before income tax, equity income, minority
interests and cumulative effect of accounting change
interests and cumulative effect of accounting change
(711)
(96)
(363)
Taxation (expense)/benefit
7
(118)
(122)
121
Minority interest
(28)
(29)
(23)
Equity income in affiliates
41
99
39
Loss from continuing operations before cumulative effect of accounting change
(816)
(148)
(226)
Discontinued operations
8
2
6
(44)
Loss before cumulative effect of accounting change
(814)
(142)
(270)
Cumulative effect of accounting change, net of taxation of $11 million in 2005
2/5
-
-
(22)
Net loss – applicable to common stakeholders
(814)
(142)
(292)
(Loss)/earnings per share : (cents)
From
continuing
operations
9
Ordinary shares
(293)
(54)
(85)
E Ordinary shares
(146)
(91)
-
Ordinary shares - diluted
(293)
(54)
(85)
E Ordinary shares - diluted
(146)
(91)
-
Discontinued
operations
9
Ordinary shares
1
2
(17)
E Ordinary shares
-
-
-
Ordinary shares - diluted
1
2
(17)
E Ordinary shares - diluted
-
-
-
Before cumulative effect of accounting change
9
Ordinary shares
(292)
(52)
(102)
E Ordinary shares
(146)
(91)
-
Ordinary shares - diluted
(292)
(52)
(102)
E Ordinary shares - diluted
(146)
(91)
-
Cumulative effect of accounting change
9
Ordinary shares
-
-
(8)
E Ordinary shares
-
-
-
Ordinary shares - diluted
-
-
(8)
E Ordinary shares - diluted
-
-
-
Net loss
9
Ordinary shares
(292)
(52)
(110)
E Ordinary shares
(146)
(91)
-
Ordinary shares - diluted
(292)
(52)
(110)
E Ordinary shares - diluted
(146)
(91)
-
Weighted average number of shares used in computation
9
Ordinary shares
277,337,292
272,613,263
264,635,634
E Ordinary shares - basic and diluted
4,117,815
194,954
-
Ordinary shares - diluted
277,337,292
272,613,263
264,635,634
Dividend paid per ordinary share (cents)
44
39
56
Dividend paid per E ordinary share (cents)
22
-
-
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-2
ANGLOGOLD ASHANTI LIMITED
Consolidated balance sheets
AT DECEMBER 31, 2007 and 2006
(In millions, except share information)
Notes
2007
$
2006
$
ASSETS
Current Assets
Current Assets
2,113
1,876
Cash and cash equivalents
477
471
Restricted cash
10
37
11
Receivables
205
160
Trade
35
40
Recoverable taxes, rebates, levies and duties
77
59
Related
parties
6
1
Other
87
60
Inventories
11
523
354
Materials on the leach pad
11
49
46
Derivatives
26
516
649
Deferred taxation assets
7
275
167
Assets held for sale
16
31
18
Property, plant and equipment, net
12
5,527
4,977
Acquired properties, net
13
1,280
1,289
Goodwill
14
569
542
Other intangibles, net
14
22
24
Derivatives
26
-
6
Other long-term inventory
11
84
68
Materials on the leach pad
11
190
149
Other long-term assets
15
559
543
Deferred taxation assets
7
37
39
Total assets
10,381
9,513
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Current liabilities
3,795
2,467
Trade accounts payable
396
278
Payroll and related benefits
106
94
Other current liabilities
17
132
126
Derivatives
26
2,782
1,782
Short-term debt
18
319
33
Tax payable
59
148
Liabilities held for sale
16
1
6
Other non-current liabilities
19
146
24
Long-term debt
20
1,564
1,472
Derivatives
26
297
397
Deferred taxation liabilities
7
1,345
1,275
Provision for environmental rehabilitation
5 / 21
394
310
Other accrued liabilities
22
45
27
Provision for pension and other post-retirement medical benefits
23
180
172
Minority interest
63
61
Commitments and contingencies
24
-
-
Stockholders’ equity
25
2,552
3,308
Common stock
400,000,000 (2006 – 400,000,000) authorized common stock of 25 ZAR cents each
400,000,000 (2006 – 400,000,000) authorized common stock of 25 ZAR cents each
Stock issued 2007 – 277,457,471 (2006 – 276,236,153)
10
10
Additional paid in capital
5,607
5,539
Accumulated deficit
(2,440)
(1,476)
Accumulated other comprehensive income
(625)
(765)
Total liabilities and stockholders’ equity
10,381
9,513
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-3
ANGLOGOLD ASHANTI LIMITED
Consolidated statements of cash flows
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 and 2005
(In millions, except share information)
Notes
2007
$
2006
$
2005
$
Net cash provided by operating activities
561
770
347
Net loss – applicable to common stockholders
(814)
(142)
(292)
Reconciled to net cash provided by operations:
Cumulative effect of accounting change
-
-
22
Loss/(profit) on sale of assets, realization of loans, indirect
taxes and other
taxes and other
14
6
(3)
Depreciation, depletion and amortization
655
699
593
Deferred stripping costs
-
-
(28)
Impairment of assets
1
6
141
Deferred
taxation
(73)
(34)
(191)
Movement in non-hedge derivatives
802
339
54
Equity income in affiliates
(41)
(99)
(39)
Dividends received from affiliates
65
85
51
Other non cash items
34
5
31
Net increase/(decrease) in provision for environmental
rehabilitation and pension and other post-retirement medical
benefits
rehabilitation and pension and other post-retirement medical
benefits
90
(62)
52
Effect of changes in operating working capital items:
Receivables
(77)
11
8
Inventories
(240)
(165)
(58)
Accounts payable and other current liabilities
147
122
37
Net cash provided by continuing operations
563
771
378
Net cash used in discontinued operations
(2)
(1)
(31)
Net cash used in investing activities
(1,031)
(611)
(624)
Acquisition of assets
(40)
-
-
Increase in non-current investments
(27)
(20)
(27)
Additions to property, plant and equipment
(1,015)
(811)
(710)
Proceeds on sale of mining assets
29
57
8
Proceeds on sale of discontinued assets
1
9
4
Proceeds on sale of available for sale investments
25
11
1
Dividends from available for sale investments
2
-
-
Cash outflows from derivatives purchased
-
-
(69)
Cash inflows from derivatives puchased
19
141
153
Loans receivable advanced
(1)
(1)
(7)
Loans receivable repaid
1
6
6
Change in restricted cash
(25)
(3)
17
Net cash generated by financing activities
462
119
200
Short-term debt repaid
(520)
(134)
(284)
Short-term debt raised
318
16
137
Issuance of stock
34
512
9
Share issue expenses
-
(5)
-
Long-term debt repaid
-
(418)
(19)
Long-term debt raised
525
142
471
Cash inflows from derivatives with financing
249
138
55
Dividends paid
(144)
(132)
(169)
Net (decrease)/increase in cash and cash equivalents
(8)
278
(77)
Effect of exchange rate changes on cash
14
(3)
(3)
Cash and cash equivalents – January 1,
471
196
276
Cash and cash equivalents – December 31,
477
471
196
The accompanying notes are an integral part of these Consolidated Financial Statements.
ANGLOGOLD ASHANTI LIMITED
Consolidated statements of stockholders’ equity
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 and 2005
(In millions, except share information)
Common stock
Common
stock
$
Additional paid
in capital
$
Accumulated other
comprehensive income*
$
Accumulated
deficit
$
Total
$
Balance – January 1, 2005
264,462,894
10
4,961
(423)
(702)
3,846
Net loss
(292)
(292)
Translation loss
(132)
(132)
Net loss on cash flow hedges removed from other comprehensive income and reported in income, net of tax
11
11
Net loss on cash flow hedges, net of tax
(134)
(134)
Net gain on available for sale financial assets arising during the period, net of tax
2
2
Comprehensive loss
(545)
Stock issues as part of Share Incentive Scheme
475,538
-
9
9
Unearned stock awards compensation expense
2
2
Dividends
(149)
(149)
Balance – December 31, 2005
264,938,432
10
4,972
(676)
(1,143)
3,163
Cumulative deferred stripping adjustment. Refer to Note 2.
(73)
(73)
Cumulative cut-off adjustment. Refer to Note 2.
(11)
(11)
Net loss
(142)
(142)
Translation loss
(108)
(108)
Net loss on cash flow hedges removed from other comprehensive income and reported in income, net of tax
97
97
Net loss on cash flow hedges, net of tax
(86)
(86)
Net gain on available for sale financial assets arising during the period, net of tax
8
8
Comprehensive loss
(315)
Stock issues as part of equity offering
9,970,732
-
498
498
Stock issues as part of Share Incentive Scheme
398,399
-
9
9
Stock based compensation expense
60
60
Dividends
(107)
(107)
Balance – December 31, 2006
275,307,563
10
5,539
(765)
(1,476)
3,308
F-4
Cumulative FIN 48 adjustment. Refer to Note 2.
(25)
(25)
Net loss
(814)
(814)
Translation gain
93
93
Net loss on cash flow hedges removed from other comprehensive income and reported in income, net of tax
200
200
Net loss on cash flow hedges, net of tax
(166)
(166)
Hedge ineffectiveness on cash flow hedges, net of tax
10
10
Net gain on available for sale financial assets arising during the period, net of tax
3
3
Comprehensive loss
(699)
Stock issues as part of Share Incentive Scheme
1,181,882
-
37
37
Stock issues in exchange for E Ordinary shares cancelled
8,026
-
2
2
Stock issues transferred from Employee Share Ownership Plan to exiting employees
46,590
-
2
2
Stock based compensation expense
27
27
Dividends
(125)
(125)
Balance – December 31, 2007
276,544,061
10
5,607
(625)
(2,440)
2,552
* The cumulative translation loss included in accumulated other comprehensive income amounted to $488 million (2006: $581 million). The translation loss has no tax effect. The cumulative charge, net of deferred taxation of
$96 million (2006: $96 million), included in accumulated other comprehensive income in respect of cash flow hedges amounted to $216 million (2006: $260 million). The cumulative gain, net of deferred taxation of $2 million
(2006: $1 million), included in accumulated other comprehensive income in respect of available for sale financial assets amounted to $15 million (2006: $12 million). The cumulative gain included in accumulated other
comprehensive income in respect of the hedge of a net investment in foreign entities amounted to $64 million (2006: $64 million). This gain is offset by $64 million (2006: $64 million) arising from translation of a net
investment in foreign entities.
(2006: $1 million), included in accumulated other comprehensive income in respect of available for sale financial assets amounted to $15 million (2006: $12 million). The cumulative gain included in accumulated other
comprehensive income in respect of the hedge of a net investment in foreign entities amounted to $64 million (2006: $64 million). This gain is offset by $64 million (2006: $64 million) arising from translation of a net
investment in foreign entities.
As at December 31, 2007 and 2006, $402 million and $286 million, respectively, of retained earnings arising from the Company’s equity accounted joint ventures and certain subsidiaries may not be remitted without third-
party shareholder consent.
party shareholder consent.
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-5
ANGLOGOLD ASHANTI LIMITED
Notes to the consolidated financial statements
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 and 2005
(In millions, except share information)
1.
NATURE OF OPERATIONS
AngloGold Ashanti Limited (the "Company"), as it conducts business today, was formed on April 26, 2004 following
the Business Combination of AngloGold Limited (AngloGold) with Ashanti Goldfields Company Limited (Ashanti).
AngloGold, formerly Vaal Reefs Exploration and Mining Company Limited, was incorporated in South Africa on
May 29, 1944 and Ashanti was incorporated in Ghana on August 19, 1974. The Company conducts gold-mining
operations in Argentina, Australia, Brazil, Ghana, Guinea, Mali, Namibia, South Africa, Tanzania and the United
States of America (USA). The Company also produces uranium oxide and sulphuric acid.
the Business Combination of AngloGold Limited (AngloGold) with Ashanti Goldfields Company Limited (Ashanti).
AngloGold, formerly Vaal Reefs Exploration and Mining Company Limited, was incorporated in South Africa on
May 29, 1944 and Ashanti was incorporated in Ghana on August 19, 1974. The Company conducts gold-mining
operations in Argentina, Australia, Brazil, Ghana, Guinea, Mali, Namibia, South Africa, Tanzania and the United
States of America (USA). The Company also produces uranium oxide and sulphuric acid.
2.
ACCOUNTING CHANGES
Uncertain taxes
The Company adopted Financial Accounting Standards Board (FASB) Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes” (“FIN 48”) on January 1, 2007.
Uncertainty in Income Taxes” (“FIN 48”) on January 1, 2007.
As at January 1, 2007, the Company had $84 million of total gross unrecognized tax benefits and the Company
recorded an opening adjustment of $25 million against opening retained income as a result of adopting FIN 48 on
January 1, 2007.
recorded an opening adjustment of $25 million against opening retained income as a result of adopting FIN 48 on
January 1, 2007.
The Company operates in numerous countries around the world and accordingly is subject to, and pays annual
income taxes in terms of the various income tax regimes in the countries in which it operates. Some of these tax
regimes are defined by contractual agreements with local government and others are defined by the general
corporate income tax laws of the country. The Company has historically filed, and continues to file, all required
income tax returns and to pay the taxes reasonably determined to be due. The tax rules and regulations in many
countries are highly complex and subject to interpretation. From time to time, the Company is subject to a review of
its historic income tax filings. In connection with such reviews disputes can arise with the taxing authorities over the
interpretation or application of certain rules to the Company's business conducted within the country involved. Refer
to Note 7.
income taxes in terms of the various income tax regimes in the countries in which it operates. Some of these tax
regimes are defined by contractual agreements with local government and others are defined by the general
corporate income tax laws of the country. The Company has historically filed, and continues to file, all required
income tax returns and to pay the taxes reasonably determined to be due. The tax rules and regulations in many
countries are highly complex and subject to interpretation. From time to time, the Company is subject to a review of
its historic income tax filings. In connection with such reviews disputes can arise with the taxing authorities over the
interpretation or application of certain rules to the Company's business conducted within the country involved. Refer
to Note 7.
Stock Based Compensation
At December 31, 2007, the Company has five stock-based employee compensation plans consisting of time-based
awards, performance related awards and equity settled compensation plans, which are described in Note 30 the
“AngloGold Limited Share Incentive Scheme and Plans”. Prior to January 1, 2006, the Company accounted for
share-based payments under the recognition and measurement provisions of APB Opinion No. 25, “Accounting for
Stock Issued to Employees, and Related Interpretations”, as permitted by SFAS123, “Accounting for Stock-Based
Compensation”.
awards, performance related awards and equity settled compensation plans, which are described in Note 30 the
“AngloGold Limited Share Incentive Scheme and Plans”. Prior to January 1, 2006, the Company accounted for
share-based payments under the recognition and measurement provisions of APB Opinion No. 25, “Accounting for
Stock Issued to Employees, and Related Interpretations”, as permitted by SFAS123, “Accounting for Stock-Based
Compensation”.
Deferred Stripping Costs
On January 1, 2006, the Company adopted Emerging Issues Task Force (“EITF”) Issue 04-6, “Accounting for
Stripping Costs in the Mining Industry”. Issue No. 04-6 addresses the accounting for stripping costs incurred during
the production phase of a mine and that post production stripping costs should be considered costs of the extracted
minerals under a full absorption costing system and recognized as a component of inventory to be recognized in cost
of sales in the same period as the revenue from the sale of the inventory. Additionally, capitalization of such costs
would be appropriate only to the extent inventory exists at the end of a reporting period.
Stripping Costs in the Mining Industry”. Issue No. 04-6 addresses the accounting for stripping costs incurred during
the production phase of a mine and that post production stripping costs should be considered costs of the extracted
minerals under a full absorption costing system and recognized as a component of inventory to be recognized in cost
of sales in the same period as the revenue from the sale of the inventory. Additionally, capitalization of such costs
would be appropriate only to the extent inventory exists at the end of a reporting period.
Prior to January 1, 2006, stripping costs incurred in open-pit operations during the production phase to remove
additional waste were charged to operating costs on the basis of the average life of mine stripping ratio and the
average life of mine costs per tonne and resulted in capitalization of such stripping costs (deferred stripping) as part
of mining assets.
additional waste were charged to operating costs on the basis of the average life of mine stripping ratio and the
average life of mine costs per tonne and resulted in capitalization of such stripping costs (deferred stripping) as part
of mining assets.
F-6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
2.
2.
ACCOUNTING CHANGES (continued)
As at December 31,
(in millions)
2006
$
2005
$
Movements in the deferred stripping costs balance were as follows:
Opening balance
105
69
Cumulative effect adjustment
(105)
-
Net amount deferred
-
28
Translation
-
8
Closing balance
-
105
Production costs for the year ended December 31, 2005 as disclosed in the consolidated statements of income,
would have increased by $28 million if stripping costs were expensed rather than capitalized in this period.
would have increased by $28 million if stripping costs were expensed rather than capitalized in this period.
Total stripping costs (net of amortization) included in production costs in the consolidated statements of income for
the period ended December 31, 2005 amounted to $203 million.
the period ended December 31, 2005 amounted to $203 million.
Total stripping costs included in production costs in the consolidated statements of income for the year ended
December 31, 2007 and 2006 amounts to $284 million and $227 million, respectively.
December 31, 2007 and 2006 amounts to $284 million and $227 million, respectively.
Cut-off adjustments
In prior years certain subsidiaries within the Company have consistently determined the year end close process in
respect of certain operating costs at dates immediately preceding the Christmas vacation period. Historically,
management concluded that any resulting adjustment was immaterial to operating results as all entities had twelve
reporting periods and used the same cut-off dates from year to year.
respect of certain operating costs at dates immediately preceding the Christmas vacation period. Historically,
management concluded that any resulting adjustment was immaterial to operating results as all entities had twelve
reporting periods and used the same cut-off dates from year to year.
The above errors arose as a combination of the cut-off process being linked to the mine production cycle as well as
utilizing a date not aligned to December 31 each year, although the same dates were utilized from year to year.
utilizing a date not aligned to December 31 each year, although the same dates were utilized from year to year.
On September 13, 2006, the SEC staff published Staff Accounting Bulletin (SAB) No. 108, “Considering the Effects
of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”).
SAB 108 (SAB Topic 1.N) addresses quantifying the financial statement effects of misstatements, specifically, how
the effects of prior year uncorrected errors must be considered in quantifying misstatements in the current year
financial statements.
of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB 108”).
SAB 108 (SAB Topic 1.N) addresses quantifying the financial statement effects of misstatements, specifically, how
the effects of prior year uncorrected errors must be considered in quantifying misstatements in the current year
financial statements.
As part of the 2006 year end financial statement close process the Company quantified the balance sheet impact
and determined that it would only have a material effect in the reporting of “Payroll and related benefits”, which is
separately identified on the face of the balance sheet for all years presented. The other accounts that were affected
are Tangible Assets – Mine development costs; Inventories – Gold in process; Deferred taxation; Cash and cash
equivalents; Trade accounts payable and Payroll and related benefits.
and determined that it would only have a material effect in the reporting of “Payroll and related benefits”, which is
separately identified on the face of the balance sheet for all years presented. The other accounts that were affected
are Tangible Assets – Mine development costs; Inventories – Gold in process; Deferred taxation; Cash and cash
equivalents; Trade accounts payable and Payroll and related benefits.
The Company previously considered the above errors to be immaterial under the rollover method and evaluated the
misstatement against the current year financial statements under both the rollover and iron curtain methods.
misstatement against the current year financial statements under both the rollover and iron curtain methods.
In accordance with the transition provisions provided in SAB 108 the cumulative effect of applying SAB 108 as an
adjustment to opening retained earnings is summarized below:
adjustment to opening retained earnings is summarized below:
(in millions)
$
Assets
Tangible Assets – Mine development costs
Tangible Assets – Mine development costs
3 (increase)
Inventories – Gold in process
1
(increase)
Deferred taxation
5
(increase)
Trade receivables
5
(decrease)
Liabilities
Trade accounts payable
Trade accounts payable
3
(increase)
Payroll and related benefits
10
(increase)
Other creditors
2
(increase)
Retained earnings
11
(decrease)
F-7
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
2.
2.
ACCOUNTING CHANGES (continued)
Employee Benefit Plans
On September 29, 2006 the FASB issued SFAS158, “Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R)”. SFAS158 requires an entity
to:
Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R)”. SFAS158 requires an entity
to:
•
recognize in its statement of financial position an asset for a defined benefit post-retirement plan's overfunded
status or a liability for a plan's underfunded status;
• measure a defined benefit post-retirement plan's assets and obligations that determine its funded status as of
the same day of the employer's fiscal year-end statement of financial position;
• recognize as a component of accumulated other comprehensive income, net of tax, amounts accumulated at
the date of adoption due to delayed recognition of actuarial gains and losses, prior service costs and credits,
and transition assets and obligations; and
• expand the disclosure requirements of SFAS132(R) to include disclosure of additional information in the notes
to financial statements about certain effects on net periodic benefit cost in the next fiscal year that arise from
delayed recognition of actuarial gains or losses, prior service costs or credits and unrecognized transition
assets and obligations.
status or a liability for a plan's underfunded status;
• measure a defined benefit post-retirement plan's assets and obligations that determine its funded status as of
the same day of the employer's fiscal year-end statement of financial position;
• recognize as a component of accumulated other comprehensive income, net of tax, amounts accumulated at
the date of adoption due to delayed recognition of actuarial gains and losses, prior service costs and credits,
and transition assets and obligations; and
• expand the disclosure requirements of SFAS132(R) to include disclosure of additional information in the notes
to financial statements about certain effects on net periodic benefit cost in the next fiscal year that arise from
delayed recognition of actuarial gains or losses, prior service costs or credits and unrecognized transition
assets and obligations.
The adoption of the recognition and disclosure requirements of SFAS158 which are effective for fiscal years ending
after December 15, 2006, did not have a material impact on the Company’s earnings and financial position as the
Company changed its accounting policy during the second quarter of 2005, retroactive to January 1, 2005, with
respect to accounting for employee benefit plans to recognize the effects of actuarial gains and losses in income,
rather than amortizing over the expected average remaining service period of employees participating in the plan.
after December 15, 2006, did not have a material impact on the Company’s earnings and financial position as the
Company changed its accounting policy during the second quarter of 2005, retroactive to January 1, 2005, with
respect to accounting for employee benefit plans to recognize the effects of actuarial gains and losses in income,
rather than amortizing over the expected average remaining service period of employees participating in the plan.
This change was made as the Company believes that elimination of the permitted pension and post-retirement
benefit corridor, as allowed by SFAS87 and SFAS106 will result in more accurate financial information.
benefit corridor, as allowed by SFAS87 and SFAS106 will result in more accurate financial information.
The cumulative effect of this change in accounting treatment with respect to actuarial gains and losses recorded in
2005 decreased net income and stockholders’ equity by $22 million (net of taxation of $11 million).
2005 decreased net income and stockholders’ equity by $22 million (net of taxation of $11 million).
The Company’s employee benefit plans are described more fully in Note 30 the “Employee benefit plans”.
3.
ACQUISITIONS AND DISPOSALS OF BUSINESSES AND ASSETS
2007 acquisitions
The Company made the following acquisitions during the year:
The Company made the following acquisitions during the year:
In June 2007, the Company acquired certain assets from Trans-Siberian Gold plc (TSG) as further discussed in this
note under 2006 acquisitions “Strategic alliance in Russia with Polymetal and assets acquired from Trans-Siberian
Gold plc”.
note under 2006 acquisitions “Strategic alliance in Russia with Polymetal and assets acquired from Trans-Siberian
Gold plc”.
•
Acquisition of minority interests in Ghana
AngloGold Ashanti completed the acquisition of the minority interests in the Iduapriem and Teberebie mine previously
held by the Government of Ghana (5 percent) and the International Finance Corporation (10 percent) effective
September 1, 2007 for a total cash consideration of $25 million. The Iduapriem and Teberebie mine is now wholly-
owned by the Company. The Company is in the process of finalizing the purchase price allocation of fixed assets. The
final purchase price allocation is not expected to vary significantly from the preliminary allocation.
AngloGold Ashanti completed the acquisition of the minority interests in the Iduapriem and Teberebie mine previously
held by the Government of Ghana (5 percent) and the International Finance Corporation (10 percent) effective
September 1, 2007 for a total cash consideration of $25 million. The Iduapriem and Teberebie mine is now wholly-
owned by the Company. The Company is in the process of finalizing the purchase price allocation of fixed assets. The
final purchase price allocation is not expected to vary significantly from the preliminary allocation.
2007 disposals
The Company’s disposals during the year included:
The Company’s disposals during the year included:
•
Sale of Ergo surface reclamation operation
On June 8, 2007, AngloGold Ashanti announced that it had sold, subject to certain conditions, most of the remaining
moveable and immovable assets of Ergo, the surface reclamation operation east of Johannesburg, discontinued in
March 2005, to a consortium of Mintails South Africa (Pty) Limited/DRD South African Operations (Pty) Limited Joint
Venture. The site is currently being rehabilitated by AngloGold Ashanti. The assets and associated liabilities were sold
for R42.8 million (approximately $6 million). The joint venture will operate, for its own account, under the AngloGold
Ashanti authorizations until new order mining rights have been obtained and transferred to the joint venture. Refer to
Note 8 – Discontinued operations.
On June 8, 2007, AngloGold Ashanti announced that it had sold, subject to certain conditions, most of the remaining
moveable and immovable assets of Ergo, the surface reclamation operation east of Johannesburg, discontinued in
March 2005, to a consortium of Mintails South Africa (Pty) Limited/DRD South African Operations (Pty) Limited Joint
Venture. The site is currently being rehabilitated by AngloGold Ashanti. The assets and associated liabilities were sold
for R42.8 million (approximately $6 million). The joint venture will operate, for its own account, under the AngloGold
Ashanti authorizations until new order mining rights have been obtained and transferred to the joint venture. Refer to
Note 8 – Discontinued operations.
F-8
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
3.
3.
ACQUISITIONS AND DISPOSALS OF BUSINESSES AND ASSETS (continued)
•
Sale of Mwana Africa plc shares
During July 2007, AngloGold Ashanti disposed of its investment of 600,000 shares previously held in Mwana Africa
plc for $0.8 million. The shares were acquired pursuant to the sale of AngloGold Ashanti’s entire interest in Ashanti
Goldfields Zimbabwe Limited to Mwana Africa Holdings (Proprietary) Limited during 2004.
During July 2007, AngloGold Ashanti disposed of its investment of 600,000 shares previously held in Mwana Africa
plc for $0.8 million. The shares were acquired pursuant to the sale of AngloGold Ashanti’s entire interest in Ashanti
Goldfields Zimbabwe Limited to Mwana Africa Holdings (Proprietary) Limited during 2004.
2006 acquisitions
The Company made the following acquisitions during the year:
The Company made the following acquisitions during the year:
•
Agreement signed with China explorer Dynasty Gold Corporation
On February 27, 2006, AngloGold Ashanti announced that it had signed an agreement with Dynasty Gold
Corporation, a Vancouver-based company, with exploration activities in China, to acquire an effective 8.7 percent
stake in that company through a purchase of 5.75 million Dynasty units at a price of C$0.40 each. Each unit consists
of one common share and one-half common share purchase warrant exercisable at a price of C$0.60 per unit for two
years.
On February 27, 2006, AngloGold Ashanti announced that it had signed an agreement with Dynasty Gold
Corporation, a Vancouver-based company, with exploration activities in China, to acquire an effective 8.7 percent
stake in that company through a purchase of 5.75 million Dynasty units at a price of C$0.40 each. Each unit consists
of one common share and one-half common share purchase warrant exercisable at a price of C$0.60 per unit for two
years.
•
Agreement with International Tower Hill Mines Limited
On June 30, 2006, AngloGold Ashanti (U.S.A.) Exploration Inc. (AngloGold Ashanti), International Tower Hill Mines
Ltd (ITH) and Talon Gold Alaska, Inc. (Talon), a wholly-owned subsidiary of ITH, entered into an Asset Purchase and
Sale and Indemnity Agreement whereby AngloGold Ashanti sold to Talon a 100 percent interest in six Alaska mineral
exploration properties and associated databases in return for 5,997,295 common shares of ITH stock, representing an
approximate 19.99 percent interest in ITH (December 31, 2007: 15.12 percent). The sales transaction closed on
August 4, 2006. AngloGold Ashanti also granted to ITH the exclusive option to acquire a 60 percent interest in each
of its LMS and Terra projects by incurring $3 million of exploration expenditure on each project (total of $6 million)
within four years of the grant date of the options. As part of the two option agreements, AngloGold Ashanti will have
the option to increase or dilute its stake in these projects, subject to certain conditions.
On June 30, 2006, AngloGold Ashanti (U.S.A.) Exploration Inc. (AngloGold Ashanti), International Tower Hill Mines
Ltd (ITH) and Talon Gold Alaska, Inc. (Talon), a wholly-owned subsidiary of ITH, entered into an Asset Purchase and
Sale and Indemnity Agreement whereby AngloGold Ashanti sold to Talon a 100 percent interest in six Alaska mineral
exploration properties and associated databases in return for 5,997,295 common shares of ITH stock, representing an
approximate 19.99 percent interest in ITH (December 31, 2007: 15.12 percent). The sales transaction closed on
August 4, 2006. AngloGold Ashanti also granted to ITH the exclusive option to acquire a 60 percent interest in each
of its LMS and Terra projects by incurring $3 million of exploration expenditure on each project (total of $6 million)
within four years of the grant date of the options. As part of the two option agreements, AngloGold Ashanti will have
the option to increase or dilute its stake in these projects, subject to certain conditions.
•
Strategic alliance in Russia with Polymetal and assets acquired from Trans-Siberian Gold plc
On September 21, 2006, AngloGold Ashanti announced that it had entered into a 50:50 strategic alliance with Russian
gold and silver producer, OAO Inter-Regional Research and Production Association Polymetal (Polymetal) in terms of
which, Polymetal and AngloGold Ashanti would cooperate in exploration, acquisition and development of gold mining
opportunities within the Russian Federation. At the same time, AngloGold Ashanti announced that it had submitted an
offer to the board of Trans-Siberian Gold plc (TSG) to acquire all of TSG’s interest in its Krasnoyarsk based
subsidiaries, OOO GRK Amikan (Amikan) and OOO Artel Staratelei Angarskaya Proizvodstvennaya Kompania (AS
APK) for a total consideration of $40 million. In June 2007, the Company concluded the purchase of TSG’s interests in
Amikan (which holds the Veduga deposit, related exploration and mining licenses) and AS APK (which holds the
Bogunay deposit, related exploration and mining licenses). These companies acquired from TSG by AngloGold
Ashanti, together with two greenfields exploration companies held by Polymetal, hold the initial operating assets of the
strategic alliance. Of the assets acquired from TSG, assets of $15 million were subsequently classified as held for sale
during 2007. Refer to Note 16 – Assets and liabilities held for sale.
On September 21, 2006, AngloGold Ashanti announced that it had entered into a 50:50 strategic alliance with Russian
gold and silver producer, OAO Inter-Regional Research and Production Association Polymetal (Polymetal) in terms of
which, Polymetal and AngloGold Ashanti would cooperate in exploration, acquisition and development of gold mining
opportunities within the Russian Federation. At the same time, AngloGold Ashanti announced that it had submitted an
offer to the board of Trans-Siberian Gold plc (TSG) to acquire all of TSG’s interest in its Krasnoyarsk based
subsidiaries, OOO GRK Amikan (Amikan) and OOO Artel Staratelei Angarskaya Proizvodstvennaya Kompania (AS
APK) for a total consideration of $40 million. In June 2007, the Company concluded the purchase of TSG’s interests in
Amikan (which holds the Veduga deposit, related exploration and mining licenses) and AS APK (which holds the
Bogunay deposit, related exploration and mining licenses). These companies acquired from TSG by AngloGold
Ashanti, together with two greenfields exploration companies held by Polymetal, hold the initial operating assets of the
strategic alliance. Of the assets acquired from TSG, assets of $15 million were subsequently classified as held for sale
during 2007. Refer to Note 16 – Assets and liabilities held for sale.
•
Purchase of Central African Gold Plc (CAG) shares
Arising from the sale of Bibiani assets, AngloGold Ashanti decided to apply $3 million of the partial proceeds to an
investment of 15,825,902 Central African Gold plc (CAG) shares. Subsequent to this decision, local regulators
required that the shares in CAG be sold within 90 days of December 28, 2006. On February 14, 2007, the Company
disposed of 7,000,000 CAG shares yielding total proceeds of £768,845 ($1.5 million) and during April 2007, disposed
of the remaining 8,825,902 CAG shares yielding total proceeds of £894,833 ($1.8 million).
Arising from the sale of Bibiani assets, AngloGold Ashanti decided to apply $3 million of the partial proceeds to an
investment of 15,825,902 Central African Gold plc (CAG) shares. Subsequent to this decision, local regulators
required that the shares in CAG be sold within 90 days of December 28, 2006. On February 14, 2007, the Company
disposed of 7,000,000 CAG shares yielding total proceeds of £768,845 ($1.5 million) and during April 2007, disposed
of the remaining 8,825,902 CAG shares yielding total proceeds of £894,833 ($1.8 million).
2006 disposals
The Company’s disposals during the year included:
The Company’s disposals during the year included:
•
Sale of Western Tanami project
During the period October 10 through October 18, 2005, AngloGold Ashanti Australia reduced it shareholding in
Tanami Gold to 5 percent, through the sale of 8 million fully paid ordinary shares for a cash consideration of
A$1.3 million ($1.0 million) and in February 2006, disposed of the entire investment in Tanami Gold with the sale of
19 million shares for a cash consideration of A$3.9 million ($3.0 million).
During the period October 10 through October 18, 2005, AngloGold Ashanti Australia reduced it shareholding in
Tanami Gold to 5 percent, through the sale of 8 million fully paid ordinary shares for a cash consideration of
A$1.3 million ($1.0 million) and in February 2006, disposed of the entire investment in Tanami Gold with the sale of
19 million shares for a cash consideration of A$3.9 million ($3.0 million).
F-9
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
3.
3.
ACQUISITIONS AND DISPOSALS OF BUSINESSES AND ASSETS (continued)
•
Sale of Bibiani
On August 23, 2006, AngloGold Ashanti announced that it had entered into a conditional agreement with Central
African Gold plc (CAG) to sell the assets, related to Bibiani and Bibiani North prospecting permit, including all of
Bibiani’s employees, fixed mining and non-mining assets, inventory, trade receivables and intellectual property as well
as the Bibiani mining lease and the Bibiani North prospecting license, and procure the cessation and delegation of all
contracts related to Bibiani to CAG for a total consideration of $40 million. The conditions precedent to the sale of
Bibiani were satisfied effective December 28, 2006. The Bibiani North prospecting license was assigned to CAG on
May 17, 2007 by the Ghanaian Land Commission and Registry.
On August 23, 2006, AngloGold Ashanti announced that it had entered into a conditional agreement with Central
African Gold plc (CAG) to sell the assets, related to Bibiani and Bibiani North prospecting permit, including all of
Bibiani’s employees, fixed mining and non-mining assets, inventory, trade receivables and intellectual property as well
as the Bibiani mining lease and the Bibiani North prospecting license, and procure the cessation and delegation of all
contracts related to Bibiani to CAG for a total consideration of $40 million. The conditions precedent to the sale of
Bibiani were satisfied effective December 28, 2006. The Bibiani North prospecting license was assigned to CAG on
May 17, 2007 by the Ghanaian Land Commission and Registry.
2005 acquisitions
The company’s acquisitions during the year included:
The company’s acquisitions during the year included:
•
AngloGold Ashanti acquires stake in Trans-Siberian Gold plc
On May 31, 2005 AngloGold Ashanti acquired an additional 12.4 percent interest (6,131,585 ordinary shares) in
Trans-Siberian Gold plc (TSG) for an aggregate consideration of £8 million ($15 million) as a second subscription in a
transaction involving two subscriptions for ordinary shares. The first tranche of ordinary shares of 17.5 percent was
acquired during July 2004. The Company’s aggregate shareholding in TSG at December 31, 2007 was 12,263,170
ordinary shares (29.8 percent interest held, after the dilution of shareholding resulting from an increase in issued
share capital).
On May 31, 2005 AngloGold Ashanti acquired an additional 12.4 percent interest (6,131,585 ordinary shares) in
Trans-Siberian Gold plc (TSG) for an aggregate consideration of £8 million ($15 million) as a second subscription in a
transaction involving two subscriptions for ordinary shares. The first tranche of ordinary shares of 17.5 percent was
acquired during July 2004. The Company’s aggregate shareholding in TSG at December 31, 2007 was 12,263,170
ordinary shares (29.8 percent interest held, after the dilution of shareholding resulting from an increase in issued
share capital).
•
Agreement with Red 5 Limited
On August 26, 2005, AngloGold Ashanti subscribed for additional shares in Red 5 Limited, for a cash consideration of
A$0.8 million ($0.6 million), thereby increasing its holding to 14.1 percent from a 12.3 percent stake originally acquired
in the expanded issued capital of Red 5 Limited during 2004. On September 18, 2006, AngloGold Ashanti elected to
exercise a second Joint Venture option with Red 5 Limited – the Outer Siena Joint Venture, located to the south-east
of Boyongan - in terms of which the Company will spend a minimum of A$1.5 million ($1.2 million) in the first year with
no interest. The Company may earn between 52 percent and 58.5 percent interest in two tenements through an
additional expenditure of A$4 million ($3 million), with a right to increase its holding by 8 percent to 9 percent through
an additional spend of A$5 million ($4 million). As at December 31, 2007, AngloGold Ashanti held a 10.2 percent
interest in Red 5 Limited.
On August 26, 2005, AngloGold Ashanti subscribed for additional shares in Red 5 Limited, for a cash consideration of
A$0.8 million ($0.6 million), thereby increasing its holding to 14.1 percent from a 12.3 percent stake originally acquired
in the expanded issued capital of Red 5 Limited during 2004. On September 18, 2006, AngloGold Ashanti elected to
exercise a second Joint Venture option with Red 5 Limited – the Outer Siena Joint Venture, located to the south-east
of Boyongan - in terms of which the Company will spend a minimum of A$1.5 million ($1.2 million) in the first year with
no interest. The Company may earn between 52 percent and 58.5 percent interest in two tenements through an
additional expenditure of A$4 million ($3 million), with a right to increase its holding by 8 percent to 9 percent through
an additional spend of A$5 million ($4 million). As at December 31, 2007, AngloGold Ashanti held a 10.2 percent
interest in Red 5 Limited.
2005 disposals
The Company’s disposals during the year included:
The Company’s disposals during the year included:
•
Conditional sale of Weltevreden mine in exchange for Aflease shares
On July 19, 2005, Aflease Gold and Uranium Resources Limited (Aflease) announced that it had purchased from
AngloGold Ashanti, its Weltevreden mine. On December 19, 2005, Aflease was acquired by sxr Uranium One
Incorporated (formerly Southern Cross Incorporated) (sxr Uranium One). The conditions precedent to the agreement
with sxr Uranium One were not fulfilled by the expiry date of December 31, 2007 and a new agreement is being
negotiated with Aflease Gold Limited. The Company has separately classified assets and liabilities for Weltevreden
presented in the consolidated balance sheet, as held for sale. Refer to Note 16 – Assets and liabilities held for sale.
On July 19, 2005, Aflease Gold and Uranium Resources Limited (Aflease) announced that it had purchased from
AngloGold Ashanti, its Weltevreden mine. On December 19, 2005, Aflease was acquired by sxr Uranium One
Incorporated (formerly Southern Cross Incorporated) (sxr Uranium One). The conditions precedent to the agreement
with sxr Uranium One were not fulfilled by the expiry date of December 31, 2007 and a new agreement is being
negotiated with Aflease Gold Limited. The Company has separately classified assets and liabilities for Weltevreden
presented in the consolidated balance sheet, as held for sale. Refer to Note 16 – Assets and liabilities held for sale.
4.
SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation: The accompanying financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America. The Company presents its consolidated financial
statements in United States dollars. The functional currency of a significant portion of the group’s operations is the
South African rand. Other main subsidiaries have functional currencies of US dollars and Australian dollars. The
translation of amounts into US dollars was in accordance with the provisions of SFAS52, “Foreign Currency
Translation”.
principles generally accepted in the United States of America. The Company presents its consolidated financial
statements in United States dollars. The functional currency of a significant portion of the group’s operations is the
South African rand. Other main subsidiaries have functional currencies of US dollars and Australian dollars. The
translation of amounts into US dollars was in accordance with the provisions of SFAS52, “Foreign Currency
Translation”.
F-10
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
Use of estimates: The preparation of the financial statements requires the Company’s management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses
during the reporting period. The determination of estimates requires the exercise of judgment based on various
assumptions and other factors such as historical experience, current and expected economic conditions, and in some
cases actuarial techniques. The Company regularly reviews estimates and assumptions that affect the annual
financial statements, however, actual results could differ from those estimates.
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses
during the reporting period. The determination of estimates requires the exercise of judgment based on various
assumptions and other factors such as historical experience, current and expected economic conditions, and in some
cases actuarial techniques. The Company regularly reviews estimates and assumptions that affect the annual
financial statements, however, actual results could differ from those estimates.
The more significant areas requiring the use of management estimates and assumptions include mineral reserves that
are the basis of future cash flow estimates and unit-of-production depreciation, depletion and amortization
calculations; environmental, reclamation and closure obligations; estimates of recoverable gold and other materials in
heap leach pads; asset impairments (including impairments of goodwill, long-lived assets, and investments); write-
downs of inventory to net realizable value; post employment, post retirement and other employee benefit liabilities;
valuation allowances for deferred taxation assets; reserves for contingencies and litigation; and the fair value and
accounting treatment of financial instruments.
are the basis of future cash flow estimates and unit-of-production depreciation, depletion and amortization
calculations; environmental, reclamation and closure obligations; estimates of recoverable gold and other materials in
heap leach pads; asset impairments (including impairments of goodwill, long-lived assets, and investments); write-
downs of inventory to net realizable value; post employment, post retirement and other employee benefit liabilities;
valuation allowances for deferred taxation assets; reserves for contingencies and litigation; and the fair value and
accounting treatment of financial instruments.
Comparatives: Comparatives have been reclassified, where necessary to comply with the current year’s
presentation.
presentation.
The following are the accounting policies used by the Company which have been consistently applied except for the
adoption of FIN 48, “Accounting for Uncertainty in Income Taxes” on January 1, 2007, the adoption of SFAS123(R),
“Share-Based Payment” on January 1, 2006 and the adoption of EITF Issue 04-6, “Accounting for Stripping Costs in
the Mining Industry” on January 1, 2006.
adoption of FIN 48, “Accounting for Uncertainty in Income Taxes” on January 1, 2007, the adoption of SFAS123(R),
“Share-Based Payment” on January 1, 2006 and the adoption of EITF Issue 04-6, “Accounting for Stripping Costs in
the Mining Industry” on January 1, 2006.
4.1 Consolidation
The consolidated financial information includes the financial statements of the Company and its subsidiaries.
Where the Company has a direct or indirect controlling interest in an entity through a subsidiary, the entity is
classified as a subsidiary. Interests in incorporated mining joint ventures in which the Company has joint control
are accounted for by the equity method and are included in other long-term assets.
Where the Company has a direct or indirect controlling interest in an entity through a subsidiary, the entity is
classified as a subsidiary. Interests in incorporated mining joint ventures in which the Company has joint control
are accounted for by the equity method and are included in other long-term assets.
The financial statements of subsidiaries and the Environmental Trust Fund (a rehabilitation trust under the
Company’s control) are prepared for the same reporting period as the Company, using the same accounting
policies, except for Rand Refinery Limited (a subsidiary of the Company) which reports on a three-month time
lag. Adjustments are made to subsidiary financial results for material transactions and events in the intervening
period.
Company’s control) are prepared for the same reporting period as the Company, using the same accounting
policies, except for Rand Refinery Limited (a subsidiary of the Company) which reports on a three-month time
lag. Adjustments are made to subsidiary financial results for material transactions and events in the intervening
period.
Subsidiaries are fully consolidated from the date on which control is transferred to the Company. They are de-
consolidated from the date on which control ceases.
consolidated from the date on which control ceases.
All significant intercompany transactions and accounts are eliminated in consolidation.
4.2 Investments in equity investees (associates and incorporated joint ventures)
An associate is an entity other than a subsidiary in which the Company has a material long-term interest and in
respect of which the Company has the ability to exercise significant influence over operational and financial
policies, normally owning between 20 percent and 50 percent of the voting equity.
respect of which the Company has the ability to exercise significant influence over operational and financial
policies, normally owning between 20 percent and 50 percent of the voting equity.
A joint venture is an entity in which the Company holds a long-term interest and which is jointly controlled by the
Company and one or more external joint venture partners under a contractual arrangement that provides for
strategic, financial and operating policy decisions relating to the activities requiring unanimous consent of the
parties sharing control.
Company and one or more external joint venture partners under a contractual arrangement that provides for
strategic, financial and operating policy decisions relating to the activities requiring unanimous consent of the
parties sharing control.
F-11
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.2 Investments in equity investees (associates and incorporated joint ventures) (continued)
Investments in associates and incorporated joint ventures are accounted for using the equity method. The initial
investment in these entities is recorded at cost. Post acquisition, the Company’s share of profits or losses of
associates and incorporated joint ventures is recognized in the income statement as equity accounted earnings.
The carrying amount of investments in associates and incorporated joint ventures is adjusted to recognize all
cumulative post-acquisition movements in the equity of the investment.
investment in these entities is recorded at cost. Post acquisition, the Company’s share of profits or losses of
associates and incorporated joint ventures is recognized in the income statement as equity accounted earnings.
The carrying amount of investments in associates and incorporated joint ventures is adjusted to recognize all
cumulative post-acquisition movements in the equity of the investment.
Goodwill relating to associates and incorporated joint ventures is included in the carrying value of the Company’s
investment in those entities. The total carrying value of equity accounted investments in associates and
incorporated joint ventures, including goodwill, is evaluated for impairment when conditions indicate that a decline
in fair value below the carrying amount is other than temporary or at least annually. When an indicated
impairment exists, the carrying value of the Company’s investment in those entities is written down to its fair
value. The Company’s share of results of equity accounted investees, that have financial years within three
months of the fiscal year-end of the Company, is included in the consolidated financial statements based on the
results reported by those investees for their financial years. There were no significant adjustments required to be
made in respect of equity accounted investees which have financial years that are different to those of the
Company.
investment in those entities. The total carrying value of equity accounted investments in associates and
incorporated joint ventures, including goodwill, is evaluated for impairment when conditions indicate that a decline
in fair value below the carrying amount is other than temporary or at least annually. When an indicated
impairment exists, the carrying value of the Company’s investment in those entities is written down to its fair
value. The Company’s share of results of equity accounted investees, that have financial years within three
months of the fiscal year-end of the Company, is included in the consolidated financial statements based on the
results reported by those investees for their financial years. There were no significant adjustments required to be
made in respect of equity accounted investees which have financial years that are different to those of the
Company.
Profits realized in connection with transactions between the Company and associated companies are eliminated
in proportion to share ownership.
in proportion to share ownership.
4.3 Foreign currency translation
Items included in the financial statements of each of the Company’s entities are measured using the currency of
the primary economic environment in which the entity operates (the ‘functional currency’).
the primary economic environment in which the entity operates (the ‘functional currency’).
Transactions and balances
Transactions in foreign currencies are converted at the rates of exchange ruling at the date of these transactions.
Monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange ruling at
balance sheet date. Non-monetary items are translated at historic rates. Gains, losses and costs associated
with foreign currency transactions are recognized in the income statement in the period to which they relate,
except where hedge accounting is applied. These transactions are included in the determination of other income.
Monetary assets and liabilities denominated in foreign currencies are translated at rates of exchange ruling at
balance sheet date. Non-monetary items are translated at historic rates. Gains, losses and costs associated
with foreign currency transactions are recognized in the income statement in the period to which they relate,
except where hedge accounting is applied. These transactions are included in the determination of other income.
Group
companies
The results and financial position of all group entities (none of which has the functional currency of a
hyperinflationary economy) that have a functional currency different from the presentation currency are translated
into the presentation currency as follows:
• equity items other than profit attributable to equity shareholders are translated at the closing rate on each
hyperinflationary economy) that have a functional currency different from the presentation currency are translated
into the presentation currency as follows:
• equity items other than profit attributable to equity shareholders are translated at the closing rate on each
balance sheet date;
• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that
balance sheet;
• income and expenses for each income statement are translated at average exchange rates (unless this
average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction
dates, in which case income and expenses are translated at the dates of the transactions); and
dates, in which case income and expenses are translated at the dates of the transactions); and
• all resulting exchange differences are recognized as a separate component of equity and included within other
comprehensive income.
Exchange differences arising from the translation of the net investment in foreign operations, and of borrowings
and other currency instruments designated as hedges of such investments, are taken to stockholders’ equity on
consolidation.
and other currency instruments designated as hedges of such investments, are taken to stockholders’ equity on
consolidation.
When a foreign operation is sold, cumulative exchange differences are recognized in the income statement as
part of the gain or loss on sale.
part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and
liabilities of the foreign operation and translated at the ruling closing rate at each balance sheet date.
liabilities of the foreign operation and translated at the ruling closing rate at each balance sheet date.
F-12
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.4 Segment reporting
A business segment is a group of assets and operations engaged in providing products or services that are
subject to risks and returns that are different from those of other business segments and are reported on a
reporting segment basis using a management approach. This approach is based on the way management
organizes segments within the Company for making operating decisions and assessing performance. The Chief
Operating Decision Maker has determined that the Company operates primarily in the delivery of one product,
namely Gold. A geographical segment is engaged in providing products or services within a particular economic
environment that is subject to risks and returns that are different from those of segments operating in other
economic environments.
subject to risks and returns that are different from those of other business segments and are reported on a
reporting segment basis using a management approach. This approach is based on the way management
organizes segments within the Company for making operating decisions and assessing performance. The Chief
Operating Decision Maker has determined that the Company operates primarily in the delivery of one product,
namely Gold. A geographical segment is engaged in providing products or services within a particular economic
environment that is subject to risks and returns that are different from those of segments operating in other
economic environments.
4.5 Cash and cash equivalents and restricted cash
Cash and cash equivalents consist of all cash balances and highly liquid investments with an original maturity of
three months or less. Due to the short maturity of cash equivalents, their carrying amounts approximate their fair
value. Restricted cash is reported separately in the consolidated balance sheets for all periods presented.
three months or less. Due to the short maturity of cash equivalents, their carrying amounts approximate their fair
value. Restricted cash is reported separately in the consolidated balance sheets for all periods presented.
4.6 Non-marketable debt securities
Investments in non-marketable debt securities for which the Company does not control or exercise significant
influence are classified as held to maturity are subsequently measured at amortized cost. If there is evidence
that held to maturity financial assets are impaired the carrying amount of the assets is reduced and the loss
recognized in the income statement.
influence are classified as held to maturity are subsequently measured at amortized cost. If there is evidence
that held to maturity financial assets are impaired the carrying amount of the assets is reduced and the loss
recognized in the income statement.
4.7 Marketable equity investments and debt securities
Marketable equity investments and debt securities which are considered available-for-sale, are carried at fair
value, and the net unrealized gains and losses computed in marking these securities to market are reported
within other comprehensive income in the period in which they arise. These amounts are removed from other
comprehensive income and reported in income when the asset is derecognized or when there is evidence that
the asset is impaired in accordance with the provisions of SFAS115, “Accounting for Certain Investments in Debt
and Equity Securities”.
value, and the net unrealized gains and losses computed in marking these securities to market are reported
within other comprehensive income in the period in which they arise. These amounts are removed from other
comprehensive income and reported in income when the asset is derecognized or when there is evidence that
the asset is impaired in accordance with the provisions of SFAS115, “Accounting for Certain Investments in Debt
and Equity Securities”.
Marketable debt securities that are classified as held to maturity are subsequently measured at amortized cost.
4.8 Inventories
Inventories, including gold in process, gold on hand (doré/bullion), uranium oxide, sulphuric acid, ore stockpiles
and supplies, are stated at the lower of cost or market value. Gold in process is valued at the average total
production cost at the relevant stage of production as described below. The cost of gold, uranium oxide and
sulphuric acid is determined principally by the weighted average cost method using related production costs.
and supplies, are stated at the lower of cost or market value. Gold in process is valued at the average total
production cost at the relevant stage of production as described below. The cost of gold, uranium oxide and
sulphuric acid is determined principally by the weighted average cost method using related production costs.
Ore stockpiles are valued at the average moving cost of mining the ore. Supplies are valued at the lower of
weighted average cost or market value. Heap leach pad materials are measured on an average total production
cost basis.
weighted average cost or market value. Heap leach pad materials are measured on an average total production
cost basis.
The cost of inventory is determined using the full absorption costing method for the stage of completed
production. Gold in process and ore stockpile inventory include all costs attributable to the stage of completion.
Costs capitalized to inventory include amortization of property, plant and equipment and capitalized mining costs,
direct and indirect materials, direct labor, shaft overhead expenses, repairs and maintenance, utilities, metallurgy
costs, attributable production taxes and royalties, and directly attributable mine costs. Gold on hand (doré/bullion)
includes all gold in process and refining costs. Ore is recorded in inventory when blasted underground, or when
placed on surface stockpiles in the case of open-pit operations.
production. Gold in process and ore stockpile inventory include all costs attributable to the stage of completion.
Costs capitalized to inventory include amortization of property, plant and equipment and capitalized mining costs,
direct and indirect materials, direct labor, shaft overhead expenses, repairs and maintenance, utilities, metallurgy
costs, attributable production taxes and royalties, and directly attributable mine costs. Gold on hand (doré/bullion)
includes all gold in process and refining costs. Ore is recorded in inventory when blasted underground, or when
placed on surface stockpiles in the case of open-pit operations.
F-13
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.8 Inventories (continued)
4.8 Inventories (continued)
The costs of materials currently contained on the leach pad are reported as a separate line item apart from
inventory. As at December 31, 2007, $49 million was classified as short term compared with $46 million as at
December 31, 2006 as the Company expects the related gold to be recovered within twelve months. The short
term portion of materials on the leach pad is determined by multiplying the average cost per ounce in inventory,
by the expected production ounces for the next twelve months. Based on data gathered and analyzed from heap
leach pad drilling results, and other studies and analysis completed, short-term heap leach pad inventory occurs
in two forms: (1) gold recoverable but yet to be dissolved (i.e. gold still in the ore), and (2) gold recoverable from
gold dissolved in solution within the leach pad (i.e. pore water). This estimate calculation was used in
determining the short term portion of materials on the leach pad as at December 31, 2007. As at December
31, 2007, $190 million was classified as long term compared with $149 million as at December 31, 2006.
inventory. As at December 31, 2007, $49 million was classified as short term compared with $46 million as at
December 31, 2006 as the Company expects the related gold to be recovered within twelve months. The short
term portion of materials on the leach pad is determined by multiplying the average cost per ounce in inventory,
by the expected production ounces for the next twelve months. Based on data gathered and analyzed from heap
leach pad drilling results, and other studies and analysis completed, short-term heap leach pad inventory occurs
in two forms: (1) gold recoverable but yet to be dissolved (i.e. gold still in the ore), and (2) gold recoverable from
gold dissolved in solution within the leach pad (i.e. pore water). This estimate calculation was used in
determining the short term portion of materials on the leach pad as at December 31, 2007. As at December
31, 2007, $190 million was classified as long term compared with $149 million as at December 31, 2006.
4.9
Development costs and stripping costs
Development costs relating to major programs at existing mines are capitalized. Development costs consist
primarily of expenditures to initially establish a mine and to expand the capacity of operating mines.
primarily of expenditures to initially establish a mine and to expand the capacity of operating mines.
Prior to January 1, 2006, stripping costs incurred in open-pit operations during the production phase to remove
additional waste were charged to operating costs on the basis of the average life of mine stripping ratio and the
average life of mine costs per tonne. The average stripping ratio was 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 was 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 were recalculated annually in the light of additional knowledge and changes in estimates. The
cost of the “excess stripping” was capitalized as mine development costs when the actual mining costs exceed
the sum of the adjusted tonnes mined, being the actual ore tonnes plus the product of the actual ore tonnes
multiplied by the average life of mine stripping ratio, multiplied by the life of mine cost per tonne. When the actual
mining costs were below the sum of the adjusted tonnes mined, being the actual ore tonnes plus the product of
the actual ore tonnes multiplied by the average life of mine stripping ratio, multiplied by the life of mine cost per
tonne, previously capitalized costs were expensed to increase the cost up to the average. Thus, the cost of
stripping in any period was reflective of the average stripping rates for the orebody as a whole.
additional waste were charged to operating costs on the basis of the average life of mine stripping ratio and the
average life of mine costs per tonne. The average stripping ratio was 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 was 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 were recalculated annually in the light of additional knowledge and changes in estimates. The
cost of the “excess stripping” was capitalized as mine development costs when the actual mining costs exceed
the sum of the adjusted tonnes mined, being the actual ore tonnes plus the product of the actual ore tonnes
multiplied by the average life of mine stripping ratio, multiplied by the life of mine cost per tonne. When the actual
mining costs were below the sum of the adjusted tonnes mined, being the actual ore tonnes plus the product of
the actual ore tonnes multiplied by the average life of mine stripping ratio, multiplied by the life of mine cost per
tonne, previously capitalized costs were expensed to increase the cost up to the average. Thus, the cost of
stripping in any period was reflective of the average stripping rates for the orebody as a whole.
Prior to January 1, 2006, capitalized stripping costs were included in the calculations of the impairment tests
performed in accordance with the provisions of SFAS144, “Accounting for the Impairment or Disposal of Long-
Lived Assets”. The practice of deferring stripping costs, had the effect of amortizing the cost of waste ore
removal over the expected life of mine rather than reflecting actual waste ore removal cost incurred in each
period presented. Deferred stripping costs deferred and amortized were included in production costs in the
consolidated statements of income for the year ended December 31, 2005.
performed in accordance with the provisions of SFAS144, “Accounting for the Impairment or Disposal of Long-
Lived Assets”. The practice of deferring stripping costs, had the effect of amortizing the cost of waste ore
removal over the expected life of mine rather than reflecting actual waste ore removal cost incurred in each
period presented. Deferred stripping costs deferred and amortized were included in production costs in the
consolidated statements of income for the year ended December 31, 2005.
On January 1, 2006, the Company adopted EITF Issue 04-6, “Accounting for Stripping Costs in the Mining
Industry”. In accordance with the guidance of Issue No. 04-6, post production stripping costs are considered
costs of the extracted minerals under a full absorption costing system and recognized as a component of
inventory to be recognized in cost of sales in the same period as the revenue from the sale of the inventory.
Additionally, capitalization of such costs are appropriate only to the extent inventory exists at the end of a
reporting period.
Industry”. In accordance with the guidance of Issue No. 04-6, post production stripping costs are considered
costs of the extracted minerals under a full absorption costing system and recognized as a component of
inventory to be recognized in cost of sales in the same period as the revenue from the sale of the inventory.
Additionally, capitalization of such costs are appropriate only to the extent inventory exists at the end of a
reporting period.
The guidance requires application through recognition of a cumulative effect adjustment to opening retained
earnings in the period of adoption, with no charge to current earnings for prior periods. The results for prior
periods have not been restated. Upon adoption, the cumulative effect of accounting change reduced opening
retained earnings by $73 million (net of Taxation), increased the value of inventory by $5 million, eliminated the
capitalized deferred stripping balance of $105 million, decreased Deferred taxation by $29 million, reduced Other
long-term assets by $3 million and decreased Minority interest by $1 million. Adoption of the new guidance had
no impact on the Company’s cash position or net cash from operations.
earnings in the period of adoption, with no charge to current earnings for prior periods. The results for prior
periods have not been restated. Upon adoption, the cumulative effect of accounting change reduced opening
retained earnings by $73 million (net of Taxation), increased the value of inventory by $5 million, eliminated the
capitalized deferred stripping balance of $105 million, decreased Deferred taxation by $29 million, reduced Other
long-term assets by $3 million and decreased Minority interest by $1 million. Adoption of the new guidance had
no impact on the Company’s cash position or net cash from operations.
F-14
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.10 Depreciation, depletion and amortization
Mine development costs, mine plant facilities and other fixed assets
Mine development costs, mine plant facilities and other fixed assets are recorded at cost less accumulated
amortization and impairments. Cost includes pre-production expenditure incurred during the development of a
mine and the present value of future decommissioning costs. Cost also includes finance charges capitalized
during the construction period where such expenditure is financed by borrowings.
amortization and impairments. Cost includes pre-production expenditure incurred during the development of a
mine and the present value of future decommissioning costs. Cost also includes finance charges capitalized
during the construction period where such expenditure is financed by borrowings.
Capitalized mine development costs include expenditure incurred to develop new orebodies, to define further
mineralization in existing orebodies and to expand the capacity of a mine. Where funds have been borrowed
specifically to finance a project, the amount of interest capitalized represents the actual borrowing costs incurred.
mineralization in existing orebodies and to expand the capacity of a mine. Where funds have been borrowed
specifically to finance a project, the amount of interest capitalized represents the actual borrowing costs incurred.
Depreciation, depletion and amortization of mine development costs are computed principally by the units-of-
production method based on estimated proven and probable mineral reserves. Proven and probable mineral
reserves reflect estimated quantities of economically recoverable reserves which can be recovered in the future
from known mineral deposits.
production method based on estimated proven and probable mineral reserves. Proven and probable mineral
reserves reflect estimated quantities of economically recoverable reserves which can be recovered in the future
from known mineral deposits.
Mine plant facilities are amortized using the lesser of their useful life or units-of-production method based on
estimated proven and probable mineral reserves. Main shafts are depleted using total proven and probable
reserves as the shaft will be used over the life of the mine. Other infrastructure costs including ramps, stopes,
laterals, etc and ore reserve development are depleted using proven and probable reserves applicable to that
specific area. When an area is vacated and there is no longer an intention to mine in that area due to a change
in mine plans, all costs that have not been depleted are written off.
estimated proven and probable mineral reserves. Main shafts are depleted using total proven and probable
reserves as the shaft will be used over the life of the mine. Other infrastructure costs including ramps, stopes,
laterals, etc and ore reserve development are depleted using proven and probable reserves applicable to that
specific area. When an area is vacated and there is no longer an intention to mine in that area due to a change
in mine plans, all costs that have not been depleted are written off.
Other fixed assets comprising vehicles and computer equipment, are depreciated by the straight-line method
over their estimated useful lives as follows:
over their estimated useful lives as follows:
·
vehicles up to five years; and
· computer equipment up to three years.
Acquired properties
Acquired properties are carried at amortized cost. Purchased undeveloped mineral interests are acquired
mineral rights and, in accordance with FSP141/142-1, are recorded as tangible assets as part of acquired
properties. The amount capitalized related to a mineral interest represents its fair value at the time it was
acquired, either as an individual asset purchase or as a part of a business combination. “Brownfield” stage
mineral interests represent interests in properties that are believed to potentially contain other mineralized
material, such as measured, indicated or inferred mineral resources with insufficient drill spacing to qualify as
proven and probable mineral reserves, that is in proximity to proven and probable mineral reserves and within an
immediate mine structure. “Greenfield” stage mineral interests represent interests in properties that are other
mine-related or greenfields exploration potential that are not part of measured or indicated resources and are
comprised mainly of material outside of a mine’s infrastructure. The Company’s mineral rights are enforceable
regardless of whether proven and probable mineral reserves have been established. The Company has the
ability and intent to renew mineral rights where the existing term is not sufficient to recover all identified and
valued proven and probable mineral reserves and/or undeveloped mineral interests.
mineral rights and, in accordance with FSP141/142-1, are recorded as tangible assets as part of acquired
properties. The amount capitalized related to a mineral interest represents its fair value at the time it was
acquired, either as an individual asset purchase or as a part of a business combination. “Brownfield” stage
mineral interests represent interests in properties that are believed to potentially contain other mineralized
material, such as measured, indicated or inferred mineral resources with insufficient drill spacing to qualify as
proven and probable mineral reserves, that is in proximity to proven and probable mineral reserves and within an
immediate mine structure. “Greenfield” stage mineral interests represent interests in properties that are other
mine-related or greenfields exploration potential that are not part of measured or indicated resources and are
comprised mainly of material outside of a mine’s infrastructure. The Company’s mineral rights are enforceable
regardless of whether proven and probable mineral reserves have been established. The Company has the
ability and intent to renew mineral rights where the existing term is not sufficient to recover all identified and
valued proven and probable mineral reserves and/or undeveloped mineral interests.
Brownfield properties are carried at acquired costs until such time as a mineral interest enters the production
stage and are amortized using the unit-of-production method based on estimated proven and probable mineral
reserves.
stage and are amortized using the unit-of-production method based on estimated proven and probable mineral
reserves.
Greenfield mineral interests are carried at acquired costs until such time as a mineral interest enters the
production stage and are amortized using the unit-of-production method based on estimated proven and
probable mineral reserves.
production stage and are amortized using the unit-of-production method based on estimated proven and
probable mineral reserves.
Both Brownfield properties and Greenfield mineral interests are evaluated for impairment as held for use assets
in accordance with the Company’s asset impairment accounting policy. See Note 4.13.
in accordance with the Company’s asset impairment accounting policy. See Note 4.13.
4.11 Other mining costs
Other mining costs including repair and maintenance costs incurred in connection with major maintenance
activities are charged to operations as incurred.
activities are charged to operations as incurred.
F-15
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.12 Goodwill
Where an investment in a subsidiary, joint venture or an associate is made, any excess of the purchase price
over the fair value of the attributable mineral reserves including value beyond proven and probable, acquired
properties and other net assets is recognized as goodwill.
over the fair value of the attributable mineral reserves including value beyond proven and probable, acquired
properties and other net assets is recognized as goodwill.
Goodwill relating to subsidiaries is tested for impairment at least annually or when indicators of impairment exist
and is carried at cost less accumulated impairment losses.
and is carried at cost less accumulated impairment losses.
Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to reporting units for the purpose of impairment testing.
Goodwill is allocated to reporting units for the purpose of impairment testing.
Goodwill in respect of subsidiaries is disclosed as goodwill. Goodwill relating to incorporated joint ventures and
associates is included within the carrying value of the investment in incorporated joint ventures and associates
and tested for impairment when indicators exist. See Note 4.2.
associates is included within the carrying value of the investment in incorporated joint ventures and associates
and tested for impairment when indicators exist. See Note 4.2.
An individual operating mine is not a typical "going-concern" business because of the finite life of its reserves.
The allocation of goodwill to an individual operating mine will result in an eventual goodwill impairment due to the
wasting nature of the mine reporting unit. In accordance with the provisions of SFAS142, the Company performs
its annual impairment review of assigned goodwill during the fourth quarter of each year.
The allocation of goodwill to an individual operating mine will result in an eventual goodwill impairment due to the
wasting nature of the mine reporting unit. In accordance with the provisions of SFAS142, the Company performs
its annual impairment review of assigned goodwill during the fourth quarter of each year.
4.13 Asset impairment
The Company evaluates its held-for-use long lived assets for impairment when events or changes in
circumstances indicate that the related carrying amount may not be recoverable. If the sum of estimated future
cash flows on an undiscounted basis is less than the carrying amount of the related asset, including goodwill, if
any, an asset impairment is considered to exist. The related impairment loss is measured by comparing
estimated future cash flows on a discounted basis to the carrying amount of the asset. Changes in significant
assumptions underlying future cash flow estimates may have a material effect on the Company’s financial
position and results of operations. Management’s estimate of future cash flows is subject to risk and
uncertainties. It is therefore reasonably possible that changes could occur which may affect the recoverability of
the group’s mining assets. The Company records a reduction of a group of assets to fair value as a charge to
earnings if expected future cash flows are less than the carrying amount. The Company estimates fair value by
discounting the expected future cash flows using a discount factor that reflects the risk-free rate of interest for a
term consistent with the period of expected cash flows, adjusted for asset specific and country risks. A low gold
price market, if sustained for an extended period of time, may result in asset impairments. In addition, an asset
impairment is considered to exist where the net selling price of an asset held for sale is below its carrying
amount. Once recognized an impairment loss is never reversed.
circumstances indicate that the related carrying amount may not be recoverable. If the sum of estimated future
cash flows on an undiscounted basis is less than the carrying amount of the related asset, including goodwill, if
any, an asset impairment is considered to exist. The related impairment loss is measured by comparing
estimated future cash flows on a discounted basis to the carrying amount of the asset. Changes in significant
assumptions underlying future cash flow estimates may have a material effect on the Company’s financial
position and results of operations. Management’s estimate of future cash flows is subject to risk and
uncertainties. It is therefore reasonably possible that changes could occur which may affect the recoverability of
the group’s mining assets. The Company records a reduction of a group of assets to fair value as a charge to
earnings if expected future cash flows are less than the carrying amount. The Company estimates fair value by
discounting the expected future cash flows using a discount factor that reflects the risk-free rate of interest for a
term consistent with the period of expected cash flows, adjusted for asset specific and country risks. A low gold
price market, if sustained for an extended period of time, may result in asset impairments. In addition, an asset
impairment is considered to exist where the net selling price of an asset held for sale is below its carrying
amount. Once recognized an impairment loss is never reversed.
4.14 Borrowing costs
Interest on borrowings relating to the financing of major capital projects under construction is capitalized during
the construction phase as part of the cost of the project. Such borrowing costs are capitalized over the period
during which the asset is being acquired or constructed and borrowings have been incurred. Capitalization
ceases when construction is interrupted for an extended period or when the asset is substantially complete.
Other borrowing costs are expensed as incurred.
the construction phase as part of the cost of the project. Such borrowing costs are capitalized over the period
during which the asset is being acquired or constructed and borrowings have been incurred. Capitalization
ceases when construction is interrupted for an extended period or when the asset is substantially complete.
Other borrowing costs are expensed as incurred.
4.15 Leased assets
Assets subject to finance leases are capitalized at the lower of fair value or present value of minimum lease
payments with the related lease obligation recognized at the same amount. Capitalized leased assets are
depreciated over the shorter of their estimated useful lives and the lease term. Finance lease payments are
allocated using the effective interest rate method, between the lease finance cost, which is included in finance
costs, and the capital repayment, which reduces the liability to the lessor.
payments with the related lease obligation recognized at the same amount. Capitalized leased assets are
depreciated over the shorter of their estimated useful lives and the lease term. Finance lease payments are
allocated using the effective interest rate method, between the lease finance cost, which is included in finance
costs, and the capital repayment, which reduces the liability to the lessor.
Operating lease rentals are charged against operating profits in a systematic manner related to the period the
assets concerned will be used.
assets concerned will be used.
F-16
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.16 Provisions
Provisions are recognized when the Company has a present obligation, whether legal or constructive, as a result
of a past event for which it is probable that an outflow of resources embodying economic benefits will be required
to settle the obligation and a reliable estimate can be made of the amount of the obligation.
of a past event for which it is probable that an outflow of resources embodying economic benefits will be required
to settle the obligation and a reliable estimate can be made of the amount of the obligation.
Provisions are measured at the present value of management’s best estimate of the expenditure required to
settle the present obligation at the balance sheet date. The discount rate used to determine the present value
reflects current market assessments of the time value of money and the risks specific to the liability.
settle the present obligation at the balance sheet date. The discount rate used to determine the present value
reflects current market assessments of the time value of money and the risks specific to the liability.
4.17 Taxation
Current and deferred taxation is recognized as income or expense and included in the profit or loss for the period,
except to the extent that the tax arises from a transaction or event which is recognized, in the same or a different
period directly in equity; or a business combination that is an acquisition. See Note 4.22.
except to the extent that the tax arises from a transaction or event which is recognized, in the same or a different
period directly in equity; or a business combination that is an acquisition. See Note 4.22.
Current taxation is measured on taxable income at the applicable enacted statutory rate.
The Company’s operation involves dealing with uncertainties and judgments in the application of complex tax
regulations in multiple jurisdictions. The final taxes paid are dependent upon many factors, including negotiations
with taxing authorities in various jurisdictions and resolution of disputes arising from federal, state, and
international tax audits. The Company recognizes potential liabilities and records tax liabilities for anticipated tax
audit issues in tax jurisdictions based on its estimate of whether, and the extent to which, additional taxes will be
due. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax
expense.
regulations in multiple jurisdictions. The final taxes paid are dependent upon many factors, including negotiations
with taxing authorities in various jurisdictions and resolution of disputes arising from federal, state, and
international tax audits. The Company recognizes potential liabilities and records tax liabilities for anticipated tax
audit issues in tax jurisdictions based on its estimate of whether, and the extent to which, additional taxes will be
due. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax
expense.
4.18 Asset retirement obligations and rehabilitation costs
The Company accounts for asset retirement obligations in accordance with Statement of Financial Accounting
Standards No. 143, “Accounting for Asset Retirement Obligations (AROs)” (“SFAS143”).
Standards No. 143, “Accounting for Asset Retirement Obligations (AROs)” (“SFAS143”).
AROs arise from the acquisition, development, construction and normal operation of mining property, plant and
equipment, due to government controls and regulations that protect the environment on the closure and
reclamation of mining properties. The asset is amortized over its estimated useful life. In accordance with the
provisions of SFAS143 the fair value of a liability for an asset retirement obligation is recorded in the period in
which it is incurred. When the liability is initially recorded, the cost is capitalized by increasing the carrying
amount of the related long-lived asset. Over time, the liability is increased to reflect an interest element
(accretion) considered in its initial measurement at fair value, and the capitalized cost is amortized over the useful
life of the related asset. Where the obligation arises from activities that are operational of nature and does not
give rise to future economic benefit, the capitalized cost is amortized in the period incurred. Upon settlement of
the liability, a gain or loss will be recorded if the actual cost incurred is different from the liability recorded.
equipment, due to government controls and regulations that protect the environment on the closure and
reclamation of mining properties. The asset is amortized over its estimated useful life. In accordance with the
provisions of SFAS143 the fair value of a liability for an asset retirement obligation is recorded in the period in
which it is incurred. When the liability is initially recorded, the cost is capitalized by increasing the carrying
amount of the related long-lived asset. Over time, the liability is increased to reflect an interest element
(accretion) considered in its initial measurement at fair value, and the capitalized cost is amortized over the useful
life of the related asset. Where the obligation arises from activities that are operational of nature and does not
give rise to future economic benefit, the capitalized cost is amortized in the period incurred. Upon settlement of
the liability, a gain or loss will be recorded if the actual cost incurred is different from the liability recorded.
Rehabilitation costs and related liabilities are based on the Company’s interpretation of current environmental
and regulatory requirements.
and regulatory requirements.
Based on current environmental regulations and known rehabilitation requirements, management has included its
best estimate of these obligations in its rehabilitation accrual. However, it is reasonably possible that the
Company’s estimates of its ultimate rehabilitation liabilities could change as a result of changes in regulations or
cost estimates.
best estimate of these obligations in its rehabilitation accrual. However, it is reasonably possible that the
Company’s estimates of its ultimate rehabilitation liabilities could change as a result of changes in regulations or
cost estimates.
Environmental liabilities other than rehabilitation costs which relate to liabilities from specific events are accrued
when they are known, probable and reasonably estimable.
when they are known, probable and reasonably estimable.
F-17
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.19 Product sales
Revenue from product sales is recognized when:
·
persuasive evidence of an arrangement exists;
· delivery has occurred or services have been rendered;
· the seller’s price to the buyer is fixed or determinable; and
· collectability is reasonably assured.
The sales price, net of any taxes, is fixed on either the terms of gold sales contracts or the gold spot price.
4.20 Financial instruments
Financial instruments recognized on the balance sheet include investments, loans receivable, trade and other
receivables, cash and cash equivalents, borrowings, derivatives, and trade and other payables. Financial
instruments are initially measured at cost, including transaction costs, when the group becomes a party to the
contractual arrangements. The subsequent measurement of derivative instruments is dealt with below.
receivables, cash and cash equivalents, borrowings, derivatives, and trade and other payables. Financial
instruments are initially measured at cost, including transaction costs, when the group becomes a party to the
contractual arrangements. The subsequent measurement of derivative instruments is dealt with below.
Derivatives
The Company accounts for derivative contracts in accordance with Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS133") as amended.
No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS133") as amended.
SFAS133 requires all contracts which meet the definition of a derivative, to be recognized on the balance sheet
as either assets or liabilities and recorded at fair value. Gains or losses arising from remeasuring derivatives to
fair value each period are to be accounted for either in the income statement or in other comprehensive income,
depending on the use and designation of the derivative and whether it qualifies for hedge accounting. The key
criterion which must be met in order to qualify for hedge accounting, is that the derivative must be highly effective
in offsetting the change in the fair value or cash flows of the hedged item.
as either assets or liabilities and recorded at fair value. Gains or losses arising from remeasuring derivatives to
fair value each period are to be accounted for either in the income statement or in other comprehensive income,
depending on the use and designation of the derivative and whether it qualifies for hedge accounting. The key
criterion which must be met in order to qualify for hedge accounting, is that the derivative must be highly effective
in offsetting the change in the fair value or cash flows of the hedged item.
Contracts that meet the criteria for hedge accounting are designated as the hedging instruments hedging the
variability of forecasted cash flows from the sale of AngloGold Ashanti’s production into the spot market, and are
classified as cash flow hedges under SFAS133. Where a derivative qualifies as the hedging instrument in a cash
flow hedge under SFAS133, changes in fair value of the hedging instruments, to the extent effective, are deferred
in other comprehensive income and reclassified to earnings as product sales when the hedged transaction
occurs. The ineffective portion of changes in fair value is reported in earnings as gains or losses on non-hedge
derivatives in the period in which they occur.
variability of forecasted cash flows from the sale of AngloGold Ashanti’s production into the spot market, and are
classified as cash flow hedges under SFAS133. Where a derivative qualifies as the hedging instrument in a cash
flow hedge under SFAS133, changes in fair value of the hedging instruments, to the extent effective, are deferred
in other comprehensive income and reclassified to earnings as product sales when the hedged transaction
occurs. The ineffective portion of changes in fair value is reported in earnings as gains or losses on non-hedge
derivatives in the period in which they occur.
All other contracts not meeting the criteria for the normal purchases and sales or hedge accounting, as defined in
SFAS133, are recorded at their fair market value, with changes in value at each reporting period recorded in
earnings as gains or losses on non-hedge derivatives.
SFAS133, are recorded at their fair market value, with changes in value at each reporting period recorded in
earnings as gains or losses on non-hedge derivatives.
Cash flows from derivative instruments accounted for as cash flow hedges are included in net cash provided by
operating activities in the statements of consolidated cash flows for all periods presented. Contracts that contain
‘off-market’ terms that result in the inflow of cash at inception are analogous to borrowing activities and, as such,
are treated as financing activities. All current and future cash flows associated with such instruments are
classified within the financing activities section of the consolidated cash flow statement. Contracts that contain
‘off-market’ terms that result in the outflow of cash at inception are analogous to lending activities and, as such,
are treated as investing activities. All current and future cash flows associated with such instruments are
classified within the investing activities of the consolidated statement of cash flows.
operating activities in the statements of consolidated cash flows for all periods presented. Contracts that contain
‘off-market’ terms that result in the inflow of cash at inception are analogous to borrowing activities and, as such,
are treated as financing activities. All current and future cash flows associated with such instruments are
classified within the financing activities section of the consolidated cash flow statement. Contracts that contain
‘off-market’ terms that result in the outflow of cash at inception are analogous to lending activities and, as such,
are treated as investing activities. All current and future cash flows associated with such instruments are
classified within the investing activities of the consolidated statement of cash flows.
The estimated fair values of derivatives are determined at discrete points in time based on the relevant market
information. These estimates are calculated with reference to the market rates using industry standard valuation
techniques.
information. These estimates are calculated with reference to the market rates using industry standard valuation
techniques.
Certain derivative instruments are designated as hedges of foreign currency denominated borrowings and
investments in foreign entities. This designation is reviewed at least quarterly, or as borrowing and investment
levels change. The hedge amounts (to the extent effective) are recorded as an offset to the translation
gains/losses that are being hedged.
investments in foreign entities. This designation is reviewed at least quarterly, or as borrowing and investment
levels change. The hedge amounts (to the extent effective) are recorded as an offset to the translation
gains/losses that are being hedged.
F-18
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.21 Employee benefits
Pension obligations
Group companies operate various pension schemes. The schemes are funded through payments to insurance
companies or trustee administered funds, determined by annual actuarial calculations. The Company has both
defined benefit and defined contribution plans. A defined benefit plan is a pension plan that defines an amount of
pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as
age, years of service and compensation.
companies or trustee administered funds, determined by annual actuarial calculations. The Company has both
defined benefit and defined contribution plans. A defined benefit plan is a pension plan that defines an amount of
pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as
age, years of service and compensation.
The current service cost in respect of defined benefit plans is recognized as an expense in the current year. Past
service costs, experience adjustments, the effect of changes in actuarial assumptions and the effects of plan
amendments in respect of existing employees are recognized as an expense or income as and when they arise.
This method is applied consistently in each period end to all gains and losses. See Note 2.
service costs, experience adjustments, the effect of changes in actuarial assumptions and the effects of plan
amendments in respect of existing employees are recognized as an expense or income as and when they arise.
This method is applied consistently in each period end to all gains and losses. See Note 2.
The asset/liability recognized in the balance sheet in respect of defined benefit pension plans is the present value
of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The defined benefit
obligation is calculated annually by independent actuaries using the projected unit credit method.
of the defined benefit obligation at the balance sheet date less the fair value of plan assets. The defined benefit
obligation is calculated annually by independent actuaries using the projected unit credit method.
A defined contribution plan is a pension plan under which the group pays fixed contributions into a separate
entity. The Company has no legal or constructive obligations to pay further contributions if the fund does not hold
sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.
The contributions are recognized as employee benefit expense when they are due. Prepaid contributions are
recognized as an asset to the extent that a cash refund or a reduction in the future payments is available.
entity. The Company has no legal or constructive obligations to pay further contributions if the fund does not hold
sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.
The contributions are recognized as employee benefit expense when they are due. Prepaid contributions are
recognized as an asset to the extent that a cash refund or a reduction in the future payments is available.
Other post-employment benefit obligations
Some group companies provide post-retirement healthcare benefits to their retirees. The entitlement to these
benefits is usually conditional on the employee remaining in service up to retirement age and the completion of a
minimum service period. The expected costs of these benefits are accrued over the period of employment using
an accounting methodology on the same basis as that used for defined benefit pension plans. These obligations
are valued annually by independent qualified actuaries. Actuarial gains and losses arising in the plan are
recognized as income or expense as and when they arise. See Note 2.
benefits is usually conditional on the employee remaining in service up to retirement age and the completion of a
minimum service period. The expected costs of these benefits are accrued over the period of employment using
an accounting methodology on the same basis as that used for defined benefit pension plans. These obligations
are valued annually by independent qualified actuaries. Actuarial gains and losses arising in the plan are
recognized as income or expense as and when they arise. See Note 2.
Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date, or when an
employee accepts voluntary redundancy in exchange for these benefits. The Company recognizes termination
benefits when it is demonstrably committed to either: terminating the employment of current employees according
to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer
made to encourage voluntary redundancy based on the number of employees expected to accept the offer.
Benefits falling due more than 12 months after balance sheet date are discounted to present value.
employee accepts voluntary redundancy in exchange for these benefits. The Company recognizes termination
benefits when it is demonstrably committed to either: terminating the employment of current employees according
to a detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer
made to encourage voluntary redundancy based on the number of employees expected to accept the offer.
Benefits falling due more than 12 months after balance sheet date are discounted to present value.
4.22 Deferred taxation
The Company follows the liability method of accounting for deferred taxation whereby the Company recognizes
the tax consequences of temporary differences by applying enacted tax rates applicable to future years to
differences between financial statement amounts and the tax bases of certain assets and liabilities. Changes in
deferred taxation assets and liabilities include the impact of any tax rate changes enacted during the year.
Principal temporary differences arise from depreciation on property, plant and equipment, derivatives, provisions
and tax losses carried forward. A valuation allowance is recorded to reduce the carrying amounts of deferred
taxation assets if it is more likely than not that such assets will not be realized.
the tax consequences of temporary differences by applying enacted tax rates applicable to future years to
differences between financial statement amounts and the tax bases of certain assets and liabilities. Changes in
deferred taxation assets and liabilities include the impact of any tax rate changes enacted during the year.
Principal temporary differences arise from depreciation on property, plant and equipment, derivatives, provisions
and tax losses carried forward. A valuation allowance is recorded to reduce the carrying amounts of deferred
taxation assets if it is more likely than not that such assets will not be realized.
F-19
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.23 Dividends paid
Dividends paid are recognized when declared by the board of directors. Dividends may be payable in Australian
dollars, South African rands, United Kingdom pounds or Ghanaian cedis. Dividends declared to foreign
stockholders are not subject to approval by the South African Reserve Bank in terms of South African foreign
exchange control regulations. Dividends are freely transferable to foreign stockholders from both trading and
non-trading profits earned in South Africa by publicly listed companies. Under South African law, the Company
may declare and pay dividends from any reserves included in total shareholders’ equity (including share capital
and premium) calculated in accordance with International Financial Reporting Standards (IFRS), subject to its
solvency and liquidity.
dollars, South African rands, United Kingdom pounds or Ghanaian cedis. Dividends declared to foreign
stockholders are not subject to approval by the South African Reserve Bank in terms of South African foreign
exchange control regulations. Dividends are freely transferable to foreign stockholders from both trading and
non-trading profits earned in South Africa by publicly listed companies. Under South African law, the Company
may declare and pay dividends from any reserves included in total shareholders’ equity (including share capital
and premium) calculated in accordance with International Financial Reporting Standards (IFRS), subject to its
solvency and liquidity.
4.24 Earnings per share
Earnings and diluted earnings per share have been calculated, for each class of common stock outstanding, in
accordance with SFAS128, “Earnings per Share”, using the two class method. Under the provisions of
SFAS128, basic net income (loss) per share is computed using the weighted average number of shares
outstanding during the period. Diluted net income (loss) per share is computed using the weighted average
number of Ordinary shares and, if dilutive, potential common shares outstanding during the period. The
computation of the diluted income (loss) per share of Ordinary shares assumes the conversion of E Ordinary
shares.
accordance with SFAS128, “Earnings per Share”, using the two class method. Under the provisions of
SFAS128, basic net income (loss) per share is computed using the weighted average number of shares
outstanding during the period. Diluted net income (loss) per share is computed using the weighted average
number of Ordinary shares and, if dilutive, potential common shares outstanding during the period. The
computation of the diluted income (loss) per share of Ordinary shares assumes the conversion of E Ordinary
shares.
The rights, including the liquidation, voting and dividend rights, of holders of Ordinary shares and E Ordinary
shares are identical. As a result, and in accordance with EITF 03-6, “Participating Securities and the Two-Class
Method under FASB Statement No. 128”, the undistributed earnings for each year are allocated based on the
contractual participation rights of the Ordinary and E Ordinary shares as if the earnings for the year had been
distributed. As only 50 percent of dividends are paid to E ordinary share holders in cash (the remaining
50 percent reduces the exercise price of the E ordinary shares), the undistributed earnings are allocated between
E ordinary shares and ordinary shares based on this proportionate basis. Further, as the Company assumes the
conversion of E Ordinary shares in the computation of the diluted net income (loss) per share of Ordinary shares,
the undistributed earnings are equal to net income (loss) for the computation.
shares are identical. As a result, and in accordance with EITF 03-6, “Participating Securities and the Two-Class
Method under FASB Statement No. 128”, the undistributed earnings for each year are allocated based on the
contractual participation rights of the Ordinary and E Ordinary shares as if the earnings for the year had been
distributed. As only 50 percent of dividends are paid to E ordinary share holders in cash (the remaining
50 percent reduces the exercise price of the E ordinary shares), the undistributed earnings are allocated between
E ordinary shares and ordinary shares based on this proportionate basis. Further, as the Company assumes the
conversion of E Ordinary shares in the computation of the diluted net income (loss) per share of Ordinary shares,
the undistributed earnings are equal to net income (loss) for the computation.
4.25 Exploration and evaluation costs
The Company expenses all exploration costs until the directors conclude that a future economic benefit is more
likely than not of being realized. In evaluating if expenditures meet this criterion to be capitalized, the directors
utilize several different sources of information depending on the level of exploration. While the criteria for
concluding that expenditure should be capitalized is always probable, the information that the directors use to
make that determination depends on the level of exploration.
likely than not of being realized. In evaluating if expenditures meet this criterion to be capitalized, the directors
utilize several different sources of information depending on the level of exploration. While the criteria for
concluding that expenditure should be capitalized is always probable, the information that the directors use to
make that determination depends on the level of exploration.
·
Costs on greenfields sites, being those where the Company does not have any mineral deposits which are
already being mined or developed, are expensed as incurred until the directors are able to demonstrate that
future economic benefits are probable, which generally will be the establishment of proved and probable
reserves at this location.
already being mined or developed, are expensed as incurred until the directors are able to demonstrate that
future economic benefits are probable, which generally will be the establishment of proved and probable
reserves at this location.
·
Costs on brownfields sites, being those adjacent to mineral deposits which are already being mined or
developed, are expensed as incurred until the directors are able to demonstrate that future economic
benefits are probable, which generally will be the establishment of increased proved and probable reserves
after which the expenditure is capitalized as a mine development cost.
developed, are expensed as incurred until the directors are able to demonstrate that future economic
benefits are probable, which generally will be the establishment of increased proved and probable reserves
after which the expenditure is capitalized as a mine development cost.
·
Costs relating to extensions of mineral deposits, which are already being mined or developed, including
expenditure on the definition of mineralization of such mineral deposits, are capitalized as mine
development costs.
expenditure on the definition of mineralization of such mineral deposits, are capitalized as mine
development costs.
Costs relating to property acquisitions are capitalized within development costs.
Drilling and related costs incurred on sites without an existing mine and on areas outside the boundary of a
known mineral deposit that contain proven and probable reserves are exploration expenditures and are expensed
as incurred.
known mineral deposit that contain proven and probable reserves are exploration expenditures and are expensed
as incurred.
F-20
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.25 Exploration and evaluation costs (continued)
4.25 Exploration and evaluation costs (continued)
Drilling and related costs incurred to define and delineate a residual mineral deposit that has not been classified
as proven and probable reserves at a development stage or production stage mine are capitalized when
management determines that there is sufficient evidence that the expenditure will result in a future economic
benefit to the company in the accounting period when the expenditure is made. Management evaluates whether
or not there is sufficient geologic and economic certainty of being able to convert a residual mineral deposit into a
proven and probable reserve at a development stage or production stage mine, based on the known geologic
and metallurgy, existing mining and processing facilities, operating permits and environmental programs.
Therefore prior to capitalizing such costs, management determines that the following conditions have been met:
as proven and probable reserves at a development stage or production stage mine are capitalized when
management determines that there is sufficient evidence that the expenditure will result in a future economic
benefit to the company in the accounting period when the expenditure is made. Management evaluates whether
or not there is sufficient geologic and economic certainty of being able to convert a residual mineral deposit into a
proven and probable reserve at a development stage or production stage mine, based on the known geologic
and metallurgy, existing mining and processing facilities, operating permits and environmental programs.
Therefore prior to capitalizing such costs, management determines that the following conditions have been met:
a.
There is a probable future benefit;
b.
AngloGold Ashanti can obtain the benefit and control access to it; and
c.
The transaction or event giving rise to it has already occurred.
The Company understands that there is diversity in practice within the mining industry, in that some companies
expense the drilling and related costs incurred to define and delineate residual mineral deposits that have not
been classified as proven and probable reserves at a development stage or production stage mine. Had
AngloGold Ashanti expensed such costs as incurred, net income, earnings per share and retained earnings
would have been lower by approximately the following amounts:
expense the drilling and related costs incurred to define and delineate residual mineral deposits that have not
been classified as proven and probable reserves at a development stage or production stage mine. Had
AngloGold Ashanti expensed such costs as incurred, net income, earnings per share and retained earnings
would have been lower by approximately the following amounts:
2007
2006
2005
Net income ($ millions)
1
12
13
Earnings per share
(1)
(cents)
-
5
5
Retained income – January 1 ($ millions)
59
47
34
Retained income – December 31 ($ millions)
60
59
47
(1)
Impact per basic and diluted earnings per common share.
4.26 Stock-based compensation plans
The Company’s management awards certain employees stock options on a discretionary basis.
The fair value of the stock-based payments is calculated at grant date using an appropriate model. For equity
settled stock-based payments, the fair value is determined using a Black-Scholes method and expensed on a
straight-line basis over the vesting period based on the group’s estimate of shares that will eventually vest.
settled stock-based payments, the fair value is determined using a Black-Scholes method and expensed on a
straight-line basis over the vesting period based on the group’s estimate of shares that will eventually vest.
Option schemes which include non-market vesting conditions have been calculated using the Black-Scholes
model. For all other stock-based payments to employees the fair value is determined by reference to the market
value of the underlying stock at grant date adjusted for the effects of the relevant terms and conditions. All other
stock-based payments fair values are determined by reference to the goods or services received.
model. For all other stock-based payments to employees the fair value is determined by reference to the market
value of the underlying stock at grant date adjusted for the effects of the relevant terms and conditions. All other
stock-based payments fair values are determined by reference to the goods or services received.
For schemes with non-market related vesting conditions, the likelihood of vesting has been taken into account
when determining the income statement charge. Vesting assumptions are reviewed during each reporting period
to ensure they reflect current expectations.
when determining the income statement charge. Vesting assumptions are reviewed during each reporting period
to ensure they reflect current expectations.
Stock options are subject to a three year vesting condition and their fair value is recognized as an employee
benefit expense with a corresponding increase in Additional paid in capital over the vesting period. The proceeds
received, net of any directly attributable transaction costs are credited to common stock (nominal value) and
Additional paid in capital when the options are exercised.
benefit expense with a corresponding increase in Additional paid in capital over the vesting period. The proceeds
received, net of any directly attributable transaction costs are credited to common stock (nominal value) and
Additional paid in capital when the options are exercised.
Prior to January 1, 2006, the Company accounted for share-based payments under the recognition and
measurement provisions of APB Opinion No. 25, “Accounting for Stock Issued to Employees, and related
Interpretations”, as permitted by SFAS123.
measurement provisions of APB Opinion No. 25, “Accounting for Stock Issued to Employees, and related
Interpretations”, as permitted by SFAS123.
On January 1, 2006, the Company adopted the fair value recognition provisions of SFAS123(R), “Share-Based
Payment”, using the modified prospective transition method. See Note 2.
Payment”, using the modified prospective transition method. See Note 2.
F-21
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.27 Recent pronouncements
On September 15, 2006 the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value
Measurements” (“SFAS157”).
Measurements” (“SFAS157”).
SFAS157 provides enhanced guidance for using fair value to measure assets and liabilities. Under SFAS157, fair
value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants in the market in which the reporting entity transacts. SFAS157 clarifies
the principle that fair value should be based on the assumptions market participants would use when pricing the
asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those
assumptions. SFAS157 also requires that fair value measurements be separately disclosed by level within the
fair value hierarchy. On February 12, 2008, the FASB issued FASB Staff Position No. FAS157-2, “Effective date
of FASB Statement No. 157” (“the FSP”). The FSP provides a one year deferral until January 1, 2009 for the
implementation of SFAS157 for certain non-financial assets and non-financial liabilities, except for those items
that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually).
The Company does not expect the adoption of SFAS157 to have a material impact on the Company’s financial
statements.
value refers to the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants in the market in which the reporting entity transacts. SFAS157 clarifies
the principle that fair value should be based on the assumptions market participants would use when pricing the
asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those
assumptions. SFAS157 also requires that fair value measurements be separately disclosed by level within the
fair value hierarchy. On February 12, 2008, the FASB issued FASB Staff Position No. FAS157-2, “Effective date
of FASB Statement No. 157” (“the FSP”). The FSP provides a one year deferral until January 1, 2009 for the
implementation of SFAS157 for certain non-financial assets and non-financial liabilities, except for those items
that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually).
The Company does not expect the adoption of SFAS157 to have a material impact on the Company’s financial
statements.
On September 29, 2006 the FASB issued Statement of Financial Accounting Standards No. 158, “Employers’
Accounting for Defined Benefit Pension and Other Post-retirement Plans, an amendment of FASB Statements
No. 87, 88, 106 and 132(R)” (“SFAS158”).
Accounting for Defined Benefit Pension and Other Post-retirement Plans, an amendment of FASB Statements
No. 87, 88, 106 and 132(R)” (“SFAS158”).
SFAS158 represents the completion of the first phase in the FASB's post-retirement benefits accounting project
and requires an entity to:
and requires an entity to:
·
recognize in its statement of financial position an asset for a defined benefit post-retirement plan's overfunded
status or a liability for a plan's underfunded status;
·
measure a defined benefit post-retirement plan's assets and obligations that determine its funded status as of
the same day of the employer's fiscal year-end statement of financial position;
·
recognize as a component of accumulated other comprehensive income, net of tax, amounts accumulated at
the date of adoption due to delayed recognition of actuarial gains and losses, prior service costs and credits,
and transition assets and obligations; and
and transition assets and obligations; and
·
expand the disclosure requirements of SFAS132(R) to include disclosure of additional information in the notes
to financial statements about certain effects on net periodic benefit cost in the next fiscal year that arise from
delayed recognition of actuarial gains or losses, prior service costs or credits and unrecognized transition
asset and obligations.
delayed recognition of actuarial gains or losses, prior service costs or credits and unrecognized transition
asset and obligations.
The Company adopted the provisions of SFAS158 in 2006, as required, except for the requirement to measure
the plan assets and benefit obligations at the fiscal year end, which is effective in fiscal years ending after
December 15, 2008. The Company is currently considering processes to meet these measurement requirements
of SFAS158.
the plan assets and benefit obligations at the fiscal year end, which is effective in fiscal years ending after
December 15, 2008. The Company is currently considering processes to meet these measurement requirements
of SFAS158.
On February 15, 2007 the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value
Option for Financial Assets and Financial Liabilities Including an amendment of FASB Statement
No. 115” (“SFAS159”).
Option for Financial Assets and Financial Liabilities Including an amendment of FASB Statement
No. 115” (“SFAS159”).
SFAS159 permits entities to choose to measure many financial instruments and certain other items at fair value.
The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in
reported earnings caused by measuring related assets and liabilities differently without having to apply complex
hedge accounting provisions.
The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in
reported earnings caused by measuring related assets and liabilities differently without having to apply complex
hedge accounting provisions.
The fair value option permits all entities to choose to measure eligible items at fair value at specified election
dates. A business entity shall report unrealized gains and losses on items for which the fair value option has been
elected in earnings at each subsequent reporting date.
dates. A business entity shall report unrealized gains and losses on items for which the fair value option has been
elected in earnings at each subsequent reporting date.
F-22
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.27 Recent pronouncements (continued)
4.27 Recent pronouncements (continued)
The fair value option:
·
may be applied instrument by instrument, with a few exceptions, such as investments otherwise accounted for
by the equity method;
·
is irrevocable (unless a new election date occurs); and
· is applied only to entire instruments and not to portions of instruments.
· is applied only to entire instruments and not to portions of instruments.
SFAS159 is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. The
Company will apply the provisions of SFAS159 from January 1, 2008. The Company does not expect the
adoption of SFAS159 to have a material impact on the Company’s financial statements.
Company will apply the provisions of SFAS159 from January 1, 2008. The Company does not expect the
adoption of SFAS159 to have a material impact on the Company’s financial statements.
In December 2007, the FASB issued FASB Statement No. 141(R), “Business Combinations” (“SFAS141(R)”).
SFAS141(R) requires the acquiring entity in a business combination to recognize all (and only) the assets
acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the
measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to
investors and other users all of the information they need to evaluate and understand the nature and financial
effect of the business combination. SFAS141(R) applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting period beginning on or after
December 15, 2008. An entity may not apply it before that date. SFAS141(R) applies to all transactions or other
events in which an entity (the acquirer) obtains control of one or more businesses (the acquiree), including
combinations achieved without the transfer of consideration. The Company is currently evaluating the potential
impact of adopting SFAS141(R) on the Company’s financial statements.
acquired and liabilities assumed in the transaction; establishes the acquisition-date fair value as the
measurement objective for all assets acquired and liabilities assumed; and requires the acquirer to disclose to
investors and other users all of the information they need to evaluate and understand the nature and financial
effect of the business combination. SFAS141(R) applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting period beginning on or after
December 15, 2008. An entity may not apply it before that date. SFAS141(R) applies to all transactions or other
events in which an entity (the acquirer) obtains control of one or more businesses (the acquiree), including
combinations achieved without the transfer of consideration. The Company is currently evaluating the potential
impact of adopting SFAS141(R) on the Company’s financial statements.
In December 2007, the FASB issued FASB Statement No. 160, “Noncontrolling Interests in Consolidated
Financial Statements” (“SFAS160”).
Financial Statements” (“SFAS160”).
SFAS160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a
subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is
an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial
statements. SFAS160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2008. Earlier adoption is prohibited. It shall be applied prospectively as of the beginning of
the fiscal year in which this Statement is initially adopted, except for the presentation and disclosure
requirements. The presentation and disclosure requirements shall be applied retrospectively for all periods
presented. The Company is currently evaluating the potential impact of adopting SFAS160 on the Company’s
financial statements.
subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is
an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial
statements. SFAS160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or
after December 15, 2008. Earlier adoption is prohibited. It shall be applied prospectively as of the beginning of
the fiscal year in which this Statement is initially adopted, except for the presentation and disclosure
requirements. The presentation and disclosure requirements shall be applied retrospectively for all periods
presented. The Company is currently evaluating the potential impact of adopting SFAS160 on the Company’s
financial statements.
In March 2008, the FASB issued FASB statement No. 161, “Disclosures about Derivative Instruments and
Hedging Activities – an amendment of FASB statement No. 133” (“SFAS161”).
Hedging Activities – an amendment of FASB statement No. 133” (“SFAS161”).
SFAS161 applies to all derivative instruments and nonderivative instruments that are designated and qualify as
hedging instruments pursuant to paragraphs 37 and 42 of SFAS133 and related hedged items accounted for
under SFAS133. SFAS161 requires enhanced disclosures about an entity’s derivative and hedging activities and
thereby improves the transparency of financial reporting. Entities are required to provide enhanced disclosures
about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged
items are accounted for under SFAS133 and its related interpretations, and (c) how derivative instruments and
related hedged items affect an entity’s financial position, results of operations and cash flows. SFAS161 is
effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008,
with early application encouraged. Comparative disclosures for earlier periods at initial adoption are encouraged
but not required. The Company does not expect the adoption of SFAS161 to have a material impact on the
Company’s financial statements.
hedging instruments pursuant to paragraphs 37 and 42 of SFAS133 and related hedged items accounted for
under SFAS133. SFAS161 requires enhanced disclosures about an entity’s derivative and hedging activities and
thereby improves the transparency of financial reporting. Entities are required to provide enhanced disclosures
about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged
items are accounted for under SFAS133 and its related interpretations, and (c) how derivative instruments and
related hedged items affect an entity’s financial position, results of operations and cash flows. SFAS161 is
effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008,
with early application encouraged. Comparative disclosures for earlier periods at initial adoption are encouraged
but not required. The Company does not expect the adoption of SFAS161 to have a material impact on the
Company’s financial statements.
F-23
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
4.
4.
SIGNIFICANT ACCOUNTING POLICIES (continued)
4.27 Recent pronouncements (continued)
4.27 Recent pronouncements (continued)
In May 2008, the FASB issued FASB Statement No. 162, “The Hierarchy of Generally Accepted Accounting
Principles” (“SFAS162”).
Principles” (“SFAS162”).
SFAS162 is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for
selecting accounting principles to be used in preparing financial statements that are presented in conformity with
U.S. generally accepted accounting principles (GAAP) for nongovernmental entities. SFAS162 is effective
60 days following the United States Securities and Exchange Commission (SEC's) approval of the Public
Company Accounting Oversight Board Auditing amendments to AU Section 411, “The Meaning of Present Fairly
in Conformity with Generally Accepted Accounting Principles”. The Company does not expect the adoption of
SFAS162 to have a material impact on the Company’s financial statements.
selecting accounting principles to be used in preparing financial statements that are presented in conformity with
U.S. generally accepted accounting principles (GAAP) for nongovernmental entities. SFAS162 is effective
60 days following the United States Securities and Exchange Commission (SEC's) approval of the Public
Company Accounting Oversight Board Auditing amendments to AU Section 411, “The Meaning of Present Fairly
in Conformity with Generally Accepted Accounting Principles”. The Company does not expect the adoption of
SFAS162 to have a material impact on the Company’s financial statements.
5.
COSTS AND EXPENSES
Employment Severance Costs
Total employee severance costs amounted to $19 million for 2007 (2006: $22 million, 2005: $26 million) and were due
to retrenchments reflecting mainly downsizing and rationalization of operations in the South Africa and Ghana regions.
Employee severance costs recorded in 2007, 2006 and 2005 included retrenchment costs of $5 million, $7 million and
$26 million, respectively, in the South African region (at Great Noligwa, Kopanang, Tau Lekoa, Mponeng, TauTona
and Savuka) and $14 million, $15 million and $nil million, respectively, in Ghana (at Obuasi) due to a planned
reduction in workforce.
to retrenchments reflecting mainly downsizing and rationalization of operations in the South Africa and Ghana regions.
Employee severance costs recorded in 2007, 2006 and 2005 included retrenchment costs of $5 million, $7 million and
$26 million, respectively, in the South African region (at Great Noligwa, Kopanang, Tau Lekoa, Mponeng, TauTona
and Savuka) and $14 million, $15 million and $nil million, respectively, in Ghana (at Obuasi) due to a planned
reduction in workforce.
Interest Expense
2007
$
2006
$
2005
$
Finance costs on bank loans and overdrafts
18
20
21
Finance costs on corporate bond
(1)
31
32
34
Finance costs on convertible bond
(2)
26
26
27
Capital lease charges
3
2
2
Discounting of non-current trade and other debtors
6
4
-
Other
1
3
12
85
87
96
Less : Amounts capitalized
(3)
(10)
(10)
(16)
75
77
80
(1)
On August 21, 2003 AngloGold issued an unsecured bond in the aggregate principal amount of R2 billion ($300 million). Refer to
Note 20.
(2)
On February 27, 2004, AngloGold Ashanti Holdings plc, a wholly-owned subsidiary of the Company, issued $1,000,000,000
2.375 percent guaranteed convertible bonds due 2009, convertible into ADSs and guaranteed by AngloGold Ashanti. Refer to
Note 20.
Note 20.
(3)
Interest capitalized on qualifying assets. Refer to Note 12.
Impairment of Assets
The impairment loss in respect of reporting units arose from the declining values of the remaining ore reserves and is
based on the estimated remaining cashflows computed at a discount. The impairment is made up as follows:
based on the estimated remaining cashflows computed at a discount. The impairment is made up as follows:
2007
$
2006
$
2005
$
Ghana
(1)
Impairment of Bibiani mine following an assessment and reduction in life of mine based on fair value
-
-
37
Impairment of goodwill held in Bibiani
-
-
4
Impairment of tax rate concession agreements
-
-
20
South Africa
(2)
Impairment of Goedgenoeg drilling and 1650 level decline drilling based on fair value
-
-
2
Impairment of East of Bank Dyke at TauTona access development based on fair value
-
-
4
Impairment of Western Ultra Deep Levels based on fair value
-
-
74
Other
Impairment and write-off of various minor tangible assets and equipment
1
6
-
1
6
141
(1)
Based on a pre-tax discount rate of 6.5 percent in Ghana (at Bibiani) the estimated fair value amount did not support the carrying
values and as a result, an impairment loss of $37 million on mining assets and $4 million on assigned goodwill was recorded
during 2005.
during 2005.
(2)
As the Company did not have the intention to mine and no future cash flows were expected from the Western Ultra Deep Levels
area (in South Africa), an impairment loss of $74 million was recorded during 2005.
F-24
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
5.
5.
COSTS AND EXPENSES (continued)
The Company evaluates its held-for-use long lived assets for impairment when events or changes in circumstances
indicate that the related carrying amount may not be recoverable. The carrying value of the related asset is compared
to its fair value.
indicate that the related carrying amount may not be recoverable. The carrying value of the related asset is compared
to its fair value.
The following estimates and assumptions were used by management when reviewing long-lived assets for
impairments:
impairments:
·
the forward gold price curve for the first 10 years, where a forward gold market and quoted prices exist (starting
point based on a 30-day average during the fourth-quarter of 2007 - $749 per ounce; (2006 - $630 per ounce).
Thereafter, the estimated future gold price has been increased by 2.25 percent (2006: 2.25 percent) per annum over
the remaining life of the mines. These prices have been adjusted for the effects of including the normal sale forward
contracts to arrive at an average received price across all of the reporting units. Prior to 2006, the normal sale
forward contracts were allocated to each reporting unit, based on the then prevailing contractual relationship with
hedge counterparts. Following the removal of certain hedge counterpart restrictions and the granting of group level
guarantees during 2006, the Company has applied an average received gold price across all reporting units. The
use of this approach has had a consequential impact on the fair value of the reporting units.
Thereafter, the estimated future gold price has been increased by 2.25 percent (2006: 2.25 percent) per annum over
the remaining life of the mines. These prices have been adjusted for the effects of including the normal sale forward
contracts to arrive at an average received price across all of the reporting units. Prior to 2006, the normal sale
forward contracts were allocated to each reporting unit, based on the then prevailing contractual relationship with
hedge counterparts. Following the removal of certain hedge counterpart restrictions and the granting of group level
guarantees during 2006, the Company has applied an average received gold price across all reporting units. The
use of this approach has had a consequential impact on the fair value of the reporting units.
· Proven and Probable Ore Reserves as well as value beyond proven and probable reserves estimates. For these
purposes Proven and Probable Ore Reserves of approximately 72.2 million ounces (including joint ventures) as at
December 31, 2007 were determined assuming a three year historical average gold price of $582 per ounce,
A$746 per ounce in Australia and R125,743 per kilogram in South Africa;
December 31, 2007 were determined assuming a three year historical average gold price of $582 per ounce,
A$746 per ounce in Australia and R125,743 per kilogram in South Africa;
· a real pre-tax discount rate adjusted for country risk and project risk for cash flows relating to mines not yet in
commercial production and deep level mining projects based on the discount rate applicable to the long-term dollar
market rates;
market rates;
· foreign currency cash flows are translated at estimated forward exchange rates and then discounted using
appropriate discount rates for that currency;
· cash flows used in impairment calculations are based on life of mine plans which exceed five years for the majority
of the mines; and
· variable operating cash flows are increased at local Consumer Price Index (CPI) rates.
The real pre-tax discount rates applied in the 2007 impairment calculations on reporting units with significant assigned
goodwill are as follows:
goodwill are as follows:
Percentage
Australia
Sunrise Dam
Sunrise Dam
11.0
Boddington
8.3
Tanzania
Geita
Geita
10.5
The Company reviews and tests the carrying value of long-lived assets, including goodwill, when events or changes in
circumstances suggest that the carrying amount may not be recoverable. Assets are grouped at the lowest level for
which identifiable cash flows are largely independent of cash flows of other assets. For long-lived assets other than
goodwill, if the sum of estimated future cash flows on an undiscounted basis is less than the carrying amount of the
related asset group, the long-lived asset group is not recoverable and the fair value should be determined. An
impairment loss is measured by comparing estimated future cash flows on a discounted basis to the carrying amount
of the asset. Goodwill is tested for impairment on an annual basis. Expected future cash flows used to determine the
fair value of goodwill and long-lived assets are inherently uncertain and could materially change over time. They are
significantly affected by a number of factors including reserves and production estimates, together with economic
factors such as spot and forward gold prices, discount rates, foreign currency exchange rates, estimates of costs to
produce reserves and future capital expenditure.
circumstances suggest that the carrying amount may not be recoverable. Assets are grouped at the lowest level for
which identifiable cash flows are largely independent of cash flows of other assets. For long-lived assets other than
goodwill, if the sum of estimated future cash flows on an undiscounted basis is less than the carrying amount of the
related asset group, the long-lived asset group is not recoverable and the fair value should be determined. An
impairment loss is measured by comparing estimated future cash flows on a discounted basis to the carrying amount
of the asset. Goodwill is tested for impairment on an annual basis. Expected future cash flows used to determine the
fair value of goodwill and long-lived assets are inherently uncertain and could materially change over time. They are
significantly affected by a number of factors including reserves and production estimates, together with economic
factors such as spot and forward gold prices, discount rates, foreign currency exchange rates, estimates of costs to
produce reserves and future capital expenditure.
F-25
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
5.
5.
COSTS AND EXPENSES (continued)
Should management’s estimate of the future not reflect actual events, further impairments may be identified. The
factors affecting the estimates include:
factors affecting the estimates include:
·
changes in Proven and Probable Ore Reserves as well as value beyond proven and probable reserves;
the grade of Ore Reserves as well as value beyond proven and probable reserves may vary significantly from time
to time;
the grade of Ore Reserves as well as value beyond proven and probable reserves may vary significantly from time
to time;
·
differences between actual commodity prices and commodity price assumptions;
· unforeseen operational issues at mine sites; and
· changes in capital, operating mining, processing and reclamation costs and foreign exchange rates.
· unforeseen operational issues at mine sites; and
· changes in capital, operating mining, processing and reclamation costs and foreign exchange rates.
Based on analysis, the carrying value and estimated fair values (on a discounted basis) of reporting units that are
most sensitive to a 5 percent movement in gold price, ounces, costs and discount rate assumptions are:
most sensitive to a 5 percent movement in gold price, ounces, costs and discount rate assumptions are:
Carrying amount
(including goodwill)
$
Estimated fair value
(discounted)
$
2007
Australia
Sunrise Dam
Australia
Sunrise Dam
603
648
Ghana
Obuasi
Obuasi
1,713
1,769
2006
South Africa
Tau Lekoa
South Africa
Tau Lekoa
124
126
Ghana
Obuasi
Obuasi
1,305
1,580
Should any of the assumptions used change adversely and the impact is not mitigated by a change in other factors,
this could result in an impairment of the above assets.
this could result in an impairment of the above assets.
It is impracticable to disclose the extent of the possible effects of changes in the assumptions for the future gold price
and hence life of mine plans at December 31, 2007 because these assumptions and others used in impairment testing
of long-lived assets and goodwill are inextricably linked. In addition, for those operations with a functional currency
other than the dollar, movements in the dollar exchange rate will also be a critical factor in determining the life of mine
and production plans.
and hence life of mine plans at December 31, 2007 because these assumptions and others used in impairment testing
of long-lived assets and goodwill are inextricably linked. In addition, for those operations with a functional currency
other than the dollar, movements in the dollar exchange rate will also be a critical factor in determining the life of mine
and production plans.
Therefore it is possible that outcomes within the next financial year that are different from the assumptions used in the
impairment testing process for goodwill and long-lived assets could require a material adjustment to the carrying
amounts disclosed at December 31, 2007.
impairment testing process for goodwill and long-lived assets could require a material adjustment to the carrying
amounts disclosed at December 31, 2007.
Asset Retirement Obligations
Long-term environmental obligations comprising decommissioning and restoration are based on the Company’s
environmental management plans, in compliance with the current environmental and regulatory requirements.
environmental management plans, in compliance with the current environmental and regulatory requirements.
(in US Dollars,
millions)
The following is a reconciliation of the total liabilities for asset retirement obligations:
Balance as at December 31, 2006
310
Additions to liabilities
66
Liabilities settled
(17)
Accretion expense
20
Change in assumptions
5
(1)
Translation
10
Balance as at December 31, 2007
394
(1)
Revisions relate to changes in laws and regulations governing the protection of the environment and factors relating to
rehabilitation estimates and a change in the quantities of material in reserves and a corresponding change in the life of mine
plan. These liabilities are anticipated to unwind beyond the end of the life of mine.
rehabilitation estimates and a change in the quantities of material in reserves and a corresponding change in the life of mine
plan. These liabilities are anticipated to unwind beyond the end of the life of mine.
F-26
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
5.
5.
COSTS AND EXPENSES (continued)
These liabilities mainly relate to obligations at the Company’s active and inactive mines to perform reclamation and
remediation activities in order to meet applicable existing environmental laws and regulations.
remediation activities in order to meet applicable existing environmental laws and regulations.
Certain amounts have been contributed to a rehabilitation trust and environmental protection bond under the
Company's control. The monies in the trust and bond are invested primarily in interest bearing debt securities and are
included in Other long-term assets in the Company’s consolidated balance sheet. Cash balances held in the trust and
bond are classified as restricted cash in the Company’s consolidated balance sheets for all periods presented. As at
December 31, 2007 and 2006 the balances held in the trust and bond (cash and investments) amounted to $80 million
and $91 million, respectively. Besides these assets there were no other assets that were legally restricted for
purposes of settling asset retirement obligations as at December 31, 2007.
Company's control. The monies in the trust and bond are invested primarily in interest bearing debt securities and are
included in Other long-term assets in the Company’s consolidated balance sheet. Cash balances held in the trust and
bond are classified as restricted cash in the Company’s consolidated balance sheets for all periods presented. As at
December 31, 2007 and 2006 the balances held in the trust and bond (cash and investments) amounted to $80 million
and $91 million, respectively. Besides these assets there were no other assets that were legally restricted for
purposes of settling asset retirement obligations as at December 31, 2007.
Operating Lease Charges
Operating lease rentals are charged against income in a systematic manner related to the period the leased property
will be used. Lease charges relate mainly to the hire of plant and machinery and other land and buildings.
will be used. Lease charges relate mainly to the hire of plant and machinery and other land and buildings.
Operating leases for plant and machinery are in terms of contracts entered with mining contractors to undertake mining
at certain operations. The contracts are for specified periods and include escalation clauses. Renewals are at the
discretion of the respective operating mine and allow a right of first refusal on the purchase of the mining equipment in
the case of termination of the contract. Certain contracts include the provision of penalties payable on early exiting or
cancellation.
at certain operations. The contracts are for specified periods and include escalation clauses. Renewals are at the
discretion of the respective operating mine and allow a right of first refusal on the purchase of the mining equipment in
the case of termination of the contract. Certain contracts include the provision of penalties payable on early exiting or
cancellation.
Rental Expense
(1)
2007
$
2006
$
2005
$
Comprising of:
Minimum rentals
Minimum rentals
51
40
44
(1)
Included in production costs for each period presented.
Future minimum rental payments are:
2008
2008
11
2009
1
2010
1
Thereafter
-
13
Loss/(profit) on Sale of Assets, Realization of Loans, Indirect Taxes and Other
2007
$
2006
$
2005
$
Profit on the sale of Mitchell Plateau and Cape Bougainville
-
-
(1)
Profit on disposal and abandonment of land, mineral rights and exploration properties
(1)
(10)
(48)
(2)
Recovery of loans previously written off
(2)
-
(14)
-
Non-recoverable value added state tax
(3)
5
9
-
Reassessment of indirect taxes and royalties payable in Guinea
11
(3)
-
Reassessment of indirect taxes payable in Tanzania
7
20
-
Recovery of exploration costs previously expensed in South Africa and South America (Peru)
(6)
-
-
Buildings destroyed by fire in Guinea
3
-
-
10
(36)
(3)
(1)
Refers to the disposal and abandonment of land, mineral rights and exploration properties situated in Brazil, Ghana,
South Africa, North America and Tanzania.
South Africa, North America and Tanzania.
(2)
Relates mainly to loans previously expensed as exploration costs as part of funding provided to the Yatela Joint Venture. The
Yatela Joint Venture is accounted for under the equity method. Refer to Note 15.
Yatela Joint Venture is accounted for under the equity method. Refer to Note 15.
(3)
Represents the write-off of value added state tax (at AngloGold Ashanti Brasil Mineração and Serra Grande) not expected to be
recovered from the Brazilian Government.
recovered from the Brazilian Government.
F-27
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
5.
5.
COSTS AND EXPENSES (continued)
Mining Contractor Termination Costs
Mining contractor termination costs of $9 million (before taxation of $3 million) recorded in 2005 related to contractor
termination costs at Geita, in Tanzania, on the transition to owner mining completed in early August 2005. No mining
contractor termination costs were recorded in 2007 and 2006.
termination costs at Geita, in Tanzania, on the transition to owner mining completed in early August 2005. No mining
contractor termination costs were recorded in 2007 and 2006.
Other Operating Items
2007
$
2006
$
2005
$
Comprising of:
Provision (reversed)/raised on loss on future deliveries of other commodities
Provision (reversed)/raised on loss on future deliveries of other commodities
(13)
15
(5)
Unrealized (gain)/loss on other commodity physical borrowings
(3)
1
14
(16)
16
9
6.
RELATED PARTY TRANSACTIONS
On October 26, 2005 Anglo American plc (AA plc) announced that it intended to reduce its shareholding in the
Company, while still intending to remain a significant shareholder in the medium term. During April 2006, AA plc
reduced its shareholding in the Company to less than 50 percent interest held, as the result of the sale in a public
offering, of some of its shares held in the Company and during October 2007, further to 16.61 percent interest held. As
at December 31, 2007, AA plc and its subsidiaries held an effective 16.58 percent (2006: 41.67 percent) interest in
AngloGold Ashanti. The Company had the following transactions with related parties during the years ended
December 31, 2007, 2006 and 2005:
Company, while still intending to remain a significant shareholder in the medium term. During April 2006, AA plc
reduced its shareholding in the Company to less than 50 percent interest held, as the result of the sale in a public
offering, of some of its shares held in the Company and during October 2007, further to 16.61 percent interest held. As
at December 31, 2007, AA plc and its subsidiaries held an effective 16.58 percent (2006: 41.67 percent) interest in
AngloGold Ashanti. The Company had the following transactions with related parties during the years ended
December 31, 2007, 2006 and 2005:
December 31, 2007
December 31, 2006
December 31, 2005
(in millions)
Purchases
(by)/from
related party
$
Amounts
owed to/(by)
related party
$
Purchases
(by)/from
related party
$
Amounts
owed to/(by)
related party
$
Purchases
(by)/from
related party
$
Related party transactions with
significant shareholder AA plc
significant shareholder AA plc
-
-
1
-
5
Related party transactions with
subsidiaries of AA plc
subsidiaries of AA plc
(1)
Boart Longyear Limited – mining services
(2)
-
-
-
-
5
Mondi Limited – forestry
-
-
5
-
16
Scaw Metals – A division of Anglo
Operations Limited – steel and engineering
Operations Limited – steel and engineering
-
-
1
-
6
Haggie Steel Wire Rope Operations
(3)
-
-
1
-
8
Anglo Coal – a division of Anglo Operations
Limited
Limited
-
-
-
-
1
Related party transactions of equity
accounted joint ventures and associates
Oro Group (Proprietary) Limited
accounted joint ventures and associates
Oro Group (Proprietary) Limited
-
(2)
-
(2)
-
Societe d'Exploitation des Mines d'Or de
Sadiola S.A.
Sadiola S.A.
(7)
(2)
(4)
(1)
-
Societe d'Exploitation des Mines d'Or de
Yatela S.A.
Yatela S.A.
(3)
(1)
(6)
(1)
(2)
Societe des Mines de Morila S.A.
(5)
(2)
(4)
-
(2)
Trans-Siberian Gold plc
(1)
(11)
-
(10)
-
(1)
Transactions to April 2006.
(2)
AA plc sold their interest in Boart Longyear Limited with effect from July 29, 2005.
(3)
Previously included in Scaw Metals – A division of Anglo Operations Limited.
Amounts owed to/due by joint venture related parties and the loan balance due to Goldmed Medical Scheme of
$1 million (2006: $nil), are unsecured, non-interest bearing and under terms that are no less favorable than those with
third parties.
$1 million (2006: $nil), are unsecured, non-interest bearing and under terms that are no less favorable than those with
third parties.
The Trans-Siberian Gold plc loan bears interest at LIBOR plus 4 percent and is convertible into equity under certain
circumstances at the option of the borrower.
circumstances at the option of the borrower.
The Oro Group (Proprietary) Limited loan bears interest at a rate determined by the Oro Group (Proprietary) Limited’s
board of directors and is repayable at their discretion.
board of directors and is repayable at their discretion.
F-28
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
6.
6.
RELATED PARTY TRANSACTIONS (continued)
The Company, which holds an equity interest of 29.8 percent in Trans-Siberian Gold plc (TSG), entered into a
transaction during the quarter ended June 30, 2007 with TSG in which two companies were acquired from TSG for a
cash consideration of $40 million. The companies acquired consist of Amikan (which holds the Veduga deposit, related
exploration and mining licenses) and AS APK (which holds the Bogunay deposit, related exploration and mining
licenses).
transaction during the quarter ended June 30, 2007 with TSG in which two companies were acquired from TSG for a
cash consideration of $40 million. The companies acquired consist of Amikan (which holds the Veduga deposit, related
exploration and mining licenses) and AS APK (which holds the Bogunay deposit, related exploration and mining
licenses).
In connection with the relocation of Roberto Carvalho Silva, an executive director of the Company since 2005, to
Nova Lima, Brazil, in 2000, Mr. Carvalho Silva commenced renting a house in Nova Lima from a Brazilian subsidiary of
the Company. Mr. Carvalho Silva purchased the house from the Company’s subsidiary in January 2005. The total
purchase price of the house was BRL1,150,000 ($429,923). Mr. Carvalho agreed to pay the purchase price of the
house in 60 installments, the first being BRL19,167.70 and 59 installments of BRL19,166.65 each, starting on
January 28, 2005. Such monthly installments were adjusted annually by the cumulative INPC (a Consumer Price Index
in Brazil) in lieu of interest. As at December 31, 2006, BRL728,580 ($340,458) of the purchase price remained to be
paid to the Company’s subsidiary, with BRL657,717 ($341,352) remaining to be paid as at June 20, 2007. The
remaining balance was repaid on or about August 31, 2007.
Nova Lima, Brazil, in 2000, Mr. Carvalho Silva commenced renting a house in Nova Lima from a Brazilian subsidiary of
the Company. Mr. Carvalho Silva purchased the house from the Company’s subsidiary in January 2005. The total
purchase price of the house was BRL1,150,000 ($429,923). Mr. Carvalho agreed to pay the purchase price of the
house in 60 installments, the first being BRL19,167.70 and 59 installments of BRL19,166.65 each, starting on
January 28, 2005. Such monthly installments were adjusted annually by the cumulative INPC (a Consumer Price Index
in Brazil) in lieu of interest. As at December 31, 2006, BRL728,580 ($340,458) of the purchase price remained to be
paid to the Company’s subsidiary, with BRL657,717 ($341,352) remaining to be paid as at June 20, 2007. The
remaining balance was repaid on or about August 31, 2007.
A Brazilian subsidiary of the Company received marketing, communications and corporate affairs services from a
Brazilian company in which a son of Roberto Carvalho Silva owns a one-third interest. The amounts paid by the
Company’s subsidiary to this company in respect of such services during the years were: 2007: BRL634,023
($329,055); 2006: BRL903,465 ($414,433) and in 2005: BRL311,923 ($127,837). The Company terminated the
agreement with the Brazilian marketing, communications and corporate affairs services company with effect July 2007.
Brazilian company in which a son of Roberto Carvalho Silva owns a one-third interest. The amounts paid by the
Company’s subsidiary to this company in respect of such services during the years were: 2007: BRL634,023
($329,055); 2006: BRL903,465 ($414,433) and in 2005: BRL311,923 ($127,837). The Company terminated the
agreement with the Brazilian marketing, communications and corporate affairs services company with effect July 2007.
7.
TAXATION
2007
$
2006
$
2005
$
(Loss)/income from continuing operations before income tax, equity income,
minority interests and cumulative effect of accounting change was derived from
the following jurisdictions:
minority interests and cumulative effect of accounting change was derived from
the following jurisdictions:
South Africa
(44)
79
(179)
Argentina
56
40
30
Australia
81
106
66
Brazil
21
114
81
Ghana
(207)
(128)
(139)
Guinea
(106)
(53)
(18)
Mali
5
6
-
Namibia
9
18
11
Tanzania
(383)
(213)
(86)
USA
(93)
(23)
(37)
Other, including Corporate and Non-gold producing subsidiaries
(50)
(42)
(92)
(711)
(96)
(363)
(Charge)/benefit for income taxes attributable to continuing operations is as
follows:
Current:
South Africa
follows:
Current:
South Africa
(1)
(92)
(66)
(40)
Argentina
(10)
(13)
-
Australia
(37)
(25)
(6)
Brazil
(2)
(38)
(38)
(23)
Ghana
-
(5)
-
Guinea
-
-
-
Mali
(2)
(2)
-
Namibia
(7)
(4)
-
Tanzania
(3)
(1)
-
USA
(1)
-
1
Other
(1)
(2)
(2)
Total current
(191)
(156)
(70)
F-29
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
7.
7.
TAXATION (continued)
(1)
Charges for current tax in 2007, 2006 and 2005 included an increase in
provision in respect of estimated tax payable amounting to $1 million, $1 million
and $40 million, respectively, as a result of the receipt of tax assessments for
the years ended December 31, 1998 to December 31, 2003. The increase in
the taxation charge in 2007 and 2006 partly relates to the higher gold price and
utilization of unredeemed capital expenditure.
provision in respect of estimated tax payable amounting to $1 million, $1 million
and $40 million, respectively, as a result of the receipt of tax assessments for
the years ended December 31, 1998 to December 31, 2003. The increase in
the taxation charge in 2007 and 2006 partly relates to the higher gold price and
utilization of unredeemed capital expenditure.
(2)
Charges for current tax in 2005 included $13 million relating to tax obligations
as a result of a change in interpretation of legislation made by the Brazilian
Superior Justice Court.
as a result of a change in interpretation of legislation made by the Brazilian
Superior Justice Court.
2007
$
2006
$
2005
$
Deferred:
South Africa
South Africa
(1)
52
(16)
95
Argentina
(1)
(2)
(10)
Australia
10
(4)
(10)
Brazil
(20)
4
(3)
Ghana
(2)
32
39
110
Guinea
(2)
(2)
(2)
Mali
-
-
-
Namibia
1
(3)
(4)
Tanzania
7
20
12
USA
-
-
-
Other
(6)
(2)
3
Total deferred
73
34
191
Total income and mining tax (expense)/benefit
(118)
(122)
121
(1)
Mining tax on mining income in South Africa is determined according to a
formula which adjusts the tax rate in accordance with the ratio of profit to
revenue from mining operations. This formula also allows an initial portion of
mining income to be free of tax. Non-mining income is taxed at a standard rate.
Estimated deferred taxation rates reflect the future anticipated taxation rates at
the time temporary differences reverse.
formula which adjusts the tax rate in accordance with the ratio of profit to
revenue from mining operations. This formula also allows an initial portion of
mining income to be free of tax. Non-mining income is taxed at a standard rate.
Estimated deferred taxation rates reflect the future anticipated taxation rates at
the time temporary differences reverse.
During 2007, 2006 and 2005, deferred taxation was provided at a future
anticipated taxation rate ranging between 39 percent to 37 percent for 2007,
and prior years at 37 percent and 38 percent, respectively. The increase in the
deferred tax benefit over 2006 is mainly due to the unrealized non-hedge
derivative losses due to the higher gold price. In addition, charges for deferred
taxation in 2005 included tax benefits of $13 million resulting from changes in
enacted statutory tax rates. There were no changes in the statutory tax rates
for 2007 and 2006.
anticipated taxation rate ranging between 39 percent to 37 percent for 2007,
and prior years at 37 percent and 38 percent, respectively. The increase in the
deferred tax benefit over 2006 is mainly due to the unrealized non-hedge
derivative losses due to the higher gold price. In addition, charges for deferred
taxation in 2005 included tax benefits of $13 million resulting from changes in
enacted statutory tax rates. There were no changes in the statutory tax rates
for 2007 and 2006.
The effect of the change in estimates on the results for 2007, 2006 and 2005
were as follows:
were as follows:
Year ended December 31, 2007
Impact
$
Per basic
and diluted
common share
(a)(b)
(cents)
Net income
23
8
(a)
Per basic and diluted ordinary and E ordinary shares.
(b)
The calculation of diluted earnings per common share for 2007 did not assume
the effect of 15,384,615 shares issuable upon the exercise of Convertible Bonds
and 595,934 shares issuable upon the exercise of stock incentive options as
their effects are anti-dilutive for this period.
and 595,934 shares issuable upon the exercise of stock incentive options as
their effects are anti-dilutive for this period.
F-30
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
7.
7.
TAXATION (continued)
Year ended December 31, 2006
Impact
$
Per basic
and diluted
common share
(a)(b)
(cents)
Net income
65
24
(a)
Per basic and diluted ordinary and E ordinary shares.
(b)
The calculation of diluted earnings per common share for 2006 did not assume
the effect of 15,384,615 shares issuable upon the exercise of Convertible Bonds
and 854,643 shares issuable upon the exercise of stock incentive options as
their effects are anti-dilutive for this period.
and 854,643 shares issuable upon the exercise of stock incentive options as
their effects are anti-dilutive for this period.
Year ended December 31, 2005
Impact
$
Per basic
and diluted
(a)
common share
(cents)
Net income
20
8
(a)
The calculation of diluted earnings per common share for 2005 did not assume
the effect of 15,384,615 shares issuable upon the exercise of Convertible Bonds
and 601,315 shares issuable upon the exercise of stock incentive options as
their effects are anti-dilutive for this period.
and 601,315 shares issuable upon the exercise of stock incentive options as
their effects are anti-dilutive for this period.
(2)
The deferred tax benefit in 2007 included $28 million arising from an increase
in tax losses. The deferred tax benefit in 2006 included $21 million resulting
from an extension of tax losses granted by the Ghanaian Taxation Authorities
which would have been forfeited during the year. During 2005 tax benefits of
$94 million resulted from changes in enacted statutory tax rates and is net of
valuation allowances of $4 million.
in tax losses. The deferred tax benefit in 2006 included $21 million resulting
from an extension of tax losses granted by the Ghanaian Taxation Authorities
which would have been forfeited during the year. During 2005 tax benefits of
$94 million resulted from changes in enacted statutory tax rates and is net of
valuation allowances of $4 million.
The unutilized tax losses of the North American operations which are available
for offset against future profits earned in the United States of America, amount
to $248 million (2006: $277 million, 2005: $198 million).
for offset against future profits earned in the United States of America, amount
to $248 million (2006: $277 million, 2005: $198 million).
The unutilized tax
losses of the Ghanaian operation, which are available for
offset against future profits earned in Ghana, amount to $nil million
offset against future profits earned in Ghana, amount to $nil million
(2006: $nil million, 2005: $146 million).
2007
$
Analysis of Unrecognized Tax Losses
Assessed losses utilized during the year
Assessed losses utilized during the year
28
Unutilized tax losses remaining to be used against future profits can be split
into the following periods:
into the following periods:
Utilization required within one year
1
Utilization required within one and two years
-
Utilization required within two and five years
-
Utilization in excess of five years
247
248
248
2007
$
%
2006
$
%
2005
$
%
Reconciliation between corporate income tax and statutory
income tax is as follows:
income tax is as follows:
Corporate income tax at statutory rates
(263)
37
(36)
37
(134)
37
Formula variation in mining taxation rate for current period
(3)
-
(2)
2
(4)
1
Disallowable expenditure
(1)
388
(55)
135
(140)
30
(8)
Effect of income tax rates of other countries
(9)
1
(38)
40
115
(32)
Impact of change in estimated deferred taxation rate
23
(3)
65
(68)
(127)
35
Other, net
(18)
3
(2)
2
(1)
-
Total income and mining tax expense/(benefit)
118
(17)
122
(127)
(121)
33
(1)
Disallowable expenditure includes the impact of hedge losses in non-taxable jurisdictions and share expense costs.
F-31
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
7.
7.
TAXATION (continued)
2007
$
2006
$
Deferred taxation liabilities and assets on the balance sheet as of December 31, 2007
and 2006, relate to the following:
and 2006, relate to the following:
Deferred taxation liabilities:
Depreciation, depletion and amortization
Depreciation, depletion and amortization
1,778
1,638
Product inventory not taxed
23
3
Derivatives
72
19
Other comprehensive income deferred taxation
18
72
Other
4
23
Total
1,895
1,755
Deferred taxation assets:
Provisions, including rehabilitation accruals
Provisions, including rehabilitation accruals
(210)
(171)
Derivatives
(97)
(175)
Other comprehensive income deferred taxation
(273)
(155)
Other
(10)
(23)
Tax loss carry forwards
(366)
(257)
Total
(956)
(781)
Less: Valuation allowances
99
97
Total
857
(684)
Disclosed as follows:
Long-term portion deferred taxation assets
Long-term portion deferred taxation assets
37
39
Short-term portion classified as other current assets
275
167
Long-term portion deferred taxation liabilities
1,345
1,275
Short-term portion classified as other current liabilities. Refer to Note 17.
5
2
The classification of deferred taxation assets is based on the related asset or
liability creating the deferred taxation. Deferred taxes not related to a specific
asset or liability are classified based on the estimated period of reversal. As at
December 31, 2007, the Company had no unredeemed capital expenditure, in
South Africa (2006: $8 million), on which deferred tax had been provided at the
future anticipated tax rate of 37 percent.
liability creating the deferred taxation. Deferred taxes not related to a specific
asset or liability are classified based on the estimated period of reversal. As at
December 31, 2007, the Company had no unredeemed capital expenditure, in
South Africa (2006: $8 million), on which deferred tax had been provided at the
future anticipated tax rate of 37 percent.
Unremitted Earnings of Foreign Subsidiaries and Foreign Incorporated
Joint Ventures
Joint Ventures
No provision is made for the income tax effect that may arise on the remittance
of unremitted earnings by certain foreign subsidiaries and foreign incorporated
joint ventures. It is management’s intention that these earnings will be
permanently re-invested in these entities. The amounts of these unremitted
earnings as at December 31, 2007 totaled $1,155 million (2006: $955 million). In
the event that the Company repatriated these earnings, income taxes and
withholding taxes may be incurred. The determination of such taxes is subject to
various complex calculations and accordingly, the Company has determined that
it is impractical to estimate the amount of the deferred tax liability on such
unremitted earnings.
of unremitted earnings by certain foreign subsidiaries and foreign incorporated
joint ventures. It is management’s intention that these earnings will be
permanently re-invested in these entities. The amounts of these unremitted
earnings as at December 31, 2007 totaled $1,155 million (2006: $955 million). In
the event that the Company repatriated these earnings, income taxes and
withholding taxes may be incurred. The determination of such taxes is subject to
various complex calculations and accordingly, the Company has determined that
it is impractical to estimate the amount of the deferred tax liability on such
unremitted earnings.
Analysis of Valuation Allowances
The movement in valuation allowances for the three years in the period ended December 31, is summarized as follows:
The movement in valuation allowances for the three years in the period ended December 31, is summarized as follows:
Balance at
beginning of
period
$
Provision/
(benefit)
expenses
$
Other
additions/
(deductions)
$
Balance at
end of period
$
Year ended December 31, 2007
- Valuation allowance
97
1
-
98
Year ended December 31, 2006
- Valuation allowance
112
(15)
-
97
Year ended December 31, 2005
- Valuation allowance
113
(1)
-
112
F-32
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
7.
7.
TAXATION (continued)
The deferred tax assets for the respective periods were assessed for
recoverability and, where applicable, a valuation allowance was recorded to
reduce the total deferred tax asset to an amount that will, more likely than not, be
realized in the future. The valuation allowance relates primarily to certain net
operating loss carryforwards, tax credit carryforwards and deductible temporary
differences for which we have concluded it is more likely than not that these items
will not be realized in the ordinary course of operations.
recoverability and, where applicable, a valuation allowance was recorded to
reduce the total deferred tax asset to an amount that will, more likely than not, be
realized in the future. The valuation allowance relates primarily to certain net
operating loss carryforwards, tax credit carryforwards and deductible temporary
differences for which we have concluded it is more likely than not that these items
will not be realized in the ordinary course of operations.
Although realization is not assured, we have concluded that it is more-likely-than-
not that the deferred tax assets for which a valuation allowance was determined to
be unnecessary will be realized in the ordinary course of operations based on the
available positive and negative evidence, including scheduling of deferred tax
liabilities and projected income from operating activities. The amount of the net
deferred tax assets considered realizable, however, could change in the near term
if actual future income or income tax rates differ from that estimated, or if there are
differences in the timing or amount of future reversals of existing taxable or
deductible temporary differences.
not that the deferred tax assets for which a valuation allowance was determined to
be unnecessary will be realized in the ordinary course of operations based on the
available positive and negative evidence, including scheduling of deferred tax
liabilities and projected income from operating activities. The amount of the net
deferred tax assets considered realizable, however, could change in the near term
if actual future income or income tax rates differ from that estimated, or if there are
differences in the timing or amount of future reversals of existing taxable or
deductible temporary differences.
Uncertain Tax Positions
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
(in $ millions)
Balance at January 1, 2007
109
Additions based on tax positions related to the current year
-
Additions for tax positions of prior years
22
Reductions for tax positions of prior years
-
Settlements
-
Translation
3
Balance at December 31, 2007
134
The Company’s continuing practice is to recognize interest and penalties related to unrecognized tax benefits as part
of its income tax expense. During the years ended December 31, 2007, 2006 and 2005, the Company recognized
approximately $9 million, $4 million and $26 million, respectively, in interest. The Company had approximately
$38 million and $28 million for the payment of interest accrued as at December 31, 2007 and 2006, respectively.
of its income tax expense. During the years ended December 31, 2007, 2006 and 2005, the Company recognized
approximately $9 million, $4 million and $26 million, respectively, in interest. The Company had approximately
$38 million and $28 million for the payment of interest accrued as at December 31, 2007 and 2006, respectively.
As at December 31, 2007, the Company's South African tax filings for the years 1998 - 2003 remain open to scrutiny
by the South African Revenue Service. As at December 31, 2007, in South Africa, the Company's assessments due
from the tax authorities for 2004 and all subsequent years have yet to be received. It is possible that the Company will
receive assessments during the next twelve months, which may have an effect on uncertain tax positions. The
Company cannot estimate the amounts of possible changes as a result of an assessment.
by the South African Revenue Service. As at December 31, 2007, in South Africa, the Company's assessments due
from the tax authorities for 2004 and all subsequent years have yet to be received. It is possible that the Company will
receive assessments during the next twelve months, which may have an effect on uncertain tax positions. The
Company cannot estimate the amounts of possible changes as a result of an assessment.
In all other jurisdictions, the revenue system is based on a self-assessment process, all tax filings due by
December 31, 2007 have been filed, and the self-assessed position recorded in the consolidated financial statements.
The legislation of individual jurisdictions provides for different periods for the authorities to review the filings with
specified expiry dates. The Company is disputing assessments received in some jurisdictions where it operates and
these arguments are under consideration by the authorities. Based on current legal advice, the Company does not
expect the resolution will significantly affect the Company's consolidated financial statements.
December 31, 2007 have been filed, and the self-assessed position recorded in the consolidated financial statements.
The legislation of individual jurisdictions provides for different periods for the authorities to review the filings with
specified expiry dates. The Company is disputing assessments received in some jurisdictions where it operates and
these arguments are under consideration by the authorities. Based on current legal advice, the Company does not
expect the resolution will significantly affect the Company's consolidated financial statements.
F-33
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
8.
DISCONTINUED OPERATIONS
The Ergo reclamation surface operation, which forms part of the South African
operations and is included under South Africa for segmental reporting, has been
discontinued as the operation has reached the end of its useful life and the assets are
no longer in use. After a detailed investigation of several options and scenarios, and
based on management’s decision reached on February 1, 2005, mining operations at
Ergo ceased on March 31, 2005 with only site restoration obligations remaining. On
June 8, 2007, the Company announced that it will sell, subject to certain conditions, to
a consortium of Mintails South Africa (Pty) Limited/DRD South African Operations
(Pty) Limited Joint Venture most of the remaining moveable and immovable assets of
Ergo. Refer to Note 3 – Acquisitions and disposals of businesses and assets. The
environmental rehabilitation program to restore the site continues until all legal and
sale conditions are met. The Company has reclassified the income statement results
from the historical presentation to profit/(loss) from discontinued operations in the
condensed consolidated income statement for all periods presented. The condensed
consolidated cash flow statement has been reclassified for discontinued operations
for all periods presented. The results of Ergo for the years ended December 31, 2007,
2006 and 2005, are summarized as follows:
operations and is included under South Africa for segmental reporting, has been
discontinued as the operation has reached the end of its useful life and the assets are
no longer in use. After a detailed investigation of several options and scenarios, and
based on management’s decision reached on February 1, 2005, mining operations at
Ergo ceased on March 31, 2005 with only site restoration obligations remaining. On
June 8, 2007, the Company announced that it will sell, subject to certain conditions, to
a consortium of Mintails South Africa (Pty) Limited/DRD South African Operations
(Pty) Limited Joint Venture most of the remaining moveable and immovable assets of
Ergo. Refer to Note 3 – Acquisitions and disposals of businesses and assets. The
environmental rehabilitation program to restore the site continues until all legal and
sale conditions are met. The Company has reclassified the income statement results
from the historical presentation to profit/(loss) from discontinued operations in the
condensed consolidated income statement for all periods presented. The condensed
consolidated cash flow statement has been reclassified for discontinued operations
for all periods presented. The results of Ergo for the years ended December 31, 2007,
2006 and 2005, are summarized as follows:
Year ended December 31,
2007
2006
2005
$
Per share
(1)(2)
(cents)
$
Per share
(1)(2)
(cents)
$
Per share
(2)
(cents)
Revenue
1
-
4
1
18
7
Costs, expenses and recoveries
5
2
2
1
(62)
(24)
Pre-tax profit/(loss)
6
2
6
2
(44)
(17)
Taxation
(4)
(1)
-
-
-
-
Net profit/(loss) attributable to discontinued operations
2
1
6
2
(44)
(17)
(1)
Per basic and diluted ordinary shares. Impact of E Ordinary shares for 2007 and 2006 is not significant.
(2)
Basic and diluted earnings/(loss) per common share. The calculation of diluted earnings/(loss) per common share for 2007, 2006 and 2005 did not
assume the effect of 15,384,615 shares, issuable upon the exercise of Convertible Bonds as their effects are anti-dilutive for these periods. The
calculation of diluted earnings/(loss) per common share for 2007, 2006 and 2005 did not assume the effect of 575,316, 854,643 and 601,315
shares, respectively, issuable upon the exercise of stock incentive options as their effects are anti-dilutive for these periods. The calculation of
diluted earnings per common share for 2007 and 2006 did not assume the effect of conversion of E Ordinary shares as the Company recorded a
loss from continuing operations during these periods.
assume the effect of 15,384,615 shares, issuable upon the exercise of Convertible Bonds as their effects are anti-dilutive for these periods. The
calculation of diluted earnings/(loss) per common share for 2007, 2006 and 2005 did not assume the effect of 575,316, 854,643 and 601,315
shares, respectively, issuable upon the exercise of stock incentive options as their effects are anti-dilutive for these periods. The calculation of
diluted earnings per common share for 2007 and 2006 did not assume the effect of conversion of E Ordinary shares as the Company recorded a
loss from continuing operations during these periods.
9.
LOSS PER COMMON SHARE
2007
$
2006
$
2005
$
The following table sets forth the computation of basic and diluted loss per share
(in millions, except per share data):
(in millions, except per share data):
Numerator
Loss before cumulative effect of accounting change
(814)
(142)
(270)
Cumulative effect of accounting change
-
-
(22)
Net loss
(814)
(142)
(292)
Less Dividends:
Ordinary shares
124
107
149
E Ordinary shares
1
-
-
Undistributed losses
(939)
(249)
(441)
Ordinary shares undistributed losses
(932)
(249)
(441)
E Ordinary shares undistributed losses
(1)
(7)
-
-
Total undistributed losses
(939)
(249)
(441)
Denominator for basic loss per ordinary share
Ordinary shares
276,805,309
272,214,937
264,230,586
Fully vested options
(2)
531,983
398,326
405,048
Weighted average number of ordinary shares
277,337,292
272,613,263
264,635,634
Effect of dilutive potential ordinary shares
Dilutive potential of stock incentive options
(3)
-
-
-
Dilutive potential of convertible bonds
(4)
-
-
-
Dilutive potential of E Ordinary shares
(5)
-
-
-
Denominator for diluted loss per share – adjusted weighted average number of
ordinary shares and assumed conversions
ordinary shares and assumed conversions
277,337,292
272,613,263
264,635,634
Weighted average number of E Ordinary shares used in calculation of basic
and diluted loss per E Ordinary share
and diluted loss per E Ordinary share
4,117,815
194,954
-
F-34
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
9.
9.
LOSS PER COMMON SHARE (continued)
2007
$
2006
$
2005
$
Loss per share (cents)
Before cumulative effect of accounting changes
Ordinary
shares
(292)
(52)
(102)
E Ordinary shares
(146)
(91)
-
Ordinary shares – diluted
(292)
(52)
(102)
E Ordinary shares – diluted
(146)
(91)
-
Cumulative effect of accounting changes
Ordinary
shares
-
-
(8)
E Ordinary shares
-
-
-
Ordinary shares – diluted
-
-
(8)
E Ordinary shares – diluted
-
-
-
Net
loss
Ordinary
shares
(292)
(52)
(110)
E Ordinary shares
(146)
(91)
-
Ordinary shares – diluted
(292)
(52)
(110)
E Ordinary shares – diluted
(146)
(91)
-
(1)
Rounded to zero in 2006.
(2)
Compensation awards are included in the calculation of basic loss per common share from when the necessary conditions have been met, and it is
virtually certain that shares will be issued as a result of employees exercising their options.
(3)
The calculation of diluted loss per common share for 2007, 2006 and 2005 did not assume the effect of 575,316, 854,643 and 601,315 shares,
respectively, issuable upon the exercise of stock incentive options as their effects are anti-dilutive for these periods.
(4)
The calculation of diluted loss per common share for 2007, 2006 and 2005 did not assume the effect of 15,384,615 shares issuable upon the
exercise of Convertible Bonds as their effects are anti-dilutive for these periods.
(5)
The calculation of diluted loss per common share for 2007 and 2006 did not assume the effect of conversion of E Ordinary shares as the Company
recorded a loss from continuing operations during these periods.
10.
RESTRICTED CASH
2007
$
2006
$
Cash classified as restricted for use comprise of the following:
Cash restricted by prudential solvency requirements
7
2
Cash balances held by the Environmental Rehabilitation Trust Fund
24
5
Cash balances held by the Boddington expansion
5
3
Other
1
1
37
11
11. INVENTORIES
Short-term:
Gold in process
133
111
Gold on hand (doré/bullion)
35
37
Ore
stockpiles
166
84
Uranium oxide and sulphuric acid
13
6
Supplies
225
162
572
400
Less: Heap leach inventory
(1)
(49)
(46)
523
354
(1)
Short-term portion relating to heap leach inventory classified separate, as
materials on the leach pad.
Long-term:
Gold in process
190
149
Ore
stockpiles
83
66
Supplies
1
2
274
217
Less: Heap leach inventory
(1)
(190)
(149)
84
68
(1)
Long-term portion relating to heap leach inventory classified separate, as
materials on the leach pad.
F-35
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
11. INVENTORIES (continued)
11. INVENTORIES (continued)
The Company recorded aggregate write-downs of $29 million, $2 million and
$nil million for the years ended December 31, 2007, 2006 and 2005, respectively, to
reduce the carrying value of inventories to net realizable value. Inventory write-
downs for 2007 and 2006 are included in production costs.
$nil million for the years ended December 31, 2007, 2006 and 2005, respectively, to
reduce the carrying value of inventories to net realizable value. Inventory write-
downs for 2007 and 2006 are included in production costs.
12.
PROPERTY, PLANT AND EQUIPMENT, NET
2007
$
2006
$
Mine
development
(1)
5,388
4,633
Buildings and mine infrastructure
2,729
2,293
Mineral rights and other
1,071
1,058
Land
28
26
9,216
8,010
Accumulated depreciation, depletion and amortization
(3,689)
(3,033)
Net book value December 31,
5,527
4,977
(1)
Includes interest capitalized of $10 million (2006: $10 million). Refer to Note 5.
Mining assets with a net book value of $38 million (2006: $6 million) are encumbered
by capital leases. Refer to Note 20.
by capital leases. Refer to Note 20.
13.
ACQUIRED PROPERTIES, NET
Acquired properties, at cost
2,039
1,983
Accumulated
amortization
(759)
(694)
Net book value December 31,
1,280
1,289
14.
GOODWILL AND OTHER INTANGIBLES
Goodwill
The carrying amount of goodwill by reporting unit as of December 31, 2007 and 2006 and changes in the carrying
amount of goodwill are summarized as follows:
The carrying amount of goodwill by reporting unit as of December 31, 2007 and 2006 and changes in the carrying
amount of goodwill are summarized as follows:
Australia
Ghana
Guinea
Namibia
Tanzania
Total
$
$
$
$
$
$
$
Balance at January 1, 2006
214
118
10
1
181
524
Impairment
losses
-
-
-
-
-
-
Translation
18
-
-
-
-
18
Balance at December 31, 2006
232
118
10
1
181
542
Impairment
losses
-
-
-
-
-
-
Translation
27
-
-
-
-
27
Balance at December 31, 2007
259
118
10
1
181
569
2007
$
2006
$
Other intangibles, net
Royalty rate concession agreement
(1)
Gross
carrying value
29
29
Accumulated
amortization
(7)
(5)
22
24
(1)
The government of Ghana agreed, as part of the AngloGold Ashanti Business
Combination, to a concession on royalty payments at a fixed rate of 3 percent
per year for a period of fifteen years. The fair value of the royalty rate
concession is amortized on a straight line basis over a period of fifteen years
with nil residual value.
Amortization expense included in the consolidated statements of income
amounted to $2 million for 2007 (2006: $2 million, 2005: $2 million).
Combination, to a concession on royalty payments at a fixed rate of 3 percent
per year for a period of fifteen years. The fair value of the royalty rate
concession is amortized on a straight line basis over a period of fifteen years
with nil residual value.
Amortization expense included in the consolidated statements of income
amounted to $2 million for 2007 (2006: $2 million, 2005: $2 million).
F-36
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
14. GOODWILL AND OTHER INTANGIBLES (continued)
14. GOODWILL AND OTHER INTANGIBLES (continued)
2007
$
Based on carrying value at December 31, 2007, the estimated aggregate
amortization expense for each of the next five years is as follows:
amortization expense for each of the next five years is as follows:
2008
2
2009
2
2010
2
2011
2
2012
2
15.
OTHER LONG-TERM ASSETS
2007
$
2006
$
Investments in affiliates – unlisted
6
5
Investments in affiliates – listed
15
31
Investments in equity accounted joint ventures
337
314
Carrying value of equity method investments
358
350
Investment in marketable equity securities – available for sale
34
31
Investment in marketable debt securities – held to maturity
15
18
Investment in non-marketable assets – held to maturity
2
3
Investment in non-marketable debt securities – held to maturity
52
61
Other non-current assets
98
80
559
543
Investments in affiliates
Unlisted
The Company holds a 25.0 percent (2006: 25.0 percent) interest in Oro Group
(Proprietary) Limited which is involved in the manufacture and wholesale of jewellery.
The year end of Oro Group (Proprietary) Limited is March. Results are included for the
twelve months ended September 30, 2007, adjusted for material transactions. On
September 21, 2006, Oro Group (Proprietary) Limited repaid a shareholders loan of
$1 million originally granted in 2000. The loan granted to Oro Group (Proprietary)
Limited of $2 million (2006: $2 million) bears interest at a rate determined by the Oro
Group (Proprietary) Limited’s board of directors and is repayable at their discretion.
The Company holds a 25.0 percent (2006: 25.0 percent) interest in Oro Group
(Proprietary) Limited which is involved in the manufacture and wholesale of jewellery.
The year end of Oro Group (Proprietary) Limited is March. Results are included for the
twelve months ended September 30, 2007, adjusted for material transactions. On
September 21, 2006, Oro Group (Proprietary) Limited repaid a shareholders loan of
$1 million originally granted in 2000. The loan granted to Oro Group (Proprietary)
Limited of $2 million (2006: $2 million) bears interest at a rate determined by the Oro
Group (Proprietary) Limited’s board of directors and is repayable at their discretion.
Listed
The Company holds a 29.8 percent (2006: 29.9 percent) interest in Trans-Siberian
Gold plc which is involved in the exploration and development of gold mines. The
Company’s initial 17.5 percent equity interest acquired in Trans-Siberian Gold plc
during July 2004 was increased to 29.9 percent on May 31, 2005, the date on which
the second subscription was completed. Refer to Note 3 – Acquisitions and disposals
of businesses and assets. The year end of Trans-Siberian Gold plc is December.
Results are included for the twelve months ended September 30, 2007, adjusted for
material transactions. On June 27, 2006, the Company advanced a loan of $10 million
to Trans-Siberian Gold plc at LIBOR plus 4 percent which is convertible into equity
under certain circumstances at the option of the borrower. The market value of the
Company’s share of the listed affiliate as at December 31, 2007 is $6 million. During
the years ended December 31, 2007, 2006 and 2005, the Company recorded
impairment losses of $14 million, $7 million and $nil million on its investment.
Gold plc which is involved in the exploration and development of gold mines. The
Company’s initial 17.5 percent equity interest acquired in Trans-Siberian Gold plc
during July 2004 was increased to 29.9 percent on May 31, 2005, the date on which
the second subscription was completed. Refer to Note 3 – Acquisitions and disposals
of businesses and assets. The year end of Trans-Siberian Gold plc is December.
Results are included for the twelve months ended September 30, 2007, adjusted for
material transactions. On June 27, 2006, the Company advanced a loan of $10 million
to Trans-Siberian Gold plc at LIBOR plus 4 percent which is convertible into equity
under certain circumstances at the option of the borrower. The market value of the
Company’s share of the listed affiliate as at December 31, 2007 is $6 million. During
the years ended December 31, 2007, 2006 and 2005, the Company recorded
impairment losses of $14 million, $7 million and $nil million on its investment.
F-37
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
15. OTHER LONG-TERM ASSETS (continued)
15. OTHER LONG-TERM ASSETS (continued)
Investments in equity accounted joint ventures
The Company holds the following interest in incorporated mining joint ventures, of
which the significant financial operating policies are, by contractual arrangement,
jointly controlled:
The Company holds the following interest in incorporated mining joint ventures, of
which the significant financial operating policies are, by contractual arrangement,
jointly controlled:
December 31,
2007
percentage held
December 31,
2006
percentage held
Nufcor International Limited
(1)
50.00
50.00
Sadiola
(2)
38.00
38.00
Morila
(2)
40.00
40.00
Yatela
(2)
40.00
40.00
(1)
Year end is June. Results are included for the twelve months ended December 31.
(2)
The year ends of these entities are December. Results are included for the twelve
months ended December 31.
2007
$
2006
$
Investment in marketable equity securities – available for sale
34
31
Available for sale investment in marketable equity securities consists of investments in
ordinary shares, associated purchase warrants and options.
ordinary shares, associated purchase warrants and options.
Total gains on marketable equity securities included in other comprehensive income
amount to $4 million (2006: $5 million). Total losses on marketable equity securities
included in other comprehensive income amount to $4 million (2006: $1 million).
amount to $4 million (2006: $5 million). Total losses on marketable equity securities
included in other comprehensive income amount to $4 million (2006: $1 million).
Investment in marketable debt securities – held to maturity
Investments in marketable securities represent held to maturity government and
corporate bonds. The investment is measured at amortized cost.
Investments in marketable securities represent held to maturity government and
corporate bonds. The investment is measured at amortized cost.
15
18
Investment in non-marketable assets – held to maturity
Investments in non-marketable assets represent secured loans and receivables
secured by pledge of assets.
Investments in non-marketable assets represent secured loans and receivables
secured by pledge of assets.
2
3
Investment in non-marketable debt securities – held to maturity
Investments in non-marketable securities represent the held to maturity fixed-term
deposits required by legislation for the Environmental Rehabilitation Trust Fund and
Environmental Protection Bond.
Investments in non-marketable securities represent the held to maturity fixed-term
deposits required by legislation for the Environmental Rehabilitation Trust Fund and
Environmental Protection Bond.
52
61
As of December 31, 2007 the contractual maturities of debt securities were as follows:
Marketable debt securities
Up to three years
10
Three to seven years
1
Seven to twelve years
4
15
Non-marketable debt securities
Less than one year
40
More than twelve years
12
52
52
Fair values of the held to maturity debt securities at December 31, 2007 and 2006
approximate cost.
approximate cost.
Other non-current assets
Unsecured
Unsecured
Other loans and assets
(1)
41
44
41
44
F-38
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
15. OTHER LONG-TERM ASSETS (continued)
15. OTHER LONG-TERM ASSETS (continued)
2007
$
2006
$
Non-current debtors
Prepayments and accrued income
8
5
Recoverable tax, rebates, levies and duties
47
25
Other trade debtor
(2)
2
3
Other
debtors
-
3
57
36
98
80
(1)
Other comprises loans and receivables of $2 million (2006: $4 million) measured at amortized
cost and post retirement assets of $39 million (2006: $40 million) measured according to the
employee benefits accounting policy.
cost and post retirement assets of $39 million (2006: $40 million) measured according to the
employee benefits accounting policy.
(2)
Non-interest bearing and repayable over three years.
Equity accounted joint ventures
Summarized financial statements of the joint ventures which have been equity
accounted are as follows (100 percent shown):
accounted are as follows (100 percent shown):
2007
$
2006
$
2005
$
Statements of income for the period
Sales and other income
716
817
600
Costs and expenses
(465)
(465)
(496)
Taxation
(115)
(90)
(6)
Net income
136
262
98
Balance sheets at December 31,
Non-current assets
697
720
Current assets
506
438
1,203
1,158
Long-term
liabilities
(102)
(89)
Loans from shareholders
(9)
(19)
Current
liabilities
(257)
(268)
Net assets
835
782
16.
ASSETS AND LIABILITIES HELD FOR SALE
2007
$
2006
$
Effective June 30, 2005, the investment in the Weltevreden mining rights, located in
South Africa, of $15 million, was classified as held for sale. This investment was
previously recognised as a tangible asset. Weltevreden's rights were sold to Aflease
Gold and Uranium Resources Limited on June 15, 2005. On December 19, 2005,
Aflease was acquired by sxr Uranium One (formerly Southern Cross Inc.). In terms of
these sale agreements, the purchase price would be paid in the form of sxr Uranium
One shares to be issued to the Company. The conditions precedent to the agreement
were not fulfilled by the expiry date of December 31, 2007. Consequently, the
agreement lapsed and a new agreement is being negotiated with Aflease Gold Limited.
The negotiation terms include a purchase consideration of R288 million ($42 million) to
be paid in the form of Aflease shares to be issued to the Company. In addition,
conditions precedent include the approval by the Minister of Minerals and Energy of the
cession of the Weltevreden mining right from AngloGold Ashanti to Aflease,
unconditional approval of the transaction by the Competition Commission and approval
by the JSE Limited of the issue and allotment of Aflease shares.
South Africa, of $15 million, was classified as held for sale. This investment was
previously recognised as a tangible asset. Weltevreden's rights were sold to Aflease
Gold and Uranium Resources Limited on June 15, 2005. On December 19, 2005,
Aflease was acquired by sxr Uranium One (formerly Southern Cross Inc.). In terms of
these sale agreements, the purchase price would be paid in the form of sxr Uranium
One shares to be issued to the Company. The conditions precedent to the agreement
were not fulfilled by the expiry date of December 31, 2007. Consequently, the
agreement lapsed and a new agreement is being negotiated with Aflease Gold Limited.
The negotiation terms include a purchase consideration of R288 million ($42 million) to
be paid in the form of Aflease shares to be issued to the Company. In addition,
conditions precedent include the approval by the Minister of Minerals and Energy of the
cession of the Weltevreden mining right from AngloGold Ashanti to Aflease,
unconditional approval of the transaction by the Competition Commission and approval
by the JSE Limited of the issue and allotment of Aflease shares.
Rand Refinery Limited (a subsidiary of the Company) allocated parts of its premises
previously recognized as a tangible asset, to held for sale. Rand Refinery Limited
intends to sell off parts of the estate that are no longer utilized within the next twelve
months. A buyer has been found, a sale agreement has been drawn up and parties are
in the process of finalizing the agreement.
previously recognized as a tangible asset, to held for sale. Rand Refinery Limited
intends to sell off parts of the estate that are no longer utilized within the next twelve
months. A buyer has been found, a sale agreement has been drawn up and parties are
in the process of finalizing the agreement.
14
1
9
-
F-39
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
16. ASSETS AND LIABILITIES HELD FOR SALE (continued)
16. ASSETS AND LIABILITIES HELD FOR SALE (continued)
2007
$
2006
$
Effective June 30, 2007, exploration properties acquired from Trans-Siberian Gold plc
situated in Russia were classified as held for sale. The expected cash sale of these
exploration properties forms part of the strategic alliance between Polymetal and
AngloGold Ashanti, which is expected to be concluded during 2008.
situated in Russia were classified as held for sale. The expected cash sale of these
exploration properties forms part of the strategic alliance between Polymetal and
AngloGold Ashanti, which is expected to be concluded during 2008.
15
-
Arising from the sale of the Bibiani assets in Ghana, effective December 28, 2006, to
Central African Gold plc (CAG), the Company decided to apply $3 million of the partial
proceeds to an investment of 15,825,902 CAG shares. Subsequent to this decision,
local regulators required that the 15,825,902 shares in CAG be sold within 90 days of
December 28, 2006. On February 14, 2007, the Company disposed of 7,000,000 CAG
shares yielding total proceeds of £768,845 ($1.5 million) and during April 2007,
disposed of the remaining 8,825,902 CAG shares yielding total proceeds of £894,833
($1.8 million). The investment as at December 31, 2006 was carried at fair value less
costs to sell.
Central African Gold plc (CAG), the Company decided to apply $3 million of the partial
proceeds to an investment of 15,825,902 CAG shares. Subsequent to this decision,
local regulators required that the 15,825,902 shares in CAG be sold within 90 days of
December 28, 2006. On February 14, 2007, the Company disposed of 7,000,000 CAG
shares yielding total proceeds of £768,845 ($1.5 million) and during April 2007,
disposed of the remaining 8,825,902 CAG shares yielding total proceeds of £894,833
($1.8 million). The investment as at December 31, 2006 was carried at fair value less
costs to sell.
-
3
As at December 31, 2007 and 2006 the carrying amounts of major classes of assets
and liabilities classified as held for sale, included:
and liabilities classified as held for sale, included:
Property, plant and equipment
16
15
Acquired properties
15
-
Other long-term assets (marketable equity investment)
-
3
Deferred taxation
(1)
(6)
Net assets
30
12
17.
OTHER CURRENT LIABILITIES
Deferred income
Deferred income
20
17
Deferred taxation. Refer to Note 7.
5
2
Accrual for power
17
14
Unearned premiums
43
41
Other (including accrued liabilities)
47
52
132
126
18.
SHORT-TERM DEBT
Current maturities of long-term debt. Refer to Note 20.
319
33
19.
OTHER NON-CURRENT LIABILITIES
Deferred income
Deferred income
11
24
Taxation
134
-
Related parties
1
-
146
24
20.
LONG-TERM DEBT
Unsecured
Convertible bond
Convertible bond
(1)
Fixed semi-annual coupon of 2.375% per annum. The bond is convertible, at the
holders’ option, into ADSs up to February 2009 and is US dollar-based. The bond is
convertible at a price of $65.00 per ADS.
holders’ option, into ADSs up to February 2009 and is US dollar-based. The bond is
convertible at a price of $65.00 per ADS.
1,008
1,008
Syndicated loan facility ($1,150 million) - Drawn down in US dollars and
Australian dollars
(2)
Interest charged at LIBOR plus 0.4% per annum. Loan is repayable in December 2010
and is US dollar-based. The loan is subject to debt covenant arrangements for which no
default event occurred.
and is US dollar-based. The loan is subject to debt covenant arrangements for which no
default event occurred.
526
-
Corporate bond
(3)
Fixed semi-annual coupon of 10.5% per annum. The bond is repayable on
August 28, 2008 and is ZAR-based.
August 28, 2008 and is ZAR-based.
304
296
F-40
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
20.
20.
LONG-TERM DEBT (continued)
2007
$
2006
$
Syndicated loan facility ($700 million)
Interest charged at LIBOR plus 0.4% per annum. Loan was repaid in December 2007 and
was US dollar-based. The loan was subject to certain debt covenant arrangements for
which no default event occurred.
Interest charged at LIBOR plus 0.4% per annum. Loan was repaid in December 2007 and
was US dollar-based. The loan was subject to certain debt covenant arrangements for
which no default event occurred.
-
181
Bank Belgolaise
Interest charged at LIBOR plus 1.5% per annum. Loan was repayable in 24 equal
monthly installments commencing October 2005 and was US dollar-based.
Interest charged at LIBOR plus 1.5% per annum. Loan was repayable in 24 equal
monthly installments commencing October 2005 and was US dollar-based.
-
2
Bank overdraft
Bank overdraft at market-related rates (2006: Ghanaian Cedi-based).
Bank overdraft at market-related rates (2006: Ghanaian Cedi-based).
-
8
Total unsecured borrowings
1,838
1,495
Secured
Capital leases
Turbine Square Two (Proprietary) Limited
Capital leases
Turbine Square Two (Proprietary) Limited
(4)
The leases are capitalized at an implied interest rate of 9.8% per annum. Lease payments
are due in monthly installments terminating in March 2022 and are ZAR-based. The
buildings financed are used as security for these loans. Refer to Note 12.
are due in monthly installments terminating in March 2022 and are ZAR-based. The
buildings financed are used as security for these loans. Refer to Note 12.
37
-
Senstar Capital Corporation
(5)
Interest charged at a weighted average rate of 6.9% per annum. Loans are repayable in
monthly installments terminating in November 2009 and are US dollar-based. The
equipment financed is used as security for these loans. Refer to Note 12.
monthly installments terminating in November 2009 and are US dollar-based. The
equipment financed is used as security for these loans. Refer to Note 12.
5
8
Terex Africa (Proprietary) Limited
(6)
Interest charged at a rate of 9.0% per annum. Loan is repayable in January 2008 and is
US dollar-based. The equipment financed is used as security for this loan. Refer to
Note 12.
US dollar-based. The equipment financed is used as security for this loan. Refer to
Note 12.
2
2
Unsecured
Capital leases
Csilatina Arrendamento Mercantil S.A.
Capital leases
Csilatina Arrendamento Mercantil S.A.
(7)
Interest charged at an average rate of 5.0% per annum. Loans are repayable in monthly
installments terminating in October 2010 and are Brazilian real-based.
installments terminating in October 2010 and are Brazilian real-based.
1
-
Total long-term debt
1,883
1,505
Current maturities included in short-term debt.
319
33
1,564
1,472
Scheduled minimum long-term debt repayments are:
2008
319
2009
1,006
2010
528
2011
3
2012
3
Thereafter
24
1,883
The currencies in which the borrowings are denominated are as follows:
United States dollars
1,391
1,201
South African rands
341
296
Australian dollars
150
-
Brazilian real
1
-
Ghanaian cedi
-
8
1,883
1,505
F-41
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
20.
20.
LONG-TERM DEBT (continued)
2007
$
2006
$
Undrawn borrowing facilities as at December 31, 2007 are as follows:
Syndicated loan ($1,150 million) – US dollar
627
-
FirstRand Bank Limited – US dollar
50
50
Absa Bank Limited – US dollar
42
42
Nedbank Limited – US dollar
2
2
Standard Bank of South Africa Limited – rands
38
37
FirstRand Bank Limited – rands
32
31
Nedbank Limited – rands
7
7
Absa Bank Limited – rands
4
4
Commerzbank AG – rands
3
3
ABN Amro Bank N.V. – rands
1
1
ABN Amro Bank N.V. – euros
7
7
Australia and New Zealand Banking Group Limited – Australian dollar
(a)
-
79
Syndicated loan ($700 million) – US dollar
-
520
813
783
(a)
Facility cancelled during 2007.
(1)
Convertible Bond
Senior unsecured fixed rate bond
1,000
1,000
Add: Accrued interest
8
8
1,008
1,008
On February 27, 2004, AngloGold Ashanti Holdings plc, a wholly-owned subsidiary of
the Company, issued $1,000,000,000 2.375 percent guaranteed convertible bonds
due 2009, convertible into ADSs and guaranteed by AngloGold Ashanti.
Subject to certain restrictions, holders of convertible bonds are entitled to convert
each convertible bond into an AngloGold Ashanti ADS at the then applicable
conversion price at any time from April 8, 2004 to February 20, 2009, or, if the
convertible bonds are called for redemption earlier than February 27, 2009, the
seventh business day prior to the date of early redemption.
If the bonds have not been converted by February 20, 2009, they will be redeemed at
par on February 27, 2009. AngloGold Ashanti Holdings plc has the option of calling
an early redemption of all the bonds 3 years after their issuance, if the price of the
ADSs exceeds 130 percent of the conversion price for more than 20 days during any
period of 30 consecutive trading days.
The initial conversion price for the convertible bonds was $65.00 per ADS. The
conversion premium to the reference volume weighted average price of the ADSs on
the New York stock exchange of $40.625 on February 19, 2004, when the issue of
the convertible bonds was announced, was 60 percent. If all bond holders exercise
their option to convert their bonds into ADSs and assuming no adjustments are made
to the initial conversion price, up to 15,384,615 new ADSs will be issued. The
conversion ratio is subject to adjustment in case of various corporate events including
share splits and capital distributions.
The calculation of diluted loss per common share for 2007, 2006 and 2005 did not
assume the effect of 15,384,615 shares issuable upon the exercise of Convertible
Bonds as their effects are anti-dilutive for these periods. Refer to Note 9.
The proceeds of the issue, after payment of expenses, were utilized by AngloGold
Ashanti to refinance amounts outstanding under credit facilities, to meet transaction
costs in connection with the acquisition of Ashanti and for general corporate
purposes, including planned capital expenditure.
the Company, issued $1,000,000,000 2.375 percent guaranteed convertible bonds
due 2009, convertible into ADSs and guaranteed by AngloGold Ashanti.
Subject to certain restrictions, holders of convertible bonds are entitled to convert
each convertible bond into an AngloGold Ashanti ADS at the then applicable
conversion price at any time from April 8, 2004 to February 20, 2009, or, if the
convertible bonds are called for redemption earlier than February 27, 2009, the
seventh business day prior to the date of early redemption.
If the bonds have not been converted by February 20, 2009, they will be redeemed at
par on February 27, 2009. AngloGold Ashanti Holdings plc has the option of calling
an early redemption of all the bonds 3 years after their issuance, if the price of the
ADSs exceeds 130 percent of the conversion price for more than 20 days during any
period of 30 consecutive trading days.
The initial conversion price for the convertible bonds was $65.00 per ADS. The
conversion premium to the reference volume weighted average price of the ADSs on
the New York stock exchange of $40.625 on February 19, 2004, when the issue of
the convertible bonds was announced, was 60 percent. If all bond holders exercise
their option to convert their bonds into ADSs and assuming no adjustments are made
to the initial conversion price, up to 15,384,615 new ADSs will be issued. The
conversion ratio is subject to adjustment in case of various corporate events including
share splits and capital distributions.
The calculation of diluted loss per common share for 2007, 2006 and 2005 did not
assume the effect of 15,384,615 shares issuable upon the exercise of Convertible
Bonds as their effects are anti-dilutive for these periods. Refer to Note 9.
The proceeds of the issue, after payment of expenses, were utilized by AngloGold
Ashanti to refinance amounts outstanding under credit facilities, to meet transaction
costs in connection with the acquisition of Ashanti and for general corporate
purposes, including planned capital expenditure.
F-42
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
20.
20.
LONG-TERM DEBT (continued)
2007
$
2006
$
(2)
Syndicated loan facility ($1,150 million)
Drawn down in US dollars and Australian dollars
525
-
Add: Accrued interest
1
-
526
-
In December 2007, the Company entered into a new three year $1,150 million
unsecured syndicated borrowing facility, at a margin of 0.4% over LIBOR. A
commitment fee of 0.12% per annum is payable on the undrawn portion of the facility.
The three year $1,150 million syndicated facility was used to repay a maturing facility
of $700 million (repaid on December 14, 2007) and is available for general corporate
purposes. During the year ended December 31, 2007, the Company drew down
$525 million under the $1,150 million syndicated facility. The Company, AngloGold
Ashanti Holdings plc, AngloGold Ashanti USA Incorporated and AngloGold Ashanti
Australia Limited have guaranteed all payments and other obligations of the wholly-
owned subsidiaries AngloGold Ashanti Holdings plc, AngloGold Ashanti USA
Incorporated and AngloGold Ashanti Australia Limited regarding the $1,150 million
syndicated loan facility.
commitment fee of 0.12% per annum is payable on the undrawn portion of the facility.
The three year $1,150 million syndicated facility was used to repay a maturing facility
of $700 million (repaid on December 14, 2007) and is available for general corporate
purposes. During the year ended December 31, 2007, the Company drew down
$525 million under the $1,150 million syndicated facility. The Company, AngloGold
Ashanti Holdings plc, AngloGold Ashanti USA Incorporated and AngloGold Ashanti
Australia Limited have guaranteed all payments and other obligations of the wholly-
owned subsidiaries AngloGold Ashanti Holdings plc, AngloGold Ashanti USA
Incorporated and AngloGold Ashanti Australia Limited regarding the $1,150 million
syndicated loan facility.
(3)
Corporate Bond
Senior unsecured fixed rate bond
293
286
Add: Accrued interest
11
10
304
296
On August 21, 2003, AngloGold issued an unsecured bond in the aggregate principal
amount of R2 billion ($300 million) at a fixed semi-annual coupon of 10.5% per
annum. The bond is repayable on August 28, 2008, subject to early redemption at
the Company’s option and is listed on the Bond Exchange of South Africa. The net
proceeds of the bond are for general corporate purposes.
annum. The bond is repayable on August 28, 2008, subject to early redemption at
the Company’s option and is listed on the Bond Exchange of South Africa. The net
proceeds of the bond are for general corporate purposes.
Capital
leases
(4)
Turbine Square Two (Proprietary) Limited
Capital leases are for specific periods, with terms of renewal but no purchase options.
Renewals are at the discretion of the entity that holds the lease. As of
December 31, 2007, Property, plant and equipment, allocated to Buildings and mine
infrastructure, includes $36 million of assets under capital leases and $2 million of
related accumulated depreciation. Amortization charges relating to capital leases are
included in Depreciation, depletion and amortization expense for the year ended
December 31, 2007. The weighted average interest rate on the leases existing at
December 31, 2007 is 9.8%. Payments are made monthly, including interest, through
2022.
December 31, 2007, Property, plant and equipment, allocated to Buildings and mine
infrastructure, includes $36 million of assets under capital leases and $2 million of
related accumulated depreciation. Amortization charges relating to capital leases are
included in Depreciation, depletion and amortization expense for the year ended
December 31, 2007. The weighted average interest rate on the leases existing at
December 31, 2007 is 9.8%. Payments are made monthly, including interest, through
2022.
Future minimum lease payments under capital leases together with the present value
of minimum lease payments as of December 31, 2007 are:
2008
3
2009
3
2010
4
2011
4
2012
4
Thereafter
60
Total minimum lease payments
78
Less
interest
41
Present value of net minimum lease payments
37
Less current portion
-
Long-term capital lease obligation
37
F-43
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
20.
20.
LONG-TERM DEBT (continued)
2007
$
(5)
Senstar Capital Corporation
Capital leases are for specific periods, with terms of renewal but no purchase options.
Renewals are at the discretion of the entity that holds the lease. As of
December 31, 2007 and 2006, Property, plant and equipment, allocated to Buildings
and mine infrastructure, includes $16 million and $16 million of assets under capital
leases and $12 million and $11 million of related accumulated depreciation,
respectively. Amortization charges relating to capital leases are included in
Depreciation, depletion and amortization expense for all periods presented. The
weighted average interest rate on the leases existing at December 31, 2007 is 6.9%.
Payments are made monthly, including interest, through 2009.
Future minimum lease payments under capital leases together with the present value
of minimum lease payments as of December 31, 2007 are:
Renewals are at the discretion of the entity that holds the lease. As of
December 31, 2007 and 2006, Property, plant and equipment, allocated to Buildings
and mine infrastructure, includes $16 million and $16 million of assets under capital
leases and $12 million and $11 million of related accumulated depreciation,
respectively. Amortization charges relating to capital leases are included in
Depreciation, depletion and amortization expense for all periods presented. The
weighted average interest rate on the leases existing at December 31, 2007 is 6.9%.
Payments are made monthly, including interest, through 2009.
Future minimum lease payments under capital leases together with the present value
of minimum lease payments as of December 31, 2007 are:
2008
3
2009
3
Total minimum lease payments
6
Less
interest
1
5
Present value of net minimum lease payments
Less current portion
3
Long-term capital lease obligation
2
(6)
Terex Africa (Proprietary) Limited
The capital lease is for a specific period, with no terms of renewal and a purchase
option. As of December 31, 2007 and 2006, Property, plant and equipment, allocated
to Buildings and mine infrastructure, includes $2 million and $2 million of assets
under the capital lease and $2 million and $1 million of related accumulated
depreciation, respectively. Amortization charges relating to the capital lease are
included in Depreciation, depletion and amortization expense for the years ended
December 31, 2007 and 2006. The weighted average interest rate on the lease
existing at December 31, 2007 is 9.0%. The lease is to be repaid in January 2008.
to Buildings and mine infrastructure, includes $2 million and $2 million of assets
under the capital lease and $2 million and $1 million of related accumulated
depreciation, respectively. Amortization charges relating to the capital lease are
included in Depreciation, depletion and amortization expense for the years ended
December 31, 2007 and 2006. The weighted average interest rate on the lease
existing at December 31, 2007 is 9.0%. The lease is to be repaid in January 2008.
Future minimum lease payments under the capital lease together with the present
value of minimum lease payments as of December 31, 2007 are:
2008
2
Total minimum lease payments
2
Less
interest
-
Present value of net minimum lease payments
2
Less current portion
2
Long-term capital lease obligation
-
(7)
Csilatina Arrendamento Mercantil S.A.
Capital leases are for specific periods, with terms of renewal and purchase options.
Renewals are at the discretion of the entity that holds the lease. As of
December 31, 2007, Property, plant and equipment, allocated to Buildings and mine
infrastructure, includes $1 million of assets under capital leases and $nil million of
related accumulated depreciation. Amortization charges relating to capital leases are
included in Depreciation, depletion and amortization expense for the year ended
December 31, 2007. The average interest rate on the leases existing at
December 31, 2007 is 5.0%. Payments are made monthly, including interest, through
2010.
December 31, 2007, Property, plant and equipment, allocated to Buildings and mine
infrastructure, includes $1 million of assets under capital leases and $nil million of
related accumulated depreciation. Amortization charges relating to capital leases are
included in Depreciation, depletion and amortization expense for the year ended
December 31, 2007. The average interest rate on the leases existing at
December 31, 2007 is 5.0%. Payments are made monthly, including interest, through
2010.
F-44
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
20.
20.
LONG-TERM DEBT (continued)
2007
$
2006
$
Future minimum lease payments under capital leases together with the present value
of minimum lease payments as of December 31, 2007 are:
2008
-
2009
1
2010
-
Total minimum lease payments
1
Less
interest
-
Present value of net minimum lease payments
1
Less current portion
-
Long-term capital lease obligation
1
21.
PROVISION FOR ENVIRONMENTAL REHABILITATION
Accrued environmental rehabilitation costs
394
310
Long-term environmental obligations comprising decommissioning and restoration are
based on the group’s environmental management plans, in compliance with the current
environmental and regulatory requirements.
based on the group’s environmental management plans, in compliance with the current
environmental and regulatory requirements.
Decommissioning costs
The provision for decommissioning represents the cost that will arise from rectifying
damage caused from establishing mining operations.
The provision for decommissioning represents the cost that will arise from rectifying
damage caused from establishing mining operations.
Decommissioning costs, representing obligations associated with the retirement of long-
lived assets that result from the acquisition, construction or normal operations of long-
lived assets, are accounted for in accordance with the provisions of SFAS143.
Decommissioning costs are further described in Note 5 – Asset retirement obligations.
lived assets that result from the acquisition, construction or normal operations of long-
lived assets, are accounted for in accordance with the provisions of SFAS143.
Decommissioning costs are further described in Note 5 – Asset retirement obligations.
Restoration costs
While the ultimate amount of rehabilitation cost to be incurred in the future is uncertain,
the Company has estimated that the total cost for mine rehabilitation and closure, on an
undiscounted basis, will be $1,188 million which includes a total estimated liability of
$29 million in respect of equity accounted joint ventures. Refer to Note 15. Certain
amounts have been contributed to a rehabilitation trust and environmental protection
bond under the Company's control. The monies in the trust and bond are invested
primarily in interest bearing debt securities and are included in Other long-term assets in
the Company’s consolidated balance sheet. Cash balances held in the trust and bond
are classified as restricted cash in the Company’s consolidated balance sheets for all
periods presented. AngloGold Ashanti USA has posted reclamation bonds with various
federal and governmental agencies to cover environmental rehabilitation obligations.
Refer to Note 24.
While the ultimate amount of rehabilitation cost to be incurred in the future is uncertain,
the Company has estimated that the total cost for mine rehabilitation and closure, on an
undiscounted basis, will be $1,188 million which includes a total estimated liability of
$29 million in respect of equity accounted joint ventures. Refer to Note 15. Certain
amounts have been contributed to a rehabilitation trust and environmental protection
bond under the Company's control. The monies in the trust and bond are invested
primarily in interest bearing debt securities and are included in Other long-term assets in
the Company’s consolidated balance sheet. Cash balances held in the trust and bond
are classified as restricted cash in the Company’s consolidated balance sheets for all
periods presented. AngloGold Ashanti USA has posted reclamation bonds with various
federal and governmental agencies to cover environmental rehabilitation obligations.
Refer to Note 24.
The Company intends to finance the ultimate rehabilitation costs from the monies
invested with the rehabilitation trust fund, the environmental protection bond as well as
the proceeds on sale of assets and gold from plant clean-up at the time of mine closure.
invested with the rehabilitation trust fund, the environmental protection bond as well as
the proceeds on sale of assets and gold from plant clean-up at the time of mine closure.
22.
OTHER ACCRUED LIABILITIES
Other accrued liabilities
45
27
Other accrued liabilities include the following:
Provisions for labor and civil claim court settlements for South American operations
(1)
44
26
Provision for employee compensation claims in Australia
(2)
1
1
45
27
(1)
Consists of claims filed by former employees in respect of loss of employment, work-related
accident injuries and diseases, government fiscal claims relating to levies and surcharges and
closure costs of old tailings operations. These liabilities are anticipated to unwind over the next
two to five years.
accident injuries and diseases, government fiscal claims relating to levies and surcharges and
closure costs of old tailings operations. These liabilities are anticipated to unwind over the next
two to five years.
(2)
Comprises workers compensation claims with regard to work-related incidents. The liability is
anticipated to unwind over the next three to five years.
anticipated to unwind over the next three to five years.
F-45
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
2007
$
2006
$
23.
PROVISION FOR PENSION AND OTHER POST-RETIREMENT MEDICAL BENEFITS
Accrued liability
180
172
The provision for pension and post-retirement medical funding represents the provision
for health care and pension benefits for employees, retired employees and their
dependants. The post-retirement medical liability is assessed in accordance with the
advice of independent professionally qualified actuaries. The actuarial method used is
the projected unit credit actuarial valuation method. Refer to Note 28. The costs of
post-retirement benefits are made up of those obligations which the Company has
towards current and retired employees.
for health care and pension benefits for employees, retired employees and their
dependants. The post-retirement medical liability is assessed in accordance with the
advice of independent professionally qualified actuaries. The actuarial method used is
the projected unit credit actuarial valuation method. Refer to Note 28. The costs of
post-retirement benefits are made up of those obligations which the Company has
towards current and retired employees.
24.
COMMITMENTS AND CONTINGENCIES
Capital expenditure commitments
(1)
Contracts for capital expenditure
436
354
Authorized by the directors but not yet contracted for
809
731
1,245
1,085
Allocated for:
Project expenditure
- within one year
422
367
- thereafter
311
265
733
632
Stay in business expenditure
- within one year
471
418
- thereafter
41
35
512
453
(1)
Including commitments through contractual arrangements by equity accounted joint ventures.
Other contractual purchase obligations
(2)
- within one year
437
274
- thereafter
370
190
807
464
(2)
Other purchase obligations represent contractual obligations for the purchase of mining contract
services, power, supplies, consumables, inventories, explosives and activated carbon. Amounts
stated include purchase obligations of equity accounted joint ventures.
stated include purchase obligations of equity accounted joint ventures.
Summary of contracted Uranium sales as at December 31, 2007
The Company had the following forward pricing Uranium commitments against future
production:
production:
Year
lbs('000)
(1)
Average contracted
price ($/lbs)
(2)
2008
1,751
18.13
2009
919
29.91
2010
988
33.46
2011 - 2013
1,482
35.94
(1)
Certain contracts allow the buyer to adjust the purchase quantity within a specified range.
(2)
Certain contracts are subject to market related price adjustment mechanisms. In these cases,
the price disclosed indicates the previous periodic price resets.
F-46
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24.
24.
COMMITMENTS AND CONTINGENCIES (continued)
2007
$
2006
$
Contingencies
Groundwater pollution – South Africa
The Company has identified a number of groundwater pollution sites at its current
operations in South Africa and has investigated a number of different technologies and
methodologies that could possibly be used to remediate the pollution plumes. The
geology of the area is typified by a dolomite rock formation that is prone to solution
cavities. Polluted process water from the operations has percolated from pollution
sources to this rock formation and has been transported three dimensionally, creating
pollution plumes in the dolomite aquifer. Numerous scientific, technical and legal reports
have been produced and the remedying of the polluted soil and groundwater is the
subject of a continued research program between the University of the Witwatersrand
and the Company. Subject to the technology being developed as a proven remediation
technique, no reliable estimate can be made for the obligation.
operations in South Africa and has investigated a number of different technologies and
methodologies that could possibly be used to remediate the pollution plumes. The
geology of the area is typified by a dolomite rock formation that is prone to solution
cavities. Polluted process water from the operations has percolated from pollution
sources to this rock formation and has been transported three dimensionally, creating
pollution plumes in the dolomite aquifer. Numerous scientific, technical and legal reports
have been produced and the remedying of the polluted soil and groundwater is the
subject of a continued research program between the University of the Witwatersrand
and the Company. Subject to the technology being developed as a proven remediation
technique, no reliable estimate can be made for the obligation.
Serra Grande sales tax on gold deliveries
63
47
Mineração Serra Grande S.A. (MSG), the operator of the Crixas mine in Brazil, has
received two tax assessments from the State of Goiás related to payments of sales
taxes on gold deliveries for export namely, one assessment for the period between
February 2004 and June 2005 and the other for the period between July 2005 and
May 2006. The tax authorities maintain that whenever a taxpayer exports gold mined in
the State of Goiás through a branch located in a different Brazilian state, it must obtain
an authorization from the Goiás State Treasury by means of a Special Regime
Agreement (Termo de Acordo re Regime Especial – TARE). The MSG operation is co-
owned with Kinross Gold Corporation. The Company’s attributable share of the first
assessment is approximately $39 million. Although MSG requested the TARE in early
2004, the TARE, which authorized the remittance of gold to the Company’s branch in
Minas Gerais specifically for export purposes, was only granted and executed in
May 2006. In November 2006 the administrative council’s second chamber ruled in
favor of MSG and fully canceled the tax liability related to the first period. The State of
Goiás has appealed to the full board of the State of Goiás tax administrative council.
The second assessment was issued by the State of Goiás in October 2006 on the same
grounds as the first assessment, and the Company’s attributable share of the
assessment is approximately $24 million. The Company believes both assessments are
in violation of federal legislation on sales taxes.
received two tax assessments from the State of Goiás related to payments of sales
taxes on gold deliveries for export namely, one assessment for the period between
February 2004 and June 2005 and the other for the period between July 2005 and
May 2006. The tax authorities maintain that whenever a taxpayer exports gold mined in
the State of Goiás through a branch located in a different Brazilian state, it must obtain
an authorization from the Goiás State Treasury by means of a Special Regime
Agreement (Termo de Acordo re Regime Especial – TARE). The MSG operation is co-
owned with Kinross Gold Corporation. The Company’s attributable share of the first
assessment is approximately $39 million. Although MSG requested the TARE in early
2004, the TARE, which authorized the remittance of gold to the Company’s branch in
Minas Gerais specifically for export purposes, was only granted and executed in
May 2006. In November 2006 the administrative council’s second chamber ruled in
favor of MSG and fully canceled the tax liability related to the first period. The State of
Goiás has appealed to the full board of the State of Goiás tax administrative council.
The second assessment was issued by the State of Goiás in October 2006 on the same
grounds as the first assessment, and the Company’s attributable share of the
assessment is approximately $24 million. The Company believes both assessments are
in violation of federal legislation on sales taxes.
Tax Disputes at Morro Velho and AngloGold Ashanti Brasil Mineração
8
-
Morro Velho and AngloGold Ashanti Brasil Mineração are involved in disputes with tax
authorities. These disputes involve eleven federal tax assessments including income
tax, social contributions and annual property tax based on ownership of properties
outside of urban perimeters (ITR).
authorities. These disputes involve eleven federal tax assessments including income
tax, social contributions and annual property tax based on ownership of properties
outside of urban perimeters (ITR).
VAT Dispute at MSG
8
6
Mineração Serra Grande S.A. (MSG), received a tax assessment in October 2003
from the State of Minas Gerais related to sales taxes on gold allegedly returned from
the branch in Minas Gerais to the company head office in the State of Goiás. The tax
administrators rejected the Company’s appeal against the assessment. The Company
is now appealing the dismissal of the case at the judicial sphere.
from the State of Minas Gerais related to sales taxes on gold allegedly returned from
the branch in Minas Gerais to the company head office in the State of Goiás. The tax
administrators rejected the Company’s appeal against the assessment. The Company
is now appealing the dismissal of the case at the judicial sphere.
F-47
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24.
24.
COMMITMENTS AND CONTINGENCIES (continued)
2007
$
2006
$
Financial guarantees
AngloGold Offshore Investments Limited guarantee of the Nufcor International Limited
loan facility
loan facility
40
40
AngloGold Offshore Investments Limited, a wholly owned subsidiary of the Company,
has guaranteed 50 percent of the Nufcor International Limited loan facility with First
Rand (Ireland) plc (formerly RMB International (Dublin) Limited). Nufcor International
Limited is accounted for under the equity method. Refer to Note 15.
has guaranteed 50 percent of the Nufcor International Limited loan facility with First
Rand (Ireland) plc (formerly RMB International (Dublin) Limited). Nufcor International
Limited is accounted for under the equity method. Refer to Note 15.
Oro Group surety
15
14
The Company has provided surety in favor of the lender in respect of gold loan facilities
to wholly owned subsidiaries of Oro Group (Proprietary) Limited an affiliate of the
Company. The Company has a total maximum liability, in terms of the suretyships, of
R100 million ($15 million). The suretyship agreements have a termination notice period
of 90 days. The probability of the non-performance under the suretyships is considered
minimal, based on factors of no prior defaults, being well-established companies and
recourse via general notarial bonds over the gold stocks of the subsidiaries of the Oro
Group. These bonds should enable the Company to recover the majority of the
guaranteed amount. The Company receives a fee from the associate for providing the
surety and has assessed the possibility of a claim for non-performance.
to wholly owned subsidiaries of Oro Group (Proprietary) Limited an affiliate of the
Company. The Company has a total maximum liability, in terms of the suretyships, of
R100 million ($15 million). The suretyship agreements have a termination notice period
of 90 days. The probability of the non-performance under the suretyships is considered
minimal, based on factors of no prior defaults, being well-established companies and
recourse via general notarial bonds over the gold stocks of the subsidiaries of the Oro
Group. These bonds should enable the Company to recover the majority of the
guaranteed amount. The Company receives a fee from the associate for providing the
surety and has assessed the possibility of a claim for non-performance.
Pursuant to US environmental and mining requirements, gold mining companies are
obligated to close their operations and rehabilitate the lands that they mine in
accordance with these requirements. AngloGold Ashanti USA has posted reclamation
bonds with various federal and state governmental agencies to cover potential
rehabilitation obligations in amounts aggregating approximately:
obligated to close their operations and rehabilitate the lands that they mine in
accordance with these requirements. AngloGold Ashanti USA has posted reclamation
bonds with various federal and state governmental agencies to cover potential
rehabilitation obligations in amounts aggregating approximately:
48
49
The Company has provided a guarantee for these obligations which would be payable in
the event of AngloGold Ashanti USA not being able to meet its rehabilitation obligations.
As at December 31, 2007 the carrying value of these obligations relating to AngloGold
Ashanti USA amounted to $31 million and is included in the Provision for environmental
rehabilitation in the Company's consolidated balance sheet. The obligations will expire
upon completion of such rehabilitation and release of such areas by the applicable
federal and/or state agency. There are no recourse provisions that would enable
AngloGold Ashanti to recover from third parties any of the amounts paid under the
guarantee.
the event of AngloGold Ashanti USA not being able to meet its rehabilitation obligations.
As at December 31, 2007 the carrying value of these obligations relating to AngloGold
Ashanti USA amounted to $31 million and is included in the Provision for environmental
rehabilitation in the Company's consolidated balance sheet. The obligations will expire
upon completion of such rehabilitation and release of such areas by the applicable
federal and/or state agency. There are no recourse provisions that would enable
AngloGold Ashanti to recover from third parties any of the amounts paid under the
guarantee.
The Company has guaranteed all payments and other obligations of AngloGold Ashanti
Holdings plc regarding the issued $1,000,000,000 2.375 percent convertible bonds due
2009. Refer to Note 20. The Company’s obligations regarding the guarantee are direct,
unconditional and unsubordinated.
Holdings plc regarding the issued $1,000,000,000 2.375 percent convertible bonds due
2009. Refer to Note 20. The Company’s obligations regarding the guarantee are direct,
unconditional and unsubordinated.
1,000
1,000
Guarantee provided for Syndicated loan facility
526
181
AngloGold Ashanti Limited, AngloGold Ashanti Holdings plc, AngloGold Ashanti USA
Incorporated and AngloGold Ashanti Australia Limited each have guaranteed all
payments and other obligations of AngloGold Ashanti Holdings plc, AngloGold Ashanti
USA Incorporated and AngloGold Ashanti Australia Limited regarding the $1.15 billion
Syndicated loan facility dated December 13, 2007. This Syndicated loan facility replaced
in its entirety the previous $700 million revolving credit facility dated January 26, 2005,
which was repayable in January 2008. Refer to Note 20.
Incorporated and AngloGold Ashanti Australia Limited each have guaranteed all
payments and other obligations of AngloGold Ashanti Holdings plc, AngloGold Ashanti
USA Incorporated and AngloGold Ashanti Australia Limited regarding the $1.15 billion
Syndicated loan facility dated December 13, 2007. This Syndicated loan facility replaced
in its entirety the previous $700 million revolving credit facility dated January 26, 2005,
which was repayable in January 2008. Refer to Note 20.
Hedging guarantees
683
445
The Company has issued gold delivery guarantees to several counterpart banks in
which it guarantees the due performance of its subsidiaries AngloGold (USA) Trading
Company, AngloGold South America Limited and Cerro Vanguardia S.A. under their
respective gold hedging agreements.
which it guarantees the due performance of its subsidiaries AngloGold (USA) Trading
Company, AngloGold South America Limited and Cerro Vanguardia S.A. under their
respective gold hedging agreements.
F-48
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24.
24.
COMMITMENTS AND CONTINGENCIES (continued)
2007
$
2006
$
Ashanti Treasury Services guarantees
1,494
1,047
The Company together with its wholly-owned subsidiary AngloGold Ashanti Holdings plc
has provided guarantees to several counterpart banks for the hedging commitments of
its wholly-owned subsidiary Ashanti Treasury Services Limited (ATS). The maximum
potential amount of future payments is all moneys due, owing or incurred by ATS under
or pursuant to the Hedging Agreements. At December 31, 2007 the marked-to-market
valuation of the ATS hedge book was negative $1,494 million.
has provided guarantees to several counterpart banks for the hedging commitments of
its wholly-owned subsidiary Ashanti Treasury Services Limited (ATS). The maximum
potential amount of future payments is all moneys due, owing or incurred by ATS under
or pursuant to the Hedging Agreements. At December 31, 2007 the marked-to-market
valuation of the ATS hedge book was negative $1,494 million.
Hedging guarantees of due performance by the Geita Management Company Limited
(GMC)
(GMC)
520
290
The Company and its wholly-owned subsidiary AngloGold Ashanti Holdings plc have
issued hedging guarantees to several counterpart banks in which they have guaranteed
the due performance by the GMC of its obligations under or pursuant to the hedging
agreements entered into by GMC, and to the payment of all money owing or incurred by
GMC as and when due. This guarantee remains in force until no sum remains to be paid
under the Hedging Agreements and the Bank has irrevocably recovered or received all
sums payable to it under the Hedging Agreements. The maximum potential amount of
future payments is all moneys due, owing or incurred by GMC under or pursuant to the
Hedging Agreements. At December 31, 2007 the marked-to-market valuation of the
GMC hedge book was negative $520 million.
issued hedging guarantees to several counterpart banks in which they have guaranteed
the due performance by the GMC of its obligations under or pursuant to the hedging
agreements entered into by GMC, and to the payment of all money owing or incurred by
GMC as and when due. This guarantee remains in force until no sum remains to be paid
under the Hedging Agreements and the Bank has irrevocably recovered or received all
sums payable to it under the Hedging Agreements. The maximum potential amount of
future payments is all moneys due, owing or incurred by GMC under or pursuant to the
Hedging Agreements. At December 31, 2007 the marked-to-market valuation of the
GMC hedge book was negative $520 million.
In addition to the above, the Company has contingent liabilities in respect of certain tax
assessments, claims, disputes and guarantees which are not considered to be material.
assessments, claims, disputes and guarantees which are not considered to be material.
With operations in several countries on several continents, many of which are emerging
markets, AngloGold Ashanti is subject to, and pays annual taxes under the various tax
regimes where it operates. Some of these tax regimes are defined by contractual
agreements with the local government, but others are defined by the general corporate
tax laws of the country. The Company has historically filed, and continues to file, all
required tax returns and to pay the taxes reasonably determined to be due. In some
jurisdictions, tax authorities are yet to complete their assessments for the previous
years. The tax rules and regulations in many countries are complex and subject to
interpretation. From time to time the Company is subject to a review of its historic tax
filings and in connection with such reviews, disputes can arise with the taxing authorities
over the interpretation or application of certain rules to the Company’s business
conducted within the country involved. Management believes based on information
currently to hand, that such tax contingencies have been adequately provided for, and
as assessments are completed, the Company will make appropriate adjustments to
those estimates used in determining amounts due.
markets, AngloGold Ashanti is subject to, and pays annual taxes under the various tax
regimes where it operates. Some of these tax regimes are defined by contractual
agreements with the local government, but others are defined by the general corporate
tax laws of the country. The Company has historically filed, and continues to file, all
required tax returns and to pay the taxes reasonably determined to be due. In some
jurisdictions, tax authorities are yet to complete their assessments for the previous
years. The tax rules and regulations in many countries are complex and subject to
interpretation. From time to time the Company is subject to a review of its historic tax
filings and in connection with such reviews, disputes can arise with the taxing authorities
over the interpretation or application of certain rules to the Company’s business
conducted within the country involved. Management believes based on information
currently to hand, that such tax contingencies have been adequately provided for, and
as assessments are completed, the Company will make appropriate adjustments to
those estimates used in determining amounts due.
Vulnerability from concentrations
The majority of AngloGold Ashanti’s 61,522 employees (2006: 61,453, 2005: 63,993) are
subject to collective bargaining agreements. These agreements are established in
negotiations between the Chamber of Mines, the body that represents the gold mining
industry in South Africa, and representative groups of labor. The agreements have a
two-year validity period. The most recent settlement negotiation was completed in
August 2007, when the parties reached an agreement covering the period from
July 1, 2007 to June 30, 2009.
The majority of AngloGold Ashanti’s 61,522 employees (2006: 61,453, 2005: 63,993) are
subject to collective bargaining agreements. These agreements are established in
negotiations between the Chamber of Mines, the body that represents the gold mining
industry in South Africa, and representative groups of labor. The agreements have a
two-year validity period. The most recent settlement negotiation was completed in
August 2007, when the parties reached an agreement covering the period from
July 1, 2007 to June 30, 2009.
There is a concentration of risk in respect of recoverable value added tax and fuel duties
from the Malian government. Recoverable value added tax due from the Malian
government to the Company amounts to $42 million at December 31, 2007
from the Malian government. Recoverable value added tax due from the Malian
government to the Company amounts to $42 million at December 31, 2007
(December 31, 2006: $34 million). The last audited value added tax return was for the
period ended March 31, 2007 and as at December 31, 2007, $25 million was still
outstanding and $17 million is still subject to audit. The accounting processes for the
unaudited amount are in accordance with the processes advised by the Malian
government in terms of the previous audits.
period ended March 31, 2007 and as at December 31, 2007, $25 million was still
outstanding and $17 million is still subject to audit. The accounting processes for the
unaudited amount are in accordance with the processes advised by the Malian
government in terms of the previous audits.
F-49
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
24.
24.
COMMITMENTS AND CONTINGENCIES (continued)
Recoverable fuel duties from the Malian government to the Company amount to
$7 million at December 31, 2007 (December 31, 2006: $11 million). Fuel duty refund
claims are required to be submitted before January 31 of the following year and are
subject to authorization by, firstly, the Department of Mining, and secondly, the
Customs and Excise authorities. As at December 31, 2007, the Customs and Excise
authorities have approved $2 million which is still outstanding, while $5 million is still
subject to authorization. The accounting processes for the unauthorized amount are in
accordance with the processes advised by the Malian government in terms of the
previous authorizations. With effect from February 2006, fuel duties are no longer
payable to the Malian government.
The Government of Mali is a shareholder in all of the Company’s entities in Mali.
Management is in negotiations with the Government of Mali to agree a protocol for the
repayment of the outstanding amounts. The amounts outstanding have been
discounted to their present value at a rate of 6.5 percent.
$7 million at December 31, 2007 (December 31, 2006: $11 million). Fuel duty refund
claims are required to be submitted before January 31 of the following year and are
subject to authorization by, firstly, the Department of Mining, and secondly, the
Customs and Excise authorities. As at December 31, 2007, the Customs and Excise
authorities have approved $2 million which is still outstanding, while $5 million is still
subject to authorization. The accounting processes for the unauthorized amount are in
accordance with the processes advised by the Malian government in terms of the
previous authorizations. With effect from February 2006, fuel duties are no longer
payable to the Malian government.
The Government of Mali is a shareholder in all of the Company’s entities in Mali.
Management is in negotiations with the Government of Mali to agree a protocol for the
repayment of the outstanding amounts. The amounts outstanding have been
discounted to their present value at a rate of 6.5 percent.
There is a concentration of risk in respect of recoverable value added tax and fuel
duties from the Tanzanian government. Recoverable value added tax due from the
Tanzanian government to the Company amounts to $16 million at December 31, 2007
(December 31, 2006: $14 million). The last audited value added tax return was for the
period ended June 30, 2007 and as at December 31, 2007, $14 million was still
outstanding and $2 million is still subject to audit. The accounting processes for the
unaudited amount are in accordance with the processes advised by the Tanzanian
government in terms of the previous audits. The amounts outstanding have been
discounted to their present value at a rate of 7.8 percent.
duties from the Tanzanian government. Recoverable value added tax due from the
Tanzanian government to the Company amounts to $16 million at December 31, 2007
(December 31, 2006: $14 million). The last audited value added tax return was for the
period ended June 30, 2007 and as at December 31, 2007, $14 million was still
outstanding and $2 million is still subject to audit. The accounting processes for the
unaudited amount are in accordance with the processes advised by the Tanzanian
government in terms of the previous audits. The amounts outstanding have been
discounted to their present value at a rate of 7.8 percent.
Recoverable fuel duties from the Tanzanian government to the Company amount to
$37 million at December 31, 2007 (December 31, 2006: $18 million). Fuel duty claims
are required to be submitted after consumption of the related fuel and are subject to
authorization by the Customs and Excise authorities. As at December 31, 2007,
claims for refund of fuel duties amounting to $21 million have been lodged with the
Customs and Excise authorities, which are still outstanding, whilst claims for refund of
$16 million have not yet been submitted. The accounting processes for the
unauthorized amount are in accordance with the processes advised by the Tanzanian
government in terms of the previous authorizations. The amounts outstanding have
been discounted to their present value at a rate of 7.8 percent.
$37 million at December 31, 2007 (December 31, 2006: $18 million). Fuel duty claims
are required to be submitted after consumption of the related fuel and are subject to
authorization by the Customs and Excise authorities. As at December 31, 2007,
claims for refund of fuel duties amounting to $21 million have been lodged with the
Customs and Excise authorities, which are still outstanding, whilst claims for refund of
$16 million have not yet been submitted. The accounting processes for the
unauthorized amount are in accordance with the processes advised by the Tanzanian
government in terms of the previous authorizations. The amounts outstanding have
been discounted to their present value at a rate of 7.8 percent.
25.
STOCKHOLDERS’ EQUITY
The authorized common stock of the Company was increased in 1998 to 400,000,000 shares of common stock of
25 ZAR cents each principally to meet its obligations regarding the proposed merger of AAC gold interests through the
Company. During 2006, AngloGold Ashanti approved the Employee Share Ownership Plan for the employees in the
South African operations and a Black Economic Empowerment transaction (BEE transaction) for which
4,280,000 E shares of common stock of 25 ZAR cents and 960,000 shares of common stock of 25 ZAR cents were
authorized. In addition, 1,760,000 shares of common stock of 25 ZAR cents each were authorised for issue, at the
discretion of the directors, to employee share schemes to be implemented in countries other than South Africa, where
the Company has its operations.
25 ZAR cents each principally to meet its obligations regarding the proposed merger of AAC gold interests through the
Company. During 2006, AngloGold Ashanti approved the Employee Share Ownership Plan for the employees in the
South African operations and a Black Economic Empowerment transaction (BEE transaction) for which
4,280,000 E shares of common stock of 25 ZAR cents and 960,000 shares of common stock of 25 ZAR cents were
authorized. In addition, 1,760,000 shares of common stock of 25 ZAR cents each were authorised for issue, at the
discretion of the directors, to employee share schemes to be implemented in countries other than South Africa, where
the Company has its operations.
During 2007, 1,221,318 shares of common stock and 94,230 E shares of common stock were issued by the
Company, while 139,770 E shares of common stock were cancelled. These issues and cancellations resulted in the
movement year-on-year of 1,236,498 shares of common stock and the net cancellation of 45,540 E shares of
common stock as follows:
Company, while 139,770 E shares of common stock were cancelled. These issues and cancellations resulted in the
movement year-on-year of 1,236,498 shares of common stock and the net cancellation of 45,540 E shares of
common stock as follows:
·
1,181,882 shares of common stock were issued as part of the share incentive scheme for a consideration of
$37 million;
·
8,026 shares of common stock were issued with a subscription value of $2 million in exchange for 139,770
E shares of common stock which were cancelled in accordance with the cancellation formula pertaining to the
Employee Share Ownership Plan;
Employee Share Ownership Plan;
·
46,590 shares of common stock with a subscription value of $2 million were transferred from the Employee Share
Ownership Plan to exiting employees pursuant to the rules of the scheme;
F-50
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
25.
25.
STOCKHOLDERS’ EQUITY (continued)
·
31,410 shares of common stock were issued as part of the Employee Share Ownership Plan for a consideration of
$1 million;
(1)
·
94,230 E shares of common stock were issued as part of the Employee Share Ownership Plan for a consideration
of $2 million.
(1)
(1)
Shares of common stock and E shares of common stock issued in respect of the Employee Share Ownership Plan
are eliminated as shares held within the Company. As at December 31, 2007, there were 913,410 shares of
common stock and 2,740,230 E shares of common stock in issue and outstanding in respect of the Employee
Share Ownership Plan.
are eliminated as shares held within the Company. As at December 31, 2007, there were 913,410 shares of
common stock and 2,740,230 E shares of common stock in issue and outstanding in respect of the Employee
Share Ownership Plan.
During 2006, 11,297,721 shares of common stock and 4,185,770 E shares of common stock in the Company were
issued as follows:
issued as follows:
·
398,399 shares of common stock were issued as part of the share incentive scheme for a consideration of
$9 million.
·
4,185,770 E shares of common stock and 928,590 shares of common stock in the Company were issued as part
of the Employee Share Ownership Plan and the BEE transaction for a consideration of $93 million, which are
eliminated as shares held within the Company.
eliminated as shares held within the Company.
·
9,970,732 shares of common stock in the Company were issued as part of the public offering which was
completed on April 20, 2006, amounting to $498 million.
During 2005, 475,538 shares of common stock in the Company were issued as part of the share incentive scheme for
a consideration of $9 million.
a consideration of $9 million.
At a general meeting held on April 10, 2006, ordinary resolutions were passed with the requisite majority, providing
authority to the directors to allot sufficient ordinary shares of the Company to allow it to raise $500 million before
expenses and after underwriters’ fees in a public offering. The offering was completed on April 20, 2006 and resulted
in the issue of 9,970,732 new ordinary shares, along with the simultaneous sale of 19,685,170 AngloGold Ashanti
shares held by Anglo American plc (AA plc), reducing AA plc’s holding in the Company to 41.8 percent. The
combined offering was priced at $51.25 per ADS and R315.19 per ordinary share (a 1 percent discount to the
weighted average traded price of the shares on the Johannesburg Stock Exchange (JSE) over the 30 days prior to
pricing). Net proceeds to the Company of the primary offering was $498 million, which was used for project
development capital, capital expenditure, repayment of local money-market short-term borrowings and other general
corporate purposes. During October 2007, AA plc further reduced its investment in the Company to 16.61 percent.
As at December 31, 2007, AA plc held a 16.58 percent interest in the Company.
authority to the directors to allot sufficient ordinary shares of the Company to allow it to raise $500 million before
expenses and after underwriters’ fees in a public offering. The offering was completed on April 20, 2006 and resulted
in the issue of 9,970,732 new ordinary shares, along with the simultaneous sale of 19,685,170 AngloGold Ashanti
shares held by Anglo American plc (AA plc), reducing AA plc’s holding in the Company to 41.8 percent. The
combined offering was priced at $51.25 per ADS and R315.19 per ordinary share (a 1 percent discount to the
weighted average traded price of the shares on the Johannesburg Stock Exchange (JSE) over the 30 days prior to
pricing). Net proceeds to the Company of the primary offering was $498 million, which was used for project
development capital, capital expenditure, repayment of local money-market short-term borrowings and other general
corporate purposes. During October 2007, AA plc further reduced its investment in the Company to 16.61 percent.
As at December 31, 2007, AA plc held a 16.58 percent interest in the Company.
At a general meeting of shareholders held on May 4, 2007, shareholders approved, as a general authority,
authorization to the board of directors to allot and issue, in their discretion, and for such purposes as they may
determine, up to 10 percent of the authorized but unissued common stock of 25 ZAR cents each in the share capital
of the Company (subject to the South African Companies Act and the Listings Requirements of the JSE Securities
Exchange South Africa) after setting aside so many common stock of 25 ZAR cents each as may be required to be
allotted and issued by the Company pursuant to the AngloGold Share Incentive Scheme, the Long-Term Incentive
Plan and the Bonus Share Plan, the Bokamoso Employee Share Ownership Plan, the Black Economic Empowerment
transaction and for the purposes of the conversion of the $1,000,000,000, 2.375 percent guaranteed Convertible
Bonds issued by AngloGold Ashanti Holdings plc. Refer to Note 30 and Note 20. As at December 31, 2007 of the total
unissued common stock of 122,542,529 of 25 ZAR cents each, of which 9,410,362 of 25 ZAR cents each was under
the control of the directors until the forthcoming annual general meeting. In terms of a specific authority granted at the
general meeting of stockholders held on March 29, 1993, the directors are authorized to issue the 4,221,104 unissued
B redeemable preferred stock of 1 ZAR cent each to Eastvaal Gold Holdings Limited.
authorization to the board of directors to allot and issue, in their discretion, and for such purposes as they may
determine, up to 10 percent of the authorized but unissued common stock of 25 ZAR cents each in the share capital
of the Company (subject to the South African Companies Act and the Listings Requirements of the JSE Securities
Exchange South Africa) after setting aside so many common stock of 25 ZAR cents each as may be required to be
allotted and issued by the Company pursuant to the AngloGold Share Incentive Scheme, the Long-Term Incentive
Plan and the Bonus Share Plan, the Bokamoso Employee Share Ownership Plan, the Black Economic Empowerment
transaction and for the purposes of the conversion of the $1,000,000,000, 2.375 percent guaranteed Convertible
Bonds issued by AngloGold Ashanti Holdings plc. Refer to Note 30 and Note 20. As at December 31, 2007 of the total
unissued common stock of 122,542,529 of 25 ZAR cents each, of which 9,410,362 of 25 ZAR cents each was under
the control of the directors until the forthcoming annual general meeting. In terms of a specific authority granted at the
general meeting of stockholders held on March 29, 1993, the directors are authorized to issue the 4,221,104 unissued
B redeemable preferred stock of 1 ZAR cent each to Eastvaal Gold Holdings Limited.
F-51
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
26.
FINANCIAL RISK MANAGEMENT ACTIVITIES
In the normal course of its operations, the Company is exposed to gold and other commodity price, currency, interest
rate, liquidity and credit risks. In order to manage these risks, the Company enters into derivative transactions. The
Company does not acquire, hold or issue derivatives for trading purposes. The Company has developed a
comprehensive risk management process to facilitate, control and monitor these risks. The board has approved and
monitors this risk management process, inclusive of documented treasury policies, counterpart limits, controlling and
reporting structures.
rate, liquidity and credit risks. In order to manage these risks, the Company enters into derivative transactions. The
Company does not acquire, hold or issue derivatives for trading purposes. The Company has developed a
comprehensive risk management process to facilitate, control and monitor these risks. The board has approved and
monitors this risk management process, inclusive of documented treasury policies, counterpart limits, controlling and
reporting structures.
The financial risk management activities objectives of the Company are as follows:
·
Safeguarding the Company core earnings stream from its major assets through the effective control and
management of gold price risk, other commodity price risk, foreign exchange risk and interest rate risk;
·
Effective and efficient usage of credit facilities in both the short and long term through the adoption of reliable
liquidity planning and procedures;
·
Ensuring that investment and hedging transactions are undertaken with creditworthy counterparts;
· Ensuring that all contracts and agreements related to risk management activities are coordinated, consistent
· Ensuring that all contracts and agreements related to risk management activities are coordinated, consistent
throughout the Company and comply where necessary with all relevant regulatory and statutory requirements.
A number of products, including derivatives are used to satisfy these objectives. Forward purchase and sale contracts
and call and put options are used by the Company to manage its exposure to gold price and currency fluctuations.
SFAS133 requires that derivatives be accounted for as follows:
and call and put options are used by the Company to manage its exposure to gold price and currency fluctuations.
SFAS133 requires that derivatives be accounted for as follows:
·
Commodity based (“normal purchase or normal sale”) contracts that meet the requirements of SFAS138, and are
designated as such, are recognized in product sales when they are settled by physical delivery. They are not
recorded in the financial statements between the dates that they are entered into and settled.
recorded in the financial statements between the dates that they are entered into and settled.
·
Where the conditions in SFAS133 for hedge accounting are met, the derivative is recognized on the balance
sheet, at fair value as either a derivative asset or derivative liability. For cash flow hedges, the effective portion of
changes in fair value of the hedging instruments are recognized in equity (other comprehensive income) until the
underlying transaction occurs, then the gains or losses are recognized in product sales. The ineffective portion of
changes in fair value is reported in earnings as gains or losses on non-hedge derivatives in the period in which
they occur. The ineffective portion of matured and existing cash flow hedges recognized in loss on non-hedge
derivatives in the income statement during the year was $10 million (2006: $nil million; 2005: $nil million). Of the
contracts accounted for as cash flow hedges, contracts with a carrying value of $194 million, a liability at
December 31, 2007 are expected to be reclassified from other comprehensive income and recognized as a
reduction in product sales during 2008.
changes in fair value of the hedging instruments are recognized in equity (other comprehensive income) until the
underlying transaction occurs, then the gains or losses are recognized in product sales. The ineffective portion of
changes in fair value is reported in earnings as gains or losses on non-hedge derivatives in the period in which
they occur. The ineffective portion of matured and existing cash flow hedges recognized in loss on non-hedge
derivatives in the income statement during the year was $10 million (2006: $nil million; 2005: $nil million). Of the
contracts accounted for as cash flow hedges, contracts with a carrying value of $194 million, a liability at
December 31, 2007 are expected to be reclassified from other comprehensive income and recognized as a
reduction in product sales during 2008.
·
All other derivatives are measured at their fair value, with the changes in fair value at each reporting date reported
in earnings as gains or losses on non-hedge derivatives in the period in which they occur.
Cash flows from derivative instruments accounted for as cash flow hedges are included in net cash provided by
operating activities in the statements of consolidated cash flows for all periods presented. Contracts that contain ‘off-
market’ terms that result in the inflow of cash at inception are analogous to borrowing activities and, as such, are
treated as financing activities. All current and future cash flows associated with such instruments are classified within
the financing activities section of the consolidated cash flow statement. Contracts that contain ‘off-market’ terms that
result in the outflow of cash at inception are analogous to lending activities and, as such, are treated as investing
activities. All current and future cash flows associated with such instruments are classified within the investing
activities of the consolidated cash flow statement.
operating activities in the statements of consolidated cash flows for all periods presented. Contracts that contain ‘off-
market’ terms that result in the inflow of cash at inception are analogous to borrowing activities and, as such, are
treated as financing activities. All current and future cash flows associated with such instruments are classified within
the financing activities section of the consolidated cash flow statement. Contracts that contain ‘off-market’ terms that
result in the outflow of cash at inception are analogous to lending activities and, as such, are treated as investing
activities. All current and future cash flows associated with such instruments are classified within the investing
activities of the consolidated cash flow statement.
Loss on non-hedge derivatives of $808 million (2006: $208 million; 2005: $142 million), being derivatives not
designated in formal hedge accounting relationships is included in the current year income statement. The increase in
the loss on non-hedge derivatives over 2006 is mainly the result of the revaluation of non-hedge derivatives resulting
from changes in the prevailing spot gold price, exchange rates, interest rates and greater volatilities.
designated in formal hedge accounting relationships is included in the current year income statement. The increase in
the loss on non-hedge derivatives over 2006 is mainly the result of the revaluation of non-hedge derivatives resulting
from changes in the prevailing spot gold price, exchange rates, interest rates and greater volatilities.
F-52
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
26.
26.
FINANCIAL RISK MANAGEMENT ACTIVITIES (continued)
Gold price and currency risk management activities
Gold and currency hedging instruments are denominated in South African rands, US dollars, Australian dollars and
Brazilian real. The hedging instruments utilized are forward sale and purchase contracts, purchased and sold put
options, and purchased and sold call options and gold lease rate swaps. The mix of hedging instruments, the volume
of production hedged and the tenor of the hedge book is continuously reviewed in light of changes in operational
forecasts, market conditions and the Company’s hedging policy as set by the board of directors. The Company’s
reserve and financial strength has allowed it to arrange unmargined credit lines of up to ten years with counterparties.
Brazilian real. The hedging instruments utilized are forward sale and purchase contracts, purchased and sold put
options, and purchased and sold call options and gold lease rate swaps. The mix of hedging instruments, the volume
of production hedged and the tenor of the hedge book is continuously reviewed in light of changes in operational
forecasts, market conditions and the Company’s hedging policy as set by the board of directors. The Company’s
reserve and financial strength has allowed it to arrange unmargined credit lines of up to ten years with counterparties.
Some of the instruments described above are designated and accounted for as cash flow hedges. The cash flow
hedged forecast transactions are expected to occur over the next 3 years, in line with the maturity dates of the
hedging instruments.
hedged forecast transactions are expected to occur over the next 3 years, in line with the maturity dates of the
hedging instruments.
Forward sales contracts establish the price of future gold sales at a specified price. A number of these contracts are
intended by AngloGold Ashanti for delivery against production in a future period. The volume of net outstanding
forward sales type contracts at the end of 2007 was 108,403kg (2006: 122,133kg).
intended by AngloGold Ashanti for delivery against production in a future period. The volume of net outstanding
forward sales type contracts at the end of 2007 was 108,403kg (2006: 122,133kg).
A put option gives the put buyer the right, but not the obligation, to sell the underlying to the put seller at a
predetermined price on a predetermined date. A call option gives the call buyer the right, but not the obligation, to buy
the underlying from the call seller at a predetermined price on a predetermined date. The Company’s risk in selling
gold call options is unlimited but mitigated by the fact that the Company produces the commodity required by the
option and would benefit by the same quantity as the option loss by selling production in the open market.
predetermined price on a predetermined date. A call option gives the call buyer the right, but not the obligation, to buy
the underlying from the call seller at a predetermined price on a predetermined date. The Company’s risk in selling
gold call options is unlimited but mitigated by the fact that the Company produces the commodity required by the
option and would benefit by the same quantity as the option loss by selling production in the open market.
Net delta open hedge position as at December 31, 2007
The Company has an established practice of actively managing its hedged commitments under changing market
circumstances. A substantial restructuring of the hedge book was concluded between December 2004 and
January 2005 which was followed by a smaller restructuring of the hedging commitments of the Geita Management
Company following the repayment of project finance loans. During 2006 and 2007, in addition to delivering in and
buying back a number of non-hedge derivative contracts, the Company also restructured a number of hedge contracts
maturing in the near term into later years.
circumstances. A substantial restructuring of the hedge book was concluded between December 2004 and
January 2005 which was followed by a smaller restructuring of the hedging commitments of the Geita Management
Company following the repayment of project finance loans. During 2006 and 2007, in addition to delivering in and
buying back a number of non-hedge derivative contracts, the Company also restructured a number of hedge contracts
maturing in the near term into later years.
As of December 31, 2007, the hedge book reflected a net delta tonnage position of 10.39 million ounces (323 tonnes)
or 36 percent of the next 5 years forecast production. As of December 31, 2006, the hedge book reflected a net delta
tonnage position of 10.16 million ounces (316 tonnes) or 32 percent of the next 5 years forecast production.
or 36 percent of the next 5 years forecast production. As of December 31, 2006, the hedge book reflected a net delta
tonnage position of 10.16 million ounces (316 tonnes) or 32 percent of the next 5 years forecast production.
The marked-to-market value of all hedge transactions, irrespective of accounting designation, making up the hedge
positions was a liability of $4,273 million as at December 31, 2007 (as at December 31, 2006: a liability of
$2,903 million). These values were based on a gold price of $836.30 per ounce, exchange rates of $/R6.8104 and
A$/$0.8798 and the prevailing market interest rates and volatilities at December 31, 2007. The values as at
December 31, 2006 were based on a gold price of $636.30 per ounce, exchange rates of $/R7.0010 and A$/$0.7886
and the prevailing market interest rates and volatilities at that date.
positions was a liability of $4,273 million as at December 31, 2007 (as at December 31, 2006: a liability of
$2,903 million). These values were based on a gold price of $836.30 per ounce, exchange rates of $/R6.8104 and
A$/$0.8798 and the prevailing market interest rates and volatilities at December 31, 2007. The values as at
December 31, 2006 were based on a gold price of $636.30 per ounce, exchange rates of $/R7.0010 and A$/$0.7886
and the prevailing market interest rates and volatilities at that date.
The Company had the following net forward pricing commitments outstanding against future production as at
December 31, 2007.
December 31, 2007.
Year
2008
2009
2010
2011
2012
2013-2015
Total
DOLLAR GOLD
Forward contracts
Forward contracts
Amount (kg)
22,817
21,738
14,462
12,931
11,944
12,364
96,256
$
per
oz
$314
$316
$347
$397
$404
$432
$357
*Forward contracts (Long) Amount (kg)
11,304
11,304
$
per
oz
$647
$647
Put options sold
Amount (kg)
25,962
3,748
1,882
1,882
1,882
3,764
39,120
$
per
oz
$682
$530
$410
$420
$430
$445
$607
Call options purchased
Amount (kg)
9,813
9,813
$
per
oz
$427
$427
Call options sold
Amount (kg)
58,570
45,950
36,804
39,385
24,460
39,924
245,093
$
per
oz
$521
$498
$492
$517
$622
$604
$535
F-53
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
26.
26.
FINANCIAL RISK MANAGEMENT ACTIVITIES (continued)
Year
2008
2009
2010
2011
2012
2013-2015
Total
RAND GOLD
Forward contracts
Forward contracts
Amount (kg)
933
933
Rand per kg
R116,335
R116,335
Call options sold
Amount (kg)
2,986
2,986
2,986
8,958
Rand per kg
R202,054
R216,522
R230,990
R216,522
AUD DOLLAR GOLD
Forward contracts
Forward contracts
Amount (kg)
16,018
3,390
3,110
22,518
A$ per oz
A$ 848
A$ 644
A$ 685
A$ 795
Put options sold
Amount (kg)
7,465
7,465
A$ per oz
A$ 882
A$ 882
Call options purchased
Amount (kg)
3,110
1,244
3,110
7,464
A$ per oz
A$ 680
A$ 694
A$ 712
A$ 696
Call options sold
Amount (kg)
5,599
5,599
A$ per oz
A$ 954
A$ 954
Delta (kg)
(69,805)
(70,154)
(51,200)
(51,137)
(33,123)
(47,702)
(323,121)
**Total net gold:
Delta (oz)
(2,244,280)
(2,255,500)
(1,646,116)
(1,644,090)
(1,064,928) (1,533,653)
(10,388,567)
Hedge delta as a percentage of current
production levels (%)***
production levels (%)***
41%
41%
30%
30%
19%
9%
24%
*
Indicates a long position from forward purchase contracts. The Company enters into forward purchase contracts as part of its strategy to
manage and reduce the size of the hedge book.
manage and reduce the size of the hedge book.
** The Delta of the hedge position indicated above, is the equivalent gold position that would have the same marked-to-market sensitivity for
a small change in the gold price. This is calculated using the Black-Scholes option formula with the ruling market prices, interest rates
and volatilities as at December 31, 2007.
and volatilities as at December 31, 2007.
*** Percentage based on 2007 full year production of 5,477,000 ounces.
Year
2008
2009
2010
2011
2012-2015
GOLD LEASE RATE SWAPS
Amount (‘000oz)
100,000
130,000
100,000
Gold borrowing cost associated with forward
contracts
contracts
(1)
Interest rate %
1.38
1.58
1.52
Amount (‘000oz)
1,168,000
898,000
641,000
423,000
205,000
Gold lease rate swaps
(2)
Interest rate %
1.75
1.81
1.83
1.83
1.84
(1)
Gold borrowing cost relating to Australian dollar gold forwards:
The Australian dollar denominated gold forward contract prices are shown on a net basis where the final price of the contract is
determined by the cost of borrowing gold over the full duration of the contract. The net prices shown in the table above have been
adjusted to take account of the total expected future cost of all accumulated costs incurred to date and the expected future borrowing cost
based on ruling market prices at the financial statement date. The amount shown under “Gold borrowing cost associated with forward
contracts” in the table above is the face value of the borrowing amount and the period in which it matures. The interest rates shown are
the future market rates prevailing at the time of the financial statement.
determined by the cost of borrowing gold over the full duration of the contract. The net prices shown in the table above have been
adjusted to take account of the total expected future cost of all accumulated costs incurred to date and the expected future borrowing cost
based on ruling market prices at the financial statement date. The amount shown under “Gold borrowing cost associated with forward
contracts” in the table above is the face value of the borrowing amount and the period in which it matures. The interest rates shown are
the future market rates prevailing at the time of the financial statement.
(2)
The gold lease rate swaps are contracts where the Company receives a fixed percentage of the outstanding amount in gold and pays a
floating market determined percentage in gold, quarterly in arrears. The amount shown in the table above is the number of ounces
outstanding at the beginning of each period. The interest rate shown is the weighted average fixed rate that the Company will receive for
that period.
floating market determined percentage in gold, quarterly in arrears. The amount shown in the table above is the number of ounces
outstanding at the beginning of each period. The interest rate shown is the weighted average fixed rate that the Company will receive for
that period.
Year
2008
2009
2010
2011
2012
2013-2015
Total
DOLLAR SILVER
Put options purchased
Put options purchased
Amount (kg)
43,545
43,545
$ per oz
$ 7.66
$ 7.66
Put options sold
Amount (kg)
43,545
43,545
$ per oz
$ 6.19
$ 6.19
Call options sold
Amount (kg)
43,545
43,545
$ per oz
$ 8.64
$ 8.64
Foreign exchange price risk protection agreements
The Company enters into currency forward exchange and currency option contracts to hedge certain anticipated
transactions denominated in foreign currencies. The objective of the Company’s foreign currency hedging activities is to
protect the Company from the risk that the eventual cash flows resulting from transactions denominated in US dollars
will be adversely affected by changes in exchange rates.
transactions denominated in foreign currencies. The objective of the Company’s foreign currency hedging activities is to
protect the Company from the risk that the eventual cash flows resulting from transactions denominated in US dollars
will be adversely affected by changes in exchange rates.
F-54
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
26. FINANCIAL RISK MANAGEMENT ACTIVITIES (continued)
26. FINANCIAL RISK MANAGEMENT ACTIVITIES (continued)
The following table indicates the Company’s currency hedge position at December 31, 2007.
Year
2008
2009
2010
2011
2012
2013-2015
Total
RAND DOLLAR (000)
Forward contracts
Forward contracts
Amount ($)
35,000
35,000
Rand per $
R6.94
R6.94
Put options purchased
Amount ($)
120,000
120,000
Rand per $
R6.98
R6.98
Put options sold
Amount ($)
120,000
120,000
Rand per $
R6.65
R6.65
Call options sold
Amount ($)
135,000
135,000
Rand per $
R7.35
R7.35
AUD DOLLAR (000)
Forward contracts
Forward contracts
Amount ($)
190,000
190,000
$ per A$
$0.84
$0.84
Put options purchased
Amount ($)
140,000
140,000
$ per A$
$0.83
$0.83
Put options sold
Amount ($)
140,000
140,000
$ per A$
$0.87
$0.87
Call options sold
Amount ($)
140,000
140,000
$ per A$
$0.81
$0.81
BRAZILIAN REAL DOLLAR
(000)
Forward contracts
(000)
Forward contracts
Amount ($)
31,000
31,000
BRL per $
BRL 1.99
BRL 1.99
Put options purchased
Amount ($)
24,000
24,000
BRL per $
BRL 1.87
BRL 1.87
Call options sold
Amount ($)
68,000
68,000
BRL per $
BRL 1.92
BRL 1.92
As at December 31, 2007 certain of the hedging positions reported in the above tables were governed by early
termination options in favor of certain counterparts. No termination options were exercised early.
termination options in favor of certain counterparts. No termination options were exercised early.
Interest rate and liquidity risk
Fluctuations in interest rates impacts interest paid and received on the short-term cash investments and financing
activities, giving rise to interest rate risk.
Fluctuations in interest rates impacts interest paid and received on the short-term cash investments and financing
activities, giving rise to interest rate risk.
In the ordinary course of business, the Company receives cash from the proceeds of its gold sales and is required to
fund working capital requirements. This cash is managed to ensure surplus funds are invested in a manner to achieve
market related returns while minimizing risks. The Company is able to actively source financing at competitive rates.
The counterparts are financial and banking institutions of good credit standing.
fund working capital requirements. This cash is managed to ensure surplus funds are invested in a manner to achieve
market related returns while minimizing risks. The Company is able to actively source financing at competitive rates.
The counterparts are financial and banking institutions of good credit standing.
Cash and loans advanced maturity profile
2007
2006
Maturity date
Currency
Fixed rate
investment
amount
(million)
Effective
rate
%
Floating
rate
investment
amount
(million)
Effective
rate
%
Fixed rate
investment
amount
(million)
Effective
rate
%
Floating
rate
investment
amount
(million)
Effective
rate
%
All less than one year
USD
32
4.3
66
4.0
35
5.1
64
4.5
ZAR
525
11.0
888
10.1
513
8.5
837
7.8
AUD
-
-
34
6.5
-
-
52
6.0
HKD
-
-
1
4.0
-
-
-
-
BRL
-
-
67
8.9
-
-
35
13.2
ARS
-
-
9
11.1
-
-
13
9.5
NAD
139
9.7
58
9.5
134
8.3
-
-
F-55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
26. FINANCIAL RISK MANAGEMENT ACTIVITIES (continued)
26. FINANCIAL RISK MANAGEMENT ACTIVITIES (continued)
Borrowings maturity profile
Within one year
Between
one and two years
Between
two and five years
After five years
Currency
Borrowings
Amount
(million)
Effective
Rate
%
Borrowings
Amount
(million)
Effective
Rate
%
Borrowings
Amount
(million)
Effective
Rate
%
Borrowings
Amount
(million)
Effective
Rate
%
Total
Borrowings
amount
(million)
$
34
5.8
1,003
2.4
376
8.5
1,413
ZAR
2,072
10.5
20
9.9
63
9.9
165 9.8
2,320
AUD
172
7.7
172
BRL
1
5.0
1
Interest rate risk
Fixed for less than
one year
Fixed for between
one and three years
Fixed for greater than
three years
Currency
Borrowings
Amount
(million)
Effective
Rate
%
Borrowings
Amount
(million)
Effective
Rate
%
Borrowings
Amount
(million)
Effective
Rate
%
Total
Borrowings
amount
(million)
$
34
5.8
1,378
4.1
1
6.7
1,413
ZAR
2,072
10.5
41
9.9
207
9.8
2,320
AUD
172
7.7
172
BRL
1
5.0
1
Interest rate swaps
The Company previously entered into a convertible interest rate swap. The swap was a derivative instrument as defined
by SFAS133. The swap, done on the back of the $1 billion Convertible Bond, converted the fixed coupon of 2.375% per
annum into a LIBOR-based floating rate. The swap was not designated as a fair value hedge. The swap was
terminated and settled during September 2005, based on the Company’s view of US dollar interest rates.
The Company previously entered into a convertible interest rate swap. The swap was a derivative instrument as defined
by SFAS133. The swap, done on the back of the $1 billion Convertible Bond, converted the fixed coupon of 2.375% per
annum into a LIBOR-based floating rate. The swap was not designated as a fair value hedge. The swap was
terminated and settled during September 2005, based on the Company’s view of US dollar interest rates.
The Company previously entered into interest rate swap agreements to convert R750 million ($133 million) of its
R2,000 million ($354 million) ZAR denominated fixed rate Bond to variable rate debt. The swaps were not designated
as fair value hedges. The interest rate swaps were terminated and settled during April 2005, based on the Company’s
view of ZAR interest rates.
R2,000 million ($354 million) ZAR denominated fixed rate Bond to variable rate debt. The swaps were not designated
as fair value hedges. The interest rate swaps were terminated and settled during April 2005, based on the Company’s
view of ZAR interest rates.
Credit risk
Realization of all these contracts is dependent upon the counterparts performing in accordance with the terms of the
contracts. The Company generally does not obtain collateral or other security to support financial instruments subject
to credit risk, but monitors the credit standing of counterparts. The Company spreads its business over a number of
financial and banking institutions of good credit quality and believes that no concentration of credit risk exists. Limits for
each counterpart are based on the assessed credit quality of each counterpart. The AngloGold Ashanti Treasury
Committee makes recommendation for board approval of all counterparts and the limits to be applied against each
counterpart. Where possible, management tries to ensure that netting agreements are in place.
Realization of all these contracts is dependent upon the counterparts performing in accordance with the terms of the
contracts. The Company generally does not obtain collateral or other security to support financial instruments subject
to credit risk, but monitors the credit standing of counterparts. The Company spreads its business over a number of
financial and banking institutions of good credit quality and believes that no concentration of credit risk exists. Limits for
each counterpart are based on the assessed credit quality of each counterpart. The AngloGold Ashanti Treasury
Committee makes recommendation for board approval of all counterparts and the limits to be applied against each
counterpart. Where possible, management tries to ensure that netting agreements are in place.
The combined maximum credit exposure at the balance sheet date amounts to $516 million (2006: $655 million) on a
contract by contract basis. Credit risk exposure netted by counterparts amounts to $123 million (2006: $68 million). No
set-off is applied to the balance sheet due to the different maturity profiles of assets and liabilities.
contract by contract basis. Credit risk exposure netted by counterparts amounts to $123 million (2006: $68 million). No
set-off is applied to the balance sheet due to the different maturity profiles of assets and liabilities.
The table below provides a summary of the number, type and credit quality of AngloGold Ashanti’s hedge counterparts.
Number of Counterparts
Type
Credit Rating (Fitch)
1
International
Bank
AA+
9
International
Bank
AA
8
International
Bank
AA-
3
International
Bank
A+
1
International
Bank
A
5
International
Bank
A-
1
South African Bank
AAA(zaf) (International BBB+)
2
South African Bank
AA+(zaf) (International BBB+)
1
South African Bank
AA(zaf) (International BBB)
1
South African Bank
AA-(zaf) (International BBB)
4
Brazilian
Bank
AAA(bra)
3
Brazilian
Bank
AA+(bra)
2
Brazilian
Bank
AA(bra)
1
Brazilian
Bank
AA-(bra)
1
Trade Finance House
Not rated
AngloGold Ashanti does not anticipate non-performance by any counterparts.
F-56
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
26. FINANCIAL RISK MANAGEMENT ACTIVITIES (continued)
26. FINANCIAL RISK MANAGEMENT ACTIVITIES (continued)
Fair value of financial instruments
The estimated fair values of financial instruments are determined at discrete points in time based on relevant market
information. In certain cases these estimates involve uncertainties and cannot be determined with precision. The
estimated fair values of the Company’s financial instruments, as measured at December 31, 2007 and 2006, are as
follows (assets (liabilities)):
The estimated fair values of financial instruments are determined at discrete points in time based on relevant market
information. In certain cases these estimates involve uncertainties and cannot be determined with precision. The
estimated fair values of the Company’s financial instruments, as measured at December 31, 2007 and 2006, are as
follows (assets (liabilities)):
December 31, 2007
December 31, 2006
Carrying
amount
$
Fair
value
$
Carrying
amount
$
Fair
value
$
Cash and cash equivalents
477
477
471
471
Restricted cash
37
37
11
11
Short-term debt
(319)
(319)
(33)
(33)
Long-term debt
(1,564)
(1,564)
(1,472)
(1,484)
Derivatives
(2,563)
(1)
(4,342)
(1)
(1,524)
(1)
(2,954)
(1)
(1)
Carrying amounts represent on-balance sheet derivatives and fair value includes off-balance sheet normal purchase and sale
exempted contracts.
The following is the fair value of the hedge book derivative (liabilities)/assets split by accounting designation
December 31, 2007
Normal
purchase
and
sale exemption
$
Cash flow
hedge
accounted
$
Non-hedge
accounted
$
Total
$
Forward sales type agreements
(1,044)
(336)
(236)
(1,616)
Option contracts
(708)
-
(2,030)
(2,738)
(1)
Foreign exchange contracts
-
4
7
11
Foreign exchange option contracts
-
-
(6)
(6)
Interest rate swaps – Gold
(27)
-
34
7
Total
(1,779)
(332)
(2,231)
(4,342)
(1)
Includes deliverable call options sold. A deliverable option is an option in terms of which the delivery quantity is fixed regardless of
the market price on the exercise date. In the event that the market price is lower than the strike price, gold is sold to the
counterpart at the ruling spot price.
counterpart at the ruling spot price.
December 31, 2006
Normal purchase
and
sale exemption
$
Cash flow
hedge
accounted
$
Non-hedge
accounted
$
Total
$
Forward sales type agreements
(829)
(375)
(124)
(1,328)
Option contracts
(567)
-
(1,056)
(1,623)
(1)
Foreign exchange contracts
-
2
2
4
Foreign exchange option contracts
-
-
(12)
(12)
Interest rate swaps – Gold
(34)
-
39
5
Total
(1,430)
(373)
(1,151)
(2,954)
(1)
Includes deliverable call options sold. A deliverable option is an option in terms of which the delivery quantity is fixed regardless of
the market price on the exercise date. In the event that the market price is lower than the strike price, gold is sold to the
counterpart at the ruling spot price.
counterpart at the ruling spot price.
Maturity profile of on-balance sheet derivatives, at carrying value
Total
$
2007
Assets
$
Liabilities
$
Amounts to mature within twelve months of balance sheet date
(2,266)
516
(2,782)
Amounts maturing between one and two years
(148)
-
(148)
Amounts maturing between two and five years
(123)
-
(123)
Amounts to mature thereafter
(26)
-
(26)
Total
(2,563)
516
(3,079)
F-57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
26. FINANCIAL RISK MANAGEMENT ACTIVITIES (continued)
26. FINANCIAL RISK MANAGEMENT ACTIVITIES (continued)
Total
$
2006
Assets
$
Liabilities
$
Amounts to mature within twelve months of balance sheet date
(1,133)
649
(1,782)
Amounts maturing between one and two years
(144)
6
(150)
Amounts maturing between two and five years
(190)
-
(190)
Amounts to mature thereafter
(57)
-
(57)
Total
(1,524)
655
(2,179)
The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
Cash and cash equivalents and short-term debt
The carrying amounts approximate fair value because of the short-term duration of these instruments.
The carrying amounts approximate fair value because of the short-term duration of these instruments.
Long-term debt
The fair value of listed fixed rate debt and the Convertible Bonds are shown at their quoted market value. The
remainder of debt re-prices on a short-term floating rate basis, and accordingly the carrying amount is considered to
approximate fair value.
The fair value of listed fixed rate debt and the Convertible Bonds are shown at their quoted market value. The
remainder of debt re-prices on a short-term floating rate basis, and accordingly the carrying amount is considered to
approximate fair value.
Derivatives
The fair value of volatility-based instruments are estimated based on market prices, volatilities and interest rates, while
the fair value of forward sales and purchases are estimated based on the quoted market price for the contracts at
December 31, 2007 and 2006. The amounts include those contracts accounted for as normal purchase and sale
exempt derivatives.
The fair value of volatility-based instruments are estimated based on market prices, volatilities and interest rates, while
the fair value of forward sales and purchases are estimated based on the quoted market price for the contracts at
December 31, 2007 and 2006. The amounts include those contracts accounted for as normal purchase and sale
exempt derivatives.
27.
ADDITIONAL CASH FLOW INFORMATION
2007
$
2006
$
2005
$
Non-cash items
Reported as non-cash items in the statements of consolidated cash flows
are the following:
Reported as non-cash items in the statements of consolidated cash flows
are the following:
Interest paid during the year
71
82
57
Taxation paid during the year
180
110
22
28.
EMPLOYEE BENEFIT PLANS
Defined Benefit Plans
The Company has made provision for pension and medical schemes covering substantially all employees. The
retirement schemes as at December 31, 2007, 2006 and 2005, consists of the following which reflects the following
provision values:
retirement schemes as at December 31, 2007, 2006 and 2005, consists of the following which reflects the following
provision values:
2007
$
2006
$
2005
$
AngloGold Ashanti Pension Fund (asset)
(36)
(38)
(8)
Post Retirement medical scheme for AngloGold Ashanti South African
employees
employees
168
159
188
Other defined benefit plans
9
11
10
Sub Total
141
132
190
Transferred to other non-current assets
AngloGold Ashanti Pension Fund
36
38
8
Post retirement medical scheme for Rand Refinery employees
3
2
2
Total Provision
180
172
200
F-58
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
28. EMPLOYEE BENEFIT PLANS (continued)
28. EMPLOYEE BENEFIT PLANS (continued)
South Africa Defined Benefit Pension Fund
The plan is evaluated by independent actuaries on an annual basis as at December 31, of each year. The previous
statutory valuation had an effective date of December 31, 2005, and was completed in June 2006. The next statutory
valuation will have an effective date no later than December 31, 2008. The valuation as at December 31, 2007 was
completed at the beginning of 2008. In arriving at their conclusions, the actuaries took into account reasonable long-
term estimates of inflation, increases in wages, salaries and pensions as well as returns on investments. The
accumulated benefit obligation at December 31, 2007 is $218 million.
statutory valuation had an effective date of December 31, 2005, and was completed in June 2006. The next statutory
valuation will have an effective date no later than December 31, 2008. The valuation as at December 31, 2007 was
completed at the beginning of 2008. In arriving at their conclusions, the actuaries took into account reasonable long-
term estimates of inflation, increases in wages, salaries and pensions as well as returns on investments. The
accumulated benefit obligation at December 31, 2007 is $218 million.
All South African pension funds are governed by the Pension Funds Act of 1956 as amended.
Information with respect to the Defined Benefit Fund, which includes benefits for AngloGold Ashanti
employees, for the year ended December 31, is set forth in the table below:
employees, for the year ended December 31, is set forth in the table below:
Pension benefits
2007
$
2006
$
2005
$
Change in benefit obligation
Benefit obligation at January 1,
224
222
216
Service cost
7
7
6
Interest cost
18
16
14
Plan participants’ contributions
2
2
2
Actuarial loss
11
12
31
Increase as a result of transfers into the fund
1
-
-
Benefits paid
(12)
(14)
(24)
Translation
6
(21)
(23)
Benefit obligation at December 31,
257
224
222
Change in plan assets
Fair value of plan assets at January 1,
Fair value of plan assets at January 1,
262
230
204
Actual return on plan assets
27
62
57
Company contributions
6
6
13
Plan participants’ contributions
2
2
2
Increase as a result of transfers into the fund
1
-
-
Benefits paid
(12)
(14)
(24)
Translation
7
(24)
(22)
Fair value of plan assets at December 31,
293
262
230
Funded status at end of year
36
38
8
Net amount recognized
36
38
8
Components of net periodic benefit cost
Service cost
Service cost
7
7
6
Interest cost
18
16
14
Actuarial gains and losses
12
(28)
(10)
Expected return on assets
(28)
(22)
(16)
Net periodic benefit cost
9
(27)
(6)
Pension benefits
2007
2006
2005
Assumptions
Weighted-average assumptions used to determine benefit obligations at
December 31,
Discount rate
Weighted-average assumptions used to determine benefit obligations at
December 31,
Discount rate
8.25%
8.00%
7.75%
Rate of compensation increase
(1)
6.00%
5.50%
5.00%
Weighted-average assumptions used to determine the net periodic benefit cost
for the years ended December 31,
Discount rate
for the years ended December 31,
Discount rate
8.25%
8.00%
7.75%
Expected long-term return on plan assets
11.14%
10.50%
10.14%
Rate of compensation increase
(1)
6.00%
5.50%
5.00%
Pension increase
4.73%
4.28%
4.05%
(1)
The short-term compensation rate increase is 8% (2006: 6%) and the long-term
compensation rate increase is 6% (2006: 5.5%).
compensation rate increase is 6% (2006: 5.5%).
The expected long-term return on plan assets is determined using the after tax return
of RSA Government long bond yields as a guide.
of RSA Government long bond yields as a guide.
F-59
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
28. EMPLOYEE BENEFIT PLANS (continued)
28. EMPLOYEE BENEFIT PLANS (continued)
Pension benefits
2007
2006
Plan assets
AngloGold Ashanti’s pension plan asset allocations at December 31, 2007
and 2006, by asset category are as follows:
Asset Category
Equity securities
AngloGold Ashanti’s pension plan asset allocations at December 31, 2007
and 2006, by asset category are as follows:
Asset Category
Equity securities
68%
68%
Debt securities
27%
28%
Other
5%
4%
100%
100%
Investment Policy
The Trustees have adopted a long-term horizon in formulating the Fund’s investment strategy, which is consistent with
the term of the Fund’s liabilities. The investment strategy aims to provide a reasonable return relative to inflation
across a range of market conditions.
The Trustees have adopted different strategic asset allocations for the assets backing pensioner and active member
liabilities. The strategic asset allocation defines what proportion of the Fund’s assets should be invested in each major
asset class. The Trustees have then selected specialist investment managers to manage the assets in each asset
class according to specific performance mandates instituted by the Trustees.
The Trustees have also put in place a detailed Statement of Investment Principles that sets out the Fund’s overall
investment philosophy and strategy.
Fund returns are calculated on a monthly basis, and the performance of the managers and Fund as a whole is formally
reviewed by the Fund’s Investment Sub-Committee at least every six months.
The Trustees have adopted a long-term horizon in formulating the Fund’s investment strategy, which is consistent with
the term of the Fund’s liabilities. The investment strategy aims to provide a reasonable return relative to inflation
across a range of market conditions.
The Trustees have adopted different strategic asset allocations for the assets backing pensioner and active member
liabilities. The strategic asset allocation defines what proportion of the Fund’s assets should be invested in each major
asset class. The Trustees have then selected specialist investment managers to manage the assets in each asset
class according to specific performance mandates instituted by the Trustees.
The Trustees have also put in place a detailed Statement of Investment Principles that sets out the Fund’s overall
investment philosophy and strategy.
Fund returns are calculated on a monthly basis, and the performance of the managers and Fund as a whole is formally
reviewed by the Fund’s Investment Sub-Committee at least every six months.
2007
2006
No. of
Shares
Percentage of
total assets
Fair Value
$
No. of
Shares
Percentage of
total assets
Fair Value
$
Related Parties
Investments held in related parties are summarized as follows:
Investments held in related parties are summarized as follows:
Equity Securities
Anglo American plc
Anglo American plc
(1)
-
40,400
0.8%
2
AngloGold Ashanti Limited
88,458
1.3%
4
32,960
0.6%
2
4
4
Other investments exceeding 5% of total plan
assets
Bonds
RSA R157 Government Bonds 13.5%
assets
Bonds
RSA R157 Government Bonds 13.5%
5.4%
16
-
(1)
During April 2006, AngloGold Ashanti Limited launched an
equity offering which reduced Anglo American plc’s interest in
AngloGold Ashanti Limited to 41.67%. During October 2007,
AA plc further reduced its investment in AngloGold Ashanti
Limited to 16.61%. As at December 31, 2007, AA plc held a
16.58% interest in AngloGold Ashanti Limited.
AngloGold Ashanti Limited to 41.67%. During October 2007,
AA plc further reduced its investment in AngloGold Ashanti
Limited to 16.61%. As at December 31, 2007, AA plc held a
16.58% interest in AngloGold Ashanti Limited.
Cash Flows
Contributions
The Company expects to contribute $6 million (2007: $6 million) to its
pension plan in 2008.
Contributions
The Company expects to contribute $6 million (2007: $6 million) to its
pension plan in 2008.
$
Estimated future benefit payments
The following pension benefit payments, which reflect the expected future service, as appropriate, are
expected to be paid:
2008
The following pension benefit payments, which reflect the expected future service, as appropriate, are
expected to be paid:
2008
15
2009
15
2010
15
2011
15
2012
15
Thereafter
182
F-60
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
28. EMPLOYEE BENEFIT PLANS (continued)
28. EMPLOYEE BENEFIT PLANS (continued)
South Africa post-retirement medical benefits
The provision for post-retirement medical funding represents the provision for health care benefits for employees and
retired employees and their registered dependants. The post-retirement benefit costs are assessed in accordance with
the advice of independent professionally qualified actuaries. The actuarial method used is the projected unit credit
funding method. This scheme is unfunded. The last actuarial valuation was performed at December 31, 2007.
The provision for post-retirement medical funding represents the provision for health care benefits for employees and
retired employees and their registered dependants. The post-retirement benefit costs are assessed in accordance with
the advice of independent professionally qualified actuaries. The actuarial method used is the projected unit credit
funding method. This scheme is unfunded. The last actuarial valuation was performed at December 31, 2007.
Information with respect to the defined benefit liability, which includes post-retirement medical benefits for
AngloGold Ashanti South Africa employees, for the year ended December 31, is set forth in the table below:
AngloGold Ashanti South Africa employees, for the year ended December 31, is set forth in the table below:
Other benefits
2007
$
2006
$
2005
$
Change in benefit obligation
Benefit obligation at January 1,
159
188
166
Service cost
1
1
1
Interest cost
12
13
12
Plan participants contributions
5
5
5
Benefits paid
(16)
(17)
(16)
Actuarial loss/(gain)
1
(14)
38
Translation
6
(17)
(18)
Benefit obligation at December 31,
168
159
188
Unfunded status of the end of the year
(168)
(159)
(188)
Net amount recognized
(168)
(159)
(188)
Components of net periodic benefit cost
Service cost
Service cost
1
1
1
Interest cost
12
13
12
Actuarial gains and losses
1
(14)
38
14
-
51
The assumptions used in calculating the above amounts are:
Discount rate
8.25%
8.00%
7.75%
Expected increase in health care costs
6.75%
4.75%
5.00%
Assumed health care cost trend rates at December 31,
Health care cost trend assumed for next year
Health care cost trend assumed for next year
6.75%
4.75%
5.00%
Rate to which the cost trend is assumed to decline (the ultimate trend rate)
6.75%
4.75%
5.00%
Assumed health care cost trend rates have a significant effect on the
amounts reported for health care plans. A one percentage-point change in
assumed health care cost trend rates would have the following effect:
amounts reported for health care plans. A one percentage-point change in
assumed health care cost trend rates would have the following effect:
1-percentage point
increase
1-percentage point
decrease
Effect on total service and interest cost
2
(1)
Effect on post-retirement benefit obligation
17
(15)
Cash flows
Post-retirement medical plan
Post-retirement medical plan
The Company expects to contribute $28 million (2007: $25 million) to the
post-retirement medical plan in 2008.
post-retirement medical plan in 2008.
F-61
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
28. EMPLOYEE BENEFIT PLANS (continued)
28. EMPLOYEE BENEFIT PLANS (continued)
Estimated future benefit payments
$ million
The following benefit payments, which reflect expected future service, as
appropriate, are expected to be paid:
appropriate, are expected to be paid:
2008
13
2009
13
2010
13
2011
14
2012
14
Thereafter
101
Other Defined Benefit Plans
Other plans comprise the following and have been aggregated in the tables of change in benefit obligations, change in
plan assets and components of Net Periodic Benefit Cost.
plan assets and components of Net Periodic Benefit Cost.
Information with respect to the Ashanti Retired Staff pension plan, for the year ended December 31, is as
follows:
follows:
The pension scheme provides a retirement benefit to former Ashanti employees which were based at the former
London office. The scheme is closed to new members and participants are either retired or deferred members. The
plan is evaluated by actuaries on an annual basis using the projected unit credit funding method. No contributions are
made to the plan and it is funded with a marginal shortfall.
London office. The scheme is closed to new members and participants are either retired or deferred members. The
plan is evaluated by actuaries on an annual basis using the projected unit credit funding method. No contributions are
made to the plan and it is funded with a marginal shortfall.
2007
2006
2005
Assumptions
Weighted-average assumptions used to determine benefit obligations
at December 31,
Discount rate
Weighted-average assumptions used to determine benefit obligations
at December 31,
Discount rate
5.50%
5.00%
5.00%
Weighted-average assumptions used to determine net periodic benefit
cost at December 31,
Discount rate
cost at December 31,
Discount rate
5.50%
5.00%
5.00%
Expected long-term return on plan assets
6.81%
6.13%
6.07%
Pension increase
2.00%
2.50%
2.50%
The expected long-term return on plan assets is determined using the after
tax return of domestic bonds, fixed deposits and equity securities.
tax return of domestic bonds, fixed deposits and equity securities.
2007
2006
Plan assets
The Ashanti Retired Staff defined benefit pension plan asset allocations at
December 31, 2007 and 2006, by asset category are as follows:
The Ashanti Retired Staff defined benefit pension plan asset allocations at
December 31, 2007 and 2006, by asset category are as follows:
Asset Category
Equity securities
Equity securities
59%
55%
Debt securities
36%
40%
Cash
5%
4%
Property
-
1%
100%
100%
Information with respect to the Obuasi Mines Staff Pension Scheme, for the year ended December 31, is as
follows:
follows:
The scheme provides monthly payments in the Ghanaian currency (indexed to the US dollar) to retirees until death.
The benefits for the scheme are based on years of service and the compensation levels of the covered retirees. The
scheme is closed to new members and all the scheme participants are retired. The scheme is unfunded and
accordingly, no assets related to the scheme are recorded.
The benefits for the scheme are based on years of service and the compensation levels of the covered retirees. The
scheme is closed to new members and all the scheme participants are retired. The scheme is unfunded and
accordingly, no assets related to the scheme are recorded.
F-62
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
28. EMPLOYEE BENEFIT PLANS (continued)
28. EMPLOYEE BENEFIT PLANS (continued)
2007
2006
2005
Assumptions
Weighted-average assumptions used to determine benefit obligations
at December 31,
Discount rate
Weighted-average assumptions used to determine benefit obligations
at December 31,
Discount rate
4.50%
5.00%
4.00%
Weighted-average assumptions used to determine net periodic benefit
cost at December 31,
Discount rate
cost at December 31,
Discount rate
4.50%
5.00%
4.00%
Pension increase
4.50%
4.50%
3.00%
Information with respect to the Retiree Medical Plan, which includes benefits for AngloGold Ashanti USA
employees, for the year ended December 31, is as follows:
employees, for the year ended December 31, is as follows:
North America Retiree Medical Plan – AngloGold Ashanti USA provides health care and life insurance benefits for
certain retired employees under the AngloGold North America Retiree Medical Plan (the “Retiree Medical Plan”). With
effect December 31, 1999, no additional employees were eligible to receive post-retirement benefits under the Retiree
Medical Plan. Curtailment accounting was applied at December 31, 1999.
certain retired employees under the AngloGold North America Retiree Medical Plan (the “Retiree Medical Plan”). With
effect December 31, 1999, no additional employees were eligible to receive post-retirement benefits under the Retiree
Medical Plan. Curtailment accounting was applied at December 31, 1999.
The Retiree Medical Plan is a non-contributory defined benefit plan. This plan was last evaluated by independent
actuaries in September 2007 who took into account reasonable long-term estimates of increases in health care costs
and mortality rates in determining the obligations of AngloGold Ashanti USA under the Retiree Medical Plan. The
Retiree Medical Plan reflected liabilities of $2 million (2006: $2 million, 2005: $2 million). The Retiree Medical Plan is
an unfunded plan. The Retiree Medical Plan is evaluated on an annual basis using the projected benefit method.
actuaries in September 2007 who took into account reasonable long-term estimates of increases in health care costs
and mortality rates in determining the obligations of AngloGold Ashanti USA under the Retiree Medical Plan. The
Retiree Medical Plan reflected liabilities of $2 million (2006: $2 million, 2005: $2 million). The Retiree Medical Plan is
an unfunded plan. The Retiree Medical Plan is evaluated on an annual basis using the projected benefit method.
Other
benefits
2007
Other
benefits
2006
Other
benefits
2005
The assumptions used in calculating the benefit obligations at
December 31,
Discount rate
December 31,
Discount rate
4.50%
5.00%
5.50%
Rate of compensation increase
(1)
N/A
N/A
N/A
(1)
The Company does not share in future cost increases and therefore the rate of compensation increase is not applicable.
Information with respect to the Nufcor South Africa Retiree Medical Plan, which includes benefits for the
Nufcor South Africa past employees, for the year ended December 31, is as follows:
Nufcor South Africa past employees, for the year ended December 31, is as follows:
Assumptions
Weighted-average assumptions used to determine benefit obligations
at December 31,
Weighted-average assumptions used to determine benefit obligations
at December 31,
Discount rate
8.25%
8.50%
7.75%
Expected increase in health care costs
6.75%
6.50%
5.75%
Expected return on plan assets
9.25%
8.50%
7.75%
Plan Assets
The asset allocation of the Nufcor South Africa post retirement medical
fund at December 31, 2007 and 2006, by asset category is as follows:
The asset allocation of the Nufcor South Africa post retirement medical
fund at December 31, 2007 and 2006, by asset category is as follows:
Asset Category
Unit Trust Investment Funds
Unit Trust Investment Funds
100%
100%
100%
100%
F-63
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
28. EMPLOYEE BENEFIT PLANS (continued)
28. EMPLOYEE BENEFIT PLANS (continued)
Information with respect to the Post Retirement Medical Plan and Obligation for the Rand Refinery Ltd
employees, for the year ended December 31, is as follows:
employees, for the year ended December 31, is as follows:
Other
benefits
2007
Other
benefits
2006
Other
benefits
2005
Assumptions
Weighted-average assumptions used to determine benefit obligations
at December 31,
Discount rate
Weighted-average assumptions used to determine benefit obligations
at December 31,
Discount rate
8.25%
8.50%
7.75%
Expected increase in health care costs
6.75%
6.50%
5.75%
Expected return on plan assets
7.65%
7.77%
7.26%
Other
benefits
2007
Other
benefits
2006
Plan Assets
The asset allocation of the Rand Refinery post retirement medical fund at December 31,
2007 and 2006, by asset category is as follows:
The asset allocation of the Rand Refinery post retirement medical fund at December 31,
2007 and 2006, by asset category is as follows:
Asset Category
Debt securities
Debt securities
76%
76%
Cash
24%
24%
100%
100%
North America Supplemental Employee Retirement Plan (SERP)
Certain former employees of Minorco (USA) Inc. were covered under the Minorco
(USA) Inc. Supplemental Employee Retirement Plan (the SERP), a non-
contributory defined benefit plan. The SERP was last evaluated by independent
actuaries in September 2007 who took into account long-term estimates of
inflation and mortality rates in determining the obligation of AngloGold Ashanti
USA under the SERP. The SERP reflected liabilities of $1 million
(2006: $1 million, 2005: $1 million). The SERP is an unfunded plan and is
evaluated by actuaries on an annual basis using the projected benefit method.
Certain former employees of Minorco (USA) Inc. were covered under the Minorco
(USA) Inc. Supplemental Employee Retirement Plan (the SERP), a non-
contributory defined benefit plan. The SERP was last evaluated by independent
actuaries in September 2007 who took into account long-term estimates of
inflation and mortality rates in determining the obligation of AngloGold Ashanti
USA under the SERP. The SERP reflected liabilities of $1 million
(2006: $1 million, 2005: $1 million). The SERP is an unfunded plan and is
evaluated by actuaries on an annual basis using the projected benefit method.
2007
2006
2005
Weighted-average assumptions used to determine benefit obligations at the
end of the year are as follows:
Discount rate
end of the year are as follows:
Discount rate
4.50%
5.00%
5.50%
Weighted-average assumptions used to determine the net periodic benefit
cost of the year:
Discount rate
cost of the year:
Discount rate
4.50%
5.00%
5.50%
Pension increase
(1)
N/A
N/A
N/A
(1)
Pension benefits are fixed and pension inflation thus not relevant.
Aggregated information in respect of the other defined benefit plans, for the year ended December 31, is set
forth in the table below:
forth in the table below:
2007
$
2006
$
2005
$
Change in benefit obligations
Balance at January 1,
Balance at January 1,
19
18
41
Interest cost
1
-
2
Actuarial loss
-
2
-
Settlements and curtailments
-
-
(25)
Benefits paid
(1)
(1)
(2)
Translation
(1)
-
2
Balance at December 31,
18
19
18
F-64
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
28. EMPLOYEE BENEFIT PLANS (continued)
28. EMPLOYEE BENEFIT PLANS (continued)
2007
$
2006
$
2005
$
Change in plan assets
Fair value of plan assets at January 1,
Fair value of plan assets at January 1,
8
8
23
Actual return on plan assets
-
-
1
Settlements and curtailments
-
-
(15)
Benefit paid
-
-
(1)
Translation
1
-
-
Fair value of plan assets at December 31,
9
8
8
Unfunded status at end of year
(9)
(11)
(10)
Net amount recognized
(9)
(11)
(10)
Components of net periodic benefit cost
Interest cost
Interest cost
1
-
2
Actuarial gains and losses
-
2
-
Expected return on plan assets
-
-
(1)
1
2
1
Cash flows
The other retirement defined benefit plans are all closed to new members and current members are either retired or
deferred members. The Company does not make a contribution to these plans.
deferred members. The Company does not make a contribution to these plans.
Estimated Future Benefit Payments
The following future benefit payments, which reflect the expected future service lives, as appropriate, are expected to
be paid:
be paid:
2008
1
2009
1
2010
1
2011
1
2012
1
Thereafter
13
Defined Contribution Funds
Contributions to the various retirement schemes are fully expensed during the year in which they are made and the cost
of contributions to retirement benefits for the year amounted to $51 million (2006: $40 million, 2005: $31 million).
Contributions to the various retirement schemes are fully expensed during the year in which they are made and the cost
of contributions to retirement benefits for the year amounted to $51 million (2006: $40 million, 2005: $31 million).
Australia (Boddington and Sunrise Dam)
The region contributes to the Australian Retirement Fund for the provision of benefits to employees and their
dependants on retirement, disability or death. The fund is a multi-industry national fund with defined contribution
arrangements. Contribution rates by the operation on behalf of employees varies, with minimum contributions meeting
compliance requirements under the Superannuation Guarantee legislation. Members also have the option of
contributing to approved personal superannuation funds. The contributions by the operation are legally enforceable to
the extent required by the Superannuation Guarantee legislation and relevant employment agreements. The cost to the
Company of all these contributions amounted to $3 million (2006: $2 million, 2005: $2 million).
dependants on retirement, disability or death. The fund is a multi-industry national fund with defined contribution
arrangements. Contribution rates by the operation on behalf of employees varies, with minimum contributions meeting
compliance requirements under the Superannuation Guarantee legislation. Members also have the option of
contributing to approved personal superannuation funds. The contributions by the operation are legally enforceable to
the extent required by the Superannuation Guarantee legislation and relevant employment agreements. The cost to the
Company of all these contributions amounted to $3 million (2006: $2 million, 2005: $2 million).
Namibia (Navachab)
Navachab employees are members of a defined contribution provident fund. The fund is administered by the Old
Mutual Insurance Company. Both the Company and the employees contribute to this fund. AngloGold Ashanti Limited
seconded employees at Navachab remain members of the applicable pension or retirement fund in terms of their
conditions of employment with AngloGold Ashanti Limited. The cost of providing retirement benefits for the year
amounted to $1 million (2006: $1 million, 2005: $1 million).
Mutual Insurance Company. Both the Company and the employees contribute to this fund. AngloGold Ashanti Limited
seconded employees at Navachab remain members of the applicable pension or retirement fund in terms of their
conditions of employment with AngloGold Ashanti Limited. The cost of providing retirement benefits for the year
amounted to $1 million (2006: $1 million, 2005: $1 million).
F-65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
28. EMPLOYEE BENEFIT PLANS (continued)
28. EMPLOYEE BENEFIT PLANS (continued)
Mali (Sadiola, Yatela and Morila)
The Malian operations do not have retirement schemes for employees. All employees (local and expatriate) contribute
towards the government social security fund, and the Company also makes a contribution towards this fund. On
retirement, Malian employees are entitled to a retirement benefit from the Malian Government. Expatriate employees
are reimbursed only their contributions to the social security fund. AngloGold Ashanti Limited seconded employees in
Mali remain members of the applicable pension or retirement fund in terms of their conditions of employment with
AngloGold Ashanti Limited. The cost of providing retirement benefits for the year amounted to $1 million (2006:
$1 million, 2005: $2 million). The Sadiola, Yatela and Morila Joint Ventures are equity accounted. Refer to Note 15.
The Malian operations do not have retirement schemes for employees. All employees (local and expatriate) contribute
towards the government social security fund, and the Company also makes a contribution towards this fund. On
retirement, Malian employees are entitled to a retirement benefit from the Malian Government. Expatriate employees
are reimbursed only their contributions to the social security fund. AngloGold Ashanti Limited seconded employees in
Mali remain members of the applicable pension or retirement fund in terms of their conditions of employment with
AngloGold Ashanti Limited. The cost of providing retirement benefits for the year amounted to $1 million (2006:
$1 million, 2005: $2 million). The Sadiola, Yatela and Morila Joint Ventures are equity accounted. Refer to Note 15.
Tanzania (Geita)
Geita does not have a retirement scheme for employees. Tanzanian nationals contribute to the National Social Security
Fund (NSSF) or the Parastatal Provident Fund (PPF), depending on the employee’s choice, and the Company also
makes a contribution on the employee’s behalf to the same fund. On leaving the Company, employees may withdraw
their contribution from the fund. From July 2005, the Company has set up a supplemental provident fund which is
administered by the Parastatal Provident Fund (PPF) with membership available to permanent national employees on a
voluntary basis. The Company makes no contribution towards any retirement schemes for contracted expatriate
employees. AngloGold Ashanti Limited employees seconded in Tanzania remain members of the applicable pension or
retirement fund in terms of their conditions of employment with AngloGold Ashanti Limited. The Company contributes to
the National Social Security Fund (NSSF) on behalf of expatriate employees. On termination of employment the
Company may apply for a refund of contributions from the NSSF.
Geita does not have a retirement scheme for employees. Tanzanian nationals contribute to the National Social Security
Fund (NSSF) or the Parastatal Provident Fund (PPF), depending on the employee’s choice, and the Company also
makes a contribution on the employee’s behalf to the same fund. On leaving the Company, employees may withdraw
their contribution from the fund. From July 2005, the Company has set up a supplemental provident fund which is
administered by the Parastatal Provident Fund (PPF) with membership available to permanent national employees on a
voluntary basis. The Company makes no contribution towards any retirement schemes for contracted expatriate
employees. AngloGold Ashanti Limited employees seconded in Tanzania remain members of the applicable pension or
retirement fund in terms of their conditions of employment with AngloGold Ashanti Limited. The Company contributes to
the National Social Security Fund (NSSF) on behalf of expatriate employees. On termination of employment the
Company may apply for a refund of contributions from the NSSF.
North America (Cripple Creek & Victor)
AngloGold Ashanti USA sponsors a 401(k) savings plan whereby employees may contribute up to 60 percent of their
salary, of which up to 5 percent is matched at a rate of 150 percent by AngloGold Ashanti USA. AngloGold Ashanti
USA's contributions were $1 million (2006: $2 million, 2005: $2 million).
AngloGold Ashanti USA sponsors a 401(k) savings plan whereby employees may contribute up to 60 percent of their
salary, of which up to 5 percent is matched at a rate of 150 percent by AngloGold Ashanti USA. AngloGold Ashanti
USA's contributions were $1 million (2006: $2 million, 2005: $2 million).
South America (AngloGold Ashanti Brasil Mineração, Cerro Vanguardia and Serra Grande)
The AngloGold Ashanti South America region operates defined contribution arrangements for their employees in Brazil.
These arrangements are funded by the operations (basic plan) and operations/employees (optional supplementary
plan). A PGBL fund, similar to the American 401 (k) type of plan was started in December 2001. Administered by
Bradesco Previdencia e Seguros (which assumes the risk for any eventual actuarial liabilities), this is the only private
pension plan sponsored by the Company in the country. Contributions amounted to $5 million (2006: $2 million, 2005:
$1 million).
The AngloGold Ashanti South America region operates defined contribution arrangements for their employees in Brazil.
These arrangements are funded by the operations (basic plan) and operations/employees (optional supplementary
plan). A PGBL fund, similar to the American 401 (k) type of plan was started in December 2001. Administered by
Bradesco Previdencia e Seguros (which assumes the risk for any eventual actuarial liabilities), this is the only private
pension plan sponsored by the Company in the country. Contributions amounted to $5 million (2006: $2 million, 2005:
$1 million).
Ghana and Guinea (Iduapriem, Obuasi and Siguiri)
Ghana and Guinea contribute to provident plans for their employees which are defined contribution plans. The funds
are administered by Boards of Trustees and invested mainly in Ghana and Guinea government treasury instruments,
fixed interest deposits and other projects. The costs of these contributions for the year amounted to $4 million
(2006: $3 million, 2005: $3 million).
are administered by Boards of Trustees and invested mainly in Ghana and Guinea government treasury instruments,
fixed interest deposits and other projects. The costs of these contributions for the year amounted to $4 million
(2006: $3 million, 2005: $3 million).
South Africa (Great Noligwa, Kopanang, Moab Khotsong, Mponeng, Savuka, Tau Lekoa and TauTona)
South Africa contributes to various industry-based pension and provident retirement plans which cover substantially all
employees and are defined contribution plans. These plans are all funded and the assets of the schemes are held in
administrated funds separately from the Company's assets. The cost of providing these benefits amounted to
$36 million (2006: $29 million, 2005: $20 million).
employees and are defined contribution plans. These plans are all funded and the assets of the schemes are held in
administrated funds separately from the Company's assets. The cost of providing these benefits amounted to
$36 million (2006: $29 million, 2005: $20 million).
29.
SEGMENT AND GEOGRAPHICAL INFORMATION
The Company produces gold as its primary product and does not have distinct divisional segments in terms of principal
business activity, but manages its business on the basis of different geographic segments. Therefore, information
regarding separate geographic segments is provided. During 2007, the Company changed the method of allocating
hedging to individual mines. In prior periods, forward contracts were allocated to each reporting segment, based on the
then prevailing contractual relationship with the counterparty. Following the removal of certain counterparty restrictions
and the granting of group level guarantees during 2006, the Company has applied an average received gold price
across all reporting segments. The average received gold price for each mine is thus similar to the Company’s average
received gold price which includes realized gains/losses on non-hedge derivatives. Where applicable, the
corresponding items of segment information for all earlier periods presented have been restated to reflect this. This
information is consistent with the information used by the Company’s Chief Operating Decision Maker in evaluating
operating performance of, and making resource allocation decisions among operations.
business activity, but manages its business on the basis of different geographic segments. Therefore, information
regarding separate geographic segments is provided. During 2007, the Company changed the method of allocating
hedging to individual mines. In prior periods, forward contracts were allocated to each reporting segment, based on the
then prevailing contractual relationship with the counterparty. Following the removal of certain counterparty restrictions
and the granting of group level guarantees during 2006, the Company has applied an average received gold price
across all reporting segments. The average received gold price for each mine is thus similar to the Company’s average
received gold price which includes realized gains/losses on non-hedge derivatives. Where applicable, the
corresponding items of segment information for all earlier periods presented have been restated to reflect this. This
information is consistent with the information used by the Company’s Chief Operating Decision Maker in evaluating
operating performance of, and making resource allocation decisions among operations.
F-66
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
29. SEGMENT AND GEOGRAPHICAL INFORMATION (continued)
29. SEGMENT AND GEOGRAPHICAL INFORMATION (continued)
Year ended December 31
Business segment data
2007
$
2006
$
2005
$
Revenues
Revenues from product sales:
Revenues from product sales:
South Africa
1,472
1,513
1,215
Argentina
129
118
99
Australia
378
307
208
Brazil
323
258
184
Ghana
364
330
337
Guinea
223
167
137
Mali
278
317
242
Namibia
52
50
36
Tanzania
219
199
258
USA
179
124
127
3,617
3,383
2,843
Less: Equity method investments included above
(278)
(317)
(242)
Less: Gains on realized non-hedge derivatives included above
(291)
(383)
(148)
Total revenues from product sales
3,048
2,683
2,453
Depreciation and amortization expense
South Africa
South Africa
301
324
248
Argentina
18
35
22
Australia
54
39
35
Brazil
50
35
33
Ghana
91
119
113
Guinea
45
52
39
Mali
23
50
60
Namibia
6
7
7
Tanzania
58
49
56
USA
32
39
40
678
749
653
Less: Equity method investments included above
(23)
(50)
(60)
Total depreciation and amortization expense
655
699
593
Segment income/(loss)
South Africa
South Africa
283
359
(38)
Argentina
66
43
37
Australia
132
82
39
Brazil
70
92
60
Ghana
(34)
(65)
(96)
Guinea
(2)
(16)
7
Mali
91
126
39
Namibia
10
19
11
Tanzania
(150)
(132)
(35)
USA
1
(13)
(21)
Other, including Corporate and Non-gold producing subsidiaries
(82)
(54)
(48)
Total segment income/(loss)
385
441
(45)
Reconciliation of segment income/(loss) to Net loss
Segment total
Segment total
385
441
(45)
Exploration costs
(117)
(58)
(44)
General and administrative expenses
(130)
(140)
(71)
Market development costs
(16)
(16)
(13)
Non-hedge derivative loss
(808)
(208)
(142)
Other operating items
16
(16)
(9)
Taxation (expense)/benefit
(118)
(122)
121
Discontinued operations
2
6
(44)
Minority interest
(28)
(29)
(23)
Cumulative effect of accounting change
-
-
(22)
Net loss
(814)
(142)
(292)
F-67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
29. SEGMENT AND GEOGRAPHICAL INFORMATION (continued)
29. SEGMENT AND GEOGRAPHICAL INFORMATION (continued)
Year ended December 31
Business segment data
2007
$
2006
$
2005
$
Segment assets
South Africa
South Africa
3,337
3,093
3,019
Argentina
236
254
248
Australia
1,183
805
737
Brazil
674
544
371
Ghana
2,155
2,058
2,104
Guinea
371
357
349
Mali
291
(1)
280
(1)
309
(1)
Namibia
76
64
51
Tanzania
1,343
1,382
1,281
USA
528
507
429
Other, including Corporate, Assets held for sale and Non-gold
producing subsidiaries
187
169
215
Total segment assets
10,381
9,513
9,113
Expenditure for additions to long-lived assets
South Africa
South Africa
411
321
347
Argentina
20
19
15
Australia
281
86
38
Brazil
141
186
85
Ghana
119
97
90
Guinea
21
16
36
Mali
9
6
12
Namibia
6
5
5
Tanzania
26
67
78
USA
23
13
8
Other, including Corporate and Non-gold producing subsidiaries
2
1
8
1,059
817
722
Less: Equity method investments included above
(9)
(6)
(12)
Total expenditure for additions to long-lived assets
1,050
811
710
Geographical area data
Total revenues
South Africa
Total revenues
South Africa
1,504
1,531
1,226
Argentina
130
118
101
Australia
379
309
210
Brazil
319
260
191
Ghana
364
330
338
Guinea
224
164
138
Mali
280
321
236
Namibia
54
51
36
Tanzania
224
198
257
USA
180
124
129
Other, including Corporate and Non-gold producing subsidiaries
8
13
7
3,666
3,419
2,869
Less: Equity method investments included above
(280)
(321)
(236)
Less: Gains on realized non-hedge derivatives included above
(291)
(383)
(148)
Total revenues
3,095
2,715
2,485
(1)
Investment
held.
F-68
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
29. SEGMENT AND GEOGRAPHICAL INFORMATION (continued)
29. SEGMENT AND GEOGRAPHICAL INFORMATION (continued)
Year ended December 31
Business segment data
2007
$
2006
$
2005
$
Long-lived assets by area
South Africa
South Africa
2,506
2,370
2,482
Argentina
166
183
200
Australia
975
650
606
Brazil
568
454
299
Ghana
1,928
1,875
2,002
Guinea
235
254
286
Mali
291
(1)
281
(1)
309
(1)
Namibia
23
22
25
Tanzania
1,105
1,121
1,079
USA
396
367
347
Other, including Corporate, Assets held for sale and Non-gold
producing subsidiaries
75
60
77
Total long-lived assets
8,268
7,637
7,712
(1)
Investment
held.
30. ANGLOGOLD LIMITED SHARE INCENTIVE SCHEME AND PLANS
Employee Share Incentive Scheme
Prior to January 1, 2006, the Company accounted for share-based payments under the recognition and measurement
provisions of APB Opinion No. 25, “Accounting for Stock Issued to Employees, and related Interpretations”, as
permitted by SFAS123. On January 1, 2006, the Company adopted the fair value recognition provisions of
SFAS No. 123(R), “Share-Based Payment”, using the modified prospective transition method.
Prior to January 1, 2006, the Company accounted for share-based payments under the recognition and measurement
provisions of APB Opinion No. 25, “Accounting for Stock Issued to Employees, and related Interpretations”, as
permitted by SFAS123. On January 1, 2006, the Company adopted the fair value recognition provisions of
SFAS No. 123(R), “Share-Based Payment”, using the modified prospective transition method.
At a general meeting held on June 4, 1998, shareholders approved the introduction of the AngloGold Limited Share
Incentive Scheme (“Share Incentive Scheme”) for the purpose of providing an incentive to executive directors and
senior employees of the Company and its subsidiaries to identify themselves more closely with the fortunes of the
Company and its continued growth, and also to promote the retention of such employees by giving them an opportunity
to acquire shares in the Company. Employees participate in the scheme to the extent that they are granted options and
accept them.
Incentive Scheme (“Share Incentive Scheme”) for the purpose of providing an incentive to executive directors and
senior employees of the Company and its subsidiaries to identify themselves more closely with the fortunes of the
Company and its continued growth, and also to promote the retention of such employees by giving them an opportunity
to acquire shares in the Company. Employees participate in the scheme to the extent that they are granted options and
accept them.
At a general meeting held on April 30, 2002, it was approved that the rules of the Share Incentive Scheme be amended
to provide for the exercise of options to be based on a condition, related to the performance of the Company, as
determined by the directors and which will be objective and specified. An employee would only be able to exercise his
options after the date upon which he has received written notification from the directors that the previously specified
performance condition has been fulfilled or waived. The options which have been granted prior to May 1, 2002
remained subject to the conditions under which they were granted. Although there are no automatically convertible
unsecured debentures
to provide for the exercise of options to be based on a condition, related to the performance of the Company, as
determined by the directors and which will be objective and specified. An employee would only be able to exercise his
options after the date upon which he has received written notification from the directors that the previously specified
performance condition has been fulfilled or waived. The options which have been granted prior to May 1, 2002
remained subject to the conditions under which they were granted. Although there are no automatically convertible
unsecured debentures
(1)
currently in issue under the rules of the Share Incentive Scheme, consequential amendments
were approved to the rules of the scheme which effectively made the conversion of debentures subject to the same
terms as the exercise of options.
terms as the exercise of options.
At December 31, 2007, the maximum number of ordinary shares that may be allocated for the purposes of the scheme
is 7,630,080 (December 31, 2006: 7,596,494), equivalent to 2.75 percent of the total number of ordinary shares in issue
at that date.
is 7,630,080 (December 31, 2006: 7,596,494), equivalent to 2.75 percent of the total number of ordinary shares in issue
at that date.
At the annual general meeting held on April 29, 2005, shareholders approved the amendment to the maximum
aggregate number of ordinary shares which may be acquired by any one participant in the scheme from 300,000 to
5 percent of the 2.75 percent attributable to all schemes and plans adopted by shareholders (or 0.1375 percent of the
total number of ordinary shares in issue at any one time). At December 31, 2007 the maximum aggregate number of
ordinary shares which may be acquired by any one participant in the scheme was 381,504 shares.
aggregate number of ordinary shares which may be acquired by any one participant in the scheme from 300,000 to
5 percent of the 2.75 percent attributable to all schemes and plans adopted by shareholders (or 0.1375 percent of the
total number of ordinary shares in issue at any one time). At December 31, 2007 the maximum aggregate number of
ordinary shares which may be acquired by any one participant in the scheme was 381,504 shares.
F-69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
30. ANGLOGOLD LIMITED SHARE INCENTIVE SCHEME AND PLANS (continued)
30. ANGLOGOLD LIMITED SHARE INCENTIVE SCHEME AND PLANS (continued)
Ordinary shares issued in terms of the Share Incentive Scheme shall, subject to the provisions of the Share Incentive
Scheme, rank pari passu with issued shares in all respects, including participation in dividends declared by the
Company.
Scheme, rank pari passu with issued shares in all respects, including participation in dividends declared by the
Company.
Non-executive directors are not eligible for participation in the Share Incentive Scheme.
(1)
The debenture incentive options were cancelled on June 30, 2001 in exchange for stock incentive options.
Total Plan Employee Costs
On December 31, 2007, the Company has five stock-based compensation plans, which are described below. Total
compensation cost charged against income for these plans was $33 million, $42 million and $2 million for 2007, 2006
and 2005, respectively. During the year ended December 31, 2007, $1 million (2006: less than $1 million) income tax
benefit was recognized in the income statement for share-based compensation arrangements, no income tax benefit
was recognised in 2005. The Company did not capitalize compensation cost as part of the cost of an asset during any
of these periods.
compensation cost charged against income for these plans was $33 million, $42 million and $2 million for 2007, 2006
and 2005, respectively. During the year ended December 31, 2007, $1 million (2006: less than $1 million) income tax
benefit was recognized in the income statement for share-based compensation arrangements, no income tax benefit
was recognised in 2005. The Company did not capitalize compensation cost as part of the cost of an asset during any
of these periods.
At the year end, the unallocated balance of shares subject to the Share Incentive Scheme amounts to 4,315,827
(2006: 3,396,674).
(2006: 3,396,674).
Options
An option may only be granted to an employee to purchase a certain number of shares, specified by the directors, at
the option price payable in accordance with the rules of the Share Incentive Scheme. It is personal to the employee to
whom it is addressed and may only be accepted by him, his family, his company or his family trust.
the option price payable in accordance with the rules of the Share Incentive Scheme. It is personal to the employee to
whom it is addressed and may only be accepted by him, his family, his company or his family trust.
The Share Incentive Scheme provides for the granting of options based on two separate criteria:
·
Time related options
As approved by shareholders at the general meeting held on June 4, 1998 and amended by shareholders at the
general meeting held on April 30, 2002, time related options may be exercised over a five year period from date of
grant, and may be exercised in tranches of 20 percent each in years 2, 3 and 4 and 40 percent in year five.
general meeting held on April 30, 2002, time related options may be exercised over a five year period from date of
grant, and may be exercised in tranches of 20 percent each in years 2, 3 and 4 and 40 percent in year five.
No further options will be granted under this plan which will terminate on February 1, 2012, being the date on
which the last options granted under this plan, may be exercised or will expire.
which the last options granted under this plan, may be exercised or will expire.
A summary of time related options showing movement from the beginning of the year to the end of the year, is
presented below:
presented below:
2007
Options
(000)
2007
Weighted-
average
exercise price
R
Outstanding at the beginning of the year
473
126
Granted
-
-
Exercised
(266)
126
Forfeited (terminations)
-
-
Outstanding at the end of the year
207
125
Exercisable at the end of the year
207
125
The total intrinsic value of options outstanding at year-end was R35 million (2006: R97 million), with a weighted
average remaining contractual term of 2.4 years (2006: 3.5 years). The intrinsic value of options exercised during
the years ended December 31, 2007, 2006 and 2005 was R48 million, R76 million and R53 million, respectively.
average remaining contractual term of 2.4 years (2006: 3.5 years). The intrinsic value of options exercised during
the years ended December 31, 2007, 2006 and 2005 was R48 million, R76 million and R53 million, respectively.
During the years ended December 31, 2007, 2006 and 2005 the Company recognized less than $1 million,
$1 million and $nil million, respectively, compensation expense related to time-based awards.
$1 million and $nil million, respectively, compensation expense related to time-based awards.
F-70
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
30. ANGLOGOLD LIMITED SHARE INCENTIVE SCHEME AND PLANS (continued)
30. ANGLOGOLD LIMITED SHARE INCENTIVE SCHEME AND PLANS (continued)
·
Performance related options
As approved by shareholders at the general meeting held on April 30, 2002, performance related options granted
vest in full, three years after date of grant, provided that the conditions on which the options were granted, namely
related to the performance of the Company (growth in an adjusted earnings per share) as determined by the
directors, are met. If the performance condition is not met at the end of the first three year period, then
performance is re-tested each year over the ten year life of the option on a rolling three year basis. Options are
normally exercisable, subject to satisfaction of the performance condition, between three and ten years from date
of grant. As none of the performance criteria of the options issued in 2002 and 2003 were met in the initial three
years, the grantor decided to roll the schemes forward on a “roll over reset” basis to be reviewed annually. The
performance criteria of the options issued in 2002, 2003 and 2004 were achieved during 2006.
vest in full, three years after date of grant, provided that the conditions on which the options were granted, namely
related to the performance of the Company (growth in an adjusted earnings per share) as determined by the
directors, are met. If the performance condition is not met at the end of the first three year period, then
performance is re-tested each year over the ten year life of the option on a rolling three year basis. Options are
normally exercisable, subject to satisfaction of the performance condition, between three and ten years from date
of grant. As none of the performance criteria of the options issued in 2002 and 2003 were met in the initial three
years, the grantor decided to roll the schemes forward on a “roll over reset” basis to be reviewed annually. The
performance criteria of the options issued in 2002, 2003 and 2004 were achieved during 2006.
The performance related options’ compensation expense is fixed at grant date and recorded when it is probable
that the performance criteria will be met.
that the performance criteria will be met.
No further performance related options will be granted and all options granted hereunder will terminate on
November 1, 2014, being the date on which the last options granted under this criteria may be exercised or will
expire.
November 1, 2014, being the date on which the last options granted under this criteria may be exercised or will
expire.
A summary of performance related options showing movement from the beginning of the year to the end of the
year, is presented below:
year, is presented below:
2007
Options
(000)
2007
Weighted-
average
exercise price
R
Outstanding at the beginning of the year
2,586
248
Granted
-
-
Exercised
(863)
246
Forfeited (terminations)
(85)
246
Outstanding at the end of the year
1,638
249
Exercisable at the end of the year
1,638
249
The total intrinsic value of options outstanding at year-end was R72 million (2006: R213 million), with a weighted
average remaining contractual term of 6 years (2006: 7 years). The intrinsic value of options exercised during the
years ended December 31, 2007, 2006 and 2005 was R53 million and less than R1 million for 2006 and 2005,
respectively.
average remaining contractual term of 6 years (2006: 7 years). The intrinsic value of options exercised during the
years ended December 31, 2007, 2006 and 2005 was R53 million and less than R1 million for 2006 and 2005,
respectively.
All options which have not been exercised within ten years from the date on which they were granted automatically
expire.
expire.
During the years ended December 31, 2007, 2006 and 2005 the Company recognized $3 million, $29 million and
$nil million, respectively, compensation expense related to performance related awards.
$nil million, respectively, compensation expense related to performance related awards.
During 2007, a total of 1,128,574 common shares were issued under the share incentive scheme in terms of time-
based and performance awards.
based and performance awards.
As of December 31, 2007, there was no unrecognized compensation cost related to unvested stock options.
F-71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
30. ANGLOGOLD LIMITED SHARE INCENTIVE SCHEME AND PLANS (continued)
30. ANGLOGOLD LIMITED SHARE INCENTIVE SCHEME AND PLANS (continued)
The weighted average of all options outstanding as at December 31, 2007, is as follows:
Range of exercise
Prices
R
Quantity of options within
range
(000)
Weighted average
exercise price
R
Weighted average
contractual life
Years
95 – 143
189
123.42
2.27
144 - 211
18
149.91
3.33
212 - 300
1,638
248.76
5.64
1,845
(1)
234.96
5.27
(1)
Represents a total of 206,960 time related options and 1,638,200 performance related options outstanding as at
December 31, 2007.
December 31, 2007.
No options expired during the year ended December 31, 2007.
Since December 31, 2007 to and including April 30, 2008, 286,169 options have been exercised.
No grants were made with respect to the time related scheme options and performance related options during 2005,
2006 and 2007.
2006 and 2007.
In accordance with APB No. 25, no compensation cost was required to be recognized for options granted that had an
exercise price equal to the market value of the underlying common stock on the date of grant. During the year ended
December 31, 2005 there was no compensation expense recognized related to time-based awards as the exercise
price of all awards was greater than or equal to the fair market value of the underlying stock on the date of grants.
During the year ended December 31, 2005 the Company recognized a compensation expense of $2 million related
to Bonus Share Plan (BSP) and Long-Term Incentive Plan (LTIP) treated as equity settled compensation plans under
APB No. 25. As of December 31, 2005 no compensation expense was recognized, related to the performance
awards under APB No. 25.
exercise price equal to the market value of the underlying common stock on the date of grant. During the year ended
December 31, 2005 there was no compensation expense recognized related to time-based awards as the exercise
price of all awards was greater than or equal to the fair market value of the underlying stock on the date of grants.
During the year ended December 31, 2005 the Company recognized a compensation expense of $2 million related
to Bonus Share Plan (BSP) and Long-Term Incentive Plan (LTIP) treated as equity settled compensation plans under
APB No. 25. As of December 31, 2005 no compensation expense was recognized, related to the performance
awards under APB No. 25.
On January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123(R), “Share-Based
Payment”, using the modified prospective transition method. Under this method, compensation cost recognized in
the year ended December 31, 2006 includes: a) compensation cost for all share-based payments granted prior to,
but not yet vested as of January 1, 2006, based on the grant-date fair value estimated in accordance with the original
provisions of SFAS123, and b) compensation cost for all share-based payments granted subsequent to
January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS123(R). The
results for prior periods have not been restated.
Payment”, using the modified prospective transition method. Under this method, compensation cost recognized in
the year ended December 31, 2006 includes: a) compensation cost for all share-based payments granted prior to,
but not yet vested as of January 1, 2006, based on the grant-date fair value estimated in accordance with the original
provisions of SFAS123, and b) compensation cost for all share-based payments granted subsequent to
January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS123(R). The
results for prior periods have not been restated.
As a result of adopting SFAS123(R) on January 1, 2006, the Company’s loss before income taxes and net loss for
the years ended December 31, 2007 and 2006, are $3 million and $31 million higher, respectively, than if it had
continued to account for share-based compensation under APB No. 25. Basic and diluted loss per ordinary share for
the years ended December 31, 2007 and 2006 would have been $2.91 and $0.41, respectively, if the Company had
not adopted SFAS123(R), compared to reported basic and diluted loss per share of $2.92 and $0.52, respectively.
the years ended December 31, 2007 and 2006, are $3 million and $31 million higher, respectively, than if it had
continued to account for share-based compensation under APB No. 25. Basic and diluted loss per ordinary share for
the years ended December 31, 2007 and 2006 would have been $2.91 and $0.41, respectively, if the Company had
not adopted SFAS123(R), compared to reported basic and diluted loss per share of $2.92 and $0.52, respectively.
SFAS123(R) requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a
financing cash flow, rather than as an operating cash flow. This requirement will reduce net operating cash flows
and increase net financing cash flows in periods after adoption. This requirement did not impact the Company’s
cash flow disclosure for the years ended December 31, 2007, 2006 and 2005.
financing cash flow, rather than as an operating cash flow. This requirement will reduce net operating cash flows
and increase net financing cash flows in periods after adoption. This requirement did not impact the Company’s
cash flow disclosure for the years ended December 31, 2007, 2006 and 2005.
The following table illustrates the effect on net income and earnings per share if the Company had applied the fair
value recognition provisions of SFAS123 to stock-based employee compensation in 2005. For purposes of this pro
forma disclosure, the value of the options is estimated using a Black-Scholes option pricing model and amortized to
expense over the options’ vesting periods.
value recognition provisions of SFAS123 to stock-based employee compensation in 2005. For purposes of this pro
forma disclosure, the value of the options is estimated using a Black-Scholes option pricing model and amortized to
expense over the options’ vesting periods.
F-72
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
30. ANGLOGOLD LIMITED SHARE INCENTIVE SCHEME AND PLANS (continued)
30. ANGLOGOLD LIMITED SHARE INCENTIVE SCHEME AND PLANS (continued)
Year Ended December 31, 2005
(in millions, except per share data)
$
Net loss, as reported
(292)
Add: Unearned stock awards compensation expense, calculated under APB No. 25
2
Deduct: Total stock-based employee compensation expense determined under fair
value based method for all awards, net of related tax effects
value based method for all awards, net of related tax effects
(2)
Pro forma net loss
(292)
Loss per ordinary share (cents)
Basic – as reported
Basic – as reported
(110)
Basic – pro forma
(110)
Diluted – as reported
(1)
(110)
Diluted – pro forma
(1)
(110)
(1)
The calculation of diluted loss per common share for 2005 did not assume the effect of 15,384,615 shares issuable upon the
exercise of Convertible Bonds as their effects are anti-dilutive for this period. The calculation of diluted loss per common share
for 2005 did not assume the effect of 601,315 shares issuable upon the exercise of stock incentive options as their effects are
anti-dilutive for this period.
for 2005 did not assume the effect of 601,315 shares issuable upon the exercise of stock incentive options as their effects are
anti-dilutive for this period.
Bonus Share Plan (BSP) and Long-Term Incentive Plan (LTIP)
At the annual general meeting held on April 29, 2005, shareholders approved the introduction of the BSP and LTIP and
the discontinuation of the previous share incentive scheme, which had been approved April 30, 2002. Options which
have been granted under the previous share incentive scheme will remain subject to the conditions under which they
were originally granted.
At the annual general meeting held on April 29, 2005, shareholders approved the introduction of the BSP and LTIP and
the discontinuation of the previous share incentive scheme, which had been approved April 30, 2002. Options which
have been granted under the previous share incentive scheme will remain subject to the conditions under which they
were originally granted.
Bonus Share Plan (BSP)
The BSP is intended to provide effective incentives to eligible employees. An eligible employee is one who devotes
substantially the whole of his working time to the business of the Company, any subsidiary of the Company or a
company under the control of AngloGold Ashanti, unless the board of directors (the board) excludes such a company.
An award in terms of the BSP may be made at any date at the discretion of the board, the only vesting condition being
three years’ service. The board is required to determine a BSP award value and this will be converted to a ‘share’
amount based on the closing price of the Company shares on the JSE on the last business day prior to the date of
grant.
substantially the whole of his working time to the business of the Company, any subsidiary of the Company or a
company under the control of AngloGold Ashanti, unless the board of directors (the board) excludes such a company.
An award in terms of the BSP may be made at any date at the discretion of the board, the only vesting condition being
three years’ service. The board is required to determine a BSP award value and this will be converted to a ‘share’
amount based on the closing price of the Company shares on the JSE on the last business day prior to the date of
grant.
During 2007 a total of 40,708 common shares were issued in terms of the BSP rules.
The AngloGold Ashanti Remuneration Committee has at their discretion, the right to pay dividends, or dividend
equivalents, to the participants of the BSP. Having no history of any discretionary dividend payments, the fair value
includes dividends and was used to determine the income statement expense. The fair value is equal to the award
value determined by the board.
equivalents, to the participants of the BSP. Having no history of any discretionary dividend payments, the fair value
includes dividends and was used to determine the income statement expense. The fair value is equal to the award
value determined by the board.
For awards made, the following information is presented:
Award date
2007
2006
2005
Calculated fair value
322.00
308.00
197.50
Vesting date
January 1, 2010
March 8, 2009
May 4, 2008
Expiry date
December 31, 2016
March 7, 2016
May 3, 2015
F-73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
30. ANGLOGOLD LIMITED SHARE INCENTIVE SCHEME AND PLANS (continued)
30. ANGLOGOLD LIMITED SHARE INCENTIVE SCHEME AND PLANS (continued)
A summary of time related equity settled compensation scheme showing movement from the beginning of the year to
the end of the year, is presented below:
the end of the year, is presented below:
2007
(000)
2007
Weighted-
average
exercise price
R
Outstanding at the beginning of the year
481
-
Granted
297
-
Exercised
(41)
-
Forfeited (terminations)
(51)
-
Outstanding at the end of the year
686
-
Exercisable at the end of the year
-
-
The total intrinsic value of awards outstanding at year-end was R201 million (2006: R159 million), with a weighted
average remaining contractual term of 8 years (2006: 9 years). The intrinsic value of awards exercised during the years
ended December 31, 2007 and 2006 was R13 million and R1 million, respectively. No awards were exercised during
2005.
average remaining contractual term of 8 years (2006: 9 years). The intrinsic value of awards exercised during the years
ended December 31, 2007 and 2006 was R13 million and R1 million, respectively. No awards were exercised during
2005.
Long-Term Incentive Plan (LTIP)
The LTIP is an equity settled share-based payment arrangement, intended to provide effective incentives for executives
to earn shares in the Company based on the achievement of stretched Company performance conditions. Participation
in the LTIP will be offered to executive directors, executive officers/management and selected members of senior
management of participating companies. Participating companies include AngloGold Ashanti, any subsidiary of
AngloGold Ashanti or a company under the control of AngloGold Ashanti, unless the board excludes such a company.
An award in terms of the LTIP may be granted at any date during the year that the board of the Company determine
and may even be more than once a year. The board is required to determine an LTIP award value and this will be
converted to a ‘share’ amount based on the closing price of the Company shares on the JSE on the last business day
prior to the date of grant.
to earn shares in the Company based on the achievement of stretched Company performance conditions. Participation
in the LTIP will be offered to executive directors, executive officers/management and selected members of senior
management of participating companies. Participating companies include AngloGold Ashanti, any subsidiary of
AngloGold Ashanti or a company under the control of AngloGold Ashanti, unless the board excludes such a company.
An award in terms of the LTIP may be granted at any date during the year that the board of the Company determine
and may even be more than once a year. The board is required to determine an LTIP award value and this will be
converted to a ‘share’ amount based on the closing price of the Company shares on the JSE on the last business day
prior to the date of grant.
The AngloGold Ashanti Remuneration Committee has at their discretion, the right to pay dividends, or dividend
equivalents, to the participants of the LTIP. Having no history of any discretionary dividend payments, the fair value
includes dividends and was used to determine the income statement expense. The fair value is equal to the award
value determined by the board.
equivalents, to the participants of the LTIP. Having no history of any discretionary dividend payments, the fair value
includes dividends and was used to determine the income statement expense. The fair value is equal to the award
value determined by the board.
The main performance conditions in terms of the LTIP issued in 2005 are:
·
up to 40 percent of an award will be determined by the performance of total shareholder returns (TSR) compared
with that of a group of comparative gold-producing companies;
· up to 40 percent of an award will be determined by real growth (above US inflation) in an adjusted earnings per
share over the performance period;
· up to 20 percent of an award will be dependent on the achievement of strategic performance measures which will
be set by the Remuneration Committee; and
· three-years’ service is required.
The main performance conditions in terms of the LTIP issued in 2006 and 2007 are:
· up to 40 percent of an award will be determined by the performance of total shareholder returns (TSR) compared
with that of a group of comparative gold-producing companies;
· up to 30 percent of an award will be determined by an adjusted earnings per share compared to a planned
adjusted earnings per share over the performance period;
· up to 30 percent of an award will be dependent on the achievement of strategic performance measures which will
be set by the Remuneration Committee; and
· three year’s service is required.
with that of a group of comparative gold-producing companies;
· up to 40 percent of an award will be determined by real growth (above US inflation) in an adjusted earnings per
share over the performance period;
· up to 20 percent of an award will be dependent on the achievement of strategic performance measures which will
be set by the Remuneration Committee; and
· three-years’ service is required.
The main performance conditions in terms of the LTIP issued in 2006 and 2007 are:
· up to 40 percent of an award will be determined by the performance of total shareholder returns (TSR) compared
with that of a group of comparative gold-producing companies;
· up to 30 percent of an award will be determined by an adjusted earnings per share compared to a planned
adjusted earnings per share over the performance period;
· up to 30 percent of an award will be dependent on the achievement of strategic performance measures which will
be set by the Remuneration Committee; and
· three year’s service is required.
F-74
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
30. ANGLOGOLD LIMITED SHARE INCENTIVE SCHEME AND PLANS (continued)
30. ANGLOGOLD LIMITED SHARE INCENTIVE SCHEME AND PLANS (continued)
For awards made, the following information is presented:
Award date
2007
2006
2005
Calculated fair value
322.00
327.00
197.50
Vesting date
January 1, 2010
August 1, 2009
May 4, 2008
Expiry date
December 31, 2016
July 31, 2016
May 3, 2015
A summary of time related equity settled compensation scheme showing movement from the beginning of the year to
the end of the year, is presented below:
the end of the year, is presented below:
2007
(000)
2007
Weighted-
average
exercise price
R
Outstanding at the beginning of the year
661
-
Granted
322
-
Exercised
-
-
Forfeited (terminations)
(200)
-
Outstanding at the end of the year
783
-
Exercisable at the end of the year
-
-
The total intrinsic value of awards outstanding at year-end was R230 million (2006: R218 million), with a weighted
average remaining contractual term of 8 years (2006: 9 years). No awards were exercised during 2007, 2006 and
2005.
average remaining contractual term of 8 years (2006: 9 years). No awards were exercised during 2007, 2006 and
2005.
During the years ended December 31, 2007, 2006 and 2005 the Company recognized a compensation expense of
$12 million, $9 million and $2 million, respectively, related to BSP and LTIP awards.
$12 million, $9 million and $2 million, respectively, related to BSP and LTIP awards.
As of December 31, 2007, there was $19 million of unrecognized compensation cost related to unvested awards of the
BSP and LTIP plans. This cost is expected to be recognized over a weighted-average period of approximately 2 years.
BSP and LTIP plans. This cost is expected to be recognized over a weighted-average period of approximately 2 years.
Employee Share Ownership Plan (ESOP)
On December 12, 2006, AngloGold Ashanti announced the finalization of the Bokamoso Employee Share Ownership
Plan (Bokamoso ESOP) with the National Union of Mineworkers, Solidarity and United Association for employees of the
South African operations. The Bokamoso ESOP creates an opportunity for AngloGold Ashanti and the unions to
ensure a closer alignment of the interest between South African based employees and the Company, and the seeking
of shared growth solutions to build partnerships in areas of shared interest. Participation is restricted to those
employees not eligible for participation in any other South African share incentive plan.
Plan (Bokamoso ESOP) with the National Union of Mineworkers, Solidarity and United Association for employees of the
South African operations. The Bokamoso ESOP creates an opportunity for AngloGold Ashanti and the unions to
ensure a closer alignment of the interest between South African based employees and the Company, and the seeking
of shared growth solutions to build partnerships in areas of shared interest. Participation is restricted to those
employees not eligible for participation in any other South African share incentive plan.
In order to facilitate these transactions the Company established a trust to acquire and administer the ESOP shares.
AngloGold Ashanti allotted and issued free ordinary shares to the trust and also created, allotted and issued E ordinary
shares to the trust for the benefit of employees. The Company also undertook an empowerment transaction with a
Black Economic Empowerment investment vehicle, Izingwe Holdings (Proprietary) Limited (Izingwe) and recorded a
cost of $19 million during 2006, which was included in general and administrative expenses. The Company also
created, allotted and issued E ordinary shares to Izingwe. The key terms of the E ordinary share are:
AngloGold Ashanti allotted and issued free ordinary shares to the trust and also created, allotted and issued E ordinary
shares to the trust for the benefit of employees. The Company also undertook an empowerment transaction with a
Black Economic Empowerment investment vehicle, Izingwe Holdings (Proprietary) Limited (Izingwe) and recorded a
cost of $19 million during 2006, which was included in general and administrative expenses. The Company also
created, allotted and issued E ordinary shares to Izingwe. The key terms of the E ordinary share are:
·
AngloGold Ashanti will have the right to cancel the E ordinary shares, or a portion of them, in accordance with the
ESOP and Izingwe cancellation formula, respectively;
· the E ordinary shares will not be listed;
· the E ordinary shares which are not cancelled will be converted into ordinary shares; and
· the E ordinary shares will each be entitled to receive a dividend equal to one-half of the dividend per ordinary
share declared by the Company from time to time and a further one-half is included in the calculation of the strike
price calculation.
ESOP and Izingwe cancellation formula, respectively;
· the E ordinary shares will not be listed;
· the E ordinary shares which are not cancelled will be converted into ordinary shares; and
· the E ordinary shares will each be entitled to receive a dividend equal to one-half of the dividend per ordinary
share declared by the Company from time to time and a further one-half is included in the calculation of the strike
price calculation.
F-75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
30. ANGLOGOLD LIMITED SHARE INCENTIVE SCHEME AND PLANS (continued)
30. ANGLOGOLD LIMITED SHARE INCENTIVE SCHEME AND PLANS (continued)
The award of free shares to employees:
The fair value of each free share awarded in 2007 is R306 (2006: R320). The fair value is equal to the market value at
the date-of-grant. Dividends declared and paid to the trust will accrue and be paid to ESOP members, pro rata to the
number of shares allocated to them. An equal number of shares vests in 2009, and each subsequent year up to expiry
date of November 1, 2013.
the date-of-grant. Dividends declared and paid to the trust will accrue and be paid to ESOP members, pro rata to the
number of shares allocated to them. An equal number of shares vests in 2009, and each subsequent year up to expiry
date of November 1, 2013.
A summary of time related equity settled compensation scheme showing movement from the beginning of the year to
the end of the year, is presented below:
the end of the year, is presented below:
2007
(000)
2007
Weighted-
average
exercise price
R
Outstanding at the beginning of the year
929
-
Granted
77
-
Exercised
(47)
-
Forfeited (terminations)
(49)
-
Outstanding at the end of the year
910
-
Exercisable at the end of the year
-
-
The total intrinsic value of awards outstanding at year-end was R267 million (2006: R306 million), with a weighted
average remaining contractual term of 4 years (2006: 5 years). The intrinsic value of awards exercised during the year
ended December 31, 2007 was R14 million. No awards were exercised during 2006 and 2005.
average remaining contractual term of 4 years (2006: 5 years). The intrinsic value of awards exercised during the year
ended December 31, 2007 was R14 million. No awards were exercised during 2006 and 2005.
The award of E ordinary shares to the employees:
The average fair value of the E ordinary shares awarded to employees in 2007 was R79 (2006: R105). Dividends
declared in respect of the E ordinary shares will firstly be allocated to cover administration expenses of the trust,
whereafter it will accrue and be paid to ESOP members, pro rata to the number of shares allocated to them. At each
anniversary over a five year period commencing on the third anniversary of the original 2006 award, the Company will
cancel the relevant number of E ordinary shares as stipulated by a cancellation formula. Any E ordinary shares
remaining in the tranche will be converted to ordinary shares for the benefit of the employees. All unexercised awards
will be cancelled on May 1, 2014.
declared in respect of the E ordinary shares will firstly be allocated to cover administration expenses of the trust,
whereafter it will accrue and be paid to ESOP members, pro rata to the number of shares allocated to them. At each
anniversary over a five year period commencing on the third anniversary of the original 2006 award, the Company will
cancel the relevant number of E ordinary shares as stipulated by a cancellation formula. Any E ordinary shares
remaining in the tranche will be converted to ordinary shares for the benefit of the employees. All unexercised awards
will be cancelled on May 1, 2014.
The value of each share granted is estimated on the date of grant using the Black-Scholes option-pricing model. The
Black-Scholes option-pricing model requires the input of subjective assumptions, including the expected term of the
option award and stock price volatility. The expected term of awards granted is derived from historical data on
employee exercise behavior. Expected volatility is based on the historical volatility of the Company’s stock. These
estimates involve inherent uncertainties and the application of management judgment. In addition, the Company is
required to estimate the expected forfeiture rate and only recognize expense for those options expected to vest. As a
result, if other assumptions had been used, the Company’s recorded compensation expense could have been different
from that reported. The Black-Scholes option-pricing model used the following assumptions for the years ended
December 31, 2007 and 2006, weighted-average risk free interest rates of 7% (2006: 7%); dividend yield of 2.06%
(2006: 2.30%) and volatility of 33% (2006: 36%).
Black-Scholes option-pricing model requires the input of subjective assumptions, including the expected term of the
option award and stock price volatility. The expected term of awards granted is derived from historical data on
employee exercise behavior. Expected volatility is based on the historical volatility of the Company’s stock. These
estimates involve inherent uncertainties and the application of management judgment. In addition, the Company is
required to estimate the expected forfeiture rate and only recognize expense for those options expected to vest. As a
result, if other assumptions had been used, the Company’s recorded compensation expense could have been different
from that reported. The Black-Scholes option-pricing model used the following assumptions for the years ended
December 31, 2007 and 2006, weighted-average risk free interest rates of 7% (2006: 7%); dividend yield of 2.06%
(2006: 2.30%) and volatility of 33% (2006: 36%).
F-76
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
30. ANGLOGOLD LIMITED SHARE INCENTIVE SCHEME AND PLANS (continued)
30. ANGLOGOLD LIMITED SHARE INCENTIVE SCHEME AND PLANS (continued)
A summary of E ordinary shares, awarded to employees, showing movement from the beginning of the year to the end
of the year, is presented below:
of the year, is presented below:
2007
Options
(000)
2007
Weighted-
average
exercise price
R
Outstanding at the beginning of the year
2,786
289
Granted
232
307
Exercised
(140)
298
Forfeited (terminations)
(147)
297
Outstanding at the end of the year
2,731
307
Exercisable at the end of the year
-
-
The options outstanding at year-end had no intrinsic value as the share price at year-end of R293 was lower than the
weighted average exercise price of R307 (2006: total intrinsic value of awards outstanding totaled R114 million). The
options have a weighted average remaining contractual term of 4 years (2006: 5 years). The intrinsic value of options
exercised during the year ended December 31, 2007 was R1 million. No awards were exercised during 2006 and 2005.
weighted average exercise price of R307 (2006: total intrinsic value of awards outstanding totaled R114 million). The
options have a weighted average remaining contractual term of 4 years (2006: 5 years). The intrinsic value of options
exercised during the year ended December 31, 2007 was R1 million. No awards were exercised during 2006 and 2005.
Weighted average exercise price is calculated as the initial grant price of R288 plus interest factor less dividend
apportionment. This value will change on a monthly basis.
apportionment. This value will change on a monthly basis.
During the years ended December 31, 2007 and 2006, the Company recognized a compensation expense of
$18 million and $3 million, respectively, related to the ESOP scheme.
$18 million and $3 million, respectively, related to the ESOP scheme.
As of December 31, 2007, there was $45 million of unrecognized compensation cost related to unvested awards of the
ESOP scheme. This cost is expected to be recognized over the scheme term of 6 years.
ESOP scheme. This cost is expected to be recognized over the scheme term of 6 years.
31.
MINERAL AND PETROLEUM RESOURCES DEVELOPMENT ACT
AngloGold Ashanti’s rights to own and exploit mineral reserves and deposits are governed by the laws and regulations
of the jurisdictions in which the mineral properties are located. Currently, a significant portion of its mineral reserves and
deposits are located in South Africa.
of the jurisdictions in which the mineral properties are located. Currently, a significant portion of its mineral reserves and
deposits are located in South Africa.
The Mineral and Petroleum Resources Development Act (MPRDA) vests custodianship of South Africa’s mineral rights
in the State. The State issues prospecting rights or mining rights to applicants. Prospecting, mining and mineral rights
formerly regulated under the Minerals Act 50 of 1991 and common law are now known as old order mining rights and
the transitional arrangements provided in Schedule II to the MPRDA give holders of such old order mining rights the
opportunity to convert their old order mining rights into new order mining rights within specified time frames.
in the State. The State issues prospecting rights or mining rights to applicants. Prospecting, mining and mineral rights
formerly regulated under the Minerals Act 50 of 1991 and common law are now known as old order mining rights and
the transitional arrangements provided in Schedule II to the MPRDA give holders of such old order mining rights the
opportunity to convert their old order mining rights into new order mining rights within specified time frames.
The Department of Minerals and Energy (DME) has published, pursuant to the MPRDA, the Broad-Based Socio-
Economic Empowerment Charter for the South African Mining Industry (the Charter). Compliance with the Charter,
measured using a designated Scorecard, requires that every mining company achieve 15 percent ownership by
Historically Disadvantaged South Africans (HDSAs) of its South African mining assets by May 1, 2009, and 26 percent
ownership by May 1, 2014 and achieve participation by HDSAs in various other aspects of management referred to
below. The Company has submitted to the DME two Social and Labor Plans – one for each of its main mining regions –
detailing its specific goals in these areas.
Economic Empowerment Charter for the South African Mining Industry (the Charter). Compliance with the Charter,
measured using a designated Scorecard, requires that every mining company achieve 15 percent ownership by
Historically Disadvantaged South Africans (HDSAs) of its South African mining assets by May 1, 2009, and 26 percent
ownership by May 1, 2014 and achieve participation by HDSAs in various other aspects of management referred to
below. The Company has submitted to the DME two Social and Labor Plans – one for each of its main mining regions –
detailing its specific goals in these areas.
The Scorecard allows for a portion of ‘offset’ against the HDSAs equity participation requirements insofar as companies
have facilitated downstream, value-adding activities in respect of the products they mine. AngloGold Ashanti carries out
such downstream activities and believes these will be recognized in terms of a framework currently being devised by
the South African government.
have facilitated downstream, value-adding activities in respect of the products they mine. AngloGold Ashanti carries out
such downstream activities and believes these will be recognized in terms of a framework currently being devised by
the South African government.
F-77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
31. MINERAL AND PETROLEUM RESOURCES DEVELOPMENT ACT (continued)
31. MINERAL AND PETROLEUM RESOURCES DEVELOPMENT ACT (continued)
AngloGold Ashanti has completed a number of asset sales to companies owned by HDSAs in the past (estimated to
have been equivalent to 20 percent of AngloGold Ashanti’s South African production as at August 1, 2005, when its
applications for the conversion of its West Wits and Vaal River mineral rights from old order to new order mineral rights
were approved). Furthermore, at the end of 2006 AngloGold Ashanti implemented an Employee Share Ownership
Program (ESOP) and Black Economic Empowerment (BEE) transaction, collectively with a value equivalent to
approximately 6 percent of its South African assets as calculated under IFRS. This is consistent with the Company’s
stated strategic intention to develop means of promoting broad based equity participation in the Company by HDSAs
and with an undertaking made to the DME as a condition for the granting to the Company of its new order mining rights.
AngloGold Ashanti believes that it has made significant progress towards meeting the requirements of the Charter, the
Scorecard and its own undertakings in terms of human resource development, employment equity, mine community
and rural development, housing and living conditions, procurement and beneficiation, including the implementation of
programs to help achieve the requirement of having 40 percent of management roles being held by HDSAs by 2010.
AngloGold Ashanti will incur expenses in giving further effect to the Charter and the Scorecard and the implementation
of the ESOP will affect the Company’s results of operations.
have been equivalent to 20 percent of AngloGold Ashanti’s South African production as at August 1, 2005, when its
applications for the conversion of its West Wits and Vaal River mineral rights from old order to new order mineral rights
were approved). Furthermore, at the end of 2006 AngloGold Ashanti implemented an Employee Share Ownership
Program (ESOP) and Black Economic Empowerment (BEE) transaction, collectively with a value equivalent to
approximately 6 percent of its South African assets as calculated under IFRS. This is consistent with the Company’s
stated strategic intention to develop means of promoting broad based equity participation in the Company by HDSAs
and with an undertaking made to the DME as a condition for the granting to the Company of its new order mining rights.
AngloGold Ashanti believes that it has made significant progress towards meeting the requirements of the Charter, the
Scorecard and its own undertakings in terms of human resource development, employment equity, mine community
and rural development, housing and living conditions, procurement and beneficiation, including the implementation of
programs to help achieve the requirement of having 40 percent of management roles being held by HDSAs by 2010.
AngloGold Ashanti will incur expenses in giving further effect to the Charter and the Scorecard and the implementation
of the ESOP will affect the Company’s results of operations.
AngloGold Ashanti was informed on August 1, 2005, by the Director General of Minerals and Energy that its
applications to convert its old order mining rights to new order mining rights for its West Wits and Vaal River operations,
as well as its applications for new mining rights to extend its mining areas at its TauTona and Kopanang mines, had
been successful. These applications relate to all of its existing operations in South Africa. The notarial agreements for
the converted West Wits mining right and Block 1C11 new mining rights have been executed and registered as well as
the agreements for Jonkerskraal, Weltevreden, Moab Extension Area and the new right for Edom, all of which form part
of the Vaal River operations. Two notarial agreements relating to the Vaal River operations are pending.
applications to convert its old order mining rights to new order mining rights for its West Wits and Vaal River operations,
as well as its applications for new mining rights to extend its mining areas at its TauTona and Kopanang mines, had
been successful. These applications relate to all of its existing operations in South Africa. The notarial agreements for
the converted West Wits mining right and Block 1C11 new mining rights have been executed and registered as well as
the agreements for Jonkerskraal, Weltevreden, Moab Extension Area and the new right for Edom, all of which form part
of the Vaal River operations. Two notarial agreements relating to the Vaal River operations are pending.
Even where new order mining rights are obtained under the MPRDA, these rights may not be equivalent to the old order
mining rights. The AngloGold Ashanti rights that have been converted and registered do not differ significantly from the
relevant old order rights. The duration of the new rights will no longer be perpetual as was the case under old order
mining rights but rather will be granted for a maximum period of 30 years, with renewals of up to 30 years each and, in
the case of prospecting rights, a maximum period of five years with one renewal of up to three years. Furthermore, the
MPRDA provides for a retention period after prospecting of up to three years with one renewal of up to two years,
subject to certain conditions, such as non-concentration of resources, fair competition and non-exclusion of others. In
addition, the new order rights will only be transferable subject to the approval of the Minister of Minerals and Energy.
mining rights. The AngloGold Ashanti rights that have been converted and registered do not differ significantly from the
relevant old order rights. The duration of the new rights will no longer be perpetual as was the case under old order
mining rights but rather will be granted for a maximum period of 30 years, with renewals of up to 30 years each and, in
the case of prospecting rights, a maximum period of five years with one renewal of up to three years. Furthermore, the
MPRDA provides for a retention period after prospecting of up to three years with one renewal of up to two years,
subject to certain conditions, such as non-concentration of resources, fair competition and non-exclusion of others. In
addition, the new order rights will only be transferable subject to the approval of the Minister of Minerals and Energy.
The new order mining rights can be suspended or cancelled by the Minister of Minerals and Energy if, upon notice of a
breach from the Minister, the entity breaching its obligations to comply with the MPRDA or the conditions of the notarial
agreement fails to remedy such breach. The MPRDA also imposes additional responsibilities on mining companies
relating to environmental management and to environmental damage, degradation or pollution resulting from their
prospecting or mining activities.
breach from the Minister, the entity breaching its obligations to comply with the MPRDA or the conditions of the notarial
agreement fails to remedy such breach. The MPRDA also imposes additional responsibilities on mining companies
relating to environmental management and to environmental damage, degradation or pollution resulting from their
prospecting or mining activities.
AngloGold Ashanti has a policy of evaluating, minimizing and addressing the environmental consequences of its
activities and, consistent with this policy and the MPRDA, conducts an annual review of the environmental costs and
liabilities associated with the Company’s South African operations in light of the new, as well as existing, environmental
requirements.
activities and, consistent with this policy and the MPRDA, conducts an annual review of the environmental costs and
liabilities associated with the Company’s South African operations in light of the new, as well as existing, environmental
requirements.
The South African government has announced the details of the proposed new legislation whereby new order rights will
be subject to a State royalty. The third draft of the Mineral and Petroleum Resources Royalty Bill was published on
December 6, 2007 and provides for the payment of a royalty according to a formula based on earnings before interest,
tax and depreciation. It is estimated that the formula could translate to a royalty rate of more than 4 percent of gross
sales in terms of current pricing assumptions. The latest proposal results in a large increase from the 1.5 percent rate
proposed in the second draft in 2006, and the Company is making representations to the government through the South
African Chamber of Mines to retain the proposed 1.5 percent rate. The payment of royalties is currently scheduled to
begin on May 1, 2009, if the Bill is passed by Parliament in its current form.
be subject to a State royalty. The third draft of the Mineral and Petroleum Resources Royalty Bill was published on
December 6, 2007 and provides for the payment of a royalty according to a formula based on earnings before interest,
tax and depreciation. It is estimated that the formula could translate to a royalty rate of more than 4 percent of gross
sales in terms of current pricing assumptions. The latest proposal results in a large increase from the 1.5 percent rate
proposed in the second draft in 2006, and the Company is making representations to the government through the South
African Chamber of Mines to retain the proposed 1.5 percent rate. The payment of royalties is currently scheduled to
begin on May 1, 2009, if the Bill is passed by Parliament in its current form.
F-78
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
32. CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED
CONSOLIDATING FINANCIAL INFORMATION
These parent-only-financial statements and supplemental condensed consolidating financial information should be read
in conjunction with the Company’s consolidated financial statements.
in conjunction with the Company’s consolidated financial statements.
Transfer of certain of AngloGold Ashanti’s operations located outside South Africa to wholly-owned subsidiary
With effect from October 1, 2004, AngloGold Ashanti has transferred certain of its operations and assets located
outside South Africa (excluding certain operations and assets in the United States, Australia and Africa) to AngloGold
Ashanti Holdings plc (originally SMI Holdings Limited and formerly AngloGold Holdings plc) (“IOMco”), its wholly-owned
subsidiary. IOMco is an Isle of Man registered Company.
outside South Africa (excluding certain operations and assets in the United States, Australia and Africa) to AngloGold
Ashanti Holdings plc (originally SMI Holdings Limited and formerly AngloGold Holdings plc) (“IOMco”), its wholly-owned
subsidiary. IOMco is an Isle of Man registered Company.
IOMco has issued debt securities which are fully and unconditionally guaranteed by AngloGold Ashanti Limited (being
the “Guarantor”). Refer to Note 20 and Note 24. The following is condensed financial information of the registrant and
consolidating financial information for the Company as of December 31, 2007 and 2006 and for the years ended
December 31, 2007, 2006 and 2005, with a separate column for each of IOMco as Issuer, AngloGold Ashanti Limited
as Guarantor and the other businesses of the Company combined (the “Non-Guarantor Subsidiaries”). For the
purposes of the condensed consolidating financial information, the Company carries its investments under the equity
method.
the “Guarantor”). Refer to Note 20 and Note 24. The following is condensed financial information of the registrant and
consolidating financial information for the Company as of December 31, 2007 and 2006 and for the years ended
December 31, 2007, 2006 and 2005, with a separate column for each of IOMco as Issuer, AngloGold Ashanti Limited
as Guarantor and the other businesses of the Company combined (the “Non-Guarantor Subsidiaries”). For the
purposes of the condensed consolidating financial information, the Company carries its investments under the equity
method.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
32. CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
32. CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
ANGLOGOLD ASHANTI LIMITED
Condensed consolidating statements of income
FOR THE YEAR ENDED DECEMBER 31,
(In millions, except share information)
2007
$
AngloGold Ashanti
2007
$
IOMco
2007
$
Other subsidiaries
2007
$
Cons adjustments
2007
$
Total
(the “Guarantor”)
(the “Issuer”)
(the “Non-Guarantor
subsidiaries”)
Sales and other income
1,432
3
1,670
(10)
3,095
Product sales
1,399
-
1,650
(1)
3,048
Interest, dividends and other
33
3
20
(9)
47
Costs and expenses
1,484
(49)
2,330
41
3,806
Production costs
864
-
1,053
-
1,917
Exploration costs
4
-
113
-
117
Related party transactions
(16)
-
-
-
(16)
General and administrative expenses/(recoveries)
108
(107)
66
63
130
Royalties paid
-
-
70
-
70
Market development costs
10
-
6
-
16
Depreciation, depletion and amortization
296
-
359
-
655
Impairment of assets
-
-
1
-
1
Interest expense
27
36
12
-
75
Accretion expense
9
-
11
-
20
Employment severance costs
5
-
14
-
19
(Profit)/loss on sale of assets, realization of loans, indirect taxes and other
(11)
22
21
(22)
10
Mining contractor termination costs
-
-
-
-
-
Non-hedge derivative loss and other commodity contracts
188
-
604
-
792
(Loss)/income before income tax provision
(52)
52
(660)
(51)
(711)
Taxation expense
(34)
(2)
(82)
-
(118)
Minority interest
-
-
(28)
-
(28)
Equity income/(loss) in affiliates
59
(18)
-
-
41
Equity (loss)/income in subsidiaries
(785)
-
-
785
-
(Loss)/income from continuing operations
(812)
32
(770)
734
(816)
Discontinued operations
2
-
-
-
2
(Loss)/income after discontinued operations
(810)
32
(770)
734
(814)
Preferred stock dividends
(4)
-
(5)
9
-
(Loss)/income before cumulative effect of accounting change
(814)
32
(775)
743
(814)
Cumulative effect of accounting change
-
-
-
-
-
Net (loss)/income applicable to common stockholders
(814)
32
(775)
743
(814)
F79
The accompanying notes are an integral part of these Consolidated Financial Statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
32. CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
32. CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
ANGLOGOLD ASHANTI LIMITED
Condensed consolidating statements of income
FOR THE YEAR ENDED DECEMBER 31,
(In millions, except share information)
2006
$
AngloGold Ashanti
2006
$
IOMco
2006
$
Other subsidiaries
2006
$
Cons adjustments
2006
$
Total
(the “Guarantor”)
(the “Issuer”)
(the “Non-Guarantor
subsidiaries”)
Sales and other income
1,370
5
1,355
(15)
2,715
Product sales
1,347
-
1,336
-
2,683
Interest, dividends and other
23
5
19
(15)
32
Costs and expenses
1,297
(61)
1,547
28
2,811
Production costs
683
-
854
2
1,539
Exploration costs
4
-
54
-
58
Related party transactions
(6)
-
-
-
(6)
General and administrative expenses/(recoveries)
129
(77)
60
28
140
Royalties paid
-
-
59
-
59
Market development costs
8
-
8
-
16
Depreciation, depletion and amortization
321
-
378
-
699
Impairment of assets
-
-
1
5
6
Interest expense
30
38
9
-
77
Accretion expense
8
-
5
-
13
Employment severance costs
7
-
15
-
22
Profit on sale of assets, realization of loans, indirect taxes and other
(3)
(22)
(6)
(5)
(36)
Mining contractor termination costs
-
-
-
-
-
Non-hedge derivative loss/(gains) and other commodity contracts
116
-
110
(2)
224
Income/(loss) before income tax provision
73
66
(192)
(43)
(96)
Taxation expense
(78)
(3)
(41)
-
(122)
Minority interest
-
-
(29)
-
(29)
Equity income/(loss) in affiliates
108
(9)
-
-
99
Equity (loss)/income in subsidiaries
(244)
-
-
244
-
(Loss)/income from continuing operations
(141)
54
(262)
201
(148)
Discontinued operations
6
-
-
-
6
(Loss)/income after discontinued operations
(135)
54
(262)
201
(142)
Preferred stock dividends
(7)
-
(8)
15
-
(Loss)/income before cumulative effect of accounting change
(142)
54
(270)
216
(142)
Cumulative effect of accounting change
-
-
-
-
-
Net (loss)/income applicable to common stockholders
(142)
54
(270)
216
(142)
F-80
The accompanying notes are an integral part of these Consolidated Financial Statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
32. CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
32. CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
ANGLOGOLD ASHANTI LIMITED
Condensed consolidating statements of income
FOR THE YEAR ENDED DECEMBER 31,
(In millions, except share information)
2005
$
AngloGold Ashanti
2005
$
IOMco
2005
$
Other subsidiaries
2005
$
Cons adjustments
2005
$
Total
(the “Guarantor”)
(the “Issuer”)
(the “Non-Guarantor
subsidiaries”)
Sales and other income
1,170
22
1,318
(25)
2,485
Product sales
1,153
-
1,300
-
2,453
Interest, dividends and other
17
22
18
(25)
32
Costs and expenses
1,292
76
1,512
(32)
2,848
Production costs
785
-
857
-
1,642
Exploration costs
5
-
39
-
44
Related party transactions
39
-
(2)
-
37
General and administrative expenses/(recoveries)
58
39
8
(34)
71
Royalties paid
-
-
39
-
39
Market development costs
8
-
5
-
13
Depreciation, depletion and amortization
218
-
375
-
593
Impairment of assets
80
-
61
-
141
Interest expense
28
35
17
-
80
Accretion expense
4
-
1
-
5
Employment severance costs
25
-
1
-
26
(Profit)/loss on sale of assets, realization of loans, indirect taxes and other
-
(10)
7
-
(3)
Mining contractor termination costs
-
-
9
-
9
Non-hedge derivative loss and other commodity contracts
42
12
95
2
151
(Loss)/income before income tax provision
(122)
(54)
(194)
7
(363)
Taxation benefit/(expense)
48
(1)
74
-
121
Minority interest
-
-
(23)
-
(23)
Equity income/(loss) in affiliates
40
(1)
-
-
39
Equity (loss)/income in subsidiaries
(180)
-
-
180
-
(Loss)/income from continuing operations
(214)
(56)
(143)
187
(226)
Discontinued operations
(44)
-
-
-
(44)
(Loss)/income after discontinued operations
(258)
(56)
(143)
187
(270)
Preferred stock dividends
(12)
-
(13)
25
-
(Loss)/income before cumulative effect of accounting change
(270)
(56)
(156)
212
(270)
Cumulative effect of accounting change
(22)
-
-
-
(22)
Net (loss)/income applicable to common stockholders
(292)
(56)
(156)
212
(292)
F81
The accompanying notes are an integral part of these Consolidated Financial Statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
32. CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
32. CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
ANGLOGOLD ASHANTI LIMITED
Condensed consolidating balance sheets
AT DECEMBER 31,
(In millions, except share information)
2007
$
AngloGold Ashanti
2007
$
IOMco
2007
$
Other subsidiaries
2007
$
Cons adjustments
2007
$
Total
(the “Guarantor”)
(the “Issuer”)
(the “Non-Guarantor
subsidiaries”)
ASSETS
Current Assets
Current Assets
1,549
2,636
4,923
(6,995)
2,113
Cash and cash equivalents
188
40
249
-
477
Restricted cash
26
-
11
-
37
Receivables and other current assets
1,335
2,596
4,663
(6,995)
1,599
Trade and other receivables and deferred taxation assets
284
9
190
(3)
480
Inter-group balances
784
2,587
3,621
(6,992)
-
Derivatives
182
-
334
-
516
Inventories
70
-
453
-
523
Materials on the leach pad
-
-
49
-
49
Assets held for sale
15
-
16
-
31
Property, plant and equipment, net
1,953
-
3,574
-
5,527
Acquired properties, net
258
-
1,022
-
1,280
Goodwill
-
247
589
(267)
569
Other intangibles, net
-
-
22
-
22
Derivatives
-
-
-
-
-
Other long term inventory
-
-
84
-
84
Materials on the leach pad
-
-
190
-
190
Other long-term assets and deferred taxation assets
2,263
2,461
516
(4,644)
596
Total assets
6,023
5,344
10,920
(11,906)
10,381
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
2,277
64
8,422
(6,968)
3,795
Accounts payable and other current liabilities
200
-
438
(4)
634
Inter-group balances
815
53
6,096
(6,964)
-
Derivatives
978
-
1,804
-
2,782
Short-term debt
304
9
6
-
319
Tax
(21)
2
78
-
59
Liabilities held for sale
1
-
-
-
1
Other non-current liabilities
134
-
106
(94)
146
Long-term debt
36
1,306
222
-
1,564
Derivatives
90
-
207
-
297
Deferred taxation liabilities
627
-
702
16
1,345
Provision for environmental rehabilitation
140
-
254
-
394
Other accrued liabilities
-
-
45
-
45
Provision for pension and other post-retirement medical benefits
167
-
13
-
180
Minority interest
-
-
62
1
63
Commitments and contingencies
-
-
-
-
-
Stockholders’ equity
2,552
3,974
887
(4,861)
2,552
Stock issued
10
3,625
901
(4,526)
10
Additional paid in capital
5,607
89
332
(421)
5,607
Accumulated (deficit)/profit
(2,440)
260
(1,511)
1,251
(2,440)
Accumulated other comprehensive income
(625)
-
1,165
(1,165)
(625)
F-82
Total liabilities and stockholders’ equity
6,023
5,344
10,920
(11,906)
10,381
The accompanying notes are an integral part of these Consolidated Financial Statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
32. CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
32. CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
ANGLOGOLD ASHANTI LIMITED
Condensed consolidating balance sheets
AT DECEMBER 31,
(In millions, except share information)
2006
$
AngloGold Ashanti
2006
$
IOMco
2006
$
Other subsidiaries
2006
$
Cons adjustments
2006
$
Total
(the “Guarantor”)
(the “Issuer”)
(the “Non-Guarantor
subsidiaries”)
ASSETS
Current Assets
Current Assets
1,390
2,275
4,733
(6,522)
1,876
Cash and cash equivalents
180
32
259
-
471
Restricted cash
5
-
6
-
11
Receivables and other current assets
1,205
2,243
4,468
(6,522)
1,394
Trade and other receivables and deferred taxation assets
150
6
181
(10)
327
Inter-group balances
756
2,237
3,518
(6,511)
-
Derivatives
225
-
425
(1)
649
Inventories
59
-
295
-
354
Materials on the leach pad
-
-
46
-
46
Assets held for sale
15
-
3
-
18
Property, plant and equipment, net
1,790
-
3,183
4
4,977
Acquired properties, net
273
-
1,016
-
1,289
Goodwill
-
247
562
(267)
542
Other intangibles, net
-
-
24
-
24
Derivatives
5
-
1
-
6
Other long term inventory
-
-
68
-
68
Materials on the leach pad
-
-
149
-
149
Other long-term assets and deferred taxation assets
2,858
2,437
480
(5,193)
582
Total assets
6,316
4,959
10,216
(11,978)
9,513
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
1,769
71
7,047
(6,420)
2,467
Accounts payable and other current liabilities
182
-
310
6
498
Inter-group balances
778
60
5,620
(6,458)
-
Derivatives
712
-
1,037
33
1,782
Short-term debt
11
9
13
-
33
Tax
80
2
67
(1)
148
Liabilities held for sale
6
-
-
-
6
Other non-current liabilities
-
-
117
(93)
24
Long-term debt
286
1,080
106
-
1,472
Derivatives
124
-
307
(34)
397
Deferred taxation liabilities
533
-
730
12
1,275
Provision for environmental rehabilitation
137
-
173
-
310
Other accrued liabilities
-
-
27
-
27
Provision for pension and other post-retirement medical benefits
159
-
13
-
172
Minority interest
-
-
61
-
61
Commitments and contingencies
-
-
-
-
-
Stockholders’ equity
3,308
3,808
1,635
(5,443)
3,308
Stock issued
10
3,625
898
(4,523)
10
Additional paid in capital
5,539
1
357
(358)
5,539
Accumulated (deficit)/profit
(1,476)
182
(659)
477
(1,476)
Accumulated other comprehensive income
(765)
-
1,039
(1,039)
(765)
F-83
Total liabilities and stockholders’ equity
6,316
4,959
10,216
(11,978)
9,513
The accompanying notes are an integral part of these Consolidated Financial Statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
32. CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
32. CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
ANGLOGOLD ASHANTI LIMITED
Condensed consolidating statements of cash flows
FOR THE YEAR ENDED DECEMBER 31,
(In millions, except share information)
2007
$
AngloGold Ashanti
2007
$
IOMco
2007
$
Other subsidiaries
2007
$
Cons adjustments
2007
$
Total
(the “Guarantor”)
(the “Issuer”)
(the “Non-Guarantor
subsidiaries”)
Net cash provided by/(used) in operating activities
304
(346)
612
(9)
561
Net (loss)/income – applicable to common stockholders
(814)
32
(775)
743
(814)
Reconciled to net cash provided by/(used) in operations:
Cumulative effect of accounting change
-
-
-
-
-
(Profit)/loss on sale of assets, realization of loans, indirect taxes and other
(11)
22
25
(22)
14
Depreciation, depletion and amortization
296
-
359
-
655
Deferred stripping costs
-
-
-
-
-
Impairment of assets
-
-
1
-
1
Deferred taxation
(51)
-
(22)
-
(73)
Other non cash items
880
(82)
792
(730)
860
Net increase in provision for environmental rehabilitation and pension and other
post-retirement medical benefits
post-retirement medical benefits
36
-
54
-
90
Effect of changes in operating working capital items:
Net movement inter-group receivables and payables
(51)
(319)
370
-
-
Receivables
(11)
(1)
(65)
-
(77)
Inventories
(12)
-
(228)
-
(240)
Accounts payable and other current liabilities
44
2
101
-
147
Net cash provided by/(used) in continuing operations
306
(346)
612
(9)
563
Net cash used in discontinued operations
(2)
-
-
-
(2)
Net cash (used)/generated in investing activities
(340)
-
(691)
-
(1,031)
Acquisition of assets
-
-
(40)
-
(40)
Increase in non-current investments
-
-
(27)
-
(27)
Additions to property, plant and equipment
(371)
-
(644)
-
(1,015)
Proceeds on sale of mining assets
14
-
15
-
29
Proceeds of sale of discontinued assets
1
-
-
-
1
Proceeds on sale of available for sale investments
-
-
25
-
25
Dividends from available for sale investments
2
-
-
-
2
Cash effects from hedge restructuring
14
-
5
-
19
Net loans repaid/(advanced)
-
-
-
-
-
Change in restricted cash
-
-
(25)
-
(25)
Net cash generated by financing activities
39
354
60
9
462
Net changes in short-term debt
-
(275)
73
-
(202)
Issuance of stock
34
88
(88)
-
34
Share issue expenses
-
-
-
-
-
Net changes in long-term debt
-
497
28
-
525
Cash effects from hedge restructuring
86
-
163
-
249
Dividends (paid)/received
(81)
44
(116)
9
(144)
Net increase/(decrease) in cash and cash equivalents
3
8
(19)
-
(8)
Effect of exchange rate changes on cash
5
-
9
-
14
Cash and cash equivalents – January 1
180
32
259
-
471
F-84
Cash and cash equivalents – December 31,
188
40
249
-
477
The accompanying notes are an integral part of these Consolidated Financial Statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
32. CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
32. CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
ANGLOGOLD ASHANTI LIMITED
Condensed consolidating statements of cash flows
FOR THE YEAR ENDED DECEMBER 31,
(In millions, except share information)
2006
$
AngloGold Ashanti
2006
$
IOMco
2006
$
Other subsidiaries
2006
$
Cons adjustments
2006
$
Total
(the “Guarantor”)
(the “Issuer”)
(the “Non-Guarantor
subsidiaries”)
Net cash provided by/(used) in operating activities
542
(119)
362
(15)
770
Net (loss)/income – applicable to common stockholders
(142)
54
(270)
216
(142)
Reconciled to net cash provided by/(used) in operations:
Cumulative effect of accounting change
-
-
-
-
-
(Profit)/loss on sale of assets, realization of loans, indirect taxes and other
(3)
(7)
21
(5)
6
Depreciation, depletion and amortization
321
-
378
-
699
Deferred stripping costs
-
-
-
-
-
Impairment of assets
-
-
1
5
6
Deferred taxation
(16)
-
(18)
-
(34)
Other non cash items
394
(29)
196
(231)
330
Net decrease in provision for environmental rehabilitation and pension and other
post-retirement medical benefits
post-retirement medical benefits
(44)
-
(18)
-
(62)
Effect of changes in operating working capital items:
Net movement inter-group receivables and payables
41
(144)
103
-
-
Receivables
15
-
(4)
-
11
Inventories
(25)
-
(140)
-
(165)
Accounts payable and other current liabilities
2
7
113
-
122
Net cash provided by/(used) in continuing operations
543
(119)
362
(15)
771
Net cash used in discontinued operations
(1)
-
-
-
(1)
Net cash (used)/generated in investing activities
(304)
5
(312)
-
(611)
Acquisition of assets
-
-
-
-
-
Increase in non-current investments
(59)
(10)
49
-
(20)
Additions to property, plant and equipment
(317)
-
(494)
-
(811)
Proceeds on sale of mining assets
5
-
52
-
57
Proceeds of sale of discontinued assets
9
-
-
-
9
Proceeds on sale of available for sale investments
-
-
11
-
11
Dividends from available for sale investments
-
-
-
-
-
Cash effects from hedge restructuring
58
-
83
-
141
Net loans repaid/(advanced)
-
15
(10)
-
5
Change in restricted cash
-
-
(3)
-
(3)
Net cash (used)/generated by financing activities
(57)
110
51
15
119
Net changes in short-term debt
(118)
-
-
-
(118)
Issuance of stock
112
330
70
-
512
Share issue expenses
(5)
-
-
-
(5)
Net changes in long-term debt
-
(220)
(56)
-
(276)
Cash effects from hedge restructuring
68
-
70
-
138
Dividends (paid)/received
(114)
-
(33)
15
(132)
Net increase/(decrease) in cash and cash equivalents
181
(4)
101
-
278
Effect of exchange rate changes on cash
(3)
-
-
-
(3)
Cash and cash equivalents – January 1
2
36
158
-
196
F - 85
Cash and cash equivalents – December 31,
180
32
259
-
471
The accompanying notes are an integral part of these Consolidated Financial Statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
32. CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
32. CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT AND SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION (continued)
ANGLOGOLD ASHANTI LIMITED
Condensed consolidating statements of cash flows
FOR THE YEAR ENDED DECEMBER 31,
(In millions, except share information)
2005
$
AngloGold Ashanti
2005
$
IOMco
2005
$
Other subsidiaries
2005
$
Cons adjustments
2005
$
Total
(the “Guarantor”)
(the “Issuer”)
(the “Non-Guarantor
subsidiaries”)
Net cash provided by/(used) in operating activities
258
(327)
441
(25)
347
Net (loss)/income – applicable to common stockholders
(292)
(56)
(156)
212
(292)
Reconciled to net cash provided by/(used) in operations:
Cumulative effect of accounting change
22
-
-
-
22
(Profit)/loss on sale of assets, realization of loans, indirect taxes and other
-
(10)
7
-
(3)
Depreciation, depletion and amortization
218
-
375
-
593
Deferred stripping costs
-
-
(28)
-
(28)
Impairment of assets
80
-
61
-
141
Deferred taxation
(88)
2
(105)
-
(191)
Other non cash items
272
(18)
80
(237)
97
Net increase in provision for environmental rehabilitation and pension and other
post-retirement medical benefits
post-retirement medical benefits
16
1
35
-
52
Effect of changes in operating working capital items:
Net movement inter-group receivables and payables
75
(265)
190
-
-
Receivables
(1)
(2)
11
-
8
Inventories
20
-
(78)
-
(58)
Accounts payable and other current liabilities
(33)
21
49
-
37
Net cash provided by/(used) in continuing operations
289
(327)
441
(25)
378
Net cash used in discontinued operations
(31)
-
-
-
(31)
Net cash (used)/generated in investing activities
(295)
10
(339)
-
(624)
Acquisition of assets
-
-
-
-
-
Increase in non-current investments
-
(15)
(12)
-
(27)
Additions to property, plant and equipment
(349)
-
(361)
-
(710)
Proceeds on sale of mining assets
-
10
(2)
-
8
Proceeds of sale of discontinued assets
4
-
-
-
4
Proceeds on sale of available for sale investments
-
-
1
-
1
Dividends from available for sale investments
-
-
-
-
-
Cash effects from hedge restructuring
55
-
29
-
84
Net loans (advanced)/repaid
(5)
15
(11)
-
(1)
Change in restricted cash
-
-
17
-
17
Net cash generated/(used) by financing activities
6
300
(131)
25
200
Net changes in short-term debt
126
-
(273)
-
(147)
Issuance of stock
9
-
-
-
9
Share issue expenses
-
-
-
-
-
Net changes in long-term debt
1
300
151
-
452
Cash effects from hedge restructuring
31
-
24
-
55
Dividends (paid)/received
(161)
-
(33)
25
(169)
Net decrease in cash and cash equivalents
(31)
(17)
(29)
-
(77)
Effect of exchange rate changes on cash
16
-
(19)
-
(3)
Cash and cash equivalents – January 1
17
53
206
-
276
F - 86
Cash and cash equivalents – December 31,
2
36
158
-
196
The accompanying notes are an integral part of these Consolidated Financial Statements.
F-87
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
33. SUBSEQUENT EVENTS
Golden Cycle acquisition
On January 14, 2008, AngloGold Ashanti announced that it had agreed to acquire 100 percent of Golden Cycle Gold
Corporation (GCGC) through a transaction in which GCGC’s shareholders will receive 29 AngloGold Ashanti ADRs for
every 100 shares of GCGC common stock held. GCGC holds a 33 percent shareholding in Cripple Creek & Victor while
AngloGold Ashanti holds the remaining 67 percent. The transaction will result in Cripple Creek & Victor being wholly-
owned by AngloGold Ashanti. The transaction is subject to a number of regulatory and statutory approvals, including
approval by GCGC shareholders. The transaction, at the date of announcement, was valued at approximately
$149 million.
On January 14, 2008, AngloGold Ashanti announced that it had agreed to acquire 100 percent of Golden Cycle Gold
Corporation (GCGC) through a transaction in which GCGC’s shareholders will receive 29 AngloGold Ashanti ADRs for
every 100 shares of GCGC common stock held. GCGC holds a 33 percent shareholding in Cripple Creek & Victor while
AngloGold Ashanti holds the remaining 67 percent. The transaction will result in Cripple Creek & Victor being wholly-
owned by AngloGold Ashanti. The transaction is subject to a number of regulatory and statutory approvals, including
approval by GCGC shareholders. The transaction, at the date of announcement, was valued at approximately
$149 million.
Investment in B2Gold Corp
On February 14, 2008, AngloGold Ashanti announced that it had entered into a binding memorandum of agreement
(MOA) with B2Gold Corp. (B2Gold). The MOA provides for the existing Colombian joint venture agreements between
AngloGold Ashanti and B2Gold to be amended to provide that B2Gold acquire from AngloGold Ashanti additional
interest in certain mineral properties in Colombia. In exchange, B2Gold would issue to AngloGold Ashanti 25 million
common shares and 21.4 million common share purchase warrants in B2Gold. Subsequently, the transaction was
finalized, as announced by AngloGold Ashanti on May 16, 2008.
On February 14, 2008, AngloGold Ashanti announced that it had entered into a binding memorandum of agreement
(MOA) with B2Gold Corp. (B2Gold). The MOA provides for the existing Colombian joint venture agreements between
AngloGold Ashanti and B2Gold to be amended to provide that B2Gold acquire from AngloGold Ashanti additional
interest in certain mineral properties in Colombia. In exchange, B2Gold would issue to AngloGold Ashanti 25 million
common shares and 21.4 million common share purchase warrants in B2Gold. Subsequently, the transaction was
finalized, as announced by AngloGold Ashanti on May 16, 2008.
Eskom power supply
On April 14, 2008, it was announced that, following the stabilization of power provided by Eskom (the South African
electricity supply body) to the South African operations during the quarter, AngloGold Ashanti forecast the first quarter
production to be approximately 1.19 million ounces. The revised production outlook was approximately 8 percent
above guidance provided in the fourth quarter of 2007. AngloGold Ashanti had also fully delivered into maturing hedge
contracts during the quarter. On January 25, 2008, the South African national power supplier, Eskom, had communicated
that it could not guarantee power supply to AngloGold Ashanti’s South African operations. Precautionary steps were
taken for the safety of employees, including ceasing the transportation of employees underground to carry-out mining
activities and the cessation of milling activities. Following extensive discussions with Eskom and the South African
government, Eskom agreed to guarantee a power supply equivalent to 90 percent of previous supply and undertook to
more reliably warn companies when power outages may occur. Mining operations resumed on Wednesday,
January 30, 2008 at AngloGold Ashanti’s South African mines and in late March 2008, Eskom increased power supply
to 96.5 percent of previous levels. At these power levels and as a result of the Company’s previously implemented and
ongoing initiatives to improve its energy efficiencies, the Company has been able to restore production back to
100 percent of previous capacity. Since 2004, AngloGold Ashanti and Eskom have undertaken and committed funds
and other resources to various initiatives to improve energy efficiencies and reduce power consumption at AngloGold
Ashanti’s South African mines. These combined efforts have resulted in a decline in the use of electricity, fuel and coal
and have to date achieved a 17 percent improvement in energy efficiencies at the Company’s South African operations.
AngloGold Ashanti views these initiatives as being important not only in the light of power shortages and related
disruption to its mining operations but also in that it anticipates that these initiatives will assist in managing future operating
cost increases in the light of anticipated increases in unit electrical power, fuel and other energy costs.
On April 14, 2008, it was announced that, following the stabilization of power provided by Eskom (the South African
electricity supply body) to the South African operations during the quarter, AngloGold Ashanti forecast the first quarter
production to be approximately 1.19 million ounces. The revised production outlook was approximately 8 percent
above guidance provided in the fourth quarter of 2007. AngloGold Ashanti had also fully delivered into maturing hedge
contracts during the quarter. On January 25, 2008, the South African national power supplier, Eskom, had communicated
that it could not guarantee power supply to AngloGold Ashanti’s South African operations. Precautionary steps were
taken for the safety of employees, including ceasing the transportation of employees underground to carry-out mining
activities and the cessation of milling activities. Following extensive discussions with Eskom and the South African
government, Eskom agreed to guarantee a power supply equivalent to 90 percent of previous supply and undertook to
more reliably warn companies when power outages may occur. Mining operations resumed on Wednesday,
January 30, 2008 at AngloGold Ashanti’s South African mines and in late March 2008, Eskom increased power supply
to 96.5 percent of previous levels. At these power levels and as a result of the Company’s previously implemented and
ongoing initiatives to improve its energy efficiencies, the Company has been able to restore production back to
100 percent of previous capacity. Since 2004, AngloGold Ashanti and Eskom have undertaken and committed funds
and other resources to various initiatives to improve energy efficiencies and reduce power consumption at AngloGold
Ashanti’s South African mines. These combined efforts have resulted in a decline in the use of electricity, fuel and coal
and have to date achieved a 17 percent improvement in energy efficiencies at the Company’s South African operations.
AngloGold Ashanti views these initiatives as being important not only in the light of power shortages and related
disruption to its mining operations but also in that it anticipates that these initiatives will assist in managing future operating
cost increases in the light of anticipated increases in unit electrical power, fuel and other energy costs.
Rights issue
On May 6, 2008, AngloGold Ashanti announced that it intends to proceed, subject to certain conditions, with an
approximate one-for-four renounceable rights offer, which would result in AngloGold Ashanti issuing approximately
69.4 million shares at a minimum share price of ZAR172 raising approximately ZAR11.9 billion ($1.6 billion based on an
exchange rate of ZAR7.56/$1.00 on May 5, 2008). The proposed rights offer is being fully underwritten subject to
certain customary conditions. The final rights offer price will be announced at the time of the announcement of the
rights offer. The proposed rights offer will materially change the number of common shares in issue. The proposed
rights offer will be subject to approval at a general meeting of AngloGold Ashanti shareholders to be held on
May 22, 2008.
On May 6, 2008, AngloGold Ashanti announced that it intends to proceed, subject to certain conditions, with an
approximate one-for-four renounceable rights offer, which would result in AngloGold Ashanti issuing approximately
69.4 million shares at a minimum share price of ZAR172 raising approximately ZAR11.9 billion ($1.6 billion based on an
exchange rate of ZAR7.56/$1.00 on May 5, 2008). The proposed rights offer is being fully underwritten subject to
certain customary conditions. The final rights offer price will be announced at the time of the announcement of the
rights offer. The proposed rights offer will materially change the number of common shares in issue. The proposed
rights offer will be subject to approval at a general meeting of AngloGold Ashanti shareholders to be held on
May 22, 2008.
F-88
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
33. SUBSEQUENT EVENTS (continued)
33. SUBSEQUENT EVENTS (continued)
The principal purpose of the rights offer is to provide AngloGold Ashanti with additional financial resources to improve
its financial flexibility. In particular, the net proceeds from the rights offer will allow AngloGold Ashanti both to
significantly restructure and reduce its existing gold hedging position, which has adversely affected its financial
performance in recent years, while also being able to continue to fund its principal development projects and
exploration growth initiatives. Pending this use of proceeds, the net proceeds of the rights offer may, in the interim, be
used by AngloGold Ashanti to reduce its short-term borrowings and the borrowings outstanding on AngloGold Ashanti’s
revolving credit facility or retained as cash and invested in accordance with AngloGold Ashanti’s cash management
policies.
its financial flexibility. In particular, the net proceeds from the rights offer will allow AngloGold Ashanti both to
significantly restructure and reduce its existing gold hedging position, which has adversely affected its financial
performance in recent years, while also being able to continue to fund its principal development projects and
exploration growth initiatives. Pending this use of proceeds, the net proceeds of the rights offer may, in the interim, be
used by AngloGold Ashanti to reduce its short-term borrowings and the borrowings outstanding on AngloGold Ashanti’s
revolving credit facility or retained as cash and invested in accordance with AngloGold Ashanti’s cash management
policies.
F-89
SOCIÉTÉ DES MINES DE MORILA S.A.
FINANCIAL STATEMENTS
for the year ended December 31, 2007
for the year ended December 31, 2007
Registration number: 15430
Incorporated in the Republic of Mali
Incorporated in the Republic of Mali
F-90
Société des Mines de Morila S.A.
Financial Statements
for the year ended December 31, 2007
Financial Statements
for the year ended December 31, 2007
Report of Independent Registered Public Accounting Firm
Income statement
Balance sheet
Statement of changes in shareholders’ equity
Cash flow statement
Notes to the financial statements
F-91
Report of the Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Société des Mines de Morila S.A.
We have audited the accompanying balance sheet of Société des Mines de Morila S.A. (the Company) as of
December 31, 2006, and the related statement of income, shareholders’ equity, and cash flows for the year then ended.
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on these financial statements based on our audit.
December 31, 2006, and the related statement of income, shareholders’ equity, and cash flows for the year then ended.
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal
control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal
control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of
Société des Mines de Morila S.A. at December 31, 2006 and the results of its operations and its cash flows for the year then
ended, in conformity with International Financial Reporting Standards.
Société des Mines de Morila S.A. at December 31, 2006 and the results of its operations and its cash flows for the year then
ended, in conformity with International Financial Reporting Standards.
We also audited the adjustments described in note 2.5 that were applied to restate the 2005 and 2004 financial statements.
In our opinion, such adjustments are appropriate and have been properly applied.
In our opinion, such adjustments are appropriate and have been properly applied.
As discussed in note 2.5, in 2006 the Company changed its method of accounting for stripping costs incurred during the
production phase of a mine.
production phase of a mine.
Ernst & Young Inc.
Registered Auditor
Registered Auditor
Johannesburg, Republic of South Africa
June 15, 2007
June 15, 2007
F-92
Report of the Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of Société des Mines de Morila S.A.
In our opinion, the balance sheet as of December 31, 2005 and the related the related income statements, cash flow
statements and statements of changes in shareholders equity for each of two years in the period ended December 31, 2005,
before the effects of the adjustments to retrospectively change the method of accounting for stripping costs incurred during
the production phase of a mine as described in Note 2.5, present fairly, in all material respects, the financial position of
Société des Mines de Morila S.A. (the “Company”) at December 31, 2005, and the results of its operations and its cash flows
for each of the two years in the period ended December 31, 2005, in conformity with International Financial Reporting
Standards (the 2005 financial statements before the effects of the adjustments discussed in Note 2.5 are not presented
herein). These financial statements are the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our audits, before the effects of the
adjustments described above, of these statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
statements and statements of changes in shareholders equity for each of two years in the period ended December 31, 2005,
before the effects of the adjustments to retrospectively change the method of accounting for stripping costs incurred during
the production phase of a mine as described in Note 2.5, present fairly, in all material respects, the financial position of
Société des Mines de Morila S.A. (the “Company”) at December 31, 2005, and the results of its operations and its cash flows
for each of the two years in the period ended December 31, 2005, in conformity with International Financial Reporting
Standards (the 2005 financial statements before the effects of the adjustments discussed in Note 2.5 are not presented
herein). These financial statements are the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our audits, before the effects of the
adjustments described above, of these statements in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively change the method of
accounting for stripping costs incurred during the production phase of a mine described in Note 2.5 and accordingly, we do
not express an opinion or any other form of assurance about whether such adjustments are appropriate and have properly
applied. Those adjustments were audited by other auditors.
accounting for stripping costs incurred during the production phase of a mine described in Note 2.5 and accordingly, we do
not express an opinion or any other form of assurance about whether such adjustments are appropriate and have properly
applied. Those adjustments were audited by other auditors.
PricewaterhouseCoopers Inc.
Director: Faan Lombard
Registered Auditor
Director: Faan Lombard
Registered Auditor
Sunninghill, South Africa
March 9, 2006
March 9, 2006
F-93
Société des Mines de Morila S.A.
Income Statements
for the years ended December 31,
Income Statements
for the years ended December 31,
Note
Unaudited
2007
$’000
2006
$’000
2005
$’000
Restated
(note 2.5)
Revenue
319,218
314,878
295,909
Operating costs
(151,346)
(156,552)
(158,981)
13
167,872
158,326
136,928
Other expenditure – net
(24,857)
(370)
(4,860)
- interest received
362
651
435
- finance charges
(3,392)
(3,146)
(3,811)
- other (expenses) / income, net
(21,827)
2,125
(1,484)
Profit before taxation
143,014
157,956
132,068
Taxation
14
(50,206)
(57,717)
(267)
Net profit attributable to Equity Shareholders
92,808
100,239
131,801
The accompanying notes are an integral part of the financial statements.
F-94
Société des Mines de Morila S.A.
Balance sheets
At December 31,
Balance sheets
At December 31,
Unaudited
2007
2006
Note
$’000
$’000
ASSETS
Non current assets
211,085
202,719
Mining assets
8
77,159
88,427
Deferred tax asset
9
3,084
6,261
Non-current receivables
10
28,822
12,422
Long-term ore stockpiles
11
102,020
95,609
Current assets
120,020
89
803
Inventories
11
72,061
39,380
Accounts receivable
10
33,952
37,560
Prepaid expenses
14,007
8,435
Cash and cash equivalents
-
4,428
Total assets
331,105
292,522
EQUITY AND LIABILITIES
Capital and reserves
Share capital
4
16
16
Distributable reserves
266,257
245,949
Shareholder’s equity
266,273
245,965
Non-current liabilities
20,484
22,044
Shareholder’s loan
5
3,860
3,689
Environmental rehabilitation provision
6
11,218
10,012
Interest bearing borrowings
7
5,406
8,343
Current liabilities
44,348
24,513
Accounts payable
12
22,495
17,058
Taxation payable
6,574
4,434
Short-term portion of interest bearing borrowings
7
2,715
3,021
Bank overdraft
12,564
-
Total shareholders’ equity and liabilities
331,105
292,522
The accompanying notes are an integral part of the financial statements.
F-95
Société des Mines de Morila S.A.
Statements of changes in shareholders’ equity
for the years ended December 31,
Statements of changes in shareholders’ equity
for the years ended December 31,
Share
capital
$’000
Retained
income
$’000
Total
$’000
Balance at January 1, 2005
16
179,609
179,625
Net profit for the year
-
131,801
131,801
Dividends declared and paid
-
(89,700)
(89,700)
Balance at December 31, 2005
16
221,710
221,726
Net profit for the year
-
100,239
100,239
Dividends declared and paid
-
(76,000)
(76,000)
Balance at December 31, 2006
16
245,949
245,965
Net profit for the year
-
92,808
92,809
Dividends declared and paid
-
(72,500)
(72,500)
Balance at December 31, 2007
16
266,257
266,273
The accompanying notes are an integral part of the financial statements.
F-96
Société des Mines de Morila S.A.
Cash flow statements
for the years ended December 31,
Cash flow statements
for the years ended December 31,
Note
Unaudited
2007
$’000
2006
$’000
2005
$’000
Restated
(note 2.5)
Cash flows from operating activities
Cash generated by operating activities before
changes in working capital
changes in working capital
15.1
159,369
177,764
160,006
Cash utilized by changes in working capital
15.2
(62,430)
(56,224 )
(57,636 )
Cash generated from operations
92,939
121,540
102,370
Taxation paid
15.3
(30,592)
(36,960)
(974)
Interest received
362
651
435
Interest paid -net
(2,436)
(2,982 )
(3,021 )
Net cash flows generated by operating activities
60,273
82,249
98,810
Cash flows from investing activities
Additions to mining assets
(1,694 )
(2,900)
(4,355)
Net cash flows utilized in investing activities
(1,694)
(2,900 )
(4,355)
Cash flows from financing activities
Long term liabilities repaid
(3,243)
(2,826 )
(2,891 )
Increase in shareholder loan
181
-
-
Dividends paid
(72,500)
(76,000)
(89,700)
Net cash flows utilized in financing activities
(75,572 )
(78,826 )
(92,591)
Net increase/(decrease) in cash and equivalents
(16,992)
524
1 864
Cash and equivalents at beginning of year
4,428
3,904
2,040
Cash and equivalents at end of year
(12,564 )
4,428
3,904
Cash at bank and in hand
(12,564)
4,428
3,904
The principal non-cash transactions are the acquisition of mining assets through finance leases (note 7) and the off-set of
income taxes against indirect tax receivables (note 15.3).
income taxes against indirect tax receivables (note 15.3).
The accompanying notes are an integral part of the financial statements.
F-97
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2007
Notes to the financial statements
for the year ended December 31, 2007
1.
Nature of operations
Société des Mines de Morila S.A. (the “Company”) owns the Morila gold mine in Mali. The Company is owned 80% by
Morila Limited and 20% by the Government of Mali. Randgold Resources Limited and AngloGold Ashanti Limited
(formerly AngloGold Limited) each own 50% of Morila Limited. The Company is engaged in gold mining and related
activities, including exploration, extraction, processing and smelting. Gold bullion, the Company’s principal product, is
currently produced and sold in Mali.
Morila Limited and 20% by the Government of Mali. Randgold Resources Limited and AngloGold Ashanti Limited
(formerly AngloGold Limited) each own 50% of Morila Limited. The Company is engaged in gold mining and related
activities, including exploration, extraction, processing and smelting. Gold bullion, the Company’s principal product, is
currently produced and sold in Mali.
2.
Significant
accounting
policies
The principal accounting policies applied in the preparation of these financial statements are set out below. These
policies have been consistently applied to all the years presented and are consistent with prior years, except for the
change in accounting policy relating to stripping costs. Refer note 2.5.
policies have been consistently applied to all the years presented and are consistent with prior years, except for the
change in accounting policy relating to stripping costs. Refer note 2.5.
2.1
Basis of preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards
(“IFRS”) as issued by the International Accounting Standards Board (IASB). The financial statements have been
prepared under the historical cost convention, as modified by certain financial assets and financial liabilities (including
derivative instruments), which are carried at fair value.
(“IFRS”) as issued by the International Accounting Standards Board (IASB). The financial statements have been
prepared under the historical cost convention, as modified by certain financial assets and financial liabilities (including
derivative instruments), which are carried at fair value.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting
estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting
policies. The more significant areas requiring the use of management estimates and judgment relate to the
determination of ore reserves that are the basis for future cash flow estimates and units-of-production depreciation
calculations, future rehabilitation obligations, estimates of recoverable gold and other materials in gold in process and
stockpiles, and asset impairments.
estimates. It also requires management to exercise its judgment in the process of applying the Company’s accounting
policies. The more significant areas requiring the use of management estimates and judgment relate to the
determination of ore reserves that are the basis for future cash flow estimates and units-of-production depreciation
calculations, future rehabilitation obligations, estimates of recoverable gold and other materials in gold in process and
stockpiles, and asset impairments.
2.2
General
The financial statements are measured and presented in US dollars, as it is the primary measurement currency in
which transactions are undertaken. Monetary assets and liabilities in foreign currencies are translated to US dollars at
rates of exchange ruling at the end of the financial period. Translation gains and losses arising at period-end, as well
as those arising on the translation of settled transactions occurring in currencies other than the functional currency,
are included in net income.
which transactions are undertaken. Monetary assets and liabilities in foreign currencies are translated to US dollars at
rates of exchange ruling at the end of the financial period. Translation gains and losses arising at period-end, as well
as those arising on the translation of settled transactions occurring in currencies other than the functional currency,
are included in net income.
2.3
Foreign currency translation
(a)
Functional and presentation currency
The consolidated financial statements are presented in US dollars, which is the Company’s functional and
presentation currency.
presentation currency.
(b)
Transactions and balances
Foreign currency transactions are translated into the measurement currency using the exchange rates prevailing at
the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions
and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign
currencies are recognized in the income statement.
the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions
and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign
currencies are recognized in the income statement.
F-98
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2007
Notes to the financial statements
for the year ended December 31, 2007
2.
Significant accounting policies (continued)
2.4
Property, plant and equipment
a)
Undeveloped properties
Undeveloped properties upon which the Company has not performed sufficient exploration work to determine whether
significant mineralization exists, are carried at original cost. Where the directors consider that there is little likelihood of
the properties being exploited, or the values of the exploitable rights have diminished below cost, an impairment is
recorded.
significant mineralization exists, are carried at original cost. Where the directors consider that there is little likelihood of
the properties being exploited, or the values of the exploitable rights have diminished below cost, an impairment is
recorded.
b)
Long-lived assets
Long-lived assets including development costs and mine plant facilities are initially recorded at cost. Where relevant
the estimated cost of dismantling the asset and remediating the site is included in the cost of property, plant and
equipment, subsequently they are measured at cost less accumulated amortisation and impairment. Development
costs and mine plant facilities relating to existing and new mines are capitalised. Development costs consist primarily
of direct expenditure incurred to establish or expand productive capacity, and are capitalised until commercial levels of
production are achieved, after which the costs are amortised.
the estimated cost of dismantling the asset and remediating the site is included in the cost of property, plant and
equipment, subsequently they are measured at cost less accumulated amortisation and impairment. Development
costs and mine plant facilities relating to existing and new mines are capitalised. Development costs consist primarily
of direct expenditure incurred to establish or expand productive capacity, and are capitalised until commercial levels of
production are achieved, after which the costs are amortised.
c)
Short-lived assets
Short-lived assets including non-mining assets are shown at cost less accumulated depreciation and impairment.
d)
Depreciation and amortization
Long-lived assets include mining properties, mine development costs and mine plant facilities. Depreciation and
amortization in respect of long-lived assets are charged over the life of the mine based on estimated ore tons
contained in proven and probable reserves. Proven and probable ore reserves reflect estimated quantities of
economically recoverable reserves, which can be recovered in the future from known mineral deposits. Short-lived
assets, which include motor vehicles, office equipment and computer equipment, are depreciated over estimated
useful lives of between two to five years, using the straight-line method but limited to the life of mine.
amortization in respect of long-lived assets are charged over the life of the mine based on estimated ore tons
contained in proven and probable reserves. Proven and probable ore reserves reflect estimated quantities of
economically recoverable reserves, which can be recovered in the future from known mineral deposits. Short-lived
assets, which include motor vehicles, office equipment and computer equipment, are depreciated over estimated
useful lives of between two to five years, using the straight-line method but limited to the life of mine.
e)
Impairment
The carrying amounts of the long-lived assets of the Company are compared to the recoverable amount of the assets
whenever events or changes in circumstances indicate that the net book value may not be recoverable. The
recoverable amount is the higher of value in use and fair value less cost to sell.
whenever events or changes in circumstances indicate that the net book value may not be recoverable. The
recoverable amount is the higher of value in use and fair value less cost to sell.
In assessing the value in use, the expected future cash flows from the asset is determined by applying a discount rate
to the anticipated pre-tax future cash flows. The discount rate used is derived from the Company’s credit-adjusted risk-
free rate. Working costs and sustaining capital expenditure are estimated based on the approved mine plan. An
impairment is recognized in the income statement to the extent that the carrying amount exceeds the assets’
recoverable amount. The revised carrying amounts are depreciated in line with accounting policies.
to the anticipated pre-tax future cash flows. The discount rate used is derived from the Company’s credit-adjusted risk-
free rate. Working costs and sustaining capital expenditure are estimated based on the approved mine plan. An
impairment is recognized in the income statement to the extent that the carrying amount exceeds the assets’
recoverable amount. The revised carrying amounts are depreciated in line with accounting policies.
A previously recognized impairment loss is reversed if the recoverable amount increases as a result of a reversal of
the conditions that originally resulted in the impairment. This reversal is recognized in the income statement and is
limited to the carrying amount that would have been determined, net of depreciation, had no impairment loss been
recognized in prior years.
the conditions that originally resulted in the impairment. This reversal is recognized in the income statement and is
limited to the carrying amount that would have been determined, net of depreciation, had no impairment loss been
recognized in prior years.
F-99
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2007
Notes to the financial statements
for the year ended December 31, 2007
2.
Significant accounting policies (continued)
The estimates of future discounted cash flows are subject to risks and uncertainties including the future gold price. It is
therefore reasonably possible that changes could occur which may affect the recoverability of mining assets.
therefore reasonably possible that changes could occur which may affect the recoverability of mining assets.
2.5
Stripping
costs
The Company changed its accounting policy on stripping costs under IFRS in the prior year. Previously, costs of
production stage waste stripping in excess of the expected pit life average stripping ratio were deferred and then
charged to production when the actual stripping ratio was below the expected pit life average stripping ratio. Under the
revised accounting policy all stripping cost incurred during the production phase of a mine are treated as variable
production costs and as a result are included in the cost of the inventory produced during the period that the stripping
costs are incurred.
production stage waste stripping in excess of the expected pit life average stripping ratio were deferred and then
charged to production when the actual stripping ratio was below the expected pit life average stripping ratio. Under the
revised accounting policy all stripping cost incurred during the production phase of a mine are treated as variable
production costs and as a result are included in the cost of the inventory produced during the period that the stripping
costs are incurred.
The change in the IFRS accounting policy resulted in the following adjustments to the amounts reported under IFRS:
US$000
December 31, 2005
Decrease in deferred stripping cost
9,217
Decrease/(increase) in ore stockpiles
20,856
Decrease in gold in process
127
Decrease in deferred taxation liability
3,067
Increase in deferred taxation asset
7,503
Decrease in opening retained earnings
34,038
US$000
Year
ended
December 31, 2005
Increase in net profit
14,408
2.6
Inventories
Inventories, which include consumable stores, gold in process and ore stockpiled, are stated at the lower of cost or net
realizable value. The cost of ore stockpiles and gold produced is determined principally by the weighted average cost
method using related production costs. Costs of gold inventories include all costs incurred up until production of an
ounce of gold such as milling costs, mining costs and directly attributable mine general and administration costs but
exclude transport costs, refining costs and royalties.
realizable value. The cost of ore stockpiles and gold produced is determined principally by the weighted average cost
method using related production costs. Costs of gold inventories include all costs incurred up until production of an
ounce of gold such as milling costs, mining costs and directly attributable mine general and administration costs but
exclude transport costs, refining costs and royalties.
All stockpile grades are currently being processed and all ore is expected to be fully processed. This does not include
high grade tailings, which are carried at zero value due to uncertainty as to whether they will be processed through the
plant.
high grade tailings, which are carried at zero value due to uncertainty as to whether they will be processed through the
plant.
The processing of ore in stockpiles occurs in accordance with the life of mine processing plan that has been optimized
based on the known mineral reserves, current plant capacity and mine design.
based on the known mineral reserves, current plant capacity and mine design.
Consumable stores are valued at average cost after appropriate provision for redundant and slow moving items have
been made.
been made.
F-100
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2007
Notes to the financial statements
for the year ended December 31, 2007
2.
Significant accounting policies (continued)
2.7
Interest and borrowing cost
Interest and borrowing cost is recognised on a time proportion basis, taking into account the principal outstanding and
the effective rate over the period to maturity. Borrowing cost is expensed as incurred except to the extent that it
relates directly to the construction of property, plant and equipment during the time that is required to complete and
prepare the asset for its intended use, when it is capitalised as part of property, plant and equipment. Borrowing cost
is capitalised as part of the cost of the asset where it is probable that the asset will result in economic benefit and
where the borrowing cost can be measured reliably.
the effective rate over the period to maturity. Borrowing cost is expensed as incurred except to the extent that it
relates directly to the construction of property, plant and equipment during the time that is required to complete and
prepare the asset for its intended use, when it is capitalised as part of property, plant and equipment. Borrowing cost
is capitalised as part of the cost of the asset where it is probable that the asset will result in economic benefit and
where the borrowing cost can be measured reliably.
2.8
Financial
instruments
Financial instruments are measured as indicated below. Financial instruments carried on the balance sheet include
cash and cash equivalents, receivables, accounts payable and borrowings.
cash and cash equivalents, receivables, accounts payable and borrowings.
2.9
Receivables
Receivables are recognised initially at fair value. There is a rebuttable presumption that the transaction price is fair
value unless this could be refuted by reference to market indicators. Subsequently, receivables are measured at
amortised cost using the effective interest method, less provision for impairment.
value unless this could be refuted by reference to market indicators. Subsequently, receivables are measured at
amortised cost using the effective interest method, less provision for impairment.
A provision for impairment of trade receivables is established when there is objective evidence that the company will
not be able to collect all amounts due according to the original terms of receivables.
not be able to collect all amounts due according to the original terms of receivables.
Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial
reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired.
The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated
future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the income
statement.
reorganisation, and default or delinquency in payments are considered indicators that the trade receivable is impaired.
The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated
future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the income
statement.
2.10
Cash and cash equivalents
Cash and cash equivalents are carried in the balance sheet at cost. For the purpose of the cash flow statement, cash
and cash equivalents comprise cash on hand, deposits held at call with banks, other short term highly liquid
investments with a maturity of three months or less at the date of purchase and bank overdrafts. In the balance sheet,
bank overdrafts are included in current liabilities.
and cash equivalents comprise cash on hand, deposits held at call with banks, other short term highly liquid
investments with a maturity of three months or less at the date of purchase and bank overdrafts. In the balance sheet,
bank overdrafts are included in current liabilities.
2.11
Rehabilitation costs
The net present value of estimated future rehabilitation cost estimates is recognized and provided for in the financial
statements and capitalized to mining assets on initial recognition. Initial recognition is at the time of the disturbance
occurring and thereafter as and when additional environmental disturbances are created. The estimates are reviewed
annually to take into account the effects of inflation and changes in estimates and are discounted using rates that
reflect the time value of money.
statements and capitalized to mining assets on initial recognition. Initial recognition is at the time of the disturbance
occurring and thereafter as and when additional environmental disturbances are created. The estimates are reviewed
annually to take into account the effects of inflation and changes in estimates and are discounted using rates that
reflect the time value of money.
Annual increases in the provision are charged to income and consist of finance costs relating to the change in present
value of the provision and inflationary increases in the provision estimate. The present value of additional
environmental disturbances created are capitalized to mining assets against an increase in the rehabilitation provision.
The rehabilitation asset is depreciated as noted previously. Rehabilitation projects undertaken, included in the
estimates, are charged to the provision as incurred.
value of the provision and inflationary increases in the provision estimate. The present value of additional
environmental disturbances created are capitalized to mining assets against an increase in the rehabilitation provision.
The rehabilitation asset is depreciated as noted previously. Rehabilitation projects undertaken, included in the
estimates, are charged to the provision as incurred.
Environmental liabilities, other than rehabilitation costs, which relate to liabilities arising from specific events, are
expensed when they are known, probable and may be reasonably estimated.
expensed when they are known, probable and may be reasonably estimated.
F-101
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2007
Notes to the financial statements
for the year ended December 31, 2007
2.
Significant accounting policies (continued)
2.12
Provisions
Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events
where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation,
and a reliable estimate of the amount of the obligation can be made.
where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation,
and a reliable estimate of the amount of the obligation can be made.
2.13
Borrowings
Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated
at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is
recognized in the income statement over the period of the borrowings using the effective interest method.
at amortized cost; any difference between the proceeds (net of transaction costs) and the redemption value is
recognized in the income statement over the period of the borrowings using the effective interest method.
Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the
liability for at least 12 months after the balance sheet date.
liability for at least 12 months after the balance sheet date.
2.14
Accounts
payable
Accounts payable and other short-term monetary liabilities, are initially recognised at fair value and subsequently
carried at amortised cost using the effective interest method.
carried at amortised cost using the effective interest method.
2.15
Employee
benefits
(a) Post employment benefits
The Company has a defined contribution plan. A defined contribution plan is a plan under which the Company pays
fixed contributions. The Company has no legal or constructive obligations to pay further contributions if the fund does
not hold sufficient assets to pay all employees.
fixed contributions. The Company has no legal or constructive obligations to pay further contributions if the fund does
not hold sufficient assets to pay all employees.
Retirement benefits for employees of the Company are provided by the Mali Government social security system to
which the Company and its employees contribute a fixed percentage of payroll costs each month. The Company has
no further payment obligations once the contributions have been paid. The contributions are recognized as employee
benefit expense when they are due.
which the Company and its employees contribute a fixed percentage of payroll costs each month. The Company has
no further payment obligations once the contributions have been paid. The contributions are recognized as employee
benefit expense when they are due.
(b) Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date, or whenever an
employee accepts voluntary redundancy in exchange for these benefits. The Company recognizes termination
benefits when it is demonstrably committed to either: terminating the employment of current employees according to a
detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to
encourage voluntary redundancy. Benefits falling due more than 12 months after balance sheet date are discounted to
present value.
employee accepts voluntary redundancy in exchange for these benefits. The Company recognizes termination
benefits when it is demonstrably committed to either: terminating the employment of current employees according to a
detailed formal plan without possibility of withdrawal; or providing termination benefits as a result of an offer made to
encourage voluntary redundancy. Benefits falling due more than 12 months after balance sheet date are discounted to
present value.
2.16
Finance
Leases
Leases of plant and equipment where the Company assumes a significant portion of risks and rewards of ownership
are classified as a finance lease. Finance leases are capitalized at the estimated present value of the underlying lease
payments. Each lease payment is allocated between the liability and the finance charges to achieve a constant rate on
the finance balance outstanding. The interest portion of the finance payment is charged to the income statement over
the lease period. The plant and equipment acquired under the finance lease are depreciated over the shorter of the
lease term or useful lives of the assets.
are classified as a finance lease. Finance leases are capitalized at the estimated present value of the underlying lease
payments. Each lease payment is allocated between the liability and the finance charges to achieve a constant rate on
the finance balance outstanding. The interest portion of the finance payment is charged to the income statement over
the lease period. The plant and equipment acquired under the finance lease are depreciated over the shorter of the
lease term or useful lives of the assets.
F-102
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2007
Notes to the financial statements
for the year ended December 31, 2007
2.
Significant accounting policies (continued)
2.17
Revenue
recognition
Revenue is recognized as follows:
a)
Gold sales - Revenue arising from gold sales is recognized when the risks and rewards of ownership and title
pass to the buyer under the terms of the applicable contract and the pricing is fixed and determinable.
These are met when the gold and silver leaves the mine’s smelthouse.
As gold sales are subject to customer survey adjustment, sales are initially recorded on a provisional basis using
the Company’s best estimate of contained metal. Subsequently adjustments are recorded in turnover to take
into account final assay and weight certificates from the refinery, if different from the initial certificates.
Historically the differences between the estimated and actual contained gold have not been significant.
the Company’s best estimate of contained metal. Subsequently adjustments are recorded in turnover to take
into account final assay and weight certificates from the refinery, if different from the initial certificates.
Historically the differences between the estimated and actual contained gold have not been significant.
b)
Interest income - Interest is recognized on a time proportion basis, taking into account the principal outstanding
and the effective rate over the period to maturity.
and the effective rate over the period to maturity.
2.18
Exploration
costs
The Company expenses all exploration and evaluation expenditures until the directors conclude that a future
economic benefit is more likely than not of being realised, i.e. “probable”. In evaluating if expenditures meet this
criterion to be capitalised, the directors utilise several different sources of information depending on the level of
exploration. While the criteria for concluding that expenditure should be capitalised is always probable, the
information that the directors use to make that determination depends on the level of exploration.
economic benefit is more likely than not of being realised, i.e. “probable”. In evaluating if expenditures meet this
criterion to be capitalised, the directors utilise several different sources of information depending on the level of
exploration. While the criteria for concluding that expenditure should be capitalised is always probable, the
information that the directors use to make that determination depends on the level of exploration.
a)
Exploration and evaluation expenditure on greenfields sites, being those where the Company does not have any
mineral deposits which are already being mined or developed, is expensed as incurred until the directors are
able to demonstrate that future economic benefits are probable, which generally will be the establishment of
proved and probable reserves at this location.
mineral deposits which are already being mined or developed, is expensed as incurred until the directors are
able to demonstrate that future economic benefits are probable, which generally will be the establishment of
proved and probable reserves at this location.
b)
Exploration and evaluation expenditure on brownfields sites, being those adjacent to mineral deposits which are
already being mined or developed, is expensed as incurred until the directors are able to demonstrate that future
economic benefits are probable, which generally will be the establishment of increased proved and probable
reserves after which the expenditure is capitalised as a mine development cost.
already being mined or developed, is expensed as incurred until the directors are able to demonstrate that future
economic benefits are probable, which generally will be the establishment of increased proved and probable
reserves after which the expenditure is capitalised as a mine development cost.
c)
Exploration and evaluation expenditure relating to extensions of mineral deposits, which are already being mined
or developed, including expenditure on the definition of mineralisation of such mineral deposits, is capitalised as
a mine development
a mine development
Costs relating to property acquisitions are also capitalized within development costs.
2.19
Current
Taxation
Current tax is the tax expected to be payable on the taxable income for the year calculated using rates (and laws) that
have been enacted or substantively enacted by the balance sheet date. It includes adjustments for tax expected to be
payable or recoverable in respect of previous periods.
have been enacted or substantively enacted by the balance sheet date. It includes adjustments for tax expected to be
payable or recoverable in respect of previous periods.
F-103
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2007
Notes to the financial statements
for the year ended December 31, 2007
2.
Significant accounting policies (continued)
2.20
Deferred
taxation
Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the consolidated financial statements. However, if the temporary
difference arise from initial recognition of an asset or liability in a transaction other than a business combination that at
the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for.
assets and liabilities and their carrying amounts in the consolidated financial statements. However, if the temporary
difference arise from initial recognition of an asset or liability in a transaction other than a business combination that at
the time of the transaction affects neither accounting nor taxable profit or loss, it is not accounted for.
Deferred tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance
sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is
settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available
against which the temporary differences can be utilised.
sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is
settled. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available
against which the temporary differences can be utilised.
2.21
Recent accounting pronouncements
a)
The following standards and interpretations which have been recently issued or revised have not been adopted
early by the group. Their expected impact is discussed below:
early by the group. Their expected impact is discussed below:
IFRS 8 Operating Segments (effective for annual periods beginning on or after 1 January 2009)
The objective of this IFRS is to require entities to disclose information to enable users of its financial statements to
evaluate the nature and financial effects of the business activities in which it engages and the economic environments
in which it operates. The company will apply IFRS 8 from 1 January 2009, but it is not expected to have any impact on
the accounts of the company.
The objective of this IFRS is to require entities to disclose information to enable users of its financial statements to
evaluate the nature and financial effects of the business activities in which it engages and the economic environments
in which it operates. The company will apply IFRS 8 from 1 January 2009, but it is not expected to have any impact on
the accounts of the company.
IAS 23 Borrowing Costs (revised) (effective for accounting periods beginning on or after 1 January 2009).
The main change from the previous version is the removal of the option of immediately recognising as an expense
borrowing costs that relate to assets that take a substantial period of time to get ready for use or sale. The company
will apply IAS 23 (revised) from 1 January 2009, but it is not expected to have any impact on the accounts of the
company as the policy currently applied is already in line with IAS 23.
The main change from the previous version is the removal of the option of immediately recognising as an expense
borrowing costs that relate to assets that take a substantial period of time to get ready for use or sale. The company
will apply IAS 23 (revised) from 1 January 2009, but it is not expected to have any impact on the accounts of the
company as the policy currently applied is already in line with IAS 23.
IFRIC Interpretation 11 IFRS 2 Share-based Payment - Group and Treasury Share Transactions (effective for annual
periods beginning on or after 1 March 2007). This interpretation addresses the classification of a share-based
payment transaction (as equity- or cash-settled), in which equity instruments of the parent or another group entity are
transferred, in the financial statements of the entity receiving accounts of the company.
periods beginning on or after 1 March 2007). This interpretation addresses the classification of a share-based
payment transaction (as equity- or cash-settled), in which equity instruments of the parent or another group entity are
transferred, in the financial statements of the entity receiving accounts of the company.
IFRIC Interpretation 12 Service Concession Arrangements (effective for annual periods beginning on or after
1 January 2008). This interpretation provides guidance to private sector entities on certain recognition and
measurement issues that arise in accounting for public to private service concession arrangements. The company will
apply IFRIC 12 from 1 January 2008, but it is not expected to have any impact on the accounts of the company.
1 January 2008). This interpretation provides guidance to private sector entities on certain recognition and
measurement issues that arise in accounting for public to private service concession arrangements. The company will
apply IFRIC 12 from 1 January 2008, but it is not expected to have any impact on the accounts of the company.
IFRIC 13 Customer loyalty programmes (for annual periods beginning on or after 1 July 2008)
This interpretation addresses sale transactions in which the entities grant customers aware credits that, subject to
meeting any further qualifying conditions, the customers can redeem in future for free discounted goods or services.
The company will apply IFRIC 13 from 1 July 2008, but it is not expected to have any impact on the accounts of the
company.
This interpretation addresses sale transactions in which the entities grant customers aware credits that, subject to
meeting any further qualifying conditions, the customers can redeem in future for free discounted goods or services.
The company will apply IFRIC 13 from 1 July 2008, but it is not expected to have any impact on the accounts of the
company.
F-104
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2007
Notes to the financial statements
for the year ended December 31, 2007
2.
Significant accounting policies (continued)
IFRIC 14 and IAS 19 The limits on defined asset, minimum funding requirements and their interaction – (for annual
periods beginning on or after 1 January 2008). This interpretation clarifies when refunds or reductions in future
contributions should be regarded as available in accordance with paragraph 58 of IAS19, how a minimum funding
requirement might affect the availability of reductions in future contributions and when a funding requirement might
give rise to a liability. The company will apply IFRIC 14 from 1 January 2008, but it is not expected to have any impact
on the accounts of the company.
periods beginning on or after 1 January 2008). This interpretation clarifies when refunds or reductions in future
contributions should be regarded as available in accordance with paragraph 58 of IAS19, how a minimum funding
requirement might affect the availability of reductions in future contributions and when a funding requirement might
give rise to a liability. The company will apply IFRIC 14 from 1 January 2008, but it is not expected to have any impact
on the accounts of the company.
b)
The Company has adopted the following standard which is effective for the first time this year. The impact is
discussed below:
IFRS 7 Financial Instruments Disclosure and complementary amendment to IAS 1, Presentation of Financial
Statements –Capital Disclosures (effective for annual periods beginning on or after 1 January 2007). The objective of
this IFRS is to require entities to provide disclosures in their financial statements that enable users to evaluate the
significance of financial instruments for the entity’s financial position; and the nature and extent of risks arising from
financial instruments to which the entity is exposed during the period and at the reporting date, and how the entity
manages those risks. The amendment to IAS 1 introduces disclosures about the level of an entity's capital and how it
manages capital. The adoption of IFRS 7 and the amendment to IAS 1 had a significant impact on disclosures.
Statements –Capital Disclosures (effective for annual periods beginning on or after 1 January 2007). The objective of
this IFRS is to require entities to provide disclosures in their financial statements that enable users to evaluate the
significance of financial instruments for the entity’s financial position; and the nature and extent of risks arising from
financial instruments to which the entity is exposed during the period and at the reporting date, and how the entity
manages those risks. The amendment to IAS 1 introduces disclosures about the level of an entity's capital and how it
manages capital. The adoption of IFRS 7 and the amendment to IAS 1 had a significant impact on disclosures.
c)
The group has adopted the following standards and interpretations which are effective for the first time this year
without any significant impact:
without any significant impact:
IFRIC Interpretation 7, Applying the restatement approach under IAS 29, Financial Reporting in Hyperinflationary
Economies (effective for accounting periods beginning on or after 1 March 2006)
Economies (effective for accounting periods beginning on or after 1 March 2006)
IFRIC Interpretation 8 Scope of IFRS 2 (effective for annual periods beginning on or after 1 May 2006)
IFRIC Interpretation 9 Reassessment of Embedded Derivatives (effective for annual periods beginning on or after
1 June 2006)
1 June 2006)
IFRIC Interpretation 10 Interim Financial Reporting and Impairment (effective for annual periods beginning on or after
1 November 2006)
1 November 2006)
3.
Critical accounting estimates and judgements
Some of the accounting policies require the application of significant judgement by management in selecting the
appropriate assumptions for calculating financial estimates. By their nature, these judgements are subject to an
inherent degree of uncertainty and are based on historical experience, terms of existing contracts, management’s view
on trends in the gold mining industry and information from outside sources.
appropriate assumptions for calculating financial estimates. By their nature, these judgements are subject to an
inherent degree of uncertainty and are based on historical experience, terms of existing contracts, management’s view
on trends in the gold mining industry and information from outside sources.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts
of assets and liabilities within the next financial year are discussed below:
of assets and liabilities within the next financial year are discussed below:
Future rehabilitation obligations
The net present value of current rehabilitation estimates have been discounted to their present value at 4% per annum
(2006: 6%), being an estimate of the cost of borrowings. Expenditure is expected to be incurred at the end of the mine
life.
(2006: 6%), being an estimate of the cost of borrowings. Expenditure is expected to be incurred at the end of the mine
life.
F-105
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2007
Notes to the financial statements
for the year ended December 31, 2007
3.
Critical accounting estimates and judgements (continued)
Determination of ore reserves
There are numerous uncertainties inherent in estimating ore reserves and assumptions that are valid at the time of
estimation may change significantly when new information becomes available. Changes in the forecast prices of
commodities, exchange rates, production costs or recovery rates may change the economic status of reserves and
may, ultimately, result in the reserves being restated.
estimation may change significantly when new information becomes available. Changes in the forecast prices of
commodities, exchange rates, production costs or recovery rates may change the economic status of reserves and
may, ultimately, result in the reserves being restated.
Exploration and evaluation expenditure
The Company has to apply judgement in determining whether exploration and evaluation expenditure should be
capitalised or expensed, under the policy described in note 2.
capitalised or expensed, under the policy described in note 2.
Indirect taxes receivable
Given their slow moving nature, the group has had to apply judgement in determining when amounts will be recovered
with respect to indirect taxes owing by the Mali Government. The amounts reflected in the financial statements are
based on the directors’ best estimate of the timing of the recovery of these amounts.
with respect to indirect taxes owing by the Mali Government. The amounts reflected in the financial statements are
based on the directors’ best estimate of the timing of the recovery of these amounts.
Depreciation
There are several methods for calculating depreciation, i.e. the straight-line method, the units of production method
using ounces produced and the units of production method using tonnes milled. The directors believe that the tonnes
milled method is the best indication of plant and infrastructure usage.
using ounces produced and the units of production method using tonnes milled. The directors believe that the tonnes
milled method is the best indication of plant and infrastructure usage.
4.
Share
capital
Share capital consists of the following authorized and issued ordinary par value shares with a nominal value of
Communauté Financière Africaine franc (“CFA”) 10 000 ($16.356) each:
Communauté Financière Africaine franc (“CFA”) 10 000 ($16.356) each:
Number of shares
authorized and
issued
Unaudited
2007
$’000
2006
$’000
Morila Limited
800
13
13
Government of Mali
200
3
3
1,000
16
16
F-106
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2007
Notes to the financial statements
for the year ended December 31, 2007
5.
Shareholder’s
loan
Unaudited
2007
$’000
2006
$’000
Government of Mali
3,860
3,689
3,860
3,689
Made up of:
Principal
2,560
2,622
Deferred interest
1,300
1,067
3,860
3,689
The shareholder loan is denominated in US dollars and interest accrues at a LIBOR dollar rate plus 2% per annum
and has no fixed terms of repayment. The weighted average interest rate as at December 31, 2007 on the
shareholders’ subordinated loans was 7% (December 31, 2006: 6.2%).
and has no fixed terms of repayment. The weighted average interest rate as at December 31, 2007 on the
shareholders’ subordinated loans was 7% (December 31, 2006: 6.2%).
6.
Environmental rehabilitation provision
Unaudited
2007
$’000
2006
$’000
Opening balance
10,012
9,889
Accretion expense
601
593
Change in estimate
605
(470)
11,218
10,012
The provisions for close down and restoration costs include estimates for the effect of future inflation and have been
discounted to their present value at 4% per annum, being an estimate of the risk free pre-tax, cost of borrowing.
discounted to their present value at 4% per annum, being an estimate of the risk free pre-tax, cost of borrowing.
While the ultimate amount of rehabilitation costs to be incurred in the future is uncertain, the Company has estimated
that the remaining costs for Morila, in current monetary terms, will be $14.86 million (December 31, 2006:
$13.2 million), the majority of which will only be expended at the end of the mine life.
that the remaining costs for Morila, in current monetary terms, will be $14.86 million (December 31, 2006:
$13.2 million), the majority of which will only be expended at the end of the mine life.
Although limited environmental rehabilitation regulations currently exist in Mali to govern the mines, management has
based the environmental rehabilitation provision using the standards as set by the World Bank which require an
environmental management plan, an annual environmental report, a closure plan, an up-to-date register of plans of
the facility, preservation of public safety on closure, carrying out rehabilitation works and ensuring sufficient funds exist
for the closure works. However, it is reasonably possible that the Company’s estimate of its ultimate rehabilitation
liabilities could change as a result of changes in regulations or cost estimates.
based the environmental rehabilitation provision using the standards as set by the World Bank which require an
environmental management plan, an annual environmental report, a closure plan, an up-to-date register of plans of
the facility, preservation of public safety on closure, carrying out rehabilitation works and ensuring sufficient funds exist
for the closure works. However, it is reasonably possible that the Company’s estimate of its ultimate rehabilitation
liabilities could change as a result of changes in regulations or cost estimates.
The Company is committed to rehabilitation of its properties and to ensure that it is adequately provided to do so it
makes use of independent environmental consultants to advise it. It also uses past experience in similar situations to
ensure that the provisions for rehabilitation are adequate.
makes use of independent environmental consultants to advise it. It also uses past experience in similar situations to
ensure that the provisions for rehabilitation are adequate.
F-107
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2007
Notes to the financial statements
for the year ended December 31, 2007
6.
Environmental rehabilitation provision (continued)
While the ultimate closure costs may be uncertain, there are no uncertainties with respect to joint and several liability
that may affect the magnitude of the contingency as these are clearly defined in the Company’s mining convention.
that may affect the magnitude of the contingency as these are clearly defined in the Company’s mining convention.
There are no other potentially responsible parties to consider for cost sharing arrangements.
The Company carries insurance against pollution including cost of cleanup. At present, there are no losses and or
claims outstanding.
claims outstanding.
7.
Interest Bearing Borrowings
Unaudited
2007
$’000
2006
$’000
a) Rolls Royce finance lease
6,754
9,569
b) Air Liquide finance lease
1,367
1,795
8,121
11,364
Less: Current portion of long term liabilities:
a) Rolls Royce finance lease
2,273
2,593
b) Air Liquide finance lease
442
428
2,715
3,021
5,406
8,343
a)
Rolls Royce finance lease
This lease relates to five generators leased from Rolls Royce. The lease is repayable over ten years
commencing April 1, 2001 and bears interest at a variable rate which as at December 31, 2007 was
approximately 23% (2006: 21%) per annum. The lease is collateralized by plant and equipment whose net book
value at December 31, 2007 amounted to $8.9 million (2006: $10.3 million). Average annual lease payment of
$3.8 million (capital and interest) are payable in instalments over the term of the lease. Randgold Resources
Limited guaranteed the repayment of the lease.
commencing April 1, 2001 and bears interest at a variable rate which as at December 31, 2007 was
approximately 23% (2006: 21%) per annum. The lease is collateralized by plant and equipment whose net book
value at December 31, 2007 amounted to $8.9 million (2006: $10.3 million). Average annual lease payment of
$3.8 million (capital and interest) are payable in instalments over the term of the lease. Randgold Resources
Limited guaranteed the repayment of the lease.
b)
Air Liquide finance lease
The Air Liquide finance lease relates to three oxygen generating units leased from Air Liquide. The lease is
payable over 10 years commencing December 1, 2000 and bears interest at a variable rate which as at
December 31, 2007 was approximately 3.09% (2006: 3.48%) per annum. The lease is collateralized by the
production units whose net book value at December 31, 2007 amounted to $1.3 million (2006: $1.6 million).
payable over 10 years commencing December 1, 2000 and bears interest at a variable rate which as at
December 31, 2007 was approximately 3.09% (2006: 3.48%) per annum. The lease is collateralized by the
production units whose net book value at December 31, 2007 amounted to $1.3 million (2006: $1.6 million).
F-108
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2007
Notes to the financial statements
for the year ended December 31, 2007
7.
Interest Bearing Borrowings (continued)
Finance lease liabilities – minimum lease payments:
Unaudited
2007
$’000
2006
$’000
Not later than 1 year
4,202
4,939
Later than 1 year and not later than 5 years
7,710
12,315
Later than 5 years
-
-
11,912
17,254
Future finance costs of finance leases
(3,791)
(5,890)
Present value of finance lease liabilities
8,121
11,364
The present value of the finance lease liabilities is as follows:
Not later than 1 year
2,715
3,021
Later than 1 year and not later than 5 years
5,406
8,343
Later than 5 years
-
-
8,121
11,364
The exposure of the Group's borrowings to interest rate changes at the balance sheet dates are as follows:
Unaudited
2007
$’000
2006
$’000
0 - 12 months
2,715
3,021
1 -5 years
5,406
8,343
8,121
11,364
The carrying amounts and fair value of the non-current borrowings are as follows:
Carrying amount
Fair value
Unaudited
2007
$'000
2006
$'000
Unaudited
2007
$'000
2006
$'000
Finance leases
5,406
8,343
5,406
8,343
5,406
8,343
5,406
8,343
The fair value of current borrowings equals their carrying amount, as the impact of discounting is not significant. The
fair values are based on cash flows discounted using a rate based on the borrowing rate.
fair values are based on cash flows discounted using a rate based on the borrowing rate.
The carrying amounts of the Group's borrowings are denominated in the following currencies:
Unaudited
2007
$’000
2006
$’000
US Dollar
8,121
11,364
F-109
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2007
Notes to the financial statements
for the year ended December 31, 2007
8.
Mining
assets
Unaudited
2007
$'000
2006
$'000
Opening carrying amount
88,427
101,580
Additions
1,693
2,900
Revision in estimate of rehabilitation costs
605
(470)
Depreciation
(13,566)
(15,583)
Closing carrying amount
77,159
88,427
Cost
144,307
200,975
Accumulated depreciation
(67,148)
(112,548)
Carrying amount
77,159
88,427
Long-lived
assets
Long-lived assets are those assets which are amortized over the life of the mine and are comprised of the
metallurgical plant, tailings and raw water dams, power plant and mine infrastructure. The net book value of these
assets was $74 million as at December 31, 2007 (2006: $83 million).
metallurgical plant, tailings and raw water dams, power plant and mine infrastructure. The net book value of these
assets was $74 million as at December 31, 2007 (2006: $83 million).
Short-lived assets
Short-lived assets are those assets which are amortized over their useful life but limited to the life of the mine and are
comprised of motor vehicles and other equipment. The net book value of these assets was $3.2 million as at
December 31, 2007 (2006: $3.6 million).
comprised of motor vehicles and other equipment. The net book value of these assets was $3.2 million as at
December 31, 2007 (2006: $3.6 million).
9.
Deferred
taxation
Deferred tax is calculated in full on temporary differences under the liability method using a principal tax rate of
35% (2006: 35%).
35% (2006: 35%).
The movement on deferred taxation is a follows:
Unaudited
2007
$'000
2006
$'000
At beginning of the year
6261
7,551
Income statement charge
(3,177)
(1,290)
At end of year
3,084
6,261
Deferred taxation assets and liabilities comprise of the following
Accelerated tax depreciation
(2,324)
(1,154)
Deferred taxation liability
(2,324)
(1,154)
Ore stockpiles and gold-in-process
5,408
7,415
Decelerated tax depreciation
-
-
Deferred taxation asset
5,408
7,415
Net deferred taxation asset
3,084
6,261
F-110
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2007
Notes to the financial statements
for the year ended December 31, 2007
10.
Accounts receivable
Unaudited
2007
$’000
2006
$’000
Related party receivables
- AngloGold Ashanti Limited
19
93
- AngloGold Services Mali S.A.
-
8
- Societe d’ Exploitation des Mines d’Or de Sadiola S.A.
99
1
- Societe des Mines de Loulo S.A.
-
96
- Societé Ashanti Goldfields de Guinée S.A.
46
44
- Geita Gold Mining Limited
-
1
Gold sales trade receivable
16,148
9,993
Value added tax receivable
37,760
26,487
Fuel duties receivable
10,094
14,005
MDM receivable
-
2,522
Other
1,449
3,459
65,615
56,709
Impairment provision
(2,841)
(6,727)
62,774
49,982
Less non – current portion
(28,822)
(12,422)
Current accounts receivable
33,952
37,560
As of 31 December 2007, an unused impairment provision of $3,9 million was reversed (2006: $1,1million
impairment). The amount of the provision was $2,8million as of 31 December 2007 (2006: $6.7 million).
impairment). The amount of the provision was $2,8million as of 31 December 2007 (2006: $6.7 million).
The fair values of trade and other receivables are as follows:
Unaudited
2007
$’000
2006
$’000
Related party receivables
- AngloGold Ashanti Limited
-
93
- AngloGold Services Mali S.A.
-
8
- Societe d’ Exploitation des Mines d’Or de Sadiola S.A.
-
1
- Societe des Mines de Loulo S.A.
-
96
- AngloGold Mines de Siguiri Guinea
-
44
- -Geita Gold Mining
-
1
Gold sales trade receivable
16,148
9,993
Value added tax receivable
37,185
25,174
Fuel duties receivable
7,829
8,834
MDM receivable
-
2,522
Other
1,612
3,459
62,774
49,982
Less non – current portion
(28,822)
(12,422)
Fair value of current accounts receivable
33,952
37,560
F-111
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2007
Notes to the financial statements
for the year ended December 31, 2007
11.
Inventories
Unaudited
2007
$'000
2006
$'000
Consumables stores
25,914
22,365
Gold in process
2,500
2,073
Short-term portion of ore stockpiles
45,650
18,008
74,064
42,446
Provision for obsolescence
(2,003)
(3,066)
72,061
39,380
Long-term portion of ore stockpiles
102,020
95,609
174,081
134,989
Ore stockpiles have been split between long and short-term based on the current life of mine plan estimates.
12.
Accounts payable
Unaudited
2007
$'000
2006
$'000
Related party payables
- AngloGold Ashanti Limited
3,591
543
- AngloGold Services Mali S.A.
513
332
- Societe d’Exploitation des Mines d’Or de Sadiola S.A.
-
149
Trade creditors
7,754
3,334
Payroll cost accruals
1,216
1,308
Indirect taxes payable
-
1,722
Accruals
9,421
9,670
22,495
17,058
13.
Operating profit
Unaudited
2007
$’000
2006
$’000
2005
$’000
Profit before tax is arrived at after taking into account the following:
Depreciation
13,566
15,583
20,532
Auditor’s remuneration
- audit fees
141
141
111
Impairment (reversal) on accounts receivable
(3,886)
1,137
4,030
Forex differences - net
(3,709)
(2,124)
1,483
Inventory obsolescence provision
1,063
1,062
2,004
Exploration Expense
2,076
6,606
1,105
Royalties
19,170
18,856
15,529
Related party management fee (note 21)
3,202
3,149
2,605
F-112
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2007
Notes to the financial statements
for the year ended December 31, 2007
14.
Taxation
Major items causing the Company’s actual income tax charge to differ from estimates at the standard charge of
35 percent of taxable income are as follows:
35 percent of taxable income are as follows:
Unaudited
2007
$'000
2006
$’000
2005
$’000
(Restated)
Current taxation
48,881
56,427
7,818
Deferred taxation (note 9)
1,325
1,290
(7,551)
50,206
57,717
267
The tax on the Company’s profit before tax differs from the theoretical
amount that would arise using the statutory tax rate as follows:
amount that would arise using the statutory tax rate as follows:
Profit before tax
143,015
157,956
132,068
Tax calculated at tax rate of 35%
50,055
55,285
46,224
Expenses not deductible for tax purposes
- Provisions/allowances
947
2,708
2,526
- Other Permanent Differences
(796)
(276)
-
Tax holiday permanent differences
-
-
(48,483)
Taxation charge
50,206
57,717
267
The Company benefited from a five year tax holiday in Mali which expired on November 14, 2005. The benefit of the
tax holiday to the Company was to increase its net income by $38.7 million, due to not recording a tax expense for the
taxable income generated by the Morila mine for the year ended December 31, 2005. Under Malian tax law upon
expiration of the tax holiday, the Company’s income tax expense will be based on the greater of 35 percent of taxable
income or 0.75 per cent of gross revenue.
tax holiday to the Company was to increase its net income by $38.7 million, due to not recording a tax expense for the
taxable income generated by the Morila mine for the year ended December 31, 2005. Under Malian tax law upon
expiration of the tax holiday, the Company’s income tax expense will be based on the greater of 35 percent of taxable
income or 0.75 per cent of gross revenue.
The Morila operations have no assessable capital expenditure carry forwards or assessable tax losses, as at
December 31, 2007, 2006 and 2005 respectively, for deduction against future mining income.
December 31, 2007, 2006 and 2005 respectively, for deduction against future mining income.
F-113
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2007
Notes to the financial statements
for the year ended December 31, 2007
15.
Notes to the cash flow statement
Unaudited
2007
$’000
2006
$’000
2005
$’000
(Restated)
15.1 Cash generated by operating activities before changes in working
capital
Profit after taxation
92,808
100,239
131,801
Adjustments:
- Tax expense
50,206
57,717
267
- Net finance charges
2,074
2,495
2,739
- Depreciation
13,566
15,583
20,532
- Provision for bad debt
(3,886)
1,137
4,030
- Accretion expense on environmental rehabilitation provision
601
593
637
155,369
177,764
160,006
15.2 Cash utilized by changes in working capital
- Increase in accounts receivable
(28,775)
(21,680)
(9,967)
- Increase in inventories
(39,092)
(29,441)
(46,910)
- Increase/(decrease) in accounts payable
5,437
(5,103)
(759)
(62,430)
(56,224)
(57,636)
15.3 Taxation paid
- Balance at beginning of year
4,434
6,844
-
- Charge to income statement
50,206
57,717
267
- Offsets against indirect tax receivables
(14,297)
(21,877)
-
- Movement in deferred taxation
(3,177)
(1,290)
7,551
- Balance at end of year
(6,574)
(4,434)
(6,844)
- Tax paid
30,592
36,960
974
16.
Financial
risk
management
In the normal course of its operations, the Company is exposed to commodity price, currency, interest, liquidity and
credit risk. In order to manage these risks, the Company may enter into transactions which include mainly gold
forward and gold option contracts.
credit risk. In order to manage these risks, the Company may enter into transactions which include mainly gold
forward and gold option contracts.
16.1
Concentration of credit risk
The Company’s financial instruments do not represent a concentration of credit risk because the Company
sells its gold to and deals with a variety of major financial institutions. Its receivables and loans are regularly
monitored and assessed and a provision for bad debts is maintained.
Gold bullion, the Company’s principal product, is produced in Mali. The gold produced is sold to a reputable
gold refinery. Because of the international market for gold the Company believes that no concentration of
credit risk exists with respect to the selected refinery to which the gold is sold.
sells its gold to and deals with a variety of major financial institutions. Its receivables and loans are regularly
monitored and assessed and a provision for bad debts is maintained.
Gold bullion, the Company’s principal product, is produced in Mali. The gold produced is sold to a reputable
gold refinery. Because of the international market for gold the Company believes that no concentration of
credit risk exists with respect to the selected refinery to which the gold is sold.
Included in accounts receivable is $47.9 million (2006: $40.4 million) relating to indirect taxes owing to the
Company by the Government of Mali, which is denominated in Communauté Financière Africaine franc.
Company by the Government of Mali, which is denominated in Communauté Financière Africaine franc.
F-114
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2007
Notes to the financial statements
for the year ended December 31, 2007
16.
Financial
risk
management (continued)
16.2
Foreign currency and commodity price risk
In the normal course of business, the Company enters into transactions denominated in USD. In addition, the
Company enters into transactions in a number of different currencies (primarily Communauté Financière
Africaine franc). As a result, the Company is subject to transaction exposure from fluctuations in foreign
currency exchange rates.
Company enters into transactions in a number of different currencies (primarily Communauté Financière
Africaine franc). As a result, the Company is subject to transaction exposure from fluctuations in foreign
currency exchange rates.
Unaudited
2007
$’000
2006
$’000
Bank overdrafts includes balances denominated in
- Communauté Financière Africaine franc (CFA)
(13,792)
788
Accounts receivable includes balances denominated in
- Communauté Financière Africaine franc (CFA)
49,096
39,989
Accounts payable includes balances denominated in
- Communauté Financière Africaine franc (CFA)
(3,255)
(8,046)
- South African Rand (ZAR)
(414)
(1,307)
- Pound Sterling (GBP)
(64)
(127)
- Euro (EUR)
(74)
(3,942)
- Australian Dollar (AUD)
-
(88)
- Canadian Dollar (CAD)
-
(1)
Generally the Company does not hedge its exposure to gold price fluctuation risk and sells at market spot
prices. These prices are in US dollars and do not expose the Company to any currency fluctuation risk.
However, during periods of capital expenditure or loan finance, the company may use forward contracts or
options to reduce the exposure to price movements, while maintaining significant exposure to spot prices. The
Company does not currently use any forward contracts or options.
prices. These prices are in US dollars and do not expose the Company to any currency fluctuation risk.
However, during periods of capital expenditure or loan finance, the company may use forward contracts or
options to reduce the exposure to price movements, while maintaining significant exposure to spot prices. The
Company does not currently use any forward contracts or options.
16.3
Interest rates and liquidity risk
Fluctuations in interest rates impact on the value of short term cash investments and interest payable on
financing activities (including long term loans), giving rise to interest rate risk. In the ordinary course of
business, the company receives cash from its operations and is required to fund working capital and capital
expenditure requirements. The company generally enters into variable interest bearing borrowings. This cash
is managed to ensure surplus funds are invested in a manner to achieve maximum returns while minimising
risks. The company has in the past been able to actively source financing through shareholder loans and third
party loans. A 1% change in interest rates on the Company's net cash (cash and cash equivalents less
borrowings) would result in a US$2.4 million (2006: US$1 million) negative impact on profit before tax.
financing activities (including long term loans), giving rise to interest rate risk. In the ordinary course of
business, the company receives cash from its operations and is required to fund working capital and capital
expenditure requirements. The company generally enters into variable interest bearing borrowings. This cash
is managed to ensure surplus funds are invested in a manner to achieve maximum returns while minimising
risks. The company has in the past been able to actively source financing through shareholder loans and third
party loans. A 1% change in interest rates on the Company's net cash (cash and cash equivalents less
borrowings) would result in a US$2.4 million (2006: US$1 million) negative impact on profit before tax.
16.4
Capital risk management
The company's objectives when managing capital are to safeguard the company's ability to continue as a going
concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an
optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the
company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new
shares or sell assets to reduce debt. Consistent with others in the industry, the company monitors capital on the
basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as
total borrowings (including borrowings and trade and other payables, as shown in the balance sheet) less cash
and cash equivalents. Total capital is calculated as equity, as shown in the balance sheet, plus net debt.
concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an
optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the
company may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new
shares or sell assets to reduce debt. Consistent with others in the industry, the company monitors capital on the
basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as
total borrowings (including borrowings and trade and other payables, as shown in the balance sheet) less cash
and cash equivalents. Total capital is calculated as equity, as shown in the balance sheet, plus net debt.
F-115
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2007
Notes to the financial statements
for the year ended December 31, 2007
17.
Fair value of financial instruments
The following table presents the carrying amounts and fair values of the Company's financial instruments outstanding
at December 31, 2006 and 2005. The fair value of a financial instrument is defined as the amount at which the
instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation
sale.
at December 31, 2006 and 2005. The fair value of a financial instrument is defined as the amount at which the
instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation
sale.
Unaudited
December 31, 2007
December 31, 2006
Carrying
Fair
Carrying
Fair
amount
value
amount
value
$’000
$’000
$’000
$’000
Financial assets
Cash and equivalents
-
-
4,428
4,428
Accounts receivable
62,774
62,774
49,982
49,982
Financial liabilities
Bank overdraft
12,564
12,564
-
-
Accounts payable
22,495
22,495
17,058
17,058
Long-term liabilities (excluding loans from shareholders)
5,406
5,406
8,343
8,343
Short term portion of long term liabilities
2,715
2,715
3,021
3,021
Estimation of fair values
Receivables, restricted cash, accounts payable and cash and equivalents
The carrying amounts are a reasonable estimate of the fair values because of the short maturity of such instruments.
The carrying amounts are a reasonable estimate of the fair values because of the short maturity of such instruments.
Long term debt
The fair value of market-based floating rate long-term debt is estimated using the expected future payments
discounted at market interest rates.
The fair value of market-based floating rate long-term debt is estimated using the expected future payments
discounted at market interest rates.
18.
Post employment benefits
Retirement benefits for employees of the Company are provided by the Mali Government social security system to
which the Company and its employees contribute a fixed percentage of payroll costs each month. Fund contributions
by the Company for the years ended December 31, 2007, 2006 and 2005 amounted to $2.2 million, $2.6 million and
$2.5 million respectively.
which the Company and its employees contribute a fixed percentage of payroll costs each month. Fund contributions
by the Company for the years ended December 31, 2007, 2006 and 2005 amounted to $2.2 million, $2.6 million and
$2.5 million respectively.
19.
Commitments
Capital expenditure for mining assets
Unaudited
2007
$’000
2006
$’000
Contracts for capital expenditure
-
-
Authorized but not contracted for
1,265
141
1,265
141
F-116
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2007
Notes to the financial statements
for the year ended December 31, 2007
19.
Commitments
(continued)
Somadex mining contractor expenditure
Unaudited
2007
$’000
2006
$’000
Not later than 1 year
49,281
29,050
Later than 1 year and not later than 5 years
23,742
30,014
Later than 5 years
-
-
73,023
59,064
20.
Related party transactions
In terms of the Operator Agreement between Morila SA and AngloGold Services Mali SA, a management fee,
calculated as 1% of the total sales of Morila, is payable to AngloGold Service Mali SA quarterly in arrears. The
management fees for the year ended December 31, 2007 amounted to $3.2 million (2006: $3.1 million) (2005:
$2.6 million).
calculated as 1% of the total sales of Morila, is payable to AngloGold Service Mali SA quarterly in arrears. The
management fees for the year ended December 31, 2007 amounted to $3.2 million (2006: $3.1 million) (2005:
$2.6 million).
Royalties are payable to the Government of Mali in the form of Ad Valorem taxes and CPS at a total rate of 6% of
total sales. The royalties for the year ended December 31, 2007 amounted to $19.1 million (2006: $18.9 million)
(2005: $17.8 million). Refer to the Value added tax receivable and Fuel duty receivable in note 10 to the financial
statements for the balances owed by the Government of Mali to the Company.
total sales. The royalties for the year ended December 31, 2007 amounted to $19.1 million (2006: $18.9 million)
(2005: $17.8 million). Refer to the Value added tax receivable and Fuel duty receivable in note 10 to the financial
statements for the balances owed by the Government of Mali to the Company.
Notes 10 and 12 to the financial statements set out the other balances receivable and payable relating to fellow
subsidiaries.
subsidiaries.
Transactions with fellow subsidiaries and shareholders are set out as follows:
Unaudited
2007
$’000
2006
$’000
Sales/services to related parties
- AngloGold Ashanti Limited
59
92
- AngloGold Services Mali S.A.
28
63
- Societe d’ Exploitation des Mines d’Or de Sadiola S.A.
262
(2)
- Societé d'Exploitation des Mines d'Or de Yatela S.A.
2
5
- Societe des Mines de Loulo S.A.
-
111
- Societé Ashanti Goldfields de Guinée S.A.
27
66
- Geita Gold Mining Limited
1
1
Purchases from related parties
- AngloGold Ashanti Limited
(5,696)
(2 884)
- AngloGold Services Mali S.A.
(4,260)
(4 843)
- Societe d’Exploitation des Mines d’Or de Sadiola S.A.
(22)
(285)
- Societé d'Exploitation des Mines d'Or de Yatela S.A.
(1)
(2)
- Geita Gold Mining Limited
(91)
-
- Randgold Resources Limited
-
(102)
F-117
Société des Mines de Morila S.A.
Notes to the financial statements
for the year ended December 31, 2007
Notes to the financial statements
for the year ended December 31, 2007
20. Related
party
transactions (continued)
Key management remuneration:
Unaudited
2007
$’000
2006
$’000
2005
$’000
Short-term employee benefits
1,636
1,090
866
Post-employment benefits
148
36
32
1,784
1,126
898
F-118
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Financial statements
as of and for the year ended
December 31, 2007
F-119
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Financial statements and report of the Independent Registered Public Accounting Firm
For the year ended December 31, 2007
Financial statements and report of the Independent Registered Public Accounting Firm
For the year ended December 31, 2007
Report of the Independent Registered Public Accounting Firm
Income statements
Balance sheets
Statements of changes in stockholders’ equity
Cash flow statements
Notes to the financial statements
Income statements
Balance sheets
Statements of changes in stockholders’ equity
Cash flow statements
Notes to the financial statements
F-120
Report of the Independent Registered Public Accounting Firm
The board of directors and stockholders of Société d’Exploitation des Mines d’Or de Sadiola S.A.
We have audited the accompanying balance sheets of Société d’Exploitation des Mines d’Or de Sadiola S.A. as of
December 31, 2006 and 2005, and the related statements of income, changes in stockholders’ equity and cash flows for
each of the years in the two-year period ended December 31, 2006. These financial statements are the responsibility of the
company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
December 31, 2006 and 2005, and the related statements of income, changes in stockholders’ equity and cash flows for
each of the years in the two-year period ended December 31, 2006. These financial statements are the responsibility of the
company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of
Société d’Exploitation des Mines d’Or de Sadiola S.A. as of December 31, 2006 and 2005, and the results of its operations
and its cash flows for each of the years in the two-year period ended December 31, 2006, in conformity with International
Financial Reporting Standards as issued by the International Accounting Standards Board.
Société d’Exploitation des Mines d’Or de Sadiola S.A. as of December 31, 2006 and 2005, and the results of its operations
and its cash flows for each of the years in the two-year period ended December 31, 2006, in conformity with International
Financial Reporting Standards as issued by the International Accounting Standards Board.
KPMG Inc.
Johannesburg, South Africa
June 25, 2007
June 25, 2007
F-121
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Income Statements
For the years ended December 31,
Income Statements
For the years ended December 31,
The accompanying notes are an integral part of these financial statements.
Unaudited
2007
2006 2005
Notes
US$
Revenue
3
267,911,114
300,727,005
198,138,374
Cost of sales
(173,088,367)
(167,004,820)
(148,428,779)
Gross profit
94,822,747
133,722,185
49,709,595
Exploration costs
(1,816,335)
(553,347)
(971,110)
Other operating income / (expenses)
44,668
692,296
410,115
Net foreign exchange gain / (loss)
1,926,568
1,208,733
(7,520,279)
Special impairments of indirect taxes receivable
and special expenses for indirect taxes payable
and special expenses for indirect taxes payable
5
(2,652,397)
(4,136,344)
(9,130,667)
Operating profit
4
92,325,251
130,933,523
32,497,654
Interest income
876,185
1,004,863
341,515
Interest expense
(2,426,997)
(748,870)
(3,083,377)
Profit before taxation
90,774,439
131,189,516
29,755,792
Taxation
6
(24,299,036)
(40,925,311)
(17,671,661)
Profit for the year
66,475,403
90,264,205
12,084,131
F-122
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Balance Sheet
As at December 31,
Balance Sheet
As at December 31,
Unaudited
2007
2006
Notes
US$
ASSETS
Non-current assets
Property, plant and equipment
7
127,714,713
112,447,354
Inventories
8
50,846,071
28,671,942
Trade and other receivables
9
30,260,588
28,335,326
Deferred taxation
12
1,243,101
-
210,064,473
169,454,622
Current assets
Inventories
8
62,915,746
55,843,871
Trade and other receivables
9
16,635,571
20,531,375
Taxation
2,019,356
-
Cash and cash equivalents
10
17,842,992
28,818,654
99,413,665
105,193,900
Total assets
309,478,138
274,648,522
EQUITY AND LIABILITIES
Equity
Stockholders' equity
245,768,674
179,293,271
Non-current liabilities
Provisions
11
31,904,870
14,862,531
Deferred taxation
12
-
2,426,353
31,904,870
17,288,884
Current liabilities
Trade and other payables
13
31,804,594
22,022,889
Taxation
-
33,137,071
Dividends payable
-
22,906,407
31,804,594
78,066,367
Total liabilities
63,709,464
95,355,251
Total equity and liabilities
309,478,138
274,648,522
The accompanying notes are an integral part of these financial statements.
F-123
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Statement of changes in stockholders’ equity
For the years ended December 31,
Statement of changes in stockholders’ equity
For the years ended December 31,
Ordinary stock
(note 16)
Non-
distributable
reserve
Retained
earnings
Total
stockholders'
equity
Note
US$
Balance at December 31, 2004
20,000,000
4,000,000
182,944,935
206,944,935
Profit for the year
-
-
12,084,131
12,084,131
Dividends declared
-
-
(40,000,000)
(40,000,000)
Balance at December 31, 2005
20,000,000
4,000,000
155,029,066
179,029,066
Profit for the year
-
-
90,264,205
90,264,205
Dividends declared
-
-
(90,000,000)
(90,000,000)
Balance at December 31, 2006
20,000,000
4,000,000
155,293,271
179,293,271
Profit for the year
-
-
66,475,403
66,475,403
Balance at December 31, 2007 (unaudited)
20,000,000
4,000,000
221,768,674
245,768,674
The non-distributable reserve is a legal reserve created in 1997 and is a requirement of the commercial law of Mali.
This law prescribes the transfer of 10% of profits, restricted to a maximum of 20% of ordinary share capital, to a non-
distributable reserve. Such reserve only becomes distributable in the event the company is liquidated.
This law prescribes the transfer of 10% of profits, restricted to a maximum of 20% of ordinary share capital, to a non-
distributable reserve. Such reserve only becomes distributable in the event the company is liquidated.
The accompanying notes are an integral part of these financial statements.
F-124
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Cash flow statements
For the years ended December 31,
Cash flow statements
For the years ended December 31,
Unaudited
2007
2006
2005
Notes
US$
Net cash provided by operating activities
Profit for the year
Profit for the year
66,475,403
90,264,205
12,084,131
Adjusted for:
Non-cash movements
- taxation charge per income statement
24,299,036
40,925,311
17,671,661
- adjustment for obsolete and slow-moving consumable
stores
-
432,263
358,681
- net foreign exchange (gains) / losses
(1,926,568)
(1,208,733)
7,520,279
- present value adjustment of VAT taxes refundable
1,749,582
(81,012)
2,553,510
- present value adjustment on refundable tax on fuel
(65,701)
247,119
297,000
- unwinding of non-current provisions
743,116
582,763
232,867
- environmental restoration charge to the income statement
5,734,370
67,261
2,397,330
- employee long service obligation charge to the income
statement
202,188
(1,737,418)
373,687
- amortisation of property, plant and equipment
12,100,569
34,039,909
29,661,072
Special impairments of indirect taxes refundable and special
provision for indirect taxes payable
provision for indirect taxes payable
2,652,397
4,136,344
9,130,667
Increase in non-current inventories
(22,174,129)
(10,735,511)
(7,122,597)
Increase in non-current VAT and fuel tax refundable
(1,925,262)
(13,784,316)
(17,519,010)
Income tax paid
15
(63,124,917)
(19,291,949)
(4,460,844)
Increase in inventories
(8,937,676)
(12,888,499)
(11,203,796)
Decrease / (increase) in trade and other receivables
2,211,923
2,693,227
12,059,739
Increase / (decrease) in trade and other payables
9,055,877
386,231
(4,082,958)
27,070,208
114,047,195
49,951,419
Net cash used in investing activities
Capital expenditure
(15,139,463)
(10,320,354)
(19,703,773)
Net cash outflow from investing activities
(15,139,463)
(10,320,354)
(19,703,773)
Net cash used in financing activities
Dividends paid
14
(22,906,407)
(87,093,593)
(30,802,000)
Net cash outflow from financing activities
(22,906,407)
(87,093,593)
(30,802,000)
Net increase / (decrease) in cash and cash equivalents
(10,975,662)
16,633,248
(554,354)
Cash and cash equivalents at beginning of year
28,818,654
12,185,406
12,739,760
Cash and cash equivalents at end of year
10
17,842,992
28,818,654
12,185,406
The accompanying notes are an integral part of these financial statements.
F-125
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
1.
Business
activities
Société d’Exploitation des Mines d’Or de Sadiola S.A. (Semos) is a company registered in Mali. The Company
operates a mine for the commercial exploitation of gold in the Kayes region of Western Mali. Commercial production
commenced on March 4, 1997.
operates a mine for the commercial exploitation of gold in the Kayes region of Western Mali. Commercial production
commenced on March 4, 1997.
2.
Accounting
policies
Statement
of
compliance
All amounts in the financial statements and related notes for 2007 are unaudited.
The company financial statements are prepared in compliance with International Financial Reporting Standards
(IFRS) and Interpretations of those standards, as adopted by the International Accounting Standards Board (IASB)
and applicable legislation.
(IFRS) and Interpretations of those standards, as adopted by the International Accounting Standards Board (IASB)
and applicable legislation.
During the current financial year, the following new and revised accounting standards, amendments to standards and
new interpretations were adopted by Société d’Exploitation des Mines d’Or de Sadiola S.A:
new interpretations were adopted by Société d’Exploitation des Mines d’Or de Sadiola S.A:
IAS1
Amendment – Capital Disclosures
IFRS 7
Financial Instruments: Disclosures
In addition, the following interpretation was early adopted by Société d’Exploitation des Mines d’Or de Sadiola S.A.
during previous financial years:
during previous financial years:
IFRIC 5
Rights to Interests arising from Decommissioning, Restoration and Environmental
Rehabilitation
Funds.
In addition, the following revised accounting standard and new interpretations were early adopted by Société
d’Exploitation des Mines d’Or de Sadiola S.A during the current financial year:
d’Exploitation des Mines d’Or de Sadiola S.A during the current financial year:
IAS 23
Borrowing Costs (revised)
IFRIC 11
IFRS 2 – Group and Treasury Share Transactions
IFRIC 12
Service Concession Arrangements
IFRIC 13
Customer Loyalty Programmes
IFRIC 14
IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their
Interaction
Interaction
The adoption of the accounting standards, amendments to standards and new interpretations had no material
financial impact on the financial statements identified above.
financial impact on the financial statements identified above.
The following accounting standards, amendments to standards and new interpretations, which are not yet mandatory
for Société d’Exploitation des Mines d’Or de Sadiola S.A, have not been adopted in the current year:
for Société d’Exploitation des Mines d’Or de Sadiola S.A, have not been adopted in the current year:
IAS 1
Presentation of Financial Statements
Effective years beginning on or after
1 January 2009
1 January 2009
IFRS 8
Operating Segments
Effective years beginning on or after
1 January 2009
1 January 2009
The company has assessed the significance of these new standards, amendments to standards and new
interpretations, which will be applicable from 1 January 2009 and later years and concluded that they will have no
material financial impact.
interpretations, which will be applicable from 1 January 2009 and later years and concluded that they will have no
material financial impact.
F-126
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
2.1
Basis of preparation
The financial statements are prepared according to the historical cost accounting convention, except for the
revaluation of certain financial instruments to fair value. The company's accounting policies as set out below are
consistent in all material respects with those applied in the previous year, except for the adoption of the new and
revised standards mentioned above. The financial statements are presented in US dollars.
revaluation of certain financial instruments to fair value. The company's accounting policies as set out below are
consistent in all material respects with those applied in the previous year, except for the adoption of the new and
revised standards mentioned above. The financial statements are presented in US dollars.
2.2
Changes in accounting policies
The adoption of the following new/revised standards, amendments to standards and interpretations did not have any
consequential effect on the accounting policies:
consequential effect on the accounting policies:
IAS1
Amendment – Capital Disclosures
IAS 23
Borrowing Costs (revised)
IFRS 7
Financial Instruments: Disclosures
IFRIC 11
IFRS 2 – Group and Treasury Share Transactions
IFRIC 12
Service Concession Arrangements
IFRIC 13
Customer Loyalty Programmes
IFRIC 14
IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their
Interaction
Interaction
IAS 1 Amendment – Capital Disclosures
The company adopted IAS 1 Amendment - Capital Disclosures as of 1 January 2007. The amendment requires
additional disclosures about the company’s objectives, policies and processes of managing capital. The adoption of
the amendment did not have any effect on the financial position or performance of the company.
additional disclosures about the company’s objectives, policies and processes of managing capital. The adoption of
the amendment did not have any effect on the financial position or performance of the company.
IAS 23 Borrowing Costs (revised)
The company adopted IAS 23 – Borrowing Costs (revised) as of 1 January 2007. This revision to the standard will
have no financial effect on the results of operation or the reporting of the financial condition of Société d’Exploitation
des Mines d’Or de Sadiola S.A as the company had already adopted the capitalisation of interest principle for
qualifying assets under the allowed alternative of the old IAS 23.
have no financial effect on the results of operation or the reporting of the financial condition of Société d’Exploitation
des Mines d’Or de Sadiola S.A as the company had already adopted the capitalisation of interest principle for
qualifying assets under the allowed alternative of the old IAS 23.
IFRS 7 Financial Instruments: Disclosures
The company adopted IFRS 7 - Financial Instruments: Disclosures as of 1 January 2007. The statement introduces
new disclosures to improve the information about financial instruments. It requires the disclosure of qualitative and
quantitative information about the exposure to risks arising from financial instruments including a sensitivity analysis
to market risk. The adoption of the statement did not have any effect on the financial position or performance of the
company.
new disclosures to improve the information about financial instruments. It requires the disclosure of qualitative and
quantitative information about the exposure to risks arising from financial instruments including a sensitivity analysis
to market risk. The adoption of the statement did not have any effect on the financial position or performance of the
company.
IFRIC 11 IFRS 2 – Group and Treasury Share Transactions
The company elected to adopt IFRIC Interpretation 11 as of 1 January 2007. This interpretation requires
arrangements whereby an employee of the company is granted rights, by the parent, to an entity or its parent’s
equity instruments to be accounted for as an equity-settled scheme, even if the entity buys the instruments from
another party, or the shareholders provide the equity instruments needed. The adoption of this interpretation did not
have any effect on the financial position or performance of the company.
arrangements whereby an employee of the company is granted rights, by the parent, to an entity or its parent’s
equity instruments to be accounted for as an equity-settled scheme, even if the entity buys the instruments from
another party, or the shareholders provide the equity instruments needed. The adoption of this interpretation did not
have any effect on the financial position or performance of the company.
F-127
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
2.2
Changes in accounting policies (continued)
IFRIC 12 Service Concession Arrangements
The company elected to adopt IFRIC Interpretation 12 as of 1 January 2007. This interpretation requires
arrangements where a public-to-private service concession has been established to be accounted for as balance
sheet assets and liabilities at inception. The adoption of this interpretation did not have any effect on the financial
position or performance of the company.
arrangements where a public-to-private service concession has been established to be accounted for as balance
sheet assets and liabilities at inception. The adoption of this interpretation did not have any effect on the financial
position or performance of the company.
IFRIC 13 Customer Loyalty Programmes
The company elected to adopt IFRIC Interpretation 13 as of 1 January 2007. This interpretation requires the entity
that grants the customer loyalty award to account for the sales transaction that gives rise to the award credits as a
“multiple element revenue transaction” and allocate the fair value between the award credits granted and the other
components of the revenue transaction. The adoption of this interpretation did not have any effect on the financial
position or performance of the company.
that grants the customer loyalty award to account for the sales transaction that gives rise to the award credits as a
“multiple element revenue transaction” and allocate the fair value between the award credits granted and the other
components of the revenue transaction. The adoption of this interpretation did not have any effect on the financial
position or performance of the company.
IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their
Interaction
Interaction
The company elected to adopt IFRIC Interpretation 14 as of 1 January 2007. This interpretation requires the entity to
measure any economic benefits available to it in the form of refunds or reductions in future contributions at the
maximum amount that is consistent with the terms and conditions of the plan, when determining the limit on a
defined benefit asset. The adoption of this interpretation did not have any effect on the financial position or
performance of the company.
measure any economic benefits available to it in the form of refunds or reductions in future contributions at the
maximum amount that is consistent with the terms and conditions of the plan, when determining the limit on a
defined benefit asset. The adoption of this interpretation did not have any effect on the financial position or
performance of the company.
2.3
Significant accounting judgements and estimates
Use of estimates: The preparation of the financial statements requires the company’s management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses
during the reporting period. The determination of estimates requires the exercise of judgement based on various
assumptions and other factors such as historical experience, current and expected economic conditions, and in some
cases actuarial techniques. Actual results could differ from those estimates.
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses
during the reporting period. The determination of estimates requires the exercise of judgement based on various
assumptions and other factors such as historical experience, current and expected economic conditions, and in some
cases actuarial techniques. Actual results could differ from those estimates.
The more significant areas requiring the use of management estimates and assumptions relate to mineral reserves
that are the basis of future cash flow estimates and unit-of-production depreciation, depletion and amortisation
calculations; environmental, reclamation and closure obligations; estimates of recoverable gold and other materials in
heap leach pads; asset impairments, write-downs of inventory to net realisable value; post-employment, post-
retirement and other employee benefit liabilities, the fair value and accounting treatment of financial instruments and
deferred taxation.
that are the basis of future cash flow estimates and unit-of-production depreciation, depletion and amortisation
calculations; environmental, reclamation and closure obligations; estimates of recoverable gold and other materials in
heap leach pads; asset impairments, write-downs of inventory to net realisable value; post-employment, post-
retirement and other employee benefit liabilities, the fair value and accounting treatment of financial instruments and
deferred taxation.
Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.
including expectations of future events that are believed to be reasonable under the circumstances.
The company is exposed to numerous legal risks. The outcome of currently pending and future proceedings cannot
be predicted with certainty. Thus, an adverse decision in a lawsuit could result in additional costs that are not
covered, either wholly or partly, under insurance policies and that could significantly influence the business and
results of operations.
be predicted with certainty. Thus, an adverse decision in a lawsuit could result in additional costs that are not
covered, either wholly or partly, under insurance policies and that could significantly influence the business and
results of operations.
The judgements that management have applied in the application of accounting policies, and the estimates and
assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year, are discussed below.
assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year, are discussed below.
F-128
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
2.3
Significant accounting judgements and estimates (continued)
Carrying value of property, plant and equipment
All mining assets are amortised using the units-of-production (UOP) method where the mine operating plan calls for
production from well-defined mineral reserves over proved and probable reserves.
production from well-defined mineral reserves over proved and probable reserves.
For mobile and other equipment, the straight-line method is applied over the estimated useful life of the asset which
does not exceed the estimated mine life based on proved and probable mineral reserves as the useful lives of these
assets are considered to be limited to the life of the mine.
does not exceed the estimated mine life based on proved and probable mineral reserves as the useful lives of these
assets are considered to be limited to the life of the mine.
The calculation of the UOP rate of amortisation could be impacted to the extent that actual production in the future is
different from current forecast production based on proved and probable mineral reserves. This would generally result
to the extent that there are significant changes in any of the factors or assumptions used in estimating mineral
reserves.
different from current forecast production based on proved and probable mineral reserves. This would generally result
to the extent that there are significant changes in any of the factors or assumptions used in estimating mineral
reserves.
These factors could include:
·
·
·
·
·
·
changes in proved and probable mineral reserves;
the grade of mineral reserves may vary significantly from time to time;
differences between actual commodity prices and commodity price assumptions;
unforeseen operational issues at mine sites;
changes in capital, operating, mining, processing and reclamation costs, discount rates and foreign exchange
rates; and
changes in mineral reserves could similarly impact the useful lives of assets depreciated on a straight-line basis,
where those lives are limited to the life of the mine.
differences between actual commodity prices and commodity price assumptions;
unforeseen operational issues at mine sites;
changes in capital, operating, mining, processing and reclamation costs, discount rates and foreign exchange
rates; and
changes in mineral reserves could similarly impact the useful lives of assets depreciated on a straight-line basis,
where those lives are limited to the life of the mine.
The recoverable amounts of individual assets have been determined based on the higher of value-in-use calculations
and fair values less costs to sell. These calculations require the use of estimates and assumptions. It is reasonably
possible that the gold price assumption may change which may then impact the estimated life of mine determinant
and may then require a material adjustment to the carrying value of property, plant and equipment.
and fair values less costs to sell. These calculations require the use of estimates and assumptions. It is reasonably
possible that the gold price assumption may change which may then impact the estimated life of mine determinant
and may then require a material adjustment to the carrying value of property, plant and equipment.
The company defers stripping costs incurred during the production stage of its open-pit operations, where this is the
most appropriate basis for matching the costs against the related economic benefits. This is generally the case
where there are fluctuations in stripping costs over the life of the mine.
most appropriate basis for matching the costs against the related economic benefits. This is generally the case
where there are fluctuations in stripping costs over the life of the mine.
In the production stage of the open-pit operations, further development of the mine requires a phase of unusually
high overburden removal activity that is similar in nature to preproduction mine development. The costs of such
unusually high overburden removal activity are deferred and charged against reported profits in subsequent periods
on a units-of-production basis. This accounting treatment is consistent with that for stripping costs incurred during
the development phase of a mine, before production commences.
high overburden removal activity that is similar in nature to preproduction mine development. The costs of such
unusually high overburden removal activity are deferred and charged against reported profits in subsequent periods
on a units-of-production basis. This accounting treatment is consistent with that for stripping costs incurred during
the development phase of a mine, before production commences.
If the company were to expense production stage stripping costs as incurred, this would result in volatility in the year
to year results from open-pit operations and excess stripping costs would be expensed at an earlier stage of the
mine’s operation.
to year results from open-pit operations and excess stripping costs would be expensed at an earlier stage of the
mine’s operation.
Deferred stripping costs are included in ‘Mine development costs’, within Property, plant and equipment. These form
part of the total investment in the individual asset, which is reviewed for impairment if events or a change in
circumstances indicate that the carrying value may not be recoverable. Amortisation of deferred stripping costs is
included in operating costs.
part of the total investment in the individual asset, which is reviewed for impairment if events or a change in
circumstances indicate that the carrying value may not be recoverable. Amortisation of deferred stripping costs is
included in operating costs.
The company reviews and tests the carrying value of assets when events or changes in circumstances suggest that
the carrying amount may not be recoverable. Assets are grouped at the lowest level for which identifiable cash flows
are largely independent of cash flows of other assets. If there are indications that impairment may have occurred,
estimates are prepared of expected future cash flows for each group of assets.
the carrying amount may not be recoverable. Assets are grouped at the lowest level for which identifiable cash flows
are largely independent of cash flows of other assets. If there are indications that impairment may have occurred,
estimates are prepared of expected future cash flows for each group of assets.
F-129
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
2.3
Significant accounting judgements and estimates (continued)
Carrying value of property, plant and equipment (continued)
Expected future cash flows used to determine the value in use of property, plant and equipment are inherently
uncertain and could materially change over time. They are significantly affected by a number of factors including
published reserves, resources, exploration potential and production estimates, together with economic factors such
as spot and future gold prices, discount rates, foreign currency exchange rates, estimates of costs to produce
reserves and future capital expenditure.
uncertain and could materially change over time. They are significantly affected by a number of factors including
published reserves, resources, exploration potential and production estimates, together with economic factors such
as spot and future gold prices, discount rates, foreign currency exchange rates, estimates of costs to produce
reserves and future capital expenditure.
Production start date
The company assesses the mine construction project to determine when it moves into the production stage. The
criteria used to assess the start date are determined based on the unique nature of the construction project such as
the complexity of a plant and its location. The company considers various relevant criteria to assess when the mine
is substantially complete and ready for its intended use and moves into the production stage. Some of the criteria
would include, but, are not limited to, the following:
criteria used to assess the start date are determined based on the unique nature of the construction project such as
the complexity of a plant and its location. The company considers various relevant criteria to assess when the mine
is substantially complete and ready for its intended use and moves into the production stage. Some of the criteria
would include, but, are not limited to, the following:
·
the level of capital expenditure compared to the construction cost estimates;
·
completion of a reasonable period of testing of the mine plant and equipment;
·
ability to produce gold in saleable form (within specifications and with insignificant revenue);
·
ability to sustain ongoing production of gold.
When a mine construction project moves into the production stage, the capitalisation of certain mine construction
costs ceases and costs are either regarded as inventory or expensed, except for capitalisable costs related to mining
asset additions or improvements or reserve development.
costs ceases and costs are either regarded as inventory or expensed, except for capitalisable costs related to mining
asset additions or improvements or reserve development.
Income taxes
The company is subject to income tax. Significant judgement is required in determining the provision for income taxes
due to the complexity of legislation. There are many transactions and calculations for which the ultimate tax
determination is uncertain during the ordinary course of business. The company recognises liabilities for anticipated
tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these
matters is different from the amounts that were initially recorded, such differences will impact the income tax and
deferred tax provisions in the period in which such determination is made.
due to the complexity of legislation. There are many transactions and calculations for which the ultimate tax
determination is uncertain during the ordinary course of business. The company recognises liabilities for anticipated
tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these
matters is different from the amounts that were initially recorded, such differences will impact the income tax and
deferred tax provisions in the period in which such determination is made.
The company recognises the net future tax benefit related to deferred income tax assets to the extent that it is
probable that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability
of deferred income tax assets requires the company to make significant estimates related to expectations of future
taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the
application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ
significantly from estimates, the ability of the company to realise the net deferred tax assets recorded at the balance
sheet date could be impacted.
probable that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability
of deferred income tax assets requires the company to make significant estimates related to expectations of future
taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the
application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ
significantly from estimates, the ability of the company to realise the net deferred tax assets recorded at the balance
sheet date could be impacted.
Additionally, future changes in tax laws in the jurisdiction in which the company operates could limit the ability of the
company to obtain tax deductions in future periods.
company to obtain tax deductions in future periods.
F-130
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
2.3 Significant accounting judgements and estimates (continued)
Provision for environmental rehabilitation obligations
The company’s mining and exploration activities are subject to various laws and regulations governing the protection
of the environment. The company recognises management’s best estimate for decommissioning and restoration
obligations in the period in which they are incurred. Actual costs incurred in future periods could differ materially from
the estimates. Additionally, future changes to environmental laws and regulations, life of mine estimates and discount
rates could affect the carrying amount of this provision. Such changes could similarly impact the useful lives of assets
depreciated on a straight-line-basis, where those lives are limited to the life of mine.
of the environment. The company recognises management’s best estimate for decommissioning and restoration
obligations in the period in which they are incurred. Actual costs incurred in future periods could differ materially from
the estimates. Additionally, future changes to environmental laws and regulations, life of mine estimates and discount
rates could affect the carrying amount of this provision. Such changes could similarly impact the useful lives of assets
depreciated on a straight-line-basis, where those lives are limited to the life of mine.
Stockpiles, gold in process and product inventories
Costs that are incurred in or benefit the production process are accumulated as stockpiles, gold in process and
product inventories. Net realisable value tests are performed at least annually and represent the estimated future
sales price of the product, based on prevailing and long-term metals prices, less estimated costs to complete
production and bring the product to sale.
product inventories. Net realisable value tests are performed at least annually and represent the estimated future
sales price of the product, based on prevailing and long-term metals prices, less estimated costs to complete
production and bring the product to sale.
Stockpiles are measured by estimating the number of tonnes added and removed from the stockpile, the number of
contained gold ounces based on assay data, and the estimated recovery percentage based on the expected
processing method. Stockpile tonnages are verified by periodic surveys.
contained gold ounces based on assay data, and the estimated recovery percentage based on the expected
processing method. Stockpile tonnages are verified by periodic surveys.
Although the quantities of recoverable metal are reconciled by comparing the grades of ore to the quantities of gold
actually recovered (metallurgical balancing), the nature of the process inherently limits the ability to precisely monitor
recoverability levels. As a result, the metallurgical balancing process is constantly monitored and the engineering
estimates are refined based on actual results over time.
actually recovered (metallurgical balancing), the nature of the process inherently limits the ability to precisely monitor
recoverability levels. As a result, the metallurgical balancing process is constantly monitored and the engineering
estimates are refined based on actual results over time.
Recoverable tax, rebates, levies and duties
Société d’Exploitation des Mines d’Or de Sadiola S.A. is due refunds of input tax which remain outstanding for
periods longer than those provided for in the respective statutes. In addition Société d’Exploitation des Mines d’Or de
Sadiola S.A. has unresolved tax disputes. If the outstanding input taxes are not received and the tax disputes are not
resolved in a manner favourable to Société d’Exploitation des Mines d’Or de Sadiola S.A. it could have an adverse
effect upon the carrying value of these assets.
periods longer than those provided for in the respective statutes. In addition Société d’Exploitation des Mines d’Or de
Sadiola S.A. has unresolved tax disputes. If the outstanding input taxes are not received and the tax disputes are not
resolved in a manner favourable to Société d’Exploitation des Mines d’Or de Sadiola S.A. it could have an adverse
effect upon the carrying value of these assets.
Ore Reserve estimates
Ore Reserves are estimates of the amount of product that can be economically and legally extracted from the
company’s properties. In order to calculate Ore Reserves, estimates and assumptions are required about a range of
geological, technical and economic factors, including quantities, grades, production techniques, recovery rates,
production costs, transport costs, commodity demand, commodity prices and exchange rates.
company’s properties. In order to calculate Ore Reserves, estimates and assumptions are required about a range of
geological, technical and economic factors, including quantities, grades, production techniques, recovery rates,
production costs, transport costs, commodity demand, commodity prices and exchange rates.
Estimating the quantity and/or grade of Ore Reserves requires the size, shape and depth of orebodies to be
determined by analysing geological data such as the logging and assaying of drill samples. This process may
require complex and difficult geological judgements and calculations to interpret the data.
determined by analysing geological data such as the logging and assaying of drill samples. This process may
require complex and difficult geological judgements and calculations to interpret the data.
The company is required to determine and report Ore Reserves in accordance with the SAMREC code (South African
Code for the Reporting of Mineral Resources and Reserves).
F-131
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
2.3
Significant accounting judgements and estimates (continued)
Because the economic assumptions used to estimate Ore Reserves change from period to period, and because
additional geological data is generated during the course of operations, estimates of Ore Reserves may change from
period to period. Changes in reported Ore Reserves may affect the company’s financial results and financial position
in a number of ways, including the following:
period to period. Changes in reported Ore Reserves may affect the company’s financial results and financial position
in a number of ways, including the following:
·
asset carrying values may be affected due to changes in estimated future cash flows.
·
depreciation, depletion and amortisation charged in the income statement may change where such charges
are determined by the units-of-production basis, or where the useful economic lives of assets change.
are determined by the units-of-production basis, or where the useful economic lives of assets change.
·
overburden removal costs recorded on the balance sheet or charged in the income statement may change due
to changes in stripping ratios or the units-of-production basis of depreciation.
to changes in stripping ratios or the units-of-production basis of depreciation.
·
Decommissioning, site restoration and environmental provisions may change where changes in estimated Ore
Reserves affect expectations about the timing or cost of these activities.
Reserves affect expectations about the timing or cost of these activities.
·
the carrying value of deferred tax assets may change due to changes in estimates of the likely recovery of the
tax benefits.
tax benefits.
Exploration and evaluation expenditure
The company’s accounting policy for exploration and evaluation expenditure results in certain items of expenditure
being capitalised for an area of interest where it is considered likely to be recoverable by future exploitation. This
policy requires management to make certain estimates and assumptions as to future events and circumstances, in
particular whether an economically viable extraction operation can be established. Any such estimates and
assumptions may change as new information becomes available. If, after having capitalised the expenditure, a
judgement is made that recovery of the expenditure is unlikely, the relevant capitalised amount will be written off to
the income statement.
being capitalised for an area of interest where it is considered likely to be recoverable by future exploitation. This
policy requires management to make certain estimates and assumptions as to future events and circumstances, in
particular whether an economically viable extraction operation can be established. Any such estimates and
assumptions may change as new information becomes available. If, after having capitalised the expenditure, a
judgement is made that recovery of the expenditure is unlikely, the relevant capitalised amount will be written off to
the income statement.
Development expenditure
Development activities commence after project sanctioning by the appropriate level of management. Judgement is
applied by management in determining when a project has reached a stage at which economically recoverable
reserves exist such that development may be sanctioned. In exercising this judgement, management is required to
make certain estimates and assumptions similar to those described above for capitalised exploration and evaluation
expenditure. Any such estimates and assumptions may change as new information becomes available. If, after
having started the development activity, a judgement is made that a development asset is impaired, the appropriate
amount will be written off to the income statement.
applied by management in determining when a project has reached a stage at which economically recoverable
reserves exist such that development may be sanctioned. In exercising this judgement, management is required to
make certain estimates and assumptions similar to those described above for capitalised exploration and evaluation
expenditure. Any such estimates and assumptions may change as new information becomes available. If, after
having started the development activity, a judgement is made that a development asset is impaired, the appropriate
amount will be written off to the income statement.
Contingencies
By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. The
assessment of such contingencies inherently involves the exercise of judgement and estimates of the outcome of
future events.
assessment of such contingencies inherently involves the exercise of judgement and estimates of the outcome of
future events.
Litigation and other judicial proceedings may raise difficult and complex legal issues and are subject to uncertainties
and complexities including, but not limited to, the facts and circumstances of each particular case, issues regarding
the jurisdiction in which each suit is brought and differences in applicable law. Upon resolution of any pending legal
matter, the company may be forced to incur charges in excess of the presently established provisions and related
insurance coverage. It is possible that the financial position, results of operations or cash flows of the company could
be materially affected by the unfavourable outcome of litigation.
and complexities including, but not limited to, the facts and circumstances of each particular case, issues regarding
the jurisdiction in which each suit is brought and differences in applicable law. Upon resolution of any pending legal
matter, the company may be forced to incur charges in excess of the presently established provisions and related
insurance coverage. It is possible that the financial position, results of operations or cash flows of the company could
be materially affected by the unfavourable outcome of litigation.
F-132
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statement
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statement
For the years ended December 31, 2005, 2006 and 2007
2.4 Summary of significant accounting policies
Foreign currency translation
Functional currency
Items included in the financial statements are measured using the currency of the primary economic environment in
which the entity operates (the ‘functional currency’). The functional currency of United States Dollars (US$) is used
as opposed to the currency of the country in which the enterprise is domiciled, namely Franc de la Communauté
Financière d’Afrique (F CFA). The decision has been taken on the basis of US$ being the functional currency in
which the enterprise receives its revenue and majority of costs are mainly influenced by the US dollar.
which the entity operates (the ‘functional currency’). The functional currency of United States Dollars (US$) is used
as opposed to the currency of the country in which the enterprise is domiciled, namely Franc de la Communauté
Financière d’Afrique (F CFA). The decision has been taken on the basis of US$ being the functional currency in
which the enterprise receives its revenue and majority of costs are mainly influenced by the US dollar.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the approximate exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of foreign
currency transactions and from the translation at the year-end exchange rate of monetary assets and liabilities
denominated in foreign currencies are recognised in the income statement, except for derivative balances that are
within the scope of IAS 39. Translation differences on these balances are reported as part of their fair value gain or
loss.
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of foreign
currency transactions and from the translation at the year-end exchange rate of monetary assets and liabilities
denominated in foreign currencies are recognised in the income statement, except for derivative balances that are
within the scope of IAS 39. Translation differences on these balances are reported as part of their fair value gain or
loss.
Non monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated
using the exchange rate at the date of the transaction.
using the exchange rate at the date of the transaction.
Property, plant and equipment
Property, plant and equipment are recorded at cost less accumulated amortisation and impairments. Cost includes
pre-production expenditure incurred during the development of a mine and the present value of related future
decommissioning costs.
pre-production expenditure incurred during the development of a mine and the present value of related future
decommissioning costs.
Interest on borrowings relating to the financing of major capital projects under construction is capitalised during the
construction phase as part of the cost of the project. Such borrowing costs are capitalised over the period during
which the asset is being acquired or constructed and borrowings have been incurred. Capitalisation ceases when
construction is interrupted for an extended period or when the asset is substantially complete. Other borrowing costs
are expensed as incurred.
construction phase as part of the cost of the project. Such borrowing costs are capitalised over the period during
which the asset is being acquired or constructed and borrowings have been incurred. Capitalisation ceases when
construction is interrupted for an extended period or when the asset is substantially complete. Other borrowing costs
are expensed as incurred.
If there is an indication that the recoverable amount of any property, plant and equipment is less than the carrying
value, the recoverable amount is estimated and an allowance is made for the impairment in value.
value, the recoverable amount is estimated and an allowance is made for the impairment in value.
Subsequent costs are included in the asset’s carrying amount only when it is probable that future economic benefits
associated with the item will flow to the company, and the cost of the addition can be measured reliably. All other
repairs and maintenance are charged to the income statement during the financial period in which they are incurred.
repairs and maintenance are charged to the income statement during the financial period in which they are incurred.
To the extent a legal or constructive obligation to a third party exists, the acquisition cost includes estimated costs of
dismantling and removing the asset and restoring the site. A change in estimated expenditures for dismantling,
removal and restoration is added to and/or deducted from the carrying value of the related asset. To the extent that
the change would result in a negative carrying amount, this effect is recognised as income. The change in
depreciation charge is recognised prospectively.
removal and restoration is added to and/or deducted from the carrying value of the related asset. To the extent that
the change would result in a negative carrying amount, this effect is recognised as income. The change in
depreciation charge is recognised prospectively.
F-133
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statement
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statement
For the years ended December 31, 2005, 2006 and 2007
2.4 Summary of significant accounting policies (continued)
Amortisation of assets is calculated to allocate the cost of each asset to its residual value over its estimated useful life
for those assets not amortised on the units-of-production method as follows:
for those assets not amortised on the units-of-production method as follows:
buildings up to life of mine;
plant and machinery up to life of mine;
equipment and motor vehicles up to five years;
computer equipment up to three years; and
leased assets over the period of the lease.
plant and machinery up to life of mine;
equipment and motor vehicles up to five years;
computer equipment up to three years; and
leased assets over the period of the lease.
Major renovations are depreciated over the remaining useful life of the related asset or to the date of the next major
renovation, whichever is sooner.
renovation, whichever is sooner.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
Gains and losses on disposals are determined by comparing net sales proceeds with the carrying amount. These are
included in the income statement.
included in the income statement.
Mine development costs
·
·
·
·
·
Capitalised mine development costs include expenditure incurred to develop new orebodies, to define further
mineralisation in existing orebodies, to expand the capacity of the mine and to maintain production. Where funds
have been borrowed specifically to finance a project, the amount of interest capitalised represents the actual
borrowing costs incurred. Mine development costs include acquired proved and probable Mineral Resources at cost
at the acquisition date.
mineralisation in existing orebodies, to expand the capacity of the mine and to maintain production. Where funds
have been borrowed specifically to finance a project, the amount of interest capitalised represents the actual
borrowing costs incurred. Mine development costs include acquired proved and probable Mineral Resources at cost
at the acquisition date.
Depreciation, depletion and amortisation of mine development costs are computed by the units-of-production method
based on estimated proved and probable mineral reserves. Proved and probable mineral reserves reflect estimated
quantities of economically recoverable reserves which can be recovered in the future from known mineral deposits.
These reserves are amortised from the date on which commercial production begins.
based on estimated proved and probable mineral reserves. Proved and probable mineral reserves reflect estimated
quantities of economically recoverable reserves which can be recovered in the future from known mineral deposits.
These reserves are amortised from the date on which commercial production begins.
Stripping costs incurred in open-pit operations during the production phase to remove additional waste are charged to
operating costs on the basis of the average life of mine stripping ratio and the average life of mine costs per tonne.
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 are recalculated annually in the light of additional
knowledge and changes in estimates.
operating costs on the basis of the average life of mine stripping ratio and the average life of mine costs per tonne.
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 are recalculated annually in the light of additional
knowledge and changes in estimates.
The cost of the “excess stripping” is capitalised as mine development costs when the actual mining costs exceed the
sum of the adjusted tonnes mined, being the actual ore tonnes plus the product of the actual ore tonnes multiplied by
the average life of mine stripping ratio multiplied by the life of mine cost per tonne. When the actual mining costs are
below the sum of the adjusted tonnes mined, being the actual ore tonnes plus the product of the actual ore tonnes
multiplied by the average life of mine stripping ratio, multiplied by the life of mine cost per tonne, previously
capitalised costs are expensed to increase the cost up to the average.
sum of the adjusted tonnes mined, being the actual ore tonnes plus the product of the actual ore tonnes multiplied by
the average life of mine stripping ratio multiplied by the life of mine cost per tonne. When the actual mining costs are
below the sum of the adjusted tonnes mined, being the actual ore tonnes plus the product of the actual ore tonnes
multiplied by the average life of mine stripping ratio, multiplied by the life of mine cost per tonne, previously
capitalised costs are expensed to increase the cost up to the average.
The cost of stripping in any period will 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.
Changes in the life of mine stripping ratio are accounted for prospectively as a change in estimate.
F-134
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statement
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statement
For the years ended December 31, 2005, 2006 and 2007
2.4
Summary of significant accounting policies (continued)
Mine infrastructure
Mine plant facilities, including decommissioning assets, are amortised using the lesser of their useful life or units-of-
production method based on estimated proved and probable mineral reserves. Other property, plant and equipment
comprising vehicles and computer equipment are depreciated by the straight-line method over their estimated useful
lives.
production method based on estimated proved and probable mineral reserves. Other property, plant and equipment
comprising vehicles and computer equipment are depreciated by the straight-line method over their estimated useful
lives.
Exploration and Evaluation assets
All exploration costs are expensed until the directors conclude that a future economic benefit will more likely than not
be realised. In evaluating if expenditures meet this criterion to be capitalised, the directors use several different
sources of information depending on the level of exploration. While the criteria for concluding that expenditure should
be capitalised is always probable, the information that the directors use to make that determination depends on the
level of exploration.
be realised. In evaluating if expenditures meet this criterion to be capitalised, the directors use several different
sources of information depending on the level of exploration. While the criteria for concluding that expenditure should
be capitalised is always probable, the information that the directors use to make that determination depends on the
level of exploration.
Costs on greenfields sites, being those where the company does not have any mineral deposits which are
already being mined or developed, are expensed as incurred until the directors are able to demonstrate that
future economic benefits are probable, which generally will be the establishment of proved and probable
reserves at this location.
future economic benefits are probable, which generally will be the establishment of proved and probable
reserves at this location.
Costs on brownfields sites, being those adjacent to mineral deposits which are already being mined or
developed, are expensed as incurred until the directors are able to demonstrate that future economic benefits are
probable, which generally will be the establishment of increased proved and probable reserves after which the
expenditure is capitalised as a mine development cost.
probable, which generally will be the establishment of increased proved and probable reserves after which the
expenditure is capitalised as a mine development cost.
Costs relating to extensions of mineral deposits, which are already being mined or developed, including
expenditure on the definition of mineralisation of such mineral deposits, is capitalised as a mine development
cost.
cost.
Costs relating to property acquisitions are capitalised within development costs.
Impairment of assets
·
·
·
Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for
impairment and whenever events or changes in circumstance indicate that the carrying amount may not be
recoverable. Assets that are subject to amortisation are tested for impairment whenever events or changes in
circumstance indicate that the carrying amount may not be recoverable.
impairment and whenever events or changes in circumstance indicate that the carrying amount may not be
recoverable. Assets that are subject to amortisation are tested for impairment whenever events or changes in
circumstance indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value, less costs to sell and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash flows.
amount. The recoverable amount is the higher of an asset’s fair value, less costs to sell and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash flows.
Impairment calculation assumptions include life of mine plans based on published reserves and resources,
management’s estimate of the future gold price, based on current market price trends, foreign exchange rates, and a
pre-tax discount rate adjusted for country and project risk. It is therefore reasonably possible that changes could
occur which may affect the recoverability of property, plant and equipment and intangible assets.
management’s estimate of the future gold price, based on current market price trends, foreign exchange rates, and a
pre-tax discount rate adjusted for country and project risk. It is therefore reasonably possible that changes could
occur which may affect the recoverability of property, plant and equipment and intangible assets.
Leased assets
Operating lease rentals are charged against operating profits in a systematic manner related to the period the assets
concerned will be used.
concerned will be used.
F-135
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statement
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statement
For the years ended December 31, 2005, 2006 and 2007
2.4 Summary of significant accounting policies (continued)
Exploration and research expenditure
Pre – licence costs are recognised in profit or loss as incurred. Exploration and research expenditure is expensed in
the year in which it is incurred. These expenses include: geological and geographical costs, labour, mineral resources
and exploratory drilling costs.
the year in which it is incurred. These expenses include: geological and geographical costs, labour, mineral resources
and exploratory drilling costs.
Inventories
·
·
·
·
·
Inventories are valued at the lower of cost and net realisable value after appropriate allowances for redundant and
slow moving items. Cost is determined on the following bases:
slow moving items. Cost is determined on the following bases:
gold in process is valued at the average total production cost at the relevant stage of production;
gold doré / bullion is valued on an average total production cost method;
ore stockpiles are valued at the average moving cost of mining and stockpiling the ore. Stockpiles are classified
as a non-current asset where the stockpile exceeds current processing capacity;
by-products are valued on an average total production cost method.
Mine operating supplies are valued at average cost
gold doré / bullion is valued on an average total production cost method;
ore stockpiles are valued at the average moving cost of mining and stockpiling the ore. Stockpiles are classified
as a non-current asset where the stockpile exceeds current processing capacity;
by-products are valued on an average total production cost method.
Mine operating supplies are valued at average cost
A portion of the related depreciation, depletion and amortisation charge is included in the cost of inventory.
Provisions
Provisions are recognised when the company has a present obligation, whether legal or constructive, because of a
past event for which it is probable that an outflow of resources embodying economic benefits will be required to settle
the obligation and a reliable estimate can be made of the amount of the obligation. Where some or all of the
expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement is
recognised only when the reimbursement is virtually certain. The amount to be reimbursed is recognised as a
separate asset. Where the company has a joint and several liability with one or more other parties, no provision is
recognised to the extent that those other parties are expected to settle part or all of the obligation.
past event for which it is probable that an outflow of resources embodying economic benefits will be required to settle
the obligation and a reliable estimate can be made of the amount of the obligation. Where some or all of the
expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement is
recognised only when the reimbursement is virtually certain. The amount to be reimbursed is recognised as a
separate asset. Where the company has a joint and several liability with one or more other parties, no provision is
recognised to the extent that those other parties are expected to settle part or all of the obligation.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the
obligation at the balance sheet date. The discount rate used to determine the present value reflects current market
assessments of the time value of money and the risks specific to the liability.
obligation at the balance sheet date. The discount rate used to determine the present value reflects current market
assessments of the time value of money and the risks specific to the liability.
Litigation and administrative proceedings are evaluated on a case-by-case basis considering the information
available, including that of legal counsel, to assess potential outcomes. Where it is considered probable that an
obligation will result in an outflow of resources, a provision is recorded for the present value of the expected cash
outflows if these are reasonably measurable. These provisions cover the estimated payments to plaintiffs, court fees
and the cost of potential settlements.
available, including that of legal counsel, to assess potential outcomes. Where it is considered probable that an
obligation will result in an outflow of resources, a provision is recorded for the present value of the expected cash
outflows if these are reasonably measurable. These provisions cover the estimated payments to plaintiffs, court fees
and the cost of potential settlements.
A contingent liability is disclosed when the possibility of an outflow of resources embodying economic benefits is not
remote.
remote.
Employee benefits
Short-term employee benefits
The cost of all short-term employee benefits is recognised during the period in which the employee renders the
related service.
The cost of all short-term employee benefits is recognised during the period in which the employee renders the
related service.
The provisions for employee entitlements to wages, salaries, and annual leave represent the amount which the
company has a present obligation to pay as a result of employees’ services provided to the balance sheet date. The
provisions have been calculated at undiscounted amounts based on current wage and salary rates.
company has a present obligation to pay as a result of employees’ services provided to the balance sheet date. The
provisions have been calculated at undiscounted amounts based on current wage and salary rates.
F-136
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statement
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statement
For the years ended December 31, 2005, 2006 and 2007
2.4 Summary of significant accounting policies (continued)
Employee benefits
Long-term employee benefits
Liabilities for employee benefits which are not expected to be settled within 12 months are discounted at a pre tax
rate that reflects current market assessments of the time value of money.
Liabilities for employee benefits which are not expected to be settled within 12 months are discounted at a pre tax
rate that reflects current market assessments of the time value of money.
The Company and all employees contribute towards the Malian Government social security fund. Accordingly, on
retirement, the Malian employees are entitled to a retirement benefit from the Malian Government. Expatriate
employees are reimbursed their contributions made to the social security fund.
retirement, the Malian employees are entitled to a retirement benefit from the Malian Government. Expatriate
employees are reimbursed their contributions made to the social security fund.
Environmental expenditure
The company has long-term remediation obligations comprising decommissioning and restoration liabilities relating to
its past operations which are based on the company's environmental management plans, in compliance with current
environmental and regulatory requirements. Provisons for non-recurring remediation costs are made when there is a
present obligation, it is probable that expense on remediation work will be required and the cost can be estimated
within a reasonable range of possible outcomes. The costs are based on currently available facts, technology
expected to be available at the time of the clean up, laws and regulations presently or virtually certain to be enacted
and prior experience in remediation of contaminated sites.
its past operations which are based on the company's environmental management plans, in compliance with current
environmental and regulatory requirements. Provisons for non-recurring remediation costs are made when there is a
present obligation, it is probable that expense on remediation work will be required and the cost can be estimated
within a reasonable range of possible outcomes. The costs are based on currently available facts, technology
expected to be available at the time of the clean up, laws and regulations presently or virtually certain to be enacted
and prior experience in remediation of contaminated sites.
Decommissioning costs
The provision for decommissioning represents the cost that will arise from rectifying damage caused before
production commenced. Accordingly an asset is recognised and included within mine infrastructure.
production commenced. Accordingly an asset is recognised and included within mine infrastructure.
Decommissioning costs are provided at the present value of the expenditures expected to settle the obligation, using
estimated cash flows based on current prices. The unwinding of the decommissioning obligation is included in the
income statement.
estimated cash flows based on current prices. The unwinding of the decommissioning obligation is included in the
income statement.
Estimated future costs of decommissioning obligations are reviewed regularly and adjusted as appropriate for new
circumstances or changes in law or technology. Changes in estimates are capitalised or reversed against the relevant
asset. Estimates are discounted at a pre-tax rate that reflects current market assessments of the time value of
money.
circumstances or changes in law or technology. Changes in estimates are capitalised or reversed against the relevant
asset. Estimates are discounted at a pre-tax rate that reflects current market assessments of the time value of
money.
Gains or losses from the expected disposal of assets are not taken into account when determining the provision.
Restoration costs
The provision for restoration represents the cost of restoring site damage after the start of production. Increases in
the provision are charged to the income statement as a cost of production.
the provision are charged to the income statement as a cost of production.
Gross restoration costs are estimated at the present value of the expenditures expected to settle the obligation, using
estimated cash flows based on current prices. The estimates are discounted at a pre-tax rate that reflects current
market assessments of the time value of money and risks specific to the liability.
estimated cash flows based on current prices. The estimates are discounted at a pre-tax rate that reflects current
market assessments of the time value of money and risks specific to the liability.
F-137
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statement
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statement
For the years ended December 31, 2005, 2006 and 2007
2.4 Summary of significant accounting policies (continued)
Revenue recognition
Revenue is recognised at the fair value of the consideration received or receivable to the extent that it is probable that
the economic benefits will flow to the company and the revenue can be reliably measured. The following criteria must
also be present:
the economic benefits will flow to the company and the revenue can be reliably measured. The following criteria must
also be present:
the sale of mining products is recognised when the significant risks and rewards of ownership of the products
are transferred to the buyer;
interest is recognised on a time proportion basis, taking account of the principal outstanding and the effective
rate over the period to maturity, when it is determined that such income will accrue to the company; and
Where a by-product is not regarded as significant, revenue is credited against cost of sales, when the significant
risks and rewards of ownership of the products are transferred to the buyer.
are transferred to the buyer;
interest is recognised on a time proportion basis, taking account of the principal outstanding and the effective
rate over the period to maturity, when it is determined that such income will accrue to the company; and
Where a by-product is not regarded as significant, revenue is credited against cost of sales, when the significant
risks and rewards of ownership of the products are transferred to the buyer.
Taxation
·
·
·
Deferred taxation is provided on all qualifying temporary differences at the balance sheet date between the tax bases
of assets and liabilities and their carrying amounts for financial reporting purposes.
of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax assets are only recognised to the extent that it is probable that the deductible temporary differences will
reverse in the foreseeable future and future taxable profit will be available against which the temporary difference can
be utilised.
reverse in the foreseeable future and future taxable profit will be available against which the temporary difference can
be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is
no longer probable that sufficient future taxable profit will be available to allow all or part of the deferred tax asset to
be utilised.
no longer probable that sufficient future taxable profit will be available to allow all or part of the deferred tax asset to
be utilised.
Deferred tax assets and liabilities are measured at future anticipated tax rates, which have been enacted or
substantively enacted at the balance sheet date.
substantively enacted at the balance sheet date.
Current and deferred tax is recognised as income or expense and included in profit or loss for the period.
Current tax is measured on taxable income at the applicable statutory rate enacted or substantially enacted at the
balance sheet date.
balance sheet date.
Special items
Items of income and expense that are material and require separate disclosure, in accordance with IAS 1.86, are
classified as “special items” on the face of the income statement. Special items that relate to the underlying
performance of the business are classified as “operating special items” and include impairment charges and
reversals. Special items that do not relate to underlying business performance are classified as “non-operating
special items” and are presented below “Operating (loss) profit” on the income statement.
classified as “special items” on the face of the income statement. Special items that relate to the underlying
performance of the business are classified as “operating special items” and include impairment charges and
reversals. Special items that do not relate to underlying business performance are classified as “non-operating
special items” and are presented below “Operating (loss) profit” on the income statement.
Dividend distribution
Dividend distribution to the company’s shareholders is recognised as a liability in the company’s financial statements
in the period in which the dividends are declared by the board of directors of Société d’Exploitation des Mines d’Or
de Sadiola S.A..
in the period in which the dividends are declared by the board of directors of Société d’Exploitation des Mines d’Or
de Sadiola S.A..
F-138
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statement
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statement
For the years ended December 31, 2005, 2006 and 2007
2.4 Summary of significant accounting policies (continued)
Financial instruments
Financial instruments are initially measured at fair value when the company becomes a party to their contractual
arrangements. Transaction costs are included in the initial measurement of financial instruments, except financial
instruments classified as at fair value through profit and loss. The subsequent measurement of financial instruments
is dealt with below.
arrangements. Transaction costs are included in the initial measurement of financial instruments, except financial
instruments classified as at fair value through profit and loss. The subsequent measurement of financial instruments
is dealt with below.
A financial asset is derecognised when the right to receive cash flows from the asset has expired or the company has
transferred its rights to receive cash and either (a) has transferred substantially all the risks and rewards of the asset,
or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred
control of the asset.
transferred its rights to receive cash and either (a) has transferred substantially all the risks and rewards of the asset,
or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred
control of the asset.
A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires.
On derecognition of a financial asset, the difference between the proceeds received or receivable and the carrying
amount of the asset is included in income.
amount of the asset is included in income.
On derecognition of a financial liability, the difference between the carrying amount of the liability extinguished or
transferred to another party and the amount paid is included in income.
transferred to another party and the amount paid is included in income.
Regular way purchases and sales of all financial assets and liabilities are accounted for at settlement date.
Other non-current assets
Loans and receivables are subsequently measured at amortised cost using the effective interest rate method. If
there is evidence that loans and receivables are impaired, the carrying amount of the assets is reduced and the
loss recognised in the income statement.
there is evidence that loans and receivables are impaired, the carrying amount of the assets is reduced and the
loss recognised in the income statement.
Trade and other receivables
·
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method, less accumulated impairment. Impairment of trade and other receivables is established
when there is objective evidence as a result of a loss event that the company will not be able to collect all amounts
due according to the original terms of the receivables. Objective evidence includes failure by the counterparty to
perform in terms of contractual arrangements and agreed terms. The amount of the impairment is the difference
between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original
effective interest rate. The impairment is recognised in the income statement.
effective interest method, less accumulated impairment. Impairment of trade and other receivables is established
when there is objective evidence as a result of a loss event that the company will not be able to collect all amounts
due according to the original terms of the receivables. Objective evidence includes failure by the counterparty to
perform in terms of contractual arrangements and agreed terms. The amount of the impairment is the difference
between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original
effective interest rate. The impairment is recognised in the income statement.
Cash and cash equivalents
Cash and cash equivalents are defined as cash on hand, demand deposits and short-term, highly liquid investments
which are readily convertible to known amounts of cash and subject to insignificant risk of changes in value. They
are measured at cost which is deemed to be fair value as they have a short-term maturity.
which are readily convertible to known amounts of cash and subject to insignificant risk of changes in value. They
are measured at cost which is deemed to be fair value as they have a short-term maturity.
Financial liabilities
Financial liabilities are subsequently measured at amortised cost, using the effective interest rate method.
F-139
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Unaudited
2007
2006
2005
US$
3
Revenue
Product sales
267,911,114
300,727,005
198,138,374
4
Operating
profit
Operating profit is arrived at after taking account of:
Royalties
16,059,074
18,027,171
11,874,900
Amortisation of property, plant and equipment
12,100,569
34,039,909
29,661,072
Auditors' remuneration
– Statutory audit fees
47,673
31,981
77,853
– External audit - audit fees
615,013
404,681
32,013
Contributions to Malian State social security fund
3,225,695
3,650,222
2,726,692
Exploration and evaluation expenditure
1,816,335
553,347
971,110
Legal
fees
57,300
65,201
45,636
Provision for obsolete and slow-moving consumable stores
-
432,263
358,681
Remuneration other than to employees
– management fees
2,679,111
3,007,271
1,981,333
Salaries, wages and benefits
15,020,927
14,900,568
15,164,324
Mining contractor fees
Operating leases
Operating leases
42,431,789
29,457,981
29,457,981
29,057,225
26,214,997
26,214,997
24,706,278
19,054,434
19,054,434
5
Special impairments of indirect taxes receivable and special
expenses for indirect taxes payable
expenses for indirect taxes payable
Impairment of advance on tax dispute (note 5.1)
-
-
5,184,786
Impairment of VAT refundable by Government of Mali (note 5.2)
-
-
1,947,000
2003/2004 tax audit (note 5.3)
-
4,136,344
1,434,617
Impairment of stamp duties refundable by Government of Mali (note 9.1)
-
-
564,264
2005/2006 tax audit (note 5.4)
1,984,564
-
-
2007 tax submissions (note 5.5)
667,833
-
-
2,652,397
4,136,344
9,130,667
5.1
Impairment of advance on tax dispute
During November 2003, the Government of Mali performed a tax audit of the corporate taxation and various indirect
taxes at the company for fiscal years 2000 to 2002. The results of the audit indicated that the company owed the
Government of Mali F CFA 7.9 billion (US$16.4 million as of December 31, 2004) of various taxes and penalties,
which was communicated by way of a formal letter of assessment to the company. According to Government of Mali
officials the main reasons for the additional taxes were:
taxes at the company for fiscal years 2000 to 2002. The results of the audit indicated that the company owed the
Government of Mali F CFA 7.9 billion (US$16.4 million as of December 31, 2004) of various taxes and penalties,
which was communicated by way of a formal letter of assessment to the company. According to Government of Mali
officials the main reasons for the additional taxes were:
·
withholding taxes payable;
·
fringe benefits on certain facilities provided to expatriate employees that should have been taxed differently;
·
the application of the incorrect depreciation rates to certain mining assets; and
·
different interpretations of the law with respect to VAT payable on interest paid.
The company was of the opinion that the tax filings and indirect tax submissions by the Company were in compliance
with applicable laws and regulations.
with applicable laws and regulations.
Towards the end of the 2003 financial year the Government of Mali proposed that the company and the Government
of Mali settle their differences on the tax audit findings by way of the Company paying F CFA 2.5 billion
(US$5.2 million as of December 31, 2004) to the Government of Mali. In January 2004, the Government of Mali
threatened to close down the operations of the company if the taxes were not paid and, as a result the Government of
Mali requested that an advance of F CFA 2.5 billion (US$5.2 million as of December 31, 2004) be made to them in
order for the company to continue operations. The agreement with the Government of Mali was that this advance was
not an acknowledgement of any taxes payable and that the advance would allow the company and the Government of
Mali time to resolve their differences in tax interpretation, or to allow the Company the right to arbitration. No cash
payment was made as a transfer was made from the current account held with the Government of Mali. Numerous
attempts to resolve the dispute between the Government of Mali and the company between January and June 2004
failed.
of Mali settle their differences on the tax audit findings by way of the Company paying F CFA 2.5 billion
(US$5.2 million as of December 31, 2004) to the Government of Mali. In January 2004, the Government of Mali
threatened to close down the operations of the company if the taxes were not paid and, as a result the Government of
Mali requested that an advance of F CFA 2.5 billion (US$5.2 million as of December 31, 2004) be made to them in
order for the company to continue operations. The agreement with the Government of Mali was that this advance was
not an acknowledgement of any taxes payable and that the advance would allow the company and the Government of
Mali time to resolve their differences in tax interpretation, or to allow the Company the right to arbitration. No cash
payment was made as a transfer was made from the current account held with the Government of Mali. Numerous
attempts to resolve the dispute between the Government of Mali and the company between January and June 2004
failed.
F-140
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Without admitting that the company filings have been prepared in an incorrect manner in terms of the prevailing laws
and regulations, the directors decided that the advance should be abandoned in order to close this issue and allow
management to concentrate on the company’s core business. Accordingly, the abandonment was recorded as an
special item rather than as an under provision of prior year taxation. Abandonment of this amount enabled the
company to reach an agreement with the Government of Mali on all corporate taxation issues which were in dispute
and to establish a protocol for the indirect taxes that were in dispute for the future.
and regulations, the directors decided that the advance should be abandoned in order to close this issue and allow
management to concentrate on the company’s core business. Accordingly, the abandonment was recorded as an
special item rather than as an under provision of prior year taxation. Abandonment of this amount enabled the
company to reach an agreement with the Government of Mali on all corporate taxation issues which were in dispute
and to establish a protocol for the indirect taxes that were in dispute for the future.
5.2
Impairment of VAT refundable by Government of Mali
The gross amount of VAT refundable by the Government of Mali amounted to US$29.2 million at December 31, 2005.
Management estimated that only US$27.3 million was recoverable based on previous VAT audits performed by the
authorities. Accordingly, an impairment of VAT refundable of US$1.9 million was made. Management estimates that
the gross amount of VAT refundable by the Government of Mali at December 31, 2006 is recoverable, accordingly no
impairment was made in 2006.
Management estimated that only US$27.3 million was recoverable based on previous VAT audits performed by the
authorities. Accordingly, an impairment of VAT refundable of US$1.9 million was made. Management estimates that
the gross amount of VAT refundable by the Government of Mali at December 31, 2006 is recoverable, accordingly no
impairment was made in 2006.
5.3
Payment relating to the 2003/2004 tax audit
5.4
5.5
During the 2005 financial year a tax assessment was received for corporate tax and various indirect taxes by
Government of Mali authorities for the 2003 and 2004 fiscal years. Management objected to the assessment as it did
not reflect the protocol agreement reached between the company and the Government of Mali with regard to the tax
audit of the Company for fiscal years 2000 to 2002 (note 5.1). As discussed in note 5.1 the Government of Mali
required an advance be made which the Company refused. Without admitting guilt the Company decided to pay the
Government of Mali an amount agreed by both parties. The Company and the Government of Mali reached settlement
on the disputes relating to the 2003 and 2004 fiscal year tax assessments in 2006. The additional settlement of
$4.1 million has been recorded as an special payment of indirect taxes.
Government of Mali authorities for the 2003 and 2004 fiscal years. Management objected to the assessment as it did
not reflect the protocol agreement reached between the company and the Government of Mali with regard to the tax
audit of the Company for fiscal years 2000 to 2002 (note 5.1). As discussed in note 5.1 the Government of Mali
required an advance be made which the Company refused. Without admitting guilt the Company decided to pay the
Government of Mali an amount agreed by both parties. The Company and the Government of Mali reached settlement
on the disputes relating to the 2003 and 2004 fiscal year tax assessments in 2006. The additional settlement of
$4.1 million has been recorded as an special payment of indirect taxes.
Payment relating to the 2005/2006 tax audit
During 2007 the Malian tax authorities conducted a tax audit of the corporate taxation and various indirect tax
submissions of the company for previous years. The result of the audit, which was communicated to the company in
October, indicated that the company owed the Government of Mali an amount of F CFA 10.5 billion (US$23.6 million
as of December 31, 2007). The company objected to the claim as management was of the opinion that the tax
submissions of the company were in compliance with applicable laws and regulations. The company however provided
an amount F CFA 877 million (US$1.98 million as of December 31, 2007) in respect of indirect taxes and F CFA 403
million (US$ 0.9 million as of December 31, 2007) in respect of corporate taxation based on the uncertainty of the
interpretation of certain rules (Refer Note 17.3).
During 2007 the Malian tax authorities conducted a tax audit of the corporate taxation and various indirect tax
submissions of the company for previous years. The result of the audit, which was communicated to the company in
October, indicated that the company owed the Government of Mali an amount of F CFA 10.5 billion (US$23.6 million
as of December 31, 2007). The company objected to the claim as management was of the opinion that the tax
submissions of the company were in compliance with applicable laws and regulations. The company however provided
an amount F CFA 877 million (US$1.98 million as of December 31, 2007) in respect of indirect taxes and F CFA 403
million (US$ 0.9 million as of December 31, 2007) in respect of corporate taxation based on the uncertainty of the
interpretation of certain rules (Refer Note 17.3).
Provision relating to the 2007 tax submissions
The company has reviewed it’s 2007 tax submissions based on the interpretations applied by the tax authorities in
conducting the 2005 / 2006 audit. Management has determined that there may be an under payment of F CFA 295
million (US$0.67 million as of December 31, 2007) which has been provided for in the 2007 financial results.
The company has reviewed it’s 2007 tax submissions based on the interpretations applied by the tax authorities in
conducting the 2005 / 2006 audit. Management has determined that there may be an under payment of F CFA 295
million (US$0.67 million as of December 31, 2007) which has been provided for in the 2007 financial results.
Unaudited
2007
2006
2005
US$
6
Taxation
All pre-tax income and income tax expense is related to operations in Mali
Current tax expense – 2007
27,056,753
44,327,378
13,364,869
Current tax expense – prior year
911,737
-
-
Deferred
tax
(3,669,454)
(3,402,067)
4,306,792
24,299,036
40,925,311
17,671,661
A reconciliation of the statutory tax rate to that charged in the income statement is set out in the following table:
%
%
%
Statutory tax rate in Mali
35.0
35.0
35.0
Disallowable
expenses:
- Net foreign exchange (gain) / loss
(0.7)
(0.3)
8.8
- Special impairment of indirect taxes receivable and
special expenses for indirect taxes payable
1.0
0.7
10.7
-
Other
-
-
2.2
Non-taxable
income
-
-
(2.1)
Translation (loss) / gain on current and deferred tax
(9.5)
(4.2)
4.8
Prior year tax expense
1.0
-
-
Effective tax rate
26.8
31.2
59.4
F-141
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Mine
development
costs
Work in
progress
Mine infra-
structure
Total
US$
US$
US$
US$
7
Property, plant and equipment at December 31, 2007
Cost
Balance at January 1, 2007
195,904,306
-
220,619,116
416,523,422
Additions
8.690,651
4,382,026
2,066,786
15,139,463
Transfers and other movements
-
-
12,228,465
12,228,465
Balance at December 31, 2007
204,594,957
4,382,026
234,914,367
443,891,350
Accumulated amortization
Balance at January 1, 2007
145,045,091
-
159,030,977
304,076,068
Amortisation for the year
5,607,586
-
6,492,983
12,100,569
Balance at December 31, 2007
150,652,677
-
165,523,960
316,176,637
Carrying amount at December 31, 2007 (unaudited)
53,942,280
4,382,026
69,390,407
127,714,713
Mine
development
costs
Work in
progress
Mine infra-
structure
Total
US$
US$
US$
US$
Property, plant and equipment at December 31, 2006
Cost
Cost
Balance at January 1, 2006
189,329,641
9,054,637
203,524,258
401,908,536
Additions
7,239,267
-
3,081,087
10,320,354
Transfers and other movements
(664,602)
(9,054,637)
14,013,771
4,294,532
Balance at December 31, 2006
195,904,306
-
220,619,116
416,523,422
Accumulated amortization
Balance at January 1, 2006
128,100,079
-
141,936,080
270,036,159
Amortisation for the year
16,945,012
-
17,094,897
34,039,909
Balance at December 31, 2006
145,045,091
-
159,030,977
304,076,068
Carrying amount at December 31, 2006
50,859,215
-
61,588,139
112,447,354
Unaudited
2007
2006
US$
8
Inventories
Non-current portion of inventories
Ore
stockpiles
50,846,071
28,671,942
Current portion of inventories
Ore
stockpiles
46,601,337
34,693,966
Gold bullion
36,220
3,671,881
Gold-in-process
1,529,754
1,115,895
Consumable stores
14,748,435
16,362,129
Consumable stores
17,869,564
19,483,258
Less: adjustment for obsolete and slow-moving items
(3,121,129)
(3,121,129)
Total current inventory
62,915,746
55,843,871
Total inventories
113,761,817
84,515,813
F-142
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Unaudited
2007
2006
US$
9
Trade and other receivables
Related party receivables
– AngloGold Ashanti Mali S.A.
-
44,932
– Société des Mines de Morila S.A.
-
174,937
– Société d'Exploitation des Mines d’Or de Yatela S.A.
493,053
381,698
– Rand Refinery
5,426,583
23,892
–
Other
117,049
167,303
6,036,685
792,762
Special tax account with Government of Mali
1,165,003
558,933
VAT refundable by Government of Mali (note 5.2 and 19.2.1)
31,645,860
36,006,997
Stamp duties refundable by Government of Mali (note 9.1)
-
1,003,899
Refundable tax on fuel by Government of Mali (note 19.2.2)
4,846,963
8,181,697
Prepaid
expenses
278,097
-
Other
2,923,551
2,322,413
Total current and non-current trade and other receivables
46,896,159
48,866,701
Less: non-current portion of amounts refundable by Government of Mali
30,260,588
28,335,326
Total current trade and other receivables
16,635,571
20,531,375
9.1
Stamp duties refundable by the Government of Mali
During 2002, a dispute arose between the company and the Government of Mali with regards to the payment of stamp
duties on gold exports due to different interpretations of the Convention Agreement and the Mining Code. In order to
ensure the continuation of gold exports, the company paid stamp duties raising an amount receivable from the
Government of Mali.
During 2002, a dispute arose between the company and the Government of Mali with regards to the payment of stamp
duties on gold exports due to different interpretations of the Convention Agreement and the Mining Code. In order to
ensure the continuation of gold exports, the company paid stamp duties raising an amount receivable from the
Government of Mali.
The company entered into arbitration to resolve the dispute. The Tribunal decision was announced in February 2003,
indicating that the company would no longer be obliged to pay stamp duties and that stamp duties to the value of F
CFA2.2 billion (US$3.2 million) should be reimbursed to the company.
indicating that the company would no longer be obliged to pay stamp duties and that stamp duties to the value of F
CFA2.2 billion (US$3.2 million) should be reimbursed to the company.
During the 2004, 2005 and 2006 financial years, management communicated with the Minister of Finance (MOF),
Minister of Domains (MOD) and the Minister of Mines (MOM) several times in an effort to recover the outstanding stamp
duties. However, at the end of December 2006, the amount of US$1.0 million (2005: US$3.9 million) was still
outstanding and is reflected in trade and other receivables.
Minister of Domains (MOD) and the Minister of Mines (MOM) several times in an effort to recover the outstanding stamp
duties. However, at the end of December 2006, the amount of US$1.0 million (2005: US$3.9 million) was still
outstanding and is reflected in trade and other receivables.
The MOD represented the Government of Mali during the arbitration proceedings. In order for the MOF to be able to
settle with the company the outstanding stamp duties, the MOD is required to officially notify the MOF advising that the
Government of Mali lost the arbitration case. Subsequently the MOF has confirmed to management of the company that
they will settle the long outstanding stamp duty. F CFA 800 million (US$1.4 million) was reimbursed early in January
2006. An impairment of US$0.6 million was made in December 2005 for the portion of the amount that management did
not expect to recover. Following the settlement of the indirect taxes disputes the company and the Government of Mali
have signed a protocol agreement. Repayments received in 2006 have been in accordance with the protocol
agreement.
settle with the company the outstanding stamp duties, the MOD is required to officially notify the MOF advising that the
Government of Mali lost the arbitration case. Subsequently the MOF has confirmed to management of the company that
they will settle the long outstanding stamp duty. F CFA 800 million (US$1.4 million) was reimbursed early in January
2006. An impairment of US$0.6 million was made in December 2005 for the portion of the amount that management did
not expect to recover. Following the settlement of the indirect taxes disputes the company and the Government of Mali
have signed a protocol agreement. Repayments received in 2006 have been in accordance with the protocol
agreement.
Unaudited
2007
2006
US$
10
Cash and cash equivalents
HypoVereinsbank balances – Current account
9,828,224
23,775,497
Malian bank balances
6,967,804
3,855,392
London and South African bank balances
1,028,380
1,140,576
Petty cash
18,584
47,189
17,842,992
28,818,654
F-143
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Unaudited
2007
2006
US$
11 Provisions
Environmental rehabilitation obligation
Balance at beginning of year
14,087,265
9,262,362
Unwinding of obligation
704,356
463,111
Change in estimate
16,096,888
4,361,792
Balance at end of year
30,888,509
14,087,265
Employee long service obligation
Balance at beginning of year
775,266
2,393,032
Unwinding of obligation
38,760
119,652
Change in estimate
202,335
(1,737,418)
Balance at end of year
1,016,361
775,266
Total
provisions
31,904,870
14,862,531
Assumptions applicable to provisions
Estimated gross future environmental rehabilitation costs
Estimated gross future employee long service costs
Estimated gross future environmental rehabilitation costs
Estimated gross future employee long service costs
US$36.7 million
US$1.0 million
US$17.6 million
US$0.8 million
Discount rate
3.80%
5%
Inflation
rate
2.30%
2.25%
Average discount period from the beginning of the life of mine
18 years
20 years
The average discount period is based on the current estimate of the life of mine, which is subject to revision annually.
The estimated gross future costs are based on management's best estimates at December 31, 2007, and are also
subject to revision annually. The change in estimate arises due to the change in the assumption of the discount rate
applicable and a change in the estimate of the gross future costs.
The estimated gross future costs are based on management's best estimates at December 31, 2007, and are also
subject to revision annually. The change in estimate arises due to the change in the assumption of the discount rate
applicable and a change in the estimate of the gross future costs.
Malian Government social security fund
The company and all employees contribute to the Malian Government social security fund. On retirement, the Malian
employees are entitled to a retirement benefit from the fund. The fund reimburses expatriate employees only their own
contributions made to the fund. Accordingly, there is no obligation for defined employee benefits. The company's
contributions to the Malian Government social security fund are disclosed in note 4.
employees are entitled to a retirement benefit from the fund. The fund reimburses expatriate employees only their own
contributions made to the fund. Accordingly, there is no obligation for defined employee benefits. The company's
contributions to the Malian Government social security fund are disclosed in note 4.
12
Deferred taxation
The deferred taxation liability (asset) relating to temporary differences is made up as follows:
- Property, plant and equipment
14,429,798
10,696,726
- Non-current provisions
(11,166,704)
(5,201,886)
-
Inventory
(1,092,395)
(1,092,395)
- Present value adjustment on taxes refundable
(1,645,172)
(1,055,816)
-
Other
(1,768,628)
(920,276)
(1,243,101)
2,426,353
The movement on the deferred tax liability (asset) is as follows:
Balance at beginning of year
2,426,353
5,828,420
Deferred tax benefit (note 6)
(3,669,454)
(3,402,067)
Balance at end of year
(1,243,101)
2,426,353
F-144
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Unaudited
2007
2006
US$
13
Trade and other payables
Related party payables
– AngloGold Ashanti Limited
2,997,170
156,096
– AngloGold Ashanti Mali S.A.
1,485,597
538,773
– Société d’Exploitation des Mines d’Or de Yatela S.A.
-
262
– Société des Mines de Morila S.A.
98,473
700
–
Other
-
10,929
4,581,240
706,760
Accruals
3,338,449
1,348,379
Trade and other payables
23,884,905
19,967,750
31,804,594
22,022,889
Unaudited
2007
2006
2005
US$
14
Dividends paid
Amount outstanding at beginning of year
22,906,407
20,000,000
10,802,000
Dividends declared during the year
-
90,000,000
40,000,000
Less: amount outstanding at end of year
-
(22,906,407)
(20,000,000)
Dividends
paid
22,906,407
87,093,593
30,802,000
15
Income tax paid
Amount payable / (receivable) at beginning of year
33,137,071
8,101,642
(802,383)
Current tax expense (note 6)
27,968,490
44,327,378
13,364,869
Amount (payable) / receivable at end of year
2,019,356
(33,137,071)
(8,101,642)
Income tax paid
63,124,917
19,291,949
4,460,844
16
Ordinary
stock
Authorised and issued: ordinary par value stock with a nominal value of F CFA 109 000 (US$200) each.
Held by:
Number of
outstanding
stock in
issue
Unaudited
2007
2006
US$
AngloGold Mali Holdings 1 (subsidiary of AngloGold
Ashanti Ltd)
Ashanti Ltd)
38,000
7,600,000
7,600,000
AGEM Limited (subsidiary of IAMGOLD Corporation)
38,000
7,600,000
7,600,000
Government of Mali
18,000
3,600,000
3,600,000
International Finance Corporation
6,000
1,200,000
1,200,000
100,000
20,000,000
20,000,000
17
Contractual Commitments and contingencies
17.1
Operating leases
At December 31, 2007, the company was committed to making the following minimum payments in respect of operating
leases for amongst others, hire of plant and equipment and land and buildings.
leases for amongst others, hire of plant and equipment and land and buildings.
Unaudited
2007
2006
US$
Expiry
within:
-
One
year
1,476,119
1,495,405
These balances are calculated based on the minimum rentals due in terms of the contract up to and including the expiry
date (December 2009) or minimum notice period (six months), whichever is the lesser. The contract does not provide
for guaranteed escalations. The company has no other restrictions on any of its leasing arrangements.
date (December 2009) or minimum notice period (six months), whichever is the lesser. The contract does not provide
for guaranteed escalations. The company has no other restrictions on any of its leasing arrangements.
F-145
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Unaudited
2007
2006
US$
17.2
Capital Commitments
Contracted
for
1,348,314
458,860
Not
contracted
for
5.804,754
15,811,091
Total authorised by the directors
7,153,068
16,269,951
Purchase obligations
Contracted for
31,758,000
-
The proposed capital expenditure for mine infrastructure and other purchase obligations will be financed from cash
resources generated by operating activities of the company.
resources generated by operating activities of the company.
17.3
The company is subject to and pays taxes in Mali. Some of these taxes are defined by contractual agreements with the
local government, but others are defined by the general corporate tax laws of the country. The company has historically
filed, and continues to file, all required tax returns and to pay the taxes reasonably determined to be due. The tax rules
in Mali are complex and subject to interpretation. From time to time the company is subject to a review of its historic tax
filings and in connection with such reviews, disputes can arise with the taxing authorities over the interpretation or
application of certain rules to the company’s business conducted in Mali. During 2007 the Malian tax authorities
conducted a tax audit of the corporate taxation and various indirect tax submissions of the company for previous years.
The result of the audit, which was communicated to the company in October, indicated that the company owed the
Government of Mali an amount of F CFA 10.5 billion (US$23.6 million as of December 31, 2007). The company
objected to the claim as management was of the opinion that the tax submissions of the company were in compliance
with applicable laws and regulations. The company however provided an amount F CFA 877 million (US$1.98 million as
off December 31, 2007) in respect of indirect taxes and F CFA 403 million (US$ 0.9 million as of December 31, 2007) in
respect of corporate taxation based on the uncertainty of the interpretation of certain rules. The tax authorities
subsequently reviewed their claim and submitted a revised claim of F CFA 5.2 billion (US$ 11.7 million as at 29
February 2008) on the 19 February 2008. The company has objected to the revised claim as management is of the
opinion that the authorities have no grounds for reassessing submissions for fiscal years that have previously been
closed. The ultimate outcome cannot be presently determined.
local government, but others are defined by the general corporate tax laws of the country. The company has historically
filed, and continues to file, all required tax returns and to pay the taxes reasonably determined to be due. The tax rules
in Mali are complex and subject to interpretation. From time to time the company is subject to a review of its historic tax
filings and in connection with such reviews, disputes can arise with the taxing authorities over the interpretation or
application of certain rules to the company’s business conducted in Mali. During 2007 the Malian tax authorities
conducted a tax audit of the corporate taxation and various indirect tax submissions of the company for previous years.
The result of the audit, which was communicated to the company in October, indicated that the company owed the
Government of Mali an amount of F CFA 10.5 billion (US$23.6 million as of December 31, 2007). The company
objected to the claim as management was of the opinion that the tax submissions of the company were in compliance
with applicable laws and regulations. The company however provided an amount F CFA 877 million (US$1.98 million as
off December 31, 2007) in respect of indirect taxes and F CFA 403 million (US$ 0.9 million as of December 31, 2007) in
respect of corporate taxation based on the uncertainty of the interpretation of certain rules. The tax authorities
subsequently reviewed their claim and submitted a revised claim of F CFA 5.2 billion (US$ 11.7 million as at 29
February 2008) on the 19 February 2008. The company has objected to the revised claim as management is of the
opinion that the authorities have no grounds for reassessing submissions for fiscal years that have previously been
closed. The ultimate outcome cannot be presently determined.
18
Related
parties
18.1
Identity of related parties
The stockholders of the company are disclosed in note 16. Entities within the AngloGold Ashanti group and with which
the Company has transacted, are listed in note 18.2. The directors of the company are listed below:
the Company has transacted, are listed in note 18.2. The directors of the company are listed below:
NF Nicolau (Chairman) (South African)
C Barjot (French)
J McCombe (Canadian)
MEH Keita (Malian)
M Diallo (Malian)
GA Edey (Canadian)
(resigned October 25, 2007)
FRL Neethling (South African)
AW Mbugua (Kenyan)
A der Hovanessian (American)
LA Dembele (Malian)
ND Keita (Malian)
DH Diering (South African)
W Philips (Canadian)
(appointed October 25, 2007)
F-146
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
18.2
Material related party transactions
Transactions
with related
parties
Net amounts
due by/
(owed to)
related
parties
parties
(notes 9 & 13)
Transactions
with related
parties
Net amounts
due by/ (owed
to) related
parties (notes
9 & 13)
Transactions
with related
parties
Net amounts
due by/
(owed to)
related
parties
parties
Material related party transactions
are as follows:
are as follows:
Unaudited
2007
2006
2005
US$
– AngloGold Ashanti Mali S.A.
3,239,467
(1,485,597)
5,105,740
(493,841)
4,362,040
(468,043)
– Société des Mines de Morila
S.A. (Morila)
225,674
(98,473)
(476,657)
174,237
(573,185)
21,234
– Siguiri Gold Mine
(153,345)
123,699
(153,345)
153,345
-
-
– Société d’Exploitation des
Mines d’Or de Yatela S.A.
(Yatela)
(Yatela)
(2,619,552)
493,053
(2,865,379)
381,436
(3,100,621)
160,821
– AngloGold Ashanti Limited
7,318,000
(2,997,170)
3,662,857
(156,096)
3,667,155
(192,071)
– Rand Refinery Limited
(267,391,388)
5,426,583
(300,178,723)
23,892
(197,691,634)
11,309
– Key Management Personnel
remuneration
1,056,175
-
506,223
-
850,407
-
- Salary
991,990
-
414,803
-
803,602
-
- Performance related
payments
payments
64,185
-
91,420
-
46,805
-
AngloGold Ashanti Mali S.A. is a service organisation within the AngloGold Ashanti group and, accordingly, provides
management services to the company. Included in transactions with AngloGold Ashanti Mali S.A. are management
fees paid by the Company of US$2,679,111 (2006: US$3,007,271 and 2005: US$1,981,333) (refer note 4). Morila and
Yatela are fellow subsidiaries to the company, also located in Mali. Sadiola shares certain employees with Yatela, as
well as the elution and smelting of the gold production process. The company incurs only ad hoc transactions with
Morila.
management services to the company. Included in transactions with AngloGold Ashanti Mali S.A. are management
fees paid by the Company of US$2,679,111 (2006: US$3,007,271 and 2005: US$1,981,333) (refer note 4). Morila and
Yatela are fellow subsidiaries to the company, also located in Mali. Sadiola shares certain employees with Yatela, as
well as the elution and smelting of the gold production process. The company incurs only ad hoc transactions with
Morila.
Rand Refinery Limited is a subsidiary company within the AngloGold Ashanti group. The company has entered into
contractual agreements with Rand Refinery Limited for the provision of all services required for the collection,
transport, refining and purchase of the doré bars produced by the company. Included in transactions with Rand
Refinery Limited are sales by the company of US$267.9 million (2006: US$300.7 million and 2005: US$198.1 million)
and purchases by the company of US$0.5 million (2006: US$0.5 million and 2005: US$0.4 million).
contractual agreements with Rand Refinery Limited for the provision of all services required for the collection,
transport, refining and purchase of the doré bars produced by the company. Included in transactions with Rand
Refinery Limited are sales by the company of US$267.9 million (2006: US$300.7 million and 2005: US$198.1 million)
and purchases by the company of US$0.5 million (2006: US$0.5 million and 2005: US$0.4 million).
19
·
·
·
·
Risk management activities
In the normal course of its operations, the company is exposed to gold price, other commodity price, foreign exchange,
interest rate, liquidity, price and credit risks. In order to manage these risks, the company may enter into transactions
which make use of both on- and off-balance sheet derivatives. The company does not acquire, hold or issue derivatives
for trading purposes. The company has access via its shareholders to a developed comprehensive risk management
process to facilitate, control and monitor these risks.
interest rate, liquidity, price and credit risks. In order to manage these risks, the company may enter into transactions
which make use of both on- and off-balance sheet derivatives. The company does not acquire, hold or issue derivatives
for trading purposes. The company has access via its shareholders to a developed comprehensive risk management
process to facilitate, control and monitor these risks.
The financial risk management objectives of the company are defined as follows:
safeguarding the company’s core earnings stream from its major assets through the effective control and
management of gold price risk, other commodity risk, foreign exchange risk and interest rate risk;
effective and efficient usage of credit facilities in both the short and long term through the adoption of reliable
liquidity management planning and procedures;
ensuring that investment and hedging transactions are undertaken with creditworthy counterparts; and
ensuring that all contracts and agreements related to risk management activities are coordinated and consistent
throughout the company and that they comply where necessary with all relevant regulatory and statutory
requirements.
throughout the company and that they comply where necessary with all relevant regulatory and statutory
requirements.
19.1
Gold price and currency risk
Gold price risk arises from the risk of an adverse effect on current or future earnings resulting from fluctuations in the
price of gold. The company does not hedge against the effects of fluctuations in the gold price.
Gold price risk arises from the risk of an adverse effect on current or future earnings resulting from fluctuations in the
price of gold. The company does not hedge against the effects of fluctuations in the gold price.
F-147
Société d’Exploitation des Mines d’Or de Sadiola S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
19.2
Credit risk
Credit risk arises from the risk that a counter party may default or not meet its obligations in a timely manner.
The company does not obtain collateral or other security to support financial instruments subject to credit risk,
but monitors the credit standing of counter parties. Although the company sells gold to only one counter party,
the company does not believe that this concentration of credit results in significant credit risk as the majority of
proceeds are received within two working days of the gold leaving the mine. There is however a concentration
of credit risk with respect to various taxes receivable from the Malian State. These taxes and the measures
taken to ensure recoverability thereof are discussed in note 5, note 9 and below.
but monitors the credit standing of counter parties. Although the company sells gold to only one counter party,
the company does not believe that this concentration of credit results in significant credit risk as the majority of
proceeds are received within two working days of the gold leaving the mine. There is however a concentration
of credit risk with respect to various taxes receivable from the Malian State. These taxes and the measures
taken to ensure recoverability thereof are discussed in note 5, note 9 and below.
19.2.1
Vulnerability from concentrations of VAT refundable by the Government of Mali
Value added taxes receivable from the Government of Mali amounts to US$38.9 million at 31 December 2007
(2006: US$38.5 and 2005: US$26.2 million). VAT is refundable from the government in F CFA. The last
audited VAT return was for the period ended March 31, 2007 and at 31 December 2007 US$16.2 million (2006:
US$26.0 million and 2005: US$21.7 million) is still outstanding and US$22.7 million (2006: US$12.5 million and
2005: US$6.8 million) is still subject to audit. The accounting processes for the unaudited amount are in
accordance with the processes advised by the Government of Mali in terms of the previous audits. The
Government of Mali is a shareholder in the company and protocol agreements were signed on July 5, 2006. All
payments as scheduled in terms of the protocol agreements have been recovered up to December 2007.
Certain amounts are expected to be received after 12 months of the balance sheet date and are classified as
non-current accordingly. These amounts provided for have been discounted to their present value at a rate of
6.5% per annum.
Value added taxes receivable from the Government of Mali amounts to US$38.9 million at 31 December 2007
(2006: US$38.5 and 2005: US$26.2 million). VAT is refundable from the government in F CFA. The last
audited VAT return was for the period ended March 31, 2007 and at 31 December 2007 US$16.2 million (2006:
US$26.0 million and 2005: US$21.7 million) is still outstanding and US$22.7 million (2006: US$12.5 million and
2005: US$6.8 million) is still subject to audit. The accounting processes for the unaudited amount are in
accordance with the processes advised by the Government of Mali in terms of the previous audits. The
Government of Mali is a shareholder in the company and protocol agreements were signed on July 5, 2006. All
payments as scheduled in terms of the protocol agreements have been recovered up to December 2007.
Certain amounts are expected to be received after 12 months of the balance sheet date and are classified as
non-current accordingly. These amounts provided for have been discounted to their present value at a rate of
6.5% per annum.
19.2.2
Vulnerability from concentrations of refundable tax on fuel
Fuel duties receivable from the Government of Mali amounts to US$5.3 million at 31 December 2007 (2006:
US$8.7 million and 2005: US$9.9 million). Fuel duties are paid on receipt of the fuel supply and are refundable
in F CFA, requiring the claim to be submitted before January 31, of the following year, and are subject to
authorisation by firstly the Department of Mining and secondly the Customs and Excise authorities. The
Customs and Excise authorities have approved US$0 million (2006: US$1.5 million and 2005: US$6.64 million),
whilst US$5.3 million (2006 US$7.2 million and 2005: US$3.56 million) is still subject to authorisation. The
accounting processes for the unauthorised amount are in accordance with the processes advised by the
Government of Mali in terms of the previous authorisations. The Government of Mali is a shareholder in the
company and protocol agreements have been signed. All payments as scheduled in terms of the protocol
agreements have been recovered up to December 2007. With effect from February 2006, fuel duties are no
longer payable to the Government of Mali. These amounts provided for have been discounted to their present
value at a rate of 6.5% per annum.
Fuel duties receivable from the Government of Mali amounts to US$5.3 million at 31 December 2007 (2006:
US$8.7 million and 2005: US$9.9 million). Fuel duties are paid on receipt of the fuel supply and are refundable
in F CFA, requiring the claim to be submitted before January 31, of the following year, and are subject to
authorisation by firstly the Department of Mining and secondly the Customs and Excise authorities. The
Customs and Excise authorities have approved US$0 million (2006: US$1.5 million and 2005: US$6.64 million),
whilst US$5.3 million (2006 US$7.2 million and 2005: US$3.56 million) is still subject to authorisation. The
accounting processes for the unauthorised amount are in accordance with the processes advised by the
Government of Mali in terms of the previous authorisations. The Government of Mali is a shareholder in the
company and protocol agreements have been signed. All payments as scheduled in terms of the protocol
agreements have been recovered up to December 2007. With effect from February 2006, fuel duties are no
longer payable to the Government of Mali. These amounts provided for have been discounted to their present
value at a rate of 6.5% per annum.
19.3
Currency risk
Since the functional currency of the company is US Dollars, currency risk is incurred primarily as a result of
purchases made in other currencies, such as the Euro, South African Rand and the Franc de la Communauté
Financière d’Afrique (F CFA). The company does not use derivatives to hedge foreign currency transactions.
Since the functional currency of the company is US Dollars, currency risk is incurred primarily as a result of
purchases made in other currencies, such as the Euro, South African Rand and the Franc de la Communauté
Financière d’Afrique (F CFA). The company does not use derivatives to hedge foreign currency transactions.
As the company does not enter into financial instruments for trading purposes, the risks inherent to financial
instruments are always offset by the underlying risk being hedged. The company further manages such risks by
ensuring that when decisions are made to utlise hedging the level of hedge cover will not exceed expected
requirements in future periods, that the tenor of instruments will not exceed the life of mine and that no basis
risk exist.
instruments are always offset by the underlying risk being hedged. The company further manages such risks by
ensuring that when decisions are made to utlise hedging the level of hedge cover will not exceed expected
requirements in future periods, that the tenor of instruments will not exceed the life of mine and that no basis
risk exist.
19.4
Fair values of financial instruments
The estimated fair values of the current financial instruments are determined based on relevant market
information. These estimates involve uncertainties and cannot be determined with precision. The estimated fair
values of the company’s current financial instruments as at December 31, 2007 approximates the carrying
amount of such financial instruments as reflected in the balance sheet.
The estimated fair values of the current financial instruments are determined based on relevant market
information. These estimates involve uncertainties and cannot be determined with precision. The estimated fair
values of the company’s current financial instruments as at December 31, 2007 approximates the carrying
amount of such financial instruments as reflected in the balance sheet.
US$30.3 million, included in non-current trade and other receivables relates to VAT and fuel duties which are
expected to be refunded in periods subsequent to the 2008 financial year. The fair value of this receivable
approximates its carrying amount. All other amounts are expected to be recoverable or payable within the 2008
financial year.
expected to be refunded in periods subsequent to the 2008 financial year. The fair value of this receivable
approximates its carrying amount. All other amounts are expected to be recoverable or payable within the 2008
financial year.
20.
Capital
management
The primary objective of managing the company’s capital is to ensure that there is sufficient capital available to
support the funding requirements of the company, including capital expenditure, in a way that optimizes the
cost of capital, maximizes shareholders’ returns and ensures that the company remains in a sound financial
position. There were no changes to the company’s overall capital management approach during the current
year. The company manages and makes adjustments to the capital structure as and when funding is required.
This may take the form of raising shareholder or bank debt or hybrids thereof.
support the funding requirements of the company, including capital expenditure, in a way that optimizes the
cost of capital, maximizes shareholders’ returns and ensures that the company remains in a sound financial
position. There were no changes to the company’s overall capital management approach during the current
year. The company manages and makes adjustments to the capital structure as and when funding is required.
This may take the form of raising shareholder or bank debt or hybrids thereof.
F-148
Société d’Exploitation des Mines d’Or de Yatela S.A.
Financial statements
as of and for the year ended
December 31, 2007
F-149
Société d’Exploitation des Mines d’Or de Yatela S.A.
Financial statements and report of the Independent Registered Public Accounting Firm
For the year ended December 31, 2007
Financial statements and report of the Independent Registered Public Accounting Firm
For the year ended December 31, 2007
Report of the Independent Registered Public Accounting Firm
Income statements
Balance sheets
Statements of changes in stockholders’ equity
Cash flow statements
Notes to the financial statements
Income statements
Balance sheets
Statements of changes in stockholders’ equity
Cash flow statements
Notes to the financial statements
F-150
Report of the Independent Registered Public Accounting Firm
The board of directors and stockholders of Société d’Exploitation des Mines d’Or de Yatela S.A.
We have audited the accompanying balance sheet of Société d’Exploitation des Mines d’Or de Yatela S.A. as of
December 31, 2006 and the related statements of income, changes in stockholders’ equity and cash flows for the year then
ended. These financial statements are the responsibility of the company’s management. Our responsibility is to express an
opinion on these financial statements based on our audit.
December 31, 2006 and the related statements of income, changes in stockholders’ equity and cash flows for the year then
ended. These financial statements are the responsibility of the company’s management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of
Société d’Exploitation des Mines d’Or de Yatela S.A. as of December 31, 2006 and the results of its operations and its cash
flows for the year then ended, in conformity with International Financial Reporting Standards as issued by the International
Accounting Standards Board.
Société d’Exploitation des Mines d’Or de Yatela S.A. as of December 31, 2006 and the results of its operations and its cash
flows for the year then ended, in conformity with International Financial Reporting Standards as issued by the International
Accounting Standards Board.
KPMG Inc.
Johannesburg, South Africa
June 25, 2007
June 25, 2007
F-151
Société d’Exploitation des Mines d’Or de Yatela S.A.
Income Statement
For the years ended December 31,
Income Statement
For the years ended December 31,
Unaudited
2007
2006
Unaudited
2005
Notes
US$
Revenue
3
208,846,031
214,500,620
110,251,425
Cost of sales
(110,271,525)
(116,283,590)
(86,557,143)
Gross profit
98,574,506
98,217,030
23,694,282
Exploration costs
(1,978,821)
(27,821)
-
Other operating expenses / (income)
111,707
(896,162)
-
Net foreign exchange gain / (loss)
(1,635,215)
297,449
(878,663)
Special impairments of indirect taxes receivable and special
expenses for indirect taxes payable
expenses for indirect taxes payable
5
(6,201,491)
(531,017)
(2,202,145)
Operating profit
4
88,870,686
97,059,479
20,613,474
Interest income
1,679,426
1,218,954
464,026
Interest expense
(2,132,580)
(2,996,042)
(4,622,595)
Profit before taxation
88,417,532
95,282,391
16,454,905
Taxation
6
(31,323,388)
(12,538,580)
181,096
Profit for the year
57,094,144
82,743,811
16,636,001
The accompanying notes are an integral part of these financial statements.
F-152
Société d’Exploitation des Mines d’Or de Yatela S.A.
Balance Sheet
As at December 31,
Balance Sheet
As at December 31,
Unaudited
2007
2006
Notes
US$
ASSETS
Non-current assets
Property, plant and equipment
7
23,567,351
40,790,096
Trade and other receivables
9
19,267,402
15,005,298
Deferred taxation
10
10,199,283
925,383
5
3,034,036
56,720,777
Current assets
Inventories
8
38,503,196
26,467,135
Trade and other receivables
9
16,341,087
13,311,818
Cash and cash equivalents
11
26,970,783
27,211,803
8
1,815,066
66,990,756
Total assets
134,849,102
123,711,533
EQUITY AND LIABILITIES
Equity
Stockholders' equity
55,987,144
78,893,000
Non-current liabilities
Provisions
12
21,180,344
14,506,491
21,180,344
14,506,491
Current liabilities
Trade and other payables
13
24,515,932
16,991,879
Taxation
33,165,682
13,320,163
57,681,614
30,312,042
Total liabilities
78,861,958
44,818,533
Total equity and liabilities
134,849,102
123,711,533
The accompanying notes are an integral part of these financial statements.
F-153
Société d’Exploitation des Mines d’Or de Yatela S.A.
Statements of changes in stockholders’ equity
For the years ended December 31,
Statements of changes in stockholders’ equity
For the years ended December 31,
Ordinary
stock
(note 18)
Non-
distributable
reserve
Retained
earnings
Total
stockholders
' equity
Note
US$
Balance at 31 December 2004 (unaudited)
14,513
2,903
30,495,772
30,513,188
Profit for the year
-
-
16,636,001
16,636,001
Balance at 31 December 2005 (unaudited)
14,513
2,903
47,131,773
47,149,189
Profit for the year
-
-
82,743,811
82,743,811
Dividends
declared
(51,000,000)
(51,000,000)
Balance at 31 December 2006
14,513
2,903
78,875,584
78,893,000
Profit for the year
-
-
57,094,144
57,094,144
Dividends
declared
(80,000,000)
(80,000,000)
Balance at 31 December 2007 (unaudited)
14,513
2,903
55,969,728
55,987,144
The non-distributable reserve is a legal reserve created in 2000 and is a requirement of the commercial law of Mali. This
law prescribes the transfer of 10% of profits, restricted to a maximum of 20% of ordinary share capital, to a non-
distributable reserve. Such reserve only becomes distributable when the company is liquidated.
law prescribes the transfer of 10% of profits, restricted to a maximum of 20% of ordinary share capital, to a non-
distributable reserve. Such reserve only becomes distributable when the company is liquidated.
The accompanying notes are an integral part of these financial statements.
F-154
Société d’Exploitation des Mines d’Or de Yatela S.A.
Cash flow statements
For the years ended December 31,
Cash flow statements
For the years ended December 31,
Unaudited
2007
2006
Unaudited
2005
Notes
US$
Net cash provided by operating activities
Profit for the year
57,094,144
82,743,811
16,636,001
Adjusted for:
Non-cash movements
- taxation charge per income statement
31,323,388
12,538,580
(181,096)
- deferred stripping
20,346,982
13,779,768
800,343
- provision for obsolete and slow moving consumable stores
(435,834)
757,951
-
- net foreign exchange (gain) / loss
1,635,215
(297,449)
878,663
- unwinding of non-current provisions
725,324
689,997
190,217
- environmental restoration charge to the income statement
3,776,192
1,688,625
(1,945,491)
- employee long service obligation charge to the income
statement
statement
-
(939,691)
232,803
- present value adjustment on VAT taxes refundable
1,360,681
1,100,081
369,120
- present value adjustment on refundable tax on fuel
46,575
21,528
167,000
- loss on disposal of property, plant and equipment
-
226,478
797,330
- amortisation of property, plant and equipment
9,753,803
39,381,404
22,925,663
- finance charges
-
1,184,436
3,896,258
Special impairments of indirect taxes refundable and Special
expenses for indirect taxes payable
expenses for indirect taxes payable
6,201,491
531,017
845,510
Restoration expenditure
(1,001,027)
(1,626,621)
-
Decrease / (increase) in non-current inventories
-
4,138,853
(4,138,853)
Increase in non-current VAT refundable
(4,262,104)
(11,348,849)
(4,025,569)
Interest paid
-
(1,184,436)
(3,896,258)
Income tax paid
15
(19,929,143)
(452,463)
-
(Increase) / decrease in inventories
(12,000,227)
(11,071,231)
13,876,356
Decrease / (increase) in trade and other receivables
(4,436,525)
1,253,898
(1,486,756)
Increase / (decrease) in trade and other payables
(1,135,278)
6,597,221
932,265
89,063,657
139,712,908
46,873,506
Net cash used in investing activities
Capital expenditure
(5,340,768)
(2,586,002)
(7,531,083)
Additional waste stripping
(3,963,909)
(19,015,243)
(17,676,906)
Net cash outflow from investing activities
(9,304,677)
(21,601,245)
(25,207,989)
Net cash used in financing activities
Interest-bearing loans repaid
-
(52,391,551)
(24,687,602)
Dividends paid
14
(80,000,000)
(51,000,000)
-
Net cash outflow from financing activities
(80,000,000)
(103,391,551)
(24,687,602)
Net increase / (decrease) in cash and cash equivalents
(241,020)
14,720,112
(3,022,085)
Cash and cash equivalents at beginning of year
27,211,803
12,491,691
15,513,776
Cash and cash equivalents at end of year
11
26,970,783
27,211,803
12,491,691
The accompanying notes are an integral part of these financial statements.
F-155
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
Notes to the financial statements
For the years ended December 31, 2004, 2005 and 2006
1.
Business
Activities
Société d’Exploitation des Mines d’Or de Yatela S.A. (Yatela) is a company registered in Mali. The company operates
a mine for the commercial exploitation of gold in the Kayes region of Western Mali. Commercial production
commenced on July 3, 2001.
a mine for the commercial exploitation of gold in the Kayes region of Western Mali. Commercial production
commenced on July 3, 2001.
2
Accounting
policies
Statement
of
compliance
All amounts in the financial statements and related notes for 2007 and 2005 are unaudited.
The company financial statements are prepared in compliance with International Financial Reporting Standards
(IFRS) and Interpretations of those standards, as adopted by the International Accounting Standards Board (IASB)
and applicable legislation.
(IFRS) and Interpretations of those standards, as adopted by the International Accounting Standards Board (IASB)
and applicable legislation.
During the current financial year, the following new and revised accounting standards, amendments to standards and
new interpretations were adopted by Société d’Exploitation des Mines d’Or de Yatela S.A:
new interpretations were adopted by Société d’Exploitation des Mines d’Or de Yatela S.A:
IAS1
Amendment – Capital Disclosures
IFRS 7
Financial Instruments: Disclosures
In addition, the following interpretation was early adopted by Société d’Exploitation des Mines d’Or de Yatela S.A.
during previous financial years:
during previous financial years:
IFRIC 5
Rights to Interests arising from Decommissioning, Restoration and Environmental
Rehabilitation Funds.
Rehabilitation Funds.
In addition, the following revised accounting standard and new interpretations were early adopted by Société
d’Exploitation des Mines d’Or de Yatela S.A during the current financial year:
d’Exploitation des Mines d’Or de Yatela S.A during the current financial year:
IAS 23
Borrowing Costs (revised)
IFRIC 11
IFRS 2 – Group and Treasury Share Transactions
IFRIC 12
Service Concession Arrangements
IFRIC 13
Customer Loyalty Programmes
IFRIC 14
IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their
Interaction
Interaction
The adoption of the accounting standards, amendments to standards and new interpretations had no material
financial impact on the financial statements identified above.
financial impact on the financial statements identified above.
The following accounting standards, amendments to standards and new interpretations, which are not yet mandatory
for Société d’Exploitation des Mines d’Or de Yatela S.A, have not been adopted in the current year:
for Société d’Exploitation des Mines d’Or de Yatela S.A, have not been adopted in the current year:
IAS 1
Presentation of Financial Statements
Effective years beginning on or after
1 January 2009
1 January 2009
IFRS 8
Operating Segments
Effective years beginning on or after
1 January 2009
1 January 2009
The company has assessed the significance of these new standards, amendments to standards and new
interpretations, which will be applicable from 1 January 2009 and later years and concluded that they will have no
material financial impact.
interpretations, which will be applicable from 1 January 2009 and later years and concluded that they will have no
material financial impact.
F-156
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
2.1
Basis of preparation
The financial statements are prepared according to the historical cost accounting convention, except for the
revaluation of certain financial instruments to fair value. The company's accounting policies as set out below are
consistent in all material respects with those applied in the previous year, except for the adoption of the new and
revised standards mentioned above. The financial statements are presented in US dollars.
revaluation of certain financial instruments to fair value. The company's accounting policies as set out below are
consistent in all material respects with those applied in the previous year, except for the adoption of the new and
revised standards mentioned above. The financial statements are presented in US dollars.
2.2
Changes in accounting policies
The adoption of the following new/revised standards, amendments to standards and interpretations did not have any
consequential effect on the accounting policies:
consequential effect on the accounting policies:
IAS1
Amendment – Capital Disclosures
IAS 23
Borrowing Costs (revised)
IFRS 7
Financial Instruments: Disclosures
IFRIC 11
IFRS 2 – Group and Treasury Share Transactions
IFRIC 12
Service Concession Arrangements
IFRIC 13
Customer Loyalty Programmes
IFRIC 14
IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their
Interaction
Interaction
IAS 1 Amendment – Capital Disclosures
The company adopted IAS 1 Amendment - Capital Disclosures as of 1 January 2007. The amendment requires
additional disclosures about the company’s objectives, policies and processes of managing capital. The adoption of
the amendment did not have any effect on the financial position or performance of the company.
additional disclosures about the company’s objectives, policies and processes of managing capital. The adoption of
the amendment did not have any effect on the financial position or performance of the company.
IAS 23 Borrowing Costs (revised)
The company adopted IAS 23 – Borrowing Costs (revised) as of 1 January 2007. This revision to the standard will
have no financial effect on the results of operation or the reporting of the financial condition of Société d’Exploitation
des Mines d’Or de Yatela S.A as the company had already adopted the capitalisation of interest principle for
qualifying assets under the allowed alternative of the old IAS 23.
have no financial effect on the results of operation or the reporting of the financial condition of Société d’Exploitation
des Mines d’Or de Yatela S.A as the company had already adopted the capitalisation of interest principle for
qualifying assets under the allowed alternative of the old IAS 23.
IFRS 7 Financial Instruments: Disclosures
The company adopted IFRS 7 - Financial Instruments: Disclosures as of 1 January 2007. The statement introduces
new disclosures to improve the information about financial instruments. It requires the disclosure of qualitative and
quantitative information about the exposure to risks arising from financial instruments including a sensitivity analysis
to market risk. The adoption of the statement did not have any effect on the financial position or performance of the
company.
new disclosures to improve the information about financial instruments. It requires the disclosure of qualitative and
quantitative information about the exposure to risks arising from financial instruments including a sensitivity analysis
to market risk. The adoption of the statement did not have any effect on the financial position or performance of the
company.
IFRIC 11 IFRS 2 – Group and Treasury Share Transactions
The company elected to adopt IFRIC Interpretation 11 as of 1 January 2007. This interpretation requires
arrangements whereby an employee of the company is granted rights, by the parent, to an entity or its parent’s
equity instruments to be accounted for as an equity-settled scheme, even if the entity buys the instruments from
another party, or the shareholders provide the equity instruments needed. The adoption of this interpretation did not
have any effect on the financial position or performance of the company.
arrangements whereby an employee of the company is granted rights, by the parent, to an entity or its parent’s
equity instruments to be accounted for as an equity-settled scheme, even if the entity buys the instruments from
another party, or the shareholders provide the equity instruments needed. The adoption of this interpretation did not
have any effect on the financial position or performance of the company.
IFRIC 12 Service Concession Arrangements
The company elected to adopt IFRIC Interpretation 12 as of 1 January 2007. This interpretation requires
arrangements where a public-to-private service concession has been established to be accounted for as balance
sheet assets and liabilities at inception. The adoption of this interpretation did not have any effect on the financial
position or performance of the company.
arrangements where a public-to-private service concession has been established to be accounted for as balance
sheet assets and liabilities at inception. The adoption of this interpretation did not have any effect on the financial
position or performance of the company.
F-157
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
IFRIC 13 Customer Loyalty Programmes
The company elected to adopt IFRIC Interpretation 13 as of 1 January 2007. This interpretation requires the entity
that grants the customer loyalty award to account for the sales transaction that gives rise to the award credits as a
“multiple element revenue transaction” and allocate the fair value between the award credits granted and the other
components of the revenue transaction. The adoption of this interpretation did not have any effect on the financial
position or performance of the company.
that grants the customer loyalty award to account for the sales transaction that gives rise to the award credits as a
“multiple element revenue transaction” and allocate the fair value between the award credits granted and the other
components of the revenue transaction. The adoption of this interpretation did not have any effect on the financial
position or performance of the company.
IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their
Interaction
Interaction
The company elected to adopt IFRIC Interpretation 14 as of 1 January 2007. This interpretation requires the entity to
measure any economic benefits available to it in the form of refunds or reductions in future contributions at the
maximum amount that is consistent with the terms and conditions of the plan, when determining the limit on a
defined benefit asset. The adoption of this interpretation did not have any effect on the financial position or
performance of the company.
measure any economic benefits available to it in the form of refunds or reductions in future contributions at the
maximum amount that is consistent with the terms and conditions of the plan, when determining the limit on a
defined benefit asset. The adoption of this interpretation did not have any effect on the financial position or
performance of the company.
2.3
Significant accounting judgements and estimates
Use of estimates: The preparation of the financial statements requires the company’s management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses
during the reporting period. The determination of estimates requires the exercise of judgement based on various
assumptions and other factors such as historical experience, current and expected economic conditions, and in some
cases actuarial techniques. Actual results could differ from those estimates.
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses
during the reporting period. The determination of estimates requires the exercise of judgement based on various
assumptions and other factors such as historical experience, current and expected economic conditions, and in some
cases actuarial techniques. Actual results could differ from those estimates.
The more significant areas requiring the use of management estimates and assumptions relate to mineral reserves
that are the basis of future cash flow estimates and unit-of-production depreciation, depletion and amortisation
calculations; environmental, reclamation and closure obligations; estimates of recoverable gold and other materials in
heap leach pads; asset impairments, write-downs of inventory to net realisable value; post-employment, post-
retirement and other employee benefit liabilities, the fair value and accounting treatment of financial instruments and
deferred taxation.
that are the basis of future cash flow estimates and unit-of-production depreciation, depletion and amortisation
calculations; environmental, reclamation and closure obligations; estimates of recoverable gold and other materials in
heap leach pads; asset impairments, write-downs of inventory to net realisable value; post-employment, post-
retirement and other employee benefit liabilities, the fair value and accounting treatment of financial instruments and
deferred taxation.
Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.
including expectations of future events that are believed to be reasonable under the circumstances.
The company is exposed to numerous legal risks. The outcome of currently pending and future proceedings cannot
be predicted with certainty. Thus, an adverse decision in a lawsuit could result in additional costs that are not
covered, either wholly or partly, under insurance policies and that could significantly influence the business and
results of operations.
be predicted with certainty. Thus, an adverse decision in a lawsuit could result in additional costs that are not
covered, either wholly or partly, under insurance policies and that could significantly influence the business and
results of operations.
The judgements that management have applied in the application of accounting policies, and the estimates and
assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year, are discussed below.
assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year, are discussed below.
Carrying value of property, plant and equipment
All mining assets are amortised using the units-of-production (UOP) method where the mine operating plan calls for
production from well-defined mineral reserves over proved and probable reserves.
production from well-defined mineral reserves over proved and probable reserves.
For mobile and other equipment, the straight-line method is applied over the estimated useful life of the asset which
does not exceed the estimated mine life based on proved and probable mineral reserves as the useful lives of these
assets are considered to be limited to the life of the mine.
does not exceed the estimated mine life based on proved and probable mineral reserves as the useful lives of these
assets are considered to be limited to the life of the mine.
The calculation of the UOP rate of amortisation could be impacted to the extent that actual production in the future is
different from current forecast production based on proved and probable mineral reserves. This would generally result
to the extent that there are significant changes in any of the factors or assumptions used in estimating mineral
reserves.
different from current forecast production based on proved and probable mineral reserves. This would generally result
to the extent that there are significant changes in any of the factors or assumptions used in estimating mineral
reserves.
F-158
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
2.3
Significant accounting judgements and estimates (continued)
These factors could include:
changes in proved and probable mineral reserves;
the grade of mineral reserves may vary significantly from time to time;
differences between actual commodity prices and commodity price assumptions;
unforeseen operational issues at mine sites;
changes in capital, operating, mining, processing and reclamation costs, discount rates and foreign exchange
rates; and
changes in mineral reserves could similarly impact the useful lives of assets depreciated on a straight-line basis,
where those lives are limited to the life of the mine.
the grade of mineral reserves may vary significantly from time to time;
differences between actual commodity prices and commodity price assumptions;
unforeseen operational issues at mine sites;
changes in capital, operating, mining, processing and reclamation costs, discount rates and foreign exchange
rates; and
changes in mineral reserves could similarly impact the useful lives of assets depreciated on a straight-line basis,
where those lives are limited to the life of the mine.
The recoverable amounts of individual assets have been determined based on the higher of value-in-use calculations
and fair values less costs to sell. These calculations require the use of estimates and assumptions. It is reasonably
possible that the gold price assumption may change which may then impact the estimated life of mine determinant
and may then require a material adjustment to the carrying value of property, plant and equipment.
and fair values less costs to sell. These calculations require the use of estimates and assumptions. It is reasonably
possible that the gold price assumption may change which may then impact the estimated life of mine determinant
and may then require a material adjustment to the carrying value of property, plant and equipment.
The company defers stripping costs incurred during the production stage of its open-pit operations, where this is the
most appropriate basis for matching the costs against the related economic benefits. This is generally the case
where there are fluctuations in stripping costs over the life of the mine.
most appropriate basis for matching the costs against the related economic benefits. This is generally the case
where there are fluctuations in stripping costs over the life of the mine.
In the production stage of the open-pit operations, further development of the mine requires a phase of unusually
high overburden removal activity that is similar in nature to preproduction mine development. The costs of such
unusually high overburden removal activity are deferred and charged against reported profits in subsequent periods
on a units-of-production basis. This accounting treatment is consistent with that for stripping costs incurred during
the development phase of a mine, before production commences.
high overburden removal activity that is similar in nature to preproduction mine development. The costs of such
unusually high overburden removal activity are deferred and charged against reported profits in subsequent periods
on a units-of-production basis. This accounting treatment is consistent with that for stripping costs incurred during
the development phase of a mine, before production commences.
If the company were to expense production stage stripping costs as incurred, this would result in volatility in the year
to year results from open-pit operations and excess stripping costs would be expensed at an earlier stage of the
mine’s operation.
to year results from open-pit operations and excess stripping costs would be expensed at an earlier stage of the
mine’s operation.
Deferred stripping costs are included in ‘Mine development costs’, within Property, plant and equipment. These form
part of the total investment in the individual asset, which is reviewed for impairment if events or a change in
circumstances indicate that the carrying value may not be recoverable. Amortisation of deferred stripping costs is
included in operating costs.
part of the total investment in the individual asset, which is reviewed for impairment if events or a change in
circumstances indicate that the carrying value may not be recoverable. Amortisation of deferred stripping costs is
included in operating costs.
The company reviews and tests the carrying value of assets when events or changes in circumstances suggest that
the carrying amount may not be recoverable. Assets are grouped at the lowest level for which identifiable cash flows
are largely independent of cash flows of other assets. If there are indications that impairment may have occurred,
estimates are prepared of expected future cash flows for each group of assets. Expected future cash flows used to
determine the value in use of property, plant and equipment are inherently uncertain and could materially change
over time. They are significantly affected by a number of factors including published reserves, resources, exploration
potential and production estimates, together with economic factors such as spot and future gold prices, discount
rates, foreign currency exchange rates, estimates of costs to produce reserves and future capital expenditure.
the carrying amount may not be recoverable. Assets are grouped at the lowest level for which identifiable cash flows
are largely independent of cash flows of other assets. If there are indications that impairment may have occurred,
estimates are prepared of expected future cash flows for each group of assets. Expected future cash flows used to
determine the value in use of property, plant and equipment are inherently uncertain and could materially change
over time. They are significantly affected by a number of factors including published reserves, resources, exploration
potential and production estimates, together with economic factors such as spot and future gold prices, discount
rates, foreign currency exchange rates, estimates of costs to produce reserves and future capital expenditure.
Production start date
The company assesses the mine construction project to determine when it moves into the production stage. The
criteria used to assess the start date are determined based on the unique nature of the construction project such as
the complexity of a plant and its location. The company considers various relevant criteria to assess when the mine
is substantially complete and ready for its intended use and moves into the production stage. Some of the criteria
would include, but, are not limited to, the following:
criteria used to assess the start date are determined based on the unique nature of the construction project such as
the complexity of a plant and its location. The company considers various relevant criteria to assess when the mine
is substantially complete and ready for its intended use and moves into the production stage. Some of the criteria
would include, but, are not limited to, the following:
·
·
·
·
·
·
·
the level of capital expenditure compared to the construction cost estimates;
·
completion of a reasonable period of testing of the mine plant and equipment;
·
ability to produce gold in saleable form (within specifications and with insignificant revenue);
·
ability to sustain ongoing production of gold.
When a mine construction project moves into the production stage, the capitalisation of certain mine construction
costs ceases and costs are either regarded as inventory or expensed, except for capitalisable costs related to mining
asset additions or improvements or reserve development.
costs ceases and costs are either regarded as inventory or expensed, except for capitalisable costs related to mining
asset additions or improvements or reserve development.
F-159
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
2.3
Significant accounting judgements and estimates (continued)
Income taxes
The company is subject to income tax. Significant judgement is required in determining the provision for income taxes
due to the complexity of legislation. There are many transactions and calculations for which the ultimate tax
determination is uncertain during the ordinary course of business. The company recognises liabilities for anticipated
tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these
matters is different from the amounts that were initially recorded, such differences will impact the income tax and
deferred tax provisions in the period in which such determination is made.
due to the complexity of legislation. There are many transactions and calculations for which the ultimate tax
determination is uncertain during the ordinary course of business. The company recognises liabilities for anticipated
tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these
matters is different from the amounts that were initially recorded, such differences will impact the income tax and
deferred tax provisions in the period in which such determination is made.
The company recognises the net future tax benefit related to deferred income tax assets to the extent that it is
probable that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability
of deferred income tax assets requires the company to make significant estimates related to expectations of future
taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the
application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ
significantly from estimates, the ability of the company to realise the net deferred tax assets recorded at the balance
sheet date could be impacted.
probable that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability
of deferred income tax assets requires the company to make significant estimates related to expectations of future
taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the
application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ
significantly from estimates, the ability of the company to realise the net deferred tax assets recorded at the balance
sheet date could be impacted.
Additionally, future changes in tax laws in the jurisdiction in which the company operates could limit the ability of the
company to obtain tax deductions in future periods.
company to obtain tax deductions in future periods.
Provision for environmental rehabilitation obligations
The company’s mining and exploration activities are subject to various laws and regulations governing the protection
of the environment. The company recognises management’s best estimate for decommissioning and restoration
obligations in the period in which they are incurred. Actual costs incurred in future periods could differ materially from
the estimates. Additionally, future changes to environmental laws and regulations, life of mine estimates and discount
rates could affect the carrying amount of this provision. Such changes could similarly impact the useful lives of assets
depreciated on a straight-line-basis, where those lives are limited to the life of mine.
of the environment. The company recognises management’s best estimate for decommissioning and restoration
obligations in the period in which they are incurred. Actual costs incurred in future periods could differ materially from
the estimates. Additionally, future changes to environmental laws and regulations, life of mine estimates and discount
rates could affect the carrying amount of this provision. Such changes could similarly impact the useful lives of assets
depreciated on a straight-line-basis, where those lives are limited to the life of mine.
Stockpiles, gold in process, ore on leach pad and product inventories
Costs that are incurred in or benefit the production process are accumulated as stockpiles, gold in process, ore on
leach pads and product inventories. Net realisable value tests are performed at least annually and represent the
estimated future sales price of the product, based on prevailing and long-term metals prices, less estimated costs to
complete production and bring the product to sale.
leach pads and product inventories. Net realisable value tests are performed at least annually and represent the
estimated future sales price of the product, based on prevailing and long-term metals prices, less estimated costs to
complete production and bring the product to sale.
Stockpiles are measured by estimating the number of tonnes added and removed from the stockpile, the number of
contained gold ounces based on assay data, and the estimated recovery percentage based on the expected
processing method. Stockpile tonnages are verified by periodic surveys.
contained gold ounces based on assay data, and the estimated recovery percentage based on the expected
processing method. Stockpile tonnages are verified by periodic surveys.
Although the quantities of recoverable metal are reconciled by comparing the grades of ore to the quantities of gold
actually recovered (metallurgical balancing), the nature of the process inherently limits the ability to precisely monitor
recoverability levels. As a result, the metallurgical balancing process is constantly monitored and the engineering
estimates are refined based on actual results over time.
actually recovered (metallurgical balancing), the nature of the process inherently limits the ability to precisely monitor
recoverability levels. As a result, the metallurgical balancing process is constantly monitored and the engineering
estimates are refined based on actual results over time.
Recoverable tax, rebates, levies and duties
Société d’Exploitation des Mines d’Or de Yatela S.A. is due refunds of input tax which remain outstanding for periods
longer than those provided for in the respective statutes. In addition Société d’Exploitation des Mines d’Or de Yatela
S.A. has unresolved tax disputes. If the outstanding input taxes are not received and the tax disputes are not
resolved in a manner favourable to Société d’Exploitation des Mines d’Or de Yatela S.A. it could have an adverse
effect upon the carrying value of these assets.
longer than those provided for in the respective statutes. In addition Société d’Exploitation des Mines d’Or de Yatela
S.A. has unresolved tax disputes. If the outstanding input taxes are not received and the tax disputes are not
resolved in a manner favourable to Société d’Exploitation des Mines d’Or de Yatela S.A. it could have an adverse
effect upon the carrying value of these assets.
Ore Reserve estimates
Ore Reserves are estimates of the amount of product that can be economically and legally extracted from the
company’s properties. In order to calculate Ore Reserves, estimates and assumptions are required about a range of
geological, technical and economic factors, including quantities, grades, production techniques, recovery rates,
production costs, transport costs, commodity demand, commodity prices and exchange rates.
geological, technical and economic factors, including quantities, grades, production techniques, recovery rates,
production costs, transport costs, commodity demand, commodity prices and exchange rates.
F-160
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
2.3
Significant accounting judgements and estimates (continued)
Estimating the quantity and/or grade of Ore Reserves requires the size, shape and depth of orebodies to be
determined by analysing geological data such as the logging and assaying of drill samples. This process may
require complex and difficult geological judgements and calculations to interpret the data.
determined by analysing geological data such as the logging and assaying of drill samples. This process may
require complex and difficult geological judgements and calculations to interpret the data.
The company is required to determine and report Ore Reserves in accordance with the SAMREC code (South African
Code for the Reporting of Mineral Resources and Reserves).
Because the economic assumptions used to estimate Ore Reserves change from period to period, and because
additional geological data is generated during the course of operations, estimates of Ore Reserves may change from
period to period. Changes in reported Ore Reserves may affect the company’s financial results and financial position
in a number of ways, including the following:
period to period. Changes in reported Ore Reserves may affect the company’s financial results and financial position
in a number of ways, including the following:
·
asset carrying values may be affected due to changes in estimated future cash flows.
·
depreciation, depletion and amortisation charged in the income statement may change where such charges are
determined by the units-of-production basis, or where the useful economic lives of assets change.
determined by the units-of-production basis, or where the useful economic lives of assets change.
·
overburden removal costs recorded on the balance sheet or charged in the income statement may change due
to changes in stripping ratios or the units-of-production basis of depreciation.
to changes in stripping ratios or the units-of-production basis of depreciation.
·
Decommissioning, site restoration and environmental provisions may change where changes in estimated Ore
Reserves affect expectations about the timing or cost of these activities.
Reserves affect expectations about the timing or cost of these activities.
·
the carrying value of deferred tax assets may change due to changes in estimates of the likely recovery of the
tax benefits.
tax benefits.
Exploration and evaluation expenditure
The company’s accounting policy for exploration and evaluation expenditure results in certain items of expenditure
being capitalised for an area of interest where it is considered likely to be recoverable by future exploitation. This
policy requires management to make certain estimates and assumptions as to future events and circumstances, in
particular whether an economically viable extraction operation can be established. Any such estimates and
assumptions may change as new information becomes available. If, after having capitalised the expenditure, a
judgement is made that recovery of the expenditure is unlikely, the relevant capitalised amount will be written off to
the income statement.
being capitalised for an area of interest where it is considered likely to be recoverable by future exploitation. This
policy requires management to make certain estimates and assumptions as to future events and circumstances, in
particular whether an economically viable extraction operation can be established. Any such estimates and
assumptions may change as new information becomes available. If, after having capitalised the expenditure, a
judgement is made that recovery of the expenditure is unlikely, the relevant capitalised amount will be written off to
the income statement.
Development expenditure
Development activities commence after project sanctioning by the appropriate level of management. Judgement is
applied by management in determining when a project has reached a stage at which economically recoverable
reserves exist such that development may be sanctioned. In exercising this judgement, management is required to
make certain estimates and assumptions similar to those described above for capitalised exploration and evaluation
expenditure. Any such estimates and assumptions may change as new information becomes available. If, after
having started the development activity, a judgement is made that a development asset is impaired, the appropriate
amount will be written off to the income statement.
applied by management in determining when a project has reached a stage at which economically recoverable
reserves exist such that development may be sanctioned. In exercising this judgement, management is required to
make certain estimates and assumptions similar to those described above for capitalised exploration and evaluation
expenditure. Any such estimates and assumptions may change as new information becomes available. If, after
having started the development activity, a judgement is made that a development asset is impaired, the appropriate
amount will be written off to the income statement.
Contingencies
By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. The
assessment of such contingencies inherently involves the exercise of judgement and estimates of the outcome of
future events.
assessment of such contingencies inherently involves the exercise of judgement and estimates of the outcome of
future events.
Litigation and other judicial proceedings may raise difficult and complex legal issues and are subject to uncertainties
and complexities including, but not limited to, the facts and circumstances of each particular case, issues regarding
the jurisdiction in which each suit is brought and differences in applicable law. Upon resolution of any pending legal
matter, the company may be forced to incur charges in excess of the presently established provisions and related
insurance coverage. It is possible that the financial position, results of operations or cash flows of the company could
be materially affected by the unfavourable outcome of litigation.
and complexities including, but not limited to, the facts and circumstances of each particular case, issues regarding
the jurisdiction in which each suit is brought and differences in applicable law. Upon resolution of any pending legal
matter, the company may be forced to incur charges in excess of the presently established provisions and related
insurance coverage. It is possible that the financial position, results of operations or cash flows of the company could
be materially affected by the unfavourable outcome of litigation.
2.4 Summary of significant accounting policies
Foreign currency translation
Functional currency
Items included in the financial statements are measured using the currency of the primary economic environment in
which the entity operates (the ‘functional currency’). The functional currency of United States Dollars (US$) is used
which the entity operates (the ‘functional currency’). The functional currency of United States Dollars (US$) is used
F-161
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
2.4 Summary of significant accounting policies (continued)
as opposed to the currency of the country in which the enterprise is domiciled, namely Franc de la Communauté
Financière d’Afrique (F CFA). The decision has been taken on the basis of US$ being the functional currency in
which the enterprise receives its revenue and majority of costs are mainly influenced by the US dollar.
Financière d’Afrique (F CFA). The decision has been taken on the basis of US$ being the functional currency in
which the enterprise receives its revenue and majority of costs are mainly influenced by the US dollar.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the approximate exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of foreign
currency transactions and from the translation at the year-end exchange rate of monetary assets and liabilities
denominated in foreign currencies are recognised in the income statement, except for derivative balances that are
within the scope of IAS 39. Translation differences on these balances are reported as part of their fair value gain or
loss.
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of foreign
currency transactions and from the translation at the year-end exchange rate of monetary assets and liabilities
denominated in foreign currencies are recognised in the income statement, except for derivative balances that are
within the scope of IAS 39. Translation differences on these balances are reported as part of their fair value gain or
loss.
Non monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated
using the exchange rate at the date of the transaction.
using the exchange rate at the date of the transaction.
Property, plant and equipment
·
·
·
·
·
Property, plant and equipment are recorded at cost less accumulated amortisation and impairments. Cost includes
pre-production expenditure incurred during the development of a mine and the present value of related future
decommissioning costs.
pre-production expenditure incurred during the development of a mine and the present value of related future
decommissioning costs.
Interest on borrowings relating to the financing of major capital projects under construction is capitalised during the
construction phase as part of the cost of the project. Such borrowing costs are capitalised over the period during
which the asset is being acquired or constructed and borrowings have been incurred. Capitalisation ceases when
construction is interrupted for an extended period or when the asset is substantially complete. Other borrowing costs
are expensed as incurred.
construction phase as part of the cost of the project. Such borrowing costs are capitalised over the period during
which the asset is being acquired or constructed and borrowings have been incurred. Capitalisation ceases when
construction is interrupted for an extended period or when the asset is substantially complete. Other borrowing costs
are expensed as incurred.
If there is an indication that the recoverable amount of any property, plant and equipment is less than the carrying
value, the recoverable amount is estimated and an allowance is made for the impairment in value.
value, the recoverable amount is estimated and an allowance is made for the impairment in value.
Subsequent costs are included in the asset’s carrying amount only when it is probable that future economic benefits
associated with the item will flow to the company, and the cost of the addition can be measured reliably. All other
repairs and maintenance are charged to the income statement during the financial period in which they are incurred.
repairs and maintenance are charged to the income statement during the financial period in which they are incurred.
To the extent a legal or constructive obligation to a third party exists, the acquisition cost includes estimated costs of
dismantling and removing the asset and restoring the site. A change in estimated expenditures for dismantling,
removal and restoration is added to and/or deducted from the carrying value of the related asset. To the extent that
the change would result in a negative carrying amount, this effect is recognised as income. The change in
depreciation charge is recognised prospectively.
removal and restoration is added to and/or deducted from the carrying value of the related asset. To the extent that
the change would result in a negative carrying amount, this effect is recognised as income. The change in
depreciation charge is recognised prospectively.
Amortisation of assets is calculated to allocate the cost of each asset to its residual value over its estimated useful life
for those assets not amortised on the units-of-production method as follows:
for those assets not amortised on the units-of-production method as follows:
buildings up to life of mine;
plant and machinery up to life of mine;
equipment and motor vehicles up to five years;
computer equipment up to three years; and
leased assets over the period of the lease.
plant and machinery up to life of mine;
equipment and motor vehicles up to five years;
computer equipment up to three years; and
leased assets over the period of the lease.
Major renovations are depreciated over the remaining useful life of the related asset or to the date of the next major
renovation, whichever is sooner.
renovation, whichever is sooner.
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
Gains and losses on disposals are determined by comparing net sales proceeds with the carrying amount. These are
included in the income statement.
included in the income statement.
F-162
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
2.4 Summary of significant accounting policies (continued)
Mine development costs
Capitalised mine development costs include expenditure incurred to develop new orebodies, to define further
mineralisation in existing orebodies, to expand the capacity of the mine and to maintain production. Where funds
have been borrowed specifically to finance a project, the amount of interest capitalised represents the actual
borrowing costs incurred. Mine development costs include acquired proved and probable Mineral Resources at cost
at the acquisition date.
mineralisation in existing orebodies, to expand the capacity of the mine and to maintain production. Where funds
have been borrowed specifically to finance a project, the amount of interest capitalised represents the actual
borrowing costs incurred. Mine development costs include acquired proved and probable Mineral Resources at cost
at the acquisition date.
Depreciation, depletion and amortisation of mine development costs are computed by the units-of-production method
based on estimated proved and probable mineral reserves. Proved and probable mineral reserves reflect estimated
quantities of economically recoverable reserves which can be recovered in the future from known mineral deposits.
These reserves are amortised from the date on which commercial production begins.
based on estimated proved and probable mineral reserves. Proved and probable mineral reserves reflect estimated
quantities of economically recoverable reserves which can be recovered in the future from known mineral deposits.
These reserves are amortised from the date on which commercial production begins.
Stripping costs incurred in open-pit operations during the production phase to remove additional waste are charged to
operating costs on the basis of the average life of mine stripping ratio and the average life of mine costs per tonne.
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 are recalculated annually in the light of additional
knowledge and changes in estimates.
operating costs on the basis of the average life of mine stripping ratio and the average life of mine costs per tonne.
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 are recalculated annually in the light of additional
knowledge and changes in estimates.
The cost of the “excess stripping” is capitalised as mine development costs when the actual mining costs exceed the
sum of the adjusted tonnes mined, being the actual ore tonnes plus the product of the actual ore tonnes multiplied by
the average life of mine stripping ratio multiplied by the life of mine cost per tonne. When the actual mining costs are
below the sum of the adjusted tonnes mined, being the actual ore tonnes plus the product of the actual ore tonnes
multiplied by the average life of mine stripping ratio, multiplied by the life of mine cost per tonne, previously
capitalised costs are expensed to increase the cost up to the average.
sum of the adjusted tonnes mined, being the actual ore tonnes plus the product of the actual ore tonnes multiplied by
the average life of mine stripping ratio multiplied by the life of mine cost per tonne. When the actual mining costs are
below the sum of the adjusted tonnes mined, being the actual ore tonnes plus the product of the actual ore tonnes
multiplied by the average life of mine stripping ratio, multiplied by the life of mine cost per tonne, previously
capitalised costs are expensed to increase the cost up to the average.
The cost of stripping in any period will 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.
Changes in the life of mine stripping ratio are accounted for prospectively as a change in estimate.
Mine infrastructure
·
·
·
Mine plant facilities, including decommissioning assets, are amortised using the lesser of their useful life or units-of-
production method based on estimated proved and probable mineral reserves. Other property, plant and equipment
comprising vehicles and computer equipment are depreciated by the straight-line method over their estimated useful
lives.
production method based on estimated proved and probable mineral reserves. Other property, plant and equipment
comprising vehicles and computer equipment are depreciated by the straight-line method over their estimated useful
lives.
Exploration and Evaluation assets
All exploration costs are expensed until the directors conclude that a future economic benefit will more likely than not
be realised. In evaluating if expenditures meet this criterion to be capitalised, the directors use several different
sources of information depending on the level of exploration. While the criteria for concluding that expenditure should
be capitalised is always probable, the information that the directors use to make that determination depends on the
level of exploration.
be realised. In evaluating if expenditures meet this criterion to be capitalised, the directors use several different
sources of information depending on the level of exploration. While the criteria for concluding that expenditure should
be capitalised is always probable, the information that the directors use to make that determination depends on the
level of exploration.
Costs on greenfields sites, being those where the company does not have any mineral deposits which are
already being mined or developed, are expensed as incurred until the directors are able to demonstrate that
future economic benefits are probable, which generally will be the establishment of proved and probable
reserves at this location.
already being mined or developed, are expensed as incurred until the directors are able to demonstrate that
future economic benefits are probable, which generally will be the establishment of proved and probable
reserves at this location.
Costs on brownfields sites, being those adjacent to mineral deposits which are already being mined or
developed, are expensed as incurred until the directors are able to demonstrate that future economic benefits
are probable, which generally will be the establishment of increased proved and probable reserves after which
the expenditure is capitalised as a mine development cost.
developed, are expensed as incurred until the directors are able to demonstrate that future economic benefits
are probable, which generally will be the establishment of increased proved and probable reserves after which
the expenditure is capitalised as a mine development cost.
Costs relating to extensions of mineral deposits, which are already being mined or developed, including
expenditure on the definition of mineralisation of such mineral deposits, is capitalised as a mine development
cost.
expenditure on the definition of mineralisation of such mineral deposits, is capitalised as a mine development
cost.
Costs relating to property acquisitions are capitalised within development costs.
F-163
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
2.4
Summary of significant accounting policies (continued)
Impairment of assets
Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for
impairment and whenever events or changes in circumstance indicate that the carrying amount may not be
recoverable. Assets that are subject to amortisation are tested for impairment whenever events or changes in
circumstance indicate that the carrying amount may not be recoverable.
impairment and whenever events or changes in circumstance indicate that the carrying amount may not be
recoverable. Assets that are subject to amortisation are tested for impairment whenever events or changes in
circumstance indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value, less costs to sell and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash flows.
amount. The recoverable amount is the higher of an asset’s fair value, less costs to sell and value in use. For the
purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash flows.
Impairment calculation assumptions include life of mine plans based on published reserves and resources,
management’s estimate of the future gold price, based on current market price trends, foreign exchange rates, and a
pre-tax discount rate adjusted for country and project risk. It is therefore reasonably possible that changes could
occur which may affect the recoverability of property, plant and equipment and intangible assets.
management’s estimate of the future gold price, based on current market price trends, foreign exchange rates, and a
pre-tax discount rate adjusted for country and project risk. It is therefore reasonably possible that changes could
occur which may affect the recoverability of property, plant and equipment and intangible assets.
Leased assets
Operating lease rentals are charged against operating profits in a systematic manner related to the period the assets
concerned will be used.
concerned will be used.
Exploration and research expenditure
Pre – licence costs are recognised in profit or loss as incurred. Exploration and research expenditure is expensed in
the year in which it is incurred. These expenses include: geological and geographical costs, labour, mineral
resources and exploratory drilling costs.
the year in which it is incurred. These expenses include: geological and geographical costs, labour, mineral
resources and exploratory drilling costs.
Inventories
·
·
·
·
·
·
Inventories are valued at the lower of cost and net realisable value after appropriate allowances for redundant and
slow moving items. Cost is determined on the following bases:
slow moving items. Cost is determined on the following bases:
gold in process is valued at the average total production cost at the relevant stage of production;
gold doré / bullion is valued on an average total production cost method;
ore stockpiles are valued at the average moving cost of mining and stockpiling the ore. Stockpiles are classified
as a non-current asset where the stockpile exceeds current processing capacity;
by-products are valued on an average total production cost method.
Mine operating supplies are valued at average cost; and
heap leach pad materials are measured on an average total production cost basis. The cost of materials on the
leach pad from which gold is expected to be recovered in a period greater than 12 months is classified as a non-
current asset.
gold doré / bullion is valued on an average total production cost method;
ore stockpiles are valued at the average moving cost of mining and stockpiling the ore. Stockpiles are classified
as a non-current asset where the stockpile exceeds current processing capacity;
by-products are valued on an average total production cost method.
Mine operating supplies are valued at average cost; and
heap leach pad materials are measured on an average total production cost basis. The cost of materials on the
leach pad from which gold is expected to be recovered in a period greater than 12 months is classified as a non-
current asset.
A portion of the related depreciation, depletion and amortisation charge is included in the cost of inventory.
Provisions
Provisions are recognised when the company has a present obligation, whether legal or constructive, because of a
past event for which it is probable that an outflow of resources embodying economic benefits will be required to settle
the obligation and a reliable estimate can be made of the amount of the obligation. Where some or all of the
expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement is
recognised only when the reimbursement is virtually certain. The amount to be reimbursed is recognised as a
separate asset. Where the company has a joint and several liability with one or more other parties, no provision is
recognised to the extent that those other parties are expected to settle part or all of the obligation.
past event for which it is probable that an outflow of resources embodying economic benefits will be required to settle
the obligation and a reliable estimate can be made of the amount of the obligation. Where some or all of the
expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement is
recognised only when the reimbursement is virtually certain. The amount to be reimbursed is recognised as a
separate asset. Where the company has a joint and several liability with one or more other parties, no provision is
recognised to the extent that those other parties are expected to settle part or all of the obligation.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle
the obligation at the balance sheet date. The discount rate used to determine the present value reflects current
market assessments of the time value of money and the risks specific to the liability.
the obligation at the balance sheet date. The discount rate used to determine the present value reflects current
market assessments of the time value of money and the risks specific to the liability.
F-164
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
2.4
Summary of significant accounting policies (continued)
Litigation and administrative proceedings are evaluated on a case-by-case basis considering the information
available, including that of legal counsel, to assess potential outcomes. Where it is considered probable that an
obligation will result in an outflow of resources, a provision is recorded for the present value of the expected cash
outflows if these are reasonably measurable. These provisions cover the estimated payments to plaintiffs, court fees
and the cost of potential settlements.
available, including that of legal counsel, to assess potential outcomes. Where it is considered probable that an
obligation will result in an outflow of resources, a provision is recorded for the present value of the expected cash
outflows if these are reasonably measurable. These provisions cover the estimated payments to plaintiffs, court fees
and the cost of potential settlements.
A contingent liability is disclosed when the possibility of an outflow of resources embodying economic benefits is not
remote.
remote.
Employee benefits
Short-
term employee benefits
The cost of all short-term employee benefits is recognised during the period in which the employee renders the
related service.
related service.
The provisions for employee entitlements to wages, salaries, and annual leave represent the amount which the
company has a present obligation to pay as a result of employees’ services provided to the balance sheet date. The
provisions have been calculated at undiscounted amounts based on current wage and salary rates.
company has a present obligation to pay as a result of employees’ services provided to the balance sheet date. The
provisions have been calculated at undiscounted amounts based on current wage and salary rates.
Long-
term employee benefits
Liabilities for employee benefits which are not expected to be settled within 12 months are discounted at a pre tax
rate that reflects current market assessments of the time value of money.
rate that reflects current market assessments of the time value of money.
The Company and all employees contribute towards the Malian Government social security fund. Accordingly, on
retirement, the Malian employees are entitled to a retirement benefit from the Malian Government. Expatriate
employees are reimbursed their contributions made to the social security fund.
retirement, the Malian employees are entitled to a retirement benefit from the Malian Government. Expatriate
employees are reimbursed their contributions made to the social security fund.
Environmental expenditure
The company has long-term remediation obligations comprising decommissioning and restoration liabilities relating to
its past operations which are based on the company's environmental management plans, in compliance with current
environmental and regulatory requirements. Provisons for non-recurring remediation costs are made when there is a
present obligation, it is probable that expense on remediation work will be required and the cost can be estimated
within a reasonable range of possible outcomes. The costs are based on currently available facts, technology
expected to be available at the time of the clean up, laws and regulations presently or virtually certain to be enacted
and prior experience in remediation of contaminated sites.
its past operations which are based on the company's environmental management plans, in compliance with current
environmental and regulatory requirements. Provisons for non-recurring remediation costs are made when there is a
present obligation, it is probable that expense on remediation work will be required and the cost can be estimated
within a reasonable range of possible outcomes. The costs are based on currently available facts, technology
expected to be available at the time of the clean up, laws and regulations presently or virtually certain to be enacted
and prior experience in remediation of contaminated sites.
Decommissioning costs
The provision for decommissioning represents the cost that will arise from rectifying damage caused before
production commenced. Accordingly an asset is recognised and included within mine infrastructure.
production commenced. Accordingly an asset is recognised and included within mine infrastructure.
Decommissioning costs are provided at the present value of the expenditures expected to settle the obligation, using
estimated cash flows based on current prices. The unwinding of the decommissioning obligation is included in the
income statement.
estimated cash flows based on current prices. The unwinding of the decommissioning obligation is included in the
income statement.
Estimated future costs of decommissioning obligations are reviewed regularly and adjusted as appropriate for new
circumstances or changes in law or technology. Changes in estimates are capitalised or reversed against the relevant
asset. Estimates are discounted at a pre-tax rate that reflects current market assessments of the time value of
money.
circumstances or changes in law or technology. Changes in estimates are capitalised or reversed against the relevant
asset. Estimates are discounted at a pre-tax rate that reflects current market assessments of the time value of
money.
Gains or losses from the expected disposal of assets are not taken into account when determining the provision.
Restoration costs
The provision for restoration represents the cost of restoring site damage after the start of production. Increases in
the provision are charged to the income statement as a cost of production.
the provision are charged to the income statement as a cost of production.
Gross restoration costs are estimated at the present value of the expenditures expected to settle the obligation, using
estimated cash flows based on current prices. The estimates are discounted at a pre-tax rate that reflects current
market assessments of the time value of money and risks specific to the liability.
estimated cash flows based on current prices. The estimates are discounted at a pre-tax rate that reflects current
market assessments of the time value of money and risks specific to the liability.
F-165
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
2.4 Summary of significant accounting policies (continued)
Revenue recognition
Revenue is recognised at the fair value of the consideration received or receivable to the extent that it is probable
that the economic benefits will flow to the company and the revenue can be reliably measured. The following criteria
must also be present:
that the economic benefits will flow to the company and the revenue can be reliably measured. The following criteria
must also be present:
the sale of mining products is recognised when the significant risks and rewards of ownership of the products
are transferred to the buyer;
interest is recognised on a time proportion basis, taking account of the principal outstanding and the effective
rate over the period to maturity, when it is determined that such income will accrue to the company; and
Where a by-product is not regarded as significant, revenue is credited against cost of sales, when the
significant risks and rewards of ownership of the products are transferred to the buyer.
are transferred to the buyer;
interest is recognised on a time proportion basis, taking account of the principal outstanding and the effective
rate over the period to maturity, when it is determined that such income will accrue to the company; and
Where a by-product is not regarded as significant, revenue is credited against cost of sales, when the
significant risks and rewards of ownership of the products are transferred to the buyer.
Taxation
·
·
·
Deferred taxation is provided on all qualifying temporary differences at the balance sheet date between the tax bases
of assets and liabilities and their carrying amounts for financial reporting purposes.
of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax assets are only recognised to the extent that it is probable that the deductible temporary differences will
reverse in the foreseeable future and future taxable profit will be available against which the temporary difference can
be utilised.
reverse in the foreseeable future and future taxable profit will be available against which the temporary difference can
be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it
is no longer probable that sufficient future taxable profit will be available to allow all or part of the deferred tax asset to
be utilised.
is no longer probable that sufficient future taxable profit will be available to allow all or part of the deferred tax asset to
be utilised.
Deferred tax assets and liabilities are measured at future anticipated tax rates, which have been enacted or
substantively enacted at the balance sheet date.
substantively enacted at the balance sheet date.
Current and deferred tax is recognised as income or expense and included in profit or loss for the period.
Current tax is measured on taxable income at the applicable statutory rate enacted or substantially enacted at the
balance sheet date.
balance sheet date.
Special items
Items of income and expense that are material and require separate disclosure, in accordance with IAS 1.86, are
classified as “special items” on the face of the income statement. Special items that relate to the underlying
performance of the business are classified as “operating special items” and include impairment charges and
reversals. Special items that do not relate to underlying business performance are classified as “non-operating
special items” and are presented below “Operating (loss) profit” on the income statement.
classified as “special items” on the face of the income statement. Special items that relate to the underlying
performance of the business are classified as “operating special items” and include impairment charges and
reversals. Special items that do not relate to underlying business performance are classified as “non-operating
special items” and are presented below “Operating (loss) profit” on the income statement.
Dividend distribution
Dividend distribution to the company’s shareholders is recognised as a liability in the company’s financial statements
in the period in which the dividends are declared by the board of directors of Société d’Exploitation des Mines d’Or
de Yatela S.A..
in the period in which the dividends are declared by the board of directors of Société d’Exploitation des Mines d’Or
de Yatela S.A..
Financial instruments
Financial instruments are initially measured at fair value when the company becomes a party to their contractual
arrangements. Transaction costs are included in the initial measurement of financial instruments, except financial
instruments classified as at fair value through profit and loss. The subsequent measurement of financial instruments
is dealt with below.
arrangements. Transaction costs are included in the initial measurement of financial instruments, except financial
instruments classified as at fair value through profit and loss. The subsequent measurement of financial instruments
is dealt with below.
A financial asset is derecognised when the right to receive cash flows from the asset has expired or the company has
transferred its rights to receive cash and either (a) has transferred substantially all the risks and rewards of the asset,
or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred
control of the asset.
transferred its rights to receive cash and either (a) has transferred substantially all the risks and rewards of the asset,
or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred
control of the asset.
A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires.
On derecognition of a financial asset, the difference between the proceeds received or receivable and the carrying
amount of the asset is included in income.
amount of the asset is included in income.
F-166
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
2.4 Summary of significant accounting policies (continued)
On derecognition of a financial liability, the difference between the carrying amount of the liability extinguished or
transferred to another party and the amount paid is included in income.
transferred to another party and the amount paid is included in income.
Regular way purchases and sales of all financial assets and liabilities are accounted for at settlement date.
Other non-current assets
·
Loans and receivables are subsequently measured at amortised cost using the effective interest rate method. If
there is evidence that loans and receivables are impaired, the carrying amount of the assets is reduced and the
loss recognised in the income statement.
there is evidence that loans and receivables are impaired, the carrying amount of the assets is reduced and the
loss recognised in the income statement.
Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method, less accumulated impairment. Impairment of trade and other receivables is established
when there is objective evidence as a result of a loss event that the company will not be able to collect all amounts
due according to the original terms of the receivables. Objective evidence includes failure by the counterparty to
perform in terms of contractual arrangements and agreed terms. The amount of the impairment is the difference
between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original
effective interest rate. The impairment is recognised in the income statement.
effective interest method, less accumulated impairment. Impairment of trade and other receivables is established
when there is objective evidence as a result of a loss event that the company will not be able to collect all amounts
due according to the original terms of the receivables. Objective evidence includes failure by the counterparty to
perform in terms of contractual arrangements and agreed terms. The amount of the impairment is the difference
between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original
effective interest rate. The impairment is recognised in the income statement.
Cash and cash equivalents
Cash and cash equivalents are defined as cash on hand, demand deposits and short-term, highly liquid investments
which are readily convertible to known amounts of cash and subject to insignificant risk of changes in value. They
are measured at cost which is deemed to be fair value as they have a short-term maturity.
which are readily convertible to known amounts of cash and subject to insignificant risk of changes in value. They
are measured at cost which is deemed to be fair value as they have a short-term maturity.
Financial liabilities
Financial liabilities are subsequently measured at amortised cost, using the effective interest rate method.
Unaudited
2007
2006
Unaudited
2005
US$
3
Revenue
Product sales
208,846,031
214,500,620
110,251,425
4
Operating
profit
Operating profit is arrived at after taking account of :
Cost
of
sales
Royalties
12,519,064
12,995,391
6,608,098
Amortisation of property, plant and equipment
9,753,803
39,381,404
22,925,663
Auditors’ remuneration
- Statutory audit fees
20,397
32,669
17,891
- External audit – audit fees
132,363
326,558
56,851
Contributions to Malian State social security fund
1,234,637
936,123
965,783
Legal fees
7,283
15,045
10,505
Remuneration other than to employees
-
operating
leases
45,953,100
40,948,998
35,831,851
- management fees
2,088,460
2,145,006
1,102,294
-
other
contractors
4,805,984
3,621,338
4,479,024
Salaries, wages and benefits
6,050,571
5,175,254
4,750,700
Provision for obsolete consumable stores
(435,834)
757,951
-
Consumable
stores
15,787,309
17,904,444
11,747,823
Inventory movement
(11,969,757)
(6,222,362)
10,774,414
Deferred stripping adjustment
16,383,073
(5,235,475)
(16,876,563)
Other cash operating expenses
7,332,663
3,501,246
4,162,809
Other operating expenses / (income)
- other
(111,707)
896,162
-
F-167
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Unaudited
2007
2006
Unaudited
2005
US$
5
Special impairments of indirect taxes receivable and special
expenses for indirect taxes payable
expenses for indirect taxes payable
Payment relating to 2000 to 2002 tax audit (note 5.1)
-
-
569,135
Impairment of VAT refundable by Government of Mali (note 5.2)
-
531,017
223,510
Payment relating to 2003 / 2004 tax audit (note 5.3)
-
-
787,500
Impairment of fuel taxes refundable by Government of Mali (note 5.4)
-
-
622,000
Assessment relating to 2005 to 2006 tax audit (note 5.5)
5,972,079
-
-
Provision relating to the 2007 tax submissions (note 5.6)
229,412
-
-
6,201,491
531,017
2,202,145
5.1
Payment relating to 2000 to 2002 tax audit
During November 2003, the Malian authorities performed a tax audit of the corporate taxation and various indirect
taxes at the company for fiscal years 2000 to 2002. The results of the audit indicated that the Company owed the
Government of Mali F CFA 790 million (US$1.4 million as of December 31, 2004) of various taxes and penalties, which
was communicated by way of a formal letter of assessment to the company. According to Malian government officials
the main reasons for the additional taxes were:
• withholding taxes payable;
taxes at the company for fiscal years 2000 to 2002. The results of the audit indicated that the Company owed the
Government of Mali F CFA 790 million (US$1.4 million as of December 31, 2004) of various taxes and penalties, which
was communicated by way of a formal letter of assessment to the company. According to Malian government officials
the main reasons for the additional taxes were:
• withholding taxes payable;
•
fringe benefits on certain facilities provided to expatriate employees that should have been taxed differently; and
• different interpretations of the law with respect to VAT payable on interest paid. The company was of the opinion
• different interpretations of the law with respect to VAT payable on interest paid. The company was of the opinion
that the indirect tax submissions by the Company were in compliance with applicable laws and regulations.
Without admitting that the tax submissions had been prepared in an incorrect manner in terms of the prevailing laws
and regulations, the directors decided to make a payment of F CFA 350 million (US$0.6 million) to the Government of
Mali in order to close this issue and allow management to concentrate on the company's core business. Accordingly,
the payment was recorded as a special item rather than as an under provision of prior year taxation. Payment of this
amount enabled the company to reach agreement with the Government of Mali on all taxation issues which were in
dispute and to establish a protocol for the indirect taxes that were in dispute for the future.
and regulations, the directors decided to make a payment of F CFA 350 million (US$0.6 million) to the Government of
Mali in order to close this issue and allow management to concentrate on the company's core business. Accordingly,
the payment was recorded as a special item rather than as an under provision of prior year taxation. Payment of this
amount enabled the company to reach agreement with the Government of Mali on all taxation issues which were in
dispute and to establish a protocol for the indirect taxes that were in dispute for the future.
5.2
Impairment of VAT refundable by Government of Mali
The gross amount of VAT refundable by the Government of Mali amounted to US$11.7 million at December 31, 2005.
Management estimated that only US$11.5 million was recoverable based on previous VAT audits performed by the
authorities. Accordingly, an impairment of VAT refundable of US$0.2 million was made. In 2006 an additional
impairment of VAT refundable of $0.5 million was made (Refer Note 19.2.1).
Management estimated that only US$11.5 million was recoverable based on previous VAT audits performed by the
authorities. Accordingly, an impairment of VAT refundable of US$0.2 million was made. In 2006 an additional
impairment of VAT refundable of $0.5 million was made (Refer Note 19.2.1).
5.3
Payment relating to 2003 / 2004 tax audit
During the 2005 financial year, a tax assessment was received for various indirect taxes from the Malian authorities for
the 2003 and 2004 fiscal years. Management objected to the assessment as it did not reflect the legal position for the
years assessed and thus a dispute arose between the Government of Mali and the company. Without admitting guilt
the Company decided to pay the Government of Mali F CFA 446.1 million (US$0.8 million) as agreed by both parties.
the 2003 and 2004 fiscal years. Management objected to the assessment as it did not reflect the legal position for the
years assessed and thus a dispute arose between the Government of Mali and the company. Without admitting guilt
the Company decided to pay the Government of Mali F CFA 446.1 million (US$0.8 million) as agreed by both parties.
5.4
Impairment of fuel taxes refundable by Government of Mali
At 31 December 2005, a gross amount of US$5.7 million relating to fuel taxes was receivable from the Government of
Mali. However, as a result of differences between the company and the Government of Mali, an impairment of
US$0.6 million was made by the Company (Refer Note 19.2.2).
Mali. However, as a result of differences between the company and the Government of Mali, an impairment of
US$0.6 million was made by the Company (Refer Note 19.2.2).
5.5
Assessment relating to the 2005 / 2006 tax audit
During October 2007, the Malian authorities performed a tax audit of the corporate taxation and various indirect taxes
submissions of the company for the fiscal years 2005 to 2006. The results of the audit indicated that the Company
owed the Government of Mali F CFA 2,639 million (US$6.0 million as of December 31, 2007) of various indirect taxes
and penalties, which was communicated by way of a formal letter of assessment to the company. The company was of
the opinion that the tax submissions by the Company were in compliance with applicable laws and regulations.
Management has however decided to make a provision for this assessment in anticipation of a settlement with the tax
authorities.
submissions of the company for the fiscal years 2005 to 2006. The results of the audit indicated that the Company
owed the Government of Mali F CFA 2,639 million (US$6.0 million as of December 31, 2007) of various indirect taxes
and penalties, which was communicated by way of a formal letter of assessment to the company. The company was of
the opinion that the tax submissions by the Company were in compliance with applicable laws and regulations.
Management has however decided to make a provision for this assessment in anticipation of a settlement with the tax
authorities.
5.6
Provision relating to the 2007 tax submission
The company has reviewed its 2007 tax submissions based on the interpretations applied by the tax authorities in
conducting the 2005 / 2006 audit. Management has determined that there may be an under payment of F CFA 101
million (US$0.23 million) as of December 31, 2007 which has been provided for in the 2007 financial results.
conducting the 2005 / 2006 audit. Management has determined that there may be an under payment of F CFA 101
million (US$0.23 million) as of December 31, 2007 which has been provided for in the 2007 financial results.
F-168
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Unaudited
2007
2006
Unaudited
2005
US$
6
Taxation
All pre-tax income and income tax expense is related to operations in Mali. The convention agreement specified that
the company will be taxed at 0% until July 2006.
the company will be taxed at 0% until July 2006.
Current tax expense
40,597,288
13,282,867
-
Deferred tax
(9,273,900)
(744,287)
(181,096)
31,323,388
12,538,580
(181,096)
A reconciliation of the statutory tax rate to that charged in the income statement is set out in the following table:
%
%
%
Statutory tax rate in Mali
35.0
35.0
35.0
Disallowable expenses:
3.1
0.1
6.6
-Net foreign exchange loss / (profit)
0.6
(0.1)
1.9
-Special impairment of indirect taxes receivable and special
expenses for indirect taxes payable
expenses for indirect taxes payable
2.5
0.2
4.7
Effect of tax holiday
-
(21.7)
(42.7)
Translation (loss) / gain on current and deferred tax
(3.1)
(0.2)
-
Under provision prior year
0.4
-
-
Effective tax rate
35.4
13.2
(1.1)
Mine
development
costs
Work in
progress
Mine infra-
structure
Total
US$
US$
US$
US$
7
Property, plant and equipment at December 31, 2007
Cost
Balance at January 1, 2007
84,278,860
1,217,320
87,132,975
172,629,155
Additions
1,632,596
2,141,551
1,566,621
5,340,768
Transfers & other movements
(16,763,195)
-
3,953,485
(12,809,710)
Balance at December 31, 2007
69,148,261
3,358,871
92,653,081
165,160,213
Accumulated
amortisation
Balance at January 1, 2007
56,644,375
-
75,194,684
131,839,059
Amortisation for the year
2,438,975
-
7,314,828
9,753,803
Balance at December 31, 2007
59,083,350
82,509,512
141,592,862
Carrying amount at December 31, 2007 (unaudited)
10,064,911
3,358,871
10,143,569
23,567,351
Mine
development
costs
Work in
progress
Mine infra-
structure
Total
US$
US$
US$
US$
Property, plant and equipment at December 31, 2006
Cost
Balance at January 1, 2006
78,759,214
70,083
86,061,999
164,891,296
Additions
705,112
1,038,070
842,820
2,586,002
Disposals
-
-
(708,707)
(708,707)
Transfers & other movements
4,814,534
109,167
936,863
5,860,564
Balance at December 31, 2006
84,278,860
1,217,320
87,132,975
172,629,155
Accumulated
amortization
Balance at January 1, 2006
43,559,660
-
49,080,754
92,640,414
Amortisation for the year
13,084,715
-
26,296,689
39,381,404
Disposals
-
-
(182,759)
(182,759)
Balance at December 31, 2006
56,644,375
-
75,194,684
131,839,059
Carrying amount at December 31, 2006
27,634,485
1,217,320
11,938,291
40,790,096
Included within the net book value of Mine Development costs is US$7.3 million (2006: US$23.6 million and 2005:
US$18.4 million) of capitalised stripping costs.
US$18.4 million) of capitalised stripping costs.
F-169
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Unaudited
2007
2006
US$
8
Inventories
Ore stockpiles
16,468,547
11,479,030
Gold bullion
-
760,511
Gold-in-process
16,959,228
9,218,478
Consumable stores
5,075,421
5,009,116
Consumable stores
5,397,538
5,767,067
Less: adjustment for obsolete and slow-moving items
(322,117)
(757,951)
Total inventories
38,503,196
26,467,135
9
Trade and other receivables
Related party receivables
– Société des Mines d’Or de Sadiola S.A.
Related party receivables
– Société des Mines d’Or de Sadiola S.A.
-
262
– Rand Refinery
3,731,848
3,926,803
3,731,848 3,927,065
3,731,848 3,927,065
Vat refundable by Government of Mali (note 5.2 and 20.2.1)
27,678,710
20,204,542
Prepaid expenses
84,997
59,790
Refundable tax on fuel by Government of Mali (note 5.4 and 20.2.2)
2,381,884
3,431,930
Other
1,731,050
693,789
Total current and non-current trade and other receivables
35,608,489
28,317,116
Less: non-current portion of amounts refundable by Government of Mali
19,267,402
15,005,298
Total current trade and other receivables
16,341,087
13,311,818
10
Deferred
taxation
The deferred taxation asset / (liability) relating to temporary differences is made
up as follows:
- Property, plant and equipment
up as follows:
- Property, plant and equipment
92,451
(6,382,235)
- Non-current provisions
7,413,120
5,077,272
- Inventory
112,741
137,570
- Present value adjustment on indirect taxes receivable
1,072,745
580,205
- Current provisions
1,508,226
1,512,571
10,199,283
925,383
The movement on the net deferred tax asset is as follows:
Balance at beginning of year
925,383
181,096
Deferred tax income
9,273,900
744,287
Balance at end of year
10,199,283
925,383
11
Cash and cash equivalents
Malian bank balances
Malian bank balances
4,480,356
1,240,077
London and South African bank balances
22,476,145
25,959,503
Petty cash
14,282
12,223
26,970,783
27,211,803
12
Provisions
Environmental rehabilitation obligation
Balance at beginning of year
Balance at beginning of year
14,506,491
13,799,939
Unwinding of obligation
725,324
689,997
Change in estimate
6,949,556
1,643,176
Utilised during the year
(1,001,027)
(1,626,621)
Balance at end of year
21,180,344
14,506,491
Employee long service obligation
Balance at beginning of year
Balance at beginning of year
-
939,691
Unwinding of obligation
-
-
Change in estimate
-
(939,691)
Balance at end of year
-
-
Total provisions
21,180,344
14,506,491
F-170
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Unaudited
2007
2006
US$
Assumptions applicable to environmental rehabilitation obligation
Estimated gross future environmental rehabilitation costs
Estimated gross future environmental rehabilitation costs
US$25.0 million
US$16.2 million
Discount rate
3.8%
5%
Inflation rate
2.30%
2.25%
Average cash flow period
8 years
8 years
The average cash flow period is based on the current estimate of the time necessary to fulfil all obligations, which is
subject to revision annually. The estimated gross future costs are based on management's best estimates at
December 31, 2007, and are also subject to revision annually. The change in estimate arises due to the change in the
assumption of the discount rate applicable and a change in the estimate of the gross future costs.
subject to revision annually. The estimated gross future costs are based on management's best estimates at
December 31, 2007, and are also subject to revision annually. The change in estimate arises due to the change in the
assumption of the discount rate applicable and a change in the estimate of the gross future costs.
Malian Government social security fund
The company and all employees contribute to the Malian Government social security fund. On retirement, the Malian
employees are entitled to a retirement benefit from the fund. The fund reimburses expatriate employees only their own
contributions made to the fund. Accordingly, there is no obligation for defined employee benefits. The company's
contributions to the Malian Government social security fund are disclosed in note 4.
The company and all employees contribute to the Malian Government social security fund. On retirement, the Malian
employees are entitled to a retirement benefit from the fund. The fund reimburses expatriate employees only their own
contributions made to the fund. Accordingly, there is no obligation for defined employee benefits. The company's
contributions to the Malian Government social security fund are disclosed in note 4.
Unaudited
2007
2006
US$
13
Trade and other payables
Related party payables
– AngloGold Ashanti Limited
Related party payables
– AngloGold Ashanti Limited
771,625
222,632
– AngloGold Ashanti Mali S.A.
364,612
446,404
– Société d’Exploitation des Mines d’Or de Sadiola S.A.
493,053
381,698
1,629,290
1,050,734
Accruals
15,296,481
6,381,889
Trade and other payables
7,590,161
9,559,256
24,515,932
16,991,879
Unaudited
2007
2006
Unaudited
2005
US$
14
Dividend
paid
Amount outstanding at beginning of year
-
-
-
Dividends declared during the year
80,000,000
51,000,000
-
Less: amount outstanding at end of year
-
-
-
Dividends paid
80,000,000
51,000,000
-
15
Income tax paid
Amount payable / (receivable) at beginning of year
13,320,163
-
-
Current tax expense (note 6)
40,597,288
13,282,867
-
Translation difference
(822,626)
489,759
-
Amount receivable / (payable) at end of year
(33,165,682)
(13,320,163)
-
Income tax paid
19,929,143
452,463
-
16
Contractual commitments and contingencies
16.1
Operating leases
At December 31, 2007, the company was committed to making the following minimum payments in respect of
operating leases for amongst other, hire of plant and equipment.
operating leases for amongst other, hire of plant and equipment.
Unaudited
2007
2006
US$
Expiry
within:
-
One
year
2,833,047
8,487,894
These balances are calculated based on the minimum rentals due in terms of the contract up to and including the
expiry date (October 2007) or minimum notice period (six months), whichever is the lesser. The contract does not
provide for guaranteed escalations. The company has no other restrictions on any of its leasing arrangements.
expiry date (October 2007) or minimum notice period (six months), whichever is the lesser. The contract does not
provide for guaranteed escalations. The company has no other restrictions on any of its leasing arrangements.
F-171
Société d’Exploitation des Mines d’Or de Yatela S.A
.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
For the years ended December 31, 2005, 2006 and 2007
Unaudited
2007
2006
US$
16.2
Capital commitments
Contracted for
Contracted for
3,738,345
5,694,800
Not contracted for
2,522,480
3,282,647
Total authorised by the directors
6,260,825
8,977,447
The proposed capital expenditure for mine infrastructure will be financed from cash resources generated by operating
activities of the company.
activities of the company.
16.3
The company is subject to and pays taxes in Mali. Some of these taxes are defined by contractual agreements with the
local government, but others are defined by the general corporate tax laws of the country. The company has
historically filed, and continues to file, all required tax returns and to pay the taxes reasonably determined to be due.
The tax rules in Mali are complex and subject to interpretation. From time to time the company is subject to a review of
its historic tax filings and in connection with such reviews, disputes can arise with the taxing authorities over the
interpretation or application of certain rules to the company’s business conducted in Mali. Management believes based
on information currently on hand that no such tax contingencies exist, and as assessments are completed, the
company will make appropriate adjustments to those estimates used in determining amounts due. The ultimate
outcome cannot be presently determined.
historically filed, and continues to file, all required tax returns and to pay the taxes reasonably determined to be due.
The tax rules in Mali are complex and subject to interpretation. From time to time the company is subject to a review of
its historic tax filings and in connection with such reviews, disputes can arise with the taxing authorities over the
interpretation or application of certain rules to the company’s business conducted in Mali. Management believes based
on information currently on hand that no such tax contingencies exist, and as assessments are completed, the
company will make appropriate adjustments to those estimates used in determining amounts due. The ultimate
outcome cannot be presently determined.
17
Ordinary stock
Authorised and issued: ordinary par value stock with a nominal value of F CFA 10 000 (US$14.513) each.
Held by:
Number of
outstanding
stock in issue
Unaudited
2007
2006
US$
Sadiola Exploration Ltd
794
11,523
11,523
NF Nicolau
1
14.5
14.5
J McCombe
1
14.5
14.5
M Diallo
1
14.5
14.5
GA Edey
1
14.5
14.5
FRL Neethling
1
14.5
14.5
AW Mbugua
1
14.5
14.5
Government of the Republic of Mali
200
2,903
2,903
1,000
14,513
14,513
18
Related parties
18.1
Identity of related parties
The stockholders of the company are disclosed in note 17. Entities within the AngloGold Ashanti group and with which
the company has transacted, are listed in note 18.2. The directors of the company are listed below:
The stockholders of the company are disclosed in note 17. Entities within the AngloGold Ashanti group and with which
the company has transacted, are listed in note 18.2. The directors of the company are listed below:
NF Nicolau (Chairman) (South African)
J McCombe (Canadian)
M Diallo (Malian)
M Diallo (Malian)
GA Edey (Canadian)
(resigned October 25 2007)
FRL Neethling (South African)
AW Mbugua (Kenyan)
S Malé (Malian)
W Diawara (Malian)
L. Philips (Canadian)
(appointed October 25 2007)
F-172
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
18.2
Material related party transactions
Material related party
transactions are as follow:
transactions are as follow:
Transactions
with related
parties
Net amounts
due by/
(owed to)
related parties
(notes 9 & 14)
Transactions
with related
parties
Net amounts
due by/
(owed to)
related
parties
parties
(notes 9 & 14)
Transactions
with related
parties
Net amounts
due by/
(owed to)
related
parties
parties
Unaudited 2007
2006
Unaudited 2005
US$
AngloGold Ashanti Mali S.A
2,892,386
(364,612)
3,447,035
(446,404)
2,150,765
(44,992)
Société des Mines de Morila S.A
(Morila) 2,327
(Morila) 2,327
-
1,673
-
2,082
(22)
Société d’Exploitation des Mines
d’Or de Sadiola S.A. (Sadiola)
d’Or de Sadiola S.A. (Sadiola)
2,619,552
(493,053)
2,865,379
(381,436)
3,100,621
(160,821)
AngloGold Ashanti Limited
2,981,852
(771,625)
1,089,223
(222,632)
1,201,062
(106,016)
Rand Refinery Limited
(208,846,031)
3,731,848
(214,136,050)
3,926,803
(110,021,719)
3,247,206
Sadiola Exploration Limited
-
-
1,111,147
-
3,587,294
(49,665,396)
Key management personnel
remuneration 863,863
remuneration 863,863
-
674,485
-
553,506
-
- Salary
774,434
-
619,860
-
485,779
-
- Performance related payments
58,059
-
16,995
-
21,343
-
- Pension Scheme Contributions
18,676
-
26,158
-
46,384
-
-Other Benefits
12,694
-
11,472
-
-
-
AngloGold Ashanti Mali S.A. is a service organisation within the AngloGold Ashanti company and, accordingly,
provides management services to the company. Included in transactions with AngloGold Ashanti Mali S.A. are
management fees paid by the Company of US$2,088,460 (2006: US$2,145,006 and 2005: US$1,102,294) (refer note
4). Morila and Sadiola are fellow subsidiaries to the company, also located in Mali. Yatela shares certain employees
with Sadiola, as well as the elution and smelting of the gold production process. The company incurs only ad hoc
transactions with Morila.
Rand Refinery Limited is a subsidiary company within the AngloGold Ashanti group. The company has entered into
contractual agreements with Rand Refinery Limited for the provision of all services required for the collection,
transport, refining and purchase of the doré bars produced by the company. Included in transactions with Rand
Refinery Limited are sales by the company of US$208.8 million (2006: US$214.5 million and 2005: US$110.3 million)
and purchases by the company of US$0.4 million (2006: US$0.4 million and 2005: US$0.2 million).
contractual agreements with Rand Refinery Limited for the provision of all services required for the collection,
transport, refining and purchase of the doré bars produced by the company. Included in transactions with Rand
Refinery Limited are sales by the company of US$208.8 million (2006: US$214.5 million and 2005: US$110.3 million)
and purchases by the company of US$0.4 million (2006: US$0.4 million and 2005: US$0.2 million).
19
Risk management activities
In the normal course of its operations, the company is exposed to gold price, other commodity price, foreign exchange,
interest rate, liquidity, price and credit risks. In order to manage these risks, the company may enter into transactions
which make use of both on- and off-balance sheet derivatives. The company does not acquire, hold or issue
derivatives for trading purposes. The company has access via its shareholders to a developed comprehensive risk
management process to facilitate, control and monitor these risks.
interest rate, liquidity, price and credit risks. In order to manage these risks, the company may enter into transactions
which make use of both on- and off-balance sheet derivatives. The company does not acquire, hold or issue
derivatives for trading purposes. The company has access via its shareholders to a developed comprehensive risk
management process to facilitate, control and monitor these risks.
The financial risk management objectives of the company are defined as follows:
• safeguarding the company’s core earnings stream from its major assets through the effective control and
• safeguarding the company’s core earnings stream from its major assets through the effective control and
management of gold price risk, other commodity risk, foreign exchange risk and interest rate risk;
•
effective and efficient usage of credit facilities in both the short and long term through the adoption of reliable
liquidity management planning and procedures;
liquidity management planning and procedures;
•
ensuring that investment and hedging transactions are undertaken with creditworthy counterparts; and
•
ensuring that all contracts and agreements related to risk management activities are coordinated and consistent
throughout the company and that they comply where necessary with all relevant regulatory and statutory
requirements.
requirements.
19.1
Gold price risk
Gold price risk arises from the risk of an adverse effect on current or future earnings resulting from fluctuations in the
price of gold. The company does not hedge against the effects of fluctuations in the gold price.
Gold price risk arises from the risk of an adverse effect on current or future earnings resulting from fluctuations in the
price of gold. The company does not hedge against the effects of fluctuations in the gold price.
19.2
Credit risk
Credit risk arises from the risk that a counter party may default or not meet its obligations in a timely manner.
The company does not obtain collateral or other security to support financial instruments subject to credit risk, but
monitors the credit standing of counter parties. Although the company sells gold to only one counter party, the
company does not believe that this concentration of credit results in significant credit risk as the majority of proceeds
are received within two working days of the gold leaving the mine. There is however a concentration of credit risk with
respect to various taxes receivable from the Malian State. These taxes and the measures taken to ensure
recoverability thereof are discussed in note 5, note 9 and below.
Credit risk arises from the risk that a counter party may default or not meet its obligations in a timely manner.
The company does not obtain collateral or other security to support financial instruments subject to credit risk, but
monitors the credit standing of counter parties. Although the company sells gold to only one counter party, the
company does not believe that this concentration of credit results in significant credit risk as the majority of proceeds
are received within two working days of the gold leaving the mine. There is however a concentration of credit risk with
respect to various taxes receivable from the Malian State. These taxes and the measures taken to ensure
recoverability thereof are discussed in note 5, note 9 and below.
F-173
Société d’Exploitation des Mines d’Or de Yatela S.A.
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
Notes to the financial statements
For the years ended December 31, 2005, 2006 and 2007
19.2.1
Vulnerability from concentrations of VAT refundable by the Government of Mali
Value added taxes receivable from the Government of Mali amounts to US$30.6 million at 31 December 2007 (2006:
US$21.7 million and 2005: US$11.5 million). VAT is refundable from the government in F CFA. The last audited
VAT return was for the period ended March 31, 2007 and at December 31, 2007 US$21.5 million (2006:
US$13.4 million and 2005: US$7.5 million) is still outstanding and US$9.1 million (2006: US$8.3 million and 2005:
US$ 4.0 million) is still subject to audit. The accounting processes for the unaudited amount are in accordance with
the processes advised by the Malian government in terms of the previous audits. The Government of Mali is a
shareholder in the company and protocol agreements were signed on July 5, 2006. All payments as scheduled in
terms of the protocol agreements have been recovered up to December 2007. Certain amounts are expected to be
received after 12 months of the balance sheet date and are classified as non-current accordingly. These amounts
provided for have been discounted to their present value at a rate of 6.5% per annum.
US$21.7 million and 2005: US$11.5 million). VAT is refundable from the government in F CFA. The last audited
VAT return was for the period ended March 31, 2007 and at December 31, 2007 US$21.5 million (2006:
US$13.4 million and 2005: US$7.5 million) is still outstanding and US$9.1 million (2006: US$8.3 million and 2005:
US$ 4.0 million) is still subject to audit. The accounting processes for the unaudited amount are in accordance with
the processes advised by the Malian government in terms of the previous audits. The Government of Mali is a
shareholder in the company and protocol agreements were signed on July 5, 2006. All payments as scheduled in
terms of the protocol agreements have been recovered up to December 2007. Certain amounts are expected to be
received after 12 months of the balance sheet date and are classified as non-current accordingly. These amounts
provided for have been discounted to their present value at a rate of 6.5% per annum.
19.2.2
Vulnerability from concentrations of refundable tax on fuel by the Government of Mali
Fuel duties receivable from the Government of Mali amounts to US$2.6 million at 31 December 2007 (2006: US$3.6
million and 2005: US$4.3 million). Fuel duties are paid on receipt of the fuel supply and are refundable in F CFA,
requiring the claim to be submitted before January 31 of the following year, and are subject to authorisation by firstly
the Department of Mining and secondly the Custom and Excise authorities. The Customs and Excise authorities
have approved US$0 million (2006: US$ 1.3 million and 2005: US$3.2 million) which is still outstanding, whilst
US$2.6 million (2006: US$2.3 million and 2005: US$1.1 million) is still subject to authorisation. The accounting
processes for the unauthorised amount are in accordance with the processes advised by the Malian government in
terms of the previous authorisations. The Government of Mali is a shareholder in the company and protocol
agreements have been signed. All payments as scheduled in terms of the protocol agreements have been recovered
up to December 2007. With effect from February 2006, fuel duties are no longer payable to the Government of Mali.
These amounts provided for have been discounted to their present value at a rate of 6.5% per annum.
million and 2005: US$4.3 million). Fuel duties are paid on receipt of the fuel supply and are refundable in F CFA,
requiring the claim to be submitted before January 31 of the following year, and are subject to authorisation by firstly
the Department of Mining and secondly the Custom and Excise authorities. The Customs and Excise authorities
have approved US$0 million (2006: US$ 1.3 million and 2005: US$3.2 million) which is still outstanding, whilst
US$2.6 million (2006: US$2.3 million and 2005: US$1.1 million) is still subject to authorisation. The accounting
processes for the unauthorised amount are in accordance with the processes advised by the Malian government in
terms of the previous authorisations. The Government of Mali is a shareholder in the company and protocol
agreements have been signed. All payments as scheduled in terms of the protocol agreements have been recovered
up to December 2007. With effect from February 2006, fuel duties are no longer payable to the Government of Mali.
These amounts provided for have been discounted to their present value at a rate of 6.5% per annum.
19.3
Currency risk
Since the functional currency of the company is US Dollars, currency risk is incurred primarily as a result of
purchases made in other currencies, such as the Euro, South African Rand and the Franc de la Communauté
Financière d’Afrique (F CFA). The company does not use derivatives to hedge foreign currency transactions.
Since the functional currency of the company is US Dollars, currency risk is incurred primarily as a result of
purchases made in other currencies, such as the Euro, South African Rand and the Franc de la Communauté
Financière d’Afrique (F CFA). The company does not use derivatives to hedge foreign currency transactions.
As the company does not enter into financial instruments for trading purposes, the risks inherent to financial
instruments are always offset by the underlying risk being hedged. The company further manages such risks by
ensuring that when decisions are made to utilise hedging the level of hedge cover will not exceed expected
requirements in future periods, that the tenor of instruments will not exceed the life of mine and that no basis risk
exist.
instruments are always offset by the underlying risk being hedged. The company further manages such risks by
ensuring that when decisions are made to utilise hedging the level of hedge cover will not exceed expected
requirements in future periods, that the tenor of instruments will not exceed the life of mine and that no basis risk
exist.
19.4
Fair values of financial instruments
The estimated fair values of financial instruments are determined at discrete points in time based on relevant market
information. These estimates involve uncertainties and cannot be determined with precision. The estimated fair
values of the company’s current financial instruments as at December 31, 2007 approximates the carrying amount of
such financial instruments as reflected in the balance sheet.
The estimated fair values of financial instruments are determined at discrete points in time based on relevant market
information. These estimates involve uncertainties and cannot be determined with precision. The estimated fair
values of the company’s current financial instruments as at December 31, 2007 approximates the carrying amount of
such financial instruments as reflected in the balance sheet.
US$19.3 million, included in non-current trade and other receivables, relates to VAT and fuel duties which are
expected to be refunded in periods subsequent to the 2008 financial year. The fair value of this receivable
approximates its carrying amount. All other amounts are expected to be recoverable or payable within the 2008
financial year.
expected to be refunded in periods subsequent to the 2008 financial year. The fair value of this receivable
approximates its carrying amount. All other amounts are expected to be recoverable or payable within the 2008
financial year.
20
Capital
management
The primary objective of managing the company’s capital is to ensure that there is sufficient capital available to
support the funding requirements of the company, including capital expenditure, in a way that optimises the cost of
capital, maximises shareholders’ returns and ensures that the company remains in a sound financial position. There
were no changes to the company’s overall capital management approach during the current year. The company
manages and makes adjustments to the capital structure as and when funding is required. This may take the form of
raising shareholder or bank debt or hybrids thereof.
support the funding requirements of the company, including capital expenditure, in a way that optimises the cost of
capital, maximises shareholders’ returns and ensures that the company remains in a sound financial position. There
were no changes to the company’s overall capital management approach during the current year. The company
manages and makes adjustments to the capital structure as and when funding is required. This may take the form of
raising shareholder or bank debt or hybrids thereof.
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and
authorized the undersigned to sign this annual report on its behalf.
authorized the undersigned to sign this annual report on its behalf.
ANGLOGOLD ASHANTI LIMITED
/s/ Srinivasan Venkatakrishnan
Name: Srinivasan Venkatakrishnan
Title:
Name: Srinivasan Venkatakrishnan
Title:
Chief Financial Officer
Date:
May
16,
2008
E-1
Exhibits to Form 20-F
Exhibit Number
Description
Remarks
Exhibit 19.1
Memorandum and Articles of Association of
AngloGold Limited as in effect on May 6, 2008
AngloGold Limited as in effect on May 6, 2008
Exhibit 19.2
Trust Deed dated February 27, 2004 between
AngloGold Holdings plc as Issuer, AngloGold
Limited as Guarantor and the Law Debenture
Trust Corporation plc as Trustee
AngloGold Holdings plc as Issuer, AngloGold
Limited as Guarantor and the Law Debenture
Trust Corporation plc as Trustee
Incorporated by reference to Exhibit 19.2 of
AngloGold’s annual report on Form 20-F filed
with the Securities and Exchange Commission
on March 19, 2004
AngloGold’s annual report on Form 20-F filed
with the Securities and Exchange Commission
on March 19, 2004
Exhibit 19.4.1.1
AngloGold Limited Share Incentive Scheme in
effect April 4, 2003
effect April 4, 2003
Incorporated by reference to Exhibit 19.4(c) of
AngloGold’s annual report on Form 20-F filed
with the Securities and Exchange Commission
on June 28, 2002
AngloGold’s annual report on Form 20-F filed
with the Securities and Exchange Commission
on June 28, 2002
Exhibit 19.4.1.2
Bonus Share Plan in effect
on May 6, 2008
Exhibit 19.4.1.3
Long-Term Incentive Plan in effect April 29,
2005
2005
Incorporated by reference to Exhibit 19.4.1.3
of AngloGold Ashanti’s annual report on Form
20-F filed with the Securities and Exchange
Commission on March 20, 2006
of AngloGold Ashanti’s annual report on Form
20-F filed with the Securities and Exchange
Commission on March 20, 2006
Exhibit 19.4.1.4
Registration rights agreement dated March 3,
2006 between AngloGold Ashanti Limited and
Anglo South African Capital (Proprietary)
Limited
2006 between AngloGold Ashanti Limited and
Anglo South African Capital (Proprietary)
Limited
Incorporated by reference to AngloGold
Ashanti’s Form 6-K filed with the Securities
and Exchange Commission on March 23,
2006
Ashanti’s Form 6-K filed with the Securities
and Exchange Commission on March 23,
2006
Exhibit 19.4.1.5
Letter confirming appointment of M Cutifani as
chief executive officer of AngloGold Ashanti
Limited
chief executive officer of AngloGold Ashanti
Limited
Exhibit
19.4.1.6
Retainer agreement of M
Cutifani with
AngloGold Ashanti International Services
Limited
Limited
Exhibit 19.6
Statement regarding how loss/earnings per
share information was calculated
share information was calculated
See note 9 to the consolidated financial
statements
statements
Exhibit 19.8
List of AngloGold Ashanti Limited subsidiaries
Exhibit 19.12.1
Certification of Mark Cutifani, Chief Executive
Officer of AngloGold Ashanti Limited, pursuant
to Section 302 of the Sarbanes-Oxley Act of
2002
Officer of AngloGold Ashanti Limited, pursuant
to Section 302 of the Sarbanes-Oxley Act of
2002
Exhibit 19.12.2
Certification of Srinivasan Venkatakrishnan,
Chief Financial Officer of AngloGold Ashanti
Limited, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
Chief Financial Officer of AngloGold Ashanti
Limited, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
E-2
Exhibit 19.13
Certification pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
Exhibit 19.15.1(a and b)
Consents of Ernst & Young, independent
registered public accounting firm
registered public accounting firm
Exhibit 19.15.2 (a and b)
Consents of KPMG, independent registered
public accounting firm
public accounting firm
Exhibit
19.15.3
Consent of PricewaterhouseCoopers,
independent registered public accounting firm
independent registered public accounting firm
EXHIBIT 19.1
Form CM2
REPUBLIC OF SOUTH AFRICA
COMPANIES ACT 1973
MEMORANDUM OF ASSOCIATION
of a Company having a share capital
[Section 54(1); Regulation 17(1) and 17(2)1]
Paste revenue receipt here or affix revenue stamps here or impress revenue franking machine impression here
1.
Name
(a)
The name of the Company is
AngloGold Ashanti Limited
(b)
The name of the Company in the other official language of the Republic is
N/A
(c)
The shortened form of the name of the Company is
N/A
Reproduced under Government Printer's Copyright Authority 9836 dated 14 July 1994
Amendments included in this Memorandum and
Articles of Association was approved by shareholders
at the annual general meeting held on 6 May 2008
Registration No. of Company
1944/017354/06
REPUBLIC OF SOUTH AFRICA
COMPANIES ACT 1973
Form CM 2A
2. Purpose describing the main business
The main business which the Company is to carry on:
“gold exploration, the mining and production of gold, the manufacturing, marketing
and selling of gold products and the development of markets for gold”
3. Main object
The main object of the Company is:
“To engage in all aspects of the business of gold exploration, the mining and
production of gold, the manufacturing, marketing and selling of gold products and
the development of markets for gold”
production of gold, the manufacturing, marketing and selling of gold products and
the development of markets for gold”
4.
Ancillary objects excluded
The specific ancillary objects, if any, referred to in section 33(1) of the Act, which are
excluded from the unlimited ancillary objects of the Company
N/A
5.
Powers
(a) The specific powers or part of any powers of the Company, if any, which are
excluded from the plenary powers or the powers set out in Schedule 2 of the Act
N/A
(b) The specific powers or part of any specific powers of the Company set out in
Schedule 2 to the Act, if any, which are qualified under section 34 of the Act
N/A
6.
Conditions
Any special conditions which apply to the Company and the requirements, if any,
additional to those prescribed in the Act for their alteration
N/A
REPUBLIC OF SOUTH AFRICA
COMPANIES ACT 1973
Form CM 2B
7.
Pre-incorporation contracts (if any)
NIL
8.
Capital
(a)
Par value: The share capital of the Company is 102,120,000 rand, divided into:
(i) 400,000,000 ordinary par value shares of 25 cents each*; and
(ii) 2,000,000 A redeemable preference par value shares of 50 cents each; and
(iii) 5,000,000 B redeemable preference par value shares of 1 cent each; and
(iv) 4,280,000 E ordinary par value shares of 25 cents each
#
.
(b)
No par value:
(i) The number of no par value ordinary shares is
NIL ;
(ii) the number of no par value preference shares is
NIL ; and
(iii) the number of redeemable no par value preference shares is NIL .
* With effect from close of business on 24 December 2002, the Company’s ordinary
shares were sub-divided on a two for one basis, which resulted in the authorised
ordinary share capital being amended from 200,000,000 ordinary par value shares of
50 cents each to 400,000,000 ordinary par value shares of 25 cents each. The sub-
division of the ordinary share capital of the Company was approved by members, in
general meeting on 5 December 2002 – Special Resolution No. 2, and registered by the
50 cents each to 400,000,000 ordinary par value shares of 25 cents each. The sub-
division of the ordinary share capital of the Company was approved by members, in
general meeting on 5 December 2002 – Special Resolution No. 2, and registered by the
Registrar of Companies on 10 December 2002.
#
The creation of the E ordinary shares in the capital of the Company was approved by
members, in general meeting on 11 December 2006 – Special Resolution No. 1, and
registered by the Registrar of Companies on 11 December 2006 and increased the
capital of the Company by R1,070,000.
registered by the Registrar of Companies on 11 December 2006 and increased the
capital of the Company by R1,070,000.
FORM CM44A
REPUBLIC OF SOUTH AFRICA
COMPANIES ACT, 1973
ARTICLES OF ASSOCIATION
of a Company having a share capital
not adopting Schedule 1
[Section 60(1); Regulation 18]
Name of Company
AngloGold Ashanti Limited
A.
The articles of Table A or Table B contained in Schedule 1 to the Companies Act,
1973, shall not apply to the Company.
1973, shall not apply to the Company.
B.
The articles of the Company are as follows:
Reproduced under Government Printer's Copyright Authority 9836 dated 14 July 1994
Registration No. of Company
1944/017354/06
ARTICLES OF ASSOCIATION
INDEX
Article No
Page No
ACCOUNTS
Annual general meeting, to be considered at
Balance sheet and accounts with directors' and auditors'
reports to be sent to each member prior to annual general
meeting
reports to be sent to each member prior to annual general
meeting
Inspection of, by directors only
Proper accounts to be kept
re-opening of, not permissible after being laid before annual
Proper accounts to be kept
re-opening of, not permissible after being laid before annual
general Meeting
Stock Exchanges, accounts to be sent to
Stock Exchanges, accounts to be sent to
Where books of accounts to be kept
48
132
131
130
131
130
135
132
132
131
21
47
46
46
46
46
48
47
47
46
ACQUISITION OF OWN SECURITIES
35.6
16
ACT, Companies Act, 1973, as amended, defined
2
1
ADJOURNMENT OF MEETINGS
45; 52; 54
20; 22
ALLOTMENT, renunciations of
24
12
ALTERATIONS OF CAPITAL (see Capital)
ALTERATIONS OF MEMORANDUM (see Memorandum)
ALTERNATE DIRECTORS (see Directors)
ANNUAL FINANCIAL STATEMENTS
132
47
ANNUAL GENERAL MEETINGS (see Meetings, General)
ARTICLES, These articles, definition of
2
1
AUDITORS, (see Independent External Auditors)
AUTHENTICATION OF DOCUMENTS (see Documents)
BORROWING POWERS
Directors' borrowing powers
Manner of securing borrowed money
97
97
97
Article No
Page No
BUSINESS OF COMPANY
Directors may undertake all branches of
Management and control of, vested in directors
Management and control of, vested in directors
Directors may arrange for any branch of to be carried on
through any subsidiary
through any subsidiary
94
95
96
36
36
36
CAPITAL (SHARES)
Cancellation of shares not taken
Consolidation and division, of
Conversion of, having a par value into stated capital
Consolidation and division, of
Conversion of, having a par value into stated capital
Increase of
Fractions on consolidation of
Modifying rights attached to different classes of shares in
Fractions on consolidation of
Modifying rights attached to different classes of shares in
New shares considered part of present capital
Redeemable preference shares, Company may issue
Reserve at Company's disposal
Redeemable preference shares, Company may issue
Reserve at Company's disposal
Subdivision of
35.3
35.1
35.7; 35.8
32; 35.2
36
35.5
33
8
6
6
35.4
15
15
16
16
14; 15
17
16
15
16
15
7
6
6
16
CAPITALISATION OR BONUS ISSUE (see Reserves)
CAPITAL REDEMPTION RESERVE FUND
126; 128
45; 46
CERTIFICATES
Balance certificates, member entitled to
Definition of
Issue of, member entitled to within one month of allotment
or 21 days after lodgement of transfer
Issue of, member entitled to within one month of allotment
or 21 days after lodgement of transfer
Joint holders, one certificate for
lost or defaced certificates, replacement of
numbering of, if applicable
lost or defaced certificates, replacement of
numbering of, if applicable
payment for, after the first, as the directors shall from time to
time determine
signing of
Transfer offices, any of, may issue
time determine
signing of
Transfer offices, any of, may issue
12
2
12
14
13
14
13
12
12
11
17
17
8
1
1
8
9
9
9
9
8
8
7
10
CHAIRMAN
Casting vote of
-
-
at directors’ meetings
-
at general meetings
107
58
40
24
CLOSING OF REGISTERS
16
9
COMMISSIONS AND BROKERAGE on share issues
Company may pay
9
7
Article No
Page No
CONSOLIDATION OF SHARES
35.1
15
CONSTITUTION
Tables "A" & "B" not to apply
1
1
CONVERSION OF SHARES INTO STOCK
28
13
DEBENTURES
Debentures, creation, transfer of and certificates for
97
37
DEFINITIONS
2
1
DIRECTORS
Absence from meetings, effect of
Alternate
Appointment of, additional: by company
Alternate
Appointment of, additional: by company
by directors
casual vacancies, how filled
contracts with Company by
declarations of interests by
contracts with Company by
declarations of interests by
definition of
insolvency of, effect
disqualification of
insolvency of, effect
disqualification of
fees, expenses, travelling and other, payment of
interests in contracts with Company
lunacy of, effect
interests in contracts with Company
lunacy of, effect
Managing (see Executive Officers)
May be directors of Company’s subsidiaries or associates
Number of
May be directors of Company’s subsidiaries or associates
Number of
Other office of profit, may hold
Powers of (see Powers of Directors)
Proceedings of (see Proceedings of Directors)
Powers of (see Powers of Directors)
Proceedings of (see Proceedings of Directors)
Professional capacity, director may act in
75.7
85
89
92
92
92
92
79
79
79
2
75.1
75.5
75.5
74
79; 80
75.2
77
72
76
76
78
30
33
33
35
35
35
35
35
31
31
31
2
29
30
29
31
30
29
31
29
30
29
30
30
30
Quorum, when director personally interested may count in
Removal of, by ordinary resolution
Remuneration, by ordinary resolution
Remuneration, for special services
Remuneration, by ordinary resolution
Remuneration, for special services
Request to resign, from all other directors, effect of
Resignation of
Resolutions in writing
Rotation and retirement of (see Rotation of Directors)
Resignation of
Resolutions in writing
Rotation and retirement of (see Rotation of Directors)
Vacancies, power to fill/act
Vacation of office, compulsorily, by
Validity of acts
Vacation of office, compulsorily, by
Validity of acts
81
75.4
73
74
74
75.3
75.6
75.6
109
89; 92
75
111
31
29
29
29
29
29
29
30
40
30
40
35
29
41
29
41
DIRECTORS (continued)
Voting by, when personally interested
Voting powers of Company in other companies, exercised by
directors
Voting powers of Company in other companies, exercised by
directors
Article No
82
84
Page No
32
32
DIVIDENDS AND PAYMENTS TO MEMBERS
Apportionment of
Company cannot increase , but may decrease directors’
recommendation on
Company cannot increase , but may decrease directors’
recommendation on
Currency of
Date for payment of
Declaration of, Company or directors may make
Delegation of Company’s obligation in respect of, to its
Date for payment of
Declaration of, Company or directors may make
Delegation of Company’s obligation in respect of, to its
bankers
Foreign currency, payment in
Joint holders, payment to
Foreign currency, payment in
Joint holders, payment to
Legal incapacity of member, dividend rights on
Method of payment of dividend
Rescission before payment of
Method of payment of dividend
Rescission before payment of
to whom payable
unclaimed dividends, forfeiture of
117
118
117
116
117
116
117
120
124; 129
122
27
122; 123
117
122
119
122
119
42
42
42
42
42
42
42
43
44; 46
43
13
13
43; 44
42
43
43
43
43
DOCUMENTS
Authentication of
Electronic archiving of
115
114
114
42
41
41
ELECTRONIC MAIL
Definition of
Notices by
Notices by
2
136
2
48
E ORDINARY SHARES
Conditions attaching to
147
59
EXECUTIVE OFFICERS
101; 102; 103
38; 39
FINANCIAL STATEMENTS (see Annual Financial
Statements)
Statements)
FRACTIONS
Capitalisation or bonus issue, on
Consolidation, on
Consolidation, on
Distribution of surplus profits, arising on
127
36
127
45
17
45
45
GAZETTE
Government Gazette defined
2
2
Article No
Page No
GENERAL MEETINGS
Accidental omission to give notice of; or delay or non-receipt of
notice of
notice of
Adjournment of
Annual, holding of
Chairman of (and casting vote)
Annual, holding of
Chairman of (and casting vote)
General meeting, convening of by directors or on requisition
Lack of quorum
Notice of
Place and time of
Lack of quorum
Notice of
Place and time of
Poll at
Postponement, cancellation of
Proceedings at (see Proceedings at General Meetings)
Postponement, cancellation of
Proceedings at (see Proceedings at General Meetings)
Proxies (see Proxies)
Quorum for
Representation of corporation at
Quorum for
Representation of corporation at
Separate meeting place
Special business:
-
Special business:
-
definition of
-
notice of
votes of members (see Votes of Members)
when general meetings to be held
47
45; 52; 54
42
53; 58
43
52
52
46
42
59
42
59
45
50
51
55
51
55
48
46
46
42; 43; 44
20
20; 22
19
22; 24
19
22
22
20
19
24
19
24
20
21
22
23
22
23
21
20
20
19
INCREASE OF CAPITAL
32
14
INDEMNITY AND RESPONSIBILITY
Company's indemnity to directors and officers
non-liability of directors or other officials of Company for each
other
Company's indemnity to directors and officers
non-liability of directors or other officials of Company for each
other
143
144
51
52
INDEPENDENT EXTERNAL AUDITORS
133; 134; 135
47; 48
INTERPRETATION
Tables "A" & "B" not applicable
Words in articles to mean same as in Act
1
2
1
1
IN WRITING
Definition of
2
2
JOINT HOLDERS
Certificate
Notice to
Votes
Votes
12
137
65
8
50
26
26
Article No
Page No
LEGAL INCAPACITY
Definition of
2
2
LIABILITY OF DIRECTORS AND OFFICERS
144
52
LOCAL OR DIVISIONAL BOARDS, AGENTS AND
COMMITTEES OF THE BOARD
COMMITTEES OF THE BOARD
Attorneys and agents, directors may appoint
Committees, directors may delegate to
Local boards and agencies, directors may appoint
Local boards and agencies, directors may appoint
Proceedings of, same as for directors
99
100
98
110
38
38
37
38
37
40
MANAGEMENT AND CONTROL OF BUSINESS OF
COMPANY
COMPANY
95
36
MANAGING AND EXECUTIVE DIRECTORS AND
MANAGERS
MANAGERS
Appointment of, by directors
Powers of
Remuneration of
Remuneration of
Retirement by rotation, liability for
101
103
103
74
102
38
39
39
29
38
38
MEETINGS, GENERAL (see General Meetings)
MEMBERS
Certificate, entitlement to
Death, or insolvency – transmission of shares on
Definition of
Demand for a poll by
Definition of
Demand for a poll by
12
25; 26
2
56
8
12
1
23
Financial statements – rights to receive
Inspection of books by
Inspection of books by
Notices to
Proxy, appointment of
Register of (see Register of Members)
Proxy, appointment of
Register of (see Register of Members)
Transfer of shares (see Transfer of Shares)
Votes of
Votes of
132
131
131
136
66; 67; 68; 69
63; 64; 65
47
46
46
48
26; 27
25; 26
MEMORANDUM
Alteration of
35.9
16
MEMBERS, VOTES OF (see Votes of Members)
Article No
Page No
MINUTE BOOK
to be considered prima facie evidence of proceedings at
general meetings
general meetings
62
25
MODIFICATION OF RIGHTS
class meetings for
new shares ranking pari passu, not a modification of existing
rights
written consent for
rights
written consent for
39
40
39
18
19
18
MONTH
Definition of
2
2
NOTICES
Accidental omission to give, or delay or non-receipt of
Address of member for service of
Address of member for service of
Advertisement of
Binding on successors in title to securities
Deemed receipt of
Binding on successors in title to securities
Deemed receipt of
Definition of
Directors' meetings, of
Effect of accidental omission to give
Directors' meetings, of
Effect of accidental omission to give
How days of notice of general meeting to be counted
Joint holders, to
Legal incapacity, notice valid despite member under
Joint holders, to
Legal incapacity, notice valid despite member under
Manner of giving
Member's right to receive
on whom binding
Member's right to receive
on whom binding
period of
Stock Exchanges, notices of general meetings to be given to
Time when notice deemed served
Stock Exchanges, notices of general meetings to be given to
Time when notice deemed served
47
136
136
136
138
136.2
2
136
141
141
46
137
139
136
136
136
136
139
140
136
140
136
136.2
20
48
48
48
48
50
49
49
3
48
51
20
50
51
20
50
50
48
48
48
48
50
51
48
51
48
49
ODD-LOT OFFERS
38
18
OFFICE
Definition of
2
3
PAYMENTS TO MEMBERS
in foreign currency
116
124; 129
42
44; 46
POLL
57
24
POWERS OF DIRECTORS
Alternate directors, power to appoint
Borrowing powers
Borrowing powers
85
97
33
37
POWERS OF DIRECTORS (continued)
Branch or subsidiaries, directors may conduct business
through
Capitalisation or distribution of profits
co-option to board, by directors
Capitalisation or distribution of profits
co-option to board, by directors
delegation to committee any of their powers
documents, authentication of
local boards and committees, power to appoint
(See Local, Divisional Boards, Agents and Committees of the
documents, authentication of
local boards and committees, power to appoint
(See Local, Divisional Boards, Agents and Committees of the
Board)
management of business of Company vested in directors
pensions to directors, ex-directors, officers, employees and
management of business of Company vested in directors
pensions to directors, ex-directors, officers, employees and
families, directors may pay
quotation of Company's shares on Stock Exchanges, power
of directors to obtain
quotation of Company's shares on Stock Exchanges, power
of directors to obtain
Article No
94
127
92
100
115
115
95
91
93
Page No
36
45
35
45
35
38
42
42
36
35
35
PREFERENCE SHARES
Conditions attaching to A
Conditions attaching to B
146.2
146.3
53
55
PROCEEDINGS AT GENERAL MEETINGS
Adjournment of general meetings, and notice of adjournment
Casting vote of chairman
Chairman of general meetings
Chairman's declaration of result on show of hands conclusive
evidence
Chairman of general meetings
Chairman's declaration of result on show of hands conclusive
evidence
General nature of business to be disclosed in notice
convening
Minutes of (see Minutes)
convening
Minutes of (see Minutes)
no amendment of resolution proposed without approval
objections to voting or voter at
procedure if no quorum
objections to voting or voter at
procedure if no quorum
procedure if poll demanded
45; 52; 54
58
53
53
56
49.1
49.2
61
52
59
52
59
20; 22
24
22
22
23
21
21
24
22
24
22
24
Quorum at general meetings
Representation of corporation at
Resolutions at, passed on show of hands unless poll
demanded
Resolutions at, passed on show of hands unless poll
demanded
Result of poll deemed to be resolution
Separate meeting place
Scrutineers, to conduct poll
Separate meeting place
Scrutineers, to conduct poll
Special and ordinary business, definition of
Votes, admission or rejection of
Votes, admission or rejection of
50
51
56
57
55
60
55
60
48
61
61
21
22
23
24
23
24
23
24
21
24
24
Article No
Page No
PROCEEDINGS OF DIRECTORS OR COMMITTEES
acts of directors or committees valid notwithstanding defective
appointment
appointment
appointment of committees (see Local Boards, Agents and
Committees)
chairman and deputy chairman, election of
Committees)
chairman and deputy chairman, election of
chairman's casting vote
convening of meetings of
directors' resolutions signed by all available directors
held by alternative means of communication/media
convening of meetings of
directors' resolutions signed by all available directors
held by alternative means of communication/media
meetings of directors, procedure at
meeting may exercise all directors' powers
notice of
meeting may exercise all directors' powers
notice of
quorum
vacancies, meeting only for filling if below minimum
voting at
vacancies, meeting only for filling if below minimum
voting at
111
106
107
104
107
104
109
112
104
112
104
108
136
104
136
104
105
107
107
41
40
40
39
40
39
40
41
39
41
39
40
48
39
48
39
39
40
40
PROFITS
Directors powers on capitalisation or distribution of
127
45
PROXIES
Depositing at branch office outside South Africa
Instrument appointing a proxy may be created by electronic
or other means
Instrument appointing a proxy may be created by electronic
or other means
Entitled to vote on poll only
Form of proxy instrument
Legal incapacity of member, validity of proxy after
Form of proxy instrument
Legal incapacity of member, validity of proxy after
May confer power of delegation or sub-delegation
Member of Company, proxy need not be
Must be received 48 hours before meeting
Several proxies, member may appoint
Member of Company, proxy need not be
Must be received 48 hours before meeting
Several proxies, member may appoint
Valid for maximum of 6 months
Validity at adjourned meetings
69.6; 70
69
67
69
67
69
71
69
67
69
67
69
66
69
66
69
69
26; 28
26
26
26
26
26
28
26
26
26
26
26
26
26
26
26
26
QUORUM
Directors’ meetings
General meetings
General meetings
104
50
39
21
21
REGISTER OF MEMBERS
Closing of
Branch, directors may open
Definition of
Branch, directors may open
Definition of
Main register, to be kept
Registers, main or branch, closing of
Registers, main or branch, closing of
sub-register, definition of
16
15
2
15
16
2
9
9
3
9
3
9
9
4
4
Article No
Page No
REQUISITION OF GENERAL MEETING
43
19
RESERVES
Capitalisation of (for capitalisation or bonus issue)
Directors may set aside profits to
Fractions on distribution of
Investment of
Fractions on distribution of
Investment of
use of
126
125
125
127
125
125
125
125
45
44
44
45
44
44
44
44
RESOLUTION IN WRITING SIGNED BY DIRECTORS
109
40
ROTATION OF DIRECTORS
Notice of intention to propose a person as director
Number to retire at Annual General Meeting
Retiring directors eligible for re-election
Vacated offices to be filled at general meetings
Retiring directors eligible for re-election
Vacated offices to be filled at general meetings
When retiring directors may continue in office
Who to retire by rotation
87
86
87
86
87
88
87
86
87
86
34
33
34
33
34
34
34
33
34
33
SECRETARY
Appointment of
Definition of
113
2
41
4
SECURITIES
Acquisition of own by the Company
Allotment of
Certificated, definition of
Certificates for (see Certificates)
Certificated, definition of
Certificates for (see Certificates)
Commission on issue of
Consolidation of
Control of unissued
Consolidation of
Control of unissued
Definition
Fractions of (see Fractions)
General meeting to determine rights attaching to
Fractions of (see Fractions)
General meeting to determine rights attaching to
Issue of, as Company in general meeting may determine
35
6
2
9
35
6
2
2
7
7
7
15
6
1
7
15
6
4
4
6
6
6
Joint holders
Legal incapacity of member, title to share
Modifying rights attached to different classes of
Numbering of, if applicable
Modifying rights attached to different classes of
Numbering of, if applicable
Power to pay commissions for subscription of shares
preference (see Preference Shares)
Redeemable preference, power to create
preference (see Preference Shares)
Redeemable preference, power to create
Registered holders only recognised
14
26
39
12
39
12
9
8
10
9
12
18
18
8
7
7
7
SECURITIES (continued)
Subdivision and consolidation of (see Capital (Share)
Transfers of certificated (see Transfer of Securities)
Transmission of certificated, on death of member
Transmission of certificated, on death of member
Uncertificated
Article No
25
2
Page No
12
5
SHARE CAPITAL (see Capital)
SHAREHOLDERS (see Members)
SHAREHOLDERS’ MEETINGS (see General Meetings)
SHARE PREMIUM ACCOUNT
Capitalisation or distribution of
126; 128
45; 46
SUB-DIVISION OF SHARES
35.4
16
TRANSFER OFFICE
Definition of
to be kept at places decided by directors
2
17
4
10
TRANSFER OF SECURITIES
Instrument of transfer, form of
Member may transfer in common form
Member may transfer in common form
Office to which transfer form must be sent
Power of directors to refuse to register transfer in other
circumstances
Power of directors to refuse to register transfer in other
circumstances
Powers of attorney to remain in force until written notice of
revocation
Refusal of directors to register, notice of to be given
revocation
Refusal of directors to register, notice of to be given
Renunciations of allotment
Securities of deceased members
Signatures, on instruments of transfer
Securities of deceased members
Signatures, on instruments of transfer
Transfer deed, form of
Transfer instrument, to be retained by Company
Transfers to be signed by transferor, by transferee only when
required
Transfer instrument, to be retained by Company
Transfers to be signed by transferor, by transferee only when
required
19
18
18
18
18
21
23
22
24
18
24
18
19
18
20
18
20
19
10
10
10
10
10
11
11
11
12
10
12
10
10
10
11
10
11
10
TRANSFER SECRETARY
Definition of
2
5
Article No
Page No
TRANSMISSION OF CERTIFICATED SECURITIES
Deceased member, only executors or administrators
recognised
recognised
Joint holders, only survivors of recognised
Person becoming entitled through legal incapacity of
member, rights to transfer and vote
Person becoming entitled through legal incapacity of
member, rights to transfer and vote
Persons becoming entitled through legal incapacity of
member, rights to dividend
member, rights to dividend
25
25
25
26
27
12
12
12
12
13
TRUSTEES, PAYMENTS TO
123
44
TRUSTS
Company not bound to recognise trusts of shares
10
7
UNCERTIFICATED SECURITIES
146
53
UNCLAIMED DIVIDENDS
119
43
VOTES OF MEMBERS
Body corporate member, voting by representative
Joint holders
Poll, on
Joint holders
Poll, on
Proxies (see Proxies)
Show of hands, on
Special provisions as to (if any)
Show of hands, on
Special provisions as to (if any)
Validity of votes by proxy (see Proxies)
When member is a body corporate
When member is a body corporate
64
65
63
63
63
63
64
25
26
25
25
25
25
25
WAIVER BY STOCK EXCHANGE
145
52
WINDING-UP
Authority of liquidators to distribute assets
How assets are to be distributed
142
142
142
51
51
51
YEAR
Definition of
2
5
1
TABLES A AND B
1.
Neither the regulations of Table “A” nor of Table “B” contained in Schedule I to the
Companies Act, 1973 or in any consolidation or re-enactment thereof shall apply to
the Company.
INTERPRETATION
2.
The headnotes to these articles are for reference purposes only and shall not affect
the interpretation or construction thereof. In the interpretation of these articles, if
not inconsistent with the subject or context, the words standing in the first column
not inconsistent with the subject or context, the words standing in the first column
of the following table shall bear the meanings set opposite to them respectively in the
second column hereof:
second column hereof:
WORDS
MEANINGS
Act
the Companies Act, 1973, as amended from time to
time or any re-enactment thereof.
articles
these articles of association as now framed or as from
time to time altered by special resolution.
CAS Act
the Custody and Administration of Securities Act,
1992, as amended from time to time.
certificate
a certificate evidencing title to securities.
certificated securities
securities evidenced by a certificate.
CSD
a central securities depository as defined in the CAS
Act.
2
directors
the directors for the time being of the Company and
the alternate directors thereof or, as the case may be,
the alternate directors thereof or, as the case may be,
the directors assembled as a board at which a quorum
is present.
is present.
electronic mail
includes, but is not limited to, information generated,
displayed, sent, received or stored by electronic means,
displayed, sent, received or stored by electronic means,
including websites, electronic data exchange and
electronic mail, as determined by the directors from
electronic mail, as determined by the directors from
time to time.
Gazette
the Government Gazette of South Africa.
in writing
written or produced by any substitute for writing or
partly written and partly so produced and including
partly written and partly so produced and including
printing, typewriting or lithography or any other
mechanical process or partly one and partly another.
mechanical process or partly one and partly another.
legal
incapacity
death; insolvency; or judicial management or
liquidation, or placing under curatorship by reason of
liquidation, or placing under curatorship by reason of
insanity or prodigality; infancy or minority; or marriage
of a female member subject to the marital power
of a female member subject to the marital power
(whether in community of property or out of
community of property); or any other event which
community of property); or any other event which
satisfies the directors that a member is deprived of his
legal capacity to act and that it is vested in some other
legal capacity to act and that it is vested in some other
person.
member
the registered holder of a share in the Company.
month
calendar month.
3
notices
includes, but is not limited, to any one or more of the
following- annual reports, circulars, dividend notices,
following- annual reports, circulars, dividend notices,
interest notices, interim reports, listings particulars,
proxy forms, quarterly reports and any such other
proxy forms, quarterly reports and any such other
information as the Company may wish to distribute to
such persons as are entitled to receive same, in
such persons as are entitled to receive same, in
accordance with the provisions of these articles
and/or the Act and/or the rules of any stock exchange
and/or the Act and/or the rules of any stock exchange
upon which any shares of the Company are listed or
quoted.
quoted.
office
the registered office of the Company.
paid up
paid up or credited as paid up.
participant
a depository institution accepted by a CSD as a
participant in terms of the CAS Act.
participant in terms of the CAS Act.
proxy
a person duly appointed in accordance with these
articles to represent a member at any meeting or
articles to represent a member at any meeting or
adjourned meeting.
proxy instrument
a written instrument appointing a proxy whether in
terms of a form of proxy, power of attorney or other
document, complying with article 69.
document, complying with article 69.
register
the register of members of the Company and any
branch register kept by the Company pursuant to
branch register kept by the Company pursuant to
these articles.
4
secretary
the secretary of the Company for the time being or
any person duly authorised thereto by the directors
any person duly authorised thereto by the directors
acting in the place of such secretary for the time being
or any person appointed by the directors to perform
or any person appointed by the directors to perform
any of the duties of the secretary; or any person duly
authorised to represent a body corporate or a
authorised to represent a body corporate or a
partnership which is the secretary of the Company.
securities
shares, debentures and/or other securities of the
Company.
South Africa
the Republic of South Africa as constituted from time
to time.
Statutes
the Act and every Ordinance or Act from time to time
in force concerning companies and affecting the
Company.
Company.
sub-register
the record of uncertificated securities administered
and maintained by a participant (which forms part of
and maintained by a participant (which forms part of
the register).
transfer office
the office and any office maintained for the purpose
of receiving for registration transfers of shares,
debentures or other securities of the Company.
debentures or other securities of the Company.
5
transfer secretary
any person appointed by the directors to act for the
time being in place of or in addition to the secretary
time being in place of or in addition to the secretary
for the purpose of registering transfers of shares,
debentures or other securities of the Company,
debentures or other securities of the Company,
keeping registers and other records required by the
Act to be kept at the office or the transfer office and
Act to be kept at the office or the transfer office and
issuing certificates of title to shares, debentures or
other securities of the Company and any person
other securities of the Company and any person
appointed to be a secretary to any local committee
under article 17 hereof; or any person duly authorised
under article 17 hereof; or any person duly authorised
to represent a body corporate which is the transfer
secretary of the Company.
secretary of the Company.
uncertificated securities
securities transferable without a written instrument
and which are not evidenced by a certificate.
and which are not evidenced by a certificate.
year
calendar year.
3.
Words importing the singular number only shall include the plural number and vice
versa.
Words importing the masculine gender only shall include the feminine gender.
Words importing persons shall where the context so admits include firms and bodies
corporate.
corporate.
4.
The expression “share” shall where the context so admits include debentures,
options and other securities.
The expression “dividend” shall where the context so admits include bonus; but shall
not, unless otherwise resolved by the Company in general meeting, include any
not, unless otherwise resolved by the Company in general meeting, include any
amount capitalised under articles 126 and 127.
The expression “meeting” shall include adjourned meeting.
6
The expression “sign” or “signature” includes respectively lithography, printing and
names impressed with a rubber or other kind of stamp or by any mechanical means.
names impressed with a rubber or other kind of stamp or by any mechanical means.
Reference to any provision of the Act shall be construed as a reference to such
provision as modified or re-enacted by any Statute for the time being in force.
provision as modified or re-enacted by any Statute for the time being in force.
5.
Subject to articles 2, 3 and 4, any words or expressions defined in the Act, shall, if
not inconsistent with the subject or context, bear the same meaning in these articles.
SHARES
6.
Subject always to the provisions of Sections 221 and 222 of the Act, the listings
requirements of any stock exchange on which the shares of the Company are listed
requirements of any stock exchange on which the shares of the Company are listed
or quoted and these articles, any shares for the time being unissued (whether forming
part of the original or any increased capital) shall, subject as hereinafter provided,
part of the original or any increased capital) shall, subject as hereinafter provided,
only be disposed of or dealt with in such manner as the Company in general meeting
may have directed or may direct, but so that the Company in general meeting may
may have directed or may direct, but so that the Company in general meeting may
resolve that all or any of such shares shall be at the disposal of the directors, who
may in such event allot, grant options over, or otherwise deal with or dispose of
may in such event allot, grant options over, or otherwise deal with or dispose of
them to such persons at such times, and generally on such terms and conditions, and
for such consideration, whether payable in cash or otherwise, as they may think
proper; but so that no shares shall be issued at a discount except in accordance with
Section 81 of the Act.
Section 81 of the Act.
7.
Without prejudice to any special rights previously conferred on the holders of
existing shares and subject to any provisions of these articles, any share in the
Company may be issued with or have attached thereto such preferred, deferred or
Company may be issued with or have attached thereto such preferred, deferred or
other special rights or such restrictions, whether in regard to dividend, return of
share capital or otherwise, and (subject as provided by the Act) such limited or
share capital or otherwise, and (subject as provided by the Act) such limited or
suspended rights to voting as the Company in general meeting may from time to
time determine; provided that the Company may by resolution passed at a general
time determine; provided that the Company may by resolution passed at a general
meeting direct that shares shall be issued by the directors on such terms and
7
conditions, and with such rights, privileges or restrictions attached thereto as the
directors may determine.
directors may determine.
8.
Subject to the provisions of Section 98 of the Act, the conditions of issue of any
preference shares may, with the sanction of a special resolution, provide or may be
varied so that they are, or at the option of the Company are to be liable, to be
varied so that they are, or at the option of the Company are to be liable, to be
redeemed on such terms and in such manner as the Company may by such or
subsequent special resolution determine.
subsequent special resolution determine.
9.
The Company may exercise the powers of paying commissions conferred by Section
80 of the Act; provided that the rate or amount of the commission paid or agreed to
be paid and the number of shares which persons have agreed for a commission to
be paid and the number of shares which persons have agreed for a commission to
subscribe absolutely or conditionally will be disclosed in the manner required by the
said section, and that such commission shall not exceed 10% (ten per centum) of the
price at which the shares in respect whereof the same is paid are issued. Such
commission may be satisfied by the payment of cash. The Company may also on any
commission may be satisfied by the payment of cash. The Company may also on any
issue of shares pay such brokerage as may be lawful.
10.
No person shall be recognised by the Company as holding any security upon any
trust, and no notice of any trust expressed or implied or constructive shall be entered
in the register or be receivable by the Company, and the Company shall not, except
as otherwise provided by these articles or by the Statutes or by any Order of a Court
as otherwise provided by these articles or by the Statutes or by any Order of a Court
of competent jurisdiction, be bound by or compelled in any way to recognise any
equitable, contingent, future, partial or representative interest in any security or any
equitable, contingent, future, partial or representative interest in any security or any
right in or in respect of any security, other than an absolute right to the entirety
thereof in the registered holder and such other rights in case of transmission thereof
thereof in the registered holder and such other rights in case of transmission thereof
as are hereinafter mentioned.
CERTIFICATES
11.
Certificates in respect of certificated securities shall be issued under the authority of
the directors or of a local committee or board when authorised thereto by the
the directors or of a local committee or board when authorised thereto by the
directors, in such manner and form as the directors may from time to time prescribe,
8
and shall (subject as hereinafter provided) bear the autographic signatures of two
directors or of one director and one officer authorised thereto by the directors; or of
directors or of one director and one officer authorised thereto by the directors; or of
two members of a local committee or board or of one member and the secretary of
such local committee or board, provided that:
such local committee or board, provided that:
11.1
the directors may by resolution determine either generally or in any particular
case or cases that the signatures of such directors or director and officer or
members or member and secretary (or any of them) need not be autographic
members or member and secretary (or any of them) need not be autographic
but may be in any other form;
11.2
the directors and the Company shall comply with Sections 94 and 126 of the
Act.
For the purposes of this article only the expression “sign” or “signature” shall not
include names impressed with a rubber or other kind of stamp.
include names impressed with a rubber or other kind of stamp.
12.
Every person whose name is entered as a member in the register shall be entitled,
without payment, to receive within one month after allotment or twenty-one days
after lodgement for transfer of one certificate for all his certificated securities of any
one class, or several certificates each for one or more of his certificated securities of
one class, or several certificates each for one or more of his certificated securities of
such class upon payment of such sum for every certificate after the first, as the
directors shall from time to time determine. Every certificate of certificated
directors shall from time to time determine. Every certificate of certificated
securities shall specify the number of shares in respect of which it is issued and the
amount paid up thereon at the date of issue. In the case of a member who has
amount paid up thereon at the date of issue. In the case of a member who has
transferred a part of his holding of certificated securities of any class he shall be
entitled to receive a certificate free of charge for the balance of his holding, provided
entitled to receive a certificate free of charge for the balance of his holding, provided
that notwithstanding anything herein contained or implied to the contrary where
certificated securities are registered in the names of two or more persons they shall
certificated securities are registered in the names of two or more persons they shall
be treated as one member for the purposes of this article.
9
13.
If a certificate be defaced, lost or destroyed, it may be replaced on payment of any
stamp duty payable on the new certificate and on such terms (if any) as to evidence
and indemnity and payment of the out-of-pocket expenses of the Company of
and indemnity and payment of the out-of-pocket expenses of the Company of
investigating such evidence and, in the case of loss or destruction, of advertising the
same, as the directors may think fit and, in the case of defacement, on delivery of the
same, as the directors may think fit and, in the case of defacement, on delivery of the
old certificate to the Company.
14.
The certificate for certificated securities registered in the names of two or more
persons shall be delivered to the person first named in the register in respect thereof,
or to his authorised agent, and in case of the legal incapacity of any one or more of
the joint registered holders of any shares, the survivor then first named in the register
the joint registered holders of any shares, the survivor then first named in the register
shall be the only person recognised by the Company as being entitled to such
certificate, or any new certificate which may be issued in place thereof, provided
certificate, or any new certificate which may be issued in place thereof, provided
always that the Company shall not be bound to register more than four persons as
the holders of any certificated security.
the holders of any certificated security.
REGISTER OF MEMBERS
15.
The directors shall cause to be kept a register of members at the place and in the
manner specified in the Statutes and may cause to be kept a branch register or
registers in any foreign country or countries and, subject to the provisions of the
Statutes, make and vary such regulations as they may think fit respecting the keeping
Statutes, make and vary such regulations as they may think fit respecting the keeping
of any such branch registers.
TRANSFER OF SECURITIES
16.
The transfer books and register may upon notice being given by advertisement in the
Gazette and a newspaper circulating in the district in which the office is situate, and
Gazette and a newspaper circulating in the district in which the office is situate, and
in the case of any branch register in the manner required by the Statutes, be closed
during such time as the directors may think fit, not exceeding in the whole sixty days
during such time as the directors may think fit, not exceeding in the whole sixty days
in each year.
10
17.
Transfer offices shall be maintained at such place or places whether in South Africa
or elsewhere, as the directors may from time to time prescribe. The directors may
appoint local committees (to be designated “Registrars” or by such other title (if any)
appoint local committees (to be designated “Registrars” or by such other title (if any)
as the directors may think fit) whether in South Africa or elsewhere consisting of two
or more individual persons or of a body corporate to whom the directors may
or more individual persons or of a body corporate to whom the directors may
delegate all or any of their powers, authorities and discretions with regard to the
registration of transfers, the keeping of registers and other records required by the
registration of transfers, the keeping of registers and other records required by the
Act to be kept at the office or the transfer office and the issuing of certificates and
may appoint a person to be a secretary to such local committee or authorise such
may appoint a person to be a secretary to such local committee or authorise such
local committee to appoint a person to be its secretary.
18.
Subject to the provisions of the law for the time being in force relating to stamp duty
or duty upon the estates of deceased persons or to any other statutory restrictions on
transfer and to the provisions of these articles any member may transfer all or any of
his certificated securities (to the extent that such member is not prevented from
his certificated securities (to the extent that such member is not prevented from
doing so in terms of Section 91A of the Act), but every transfer must be in writing in
the usual common form or in such other form as the directors may approve and
the usual common form or in such other form as the directors may approve and
must be left at the transfer office where the register of transfers relating to the
security comprised therein is for the time being kept or at such other place as the
security comprised therein is for the time being kept or at such other place as the
directors may prescribe and accompanied (unless the directors either generally or in
any particular case otherwise resolve) by the certificate for the securities to be
transferred and such other evidence (if any) as the directors or other person in charge
of such register may require to prove the title or capacity of the intending transferor
of such register may require to prove the title or capacity of the intending transferor
or transferee or the rights of the intending transferor to transfer the securities;
provided that any transfer instruction given by telefax or electronic mail shall be
provided that any transfer instruction given by telefax or electronic mail shall be
regarded for this purpose as having been given in writing.
19.
The instrument of transfer of a certificated security shall be signed by the transferor
and the transferee, unless the signature of the transferee is not required:
19.1
by any law from time to time in force in South Africa, or
11
19.2
where the directors decide at their discretion to dispense therewith in such case
or cases as they may deem fit.
20.
The transferor shall be deemed to remain the holder of the certificated securities
transferred until the name of the transferee is entered in the register in respect
thereof. All instruments of transfer in respect of certificated securities, when
registered, shall either be retained by the Company or disposed of in such manner as
registered, shall either be retained by the Company or disposed of in such manner as
the directors shall from time to time decide; but any instrument of transfer in respect
of certificated securities, which the directors may decline to register shall (unless the
of certificated securities, which the directors may decline to register shall (unless the
directors resolve otherwise) be returned on demand to the person who delivered it.
21.
The directors may decline to register any transfer of certificated securities unless:
21.1
the instrument of transfer, duly stamped, is lodged with the Company,
accompanied (unless the directors either generally or in any particular case
otherwise resolve) by the certificate for the securities to which it relates, and
otherwise resolve) by the certificate for the securities to which it relates, and
such other evidence as the Company may reasonably require to show the right
or capacity of the transferor to make the transfer and of the transferee to
or capacity of the transferor to make the transfer and of the transferee to
accept it; and
21.2
the instrument of transfer is in respect of only one class of security; or
21.3
the transfer, if in respect of securities which are the subject of any of the
Company’s incentive schemes, is permitted in terms of the incentive scheme
concerned.
22.
If the directors refuse to register a transfer they shall within thirty days after the date
on which the instrument of transfer was lodged, send to the transferee notice of the
refusal.
refusal.
23.
All powers of attorney or other authorities granted by members for the purpose of
transferring or accepting the transfer of certificated securities, which may be lodged,
produced or exhibited with or to the Company at the transfer office where the
produced or exhibited with or to the Company at the transfer office where the
register of transfers relating to such securities is kept, shall, as between the Company
12
and the grantor of such powers or other authorities, be taken and deemed to
continue and remain in full force and effect, and the Company may allow the same to
continue and remain in full force and effect, and the Company may allow the same to
be acted upon until such time as express notice in writing of the revocation (“the
revocation notice”) of the same shall have been given and lodged at the place
revocation notice”) of the same shall have been given and lodged at the place
aforesaid. Even after the giving and lodging of such revocation notice, the Company
shall be entitled to give effect to any instrument signed under the authority and
shall be entitled to give effect to any instrument signed under the authority and
certified by any officer of the Company as being in order before the giving and
lodging of such notice. The Company shall not be bound to allow the exercise of
lodging of such notice. The Company shall not be bound to allow the exercise of
any act or matter by an agent for a member or intending transferee of certificated
securities unless a certified copy of such agent's authority be produced and filed with
securities unless a certified copy of such agent's authority be produced and filed with
the Company.
24.
Nothing contained in these articles shall preclude the Company from recognising a
renunciation of the allotment of any security by the allottee in favour of some other
person.
TRANSMISSION OF CERTIFICATED SECURITIES
25.
Subject always to the law for the time being in force relating to stamp duty or duty
upon the estates of deceased persons, the executors or administrators of a deceased
member (not being one of several joint holders) shall be the only persons recognised
member (not being one of several joint holders) shall be the only persons recognised
by the Company as having any title to a certificated security registered in the name of
such member, and in the case of the death of any one or more of the joint holders of
such member, and in the case of the death of any one or more of the joint holders of
any certificated security, the survivors or survivor, or the executor or administrator of
the deceased, shall be the only person or persons recognised by the Company as
the deceased, shall be the only person or persons recognised by the Company as
having any title to or interest in such certificated security, but nothing herein shall
release the estate of a deceased joint holder, from any liability in respect of any
release the estate of a deceased joint holder, from any liability in respect of any
certificated security jointly held by him.
26.
Any person becoming entitled to a certificated security in consequence of the legal
incapacity of a member, or by any lawful means otherwise than by transfer in
accordance with these articles, upon producing such evidence as may sustain the
character in respect of which he proposes to act under this article or of his title, as
character in respect of which he proposes to act under this article or of his title, as
13
the directors may think sufficient, may, with the consent of the directors (which they
shall not be under obligation to give) either be registered himself as a member in
shall not be under obligation to give) either be registered himself as a member in
respect of such certificated securities or elect to have some person nominated by him
registered as the transferee thereof. If the person so becoming entitled shall elect to
registered as the transferee thereof. If the person so becoming entitled shall elect to
be registered himself he shall deliver or send to the Company a notice in writing
signed by him stating that he so elects. If he shall elect to have his nominee
signed by him stating that he so elects. If he shall elect to have his nominee
registered he shall testify his election by executing to his nominee a transfer of such
certificated security. All the limitations, restrictions and provisions of these articles
certificated security. All the limitations, restrictions and provisions of these articles
relating to the right to transfer and the registration of certificated securities shall be
applicable to any such notice of transfer or registration under this article as if the
applicable to any such notice of transfer or registration under this article as if the
legal incapacity or other means had not occurred and the notice of transfer were a
transfer executed by the member.
transfer executed by the member.
27.
Save as otherwise provided by or in accordance with these articles, a person
becoming entitled to a certificated security in consequence of the legal incapacity of a
member or by any lawful means otherwise than by transfer in accordance with these
member or by any lawful means otherwise than by transfer in accordance with these
articles shall (upon supplying to the Company such evidence as the directors may
reasonably require to show this title to the securities concerned) be entitled to the
reasonably require to show this title to the securities concerned) be entitled to the
same dividends and other advantages to which he would be entitled if he were the
registered holder of the certificated securities except that he shall not be entitled in
registered holder of the certificated securities except that he shall not be entitled in
respect thereof to exercise any right conferred by membership in relation to meetings
of the Company until he shall have been registered as a member in respect of such
of the Company until he shall have been registered as a member in respect of such
securities.
CONVERSION OF SHARES INTO STOCK
28.
The Company may from time to time by special resolution convert any paid-up
shares into stock, and may reconvert any stock into paid-up shares of any
denomination.
denomination.
14
29.
The holders of stock may transfer their respective interests therein or any part of
such interests, in such manner as the directors or the Company in general meeting
shall direct, but in default of any such direction, then in the same manner and subject
shall direct, but in default of any such direction, then in the same manner and subject
to the same regulations as and subject to which any paid-up shares may be
transferred, or as near thereto as circumstances will permit; but the directors may
transferred, or as near thereto as circumstances will permit; but the directors may
from time to time, if they think fit, fix the minimum amount of stock transferable,
which shall not exceed the nominal amount of the shares from which the stock
which shall not exceed the nominal amount of the shares from which the stock
arose, and direct that fractions of such minimum shall not be dealt with, but with
power, nevertheless at their discretion to waive such rules in any particular case.
power, nevertheless at their discretion to waive such rules in any particular case.
30.
The holders of stock shall according to the amount of the stock held by them have
the same rights, privileges and advantages as regards participation in profits, voting at
general meetings of the Company, and other matters, as if they held the shares from
general meetings of the Company, and other matters, as if they held the shares from
which the stock arose, but no such privilege or advantage (except participation in the
profits and in assets on a reduction of capital or a winding up) shall be conferred by
profits and in assets on a reduction of capital or a winding up) shall be conferred by
any amount of stock which would not, if existing in shares, have conferred such
privilege or advantage. No such conversion shall affect or prejudice any preference
privilege or advantage. No such conversion shall affect or prejudice any preference
or other special privilege.
31.
All such of the provisions of these articles as are applicable to shares shall apply to
stock.
INCREASE AND REDUCTION OF CAPITAL
32.
The Company may:
32.1
from time to time by special resolution increase its capital by such sum divided
into shares of such amount, or may constitute shares of no par value or may
increase the number of its shares of no par value to such number, as the
increase the number of its shares of no par value to such number, as the
special resolution shall prescribe.
32.2
increase its share capital constituted by shares of no par value by transferring
reserves or profits to the stated capital, with or without a distribution of shares.
15
33.
Except so far as otherwise provided by the resolution creating it, by the conditions of
issue, or by these articles, any capital raised by the creation of new shares shall be
considered part of the present capital and shall be subject to the provisions herein
considered part of the present capital and shall be subject to the provisions herein
contained with reference to transfer and transmission, and otherwise as if it had been
part of the present capital.
part of the present capital.
34.
The Company may from time to time, subject to such requirements as may be
imposed by the Act, the rules and requirements of any stock exchange on which the
securities of the Company are or may be listed or quoted, by ordinary resolution,
securities of the Company are or may be listed or quoted, by ordinary resolution,
reduce, dispose of, distribute or otherwise deal with in any manner whatsoever, the
Company’s share capital, share premium, stated capital, reserves and/or capital
Company’s share capital, share premium, stated capital, reserves and/or capital
redemption reserve fund.
CONSOLIDATION, SUBDIVISION, ACQUISITION OF OWN SECURITIES,
CONVERSION OF PREFERENCE SHARES, ALTERATION OF
MEMORANDUM
35.
The Company may from time to time by special resolution:
35.1
consolidate and divide all or any part of its share capital into shares of larger
amount than its existing shares, or consolidate and reduce the number of the
issued shares of no par value;
35.2
increase the number of its issued no par value shares without an increase of its
stated capital;
35.3
cancel any shares which, at the time of passing of the resolution in respect
thereof, have not been taken or agreed to be taken by any person, and diminish
the amount of its share capital by the amount of the shares so cancelled;
the amount of its share capital by the amount of the shares so cancelled;
16
35.4
subdivide its shares or any of them into shares of smaller amount than is fixed
by or pursuant to its memorandum of association and so that the resolution
whereby any share is subdivided, may determine that, as between the holders
whereby any share is subdivided, may determine that, as between the holders
of the shares resulting from such subdivision one or more of the shares may
have such preferred or other rights over, or may have such qualified or
have such preferred or other rights over, or may have such qualified or
deferred rights, or be subject to any such restrictions as compared with the
other or others as the Company has power to attach to unissued or to new
other or others as the Company has power to attach to unissued or to new
shares;
35.5
vary, modify or amend any rights attached to any shares whether issued or not
(including the conversion of any shares into preference shares) subject to any
consent or sanction required from the holders of that and/or any other class of
shares under article 39;
shares under article 39;
35.6
subject to the listings requirements of any stock exchange on which the
securities of the Company are listed or quoted, approve the acquisition of
securities issued by the Company or, if the Company is a subsidiary, issued by
securities issued by the Company or, if the Company is a subsidiary, issued by
its holding company, which approval may be a general approval subject to the
provisions of the Statutes or a specific approval for a particular acquisition;
provisions of the Statutes or a specific approval for a particular acquisition;
35.7
convert all its shares of one class having a par value into stated capital
constituted by shares of no par value or such of its stated capital as is
constituted by shares of no par value or such of its stated capital as is
constituted by shares of no par value into share capital consisting of shares
having a par value;
having a par value;
35.8
convert any of its shares, whether issued or not, into shares of another class;
35.9
alter the provisions of its memorandum of association with respect to the
objects and powers of the Company.
17
36.
Anything done in pursuance of article 35 shall be done in a manner provided and
subject to any conditions imposed by the Act, so far as they shall be applicable, and
so far as they shall not be applicable, in accordance with the terms of the special
so far as they shall not be applicable, in accordance with the terms of the special
resolution authorising the same and, so far as such special resolution shall not be
applicable, in such manner as the directors deem most expedient. Whenever as the
applicable, in such manner as the directors deem most expedient. Whenever as the
result of any consolidation or other transaction on the part of the Company, a
fraction of a share is included in the holding of any member, the directors may in
fraction of a share is included in the holding of any member, the directors may in
their discretion:
36.1
direct that such fraction may be sold by some person appointed by the
directors for that purpose and the proceeds thereof paid to such member.
When a fraction is sold as aforesaid the person so appointed to sell it shall be
deemed to be authorised to make such sale the validity of which shall not be
deemed to be authorised to make such sale the validity of which shall not be
questioned;
36.2
make a cash payment in lieu of such fraction;
36.3
determine that such fraction may be disregarded in order to adjust the rights of
all members;
36.4
appoint a trustee or other person to deal with such fraction on behalf of the
member concerned; or
36.5
round up each fractional entitlement of a member to the nearest whole share
by capitalising any amount available for distribution to members
notwithstanding that not all of the members may participate in such
notwithstanding that not all of the members may participate in such
capitalisation.
18
37.
All unclaimed amounts due as a result of any acquisition of securities issued by the
Company or, any consolidation or subdivision of capital or from any other cause (but
excluding any unclaimed dividends) shall be held in trust by the Company until
excluding any unclaimed dividends) shall be held in trust by the Company until
lawfully claimed by the member; provided that no such amount shall be lawfully
claimable by the member unless claimed by no later than 3 years after it became due
claimable by the member unless claimed by no later than 3 years after it became due
whereafter it shall be forfeited for the benefit of the Company.
ODD-LOT OFFERS
38.
If, upon the undertaking of any odd-lot offer made by the Company in accordance
with the requirements of any stock exchange on which the securities of the Company
are listed or quoted, there are members holding less than 100 (or such other number
are listed or quoted, there are members holding less than 100 (or such other number
as the directors may determine) ordinary securities (“odd-lots”), then unless such
members have either elected to retain their odd-lots, to sell their odd-lots or to
increase their odd-lots to holdings of 100 (or such other number as the directors may
determine) ordinary securities in accordance with the terms of the odd-lot offer made
determine) ordinary securities in accordance with the terms of the odd-lot offer made
by the Company, such members shall be deemed to have agreed to sell their odd-lot
holdings (whether to the Company by way of a repurchase or otherwise) and the
holdings (whether to the Company by way of a repurchase or otherwise) and the
Company shall cause the odd-lots of such members to be sold or repurchased on
such basis as the directors may determine and the Company shall account to such
such basis as the directors may determine and the Company shall account to such
members for the proceeds attributable to them.
MODIFICATION OF RIGHTS
39.
If at any time the capital by reason of the issue of preference shares or otherwise is
divided into different classes of shares, all or any of the rights, privileges or
conditions attached to any class of shares may, subject to the provisions of the
Statutes, be modified in any way or abrogated:
39.1
either with the consent in writing of the holders of at least three-fourths of the
issued shares of that class; or
19
39.2
with the sanction of a resolution passed as if it were a special resolution of the
Company at a separate general meeting of the holders of the shares of that
class. To every such separate general meeting all the provisions of these
class. To every such separate general meeting all the provisions of these
articles relating to general meetings of the Company shall mutatis mutandis apply
except that the quorum shall be not less than two persons holding or
except that the quorum shall be not less than two persons holding or
representing by proxy not less than one-half of the issued shares of that class,
but if at any adjourned meeting such quorum is not present the members
but if at any adjourned meeting such quorum is not present the members
present shall form a quorum;
provided that this article 39 is not by implication to curtail the power of modification
which the Company would have if this article were omitted.
40.
The creation or issue of additional preference shares ranking as to capital and
dividend after the said preference shares and/or ordinary shares shall not be deemed
to be a modification or variation of the rights of the holders of any preference shares
to be a modification or variation of the rights of the holders of any preference shares
in the Company.
41.
The rights conferred upon the holders of the shares of any class shall not, unless
otherwise expressly provided by the conditions of issue of such shares, be deemed to
be varied by the creation or issue of further shares ranking pari passu therewith.
GENERAL MEETINGS
42.
The Company shall hold a general meeting as its annual general meeting as provided
in Section 179 of the Act at such time and place as the directors may determine.
43.
The directors may, whenever they think fit, convene a general meeting and a general
meeting shall also be convened on requisition as provided in Section 181 of the Act.
44.
Save for any general meeting convened by requisitionists as provided by Section 181
of the Act, all general meetings, all adjourned general meetings and all separate
meetings of the holders of any class of shares shall be held at such time and place as
the directors shall determine.
the directors shall determine.
20
45.
Notwithstanding anything to the contrary contained in these articles and subject to
the provisions of the Statutes, the directors may by notice to members postpone,
cancel or change the place for holding a general meeting of which notice has been
cancel or change the place for holding a general meeting of which notice has been
given, but:
45.1
a meeting which is not convened by the directors; or
45.2
a meeting which is convened on the requisition of members
may not be postponed or cancelled without the prior written consent of person or
persons who convened or requisitioned the meeting.
NOTICES OF GENERAL MEETINGS
46.
Twenty-one days' notice at least shall be given in the manner hereinafter mentioned
to such persons as are, in accordance with the provisions of these articles entitled to
to such persons as are, in accordance with the provisions of these articles entitled to
receive such notices from the Company of any annual general meeting or a meeting
called for the passing of a special resolution and fourteen days' notice at least shall be
called for the passing of a special resolution and fourteen days' notice at least shall be
so given of any other general meeting. The notice shall be exclusive of the day on
which it is served or deemed to be served and of the day for which it is given, and
which it is served or deemed to be served and of the day for which it is given, and
shall specify the place, day and time of the meeting and in the case of special business
the general nature of such business. Whenever notice of a meeting is given pursuant
the general nature of such business. Whenever notice of a meeting is given pursuant
to this article the Company shall at the same time as such notice is given forward a
copy thereof to the auditors of the Company and to the appropriate officer of any
copy thereof to the auditors of the Company and to the appropriate officer of any
stock exchange upon which any shares of the Company are listed or quoted.
47.
The accidental omission to give notice of a meeting or in cases where instruments of
proxy are sent out with the notice, the accidental omission to send such instrument
of proxy to, or the non-receipt or delay in receipt of notice of a meeting or such
instrument of proxy by any person entitled to receive notice shall not invalidate the
instrument of proxy by any person entitled to receive notice shall not invalidate the
proceedings at that meeting. Furthermore, a member who is present at a general
meeting whether in person or by proxy, shall be deemed to have waived any
meeting whether in person or by proxy, shall be deemed to have waived any
objection which such member may have to the failure to give notice or proper notice
of the meeting.
of the meeting.
21
PROCEEDINGS AT GENERAL MEETINGS
48.
All business shall be deemed special that is transacted at a general meeting other than
an annual general meeting, and also all business that is transacted at an annual general
meeting, with the exception of sanctioning or declaring a dividend, the consideration
of the annual financial statements, the election of directors, the appointment of the
of the annual financial statements, the election of directors, the appointment of the
Company’s independent external auditors, the placing under control of the directors,
as a general authority, of the unissued securities and the authorising of the directors
as a general authority, of the unissued securities and the authorising of the directors
to issue the unissued securities for cash and such other business which might
through usual commercial practices be regarded as ordinary business.
through usual commercial practices be regarded as ordinary business.
49.
Subject to the provisions of the Statutes:
49.1
no business may be transacted at a general meeting unless the general nature of
the business is stated in the notice convening the meeting; and
49.2
except with the approval of the directors or the chairman of the meeting, no
person may move any amendment to a proposed resolution, the terms of
which are set out in the notice convening the meeting or to a document which
which are set out in the notice convening the meeting or to a document which
relates to such a resolution and a copy of which has been made available to
members for inspection.
50.
Subject to the provisions of Section 199 of the Act in regard to the quorum for
passing special resolutions, a quorum for a general meeting shall be three members
entitled to vote, personally present, or if a member is a body corporate, represented,
entitled to vote, personally present, or if a member is a body corporate, represented,
provided that if the Company is a subsidiary company there shall be no quorum
unless one of those present or represented is a representative of the Company’s
unless one of those present or represented is a representative of the Company’s
holding company.
22
51.
No business shall be transacted by any general meeting unless the requisite quorum
be present when the meeting proceeds to business. A body corporate, being a
member of the Company, and present by a representative duly appointed in
member of the Company, and present by a representative duly appointed in
accordance with Section 188 of the Act, shall be deemed to be a member personally
present for the purposes of these articles.
present for the purposes of these articles.
52.
If within ten minutes from the time appointed for the meeting a quorum is not
present, the meeting, if convened upon the requisition of members, shall be
dissolved. In any other case it shall stand adjourned to the same day in the next week
dissolved. In any other case it shall stand adjourned to the same day in the next week
(or if that be a public holiday to the next succeeding day other than a public holiday,
a Saturday or a Sunday) at the same time and place or to such other day and at such
a Saturday or a Sunday) at the same time and place or to such other day and at such
other time or place as the chairman of the meeting shall appoint. If at such
adjourned meeting a quorum as defined is not present within ten minutes from the
adjourned meeting a quorum as defined is not present within ten minutes from the
time appointed for holding the meeting, those members who are present in person
and are entitled to vote shall be a quorum and may transact the business for which
and are entitled to vote shall be a quorum and may transact the business for which
the meeting was called.
53.
The chairman (if any) of the directors or, in his absence, the deputy chairman (if any)
shall preside as chairman at every general meeting of the Company. If there be no
such chairman or deputy chairman, or if at any meeting neither the chairman nor the
deputy chairman is present within ten minutes after the time appointed for holding
deputy chairman is present within ten minutes after the time appointed for holding
the meeting, or if neither of them be willing to act as chairman, the directors present
shall choose one of their number to act, or if one director only be present he shall
shall choose one of their number to act, or if one director only be present he shall
preside as chairman if willing to act. If no director be present, or if all the directors
present decline to take the chair, the members present shall elect one of their number
present decline to take the chair, the members present shall elect one of their number
to be chairman.
54.
The chairman may (and shall if so directed by the meeting) adjourn the meeting from
time to time and from place to place, but no business shall be transacted at any
adjourned meeting except business which might lawfully have been transacted at the
adjourned meeting except business which might lawfully have been transacted at the
meeting from which the adjournment took place. Save as provided by Section 192 of
the Act, it shall not be necessary to give any notice of an adjournment or of the
the Act, it shall not be necessary to give any notice of an adjournment or of the
business to be transacted at any adjourned meeting.
23
55.
If the chairman considers that there is not enough room for the members who wish
to attend the meeting, he or she may arrange for any person whom he or she
considers cannot be seated in the main meeting room to observe or attend the
considers cannot be seated in the main meeting room to observe or attend the
meeting in a separate room. Even if the members present in the separate room are
not able to participate in the conduct of the meeting, the meeting will nevertheless be
not able to participate in the conduct of the meeting, the meeting will nevertheless be
treated as validly held in the main room. If a separate meeting place is linked to the
main place of a general meeting by an instantaneous audio-visual communication
main place of a general meeting by an instantaneous audio-visual communication
device which, by itself or in conjunction with other arrangements:
55.1
gives the general body of members in the separate meeting place a reasonable
opportunity to participate in proceedings in the main place;
55.2
enables the chairman to be aware of proceedings in the other place; and
55.3
enables the members in the separate meeting place to vote on a show of hands
or on a poll,
or on a poll,
a member present at the separate meeting place is taken to be present at the general
meeting and entitled to exercise all rights as if he or she was present at the main
meeting and entitled to exercise all rights as if he or she was present at the main
place.
56.
At a general meeting a resolution put to the vote of the meeting shall be decided by a
show of hands unless a poll is (whether before or on the declaration of the result of
the show of hands, or otherwise) demanded by the chairman of the meeting or as
provided in Section 198(1)(b) of the Act. Unless a poll be so demanded and the
provided in Section 198(1)(b) of the Act. Unless a poll be so demanded and the
demand be not withdrawn a declaration by the chairman of the meeting that a
resolution has on a show of hands been carried, or carried unanimously, or by a
resolution has on a show of hands been carried, or carried unanimously, or by a
particular majority, or not carried by a particular majority, or lost, and an entry to that
effect in the book containing the minutes of the proceedings of the Company shall
effect in the book containing the minutes of the proceedings of the Company shall
be conclusive evidence of the fact without proof of the number or proportion of the
votes recorded in favour of or against such resolution.
votes recorded in favour of or against such resolution.
24
57.
The result of a poll shall be deemed to be the resolution of the meeting at which the
poll was demanded.
58.
In the case of an equality of votes, whether on a show of hands or on a poll, the
chairman of the meeting at which the show of hands takes place or at which the poll
is demanded, shall be entitled to a second or casting vote in addition to the vote or
votes to which the chairman may be entitled as a member.
votes to which the chairman may be entitled as a member.
59.
No poll may be demanded on the election of the chairman of the meeting or on any
question of adjournment. A poll demanded on any other question shall be taken at
such time and place and in such manner as the chairman of the meeting directs, and
such time and place and in such manner as the chairman of the meeting directs, and
any business, other than upon which a poll has been demanded, may be proceeded
with pending the taking of the poll.
with pending the taking of the poll.
60.
The chairman of a meeting may appoint any one or more firms or persons to act as
scrutineer for the purpose of checking forms of proxy deposited for use and for
scrutineer for the purpose of checking forms of proxy deposited for use and for
counting the votes at such meeting and he may thereafter act on a certificate given by
any such scrutineer without requiring production at the meeting of the forms of
any such scrutineer without requiring production at the meeting of the forms of
proxy or the chairman counting the votes.
61.
If any votes shall be counted which ought not to have been counted or might have
been rejected or if any votes shall not be counted which ought to have been counted
the error shall not vitiate the resolution unless it be pointed out at the meeting and
not in that case unless it shall, in the opinion of the chairman of the meeting, be of
not in that case unless it shall, in the opinion of the chairman of the meeting, be of
sufficient magnitude to vitiate the resolution. No objection shall be raised to the
qualification of any voter except at the meeting or adjourned meeting at which the
qualification of any voter except at the meeting or adjourned meeting at which the
vote objected to is given or tendered, and every vote not disallowed at such meeting
or adjourned meeting shall be valid for all purposes. Any such objection made in due
or adjourned meeting shall be valid for all purposes. Any such objection made in due
time shall be referred to the chairman of the meeting, whose decision shall be final
and conclusive.
and conclusive.
25
62.
Any minutes of resolutions and proceedings at general meetings made in one of the
minute books of the Company, if signed by any person purporting to be the
chairman of the meeting to which it relates, or by any person present thereat and
chairman of the meeting to which it relates, or by any person present thereat and
appointed by the directors to sign the same in his place, or by the chairman of a
subsequent meeting of the directors, shall be receivable as evidence of the facts
subsequent meeting of the directors, shall be receivable as evidence of the facts
therein stated.
VOTES OF MEMBERS
63.
Subject to the provisions of Section 195 of the Act and of these articles and to any
special terms as to voting upon which any share may be issued or may for the time
being be held:
being be held:
63.1
on a show of hands, every member present in person and entitled to vote shall
have only one vote irrespective of the number of shares he holds or represents;
and
and
63.2
upon a poll, every member present in person or by proxy and entitled to that
proportion of the total votes in the Company which the aggregate amount of
proportion of the total votes in the Company which the aggregate amount of
the nominal value of the shares held by him bears to the aggregate amount of
the nominal value of all the shares issued by the Company at the relevant time.
64.
Any body corporate holding shares conferring the right to vote may, by resolution of
its directors or other governing body, authorise such person as it thinks fit to act as
its representative at one or more general meetings of the Company or at one or more
its representative at one or more general meetings of the Company or at one or more
meetings of holders of any class of shares of the Company, as provided by Section
188 of the Act and such representative shall be entitled to exercise the same powers
188 of the Act and such representative shall be entitled to exercise the same powers
on behalf of the body corporate which he represents as that body corporate could
exercise if it were an individual member of the Company. The directors may but
exercise if it were an individual member of the Company. The directors may but
shall not be obliged to require proof to their satisfaction of the appointment or
authority of such representative to act.
authority of such representative to act.
26
65.
In the case of joint holders of a share the vote of the senior who tenders a vote,
whether in person or by proxy, shall be accepted to the exclusion of the votes of the
other joint holders and for this purpose seniority shall be determined by the order in
other joint holders and for this purpose seniority shall be determined by the order in
which the names stand in the register or in the case of persons entitled to a share by
transmission the order in which their names were given in the notice to the Company
transmission the order in which their names were given in the notice to the Company
of the fact of the transmission.
PROXIES AND VOTING UNDER POWER OF ATTORNEY
66.
A member may attend, speak and vote at general meetings in person or by duly
appointed proxy and may appoint more than one proxy to attend on the same
occasion.
occasion.
67.
A proxy:
67.1
need not be a member; and
67.2
shall be entitled to vote on a poll only.
68.
A proxy shall only be duly appointed if appointed as such by a proxy instrument.
69.
A proxy instrument shall comply with the provisions of the Act and, subject thereto:
69.1
need not, except if so required in terms of articles 69.2 or 69.4, bear a
handwritten signature of the member appointing the proxy;
69.2
shall be in such form as is approved or accepted by the directors;
69.3
may be an instrument created by electronic or other means including, without
limitation, electronic mail or facsimile;
69.4
shall be accompanied by such documentary or other evidence as may be
required by the directors in order to establish the validity and/or authenticity
required by the directors in order to establish the validity and/or authenticity
thereof, including the authority of the person appointing the proxy;
27
69.5
may, if the directors deem fit, be sent out with the notice of any meeting for
use at such meeting;
69.6
shall be received at the office or at such other place as is specified for that
purpose in the notice convening the meeting, not less than forty-eight hours
before the time appointed for the holding of the meeting or adjourned meeting
at which the person named in such proxy instrument proposes to vote, or in
at which the person named in such proxy instrument proposes to vote, or in
the case of a poll taken subsequently to the date of a meeting or adjourned
meeting, not less than forty-eight hours (or such shorter period as the directors
meeting, not less than forty-eight hours (or such shorter period as the directors
may from time to time determine) before the time appointed for the taking of
the poll failing which the proxy instrument shall not be treated as valid;
the poll failing which the proxy instrument shall not be treated as valid;
provided that if the member is registered at a branch register kept at any
branch or other office outside South Africa, any proxy instrument executed by
branch or other office outside South Africa, any proxy instrument executed by
such member may be received at the office at which he is registered. In
determining the said period of forty-eight hours (or such shorter period as the
determining the said period of forty-eight hours (or such shorter period as the
directors may from time to time determine), Saturdays, Sundays and public
holidays shall not be taken into account;
holidays shall not be taken into account;
69.7
other than a power of attorney, shall not be valid after the expiry of a period of
six months from the date of submission of such proxy instrument, except at an
adjourned meeting or at a poll demanded at a meeting originally held within six
adjourned meeting or at a poll demanded at a meeting originally held within six
months from the date of such proxy instrument;
69.8
shall be valid at every resumption of an adjourned meeting to which it relates
unless the contrary is stated thereon;
69.9
shall not be used at the resumption of an adjourned meeting if it could not
have been used at the general meeting from which it was adjourned for any
reason other than it was not lodged timeously for the meeting from which the
adjournment took place;
adjournment took place;
28
69.10
may confer the power of delegation and sub-delegation on any proxy
appointed in terms thereof so that any proxy so appointed may appoint any
other person as proxy in his stead;
other person as proxy in his stead;
69.11
a proxy form submitted electronically (or by such other electronic means as the
directors may determine from time to time) shall be submitted to the electronic
mail address as notified by the Company from time to time.
mail address as notified by the Company from time to time.
70.
If a branch register within the meaning of the Statutes is kept at a branch or other
office of the Company outside South Africa, it shall not be necessary for any proxy
instruments appointing proxies, and the powers of attorney or other authorities (if
instruments appointing proxies, and the powers of attorney or other authorities (if
any) under which they are signed, relating to members registered on such branch
register to be received at the office or such other place designated in the notice
register to be received at the office or such other place designated in the notice
convening the meeting before the time appointed for the meeting; provided that:
70.1
the members appointing proxies shall lodge proxy instruments in accordance
with the requirements of article 69; and
70.2
the transfer secretary of the Company in that place shall communicate to the
Company in South Africa by such means as the directors, or any other
authorised person, may from time to time direct, a summary of all the votes for
and against each resolution represented by valid proxy instruments duly
and against each resolution represented by valid proxy instruments duly
accepted by them, and so that such communication shall be received by the
Company before the time appointed for the meeting to commence.
Company before the time appointed for the meeting to commence.
71.
A vote cast or act done in accordance with the terms of a proxy instrument shall be
valid notwithstanding the previous legal incapacity of the principal or revocation of
the proxy instrument or the transfer of the share in respect of which the vote is
the proxy instrument or the transfer of the share in respect of which the vote is
given, unless an intimation in writing of such legal incapacity or transfer shall have
been received by the Company not less than forty-eight hours (or such shorter
been received by the Company not less than forty-eight hours (or such shorter
period as the directors may from time to time determine) before commencement of
the meeting or the taking of the poll at which the proxy instrument is used.
the meeting or the taking of the poll at which the proxy instrument is used.
29
DIRECTORS
72.
Until otherwise from time to time determined by the Company in general meeting,
the number of directors shall be not less than four.
73.
The directors shall be entitled to such remuneration as a director as the Company by
ordinary resolution in general meeting may from time to time determine.
74.
Any director who serves on any executive or other committee or who devotes special
attention to the business of the Company or who goes or resides outside South
Africa for any purposes of the Company, or who otherwise performs services which,
in the opinion of the directors, are outside the scope of the ordinary duties of a
in the opinion of the directors, are outside the scope of the ordinary duties of a
director, may be paid such extra remuneration, in addition to the remuneration to
which he may be entitled as a director, as the directors may determine. The directors
which he may be entitled as a director, as the directors may determine. The directors
shall also be paid all their travelling and other expenses properly and necessarily
expended by them in and about the business of the Company and in attending
expended by them in and about the business of the Company and in attending
meetings of the directors or of committees of the directors or of the Company.
75.
Without prejudice to the provisions for retirement by rotation or otherwise
hereinafter contained, the office of a director shall be vacated in any of the events
following, namely:
75.1
if he becomes insolvent or assigns his estate for the benefit of his creditors,
suspends payments generally, or enters into a compromise with his creditors,
or files an application for the surrender of his estate;
or files an application for the surrender of his estate;
75.2
if he is found or becomes of unsound mind;
75.3
if he is requested in writing to resign by not less than three-quarters of the
directors ;
directors ;
75.4
if he be removed by a resolution of the Company pursuant to Section 220 of
the Act;
30
75.5
if he shall pursuant to the provisions of the Statutes or by reason of any order
made thereunder be prohibited from acting as a director;
75.6
one month, or, with the permission of the directors, earlier, after he has given
notice in writing to the Company of his intention to resign his office;
75.7
if he is absent from meetings of the directors for six consecutive months
without leave of the directors, otherwise than on the business of the Company,
and is not represented at any such meetings during such six consecutive
months by an alternate director, and the directors resolve that his office be, by
reason of such absence, vacated; provided that the directors shall have power
reason of such absence, vacated; provided that the directors shall have power
to grant to any director not resident in South Africa leave of absence for any or
an indefinite period.
an indefinite period.
76.
A director may hold any other office or position under the Company (except that of
external auditor) in conjunction with his office of director for such period and on
external auditor) in conjunction with his office of director for such period and on
such remuneration terms (in addition to the remuneration to which he may be
entitled as a director) and otherwise as a disinterested quorum of the directors may
entitled as a director) and otherwise as a disinterested quorum of the directors may
determine.
77.
A director may be or become a director or other officer of, or otherwise interested
in, any company promoted by the Company or in which the Company may be
interested as shareholder or otherwise and (except insofar as otherwise decided by
the directors), he shall not be accountable for any remuneration or other benefits
the directors), he shall not be accountable for any remuneration or other benefits
received by him as a director or officer of or from his interest in such other
company.
company.
78.
Any director may act by himself or through his firm in a professional capacity for the
Company (otherwise than as the Company’s external auditor) and he or his firm shall
be entitled to remuneration for professional services as if he were not a director.
be entitled to remuneration for professional services as if he were not a director.
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79.
A director who is in any way whether directly or indirectly interested in a contract or
arrangement or proposed contract or arrangement with the Company or its
subsidiary, shall declare the nature of his interest to the Company, mutatis mutandis, in
subsidiary, shall declare the nature of his interest to the Company, mutatis mutandis, in
accordance with Sections 234, 235, 237 and 238 of the Act.
80.
Subject to article 81 no director or intending director shall be disqualified by his
office from contracting with the Company either with regard to his tenure of any
other office or position under the Company or in any company promoted by the
Company or in which the Company is interested or in respect of professional
Company or in which the Company is interested or in respect of professional
services rendered or to be rendered by such director or as vendor, purchaser or in
any other manner whatever, nor shall any such contract or arrangement entered into
any other manner whatever, nor shall any such contract or arrangement entered into
by or on behalf of the Company in which any director is in any way interested be
liable to be avoided, nor shall any director so contracting or being so interested be
liable to be avoided, nor shall any director so contracting or being so interested be
liable to account to the Company for any profit realised by any such appointment,
contract or arrangement by reason of such director holding the office or of the
contract or arrangement by reason of such director holding the office or of the
fiduciary relationship thereby established.
81.
A director shall not vote nor be counted in the quorum and if he shall do so his vote
shall not be counted on any resolution for his own appointment to any other office
or position under the Company or in respect of any contract or arrangement in
which he is interested, but this prohibition shall not apply to:
which he is interested, but this prohibition shall not apply to:
81.1
any arrangement for giving to any director any security of indemnity in respect
of money lent by him to, or obligations undertaken by him for the benefit of,
of money lent by him to, or obligations undertaken by him for the benefit of,
the Company; or
81.2
any arrangement for the giving by the Company of any security to a third party
in respect of a debt or obligation of the Company which the director has
himself guaranteed or secured; or
81.3
any contract by a director to subscribe for or underwrite securities; or
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81.4
any contract or arrangement with a company in which he is interested by
reason only of being a director, officer, creditor or member of such company;
and these prohibitions may at any time be suspended or relaxed to any extent either
generally, or in respect of any particular contract or arrangement, by the Company in
general meeting.
general meeting.
82.
Where proposals are under consideration concerning the appointment (including
fixing or varying the terms of appointment) of two or more directors to offices or
fixing or varying the terms of appointment) of two or more directors to offices or
employments with the Company or any company in which the Company is
interested, such proposals may be divided and considered in relation to each director
interested, such proposals may be divided and considered in relation to each director
separately and in such cases each of the directors concerned shall be entitled to vote
(and be counted in the quorum) in respect of each resolution except that concerning
(and be counted in the quorum) in respect of each resolution except that concerning
his own appointment.
83.
If any question shall arise at any meeting as to the entitlement of any directors to
vote and such question is not resolved by his voluntarily agreeing to abstain from
voting, such question shall be referred to the chairman of the meeting and his ruling
in relation to any other director shall be final and conclusive except in a case where
in relation to any other director shall be final and conclusive except in a case where
the nature or extent of the interests of the director concerned have not been fairly
disclosed.
disclosed.
84.
The directors may exercise the voting powers conferred by the shares in any other
company held or owned by the Company in such manner and in all respects as they
think fit, including the exercise thereof in favour of any resolution appointing
think fit, including the exercise thereof in favour of any resolution appointing
themselves or any of them to be directors or officers of such other company or
voting or providing for the payment of remuneration to the directors or officers of
voting or providing for the payment of remuneration to the directors or officers of
such other company.
33
ALTERNATE DIRECTORS
85.
Each director may appoint either another director or any person approved for that
purpose by a resolution of the directors to act as alternate director in his place and
during his absence and may at his discretion remove such alternate director. A
person so appointed shall, except as regards power to appoint an alternate, and
person so appointed shall, except as regards power to appoint an alternate, and
remuneration, be subject in all respects to the terms and conditions existing with
reference to the other directors of the Company, and each alternate director, whilst
reference to the other directors of the Company, and each alternate director, whilst
so acting, shall be entitled to receive notices of all meetings of the directors or of any
committee of the directors of which his appointor is a member, and to attend and
committee of the directors of which his appointor is a member, and to attend and
vote at any such meeting at which his appointor is a member, and to attend and vote
at any such meeting at which his appointor is not personally present and he shall
at any such meeting at which his appointor is not personally present and he shall
generally be entitled to exercise and discharge all the functions, powers and duties of
his appointor in such appointor's absence as if he were a director. Any director
his appointor in such appointor's absence as if he were a director. Any director
acting as alternate shall (in addition to his own vote) have a vote for each director for
whom he acts as alternate. An alternate director shall ipso facto cease to be an
whom he acts as alternate. An alternate director shall ipso facto cease to be an
alternate director if his appointor ceases for any reason to be a director; provided
that if any director retires by rotation or otherwise but is re-elected at the same
that if any director retires by rotation or otherwise but is re-elected at the same
meeting, any appointment made by him pursuant to this article which was in force
immediately before his retirement shall remain in force as though he had not retired.
immediately before his retirement shall remain in force as though he had not retired.
Any appointment or removal of an alternate director shall be effected by instrument
in writing delivered at the office and signed by the appointor. The remuneration of
in writing delivered at the office and signed by the appointor. The remuneration of
an alternate director shall be payable only out of the remuneration payable to the
director appointing him and he shall have no claim against the Company for his
director appointing him and he shall have no claim against the Company for his
remuneration.
RETIREMENT OF DIRECTORS IN ROTATION
86.
Subject to article 102 at every annual general meeting one-third of the directors for
the time being or if their number is not a multiple of three, then the number who
shall retire from office shall be rounded down to the nearest whole number which is
shall retire from office shall be rounded down to the nearest whole number which is
a multiple of three. The directors so to retire at every annual general meeting, unless
otherwise determined by the board, shall be those who have been longest in office
otherwise determined by the board, shall be those who have been longest in office
34
since their last election, but as between persons who become or were last elected
directors on the same day, those to retire shall (unless they otherwise agree among
directors on the same day, those to retire shall (unless they otherwise agree among
themselves) be determined by lot; provided that notwithstanding anything herein
contained:
contained:
86.1
if at the date of any annual general meeting any director shall have held office
for a period of three years since his last election or appointment, he shall retire
at such meeting either as one of the directors to retire in pursuance of the
at such meeting either as one of the directors to retire in pursuance of the
foregoing or additionally thereto;
86.2
a director who intends to retire voluntarily at the meeting may be taken into
account in determining the one-third of the directors to retire at such meeting;
and
86.3
the identity of the directors to retire at such annual general meeting shall be
determined as at the date of the notice convening such meeting.
The length of time a director has been in office shall be computed from his last
election, appointment or date upon which he was deemed re-elected. A director
retiring at a meeting shall retain office until the close of the meeting or in the case of
retiring at a meeting shall retain office until the close of the meeting or in the case of
any adjournments thereof, at the close of such adjourned meeting.
87.
Retiring directors shall be eligible for re-election but no person, other than a director
retiring at the meeting, shall, unless recommended by the directors, be eligible for
election to the office of a director at any general meeting unless not more than thirty
days but not less than twenty-one days before the day appointed for the meeting,
days but not less than twenty-one days before the day appointed for the meeting,
there shall have been left at the office, a notice in writing by some member duly
qualified to be present and vote at the meeting for which such notice is given, of his
qualified to be present and vote at the meeting for which such notice is given, of his
intention to propose such person for election and also notice in writing signed by the
person to be proposed of his willingness to be elected.
person to be proposed of his willingness to be elected.
88.
Subject to article 87, the Company at the meeting at which a director retires in
manner aforesaid, may fill the vacated office by electing a person thereto.
manner aforesaid, may fill the vacated office by electing a person thereto.
35
89.
The Company may in general meeting (but subject to the provisions of article 88)
elect any person to be a director either to fill a casual vacancy or as an additional
director, but so that the total number of directors shall not exceed at any time the
maximum number (if any) fixed in accordance with these articles.
maximum number (if any) fixed in accordance with these articles.
90.
The validity of the appointment of any director shall not be affected by a failure to
comply with Section 211(3) of the Act.
POWERS OF DIRECTORS
91.
The directors on behalf of the Company may pay a gratuity or pension or allowance
on retirement or other benefit to any director or ex-director or other officer or
on retirement or other benefit to any director or ex-director or other officer or
employee of the Company, its holding company (if any) or any subsidiary of the
Company whether or not he has held any other salaried office or position with the
Company whether or not he has held any other salaried office or position with the
Company or to his widow or dependants and make contributions to any fund and
pay premiums for the purchase or provision of any such gratuity, pension or
pay premiums for the purchase or provision of any such gratuity, pension or
allowance or life assurance or other benefits.
92.
Without prejudice to the powers of the Company in general meeting in pursuance of
any of the provisions of these articles to appoint any person to be a director, the
directors shall have power at any time and from time to time to appoint any person
to be a director, either to fill a casual vacancy or as an addition to the existing board,
to be a director, either to fill a casual vacancy or as an addition to the existing board,
but so that the total number of directors shall not at any time exceed the maximum
number (if any) fixed in accordance with these articles. Any director so appointed
number (if any) fixed in accordance with these articles. Any director so appointed
shall hold office only until the next following annual general meeting and shall then
be eligible for re-election but shall not be taken into account in determining the
be eligible for re-election but shall not be taken into account in determining the
directors who are to retire by rotation at such meeting.
93.
The directors may take all steps that may be necessary or expedient in order to enable
the securities of the Company to be introduced into and dealt with in any country or
state and to procure the same to be recognised by and listed or quoted upon any
36
stock exchange in any country or state and may accept responsibility for and pay and
discharge all taxes, duties, fees, expenses or other sums which may be payable in
discharge all taxes, duties, fees, expenses or other sums which may be payable in
relation to any of the matters aforesaid and may subscribe to and comply with the
laws and regulations of any such country or state and the rules or regulations of any
laws and regulations of any such country or state and the rules or regulations of any
such stock exchange.
94.
Any branch or kind of business which the Company is either expressly or by
implication authorised to undertake may be undertaken by the directors at such time
or times as they shall think fit, and further may be discontinued or suspended by the
directors, whether such branch or kind of business may have been actually
directors, whether such branch or kind of business may have been actually
commenced or not, so long as the directors may deem it expedient not to commence
or proceed with the same.
or proceed with the same.
95.
The management and control of any business of the Company shall be vested in the
directors who in addition to the powers and authorities by these articles expressly
conferred upon them, may exercise all such powers and do all such acts and things as
conferred upon them, may exercise all such powers and do all such acts and things as
may be exercised or done by the Company, and are not hereby or by the Statutes
expressly directed or required to be exercised or done by the Company in general
expressly directed or required to be exercised or done by the Company in general
meeting, but subject nevertheless to such management and control not being
inconsistent with these articles nor with any resolution passed by the Company in
inconsistent with these articles nor with any resolution passed by the Company in
general meeting; but so that no such resolution shall invalidate any prior act of the
directors which would have been valid if such resolution had not been passed. The
directors which would have been valid if such resolution had not been passed. The
general powers given by this article shall not be limited or restricted by any special
authority or power given to the directors by any other article.
authority or power given to the directors by any other article.
96.
The directors may arrange that any branch of the business carried on by the
Company or any other business in which the Company may be interested, shall be
carried on by or through one or more subsidiaries of the Company and they may on
carried on by or through one or more subsidiaries of the Company and they may on
behalf of the Company make such arrangements as they think advisable for taking
the profits or bearing the losses of any branch or business so carried on, or for
the profits or bearing the losses of any branch or business so carried on, or for
financing, assisting or subsidising any such subsidiary or guaranteeing its contracts,
obligations or liabilities.
obligations or liabilities.
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BORROWING POWERS
97.
The Company may create and issue secured or unsecured debentures and subject to
any regulations from time to time made by the Company in general meeting, the
directors may borrow from time to time for the purposes of the Company or secure
the payment of such sums as they think fit and may secure the repayment or payment
the payment of such sums as they think fit and may secure the repayment or payment
of any such sums by bond, mortgage or charge upon all or any of the property or
assets of the Company or by the issue of debentures or otherwise as they may think
assets of the Company or by the issue of debentures or otherwise as they may think
fit, and may make such regulations regarding the transfer of debentures, the issuing
of certificates therefor (subject always to article 11 hereof) and all such other matters
of certificates therefor (subject always to article 11 hereof) and all such other matters
incidental to debentures as they may think fit; provided that no special privileges as
to allotment of shares in the Company, attending and voting at general meetings,
to allotment of shares in the Company, attending and voting at general meetings,
appointment of directors or otherwise, shall be given to the holders of debentures of
the Company save with the sanction of the Company in general meeting.
the Company save with the sanction of the Company in general meeting.
LOCAL OR DIVISIONAL BOARDS, AGENTS AND COMMITTEES OF THE
BOARD
98.
The directors may establish any local or divisional boards or agencies in South Africa
or elsewhere for managing any of the affairs of the Company and may appoint any
persons to be members of such local or divisional boards, or any managers or agents
persons to be members of such local or divisional boards, or any managers or agents
and may fix their remuneration, and may delegate to any local or divisional board,
manager or agent any of the powers, authorities and discretions vested in the
manager or agent any of the powers, authorities and discretions vested in the
directors with power to sub-delegate, and may authorise the members of any local or
divisional board or any of them to fill any vacancies therein and to act
divisional board or any of them to fill any vacancies therein and to act
notwithstanding vacancies, and any such appointment or delegation may be made
upon such terms and subject to such conditions as the directors may think fit, and
upon such terms and subject to such conditions as the directors may think fit, and
the directors may remove any person so appointed and may annul or vary any such
delegation, but no person dealing in good faith and without notice of any such
delegation, but no person dealing in good faith and without notice of any such
annulment or variation shall be affected thereby.
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99.
The directors may by power of attorney appoint any company, firm or person or any
fluctuating body of persons, whether nominated directly or indirectly by the
directors, to be the attorney or agent of the Company for such purposes and with
directors, to be the attorney or agent of the Company for such purposes and with
such powers, authorities and discretions (not exceeding those vested in or exercisable
by the directors under these articles) and for such period and subject to such
by the directors under these articles) and for such period and subject to such
conditions as they may think fit, and any such power of attorney may contain such
provisions for the protection and convenience of persons dealing with any such
provisions for the protection and convenience of persons dealing with any such
attorney as the directors may think fit, and may also authorise any such attorney to
sub-delegate all or any of the powers, authorities and discretions vested in him or
sub-delegate all or any of the powers, authorities and discretions vested in him or
them.
100. The directors may delegate any of their powers to an executive or other committee
whether consisting of a member or members of their body or not as they think fit.
Any committee so formed shall, in the exercise of the powers so delegated, conform
to any regulations that may from time to time be imposed on it by the directors and
to any regulations that may from time to time be imposed on it by the directors and
any such regulations may authorise the appointment of sub-committees.
EXECUTIVE OFFICERS
101. The directors may from time to time appoint one or more of their body to be
managing director, deputy managing director, chief executive officer, deputy chief
executive officer, general manager or executive director (with or without specific
executive officer, general manager or executive director (with or without specific
designation) of the Company or to other executive office with the Company as the
directors shall think fit, and may from time to time remove or dismiss him or them
directors shall think fit, and may from time to time remove or dismiss him or them
from office and appoint another or others in his or their place or places.
102. Subject to any provisions either in these articles or in the contract under which he is
appointed any director appointed to any position or executive office pursuant to
article 101 shall not, (while he continues to hold that position or office under a
article 101 shall not, (while he continues to hold that position or office under a
written contract of employment), be subject to retirement by rotation during the
currency of such contract and he shall not, in such case, be taken into account in
currency of such contract and he shall not, in such case, be taken into account in
determining the rotation of retirement of directors but, subject to any provisions in
such contract, he shall be subject to the same removal terms as the other directors of
such contract, he shall be subject to the same removal terms as the other directors of
39
the Company and, if he ceases to hold office as director, his appointment to such
position or executive office shall ipso facto and immediately be terminated but
position or executive office shall ipso facto and immediately be terminated but
without prejudice to any claims or damages which may accrue under any such
contract in respect of such termination; provided that the directors shall not appoint
contract in respect of such termination; provided that the directors shall not appoint
any director to any position or executive office under a contract as aforesaid which
provides for him to be so exempted, if at the time of such appointment under such
provides for him to be so exempted, if at the time of such appointment under such
contract the effect of such exemption would be to cause one-half or more of the
directors to be exempt from retirement by rotation.
directors to be exempt from retirement by rotation.
103. The directors may from time to time entrust to and confer upon a director appointed
to any position or executive office under article 101 such of the powers exercisable
under these articles by the directors as they think fit, and may confer such powers for
under these articles by the directors as they think fit, and may confer such powers for
such time, and to be exercised for such objects and purposes and upon such terms
and conditions and with such restrictions, as they think expedient, and they may
and conditions and with such restrictions, as they think expedient, and they may
confer such powers either collaterally with or to the exclusion of and in substitution
for all or any of the powers of the directors in that regard, and may from time to time
for all or any of the powers of the directors in that regard, and may from time to time
revoke, withdraw, alter or vary all or any of such powers.
PROCEEDINGS OF DIRECTORS AND COMMITTEES
104. The directors may meet for the dispatch of business, adjourn, and otherwise regulate
their meetings as they think fit, and may determine the quorum necessary for the
transaction of business. Until otherwise determined by the directors, two directors
transaction of business. Until otherwise determined by the directors, two directors
shall form a quorum. A director may at any time, and the secretary upon the request
of a director, shall at any time convene a meeting of the directors.
of a director, shall at any time convene a meeting of the directors.
105. The continuing directors may act notwithstanding any vacancy in their body, but if
and so long as their number be reduced below the minimum number fixed by or in
accordance with these articles, they may act only for the purpose of filling up
accordance with these articles, they may act only for the purpose of filling up
vacancies in their body or of summoning general meetings of the Company but not
for any other purpose, and may act for either of the purposes aforesaid whether or
for any other purpose, and may act for either of the purposes aforesaid whether or
not their number be reduced below the minimum number fixed by or in accordance
with these articles as a quorum.
with these articles as a quorum.
40
106. The directors may elect a chairman and a deputy chairman (to act in the absence of
the chairman) of their meetings and determine the period for which they are to hold
office, but if no such chairman or deputy chairman is elected or if at any meeting the
office, but if no such chairman or deputy chairman is elected or if at any meeting the
chairman or deputy chairman be not present within ten minutes after the time
appointed for holding the same, the directors present shall choose one of their
appointed for holding the same, the directors present shall choose one of their
number present to be chairman at such meeting.
107. Questions arising at any meeting shall be decided by a majority of votes, and in case
of an equality of votes the chairman shall have a second or casting vote; provided
that should the quorum be two and should only two directors be present at the
meeting, the chairman shall not have a second or casting vote.
meeting, the chairman shall not have a second or casting vote.
108. A meeting of the directors at which a quorum is present shall be competent to
exercise all or any of the powers, authorities and discretions by or under these articles
for the time being vested in or exercisable by the directors generally.
for the time being vested in or exercisable by the directors generally.
109. A resolution in writing signed by not less than three-quarters of the total number of
directors entitled to vote thereon (which resolution may be signed under facsimile
transmission or some other form of electronic means and which may consist of
several documents in like form each signed by one or more directors), shall be as
several documents in like form each signed by one or more directors), shall be as
valid and effectual as if it had been passed at a meeting of the directors duly called
and constituted; provided that where a director is not so present, but has an alternate
and constituted; provided that where a director is not so present, but has an alternate
who is so present, then such resolution must also be signed by such alternate. All
such resolutions shall be described as “directors' resolutions” and shall be forwarded
such resolutions shall be described as “directors' resolutions” and shall be forwarded
or otherwise delivered to the secretary without delay, and shall be recorded by him in
the Company's minute book and noted at the meeting of the directors next following
the Company's minute book and noted at the meeting of the directors next following
the receipt thereof by him.
110. The meetings and proceedings of any committee consisting of two or more
members, shall be governed by the provisions herein contained for regulating the
meetings and proceedings of directors so far as the same are applicable thereto and
are not superseded by any regulations made or imposed by the directors.
are not superseded by any regulations made or imposed by the directors.
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111.
All acts done by the directors or by a committee of directors or by any person acting
as a director or a member of a committee, shall, notwithstanding that it shall
afterwards be discovered that there was some defect in the appointment of the
afterwards be discovered that there was some defect in the appointment of the
directors or persons acting aforesaid, or that they or any of them were disqualified
from or had vacated office, shall be as valid as if every such person had been duly
from or had vacated office, shall be as valid as if every such person had been duly
appointed and was qualified and had continued to be a director or member of such
committee.
committee.
112.
Directors’ meetings and meetings of committees of the directors may be held by
means of such telephonic, electronic or other communication facility or media as
permits all persons participating in the meeting to communicate with each other
permits all persons participating in the meeting to communicate with each other
simultaneously and instantaneously and directors so participating shall be deemed to
be present at such meeting.
be present at such meeting.
SECRETARY
113. Subject to the provisions of the Statutes, the secretary (who shall be permanently
resident in South Africa and which may be a body corporate or a partnership
complying with the requirements of the Act) shall be appointed by the directors for
such term, at such remuneration and upon such conditions as they may think fit and
such term, at such remuneration and upon such conditions as they may think fit and
any secretary so appointed may not be removed without the approval of the
directors. A provision of the Statutes or these articles requiring or authorising a
directors. A provision of the Statutes or these articles requiring or authorising a
thing to be done by or to a director and the secretary shall not be satisfied by its
being done by or to the same person acting both as director and as, or in place of,
being done by or to the same person acting both as director and as, or in place of,
the secretary.
AUTHENTICATION AND ELECTRONIC ARCHIVING OF DOCUMENTS
114. Subject to the provisions of the Statutes, any director or the secretary or any person
appointed by the directors or any committee of the directors for that purpose shall
have power to store any documents affecting the constitution of the Company and
any resolutions passed by the Company or the directors, and any books, records,
any resolutions passed by the Company or the directors, and any books, records,
documents and accounts relating to the business of the Company, by electronic
42
means and to certify copies thereof or extracts therefrom as true copies or extracts;
and where any books, records, documents or accounts are elsewhere than at the
and where any books, records, documents or accounts are elsewhere than at the
office the local manager or other officer of the Company having the custody thereof
shall be deemed to be the person appointed by the directors aforesaid.
shall be deemed to be the person appointed by the directors aforesaid.
115. A document purporting to be a copy of a resolution of the directors or an extract
from the minutes of a meeting of the directors which is certified as such in
accordance with the provisions of article 114 shall be conclusive evidence in favour
accordance with the provisions of article 114 shall be conclusive evidence in favour
of all persons dealing with the Company upon the faith thereof that such resolution
has been duly passed or, as the case may be, that such extract is a true and accurate
has been duly passed or, as the case may be, that such extract is a true and accurate
record of a duly constituted meeting of the directors.
DIVIDENDS AND OTHER PAYMENTS TO MEMBERS
116. Subject to the provisions of the Statutes and the requirements of any stock exchange
on which the Company’s securities are listed or quoted, the Company may make
payments to its members from time to time.
payments to its members from time to time.
117. The Company in general meeting (subject to obtaining the declaration of the
directors referred to in article 121) or the directors may from time to time declare a
dividend or make any other payment to members (or any class of members) in such
dividend or make any other payment to members (or any class of members) in such
currency as the directors or the general meeting may determine and in proportion to
the number of shares held by them in each class. Dividends and other payments
the number of shares held by them in each class. Dividends and other payments
shall be declared payable to members registered as such on a date subsequent to the
date of the declaration thereof as determined by the directors or the Company in
date of the declaration thereof as determined by the directors or the Company in
general meeting; provided that the directors may rescind any dividend or other
payment to be made to members or any class of members before the date of
payment thereof if the directors decide that the Company’s financial position no
longer justifies such payment.
longer justifies such payment.
118. No larger dividend shall be declared by the Company in general meeting than is
recommended by the directors; but the Company in general meeting may declare a
smaller dividend.
43
119. All unclaimed dividends or other payments to members as contemplated in articles
116 and 117 may be invested or otherwise be made use of by the directors for the
benefit of the Company until claimed, provided that any dividend or other payment
benefit of the Company until claimed, provided that any dividend or other payment
to members remaining unclaimed for a period of not less than three years from the
date on which it became payable may be forfeited by resolution of the directors for
date on which it became payable may be forfeited by resolution of the directors for
the benefit of the Company.
120. The Company shall be entitled at any time to delegate its obligations to any member
in respect of unclaimed dividends or other unclaimed payments to any one of the
Company’s bankers from time to time.
121. The declaration of the directors as to whether:
121.1
the Company is, or would be, after payment of any dividend or other payment
to members, able to pay its debts as they become due in the ordinary course of
business; and
business; and
121.2
the consolidated assets of the Company, fairly valued would, after the payment
of the dividend or other payment to members, not be less than the
consolidated liabilities of the Company
consolidated liabilities of the Company
shall be conclusive.
122. Any dividend, interest or other sum payable in cash to the holder of a security may
be paid by cheque or warrant sent through the post addressed to the holder at his
registered address or, in the case of joint holders, addressed to the holder whose
name stands first on the register in respect of the share at his registered address, or
name stands first on the register in respect of the share at his registered address, or
addressed to such person and at such address as the holder or joint holders may in
writing direct, or by electronic transfer into the bank account nominated by the
writing direct, or by electronic transfer into the bank account nominated by the
holder or, in the case of joint holders, into the bank account nominated by the holder
whose name stands first in the register in respect of the share. Every such cheque or
warrant shall, unless the holder or joint holders otherwise direct, be made payable to
the order of the person to whom it is addressed and shall be sent at the risk of the
the order of the person to whom it is addressed and shall be sent at the risk of the
44
holder or joint holders. Every such electronic transfer shall be made at the risk of
the holder or joint holders. The Company shall not be responsible for the loss in
the holder or joint holders. The Company shall not be responsible for the loss in
transmission of any cheque or warrant or of any document (whether similar to a
cheque or warrant or not) sent through the post as aforesaid or the loss or
cheque or warrant or not) sent through the post as aforesaid or the loss or
misdirection of any electronic transfer. Payment of any such cheque or warrant, or
the making of such electronic transfer, to whomsoever effected, shall be a good
the making of such electronic transfer, to whomsoever effected, shall be a good
discharge to the Company.
123. Any dividend may be paid and satisfied, either wholly or in part, by the distribution
of specific assets, or in paid-up securities of the Company or of any other company,
or in cash, or in any one or more of such ways as the directors or the Company in
general meeting may at the time of declaring the dividend determine and direct, and
general meeting may at the time of declaring the dividend determine and direct, and
where any difficulty arises in regard to such distribution the directors may settle the
same as they think expedient and in particular may fix the value for distribution of
same as they think expedient and in particular may fix the value for distribution of
such specific assets and may determine that cash payments shall be made to any
member on the basis of the value so fixed in order to secure equality of distribution
member on the basis of the value so fixed in order to secure equality of distribution
and may vest any such assets in trustees upon such trusts for the persons entitled to
the dividend as may seem expedient to the directors.
the dividend as may seem expedient to the directors.
124. The directors may from time to time make such regulations as they may think fit in
regard to the payment of dividends to members having registered addresses outside
South Africa, and such regulations may provide for the payment of such dividends in
South Africa, and such regulations may provide for the payment of such dividends in
any foreign currency and the rate of exchange at which such payment shall be made
and such other matters as the directors may think fit.
and such other matters as the directors may think fit.
RESERVES
125. The directors may set aside such sum as they think proper as reserves which shall, at
the discretion of the directors be applicable for any purpose and pending such
application may, at the like discretion, either be employed in the business of the
Company or be invested in such investments as the directors may from time to time
Company or be invested in such investments as the directors may from time to time
think fit. The directors may also, without placing the same to reserve, carry forward
any sum which they may think prudent not to distribute.
any sum which they may think prudent not to distribute.
45
126. The Company in general meeting may upon the recommendation of the directors at
any time and from time to time resolve that it is desirable to capitalise all or any part
of the amount for the time being standing to the credit of any of the Company's
of the amount for the time being standing to the credit of any of the Company's
reserves or of any share premium account or capital redemption reserve fund or to
the credit of the income statement or otherwise available for distribution and not
the credit of the income statement or otherwise available for distribution and not
required for the payment of the fixed dividends on any preference shares of the
Company, and accordingly that such amount be set free for distribution among the
Company, and accordingly that such amount be set free for distribution among the
members or any class of members who would be entitled thereto if distributed by
way of dividend and in the same proportions on the basis that the same be not paid
way of dividend and in the same proportions on the basis that the same be not paid
in cash but either be applied in paying up unissued shares of the Company to be
issued to such members as fully paid capitalisation shares having a par value or be
issued to such members as fully paid capitalisation shares having a par value or be
transferred to the Company's stated capital and be applied in distributing to such
members shares of no par value.
members shares of no par value.
DIRECTORS' POWERS ON CAPITALISATION OR DISTRIBUTION OF
PROFITS
127. If any difficulty arises in regard to any distribution under article 126, the directors
may settle the same as they think it expedient. They may make all appropriations and
applications of the sum resolved to be capitalised thereby, and all allotments and
applications of the sum resolved to be capitalised thereby, and all allotments and
issues of securities, if any, and generally shall do all acts and things required to give
effect thereto, with full power to the directors to provide that fractions shall be
effect thereto, with full power to the directors to provide that fractions shall be
ignored altogether, or by payment in cash or otherwise, as they think fit, in the case
of securities becoming distributable in fractions. The directors may also appoint any
of securities becoming distributable in fractions. The directors may also appoint any
person to enter, on behalf of all members entitled to the benefit of such
appropriations and applications or to participate in such distribution, into any
appropriations and applications or to participate in such distribution, into any
contract requisite or convenient for giving effect thereto, and such appointment and
contract made under such appointment shall be effective and binding on all such
contract made under such appointment shall be effective and binding on all such
members.
46
SHARE PREMIUM ACCOUNT AND CAPITAL REDEMPTION RESERVE
FUND
128. The Company may from time to time, subject to any requirements which may be
imposed by the Statutes, by ordinary resolution authorise the directors to distribute
all or any part of the amount for the time being standing to the credit of or deal with,
all or any part of the amount for the time being standing to the credit of or deal with,
in any way recommended by the directors or authorised by the Statutes, any share
premium account or capital redemption reserve fund of the Company, save that the
premium account or capital redemption reserve fund of the Company, save that the
provisions of this article shall not apply in respect of any action properly taken by the
Company in terms of Sections 76(3) or 98(4) of the Act.
Company in terms of Sections 76(3) or 98(4) of the Act.
FOREIGN CURRENCY PAYMENTS
129. Any payments to members to be made to any member whose registered address is
outside South Africa or who has given written instructions requesting payment at an
address outside South Africa and any payment to a member whose registered address
is outside South Africa may be paid in such currency or currencies other than the
is outside South Africa may be paid in such currency or currencies other than the
currency of South Africa as may be stipulated by the directors. The directors may
also stipulate the date upon which the currency of South Africa will be converted
also stipulate the date upon which the currency of South Africa will be converted
into such other currency or currencies.
ACCOUNTS
130. The directors shall cause to be kept such accounting records and books of account as
are prescribed by the Statutes.
131. The accounting records shall be kept at the office or (subject to the provisions of
Section 284 of the Act) at such other place as the directors think fit, and shall at all
times be open to inspection by the directors. Except as provided by the Statutes or
times be open to inspection by the directors. Except as provided by the Statutes or
by the authority of the directors no member (other than a director) shall have any
right to inspect any accounting record book, account or document of the Company.
right to inspect any accounting record book, account or document of the Company.
47
132.
Subject to the provisions of the Statutes, a copy of the annual financial statements
made out in accordance with and consisting of the documents specified in Section
286 of the Act which is to be laid before the Company in annual general meeting,
286 of the Act which is to be laid before the Company in annual general meeting,
shall be:
132.1
delivered or sent by post in printed form to the registered address of each
member; or
132.2
sent by electronic mail to each member who has elected to receive notices in
that form in accordance with the provisions of these articles;
(and at the same time there shall be forwarded to the secretary or other proper
officer of any stock exchange on which any shares of the Company are listed or
officer of any stock exchange on which any shares of the Company are listed or
quoted such number of copies of such documents as for the time being may be
required under its regulations or practice) at least twenty-one clear days before such
required under its regulations or practice) at least twenty-one clear days before such
annual general meeting. Notwithstanding the foregoing, this article shall not require
a copy of the said documents to be sent:
a copy of the said documents to be sent:
132.3
to any person:
132.3.1
who is not entitled to receive notice of general meetings of the
Company;
Company;
132.3.2
the address of whom the Company is not aware; or
132.3.3
who has by notice in writing to the Company elected not to receive such
documents; or
132.4
to more than one of the joint holders of any securities.
INDEPENDENT EXTERNAL AUDITORS
133. Independent external auditors shall be appointed and their duties regulated in
accordance with the provisions of the Statutes.
48
134.
Subject to the provisions of the Statutes, all acts done by any person acting as
independent external auditor, shall as regards all persons dealing in good faith with
the Company, be valid notwithstanding that there was some defect in his
the Company, be valid notwithstanding that there was some defect in his
appointment.
135. All annual financial statements when audited and laid before an annual general
meeting shall be deemed conclusively correct, and shall not be re-opened without the
approval of the directors.
NOTICES
136. Subject to the provisions of these articles and to the requirements of any stock
exchange of which the shares of the Company are listed or quoted:
136.1
any notice which is required to be given by the Company to members or
directors shall be in writing and may be given to:
136.1.1
any member or director who has notified the Company of his electronic
mail address or telefacsimile number for this purpose, by:
136.1.1.1
sending such notice by electronic mail or telefacsimile, as the case
may be, to such address or telefacsimile number, as the case may
be; or
be; or
136.1.1.2
sending an electronic mail advising that a notice is posted on a
website and containing the web address of such website; provided
website and containing the web address of such website; provided
that such notice is available on such website for at least the period
commencing on the day after the date on which such notice was
commencing on the day after the date on which such notice was
sent and expiring on the later of the twenty-first day succeeding
that day or the day of the meeting, if any, to which the notice
that day or the day of the meeting, if any, to which the notice
relates;
49
provided that any member who has notified the Company of his
electronic mail address or telefacsimile number may by written notice to
electronic mail address or telefacsimile number may by written notice to
the Company withdraw such notification of his electronic mail address
or telefacsimile number; or
or telefacsimile number; or
136.1.2
any member or director by delivery in person; or
136.1.3
any member or director by delivering it or sending it through the post,
properly addressed, to:
properly addressed, to:
136.1.3.1
a member at his address reflected in the register;
136.1.3.2
a director at his postal address shown in the directors’ register;
136.1.4
if the Company is prevented through circumstances beyond its control
from so giving notice, then notice may be given by advertisement.
from so giving notice, then notice may be given by advertisement.
Should it be necessary to give notice by advertisement, such notice shall,
subject to the provisions of the Statutes, be advertised in the Gazette and
subject to the provisions of the Statutes, be advertised in the Gazette and
in such newspapers as the directors may from time to time determine;
provided that where a branch register or transfer office has been
provided that where a branch register or transfer office has been
established, such advertisement shall also be inserted in at least one
leading newspaper circulating in the town or district in which such
leading newspaper circulating in the town or district in which such
branch register or transfer office is located;
and any such notice to members shall simultaneously be given to the
appropriate official or department of any recognised stock exchange on which
the shares of the Company are listed or quoted, in accordance with the
the shares of the Company are listed or quoted, in accordance with the
requirements of that stock exchange. Any such notice to members shall also
be advertised in accordance with the requirements of any such stock exchange;
be advertised in accordance with the requirements of any such stock exchange;
136.2
every notice shall be deemed to have been received:
136.2.1
if it is delivered, on the date on which it is so delivered;
50
136.2.2
if it is sent by post, on the day on which it was posted;
136.2.3
if it, or an advertisement referred to in article 136.1.4, is advertised, on
the day on which the advertisement appeared in the Gazette;
136.2.4
if it, or a message referred to in article 136.1.1.2, is sent by electronic
mail, on the day on which it was so sent;
136.2.5
if it, or a message referred to in article 136.1.1.2, is sent by telefacsimile,
on the day on which it was successfully transmitted,
on the day on which it was successfully transmitted,
notwithstanding that such notice may not actually have been received.
137. In the case of joint holders of a security, all notices shall unless such holders
otherwise in writing direct and the directors agree, be given to that one of the joint
holders whose name stands first in the register, and notice so given shall be sufficient
notice to all the joint holders.
holders whose name stands first in the register, and notice so given shall be sufficient
notice to all the joint holders.
138. Every person who, by operation of law, transfer or other means whatsoever, shall
become entitled to any security, shall be bound by every notice in respect of such
security which, previously to his name and address being entered on the register, shall
have been given to the person from whom he derived his title to such security.
security which, previously to his name and address being entered on the register, shall
have been given to the person from whom he derived his title to such security.
139. Any notice or other document delivered, given or sent in accordance with the
provisions of these articles shall notwithstanding that such member be then under
legal incapacity, and whether or not the Company has notice of his legal incapacity,
be deemed to have been duly served in respect of any security registered in the name
of such member as a sole or joint holder unless his name shall at the time of the
service of the notice or document have been removed from the register as the holder
of the security; and such service shall for all purposes of these articles be deemed a
sufficient service of such notice or document on all persons interested (whether
jointly with or as claiming through or under him) in the security.
legal incapacity, and whether or not the Company has notice of his legal incapacity,
be deemed to have been duly served in respect of any security registered in the name
of such member as a sole or joint holder unless his name shall at the time of the
service of the notice or document have been removed from the register as the holder
of the security; and such service shall for all purposes of these articles be deemed a
sufficient service of such notice or document on all persons interested (whether
jointly with or as claiming through or under him) in the security.
51
140. Save as otherwise expressly provided, where a given number of days notice, or notice
extending over any period, is required to be given, the days of service shall not,
unless it is otherwise provided, be counted in such number of days or other period.
unless it is otherwise provided, be counted in such number of days or other period.
141. The accidental omission to give notice of a general meeting or a meeting of directors
to any member or director, as the case may be, shall not invalidate any resolution
passed at such meeting.
passed at such meeting.
WINDING UP
142. If the Company shall be wound up the liquidator may, with the sanction of a special
resolution of the members divide among the members in specie or kind the whole or
any part of the assets of the Company and may for such purpose set such value as he
deems fair upon any asset and may determine how the division shall be carried out as
deems fair upon any asset and may determine how the division shall be carried out as
between the members or different classes of members. The liquidator may with the
like sanction, vest the whole or any part of such assets in trustees to be held in trust
like sanction, vest the whole or any part of such assets in trustees to be held in trust
for the benefit of the members or any of them on such terms as the liquidator, with
the like sanction, shall think fit. Any such resolution may provide for and sanction a
the like sanction, shall think fit. Any such resolution may provide for and sanction a
distribution of any specific assets amongst different classes of members otherwise
than in accordance with their existing rights, but each member shall in that event
than in accordance with their existing rights, but each member shall in that event
have a right of dissent and other ancillary rights in the same manner as if such
resolution were a special resolution passed pursuant to Section 390 of the Act.
resolution were a special resolution passed pursuant to Section 390 of the Act.
INDEMNITY
143. Subject to the provisions of Section 247 of the Act:
143.1
every director, manager, secretary and officer of the Company shall be
indemnified out of the funds of the Company against all liabilities incurred by
him as such director, manager, secretary or officer in defending any
him as such director, manager, secretary or officer in defending any
proceedings, whether civil or criminal, in which judgment is given in his
favour, or in which he is acquitted, or in connection with any application under
favour, or in which he is acquitted, or in connection with any application under
Section 248 of the Act in which relief is granted to him by the Court; and
52
143.2
every such person aforesaid shall be indemnified by the Company against and,
it shall be the duty of the directors out of the funds of the Company, to pay all
costs, losses and expenses which any such person may incur or become liable
costs, losses and expenses which any such person may incur or become liable
to by reason of any contract entered into or act or deed done by him as such
director, secretary, manager or officer of the Company or in any way in the
director, secretary, manager or officer of the Company or in any way in the
discharge of his duties.
144.
Subject to the provisions of the Statutes, no director, manager, secretary or officer or
servant of the Company shall be liable for the acts, receipts, neglects, or defaults of
any other director, manager, secretary or officer or servant, or for joining in any
receipt or other act for conformity, or for loss or expense happening to the
receipt or other act for conformity, or for loss or expense happening to the
Company through the insufficiency or deficiency of title to any property acquired by
order of the directors for and on behalf of the Company, or for the insufficiency or
order of the directors for and on behalf of the Company, or for the insufficiency or
deficiency of any security in or upon which any of the moneys of the Company shall
be invested, or for any loss or damage arising from the insolvency or delict of any
be invested, or for any loss or damage arising from the insolvency or delict of any
person with whom any moneys, securities or effects shall be deposited, or for any
loss or damage occasioned by any error of judgment or oversight on his part, or for
loss or damage occasioned by any error of judgment or oversight on his part, or for
any other loss, damage or misfortune whatsoever which shall happen in the
execution of his duties of office or in relation thereto, unless the same happen
execution of his duties of office or in relation thereto, unless the same happen
through his own dishonesty.
WAIVER BY STOCK EXCHANGE
145.
Notwithstanding anything to the contrary contained in these articles, where any
action or matter is expressed in these articles to be subject to compliance with the
listing requirements or rules of any stock exchange on which the Company’s
listing requirements or rules of any stock exchange on which the Company’s
securities are listed or quoted, a waiver of such requirements or rules by the stock
exchange concerned shall constitute compliance with those requirements or rules for
exchange concerned shall constitute compliance with those requirements or rules for
the purposes of these articles.
53
RIGHTS ATTACHING TO PREFERENCE SHARES
146. Rights, privileges, restrictions and other conditions applicable to the A redeemable
preference shares of 50 cents each and B redeemable preference shares of 1 cent
each in the Company.
146.1
For purposes of this article the "Moab Lease Area" means the total lease area
of 2 149,2631 hectares of the Mining Leases as ceded to AngloGold Ashanti
Limited (formerly Vaal Reefs Exploration and Mining Company Limited) by
virtue of Deeds of Cession of Mining Leases Nos 23/92 and 26/92 and as
virtue of Deeds of Cession of Mining Leases Nos 23/92 and 26/92 and as
reflected in the diagrams attaching to the Mining Leases being RMT Nos
52/91 and 53/91.
52/91 and 53/91.
146.2
The following terms shall apply to the A redeemable preference shares of 50
cents each (“the A preference shares”), in the share capital of the Company:
146.2.1
The A preference shares shall be allotted to Eastvaal Gold Holdings
Limited as fully paid and are not transferable.
146.2.2
The A preference shares shall rank pari passu with each other and except
as provided for in this article shall rank pari passu with the B redeemable
preference shares of 1 cent each (“the B preference shares”).
146.2.3
The A preference shares shall confer the following rights on the holder
thereof:
146.2.3.1
after payment in full of the annual dividend on the B preference
shares, the right to an annual dividend equivalent to the balance of
shares, the right to an annual dividend equivalent to the balance of
the after tax profits arising from income derived from mining the
Moab Lease Area as determined by the directors in each financial
Moab Lease Area as determined by the directors in each financial
year, but shall confer no right to any dividend payment from any
other profits of the Company.
other profits of the Company.
146.2.3.2
to receive on redemption:
54
146.2.3.2.1
the nominal value of the said A preference shares;
146.2.3.2.2
a premium per share of an amount equal to the net proceeds
available from the disposal of the assets relating to the Moab
Lease Area, after redemption in full of the B preference
Lease Area, after redemption in full of the B preference
shares and payment of the nominal value of the
A preference shares, divided by 2 000 000. Any amount
A preference shares, divided by 2 000 000. Any amount
transferred to the share premium account of the Company
pursuant to Section 76(2) of the Act consequent upon the
pursuant to Section 76(2) of the Act consequent upon the
issue of such shares may be used to provide for any
premium on the redemption of the shares.
premium on the redemption of the shares.
146.2.3.3
Against payment of the said nominal value and premium, if any,
such shares shall be fully redeemed and shall constitute part of the
authorised and unissued share capital of the Company.
authorised and unissued share capital of the Company.
146.2.3.4
The A preference shares shall have no right to redemption from
any proceeds otherwise arising.
any proceeds otherwise arising.
146.2.4
The A preference shares shall confer on the holder thereof the right to
receive notice of, and to attend, any meeting of the Company and to
vote thereat and on a poll shall entitle the holder to one vote for each A
vote thereat and on a poll shall entitle the holder to one vote for each A
preference share held provided that at every general meeting of the
Company at which the holders of the ordinary shares, the A preference
Company at which the holders of the ordinary shares, the A preference
shares and the B preference shares are present and entitled to vote, on a
poll the holder of the A preference shares shall be entitled to 50 votes
poll the holder of the A preference shares shall be entitled to 50 votes
for each A preference share held, the holders of the ordinary shares shall
be entitled to 50 votes for each ordinary share held and the holder of the
be entitled to 50 votes for each ordinary share held and the holder of the
B preference shares shall be entitled to one vote for each B preference
share held.
share held.
55
146.2.5
At every separate meeting of the holder of the A preference shares the
provisions of the articles relating to the voting at general meetings of
ordinary shareholders and the appointment of proxies to act thereat,
ordinary shareholders and the appointment of proxies to act thereat,
shall apply, mutatis mutandis, except that at any such separate meeting the
sole holder of the A preference shares shall constitute a quorum.
sole holder of the A preference shares shall constitute a quorum.
146.2.6
The A preference shares shall confer the right, on a winding-up of the
Company, in priority to any payment in respect of the ordinary shares in
the capital of the Company then issued, but after any payment in respect
the capital of the Company then issued, but after any payment in respect
of the B preference shares in the capital of the Company then issued, to
receive only so much of the net proceeds from the disposal of the assets
receive only so much of the net proceeds from the disposal of the assets
relating to the Moab Lease Area as is then available for distribution.
146.2.7
The A preference shares shall not be entitled to any participation, on a
winding-up, in any of the surplus funds of the Company in any other
manner arising.
146.3
The following terms shall apply to the B preference shares in the share capital
of the Company:
146.3.1
The B preference shares shall be issued at par plus a premium of
R249,99 per share. The said shares shall be subscribed for by and
allotted to Eastvaal Gold Holdings Limited at a price of R250,00 per
share and are not transferable.
share and are not transferable.
146.3.2
The B preference shares shall rank pari passu with each other and except
as provided for in this article shall rank pari passu with the A preference
shares.
shares.
146.3.3
The B preference shares shall confer the following rights on the holder
thereof:
thereof:
56
146.3.3.1
the right to an annual dividend amounting to the lesser of 5 per
cent of the issue price of the B preference shares or an amount
equivalent to the balance of the after tax profits arising from
equivalent to the balance of the after tax profits arising from
income derived from mining the Moab Lease Area as determined
by the directors in each financial year. The annual dividend shall
by the directors in each financial year. The annual dividend shall
be a first charge on any profit available for distribution from the
Moab Lease Area but shall not be payable from any other profits
Moab Lease Area but shall not be payable from any other profits
of the Company.
146.3.3.2
to receive on redemption:
146.3.3.2.1
the nominal value of the said B preference shares;
146.3.3.2.2
a premium of up to R249,99 per share, but limited to an
amount equal to the net proceeds available from the disposal
of the assets relating to the Moab Lease Area after payment
of the assets relating to the Moab Lease Area after payment
of the nominal value of the B preference shares. Any such
premium shall be payable from so much of the share
premium shall be payable from so much of the share
premium account as arose on the issue of the shares.
146.3.3.3
Against payment of the said nominal value and premium, if any,
such shares shall be fully redeemed and shall constitute part of the
authorised and unissued share capital of the Company.
146.3.3.4
The redemption of the B preference shares shall be a first charge
against the net proceeds from the disposal of the assets relating to
the Moab Lease Area following permanent cessation of mining
operations in the Moab Lease Area, but shall have no right to
operations in the Moab Lease Area, but shall have no right to
redemption from any proceeds otherwise arising.
146.3.4
The B preference shares shall confer on the holder thereof the right to
receive notice of, and to attend, any meeting of the Company provided
that:
that:
57
146.3.4.1
the holder of a B preference share shall not be entitled to vote at
such meeting, except:
146.3.4.1.1
during any period commencing six months after the due date
for payment of any B preference share dividend which has
been declared and during which such B preference dividend
or any part of such B preference dividend remains in arrear
or any part of such B preference dividend remains in arrear
and unpaid; or
146.3.4.1.2
in regard to any resolution proposed which directly affects
any of the rights attached to the B preference shares or the
interests of the holders of the B preference shares, including
a resolution for the winding-up of the Company or for the
a resolution for the winding-up of the Company or for the
reduction of its capital; or
146.3.4.1.3
in regard to any resolution of the Company proposed for the
disposal of the whole or substantially the whole of the
undertaking of the Company or the whole or the greater part
undertaking of the Company or the whole or the greater part
of the assets of the Company, or the whole or the greater
part of the assets relating to the operations in the Moab
part of the assets relating to the operations in the Moab
Lease Area.
146.3.4.2
at every general meeting of the Company at which the holders of
the ordinary shares, the A preference shares and the B preference
shares are present and entitled to vote, on a poll the holder of the
A preference shares shall be entitled to 50 votes for each A
A preference shares shall be entitled to 50 votes for each A
preference share held, the holders of the ordinary shares shall be
entitled to 50 votes for each ordinary share held and the holder of
entitled to 50 votes for each ordinary share held and the holder of
the B preference shares shall be entitled to one vote for each B
preference share held.
preference share held.
58
146.3.5
At every separate meeting of the holder of the B preference shares the
provisions of the articles relating to the voting at general meetings of
ordinary shareholders and the appointment of proxies to act thereat,
ordinary shareholders and the appointment of proxies to act thereat,
shall apply, mutatis mutandis, except that at any such separate meeting the
sole holder of the B preference shares shall constitute a quorum.
sole holder of the B preference shares shall constitute a quorum.
146.3.6
The B preference shares shall confer the right, on a winding-up of the
Company, in priority to any payment in respect of the ordinary shares or
the A preference shares in the capital of the Company then issued, to
the A preference shares in the capital of the Company then issued, to
receive only so much of the net proceeds from the disposal of the assets
relating to the Moab Lease Area as is available for distribution but not
relating to the Moab Lease Area as is available for distribution but not
exceeding a return per B preference share of the capital paid-up thereon
and any share premium paid on the issue of the B preference shares
and any share premium paid on the issue of the B preference shares
outstanding at that time.
146.3.7
The B preference shares shall not be entitled to any participation, on a
winding-up, in any of the surplus funds of the Company in any other
manner arising.
146.4
The following terms shall apply to both the A preference shares and the B
preference shares in the share capital of the Company:
146.4.1
The rights attaching to the A and B preference shares and the interests
of the holders of the A and B preference shares shall not be regarded as
being directly affected or modified by the creation by the Company of
any further shares of any class unless those new shares rank as regards
any further shares of any class unless those new shares rank as regards
participation in the assets or profits of the Company from the Moab
Lease Area in some or all respects in priority to or pari passu with the A
Lease Area in some or all respects in priority to or pari passu with the A
and B preference shares.
146.4.2
The provisions of this article 146 shall override any similar or contrary
provisions of the Articles of Association of the Company.
59
146.4.3
Without the prior written consents of the holders of the A and B
preference shares or the prior sanction of resolutions at separate general
meetings of the holders of the A and B preference shares passed in the
meetings of the holders of the A and B preference shares passed in the
same manner, mutatis mutandis, as a special resolution:
146.4.3.1
none of the rights attaching to the A or B preference shares may
be modified;
146.4.3.2
no shares in the capital of the Company, ranking as regards
participation in the assets or profits of the Company arising from
operations in the Moab Lease Area in some or all respects in
operations in the Moab Lease Area in some or all respects in
priority to or pari passu with the A and B preference shares shall be
created.
created.
146.4.4
The A preference shares and the B preference shares shall be redeemed,
but only after cessation of mining operations in the Moab Lease Area
but only after cessation of mining operations in the Moab Lease Area
and realisation of the assets relating to the Moab Lease Area.
CONDITIONS ATTACHING TO THE E ORDINARY SHARES
147. The E ordinary shares shall confer on the holders thereof from time to time (“the E
Holder(s)”) the following rights, privileges and obligations:
147.1
Each E ordinary share shall confer on the E Holder the right to receive a
dividend ranking pari passu with all of the dividends that may from time to time
be declared to the holders of the ordinary shares, equal to one-half of the
be declared to the holders of the ordinary shares, equal to one-half of the
dividend per ordinary share declared by the Company from time to time.
147.2
The Company shall be obliged, on the delivery by the Company by an E
Holder from time to time of a written notice (“the Transaction Notice”)
delivered at such times and in such manner as the Company shall agree from
delivered at such times and in such manner as the Company shall agree from
time to time with each relevant E Holder, to reduce the issued share capital of
the Company by cancelling the E ordinary shares, or any portion of the E
the Company by cancelling the E ordinary shares, or any portion of the E
ordinary shares, and by crediting an amount equal to the par value of the E
ordinary shares so cancelled to the non-distributable reserve account in the
ordinary shares so cancelled to the non-distributable reserve account in the
60
books of the Company. In the event that the relevant E Holder shall fail, for
whatsoever reason, to deliver a Transaction Notice at the time or times and in
whatsoever reason, to deliver a Transaction Notice at the time or times and in
the manner as agreed from time to time between the Company and such
relevant E Holder, the Company shall be entitled to cancel the E ordinary
relevant E Holder, the Company shall be entitled to cancel the E ordinary
shares, or such portion of them as shall have been agreed between the
Company and such relevant E Holder, at such times and in such manner as
Company and such relevant E Holder, at such times and in such manner as
shall so have been agreed.
147.3
On the delivery by the E Holder of a Transaction Notice, or (in the absence of
the delivery of such Transaction Notice) at such time as the Company shall be
entitled to cancel the E ordinary shares, or any portion of them, as agreed from
time to time between the Company and each relevant E Holder (it being
time to time between the Company and each relevant E Holder (it being
recorded that, for the purposes of this Article 147, the E Holder shall be
deemed to have given a Transaction Notice to the Company at such time or
deemed to have given a Transaction Notice to the Company at such time or
times) the Company shall:
147.3.1
determine the morning volume weighted average traded price (“the
Transaction Notice Price”) of the ordinary shares on the JSE at midday
on the Business Day on which the Transaction Notice shall have been
given, or shall be deemed to have been given (“the Transaction Notice
given, or shall be deemed to have been given (“the Transaction Notice
Date”) on;
147.3.2
calculate, on the basis described in Article 147.4 the number of
E ordinary shares (“the Cancellation Shares”) which the Company shall
be entitled and obliged to cancel in respect of the Transaction Notice;
147.3.3
cancel the Cancellation Shares, it being recorded that the par value of the
Cancellation Shares shall be credited to the Non-Distributable Reserve
Account in the books of the Company;
Account in the books of the Company;
147.3.4
convert such number of the E ordinary shares in respect of which the
Transaction Notice shall have been given, or such number of E ordinary
shares as the Company shall at that time be entitled in terms of its
shares as the Company shall at that time be entitled in terms of its
61
agreement with the relevant E Holder to deal with by way of deemed
Transaction Notice, (collectively “the Transaction Notice Shares”) and
Transaction Notice, (collectively “the Transaction Notice Shares”) and
which shall not have been cancelled set out in this Article 147 (“the
Conversion Shares”), into ordinary shares, by not later than 5 Business
Conversion Shares”), into ordinary shares, by not later than 5 Business
Days after the Transaction Notice Closing Date (“the Transaction
Notice Closing Date”);
Notice Closing Date”);
147.3.5
procure that the Conversion Shares, after their conversion into ordinary
shares, shall be listed on the JSE by not later than 5 Business Days after
the Transaction Notice Closing Date; and
the Transaction Notice Closing Date; and
147.3.6
by not later than 5 Business Days after the Transaction Notice Closing
Date, instruct the Central Securities Depository Participant of the
Company irrevocably and in writing to credit the account of the E
Holder held with its Central Securities Depository Participant with the
ordinary shares into which the Conversion Shares shall have been
ordinary shares into which the Conversion Shares shall have been
converted.
147.4
The Company shall calculate the number of Cancellation Shares which the
Company shall be entitled and obliged to cancel in terms of respectively
Articles 147.2 and 147.3 by reference to the formula:
B – C + D
A = __________
E
where:
A
is the number of Cancellation Shares which the Company shall be
entitled to cancel, which number shall not be greater than the number of
entitled to cancel, which number shall not be greater than the number of
E ordinary shares constituting the Transaction Notice Shares;
B
is 90% of the 30 day volume weighted average traded price per ordinary
share on the date on which the E Holder shall have subscribed for and
the Company shall have allotted and issued the E ordinary shares to the
the Company shall have allotted and issued the E ordinary shares to the
62
E Holder (“Subscription Date”) multiplied by the number of
Transaction Notice Shares (“the Opening Balance”);
Transaction Notice Shares (“the Opening Balance”);
C
is the amount (“the Reduction”) equal to 50% of the aggregate dividends
per ordinary share paid by the Company during the period commencing
per ordinary share paid by the Company during the period commencing
on the Subscription Date and terminating on the Transaction Notice
Date (“the Relevant Period”), multiplied by the number of Transaction
Date (“the Relevant Period”), multiplied by the number of Transaction
Notice Shares;
D
is an increment, calculated by the application of an escalation factor (“the
Factor”) of such percentage as the Company shall have agreed with the
E Holder from time to time, nominal annual compounded monthly in
E Holder from time to time, nominal annual compounded monthly in
arrears, to the Opening Balance in respect of the Relevant Period,
provided that there shall be taken into account, in the application of the
provided that there shall be taken into account, in the application of the
Factor, the Reduction and further provided that the Reduction shall be
deemed to have reduced the total amount to which the Factor shall be
deemed to have reduced the total amount to which the Factor shall be
applied from time to time, on the same dates and in the same
proportions as the Company shall from time to time have declared and
proportions as the Company shall from time to time have declared and
paid dividends to the holders of the ordinary shares; and
E is the morning day volume weighted average traded price per ordinary
share on the JSE at midday on the Transaction Notice Date.
147.5
The provisions of Articles 147.2, 147.3 and 147.4 shall apply mutatis mutandis
(and the Company shall be obliged to cancel a portion of the E ordinary shares
held by the E Holder and to convert the balance of such E ordinary shares into
ordinary shares, mutatis mutandis on the basis described in those Articles) in
ordinary shares, mutatis mutandis on the basis described in those Articles) in
the event that:
147.5.1
any person shall have acquired the entire ordinary issued share capital of
the Company in terms of, pursuant to and/or by the operation of either
Section 311 or Section 440K of the Companies Act (collectively “the
Take-out Transaction”); and
Take-out Transaction”); and
63
147.5.2
any person shall have made a written offer in respect of a Take-out
Transaction and the Company shall have delivered, at its election, a
written notice (“the Take-out Conversion Notice”) to the E Holder,
written notice (“the Take-out Conversion Notice”) to the E Holder,
advising the E Holder that the Company intends to and shall apply the
provisions of Articles 147.2, 147.3 and 147.44 to all, but not a portion
provisions of Articles 147.2, 147.3 and 147.44 to all, but not a portion
only, of the E ordinary shares then held by such E Holder,
provided that the Transaction Notice Date shall be deemed, for such purposes,
to be the date on which such party shall so acquire the entire issued ordinary
share capital of the Company or, in the event that the Company shall have
share capital of the Company or, in the event that the Company shall have
delivered a Take-out Conversion Notice to the E Holder, the date specified in
such notice.
such notice.
147.6
Save as set out in this Article 147, the E ordinary shares shall rank pari passu in
all respects with the ordinary shares, it being recorded, for the avoidance of
doubt, that in the event that the Company shall take any action of whatsoever
doubt, that in the event that the Company shall take any action of whatsoever
nature in relation to and/or in connection with the amendment of any of the
rights attaching to the ordinary shares and/or the par value of the ordinary
rights attaching to the ordinary shares and/or the par value of the ordinary
shares (including, without limitation, by the subdivision and/or consolidation
of the E ordinary shares, or any of them) the Company shall take the same
of the E ordinary shares, or any of them) the Company shall take the same
action mutatis mutandis in relation to the E ordinary shares.
EXHIBIT 19.4.1.2
RULES OF THE
ANGLOGOLD ASHANTI LIMITED
BONUS SHARE PLAN 2005
Approved by shareholders of the Company at the Annual General Meeting held on 29 April 2005
Amendments approved by shareholders at the annual general meeting held on 6 May 2008
180 Strand
London WC2R 1BL
Tel: 020 7936 3000
1
CONTENTS
1
DEFINITIONS AND INTERPRETATION ....................................................................... 2
2
GRANT OF AWARDS ................................................................................................... 9
3
NUMBER OF SHARES IN RESPECT OF WHICH AWARDS MAY BE GRANTED.... 11
4
RIGHTS OF VESTING AND EXERCISE OF AWARDS..............................................
11
5
RIGHTS OF VESTING AND EXERCISE ON DEATH .................................................
13
6
GENERAL PROVISIONS ON TERMINATION OF EMPLOYMENT............................
13
7
RESTRICTION ON GRANT AND EXERCISE............................................................. 13
8
LAPSE OF AWARDS .................................................................................................. 14
9
CHANGE OF CONTROL, REORGANISATION, WINDING UP AND TAKEOVER ..... 15
10
MANNER OF VESTING AND EXERCISE...................................................................
17
11
DIVIDENDS ................................................................................................................. 18
12
TRANSFER OF SHARES............................................................................................ 19
13
ADJUSTMENTS ..........................................................................................................
19
14
ADMINISTRATION ......................................................................................................
20
15
ALTERATIONS............................................................................................................
21
16
LEGAL ENTITLEMENT ............................................................................................... 22
17
GENERAL.................................................................................................................... 23
2
RULES OF THE ANGLOGOLD ASHANTI LIMITED
BONUS SHARE PLAN 2005
PURPOSE OF THE PLAN:
The purpose of the Plan is to reward executives, managers and key employees for their annual
contribution to achievement of company performance objectives, and a generation of value for
shareholders. Through the issuing of a bonus, part of which is paid in cash and part of which is paid
in shares or options, the Company hopes to encourage participants to build and maintain meaningful
shareholdings in the Company.
1
DEFINITIONS AND INTERPRETATION
1.1
In this Plan, the following words and expressions shall have, where the context so admits, the
meanings set forth below.
“Anglo American”
Anglo American plc (registered number 03564138);
“Annual Accounts”
means the accounts produced by the Company on an
annual basis after they have been independently audited
and approved by the Board;
“Appropriate Period”
The period specified below (provided that if more than
one period applies, the relevant period is the last period to
expire):
(i)
in a case falling within Rule 9.1, six months
starting on the date on which the relevant
person obtains Control of the Company;
(ii)
in a case falling within Rule 9.4, six months
starting on the date on which the court
sanctions the compromise or arrangement;
and
(iii)
in a case falling within Rule 9.3, the period
during which the relevant person remains so
bound or entitled;
“Award”
A Cash Bonus or a Bonus Share Award made under the
rules of the Plan;
3
“Board”
The board of directors for the time being of the Company
or a duly authorised Committee thereof;
“Bonus Period”
The Financial Year over which the Performance Targets
must be satisfied in order for a Cash Bonus to be granted
to an Eligible Employee;
“Bonus Share Award”
An award made to an Eligible Employee in accordance
with Rule 2.1, being in one of the following forms:
(A) an option to acquire Shares (exercisable for a nil
or nominal consideration); or
(B) an award of Shares (for nil or nominal
consideration) subject to restrictions, or
(C) a conditional right to receive Shares at no cost to
the Participant, or
(D) such other form which the Grantor considers has a
substantially similar purpose or effect;
“Cash Bonus”
In relation to an Eligible Employee and any Financial
Year, the amount of any annual cash bonus which he is
awarded or which it is proposed shall be awarded to him
under the Plan on the satisfaction of the Performance
Targets;
“Committee”
Either:
(A) in relation to the grant of Awards to executive
directors of the Company, the Remuneration
Committee; or
(B) in relation to the grant of Awards to other employees,
such other duly authorised committee of the Board
as may be appointed from time to time;
4
“Compliance Officer”
The compliance officer appointed by the Company in
respect of this Plan in accordance with section 144A(2) of
the Companies Act;
“Closing Price”
The closing price as defined in the JSE Listings
Requirements as amended from time to time. This price
is currently defined as the price determined by and
disseminated by the JSE based firstly on the uncrossing
price of the closing auction, or, failing which, the volume
weighted average price of the last 10 minutes of trade
prior to the closing auction, or failing which, the last
automated trade price;
“Company”
AngloGold Ashanti Limited incorporated and registered
in South Africa (under registration no 1944/017354/06);
“Companies Act”
The Companies Act 61 of 1973 as amended, or any law
that may replace it wholly or in part from time to time;
“Control”
The meaning given by Section 440A of the Companies
Act read with the meaning ascribed thereto in the
Securities Regulation Code on Takeovers and Mergers
promulgated under GN R290 of 18 January 1991 as well
as the Rules from time to time promulgated by the
Securities Regulation Panel constituted in terms of
section 440B of the Companies Act;
“Date of Grant”
The date on which an Award is granted;
“Dealing Day”
Any day on which the JSE is open for the transaction of
business;
5
“Eligible Employee”
Any person who at the Date of Grant is:
(A) an employee of a Participating Company, who is not
a director; or
(B) an executive director of a Participating Company
who devotes substantially the whole of his working
time to the business of a Participating Company;
“Financial Year”
A financial year of the Company;
“Grant Period”
The period commencing on the second Dealing Day, or
such later date at the discretion of the Grantor, which date
shall not exceed 42 days after any of the following events:
(A) the day on which the Plan is adopted by the
Company;
(B) the day on which the Company makes an
announcement of its results for the last preceding
Financial Year, half-year or other period;
(C) any day on which the Grantor resolves that
circumstances exist which justify the grant of
Awards;
(D) any day on which any change to any relevant
legislation affecting employees’ share schemes is
proposed or made;
(E) the date of commencement of an Eligible
Employee’s employment with a Participating
Company provided that the Eligible Employee is
not already employed by a Participating Company,
but only in respect of that Eligible Employee;
6
PROVIDED THAT if, by reason of any primary or
secondary legislation, regulation or government
directive or by reason of any agreement to which
the Company is or may be a party, the Grantor is
restricted from granting Awards under the Plan
during the period specified above, the relevant
Grant Period shall, commence on the second
Dealing Day, or such later date at the discretion of
the Grantor, which date shall not exceed 42 days,
after the restriction is lifted,;
“Grantor”
The Committee (acting on behalf of the Company) or the
Board or the Trustees acting on the recommendation of, or
with the consent of, the Committee, as the case may be;
“Group Member”
A Participating Company or a body corporate which is
the Company’s holding company or a Subsidiary of the
Company’s holding company;
“Individual limits”
Grade
Maximum
cash bonus
(as a % of
salary)
Total
opportunity
(including
bonus shares
awarded)
CEO
80%
160%
Executive director
70%
140%
Executive vice
presidents
60%
120%
Other Management
35-50%
70-100%
“ITASA”
The South African Income Tax Act No. 58 of 1962;
“JSE”
JSE Securities Exchange South Africa or any successor
body carrying on the business of a securities exchange;
“Market Value”
In relation to a Share on any day if and so long as the
Share is listed on the JSE, its Closing Price for the
7
immediately preceding Dealing Day;
“Participant”
Any Eligible Employee to whom an Award has been
granted or (where the context so admits) the personal
representative of any such person;
“Participating Company”
(A)
The Company; and
(B) Any other company which is under the Control of
the Company and is a Subsidiary of the Company
except one which the Grantor has designated shall
not be a Participating Company;
“Performance Targets”
Such targets (if any) as the Committee may from time to
time determine which shall be measured over the Bonus
Period;
“Plan”
The AngloGold Ashanti Limited Bonus Share Plan 2005
in its present form or as from time to time amended in
accordance with the provisions hereof;
“Remuneration Committee”
The remuneration committee of the Company acting as an
authorised Committee of the Board;
“Retirement”
Retirement on or after the Participant’s contractual
retirement date;
“Rules”
The rules of the Plan as amended from time to time;
The operation of the BSP may at any time be altered by
the board in any respect. However, any alternations to the
advantage of participants to the rules governing eligibility,
limits on participation and the number of new shares
available under the BSP, terms of vesting, adjustment of
awards and the rights of participants in the event of
variation of the share capital must be approved in advance
by shareholders in general meeting unless the alteration or
addition is minor in nature, or made to benefit the
administration of the BSP, to comply with the provisions
of any proposed legislation changes, or to obtain or
8
maintain favourable tax, exchange control or regulatory
treatment for participants or group companies.
“Share”
A fully paid ordinary share in the capital of the Company;
“Subsidiary”
The meaning given by section 1(3) of the Companies Act
No. 61 of 1973;
“Tax Liability”
A liability to account for any tax, national insurance,
social security or other levy for which the Participant
entitled to the Award is liable in respect of an Award by
the Company or any Group Member (“the Relevant
Company”), whether by reason of grant, vesting, exercise
or otherwise and including for the avoidance of doubt, any
liability arising after termination of a Participant’s
employment for whatever reason and which may arise or
be incurred in any jurisdiction whatever, and by the law of
the same jurisdiction may or shall be recovered from the
person entitled to the Award;
“Trustees”
The trustee or trustees for the time being of any employee
benefit trust established for the benefit of all or
substantially all of the Eligible Employees;
“Vesting Date”
1. The third anniversary of the Date of Grant or such
other later or earlier date as is determined by the
Grantor at the Date of Grant for all Bonus Share
Awards granted to and including 31 December 2007;
2. Forty percent (40%) of Bonus Share Awards granted
from 1 January 2008 will vest on the first anniversary
of the Date of Grant or such other later or earlier date
as is determined by the Grantor at the Date of Grant;
and
3. Sixty percent (60%) of Bonus Share Awards granted
from 1
January 2008 will vest on the second
9
anniversary of the Date of Grant or such other later or
earlier date as is determined by the Grantor at the Date
of Grant, or
4. In the event that the Eligible Employee to whom the
Bonus Share Award was made has not exercised his
right in terms of (2.) and (3.) above, and in the vent
that he only exercises his right on the third anniversary
of the Date of Grant, then the Grantor will award to
the Eligible Employee, an additional twenty percent
(20%) of Bonus share Awards at such date.
“Vesting Period”
The period starting on the Date of Grant of a Bonus Share
Award and ending on the Vesting Date of a Bonus Share
Award.
1.2
Words and expressions not otherwise defined herein have the same meaning they have in
ITASA.
1.3
Where the context so admits or requires words importing the singular shall include the plural
and vice versa and words importing the masculine shall include the feminine.
1.4
Reference in the Rules of the Plan to any statutory provisions are to those provisions as
amended, extended or re-enacted from time to time, and shall include any regulations made
thereunder.
1.5
The headings in the Rules of the Plan are for the sake of convenience only and should be
ignored when construing the Rules.
2
GRANT OF AWARDS
2.1
The Grantor may during a Grant Period grant Awards to such Eligible Employees as it may in
its absolute discretion determine. Subject to Rules 4, 5 and 9, a Cash Bonus shall only be
granted to an Eligible Employee after the Committee has determined the extent to which the
relevant Performance Targets have been satisfied. The number of Shares compromised in a
Bonus Share Award, will be determined by the Grantor in its absolute discretion at the Date of
Grant. Such number will usually be determinable by dividing the value of the proposed Bonus
Share Award to be granted by the Closing Price of the Shares trading on the JSE on the last
Dealing Day prior to the Date of Grant. The grant of a Cash Bonus will be made net of an
amount equal to any Tax Liability.
10
2.2
The grant of a Bonus Share Award or the delivery of any Shares following its vesting or
exercise shall be subject to obtaining any approval or consent required under any applicable
laws, regulations or governmental authority and the requirements of the JSE and any other
recognised stock exchange on which the Shares are traded.
2.3
As soon as practicable after the grant of a Bonus Share Award, the Grantor shall issue to each
Participant a certificate evidencing the Bonus Share Award in such form as the Grantor may
from time to time prescribe. Such certificate must state:
2.3.1
the Date of Grant;
2.3.2
the number of Shares over which the Bonus Share Award has been granted to the
Participant;
2.3.3
the first date on which any part of the Bonus Share Award vests or becomes
capable of exercise and any subsequent dates on which any remaining part of the
Bonus Share Award vests or becomes capable of exercise;
2.3.4
the date on which the Bonus Share Award will lapse pursuant to Rules 8.1.1, 8.1.2
or 8.1.3 or any earlier date on which the Grantor determines that the Bonus Share
Award should lapse;
2.3.5
whether or not a Participant to whom a Bonus Share Award have been granted is
entitled to receive any dividends which are paid in respect of the Shares subject to
the Bonus Share Award during the Vesting Period or dividend equivalents, or
whether or not any such dividends will be re-invested (either gross or net) in
further Shares to be subject to the terms applying to the Bonus Share Award; and
2.3.6
the form in which the Bonus Share Award is made.
2.4
No payment by the Participant shall be required on the grant of a Bonus Share Award.
2.5
Subject to the vesting of a Bonus Share Award or the rights of exercise by the Participant’s
personal representatives pursuant to Rule 5, every Bonus Share Award shall be personal to the
Participant to whom it is granted and shall not be transferable or in any way alienable without
the prior written agreement of the Grantor and such transfer shall be subject to such
conditions as the Grantor may prescribe at that time.
2.6
A Participant may surrender his Bonus Share Award in whole or in part within the period of
30 days immediately following the Date of Grant and if a Bonus Share Award, or any part of
a Bonus Share Award, is so surrendered, it shall be deemed for all purposes not to have been
granted and shall therefore lapse.
11
3
NUMBER OF SHARES IN RESPECT OF WHICH AWARDS MAY BE GRANTED
3.1
The total number of Shares which may be allocated under the Plan to Eligible Employees on
any day shall not, when added to the aggregate of the number of Shares which have been
allocated to Eligible Employees under the Plan and any other employees’ share incentive
schemes adopted by the Company, exceed such number as represents 2.75 per cent of the
ordinary share capital of the Company in issue immediately prior to that day. The said
percentage at the time of submitting this Plan to the JSE for approval equates to [7,273,538]
ordinary shares in the share capital of the Company.
3.2
The total number of Shares that may be allocated to any individual Eligible Employee on any
day shall not, when added to the aggregate of the number of Shares which have been allocated
under this Plan and any other employees’ share incentive scheme adopted by the Company to
that Eligible Employee, exceed such number as represents 0.1375 percent (being 5 per cent of
2.75 per cent) of the ordinary share capital in issue immediately prior to that day.
3.3
In determining the above limit:
3.3.1
no account shall be taken of any Shares where the right to acquire such Shares was
released or lapsed without being exercised, including pursuant to Rule 2.6 above;
3.3.2
no account shall be taken of any Shares where the right to acquire such Shares has
been or is to be satisfied other than by the issue or allotment of any part of the share
capital of the Company.
3.4
For the avoidance of doubt, references in this Rule 3 to the “allocation” of Shares shall mean,
in the case of any share option plan, the placing of unissued Shares under option and, in
relation to other types of employees’ share scheme, shall mean the commitment to issue
Shares or the issue and allotment of Shares (whichever is the earlier).
4
RIGHTS OF VESTING AND EXERCISE OF AWARDS
4.1
A Bonus Share Award save as provided in Rules 4.2, 4.3, 5 and 9 below shall not vest or be
exercised before the Vesting Date.
4.2
Where a Participant ceases to hold office or employment with a Group Member as a result of:
4.2.1
injury, illness or disability;
4.2.2
operational requirements dismissal within the meaning of the Labour Relations Act
No. 66 of 1995 (or applicable equivalent legislation);
12
4.2.3
the company which employs him ceasing to be a Group Member;
4.2.4
Retirement or early retirement by agreement with the company which employs
him;
4.2.5
transfer or sale of the undertaking or part undertaking in which he is employed to a
person who is not a Group Member;
that Participant may exercise any vested Bonus Share Award which was granted as a “nil” cost
option at any time during the period of six months following the date of cessation of
employment (“the Exercise Period”). Where such cessation occurs during the Vesting Period,
the Participant may if permitted by the Grantor exercise such proportion of the Bonus Share
Award during the aforementioned Exercise Period or such proportion of a Bonus Share Award
may vest, as shall be determined by the Grantor, in its absolute discretion, having regard to the
length of time that the Participant has held the office or employment during the Vesting Period
apportioned on a monthly basis;
Alternatively, the Grantor may in its discretion, determine that the Participant may exercise a
proportion of his Bonus Share Award, or a proportion of his Bonus Share Award may vest, at
the end of the Vesting Period, and in determining such proportion the Grantor may have
regard to the number of whole months that had elapsed during the Vesting Period to the date
of the cessation of the employment. In these circumstances, any Bonus Share Award granted
as a “nil” cost option may be exercised within the period of six months following the end of
the Vesting Period.
4.3
A Participant who ceases to hold office or employment with a Group Member by virtue of the
participant’s termination of services (resignation), may exercise any vested Bonus Share
Awards granted as a “nil” cost option by no later than the date of cessation. Any Bonus Share
Awards which have not vested at the date of such cessation will lapse at that time unless the
Grantor, in its discretion, determines otherwise.
4.4
Where a Participant ceases to hold office or employment with a Group Member by reason of
termination of services by reason of the dismissal of the Participant for misconduct, all his
Bonus Share Awards (whether vested or not) will lapse in accordance with Rule 8.1.9.
4.5
In the event that Bonus Share Awards vest or become exercisable under Rule 4.2.3 and
Rule 9, the provisions of Rule 9 shall prevail.
4.6
On the vesting or exercise of a Bonus Share Award in accordance with Rules 4.2, 4.3, the
Grantor may, in consultation with the Participant, agree that instead of delivering Shares to a
Participant, a cash payment shall be made to the Participant of a sum equal to the number of
13
Shares over which the Bonus Share Award has vested or is exercised (as at the date of vesting
or exercise as the case may be).
5
RIGHTS OF VESTING AND EXERCISE ON DEATH
5.1
In the event of the death of the Participant,
5.1.1 any vested Bonus Share Award which was granted as a “nil” cost option may be
exercised;
5.1.2 any unvested Bonus Share Award will vest in such proportion having due regard to
the length of time that the Participant has held the office or employment during the
Vesting Period;
and the Bonus Share Award may be exercised at any time during the period of twelve months
following the date of death (“the Exercise Period”).
5.2
On the vesting or exercise of a Bonus Share Award in accordance with Rule 5.1. or a Bonus
Share Award granted in accordance with Rule 5.2, the Committee may determine, in its
absolute discretion, that instead of delivering Shares to the Participant’s personal
representatives, a cash payment shall be made to the Participant’s personal representatives of
a sum equal to the Market Value of the number of Shares over which the Bonus Share Award
has vested or is exercised (as at the date of vesting or exercise as the case may be).
6
GENERAL PROVISIONS ON TERMINATION OF EMPLOYMENT
6.1
For the purpose of this Plan, no person shall be treated as ceasing to hold an office or
employment with a Group Member by virtue of which that person is eligible to participate in
the Plan until that person ceases to hold any office or employment with any Group Member.
6.2
For the purpose of this Plan, a woman on maternity leave will not cease to hold an office or
employment with a Group Member until the earlier of the date on which she notifies her
employer of her intention not to return or the date on which she ceases to have statutory or
contractual rights to return to work.
7
RESTRICTION ON GRANT AND EXERCISE
No Bonus Share Award may be granted, vested, exercised, released or surrendered at a time
when such grant, exercise, release or surrender would not be in accordance with any
provisions in the Companies Act or the provisions of the JSE Listings Requirements, as
14
amended from time to time, or the Company’s policy in force from time to time, in relation to
closed periods in respect of dealings in securities.
8
LAPSE OF AWARDS
8.1
Bonus Share Awards shall lapse upon the occurrence of the earliest of the following events:
8.1.1
for Bonus Share Awards made in the form of a “nil” cost option, the tenth
anniversary of the Date of Grant (unless the Grantor specifies any earlier date);
8.1.2
for Bonus Share Awards in the form of an award of Shares subject to restrictions
the fifth anniversary of the Date of Grant (unless the Grantor specifies any other
date);
8.1.3
for Bonus Share Awards in such other form , the period specified by the Grantor at
the Date of Grant under Rule 2.3.4;
8.1.4
the expiry of any of the periods specified in Rules 4.2, 4.3 and 5 (save that if at the
time the applicable period under Rules 4.2 or 4.3 expires, time is running under the
period in Rule 5, the Bonus Share Award shall not lapse by reason of this Rule
8.1.4 until the expiry of the period specified in Rule 5);
8.1.5
the expiry of any of the periods specified in Rules 9.1, 9.3, 9.4 and 9.5 save where
an Bonus Share Award is released in consideration of the grant of a New Bonus
Share Award pursuant to Rule 9.6;
8.1.6
subject to Rule 9.5, the passing of an effective resolution, or the making of an
order by the Court, for the winding-up of the Company;
8.1.7
the Participant being deprived of the legal or beneficial ownership of the Bonus
Share Award by operation of law, or doing or omitting to do anything which
causes him to be so deprived or being sequestrated;
8.1.8
the Participant purporting to transfer or dispose of the Bonus Share Award or any
rights in respect of it other than as permitted under Rule 2.5; and
8.1.9
the Participant ceasing to hold an office or employment by reason of the dismissal
of the Participant for misconduct or giving or being given notice to terminate
employment with a Group Member by reason of the dismissal of the Participant
for misconduct.
15
9
CHANGE OF CONTROL, REORGANISATION, WINDING UP AND TAKEOVER
9.1
Subject to Rules 9.3, 9.6 and 9.10 below, if any person (other than a person under the Control
of Anglo American) obtains Control of the Company, Bonus Share Awards may vest or be
exercised within six months of the time when the person making the offer has obtained
Control of the Company and, if applicable, any condition subject to which the offer is made
has been satisfied.
9.2
For the purpose of Rule 9.1 a person shall be deemed to have obtained Control of the
Company if he and others acting in concert (as defined by section 440A of the Companies
Act), with him have together obtained Control of it.
9.3
Subject to Rules 9.6 and 9.10, if any person (other than a person under the Control of Anglo
American) becomes bound or entitled to acquire Shares under Section 440K of the
Companies Act (dealing with compulsory acquisitions of securities of minorities in affected
transactions) and/or under rule 8 of the Securities Regulation Code on Takeovers and Mergers
(dealing with the mandatory offer and its terms), a Bonus Share Award may vest or be
exercised within a period of four weeks beginning with the date on which that person
becomes so bound or entitled.
9.4
Subject to Rule 9.6, if under Section 311 of the Companies Act the Court sanctions a
compromise or arrangement, the Participant may then, subject to Rule 9.10, be vested with the
Bonus Share Award or, as the case may be, exercise the Bonus Share Award subject to the
terms of this Rule 9.4 during a period of one month commencing on the date on which the
Court sanctions the compromise or arrangement.
9.5
If notice is duly given of a resolution for the voluntary winding-up of the Company, the
Company shall give notice thereof to all Participants to whom an Award has been granted.
Subject to Rules 9.6 and 9.10, a Bonus Share Award may then vest or be exercised until the
resolution is duly passed or defeated or the meeting concluded or adjourned sine die provided
that any such exercise of a Bonus Share Award pursuant to this Rule 9.5 shall be conditional
upon the said resolution being duly passed. If such resolution is duly passed all Bonus Share
Awards shall, to the extent that they have not vested or been exercised, lapse immediately.
9.6
If a company obtains Control of the Company in accordance with Rule 9.1, or obtains Control
of the Company under a compromise or arrangement sanctioned by the Court under Section
311 of the Companies Act, or becomes bound or entitled in accordance with Rule 9.3, any
Participant may at any time within the Appropriate Period, by agreement with the relevant
company, release any Bonus Share Award which has not lapsed (“the Old Bonus Share
Award”) in consideration of the grant to him of a Bonus Share Award which is equivalent to
16
the Old Bonus Share Award but relates to shares in a different company (whether the
company which has obtained Control of the Company itself or some other company) (“the
New Bonus Share Award”).
9.7
For the purposes of Rule 9.6 the provisions of the Plan shall be construed as if:
9.7.1
the New Bonus Share Award was an Award granted under the Plan at the same
time as the Old Bonus Share Award;
9.7.2
except for the purpose of the definition of “Participating Company” in Rule 1 and
the reference to “the Company” in Rule 15.2, the reference to AngloGold Ashanti
Limited in the definition of “the Company” in Rule 1 were a reference to the
different company mentioned in Rule 9.6;
9.8
Rules 9.1, 9.3 and 9.4 above shall not apply where:
9.8.1
the events form part of a scheme or arrangement whereby Control of the Company
is obtained by another company (“the Acquiring Company”);
9.8.2
immediately after the Acquiring Company obtains Control, the issued equity share
capital of the Acquiring Company is owned substantially by the same persons who
were equity shareholders of the Company immediately prior to the Acquiring
Company obtaining Control; and
9.8.3
the Acquiring Company has agreed to grant new Awards in accordance with Rule
9.6 in consideration for the release of any Awards which have not lapsed.
9.9
If the Company has been or will be affected by any dividend in specie, super dividend or
other transaction which will adversely affect the current or future value of any Bonus Share
Awards, the Grantor may, acting fairly, reasonably and objectively, allow all such Bonus
Share Awards (but not some only) to vest or be exercised conditionally on such event
happening. The Grantor will specify the period of exercise of such Bonus Share Awards in
these circumstances. The Grantor will notify any Participant to whom an Award has been
granted who is affected by this Rule in accordance with Rule 14.1.
9.10
Where, during the Vesting Period, Rules 9.1, 9.3, 9.4 or 9.5 apply, the Bonus Share Award
that may vest or be exercised shall be determined by the Grantor in its absolute discretion.
9.11
Where one of the corporate events referred to in Rules 9.1, 9.3, 9.4 or 9.5 occurs during a
Bonus Period, the Grantor may, in its discretion, determine the extent to which an Eligible
Employee to whom it was contemplated an Award might be made in respect of that Bonus
Period shall receive a Cash Bonus (if any) in respect of that Bonus Period (having regard to
17
the extent to which any Performance Targets have been meet at the date of the relevant
corporate event). In these circumstances, the terms of a Bonus Share Award (if any) to be
granted to that Eligible Employee shall be determined by the Grantor in its absolute discretion
(including without limitation, the form of, and number of Shares comprised in, such a Bonus
Share Award, and the terms of vesting and/or exercise of such a Bonus Share Award).
9.12
In the event that the United Kingdom equivalent of one of the corporate events described in
Rules 9.1, 9.3, 9.4, 9.5, 9.6 or 9.9 is contemplated or occurs in relation to Anglo American,
the Grantor may, in its discretion, determine that, where the context so permits, this Rule 9
shall be interpreted as if references to "the Company" within this Rule 9 (and within the
definition of any defined terms in this Rule 9) were to "Anglo American" and references to
any South African legislation or other South African provisions within this Rule 9 (including,
for the avoidance of doubt, any terms within this Rule 9 which are defined by reference to any
South African legislation or provisions) were to the equivalent United Kingdom legislation or
provisions. In the event of any conflict between the South African legislation and provisions
referred to in this Rule 9 and their United Kingdom equivalent, the Grantor may, in its
discretion, apply the provisions of this Rule 9 in such amended form as is necessary or
desirable to give effect to the United Kingdom equivalent legislation or provisions.
10
MANNER OF VESTING AND EXERCISE
10.1
A Bonus Share Award in the form of a “nil” cost option may be exercised in whole or in part.
10.2
A Bonus Share Award may be exercised by the delivery in writing or in electronic format to
the Company Secretary (as agent for the Grantor), or his duly appointed agent, of a Bonus
Share Award certificate covering at least all the Shares over which the Bonus Share Award is
then to be exercised, with the notice of exercise in the prescribed form duly completed and
signed by the Participant (or by his duly authorised agent) to the Company (as agent for the
Trustees where the Trustees have agreed to satisfy the Bonus Share Award) in respect of the
Shares over which the Bonus Share Award is to be exercised, unless the Grantor determines
that a different exercise procedure should apply.
10.3
The effective date of exercise shall be the date of delivery of the notice of exercise. For the
purposes of this Plan a notice of exercise shall be deemed to be delivered when it is received
by the Company.
10.4
In the event that any Tax Liability becomes due on the vesting or exercise of a Bonus Share
Award, the Participant will be deemed to have given irrevocable instructions to the
Company’s brokers (or any other person acceptable to the Company) for the sale of sufficient
18
Shares acquired on the vesting or exercise of the Award to realise an amount equal to the Tax
Liability and the payment of that amount to the Relevant Company, unless:
10.4.1 the Relevant Company decides in its absolute discretion to and is able to deduct an
amount equal to the whole of the Tax Liability from the Participant’s net pay for
the relevant pay period; or
10.4.2 the Participant has paid to the Relevant Company an amount equal to the Tax
Liability; or
10.4.3 the Grantor determines otherwise.
11
DIVIDENDS
11.1
Participants may (to the extent not already entitled), at the discretion of the Grantor, receive
dividends or dividend equivalents in respect of their Bonus Share Awards in such form as the
Grantor at its discretion determines including, without limitation, the following:
11.1.1 a discretionary cash payment paid to the Participant, which is equal in value to the
dividends (gross or net value at the discretion of the Grantor) which would have
been paid on a Bonus Share Award of actual Shares (equivalent to the number of
Shares in respect of which the Bonus Share Award vests) during the Vesting
Period and treating such dividends as having been re-invested in Shares at the
respective payment dates for the purposes of this calculation;
11.1.2 at the time the Bonus Share Award vests, an award of, or the grant of a nil cost
option over, such number of Shares as could have been purchased if the dividends
(gross or net value at the discretion of the Grantor) which would have been paid on
a Bonus Share Award of actual Shares (equivalent to the number of Shares in
respect of which the Bonus Share Award vests) had been re-invested in Shares at
the respective payment dates of the dividends which were paid during the Vesting
Period.
11.2
For the avoidance of doubt, where an option is granted or Shares are awarded under Rule 11.1
above in respect of a Bonus Share Award, the definition of “Bonus Share Award” shall be
where appropriate, interpreted in relation to such a Bonus Share Award to include such
additional option or Shares.
11.3
For the further avoidance of doubt, any cash or Shares awarded under this Rule 11 shall not
count towards the individual limits in Rule 3.
19
12
TRANSFER OF SHARES
12.1
Subject to Rule 12.3 Shares to be issued or transferred pursuant to the vesting or exercise of a
Bonus Share Award shall be allotted or transferred to the Participant (or his nominee) within
30 days following the date of effective exercise or vesting of the Bonus Share Award.
12.2
Subject to Rule 12.3, the Grantor shall procure the transfer of any Shares to be transferred to a
Participant (or his nominee) pursuant to the vesting or exercise of a Bonus Share Award
within 30 days following the date of effective exercise of the Bonus Share Award.
12.3
The allotment or transfer of any Shares under the Plan shall be subject to obtaining any such
approval or consent as is mentioned in Rule 2.2 above.
12.4
Shares issued pursuant to the Plan will rank pari passu in all respects with the Shares then in
issue, except that they shall not rank for any right attaching to Shares by reference to a record
date preceding the date of allotment.
12.5
Without prejudice to Rule 11, if Shares are transferred pursuant to the Plan the Participant
shall not be entitled to any rights attaching to Shares by reference to a record date preceding
the date of transfer.
12.6
If and so long as the Shares are listed on the JSE, the Company shall apply for listing of any
Shares issued pursuant to the Plan as soon as practicable after the allotment thereof.
13
ADJUSTMENTS
13.1
The number of Shares over which a Bonus Share Award is granted and the conditions of
vesting or exercise (and where a Bonus Share Award has vested or has been exercised but no
Shares have been allotted or transferred pursuant to such vesting or exercise, the number of
Shares which may be so allotted or transferred) shall be adjusted in such manner as the
Grantor shall determine following any capitalisation issue, any offer or invitation made by
way of rights, subdivision, consolidation, reduction, other variation in the share capital of the
Company or any other exceptional event which in the reasonable opinion of the Grantor
justifies such an adjustment.
13.2
The Grantor shall take such steps as it may consider reasonable and necessary to notify
Participants of any adjustment made under this Rule 13 and to call in, cancel, endorse, issue
or reissue any certificate consequent upon such adjustment.
20
14
ADMINISTRATION
14.1
Any notice or other communication under or in connection with the Plan may be given by
personal delivery or by sending the same by electronic means or post, in the case of a
company to its registered office, and in the case of an individual to his last known address, or,
where he is a director or employee of a Group Member, either to his last known address or to
the address of the place of business at which he performs the whole or substantially the whole
of the duties of his office or employment, and where a notice or other communication is given
by post, it shall be deemed to have been received 72 hours after it was put into the post
properly addressed and stamped, and if by electronic means, when the sender receives
electronic confirmation of delivery.
14.2
The Company may distribute to Participants copies of any notice or document normally sent
by the Company to the holders of Shares.
14.3
In the case of partial exercise of a Bonus Share Award, the Grantor may in consequence call
in, endorse, cancel and reissue, as it considers appropriate, any certificate for the balance of
the Shares over which the Bonus Share Award was granted.
14.4
If any certificate shall be worn out, defaced or lost, it may be replaced on such evidence being
provided as the Grantor may require.
14.5
The Company shall at all times keep available for allotment unissued Shares at least sufficient
to satisfy all Bonus Share Awards under which Shares may be subscribed or the Grantor shall
procure that sufficient Shares are available for transfer to satisfy all Bonus Share Awards
under which Shares may be acquired.
14.6
The Plan shall be administered by the Board. The Board shall have full authority, consistent
with the Plan, to administer the Plan, including authority to interpret and construe any
provision of the Plan and to adopt such regulations for administering the Plan and such forms
of exercise as it may deem necessary or appropriate. Decisions of the Board shall be final and
binding on all parties.
14.7
The Board shall appoint a Compliance Officer as required by section 144A of the Companies
Act who shall, for and on behalf of the Board, be responsible for the day to day administration
of the Plan and compliance by the Company and the Board with the provisions of section
144A of the said Companies Act.
14.8
The costs of introducing and administering the Plan shall be borne by the Participating
Companies in such proportions as the Board shall in its discretion decide.
21
15
ALTERATIONS
15.1
Subject to Rules 15.2 and 15.4, the Board may at any time (but only with the prior consent of
the Trustees if there are subsisting Awards which they have agreed to satisfy or which will be
affected by the alteration or addition) alter or add to all or any of the provisions of the Plan in
any respect.
15.2
Subject to Rule 15.3 no alteration or addition shall be made under Rule 15.1 to:
15.2.1 the persons to whom Awards may be granted under the Plan;
15.2.2 the limitations on the number of Shares which may be issued under the Plan;
15.2.3 the individual limits on participation for each Participant in the Plan;
15.2.4 the amount, if any, payable on grant, vesting or exercise of a Bonus Share Award;
the basis for determining any price paid by Participants(if applicable); the period in
which any such payments to provide the same, must be made; the procedure to be
adopted on termination of employment or retirement of a Participant ;
15.2.5 the voting, dividend, transfer and other rights, including those arising on a
liquidation of the Company, attaching to the Shares and to any options (if
appropriate);
15.2.6 the rights of Participants in the event of a variation of the share capital; and
15.2.7 the terms of this Rule 15.2;
without the prior approval by ordinary resolution of the members of the Company in general
meeting.
15.3
Rule 15.2 shall not apply to any minor alteration or addition which is to benefit the
administration of the Plan or to take account of any change in legislation or to obtain or
maintain favourable taxation, exchange control or regulatory treatment for the Company, or
any Subsidiary of the Company or any Participant.
15.4
No alteration or addition shall be made under Rule 15.1 which would materially abrogate or
adversely affect the subsisting rights of a Participant unless it is made:
15.4.1 with the consent in writing of such number of Participants as hold Bonus Share
Awards under the Plan to acquire 75 per cent of the Shares which would be issued
22
or transferred if all Bonus Share Awards granted and subsisting under the Plan
were vested or exercised; or
15.4.2 by a resolution at a meeting of Participants passed by not less than 75 per cent of
the Participants who attend and vote either in person or by proxy,
and for the purposes of this Rule 15.4 the provisions of the Articles of Association of the
Company relating to shareholder meetings shall apply mutatis mutandis.
15.5
Notwithstanding any other provision of the Plan other than Rule 15.1 and 15.2 the Board
may, in respect of Awards granted to Eligible Employees who are or who may become
subject to taxation outside South Africa on their remuneration amend or add to the provisions
of the Plan and the terms of Awards as it considers necessary or desirable to take account of
or to mitigate or to comply with relevant overseas taxation, securities or exchange control
laws provided that the terms of Awards granted to such Eligible Employees are not overall
more favourable than the terms of Awards granted to other Eligible Employees.
15.6
As soon as reasonably practicable after making any alteration or addition under Rule 15.1, the
Board shall give written notice thereof to any Participant materially affected thereby.
15.7
No alteration to the Plan under this Rule 15 shall require the consent of any person unless
expressly provided in the Rules.
16
LEGAL ENTITLEMENT
16.1
Nothing in the Plan or in any instrument executed pursuant to it will confer on any person any
right to continue in employment, nor will it affect the right of the provider of any service
relationship to terminate the employment of any person without liability at any time with or
without cause, nor will it impose upon the Grantor or any other person any duty or liability
whatsoever (whether in contract, delict or otherwise) in connection with:
16.1.1 the lapsing of any Award pursuant to the Plan;
16.1.2 the failure or refusal to exercise any discretion under the Plan; and/or
16.1.3 a Participant ceasing to be a person who has a service relationship for any reason
whatsoever.
16.2
Awards shall not (except as may be required by taxation law) form part of the emoluments of
individuals or count as wages or remuneration for pension or other purposes.
23
16.3
Any person who ceases to have the status or relationship of an employee with any
Participating Company as a result of the termination of his employment for any reason and
however that termination occurs, whether lawfully or otherwise, shall not be entitled and shall
be deemed irrevocably to have waived any entitlement by way of damages for dismissal or by
way of compensation for loss of office or employment or otherwise to any sum, damages or
other benefits to compensate that person for the loss of alteration of any rights, benefits or
expectations in relation to any Award, the Plan or any instrument executed pursuant to it.
16.4
The benefit of this Rule 16 is given to the Company for itself and as trustee and agent of each
Group Member. To the extent that this Rule benefits any company which is not a party to the
Plan, the benefit shall be held on trust and as agent by the Company for such company and the
Company may, at its discretion, assign the benefit of this Rule 16 to any such company.
17
GENERAL
17.1
The Plan shall endure for an indefinite period until terminated by a resolution of the directors
or a resolution of the Company in general meeting, but that termination will not affect or
modify any existing rights or obligations of the Participants and the Grantor will continue to
administer the Plan for so long as it may be necessary to give affect thereto.
17.2
The Company and any Subsidiary of the Company may provide money to the Trustees of any
trust or any other person to enable them or him to acquire Shares to be held for the purposes
of the Plan, or enter into any guarantee or indemnity for those purposes, to the extent
permitted by Section 38 of the Companies Act.
17.3
The Company may require any Subsidiary to enter into such other agreement or agreements
as it shall deem necessary to oblige such Subsidiary to reimburse the Company for any other
amounts paid by the Company hereunder, directly or indirectly in respect of such Subsidiary’s
employees.
17.4
Nothing in the Plan shall be deemed to give any employee of any Participating Company any
right to participate in the Plan.
17.5
To the extent that the Company or a share trust established for the purpose of implementing
this Plan, acquires or holds Shares for the purpose of this Plan, the voting rights attaching to
such Shares shall not be taken into account at any general annual general meetings held by
Company for any JSE resolution voting purposes. The voting rights attaching to such Shares
shall also not be taken into account for the purposes of determining categorisations as detailed
in Section 9 of the JSE Listing Requirements.
24
17.6
These Rules shall be governed by and construed in accordance with the laws of South Africa,
including conflicts of laws.
1
EXHIBIT 19.4.1.5
MDS/1275
–
M
Cutifani
29 October 2007
PERSONAL
Mr M Cutifani
21 Methwold Way
SAXONWOLD 2196
21 Methwold Way
SAXONWOLD 2196
Dear Mark
APPOINTMENT AS CHIEF EXECUTIVE OFFICER OF ANGLOGOLD ASHANTI
I am pleased to confirm your appointment to the position of CEO of AngloGold Ashanti Limited, based
at the Corporate Office in Johannesburg. Your employment will be with effect from 17 September 2007
and will be for an initial fixed period of two years, after which it will be renewable annually. Your
employment is subject to you holding valid documentation enabling your employment in South Africa.
at the Corporate Office in Johannesburg. Your employment will be with effect from 17 September 2007
and will be for an initial fixed period of two years, after which it will be renewable annually. Your
employment is subject to you holding valid documentation enabling your employment in South Africa.
1.
REMUNERATION PACKAGE AND EMPLOYMENT CONDITIONS
1.1
Salary
Your basic salary will be R5 240 076.00 (Five Million, Two Hundred and Forty Thousand
and Seventy Six rand) per annum and will be paid on a monthly basis in twelve equal
payments of R436 673,00 (Four Hundred and Thirty Six Thousand, Six Hundred and
Seventy Three rand). All payments are subject to normal South African tax deductions.
and Seventy Six rand) per annum and will be paid on a monthly basis in twelve equal
payments of R436 673,00 (Four Hundred and Thirty Six Thousand, Six Hundred and
Seventy Three rand). All payments are subject to normal South African tax deductions.
Your next salary review will be in January 2009.
AngloGold Ashanti Limited \ Reg. No.1944/017354/06
76 Jeppe Street \ Newtown \ 2001 \ PO Box 62117 \ Marshalltown \ 2107 \ South Africa
Tel +27 (0)11 637 6000 \ Fax +27 (0)11 637 6624 \ Website: www.AngloGoldAshanti.com
76 Jeppe Street \ Newtown \ 2001 \ PO Box 62117 \ Marshalltown \ 2107 \ South Africa
Tel +27 (0)11 637 6000 \ Fax +27 (0)11 637 6624 \ Website: www.AngloGoldAshanti.com
2
1.2
Incentive
Schemes
You will be eligible to participate in the following incentive schemes:
i)
Annual
Bonus
As CEO, you may earn up to 60% of your base salary as an annual cash bonus.
The annual bonus is determined by the achievement of a number of Company
level performance targets (70% weighting) and personal targets (30% weighting).
The annual bonus is determined by the achievement of a number of Company
level performance targets (70% weighting) and personal targets (30% weighting).
ii)
Bonus Share Plan (BSP)
Your annual cash bonus will be matched by an award of shares (Bonus Shares)
to the same value. Each grant of bonus shares has a vesting period of three
years.
to the same value. Each grant of bonus shares has a vesting period of three
years.
In your case, we guarantee a minimum payment of 60% of maximum annual
bonus and BSP shares for the balance of 2007 and all of 2008.
bonus and BSP shares for the balance of 2007 and all of 2008.
iii)
Long Term Incentive Plan (LTIP)
LTIP shares are awarded annually to executive and senior managers. In the
case of the CEO, the value of the annual grant is set at 120% of base salary.
case of the CEO, the value of the annual grant is set at 120% of base salary.
Each award is linked to a set of stretched company performance measures,
assessed at the end of the following three years.
assessed at the end of the following three years.
1.3
Car
Allowance
The Company will provide you with two rental vehicles for up to three months after your
arrival in Johannesburg. Once you have purchased your own vehicles you may
nominate a car allowance for your vehicle from your salary of up to 30%, which is
intended to compensate you for the use of your private vehicle for business purposes.
arrival in Johannesburg. Once you have purchased your own vehicles you may
nominate a car allowance for your vehicle from your salary of up to 30%, which is
intended to compensate you for the use of your private vehicle for business purposes.
You will be reimbursed for all business travel in excess of 3000 kilometers per tax year.
1.4
Annual
Leave
Your annual leave entitlement will be 30 working days per year. You are required to take
at least 15 working days leave each leave cycle. The remaining 15 working days may be
encashed or accumulated up to a maximum of 30 days.
at least 15 working days leave each leave cycle. The remaining 15 working days may be
encashed or accumulated up to a maximum of 30 days.
2.
RETIREMENT BENEFITS, HEALTH CARE AND INSURANCES
2.1
Retirement
Funding
The Company will contribute 18.25% of your basic salary to a retirement fund of your
choice. This contribution is not subject to tax provided it is made to an approved
retirement fund.
choice. This contribution is not subject to tax provided it is made to an approved
retirement fund.
3
2.2
Medical Aid
You will be required to join the Discovery Health medical scheme which provides
comprehensive cover for you and your family. Monthly contributions are of the order of
R4000, paid in equal part by you and the Company.
comprehensive cover for you and your family. Monthly contributions are of the order of
R4000, paid in equal part by you and the Company.
2.3
Accident Insurance Cover
This cover currently provides for a death benefit of 36 months annual earnings and a
permanent total disablement benefit of 36 months annual earnings dependent on the
degree of disablement, as well as medical cover up to R100 000,00. The Company pays
the premium.
permanent total disablement benefit of 36 months annual earnings dependent on the
degree of disablement, as well as medical cover up to R100 000,00. The Company pays
the premium.
This insurance policy also covers you for any medical expenses that you incur as a result
of any accidental injury that you sustain, whether or not you are on duty and even if there
is no permanent disability.
of any accidental injury that you sustain, whether or not you are on duty and even if there
is no permanent disability.
2.4
Unemployment Insurance Fund
You will be required to contribute towards the UIF. Your contribution will be 1% of your
taxable earnings, up to a maximum contribution of R1399.00 per annum.
taxable earnings, up to a maximum contribution of R1399.00 per annum.
3. GENERAL
3.1
Other
Employment
Employment with AngloGold Ashanti precludes you from doing work for your own account
or for any other employer other than a member of the AngloGold Ashanti Group unless
you have received the written permission of AngloGold Ashanti.
or for any other employer other than a member of the AngloGold Ashanti Group unless
you have received the written permission of AngloGold Ashanti.
3.2
Removal and Relocation
AngloGold Ashanti Limited will meet the cost of business class travel between Toronto
and Johannesburg for you, your wife and your children.
and Johannesburg for you, your wife and your children.
AngloGold Ashanti will bear the reasonable cost of transporting your household and
personal effects from Sudbury, Canada to Johannesburg, South Africa. The Company
will pay you a relocation allowance of one month of your salary (i.e. R436 673,00) upon
your arrival. This allowance is tax free but the Receiver of Revenue may ask for proof that
it was spent on expenses incurred as a result of your relocation to Johannesburg.
personal effects from Sudbury, Canada to Johannesburg, South Africa. The Company
will pay you a relocation allowance of one month of your salary (i.e. R436 673,00) upon
your arrival. This allowance is tax free but the Receiver of Revenue may ask for proof that
it was spent on expenses incurred as a result of your relocation to Johannesburg.
4
3.3
Temporary
Accommodation
AngloGold Ashanti will provide furnished accommodation for yourself and your family for
up to six months after your arrival in order to give you time to find suitable
accommodation. Should you move out of the Company provided accommodation before
six months, the allowance referred to under 3.4 (i) will be paid to you for the remaining
balance of 24 months (i.e. the Company will provide you with accommodation or an
accommodation allowance for the first 2 years of your stay in South Africa.)
up to six months after your arrival in order to give you time to find suitable
accommodation. Should you move out of the Company provided accommodation before
six months, the allowance referred to under 3.4 (i) will be paid to you for the remaining
balance of 24 months (i.e. the Company will provide you with accommodation or an
accommodation allowance for the first 2 years of your stay in South Africa.)
3.4
Allowances
i)
Once you have found suitable accommodation the Company will pay you a
housing allowance of R83 333.00 per month which is fully taxable at a rate of
40%. It will be paid to you for up to 24 months after which it will fall away. The
provision of the allowance does not preclude you from purchasing property in
Johannesburg.
housing allowance of R83 333.00 per month which is fully taxable at a rate of
40%. It will be paid to you for up to 24 months after which it will fall away. The
provision of the allowance does not preclude you from purchasing property in
Johannesburg.
ii)
You, your wife and your immediate dependents will be allowed one business
class flight per annum from Johannesburg to your nominated home base.
class flight per annum from Johannesburg to your nominated home base.
iii)
The Company will assist with schooling costs by providing an allowance of
R65 000 per annum per child living with you. The allowance is fully taxable.
R65 000 per annum per child living with you. The allowance is fully taxable.
3.5
Termination of Employment
Your contract of employment is initially fixed for a period of 2 years, after which it will be
renewable annually, for further periods of 12 months at a time, at the election of the
Board.
renewable annually, for further periods of 12 months at a time, at the election of the
Board.
It is recorded that there is a mutual expectation that your contract will be renewed for
each 12 month period following the expiry of the fixed term, subject to the Company's
right to refuse to renew the contract for reasons recognised by the Labour Relations Act,
being misconduct, incapacity and reasons related to the Company's operational
requirements. AngloGold Ashanti has policies and procedures to regulate termination of
employment in each case, and to ensure that employment is terminated for a fair reason
and after a fair procedure has been followed. Should the Company refuse to renew your
contract in these circumstances, you will be paid the equivalent of 12 months' salary in
lieu of notice. Despite this provision, your services may be terminated summarily, at any
stage during any fixed term of employment, for any reason justifiable by law.
each 12 month period following the expiry of the fixed term, subject to the Company's
right to refuse to renew the contract for reasons recognised by the Labour Relations Act,
being misconduct, incapacity and reasons related to the Company's operational
requirements. AngloGold Ashanti has policies and procedures to regulate termination of
employment in each case, and to ensure that employment is terminated for a fair reason
and after a fair procedure has been followed. Should the Company refuse to renew your
contract in these circumstances, you will be paid the equivalent of 12 months' salary in
lieu of notice. Despite this provision, your services may be terminated summarily, at any
stage during any fixed term of employment, for any reason justifiable by law.
5
Should you wish to terminate your contract of employment, you may do so by giving the
Company notice, by a date no later than the commencement of any renewed contract, of
your intention not to seek further renewal of your contact after the expiry of the fixed
term.
Company notice, by a date no later than the commencement of any renewed contract, of
your intention not to seek further renewal of your contact after the expiry of the fixed
term.
3.6
Change of Control
In the event that AngloGold Ashanti becomes a subsidiary of another company, or all, or
substantially all, of the businesses, assets and undertakings of AngloGold Ashanti
become owned by any person, firm or company, and within a period of twelve months
your employment is terminated as a consequence, you will be paid an amount equal to
24 months earnings, including benefits and bonuses.
substantially all, of the businesses, assets and undertakings of AngloGold Ashanti
become owned by any person, firm or company, and within a period of twelve months
your employment is terminated as a consequence, you will be paid an amount equal to
24 months earnings, including benefits and bonuses.
If you would like clarity on any of these terms and conditions, please contact the undersigned or Nigel
Unwin.
Unwin.
If is the above terms are acceptable to you, please would you sign the attached copy and return it to
me.
me.
I very much look forward to working with you in the years to come.
Yours sincerely
/s/R P Edey
RP EDEY
CHAIRMAN
CHAIRMAN
ACCEPTANCE
:
/s/ M Cutifani
DATE: 2 November 2007
M CUTIFANI
1
EXHIBIT 19.4.1.6
AngloGold Ashanti International
Services Limited
Correspondence Address:
Falcon Cliff, Palace Road,
Douglas, Isle of Man, IM2 4LB,
British Isles.
P O Box 75, Douglas,
Isle of Man, IM99 1EP, British Isles
Tel: (+44 1624) 63 00 00
Fax: (+44 1624) 63 00 01
Mark Cutifani
21 Methwold Way
Saxonwold
2196
21 Methwold Way
Saxonwold
2196
29 October 2007
Your Ref:
Your Ref:
Our Ref:
071008 Cutifani
Dear Mark
RETAINER AGREEMENT
AngloGold Ashanti International Services Limited (“the Company”) is a subsidiary of AngloGold Ashanti
Holdings Plc (“AGAH”), which holds and manages the non-South African assets and investments of
AngloGold Ashanti Limited. The Company has contracted with AGAH to provide various specialist services
to AGAH, its subsidiaries and affiliates (“the AngloGold Ashanti Offshore Group”) and any joint ventures
involving the AngloGold Ashanti Offshore Group.
Holdings Plc (“AGAH”), which holds and manages the non-South African assets and investments of
AngloGold Ashanti Limited. The Company has contracted with AGAH to provide various specialist services
to AGAH, its subsidiaries and affiliates (“the AngloGold Ashanti Offshore Group”) and any joint ventures
involving the AngloGold Ashanti Offshore Group.
You are hereby retained to provide, on behalf of the Company, management services to the AngloGold
Ashanti Offshore Group outside of South Africa, on the following terms and conditions:
Ashanti Offshore Group outside of South Africa, on the following terms and conditions:
1.
The term of this retainer ("the Term") will be from 17 September 2007 until such time as it is
terminated in terms of paragraph 7 below.
terminated in terms of paragraph 7 below.
2.
During the Term the Company may at any time require of you to make your services available to it or
to assist it with matters relating to its business or any business of the AngloGold Ashanti Offshore
Group outside of South Africa.
to assist it with matters relating to its business or any business of the AngloGold Ashanti Offshore
Group outside of South Africa.
3.
In consideration of your services in terms of this agreement, you will be paid a gross annual retainer
("the Retainer") in the amount of the USD equivalent of ZAR 2.1 million, quarterly in arrears in equal
instalments at the prevailing USD / ZAR exchange rate, regardless of the time spent discharging your
duties hereunder. The Company will make such deductions from the amount payable as may be
required by law.
("the Retainer") in the amount of the USD equivalent of ZAR 2.1 million, quarterly in arrears in equal
instalments at the prevailing USD / ZAR exchange rate, regardless of the time spent discharging your
duties hereunder. The Company will make such deductions from the amount payable as may be
required by law.
4.
In addition to the Retainer, the Company will contribute an amount equal to 18.25% thereof to any
pension fund, benefit trust or other retirement arrangement of your choice.
pension fund, benefit trust or other retirement arrangement of your choice.
2
5.
The Company will also procure that your participation in the Annual Bonus Scheme, the Bonus Share
Plan and the Long Term Incentive Plan (and any other incentive scheme that might apply to your
employment by AngloGold Ashanti Limited) will be calculated on the basis that your base salary
includes the Retainer.
Plan and the Long Term Incentive Plan (and any other incentive scheme that might apply to your
employment by AngloGold Ashanti Limited) will be calculated on the basis that your base salary
includes the Retainer.
6.
The Company will reimburse you for your reasonable travelling, telephone, hotel, entertainment and
other business expenses incurred in the course of your duties provided that you comply with the
Company's regulations from time to time in this respect and provide the Company with receipts or
other proof of payment as the Company may reasonably require within 3 months of expenditure.
other business expenses incurred in the course of your duties provided that you comply with the
Company's regulations from time to time in this respect and provide the Company with receipts or
other proof of payment as the Company may reasonably require within 3 months of expenditure.
7.
The provisions of your employment contract with AngloGold Ashanti Limited as regards termination
will apply to this letter mutatis mutandis.
will apply to this letter mutatis mutandis.
8.
In the event that AngloGold Ashanti becomes a subsidiary of another company, or all, or substantially
all, of the businesses, assets and undertakings of AngloGold Ashanti become owned by any person,
firm or company, and within a period of twelve months your employment with AngloGold Ashanti is
terminated as a consequence, you will be paid an amount equal to 24 months of the Retainer.
all, of the businesses, assets and undertakings of AngloGold Ashanti become owned by any person,
firm or company, and within a period of twelve months your employment with AngloGold Ashanti is
terminated as a consequence, you will be paid an amount equal to 24 months of the Retainer.
9.
Any payment due in terms of this letter for a period less than a full quarter will be adjusted on a pro-
rata basis.
rata basis.
10.
During the Term and after the termination of this agreement, you will not directly or indirectly disclose
or make use of any confidential information of the Company or the AngloGold Ashanti Offshore
Group for any purpose other than a legitimate purpose of the Company or the AngloGold Ashanti
Offshore Group save that nothing in this clause shall be construed as preventing you from making
any disclosure required by law.
or make use of any confidential information of the Company or the AngloGold Ashanti Offshore
Group for any purpose other than a legitimate purpose of the Company or the AngloGold Ashanti
Offshore Group save that nothing in this clause shall be construed as preventing you from making
any disclosure required by law.
11.
During the Term you will not, save with the approval of the board of the Company, be concerned with
or engaged in any business than that of the Company, the AngloGold Ashanti Offshore Group or
AngloGold Ashanti Limited. This expression "concerned with or engaged in" shall, without limitation,
mean any employee, advisor, partner, consultant, contractor, director, shareholder or otherwise,
engaged in a business competing with, or similar to that of the Company, the AngloGold Ashanti
Offshore Group or AngloGold Ashanti Limited.
or engaged in any business than that of the Company, the AngloGold Ashanti Offshore Group or
AngloGold Ashanti Limited. This expression "concerned with or engaged in" shall, without limitation,
mean any employee, advisor, partner, consultant, contractor, director, shareholder or otherwise,
engaged in a business competing with, or similar to that of the Company, the AngloGold Ashanti
Offshore Group or AngloGold Ashanti Limited.
12.
This letter and its terms shall be governed by the laws of the Isle of Man.
If you are in agreement with the terms of this letter, please sign your acceptance on the attached copy and
return same to us at your earliest convenience.
return same to us at your earliest convenience.
Yours sincerely
/s/ L McGlew
DIRECTOR
ACCEPTANCE: __/s/ M Cutifani___ DATE: __2 November 2008_____
1
ANGLOGOLD ASHANTI LIMITED
Exhibit 19.
8
INVESTMENT IN PRINCIPAL SUBSIDIARIES AND JOINT VENTURE INTERESTS
AT DECEMBER 31, 2007
Country
of
Incorpo-
ration
Nature
of
business
Shares Held
Shares Held Percentage held
2007
2006
2007
%
2006
%
%
Direct investments
Advanced Mining Software Limited
18
C
40,000
40,000
100
100
AGRe Insurance Company Limited
18
F
2
2
100
100
AngloGold American Investments Limited
5
B
1,001
1,001
100
100
100
AngloGold Ashanti USA Incorporated
21
B
* 500
100
100 100
AngloGold Ashanti Health (Pty) Limited
18
E
8
8
100
100
AngloGold Ashanti Holdings plc
5
B
2,077,313,678
2,077,313,678
100
100
AngloGold Offshore Investments Limited
10
B
5,000,000
5,000,000
100
100
Eastvaal Gold Holdings Limited
18
B
454,464,000
454,464,000 100
100
Masakhisane Investment Limited
18
B
100
100
100
100
Nuclear Fuels Corporation of SA (Pty) Limited
18
D
1,450,000
1,450,000
100
100
Rand Refinery Limited **
18
G
208,471
208,471
53.03
53.03
Xinjiang Yunhai Mining Company Limited
7
H
60
–
Indirect investments
AG Mali Holdings 1 Limited
5
B
10,002
10,002
100
100
AG Mali Holdings 2 Limited
5
B
10,002
10,002
100
100
AngloGold Argentina Limited
5
B
1
1
100
100
AngloGold Argentina S.A.
1
B
1,331,093
1,331,093
100
100
AngloGold Ashanti Australia Limited
2
B
257,462,077
257,462,077 100
100
AngloGold Ashanti (Colorado) Corp.
21
B
1,250
1,250
100
100
AngloGold Ashanti Exploration (Ghana) Limited
9
H
2
2
100
100
AngloGold Ashanti (Ghana) Limited
9
A
132,419,585
132,419,585 100
100
AngloGold Ashanti (Iduapriem) Limited
9
A
66,270
53,010
100
80
AngloGold Ashanti (Nevada) Corp.
21
B
100
100
100
100
AngloGold Ashanti North America Inc.
21
B
7,902
7,902
100
100
AngloGold Australia Investment Holdings Limited
5
B
1,000
1,000
100
100
AngloGold Australia (Sunrise Dam) Pty Limited
2
A
2
2
100
100
AngloGold Ashanti Brasil Mineração Ltda
4
A/B
8,827,437,875
8,827,437,875
100
100
AngloGold Brazil Limited
4
B
1
1
100
100
AngloGold CV 1 Limited
5
B
11,002
11,002
100
100
AngloGold CV 2 Limited
5
B
1,002
1,002
100
100
AngloGold CV 3 Limited
5
B
1,002
1,002
100
100
AngloGold Finance Australia Holdings Limited
16
B
2
2
100
100
AngloGold Finance Australia Limited
16
B
2
2
100
100
AngloGold Geita Holdings Limited
5
B
3,513
3,513
100
100
AngloGold Investments Australasia Limited
5
B
1,000
1,000
100
100
AngloGold Investments Australia Pty Ltd
2
B
1
1
100
100
AngloGold Investments (Sadex) Limited
5
B
1,000'A'
1,000'A'
100
100
AngloGold Morila Holdings Limited
5
B
1,000
1,000
100
100
AngloGold Namibia (Pty) Ltd
17
A
10,000
10,000
100
100
AngloGold Offshore Investments Limited
5
B
422,510,000*
422,510,000*
100
100
AngloGold South America Limited
5
B
488,000
488,000
100
100
2
Country
of
Incorpo-
ration
Nature
of
business
Shares Held
Shares Held Percentage held
2007
2006
2007
2006
%
Indirect investments (continued)
AngloGold South American Holdings Limited
5
B
1
1
100
100
Ashanti Goldfields Belgium S.A.
3
B
2,500
2,500
100
100
Ashanti Goldfields (Cayman) Limited
6
B
2
2
100
100
Ashanti Goldfields Holding (Luxembourg) S.A.
14
B
3,000,000
3,000,000
100
100
Ashanti Goldfields Kilo Scarl
8
H
15,520
15,520
86.22
86.22
Ashanti Goldfields Services Limited
20
B
588,409
588,409
100
100
Ashanti Goldfields Teberebie Limited
6
B
2
2
100
100
Ashanti Treasury Services Limited
12
I
250,000
250,000
100
100
Australian Mining & Finance (Pty) Limited
2
B
48
48
100
100
Cerro Vanguardia S.A.
1
A
13,875,000
13,875,000
92.50
92.50
Chevaning Mining Company Limited
20
B
1,000
1,000
100
100
Cluff Mineral Exploration Limited
20
B
500,000
500,000
100
100
Cluff Oil Limited
20
B
19,646,377
19,646,377
100
100
Cluff Resources Limited
20
B
93,638,562
93,638,562
100
100
Cripple Creek & Victor Gold Mining Company
21
A
–
–
67
67
Erongo Holdings Limited
5
B
13,334"A"
13,334"A"
100
100
Geita Gold Mining Limited
19
A
2
2
100
100
Golden Shamrock Mines Limited
14
B
2,000,000
2,000,000
100
100
GSM Gold S.A.
2
B
325,000
325,000
100
100
Mineração Serra Grande S.A.
4
A
499,999,997
499,999,997
50
50
Morila Limited
13
B
1
1
50
50
Pioneer Goldfields Limited
5
B
75,000,000
75,000,000
100
100
Sadiola Exploration Limited
5
B
5,000 'A'
5,000 'A'
50
50
Societé Ashanti Goldfields de Guinée S.A.
11
A
3,486,134
3,486,134
85
85
Teberebie Goldfields Limited
9
A
2,066,667
1,860,000
100
90
Joint ventures
Nufcor International Limited **
20
D
3,000,000
3,000,000
50
50
Société des Mines de Morila S.A.
15
A
400
400
40
40
Société d'Exploitation des Mines d'Or de Sadiola
S.A.
S.A.
15
A
38,000
38,000
38
38
Société d'Exploitation des Mines d'Or de Yatela
S.A. 15
S.A. 15
A
400
400
40
40
BGM Management Company Pty Ltd
2
A
3'B'
3'B'
33.33
33.33
*
Indicates preference shares
**
The statutory year-ends of Rand Refinery Limited and Nufcor International Limited are 30 September and 30 June respectively. AngloGold Ashanti does not
consider these companies significantly material subsidiaries requiring an alignment of year-end.
Countries of incorporation
1. Argentina
2. Australia
3. Belgium
4. Brazil
5. British Virgin Islands
1. Argentina
2. Australia
3. Belgium
4. Brazil
5. British Virgin Islands
6. Cayman Islands
7.
China
8. Democratic Republic of Congo
8. Democratic Republic of Congo
9. Ghana
10. Guernsey
11. Republic of Guinea
10. Guernsey
11. Republic of Guinea
12. Isle of Man
13. Jersey
14. Luxembourgh
15. Mali
16. Malta
14. Luxembourgh
15. Mali
16. Malta
Countries of incorporation (continued)
17. Namibia
18. Republic of South Africa
17. Namibia
18. Republic of South Africa
19. Tanzania
20. United Kingdom
20. United Kingdom
21. United States of America
Nature of business
A Mining
B Investment holding
A Mining
B Investment holding
C Software development
D Market agent
E Health care
F Short-term insurance and re-assurance, captive insurance
G Precious metal refining
H Exploration
I Treasury
I Treasury
EXHIBIT 19.12.1
CERTIFICATION
I, Mark Cutifani, certify that:
1.
I have reviewed this annual report on Form 20-F of AngloGold Ashanti Limited;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods
presented in this report;
all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods
presented in this report;
4.
The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the company, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
(c)
Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
this report based on such evaluation; and
(d)
Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the
period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the
company’s internal control over financial reporting; and
company’s internal control over financial reporting; and
5.
The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the company’s auditors and the audit committee of company’s board of directors (or persons
performing the equivalent functions):
performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and
report financial information; and
report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
company’s internal control over financial reporting.
Date: May 16, 2008
/s/ Mark Cutifani
Mark Cutifani
Chief Executive Officer
Mark Cutifani
Chief Executive Officer
EXHIBIT 19.12.2
CERTIFICATION
I, Srinivasan Venkatakrishnan, certify that:
1.
I have reviewed this annual report on Form 20-F of AngloGold Ashanti Limited;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4.
The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
(c)
Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
this report based on such evaluation; and
(d)
Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the
period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the
company’s internal control over financial reporting; and
company’s internal control over financial reporting; and
5.
The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the company’s auditors and the audit committee of company’s board of directors (or persons
performing the equivalent functions):
performing the equivalent functions):
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and
report financial information; and
report financial information; and
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
company’s internal control over financial reporting.
Date: May 16, 2008
/s/ Srinivasan Venkatakrishnan
Srinivasan Venkatakrishnan
Chief Financial Officer
Srinivasan Venkatakrishnan
Chief Financial Officer
EXHIBIT 19.13
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of AngloGold Ashanti Limited (the “Company”) on Form 20-F for the period
ending December 31, 2007, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the
undersigned hereby certify that to the best of our knowledge:
undersigned hereby certify that to the best of our knowledge:
1.
The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
2.
The information contained in the Report fairly presents, in all material respects, the financial condition and
results of operations of the Company.
results of operations of the Company.
Date: May 16, 2008
/s/ Mark Cutifani
Name: Mark Cutifani
Title: Chief Executive Officer
Date: May 16, 2008
/s/ Srinivasan Venkatakrishnan
Name: Srinivasan Venkatakrishnan
Title: Chief Financial Officer
EXHIBIT 19.15.1a
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements:
(1)
Registration Statement (Form F-3 No. 333-132662) of AngloGold Ashanti Limited;
(2)
Registration Statement (Form F-4 No. 333-149068) of AngloGold Ashanti Limited;
(3)
Registration Statement (Form S-8 No. 333-10990) of AngloGold Ashanti Limited; and
(4)
Registration Statement (Form S-8 No. 333-113789) of AngloGold Ashanti Limited;
of our report dated May 16, 2008, with respect to the consolidated financial statements of AngloGold Ashanti
Limited and the effectiveness of internal control over financial reporting of AngloGold Ashanti Limited included
in this Annual Report (Form 20-F) for the year ended December 31, 2007.
Limited and the effectiveness of internal control over financial reporting of AngloGold Ashanti Limited included
in this Annual Report (Form 20-F) for the year ended December 31, 2007.
/s/ Ernst & Young Inc.
Ernst & Young Inc.
Registered Auditor
Registered Auditor
Johannesburg
Republic of South Africa
May 16, 2008
Republic of South Africa
May 16, 2008
EXHIBIT 19.15.1b
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Registration Statement on Form F-3 (File No. 333-
132662), the Registration Statement on Form F-4 (File No. 333-149068) and the Registration Statements on
Form S-8 (File No. 333-10990 and 333-113789) of AngloGold Ashanti Limited of our report date June 15,
2007, with respect to the balance sheet of Société des Mines de Morila S.A. as of December 31, 2006, and
the related statement of income, cash flows, and changes in shareholders’ equity for the year then ended, as
included in the December 31, 2007 Annual Report on Form 20-F of AngloGold Ashanti Limited.
132662), the Registration Statement on Form F-4 (File No. 333-149068) and the Registration Statements on
Form S-8 (File No. 333-10990 and 333-113789) of AngloGold Ashanti Limited of our report date June 15,
2007, with respect to the balance sheet of Société des Mines de Morila S.A. as of December 31, 2006, and
the related statement of income, cash flows, and changes in shareholders’ equity for the year then ended, as
included in the December 31, 2007 Annual Report on Form 20-F of AngloGold Ashanti Limited.
/s/ Ernst & Young Inc
Ernst & Young Inc.
Registered Auditor
Registered Auditor
Johannesburg
Republic of South Africa
May 16, 2008
Republic of South Africa
May 16, 2008
EXHIBIT 19.15.2a
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Registration Statement on Form F-4 (File No. 333-
149068), the Registration Statement on Form F-3 (File No. 333-132662) and the Registration Statements on
Form S-8 (File No. 333-10990 and 333-113789) of AngloGold Ashanti Limited of our report dated June 25,
2007, with respect to the balance sheets of Société d’Exploitation des Mines d’Or de Yatela S.A. as of
December 31 2006, and the related statements of income, changes in stockholders’ equity and cash flows for
the year then ended, which report appears in the December 31, 2007 annual report on Form 20-F of
AngloGold Ashanti Limited.
149068), the Registration Statement on Form F-3 (File No. 333-132662) and the Registration Statements on
Form S-8 (File No. 333-10990 and 333-113789) of AngloGold Ashanti Limited of our report dated June 25,
2007, with respect to the balance sheets of Société d’Exploitation des Mines d’Or de Yatela S.A. as of
December 31 2006, and the related statements of income, changes in stockholders’ equity and cash flows for
the year then ended, which report appears in the December 31, 2007 annual report on Form 20-F of
AngloGold Ashanti Limited.
/s/ KPMG Inc
KPMG Inc
Johannesburg
South Africa
April 18, 2008
South Africa
April 18, 2008
EXHIBIT 19.15.2b
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Registration Statements on Form F-4 (File No. 333-
149068), the Registration Statement on Form F-3 (File No. 333-132662) and the Registration Statements on
Form S-8 (File No. 333-10990 and 333-113789) of AngloGold Ashanti Limited of our report dated June 25,
2007, with respect to the balance sheets of Société d’Exploitation des Mines d’Or de Sadiola S.A. as of
December 31 2006 and 2005, and the related statements of income, changes in stockholders’ equity and cash
flows for each of the year in the two-year period ended December 31, 2006, which report appears in the
December 31, 2007 annual report on Form 20-F of AngloGold Ashanti Limited.
149068), the Registration Statement on Form F-3 (File No. 333-132662) and the Registration Statements on
Form S-8 (File No. 333-10990 and 333-113789) of AngloGold Ashanti Limited of our report dated June 25,
2007, with respect to the balance sheets of Société d’Exploitation des Mines d’Or de Sadiola S.A. as of
December 31 2006 and 2005, and the related statements of income, changes in stockholders’ equity and cash
flows for each of the year in the two-year period ended December 31, 2006, which report appears in the
December 31, 2007 annual report on Form 20-F of AngloGold Ashanti Limited.
/s/ KPMG Inc
KPMG Inc
Bloemfontein
South Africa
April 18, 2008
South Africa
April 18, 2008
EXHIBIT 19.15.3
Consent of Independent Registered Public Accounting Firm
We hereby consent to the incorporation by reference in the Registration Statement on Form F-4 (No. 333-
149068), the Registration Statement on Form F-3 (No. 333-132662) and the Registration Statements on Form
S-8 (No. 333-10990 and 333-113789) of AngloGold Ashanti Limited of our report dated March 9, 2006, with
respect to the statements of income, cash flows, and changes in shareholders’ equity of Société des Mines de
Morila S.A. for the year ended December 31, 2005, which appears in this Form 20-F.
149068), the Registration Statement on Form F-3 (No. 333-132662) and the Registration Statements on Form
S-8 (No. 333-10990 and 333-113789) of AngloGold Ashanti Limited of our report dated March 9, 2006, with
respect to the statements of income, cash flows, and changes in shareholders’ equity of Société des Mines de
Morila S.A. for the year ended December 31, 2005, which appears in this Form 20-F.
/s/ PricewaterhouseCoopers
PricewaterhouseCoopers Inc.
Registered Accountants and Auditors
Chartered Accountants (S.A.)
Registered Accountants and Auditors
Chartered Accountants (S.A.)
Johannesburg
Republic of South Africa
May 16, 2008
Republic of South Africa
May 16, 2008