[ CONTENTS ]

ITEM 1. DESCRIPTION OF BUSINESS

Formation of the Company

    AngloGold, formerly Vaal Reefs Exploration and Mining Company Limited (in such capacity "Vaal Reefs"), was incorporated in 1944 in South Africa and conducts gold mining operations in three countries in Africa: the Republic of South Africa, Mali and Namibia. In December 1998, AngloGold agreed to purchase, subject to certain conditions, Minorco's gold interests located primarily in North and South America in a transaction expected to close on or about March 31, 1999. See "Presentation of Information" on page 4 and "Minorco Acquisition" on page 35 of this Annual Report.

    Vaal Reefs was chosen as the vehicle to merge the gold mining interests of Anglo American into a single, focused, independent, global gold company. Vaal Reefs was chosen as the vehicle for the Consolidation because it had the largest market capitalization of all the gold mining companies in which Anglo American held interests. As part of the Consolidation, the Company changed its name
to AngloGold Limited and increased its authorized share capital with effect from March 30, 1998. The Company then acquired, in consideration for its ordinary shares, all of the issued shares of the Participating Companies, certain other share interests in the Share Interests Companies and the Gold Mineral Rights from Anglo American, and rights of Anglo American and JCI under the Service Agreements.

    As a result of the Consolidation, which became effective on June 29, 1998 for accounting purposes, the Participating Companies and the 50 percent or more owned Share Interests Companies became subsidiaries, and the less than 50 percent owned Share Interests Companies became associate companies, of AngloGold. The following discussion reflects the Company's business resulting from the Consolidation.

Gold Market

    The gold market is relatively deep and liquid, with the price of gold generally quoted in U.S. dollars. The demand for gold is primarily used for fabrication purposes and for bullion investment and is traded on a worldwide basis. Fabricated gold has a variety of uses, including jewelery (which accounts for 85 percent of fabricated demand), electronics, dentistry, decorations, medals and official coins. 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 (ie., the tendency of gold to retain its value in relative terms against basic goods and in times of inflation and monetary crisis) and the large quantities of gold held for this purpose in relation to annual mine production has meant that historically the potential total supply of gold has been far greater than demand. Thus, while current supply and demand plays some part in determining the price of gold, this does not occur to the same extent as for other commodities. Gold prices have, in addition, been significantly affected by macro-economic factors such as expectations of inflation, interest rates, exchange rates, changes in reserve policy by central banks and global or regional political and economic crises. In times of inflation, currency devaluation, gold is often seen as a refuge, which increases purchases of gold and thereby supports the price of gold.

    Interest rates affect the gold price on several levels. High real interest rates increase the cost of holding gold, and discourage physical buying in the developed economies. High U.S. dollar interest rates also make hedging of forward selling attractive because of the higher contango premiums obtained in the forward prices. Increased forward selling in turn impacts the spot price at the time of such sales. At a secondary level, changes to interest rates are viewed by market participants as indicators of other economic changes (including expectations of inflation), and have also in the past been used by market participants to motivate decisions to buy or sell gold.

    Changes in exchange rates against the U.S. dollar affect levels of demand for gold in non-U.S. economies. In South East Asia, for example, strong local currencies encouraged robust gold demand on the back of low real gold prices in local currencies. In contrast, when the South East Asian currencies fell sharply against the U.S. dollar in 1997, the local currency value of gold increased proportionally, and wholesale selling of metal ensued in the region. In 1998, greater volatility in the world's currency markets primarily caused by the financial crisis in Russia did not result in substantial changes in levels of demand and, as a result, gold prices. In the South African market, the average local spot price of gold for 1998 increased by 16 percent over 1997 due mainly to depreciation of the South African rand during the year.

    Changes in the reserves policies of central banks have affected the gold market and gold price on two levels. On the physical level, a decision by a central bank to decrease or to increase the percentage of gold holdings in bank reserves leads to either sales or purchases of gold, which in turn impact directly on the physical market for the metal. In practice, sales by central banks have often involved substantial tonnages within one period, and this selling places strong downward pressure on the markets at the time when it is transacted. More importantly, announcement or rumors of changes in central bank policies which might lead to the sale of gold reserves have in recent years had a powerful negative effect on market sentiment and encouraged large speculative positions against gold in the futures market for the metal. Recent examples of decreases in the gold price linked directly to either the sale of gold by a central bank or the announcement by a central bank of its intention to sell gold, can be seen in the movement of the gold price following the July 1997 announcement by the Reserve Bank of Australia of its sale of 167 tonnes of gold, and the October 1997 announcement of the Swiss National Bank's intention to sell up to 1,400 tonnes of gold from its gold reserves. In 1998, the formal inauguration of the European Central Bank ("ECB") and the launch of the single European currency, the euro, on January 1, 1999, did not result in reserve banks of member states of the ECB selling gold or announcing changes in central bank policies leading to the sale of gold reserves. In addition, the Swiss National Bank's planned sale of up to 1,400 tonnes of gold from its gold reserves is expected to be spread over several years, reducing its further adverse effect on the price of gold.

    Historically, political and economic crises have been linked to a flight to gold and a consequent increase in the price of the metal, as happened, for example, in 1989 during the Tianamen Square massacre crisis and in 1990 at the time of the Iraqi occupation of Kuwait. More recently, however, the economic and political crisis in South East Asia has had a negative effect on the gold price. In South Korea, in 1997, an appeal was made by the government of that country to all citizens of the country to contribute their private holdings of gold in whatever form (personal jewellery, coins, etc), in exchange for South Korean Won in order to provide the government with metal to sell or swap for U.S. dollars to boost foreign exchange holdings. An amount of over 200 tonnes of gold passed into the market through this route, overwhelming demand at the time and depressing sentiment. A similar exercise occurred in Thailand during 1996. In essence, political and economic crises can affect the gold price both positively or negatively depending on the circumstances of the event. In 1998, despite negative sentiments caused by the Russian financial crisis, the ensuing corrections in the capital markets worldwide, the fall of the value of the U.S. dollar against the Japanese yen at the end of the third quarter and despite the support to market demand lent by the purchase by the Indian Reserve Bank and reserve banks of certain states in the United States of 815 and 428 tonnes of gold, respectively, the value of the gold remained stable. In addition, the price of gold has been subject to rapid short-term volatility due to speculative activity. In October 1998, active buying on the New York Commodities Exchange caused by investors temporarily closing their short positions only marginally increased the price of gold on that exchange.

Mining Process Description

Mining Methods

    The mining process can be divided into four main phases: (i) discovering the ore body; (ii) creating access to the ore body; (iii) removing the ore by actual mining or breaking the reef; and (iv) transporting the broken material from the mining face to the plants for treatment. This basic process applies to both underground and surface operations.

    Ore body discovery. Identification of ore bodies is the output of the geological search for new reserves. It is extended once access to the ore body has been obtained in order to enable clearer identification of the portions to be mined. Geological techniques and interpretations are constantly refined to improve the economic viability of both prospecting and mining activities.

    Access to the ore body. In underground mines, access to the ore body is by means of shafts sunk from the surface to the lowest economically and practically mineable level. Once the shaft has been sunk and equipped, horizontal development at various intervals (known as levels) extends access to the actual siting of the reef to be mined. On-reef development then provides specific mining access.

    Access in open-pit mining is provided by overburden stripping, which removes the covering layers of topsoil or rock, through a combination of drilling, blasting and scraping as required.

    Ore removal. The process of ore removal from the host rock in tabular deep-level ore bodies starts with drilling and blasting the accessible ore. The blasted faces are then cleaned and the ore is made available to the transport system. In open-pit mines, gold-bearing material may require drilling and blasting and is usually collected by scrapers or shovels to make it available to the ore transport system.

    Ore transport. Once ore has been broken in deep-level mines, underground train systems collect ore from the faces and remove it to a series of ore passes which gravity feed the ore to hoisting levels at the bottom of the shaft. The ore is then hoisted to the surface in dedicated conveyances and either transported by conveyor belts directly, or via surface railway systems to the treatment plants. In addition to ore, waste broken to access reef horizons must similarly be hoisted and then placed on waste rock dumps. Open-pit mines usually transport ore to treatment facilities in large capacity vehicles.

    Services. Mining activities require extensive services, located both on surface and frequently in the underground environment. These services include mining-related matters such as mining engineering (optimizing mining layouts and safe mining practices), planning (developing short- and long-term mining plans), mineral resource management (to achieve optimal ore body extraction), ventilation (sustaining operable mining conditions underground) and provision of resources. In addition, engineering services are required to ensure equipment operates effectively, and the normal range of personnel and financial services is provided.

Gold Plants

    Extracting gold from ore is a critical component of the overall economic success of the mining process. Therefore, extensive research and development has been conducted in the field of extracting ore, primarily by Anglo American and its research arm, Anglo American Research Laboratories ("AARL"). AARL developed a special elution process, known in the gold mining industry as the AARL process, as well as the linear screen (for removing tramp materials) and the pump cell (for pumping pulp between stages in the carbon-in-pulp section). Processes are also constantly re-engineered in order to improve productivity and security. Consequently, modern plants are characterized by a high degree of automation and a relatively low headcount.

    A typical gold plant circuit consists of the following:

    Delivery from the Shafts. Delivery from the shafts is either direct, by means of belt conveyor systems, or by road or rail. These are based on both public and private networks. Systems operated by the Company conform to operating standards utilized in the mining industry.

    Comminution. Comminution breaks up ore to make gold available for treatment. Conventionally, this process occurs in multi-stage crushing and milling circuits, which include the use of jaw and gyratory crushers and rod and tube mills. Modern technology is based on large mills fed directly from the shaft or via silo storage with run-of-mine material. This process is either semi-autogenous grinding (SAG) milling, with the addition of steel balls, or fully autogenous grinding (FAG) milling, using ore itself as the grinding medium.

    Treatment. Gold is separated from the host ore by leaching in agitated tanks using cyanide and oxygen-enhancement and then adsorbed on to carbon (the CIP process). In some plants, gold is extracted by carbon directly from the leach (the CIL process).

    Recovery. Recovery takes place by zinc precipitation, or by elution and electro-winning. Elution processes used are AARL (batch) or Zadra (continuous). As a final on-mine recovery step, the precipitate is smelted to produce rough gold bars. These bars are then transported to Rand Refinery Limited which is responsible for refining the bars to good delivery status. Good delivery status refers to a bar of gold that is accepted to contain the quantity and purity of gold as stamped on the bar without further weighing or assaying. Only certain refineries, including the Rand Refinery Limited, are accredited to provide good delivery status to gold bars.

Secondary Processes

    In order to increase recovery of gold from various tailings arising from the extraction processes, secondary processes are used. These processes include pyrite flotation and sulphuric acid production followed by gold recovery.

Uranium Plants

    In the early 1950s many mines enhanced their profits by producing uranium oxide and a large number of plants were built to treat gold plant tailings. After dissolution in sulphuric acid, liquid solid separation and ion exchange, the uranium was precipitated as ammonium diuranate, known in the industry as "yellowcake", before being transported to the Nuclear Fuels Corporation of South Africa (Proprietary) Limited for calcining to uranium oxide, packaging and distribution to customers. Owing to the decline in price, the only uranium plant operating is at AngloGold's Vaal River operations. The plant employs the NIMCIX ion exchange process, followed by solvent extraction. The NIMCIX ion exchange process is the adsorption of uranium in solution onto resin beds, which are then eluted to introduce the uranium into a concentrated purified form in solution. Both the adsorption and elution are carried out by passing solution through staged resin beads in columns, with the periodic withdrawal of quantities of resin for the next stage in the cycle. Uranium plants are completely separate from the plants built to recover secondary gold from gold tailings.

Acid Plants

In addition to gold and uranium production, a number of other processes have been or are being used to enhance gold recoveries. The most notable of these processes is used at the Ergo operations where pyrite is floated to feed a sulphuric acid plant. In this process, the Company benefits from acid sales as well as recovery of gold from pyrite calcine. However, most of the gold produced is presently recovered by direct cyanidation of reclaimed tailings dams.

Summary of Metallurgical Operations

(1) FS 2 was not sold as anticipated in June 1998 and currently treats the ore mined from Matjabeng.
(2) Design capacity.
(3) Run of mine mills ("R.O.M. mills").

Operations and Geographic Locations

    The Company's main product is gold. A very insignificant portion of its revenues, from 1 percent to 2 percent, is derived from sales of silver, uranium oxide and sulphuric acid. Since the beginning of 1998, when restrictions imposed by the South African government on the sale of gold by South African gold mining companies were lifted, the Company sells gold produced on world markets.

    The operations and geographical areas in which the Group currently operates are set forth in the following table. AngloGold has a 100 percent interest in each of the operations, except Sadiola Hill (38 percent), Navachab (70 percent) and Driefontein (21 percent):

(1) The Vaal River Operations also include the Eastvaal and Southvaal areas. Eastvaal and Southvaal are not operating companies. The mining areas are operated by AngloGold.

(2) Associate company, accounted for on an equity method. In February 1999, the Company entered into an agreement to dispose of its entire interest in Driefontein. See "Other Operations ? Driefontein Joint Venture".

    The Vaal River, Free State and West Wits operations are located within the Witwatersrand Basin in South Africa. The Group's Sadiola operations are located in Mali and the Navachab operations in Namibia. Ergo is re-working slimes dams left over from primary gold mining operations of the Group and third parties. In addition, the Company is engaged in exploration in prospective areas in Botswana, Tanzania, Mali, Senegal and the Democratic Republic of the Congo ("DRC") where it obtained gold mineral rights as part of the Consolidation.

    In December 1998, AngloGold agreed to purchase, subject to certain conditions, Minorco's gold interests located primarily in North and South America in a transaction expected to close on or about March 31, 1999. See "Minorco Acquisition" on page 35.

Location of AngloGold's Gold Interests in Operations (1)

(1) In December 1998, AngloGold agreed to purchase, subject to certain conditions, Minorco's gold interests located primarily in North and South America in a transaction expected to be closed by March 31, 1999. See "Minorco Acquisition" on page 35.

Location of the Gold Interests in Operation within the Witwatersrand Basin

Note: Each mine indicated on this map is accessible via road and rail.

Vaal River Operations

Free State Operations

(1) Masimong was sold effective September 21, 1998 to Harmony Gold Mining Company.

West Wits Operations

[ DESCRIPTION OF BUSINESS CONTINUED ] [ CONTENTS ]