2007 Annual Report

Group financial statements

Notes to the financial statements (11-20)

For the year ended 31 December
SA Rands  US Dollars
20062007  20072006
  11Share-based payments  
   

Share incentive schemes

No new share incentive schemes were approved by the shareholders of AngloGold Ashanti Limited during the current financial year. New awards were made under the existing BSP and LTIP plans. ESOP awards that were surrendered by participants during the year were re-issued to new employees. The total cost relating to share incentive schemes was $33m, R232m (2006: $50m, R344m) and is made up as follows:

  
1264 Employee Share Ownership Plan (ESOP) – Free shares92
1364 Employee Share Ownership Plan (ESOP) – E ordinary shares to employees92
3770 Bonus Share Plan (BSP)105
2311 Long-Term Incentive Plan (LTIP)24
69– Performance-related share-based remuneration scheme (PRO) – 1 May 2003–10
6023 Performance-related share-based remuneration scheme (PRO) –1 November 2004 39
213232 Total employee compensation cost (note 10)3331
131– Employee Share Ownership Plan (ESOP) – E ordinary shares to Izingwe–19
344232 Total share incentive scheme cost3350
   Included in:   
49134      – cost of sales197
3598      – corporate administration and other expenses145
260–      – other operating special items (note 6) –38
344232  3350
   

Employee Share Ownership Plan (ESOP)

On 12 December 2006, AngloGold Ashanti Limited announced the finalisation of the Bokamoso Employee Share Ownership Plan (Bokamoso ESOP) with the National Union of Mineworkers, Solidarity and United Association of South Africa. The Bokamoso ESOP creates an opportunity for AngloGold Ashanti Limited 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.

  
Number
of
shares		Weighted
average
exercise
price		  Number
of
shares		Weighted
average
exercise
price
SA Rands 2006  Figures in million SA Rands 2007
   

The company also undertook an empowerment transaction with a Black Economic Empowerment investment vehicle, Izingwe Holdings (Proprietary) Limited (Izingwe).

In order to facilitate this transaction the company established a trust to acquire and administer the ESOP shares. AngloGold Ashanti Limited 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 shares are:

  • AngloGold Ashanti Limited 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;
  • 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.

The award of free ordinary shares to employees

The fair value of each free share awarded on 10 December 2007 is R305.99 (awarded on 13 December 2006: R320.00). 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 the expiry date of 1 November 2013.

Accordingly, for the awards issued, the following information is available:

  
–– Awards outstanding at beginning of year928,590–
928,590– Awards granted during the year77,490–
–– Awards lapsed during the year49,230–
–– Awards exercised during the year46,590–
928,590– Awards outstanding at end of year910,260–
–– Awards exercisable at end of year––
   Up to 31 December 2007, the rights to a total of 49,230 (2006: nil) shares were surrendered by the participants. A total of 46,590 (2006: nil) shares were allotted to deceased, retired or retrenched employees. The income statement charge for the year was $9m, R64m (2006: $1,7m, R12m).

The award of E ordinary shares to employees

The average fair value of the E ordinary shares awarded to employees on 10 December 2007 was R79.00 per share (awarded on 13 December 2006: R105.00). Dividends declared in respect of the E ordinary shares will firstly be allocated to cover administration expenses of the trust, whereafter they 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 that tranche will be converted to ordinary shares for the benefit of employees. All unexercised awards will be cancelled on 1 May 2014.

Accordingly, for the E ordinary shares issued, the following information is available:

  
–– Awards outstanding at beginning of year2,785,770289.00
2,785,770288.00 Awards shares granted during the year232,770307.13
–– Awards shares lapsed during the year147,690296.97
–– Awards shares cancelled during the year––
–– Awards shares converted during the year139,770298.15
2,785,770289.00 Awards shares outstanding at end of year 2,730,780307.49
   
The weighted average exercise price is calculated as the initial grant price of R288.00 plus an interest factor less dividend apportionment. This value will change on a monthly basis, to take account of employees leaving the company and those shares being reissued to new employees. The income statement charge for the year was $9m, R64m (2006: $1,7m, R12m).

Up to 31 December 2007, the rights to a total of 147,690 (2006: nil) shares were surrendered by participants. A total of 139,770 (2006: nil) shares were allotted to deceased, retired or retrenched employees.

  
   

The award of E ordinary shares to Izingwe

The average fair value of the E ordinary shares granted to Izingwe on 13 December 2006 was R90.00 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 that 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.

  
–– E ordinary shares outstanding at beginning of year1,400,000289.00
1,400,000288.00 E ordinary shares granted during the year––
–– E ordinary shares cancelled during the year––
–– E ordinary shares converted during the year––
1,400,000289.00 E ordinary shares outstanding at end of year1,400,000307.49
    The weighted average exercise price is calculated as the initial grant price of R288.00 per share plus an interest factor less dividend apportionment. There was no income statement charge for the year as the full amount was expensed in 2006 (2006: $19m, R131m).

The fair value of each share granted for the ESOP and Izingwe schemes was 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 share price volatility. The expected term of award granted is derived from historical data on employee exercise behaviour for the ESOP award. Expected volatility is based on the historical volatility of our shares. These estimates involve inherent uncertainties and the application of management judgment. In addition, we are required to estimate the expected forfeiture rate and only recognise expenses for those options expected to vest. As a result, if other assumptions had been used, our recorded share-based compensation expense could have been different from that reported. The Black-Scholes option-pricing model used the following assumptions for the year, weighted-average risk free interest rates of 7% (2006: 7%); dividend yields of 2.06% (2006: 2.3%) and volatility of 33% (2006: 36%).

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 AngloGold Ashanti Limited, any subsidiary of AngloGold Ashanti Limited or a company under the control of AngloGold Ashanti Limited, 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 AngloGold Ashanti Limited's shares on the JSE on the last business day prior to the date of grant. The AngloGold Ashanti Limited's 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.

Accordingly, for the awards made, the following information is available:

  
   
Award date200520062007
Calculated fair valueR197.50R308.00R322.00
Vesting date4 May 20088 Mar 20091 Jan 2010
Expiry date3 May 20157 Mar 201631 Dec 2016
      
271,945– Awards outstanding at beginning of year480,585–
254,110– Awards granted during the year296,495–
41,221– Awards lapsed during the year50,704–
4,249– Awards exercised during the year40,708–
480,585– Awards outstanding at end of year685,668–
–– Awards exercisable at end of year––
   

Up to 31 December 2007, the rights to a total of 50,704 (2006: 41,221) shares were surrendered by the participants. A total of 40,708 (2006: 4,249) shares were allotted to deceased, retired or retrenched employees.

The income statement charge for the year was $10m, R70m (2006: $5m, R33m).

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 Limited, any subsidiary of AngloGold Ashanti Limited or a company under the control of AngloGold Ashanti Limited, 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 AngloGold Ashanti Limited 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 AngloGold Ashanti Limited's shares on the JSE on the last business day prior to the date of grant. AngloGold Ashanti Limited's 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 as determined by the board.

The main performance conditions in terms of the LTIP issued in 2005 are:

  • up to 40% 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% 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% 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 2007 and 2006 are:

  • up to 40% 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% 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% 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.

Accordingly, for the awards made, the following information is available:

  
   
Award date200520062007
Calculated fair valueR197.50R327.00R322.00
Vesting date4 May 20081 Aug 20091 Jan 2010
Expiry date3 May 201531 Jul 201631 Dec 2016
      
   Accordingly, for the awards made, the following information is available:  
363,500– Awards outstanding at beginning of year660,175–
316,675– Awards granted during the year321,664–
20,000– Awards lapsed during the year198,414–
–– Awards exercised during the year––
660,175– Awards outstanding at end of year783,425–
–– Awards exercisable at end of year––
   The income statement charge for the year was $2m, R11m (2006: $4m, R23m).  
      
   

Performance-related share-based remuneration scheme – 1 May 2003

The options, if vested, may be exercised at the end of a three-year period commencing 1 May 2003. The share options were granted at an exercise price of R221.90. The performance condition applicable to these options was that the US dollar EPS must increase by at least 6% in real terms, after inflation, over the next three years, in order to vest. As none of the performance criteria were met, in the initial three years, the grantor decided to roll the scheme forward on a “roll over reset” basis, in February 2006, to be reviewed annually. The performance criteria of these options was achieved during 2006. The remaining weighted average contractual life of the options granted is 5.33 years. An employee would only be able to exercise his options after the date upon which he receives written notification from the directors that the previously specified performance criteria have been fulfilled.

  
      
999,400221.90 Options outstanding at beginning of year885,900221.90
–– Options granted during the year––
112,000221.90 Options lapsed during the year21,400221.90
1,500221.90 Options exercised during the year414,600221.90
–– Options expired during the year––
885,900221.90 Options outstanding at end of year449,900221.90
885,900221.90 Options exercisable at end of year449,900221.90
   During 2006 1,500 options were exercised by the estate of a deceased employee. On death, the performance criteria were set aside in accordance with the scheme rules.

There was no income statement charge for the year, as the total compensation cost was expensed up to the date of vesting in 2006 (2006: $10m, R69m).

Performance-related share-based remuneration scheme – 1 November 2004

The options, if vested, may be exercised at the end of a three-year period commencing 1 November 2004. The share options were granted at an exercise price of R228.00. The performance condition applicable to these options was that US dollar EPS must increase from the 2004 year by at least 6% in real terms, i.e. after inflation, over the following three years in order to vest. The performance criteria was met during 2006. The remaining weighted average contractual life of options granted is 6.83 years. An employee would only be able to exercise his options after the date upon which he has receives written notification from the directors that the previously specified performance criteria have been fulfilled.

  
      
1,012,900228.00 Options outstanding at beginning of year911,400228.00
–– Options granted during the year––
100,200228.00 Options lapsed during the year40,526228.00
1,300228.00 Options exercised during the year197,974228.00
–– Options expired during the year––
911,400228.00 Options outstanding at end of year672,900228.00
–– Options exercisable at end of year672,900228.00
   During 2006 1,300 options were exercised by the estate of a deceased employee. On death, the performance criteria were set aside in accordance with the scheme rules. The income statement charge for the year was $3m, R23m (2006: $9m, R60m).

There are currently two share incentive schemes that fall outside the transitional provisions of IFRS 2, as the options were granted prior to 7 November 2002. The details of these schemes are as follows:

Performance-related share-based remuneration scheme – 1 May 2002

The share options were granted at an exercise price of R299.50 per share. The performance condition applicable to these options was that US dollar EPS must increase by 7.5% for each of the three succeeding years. On 24 December 2002, AngloGold Ashanti Limited underwent a share split on a 2:1 basis therefore the EPS target was reduced accordingly. As none of the performance criteria was met, in the initial three years, the grantor decided to roll the scheme forward on a “roll over reset” basis, to be reviewed annually. The performance criteria of these options were achieved during 2006. The remaining weighted average contractual life of options granted is 4.33 years. An employee would only be able to exercise his options after the date upon which he receives written notification from the directors that the previously specified performance criteria have been fulfilled.

  
      
884,700299.50 Options outstanding at beginning of year788,500299.50
–– Options granted during the year––
94,700299.50 Options lapsed during the year23,400299.50
1,500299.50 Options exercised during the year249,700299.50
–– Options expired during the year––
788,500299.50 Options outstanding at end of year515,400299.50
788,500299.50 Options exercisable at end of year515,400299.50
   


Time-related share-based remuneration scheme – granted up to 30 April 2002

Except where the directors at their sole and absolute discretion decide otherwise, a grantee may not exercise his options until after the lapse of a period calculated from the date on which the option was granted. The remaining weighted average contractual life of options granted is 2.36 years. The period in which and the extent to which the options vest and may be exercised are as follows:

  • after two years – up to 20% of options granted
  • after three years – up to 40% of options granted
  • after four years – up to 60% of options granted
  • after five years – up to 100% of options granted
  
864,710126.91 Options outstanding at beginning of year473,260125.82
–– Options granted during the year––
1,600211.00 Options lapsed during the year––
389,850127.89 Options exercised during the year266,300125.89
–– Options expired during the year––
473,260125.82 Options outstanding at end of year206,960124.69
465,260123.90 Options exercisable at end of year206,960124.69
   No grants were made with respect to the time related scheme options and performance related options during 2005, 2006 and 2007. The value of each option granted during 2002, 2003 and 2004 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 share price volatility. The expected term of options granted is derived from historical data on employee exercise and post-vesting employment termination behaviour. Expected volatility is based on the historical volatility of our shares. These estimates involve inherent uncertainties and the application of management's judgment. In addition, we are required to estimate the expected forfeiture rate and only recognise expense for those options expected to vest. As a result, if other assumptions had been used, the recorded share-based compensation expense could have been different from that reported.  
   

The Black-Scholes option-pricing model used the following assumptions, at grant date:

 200220032004
Risk-free interest rate11.00%11.00%8.18%
Dividend yield4.27%4.27%2.27%
Volatility factor of market share price0.3900.3900.300
Weighted average expected life7 years7 years7 years
Calculated fair valueR100.20R77.76R94.65
    
SA Rands  US Dollars
20062007Figures in million20072006
  12Taxation  
   South African taxation  
193371     Mining tax (1)5527
257212     Non-mining tax2939
5747     Under provision prior year68
       Deferred taxation:  
565285         Temporary differences (2)4181
(771)(634)         Unrealised non-hedge derivatives and other commodity contracts(93)(110)
41257         Change in estimated deferred tax rate (3) (4)859
713338  46104
   Foreign taxation  
9331,065     Normal taxation (1)151137
(8)(15)     Over provision prior year(2)(1)
       Deferred taxation:  
(294)(310)         Temporary differences (2)(45)(43)
29(39)        Unrealised non-hedge derivatives and other commodity contracts(5)4
(141)–        Change in estimated deferred tax rate (5)–(21)
519701  9976
      
1,2321,039  145180
   Tax reconciliation  
   A reconciliation of the effective tax rate charged in the income statement to the prevailing corporate tax rate is set out in the following table:  
%%  %%
144(34)     Effective tax rate(29)107
       Disallowable items:  
(116)66        Derivative losses58(90)
(5)9        Other9(5)
29(2)     Foreign income tax allowances and rate differentials(2)23
56(5)     Current tax assets recognised (previously unrecognised)(4)43
(5)7     Current unrecognised tax assets6(4)
(47)2     Change in estimated deferred tax rate (4) (5)2(35)
(6)1     Prior year under provision1(4)
(13)(7)     Other(4)2
3737     Estimated corporate tax rate (3)3737
   
(1)
  		Included in South African mining taxation is tax on the disposal of tangible assets of $3m, R21m (2006: nil). Included in normal foreign taxation is tax on the disposal of tangible assets of $3m, R19m (2006: $2m, R13m) (note 14).
(2)
  		Included in temporary differences in South African taxation is tax on the impairment and disposal of tangible assets of $1m, R6m (2006: nil). Included in temporary differences of foreign taxation is a tax credit on the impairment and disposal of tangible assets of $4m, R24m (2006: tax charge of $8m, R56m) (note 14).
(3)Mining tax on mining income in South Africa is determined according to a formula based on the profit and revenue from mining operations. The company has elected to be exempt from STC and is taxed at a higher rate of company tax for mining and non-mining income tax purposes.

All mining capital expenditure is deducted to the extent that it does not result in an assessed loss and depreciation is ignored when calculating the South African mining income. Capital expenditure not deducted from mining income is carried forward as unredeemed capital to be deducted from future mining income. South Africa operates under two tax paying entities, Vaal River Operations and West Wits Operations. Under ring-fencing legislation, each entity is treated separately and deductions can only be utilised against income generated by the relevant tax entity.

The formula for determining the South African mining tax rate is:
Y = 45 – 225/X
where Y is the percentage rate of tax payable and X is the ratio of mining profit net of any redeemable capital expenditure to mining revenue expressed as a percentage.

(4)In South Africa the mining operations are taxed on a variable rate that increases as profitability increases. The tax rate used to calculate deferred tax is based on the group's current estimate of future profitability when temporary differences will reverse. Depending on the profitability of the operations, the tax rate can consequently be significantly different from year to year. The change in the estimated deferred tax rate at which the temporary differences will reverse amounts to $8m, R57m (2006: $59m, R412m).
(5)The Ghanaian tax authorities have granted an extension on tax losses which would have been forfeited during the prior year $21m, R141m.
  
   

Unrecognised tax losses

  
1,9431,692 The unrecognised tax losses of the US operations which are available for offset against future profits earned in the USA248277
1,9431,692  248277
   Analysis of tax losses  
   Tax losses available to be used against future profits  
–8 – utilisation required within one year1–
1,9431,684 – utilisation in excess of five years247277
1,9431,692  248277
   Unrecognised tax   
448191 Assessed losses utilised during the year2864
       
  13Discontinued operations  
   

On 8 June 2007, AngloGold Ashanti announced that it would sell, subject to certain conditions, to a consortium of Mintails South Africa (Pty) Ltd/DRD South African Operations (Pty) Ltd joint venture, most of the remaining assets of Ergo, the surface reclamation operation east of Johannesburg.

The Ergo reclamation surface operation, which forms part of the South African operations and is included under South Africa for segmental reporting, 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 1 February 2005, mining operations at Ergo ceased on 31 March 2005, with only site restoration obligations remaining. The environmental rehabilitation programme to restore the site continues until all the legal and sale conditions have been met.

  
       
   The results of Ergo are presented below:  
265 Gold income14
(2)(22) Cost of sales(3)(1)
(37)37 Reversal (increase) in environmental provision5(5)
(13)20 Gross profit (loss)3(2)
–10 Other income2–
(13)30 Profit (loss) before taxation5(2)
(17)(2) Normal taxation (note 35)–(2)
18(21) Deferred taxation (note 33)(4)2
(12)7 Net profit (loss) after taxation1(2)
      
SA Cents US Cents
  14Earnings per ordinary share  
   Basic (loss) profit per ordinary share  
(211)(1,519) – Continuing operations(237)(15)
   The calculation of basic loss per ordinary share is based on losses attributable to equity shareholders of $669m, R4,275m (2006 losses of: $42m, R575m) and 281,455,107 (2006: 272,808,217) shares being the weighted average number of ordinary shares in issue during the financial year.  
(4)3 – Discontinued operations–(1)
   The calculation of basic profit (loss) per ordinary share is based on profits (losses) attributable to equity shareholders of $1m, R7m (2006 losses of: $2m, R12m) and 281,455,107 (2006: 272,808,217) shares being the weighted average number of ordinary shares in issue during the financial year.  
   Diluted (loss) profit per ordinary share  
(211)(1,519) – Continuing operations(237)(15)
   The calculation of diluted loss per ordinary share is based on losses attributable to equity shareholders of $669m, R4,275m (2006 losses of: $42m, R575m) and 281,455,107 (2006: 272,808,217) shares being the diluted number of ordinary shares. In 2006 and 2007, no adjustment was made since the effect is anti-dilutive.  
(4) 3  – Discontinued operations–(1)
     The calculation of diluted profit (loss) per ordinary share is based on profits attributable to equity shareholders of $1m, R7m (2006 losses of: $2m, R12m) and 281,455,107 (2006: 272,808,217) shares being the diluted number of ordinary shares. In 2006 and 2007, no adjustment was made since the effect is anti-dilutive. 
    Number of shares
   In calculating the diluted number of ordinary shares outstanding for the year, the following were taken into consideration:  
   Ordinary shares276,805,309272,214,937
   E ordinary shares (1)4,117,815194,954
   Fully vested options (2)531,983398,326
   Weighted average number of shares281,455,107272,808,217
   Dilutive potential of share options (3)––
   Diluted number of ordinary shares281,455,107272,808,217
   
(1)As E ordinary shares participate in the profit available to ordinary shareholders, these shares were included in basic earnings per share.
(2)Employee compensation awards, are included in basic earnings per share from the date that all necessary conditions have been satisfied and it is virtually certain that shares will be issued as a result of employees exercising their options.
(3)The calculation of diluted earnings per share did not take into account the effect of 575,316 (2006: 854,643) shares, issuable on share awards as the effect of this was anti-dilutive for this period.

The calculation of diluted earnings per share for 2007 did not take into account the effect of 15,384,615 (2006: 15,384,615) shares, issuable upon the exercise of convertible bonds, as the effect of this was anti-dilutive for this period.

  

SA Rands Figures in millionUS Dollars
   Headline loss  
   The loss attributable to equity shareholders was adjusted by the following to arrive at headline loss:  
(587)(4,269) Loss attributable to equity shareholders(668)(44)
–7 Impairment of goodwill (notes 6 and 17)1–
446 Impairment of tangible assets (notes 6 and 16)16
(376)(56)  Profit on disposal of assets (note 6)(7)(54)
   Taxation on items above  
1340 – current portion (note 12)62
56(18) – deferred portion (note 12)(3)8
–154 Impairment of investment in associates (note 8)22–
(850)(4,136) Headline loss(648)(82)
      

SA Cents  US Cents
(312)(1,470) 

Cents per share

Headline loss removes items of a capital nature from the calculation of earnings per share, calculated in accordance with Circular 8/2007 issued by the South African Institute of Chartered Accountants (SAICA).

The calculation of headline loss per ordinary share is based on headline losses of $648m, R4,136m (2006: $82m, R850m) and 281,455,107 (2006: 272,808,217) shares being the weighted average number of ordinary shares in issue during the year.

(230)(30)

SA Rands Figures in millionUS Dollars
  15Dividends  
   Ordinary shares  
164– No. 99 of 62 SA cents per ordinary share was declared on 9 February 2006 and paid on 10 March 2006 (10 US cents per share).–26
578– No. 100 of 210 SA cents per ordinary share was declared on 26 July 2006 and paid on 25 August 2006 (29 US cents per share).–81
–664 No. 101 of 240 SA cents per ordinary share was declared on 12 February 2007 and paid on 16 March 2007 (32 US cents per share).90–
–249 No. 102 of 90 SA cents per ordinary share was declared on 30 July 2007 and paid on 31 August 2007 (12 US cents per share).34–
–4 No. E1 of 120 SA cents per E ordinary share was declared on 12 February 2007 and paid on 16 March 2007 (16 US cents per share).1–
–2 No. E2 of 45 SA cents per E ordinary share was declared on 30 July 2007 and paid on 31 August 2007 (6 US cents per share).––
742919 (note 28)125107
   No. 103 of 53 SA cents per ordinary share was declared on 6 February 2008 and will be paid on 7 March 2008 (approximately 7 US cents per share). The actual rate of payment will depend on the exchange rate on the date of currency conversion.

No. E3 of 26.5 SA cents per E ordinary share was declared on 6 February 2008 and will be paid on 7 March 2008 (approximately 4 US cents per share). The actual rate of payment will depend on the exchange rate on the date of currency conversion.

  
16Tangible assets
Figures in millionMine
development
costs		Mine
infrastructure		Mineral
rights
and
dumps		Exploration
and
evaluation
assets		Land
and
buildings		Total
US Dollars
Cost      
Balance at 1 January 20065,1282,2441,21833278,650
Additions      
– project expenditure29382––303
– stay-in-business expenditure40597––2504
Disposals(2)(14)(3)(2)(2)(23)
Transfers and other movements (1)(66)173(31)––76
Finance costs capitalised (note 7)10––––10
Translation(191)(71)(1)–(1)(264)
Balance at 31 December 20065,5772,4371,18531269,256
Accumulated amortisation      
Balance at 1 January 20061,5691,0351371–2,742
Amortisation for the year (notes 4, 9 and 36)466107231–597
Impairments (notes 6 and 14) (3)24–––6
Disposals(1)(3)–(1)–(5)
Transfers and other movements (1)(92)62(1)––(31)
Translation(66)(39)(2)––(107)
Balance at 31 December 20061,8781,1661571–3,202
Net book value at 31 December 20063,6991,2711,02830266,054
Cost      
Balance at 1 January 20075,5772,4371,18531269,256
Additions      
– project expenditure45821–––479
– stay-in-business expenditure350184––36570
Acquisition of exploration assets (2)–3–25–28
Disposals(3)(12)–(1)(1)(17)
Transfers and other movements (1)(184)225–––41
Finance costs capitalised (note 7)10––––10
Translation1582512–3198
Balance at 31 December 20076,3662,8831,197556410,565
Accumulated amortisation      
Balance at 1 January 20071,8781,1661571–3,202
Amortisation for the year (notes 4, 9 and 36)36420321–2590
Impairments (notes 6 and 14) (3)1––––1
Disposals(1)(8)–(1)–(10)
Transfers and other movements (1)(37)15–––(22)
Translation63154––82
Balance at 31 December 20072,2681,391182–23,843
Net book value at 31 December 20074,0981,4921,01555626,722
       
SA Rands
Cost      
Balance at 1 January 200632,53614,2417,73120617454,888
Additions      
– project expenditure1,9775514––2,046
– stay-in-business expenditure2,745660––113,416
Disposals(13)(98)(20)(11)(11)(153)
Transfers and other movements (1)(427)1,171(210)–(3)531
Finance costs capitalised (note 7)71––––71
Translation2,1531,03678322144,008
Balance at 31 December 200639,04217,0658,29821718564,807
Accumulated amortisation      
Balance at 1 January 20069,9576,5658744117,401
Amortisation for the year (notes 4, 9 and 36)3,16773015210–4,059
Impairments (notes 6 and 14) (3)1328––344
Disposals(7)(20)–(9)–(36)
Transfers and other movements (1)(620)422(9)–(3)(210)
Translation634442901–1,167
Balance at 31 December 200613,1448,1671,1076122,425
Net book value at 31 December 200625,8988,8987,19121118442,382
Cost      
Balance at 1 January 200739,04217,0658,29821718564,807
Additions      
– project expenditure3,225147–––3,372
– stay-in-business expenditure2,4531,295––2564,004
Acquisition of exploration assets (2)–24–174–198
Disposals(18)(86)(3)(9)(4)(120)
Transfers and other movements (1)(1,309)1,581–––272
Finance costs capitalised (note 7)68––––68
Translation(106)(388)(140)(10)(2)(646)
Balance at 31 December 200743,35519,6388,15537243571,955
Accumulated amortisation      
Balance at 1 January 200713,1448,1671,1076122,425
Amortisation for the year (notes 4, 9 and 36)2,5591,426147–114,143
Impairments (notes 6 and 14) (3)51–––6
Disposals(9)(57)–(7)–(73)
Transfers and other movements (1)(262)108–––(154)
Translation6(169)(12)1(1)(175)
Balance at 31 December 200715,4439,4761,242–1126,172
Net book value at 31 December 200727,91210,1626,91337242445,783

Included in the amounts above for mine infrastructure are assets held under finance leases with a net book value of $9m, R60m (2006: $15m, R105m). Included in land and buildings are assets held under finance leases with a net book value of $34m, R235m (2006: nil).

The majority of the leased assets are pledged as security for the related finance lease.

The carrying value of assets encumbered by project finance amounts to nil (2006: $12m, R85m).

The weighted average capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation is 9.75% (2006: 8.23%).

A register containing details of properties is available for inspection by shareholders or their duly authorised agents during business hours at the registered office of the company.

(1)
  		Transfers and other movements comprise amounts from deferred stripping, change in estimates for decommissioning and asset reclassifications.
(2)
  		Exploration assets of $43m, R298m were acquired from Trans-Siberian Gold plc (TSG). Assets to the value of $15m, R100m has been tranferred to non-current assets held for sale (note 26).
SA Rands  US Dollars
20062007 Figures in million20072006
   (3) Impairments include the following:  
446 Write-off of various minor tangible assets and equipment16
446 (note 6)16
   The above impairments relate to mining properties, mine development costs and mine plant facilities and have been recognised in operating special items (note 6). The recoverable amount was determined by reference to value in use.

Impairment calculation

Management assumptions for the value in use of tangible assets and goodwill include:

  • 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/oz, (2006: $630/oz). Thereafter, the estimated future gold price has been increased by 2.25% (2006: 2.25%) per annum over the remaining life of the mines. These prices have been adjusted for the effects of including normal sale forward contracts to arrive at an average received price across all of the cash generating units (CGUs).

Annual life of mine plans which take into account the following:

  •  Proved and probable ore reserves included in this report;
  • value beyond proved and probable reserves (including exploration potential) determined using the gold price assumption referred to above;
  • 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;
  • 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 rates.

The real pre-tax discount rates applied in impairment calculations are based on a calculated weighted average cost of capital (WACC) of 4.53% (2006: 4.00%), adjusted for appropriate factors being country risk, project risk, value and timing of tax payments. The WACC is based on the average weighting of AngloGold Ashanti and those of its main peers.

Real pre-tax discount rates applied in impairment calculations on CGU’s for which the carrying amount of goodwill is significant are as follows:

  
   Sunrise Dam (1)11.0%10.2%
   Boddington (1)8.3%7.7%
   Geita (1)10.5%10.3%
   The group reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. In addition, goodwill is tested on an annual basis for impairment. Assets are grouped at the lowest level for which identifiable cash flows are largely independent of cash flows of other assets and liabilities. 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 goodwill and tangible 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.

Should management’s estimate of the future not reflect actual events, further impairments may be identified. Factors affecting the estimates include:

  • changes in proved and probable Ore Reserves as well as value beyond proven and probable reserves;
  • the grade of Ore Reserves as well as value beyond proved 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.

(1)The discount rates for 2006 were calculated on a consistent basis to the 2007 discount rates.

Based on an analysis carried out by the group, the carrying value and value in use of cash generating units that are most sensitive to a 5% movement in gold price, ounces, costs and discount rate assumptions are:

  
Carrying valueValue in use  2007Carrying valueValue in use
10,89012,048 Obuasi1,5991,769
647783 Sadiola95115
933933 Morila (1)137137
3,6543,876 Sunrise dam (1)537569
  2006  
10,76011,065 Obuasi1,5371,580
782880 Tau Lekota112126
   

Should any of the assumptions used change adversely and the impact not be mitigated by a change in other factors, 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 31 December 2007 because these assumptions and others used in impairment testing of tangible assets and goodwill are inextricably linked. In addition, for those mines with a functional currency other than the US dollar, movements in the US dollar exchange rate will also be a critical factor in determining 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 tangible assets could require a material adjustment to the carrying amounts disclosed at 31 December 2007.

(1)  The above carrying value of Morila and Sunrise Dam includes goodwill of $20m, R137m and $133m, R907m respectively (note 17).

  
SA Rands  US Dollars
20062007 Figures in million20072006
  17Intangible assets  
   Goodwill  
   Net carrying value  
2,3662,739 Balance at beginning of year391373
–(7) Impairment of goodwill (notes 6 and 14)(1)(1)–
373112 Translation2818
2,7392,844 Balance at end of year418391
 
   Net carrying amount allocated to each of the cash  
   generating units:  
836907 Sunrise Dam133119
836907 Boddington133119
763742 Geita Gold Mining Limited109109
148137 Morila Limited2021
10097 AngloGold Ashanti Brasil Mineração1515
5654 Serra Grande Company Limited88
2,7392,844  418391
   
(1)Goodwill has been allocated to its respective cash generating units (CGUs) where it is tested for impairment as part of the CGU (note 16). The group reviews and tests the carrying value of goodwill on an annual basis for impairment. Following the impairment review, goodwill to the value of $1m, R7m at Morila was impaired.
  
 
   Royalty and tax rate concession  
   Cost  
312344 Balance at beginning of year4949
32(9) Translation––
344335 Balance at end of year4949
  
   Accumulated amortisation  
145174 Balance at beginning of year2523
1314 Amortisation (notes 4 and 36)22
16(5) Translation––
174183 Balance at end of year2725
170152 Net book value2224
      
2,9092,996 Total intangible assets440415
   The government of Ghana agreed to a concession on the royalty payments by maintaining a rate of 3% for 15 years from 2004.

The tax rate concession was granted at a rate of 30% for the Ashanti business combination in 2004. During 2005, the corporate tax rate in Ghana decreased to 25% and the tax rate concession, which expires in 2019, was fully impaired.

   
      
  18Investments in associates  
   The group has a 25% (2006: 25%) interest in Oro Group (Pty) Ltd which is involved in the manufacture and wholesale of jewellery. The year-end of Oro Group (Pty) Ltd is 31 March. Equity accounting is based on results to 30 September 2007 adjusted for material transactions.

The group has a 29.8% (2006: 29.9%) interest in Trans-Siberian Gold plc (listed on the London Stock Exchange), which is involved in the exploration and development of gold mines. The year-end of Trans-Siberian Gold plc is 31 December. Equity accounting is based on results to 30 September 2007 adjusted for material transactions.

  
      
   The carrying value of associates consists of:  
218203 Shares at carrying value brought forward3235
(15)12 Share of retained earnings (loss) brought forward(1)(3)
203215  3132
(6)(10) Share of associates' loss after taxation (note 8)(1)(1)
–(154) Impairment (note 8) (1)(22)–
–3 Investment acquired in Margaret Water Company Limited––
183 Translation1–
8583 Loans advanced (2)1212
300140  2143
   
(1)
  		In 2007, the Trans-Siberian Gold plc and Margaret Water Company Limited investments were impaired. The impairment tests considered the investments fair value and anticipated future cash flows. Impairments of $22m, R154m were recorded.
(2)
  		Loans advanced consist of $10m, R68m (2006: $10m, R70m) to Trans-Siberian Gold plc and $2m, R15m to the Oro Group (Pty) Ltd (2006: $2m, R15m).

The Trans-Siberian Gold plc loan bears interest at LIBOR + 4% and is convertible into equity under certain circumstances at the option of the borrower.

The Oro loan bears interest at a rate determined by the Oro Group (Pty) Ltd's board of directors and is repayable at their discretion.

  
      
   The carrying value consists of the following:  
   Share capital and reserves  
2023 Oro Group (Pty) Ltd43
19534 Trans-Siberian Gold plc528
21557  931
   Loans advanced  
1515 Oro Group (Pty) Ltd22
7068 Trans-Siberian Gold plc1010
300140  2143
6341 Market value of listed associate69
   The group's effective share of certain balance sheet items of its associates at 30 September 2007 is as follows:  
117100 Non-current assets1517
97147 Current assets2214
214247 Total assets3731
5044 Non-current liabilities77
3042 Current liabilities64
8086 Total liabilities1311
      
134161 Net assets2420
   Reconciliation of the carrying value of investments in associates with net assets:  
134161 Net assets2420
10199 Goodwill1414
235260  3834
7068 Loan advanced to Trans-Siberian Gold plc1010
–(154) Impairment(22)–
(5)(5) Repayment of Oro Group (Pty) Ltd shareholders' loan(1)(1)
–(43) Elimination of profits within the group(6)–
–14 Translation2–
300140 Carrying value2143
       
  19Other investments  
   Listed investments  
   Available-for-sale  
97310 Balance at beginning of year4415
51230 Additions476
(388)(23) Disposals(3)(57)
778 Fair value adjustments (1)111
12(2) Translation2(1)
310323 Balance at end of year4844
   Available-for-sale listed investments consist of investments in ordinary shares, associated purchase warrants and options.  
   The available-for-sale investments primarily consists of:  
9196 Nufcor Uranium Limited1413
10176 International Tower Hill Mines Limited1114
2256 Red 5 Limited83
   Various listed investments held by Environmental  
8089 Rehabilitation Trust Fund1311
166 Other23
310323  4844
   Held to maturity  
118124 Balance at beginning of year1819
–15 Additions2–
–(39) Maturities(6)–
64 Interest earned11
–– Translation–(2)
124104 Balance at end of year1518
   Rehabilitation Trust Fund administered by RMB Private Bank comprising:  
9072 Government bonds1013
3432 Quasi-Government bonds55
124104  1518
434427 Book value of listed investments6362
434430 Market value of listed investments6362
  The market value of held to maturity bonds above is $15m, R107m. The market value has a sensitivity of R27,433 for a basis point change in interest rates.

 
   Unlisted investments  
   Available-for-sale  
22 Balance at beginning of year––
22 Balance at end of year––
   Available-for-sale unlisted investments consist primarily of the  
   Chamber of Mines Building Company Limited.  
22 Directors' valuation of unlisted investments (2)––
   Held to maturity  
428448 Balance at beginning of year6468
5215 Additions27
(74)(102) Maturities(15)(11)
369 Interest earned15
6(4) Translation2(5)
448366 Balance at end of year5464
   Additions to unlisted investments consist of contributions to the Environmental Rehabilitation Trust Fund and Environmental Protection Bond. These investments are collateral for certain of the group’s environmental obligations.

Unlisted investments – held to maturity include:

  
367274 Negotiable Certificates of Deposit – Rehabilitation Trust Fund administered by RMB Private Bank4052
6476 Environmental Protection Bond – fixed-term deposit required by legislation129
1716 Other23
448366  5464
450368 Book value of unlisted investments5464
450366 Fair value of unlisted investments5464
884795 Total book value117126
884796 Total fair value117126
  
(1)The exposure to equity price risk on equity investments is not significant.
(2)There is no active market for the unlisted equity investments and fair value cannot be reliably measured. The unlisted equity investments are carried at cost. The group does not intend to sell the investments in the foreseeable future.
 
       
  20Interest in joint ventures  
   The group's effective share of income, expenses, assets and liabilities of joint ventures, which is included in the consolidated financial statements, is as follows:  
   Income statement  
2,1461,951 Gold income278317
(1,101)(1,217) Expenses(173)(161)
1,045734 Operating profit105156
910 Interest received11
(46)(35) Finance costs and unwinding of obligations(5)(7)
1,008709 Profit before taxation101150
(219)(304) Taxation(43)(34)
789405 Profit after taxation58116
   Balance sheet  
   Non-current assets  
832688     Tangible assets101119
148137     Intangible assets2021
9196     Other investments1413
485410     Inventories6069
161180     Trade and other receivables2623
74113     Deferred taxation1711
   Current assets  
702850     Inventories125100
204232     Trade and other receivables3429
170135     Cash and cash equivalents2024
2,8672,841 Total assets417409
1,9572,043 Equity300280
   Non-current liabilities  
5925     Borrowings48
248244     Provisions and deferred taxation3635
   Current liabilities  
184136     Current portion of borrowings2026
419393     Trade and other payables5760
2,8672,841 Total equity and liabilities417409
   Refer to Investment in principal subsidiaries and joint ventures for details.  
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AngloGold Ashanti Annual Report 2007 – Annual Financial Statements