South Africa

AngloGold Ashanti’s seven mining operations in South Africa are grouped into the West Wits and Vaal River regions. These deep-level operations produced 2.3 million ounces in 2007, equivalent to 43% of group production.

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 man 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 man 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 behaviour-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-emphasise the company’s principles and standards regarding safety. The focus is on leadership, behaviour and on improving compliance with operating standards at all levels.

Operating review: Gold production from the South African operations totalled 72,429 kilograms (2,328,000 ounces) in 2007, down by 9% on the 79,427 kilograms (2,554,000 ounces) produced in 2006. An increase in output at Moab Khotsong was offset by marked declines in production at Great Noligwa and TauTona.

Total cash costs at the South Africa operations rose by 25% to R77,372/kg ($343/oz) from R61,667/kg ($285/oz) in 2006. This was largely a result of the reduced volumes mined, declining grades, safety-related stoppages and wage increases. A two-year wage agreement, effective from 1 July 2007, was signed through the Chamber of Mines with three recognised labour unions. The agreement covers 29,000 employees and allows for wage increases of between 8% and 10%. The increase in the second year will be at CPIX plus 1% with a minimum of 8%. The agreement also allows for various other benefits.

The relatively stronger South African rand and uranium by-product losses combined to offset the increase in the gold price received, which rose from R130,056/kg ($596/oz) in 2006 to R142,116/kg ($629/oz) in 2007, resulting in an adjusted gross profit of R2,845 million ($403 million) for 2007, compared to R3,746 million ($549 million) in 2006.

Capital expenditure at the South African operations totalled R2,535 million ($361 million) (2006: R2,116 million ($313 million)), largely on expansion projects at Mponeng and TauTona, and the ramping up at Moab Khotsong.

Uranium oxide (U₃O₈) is an important by-product at the operations in the Vaal River region and in 2007, these operations collectively produced 1.2 million pounds of U₃O₈.

West Wits

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.

Together, the West Wits operations collectively produced 33,258 kilograms (1,069,000 ounces) of gold, equivalent to 20% 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 metres. The deepest operating stope is at a depth of 3,370 metres 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.

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 one an accident involving machinery.

Operating review: Production declined by 2% 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.

There was a 4% decline in the area mined in 2007, largely as a result of a 3% 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 16% to R59,596/kg ($264/oz), 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.

Adjusted gross profit increased by 9% from R1,063 million ($156 million) in 2006 to R1,159 million ($165 million), largely as a result of the higher price received and the treating and milling of the entire stockpile.

Capital expenditure (including the amounts spent on below 120 VCR project) for the year totalled R604 million ($86 million) (2006: R325million ($48 million)). This included the purchase of equipment and ore reserve development. The SS2 shaft, which extends the mining depth to 6,700m, was commissioned in December 2007 at a cost of R75 million ($11 million).

Growth prospects: There are currently two growth projects under consideration 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.

• CLR below 120 project: Work is currently under way on this project aimed at accessing the Carbon Leader Reef which is located about 900m below the VCR. Initial estimates are that it has the potential to contribute 6.8 million ounces to production at a cost of $1.1 billion (R7.5 billion). The project is to be presented to the board for formal approval in October 2008 and is due to begin in January 2009 with production scheduled to begin in 2017.

Outlook: Production in 2008 is projected to be in a range of 13,563 to 14,309 kilograms (436,000 to 460,000 ounces), a decrease of 20%, at a total cash cost ranging from R69,000/kg to R72,000/kg ($278/oz to $288/oz). Capital expenditure of R568 million ($73 million) is planned, to be spent mostly on the VCR below 120 and CLR below 120 level projects.

Savuka

Description: Savuka is situated on the West Wits line in the province of Gauteng, approximately 70 kilometres 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).

This mining operation comprises sub and tertiary shaft systems with the latter reaching a depth of 3,777 metres, 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.

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.

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.

Safety: There was a deterioration in safety during the year with an overall LTIFR for the year of 25.99 per million man 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.

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% down on 2006 with tonnes milled down by 5%. 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 25% to R91,089/kg ($403/oz), 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.

Although adjusted gross profit was boosted by an increase in the received gold price, this was insufficient to offset the rise in costs. Adjusted gross profit consequently declined by 46% to R79 million ($11 million).

Growth prospects: There is an extensive resource to the west of current mining activities. Exploration and drilling programmes are being undertaken to determine extent and accessibility of this resource and to target potential mining prospects prior to the conduct of feasibility studies.

The restructuring programme instituted at Savuka over the last two years has increased its life of mine.

Outlook: Production in 2008 is projected to be between 1,742 and 1,835 kilograms (56,000 and 59,000 ounces), a decrease of 20%, at a total cash cost of between R108,000/kg and R110,000/kg ($432/oz to $442/oz). Capital expenditure of R79 million ($10 million) is planned.

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 metres to 3,500 metres 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.

Safety: There was a 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).

Operating review: Gold production declined by 14% 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.

The decline in production, together with an increase in input costs, annual wage increases, work stoppages and a stronger rand contributed to a 22% increase in total cash costs to R71,523/kg ($317/oz). 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.

Consequently, adjusted gross profit decreased by 31% to R476 million ($67 million) (2006: R693 million ($101 million)), despite the considerably improved price received.

Capital expenditure was 5% higher at R500 million ($71 million), less than had been planned.

Growth prospects: There are currently three growth projects under way at TauTona:

• 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.

• 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/oz during this period. Capital expenditure for this project is R272 million ($40 million) at current exchange rates, most of which has been committed.

• 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/oz.

Outlook: Production in 2008 is projected to decrease by 27% to between 8,834 and 9,332 kilograms (284,000 and 300,000 ounces) at a total cash cost between R99,000/kg and R101,000/kg ($396/oz and $406/oz). The reduced production will be in line with the implementation of stricter rock engineering guidelines at the shaft pillar and at drilling ahead of faces where seismically active structures have been identified. There may be a further decrease in forecast production, mainly a result of work stoppages caused by the non-availability of power and safety concerns. Capital expenditure of R475 million ($61 million) is planned.

Vaal River

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.

Combined, the Vaal River operations (including surface operations) produced 39,171 kilograms (1,259,000 ounces) of gold, equivalent to 23% 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 metres.

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.

Safety: Safety 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.

Operating review: Production declined by 27% 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% decline in tonnes mined.

Overall, total cash cost for the year rose by 61% to R90,817/kg ($403/oz). Increases in costs were the result of lower volumes, higher input costs, annual wage increases and losses on uranium by-product. The losses on uranium were caused by firstly, reduced production and secondly, uranium purchases which had to be made to meet contractual obligations. This increase in costs had a negative effect on adjusted gross profit which fell by 59% to R434 million ($61 million). Capital expenditure totalled 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.

Outlook: Production for 2008 is scheduled to decline by around 18% to between 11,696 and 12,349 kilograms (376,000 to 397,000 ounces) at a total cash cost of between R125,000 and R127,000/kg ($500/oz and $510/oz). Capital expenditure of R208 million ($27 million) is planned.

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 metres to 2,240 metres.

The Kopanang operation comprises of 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 tunnelling, 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.

Operating review: Gold production declined by 6% to 13,013 kilograms (418,000 ounces) (2006: 13,886 kilograms (446,000 ounces)) with volumes mined decreasing by 5%. 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 10% increase in total cash costs to R69,201/kg ($307/oz).

Consequently, adjusted gross profit decreased by 6% to R699 million ($99 million) (2006: R744 million, $109 million), despite the considerably improved price received. Capital expenditure rose by 29% 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.

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.

Outlook: The overall yield of ore mined is expected to decline in 2008 as the mining of lower grade panels located further from the shaft come into production. The production profile will increase, however, as the decline in yield is offset by additional development planned to overcome problems regarding face length, which arose as a result of the lengthy legal process to acquire the EDOM block of ground. This ground, which lies at the extremity of the mine boundary, has the potential to increase the life of the operation by one year and improve production flexibility. Gold production is forecast to be between 10,265 and 10,825 kilograms (330,000 to 348,000 ounces) in 2008.

It is estimated that total cash costs for 2008 will be in the region of between R86,000/kg and R88,000/kg ($345/oz and $355/oz) and capital expenditure is planned to increase to R521 million ($67 million) primarily due to the new uranium leach plant.

Tau Lekoa

Description: Tau Lekoa is one of 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 metres to 1,743 metres, 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 tunnelling 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).

Operating review: Production declined by 6% 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.

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.

Total cash costs rose by 13% to R107,016/kg ($474/oz) compared to R94,730/kg ($440/oz) the previous year.

There was an improvement from an adjusted gross loss of R22 million ($4 million) in 2006 to an adjusted gross profit of R10 million ($1 million), a result of the higher gold price received and the realignment of the operation. Capital expenditure for 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.

Outlook: Production in 2008 is projected to decrease to between 4,230 and 4,479 kilograms (136,000 to 144,000 ounces) at a total cash cost of between R123,000/kg and R126,000/kg ($495/oz to $505/oz). Capital expenditure of R125 million ($16 million) is planned.

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 metres and 3,054 metres 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.

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).

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 alone. Annual production was, however, less than had been budgeted as a result of poor face advance which was 25% less than planned. Consequently, tonnes mined were 21% 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 ($599 million) (at an exchange rate of R7/$).

The values mined and volumes treated increased by 25% and 21% 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.

Total cash cost rose by 6% to R150,135/kg ($668/oz) compared to R141,574/kg ($655/oz) 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 on the year. These factors all combined to contribute to an increase in the adjusted gross loss from R148 million ($22 million) to R274 million ($40 million). Capital expenditure for the year totalled 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.

Outlook: Production in 2008 is projected to be between 3,107 and 3,173 kilograms (97,000 to 102,000 ounces), an increase of 52%, at a total cash cost of approximately R171,000/kg to R173,000/kg ($685/oz to $695/oz). Capital expenditure of R571 million ($74 million) is planned.