Srinivasan VenkatakrishnanListen to podcast
The financial objectives for 2010 as included in the 2009 CFO’s report were:
- maximising margins and cash generation in the business;
- continuing with opportunistic reductions to the hedge book to further improve participation in a gold price rally; and
- introducing more tenor into the statement of financial position whilst refinancing the group’s $1.15bn revolving credit facility before December 2010.
We are pleased to report that all three of the above financial objectives were successfully met in 2010, thereby ensuring that AngloGold Ashanti finished the year 2010 in a stronger financial position.
First, starting with maximising margins and cash generation in the business - stronger gold prices, (albeit partially mitigated by cost pressures and stronger local currencies), steady production performance, greater exposure to spot prices, elimination of the hedge-book during the last quarter of 2010 and a lower than anticipated capital spend, helped us deliver on this objective. The operating cash flow (a measure to show funds available to meet capital expenditure, financing and dividend requirements) amounted to $1.7bn for the year. Free cash flow (a measure to show funds available to meet dividends) amounted to $525m for the year. These measures increased by 28% and 169% respectively on 2009 levels. In addition $134m was realised from the sale of non-core assets – Tau Lekoa and a 10% equity stake held in B2Gold Corporation. Our adjusted headline earnings for 2010 rose to $787m from $708m in 2009, an increase of $79m or 11%. Our returns on net capital employed and on equity for 2010 were 16.0% and 19.9% respectively, above the group’s strategic target of delivering a 15% return through the cycle. All of the above numbers exclude the cost of the accelerated hedge buy-back that was completed in 2010 and which is dealt with separately below.
Turning to the second objective of hedge book reduction, we completed the final phase of the hedge buy-back programme in the third and fourth quarter of 2010, which saw the elimination of the residual 3.0Moz at an after tax impact of $2.5bn. With this elimination, AngloGold Ashanti is no longer obliged to deliver a significant portion of its annual production for years 2011 to 2014 at deep discounted prices and will now enjoy full exposure to spot gold prices going forward, with consequential benefits of improved earnings, cash flow and debt carrying capacity. In order to ensure that the group’s financial position is not constrained, the hedge take-out was funded with an optimum balance of equity, mandatory convertible bonds and debt. Approximately 60% ($1.5bn) of the cost of the hedge take-out was funded using equity and mandatory convertible bonds, with approval from shareholders. The balance of 40% was funded from a combination of cash and debt facilities.
In addition to the equity raisings referred to above, we implemented a comprehensive refinancing plan in March and April of 2010, to address the tenor and mix of our debt, in order to meet the third and final financial objective, as follows:
- Secured international investment grade credit ratings from both Moody’s Investors Service and Standard and Poors (Moody’s and S&P);
- Raised $1.0bn of long term money in the form of two rated international bonds at competitive rates – 30-year $300m and 10-year $700m, and applied the proceeds to eliminate the amounts drawn under the $1.15bn revolving credit facility; and
- Obtained a new four year $1.0bn revolving credit facility from a syndicate of international banks at competitive rates, in order to provide the group with liquidity.
The group’s debt profile now comprises an optimum mix of both sources (bank facilities, rated bonds and convertible bonds) and tenor (short-, medium- and long-term money) whilst providing sufficient liquidity and flexibility that is required in order to ensure that the project pipeline is not compromised.
Now turning to the 2010 performance, some of the key financial performance metrics include:
- Gold production: 4.52Moz (within guidance provided at the start of 2010 of 4.5Moz – 4.7Moz);
- Average US dollar spot price: $1,227/oz (26% higher than previous year, but partly eroded in the case of AngloGold Ashanti by a 5.5% discount to spot, until elimination of the hedge book);
- Total cash costs: $638/oz (within exchange rate adjusted guidance). Given the relationship between US dollar gold prices and US dollar-denominated costs, unit costs were 24% higher than last year, due to inflation, currency strength, higher royalties and deferred stripping costs;
- Adjusted headline earnings (excluding accelerated hedge buy backs): $787m or 212 US cents per share;
- Adjusted headline loss (including cost of accelerated hedge buy backs): loss of $1.76bn or loss of 473 US cents per share;
- Net profit attributable to equity shareholders: $76m (2009: net loss of $320m);
- Operating cash flow: $1.7bn;
- Free cash flow (pre-dividends to shareholders): $525m plus $134m from non-core asset sales;
- Hedge book remaining as at 31 December 2010: Nil;
- Net debt (excluding mandatory convertible bonds) as at 31 December 2010: $1.3bn, despite funding 40% of the accelerated hedge take out;
- Return on net capital employed: 16.0%;
- Return on shareholder’s equity: 19.9%; and
- Dividend declared per ordinary share: 145 South African cents (approximately 20 US cents per share), 12% higher than the previous year.
Looking ahead to 2011, our three key financial objectives are:
- Ensuring that the benefits of the hedge book elimination are captured in improved earnings and cash generation;
- Maintaining our international investment grade credit ratings, and
- Maintaining a prudent statement of financial position, whilst at the same time not compromising the project pipeline of the group and returns to shareholders.
Gold production of 4.52Moz for the year was within the market guided range of 4.5Moz to 4.7Moz, but 2% or 84,000 ounces lower than that of 2009, primarily due to lower production from Continental Africa.
South Africa’s production decreased by 1% or 12,000oz to 1.79Moz. Production was down at Great Noligwa, in line with a planned downscaling of that operation, at Tau Lekoa following the transfer of the mining rights on 1 August 2010 on completion of the sale, at Kopanang due to lower volumes mined at a lower grade, and at Savuka where production remained constrained following the seismic event on 22 May 2009. In addition, there were delays to the shaft infrastructure repair programme at Savuka. These decreases in production were partly offset by production increases at TauTona owing to the higher volumes mined, at Moab Khotsong where improved reef hoisting performance combined with fewer safety stoppages, and at Mponeng due to the mining of higher grade areas.
Production during the year from Continental Africa fell by 6% or 93,000oz to 1.49Moz as lower grades were mined across most of the mines, most notably at Siguiri, Morila and Yatela. At Obuasi, production was lower owing to the upgrading of the water management facilities, blasting fragmentation and restricted ore passes. At Iduapriem, inadequate tailings storage facilities on site resulted in operational stoppages which were recovered by re-planning operations and mining, thus minimising the impact on production. Decreases at these operations were partly offset by increased production at Geita and Navachab where higher grades and volumes were mined.
In the Americas, production increased by 3% or 26,000oz to 842,000oz. This increase was due mainly to the implementation of the Lamego project at AngloGold Ashanti Córrego do Sítio Mineração and better ounce recovery from the heap leach pad at Cripple Creek & Victor, which benefitted from better pad pH chemistry and the strategy of stacking higher grade ore closer to the pad liner.
Australasia’s production decreased by 1% or 5,000oz to 396,000oz due to the lower volumes mined at Sunrise Dam and marginally lower grade of ore processed in line with the mine plan.
Uranium production of 1.46Mlbs was 15% ahead of mine plan due to better grades and recoveries. Year-on-year, uranium production was 1% or 21,000lbs higher than in 2009.
An analysis of the abridged income statement for the year, with comments on significant variances is presented as follows:
|Figures in $ million||Notes||2010||2009|
|Cost of sales||2||(3,550)||(2,813)|
|Loss on non-hedge derivatives and other commodity contracts||3||(702)||(1,533)|
|Gross profit (loss)||1,082||(578)|
|Corporate, marketing, exploration and other operating expenditure||4||(438)||(322)|
|Operating profit (loss)||518||(209)|
|Net interest paid||6||(123)||(85)|
|Exchange gains and fair value adjustments on convertible bonds||7||(53)||79|
|Share of equity accounted investments' profit||63||94|
|Profit (loss) before taxation||405||(121)|
|Profit (loss) for the year||129||(268)|
|Other financial data|
|EBITDA (excluding hedge buy-back costs)||1,897||1,663|
|Adjusted headline earnings (excluding hedge buy-back costs)||787||708|
Income statement commentary
The increase in profits for the year to $129m from a loss of $268m in 2009 was mainly a result of the higher received gold price and the reduced loss on the non-hedge derivatives as outlined in note 3 below.
1. Gold income
Despite the lower gold production, gold income at $5,334m was 42% higher than in 2009. This was due to the increase in the average gold price received (excluding hedge buy-back costs) which rose from $925/oz to $1,159/oz, in line with the higher spot gold price. In addition, included in the 2009 gold income, were normal purchase and sale exempted (NPSE) contract losses of $292m, which from July 2009 onwards were redesignated at fair value on the balance sheet and reported in the loss from non-hedge derivatives. The price received (excluding the cost of the hedge buy-backs) was at a 5.5% discount to the average spot gold price, similar to the 5% discount in 2009 and better than the guidance of 8% to 10% due to the early elimination of the hedge book.
2. Cost of sales
Cost of sales increased by 26% from $2,813m to $3,550m in 2010.
Components of cost of sales are:
- Total cash costs increased by 22% from $2,283m in 2009
to $2,778m in 2010. In unit cash cost terms, total cash
costs increased from $514/oz to $638/oz (refer to graph).
This was due mainly to:
- stronger local operating currencies, all except the Argentinean peso, appreciating between 1% to 8%;
- inflation related increases in salaries and consumables including power;
- higher royalties paid related to the higher gold price and the new profit based royalty introduced in South Africa from 1 March 2010;
- deferred stripping cost reversals during 2010 compared to deferrals in 2009; and
- higher infrastructure maintenance and labour costs;
Partially offset by:
- stockpile inventory credits;
- higher income from by-products, mainly price related, and higher sales of silver and sulphuric acid; and
- Insurance refunds relating mainly to the Savuka seismic event.
- Rehabilitation costs increased from $22m to $109m, owing mainly to changes and reviews in estimates resulting from the changes to the life of mine profiles and additional environmental damage incurred, legislation, discount and inflation rate assumptions as well as stronger local currencies
- Retrenchment costs of $23m occurred mainly at the South African operations.
- Amortisation of tangible and intangible assets increased from $557m to $692m in 2010. This increase is attributable to the reassessment of the useful lives of assets and the components of property, plant and equipment in accordance with revisions to the business plans, the higher tangible asset base and the impact of stronger local currencies.
Analysis of total cash cost
2010 vs 2009 ($/oz)
3. Loss on non-hedge derivatives and other commodity contracts
The decrease in the loss on non-hedge derivative contracts from $1,533m in 2009 to $702m in 2010 is attributable to the following:
|Figures in $ million||2010||2009|
|Loss on hedge buy-back costs||(2,698)||(797)|
|(Loss) gain on realised non-hedge derivatives||(277)||254|
|Gain (loss) on unrealised non-hedge derivatives and other commodity contracts||2,273||(990)|
With the July 2009 hedge buy-back, NPSE contracts were cash settled, resulting in the remaining NPSE contracts being re-designated as non-hedge derivatives and reflected in the statement of financial position. Fair value changes of these historical NPSE contracts were accounted for in the income statement, thus increasing the loss on non-hedge derivative contracts substantially when compared with 2010. The total loss in the income statement of the 2009 hedge buy-back and the related re-designation of the historical NPSE contracts amounted to $1,028m.
The loss on the 2009 hedge buy-back of $797m was made up of $580m previously designated as NPSE contracts and held off the statement of financial position and a further $217m of existing non-hedge derivative contracts.
With the elimination of the gold hedge book, the company and its shareholders will now have full exposure to the gold spot price.
4. Corporate, marketing, exploration and other operating expenditure
Corporate and other administration expenses increased from $154m to $206m in 2010 and included additional costs associated with the business improvement initiative, Project ONE, implementation of the global security framework, inflation-related increases and costs associated with capacity building activities. In addition, the strengthening of the South African rand relative to the US dollar also contributed to increased costs.
Marketing costs of $14m are $4m higher than 2009. Membership fees paid to the World Gold Council in 2010 and 2009 were $9m, and the remaining expenditure relates to other marketing initiatives.
Expensed exploration costs increased from $150m in 2009 to $198m in 2010, a function of higher prefeasibility expenditure at La Colosa in Colombia, Tropicana in Australia and Mongbwalu in the Democratic Republic of the Congo. The expensed exploration costs consisted of greenfield expenditure of $85m, brownfield expenditure of $50m and prefeasibility expenditure of $63m.
Other operating expenses increased from $8m in 2009 to $20m in 2010. The increase of $12m was due to the higher level of claims filed by former employees in respect of loss of employment, work-related accident injuries and diseases and governmental fiscal claims. In addition, the 2009 year included a non-recurring $6m rebate relating to governmental fiscal claims.
5. Special items
Special items in 2010 amounted to an expense of $126m compared to an income in 2009 of $691m and is made up as follows:
|Figures in $ million||2010||2009|
|Losses recovered through insurance claims||24||7|
|Profit on disposal of assets and investments||43||49|
|Impairment of assets, investments and receivables||(102)||(41)|
|Loss on sale of assets||(25)||–|
|Indirect taxes and legal claims||(17)||(29)|
|Mandatory convertible bond transaction costs||(56)||–|
|Total special items||(126)||691|
In 2010, impairment charges of $102m were recorded, primarily in relation to South Africa (at TauTona and Savuka).
Transaction costs on the mandatory convertible bonds of $56m was also incurred in 2010.
In 2009, asset impairments of $717m, raised initially in 2008, were partially reversed due to the increase in the long-term real gold price and improved mine plans, occurring at Obuasi of $373m, Geita of $261m, and Iduapriem of $83m.
6. Net interest paid
Net interest paid increased from $85m to $123m in 2010. This was due to the higher interest and fees paid on the rated and mandatory convertible bonds, the accelerated amortisation of fees on debt facilities repaid and cancelled, and reduced interest capitalised related to the Boddington joint venture asset disposed of during 2009.
7. Exchange gains and fair value adjustments on convertible bonds
The 2010 exchange gain of $3m relates to the translation on monetary items, net exchange differences on receivables and payables, and realised exchange gains. In 2009, an exchange gain of $121m arose when part of the proceeds from the sale of the Boddington joint venture was used to repay borrowings.
In 2010, the fair value loss of $1m on the option component of the convertible bonds was due to the substantial drop in volatilities which decreased the option value significantly. In 2009, the fair value loss of $33m on the option component was mainly due to an increase in volatilities and the share price underlying the $732.5m convertible bond.
In 2010, the fair value loss of $55m on the mandatory convertible bonds was a result of the movement in the listing price of the bonds on the New York Stock Exchange between 15 September 2010 and 31 December 2010. The mandatory convertible bonds are carried at fair value as they will be settled by the issue of equity.
The taxation charge was substantially higher in 2010 at $276m compared with the $147m in 2009. The 2009 taxation charge included a non-recurring tax credit of $246m on impairment reversals. In addition, the year-on-year increase was due to higher earnings, the reversal of the deferred taxation assets on unrealised non-hedge derivative losses of $558m, which was partly mitigated by the higher tax benefits arising from the hedge book settlement of $174m and a once-off tax credit in 2010.
Other financial data
EBITDA (excluding the cost of hedge buy-backs) increased from $1,663m in 2009 to $1,897m in 2010. The year-on-year increase of $234m is illustrated in the graph below.
2010 vs 2009 ($m)
Adjusted headline earnings (excluding the cost of hedge buybacks) increased from $708m in 2009 to $787m in 2010. The year-on-year increase of $79m is illustrated in the graph below:
- The increase in adjusted gross profit was due to the improved margins resulting from the higher received gold price partly offset by higher operating costs and lower production.
- Corporate and marketing costs increased by $55m and exploration by $48m (refer note 4 to the income statement commentary).
- Net interest paid is $38m higher due to additional borrowings (the rated bonds, mandatory convertible bonds and the R1.5bn revolving credit facility), increased costs and discounts on the unwinding provisions, and a non-recurring benefit arising from the unwinding of the Boddington joint venture deferred debtor in 2009.
- Taxation is lower due to the higher tax benefit of the hedge buy-backs and a once-off tax credit in 2010 of $84m, partly offset by higher earnings.
- Abnormal items relates to the Savuka business interruption insurance payout and a recovery of funds pertaining to the loss of consignment inventory.
- Other relates mainly to a non-recurring exchange gain on a loan repayment in 2009 (refer note 7 to the income statement commentary).
Adjusted headline earnings (excluding hedge buy-back costs)
2010 vs 2009 ($m)
Statement of financial position
An analysis of the abridged statement of financial position as at 31 December is presented, with comments on significant variations as follows:
|Figures in $ million||Notes||2010||2009|
|Tangible and intangible assets||1||6,374||5,996|
|Cash and cash equivalents||575||1,100|
|Total equity and liabilities||9,532||9,787|
Statement of financial position commentary
The statement of financial position has improved significantly during the 2010 and 2009 years. Equity of approximately $1bn has been injected, hedge contracts of $3.5bn before taxation were accelerated and cash settled. Long-term tenor has been introduced onto the balance sheet through the issuing of a convertible bond in 2009 for $0.7bn, the issue of two rated bonds totalling $1bn and mandatory convertible bonds of $0.8bn.
Significant events that impacted the statement of financial position were:
1. Tangible and intangible assets
The increase in the tangible and intangible assets from $5,996m to $6,374m was mainly due to the capital expenditure incurred during the year amounting to $973m (excluding that of joint ventures), the effects of stronger closing positions of local currencies against the US dollar of $314m, all of which was partly offset by an amortisation and depreciation charge of $692m, deferred stripping costs of $126m, and impairments of $83m. The balance of movements included changes in estimates of decommissioning assets and asset reclassifications.
2. Other assets
Other assets consists mainly of investments, inventories, financial derivatives, trade and other receivables, non-current assets, deferred tax assets, and cash restricted for use. Other assets decreased from $2,691m in 2009 to $2,583m in 2010.
Significant movements included:
- a decrease of $71m in assets held for sale owing mainly to the sale of the Tau Lekoa mine together with the adjacent properties of Weltevreden, Jonkerskraal and Goedgenoeg (Tau Lekoa) to Simmer & Jack Mines Limited (Simmers). The sale was concluded effective 1 August 2010;
- a reduction of $334m in financial derivative assets as a consequence mainly of the accelerated settlement of the final close-out of the hedge book;
- a decrease of $18m in investments in associates and equity accounted joint ventures given the higher dividends paid at the Malian operations; and
- decreases of $41m in deferred tax assets following the reorganisation of the operations in Brazil;
all of which were partly offset by:
- an increase of $62m in other investments due primarily to movements in rehabilitation trust funds, the addition of the Simmers shares following the sale of Tau Lekoa, which was partly offset by the disposal of the investment in Vancouver-based gold producer B2Gold Corp;
- an increase of $212m in inventories due to the timing of gold dispatches, higher production costs and uranium inventory levels, and in North America, the heap leach inventory increased as a result of the higher levels of cost ounces that were placed on the leach pad and the slower percolation rates of the gold-bearing solution through the leach pad; and
- a rise of $102m in trade and other receivables owing to increases in recoverable taxes and duties and the timing of payments received.
3. Total equity
Total equity increased from $3,030m in 2009 to $4,113m in 2010.
Significant movements included:
- an equity offering during September 2010 raised gross proceeds of $789m;
- profit for the year of $129m was mainly a function of the higher gold price received, the decline in the loss on non-hedge derivatives and the elimination of the remaining hedge book at a cost of $2.5bn;
- an increase in other comprehensive income of $250m included foreign currency translation reserves, cash flow hedge reserves, available-for-sale reserves and actuarial gains and losses; and
- Dividends paid to equity shareholders of $67m and to minorities of $64m.
Total long- and short-term borrowings increased from $1,931m in 2009 to $2,704m in 2010. The borrowings and related facilities can be summarised as follows:
|Figures in $ millions||Notes||Facility status at
31 December 2010
|Mandatory convertible bonds||1||Refer group note 26 for conversion features||874||–|
|Rated bonds||2||$700m 10-year bonds and|
|$300m 30-year bonds||995||–|
|3.5% Convertible bonds||Refer group note 26 for conversion features||623||596|
|FirstRand Bank Limited loan||3||R1.5bn ($222m)||107||–|
|Syndicated loan facility||4||$1.0bn||38||–|
|Syndicated loan facility||2||Repaid and cancelled||–||1,024|
|Standard Chartered term facility||5||Repaid and cancelled||–||238|
|Other loans and finance leases||67||73|
- During September 2010, the company issued $789m worth of mandatory convertible subordinated bonds due on 15 September 2013. The proceeds were also applied to part fund the hedge close-out. Both the Moody’s and S&P ratings agencies have confirmed that they regard the bonds as equity in determining their ratings, and have reaffirmed AngloGold Ashanti’s international investment grade credit ratings. These instruments have therefore been treated as equity and excluded from borrowings in the Non-GAAP debt metrics.
- During April 2010, two rated bonds, maturing in 10 and 30 years, were issued and aggregated $1.0bn. The proceeds were applied to repay and cancel amounts drawn under the $1.15bn syndicated loan facility and the Standard Chartered term facility.
- During September 2010, the short-term local facility of R1.5bn with FirstRand Bank Limited was drawn to part fund the South African hedge close-out.
- During May 2010, the company entered into a four-year unsecured syndicated revolving credit facility for $1.0bn, of which $170m was drawn to part fund the hedge close-out.
- During May 2010, the company repaid and cancelled the Standard Chartered term facility.
5. Other liabilities
Other liabilities consist mainly of provisions such as the environmental rehabilitation liability, retirement defined benefit plans, liabilities held for sale, trade, other payables and deferred income, financial derivatives and taxation payable. The decrease from $4,073m to $1,815m in 2010 was mainly due to the decrease in financial derivative liabilities of $2,525m, the result of the accelerated settlement of the hedge book.
Other movements included:
- Increases in environmental rehabilitation and other provisions of $138m owing to changes and reviews in estimates, legislation, discount and inflation rate assumptions as well as stronger local currencies. The changes in estimates result from changes to the life of mine profiles and additional environmental damage incurred;
- Increases in the provision for pension and post-retirement benefits of $32m due largely to stronger local currencies against the US dollar, which were partly offset by the effect of changes to discount and inflation rate assumptions; and
- An increase in trade, other payables and deferred income of $126m owing mainly to the timing of payments, increased payroll, power and electricity accruals, and social security and other tax provisions.
Statement of cash flows
An analysis of the abridged cash flow statement is presented and significant variations in balances are commented upon below.
|Figures in $ millions||Notes||2010||2009|
|Cash generated from operations||1||1,714||1,345|
|Dividends received from equity accounted investments||2||143||101|
|Cash utilised for hedge buy-back costs||3||(2,611)||(797)|
|Net cash (outflow) inflow from operating activities||(942)||502|
|Net proceeds from the acquisition and disposal of tangible assets,|
|investments, associate and joint venture loans||5||51||778|
|Other investing activities||19||(9)|
|Net cash (outflow) inflow from operating activities||(871)||(195)|
|Net proceeds from share issues||6||778||295|
|Net borrowings proceeds||7||648||43|
|Dividends and finance costs paid||(232)||(167)|
|Net cash (outflow) inflow from operating activities||1,194||171|
|Net (decrease) increase in cash and cash equivalents||(619)||478|
|Cash and cash equivalents at beginning of year||1,100||575|
|Cash and cash equivalents at end of year (1)||586||1,100|
- (1) The cash and cash equivalents balance at 31 December 2010 includes cash and cash equivalents included in the statement of financial position as part of non-current assets held for sale of $11m.
The reduced closing cash position was mainly a result of the hedge buy-back cash outflow of $2.6bn, which was partly funded from proceeds arising from debt and the issue of equity.
Cash generated from operations increased by $369m from $1,345m in 2009 to $1,714m in 2010 mainly due to the higher received gold price, the benefits of which were partly negated by the decline in ounces sold and the rise in total cash costs. Movements in working capital resulted in a net outflow of $299m in 2010 compared with $50m the prior year. The increased level of cash locked up in working capital was mainly due to an increase in inventories and trade and other receivables. Inventories increased mainly due to higher ore stockpile and uranium inventory levels, and in North America the heap leach inventory increased as a result of the higher cost ounces that were placed on the leach pad and the slower percolation rate of the goldbearing solution through the leach pad. Trade and other receivables increased owing to the timing of receipts, the rise in recoverable taxes, and the over payment of provisional taxes in South Africa.
The higher dividends received in 2010 from equity accounted investments was due to the higher distribution of $44m from Sadiola.
- Cash utilised for hedge buy-back costs increased from $797m in 2009 to $2,611m in 2010, reflecting the final tranche of 3.0Moz that was bought back in 2010. The elimination of the hedge book fulfils a crucial strategic objective by ending the practice of selling gold at a discount to current market prices, thus improving cash flows and earnings.
Capital expenditure decreased by $46m from $1,019m to $973m in 2010. Capital expenditure during 2010 consisted of $250m relating to project capital, $352m for Ore Reserve development and $371m for stay-in-business capital.
Excluding expenditure of $145m on the Boddington joint venture in 2009, project capital expenditure year-on-year reduced by $18m. Ore Reserve development expenditure increased by $5m and mainly arose at the Americas, in line with increased Ore Reserve development meters. Stay-in-business expenditure increased by $113m and was mainly driven by increased capital requirements at Obuasi of $27m, AngloGold Ashanti Córrego do Sítio Mineração of $24m, Geita of $22m, Mponeng of $17m, Moab Khotsong of $13m and Cerro Vanguardia of $7m.
Net proceeds from the sale of assets decreased from $778m to $51m in 2010. During 2010, the B2Gold and Red 5 investments were sold for $68m and $9m respectively, and additional shares were acquired in International Tower Hill for $11m and XDM Resources for $6m. During 2009, $990m was received from the sale of the Boddington joint venture and $145m was reimbursed for the capital expenditure incurred. In addition, $344m was spent on acquiring the 45% effective interest in the Kibali gold project and $6m on the additional 3% holding in Sadiola. The balance of the proceeds related mainly to real estate activities in Brazil, investments in environmental rehabilitation trust funds established by AngloGold Ashanti in compliance with regulatory requirements and other sundry investment purchases.
The net proceeds from the issue of shares increased from $295m in 2009 to $778m in 2010. The most significant movement relates to an equity offering which resulted in the issue of 18,140,000 ordinary shares at an issue price of R308.37, raising $773m (net of share issue costs). In 2009, an equity offering resulted in the issuing of 7,624,162 ordinary shares at an issue price of R288.32 per ordinary share. Net proceeds of $280m were raised. The balance of the proceeds relate to the normal issue of shares related to the employee share scheme.
Net borrowing proceeds increased from $43m in 2009 to $648m in 2010. The 2010 year includes proceeds of $983m from the $700m and $300m rated bonds, $819m from the mandatory convertible bonds, $307m from FirstRand Bank Limited and $170m from the $1bn syndicated loan. This was partly offset by repayments of $1,060m on the $1.15bn syndicated loan facility, $250m on the Standard Chartered term facility, $120m on the $1bn syndicated loan facility and $200m to FirstRand Bank Limited.
The 2009 year included proceeds of $732.5m from the 3.5% convertible bonds, $1bn from the term facility and $985m from the $1.15bn syndicated loan facility. This was partly offset by repayments of $1bn on the 2.375% convertible bonds, $750m on the term facility and $899m on the $1.15bn syndicated loan facility. The balance of the movements related to proceeds and repayments in terms of other loan agreements.
- During the first half of the year, some of the Brazilian whollyowned operations were restructured to capitalise on operating and financial synergies. A new company was formed and named AngloGold Ashanti Córrego do Sítio Mineracão S.A.
- AngloGold Ashanti is in the process of filing its US GAAP financials in XBRL (eXtensible Business Reporting Language) format in accordance with the United States Securities and Exchange Commission regulations. In South Africa, XBRL filing for the IFRS financials is presently a voluntary filing programme. The company is considering this method of presenting financial information in South Africa, upon successful implementation of the current XBRL filing.
One-year forecast – 2011
AngloGold Ashanti’s annual production guidance for 2011 is 4.55Moz to 4.75Moz.
Capital expenditure for 2011 is estimated to range between $1.5bn and $1.6bn.
|For the year ended 31 December 2011||Forecast
|000oz||$/oz (1)||$m (2)|
|South Africa (3)||1,717 – 1,792||624 – 647||600|
|Ghana||490 – 511||783 – 813||176|
|Guinea||270 – 281||693 – 719||36|
|Mali||236 – 246||784 – 814||25|
|Namibia||83 – 87||921 – 955||10|
|Tanzania||485 – 506||631 – 655||66|
|Australia||344 – 360||881 – 914||158|
|Argentina||190 – 198||536 – 556||66|
|Brazil||435 – 455||515 – 535||279|
|United States||300 – 314||547 – 567||72|
|Democratic Republic of the Congo||–||–||84|
|AngloGold Ashanti||4,550 – 4,750||660 – 685||1,599|
- (1) Based on the following assumptions: R7.11/$, A$/$0.98, BRL1.70/$ and Argentinean peso 4.12/$; Brent crude at $95 per barrel.
- (2) Capital expenditure is managed in line with earnings and cash flows and may fluctuate accordingly. Forecast capital expenditure for operations with minorities is reported at 100%. For entities which are equity accounted, the forecast capital spend is the attributable share.
- (3) In South Africa, production assumes stable power supply from Eskom at 48c/Kwh.
|Depreciation and amortisation||$810m|
|Corporate, marketing, Project ONE and capacity building costs||$275m|
|Expensed exploration and prefeasibility costs (including equity accounted associates and joint ventures of $30m)||$325m|
|Interest and finance costs (income statement)||$205m|
|Interest and finance costs (cash flow)||$145m|
Chief Financial Officer
11 March 2011