Group – Notes to the group financial statements

15 Tangible assets

Figures in million	Mine develop- ment costs	Mine infra- structure	Mineral rights and dumps	Explora- tion and evaluation assets	Assets under construc- tion	Land and buildings	Total
US Dollars
Cost
Balance at 1 January 2009	5,323	2,495	1,064	30	229	50	9,191
Additions
– project capital	122	5	–	–	289	–	416
– stay-in-business capital	394	125	–	1	81	1	602
Disposals	(1)	(11)	–	–	–	–	(12)
Transfers and other movements ⁽¹⁾	(134)	161	(18)	–	(373)	3	(361)
Finance costs capitalised (note 7)	4	–	–	–	11	–	15
Translation	737	148	32	–	14	8	939
Balance at 31 December 2009	6,445	2,923	1,078	31	251	62	10,790
Accumulated amortisation
Balance at 1 January 2009	2,726	1,227	860	30	–	3	4,846
Amortisation for the year (notes 4, 9 and 32)	366	177	10	–	–	2	555
Impairments (notes 6, 13 and 24) ⁽²⁾	3	4	–	–	–	–	7
Impairments reversal (notes 6, 13 and 24) ⁽³⁾	(348)	–	(369)	–	–	–	(717)
Disposals	(1)	(10)	–	–	–	–	(11)
Transfers and other movements ⁽¹⁾	(163)	(5)	(7)	–	–	–	(175)
Translation	373	76	16	–	–	1	466
Balance at 31 December 2009	2,956	1,469	510	30	–	6	4,971
Net book value at 31 December 2009	3,489	1,454	568	1	251	56	5,819
Cost
Balance at 1 January 2010	6,445	2,923	1,078	31	251	62	10,790
Additions
– project capital	130	10	–	–	110	–	250
– stay-in-business capital	447	183	–	2	90	1	723
Disposals	–	(40)	–	–	–	–	(40)
Transfers and other movements ⁽¹⁾	(203)	41	(31)	–	34	6	(153)
Translation	491	105	18	1	17	5	637
Balance at 31 December 2010	7,310	3,222	1,065	34	502	74	12,207
Accumulated amortisation
Balance at 1 January 2010	2,956	1,469	510	30	–	6	4,971
Amortisation for the year (notes 4,9 and 32)	478	198	11	1	–	2	690
Impairments (notes 6, 13 and 24) ⁽²⁾	20	16	–	–	47	–	83
Disposals	–	(40)	–	–	–	–	(40)
Transfers and other movements ⁽¹⁾	(8)	(18)	–	–	8	–	(18)
Translation	273	53	11	–	3	1	341
Balance at 31 December 2010	3,719	1,678	532	31	58	9	6,027
Net book value at 31 December 2010	3,591	1,544	533	3	444	65	6,180

SA Rands
Cost
Balance at 1 January 2009	50,331	23,591	10,059	281	2,167	472	86,901
Additions
– project capital	1,024	43	–	–	2,424	–	3,491
– stay-in-business capital	3,302	1,047	–	8	683	4	5,044
Disposals	(9)	(95)	–	–	–	(1)	(105)
Transfers and other movements ⁽¹⁾	(1,120)	1,349	(156)	–	(3,245)	28	(3,144)
Finance costs capitalised (note 7)	33	–	–	–	102	–	135
Translation	(5,644)	(4,199)	(1,891)	(60)	(267)	(41)	(12,102)
Balance at 31 December 2009	47,917	21,736	8,012	229	1,864	462	80,220
Accumulated amortisation
Balance at 1 January 2009	25,783	11,601	8,129	278	–	29	45,820
Amortisation for the year (notes 4,9 and 32)	3,048	1,469	82	–	–	16	4,615
Impairments (notes 6, 13 and 24) ⁽²⁾	22	28	–	–	–	–	50
Impairments reversal (notes 6, 13 and 24) ⁽³⁾	(2,601)	–	(2,764)	–	–	–	(5,365)
Disposals	(7)	(85)	–	–	–	–	(92)
Transfers and other movements ⁽¹⁾	(1,363)	(44)	(56)	–	–	–	(1,463)
Translation	(2,906)	(2,043)	(1,600)	(59)	–	–	(6,608)
Balance at 31 December 2009	21,976	10,926	3,791	219	–	45	36,957
Net book value at 31 December 2009	25,941	10,810	4,221	10	1,864	417	43,263
Cost
Balance at 1 January 2010	47,917	21,736	8,012	229	1,864	462	80,220
Additions
– project capital	950	72	1	–	806	–	1,829
– stay-in-business capital	3,267	1,333	–	17	657	4	5,278
Disposals	(3)	(294)	–	–	–	(1)	(298)
Transfers and other movements ⁽¹⁾	(1,480)	303	(229)	–	246	45	(1,115)
Translation	(2,624)	(1,980)	(788)	(27)	(274)	(25)	(5,718)
Balance at 31 December 2010	48,027	21,170	6,996	219	3,299	485	80,196

Accumulated amortisation
Balance at 1 January 2010	21,976	10,926	3,791	219	–	45	36,957
Amortisation for the year (notes 4, 9 and 32)	3,481	1,437	78	9	–	17	5,022
Impairments (notes 6, 13 and 24) ⁽²⁾	136	111	–	–	329	–	576
Disposals	(3)	(291)	–	–	–	–	(294)
Transfers and other movements ⁽¹⁾	(61)	(129)	–	–	62	–	(128)
Translation	(1,095)	(1,031)	(377)	(26)	(7)	(1)	(2,537)
Balance at 31 December 2010	24,434	11,023	3,492	202	384	61	39,596
Net book value at 31 December 2010	23,593	10,147	3,504	17	2,915	424	40,600

Included in the amounts for mine infrastructure are assets held under finance leases with a net book value of $20m, R134m (2009: $17m, R126m). Included in land and buildings are assets held under finance leases with a net book value of $28m, R185m (2009: $27m, R201m). The majority of the leased assets are pledged as security for the related finance lease. No assets are encumbered by project finance. No borrowing costs were capitalised in 2010. The weighted average capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation in 2009 was 4.10%. 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 of decommissioning assets, asset reclassifications and transfers to/from non-current assets held for sale. In 2010 transfers to/from non-current assets held for sale comprise: assets with a net book value of $10m, R74m relating to Tau Lekoa were transferred to non-current assets held for sale. In 2009 transfers to/from non-current assets held for sale comprise: assets with a net book value of $84m, R704m relating to Tau Lekoa were transferred to non-current assets held for sale. assets with a net book value of $145m, R1,335m relating to the 33.33% joint venture interest in Boddington Gold Minewere transferred to non-current assets held for sale.
⁽²⁾	Impairments include the following: South Africa Below 120 level at TauTona – assets under constructionDue to a change in the mine plan resulting from safety-related concerns following seismic activity, the below 120 level development has been abandoned and will not generate future cash flows. An impairment loss of $47m, R329m, was recognised in the income statement. Savuka – mine development and mine infrastructure costs Due to a change in the mine plan, the Savuka assets have been abandoned and will not generate future cash flows. An impairment loss of $16m, R114m was recognised in the income statement. Ghana Induapriem – mine infrastructure costs The use of a tailings storage facility was discontinued, resulting in an impairment loss of $8m, R61m. Other Impairment of various minor tangible assets and equipment $12m, R72m (2009: $7m, R50m).
⁽³⁾	Impairments of cash generating units recognised in 2008 were partially reversed during 2009. The impairment reversals were largely due to increases in the long-term real gold price resulting in increased future discounted cash flows. Tanzania Geita mine As a result, Geita’s recoverable amount exceeded its carrying value in 2009 and an impairment reversal was recognised of $261m, R1,954m consisting of mine development of $106m, R793m and mineral rights and dumps of $155m, R1,161m. The recoverable amount was determined using a real pre-tax discount rate of 13.6% and was based on the impairment assumptions detailed below. Ghana Obuasi mine As a result, Obuasi’s recoverable amount exceeded its carrying value in 2009 and an impairment reversal was recognised of $373m, R2,790m consisting of mine development of $159m, R1,187m and mineral rights and dumps of $214m, R1,603m. The recoverable amount was determined using a real pre-tax discount rate of 8.4% and was based on the impairment assumptions detailed below. Iduapriem mine As a result, Iduapriem’s recoverable amount exceeded its carrying value in 2009 and an impairment reversal was recognised of $83m, R621m consisting of mine development. The recoverable amount was determined using a real pre-tax discount rate of 13.4% and was based on the impairment assumptions detailed below. The impairments/reversals relate to mining properties, mine development costs and mine plant facilities, and have been recognised in special items (note 6). The recoverable amount was determined by reference to value in use at an individual mine level. Impairment calculation assumptions – tangible assets and goodwill Management assumptions for the value in use of tangible assets and goodwill include: the gold price assumption represents management’s best estimate of the future price of gold. In arriving at the estimated long-term gold price, management considered all available market information, including current prices, historical averages, and forward-pricing curves. A long-term real gold price of $1,113/oz (2009: $906/oz) is based on a range of economic and market conditions that will exist over the remaining useful life of the assets. Annual life of mine plans take into account the following: proved and probable Ore Reserve; value beyond proved and probable reserves (including exploration potential) determined using the gold price assumption referred to above; the real pre-tax discount rate is derived from the group’s weighted average cost of capital (WACC) and risk factors which is consistent with the basis used in 2009. The WACC of 5.8% which is 60 basis points lower than in 2009 of 6.4%, is based on the average capital structure of the group and three major gold companies considered to be appropriate peers. The risk factors considered are country risk as well as project risk for cash flows relating to mines that are not yet in production and deep level mining projects. The country risk factor is based on the group’s internal assessment of country risk relative to the issues experienced in the countries in which it operates and explores; foreign currency cash flows 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 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 cash generating unit. 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. The cash flows are significantly affected by a number of factors including reserves and production estimates, together with economic factors such as spot 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 Reserve as well as value beyond proved and probable reserves; the grade of Ore Reserve 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. There were no impairment indicators or impairment reversal indicators for cash generating units during 2010. Based on an analysis carried out by the group in 2009, the carrying value and value in use of cash generating units that were most sensitive to a 5% movement in gold price, ounces, costs and discount rate assumptions are:

Carrying value	Value in use	Figures in million	Carrying value	Value in use
SA Rands		2009	US Dollars
8,669	8,669	Obuasi	1,166	1,166
6,978	6,978	Geita Gold Mining Limited	939	939
2,126	2,126	Iduapriem	286	286

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 cash generating units.

It is impracticable to disclose the extent of the possible effects of changes in assumptions for the future gold price and hence life of mine plans at 31 December 2010 because these assumptions and others used in impairment testing of tangible assets and goodwill are inextricably linked. In addition, for those cash generating units 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 2010.