In the normal course of its operations, the group is exposed to gold price, other commodity price, foreign exchange, interest rate, liquidity, equity price and credit risks. In order to manage these risks, the group may enter into transactions which make use of both on- and off-balance sheet derivatives. The group does not acquire, hold or issue derivatives for trading purposes. The group has developed a comprehensive risk management process to facilitate, control and monitor these risks. The board has approved and monitors this risk management process, inclusive of documented treasury policies, counterpart limits and controlling and reporting structures.
The Executive Committee and the Treasury Committee are responsible for risk management activities within the group. The Treasury Committee, chaired by the independent chairman of the AngloGold Ashanti Audit and Corporate Governance Committee, comprising executive members and treasury executives, reviews and recommends to the Executive Committee treasury counterparts, limits, instruments and hedge strategies. The treasurer is responsible for managing gold and other commodity price, foreign exchange, interest rate, liquidity and credit risks. Within the treasury function, there is an independent risk function, which monitors adherence to treasury risk management policy and counterpart limits and provides regular and detailed management reports.
The financial risk management objectives of the group are defined as follows:
Gold price risk arises from the risk of an adverse effect on current or future earnings resulting from fluctuations in the price of gold. The group has transactional foreign exchange exposures. Such exposure arises from sales or purchases by an operating unit in currencies other than the unit’s functional currency. The gold market is predominately priced in US dollars which exposes the group to the risk that fluctuations in the SA rand/US dollar, Brazilian real/US dollar, Argentinean peso/US dollar and Australian dollar/US dollar exchange rates may also have an adverse effect on current or future earnings. The group is also exposed to certain by-product commodity price risk.
A number of products, including derivatives, are used to manage the gold price and foreign exchange risks that arise out of the group’s core business activities. Forward sales contracts and call and put options are used by the group to manage these risks. At year-end, the volume of outstanding net forward sales contracts was 571kg (2008: 39,990kg). The volume of outstanding net call options sold was 120,594kg (2008: 146,542kg) and the volume of outstanding net put options sold was 27,071kg (2008: 16,963kg).
As the group does not enter into financial instruments for trading purposes, the risks inherent to financial instruments are always offset by the underlying risk being hedged. The group further manages such risks by ensuring that the level of hedge cover does not exceed expected sales in future periods, that the tenor of instruments does not exceed the life of mine and that no basis risk exists.
The group’s cash flow hedges consist of commodity and foreign exchange forward contracts that are used to protect against exposures to variability in future commodity, foreign exchange and capital expenditure cash flows. The amounts and timing of future cash flows are projected for each portfolio of financial assets and liabilities on the basis of their contractual terms and other relevant factors, including estimates of prepayments and defaults. The contractual cash flows across all portfolios over time form the basis for identifying gains and losses on the effective portions of derivatives designated as cash flow hedges of forecast transactions. Gains and losses are initially recognised directly in other comprehensive income and reclassified to earnings as gold income or as an adjustment to depreciation expense pertaining to capital expenditure, when the forecast transactions affect the income statement.
The cash flow hedge forecast transactions are expected to occur in the next year, in line with the maturity dates of the hedging instruments and will affect profit and loss simultaneously in an equal and opposite way.
The gains and losses on ineffective portions of such derivatives are recognised immediately in the income statement. During the year to 31 December 2009, a loss of $5m, R40m (2008: loss of $8m, R64m) was recognised on non-hedge derivatives and other commodities in the income statement due to hedge ineffectiveness.
| Figures in million | 2009 | 2008 |
|---|---|---|
| US Dollars | ||
| Loss on non-hedge derivatives and other commodity contracts | (1,533) | (310) |
| Unrealised gain on other commodity physical borrowings | – | 8 |
| Provision reversed for loss on future deliveries and other commodities | – | 5 |
| Loss on non-hedge derivatives and other commodity contracts per the income statement | (1,533) | (297) |
| SA Rands | ||
| Loss on non-hedge derivatives and other commodity contracts | (11,934) | (6,388) |
| Unrealised gain on other commodity physical borrowings | – | 74 |
| Provision reversed for loss on future deliveries and other commodities | – | 37 |
| Loss on non-hedge derivatives and other commodity contracts per the income statement | (11,934) | (6,277) |
Loss on non-hedge derivatives and other commodity contracts was $1,533m, R11,934m in 2009 compared to a loss of $297m, R6,277m in the previous year. The loss is as a result of forward gold contracts previously qualifying for the normal sale exemption being included in the statement of financial position, with a change in fair value reflected in the income statement as non-hedge derivatives, $556m, R4,144m (2008: $173m, R1,520m), as well as the revaluation of existing and new non-hedge derivatives resulting from changes in the prevailing spot gold price, exchange rates, interest rates, volatilities and credit risk compared to the previous year.
During 2009 the company embarked on a hedge buy-back that resulted in the accelerated settlement of both non-hedge and forward and option gold contracts qualifying for the normal sale exemption (which permits the group to not record such amounts in its financial statements until the maturity date of the contract) under which the group had committed to deliver a specified quantity of gold at a future date in exchange for an agreed price. As a result of the accelerated settlement of the normal sale exempted contracts, all remaining contracts scheduled to mature in later periods have been determined to not meet all of the requirements necessary for them to continue to qualify for the normal sales exemption in future periods and are being accounted for as non-hedge derivatives and recorded on the statement of financial position at fair value with fair value changes reflected in the income statement. During 2008, due to the inability of a single counterparty to accept the physical delivery of gold for the forward contracts expiring in April through June 2008, the group cash settled such contracts during the period. This resulted in the remaining contracts with this counterparty scheduled to mature in later periods being accounted for as non-hedge derivatives at fair value on the statement of financial position, with a change in fair value reflected in the income statement.
The total realised loss before taxation as a result of the hedge buy-back effected during the year was $797m, R6,315m (2008: $1,088m, R8,634m), of which $217m, R1,719m (2008: $1,088m, R8,634m) was due to the accelerated settlement of non-hedge derivatives and $580m, R4,596m (2008: nil) was due to the accelerated settlement of forward gold contracts previously qualifying for the normal sale exemption.
The marked-to-market value of derivatives, irrespective of accounting designation, making up the hedge position was negative $2.18bn, negative R16.18bn as at 31 December 2009 (as at 31 December 2008: negative $2.46bn, negative R23.25bn). These values were based on a gold price of $1,102 per ounce, exchange rates of $1 = R7.4350 and A$1 = $0.8967 and the prevailing market interest rates and volatilities at 31 December 2009. The values as at 31 December 2008 were based on a gold price of $872 per ounce, exchange rates of $1 = R9.4550 and A$1 = $0.6947 and the market interest rates and volatilities prevailing at that date.
The table below reflects the hedge position as at 31 December 2009 and includes the effect of all hedge buy-backs undertaken during the year.
Summary: All open contracts in the group’s commodity hedge position as at 31 December 2009
| Year | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | Total | 2008 |
|---|---|---|---|---|---|---|---|---|
| US Dollar/Gold | ||||||||
| Forward contracts | ||||||||
| Amount (kg) | (13,534) (1) | 1,866 | 3,810 | 3,717 | 2,846 | (1,295) (1) | 38,466 | |
| $/oz | $909 (1) | $227 | $418 | $477 | $510 | $5,457 (1) | $467 | |
| Put options sold | ||||||||
| Amount (kg) | 14,801 | 4,603 | 2,659 | 1,882 | 1,882 | 25,827 | 16,963 | |
| $/oz | $929 | $623 | $538 | $440 | $450 | $764 | $579 | |
| Call options sold | ||||||||
| Amount (kg) | 33,137 | 24,161 | 25,238 | 17,857 | 21,165 | 902 | 122,460 | 150,896 |
| $/oz | $619 | $554 | $635 | $601 | $604 | $670 | $605 | $557 |
| Rand/Gold | ||||||||
| Forward contracts | ||||||||
| Amount (kg) | (1,244) (1) | (1,244) (1) | (1,866)(1) | |||||
| R/kg | R232,225 (1) | R232,225 (1) | R157,213 (1) | |||||
| Put options sold | ||||||||
| Amount (kg) | 1,244 | 1,244 | ||||||
| R/kg | R240,354 | R240,354 | ||||||
| Call options sold | ||||||||
| Amount (kg) | 1,244 | 1,244 | ||||||
| R/kg | R262,862 | R262,862 | ||||||
| Australian Dollar/Gold | ||||||||
| Forward contracts | ||||||||
| Amount (kg) | 3,110 | 3,110 | 3,390 | |||||
| A$/oz | A$646 | A$646 | A$669 | |||||
| Call options purchased | ||||||||
| Amount (kg) | 3,110 | 3,110 | 4,354 | |||||
| A$/oz | A$712 | A$712 | A$707 | |||||
| Total net gold | ||||||||
| Delta (kg) (2) | (13,582) | (24,567) | (26,855) | (20,278) | (22,383) | (817) | (108,482) | (162,223) |
| Delta (oz) (2) | (436,666) | (789,849) | (863,406) | (651,962) | (719,638) | (26,258) | (3,487,779) | (5,215,610) |
The open delta hedge position of the group at 31 December 2009 was 3.49Moz or 108t (31 December 2008: 5.22Moz or 162t).
(1) Represents a net long gold position and net short US dollars/rands position resulting from both forward sales and purchases for the period.
(2) The delta of the hedge position indicated above, is the equivalent gold position that would have the same marked-to-market sensitivity for a small change in the gold price. This is calculated using the Black-Scholes option formula with the ruling market prices, interest rates and volatilities as at 31 December 2009.
Summary: All open contracts in the group’s currency hedge position as at 31 December 2009.
| Year | 2010 – 2015 | 2008 |
|---|---|---|
| Rand/US Dollar (000) | ||
| Put options purchased | ||
| Amount ($) | – | 30,000 |
| R per $ | – | R11.56 |
| Put options sold | ||
| Amount ($) | – | 50,000 |
| R per $ | – | R9.52 |
| Call options sold | ||
| Amount ($) | – | 50,000 |
| R per $ | – | R11.61 |
| Australian Dollar/US Dollar (000) | ||
| Forward contracts | ||
| Amount ($) | – | 450,000 |
| $ per A$ | – | $0.65 |
| Put options purchased | ||
| Amount ($) | – | 10,000 |
| $ per A$ | – | $0.69 |
| Put options sold | ||
| Amount ($) | – | 10,000 |
| $ per A$ | – | $0.76 |
| Call options sold | ||
| Amount ($) | – | 10,000 |
| $ per A$ | – | $0.64 |
| Brazilian Real/US Dollar (000) | ||
| Forward contracts | ||
| Amount ($) | – | 62,340 |
| BRL per $ | – | BRL1.86 |
The mix of hedging instruments, the volume of production hedged and the tenor of the hedging book is continually reviewed in the light of changes in operational forecasts, market conditions and the group’s hedging policy.
Forward sales contracts require the future delivery of the underlying at a specified price.
A put option gives the put buyer the right, but not the obligation, to sell the underlying to the put seller at a predetermined price on a predetermined date.
A call option gives the call buyer the right, but not the obligation, to buy the underlying from the call seller at a predetermined price on a predetermined date.
Fluctuations in interest rates impact on the value of short-term cash investments and financing activities, giving rise to interest rate risk.
In the ordinary course of business, the group receives cash from the proceeds of its gold sales and is required to fund working capital requirements. This cash is managed to ensure surplus funds are invested in a manner to achieve market-related returns while minimising risks. The group is able to actively source financing at competitive rates. The counterparts are financial and banking institutions and their credit ratings are regularly monitored.
The group has sufficient undrawn borrowing facilities available to fund working capital requirements (notes 27 and 37).
The following are the contractual maturities of financial liabilities, including interest payments. Non-derivative financial liabilities
| Within one year | Between one and two years | Between two and five years | After five years | ||||||
|---|---|---|---|---|---|---|---|---|---|
| Effective rate | Effective rate | Effective rate | Effective rate | Total | |||||
| Million | % | Million | % | Million | % | Million | % | Million | |
| 2009 | |||||||||
| Financial guarantees (3) | – | – | – | 13 | 13 | ||||
| Borrowings | 1,332 | 41 | 826 | 47 | 2,246 | ||||
| – In USD | 1,327 | 2.3 | 35 | 3.5 | 810 | 3.5 | – | 2,172 | |
| – ZAR in USD equivalent | 3 | 9.8 | 4 | 9.8 | 12 | 9.8 | 47 | 9.8 | 66 |
| – BRL in USD equivalent | 2 | 6.1 | 2 | 6.0 | 4 | 6.0 | – | 8 | |
| Trade and other payables | 573 | – | – | – | 573 | ||||
| 2008 | |||||||||
| Financial guarantees (3) | – | – | – | 11 | 11 | ||||
| Borrowings | 1,114 | 882 | 13 | 40 | 2,049 | ||||
| – In USD | 1,075 | 2.6 | 330 | 2.6 | 4 | 2.9 | – | 1,409 | |
| – ZAR in USD equivalent | 3 | 10.7 | 3 | 9.9 | 9 | 9.8 | 40 | 9.8 | 55 |
| – AUD in USD equivalent | 35 | 6.1 | 549 | 6.1 | – | – | 584 | ||
| – BRL in USD equivalent | 1 | 11.7 | – | – | – | 1 | |||
| Trade and other payables | 488 | – | – | – | 488 | ||||
(3) Not included in the statement of financial position.
The following are the undiscounted forecast principal cash flows arising from derivative contracts included in the statement of financial position (cash flow hedges and non-hedges).
| Figures in million | Within one year | Between one and two years | Between two and five years | After five years | Total |
|---|---|---|---|---|---|
| US Dollar | |||||
| At 31 December 2009 | |||||
| Cash inflows from assets | 277 | 46 | 13 | – | 336 |
| Cash outflows from liabilities | (722) | (543) | (1,468) | (18) | (2,751) |
| Net cash outflows | (445) | (497) | (1,455) | (18) | (2,415) |
| At 31 December 2008 | |||||
| Cash inflows from assets | 436 | 121 | 41 | – | 598 |
| Cash outflows from liabilities | (213) | (305) | (845) | (292) | (1,655) |
| Net cash inflows (outflows) | 223 | (184) | (804) | (292) | (1,057) |
| SA Rand | |||||
| At 31 December 2009 | |||||
| Cash inflows from assets | 2,068 | 339 | 93 | – | 2,500 |
| Cash outflows from liabilities | (5,367) | (4,038) | (10,915) | (136) | (20,456) |
| Net cash outflows | (3,299) | (3,699) | (10,822) | (136) | (17,956) |
| At 31 December 2008 | |||||
| Cash inflows from assets | 4,120 | 1,142 | 389 | – | 5,651 |
| Cash outflows from liabilities | (2,011) | (2,888) | (7,991) | (2,755) | (15,645) |
| Net cash inflows (outflows) | 2,109 | (1,746) | (7,602) | (2,755) | (9,994) |
Credit risk arises from the risk that a counterpart may default or not meet its obligations timeously. The group minimises credit risk by ensuring that credit risk is spread over a number of counterparts. These counterparts are financial and banking institutions. Counterpart credit limits and exposures are reviewed by the Treasury Committee. Where possible, management ensures that netting agreements are in place. No set-off is applied to the statement of financial position due to the different maturity profiles of assets and liabilities. The combined maximum credit risk exposure at the reporting date by class of derivative financial instrument is $335m, R2,490m (2008: $570m, R5,386m) on a contract-by-contract basis.
The combined maximum credit risk exposure of the group is as follows:
| Figures in million | 2009 | 2008 | 2009 | 2008 |
|---|---|---|---|---|
| US Dollars | SA Rands | |||
| Commodity option contracts | 47 | 56 | 351 | 527 |
| Foreign exchange option contracts | – | 6 | – | 57 |
| Forward sale commodity contracts | 283 | 468 | 2,099 | 4,426 |
| Forward foreign exchange contracts | – | 25 | – | 239 |
| Gold interest rate swap | – | 15 | – | 137 |
| Warrants on shares | 5 | – | 40 | – |
| Total derivatives | 335 | 570 | 2,490 | 5,386 |
| Other investments | 60 | 49 | 447 | 461 |
| Other non-current assets | 1 | 1 | 12 | 17 |
| Trade and other receivables | 80 | 82 | 599 | 773 |
| Cash restricted for use (note 23) | 65 | 44 | 481 | 415 |
| Cash and cash equivalents (note 24) | 1,100 | 575 | 8,176 | 5,438 |
| Total financial assets | 1,641 | 1,321 | 12,205 | 12,490 |
| Financial guarantees | 13 | 11 | 100 | 100 |
| Total | 1,654 | 1,332 | 12,305 | 12,590 |
In addition, the group has also guaranteed the hedging commitments of several subsidiary companies as disclosed in note 35.
Credit risk exposure of derivatives netted by counterparts amounts to $104m, R773m (2008: $207m, R1,954m). Trade and other receivables that are past due but not impaired totalled $45m, R337m (2008: $8m, R74m). Trade and other receivables that are impaired totalled $34m, R251m (2008: $2m, R14m) and other investments that are impaired totalled nil (2008: $6m, R60m). No other financial assets are past due but not impaired.
Trade debtors mainly comprise banking institutions purchasing gold bullion. Normal market settlement terms are two working days. No impairment was recognised as the principal debtors continue to be in a sound financial position.
The group does not generally obtain collateral or other security to support financial instruments subject to credit risk, but monitors the credit standing of counterparts. The group’s reserves and financial strength have allowed it to arrange unmargined credit lines with counterparts.
The estimated fair value of financial instruments are determined at discrete points in time based on relevant market information. The estimated fair value of the group’s financial instruments as at 31 December are as follows:
| Carrying amount | Fair value | Carrying amount | Fair value | |
|---|---|---|---|---|
| Figures in million | 2009 | 2008 | ||
| US Dollars | ||||
| Financial assets | ||||
| Other investments (note 19) | 175 | 171 | 66 | 67 |
| Other non-current assets | 1 | 1 | 1 | 1 |
| Trade and other receivables | 80 | 80 | 82 | 82 |
| Cash restricted for use (note 23) | 65 | 65 | 44 | 44 |
| Cash and cash equivalents (note 24) | 1,100 | 1,100 | 575 | 575 |
| Derivatives (4) | 335 | 335 | 570 | 570 |
| Financial liabilities | ||||
| Borrowings (note 27) | 1,931 | 2,153 | 1,933 | 1,918 |
| Trade and other payables | 573 | 572 | 488 | 488 |
| Derivatives (4) | 2,701 | 2,701 | 1,762 | 3,068 |
| SA Rands | ||||
| Financial assets | ||||
| Other investments (note 19) | 1,302 | 1,279 | 625 | 636 |
| Other non-current assets | 12 | 13 | 17 | 17 |
| Trade and other receivables | 599 | 599 | 773 | 773 |
| Cash restricted for use (note 23) | 481 | 481 | 415 | 415 |
| Cash and cash equivalents (note 24) | 8,176 | 8,176 | 5,438 | 5,438 |
| Derivatives (4) | 2,490 | 2,490 | 5,386 | 5,386 |
| Financial liabilities | ||||
| Borrowings (note 27) | 14,355 | 16,004 | 18,270 | 18,131 |
| Trade and other payables | 4,272 | 4,266 | 4,619 | 4,619 |
| Derivatives (4) | 20,080 | 20,080 | 16,661 | 29,006 |
(4) Carrying amounts represent on-balance sheet derivatives and fair value includes off-balance sheet normal sale exempted contracts in 2008.
The amounts in the tables above do not necessarily agree with the totals in the notes as only financial assets and liabilities are shown.
The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
The carrying amounts approximate fair value because of the short-term duration of these instruments.
The fair value of the non-current portion of trade and other receivables and trade and other payables has been calculated using market interest rates.
Listed equity investments classified as available for sale are carried at fair value while fixed income investments and other non-current assets are carried at amortised cost. The fair value of fixed income investments and other non-current assets has been calculated using market interest rates. The unlisted equity investment is carried at cost. There is no active market for the unlisted equity investment and fair value cannot be reliably measured.
The fair value of the convertible bonds are shown at their closing market value as at 31 December 2009. The interest rate on the remaining borrowings is reset on a short-term floating rate basis, and accordingly the carrying amount is considered to approximate fair value.
The fair value of derivatives are estimated based on ruling market prices, volatilities, interest rates and credit risk as at
31 December 2009 and includes all derivatives carried on the statement of financial position. In 2008, the fair value for derivatives included off-balance sheet normal sale exempted gold contracts, which were not carried on the statement of financial position and were excluded from the carrying amount.
The group uses the Black-Scholes option pricing formula to value option contracts. One of the inputs into the model is the level of volatility. These volatility levels are themselves not exchange traded. The group uses volatility inputs supplied by leading market participants (international banks).
Derivative assets (liabilities) comprise the following:
| Assets | Liabilities | |||||||
|---|---|---|---|---|---|---|---|---|
| Normal sale exempted | Cash flow hedge accounted | Non-hedge accounted | Total | Normal sale exempted | Cash flow hedge accounted | Non-hedge accounted | Total | |
| Figures in million | 2009 | |||||||
| US Dollars | ||||||||
| Commodity option contracts | – | – | 47 | 47 | – | – | (2,034) | (2,034) |
| Forward sale commodity contracts | – | – | 283 | 283 | – | (37) | (441) | (478) |
| Gold interest rate swaps | – | – | – | – | – | – | (13) | (13) |
| Sub-total hedging | – | – | 330 | 330 | – | (37) | (2,488) | (2,525) |
| Embedded derivative | – | – | – | – | – | – | (1) | (1) |
| Warrants on shares | – | – | 5 | 5 | – | – | – | – |
| Option component of convertible bonds | – | – | – | – | – | – | (175) | (175) |
| Total derivatives | – | – | 335 | 335 | – | (37) | (2,664) | (2,701) |
| 2008 | ||||||||
| Commodity option contracts | – | – | 56 | 56 | (534)(5) | – | (1,311) | (1,845) |
| Foreign exchange option contracts | – | – | 6 | 6 | – | – | (5) | (5) |
| Forward sale commodity contracts | – | – | 468 | 468 | (748) | (146) | (290) | (1,184) |
| Forward foreign exchange contracts | – | – | 25 | 25 | – | (1) | (9) | (10) |
| Gold interest rate swaps | – | – | 15 | 15 | (24) | – | – | (24) |
| Total derivatives | – | – | 570 | 570 | (1,306) | (147) | (1,615) | (3,068) |
| Assets | Liabilities | |||||||
| Normal sale exempted | Cash flow hedge accounted | Non-hedge accounted | Total | Normal sale exempted | Cash flow hedge accounted | Non-hedge accounted | Total | |
| Figures in million | 2009 | |||||||
| SA Rands | ||||||||
| Commodity option contracts | – | – | 351 | 351 | – | – | (15,122) | (15,122) |
| Forward sale commodity | ||||||||
| contracts | – | – | 2,099 | 2,099 | – | (276) | (3,273) | (3,549) |
| Gold interest rate swaps | – | – | – | – | – | – | (99) | (99) |
| Sub-total hedging | – | – | 2,450 | 2,450 | – | (276) | (18,494) | (18,770) |
| Embedded derivative | – | – | – | – | – | – | (10) | (10) |
| Warrants on shares | – | – | 40 | 40 | – | – | – | – |
| Option component of | ||||||||
| convertible bonds | – | – | – | – | – | – | (1,300) | (1,300) |
| Total derivatives | – | – | 2,490 | 2,490 | – | (276) | (19,804) | (20,080) |
| 2008 | ||||||||
| Commodity option contracts | – | – | 527 | 527 | (5,048)(5) | – | (12,391) | (17,439) |
| Foreign exchange option | ||||||||
| contracts | – | – | 57 | 57 | – | – | (45) | (45) |
| Forward sale commodity | ||||||||
| contracts | – | – | 4,426 | 4,426 | (7,069) | (1,385) | (2,744) | (11,198) |
| Forward foreign exchange | ||||||||
| contracts | – | – | 239 | 239 | – | (9) | (86) | (95) |
| Gold interest rate swaps | – | – | 137 | 137 | (228) | – | (1) | (229) |
| Total derivatives | – | – | 5,386 | 5,386 | (12,345) | (1,394) | (15,267) | (29,006) |
The derivative assets (liabilities) are stated after taking into consideration the impact of credit risk adjustment totalling $150m, R1,113m at 31 December 2009 (2008: $227m, R2,146m).
(5) Deliverable call options sold.
The group uses the following hierarchy for determining and disclosing the fair value of financial instruments:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2: inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); and Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The following tables set out the group’s financial assets and liabilities measured at fair value by level within the fair value hierarchy as at 31 December:
Assets measured at fair value
| Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 1 | Level 1 | Total | |
|---|---|---|---|---|---|---|---|---|
| Figures in million | 2009 | 2008 | ||||||
| Financial assets at fair value through profit or loss | ||||||||
| Commodity option contracts – non-hedged | – | 47 | – | 47 | – | 56 | – | 56 |
| Foreign exchange option contracts – non-hedged | – | – | – | – | – | 6 | – | 6 |
| Forward sale commodity contracts – non-hedged | – | 283 | – | 283 | – | 468 | – | 468 |
| Forward foreign exchange contracts – non-hedged | – | – | – | – | – | 25 | – | 25 |
| Warrants on shares | – | 5 | – | 5 | – | – | – | – |
| Gold interest rate swaps – non-hedged | – | – | – | – | – | 15 | – | 15 |
| Available for sale financial assets | ||||||||
| Equity securities | 111 | – | – | 111 | 17 | – | – | 17 |
| SA Rands | ||||||||
| Financial assets at fair value through profit or loss | ||||||||
| Commodity option contracts – non-hedged | – | 351 | – | 351 | – | 527 | – | 527 |
| Foreign exchange option contracts – non-hedged | – | – | – | – | – | 57 | – | 57 |
| Forward sale commodity contracts – non-hedged | – | 2,099 | – | 2,099 | – | 4,426 | – | 4,426 |
| Forward foreign exchange contracts – non-hedged | – | – | – | – | – | 239 | – | 239 |
| Warrants on shares | – | 40 | – | 40 | – | – | – | – |
| Gold interest rate swaps – non-hedged | – | – | – | – | – | 137 | – | 137 |
| Available for sale financial assets | ||||||||
| Equity securities | 829 | – | – | 829 | 164 | – | – | 164 |
Liabilities measured at fair value
| Level 1 | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total |
|---|---|---|---|---|---|---|---|---|
| Figures in million | 2009 | 2008 | ||||||
| US Dollars | ||||||||
| Financial liabilities at fair value through profit or loss | ||||||||
| Commodity option contracts – non-hedged (6) | – | 2,034 | – | 2,034 | – | 1,845 | – | 1,845 |
| Foreign exchange option contracts – non-hedged | – | – | – | – | – | 5 | – | 5 |
| Forward sale commodity contracts – non-hedged (6) | – | 441 | – | 441 | – | 1,038 | – | 1,038 |
| Forward foreign exchange contracts – non-hedged | – | – | – | – | – | 9 | – | 9 |
| Gold interest rate swaps – non- hedged (6) | – | 13 | – | 13 | – | 24 | – | 24 |
| Option component of convertible bonds | – | 175 | – | 175 | – | – | – | – |
| Embedded derivatives | – | 1 | – | 1 | – | – | – | – |
| Cash flow hedges | ||||||||
| Forward sale commodity contracts cash flow hedged | – | 37 | – | 37 | – | 146 | – | 146 |
| Forward foreign exchange contracts cash flow hedged | – | – | – | – | – | 1 | – | 1 |
| SA Rands | ||||||||
| Financial liabilities at fair value through profit or loss | ||||||||
| Commodity option contracts – non-hedged (6) | – | 15,122 | – | 15,122 | – | 17,439 | – | 17,439 |
| Foreign exchange option contracts – non-hedged | – | – | – | – | – | 45 | – | 45 |
| Forward sale commodity contracts – non-hedged (6) | – | 3,273 | – | 3,273 | – | 9,813 | – | 9,813 |
| Forward foreign exchange contracts – non-hedged | – | – | – | – | – | 86 | – | 86 |
| Gold interest rate swaps – non- hedged (6) | – | 99 | – | 99 | – | 229 | – | 229 |
| Option component of convertible bonds | – | 1,300 | – | 1,300 | – | – | – | – |
| Embedded derivatives | – | 10 | – | 10 | – | – | – | – |
| Cash flow hedges | ||||||||
| Forward sale commodity contracts cash flow hedged | – | 276 | – | 276 | – | 1,385 | – | 1,385 |
| Forward foreign exchange contracts cash flow hedged | – | – | – | – | – | 9 | – | 9 |
(6) Fair value of financial instrument liabilities includes off-balance sheet normal sale exempted contracts in 2008.
A principal part of the group’s management of risk is to monitor the sensitivity of derivative positions in the hedge book to changes in the underlying factors, viz. commodity price, foreign exchange rate and interest rates under varying scenarios. Additionally the group’s management of risk is to monitor the sensitivity of the convertible bond to changes in AngloGold Ashanti Limited’s share price and warrants on shares.
The following table discloses the approximate sensitivities of the US dollars marked-to-market value of the hedge book, warrants on shares and the convertible bond to key underlying factors at 31 December 2009 (actual changes in the timing and amount of the following variables may differ from the assumed changes below).
The table sets out the impact on the marked-to-market value of the hedge book of an incremental parallel fall or rise in the respective yield curves at the beginning of each month, quarter or year (as is appropriate) from 1 January 2010. The yield curves match the maturity dates of the individual derivative positions in the hedge book. These figures incorporate the impact of any option features in the underlying exposures.
| Change in underlying factor (+) | Normal sale exempted (million) | Cash flow hedge accounted (million) | Non-hedge accounted (million) | Total change in fair value (million) | Total change in fair value (million) | |
|---|---|---|---|---|---|---|
| US Dollars | 2009 | 2008 | ||||
| Hedge book | ||||||
| Currency (R/$) | Spot(+R1) | – | – | 2 | 2 | 1 |
| Currency (A$/$) | Spot(+A$0.25) | – | – | 2 | 2 | 175 |
| Currency (BRL/$) | Spot(+BRL0.25) | – | – | – | – | (5) |
| Gold price ($/oz) | Spot(+$250) | – | (12) | (903) | (915) | (1,053) (7) |
| USD interest rate (%) | IR(+0.1%) | – | – | (4) | (4) | (48) |
| AUD interest rate (%) | IR(+1.5%) | – | – | – | – | (2) |
| Gold interest rate (%) | IR(+0.1%) | – | – | 11 | 11 | 66 (8) |
| Convertible bond | ||||||
| AngloGold Ashanti Limited share price (US$) | Spot (+$1) | – | – | (9) | (9) | – |
| Warrants on shares | ||||||
| B2Gold Corporation share price | Spot (+C$0.1) | – | – | 1 | 1 | – |
| Change in underlying factor (-) | Normal sale exempted (million) | Cash flow hedge accounted (million) | Non-hedge accounted (million) | Total change in fair value (million) | Total change in fair value (million) | |
| US Dollars | 2009 | 2008 | ||||
| Hedge book | ||||||
| Currency (R/$) | Spot(-R1) | – | – | (6) | (6) | (3) |
| Currency (A$/$) | Spot(-A$0.25) | – | – | (2) | (2) | (173) |
| Currency (BRL/$) | Spot(-BRL0.25) | – | – | – | – | 6 |
| Gold price ($/oz) | Spot(-$250) | – | 12 | 789 | 801 | 975 (7) |
| USD interest rate (%) | IR(-0.1%) | – | – | 4 | 4 | 50 |
| AUD interest rate (%) | IR(-1.5%) | – | – | – | – | 2 |
| Gold interest rate (%) | IR(-0.1%) | – | – | (11) | (11) | (68) (8) |
| Convertible bond | ||||||
| AngloGold Ashanti Limited share price (US$) | Spot (-$1) | – | – | 9 | 9 | – |
| Warrants on shares | ||||||
| B2Gold Corporation share price | Spot (-C$0.1) | – | – | (1) | (1) | – |
IR represents interest rate.
(7) Change in gold price (+) of spot (+$200) and change in gold price (-) of spot (- $200).
(8) Change in interest rate (+) of IR (+0.5%) and change in interest rate (-) of IR (- 0.5%).
The sensitivity analysis in SA rands can be calculated by applying the exchange rate in US dollars of $1 = R7.4350 at 31 December 2009 (2008: $1 = R9.4550).
The group also monitors interest rate risk on other financial assets and liabilities.
The following table shows the approximate interest rate sensitivities of other financial assets and liabilities at 31 December 2009 (actual changes in the timing and amount of the following variables may differ from the assumed changes below). As the sensitivity is the same (linear) for both increases and decreases in interest rates only absolute numbers are presented.
| Change in interest rate (%) | Change in interest amount in currency (million) | Change in interest amount US dollars (million) | Change in interest rate (%) | Change in interest amount in currency (million) | Change in interest amount US dollars (million) | |
|---|---|---|---|---|---|---|
| Figures in million | 2009 | 2008 | ||||
| Financial assets | ||||||
| USD denominated (%) | 1.00 | 2 | 2 | 1.00 | 1 | 1 |
| ZAR denominated (%) (9) | 1.50 | 13 | 2 | 1.50 | 10 | 1 |
| BRL denominated (%) | 2.50 | 4 | 2 | 2.50 | 4 | 2 |
| NAD denominated (%) | 1.50 | – | – | 1.50 | 1 | – |
| Financial liabilities | ||||||
| USD denominated (%) | 1.00 | 13 | 13 | 1.00 | 3 | 3 |
| AUD denominated (%) | 1.50 | – | – | 1.50 | 8 | 6 |
(9) This is the only interest rate risk for the company.