Anglogold Ashanti PLC (AU) 2003 Q4 法說會逐字稿

Good morning. My name is Theresa (ph) and I will be your conference facilitator. At this time, I would like to welcome everyone to the AngloGold fourth quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period.

[Operator Instructions]. Thank you. I will now turn the call over to Mr. Steve Lenahan. Sir, you may begin your conference.

Thank you, Theresa. Ladies and gentlemen, good morning and welcome and good afternoon. Welcome to the session by the AngloGold executive team of our results for the final quarter and the year 2003. The format today will be as follows. Bobby Godsell will review and give both financial performance as of this period and update you on the merger (inaudible).

Jonathan Best will then talk to some changes to the economy achievement and development costs and results financial operation. Kelvin Williams will briefly summarize the gold market conditions and AngloGold performance activities during the fourth quarter. This will be followed by (inaudible) of our operating performance (inaudible) by Dave Hodgson. After the presentations, we will, as usual, take your questions.

However, before we begin, it necessary for me to read a declaration regarding forward-looking statements that may be made during the presentations. Except for the historical information contained in the presentation to be made, there are matters discussed here that are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Safe Harbor provisions of the U. S. Private Securities Litigation Reform Act of 1995. Although AngloGold believes that the expectations reflected in such forward-looking statements are reasonable at this time, no assurance can be given that such expectations will prove to have been correct.

These statements, including those given during the question-and-answer part of this presentation, are therefore only predictions and actual events or results may differ materially. You are cautioned not to place undue reliance on such forward-looking statements.

For a discussion of important risk factors including, but not limited to, development of the company's business, the economic outlook in the gold mining industry, expectations regarding gold prices and production, and other risk factors which could cause actual results to differ materially from any forward-looking statements, please refer to the company's annual report on Form 20-F for the year ended 31 December 2002 which was filed with the SEC on 7 April 2003 and any document filed under Form 6-K in connection with the merger of AngloGold and Ashanti.

Go ahead, Bobby.

Steven, thank you very much and good morning. AngloGold again this quarter reports steady performance for the final calendar quarter of 2003, after the solid results in the third quarter of that year. This is in the face of continued adverse changes in exchanges rates. Our gold production for the fourth quarter was virtually unchanged at 1.39 million ounces.

We're pleased that the steps taken to overcome technical and production difficulties at the Cripple Creek and Victor mine in Colorado and at the Cerro Vanguardia mine in Argentina are beginning to yield results, with improved performance from both those mines in the quarter.

The received price of gold increased by $28 per ounce and matched the spot price at $392 per ounce. Strengthening currencies were again a feature of the quarter. However, I'm pleased to say that with effective cost control, we were able to limit the increase in total cash cost across the company to 5% with the costs rising to $249 an ounce.

This facilitated an increase in cash operating profit. This cost control is evidenced by the cash costs in the South African region. When measured in local currency terms, these were 1% lower this quarter. Equally, at the Sunrise Dam mine, unit costs measured in Australian dollar terms were 12% lower.

Amortization increased, due to a year-end adjustment and operating profits adjusted to exclude non-hedge derivatives was marginally higher this quarter at $137 million. Similarly adjusted headline earnings, including a favorable $7 million in abnormal items were 11% higher at $75 million or 34 cents per share. For the year ended 31st of December, 2003 and AngloGold's performance was impacted by a combination of stronger currencies in most of the company's operating regions as well as some lower ore grades in some of those regions.

Our mine safety performance for the year 2003 in South Africa was disappointing. Using the measure that measures lost time accidents, we produced virtually no change from the 2002 level. The fatality frequency did reduce by 6%. This, however, was not the stiff change that we seek, given our substantial efforts in this area.

I am encouraged, however, by the 40% improvement in the fatal accident rate in South Africa during the second half of 2003, when compared to the first half. If we are able to continue this trend, the stiff change that we seek now seems possible.

The gold price reflected the 20% decline in the value of the U.S. dollar against the euro during 2003 with the average spot price for 2003 at $363 an ounce. This was 17% higher than the average price in dollars for 2002. Against this background, AngoGold's net delta hedge position was again marginally lower over the fourth quarter at 8.59 million ounces, illustrating the company's continued faith in the strength of the gold price.

We also announced today a final dividend for the year of 335 South African cents per share equivalent at yesterday's closing exchange rate to 47 U.S. cents per share. This gives a total dividend of 710 cents per share in South African currency or a dollar in U.S. currency. This continues AngloGold's practice of paying to shareholders a high proportion of the company's earnings once we have provided for our organic growth objectives.

Now as far as our planned merger with Ashanti is concerned, progress is good. We have received confirmation from the United States Security Exchange Commission of the availability of an exemption under Section 3 (a) (10) of the U.S. Securities Act that will enable the company to issue AngloGold shares in the scheme relating to the merger of AngloGold and Ashanti, without registration in the United States.

Once we have received the approval of the parliament of Ghana, a process which is now underway, the scheme documents will be finalized and distributed to Ashanti shareholders. We anticipate government approval in the next fortnight and expect the transaction to close during April of this year.

Looking forward to the rest of 2004, we are anticipating against a background of gradually - a gradually weakening South African currency as interest rate differentials between South Africa and the U.S. reduce and the anticipated merger with Ashanti.

We anticipate gold production will increase from approximately 5.6 million ounces in this year to 6.6 million ounces in 2004. We are expecting unit cash costs of $238 an ounce and we're expecting a capital expenditure program, which will increase to $589 million.

Jonathan will now take you through an important change in our accounting treatment of all reserve development. Thanks very much.

Good morning. In 1997, AngloGold moved from appropriation account, which was effectively cash accounting to international accounting standards. And this move away from cash accounting, consistent with the current (ph) international account standard, consistent with U.S. GAAP and a number of others, led to the capitalization of assets, when capital expenditure was incurred, and then this capital asset was amortized or depreciated over the useful life of that net asset. That's before the capital charge was matched to its revenue generating capacity rather than the year in which the expenditure was incurred.

At the time, the South African mines had an acceptable level of oil reserves and were in 30 states. And consequently, any development done replaced that which was mined. That is the amount to be capitalized was the same as the amount to be amortized. This treatment, however, is not valid when a mine is in build-up phase or the development does not match the rate of mining.

In AngloGold's case, operations such as Moab Khotsong are now in a build-up phase and to continue to - with the existing practice would be to overstate the costs in the short-term and understate them in the long-term. We have therefore moved the capitalization of oil reserves - or should we say we're going to treat the oil reserve development as a capitalized cost and not just an in and out.

So, from 2004 onwards, all development costs will be capitalized and amortized and amortized over the period that that particular block is mined. The effect on matters that will happen in 2004, reducing cash costs by $75 million and that, obviously, will increase the capital expenditure figure about $75 million.

However, amortization will increase about $40 million and there'll be an introduction in production costs of $35 million compared to how it would have been had we not made the change. This brings us into line with most other companies.

As we said before, up until now between a zero, it's ongoing, and it didn't really matter how we treated it and with the buildup of 30 mines, we have now changed to be the same as the rest of our mines elsewhere in the world, as well as the rest of industry.

Thanks, Jon. Kelvin?

Thank you, Steve, and good morning. As you will all - have observed, the gold price made a very strong finish to a strong quarter and a strong year. And despite a retracement in January, the upward trend in this price, we believe, remains intact. The gold price figures really speak for themselves through this year and Bobby's already touched on the average price of $363 an ounce, which was 17% or $53 higher than the price in 2002. The higher 417 during this final quarter was also fully $70 higher than the low price we saw during 2003.

During this quarter, the movement in the gold price pretty well mirrored U.S. dollar weakness. This is a patent that we've seen for some time now. But during the fourth quarter of 2003, the strengthening dollar gold price cracked the U.S. dollar weakness almost exactly.

The association is a strong one and explains, in part, some of the weakness in the gold price today. The association between the two phenomena is not necessarily one of cause and effect. It is, as we it, rather that many of the economic circumstances that are persuasive to gold investors to buy gold are equally persuasive against the dollar and function in inverse relationship to each other.

But while the U.S. dollar weakness remains the key indicator for our metal price, it remains true that the actives who deliver this high a price are largely the speculators and the investors in gold, and particularly those on the New York Commodities Exchange, where we once again saw record levels of gross open interest and net long exposure. During the final quarter of 2003, the net futures and options position on that exchange moved over 19 million ounces long or almost 600 tons of gold long - net long - and representing a net open position that hasn't before been seen on this exchange.

It's worth noting, I think, that in this constituency of investors and speculators in gold, inevitably there are those that have shorter-term horizons, who are possibly weaker holders. And it was inevitable that this record level of net longs on kermix (ph) would see some replacement and that's certainly is what we've seen in January as there has been profit taking on kermix that has brought our price back to where it is at the moment - around $400.

Now only have the circumstances in the investment market have been favorable, but in a number of other areas of our business. In the - in the - aside from the traditional vehicle of investment in futures in gold, the World Gold Counsel, during the past year, has brought into being a new medium for gold investment, being more directly tied to physical gold and that is the exchange rated fund in gold.

New funds have been launched in both the United Kingdom and Australia and these have been well received. And I think we all look forward to the World Gold Counsel introducing these gold investment products in other major markets, once regulatory authorities have approved the incident (ph).

There was good new also in the investment sector. The official sector, I should say, where the past few months have seen the Bundes (ph) Bank signaling a desire to sell a modest amount of gold during the period of any Washington agreement renewal.

And by modest, I would say specifically, their target is slightly less than half, I would think, of what the Swiss sales have been over the last five years. They signal also a desire to see the Washington Agreement extended or repeated on pretty well identical terms to those used on 1999. Both of those elements we see as good news.

Regrettably, the rising and volatile price of gold has further depressed physical demand and we've seen this particularly in global gold offtake for jewelry fabrication during 2003, which was some 7% down in - against 2002. The rate of falloff in demand has particularly accelerated during the last quarter of 2003. Overall, if we look at the last four years, we're probably looking at a fall of some 22-25% in global physical demand for gold and jewelry during the four-year period since '99.

And while this has been offset by dehedging and by investment demand to some degree, this trend is obviously worrying (ph). Physical demand in the jewelry market remains important as it provides a flow of support and buying when investment interest weakens. And we saw this phenomenon repeatedly during the period '99 to 2001, where it's benefited the gold market and the gold price particularly.

Whilst we will continue to make every effort through the World Gold Counsel to encourage investor demand for gold in this current market, we much also stress the important of concern about the medium and long-term health of real physical demand for fabrication purposes of our metal.

Finally, and I turn to the hedge and, as Bobby has referred to already, as of 31 December 2003, the net delta hedge position of the company was 8.59 million ounces or 267 tons. And this was at a stock price of $14.16 per ounce. To mark to market value of this position as of 31 December was a negative $664 million.

The relatively small reduction in the level of hedging compared with the level of 30th of December, 2003, does not reflect the ongoing reductions in forwards, which the company continues to affect, but it is a result, rather of higher delta volume, consequent on the higher - sharply higher stock price of gold at the quarter end, specifically a stock price of $416 per ounce versus the $383 per ounce at 30 September, 2003. Looking back across over the year, this particular year, 2003, we have taken some 53 tons of hedge off our commitments.

The company will continue to manage its hedge positions activity actively and you should continue to look to reduce -- to see reduced overall levels of forward pricing on gold in the company. Thank you.

Thank you Stephen. Good morning and good afternoon. As Bobbie has said, this has been another solid operating quarter for AngloGold and, as such, my presentation will be slightly briefer than in the past.

South Africa, I'm particularly pleased with our performance in moving Rand denominated cash costs down by 1.5% to 60,784 Rand per kilogram. As the major producer (inaudible) grade declines on a year on year basis from 11 grams a ton to 10.5 grams a ton as we indicated it would. Yield for the December quarter was above the previous period and we expect it to remain in the high 10 grams per ton for the remainder of 2004.

Although I spoke of safety drives and a fire in a neighboring mine impacted Kopanang's volume performance this quarter and (inaudible) reduced volumes mined at Mponeng, both mines are still operating above their target levels.

While we have commented on our concerns about the absence of a stiff change in safety in South Africa and I endorse his commitment to making progress during 2004. Whilst concerned about the safety in the South Africa region, I must compliment Neville and his team on their improvements in volume efficiencies and cost controls.

Tanzania. Geita performed to our expectations and reported a 33% increase in gold production this quarter on the back of better grades at the lower levels in Cutback Number Three. At Morila Mine in Mali, production was 40% lower than the September quarter and grades came down from 7.5 grams a ton to 4.4 grams per ton. The grades at Morila for 2004 will get much the same levels as the December 2003 quarter with an improvement anticipated in 2005 and 2006 as Pit 3 is established.

At Cripple Creek and Victor in Colorado production was up by 15% this quarter to 76,000 ounces due to the improvement in leak pad chemistry and cash costs were 6% lower as production improved without proportionate cost increases. The new processes and facilities at the mine exceeded their design capacity throughout the quarter and haulage fleet availability ended the year nearing targeted levels. And all these results are very welcome.

Similarly at Cerro Vanguardia in Argentina the commissioning of a scrubber into the circuit introduced to allow the effective treatment of wet ore has yielded the expected result. Gold production was 40%, 1% higher for the quarter. Grades was up 20% to 7.25 grams per ton and total cash costs were down 20% to $158 per ounce.

Mining operations at Union Reefs in Australia eventually came to an end in October and plant clean up is underway. In November we announced that we had reached an agreement in principle with Great Pacific Gold to sell the Union Reef mine for around AS$6 million.

At Sunrise Dam the planned move to higher grade years of the mine was finished. Recovery grades exceed grams per ton. The recovery rates also have improved. Underground development of Sunrise Dam began in October and by the end of the year more than 500 meters of development have been completed.

Turning to exploration. Our exploration activity in the iron quadrilateral in Brazil, at Sadiola in Mali and at Sunrise Dam in Australia yielded particularly promising results during the December quarter. And, as usual, these and other projects are dealt with in some detail in our full quarterly report. Thank you, Steve.

We're going to take questions now from participants.

Thank you, sir. [Operator Instructions]. Your first question comes from Dave Kazmanish from J.P. Morgan.

Morning, gentlemen. Just in terms of your production, onshore and offshore, out of South Africa, are there any optimal levels that you'd like to see the group get to within the next few years in terms of how much comes from out of -- out of the borders of the country?

David, what we've got just indicating that when we restructured the company five years ago our aim on the production side was to diversify risk. We view the risk, primarily in mining type. There is a distinctive set of risks relating to deep level narrow vein hard rock mining. We were keen to -- and at that time virtually 100% of our production came from such mines, seismically active and with a particular risk profile.

We set out to balance this and to increase open pit production and gold production from shallow underground operations. That equation has very substantially rebalanced with about 50% of the production coming from deep narrow vein hard rock mines and I think, certainly speaking from my perspective as a CEO, I'm happy with our risk profile. You know, I think going forward we simply look for high margin gold production anywhere in the world.

Thank you.

Your next question comes from George Lakim of RBC Capital.

Good afternoon, gentlemen. Just a couple of questions relating to cost. Dave, I didn't quite follow what the repositioning that's been taking place in South Africa. I see the tonnage has come down and the number of operations.

The grades held up pretty well. The costs have come in at around about 61,000 Rand a kilogram this year. It's up about 15 on the previous year. What can we expect over the next 12 to 24 months with respect to the cost per kilogram, ignoring the 6% benefit that you'll get from the accounting change?

George, obviously we had set ourselves targets in all our regions, Africa included, to make productivity improvements and obviously we try and beat the inflation. So, going forward, the South Africa regions will concentrate on efficiency, productivity and try and have an increase in Rand to kilogram and particularly in Rand to square meter and the volume parameter of less than inflation.

Do you think there's still some more scope to actually see improved grades coming through to tool set at all or is it -- are you relying now in 2004 really on getting real productivity at the face to actually offset some of those inflationary pressures.

George, mines in South Africa are pretty mature so we don't see help from the grades. The grades will be pretty consistent with the way they are and so we will be looking for technology improvements and productivity improvements to meet the objective of cutting back our unit cost versus inflation.

Can you give us an estimate of where you think costs will be in 12 months time in South Africa?

We set ourselves targets to be below that inflation. So you've got to look at what inflation is and we want to be below it, particularly in a volume, Rand to square meter, term. So, that's where we're setting our target. So you can look what inflation is, that's where we're looking to be, about two-thirds of it is when reaction.

Thanks, Dave. Just one -- one other question just on cost for Jonathan, the figure that you mentioned was the expected cash costs derived from the 229 to 238 in 2004, I think Robbie mentioned earlier, you're expecting some kind of weakening of the Rand coming in 2004, can you give us the figure that you used in coming to that 238 on the exchange rate?

7 Rands to the Dollar.

7 Rands?

Yeah.

Thanks Jonathan. And then one final question to Dave, just on Geita can you just give us a bit of insight on the grades? Those were up about 33% quote unquote; is that sustainable looking forward?

Those were the (inaudible) we did say in 2002 to be much lower in the first part of the year then high in the second half of the year and that's exactly how it worked out. Now, the grades, you know, the part grams per ton are not sustainable. If you look at the grades at Geita in the previous two years, 2002, 2003, the average (inaudible) is 3.6 grams per ton. Going forward in 2004 they'll be slightly higher in the first half of the year compared to the second half of the year and in the order and slightly above the last two years. That's just above the 3 grams per ton.

Thanks very much.

Your next questions comes from Jim Copeland of Goldman Sachs.

Good afternoon, gentlemen. On your guidance for 2004 of 6.6 million ounces, could you please confirm, is that assuming the transaction with Ashanti is closed in April of '04, i.e., that we're really only getting three quarters of the year?

Correct.

Great and thank you. Second one just on safety, I know you've got to take this very seriously, what can you do differently at the South African operations to -- to change the disappointing 2003?

Jim, I think I'll ask Neville to answer that one directly seeing as he's responsible for South African operations.

I'm not sure it's a matter of doing things hugely differently to the course that we've embarked on over the past year and maybe two years. The ,you know, we are starting to see our mines training getting through to, you know, our frontline supervisors early in this year. I think that that would have a very positive effect. The second thing is that we are starting to see some of the benefits of the rock engineering planning that we - that we sort of commenced on in the beginning of last year actually come through in working place reports and the quality of work that's being done.

The, you know, so, I think - I think what we're trying to do is we're trying to reduce the risk in our operations by managing it out systematically. But, you know, it is the risk in these very deep seismic reactive operations and we should not forget that.

Great. Thanks, Nevel (ph). Thanks, gentlemen.

Your next question comes from Heather Douglas of CMO Nesbitt Burn.

Hi, good afternoon, everyone. I have a couple of questions about Mali. The first is about Sadiola. Are there any plans to look at an owner mining scenario at Sadiola and can you give us a little bit more, if yes? Can you give us some timelines and scoping numbers?

Hi Heather, it's Dave I'm going to talk (inaudible) to comment on the mining (inaudible) see we've been very busy with these exercises over the last quarter.

Hi, Heather. This is Tai Sobaha (ph) speaking. The situation at Sadiola really is affected across a broad margin of our open cost lines where we have been operating with contractors up to now. And we have found that the contractors have found it very difficult to maintain their profit margins and therefore are tending to raise their costs and their charges to us. We have, therefore, been able to - will be forced to look at alternatives of which I must immediately say that owner mining is only one of the many alternatives that exist.

At Sadiola, particularly at the moment, we are, as I speak, finishing off the latest round of calculations to arrive at some idea of how we're going forward. The owner mining option will certainly not be hugely attractive on the shorter mine life alternatives at Sadiola, although they are competitive.

On the other hand, we are looking at options of alliance agreements with our contractors, so we are not in a position at this stage to provide any numbers. Only to say that yes, there are alternatives. Owner mining is an alternative. Alliancing with a contract day is another. We haven't yet taken a position on that. I hope to be in a better position in a month from now when clearly a decision at Sadiola will have to be made.

OK. So that decision in about a month. So I'll follow up. And that brings me to ask about Morila because the write-up also mentioned that contractor costs were up at Morila and I was wondering if you could break up the cost increase in terms of how much of it was because of the lower grades and how much was because of the owner mining - I'm sorry, not the cost of owner mining. Because of the higher contractor costs.

Well, certainly - it's Tai Sobaha again, Heather. There's been a, from last year, certainly, the major increase in cost has come from the reduction in grade. We have - we've moved from the $120 an ounce area to the $180 an ounce area, essentially, through grade change.

The cost effects of the contractor will only start showing up towards the end of this first quarter and into the rest of the year when we - when we should - we should also see a move from about $180 an ounce through to the $195 to 200 an ounce area, largely as a result of the increased contractor cost.

I must also add that the mine does start moving into its tax regime where customs, duties or starting to become applicable and these also have an effect on the cash costs on the mine.

And one last question about Morila. What grades are you expecting to see in 2004?

Dave again. As I said, we're expecting grades in the order of what we saw this last quarter in December, which is around 4.5 (inaudible).

Sorry if I missed part of the call. Thanks again for all your interest.

Your next question comes from Bo Zou (ph) of Visioner (ph).

Yes. My question has been asked. Thanks.

Your next question comes from Jared Muross (ph) with Prudential.

Good morning. Just wanted to go over the production profile. The forecast you laid out of 6.6 million ounces next year - I was a little taken by surprise by that because you get nine months of Ashanti, as you said, and I had thought you're going to get better production out of Cripple Creek and Victor as well as Sunrise Dam as projects there kind of pump to fruition. Other than the mines that you won't have output from Union Reefs at Jarrett (ph) Canyon are there - is there anywhere where production is falling off into '04 from 2003's levels. Your production forecast just seemed a little lower than I was expecting.

I think other than the two that you mentioned - this is Jonathan. Obviously, we don't have Jarrett Canyon and Union Reefs, as you said, but then Morila has a huge impact and comes down significantly from '02 to '03 to '04.

OK. So, it's just Morila, really?

Well, obviously, there are pluses and minuses all over the place, but, you know, that's the big single one.

If I can add as well so, I mean, what you've indicated over the last year or so is our strategy was to roll our production up to organic growth projects and I think we were envisioning about a 500,000 ounce increase. That is a phenomena that we will see when those projects come on stream. And, I mean, the projects are - we've talked about them before - Koreba (ph), for example, which is under construction. Worthington (ph), which we very much hope will come on stream, but we still have some management issues to resolve.

Looking down a couple of years time, I mean, we would aspire to be a producer in the low seven million ounce level and that's, I think, what people did when they put Ashanti and AngloGold together. They got into the 7.2 million ounce. That remains our target, but we're only going to achieve that when we've got the AngloGold organic projects up and running.

OK. Thanks. A couple of housekeeping items. I was just wondering with the - there was a 7 or $8 million profit on abnormal items. I'm just trying to figure out what that is. It looks like the tax benefit from it was more than the deduct on the - on the income statement. If you could just give a sense of what that was.

You're right about the tax benefit. It was - there were only - two things. The one was we put through a fairly large provision to our postal time and medical liability. And then, we obviously had the deferred tax offset on that. And then we had another deferred tax provision in South America and we had - we were able to get a deduction on reevaluating of offshore land at the end of the year. So, it's essentially the postal time, medical and then tax.

Great. Great. And then, one final question. I didn't see - I didn't see reserves in the - in the release. Did I just miss that or are they coming out at a later date?

They'll be coming out at a later date.

Do you know what date that is or around when that is?

What we have typically done is released that figure with our annual report. Last year, we did it a bit earlier. If we can do it earlier than the release of our annual report, which is due at the end of March, we certainly will do that.

Right. Those numbers will be in the Ashanti documentation and listing particulars, which will be posted on about the first of March. We might well make a statement about them just before that.

OK. And then, one final question. If you could give us some flavor of where you stand with the Ghanaian government. Has it been presented to the court and has it been brought up in Parliament? You seem pretty confident about the April date. I'm just wondering where they stand in their process of it.

The agreement was put to Parliament this week and it was referred to a select subcommittee who will meet this weekend and it will be totaled again in Parliament next week. So we would anticipate that either towards the end of next week or the following week, the Parliamentary approval will be obtained.

Thank you.

Your next question comes from Victor Florez of HSBC.

Yes. I wanted to come back to the South African operations because it seems that there's a - they're pretty widespread in terms of the cash cost. At some of the operations, it looks like the cost containment in the face of, you know, the Rand movement and, you know, labor cost and whatnot has been quite good. You know, like at Great Noligwa and Tau Tona. There seems to be a few assets, like Savuka stands out, where the cost containment hasn't been quite as successful. Could Dave Hodgson perhaps spend a couple minutes talking about, you know, that variance?

(inaudible) right here. Yes, Savuka is different. Nevel - yes, I think, Nevel should address that question. He can fully handle it more deeper than I can.

You know, the Savuka mine started off last year with a longer life plan than what we ended the year with. And, as a result of that, in the beginning of the year, we were looking to develop the old body and at 100,000 Rand per kilogram plus. You know, this was a viable plan.

As the year passed and we dropped down to 80 (inaudible) Rand per kilogram, we had change what we doing at Savuka. And as a result of that, we've now modified the plan to something that suits the old body and the gold price. And what we had at the end of the year, was really a pretty big hangover from the beginning of the year where costs were high in development and so.

As a result of that, you know, we still, on a cost reduction campaign at Savuka, and we expect in this quarter to, we're kind of hoping that we will break even in this quarter. But certainly that we would break even for this year at Savuka at the current low rent gold price.

It's not that there's any less effort to cut the cost of Savuka than there is at greater liquid (ph) for example. In fact we probably cut out more Rand million costs at Savuka than we actually cut out of greater liquid (ph). But the great situation has made the numbers not look as exciting as some of the other mines.

So it doesn't (inaudible). Savuka basically is from a two-year orbiting (ph) closure (inaudible), if it cannot contribute, than we will accelerate that plan, depending on how we see the result of the mine, and the options at which we can handle it.

OK, fair enough. Just following on that topic for Jonathan with the change in approach on the accounting for cost and capital. Is there going to be a requirement under U.S. GAAP to restate previous periods, or is this just a go forward type situation?

To avoid confusionable resets (ph) in whether it's a requirement or not.

OK, fair enough, thank you very much.

Your next question comes from Ono Houghton (ph) of Scotia Capital.

Yes, good afternoon gentlemen. A few questions with South Africa and then Morila. First of all, South Africa, the lease and seismic events at en ponang (ph)? Will that have a dramatic impact on the production going forward for 2004?

No, these big seismic events, especially when a multiple cycle occurs always has an effect on the production going forward. If your question is do I think that the gold at the end of the quarter will be less than we expected to be. I don't think it will have a material effect on the quarter's production.

OK, and looking further in the year, that should be balanced out then, the impact?

Yeah.

OK. And I'm wondering about Moab (inaudible), the studies of development and production planning in 2004? Could you give some guidance about the Moab?

The production planning is going, well, the production is going according to schedule. We don't show it in our results because it's a very small amount of gold that we produce at this stage, which is exactly in line with the build up plan for Moab (inaudible). We are still spending large amounts of capital there, and this will continue this year. It's only in this second half of next year that you will see a dramatic increase in the total production coming from mai put sung (ph). Which is in line with the long term plans that we have for the mine.

So that would be the middle of '05, then?

I'm not sure we're going to start showing as a working cost goal production, but it is in about the middle of '05. At the end of '05 we should start showing significant, in fact, I think we're actually planning to capitalize the small amount of gold production for this year and next year. I'm not sure exactly when that changes.

OK.

But in terms of the volume of production, it's on line with what we expected it to be. We would like to accelerate it very slightly. But it's in line with our current plans.

OK, thank you, and then on Morila, the grade guidance was already given the following to depth. The commissioning was delayed as the plant expansion that's now only in the first quarter. Would that have a significant impact on the production, or is the tie in relatively easy the way you look upon it now?

No, the transition, sorry, this is Tai Sobaha (ph) speaking, the transition from the current plant into the expanded plant is not going to be a major problem. The tie in is not a complicated one. So we don't expect that the tie in, with the extension is going to create production problems. But yes, there has been a delay in the commissioning of that extension, which we believe will take place middle to end of February.

OK, and at those lowered rates, could you give an indication of the actual recovery in the plant?

The actual recoveries in the plant won't be that much different. The main exchange of the exchange has been to increase the volumes, the recoveries will be in the low 90s, 90 to 92% recovery.

OK, thank you, and finally, on the Ashanti merger process, the role of the parliament Ghana was already discussed, could you further elaborate on the roll of the Ghanaian high court, will they be involved, and if so, when in the process?

The Ghanaian high court is an integral part of the process. And, once we have finalized our documentation, and anything that's holding that up at the moment is that we have to put pro forma figures in for '04, and we're waiting for Ashanti to announce their results and produce them.

Once they do that they'll give them to us, and we'll produce pro forma for '04. We will then go to the court and petition the court to set a date for this team meeting. It will take probably a week or two for the court to read the documentation and then to set the court date.

So, we would anticipate that we would put our submission into the court, probably somewhere around the 8th or 9th of March, and they would take two weeks to review it, that puts us, in round terms toward the end of March, after which we will post documentation. There will be a shareholders meeting early in April.

After the shareholders meeting you have to go back to the court on the date which they have given us earlier on, and I will then consider the fairness of the process, and the court reporter will opine on the value and hopefully that will confirm the decision taken by the shareholders at the shareholder meeting. As we said, that takes us into early to mid April.

OK, perfect, thank you for that detail. That's all for me, thank you.

Your next question comes from Barry Cooper of CIBC World Market.

Yes, a couple questions for Jonathan. First of all, Jonathan, did you do anything with respect to changing the amortization and in Q4 here I noticed that your cash costs went up by 12 dollars, but your total production costs went up by $26. (inaudible) much higher, just the cash costs. Did you start that close up already yet?

No, we didn't, but we did make an adjustment in the last quarter for amortization in South Africa for the year to bring it in line with current (inaudible), but there is a one off adjustment in there. And hence the total production costs have gone up, as you point out by more than the total cash costs.

OK, so there is, as adjusted for your year end numbers?

Yes.

OK, would I be incorrect in assuming that the year end reserves has gone down?

Not really, the basis upon which we calculate it, and we included initially in the calculation to be honest, some production which didn't materialize, or won't materialize.

OK, then on your tax rate, you talked about basically before have an awful lot of deferred taxes associated with it, and the defective rate was around 17%. Has 33, 34% on a go forward basis the correct number to try to be using?

The answer to that is yes, but it does pertain hugely on the profits in South Africa, and the amount of tax being paid in South Africa. If the rate stays at its current level, the tax in South Africa will be low in '04, and 33 will be a high number.

OK, any guidance that you kind of want to pass onto us?

Not really, I don't have in my head a figure for '04. But if the Rand stays at around seven, as I say, I think 33 is a bit high.

OK, fair enough, I'll take my guesses on that, thanks.

Your next question comes from Alberto Arias of Goldman Sachs.

Yes, good morning gentlemen, just a follow up on the question on the impact of the strong South African Rand on the reserve and capital location of the company. If you could please elaborate a little bit more about how is the strength of the Rand affecting the viability of some projects.

It seems from your previous comments that there was some production that was expected to be economically viable, but it might not have been because of the strength of the Rand, is that correct?

The answer to that is not really, and it's really difficult for us to give you a concrete answer because we haven't had published our reserves. But what we did say, if I recall, at a previous public forum, when somebody asks us what the effect on our major projects with the word, we said that it might, probably at the low 120 level jumping in the marginal, the sort of gold class or Rand per kilogram price. But outside of that, all of our organic growth projects are pretty robust.

OK, another question is with regards to the royalty dealings of Africa, if you could give us an update on that process, the scorecard, and mining reservation in general in South Africa.

It's Bobby Godsell, unfortunately I can't offer you very much guidance here because, the royalty gold is in the hands of our finance department all many goals. Constitutionally in South Africa has to originate out of the finance department. The change in the mineral rocks of course comes from the mineral and energy departments, so they are separate departments. The process was that a proposal to impose a royalty at differential levels per mining product was published.

That elicited a very large amount of response from the mining industry. I think that there are two elements at this point that I would mention to you, because I hope it would be indicative of future actions from the finance ministry. At the time of releasing the royalty gold, comments were made by people from the finance ministry that the mining industry paid very little tax. That of course, as indicated by a previous question, this is of course with our experience at all.

We think that we actually are quite significantly taxed. And so, a great garage of factual information about taxes actually paid in the recent past by mining went into the finance ministry. And my experience is that those facts have lead to a changed perception of a tax contribution of mining. The second element of response was the percentages included in the initial proposal, which, I would remind you is a three percent tax on revenue for gold mining.

We've indicated by the finance ministry to be feasible and competitive with other mining regimes. That's what they argue. We in response argue that A, 3% revenue tax in the context of South Africa and its general tax system for gold mining was in fact really high. And we've put South African taxation rates at the high end of the range of countries in the world that actually produce gold.

You could indeed produce a table of lower revenue rates, but the lower revenue rates all came from countries that had no gold production. It's of course easy for a fiscal authority to give money away when there's none to give.

So, that was an argument that went forward, and my experience is that that factual point, that 3% was a high level of royalty for gold mining compared to other major gold producers, has certainly been, the argument has been made by the mining industry, and I believe it has been heard.

Now, what we don't know is what decision the finance ministry will make, and when it will make it. There has been an indication from our finance industry that there may be an announcement about the status of the royalty gold in the budget, and the budget is due for presentation I think on the 19th of February, or in the second half of February. So, that's the status.

In regard to the mineral right dispensation, and the conversion to use South African vocabulary or old order rights into new order rights, we've been working intensively on our compliance with regard to the mining charter. And really, all I would want to say on that is that we would be lining up to file our application just as soon as that law came into operation, and so to speak with office, that you had to hand in your application with open for business.

All right, thank you.

Your final question comes from John Bridges of J.P. Morgan

Hi, I sort of came on late, you may have discussed it already, but I wonder if you can elaborate a little bit on the Boddington situation. The last I heard we were waiting on a feasibility study which was only due late in the year.

Again, it's Bobby Godsell, all I'd like to say with regard to Boddington is that we think there is a good project there. We are working to get on with it. What we have to do is to align the three owners about the nature of the project, and it's timetable. And that has not yet been achieved.

Presumably with the Australian dollar has been putting some pressure on the project as well.

Yes of course, of course the change in the Australian dollar has made a major change, this is, however, a very long life or body (ph). And, at the current Australian dollar level, AngloGold continues to believe that this is a viable project. And I would say enthusiastic even impatient to try and get this project up and running.

OK, thanks Bobby.

Sir, there are no further questions at this time, do you have any closing remarks?

Thank you very much, we don't further remarks.

This concludes today's AngloGold fourth quarter earnings conference call, you may now disconnect.