Anglogold Ashanti PLC (AU) 2004 Q4 法說會逐字稿

Good afternoon, welcome to the AngloGold Ashanti fourth quarter results conference call. [Operator Instructions] I would now like to turn the conference over to Mr. Steve Lenahan, please go ahead, sir.

Ladies and gentlemen, [Inaudible - background noise]

Ladies and gentlemen, please continue to hold while we try to connect Steve Lenahan online, thank you. Ladies and gentlemen we have Mr. Steve Lenahan back online, please go ahead gentlemen.

Thanks very much. Ladies and gentlemen, good morning to you and good afternoon to listeners in the United Kingdom and welcome to this presentation by the AngloGold Ashanti executive team of our results for the fourth quarter and the year ended December 31, 2004. The format today for this presentation will be as follows. Bobby Godsell will review the company's performance in the fourth quarter and the year. Kelvin Williams will then briefly summarize the gold and currency market conditions and he will give some details on the restructuring of the AngloGold Ashanti hitch during the quarter and the month of January. Jonathan Best will then update you on the progress of the cost management project, which you will recall he's been heading since the beginning of the year. This will be followed by an overview of our operating performance presented by Dave Hodgson. And then he will be followed by Neville Nicolau, our new Deputy Chief Operating Officer, who will provide you with an update on the Obuasi Mine in particular.

After these presentations, we will as we usually do take your questions. Although before we begin, I must read a declaration regarding forward-looking statements that may be made during the conference call. Except for the historical information contained in the presentations to be made, there are matters discussed here that are forward looking statements between intersection 27-A of the Securities Act of 1933. Section 21-E of the Securities Exchange Act of 1934, and the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.

AngloGold Ashanti believe that is the expectations inflicted in any 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're cautioned not to place undue reliance on such forward-looking statements, for discussion of important risk factors including but not limited to the 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 December 31, 2003 which was filed with the S.E.C. on March 19,2004. And any documents filed under form 6-K in connection with the merger of AngloGold Ashanti.

AngloGold Ashanti does not undertake any obligations update in any forward-looking statements discussed in this presentation whether as a result of new information, future events or otherwise. Before I hand over to Bobby, ladies and gentlemen, I just want to draw your attention to the fact that on our web site at www.anglogoldashanti.com, there's a PowerPoint presentation that the presentations today will be following. Although it's not imperative that you have this in front of you, it might provide some illustration, a long introduction. Bobby.

Thank you, Steve. Good morning and good afternoon to our listeners. In my view there are three distinguishing features of AngloGold Ashanti's final quarter of 2004. The first of these is that the quarter has seen the best safety performance in the history of the company. With lost time injuries, frequencies declining by 26%. Not only is the safety improvement of paramount significance for the company as a whole, it is also so that in our experience, improved safety almost always goes hand in hand with improved productivity and efficiency.

The second important feature is the continued under performance of the Obuasi Mine, a very important asset included in the company as part of the Ashanti-AngloGold merger. The sources of this under performance have been clearly identified and indeed have been known for sometime. Interventions to address these are now in place and we as a management team expect improving trends in 2005 and indeed would expect to be judged on the trends in a completely key way.

The third important feature of the quarter has been a comprehensive restructuring or a significant restructuring of our hedgebook. The restructuring is driven by three factors. It first flows from our view of a robust and continuingly strong gold market with our view that the price is likely to trade in the current range or, indeed, higher for the foreseeable future. Perhaps 24 months.

Secondly, the combined Ashanti and AngloGold hedges have left this company in September with levels of forward sales that were altogether in our view too high. The third factor is that this overall high-level of hedging has also been very strongly concentrated in the immediate future the fourth quarter of 2004 and 2005 and 2006 through the restructure, we've reduced the hedge by some 2.2 million ounces. We've reduced the coverage of forward sales over a five-year production profile from 40% to 31%. And we reduced the level of cover in 2005 and 2006 to 10% and 17% respectively.

For the quarter, gold production increased by 4% to almost 1.7 million ounces at a total cash cost of $278 an ounce and total production cost of $354 an ounce. Adjusted operating profit was virtually unchanged at $97 million. Headline earnings increased from $43 million to $110 million, that figure of 110 includes an abnormal tax credit of $59 million, primarily the result of a changed estimate to the company's deferred tax liability. The anticipated significant rebound in the performance of Gautier (ph) and Mariler (ph) mines something we signaled in the third quarter was unfortunately offset by the continuing disappointing production performance at Obuasi.

In South Africa, cash costs for the quarter reduced by 2% in rand the kilogram terms to the 59,000 rand level. We have now over several years consistently managed cost in South Africa at or around the 60,000 rand per kilogram level. This is the result of the work that Neville Nicolau and his team have been doing in improving the efficiencies of these assets. This program of enhancing our effective cost management is one that Jonathan will review more broadly than South Africa later in this conference call.

At Obuasi, production continues to suffer from a long period of capital starvation. We've identified a range of operational performance parameters, which will overtime address this, and Neville will speak to these.

In order to strengthen operational effectiveness of this company and its management, in its expanded 21-operation 12-country, 4-continent character, we have appointed two Deputy Chief Operating Officers to assist Dave Hodgson. Neville Nicolau has an impressive track record in managing the South Africa region will now add West and East Africa to his South African focus. Neville has been replaced in the South African region by Robby Lazare, similarly the five operations outside of Africa together with a major new project announced today in Brazil and the prospect of the Boddington project in Australia. These will benefit greatly from the leadership of Roberto Carvalho Silva, who is Deputy COO International, meaning everything outside of Africa.

With respect to the full-year, 2004, gold production was 8% higher at just over 6 million ounces, total cash cost was $54 higher and in the previous $268 an ounce and adjusted hip on earnings declined by 7% to $263 million. At this week's board meeting the board of the company approved the $121 million Cuiaba deepening project in Brazil. This project will add some 1.9 million additional production answers to the lack of this important Brazilian mine and the deepening should be completed within two years.

This week the company also replaced its 600 million line facility that matured in February with the somewhat expanded 700 million facility achieved at significantly better rates, that's 40 basis points above liable compared to the 70 basis points of the 600 million facility. We think this is an indication of the credit rating of the company and indeed of - the country base of its assets. The board declared a dividend for the second half of 2004 of 180 South African cents, which at a six rand to the dollar exchange rate equates to 30 US cents. Thank you.

Thank you, Steven. We will deal first with the restructuring and then deal with the market briefly afterwards. As all of you who are familiar with the company are aware that we have an established practice of actively managing our hedge commitments to reflect changing market circumstances and you've seen this practice over recent years as we have reduced this hedge from its peak of $17.8 million ounces at the end of December 2000, to just over 7 million ounces in mid 2004. The level of 7 million ounces in mid 2004 attached to the AngloGold heritage assets. We were dealing with a hedge of effectively about 20%, 21% of our annual production over then next five years, which we thought was manageable in a rising market.

Following the merger with Ashanti, however the combined hedgebook rose to an amount of 12.7 million ounces at the end of September 2004. And the level of cover increased to just over 40% of five-years' production. The company has indicated its intention to continue with the reduction of hedging levels and the argument for this reduction for us has been further supported by the company's positive view of the gold price in the current market cycle. We believe that the market circumstance is favorable for the gold price are likely to remain in place for sometime and that the gold price will continue to trade in its current range or higher.

Consequently, a substantial restructuring of the hedge was commenced in late December 2004 and completed in this month. It has resulted in a reduction in the next delta of the combined hedge of some 2.2 million ounces or 69 tons of gold, down to a net hedge delta size of 10,49 million ounces at the end of December 2004. The restructured hedge now represents cover equal to 31% of five-years production spread over a 10-year period. The reduction of 2.2 million ounces in this one-quarter is of the same order of magnitude some of you may remember as the reductions achieved head restructuring by end results during 2002 and specifically there is reduction in the second quarter of 2002.

Turning to the value of the hedge, not withstanding a spot price at the end of December 2004, which was $16 an ounce higher than in the previous quarter. The month-to-market valuation of the hedgebook at the end of the year was almost unchanged quarter-on-quarter from the previous quarter. At the end of the year, we were at 1,161 million negative compared to 1,139 million at end of the previous quarter. If we were to attempt a like-for-like comparison, the month-to-market value of the now restructured book at the 30th of September spot price of $418.80 per ounce , would result in a value of negative $922 million, reflecting a positive variance of $217 million.

This improvement was achieved by a combination of the elimination from the hedge of lower price contracts and the injection of $83 million of cash into the book in the final quarter of 2004 and a further $17 million during January 2005. Injection of cash assisted particularly in the funding of both buyback of fully price contract for 2005 to 2007, and the pricing in new contracts but also in the credit costs associated with the later dated new contracts. The balance and the improvement in the present value of the book of that head count from the enclosure of contracts in the fourth quarter, which negatively impacted our received gold price and from the new positions entered into and as Bobby, in his description, referred to the reductions, particularly we've addressed 2005 and 2006 in which in which we now have a cover of only 10% and 17% of projected production respectively.

In broad terms the steps undertaken in the restructuring included the effective buyback of fully priced forward in coal option contracts for 2005 to 2007. In order to remove the concentration of hedging in these years, particularly following the incorporation of the Ashanti hedgebook, and to increase exposure to the spot price of gold in this period. And the sale of new forward and option contracts in the years 2008 to 2014 at higher gold prices than had been the case in the existing head structure and spread more evenly.

These new positions are not identified separately in the composite and detailed hedge position reports of which you're familiar and those I think you'll have seen appear on page 12 for the 31st December position and 14 for the updated end of January position of your report. Instead of showing these new positions separately and consistent with our practice in this reporting the new positions are actually included in an average in the existing commitments. However the new forward and call option positions for 2008 to 2014 in the restructured hedge have been priced along the forward line of a spot price of $420 per ounce.

Because of the nature of the current accounting treatment of derivative contract, much of the restructuring of the hedge has been effected by overlaying the existing hedge commitments with new contract. This achieved the effective buying back and replacing with new contracts at different rates and dates.

The cash earnings will reflect significantly great exposure of the company for the spot price in 2005 and 2006 in particular and beyond these years, the higher contracted prices in the restructured forward position will provide further benefits. It's the intention of management to continue to actively manage the hedgebook and this will include delivering into contracts, reducing the size of the book, and continuing to seek the maximum economic benefits from the book.

Now, as much of the impact of this restructuring as possible has been taken in the fourth quarter of 2004. What remained to be concluded of the restructuring after the year-end has been largely the apportionment of the net long position against existing short forward positions and the completion of the balance of longer dated new forward and option positions that complete the restructuring.

The shortfall in the received price in relation to the average stock price for the fourth quarter of 2004 was the consequence of both the bunching of hedge contracts at year-end and the restructuring of the hedgebook and the gap of this magnitude is not expected to recur in anticipated market conditions. For the year ahead, it is our intention to track the spot price more closely than in this previous called quarter and to manage the hedgebook actively with a goal of moderating negative impacts on the price received.

Turn briefly to the gold and currency markets. You will all have seen the strength of the previous quarter, even though the market corrected somewhat at the end of the quarter and into January. Gold price closed the quarter at $435 an ounce up by 5% from the beginning of 2004 and the average spot price of $434 an ounce for the last quarter of 2004 was fully $33 per ounce or 8% stronger than the average price for the previous quarter.

However, for production from South Africa and the lesser extent, other currencies, but for South Africa in particular, the rand strengthened against the dollar by some 13% during this period and the South African gold price hardly benefited from higher dollar prices at an average local price of $84,000, only 2% higher than the rand price for the previous quarter. More significantly, the gold price in rand at the end of the year are approximately $79.5 thousand rand per kilogram, was over 10% or 9,000 per kilogram lower than the local spot gold price at the beginning of the year.

The gold price driver for the quarter remains definitively the weakening of the U.S. dollar, particularly against the Euro but also against Japanese Yen in this past quarter. The weakening of the U.S. currency has been the primary driver of the gold price rise over the past 3 1/2 years and the correlation between a rising U.S. dollar spot price of gold and a weakening dollar against the Euro, reached a remarkable 97% over a three-month period over December of 2004. The physical market for gold during the first half of 2004 showed some positive adjustments to these changes in the price of gold, and some acceptance of higher gold prices. The upshot has been a slight recovery in aggregate demand and some slippage in supply and a physical market more in balance for that. Thank you.

Good morning, and good afternoon. You will recall at the beginning of the year, Bobby, announced that we were going to do a comprehensive review of our cost structure of the company. This was in response to us trying to improve margins that had been eroded by a number of factors, not the least of which was the strengthening of currencies in some of the countries in which we operate. The objectives we originally setup which analyze cost again in understanding of the cost components and they impact on our business, to review cost escalation as in a lot of areas these were becoming increasingly higher and higher not withstanding the fact that T.P.I. and a lot of the countries are at a relatively low rate, to review our existing cost reduction initiatives and to review overhead and organization structure.

While clearly, we had the information and many of these points are looking to the first to where the cost were and to look at the escalation rate, we looked at them specifically to see what the combined effect was of high valued areas that had cost escalated rates significantly higher than inflation. This helped us to focus on areas that we should we tackling. They found instances within this where we are unhappy but unable to influence there we have concentrated on the strategic changes especially looking forward, an example of this is to work with local government, to supply us with grid power, rather than generate diesel power and to look at mining rather than contract mining.

The purpose of reviewing existing initiatives is to ensure that we can rollout best practice across the company. This stage is in infancy, but the gap analysis team from South Africa who was so instrumental in system changes and improvements in that region are going to do a similar gap analysis at Obuasi. They made good progress in South Africa; they're to be complimented on this result.

Looking at where we came out for the year, this year the costs would have been $52 million higher than they would otherwise have been had it been for this intervention. And on an ongoing basis, we have a program for the next three years, which in 2005 we will take out some $59, $60 million from costs. In 2006, at the moment we have planned something around $43 million and in 2007, somewhere around $50 million. As I've said, this has been very evident in the South African costs and elsewhere especially where we've taken significant increase to mining contracts across compounded by the increase in the price of diesel.

These savings came mainly from operating procurement, which accounted the bulk of it and there were some restructuring, which helped as well. When it comes to procurement, we are concentrating heavily on renegotiating supply contracts with suppliers. We've looked at a number of projects where we've targeted certain initiatives. And thirdly, we've worked with our suppliers to take out the inefficiencies in the whole supply chain process.

In terms of operating efficiencies , the operations are looking at; I think some of the examples of new era underground workers and that specifically in South Africa. The agency efficiency improvements we're seeing initiatives right across the board in this area. Related to that is to reduce detox reagents components to find out recovery, fuel management's have already alluded to utilization of grid power as well, and obviously there are a number of labor productivity initiatives.

With regard to the consumables, we are looking at revised standards and changes to different materials and equipment where we will have the same effect at lower costs.

Last but not least, owner (ph) mining to counteract low contract efficiencies and high contractor rates . At CCMV (ph) in North America we do our own mining and we're one of the lowest custom(ph) miners in the world. We believe that we can use the expertise elsewhere where we have the lack of mine to sustain the investment. If you spoke to Neville, I am sure that he would tell you that continuous improvement is a process that requires a change in mindset and becomes an interval part of proactive management systems, planning and review and it's not just a one-time intervention. Thank you.

Thanks. Jonathan Best. Good morning, good afternoon. I would like to begin by reiterating Bobby's remarks about our safety performance this past year. And adding my thanks to our operating management for their very successful efforts to improve our safety performance throughout the company in all of its regions. As I normally do in reviewing our operating performance, I'll comment on some noteworthy performances and identify key problem areas where they exist. I will then hand over to Neville Nicolau to talk about Obuasi in more detail. As Bobby has said, this has been a generally sound operating performance. Gold production was 4% higher than the September quarter at almost 1.7 million ounces and total cash cost increased $6 an ounce to $278 per ounce, mainly as a result of the strong rand.

In South Africa, production was marginally lower at 762,000 ounces. I have the measure achievement was the 2% reduction in total cash costs in rand terms to 59,541 rand per kilogram. Again this quarter, (inaudible) Mponeng and Kopanang continued to deliver steady performances. In our October earnings call, I said that the markets should expect lower grades from Tau Tona for the foreseeable future for reasons associated with rock engineering, seismicity and the negotiation of faults (ph). These issues combined to reduce yield with gold production with the negative impact on negative cash cost at Tau Tona.

The South American operations again produced a solid set of results, but Sera Lagardia reporting another excellent quarter, with an 11% increase in production and a 10% decrease in total cash costs to 138 per ounce. Both the Australian and North American operations posted good results. Sunrise Dam generated its highest gold production for a quarter and production at CCNB (ph) was higher the third to (inaudible) quarter at 91,000 ounces. Quarter one we'll see lower production of CCNB resulting from a 10-day (inaudible)shutdown in December. It's pleasing to know that CCNB completed 2004 without a single lost arm injury.

In our last fourth year report, we indicated that the market should anticipate significantly higher grades, production from (inaudible) and Marli (ph). I am pleased to say that production was indeed up by some 140% to 90,000 attributable ounces or 227,000 total ounces, reflecting a 93% increase in grade and a 28% increase in tonnage input.

The higher grade are as a result of mining moving in the top portion of fiscal year plan. And although we do not anticipate grades at this high level to persist, the grades for 2005 will be higher than they were in 2004.

At Qatar and Tanzania as we expected and consistent with our guidance, production increased to 28% to 190,000 ounces. The mine achieved its target of 690,000 ounces for the year. The variable grade will continue to impact the mine's production and we expect lower grades in 2005 and especially 2006 when they move into cut four will cause further decline in grades as the move to cut three did three years ago. The major challenge especially in the management in Qatar will continue to be cost management with a focus on mining contractor, fuel, and transport costs.

Our most significant challenge continues to come from the former Ashanti assets. At Siguiri in Guinea, production improvements were hampered by some interavailability (ph). Upon commissioning of the new CIP (ph) plant will start in February and this will alleviate the demand for cement. 2005 should thus be a good year for Siguiri. Production was lower at both Bibiani and in Idiaprim (ph) in Ghana for technical reasons associated with the (Inaudible) availability at Idiaprim and at Bambanani for the consequences of our mine failure that had occurred in the last quarter of 2004.

At Obuasi gold production was 40% lower and the total cash cost increased to $320 per ounce. As Bobby said at the outset, the mines continues to be affected by the problems arising from the combination of necessary moves from the (inaudible) in the north of the mine to the lower grade south and the operations substantial under capitalization. The shortage of developed and drill reserves, the erratic nature of the Hobody (ph) in the south of the mine and the inadequacies of the mining infrastructure and equipment continue to lead to low volumes mined, reduced flexibility, and higher costs during 2004.

To deal with these problems, management is engaged in a range of remedial actions. Upgrading the development equipment and the involvement of the development contractors in planning. New drilling equipment is being acquired to include all body drilling. We are upgrading infrastructure the Sansuri(ph) is complete 32 level will be held in July of this year, the 93 all parts will be completed in May and the VHBH is being equipped. Workshop facilities and operator training are being improved. Mineral resource management is being centralized and improved and environmental conditions are being improved.

In order to assist our performance against these objectives a number of key parameters have been identified as focus areas and will continually be monitored. These include the development meters where we are targeted a rate of 208 meters per month from the current base of 2,100 meters per month. We intend to achieve this by the end of 2005. Definition drill meters where we set ourselves the goal of increasing from 1,200 meters per month, to 2,100 per month by the end of the year. The number of mining panels with the targeted increase from the current level of 16 to 22 by year-end and the completion of the infrastructure projects which I had just referred to within the individual time frames.

For the operations as a whole, we expect to produce between 450,000 and 500,000 ounces in 2005 depending on the speed at which we're able to achieve the operational objectives we have set ourselves.

As far as the Obuasi project is concerned the tender has been awarded for the drilling of the first 2,000 or 3,000 meters surface holes in March with the balance of the four holes to come at the later stage. We anticipate the results from the first two holes in 2006.

We're ready to take questions.

Thank you very much. [Operator Instructions] The first question comes from Victor Flores, HSBC. Please go ahead, Mr. Flores.

Thank you, good morning. Obviously very detailed press release as always, but the one thing I didn't see in the press release was the discussion of the forecast for this year in terms of production and cost and you detailed a few of the operations but maybe we can talk a little bit about 2005 if that's Okay.

Victor, it's Steve here, the forecast for this year for the coming quarter end here is in fact on page 2 of the quarterly report.

Give the numbers.

Production for the first quarter, it's estimated to be 1.6 million ounces for the cash of 280 per ounce. And for the year, production is estimated to be 1.6 million ounces; total cash cost of $273 an ounce. We do also provide exchange rate assumptions.

Important to that assumption is for the first quarter, six rand to the dollar for the year six rand 20. That we're taking a really strong rand view.

Now that I totally embarrassed myself, because I see it on page 2. Obviously I started reading on page 3. Can I ask the question about the hedgebook restructuring? Please. How many ounces were attached, if you will, to the $83 million buyback and how many ounces were actually just delivered to the regular positions during the quarter. And maybe if you also can tell us how many ounces were attached to the $76 million of positions for January.

Victor, it's Kelvin Williams. I'm afraid my reply is not going to help your question directly. The input of money on this is not attached to any specific part of the transaction. The transaction was envisaged as a whole with the target to reduce a specific number of ounces we then elected and selected the particular contracts we'd like to effectively buyback or negate or take back. We calculated a cost on those.

We calculated how much we wish to put in as new positions and what some of those new positions would generate, i.e. the short option positions. And the net was the amount that we decided to introduce to the book. In order both to meet those targets and to be able to, shall we say, oblige the banks to give us more competitive credit terms. Because as you can imagine, in a structure of this nature, credit terms aren't seven or eight or nine years can become expensive and we think we were able to introduce significant value by contributing to the cost of the book. So I'm afraid it was really more a one-stop piece of arithmetic.

Right, and I guess the follow-up question is, do you anticipate doing more of these transactions depending on conditions in the market given your view that the gold prices are going be higher? Or was this kind of a one up event?

You have to assume this is not being a one off bit in any event because as you know, we've done this in the hedgebook repeatedly in the past. I think the company leans towards lower hedge cover. And that our behavior consistently and aggressively for four years has been to reduce that cover. I think you should take the view that this might have be replicated again in the future.

Thank you very much Kelvin.

Our next question comes from James Covin(ph) of Goldman Sachs. Please go ahead.

Thank you good afternoon. Firstly, on the safety, congratulations on that result. What are your safety goals for 2005. How does that impact upon your productivity and cost targets for 2005?

Dave Hodgson speaking. 15 of our 30 targets, we have a zero fatality target. We don't want anyone to lose his or her life in operations. The different operations here, different targets for our LTFR. Everyone has to prove against themselves and in some areas we look for 20% improvement and in certain operations where there are exceptionally low, obviously more difficult to get that kind of improvement. As Bobby has said, I think we've been proven in many year that is good safety and good productivity and efficiencies go hand in hand. So obviously other than natural hard cash costs related to the medical side, we think it's all good business to have good safety and good systems.

Right. Is anything that you can put your finger on -- anything that measures the H.O.V. infection rate or on the literacy program. Is there anything that you can put your finger on as to what is causing the good results?

Jim, hard work. It will let Neville Nicolau to answer to this.

Look, it is a view of sort of addressing the key areas of risking the operations. Management and from force of ground and seismicity is the major area. We have instituted and put systems in place that affected the long-term management of the business. The other important area has been the mindset of the employees and we worked our way through the organization. We still have some way to go, so we still see some upside in this in the future. And in those two area, we have in terms of H.I.V. AIDS, I don't think we can see any materially effectiveness on our operations at this stage. Much of our disease in the H.I.V. phase where you don't really see any effect on productivity. We are watching that and you know the situation there very closely to make sure that we don't make our future safety results.

Just to add to that, in East and West Africa, there's been a big focus on behavioral-based safety, there's been training and input in behavior-based safety. They worked on the system and they have success because they didn't have an injury and in Australia they put input and employer involvement and I think as a result of that that won the prestigious award for mines in Australia this past year.

Thank you, turning to Obuasi. I just wonder are you surprised positively or negatively, as to how long it's taking to turn operations around? What have you found, I guess, over the last nine months?

Let me start from my perspective, its Bobby Godsell. The guy who's certainly presided over the10th section and persuaded our board and shareholders that was eminently an interest. You know we how do you find value in one public company combining with another? Well, unless there is something that's been constraining value, by enlarge, markets are pretty good judgments of value. Our analysis of Ashanti was that it was I mean to put bluntly and simply is was a company that had a greater ounce endowment and capital resources. We view Ashanti as being ounce rich and being people rich and capital starved. That was the analysis and that was the reason that we believe that with a restructured balance sheet and larger capital base. More ounces could be turned to better effect. We absolutely continued to believe that nothing has happened in the nine months since the combination that has led us to a different view of the ounce endowment of Obuasi, for example or indeed security as another of the major assets.

Frankly, the issues that Neville has been talking about, the lack of development, high levels of dilution, the problems with the vehicle -- the mining of Obuasi and the problems of infrastructure where you could rely on a single (indiscernible) for your entire production from the section mine, these were all identified in our due diligence. We had plans in place to turn these things around. I must say with 10 years in the job of CEO, it is true that when a large mine and indeed that undergone in different ways a surface operation get into trouble where they are backed into a corner where they have reduced flexibility or wrong recovery mixes or they have a heap dish that's not heaping, it is my experience that this is not a thing that comes back in a matter of days or weeks.

There is a lot of hard work that goes to changing the mining strategy which is what is happening at Obuasi, improving infrastructure and doing things of that nature. It's for this reason that we tried quite hard in the market to say don't expect a dramatic kind of before and after change in the new company and we indicated we thought it would be four to six quarters, 12 to 18 months before a clearly improving trend was evident. We stick with this, I thoroughly understand that our shareholders will expect to see improving trends during the course of 2005. I think Neville is the immediately responsible operational executive understands As well that we are both in the same boat - restrict them we should both be expect to be severely reprimanded by the market if we can't demonstrate that. So that's a sort of (inaudible) to your question.

That's great. Thank you very much.

[Operator Instructions] The next question comes from George Albino RBC Capital. Please go ahead sir.

Thanks, good afternoon, gentlemen. Focus on the positives -- the costs were down quite well right across the board. You just put something in the text about lower summit tariffs in South Africa that's helped to drive down costs? Is this something that's seasonal impact or are we going see maybe an impact of higher tariffs over the next couple of quarters?

Hi, George this is Neville here. Last year there was a different rate of power charge in the winter months as opposed to the summer months which quarter is a bit under at the ending of the year. We are slightly better prepared to forecast for this year and to manage it. But, you know, the situation in South Africa at the moment is that we do -- we get differential rates in summer and winter. So it does come up. Power is about 10% of our total costs and, you know, there's a small portion of that that varies from quarter-to-quarter.

I mean, just trying to quantify, there's not more than $1 an ounce one-way or the other.

Your guess is as good as mine in this regard. Not a huge amount.

Surprised that you brought it into the tent.

You know, it fixes our rates on a quarterly basis quite dramatically. Well, not dramatically, but we're talking there about a -- a few hundred rand per kilogram swing quarter-on-quarter. It has that type of effect on it.

A question for Jonathan. You mentioned earlier about the cost reduction that you see coming through in 2005 and 2006 and 2007. I wrote down $59 million, $43 million, and $50 million. It sounds most of that outside of South Africa. But you've done a remarkable job in the last 12 and probably last 24-months. Is this the reason that most of that coming from the South African or things acquired from Ashanti or how should we look at these numbers to factor in cost production?

George, in 2005, South Africa looking to target almost a similar amount. It's tough given what they have done today. But you have to remember too that it closed in 2005. They'll have to be ahead of the curb in cutting overhead as they go along. So, 2005, the gain is going be a tough year for them. And so I would imagine the distribution next year will be much the same as this year, although we from a management side will be looking to the non-South African side to push very hard on the cost side over the next year or two.

Effectively saying to me that of that 59 that you mentioned earlier, 59 to 60 in 2005, so it will be coming from South Africa?

Yes, this year of the 52, 44 came from South Africa. Next year, of the 59,41 is going to come from South Africa. It's still a large chunk. But, again, you must remember, there are proportionately a huge chunk of our cost base.

And can you just clarify to me again exactly the timing on the closure of Ogo?

Neville can give you a more accurate answer than I can.

Ogo is scheduled to close in the second quarter in other words stop gold production in the second quarter within a year or a year and a half of rehabilitation and cleanup as it follows there. Sabuka is scheduled to close in two years' time and similarly there will be a stop to the mine.

Thanks, gentlemen.

Our next question comes from Russell Fryar(ph) of Deutsche Banc. Go ahead.

Good afternoon, gents. A question to the regards of the gold price received in regards to the average $35, $38. I apologize I have joined late. That tome looks fairly diabolical. If you look at your history, you know you trade --you receive normally $2 or $3 below spots. What happens? What are we going to do moving forward to close that gap? Because it looks like over the course of 2004,your average gold price was in the $390's, in fact, the low $390's. What can we look forward to going forward?

Kelvin Williams speaking. I think you have to look forward to certainly the intention to go back to the kind of tracking of the gold price that we achieved earlier last year. The circumstances of the fourth quarter were unusual. We had a -- in a sense, a need to clear out bunched positions in Ashanti that we had inherited. And we needed to do the bigger restructuring at the same time. And we elected in a sense to take as much of the pain of the cleaning up and bunching and restructuring in one quarter. So, I would be loathe to forecast we would track within $10.You have to assume that's an aspiration and an intention on our part.

Actually this is Bobby Godsell. A point to the fact that if you're going be 10% forward in 2005and 90%, it creates a different dynamic for the prospects.

Okay, can we just move on to Boddington? The commentary was that you're going to make a decision the second quarter of this year. What is the holdup? You know? We've been waiting for Boddington for a bit now. And, you know, is it the shareholders not agreeing? Your other shareholders? You know, when are we going to see some further, deeper clarification on this?

Well, let me kick off, because the short answer is that one (inaudible) than three. As I mean to move beyond that sort of flippant formula --the problem is I don't think any one of the three owners had ever thought anything other than Boddington that it's basically a good project, interesting long life or body that you would be crazy to walk away from. I think the dilemma has been that the three companies have assigned, have some different time priority to Boddington. If I start with the Australian, 22% earn in Nucryst it's a relatively small company. They've been very fixated over the last couple of years and the successful thing to over the completion of the subject that requires financing and then it required project delivery.

And took over, Normandy took some time to go back to basics and wanted to test all of the underlying assumptions of Boddington. In a way, I guess we have the greatest continuity for the Boddington prospect for a long period of time. We're fortunate to have running our Australian operations someone who's intimately associated with the first feasibility with the size of Boddington. I think what we've achieved is the broad alignment we hoped o the three partners understanding the size and nature of the oil body, the technical requirements of effectively mining and reprocessing and the oil parameter that is would need to be in place that believed to be a shareholder rewarding process. I think this enables us to really begin to move forward. And I can only speak for AngloGold Ashanti, I will be very disappointed if we are not bring a proposal to the board in the second half of the year.

My last question -- sorry to monopolize the time. My last question deals with uranium. Give the outlook for 2005 for the production of uranium for AngloGold.

We have to take Neville back to the previous responsibility. Any production comes from one mine in South Africa, and he's looking puzzled. We may need to get back to you. I think I have to say we have a relatively modest capacity to ramp up uranium production. Kelvin can answer that.

It's between 900 to 100 tons. We are in the process of rehabilitating the uranium processing plant. And therefore for this year it's likely to below enclosure to 900. We're also seeking to maximize the particular section of all that's uranium bearing and it will take us over 1,000 in the years ahead.

Thank you, gents.

[Operator Instructions] Our next question comes from (indiscernible) CIBC World Markets. Go ahead, sir.

Thank you. Hello. You mentioned owner operated and I just wanted to know if you had a schedule as to who when the rollout would start and which mine it will start on first and if you had an idea of the cost savings and the cost.

Dave Hodgson speaking. 50 in this last year, we actually implemented owner mining in one of our mines of Navachab in Namibia. And we've done our own exercise where is consultants have come in and reviewed the work we've done and it showed a financial benefit of us going to mining. We did that in the second half of the year and we're getting cost savings and other jobs and, of course, every operation is difference. Inline with the expectation that is' between 10% and 20% improvements on the costs with owner mining.

A lot of the contractors now, the principal shareholders are demanding higher rates of return and they are really trying to push for higher mining rates. As a result, we've been looking at owner mining at all of our operations in East and West Africa. It depends on the life that you still have available. So a short-life operation doesn't give you necessary economic returns. But certainly a longer life operation such as Qatar, it's attractive and we've been doing a lot of work at Qatar to look at owner mining versus the current contractor.

Okay, thanks. I had another one you mentioned Marilia and you were mining higher grades. Is that a result of where you're mining or is it the model under estimated?

No, last year the mining was (inaudible) three, which is a new pit. We got to the top of the whole body with where the higher grades are this. It was similar to what happened in (inaudible) when we were in the higher areas you will get the higher grades. So it was a plan to be in the (inaudible) three. It's also assisted by some positive reconciliation's but basically because we're mining at the higher-grade zones. Going forward, as we have said, the grades won't be as high as they were in this quarter. But in general, 2005 will have higher grades than the 4.4 grams per ton experienced in 2004.

All right, thanks.

Gentlemen, there are no further questions. I would like to hand it back to Mr. Lenahan for closing comments.

Thanks. I'd like to thank the participants for joining us today. We look forward to talking to you again soon.

Thank you, gentlemen. On behalf of AngloGold Ashanti, that concludes this afternoons' conference. Thank you for joining us. You may now disconnect your lines.