Anglogold Ashanti PLC (AU) 2005 Q2 法說會逐字稿

Good morning and welcome to this presentation by the AngloGold Ashanti Executive Team of our results for the Second Quarter and Half Year of 2005.

I would also like to welcome those participants elsewhere in South Africa online as well as in Australia and I would direct you to our website where you'll find the presentation that we will be using live today.

The format of this presentation is as follows:

Bobby Godsell will provide a brief overview of the financial and operating performance.

Kelvin Williams will comment on the gold market hedge book and this will be followed by presentations by our two Chief Operating Officers, Neville Nicolau discussing the African operations and Roberto Carvalho Silva covering international operations.

After these presentations we will as usual take your questions. Before we begin it is necessary for me to read a declaration regarding forward-looking statements that may be made during this presentation.

Certain statements contained in this document including without limitation those concerning the economic outlook for the gold mining industry, expectations regarding gold prices and production, the completion and commencement of commercial operations of certain of AngloGold Ashanti's exploration and production projects, and its liquidity and capital resources and expenditure contain certain forward-looking statements regarding the company's operations, economic performance and financial condition.

Although AngloGold Ashanti believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct.

Accordingly, results could differ materially from those set out in the forward-looking statements and as a result of, among other factors, changes in economic and market conditions, success of business and operating initiatives, changes in the regulatory environment and other government actions, fluctuations in gold prices and exchange rates, and business and operating risk management.

AngloGold Ashanti undertakes no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after the date of the annual report on Form 20-F which will reflect the occurrence of unanticipated events. All subsequent written or oral forward-looking statements attributable to the company or any person acting on its behalf are qualified by the cautionary statements herein. For a discussion on such risk factors, refer to the company's annual report on Form 20-F for the year ended 31 December 2004, which was filed with the Securities and Exchange Commission in the U.S. on 14 July 2005.

With that lengthy introduction, I'd just like to hand over to Bobby Godsell.

Thanks Charles and good morning. I'm pleased to report that the June quarter was marked by good financial performance of headline earnings adjusted for the effect of unrealized non-hedged derivatives increasing by 19% to $92m.

We benefited this quarter from a very welcome reduction in the Ghana company tax rate as indeed in the last quarter we had a benefit from a reduction in the South African company tax rate.

Profit attributable to equity shareholders were $74m higher than in the first quarter. This previously has appeared in our accounts as net profit and adjusted gross profit, previously operating profit increased 4% to $117m.

For the six months ended 30 June 2005 with the clearing a dividend of R1.70 ($0.25) per share. That's current exchange rates.

Secondly in respect of our operating performance let me first turn to safety. The quarter saw the lost time injury rate replaced modestly by 6% to an index of 7. This regression is certainly receiving managements close attention.

On the other hand in regard to fatalities we've seen a much more significant reduction year to date a 28% reduction which is certainly encouraging. Obviously as a company we're striving to be fatality free and indeed its pleasing that we have a growing number of mines that for this year are in fact without a single lost time accident. This is clearly an indication that it's possible to run mines including complex and indeed deep level mines such as our own on set basis.

The quarter operationally was steady. Production in a rounded numbers 1.6Moz was equal to that of the last quarter with good performances coming from our mines in Brazil, Malia and Australia as well as significant improvements from two key Ashanti assets of Obuasi and Siguiri.

At Geita we saw lower grades and significantly higher costs. We have flagged the problem at Geita of a non-performing mining contractor and also a general push on mining contractor costs.

We will from the first of August convert to owner mining at Geita. However the transition to owner mining will initially actually involve some effectively duplicate costs and indeed the benefits in both production labels and costs will become evident towards the end of this year.

Turning to our South African operations in oversight the Mponeng mine had an excellent quarter with production up 11% and cash costs down 10% to $278/oz. This improvement helped to offset the production reductions experienced that most of the other South African operations and in particular at Great Noligwa and TauTona where production was down 4% and 8% respectively. There were both grade and mining mix issues here and Neville will speak on this in greater detail as Roberto will cover our operational performance in our international operations in much greater detail.

This quarter we reported cash costs at $278/oz, 2% down on last quarter. Cash management in South Africa and in local currency terms continues to be impressive with total cash costs at R60,000/kg of gold produced constituting a 3% reduction on the last quarter. In the context of the challenges of lower grade and indeed lower production this performance seems to me to be particularly admirable.

In terms of our broader program to reduce costs we continue to focus on this with great energy. In our January presentation we indicated that we targeted savings of just under $60m - $58,7m. At the end of the first quarter looking at the past pressures that we've continued to face we indicated that we were going to aim for an average cash costs for the year of $273/oz. This implied further that dollar savings are $44m. To date we've achieved $61m of savings and we have commitments firm and concrete plans to achieve the balance which should give us a total saving for this year of $112m.

However, this quarter as the last has seen continuing cost pressures particularly in oil prices and in miner contracting costs. We've also seen some continued local currency strength particularly in Brazil and in Argentina. Some of the gains we are making on our cost management side are being offset by continued margin pressure particularly in some of our highest margin operations such as in South America and that impact of this is that our goal of last quarter of $273/oz remains a stretched target we're absolutely committed to doing everything we can to achieve it but it's clearly going to tough.

First the close of the quarter we concluded an agreement with Aflease for the sale of our Weltevreden property in the Klerksdorp area for a purchase consideration of 23,6m Aflease shares. In its current structure this will give us a holding in Aflease of just in excess of 5%. From our point of view this has certainly proved to be a good deal. Our shares are already in the money and it is one which enables Aflease to exploit that portion of the Weltevreden ground that is near the surface while we can continue to consider whether we're able to mine at DIT. This deal also provides us with additional exposure to uranium over and above our existing by-product production.

On the 27th of July i.e., yesterday we reached an agreement with the government of Guinea to amend the Convention de Base or stability agreement and resolve all outstanding disputes between ourselves and that government in respect of which we have made a payment of $7m.

In addition, we have agreed as part of the settlement to meet the historic and follow-up fees and costs of a consultant the government retained to advise and assist it in its negotiations and resolution of this dispute. In consideration of the above settlement the government of Guinea has irrevocably confirmed its waiver and abandonment of all claims and disputes of any nature whatsoever against the AngloGold Ashanti group of companies.

Finally, let me make a few comments about management changes to the executive team during the first half of the year.

The retirement last quarter of chief operating officer Dave Hodgson lead to the appointment of two new CEOs. Neville Nicolau who now heads the Africa region and Roberto Carvalho Silva who's portfolio covers the five operations outside Africa. Both of these are seasoned executives. Roberto has 33 years of experience in the greater Anglo American group in South America and has lead our assets in that part of the world since the inception of AngloGold.

In the context of AngloGold our South American assets under Roberto's leadership have consistently produced excellent operational and financial performances and the evidence of this quarter simply reconfirms that track record.

Neville Nicolau has worked for this company and its predecessors for 26 years having started as a learner official at Vaal Reefs in 1979 and moved up the ranks to become general manager at Great Noligwa in 1996. After that served as technical director in South America under Roberto's leadership and then returned to South Africa to run the South African region. In South Africa he certainly lead the foundation for the benefits we're seeing in cost management and indeed for safety improvement in this region.

Neville in turn has started to restructure his Africa region management team. A consequence of this is the departure of Thys Sabbagha formerly head of our East and West African region. Thys has been succeed by Fritz Neethling. Neethling too is a seasoned executive. Prior to assuming this role he was head of engineering in our central technical group. He joined AngloGold Ashanti as general manager of Ergo in 1999 having previously worked for DeBeers, for Sonchem and for Iscor.

I certainly am delighted that I have in Neville and Roberto two exceptional individuals both of whom are hugely committed to the success of the company and have a track record that I think should inspire confidence in all.

With Sam Jonah's decision to move to a non-executive role in our Board these two COOs will report to me directly. At the same time and was previously announced Richard Duffy who heads our business development group and which now includes exploration and who's worked closely with Sam will also report directly to me.

We have seen another departure this quarter which is the head of our exploration unit Gordon Wylie and we will be looking to replace him with a high level exploration executive.

This month sees also the retirement of Jonathan Best. Jonathan has served for more than 30 years with AngloGold Ashanti, with Anglo American and with DeBeers. He's played a completely central role in this company particularly in AngloGold Ashanti over the ten years of our existence.

During that period of time we consolidated separately listed South African companies into AngloGold Ashanti into AngloGold. We acquired Minorco's international gold assets becoming global. We became the first South African company to adopt IAS in our reporting and thereafter we also became the first South African company to list on the NYSE, part on the heels I might say Ashanti as lived there by Sam Jonah.

We subsequently acquired Acacia. Bought our interest in Morilla and Geita. Bid unsuccessfully for Normandy and most recently merged with Ashanti. With our multiple global listings the constantly evolving global financial reporting standards and governance requirements and our acquisition and disposal of assets Jonathan has tirelessly ensured that AngloGold Ashanti could hold its own on the world's gold mining stage in respect of financial integrity.

I certainly will miss his diligence, hard work, wise counsel and particularly his friendship. Stepping into Jonathan's substantial shoes as CFO is Srinivasan Venkatakrishnan with slightly longer name than Jonathan and more evocative body language as well. I always thought from first meeting Jonathan that he would make an excellent poker player. I'm not sure about Venkat in this respect.

Venkat comes to us with a very distinguished career. It's a career that started with university education in India. Involved nine years of senior level appointments at Deloitte & Touche. At the end of that period as director of reorganization services based out of London and it was in that role that he came across Ashanti coming across the company at a time of considerable difficulty relating to the hedging prices that impacted on that company.

He was - saying Srinivasan had been asked before that he was asked by Sam Jonah to stay on and to become its CFO and to contribute to that company's bounce back from a difficult time in 2000 to it's reconstituted forming the years that followed.

Venkat has a track record as the CFO of a major gold company. He brings to us great market respect. He brings to us very much the same energy and diligence and we're going to have the same problems in persuading him to allow his staff to occasionally take weekends. What he also brings to us is a very considerable luring of the average age of our executive as he's just turned 40.

With that review of our management changes, I'm very happy now to hand over to Kelvin Williams to look at the gold market review. Thanks very much.

Thank you Bobby and good morning. As you all have seen during this past quarter our market has done a couple of interesting things. This is not however immediately evident from the statistics of the gold market during the past quarter. The average price of gold for the past quarter was $427/oz and that's exactly the same as the average price of gold for the first quarter of 2005.

The high of $444/oz and the low of $413/oz were both within spitting distance of $445 and $410 which is the high and low for the first quarter of 2005. The interesting behavior in the gold market comes not in the comparable prices between second quarter and first quarter but in the behavior of the price when we look at the performance of the U.S. dollar during the quarter.

After four years of progressive weakening against the Euro the U.S. currency turned around strongly against the European currency and strengthened by almost 10% during this past quarter. If gold had followed the pattern of the Euros weakening and the dollars strengthening it would have followed its pattern as a currency play against the dollar. This renewed strength in the dollar ought to have taken a proportionate 10% of the dollar gold price knocking our gold price down to $400/oz. This didn't happen and gold instead finished the quarter at around $435/oz. Not $400.

Certainly there were circumstances in the gold market that helped the gold price. Much of the strength of the stock price during the last month came from sustained short covering in gold which took place on the New York COMEX as the open position which had reached a low net long of less than 6m ounces at the end of May, turn around to be bought up to a net long of 18m ounces producing the closing price of $435 that we saw.

However, the second interesting point is that since the end of the quarter as investors have become more cautious about this net long of 18m and reduced their net position on COMEX by almost half down to a current 9m ounces the gold prices only come off some $15/oz and we remain comfortably above $420/oz.

For this period of strengthening in the dollar and sustained dollar gold prices we have seen a break between the behavior in the gold market and the behavior in the currency market which has left our spot price of metal stronger today than it would otherwise have been had we continued to trade the way we've done in the last four years.

Looking forward. Commentators in our market are increasingly divided as to the near and medium term direction of the U.S. currency particularly against the Euro but also against a wider basket and this spectrum of views extends also to the forecasts of the dollar gold price for the balance of 2005 and for 2006 and in this room there are banks forecasting $415 for gold and a bank forecasting $460 for gold next year. So different are the forecasts that we're looking at right now.

Our view continues to be however that the factors that are cyclically favorable to gold will remain so for the period that we're looking at. The short and the medium term. The cyclically favorable circumstances for the U.S. dollar will not always remain so and the market will revisit the fundamental structural deficits in the U.S. economy and with it the strength of the dollar.

In this environment we believe that the gold price will continue to receive the support from uncertainty in the currency markets and our view in this respect is reinforced by the recent change in the management for NNB.

Regarding our gold price hedge, book and our commitments and exposures to the company we continue to manage these actively and you will note that the price received by the company for this past quarter was within some $4.00/oz of the spot price of $427/oz for the quarter. The net delta size of the hedge has been reduced by some 400,000 ounces or 12.5 tons notwithstanding a higher spot price at the end of the quarter i.e., $435/oz compared to the $428 against which we measured the hedge on the 31st of March.

The negative value of $1,032 billion was slightly better than at the end of the previous quarter. Again in spite of the higher gold price against which it was marked.

Looking forward. You will be aware from the detailed table of hedge commitments which we include in our quarterly report that the company has little volume in our hedge commitments for the rest of this year and for 2006 when hedge cover amounts to only some 16% or production.

Under these circumstances it is unlikely that we will see material reductions in the volume of hedge outstanding during the next 6-18 months and the efforts of treasury will be applied instead to narrowing the value gap between the prices in our hedge for this year and for next year and the currently robust spot price of gold.

This does not rule out further restructuring in either volume or value but reflects rather our current focus on value today and as I indicated a moment ago we will continue to actively manage this hedge going forward. Thank you.

Good morning. The African assets this quarter produced a mixed set of operating results with key two key Ashanti assets. Obuasi in Ghana and Siguiri in Guinea recording significant improved production and cash costs while production at Geita in Tanzania, Navachab in Nambia we're down quarter on quarter.

In South Africa an 11% production improvement at Mponeng helped partially offset production declines at several of the regions other operations including TauTona and Great Noligwa while the three Molian assets produced a set of results that were comparable or slightly better than those of the first quarter.

As Bobby mentioned earlier cost management continues to be an important focus across the group and the South Africa region which has a distinguished track record of managing costs down must be commended for the efforts in this area. This quarter on a production base of 20.5 tons of gold came in with total cash costs of just over R60,000/kg at the same level there have been for the last two years even though the production base has declined from 25 tons for the comparable quarter of 2003.

Most of the success in the South African region has been realized through increasing operational efficiency and to a lesser degree better procurement and the restructuring strategies all of which are part of our cost management approach rather than our cost cutting approach and aimed at keeping costs down in the current rand environment.

Looking ahead. Savuka's on track for closure early next year so management is focused on replicating the success of the closure of Ergo where associated overheads where restructured and eliminated before closure preventing a domino effect in the costs of the current operations.

Turning to the issues of grades in the South Africa region. Great Noligwa is particularly important to this quarter as it is down to 9.5 grams a ton from the 10.23 of the first quarter.

As we have previously flagged the grade of this operation is expected to continue to decline in the coming quarters with the consequent impact on production. At the same time, the Moab Khotsong will slowly ramp up to full commercial production which unlike Great Noligwa is essentially being mined from - Great Noligwa which is being mined from higher grades towards lower grades. Moab starts in slightly lower grades and mines towards higher grades which is very clearly shown on the slide.

Elsewhere in Africa. Geita in Tanzania has had a difficult quarter with production down 14% to 165,000 ounces and the total cash costs up 55% to $331/oz as a result of both lower grades and reduced mining contractor efficiencies.

As we noted last quarter the grades in production are both expected to decline at Geita for the remainder of the year as the high grade ore in the current cutback will be exhausted before the higher grade ore of the next mining phase in the Nyankanga can be assist.

We are also just beginning to undertake the transition to owner mining at Geita. A significant refurbishment expenditure will initially be required to bring the quality of the mining equipment up to standard. As such, limited cost benefits will only be seen in the fourth quarter of this year while we're expected to realize the real gains in the transition to owner mining by the beginning of 2006.

As most of you know, Geita is one of our longest life operations with a current mining plan until 2020 and further justifying the initial outlay associated with the transition to owner mining. There are currently 9m ounces in the reserve at Geita and we have identified further upside around the immediate operations which is currently being drilled. The down dip and strike extensions drilled continues to yield positive results at the northeastern extension of the Geita hill pit and a new zone of mineralization has also been intersected in the footwall of the Geita hill pit situated outside the current pit shoal.

We also indicated additional regional targets which are noted here and are within the licensed area and these are being followed up.

In Guinea Siguiri had an excellent quarter with production up 86% to 80,000 ounces for the quarter and this has been the first full quarter of production of the newly commissioned carbon and pulp plant. As this plant begins to reach its operating level which is likely to be by the end of the third quarter the last bits of the heap leach gold will be expected from the heaps and production will return to normal levels.

At Obuasi. Obuasi made its production target this quarter of 102,000 ounces with a total cash cost of $324/oz representing an 11% and 10% improvement respectively quarter on quarter.

Other objectives for the year are also on their way to being met particularly with regard to development and definition drilling which will result in considerable improvement in the mining mix and flexibility next year.

Infrastructure upgrades are going similarly well. To date, the Sansu ramp and the 93 level ore passes have been completed and 32 level is well on its way to being hold and completed probably by September this year which will significantly improve ventilation on the mine.

Our focus next year will be the introduction of refrigeration and we will benefit from that in the future. The drilling program at Obusai is currently underway and the first two of the plan six holes for the Obusai's ultra deep projects are underway. These are planned to intersect the Obusai fisher at about 3,400 meters below surface and are expected to be completed in January 2007.

I will now hand over to Roberto.

Good morning everyone. First before I start talking about the international operations I would like to just say a few words about the cultural diversity of this company. Today the CEO international is a Brazilian. It's clearly a demonstration of the cultural diversity that AngloGold looks for and we're going to talk about the assets that we have been producing strongly cash generators of this company and those are located in America and Australia produce a solid set of results in this quarter.

Look at first to South America. Although the same set of appreciation of the Brazilian Real over the quarter negativity affected impact the course of both Brazilian operations we have pulled all the levers that we have in our hands and Anglogold Ashanti South nevertheless posted a 7% production up improvement and Serra Grande produced 24,000 ounces attributable in line with the last quarter results.

The production of sales and Cerro Vanguardia seen a decrease of 11% in comparison with the last quarter that was expected and planned due primarily to decline in fit grade as a result of the mining sequence of the variable mining areas at the pits and the catch course consequently went higher 21% quarter on quarter at $171/oz. This is also added by some additional maintenance costs and related with the replacements in ball bearings at the gear box and some three or four days of very heavy winter at south Patagonia where we seen some frost into the water pipeline. Nevertheless, the mine remains on target to produce the same level of production it had produced last year.

At Cripple Creek and Victor production has declined to 12% in this quarter overall place it at significant distance of lease bed liner in the first quarter result and the delay of recoveries in the second. We expect that there will be improvement in the third quarter and we shall see it and CC&V remains on track to meet its anticipated overall production of 330,000 ounces in a year.

Sunrise Dam has been the star of the quarter and consecutively been repeating an extraordinary performance has produced again 131,000 ounces this quarter in another record production mining of the high grade ore is [inaudible-highly accented] cut deck position of the pit which have now been completed. So we expected a decline because we are going to be moving predominately mining to the Sunrise Shear Portal in the mega pit where we expect grades to be low. We can anticipate that the production should be in the level of 100,000 ounces per quarter for the next two quarters to the end of the year.

The mining remains on track to achieve exclusively a production for 160,000 ounces cash for a cost [inaudible-highly accented] 2004 and long report.

On extension front we are now two years into the Sunrise Dam underground feasibility study and one can see by that slide the mine about to remain on a scale and development shown here in the white where it has been in the development and it has reached already 5km of a total of 9km that we are expecting to develop.

The next slide in the red shows - in red the pit showed the large of underground targets. One can see that Sunrise shear decline, Astro, GQ lodes, Cosmo and eastern area. The first phase of being in the north was not particularly encouraging so it has been postponed and delayed for the years as other gradual sites became available to the south from the year 2005 we have been able to systematically drill out to the south end areas which show more promise.

Relating to GQ target zone has been highly successful in identifying additional high grade zones of organization. That's being shown in the slides on your right and the bill has also confirmed extension which will appear to be continuous to the north into Astro into the south into the Dolly lots.

There are two other areas which are east of Cosmos and its call it a tress and the hammer head which are very promising and have been discovered since they started the feasibility study. Both zones have potential to develop a long strike and down deep and add significantly to resources.

Deep drilling between the carry chizon (ph) has confirmed those potential strike the length of more than 400 meters immediately beneath the access of the opening pit. The potential for [inaudible-highly accented] the organization due to the repetition of the first complex duplex system has been confirmed. Growth is the name of the game in this international region.

On the next slides we'll show you a high potential area in South America in the [inaudible-highly accented] outside of Australia and Brazil [inaudible-highly accented] continues to produce and yield promising results. A previous study and trial mine is planned to commence next year followed by a feasibility study in 2007. The exploration program will carry on with some 35,000 meters per year additional drilling planned for 2006 and '07 obtaining the proof of the project. Construction and ramp should start in 2008. Actually we are pushing to see if we can have a quick start on a feasibility study. It's not a promise yet but the team is working very hard.

The next slide shows another growth in the region which are clear by deepening projects. It has been approved in the first quarter of this year. It's on the shelf and well underway. Several permits on the environmental side has been granted and as we have previously noted in the first quarter - the quarter where we'll print one million projects - $30m will be spent this year. We will increase the annual production from 190 to an average of 250 being in the first years a bit higher than that and we extended the mines life by six years as a whole bringing an additional 1.9m ounces to the game.

The cash costs of that mine as in the activity scope of Brazil and the South American mines will be in the region of $169/oz. The current exploration been on level 14 is beginning to be very encouraging raising the potential for additional resource and reserve conservation down the road.

I'll now hand back to Charles.

Good morning. A question for Bobby to start. Are the only wage negotiations this year can you give us an update of how things are going?

Really no more than is in the public domain. We have entered into a mediation phase. I can't think of a wage negotiation in the last ten years that hasn't gone through that phase. Wage negotiations in South Africa tend to be resolved in the last ten minutes of the game or into expert time. I've seen that being the changes that have been so we basically have a clear strategy at the moment. We very much would like an agreement that serves the interests of all the parties and in particular that enables us to optimize ounces and [inaudible-highly accented] in South Africa going forward. Not a very useful answer.

Good morning gentlemen. Just looking - it's an operational question for Neville and Roberto as well. Neville first. Can you give us some sort of timeline with regards to Obuasi what we should expect when. September you mentioned 2005, refrigeration in 2006. Just ballpark you know when will certain things come to the surface and then for-answer that.

I think what you can expect is continual improvement in terms of the production process. Along the way a whole series of events will occur. We are addressing ventilation initially this year with certain holdings and fan installations and so on. By the end of this year we will have introduced the first of two valkunas (ph) on surface at Obuasi. By the middle of next year we'll have introduced the second. Each of these processes continually reduces the underground temperatures. At the same time now increase development program will on a month by month basis improve the flexibility that we have at the operation and what you can expect to see from the underground operations at Obuasi is continual improvement.

Okay Roberto on the Sunrise Dam operations. I mean it was great or amazing if the grades that you put listed in the table, if they're correct. I hope they are. Just going forward though. This feasibility plan on the underground operations. How long, it been going on for two years now. How long before that ends and we move into full production in the (inaudible) one operations and can you give us some sort of indication as to what the matrix will be on the underground operations? What sort of answers are we looking at? What sort of costs, capital requirements that sort of thing?

Actual now the results has been very encouraging. I don't know if the slides show that very clear. About 1.5m ounces have been defined already as reserves on joint terms. This is progressing very well. Next year we should seeing some production coming out from the development ramp when we finish the feasibility study and we expect the costs to be in the range slightly lower than the costs we are practicing now and that's what we expect and for 2007 and consistent in contribution from underground operations to Sunrise Dam complimenting the beat and maintaining the production in a level that we strength.

Steve Shepard, JP Morgan. First may I just to say to you Neville I'm very relived you getting these results out of Obusai. I sort of detected a bit of threat from your chief executive the last time we listened. If I could just ask you in more detail about Obusai, I recall from the visit that was conducted there a year ago last February that comments were made about the mining method and I think if I recall a correct year were mentioned a graphite - a brittle hanging wall and therefore scaling and dilution able and I see you've achieved-

Think of it more into the-

Sorry. I see you've achieved a yield of what was it 4.95 grams a ton from underground. I think from memory in the old days it use to be a lot higher. There could be reasons for that. Could you comment on your approach to mining underground there and talk to us a little bit about what sort of yield potential you can see there Neville?

Excuse me. Did you say 4.5 grams a ton from underground? It says 4.95?

It says 4.95 in the book yield.

We need to just check that. Let me just answer the question in terms of the underground mining. We've reviewed our underground mining methods and the layout. In some cases we've reduced the inter-level spacing so that we are able to be more selective in terms of the ore body. This definition clearly significantly improved our ability to follow the ore and our head grade from underground has improved from about 5.5 grams a ton up to about 6.5 grams a ton but I think that the yield that you're seeing there is contaminated by some surface sources. So let me look at that with you afterwards but we have on a quarter on quarter basis shown an improvement in grade from underground partly because we've been able to be more selective.

The actual mining method is in parts of the mine dependant on the introduction of backflow or hydro flow and we have a - part of the - when we talk about infrastructure upgrading program the upgrading of the backflow and hydro flow plants is high on our agenda at the moment and receiving attention and we have been able to improve the amount of hydro flow that we placed. So the - critical to the underground operation is the amount of development that we can get in and the amount of oil reserve that we have developed and drilled and of the 12 or so mining blocks that we have only two have more than 10 months reserve developed. Most of them are around about the one or two months of reserve developed at this stage.

Our development program will take us up to 10 months develop reserve and three months drilled reserve by the fourth quarter of next year. In other words there'll be steady improvement up to those levels and we feel that once we get to those levels with the correcting mining layout we'll have enough flexibility to be able to control our mining mix and then we would be able to with more certainty forecast our head grade because we'll have more control in where we mine.

At the moment we do a little bit of mine what we get. If the start flows close we don't have enough flexibility to be able to move people around so we're limited by the amount of development that we have in place.

Are you able to share with us - or planning to achieve and wherever head grade say 12 months. I know it's difficult but could you do that?

The head grade will get up to between 6.5 and 7.5 grams a ton depending on where we're mining.

Peter Townsend again. This one is on the operations. I see on the forecast Neville and Roberto for next quarter production margin rate down. If I look at what could possibly swing that Sunrise Dam and Geita you indicate are going to be lower but also there's some other increases forecast at other operations. Where is the big swing factor there?

In addition to what you've said Siguiri figures we try to indicate that they would be down on the exceptional level that they were in the second quarter. The second quarter had both the Sea (inaudible) plant producing and had the loss of the heap leach coming out so we had a double shot at it in the second quarter and that will come down to - the heap leach will still drain after a while but that will be down in the second quarter so in addition to what you said that's a mine that will come down.

Just a quick question on the 69m loss. I know it's being treated as a discontinued operation. Is the last year you've got a loss coming through? Will there be some bits and (inaudible) coming through in the next quarter or is this the end of the losses accounted for?

This is the end of the rope now. We've got the treasure planning in place. We up the provision release within the industry and its now for practical purposes in rehabilitation.

(inaudible) for mining information the usual obscure questions. First of all on your retro viable program has that's going and how's the research program with Bill Gates money going? Any comments at all on your ESOP you Employee Share Ownership Plans? And lastly just a small comment. Have I got it correct that Donnie Speace has been moved to Obuasi? Thanks very much.

Starting with the last question yes and by all accounts very successfully. The anti-grator viral programs continues to produce very encouraging improvements in the participants immunity levels and state of health. On the ESOP I'm pleased to tell you we'll have one and we're in the process of negotiating with the parties we need to negotiate a [inaudible-highly accented] and ESOP and I think I missed one of your questions.

(inaudible) from Deutsche Bank. Just more operational stuff. Suvuka and the mine at Suvuka when - sorry I missed it. You did chat about it. If you could just go into a little bit more detail. Are you comfortable with it and comfortable with the shutdown and the timing of that? The other question slipped by mind right now but it will come back.

Well the answer slipped my mind. Savuka we are - you know it's always difficult to say exactly when it closes. I mean you're not ever sort of last day and close the door and walk away but we are planning to stop production at the end of this year and close in the first quarter of next year but close doesn't mean to say that we will put a concrete slab on the head gear. Savuka we will keep the shaft and pumping facilities particularly operational as a standby for the TauTona entry to east of the bank dike area where there is a possibility which is becoming less and less of a likelihood but we will keep those pumps on standby until such time as we've got into that area and ensured that there's no water in that area. There will be continuing clean up and removal of equipment from Savuka in the first quarter and probably the second quarter of next year.

I remembered the second one. Geita. Do you think that costs - Bobby you spoke about that. Just looking - you obviously - well I can see you're going to be running parallel systems. The old equipment possibly with some new equipment. Am I right in saying that or what do you actually mean by duplicate costs?

Well Morin is - the contract completes his work on Sunday the 31st the end of the month and we then officially take over. Now during this time of course we've been paying the contractor for the mining that is going on there but at the same time we have used this time the past three or four months to put into place facilities and management and so on. Most of what we need we will take over from the contractor but we have had some duplicate costs in terms of some management and supervision levels and just generally the sort of conversion from them to us. We've accounted for a lot of the real costs of refurbishing of equipment and so on under the capital program but I mean you will understand that we have run some duplicate systems during this time.

Is that pickup that we've seen in the capital scene at Geita I think around 65m, I don't know if it's right. It's probably right. Have you purchased equipment in this time? Have you got new equipment that's sitting there? Are you going to be running the contractors equipment until that dies down?

There are two parts to the answer to that question. The first is that we will essentially take over the contractors equipment. The capital that we put in is the pleasure of the contract which partially means the purchase of their equipment from them at the book value and also includes some refurbishing of that equipment and some installation of workshops and so on and that's to take over that fleet. We have a second plan which is the introduction of four big Puritan 40-ton trucks and a matching shovel which we are in the process of purchasing. The first ones will be delivered in - well they've been delivered to the harbor. They're on their way to the mine at the moment and that is to accelerate the push back program to open up the Owen ti tanger (ph) pit.

We've got time for one or two more questions and then if possible we'd like to close on the hour because we have some media activity. The management team will of course be here to carry on with informal discussions briefly. Steve.

Thank you. Another one for you Neville and just a forward-looking question. You mentioned the build up of Morlia. You mentioned the build up of Morlia. I'd like to share with you - in our numbers we're looking for costs below R40,000/kg eventually. Could you give us some guidance on whether you think that's sensible or not?

We will give you guidance in this regard. Steve there's a mine that's coming into operation next year and the costs initially will be higher than that simply because of the volume and it's going to take us about three years to build up production to full production at Morlia and the reason for that is that where we start is sort of the wedge of the triangle and it's simply possible to ramp up faster than the rate that we're going at. The long term costs of Morlia will be - the better costs in the South Africa region and probably better than Great Noligwa, better than TauTona but it will be below R40,000/kg in two years time.

That's in today's money terms?

TauTona's about R50,000/kg and Great Noligwa's about R55,000/kg so R40,000/kg you need some very, very high growth and we are hitting towards some high growth so there will be times when the costs will be down a bit consistently on a long term basis if you're optimistic but I hope you're right.

Thank you Neville.

Justin Brown from I-Net Bridge. I just wanted to find out any progress in terms of resolving the [inaudible-highly accented][ issue and just also an environmental question as well. Any progress between AngloGold Ashanti and Department of Environmental Affairs and Tourism regarding the move to AngloGold Ashanti and the gold miners with possible environmental legislature regarding (inaudible). Thank you.

I think particularly Robbie Lazare, a notice to respond to that second question. In regard to the pumping issue two things are happening simultaneously. There is continued court jurisdiction over this issue and there are a number of court actions in plan. I can't comment on those. We are continuing to talk with all of the stakeholders to find a practical solution to the water pumping problem in that area. We think there is one. We think what it requires is the cooperation of all stakeholders including three government departments and that's what we're seeking to achieve. On the DEAT the Department of Environmental Affairs and Tourism perhaps Neville or Robbie would like to comment.

Are you talking about particular notices that have been issued by that department? Yes Robbie.

I thought Neville was going to respond.

I think one of the first striking aspects of this whole water issue is that we're dealing with the different government departments that are giving - each one wants to give its own directive but for different reasons and we've now engaged with the Department of Water Phase recently a formal engagement, Neville and myself. We've made certain proposals to them. They of course are undertaken to get the parties together and the parties is the other government departments that we see that we sort of have a joint approach towards this problem in the Klerksdorp area. So we are still dealing with it. It's a long process. It's dealing with them at ground level with a different department. It's a legal process going on at this stage but we'll eventually get to a solution.

(inaudible) comment from my perspective. I actually think this issue is progressing very well and I think what we're seeing is a pattern of cooperative governance which makes me very pleased and encouraged to block our ability to face similar challenges which we will in other parts of the mine area in a sensible way. I think it's been a pretty good process. I'm particularly pleased with the contribution that AngloGold Ashanti affords both in the courts but also in the engineering part of solving this problem. We've love to take the water and turn it from being a problem and turn it into a resource. If you can find a model to do that that's a very good thing for the country actually.

Thank you. With that we'd like to close up and thank our participants particularly in Australia and elsewhere in South Africa and as I said members of the team will be here briefly. Thank you.