Anglogold Ashanti PLC (AU) 2006 Q3 法說會逐字稿

Good afternoon and welcome to the AngloGold Ashanti third-quarter earnings conference. All participants are in listen-only mode. There will be an opportunity for you to ask your questions at the end of today's presentation. (OPERATOR INSTRUCTIONS) Please note that this conference is being recorded.

At this time, I would like to turn the conference over to Charles Carter. Please go ahead, sir.

Thank you and welcome to this presentation by the AngloGold Ashanti executive team of our results for the second quarter ended 30 September, 2006. The format of the presentation will be as follows. Bobby Godsell, our CEO, will review AngloGold Ashanti's performance over this period. Venkat, our Finance Director, will briefly discuss key aspect of our financial performance. This will be followed by Mark Lynam, our Treasurer, who will talk to our hedge book. And then our two Chief Operating Officers, Neville Nicolau discussing the operations in Africa and Roberto Carvalho Silva covering the international operations. And finally Richard Duffy, Head of New Business Development, will reflect on key greenfield exploration achievements this quarter. After these presentations, we will take your questions.

Before we begin, it is necessary for me to read a declaration regarding the forward-looking statements that may be made during this presentation. Certain statements made during this presentation including without limitation those concerning the economic outlook for the gold mining industry, expectations regarding gold prices, production, cash costs, and other operating results, growth prospects, and the outlook of AngloGold Ashanti's operations including the completion and commencement of commercial operations for certain of AngloGold Ashanti's exploration and production projects, and its liquidity and capital resources and expenditure contain certain forward-looking statements regarding AngloGold Ashanti's operations, economic performance, and financial conditions.

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 be incorrect. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of amongst 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 operational risk management.

For a discussion of such factors, refer to AngloGold Ashanti's annual report on Form 20-F for the year ended 31 December, 2005, which was filed with the Securities and Exchange Commission on 17 March, 2006. AngloGold Ashanti undertakes no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after today's date or to reflect the occurrence of unanticipated events.

With that, let me hand over to Bobby.

Thanks, Charles. Management are dismayed and saddened by the tragic accident in which five of our colleagues lost their lives at our TauTona mine in South Africa last week. We offer our deepest condolences to their families and friends. We also salute the efforts of the rescue and recovery team who worked tirelessly for a period of five days in the most extreme conditions.

The only redemption in an event of this nature is to be found in reviewing our entire mining strategy in this area against what we can learn from the accident. The management team of the Company has committed itself to take every action to return the Company to the improving safety trends of recent years.

Even in this disappointing quarter, six of our mines completed their three-month period without a loss time accident. This is the level of certainty to which all 21 operations aspire.

Turning to our financial performance this quarter, adjusted headline earnings were in line with those of the June quarter at $141 million. I should note that is translates into 131% increase in the year-to-date earnings on those of the first nine months of 2005. This contrasts with a 39% increase in the spot gold price for the same period.

Our third-quarter price received of $584 an ounce were 6% below spot, well in line with market guidance. We indicated we want to be between 5 and 10% below spot. We have continued to deliver fully into our hedge book, as can be seen from our hedge reporting. Mark Lynam will speak more to these mechanics in a moment.

Turning to production, we reported 1.4 million ounces for the third quarter, in line with that of the previous quarter. Total cash costs were up 2% at $311 an ounce. This increase was primarily due to lower grades at most of our operations as well as the impact of the annual South African wage increase and the higher winter power costs in South Africa, as well as increased power costs in Ghana.

I would characterize the production results from the South African operations as respectable with TauTona, Savuka, and Tau Lekoa posting good results even as lower grades impacted. We saw the lower grade trend at [Copper Mountain], at Iduapriem, and [Tranquiligua]. There were also improvements seen at several of our other African operations in the third quarter including Navachab in the Namibia and two of the three Ghanaian operations while all three mines in Mali reported grade related reduction declines and closed at consequent total cash cost increases.

Results from the international efforts were marked by the continued strength of the Brazilian operations and a bit of quarter-on-quarter performance from the Cripple Creek and Victor mine in the United States. Cerro Vanguardia in Argentina and Sunrise Dam in Australia, on the other hand, were also negatively affected by lower grades. Roberto and Neville will take you through the operational performance of their respective regions.

Looking ahead, we are estimating production to increase slightly to 1.48 million ounces next quarter at an average total cash cost of $308 an ounce. This cash cost all cost assumes exchange rates to the dollar of 7.50 rands in South Africa, of 2.20 Brazilian reals to the dollar, of 3.08 Argentina in peso to the dollar, and an Australian dollar exchange rate of American $0.75.

In respect of this production outlook, we are still reviewing our mining plan at TauTona in the light of last week's accident. I should also mention that we expect earnings for the fourth quarter to be significantly distorted due to certain accounting adjustments which rank at Venkat will discuss.

Earlier this month, we along with a local national union of mine workers, a second union solidarity and a third union UASA as well as the Izingwe Holdings announced the simultaneous launch of an employee share ownership program and a black economic empowerment transaction. The proposed share ownership plan, which will be put before shareholders in a special general meeting on the 11th of December, proposes the issuance of 960,000 ordinary shares to nearly 31,000 South African employees. In addition, a total of 2.88 million loan shares issued an a 10% discount market value calculated using a thirty-day average price and which will vest in five equal tranches over the next eight years, will also then be made to employees.

Regarding the BEE scheme, this allows Izingwe Holdings, a private South African investment company, to acquire approximately 1.4 million loan shares and at broadly similar terms to the ESOP. Both of these transactions seek to give effect to the undertakings we made when we gained our mineral rights conversions in South Africa one year ago.

Finally and also in South Africa, the recent treasury announcement of a revised stock royalty book has reduced the proposed rate on refined gold from 3% to 1.5%. This considerably lower royalty than was proposed in the initial draft is welcome, and will have a less severe impact on AngloGold Ashanti and indeed the South African gold industry.

I now hand over to Venkat to provide a financial overview of the quarter.

Thank you Bobby. As Bobby has mentioned, total cash costs were 2% higher at $311 an ounce, some $5 above our third-quarter forecast of $306 per ounce. This was primarily a function of lower grades and a number of mines reported yields declines.

Beyond the overall grade decline, the other 2 key cost drivers were higher power costs in South Africa and Ghana and the impact of annual South African wage increases. In this context, I view our cost performance as reasonable particularly given that power costs and wage increases partly represent the current cost of doing business in these jurisdictions.

I would point out that in South Africa when total cash costs were up 6%, the higher electricity charges during winter contributed nearly 3000 out of this decrease. In other words, absent higher power rates during winter, total cash costs for South Africa would have again been below 60,000 rands a kilogram.

The effect of slightly higher cash costs combined with a price received of some 6% below spot was mitigated by the sale of uranium this quarter to the newly listed Nufcor Uranium Ltd. and helped maintain our adjusted headline earnings of $141 million or $0.51 per share, a financial performance that is line with the June quarter.

As Bobby mentioned earlier, year-to-date adjusted headline earnings are up 131% as compared to the same period in 2005 while gold price is up only 39% over the same comparative period. This demonstrates the fact that our shareholders are seeing significant earnings leverage on the back of a gold price rally.

Regarding the future accounting treatment of our employee share ownership plan, I would like to make the following points. It is important to note that we have taken the decision not to fair value the scheme through the income statement in order to eliminate related volatility adjustments each quarter. This would however mean that our adjusted headline earnings will therefore reflect the full option value of the ESOP as of the date of implementation, which will be amortized over the vesting period in respect of the shares awarded to our employees and recorded as a oneoff expense in the fourth quarter in respect of the Izingwe transaction.

Assuming a share price on the date of grant of 300 rands per share, a 35% volatility factor, and a grant price of, say, 270 rands per share representing a 10% discount on a thirty-day average price, the total charge to the income statement over the life of the ESOP, i.e., from 2006 to 2013 inclusive, would be estimated at 559 million rands. Some 130 million rands of which will be accounted for in the fourth quarter of this year. This accounting charge and subsequent accounting charges will not -- I repeat, will not -- impact on group's cash flow.

The accounting standards also stipulate that the 960,000 free shares and the 4.28 million notional shares must be included in the total shares in issue for the purpose of calculating earnings per share.

Turning to our balance sheet, the proceeds of the equity raising completed earlier this year and strong cash generation from the operations have helped meet all our capital expenditures and dividend requirements and still maintain our net debt at a significantly reduced level of just over US$1 billion. Our net debt EBITDA ratio has improved to below 1 from 2.23 and sits currently at 0.82 times, which compares very favorably indeed with other companies in the industry.

Finally, as Bobby mentioned, our fourth-quarter earnings are expected to be significantly distorted due to certain accounting adjustments. These include among other things increases in our current and deferred tax provisions due to higher gold prices and consequent changes to effective tax rates; the implementation of the ESOP as just described; and the potential vesting of certain share-based awards.

I will now hand you over to Mark to take you through our hedging activities in more detail.

Thank you, Venkat. As has been noted, our processes at $584 per ounce was $16 per ounce below that of the second quarter and some 6% lower than the average spot price seen during the third quarter. This was well within our forecast range of 5 to 10% below the average spot price as we continue with our strategy of delivering into the hedge book as fully as we can in order to bring the hedge delta down in a way that does not destroy value. At the 30th of September, the hedge showed a 635,000 ounce reduction to 9.5 million ounces as compared with a 10.14 million ounces as at the 30th of June, 2006.

It is important to note that the buying back of hedges, or going long, is consistent with and a part of our long-held [tactic] of actively managing the hedge book. As a result of this strategy, there is currently a net long dollar bill position of 26.5 tonnes at an average price of $650 an ounce for 2006 visible in our hedging table.

The hedge price on this long position is a weighted average net price and does not imply that we purchased the gold at $650 per ounce. Likewise the hedge position is fluid and it should also not be assumed that these long positions will be closed out and losses realized in 2006. Rather as has historically been our practice these long positions will be integrated into the hedge book and used to reduce hedging commitments in future periods.

I will now hand over to Neville to take you through the operational performance of the African assets for this quarter.

Thank you, Mark. The African assets produced a mixed set of results this quarter with good performances from several of our South African operations and significant production increases from Siguiri in Guinea, Navachab in Namibia, and two of our three Guinean operations. The Malian assets, on the other hand, had a rather more difficult quarter with lower grades affecting all three lines and resulting in production declines of 7% in Morila; 12% at Sadiola; and 15% at Yatela.

In South Africa, all seven operations were affected by the annual wage increase of around 6% plus the normally higher winter power rates. This resulted, as Venkat described, in a 6% increase in the total cash costs, although despite lower grades at Mponeng, Great Noligwa, and Kopanang, production for the region was more or less steady quarter on quarter. This was in part due to TauTona's pleasing 8% production increase and steady total cash costs, while Savuka and Tau Lekoa, our two recently restructured South African operations, operational performance was also encouraging.

At Tau Lekoa, cash costs were up slightly while production increased 5% as the mine stabilized at revised planning levels. Savuka reported excellent results with production up 24%, grade up 18% and total cash costs consequently 9% lower. As Bobby mentioned, we saw a disappointing deterioration in the safety performance in the third quarter and this decline was primarily concentrated in our operations in South Africa. This led to four South African operations scheduling two full safety days in October during which the operational teams focused on short-term intervention and long-term solutions addressing workplace skill loss, employee fatigue, and other issues that contribute to unsafe working conditions.

Regarding the last week's tragedy in TauTona, mining in this area where the seismic event occurred has been and will be scrutinized by external and governmental consultants and review of their activities there and the Company's overall safety strategies are underway. Notwithstanding this accident, progress has been made over the past few years in the development of support systems and in the research and understanding of seismicity. We believe that continued effort in this result can result in the elimination of fatalities and injuries caused by seismicity.

Turning to our other African underground mines, production was down 3% at Obuasi in Guana this quarter, due mainly to a 6% decline in grade. Total cash costs however improved 4% to $388 per ounce. Regarding Bibiani, where production was 11% lower and cash costs were up significantly this quarter, we announced in August an agreement to sell this asset to Central African Gold PLC for a cash consideration of US$40 million. This deal is subject to both parties obtaining certain regulatory consent and it is expected to be completed by year end.

Finally as our third Ghanaian operation, Iduapriem, the mill problems I highlighted in the last quarter have been resolved and production and total cash costs improved by 7 and 17% respectively. This is particularly pleasing in light of the expected cost repercussions related to the power shortages currently underway in Ghana.

On this note, I should mention that the water level of the Volta system has begun to rise and is now at 240 feet, a low but likely manageable level and that the country's thermal energy capacity has been fully restored, thereby easing some of the national reliance on hydropower. The Ghanaian government however has continued with its mandated energy rationalization process and is expected to reassess the situation towards the end of the year when we will have a clearer idea of the impact of the power shortages on 2007 costs for our Ghanaian operations, at which point we will offer market guidance accordingly.

As I mentioned Siguiri in Guinea had a solid production quarter, posting a 5% improvement to 62,000 ounces with fewer plant maintenance shutdowns resulting in better throughput. The total cash costs rose 8%, however, due in part to lower grades and also to increased royalty payments. Brownfield drilling around this operation focused this quarter on -- following up on known mineralization in four key areas. Reverse circulation drilling has commenced on selected portions of the spent heap leach bridge where we intend to define a Mineral Resource.

Looking across to East Africa, Geita in Tanzania had a slightly better operating performance quarter on quarter with production up marginally to 73,000 ounces primarily due to a 5% increase in tonnage throughput. Total cash costs however were 7% higher at $540 per ounce as a result of the lower grade than we forecast last quarter, which are related to the slower than anticipated pushback for and associated delays until next year in assessing the high-grade ore body underneath.

Brownfield exploration continued this quarter at Geita with results from 19 reverse circulation holes and 14 diamond drill holes indicating significant mineralization in the gap between Ridge 8 and Star and Comet targets. We expect a Mineral Resource to be generated in this area.

I will now hand over to Roberto who will discuss the international operations.

Thank you Neville. The international operations also posted mixed results for the September quarter. Looking first to South America, Serra Grande reported production again maintaining at 24,000 ounces and total cash costs 6% lower due in to part higher grades. At AngloGold Ashanti Brazil, production increased at 18%, reflected both as a result from heap leaching procedure [exhibits] and more ounces from the [Cachorro] (indiscernible) mine following the completion of the (indiscernible) and the (indiscernible) upgrade there which was part of the Cachorro expansion, a project that we expect to be commissioning earlier next year.

Despite the improved production, total cash costs at AngloGold Ashanti Mineracao rose 9% as a result of both the lower grades and the labor bonus paid out in August as part of the collective agreements.

Cerro Vanguardia in Argentina had a more difficult quarter, with production declining 14% as planned. Nevertheless 4% above such a plan to 55,000 ounces due to a decrease in grade. This in turn resulted in a 13% increase in total cash costs, which are also negative and impacted by a lower silver byproduct credit.

Regarding brownfield exploration in South America, two new veins have been confirmed by resource reconnaissance drilling at Cerro Vanguardia while at the Corrego do Sitio in Brazil a new deposit, Paiol, is in the process of being delineated after the initial pre intersection returned positive results.

In Australia, Sunrise Dam also had a planned challenged in the third quarter. Production was 4% lower to 108,000 ounces due to fewer tonnes treated and a return to a more normal grade levels after last quarter unexpected higher yields. Total cash costs were consequently 25% higher at [458] ounces. Also in Australia, the Boddington expansion project continues to progress well. Brownfield exploration is underway and with the five diamond drill rigs employed on programs to converting further resource indicated resource in the Wadoo South pit were historically (indiscernible) and mineralization have been intersected.

Finally at our North American operations, CC&V Colorado, I am pleased to report a good quarter with production up 6% due to the better solution flows on the leach bed, which led to an increase in recoverable ounces. Total cash costs were maintained at $243 per ounce, in line with those of the previous quarter. Brownfield exploration continues to make good progress at CC&V with encouraging results. We see that this quarter from the life of mine (LOM) expansion project.

Additional modeling will be completed in the last quarter of the year while developing driven continues in the South Cresson deposit to define final pit depths and high wall designs.

I now hand over to Richard to discuss the highlights of the greenfield exploration program.

Thank you, Roberto. Exploration continued this quarter in Australia, Columbia, the DRC, China, Laos, the Philippines and Russia, with good progress in particular being made on our four priority greenfield targets, Tropicana in Western Australia, Quinchia and Gramalote in Columbia, and in Addidi/Kanga in the DRC. We also successfully concluded our transaction with ITH in which we contributed our Alaskan exploration assets in exchange for a 19.9% equity stake in that Company.

Drilling of the Tropicana joint venture is underway on both the Tropicana and Havana zones. At Tropicana, we are focused on identifying extensions to the known mineralization and to better defining the orientation and extent of the high-grade shoots. Best recent results include 39 meters at 3 grams a tonne including 15 meters at 6 grams a tonne; 36 meters at 3.5 grams a tonne which included 12 meters at 8.7 grams a tonne; and 41 meters at 3.7 grams a tonne which included 11 meters at 11.5 grams a tonne.

At the Havana zone, an area that we believe is a southern extension of the Tropicana zone, mineralization has now been identified over a strike length of 2.1 km and is still open to the north, south, and down dip. Encouraging intercepts this quarter include 10 meters at 5.3 grams a tonne and 25 meters at 2.5 grams a tonne, including 13 meters at 3.5 grams a tonne. As I mentioned at the Denver Gold Conference in September, we see the potential for a multi-million ounce deposit in this new gold region and we plan to commence a pre-feasibility study next year.

In addition to initiating several exploration partnerships in Columbia, we have recently completed Phase I drilling directed at bulk tonnage targets on two of our own projects in central Columbia, Gramalote, where a total of seven holes have been trailed with best results including 255 meters at 1.16 grams a tonne and 275 meters at 1.2 grams a tonne. And Quinchia, where 19 holes have been drilled, with best results of 265 meters at 0.8 grams a tonne and 242 meters at 0.85 grams a tonne. Second phase drilling at Gramalote is scheduled for next quarter, as is further test work on mineralization at Quinchia.

In the DRC, whereas most of you will know, we are initially targeting a 3 million ounce and third resource at Adidi Kanga. Significant new intercepts include 0.63 meters at 240 grams a tonne; 5.48 meters at 2.46 grams a tonne; and 10.07 meters at 1.54 grams a tonne. The unfettered arrival of a reverse circulation drill rig in November in addition to the two diamond drill rigs currently on site will allow us to continue to accelerate our exploration program.

In September, we also announced the signing of a strategic alliance with Polymetal to explore, acquire, and develop gold mining opportunities within the Russian Federation. This alliance will initially focus on two projects contributed by Polymetal as well as two assets, Veduga and Bogunay in Krasnoyarsk which we will be acquiring from a Trans Siberian Gold. I should note that AngloGold Ashanti will retain its 29.8% stake in TSG. Thanks.

I will now hand back to Charles.

Thank you, Richard. With that, we will be happy to take some questions.

(OPERATOR INSTRUCTIONS) Victor Flores, HSBC.

Just a question about the results and reconciling the headline results to what we would call sort of clean number. $268 million at the headline earnings level, but that includes $143 million of unrealized and realized gains on nonhedged derivatives, a deferred tax on those hedge derivatives of about $3 million; $58 million for the option component of the bond, which is another non-cash item. It leaves you down at $64 million, which is about $0.23 a share. Then apparently some gains on sale of uranium, which I did not see broken down in the results. So am I missing anything there?

Victor, it is Venkat. If you look at page 31 of our results, we have actually put a non-GAAP disclosure on Item A reconciling the headline earnings and bringing it to the adjusted headline earnings. You have got all your numbers right. I think on one occasion your brackets has gone the other way around. So it is 268, take away 65, take away 3, take away 58 gives you $141 million for the quarter. That's point one.

And point two is in terms of uranium if you look at it slightly differently, the net impact in our adjusted headline earnings after tax is $6 million and you can work that out another way around. A $2 decrease in the spot price, a 2% increase in cash cost times the ounces gets you to the same place. So the reconciliation is on page 31 and the impact on sale of uranium was about $10 million pretax, $6 million post tax.

I have seen note A and I've also seen note C, where your nonhedged derivative gain is summarized as realized of $77 million and unrealized of $65 million for a total of $143 million. So only the $65 million unrealized is being netted from the result?

Correct.

Okay.

The realized gain is actually included in our adjusted headline earnings because that gain has been realized.

So is that part of separate hedge book activities?

Victor, it is Mark here. No, it is consistent with how we have always treated it in the past. The unrealized gain relates to a mark-to-market value on positions which are still open at the end of the period. It is simply the movement on those contracts over the period. It is absolutely consistent with previous. I think up until this point, over the last number of quarters we have actually had an unrealized loss which we have always stripped out.

Okay, maybe we will follow up off-line with the details.

Sure.

Peter Townsend, BJM.

Both my questions are grade related. Firstly for Neville in Obuasi, if I look back 18 to 24 months, we have dropped down from levels closer to 6 grams a tonne and Obuasi is now sitting at just over 4 grams a tonne, so a 20 or a 30% drop. And I had understand it in my model am assuming grades of close to 6 grams a tonne, but I'm just trying to get an idea of exactly what is going on underground at Obuasi and why the grades are as low as 4 grams at tonne?

Earlier in this year we gave some guidance in terms of our concerns with the grade at Obuasi and the conclusion of that guidance was that just below 5 grams a tonne was where we expected it in the short maybe to medium term. The upside comes from below 50 where we are planning medium-term projects to get into it to take the grade up and then there are also some very specific reserve generating projects that we're looking out in the north of the mine above [50] level to get the grade up. But the grade at the moment is only slightly below our current expectation. It is not 30% below our current expectation.

Okay, so it is not a dilution issue or anything underground that starts on behaving as they should. This is just slightly below where you think the mine should be producing?

It is slightly below what our expectation given our broken grade on the faces and the broken grade on the face is in line with our current model of geological interpretation orebody. And the difference is that we need to improve the dilution and the quality of actual ore extraction. Those are sort of ongoing projects. But I mean, these are fine-tuning activities and not -- we are not taking a major [hit] with the grade.

Thanks. Then for Roberto, Cerro Vanguardia, the nature of the orebody, you did (technical difficulty) I'm presuming the fluctuations we've seen this quarter in grade are just representative of the nature of the orebody. Is that correct?

That is correct. However, I must highlight one thing which is very important. We are following a strategy for mining Cerro Vanguardia and that was at beginning of the initial five years, we mine at higher grades lowest durations and now there is a natural (indiscernible) to be mining in lower grades and higher stripping ratio. In 2006 particularly we planned the mines to have a decreasing production on the quarters going forward. So that is the nature of the orebody and I can anticipate for you that next quarter we will have a 13,000 ounces. That is my estimate -- lower ounces than on the previous one. That was planned. However we are 4% better than what we had planned.

But in summary what I'm telling you, yes, it is the nature of the orebody and that is the way that we planned it at that mine.

Thank you. And if I can just ask one more. On the extension project in Brazil, is everything there still going as planned in terms of timing and the capital cost of the project?

In terms of implementation, the project is everything going as planned. In terms of the capital cost in local currencies, 2% below the budget; but however, when you look at the dollar number, you see a much higher number due to the real appreciation which is about $45 million above. However, with 538,000 ounces having been added to the project with the new ounces in and the price better, so the NPV of the project is three times the one that we have approved at the time that the Board approved the project.

So that production coming in when, Roberto?

That production is coming, the ramp up normally as we predicted from January to June and with no delays whatsoever. There is some of the broken ore has been transported by truck, given the delay of public commission on the problems of commissioning the crusher at the surface and the upgrading of the shaft. However that has been -- we overcome these problems. We transported some ore to the Queiros plant. The [net] fund have been commissioned by the end of September very successfully, so it is up and running. So I don't expect any delay on the run time.

Thanks very much.

[Munir Ishmael], Deutsche Bank.

Just a few questions. Venkat, for yourself on the dividend policy, could you give us an idea prior to the increased risk on the balance sheet -- you solved that now with the $500 million raising. Prior to that we were able to just a throw in 1.3 times cover on the dividend side. Have you got a policy that we can sort of to and push forward into our models? What would you recommend there?

I would not lock off those to a particular formula but purely for modeling purposes I would suggest that you apply the same ratio of dividends to adjusted in line earnings, which we declared in the first half of last year and the second half of last year. Again that is going to be a function of cash generation from the operations, capital expenditure, etc. But for modeling purposes that should suffice for the moment.

Okay. On the tax issues that you mentioned, sorry, you rattled them off quite quickly. We did chat earlier and my apologies but there were two that I picked up -- the higher than anticipated profits so tax should increase on the back of that. Tax associated with the ESOP I have got. What are the other tax issues that --?

Actually, Munir, there was one tax issue and two other separate accounting adjustments. The tax issue which you picked up was higher spot price, therefore we have to reset our effective rates at which the capital elements and so on will unwind and therefore reset our deferred tax provision. That is the tax adjustment that is issue one.

Issue two is the charge for the ESOP, the 130 million rands which will go through in the fourth quarter. That is not tax. That is purely an accounting charge for the ESOP. And the third category is depending on certain trigger conditions being that, our share awards which were given in 2002 and 2003 may actually vest but we will only know that come the end of this year.

All right, thank you. One last question for Neville. With regards to Great Noligwa, it's the second quarter that we've seen this dilution problem with the ore pass system. Can you give us an idea on what the actual issue is? Is it scaling or is it a problem with the waste cost that is forcing you to go down through the ore pass system? Then just an idea on when will this be cleared up?

Great Noligwa is still a ongoing ore pass issue. There is a multiple system of ore passes and with scaling and seismicity and so on, this does from time to time affect the grade. But quite importantly, Great Noligwa has for some time hoisted waste and reef together simply because of the size of the molds and so on, the waste is the grinding medium that we add on surface anyway.

So the problem with Great Noligwa's grade is not directly related to the ore pass situation. It is a mining mix problem together with a volume problem and this comes from earlier this year's seismic activity particularly in the southwest corner of the mine, where seismic activity forced us to review the mining methods and the mining sequence and the layout and that has resulted in actually the mine underperforming both in terms of grade and volume.

The volume is on an upward trend and is encouraging. The grade is disappointing at the moment, but I would remind you that we have guided the market in terms of Great Noligwa's grade coming down in time. So it is not hugely off the pace in terms of our forecasts were, but it is off the pace in terms of where Great Noligwa was as a mine, if I am explaining that well enough to you.

Okay. It just seems as though you guys put it forward as a reason for the underperformance at the mine and the blurb in the release. So one expects that it is an issue. What you are saying is that it is not an issue. It is actually part of the ongoing operations at the mine. Am I right? (multiple speakers)

Great Noligwa has gone through a little bit of more off reef mining lately due to structures that they are mining through and then the other problem is they are not mining what I'll call a targeted mining volumes. And I think that is the reason why you are seeing the dilution in terms of grade. We are sort of seeing that the grade in terms of where it is at the moment, if we look at the next 12 months, that is where the grade is going to be at Great Noligwa.

Great stuff. Thanks Robbie.

George Lequime, RBC Capital Markets.

Neville also discussed a little bit on Moab because that is one of your key operations going ahead. You mentioned about some flexibility problems there that the cause of the grade being as low as you came out with. And then in context just looking out into 2007 can you give us an idea on production level and costs in light of where we are at the moment?

The grade issue at Moab, one looks at it and maybe it is a volume issue of gold at Moab. When one looks at it in terms of the quarter it is very disappointing. But the issue at Moab is that we just opened up the orebody and we are in a buildout process. It is the lower grade side of the orebody as we've tried to give guidance on before and the volatility of grade in this area is huge and it comes from a small area. We have reviewed the quarter and looked at the next quarter and at the moment we are expecting an improvement in production from Moab in the next quarter simply because we are mining into slightly higher grade areas.

I think at this point in time we are not overly concerned with the overall buildup of Moab's production. We are not happy with poor quarters like this but in the beginning phases these will be compensated by better quarters. Overall the trend is upward and it is still in line with the market guidance that we gave last year and in terms of negative market guidance, we will give that as soon as Charles Carter puts together the presentation day and guides us on -- and we give guidance on that. But I don't expect at this stage that it is going to be hugely different from our previous guidance.

Any commentary you want to make as well on expanding on TauTona, the problems that you've got and obviously given the fatalities, overall what the operations are -- is it going to mean a sort of medium-term change in approach of the rate at which you are mining or support costs?

We are reviewing the entire process of mining in the shaft pillar area. The mining which we're doing at TauTona has been subject to a lot of scrutiny in the past. But it is still too early to say whether the current events are going to cause us to change our approach or our mining method or anything for that matter. We did say in the text of these interviews to update the market as soon as any clear direction is forthcoming from our evaluation of the orebody and the mining of the orebody.

When will that be? Do you have an idea?

As soon as it is done. This is not an easy process. It is a complicated matter and I really would not like to commit to a timeframe. Of course I'd like it done as quickly as possible and of course we would like to give guidance as quickly as possible, but at this stage we are evaluating all of the options. I certainly -- I know that we will have an announcement before the end of the quarter but we'll give you the answer when we've got it.

Okay, thanks.

(OPERATOR INSTRUCTIONS) Terence Ortslan, TSO Associates.

Just on Boddington, could you talk about it more about the resource conversion with the infill drilling you are doing? And two, how the project is going? And number three, if any changes in the project parameters?

Okay. First on the infill drilling is going well. I think we just managed to put some extra drill rigs in potential operation. Our intention is to accelerate the ounce conversion there. It is going well. By the end we should be converted some more ounces and as we expected.

The project is going well. We planned a 30% (indiscernible) based on the design and engineering for late November/beginning of December, and so far the things are going well with some update and some estimates, we will actually communicate and brief the market when that is done. We do not expect major variance or distortions to what we have planned.

In summary, I think there is no change in the -- on the parameters on the present so far of great significance and I think the project is moving exactly on pace.

All your (inaudible) rigs are essentially for the purpose of resource, the resource indicators gross conversion that you're doing?

(multiple speakers) Yes.

And can you talk about the percentage terms that any conversions or any surprises on the percent side or just basically in line? Or just give me the parameters please.

I beg your pardon? I missed --

I said are the conversion ratios, what are they? Because you are doing the rand to South pit right now which is fairly -- you've got very broad mineralization as it is.

Yes, the conversion is exactly where we thought it should be and it is just a question of how we plan that and we are just speeding up the problem -- and we should be. (multiple speakers) Sorry? Is there anything else?

Yes, one more exploration question on the Cerro Vanguardia, the two new veins that you have confirmed, can you talk about the width and the strength on those?

Those two veins are very important because actually the exploration team at Cerro Vanguardia has been confirmed and converting going ounces, which has been helping to maintain the profile of the mine. Those two new veins into Cerro Vanguardia are going to add -- we expect that we could convert those relatively to 150,000 ounces for next year.

Just a final question on the exploration. Your annual exploration expense rate, does your breakdown in expense then get capitalized please?

For this year we probably are looking at a total exploration spend of around $90 million and about probably closer to $95 million. Of that amount, $35 million to $40 million is on greenfields exploration and the balances on brownfields exploration. If that helps? In terms of expense, we're probably looking at a total of about $50 million would be around $50 million would be expensed, slightly over half.

Great. Thank you very much.

Justin Brown, Business Report.

I have three questions please. I just wanted to confirm a number of fatalities that AngloGold Ashanti has sustained its existing operations and specifically TauTona.

My next question is why AngloGold Ashanti has had a higher number of fatalities at your South African operations in 2006 versus 2005.

And just my third question please is just the specific actions that AngloGold Ashanti is doing to stem the fatalities and could you please elaborate on the review that was mentioned earlier? Thank you.

Commenting to your first question, South Africa has now had 29 fatalities for the year to date and that is versus 17 fatalities for the whole of last year. TauTona alone has had 16 fatalities, of which three incidents were multiple fatalities. We had two in one incident, three in another incident, and this last incidents we had five. All three of them were seismic (indiscernible) related incidents.

If we look at 2005 or '06, I think I gave that answer already. We had 17 last year but also excepting that 2005 was an exceptional year and that we came down from 32 fatalities in 2004, down to 17 fatalities last year which doesn't mean to say that we need to go up again. But over the last few years we are still on a downward trend if you take the last five years into account. Any one fatality is unacceptable to us and it just means that we have to work harder in terms of managing the risk and preventing these fatalities from happening. I think your last part of the question I didn't catch.

What specific actions is AngloGold Ashanti planning to stem the fatalities in [TauTona]?

What are we going to do specifically coming out of this TauTona fatality? The shaft pillar mining was modeled in about 2002 and it was actually then exposed to some external parties to evaluate the appropriateness of that strategy. That was the [CSI Ore Mining Tech] and some external rock engineering consultants actually reviewed these strategies because we wanted it to be the appropriate mining design and mining strategy. They gave its okay.

What we're going to do now is invite those same parties back again and some other parties in saying, guys, what went wrong in terms of this strategy? Why did this event actually take place and cause the damage that it caused underground? That is the first part in terms of looking specifically at the TauTona shaft pillar strategy.

The second part we are also going to open our total South Africa safety strategy to external input scrutiny. So what we're going to do is we're going to call on some consultants. We're going to call on some people from Anglo-American as well to lead the process for us in terms of looking at the South Africa safety strategy and see what is there that we can actually improve on.

Okay. The review of the mining strategy, will that be specifically at TauTona or all your South African operations?

It is going to be specifically at TauTona. TauTona is doing the shaft pillar mining at this stage. It is the only operations that is mining directly within the shaft pillar. But of course there's going to be an inquiry into this as well. There's already a lot of sensitivities regarding shaft pillar mining as such across the industry and we will have to see what the implications and output is going to come from the inquiry.

What are the concerns about shaft pillar mining?

I suppose it is the number of accidents that are happening within shaft pillar mining. Although we've modeled this thing -- and I mean if you look at the stresses in terms of our shaft pillar versus the stasis and the other areas of mind -- and I'm talking about the rock spaces now -- it is very, very similar. It is more the approach -- at TauTona we are mining what we call outside the zone of influence, so the mining that's taking place there is not affecting the shaft infrastructure, the shaft (indiscernible) or our [leach] plants or anything like that. It is more in terms of I think the seismic events that we are experiencing. But I must say if you compare seismic events within shaft pillar and you compare it to other areas within TauTona, that's a very similar experience.

Thank you very much.

Ladies and gentlemen, we have no further questions. Would you like to make some closing comments?

We would be happy to conclude with that. Thank you.

Thank you very much. On behalf of AngloGold Ashanti, that concludes this afternoon's conference. Thank you very much for joining us. You may now disconnect your lines.