Anglogold Ashanti PLC (AU) 2007 Q1 法說會逐字稿

Good afternoon and welcome to the AngloGold Ashanti first quarter results. All participants are now 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 also note that this conference is being recorded.

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

Thank you, Dylan. And welcome to this presentation by the AngloGold Ashanti executive team of our results for the first quarter ended 30th March, 2007. The format of the presentation will be as follows. Bobby Godsell, our CEO, will review AngloGold Ashanti's performance over this period and offer a production and cost outlook for the Company. This will be followed by presentations by our two Chief Operating Officers, with Neville Nicolau discussing the operations in Africa, and Roberto Carvalho Silva covering the international operations. Other members of the management team present include Venkat, our Finance Director; Richard Duffy, our Head of Business Development and Exploration; [Kara Situani], Head of Marketing; Robbie Lazar, Head of our Africa Underground Operations; Mark Lynam, Head of Treasury; and Mike Birkhead, who runs our Procurement Group.

I should note that we do have a slide presentation on our website to which we will refer during the course of the call. That can be found at www.AngloGoldAshanti.com. After these presentations, we will 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 made during this presentation, including without limitations 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 of certain of our exploration and production project, and the Company's liquidity and capital resources and expenditure, contains certain forward-looking statements regarding AngloGold Ashanti's operations, economic performance and financial condition.

With that, AngloGold Ashanti believes that the expectations reflected in such forward-looking statements are reasonable. No assurance can be give than such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of, among other factors, changes in economic and market conditions, success of business and operating initiatives, changes in the regulating 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 for the year ended 31 December, 2006, which was distributed to shareholders on 29 March, 2007. 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, which will reflect the occurrence of unanticipated events.

With that, let me hand it over to Bobby. Thank you.

Thanks, Charles. March quarter saw operational performance broadly in line with Company guidance, as well as adjusted headline earnings of $97 million or $0.34 a share, nearly double that of the previous quarter due to a 4% higher price received and absent this quarter of the accounting adjustments that negatively affected earnings in the fourth quarter of 2006.

Production of 1.33Moz was just under 10% lower than the previous quarter, largely as a result of the year-end breaks in South Africa and Mali, which as is customary, resulted in fewer production [shift streams] during the first quarter of the year. Total cash costs at $332/oz were consequently 7% higher, affected in part by a reduction in the by-product revenue from uranium in South Africa and to a lesser extent, sulfuric acid in Brazil.

Our received price at $602/oz was $24/oz or 4% above that of last year's fourth quarter. At 7% below the average spot for the quarter, this was within the guidance that we had provided to the market. Our hedge delta decreased by 570,000 ounces, to 5.59Moz, notwithstanding the effect that the gold price was $27/oz higher at the end of the quarter. Assuming that gold continues to trade at a range of $600 to $700/oz, the group's received price for the remainder of the year is likely to continue to be some 8 to 10% below the spot price, as we continue to settle maturing contracts.

As we indicated last quarter, all mines are now reporting similar received prices. This quarter they ranged from $594/oz to $609/oz. The effect of hedging is less reported proportionately to the attributable gold sold, and therefore, the average received gold price for each mine is similar to the overall average price received for the Company.

In respect of operating performance, South African production declined 12% this quarter, largely as a result of the scheduled holiday breaks, as well as seismicity concerns at TauTona and reduced face advance at the Great Noligwa mine. Total cash costs were consequently 16% higher at $72,979/kg, sorry, Rands per kilogram Elsewhere in Africa, Obuasi in Ghana and Yatela in Mali both reported a 3% improvement in production. While production at the Siguiri mine in Guinea returned to more normal levels of 73,000 ounces, after an exceptional fourth quarter of 2006. At the Geita mine in Tanzania, ounces were marginally lower but total cash costs improved 26%.

Regarding the international operations, Cerro Vanguardia in Argentina posted a particularly strong operational improvement, including a 21% increase in production and a 45% reduction in total cash costs. In Brazil, production was steady at the Serra Grande mine and slightly lower at AngloGold Ashanti Brasil Mineracao. At Sunrise Dam in Australia, cash costs were held steady, despite the 3% production decline. At the Cripple Creek & Victor mine in Colorado, good cost control was also reported, with total cash costs 7% better, notwithstanding lower production.

In response to the negative trends in safety experienced last year and which have regrettably continued into this quarter, a full safety review, as -- yielded a range of new outcome-based initiatives, focusing on a range of key areas, including fatigue management, production flexibility, skills retention, culture surveys and fall of ground management. With our employees and the trade unions that represent them, this management team is committed to continually reviewing and improving our safety programs. The fact that four of our operations completed the quarter without a single lost time injury and, indeed, that our Cripple Creek & Victor mine in Colorado has now operated for over three years without such an injury, continues to demonstrate that it's possible to run large conflicts and physically-challenging operations with a very high level of safety.

Looking ahead, production for the second quarter is estimated to be 1.39Moz at an average total cash cost of $325/oz, assuming the following exchange rates; in South Africa, Rand 7.30 to the U.S. dollar, an Aussie Dollar of $0.80, a Brazilian Real of $2.12 and Argentinean Peso of $3.13. Capital expenditure for the next quarter is estimated at $319 million and as usual, will be managed in line with profitability and cash flow.

With respect to the full year end, AngloGold Ashanti is targeting production of around 5.7Moz. We've increased our original total cash cost guidance by $11/oz to the $320/oz level, based again on the following exchange -- average exchange rates for the period; of the South African Rand at $7.32, the Australian dollar at $0.79, the Brazilian Real at $2.12 and the Argentinean Paso at $3.12. This increase is mainly due to stronger local currency assumptions, as well as higher royalty estimates arising on an improved gold price outlook for the remainer of the year.

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

Thank you, Bobby.The African assets had a generally difficult quarter, marked by several exceptions, including production improvements at both Obuasi in Ghana, Yatela in Mali, as well as good cost performances at Geita in Tanzania.

Let me highlight a few of these key operating performances. As is the case throughout the country, and our history, the South African operations suffered in the first quarter from a light start to the year as a result of the planned holiday break, with production ending the period 12% lower at 17,626 kilograms. A revised mining plan at TauTona where production decreased 17%, due to seismicity concerns, plus lower ounces from Great Noligwa, where reduced face advance led to lower volumes, also contributed to the production decline for this region.

Despite good examples of cost management, particularly at Mponeng, where total cost escalation was limited to 2% despite lower production, and at TauTona, where costs were unchanged quarter-on-quarter, total catch costs in South Africa rose 16% for the quarter to R72,979/kg. In particular, Great Noligwa and Moab Khotsong posted increases of 55% and 15% after a corrosion in the volumes at the South Vaal uranium plant led to reduced inspection efficiencies and combined with low production volumes, negatively impacted our uranium by-product credit.

In respect to the rates -- to our recent track record of managing costs in South African operations, together with our current outlook for the remainder of the year, let me talk to slide number nine in the presentation, which you will find on our website. The last quarter, our total cash costs for South African operations were R62,888/kg. This was made up of direct costs of R64,607/kg and other costs of R369/kg. In addition, we had a positive contribution by by-products, primarily uranium, which reduced our production costs by R1,788/kg and to a lesser extent silver, which contributed a further R300/kg. When you compare this to the current quarter, the key difference is that our direct mining costs have gone up by R4,531/kg or 7%. After taking into account a range of cost saving initiatives, which partially offset the unit cost increase, due to the volume reduction. You will see that the loss on our uranium sales then added a further R3,897/kg, which when taken together with the positive contribution of silver, R340/kg and a small negative other cash cost amount of R284/kg, has resulted in a total cash cost for the South African operations of R72,979/kg. This is 16% up on the prior quarter.

Let me explain the key swing factors quarter-on-quarter, which you can see relates to the by-product losses which we incurred this quarter. This is a result of two things. First, as already noted, we experienced problems at our Vaal River South uranium plant. This is South Africa's only uranium processing plant, which was commissioned in 1979, which had an estimated life of 20 to 25 years at the time, and was designed to run as long as the estimated life of uranium production. With the reality of an extended life of uranium production at Great Noligwa, coupled with the positive paradigm shift in the uranium market only quite recently, two years ago we initiated a complete refurbishment of the Vaal River South uranium complex. This upgrade will see the replacement of the CCIX section, the relocation and repair of the acid storage tanks, the replacement of the [plantation] circuit of the east gold and flow plant and an upgrading of the acid protection systems. While we are about to initiate the commissioning of the five new CCIX columns, with one column coming onstream per month, until this complete, our recoveries will be adversely impacted.

Alongside the negative production impact I have just outlined, the second factor impacting our by-product loss is the fact that we have temporarily mismatches between production and sales. If I step back and look -- from this and look at the outlook for the year, you will see that our current forecasts, we are projecting total cash costs in South Africa of approximately R69,999/kg, which assumes direct mining costs for just over R68,000/kg for the year and a negative contribution from uranium of approximately R1,64/kg. I should note that this is to get -- to get this cash costs outlook, we had to realize just over R100 million worth of savings beyond that, which we have already budgeted. In the context of our reduced production outlook, particularly at TauTona, we are committed to achieving this target.

I also think that it's important to reiterate the comments that we made in previous presentations, mainly that our uranium business will be a meaningful contributor to AngloGold Ashanti from 2009. This is when we have the combination of higher volumes of production from Moab, coupled with the improved efficiencies from our plant refurbishments, we should see a uranium production rising by some 25% off of it's current base, just below 1.5 million pounds per year. We also have additional production upside with the potential to treat the Kopanang ore and we are also investigating the potential to improve our uranium recoveries using either atmospheric or pressure leach technologies. At this time, you will see an improvement in production from 2009, and we will also have rolled-off many of our long-term contracts which we have with uranium utilities. Increased production should enjoy quite a different pricing environment.

Lastly, on uranium, you will see that in our recent published mineral resource and oil reserve statement, we have uranium reserves of 1.8 thousand tons based on 35 million tons at a grade of 0.333 kilogram and there is also 58.3 tons -- sorry, kilotons, based on 93.1 million tons graded at 0.63 kilograms per ton. In uranium, that means reserves of 25.9 million tons and resource of 128.6 million pounds. This is a significant uranium inventory to which one should add our 50% share of the (inaudible) international note, which in turn, has its own uranium inventories.

Turning now to our other African underground mines. Production improved for the quarter at Obuasi in Ghana due to a 5% improvement in grade. The total cash costs, consequently, increased 9% to $397/oz, also aided by the payroll savings associated with the retrenchments completed in the previous quarter, as well as the savings from procurement initiatives. We had flagged at the end of last year that another wave of redundancies at Obuasi was likely to occur in the first half of 2007, as we continue to improve efficiency at that operation. This is likely to be effective in the second quarter and you will consequently see a related retrenchment cost of approximately $7 million for the next reporting period.

Our [domain] operations at Iduapriem had a more difficult quarter, after a gearbox problem in mill reduced the tonnage throughput by 37%, and consequentially, production by 31%. This problem has since been involved and it's anticipated that production at Iduapriem should improve significantly in the next quarter. Total cash costs, which rose 23% in the first quarter, should also recover.

In Namibia, our Navachab mine reported steady production quarter-on-quarter, with higher tonnage throughput offsetting the effect of a low recovered grade, although the increase in labor and explosive costs, nevertheless, pushed the total cash costs up by 21% to $368/oz..

Production at Siguiri in Guinea returned to more normal levels in the first quarter of 2007, declining 5% to 73,000oz. This, combined with higher royalty payments linked to the rising gold price, resulted in an 11% increase in cash costs. The Malian assets had a mixed quarter. As I mentioned, production was 3% at Yatela and total cash costs remained unchanged at quarter-on-quarter at $223/oz. At our other two Malian operations, their low recover grades led to production decreases of 15% at Morila and 38% at Sadiola where an increased (inaudible) portion of sulfide ore is being treated. The total cash costs, consequently, rose by 13% at Morila and by 54% at Sadiola.

Turning to East Africa. A shutdown in the primary crusher planned for maintenance led to a reduced tonnage throughput at Geita in Tanzania, and consequently, a marginal production decline to 78,000oz. Total cash costs higher have improved 26% due to lower expenditure on equipment rebuilds and contractor services.

Regarding the partial slope failure at the Nyankanga pit in January, work continues on optimizing the new mine plan, with Geita on track to produce some 400,000oz of gold this year. We are busy refining a new mining plan, which has the following key elements -- and I refer to slide number 13 in the pack with this presentation. Given that broken rock from the failure has temporarily covered the high-grade ore in Cut 4, which would have been mined this year, the accessible portion of Cut 4 has been redefined and mining is currently continuing there, yielding the remaining high-grade ore through 2007 and early into 2008. That's of the 400,000oz of gold that we expect to come out of Geita this year, almost half of it will come from the Nyankanga Cut 4.

Cut 5 has also been redesigned to stabilize the pit wall post the failure. This has delayed access to some of the higher-grade ore in Cut 5. Our strategy is to mine down Cut 5 as fast as possible, which will see us mining the remainder of the high-grade ore through next year. Cut 6, which includes the failed area, has been redesigned with a focus on exposing all of the high-grade ore in Cuts 4 and 5. Cut 6 will mine out all of the broken material from the failure. This is a precautionary measure. We have in the interim -- as a precautionary measure, we have in the interim reduced Cut 6 slope angle to 38 degrees to reduce the risk of further failures. Detailed [gear] technical design work is currently underway to optimize final slope design of Cut 6. I should note that mining in Cut 6 started in March of this year and is expected to reach the high-grade ore by the end of 2009.

Over the next several months, we will continue to work on detailed designs and mining schedules for the Nyankanga pit, and once we have completed our full business planning cycle across all of our operations, which will be finalized later this year, we will guide the market accordingly on AngloGold Ashanti's 2008 production costs and CapEx outlooks. As things currently stand at Geita, I'm encouraged by the significant work done to date and I'm hopeful to increase gold production next year.

Safety is always high on the agenda of any mining company, and we are no different, especially when we perform badly by our own standards. This past year has been a difficult and traumatic one because of the number of people that have died in our operations. In Africa, both the underground and the open-pit regions have addressed the problem seriously at the highest level.

Following immediate actions to heighten awareness, both regions conducted analyses of the type of accidents occurring and a gap between the current and the desired safety status. These analyses led to -- led the regions to conduct high level workshops where plans were made in three broad categories; safety systems that need to continually improve, engineering solutions which attempt to design-out risk, and the safety mind-set, which includes items like fatigue, that influences peoples ability to work safely. In each of these areas, appropriate action plans have been initiated and the first signs of improvement have started to flicker on some of our mines.

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

Thank you, Neville. The international operations (inaudible) posted solid performance. Look at -- first to Australia. Our Sunrise Dam mine reported strong results for the quarter despite a planned mill shut-down, resulted in lower tons and consequently slight production decline to 148,000oz. Mining continued this quarter in the high-grade area of the mine. However, and a total cash costs -- we are steady quarter-on-quarter at A$381/oz.

It is also very pleasing to report that Sunrise Dam Emergent Response Team excelled at the recent Westinghouse Trainer (inaudible) Mines Rescue Competition, taking first place in Team Safety, second place in Hazardous Chemicals, and first place in Theory, while winning awards for Best Captain and Best New Team.

At our North American operations, CC&V in Colorado, gold production was 64,000oz or 26 lower quarter-on-quarter, after ore was placed at a greater distance to the leach-pad liner, as planned. Recoverable gold placed was 5% higher than the (inaudible) and gold production is projected to increase as the year progresses. Cash cost of $242/oz was 7% improved over last quarter, due to cost management and additional gold placed, as well as lower contractor costs.

Looking across to South America, I'm very pleased to report that Cerro Vanguardia in Argentina had an excellent quarter with production up 21% to 32,000oz to higher feed grade. Also cash costs consequentially improved $0.45 to $188/oz and also due in part to lower maintenance costs and a higher silver by-product credit. I should note that this -- higher grades at Cerro Vanguardia was consistent with the mining plan sequence and should remain at or near these levels for the rest of the year.

At AngloGold Ashanti Brasil Mineraco, production decreased 4% to 66,000oz, reflecting a mix of performance in the quarter. At Cuiaba mine, production was 6% higher, after some related ore at the (inaudible) plant was used, for their [tech] of expansion [and stock-up] at the mine. At Corrego do Sitio, the heap leach operation was affected by the heavy rainy season this year. Looking forward, production for next quarter will increase as a result of the Cuiaba expansion project mine tonnage ramp-up. Total cash costs AngloGold Ashanti Brasil Mineraco rose 8% to $207/oz, due to a lower acid by-product credit, net received price.

Production at Serra Grande was again unchanged, quarter-on-quarter at 24,000oz, but the rising power costs and increased treatment of lower-grade materials pushed up costs by 13% to $233/oz.

I will now hand it back to Charles.

Thank you, Roberto. Just before going across to Dylan to take your questions, let me just correct one thing. And that's our hedge delta currently stands at 9.59Moz, to which Bobby referred. Thank you.

Thank you very much, sir. (OPERATOR INSTRUCTIONS) Our first question comes from Victor Flores of HSBC. Please go ahead, sir.

Thanks. Good morning. I have a question with respect to Obuasi. I'm glad to see that the grades in the underground are moving up somewhat. Could you give us a sense of why that happened? And if you have identified some of the issues surrounding the lower grades in the past quarters? And whether we can expect that to continue or perhaps improve in the future?

This is Robbie Lazar speaking.

Hi, Robbie.

One of the reasons why we've seen in increase in terms of the grade is that we are mining less dilution. So our quality of mining in terms of the drilling, in terms of those (inaudible) has improved significantly through a process of systems that we have put in place there. And we see that continuing. I mean, we are constantly on the lookout in terms of how can we improve the yield further in that operation in terms of finding higher-grade areas. We've definitely seen that the yield that you've seen this quarter -- or last quarter can be maintained.

Just a follow-up then. So you think that the primary issue has been -- has been dilution at Obuasi?

Yes. You will actually see that there's been a slight drop in terms of the volume but the yield has improved.

Okay. Great. The second question also goes to Obuasi. Could you give us an update on the status of Obuasi deep?

We have just completed the scalping exercises in terms of Obuasi deep and from that, a decision was made to go into the feasibility study. We are busy with the feasibility study at the moment. I have a dedicated team that's looking at that. And our intent is to go to the April board with the feasibility study.

And has that changed materially from previous thoughts about how to develop the mine?

What was the question? Just repeat the question.

Yes, has this feasibility basically -- approaching the development of the ore body in a similar fashion to what had been proposed earlier?

We are looking at different mine designs and that's probably feasibility study in terms of considering different mine designs and how we are going to access that ore body. But the intent of going down to on a -- sort of a piece meal -- pay-as-you-go type situation, that we'll put down the shelfs down to -- that's the proposal on the table at the moment -- down to 60 levels. But the long-term intent is take the shelfs down to 100 level. And that will be shaft on (inaudible) side and at the [Ashanti] side of the ore body. Just a correction, when I talk about the April board, I'm talking about April 2008.

Oh, okay. Great. Thank you very much.

Our next question comes from Muneer Ismail of Deutsche Bank. Please go ahead, sir.

Good afternoon, guys. Neville, I'm not sure if this is for you or Robbie Lazar. But just looking at the health and the safety problem. It doesn't look good and you guys recognize this, I appreciate. 14 employees lost their lives in this quarter alone, but just looking at the proportion of people that were killed by fall of ground accidents or potentially seismic-related accidents, it is a small proportion of that 14. I'm just trying to understand. I mean, the [dark] rates of production for the year is primarily off the back of increased health and safety risk in South Africa. Now if that's associated with seismicity, but not a lot of it did come from seismicity. I'm not sure why there is this strong focus on seismicity now and pushing that forward as a reason for the reduction.

No, the -- Muneer, it's Neville, here. The reduced number of deaths in seismicity is encouraging us that the -- the work that we are doing at TauTona is effective. And it slowed down the mining rate to a rate which is less -- the seismicity has less effect on the working places at the rate that we're going now. So actually, that's a sign that we got it right. It does concern us, however, that the high number of non-rock related in this first quarter. And I mean, it's focused our attention in looking at fatigue management, mind-set of people, the distances that people travel, the circumstances underground. We've redirected our efforts in this regard. But having done that, we still have to look at the engineering aspects, which fall of ground management, management for seismicity, engineering out risk operations continues. I think going down both of these routes will improve our safety as we go forward.

All right. Thanks for that.

Our next question comes from Barry Cooper of CIBC. Please go ahead, sir.

Yes, good day, everyone. My question relates to Sadiola. I was just wondering with respect to kind of a medium term and then the longer term outlook; obviously some issues with the sulfide circuit there. How is that changing your views for the deep sulfides? And indeed, is there anything that we should kind of look for this quarter as being a foreshadowing of what might be happening sulfide deep portion?

Well, for the short term, the -- the recovery at Sadiola decreased dramatically early in the quarter. And following our investigation and laboratory work and test work onsite -- essentially what we found is the oxides going through the plant are being treated at high recoveries, as they always have been. And the low-grade sulfides that go through the plant are also effectively treated by the plant. It's the high-grade sulfides -- and this is similar to the deep sulfides, which has a lower level of recovery. And as a result of that, we -- we've twin streamed the plant with oxides and low-grade sulfide and currently we are stockpiling the high-grade sulfides.

If we look at our detailed figures, in fact, our mining figures in terms of taking gold out of the pit, we have actually increased the amount of gold quite significantly. But it's being stockpiled at the moment. The problem with the high-grade sulfide materials is very similar to the problem that we -- we see with the deep level sulfides. And the one factor that has been very important in deciding whether we go ahead with the deep level sulfide project has been the recovery, which is -- in the first work, in the sort of low 60% recovery. What we are finding now is that the work that we have done to improve that recovery, in terms of gravity separation and intensive cyanidation the solution to our short-term problem and to the long-term deep sulfide problem. What that means is that we are putting gravity circuits and intensive cyanidation this year and we are hope to be able to treat the high-grade sulfide stockpiles by the end of this year. And we will see a continual improvement this year in terms of the recoveries at Sadiola.

In terms of the project, the deep sulfide project, work continues on this project. We are in pre-feasibility stage, which is where we play different options and different mine concepts up against each other. We are quietly confident that we will take this project forward but there's still a lot of work to be done. We hope to be able to take a pre-feasibility study to the mine's October board with the view of possibly starting this project early next year.

Great. That's a great run-down. So basically what I interpret from that is you have got a large-scale bench test that you can undertake here with the material that you are removing from the pit right now?

Yes, that's essentially right. Yes, that's right, Barry.

Okay. Thanks a lot.

Sure.

(OPERATOR INSTRUCTIONS) Our next question comes from John Bridges of JPMorgan. Please go ahead.

Hi, Bobby, everybody. I was just wondering with the extra focus on the safety and health, particularly in South Africa, do you see that rolling over into the other operations and continuing to put down pressure on production? Do you see any sort of floor, in terms of SA production, or do you see continued deterioration?

I -- the South African mines in general -- the current operating mines have a downward trend in the grade expectations for the future. And they do get further and further away from the working prices. But we do have Moab Khotsong coming online, which will contribute positively to the South African situation. I don't think the current safety issues will, as you say, make the South African mines continue to get worse. I think this is an issue which the management has addressed. We had seen positive signs in terms of improving safety trends. We'd like them to be quicker but they are positive. And we should be able to get South Africa back on track quite quickly.

What I'm trying to pin down is -- is this trend that we are seeing across world, in terms of gold supply coming to the market and having an impact on gold prices. I'm just trying to get a sense to where SA production is going to go. And if there's any impact from a bigger focus on safety and health on supply.

This is Bobby. The supplement -- I think for South Africa is quite important to not conflict an event at TauTona, where we had a major seismic accident, which caused us very consciously to reduce the rate of mining by 25%. That's a particular machine and we have taken it down by 25%, inevitably in high-grade panels --and so there's a greater than 25% reduction in gold production. My experience here over the last 10 years doesn't see a negative correlation between safety and production at all. It is quite the reverse. I mean, when you are mining to plan, when your systems are working, when you have the right technology and when you have well-motivated production teams, good production and good safety go together. And I just say -- absolutely, I see no, in a way, [contingent] from a South African concern about rate of mining at TauTona from seismicity to production levels in the rest of the Company.

Overwhelmingly -- now if you turn to your gold appreciation about gold supply into the market, I think if you look at the gold [mazes] at any rate -- and not only the mazes for that matter -- what we are seeing is great [for time]. We are seeing material ore bodies. We are seeing, perhaps, declining grade and production and increasing costs as mines do mature and get some distance increase. So I think production is going to be under pressure but not from safety reasons, but for the reasons that I have just outlined. The mind-set of this team is that when management and workers developed plans that have credibility and integrity and work to those plans, production goes well, costs are well-managed and safety is better. Honestly, the four mines that completed the quarter without a loss time accident in different parts of the world, by the way, and with quite different social conflicts completely indicates that.

Okay. Thanks for clarifying that. And then on the bigger picture, did you see South African production stabilizing anywhere? Or do you just see continued depletion as grades come off?

Well, again, I will offer you -- what our agreements -- look to both Neville and Robbie to come in and agree or disagree with me. It's interesting and complicated question. First thing, we have a brand new parameter. We have a parameter of 150,000 ramp kilogram price. Honestly, we haven't seen anything close to this. I mean, in the time that I've been around, and that's a good 20 years. So you have got a new cash parameter. You've got strong cost pressures, you've got grade decline. The price parameter has caused this Company to contemplate growth in the sense of thinking about a Moab Khotsong phase two, thinking about a further deepening to Mpongeng. What is true is that this is mainly an extension of life. It's mainly extending layers of production into the future, rather than increasing levels of production. So I think, in a way, what you're going to -- what it's going to pay off is declining grades and ore body exhaustion on the one hand and organic growth on the other. And it will be ore body specific as to whether the one trumps the other. And in aggregate terms for South African production all together, I don't know. What I do know is if you think of total ounces expected to be mined for the rest of the life of existing ore body, it's great -- in that measure, in South African ore bodies.

So if the gold bidders are out there looking for a big supplier response from South Africa, they are going to be disappointed?

Yes. The South African -- the AngloGold Ashanti South African gold assets are likely to be at or about the levels they are now for at next four to five years and there is a decline after that. And we are aggressively looking at opportunities to fill that gap going into the future. And we have real opportunities in organic growth to be able to fill that gap.

Where would those opportunities be?

Moab Khotsong phase two design plots project is a major area, the carbon leader reef at Mpongeng below 120 level, and other places. There's parts of the Great Noligwa that are coming into it, there's Kopanang going out into the Southeast. So there are extensions through our current ore bodies that we are busy looking at the feasibility of now.

So the lead times actually work? We gotten used to lead times of eight to ten years.

Well, the project -- what we do is, once we have drawn out our loss of mine plans and we know where they are going down, we then know when we have to start producing gold in those areas. And that determines the rate at which we do the project work so that we maintain the profile. So we are very aware of the time that we have. And we are aware of the level of resource that we have to allocate to each of these projects to be able to bring them online.

John, maybe just a statement. Maybe confirming what Neville is saying. With understanding -- the South African content, not just within AngloGold, if we are looking for more gold in the future, it means going down deeper. And the projects that Neville is talking about is all below current infrastructure, except maybe for the (inaudible) area. But there is -- it is going to stabilize out for the next few years, but then there is a downward trend. Because we have maturing operations, some of them coming to the end of their life, unless we have these capital projects to prove in terms of going deeper into the future.

Yes. Don't misunderstand me. I'm just trying to dig down into mine supply because the gold rush just doesn't seem to be reacting to this fall off in mine supply. Thanks anyways, guys. Good luck.

Our next question comes from Steve Shepherd of JPMorgan. Please go ahead.

Good afternoon, guys. This is a question for Bobby. Over the last two years, Bobby, our analysis shows that all the major gold producers have underperformed bullion in terms of their stock price, that includes Barrick, Newmont, Goldfields, Harmony, yourselves. I'm just -- just say to you, why? And what do you think CEO -- super-major gold mining CEOs can do about this? And how do you see this in the context of a full failure of 20 gold mines in nine countries on four continents?

10 countries on four continents.

10 -- sorry.

You could do my job well.

I doubt it.

Now absolutely fair question. In broad terms, I think the fact of the matter is that costs have increased, at least as fact and in -- over periods faster than the price, margins have reduced. And the higher prices have not translated into higher levels of earnings for gold mining companies. And I think that's why they have disappointed and -- and have done -- have done better to hold physical bullion. In the case of AngloGold Ashanti, I think since October of 2005, there's been an additional factor and that factor has been that from October 2005, a 51% to 52% holder of this Company announced its intention to sell. So we've had an overhang. Its not possible to quantify the impact of it -- the overhang with any great precision. I think that the -- what -- my own sense is the overhang has been -- it doesn't seem to existing holders to increase their holdings and to new holders to come in. I will say that in the sense that they have been waiting for an opportunity to buy in at an attractive price, which they believe one, two, or three forms of Anglo [exit] would provide them with. And that -- that continues.

I just would say to you that in 2006, our earnings increased by 105% and the gold price increased by 36%. And that's [during] -- and that's the reason that you go out and buy ore bodies in 10 countries on four continents. And you buy management with a strange range of accents which are difficult to understand, particularly on teleconference. You do it for the [gearing]. You do in the belief that the price going up is going to see the earnings go up even greater. I don't -- I'm not just trying to be funny. I'm trying to be funny at the end of my long day. But there's no reason why a well-managed gold mine should not be able to gear its earnings towards increasing price. And that's absolutely the aspiration of this Company. For gold mining companies, I think the two reasonable challenges -- manage your costs so that margins improve rather than -- than decrease and find more ounces. If you can do that, then you are able to compete with an [ETF] hold, the holding of physical bullion, in that you are able to offer people much greater uplift than the fixed increase on price on a fixed number of ounces.

That's an interesting answer. Profit gearing is one thing but you don't buy profits. You buy the share price, don't you, Bobby? And the share prices haven't responded.

Yes.

I kind of wonder if people are starting to question if this 'big is beautiful' thing is the right way to go, because so many of you are battling to replace your ounces with exploration and so there seems to be a tendency to go out and buy acquisitions at premium prices. Do you think that might be a factor? Do you think big is beautiful? What do you think about that?

I've never though big is beautiful. Not in particularly -- as defined by production units. I mean, I think for General Motors to be obsessed by the number of cars that they sell rather than their margins or their revenue is absolutely crazy. We've looked at size in a financial sense rather than in a production. This Company started with 7.5Moz and we have gone down. That doesn't worry me one iota. What worries me is that if we plan to produce certain ounces and we have a cost structure and we don't meet that plan, I worry about earnings growth. And that's where we're going.

And what's interesting is that though the 1980s, I think perhaps you would agree with me, gold -- the share prices of gold mining companies, particularly North Americans, rose in a way that was quite unconnected with their earnings. I think that there's a reconnection taking place now between earnings and share price. Not an immediate and week by week, day by day reconnection. I think that's healthy. I think the winners of gold equity companies are going to be those that can show that they are producing real earnings and earnings growth. And that will be reflected in their share price over time.

I understand the importance of the share price, but I don't fix the share price. I and my management colleagues determine whether we mine gold, profitably and safely. That's our job. I'm quite convinced that if we can do that, our share price will reflect this in due course. I think getting the (inaudible) overhang which will happen soon, in my belief, out of the way, will just remove a distraction from the fundamental equation.

Thank you, Bobby.

Buy the shares.

Our next question comes from Matthew Hill of 'Mining Weekly.' Please go ahead.

Good afternoon. Just a question on your hedging strategy. You've obviously dehedged quite a bit this past quarter. I'm just wondering how much do you plan to dehedge for the rest of the year? And maybe next year? And also where you see the gold price at in the next couple of years?

We will get Mark Lynam to answer that question. Dylan, if could you could connect him -- he is patched in on a separate line. It will take a few seconds to do that. Thank you.

Mark Lynam is in talk/listen. Thank you.

Hi, Matthew, it's Mark. We have no set target at the time that we will unwind. We opportunistically bring down the hedge book when the prices allow it. But even just delivering into hedge books, allowing the contracts to mature over the next three years, in itself will bring down the hedge book by almost a half, by over 4Moz.

With regard to the outlook on prices. We have a positive outlook. Again, we don't have a specific target price, but we believe the factors -- some (inaudible) factors in the market are very positive for us. We certainly see the opportunity for gold to trade and stay north of $700 over the next -- in the medium term.

Great. Thank you very much. And then just one other question, if I may, about Angelo American's stake and them getting rid of that; last year Tony Trahar indicated that it might not be in Anglo American -- the shareholders best interest to exit it quickly and they were probably looking at about two or three years. What are your thoughts on this?

I mean, I would refer you to the remarks made by the new CEO at her first major speech, which I'm sure she will be repeating in Dublin next week.

Okay. Yes.

Where she said it was the intention to exit within two years.

Okay.

And so it's a confirmation of the original strategy.

All right, thank you.

Ladies and gentlemen, our final question comes from Nicky Smith from 'The Financial Mail.' Please go ahead.

I have a question for Bobby, which goes over a bit with what Matthew said and further, on a comment that you made to the guy before Matthew. You said you believe the overhang will be gone quite soon. Could you expand a little on that thought for us, please?

No. There's two years in this question and you can sort of make of it what -- I'm not -- I mean, I'm being unhelpful because unfortunately, I don't push that particular button. I think it's in the interest of both companies, Anglo American PLC and AngloGold Ashanti that this should be sooner rather than later. And I think that's the spirit in which both companies are approaching the exit.

And have you spoken to Cynthia Carroll specifically on this issue?

I speak to our key shareholders all the time.

Is that a yes?

Well, why don't you decide?

Thank you very much.

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

Joining in the spirit of my CEO's comments, no. So we thank you for the call.

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