Anglogold Ashanti PLC (AU) 2008 Q1 法說會逐字稿

Good afternoon and welcome to the AngloGold Ashanti Earnings Results for the first quarter of 2008. 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 and welcome to this presentation by the AngloGold Ashanti executive team of our results for the first quarter ended March 31, 2008.

The format of the call will be as follows. Mark Cutifani, our CEO, will talk through an overview of the rights issue that we announced this morning, review AngloGold Ashanti's performance over the quarter, including progress made on the initiatives outlined at our year-end results presentation, as discussed in early February with the market. This will be followed by Venkat, our CFO, who will discuss our financial performance. And then Richard Duffy, our Head of Business Development and Exploration, will provide a brief update on our exploration strategy and talk to our most recent exploration discovery at Colosa.

Other members of the executive team are present, including Chris Lodder, who heads up our exploration in the Americas, and our new Head of Global Exploration, Dr. Roric Smith, are both -- are also with us here in Joburg today.

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 limitation those concerning our strategy to reduce gold hedging, including the extent and effects of the reduction, 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 at certain of our exploration and production projects, the completion of acquisitions and dispositions and the Company's liquidity and capital resources and expenditure, contain certain forward-looking statements regarding AngloGold Ashanti's operations, economic performance and financial conditions.

Although the Company 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 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 operational risk management. For a discussion of such factors, refer to AngloGold Ashanti's annual report for the year ended December 31, 2007, which was distributed to shareholders on March 31, 2008.

AngloGold Ashanti undertakes no obligation to publicly update 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.

In connection with the proposed merger transaction involving AngloGold Ashanti and Golden Cycle Gold Corporation, AngloGold Ashanti will file with the Securities and Exchange Commission a registration statement on Form F-4 and Golden Cycle will mail a proxy statement prospectus to its stockholders, and each will be filing other documents regarding the proposed transaction with the SEC as well. Before making any voting or investment decision, investors are urged to read the proxy statement prospectus regarding the proposed transaction and any other relevant documents carefully when they become available, because they will contain important information about the proposed transaction.

The final proxy statement/prospectus will be mailed to Golden Cycle's stockholders. They will be able to obtain a free copy of the proxy statement and prospectus, as well as other filings containing information about AngloGold Ashanti and Golden Cycle, without charge, at the SEC's Internet site at www.sec.gov. Copies of the proxy statement and prospectus and the filings of the SEC that will be incorporated by referencing the proxy statement can also be obtained without charge by directing the request to the Investor Relations personnel at AngloGold Ashanti at our various locations, as well as to the offices of Golden Cycle Gold Corporation in Colorado Springs.

With that, let me hand you over to Mark Cutifani.

Thank you, Charles. Last quarter I spoke at length about my first impressions as new CEO at AngloGold Ashanti. I outlined why I thought the business was not delivering to its potential and I set out the steps we were taking to drive accountability, with a new leadership structure and improved performance through the business.

Today, I am pleased to say that these first quarter results speak to the fact that we are starting to see some progress from these early interventions. However, before I discuss the results, I would like to talk to you about the proposed $1.6b rights issue that we announced this morning.

In short, I believe that this creates the potential for a step change in delivery and the timing of the delivery of our strategic objectives. So, why are we doing this? I made it clear last quarter that I am no fan of hedging. We are firm believers in the outlook for gold and therefore, as we look forward to a sustained high gold price environment, it makes no sense to retain a substantial hedge book, particularly one with committed prices that are not attractive when compared to our cost base.

On that basis, we have been assessing the options open to us to execute a meaningful reduction of the hedge book, in a manner that does not compromise our ability to deliver on our growth objectives. To date, we have been primarily focused on aggressive delivery into the hedge book and this quarter I am pleased that we have succeeded in reducing the net hedge delta by well over 1m ounces.

That certainly represents progress, but we would much prefer to deliver a more fundamental step change and deliver one quickly. However, any more radical solutions comes with a substantial upfront financial cost that would stretch our balance sheet and limit our flexibility to deliver on our growth initiatives. Therefore, we believe an equity issue is the most effective solution to provide meaningful acceleration in our objectives around the hedge book, whilst maintaining the integrity of our asset portfolio.

We are not looking to raise the maximum amount of capital that we believe is available. By contrast, we are seeking to raise the minimum amount that enables to state that we have financial flexibility to materially address the hedge book whilst retaining confidence in our ability to fund all of our capital projects. By structuring this capital raising by means of a rights issue, it also ensures that our shareholders have the ability to participate and are not forced to dilute their interests. The rights issue structure also helps to explain why we are willing to issue equity at current prices.

We do not believe that we are currently at an attractive share price level, quite the contrary. However, we do believe that it is the right time to address the hedge book, given the nature of our hedge book, our gold price outlook, the structural costs across the industry and the opportunity created by the gold price weakness over the last few weeks.

So, what are we going to do with the proceeds? In summary, we intend to use the proceeds to bring down the size of our hedge book to around 6.25m ounces, primarily through the early settlement of certain contracts that are currently due to mature in 2009 and 2010, during the course of 2008, in addition to settling contracts that will mature in 2008. We also intend to undertake some restructuring around the rest of the hedge book, in order to improve gold price participation from 2010 onwards. If executed successfully, and assuming a gold price of around $900 per ounce, that would result in us realizing a discount to spot of around 6% in 2009 and at around that level from that point onwards. I believe that delivers on our objective to meaningfully address the hedge book.

Critically, we will also have the capacity to ensure that we continue to give full support to our existing capital projects, as well as other growth initiatives such as in Colombia, where today's announcement about our tremendously exciting discoveries there gives me a huge sense of optimism about prospects going forward.

This rights issue is fully underwritten and the EGM is scheduled to take place on May 22, 2008, where we will be looking for support of 50% of our shareholders, plus one vote, to execute the strategy. To date, we have the support of several of our leading long-term shareholders, with approximately 35% of our shareholders voting in favor of the proposed rights issue or indicating they will vote in favor of the proposed rights issue. In addition, AA plc has indicated they will extend their lockup to until October.

Turning back to results, as I mentioned in my introduction, I am pleased that we are already starting to see some benefits from the initiatives announced last quarter in terms of the business, although I believe there is much potential left to be unlocked.

Let me start with the key highlights. First, on safety, since our Safety is Our First Value campaign, which was launched in November 8, 2007, we have recorded an 80% decrease in fatality frequency rates in South Africa. While we believe it is still too early to attribute the full reduction to the new program, we do believe that the heightened awareness around safety issues and the direct link people are making to our seven key strategies that Johan Viljoen and Robbie Lazare have driven in the South African operation in particular is making a difference.

The key going forward will be to maintain the central focus on safety, both through management messaging and actions, and to continue the specific risk work through the key strategies. We are very proud of the effort and commitment of our colleagues and we are also very cautious on declaring that we have crossed a new threshold. There is much work still to be done. And in seismically active ore bodies such as the West Wits, we have to continue to proceed with diligence and due care.

On the production front, our production of 1.196m ounces for the quarter was some 9% above our guidance, mainly due to the strong performance from South Africa operations, post the Eskom crisis. Under Robbie's leadership role with our industry colleagues, and with labor and government, combined with Johan's exceptional operating leadership, we have turned the power adversity into opportunity, with the focus on improved efficiencies to utilize less power turning to our advantage.

While total cash costs of $430 an ounce was an improvement on our guidance of $467 an ounce, unit operating costs remain a threat to us, as it does for everyone in our industry, as we are experiencing significant increases in power, steel, reagents, materials and contract labor costs. We are managing these challenges and we will continue to maintain our focus on our competitive cost position and continue focusing on delivering on the improvements against structural costs that we have compared to our competitors.

Adjusted headline earnings of $105m was up significantly on the prior quarter's $18m, which was also ahead of our guidance framework. This was in spite of the hedge book discount that we saw in the quarter. These improved earnings reflect prior realized gold prices, reduced costs and marginally higher volumes.

On the hedge book, we undertook to reduce the book by some 2m ounces through the full year by delivering into all maturing contracts. I am pleased to say that we have aggressively begun this undertaking, reducing the net delta hedge by 1.14m (sic - see presentation) ounces to 9.25m (sic - see presentation) ounces, notwithstanding the higher gold prices, while reducing actual commitments by some 1.2m ounces during the quarter.

At the same time, we have delivered a price discount of some 18%, which is at the low end of our guidance. This is a great credit to Venkat, Mark Lynam and the treasury team, to achieve both results.

On growth, good progress has been made on our Boddington project and the project appears to be on schedule for target, late 2008 commissioning, with 2,009 ounces delivered. In addition, cost estimates still appear to be in control.

A new and very exciting development is that we are today announcing the first drill results from our 100% owned La Colossa prospect in Colombia, with 4.9m ounces on inferred resources. This represents the first significant gold porphyry discovery in the Colombian Andes, followed by our Gramalote project which yielded a mineral resource of 2.12m ounces at the end of 2007.

Richard will talk to this discovery in greater detail. Suffice to say that our exploration colleagues have done a spectacular job in what I expect will become a significant component of our growth profile going forward.

On the asset review process, the team has come back with a range of recommendations which include initial scoping on optimization strategies for Obuasi, Siguiri in West Africa, together with Geita in East Africa. We have also embarked upon an asset disposal process in Mali. I should note that though we are sellers we are only sellers for value and thus, if we cannot realize our target value, we will be more than happy to remain committed joint venture partners.

In the previous quarter, we flagged our iron ore potential in Brazil and I am glad to report that we are starting to drill, to fully understand this potential. I would expect to report back on progress and our thoughts on value at our Q3 results presentation.

In South Africa, the West Wits region, we have received a number of expressions of interest in our uranium tailings resources, which we are exploring with interested parties. Our objective is to monetize the asset through either sale or joint venture development. We remain focused on extracting the maximum value from our asset portfolio, which works with our focus on capital deployment optimization as an avenue to improve returns.

Turning to the quarter's operational performance in slightly more detail, and starting with South Africa, gold production reduced 11.5% to 15,498 kilograms, up -- as against the previous quarter, following the power shortages and the slower buildup from the year-end break compared to the December period. This was, however, 19% higher than the guidance provided in February, following the improved power management, with Mponeng standing out as the most notable local producer, with production down only 3% against the previous quarter and 23% above guidance.

Total cash costs for South Africa were only 1% higher, at ZAR88,000 per kilogram, primarily due to the lower gold production, partially offset by lower byproduct losses incurred. This is a credible effort, given the production situation and the pressure we were under on the power side. Robbie and the team are commended for a great effort.

At the other African assets, we had a mixed quarter. Production at Siguiri was 12% higher than the previous strong quarter's performance and both Geita and Obuasi have shown improvements in their previous performance. And we still have greater potential -- and still both have greater potential to be significant contributors to the Group. I will talk in more detail on Geita and Obuasi in terms of bringing these assets to their full potential.

The Malian assets had a difficult quarter, with Morila down due to the lower feed grade. Sadiola's tonnage throughput was reduced owing to treatment of sulfide ore, while Yatela's production was down due to a decrease in both tonnage and recovered grades. At Morila, we have now passed the operatorship to Randgold and I am looking forward to see the new energy that Mark Bristow will bring to this operation and how he turns that energy to improved performance.

The international operation has had a challenging quarter, with production decreasing quarter on quarter. At AngloGold Ashanti Brasil, production declined as planned, following the high tonnage treatment of the Cuiaba Mine the previous quarter. At an operating level, production was impacted through backfill constraints, lower availability of the operation's production fleet and the decision to implement some additional rock mechanic precautions.

Ron Largent, who you know was only appointed a couple of months ago or three months ago, and his team are now working through key operating issues at each mine, in addition to assessing improvement opportunities. And as a side note, Ron was actually part of the asset review team and so he comes equipped with a lot of ideas in terms of how to take the operations forward.

We are now operating on a set of new -- we are now working on a set of new operating standards that will become the basis for our short-term improvements, which is consistent with the new framework we need to implement across our global operations, to build a sustainable operations improvement program.

During the previous quarter, the South African power situation was the most urgent issue we needed to manage, to meet our target production schedule. The issue represented a net reduction to production of 400,000 ounces for the year, with 200,000 ounces expected to be lost in the first quarter, due to the dead stop imposed in January, and the remaining loss of 200,000 ounces averaged over the balance of the year.

I am pleased to say that our approach to managing this crisis has worked well for us. Let me elaborate on what South Africa operating colleagues did to bring us back to full production, using reduced power.

We did not react drastically, to the detriment of our operations, by cutting development, which is critical to the future revenue. Nor did we cut employees or accept that we had to operate at a lower production rate. However, we worked around the clock to adapt our operating plans to the 90% power constraint and we focused on what the likely scenarios were for us going forward.

At the same time, we accelerated our initiatives to reduce power consumption across a range of areas. Under the leadership of Johan Viljoen and his team, we worked with Eskom, unions, government and their employees to find solutions to the problems. And although we stopped our surface operations on a stop/start basis, we believe that we pushed most of the right buttons, navigating through the crisis.

Our South African team applied their minds and implemented some of the following steps to minimize our power usage, while maintaining the focus on production. We adopted a rotational rock hoisting system, which means that we actually selectively operated one operating hoist per production region. Times were allocated to each of our seven South African operations and the leaders were then charged with the responsibility to optimize their operations within this context. They each did an exceptional job. We are one of the only South African deep-level gold miners to have generators in place at all of our operations and we have used our generators to balance the power load and minimize the Eskom supply during critical peak areas.

At our metallurgical plants, we reduced our mills to manage the load while building stockpiles to process on an opportunistic basis. As a consequence, we are well positioned to continue operating well into the second quarter off some of these stockpiles. Among our 5,200 residential properties, we load shed on weekdays for two hours and accelerated the conversion of low-voltage bulbs and other internal power improvement initiatives.

As you can see, everyone at AngloGold Ashanti played their part. And for us, I think it was a very clear demonstration of what we can do as an organization and as a team in delivering improvements within the business. And for us to effectively deliver a 5% power efficiency improvement that is sustainable and provides a platform for another 5% improvement next year, and a further platform for a longer-term 15% improvement, I think it was very important for the team to see what it could achieve; and so I am very optimistic about our improvement strategies on a whole range of fronts, going forward.

To the communities in which we operate we owe a debt of gratitude, and to all of our employees. And we know some of the people are listening to this call, so we would like to thank them for their cooperation and support, and certainly for the demonstration to everyone that we can actually make significant changes when we apply our minds together.

During late March, Eskom increased its power allocation from 90% to 95%. And I have to say, we were the first company to actually achieve the increased allocation, as we were the first company to submit our proposals as we'd been working on these plans for some months. This ultimately means that we need to reduce our power consumption by around 3.5% to effectively run our operations at 100% production capacity.

As I said, we will have 4.5% efficiency reduction by the end of the year. The projects include replacing dewatering systems at Moab with more effective U-tube systems that use a U-tube system to remove water in a process that is very power friendly. This is expected to reduce Moab's electricity consumption by at least 3.5 megawatts, or approximately 1.3% of the total S.A. energy usage.

There are a number of other projects in process and I'll talk to some of those just now. At Tau Tona mine in the West Wits region, we have successfully rolled out Hilti electric drills in all our stopes, replacing low electrical efficiency compressed air units. We were the first to partner up with Hilti in the development and implementation of these drills in our operations, a relationship that started four years ago. The benefits of this system as opposed to the pneumatic drill include an 80% reduction in electrical usage to generate drill face advance. Further energy savings will occur as we convert other mechanical compressed air processors to electro hydraulic.

In addition to energy savings there is reduced physical effort, which improves safety. At the same time, we are able to operate our crews with two less people, which again improves our productivity and also removes people from high-risk areas in our business. This project is a great example of how safety and productivity go hand in hand and has been used as a great example to all of our employees how, when we again apply our minds, we can work on all fronts to improve the operations and productivity within the business.

Based on a higher power allocation of 96.5%, and together with power initiatives that I have discussed, we are confident in moving towards full production capacity and will start to claw back a substantial proportion of the 200,000 ounces that we anticipated to lose from April 2008 to December 2008.

Looking ahead at the longer term, we were targeting a 15% improvement in energy usage over the next five years. We have now brought that down to three years and Robbie tells me he's starting to think about how he may even do that quicker.

Now, let me turn to those underperforming operations with significant turnaround potential. Obuasi remains a clear asset to AngloGold Ashanti, with a high reserve endowment and equivalent production upside potential. In the previous quarter, we mentioned that we are targeting a 10% to 15% grade improvement and looking to improve mine flexibility. To date, we have staffed the operations appropriately and we have world-leading experts on the ground to assist in the turnaround. Under the leadership of Christian Rampa Luhembwe for West Africa and John Miller at Obuasi, the following strategy is being implemented to realize the grade benefit and mining flexibility.

Starting with the mining strategy, we are looking at consolidating the working areas from 14 to ten and increasing development meters to achieve development reserve inventory of around 18 months. The development strategy will include the addition of high-speed development crews in targeted areas. This approach will assist operating flexibility and the delivery of consistent and higher productivity outcomes.

We have also increased the percentage of longitudinal longhole open stope mining and increasing the stoke length from a current maximum of 20 meters to between 50 and 70 meters. This should substantially improve our productivity from this form of mining and this retreat mining method is actually the method we use on the selected narrow high-grade zones. So again, very important in terms of improving our grade presented to the mill.

We are introducing a large range or a range of upgraded production planning and control processes, necessary to support a high-productivity and high-quality multi-point extraction strategy for our sublevel cave and our longhole operations.

We are implementing a metallurgical recovery improvement plan, which includes increases in grinding and flotation capacity and the installation of a Knelson concentrator to recover a higher proportion of gravity gold from our tailing stream. In our longer-term development strategy, we are working on a lower-cost extraction strategy, a shorter timeframe decline development to access the higher-grade deep zones and a revised infrastructure mix to enhance productivity.

For those that have been tracking what we have been doing at Obuasi, they will recall that when we initially took over the asset we were talking about major shaft installations, major capital programs. What we have said today is that we are focusing on rapid decline development, high-productivity programs where we can access those deeps areas without the same infrastructure, which means we push back the major infrastructure expenditures required to access the deeps some five to 10 years. And so, from a value perspective, and that's what we're about, it enhances both the value and provides us the ability to improve our production in the shorter term.

We are also pleased to announce the Board has just approved $48m for conversion of an oxide treatment plant into a sulfide plant, which will give the operation the opportunity to treat lower-grade surface and underground stockpiles. We are anticipating gold production of 390,000 ounces at Obuasi for 2008. The final execution strategy and plan will be detailed with the executive in June, and we will advise targets and timeframes in the following quarters and report back to you at that time.

We are also progressing our turnaround plans at our Geita operation. Under the leadership of Richard Le Sueur, the new GM at Geita, the following five focus areas are being targeted. First, looking at improved mill utilization from 88% to 92%, by following a basic maintenance program, staffing up where necessary and executing turnkey improvement projects which can be done in parallel with the basic operating enhancements.

A 5% improvement in mine to mill throughput is being targeted through improved blasting fragmentation, by employing a specialist drill and blast contractor in order to implement improved bench designs, explosive usage, blast pattern designs and adherence to proper quality control. This will work with our maintenance program, as we would expect the drill and blast improvement will increase production from the mine, accelerating access to the higher-grade ore zones.

The third area of focus is to improve grade by 5% by improving grade control practices. Controls are being put in place to measure and manage ore loss and mining dilution properly and to reconcile realized production to blast perimeter designs. Campaign milling trials are being undertaken, with the priority on Geita Hill. And we are looking at various ways of improving flexibility by splitting benches and designing stack benches.

The fourth area of the turnaround strategy is to improve process recoveries by 3% through improved ore blending and measurement and the installation of a second Knelson concentrator.

The final action step is to increase the mining grade from 2.48 grams per ton to 2.9 grams per ton, which is expected to take place from 2009, through accelerating access to quality ore from the Nyankanga pit. This acceleration will be delivered through improved extraction fleet efficiency, drill and blast productivities and quality focus and bench redesigns, targeting critical mining zones.

We are anticipating gold production of 320,000 ounces at Geita for 2008. If I can say, today, the focus for the business has been delivery on commitments and today we've talked to delivery on safety, production costs and the implementation of our strategic programs to improve shareholder value and certainly drive value back into the share price.

I think it's also very important, when I outline what we're doing at Obuasi and Geita, to start a detailed conversation to demonstrate to yourselves we know where the opportunities are. Robbie and the team will actually table their execution plans to convert those ideas into actions on the ground, and he'll be presenting those action plans at the end of June and we will share those key milestones with you in the next quarterly results. But certainly, from my point of view, I think we've got the people on the ground, we've got the leadership and we know what we have to do. It's a matter of getting on with it and I think in the first quarter we're demonstrating a commitment to delivering on our commitments.

Finally, with regard to the outlook for the second quarter of the year, we are forecasting production to be around 1.22m ounces at a total cash cost of $464 an ounce for the quarter. And we have increased our annual outlook to increase the production range from 4.9 to 5.2 -- 5.1m ounces, following the stronger quarter performance and improved power management in South Africa. Total cash costs, we believe, will be in the range $440 to $460 an ounce.

I will now hand over to Venkat, who will provide more detail on our financial performance.

Thank you, Mark. Turning now to the financial performance for the quarter, the received gold price, at $755 an ounce, was 18% below the average spot price for the quarter and well within the guidance we provided during the fourth quarter call, as the Company continued to deliver a significant proportion of its production into the hedge book.

Adjusted headline earnings for the first quarter were $105m, compared against the $18m in the previous quarter. Adjusted headline earnings were distorted in the prior quarter due to annual accounting adjustments of $64m. The first quarter's earnings were indeed assisted by a higher received gold price and a reduction in tax rates in South Africa, which amounted to $25m, partially offset by a reduced gold production quarter on quarter.

As Mark has said, our total cash costs were 9% lower than our previous guidance of $467 an ounce, at $430 an ounce, primarily due to higher production of 96,000 ounces. Against the previous quarter's performance, our cash costs have increased from $404 an ounce to $430 an ounce, despite a weakening local currency, due to lower production volume and grade, higher royalty payments given the higher gold price and inflation.

Inflationary impact in the first quarter was around $7 an ounce, which was especially noticeable in March 2008 and continues to be a concern to all mining companies globally. Picking up on inflationary pressure that we and the industry face, following higher commodity prices, increasing oil prices and rising input costs, the Company has a solid track record with regard to cost management and delivered savings to the value of $58m in 2007, bringing the total sustainable savings for the last three years to $291m, which was achieved through various interventions that included efficiencies, procurement interventions and restructuring initiatives.

We continue to work with our suppliers to ensure that we have a win/win relationship, which is built on trust and cooperation. The success of this relationship is evident from the graphs, which you will see from the presentation, of us outperforming the relative market index for the last three years, on our spend on a weighted commodity basket that comprises fuel, mining contractor charges, explosives, underground support, cyanide, chemicals, steel and power, in total representing around two-thirds of our total spend.

We especially continue to find strong upward pressure on prices experienced over the last three months on steel supplies, which have increased by over 30%, fuels by 19%, driven by a global demand for these key commodities. We continue to focus on product substitutions, limited forward buying, commercial restructuring of key contracts, usage efficiencies and low-cost country sourcing to limit the impact of the increasing costs. Our efforts for 2008, which are aimed at generating a similar amount of savings this year, are the $58m which was achieved in 2007.

Looking ahead at 2008, we estimate that our depreciation and amortization charge for the year would be around $600m to $610m, as previously guided, and expensed exploration would be around $160m.

I will now hand you over to Richard, for an update on our business development and greenfield exploration.

Thank you, Venkat. In the business development area during the quarter, we undertook further steps to consolidate our interests and capitalize on opportunities. On January 14 this year, we agreed to acquire 100% of Golden Cycle Gold Corporation through an equity transaction. Golden Cycle holds a 33% shareholding in CC&V, while we hold the remaining stake. This transaction is subject to a number of regulatory and statutory approvals, including approval by Golden Cycle shareholders. This transaction allows us to continue to consolidate our interest, like we did with Iduapriem last year, and to further drive the strategic direction of this low-cost highly efficient operation.

A further binding agreement was entered into at B2Gold on February 14 this year, where B2Gold will acquire certain mineral properties in Colombia from AngloGold Ashanti, as well as increased exploration expenditures in order to earn into prospects within the existing joint venture area. In exchange, AngloGold Ashanti would hold an equity stake in B2Gold of 15.9%, with the option to increase to approximately 26%. This transaction allows us to leverage our exploration program in Colombia and also focus on our wholly owned projects, thereby optimizing the development of our 37,500 square kilometer land position aimed at identifying further significant discoveries.

In late February this year, certain North American royalty and production related payment interests of the El Chanate and Marigold projects were sold to Royal Gold for $13.75m. We will continue to evaluate our asset base and monetize non-core assets in our portfolio.

Before turning to greenfield exploration, I would just like to welcome two important members of our exploration team. On April 1, Dr. Roric Smith was appointed as the new Head of Global Greenfield Exploration. Prior to that, Roric was responsible for our exploration activities in China. Chris Lodder has headed up our Colombian program since its inception in 2003, 2004 and must take credit for much of the success of our Colombian program to date.

Our greenfield exploration continues in six countries around the world, in the key gold-producing countries and new frontiers. In 2007, we delivered over 9m ounces of uncertain indicated resources and have delivered on 12.9m ounces this year. This brings our total greenfields portfolio to 22m ounces and to approximately 20m ounces on an attributable basis.

In our view, and based on comparable market values for exploration companies with published resources, our greenfield exploration portfolio is worth in excess of $2b. Through continuing to progress our various projects, we believe this value will be reflected in our share price. Our greenfields portfolio, comprising over 60,000 square kilometers of prospective ground in the DRC, Australia and Colombia, will attract total spend of around $133m this year, primarily directed at drilling activities to generate additional resource answers and improve our understanding of the ore bodies.

AngloGold Ashanti's greenfield strategy has been focused on securing prospective new district and not just individual projects. As a result, we have substantial land positions in key areas, which we are working on with our own exploration teams and, in some cases, key joint ventures with partners. This strategy continues to deliver exciting results, particularly through our exploration programs in Colombia, Australia and the DRC.

Let me turn firstly to Colombia, where we have a three-tier strategy to explore our land holding across a range of metals, either on our own or with partners, with over 400 gold and base metals targets. Tier one gold projects have the potential to be 2m ounces and larger. We are currently evaluating 82 gold targets. We also have 102 base metal targets being evaluated, a number of these through our joint venture partner, Glencore. Tier two projects are those that are between 0.5m and 2m ounces, all those that represent higher geological risk. We currently have over 160 gold targets in tier two. Tier three projects are the smaller projects with less than 0.5m ounce potential, and we have 58 gold targets in this category.

These tiers are used for internal classification purposes and it is quite possible that projects in the different tiers will exceed the potential size threshold, a case in point being our Gramalote joint venture with B2Gold, which already exceeds 2m ounces of resource.

La Colosa represents our first significant tier one project, where we have just announced a 12.9m ounce inferred resource. This follows our announcement in December last year of a 2m ounce resource at our Gramalote joint venture with B2Gold. Both La Colosa and Gramalote are the result of our first mover advantage in Colombia, which in this year resulted in us applying for rights to over 12m hectares of prospective gold, copper gold and base metal district in that country. This land position has now been reduced to around 3.7m hectares through a substantial and systematic exploration program, both in our own right and together with our partners.

Regional exploration and target generation activities continued during the first quarter, with diamond drilling on four prospects. The major focus was of course directed at drilling and resource modeling at La Colosa, where just under 6,000 meters of diamond drilling was completed on the main porphyry sector.

By the end of the quarter, a total of just over 17,000 meters had been drilled from 59 holes throughout the La Colosa area, resulting in the definition of an inferred resource of 12.9m ounces. That's just under 0.9 grams a ton in the main porphyry, using a resource gold price of $1,000 an ounce. At a gold price of $800 an ounce, the resource reduces to 10.8m ounces at 0.95 grams a ton, and at $700 an ounce the resource comes in at just under 10m ounces at 1.30 grams a ton, indicating the robustness of this new discovery. The project is located some 150 kilometers west of Colombia's capital city Bogota, in the Department of Tolima.

A conceptual study has been completed and will form the basis of a proposal to take the project into a pre-feasibility stage in the third quarter of this year. The La Colosa drill program has been temporarily suspended pending the issuing of a new environmental permit, which is expected to be finalized within the next few months.

Since its discovery only 18 months ago, exploration drilling at La Colosa has rapidly defined porphyry style mineralization at grades of greater than 0.3 grams a ton, extending over a strike length in excess of 1.5 kilometers and a width of 600 meters. Additional upside potential, which is considered material, remains untested both along strike to the north and south, as well as to the east of the drilled portion of the deposit and regionally, where at least three quality targets require follow up.

Included within the pit optimization are some 0.5m ounces of potentially mineralized material that has not yet been drilled as a result of logistical constraints. This material was included in the pit optimization, as it lies at the crest of the La Colosa Hill, although there is strong geological evidence that this material exists. This is not included in the current mineral resource and constitutes further near-term upside potential.

Turning now to Tropicana, our most advanced project, located in Western Australia. Drilling continued at the Tropicana and Havana project as part of a pre-feasibility study currently underway. On completion of the pre-feasibility stage at the end of the second quarter this year, the exploration focus will shift to a number of regional programs within the 12,500 square kilometers of tenement held by AngloGold Ashanti in the Tropicana joint venture and Viking project areas.

The Viking project tenements, comprising some 3,500 square kilometers, are wholly owned by AngloGold Ashanti and lie to the southwest of the Tropicana joint venture area. Viking lies within the same Albany-Fraseer orogenic belt that hosts the Tropicana deposit, and together with the Tropicana joint venture provides a strike length of some 600 kilometers. Earlier reconnaissance work in the Tropicana joint venture tenements is returning encouraging results, supporting our view of this being a potential new gold district.

To the north of the Tropicana and Havana zones, significant results were returned from rock chip samples and air core drilling. At Black Dragon, some 30 kilometers north of the Tropicana project, rock chip samples as high as 22 grams a ton were returned. At Voodoo Child, some 10 kilometers north of Black Dragon, rock chip results included 1.76 and 5.38 grams a ton.

At Screaming Lizard, some 5 kilometers south of the Tropicana project, air core drilling returned results which include 4 meters of 2.3 grams a ton. At Beachcomber, which we have referred to previously, located some 200 kilometers southwest of the Tropicana project, results from the recently initiated diamond drilling program included 6 meters at 3.63 grams a ton and 3 meters at 13.5 grams a ton. This supports earlier results from air core drilling of 3 meters at 65 grams a ton. The latest diamond drill hole, for which results are still outstanding, contains three separate intersections of visible gold in quartz vein.

Exploration during the quarter continued in the DRC at concession 40, a 10,000 square kilometer area incorporating almost the entire Kilo Greenstone belt, one that remains virtually unexplored using modern methods. A total of 1,950 meters of infill drilling for definition of the open pitable resource at Mongbwalu was completed, and a 2007 resource estimation of 33m tons at 2.6 grams a ton will be updated with assay results from the 20 holes drilled during the quarter. A further 14,050 meters of infill drilling, spaced at 50 by 50 meter intervals, adjacent to the open pit resource will focus on defining an underground resource.

Around Mongbwalu, detailed surface mapping and data integration is leading to an enhanced understanding of the potential in the immediate area. Regional exploration activities focused around four main areas, including Lodjo, Bunia West, Mont Tsi and Petsi, all located within 50 kilometers of the Mongbwalu resource area. Mont Tsi is a historically mined area where an old open pit, which is approximately 1.5 kilometers long, exposes strongly deformed and altered mafic granitoid that hosts gold mineralization. Assay results from trenches for both Petsi and Mont Tsi are still being awaited.

The findings of the DRC Minerals Review Commission have resulted in AngloGold Ashanti and the AGK Joint Venture engaging the DRC government to seek resolution and agree a way forward to optimally develop Concession 40.

In Russia the formation of Zoloto Taigi, the AngloGold Ashanti/Polymetal strategic alliance vehicle, was completed. Through this alliance, we hope to pursue new opportunities in Russia through participation in license auctions, perspective projects and new project generation through exploration.

Exploration activities in China continued, with work being carried out at Yili-Yunlong and Jinchanggou joint venture properties.

In the Philippines, progress was made in processing permits at our Mapawa joint venture with Red 5, with final approval still required from the Department of Environment and Natural Resources.

I would now like to hand back to Mark for some concluding comments.

Thanks very much, Richard. Yes, it has been a busy six or seven months for us, but I have to say I think we are only just getting started. We have a clear sense of what our potential is and we are now beginning to unlock a new value proposition, as we execute on our strategy.

There are really three core areas of focus for us, in terms of what we are doing in the business. First, managing the business, implementing the structures, the systems, the processes, to deliver on our promises and to deliver value to our shareholders. Secondly, optimizing the portfolio is a key aspect and really talks to our strategy to optimize our capital deployment within the business. And third, growing the business. By way of conclusion, let me briefly talk to progress in all three.

First, in terms of managing the business, we have restructured the organization's leadership, so as to build capacity and deliver on the strategy. The team is skilled, has the experience and the dedication and will deliver on results and on commitments. I think the first quarter results are a demonstration of our determination to deliver on our commitments.

Safety remains our first value and we will continue to maintain the central focus on safety through management messaging and actions. And again, I think the improvements that have been delivered in South Africa are remarkable, albeit we are cautious in talking about where we are, as we believe and we understand that we still have a long, long way to go.

With regard to power in South Africa, we are proactively managing the situation, together with Eskom and the government, and moving towards full capacity in South Africa with a higher power allocation. In our view, power is not an issue for AngloGold Ashanti in South Africa.

We are executing the turnaround strategy at Obuasi and the recovery plan at Geita, both of which have shown production improvements in this quarter. We aren't here for the short term, so the improvements we're putting in place are about delivering long-term value, so we will take the right amount of time to put in place the right strategy to deliver the right results, to deliver value in the long term.

We have accelerated hedge book deliveries in this quarter. And today's announcement with regard to our $1.6b rights issue is an indication that we are determined to position ourselves to take advantage of what we believe will be a strong gold price looking forward. We are looking to leverage ourselves to that future price.

Our second key strategic area is optimizing the portfolio. In this quarter, we concluded our asset review, we understand our asset portfolio and we know what actions are needed to bring about operational improvement and the building process has already started.

The asset review team will continue their assessment in assuring that the portfolio is optimized to deliver value. We will continue to take advantage of opportunities such as the proposed purchase of the remaining stake in CC&V, and we will continue to understand our asset portfolio's potential, such as the iron ore deposits in Brazil, disposal of non-core assets and also movement on areas such as the royalties as we undertook in this quarter.

The potential to build, the potential through Siguiri and these other assets is another very important string to our bow that hasn't really fully come to the market, and we expect to talk about these programs and these strategies in the next 12 months.

In terms of growing the business, we will continue to seek untapped opportunities in our current assets and our greenfields projects. And we have delivered on the commitment on finding new resources with some 22m ounces delivered to date, the most exciting being the La Colosa project in Colombia with an inferred resource of 12.9m ounces, and with significant upside potential. Our brownfields exploration programs continue and we are looking to create new reserves in cost-effective ways.

Our project pipeline remains robust, with approved projects, and followed by value-adding unapproved projects across all regions of the business. Most importantly, we remain focused on delivering to our true potential and on our commitments to you to maximize value.

With that, I'd like to hand back to Charles.

Thank you, Mark. And at this point we would be delighted to take your questions.

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

Thank you. Good morning. A first question goes to the discovery that you've made at La Colosa. I appreciate that you have given us an inferred resource to think about, but could you spend perhaps a minute or two talking about the geology of the deposit and how you see this going forward, given that the grade is fairly low, so you must have some sense that the strip ratios are low and that the metallurgy is perhaps forgiving?

Victor, it's Richard. I'm going to immediately pass this over to Chris Lodder to give you some background on the information you are asking for.

Hi, Victor. Yes, just a little bit on the geology. It is a gold porphyry system with a skarn [hail or a horn tail] that's also mineralized. We are still basically proving the limits of this system. We do not know the limits of it yet. You mentioned the grade, yes, it's an inferred resource. It's about 1 gram at about 10m ounces at this time and 12.9m ounces at about 0.9 grams. There's a very low stripping ratio. We're looking at about 0.5 or 0.6 to 1, with mostly the first year almost no stripping ratio. The metallurgy is very favorable. It's again recoverable by conventional CIP/CIL processes. And we hope that the project will continue to grow. We have the confidence, we are very optimistic about that. On our presentation you see that we've just drilled a very small part of the anomaly so far and we hope to see it grow quite significantly over the next 12 months.

And I'd just add to that, Victor, that there is also very good infrastructure around La Colosa, which would assist the project.

If I could just ask a couple of follow-ups on the project, is there any base metal content? And what exactly is your ore host?

Okay. The host is actually a diorite porphyry intrusive is the central ore host, with a secondary ore host of metasediment rock. There is no base metal [credit] to speak of. This has a very, very low -- very non-anomalous in base metals. There's less than the average, less than 100ppm copper, with less than 30ppm molybdenum, and it's only a one to one ratio of silver. This is truly a gold only system.

Great. Thank you. Second question, if I could go to a comment, Mark, that you made in your introductory remarks regarding the rights issue. This may be splitting hairs, but is the intention to actually use the proceeds from the rights issue to buy back hedge positions, or do you intend to continue delivering into positions as you did in the first quarter and the rights issue is in a sense sort of a backstop for the balance sheet?

Yes, good question, Victor. I might, if I can, answer two parts to the question. If I can go to your question on grade and the economics of something like La Colosa and just working off Chris' comments, you should remember that we've got Cripple Creek in our portfolio. And a couple of us around the table here have run [Malblation], very low-grade operations, and a number of other large-scale open pit operations. So La Colosa, from our point of view, looks very attractive. It's virtually no strip ratio in terms of where we are.

We are 3 kilometers from infrastructure, we're 20 kilometers from a city; we're sitting on top of a hill. The only real technical issue I think that we have to deal with is the placement of tailings in an area that has seismic activity. And again, technically that's quite manageable. So from a mining operations point of view, and in terms of large-scale open pit experience, we've got lots of experience in this business dealing with these sorts of deposits, and so we're obviously very excited.

The other point I'd like to make is the reason Ron Largent is now the Head of the Americas is in no small measure a reflection of what we could see in this deposit. And so I think we've got the right people, the right leadership, and with Chris and the team identifying and finding deposits we've got the team that will develop these deposits, I think, over the long term.

In terms of the rights issue and your question on the application of funds, our strategy is about delivering into current positions. And so we've got the flexibility on timing and so we felt it was very important to make sure the balance sheet is built up, so that we can actually pick and choose the timing of our delivery such that where possible we'll be opportunistic, but it will be about delivering in the current positions. So no one can front run us. We're in control of the process. We can look at what's happening in the gold price and make decisions as we go. So we're in control of the process.

There's no -- we believe there's very little risk on execution, given the commitment of our major shareholders. So we think the way we've done it takes out basically the execution risk and actually puts us in the driving seat. So we think it's the right way to go. And as well as that, we've put the muscle in the balance sheet to then develop the prospects we have on a go-forward basis. So we had an eye on all of those issues when we put this strategy in place.

Great. Thanks, Mark. And if I could just ask one final question, you pointed out that you lost about 11.5% of your South African production in the first quarter, which was obviously better than you thought at the time of the power issues. How much of that came from those four or five days that you were shut down completely?

Yes. It's Robbie Lazare speaking. I would say that about 60% of it came from the four or five days, but remembering that if you get a five-day closure it's going to take you five days to get those operations up and running again. So actually a five-day closure was equal to a 10-day closure in getting the temperatures back up, or back down, to about 28.5 degrees to get the right working conditions.

It's probably fair to say, Victor, that you can attribute the full loss or basically all of the loss to that loss -- or to the actual closure. What I found remarkable is the way the guys managed the operations back up. And in fact, for every one-degree temperature increase, you actually have about a 20% productivity loss and we are still, I think, only just starting to hit normal temperatures in the operation. So I think the team has done one hell of a job and if you look at the performance of the guys against our competitors I think the team did very well.

But I guess the point I'm trying to get at, because I'm trying to understand what happens for the remainder of the year, if you lost 60% of the production over those four or five days that you were shut down and say the four or five days that you ramped back up, it means that essentially the rest of the quarter the power issues really didn't affect you that much.

Yes, but just understand as well, we lost one of our mill (inaudible) during that time, which is the [Moespa] mill. That will only be back in operations at the end of this month. There's individual operations that lost more. One of our operations, we lost our total underground pumping system, which took us out for about a three-week period. So I'm talking here in terms of averages, but individual operations were affected differently during this time in terms of the holdup position.

Victor, also don't forget we only had 90% power for probably four weeks after the initial impact, so in terms of a full quarter basis the loss was attributable to the power.

Well, the whole quarter was basically the 90%. We only got back to 96.5% right at the end of the quarter.

That's right.

I guess what I'm trying to get you to say, and you're not saying it, is that in the remaining three quarters of the year, at 96.5% power, you should be more or less, more or less, back on track.

Yes, but we have been careful in that until we see longer-term continuity from Eskom, we're being cautious in what we are forecasting on a go-forward basis. So obviously we have increased guidance, reflecting the strong performance in quarter one, but we are not saying yes until we see a couple more months under our belt in terms of Eskom. But I will say, as each day goes by, they seem to be getting better and in fact they have just announced that there will be no load shedding over the next month. So there's some encouraging news, but we still think we've got a little way to go before we are comfortable with the full year estimates. Robbie?

Yes, and understanding as well, Victor, that we are actually going into the winter months now, which requires a higher power allocation than in the summer months in South Africa. So there is a little of conservatism built in, as Mark has basically said, a small bit of conservatism.

Okay. Great. Thank you very, very much.

Thank you very much. Our next question comes from Mandy Lagrange of Nomura. Please go ahead.

Hello, gentlemen. I'm just going to ask a very brief question on (inaudible) derivatives. I think I'm always asking questions about this. I know that you say we should be evaluating you looking at your hedge line, earnings per share, etc., but this number, the number that you're making on your non-hedge derivatives is just estimating at this point in time. So my question is do you have any scope to remove some of the non-hedge derivatives from your books, as you see you're taking actions to remove your hedged -- some of your hedged gold commitments? And if so, what is the time scale that you could potentially look at doing something about this?

Actually, if I can pick that up, it's Venkat here. You are absolutely right, the non-hedge derivative does make a lot of volatility going through the income statement quarter on quarter. And what we are doing as part of the (technical difficulty). Yes, I think you are absolutely right. The non-hedge derivative line, which roughly accounts for about 50% of the value of the book, results in volatility going through our income statement quarter on quarter. That's the bad news. The good news, of course, is that the value of those derivatives are already on the balance sheet.

As part of the restructuring, we will be looking at addressing a chunk of these non-hedge derivatives, so the extent of the volatility going forward will come down. I wouldn't be able to say we'd be able to eliminate it completely, but it will be significantly lower than what we have seen in the past. And if you ask in terms of timeframes of what we are looking at to get there, is we have given ourselves the next three quarters, i.e. until end of 2008, to make the clear achievement.

Okay. Thanks, Venkat. On that point, then, if you are looking to do that, can you give us any feel for what you think your overall losses -- I know it's very difficult to predict what's going to happen with the markets, etc., but if we continue in the environment that we are in, how big could these losses be for this year?

I think it depends on where the gold price ends up at the time when we are settling contracts. But broadly, we have disclosed what our committed prices are. And needless to say, the discount would actually go up as compared to our normal level. And if I were to guess, at a $900 gold price the discount would be probably about 25% to 27% higher than what we would have normally achieved, if we were to deliver into those hedges per the maturity schedule. But it is very easy to model. You've just got to plug in a given gold price into the hedge maturity profile and bring forward the 2009 contracts.

But the reality here is that is a hedge which we are going to take in 2008. When you look at 2009, the book is going to be half of where it was. As compared to the 2007 level, 2008 is going to be highly leveraged to gold price, given the low discount and higher production which is going to come out of the system. And the interest free cash flow which we'll be generating in 2009 we can actually apply for further restructuring.

Excellent. Thanks very much, gentlemen, and good luck.

Our next question domes from Terence Ortslan of TSO & Associates. Please go ahead.

Thanks for a very detailed presentation, guys. Just a question on the capital structure, with the rights issue announced today. What is the ideal CapEx structure we are striving for going forward, and the way the rights issue is going to be enhancing this in the overall capitalization of the firm.

If I can pick that up, it's Venkat here. Firstly, to clarify, we are not doing this rights issue with a view to addressing the capital structure. It is part of a valuable byproduct we get in that process. The main reason for effecting the rights issue is to give the Company the flexibility to basically deliver early into these hedges, thereby give the investors leverage in terms of gold price participation going forward. That's the first point we want to say.

Secondly, our balance sheet is still healthy. The key ratio we watch is the net debt to EBITDA ratio, and our covenants in terms of banking agreements are a maximum of three. We are around 1.14 at the moment, so we've given ourselves a considerable amount of flexibility. A comfortable threshold for us would be a ratio of somewhere between 1 and 2. That's when you are looking at your cash flow generating ability in the business vis-a-vis your net debt level, net debt to EBITDA. But looking at a different ratio, if you were to compare your net debt to equity, in our case it can be quite confusing, given the volatility of the book is operating on the balance sheet, but as at the end of March that ratio of net debt to equity was about 65%. Post the rights issue that would drop to about 37%, assuming that the derivatives which are being addressed are on balance sheet derivatives. If you look at a different metric, which is your net debt divided by equity plus net debt, in other words the total capitalization of the business, that would improve from 40% to around 27%.

So, to answer your question, the comfortable threshold is net debt to EBITDA between 1 and 2, net debt to equity between 30% to 40% and net debt to equity plus net debt is somewhere around 20% to 25% to 30%. That's the sort of comfort threshold we're looking for.

If that is an internal target or internal definition, are you comparing yourself to the -- the industry numbers are different than yours, so what are we trying to model ourselves here?

I think I have given you the type of levels we are striving for, but the more important part is the rights issue is not designed with the capital structure in its mind. It's more to give the flexibility for the Company to basically (inaudible) the hedge structure which we currently have, and therefore improving participation. So we are not trying here to go address an industry average. In fact, the benchmark in this industry is all over the place.

Thanks, guys. Thanks for a decent presentation again.

Thank you very much, sir. I would now like to turn this conference back to Charles Carter for closing comments.

Thank you. We'd just like to thank participants for joining us today.

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