Anglogold Ashanti PLC (AU) 2008 Q2 法說會逐字稿

Good morning and welcome to this presentation by the AngloGold Ashanti team on our results for the second quarter ended June 30, 2008.

Before we begin, I'd just like to go through safety procedures for those who are new to this auditorium. In the event of emergency. There will be a loudspeaker system that kicks in. We'll persist through the back door at the left, exit the building and assemble down on Miriam Makeba Street. If you don't use the back door, there are two on either side here which take you through the auditorium out in front of (Turbine) Hall and we persist behind the building. There will be safety marshals to guide you along the way.

I'm also mindful that many of you are covering other companies reporting today, so we will try and keep this as short as we can, although we do want to have a good discussion with you.

The format will be, Mark Cutifani, our CEO, talking to the quarter's performance and the key areas of focus for the management team and then Venkat, our executive director and CFO will update you on the recent successful rights offer and discuss our financial performance in greater detail. Other members of the team are here with us and they'll sit and participate in Q&A as needed and will be outside if you want to have a discussion afterwards.

Before we get into the formal presentation, let me just read our Safe Harbor Statement which thankfully is short this quarter given that we've just executed a whole lot of corporate activity. Certain statements made during this presentation including, without limitation, those concerning our strategy to reduce gold hedging positions including the extent and effect of reductions, 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 projects, the completion of acquisitions and dispositions, and our liquidity and capital resources and expenditure contain certain forward-looking statements regarding AngloGold Ashanti's operations, economic performance and financial condition.

Although AngloGold Ashanti believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements 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 could impact our outlook.

For a discussion of such factors, refer to the Company's report for the year ended December 31, 2007 which was distributed to shareholders on March 31, 2008. AngloGold Ashanti undertakes no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstance after today's date or to reflect the occurrence of unanticipated events.

With that, let me hand over to Mark.

All right, thanks very much, Charles. Ladies and gentlemen, you probably appreciate that the reason Charles and Venkat sit either side of me is to make sure I stay on script. So I will generally follow that principal, but certainly from the point of view of being able to ask questions, I'll tell you what I really think at the end of the presentation. But I will go off script to start off with. The last quarter has been a very important one for AngloGold Ashanti and I think from one particular aspect, we've demonstrated that you can't operate in South Africa without having fatalities. And so if I could upfront acknowledge Robbie Lazare and Johan Viljoen, head of Africa and head of South Africa, in terms of a fantastic achievement.

Having said that, we did have a fatality just after the end of the quarter at TauTona, [Tumello Dumani] and so for us a tragedy. But having said that, I didn't want to take away from what has been achieved. 110 days fatality free and for us I think a very significant milestone and for me the most important I think success that we all talk about during the quarter. So again, a very significant achievement and one that I think speaks to how we think about people. And we have a saying at AngloGold Ashanti that people are the business and our business is people. And I think that we're demonstrating that we're living that vision and we also appreciate that we've got a long way to go to get to where we want to be, but certainly in terms of milestones in the Company's history, that's a first for this Company in 100 years. And quite frankly we've got two of the team representing 30,000 employees across South Africa I think is just a fantastic achievement. And to Ron Largent, Graham Ehm, who are leading the rest of the business, Roric Smith, across the global operations, to achieve that with 60,000 people given where we've come from was just fantastic and these are the guys that have actually made the business and I think the three of us are pretty proud to be sitting here representing them in terms of the achievement. So just a (inaudible) in the presentation I think is appropriate.

Before we review the second quarter's results in detail, I think it's important to reflect back on what we promised you late last year. In setting our priorities, we outlined a set of key deliverables and here's the elevator version of what we've done so far. We said that the Anglo American stake needed to be reduced below 20% and we executed this transaction three weeks after starting with AngloGold Ashanti late last year, reducing the stake in one day placement from 42% to 16.6%. We were hopeful that the recent rights issue might have provided an opportunity to get down to around 12.5%, but Cynthia and the team were quite astute in recognizing that AngloGold still represents great value and decided to take up their share. But certainly we maintain a good relationship working with the team to get that down to zero in the next six to 12 months.

We said the hedge book needed to be reduced and we've delivered ahead of schedule. Business performance needed to be sharpened to insure we consistently delivered on our commitments. And while we can't say we've narrowed it beyond what we achieved in the last two quarters, we can say we have now delivered on our promises in those two quarters. And for us, that's a very important milestone and I think a demonstration of our commitment to deliver against our commitments.

More specifically we said safety is our first operating priority and again, we're pleased to report that we saw a fatality free quarter, the first in our 100 years of history. We then had the Eskom process in South Africa and we are operating at full production capacity and we're using 6% less power, well ahead of our initial improvement targets and the anticipated delivery timetable. We said we would optimize our asset portfolio to maximize returns on capital. We've acquired a minority interest in Iduapriem and Cripple Creek and we have announced the first sale of a non core asset this quarter.

We've substantially restructured the management team with around 60% change in the top 80 roles. We now have a leadership team that can and will deliver and we have started our critical project recovery, recovery projects at Geita and Obuasi along with the identification of major expansion potential in Siguiri and Brazil. These organic growth opportunities have been supplemented with three significant gold discoveries and the identification of Columbia as an exciting new gold province.

Finally, we are building a new business strategy that will take us beyond the setting foundations. The next six months will be very exciting in the world of AngloGold Ashanti.

Turning back to the quarterly results, in our recent presentations, we've outlined three key strategies to rebuild the AngloGold Ashanti value proposition. The first, managing the business, making sure the basics are in place. The second, optimizing the portfolio is all about capital deployment and making sure every dollar we spend is working for our shareholders. And our third, growing the business, or more specifically, growing the business to support real growth in shareholder value. In the context of these three key strategies, I would like to discuss AngloGold Ashanti's performance as of the last quarter.

Starting with managing the business and our number one value, safety. Since launching our Safety is Our First Value campaign on the 8th of November, 2007, we've recorded a 75% decrease in fatality frequency rates across the business. More importantly and beyond the quarter's results, we operated for 110 days without incurring a fatality across our global operations. The first quarter in our history, reaffirming our strong conviction that we can operate in our deep level operations fatal free. I'd like to take this opportunity to thank all 62,000 colleagues in our 21 operations across the globe for living safety as their first value.

Tragically, immediately post the quarter close, we experienced a seismic event at TauTona at the TauTona mine. Tumello Dumani was fatally injured. My sincere condolences and our sincere condolences go to Tumello's family and friends. Again, this brings on the realization that while we are making significant improvements, we still have a significant way to go. But we are navigating that pathway together and we will get there.

Under Johan Viljoen's leadership in South Africa, we are seeing improvements across all aspects of safety where we've established a simple creed in the way we manage relationships. Relationships built on trust and caring for each other. In the broader South African context, this has to be the right place to start.

On production, the Company produced 1.25 million ounces of gold, 5% higher than the prior quarter and 2% above our guidance, mainly due to the stronger performance in Mpoeneng, TauTona, and Geita. Total cash costs were $434 an ounce, marginally higher than the $430 an ounce recorded in the previous quarter, showing a 6% improvement against the guidance of $464 an ounce.

Our total production costs at $554 were lower than the last quarter's $561 an ounce as we remain very competitive across the gold space. Like all or our mining industry colleagues, unit operating costs remain under pressure as we experience significant increases in power costs, steel reagents, materials, and labor costs. The key to managing these challenges successfully will be to deliver sustainable productivity improvements and reductions in waste across all areas. We are actually developing new operating framework that will be actually tested for the first time as part of our turnaround strategy at Geita and we're all very excited in terms of the potential we see coming from that initiative.

This has been the second consecutive quarter that we've delivered on our commitments on production and costs. Venkat will talk in more detail about cost movements as we are managing to hold our costs better than most. Looking at the operating performance in detail, in South Africa, gold production increased 9% to 16,867 kilograms, reflecting continuous improvements in power supply and our internal efficiency initiatives.

Mpoeneng and TauTona were the standout performers while Great Noligwa had a difficult quarter with gold production in this operation declining 10% to 2,997 kilograms. Johan and the team are actually in the process of conducting a fairly significant rationalization of operations within Great Noligwa and I'm sure that with the interventions they've put in place and the new leadership, we'll take the operation forward in a very positive and productive way.

Total cash costs for the South African operations were lower at R87,459 per kilogram or $352 an ounce, still a very competitive set of operations in any measure, the improved productivity offsetting other inflation pressures.

With regard to the power situation in South Africa, it has now been six months since we faced the Eskom crisis. In the first quarter, we were able to rapidly recover production areas following the sudden shutdown. At the same time, we worked with Eskom, unions, government, and our employees to find solutions to the problem. During the quarter, Eskom delivered on its commitments and provided steady and reliable power.

The South African operations team has continued to proactively identify projects that could reduce consumption. And we have made a commitment to deliver power savings of 4.5%, as we had made a commitment to deliver power savings of 4.5% by December year end. I'm pleased to announce that we've achieved this target six months ahead of schedule and exceeded our first savings targets, delivering an actual 6% reduction as we speak.

And we are still operating at 100% production capacity and I think putting those two pieces together quite a remarkable achievement given the circumstances we found ourselves in in January. Just as an aside, for those that may or may not be aware, there's an internal target in the City of Johannesburg for companies and businesses to reduce power consumption within office blocks of 15%. As of today, I think we've delivered 25% in this building. So everybody is playing their part and we've been very pleased with the success and progress we've made. You will notice there are a couple of lights that aren't on. That's part of the initiative. And we haven't given Venkat a microphone as he'll do it off the voice alone.

We've achieved this exceptional outcome through reducing leakage and improved management of compressed air reticulation through the operations. Proactive demand side management, scheduling during peak hours. We've commissioned the first phase of the three part pipe chamber feed, the system at Moab. And if you want to know what that is, Johan will be happy to talk to it. This project, once fully commissioned, will reduce our South African power usage by around 3.5 megawatts or 1.3% of total energy usage.

We continue to focus on numerous initiatives ranging from low voltage lighting, management pumps and fans and many other progressive initiatives. And I also would like to make a special mention of those people living on the operating sites. They've been part of the whole process and I'd have to say that in the residential areas, we've had a great contribution from all the communities within our operations. And a special mention to those people that have done a great job.

We're targeting further to reduce our power consumption by 10% by the end of 2008 and I'm sure that given the progress and the performance the team has demonstrated so far, we'll blow that target away as well.

In Africa, we are starting to see some encouraging trends. The Mali assets were solid with gold production increasing 13% to 106,000 ounces. Morilla 15% higher on the back of improved throughput and grade, while Sadiola was 20% [sic-slide presentation] higher due to an increase in yield following an improved performance on the gravity circuit of the plants which improved overall recovery. Total cash costs for the Mali operations are in control at $432 an ounce with the increase 4% higher than the previous quarter reflecting a substantial inflation-- reflecting the substantial inflation pressures, particularly fuel, offset by the stronger production.

In my last report, I spoke to the turnaround issues at Geita. I'm pleased to report that we have stabilized grades and gold production increased 16% to 74,000 ounces. On the back of our high gold production and stockpile credits, total cash costs have improved to $630 an ounce. Clearly we're not happy with where we are, but we have started the road to sustainable recovery. I will talk more to that detail when I talk about the turnaround plan a little later. And again, as an aside, we had Richard LeSueur and Robbie present to the board yesterday on the strategy for Geita and the board remarked that it was the first time for quite awhile that they really felt comforted that we had Geita by the throat and we knew where and how we were going to deliver the performance. And again, I think the guys have done a great job.

At Obuasi we are disappointed with gold production declining 9% following lower delivered grades and throughput resulting from unscheduled plant stoppages for maintenance and power shortages. As a result, total cash costs were 18% higher at $612 an ounce. The turnaround strategy for Obuasi has been developed by the team and is currently subject to an in-depth review. I will say that we were hoping to be in a position where we could talk to the detail of this quarter, but quite frankly, once we got with the team, we weren't comfortable that we had all the resources identified and we didn't have enough data on the execution plan such that we could stand here and say we had all the key issues defined. We will have that work done by the next quarterly report and I'm sure that we'll be able to talk to exactly where we are going.

In those discussions, certainly some of the numbers and the improvements look pretty impressive. But again, more work needs to be done to make sure we've got every angle pinned. And quite frankly, as a team we've made a commitment not to stand up in front of this forum and present or promise things we can't deliver. So we're doing the work to make sure we can and we'll do that at the next quarterly report.

In respect of our international operations, Brazil production increased 12% to 104,000 ounces with AngloGold Ashanti Brazil having a strong quarter Total cash costs for the Brazil operations were marginally higher at $341 an ounce, primarily due to the stronger Brazilian Real which appreciated 5% against the previous quarter. We are proud of the work our Brazilian colleagues have done and I expect to see this production increased to an annual production of 600,000 ounces over the next five years. And we do have Ron Largent, head of the Americas operation here. He's been spending the last four or five months travelling and working pretty hard with the team in identifying potential and working through some of the turnaround strategies, particularly in Argentina. I think Ron is quite excited, in fact very excited, particularly when you take into account the new acquisition we announced at Sao Bento as well.

This is the challenge that we've put to Ron and the Brazilian team led by [Helsi Agreres] and so I know they have both the team, the ability, and the assets to make a significant difference. And again, over the next five years you will see a significant improvement and performance in the delivery of returns in Brazil.

At Cerro Vanguardia in Argentina we've had problems with scheduling mining and processing sequences dating back into mid 2007. Ron Largent and his team have identified the issues and are now working on a recovery plan. The 4% reduction in quarter on quarter production and the increasing cash costs reflect these issues. We now expect the operation to improve from here starting with a much improved third quarter.

At Cripple Creek in the USA, gold production increased 2% to 59,000 ounces. Increasing fuel costs impacted cash costs which were 6% higher at $301 an ounce. Again, a very competitive operation with Ron and the team having created a very competitive I think world-class asset. As from the first of July, 2008, following the successful acquisition of Golden Cycle Corporation, Cripple Creek is now fully owned by AngloGold Ashanti.

In Australia, gold production at Sunrise Dam was 4% lower at 114,000 ounces, but that was exactly as Graham and the team had forecasted, there were no surprises. And it does reflect the shift that's going on to underground operations. Total cash costs increased by 17% to $586 an ounce, reflecting the treatment of a higher proportion of lower grade stockpiles and their actual cash flow operating costs are substantially lower than that. If you recall, we do have stockpiles and we reflect waste redemption numbers through those operating costs, and so it's not a true reflection of the cash we're actually generating from Australia.

Turning from managing production and costs, let's talk to managing revenues. As you're aware we have successfully completed our rights offering which has enabled us to raise $1.7 billion to support and address the hedge book. I would like to take this opportunity to thank our shareholders for their vote of confidence and for backing the strategy. The fact that we have received such incredible support in testing market conditions, particularly when one considers the US situation, gives us real confidence in the pathway ahead and we have moved quickly to honor our commitments. During the second quarter, we took advantage of wheat we believe was some transient price weaknesses and certainly the market is volatile at the moment. And we reduced our headcount commitments by 3.1 million ounces to 6.9 million ounces.

We plan to reduce our commitments by further 800,000 ounces over the remaining two quarters through delivery into contracts so that by year end we will have approximately hit 6.1 million ounces which is slightly better than the commitment we gave when we went into the restructuring program. Due to the accelerated reduction in the book, the next two quarters are expected to see realized gold prices of around 17% discount to spot. So we all apologize for the complexity of the counts that we presented this quarter. We promise that next quarter will be much easier to work through. And certainly from our point of view, a good result expected given the obviously 17% discount to spot which will go through for the next two quarters. And then next year we start to see really clean results and we're anticipating around a 6% discount. So again, on track to deliver against those commitments. And when we talk discounts, we're assuming a gold price of around $900 an ounce.

Reflecting our focus on running the business on the fundamentals, we also cancelled 1 million pounds of uranium contracts during the quarter. This represents approximately 30% of our total long term contracts and was accomplished for a total charge of $11 million after tax. This is an important transaction seeing that it will expose AngloGold Ashanti to uranium spot prices earlier than expected with some 150,000 pounds of uranium being exposed late this year. For 2009 and assuming an annual production of around 1.25 million pounds, which is probably a tad conservative, we will be exposed to approximately 60% of spot prices, substantially higher than the $25 to $30 that we see currently.

Thus, as we go into 2009, we're looking at substantially improved leverage to both gold and uranium prices. And we will deliver this off a very competitive total production cost base. As a consequence, our shareholders will enjoy significant margin expansion. While we still have to guide 2009 production, CapEx, and costs, we will do this later this year when we finalize our business plan. I am expecting increased gold and uranium production and a competitive, and a very competitive all around cost base. I also expect us to deliver on resources and reserves growth. But even after depletion, continuing to build the foundation for our future production profile.

We have also finalized the leadership structure of the Company and, as you are aware, we have appointed Tony O'Neil to the position of Executive Vice President, Business and Technical Development. Tony brings over 30 years of gold and precious metals experience, iron ore, base metals, to the Company having been previously responsible for operations in Newcrest, Western Mining, and within the Calgary Gold Fields operations and in particular the Calgary Super Pit. He was in fact the first mining superintendent of the super pit when I was the general manager and we worked very closely in both the conceptualization and the bringing into production of the super pit back in the late 80s. And we worked together in the restructure of Western Mining's nickel basins in the mid 90s and that's where we saw 150% productivity increase over the four years we were together through that business restructure.

Tony will oversee our exploration strategy working with Roric and the team, major capital projects, global business improvement strategies and new business development. In his role he will also work closely with Venkat and Charles in our business development opportunities. The strength that Tony does bring is I think in South Africa our technical team is quite frankly the best I've seen in I think the country and has great expertise in the deep miming areas. But what we do need is a little bit more help with the large scale open cut and the different underground stoking operations we have. So I think Tony will bring that expertise along with a couple more recruitments that we are in the process of securing. And so I think people will be impressed with the team that we've put together on a global basis over the next three to six months.

The other thing, Richard Duffy will be taking over the Africa operations, but Tony and Rich have worked closely together in the asset review and so with those two guys, we've got a very good pairing in terms of looking at how we take the African operations forward in a very constructive way and consistent with the opportunities we identified in the restructure of the business.

Just a word on the side, I'd like to thank Robbie Lazare for the great contribution he's made to both South Africa and the African operations and I'd have to say that the progress we've made at Geita is I think significant credit to Robbie, and in particular his work with Richard LeSueur in developing the turnaround plan has been exceptional. And obviously Robbie's leadership in safety and taking on some of the toughest challenges we've had in the business have been very much appreciated and now he gets the chance to stick his finger into every operation in the business and really help us in terms of what I believe is a critical aspect of the business. He's building that capability from where we are in the business.

Also a special mention to Nigel Unwin who's taking on the corporate services role within the head office. Like all head offices, we've got to look at our cost structures and Nigel has got a challenge there in helping us develop the right strategy to make sure we're delivering value across the business and delivering that value at the right price.

So in wrapping the back to basics discussion within the business, we've made significant inroads in safety. We have delivered on production and cost commitments. We have restructured the hedge book. And we are building the operating capacity to insure we continue to improve and create value for shareholders.

In looking at the second key strategy, optimizing the business, once again, we have had a busy quarter with execution, tracking our planned commitment. Let me start with Geita. Geita as you know is a core long life asset and has significant potential. The immediate issues were clear. The (inaudible) restricting access to the deeper high grade oil. The poor performance of the new mining fleet, and the impact of the hot ore in the mill. All that has been mined out of sequence and the loss of key staff. All critical factors in I think determining why we struggled for an extended period of time.

Our approach over the last five months, again, led by Robbie and the team, has been to focus on the key issues and not simply wallpaper over the cracks. And by that I mean not simply work to get the next quarter numbers right, we've got to make sure that we deliver the numbers every quarter consistently. And so Robbie and the team have been working on the right types on interventions to improve the operation and the sustainability of the operation.

In January this year, we placed the leadership of Geita under Richard LeSueur who with his team to date has focused on the identification of the issues and the building and implementation of a sustainable recovery plan. They have identified the review of the technical issues facing the operation which were poor mill utilization at 88%, low and inconsistent throughput, placing additional pressure on the mill and plant circuit resulting in increasing breakdowns in operating shortfalls, but probably dropping the real capacity of the mill by some 15% to 20%. Inadequate grade control and low process reconciliations, grade dilution and ore type mishandling following a poor mining and stockpile management. I'm being very blunt here in terms of the assessment. The team has established control and has started working with the following targets.

Grade control. Definition to go from three days to three months ahead of primary earthmoving functions. Scheduling and the management of the fleet mix to optimum grade and mineralogical blends to insure optimum plant performance. Rebuild mining control, a link to planned reconciliations, and rebuild the operating team. Importantly, in the last few months, we've seen plant recoveries go from 75% to almost 90% and I think that's a reflection of the control the team has established back in the operations. And I think that's the first place we have to start.

The execution plan is targeting improved mill utilization from 88% to 92%, a 5% improvement in mine to mill throughput through improved blasting fragmentation, and I think the work we can do with the mills will enhance that opportunity. The third area of focus is to improve minable grades by 5% by improving grade control practice which is also linked to the blasting practices which we're thoroughly reviewing and have already implemented changes. And finally, to improve process recoveries 3% which is above and beyond the recovery you've seen in the last few months. We believe there is further recovery improvement potential with the installation of a second Nelson concentrator.

We are starting to see the emergence of positive trends and in fact, Robbie, myself and Richard were together three weeks ago and quite frankly, it's hard not to be impacted by the enthusiasm that the team now has. And we're now having inquiries from those people that left the operation in the last couple of years, we're now starting to have inquiries about coming back to the operation. So for me that's a great sign and again, it was hard not to be caught up in the enthusiasm of the team and in terms of where they're taking it.

For this quarter, the average recovery frankly as I said was above 90%. And again, coming from the 75% to 79% is significant and certainly I think a harbinger of good news to come in the next couple of quarters. If you step back from these interventions, we expect Geita to get back above 430,000 ounces next year and I do mean materially above that figure. The next year about 500,000 ounces and with a target beyond that of 600,000 ounces over the medium term. And I know a couple of people in this room asked me, will we see 600,000 ounces again? And the answer is, yes. But when we deliver it will be sustainable and it will be at the right cost so that we insure we are delivering returns for our shareholders and creating value.

Importantly, well just as importantly if not more importantly, our combined Brownfields and Greenfields exploration teams have also been working together for the first time to review the full geological potential of the Geita land position and I'm excited by the comprehensive new district exploration program that is starting to unfold.

On Obuasi, we've completed a significant amount of work and we are seeing improvements in safety, mining development rights, and some aspects of staffing operations. However, the improvement is not consistent across the operation and we're the first to say the plan is not yet in shape where we believe it's executable to the standard that we're expecting. So that's where we're working with the team to make sure we're able to deliver that in the next quarter. This is where our focus will be as an executive team over the next quarter and as part of that process, both Robbie and I will support Richard, making sure we get to that milestone at the end of the quarter.

Staying on the theme of optimizing the business and part of the asset review process, we sold our 50% interest in Nufcor International, a London based uranium marketing, trading, and advisory business. We sold it to Constellation Energy Commodities Group for net proceeds of $50 million. We still retain our 100% interest in Nuclear Fuels Corporation of South Africa, a local uranium (inaudible) facility which we see as an integral part of our local gold and uranium business. And for those that may ask the question, is this a move away from uranium? It is a resounding no. When we look at what we do in the business, we look at how we best add value. And for our point of view, we didn't see that that component of the business is where we could best add value. So we're making the decision as we sit on these noncore assets of ours, to monetize and make sure we redirect that capital in areas that will work harder and more effectively for the business. And we think investing in unwinding some of the contracts at the lower rate was the right place to put some money for our shareholders.

During the quarter we also completed the sale of various exploration interests, the sale of various exploration interests in Columbia to B2 Gold, taking our interest in that company on a fully diluted basis to 26%. This transaction allows us to continue to leverage our first (inaudible) advantage in Columbia and to co-fund our tier two projects while retaining full control over our own exploration program at La Colosa and the potential large scale open pit prospects that we're looking at as we speak.

Also, as mentioned earlier, we completed the Golden Cycle transaction which consolidates Cripple Creek, our long life North American asset in our hands. Today we have also announced that we have entered into a letter agreement with Eldorado Gold to acquire 100% of Eldorado's wholly owned subsidiary, Sao Bento, for $70 million. The Sao Bento mine is close to our Corrego do Sitio mine and this enables us to consolidate -- I have enough trouble with English, let alone Spanish, or Portuguese, I should say-- in [Menajeras] and to potentially double the scale of the Corrego project.

Turing to the final strategy, growth, good progress is being made across a broad front. On the exploration front we spent a total of $52 million during the quarter bringing our total spend for six months to $98 million as we aggressively seek to grow the business organically and in new frontiers. If you look at the operations cash flow contribution from our operations, and particularly as we count our hedge, we're a significant cash flow generator. But at the same time, we're putting money into the development of our prospects, we're putting money into exploration. Our job is to create value for shareholders over time. And so we're thinking very carefully about where we use our cash and how we make it work for our shareholders. And so from that point of view, I think it's important when you look at mining companies is how are they using that cash and is it being deployed to create value over the long term? And I think for us in terms of exploration, if I could say five years ago our exploration portfolio was worth about $500 million depending on the metrics you took, my guess is it's worth somewhere between $2.5 billion to $5 billion and I don't think the market sees that value. I think they will when they start considering acquisitions next to our La Colosa project of $1.2 billion and start adding the metrics up in terms of what we have. I think when we start to demonstrate what potential those assets have, I think you'll see a significant rewriting in AngloGold Ashanti's position. And from our point of view, a very important part of our strategy.

So as I said, significant investment in the ground. And for us, we're putting the runs on the board. Our discovery costs year to date, $15 an ounce. In Columbia, regional exploration focused on 41 targets with three targets at the drill ready stage. We are in the process of constituting a team to scope the La Colosa project and we'll continue to provide feedback as we understand the potential and where we're going with this prospect. And I quite frankly expect it will go beyond La Colosa and that will be a very important part of our work over the next 12 to 18 months.

At Tropicana, drilling continued and the pre-fill at least is progressing well, consistent with our target schedule. At the Boddington joint venture, the project continues to progress consistent with our expectations We are working closely with (inaudible) to monitor commissioning timelines and the capital cost outlook.

Finally for the six months ended June 30, 2008, we're declaring a dividend of 50 South African cents and 6.7 US cents. I'll hand over to Venkat, who will provide more detail on the financial performance.

Thank you, Mark. I'd now like to cover five matters. Firstly, the recently completed rights issue and the hedge book reduction. Then our financial performance for the quarter. Moving then on to total cash costs for the quarter and outlook for the third quarter. Some guidance on amortization and expensed exploration for the quarter, net debt levels, and the number of shares which will qualify for EPS purposes going forward. And finally some proposed accounting changes going forward that will impact on how we present our incorporated joint venture interests in our financial statements.

Starting off with our rights issue and hedge reduction, you will recall that on the 6th of May we undertook to raise R11.9 billion with a view reflecting a major reduction of our hedge book which would see hedge commitments drop from 11.28 million ounces at the start of the year to 6.25 million ounces at the end of '08. We are pleased to report the following. Completion of a very successful rights issue in a particularly challenging and volatile capital and commodity market. An increase in the proceeds of the rights issue following a positive share price performance which enabled us to price up the rights issue from, to $1.94 per share from the previously announced $1.72 per share. This resulted in the total proceeds from the rights issue increasing from R11.9 billion to R13.5 billion, or $1.7 billion.

Our share price actually increased between the announcement of the rights issue and completion, outperforming our key peers in the process, which is very unusual particularly in the current market conditions and thereby a clear endorsement of our strategy. We also capitalized on a relatively weaker gold price environment during the second quarter to fast track the hedge reduction through a combination of delivering to an early settlement of non hedged derivative contracts, these are contracts which are (inaudible) in our balance sheet. This enabled us to reduce our hedge commitments from 6.3 hedge commitments to 6.88 million ounces at the end of the second quarter. That's a reduction of 4.4 million ounces since January 1, 2008.

At this point, I would like to recognize the efforts of our treasury team led by Mark Lynam and (inaudible) for delivering this result without moving the gold price during the quarter. We will continue to deliver a further 800,000 ounces into maturing contracts for the remainder of 2008 which will reduce AngloGold Ashanti's hedge commitments to 6.1 million ounces or a cumulative reduction of 46% for the full year 2008.

The above steps will result in our shareholders enjoying significantly improved participation in the gold price relative to the position that existed pre the hedge reduction. These have been illustrated using a gold price assumption of $900 an ounce. Firstly, for the last six months of this year, the discount to spot will improve from the previously guided 47% to around 17%. That's an additional $270 for every ounce of gold sold. And for 2009, the discount will improve from 23% to approximately 6% when compared to the position that existed pre the reduction. That's an additional $153 an ounce for every gold sold.

Turning to our financial performance, here again, if you recall, we did put out an announcement in the middle of July stating and guiding the market of what to expect. Our financial performance for the quarter was adversely impacted by three once-off items aggregating $996 million post tax which are the accelerated reduction of the hedge book which amount to $977 million, the elimination of the commodity contracts covering a million pounds of uranium that Mark eluded to earlier on which amounted to $11 million, and the accounting impact of the rights issue on our ESOP and BEE shares which amounted to $8 million.

The adjusted headline loss for the quarter was therefore $946 million as compared to what it would have been, i.e., in earnings, of $50 million for the quarter if we were to exclude these three one-off adjustments. The $50 million is lower than the adjusted headline earnings of $105 million recorded in the previous quarter primarily for two reasons. One, a lower spot and received gold price quarter on quarter, that's $33 million, and we got the upside of it by fast tracking the hedge reduction during the period. And a once-off tax credit in respect of South African tax rates recorded in the previous quarter of $25 million.

As Mark mentioned, our total cash costs of $434 an ounce was 7% lower than the guidance of $464 due to, amongst other factors, higher production and favorable stockpile movements. Against the previous quarter's performance, our cash cost was relatively flat. The benefits of higher grade and volume, which amounted to $16 an ounce, and all stockpile credits of $12 an ounce, which is purely a timing issue, helped mitigate the effects of inflate of $22 an ounce during the quarter which was largely power and fuel.

Our third quarter's total cash costs are expected to be impacted by the following factors. The seasonal winter power tariff in South Africa, the impact is $8 million. The South African annual wage increase which is effective on the first of July, the impact there is $10 million. And the full impact of our estimated increase. It's still being negotiated in the South African power tariff and the proposed [Ganan] power tariff which is $14 million. The negotiation is still underway in respect to the Ganan power tariffs, but we are estimating the total impact to be $14 million.

In addition to the above, we are forecasting a drawdown during the third quarter of our stockpiles at Geita, Siguiri, which will be mining during the rainy season, and Sunrise Dam which is in accordance with our plan, and inventory release at CC&V which would adversely impact our total cash costs by $45 an ounce.

Taking the above factors, which will cause our third quarter cash costs to be abnormally skewed, and the benefit of higher production, we are guiding our third quarter's total cash costs at about $490 an ounce with a total cash cost normalizing in the fourth quarter resulting in the guidance for the full year at around $450 to $460 an ounce.

We are forecasting depreciation and amortization charge for the third quarter and full year to be around $157 million and $619 million respectively. Expensed exploration for the third quarter is forecast at $44 million and for the full year at $153 million. As you will have noticed, our net debt levels, including the increase which you see against the creditor's line have increased to $2.65 billion at the end of the quarter. This includes the impact of the $1.1 billion accruing as a consequence of the accelerated hedge closeouts. But it does not include, I repeat, it does not include the proceeds of $1.7 billion for the rights issue which was only received by AGA post the quarter end.

Once the proceeds of the rights issue are factored in, we expect net debt to reduce significantly and our net debt to EBITDA ratio to return to around one time. Following the completion of our rights offering wherein 69.5 million shares were issued, and the acquisition of Golden Cycle, which involved 3.2 million shares, our total ordinary shares issued currently stands at 350.6 million shares. Our total shares, including our ESOP and BEE shares which qualify for EPS purposes, going forward will therefore stand at 354.6 million shares.

Finally, I wish to draw your attention to a change on how we will account and present our incorporated joint ventures. To give you an example, this will include Sadiola, Yatela and Morila in our financial statements. Going forward, we will be accounting for such joint ventures using the equity accounting method as opposed to proportionate consolidation to simply align presentation under both US GAAP and IFRS. The difference between the two methods is simply a matter of how we present it on the face of the financial statements. The proportionate consolidation method consolidates the results of the joint venture on a line by line basis on the financial statements, whereas the equity method simply incorporates the results into a single line into the financial statements. None of the other metrics such as attributable production or attributable total cash costs, etc., will change.

With that bit of accounting literature, I'd like to hand you back to Charles.

Mark, if you want to wrap, and then we'll take Q&A.

Yes, just a couple of words after that exciting piece. Ladies and gentlemen, the last six months, safety, production, costs, the hedge book, restructuring the portfolio, managing the Eskom issues, and the exploration discoveries have all been significant I think achievements of the team. And in that process we're building a new team. And so we've done a lot of pedaling and quite frankly, not all that pedaling has yet expressed itself in terms of the earnings. But on a go forward basis, I think you are now starting to see the start of or will start to see the start of the delivery of results and performance that we've been talking to in terms of the foundations we've been creating.

More specifically, in the next quarter, the focus for us has to be the delivery and a real demonstration of the delivery of the turnaround at Geita. And as I said, I'm very encouraged to see the early signs, but we've really got to nail the next step. And the next step at Geita is a clear and obviously focus for us as a team.

The second part is to make sure we nail the Obuasi team and we make sure we've got the team in place to actually execute that. And by that I mean that also includes all of us understanding the roles we have to play in making sure that we take Obuasi forward in a very aggressive and constructive way. And I'll tell that the full team is very focused on delivering on that key promise for us as a business.

Finally, a lot of work is and has been going on in terms of the portfolio. There's still more work to be doing and we're looking at how we balance the value conversation with potential sales. And certainly we're not going to say too much about what we've got in play, but there are a number of things in play, and when they're completed we will come to the market. But there's a lot of work going on. My expectation is that in the fourth quarter is where you'll really start to see some of those issues hit the headlines. But from our point of view, I think the third quarter will be a lot of our getting our heads down and making sure we get those three issues appropriately tucked. And given the performance we've delivered, given the hedge book changes, I think you're starting to see a new AngloGold Ashanti emerge. Charles?

Thank you. Be happy to take your questions. Steve? You're on mikes.

Thank you. Steve Shepherd, JPMorgan. First of all, I take my hat off to your management team for an amazing safety achievement in this industry and South Africa in particular. You've sort of been focusing on shareholder value. Alan and I recently did a piece of research which suggested that if we put average international multiples on your offshore business, the market is ascribing very little value indeed to your very high quality South African assets. And could you talk to that in the context of your portfolio review and what your thoughts are on that please?

Yes, I think that's right, Steve. And also I think they're not attributing value, or the value that I've been seeing, against a lot of the other assets in the portfolio as well. And as we said some 9 months ago, I think getting the basis for this, we hadn't delivered on our commitments. So quite frankly I don't think six months buys you credibility. And for me, I think we've got to demonstrate the ability to deliver on commitments for probably another quarter or two. But certainly I think we've demonstrated that the foundations have been put in place and we have actually delivered on our commitments in the last two quarters.

So I think that's where you've got to start. As you rightly point out, I think the South African assets are exceptional in terms of their quality and quite frankly, where else do you go in the world where you've got a 2 million ounce production base? You've got the operating costs that we've got and the potential on an ongoing basis. But they do have challenges. And I think Johan and the team has done a great job. I think we'll continue to see improvements. As we said on the safety front, I think we're-- it looks like we're working on the right things. But for us, I think South African assets remain core to the business. We are looking all around the world to find assets as good as the South African assets and so they will remain core. And I think quite frankly, if I could talk on a broader basis, I don't think we're selling the country terribly well. I've only been here 10 months and one of the great frustrations I suppose I have is that we don't tend to sell ourselves very well to the rest of the world. And if you look at Africa and you look at the rest of the world, you look at the way people are finding gold deposits these days, they are in tough locations. You don't have the political and legal stability that we do have in this country. You don't have access to the skills that we have in this country, you don't have access, and even though we may complain about infrastructure, you don't have access to the same infrastructure. I think quite frankly, South Africa is as good as it gets in Africa and if it's not one of the top places in the world to be mining, then I don't know where it is. I've worked across six continents and quite frankly I've been absolutely blown away by what we've got. And we tend to focus on the negatives from time to time. So I think for us, there's a job here to promote both a country and our assets and what we can deliver and I think delivery on commitments and us keeping, reinforcing that story, I think is going to take us forward.

Just a last one, thank you for that--

Sorry, I didn't mean it to be a lecture. I'm feeling pretty passionate about the place at the moment.

Very carefully worded answer, Mark, thank you for that. Just on the hedging, you've proved that you're prepared to be opportunistic already. Is that a policy that might be seen happening in the future?

The answer is yes, but--

Definitely yes. Again, they want us to be realistic. There are some accounting constraints in terms of what you can do with off balance sheet contracts. We are operating within that constraint, but certainly we would be opportunistic in terms of basically affecting hedge reductions, especially from proceeds from asset sales.

Good morning, guys. Muneer (Inaudible) from Deutsche. I'd like to repeat what Steve said, well done on the safety side, it's encouraging and progressive. On -- two questions. The first one has got to do with dividend policy. Now it's becoming increasingly more difficult to try and understand what the more (inaudible) dividend policy is. I know that this is mining and things are not easy, things change all the time and it's fairly dynamic. But I'd just like to get an idea on how you guys decide on the dividend, maybe just a scientific idea on how you get to $0.50 or how do you make that decision? I think that's the first one if you could.

I might ask Venkat to deal with the science of the decision and then I'll pick up the less than scientific aspects of that decision. Venkat?

The policy hasn't changed. We have always said that we will distribute after allowing for growth needs and the capital projects of the Company. What we are trying to do this particular six months is to maintain our dividend payout ratio as compared to our final dividend of last year. It works out to be roughly 20% of adjusted headline earnings on an normalized basis. When you remove the tax credit from quarter one and you add the $15 million for this quarter and 3%, you're not far off. And we have rounded it up to about $0.50 a share. That's the mathematical calculation of how we got here.

Muneer, it's the right question. I would have to say that as a board, we've had a discussion on the dividend and I think we're aligned and believe that it's appropriate to pay dividends. I certainly am a strong believer in a transparent and appropriate dividend policy. We're in the process of restructuring the business, as you know, and so in the next six months, particularly as we go through some of the portfolio work, that will change our strategic positioning in how we take the business forward. Consistent with those changes that we'll make over the next six to nine months, we are also setting up for a very thorough review with the board on our dividend policy And we actually talked about that yesterday.

And so what I've recommended is that we hold the current position and make it very clear to the market that we're thinking very carefully about what that looks like as part of the portfolio review. And at the end of the year, after having a long discussion with the board about how we're going to take that policy forward with the portfolio, we'll be very clear on a dividend strategy. So if I could say in the short term, steady as she goes, but very, very, it's very high on our agenda in terms of dealing with the board. But certainly from my point of view, I believe that it's appropriate to maintain a dividend and I think we've got to be much more transparent about what that will look like. And I think we can do that once we've decked a few of the issues that will come out as part of the portfolio review. So towards-- at the end of the year, we'll be very, very clean.

Okay. Second question on Anglo American's decision regarding to follow their rights, I mean, that's positive. The problem is -- sorry, maybe it's not a problem, but you tell me if it is-- the problem is they appear to have put out timing or you putting out timing, 6 to 12 months they'll be down to 0%. So I expect we should see Anglo American getting out of their position over the next 12 months? Is this a discussion that you've have with Anglo American or is that your suggestion that that's what Anglo American do?

In the short term, I'd have to say that Cynthia is being very astute in that she recognizes a good investment when she sees one. But we'd like to hope that she's not as astute over the longer term. The discussion is a very constructive and positive one and we're looking at how we both preserve value as they exit the share. So we'll be looking to see how that could be managed over that timeframe. But quite frankly, it is a question for Anglo American to answer. But certainly I think it's important to say we do have a positive relationship, we do have a positive dialogue. And certainly from everything they've said, they'll look to do it in a way that is value protective from both their perspective and ours. And that's the best we can advise you on. Apart from that, you've obviously got to ask Cynthia and the team exactly how they'd like to take it forward. But from our point of view, we've kept the dialogue and will going forward.

So just to be clear -- I'm not trying to be a stick in the mid, but this is not a time that you've discussed with them, this 12 month period? This is speculating the stock going down to 0%?

I am quoting from the public statements that they've made and I won't say anything beyond that.

Good. Thanks.

Any other questions?

Hi, guys, Allan Cooke from JPMorgan. Just quickly if you can, Venkat, and you have these numbers to hand, in terms of the increase of fuel costs on your operations, can you give us a number more--

Yes, I can.

What is the impact of movements for example in the dollar price of oil as it comes through diesel into the group costs? And then also if you could give us similar guidance on power. Power costs are going to go up in South Africa, they're an issue to garner, too. If you could give us a feel for the impact of the contribution of power to the group costs as a whole, what is the impact there? And then, Mark, if I may press you on -- I think I can say with a firm certainty, $2.5 billion to $5 billion worth of expiration value is not reflected in your share price. Could you give us some color on that expiration portfolio please? I'd like to highlight that issue.

Sure. I'll let you go first. You want me to go first? You're looking for the numbers? On the expiration portfolio we've just seen, and Roric and Richard, you can jump in and help me in this discussion, but we've just seen the [Orelia] acquisition $1.2 billion. They have a gold prospect in Ecuador that [Kenross] has just paid $1.2 billion for. We have a prospect called La Colosa that's 13 million ounces. We have indicated I think fairly clearly that we know that's going to grow. And we've certainly got some significant additional potential that's still too early to talk about above and beyond the numbers we have. But if that isn't one of the great piece of ground in the world, if not the most prospective piece of ground on the face of the earth as we speak today, then I'd love to see what it is because I'm not sure where it is.

And so quite frankly, that will take a bit of time. So that's not from our point of view a concern. Because I think over the next 12 months, we'll demonstrate that we've got something special in Columbia. We've already announced three discoveries in Columbia through (inaudible) through La Colosa and certainly very enthusiastic about where you think is the potential. Then you look at the work that Roric in fact has been working from his Normandy days right through to where we are today in terms of Tropicana. And we've opened up a new district in Australia. Now again, a lot more work to do, but we've opened up a new district.

Congo-- now we're going through the normal conversations, the conversations everybody else is going through with the government and we will get to an outcome that is sensible for all parties, I'm sure we will. But we've already started to work on pre-feasibility work on [Mongoleu] and it's looking very exciting.

Now again, more work to be done, but very excited by what we're seeing. So from that point of view, if I-- and I was being a little bit cheeky when I say at the higher level of that range, but when I see some of the numbers that are being paid for resources, not reserves, and you're talking billions of dollars, then what does that make our portfolio and the positions we've got in terms of the next two to five years?

And again, that's the challenge for us as a management team is converting that potential into value for shareholders. And so as I said, that's where we very firmly focused. But again, I use the metric for every dollar the guys have put in the ground over the last five years, I think they've added $5 worth of value to the business. And you'll see that value I think expressed over the next two to three years in terms of what we bring to the guy in terms of resources and reserves of $15 an ounce. If you look at the margins, people are paying $100 to $200 an ounce in resources. We're delivering it on the balance sheet at $15 an ounce. Now again, that points at us doing a better job in selling the story, but that's what we're doing and that's what we have to do. And certainly when people start to see what we can deliver on a non hedged basis, I think those two numbers will start fitting together. And I think people will start appreciating where we're coming. But I'm not blaming the market, that's our issue to deal with and I think that's the challenge and that will ultimately be the measure of our success is whether we're able to demonstrate what that value is and that value accretes on share price.

Allan, I'm going to answer your question in four parts. Firstly, giving you a detailed breakdown of the energy and fuel costs and electricity costs by category of mine. At a group level, total energy and electricity together is 18%. It's broken down at a group level between energy and fuel at 8% and in terms of power at 10%. If you analyze it by type of mine, the power costs in SA underground is 11%, SA surface is 8%, total SA 11%, open pit in respect of general open pit operations is 12%. In terms of Africa, international it works out to about 3%. International underground is 12%. I can give you a schedule of this.

Turning to energy and fuel breakdown, in terms of Africa open pit, it fluctuates between 11% to 19%, international open pit is about 25%, international underground is 6%. That's the macro breakdown between energy, fuel, and electricity.

Turning to the sensitivity question you asked, for every $10 increase in the price of fuel barrel, our group cash costs go up or down by about $6 an ounce. To give you an example, if fuel retraces down to about $120 from $140, we'd expect to see a benefit of about $12 an ounce coming through to our bottom line. That's the second part of the question.

Turning now to the power costs in South Africa, and here I'd like Robbie and Shane to tell me if my numbers are right-- the 2% levy on an annualized basis in South Africa amounts to R63 million and the 27% increase is R147 million. Originally we budgeted for a much higher increase, but the actual increase works out to be about R147 million. Shane is nodding his head, that's comforting for me.

In terms of Ghana, if-- and this is purely discussing scenarios here, currently we pay $0.093 a kilowatt hour. If we were to go to say $0.15 and no science in the number, just a thumb suck, the monthly cost of operating our mines, that is Obuasi, Iduapriem and Ghana, would go up by about $3 million a month. So it could be quite significant. But that $0.15 is purely a guesstimate at this stage.

For those that may be wondering, yes, Venkat does sleep with that book.

Thank you. We're going to stop there and the management team will be available outside for an informal discussion. Thank you.