Anglogold Ashanti PLC (AU) 2008 Q3 法說會逐字稿

Good afternoon and welcome to the AngloGold Ashanti third quarter earnings results. All participants are now in listen only mode and there will be an opportunity for you to ask 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, Dillon, and welcome to this presentation by the AngloGold Ashanti executive team of our results for the third quarter ended 30th September 2008. The format will be as follows. Mark Cutifani, our CEO, will review the Company's performance over the quarter. This will be followed by Venkat, our CFO, who will discuss the financial aspects of our performance in more detail. And this will be followed by Richard Duffy, who heads up our African operation, who will talk to you of his first impressions of the Africa region including progress on turnaround interventions underway of certain assets.

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 AngloGold Ashanti's strategy to reduce its gold hedging position 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 outlook of AngloGold Ashanti's operations, individually or in the aggregate, including the completion and commencement of commercial operations of certain of AngloGold Ashanti's exploration and production projects and completion of acquisitions and dispositions; AngloGold Ashanti's liquidity and capital resources, including its intentions and ability to refinance its $1 billion convertible bond; and expenditure and the outcome and consequences of any pending litigation proceedings, 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 be incorrect. 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 31 December, 2007, which was distributed to shareholders on 31 March, 2008 and AngloGold Ashanti's report to shareholders for the quarter and nine months ended 30th September, 2008, which was distributed to shareholders on 30th October, 2008.

AngloGold Ashanti undertakes no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after today's date or to reflect the occurrence of unanticipated events. All subsequent written or oral forward-looking statements attributable to AngloGold Ashanti or any person acting on its behalf are qualified by the cautionary statements herein. With that, let me hand over to Mark Cutifani.

Thanks very much, Charles. Ladies and gentlemen, about 12 months ago we sat here and talked about our strategy and where we were taking AngloGold Ashanti. And for me and for the team, I think it's very important that we again update you on our progress and talk to where we've come from in the last 12 months.

First, the September quarter has been a tough one for the global financial markets in the mining industry. We have seen gold trade in a range from a high of $988 an ounce to a low of $736 an ounce and post quarter end we've seen a dramatic sell-off across all markets with gold dipping below $700 an ounce late last week and the rand weakening to below ZAR11 to the dollar.

At the same time, all investment classes are being punished and gold equities have been no exception. Against this backdrop of increased price and currency volatility, together with the dramatic market sell-off across all sectors, let me walk through what the AngloGold Ashanti team has been doing and what we've achieved.

On the operations, we have now, for the third quarter in a row, met our production and cost guidance. This is despite the fact that we face two unplanned national mine stoppages in South Africa as well as an unscheduled mill shutdown at Geita. On the safety front, we've continued to focus on building a leadership culture that ensures safety as our first value.

While we are disappointed in the four fatalities we reported for this quarter, particularly following our milestone fatality-free quarter last time we spoke, we are still 64% ahead of where we were last year. And again, we're very proud of that result and, in particular, we are proud of the work Johan Viljoen and his team have done in South Africa in delivering that outcome.

In addition, we're very encouraged by the positive trends we're seeing on lost time in [addressing] injury frequency rates, reporting results 15% below where we were in 2007. This trend is encouraging as it supports our sense that we are seeing traction on behaviors and the broader approach to safety within the operation management team.

On a more general business basis, we've continued to work on the development of a new approach to managing operations, which is designed around a series of new processes to ensure that the Company's planned operating performance is achieved with a high level of consistency and confidence. Our longer-term productivity and cost reduction strategies will be built off these new process foundations.

This work, led by Tony O'Neill and our operations executives, has started to take hold and whilst we still have a long way to go -- and I'll talk a little bit later about our plans for next year, we're very encouraged by what we see so far. At the same time, Tony is also leading a capital review program which includes the operating structures to ensure that we derive the financial returns that we expect to see from our substantial project pipeline.

While this means we've got lots of opportunities in the current market, we will not develop all our project potential as it's always, I think, a lot smarter to develop the best projects with a view to maintaining returns above our target minimums, but certainly, from our point of view, we've got the options, we're putting in place the processes and we should deliver on that potential.

You've seen our new management structure, the new faces in the team and three quarters of delivery on commitments. Our focus on people is about driving productivity improvements and associated cost reductions. Our five-year strategy is targeting a 30% productivity improvement with associated real cost reductions.

None of these interventions are quick fixes. We are focused on building the foundations for sustained value creation and gold equity outperformance over the long-term at a time when the gold mining sector has failed consistently to deliver investor returns, or earnings leverage as they expect, particularly with current gold prices.

While the fruits of these interventions will take time, I am very pleased that a number of our operations have shown material improvements this quarter. At Obuasi, the step up in performance was consistent with the team's forecast and is consistent with the turnaround strategy that we've been working through to implementation. The other good news or the good news that continues is we expect this to continue into this quarter.

And in fact, in October, we're seeing and expect delivery again of our budget. We also saw solid performance in South Africa, particularly in Mponeng, in Australia at our Sunrise Dam operation, Cerro Vanguardia in Argentina and Obuasi and Geita. As well as that of our Brazilian operations, they continue to improve after a slow start in the year. Siguiri in Guinea also have delivered another strong performance.

As we continue to build our financial strength, Venkat, Mark Lynam and the financial team have continued to deliver. On our hedge book restructuring, the treasury team continue to accelerate deliveries, taking out 236,000 ounces ahead of schedule and reducing committed ounces by 580,000 ounces. At quarter end, our hedge delta stood at 5.79 million ounces and our committed ounce position was at 6.3 million ounces. This puts us comfortably on track to meet our target of reducing the hedge book to around 6 million ounces committed by the end of the year.

It's also important to recognize that following our $1.7 billion rights issue in early June and our reduction to the hedge book of almost 5 million ounces of committed ounces year to date, that we have reduced our banking counterparty risk by some $1.3 billion. We have also reduced debt by $300 million with the retirement of our South African bond. At the same time, you will see from our published results that we have cash on hand of just over $550 million and a net debt position of $1.3 billion. We also have undrawn headroom on our revolving debt facility, which assumed a credit across 21 banks of some $400 million using today's exchange rates.

We are now working on the refinancing of our $1 billion convertible bond that matures the end of February 2009. While our preference has always been to replace this bond with a new convertible instrument, we recognize that the convert market is, for all intents and purposes, currently closed as a result of the unprecedented global financial crisis. The refinancing of the bond is a top priority for the Company and several refinancing options are being actively explored, including a bridge facility, further debt financing and additional asset sales as well as reviewing all discretionary operating and capital expenditures.

We have also continued to progress our asset disposal program on non-core assets and, while market conditions have slowed this a little, we do have discussions underway on certain assets. In the context of the current market, we have also taken the view that it does not create real shareholder value to rush to produce gold in a dramatically volatile price environment, where we've seen up to $150 an ounce swings in a matter of days, nor to rush new capital projects. We are currently slowing some high cost development in the existing operations and we have marginally reduced our gold production outlook for the fourth quarter to 1.25 million ounces.

Tony O'Neill has led a full capital review, which has targeted a $50 million reduction in the current December quarter, and we will deliver on that reduction, and at least a $400 million reduction on the preliminary 2009 capital budget submission. While we are still finalizing our 2009 business plan, which will go to the Board in December, I am confident that we are making prudent decisions around the reducing of our near-term capital spend.

Decisions taken at this October Board meeting include -- the capital expenditure spend on the TauTona deepening project has now been put on hold as we review the impact of geological features and other scope changes on the project. While we still expect to recover the project goal through utilizing a substantial part of the capital structures and development still today, we will most likely do this through a revision to both Mponeng and TauTona mining strategies.

For those that watched closely or listened closely to our calls early in the year, one of the things we said we were doing by actually creating a South African position, installing the operating management at [Postercrew], which is in the center of the operating area, we will look at managing the two regions on a consolidated basis, looking for synergies, capital reductions and operating productivity efficiency improvements. And this change in the capital structure and plan for this project is a direct consequence of those efficiency moves that we put in place earlier in the year.

At the Tropicana project, we've also been working on the pre-feasibility study consistent with the target schedule. We are slowing the progress of this work to focus on the identification of project enhancement opportunities. And as I've said, whilst we have a good project, we are looking at making it a great project and, quite frankly, while the debate on the carbon tax issues works through its processes over the next 12 months in Australia, we think it is prudent to slow and make sure it is the best place to place our capital.

And again, I think we're taking a -- making a prudent decision on what is a good project, but quite frankly, we've got a number of good opportunities and we think we should just slow that project up. We are also putting on hold potential expansions to Navachab in Namibia, slowing some of the greenfields exploration work and tightening our development expenditures across the board. And that's how we'll get to that $400 million reduction over the course of the next 12 months.

On disappointment has been project delays and cost overruns at our Boddington project. The project is 85% complete with site construction 65% complete. Project startup is now scheduled for early to mid-2009. Attributable capital costs have increased to somewhere between $850 million and $950 million and that's for AngloGold Ashanti's attributable share due to the delay and escalation-driven costs in steel, fuel and labor.

While we appreciate Newmont, as the manager, is doing their best to mitigate these disappointments, we are also maintaining our focus on supporting them to bring this project into operation as soon as possible. In all of the recent market upheaval, one real positive is that we are starting to see the benefits of weakening local currencies outside North America. We are expecting that, in the fourth quarter, we will also start to see the benefits of reduced oil prices and other commodity inputs on our cost structure.

Unlike our North American peers, we have not enjoyed the cash cost sweeteners of byproduct credits like copper where the price has dropped 85% since the beginning of the year. As you know, we are the most competitive global major gold producer on a total cash cost basis or on a total cost basis and that has been without the benefit of byproduct credits. So our position and our relative competitive position will continue to improve as other commodity prices drop away.

Thus looking into next year and following our completed hedge restructure, we are expecting to see real operating cost outperformance, margin expansion and solid earnings leverage. This is, of course, dependent on the gold price, but here I make (inaudible) by year end we will start to see gold reassert itself on the fundamentals in our industry. And in reflecting on that -- and we discussed this this morning, the industry has seen around six years of production decline.

Interestingly, other commodities we've seen significant capital injected into new capacity whether it's nickel, copper, coal, iron ore and a range of other commodities. Yet in the gold industry, we've not seen the same capital commitment to new production growth. And I'd expect and we'd expect to see production in our industry to continue to decline in the range 2% to 5% over the next five years.

So again, we believe that there is reason to be optimistic about the gold price, particularly in the face of the fundamentals facing the industry and certainly the fundamentals facing many of our competitors. Before I hand off to Venkat to unpack our financial performance and given that Richard will discuss the performance in the Africa region, let me just comment briefly on the performance of the Americas and the Australian operations and progress on the exploration portfolio.

Looking at the Americas region and starting with Cripple Creek in the USA, gold production was encouragingly 7% higher at 63,000 ounces. Despite the higher production, total cash costs increased 7% to $321 an ounce, driven by rising fuel costs. This cost trend would likely reverse in the last quarter as we improve on this production level and fuel costs start to drop away as we've seen in the last couple of weeks.

In Brazil, production remains steady at 103,000 ounces while total cash costs were 4% high due to the annual wage increases and inflation-impacted consumables, again fuel. At Serra Grande, the mill expansion project is on track for startup in the second quarter of 2009, increasing throughput capacity from 850,000 tons to 1.5 million tons per year.

In Argentina, at Cerro Vanguardia, run margin in these two have been very busy turning or applying new processes and turning the operations around after a very slow start to the year. Our actions seem to be delivering results. Production rose 59% to 43,000 ounces, a result of improved grades and mine and plant ore production throughput. Consequently, total cash cost reduced 23% to $666, still nowhere near acceptable. But the trend is starting to move in the right way. We expect that this improving trend, both in production terms and on cost terms, will continue and certainly we expect our last quarter to be far our best quarter of the year.

In Australia, gold production at Sunrise Dam was 1% higher than the previous quarter and 7% higher than planned levels with this quarter marked by the completion of the mining in the MegaPit. Going forward, this means the production will step down in accordance with our mine plan by some 35,000 ounces in the next quarter, as a larger proportion will now be produced from underground sources.

The north wall cutback is currently underway and is expected to provide around 200,000 ounces of the 400,000 ounces scheduled for production in 2009. As an aside, we're very excited by what we're seeing in the underground operations in Sunrise Dam and we would expect over the next six months to update you on extensions to life and potential increases to mining capacity beyond 2009.

On the exploration front, in global exploration we spent some $47 million during the quarter, again continuing on our commitment to identify real growth opportunity for the business, bringing our total spend for the year or for the nine months to $145 million. In Australia at Tropicana, we continue to make good progress and we are now drilling four new prospects that have the potential to add both quality and quantity to the current resource position.

Turning to Colombia, our activity is focused on systematic reconnaissance and drill target definition work. We completed approximately 3,000 square kilometers of airborne geophysical surveys during the quarter. One of our joint venture partners, B2Gold, continued resource delineation drilling at Gramalote and the results continue to be very encouraging and supporting of a project development.

And at Quebradona, our joint venture project, we certainly are starting to see some very encouraging results and we're very excited by what we've probably got in this area as well. As well, our 2009 exploration plan will look to rationalize some spending. We have an excellent set of opportunities starting to emerge in the portfolio. I'll now hand over to Venkat.

Thank you, Mark. Apologies to everyone on the call. My presentation is going to have more detail than it normally does. I would like to unpack what we have done during the quarter from a financial point of view and also spend some time on the balance sheet and the outlooks for fourth quarter and next year in terms of earnings leverage.

To kick off with six matters -- an update on our hedge book and further hedge reductions that were achieved during the quarter; total cash costs for the quarter and outlook for the fourth quarter; our financial performance for the third quarter and the impact the further hedge reductions have had on this quarter's earnings; impact of sensitivities with regard to weakening local currencies; diesel costs and outlook on the quantity of uranium that is now becoming available for sale in the spot market; our net debt levels and refinancing of the $1 billion convertible bond, which is due in February '09; and provide some guidance on amortization and expense exploration charge for the full year 2008 and the fourth quarter.

Starting off with the hedge book, our efforts to reduce the hedge book continued into the third quarter. In addition to the contracts that were maturing during the quarter, a further 263,000 ounces that would have matured during the fourth quarter of this year and early next year were settled and delivered into during the third quarter.

The total reduction on the hedge commitment during the quarter amounted to 580,000 ounces. That's pretty close to half our current quarter's production, which was delivered into the book, which took the hedge book down from 6.88 million ounces at the start of the quarter to 6.3 million ounces at the end of the quarter.

This, if you recall, amounts to a cumulative reduction of approximately 5 million ounces from the start of the year, or close to 44% reduction in the hedge book. We are on target to finish this year with total commitments in the hedge book close to 6 million ounces, which is an improvement of what we had at the time we planned the rights issue, which was 6.25 million ounces.

The net delta at the quarter end at $876 spot was 5.79 million ounces with a negative mark to market value of just under $3 billion. At a spot price of $745 an ounce, that's the price which was prevailing on the 28th of October, this delta reduces sharply to 5.261 million ounces with a negative mark-to-market value of the book being around $2.2 billion.

These represent significant reductions close to 50% in our hedge exposures since the start of the year when compared to the mark to market value of the hedge book, which stood at $4.27 billion. I think this is quite an important point, the reduction in the hedge banking exposure, which I will touch upon when we come to discussing the refinancing of our convertible bond.

The accelerated reduction on the hedge book meant that our third quarter received price was 26% lower than the prevailing spot. This will, however, result in a benefit that is better leveraged to the gold price during the fourth quarter with discount projected at between 10% to 15% of an $800 to $900 gold spot price range. This is an improvement from where we were at the end of last quarter, which was close to 20%. Our current projected discount to spot price for 2009 at $900 goal still remains around 6%. Both represent significant leverage to gold price as compared to the position that existed pre the hedge reduction.

Now turning to our total cash costs, as guided during the previous quarter, our total cash costs for the third quarter were higher by $52 an ounce -- there are no surprises here -- at $486 an ounce. This was a $4 per ounce improvement as compared to our guidance. The $52 an ounce increase in total cash cost quarter on quarter can be categorized into two parts -- those which were one-off or seasonal and are not likely to recur during the fourth quarter and those that could flow through into the next quarter.

The once-off or seasonal expenditure during the quarter aggregated $29 an ounce and this comprised of inventory movements which we flagged to the market earlier of $13 an ounce, winter power tariffs in South Africa of $3 an ounce, which impacts on our third quarter cash costs; higher maintenance, labor, reagents and contractors' costs, bearing in mind that we settled a couple of recent fall claims, amounts to about $13 an ounce.

The balance of $23 an ounce increased was primarily due to inflationary increases and comprised of the following -- the midyear wage increases, which comes into effect on the 1st of June at $7 an ounce; higher power tariffs, primarily Ghana and to a limited extent South Africa, of $7 an ounce; and fuel costs, consumable and others, given the fuel prices that prevail during the third quarter of $9 an ounce.

We therefore expect the cash costs during the fourth quarter to normalize and are guiding fourth quarter's 2008 cash costs at the production level of 1.25 million ounces at around $460 an ounce at the exchange rates which are outlined in our release with potential further upside from weakening currencies, which I'll touch upon later in this presentation. And to give you an example, if the rand were to average close to ZAR10 to $1 during the fourth quarter, our cash costs would be a range in the fourth quarter between $430 to $440 an ounce.

Looking on the financial side, our adjusted headline loss for the quarter was $119 million and it was impacted by three factors -- primarily the accelerated reduction in the hedge book of $263 an ounce, which amounted to $120 million; an accounting write down, non-cash, following a reassessment of Geita stock piles in terms of grades and costs of $16 million; and the impact of the increase in costs quarter on quarter as mentioned earlier of about $46 million.

Turning on to sensitivity to currencies, with the current financial turmoil, local currencies have weakened considerably as compared to the US dollar since the quarter end, i.e. from the 1st of October. For example, from the 1st of October, 2008, to the 28th of October, the South African rand has depreciated by 24%; the Brazilian real has fallen by 12%; the Australian dollar has fallen by 18%; and the Argentinean peso is down by about 8%.

Despite being a globally diversified player, we still enjoy considerable leverage to emerging market currencies, which often gets forgotten, given our diversified portfolio. If you unpack the currencies in which the input costs are comprised off of the various mines, over two-thirds of our total expenditure is, in fact, incurred in local currencies.

We have given the sensitivity analysis before. Our analysis indicates that a 1% weakening in all local currencies should reduce our group cash costs by around $3 an ounce. So if you were to assume a paradigm shift, i.e. a 20% depreciation in all local currencies off a 5 million ounce annual production base, assuming all other aspects are constant, this should boost our annual pretax cash flows by some $300 million.

Turning to brent crude, which has fallen from about $97 a barrel at the third quarter end to lows of $60 a barrel, our sensitivity analysis shows that a $10 movement in the barrel price, i.e. a reduction in the fuel price, should reduce our cash costs by around $6 an ounce.

Assuming a $20 reduction in the price of fuel per barrel, off a 5 million ounce annual production base, our fuel bill should reduce by around $60 million, although some of this leverage will be captured under the weakening currencies. However, there is an averaging effect because our inventories are valued at average costs and there will be a time lag depending on the input of somewhere between three to six months for these benefits to flow through to the income statement.

Turning to uranium, we estimate that we will finish the year with around 350,000 pounds of uranium -- this is as at this year end -- which is available for sale in the spot market should we choose to do so. In addition, we anticipated that after delivering into our 2009 contracts, there will be a further 750,000 pounds of uranium that will become available for sale in the spot market during 2009.

So that would imply a total stock holding of 1.1 million pounds of uranium, roughly close to our annual production, which is available on our hand at the end of '09, which can be sold in the spot market. Assuming a depressed price of uranium of, say, $50 a pound, this should still improve our cumulative cash flows through 2009 by some $55 million.

As mentioned earlier, the hedge reduction should improve our 2009 pretax cash flows of an $800 to $900 gold price by some $136 per ounce to $153 per ounce of gold sold as the hedge discount narrows from the previously stated 23% discount to spot to the targeted 6%. Even assuming a conservative 5 million ounce annual production profile for 2009, the impact of the hedge reduction should boost our pretax cash flows by some $680 million to $765 million in 2009 as compared to having not done the hedge reduction.

This should demonstrate the considerable leverage AngloGold Ashanti should enjoy in 2009 by a combination of several factors. Firstly, a marked reduction in the hedge book. Secondly, potentially weaker currencies, easing of fuel prices. Thirdly, spot uranium sales, not to mention increase in production by Boddington coming on stream during 2009 and the various business improvement initiatives as Mark outlined coming to fruition. Mark has already covered in his section the relative values of these benefits when compared to our costs of our global peers.

Now turning to our balance sheet, our net debt level at the end of June 2008, if you recall, was $2.7 billion. Following completion of the rights issue, this has been reduced to $1.23 billion, well below 50%. During the quarter, we used the proceeds of the rights issue and we also redeemed in full the ZAR2 billion South African bond that matured in August 2008. Our net debt to EBITDA ratio currently stands at a comfortable 1.16 times as against a covenant threshold of three times. And if you recall, two years ago this ratio was in the region of 2.3 times. So it's a marked improvement.

I'd now like to spend some time addressing the refinancing of our convertible bond that matures on the 27th of February. It was our intention to refinance this bond with the proceeds of a new convertible bond. However, global market conditions have been and continue to be disrupted and volatile in recent weeks and the volatility and lack of liquidity in the global capital markets have reached unprecedented levels.

In the light of these market conditions and as a matter of prudence, we are ahead of time, actively exploring a broad range of refinancing options, which include bridge financing, further debt financing, additional asset sales as well as reviewing discretionary capital and operating expenditure, which Mark alluded to earlier.

In addressing any potential concerns on our ability to refinance and redeem the convertible bond, I'd like to make the following points. Starting with cash on hand, our cash and cash equivalents -- that is excluding cash held in joint ventures and other restricted cash -- as of 30th of September, 2008, stood at $555 million, a substantial portion of which is held in US dollars and thereby not affected by the recent currency swings.

Secondly, the undrawn headroom in our $1.15 billion revolving credit facility, as of 30th of September, 2008, amounted to $294 million. As a portion of the borrowings are in Australian dollars, this headroom should increase by a further $140 million at the current weak Australian dollar exchange rates. Our budgeted spend on the Boddington project for the remainder of this year is approximately AUD150 million, or close to $100 million.

In addition, we have budgeted capital expenditure through the remainder of the year of some $200 million to $255 million, which represents a $50 million reduction on the previous estimates and our EVPs of the three regions along with Tony O'Neill and Eskom are currently reviewing these capital expenditures to see what can be reprioritized without damaging the long-term prospects of the business. Our net debt to EBITDA ratio at 1.16 times is below 40% of the covenant limit. Our net debt to capital employed is at around 21% and both represent significant improvements as compared to a year or two ago.

Turning to quite an important aspect, which is critical in any discussions on bridge financing, the exposure to our banking group, following the hedge reduction, has fallen by $1.3 billion as compared to the position that existed at the start of the year. This is a level of reduction that has been achieved, which is higher than the current refinancing need.

In addition to that, we have freed up our borrowing capacity in South Africa. A year and a half ago, our total borrowings in South Africa were ZAR4.5 billion, which equals approximately $500 million. And today the amount of borrowing stands at zero. So our ability to raise funds in South Africa is still available. The hedge book reduction should free up free tax cash flows by some $680 million to $765 million on the assumed gold price ranges as mentioned previously in 2009.

I've outlined a few moments ago the additional cash flow potential from weakening currencies, potentially falling fuel prices and uranium upside, which are not insubstantial by any means. A sales process is already underway and banks mandated in respect of certain assets such as Tau Lekoa in South Africa and certain of our uranium tailings.

Now turning to amortization and expensed exploration outlook for 2008, our estimates for 2008 in terms of annual amortization charge amounts to $600 million. That would represent a charge in the fourth quarter at $178 million. The expensed exploration for the year is around $135 million, which would represent a charge in the fourth quarter of $39 million.

Finally, earnings for the fourth quarter, in line with previous years, are expected to be distorted by, amongst other things, due to annual accounting adjustments as we reassess our rehabilitation provisions, inventory carrying values and our current and deferred tax provisions. I will now hand you over to Richard Duffy.

Thank you, Venkat. My initial and overriding impression in assuming this new role is one of considerable potential in the portfolio of assets in the African region. To capture this potential, we will need to bolden our steady performance in South Africa and also successfully implement our capital projects, implement our turnaround strategies at Geita and Obuasi and develop Siguiri to capture the significant upside potential that this ore body offers.

The implementation of the new approach to managing our operations will facilitate more stable and consistent operating performances. We have very good management and operating teams in the region, but there are still some key skills gaps that are currently being addressed and that will help us to deliver the full potential of our assets. Cost management and business analysis requires greater focus in the region, specifically in our non-South African operations and we will be developing additional capability in this area to improve our business performance.

Safety, an area in which we have seen considerable improvement during the year, will require an even greater effort. Besides the obvious moral and human imperative behind improving safety, we know from experience that our safest operations are also our most productive and that ongoing safety improvements should not be viewed as a drag on production.

In the interim, however, in working towards improved safety performance, we have seen some impact on our operations. In this area of safety, we share a common objective with our partners, both government and the unions, of accident-free workplaces. Our South African division introduced the concept of white flag days towards the end of last year.

A white flag day occurs when none of our South African operations has any accidents over a full 24-hour period. Which, to put it in context, means that 32,000 people have worked accident-free over a 24-hour period. For all of last year we managed only two white flag days. For the year-to-date ending September we have recorded 33 white flag days.

Also in the South African operations, the third quarter saw the lowest ever number of dressing cases being recorded and the lost time injury rate improved by 14.5% to 10.74 accidents per million hours. Also of note is that our Vaal River operations have worked for two quarters without any fatalities. All of our South African operations have now received OHSAS 18001 certification -- that's 2007 certification -- and we expect all of our operations in the Africa region to be certified by the end of this year.

Sadly, we have had a further three fatalities in the first month of the fourth quarter, two at TauTona and one at Obuasi. Our sincere condolences go out to the family and friends of our colleagues. This brings home the realization that while we are making significant improvements in our safety performance, we still have a significant way to go together.

Turning to energy, specifically in South Africa and Ghana, will require our close ongoing management attention, not only around ensuring consistent supply, but also in terms of containing rising power costs. During the quarter, our energy consumption in South Africa was 92.4% against our Eskom allocation of 96.5% and in line with our target of reducing consumption to 90% by the end of 2009.

It has now been nine months since we were faced with the Eskom crisis. The third quarter of the year marks the winter season in South Africa where power demand increases substantially posing Eskom with the highest challenge of meeting consumer electricity demand. Eskom did an excellent job during this difficult period and managed the task without any serious incidents. Our power consumption is estimated to remain between 92% and 95% of our January 2008 consumption level as we move into the summer months and increase our refrigeration requirements and continue our buildup at the Moab Khotsong mine.

In South Africa, gold production was steady at 16,733 kilograms or 538,000 ounces despite an increase in safety stoppages and nationwide strike action. Both Mponeng and Tau Lekoa had solid performances with gold production up 3% and 9% respectively. On the 1st of July this year we initiated a restructuring program at Great Noligwa that resulted in the SV4 section, which is a high-grade area being transferred to Moab Khotsong due to its proximity to the Moab Khotsong infrastructure, as it undertakes a restructuring program to right size and align its cost structure to reduced mine plan.

As a result of the transfer, Great Noligwa saw production decline 34%, while Moab Khotsong increased 141% in line with its ramp-up profile. At TauTona mine, gold production was down 12% to 2,464 kilograms or 79,000 ounces as a result of reduced mining volumes due to seismicity. Following the last fatality we had at the mine on the 2nd of October, we took a decision to discontinue mining in the shaft pillar and are taking the necessary steps to demobilize in those areas.

We have also changed the mine's design in the lower carbon leader area. As a result, we have reduced our forecasted production for the fourth quarter by 530 kilograms or 17,000 ounces to around 1,920 kilograms. Total cash costs for the South African operations were higher at ZAR102,682 a kilogram or $411 an ounce, impacted by annual wage increases, winter power tariffs and inflation on consumables.

We continue to work on our feasibility studies for both Mponeng, below 120 carbon leader and Zaaiplaats 2, below Moab Khotsong. Mponeng, below 120 carbon leader project is planned to deliver over 10 million ounces and extend the life of the operation by 20 years with first gold in 2019.

This project builds on the work currently being done on the Mponeng below 120 VCR project, which is ahead of its development schedule and in line with the Board-approved capital spend. This VCR project will recover some 2.7 million ounces of gold, commencing production at the end of 2013 and running through to 2029.

Zaaiplaats 2 is planned to deliver 3.4 million ounces and extend the life of Moab Khotsong to beyond 2030. Further to Mark's earlier comments, we have taken a decision to delay the Mponeng below 120 carbon leader project by some six months and Zaaiplaats 2 by up to a year, which will have little impact on the outcome of both of these projects.

Turning to Ghana, our Ghanaian operations increased production for the quarter by 14% to 142,000 ounces. At Iduapriem, gold production increased 9% to 50,000 ounces as recovered grades normalized. Total cash costs, however, increased by 14% to $563 an ounce due to substantial power increases and inflationary pressure arriving from higher fuel prices.

The Obuasi team continues to work on implementing a turnaround strategy for the mine and in this quarter production exceeded budget in both August and September on the back of increased tonnage from underground and improved mill recovery. This is the first time that the mine has [bedded] its budget for two consecutive months in around four years.

As a result, gold production was 16% higher than the previous quarter at 92,000 ounces. As mentioned by Mark at our previous quarter year results, increased development is critical to providing mining flexibility. Improvements in development have supported higher grades and tonnage throughput during the quarter and in this period development meters increased by 26%. The sulphide treatment plant improved tons milled from an average of 164,000 tons per month for the first half of the year to 182,000 tons per month over the last three months and at the same time, improved recovery through improved floatation and grind.

The improvement in tons hoisted and milled has been the result of increasing productivities, improved maintenance and increased mining flexibility. The key objectives of the turnaround strategy at Obuasi are to increase ore production from 170,000 tons to 230,000 tons a month and improve mined grade from around 5.6 to 7 grams a ton by the end of next year. We are also planning to increase sulphide plant recovery from 79% to 83% by the middle of next year. These objectives will continue to be assessed in the context of our capital review process, which Tony O'Neill is leading.

We are currently in the process of filling some gaps in the Obuasi technical and turnaround project teams to support delivery of the plan, although early in the plan turnaround we are starting to see some improvement, as discussed earlier. Total cash costs have, however, increased by $65 an ounce to $677 an ounce, primarily due to the power and fuel increases, which amounted to $43 an ounce. The reliability and escalating cost of power in Ghana remains a concern.

Turning to Tanzania, our other key turnaround operation is Geita, where we had expected gold production to increase during this quarter. A number of factors resulted in gold production remaining flat, quarter on quarter. A reduction in both tons and grades for the base of Nyankanga put in Cut 4 when compared to the resource model resulted in lower-than-expected production from that part of the mine. In addition, the operation in the base of Cut 4 was both spacially constrained and carried a higher geotechnical risk from potential wedge failures and high wall rock falls from Cut 5.

In the interest of safety, it was decided to cease all operations in that area. On the 20th of September, a crack in the SAG mill shell was discovered that severely impacted the month's production. Repair work on the SAG mill face end plate was completed on the 20th of October and tonnage throughput is expected to return to normal levels during November. The replacement part is currently being manufactured and is expected to be delivered to site in quarter one next year. As a result, gold production is expected to be approximately 65,000 ounces for the fourth quarter.

Although production was flat quarter on quarter, total cash costs were 11% higher at $699 an ounce as a result of higher fuel prices and the non-recurrence of a tax credit in the previous quarter. Going forward, we are completing the drilling of 51 grade control holes at Nyankanga to better understand the differences between the current resource model and recovered gold and will recalibrate the models as required. Despite the setbacks during the quarter, we remain confident that we will start to see the positive impact of our business improvement initiatives from next year and remain on track to deliver 400,000 ounces of production in 2009.

Our Siguiri operation in Guinea had another very good quarter in exceeding high expectations, despite production being lower than the previous quarter as was anticipated as a result of lower feed grade material being available for processing. Besides maintaining our current momentum at Siguiri, the management team is turning its focus to developing the potential of that mine's ore body through implementing a comprehensive exploration program where some $17 million has been budgeted for drilling next year.

The planned debottlenecking of the plant next year is also expected to provide further upside potential before we look at increasing processing capacity. Cash costs for the quarter increased 22% to $528 an ounce as a result of lower production and inflationary pressure on fuels and reagents. Thank you very much. I will now hand back to Mark.

Thanks very much, Richard. I would make the point that whilst at Siguiri, we've said we've exceeded our internal expectation, I'm not sure we'll ever do that. We certainly did much better than the plan. So certainly Siguiri has been a real [holler] to the African operations. Just to say a couple of comments in summary. Firstly, as we said 12 months ago, we made a number of commitments.

Those commitments included reducing the Anglo American shareholding from 42% down to 16%, reduction in the hedge book, improvements in safety, bringing the operations into control so that we've delivered on our commitments and we've actually delivered the last three quarter's commitments in terms of our guidance figures. We've increased our uranium production and our exposure to spot prices and we've continued to make structural changes within the business that will stand us in good stead going forward.

As we like to say in the business, we defined the first phase reconstruction program for 2008 that we've delivered on at around 80% of our objectives. And the two parts that we've got -- were going on are obviously the portfolio adjustments or some of the asset sales we've been talking to. And the second part and the most important part of that is the bond refinancing and that becomes our most important priority over the next couple of months.

So the first thing that I think is very important to stress that we're focused on getting that work done. And whilst in the current market there is always uncertainty, we believe we've got the right things happening to make sure we get the job done.

I think very importantly as part of our phase I restrategizing and reconstruction, as a consequence in the first quarter of 2009, our shareholders will see a significant improvement in our earnings performance. And on the basis of a $900 gold price or thereabouts, and certainly if the exchange rate continues in our favor, then we can still see very good margins even if the price is a bit below that.

You'll see, in the first quarter, compared to our results this quarter, something like a $250 million increase in revenues for the business. And that comes without additional or incremental cost. That's a significant improvement or, if you like, leverage to the gold price that would occur as a consequence of the restructuring we've been doing this year.

When we talk about part two of the reconstruction of the new AngloGold Ashanti, we're very much focused on the new business processes we've been detailing, designing. And in fact, this week we started a rollout of our new business process at our Mponeng operation in South Africa. And as we go into 2009, there will be a significant work program introduced across all of our operations.

The target of this program -- and it is a five-year program -- we're looking at a 30% productivity improvement across our global operations in terms of gold produced per person -- or gold equivalents produced per person. We're looking at and targeting a 20% real cost reduction, a 3% recovery improvement across all our processes and, from our perspective, and very importantly, a 15% reduction on long-term capital commitments as we improve our efficiency of execution on our major capital projects.

For us this represents the second part of our reconstruction or the development of the new AngloGold Ashanti. And as we like to say, we've got new tires, we've dressed the body, we're now working on the engine in terms of cash flow. And that's what we call our operations -- the cash flow engine.

And so as we work to optimize our capital expenditures, and irrespective of the current financial turmoil in the markets, we were focused on making sure that our capital fits the organization and supports the growth profile that we see, but in a way that is accretive in terms of value to our shareholders. And when we talked about return on the capital employed for 2007, we're at around 6%.

In 2009, we're looking at hitting north of 10% and certainly over the next three years we're on track -- or we believe we're on track to hit our 15% target, obviously contingent on gold prices. But as we said earlier, the fundamentals in the industry will support where we've taken the business, we believe, and certainly the creation of value in the gold space, which we think is quite unique in our industry.

To support that I also make the point that AngloGold Ashanti is the most competitive of the major gold producers in terms of its total costs and its potential for margin growth in the next five years in this industry. Finally, we believe we have the team that can deliver. As we said, we're focused on making sure we get the refinancing done over the next three months. And from our point of view, that will put the engine in the tank for us to really go forward at pace as we deliver on our commitments in 2009. Thank you very much.

Thank you, Mark. We'll hand back to Dillon for Q&A.

(Operations Instructions) Victor Flores of the HSBC.

Yes, thank you. Good morning. I have a couple of questions on the operations. It would seem that since Halloween is tomorrow, it's appropriate to ask whether Geita is haunted because you seem to have an ongoing number of problems there. I'm just wondering how you hope to get to the 400,000 ounces next year.

Victor, I'll make a couple of quick comments. Then I'll hand across to Richard. We've seen in the second and third -- first and second quarter, certainly significant improvements, Victor. We're disappointed with the third quarter in that we equaled the second quarter. But certainly we were heading for another significant improvement. So it's a setback. But I don't think it fundamentally undermines the recovery strategy that we're working on. And I'll let Richard answer the question on the delivery of the 400,000.

Yes. Victor, it's a combination of -- it's a combination of things. One is the -- starting to see the improvement in plant availability as we stabilize the plant and avoid breakdowns like those we saw in this last quarter. The other is we're expecting higher grade through our mining next year. You may have noticed that I mentioned we had stopped our mining at the bottom of Cut 4.

We'll be taking that up as part of Cut 5 next year. So it's a combination of improved plant availability. It's a combination of reduced dilution in our mining as well as getting our grades up through improvements around our mining activities and being in higher-grade areas than we have been this year. So there is lots of work to be done yet. But we're confident that the 400,000 ounces is achievable for next year.

And you're happy with the performance of the fleet now?

We have supplemented the fleet with some new equipment and it's performing much better. We've got new drill rigs on site and we're getting our drill rig availability up. So with the new equipment, we are starting to see improved performance and improved availabilities, which we will continue to build on through next year.

Victor, there is something that goes with that. Richard is going to show me at the end of the year a 30% improvement in drill penetration rates. And if the team [can] deliver it, then we're going contract. So we've got a front plan and we've got a fallback plan and we're going to deliver 400,000 ounces next year.

Great. Thank you. (Multiple speakers) Oops. I've put Richard on the spot now. Second question goes to Obuasi. You've laid out some very specific targets, which is great to see, for mid to late '09. And the same question. How do you get the tonnage up? How do you make sure that those grades are higher and what tweaks have you made to the plan to get that extra recovery?

Yes. Victor, again, on that -- as I outlined, there are a number of areas we're targeting. The first area where we've seen some success, which has supported the increase in production has been getting our development rates up. And as I mentioned, we are 26% up this period over the last.

We also have our -- upgrade of the -- or our completion of the TSP plant, which happens probably end of quarter one, early quarter two next year, which provides us with greater capacity for treating sulphide material. What this means is it gives us much more flexibility to, for example, bring some surface material, which sits in existing open pit, through the plant. We are not able to do that at this stage.

So part of the plan at Obuasi is to create additional flexibility, which we are -- we certainly have done and we'll continue to do on the processing side. So that removes the processing bottleneck and brings about greater stability on the processing side. We've also added some additional -- we've also added some additional capacity to our BIOX circuit and we've seen improvement there.

When we move to the mining side, we've seen our developments and broken rock now be in line with our budget. What that means is we're not being constrained by underground material. And you would have seen in the past that our grades were a lot lower because we were putting more surface material through and we weren't getting the underground rock through Obuasi.

And as we move through the mining process, we will start to address our hoisting capacity to ensure that we don't have any bottlenecks on that front. So it's -- there are a number of initiatives that, first and foremost, getting the processing end right, getting our mining up from underground sources and, as a result, getting an uplift in our grade. And then getting our recoveries through the sulphide plant up towards 83%, we believe, will start to deliver a much more sustained performance from Obuasi.

Great. Thank you. And if I could just ask one last question. What is the status of the power increases in Ghana? I mean, there have been some -- I guess, everybody's talking about a doubling of the tariff, but I think there had been discussion that there might be some room for negotiation with the power authority. And I'd like to just understand what the power cost actually is in kilowatt hours and if there is any wiggle room.

Yes, look, we did -- Victor, there was a significant increase in our power costs during the quarter and near enough a doubling -- close to a doubling. We were at a level of around $0.09 a kilowatt hour and the latest tariffs are around $0.17 a kilowatt hour and there's some difference because the exchange rate comes into it. But that's the order of magnitude of the increase.

Obviously, at the time of the increase, we sat down with the various authorities and set out that these increases were simply not sustainable for the business going forward. And we did, although we don't have any formal commitment at this stage, we certainly had an undertaking from the authorities that we could revisit this early in the new year with a view to agreeing more sustainable rates going forward. So that is the plan. We will be sitting down with the authorities to discuss what we hope will be a more acceptable and more sustainable tariff going forward.

The other important thing to note is we're doing a similar thing in Ghana as we've been doing in South Africa and that is looking at conserving our power consumption. So we're looking at initiatives to reduce the electricity consumed at Ghana and so we're attacking it on two fronts. One is to get the consumption down and two is to revisit the tariffs with the various authorities.

Great. Thank you, Richard.

Oscar Cabrera of Goldman Sachs.

Good afternoon, gentlemen. Just want to get back to the issue with the refinancing, if I may. And Mark and Venkat, I know these are early days. We'd just like to understand how your thought process is going in terms of how are you prioritizing the way that you're going to achieve this? Is the -- is the bridge financing an option that you're very intent in looking at or how would asset sales, for example, fall into that? And if that's the path that you're looking at, what sort of the -- what parts of the operations might you be looking more intently at?

Okay, if I can pick that up, Oscar, and then Mark Cutifani will supplement me in terms of the assets as well. Firstly, the point I want to make is we are not just relying on one solution. I think that's very important to bear in mind. It's a multi-pronged approach which is being taken four months ahead of schedule.

Firstly, we have cash on hand. Secondly, we have quite a big headroom in our revolving credit facility. Thirdly, we are looking at bridge financings from groups of banks who have had their exposure to AGA reduced significantly from over a year ago. And also who see leverage in terms of cash flows coming back. It's not like the payback takes forever. The cash flows which come back from '09 would be more than adequate to service the bridge. They also get comfort on the fact that the revolving credit facility only matures in 2010.

In addition to that, and the reason I mentioned our South African borrowing capacity is, the market in South Africa is reasonably well insulated from the global events and consequently we do have our gunpowder dry in South Africa. We have sold enough gold internationally, if you recall. In addition to that, we are in the process of selling Tal Lekoa.

And we are also in the process of selling our selected uranium sales. We are looking at the portfolio of assets. But really what we are -- if there is a strategic fit in terms of an asset sale, we'll look at it, but it will not be driven as a pure financing decision at this stage. There is quite a lot of internal cash generation ability, head room in the revolver and ability to raise debt in different parts of the market. And also we have a couple of months at our disposal. So it's a multi-pronged approach rather than just relying on one.

Yes, thanks, Venkat. Oscar, firstly, you'd be aware that we've got at least two active processes -- the tailings and the Tal Lekoa asset. The Tal Lekoa asset probably caught a couple of people by surprise. But when they look at the size, relatively small in South Africa, it, from our point of view, is not going to be one of the drivers of long-term value, so it makes a lot of sense to actually monetize that asset and redeploy, we think, the capital, so. And that -- and we've had lots of interest in both assets. So we're well down the process in both of those and we'll see what they come up over the next couple of months.

In [Marley] we remain open to the conversations. We've made it very clear to the joint venture partners where we stand. We are not interested in fire sales. It's all about value. We are very strong, as Venkat described in terms of cash and where we stand in the balance sheet. And so from our point of view we have a number of options with respect to assets.

At the third level, we've said that we are interested in selling non-strategic assets of larger scale and when I described that about nine months ago, I said they are the assets that have scaled that may be worth more in someone else's hands where we could apply that capital more effectively within the portfolio to drive value and returns to our shareholders. We've had a number of approaches on some of those assets. I'm not going to talk about what those assets are.

Given the current market circumstance, I don't think it's appropriate. But for those that listen very closely to what we said about six months ago, they will have a sense of a couple of the assets at least that people have been approaching us on and we're looking at those with interest. But quite frankly we're not interested in fire sales. We're not interested in destroying shareholder value, but we are interested in making sure that the financing is done, it's done appropriately and in a way that will add value.

And again, we made the point about reconstructing the balance sheet during the course of the year. If we were here six months ago, it would be a tougher conversation. We've done a lot of hard work -- the $300 million, the rights issue to get the hedge book underway, the taking out of the mark to market risk in the balance sheet. So we believe we're in a strong position to get the right solution. And quite frankly, it may be a blended proposition of all three, but we're confident that we'll get there. But again, you have to remain cautious in this market.

Yes. No, great. Okay. And if I may -- so would it be fair to say that, in terms of your development project that would -- obviously, you're going to be reviewing what the returns are on those under the current environment. But would that be sort of like at the bottom of the list in terms of just conserving capital?

Well, we've been very clear. In fact, I made the observation halfway through the year before the prices hit that we are not as sharp as we need to be with the capital. So I'd have to say that the current crisis has helped to sharpen ourselves real quick as part of that process. And Tony's review has been a very good one.

So that's what -- we've identified $50 million in the last quarter and another $400 million that will be carved out as part of our program of value creation. And most of that is a deferral in time, but I think that's appropriate to get your cash balances right. But also part of our focus in our capital spend is we're not spending our capital efficiently. And as part of that program, Tony has a 15% target for reconstructing and reconstructing the way we do our projects.

And that includes our mine development, our stay in business capital and our project capital. So I'd expect for some of those savings to be absolute savings. But certainly from our point of view, I think it's entirely appropriate. We're not going to do anything that actually hurts the potential and the potential value of the business. And quite frankly, we're not going to do what some are doing by skinning out stuff over the next couple of years to create cash.

What we're trying to do is set up the business so it's a long-term sustainable deliverer of cash and it has a growth profile. And we've got options in terms of the projects we have. So we think we're setting ourselves up and the decisions we're making are prudent in both the current circumstance and for the delivery of value over the next three to five years as a minimum.

Great. Thanks very much, Mark.

[Paul Durham] of the HSBC.

Oh, okay. Sorry. Just picking up a bit on the productivity improvement program you've got in place. 30% on gold equivalent per person -- clearly, from a grade point of view, that's virtually impossible. But taking 30% out of your personnel number is a relatively easy thing to do. But clearly, there's going to be a balance in that metric. Where do you see the bulk of that improvement coming from, Mark?

Hi, Paul. Paul, I think Richard gave a pretty good outline of at least two areas that we're attacking. Obviously, Geita and Obuasi. At Obuasi, for example, you're chasing a 20% grade swing by changing the mining efforts and that's been technically designed. So I expect to see that in the next 12 months and I expect to see that delivered.

At Geita, obviously, we're heading into the Nyankanga pit. Already this year, Richard has taken about 20% of his numbers out of the Geita operations. We reduced our overtime from -- by about 70% -- that's our structural overtime -- and reduced the numbers in the operation. In South Africa, we're restructuring the operations around the two hubs and we've announced a restructuring of the Great Noligwa operation.

If you look at our South African operations, the operation that perennially disappoints has been Great Noligwa. And so we're taking about 20% out of the operations, of people out of the operations there. We're doing it with natural attrition. We're doing it in a sensitive way. But we're restructuring the business in that part of the operations.

And with the design of the new business prices framework, we're also looking at low capital injections in South Africa. So we've got a lot of material on the surface that we're not processing. And with the improvements in mine production, we can also get a divisional stopper. So we've got the team at Mponeng as we speak today.

In terms of the underground operation at Sunrise Dam, we're looking at expansions to the underground operation over time and, as I said, the news fly from that, I think, will be positive over the next six to 12 months. And certainly, as a grade driver within the operation, based on where we are, we think that will be an improvement. In Brazil, if you go through the operations, people treat labor in Brazil as being cheap. It's not, given where the real has gone.

So we've got [Helsi Agurarus] who's come out of CVRD focusing on how they can improve productivity on a numbers and business performance basis. And don't forget we're planning to go from 400,000 ounces to 700,000 ounces over the next five years. And Ron is looking at expanding and going up on his lifts at Cripple Creek. So the mix changes from site to site. And you're right, it's a combination of all three, depending on which operation you're at.

But it was interesting -- we, as an Eskom team, focused on how we do it. We did it independently. We then had the technical guys go through an exercise and they presented it to us last week. And we came within about 5% of the same numbers. So we're pretty confident from a leadership perspective it can be delivered. And we're confident from a technical perspective it can be delivered.

Okay. Great. Thank you very much.

Ladies and gentlemen, that concludes our conference for today. Gentlemen, would you like to make any closing comments?

No, that's it. Thank you.

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