Anglogold Ashanti PLC (AU) 2009 Q1 法說會逐字稿

Good afternoon, and welcome to the AngloGold Ashanti earnings results for the first quarter of 2009. (Operator Instructions). Please note that this conference is being recorded. At this time, I'd like to turn the conference over to Charles Carter. Please go ahead, sir.

Thank you, and welcome to this presentation by the AngloGold Ashanti team. The format will be as follows. Mark Cutifani, our CEO, will introduce the Company's performance over the quarter. This will be followed by Venkat, our CFO, who will discuss the financial aspects of our performance. And then Richard Duffy will briefly talk to the Africa Regions operations' performance. And then we'll hand back to Mark for some completing comments.

Before we begin, let me just refer you to our disclaimer. Certain statements made in 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 the 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, our liquidity and capital resources 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 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 exchanges rates, and business and operational risk management.

For a discussion of such factors, refer to AngloGold Ashanti's Annual Report for the year ended December 31, 2008 which was distributed to shareholders on March 27, 2009, and the Company's annual report on form 20F, filed with the Securities and Exchange Commission in the United States on May 5, 2009, and as amended on May 6, 2009.

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 statement I am reading.

AngloGold Ashanti posts information that is important to investors on the main page of our website at www.anglogoldashanti.com and under the Investors tab on the main page. This information is updated regularly. Investors should visit this website to obtain important information about AngloGold Ashanti.

With that, let me hand over to Mark.

Thanks very much, Charles. As everybody can see, Charles has given that speech a lot of thought. Certainly, from our point of view, ladies and gentlemen, this quarter has been a very important milestone in terms of the life of AngloGold Ashanti. Most importantly, a lot of the restructuring work we've done from a financial perspective, and within the operations, has come home in terms of the results we've reported in the quarter.

At the same time there is still a hell of a lot of work to do, and we also acknowledge that we've missed a couple of things. And I'll talk about both perspectives in terms of my discussion on the business.

First thing on safety. Two of our colleagues tragically lost their lives in our operations during the quarter. However, after introducing our Safety is our First Value program back at the end of 2007, we've seen to the end of last year about a 70% improvement in our fatality frequency rate. And, in fact, in the first quarter it represents a 44% improvement on that again. So we're very pleased with what we've done in terms of the first quarter but, at the same time, obviously, still distressed that we've lost two of our colleagues.

Disappointingly, we've had an additional four fatalities this quarter. And so, from our point of view, if I take the full year to date, we're operating at a little bit better than last year's good results, but still clearly a lot of work to do. So, from our point of view, safety still remains number one. We've done a lot of work on how we'll think about things going forward to make another step change, and I'll talk about that a little bit later.

On the positive side of safety, we did have some notable successes during the quarter. As I said, the fatality frequency rate was the best we've seen in a first quarter. And, in fact, in January we were fatality free, which is the first time we've delivered on that in 100 years within AngloGold Ashanti. So we're very proud of that because, as you know, in South Africa coming back from the Christmas break has always represented a challenge and I think the team managed that challenge very capably.

On the other hand, we've also made improvements on our all-accident frequency rate, and so I'm very encouraged that the work that measures cultural success, and that's about 11% improvement, is still going in the right direction. And I'm sure that we'll turn around the recent spate that we've had and get back on track in terms of continuing the thrust in improvements in safety right across the business.

On the operations front we've started to see strong earnings leverage come through, even though we had a slow production start to the year after the year-end break in South Africa. In particular, January was a very tough month and, encouragingly, the team did much better in January/February but -- in February and March but, obviously, the January result was the thing that held us back.

The disappointing performance at Geita further impacted the production numbers, clouding what was generally a very strong operating performance across our other global operations. Strong adjusted headline earnings of $150m, which shows that our significant hedge restructuring during 2008, combined with a strong gold price, is delivering to our investors the earnings leverage that we promised.

And interesting to note that, apparently, that is a record for AngloGold Ashanti, and so we're very pleased to post that result, post the hard work that we've done last year and in what was, as we consider, a soft operating quarter. So very pleased with the earnings result and, certainly, starting to see positive outcomes from the hard work we've done over the last 18 months.

We've maintained our full-year guidance of 4.9m ounces to 5m ounces, although we do acknowledge that we've had a bit of a slow start. And Q2 has its challenges with the additional annual leave and public holidays this year in South Africa. And obviously we've also taken into account those safety interventions that we've experienced as a consequence of the fatalities.

So we've taken those issues into account, which means we're going to have to do very well in the second half, but there are a lot of reasons why, structurally, we'll do better. We have traditionally done much better in the second quarter but, again, there are some challenges there. And if I said that there was one challenge we have to keep our eye on is obviously the performance in South Africa. But, again, I think Johan and the team are putting the right processes in place to take that next step.

First quarter production of 1.103m ounces was in line with our revised guidance. Despite the lower volumes, total cash costs of $445 an ounce were at the midpoint of our initial guidance. I was very pleased to report that. In the first, indications we thought our costs might be a bit higher, but the guys did some really good work, certainly in the last month to turn, the trend around, and certainly we're encouraged with what we've done on the cost side.

Uranium production was up 5% with an increase in contribution, notwithstanding the weaker spot Uranium prices and, again, a consequence of the restructuring work we did in our contracts last year.

Obuasi continues to deliver on its turnaround strategy, with the improving development rates, underground tonnages and delivered head grades. While we experienced a significant structural failure on one of the leach tanks in the oxide plant, the strong performance from the underground and the in-pit -- or the insulfide processing plant helped us post a continuing steady and strong production result.

We continue to reduce the hedge book, knocking out 154,000 ounces this quarter, while we also hit our target of 6% discount to the $900 an ounce price assumption. The actual spot we saw was about $907 and we came in at a discount of 5.6%, so we did better on both fronts.

We continue to make progress on the strategic front with the restructuring of the portfolio, confirming the sale of the smaller South African operation, Tau Lekoa and the 33% interest in Boddington. These transactions have helped us in our balance sheet restructuring, with funds scheduled for receipt in future periods. And certainly things look strong, and we continue to forecast a strong outcome on the balance sheet to the end of the year.

Finally, the exit of Anglo American from the share register was completed, with the sale of their 11.3% residual holding to John Paulson. We're very pleased to have John Paulson and his team on board as a shareholder in AngloGold Ashanti, and I'm sure that we can continue to demonstrate a real value proposition.

During the quarter we continued with our management restructuring to improve the pace of change as we focus on operational delivery, and meeting our commitments. As you know, when we first started the restructuring work some 15 months ago, we said we'd have to make some hard decisions. We have made changes. Around 70% of the senior management roles have changed, with many people leaving as a consequence of discussions we've had about accountability and what we need to deliver in the future. We're still doing work and working with the team in putting the right people in place in the hard roles.

Keith Faulkner, our most recent appointment in Ghana; he has a very strong resume and a career in operations, including the running of the Ok Tedi mine after BHP's withdrawal some years back, and he has done a wonderful job in that operation. He's now joined our organization and is in charge of Obuasi and took over in January. And we're very pleased with the rate of progress and improvement he's achieved, above and beyond what we'd done last year.

At the same time, I've asked Graham Ehm to help us and provide leadership in the change strategy at Geita. Graham will actually take over the role on June 1. Graham was our EVP Australia Operations and, again, very important to put the right leadership in place.

Our current General Manager, Richard La Sueur, has done some solid work and put some foundations in place. He will be leaving us to pursue other interests, and I'm sure that Graham will pick up the ball and drive the operation harder and much more quickly towards the goals of making the required standards that we're looking for, in terms of where it is and what it will contribute in the future.

During Graham's secondment, Mike Erickson, our GM at Sunrise Dam and the guy who has led the operation through delivery of some important milestones in the last five years, will take over the Australian operations, and he will report to myself.

Importantly, Geita will remain part of the Africa region and, hence, Graham will look very closely with Richard Duffy and his Africa team. But I've also taken -- and Graham has a direct accountability to me in terms of the turnaround work. And we're all in this, and we will turn the operation around.

These management changes, and the work we've already been doing, are leading to an improvement in performance, and I believe Geita will stabilize over the next three to six months. The encouraging thing in April is we've already seen 22,000 ounces delivered on the production side, which represents 50% already of the Q1 results. So we will do better Q2, and we will continue and improve on the way forward.

Now for a high-level look across the key regions, before I ask Venkat to take us through the financial highlights.

In Southern Africa production was lower quarter-on-quarter by about 11% at 481,000 ounces, and that was slightly below our plan. Overall, the SA division lost the equivalent of three production days on safety-related stoppages, most notably at Moab Khotsong where we took pre-emptive action during February to improve working practices and installed additional ground support in targeted areas.

The return to normal of our South African operations after the year-end break was also slower than we anticipated, which contributed to the 12% overall reduction in tonnes milled across the region. We also had to deal with tonnes lock up in all passes at Great Noligwa and Savuka, and low availability of the mill at Mponeng.

At Tautona, lower volumes as a result of fuller ground incidents, seismic activity and consequent lower availability of working areas resulted in lower production.

And, as I said, we have had some issues this quarter. Even with those issues and taking them into account, we will do better in South Africa in Q2, despite the additional public holidays. But certainly very disappointed with what we've done in the first quarter and we'll start to see an improvement in the second quarter.

An important point to note when looking at the South Africa operations and the challenges we've had, notwithstanding the drop in production and the increase in cost in the region, we still saw a 33% jump in adjusted gross profit, which underscores the strong earnings leverage from these operations. As you are all aware, we remain the most cost-competitive Gold business in South Africa. And, now, post the hedging restructure, we have the most profitable Gold business in South Africa.

On Uranium, our Uranium business is going from strength to strength and is starting to show the benefits of contract restructuring to increase our exposure to spot prices. We remain bullish going forward on the prospects for Uranium and are examining further ways to continue to improve the value contribution from this area of the business.

Uranium production continued to improve with another 5% increase, to 369,000 pounds, in line with our 1.4m pounds full-year target. Income from Uranium was up 225%, again, reflecting our contract restructuring and good cost performance against that improving production base.

Contribution towards total cash costs for South Africa operations was $5 an ounce. And certainly, again, that indicates the leverage and the performance potential that can give us as the spot price improves from its current, what we believe is a low base, at $42 to $45 a pound, with a view that $65 to $70 is probably more likely a long-term price. And so we're well positioned to participate in that upside.

On the Rest of Africa, Continental Africa's production dropped to 342,000 ounces for the quarter. It was anticipated in a couple of areas but, obviously, the Geita drop was more than we anticipated. The main disappointment here was the maintenance required to the SAG mill, which had damage and issues more extensive than we originally thought when we took the plant down late in quarter four. We've taken decisive steps to deliver on our turnaround commitments for the operation, which Richard Duffy will cover in his presentation.

However, there were some real bright spots elsewhere in Africa, and certainly good encouragement in terms of the turnaround work that we are currently undertaking. Obuasi continued to build on the early stages of its success and improved on key metrics under the leadership of Keith Faulkner.

As I outlined earlier, development meters are now 30% up on where they were 12 months ago. Tonnes mined are 10% up on where they were from the underground operation on where they were 12 months ago, and grades are up 7%. It will also take two years for the full impact of our mining restructuring to realize their full benefit, and so the improvements we've seen so far are very encouraging and we're very pleased with what Keith and the team have done.

We've also seen a very strong January. I won't talk to the numbers. We're going to wait to see the next two months, but I anticipate we'll have another very positive conversation in the next quarter regarding the continuing improvement at Obuasi.

At Siguiri, I think they've delivered an outstanding result in a tricky operating environment. We saw a number of unplanned stoppages imposed by the new government in the quarter, and we've been very carefully navigating those relationships.

I think it's important to stress that we continue to navigate. We've had very positive feedback, even to the extent where we've had a full government crew track the way we deliver our Gold from the site to the refineries, and they've been very impressed and very comfortable, I think, with the way we manage the processes. And so we're looking to continue to build the relationship in Guinea, but it's obviously one we've got to keep an eye on and keep very close to.

Mali also turned in a very solid performance, with encouraging cash cost reductions delivered at both Yatela and Sadiola.

In The Americas, under Ron Largent, we delivered a solid operating performance. Production was in line with plans, despite the apparent 25% drop compared to last quarter, as we were navigating cyclic grade drops at both Cuiaba and Cerro Vanguardia. But you will see those operations improve in terms of grade over the next couple of quarters. So, certainly, they will continue on a full-year basis to deliver as you would expect.

Encouragingly, we saw a 14% decline in cash costs, where Jorge Palmes has done a wonder job since taking over. And, if you recall, we're now seeing about a 50% improvement in the operation over the last 12 months. And, certainly, the turnaround work there, the turnaround work in Brazil, the turnaround work in Siguiri, the turnaround work in all of our Mali operations is really starting to hit the bottom line. And certainly, while we've still got a couple of challenges there, in the main we're making the right steps and certainly seeing progress.

At CC&V cash costs rose only 4%, despite the production dip due to pad-phase timing. And if you are aware, and you know the CC&V operation, it is a bit of a cyclic process through the year, and you will certainly see a better result in the second half of the year.

In Australia, higher grades at Cosmo and the Western Shear Zone helped us push production 15% higher to 98,000 ounces. And Mike Erickson and the team have done a great job there. They continue to do better than their forecast, and I'm expecting them to contribute just a little bit more in the next few quarters as we make sure to deliver on our full-year commitments.

Further good news from Australia. Following extensive drilling at Sunrise Dam we continue to [find] exciting potential for the underground [mineralization]. And whilst we haven't got a 10-year reserve to speak to, I'm confident the team will do -- continue to do well and will give us a 10-year life at the operation. And we're very excited and thrilled to see that base going with the good stuff we've seen from Tropicana. So very optimistic about what we're doing in Australia.

So, with that, I'll hand over to Venkat who will cover the financial review.

Thank you, Mark. Adjusted headline earnings for the first quarter of $150m, as Mark mentioned, represents an all-time US dollar quarterly earnings record for the Company. The leverage in earnings came on the back of three factors; first, higher spot gold prices, secondly, lower hedge discount and, to a lesser extent, weaker local operating currencies.

If I can spend a moment elaborating on the leverage to spot prices coming on the back of the recent reductions to our hedge book, you will have noticed from our results that the average spot price for the quarter was up 14%, or $114 per ounce higher, as compared to the previous quarter. However, with a much lower hedge discount relative to the previous quarter, the received price rose sharply by 25%, or $171 per ounce quarter-on-quarter, as compared to the $114 per ounce increase on the spot price.

It is worth mentioning that the adjusted headline earnings of $150m was after providing for $6m in respect of the receivables from Pamodzi Gold, in respect of which a claim has been lodged with the liquidators. Adjusted headline earnings per share were $0.42, or ZAR4.14 per share, on 358m shares that qualify for EPS.

Turning to our hedge book and total cash costs, the hedge commitment reduced from 5.99m ounces to 5.84m ounces. And the hedge delta, at $920 per ounce, was below 5m ounces as at March 31. The discount to spot for the quarter of 5.6% was within the previously guided range of approximately 6% for the year, assuming a $900 per ounce spot price. Total cash costs of $445 per ounce were within the previously guided range of $440 to $450 per ounce.

As Mark mentioned, we are maintaining our annual production guidance at 4.9m to 5m ounces, while watching carefully safety and any other unplanned stoppages that could impact our outlook. You will recall that our annual total cash cost guidance for 2009 was between $435 to $450 per ounce. If you recall, this was based on the following assumptions; the rand at ZAR9.75 to the US dollar, Australian dollar at AUD0.68, Brazilian real at BRL2.25, Argentinean peso at ARS3.65, and fuel at $50 per barrel.

However, the local operating currencies, in particular the South African rand, have shown signs of strengthening recently, which makes us a bit cautious on cost guidance, so here are some sensitivities. Should the rand average ZAR9.25 to the US dollar, as compared to the original guidance at ZAR9.75, for the last nine months of 2009 the total cash costs for the year are likely to be in the range of $450 to $460 per ounce.

However, if the rand was to average ZAR8.50 to the US dollar for the last nine months of 2009, then the total cash costs for 2009 are likely to be in the range of between $460 to $475 per ounce for the year.

For the second quarter, given the higher number of public holidays in South Africa, we are guiding second quarter's production at 1.14m ounces. The total cash costs are estimated as follows, based on indicated exchange rates. Assuming ZAR9.25 for the rand, ASD0.66 for the Australian dollar, BRL2.25 for the Brazilian real and ARS3.65 for the Argentinean peso, and fuel costs at $51 per barrel, the costs are likely to be in the region of $465 per ounce for the second quarter.

If, however, one assumes ZAR8.50 for the rand, ASD0.73 for the Australian dollar, BRL2.25 for the Brazilian real and ARS3.65 for the Argentinean peso, with fuel costs at around $51 per barrel, then we're looking at cash costs for the second quarter at around $485 per ounce.

It must be noted that, given the recent volatile movements in local currencies as compared to either the fourth quarter of 2008 or the first quarter of this year, these cost estimates ranges for both the year and the second quarter are best regarded as indicative rather than definitive estimates.

On first glance, looking at our cash flow, it would appear that our net debt levels have been relatively flat quarter-on-quarter, at around $1.28b. However, this is primarily due to approximately $90m of cash flow that was generated by the business being applied towards the Boddington project. Under the terms of the sale agreement with Newmont, this will be reimbursed by Newmont to us upon closing of the transaction.

Both Newmont and AngloGold Ashanti are working towards fulfilling the remaining closing conditions, and we expect the transaction to close during the second quarter.

Now, over to Richard, for a review of our African operations.

Thank you, Venkat. As Mark mentioned, Geita was a disappointment during the quarter. Maintenance and repairs to the gearbox on the SAG mill took longer than expected, effectively taking the plant out of action for five days. Production, as a result, was 15% lower, at 44,000 ounces, and we saw an 11% rise in costs.

Mark has spoken about Graham's moved to Geita, and we're also beefing up his operational management team with the appointment of Johnny Veloza, previously the Operations Manager for De Beers at their largest mine in South Africa.

Identified deficiencies in our blasting skills set has resulted in us entering into negotiations with Ausdrill, with a view to outsource drilling and blasting. This should give us the necessary expertise we need to implement better bench designs, optimize explosive usage, achieve better blast fragmentation and improve adherence to quality assurance and control.

Our overall objective now is to roll out our business process framework at Geita which changes, not only the way we conduct our mining and processing activities, but also the way we manage and grow our people. The high level five-year delivery targets of the framework are to achieve productivity improvements of 30%, production improvements of 20% and a 25% decrease in real unit costs, all while lowering accident rates and improving returns on capital. We'll provide regular updates of the progress we make in this regard.

At Obuasi we're seeing good progress under the leadership of Keith Faulkner, based on site, who's being assisted by Dave Ingle, who has relocated to Accra. Collectively, Keith and Dave bring more than 60 years of experience to bear in Ghana, and the initial indications are very encouraging for us.

Grades have improved, and their diligent focus on the basics helped us achieve a 2% reduction in cash costs during the quarter, even with a 6% drop in production. The results would have been better were it not for the damage to the oxide treatment plant in February. Keith and his team are now working on the current business plan to sharpen the focus on improving the margin at Obuasi still further through the course of this year and next.

Siguiri in Guinea was the star performer across the Group during the quarter, managing to maintain production at 80,000 ounces and keeping the cash cost increase to less than 3%. Much of that was achieved with a 16% improvement in the recovered grade. What's important to note is that their performance was achieved even with a loss of five days, after we temporarily suspended operations at the mine on the Government's instruction in March.

With that brief summary, let me hand back to Mark for his concluding comments.

Thanks, Richard. And I will make a quick aside that I made the observation earlier that we've made a lot of hard calls in the last 18 months with people. And I'd have to say that Richard, since taking over, has been diligent and tough in looking at all the things we have to do. And you will see, I think, the team that he's building is world class.

He's made some tough calls in the last six months, but I do want to make people aware and to let people -- or make sure people know that both Richard and I are fully accountable for what we deliver in Africa. And certainly the only debate we have in the organization is the timing on the turnaround of these operations and within Africa. And I'm very pleased with the progress. We've had to make some tough calls. We'll continue to make tough calls. And we will deliver on stabilizing and starting to see turnaround in both operations. And whilst I think, at Obuasi, the signs are very positive, Geita is taking too and you will see it turn over in the next couple of quarters.

So in taking a broader view, the Case for Gold. While we continue to focus all of our efforts on delivering on our commitments from safety through to improved shareholder returns, the current state of the gold market merits a brief comment. In short, our outlook for gold price remains more positive than ever. The US Government's bail out of large sectors of the economy has put enormous pressure on the Treasury's borrowing [we made] this year, as you can see.

In fact, the US Treasury's net borrowing is likely to increase almost four-fold in around -- to around $2.4 trillion this year, and even higher in 2010. And, interestingly, I'm hearing more of that from many of our shareholders in North America and Europe so, again, we don't need to tell you the story. But certainly, from our point of view, and in dealing with the World Gold Council and the other key players in the industry, we see -- we're seeing and hearing the same stories from all sources.

So from our point of view of the outcome, particularly when you look at the supply side of the equation, the industry's struggling to deliver new gold into the market, but the fundamentals are very strong from all points or all the four points of the compass.

The Financial Times ran a series of articles last week which we spoke about -- which spoke about the beginning of a new era in gold markets. They point to a steep decline in Central Banks' net gold sales. That much was demonstrated last month when we saw China almost double their gold resource -- reserves to more than 1,000 tonnes. It's interesting, we suspected it was much higher, but we didn't appreciate how much they'd accumulated.

There's also lots of talk that Russia and others are slowing, adding to their stocks in an effort to diversify their dollar reserves. And again, whilst many of you may be cautious of those conversations, for us, it's further proof on a broader basis that the case for gold remains very strong.

The more important thing to take away from all of this data is that sales from the Central Bank sector is also slowing, taking a significant source of supply out of the market. But even with the announcement of the IMF sale which, from our point of view, was nothing new, the net reduction in sales from those sources is significant.

Again, add the decline in grade across the industry. We've seen about a 30% reduction over the last five years. Old operations are getting tougher. There aren't many new developments occurring. So the industry is struggling to supply and so we believe, on all fundamentals, the case is very strong.

In closing, as I reflect on where we stand today, I think it's important to make a few points. First, in the last 12 months AngloGold Ashanti has performed well compared to our peers in the industry and, certainly, both in terms of our global position and within our local competitive base. Our corporate restructuring, including the removal of Anglo American and our building of a quality and diverse shareholder base, is adding value and, certainly, breadth to our shareholder base.

The balance sheet and hedge restructuring is certainly changing the face of the Company and our ability to participate in new opportunities across the [globe]. Safety across the business has been a prime focus. But if I could use that as a surrogate to risk and managing the business, I think we've made good gains, but there is a hell of a lot more work to do, and I believe that we have got the team that can deliver on that potential.

And, finally, delivering on our operating commitments is a culture that we are developing. We're sensitive to missing our targets and, as I said this morning, we won't dress the production result up. We're going to be kind on [pigs]. And let us say we are not going to put lipstick on the kangaroo. We've got more work to do. We're very honest. We're very open. We're transparent and we are accountable for what results we deliver. You will see improvement during the course of the year. We've got challenges, but we will continue to deliver on our commitments. And, as I said, we've delivered on our earnings leverage and we will deliver on our operating commitments.

On a go-forward basis we will continue to restructure the hedge book to give us more exposure to the spot gold and uranium prices. We must deliver on our operating commitments and, in particular, we must stabilize and move both Geita and Obuasi towards delivery on their real potential. In exploration and mine development, we must move into the formal study and development phases for Tropicana and Colombia and, obviously, of announcements this quarter provide us new enthusiasm in terms of we go forward. And the other bit of good news is that the pre-feasibility work is just starting to wind up on Tropicana and the results look very good.

If I can ask you think for just a moment. When you think about AngloGold Ashanti, I'd like you to think about three things. First, we're managing the core business. Today, this quarter, for the first time in a number of years, we've actually delivered double-digit returns on capital employed. We said that that's what we'd do in the last 18 months. And I'm pleased to say, even with the softer operating result, we've delivered a double-digit return on capital.

Secondly, increasing our leverage to the gold prices. As we've continued to restructure the hedge book, we've put ourselves in a position and we've put our shareholders in the position to participate in the further strengthening of the gold price, and we continue -- and we're going to continue to provide that leverage.

And, third, we've got great exploration and development prospects so that, from our perspective, in the medium to longer term, we're providing our shareholders with an opportunity to double up on leverage through those exploration opportunities and those development leverage prospects.

So, first, managing the business, second, we're increasing our leverage to gold through earnings and, third, with the profile we've got, we've got the future well and truly -- or we're setting the foundations for the future.

Finally, our observation on the gold sector is the case for gold remains very strong. Global financial uncertainty, the recognition that gold does have a real role to play in sensibly constructing an investment portfolio and the weakening supply supports our view.

In our view, AngloGold Ashanti presents a compelling value case, given its global spread, competitive cost position and the potential we have in our portfolio and in our people.

In that, we'll turn over for questions.

Thank you. (Operator Instructions). Our first question comes from Victor Flores of HSBC. Please go ahead, sir.

Yes, thank you. Good afternoon. Mark, I have a few questions about the wording on the permits in La Colosa. Could you explain what it means when it says they will issue a permit, as in, when that might happen? And what it means on a portion of the concession?

Yes. Let me go to the portion of the concession first, Victor.

When I met the President a couple of months ago, the one thing he committed is that they would deliver a permit to AngloGold Ashanti. And, in fact, they were very strong in encouraging us and assuring us that Columbia is open to investment and, in particular, open to the mining industry for the future. And I've been very impressed with what they've done.

What they've done is interesting. They haven't developed a new large operation in 27 years, and so they're really navigating a new process. And so what they've done is they've said, look, we'll issue the permit to allow you to go forward with the areas that you've developed and you've worked on, and that's what we've done. So the areas of disturbance that we're working to, and we need to work on as we drill and extend the resource of La Colosa, is about 6.5 hectares. So that's how they've come up with that number.

So we've actually worked with them to come up with the area that we want to work on over the next 12 months to continue taking the project forward. So they're a critical part. So it allows us to work on the critical path items.

At the same time, we're developing together, and they're developing in their own right, a pathway for us to follow to make sure we go through the appropriate permitting processes in forestry areas. And so that's very important. And, for us, that's a real milestone, it's a very positive step and a demonstration that we are working constructively with the government. So I'm very pleased with the step.

At the same time, we need to navigate and design a process that covers all the stakeholders. So we're currently working with the local stakeholders.

In issuing or in signaling the intent to issue a permit, they also have to take objections to that permitting process, or process approval. So there is likely to be some appeals, which we believe will take somewhere between two and four months to process before we're then officially granted the permits. So it's actually -- it speaks to the process they have to follow, and we'd expect to be on the ground within four months.

Obviously, we've got to navigate those approvals. But there's nothing we've seen that would knock us out of the process, we believe. But, again, it's being done in a very constructive and collaborative way, so I'm optimistic we will take that next step. But it will take about four months to get on the ground.

Does that answer that, Victor?

Yes, thank you. And then the follow up is, is that related in any way what you're talking about the process to what you say is a legally-binding decision within the government's administrative processes awaited?

Yes. They've got to go through that process, which is part of their legal process, to make sure they can then make a binding decision. So they have to appropriately reflect their own internal processes. And the thing that (technical difficulty) President --.

We seem to be getting interference. If you can put yourself on mute, Victor?

Thanks, I'm assuming you're still there.

From our point of view, I said to the President that it was most important for us to navigate this in a long-term sustainable way, because we want to be there for 30 to 50 years, or longer if possible. And so we want to make sure we build a good relationship with the government, we want to build a good relationship with the community and we don't want anybody regretting that we're there five years from now.

Great. Thanks. If I could just ask one final question. The $200m to be spent over the next three or four years, what is that primarily devoted to, in addition to drilling? Thanks.

Obviously, it includes drilling. It includes drilling and additional prospects. And, as you know, we've got three -- up to five what appear to be very serious prospects very close to La Colosa, so it takes that work into account.

It takes into account pre-feas concept, pre-feasibility work and starting to move in full feasibility work. So it takes that range of work over the next four years.

Great. Thank you so much.

Thank you, Mr. Flores. (Operator Instructions). Our next question is from [Gilbert Funiverson] of [Solva Era Capital Management]. Please go ahead.

Good afternoon. Mark, I have a couple of questions. What is the revenue improvement as a result of the lower fatality rate, and how do you monitor the fatalities? And how do you improve on that?

The cash cost development, the way you see it for Obuasi?

And sharing your view of higher gold prices going forward, where do you see your hedge book by the end of the year?

Gilbert, can I just ask you the second question? I didn't quite get that second question?

What the cash cost development would be for Obuasi, because the cash cost there are now say around $700 per ounce. And what do you see happening, because you were talking about the turn -- meeting the turnaround objectives? So I would like --.

Sorry, Gilbert, I got that. Sorry, I didn't hear the second, but I've got that, that's no problem so I'll answer that.

Firstly, on the revenue side, Gilbert, I'm always careful in linking safety-related issues to revenues. But we believe that last year, with 11 fatalities, it impacted our production in the order of 150,000 ounces. Now that is a bit of a lose relationship but it probably is fairly close, given that the year before in South Africa we had more than -- I think we had 24 fatalities -- 27 fatalities, and our estimate on Gold production was somewhere in the range of 200,000 ounces to 250,000 ounces.

So safety is about -- is a moral issue for us, but it does have a bottom line financial impact. And we guess it's in that range but, again, it's something that we don't dwell on. It's all about doing the right thing and making sure we're looking after people. But to try and answer your question as best I can, that's as we see it at the moment. And that's probably about right.

On the cash costs at Obuasi, we believe that we can do better than $500 an ounce on a cash-cost basis. Richard and myself and the team are being very careful about the public commitments on exactly when that will be hit but, certainly, we are seeing improvements against the 700.

You will see us do better this quarter against the last quarter and I'm more than happy to actually take that question on again, on a quarterly basis, as we go forward. But certainly we're looking for better than $500, and we're better than -- we're looking for better than 650 on a total cost basis as part of our long-haul strategy.

On the third part, as part of the gold price and the hedge book, look, we think the gold price will be volatile, will remain volatile in this market, $850 to $1,000, anything's possible. But our tummy tells us that the average on a go-forward basis will be north of $900; that's our sense. And particularly, I think today, we're at about $920 to $930, we're in a generally soft period for the gold price, so we're pretty encouraged by what we see.

On our look forward into 2010 I wouldn't be surprised to see gold trade above $1,000, because I think it'll take about that length of time for the world to start working what the greatest spending spree of governments that the world has ever seen will mean for inflation and other base economic factors across the globe. So, again, it'll be volatile but, for the balance of the year, certainly north of $900 would be our expectation, and we believe it could possibly breach $1,000 next year.

But your hedge book, where do you see your hedge book next year.

Sorry, Gilbert, I should have answered the second part of that. What I've said and what we've talked to is, we'd like to see the hedge book at around 4m ounces or less by the end of the year. We've said we're going to be optimistic -- end of next year, sorry, not the end of this year. I do apologize; at the end of next year.

We've said we're going to be opportunistic. We remain in that frame of mind. We chipped away 154,000 ounces last quarter. We probably on a daily course of business chop away a little bit less than that this year, as we've got more contracts that pop up later in the year. But certainly, from our point of view, we'll take the opportunity and have a bit of a crack at it as we see the opportunity arises.

And, again, we expect the next three or months maybe to be a little bit weaker, there might be an opportunity but, again, we're flexible. We've got the balance sheet to be flexible and so we're going to be opportunistic, and that means exactly what it means.

You had a -- last question. You had a good improvement in your net debt position last year. What do you see happening to your net debt position this year?

Let me hand across to Venkat. Mr. Money Bags is the man to talk to that one.

If you look at our net debt position as at the end of March, it stands around $1.286b. We've certainly got $750m plus another $90m which will come through at the end of second quarter, following the Boddington transaction being completed. That's $840m coming through in terms of additional cash from the transaction, the $90m being the reimbursement of the Boddington spend.

Another $240m is due from Newmont at the end of this year. So, potentially, you'll see our net debt level coming down quite drastically, unless we chose to apply some of the proceeds in to do other activities at the Company such as the hedge book etc. So, certainly, the Boddington proceeds would come in to reduce our net debt position quite significantly.

Gilbert, I think the really encouraging thing is the performance, to add to Venkat's comments, is that in the first quarter we believe we had a soft production quarter but we held our cash cost, which is absolutely critical. So I think -- and if I said that I'm pleased with the operations, I think the cost management was pleasing in the first quarter.

And, as Venkat said, if you take back that Boddington $90m, we actually generated free cash. And from our point of view, on a net debt position, even under the toughest circumstances we've generated real cash. And we said on a $900 an ounce we'd expect to generate somewhere between $300m and $400m free cash flow. That gives you a sense that we're on track for delivering on our financial objectives and, from that point of view, I'm very happy with what we did in the first quarter.

Okay. Thank you very much.

Our next question is from [David Lafel] of Deutsche Bank. Please go ahead, sir.

Yes, thanks. Mark, just wanted to follow up your longer-term target for Obuasi, $500. What sort of production in ounces would you expect to be doing at that point in time because, clearly, there are some volume metric issues there?

And maybe a second question, you mentioned that your return on capital is greater than 10%, or in double digits. I was just wondering if that is on book value that we see in the accounts, or is it that's on a replacement value and why one wouldn't look at replacement value as opposed to [accounting] value?

Two good questions, David. David, if I could just make a quick observation, I'll hand across to Richard.

First thing, we're focused on stabilizing the existing operations within the range 360,000 to 400,000 ounces, and we think we can give 400,000 ounces a scare. But the most important thing, and Richard and I were together in Obuasi, is we sat with the team and we said we're focusing on margins.

I'm not so much worried about the volume, although obviously it's a key performance driver, but getting the margins there is all about earnings and returns. So that 360,000 to 400,000, I think we can make a substantial improvement on where we are. Certainly in the order of 15% to 20% on a cash-cost basis from where we are.

The next step, if you think about a 500,000 ounce at a $500 cash cost, I think those numbers go together fairly well. And obviously with the [Deeps] another potential we see potential to go to $600. So that gives you a sense of how we're thinking.

If I pass across to Richard in terms of the logic and how long he thinks it might start to take steps beyond the 400 base, Richard.

I don't have too much to add, Mark. Just to agree with you that, in stabilizing at around 360,000 to 400,000, I think we -- our expectation is we will get to below $600 an ounce. So there is a strong cost focus as well. And then as we move towards 500,000 ounces, that's when we'd be looking at a $500 cash cost.

I think in terms of timeframe, we're probably looking at 18 to 24 months in terms of stabilizing that or around the 400,000 mark, and then the step up to 500,000 beyond that. So I would say we're in a two to three-year -- probably close to three-year window around moving up beyond 400,000 towards 500,000. It all depends on how quickly we can progress accessing below the current mining and getting to below 50 level. And we'll be in a better position to talk about that when we see our new plan later this year.

David, on returns, on -- we use return on capital employed. We also reuse return on capital on (technical difficulty) we're about 10%. One is [just] higher than the other.

And let me pass across to Venkat, then I'll come back to your question about opportunity.

Yes, in fact, we've actually used both metrics, as you point out. The first one is on book value. If you take our quarterly earnings of $150m, annualize it to $600m, divided it by the book value of shareholder's equity of $2.5b, the return is about 23%.

But your point, when you add back capital employed and the deferred tax which is really sitting as a provision in the accounts, when you add that, the $600m over $4.4b gives you a return of 13%. So under both metrics; 23% on book value and 13% on full capital employed.

And if I'm even tougher and add back some of the write-downs you've seen, you're at about 10, so across all the three metrics we got to the targets we said. If you take us from our base last year and on the new metrics, we're there.

Second point on the opportunity cost, I think that's an interesting comment. On an equivalent basis in Africa, our returns or our replacement value returns are double what they would be in the US. And if you think about what you're prepared to pay for assets in North America based on what we're prepared to pay for assets, I think you will understand the difference in the concept. So, on a replacement value cost, you're probably at a bit less than 10%.

We do always value things and look at our capital in terms of investors and what their opportunity cost is. The question is what value to put on the levers that we're building into the book and how do you value that against that opportunity cost. But certainly, from our point of view, we look at relative value in what we're delivering. And we go off of that metric in terms of what we do in terms of our capital.

I'll let you, as a shareholder, make decisions on opportunity cost.

Okay. Thanks.

Gentlemen, there are no further questions. Would you like to make any closing comments?

No. We'd just like to thank participants for joining us on the call.

Thank you. On behalf of Anglo Gold Ashanti, that concludes today's call. Thank you for joining us. You may now disconnect your lines.