Anglogold Ashanti PLC (AU) 2012 Q1 法說會逐字稿

Good afternoon or good morning to those in the US. Welcome to the AngloGold Ashanti third quarter call for the three months to March 31. Members of the AngloGold Ashanti executive team are present. And, as is customary, Mark Cutifani will give an overview followed by Venkat with a walk through the financials. Mark will put us through the exciting slides of exploration and projects, and then offer his concluding remarks before our Q&A.

As is customary, I'll just briefly read through our Safe Harbor statement. Certain statements made in this communication, other than statements of historical fact, including without limitation those concerning the economic outlook for the gold mining industry, expectations regarding gold prices, production, cash costs and other operating results, growth prospects and the outlook of AngloGold Ashanti's operations individually or in the aggregate, including the completion and commencement of commercial operations of certain of AngloGold Ashanti's exploration and production projects and the completion of acquisitions and dispositions, AngloGold Ashanti's liquidity and capital resources and capital expenditure and outcome and consequence of any potential or pending litigation or regulatory proceedings or environmental issues are forward-looking statements regarding AngloGold Ashanti's operations, economic performance and financial condition. These forward-looking statements involve known and unknown risk, uncertainties and other factors that may cause AngloGold Ashanti's actual results, performance or achievements to differ materially from the anticipated results, performance or achievements expressed or implied in these forward-looking statements. 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 and 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 factors, including environmental approvals and actions, fluctuations in gold prices and exchange rates and business and operational risk management. For a discussion of these and other factors, refer to AngloGold Ashanti's annual reports on Form 20-F which was filed with the SEC in the United States on April 23, 2011. These factors are not necessarily all of the important factors that could cause AngloGold Ashanti's actual results to differ materially from those expressed in any forward-looking statements. Other unknown or unpredictable factors could also have material adverse effects on future results.

Consequently, stakeholders are cautioned not to place undue reliance on forward-looking statements. 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, except to the extent required by applicable law. All subsequent oral or written forward-looking statements attributable to AngloGold Ashanti or any person acting on its behalf are qualified by the cautionary statements herein.

This communication may contain certain non-GAAP financial measures. AngloGold Ashanti uses these non-GAAP financial measures and ratios and managing its business. Non-GAAP financial measures should be viewed in addition to and not as an alternative for the reported operating results of cash flow from operations or any other measures of performance prepared in accordance with IFRS. In addition, the presentation of these measures may not be comparable to similarly titled measures other companies may use. AngloGold Ashanti posts information that is important to investors on the main page of its 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.

I'll now hand over to Mark.

Thanks very much, Stewart. Ladies and gentlemen, it's again a pleasure to be here. I am working off the presentation that you should have on your computers, but I will continue to refer to where I'm up to and try and keep the commentary succinct for those that may not be listening or reading off presentations.

For us, a very important quarter this quarter -- obviously, important in terms of earnings, in spite of the short-term headwinds we've been experiencing in South Africa, a good result. And whilst the tax credit that we received based on the great news we've had from the South African government on reduction in corporate tax rates -- a good result. Costs have been held pretty well in line, in fact better than guidance, and I think about 10% up on last year, this time last year against an inflation across the industry of about 15%. So we've done a lot of work on our costs, as people know, with the implementation of Project ONE, and we're certainly seeing some benefits. But still, more we can do and we can do a lot better on the cost side. And if South Africa had delivered in terms of its potential, you would have seen probably a 5% better results. So some real opportunities for us to continue to improve. EBITDA is up 39% to $800 million against a gold price that's up around 22%, so a solid effort there. We've seen some good results across the operations.

The other thing that -- or the other couple of key features of the result has been the exciting exploration results. And I've been told that I used the word exciting 39 times in my presentation this morning, so I'm going to try and use that word a lot less this time around, Stewart.

Finally, the big news for us -- the commitment to three major projects, being the Cripple Creek expansion and extension, which also positions us, we think, to start looking for additional gold, high-grade gold pods underground, the commitment to Kibali, the formal commitment to Kibali; and Mongbwalu in the DRC. So certainly a very exciting quarter with lots of important news to share with you today.

Firstly, starting off with safety, it has been a tough quarter on the safety front -- three fatal operating incidents in South Africa and one fatality in Argentina. I think that's the second fatality that we've had in the life of Argentina, so obviously a disappointing result.

In terms of business results, the section 54 stoppages and associated safety stoppages in South Africa have had a real impact on the first quarter. The good news there is that we are developing quite a constructive set of dialogues with the Department of Minerals and Resources, and we've certainly seen a pretty significant change in our conversations and certainly less interruption as a consequence of doing a number of things on safety front which I think are very important but also, at the same time, the department has recognized that across the industry, those sort of stoppages don't make sense. And so we've, I think, had a very constructive dialogue and we should see improvement.

We're expecting to see a 30,000- to 50,000-ounce improvement in the second quarter as a consequence of that and other things we've done. So a tough quarter, but certainly improving towards the end. And as we come to the new quarter we should be able to recover and start moving forward in South Africa. And again, that will help us improve both production and costs.

If I move to slide six in your pack, regional overview, Continental Africa -- great quarter, 382,000 ounces up against 363,000 this time last year. Geita, Siguiri, Iduapriem, Navachab -- all doing good work and certainly improving. Sadiola -- results a little bit down because of low grade. We've actually been preferentially processing some low-grade stockpile material as we've moved people in and out of the operation. We're getting back to normal operations. We'll start to see some high grade come through there, so that will pick back up. We did have a problem in one of the shafts at Obuasi that impacted us for 21 days. Again, you'll see a recovery in performance there.

So against that backdrop, great performance by the African team -- on budget, costs are on budget. And if you look at their costs on a 12 month basis, flat against a 15% inflation rate across the industry, so fantastic performance by Richard Duffy and his team, again confirming the positive trends we've seen probably the last eight quarters now, so great results.

In the Americas, Cripple Creek -- again, a solid quarter, 225,000 ounces total cash costs -- this is across the Americas region -- at $534 an ounce. Cripple Creek, strong performance, Cerro Vanguardia in Argentina, again, a strong performance in spite of some of the constraints people were experiencing. We are doing pretty well with the government; we're getting material through. So the operation performed very, very well. In fact, we had the President visit our operations during the quarter, and she declared that Cerro Vanguardia was a model for a mining/government relationship. The government owns 15% through Formicruz and they've been very pleased with what we've had and, obviously, the great performance that we've delivered in terms of dividends to governments has been very much appreciated.

Brazil -- two good operating performances, but that can get better as the team recovers from tougher quarters at the end of last year. So we're seeing the operation on the upswing and I expect next quarter to be better again.

In Australia, again, operations coming in on plan, production a little bit lower compared to this time last year, mainly as a consequence a bit lower grade because we are mining the lower-great stockpiles and we are starting to transition towards the new Vogue discovery. And whilst we'll spend much of the time, much of this year getting there, Graham Ehm has got some very good work going on, which is in addition to the Project ONE work where he's looking to get his production steady-state around 75,000 ounces a quarter and trying to get those costs down to near $1000, which then gives us a couple of years before we start to see the larger-scale underground starting to impact on the operation, which will then see us both improve production and our operating cost performance on a more sustainable basis.

You must remember that we had -- three years ago, we had about five years' life at Sunrise Dam. Now we look like we've got 10 to 15 years. So the transition will be a little bit bumpy because we were a bit late in finding that extra potential. But it's still open at depth, so we are pretty confident we've got a real future, and certainly the transition is already starting to occur. So very happy to see that transition occur. And we'll see marginal improvement during the course of the year.

In South Africa, as I said, tough quarter impacted by safety stoppages. In fact, safety stoppages in section what we call 54 stoppages, which is associated with safety risks identified hit us to the tune of about 76,000 ounces. The rest was a consequence of some additional seismicity we've had in a couple of our West Wits operations. Certainly, the section 54 impacts have reduced in the last month, and I think that's a direct consequence of improving safety performance and the dialogue that we've had with the minister, the chief inspector and the various inspectors. And even myself, I've been involved in at least half a dozen conversations, two with the minister. I certainly think we've got a much more constructive process agreed going forward, and we should see improvements in those results, which should and will flow through to the operating cost line. The jump from 637 to 849 with a direct consequence of the production, and that should similarly turn around. And I'm guessing we're going to be somewhere between what we did this with and the fourth quarter last year in terms of Q2. I would expect a 30% to 50%, 50,000-ounce improvement, but a little bit of work still to be done there. And by the end of the year we should be back on track.

Now, with that brief overview, I'll hand across to the CFO, Mr. Venkat.

Thank you, Mark. Good morning, ladies and gentlemen. You will see from the first-quarter results which we presented today that we are presenting our consolidated group financial results in US dollars only. This change brings our reporting more in line with the global spread of our business, reporting by our international peers and our investor presentation. This change also brings with it the incidental advantage of reducing the size of our printed quarterly report and content of the tables supporting the financials by around 50%. However, for the benefit of any analyst who uses our Rand numbers, these have been made available by way of supplementary information on our website.

If I can now turn on to the slide headed first-quarter financial results, despite the production setback in South Africa that Mark outlined earlier, the adjusted headline earnings for the first quarter were strong at $429 million. You will recall that the first quarter of 2011 was the Company's first quarter rest following the removal of the hedge book, which, with the benefit of the full exposure to spot prices, adjusted headline earnings rose to $209 million during the quarter. The first quarter 2012 adjusted headline earnings of 429 million represents a more than doubling of the adjusted headline earnings off that base.

When compared against the previous quarter, which tends to be seasonally our strongest quarter, adjusted headline earnings rose by 45% or $134 million from $295 million last year to $429 million, primarily due to three factors. Our previous quarter's earnings were adversely impacted by $105 million worth of environmental provisions, net impact of $61 million from lower quarter on quarter production, partly negated by favorable pacing of expenditure and once-off impact of deferred tax credits relating to the statutory tax rate changes as outlined in our announcement in early April. South Africa -- the decrease was $131 million, and in Ghana the impact of the tax rate increase was $41 million with a net favorable impact of $90 million during the quarter.

Adjusted headline earnings per share amounted to $1.11 for the quarter. The total cash costs at $795 per ounce came in better than the guidance of $820 to $830 per ounce, due to weaker local currencies, less expenditure being incurred during periods of safety stoppages, better than anticipated grades at Geita and pacing of consumable and maintenance spend.

Margins calculated off both total cash cost and cash cost plus capital expenditure remained healthy at 53.1% and 32.3%, respectively.

Now turning to free cash flow and balance sheet, during the first quarter of 2012, all cash flow metrics were strong as follows. EBITDA was $800 million. Cash inflow from operating activities, which is after working capital and tax, was $581 million. Free cash inflow, which is after all items of expenditure except dividends payable to shareholders, was $185 million. In addition, $20 million was received for the sale of certain non-core investments.

The free cash flow and cash inflow from operating activities both benefited from a lower capital expenditure profile during the first quarter whilst free cash flow also benefited from the timing of interest and tax payments. The net debt level -- that will drop to $483 million from $127 million lower than Q4 2011 net debt level of $610 million.

Given the residual capital expenditure of $2 billion for 2012, a large proportion of which is on project capital, funds earmarked for the acquisition of Mine Waste Solutions aggregating $335 million and ongoing quarterly dividend payments to shareholders, we expect net debt to increase during the remaining three quarters of 2012.

During the first quarter of 2012, Moody's Investors Service upgraded AngloGold Ashanti's international credit rating from BAA 3 to BAA 2, citing improved fundamentals. This is currently the highest credit rating enjoyed by a South African-domiciled gold producer.

Now turning to outlook, anticipating a stronger second half of 2012, the Group's gold production target and total cash costs for 2012 remain unchanged at between 4.3 million to 4.4 million ounces at $780 to $805 an ounce. Gold production for the second quarter of 2012 is estimated at 1.04 million ounces. Total cash costs are estimated at $840 to $[855] (sic -- see slide presentation) an ounce at average exchange rate against the US dollar, while ZAR7.70 for the rand, BRL1.73 for the Brazilian real, AUD0.97 for the Aussie dollar, ARS4.40 for the Argentinian peso, and fuel at $125 a barrel. The increase in unit cash costs quarter on quarter is due to power tariff increase and winter power tariff in SA, lower silver credits, timing of maintenance and consumable spend, deferred stripping and inventory adjustments.

Both production and total cash cost estimates will be reviewed quarterly in the light of any safety-related stoppages in South Africa and any other unforeseen factors impacting these estimates.

I will now hand you back to Mark Cutifani.

Thanks very much, Venkat. I think -- as an observation, I think we're the most highly rated gold outfit in the Eastern Hemisphere after those numbers, Venkat, so even more than South Africa.

Ladies and gentlemen, I'm actually on slide 15, looking at the exploration slide with the yellow and the green dots. Very simply put, we're showing 15 exploration projects. The 11 yellow dots represents our current active projects. And as you know, we renew the portfolio on an annual basis. And the four green dots are showing four what are potentially significant gold discoveries. Firstly, in terms of Egypt, we continue to see hits on the Hutite prospect and certainly does continue to confirm that we think we've got 3 million to 5 million ounce potential there. We've seen new hits on a 1.7-kilometer surface trend on what appears to be a 5-kilometer structure in Djibouti, which is near Ethiopia. We've seen two new discoveries in Guinea, one of which we've talked about before, in Saraya. But we also have Kounkoun, which certainly is support for our strategy to look at doubling the size of Guinea within seven years. And in Colombia, it looks like we put some holes through what could be a significant copper/gold porphyry deposit.

So very exciting, and continuing to renew the portfolio. And just to reinforce that point, Mineral Economics Group, in their most recent publications, have acknowledged the AngloGold Ashanti team as the most successful exploration outfit in the gold industry. And I think with these results, one could easily argue that we are, if not the most successful, one of the most successful exploration outfits in all of the mining industry. And I think Roric Smith and the guys have done a tremendous job, and the results this quarter are exceptional.

Firstly, if I go to slide 16, you'll see La Colosa. The resource has grown 48% to 24 million ounces with the addition of the current drilling. And if you've noted in the last six months, we've had grades well in excess of the average grade of the deposit of 0.8 to 1 gram to well over 2 grams. And again this quarter, we've seen a 26 meters at 1.9 grams and a 352 meters at 1.45 grams. So we're continuing to see improving grades, and with the new resource of 24 million ounces, significant improvement. And we are still drilling the deposit. And we certainly haven't finished that process, by any stretch of the imagination.

In terms of drilling in Guinea, two discoveries. Additional information on Saraya with intersections of 34 meters at 4 grams, 39 meters at 4 grams, 65 meters at 5.4 grams, 21 meters at 4 grams, near surface deposit with a significant oxide cap through to fresh rock, which is very encouraging in terms of long-term both open pit potential and potentially underground possibilities, so certainly very encouraging results there, which are about 40 kilometers from the mill. Kounkoun -- the most recent discovery, 20s to 70-meter intersections above a gram; again, very encouraging. And when you look at our current mill feed of 0.8 grams a tonne, those intersections take on even more significance. So we've had a great quarter from an operations perspective in Guinea and we've had a great quarter from the exploration perspective as well. So very, very happy with what we've seen, and I'm going to use exciting for the second time in my chat.

Going to slide 17, again looking at the intersections from the Hutite prospect in Egypt, solid intersections raging 4 meters to 35 meters, grade 1 gram to 18-19 grams a tonne reinforces the view that we could be onto something of around 3 million to 5 million ounces. So again, very happy with the work the guys have done.

And a new prospect in Djibouti. And for those that may not be aware, Djibouti is a small country on the east-northeastern coast of Africa, basically surrounded by Ethiopia. Now, we have exploration work in Ethiopia. What we've found here is a structure about 5 kilometers long daylighting its surface on a 1.7-kilometer trend. And right along that trend, we've picked up grades ranging from 0.5 a gram through to 25 grams a tonne. The Wits there -- and these are on channel chip samples around 1 to 3 meters, so very excited with what we've picked up there. There's another two-thirds of that structure that are untested because it's below cover, but we'll be setting up to drill in the next few months. And that looks, again, very encouraging.

To go to slide 18, Quebradona, and for those that don't have a section in front of them, it would be advisable to have a good look at this. We have been drilling this prospect. It was a blind prospect where we picked up on our electromag surveys, significant anomaly. We've been drilling the last few months. We've got about 300 meters of cover and you'll see that we are starting to poke some holes. And we've stylized a section there that is probably about a kilometer across. And the most recent hole that we've put through what we think could be significant deposit is 580 meters at 0.18 grams per tonne gold, 0.48% copper and 175 parts per million of molybdenum.

Now, if you look at the bottom of that hole as we start to move into what we suspect is a higher grade bornite core, we have an intersection of 244 meters at 0.25 grams per tonne gold, 0.68% copper and 179 parts per million molybdenum. Now, if you look at copper equivalents, if I talked in copper equivalents, we're looking at something that could be between 0.8% to 1.2% copper that is in copper equivalents. And the molybdenum probably adds about somewhere between 5% to 10% to the value. So it is still very early days. We have a few holes in the deposit. It looks like 600 meters breadth, width of about a kilometer, open to depth, very interesting intersections. We're obviously mobilizing some larger scale, deeper drilling rigs to get a good handle on what this might be. But certainly very excited -- backs up the thoughts that our geologists had some two or three years ago, so very happy. And it's great to back pure geological judgment and assessment and come up with something like this.

So we'll wait for the next couple of quarters to see what the drill results indicate. But, as people know, copper or copper/gold porphyries generally can be large in size, reasonably consistent. So a very interesting prospect that will provide a stream of information flow over the next few quarters, I expect.

Moving onto projects, so stuff we've actually got on the ground, so that's stuff that really has the place buzzing in terms of what's potential going forward. But what we're doing right on the ground, we're talking about growing the business to 5.5 million ounces. We're backing that, we're building the projects. Corrego do Sitio is running up to full scale, will be up to full scale by June. Cripple Creek leach extension pad delivered a year ahead of schedule, on budget. Tropicana currently delivering on schedule, in fact a little bit ahead of schedule, on budget in terms of cost.

Compare that to what everybody else seems to be reporting at the moment, major cost blowouts on capital. We've kept our capital tight. We are keeping to our project deadlines. Yet, there's lots of pressure, particularly in Western Australia. But we are holding schedule and we're holding the capital costs, so very encouraging there.

And if you slip across, you'll see Tropicana there on schedule. They've got a drill rig mobilized to start drilling Havana Deeps and these other prospects continuing to pick up gold. So that reinforces the view that we have a potential underground operation in Havana Deeps, so very encouraging there. We commissioned the airport literally today. We had our first flight land, so our first milestone as well as the commissioning of the road from Kalgoorlie. Construction facilities in place, we're starting the civil works, major concrete has already been poured for the primary crusher, the leach area, the mill foundations and the thickening areas.

So very excited and very happy with the progress the team is making. And they are working under some pressure, but certainly the team's done a great job. And the fact we've finalized all the major contracts and we look like we're still within our budget limits -- very tight, but we're there. And the schedule looks pretty good, so I'm very happy with the progress they're making.

On Cripple Creek, very good photo on slide 23 for those that are looking at the presentation. It's a very good aerial view. The good news is, we've just been awarded the Best of the Best Award on environmental management, so we're very proud of the team and what they've done. That goes with the Best in Brazil Award and the commendation the President of Argentina has just given us in South America, so very pleased with the Americas team and the standards they're setting for the rest of the group.

What we are doing with the Cripple Creek project is we're installing a new mill based on the high grades we're finding deeper in the pit. That will improve production somewhere between 70,000 to 100,000 ounces. With the great variation that we have in the leach pad extension, not only do we think the operation up to 400,000 ounces, we're also extending the life of the project to beyond 2025. And even beyond there, we have about a 350,000-ounce profile. That is without taking into account the underground potential that we see based on the high grades we're finding in the basins pit. And don't forget at Cripple Creek that we're mining down to 1000 meters over the last hundred years, so we're now getting ourselves in the position where we can start testing some of those lodes, looking for material the miners may have left behind. And we're certainly on a couple of those lodes at the moment in the pit, which provides us with the confidence in putting the mill in. So an exciting development there, very pleased with the great work the Cripple Creek guys have done.

On page 24 we've provided a schematic showing both Kibali and Mongbwalu in the DRC. And as you can see, based on the map, it's not that far away from another major mineral province, and on the same sort of trends across the African continent where we have Geita and, obviously, the three Barrick operations. Just interesting to note that Geita at the moment is delivering free cash flow in excess of African Barrick in Geita, so again very pleased with the sort of performance the guys are delivering. Project ONE has been an outstanding success with productivity improvements almost up to 100%, cost reductions about 40% and, again, another stellar quarter.

Kibali -- good progress. We've been supporting Randgold all the way. We took a little bit longer to approve the project. We actually cost and estimate final numbers a little different with the Randgold. And if I should explain that, Randgold's $800 million estimate for the project for their share compares to our $981 million. We actually -- well, Randgold estimates contingency at a unit level, which is what we support. But what we do then is we make another provision which we call a broader contingency for those items that are difficult to plan for. So, whether it's some sort of disruption to supply lines, some other disruptions that are very difficult to plan for -- in our view is in like a country in the DRC where the unexpected can happen; we make an additional contingency provision based on our experience over many projects across the globe.

We also provide escalation, so there are different numbers. Our numbers are nominal, whereas the Randgold number is a real number. Now, we're very happy with the way Randgold is estimating their numbers. Mark and the team are absolutely committed to delivering on that number or as close to that number as they can, and that is consistent with the December 2013 commissioning target. We, again, also include a bit of contingency for slide on the schedule, which goes into our costings. But again, we're fully committed to support Mark and the team, deliver on that December target. And, hopefully, I'm going to have to buy Mark a very expensive bottle of red wine in December 2013.

At Mongbwalu, we've advised of a $345 million project expenditure estimate for Mongbwalu, takes us to 130,000 ounces a year for three years. Average over the life will be about 100,000 ounces. We believe we'll be able to hold that 130,000 ounces beyond that three years. It really is a function of the areas we're mining in the early life of the project. We expect and will deliver a quick return on our cash with a view to then reinvesting and at least doubling the size of the project within four to six years. And so, from our point of view, very low-risk approach. We bootstrap it up over time, use cash flow to then expand the operation. And so we will be very aggressive on the exploration, start looking to expand that operation. But again, very excited with what we have there, and the team has done a great job in getting that to a point where we're approved and we are actually building today. The roads are commissioned, power plants -- a whole range of things are actually in place.

The least areas are quite significant, and for Mongbwalu, we control about a 6000-square kilometer area of ground. So, again, lots of room for exploration plays through those areas, and we remain committed to exploration on both leases. And Randgold has done a great job continuing to add ounces to Kibali.

More specifically, on page 26 you can see some of the diamond drilling work that we're doing at Mongbwalu. We have a time line there for the operation, looking to commission at the end of 2013, moving into early 2014. So we're all go for that. And the following two slides just shows you the work that we've already done at Mongbwalu upgrading pipelines, upgrading power stations on page 28. So well progressed, going well, long lead items have been ordered. So we're in good shape in terms of Mongbwalu.

The Mongbwalu footprint -- relatively small, as you'd expect with an operation of about 130,000 ounces, but you can see on page 29 a couple of blank areas on the processing plant footprint. Those areas provide us the ability to expand the operation. We can double the size in relatively quick order. And in fact, 70% of the capital that we're putting in place now will serve as an expanded facility. And if I could say that on a 15% return project as we stand, we moved that to well over 25% for with incremental capital expansion and we position ourselves for long-term growth and opportunity in a very prospective part of the world.

On Kibali, again the schedule is shown there. Very happy with the with the work Randgold has done -- very professional, fantastic work on relocation, good project work. They've engaged us through the process, and we do feel like we're part of it.

You can see on page 31, it's a magnificent ore body. The grid scales that you can see, under the ore body, 1-kilometer grids, great ore body, very well tested in terms of the drilling. You can see the concentration of the drilling, so very confident that the guys will be able to deliver on their promises in terms of tonnes and grade and delivery on improvement.

Ladies and gentlemen, in just moving through into a conclusion I'm going to jump to page 33, which just shows a couple of the financial metrics. Gold price is up 22%. Our EBITDA is up 39%. Normally, we would expect to see EBITDA up 44%, but remember that we are a little bit off on the South African operations. If it had delivered even half of what we were hoping for, we'd be above the 44%. So that 2-to-1 leverage ratio that we use in terms of percentages, for every 1% in the gold price we delivered 2% improvement in EBITDA, still holds pretty solidly.

Earnings, both EPS and earnings much higher than you would expect as a consequence of the tax credit we got in South Africa. Now, that's obviously a one-off. But certainly, we hope that the positive conversations continue in South Africa. While all other governments are adding taxes, it's great to see a government pulling a tax back. And the government has been very constructive in the tax restructuring that they're looking at for the mining industry. And I'd have to say we're the only country in the world that has already negotiated what we call a mining charter, which is a tripartite agreement between government, unions and its industry to grow the mining industry in the country. And despite all the rhetoric, the misleading commentary on South Africa, we have had a very supportive regime in the main. And if we can deliver on the mining charter commitments and the tax conversation is a constructive and positive one, given we have a very modern earnings-based royalty regime, we believe South Africa is positioning itself to be the go-to exploration or destination in the mining industry.

It's an important year this year. I'm committed to be involved in the process as the Vice President of the Chamber of Mines. And I'm pushing the point on the mining charter being a leading-edge document. If we can deliver that, we will turn around the perceptions on South Africa, and it will be the go-to destination within 12 months. That's the vision we have for those conversations. And for us, we believe it has great potential.

Page 34, value proposition -- it's one thing to find resources. It's one thing to develop new projects. It's one thing to deliver on your commitments. But we're also delivering industry-best returns on equity, on return on capital employed. And as we say about value, our enterprise value-add, or EBITDA -- we are the cheapest if not the second-cheapest stock in the market. In our view, we are trading 50% to 60% under true value. So we'll be pushing the delivery and continuing to deliver cash, cash flow, production, earnings growth, new projects, new exploration discoveries. And at some point, when you're delivering the best turnaround and the best story in the industry, the market will get on board. That's our belief and that's where we're going.

And on page 35, a simple summary of where we are. Best industry exploration performance, delivering new discoveries at a rate no one can compare to in this industry, which means we're delivering new resources at $35 an ounce -- not $350 an ounce, not $1000 an ounce, $35 an ounce. We had committed within our teams to deliver 20 million ounces this year. We've already banked 12 million ounces. We've upped the target to 25 million for the team, and I'm sure we've got the people that can deliver. We've proven turnarounds with EBIT performance increasing from $1 billion to $3 billion. We're going to continue to improve the business, and we're going to make sure that that improvement in the way we operate is reflected through our project delivery. And so far, we're on track.

We have high-quality, low-execution risk projects. They are not $3 billion projects; they are $100 million to $500 million with Kibali being the largest project. And we're throwing the full weight of our support behind Mark Bristow. But we've demonstrated the ability with our current projects to deliver, and we will deliver these projects on time and certainly within schedule.

Yes, there are some risks. We might have a couple of bumps, but they won't be major blowouts. The balance sheet's in good shape -- low gearing, substantial unused debt capacity. We will fund those projects from our operating cash flows. We have the geographically most diverse portfolio in the global gold industry. When you think gold, when you think global gold, you should be thinking AngloGold Ashanti. And given the performance that's been delivered by this team over four years, we believe we represent the most significant value in this industry. And with that, we're very happy to take questions.

(Operator instructions) John Bridges, JPMorgan.

Hi, good afternoon, congratulations Mark, everybody. I was just wondering -- your comments on the changes in South Africa seem pretty amazing. I just wondered what -- was there any particular trigger that has led to these changes?

John, I think -- I'm very frustrated. I'm an Australian in South Africa --

That must be tough.

And I watched the debate in Australia, and I watched the debate in South Africa, AND I can't understand why people report Australia in a reasonably constructive way and South Africa so destructively. Very simply put, the nationalization debate has been put to bed very clearly. The country debates these things in a very open way. What we are now debating is, what is the tax structures that should apply in the country? It's an open debate. Unlike Australia, we are being asked to comment and propose alternatives to the ANC as the ruling party on what we should see as a tax structure. And we praise the government on their royalty regime, we thank the government for reducing corporate taxation rates and we've been given an opportunity to debate the Sims document, unlike any other jurisdiction in the world.

For the life of me, I can't understand why things get reported so negatively. Now, I do concede that we don't promote ourselves as a country. And we as a company need to promote what's happening in the country better than we have. I'm very encouraged -- certainly a long way to go, a long way to go in terms of the next six months. But I'll tell you what. We've positioned to debate with the government in South Africa very differently to the way the debate was positioned in Australia. And I'm sure we're going to deliver a better outcome because we're engaged, we have a say and we get off our bums and we lobby and we're working the problem. That's all I've got to say.

That's quite a lot. (laughter) over the years, it's been quite amazing to see Anglo and AngloGold Ashanti popping up as discoverers or joint discovers of some of the world's major deposits. So I really like the recognition you got from those guys up in Canada.

Just could you talk a little bit about these things you're finding in Djibouti and Ethiopia? Given all the political uncertainty we see nowadays, what would you required for you to actually get involved over there?

Thanks, John, and thanks again. Roric Smith and the team have just done an outstanding job on the exploration front. We've now put on the table several major discoveries. And if all of these come through -- I think it's up to eight or nine. That's a remarkable performance and the guys have got more prospects, and they're drilling other prospects. So we appreciate the feedback.

On Ethiopia, I look -- to be Frank, John, I was focused on Ethiopia. And we're watching it very carefully, but there's a structural trend that runs into Djibouti. So when the guys told me that we had picked up a 5-kilometer structure, I had to go back to the maps and look where Djibouti was.

Well, at least you knew where to start.

Being very honest -- so they've done great work. They've worked off the major structural trends, and like the good explorationists, they ignore the boundaries of countries and they look at the major geological trends. And this thing runs through from Ethiopia. So very good structural, first principles geological work. It's a 5-kilometer trend. The guys believe it's sort of a 3-meter type structure. We've had some very high-grade hits, which is always encouraging -- or high-grade channel samples, which is always encouraging to say that you've got that intensity of mineralization.

So, quite frankly, we're not sure what we've got, other than we've got 1.7 kilometers of very good channel sample results. And we can get back to you on the JV details. We're still getting the details; they only come through in the last week. But more than happy to follow up with you and give you some background on that.

And we've been doing less work in Ethiopia. This thing was the thing that caught our guys' eye, and they haven't even told us they had sort of moved into Djibouti. So we're quite excited. And I'm going to have to go and do a trip to Djibouti.

It's exciting. Apparently there's a place called [Sekocha] Island offshore, which is worth the trip.

Ah --

Anyway, congratulations. I've taken up too much of your time. But good luck, guys.

David Haughton, BMO Capital Markets.

Good morning and thanks for the update, Mark and Venkat. If I could just start, perhaps, with your okay there, Mark, on Venkat looking at the earnings -- can you talk us through that $90 million rebate that you got from South Africa? And I presume that's included in your $429 million, which is about a $0.20 impact. Is that a one-off, or what should we be looking forward on?

Okay, David, you are right; the $90 million -- if I can just explain the $90 million credit, it includes a credit from South Africa which is purely a deferred tax rate adjustment of $131 million. And it's partially mitigated by the Ghana tax rate increase because our stability agreement protects us beyond 30%, but we'll be on the hook from 25% to 30%, and that's $41 million. So the net impact is $90 million.

Yes, you are correct, that once-off on deferred tax credit. In cash terms this year, 2012, we're looking at a ZAR300 million savings, a ZAR300 million savings in cash flow terms. In terms of tax, our South African tax rate used to be around 43% on the gold tax formulae. That has now dropped to around 34% in South Africa. And the group as a whole, our effective tax rate, based on current assumptions, etc., is around 32% consequential exchange.

That's great, Venkat, because you anticipated each of those questions on the various tax rates there. So that's good. Thank you.

Thank you very much, David.

I haven't finished yet. Down to Cerro Vanguardia, I visited that operation late last year, as you know. Very impressive part of the world. All sorts of confusion there about what the state of play is in Argentina. I'm pleased that you seem to have -- be held in high standing there. How are you going in repatriating funds out of there? Or are you just investing funds domestically?

David, we've had a good track record in Argentina, and with the turnaround of the operation in the last three years and the investments we've made in San Julian, we've certainly kept a good relationship, the good -- the environmental performance being good. The actual President comes from that region. So when she heads down that way, we invite her to come have a look. And she's said some very nice things, which was helpful.

We are moving things through very carefully, keeping the operation going, although it's certainly become a lot tougher. But we've certainly been supported in what we've been doing, and so we've been able to continue to do well. And obviously, we want to keep that relationship on the right side of things.

All right, I specifically asked Barrick, Yamana and Goldcorp over the last quarterly how they have been able to get funds out of the country. None of them have an answer because they're all still net investors because what I'm uncertain about is that if you want to pull money out, what exchange rate do you get charged at? Is it the official or the unofficial rate?

David, what we've been doing -- as I said, we've been able to move parts and materials -- because some guys have had trouble moving parts, importing parts. We've been able to move some stuff in, so we've managed that. We've not tried to do anything on a cash flow basis. Venkat?

Yes.

So we haven't really tested the system. We are being prudent in looking for the right circumstances and opportunity to do that in a constructive way. So we haven't tested the system as yet.

Okay, well, given the feedback that I've had from Barrick, Yamana and Goldcorp, no one has tested the system yet. But everyone is talking about the requirement to have goods manufactured in-country. It doesn't seem to be a huge impediment. There is capacity in-country to manufacture these items, but it's just been -- a little bit of a hassle factor.

Yes, we -- not everything. One thing, I'd say some of the high precision engineering stuff will be problematic. And we've been able to bring some stuff in, David. But our experience -- we've been in Argentina for a long period of time. We've seen this, they tell me, before. You have to keep a constructive and positive engagement going with the government. The good news is the government has 15% of our business -- sorry, 17.5.

7.5.

7.5 -- and we've been -- that's right, we change the numbers. We've been in a dialogue, we've been dividending to former crews, which is the government. And the President was saying that that was the ownership model she was looking at for the mining industry. Now, if you know the history of the problem at the petroleum producer, there's been a long-running argument over the history of ownership and commitments on investment. And we've continued to invest. So not wanting to comment on that specific circumstance, we're certainly not considered to be in the same category. We've been very constructive in our engagements and we want to keep that relationship. And we want to keep it there.

So I can't say anything more than that, other than that's where we are.

Righty-o. Over to Cripple Creek, I thought one of the major hurdles for expansion there was the pad footprint. How have you addressed that? And is that no longer an issue for you?

It's actually a process. So we extend the pad footprint, we've got all the approvals in place. So we're in good shape. In fact, we don't go with the project unless we get that in place, but we are going out and up. So we're in place; we're putting stuff on some of the low-level pads as we speak. That's also helped us to get some nice production going, as we speak. So we've got those approvals. We've had to relocate roads. We still have to do a couple things on county permits, but they are low-risk permits. So all the hard work's been done, roads have been relocated. And we've got a mill position that's been approved, so we're in good shape right across the board.

The other thing, David -- on the volumes, the mill has been designed so that it represents less than 15% of the material. So we'll actually take the tailings and put them back onto the pad so we get a second crack at the gold on the leach pads. So we don't have to build the dedicated tailings facility because we've kept it below the 15% threshold. So it becomes economically a very smart way to set the operations up and set the leach pads up.

So you'll have some filler pressures on that tail so that you can dry stack it?

Sorry? Say that again, David.

So at the back end of the mill, you'll have some filter presses so you can dry stack the tails, put it on the leach?

Yes, but we don't have to do too much because it's such a low volume. But yes, it's dry, and I'm not sure if we've got the filter presses in the flow sheet. But it's actually a dry material that goes back into leach pads, but we have a second crack at it. So it doesn't matter if it's a bit moist because you're putting solutions through it, anyway.

Right. Now, to South Africa, section 54 stoppages -- obviously problematic not only for you but for Harmony in the first quarter. You were describing the dialogue that you had to improve that. Is that to reduce the stoppage, period, or to enhance the safety principles, or what should we be thinking about?

All the above. I've had two sessions with the minister, one as an AGA representative and one with my Chamber of Mines Vice President hat on. We talked about the safety issues in their own right. In the industry we all have to do a lot better on the safety front. We're all agreed on that. We are at a point now where our Project ONE implement -- it takes about 12 months for us to get to the operating level on our Project ONE implementations at a site of 500 people. Given that some of these South African sites are 4000 and 5000 people, it actually takes you two years.

We are only now implementing at the operating level. And we think that will give us a big kicker over the next 12 months, we're hoping, on the safety and productivity front. And certainly, the Mines Department has been very impressed with the work they've seen so far in the early days of the changes we've been introducing.

The key change that I think we are walking through with the Mines Department at the moment is that what I suspect you'll see is, instead of a whole mine being stopped for a safety incident, it's more likely we'll get sectional shutdowns as opposed to full mine shutdowns -- so they call that a section 55 -- and that we'll get a much more, certainly, circumspect application of the section 54s. Now, we've seen that so far in the last month across the industry, both the platinum sector and the gold sector. But I must say that we've got to keep improving our safety performance, which we've been doing, to reinforce that. But the minister has been open, the principal inspectors have been very open. I've had a number of meetings with Mike O'Hare, and we certainly have the right dialogues. And I think we've improved our connection with the DMR as part of that process. And we've certainly seen probably a 50% to 60% reduction in those types of stoppages, which is material.

All right, well, thank you, Mark and Venkat and Stewart for your brilliant diction at the beginning of this conference call.

Anytime, David, no problem.

Harry Mateer, Barclays.

Hi, guys. Venkat, just a clarification question for you. You mentioned that you do expect net debt to increase a bit during the balance of the year, given CapEx and the acquisition activity. Can you just give us a little bit more detail on that? Do you expect to use the Company's cash balance, which was fairly ample at the end of the first quarter, or do you anticipate roast it actually increasing, so actually borrowing on your bank lines or potentially doing a bond deal?

Okay, if I can pick up that response to the question, the first comment I want to make is, as you would have seen in our annual report, our commitment to maintain our international investment credit rating stance -- that's sacrosanct. We will not go to any point which would compromise our investment-grade credit ratings, and that was quite an important discussion we have had with both Moody's and S&P. That's point number one.

Point number two -- certainly, under the metrics as you would have seen, based on what Moody's published, based on our cash flow metrics now, you have seen an improvement in fundamentals. Our first approach was to draw down on the existing cash balances. Then, as and when the project capital increases, needless to say, the funds will be generated from operations. But we do have the two revolving credit facilities available to draw down as requested, as required. But in any event, what we are looking at is any increase in debt would be well within the tolerance limits of the rating agencies. We've had dialogues with both the rating agencies in this regard. We also fully recognize that these project capital which would be spent over 2012 and 2013 is going to contribute to quite increased cash flow for periods 2014 and beyond. So they do allow an element of effectively short-term peaks in the net debt levels, but within certain tolerance limits.

So the key message here is, certainly the net debt would go up quarter on quarter, but not to a point which would impact our credit rating.

That's great, thank you very much.

Venkat, I know you've made this -- Harry, just another point. Obviously, the gold price is very important to that equation. And for a $100 movement in the gold price on a net cash flow basis, we get about $300 million back. So Venkat and I are debating what gold price we would see. So we still think the gold price has legs, particularly in the second half. So that sensitivity, about $100 on a full-year basis, about $300 million per $100 an ounce gives you a bit of a sensitivity, feeling for the sensitivities on the revenue side.

That's excellent. Thanks very much.

Joung Park, MorningStar.

Hey, Mark and Venkat. Thanks for taking my questions and congrats on a good first quarter. So just a couple of quick questions -- first, given the new second-quarter outlook as well as the first-quarter costs, the full-year cost guidance implies a big drop in cost during the second half of the year. So what's the main drivers behind those cost improvements? It looks like at least fuel price assumptions are going down throughout the year.

I think the main driver is ounces. If you look at the ounce profile, we've had 980,000 ounces in Q1, [1-0, 4-0] for Q2, and we are expecting a very stronger second half of the year. So the main driver is basically in terms of ounces. And that's what drives the full-year cash costs down.

Okay, and then, have you guys heard anything from Eskom about future rate hikes in South Africa coming over the next, say, couple of quarters?

The latest information we have from Eskom is that they've downgraded the last hike from 26% to 16%. I'm looking at Venkat; yes, he's nodding his head, so I've got the numbers right. We're also, as an industry, in active conversation with Brian Dames. Eskom has done very well. Revenues have been strong. The industry is arguing that they continue to be circumspect with those increases. We are lobbying the finance department.

Again, as I said, we are active on a number of fronts. So we've not been given a forecast beyond that reduction, but I'd have to say that the politicians, the government, in particular, is very sensitive to cost pressure, to encouraging jobs, to encouraging investment. And so we're hopeful, but we don't have anything other than that most recent announcement.

Okay, thanks so much.

Thank you very much. We have no further questions. If you wish to make final statements?

I think, ladies and gentlemen, we've had a mixed quarter in terms of three -- the regions have delivered very strong results and we've been sailing into some heavy headwinds in South Africa. We certainly see the situation improving in South Africa, but with the implementation of the new Project ONE initiatives on the ground, we deliberately made sure that what we put in place sticks. So you're not going to see a mad rush improvement. I'd love to see that, but it is going to be measured. It's going to be sustainable. We are doing it with the government, and you will see improvement.

So more work to be done, more opportunities. The other regions continue to go well. We're very pleased with the base that they've established in terms of the Project ONE improvements and the sustainability, which has been a great improvement. That will be I think a key feature of operating or should be a key feature that we're expecting in the operations. The other thing will be news flow from some of these new prospects that we've identified and, obviously, keeping you abreast of the project developments that we have right across the portfolio will be important. And certainly, we are very switched on to the sort of things that others have seen on projects. But again, we've probably been quite conservative in the way we've estimated our numbers. And you'll see that that conservatism is in the Kibali numbers and other projects. That's the way we operate -- certainly committed to delivering and making sure that by 2014, you're seeing all these new projects hitting the bottom line and really building the base for the new AngloGold Ashanti. Thank you.

Thank you very much. On behalf of AngloGold Ashanti, that concludes today's conference. Thank you for joining us and you may now disconnect your lines.