Anglogold Ashanti PLC (AU) 2012 Q3 法說會逐字稿

Everybody, welcome to the presentation of our Q3 2012 financial and operating results. As is customary, Mark is going to kick off with an overview of the quarter. He's also going to talk to the unprotected strike action that we've had here in South Africa, as you'd all know. Venkat will then talk us through the results, the financials, and the balance sheet. Mark will then talk to our project review and then make some concluding remarks. The other members our executives are present.

And, without further ado, I'm just going to whip through our disclaimer, our safe harbor statement, and then had over to Mark.

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 outlook of AngloGold Ashanti's operations, individually or in the aggregate, including the achievement of project milestones, 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 expenditures and the outcome and consequence of any potential or pending litigation or regulatory proceedings or environmental issues, are forward-looking statements or forecasts regarding AngloGold Ashanti's operations, economic performance, and financial condition.

These forward-looking statements or forecasts involve known and unknown risks, 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 and forecasts 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, social, political and market conditions, success of business and operating initiatives, changes in the regulatory environment and other government actions including environmental approvals and actions, fluctuations in gold prices and exchange rates, and business and operational risk management.

For a discussion of certain of these and other factors, refer to AngloGold Ashanti's annual report for the year ended December 31, 2011, distributed to shareholders on April 4, 2012, and the Company's 2011 annual report on Form 20-F, filed with the SEC in the US on April 23, 2012, and the prospectus supplementary and Company's prospectus dated July 17, 2012 that was filed with the SEC on July 25, 2012.

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 written or oral 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 utilizes certain non-GAAP performance measures and ratios in managing its business. Non-GAAP financial measures should be viewed in addition to and not as an alternative for the reported operating results or cash flow from operations or any other measures of performance prepared in accordance with IFRS.

In addition, the presentation of other measures may not be comparable to similarly titled measures other companies may use.

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

With that, I'll hand over to Mark.

Ladies and gentlemen, thank you very much for joining us this morning in some locations, this afternoon in others.

Kicking straight off, it's been a tough quarter in South Africa. Marikana and its unsettling aftermath, strikes and general labor unrest, and our ratings downgrade for the country have certainly made it a very tough quarter.

As a consequence, we're about 4% down on our production guidance. Costs are generally in line with our guidance. And, certainly, we're expecting a much tougher quarter four, given that most of the strike impact will actually hit our current operating quarter.

The good news is we have six of our seven operations back at work and, certainly, in dialogue with the seventh. We've managed through the crisis. By and large, we've managed to avoid serious violence and injury to people, which certainly has been a challenge. And we're very pleased with how our team has managed those challenges.

The task ahead for us now is to get the operations up to full capacity safely so that we're delivering to our potential in the new year.

On the numbers, we're disappointed, obviously, but not surprised. As a leadership team, we're using this crisis to focus on our next steps to deliver on our pledge to be the leading mining company. And, from our point of view, we've taken some steps, obviously, to deal with some of the short-term issues that we face and to ensure that we continue to improve the operations and the portfolio to deliver on that potential.

If you go to the overhead presentation, you'll see that, in looking at the share price performance over the last couple of months, it's obviously been impacted by the situation in South Africa and, from our point of view, very disappointing to see how we've performed, certainly, against our global peers. And we're doing -- probably performing in line with our local peers.

The market reaction has been not surprising. And, from our point of view, the next six months recovering that and continuing to improve the performance of the portfolio so we recover that ground and go forward is certainly our most important challenge and certainly one that we're addressing in terms of the steps we've taken and I'll talk about a little bit later in the presentation.

If you look at the 2012 overview, the numbers reflect our South African challenges. Gold production was down slightly on guidance, costs in line. Obviously, our earnings and returns took a hit.

However, we continue to make good progress on our growth projects and the underlying strategic improvements that we've got in place through the portfolio. So we expect to continue to improve, get ourselves back on track in the first quarter of next year. And we should go from string to strength as a couple of those big projects start to punch in and make a contribution in the second half of next year.

On safety, while our underlying trends have been very solid, we've had a tough quarter in South Africa with three (sic - see press release) fatalities reported.

We have finalized 22 major hazard standards as we head towards the end of the year, and we expect to be implementing those standards over the next 12 months. So that poor performance on the fatality measurement front should improve during the course of next year. Certainly, we expect to be able to continue the overall performance trend. Since we've started our work, we've improved by around 70%. We are now talking about how we take another major step going forward and we improve another 70%.

On the production front, and starting with South Africa, as we said, a tough quarter.

The good news? We're really happy with the acquisitions that we've made during the course of the quarter both in terms of Mine Waste Solutions and, obviously, I'll talk a little bit more about our acquisition in Brazil.

As we integrate Mine Waste Solutions into the operations, we're very pleased with what we've seen. The value proposition that guided the acquisition looks to be in good shape if not a little bit better than we thought. And so continuing on our track record of making the right capital decisions and with the asset sales included in that conversation, around a $3 billion commitment on acquisitions and sales over the last four years with our view that the value in our hands has more than doubled on those acquisitions. And we think, with Mine Waste Solutions, we're heading to that portfolio of value that we've delivered in terms of those capital acquisitions. And, certainly, we're in good shape.

As we go through on page 8, the events as they unfolded in South Africa, I don't probably need to do anything more, given my opening comments.

But I do want to make it clear that violence, intimidation, and lawlessness that we have seen in certain areas of the business across South Africa have no place in AngloGold Ashanti. And, from our point of view, that's the main reason why Mponeng is still out. We had some violence when the employees returned to work. We put a stop to it. We shut the operations and said that we won't be entertaining people coming back to the operation until that ceases. Certainly, we've seen, literally, all violence stop.

We are in dialogue now about a return, but that may take another few days as we make sure that we sort out the issues and we don't have a repeat of what happened when the guys returned to work a few days ago.

So we'll work through that. But we have made it clear to everybody that unacceptable behavior won't be tolerated and that we will not entertain people returning to work if there's any sorts of violence either towards people or in terms of the assets. And that has become very clear to everybody in the last couple of days. We'll get it back.

In terms of South Africa on a go-forward basis, I did want to make people -- or did want to make sure people understood where we stood. Back in 2004, we produced about 3 million ounces from our South African operations and then a combined EBITDA from the operations of around $300 million. Now, obviously, we've enjoyed a price rise. And, whilst many operations have seen pressure on operating costs, we've been able to see relative improvement in our operating position. We've seen more cost reductions. We downsized from 40,000 employees to less than 28,000 at the operating level. And, while our production has dropped from 3 million ounces to 1.5 million ounces in the intervening period, our EBITDA from the operations has improved by a factor of more than 4 with about $1.4 billion EBITDA delivered in 2011.

And that really speaks to the strategy that we have in place. It's about quality of production not quantity of production. Our returns our better than 24% return on capital employed. And so we'll continue to focus on those issues.

And, as we go forward, we will continue to look at the management practices that we have in place for the implementation of Project ONE. We are looking very aggressively at those areas in the business that aren't delivering value. And, we foresee those as part of our review in the next three months, we will be pulling back production. We are looking at improving the planning and execution process and working with the employees and making sure that's improved.

And, with our technology strategy over the next two or three years, we believe we can continue to focus on the quality of the portfolio. And, whilst we will see reductions in production over time and they are obviously being forecast over the next few years, we believe the financial contribution from South Africa will remain robust. And, as we've done over the last seven or eight years, it will remain a very viable and solid contributor to the portfolio, although it will, over the next three to five years, drop to less than 20% of the portfolio.

In continental Africa, production was off a bit with lower grades reported out of Obuasi, Geita, and Iduapriem. In the case of Geita and Iduapriem, it was more around the scheduling of ore; so, not a surprise.

Obuasi was more about production scheduling and not having flexibility due to development. And, with that, we announced a little bit less than a month ago the removal of the development contractor that's been there for 85 years. I know people have seen us improve the operation over time but not getting to where we need to get to. So we've made the tough decision to take over development in our own right.

What we're looking to deliver over the next six months is a 25% increase in our development rights to give us the flexibility to improve the grades, to make sure that we're continuing to deliver on improvement.

And what we've done in the presentation pack, and I'll take you to slide 11, is just shown you what we've actually done with Obuasi over the last four years. If you go back to the merger in 2004, you could see that EBITDAs 2004 through to 2007 were bouncing around $30 million to $50 million. However, the cash flow from the operation declined so that, by 2008, we were losing about $120 million a year.

We made some significant changes. We reduced workforce numbers by around 20%. We renegotiated electricity or power rates with the government. We actually took about 15% out of our monthly operating costs. We made some other changes, including changes to mining methods. And that saw a $120 million improvement from 2007 through to 2009.

And, since then, we've been using the cash flow from the operations to fund the cleanup of the many legacy issues that we'd picked up as part of the merger process.

We're now in a position to take the next step, where we're targeting getting to 500,000 ounces with a target of around $315 million EBITDA with an overall free cash flow target of $200 million a year from the asset.

What we will do is we're committing to a development decline in three parts using a development contractor that will allow us to access different points in the ore body adjacent to the old workings so that we'll, effectively, develop a new mine around the old mine.

If you go to page 14, you'll see that, in the first instance, we've reduced our surface operating footprint in the old operation, and that's where we've been funding the cleanout of the legacy issues.

And, on page 15, you'll see a decline operation going from surface to the base of the existing operations in which we'll pick up additional production so that we're looking to hit a target of 500,000 ounces by 2015.

Now, while we won't fully fund those developments and the establishment of the new operations from cash flow from the operation, it will be substantially self-funding and, certainly, reposition the operation based on our own development within the operations and a new commitment to development outside the existing areas of the ore body through the decline development. And that has been consistent with what we've been talking to in the last 18 months.

The concern that we've had with Obuasi -- it's taken about 12 months longer than it should have. And, for those people that follow the portfolio, know that we've made significant improvements to 20 of the 21 operations. We have certainly stopped the cash flow drain that we were seeing back a few years ago at Obuasi. Now it's time to take that next step and get the asset generating real cash flow, real value for shareholders. And so, with the commitment to the decline, we think we start making those changes, along with taking over the in situ mine development.

So, important steps with Obuasi and again demonstrating our commitment to turn around all the assets within the portfolio.

In the Americas, it's been a tough quarter as well. And, whilst production was pretty steady, cash costs were up as we dropped grades in a couple of areas through some geotechnical issues in Cuiaba. We've seen inflation across a couple of the regions. So Ron Largent and the team have got some work to do to clean up those issues at Cuiaba in Brazil.

Cripple Creek will continue to improve as we improve access to the leach pads and the new ore being stacked. And I expect to see some improvements in the next couple of quarters and, certainly, establish Americas as a key contributor through that period.

In Australia, production was a little bit above targets. Cash operating costs had the benefit of a $30 million credit due to the receipt of insurance claims post the flooding early last year. So we're back on track. The guys are doing a good job. We're very excited in terms of the potential that they're uncovering with the new developments under the Sunrise Dam ore body in Vogue. And I'll talk a little bit more about that a little bit later.

And, with that, I'll hand across to Venkat to take you through our financial results and the balance sheet issues. And I'll pick up in terms of the summary after Venkat.

Good morning, ladies and gentlemen. I'd like to cover the following three areas in today's presentation -- third quarter 2012 financial results, cash flow and balance sheet, dividends and fourth quarter 2012 update.

Starting with the third quarter 2012 financial results, as you know from our release last month, third quarter delivered lower gold production of 1.030 million ounces compared to last quarter and unit cash costs of $866 an ounce. Gold production was down when you compare it to the previous quarter by 4%, mainly due to lower grades and limited mining flexibility at Obuasi, around 23,000 ounces, relatively higher grades mined at Geita in the second quarter, around 13,000 ounces, and lower grades and (inaudible) availability at Brasil Mineracao, around 8,000 ounces. And the production was also 4% below market guidance, primarily due to the strike impact in South Africa, lower production at Obuasi, and Brasil.

This resulted in AngloGold Ashanti posting adjusted headline earnings of $235 million, or $0.61 per share. This level of adjusted headline earnings was lower when compared to both the previous quarter and the third quarter of 2011.

When compared to the $253 million adjusted headline earnings recorded in the second quarter of 2012, the third quarter earnings were positively impacted by insurance recoveries of $21 million post-tax at Sunrise Dam, which compensated for the loss of the Boddington royalty, and a deferred tax credit of $58 million from the restructuring at Serra Grande in Brazil.

However, the 7% reduction in the third quarter earnings were due to the following principal reasons -- a 4% drop in production, increase in wages, winter power tariffs in South Africa region, and lower byproducts impacting unit cash costs all in line with the guidance we gave during the previous earnings call, higher exploration study costs, and finance charges.

Turning now to cash flow and balance sheet, the net debt increased during the quarter from $879 million to $1.57 billion due to higher capital expenditure levels of $545 million as compared to $451 million in the second quarter and $335 million paid in cash as purchase consideration for the acquisition of Mine Waste Solutions.

It should be noted that the third quarter 2012 net debt level is after meeting acquisition costs of around $555 million during the year relating to the acquisitions of both Serra Grande and Mine Waste Solutions. In other words, a third of our September 2012 net debt balance related to the two acquisitions, which are currently cash generative.

During the third quarter of 2012, cash flow metrics were as follows -- EBITDA $597 million, cash inflow from operating activities $304 million, and free cash outflow of $303 million due to higher capital expenditure and lower operating cash flow.

Turning now to dividends and the fourth quarter update, the Company remains committed to focusing on cash returns to shareholders whilst, as previously stated, considering cash flow, investment needs, and financial strength of the business in the context of delivering on its business plan and strategic growth objectives.

The unprotected strike action at the South African operations, which started late in the third quarter and continued through much of the fourth quarter to date, has had an adverse impact on the third quarter results and will significantly impact, as Mark outlined, the fourth quarter results.

Further, on October 17, following the downgrade of the South African sovereign ratings, Standard & Poor's announced that the Company is being placed on credit watch negative, along with other South-African-based corporates, which may result in the downgrading of the Company's credit rating to below investment grade.

On the basis of these developments and management's efforts to effect cuts in expenditures whilst retaining confidence in the long-term outlook, the board has reduced the third quarter dividend to ZAR0.50 per share. The dividend is expected to be at a similar level in the fourth quarter, assuming that the unprotected strike action speedily resolves, before moving back in line with long-term operating and financial performance in 2013.

Given the continued work stoppage at Mponeng mine and uncertainty around the timing of a resolution and, also, the consequent ramp up of production, AngloGold Ashanti believes it's prudent to withhold quarterly cost and production guidance for the fourth quarter at this time. Once a resolution is reached, normal work patterns have resumed, and there is greater visibility of future production, the Company will review this position.

As in prior quarters, the fourth quarter earnings will be distracted by yearend accounting adjustments such as reassessment of useful life of assets, reset of environmental and rehabilitation provisions, direct and indirect tax and inventory provisions. In addition, the fourth quarter 2012 will also include adverse impact of the South African strike and the cost of changeover of the Obuasi mining contract.

I will now hand you back to Mark Cutifani.

Ladies and gentlemen, the last four years, (technical difficulties) industry and performance improvement and, in particular, returns on capital employed and returns on equity and delivery on cash flow improvements across the operations. While we've had some challenges, we have moved quickly to adjust to protect the balance sheet and our strategic development projects.

So our modus operandi has not changed. Where we see issues, we act decisively. We act quickly to make sure that we address the issues in a timely way.

And so, as you would expect, after a tough quarter and, certainly, in the process of working through another tough quarter, we are taking the actions you'd expect us to take. We do expect to come out of this year stronger for what we've been through, and we do expect to come out strongly in the new year.

But, having said that, we still need to take the right actions to make sure we're managing all parts of the business. With that, we've undertaken a portfolio review in terms of where we are. And, in particular, we're focused on our discretionary expenditures. And so we have advised that we've cut our 2012 capital allocation by around $200 million so that we're around -- somewhere between $2 billion and $2.1 billion on a full year basis.

Secondly, in terms of capital projects, we have advised that -- and the good news here is we've actually identified three new ore bodies, one of them quite high grade, around 8 grams, that will potentially change the scope of the Mongbwalu development. So our intention is to slow the development up and, given we have started construction, to slow some of those construction expenditures up to give us time to actually scope out the variations that the new exploration information has delivered to us and, at the same time, preserve some capital through the next 12 months as we start moving the two major projects into commissioning.

We've also -- we are also in the process of taking a hard look at the Sadiola Deeps project. And, whilst we expect one more step in delivering government approvals and we do expect that in the next couple of weeks, we're going to look at the capital allocations and whether it's prudent to wait a little bit longer before we actually commit to the project, given the current circumstance.

And, in South Africa, both at Moab and at Mponeng, given that we've just come out of the strike situation, we're reviewing all our face areas. We will look to probably slow some development in those areas and, in particular, at (inaudible), where Mike and the team have identified an additional ore body that could be factored into the mix that will also provide us with the opportunity to adjust the development schedules to preserve some cash in the short term.

So that's the second set of key steps.

Third, in South Africa, we'll continue to review the production base, focusing on those low-margin, high-cost areas to continue to keep our focus on the quality production so that we preserve our margins and continue to deliver good returns.

As well as that, we're looking to accelerate the technology work. We've had some great successes with the new technology applications that we're developing. Where it took us 24 days to drill a hole, we've now got that down to 7 days. And the team is targeting in the next six months getting it down to 3 days. And, if that is delivered over the next six months, then Mike and the team will have an operating unit in place, operating, delivering gold by the end of next year with a ramp-up schedule being developed to go into 2014 and 2015. And we're very excited in terms of what that potential will bring.

Now, consistent with that approach, we have to review all other parts of the South African business. And what we'll do is we'll advise on the outcomes of that review early next quarter in terms of what impacts that will have in terms of the way we go forward in South Africa.

But, overall, still very strong operation. Lots of opportunities to do better than we're doing. We're bringing all those pieces together as part of our review over the next couple of months.

At the corporate level, with the regionalization of the business, the big operating improvements we've delivered, a lot more potential to be had. We are also seeing some duplication in the area of corporate costs across the global organization. We see an opportunity to take about $50 million out of those costs across the business. We have Deloitte doing some work for us at the moment. The outcome of those studies will be completed in January, and so we'll be updating you in February on what we're trying to do in trying to streamline and reduce our corporate costs.

And, as important as any one of those -- in fact, more important in the short term, our Tropicana [project] in Australia is tracking a couple months ahead of schedule, on budget. Very pleased with the progress they're making.

In Kibali, the project is on schedule. And, whilst we've seen commentary around some cost pressures, don't forget that we included some extra contingency, and we also provided for escalation. So we still think the project is tracking well within our budget limits. And so we're very happy with the progress. And, certainly, from a cost point of view, we don't think there have been any real surprises in the execution of the project. So we're doing well there.

Cripple Creek, on track, on budget.

CVSA underground -- that is Argentina -- is going well. More developments. High-grade chutes being hit. Very pleased with the development there. And that will help improve their cost structures over the next two quarters.

Sunrise Dam underground development continuing increased exploration hits. We'll talk about that a little bit later.

And Colombia, with Charles' work and the team on Gramalote, La Colosa, Quebradona, and those other new targets -- very pleased with that progress.

So, it is about managing cash, managing the balance sheet, making sure that we demonstrate to the market that we are investment grade in all respects. And, as a management team, very focused on making sure we send all the right messages to all of our stakeholders in terms of running the business and making sure that we preserve our position as the best delivery in terms of capital returns across the industry. And that won't change, given where we are and where we're going to go as a team.

Now, in going through where we are on the key projects, you'll see there a note on Tropicana. Again, progress is going very well. Major structures in place. I think we're about 64% through the project. We're one of the few companies on a global basis that has been able to manage the projects within budget, within cost, and on schedule, and we're very proud of that achievement. Tropicana's been a great job. And, with the visit that we had from a number of people over the last three months, I think people are quite surprised and quite impressed with how substantive the project is.

In the DRC at Kibali, we believe Randgold with Mark Bristow at the helm is doing a great job. Very pleased to be involved. It's a great partnership. And, when we have a debate on what should and shouldn't be, it's always constructive. And, in our view, we always come up with the right outcome on the basis that it's a good relationship. It's a good partnership. Very pleased with the progress they're making. And, as I said, whilst we're hearing a little noise about costs, it's certainly well within our provisions and the budget provisions that we made, so we're very happy with the progress and, again, expect that to be a good outcome for both companies.

In the Americas, CC&V moving very quickly on key elements to get the foundations right for the expansion. Ron and the guys have done a great job. They're getting their approvals through. And so we're very optimistic that that project will be another that comes forward on time and on budget.

If you look at exploration, it's been another good quarter. And, quite frankly, I could have given you another four or five pages in terms of good results.

At Geita, 16 meters, 8 grams. Continues to confirm the underground development potential in Geita, and we're pushing the guys to think about a new underground development to supplement the operations in the next two or three years. And, certainly, that will be important to extend the life and the quality of the production beyond the seven years' life that we have there at the moment per the open cut.

At Kibali, it doesn't matter where you go we seem to hit more gold, 35 meters at almost 4 grams, relatively shallow, at 231 meters, confirming the potential we've seen and confirming why we actually took the position with Randgold in the first place.

At Sunrise Dam, 77 meters at 3.5 grams; again, continuing to confirm continuity at depth. This time five years ago when I first joined the Company, we actually said Sunrise Dam might have five years. Well, today, Sunrise Dam looks like it's got 15 years with these new developments. So that's been a great outcome for the Company.

La Colosa, [a director's special], 310 meters at around 2 grams from 20 meters depth. That's right -- 20 meters. So very exciting. We're at about 25 million ounces. I'm hoping that we end up up near 30 million ounces by yearend in terms of resources. And, certainly, from our perspective, we see this being a 40-million-ounce resource.

Again, Tropicana confirming underground potential. We are likely to look at developing an underground (inaudible) within three to five years to both complement, continue access to high-grade zones, so that, once we've run through the higher, more shallow, high-grade zones in the pit for the first three years, we can complement that production with the underground to hold our production levels in the range 400,000 to 500,000 ounces.

So, again, a pretty strong quarter on the exploration front. It continues to confirm the quality of work that's being done on that front and certainly confirms the number-one ranking that our exploration team has, both across the gold industry and, arguably, across the mining industry in total.

Ladies and gentlemen, as we look to just wrap up the conversation, I take you to slide 29, where we talk about our value proposition. In 2007, we talked about the model for the industry being bright, and we talked about the need to deliver real returns in terms of businesses so that we have a sustainable business. Our target has been to deliver a 15% return through the cycle. We've delivered that in the last three years.

We certainly have had a much tougher quarter and a second -- and quarter to come, but, even with that, we'll still post a positive return or a pretty solid return for the year. I expect 2013 to be a much better year and that we should be able to preserve our position as the leading gold mining company in terms of delivery on capital returns for the industry. And, with our growth projects, we should continue to be able to grow the portfolio, consistent with creating value for the industry.

And, whilst we're looking at a few of those projects in terms of timing, overall, the underlying strategy is the same. And we may, as I said in February, talk to the timing on the delivery of the overall targets. We'll certainly see good growth coming into 2014 and beyond.

Finally, in thinking about the things that we need to do well in 2013 to pick that momentum up and turn that 20% performance around against our peers in terms of share price, we see five areas of strategic focus that will make a difference and shift our rankings, we believe, in terms of the market.

Firstly, delivery of the anchor growth projects. Tropicana, Kibali, Cripple Creek, all on budget, all on time. We're progressing better than 60% through the first two. And, certainly, the start we've had at Cripple Creek, and given that we've delivered the last two projects ahead of schedule, we certainly expect that to continue. And that, in and of itself, is a remarkable set of milestones compared to what's happening in the rest of the industry.

Secondly, course correction in our South African operations. The focus is on improving our productivities over the next 12 months by 15%, make sure we focus on quality, high-margin ounces -- so it's all that quality, not quantity, in terms of returns -- and fast track that technology change, which really has the potential to step change the business over the next three to five years. And Mike and the team have got the bit between their teeth, and we certainly expect to see real development in the next 12 months, starting to hit the numbers in a material way in 2014 but, in particular, in 2015.

On Obuasi, we've taken the tough call. We've removed the contractor post 85 years. And, whilst that is a tough call, it was the right call. As we said before, when you look at the major turnarounds, we've delivered right across the portfolio, Obuasi, whilst we've made improvements, hasn't delivered to its potential. Our eyes are firmly fixed on getting it to deliver. And we've made the hard calls. And you'll see that development strategy unfold through the course of 2013 so that we're delivering that 500,000-ounce target by 2015.

In Colombia, with Charles' dedicated in terms of the role in Colombia working with Ron and Tony and the rest of the team, Gramalote, La Colosa, Quebradona, game-changing projects for us as a business. And, certainly, we're putting the resources in place to deliver and keep driving through the projects in Colombia.

Finally, we will maintain our focus on capital returns. We'll protect the balance sheet flexibility and its efficiency. And, from our point of view, it's a great time to get into the detail of costs and make sure that we strip out duplication and waste through the business and continue to improve our performance right across the portfolio.

We will continue to make the right steps going forward. We will take the hard decisions that we've demonstrated over the last five years. And, from our point of view, we'll come out of these two tough quarters much stronger, much better for the experience, and we'll make 2013 a very strong one for the Company and for the business as we go forward.

Ladies and gentlemen, with that, we'd be more than happy to take questions.

(Operator Instructions). Harry Mateer, Barclays.

Two questions for me, the first of which -- the S&P review seems driven mainly by macro concerns in South Africa rather than the Company-specific factors. So I'm just wondering, other than cutting the dividend, in your conversations with the agency, is there anything else that they are saying you could possibly do to salvage investment grade? That's first.

And then, second, I know it's still early days, and you indicated we'll get more information on this in a few months. But, as you noted, these actions have to make one rethink how you operate inside Africa. So I'm just curious how you think about the Company's geographic structure. Is it possible to accelerate a shift in the portfolio to regions outside of South Africa?

Let me pick up the South African question first. Then I'll hand across to Venkat on the investment-grade conversation.

Firstly, on South Africa, Harry, look, we've had two strikes in 25 years in South Africa. So the one thing I do want to say is that we shouldn't overreact to a strike in South Africa. I think the Marikana issue -- I think they're two separate issues. And that's something that we as a country have to deal with in a different way.

In terms of the operations, we've got to do a lot more work with our people. And, from our point of view, we think we've learned a number of lessons from this, and we'll go forward and, in particular, need to adjust a couple of things operationally.

We are looking at the operation. We're continuing to improve our margins. And, with the technology stuff that we're working on, we still see significant potential. And, if you look at our South African business, we've got two tier-one assets, long-term, 500,000-ounce producers, 30-year life, with a 30% to 50% margin, inclusive of capital. So they are great assets. We've delivered a better than 25% return, on average, over the last four years. And so we're not going to overreact on the negative side, but we're also not going to under react. We're going to make sure we do the re-engineering work to keep them as a very contributor in the portfolio.

In terms of the portfolio conversation, that won't change our view. We certainly will continue to consider options but, certainly, nothing radical as a consequence of the last few weeks. As I said, unfortunately, in our industry, these things happen from time to time. We've just got to make sure we learn and do a better job with it.

On investment grade, one thing I'll say is we will do what's required to protect our position. And I'm saying that as the CEO. We've got a number of initiatives that we haven't included in our discussion today.

And, with that, I'll hand across to Venkat. But you need to know the management team here has done more in terms of turnarounds and delivery across this industry in the last five years, and we're certainly focused on make sure we maintain our investment grade. And we'll do everything we need to do to keep it there.

You're absolutely right that the downgrade really is driven by macro factors. Typically, S&P's rating methodology looks at three factors. They look at the business risk profile first. They then interpose it with the financial risk profile and then check the adequacy of liquidity.

On the liquidity front, we've got enough liquidity under our undrawn, revolving credit facility, $1 billion, and in terms of the Australian dollar revolving credit facility, as well, plus cash on hand. So, in terms of liquidity, nothing to -- there is certainly not really an issue.

Where the big changes come about is they have changed our business risk profile, primarily driven by South Africa, from satisfactory to fair. And that, when you interpose it with an intermediate financial risk profile, gives you a sub-investment-grade rating.

So what we've been working is a two-pronged approach to see whether they would shift based on the events which we have seen; certainly, improvement in the strike position, even in terms of our mines and across the mining industry. And, certainly, their decision to downgrade South Africa came before the finance minister's midterm budget speech with what he said in the budget speech would look at them to reconsider their view. So we are looking at it on a broader basis to change their views on South Africa Inc.

And, certainly, as Mark mentioned, a number of initiatives are underway to try and improve the financial risk profile with a view to retaining the investment-grade rating across capital expenditure, operating costs, exploration and evaluation costs, whilst, at the same time, taking care that we are not blowing up the long-term future and viability of the business with a view to trying to secure short-term gains.

Put it this way. If, despite all of this, we face a downgrade by S&P, it wouldn't be because the management team and the board -- for lack of trying. We are going to give this our best shot.

Okay. Thank you.

(Operator Instructions). Joung Park, Morningstar.

The first question I had was -- I think -- what's the magnitude of the CapEx work that you guys might need to do to restore the South African mines to normal safety and working standards, given that many of them have been sitting idle for several weeks?

The capital work -- we don't need significant capital work. In fact, we actually need less capital at the moment because there's lower production.

What we need to do -- what we do is we open each working face, check the support, and then start the blasting processes. But we do it on a very careful, much slower basis. So, in actual fact, the issue is we just take time to get each face moving. And what we generally see is we're able to do two or three blasts. The area that is impacted is probably about 5 to 10 meters in from where the faces are now. We make sure we navigate those areas. So it's a four- to six-week process of gradually building up our production.

Now, what we want to do is try and build that and secure our working faces for Christmas so that, when we come back after the Christmas break, we get a reasonable start to the new year and we get the business up and running as per our normal startups through January.

Mike, do you want to add anything to that at all?

We're running six of the seven operations virtually normally at the moment, given that we've lost about 5% of the face link that we had pre the strike action. At none of our operations have we found that we've had significant infrastructure damage other than the faces. So we don't see any need to talk about CapEx or additional CapEx requirements. Really, it's just the bolt-up work as a result of the ground sagging due to the fact that it's been left for such a long time.

And the 250,000 ounces that we've talked about impacting the fourth quarter takes into account a very steady, careful, and safe production ramp-up in the South African operations.

Okay. That's good to hear. Thanks so much.

Tanya Jakusconek, Scotiabank.

Just a few questions and, maybe, for Mark so that I understand this correctly. Just in South Africa, can we assume that none of the reserves have been sterilized at this point with your strike?

Tanya, effectively, it would be a small amount impacted. What Mike's saying is 5% of the open faces at the moment have been impacted. So what we'll do is we take a step back around those areas and recommence production. So there'll be a minor resource adjustment -- reserve adjustment, not that you would see as being material on a year-to-year basis. So nothing major, Tanya.

Okay. And then, again, from understanding from the previous questions, we're ramping up, and, really, it's January 1, 2013 that we're going to go back to a more normalized state out of the South African operations.

Yes. I think we will progressively improve through the balance of this quarter. And then we'll make sure we're set so that we can push the button in 2013 and get a good start. And we've taken that into account in our estimate of the 250,000 ounces for this quarter, Tanya, so we've taken all of those issues into account to try and give you the best sense of what we expect.

And just maybe moving on to other areas of the world, just the one in Brazil. Maybe, Mark, on the power cost savings that you could potentially see with the Brazilian government now looking to lower power rates there, do you have any idea of what that would do to your operations there?

Tanya, costs in Brazil are a bit high this quarter. We had some dilution issues in Cuiaba. CDS was a little bit slower. So we had a couple of factors there. But power is generally in the range 15% to 20% of our costs. So anything we see as an improvement will improve against that relative cost input. Okay?

Okay. That relative -- fair enough. Yes. Perfect.

And then, just maybe coming back to your capital projects that are under review, and you mentioned Mongbwalu, Sadiola Deeps, and, obviously, your South African operations. Are you implying that these do -- at this point are very close to your cost of capital, and you're looking at whether you go ahead? Or is it just because of what's happened in South Africa you're -- and having to cut the dividend and looking at the balance sheet, that you're just deferring them at this point? It's nothing to do with -- ?

No. It's not -- in fact, all four projects have got very healthy returns, and I can almost quote those numbers off my head -- 24%s, 23%s, 19%. And Mongbwalu I said at the time was around 15%. But if I include stage two, it jumps up to 26%. So they're all very strong, robust, healthy projects.

But, Tanya, we've got Tropicana, Kibali, CC&V, Argentina. It's about preserving the balance sheet and making sure that we keep ourselves flexible. Given that South Africa's taken a knock and that we've taken a knock with them, we want to make sure that we give the rating agencies every reason not to touch our investment grade. So it's about being prudent and to make sure we manage the issues.

And I guess, if I could say it this way, one should never waste a good crisis in terms of getting into your cost structures, and that's what we're working on at the moment as well. And, as a management team, we pride ourselves in being ahead of the curve in taking the right steps to preserve the business and make sure we continue to deliver leading industry returns.

Okay. And then maybe one for Venkat. You mentioned that, in Q4, there's going to be quite a lot of noise coming through the earnings. And I think you mentioned that, obviously, some sort of a charge for this South African labor issue. So is it a one-time item that you will be putting through?

Yes. In fact, we are actually looking at the accounting first because the strike has been quite an abnormal event. And whether we actually put it into cash costs or we disclose the impact of the strike separately is something we are looking at. So it's effectively the loss of production and during the period in which we're incurring some of the fixed costs. That's really what we are talking about and the cost of producing the gold, which is likely to be higher during the ramp-up period until normality resumes.

Okay. And I guess you wouldn't get anything from an insurance policy standpoint?

No. The only thing that the insurance policy would cover would be any material damage, which is very minimal, given that we have not had violence at our mine site.

Tanya, the good news is that we've been able to keep violence and intimidation to a minimum. That's the positive thing for us. And the relationship with the six of the operations that have started is actually pretty good. So we've kept a good relationship. That's why we're hopeful that the ramp-up goes through quite smoothly. So that's where we are.

Okay. Well, best of luck. We're always interested in what you guys are doing. Thank you.

(Operator Instructions). John Bridges, JPMorgan.

Talking about recovering those [long walls] reminds me of the happy days along, [north-siding] back into production many, many years ago.

I just wondered. With Serra Grande, you've got control of that now. What are your plans with that asset?

John, firstly, we're very pleased with what we've picked up. And you would have noted that Venkat and the team have done a great job in getting us a tax credit that's made a big difference to the acquisition price. So, for us, again, another good acquisition in our view. We think there's lots of exploration potential.

The first step is to roll out the production or extend the life of mine beyond ten years. And, if, through the exploration work, we're able to add some ounces, then we will think it may be incrementally ticking it up. But that's going to take about 18 months for us to determined based on the exploration work we've done. And we've put a little bit of that expenditure back, so we might add another 6 to 12 months on that. But we're very pleased with what we've got. We want to consolidate at around 140,000 or 150,000 ounces. And it does have some upside potential that we'll chase out through the exploration work. But, so far, so good.

And our business improvement work has been going very well at Serra Grande. So we've seen about a 10% cost reduction in the last 18 months. And I still think they've got a lot of room to move that should improve the contribution to the asset mix.

Yes. It's a nice, little asset. It would be nice if you could do as well there as [LCO] has done down in (technical difficulties).

Anyway, keep on. Good work, guys. It's a great story. Congratulations.

[Mark Lawrence], T. Rowe Price.

Just two questions. First of all, did you make any comments about 2014 guidance this morning? There's been various research written. So, if you have, could you just sort of articulate what you're currently thinking? I guess it's the capital projects under review.

I'm sorry, Mark. We missed that first point.

2014 production guidance. Have you said anything in the earlier meetings regarding that in questions from the sell side? If so, what were you actually saying?

Mark, we've not said anything about the target, but we did answer some questions on the assets. What we were asked about -- we said the three areas that are being reviewed, being, firstly, Sadiola Deeps -- now, the Sadiola operations makes about a 200,000-ounce contribution to the target in 2014. So don't forget it's already a year behind the original schedule because of the coup in Mali. And what we said is we wanted to make sure that we were happy with the conditions that the government had originally agreed. So that was one potential impact.

Two, Mongbwalu makes about a 120,000-ounce contribution, and we've said that, if we end up adjusting the scope, then that may impact in terms of timing in [2004]. And, obviously, anything we do on South Africa with respect to size and scale and, if we decide to pull the production down a bit quicker with a view to improving returns, that may also have an impact. But we would outline -- and they're the three areas that have the potential to impact those numbers. But we said we would do -- whatever we would do would be on the basis of making the right decisions from a financial perspective. And we'll outline those implications from the work we do over the next couple of months at the next quarterly review.

Very clear. A second question. As we go through the eye of the storm in South African trade relations and these problems you've had, do you think the -- ? Obviously, you have a slide about putting quality ahead of quantity. Has the SA depletion curve changed at all? There was always -- it was always depleting. Are you beginning to think now we can accelerate this? Or you're saying to us -- no, we're just delaying it, reviewing it. The IRRs that you quoted earlier would suggest that you're still as happy to invest in the mid 20%s gross margin SA business reasonably (inaudible) 30%-plus gross margin business elsewhere in the Group.

Mark, it's a good question. If I could outline what I've seen so far, and Mike and the guys are working through this in a very detailed way -- in my view, the key returns driven out of South Africa are carried by about 80% of the production ounces. The balance of those ounces, I think, are very marginal.

And, in fact, the question that I've put to the team is -- if those ounces are marginal, how much of your time is being diverted to managing those tougher areas of the business? What if -- ? If we were a bit more aggressive in pulling those ounces back and got to the longer-term profile of the million ounces, is there potential to do, actually, better on an earnings basis through the Group?

And, if we looked at punching harder on the technology work and transitioned quicker and put the horizontal [raised] bores in high-grade, remnant pillars that we walked away from in (inaudible) and places like that, is there a potential to actually improve our earnings on a relative basis? And they are two of the questions, amongst others, that the team's working on right now.

So what's driving us in our conversations is improving the EBITDA, improving returns, and not necessarily being locked in on a quantity number that may in fact be losing value or destroying value in the business. That's what the team is working on now.

We expect it to be at around 1 million ounces within a three- to five-year timeframe. We might get there a little bit quicker. So, in terms of reserve, it's at the edges. But, in terms of focus and margins, I think it's an important question that Mike and the team are working through. They're probably about 80% of the way through that because we've been working on this over the last five or six months. So we're not far away from coming up with a view.

But I'll tell you one thing. Both of those assets, tier-one assets, will demonstrate that, I think, in the next year or two, and certainly the margins and returns. If we add that technology stuff that has the potential to be contributing, certainly, more than 10% of the production by 2015 and 20% by 2016, then we've really got something special, I think, in South Africa. And that's the nature of the work we're doing.

Okay. Very clear. Thank you.

Allan Cooke, JPMorgan.

I missed a question. I meant to ask of you this morning at the result presentation, just one. If you were offered the CEO position at Anglo American, would you consider that post, please?

Allan, do you really expect me to answer that question?

I think it's an important one.

Allan, I'm happy in the role that I have here. We'll leave it at that.

Tanya Jakusconek.

I forgot to ask about Obuasi. Sorry about that. Just coming back to Obuasi, and I know you've changed to owner development from November 9 onward, and, I mean, we can all appreciate how difficult it is, underground mining. Can you just give us an update on what exactly, with your own employees, maybe the training programs and the goals that you have for the advancement and how we're going to achieve that with some of the programs you have in place?

Tanya, some people are aware, but we haven't talked about it extensively. And it's a good question. When we did the big work, the big changes, in Geita and some of these other operations -- and continental Africa has gone from $200 million EBITDA to $1.1 billion. The change that we did at Geita, the big improvements we've seen in Siguiri, the improvements in Sadiola, the improvements we've seen in Iduapriem -- we were implementing our Project ONE changes. Obuasi was the last operation that we've gone to, and we've improved a number of parts -- a number of areas of the business. We've taken out and improved the environmental work done, a lot of legacy work.

But we haven't been able to drive those improvements through development because the leadership and the supervision of the development contractor have simply not understood and been able to implement the changes we wanted to implement. And so we've been doing about 1,300 meters a month. And the issue is the ability to run the businesses we wanted run.

And so we've said no more through a third party. We'll pick up the operations. We'll put the team in place. Now, we've already employed half of the operators that we wanted to employ through the termination or through the change process. So we've got the best operators. We've got 45 pieces of new equipment that hasn't been going underground because we weren't happy with their performance. We'll immediately start moving the new gear underground that's already been paid for and is part of the transition approach.

So, from our point of view, we think we can take 1,300 meters and be doing something like 1,700 to 1,800 meters development by this time next year, which, for us, implies a 20% to 30% improvement in the working faces that we create, which you need to deliver the ounces that we're targeting from the operation.

Now, the problem is it's an 85-year relationship. Many different shareholders and stakeholders through the country. It's taken us 12 months longer than we would have liked to establish it.

But the good news is we've done it. We've managed every stakeholder in the process. It's been a constructive conversation. We've kept every employee. And, in fact, we've done better this month in development to what we've done all year, and I think that's a testament to the planning and the execution process that the guys have followed through the process.

So we expect to see an improvement. I won't say significant improvement yet because I think it's too early to call. But, certainly, with the way it's gone in the last four weeks post the announcement, we're very encouraged seeing what we're seeing, and I certainly expect to see us start strengthening the performance in Q1 2013.

Okay. Great. Thank you.

Gentlemen, we have no further questions if you would like to make final statements.

Yes, Chris. Thanks very much, ladies and gentlemen.

Again, I think the key point to make here is that, as a leadership team and as an organization, we take pride in making sure that we remain ahead of the curve. We take the actions when they need to be taken. We are focused on the quality of the business and the returns we deliver; so, again, reinforcing our intention and confirming that we're already in action on the key things you'd expect to be in action on. And Venkat, myself, and the rest of the team will keep you posted over the next couple of months and certainly look forward to give you a much broader view of the strategic approach in the business as we come into the first quarter next year.

So thank you very much.

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