Anglogold Ashanti PLC (AU) 2014 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the AngloGold Ashanti results. (Operator Instructions).

I would now like to hand the conference over to Stewart Bailey. Please go ahead, sir.

Thanks, Dylan, and welcome, everybody, to our results for the three months to June 30, our second-quarter results for this year. As is customary, we're going to work quickly through the Safe Harbor statement, and then we'll go into the results.

Certain statements contained in this document, other than statements of historic fact, including without limitation those concerning the economic outlook for the gold mining industry, expectations regarding gold prices, production, cash costs, all-in sustaining costs, cost savings and other operating results, return on equity, productivity improvements, growth prospects and outlook for our operations individually or in the aggregate, including the achievement of project milestones, commencement and completion of commercial operations of certain of AngloGold Ashanti's exploration and production projects and the completion of acquisitions and dispositions, our liquidity and capital resources and capital expenditures, and the outcome and consequences of any potential or pending litigation or regulatory proceedings or environmental, health or safety issues are forward-looking statements regarding our operations, economic performance and financial condition.

Forward-looking statements or forecasts involve known and unknown risks, uncertainty and other factors that may cause our actual results, performance or achievements to differ materially from the anticipated results, performance, and achievements expressed or implied in these forward-looking statements. 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 and political and market conditions, success of business and operating initiatives, changes in the regulatory environment and other actions, including environmental approval, fluctuations in gold price and exchange rates, the outcome of pending or future litigation proceedings and business and operational risk management.

For a discussion of such risk factors, refer to our annual reports on Form 20-F for the year ended December 31, 2013, filed with the US SEC on April 14 of this year. These factors are not necessarily all of the important factors that could cause our 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, you are cautioned not to place undue reliance on forward-looking statements. We undertake no obligations to update specifically or release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof 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 our behalf are qualified by the cautionary statements herein.

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As usual, we'll be starting off with some introductory comments today from Venkat. We will then move on to Mike O'Hare, who will discuss the South African operations, as well as our recovery efforts from the earthquake here last week. Ron Largent will then talk us through the international operations, Graham Ehm through projects and exploration, and then Venkat will provide some concluding remarks.

Over to you, Venkat.

Thank you, Stewart. Good morning, ladies and gentlemen. In the international, I'll pick up slides number 5 through 8 for those of you who have got the presentation open before you.

Starting off with slide number 5, if you can recap on our strategy that we've been articulating each quarter, the five building blocks to get us to sustainable cash flow improvement and return, the first pillar being the foundation of the business, which is around safety, people and sustainability.

The second pillar is proactively ensuring that we maintain our financial flexibility. The third pillar, around optimizing cost, overheads and capital. The fourth, improving our portfolio quality and making assets work harder. And the last pillar, keeping in mind that we are in a long-term business, and therefore keeping our long-term optionality both affordable and intact.

The end result is a solid business with strong foundation and fundamentals, a team that is focused on delivery and commitment and generation of sustainable free cash flow from a diversified, quality portfolio.

If I can then focus on slide number 6, it's around safety. Safety is an area we have worked very hard over the years, and we go back to 2007, where we made some step changes in safety across our mines, as we strive to get to zero harm.

Our approach, as outlined in the previous presentation, includes: a relentless and steadfast leadership commitment at all levels; improving systems and processes and bringing in behavioral change so that everyone looks out for another to ensure safety is paramount; the use of technology to remove people from harm; and understanding and management of major hazards, fully recognizing that we cannot afford to be complacent in respect toward the improvements we have seen over the last several years.

We are pleased to report that we have had the first fatality-free quarter in four years. This is the first time in AngloGold Ashanti's history and the first time since 2010.

We've had our best-ever second quarter all injury frequency rate performance on record at 6.79 per million man hours worked and the second best overall. And whilst recognizing that one fatality is one fatality too many, we have pulled down the number of fatalities from nine for the same period in 2012 to five in 2013 to three in the first half of 2014.

Another point to bear in mind is that none of the fatalities in the six months, sorry, in the first quarter of this year happened at the production faces. They were isolated to certain maintenance areas and isolated to projects. So it's an area where we will need to undoubtedly do better.

We have had 26% fewer injuries during the quarter and fewer lost days worked. And in addition to that, a number of operations have actually beaten their own previous best records across the Group.

The notable star performer here has been South Africa, which posted a record safety performance. And across the Group, if you look at it, in the last four quarters, we recorded three of our best for any non-strike-impacted quarter in terms of our all-injury frequency rates, which were third quarter of 2013, fourth quarter of 2013 and the second quarter of 2014.

Importantly, we have just broken the longest period without a single fatality in any one of our mines, and we are currently running at 144 days. Long may this continue.

Having said all of this, we are seeing high-potential incidents, and we are using the learning from those high-potential incidents on what happened and what went right to prevent it from becoming a fatality and learning from both of these instances. However, as Tuesday, August 5, 2014, very humbly reminded us that we can never afford to be complacent.

That was when our South African operations were struck by an earthquake of magnitude 5.3, and the South African team, led by Mike O'Hare, did an excellent job in evacuating every one of our 3,300 colleagues safely to the surface by around 7:30 p.m. on that day.

Looking at the quarter's results, on to page 7, another solid quarter's operating performance across the mines in all regions. Production was up to 1.098m ounces. It was up 17% year on year and 4% on prior quarters. Certainly, Kibali and Tropicana contributed; their-ramp up contributed to the higher ounces. But even if you strip that out, the residual mines actually provided an increase of about 3% in their gold produced.

Total cash costs at $836 an ounce was at the lower end of market guidance, 7% lower year on year. Our all-in sustaining cost at $1,060 an ounce and all-in cost at $1,192 an ounce represented a decrease of 19% and 29% year on year.

As Richard will cover in his presentation, net debt was reduced further from the sale proceeds of Navachab and net debt to adjusted EBITDA improved to 1.73 times. And Richard will cover our refinancing, which happened in our banking facilities during the quarter.

This quarter has had a lot of noise in terms of earnings. On a normalized basis, earnings were $76m on the back of strong production, despite the lower gold price, inflationary increases which you see year on year and winter power tariffs.

As Randgold outlined in their conference call, Kibali has had a challenging quarter. The good news is that it has shown very good signs of improvement in the last three, 3.5 weeks, but the impact of Kibali's production on AngloGold Ashanti's earnings was around roughly $20m on earnings and $17 an ounce on costs. So there was potential to have beaten our existing performance.

Looking long term and looking at what we can do to change the shift on cost, our Australian operations have signed up a natural gas line pipeline project, which will reduce our costs from 2016 by AUD25 to AUD30 an ounce and opens up potential upside at these operations.

And Richard will provide you our guidance for the full year, guiding the issue that happened in terms of South Africa, for which we have modified our third-quarter guidance. We are still holding our full-year production target intact and the cost target at the original currency assumptions that were given back in February.

Turning over to slide number 8, that's a table which compares our performance across most metrics for the same quarter last year i.e., second-quarter 2013 to second-quarter 2014 and it compares it on a half year for 2013 versus 2014. And this table says what we have been able to implement; we would have normally taken 1,000 words to write.

Gold price, as you can see, has fallen sharply over the period, and we have had to pull every lever within our control to plug the gap and reverse the underperformance, because a 1% drop in gold price doesn't necessarily translate to a 1% drop in earnings. It flows through right to the bottom line sale for tax, so we have to pedal harder to keep the margins moving.

Gold production was up 17%, whichever period you compare. Total cash costs were down 7% to 10%. In saying that, we are recognizing and we are seeing inflationary pressures starting to come through, and in some instances, currency is also starting to strengthen, so the operations are working harder to keep their cost base on a tight leash.

Turning to our indirect costs, corporate and marketing costs and exploration and evaluation costs have come down by between 60% to 65% and 58% to 61%, respectively, over the period. Our capital expenditure is down 45%, largely due to the project capital expenditure paying off and also some reductions which we have been able to implement in some of the other areas of capital expenditure.

All of these translates to a drop in all-in sustaining costs by 20% and all-in costs by 30%. So what we are seeing as a result of it is a sharp improvement in terms of cash flow, whether you look at cash inflow from operating activities or whether you look at EBITDA. But importantly, a cash burn rate of $488m in the second quarter of 2013 and $727m in the first half of 2013 now translates to positive cash flows in respect of those two quarters.

As Richard had flagged in the previous quarters' presentations, there are some timing differences and benefits which we get in the first part of the year, so these will start to unwind during the latter part of the year. But certainly, the cash targets which we have been able to meet against the backdrop of challenging gold price environment has been quite comforting, but we recognize, we need to continue to do more.

With those introductory comments, I will now hand you over to Mike O'Hare to walk you through the South African operations.

Thank you, Venkat. I'm going to talk to production first, production and cost, and then I'm going to go drive on to safety and then talk a little bit about the earthquake.

Our underground operations improved their production volumes quarter on quarter by 25%, and that resulted in a 15% increase in the underground gold production. This we expected primarily as a result of the increased shifts that we worked quarter on quarter, given that we had the Christmas and New Year stoppages in Q1.

We also had less safety stoppages during the quarter, due to the good safety performance. This improvement in production offset an underground grade decrease of 8%.

Production at Moab Khotsong continued to perform well, despite a grade decrease of 12%, and we expect the grade to fluctuate around this kind of mark. Previous quarter, we had quite a high grade. I think this grade for this quarter's come back down to the normal level that we could expect through the rest of the year.

The work around the integration of Moab and the Great Noligwa mine continues, and that is on schedule. We now are able to put all of the people underground for Great Noligwa mine at Moab Khotsong, and by the middle of next year, we should be able to service all of their hoisting needs from Moab, as well. And this certainly will allow us to continue to have a decent margin at Great Noligwa.

I guess the disappointment for the quarter remains mine waste dilution, where our grade and our recovery percentages continue to underperform. The uranium circuit was reconfigured during the quarter, and we should start to see uranium production towards the end of this quarter and into Q4. We know that this will improve the recovery of the gold circuit.

If I move on to slide 11, there are many achievements across the region over the last 14 months, but I think the one that stands out for me is that we have had no fall of ground fatalities for the previous 14 months. The elements that have gone into achieving these milestones remain primarily leadership.

If the leadership believes that we can get to zero harm, the journey is to remove the fatalities. The example set by Venkat is certainly impressive and helps us as a region do the work that we need to do, which has been around technology, and this is not the longer-term technology I'm going to talk to you a little bit later. This is about technology that removes people from the risk: better support systems, locomotives that can detect where other locomotives are in order to prevent collisions, tracking of people underground to prevent people from getting lost or us being able to find them in time. Our systems, our BPF systems, which we've continued to implement, and our critical control monitoring systems I think certainly have improved quarter on quarter.

And over a number of years now, our systems are far better than they used to be. People eventually will determine whether you have accidents or not, and our work around engaging our people on the safety and health front, together with motivations via bonus schemes and safety incentives are important for us to achieve these kinds of results.

I think it's significant -- and I'm on slide 12 now -- that the day last week we were presenting to the Subcommittee of the Board on Safety and Health, we had the earthquake in the Vaal River region, which gave us all an enormous fright. And I think the fright we got is nothing compared to what was experienced by our 3,300 colleagues who were underground.

Nevertheless, our safety protocols kicked in, and we very shortly had the electricity supply reestablished and were able to examine our major shaft infrastructure. We were also able to receive calls from our people underground to ensure that nobody was injured or there was nobody trapped.

And we were able to hoist people, and by 7 o'clock that night, we had all of our mines cleared.

The effect of the damage has been assessed over the previous week, and we've ascertained that our shaft, our major shaft infrastructure, is intact, and that is quite a feat, given the size of the event and the length of the shaft that we're talking about. Moab Khotsong, for instance, is the single-deepest shaft in the world, at just under 3 kilometers in a single lift.

In the infrastructure, and I'm now on slide 14, the infrastructure that leads from the shaft to the working places has now also been examined in the last few days and found to be intact. And as we speak, crews are examining the working places themselves in order to assess any damages that we have at the actual working sites.

The reason we've remained -- we've only started going back into the working places so recently is that, together with our seismologists and an international team of seismologists, we have been following the seismic decay curves, which really tell us that this earthquake event has now stopped giving the aftershocks that are typical of a big earthquake and allowed us to get back to the working places safely.

We are working with the community and the local leadership in the community to see what help we can give them around areas that may be damaged on surface. We've guided a loss for, as a result of this earthquake, of 30,000 ounces, and we've estimated that number based on the time we think it's going to start up the mine and the kind of damage or lack of damage, that we've seen so far.

Clearly, that number may change if there's things that we find later that we haven't built in yet -- for instance, if the earthquake has affected our major shaft ore passes, and we won't know that until we start to produce again.

If I move on to slide 15, which is just an update on our technology and innovations. As promised, we have the test site, the original test site we saw in production but we've now commissioned three production sites at the high-grade pillar at TauTona, and they are beginning to mine and get through their teething problems.

We've commissioned the machine at Great Noligwa, which is really aimed at seeing whether we could make this very narrow reef that we have in South Africa viable, and that machine is drilling as we speak.

The ultra high strength backfill plant is operating in a very nice way. It's taken away the labor intensiveness that we had in the original plant at the very first site, and our geological drilling continues to do extremely well. With that, I'd like to hand over to Ron Largent.

Thank you, Mike. I will take you through the quarter two operating results for the Continental Africa, Australia and Americas region. But before I talk about the regional performance, I'd like to make a comment regarding the safety performance.

This performance was previously covered by Venkat, but I wanted to reemphasize the fatal-free quarter and the best quarter-two performance on record for AGA. Although we're enjoying these metrics -- but we do understand the challenges and work that is required to continue achieving our targeted safety improvements.

Each quarter, I've discussed the cost-rationalization work and recommended to you to continue to watch the outcomes on a quarterly basis. To set a little context regarding this work, this work was communicated in mid-2013 and had a target of removing $500m from the operating costs. The time frame we committed to in quarter two 2013 was to remove these costs over an 18-month period ending in December of 2014. At the end of 2013, we had documented the removal of a certain value and defined the remaining value in our 2014 business plan.

Currently, the comparison to our expenditure plan is 3% better than budget. So with that said, the current business plan contains approximately $500m in cost reduction, and by currently meeting this target, we expect to meet these commitments by year end.

The cost rationalizing can be seen in the actual regional cash costs and all-in sustainable costs shown in the next few slides when compared to the quarter-two 2013 metrics. I would however wish to point out that, while we maintained a lid on inflationary pressures for close to 1.5 years, we were seeing these pressures increase into our operations, primarily in labor, power and fuel costs, which continue to create headwinds for us at our operations.

So now I'll go to slide 17, Continental Africa region. Production for quarter two was 395,000 ounces at a cash cost of $846 per ounce, compared to 343,000 ounces at a cash cost of $883 for quarter two 2013. The contribution from the Kibali mine and improved grades and throughput at the Siguiri mine are the primary differences year on year -- for this year-on-year quarterly production comparison.

Siguiri mine produced 80,000 ounces for quarter two 2014, at a cash cost of $777, compared to quarter-two 2013 production of 62,000 ounces at $850 an ounce. The Iduapriem mine had a respectable quarter-two production of 47,000 ounces at a cash cost of $911. At the Geita mine in Tanzania quarter two was also successful, producing 110,000 ounces at a cash cost of $667 per ounce.

Next, to slide 18, the Americas region. Production for quarter-two 2014 was $229 an ounce (sic - see slide 18, "Production oz 229,000") at a cash cost of $765 an ounce, compared to quarter-two 2013, 235,000 ounces at $733 per ounce. Production in the region was impacted by an altered stacking plan at the Cripple Creek mine in Colorado that we will see these additional ounces later in 2014 -- and a geotechnical issue impacting the access to higher grades at the Cuiaba mine in Brazil, but this also will be recovered in the second half of 2014.

In Brazil, AngloGold Ashanti Mineracao operations produced 88,000 ounces at a cash cost of $717, compared to 76,000 ounces at $858 for quarter-two 2013. At Serra Grande, production totaled 30,000 ounces at $879 an ounce cash cost. We're continuing to process lower-grade ore at Serra Grande, 17% lower year on year, as the underground mines deplete the high-grade ore body in Mina III. Considerable work on a new high-grade ore body known as Inga is being defined and it appears it will be available in the 2016 production schedule.

In Argentina, the Cerro Vanguardia mine produced 62,000 ounces at a cash cost of $682 per ounce. The primary work there is to increase the availability and volume of underground ore tonnes commencing in quarter-three 2014.

On to slide 19, the Australia region -- this region produced -- production for quarter-two 2014 was 155,000 ounces at a cash cost of $850 per ounce compared to a production of 50,000 ounces at cash costs of $1,829 for quarter-two 2013. This improvement was primarily due to the Tropicana mine that was not in production in quarter-two 2013.

However, production at the Sunrise Dam mine for quarter-two 2014 was 62,000 ounces, compared to 50,000 ounces in quarter-two 2013. Production costs at Sunrise have come down significantly from the $1,700 costs in quarter-two 2013 to around $1,300 during quarter-two 2014.

These costs will continue to improve as the new production profiles from the underground mine are maximized and the ore body grades are realized. Grade improvements were 12% higher than the previous quarter at Sunrise Dam. This site has met and sustained for three consecutive quarters production volumes of 200,000 tonnes per month, a very key metric in this mine's future.

Attributable production for Tropicana mine was 93,000 ounces for quarter-two 2014, with an associated cash cost of $498 per ounce. Although the site has had associated startup challenges, productivity rates are being achieved. During the month of July, which is in the third quarter, but I thought important to comment on for our third-quarter outlook, each week presented a specific challenge that caused either plant downtime, whether scheduled or unscheduled, or grade presentation.

The plant has been running at or above nameplate throughput since this set of challenges. AGA management is excited about this asset, as the planned outputs are being met early in the operating cycle, and believe we still have room for improvements. So with that summary of the three regions, I'll turn it over to Graham Ehm.

Thanks, Ron. This morning, I'll cover our projects and then comment on one of our greenfield exploration projects. I'm on slide 21. In regard to Kibali, solid progress continues to be made at Kibali. During quarter two, the prime focus has been on completion and commissioning of the plant's sulfide circuit.

The secondary crushing circuit, the flotation circuit, regrind mills and pump cells were completed and commissioned. Ramp-up commenced, resulting in gold production of 91,000 ounces during the quarter on a 100% basis. The Nzoro hydropower station was commissioned and is being integrated with the diesel power station at a pace commensurate with the stabilization of the project's plan.

Development of the underground mine is going especially well. Lateral development of the first load level off the shaft has just been completed and sinking has resumed. Shaft depth is at about 520 meters, with a final depth of 760 meters.

A notable milestone has been achieved with the development off the deep lines in the cross-cuts in the top of the 5,000 load, and this is the diagram that's shown in the slide. You'll note that the ore body has been intersected where expected and at the same tenor as expected.

Turning to Cripple Creek, you'd recall that the Cripple Creek and Victor mine life extension project consists of two elements: the construction of the mill to treat higher grade and partially refractory ore within the main ore body and construction of a new valley leach facility. Mill construction remains on schedule for first gold at the end of the year. Approximately 500,000 tonnes of ore is stockpiled ahead of the mill in preparation for commissioning and ramp-up. The valley leach facility construction remains on schedule for completion in mid-2016. Both elements of the project are on schedule and on budget.

On slide 23, in regard to Obuasi. Last quarter I spoke about the significant changes that are planned to deal with Obuasi. During the quarter we've made considerable progress in putting plans into action. The amendment for the Programme of Mining Operations has been submitted to the minister for lands and natural resources. We've also submitted the environment management plan covering the amendment period to the EPA.

As you'd appreciate, this will be a substantial change. Consequently close communication is being maintained with key stakeholders. This work is being led by David Noko, our EVP Sustainability. The program involves a very substantial wind-down in activity and a commensurate reduction in the workforce. The footprint of the operation is being rationalized and contracted to the southern end of the mine.

On the next slide, a notable achievement was made in July this year. The Obuasi decline development has broken through. We now have decline access into the upper levels of the underground mine.

Turning to one of the greenfield exploration projects in Colombia, on slide 26 (sic - see slide 25). At the new Nuevo Chaquiro copper gold discovery, impressive drill results continue to be maintained. The plan shows the surface projection of the 0.45% copper envelope in the grey dashed line. The surface projection of what appears to be a high grade core is shown in the red dashed line.

Intercepts of note for the quarter include 810 meters at 0.78 grams per tonne and 1.65% copper, and 852 meters at 0.61 grams per tonne and 1.19% copper.

On slide 26, the cross section shows that the porphyry is a blind discovery and is approximately 250 meters below surface. The high grade zone is shown in orange. Drill results support the potential for a plus 200m tonne high grade component with a high grade cap of approximately 2% copper between 350 and 450 meters depth. Though it's still early days, Nuevo Chaquiro is shaping up as a 10m to 20m ounce equivalent or a 7b to 10b pound copper deposit, quite significant in copper porphyry terms.

We hope to be able to announce a maiden resource estimate towards the end of the year.

Thanks, and I'll pass over to Richard.

Thanks, Graham, I'm on slide 28. Our ongoing focus on costs across the business is evident in the 19% decrease in our all-in sustaining cost from $1,302 an ounce in quarter two of last year to $1,060 an ounce this quarter driven by a lower operating corporate and exploration cost and lower sustaining CapEx.

Our all-in sustaining costs increased by 7% over quarter one's $993 an ounce. I had indicated at our last quarterly presentation that we expected our all-in sustaining costs to increase to between $1,100 and $1,145 an ounce as a result of stronger local currencies and increased operating costs relating to power increases, winter tariffs and higher fuel costs together with adverse ore inventory and consumable store movement.

I also flagged some timing differences in our stay-in-business spend that would result in increased stay-in-business over the remainder of the year. Lower than anticipated movements on inventories, services and stay-in-business spend, coupled with the benefit of high production, enabled us to deliver a lower Q2 all-in sustaining cost than we had projected at the end of Q1.

The 29% year-on-year reduction in all-in cost from $1,679 an ounce to $1,192 an ounce this quarter reflects the all-in sustaining cost improvement and also the reduced project capital spend following the completion of Tropicana and the first phase of the Kibali project.

Turning to earnings, on slide 29. There were a number of abnormal transactions that impacted on our earnings during the quarter. In order to provide a better understanding of our underlying quarterly earnings performance, we have normalized our adjusted headline earnings. The major adjustments made in moving from our Q2 negative $4m adjusted headline earnings to our normalized adjusted headline earnings of $76m related to operational and corporate redundancies of $27m, primarily as a result of our ongoing restructuring at Obuasi and closure and termination costs of $27m, $24m of which related to Yatela.

The reconciliation of our adjusted headline earnings to normalized adjusted headline earnings is set out on page 3 of our quarterly report.

Earnings this quarter improved by $67m over the same period last year, with higher production and lower corporate, marketing and exploration costs more than offsetting the lower gold price and inflation.

Turning to slide 30. Our quarter two normalized adjusted headline earnings of $76m are $43m lower than the first quarter of this year, driven largely by higher operating costs, stronger local currencies and lower income from associates, in particular at Kibali.

You will have seen the announcement around the provision of the ZAR1.2b facility that we extended to Rand Refinery, along with its other shareholders. We have adopted a conservative accounting approach relating to this in that we have assumed that the facility will be drawn and will not be repaid and have accordingly made a provision of ZAR546m against this.

This amount is included in our headline earnings but has been stripped out of our adjusted headline earnings. So if you're looking for this in our income statement, it is part of the $85m against the share of associates and joint venture line in our Group income statement. If this facility is not drawn or is only partially drawn, we will write back part or all of the provision.

In looking at financial flexibility on slide 31, our stronger operational performance, coupled with the refinancing of our bank facilities has further improved our financial flexibility. We generated free cash of $34m during the quarter and have reduced our net debt by $101m since the end of last year.

Our net debt to EBITDA has improved from 1.86 times at the end of 2013 to 1.73 times at the end of June this year.

We have recently signed new revolving credit facilities for both our US dollar and A-dollar facilities for a further five-year period. The US dollar revolving credit facility will remain at $1b and continues to be undrawn. The Aussie RCF will reduce from AUD600m to AUD500m and is currently AUD370m drawn. We are also in the process of finalizing an amendment to our South African ZAR1.5b facility to reflect the same terms as our US and Australian dollar facilities.

These facilities incorporate a looser financial covenant with net debt to EBITDA now set at 3.5 times from 3 times previously together with a one-period waiver of up to 4.5 times, subject to certain conditions.

The US and Aussie dollar facilities have also been priced more tightly, reflecting the current market.

At the end of July, Moody's completed their credit review of AngloGold Ashanti and left our rating unchanged at Baa3 with a negative outlook.

Notwithstanding our significant operational improvement and cash generation of $56m for the first six months of the year, which excludes the $105m proceeds from the Navachab sale, the funding requirements associated with the completion of our capital projects at CC&V and phase 2 Kibali, together with the funding required to implement the Obuasi amended program of mining operations which Graham spoke to earlier, preclude us from declaring an interim dividend.

My final slide talks to our outlook for the third quarter. Production is forecast to be slightly down on quarter two at between 1.060m and 1.090m ounces as a result of Navachab's production being excluded following its sale, Obuasi production winding down and the impact of the recent earthquake at our Vaal River operations, which Mike spoke to during his presentation.

Total cash costs are expected to be slightly up on quarter two at between $850 to $890 an ounce, primarily due to mid-year wage increases, stronger local currencies and higher cost profiles in South Africa with a full quarter of winter power tariffs. All-in sustaining costs are projected to be between $1,100 and $1,150 an ounce, negatively impacted by our stay-in-business spend profile.

Importantly, our guidance for the year remains unchanged, as Venkat had mentioned, based on our current understanding of the impact of the South African earthquake, at 4.2m to 4.5m ounces and $740 to $790 an ounce based on the assumptions provided.

It is worth noting that these costs are based on a weaker rand assumption than is currently prevailing.

I will now hand back to Venkat. Thank you.

Thank you, Richard. Just to wrap up, if we can take you to slide number 34 which shows what the production performance has done in between two years for the same quarter and what the all-in sustaining costs and all-in costs have done over the period. Without compromising safety, we have pulled together six quarters of consistent good delivery as a team. And during this period, we have shown safety improvement, production growth, cost decline across all metrics and cash generation as well.

Having said all of this, headwinds continue to be very formidable in a business such as ours and given the scale of our operations, may cause us to miss a quarter here or there. But certainly, the overall trend is heading in the right direction.

On the next slide, we have mapped out what the exploration and evaluation spend and what the corporate costs have done over the period and the benefits of cost-saving efforts are marked. We have got a focused exploration strategy to deliver best value in terms of targeted, key regions. On the corporate costs, restructuring, we continue to remove inefficiencies from within the system by eliminating duplication and keeping a very firm lid on indirect spend.

But as Richard flagged in the last quarterly presentation, the first half of 2014 had some timing benefits built into it. So our annual numbers still stand which is what we guided to you previously, exploration and evaluation costs of $150m to $175m and corporate costs of between $120m to $140m.

Moving to the slide on capital expenditure. To recap, 2012 and 2013 were heavy capital spend years as we were building Tropicana and Kibali. We are starting to see the project capital reduce and cash flows starting to come in. Our sustaining capital for 2014 is at or around the levels for 2013 at around $1b, and project capital of $400m in 2014 is focused on the four key projects: the Cripple Creek and Victor mine life extension, Mponeng below 120, Kibali underground and the Obuasi decline project.

Moving onto the final slide, slide number 37. It's perhaps apt to look at this, now that we are just over a year from when we articulated our strategy, to see what we have delivered as a team over the last five to six quarters.

On the points on foundation, we have certainly shown marked improvements in the areas of safety, fully recognizing we need to continue to do better. And the sustainability team at the operations and corporate have tried -- have worked hard to reduce the number of environmental incidents which are being caused.

On the balance sheet, the finance team, led by Richard, has worked very hard to bring in as much liquidity and balance sheet flexibility that is feasible, by issuing the $1.25b bond last year and importantly renegotiating covenants under the two revolving credit facilities to give us a bit more breathing space in the event there are shocks in the gold price.

Having said that, as we mentioned in the previous quarter, high debt levels and interest burden remain a concern and financial flexibility is going to be an area of focus for us going forward.

On the cost side, all-in sustaining costs have dropped by 20%, all-in costs by 30%, overhead and exploration costs by about 60%, and capital costs by 30%. Whilst admittedly there has been some currency benefits which we have managed to reap during this period as a result of the fall in the gold price, i.e. the strengthening of the dollar, nevertheless, the underlying savings which have been implemented across the business have been marked.

In terms of the portfolio, if you sit back and look, we have taken out of our portfolio of 21 mines originally, we have taken action in respect of five of them within a year, namely Kibali and Tropicana have been commissioned ahead of time and on budget.

Charles and the team have delivered the sale of Navachab on track for about $104m, net of -- net proceeds which have been received. And we have taken a decision with IAMGOLD and the government of Mali to put Yatela into closure. And we have taken the tough decision with regards to Obuasi, that's five out of 21 mines.

In terms of CC&V expansion, that is still on track and in terms of proceeding per schedule in terms of our CapEx spend. And we are optimistic about that project going forward.

At the same time, we have kept our long term optionality intact. Greenfield exploration is very focused in key areas. Graham outlined the success we have had in Nuevo Chaquiro. Ron is excited about the exploration finds that they have found in Serra Grande, whilst the Australia team is looking for upside within Tropicana.

Mike and the team in South Africa have been working relentlessly with the limited resources and budgets that they have to ramp up the South African technology project as quickly as they can to get it to a meaningful scale to provide the long-term future for our South African operations to enable us to go back and mine previously mined-out areas and shaft pillar safety.

So before handing it over to Stewart to take questions, two points. This is Richard Duffy's last quarterly presentation as CFO in AngloGold Ashanti. Richard has had a number of roles within AngloGold Ashanti and at a critical time when there was a change in leadership, stepped in to do the role of the CFO until a long term successor was found. He performed this role extremely well and we thank him for his help and wish him well in his future efforts.

We also welcome Miss Christine Ramon to the role of CFO, effective October 1, 2014. Christine comes with significant experience as CEO, CFO of a number of companies, notably Sasol mining -- Sasol in the oil and gas space and mining, very recently, where she was CFO. She also has very good standing in both the South African and international accounting and finance profession. She's started going through her induction already and she will hit the ground running on October 1 and bringing valuable external experience to the team.

With those concluding comments, I'll hand you over to Stewart to take questions.

Thanks very much, Venkat. We'll take questions from the line. Please identify yourselves and your institution.

Operator, over to you.

(Operator Instructions). Andrew Byrne, Barclays.

Hi, good afternoon, guys. A couple of questions, if I may. The first one, I think, is for Ron. If we look at Siguiri, you've had a great quarter here -- well, a great first half. A lot of that is driven by those higher grades.

How sustainable are those grades? Or where should we start to see them revert back to around that 0.7? That's the first question I've got.

Okay, thanks. Basically, that -- the higher grade that we've seen has come out at what we called the [Siguirian] pit which is then worked on for many years to get access. And when you come in on the top of any ore body, you have difficulty in estimating the grade. So we are seeing that is where the grade has come to get the ounces. But we have had a few more tonnes or a little bit higher throughput to the mill.

So we'll continue to mine it and we're putting together a new model for the remaining part of the Siguirian pit. But it's not that many ounces that come out of that small pit. So it's a one-off but it's not that we're high grading, it's just that we're mining a small open pit there.

Okay. And so should we expect to have 1 gram per tonne continue through the second half of the year? Or is it before that it rolls off?

It actually -- in the model that we have, it drops back. We're still seeing we have enough to say that our third quarter will still be probably closer to the 1 gram than the 0.8 grams. But still, we don't have total knowledge of that little ore body.

Okay, no worries. The second one I think is for Graham. You talked about Obuasi there, I think it's an asset that we've talked about for a number of years and I think it's sometimes difficult to lose track of exactly where we are with it. You've submitted a plan to the Ghanaian government. Is it possible you could maybe flesh out an indicative timeline for the asset from here?

How long do we continue to see high CapEx at the new mine? And when does the old mine start to drop off? And what are production levels coming out of this in 2016, 2017?

Okay. If I could pick up the question, it's Venkat here. With regards to Obuasi mine -- and then Graham will come in to fill in the details. If you remember, Obuasi as you've correctly said, we have talked about it for several years, it has burned a significant amount of cash. We took a decision earlier on in the year, after several months of engagement with the various stakeholders, bearing in mind that this mine has been operated for over 100 years.

And we got their in principle buy-in to effectively amend the Programme of Mining Operations where we said, we cannot continue to operate as we are operating. We are continuing to try and fix the car as it's running. So we've got to give it a break, take it down, try and complete the decline work, re-modernize the mine, pull down the footprint of the mine and also reduce the size of the workforce.

They said, we understand it, they arranged for a delegation to come over to the mine, have a look at it, confirm that that's the strategy we should take as well. And we were asked to submit a formal amendment to the Programme of Mining Operations, which is like a mini-booklet which you've got to prepare in granular detail.

So Graham, David and Ria, given that it's got legal implications, has all worked together with the team and produced the amendment. The amendment has been formally tabled to the Ghanaian government in July. And it actually covers all of the aspects: the technical aspects, the social aspect, the environmental aspect, the financial aspect, the human resources side, etc.

The government has put together a taskforce which is involving people across the Minerals Commission, the EPA, the Mines Department and also membership of the union to work with us on the granular detail. So once that is approved, and at the same time we have put an amendment environmental plan to key in with this particular amendment. The intention here is -- and you will have noticed that Obuasi has actually improved its production and reduced its cost in the last two quarters.

But notwithstanding that, the strategy still holds. The government will go through a consultation with us. The APMO, as we call it, gets approved and the timing here is some time towards the end of the third quarter. But in this intervening process, our ongoing retrenchments have continued. And we are slimming down the size of the workforce with the bulk of the retrenchments coming in the third and the fourth quarter of this year.

So effectively, at the end of this year, the plan is that, after getting these consents, the mine goes into production limited to one particular surface source. And at the same time, Graham is working through a detailed feasibility study in terms of the underground, based on these declines. And the declines have been opened up.

And you can now go from surface to the 17 level and access the shaft infrastructure from the decline. That work will continue. And the intention here is to get 2015 for the mine to effectively go through this recapitalization etc. before it starts to look at getting back into some form of normality towards the end of 2016.

And we have been consistent in saying, it's somewhere going to be between 18 to 24 months, as the case may be. So we promise to update the market at the time of our results announcement for 2014 in February of 2015. And that's really what we are holding to right now. And Graham, you're welcome to add anything to this.

Andrew, I think Venkat's mostly covered it. Clearly we're taking the operation down into essentially a care and maintenance and a limited surface activity with some ongoing underground developments. During that period, we're going top to bottom in terms of feasibility studies to configure the mine for the future. So I can't update you in terms of any 2016, 2017 production projections or cost projections until we've done that work. And we'll need to update you on that in February next year.

Okay. Maybe, as a different way to approach it, I'm really not trying to tie you down into any form of detail, because I appreciate how sensitive it is. But maybe what's the capacity that the declines could take, just in terms of tonnages or something along those lines? To just conceptualize what does this look like in 10 years?

The general thinking around the mines configuration is it will move to larger scale mechanized long-hole open stoping. Ore will still come up the shaft and the capacity of the shaft is between about 6,000 tonnes per day. Mill capacity is similarly matched.

At this stage, we're not planning to use the decline for ore haulage unless we use the decline for some of the shallow ore bodies, such as at Sansu but nominally about 6,000 tonnes per day.

Sure, okay. And then (multiple speakers) --

Andrew, do you mind if we grab -- get somebody else and then just get a question at the end of the queue?

Okay, no worries. No worries.

Thanks, mate. Operator, next.

David Haughton, Bank of Montreal.

Yes, good morning, everyone, and thank you for the update. Just having a look at CC&V, a lot of work underway there for the MLE. Can you just remind us where you are in your CapEx spend? How much is left to go?

I see that you'd expect some ore through the mill within the next six months or so. And your expectations of production out of that mill? Thank you.

Yes, okay. As we find the exact number here, but yes, we're planning on putting ore through the mill at the end of this year. So there'll be very little ounce production this year. But it takes the site to -- between the heap leach and the mill, it takes it into the 350 to 400 ounce per year range. And when you get to that point, about a little more than 100,000 ounces is the mill production rate.

David, if I can come in here. The total project approval, the $585m nominal when the Board approved the project. The total project spend to date, to June 2014 is around $270m and an additional committed amount of around $86m. That takes the total spent and committed to $356m out of the $585m. I hope that helps.

Yes, no, that's good. Thank you for filling that in, Venkat. And I presume that the balance of that money would just be spent during the balance of this year and the early part of next year?

No. Actually, it goes onto 2016 because there's two parts to this. One is the mill and then you have the valley leach facility and the absorption-desorption recovery plant to go with that. And that's just getting commenced, I think we're about 50% of the way through the valley leach facility but it really moves all the way on to mid-2016.

Okay. With the decision to close Yatela, I guess there's no surprise there. What are your thoughts about the Sadiola sulfide project? Do you have any view that that's something you'd like to move forward on? Do you have better assets within your portfolio that you'd rather advance before that one?

At the end of the day, allocation of capital is all about prices and returns. With regards to Sadiola sulfide project, what we are excited about the project is around the potential upside in terms of the ore as we transition from oxide to sulfide. Exploration results are promising. But the real catch here hinges around two aspects. One is affordable, reliable and adequate power coming to the project as we switch from the oxide circuit into the sulfide circuit.

And in that regard, we are working with the government and also in terms of getting adequate fiscal concessions which we will need for the project to remain viable. And here, we've been working with IAMGOLD and the government of Mali, have had numerous engagement with them including one as late as two, three weeks ago where there was a meeting between all of the mining companies which operate in Mali, Randgold, ourselves and IAMGOLD.

We went there, met with the Minister of Mines who is a very impressive individual, very committed in getting the mine to operate in the future because the benefits which the government get as a result of operating the mine, notwithstanding the fact that they will have to make available cheaper grid power and fiscal concessions, is quite phenomenal. Not to just mention the social aspects of it.

So the government has agreed to look at this in some detail and come back to us. And we are obviously certainly allocated the next quarter or two to work with the government to come to a solution in this regard.

So in summary, exploration potential and potential from the project is promising. It's all going to be around the question on power and the viability of the project. And that's really where the discussions are taking place.

Ron?

Okay, just -- thank you. Just switching over now to technology and the reef boring. So continuing with the good progress at TauTona, rolling out now at Great Noligwa, together with a few other sites, you had a brief comment there that Noligwa wasn't as straightforward as you would have liked.

Do you want to just add a little bit of information as to what the issues are and how it could be applied at that site?

Okay, David, the Great Noligwa site is an R&D site to see whether we can reef-bore out an ultra-narrow reef. In other words, the reef there is a couple of centimeters thick, it's called the C reef. We've mined it on and off but we had that good few million ounces that are available. If we could bore this reef out, we could potentially turn it into a viable reef.

The issues we're having with the boring is that the footwall is softer than the reef itself. And although we're getting phenomenal drill rates, the drill keeps diving into the footwall. So we're on, I think, hole 7 or 8 there, with a number of technical issues we plan to see if we can overcome that problem at the moment.

All right, okay. Thanks for that to chew on. Thank you everyone, that's my questions.

Thanks very much. Operator.

(Operator Instructions). Dinesh Saboo, Copal Amba.

Hi. Good afternoon. Thanks for the presentation. I just had one question on the financing side of the business. If you can give an idea about the debt maturity profile of the Company? What's the amount of debt maturing in 2014, 2015 and 2016?

And secondly, in terms of the new refinancing of the facilities, just wanted to understand what will be the impact on the average interest cost going forward?

Thanks. It's Richard Duffy. Just in terms of our borrowings, we have a number of bonds that mature. The earliest of those, though, is in 2020. We've got two bonds that mature in 2020. The $1.25b bond and there's a $700m bond. So, no maturities before 2020 in terms of debt.

In answer to your question on the refinancing of the revolving credit facilities, across the piece, we've priced about 25 basis points better than the existing facility. So we will see about a 25 basis point improvement on that finance.

Sure. And just one follow-up question. In terms of the dividends, as I understand, this year you are not anticipating any dividend payments. How about 2015?

If I can pick up the dividend question. I think this is a discussion which -- a debate which we have every six months with the Board. Certainly, the priority right now has been around debt reduction, and that's where the focus has been going in terms of debt reduction. We have not made a call in terms of the dividend for end 2014 so I would not come to that conclusion.

But certainly, the call is always a balancing act between our capital requirement in terms of projects and also in terms of level of debt. And also in terms of returns which we make available to shareholders. We are not fixated on any particular percentage or formula in terms of dividend returns. So I can't give you any sort of guidance et cetera to lock you or lock us into a 2015 outlook.

Sure, thank you so much.

Thank you, operator. And thank you everybody for joining us on the call today. We will be back same time, same place in around three months. Thank you.

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