Anglogold Ashanti PLC (AU) 2015 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the AngloGold Ashanti second Quarter 2015 results conference. (Operator Instructions). Please also note that this conference is being recorded.

I would now like to turn the conference over to Mr. Stewart Bailey. Please go ahead sir.

Thanks, Chris. Good afternoon or good morning, everybody, and welcome to the presentation of our second quarter results for the three months to June 30. In the room here in Johannesburg you've got a full Executive Committee, you have Graham Ehm who is our Head of Project and Planning, you've got Venkat,; Ron Largent; Chris Sheppard, our new Chief Operator Officer for South Africa; Christine Ramon, our CFO; and Charles Carter, our Head of Business Development.

As is customary I'm just going to run through our Safe Harbor Statement and then we'll get right into it. Certain statements contained in this document, 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, all-in sustaining costs, all-in costs, cost savings and other operating results, return on equity, productivity improvements, growth prospects and the outlook of our operations individually or in the aggregate, including the achievement of project milestones, commencement and completion of commercial operations of certain of our exploration and production projects and completion of acquisitions, dispositions or joint venture transactions, our liquidity and capital resources and capital expenditures and the outcome and consequence of any potential or pending litigation or regulatory proceedings or environmental health and safety issues are forward-looking statements regarding our operations, economic performance and financial condition.

These forward-looking statements or forecasts involve known and unknown risks, uncertainties and other factors that may cause actual results performance or achievements to differ materially from the anticipated results performance or achievements expressed or implied in these forward-looking statements. Although we believe that the expectations reflected in these 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 forward-looking statements as a result of amongst other factors changes in economic, social and political and market conditions, success of business and operating initiatives, changes in the regulatory environment and other government actions including environmental approvals, fluctuations in gold prices and exchange rates, the outcome of pending or future litigation proceedings and business operational risk management.

For a discussion of these factors refer to annual reports on Form 20-F filed with the US SEC. These factors are not necessarily all of the important factors that cause our actual results to differ materially from those expressed in forward-looking statements. Other unknown or unpredictable factors could also have material adverse effects on future results and consequently you are cautioned not to place undue reliance on them. We undertake no obligation to update publicly or release revisions to these forward-looking statements to reflect events or circumstances after the date hereof 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 other person acting on its behalf are qualified by these cautionary statements.

The communication may contain certain non-GAAP financial measures. We use these measures in managing our 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 measure of performance prepared in accordance with IFRS. In addition, the presentation of these measures may not be comparable to similarly titled measures other companies use. We post information for investors on our website on the main page under the Investors tab, we update it regularly and you should look it.

Venkat, without further ado I'll hand over to you.

Good morning and good afternoon, ladies and gentlemen. Firstly, apologies for my voice. I've picked up some sort of a throat bug, so if I don't come across as I normally do that is the reason.

To kick off, the AngloGold Ashanti team is pleased to present today another strong set of results and a continued delivery of our strategy. As you know we, like several other gold mining companies, are in a tough market but certainly from our perspective the more tougher it gets the more our determination to deliver becomes.

If I can quickly refer to the introductory slide starting with slide number 5. To recap our strategy to deliver sustainable cash flow improvements and returns are built on five pillars starting with the foundation, which is around safety, people and sustainability. Secondly, financial flexibility to see us through the various cycles. And the third one is around operational excellence where we take into account the production costs and capital and we measure it on all-in sustaining costs and all-in costs. Further enhancing our portfolio of quality. And finally, preserving a focused long-term optionality in the portfolio recognizing that the mining industry does go through cycles.

From the team's perspective we are a committed and reliable team. Our philosophy is very simple, we say what we're going to do, we do it, we then come back and say we have done it. So what you see with us is what you get.

So moving on to slide number 6 in terms of the second quarter highlights. Starting off with free cash flow we delivered free cash flow of $71m during the quarter and Christine will unpack the number in further detail. In terms of production across the Group we met our market guidance of 960 to 1m ounces, came in at 1.007m ounces. Our total cash costs dropped by 14% year on year, came in at $718 per ounce, again beating our guidance. Our adjusted headline earnings came in at $26m. And our all-in sustaining cost for the Group came in at $928 per ounce, an improvement of 12% year on year.

Unpacking these further, at the international operations, which includes our operations in Americas, in Continental Africa and Australia, the all-in sustaining cost came in at $844 per ounce, reflecting a strong performance from the international operation and the cost improved by 16% as compared to the second quarter of 2014.

Turning to the South African region, although the production fell year on year the performance improved by 9% from the first quarter of 2015 this year in the second quarter. And the South Africa region accounted for 26% of the Group's production during the quarter.

Importantly Mponeng, that was the area of trouble during the first quarter, delivered a 34% improvement going into the second quarter of this year.

Turning to the balance sheet, we completed the sale of Cripple Creek and Victor and we have ring-fenced those proceeds from their production and on a pro-forma basis the balance sheet has actually improved with a ratio of 1.44 times. Further details will be provided by Christine but, more importantly, the balance sheet deleveraging has come on the back of no dilution to our shareholders.

Turning to safety on slide number 7, it was a good quarter overall save for the very last day where we unfortunately had one fatality in South Africa at Kopanang. It was a fall-of-ground incident. Our safety metrics improved quarter on quarter; all-injury frequency rate improved by 4%, the fatality injury frequency rate improved by about 70% and the lost-time injury frequency rate by 3% as well.

Continental Africa continues to deliver a very good safety performance with Siguiri, Iduapriem and Sadiola being injury-free.

In terms of South Africa, two milestones were reached. At TauTona a record of two years without any fatality for the first time in its history, and Moab Khotsong recorded 2m fatality-free shifts as well. And our focus in terms of safety continues without any interruption in that regard.

Turning to slide number 8, most of which I've covered during the introduction slide, as you can see the price actually reduced quarter on quarter. Given the decline in the production in South Africa year on year and the fact that the second quarter of last year included pre-production from our Navachab mine and pre-production from Obuasi, you saw an 8% decline in production.

But virtually every cost metric was reported positive. We saw an improvement in total cash cost to 14%, CapEx reduction around 26% and our all-in sustaining cost and all-in cost improved by 12%. While our EBITDA and free cash flow also improved quarter on quarter, the small swing you see in corporate costs relates to a reversal of some of the charges which we had made to one of our joint ventures but on a year-to-date basis 2014 and 2015 it is flat year on year.

With those introductory comments I'll hand you over the Chris Sheppard for his maiden presentation on the South African operations.

Thank you, Venkat, and good day, ladies and gentlemen.

As you are no doubt aware and as indicated previously, I've taken over from Mike O'Hare from June 1 this year. And to say that a hand over has taken place over the last few months and that has assisted a smooth transition given the criticality of the South African region.

My immediate focus areas in the short term, I'd like to touch on those. Firstly safety. We are pursuing our journey to zero harm and minimizing the debilitating effects of Section 54s is number one on my agenda at this stage.

Secondly, we need to improve our face length mineable position in order to improve volumes through increased our mining flexibility.

And the third and important issue in my life at this stage is the delivery of Mponeng below 120 project.

If we can then turn the page to our West Wits operations on page -- or slide 10. It's pleasing to note that TauTona delivered to expectation with a year-on-year improvement in cash costs of some 8%, and, as commented on by Venkat, TauTona achieved 2m fatality-free shifts during the month of May this year. We are seeing pleasing progress with the reef boring project with the latest Mark IV machine being imminently commissioned onsite and the current machines that are onsite operating are approaching blueprint cycle times.

Furthermore, the ultra-high-strength backfill tests have successfully been able to achieve a pumping of backfill over 1,000 meter distance which was a key milestone in the project program.

Turning to Mponeng, performance was impacted on two fronts. Firstly, the Section 54 stoppages that occurred in quarter 1 that ultimately impacted on the performance in Quarter 2, as well as physical stoppages that took place in Quarter 2. Secondly, the execution of a de-risk plan saw planned reductions in all three operating levels for the existing mines and these plans intended to address safety concerns related to seismicity and ventilation issues and it's pleasing to note that this has now resulted in some stable performance going forward.

Having said that, the West Wits operations cash costs have improved quarter on quarter by some 19% with quarter-on-quarter production improving by 22%.

If we turn the page to slide 11, for some more updates on Mponeng, I think the key issue here is that Mponeng's broader challenges in essence relate to the delay in delivery of the below 120 project on 123 level and 126 level. On an above 120 level, as I indicated, production is constricted by seismicity and ventilation issues and then also coupled with the extended lateral distances to work places along with -- and reducing effective face times.

As far as the below 120 project is concerned, completion of the infrastructure and associated operational readiness is a clear current management focus. And secondly, the completion of significant secondary ground support work is necessary to facilitate full infrastructure commissioning to support the medium-term ore reserve development program and the production ramp-up.

Fleet availability challenges have been addressed by the introduction of redundant fleet ex-Obuasi, the constructive engagement with the original equipment manufacturer to provide the requisite aftersales service and then the improvement in our overall operating underground environment.

Turning to slide 12 and Vaal River, here production was significantly impacted upon by safety-related stoppages. If one unpacks the grades, at Moab Khotsong this was adversely impacted by mining mix which resulted from higher grade production being impacted by seismicity and having to redeploy production crews to lower grade areas. And obviously this then had an impact on the overall grade recovered.

Great Noligwa shaft has been placed on care and maintenance with all the logistics and men and material being delivered through the Moab Khotsong shaft system.

It must be noted that Kopanang is a lower grade operation and as such requires it to deliver its volumes of production in order to deliver a required margin, and this, of course, being challenged by the high number of safety-related stoppages in the quarter.

Lastly, to note that the consolidation of the Vaal River district continues and has yielded some $18m of savings with associated efficiency improvements if measured the same period to last year.

Turning to slide 13, I think it's important to note that our ore reserve development position, as said in my opening comments, is high on our priority list. I think the first point is that we recognize that our ore reserve development has been negatively impacted on all fronts by the safety stoppages, hence the priority.

Better safety performance will facilitate improved ore reserve development volume and will provide for additional mining flexibility as additional face length becomes available.

Clearly one can see in the graphic on slide 13, I think there are two points to be made, one is that the ore reserve position is clearly stable. Having said that, the Mponeng below 120 project, it's imperative that that project then delivers additional face length in order to improve its ore reserve development position to get it to a 20 to 24 month horizon.

Kopanang, one can see in the graphic that the underground plans that one can see it in the presentation slide 13, does indicate the fact that we are getting pinching out in some areas of the mines. We've had to, along with the reduced gold price, have repositioned ourselves to mine still profitably for cash. And I think that's enough said on that one.

Turning the page to surface operations, if we look at the hard rock portion of surface sources with respect to production, increased volumes are being mined from the lower grade Kopanang marginal ore dump. The surface rail infrastructure bottleneck has been addressed through the introduction of road transport flexibility. And lastly, plant availability issues have been addressed. And these issues ultimately have pushed up the unit costs, as indicated, for Quarter 2.

With respect to mine waste solutions, Quarter 2 volumes were impacted upon by late commissioning of pumping facilities. Recovery challenges in the floatation circuits continue to receive focused management attention along with improved carbon management.

Lastly, I'd liked to touch on the current wage negotiations on slide 15. And I think the key point I'd like to make here, ladies and gentlemen, is all unions have rejected the final offer, in other words, ZAR1,000 per month for entry level employees with no added benefits, and this offer would have essentially got entry level employees to around ZAR13,200 per month in the third year of the agreement.

Secondly, the NUM has registered a dispute with the CCMA for statutory mediation and we remain of the view that we have made a fair and generous offer which is sustainable for our business and for the broader gold industry. And a reminder to all, that our offer requires all parties to accept the offer that we've made.

Importantly, we will continue to keep all communication channels open at this time and it should be noted for this meeting that the rejection of our final offer -- with the rejection of our final offer, that we have reverted to our previous firm offer of ZAR750 per month for entry level employees which includes benefits for each of the three years.

Thank you, ladies and gentlemen. I'll now hand over to Ron Largent.

Thank you, Chris, and good morning. I will provide some detail around our Quarter 2 2015 operating results for Continental Africa, Australia and Americas region, and also discuss some of the critical work streams that are underway to develop the optionality within the portfolio. As usual I will not dig into the nitty-gritty of each operating asset as the detailed results are contained within the quarterly report.

Before I get into each regional outcome for Quarter 2 I'd like to reflect on some of the trends that we've seen in the international portfolio over the past two-plus years, since we embarked on our drive to improve efficiency and navigate this low gold price scenario, but also to prove that we actually can thrive in it. For the past two years I've asked you to watch or monitor the cost numbers in each of our quarterly results and to draw your own conclusions around the effectiveness and sustainability of our cost management work within AngloGold Ashanti.

We set ourselves a challenging list of objectives in early 2013 for this work. We communicated during the quarterly results that the primary outcome was to remove $500m from the operating cost basis within an 18-month period. Referring to slide 17 I think you'll agree that this slide tells a compelling story around what this team's been able to achieve by focusing on the operations and relentlessly driving efficiencies. Now with more than two years of data to support us we can illustrate not only the effectiveness but the sustainability of the process we've created.

The first step change was in early 2013 when our all-in sustaining cost reduced to around $1,200 per ounce. We worked hard at capital allocation and addressing all other cost elements, overhead and operating. And by the end of 2013 and for the entire year of 2014 another step change was completed that produced an all-in sustaining cost of $1,000 per ounce. Now for the first two quarters of 2015 we've ended with all-in sustainable costs of less than $850 per ounce.

Overall, the international operations, which account for approximately 70% of the total AngloGold Ashanti production, have continued to improve margins, even with the reduced gold price. My group continues to work on efficiencies that will maintain and improve our outcomes into the future. I will reiterate that this work is all inclusive, including stay-in-business capital, working capital and direct operating costs.

But this effort is not only around cost reduction. We are devoting significant effort to analyzing our mining methods, looking at our ore body options, process optimization and scrutinizing procurement and contracts, and looking hard at how to best lift our labor efficiencies. Everyone is aware of the challenges we face as an industry but we must not lose sight of the fact that there are significant opportunities that remain.

Slide 18, this slide we utilize internally to create competition within my management team and with their peers in the industry. This data is from publicly available information. As you can see, it's been a transformational move for the Company, especially for this portfolio of the international assets. We've moved from the top cost quartile in 2013 to the lower quartile in the first half of this year.

We will continue to work hard to stay there and I believe we have shown on the previous slide that our efforts are sustainable. So in total, the international operations have managed approximately $300 per ounce off the all-in sustaining costs from a 2013 base. This would even be greater if I compared it to 2012.

Now for the Quarter 2 results of the international operations, the international operating group performed well on all production-related metrics during Quarter 2. Production totaled 746,000 ounces compared to 713,000 in Quarter 2 2014 with an associated 12% reduction in all-in sustaining costs.

Slide 10, Continental Africa region production for Quarter 2 was 368,000 ounces at a cash cost of $638 per ounce, compared to $846 per ounce for Quarter 2 2014. Although the ounce production reduced on a year-on-year comparison, this reduction is due to the planned reductions at Obuasi and our anticipated grade and throughput reductions at Siguiri mine.

Geita mine produced 132,000 ounces at a cash cost of $405 per ounce. This improvement can be attributed to higher grades from the Nyankanga ore body, cost reduction through efficiencies in planning and improved plant throughput 8%.

The Kibali mine, operated by Randgold, had another strong production quarter, producing 75,000 attributable ounces with associated cash costs of $547.

Slide 20. In the Americas region production for Quarter 2 was 239,000 ounces at a cash cost of $662 per ounce compared to $729 for Quarter 2 2014. Ounce production from Brazil was impacted by timing of available stopes in the Cuiaba mine which will be mined in quarter 3 when comparing to Quarter 2 2014. Cash costs were down 10% compared to Quarter 2 2014 at $680 per ounce.

In Cerro Vanguardia in Argentina, they produced 70,000 ounces in Quarter 2 which is a 13% improvement compared to Quarter 2 2014. Costs improved slightly despite the inflationary pressures in the country.

Slide 21, the Australia region. Production for Quarter 2 was 139,000 ounces at a cash cost of $772 (sic - see slide 21 "$727") compared to a cash cost of $850 for Quarter 2 2014. Sunrise Dam underground ore production annualized rate has increased to 2.75m tonnes per year. This is in line with the plans for increased ore extraction from the underground operations. The mine tonnage movement is critical for establishing the future mine plan and asset capability. The site is working diligently on ore grade reconciliation as the result of a mining method change.

At Tropicana mine production was 81,000 attributable ounces at a cash cost of $533 per ounce. This asset is producing at the design throughput and cost assumption.

Now on to slide 22, this slide represents the work at the individual assets that has been completed, analyzed or implemented. I guess overall I would say there remains optionality in each asset.

Just briefly, at Sunrise Dam due to the comprehensive work changing from open cut to underground, the mining efficiencies have been the priority. The site has reduced unit mining costs by greater than 40% and increased total ore mines to 2.75m tonnes per annum. Now the resource conversion at Vogue ore body, ore-sorting and ore handling infrastructure is becoming a more important consideration for future mine life.

At Tropicana, the continuation of a regional exploration program to fulfill life of mine requirements and backfill sequencing of the pits to optimize mining costs.

Siguiri mine, access to Area 1 which is a community and government affairs priority. The pre-feasibility for the combination plant is completed and we're now finalizing the feasibility work. Work continues on optionality of the remote ore bodies at Koun Koun and Saraya.

In the Geita mine, mobilizing an underground contractor for the Star and Comet ore bodies by end of 2015. Evaluation of other underground options with design and exploration work ongoing.

At Iduapriem, spent heap leach [net] testing is complete and confirming exploration potential Block 1 and analyzing mill throughput improvements.

Serra Grande in Brazil is reviewing the cut-off grade options that can potentially improve head grade but we must assure ourselves of the ore body capability. The development of the Inga ore body in defining the Palmeiras South Sul ore body are a critical path to Serra Grande.

Within the [iron quad] in Mineracao, maximizinng the ore body capability of Lamego and exploring the satellite ore bodies of Cuiaba the quartz veins and hanging wall and footwall and testing ore sorting opportunities.

With our portfolio projects in Colombia we've continued to reduce holding costs while maintaining optionality, completing the concept study at Quebradona and limited drilling of the current resource. At Colosa the pre-feasibility is in a phased approach with ability to manage the level of spend. At Gramalote the EIA has been submitted, comments received from federal government, and the pre-feasibility has been updated.

As you can see, there are tremendous options, opportunities and outcomes that we can manage within this suite of assets.

So with that said I will now turn you over to Graham Ehm.

Thanks, Ron. Today I'll provide an update on Kibali and Obuasi, share some of our thinking around business and mine planning and share some of the good results that are coming from exploration.

On slide 24, I have commented previously that phase one of Kibali's development has been completed. Remaining elements are two hydropower stations and the shaft. The Ambarau hydropower station is about 70% complete and will commence power generation in quarter 3. Detailed design of the Azambi station has just commenced and will be built during 2016.

The three hydro stations will have an installed capacity of 44 megawatts and generate power at a cost of a $0.015 per kilowatt hour.

The shaft bottom at 760 meters was reached on July 23, about three months ahead of planned. Fit-out will take until quarter 1 2016 followed by construction of the crusher chamber and load level leading to ore hoisting around mid-2017.

On slide 25, at Obuasi, the limited operating phase remains on track producing gold from the retreatment of tailings and the remnant stockpiles. The team is very focused and doing well and produced 14,000 ounces this quarter and 31,000 ounces year to date. Development of the decline is continuing to progress according to plan and the feasibility study is also on track for completion by yearend.

The study reached an interim milestone this quarter with the completion of the draft study. Even at today's spot price the results were sufficiently encouraging to warrant us continuing to optimize the study and think through execution planning and risk management. We have also commenced engagement with the government of Ghana on the key issues on which we would need to align for any future development of Obuasi.

In regard to the portfolio on slide 36, I'll spend a little bit of time here. This chart illustrates AngloGold's portfolio in terms of annual production, all-in sustaining cost and reserve size in bubbles. You'll see that several operations are below $800 per ounce, a few are between $900 and $1,000 and some are still above $1,000.

In Ron's presentation, you would have noted the results of the very good and effective work that has been done to improve the all-in sustaining costs over the last two years. Having made significant progress through cost management and a range of efficiency improvements, the next step is achieved through working the mine plans to achieve lower-cost mine configuration.

Each mine has a unique set of characteristics, driven by the ore body capability that drives the achievable range in production, capacity and costs. Now, our aim is to move the all-in sustaining costs of all the operations to at least below $1,000, and preferably below $900. Every ounce produced needs a healthy margin at today's spot and should be resilient at a lower gold price.

To get the next tranche of cost reductions, we need to look at the mine plans and think outside the box. I'll use a few examples to share what we are doing. Before I move off this chart, you'll note on the chart where we think Obuasi will land, in a similar position to that of Geita.

On slide 27, in Tanzania, Geita's costs are very good, and we want to keep it that way. Cutbacks are expensive, and if you're not careful, can introduce high-cost ounces into the production schedule. At Geita, we have reworked the mine plan for the next six to seven years.

We're considering an option to remove two of the high-cost cutbacks, Cutbacks 9 and 10 and the redesigned Cutback 8 to reduce short-term exposure to the gold price, retain the low all-in sustaining cost and improve medium-term cash flow. With this approach, ore that was scheduled to be mined by Cutbacks 9 and 10 would still be available in the future via underground methods or a cutback at higher gold prices.

On slide 28, we have been in operation at Sunrise Dam for almost two decades and transitioned to solely underground mining early last year. You'll note that on the portfolio slide, Sunrise Dam's costs are above our target.

Driving costs down can be more challenging in an underground environment, where there is often less flexibility. The Sunrise Dam's costs are above our target. Driving costs down can be more challenging in an underground environment, where there is often less flexibility.

The Sunrise Dam team have been successful in delivering a plan to progressively lift underground ore production through the application of intensive geological work, which is utilized partially drilling for great control and bulk mining methods, complemented by significant improvements in mining productivity.

We are currently running at an annual rate of 2.7m tonnes per annum and reduced ore mining costs substantially, as demonstrated in the chart in the slide. Over the next few years, mining will progress to the Vogue area, which is progressively deeper than the current ore body. To further improve costs, the team is aiming to increase the production rate to above 3m tonnes per annum and are examining an inclined conveyer system to reduce ore hauling cost.

On slide 29, at Tropicana, we are continuing to look at ways to improve the site's performance and reduce costs. A grade streaming approach has been used in the first three years of the operation to leverage the payback period and returns.

As we approach 2017, the focus now is on offsetting the gradual drop in grade by optimizing the performance of the process plant through targeted exploration and through mine design. Exploration has been successful in demonstrating the down-dip continuity of the ore body at the contiguous Havana, Tropicana and Boston Shaker pits.

Down-dip presents a challenge with the costs and scheduling of conventional cutbacks. We are studying an alternative low-cost approach by adapting the strip-mining method that is commonly used in coal and sand mining. This work is considering a starter pit, followed by strip mining of a large cutback, with a progressive backfilling of the mined-out areas. The cutback could be as deep as 400 meters. This approach would extend mine life considerably. It would reduce stripping costs substantially due to in-pit dumping and shorter haul distances, keep cash flows much lower, compared with the traditional approach to a major pushback.

On slide 30, I'd like to share a few comments on brownfields exploration. Firstly, at Geita, all the main ore bodies at Nyankanga, Geita Hill and Star and Comet continued down dip. At Star and Comet, brownfields' result on the high-grade lodes have been sufficiently encouraging to justify a small decline at the base of the pit to enable underground exploration and trial mining. And this quarter, deeper drilling at Geita Hill returned encouraging intersections of 16 meters at 1.5 and 3.7 meters at 32 grams per tonne.

And on slide 31, at Kibali, exploration continued along the 20-kilometer-long [KZ] structure. Results at Korumbwa intersected a new lode with intersections at 12 meters and 24 and 30 meters at 3.7. At Pakaka, which is just near the airstrip, further drilling returned a number of significant intercepts with significant widths and grades ranging from four to 11 grams per tonne.

Thank you, and with that, I'll hand over to Christine.

Thank you, Graham. Good morning and good afternoon, everyone. As you can see from another strong set of results, our second quarter's performance reflects our sustained operational delivery, again beating market consensus views.

These numbers reflect the strength of our portfolio and continue AngloGold Ashanti from the majority of our peer group. The global macroeconomic environment remains volatile, with downside risk, but proceeds received from the sale of CC&V enhances our liquidity and reduces our net debt, providing the much-needed buffer for volatility. I'll now talk through the detail of our second quarter performance, concluding on the third-quarter and full-year outlook.

Moving to slide 33, AngloGold Ashanti is uniquely positioned compared to our peers due to our geographic diversification and our exposure to a basket of currencies. Our basket of currencies cushioned the drop in the US dollar gold price in 2015. The US dollar per ounce gold price dropped by approximately 8%, while on a production-weighted basis, AGA was positively impacted by 2%.

Weakening currencies in South Africa, Brazil, Argentina and Australia cushioned the US dollar drop in the gold price. Given its production weighting and the rand depreciation, South Africa comprises roughly one-third of the currency basket. This benefited our results in addition to the positive impact of lower oil prices, which helped lower cash costs in the continental Africa and Australia regions.

Moving on to slide 34, which deals with the quarterly financial and operating metrics, as we've heard from Venkat, we've delivered ahead of guidance on our overall production and cost targets, despite the safety stoppages that affected our South African operations due to good performance from our international operations. Notwithstanding an 8% weaker gold price and 8% lower production, we continue to deliver a strong cost performance, underpinned by a 12% reduction in all-in sustaining costs.

The $124 per ounce reduction in all-in sustaining costs was well supported by improved operational deliveries, our cost optimization initiatives, whilst we saw significant benefit from weaker currencies and lower oil prices. In addition, while there has been a lag in sustaining capital compared to last year due to the safety stoppages in South Africa, there has also been positive currency effects on capital expenditure.

We remain sensitive to the oil price and currencies and confirm our sensitivities at budgeted oil and exchange rate assumptions, which we issue with caution. Just to recap, for every $10 per barrel change in the average Brent crude oil price, it will impact our cash costs by $8 an ounce, while a 1% weakening in our currency basket will positively impact cash costs by approximately $6 an ounce.

Adjusted EBITDA was solid at $391m for Q2, despite lower gold price and lower ounces sold. Free cash flow before financing costs was $130m, compared to $98m last year. The big swing in free cash flow from last year was due to the positive impact of working capital movement as a result of the decrease in receivables resulting from tax recoveries in continental Africa and an increase in payables due to timing.

Net debt levels increased marginally to approximately $3.1b at June 30, compared to levels in June 2014. Net debt levels against March 2015, however, reduced by $74m resulting from the free cash flow generation. Following the receipts of the CC&V proceeds on August 3, net debt reduced to approximately $2.3b on a pro forma basis.

Moving on to slide 35, all-in sustaining costs showed steady improvement over the past five quarters. As we've heard from Ron, Chris and Graham, we remain focused on increasing cash margins over this period through a focus on cost discipline with further improvements in operational excellence, even in a decreased gold price environment.

We've reduced all-in costs by over $1,100 per ounce from the quarterly peak since 2012, and we've also reduced approximately $625 per ounce from our all-in sustaining costs, again, from their highest levels to where they are now. This has largely been driven by the improvement in cost performance by the international operations, which was covered by Ron. The extent of this reduction relative to where we were and our ability to absorb pressures and sustain this over 10 quarters stands out in our peer group.

Moving on to slide 36, despite overall lower production levels due to Obuasi's transition to limited operations phase and the disposal of Navachab, as well as the safety-related stoppages in South Africa, we were able to reduce all-in sustaining cost per ounce by $124 per ounce in Q2.

The reduction in all-in sustaining costs comprised of efficiency improvements of $73 an ounce, which included oil price benefits of $25 an ounce. In addition, there were currency benefits of $87 an ounce, as well as lower inventory levels of $27 per ounce. These benefits were offset in part by inflation, as well as volume and grade issues.

Sustaining capital is down by $20 an ounce, mainly relating to Obuasi, now in limited operations, regulatory stoppages in South Africa. There were also changes in the mine plan at Iduapriem, and we also experienced some currency benefits.

We are experiencing some catch-up in -- certainly, we're expecting some catch-up in sustaining CapEx in the coming quarters that followed due to the timing of some expenditures and increased sustaining business CapEx, particularly at Geita, which is forecast for the rest of the year.

I think quite importantly is we do expect to remain within the overall capital expenditure range. However, depending on currency assumptions, we are expecting to bank some of the currency benefits as permanent savings. Our full-year guidance on capital expenditure has been reduced by $100m due to CC&V disposal.

Moving on to slide 37, which deals with the year-on-year adjusted headline earnings movements, we saw that normalized adjusted headline earnings declined by $50m compared to last year, mainly as a result of the lower ounces sold. As we can see from the slide, the positive currency effects more than compensated for the drop in the gold price and inflationary pressures. The special operating items mainly relate to Obuasi's care and maintenance charges.

In the announcement, we do point out that there was a higher amortization charge compared to the previous quarter, and that result is mainly due to deferred stripping at Geita, and these occurred for two reasons. One relates to timing, and the second reason really relates to changes in the accounting standard. Previously, these kinds of costs of amortization could be amortized over the life of the mine. Now, we've got to treat it according to components accounting, which means that it's going to be amortized over a particular section of the mine, which does introduce income statement volatility.

Moving on to slide 38, which deals with our financial flexibility. Our net debt to EBITDA ratio of 1.94 times at June 30 reduced to 1.44 times in August, following the receipt of the proceeds from the CC&V disposal. We have achieved our medium-term leverage target of 1.5 times, which compares favorably to our peers and positions the Company well to withstand the gold price volatility, as well as production disruptions within reason.

Just to contextualize the potential impact of production disruption in the South African region, bear in mind than on an annualized basis, and this is based on the actuals for 2014, at least 72% of our EBITDA is generated by our international operations. More importantly, for Quarter 2 in 2015, more than 80% -- so in actual fact, 84% of our EBITDA was generated from international operations. Hence, the geographic diversification of our portfolio continues to enhance our resilience to this risk.

Our liquidity of $2.5b has strengthened due to the proceeds received from the disposal of CC&V. In addition, we have increased our rand RCF facilities by ZAR1.4b post the quarter end to provide additional liquidity in the event of a production disruption in South Africa.

We continued to maintain significant headroom, and our debt maturity profile remains long dated with no material bond maturities due until 2020. We continue to see the redemption of the high-yield bond as an opportunity, bearing in mind that the issuer's call can only be exercised from July 2016 onward at our discretion.

Cash is king in the current environment. We have ring-fenced the CC&V proceeds for debt reduction, and we will continue to focus on optimizing the financing costs in the Group. Our credit ratings remain unchanged at BA3 rating with a negative outlook by Moody's and a BB+ with a negative outlook by S&P.

Finally, moving on to the outlook for Quarter 3 and the full-year guidance for 2015, and it has been rebased for CC&V. Overall, we are maintaining the cost guidance for the year, despite reducing the production outlook due to the CC&V disposal, which is effective from August 1, 2015.

Our Quarter 3 guidance includes one month of CC&V's production and the production outlook for Q3 is 900,000 to 950,000 ounces. The Q3 cost guidance, cash cost guidance, is unchanged compared to Q2 at $770 to $820 per ounce, and that does take into account improved production in the South African region, given the recent safety stoppages in Q2, as well as higher winter power tariffs in South Africa and timing of expenditures.

Our annual production guidance has been revised from 3.8m to 4.1m ounces for 2015, now excluding CC&V from August 2015 onwards. However, cash costs are $770 to $820 per ounce, and all-in sustaining costs at $1,000 to $1,050 per ounce remains unchanged. We've made no provision for power-related stoppages in South Africa and Ghana and any unforeseen operational disruptions.

The capital guidance, which includes CC&V from July 2015 onwards, has been reduced to $900m to $1b, of which 77% relates to sustaining CapEx.

In conclusion, we have consistently delivered on our production and cost targets, and we will continue to look for improvements on our key metrics.

And on that positive note, I will now hand over to Venkat to conclude.

Thank you, Christine. As the slide will show, and I'm now looking at slide number 41, we have built a good track record of consistency and delivery on our quarterly guidance. We have either met or beaten every production and cost target since the current team took charge in early 2013.

We are into our 10th consecutive quarter of consistent delivery, and that's despite numerous headwinds that have been coming at us as a gold-mining company. However, as I reiterate every quarter, mining is a long-term game, and we may lose a quarter or two here and there. But so far, we have certainly banked all of the quarters to date.

Turning to the concluding slide, slide number 42, it's now 36 months since the gold price started to fall from its peak in September 2011. At some stage, this has to reverse and start showing a positive trend, but notwithstanding that, we have been proactive and decisive in our response every step of the way.

An overarching comment when you are looking at AngloGold Ashanti in a falling gold price environment, do bear in mind that we have got ongoing P500 initiatives, which certainly Ron covered and Chris will be implementing in the South African region, which provides an overall cushion in terms of our cash flow generation. And this we measure in all-in sustaining costs, but it's income versus a range of initiatives, which involve improving production, production efficiency and active cost management.

In addition to that, favorable currency exposure and weakening oil prices, which Christine alluded to, will continue to provide a natural cushion for falling gold prices in a partial manner.

And if you look back, as the price has been falling, we have been decisive. We have taken a number of steps, which includes slashing our corporate and speculative exploration costs by more than two-thirds since 2012, using conservative planning assumptions, shelving marginal projects and prioritizing margin over volume, proactively addressing our balance sheet requirement by terming out debt, by loosening our covenant, importantly effecting an asset sale.

In addition to that, we have continued our cost focus in terms of both supply chain and ongoing labor cost across the portfolio, and that has seen our all-in sustaining cost and all-in cost drop significantly, whilst keeping long-term options intact.

In addition to that, going forward, as we get ready to deal with any further drop in the gold price, we will tighten our planning assumptions, as Chris alluded. A focus in South Africa would be around safety and getting our ore [set] development up to recover volume, we will intensify our efforts in terms of efficiencies and costs across the Group to [also] prioritize near-term production, exploration and also look at reducing our Colombian holding costs and potentially optimizing the Obuasi redevelopment schedule.

And in some of the near to end of life assets, which require a significant amount of capital to development, we may choose to harvest these for cash if required in the shorter period. With those concluding comments, I'll hand you over to Stewart Bailey.

Chris, we're happy to take questions now, please.

(Operator Instructions). Andrew Byrne, Barclays.

Hi, guys. I've just got a couple questions on the South African region. I think the international portfolio, the results are speaking for themselves there. If we look at (inaudible) and questions for Chris, is there any chance you could talk us through a recap of the B120 project, give us an idea of timing and CapEx and production and potentially the timeframe and CapEx needed to move that ore reserve back up to the 20% (inaudible) target that you'd talked about?

Andrew, I think first point, as I've alluded to in the presentation, right now, as we speak, a large amount of our focus is really on the infrastructure and the operational readiness of the project, on phase one. As I indicated, we're focusing on 123 level and 126 level, getting the decline operations operational to fully facilitate the production buildup and the medium-term ore reserve development program.

As far as the capital amount is concerned, I don't have that figure right here in front of me at present, and it's something that we should have a discussion on once my first 100 days is actually up, in actual fact, and have a more detailed conversation.

Yes, sure, okay. And then just on Mponeng, you mentioned that you're getting [pinching] out there. Is that due to the actual ore body, or is that due to a boundary constraint? Are there any potential synergies with neighbors that you could look to there? Yes.

Okay, I think first taking out the piece about are there any synergies with adjacent properties, the answer to that would be a no. That's because we are the deepest part of the ore body on the Ventersdorp Contact Reef at this point in time.

Point number two is laterally, there are defined grade limits, which we understand, so I think that's where I would position my answer to you on that one.

Yes, sure. No problems. And then potentially one for Ron. Just on Geita, Christine mentioned the CapEx is going to pick up in the second half. Is there any chance you can just put some numbers around that, just to avoid any shocks in Q3 or Q4?

Okay, if I can just help with the numbers, Andrew, in essence, we anticipate forecast at about $35m stay-in-business CapEx in Geita for the full year, and in essence, we saw that coming through in the first half, about $17m of that. The balance will come through in the second half.

But I think quite importantly, we will be overall staying within the guidance range that we actually put up, and as you know, of the guidance range, $900m to $1b total, 77% of that's being spent on stay-in-business capital in the Group.

Okay. Thanks very much. I'll leave it there.

[Lars Cheti], BlueBay Asset Management.

Yes, hi. Good afternoon. I was wondering if you could give us an update in terms of your capital structure. I think you alluded to it on the call. Obviously, in the past, you've commented on your need to reduce gross debt. You've said that the 2020 bond represents a part of your capital structure that you're not happy with in terms of cost. Has anything really changed in terms of your ability or want to reduce that, given your need to retain potentially excess liquidity in light of a declining gold price? That's my first question.

And then the second question I had is, given that you are facing fairly mature operations in terms of your portfolio, have you reconsidered the need to kind of hedge your gold price exposure? Thanks.

I think from a capital structure perspective, we've always said that the high-yield bond is an opportunity for us, and as you know, that the call option is due from July 2016 onward. We are focusing on how we can reduce the interest bills from a Group perspective. About just over $100m of the $250m interest bill does relate to the high-yield bond.

In the current environment, I'd just say cash is king, and I think once there's more stability in the gold price outlook, we would be looking at opportunities of how we can reduce the interest bill. What we have done post the quarter end is that we actually have repaid the broad amount of the US dollar RCF facilities. About $200m was actually drawn, and we've repaid that, but as I think quite importantly is the $4b of the US dollar facility will be available to us, so we're keeping our powder dry on that. And I think that's all I'd like to say that's at this point in time.

I think importantly from a gold price hedging perspective, we're not making any fundamental changes from that perspective, and as Venkat and I spoke to in the presentation, there is a natural hedge as relates to the gold price, very strong correlation in terms of the currency basket that we're exposed to. It's only really continental Africa that actually doesn't benefit from the currency aspects, but the rest of the portfolio actually does.

And then, of course, in a low gold price environment. One actually does experience the lower oil prices, lower inflationary effects coming through, and clearly, there is a bit of a natural cushion with relation to that.

Right. On the earnings call, you mentioned that you've ring-fenced the proceeds from CC&V. What do you mean by that?

It means that the proceeds is being kept in dollars offshore, between the Isle of Man and the United States at this point in time, and so it's ring-fenced for debt reduction, so it will not be applied to any projects-related capital.

Right, okay. Given that the call price on the bonds is 106 and they're trading below that, would you look to potentially move ahead of the call option next July? Or are you more inclined to retain liquidity and see if the gold price stabilizes?

Yes, I think like I've said, we would be looking at that from July of next year onwards, and clearly, the current gold price environment does make us want to hang onto the cash, and I think that's where I'd like to leave it.

All right. Thank you.

Thank you.

(Operator Instructions). [Anand Jha], Copal Amba.

Good afternoon, guys. Thanks for taking my questions. I have two questions. Would it be possible for you to give us a break up between your sustainable CapEx and development in CapEx and the guidance which you have given?

And second question, if I look at the guidance for your total cash cost and all-in sustaining cost this quarter and compared with last quarter, while the currency assumptions for currency active in weaker currencies and lower crude oil prices, your cash cost of operations, you have not revised that guidance. Can you give some color on that? Thank you.

Okay, thank you for the question. I think I'd just speak to capital and the capital guidance for the year, and I said 77% of the range, so the $900m to the $1b capital guidance, 77% of that is relating to sustaining capital. So then the balance, 23%, would be relating to project capital.

As regards the outlook for the year, yes, it is based on stronger exchange rate assumptions than what we've experienced, and if you look at the commodity prices that we've actually used, particularly the oil price, we've also assumed the higher assumption than what it's trading at for both Q3 and for the remainder of the year. And hence, that actually does factor into our cash costs and all-in sustaining costs outlook for the year.

I think quite importantly is we are quite cautious. There's still six months of the year to [flow], and I'm talking about on the numbers that we've actually reported on. In addition to that, we've always experienced a big lag when it actually comes to capital expenditures, so there's normally quite a bit catch up in Q3 and in Q4. And then there are some wage negotiations, as you're aware, that's actually underway across jurisdictions, also in continental Africa and those increases have to be backdated into the beginning of the year.

So it does factor some of that in, so we are conservative, and so clearly there is a little bit of a buffer that's actually factored into that outlook, as well. But as I've also said on my outlook slide, we actually certainly look and we focus on how we can actually improve on the guidance that we do actually give, and so the focus will remain there.

Thank you. I have just one more quick question, which is related to a question asked earlier. Given the fact that your 2020 bonds are trading at around $1.024 to a dollar and they're callable at $1.0624 to a dollar next year in July and that you have sufficient cash balance and undrawn credit facilities, does it not make much financial sense to call in the bonds or make a tender offer for the bonds, so now even after, say, 10%, 15% payment?

Yes, I did answer the question previously. I think it's important for us to retain liquidity in the current environment. We're obviously focusing on how we can reduce the interest bill, and so certainly that focus will remain, but like we said, the target does remain the high-yield bond and when the call option is actually do, and it's from then onwards, so there is flexibility even after July next year.

That's. That's clear.

Thank you.

Harry Mateer, Barclays.

Hello. Two questions, I guess. First, just as it relates to the ongoing labor (technical difficulty), can you just give us a roadmap of some of the key dates and events (technical difficulty) forward?

Sorry, Harry. Your line is breaking up at the moment. We can't hear it. It's sort of coming in, actually.

Sorry. Perhaps this is better. So just two questions. First, as it relates to the ongoing labor negotiations in South Africa, can you just give us a roadmap of the key dates and events we should be watching for from this point forward?

Okay, let me pick that up. Typically, what happens is we started negotiating sometime in June. Initially went through to July, where in August, certainly one of the unions has formally declared a dispute and is taking it to the CCMA.

Typically, a CCMA process, and this is the Council for Mediation and Arbitration, established under the labor regulations in South Africa -- the process can take anything from two days to around 30 days. In practice, it tends to take closer to the 30 days than the two days.

So, certainly, over the next four to five weeks, you will have news flow coming out of that, and at the end of 30 days, a decision will be made by the CCMA in terms of the way forward.

Okay, great. Thank you. And then second question, just I know there have already been some questions on debt reduction, but just to put a finer point on it, perhaps, should we take your comments to mean that you are focused on retaining cash right now? And as a result, you really are just looking at the high-yield bonds next year and not reducing any debt under the credit facilities at present?

Well, yes, you've [fronted] that correctly, but I think quite importantly is we're keeping app options open at this point in time. Cash is king.

And, Harry, just another point is Christine did reference the fact that we have paid down $200m on the US dollar [half year].

Yes.

Got it, and then what about the Aussie dollar facility?

No. No, for Aussie dollar, obviously, it still remains intact. There has been some debt repayment as regards that in the past quarter, but there's about $270m still undrawn as regards the Aussie dollar facility at this point in time.

Got it, thank you.

Thanks.

Tanya Jakusconek, Scotiabank.

Yes, good afternoon, everybody. Maybe some questions for Christine. Just on your slide page 46, you show your June quarter over your prior quarter, so Q2 over Q1, and you show the $11 per ounce benefit from exchange. What about your fuel? Where's your fuel in this, and how much was that?

Yes, so I did talk to it in my slides. The fuel benefits have been offset, and this is actually June quarter versus prior-year quarter, but I think some of that has actually been offset in the special receipts block over here.

I'll just say in the year-on-year figure, I don't have the outright number on quarter on quarter, but if you compare the current year to the prior year, it was about a $25 benefit that was included in the efficiency gains that is actually referred to within that. You're referring to the backup sides?

Yes. I'm actually interested in June over Q1, because a year ago is a long time ago, and oil is very different. So maybe if we could get someone to get us back the -- what did we offset?

We can get back to you on that. Obviously, there would have been oil benefits actually coming through, and --

Exactly.

-- that you have that.

Yes, and I think we had for you combined for Q1 currency and fuel helping you by $25 an ounce, so I'm just trying to see what that number would be in Q2. And then maybe, Christine, just on some of your other holding costs, what are your holding costs right now for Obuasi, Colosa and some of the other assets that you're trying to reduce some of these holding costs? What are they, annually, so we understand what's it costing you to hold them?

Actually, Tanya, if I can pick it up, the holding costs we have provided is only in respect of 2015, when we took Obuasi into limited operating phase. And if you recall, we said from a profit and loss account point of view, you've got about $100m for Obuasi. That's around $60m of care and maintenance, and then $30m in terms of underground development and $10m for the feasibility study.

That is just for 2015. We have not given any forward-looking numbers for 2016, because that's really a function of whether the project goes ahead or it doesn't go ahead. It could change materially. That's in respect of Obuasi.

The second, in respect of Colombia, I'd like [John] and Christine to come in. It's around just north of $80m in terms of our holding cost for 2015. Going into 2016, we will look at reducing that quite significantly, and work is underway in that regard.

So you said $80m, eight-zero?

Eight-zero, that's correct.

That's actually across all of the projects in Colombia, and it will produce greenfield exploration of about $15m there.

Correct.

Okay, perfect. Thank you.

Thanks very much. Thanks very much, ladies and gentlemen. That's all we've got time for today. Thanks for making the time, and we'll chat to you again in three months.

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