Anglogold Ashanti PLC (AU) 2017 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to AngloGold Ashanti's Second Half 2017 Results Conference. (Operator Instructions) Please note that this conference is being recorded.

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

Thanks, Judith, and welcome, everybody, to this conference call for our full year and second half results for 2017. I'll quickly read through the disclaimer, and then hand over to Venkat to make some opening comments.

Certain statements contained in this document other than statements of historical facts including, without limitation, those contained in the economic outlook for the gold mining industry, expectations regarding gold price, production, total cash costs, all-in sustaining costs, all-in costs, cost savings and other operating results, productivity improvements, growth prospects and 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 completions of acquisitions, dispositions or JV transaction; 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 our actual results, performance or achievements to differ materially from those anticipated results, performance or achievements expressed or implied in these forward-looking statements. Although we believe that the expectations reflected in such forward-looking statements and forecasts are reasonable, no assurance can be given that these expectations will prove they have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of, amongst other, changes in economic, social and political and market conditions, the 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 and operational risk management.

For a discussion of these factors, refer to our Annual Report on Form 20-F filed with the U.S. SEC. These factors are not necessarily all of the important factors that cause 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. And consequently, you're cautioned not to place undue reliance on forward-looking statements.

We undertake no obligation to update publicly or release any revision to these forward-looking statements to reflect events or circumstances after today's date or to reflect the occurrence of unanticipated events, save to the extent required by applicable law. All subsequent written or oral forward-looking statements attributable to the company or any person acting on its behalf are qualified in these cautionary statements.

Financial information contained in this market update presents -- presentation has not been reviewed or reported on by the company's external auditors.

The communication may contain certain non-GAAP financial measures. We use these measures and ratios in managing our business. Non-GAAP financial measures should be used in addition to and not as an alternative for the reported operating results or cash flow from operations or any other measures of performance prepared in accordance with IFRS. In addition, the presentation of these measures may not be comparable to similarly titled measures other companies may use. We post information important to investors on the main page of our website. You should read it.

Thanks, Venkat.

Thank you, Stewart. Good morning all. In terms of the running order, I'll provide an overview and I'm sure you've got a copy of the presentation before you. I'll then pass the microphone onto Ludwig to walk us through the performance of the international operations, then followed by Chris for the South African operations; Graham talking about the projects, and in particular, spending some time on Obuasi; and then over to Christine on the financials; and then back to me to conclude.

So if I can kick off with Slide #4. Given the ground that we'll be covering today, I won't spend too much time on this slide. Suffice to say, our strategy is steady as she goes, with our focus on safety, active portfolio management and tightly managing cost and capital to keep our balance sheet robust enough to handle any market environment. We are and will continue to invest for the longer term. All of these business pillars support our central objective of improving cash flows and returns on a sustainable basis.

Turning to safety on Slide 5. It was perhaps the highlight in the first half of the year when we passed 349 days without an operating fatality at any of our mines. That includes the ultra-deep operations here in South Africa. Similarly, it's difficult to articulate the disappointment that we didn't extend that further after a series of seismic events in South Africa ended that run in the second half.

In reflecting, it's clear what remains possible with Mponeng, the world's deepest mine, passing 2 million shifts without a fatality; TauTona marked more than a year without a fatal accident, which I'm happy to say is a feat that a number of our operations can now claim. In fact, our entire international operations passed 495 days without a fatality, a remarkable achievement, and again, a record within AGA.

We also ended the year with another improvement in our all-injury frequency rate. As Chris Sheppard is always quick to remind us, that safety is a journey rather than a destination. It's a point we'll never forget as we continue on the path of eliminating all injuries from our mines.

Turning to Slide #6. A quick run through the highlights shows that we have an exceptionally strong fourth quarter, which helped us deliver a very good second half of 2017. Production was up 7% year-on-year to over 2 million ounces for the second half, but we managed to drop all-in sustaining cost by $20 an ounce, based largely on a very good cash cost performance at our key assets. This all came despite stronger currencies and higher fuel prices. That drove an excellent cash flow performance of $231 million before allocating growth CapEx, which continues to keep our financial flexibility intact.

Turning to the full year on Slide 7. We saw our investments across the portfolio help to deliver production growth at around 4%. Cash flows were also strong despite the higher CapEx here that we flagged well in advance as we put money to work internally, extending life at our best assets and improving margins where possible. Those projects all stayed well on track and within our budgeted projections. If you recall, we flagged close to $1 billion to $1,050,000,000 as the capital expenditure for 2017, and we came in at $953 million.

Graham will talk through our reserve additions where we managed to offset that vast majority of depletion and keep our mineral inventory steady despite the strong production performance which, of course, depletes ounces. Notable here is our maiden attributable reserve of 1.8 million ounces at Gramalote in Colombia, which we believe will be the first of many more over time as we start to bring this important jurisdiction to account. We will, during the feasibility study period and beyond, ensure that we optimize all key metrics of the project, including capital.

This is an important longer-term option for us and we will keep all avenues open to realize value from this asset. It is very important to note that there is still some way to go on this project and we are a long way away from approving any project capital.

The strong overall performance helped us declare a dividend again, answering some of the questions around our ability to reinvest and offer a direct return, albeit a modest one. Just to repeat what I've said this time last year, the dividend really is a way of instilling capital discipline into the business, giving back the first slice of cash to the shareholders before reinvestments.

Turning to Slide 8. As you can see, we shared an ambitious list of priorities with you this time last year, and I'm happy to report we have covered very good ground in fulfilling those obligations. Safety has improved. We have moved our capital projects closer to development according to our plans. We've improved EBITDA margins and saw solid exploration success. All of this has been underpinned by a strong balance sheet that weathered the cash calls for reinvestment. We made real progress on the restructuring of our South African businesses, agreeing the sale of Moab and Kopanang and taking the tough decision to place TauTona in orderly closure. This process, as you can appreciate, is complex but necessary as it has been navigated exceptionally well with appropriate respect and sensitivity by our corporate and operating teams. The 2-sale transactions, Moab and Kopanang, are expected to close shortly, given that the key regulatory conditions have now been met, and Chris will expand on this further.

Colombia is edging up the value curve at a lower cost as promised and is at the forefront of another solid exploration performance. Perhaps the most notable point is our decision to move ahead on the development of Obuasi, which is a fundamentally reengineered project that we believe is one of the more attractive projects from a return perspective and a capital-intensity perspective within the industry, and it comes with the support of the host government. And as a footnote here, we once again distinguished ourselves by passing yet another year without diluting shareholders through equity issuance. This is something we have managed since 2010, placing us in an increasingly exclusive club.

Slide 9 shows what we have delivered in terms of consistent performance. We have worked hard to make consistency, reliable delivery on our commitments and capital discipline the hallmark of the company over the past 5 years. The slide shows that we continue to be true to that aim with production, costs and capital all meeting or beating our market guidance every year for 5 consecutive years, and that is despite considerable headwinds and volatility coming at us each month. We are of the firm opinion that this is the absolute minimum required to achieve the rerating of our equity, and we will continue to ensure we set challenging targets and then provide the right environment for our operators to meet them.

With those introductory comments, I hand you over to Ludwig.

Thank you, Venkat, and good day, everyone.

When I took over as Chief Operating Officer for the international business last year, I had the great privilege of taking charge of a focused, well-run set of assets. We hit the ground running in 2017 and made great traction in improving on that base, but, as always, we realize increasingly that there remains a lot of potential for us to get to. I'll touch on that in a moment.

Looking at Slide 11, production increased by 7% during the year, with higher grades from Siguiri, Iduapriem and Geita. The Americas region saw growth in throughput level, and Australia significantly improved as Tropicana registered a 10% increase in mill throughput. And Sunrise Dam saw better grades and recovery rates. We also have some exciting potential opening at Sunrise where, if you can remember, we spoke in August about Butcher's Well prospect about 20 kilometers away, where we are investigating the potential of a new run of mine ore source to displace the 600,000 tonnes of marginal stock a year that we are putting through the plant.

Well, you may have seen that Saracen, our partner there, put out some excellent high-grade drill intercepts last week that shows significant and growing potential at Butcher's Well and also, at the Mt Minnie zone. This is shaping up as a potentially high-grade source of oxide ore at surface that could provide a significant boost to margins at Sunrise.

All-in sustaining costs for the region remain somewhat contained at $972 per ounce, up just 5% despite inflation, currency pressures as well as some major reinvestments relating to the portfolio. We will see the benefits of these capital investments during this year and years to follow.

And finally, it's important not to forget Kibali. We've had an excellent year in 2017 given its strong finish. We are also expecting a good increase in production this year with a drop in cost.

Turning to Slide 12. As you can see here, we've been able to preserve a healthy margin from our international operation even as we reinvest into the business and see outside cost pressures creeping in. To remain competitive, we recognize the next step will come from actively working to increase our margins by reducing our costs where we can and being intentional about prioritizing cash flows at every level of the business.

Slide 13. We remain focused on maintaining the trajectory of continuously improving on a solid set of assets. Our strategy is centered on the premise that we create a value from every angle possible, whether it be from cost savings or opportunities for additional ounces, exploration to extend our mine lives and to the grade options or reinvestment in high-return brownfield opportunities.

On the cost front, we will continue to strive for further achievements, particularly in Australia and Brazil. We are working hard to offset the combination of natural mining inflation in addition and currency pressures. Our exploration efforts continue to translate to a higher value across the asset base, and Graham will cover our achievements later in his presentation.

Turning to Slide 14. Going into 2018, we will continue our vigilance around costs, and as we believe that the right focus on costs will help us to deliver the maximum potential of each asset and help us deliver maximum cash flow performance from the portfolio. This requires us to provide the right set of tools and technical support to our GMs and their teams that help them identify, understand the critical metrics, establish proven best practices, streamline structures, improve planning and sustain cash flow.

What you see on the slide is an illustration of how we are tackling the issue at each mine, first, by targeting the key value drivers or areas that we will deliver the biggest, most sustainable uplift in value. We have also conducted a very thorough benchmarking exercise, where we have global best practice operating metrics in each of those key areas. That allows us to properly gauge the optimal potential of each asset. As much as we have already squeezed a lot of the value out of this portfolio, which is operating better than it ever had in most areas, we can see considerable additional value to be added. I believe in under-promise and over-deliver and would like to urge you to keep a close eye on our cost numbers over the next 12 to 18 months. We believe that we can offer a pleasant surprise in this regard.

On that note, I'll hand over to Chris.

Thanks, Ludwig. Good afternoon, ladies and gentlemen.

Referencing Slide 16. 2017 was indeed quite a transformational year for the South African region with the restructuring that will allow us to safely return this business to profitability and a sustainable future. We've obviously also been very sensitive to the need to minimize job losses throughout that process. During 2017, the South Africa region produced 903,000 ounces of gold at a cash cost of $1,085 per ounce, which included the impact of a reclassification of certain capital costs to operating expenses at our assets undergoing orderly closure.

All-in sustaining costs were $1,245 per ounce compared with $1,081 per ounce for the year ended December 2016. The year was negatively impacted by a slow start to the year, along with higher dilution, lower feed grades across the asset base, inflation and currency pressures. Importantly, though, we saw grades at Mponeng recover to average 8.54 grams per tonne during quarter 4, so we're starting to see the good potential that exists as we get further into the Below 120 project ramp-up.

Regarding Phase 1 of the Below 120 project, the completion of the decline system below the current secondary shaft is on track for completion around midyear, which will position us to access deeper, higher-grade ore, which will help grow production by about 10% this year. At TauTona, the final blast took place in September and the Section 189 process has been essentially completed and orderly closure activities have commenced.

We continued operating Kopanang, pending the disposal of the mine, in terms of the sale agreement. Mine Waste Solutions saw a 19% increase in production year-on-year, thanks to high grades from the sulphur pay dam and east tailing storage facilities, along with better gold recoveries.

Briefly touching on the safety performance, as Venkat mentioned, safety is a journey for us. Fatal events in the fourth quarter marred a year where we've achieved safety records of our business -- or for our business in the ultra-deep gold mining industry of South Africa. The potential for risk and seismic activity remains a dark cloud over our intensifying safety practices. We aim to achieve even greater records into 2018 by further stepping up our game when it comes to our focus on reducing high-potential incidents, refining daily work routines and embedding safe best practices into our safe production culture.

Regarding the Moab and Kopanang sale of assets, on the 19th of October last year, AngloGold Ashanti announced the sale of the Kopanang mine and related infrastructure to Heaven-Sent SA Sunshine Investment Company Limited, which owns 74% of Village Main Reef and which operates the Tau Lekoa mine. Under the sale agreement, one of the conditions precedents was for the new owners to conclude an agreement of AngloGold Ashanti and the employees' organized labor representatives to determine the number of existing employees who would continue to work at the operations after the change in ownership comes into effect. This agreement was concluded on the 16th of November last year. It is anticipated that about 3,000 employees of the total workforce of some 3,600 were transfer to the new company, Heaven-Sent. AngloGold Ashanti will honor its undertaking to pay accrued severance packages to all affected employees of Kopanang immediately following the conclusion of the sale transaction.

The Kopanang sale transaction is conditioned upon certain conditions precedent being fulfilled, including Section 11 and 102 and Competition Commission approvals, which have all been achieved. The completion of the Kopanang sale transaction is anticipated imminently.

Additionally, on the 19th of October last year, the conclusion of the sale agreement for the disposal of the Moab Khotsong and Great Noligwa mines and related infrastructure to Harmony Gold Mining Company Limited was announced. This transaction is also subject to conditions precedent, all of which, including Section 11 and 102 approvals, Competition Commission and tribunal approvals and the Harmony shareholder approval have all been achieved. Consequently, the Moab Khotsong and Great Noligwa sale transaction will close imminently.

Turning to Slide 17. We are entering 2018 with a simpler, more sustainable portfolio in South Africa, consisting of the long-life, world-class Mponeng mine in the West Wits region, along with our surface operations consisting of the long-life Mine Waste Solutions tailings retreatment operations and the surplus rock-dump reclamation operations. Accounting for just under 15% of our group production on a pro forma basis, our now streamlined business in South Africa will allow us to shift our focus and energy away from managing marginal ounces to a tidier portfolio with increased operating stability, intensified safety efforts and the margin growth opportunities as the Mponeng Below 120 project ramps up.

Phase 2 of the project, currently under evaluation, would deepen the secondary shaft to further extend its life. With a 12.2 million ounce ore reserve and a 50 million ounce mineral resource base at Mponeng, we look forward to new exciting prospects at Mponeng in the decades to come.

I'll now hand over to Graham.

Thanks very much, Chris. Good morning all.

Today, I'll focus on our 2017 ore reserve and mineral resource statements and relate this to the expected mine life for some of our key operations. I'll briefly cover our project pipeline and then spend a fair bit of time on the Obuasi redevelopment project, which has been approved for implementation.

I'm on Slide 19. The gold price used for our ore reserves is $1,100 an ounce and $1,400 an ounce for mineral resources, unchanged with the last few years. I am pleased to report that our focus on exploration has substantially offset depletions of approximately 4.3 million ounces in 2017, and our reserves are maintained around 50 million ounces.

Today, we published the maiden ore reserve for an attributable 1.8 million ounces for Gramalote in Colombia following the completion of the pre-feasibility study. On a 100% basis, the project aims to produce a total of 4.2 million ounces over the mine life, with annual production ranging from 300,000 to 450,000 ounces per annum. Gramalote would be a large open pit project. And due to low strip ratio, very favorable metallurgy and the availability of ample low-cost power, the operating costs are low and the project returns are favorable. Please refer to a separate release, which provides more color on the project.

Turning to Slide 20. Mine lives generally extend beyond the published ore reserves. During a mine's operation, a combination of brownfield exploration, resource conversion, operational excellence and mine optimization and price can extend the life considerably compared to that based on the reserve at a particular time. This is even more the case for underground operations. The chart illustrates the expected mine lives for several of our operations and demonstrate that the expected mine life is double or more than that in some cases based on the published ore reserve.

AngloGold has a solid and enviable project pipeline. In the short term, the Siguiri hard rock project, Mponeng Phase 1 and the Kibali ramp-up are delivering production growth and mine life extension. In the medium term, the Obuasi redevelopment, Tropicana's Long Island open pit expansion and Gramalote deliver into the pipeline. A bit further out, the high-grade copper gold project at Quebradona in Colombia, Mponeng Phase 2 and Sadiola sulphides project are on the horizon.

On Slide 22, just turning now to Obuasi. Today, AngloGold is pleased to announce the approval of the Obuasi redevelopment. You will have followed the Obuasi story over the past few years as we worked on optimizing the approach to the redevelopment and worked with the government of Ghana to agree the framework and the conditions for the redevelopment.

I would like to thank the government of His Excellency, President Akufo-Addo, and the Minister of Lands and Natural Resources, the Honorable John-Peter Amewu, who have worked closely with AngloGold to negotiate and agree the relevant system and development agreements, which underpin the redevelopment. These agreements have been signed by government, and ratification is expected during this parliamentary sitting. The board has, therefore, approved interim funding of $31 million, covering the first 6 months of the project, pending ratification.

I would also mention that we have agreed on security measures and the mine's reclamation plan, removing prior material risks to the project. The environmental approvals process has been completed, and we expect to receive the permits imminently.

The Obuasi ore body is truly world-class, even after 120 years of mining. Over the last 2 years, we have totally rebuilt the resource model, validating data, remodeling and reestimating grades. The mineral resource is 34 million ounces, with measured and indicated resources at just over 20 million ounces. The mine has been redesigned, tested and scheduled. Ore reserves are now 5.86 million ounces, representing 68% of the planned production.

Moving to Slide 23. The ore bodies are located within the Ashanti sheer over a strike length of 13 kilometers. The project focuses on the ore bodies from Sansu to Adansi over a length of 8 kilometers. There are 2 styles of mineralization: disseminated sulphides and quartz veins. These coexist throughout the mine, but the sulphide is dominating the South and the quartz vein in the North.

On Slide 24, the mine has been fully redesigned and will utilize some of the existing infrastructure, including the KRS, BSVS and KMS shafts and will require some new infrastructure such as the GC and KM vent shafts and the continued development of the Obuasi Deeps decline. Mining will progress from the shallower Sansu Block 8, Block 10 ore bodies to the deeper Block 10 -- Block 11 ore body with C'dor and Adansi coming in late in the mine life.

On Slide 25, the existing biox processing plant will be extensively refurbished and rebuilt. The plant will have a capacity of 1.9 million tonnes per annum due to the existing major equipment. However, the plant will run at between 21.6 million and 1.8 million tonnes per annum.

One advantage of having the existing plant is that the metallurgy and capacity is well proven. Just before the biox plant was closed in late 2014, the new flotation and biox CIL sections were commissioned and the plant trial was run over 6 weeks, during which we undertook extensive sampling and testing. The plant can treat both sulphide and quartz ores with recoveries in the high 80s.

The redevelopment will take approximately 2.5 years. However, production will commence from the third quarter of 2019 using the existing SAG milling circuit, enabling a milling rate of 2,000 tonnes per day. In parallel, the SAG ball circuit and the rest of the plant will be rebuilt, taking a further 12 months. Production will start at 4,000 tonnes per day in late 2020. The operation will then ramp up to 5,000 tonnes per day over the following 3 years.

On Slide 27, looking at some of the key metrics, I'll only go through a few and I'll let -- leave the rest of those for you to consider. Total production is expected to be 8.6 million ounces over 21 years. There's plenty of scope for optimization and life extension during that period. Average annual production is between 350,000 and 400,000 ounces in the first 10 years and increases to 400,000 to 450,000 ounces when the high-grade quartz areas are mined. Cash costs are very competitive at $590 to $680 an ounce as is the all-in sustaining cost, which ranges from $750 to $850 an ounce.

The project capital cost extends over a period of 6 years. This is intentional to optimize cash flow. The project capital cost is between $540 million and $590 million, with $450 million to $500 million covering the initial 2.5-year period.

Project returns are good; at gold prices ranging from $1,100 to $1,240 an ounce, the IRR ranges from 16% to 23%. At current spot prices, the return is in the high 20s. Note that the care and maintenance needs to continue for 18 months, especially regarding mine dewatering and environmental water treatment at a cost of $57 million.

Turning to Slide 28. The project is quite complex to execute as it involves demolition, extensive refurbishment and new construction. The operating team needs to be rebuilt and operating systems and processes designed for a modern mechanized operation.

Overall governance will be through the AGA Ghana board, which includes 2 prominent and influential Ghanaians and members of the AGA executive team. The Project Director will be Massoud Massoudi, who was the project manager for the successful Tropicana project in Western Australia and has been involved in the Obuasi feasibility study and project planning. The operating team will be led by the AGA Ghana Managing Director, Eric Asubonteng, who has overseen the mine for the last few years, participated in the feasibility study and was instrumental in the negotiations with the government.

Thanks very much, and I'll hand over to Christine.

Thanks, Graham, and good day, everyone.

As we've heard from Venkat and my colleagues, we continue to make progress on our strategic objectives and have delivered a strong performance that is reflected both in our financial and operating metrics. Our financials have been impacted by some significant one-off charges and impairments, but our cash flows and balance sheet remains robust.

I'll now talk to second half and full year performance, Slide 30. The strong performance in the second half delivered production of just over 2 million ounces, up 15% over the first half. This was delivered despite TauTona's move to orderly closure with a 27,000 ounce lower in the second half of 2017 compared to the prior year. We also lost about 50,000 ounces in the second half of the year from our South African operation due to safety-related issues, which was offset by improvements from Geita, Siguiri and our Australian operations.

Our cash costs increase was contained at 1% despite inflation and stronger local currencies on the back of the additional 7% ounces produced. All-in sustaining costs of $1,038 an ounce was down 2% year-on-year, given lower sustaining CapEx per ounce.

Adjusted EBITDA of $872 million was up by 14%, driving the EBITDA margin 4% higher to 37.5%. This is primarily due to higher sales volumes, which offset the currency and inflationary pressures.

Free cash flow for the second half was down 5% at $162 million, and that was after funding about $40 million in retrenchment costs and unfavorable working capital movements.

Free cash flow generation for the year was only $1 million. Again, this reflects the increase in the lockup of VAT at Kibali and Geita, which was about $20 million and $50 million, respectively, and sharply higher capital expenditure.

In line with the reinvestment flagged previously, total self-funded CapEx of $953 million increased by $142 million from last year. Included in this expenditure was a large component of brownfield reinvestment, which will better position our key assets for the future.

Net debt was up marginally at $2 billion compared to December 2016, however, was lower by $150 million from June 2017.

The normalized 2017 effective tax rate jumped to 38% compared to 31% in 2016. The increase in the effective tax rate year-on-year is directly attributable to the significant losses incurred in South Africa, mainly due to the large retrenchment costs and once-off noncash adjustment for silicosis and impairments. Furthermore, the impact of the deferred tax rate in South Africa, together with the deferred tax assets not recognized, all resulted in the increase in the overall tax rate. Excluding the adverse effect of the South African taxes, the normalized tax rate for the group is 30%.

Moving on to Slide 31. Despite stronger currencies and inflationary pressure, our continued focus on meeting production targets, strong cash management and stringent capital discipline has resulted in the all-in sustaining cost margin increasing from 17% in the second half of last year to 19% in the last 6 months of 2017. This is especially encouraging given the flat gold price. As Ludwig and Chris mentioned, we continue to pursue efficiencies and improve margins on a sustainable basis, and we'll be working hard to see those reflected in the coming year.

Moving on to Slide 32. Cash costs for the second half remained largely flat, with the positive volume and grades and favorable stockpile movement largely offsetting inflation and stronger local currencies. The South African rand and Australian dollar were 4% and 3% stronger, respectively, slightly offset by the 15% weaker Argentinian peso during this period.

The higher ounces sold impacted positively on sustaining CapEx by $14 an ounce. Also, slightly lower overhead costs partially negated the $8 an ounce increase in cash costs.

Moving to Slide 33. Here, we see basic earnings for the year fell to a loss of $191 million and was impacted by a number of once-off or abnormal items. Firstly, the impairment and derecognition of certain South African assets and goodwill amounting to $294 million; as well as the silicosis provision of $46 million posttax, both of which were noncash in nature. Secondly, the provision for retrenchment costs in South Africa of $71 million posttax had a cash impact of $49 million for the year, with the balance expected to impact 2018 cash flow.

Moab Khotsong was reclassified as an asset held for sale and the carrying value of these assets had to be impaired to the fair value of the sale consideration of $300 million. It is important to note that given the cash consideration of these assets is dollar based, a further strengthening in the rand could result in further impairment until the proceeds are received, which will be offset against the profit on disposal.

Furthermore, in calculating the impairment, the related deferred tax assets of approximately $81 million could not be taken into consideration in 2017. This deferred tax benefit will only be recognized on the completion of the transaction as part of the overall profit on the sale of Moab Khotsong, which is expected to be concluded on the 1st of March.

Headline earnings were also significantly impacted by these once-off charges as only the impairments are permitted to be added back in this calculation. Excluding the abnormal charges relating to the silicosis provision and the South Africa retrenchment, headline earnings would have increased from $27 million to $144 million for the year, which reflects a 30% increase on the prior year on the back of a strong operational performance.

Slide 34. We saw a slight rise in net debt from $1.9 billion to $2 billion, mainly as a result of higher CapEx, the funding of the South Africa retrenchment costs and VAT lockups in Continental Africa, all of which were partially offset by a reduction in the interest paid of $34 million.

The net debt-to-adjusted-EBITDA is 1.35x, reflecting an improvement from 1.56x at the end of June 2017. This shows ample headroom to our covenant levels of 3.5x.

Our liquidity position has improved from $1.58 billion at the end of December 2016 to $1.72 billion at the end of 2017, reflecting additional facilities put in place to assist with our South African funding requirements. Proceeds from the Moab sale will be applied to reduce our South African debt, which will benefit our local interest bill.

Our balance sheet remains robust with strong liquidity, sufficient undrawn facilities and no near-term maturities, giving us the flexibility in what remains a volatile market environment. We've consistently demonstrated our ability to self-fund our high-return reinvestment opportunities whilst sustaining our cash dividend.

Moving to Slide 35. As we said a year ago, our policy is to return 10% of free cash flow before growth capital to shareholders as a dividend. This is obviously subject to the board's discretion. Given that basis for the dividend calculation, volatility is to be expected in the payout given our reinvestment needs, as was the case with the flagged 19% increase in sustaining CapEx last year to $829 million.

Free cash flow before growth capital was $125 million. The board has exercised its discretion by adjusting the metric of free cash flow before growth capital to take into account the South Africa retrenchment payment and has approved a dividend of ZAR 0.70 or approximately USD 0.06 per share.

The continuation of the dividend is a reflection of our capital discipline and commitment to improving shareholder return on the back of sustainable free cash flow generation. Importantly, we will maintain adequate balance sheet flexibility and utilize our cash flow and available facilities to fund our ongoing capital and operational requirements.

Slide 36. Concluding on the guidance for 2018, the production guidance range has been adjusted for the disposals of Moab and Kopanang mines in South Africa in the first quarter of 2018, which contribute 30,000 ounces per month. In addition, the production contribution from TauTona has been excluded due to the orderly closure of the mine. We also expect a ramp-up of production from Kibali and improved production, in particular, from the Australian and Brazilian operations. We can expect both the production and capital expenditure profile to follow a similar trend as in past years, with peak production and CapEx in the last 2 quarters of the year.

The cash costs and all-in sustaining costs guidance ranges reflect the stronger currency and higher oil price assumptions as well as the reduced sustaining capital expenditure off a lower production base. The capital expenditure is guided at $800 million to $920 million for 2018 with close to 3/4 to be spent on sustaining capital. Growth capital of $200 million to $250 million reflects an increase of $100 million compared to last year, primarily relating to the development of the Obuasi project, assuming Ghanaian parliamentary ratification.

As Graham elaborated, project capital comprises the Obuasi redevelopment, the Siguiri hard rock project, Mponeng and Kibali. The Obuasi redevelopment expenditure is expected to ramp up from the second half of the year, and the bulk of the project capital spend of $450 million to $500 million will be spread over 2.5 years split as follows: 25% in 2018; 55% in 2019; and 20% in 2020.

Both the costs and capital guidance remain sensitive to the full cost average exchange rates and commodity prices, and the sensitivities provided on this slide are issued with a health warning.

Finally, we remain strongly levered to the higher gold price despite the strong exchange rates and higher oil price, which together with a strong focus on operational excellence, we expect to benefit our cash flows for the year ahead.

I will now hand over to Venkat to conclude.

Thank you, Christine.

As you'll have seen, there's a lot to digest in today's presentation, so perhaps it's worth stepping back for a minute and taking stock.

A quick look at the table shown on the penultimate slide shows that our key metrics are moving in the right direction, notably the big cost, capital and production levers. Given that we have kept our share count tight for almost a decade, it ensures we maintain excellent leverage to a rising gold price. Proceeds from our South African asset sales will further improve our flexibility.

We have resolved the burning questions around the structure of our South African asset base, monetizing some assets and putting other unprofitable ones into orderly closure. That puts South Africa at a little over 10% of our portfolio, though crucially with a long-life contribution that will improve in quality over time.

And finally, recognizing, as always, that mining is a long-term game, we continue to drive investment in world-class exploration talent, in energetic brownfields and greenfields programs that have an excellent potential from a drilling and portfolio investment perspective.

And in closing, looking at the last slide, we have our work cut out for us in the months ahead with a clear set of priorities as we normally do each year. We will work to ensure that completion of our SA asset sales happens and the optimization of the remaining surface and support businesses to ensure we match our remaining production base in South Africa.

We'll continue our engagement with our host in Tanzania to find the requested clarity around the legislative and regulatory environment. We will, to be clear, be looking for a pathway that ensures the long-term viability of an asset. That is important not only to us, but to Tanzania as a whole.

In the DRC, we are working with our joint venture partner, Randgold, and peers in the industry to lobby against the implementation of the new mining code, which we believe will cause the reduction in the new reinvestment over time. We will, as always, continue to look ways to unlock latent value from within our portfolio whilst advancing our exciting set of projects to completion on budget and on schedule.

And finally, we'll ensure that we do justice to the spectacular high-grade ore body at Obuasi, which for decades has been waiting to be modernized and capitalized in the way we are now proposing to ensure a profitable, long-life, high-margin coal mining operations.

I'll now hand you back to Stewart.

Thanks, Venkat. Judith, I think we're ready to take questions.

(Operator Instructions) The first question comes from James Bell of Bank of America Merrill Lynch.

Just a couple on Obuasi. First of all, can you talk about the technical changes you've made to the mine plant at Obuasi since Randgold chose to exit the JV at the asset? And then secondly, can you just talk about why you feel the need to push ahead with development of this asset at this time? I mean, if you look at your portfolio of mines, basically, all but one have greater than 10-year life of mine. So I just wondered why the need to push forward with development of this asset this year.

Graham, do you want to pick it up?

Yes. Thanks, James. Randgold spent a good 4 months having a look at Obuasi. And overall, the general approach to the mine wasn't radically different in terms of starting at the south, moving gradually deeper and using a biox facility. The areas they focused on were resource modeling; they did some independent drilling and some independent structural interpretation. We've built on that considerably over the last couple of years and we totally reworked the model. Now we've gone back to square one and validated all of the data, completed the reinterpretation and then the re-estimation of grade. In terms of the mining rate, we had been looking at a fairly aggressive mining rate of some 6,000 tonnes per day. The current project looks at ramping to 4,000 and then slowly up to 5,000 and that addresses what might have been some concerns on the aggressive mining rate and also on geotech stability. So we've reworked the sequence and the mining rate to address what was a legitimate concern about geotechnical risk. We've had that particular approach independently. All of them were quite comfortable with the situation now. From a processing point of view, we have included an earlier start to production after 18 months instead of treating it like a greenfield project and completing all of the work and then commissioning. So we have included an earlier start after 18 months and then moving up to full production after the 2.5 years. I think those are probably the key points that we picked up. So the work done by Randgold was thorough and we picked up on quite a few of the things that were suggested and came out of that joint work. But at the end of the day, you'd be aware of the sort of returns that Randgold looks for. You can see by the numbers. We don't get down to that sort of level of $1,000, but $1,100 is a very robust project. Thanks.

And James, in addition to that, a big factor of that change was obviously the government's view in terms of this particular project. We had a government which was willing to engage, grant what was needed within reason, whether it's in terms of stability, environmental compliance and also in terms of physical arrangements to get this project up and running. So that was a big factor also, which played in Randgold's mind at that stage. Now going back to your second question, which is why develop it now, why not later and keep it in the pipeline. We did think about this. But for a number of reasons, you do want to strike the iron when it's hot. You do have a government which is hungry to revive the region. We had a project which had very good returns and the optimization work had been completed, enjoyed very good stakeholder support. And at the same time, we were also conscious in care and maintenance costs incurring each year, is money thrown down the drain. If you can actually apply it to restart the project, it actually delivers very good returns, and it certainly starts to ramp up quickly. And there, we focused on was optimizing CapEx, reducing the payback period and also starting it to be cash positive from effectively year 4. And the ramp-up comes in where the -- well, initial production comes in at the end of '19, and then it ramps up to 4,000 tonnes a day by end of 2020 and then goes further. And it pulls down the average all-in sustaining costs for the group as well, and it will be quite a key Tier 1 asset within our portfolio.

Okay. And then maybe one -- just one more, if I may, Venkat. When I look at your portfolio, you have probably, well, the most number of assets of a lot of -- certainly, versus a lot of your peers, the gold majors. And we're seeing a lot of asset divestments across the sort of gold industry. I just wondered if you look at some of the assets in your portfolio and think that they maybe are not getting recognized for full value. And if so, could you look for -- towards further simplification of the AngloGold story? And by that, I mean, more ex South Africa, obviously, post the Moab transaction?

Yes. James, this is something we constantly look at. And if you recall, in terms of asset disposals we have done, we have bought 2 mines into production: Kibali and Tropicana. We have sold Navachab. That was an ex-South African mine. CC&V, then in South Africa as well. We look at it all the time. But having said that, there is a time and place for it. As part of our current initiative through what Ludwig is doing is we are looking at ways of reducing the all-in sustaining costs across the group and, in fact, certainly focusing on some of these assets, which are borderline. And if those don't lend itself to it, obviously, it will come back on to potentially a debate. But at the right price, any of the assets would be in for sale.

The next question comes from Tanya Jakusconek of Scotiabank.

I just have a couple of questions on your guidance, if I may. I just wanted to get an idea from, in terms of regions, where the 3.3 to 3.45 breakup of your guidance comes from? I appreciate -- I think guidance for South Africa is 15% lower than 2017. So that would put you at about 770. Is that in the right ballpark?

In fact, Christine will walk you through the answers in terms of the guidance, Tanya.

Yes, just by region. Yes?

Yes. I think reaching the -- I think from South Africa, you can say we're expecting around 500,000 ounces. In terms of...

Okay. Yes, sorry, Christine, does that include the 90,000 ounces from -- okay.

Yes. So yes, it would include, and I think just bear in mind given the fact that we've said that the transaction is likely to close about the 1st of March, you would need to adjust that for the 30,000 ounces. But I think we count that still with the guidance that we've put out overall that it is covered in the range. So I think if I say 500,000, it covers that, the loss of the 30,000 ounces for the 1 month. And then -- yes. And then I think just bear in mind, in Continental Africa, like I said, we are expecting increased production to come through, in particular, from Kibali. But overall, for Continental Africa, I would say it's around...

I think maybe a way to do it might be, Tanya, South Africa does roughly 16% of the ounces; Continental Africa, roughly 42% of the ounces; it's about 18% from Australia; and the balance from the Americas.

Okay.

Great. And then maybe if we could just get a bit more guidance on the development capital, the $200 million to $250 million. I guess, from what Christine was saying, about $125 million would be Obuasi…

Yes.

To be spent in the second half of the year. What about some of the other, the difference for Kibali, the Siguiri project and other?

Yes. So for Siguiri, we've got about $60 million. We're talking about project capital, so you're talking growth capital, yes?

Yes.

So there's about $60 million coming through for Siguiri. Mponeng, we've got about $11 million, and then Kibali, $11 million.

Okay. And then, Christine, a 30% tax rate would still be something reasonable to assume?

Normalized tax. I think...

Yes.

Yes, absolutely.

The next question comes from Dominic O'Kane of JP Morgan.

A couple of questions from me. Just at Obuasi, could you just remind us of what the sort of deferred tax assets are at the moment? How should we think about Obuasi taxation during the restart? And then also on Obuasi, which should we -- is sort of price protection something that you're considering during the CapEx phase for Obuasi? And then just moving to Tanzania, could you just maybe comment on what happened on Geita's costs in Q4? They were sort of a bit higher than Q3 and higher than H1. And given the political landscape in Tanzania at the moment, is Geita still a core asset for you?

All of them actually. Rather than getting into the deferred tax quantum here, really reestimate that the capital allowances and the new tax losses would give us the shield during the payback period, 6.5 years roughly. So you can work off that in terms of tax. Any tax coming in, most likely to come in after that period, these are cash taxes. Then in terms of Tanzania, which you raised the question here, in terms of costs going up in the latter part of it and whether it's a core asset, absolutely, Tanzania is a core asset for us, Geita. And in terms of higher costs in Q4 and Q3, Christine can correct me if I'm wrong. I presume the extra levies and royalties have been charged into those costs. But it's treated separately as an operating item. But your jump in costs in Q4 and Q3, if you can clarify that?

That comes through, but I think the impact of that was about $10 million that came through in the second half of 2017. The Tanzanian clearance levy, 1%, and then 2% was the additional royalties. So you can expect that impact to come through, $20 million, to come through in 2018 because there's 6 months in '17...

So just in terms of...

And it will be 12 months for 2018. I don't know if that's the question.

The costs include...

Should we expect similar types of costs at Geita in 2018?

I think it's a lower capital cost.

Yes. Dominic, maybe if I can comment, if you look at the capital profile of Geita, we had a couple of once-offs last year. Obviously, it was the…

Tailing.

[Tailing] plant. It was major cutbacks and some of the mining equipment. That is typically the once-offs that's not coming through going forward. So typically, the capital gain this year is about 1/3 that it was last year, 2017.

So it's $100 million less because of the once-off capital that was classified to sustaining capital in 2017, so that will come off in 2018.

Yes, that's right. That's correct.

The next question comes from David Haughton of CIBC.

Over to Obuasi. Can you just run us through what the fiscal arrangement is that you've got with the government and the duration of any standstill?

The agreements which we have with the Ghanaian government are subject to -- 2 of them are subject to ratification by parliament. The first one is the Reclamation Security Agreement, which governs what the historical exposure is and it's within what we have got accrued for in the books. And importantly, the bond is fixed at the current level, which is around $50 million rather than full bonding. Then the second agreement is around the stability agreement, which provides stability in terms of existing laws and arrangements. They're not just fiscal laws, it's wider than that. The only thing carved out is any local content element, et cetera; that, we obviously have to subscribe from under the current regime. The stability period for that agreement is around 10 years, and we've got an option to renew it for 5 years by mutual consent, by mutual discussions and negotiations. Turning to the fiscal arrangement, the tax concession agreement really has the following key elements. One is around the utilization of brought-forward losses and capital allowances, which they're provided for over the period, which is about 10 years, if I'm correct in terms of the tax agreement. The royalties on a sliding scale, starting at 3% at $1,300, and it goes up to 5% at $2,000 gold, give or take. Then in terms of corporate tax, it's capped at 32.5%. So if the lower rate is formulated in any budget, we get the benefit of that. And we get a 25% discount on the withholding tax on any interest payable on the loan. They are the broad elements in there, and there are a bunch of other provisions as well, but these are the main fiscal arrangements which we needed for the initial payback period. We are really careful in terms of the negotiations, in terms of what we ask for to get the initial payback period to work rather than throwing the kitchen sink in. And one agreement, sorry, David, I forgot to mention one agreement is that we have got a security agreement directly with the government this time to protect it against any sort of illegal mining invasion, which was not there previously.

Okay. Over to Gramalote, what's the next step? And what's the status with the permits and your relationship with the JV partner?

Okay. The next step in this regard is basically optimizing it further to get it to feasibility study. But as you can see, our overall holding costs in Colombia have come down quite considerably as compared to where we were last year. So we are doing it on a very tight budget. The intention here would be to take it through to feasibility study. The permits are still in place. There's no change in terms of the permits. And as far as the relationship with the JV partner, there's no change in that regard. We do have a cordial relationship. And certainly, the acquisition on the project is well-known. They've actually put that up in their presentations. And we are working together to see how we can get maximum value out of this project. But the important thing here is that we are not about to cut checks for any development of this project anytime soon. Thanks, David.

Thank you, ladies and gentlemen, that was the final question. I'll now hand back over to Stewart Bailey for closing comments.

Great. Judith, thank you very much, and thank you very much to everyone who joined the call. Please, as always, if you have any follow-up questions, don't hesitate to contact anyone on the IR team. Thank you.

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