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ANGLOGOLD LIMITED
Registration No. 1944/017354/06
Incorporated in the Republic of South Africa
REPORT TO SHAREHOLDERS
FOR THE QUARTER AND YEAR ENDED 31 DECEMBER 2001
Another solid quarter, completes a good year
Group results for the quarter
* Headline earnings (before unrealised hedging activities) up 16% to $88
million or in rand terms up by 45% to R924 million
* Total cash costs down from $176/oz to $159/oz
* Operating profit up 13% to $153 million (or 43% to R1,621 million)
* Bid for Normandy Mining Limited unsuccessful but value-adding growth
strategy continues
... and for the year
* Headline earnings (before unrealised hedging activities) increased 13% to
$286 million (or 43% to R2,536 million) despite gold production reducing 4%,
largely due to sale of Elandsrand and Deelkraal
* Total cash costs down 16% to $178/oz
* Operating profit up 12% to $522 million (or 41% to R4,617 million)
* Africa region increased production by 137%
* Final dividend of R11.00 per share ($0.48 per ADS), giving an annualised
yield of 4.7% at R468 per share ($20.36 per ADS)
Regional operating results for the quarter
SOUTH AFRICA
* Operating profit up 50% to R1,074 million ($101 million)
* Total cash costs steady in local currency terms at R49,757 and down 16% in
dollars to $154/oz
* Disappointing safety performance
* Announcement of the sale of Free State assets to Harmony and ARM joint
venture
AFRICA
* Record 233,000 attributable ounces production - up 2% on previous quarter
* Operating profit up 14% to $25 million
* Total cash costs up 5% to $138/oz
NORTH AMERICA
* Operating difficulties experienced during the quarter
* Operating profit down to $1 million
* Gold production down 21% to 106,000 ounces
* Total cash costs up 18% to $235/oz
SOUTH AMERICA
* Gold production up 4% to 116,000 ounces
* Operating profit up 13% to $18 million
* Total cash costs down 4% to $123/oz
AUSTRALIA
* Production down 7% on previous quarter due to mine closures
* Total cash costs down 7% to $183/oz (A$357/oz)
* Operating profit up 14% to $8 million (A$16 million)
* Boddington ceased production during the quarter
* Sunrise Dam expansion complete with first additional ounces mined during
the quarter
Quarter Quarter Year Year
ended ended ended ended
Dec Sept Dec Dec
2001 2001 2001 2000
Rand/Metric
Gold
Produced - kg/oz 000 53,471 55,440 217,203 225,295
Revenue - R/kg/$/oz sold 92,544 77,635 79,384 67,158
Total cash costs - R/kg/$/oz produced 51,710 47,687 48,828 46,404
Total production costs - R/kg/$/oz produced 62,995 57,046 58,579 53,334
Operating profit - R/$ million 1,621 1,136 4,617 3,273
Net profit - R/$ million 895 439 2,180 1,116
Headline earnings - R/$ million 971 491 2,476 1,773
Headline earnings
before unrealised
hedging activities - R/$ million 924 637 2,536 1,773
Capital expenditure - R/$ million 815 631 2,567 2,063
Net earnings (basic) - cents per share 835 410 2,035 1,043
Headline earnings - cents per share 906 459 2,311 1,658
Headline earnings
before unrealised
hedging activities - cents per share 862 595 2,367 1,658
Dividends - cents per share 1,800 1,400
Quarter Quarter Year Year
ended ended ended ended
Dec Sept Dec Dec
2001 2001 2001 2000
Dollar/Imperial
Gold
Produced - kg/oz 000 1,719 1,782 6,983 7,243
Revenue - R/kg/$/oz sold 280 288 286 308
Total cash costs - R/kg/$/oz produced 159 176 178 213
Total production costs - R/kg/$/oz produced 193 211 213 245
Operating profit - R/$ million 153 135 522 468
Net profit - R/$ million 86 53 245 166
Headline earnings - R/$ million 94 59 281 254
Headline earnings
before unrealised
hedging activities - R/$ million 88 76 286 254
Capital expenditure - R/$ million 82 75 298 304
Net earnings (basic) - cents per share 80 50 229 155
Headline earnings - cents per share 88 55 262 237
Headline earnings
before unrealised
hedging activities - cents per share 82 71 267 237
Dividends - cents per share 181 190
Certain forward-looking statements
Certain statements contained in this document, including, without
limitation, those concerning the economic outlook for the gold mining
industry, expectations regarding gold prices and production, the completion
and commencement of commercial operations of certain of AngloGold's
exploration and production projects, and its liquidity and capital resources
and expenditure, contain certain forward-looking statements regarding
AngloGold's operations, economic performance and financial condition.
Although AngloGold believes that the expectations reflected in such forward-
looking statements are reasonable, no assurance can be given that such
expectations will prove to have been correct. Accordingly, results could
differ materially from those set out in the forward-looking statements as a
result of, among other factors, changes in economic and market conditions,
success of business and operating initiatives, changes in the regulatory
environment and other government actions, fluctuations in gold prices and
exchange rates, and business and operational risk management.
Throughout this document, $ refers to US dollars, unless otherwise stated.
Published by AngloGold
PO Box 62117
Marshalltown
2107
South Africa
Telephone: +27 11 637 6000
Fax: +27 11 637 6399/6400
E-mail: investors@anglogold.com
LETTER FROM THE CHAIRMAN AND DDEPUTY CHAIRMAN
Dear Shareholder,
The December quarter was notable for continued sound performances from most
of AngloGold's operations, the sudden and significant devaluation of the
rand, and the bid for Normandy.
The fourth quarter of 2001
In operating terms, AngloGold's fourth quarter for 2001 was pleasing
overall. While production fell 4% to 1.72 million ounces, largely as a
result of a disappointing performance from the North American operations and
lower grades and mining volumes from two of the South African region's
largest producers, costs were well contained in local currency terms.
However, with the 20% devaluation of the rand over the quarter, dollar-
denominated total cash costs were dramatically reduced by $17 per ounce to
$159 per ounce.
In financial terms, the combination of rigorous cost controls and the lower
rand value contributed to a 13% improvement in operating profit to $153
million and a 16% increase in headline earnings, before unrealised hedging
activities, to $88 million. This good performance has yielded returns on
net capital employed and shareholders' equity for the quarter of 16% and 20%
respectively, putting the company well on track to meet its own ambitious
returns and targets.
AngloGold has sold forward part of its South African production in rand
denominated contracts for many years now. The company certainly did not
anticipate the very sharp drop in the rand value against the dollar, and
other hard currencies, which occurred during this quarter. Clearly the
extent of these rand-priced contracts has limited the extent of the benefit
derived by AngloGold from the significantly lower rand/dollar exchange rate.
The dislocation of the rand during this quarter required active management
of the portion of the hedge book priced in rands, delivering into contracts
and restructuring the hedge. This has left the book substantially less
exposed to further declines in the local currency and, going forward,
management intends to continue to reduce the rand component of its forward
contracts. Additionally, we have also continued to reduce our overall hedge
position during this quarter; the cumulative reduction over the past 12
months has been some 3.5 million ounces.
The year ended 31 December 2001
Turning to AngloGold's performance during the year ended 31 December 2001,
gold production declined by 4% as a result of the sale of the Elandsrand and
Deelkraal mines. Improvements in cost control and productivity and the
devaluation of the rand led to a 16% improvement in total cash costs from
$213 per ounce to $178 per ounce, lifting operating profit by 12% to $522
million.
AngloGold is declaring a final dividend for the half-year of R11.00 per
share, which, in dollar terms, is equal to 48 US cents per ADS, using an
illustrative exchange rate of R11.495 to the dollar - the rate on 30 January
2002, and represents an annualised dividend yield of 4.7% calculated on a
share price of R468 per share (or $20.36 per ADS), the closing JSE price on
30 January 2002. This announcement is consistent with AngloGold's
established practice of paying most of the company's earnings back to
shareholders, after allowing for organic growth.
Normandy
We were, of course, disappointed to have lost in our bid for Normandy but we
are confident that, given the level of the offer price, the decision to
withdraw from the transaction was made on sound business logic. On 21
January we sold our 7.1% interest in Normandy for $159 million and intend to
use the proceeds to repay debt, thereby strengthening our balance sheet. The
company's value-adding growth strategy remains a core focus going forward
and we will continue to look for additional opportunities to grow our
business, through organic growth, focused exploration and a disciplined
approach to opportunistic asset purchases as well as through value-driven
corporate mergers and acquisitions.
Sale of the Free State assets - South Africa
The announcement of the sale of the Free State assets during the quarter was
driven by the need to consolidate the central Free State gold mines under
common ownership and management, which has now been largely achieved. This
common ownership and management allows these assets optimal future life, to
the benefit of all Free State gold stakeholders. For AngloGold it creates
a South African asset base which is low cost, high margin and long life.
Indeed, our remaining South African assets, with the exception of the end of
life operations Savuka and Ergo are now all world-class.
Outlook for 2002
Following the disposal of its operations in the South African Free State and
the closure of end-of-life assets, AngloGold expects annual gold production
for 2002 to reduce to 5.8 million ounces, at a cash cost of $154 per ounce.
Capital expenditure for the year 2002 is expected to be $268 million.
BOBBY GODSELL
Chairman and Chief Executive Officer
RUSSELL EDEY
Deputy Chairman
30 January 2002
OPERATING AND FINANCIAL REVIEW
OVERVIEW
The quarter
AngloGold reports the fourth satisfactory quarter in succession, with
headline earnings (before unrealised hedging activities) increasing by 16%
to $88 million (or 45% to R924 million). This quarter saw stable production
and lower unit costs, further assisted by the devaluation of the rand. Gold
production, although 4% down on the previous quarter at 1.72 million ounces,
was better than planned and total cash costs were well controlled, falling
10% from $176 per ounce to $159 per ounce.
In South Africa, Great Noligwa and Kopanang had production levels below an
exceptional third quarter due to lower mining volumes and grades. The North
American mines continue to have operating difficulties and in Australia, the
Boddington and Tanami operations closed earlier than anticipated.
In South Africa, costs were held steady in local currency terms, quarter-on-
quarter, despite a reduction in gold produced. Operating profit increased
by 13% ($18 million) to $153 million (or 43% to R1,621 million). Return on
net capital employed and return on shareholders' equity increased
accordingly, to 16% and 20% respectively.
The year
For the year ended 31 December 2001, gold production declined by 4% as a
result of the sale of the Elandsrand and Deelkraal mines. This was
partially offset by a 137% increase in production from the Africa region,
with the full inclusion of Geita and Morila. Improvements in cost control
and productivity assisted by the devaluation of the rand, resulted in total
cash costs improving by 16%, from $213 per ounce to $178 per ounce, lifting
operating profit by 12% to $522 million (or 41% to R4,617 million).
Headline earnings (before unrealised hedging activities) increased by 13% to
R286 million (or 43% to R2,536 million).
SOUTH AFRICA
Overall performance
This was another good quarter for South Africa with production and
productivity only showing a marginal decline compared with the previous
excellent quarter.
The impact of the 16% increase in the price received is reflected in the 50%
or R359 million ($16 million) improvement in operating profit to R1,074
million ($101 million).
Management's commitment to containing operating costs is once again evident
in the total cash costs, which were held steady at R49,757 per kilogram.
(down 16% in dollar terms to $154 per ounce).
Productivity indices, expressed in grams per employee as well as square
metres per employee, both showed slight deteriorations of 1% and 3%
respectively over the previous quarter despite the 2% reduction in the
number of employees.
Tragically, during the month of December, ten employees lost their lives in
six mine accidents, taking the total number of fatalities for the quarter to
14. The number of fatal incidents recorded for the year decreased from 49
in 2000 to 43 in 2001.
The effects of seismicity remain a major threat facing the region in respect
of safety. A research and development project entitled Hazmap has been
initiated, which will use a multi-dimensional modelling approach to improve
the ability to forecast where underground teams may be exposed to undue
risk. ISS International, an AngloGold subsidiary, has been contracted to
manage the monitoring of seismicity.
On a positive note, Moab Khotsong recorded 1 million fatality-free shifts on
9 November. Its lost-time injury frequency (LTIF) rate of 4.65 for the year,
improving on the rate of 5.44 for 2000, is well below the Ontario benchmark
of 6.5. Kopanang achieved 2 million fatality-free shifts on 15 November,
while TauTona was awarded the Mine Health and Safety Council Flag award for
deep-level mines for the second consecutive year. Safety will continue to
be a high priority during 2002.
The year 2001 began with the sale of the Elandsrand and Deelkraal
operations. Despite these activities, the South African region recorded a
39% increase in operating profit to R2,947 million ($331 million). Area
mined fell by 22% (5% excluding closure and sold operations) and gold
produced was reduced by 748,000 ounces (14%) to 4,670,000 ounces, which is
mainly attributable to the closure or selling of operations. Total cash
costs for the year were up 3%, from R48,395 per kilogram to R50,065 per
kilogram, but decreased in dollar terms from $217 per ounce to $184 per
ounce, compared to a 6.5% inflation rate for the period and wage increases
in the order of 8%. Productivity indices, expressed in grams per employee
and square metres per employee, showed a 10% improvement and a 1% reduction
respectively.
In November, AngloGold announced that it would sell its Free State assets to
ARM and Harmony for R2.2 billion. On fulfilment of the conditions of sale,
AngloGold will be paid R1.8 billion, with the balance of R400 million
payable in three years' time. In 2001, the Free State operations produced
17% of AngloGold's worldwide production but only 9% of its EBITDA. Taken
over the 12 months to December 2001, the sale would have the effect of
lowering AngloGold's total cash costs for its remaining worldwide assets by
4% - from $178 per ounce to $170 per ounce.
Mine performance for the quarter
Great Noligwa was unable to maintain its remarkable performance of the
previous quarter because of lower volumes mined (4%) and lower reef values
(11%). Year-on-year, grades were constant at 12.3 grams per tonne.
However, the total cash costs were reduced by 2% to R31,027 per kilogram,
which at the current exchange rate is equivalent to $97 per ounce.
Operating profit was R403 million ($39 million), up 20% on the previous
quarter.
At Kopanang, the quarter was highlighted by the outstanding achievement of 2
million fatality-free shifts - the first time that an AngloGold operation
has achieved this significant milestone. Area mined fell by 12% from the
previous excellent quarter, which together with the 11% drop in yield from
mining lower values than planned, resulted in a reduction of 11% in gold
produced. Despite this, operating profit increased by 31%, with total cash
costs at R46,062 per kilogram ($144 per ounce) reflecting a 2% improvement.
Following a poor third quarter performance, Tau Lekoa focused attention on
mining values and metallurgical processes and tabled a 4% improvement in
volume mined, a 23% improvement in yield and a 27% increase in gold
production. Total cash costs were reduced by 16% to R55,573 per kilogram
($173 per ounce), which helped to effect a turnaround from an operating loss
of R15 million ($2 million) in September to an operating profit of R52
million ($5 million) for the quarter.
Gold production at TauTona decreased by 5% to 4,781 kilograms (154,000
ounces) following a lower Mine Call Factor and a drop in grade experienced
in the Upper Carbon Leader. Total cash costs increased by 6% to R43,917 per
kilogram ($135 per ounce). Operating profit showed a 24% improvement.
Savuka's production fell short of planned levels and was down on the
previous quarter. Both yield and gold production fell by 5% and 1%
respectively, following increased damage from seismicity. Total cash costs
per kilogram increased to R73,341 per kilogram ($225 per ounce) following
increased expenditure on development and the maintenance of major equipment
in anticipation of an extended life of mine. The operation achieved a R16
million ($1 million) operating profit.
As anticipated, Mponeng showed further improvements over the previous
quarter with mined volumes up 1%, yield up 1% and gold production up 3%.
This was mainly because of the availability of new panels in the recently
holed raise lines. Total cash costs fell by 1% to R56,391 per kilogram
($173 per ounce) and operating profit improved by R41 million ($3 million)
to R52 million ($5 million).
At Bambanani, production volumes were affected by two fires and a major
seismic event on 21 November, which resulted in the deaths of three
employees. Mined volume decreased by 7% but was offset to a significant
degree by an increased yield (4%) to reach the gold production level of the
previous quarter. Total cash costs increased to R67,205 per kilogram ($206
per ounce), with operating profit rising to R33 million ($3 million).
Tshepong had another excellent quarter, with production on a par with the
previous quarter. Although still above target, there was a drop in
recovered grade (down by 3%). Total cash costs increased marginally to
R50,940 per kilogram ($156 per ounce) with operating profit up 63% to R73
million ($7 million).
Matjhabeng and Joel both posted improved operating results.
At Ergo, gold production fell only marginally despite the closure of
Daggafontein and production disruptions from power failures and excessive
rainfall. This was achieved through improved head grade, higher
metallurgical efficiency and the gold recovered from the toll treatment of
loaded carbon material. Operating profit increased by 84% to R58 million
($5 million).
AFRICA
The Africa region includes all operations on the continent outside of South
Africa.
Overall performance
The Africa region returned to the performance levels of earlier in 2001 by
producing a record 233,000 attributable ounces and an operating profit of
$25 million - increases of 2% and 14% respectively on the September quarter.
Total cash costs were 5% higher at $138 per ounce. The region continued its
good safety performance with only four lost-time injuries recorded for the
quarter.
For the year, the region performed very well with a total of 868,000
attributable ounces, including production from Geita and Yatela for the
first time and Morila for its first full year. Total cash costs for the
year were $129 per ounce.
Operating profit for the year improved by 93% or $42 million to $87 million.
Mine performance for the quarter
An improved performance at Sadiola (38% attributable) led to a 17% increase
in production to 55,000 ounces, largely as a result of improved grades.
Total cash costs improved by 4% to $131 per ounce. Sadiola had an
outstanding year in terms of safety, with no lost-time injuries recorded for
2001. A project is under way to convert the process plant to treat sulphide
ore from the first quarter of 2002, which will enable the mine to sustain
gold production volume. Exploration in the oxide ore continues to prove
successful and exploration drilling in the hard sulphide is in the process
of evaluation for economic extraction.
Since first production in mid-2001, Yatela (40% attributable) has exceeded
expectations in production, costs and safety and is currently in the process
of an internal post-project performance testing. Production in the fourth
quarter increased to 28,000 attributable ounces, 12% up on the previous
quarter. Total cash costs increased by 3% to $151 per ounce. Yatela has
continued its excellent safety performance having recorded only one lost-
time injury since commissioning in June 2001.
A 3% increase in plant throughput was achieved at Morila (40% attributable)
during the quarter, however a 14% planned reduction in grade to 5.8 grams
per tonne resulted in an 11% drop in gold production to 58,000 ounces
(attributable). Grades are expected to remain at this level for the first
half of 2002 prior to the mining of higher grades from the second pit,
resulting in an expected overall improvement in annual production levels for
2002. Total cash costs for the quarter increased by 13% to $117 per ounce
largely as a result of the decrease in production in the fourth quarter.
Gold production at Geita (50% attributable) decreased by 4% to 69,000
attributable ounces. Increased plant throughput of 12%, at 596,000 tonnes,
was largely offset by a 14% reduction in recovered grade to 3.6 grams per
tonne, caused by planned mining of lower grade ore in the Nyankanga Pit.
Gold production levels achieved in 2001 are expected to be repeated in 2002.
Total cash costs increased by 9% to $163 per ounce for the quarter due to
the decreased production and contract payment adjustments during the
quarter.
An all-time record quarter was achieved by Navachab with a 15% improvement
in production to 23,000 ounces and total cash costs of $142 per ounce, 22%
lower than in the third quarter. This record production was mainly as a
result of higher than expected grades. An exploration programme has been
designed to assess upside potential during 2002.
NORTH AMERICA
Overall performance
The North America operations had a difficult quarter due to severe winter
weather, a fire in the roaster at Jerritt Canyon and ongoing technical
problems associated with the leach pad at Cripple Creek & Victor (CC&V).
Operating profit decreased to $1 million due to a significant decline in
gold production. Reduced gold production of 106,000 ounces for the quarter
also contributed to higher total cash costs of $235 per ounce.
During 2001, approval for the $195 million CC&V expansion plan was granted.
The project is described in the "Value-Adding Growth" section of this
report.
Operating profit for the year of $16 million is 16% lower than in 2000 with
total cash costs increasing by 6% to $211 per ounce.
Mine performance for the quarter
Production at Cripple Creek & Victor (67% attributable - effectively 100% -
see Note 4 on page 12 was 26% lower for the quarter at 45,000 ounces due to
ongoing technical problems with the leach pad. As a result of the decreased
production, total cash costs were 10% higher than in the third quarter at
$212 per ounce. During 2001, the Colorado Mining Association and the
Colorado Division of Minerals and Geology recognised the CC&V mine as the
safest surface mine in the State of Colorado.
Jerritt Canyon's (70% attributable) production was 18% lower quarter-on-
quarter at 61,000 attributable ounces. Fire caused a roaster shutdown and
adverse weather conditions, including significantly higher than normal
snowfall, caused a reduction in mill throughput. Total cash costs were 24%
higher quarter-on-quarter at $248 per ounce because of the decrease in
production, repair of the roaster fire damage and higher wet ore handling
costs. SSX mine received the Mine Safety and Health Administration's
Sentinels of Safety award as the safest underground metal group mine in the
United States.
SOUTH AMERICA
Overall performance
During the quarter, gold production in the South America region increased by
4% to 116,000 ounces with operating profit improving by 13% to $18 million.
Total cash costs were reduced by 4% to $123 per ounce, mainly as a result of
increased production.
Despite good performances by all three operations in South America during
2001, operating profit for the year was 9% down on 2000 at $63 million.
Higher ounces sold offset a lower realised price, while total cash costs
were 7% lower at $134 per ounce. Gold production for 2001 was the same as
2000 at 441,000 ounces with silver production 35% higher at Cerro
Vanguardia.
Mine performance for the quarter
Operating profit was 8% higher ($7 million) at Morro Velho, largely as a
result of increased gold sales and higher received price. Production
increased by 6% to 56,000 ounces with average grade at 6.9 grams per tonne
(1% higher). Safety has improved to a LTIF rate of 9.06, although this is
still above the Ontario benchmark of 6.5.
Serra Grande's (50% attributable) operating profit declined by 3% as a
result of a 12% decrease in the gold sold. This was partially offset by a
higher received price. A planned decrease in production, due to mining a
lower grade ore zone, saw Serra Grande's ounces fall by 12% to 22,000
attributable ounces. Good safety performances saw the LTIF rate at just
outside of the Ontario benchmark of 6.5.
At Cerro Vanguardia (46.25% attributable), production increased during the
quarter by 12% to 38,000 attributable ounces as a result of higher tonnage
treated with grades running 2% below those of last quarter. Operating
profits were 35% higher as a result of increased gold sold and higher
received prices. LTIF rate is currently running at 7.54 compared to the
Ontario benchmark of 6.5.
AUSTRALIA
Overall performance
Production for the quarter of 124,000 ounces was 7% below output in the
September quarter, with the loss of production attributable to the closure
of the Tanami and Boddington oxide mines during the quarter. Despite lower
gold production for the quarter, total cash costs fell by 7% to A$357 ($183)
per ounce. Operating profit for the quarter improved by 14% to A$16 million
($8 million).
Production during 2001 was 508,000 ounces, 3% lower than in 2000. Record
production from Sunrise Dam could not fully offset the losses resulting from
the closure of the Brocks Creek mine in 2000 and the Tanami mine during
2001. In addition, Boddington ceased operations during the fourth quarter.
The operating profit for the year of A$48 million ($25 million) was 19%
below that recorded for 2000.
The LTIF rate in the December quarter improved to 9.3, down 38% compared to
the previous quarter.
Mine performance for the quarter
Production at Sunrise Dam fell marginally (by 1%) to 76,000 ounces. Plant
throughput increased to around 3 million tonnes per annum following the
expansion completed earlier in the year. Operating profit increased by 33%
to A$12 million ($6 million), with total cash costs at the operation down by
5% to A$317 ($162) per ounce during the quarter. With continued outstanding
exploration results adding to the resource, further cutbacks to the open pit
are being planned to access ore in the Watu and Mako lodes.
Despite the onset of the wet season, gold production for the fourth quarter
at Union Reefs increased by 1% to 31,000 ounces. Increased mining activity
led to a 2% increase in total cash costs to A$463 ($237) per ounce.
Operating profit of A$3 million ($1 million) is 25% lower than in the third
quarter.
Operations at Boddington (33.33% attributable) ceased at the end of November
and the plant has been placed on care and maintenance pending the
commencement of the Boddington Expansion Project. As a result of the
closure, production for the quarter fell 23% to 17,000 attributable ounces.
With the inclusion of gold recovered from the plant clean-out, total cash
costs were reduced by 8% to A$316 ($161) per ounce. The mine returned an
operating profit of A$4 million ($2 million) - the same as in the previous
quarter.
Operations at Tanami (40% attributable) ceased early in the December
quarter, resulting in production of less than 1,000 attributable ounces.
Implementation of the mine rehabilitation plan is continuing with the plant
now leased to Normandy North Flinders. The mine recorded an operating loss
of A$1 million for the quarter.
VALUE-ADDING GROWTH
AngloGold continues to enhance the value of the company through organic
growth. The company currently has five major capital projects in
development which will be coming into production over the next three years,
and which will produce around 18 million ounces of gold in total over the
life of the projects at an average cash cost of approximately $150 per
ounce. AngloGold will also seek value growth through its substantial and
focused exploration programme, in addition to the acquisition of both
individual orebodies and corporate entities where these acquisitions add
value to AngloGold.
CAPITAL PROJECTS
Sunrise Dam - Cleo pit and treatment plant expansion
This project was based on a significant increase in the Cleo resource which
had expanded to 4.5 million ounces by the end of 2001. The expansion will
increase production by approximately 2.1 million ounces and the life of mine
by four years to 2008. The expansion is effectively complete, at a capital
cost of A$97 million. Beyond this initial Megapit expansion project,
drilling results indicate significant upside potential which could result in
a doubling of the current resource base and a further extension to the life
of Sunrise Dam. Production from the Megapit commenced during the fourth
quarter of 2001 at an average cash cost of $170 per ounce.
Mponeng - deepening to 120 level
This project will extend the life of mine by five years to 2012. The total
capital expenditure for the deepening is R1.3 billion, with half of this
already spent. The project is expected to add 3 million ounces to
production over the life of the mine, resulting in an average cash cost for
the mine of $156 per ounce.
TauTona
The project will extend TauTona's life by at least another four years to
2011. The project has two main areas of focus - accessing and mining part
of the shaft pillar and accessing and mining an area east of the Bank Dyke,
previously part of the mine plan of the adjacent Mponeng mine. The project
will require capital expenditure of R462 million, R60 million of which has
already been spent to date. The project will add 2.3 million ounces of gold
production over the life of the operation resulting in an average cash cost
for the mine of $133 per ounce. The project is advancing on schedule.
Cripple Creek & Victor expansion
The CC&V expansion will extend the life of mine by four years to 2013 and
will produce 2.8 million ounces of additional gold resulting in an average
cash cost for the mine of $174 per ounce.
Progress on project construction is on plan. The mining fleet is now in
place and leach pad performance is being monitored. Life of mine capital
expenditures is expected to total $195 million, of which approximately $119
million has been spent to date.
The installation of process equipment is on schedule with the crusher to be
commissioned early in the third quarter of 2002.
Moab Khotsong
This project and new mine is due to commence operating in October 2003,
reaching full production in 2006. With capital expenditure of R3.8 billion,
R2.4 billion of which has been spent to date, the mine which extends to 101
level, is expected to produce 4.5 million ounces of gold through to 2015 at
an average cash cost of $97 per ounce. To date, development is on schedule
and within budget. Drilling below 101 level will continue in 2002 to assess
upside potential.
ADVANCED DEVELOPMENT PROJECTS
Cuiaba' expansion - Brazil
The planned Cuiaba' expansion project is expected to effectively increase
production from approximately 2,300 to 4,000 tonnes per day and will
increase the amount of gold produced by some 150,000 ounces per year. The
ore reserve between 11-level and 21 level (approximately 1,400 metres below
surface at 21 level) is 9 million tonnes at 7.7 grams per tonne, or
approximately 2.2 million ounces. The project is likely to require capital
expenditure of $140 million. Should the project be approved, it is expected
that the pre-feasibility study would commence late in 2002 or early in 2003,
and production in 2005 or 2006.
Boddington expansion - Western Australia
AngloGold (33.33% attributable) is a partner in Boddington with Normandy
(44.44% attributable) and Newcrest (22.22% attributable). Boddington's
oxide mining operation came to an end during the December quarter, pending a
decision on the expansion project. In late 2000, a feasibility study was
completed for the expansion of the operation, which has a reserve of 390
million tonnes at 0.87 grams per tonne, containing 10.9 million ounces of
gold. A decision on the project is expected during the year.
EXPLORATION
AngloGold's exploration strategy is to extend the life of existing
operations and to find new, cost-effective ounces through in-house
exploration or joint ventures and the acquisition of late-stage exploration
projects. The company's significant and focused exploration programme has
shown encouraging results, some of which are outlined below.
Brownfields exploration
At Sadiola in Mali, exploration activity delineated 0.6 million attributable
ounces of oxide resources from satellite deposits. The hard sulphide
potential below and adjacent to the pit is being assessed by drilling and
structural reinterpretation.
At Sunrise Dam in Western Australia, drilling results from the Western Shear
and Watu structures at the southern end of the pit have been encouraging and
indicate that further pit cut-backs may be justified. Significant
intercepts from the Western Shear included 13 metres at 19.42 grams per
tonne. Results from Watu included 9 metres at 26.77 grams per tonne.
On the northern side of the pit, intersections of new structures at Mako
lode included 4 metres at 150.79 grams per tonne which is promising for
future work. The operation will continue to expand as exploration
continues.
At the advanced exploration project at Coyote in the Tanami region of
Australia, the main high-grade Buggsy-Gonzalez structure has been defined
over a strike length of 800 metres and to a depth of 250 metres.
Significant intercepts include 2 metres at 27.40 grams per tonne and 7
metres at 132.00 grams per tonne. This structure is open-ended and
provisional resource estimation is in progress.
At Morila in Mali, exploration comprised drilling in the Donba corridor as
well as an electromagnetic (EM) airborne programme. Drilling results at
Donba include 33 metres at 3.30 grams per tonne. Target generation from the
exploration programmes have produced a number of new targets that will be
drill-tested in 2002.
At Serra Grande, geophysics has identified several new targets in the Crixas
greenstone belt. These will be followed up in 2002. Deep drilling has
confirmed the down-plunge mineralisation at Mina Nova and Mina III.
Within the Iron Quadrangle at Corrego do Sitio in Brazil, drilling will be
conducted from a ramp to assess the underground sulphide potential. Oxide
drilling results at Corrego do Sitio include 12.2 metres at 15.04 grams per
tonne.
In the Geita region, exploration drilling has produced encouraging results
at Geita Hill and the focus for 2002 will be extensions to the Nyankanga
orebody. Testing of the down-dip extension at Geita Hill intersected 21
metres at 2.55 grams per tonne with the best results to date 39 metres at
7.08 grams per tonne. Exploration results for satellite deposits include 5
metres at 13.31 grams per tonne at Samena, 5 metres at 16.00 grams per tonne
at Prospect 30 and 51 metres at 2.40 grams per tonne at Chipaka.
At Cripple Creek & Victor in Colorado, exploration for new resources will
remain focused on the definition of high-grade underground targets and
surface potential in operational areas. Encouraging drill results were
obtained from the latter.
Underground drilling at the Smith mine at Jerritt Canyon in Nevada yielded
several high-grade intersections including 15 metres at 30.63 grams per
tonne. Diamond drilling at the SSX mine included intersections of 18 metres
at 10.92 grams per tonne.
Greenfields exploration
In Southern Mali, AngloGold conducted a high-resolution airborne
electromagnetic survey and has identified a number of new targets. Several
new joint ventures and permits were negotiated and granted with drilling
planned to commence during 2002.
At Red Lake in Canada, diamond drilling intersected encouraging values
during the year and follow-up drilling on other targets will continue during
2002.
In Peru, four target areas are being explored and drilling has proceeded in
three of these. Encouraging results were intersected and a drilling
programme is planned for 2002.
GOLD MARKET
After an eventful and volatile year in the gold market, the gold price
remained well supported during the final quarter of 2001, with firm prices
for the metal into the new year. The spot price again traded above $290 per
ounce during this period, this time on the back of the terrorist attacks on
the United States of America. The average price of $278 for the quarter was
the highest quarterly average spot price in the past 18 months.
Activity in the gold market was completely overshadowed, however, by the
unprecedented weakness of the South African currency during this quarter.
At its weakest point just before Christmas, the rand fell to R13.81 against
the US dollar and R20.00 against the pound. At this point, the currency had
fallen by some 50% in value from its opening exchange rate of slightly less
than R9.00 to the dollar at the beginning of the year. The average exchange
rate against the US dollar for the quarter of R10.17 was over 20% weaker
than the average for the previous quarter. The local currency has since
steadied, closing the year at around R12.00 to the dollar, and trading in
the new year at around R11.50 to the dollar. This produced record high
local spot gold prices of just under R123,000 per kilogram on 21 December
2001. Spot gold prices have since fallen with the firmer rand to around
R105,000 per kilogram.
GRAPHIC: SEE PRESS FOR DETAIL
This fall in the value of the rand has seen the currency break out of all
long-term exchange rate relationships with the currencies of South Africa's
major trading partners. The currency's average depreciation of some 15%
against the US dollar since the early 1990's was broken in September when
the rand moved above R8.50 to the dollar, and current exchange rates bear no
relationship to any economic fundamentals such as purchasing power parities,
cumulative interest rate differentials or inflation rate differentials.
This leaves the currency and the associated local gold spot price in a no
man's land where forecasts of future movement are impossible. Whilst
previous experience of exchange rate dislocation from time to time would
suggest that the rand should stabilise and trade sideways at around current
levels, there remains a danger that speculation against the currency might
recur. A government commission of enquiry into the exceptional movement in
exchange rates during last quarter has brought some sense of reassurance to
this nervous market.
GRAPHIC: SEE PRESS FOR DETAIL
Turning to the gold market, the past year has been one of change and
transition in a number of important areas of physical supply and demand, and
the final quarter of the year was no different. The most important
determinant of this change has been the slow-down in the global economy, and
in particular in the developed economies. This has been negative for gold
demand. However, lower US interest rates and other circumstances in the
market have led to a material fall in hedging activities and a reversal in
gold disinvestment seen in recent years, leaving the physical market for
gold overall in an unchanged state of balance. A fall in physical demand
was seen in both gold jewellery and industrial offtake in the developed
economies in particular, with some slippage also in gold offtake in certain
important developing markets due to specific regional causes. Early
estimates of fabrication demand for the year show a slippage of some 7% or
270 tons, from 3,750 tons in 2000 to 3,480 in 2001. On the supply side,
mining production has stalled at unchanged levels year on year, whilst net
producer hedging and implied disinvestment saw reduced supplies to the
market of around the same level as the fall in demand.
Secular changes in the valuation of currencies or metal prices obviously
have a material impact on price hedges in place in such markets. This is
certainly true of the fall in the rand value. AngloGold has consistently
hedged a portion of its forward pricing in rands, and at the end of the
previous quarter, 153 tons or 30% of the total hedge of 506 tons was priced
in rands.
Following deliveries against contracts in the final quarter of the year, and
a measure of restructuring of the hedge during December, the outstanding
rand priced hedges amount to 125 tons or 27% of the total hedge. By
maintaining forward price cover, AngloGold has managed its hedge actively
over the years, and it is our intention to further reduce the level of rand
priced cover by restructuring the hedge as particular market circumstances
provide the opportunity to do so from time to time. During the quarter
under review, the company reduced its hedge position by some 53 tons or 1.7
million ounces; the progressive reduction in net hedge commitments over the
past year has been just on 105 tons or 3.4 million ounces. In current
market circumstances, the company will continue to deliver into maturing
hedge contracts in the year ahead.
GOLD MARKET
NET DELTA OPEN HEDGE POSITION AS AT 31 DECEMBER 2001
As at 31 December 2001, the group had outstanding the following net forward-
pricing commitments against future production.
Rand Gold Dollar Gold AUS Dollar Total Total
kg's Kg Gold kg's oz sold
sold R/kg sold $/oz kg's sold A$/oz sold '000
12 months
ending
31 Dec
2002 22,920 60,332 66,375 301 18,919 563 108,214 3,479
2003 24,706 90,914 39,226 320 13,686 524 77,618 2,495
2004 22,438 109,137 35,404 322 5,443 534 63,285 2,035
2005 22,509 132,592 32,287 325 5,163 646 59,959 1,928
2006 14,007 135,287 26,901 332 6,146 615 47,055 1,513
Jan 2007
- Dec 2011 10,140 135,367 76,525 352 10,397 535 97,061 3,121
116,720 105,636 276,718 327 59,754 559 453,192
14,571
The marked-to-market value of all hedge transactions making up the hedge
positions in the above table was a negative R2,850 million (negative $238
million) as at 31 December 2001. The value was based on a gold price of
$278 per ounce, exchange rates of R/$12.0 and $/A$ 0.5111 and the prevailing
market interest rates and volatilities at the time.
As at 29 January 2002, the marked-to-market value of the hedge book was a
negative R2,173 million ($189 million) based on a gold price of $279 per
ounce and exchange rates of $/R11.47 and A$/$0.515 and the prevailing market
interest rates and volatilities at the time.
Note to AngloGold Hedge Position as at 31 December 2001
*The delta position indicated hereafter reflects the nominal amount of the
option multiplied by the mathematical probability of the option being
exercised. This is calculated using the Black and Scholes option formula
with the ruling market prices, interest rates and volatilities as at 31
December 2001.
ANGLOGOLD HEDGE POSITION
AS AT 31 DECEMBER 2001
Year 2002 2003 2004 2005 2006 2007-2011 Total
DOLLAR GOLD
Forward Contracts
Amount (kg) 61,727 33,465 32,435 25,879 20,524 43,831 217,861
$ per oz $299 $315 $317 $326 $334 $349 $321
Put Options Purchased
Amount (kg) 10,238 5,808 2,662 757 563 728 20,756
$ per oz $312 $352 $390 $291 $291 $292 $331
*Delta (kg) 5,110 4,898 2,118 283 183 210 12,802
Put Options Sold
Amount (kg) 3,732 3,732
$ per oz $273 $273
*Delta (kg) 1,270 1,270
Call Options Purchased
Amount (kg) 24,535 4,710 572 29,817
$ per oz $338 $394 $360 $347
*Delta (kg) 1,049 176 115 1,340
Call Options Sold
Amount (kg) 24,584 10,463 3,303 12,902 12,222 57,194
120,668
$ per oz $340 $372 $342 $321 $329 $357 $348
*Delta (kg) 1,857 1,039 966 6,125 6,194 32,484 48,665
RAND GOLD
Forward Contracts
Amount (kg) 20,316 21,067 20,264 19,964 11,825 10,140 103,576
Rand per kg R56,208 R90,427 R110,801 R133,897 R142,973 R135,367 R106,479
Put Options Purchased
Amount (kg) 1,875 1,875 1,875 1,875 1,875 9,375
Rand per kg R93,603 R93,603 R93,603 R93,603 R93,603 R93,603
*Delta (kg) 144 103 79 44 31 401
Put Options Sold
Amount (kg)
Rand per kg
*Delta (kg)
Call Options Purchased
Amount (kg) 12,031 1,058 13,089
Rand per kg R86,039 R93,881 R86,673
*Delta (kg) 11,746 980 12,726
Call Options Sold
Amount (kg) 14,669 4,831 2,187 3,432 2,187 27,306
Rand per kg R87,148 R93,767 R93,630 R122,862 R93,630 R93,846
*Delta (kg) 14,206 4,516 2,095 2,501 2,151 25,469
AUS DOLLAR (A$) GOLD
Forward Contracts
Amount (kg) 18,040 13,841 5,443 6,221 9,331 22,395 75,271
A$ per oz A$572 A$526 A$534 A$659 A$635 A$618 A$590
Call Options Purchased
Amount (kg) 6,687 3,888 3,110 6,221 20,062 39,968
A$ per oz A$728 A$701 A$724 A$673 A$691 A$698
*Delta (kg) 847 817 1,058 3,185 11,998 17,905
Call Options Sold
Amount (kg)
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