Wrap Text
2002
Anglogold Limited
Registration No. 1944/017354/06
Incorporated in the Republic of South Africa
JSE share code: ANG ISIN: ZAE000014601
REPORT TO SHAREHOLDERS
FOR THE QUARTER ENDED 31 MARCH 2002
Sound operating results and a positive gold market
Overview
* Operating profit, including realised gains from non-hedge derivatives,
from current operations (excluding Free State assets) increases by 7.3% to
$147m or R1.7bn. This represents a cash operating profit of $197m or
R2.3bn.
* Total cash costs for the current operations reduced by 2% to $151/oz.
* Record cash operating margin of 47% ($136/oz), up 13% from December
quarter.
* Headline earnings, before unrealised non-hedge derivatives, increases 1%
to $89m with earnings marginally down to 81 US cents per share.
* Return on equity increases to 23% and return on capital employed to 16%.
* Increased exposure to rising gold prices through deliveries into low-
priced forward sales contracts.
* Hedge book restructured to eliminate all low-priced rand gold forward
sales for the remainder of this year.
* Open hedge position reduced by 1.7Moz (120% of the quarter's production)
to 12.9Moz.
Regional operating results for the quarter
SOUTH AFRICA
* Operating profit from current operations, (excluding the Free State
assets), including reaslied non-hedge derivatives, up 23% to R1,192m
($103m).
* Total cash costs up 1% to R50,471/kg, down 12% in dollar terms to $136/oz.
* Reduced production due to the substantial Christmas shutdown.
EAST AND WEST AFRICA
* Gold production down 3%, as planned, to 227,000oz and operating profit,
including realised non-hedge derivatives, $1m lower at $24m.
* Total cash costs 8% lower at $127/oz.
* Approval granted for the first phase of Geita expansion project, taking
plant throughput to 5.4Mtpa.
* Promising exploration results at Geita.
NORTH AMERICA
* Production down 10% to 95,000oz due to severe winter weather at Jerritt
Canyon and continuing inventory build-up on the leach pad at CC&V.
* Jerritt Canyon set to improve during June quarter and CC&V during second
half of 2002.
* Operating loss of $1m and higher total cash costs of $254/oz.
SOUTH AMERICA
* Operating profit, including realised non-hedge derivatives, up 13% to
$18m.
* Gold production down 12% to 102,000oz due to anticipated reductions at
Morro Velho and Cerro Vanguardia.
* Total cash costs up 2% to $125/oz due to lower production.
AUSTRALIA
* Operating profit, including realised non-hedge derivatives, down 11% to
A$8m ($4m).
* Production down 6% to 116,000oz due to Boddington closure.
* Total cash costs increases 6% to A$379/oz ($196/oz).
* Very encouraging exploration results at Sunrise Dam and in the Tanami
region
Quarter Quarter Year
ended ended ended
Mar 2002 Dec 2001* Dec 2001
Dollar/Imperial
Gold
Produced - oz (000)/kg 1,377 1,719 6,983
Price received** - $/oz-R/kg sold 287 279 287
Total cash costs - $/oz-R/kg produced 151 159 178
Total production costs - $/oz-R/kg produced 188 193 213
Operating profit, including realised
non-hedge derivatives - $/R million 147 151 527
Net profit - $/R million 71 86 245
Headline earnings - $/R million 93 94 281
Headline earnings before unrealised
non-hedge derivatives - $/R million 89 88 286
Capital expenditure - $/R million 51 82 298
Net earnings (basic) - cents per share 64 80 229
Headline earnings - cents per share 84 88 262
Headline earnings before unrealised
non-hedge derivatives - cents per share 81 82 267
Dividends - cents per share 181
* Includes the Free State operations
** Price received includes realised non-hedge derivatives
CONTINUED
Quarter Quarter Year
ended ended ended
Mar 2002 Dec 2001* Dec 2001
Rand/Metric
Gold
Produced - oz (000)/kg 42,816 53,471 217,203
Price received** - $/oz-R/kg sold 106,181 92,169 79,523
Total cash costs - $/oz-R/kg produced 56,033 51,710 48,828
Total production costs - $/oz-R/kg produced 69,653 62,995 58,579
Operating profit, including realised
non-hedge derivatives - $/R million 1,696 1,601 4,647
Net profit - $/R million 810 895 2,180
Headline earnings - $/R million 1,070 971 2,476
Headline earnings before unrealised
non-hedge derivatives - $/R million 1,027 924 2,536
Capital expenditure - $/R million 588 815 2,567
Net earnings (basic) - cents per share 734 835 2,035
Headline earnings - cents per share 969 906 2,311
Headline earnings before unrealised
non-hedge derivatives - cents per share 930 862 2,367
Dividends - cents per share 1,800
* Includes the Free State operations
** Price received includes realised non-hedge derivatives
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 e
xchange rates, and business and operational risk management.
List of abbreviations
$ United States dollars
A$ Australian dollars
Bn billion
Capex capital expenditure
FIFR Fatal Injury Frequency Rate per million hours worked
g grams
kg kilograms
LOM Life of Mine
LTIFR Lost Time Injury Frequency Rate per million hours worked.
AngloGold utilises the strictest definition in reporting LTIFR in that it
includes all Disabling Injuries (where an individual is unable to return to
his place of regular work the next calendar day after the injury) and
Restricted Work Cases (where the individual may be at work, but unable to
perform full or regular duties on the next calendar day after the injury)
within this definition.
M metre or million; depending on the context
m2 square metres
Mt million tonnes or tons
Mtpa million tonnes/tons per annum
Moz million ounces
oz ounces (troy)
R / rand South African rands
RIFR Reportable Injury Frequency Rate per million hours worked
t tons (short) or tonnes (metric)
tpm tonnes per month
VCR Ventersdorp Contact Reef
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
FINANCIAL AND OPERATING REVIEW
OVERVIEW
The principal features of the first quarter of 2002 were the company's
sound operating performance, the strong gold market and the improving gold
price.
The average spot price of gold rose from $278/oz last quarter to $290/oz
this quarter. Against this background, AngloGold delivered its quarterly
production into its low-priced forward positions, thus increasing the
company's exposure to the rising price in the future. Simultaneously,
AngloGold actively managed the outstanding hedge book and open forward
positions to offset the loss against the spot price caused by deliveries
into these contracts. Consequently the price received for the quarter,
including realised non-hedge derivative income, was $287/oz, thereby meeting
the company's objective of achieving a received price close to the spot
price in a rising market. In addition to delivering into hedge positions, a
partial restructuring of the hedge book was undertaken over the quarter-end
to eliminate all rand gold forward contracts from the book for the remainder
of this year. As a result of these two actions the open hedge position was
reduced from 14.6Moz at the end of December to 12.9Moz - a reduction of
1.7Moz or 120% of the quarter's production.
The operations performed well in what is historically a weak quarter
because of the slow start after the Christmas shut-down in the South African
operations.
Operating profit for the quarter - including realised non-hedge
derivative gains - decreased by $4m (3%) to $147m. There was a reduction of
$14m due to the sale of the Free State assets and an increase from current
operations of $10m. This increase resulted from a rise of $8/oz in the
received price of gold at $287/oz and a decrease of $3/oz in total cash
costs for current operations to $151/oz. This was partially offset by a
decrease of 52,000oz in gold production to 1.377Moz, primarily as a result
of the Christmas break and a continued inventory build-up at Cripple Creek &
Victor (CC&V).
The decrease in operating profit was partially offset by lower net
interest paid and lower taxation. Headline earnings, excluding unrealised
non-hedge derivatives, increased by $1m (1%) to $89m. Headline earnings per
share decreased by 1% from 82 US cents per share to 81 US cents per share -
the decrease in cents per share arises from the additional 3.2 million
shares issued as a result of the AngloGold bid for Normandy. An after tax
loss of $15m arising from the disposal of the Free State assets resulted in
the reduction of the net profit from $86m to $71m.
The company continues to achieve its targeted return ratios. Annualised
returns on equity and capital employed were 23% and 16% respectively, in
line with last quarter.
SOUTH AFRICA
Overall performance
The results of the South Africa region for the quarter do not include the
Free State assets: the operations were under the management of the new
owners during this period and the sale was concluded during April.
Total cash costs rose 1% from R49,757/kg to R50,471/kg (down 12% in
dollar terms to $136/oz). If the December quarter is adjusted for the sale
of the Free State assets, however, total rand cash costs per kilogram
increased quarter-on-quarter by 10%, largely as a result of the Christmas
shut-down.
Operating profit, including realised non-hedge derivatives, increased by
7% to R1,192m ($103m), despite a 303,000oz reduction in gold production, of
which some 290,000oz was attributable to the Free State operations.
Productivity indices, expressed in grams of gold produced per employee
showed a 5% improvement to 222g/employee, while square metres mined per
employee dropped by 8%, highlighting the impact of the sale of the high-
volume, low-grade Free State assets.
Tragically, eight employees lost their lives in mine accidents during the
quarter. Half of these were due to seismically induced falls of ground. As
a result, the FIFR deteriorated from 0.28 in 2001 to 0.29. The South
African operations recently launched 'fall of ground' safety campaigns in an
attempt to increase awareness of the risks associated with these events.
Mine performance
Volume mined at Great Noligwa fell by 5% compared with the previous
quarter and this, together with a 3% drop in grade, accounted for a 293kg,
or 4% decrease in gold production. Total cash costs increased by 19% to
R37,007/kg ($100/oz). The quarter-on-quarter difference arises
from both the impact of the Christmas break and the inclusion of the
higher income from uranium sales in the last quarter of 2001. Operating
profit, including realised non-hedge derivatives, at R444m ($39m) was 8%
higher than the previous quarter.
At Kopanang, volume mined was 4% lower than the previous quarter.
However, higher mining efficiency led to an 8% improvement in yield to
7.35g/t and 3% increase in gold produced to 3,715kg. Total cash costs rose
9% to R50,121/kg ($135/oz) quarter-on-quarter, again owing to by-product
sales in the fourth quarter. Operating profit, including realised non-hedge
derivatives, increased by 33% to R170m ($15m).
Tau Lekoa experienced a 6% drop in volume mined which was partially
offset by a 2% improvement in head grade, with gold production 4% lower than
the previous quarter at 2,226kg. The impact of the R14m increase in acid by-
product contribution in the previous quarter and lower gold production in
this quarter caused a 14% rise in total cash costs to R63,346/kg ($171/oz).
Operating profit, including realised non-hedge derivatives, rose 14% to R63m
($5m).
At TauTona, volume mined fell by 6%, but this was offset by increased
production in higher-grade areas resulting in a 7% improvement in yield and
a 4% rise in gold production to 4,960kg. Total cash costs went up by 2% to
R44,662/kg ($121/oz). Operating profit, including realised non-hedge
derivatives, rose 43% to R274m ($24m).
Increased seismicity in the VCR at Savuka resulted in an 9% drop in
volume mined. However, the higher grade in the Carbon Leader Reef resulted
in a 4% improvement in yield and only a marginal drop in gold produced.
Total cash costs increased by 5% to R77,211/kg ($209/oz). Operating profit,
including realised non-hedge derivatives, increased by 127% to R40m ($4m).
At Mponeng, volumes mined were 6% down on the previous quarter due to
poor face advance which saw a subsequent 6% drop in gold production to
3,039kg despite a constant yield. Total cash costs increased by 12% to
R63,200/kg ($171/oz). Operating profit, including realised non-hedge
derivatives, rose 32% to R73m ($6m).
At Ergo, gold production fell by 13% to 2,223kg following the closure of
Daggafontein in December, production disruptions from power failures and
excessive rainfall. This was partially offset by improved head grades and
higher metallurgical efficiency as well as increased gold recovered from the
toll treatment of loaded carbon material. Despite the drop in production,
total cash costs improved by 2% to R58,904/kg ($159/oz). Operating profit,
including realised non-hedge derivatives, rose by 34% to R82m ($7m).
EAST AND WEST AFRICA
Overall performance
The East and West Africa region (formerly the Africa region) had a strong
quarter, exceeding production and profit targets, but was unable to sustain
the record performance levels achieved in the December quarter. Gold
production was down 3% to 227,000 attributable ounces and operating profit,
including realised non-hedge derivatives, of $24m was 4% lower than the
December quarter. Despite the decreased production, total cash costs were
8% lower at $127/oz.
The first phase of the Geita gold plant expansion was approved during the
quarter. This decision follows encouraging results from recent exploration
drilling in the Nyankanga pit, which identified 30m additional tonnes of
ore. To realise the full benefit of this increased reserve, anticipated by
AngloGold at the time that it acquired its share in this operation, the
plant throughput will be raised from 4.5Mtpa to 6Mtpa in two phases over the
next two years and, ultimately, to the planned level of 7Mtpa.
Phase one will see the installation of secondary crushers and
modification to the existing ball mill to cater for the increased
throughput. This will raise the treatment rate to 5.4Mtpa at a capital cost
of $3m and will take eight months to complete. Following an assessment of
this first stage, phase two will see the installation of additional ball
milling capacity and extension to the wet plant section, at an estimated
capital cost of $11m.
Regrettably, safety performance was below standard with ten lost-time
injuries recorded for the quarter against only four in the previous quarter.
The main contributing factors have been identified and action plans will be
implemented to address the deficiencies.
Mine performance
Tonnage throughput at Sadiola (38% attributable) was adversely affected
by mineral sizer downtime and problems with the treatment of sulphide ore at
the start of the quarter. Gold production of 50,000oz was 9% lower than the
previous quarter. Total cash costs increased by 2% to $134/oz due to the
lower production. Operating profit, including realised non-hedge
derivatives, fell by 37% to $4m.
The plant conversion project to improve gold recovery from the treatment
of sulphide ore was completed on schedule by the end of February.
Yatela (40% attributable) continued to exceed targets, but was unable to
match the performance of the previous quarter. Gold production of 27,000oz
was 4% lower than the previous quarter due to a EAST AND WEST AFRICA
Overall performance
The East and West Africa region (formerly the Africa region) had a strong
quarter, exceeding production and profit targets, but was unable to sustain
the record performance levels achieved in the December quarter. Gold
production was down 3% to 227,000 attributable ounces and operating profit,
including realised non-hedge derivatives, of $24m was 4% lower than the
December quarter. Despite the decreased production, total cash costs were
8% lower at $127/oz.
The first phase of the Geita gold plant expansion was approved during the
quarter. This decision follows encouraging results from recent exploration
drilling in the Nyankanga pit, which identified 30m additional tonnes of
ore. To realise the full benefit of this increased reserve, anticipated by
AngloGold at the time that it acquired its share in this operation, the
plant throughput will be raised from 4.5Mtpa to 6Mtpa in two phases over the
next two years and, ultimately, to the planned level of 7Mtpa.
Phase one will see the installation of secondary crushers and
modification to the existing ball mill to cater for the increased
throughput. This will raise the treatment rate to 5.4Mtpa at a capital cost
of $3m and will take eight months to complete. Following an assessment of
this first stage, phase two will see the installation of additional ball
milling capacity and extension to the wet plant section, at an estimated
capital cost of $11m.
Regrettably, safety performance was below standard with ten lost-time
injuries recorded for the quarter against only four in the previous quarter.
The main contributing factors have been identified and action plans will be
implemented to address the deficiencies.
Mine performance
Tonnage throughput at Sadiola (38% attributable) was adversely affected
by mineral sizer downtime and problems with the treatment of sulphide ore at
the start of the quarter. Gold production of 50,000oz was 9% lower than the
previous quarter. Total cash costs increased by 2% to $134/oz due to the
lower production. Operating profit, including realised non-hedge
derivatives, fell by 37% to $4m.
The plant conversion project to improve gold recovery from the treatment
of sulphide ore was completed on schedule by the end of February.
Yatela (40% attributable) continued to exceed targets, but was unable to
match the performance of the previous quarter. Gold production of 27,000oz
was 4% lower than the previous quarter due to a planned decline in recovered
grade. Despite the lower production, total cash costs decreased by 5% to
$143/oz. Operating profit, including realised non-hedge derivatives, rose
by 50% to $3m.
Gold production at Morila (40% attributable) increased by 2% to 59,000oz,
largely due to improved recovered grade. Total cash costs for the quarter
decreased by 15% to $100/oz as a result of increased grade and production.
Operating profit, including realised non-hedge derivatives, rose by 23% to
$7m.
Geita (50% attributable) experienced another good quarter and production
was maintained at the previous level of 69,000oz. Total cash costs
decreased by 4% to $156/oz for the quarter. However, operating profit,
including realised non-hedge derivatives, fell by 16% to $6m.
Navachab was unable to match the record-breaking performance of the
previous quarter, but still exceeded production targets. Gold production
was 4% lower at 22,000oz, mainly due to a planned decline in tonnage
throughput. This decline was partially offset by improved recovered grades.
Despite the decrease in production, total cash costs at $116/oz were 18%
down on the previous quarter. The reduced cash costs are largely owing to
the improved recovered grade, and lower mining and processing costs.
Operating profit, including realised non-hedge derivatives, was maintained
at $3m. Due to recent improvements in the gold price, a conceptual study
has commenced to evaluate the economic viability of proceeding with a mine
expansion project. If the conceptual study yields positive results, a pre-
feasibility and feasibility study will follow.
Exploration
At Sadiola, resource delineation drilling returned higher than expected
gold values with intercepts of up to 64m at 3.55g/t. This oxide potential
has been drilled out over a strike length of 400m. Drilling of the sulphide
resource yielded notable intercepts of 110m at 3.23g/t, 50m at 4.91g/t and
22m at 3.87g/t. At the nearby Yatela mine, metallurgical tests on the
Alamoutala satellite deposit returned 90% recoveries; this implies that
further drilling to upgrade the 200,000oz resource is justified.
At Geita, drilling between the Geita Hill Main and West pits intersected
substantial mineralisation in previously unexplored territory. Significant
intercepts were 42m at 5.47g/t and 9m at 9.62g/t down to 200m in depth.
Drilling at Nyankanga Deeps continued to return good results with 26m at
7.17g/t and 15m at 5.23g/t.
NORTH AMERICA
Overall performance
The North American operations had a challenging quarter due to the
continuation of severe winter weather at Jerritt Canyon and ongoing
technical problems associated with the leach pad at CC&V.
Operating profit, including realised non-hedge derivatives, decreased
quarter-on-quarter from a profit of $1m to a loss of $1m due to an 10%
decline in gold production. Decreased gold production of 95,000oz for the
quarter also contributed to higher unit cash costs of $254/oz.
Approval for the $195m CC&V expansion plan was given during the first
quarter of 2001. The project will increase the average annual gold
production by 40% and extend the LOM from 2008 to at least 2013, yielding
2.8m additional ounces. Based on the latest economics for the project,
average LOM cash costs are expected to be reduced from $227/oz to $176/oz
and the project has an expected internal rate of return of 23%.
Construction will be completed in the third quarter of 2002 with higher gold
production forecast for the following quarter.
The region reported sound safety performance for the quarter with no lost-
time injuries and six minor medical treatment incidents.
Mine performance
Production at Cripple Creek & Victor (67% attributable - effectively 100%
- see note 4 on page 12) was 4% lower for the quarter at 43,000oz due to
ongoing technical problems associated with gold transportation times through
the leach pad. Despite reduced production, total cash costs at $199/oz were
6% lower than in the previous quarter as a result of continued cost-cutting
efforts. Construction is continuing on schedule for the commissioning of
the new crushing facility in the third quarter of 2002. Operating profit,
including realised non-hedge derivatives, decreased to $1m.
Jerritt Canyon's (70% attributable) production was 15% lower at 52,000oz.
The drop in production was as a result of a reorganisation of labour in the
underground mines, which reduced productivities in the short term, and
adverse winter weather conditions reducing mill throughput. Total cash
costs were 19% higher quarter-on-quarter at $294/oz due to the lower
production ounces. Jerritt Canyon's operating loss, including realised non-
hedge derivatives, increased to $2m.
Exploration
Exploration was focused on reserve development goals to meet the 2002
business plan. At Jerritt Canyon, exploration concentrated on targets near
the current mine workings. Results from underground drilling on targets on
the SSX mine property are encouraging and include 6m at 10.51g/t in the West
Mahala area. Drilling on the eastern side of the MCE mine confirmed the
continuation of known mineralisation with a best intercept of 10m at
35.26g/t. At Cripple Creek, reserve development drilling commenced in the
latter part of the quarter on the East Cresson deposit.
At Red Lake in Canada, drilling commenced in February on the Dorion-
McCuaig and Humlin target areas. A total of 17 holes (6,200m) were drilled
of which eight returned gold values in excess of 1g/t. Visible gold was
encountered in two holes in the Dorion-McCuaig area. The most promising
intercepts were between 9g/t and 10g/t over narrow (less than 1m) intervals.
SOUTH AMERICA
Overall performance
Gold production was 12% lower than the previous quarter but better than
planned at 102,000oz. Total cash costs for the quarter were 2% up on the
previous quarter at $125/oz as a result of decreased production.
The reduced gold production for the quarter was due to an anticipated
decline in production at Morro Velho and Cerro Vanguardia. This was
partially offset by increased production at Serra Grande. Despite the lower
production and higher costs, operating profit, including realised non-hedge
derivatives, rose by 13% to $18m, due to the higher gold price received.
Mine performance
At Morro Velho, a reduced volume of ore treated at a planned lower grade,
partially affected by rock mechanics problems at Cuiab Mine, resulted in an
18% decline in production for the quarter to 46,000oz. These problems have
now been resolved. Operating profit, including realised non-hedge
derivatives, rose by 20% to $7m.
At Cerro Vanguardia (46.25% attributable) gold production was 13% lower
at 33,000oz. due to planned reduced volumes and grade. Production in the
December quarter had been increased to compensate for reduced output in July
2001 due to poor weather. Operating profit, including realised non-hedge
derivatives, was maintained at $5m.
At Serra Grande (50% attributable) production increased by 5% to 23,000oz
as a result of improved grade. Operating profit, including realised non-
hedge derivatives, was maintained at $4m.
The South America region had a good safety performance this quarter, with
its LTIFR below the Ontario benchmark. Cerro Vanguardia continues to
maintain its enhanced safety conditions with no lost time injuries in the
quarter. Morro Velho and Serra Grande both had improved performances and
were audited and awarded with 3 and 4 NOSA Stars respectively during the
quarter.
Exploration
At Cerro Vanguardia in Argentina, significant down dip extensions to
mineralisation were established below or adjacent to existing pits. The
best intercept was 9.15m at 75.8g/t at a drilled depth of 187m. This, with
the delineation of further surface mineralisation, will add considerably to
the existing resource base during 2002.
In the Iron Quadrangle of Brazil, drilling at the Corrego do Sitio
project intersected further oxide mineralisation below the Mutuca pit.
Intercepts included 2.4m at 38.0g/t and 21.7m at 5.49g/t.
Greenfield exploration in Peru continued at the La Rescatada project,
where positive drill results have led to planning for a second phase of the
drilling due to start in May 2002.
AUSTRALIA
Overall performance
Production for the March quarter of 116,000oz was 6% below the output of
the previous quarter. Although production at Sunrise Dam increased, this
was not sufficient to offset the losses resulting from the closure of the
Boddington mine which contributed 17,000oz to the December quarter results.
Overall total cash costs increased by 6% to A$379/oz ($196/oz) - A$357/oz
($183/oz) in the December quarter. The December quarter benefited from the
inclusion of a volume of low-cost production generated from the 'clean-out'
of the Boddington plant. Operating profit, including realised non-hedge
derivatives, fell by 11% to A$8m ($4m).
The region had a pleasing safety performance during the quarter, with two
minor lost-time injuries and six restricted work cases.
Mine performance
Production at Sunrise Dam increased strongly by 12% to 85,000oz. Plant
throughput was up by 13% to an annualised rate of 3.4Mtpa as operations were
optimised following the capital expansion undertaken last year. Grades fell
during the quarter as mining moved through some depletion zones in the upper
areas of the recently completed open-pit cutback. As a consequence, total
cash costs rose by 9% to A$344/oz ($179/oz). Operating profit, including
realised non-hedge derivatives, rose to A$10m ($5m) compared to A$8m ($4m)
for the previous quarter.
Despite disruptions to mining in the main Crosscourse pit due to the wet
season, gold production at Union Reefs of 30,000oz was only marginally below
that of the previous quarter. Total cash costs fell by 6% to A$435/oz
($225/oz) as stockpiles built up during the previous quarter were drawn
down. Including realised non-hedge derivatives, there was no operating
profit compared to A$3m ($1m) in the previous quarter.
Operations at Boddington (33.33% attributable) ceased during the December
2001 quarter and the plant has been placed on care and maintenance pending
the commencement of the Boddington Expansion Project. The only production
recorded during the quarter was from residual plant clean-out and, as a
consequence, production fell to 1,000 attributable ounces compared with
17,000 attributable ounces in the previous quarter.
Operations at the Tanami (40% attributable) mine have ceased and no
production was recorded in this quarter. Implementation of the mine
rehabilitation plan is continuing.
Exploration
At Sunrise Dam, exploration was again successful in improving the quality
of the orebodies. Infill drilling of the Mako lode returned intercepts
including 5m at 66.1g/t and 5m at 73.2g/t. In addition, step-out drilling
on the underground Dolly target intersected 17m at 7.0g/t, confirming
mineralisation 70m updip from previous drillholes.
At the advanced Coyote exploration project in the Tanami region, initial
drilling indicates that the Buggsy-Gonzalez structure continues at depth.
Drill intersections at 237m and 268m returned values of 2m at 19.7g/t and 1m
at 117.5g/t respectively. The mineralised structure is open at depth.
Gold Market
The gold market continues to strengthen, and the trading range for gold
has improved steadily over the past six months. After opening the quarter
in a range around $285/oz, the spot market moved strongly up above $300/oz.
The price has held in a new range around $300/oz since late January,
yielding an average price for the quarter of over $290/oz, $12 higher than
the average price for the final quarter of 2001. By contrast, the rand
currency market was quieter and more stable for the quarter, and the local
price of gold averaged R107,000/kg, unchanged from the opening local price
for the quarter.
The incremental firming in the spot price of gold has renewed interest in
the metal as an investment. Unlike other price rallies in recent years,
where the gold price has tended to rise on the back of a single issue or
incident, the current price improvement has been built on a number of
favourable circumstances for gold.
Continuing uncertainty about developed economies, and about equity
markets in those economies - an uncertainty reinforced by the collapse of
Enron - has provided a positive context for investors to reconsider the
potential of gold. Other circumstances have also opened opportunities for
gold. In Japan, the withdrawal of savings deposit guarantees by the
government, and consumer concern over the health of the Japanese banking
sector saw significant retail buying of gold investment products during this
past quarter, as Japanese investors switched cash deposits into gold.
Investment offtake in Japan increased more than threefold over the first
quarter of 2001 to 45t in the first quarter 2002. Although buying peaked in
February, it is likely that uncertainty in the Japanese market could
continue to generate a demand for investment metal for some time.
In the political arena, the escalation of conflict in the Middle East has
helped gold in one of its traditional roles as a safe haven. The rise in
spot oil prices that has accompanied the conflict has also encouraged
interest in gold.
With the cumulative cuts in US interest rates over the past twelve
months, circumstances in the futures markets are also favourable to gold.
Lower US rates have reduced the motivation by gold producers, investors and
speculators, and central banks to sell the metal. In particular, many gold
producers - AngloGold included - who have previously sold gold forward, are
delivering into hedge contracts without renewing these contracts. This has
an effect equivalent to withdrawing the same amount of production from the
spot market with a beneficial tightening of that market as a result.
Reflective of both the change in forward pricing of gold and of improved
sentiment towards the gold price, the net non-commercial trading position in
gold on the New York Comex has remained long gold for almost four months (by
comparison between 1997 and 1999 traders' net positions on the Comex were
short gold for 90% of a 156 week period).
As is often the case in times of a rising gold price, the physical
markets for gold have come under pressure. The second half of 2001 saw a
significant setback in the largest gold market, India (down year on year by
17% in the third quarter, and 20% in the final quarter of 2001). During the
quarter under review, the fall in gold imports to India was probably greater
than the increase in gold offtake in Japan for this period, underlining the
importance of maintaining physical demand in existing markets, which
provides the basic underpinning for the price of the metal. In this regard,
the unwinding of producer hedge positions will provide some offset for
slippage in physical demand.
New investor buying of gold, particularly in the forward or futures
markets such as the New York Comex, will be critical to further improvement
in the spot price of the metal.
Currency markets attracted less attention during the quarter. The rand
market was relatively steady by comparison with the previous quarter, moving
sideways against the US dollar for most of the period. However, in a
broader context, the Australian dollar, the Euro and the rand all ended the
period stronger against the US dollar than they had been at the beginning of
the quarter. This is of particular interest to the gold market, as the
enduring strength of the US currency over recent years has been viewed as a
significant contributor to the downward pressure on the spot price of gold.
Since the end of the quarter, the US dollar has weakened further against
major currencies.
The report for this quarter on the open hedge position for AngloGold as
at 31 March 2002, shows a further reduction in the hedge by some 52t or
1.67Moz. Consistent with the company's stated intentions, this position has
been reduced by a further 20t or 643,000oz as at the end of April.
Following the rapid devaluation of the rand late last year, the company has
been particularly concerned to address the open positions priced in rands.
To this end, the net open rand gold forward sale position for 2002 of
20,316kg of gold priced at R56,208/kg as reported in the detailed report of
AngloGold's hedge position as at 31 December 2001, has been taken back in
full during the first quarter of 2002.
Going forward, the company will continue to deliver against or otherwise
close maturing forward pricing contracts and to address particular attention
to those parts of the open hedge book which have been overtaken by moves in
the underlying market - specifically rand-denominated hedges. In managing
the hedge AngloGold have put in place new option positions which have been
priced at the forward line off today's higher spot price; these new
positions are still subject to the overall objective of progressively
reducing the net total tonnage sold forward by the company.
NET DELTA OPEN HEDGE POSITION AS AT 31 MARCH 2002
As at 31 March 2002, the group had outstanding, the following net forward-
pricing commitments against future production. These net commitments
include all restructuring of forward positions in progress at 31 March 2002
and completed thereafter. A portion of these sales consists of US dollar-
priced contracts which have been converted to rand prices at an average
annual forward rand value based on spot rand/dollar rate of 11.351 available
on 31 March 2002.
AUS
Rand Dollar Dollar
Gold Gold $ Gold A$ Total Total
kg's R per Kg per kg's per kg's oz's
sold kg sold oz sold oz sold sold
12 months
ending
31 Dec
2002 2,621 90,085 27,009 306 14,378 573 44,008 1,414,891
2003 24,070 89,939 34,016 325 13,636 533 71,722 2,305,929
2004 24,226 111,273 26,920 317 5,443 555 56,589 1,819,386
2005 23,000 132,155 35,542 325 4,921 674 63,463 2,040,387
2006 14,543 135,944 29,505 332 5,630 654 49,678 1,597,200
Jan 2007-
Dec 2011 18,437 163,895 88,380 354 8,879 555 115,696 3,719,685
106,897 122,875 241,372 333 52,887 576 401,156 12,897,478
The marked-to-market value of all hedge transactions making up the hedge
positions in the above table following all restructuring was a negative
R5,623m ($495m) as at 31 March 2002. The value was based on a gold price of
$301.40 per ounce, exchange rates of R/$11.351 and $/A$ 0.5202 and the
prevailing market interest rates and volatilities at the time.
As at 29 April 2002, the marked-to-market value of the hedge book was a
negative R5,280m ($496.7m) based on a gold price of $310.90/oz and exchange
rates of $/R10.63 and A$/$0.5428 and the prevailing market interest rates
and volatilities at the time.
Note to AngloGold Hedge Position as at 31 March 2002
* 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
March 2002.
ANGLOGOLD HEDGE POSITION
AS AT 31 MARCH 2002 2007-
Year 2002 2003 2004 2005 2006 2011 Total
DOLLAR GOLD
Forward Contracts
Amount (kg) 17,431 25,900 26,836 25,879 20,524 43,831 160,401
$ per oz $301 $317 $316 $326 $334 $349 $327
Put Options Purchased
Amount (kg) 2,663 5,808 796 757 563 728 11,315
$ per oz $278 $352 $291 $291 $291 $292 $319
*Delta (kg) 303 4,196 193 189 125 145 5,151
Put Options Sold
Amount (kg) 11,819 6,221 6,221 24,261
$ per oz $289 $301 $311 $298
*Delta (kg) 1,724 2,436 2,495 6,655
Call Options Purchased
Amount (kg) 4,288 1,756 572 6,616
$ per oz $359 $377 $360 $364
*Delta (kg) 351 244 185 780
Call Options Sold
Amount (kg) 26,655 16,653 5,294 15,825 14,213 67,147 145,787
$ per oz $313 $331 $332 $323 $329 $358 $339
*Delta (kg) 11,350 6,600 2,571 9,474 8,856 44,404 83,255
RAND GOLD
Forward Contracts
Amount (kg) 19,567 20,264 19,342 10,581 8,274 78,028
Rand per kg R87,879 R110,801 R132,688 R138,137 R117,021 R114,845
Put Options Purchased
Amount (kg) 1,094 1,875 1,875 1,875 1,875 8,594
Rand per kg R93,542 R93,603 R93,603 R93,603 R93,603 R93,595
*Delta (kg) 80 100 47 21 13 261
Put Options Sold
Amount (kg)
Rand per kg
*Delta (kg)
Call Options Purchased
Amount (kg) 5,232 5,232
Rand per kg R83,471 R83,471
*Delta (kg) 5,224 5,224
Call Options Sold
Amount (kg) 7,090 4,999 5,000 4,999 5,000 14,930 42,018
Rand per kg R85,599 R99,009 R113,930 R129,548 R130,208 R202,056 R142,483
*Delta (kg) 7,765 4,403 3,915 3,637 3,949 10,163 33,832
AUS DOLLAR (A$) GOLD
Forward Contracts
Amount (
Sharenet Sites 
