Wrap Text
NEWS RELEASE
CORPORATE COMMUNICATIONS DEPARTMENT
12TH FLOOR, 11 DIAGONAL STREET
JOHANNESBURG 2001
TELEPHONE: (+27 11) 637 6147
FAX: (+27 11) 637 6399/6400
SKB/CCD/AG070.99
4 AUGUST 1999
REPORT FOR THE QUARTER ENDED 30 JUNE 1999
KEY FEATURES
* HEDGING SERVES WELL - RECEIVED PRICE OF $312 FOR SIX MONTHS
* OPERATING PROFIT UP 47% TO R1.6 BILLION (22% TO $258 MILLION)
* HEADLINE EARNINGS BEFORE DEFERRED TAX ADJUSTMENT UP 51% TO R1 BILLION (26% TO
$168 MILLION)
* 16% RETURN ON SHAREHOLDERS' EQUITY (INCLUDING DEFERRED TAX)
* DIVIDEND OF 900 CENTS PER SHARE - YIELD OF 7% OFF A SHARE PRICE OF R250
PREPARED IN ACCORDANCE WITH INTERNATIONAL ACCOUNTING STANDARDS
QUARTER ENDED SIX MONTHS ENDED
JUNE MARCH JUNE JUNE
1999 1999 1999 1998
RAND/METRIC
GOLD
PRODUCED - KG/OZ(000) 53 438 53 711 107 150 104 744
REVENUE- R/KG/$/OZ SOLD 61 841 60 960 61 398 56 464
CASH COSTS- R/KG/$/OZ PRODUCED 41 363 40 701 41 031 38 983
TOTAL PRODUCTION COSTS- R/KG/$/OZ
PRODUCED 47 017 46 492 46 753 45 715
OPERATING PROFIT - R MILLION/
$ MILLION 797 779 1 576 1 071
NET CAPITAL EXPENDITURE- R MILLION/
$ MILLION 306 252 558 197
ATTRIBUTABLE PROFIT- R MILLION/
$ MILLION 1 018 611 1 629 1 000
ATTRIBUTABLE EARNINGS- CENTS PER
SHARE 1 040 625 1 664 1 022
HEADLINE EARNINGS- CENTS PER SHARE 519 974 1 492 677
HEADLINE EARNINGS BEFORE - CENTS
PER SHARE 519 504 1 022 677
DEFERRED TAX ADJUSTMENT
DIVIDENDS- CENTS PER SHARE - - 900 750
QUARTER ENDED SIX MONTHS ENDED
JUNE MARCH JUNE JUNE
1999 1999 1999 1998
DOLLAR/IMPERIAL
GOLD
PRODUCED- KG/OZ(000) 1 717 1 728 3 445 3 368
REVENUE - R/KG/$/OZ SOLD 314 311 312 347
CASH COSTS- R/KG/$/OZ PRODUCED 210 208 209 240
TOTAL PRODUCTION COSTS - R/KG/$/OZ
PRODUCED 239 237 238 286
OPERATING PROFIT- R MILLION/
$ MILLION 131 127 258 211
NET CAPITAL EXPENDITURE- R MILLION/
$ MILLION 50 41 91 40
ATTRIBUTABLE PROFIT- R MILLION/
$ MILLION 166 101 267 198
ATTRIBUTABLE EARNINGS- CENTS PER
SHARE 170 103 273 202
HEADLINE EARNINGS- CENTS PER SHARE 85 160 245 133
HEADLINE EARNINGS BEFORE - CENTS PER
SHARE 85 83 168 133
DEFERRED TAX ADJUSTMENT
DIVIDENDS- CENTS PER SHARE 149 127
A LETTER FROM THE CHAIRMAN AND THE CHIEF EXECUTIVE OFFICER
DEAR SHAREHOLDER
IT IS WITH PROFOUND SADNESS THAT WE BEGIN THIS COMMUNICATION TO YOU BY
REFLECTING ON THE UNDERGROUND EXPLOSION AT MPONENG MINE THAT CLAIMED THE LIVES
OF 19 WORKERS ON THE NIGHT OF 29 JULY. WE HAVE COMMITTED YOUR COMPANY TO FULL
SUPPORT OF A GOVERNMENT INQUIRY, ALREADY UNDER WAY, AND ARE CONFIDENT THAT
EVERY EFFORT WILL BE MADE TO IDENTIFY THE CAUSE OF THIS TRAGEDY, TOGETHER WITH
WAYS TO PREVENT ANY RECURRENCE IN THE FUTURE. IT IS MOST IMPORTANT THAT THE
LESSONS LEARNED ARE EMBODIED IN THE COMPANY'S EXTENSIVE ZERO TOLERANCE SAFETY
CAMPAIGN LAUNCHED RECENTLY. IN EXTENDING OUR DEEPEST CONDOLENCES TO THE
FAMILIES OF THE MEN WHO DIED, WE ARE MINDFUL OF THE NEED TO CONSIDER THEIR
FUTURE WELL-BEING. THE BOARD HAS ASKED MANAGEMENT TO IDENTIFY, IN DISCUSSION
WITH THE REPRESENTATIVE UNIONS, THE MOST APPROPRIATE MEANS OF ASSISTING NOT
ONLY THESE FAMILIES BUT THOSE OF ALL WORKERS WHO DIE IN ACCIDENTS ON ANGLOGOLD
MINES.
IN THE FIRST SIX MONTHS OF 1999 - A PERIOD DURING WHICH THE GOLD PRICE FIRST
TRADED IN THE $278 TO $293 RANGE AND THEN PLUMMETED TO A 20-YEAR LOW -
ANGLOGOLD HAS PRODUCED CREDITABLE IMPROVEMENTS IN PERFORMANCE, COMPARED WITH
THE SAME PERIOD LAST YEAR.
OPERATING PROFIT INCREASED BY 47% TO R1.6 BILLION AND HEADLINE EARNINGS BEFORE
DEFERRED TAX ADJUSTMENT BY 51% TO R1 BILLION, GIVING A RETURN ON SHAREHOLDERS'
EQUITY (INCLUDING DEFERRED TAX) OF 16%, COMPARED WITH 11% FOR THE SAME PERIOD
LAST YEAR.
THE COMPANY HAS BEEN WELL SERVED BY ITS HEDGING ACTIVITIES, REPORTING A
RECEIVED PRICE FOR THE SIX MONTHS OF $312, COMPARED WITH A SPOT PRICE OF $280.
THIS RECEIVED PRICE IS, NEVERTHELESS, SIGNIFICANTLY LOWER THAN THE $347
RECEIVED FOR THE EQUIVALENT PERIOD LAST YEAR.
A DIVIDEND OF 900 CENTS PER SHARE (COMPARED TO 750 FOR THE FIRST HALF OF 1998)
HAS BEEN DECLARED BY THE BOARD. THIS REPRESENTS A DIVIDEND YIELD OF 7%
ANNUALISEDR,, THUS MAINTAINING OUR REPUTATION AS A HIGH INCOME EQUITY. THE
COMPANY'S SOUND PERFORMANCE IS REFLECTED IN ITS SHARE PRICE, COMPARED WITH THE
FTSE GOLD INDEX, SHOWN IN THE GRAPH BELOW.
(GRAPH APPEARS HERE)
THE SOUTH AFRICAN MINES HAVE HAD A DIFFICULT SIX MONTHS. THE ELANDSRAND,
DEELKRAAL, SAVUKA AND BAMBANANI MINES HAVE ALL EXPERIENCED PRODUCTION PROBLEMS
OF VARIOUS KINDS AND THE MATJHABENG MINE LOST MORE THAN ONE TONNE OF GOLD
PRODUCTION IN THE AFTERMATH OF THE SEVERE EARTHQUAKE WHICH OCCURRED IN APRIL.
WE INTEND TO PROVIDE MORE FOCUSED RESOURCES TO THESE MINES, WHICH COMPRISE 85%
OF THE COMPANY'S BUSINESS, AND THIS IS EXPECTED TO CONTRIBUTE TO THEIR IMPROVED
PERFORMANCE.
THE NORTH AMERICAN MINES ALSO HAD A SLOWER THAN ANTICIPATED START, THOUGH
PRODUCTION HAS PICKED UP IN THE SECOND QUARTER AND COSTS HAVE BEEN WELL
CONTROLLED. IN CONTRAST, THE SOUTH AMERICAN MINES HAVE HAD AN EXCELLENT
HALF-YEAR, WITH PRODUCTION UP AND COSTS DOWN. THIS IS TRUE ALSO OF THE SADIOLA
MINE IN MALI. THE DIVERSITY OF ANGLOGOLD'S OPERATIONS DEMONSTRATES THE ABILITY
OF THE COMPANY TO COPE WITH THE INEVITABLE ADVERSITIES OF INDIVIDUAL MINES.
THE MEDIUM-TERM PROSPECTS FOR ANGLOGOLD ARE CLOSELY LINKED TO THOSE OF THE GOLD
PRICE. OUR EXISTING PRICE HEDGE SHOULD ALLOW THE COMPANY TO REALISE PRICES IN
THE SECOND HALF OF THIS YEAR SIMILAR TO THOSE OF THE FIRST SIX MONTHS, EVEN IF
THE SPOT PRICE REMAINS AT ITS PRESENT TWO-DECADE LOW.
PRESENT PRICE LEVELS ARE FRUSTRATING, AS THE LAST QUARTER HAS SEEN STRONG
GROWTH IN ALMOST ALL PHYSICAL OFF-TAKE MARKETS. SOUTH KOREAN AND SOUTH EAST
ASIAN DEMAND INCREASED BY 50%, THE JAPANESE MARKET BY 80% AND THE UNITED STATES
BY 17%, WHILE INDIA RECOVERED FROM A WEAK FIRST QUARTER.
HOWEVER, PHYSICAL DEMAND IS TAKING SECOND PLACE AT THE MOMENT TO THE
SPECULATION THAT MOST CENTRAL BANKS WILL, IN THE FORESEEABLE FUTURE, SELL MOST
OF THEIR GOLD. INDICATIONS FROM THE US FEDERAL RESERVE AND THE EUROPEAN
CENTRAL BANK SUGGEST THAT NEITHER OF THESE IMPORTANT HOLDERS INTENDS REDUCING
THE 21 000 TONNES THEY HOLD. SOME PERSPECTIVE NEEDS TO BE BROUGHT TO THE DEBATE
ON THE FUTURE GOLD MANAGEMENT POLICIES OF CENTRAL BANKS AND OTHER OFFICIAL
INSTITUTIONS.
NICKY OPPENHEIMER BOBBY GODSELL
CHAIRMAN CHIEF EXECUTIVE OFFICER
3 AUGUST 1999
GOLD MARKET
CIRCUMSTANCES IN THE GOLD MARKET CHANGED MATERIALLY DURING THE SECOND QUARTER
OF 1999 WITH THE ANNOUNCEMENT ON 7 MAY OF THE UNITED KINGDOM'S INTENTION TO
SELL 415 TONNES OUT OF 715 TONNES OF OFFICIAL GOLD RESERVES BY PUBLIC AUCTION
OVER A NUMBER OF YEARS, STARTING ON 6 JULY 1999. THIS METHOD OF
PRE-ANNOUNCEMENT AND SALE BY PUBLIC AUCTION IS AT ODDS WITH THE NATURE OF THE
TRADED MARKET IN GOLD, WHICH OPERATES MUCH LIKE A CURRENCY MARKET WHERE VOLUMES
OF DERIVATIVE TRADE SUBSTANTIALLY OUTWEIGH THE FLOWS OF THE UNDERLYING CURRENCY
OR METAL. THE PRE-ANNOUNCEMENT WAS AN INVITATION TO SPECULATORS IN THAT
DERIVATIVE MARKET TO SELL THE METAL SHORT, AND EXACTLY THIS PROCESS FOLLOWED,
DEPRESSING THE GOLD PRICE TO A 20-YEAR LOW OF $257 PER OUNCE. THE AVERAGE
PRICE FOR THE QUARTER WAS $273 PER OUNCE, COMPARED WITH AN AVERAGE OF $287 FOR
THE FIRST QUARTER OF THIS YEAR.
THE FIRST OF THE BRITISH AUCTIONS TOOK PLACE ON 6 JULY WITH THE SALE OF 25
TONNES OF GOLD OUT OF THE 125-TONNE FIRST TRANCHE WHICH THE UNITED KINGDOM
PROPOSES TO SELL BY MID-2000. THE SALE PROCEEDED WITHOUT EVENT, BUT PROVIDED
SPECULATORS WITH A BENCHMARK AGAINST WHICH TO SELL SHORT IMMEDIATELY AFTER THE
AUCTION. THE MARKET REMAINS WEAK AT THESE LEVELS ALTHOUGH THERE IS SOME
EVIDENCE OF A RETURN OF TWO-WAY BUSINESS TO THE MARKET.
THE OPPORTUNITIES PROVIDED TO SPECULATORS BY THE PUBLIC PRE-ANNOUNCEMENT OF THE
BRITISH SALES, AND THE DAMAGE DONE TO THE GOLD PRICE BY THIS SPECULATION, HAS
REVIVED A VIEW AMONGST GOLD MARKET COMMENTATORS - REFLECTED IN THE MEDIA - THAT
WIDESPREAD SALES OF OFFICIAL GOLD RESERVES ARE INEVITABLE AND WILL, IN DUE
COURSE, PUSH THE DEPRESSED GOLD PRICE SUBSTANTIALLY LOWER. THIS VIEW HAS BEEN
SUPPORTED BY THE PROPOSAL BY INTERNATIONAL MONETARY FUND (IMF) MANAGEMENT TO
SELL SOME 10 MILLION OUNCES OF IMF GOLD RESERVES AS PART OF A DEBT RELIEF
SCHEME FOR HEAVILY INDEBTED POOR COUNTRIES. IN ADDITION, SWITZERLAND HAS
CONTINUED TO MOVE TOWARDS ITS AIM OF SELLING HALF OF THE SWISS NATIONAL BANK
GOLD HOLDINGS OF 2 590 TONNES, TO BE SPREAD OVER A PERIOD AS LONG AS TEN YEARS.
NEITHER OF THESE PROPOSALS TO SELL GOLD RESERVES WOULD NECESSARILY LEAD TO NET
OFFICIAL SALES OF GOLD IN ANY YEAR IN EXCESS OF THE TYPICAL LEVELS ABSORBED BY
THE GOLD MARKET ANNUALLY IN RECENT YEARS. HOWEVER, THE DAMAGE DONE TO THE GOLD
MARKET BY SPECULATORS IN REACTION TO THE BRITISH GOLD SALE ANNOUNCEMENT HAS
ALERTED GOLD PRODUCERS AND OTHER CONSTITUENCIES IN THE GOLD MARKET TO THE
POTENTIAL NEGATIVE IMPACT IN TODAY'S FRAGILE MARKET OF ALL OFFICIAL GOLD SALES
ANNOUNCEMENTS. WHILST THE GOLD MINING INDUSTRY IS ABSORBED CURRENTLY WITH
THESE IMMEDIATE CHALLENGES, IN THE LONGER TERM IT WILL BE INCUMBENT ON ALL OF
THOSE WITH AN INTEREST IN THIS INDUSTRY TO FIND A MODUS OPERANDI FOR
INTERACTION BETWEEN MAJOR HOLDERS OF GOLD AND THE TRADED MARKET IN THE METAL
WHICH AVOIDS MARKET DISLOCATION. THIS IS CLEARLY NOT WHAT HAS HAPPENED IN THE
CASE OF THE BRITISH SALES, WHERE ALL PARTIES WITH A LONG-TERM INTEREST IN GOLD
- OFFICIAL INSTITUTIONS AND INDIVIDUALS - HAVE SUFFERED, AND ONLY SPECULATORS
WITH NO LONG-TERM INTEREST IN EITHER THE METAL OR THE GOLD MARKET HAVE
BENEFITED.
IN CONTRAST TO THE AGGRESSIVE SELLING OF GOLD BY SPECULATORS, THE PHYSICAL
MARKET FOR GOLD DURING THIS PAST QUARTER HAS SHOWN FURTHER ENCOURAGING GROWTH.
OFF-TAKE IN SOUTH KOREA AND SOUTH EAST ASIA WENT UP BY 50% COMPARED WITH THE
SECOND QUARTER OF 1998, WHILST GOLD IMPORTS INTO JAPAN ARE 80% UP. DEMAND FROM
THE USA WAS UP BY 17%, AND OFF-TAKE IN INDIA INCREASED AFTER A DISAPPOINTING
FIRST QUARTER. NEW OPPORTUNITIES FOR MARKET GROWTH ARE BEING OPENED UP IN
PAKISTAN AND IN THE MIDDLE EAST, PARTICULARLY EGYPT.
THIS PARADOX OF HEALTHY AND GROWING PHYSICAL DEMAND JUXTAPOSED WITH AGGRESSIVE
SHORT SELLING IN THE DERIVATIVES MARKET REINFORCES THE EXTENT TO WHICH THE
CURRENT GOLD MARKET HAS LOST TOUCH WITH REALITY, AS SPECULATORS FROM THE
FINANCIAL AND INVESTMENT SECTORS ARE ENCOURAGED TO SELL THE METAL ON THE AS YET
UNPROVED SPECULATION OF IMMINENT, WIDESPREAD AND ONGOING CENTRAL BANK GOLD
SALES. THESE RUMOURS HAVE BEEN USED FOR A NUMBER OF YEARS NOW TO DEPRESS THE
GOLD PRICE, AND YET THERE REMAINS TO DATE NO SUPPORT IN THE ACTUAL BEHAVIOUR OF
THE OFFICIAL SECTOR FOR THESE VIEWS.
BY CONTRAST, OF THE APPROXIMATELY 33 000 TONNES OF OFFICIAL GOLD HOLDINGS, WE
KNOW THAT NEARLY 21 000 TONNES IS HELD IN THE FIRM HANDS OF THE UNITED STATES
FEDERAL RESERVE, AND THE MEMBERS OF THE EUROPEAN CENTRAL BANK, BOTH OF WHICH
INSTITUTIONS HAVE GIVEN REASSURANCES TO THE MARKET IN RECENT MONTHS THAT THEY
HAVE NO INTENTION OF REDUCING THEIR HOLDINGS OF GOLD. THE CHALLENGE IN THE
MARKET PLACE GOING FORWARD MUST BE TO CONVEY THIS REALITY TO MARKET
COMMENTATORS AND MEDIA ALIKE, IN CONTRADICTION TO THE POPULAR MISREPRESENTATION
DESCRIBED ABOVE.
AS AT 30 JUNE 1999, THE COMPANY HAD OUTSTANDING THE FOLLOWING NET FORWARD
PRICING COMMITMENTS AGAINST FUTURE PRODUCTION. A PORTION OF THESE SALES
CONSISTS OF US DOLLAR-PRICED CONTRACTS WHICH HAVE BEEN CONVERTED TO RAND PRICES
AT AVERAGE ANNUAL FORWARD RAND VALUES BASED ON A SPOT RAND/DOLLAR EXCHANGE RATE
OF R6.00 AVAILABLE ON 30 JUNE 1999. THE PERCENTAGE OF THE SALES PRICED IN US
DOLLARS IS SHOWN BELOW.
FORWARD FORWARD % OF
KG PRICE PER OZ PRICE PER POSITIONS
SOLD KG SOLD SOLD OZ SOLD PRICED IN
R 000 R US$
6 MNTHS ENDING 31 DEC
1999 101 317 60 811 3 257 311 35
12 MNTHS ENDING
31 DEC 2000 79 077 71 215 2 542 350 63
2001 67 930 76 019 2 184 354 60
2002 60 116 82 927 1 933 350 60
2003 31 172 96 731 1 002 346 78
2004 20 272 105 526 652 346 86
JAN 2005 - JUN 2009 63 558 135 080 2 043 361 82
THE AGGREGATE OF US DOLLAR-PRICED CONTRACTS OVER THE FULL DURATION OF THE HEDGE
IS 59%.
THE HEDGE POSITION OF THE COMPANY INCREASED BY 6% TO 13.6 MILLION OUNCES SPREAD
OVER TEN YEARS - EQUIVALENT TO A YEAR AND TEN MONTHS OF PRODUCTION. THE
AVERAGE PRICE OF THESE POSITIONS, 59% OF WHICH ARE PRICED IN US DOLLARS,
DECREASED MARGINALLY BY 0.3% TO $343 PER OUNCE OR R84 266 PER KILOGRAM AT AN
EXCHANGE RATE OF R/$6.00. THE INCREASE IN HEDGE TONNAGE REFLECTS THE
COMPLETION OF THE HEDGING FOR THE MINES ACQUIRED FROM MINORCO IN TERMS OF THE
LOAN AGREEMENTS.
THE NET PRESENT VALUE OF ALL HEDGE TRANSACTIONS MAKING UP THE HEDGE POSITIONS
IN THE ABOVE TABLE WAS R3.04 BILLION ($507 MILLION) AS AT 30 JUNE 1999. THIS
VALUE WAS BASED ON A GOLD PRICE OF $262.45 PER OUNCE, AN EXCHANGE RATE OF
R/$6.00 AND THE PREVAILING MARKET INTEREST RATES AND VOLATILITIES AT THE TIME.
AS AT 28 JULY 1999, THE NET VALUE OF THE HEDGE BOOK WAS R3.57 BILLION ($583
MILLION), BASED ON A GOLD PRICE OF $253.65 PER OUNCE, AN EXCHANGE RATE OF
R/$6.12 AND THE PREVAILING MARKET INTEREST RATES AND VOLATILITIES AT THE TIME.
QUERIES:
IN SOUTH AFRICA: IN THE UNITED KINGDOM:
JAMES DUNCAN ALEX BUCK
TELEPHONE: (11) 637 6147 TELEPHONE: (171) 849 5630
FAX: (11) 637 6399/6400 FAX: (171) 849 6137
IN THE UNITED STATES OF AMERICA:
STEVE LENAHAN
TELEPHONE: (917) 368 8075
FAX: (917) 368 8077
CHARLES CARTER
TOLL-FREE: 800 417 9255
TELEPHONE: (303) 843 9255
FAX: (303) 694 4969
FOR THE FULL REPORT ON THE QUARTER VISIT THE ANGLOGOLD WEBSITE:
WWW.ANGLOGOLD.COM
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