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/AG056.99
30 APRIL 1999
REPORT FOR THE QUARTER ENDED 31 MARCH 1999
HIGHLIGHTS
* SHORTFALL IN GOLD PRODUCTION, DUE TO OPERATIONAL PROBLEMS, LESS THAN
ANTICIPATED
* OVERALL PRODUCTION INCREASES BY 8% TO 53,7 TONNES (1.7 MILLION OUNCES) WITH
ADDITION OF MINORCO GOLD MINES
* CASH COSTS DECREASE BY 7% TO $209 PER OUNCE
* TOTAL PRODUCTION COSTS DOWN BY 6% TO $238 PER OUNCE
* ATTRIBUTABLE PROFIT INCREASES BY 29% TO R611 MILLION
* EARNINGS BEFORE EXCEPTIONAL ITEMS DECLINE BY 3% TO R493 MILLION
* CASH GENERATED FROM OPERATIONS - R793 MILLION
* RETURN ON SHAREHOLDERS' EQUITY - 34%
* RETURN (BEFORE TAX) ON CAPITAL EMPLOYED - 22%
* ALL FINANCIAL FIGURES REPORTED SOLELY ACCORDING TO INTERNATIONAL ACCOUNTING
STANDARDS FOR THE FIRST TIME
PREPARED IN ACCORDANCE WITH INTERNATIONAL ACCOUNTING STANDARDS
QUARTER QUARTER YEAR QUARTER QUARTER YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MARCH DECEMBER DECEMBER MARCH DECEMBER DECEMBER
1999 1998 1998 1999 1998 1998
RAND/METRIC DOLLAR/IMPERIAL
GOLD
PRODUCED - KG/OZ (000)
53 711 49 914 205 349 1 728 1 604 6 602
REVENUE - R/KG/$/OZ SOLD
60 960 61 653 58 946 311 332 334
CASH COSTS - R/KG/$/OZ PRODUCED
40 951 41 582 40 587 209 224 230
TOTAL PRODUCTION COSTS - R/KG/$/OZ PRODUCED
46 741 47 247 46 704 238 254 264
OPERATING PROFIT - R/$ MILLION
746,8 798,0 2 475,3 122.2 138.1 444.7
NET CAPITAL EXPENDITURE - R/$ MILLION
249,2 253,8 544,9 40.8 44.0 98.7
ATTRIBUTABLE PROFIT - R/$ MILLION
611,3 473,9 1 710,5 100.9 82.0 317.5
ATTRIBUTABLE EARNINGS - CENTS PER SHARE
625 485 1 748 103 84 324
EARNINGS BEFORE EXCEPTIONAL ITEMS - CENTS PER SHARE
504 521 1 568 83 90 283
HEADLINE EARNINGS - CENTS PER SHARE
974 521 1 568 160 90 283
LETTER FROM THE CHAIRMAN AND THE CHIEF EXECUTIVE OFFICER
DEAR SHAREHOLDER
ANGLOGOLD HAS PRODUCED A GOOD SET OF RESULTS FOR THE FIRST QUARTER OF ITS 1999
FINANCIAL YEAR. SIGNIFICANT CHANGES HAVE TAKEN PLACE IN THIS QUARTER IN THE
COMPOSITION OF THE COMPANY'S ASSETS, ITS ACCOUNTING CONVENTIONS AND THE FISCAL
REGIME WITHIN WHICH IT OPERATES, AND SHAREHOLDERS NEED TO TAKE ACCOUNT OF THESE
CHANGES IN ORDER TO SEE IN THESE RESULTS BOTH AN ACCURATE PICTURE OF CURRENT
PERFORMANCE AS WELL AS AN INDICATOR OF PROSPECTS FOR THE REMAINDER OF THE YEAR.
DURING THIS QUARTER THE COMPANY CONCLUDED THE ACQUISITION OF THE MINORCO GOLD
ASSETS AND THEIR FINANCIAL AND OPERATING RESULTS ARE INCLUDED FOR THE FIRST
TIME. THE QUARTERLY RESULTS BENEFIT FROM BOTH THE INCREASED PRODUCTION AND
LOWERED PRODUCTION COSTS OF THESE ASSETS. A SIGNIFICANT INCREASE IN DEBT, AND
IN AMORTISATION (WHICH INCREASED BY R72 MILLION) AND A PARTIAL WRITE-OFF OF
GOODWILL (R342 MILLION THIS QUARTER) IN RELATION TO THE MINORCO ACQUISITION IS
ALSO EVIDENT.
ALSO DURING THE QUARTER THE COMPANY AGREED TO SELL ITS 21,5% INTEREST IN THE
SOUTH AFRICAN GOLD COMPANY DRIEFONTEIN. ANGLOGOLD'S ATTRIBUTABLE SHARE OF THIS
COMPANY'S GOLD PRODUCTION (SOME 300 000 ANNUAL OUNCES) HAS BEEN EXCLUDED FROM
THIS QUARTER'S OPERATIONAL RESULTS. AS THE SALE WAS ONLY APPROVED BY
SHAREHOLDERS IN APRIL, EQUITY ACCOUNTED EARNINGS (R68 MILLION), INCLUDING A
DEFERRED TAX RATE CHANGE (R37 MILLION), HAVE BEEN INCLUDED THIS QUARTER. THIS
WILL BE SET OFF AGAINST THE PROFIT FROM THE SALE OF APPROXIMATELY R544 MILLION,
WHICH WILL BE ACCOUNTED FOR NEXT QUARTER. THE CASH PROCEEDS AMOUNT TO SOME R1,3
BILLION, R714 MILLION OF WHICH WAS PAID IN APRIL WITH THE BALANCE TO BE PAID
WITHIN NINE MONTHS.
FOR THIS QUARTER THE COMPANY REPORTS ITS RESULTS EXCLUSIVELY ACCORDING TO
INTERNATIONAL ACCOUNTING STANDARDS (IAS), AS IT IS THE BOARD'S VIEW THAT THESE
STANDARDS PROVIDE THE MOST RELIABLE, EFFECTIVE AND INTERNATIONALLY COMPARATIVE
PICTURE OF THE PERFORMANCE OF ANGLOGOLD. LAST QUARTER BOTH IAS AND
APPROPRIATION ACCOUNTING CONVENTIONS WERE REPORTED. LAST QUARTER'S PROFIT
AVAILABLE FOR DISTRIBUTION WAS R414 MILLION (424 CENTS PER SHARE) IN
APPROPRIATION TERMS, AND HEADLINE EARNINGS WERE R510 MILLION (521 CENTS PER
SHARE) IN IAS TERMS. IT IS THE IAS AVAILABLE PROFITS THAT PROVIDE A MEANINGFUL
COMPARISON WITH THIS SET OF RESULTS.
A FURTHER DEVELOPMENT THAT HAS HAD AN IMPACT ON THE REPORTED RESULTS IS THE
CHANGE EFFECTED TO THE SOUTH AFRICAN CORPORATE TAX RATE DURING THIS QUARTER,
WHERE THE CORPORATE RATE WAS LOWERED FROM 35% TO 30% WITH A SIMILAR ADJUSTMENT
BEING MADE TO THE GOLD MINING TAX FORMULA. THIS LOWER RATE IS REFLECTED (IN
PART) IN THE R82 MILLION REDUCTION IN TAX, AND IN A R460 MILLION REDUCTION IN
DEFERRED TAX.
AGAINST THIS BACKGROUND, THE PROFIT ATTRIBUTABLE TO SHAREHOLDERS FOR THE MARCH
QUARTER INCREASED TO R611 MILLION (UP BY 29%), HOWEVER ONCE THE GOODWILL
WRITE-OFF OF R342 MILLION, AND THE DEFERRED TAX ADJUSTMENT OF R460 MILLION ARE
EXCLUDED, EARNINGS ARE R493 MILLION (504 CENTS PER SHARE). THIS REPRESENTS A
3% DECREASE IN THE EARNINGS OF THE DECEMBER QUARTER ON A COMPARABLE BASIS.
IN TERMS OF THE COMPANY'S OPERATING PERFORMANCE, PRODUCTION PROBLEMS WERE
EXPERIENCED AT A NUMBER OF OPERATIONS, LEADING THE COMPANY TO REVISE DOWNWARDS
ITS PRODUCTION TARGET FOR THE QUARTER FROM 55 TONNES (1,8 MILLION OUNCES) TO 52
TONNES (1,7 MILLION OUNCES) IN A PUBLIC ANNOUNCEMENT ON 6 APRIL 1999. SINCE
THIS DATE 1,7 TONNES (55 000 OUNCES) OF THIS DEFICIT HAS BEEN MADE UP, AND
MANAGEMENT IS CONFIDENT OF RECOVERING THE REMAINING OUNCES BY THE END OF THE
YEAR.
THE PRICE RECEIVED ON GOLD SALES DECLINED AGAINST THE PREVIOUS QUARTER BY 1% TO
R60 960 PER KILOGRAM. CASH COSTS FELL FROM $224 TO $209 PER OUNCE AND TOTAL
PRODUCTION COSTS FROM $254 TO $238 PER OUNCE.
CAPITAL EXPENDITURE FOR THE QUARTER WAS R249 MILLION COMPARED TO R254 MILLION
THE PREVIOUS QUARTER.
THE COMPANY HAS THEREFORE BEEN ABLE TO REPEAT THE SOUND OPERATING PERFORMANCE
OF THE DECEMBER QUARTER, WITH AN OPERATING PROFIT MARGIN THIS QUARTER OF 23%, A
RETURN ON SHAREHOLDERS' EQUITY OF 34% AND ON CAPITAL EMPLOYED (BEFORE TAX) OF
22%.
MANAGEMENT REMAINS CONFIDENT OF ACHIEVING THE TARGETED PRODUCTION LEVELS FOR
THE YEAR OF 7 MILLION OUNCES, AT CASH COSTS OF AROUND $210 PER OUNCE.
NICKY OPPENHEIMER BOBBY GODSELL
CHAIRMAN CHIEF EXECUTIVE OFFICER
GOLD MARKET
FOR THE FIRST QUARTER OF 1999, THE SPOT PRICE OF GOLD CONTINUED TO FLUCTUATE
WITHIN A NARROW PRICE BAND OF SOME $15. OVERALL, THE PRICE MOVED LOWER FROM
THE FINAL QUARTER OF 1998, AND THE AVERAGE PRICE FOR THE QUARTER OF $287 PER
OUNCE WAS AROUND $7 BELOW THE PREVIOUS QUARTER. THE PRICE REMAINS UNDER
PRESSURE AT THE LOW END OF THIS RANGE.
THE REASONS FOR THIS PRESSURE ARE NOT IMMEDIATELY OBVIOUS. WHILST THERE WAS
DISAPPOINTING NEWS EARLY IN THE QUARTER WITH THE ANNOUNCEMENT BY THE INDIAN
GOVERNMENT OF AN INCREASE IN IMPORT DUTIES ON GOLD INTO INDIA (WHICH RESULTS IN
A PRICE OF GOLD IN INDIA ABOUT 10% ABOVE THE FREE MARKET), THIS TAX HAS NOT HAD
ANY MEASURABLE IMPACT ON PHYSICAL GOLD OFF-TAKE. THE INDIAN MARKET RETAINS THE
FALLBACK SOURCE OF GOLD SMUGGLED FROM DUBAI IN THE EVENT THAT GOVERNMENT
TAXATION ON THE METAL BECOMES TOO ONEROUS, AND INDIAN OFF-TAKE IS STILL
RELATIVELY FIRM AFTER THE RECORD DEMAND OF 800 TONNES OF METAL IN THAT COUNTRY
DURING 1998. PHYSICAL OFF-TAKE ELSEWHERE IN THE WORLD IS EQUALLY REASSURING,
WITH INDICATIONS OF RECOVERY IN BOTH SOUTH-EAST ASIA AND THE MIDDLE EAST.
SIMILARLY, THE REVIVAL OF A PROPOSAL TO SELL A LIMITED AMOUNT OF IMF GOLD
RESERVES (5 TO 10 MILLION OUNCES OVER A PERIOD OF YEARS) IN A MOVE TO EASE
THE DEBT BURDENS OF POOR COUNTRIES IS NOT A NEW ISSUE IN THE GOLD MARKET. MORE
IMPORTANTLY, THE AMOUNT PROPOSED FOR THE SALE IS NOT IN ITSELF MATERIAL, AND
WOULD ALMOST CERTAINLY BE ABSORBED IN TODAY'S MARKETS WITHOUT IMPACT ON THE
PRICE. IN GENERAL, WITH THE EXCEPTION OF THE SWISS PROPOSALS TO SELL UP TO
HALF OF THEIR GOLD RESERVES OVER A NUMBER OF YEARS, THE PROGNOSIS FOR GOLD
SALES FROM THE OFFICIAL SECTOR IS ENCOURAGING, WITH NO LARGE SALES LIKELY FROM
ANY OF THE MAJOR HOLDERS OF GOLD. THIS IS THE MOST POSITIVE POSITION WE HAVE
FACED FROM THIS SECTOR OF THE GOLD MARKET IN THE PAST DECADE.
THE REASONS FOR THE MALAISE IN THE GOLD PRICE APPEAR TO LIE ELSEWHERE, IN A
BANKING AND INVESTMENT SECTOR WHICH SEEMS TO IGNORE ANY AND ALL GOOD NEWS ON
GOLD AND WHICH FOLLOWS A POLICY OF RECOMMENDING SELLING ON EVERY IMPROVEMENT IN
THE GOLD PRICE, NO MATTER HOW MODEST. WHAT THE MOTIVATION MIGHT BE BEHIND SUCH
A NEGATIVE POSITION IS NOT CLEAR. HOWEVER, INITIATIVES ARE UNDER WAY TO
ACHIEVE MORE SATISFACTORY REPORTING OF OPEN POSITIONS AND FLOWS IN GOLD
DERIVATIVE MARKETS, AND IT IS TO BE HOPED THAT WITH SOME GREATER TRANSPARENCY
IN THESE MARKETS WE MAY GAIN A BETTER UNDERSTANDING OF THE FORCES WHICH
CURRENTLY CONSTRAIN THE PRICE OF THE METAL.
THE CURRENCY MARKETS WERE GENERALLY MORE STABLE DURING THIS QUARTER THAN THEY
WERE DURING 1998. THE AVERAGE RAND/DOLLAR EXCHANGE RATE OF R6,15/US$ WAS SOME
4% WEAKER THAN THE AVERAGE IN THE FINAL QUARTER OF 1998, LARGELY DUE TO A
STRONGER DOLLAR. IN GENERAL, INVESTORS HAVE FAVOURED THE SOUTH AFRICAN
CURRENCY RECENTLY, AND IN THE ABSENCE OF MAJOR UPHEAVALS, THE RAND COULD WELL
CONSOLIDATE AROUND CURRENT LEVELS AGAINST THE DOLLAR.
THE HEDGE POSITION REFLECTED BELOW INCLUDES AN AMOUNT OF SOME 142 300 KILOGRAMS
OF FORWARD COVER ENTERED INTO IN RESPECT OF FORECAST PRODUCTION FROM THE NEWLY
ACQUIRED GOLD MINING ASSETS IN THE UNITED STATES AND SOUTH AMERICA.
AS AT 31 MARCH 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 R6,20 AVAILABLE ON 31 MARCH 1999. THE INCREASE IN HEDGE COVER REFLECTS THE
GROWING DIVERSITY OF GOLD PRODUCTION BY ANGLOGOLD IN 1999 AND BEYOND. THE
PERCENTAGE OF THE SALES PRICED IN US DOLLARS IS SHOWN BELOW:
12 MONTHS ENDING KILOGRAMS OUNCES SOLD FORWARD PRICE PER PERCENTAGE OF
31 MARCH SOLD 000 KILOGRAM SOLD POSTITIONS
R PRICED IN US$
1999 109 323 3 515 67 150 71
2000 80 326 2 583 75 859 53
2001 71 273 2 291 81 665 51
2002 50 138 1 612 89 009 55
2003 22 380 720 101 039 69
2004 - 2008 67 121 2 158 129 199 78
THE AGGREGATE OF US DOLLAR-PRICED CONTRACTS OVER THE FULL DURATION OF THE HEDGE
IS 63 PER CENT.
THE HEDGE POSITION OF THE COMPANY INCREASED BY 8,7% TO 12.9 MILLION OUNCES
SPREAD OVER TEN YEARS - EQUIVALENT TO A YEAR AND NINE MONTHS OF PRODUCTION.
THE AVERAGE PRICE OF THESE POSITIONS, 63% OF WHICH ARE PRICED IN US DOLLARS,
INCREASED BY 2% TO $344 PER OUNCE OR R86 506 PER KILOGRAM AT AN EXCHANGE RATE
OF R/$6.20. THE INCREASE CATERS FOR THE HEDGING OF THE ADDITIONAL PRODUCTION
OF THE MINES ACQUIRED FROM MINORCO IN TERMS OF LOAN AGREEMENTS.
FOR MORE DETAILED INFORMATION VISIT THE ANGLOGOLD WEBSITE: WWW.ANGLOGOLD.COM
QUERIES:
SA, UK & EUROPE
JAMES DUNCAN
+2711 637 6147 (B)
+2711 849 4161 (H)
+27 82 892 8052 (M)
JDUNCAN@CORP.ANGLOGOLD.COM
SHELAGH BLACKMAN
+27 11 637 6379 (B)
+27 11 884 6491 (H)
+27 83 308 2471 (M)
USA
CHARLES CARTER
+91 800 417 9255 (TOLL-FREE)
+91 303 888 7412 (M)
CCARTER@CORP.ANGLOGOLD.COM
STEVE LENAHAN
+91 212 317 3818 (W)
+91 732 740 1568 (M)
SLENAHAN@CORP.ANGLOGOLD.COM
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