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ANGLOGOLD LIMITED
REGISTRATION NO. 05/17354/06
INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA
REPORT TO SHAREHOLDERS
FOR THE QUARTER AND NINE MONTHS ENDED 30 SEPTEMBER 2000
A STRONGER PRODUCTION QUARTER, BUT INCREASED COSTS DEPRESS EARNINGS
GROUP RESULTS FOR THE QUARTER
* STEADY PERFORMANCE FOR THE GROUP'S OPERATIONS.
* GOLD PRODUCTION INCREASES BY 2% TO 1.83 MILLION OUNCES (56,924 KILOGRAMS).
* WAGE AND DIESEL INCREASES LEAD TO A 3% INCREASE IN TOTAL CASH COSTS TO
R46,914
PER KILOGRAM.
* OPERATING PROFIT IS MARGINALLY LOWER.
* HEADLINE EARNINGS ARE DOWN 7% TO 399 CENTS PER SHARE, DUE LARGELY TO
INCREASED CORPORATE ACTIVITIES.
* REGIONAL OPERATING RESULTS FOR THE QUARTER
* SOUTH AFRICA
* GOOD PERFORMANCES AT GREAT NOLIGWA, TAU LEKOA, TSHEPONG AND SAVUKA AND
PRODUCTION IMPROVEMENTS AT MOST OTHERS.
* UNRESOLVED PROBLEMS AT ELANDSRAND AND BAMBANANI.
* GOLD PRODUCTION IS UP 1% TO 43,000 KILOGRAMS DESPITE THE CLOSURE OF
MATJHABENG'S KUDU SHAFT AND RESULTANT LOSS OF 250 KILOGRAMS OF GOLD AND OTHER
OPERATING PROBLEMS.
* VOLUME AND VALUE EFFICIENCIES ARE UP 5% AND 3% RESPECTIVELY.
* TOTAL CASH COSTS ARE CONTAINED TO A 2.5% INCREASE, REFLECTING THE 9% ANNUAL
WAGE ADJUSTMENT AND INCREASES IN MINING ACTIVITY.
* AFRICA
* BOTH SADIOLA AND NAVACHAB REPORT IMPROVED PRODUCTION AND CREDITABLE COST
PERFORMANCES, DESPITE DIESEL PRICE INCREASES.
* AT YATELA THE CEREMONIAL FIRST CONCRETE IS POURED BY THE MALI MINISTER OF
MINES ON 12 OCTOBER.
AT MORILA THE FIRST COMMISSIONING GOLD IS POURED ON 18 OCTOBER.
* ASHANTI'S BANKERS GIVE APPROVAL TO THE GEITA DEAL AND FINALISATION OF THE
TRANSACTION SHOULD TAKE PLACE AT THE END OF NOVEMBER.
* NORTH AMERICA
* COST INCREASES FOR THE REGION ARE CONTAINED TO 2% DESPITE DIESEL INCREASE AND
GRADE PROBLEMS AT JERRITT CANYON.
* DECREASED GRADE AT JERRITT CANYON LEADS TO A 9% REDUCTION IN GOLD PRODUCTION,
TO BE OFFSET IN THE LAST QUARTER AS THE CORTEZ ORE PURCHASE ARRANGEMENT COMES
ON STREAM.
* AT CRIPPLE CREEK & VICTOR, PRODUCTION IS UP BY 3% AND COSTS DOWN BY 6%, AND
PHASE 3 OF THE LEACH PAD EXPANSION IS COMPLETED DURING THE QUARTER.
* SOUTH AMERICA
* ANOTHER GOOD QUARTER OVERALL.
* DESPITE BAD WEATHER AT CERRO VANGUARDIA, GOLD PRODUCTION FROM THE REGION'S
OPERATIONS INCREASES BY 2%.
* TOTAL CASH COSTS ARE PUSHED HIGHER BY WAGE INCREASES AT MORRO VELHO AND
WEATHER-INDUCED PRODUCTION PROBLEMS AT CERRO VANGUARDIA.
* AUSTRALASIA
* GOLD PRODUCTION AT SUNRISE DAM INCREASES BY 31% AND TOTAL CASH COSTS DROP BY
31%.
* PRODUCTION AT BODDINGTON IS REDUCED BECAUSE OF HEAVY RAINS EARLY IN THE
QUARTER.
* PRODUCTION IMPROVES AT BOTH PINE CREEK AND TANAMI.
* TECHNICAL APPRAISAL OF THE BODDINGTON EXPANSION PROJECT IS UNDER WAY, WITH
COMPLETION LIKELY AT YEAR-END. ANGLOGOLD IS POSITIVE ABOUT THE OUTCOME.
QUARTER QUARTER NINE NINE
ENDED ENDED MONTHS MONTHS
SEPT JUNE ENDED ENDED
2000 2000 SEPT SEPT
2000 1999
GOLD RAND/METRIC
PRODUCED - KG/OZ 000 56,924 55,957 167,390 162,487
REVENUE - R/KG/$/OZ SOLD 67,460 66,192 65,901 61,489
TOTAL CASH COSTS 46,914 45,734 45,763 41,497
- R/KG/$/OZ PRODUCED
TOTAL PRODUCTION COSTS
- R/KG/$/OZ PRODUCED 53,967 52,726 52,601 47,556
OPERATING PROFIT
- R/$ MILLION 814 821 2,383 2,389
NET CAPITAL EXPENDITURE 438 356 1,071 885
- R/$ MILLION
NET PROFIT - R/$ MILLION 394 424 1,247 2,122
NET EARNINGS
- CENTS PER SHARE 369 397 1,167 2,169
HEADLINE EARNINGS
- CENTS PER SHARE 399 429 1,257 2,003
HEADLINE EARNINGS BEFORE
DEFERRED TAXATION RATE
CHANGE - CENTS PER SHARE 398 426 1,255 1,533
DIVIDENDS
- CENTS PER SHARE 750 900
QUARTER QUARTER NINE NINE
ENDED ENDED MONTHS MONTHS
SEPT JUNE ENDED ENDED
2000 2000 SEPT SEPT
2000 1999
GOLD DOLLAR/IMPERIAL
PRODUCED - KG/OZ 000 1,830 1,799 5,382 5,224
REVENUE - R/KG/$/OZ SOLD 300 300 305 313
TOTAL CASH COSTS
- R/KG/$/OZ PRODUCED 209 207 212 211
TOTAL PRODUCTION COSTS
- R/KG/$/OZ PRODUCED 240 239 244 242
OPERATING PROFIT
- R/$ MILLION 115 119 352 392
NET CAPITAL EXPENDITURE
- R/$ MILLION 63 52 158 145
NET PROFIT - R/$ MILLION 54 61 182 348
NET EARNINGS
- CENTS PER SHARE 50 57 171 356
HEADLINE EARNINGS
- CENTS PER SHARE 55 62 184 328
HEADLINE EARNINGS BEFORE
DEFERRED TAXATION RATE
CHANGE - CENTS PER SHARE 55 62 184 251
DIVIDENDS - CENTS PER SHARE 110 149
* 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'S
* CORPORATE COMMUNICATIONS DEPARTMENT
* PO BOX 62117
* MARSHALLTOWN
* 2107
* SOUTH AFRICA
* TELEPHONE: +27 11 637 6147
* FAX: +27 11 637 6399/6400
* E-MAIL: INVESTORS@ANGLOGOLD.COM
LETTER FROM THE CHAIRMAN AND THE CHIEF EXECUTIVE OFFICER
DEAR SHAREHOLDER
THE GOLD MARKET
THE SPOT GOLD PRICE HAS STAYED IN THE LOW $270S FOR MOST OF THE LAST QUARTER.
HOWEVER, SUPPLY AND DEMAND FUNDAMENTALS ARE MORE POSITIVE FOR THE PRICE THAN
THEY HAVE BEEN FOR A LONG TIME.
FROM THE SUPPLY POINT OF VIEW, CUTBACKS CONTINUE TO BE MADE TO EXPLORATION
SPENDING IN GOLD MINING. THIS STRONGLY SUGGESTS THAT, WHILE CURRENT LEVELS OF
NEW MINE PRODUCTION MIGHT BE MAINTAINED, IT IS MORE PROBABLE THAT THEY WILL
DECLINE. CENTRAL BANK SALES, ALTHOUGH HIGHER THIS YEAR THAN IN RECENT YEARS,
ARE LARGELY REGULATED BY LAST YEAR'S WASHINGTON AGREEMENT. THESE OFFICIAL
SALES SEEM NOW TO BE DISCOUNTED IN THIS MARKET, WITH NEITHER THE CONTINUING
BRITISH AUCTIONS NOR THE MORE CONVENTIONAL SWISS SALES HAVING A MAJOR PRICE
EFFECT.
IN CONTRAST, JEWELLERY DEMAND HAS CONTINUED, BY AND LARGE, TO BE STRONG, WITH
OFF-TAKE IN MOST ASIAN MARKETS NOW BACK TO LEVELS PRIOR TO THE 1998 FINANCIAL
CRISIS IN THAT PART OF THE WORLD.
EQUALLY, BROAD MARKET CIRCUMSTANCES ARE MORE FAVOURABLE FOR GOLD. UNITED
STATES EQUITIES MARKETS APPEAR TO HAVE ENTERED A BEAR PHASE WITH THE 'OLD'
ECONOMY ENJOYING INVESTOR SUPPORT AND THE OIL PRICE RISING BY MORE THAN 40%
OVER THE PAST SIX MONTHS. WHILE ANGLOGOLD HAS VIGOROUSLY PROMOTED GOLD
JEWELLERY AND, MORE RECENTLY, THE DEVELOPMENT OF NEW INDUSTRIAL APPLICATIONS
FOR GOLD, IT WILL ALSO CONTINUE TO SUPPORT AND ADVOCATE THE METAL'S TRADITIONAL
MONETARY ROLE, PARTICULARLY DURING TIMES OF POLITICAL AND ECONOMIC UNCERTAINTY.
ALTHOUGH IT IS LOGICAL TO LOOK TO PRICE IMPROVEMENT IN THE MEDIUM TERM IT IS
ALSO CLEARLY PRUDENT TO SEEK PROFITABILITY AT CURRENT PRICE LEVELS IN THE SHORT
TERM. ANGLOGOLD IS THEREFORE PLANNING ITS BUSINESS ON CURRENT PRICES.
OPERATING AND FINANCIAL PERFORMANCE
OVERALL, ANGLOGOLD'S OPERATIONS IN ALL REGIONS COMBINED TO GIVE A STEADY
PERFORMANCE THIS QUARTER. THE OPERATIONS IN SOUTH AND WEST AFRICA, IN SOUTH
AMERICA AND AUSTRALIA ALL INCREASED GOLD PRODUCTION. WE ARE PARTICULARLY
PLEASED TO REPORT STRONG PERFORMANCES AT SUNRISE DAM IN WESTERN AUSTRALIA,
SADIOLA IN MALI AND NAVACHAB IN NAMIBIA. PRODUCTION FROM THE NORTH AMERICAN
OPERATIONS DECREASED BUT THEY CONTINUE TO FORECAST MEETING GOLD PRODUCTION
TARGETS FOR THE YEAR, WITH A SIGNIFICANT INCREASE IN THE OUNCES PRODUCED IN THE
FOURTH QUARTER. COSTS, HOWEVER, ALSO INCREASED, PARTICULARLY IN THE SOUTH
AFRICAN OPERATIONS. THIS, TOGETHER WITH SOME INVENTORY MOVEMENTS, PRODUCED
OPERATING PROFITS SLIGHTLY DOWN (1%) FOR THE QUARTER. INCREASED SPENDING ON
EXPLORATION AND ON CORPORATE ACTIVITIES, TOGETHER WITH LOWER INCOME FROM
ASSOCIATES, SAW HEADLINE EARNINGS DECLINE BY 7%. IN THE CONTEXT OF THE 9% WAGE
INCREASE WHICH BECAME EFFECTIVE THIS QUARTER IN THE SOUTH AFRICAN OPERATIONS,
AND WHICH AFFECTS SOME 54% OF WORKING COSTS, THIS REPRESENTS A RESPECTABLE
PERFORMANCE BY THE REGION AS A WHOLE. HOWEVER, FURTHER STEPS ARE NEEDED AT
BAMBANANI, MATJHABENG, JOEL, ELANDSRAND AND DEELKRAAL.
HEADLINE EARNINGS FOR THE NINE MONTHS ENDED SEPTEMBER 2000 WERE DOWN 37% TO
1,257 CENTS PER SHARE. THIS WAS LARGELY DUE TO THE DEFERRED TAXATION RATE
CHANGE DURING THE PREVIOUS PERIOD. HOWEVER, HEADLINE EARNINGS BEFORE THE
DEFERRED TAXATION RATE CHANGE WERE 18% LOWER.
THE SAFETY PERFORMANCE OF THE SOUTH AFRICAN MINES IS VERY ENCOURAGING, WITH THE
LOST TIME INJURY RATE, EXPRESSED PER ONE MILLION MAN HOURS WORKED, AT 9.6 BEING
THE LOWEST QUARTERLY RATE EVER RECORDED BY THESE MINES. TWO MINES, MOAB
KHOTSONG AND GREAT NOLIGWA, ACHIEVED THE INTERNATIONAL BEST PRACTICE BENCHMARK
USED BY ANGLOGOLD, WHICH IS THE LOST TIME ACCIDENT RATE IN UNDERGROUND MINES IN
THE ONTARIO PROVINCE OF CANADA. CURRENTLY, THIS IS 6.5 LOST TIME INJURIES PER
MILLION MAN HOURS WORKED.
PROSPECTS
IN THE LIGHT OF THE WEAK GOLD PRICE THE COMPANY FACES A DIFFICULT FOURTH
QUARTER, WHEN, IN SOUTH AFRICA, THE COMBINATION OF THE CHRISTMAS CALENDAR AND
THE ADDITIONAL PUBLIC HOLIDAY ANNOUNCED FOR THIS YEAR'S MUNICIPAL ELECTIONS,
REDUCE THE QUARTER'S WORKING SHIFTS. THE COST TO OUR BUSINESS GOES BEYOND THE
SHIFTS DIRECTLY LOST, AS A MID-WEEK HOLIDAY OFTEN PRODUCES LOWER PRODUCTION ON
EITHER SIDE OF THE BREAK.
MANY DEMOCRACIES AROUND THE WORLD HOLD NATIONAL AND LOCAL GOVERNMENT ELECTIONS
WITHOUT LOST PRODUCTION. MINING COMPANIES IN SOUTH AFRICA HAVE, SINCE 1994,
SHOWN THEIR ABILITY TO WORK WITH THE INDEPENDENT ELECTORAL COMMISSION TO ENSURE
THAT ALL OF THEIR EMPLOYEES HAVE THE OPPORTUNITY TO VOTE CONVENIENTLY AND
EXPEDITIOUSLY. IF SOUTH AFRICA WANTS TO COMPETE IN WORLD MARKETS IT WILL HAVE
TO REVIEW THE EXTENT AND PATTERN OF ITS PUBLIC HOLIDAYS AND THEIR EFFECT ON
PRODUCTIVITY AND PRODUCE A MORE INTERNATIONALLY COMPETITIVE WORK CALENDAR.
THE ANGLOGOLD BOARD
WE ARE VERY PLEASED TO ANNOUNCE THAT TONY TRAHAR, THE CEO OF ANGLO AMERICAN
PLC, HAS ACCEPTED OUR INVITATION TO JOIN THE ANGLOGOLD BOARD. HE REPLACES
ANGLO AMERICAN'S BILL NAIRN, WHO ASSUMES THE POSITION OF ALTERNATE DIRECTOR AND
WILL CONTINUE TO PROVIDE TECHNICAL AND OPERATIONAL COUNSEL TO THE BOARD.
NICKY OPPENHEIMER BOBBY GODSELL
CHAIRMAN CHIEF EXECUTIVE OFFICER
26 OCTOBER 2000
SUMMARY OF OPERATIONS
SOUTH AFRICA
OVERALL PERFORMANCE
BOTH MINING VOLUME AND GOLD PRODUCTION EFFICIENCY INDICATORS CONTINUED TO SHOW
IMPROVEMENT OVER THE QUARTER: AREA MINED PER EMPLOYEE ROSE BY 5%
QUARTER-ON-QUARTER AND GOLD PRODUCTION, MEASURED IN GRAMS PER EMPLOYEE,
INCREASED BY 3%, DESPITE A 2% DROP IN RECOVERED GRADE.
CONTINUED STRONG PERFORMANCE AT GREAT NOLIGWA AND TAU LEKOA, TSHEPONG AND
SAVUKA, TOGETHER WITH ENHANCED PERFORMANCES AT TAUTONA AND DEELKRAAL, RESULTED
IN GOLD PRODUCTION INCREASING BY 1% TO 42,914 KILOGRAMS (1.4 MILLION OUNCES).
THE KUDU SHAFT AT MATJHABENG WAS SUCCESSFULLY CLOSED AT THE END OF THE SECOND
QUARTER.
TOTAL CASH COSTS OF R48,778 PER KILOGRAM ($217 PER OUNCE) FOR THE QUARTER WERE
CONTAINED TO A 2.5% INCREASE OVER THE PREVIOUS QUARTER, DESPITE THE IMPACT OF
THE ANNUAL WAGE ADJUSTMENT OF 9% AND GREATER PRODUCTION ACTIVITY IN STOPING
(3%) AND DEVELOPMENT (5%). DOLLAR-DENOMINATED TOTAL CASH COSTS INCREASED BY
ONLY 1%, AS A RESULT OF A 1.7% DEVALUATION OF THE RAND DURING THE QUARTER.
WE REGRET TO REPORT THE DEATH OF 11 EMPLOYEES IN WORK-RELATED ACCIDENTS DURING
THE QUARTER. NEVERTHELESS, THE IMPROVING SAFETY TREND REPORTED FOR THE SECOND
QUARTER HAS CONTINUED: THE NUMBER OF LOST TIME INJURIES IN THIS QUARTER ARE
AGAIN THE LOWEST ON RECORD, UP BY 22% ON THE PREVIOUS QUARTER. BOTH MOAB
KHOTSONG AND GREAT NOLIGWA AGAIN REPORTED LOST TIME INJURY FREQUENCY RATES
BELOW THE ONTARIO BENCHMARK.
MINE PERFORMANCE
ALL PRODUCTION, EFFICIENCY AND COST INDICATORS AT GREAT NOLIGWA SHOWED
IMPROVEMENTS IN THE THIRD QUARTER, WITH GOLD OUTPUT INCREASING BY 8% AND TOTAL
CASH COSTS REDUCING BY MORE THAN 6%. KOPANANG WAS UNABLE TO SUSTAIN ITS
EXCELLENT SECOND QUARTER RESULTS AS GOLD PRODUCTION DECLINED AND TOTAL CASH
COSTS ROSE IN LINE WITH A DROP IN RECOVERED GRADE. AT TAU LEKOA, EXCELLENT
PERFORMANCE WAS SUSTAINED WITH ALL PRODUCTION, EFFICIENCY AND COST INDICATORS
SHOWING IMPROVEMENT OVER THE JUNE QUARTER.
THE SPECIAL FOCUS ON MINERAL RESOURCE MANAGEMENT AT BAMBANANI RESULTED IN A 3%
IMPROVEMENT IN GOLD PRODUCTION, ALTHOUGH TOTAL CASH COSTS INCREASED BY SOME 6%.
AT TSHEPONG, GOLD PRODUCTION ROSE BY 5% THROUGH IMPROVED MINE AND PLANT
EFFICIENCIES. A 7% REDUCTION IN GOLD OUTPUT AT MATJHABENG ARISES FROM THE
CLOSURE OF THE KUDU SHAFT AND THE SCALING BACK OF PRODUCTION PRIOR TO THE
CLOSURE OF THE NYALA AND SABLE SHAFTS AT THE END OF THIS YEAR. MINING VOLUMES
HAVE BEEN INCREASED BY 11% AT JOEL TO COUNTER THE IMPACT OF DECLINING GRADE.
GOLD PRODUCTION IS UP BY 5%.
DESPITE PROBLEMS EXPERIENCED IN THE DECLINE SHAFT AT TAUTONA, GOLD PRODUCTION
ROSE BY 4% OVER THE PREVIOUS QUARTER. AT SAVUKA, THE OPERATION MAINTAINED A
STEADY IMPROVEMENT IN MINING VOLUME AND GOLD OUTPUT.
MPONENG INCREASED GOLD PRODUCTION MARGINALLY OVER THE PREVIOUS QUARTER. POOR
FLEXIBILITY IN GRADES ABOVE CUT-OFF RESULTED IN A FURTHER DROP IN GOLD OUTPUT
AND SIGNIFICANTLY HIGHER TOTAL CASH COSTS AT ELANDSRAND, DESPITE AN INCREASE IN
VOLUMES MINED. DEELKRAAL IMPROVED GOLD PRODUCTION BY 8%, RESULTING FROM BETTER
FACE VALUES AND A RELEASE OF LOCK-UP TONNAGE.
ERGO'S PERFORMANCE CONTINUED TO MEET EXPECTATIONS.
AFRICA
ANGLOGOLD'S AFRICA REGION CONTINUES TO PERFORM ABOVE EXPECTATIONS. GOLD
PRODUCTION INCREASED BY 5% FOR THE QUARTER AND TOTAL CASH COSTS WERE LARGELY
UNCHANGED, DESPITE DIESEL FUEL PRICE INCREASES.
SADIOLA (38% ATTRIBUTABLE) HAD ANOTHER GOOD QUARTER. MILL THROUGHPUT INCREASED
BY 3% TO A QUARTERLY RECORD OF 572,500 TONS, AND PRODUCTION BY 2% TO A RECORD
63,100 OUNCES. TOTAL CASH COSTS AT $108 PER OUNCE WERE AT A LEVEL SIMILAR TO
THE PREVIOUS QUARTER. THE MINE HAD ACHIEVED A RECORD 322 DAYS WITHOUT A
DISABLING INJURY, PRIOR TO AN INJURY DURING SEPTEMBER.
CONSTRUCTION AT THE NEW YATELA MINE IS IN PROGRESS WITH ALL THE CONSTRUCTION
AND MINING CONTRACTORS ON SITE. WORK IS CURRENTLY ON SCHEDULE AND WITHIN
ORIGINAL COST ESTIMATES. THE NIAMBOULAMA VILLAGE, ORIGINALLY SITUATED ON THE
EDGE OF THE YATELA PIT, HAS BEEN SUCCESSFULLY RELOCATED IN CONSULTATION WITH
LOCAL AUTHORITIES AND THE VILLAGERS. THE MINISTER OF MINES OF MALI, MR
ABOUBACARY COULIBALY, LAID THE FIRST CEREMONIAL CONCRETE AT THE MINE SITE ON 12
OCTOBER.
CONSTRUCTION OF THE MORILA (40% ATTRIBUTABLE) PROJECT IN MALI IS NEARING
COMPLETION. COMMISSIONING OF THE PLANT STARTED ON 5 OCTOBER AND MINING IS AHEAD
OF SCHEDULE IN THE OXIDE AREAS. THE FIRST COMMISSIONING GOLD WAS POURED ON 18
OCTOBER AND THE MINE IS EXPECTED TO BE IN FULL PRODUCTION BY YEAR-END.
THE COMPLETION OF THE GEITA TRANSACTION, IN WHICH ANGLOGOLD WILL BE ACQUIRING
FROM ASHANTI A 50% INTEREST IN THE GEITA PROJECT, IS EXPECTED TO BE COMPLETED
BY THE END OF NOVEMBER, FOLLOWING THE APPROVAL OF THE DEAL BY ASHANTI'S
BANKERS. THE MINE WAS OFFICIALLY OPENED BY THE PRESIDENT OF TANZANIA, MR
BENJAMIN MKAPA, ON 3 AUGUST.
NAVACHAB HAD AN EXCELLENT QUARTER WITH PRODUCTION OF 20,500 OUNCES AND TOTAL
CASH COSTS OF $178 PER OUNCE, IMPROVEMENTS FROM LAST QUARTER OF 16% AND 14%
RESPECTIVELY. THE IMPROVED PRODUCTION WAS DUE TO A COMBINATION OF INCREASED
MILL THROUGHPUT AND AN INCREASE IN RECOVERED GRADE.
NORTH AMERICA
DESPITE A 2% REDUCTION IN GOLD PRODUCED AND A MARGINAL RISE IN TOTAL CASH
COSTS, DUE LARGELY TO HIGHER DIESEL FUEL PRICES, THE REGION RECORDED AN
INCREASE IN OPERATING PROFIT.
AT JERRITT CANYON (70% ATTRIBUTABLE), THE THIRD QUARTER'S PRODUCTION, AT 52,400
OUNCES, WAS 8% LOWER THAN THE SECOND QUARTER AS A RESULT OF DECREASED ORE
GRADES. THE MILL GRADE WAS 18% LOWER THAN THE SECOND QUARTER. TONNAGE
PROCESSED IN THE THIRD QUARTER WAS APPROXIMATELY 14% HIGHER THAN THE SECOND
QUARTER. THIS, HOWEVER, DID NOT MAKE UP FOR THE UNFAVOURABLE ORE GRADES AS 28%
MORE LOW-GRADE STOCKPILE WAS MILLED IN THE THIRD QUARTER THAN IN THE SECOND
QUARTER. PRODUCTION OUNCES ARE EXPECTED TO INCREASE IN THE LAST QUARTER AS A
RESULT OF THE PROCESSING OF ORE PURCHASED FROM CORTEZ. THE FIRST BATCH OF
26,000 TONNES OF PURCHASED ORE WAS MILLED DURING THE FIRST WEEK OF OCTOBER WITH
NO SIGNIFICANT PROCESS DIFFICULTIES.
TOTAL CASH COSTS FOR THE THIRD QUARTER WERE $224 PER OUNCE, 13% HIGHER THAN THE
SECOND QUARTER, OWING TO HIGHER THAN PLANNED UNDERGROUND MINED TONNES AND
ASSOCIATED COSTS.
PRODUCTION AT CRIPPLE CREEK & VICTOR J.V. (67% ATTRIBUTABLE, WITH A 100%
INTEREST IN PRODUCTION OUNCES, SUBJECT TO CONTRACTUAL OBLIGATIONS BY THE JOINT
VENTURE PARTNERS) WAS 65,400 OUNCES, 3% HIGHER THAN THE SECOND QUARTER. TOTAL
CASH COSTS WERE $182 PER OUNCE, SOME 6% LOWER THAN THE SECOND QUARTER.
PHASE 3 OF THE LEACH PAD EXPANSION WAS COMPLETED DURING THE THIRD QUARTER. THE
PROJECT WAS FINISHED UNDER BUDGET AND AHEAD OF SCHEDULE.
WORK CONTINUED ON THE GREAT BASIN PROSPECTIVITY STUDY WHICH IS EXPECTED TO BE
COMPLETED BY THE END OF THE YEAR.
SOUTH AMERICA
GOLD PRODUCTION AT THE SOUTH AMERICAN OPERATIONS - MORRO VELHO, SERRA GRANDE
(50% ATTRIBUTABLE) AND CERRO VANGUARDIA (46.25% ATTRIBUTABLE) - WAS 2% HIGHER
THAN THE PREVIOUS QUARTER AT 107,000 OUNCES. THIS IS ATTRIBUTABLE TO INCREASED
VOLUMES OF ORE PRODUCTION AT MORRO VELHO AND BETTER GRADES AT MORRO VELHO AND
SERRA GRANDE. THESE IMPROVEMENTS COMPENSATE FOR REDUCED PRODUCTION AT CERRO
VANGUARDIA, WHICH WAS AFFECTED BY BAD WEATHER CONDITIONS IN JULY AND SEPTEMBER.
TOTAL CASH COSTS FOR THE QUARTER WERE 3.6% HIGHER THAN THE PREVIOUS QUARTER AT
$137 PER OUNCE, CHIEFLY BECAUSE OF HIGHER MAINTENANCE COSTS AND WAGE INCREASES
AT MORRO VELHO IN AUGUST AND THE LOWER PRODUCTION AT CERRO VANGUARDIA. CAPITAL
EXPENDITURE WAS SOME $1.8 MILLION LOWER THAN THE PREVIOUS QUARTER OWING TO THE
PHASING OF EQUIPMENT REPLACEMENT. RECOUPMENTS OF $4.4 MILLION RELATE TO THE
SALE OF MINERAL RIGHTS AND OTHER ASSETS IN ARGENTINA.
AT CERRO VANGUARDIA, THE IMPROVING SAFETY TREND NOTED IN THE FIRST AND SECOND
QUARTERS CONTINUES AND SERRA GRANDE REMAINS BELOW THE ONTARIO BENCHMARK,
ALTHOUGH MORRO VELHO HAS YET TO ACHIEVE THIS TARGET.
THE EXPLORATION PROGRAMME AT THE CORREGO DO SITIO PROJECT IN BRAZIL CONTINUES,
WITH ENCOURAGING RESULTS.
AUSTRALASIA
THE SEPTEMBER QUARTER BUILT ON THE IMPROVEMENTS REGISTERED IN THE PREVIOUS
QUARTER, WITH A FURTHER INCREASE IN PRODUCTION TO 142,000 OUNCES (16% HIGHER
THAN THE PREVIOUS QUARTER).
SUNRISE DAM RECORDED AN OUTSTANDING QUARTER WITH PRODUCTION RISING TO 64,300
OUNCES, WHICH IS 31% UP ON THE PREVIOUS QUARTER. THE PRODUCTION INCREASE WAS
LARGELY DRIVEN BY AN IMPROVEMENT IN THE MILL HEAD GRADE. THE PRODUCTION LEVELS
WERE ACCOMPANIED BY A SIGNIFICANT FALL IN TOTAL CASH COSTS TO $149 (A$262) PER
OUNCE (31% BELOW THE PREVIOUS QUARTER). THE CUT-BACK OF THE PIT AND THE
EXPANSION OF THE PROCESSING PLANT ARE PROCEEDING ON SCHEDULE.
PRODUCTION FROM PINE CREEK OPERATIONS INCREASED BY 7% TO 45,000 OUNCES. TOTAL
CASH COSTS, HOWEVER, ROSE BY 13% TO $273 (A$478) PER OUNCE. PRODUCTION AT
UNION REEFS IMPROVED MARKEDLY TO 33,500 OUNCES (14% HIGHER THAN THE PREVIOUS
QUARTER). THE NEW MINING CONTRACT HAS BEEN AWARDED AND THE CONTRACTOR WAS
MOVING EQUIPMENT ON TO SITE TOWARDS THE END OF THE QUARTER, PREPARATORY TO THE
START OF MINING IN OCTOBER. PRODUCTION AT BROCKS CREEK FELL TO 11,500 OUNCES
(DOWN 11% FROM THE PREVIOUS QUARTER) AS THE PROCESSING OF RESIDUAL STOCKPILES
NEARED COMPLETION. GOLD OPERATIONS WILL CEASE DURING THE NEXT QUARTER AND THE
ONLY ONGOING ACTIVITY WILL BE SITE REHABILITATION.
AT BODDINGTON (33.3% ATTRIBUTABLE), PRODUCTION OF 18,500 OUNCES WAS 6% LOWER
THAN THE PREVIOUS QUARTER. HEAVY RAINS EARLY IN THE QUARTER RESTRICTED MINING
IN THE REMAINING, MAINLY CLAY, PITS AND ADVERSELY AFFECTED MILL THROUGHPUTS AND
HEAD GRADES AT VARIOUS TIMES DURING THE MONTH. TOTAL CASH COSTS OF $211
(A$367) PER OUNCE WERE, HOWEVER, STILL 7% BELOW THE PREVIOUS QUARTER.
REVISIONS TO THE MINE DESIGN FOR THE EXPANSION PROJECT, TO INCORPORATE THE
LATEST GEOTECHNICAL DATA, SLIGHTLY DELAYED COMPLETION OF THE FEASIBILITY STUDY.
TECHNICAL APPRAISAL OF THE FINAL STUDY DOCUMENTATION WAS IN PROGRESS AT THE
END OF THE MONTH.
AS THE IMPACT OF THE WEATHER DURING THE FIRST HALF OF THE YEAR DIMINISHED,
PRODUCTION FROM THE TANAMI MINE (40% ATTRIBUTABLE) INCREASED BY 18% IN THE
THIRD QUARTER TO 14,200 OUNCES. HOWEVER, THE NEED TO REARRANGE MINING
SCHEDULES AND REBUILD ORE STOCKPILES PUSHED TOTAL CASH COSTS UP TO $298 (A$520)
PER OUNCE (12% HIGHER THAN THE PREVIOUS QUARTER).
RELATIVELY HIGH LEVELS OF EXPLORATION ACTIVITY WERE MAINTAINED DURING THE
QUARTER. DRILLING BELOW THE CURRENT SUNRISE DAM OPEN PIT CONTINUES TO
INTERSECT SIGNIFICANT MINERALISATION. FURTHER DRILLING AT COYOTE PROSPECT IN
THE TANAMI REGION HAS GIVEN GOOD INTERCEPTS IN SEVERAL ZONES OVER A
ONE-KILOMETRE STRIKE LENGTH.
GOLD MARKET
THE GOLD MARKET WAS QUIET FOR MUCH OF THE THIRD QUARTER, AND THE PRICE DRIFTED
LOWER. THE AVERAGE SPOT PRICE OF $276 PER OUNCE COMPARES WITH THE AVERAGE FOR
THE SECOND QUARTER OF $280 PER OUNCE. SUPPORT FOR THE PRICE FROM PHYSICAL
DEMAND AROUND LEVELS OF $270 PER OUNCE WAS EVIDENT AGAIN IN THE QUARTER; THE
PRICE CLOSED THE QUARTER AT $274 PER OUNCE AT THE LOW END OF ITS RECENT TRADING
RANGE.
ONCE AGAIN, THERE WAS SIGNIFICANTLY MORE ACTION IN THE CURRENCY MARKETS, DRIVEN
BY THE STRENGTH OF THE US DOLLAR. THE RAND WEAKENED AGAINST THE US CURRENCY
FOR THE THIRD SUCCESSIVE QUARTER, FOR AN AVERAGE EXCHANGE RATE OF R7.00 TO THE
DOLLAR FOR THE PERIOD UNDER REVIEW. SINCE THE END OF THE QUARTER, FURTHER
SELLING OF THE RAND HAS TAKEN THE CURRENCY TO AN HISTORIC LOW OF R7.73 TO THE
DOLLAR. THE AUSTRALIAN DOLLAR ALSO TOUCHED HISTORIC LOWS AGAINST THE US DOLLAR
DURING THIS PERIOD. FOR THE MOMENT, THE CYCLE OF US DOLLAR STRENGTH REMAINS
INTACT, ALTHOUGH SOME COMMENTATORS HAVE BEGUN TO SPECULATE ABOUT THE UNUSUAL
DOMINANCE OF THE DOLLAR IN WORLD MARKETS TODAY. FOR GOLD PRODUCTION OUTSIDE OF
THE UNITED STATES, US DOLLAR STRENGTH HAS MEANT A FURTHER WINDFALL IN LOCAL
GOLD PRICES. IN SOUTH AFRICA, THE AVERAGE PRICE FOR THE QUARTER OF R62,176 PER
KILOGRAM WAS UP SLIGHTLY ON THE SECOND QUARTER, BUT SINCE THE END OF THE THIRD
QUARTER, WE HAVE SEEN HISTORIC RECORD RAND PRICES FOR GOLD OF OVER R67,000 PER
KILOGRAM.
THE PHYSICAL MARKETS FOR GOLD REMAIN LARGELY IN BALANCE. COUNTRIES WHICH
SUPPORT THE WASHINGTON AGREEMENT HAVE SHOWN EVERY SIGN OF ADHERING TO THAT
AGREEMENT, BUT COUNTRIES AND INSTITUTIONS THAT ARE NOT SIGNATORIES HAVE FELT
FREE TO SELL GOLD FROM THEIR RESERVES. THE MARKET HAS HAD TO ABSORB
OPPORTUNISTIC SALES OF GOLD FROM A NUMBER OF OFFICIAL SELLERS OUTSIDE OF THE
WASHINGTON AGREEMENT DURING THE PAST NINE MONTHS AND TOTAL OFFICIAL SALES OF
THE METAL FOR THIS YEAR LOOK LIKELY TO BE HIGHER THAN IN 1999. TO BALANCE
THIS, PHYSICAL DEMAND HAS BEEN GOOD, ALTHOUGH UNEVEN IN SOME IMPORTANT MARKETS.
IT IS ENCOURAGING THAT GOLD PRODUCERS APPEAR TO BE MORE AWARE OF THE NEED FOR
THE MARKETING OF GOLD, AND IT MUST BE HOPED THAT THIS AWARENESS WILL TRANSLATE
TO MORE WIDESPREAD SUPPORT FOR GOLD PROMOTION BY GOLD PRODUCERS THAN HAS BEEN
THE CASE IN THE PAST.
THE PAPER MARKET FOR GOLD REMAINS THIN, WITH LIMITED INTEREST; THIS HAS
CONTRIBUTED TO A NARROW PRICE RANGE FOR THE METAL. THIS PRICE RANGE IS LIKELY
TO PREVAIL INTO THE FUTURE UNTIL SOME MAJOR DISLOCATING EVENT IN OTHER
FINANCIAL MARKETS OCCURS TO MOVE INVESTOR INTEREST BACK TO GOLD. A SETBACK IN
EQUITY MARKETS, OR IN THE VALUE OF THE US DOLLAR COULD LEAD TO MORE FAVOURABLE
INTEREST IN GOLD.
THE LOWER SPOT PRICE OF GOLD AND THE LIMITED PRICE RANGE HAVE MADE IT NECESSARY
FOR THE COMPANY TO INCREASE FURTHER THE LEVELS OF HEDGE COVER FOR NEW PROJECTS
IN MALI AND TANZANIA, AND FOR EXISTING CAPITAL PROJECTS IN SOUTH AFRICA. THIS
COVER IS CONSISTENT WITH THE COMPANY'S POLICY OF ACTIVELY MANAGING REVENUE RISK
IN THE SHORT TO MEDIUM TERM, AND WITH THE COMPANY'S COMMITMENT TO PAYING
APPROPRIATE RETURNS TO SHAREHOLDERS ON CAPITAL INVESTED IN THE COMPANY. HEDGE
COVER REMAINS CONCENTRATED PRIMARILY IN THE TWO YEARS IMMEDIATELY AHEAD, WITH
RELATIV
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