2006 Annual Report
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Non-GAAP disclosure

For the year ended 31 December

From time to time AngloGold Ashanti Limited may publicly disclose certain ‘Non-GAAP financial measures’ in the course of their financial presentations, earnings releases, earnings conference calls and otherwise.

The group utilises certain Non-GAAP performance measures and ratios in managing the business and may provide users of this financial information with additional meaningful comparisons between current results and results in prior operating periods. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the reported operating results or cash flow from operations or any other measure of performance prepared in accordance with IFRS. In addition, the presentation of these measures may not be comparable to similarly titled measures other companies use.

2005 2006   Figures in million 2006 2005
SA Rands     US Dollars
    1. Headline earnings adjusted for the loss on unrealised non-hedge derivatives and other commodity contracts, fair value adjustment on convertible bond and interest rate swaps (1) (adjusted headline earnings)    
(716) (838)   Headline loss (80) (97)
1,900 4,507   Loss on unrealised non-hedge derivatives and other commodity contracts 615 286
(128) (742)   Deferred tax on unrealised non-hedge derivatives and other commodity contracts (group note 12) (106) (21)
211 (137)   Fair value adjustment on option component of convertible bond (16) 32
5 –   Fair value loss on interest rate swap – 1
      Headline earnings adjusted for the loss on unrealised non-    
      hedge derivatives and other commodity contracts, fair value    
1,272 2,790   adjustment on convertible bond and interest rate swaps 413 201
     
(1)
  		 Loss on non-hedge derivatives and other commodity contracts in the income statement comprise the change in fair value of all non-hedge derivatives and other commodity contracts as follows:
– Open positions: The change in fair value from the previous reporting date or date of recognition (if later) through to the current reporting date; and
– Settled positions: The change in fair value from the previous reporting date or date of recognition (if later) through to the date of settlement.
Headline earnings adjusted for the loss on unrealised non-hedge derivatives and other commodity contracts, fair value adjustment on convertible bond and interest rate swaps are intended to illustrate earnings after adjusting for:
–
  		 The unrealised fair value change in contracts that are still open at the reporting date, as well as the unwinding of the historic marked-to-market value of the positions settled in the period;
– Investment in hedge restructure transaction: During the hedge restructure in December 2004 and March 2005 quarters, $83 million, R475 million and $69 million, R415 million in cash were injected respectively into the hedge book in these quarters to increase the value of long-dated contracts. The entire investment in short-dated derivatives (certain of which have now matured) and investment in long-dated derivatives (all of which have not yet matured), for the purposes of the adjustment to earnings, will only be taken into account when the realised portion of long-dated non-hedge derivatives are settled, and not when the short-term contracts are settled;
– The unrealised fair value change on the option component of the convertible bond amounting to $16 million, R137 million (2005: $ 32 million, R211 million); and
– The unrealised fair value change on the onerous uranium contracts.
   
481 1,023   Cents per share 151 76
      This calculation is based on adjusted headline earnings of $ 413 million, R2,790 million (2005: $ 201 million, R1,272 million) and 272,808,217 (2005: 264,635,634) shares being the weighted average number of ordinary shares in issue during the financial year.    
           
    2. Gross profit adjusted for the loss on unrealised non-hedge derivatives and other commodity contracts (adjusted gross profit)    
      Reconciliation of gross profit to gross profit adjusted for the loss on unrealised non-hedge derivatives and other commodity contracts    
1,099 2,700   Gross profit 443 185
1,900 4,507   Loss on unrealised non-hedge derivatives and other commodity contracts 615 286
2,999 7,207   Gross profit adjusted for the loss on unrealised non-hedge derivatives and other commodity contracts (1) 1,058 470
     
(1)
  		 Loss on non-hedge derivatives and other commodity contracts in the income statement comprise the change in fair value of all non-hedge derivatives and other commodity contracts as follows:
– Open positions: The change in fair value from the previous reporting date or date of recognition (if later) through to the current reporting date; and
– Settled positions: The change in fair value from the previous reporting date or date of recognition (if later) through to the date of settlement.
   
      Gross profit adjusted for the loss on unrealised non-hedge derivatives and other commodity contracts, is intended to illustrate earnings after adjusting for:
– The unrealised fair value change in contracts that are still open at the reporting date, as well as, the unwinding of the historic marked-to-market value of the positions settled in the period;
– Investment in hedge restructure transaction: During the hedge restructure in the quarter ended 31 December 2004 and the quarter ended 31 March 2005, $83 million, R475 million and $ 89 million, R415 million in cash was injected into the hedge book in these quarters to increase the value of long-dated contracts. The entire investment in short-dated derivatives (certain of which have now matured) and investment in long-dated derivatives (all of which have not yet matured), for the purposes of the adjustment to earnings, will only be taken into account when the realised portion of long-dated non-hedge derivatives is settled, and not when the short-term contracts are settled; and
– The unrealised fair value change on the onerous uranium contracts.
   
         
         
      Gross profit (loss) adjusted for the loss on unrealised non-hedge derivatives and other commodity contracts is analysed by origin as follows:    
1,480 3,746   South Africa 549 230
203 245   Argentina 37 32
288 934   Australia 137 46
543 946   Brazil 138 86
(191) (186)   Ghana (26) (29)
98 19   Guinea 4 15
443 986   Mali 146 69
64 148   Namibia 22 10
49 (19)   Tanzania (2) 9
107 167   USA 23 17
(85) 221   Other, including corporate and non-gold producing subsidiaries 30 (15)
2,999 7,207     1,058 470
           
    3. Loss on non-hedge derivatives and other commodity contracts is summarised as follows:    
      Group:    
951 2,552   Gains on realised non-hedge derivatives 376 151
(1,842) (4,343)   Loss on unrealised non-hedge derivatives (591) (277)
(91) (9)   Unrealised loss on other commodity physical borrowings (1) (14)
33 (155)   Provision for loss on future deliveries of other commodities (23) 5
(949) (1,955)   Loss on non-hedge derivatives and other commodity contracts per the income statement (239) (135)
      Company:    
379 1,112   Gains on realised non-hedge derivatives 166 62
(635) (1,938)   Loss on unrealised non-hedge derivatives (265) (95)
(91) (9)   Unrealised loss on other commodity physical borrowings (1) (14)
33 (101)   Provision for loss on future deliveries of other commodities (15) 5
(314) (936)   Loss on non-hedge derivatives and other commodity contracts per the income statement (115) (42)
           
    4. Price received    
16,750 20,137   Gold income per income statement 2,964 2,629
(566) (804)   Adjusted for minority interests (119) (89)
16,184 19,333     2,845 2,540
951 2,552   Gains on realised non-hedge derivatives 376 151
17,135 21,885     3,221 2,691
190,767 173,639   Attributable gold sold – kg/ – oz (000) 5,583 6,133
89,819 126,038   Revenue price per unit – R/kg/ – $/oz 577 439
           
    5. Total costs    
11,229 11,839   Total cash costs (group note 4) 1,746 1,766
(208) (73)   Adjusted for minority interests and non-gold producing companies (11) (33)
11,021 11,766   Total cash costs adjusted for minority interests and non-gold producing companies 1,735 1,766
168 152   Retrenchment costs (group note 4) 22 26
368 (35)   Rehabilitation and other non-cash costs (group note 4) (3) 57
3,203 4,059   Amortisation of tangible assets (group note 4) 597 503
13 13   Amortisation of intangible assets (group note 4) 2 2
(102) (122)   Adjusted for minority interests and non-gold producing companies (18) (16)
14,671 15,833   Total production costs adjusted for minority interests and non-gold producing companies 2,335 2,305
191,783 175,253   Gold produced – kg/– oz (000) 5,635 2,305
57,465 67,133   Total cash cost per unit – R/kg/ – $/oz 308 281
76,495 90,345   Total production cost per unit – R/kg/– $/oz 414 374
           
    6. Cash gross profit    
      Gross profit adjusted for the loss on unrealised non-hedge    
2,999 7,207   derivatives and other commodity contracts 1,058 470
3,203 4,059   Amortisation of tangible assets (group note 4) 597 503
13 13   Amortisation of intangible assets (group note 4) 2 2
(130) (43)   Non-cash revenues (5) (20)
6,085 11,236     1,652 955
      Cash gross profit is analysed by origin as follows:    
2,562 5,366   South Africa 788 399
354 465   Argentina 69 56
494 1,179   Australia 173 78
687 1,136   Brazil 165 108
249 396   Ghana 60 40
258 282   Guinea 42 40
732 1,274   Mali 188 115
110 192   Namibia 28 17
289 246   Tanzania 37 47
363 432   USA 62 57
(13) 268   Other, including corporate and non-gold producing subsidiaries 40 (2)
6,085 11,236     1,652 955
           
    7. EBITDA    
(309) 1,349   Operating profit (loss) per the income statement 246 (34)
3,203 4,059   Amortisation of tangible assets (group note 4) 597 503
13 13   Amortisation of intangible assets (group note 4) 2 2
300 44   Impairment of tangible assets (group note 6, 14 and 16) 6 44
125 –   Impairment of intangible assets (group note 17) – 20
      Loss on unrealised non-hedge derivatives and other commodity    
1,900 4,507   contracts (note 3) 615 286
(5) (2)   Share of associates’ EBITDA (group note 8) (1) (1)
(40) (333)   Profit on disposal of assets (group note 6) (48) (5)
– (36)   Recovery of exploration loan previously expensed (group note 6) (5) –
– (9)   Profit on disposal of shares in Nufcor Uranium Limited (group note 6) (1) –
31 –   Abandonment of assets at Malian operations (group note 6) – 5
5,218 9,592     1,411 820
           
    8. Interest cover    
5,218 9,592   EBITDA (note 7) 1,411 820
690 822   Finance costs (group note 7) 123 108
102 71   Capitalised finance costs (group note 7 and 16) 10 16
792 893     133 124
7 11   Interest cover – times 11 7
           
    9. Equity and net capital employed    
16,508 20,895   Shareholders’ equity per balance sheet 2,985 2,603
      Adjusted to exclude:    
1,655 1,503   – Other comprehensive income (group note 28) 215 261
227 45   – Actuarial losses (group note 28) 6 36
18,390 22,443     3,206 2,900
7,320 7,722   Deferred tax (group note 33) 1,103 1,154
      Adjusted to exclude:    
1,015 1,581   – Deferred tax on derivatives and other comprehensive income 226 160
131 28   – Deferred tax on actuarial losses 4 22
26,856 31,774   Equity 4,539 4,236
374 436   Minorities (group note 29) 62 59
10,825 9,963   Borrowings – long-term portion (group note 30) 1,423 1,706
1,190 413   Borrowings – short-term portion (group note 30) 59 188
12,015 10,376   Capital employed 6,083 6,189
(1,328) (3,467)   Cash and cash equivalents (group note 25) (495) (209)
37,917 39,119   Net capital employed 5,588 5,980
           
    10. Net debt    
10,825 9,963   Borrowings – long-term portion (group note 30) 1,423 1,706
1,190 413   Borrowings – short-term portion (group note 30) 59 188
12,015 10,376   Total borrowings 1,482 1,894
(1,328) (3,467)   Cash and cash equivalents (group note 25) (495) (209)
10,687 6,909   Net debt 987 1,685
           
    11.  Net asset value – cents per share    
16,882 21,331   Total equity per balance sheet 3,047 2,662
265 280   Number of ordinary shares in issue (millions) 280 265
6,372 7,607   Net asset value – cents per share 1,087 1,005
      Number of ordinary shares in issue consists of:    
      276,236,153 (2005: 264,938,432) ordinary shares (group note 27)    
      4,185,770 (2005: nil) E ordinary shares (group note 27)    
           
    12. Net tangible asset value – cents per share    
16,882 21,331   Total equity per balance sheet 3,047 2,662
(2,533) (2,909)   Intangible assets (group note 17) (415) (399)
14,349 18,422     2,632 2,263
265 280   Number of ordinary shares in issue (millions) (note 11) 280 265
5,416 6,569   Net tangible asset value – cents per share 939 854
    13. Return on equity    
      Headline earnings adjusted for the loss on unrealised non-hedge derivatives and other commodity contracts, fair value adjustment    
1,272 2,790   on convertible bonds and interest rate swaps (note 1) 413 201
26,856 31,774   Equity (note 9) 4,539 4,236
26,719 29,315   Average equity 4,388 4,472
      Note – equity for 2004 amounted to $4,708 million, R26,581 million    
5 10   Return on equity – % 9 4
           
    14. Return on net capital    
      Headline earnings adjusted for the loss on unrealised non-hedge derivatives and other commodity contracts, fair value adjustment    
1,272 2,790   on convertible bonds and interest rate swaps (note 1) 413 201
690 822   Finance costs (group note 7) 123 108
      Headline earnings adjusted for the loss on unrealised non-hedge derivatives and other commodity contracts, fair value adjustment    
1,962 3,612   on convertible bonds and interest rate swaps (note 1) 536 309
37,917 39,119   Net capital employed (note 9) 5,588 5,980
36,129 38,518   Average net capital employed 5,784 5,988
      Note – Net capital employed for 2004 amounted to $5,996 million,R34,340 million    
5 9   Return on net capital – % 9 5
           
    15. Free cash flow    
3,892 7,825   Net cash inflow from operating activities per cash flow 1,137 612
(2,879) (3,416)   Stay-in-business capital expenditure per cash flow (504) (452)
1,013 4,409     633 160
           
    16.  Market capitalisation    
      Number of ordinary shares in issue at year end (millions)    
265 280   (group note 27) 280 265
      Closing share price as quoted on the JSE and New York Stock    
314.00 329.99   Exchange 47.09 49.33
83,191 92,536   Market capitalisation 13,205 13,069
           
    17. Average number of employees    
      South Africa 35,968 40,754
      Argentina 906 946
      Australia 479 393
      Brazil 4,428 3,371
      Ghana 9,443 10,180
      Guinea 2,708 1,978
      Mali 1,473 1,309
      Namibia 313 315
      Tanzania 3,220 2,280
      USA 369 357
      Other, including corporate and non-gold producing subsidiaries 2,146 2,110
        61,453 63,993

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AngloGold Ashanti Annual Report 2006 - Annual Financial Statements