Economic performance

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Review 2006

Financial performance

In 2006, AngloGold Ashanti produced 5.6Moz of gold from 21 operations in 10 countries, a decline of 9% on the total for 2005 (6.21Moz).

The group’s South African operations continue to contribute the greatest proportion of attributable ounces (45% in 2006, as against 43% in 2005). Attributable contributions to production from Guinea (5% vs 4% in 2005), Mali (10% vs 8% in 2005) and Namibia (2% vs 1% in 2005) rose in 2006.

Atributable gold production (000oz)	2006	2005
Argentina	215	211
Australia	465	455
Brazil	339	346
Ghana	592	680
Guinea	256	246
Mali	537	528
Namibia	86	81
South Africa	2,554	2,676
Tanzania	308	613
USA	283	330
Total	5,635	6,166

The average gold price received for the year increased by 31% to $577 per ounce from $439 per ounce in 2005. Total gold income during 2006 thus amounted to $2,964 million (2005: $2,629 million), an increase of 13%.

The gold market was characterised by robust investor and speculator interest during 2006. This, combined with exceptional price volatility in the first half of the year, resulted in the price peaking at $725 per ounce, and averaging $604 per ounce, up by 36% on 2005. Given this price volatility,  global demand for gold, and gold jewellery in particular, was affected for the year. Total demand was 5% lower at 3,866 tonnes.

Total cost of sales declined by 1% to $2,282 million in 2006 (2005: $2,309 million), with average total cash costs increasing by 10% to $308 per ounce (2005: $281 per ounce).

Adjusted headline earnings increased by 105% to $413 million in 2006 (2005:$201 million).

Group value-added statement

		2006		2005
Dollar million	%	$million	%	$million
Value added
Gold income		2,964		2,629
Less: Purchases of goods and services in order to operate mines and produce refined metal, including market development costs net of other income		(1,041)		(1,087)
Value-added by operations	85	1,923	80	1,542
Fair value gain (loss) on interest rate swaps and option component of convertible bond	1	16	(2)	(33)
Profit on disposal of assets	2	54	–	5
Income from investments and interest received	1	31	1	22
Government
Deferred taxation	1	30	6	117
Utilised in the group
Retained income	10	217	15	277
Total value added	100	2,271	100	1,930
Value distributed
Employees
Salaries, wages and other benefits	39	887	46	877
Government
– Current taxation	9	210	4	82
Providers of capital
– Finance costs and unwinding of decomissioning obligation	6	123	6	108
– Dividends declared	8	173	5	95
– Minorities	1	30	1	23
Other
– Impairment of tangible and intangible assets	–	6	3	64
– Loss from discontinued operations	–	2	2	36
– Exchange loss	–	2	–	5
– Loss on non-hedge derivatives and other commodity contracts	11	239	7	135
Total value distributed	74	1,672	74	1,425
Re-invested in the group
– Amortisation and depreciation	26	599	26	505
	100	2,271	100	1,930

Further details and notes may be found in the Annual Financial Statements.

Distributing value – to employees

During 2006, AngloGold Ashanti employed (on an average monthly basis) 61,453 people (employees and contractors) (2005: 63,993). Total distributions of $887 million were made to employees (including executive directors), an increase of 1% on the distributions made in 2005. This represents 39% of the value distributed by the group in 2006.

Employee benefits ($m)	2006		2005
Salaries, wages and other benefits	723	82%	752	86%
Health care and medical schemes, including
defined post-retirement medical expenses	70	8%	61	7%
Contribution to pension and
provident plans	41	3%	36	4%
Retrenchments costs	22	2%	26	3%
Share-based payment/expense	31	3%	2	–
Total included in cost of sales, other operating expenses and operating special items	887	100%	877	100%

For further information on AngloGold Ashanti’s performance as an employer, see the section on Human Resources. In 2006, AngloGold Ashanti initiated an Employee Share Ownership Programme (ESOP) in South Africa. (See case study, Harvesting for the future – Bokamoso ESOP.)

Distributing value – to governments

Taxation of $210 million was provided for during 2006. This represents an increase of 156% on the $82 million provided for in 2005. Other payments made to governments include value added tax, royalties and dividends. Further detail may be found in the Country and Operational Reports.

Taxation by country ($m)	2006	2005
Argentina	13	–
Australia	25	6
Brazil	38	23
Ghana	5
Guinea	–
Mali	47	12
Namibia	4
South Africa	77	42
Tanzania	1
USA	–	-1
Total	210	82

Distributing value – shareholders and providers of capital

AngloGold Ashanti has a vast range of shareholders around the world, ranging from private individuals to institutions and governments.These shareholders may benefit from their investment in two ways: by the appreciation in the share price of the company during the year and with the payment of dividends.

The share price appreciated by 5% to end the year at R330 on 31 December 2006 (31 December 2005: R314). Dividend payments for 2006 totalled $132 million compared with total dividends paid of $169 million in 2005. Payments to providers of capital increased by 45% to $326 million. These payments included those made to banks and other financial institutions as well as dividends declared.

Distributing value – our customers

AngloGold Ashanti’s customers are located around the world. A geographical analysis of gold income is provided in the chart below.

The gold market

AngloGold Ashanti’s commitment to gold extends beyond the refinery gates and supports a number of global marketing initiatives. We believe that our marketing programme, comprising projects designed to increase the demand for and enhance the desirability of gold, will assure a future market for our product. As more than 60% of gold mined each year is consumed by the gold jewellery sector, we actively support the development of a vibrant gold jewellery industry.

In addition to supporting the efforts of the World Gold Council (WGC), AngloGold Ashanti’s independent strategic marketing initiatives include a focus on taking the lead in the gold jewellery market in the areas of design innovation, branding, marketing and retail. These marketing initiatives are undertaken in the major markets for gold jewellery, namely, India, the Middle East, the United States and China, usually in conjunction with local partners or the WGC. (See the case study: AuDITIONS goes global ).

Sustaining operations

As a mining company exploiting a set of finite resources, it is incumbent on AngloGold Ashanti to:

• incur capital expenditure, both to prolong the viability and sustainability of existing operations, and to develop access to new reserves;
• undertake exploration, both greenfields and brownfields, to identify and possibly develop new operations; and
• acquire projects and operations that might extend the production profile of the group in years to come.