Review of 2007

Introduction

We recognise that as a mining company our business entails the recovery, processing and sale of a non-renewable resource. Thus, our direct economic impact in terms of any orebody will always be finite. It is therefore imperative that the economic benefits which are derived from the resources that we exploit are not limited to one particular set of stakeholders, but accrue to a broader stakeholder group in advance of, during and after mining. The economic benefit must also be balanced against the impacts that we have on the broader socio-economic and natural landscapes.

We also recognise that our operations – and indeed our product – are about people: employees and their families, our neighbours, our customers and suppliers, our shareholders and other interested parties. See the section on Engaging with our Stakeholders.

The Economic Performance section of this report is based on information drawn from our Annual Financial Statements which is published concurrently with the Report to Society. On a quarterly basis through the year, a comprehensive review of the operational activities of the group and its individual operations is published in the company’s Quarterly reports to shareholders on the AngloGold Ashanti website.

Operational performance

In 2007, AngloGold Ashanti produced 5.5 million ounces of gold from 20 operations in 10 countries, a decline of 3% on gold production achieved in 2006. The table below analyses our production by region.

Attributable gold production (000oz) 2007

	2007	2006	2005
Argentina	204	215	211
Australia	600	465	455
Brazil	408	339	346
Ghana	527	592	680
Guinea	280	256	246
Mali	441	537	528
Namibia	80	86	81
South Africa	2,328	2,554	2,676
Tanzania	327	308	613
USA	282	283	330
Total	5,477	5,635	6,166

The gold market

Continued strong levels of investor and speculator interest, particularly in the fourth quarter of the year, pushed the gold price to levels just short of record highs, records which were then surpassed soon after year end in an exceptionally buoyant market. The average spot gold price for the year, at $697 per ounce, was 15% higher than that in 2006. The main contributing factor to the price gains seen in the third and fourth quarters was economic uncertainty relating to credit concerns and the impact of the sub-prime mortgage crisis in the US. Inflationary concerns driven by higher food, oil and commodity prices also played a role, as did the escalation in geopolitical tension.

The average gold price received for the year increased by 9% to $629 per ounce, from $577 per ounce in 2006. Total gold income for 2007 was $3,280 million, total uranium income was $100 million, and total income from silver and sulphuric acid was $45 million.

Production costs

Total cash costs increased year-on-year to $357 per ounce as a result of the lower levels of production, stronger local currencies against the US dollar and local inflationary pressures.

Group value-added statement

	2007		2006
Dollar million	%		%
Value added
Gold income		3,280		2,964
Purchases of goods and services in order to operate mines and produce refined metal, including market development costs net of other income		(1,352)		(1,041)
Value added by operations	68	1,928	85	1,923
Fair value gain on option component of convertible bond	2	47	1	16
Profit on disposal of assets	–	7	2	54
Income from investments and interest received	1	24	1	31
Government
– Deferred taxation	3	94	1	30
Utilised in the group
– Retained income	26	722	10	217
Total value added	100	2,822	100	2,271
Value distributed
Employees
Salaries, wages and other benefits	35	998	39	887
Government
– Current taxation	9	239	9	210
Providers of capital
– Finance costs and unwinding of obligations	4	125	6	123
– Dividends declared	2	54	8	173
– Minorities	1	32	1	30
Other
– Impairment of tangible and intangible assets	–	2	–	6
– Loss from discontinued operations	–	–	–	2
– Exchange loss	–	–	–	2
– Loss on non-hedge derivatives and other commodity contracts	28	780	11	239
Total value distributed	79	2,230	74	1,672
Re-invested in the group
– Amortisation and depreciation	21	592	26	599
	100	2,822	100	2,271

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

Distributing value to employees

In 2007, the group employed some 62,000 people, mostly in South Africa (60%). Total distributions of $998 million were made to employees (including executive directors), which represents 35% of the value distributed by the group. For further information on AngloGold Ashanti as an employer refer to the Employment section.

All permanent employees are eligible for certain post-retirement benefits, the specific nature of which varies from region to region. The contribution by the employer varies from 10% to 20% of basic pay.

All employees earn in excess of the minimum wages where these are regulated.

Around 68% of employees within the group benefit from the participation in a share option scheme or a share ownership programme (ESOP). The latter is specific to South Africa; similar schemes elsewhere in the world are being considered. (See case study in the Report to Society 2006 on Harvesting for the future – Bokamoso ESOP).

Employee benefits ($m)

	2007		2006
Salaries, wages and other benefits	828	83%	723	82%
Health care and medical schemes, including defined post-retirement medical expenses	70	7%	70	8%
Contribution to pension and provident plans	48	5%	41	5%
Retrenchment costs	19	2%	22	2%
Share-based payment expense	33	3%	31	3%
Total included in cost of sales, other operating expenses operating special items and corporate administration and other expenses	998	100%	887	100%

Payments to government

AngloGold Ashanti is supportive of the Extractive Industries Transparency Initiative (EITI) (PDF - 40KB) and is committed to reporting in line with this initiative in all of the countries in which it operates.

The governments of the following countries are shareholders in the company or in the respective operations:

Shareholding by government

Country	Company/Operation	% interest
Argentina	Cerro Vanguardia	7.5
Ghana	AngloGold Ashanti	3
Guinea	Siguiri	15
Mali	Morila	20
	Yatela	20
	Sadiola	20

Note that the group acquired the 5% stake in the Iduapriem mine that was held by the government of Ghana effective 1 September 2007.

The following payments were made to government by AngloGold Ashanti, or its subsidiaries or the joint ventures that the company manages, during the year under review:

Payments to government

	Description	US$ (000)
Argentina	Dividends	2,671
	Corporate taxation/provision	9,925
	Royalties	10,315
	Other taxes and duties	2,272
	VAT	13,700
	Employee taxes and contributions*	4,731
	Total	43,614
Brazil	Corporate taxation/ provision	38,745
	Royalties	–
	Other taxes and duties	13,661
	VAT	9,086
	Employee taxes and contributions*	25,006
	Total	86,498
Australia	Corporate taxation/provision	36,733
	Royalties	8,458
	Other taxes and duties	2,367
	VAT	27,182
	Employee taxes and contributions*	5,813
	Total	80,553
Ghana	Dividends	4,048
	Corporate taxation/provision	–
	Royalties	9,383
	Other taxes and duties	–
	VAT	365
	Employee taxes and contributions*	1,550
	Total	15,346
Guinea	Dividends***	–
	Corporate taxation/provision***	–
	Royalties	21,577
	Other taxes and duties	914
	VAT	2,901
	Employee taxes and contributions*	2,662
	Total	28,054
Mali	Dividends**	35,040
	Corporate taxation/provision	48,925
	Royalties	15,232
	Other taxes and duties	4,999
	VAT	5,970
	Employee taxes and contributions*	7,665
	Total	117,831
Namibia	Corporate taxation/provision	6,606
	Royalties	1,420
	Other taxes and duties	250
	VAT	2,940
	Employee taxes and contributions*	1,942
	Total	13,158
South Africa	Corporate taxation/provision	93,600
	Royalties	–
	Other taxes and duties	10,496
	VAT	88,708
	Employee taxes and contributions*	76,581
	Total	269,385
Tanzania	Corporate taxation/provision	3,038
	Royalties	6,025
	Other taxes and duties	26,140
	VAT	5,265
	Employee taxes and contributions*	7,186
	Total	47,654
USA	Corporate taxation/provision	1,170
	Royalties	1,190
	Other taxes and duties	3,137
	VAT	–
	Employee taxes and contributions*	3,589
	Total	9,086

*	Note that employee taxes and contributions include remittances made to government but borne by employees as individual taxation.
**	Dividend payments ($4,500,000 by Sadiola, $16,000,000 by Yatela and $14,540,000 by Morila).
***	No dividends or corporate taxes were paid in 2007. Siguiri has a large shareholders’ loan which will be repaid before dividends are declared. Siguiri is not yet in a tax-paying position owing to historic tax losses.

Assistance from government

No significant financial assistance was received by the company or the operations from government. Any assistance received is detailed below.

Assistance from government

Country	Value in US$ (000)		Description
Argentina	–
Australia	1,216		Fuel rebates
Brazil	–
Colombia	–
DRC	–
Ghana	–
Guinea	–
Mali	–
Namibia	–
South Africa	3,147		Skills development levy
Tanzania	–
USA	–

Distributing value – shareholders

AngloGold Ashanti is a publicly listed company with shareholders located all around the world. Following the placement by Anglo American of a large percentage of its holding in various markets around the world, 80% of the shares are now in free float. The balance (17%) is held by Anglo American plc and (3%) by the Government of Ghana.

A graph depicting the geographical location of the company’s shareholders is depicted below. The largest percentage shareholding (after removing shareholding of Anglo American plc and the Government of Ghana, that is, free float) is in South Africa (44.5%), followed by North America (36.5%) and then the United Kingdom (9.9%).

The company is listed on the following exchanges around the world:

The share depreciated by 11% during the year, from R330 per share on the JSE (primary listing) on 31 December 2006 to R293 per share on 31 December 2007. The share peaked at R359 per share and reached a low of R254 per share, and traded within a range between R273 and R331 during the year.

Dividends declared for 2007 amounted to $54 million (2006: $173 million).

Capital investment

A great deal of emphasis is placed by the company on capital investment both to sustain operations and in developing operations. In 2007, the group spent $1.1 billion on capital expenditure (2006: $817 million). Stay-in-business capex, including ore reserve development, amounted to $570 million while new project development made up for 45%. Major capital expansion projects are:

Major capital expansion projects are:

In South Africa:

• development of Moab Khotsong South Africa; and
• expansion projects at TauTona and Mponeng.

In Brazil:

• the Cuiabá Expansion project at Brasil Mineração.

In Australia:

• underground expansion at Sunrise Dam; and
• the Boddington Expansion project, a joint venture with Nemont Mining Corporation

Supporting the gold market

Gold market development

AngloGold Ashanti has since its inception been committed to growing the market for its product, particularly as gold jewellery sales in many developed markets have declined materially over the years in favour of other luxury goods. In response, the company’s marketing programmes aim to increase the desirability of gold to sustain and grow demand and to support the deregulation of the market in key economies.

AngloGold Ashanti’s market development activities centre on the following areas:

• strategic projects undertaken in key and critical gold jewellery offtake markets (USA, India, China, Italy, Middle East), which aim to develop positive corporate identification and recognition while achieving, where sensible and possible, financial returns for AngloGold Ashanti;
• host country projects of a downstream development nature; and
• AuDITIONS, the company’s gold jewellery design competition. See the case study AngloGold Ashanti’s AuDITIONS launches in China

AngloGold Ashanti remains a member of the World Gold Council (WGC) and undertakes its own strategic marketing projects in such a way as to co-operate with and support the WGC’s wider objectives.

Exploration and development

The main focus of AngloGold Ashanti’s 2007 exploration programme was on greenfields exploration, that is, exploration in new terrains, notably in Australia, Colombia, and the DRC. Brownfields exploration, which is aimed at identifying replacement ounces for production, was undertaken around most current operations, with the most successful programmes being undertaken in Ghana, the United States of America, Australia, and Guinea.

Total exploration expenditure in 2007 amounted to $167 million, of which $92 million was spent on greenfields exploration and the balance of $75 million on brownfields exploration.

The group’s exploration programme has yielded a great deal of success during the year and is covered extensively in the Annual Financial Statements.

Procurement

With significant annual procurement expenditure, the group can and does have a major impact on economic activity. The total amount for the purchase of goods and services in order to operate mines and produce refined metal, including market development costs net of other income, was $1,352 million in 2007.

It is the group’s intention that, as far as it is possible and sensible to do so, goods and services are procured locally and regionally.

In South Africa, the company is aligning its procurement policies with the Department of Trade and Industry’s Codes of Good Practice by 2009. The code is a part of the country’s transformation process and is aimed at encouraging new and small suppliers, particularly from historically disadvantaged communities.

See case study: Preparing for a changing BEE procurement landscape.