Chairman’s letter

Launch podcast Russell Edey looks back on his time at AngloGold Ashanti

Please read the cautionary statement regarding forward-looking statements before listening to this podcast.

Russell Edey, Chairman

Dear shareholder,

This is my eighth and final letter to you since I became chairman of the then AngloGold in 2002. Reflecting on the company’s progress since then paints, on balance, a healthy picture, though it cannot be said that it has been without its challenges.

Perhaps the most fundamental strategic shift occurred early last year when former majority shareholder, Anglo American, completed the process of selling off its stake in AngloGold Ashanti. While acknowledging the positive role played over years by Anglo American, this has given our company greater freedom to pursue its best interests. I believe the consequences of this will become increasingly apparent in the years ahead.

A major milestone during my tenure as chairman was the business combination with Ashanti Goldfields in 2004. We must concede that it took longer than expected to turn around Ashanti’s main asset, Obuasi. Indeed, hindsight tells us that we could have managed better the process of integrating the two companies, and taking advantage of the synergies and other opportunities the transaction offered. Hopefully lessons have been learned from this experience. Nonetheless, the transaction offered geographical diversity and with Obuasi, Geita, Siguiri and the exploration rights in the Democratic Republic of Congo, has given us significant long-term assets.

On the financial side, a central focus since 2002 has been on reducing the hedge book to take greater advantage of the recovery in the gold price in the last decade. The company has accelerated that process in the past two years, during which time our total hedge commitment has been reduced from 10.39Moz at end 2007 – more than double our annual production – to 3.9Moz, significantly less than a full year’s production. The company will continue to focus on reducing hedge on an opportunistic basis so as to ensure maximum exposure to the spot gold price.

The gold price climbed steadily through the year, ending 24% stronger than it began. Starting at around $875/oz, it reached a high of $1,226/oz early in December but by year-end was closer to $1,100/oz. Continuing economic and jewellery demand growth in China and India, expansionary US monetary and fiscal policies and limited major new orebody discoveries, all to sustained gold strength, though this trend is likely to be marked by significant market volatility.

My greatest regret is that we have not yet achieved our safety performance goals. I do, however, recognise the efforts of Chief Executive Officers, Bobby Godsell and now Mark Cutifani, under whose stewardship the fatality rate on our mines been reduced from 0.31 deaths per million hours worked in 2002, to 0.10 in 2009. Mark and his team will strive to reach the target of zero fatalities.

The energetic corporate activity aimed at restructuring our asset portfolio in order to add value is evidence of the dynamism of AngloGold Ashanti’s management. Following the 2008 transactions in Colombia, the US and Brazil, 2009 saw a sale agreement for our Tau Lekoa mine in South Africa, completion of which is pending final regulatory approval. We also sold 33.3% interest in Boddington, Australia, while enhancing our operating and exploration base through the transactions involving the Kibali gold project in the DRC, the alliance with Thani Dubai Mining, the increased interest in Sadiola in Mali, and the marine exploration joint venture with De Beers.

In May, the company finalised a fund raising of $732.5m of 3.5% convertible bonds due 2014 on competitive terms. The funds were used to refinance AngloGold Ashanti’s debt facilities and for general corporate purposes.

It is gratifying that AngloGold Ashanti has – justifiably – sustained its reputation over the years as a responsible corporate citizen in the countries and communities where it operates. Though the scrutiny of our activities is intense, and challenges are manifold and often complex, we have always sought to act with integrity, and have been willing to acknowledge any errors of judgement and remedy them.

AngloGold Ashanti, like most major mining companies, continues to face significant challenges as a corporate citizen.

Energy issues are becoming a particular challenge in terms of security of supply, price and our obligation to minimise our carbon footprint. South Africa faces a major challenge to meet the demand for electricity. Our company played a prominent role in commissioning a submission to the energy regulator as it considered an initial application from the state-owned power company for a 45% a year tariff increase over three years. While we recognise that power prices in South Africa have been unrealistically low for many years, an increase of such magnitude would seriously damage not only our industry but the economy as a whole. We hope our work played a part in the outcome of lower increases of about 25% a year over the three-year period – a substantial improvement on the original request. In addition, together with other business groups, we continue to engage relevant government structures in an effort, jointly, to ensure a secure, fairly priced and cleaner supply of power to the country.

More broadly, public policy debate over the nature of a nations’ stewardship over their natural resources, and the question of a fair division of the benefits of mining between companies and the people of those nations, continues to intensify. This is the case not least in our company’s country of domicile, South Africa, where a review of the Mining Charter promises to be a major issue in 2010, and where vocal calls for nationalisation of the industry, emanating mostly from the ruling party’s youth wing, have become common. President Zuma and other senior government figures have stated that nationalisation is not on the government’s agenda.

Nevertheless, companies such as ours, and the business organisations to which we are affiliated, need to become more effective in these public policy debates. There is, in some jurisdictions, a tendency to be coy about such interventions. However, provided it is done in a manner of mutual respect, and provided appropriate regard is given to the national interest (as opposed to adopting unsustainable positions reflecting overly narrow corporate interests) there is no reason for coyness.

It is particularly important that the Chamber of Mines – weakened in recent years by various factors, including the departure of some mining majors to foreign domiciles and primary listings – re-establishes itself as a credible representative of industry. In pursuit of this goal, we made our Chief Executive Officer available for election as Vice President of the Chamber November. He, along with the rest of the new Chamber leadership, are already doing good work in this regard.

In conclusion, I would like to pay tribute to Mark. Even the best managed companies need regular phases of renewal. In period since September 2007 when he joined us, Mark has truly positioned AngloGold Ashanti for a new and successful era. He has achieved this through lucid strategic thinking, and putting those new strategies into effect. This is reflected in rationalisation of our asset portfolio, the financial restructuring and, most importantly, the work he has done as a manager people, building a highly capable team and giving them the confidence to take the business forward.

I am very pleased to be succeeded by Tito Mboweni, who recently retired, after ten years in that position, as Governor of South African Reserve Bank. His standing in international business and financial circles, and his clear identification with values upon which AngloGold Ashanti is built, places the leadership of the board in very capable hands.

It has been a privilege to serve you over the past 12 years. I leave you with a dynamic board and management team that will take AngloGold Ashanti to new heights.

Yours sincerely,

Russell Edey
Chairman

ANGLOGOLD ASHANTI Annual Financial Statements 2009