16 Tangible assets

Included in the amounts for mine infrastructure are assets held under finance leases with a net book value of $17m, R126m (2008: $5m, R45m). Included in land and buildings are assets held under finance leases with a net book value of $27m, R201m (2008: $23m, R218m).

The majority of the leased assets are pledged as security for the related finance lease.

No assets are encumbered by project finance.

The weighted average capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation is 4.10% (2008: 8.17%).

A register containing details of properties is available for inspection by shareholders or their duly authorised agents during business hours at the registered office of the company.

⁽¹⁾ Assets under construction account for the expenditures recognised in the carrying amount of property, plant and equipment in the course of its construction. The 2008 amounts were reclassified to include the effect of separate disclosure to enhance disclosure of tangible assets.

⁽²⁾ Transfers and other movements comprise amounts from deferred stripping, change in estimates of decommissioning assets, asset reclassifications and transfers to/from non-current assets held for sale.

In 2009 transfers to/from non-current assets held for sale comprise:

• assets with a net book value of $84m, R704m relating to Tau Lekoa were transferred to non-current assets held for sale.
• assets with a net book value of $145m, R1,335m relating to the 33.33% joint venture interest in Boddington Gold Mine were transferred to non-current assets held for sale.

In 2008 transfers to/from non-current assets held for sale comprise:

• assets with a net book value of $672m, R6,355m relating to the 33.33% joint venture interest in Boddington Gold Mine were transferred to non-current assets held for sale.
• assets with a net book value of $3m, R22m relating to the discontinued operations were transferred to non-current assets held for sale and disposed of during 2008.
• assets with a net book value of $13m, R100m relating to Weltevreden were transferred from non-current assets held for sale to tangible assets held for use.

⁽³⁾ Impairments include the following:

South Africa

Below 120 level at TauTona – mine development costs

Due to a change in the mine plan resulting from safety-related concerns following seismic activity, a portion of the below 120 level development had been abandoned and will not generate future cash flows. During 2008, an impairment loss of $16m, R159m was recognised.

Tanzania

Geita mine – cash generating unit
The 2008 impairment was due to a combination of factors such as the lower gold price, higher discount rates and a change in the mine plan revised mainly due to a reduction in reserves resulting from resource model changes, grade factors and an increase in the cost of extraction. As a result, Geita’s recoverable amount did not support its carrying value in 2008 and an impairment loss was recognised of $427m, R4,229m consisting of mine development of $144m, R1,429m and mineral rights and dumps of $283m, R2,800m. The recoverable amount was determined using a real pre-tax discount rate of 11.5% and was based on the impairment assumptions detailed below.

Ghana

• An impairment of the Obuasi mine arose as follows:
  During 2008, the reserve power plant which was allocated to mine infrastructure had been placed on care and maintenance pending handover to the Volta Regional Authority in 2009 and the abandoned shaft infrastructure was impaired by $15m, R145m.
The Obuasi cash generating unit impairment was the result of factors such as the lower gold price, higher discount rates and a revised mine plan which incorporated changes in the cost of extraction due to the higher cost of power experienced recently in Ghana. As a result, Obuasi’s recoverable amount did not support its carrying value in 2008 and an impairment loss was recognised of $815m, R8,077m consisting of mine development of $340m, R3,367m and for mineral rights and dumps of $475m, R4,710m. The recoverable amount was determined using a real pre-tax discount rate of 9% and was based on the impairment assumptions detailed below.


• An impairment of the Iduapriem mine arose as follows:
  The reserve power plant which was allocated to mine infrastructure had been placed on care and maintenance pending handover to the Volta Regional Authority in 2009. During 2008, $3m, R33m was recognised as an impairment loss.
  
  The Iduapriem cash generating unit impairment was the result of factors such as the lower gold price, higher discount rates and a revised mine plan which incorporated changes in the cost of extraction due to the higher cost of power experienced recently in Ghana. As a result, Iduapriem’s recoverable amount did not support its carrying value in 2008 and an impairment loss of $181m, R1,791m was recognised for mine development. The recoverable amount was determined using a real pretax discount rate of 8.8% and was based on the impairment assumptions detailed below.

Guinea

Siguiri mine – mine infrastructure
The heap leaching process was abandoned due to the lower recoveries and deteriorated condition of the stacking pads. During 2008, the remaining heap leach infrastructure was impaired by $7m, R68m.

Democratic Republic of the Congo

Exploration assets – exploration and evaluation assets
During 2008, with the volatile political environment in the Democratic Republic of the Congo, commercial exploitation in the near term appeared unlikely and the mineral right value was impaired by $29m, R292m.

Impairment of various minor tangible assets and equipment $7m, R50m (2008: $2m, R21m).

⁽⁴⁾ Impairment reversal includes the following:

South Africa

East of Bank Dyke at TauTona – mine development cost
Due to a re-assessment of the mine plan, the East of Bank Dyke access development had become economically viable. The increased gold price will generate future cash flows, and as a result, the impairment raised during 2005 was partially reversed by $2m, R23m during 2008.

Tanzania

Geita mine – cash generating unit
The Geita mine impairment recognised in 2008 was partially reversed. The impairment reversal was largely due to an increase in the long term real gold price resulting in increased future discounted cash flows. As a result, Geita’s recoverable amount exceeded its carrying value in 2009 and an impairment reversal was recognised of $261m, R1,954m consisting of mine development of $106m, R793m and mineral rights and dumps of $155m, R1,161m. The recoverable amount was determined using a real pre-tax discount rate of 13.6% (2008: 11.5%) and was based on the impairment assumptions detailed below.

Ghana

• An impairment reversal of the Obuasi mine arose as follows:

The Obuasi mine impairment recognised in 2008 was partially reversed. The impairment reversal was largely due to an increase in the long term real gold price resulting in increased future discounted cash flows. As a result, Obuasi’s recoverable amount exceeded its carrying value in 2009 and an impairment reversal was recognised of $373m, R2,790m consisting of mine development of $159m, R1,187m and mineral rights and dumps of $214m, R1,603m. The recoverable amount was determined using a real pre-tax discount rate of 8.4% (2008: 9%) and was based on the impairment assumptions detailed below.


• An impairment reversal of the Iduapriem mine arose as follows:

The Iduapriem mine impairment recognised in 2008 was partially reversed. The impairment reversal was largely due to an increase in the long term real gold price resulting in increased future discounted cash flows. As a result, Iduapriem’s recoverable amount exceeded its carrying value in 2009 and an impairment reversal was recognised of $83m, R621m consisting of mine development. The recoverable amount was determined using a real pre-tax discount rate of 13.4% (2008: 8.8%) and was based on the impairment assumptions detailed below.

The impairments/reversals relate to mining properties, mine development costs and mine plant facilities, and have been recognised in operating special items (note 6). The recoverable amount was determined by reference to value in use at an individual mine level.

Impairment calculation assumptions – tangible assets and goodwill

Management assumptions for the value in use of tangible assets and goodwill include:

• the gold price assumption represents management’s best estimate of the future price of gold. In arriving at an estimated long-term gold price, management considered all available market information, including current prices, historical averages and forward-pricing curves. A long-term real gold price of $906/oz (2008: $817/oz) is based on a range of economic and market conditions that will exist over the remaining useful life of the assets.

Annual life of mine plans take into account the following:

• proved and probable Ore Reserve as included in the Mineral Resource and Ore Reserve.
• value beyond proved and probable reserves (including exploration potential) determined using the gold price assumption referred to above;
• the real pre-tax discount rate is derived from the group’s weighted average cost of capital (WACC) and risk factors which is consistent with the basis used in 2008. The WACC of 6.4% which is 83 basis points higher than in 2008 of 5.57%, is based on the average capital structure of the group and three major gold companies considered to be appropriate peers. The risk factors considered are country risk as well as project risk for cash flows relating to mines that are not yet in production and deep level mining projects. The country risk factor is based on the group’s internal assessment of country risk relative to the issues experienced in the countries in which it operates and explores;
• foreign currency cash flows translated at estimated forward exchange rates and then discounted using appropriate discount rates for that currency;
• cash flows used in impairment calculations are based on life of mine plans which exceed five years for the majority of the mines; and
• variable operating cash flows are increased at local Consumer Price Index rates.

The group reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. In addition, goodwill is tested on an annual basis for impairment. Assets are grouped at the lowest level for which identifiable cash flows are largely independent of cash flows of other assets and liabilities. If there are indications that impairment may have occurred, estimates are prepared of expected future cash flows for each group of assets. Expected future cash flows used to determine the value in use of goodwill and tangible assets are inherently uncertain and could materially change over time. The cash flows are significantly affected by a number of factors including reserves and production estimates, together with economic factors such as spot gold prices, discount rates, foreign currency exchange rates, estimates of costs to produce reserves and future capital expenditure.

Should management’s estimate of the future not reflect actual events, further impairments may be identified. Factors affecting the estimates include:

• changes in proved and probable Ore Reserve as well as value beyond proved and probable reserves;
• the grade of Ore Reserve as well as value beyond proved and probable reserves may vary significantly from time to time;
• differences between actual commodity prices and commodity price assumptions;
• unforeseen operational issues at mine sites; and
• changes in capital, operating mining, processing and reclamation costs and foreign exchange rates.

Based on an analysis carried out by the group, the carrying value and value in use of cash generating units that are most sensitive to a 5% movement in gold price, ounces, costs and discount rate assumptions are:

Should any of the assumptions used change adversely and the impact not be mitigated by a change in other factors, this could result in an impairment of the above assets.

It is impracticable to disclose the extent of the possible effects of changes in assumptions for the future gold price and hence life of mine plans at 31 December 2009 because these assumptions and others used in impairment testing of tangible assets and goodwill are inextricably linked. In addition, for those mines with a functional currency other than the US dollar, movements in the US dollar exchange rate will also be a critical factor in determining life of mine and production plans.

Therefore it is possible, that outcomes within the next financial year that are different from the assumptions used in the impairment testing process for goodwill and tangible assets could require a material adjustment to the carrying amounts disclosed at 31 December 2009.

⁽⁵⁾ The carrying value includes goodwill of $15m, R106m (2008: $15m, R135m) at AngloGold Ashanti Brasil Mineração and $8m, R59m (2008: $8m, R75m) at Serra Grande (note 17).