Company – Notes to the company financial statements

For the year ended 31 December

  Figures in million20102009
  SA Rands

1

Revenue

  
 Revenue consists of the following principal categories:  
 Gold income15,82712,461
 By-products (note 2)355363
 Dividends received from subsidiaries – in specie (notes 11 and 27)17,693
 Dividends received from subsidiaries – in cash (note 27)611543
 Royalties received (note 4)21
 Interest received (note 27)  
 – loans and receivables515
 – cash and cash equivalents76153
  34,63413,525

2

Cost of sales

  
 Cash operating costs (1)7,9347,222
 Insurance reimbursement(123)
 By-product revenue (note 1)(355) (363)
  7,4566,859
 Other cash costs322 40
 Total cash costs7,7786,899
 Retrenchment costs (note 7)13877
 Rehabilitation and other non-cash costs182 (3)
 Production costs8,0986,973
 Amortisation of tangible assets (notes 6, 9 and 27)2,450 2,217
 Total production costs10,5489,190
 Inventory change31 (29)
  10,579 9,161
 
(1) Cash operating costs comprises: 3,969 3,832
  – salaries and wages 1,789 1,876
  – stores and other consumables 1,262 970
  – fuel, power and water 85 107
  – contractors 829 437
  – services and other charges 7,934 7,222

3

Other operating expenses

  
 Pension and medical defined benefit provisions2941

4

Special items

  
 Impairment of tangible assets (notes 9 and 19)501200
 Loss on disposal and derecognition of land, mineral rights and tangible assets196113
 Impairment of other receivables4466
 Indirect tax expenses7
 Insurance claim recovery(134)(79)
 Royalties received (note 1)(21)
 Profit on disposal of investment(1)
 Loan waived3
  592303

5

Finance costs and unwinding of obligations

  
 Finance costs  
 Finance lease charges2525
 Finance costs on bank loans and overdrafts (1)23
 Other9
  4834
 Unwinding of obligations  
 Unwinding of decommissioning obligation (note 22)3633
 Unwinding of restoration obligation (note 22)2322
 Total unwinding of obligation costs5955
       
 Total finance costs and unwinding of obligations (note 27)107 89
 
(1) Finance costs have been determined using the effective interest rate method.
   
  

6

Profit (loss) before taxation

  
 Profit (loss) before taxation is arrived at after taking account of:  
 Auditors’ remuneration  
 – audit fees4144
 – over provision prior year(1)(3)
 – other assurance services94
  4945
 Amortisation of tangible assets  
 – owned assets2,4332,200
 – leased assets1717
 (notes 2, 9 and 27)2,4502,217
 Community investment2325
 Operating lease charges18139

7

Employee benefits

  
 Employee benefits including executive directors’ salaries and other benefits5,0494,785
 Health care and medical scheme costs  
 current medical expenses447362
 defined benefit post-retirement medical expenses10379
 Pension and provident plan costs  
 defined contribution326307
 defined benefit pension plan2023
 Retrenchment costs (note 2)13877
 Share-based payment expense (1)316 256
  Included in cost of sales, other operating expenses, special items and corporate administration, marketing and other expenses6,399 5,889
 Actuarial defined benefit plan expense analysis  
 Defined benefit post-retirement medical  
 current service cost64
 interest cost9775
   10379
 Defined benefit pension plan  
 current service cost5051
 interest cost179137
 expected return on plan assets(209)(165)
   2023
 Actual return on plan assets  
 South Africa defined benefit pension plan290264
       
 Refer to the Remuneration report for details of directors’ emoluments.  
 (1) Details of the equity-settled share-based payment arrangements of the group have been disclosed in group note 11. These arrangements consist of awards by the company to employees of various group companies. The income statement expense of R316m (2009: R256m) for the company is only in respect of awards made to employees of the company.  

8

Taxation

  
 Current taxation  
  Mining tax (1)153
  Non-mining tax (2)4333
  (Over) under provision prior year(629)32
 (note 26)(586)218
 Deferred taxation  
  Temporary differences (3)(1,384)534
  Unrealised non-hedge derivatives and other commodity contracts2,353(1,451)
  Change in estimated deferred tax rate (4)(39)(156)
 (note 24)930(1,073)
         
   344(855)
 Tax reconciliation  
  A reconciliation of the effective tax rate charged in the income statement to the prevailing mining and non-mining tax rate is set out in the following table:  
  %%
 Effective tax rate567
 Disallowable items(4)(4)
 Exchange variation and translation adjustments(6)
 Impairment of investment in subsidiaries(73)
 Dividends received97(15)
 Prior year’s provision102
 Change in estimated deferred tax rate (4)1(12)
 Other(1)3
 Estimated corporate tax rate (5)3535
 
(1) There was no mining tax charge in the current year as it was primarily offset by losses from the accelerated non-hedge derivative buy-backs.
(2) Non-mining income is taxed at the higher non-mining tax rate of 35% (2009: 35%) as the company has elected to be exempt from STC. Companies that elected to be subject to STC are taxed at the lower company tax rate, that of 28% (2009: 28%) for non-mining taxation purposes.
(3) Included in temporary differences is a tax credit on the derecognition of tangible assets and impairments in respect of held for sale assets of R193m (2009: R61m).
(4) The mining operations are taxed on a variable rate that increases as profitability increases. The tax rate used to calculate deferred tax is based on the company’s current estimate of future profitability when temporary differences will reverse. Depending on the profitability of the operations, the tax rate can consequently be significantly different from year to year. The change in the estimated deferred tax rate at which the temporary differences will reverse amounts to a tax credit of R39m (2009: tax credit of R156m).
(5) Mining tax on mining income is determined according to a formula based on profit and revenue from mining operations. The company has elected to be exempt from STC and is taxed at a higher rate of company tax for mining and non-mining income tax purposes.
  All mining capital expenditure is deducted to the extent that it does not result in an assessed loss and depreciation is ignored when calculating the mining income. Capital expenditure not deducted from mining income is carried forward as unredeemed capital to be deducted from future mining income. The company operates under two tax paying operations, Vaal River Operation and West Wits Operation. Under ring-fencing legislation, each operation is treated separately and deductions can only be utilised against income generated by the relevant tax operation.
  The formula for determining the mining tax rate is: Y = 43 – 215/X (2009: Y = 43 – 215/X) where Y is the percentage rate of tax payable and X is the ratio of mining profit net of any redeemable capital expenditure to mining revenue expressed as a percentage.
  The maximum statutory mining tax rate is 43% (2009: 43%), non-mining statutory tax rate 35% (2009: 35%) and statutory company tax rate 28% (2009: 28%).
  Figures in millionMine
development
costs
Mine infra-
structure
Mineral
rights
and dumps
Assets
under
construction
Land and
buildings
Total
 SA Rands      

9

Tangible assets

 Cost      
 Balance at 1 January 200920,6743,91570181326526,368
 Additions      
  project capital 2942270566
  stay-in-business capital 2,4532162,669
 Transfers and other movements (1)(2,018)(143)(156)(2,317)
 Balance at 31 December 200921,4033,9905451,08326527,286
 Accumulated amortisation      
 Balance at 1 January 200910,0422,0092752912,355
 Amortisation for the year      
 (notes 2, 6 and 27)2,03714122172,217
 Transfers and other movements (1)(1,334)(35)(56)(1)(1,426)
 Balance at 31 December 200910,7452,1152414513,146
  Net book value at 31 December 200910,658 1,875 304 1,083 220 14,140
 Cost      
 Balance at 1 January 201021,4033,9905451,08326527,286
 Additions      
  project capital 340(18)87409
  stay-in-business capital 2,3893052,694
 Transfers and other movements (1)(214)48(166)
 Balance at 31 December 201023,9184,3255451,17026530,223
 Accumulated amortisation      
 Balance at 1 January 201010,7452,1152414513,146
  Amortisation for the year (notes 2, 6 and 27)2,22118626172,450
 Impairment (note 4) (2)117(3)329443
 Transfers and other movements (1)(57)(59)(116)
 Balance at 31 December 201013,0262,2392673296215,923
  Net book value at 31 December 201010,892 2,086 278 841 203 14,300
   
  Included in land and buildings are assets held under finance leases with a net book value of R185m (2009: R201m).
   
  The majority of the leased assets are pledged as security for the related finance lease
   
  No assets are encumbered by project finance.
   
  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) Transfers and other movements comprise amounts from changes in estimates of decommissioning assets, asset reclassifications and transfers to/from non-current assets held for sale.
   
  In 2010, transfers to non-current assets held for sale comprised:
 
  • assets with a net book value of R74m relating to Tau Lekoa which were transferred to non-current assets held for sale.
  In 2009, transfers to non-current assets held for sale comprised:
 
  • assets with a net book value of R704m relating to Tau Lekoa which were transferred to non-current assets held for sale.
(2) Impairments include the following:
  Below 120 level at TauTona – assets under construction
Due to a change in the mine plan resulting from safety-related concerns following seismic activity, the below 120 level development has been abandoned and will not generate future cash flows. An impairment loss of R329m (2009: nil) was recognised in the income statement.
     
  Savuka – mine development and mine infrastructure costs
Due to a change in the mine plan, the Savuka assets have been abandoned and will not generate future cash flows. An impairment loss of R114m (2009: nil) was recognised in the income statement.
     
  The impairment calculation methodology is included in group note 15.
  Figures in million20102009
  SA Rands

10

Investments in associates and joint venture

  
 The carrying value of investments in associates and joint venture can be  
 analysed as follows:  
 Carrying value of investments in associates1825
 Loans advanced to associates (1)1717
 Loan advanced to joint venture (2)3512
  7054
   
  In 2010 and 2009, the Margaret Water Company investment was impaired. The impairment tests considered the investment’s fair value and anticipated future cash flows. Impairments of R6m (2009: R4m) were recognised in the income statement.
   
 
(1) Loans advanced to associates consist of R12m (2009: R12m) to Oro Group (Pty) Limited and R5m (2009: R5m) to Orpheo (Pty) Limited. The Oro Group (Pty) Limited loan bears interest at a rate determined by the Oro Group (Pty) Limited’s board of directors and is repayable at its discretion. The Orpheo (Pty) Limited loan is unsecured, interest free and there are no fixed terms of repayment
(2) The loan advanced to AuruMar (Pty) Limited is interest free and there are no fixed terms of repayment.
  Investments in associates comprises:
  NameEffective %Description
   20102009 
 Oro Group (Pty) Limited (3)2525Manufacture and wholesale of jewellery.
 Margaret Water Company33.333.3Pumping of underground water in the Vaal River Region.
 Orpheo (Pty) Limited (3)5033.3Design, manufacture and wholesale of jewellery.
 Wonder Wise Holdings Limited25Marketing and wholesale of jewellery.
         
 
(3) Equity accounting is based on results to 30 September 2010, adjusted for material transactions.
  Investment in joint venture comprises:
  NameEffective %Description
   20102009 
 AuruMar (Pty) Limited                     5050 Global exploration of marine deposits containing gold as the primary mineral.
  Figures in million 2010 2009
    SA Rands

11

Investment in subsidiaries

   
  Shares at cost:    
  Advanced Mining Software Limited 2 2
  AGA Zerps Holding Limited 5,028
  AGRe Insurance Company Limited 14 14
  AngloGold Ashanti Americas Investments Limited 849
  AngloGold Ashanti Holdings plc 32,341 27,677
  AngloGold Ashanti USA Incorporated 2,722 2,722
  AngloGold Namibia (Pty) Limited 51 51
  AngloGold Offshore Investments Limited 327
  Eastvaal Gold Holdings Limited 917 917
  Gansu Jinchanggou Mining Company Limited 15 15
  Nuclear Fuels Corporation of SA (Pty) Limited 7 7
  Rand Refinery Limited 116 116
    41,213 32,697
       
  During November 2010, a number of the dormant subsidiaries of the group unbundled their underlying assets as part of a rationalisation process to consolidate cross shareholdings, simplify the corporate structure and eliminate unnecessary costs relating to these entities.
   
  As a result of the rationalisation, the company received dividends in specie of R17,693m (note 1). The accounting standards do not allow the offset of the dividends in specie against the carrying values of the investments in subsidiaries and accordingly the carrying values were subject to impairment testing. Impairments following the restructuring of R13,788m were recorded.

12

Other investments

  
 Listed investment  
 Available-for-sale  
 Balance at beginning of year
 Additions30
 Fair value adjustments(1)
 Balance at end of year29
 Market value of listed investment29
 The available-for-sale investment consists of ordinary shares in Simmer & Jack Mines  
 Limited received as consideration for the sale of Tau Lekoa mine.  
       
  The company's listed available-for-sale equity investment is susceptible to market price risk arising from uncertainties about the future value of the investment.  
       
 Unlisted investments  
 Available-for-sale  
 Balance at beginning of year22
 Disposals(1)
 Balance at end of year (1)12
       
  The available-for-sale investments consist primarily of the Chamber of Mines Building Company Limited.  
       
 Held-to-maturity  
 Balance at beginning of year1414
 Balance at end of year1414
 Book value of unlisted investments1516
 The investment held-to-maturity consists of the Gold of Africa Museum.  
 Total other investments (note 30)4416
 
(1) There is no active market for the unlisted equity investments and fair value cannot be reliably measured. The unlisted equity investments are carried at cost. The company does not intend to sell the investments in the foreseeable future.
   

13

Inventories

  
 Work in progress  
 – metals in process288253
 Finished goods  
 – gold doré/bullion133
 – by-products267 233
 Total metal inventories556519
 Mine operating supplies115155
 Total inventories (1)671674
 
(1) The amount of the write-down of metals in process, by-products and mine operating supplies to net realisable value, and recognised as an expense is R6m (2009: R1m). This expense is included in cost of sales which is disclosed in note 2.
   

14

Investment in Environmental Rehabilitation Trust Fund

  
 Balance at beginning of year294294
 Balance at end of year294294
  The fund is managed by Rand Merchant Bank and invested mainly in equities, government long bonds and other fixed-term deposits.  

15

Intra-group balances

  
 Advanced Mining Software Limited(9)(10)
 AngloGold Ashanti Americas Investments Limited(52)
 AngloGold Ashanti Australia Limited1913
 AngloGold Ashanti Colombia SA7
 AngloGold Ashanti Córrego do Sitío Mineração S.A.2823
 AngloGold Ashanti (Ghana) Limited8285
 AngloGold Ashanti Health (Pty) Limited(3)3
 AngloGold Ashanti Holdings plc(505)(556)
 AngloGold Ashanti (Iduapriem) Limited229
 AngloGold Ashanti North America Inc2618
 AngloGold Ashanti Senegal Investments Limited8
 AngloGold Namibia (Pty) Limited104
 AngloGold Offshore Investments Limited(5)
 AngloGold South America Limited(192)(202)
 Ashanti Goldfields Kilo Scarl76
 Cerro Vanguardia S.A.42
 Eastvaal Gold Holdings Limited(604)(604)
 Geita Gold Mining Limited4088
 Mineração Serra Grande S.A.53
 Nuclear Fuels Corporation of SA (Pty) Limited12186
 Société Ashanti Goldfields de Guinée S.A.3128
  (903)(1,061)
 Included in the statement of financial position as follows:  
 Non-current assets413387
 Non-current liabilities(1,316)(1,448)
  (903)(1,061)
  During 2009 a loan to a joint venture of R4m was reclassified to trade and other receivables (note 17).  

16

Other non-current assets

  
 AngloGold Ashanti Limited Pension Fund (note 23)138
 Loans and receivables  
 Loan receivable at 31 December 2011 bearing interest at 3% per annum45
 Other non-interest bearing loans and receivables – receivable on various dates 2
  545
 Current portion of other non-current assets included in current assets(4)(1)
  144

17

Trade and other receivables

  
 Non-current  
 Other receivables (1)230136
 Amounts due from related parties (note 15)4
  230140
 Current  
 Trade receivables9492
 Prepayments and accrued income1815
 Recoverable tax, rebates, levies and duties326111
 Amounts due from related parties2135
 Interest receivable5412
 Other receivables1423
  527288
       
 Total trade and other receivables757428
 Current trade receivables are non-interest bearing and are generally on terms less than 90 days.  
 During the year, trade receivables were impaired by R44m (2009: R67m).  
 
(1) The amounts receivable have been discounted to their present value at a rate of 9.25% (2009: 9.25%).
  

18

Cash and cash equivalents

  
 Cash and deposits on call851715
 Money market instruments1491,005
 (note 30)1,0001,720

19

Non-current assets and liabilities held for sale

  
  Effective 17 February 2009, the interest in the Tau Lekoa mine together with the adjacent Weltevreden, Jonkerskraal and Goedgenoeg project areas in South Africa were classified as held for sale. Tau Lekoa was previously recognised as a combination of tangible and current assets, current and long-term liabilities.  
    
  The purchase consideration consists of two components: an initial cash payment or combination of cash payments and Simmer & Jack Mines Limited (Simmers) shares together with future royalty payments.  
    
  The Department of Mineral Resources has transferred the mining rights for its Tau Lekoa mine to Buffelsfontein Gold Mines Limited, a wholly owned subsidiary of Simmers. Full ownership of Tau Lekoa and the adjacent properties of Weltevreden, Jonkerskraal and Goedgenoeg passed to Simmers on 1 August 2010.  
    
  Following the classification of Tau Lekoa as held for sale, an impairment loss of R58m (2009: R200m) was recognised to reduce the carrying amount of the disposal group to the fair value less costs to sell (note 4).  
  529
  Effective 3 November 2010, ISS International Limited (ISSI) was classified as held for sale. AngloGold Ashanti Limited entered into a memorandum of understanding with The Institute of Mine Seismology (IMS) relating to the disposal of ISSI. The transaction was completed on 28 February 2011.1
  1529
 Non-current liabilities held for sale relating to Tau Lekoa mine56
  56

20

Share capital and premium

  
 Share capital  
 Authorised  
 600,000,000 ordinary shares of 25 SA cents each150150
 4,280,000 E ordinary shares of 25 SA cents each11
 2,000,000 A redeemable preference shares of 50 SA cents each11
 5,000,000 B redeemable preference shares of 1 SA cent each
  152152
 Issued and fully paid  
 381,204,080 (2009: 362,240,669) ordinary shares of 25 SA cents each (1)9590
 2,806,126 (2009: 3,794,998) E ordinary shares of 25 SA cents each11
 2,000,000 (2009: 2,000,000) A redeemable preference shares of 50 SA cents each11
 778,896 (2009: 778,896) B redeemable preference shares of 1 SA cent each
  9792
 Share premium  
 Balance at beginning of year40,57238,158
 Ordinary shares issued (1)5,7662,436
 E ordinary shares cancelled(90)(22)
 Balance at end of year46,24840,572
    
 Share capital and premium46,34540,664
    
 
(1) The most significant movement was the equity offering which resulted in the issue of 18,140,000 (2009: 7,624,162) ordinary shares at an issue price of R308.37 (2009: R288.32) per share. Total proceeds of R5.6bn (2009: R2.2bn) were received.
  
 The rights and restrictions applicable to the A and B redeemable preference shares:  
    
 A redeemable preference shares are entitled to:  
 
  • an annual dividend, after payment in full of the annual dividend on the B preference shares, equivalent to the balance of after tax profits from mining the Moab Mining Right Area; and
  • on redemption, the nominal value of the shares and a premium per share equal to the balance of the net proceeds from disposal of assets relating to the Moab Mining Right Area, after redemption in full of the B preference shares payments of the nominal value of the A preference shares.
  
 B redeemable preference shares are entitled to:  
 
  • an annual dividend limited to a maximum of 5% of their issue price from the period that profits are generated from the Moab Mining Right Area; and
  • on redemption, the nominal value of the shares and a premium of up to R249.99 per share provided by the net proceeds from disposal of the assets relating to the Moab Mining Right Area.
  
 The Moab Mining Right Area consists of the Moab Khotsong mine operations.  
    
  The B preference shares will only be redeemable from any net proceeds remaining after the disposal of the Moab Mining Right Area following permanent cessation of mining activities. The maximum redemption price will be R250 per share.  
    
  In the event of any surplus remaining after the redemption in full of the B preference shares, the A preference shares will be redeemable at such value as would cover the outstanding surplus.  

21

Borrowings

  
 Unsecured  
 FirstRand Bank Limited loan facility (R1.5bn)701
  Interest charged at JIBAR plus 0.95% per annum. Loan is repayable in May 2011 and is SA rand-based, the loan is subject to debt covenant arrangements for which no default event occurred.    
       
 Secured  
 Finance leases  
 Turbine Square Two (Pty) Limited259258
  The leases are capitalised at an implied interest rate of 9.8% per annum. Lease payments are due in monthly instalments terminating in March 2022 and are SA rand-based. The buildings financed are used as security for these loans.  
 Total borrowings (note 30)960258
 Current portion of borrowings included in current liabilities(703)(2)
 Total long-term borrowings257256
 Amounts falling due  
 Within one year7032
 Between two and five years2415
 After five years233241
 (note 30)960258
 Undrawn facility  
 Undrawn borrowing facility as at 31 December is as follows:  
 FirstRand Bank Limited – SA rand800

22

Environmental rehabilitation provisions

  
 Provision for decommissioning  
 Balance at beginning of year383457
 Change in estimates (1)192(86)
 Transfer to assets held for sale(1)(21)
 Unwinding of decommissioning obligation (note 5)3633
 Balance at end of year610383
 Provision for restoration  
 Balance at beginning of year386440
 Charge to income statement13013
 Change in estimates (1)58(61)
 Transfer to assets held for sale(1)(13)
 Unwinding of restoration obligation (note 5) (2)3622
 Utilised during the year(14)(15)
 Balance at end of year595386
       
 Total environmental rehabilitation provisions1,205769
 
(1) The change in estimates relates to changes in laws and regulations governing the protection of the environment and factors relating to rehabilitation estimates and a change in the quantities of material in reserves and a corresponding change in the life of mine plan. These provisions are expected to unwind beyond the end of the life of mine.
(2) Included in unwinding of restoration obligation is R13m (2009: nil) which is recoverable from a third party. The asset is included in non-current debtors.
   

23

Provision for pension and post-retirement benefits

  
 Defined benefit plans  
  The company has made provision for pension, provident and medical schemes covering substantially all employees. The retirement schemes consist of the following:  
 AngloGold Ashanti Limited Pension Fund asset (group note 28)(1)(38)
  Post-retirement medical scheme for AngloGold Ashanti Limited South African employees (group note 28)1,161 1,095
  1,1601,057
 Transferred to other non-current assets (note 16):  
 – AngloGold Ashanti Limited Pension Fund138
  1,1611,095

24

Deferred taxation

  
 Deferred taxation relating to temporary differences is made up as follows:  
 Liabilities  
   Tangible assets 4,9475,044
   Inventories 47
   Other 55
  4,9525,096
 Assets  
   Provisions 963738
   Derivatives 2,451
   Tax losses 1,11311
   Other 5578
  2,1313,278
       
 Net deferred taxation liability2,821 1,818
 The movement on the deferred tax balance is as follows:  
 Balance at beginning of year1,8182,624
 Income statement movement (note 8)930(1,073)
 Taxation on items included in other comprehensive income50248
 Taxation on cost of ESOP Share Trust establishment2319
 Balance at end of year2,8211,818

25

Trade and other payables

  
 Trade payables636630
 Accruals3,3331,107
  3,9691,737
 Trade and other payables are non-interest bearing and are normally settled within 60 days.  

26

Taxation

  
 Balance at beginning of year699629
 Payments during the year(277)(148)
 Provision during the year (note 8)(586)218
 Balance at end of year(164)699
 Taxation asset included in trade and other receivables (note 17).164

27

Cash generated from operations

  
 Profit (loss) before taxation6,619(1,277)
 Adjusted for:  
 Movement on non-hedge derivatives and other commodity contracts5274,146
 Amortisation of tangible assets (notes 2, 6 and 9)2,4502,217
 Finance costs and unwinding of obligations (note 5)10789
 Environmental, rehabilitation and other expenditure101(85)
 Special items749385
 Impairment of investment in subsidiaries (note 11)13,788
 Impairment of investment in Margaret Water Company (note 10)64
 Interest received (note 1)(127)(158)
 Dividends received from subsidiaries (note 1)(18,304)(543)
 Foreign currency translation on intergroup loans(93)(221)
 Other non-cash movements26123
 Movements in working capital(59)19
  5,7904,699
 Movements in working capital:  
 Decrease (increase) in inventories5(30)
 (Increase) decrease in trade and other receivables(357)20
 Increase in trade and other payables29329
  (59)19

28

Related parties

  
 Material related party transactions were as follows:  
 Sales and services rendered to related parties  
 Joint ventures137155
 Associates(5)(1)
 Subsidiaries369397
 Purchases and services acquired from related parties  
 Associates2016
 Subsidiaries361290
  Outstanding balances arising from sale of goods and services and other loans due by related parties  
 Joint ventures2134
 Associates1734
 Subsidiaries707681
  Outstanding balances arising from purchases of goods and services and other loans owed to related parties  
 Subsidiaries1,3161,448
       
  Amounts owed to/due by related parties are unsecured and non-interest bearing. Terms relating to associate and joint venture related parties are detailed in note 10.
   
  Management fees, royalties, interest and net dividends from subsidiaries amounts to R17,794m (2009: R40m). Dividends of R17,693m were received in specie and R611m were received in cash (2009: in cash R1m).
   
  The company has refining arrangements with various refineries around the world including Rand Refinery Limited (Rand Refinery) in which it holds a 53% interest. Rand Refinery refines all of the group’s South African gold production and some of the group’s African (excluding South Africa) gold production. Rand Refinery charges AngloGold Ashanti Limited a refining fee.
   
  The company did not receive any claims from its insurance subsidiary, AGRe Insurance Company Limited (2009: R68m).
   
  Doubtful debts expensed during the year amounted to R11m (2009: R13m).
   
  Details of guarantees to related parties are included in note 29.
   
  Shareholders
The top 20 shareholders of the company are detailed under shareholder information.
   
  Refer to Principal subsidiaries and operating entities for the list of principal subsidiaries and operating entities.
       
 Directors and other key management personnel  
 Details relating to directors’ emoluments and shareholdings in the company are  
  disclosed in the Remuneration and Directors’ reports.  
 Compensation to key management personnel included the following:  
 – short-term employee benefits9792
 – post-employment benefits1213
 – share-based payments923
  118128

29

Contractual commitments and contingencies

  
 Operating leases  
  At 31 December 2010, the company was committed to making the following payments in respect of operating leases for amongst others, the hire of plant and equipment and land and buildings. Certain contracts contain renewal options and escalation clauses for various periods of time.  
 Expiry:  
 – within one year4118
 – between one and two years42
  8318
 Finance leases  
  The company has finance leases for buildings and motor vehicles. The building leases have terms of renewal but no purchase options and escalation clauses. The motor vehicle leases have no purchase option and have escalation clauses. Renewals are at the option of the lessee. Future minimum lease payments under finance lease contracts together with the present value of the net minimum lease payments are as follows:
  Figures in millionMinimum
payments
Present
value of
payments
Minimum
payments
Present
value of
payments
  SA Rands20102009
       Within one year2525
  After one year but not more than five years1273111718
  More than five years314 228 349 240
  Total minimum lease payments466259491258
  Amounts representing finance charges(207)(233)
  Present value of minimum lease payments259259258258
           
 Figures in million20102009
  SA Rands
       Capital commitments  
 Acquisition of tangible assets  
 Contracted for177506
 Not contracted for2,5544,676
 Authorised by the directors2,7315,182
 Allocated to:  
 Project capital  
 – within one year632244
 – thereafter6081,082
  1,2401,326
 Stay-in-business capital  
 – within one year1,4913,284
 – thereafter572
  1,4913,856
 Purchase obligations  
 Contracted for  
 – within one year24495
 – thereafter45
  28995
   
  Purchase obligations represent contractual obligations for the purchase of mining contract services, supplies, consumables, inventories, explosives and activated carbon.
   
  To service these capital commitments, purchase obligations and other operational requirements, the company is dependent on existing cash resources, cash generated from operations and borrowing facilities.
   
  Cash generated from operations is subject to operational, market and other risks. Distributions from operations may be subject to foreign investment, exchange control laws and regulations and the quantity of foreign exchange available in offshore countries. In addition, distributions from joint ventures are subject to the relevant board approval.
   
  The credit facilities and other finance arrangements contain financial covenants and other similar undertakings. To the extent that external borrowings are required, the company’s covenant performance indicates that existing financing facilities will be available to meet the commitments detailed above. To the extent that any of the financing facilities mature in the near future, the company believes that sufficient measures are in place to ensure that these facilities can be refinanced.
   
  Summary of contracted uranium sales as at 31 December 2010
Refer to group note 34 for a summary of contracted uranium sales.
   
  Figures in millionGuarantees
and
contin-
gencies
Liabilities
included
in the
statement
of financial
position
Guarantees
and
contin-
gencies
Liabilities
included
in the
statement
of financial
position
  SA Rands20102009
  Contingent liabilities    
  Groundwater pollution – South Africa (1)
  Deep groundwater pollution – South Africa (2)
  ODMWA litigation (3)
  Contingent asset    
  Royalty – Tau Lekoa Gold Mine (4)
  Guarantees    
  Financial guarantees    
  Convertible bonds (5)4,8133095,446400
  Syndicated loan facility (6)6,5703638,55030
  Term facility (7)1,85924
  Rated bonds (8)6,5701,704
  Mandatory convertible bonds (9)5,184227
  Oro Group (Pty) Limited (10)100100
  Hedging guarantees    
  Ashanti Treasury Services (11) (14)3,293
  Geita Management Company (12) (14)3,213
  AngloGold South America (13) (14)1,071
  AngloGold USA Trading Company (13) (14)1,679
  Cerro Vanguardia S.A. (13) (14)
   23,2372,60325,211454
  Contingent liabilities        
 
(1) The company has identified groundwater contamination plumes at its Vaal River and West Wits operations in South Africa, which have occurred primarily as a result of seepage from mine residue stockpiles. Numerous scientific, technical and legal studies have been undertaken to assist in determining the magnitude of the contamination and to find sustainable remediation solutions. The company has instituted processes to reduce future potential seepage and it has been demonstrated that Monitored Natural Attenuation (MNA) by the existing environment will contribute to improvement in some instances. Furthermore, literature reviews, field trials and base line modelling techniques suggest, but are not yet proven, that the use of phyto-technologies can address the soil and groundwater contamination at all South African operations. Subject to the completion of trials and the technology being a proven remediation technique, no reliable estimate can be made for the obligation.
(2) The company has identified a flooding and future pollution risk posed by deep groundwater in the Klerksdorp and Far West Rand gold fields. Various studies have been undertaken by AngloGold Ashanti Limited since 1999. Due to the interconnected nature of mining operations, any proposed solution needs to be a combined one supported by all the mines located in these gold fields. As a result, the Department of Mineral Resources and affected mining companies are involved in the development of a “Regional Mine Closure Strategy”. In view of the limitation of current information for the accurate estimation of a liability, no reliable estimate can be made for the obligation.
   
  Contingent asset
(3) The case of Mr Thembekile Mankayi was heard in the High Court of South Africa in June 2008, and an appeal heard in the Supreme Court of Appeals in 2010. In both instances judgement was awarded in favour of AngloGold Ashanti Limited. A further appeal that was lodged by Mr Mankayi was heard in the Constitutional Court in 2010. Judgement in the Constitutional Court was handed down on 3 March 2011.
   
  Following the judgement, Mr Mankayi’s executor may proceed with his case in the High Court. This will comprise, amongst others, providing evidence showing that Mr Mankayi contracted silicosis as a result of negligent conduct on the part of AngloGold Ashanti.
   
  The company is still studying the details of the Constitutional Court judgement and will defend the case and any subsequent claims on their merits. Should other individuals or groups lodge similar claims, these too would be defended by the company and adjudicated by the Courts on their merits. In view of the limitation of current information for the accurate estimation of a possible liability, no reliable estimate can be made for this possible obligation.
   
(4) As a result of the sale of the interest in the Tau Lekoa Gold Mine during 2010, the company is entitled to receive a royalty on the production of a total 1.5Moz by the Tau Lekoa Gold Mine and in the event that the average monthly rand price of gold exceeds R180,000/kg (subject to inflation adjustment). Where the average monthly rand price of gold does not exceed R180,000/kg (subject to inflation adjustment), the ounces produced in that quarter do not count towards the total 1.5Moz upon which the royalty is payable. The royalty will be determined at 3% of the net revenue (being gross revenue less state royalties) generated by the Tau Lekoa assets. Royalties of R21m were received during the year.
   
  Guarantees
(5) The company has guaranteed all payments and other obligations of AngloGold Ashanti Holdings Finance plc regarding the convertible bonds amounting to R5,446m issued during 2009, with a maturity date of 22 May 2014 and a fixed coupon of 3.5% payable semi-annually. The company's obligations regarding the guarantees will be direct, unconditional and unsubordinated.
(6) The company, together with AngloGold Ashanti Holdings plc and AngloGold Ashanti USA Incorporated, has provided guarantees for all payments and other obligations of the borrowers and the other guarantors under the $1bn four-year syndicated loan facility. The company also guaranteed all payments and other obligations of the wholly owned subsidiaries AngloGold Ashanti Holdings plc, AngloGold Ashanti Australia Limited and AngloGold Ashanti USA Incorporated regarding the $1,150m syndicated loan facility which was repaid and cancelled during April 2010.
(7) The company has guaranteed all payments and other obligations of the wholly owned subsidiary AngloGold Ashanti Holdings plc regarding the $250m term facility which was repaid and cancelled during April 2010.
(8) The company has fully and unconditionally guaranteed all payments and other obligations of AngloGold Ashanti Holdings plc regarding the issued $700m 5.375% rated bonds due 15 April 2020 and the issued $300m 6.5% rated bonds due 15 April 2040.
(9) The company has fully and unconditionally guaranteed on a subordinated basis all payments and other obligations of AngloGold Ashanti Holdings Finance plc regarding the $789m 6% mandatory convertible bonds issued during 2010, with a maturity date of 15 September 2013.
(10) The company has provided sureties in favour of a lender on a gold loan facility with its affiliate Oro Group (Pty) Limited and one of its subsidiaries to a maximum value of R100m (2009: R100m). The suretyship agreements have a termination notice period of 90 days.
(11) The company, together with its wholly owned subsidiary, AngloGold Ashanti Holdings plc, has provided guarantees to several counterparty banks for the hedging commitment of its wholly owned subsidiary Ashanti Treasury Services Limited (ATS).
(12) The company together with its wholly owned subsidiary, AngloGold Ashanti Holdings plc have issued hedging guarantees to several counterparty banks in which they have guaranteed the due performance by the Geita Management Company Limited (GMC) of its obligations under or pursuant to the hedging arrangements entered into by GMC, and to the payment of all money owing or incurred by GMC as and when due.
(13) The company has issued gold delivery guarantees to several counterparty banks in which it guarantees the due performance of its subsidiaries AngloGold USA Trading Company, AngloGold South America Limited and Cerro Vanguardia S.A. under their respective gold hedging agreements.
(14) At 31 December 2010, the group had no open gold hedge contracts.

30

Financial risk management activities

  In the normal course of its operations, the company is exposed to gold price, other commodity price, foreign exchange, interest rate, liquidity, equity price and credit risks. In order to manage these risks, the company may enter into transactions which make use of both on- and off-balance sheet derivatives. The company does not acquire, hold or issue derivatives for speculative purposes. The company has developed a comprehensive risk management process to facilitate, control and monitor these risks. The board has approved and monitors this risk management process, inclusive of documented treasury policies, counterparty limits and controlling and reporting structures.
   
  Managing risk in the company
Risk management activities within the company are the ultimate responsibility of the board of directors. The chief executive officer is responsible to the board of directors for the design, implementation and monitoring of the risk management plan. The newly formed Risk and Information Integrity Committee is responsible for overseeing risk management plans and systems and the Audit and Corporate Governance Committee oversees financial risks which include a review of treasury activities and the company’s counterparties.
   
  The financial risk management objectives of the company are defined as follows:
 
  • safeguarding the company's core earnings stream from its major assets through the effective control and management of gold price risk, other commodity risk, foreign exchange risk and interest rate risk;
  • effective and efficient usage of credit facilities in both the short and long term through the adoption of reliable liquidity management planning and procedures;
  • ensuring that investment and hedging transactions are undertaken with creditworthy counterparties; and
  • ensuring that all contracts and agreements related to risk management activities are co-ordinated, consistent throughout the company and that they comply where necessary with all relevant regulatory and statutory requirements.
  Gold price and foreign exchange risk
Gold price risk arises from the risk of an adverse effect on current or future earnings resulting from fluctuations in the price of gold. The gold market is predominately priced in US dollars which exposes the company to the risk that fluctuations in the SA rand/US dollar exchange rate may also have an adverse effect on current or future earnings. The company is also exposed to certain by-product commodity price risk.
   
  During the year the company had utilised derivatives as part of its hedging of these risks. In order to provide financial exposure to the rising spot price of gold and the potential for enhanced cash-flow generation the company completed its final tranche of the hedge buy-back programme and settled all forward gold and foreign exchange contracts that had been used by the company in the past to manage those risks. At year-end, there were no net forward sales contracts (2009: 1,189kg), net call options sold (2009: 44,742kg) and net put options sold (2009: 15,381kg) outstanding.
   
  Cash flow hedges
The company's cash flow hedges consist of commodity forward contracts that are used to protect against exposures to variability in future commodity cash flows. The amounts and timing of future cash flows are projected for each portfolio of financial assets and liabilities on the basis of their contractual terms and other relevant factors, including estimates of prepayments and defaults. The contractual cash flows across all portfolios over time form the basis for identifying gains and losses on the effective portions of derivatives designated as cash flow hedges of forecast transactions. Gains and losses are initially recognised directly in other comprehensive income and are transferred to earnings as gold income when the forecast transactions affect the income statement.
   
  The company does not have any cash flow hedge contracts relating to product sales as at 31 December 2010.
   
  The gains and losses on ineffective portions of such derivatives are recognised in the income statement. During the year to 31 December 2010, a loss of nil (2009: R22m) was recognised on non-hedge derivatives and other commodity contracts in the income statement due to hedge ineffectiveness.
   
  Non-hedge derivatives
Loss on non-hedge derivatives and other commodity contracts is summarised as follows:
  Figures in million20102009
   SA Rands
      Loss on hedge buy-back costs(7,631)
  (Loss) gain on realised non-hedge derivatives and other commodity contracts(932)58
  Gain (loss) on unrealised non-hedge derivatives and other commodity contracts7,080(4,148)
  Loss on non-hedge derivatives and other commodity contracts per the income statement(1,483)(4,090)
       
  The loss on non-hedge derivatives and other commodity contracts was R1,483m (2009: R4,090m). This was as a result of the accelerated hedge book settlement, normal realised losses on non-hedge derivatives and the revaluation of non-hedge derivatives resulting from changes in the prevailing spot gold price, exchange rates, interest rates, volatilities and credit risk compared to the previous year. The realised loss as a result of accelerated settlement of non-hedge derivatives was R7,631m (2009: nil) and was due to the hedge book elimination that was effected during the current year.
   
  Net open hedge position as at 31 December 2010
As at 31 December 2010, the company had no outstanding commitments against future production as a result of the elimination of the hedge book. At 31 December 2009, the marked-to-market value of all derivatives, irrespective of accounting designation, making up the hedge position was negative R6.98bn based on a gold price of $1,102 per ounce, an exchange rate of $1 = R7.4350 and the market interest rates and volatilities prevailing at that date.
   
  The table below reflects the hedge position as at 31 December 2010.
   
  Summary: All open contracts in the company’s commodity hedge position as at 31 December 2010
  Year 20102009
  US Dollar/Gold   
      Forward contracts   
  Amount (kg) 2,433 (1)
  $/oz$532 (1)
  Put options sold   
  Amount (kg) 14,137
  $/oz$665
  Call options sold   
  Amount (kg) 43,498
  $/oz$522
 
(1) Represents a net short gold position and net short US dollars position, resulting from both forward sales and purchases for the period.
  Year 2010 2009
  SA Rand/Gold    
      Forward contracts    
  Amount (kg) (1,244) (2)
  R/kg R232,225 (2)
  Put options sold    
  Amount (kg) 1,244
  R/kg R240,326
  Call options sold    
  Amount (kg) 1,244
  R/kg R262,832
  Total net gold    
  Delta (kg) (41,235) (3)
  Delta (oz) (1,325,722) (3)
  The open delta hedge position of the company at 31 December 2010 was nil (31 December 2009: 1.33Moz or 41t).
 
(2) Represents a net long gold position and net short US dollars/rands position, resulting from both forward sales and purchases for the period.
(3) The delta of the hedge position indicated above, is the equivalent gold position that would have the same marked-to-market sensitivity for a small change in the gold price. This is calculated using the Black-Scholes option formula with the ruling market prices, interest rates and volatilities as at 31 December 2009.
  As at 31 December 2010, the company had no open forward exchange or option contracts in its currency and gold hedge position.
   
  The mix of hedging instruments, the volume of production hedged and the tenor of the hedge book is continually reviewed in the light of changes in operational forecasts, market conditions and the company's hedging policy.
   
  Forward sales contracts require the future delivery of the underlying at a specified price.
   
  A put option gives the put buyer the right, but not the obligation, to sell the underlying to the put seller at a predetermined price on a predetermined date.
   
  A call option gives the call buyer the right, but not the obligation, to buy the underlying from the call seller at a predetermined price on a predetermined date.
   
  Interest rate and liquidity risk
Refer note 35 in the group financial statements.
   
  The following are the contractual maturities of financial liabilities, including interest payments.
   
  Non-derivative financial liabilities
    Within one year
Effective
rate
Between one
and two years
Effective
rate
Between two
and five years
Effective
rate
After five years
Effective
rate
    Million%Million%Million%Million%
  2010ZAR        
      Financial guarantees (4) 100  16,5673.76,5705.7
  Borrowings 7457.3289.8999.83149.8
  Trade and other payables    3,969    
      Within one year
Effective
rate
Between one
and two years
Effective
rate
Between two
and five years
Effective
rate
After five years
Effective
rate
      Million % Million % Million % Million %
  2009 ZAR                
      Financial guarantees (4)   10,409 1.6   5,446 3.5 100  
  Borrowings   26 9.8 26 9.8 91 9.8 350 9.8
  Trade and other payables   1,420        
 
(4) Not included in the statement of financial position.
  Derivative financial assets and (liabilities)
At 31 December 2010, the company had no open hedge and non-hedge contracts as a result of the hedge book elimination. The following were the undiscounted forecast principal cash flows arising from all derivative contracts included in the statement of financial position (cash flow hedges and non-hedges) as at 31 December 2009 based on scheduled maturity dates:
  Figures in million Within
one year
Between
one and
two years
Between
two and
five years
After
five years
Total
  SA Rands      
     At 31 December 2009      
  Cash inflows from assets 65821793968
  Cash outflows from liabilities (2,172)(2,694)(3,746)(8,612)
  Net cash outflows (1,514)(2,477)(3,653)(7,644)
             
  Credit risk
Refer note 35 in the group financial statements.
   
  The combined maximum credit risk exposure of the company is as follows:
  Figures in million20102009
   SA Rands
      Forward sale commodity contracts 944
  Total derivatives944
  Other investments (note 12)1414
  Other non-current assets47
  Trade and other receivables413302
  Cash restricted for use98
  Cash and cash equivalents (note 18)1,000 1,720
  Total financial assets1,4402,995
  Financial guarantees23,23715,955
  Hedging guarantees9,256
  Total24,67728,206
       
 

The company has trade and other receivables that are past due totalling R58m (2009: R153m) and an impairment totalling R44m (2009: R67m). Trade and other receivables arise mainly due to intergroup transactions. The principal receivables continue to be in a sound financial position. No other financial assets are past due but not impaired.

Fair value of financial instruments

The estimated fair values of financial instruments are determined at discrete points in time based on relevant market information. The estimated fair value of the company’s financial instruments as at 31 December are as follows:

Type of instrument
 
 
 
 
   CarryingFairCarryingFair
  Figures in millionamountvalueamountvalue
  SA Rands20102009
      Financial assets    
  Other investments (note 12)44431614
  Other non-current assets4478
  Trade and other receivables413413302302
  Cash restricted for use9988
  Cash and cash equivalents (note 18)1,0001,0001,7201,720
  Derivatives944944
  Financial liabilities    
  Borrowings (note 21)960960258258
  Trade and other payables3,9693,9691,7371,737
  Derivatives 7,948 7,948
  The amounts in the tables above do not necessarily agree with the totals in the notes as only financial assets and liabilities are shown.
   
  The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
   
  Cash restricted for use, cash and cash equivalents and trade and other payables
The carrying amounts approximate fair value because of the short-term duration of these instruments
   
  Trade and other receivables
The fair value of the non-current portion of trade and other receivables has been calculated using market interest rates.
   
  Investments and other non-current assets
Listed equity investments classified as available-for-sale are carried at fair value while fixed income investments and other non-current assets are carried at amortised cost. The fair value of fixed income investments and other non-current assets has been calculated using market interest rates. The unlisted equity investment is carried at cost. There is no active market for the unlisted equity investment and fair value cannot be reliably measured.
   
  Borrowings
The interest rate on the borrowings is reset on a short-term floating rate basis, and accordingly the carrying amount is considered to approximate fair value.
   
  Derivatives
The fair value of derivatives are estimated based on ruling market prices, volatilities, interest rates and credit risk as at 31 December and includes all derivatives carried in the statement of financial position.
   
  The company uses the Black-Scholes option pricing formula to value option contracts. One of the inputs into the model is the level of volatility. These volatility levels are themselves not exchange traded. The company uses volatility inputs supplied by leading market participants (international banks).
   
  There are no open hedge positions as a result of the hedge book elimination during 2010.
   
  Derivative assets (liabilities) comprise the following:
  Figures in millionCash flow
hedge
accounted
Assets
Non-
hedge
accounted
TotalCash flow
hedge
accounted
Liabilities
Non-
hedge
accounted
Total
  SA Rands20092009
      Commodity option contracts(6,127)(6,127)
  Forward sale commodity contracts944944(276)(1,545)(1,821)
  Total derivatives944944(276)(7,672)(7,948)
               
  At 31 December 2010, the company had no open derivative positions in the hedge book. The impact of credit risk adjustment totalled R393m at 31 December 2009.
   
  The company uses the following hierarchy for determining and disclosing the fair value of financial instruments:
   
  Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
   
  Level 2: inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); and
   
  Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
   
  The following table sets out the company's financial assets and liabilities measured at fair value by level within the fair value hierachy as at 31 December.
   
  Type of instrument
  Figures in millionLevel 1Level 2Level 3TotalLevel 1Level 2Level 3Total
  SA Rands2010 2009 
      Assets measured at fair value         
  Financial assets at fair value through profit or loss         
  Forward sale commodity contracts – non-hedged 944944
  Available-for-sale financial assets          
  Equity securities2929
  Liabilities measured at fair value        
  Financial liabilities at fair value through profit or loss        
  Commodity option contracts         
  – non-hedged6,1276,127
  Forward sale commodity contracts – non-hedged 1,5451,545
  Cash flow hedges        
  Forward sale commodity contracts – cash flow hedged 276 276
   
  The amounts in the tables above do not necessarily agree with the totals in the notes as only financial assets and liabilities are shown.
   
  Sensitivity analysis
Derivatives
A principal part of the company's management of risk is to monitor the sensitivity of derivative positions in the hedge book to changes in the underlying factors, viz. commodity price, foreign exchange rate and interest rates under varying scenarios.
   
  The following table discloses the approximate sensitivities of the US dollar’s marked-to-market value of the hedge book to key underlying factors at 31 December 2009 (actual changes in the timing and amount of the following variables may differ from the assumed changes below). There are no open hedge positions as a result of the hedge book elimination during 2010.
   Change in
underlying
factor (+)
Cash flow
hedge
accounted
million
Non-hedge
accounted
million
Total
change in
fair value
million
  SA Rands2009
   Currency (R/$)Spot(+R1)1212
  Gold price ($/oz)Spot(+$250)(93)(2,492)(2,585)
  ZAR interest rate (%)IR(+1.5%)11
    Change in
underlying
factor (-)
Cash flow
hedge
accounted
million
Non-hedge
accounted
million
Total
change in
fair value
million
  SA Rands 2009
  Currency (R/$) Spot(-R1) (42) (42)
  Gold price ($/oz) Spot(-$250) 93 2,170 2,263
  ZAR interest rate (%) IR(-1.5%) (1) (1)
           
  IR represents interest rate.
   
  Interest rate risk on other financial assets and liabilities (excluding derivatives)
   
  Refer note 35 in the group financial statements.

31

Capital management

  Capital is managed on a group basis only and not on a company basis. Refer to note 36 in the group financial statements
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