Description: The Bibiani mine was restarted in 1998 as an open-pit mine with a CIL plant. The mine had previously operated
between 1903 and 1968 as an underground operation with minor surface quarrying activities. In addition to the open-pit ores,
resources at Bibiani include old tailings dumps and underground mineral potential which is presently being explored and
evaluated.
Location: Bibiani is located in the Western Region of Ghana, 90 kilometers west of Kumasi.
Geology: The Bibiani gold deposit lies within Birimian metasediments and related rocks which occur in the Proterozoic Sefwi
Belt of southern Ghana. Gold and gold-bearing sulphide mineralization occurs in quartzfilled shear zones and in altered rocks
adjacent to those shears. The full strike of the Bibiani structure is at least 4 kilometers. For metallurgical classification there are
three main ore types at Bibiani: primary, transition and oxide. Further lithological classification gives four ore types: quartz
(generally high grade), stockwork (medium-high grade), phyllites and porphyry (both low grade).
Attributable gold production at Yatela decreased by 19 percent to 87,000 ounces in 2003 compared to 107,000 ounces in
2002 due to a reduction in recovered grade and lower tonnage stacked. Tonnage was negatively affected in the second half of
the year by bottlenecks in the new crushing circuit. Following excessive wear and high maintenance costs on the mineral sizer
caused by hard ore, the mineral sizer was replaced in June 2003 by a primary jaw crusher and secondary cone crusher. Total
cash costs increased by 34 percent to $235 per ounce, largely as a result of the lower grade, higher landed diesel fuel prices,
increased mining contractor costs and the impact of the weaker United States dollar on expenditure expressed in dollar terms.
Growth prospects: An investigation into the potential for sulphide ore below the existing Alamoutala deposit is ongoing.
Outlook: In 2005, Yatela is expected to produce 107,000 ounces, an increase of 10 percent, at a total cash cost of $261 per
ounce. Capital expenditure attributable to AngloGold Ashanti is expected to remain constant at $3 million, largely for leach pad
construction.
•
Morila (attributable 40 percent)
Description: AngloGold Ashanti and Randgold Resources Limited each hold an effective 40 percent interest in the Morila Joint
Venture, with the other 20 percent held by the Malian government. Under the joint venture agreement, AngloGold Ashanti is
the operator of the mine.
Location: This mine is situated some 180 kilometers by road, south-east of Bamako, the capital city of Mali (600 kilometers
south-east of Sadiola).
Geology: Morila is a mesothermal flat lying shear-zone hosted deposit, apart from steepening to the east against steep
faulting. The deposit lies within a sequence Birimian metal-arkoses of amphibolite metamorphic grade. Mineralization is
characterized by silica-feldspar alteration and sulphide mineralization consists of arsenopyrite, pyrrhotite, pyrite and
chalocopyrite.
Operating and production data for Morila
Corporate activities
Activities provided in the corporate area fall into three categories. First, support is provided to the executive officers in
managing AngloGold Ashanti as a whole. Second, certain activities are managed centrally, including strategic and business
planning, marketing, corporate finance, treasury, exploration, technology and innovation, corporate secretarial and corporate
affairs. Third, certain specialized services are directed from the center although they are managed by operations. These
include mining, engineering, metallurgy, mineral resource management, safety and health, the environment and human
resources.
AngloGold Ashanti has investments in numerous principal subsidiaries and joint venture interests, see "Item 19.: Exhibits" for
details.
4D.
Property, plant and equipment
For a discussion on AngloGold Ashanti’s mining properties, plant and equipment, see “Item 4B.: Business Overview”.
With operations in several countries on several continents, AngloGold Ashanti is exposed to a number of factors that could
impact on its profitability, including exchange rate fluctuations, inflation and other risks relating to these specific countries.
These factors are inherent in conducting mining operations on a global basis, and AngloGold Ashanti applies measures, such
as hedging instruments, intended to reduce its exposure to these factors.
In conducting mining operations, AngloGold Ashanti recognizes the inherent risks and uncertainties of the industry, and the
wasting nature of assets. The costs and expenses relating to the production of gold are either expensed or capitalized to
mining assets. Recoverability of capitalized amounts is reviewed on a regular basis.
Effect of exchange rate fluctuations
Currently, the majority of AngloGold Ashanti’s revenues are generated in South Africa, and to a lesser extent in Brazil,
Argentina and Australia, and most of its production costs, therefore, are denominated in local currencies, such as the South
African rand, the Brazilian real, the Argentinean peso and the Australian dollar. In 2004, AngloGold Ashanti derived 75 percent
(68 percent including joint venture arrangements) of its revenues from these countries and incurred 74 percent (68 percent
including joint venture arrangements) of its production costs in these local currencies. In 2004, the weakening of the US dollar
against these local currencies accounted for nearly $28 per ounce, or 52 percent of the total increase in total cash costs per
ounce from 2003. As the price of gold is denominated in US dollars and AngloGold Ashanti realizes the majority of its
revenues in US dollars, devaluation of these local currencies against the US dollar improves AngloGold Ashanti’s profitability in
the short-term. Mainly as a result of its hedging instruments, a small portion of AngloGold Ashanti’s revenues are denominated
in South African rand and Australian dollar, which partially offsets the effect of the US dollar’s strength or weakness on
AngloGold Ashanti’s profitability. Based upon average rates during the respective years, the rand and the real strengthened by
approximately 15 percent and 5 percent respectively, against the US dollar in 2004 compared to 2003. The Argentinean peso
traded freely against the US dollar from January 1, 2002 and had devalued to 2.9:1 against the US dollar by June 30, 2005.
The Australian dollar, based on the average rates during the respective years, strengthened by 12 percent against the
US dollar in 2004 compared to 2003.
To fund local operations, AngloGold Ashanti holds funds in local currencies. The US dollar value of these currencies may be
affected by exchange rate fluctuations and, as a result, AngloGold Ashanti’s cash and cash equivalents reported in US dollars
could change. At December 31, 2004, approximately 48 percent of AngloGold Ashanti’s cash and cash equivalents were held
in local currencies.
Certain exchange controls are currently in force in South Africa. Although the exchange rate of the rand is primarily market
determined, its value at any time may not be considered a true reflection of the underlying value of the rand while exchange
controls exist. The government has indicated its intention to lift exchange controls over time. When this occurs, rand
exchange rates will be more closely tied to market forces. It is not possible to predict when this will occur or the future value of
the rand. For a detailed discussion of these exchange controls, see “Item 10D.: Exchange controls”.
AngloGold Ashanti’s operations have not been materially adversely affected by inflation in recent years. However, AngloGold
Ashanti is unable to control the prices at which it sells its gold (except to the limited extent that it utilizes commodity
instruments) and it is possible, therefore, that if there is to be significant inflation in South Africa, and to a lesser extent in
Brazil, Argentina and Australia, without a concurrent devaluation of the local currency or an increase in the price of gold, there
could be a material adverse effect upon AngloGold Ashanti’s results and financial condition.
AngloGold Ashanti has utilized commodity instruments to protect the selling price of some of its anticipated gold production.
Although the use of these instruments may protect a company against low gold prices, it will only do so for a limited period and
only to the extent the hedge book can be sustained. The use of such instruments may also prevent full participation in
subsequent increases in the market price for gold with respect to covered production. During 2003, AngloGold Ashanti took
the decision to lower its mandate for hedging from 50 percent to 30 percent of the next five years of production spread over ten
years. In addition, AngloGold Ashanti in 2004, restructured its hedge book. The effect of this was to increase the proportion of
the company’s anticipated 6.5 million ounces of gold production that is exposed to the spot price to 90 percent in 2005 and
83 percent in 2006 and to improve the value of remaining forward sales contracts in future years. For a discussion of
AngloGold Ashanti’s commodity instruments, see “Item 11.: Quantitative and qualitative disclosures about market risk”.
Acquisitions and dispositions
The global gold mining industry has experienced active consolidation and rationalization activities in recent years. Accordingly,
AngloGold Ashanti has been, and expects to continue to be, involved in a number of acquisitions and dispositions as part of
this global trend and to identify value-adding business combination and acquisition opportunities.
In November 2001, AngloGold announced the sale of its Free State operations in South Africa effective January 1, 2002. The
sale closed in April 2002. AngloGold also announced the sale of its Normandy shares in January 2002 after its offer to
purchase all of the outstanding share capital of Normandy Mining Limited in Australia expired without it obtaining control of
Normandy.
During July 2002, AngloGold acquired an additional 46.25 percent interest in the Cerro Vanguardia mine in Argentina doubling
its interest in this operation to 92.5 percent. The transaction was effective from July 1, 2002. With effect from October 1, 2002
AngloGold disposed of its wholly-owned subsidiary, Stone and Allied Industries, to a joint venture of that company’s existing
management and a group of black entrepreneurs.
On May 23, 2003, AngloGold announced that it had signed an agreement to sell its wholly-owned Amapari Project to
Mineração Pedra Branca do Amapari. The effective date of the transaction was May 19, 2003. The Amapari project is located
in the State of Amapá, North Brazil. Since acquiring the property as part of the Minorco transaction, the company had sought
to prove up additional reserve ounces in order to get it to a size and life that would justify the management resources needed
to run it effectively. This was not achieved and AngloGold, on receiving an offer from a purchaser who could constructively
turn this orebody to account, agreed to sell.
On June 6, 2003, AngloGold announced that it had finalized the sale of its 49 percent stake in the Gawler Craton Joint Venture,
including the Tunkillia project located in South Australia, to Helix Resources Limited. Helix’s proposed acquisition of
AngloGold’s rights to the Tarcoola Project, 60 kilometers to the south, was excluded from the final agreement. This resulted in
a restructure of the original agreement terms, as announced on April 8, 2003.
On July 8, 2003 AngloGold disposed of its entire investment of 8,348,600 shares held in East African Gold Mines Limited and
in the second half of 2003 AngloGold disposed of 952,481 shares in Randgold Resources Limited.
On September 18, 2003 AngloGold and Gold Fields Limited jointly announced that agreement had been reached on the sale
by Gold Fields Limited of a portion of the Driefontein mining area in South Africa to AngloGold.
On July 1, 2004, AngloGold Ashanti announced that it had entered into an agreement with Trans-Siberian Gold plc (TSG) for
the acquisition of a 29.9 percent stake in the company through an equity investment of approximately £18 million ($32 million)
in two subscriptions for ordinary shares. The first tranche of ordinary shares of 17.5 percent was acquired during July 2004.
TSG is listed on the London Stock Exchange’s Alternative Investment Market (AIM). This first move into Russia allows
AngloGold Ashanti the opportunity of establishing a meaningful interest in a company with Russian assets and activities,
thereby allowing AngloGold Ashanti to gain exposure to, and familiarity with, the operating and business environment in
Russia, as well as to being able to establish a business within this prospective New Frontier. On December 23, 2004, it was
announced that the second subscription had been delayed to April 15, 2005 while on April 18, 2005, the second subscription
date was extended by a further two weeks to April 29, 2005. On April 28, 2005, the company announced that agreement had
been reached with TSG on revised terms for the second subscription of shares in TSG, and a revised subscription price of
£1.30 per share, compared to £1.494 per share agreed between the parties on June 30, 2004. The revised terms of the
subscription was approved by TSG shareholders on May 27, 2005 and AngloGold Ashanti’s 17.5 percent equity interest in
TSG increased to 29.9 percent on May 31, 2005, the date on which the second subscription was completed.
On August 5, 2004, AngloGold Ashanti announced the sale of its Union Reefs assets to the Burnside Joint Venture, comprising
subsidiaries of Northern Gold NL (50 percent) and Harmony Gold Mining Company Limited (50 percent), for a total
consideration of A$4 million ($2 million). The Burnside Joint Venture is responsible for all future obligations associated with the
assets, including remaining site rehabilitation and reclamation.
In 2004, Queenstake approached the Jerritt Canyon Joint Venture partners, AngloGold and Meridian Gold, about the possibility
of monetizing all or at least a majority of the $6 million in deferred payments and $4 million in future royalties, payable in the
concluded sale of AngloGold’s interest in the Jerritt Canyon Joint Venture to Queenstake Resources USA Inc., effective
June 30, 2003. Based on an agreement reached between the parties, AngloGold Ashanti was paid on August 25, 2004
approximately $7 million for its portion of the deferred payments and future royalties, thereby monetizing all outstanding
obligations, except for a minor potential royalty interest that AngloGold Ashanti retained.