Embed Size (px)
Citation preview
1
Q3AngloGold Ashanti Results for the third quarter ended 30 September 2010
Q3
Building’s safety procedure
In case of an emergency... A siren will sound and information
will be broadcast over the publicwill be broadcast over the publicaddress system.
Move quickly to the nearest exitpoints, which are on both sides ofthe auditorium and at the backright hand corner.
Pl th t th k
2
Please gather at the open car parkbehind Turbine Hall where safetywardens will advise of anyadditional procedures.
2
Overview – Mark Cutifani, CEO
Agenda
Tropicana – Graham Ehm, EVP Australia
South Africa – Robbie Lazare, EVP South Africa
Exploration - Tony O’Neill, EVP Business Development
3
Financials – Srinivasan Venkatakrishnan, CFO
Conclusion – Mark Cutifani, CEO
Disclaimer
Certain statements made in this communication, including, without limitation, those concerning the economic outlook forthe gold mining industry, expectations regarding gold prices, production, cash costs and other operating results, growthprospects and outlook of AngloGold Ashanti’s operations, individually or in the aggregate, including the completion andcommencement of commercial operations of certain of AngloGold Ashanti’s exploration and production projects, thecompletion of announced mergers and acquisitions transactions, AngloGold Ashanti’s liquidity and capital resources, andexpenditure and the outcome and consequences of any litigation proceedings and AngloGold Ashanti’s Project Oneperformance targets , contain certain forward-looking statements regarding AngloGold Ashanti’s operations, economic
f d fi i l diti Alth h A l G ld A h ti b li th t th t ti fl t d i h f dperformance and financial condition. Although AngloGold Ashanti believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct.Accordingly, results could differ materially from those set out in the forward-looking statements as a result of, among otherfactors, changes in economic and market conditions, success of business and operating initiatives, changes in theregulatory environment and other government actions including environmental approvals and actions, fluctuations in goldprices and exchange rates, and business and operational risk management. For a discussion of certain of these factors,refer to AngloGold Ashanti's annual report for the year ended 31 December 2009, which was distributed to shareholderson 30 March 2010. The company’s annual report on Form 20-F, was filed with the Securities and Exchange Commissionin the United States on April 19, 2010 and as amended on May 18, 2010. AngloGold Ashanti undertakes no obligation toupdate publicly or release any revisions to these forward-looking statements to reflect events or circumstances aftertoday’s date or to reflect the occurrence of unanticipated events. All subsequent written or oral forward-lookingt t t tt ib t bl t A l G ld A h ti ti it b h lf lifi d b th ti t t t
4
statements attributable to AngloGold Ashanti or any person acting on its behalf are qualified by the cautionary statementsherein.
This communication contains certain “Non-GAAP” financial measures. AngloGold Ashanti utilises certain Non-GAAPperformance measures and ratios in managing its business. Non-GAAP financial measures should be viewed in additionto, and not as an alternative for, the reported operating results or cash flow from operations or any other measures ofperformance prepared in accordance with IFRS. In addition, the presentation of these measures may not be comparableto similarly titled measures other companies may use.
AngloGold Ashanti posts information that is important to investors on the main page of its website atwww.anglogoldashanti.com and under the “Investors” tab on the main page. This information is updatedregularly. Investors should visit this website to obtain important information about AngloGold Ashanti.
3
Third quarter overview
A strong operational quarter…
Adjusted headline earnings* more than doubled to $303m.
Production of 1.162Moz at a total cash cost of $643/oz, ahead of guidance.
Capital raising completed; proceeds earmarked for hedge elimination.
South Africa shows strong recovery in production volumes as interventions gain traction.
Geita continues turnaround progress, delivering 15% cost reduction to $705/oz.
CC&V continues on strong recovery path.
Exploration program yields positive results in Tropicana belt, Baffin Island and Egypt.
Uranium production 389 000lbs on the back of continued improvement in recoveries; inventories of 1 39Mlbs
5...with hedge elimination boosting cash flow potential.
Uranium production 389,000lbs on the back of continued improvement in recoveries; inventories of 1.39Mlbs.
Post quarter-end…
Hedge book eliminated Oct. 7 at average $1,300/oz; gives full exposure to gold price, widens margins.
Tropicana feasibility study completed; AngloGold Ashanti’s board approves project development.
*excluding hedge buy-back costs
Safety performanceProgress being made to mitigate first-half challenges…
Three fatalities recorded in South Africa, one in Mali.
Group fatality injury frequency rateper million hours worked
0.21
All accident frequency rate 6.4% lower than 2009.
South Africa posted 1.6m fatality free shifts.
Project ONE rollout in South Africa accelerates, with emphasis on safety improvements.
All accident frequency rateper million hours worked
0.09 0.090.11
2007 2008 2009 2010YTD
6...underlying trends remain positive.
Focus on incidents related to equipment installation.
Long-term improvement in safety trend intact.
27.85
22.95
18.56 17.38
2007 2008 2009 2010YTD
4
Operational overview: Americas
ProductionQ3 2010, koz
Q3 production largely flat at 218,000oz at a total cash cost of $433/oz.
Operational cash flow $339m year-to-date.
Another strong production and cost performance…
Cerro Vanguardia continues as lowest-cost producer at $374/oz; underground feasibility scheduled for completion by year-end.
Cripple Creek & Victor output down to 56,000oz as planned after strong first-half. MLE Project yields first gold in January, a year ahead of schedule. Feasibility for MLE2/high-grade mill under way.
Operational free cash flowYTD 2010, contribution to group $m
7
Brasil Mineração output up 19% to 93,000oz at $415/oz on release of plant lock-up.
Córrego do Sítio Project on schedule.
...with growth projects running to schedule.
Operational overview: Continental AfricaGeita’s progress points to strong regional potential…
Production climbs to 373,000oz at a total cash cost of $725/oz.
Operational cash flow $318m year to date32%
ProductionQ3 2010, koz
Operational cash flow $318m year-to-date.
Navachab production up 28% on better recovered grade after DMS commissioning.
Geita’s strong trend continues as grade improves – production up 3% to 93,000oz, while total cash costs fall 15% to $705/oz.
Iduapriem production continues rebound, up 14% as tonnages recover after Q1 stoppage.
32%
Operational free cash flowYTD 2010, contribution to group $m
8…while focus is now on realising similar gains at Obuasi.
% g Q pp g
Obuasi continues to present challenges with respect to underground development; new task team appointed to increase pace for turnaround project.
5
Operational overview: Australasia
Q3 production climbs to 93,000oz at a total cash cost of $1,064/oz (includes $289/oz non-cash deferred stripping charge and ore stockpiles).
An operating region with a long-term future…
ProductionQ3 2010, koz
Output increase arises from greater proportion of higher-grade underground ore milled.
Cash flow increases year-to-date to $91m.
Project ONE rollout advanced; mining rates and productivity improving.
Long-term underground potential continues to
Operational free cash flowYTD 2010, contribution to group $m
9
g g pdevelop; feasibility study on underground sub-level cave operation planned for 2011.
Tropicana feasibility study completed; AngloGold Ashanti approves development.
...as greenfield and brownfield exploration yields more ounces.
TropicanaTropicana has developed into a tier-one asset…
Project metrics (100% basis)
Capital expenditure A$725m – A$775m (US$745-US$765 million*)
Production: 470,000oz/y – 490,000oz/y (1st three years). 330,000oz/y – 350,000oz/y (LOM average).
Cash costs*: $568/oz - $588/oz (1st three years average).$696/oz - $715/oz (LOM average).
Reserve: 3.4Moz (proved and probable @ 2.2g/t).
10...with potential continuing at depth and along strike.
All figures on 100% basis: * US$ amounts calculated at AUD/USD of 0.98
First production Q4, 2013.
Mine life 10 years; likely to increase with addition of Boston Shakes, Havana Deeps and other deposits.
6
http://www.corpcam.com/AngloGold/Tropicana_Oct2010_250kb.wmv
Please click below for Tropicana JV video(note that the video has no sound)
1111
Q3 production climbs to 478,000oz at a total cash cost of $594/oz.
Top operational cash flow contributor at $377m
Operational overview: South Africa
Operational improvement interventions gaining good traction…
ProductionQ3 2010, koz
Top operational cash flow contributor at $377m year-to-date.
Project ONE rollout out across operations; productivity up 13%.
Moab Khotsong production up 19% as improved safety performance boosts volumes.
TauTona production up 15% on higher yields.
Operational free cash flowYTD 2010, contribution to group $m
Surface operation production up 33% on lift from resin recoveries and Kopanang gold plant.
Savuka infrastructure on care-and-maintenance; ore body will now be accessed from Mponeng.
12…resulting in strong cash flow generation.
7
South Africa strategy
In February, we set our sites on three horizons…
Horizon Two Horizon Three1 Horizon One
Engage and fix
2
Optimise Design Future
3
Design new organisation
Value stream redesign
Optimise assets Asset integration
Technology platform roadmap
Socio-economic development plan
Engage with stakeholders
Fix production and costs
Address safety stoppages
Horizon Three
ving
s Horizon Two
13...to secure AngloGold Ashanti’s long-term future in the industry.
Cos
t sa
Time to financial realisation
Horizon One
Horizon One – Key focus areasWe focused on doing the basics right…
Horizon One
1 Horizon One
Engage and fix
Stabilise operations
& grow
Engage with stakeholders
Fix production and costs
Address safety stoppages
Development meters
Costs control
Stope face advance
14…to build the foundation for a sustained turnaround.
& grow cash flow.
Development meters
Backlog vamping
Face length availability
8
South Africa – Operational gainsFocusing on getting the basics right…
Backlog vampingkg
Focus on vamping has yielded results that can be sustained over a protracted period.
394.8 401.3
522.8
599.8
Managers are measured on their success in reclaiming gold from old mining areas.
The downward trend in stope-face advance has been reversed by getting basics right.
Focusing on seamless resourcing, specifically for the most productive 20% of work crews, is yielding early results.
Stope face advanceMetres
8.0
*quarterly averages
261.8
2008* 2009* 2010 Q1 2010 Q2 2010 Q3
15...is yielding early results in producing areas.
Project ONE scheduling and planning attributes lend themselves to improving stope-face advance.
6.6
6.8
7.0
7.2
7.4
7.6
7.8
2007 2008 2009 2010 YTD
The early focus on improving flexibility and controlling costs…
Development metersMetres (‘000)
Development has been stabilized at a higher level.
5
6
7
8
South Africa – Operational gains
Excluding project metres
Mechanized techniques used in project areas now being employed in some conventional production areas.
All operations besides Kopanang are ahead of budget on development.
P d ti i i t t i t lli
ORD SIBC WC Waste WC Reef Planned
0
1
2
3
4
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep Oct
Nov
Dec
2009 2010
Total cash costR/kg
16...is paying dividends.
Production gains important in controlling unit costs.
Costs in South Africa now under control.
R/kg
151,186
135,419139,350
Q1 2010 Q2 2010 Q3 2010(Incl. labour increase/winter power tariffs)
9
South Africa – Project ONE case studyThe impact of Project ONE has been felt in the plant…Mponeng – Leach cyanide concentration South Africa – Mponeng – Daily stoping m2 – 2010
1,000
1,200
1,400
1,600
200
250
South Africa – Daily cyanide consumption (g/t)
April Jun Jul Sep Oct NovMay
400
600
800
200
0
Project ONE rolled out across all South Africa operations.
April May Jun Jul Aug Oct
150
100
50
2010
450
500
17…and has seen a promising start in the mines.
p
Early results encouraging in underground mining areas.
Project ONE team support to ensure improvements are sustained.
May Jun Jul Aug Sep Oct
150
200
250
300
350
400
450
2010
South Africa – The results so farOur operating interventions result in real benefits…
Gold production and cash flowKg and Rand
14 85914000
16000
1200
1400
Gol
d pr
oduc
tion C
ash flow
13,91914,859
11,949
4000
6000
8000
10000
12000
14000
400
600
800
1000
1200
18...and will be made sustainable with Project ONE design.
0
2000
4000
Q1 2010 Q2 2010 Q3 2010
0
200
Production Cash flow
10
Exploration pipelineWe’re moving our key prospects through the pipeline...
Pathway to value – Concept to resource definition
Create the value platform Crystallise the value
Havana DeepsBoston Shaker
Tumbleweed, Black Dragon, Dragonfly Tropicana Region
La Colosa Regional, Salvajina, Quebradona, Rio Dulce
Vulu, Tango
Malrok, Kanosak
L Mb li
Mase / Kele JV
Baffin Island
Ndj l
Superior JV
New Georgia JVSolomon Islands
Colombia Regional
HutiteHodineEgypt
Me angGabon Regional
Arctic Canada
19...to add ounce to inventory and ultimately, to the production profile.
Early-stage exploration Mid-stage exploration Late-stage Exploration
Pre
feasibility study
Resource Definition/ Conceptual studies
Drill Testing Drill Target Definition
Target
GenerationProject
Generation
4 – 5 yrs 3 - 4 yrs 1 - 2 yrs2 - 3 yrs
LaMbouliNdjoleMevangGabon Regional
Exploration focus – Australia and South East Asia We have the 600km Tropicana belt nailed down…
Dominant 24,000km2 position in Tropicana belt along 600km strike. Strong initial results at Havana Deeps includes 13m @ 6.11g/t from 417m; at Boston Shaker 22m @ 4.38g/t from 247m.
Saxby JV in Queensland shows early promise
Applied for 13,780km2 of copper and gold mineralisation south of Telfer.
Solomon Island position of 1,900km2 across West Georgia and Vanguna islands, targeting epithermal and copper-gold porphry mineralisation; promising early results include [email protected]/t true width and 3m @ 10.2g/t trench.
20
Hutite deposit in Egypt returns encouraging gold showings from pre-WWII mine site.
Gabon exploration team has collected 15,000 soil samples and has commenced drilling at Lamboumi Central project.
...now looking for new frontiers in Australia and Solomon Islands.
11
Exploration focus – Africa and Americas Colombia is the cornerstone of our Americas effort…
Greenfields exploration drilling increased 19% to 98,000m during the quarter., g q
La Colosa drilling resumed following hiatus.
La Colosa initial drilling returns intercepts of 74m@ 1.9g/t and [email protected]/t. in Hornfels-style mineralisation. Further investigation underway.
Kanosak in Baffin Island returned promising grades, including:
– 9m @ 2.26g/t Au in the upper strata.
21...with interesting initial results from the Arctic.
– 1m @ 22.5g/t Au a vein in the deeper layer assaying.
Financial results for the quarter Production and costs ahead of guidance...
Gold production up 3% to 1.162Moz; 1% ahead of guidance.
Gold price discount of 6 9% for received* price of $1 141/oz; better than guidance of 8% to 10% Gold price discount of 6.9% for received price of $1,141/oz; better than guidance of 8% to 10%.
Total cash costs of $643/oz; $2/oz better than guidance despite negative currency impact of $15/oz.
Currency impact mitigated by: $5/oz – higher output; $4/oz – Savuka insurance; $6/oz – other factors.
Cash margin 43%; fully costed margin 24.5% despite maturing hedge book deliveries.
22…while margin increase achieved despite stronger currencies.
Adjusted headline earnings* up 135% to $303m, or 82 US cents per share due to:
– Higher gold production of 36,000oz and higher gold sales of 78,000oz.
– Spot price increase of $28/oz; higher received price of $46/oz.
– Lower hedge discount which added $46/oz to received price.
– Non-cash prior period tax credits of $84m.
*excluding accelerated hedge buy-back costs
12
Market guidance
Production Total cash costs Assumptions
Q4 2010 guidance 1.14Moz$640/oz
R7.25/$
$80/barrel
$675/ozR6.75/$
$80/barrel
Guidance Previous guidance
Capital expenditure $1.1bn $1.1bn
$80/barrel
2010 Full year guidance 4.5Moz $635/oz R7.34/$
23
Depreciation and amortisation $700m $700m
Corporate costs, marketing and business improvement costs $210m $210m
Exploration and pre-feasibility studies $216m $216m
Financing costs $116m $105m
Non-cash unwinding of obligations & equity portion of convertible bond $49m $43m*subject to currency volatility in Q4
Hedge book eliminated The final stage of our strategic hedge restructuring is complete...
Hedge commitmentsMoz
11.61 11.28 Hedge commitments of 1.37Moz at 30 Sept.
5.99
3.93.22
g p
Hedge fully closed out on 7 Oct. Average price of $1,300/oz in final phase.
Net impact in Q3 (post tax) of hedge close out:
– Cash outflow = $1.578bn
– P&L (AHE) = $1.487bn
Estimated impact in Q4 (post estimated tax) of
24...opening margins and increasing earnings and cash flow potential.
1.37 02006 2007 2008 2009 30 Jun
201030 Sep 2010
7 Oct 2010
Estimated impact in Q4 (post estimated tax) of hedge close out (subject to fx fluctuations):
– Cash outflow = $1.061bn
– P&L (AHE) = $1.045bn
Moz
13
Net debt and liquidity position
Net Debt Movements Quarter on Quarter
All amounts US$m Maturity Coupon 30 June
2010
3rd Quarter
Movement 30 Sep 2010
4th Quarter Movement
Keeping investment-grade ratings intact...
Equity raisings
Operating inflows
Other inflows
Hedge takeout
outflows Hedge takeout
Gross Debt Excluding mandatory convertible bond (MCB)
Corporate Rated Bonds
30 year April 2040 6.500% 300 300
10 year April 2020 5.375% 700 700
Convertible Bond May 2014 3.500% 732 732
RCF April 2014 Libor +1.75% - - 170
Short Term ZAR debt 6 months Jibor +0.95% - 222 222
Oth 27 3 30
25
Other 27 3 30
1,759 3 222 1,984 170
Less: Cash 866 1,528 119 155 (1,330) 1,338 (891)
Less: Restricted cash 59 (16) 43
Net Debt 834 (1,528) (119) (136) 1,552 603 1,061
Equity settled MCB (principal)
Sep 2013 6.00% 789
...whilst offering balance sheet flexibility to fund project pipeline.
Hedge book leverageThe hedge restructuring has opened up significant margin…
$472/oz
30%
$227/oz
$362/oz
60%
26...complementing the operational improvement work under way in the business.
EBITDA Margin EBITDA erosion due to legacy hedge Eliminated Oct. 7
2008 2009 YTD 2010
14
Operational improvements: Portfolio assessment in 2008Focused on rebuilding performance…
Operational free cash flow, YTD Sept. (US million)
308
South Africa
‘08
USACC&V
MaliMorilaSadiolaYatela
GuineaSiguiri
GhanaIduapriem 136
53
Australia
ContinentalAfrica
‘08
‘08
‘08
-56
27…we assessed where we were on delivering to our potential.
Best practice
Solid performance
Turnaround – good trends
Improvement needed
Cash drain – material risk
BrazilSerra GrandeBrasil Mineração
ArgentinaCerro Vanguardia
IduapriemObuasi
NamibiaNavachab South Africa
Vaal RiverSurface OperationsWest Wits
AustraliaSunrise DamTropicana
TanzaniaGeita
136
Americas
08
Operational improvements: Portfolio assessment in 2010Portfolio improvements are tangible…
Operational free cash flow, YTD Sept. (US million)
389
308
South Africa '09
‘08
USACC&V
MaliMorilaSadiolaYatela
GuineaSiguiri
GhanaIduapriem
318
91
377
185
74
136
-56
53
Australia
ContinentalAfrica
‘10
'09
‘10
‘08
'09
‘10
‘08
‘08
28…and our current portfolio assessments see more opportunities.
YTD Sept. 2010 vs. YTD Sept. 2008
= 155% increase
Best practice
Solid performance
Turnaround – good trends
Improvement needed
Cash drain – material risk
BrazilSerra GrandeBrasil Mineração
ArgentinaCerro Vanguardia
IduapriemObuasi
NamibiaNavachab South Africa
Vaal RiverSurface OperationsWest Wits
AustraliaSunrise DamTropicana
TanzaniaGeita
339
261
136
Americas '09
‘10
08
15
Sustainable gold equation*…our value model
In light of the recent M&A transactions in the industry …
Exploration success ensures competitive entry cost, laying foundation for long-term value
Focus on competitive capital and strong operating margins
drives the return equation.
Total costs must remain below our strategic cut-off of $920/oz. M&A opportunities must
compete with organic cost structures.
1. 2. 3.
Cash flow margin
$300/oz890 920
550
160 30
Gold price @ 1220/oz
$/oz
29...our strategic operating cost model differentiates us from peers.
30
150
Greenfields exploration
(Resources)
Project development
Cash operating expenditure
Sustain. capex Sub Total(project level cost
structure)
Corporate admin. cost
Grand Total(before tax & interest)
*Gold production at annual steady state of 5Moz; long term exchange rate of R 8.00/$; excludes tax and interest
Organic growth potentialTargeting 1Moz of growth within five years…
30...with current inventory supporting growth beyond this horizon.
Operating RegionsAmericas Continental Africa South Africa Australia
‘Organic growth’ ‘Operating improvements’ ‘Baseload production’ ‘Exploration platform’
Five years target 840koz to 1.2 Moz 1.54Moz to 1.8Moz 1.75Moz to 1.8Moz 390koz to 700koz
Operating RegionsAmericas Continental Africa South Africa Australia
‘Organic growth’ ‘Operating improvements’ ‘Baseload production’ ‘Exploration platform’
Five years target 840koz to 1.2 Moz 1.54Moz to 1.8Moz 1.75Moz to 1.8Moz 390koz to 700koz
Incremental growth beyond five years
500koz to 1Moz 400koz to 800koz - -
16
Relative performanceSince the launch of our new strategy…
31 March 2008 – 9 November 2010
34%Newmont
50%AngloGold
7%Freeport
17%Barrick
18%Agnico-Eagle
20%Goldcorp
22%Gold Fields
31…the stock has rerated relative to its peers.
-21% Yamana
-17% Kinross
1.5%Harmony
Driving shareholder value
Driving margin growth through operational improvements, hedge elimination.
Driving organic production growth from existing endowment.
32
Driving endowment growth through aggressive exploration strategy.
17
33333333
