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Anglogold Ashanti Limited (JNB:ANG NYSE:AU PINK:AULGF) is a Johannesburg based mineral resource company with mining operations in Asia (China and other parts of the South East), Africa (Congo, North and South Africa, Mali, Guinea), North and South America, Russia and the USA. Though gold mining and selling is at the core of its business, it also deals in silver, sulfuric acid production (sulfur oxide produced as a by product of gold mining is converted into sulfuric acid through sulfur burning and then sold to paper pulp, fertilizer and chemical manufacturers) and uranium.[1] It is the world's third largest producer of gold.[2] The company's largest project is La Colosa, a mine located 150 km west of Bogota, Colombia. La Colosa has 12.3 million ounces of 2P gold reserves but isn't scheduled to start producing until 2018.

Anglogold produced 3.367 million ounces of gold in the first three quarters of 2010 which represents a 1.5% decrease when compared to the same period in 2009 (3.417 million ounces) at a total production cost of US $783 per ounce, a 27.9% yoy increase (though price received per ounce went up 22.3%).[3] Though Anglogold is one of the largest gold producers in the world (produces about twice as much as the world's second leading gold company by market cap) it has relatively high production costs (for example Eldorado Gold's is less than half that of Anglogold), which has forced it to take on undesirable hedging positions (when gold rises in price, hedge exposed companies aren't able to reap as much of the benefits). In the first nine months of 2010 the gold miner lost US $714 million despite a 47.7% rise in sales (up to almost $4 billion). For the 2010 year gold production stood at 4.52 million ounces (cash cost of $638/oz, which remains relatively high in Australia ($894/oz) and Africa ($790/oz).[4]

For the third quarter of 2010 assets went up in value 4.6% qoq rebounding from a 2.5% fall in value between December 2009 and June 2010. Assets were worth 23.6% more in Sept 2010 than in Sept 2009. As of the second quarter of 2010 hedge commitments were 3.22 million ounces (about 4.4% of total reserves), down from 3.9 million 6 months earlier and 5.99 million at the end of 2008.[5]

Company Overview

In 2008 most of the increase in resources came from La Colosa in Colombia (12.3 million ounces added). Also during the year AngloGold acquired all of Golden Cycle Gold Corporation which held a 33.33% interest in the American Cripple Creek & Victor mine, as well as Sao Bento Gold Company Ltd from Eldorado Gold. Hedging practices contributed to a lowering of the price received for gold.

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During the year 4.98 million ounces of gold was produced putting the company firmly in 3rd place among producers (7% of world production at cash costs of 444 dollars per ounce). 42% of it came from south africa. At the end of the fiscal year it had 62,895 employees, spent $1.201 billion in capex, had mineral resources of 241 million ounces (compared to 207.6 in 2007). Geita, Tanzania mine experienced some problems related to inconsistency. Power crisis in South Africa affected the performance of mines there (deep mining requires a constant power supply).

Mines and Projects

mil oz
australasia americas

*Australia - Has a 70% interest in Western Australia's Tropicana Gold Project. It has proved gold reserves of at least 3.45 million ounces which translates into a mine life of close to 10 years. Though large (scheduled to produce over 470,000 ounces of gold annually, initially) cash costs are high (average of over US$600 an ounce rising after the first three years). A capex of US$720-760 million is required to get the mine constructed and operating (construction begins in 2011 production begins in December 2013).[7] 90.4% of the the gold is considered recoverable.
mil oz 2006 2007 2008[8] 2009[8] 1q10
reserves 66.973.170.171.470.95
resources 239.2226.7226.69

Continental Africa-7 mining regions (Ghana, Guinea, Mali and Tanzania) West Wits, South Africa - Mponeng, Savuka, TauTona. Mponeng - Carletonville in the NW province of South Africa SW of Johannesburg. It operates a gold processing plant there. Savuka, Gauteng - underground mines extracting from the CLR and VCR reefs. Namibia - Navachab is an open pit mine near Karibib, Namibia (65,000 oz produced in 2009) that also has mills.

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As of the end of 2009 there were Operating Mines in the USA, Brazil, Argentina, Mali, Guinea, Ghana, Namibia, South Africa, Tanzania and Australia, Exploration projects in Colombia, Congo (Mongbwalu, Kibali), Russia (Veduga), China (Yili Yunglong, Jinchanggou), Philippines (Mapawa Area) and Australia (Tropicana), and New Exploration projects in Canada, Brazil, Argentina, Guinea, Gabon, Saudi Arabia, Egypt, Eritrea, Solomon Islands, Australia and New Zealand.

Pie graph to the left summarizes gold production in 2010

La Colosa

The 12.3 million ounce gold (2P reserves) mine in Colombia which will account for 20% of AngloGold's total production upon completion and 50% of its production in the America's (800,000 ounces per year) will cost the company $3.5 billion to construct and develop. First production is slated to begin in 2018.


Owned by subsidiary AngloGold Ashanti Brasil Mineração has the capacity to produce 400 metric tons of sulfuric acid daily. Required an investment of US $36 million in 2006 to expand.[2]


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In the first quarter of 2011 gold production finished at 1.039 million ounces, 34.9% (363,000) ($819/oz) from continental Africa where Geita production (up 4% to 94,000 oz) benefited from higher grades at the Nyankanga pit, 6% higher at Obuasi, continental Africa which provided the group with 29% of its operating cash flow ($161 of $553 million) received 33.2% ($62 million) of capital expenditures in the first three months. The America's had a relatively strong showing at 203,000 ounces (19.5% of total, at cash cost of $480/oz) riding the momentum of Cripple Creek (up 36% vs 2010 1qtr period) but negatively affected by a grade reduction at Cerro Vanguardia (where production fell 10%). Australian operations were affected by flooding which provided murky results (production only 72,000 ounces at a very high cash cost of $1,153/oz) though prospects at Sunrise Dam and Tropicana are more than enough reason to be optimistic. South Africa remained the most important producing region (403,000 ounces at $637/oz) however its position at the top is being challenged by contental Africa (38.6% vs 34.9% compared to a wider spread in previous years). In Canada AngloGold has two joint ventures (Superior and Baffin) and controls one project (Melville).[9]

In 2010 gold production was highest in the 3rd quarter (3.2% higher than the quarter ended in June) with most of that increase coming from South Africa which produced 31,000 ounces of gold more than the second quarter (6.9% difference). There was 1.37 million ounces of Gold hedged. For the 2010 year gold production stood at 4.52 million ounces (cash cost finished at $638/oz overall, which remains relatively high in Australia ($894/oz, 406,800 ounces = 9% of total) and continental Africa ($790/oz, 1.49 million ounces = 33%).

For the first nine months of 2010 South Africa was the largest source of gold. Production was at 1.309 million ounces (4.2% less than in 2009) and represented 38.9% of total production (down from 40% the year before). Continental Africa production (33.2% of total down from 34.2% the year prior) was 4.2% less than it was in the first nine months of 2009 (down to 1.118 from 1.167 million ounces). In Australasia and the America's production grew especially as a fraction of the company's total. Together the area represented 27.9% of total company production up from 25.9% the year before.

Gold production (000 oz) '06 '07 '08 '09 3q
'06 '07 '08 '09 3q
Great Noligwa 615 483 330 158 36 Kopanang 446 418 362 336 79
Moab Khotsong 44 67 192 247 83 Tau Lekoa 176 165 143 124 10
Surface Op (Africa) 113 125 92 164 53 Mponeng 596 587 600 520 138
Savuka 89 73 66 30 8 Bibiani 37 0 0 0 0
Iduapriem 167 167 200 190 57 Obuasi 387 360 357 381 75
Siguiri 256 280 333 316 62 Morila 207 180 170 137 23
Sadiola 190 140 172 135 30 Yatela 141 120 66 89 10
Navachab 86 80 68 65 23 Geita 308 327 264 272 93
Cripple Creek 283 282 258 218 56 Vanguardia 215 204 154 192 48
sunrise dam 465 600 433 401 93 Brasil Mineracao 242 217 320 329 93
Serra Grande 97 91 87 77 20

In the third quarter of 2010 53.2% of gold production came from underground operations (happened in all major regions) compared to 35.7% for open pit (all regions except South Africa). 56.2% of the rest came from heap leach operations (80% from the America's, 20% from Continental Africa) with the rest from surface dump reclamation (88% from South Africa).[10]

3qfy10 production was 3% higher than the previous quarter due to strong results in South Africa and Australia (in contrast with total cash costs which rose 4%). Production was 6.5% higher qoq in South Africa (total cash costs 6% higher though they were down 1% at Vaal River) mostly due to a 19% rise at Vaal River (Vaal River was the second most important producing South African operation), Mponeng rose 1% to 138,000. TauTona production rose 15% because the grade of its gold was higher.

Largest shareholders

American billionaire John Paulson whose fund owns 11.8% of AngloGold Ashanti, is the company's largest shareholer; Initially the fund purchased 11.3% of the company for $1.28 billion back in 2008. The Paulson fund also holds a major stake in Gold Fields Ltd, South Africa's second largest gold producer. In 2010 George Soros lowered his interest in general bullion trusts while raising them in Goldcorp.[11]

Business and Financials

$US mil 2006[12] 2007[12] 2008[13] 2009[13] 9M09[14] 9M10[14] (9M10,9M09)
revenue 3106 3472 3916 3743 2642 3901 47.7%
adj gross profit 1058 935 (384) 412 (618) 637
ebitda 1409 1224 1131 1663 1204 1278 6.1%
market cap 13,008 11,878 9795 14,555
tot cash costs 308 357 444 514 485 627 29.3%
tot prod costs 414 476 567 647 612 783 27.9%
avg gold spot 604 697 872 974 na na na
dividends per share 62 20 11 17 67mil(tot) 45mil(tot) (32.8)%
long term debt 1423 1533 870 654 1655 1653 (1.2)%
total equity 3047 2442 2511 3030 2529 3930 55.4%
total assets 8822 9708 8060 9787 8833 10,032 13.6%

In the third quarter of 2010 total cash costs were 16% higher at Mponeng part of the reason total cash costs overall rose 4%. Like South Africa continental Africa suffered from a rise in total cash costs (up $23/oz or 3.3%). Slower ore reserve development in Obuasi affected total cash costs there (16% higher to $831 per ounce). The America's showed higher total cash costs up to $433 an ounce. Helping the company's earnings were relatively high commodity prices (average gold price recieved was $1,141 per ounce 4% higher than the last quarter while the gold price was 2% higher at $1,226 per ounce) and strong local operating currencies.[14]

Jewellery sales in China, India and the Middle East had a large impact on the demand for gold; Indian demand during the first eight months of 2010 was roughly the same as it was during the last fiscal year (526 tonnes compared to 559) the result of such factors as a great monsoon season, more valuable rupee and the diwali festival (hasn't happened yet but is expected to push the numbers far ahead of what they were in 2009). Retail Jewellery demand in China was 6-8% higher year on year (August and September are usually celebratory months with numerous holidays); most of the increases came from high karat jewellery (18 carat gold jewellry manufacturers reported sales increases of 12% to 20%, 24 carat 8% to 10% year on year).[14]

Trends and Forces

Hedging strategy

For much of its recent history Anglogold Ashanti's hedging strategy gave the company an edge over its competition, but as gold prices continue to rise it has been forced to take a less conservative approach (a more recent consequence of its former policy has been less growth when gold prices increase). The unanticipated duration of the bear market for gold forced Anglogold to revise its hedge strategy in favor of one that gives it more exposure to fluctuating gold prices. Fewer hedges mean higher risk especially when commodity prices experience greater volatility.

On October 7, 2010 Anglogold Ashanti elimited its hedge book giving it full exposure to gold prices.[15]

La Colosa mine development delayed two years

The 12.3 million ounce gold (2P reserves) mine in Colombia which will account for 20% of AngloGold's total production upon completion and 50% of its production in the America's (800,000 ounces per year) has recently encountered major setbacks; although exploration permits from the government were finally received in April 2011 (after being suspended since February 2008 because of restrictions regarding the use of forestland) and the company was given permission to access and use local water supplies, the impact of strict new environmental regulations have impacted total costs (up to $3.5 billion from $2.7 billion) and startup date (moved to 2018 from 2016). La Colosa is located 150 km from Bogota, Colombia. In the 12 months leading to May 2, 2011 the spot price of gold rose 22%.[11]


  1. Acid Plant Database:Nova Lima (2005-08-11).
  2. 2.0 2.1 Stock in South Africa advance, Led by Anglo American, Billiton, AngloGold (2010-11-11).
  3. anglogold ashanti third quarter 2010 financial report (2010-11-11).
  4. AngloGold Ashanti 2010 end of year, 4th quarter results (February 2011).
  5. anglogold 2010 half year results (2010-08-12).
  6. anglogold first quarter 2010 results (2010-03-31).
  7. Tropicana Gold Project development approved (2010-11-11).
  8. 8.0 8.1 anglogold 2009 report (2010-02-16).
  9. {cite web|url=http://www.anglogold.co.za/NR/rdonlyres/3FFDDE2F-FCB9-43CF-B19F-4D4522926064/0/Q12011presentation_final.pdf|title=Anglogold Ashanti 2011 First Quarter Presentation|date=2011}}
  10. 10.0 10.1 10.2 Anglogold Ashanti Third Quarter 2010 Presentation (2010-11-11).
  11. 11.0 11.1 Paulson Top Pick AngloGold Delayed in Colombia as Billionaire Boosts Stake (2011-05-25).
  12. 12.0 12.1 Anglogold Ashanti 2007 Consolidated Financial Statement (2008).
  13. 13.0 13.1 Anglogold Ashanti 2009 Consolidated Financial Statement (2010).
  14. 14.0 14.1 14.2 14.3 Anglogold Ashanti 2010 first half full report on financial results (2010-11-11).
  15. Gold Mining and Marketing : AngloGold Ashanti eliminates hedge book, gains full exposure to gold (2010-10-07).
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