Economic performance

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A comprehensive review of the operational activities of the company during 2005 may be found in the Annual Report 2005 and in the quarterly reports produced during the year. These documents are available at www.anglogoldashanti.com.

The business of gold

AngloGold Ashanti's business is gold. The profitability of the company is determined by the amount of gold produced, the price at which this is sold and the costs incurred through the purchase of the goods and services necessary to produce that gold.

In 2005, the company produced 6.2 Moz of gold (2004: 5.8 Moz) from operations in 10 countries. By far the largest gold producing country within the company is South Africa with gold production of 2.7 Moz (2004: 2.9 Moz), or 43% of total group production, although this percentage continues to decline.

The average gold price received for the year increased by 11% to $439/oz (2004: $394/oz).

Total gold income in 2005 was $2,629 million (2004: $2,309 million).

Total cost of sales in 2005 amounted to $2,311 million (2004: $1,924 million), with average total cash costs rising 6% to $281/oz (2004: $264/oz).

Adjusted headline earnings decreased by 26% to $200 million (2004: $271 million).

While the company's business is gold, a number of the South African mines recover and process uranium as a by-product of gold mining. This uranium is processed and marketed by the Nuclear Fuels Corporation of South Africa (Nufcor), a wholly owned subsidiary of AngloGold Ashanti. (See case study: Uranium mined as a by-product contributes to the bottom line.)

Economic contribution to sustainable development: group value added statement for the year ending 31 December

2005 Distribution of wealth (%)
2004 Distribution of wealth (%)

Key aspects of this value-added statement include distributions made to employees, payments to governments in the form of taxation and value distributed to the providers of capital, which are discussed below. Contributions to community projects are not captured in the value-added statement but are discussed in detail  in the Community Section of this report.

Distributions to employees

In 2005, AngloGold Ashanti employed 63,993 people (employees and contractors) on average per month (2004: 65,400), predominantly at its South African operations (66%). Distributions to employees (including executive directors) amounted to $877 million (2004: $823 million). This represents a distribution of 46% of the value created by the group in 2005.

A more detailed discussion on AngloGold Ashanti as an employer may be found in the Labour Section of this report.

Taxation

Current taxation of $82 million (2004: $66 million) was set aside in various jurisdictions around the world. A breakdown per country is indicated in the table below.

Providers of capital

Payments of $226 million (2004: $254 million) were made to the various providers of capital during the year. These include, among others, payments made to banks and other financial institutions of $108 million and distributions to shareholders in the form of dividends ($95 million).

Shareholders invest in the company for a number of reasons. In addition to the potential receipt of dividends that may be paid by the company to shareholders, shareholders may buy, hold or sell shares, depending on the past and expected performance of the company on the various stock exchanges on which it is listed, in the expectation of an appreciation in the share price. The share price performance of AngloGold Ashanti in 2005 is indicated in the graphs below.

JSE AngloGold Ashanti share price 2005
NYSE AngloGold Ashanti share price 2005
Declared dividends per ordinary share (US cents)		Adjusted headline earnings per ordinary share (US cents)

Sustaining operations

An important function of AngloGold Ashanti today is preparation for the future in terms of finding new orebodies, bringing new mines into production, investing in human and infrastructural capital to sustain production, undertaking research and development, investing in the development of the market for gold and the putting aside of sufficient funding to ensure the orderly closure of operations when they reach the end of their economic lives. A key element of this process during 2005 was the granting to the company by the South African Department of Minerals and Energy (DME) of new order mining rights. AngloGold Ashanti was the first gold mining company to receive these rights for all its operations in terms of the new minerals legislation. (See case study: AngloGold Ashanti granted new order mining rights.)

Exploration, reserves and resources

In 2005, AngloGold Ashanti spent $79 million (2004: $81 million) on exploration in 19 countries around the world, split between brownfields exploration which is aimed at sustaining or expanding existing operations, and greenfields exploration aimed at discovering new gold deposits. The company has actively persued its ‘new frontiers' strategy. (See case study: Doing business in new places – AngloGold Ashanti on operating in Russia). A detailed discussion of the company's exploration programme may be found in the Annual Report 2005.

As at the end of 2005, the company's attributable Mineral Resources amounted to 176 Moz, while Ore Reserves stood at 63 Moz.

Capital expenditure

The company places significant emphasis on capital expenditure to sustain existing operations and develop new ones. In 2005, AngloGold Ashanti invested $722 million, an increase of 23% on 2004, of which 63% was stay-in-business expenditure and 37% on new projects.

Developing the market for gold

Gold is used mainly for fabrication purposes, of which the gold jewellery market accounts for almost 80%. Other fabrication uses include electronics, dentistry, medals and coins. In addition, gold is held by central banks, financial institutions and private individuals as a store of value or a form of investment.

AngloGold Ashanti is involved in the marketing of gold as the demand for gold jewellery has decreased in recent years. In 2005, the company's marketing programme, both on its own and in collaboration with the World Gold Council (to which AngloGold Ashanti contributed $9 million of its total expenditure of $13 million), was aimed at increasing the desirability of the metal, sustaining and growing demand, and supporting the deregulation of the gold market in certain key economies.

Anticipating closure

Mining operations have finite lives and as older mines reach the end of their lives, mining operations may leave an unwanted legacy for local communities, particularly from an environmental perspective. Thus, an integral part of responsible mining is the provision for closure from an environmental perspective during the lifetime of the operation. A detailed breakdown of the company's estimated environmental liabilities and provisions may be
found on in the Environment Section of this report.

Geographical analysis of gold income by origin (%)

Geographical analysis of gold income by destination (%)