2007 Annual Report

Group financial statements

Notes to the financial statements (31-41)

For the year ended 31 December
SA Rands  US Dollars
20062007Figures in million20072006
  31Environmental rehabilitation and other provisions  
   Environmental rehabilitation obligations  
   Provision for decommissioning  
9081,225     Balance at beginning of year175143
(19)–     Adjustments due to disposal of assets–(3)
24588     Change in estimates (1)1336
3884     Unwinding of decommissioning obligation (note 7)126
(2)(19)     Utilised during the year(3)–
552     Translation6(7)
1,2251,380     Balance at end of year203175
 
   Provision for restoration  
1,2351,300     Balance at beginning of year186194
(17)–     Adjustments due to disposal of assets–(2)
11340     Charge to income statement482
(33)49     Change in estimates (1)7(5)
7171     Unwinding of restoration obligation (note 7)1010
(67)(104)     Utilised during the year(15)(10)
100–     Translation7(3)
1,3001,656     Balance at end of year243186
 
   Other provisions  
122260     Balance at beginning of year3719
13759     Charge to income statement920
–(6)     Change in estimates(1)–
–2     Unwinding of other provisions (note 7)––
(29)(23)     Utilised during the year(3)(4)
3033     Translation62
260325     Balance at end of year4837
      
   Other provisions comprise the following:  
       – provision for labour and civil claim court settlements  
186299        in South America (2)4426
64     – provision for employee compensation claims in Australia (3)11
60–     – provision for onerous uranium contracts (4)–9
822     – provision for long-term management incentives in Nufcor International Limited31
260325  4837
      
2,7853,361 Total environmental rehabilitation and other provisions494398
   
(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)Comprises claims filed by former employees in respect of loss of employment, work-related accident injuries and diseases, governmental fiscal claims relating to levies and surcharges and closure costs of old tailings operations. The liability is expected to unwind over the next two- to five-year period.
(3)Comprises workers compensation claims filed by employees in Australia with regard to work-related incidents. The liability is expected to unwind over the next three- to five-year period.
(4)Relates to onerous uranium contracts in Nufcor International Limited. The amount indicates the estimated cost of exiting the contracts and results from the market price increase above the contracted sales price. The onerous contracts have maturities up to 2011.
  
      
  32Provision for pension and post-retirement benefits  
   Defined benefit plans  
   The group has made provision for pension provident and medical schemes covering substantially all employees. The retirement schemes consist of the following:  
(267)(244) AngloGold Ashanti Pension Fund (asset)(36)(38)
1,0941,121 Post-retirement medical scheme for AngloGold Ashanti South African employees165156
6967 Other defined benefit plans (1)911
896944 Sub-total138129
   Transferred to other non-current assets (note 22)  
267244 AngloGold Ashanti Pension Fund3638
1719 Post-retirement medical scheme for Rand Refinery employees32
11 Retiree Medical Plan for Nufcor South Africa employees––
1,1811,208  177169
   (1) Other defined benefit plans comprise the following:  
5–      – Ashanti Retired Staff Pension Plan–1
6267      – Obuasi Mines Staff Pension Scheme99
(17)(19)      – Post-retirement medical scheme for Rand Refinery employees (asset)(3)(2)
1313      – Retiree Medical Plan for North American employees22
77      – Supplemental Employee Retirement Plan (SERP) for North America (USA) Inc employees11
(1)(1)      – Retiree Medical Plan for Nufcor South Africa employees (asset)––
6967  911
   

AngloGold Ashanti Pension Fund

The plan is evaluated by independent actuaries on an annual basis as at 31 December of each year. The valuation as at 31 December 2007 was completed at the beginning of 2008 using the projected unit credit method. In arriving at their conclusions, the actuaries took into account reasonable long-term estimates of inflation, increases in wages, salaries and pension as well as returns on investments.

A formal statutory valuation is required by legislation every three years. The previous statutory valuation had an effective date of 31 December 2005, and was completed in June of 2006. The next statutory valuation will have an effective date no later than 31 December 2008.

All South African pension funds are governed by the Pension Funds Act of 1956 as amended.

Information with respect to the AngloGold Ashanti Pension Fund is as follows:

Change in benefit obligation

  
1,4081,568 Balance at beginning of year224222
5047 Current service cost77
108124 Interest cost1816
1214 Participants’ contributions22
8477 Actuarial loss1112
–7 Increase as a result of transfers into the fund1–
(94)(84) Benefits paid(12)(14)
–– Translation6(21)
1,5681,753 Balance at end of year257224
 
   Change in plan assets  
1,4591,835 Balance at beginning of year262230
146191 Expected return on plan assets2822
272(6) Actuarial (loss) gain(1)40
4040 Company contributions66
1214 Participants’ contributions22
–7 Increase as a result of transfers into the fund1–
(94)(84) Benefits paid(12)(14)
–– Translation7(24)
1,8351,997 Fair value of plan assets at end of year293262
267244 Funded status at end of year3638
267244 Net amount recognised3638
 
   Pension benefit obligation  
1,5681,753 Benefit obligation257224
1,8351,997 Fair value of plan assets293262
 
   Components of net periodic benefit cost  
108124 Interest cost1816
5047 Current service cost77
(146)(191) Expected return on assets(28)(22)
12(20) Net periodic benefit cost(3)1
 
   Assumptions  
   Assumptions used to determine benefit obligations at the end  
   of the year are as follows:  
   Discount rate8.25%8.00%
   Rate of compensation increase (1)6.00%5.50%
   Expected long-term return on plan assets11.14%10.50%
   Pension increase4.73%4.28%
   
(1) The short-term compensation rate increase is 8% (2006: 6%) and the long-term compensation rate increase is 6% (2006: 5.5%).
  
   The expected long-term return on plan assets is determined using the after tax yields of the various asset classes as a guide.

Plan assets

AngloGold Ashanti’s pension plan asset allocations at the end of the year, by asset category, are as follows:		  
   Equity securities68%68%
   Debt securities27%28%
   Other5%4%
    100%100%
   

Investment policy

The Trustees have adopted a long-term horizon in formulating the Fund’s investment strategy, which is consistent with the term of the Fund’s liabilities. The investment strategy aims to provide a reasonable return relative to inflation across a range of market conditions.

The Trustees have adopted different strategic asset allocations for the assets backing pensioner and active member liabilities. The strategic asset allocation defines what proportion of the Fund’s assets should be invested in each major asset class. The Trustees have then selected specialist investment managers to manage the assets in each asset class according to specific performance mandates instituted by the Trustees.

The Trustees have also put in place a detailed Statement of Investment Principles that sets out the Fund’s overall investment philosophy and strategy.

Fund returns are calculated on a monthly basis, and the performance of the managers and Fund as a whole is formally reviewed by the Fund’s Investment Sub-Committee at least every six months.

  
 Number of sharesPercentage
of total
assets		Fair valueNumber
of shares		Percentage
of total assets		Fair value
US Dollars million 2007  2006 
Related parties      
Investments held in related parties are summarised as follows:      
 
Equity securities      
Anglo American plc (1)   40,4000.8%2
AngloGold Ashanti Limited88,4581.3%432,9600.6%2
   4  4
Other investments exceeding 5% of total plan assets      
Bonds      
RSA R157 Government Bonds 13.5% 5.4%16  –
SA Rands million
Related parties      
Investments held in related parties are      
summarised as follows:      
 
Equity securities      
Anglo American plc (1)   40,4000.8%14
AngloGold Ashanti Limited88,4581.3%2632,9600.6%11
   26  25
Other investments exceeding 5% of total plan assets      
Bonds      
RSA R157 Government Bonds 13.5% 5.4%107  –
 

Cash flows
Contributions

The company expects to contribute $6m, R38m (2007: $6m, R40m) to its pension plan in 2008.

(1)During April 2006, AngloGold Ashanti launched an equity offering which, together with the shares placed by Anglo American plc, reduced Anglo American plc's interest in AngloGold to 41.7%. In October 2007, Anglo American plc further reduced their investment in AngloGold Ashanti Limited to 16.6%.
SA Rands  US Dollars
20062007Figures in million20072006
   Estimated future benefit payments  
   The following pension benefit payments, which reflect the expected future service, as appropriate, are expected to be paid:  
 104 200815 
 103 200915 
 102 201015 
 101 201115 
 100 2012 15 
 1,243 Thereafter182 
 
   

Post-retirement medical scheme for AngloGold Ashanti South African employees
The provision for post-retirement medical funding represents the provision for health care benefits for employees and retired employees and their registered dependants.

The post-retirement benefit costs are assessed in accordance with the advice of independent professionally qualified actuaries. The actuarial method used is the projected unit credit funding method. This scheme is unfunded. The last valuation was performed as at 31 December 2007.

Information with respect to the defined benefit liability is as follows:

  
   Change in benefit obligation  
1,1721,094 Benefit obligation at beginning of year156185
76 Current service cost11
8886 Interest cost1213
3533 Participants’ contributions55
(112)(111) Benefits paid(16)(17)
(96)13 Actuarial loss (gain)2(14)
–– Translation5(17)
1,0941,121 Balance at end of year165156
(1,094)(1,121) Unfunded status at end of year(165)(156)
(1,094)(1,121) Net amount recognised(165)(156)
 
   Components of net periodic benefit cost  
76 Current service cost11
8886 Interest cost1213
9592 Net periodic benefit cost1314
 
   Assumptions  
   Assumptions used to determine benefit obligations at the end of the year are as follows:  
   Discount rate8.25%8.00%
   Expected increase in health care costs6.75%4.75%
 
   Assumed health care cost trend rates at 31 December:  
   Health care cost trend assumed for next year6.75%4.75%
   Rate to which the cost trend is assumed to decline (the ultimate trend rate)6.75%4.75%
 
1% point
increase		 Assumed health care cost trend rates have a significant effect on the amounts reported for health care plans. A 1% point change in assumed health care cost trend rates would have the following effect:1% point
increase		 
 11 Effect on total service and interest cost2 
 113 Effect on post-retirement benefit obligation17 
 1% point decrease  1% point decrease 
 (9) Effect on total service and interest cost(1) 
 (97) Effect on post-retirement benefit obligation(14) 
      
   

Cash flows

Contributions

AngloGold Ashanti Limited expects to contribute $28m, R189m (2007: $25m, R178m) to the post-retirement medical plan in 2008.

Estimated future benefit payments

The following medical benefit payments, which reflect the expected future service, as appropriate, are expected to be paid:		  
 86 200813 
 88 200913 
 90 201013 
 92 201114 
 94 201214 
 671 Thereafter98 
 
   

Other defined benefit plans

Other defined benefit plans include the Ashanti Retired Staff Pension Plan, the Obuasi Mines Staff Pension Scheme, the Post-retirement medical scheme for Rand Refinery employees, the Retiree Medical Plan for North American employees, the Supplemental Employee Retirement Plan for North America (USA) Inc. employees and the Nuclear Fuels South Africa (NUFCOR) – Retiree Medical Plan for Nufcor South African employees.

Information in respect of other defined benefit plans for the year ended 31 December 2007 has been aggregated in the tables of change in benefit obligations, change in plan assets and components of net periodic benefit cost, and is as follows:

  
 
   Change in benefit obligation  
116132 Balance at beginning of year1918
37 Interest cost1–
125 Actuarial loss–2
(11)(10) Benefits paid(1)(1)
12– Translation(1)–
132134 Balance at end of year1819
 
   Change in plan assets  
5663 Fair value of plan assets at beginning of year88
54 Expected return on plan assets––
–2 Actuarial gain––
(2)(2) Benefits paid––
4– Translation1–
6367 Fair value of plan assets at end of year98
(69)(67) Unfunded status at end of year(9)(11)
1320     – funded plans31
(82)(87)     – unfunded plans(12)(12)
(69)(67) Net amount recognised(9)(11)
 
   Components of net periodic benefit cost  
37 Interest cost1–
(5)(4) Expected return on plan assets––
(2)3 Net periodic benefit cost1–
 
   

Cash flows
The other retirement defined benefit plans are all closed to new members and current members are either retired or deferred members. The company does not make contributions to these plans.

Estimated future benefit payments
The following pension benefit payments, which reflect the expected future service, as appropriate, are expected to be paid:

  
     
     
 6 20081 
 6 20091 
 6 20101 
 6 20111 
 5 20121 
 105 Thereafter13 
  
   

Other aggregated defined benefit plans comprise the following:

Ashanti Retired Staff pension plan

The pension scheme provides a retirement benefit to former Ashanti employees who were based at the former London office. The plan is evaluated by actuaries on an annual basis using the projected unit credit funding method. No contributions are made to the plan and it is funded with a marginal shortfall.

Information with respect to the Ashanti Retired Staff pension plan is as follows:

Assumptions

Assumptions used to determine benefit obligations at the end of the year are as follows:

  
   Discount rate5.50%5.00%
   Expected long-term return on plan assets6.81%6.13%
   Pension increase2.00%2.50%
   The expected long-term return on plan assets is determined using the after tax return of domestic bonds and fixed-term investments.  
  
   Plan assets  
   The Ashanti Retired Staff defined benefit pension plan asset allocations at the end of the year, by asset category, are as follows:  
   Equity securities59%55%
   Debt securities36%40%
   Property0%1%
   Cash5%4%
    100%100%
    No investments are made in related party entities.

Obuasi Mines Staff Pension Scheme
The scheme provides monthly payments in Ghanaian currency (indexed to the US dollar) to retirees until death. The benefits under the scheme are based on years of service and the compensation levels of the covered retirees. The scheme is unfunded and accordingly, no assets related to the scheme are recorded. The scheme is evaluated by actuaries on an annual basis.

Information with respect to the Obuasi Mines Staff Pension Scheme is as follows:

Assumptions

  
   Assumptions used to determine benefit obligations at the end of the year are as follows:  
   Discount rate4.50%5.00%
   Pension increase4.50%4.50%
  
   Post-retirement medical scheme for Rand Refinery employees  
    The Rand Refinery Retiree Medical Plan (Medipref) is a non-contributory defined benefit plan in respect of certain past qualifying employees. The accumulated post-employment medical aid obligation was determined by independent actuaries in September 2007 using the projected unit credit funding method. Movements that could affect the valuation between the interim date and the date of the balance sheet have been considered. The plan is fully funded and evaluated by independent actuaries on an annual basis.

Information with respect to the post-retirement medical plan and obligation for the Rand Refinery Limited past employees is as follows:

Assumptions
Assumptions used to determine benefit obligations at the end of the year are as follows:		  
   Discount rate8.25%8.50%
   Expected increase in health care costs6.75%6.50%
   Expected return on plan assets7.65%7.77%
 
   Plan assets  
   The asset allocation of the Rand Refinery post-retirement medical fund as at the end of the year, by asset category, is as follows:  
   Debt securities76%76%
   Cash24%24%
    100%100%
   No investments are made in related party entities.

Retiree Medical Plan for North American employees

AngloGold Ashanti USA provides health care and life insurance benefits for certain retired employees under the AngloGold North America Retiree Medical Plan (the Retiree Medical Plan). With effect from 31 December 1999, no additional employees were eligible to receive post-retirement benefits under the Retiree Medical Plan. Curtailment accounting was applied at 31 December 1999.

The Retiree Medical Plan is a non-contributory defined benefit plan. This plan is evaluated by independent actuaries on an annual basis. It was last evaluated by independent actuaries in September 2007 who took into account reasonable long-term estimates of increases in health care costs and mortality rates in determining the obligations of AngloGold Ashanti USA under the Retiree Medical Plan. The Retiree Medical Plan reflected liabilities of $2m, R13m (2006: $2m, R13m). The Retiree Medical Plan is an unfunded plan. The Retiree Medical Plan is evaluated using the projected unit credit funding method. The company does not share in future cost increases and therefore the rate of compensation increase is not applicable.

Information with respect to the Retiree Medical Plan is as follows:

Assumptions

Assumptions used to determine benefit obligations at the end of the year are as follows:

  
   Discount rate4.50%5.00%
   

Benefits are fixed and independent from inflation and consequently increases in the cost of health care are not relevant.

Supplemental Employee Retirement Plan for North America (USA) Inc. employees

Certain former employees of Minorco (USA) Inc. were covered under the Minorco (USA) Inc. Supplemental Employee Retirement Plan (SERP), a non-contributory defined benefit plan. The SERP was last evaluated by independent actuaries in September 2007 who took into account long-term estimates of inflation and mortality rates in determining the obligation of AngloGold Ashanti USA under the SERP. The SERP is an unfunded plan and is evaluated annually by actuaries using the projected unit credit funding method.

Information with respect to the SERP is as follows:

Assumptions
Assumptions used to determine benefit obligations at the end of the year are as follows:

  
   Discount rate4.50%5.00%
 
   

Nuclear Fuels South Africa (NUFCOR) – Retiree Medical Plan for Nufcor South African employees

The Nufcor South Africa Retiree Medical Plan (Mascom) is a defined benefit plan in respect of certain past qualifying employees. The accumulated post-employment medical aid obligation was determined by independent actuaries in September 2007 using the projected unit credit funding method. Movements that could affect the valuation between the interim date and the date of the balance sheet have been considered. The plan is fully funded.

Information with respect to the Retiree Medical Plan for Nufcor South Africa employees is as follows:

Assumptions
Assumptions used to determine benefit obligations at the end of the year are as follows:		  
   Discount rate8.25%8.50%
   Expected increase in health care costs6.75%6.50%
   Expected return on plan assets9.25%8.50%
 
   Plan assets  
   The asset allocation of the Nufcor South Africa post-retirement medical fund as at the end of the year, by asset category, is as follows:  
   Unit trust investment funds100%100%
   No investments are made in related party entities.  

Five-year Defined Benefit Plan disclosure

Figures in million20072006200520042003
US Dollars
AngloGold Ashanti Pension Fund     
Defined benefit obligation257224222216163
Plan assets(293)(262)(230)(204)(138)
Net (funded) unfunded(36)(38)(8)1225
Experience adjustments on plan liabilities314610–
Experience adjustments on plan assets1(40)(41)(19)(4)
 
Post-retirement medical scheme for AngloGold Ashanti South African employees     
Defined benefit obligation165156185150128
Unfunded165156185150128
Experience adjustments on plan liabilities(2)(8)615(9)
 
Other Defined Benefit Plans     
Defined benefit obligation1819184118
Plan assets(9)(8)(8)(23)(11)
Unfunded91110187
Experience adjustments on plan liabilities1–(1)32
Experience adjustments on plan assets–––(2)(1)
 
SA Rands
AngloGold Ashanti Pension Fund     
Defined benefit obligation1,7531,5681,4081,2181,089
Plan assets(1,997)(1,835)(1,459)(1,150)(920)
Net (funded) unfunded(244)(267)(51)68169
Experience adjustments on plan liabilities23953764–
Experience adjustments on plan assets6(272)(260)(125)(28)
 
Post-retirement medical scheme for AngloGold Ashanti South African employees     
Defined benefit obligation1,1211,0941,172849850
Unfunded1,1211,0941,172849850
Experience adjustments on plan liabilities(13)(57)3899(60)
 
Other Defined Benefit Plans     
Defined benefit obligation134132116238110
Plan assets(67)(63)(56)(143)(77)
Unfunded6769609533
Experience adjustments on plan liabilities53(4)1914
Experience adjustments on plan assets(2)–(2)(9)(10)

Defined Contribution Funds

Contributions to the various retirement schemes are fully expensed during the year in which they are made and the cost of contributing to retirement benefits for the year amounted to $51m, R358m (2006: $40m, R274m).

Australia (Boddington and Sunrise Dam)

The region contributes to the Australian Retirement Fund for the provision of benefits to employees and their dependants on retirement, disability or death. The fund is a multi-industry national fund with defined contribution arrangements. Contribution rates by the operation on behalf of employees varies, with minimum contributions meeting compliance requirements under the Superannuation Guarantee legislation. Members also have the option of contributing to approved personal superannuation funds. The contributions by the operation are legally enforceable to the extent required by the Superannuation Guarantee legislation and relevant employment agreements. The cost to the group of all these contributions amounted to $3m, R20m (2006: $2m, R14m).

Ghana and Guinea (Iduapriem, Obuasi and Siguiri)

AngloGold Ashanti mines in Ghana and Guinea contribute to provident plans for their employees which are defined contribution plans. The funds are administered by Boards of Trustees and invest mainly in Ghana and Guinea government treasury instruments, fixed term deposits and other projects. The cost of these contributions were $4m, R22m (2006: $3m, R21m).

Mali (Sadiola, Yatela and Morila)

The Malian operations do not have retirement schemes for employees. All employees (local and expatriate) contribute towards the government social security fund, and the company also makes a contribution towards this fund. On retirement, Malian employees are entitled to a retirement benefit from the Malian government. Expatriate employees are reimbursed only their contributions to the social security fund. AngloGold Ashanti seconded employees in Mali remain members of the applicable pension or retirement fund in terms of their conditions of employment with AngloGold Ashanti. The cost to the group of all these contributions amounted to $1m, R7m (2006: $1m, R6m).

Namibia (Navachab)

Navachab employees are members of a defined contribution provident fund. The fund is administered by the Old Mutual insurance company. Both the company and the employees contribute to this fund. AngloGold Ashanti seconded employees at Navachab remain members of the applicable pension or retirement fund in terms of their conditions of employment with AngloGold Ashanti. The cost to the group of all these contributions amounted to $1m, R6m (2006: $1m, R7m).

North America (Cripple Creek & Victor)

AngloGold Ashanti USA sponsors a 401(k) savings plan whereby employees may contribute up to 60% of their salary, of which up to 5% is matched at a rate of 150% by AngloGold Ashanti USA. AngloGold Ashanti USA's contributions were $1m, R10m (2006: $2m, R11m).

South Africa (Great Noligwa, Kopanang, Moab Khotsong, Mponeng, Savuka, Tau Lekoa and TauTona)

South Africa contributes to various industry-based pension and provident retirement plans which covers substantially all employees and are defined contribution plans. These plans are all funded and the assets of the schemes are held in administrated funds separately from the group's assets. The cost of providing these benefits amounted to $36m, R257m (2006: $29m, R201m).

South America (AngloGold Ashanti Brasil Mineração, Cerro Vanguardia and Serra Grande)

The AngloGold Ashanti South America region operates defined contribution arrangements for their employees in Brazil. These arrangements are funded by the operations (basic plan) and operations/employees (optional supplementary plan). A PGBL fund, similar to the American 401(k) type of plan was started in December 2001. Administered by Bradesco Previdencia e Seguros (which assumes the risk for any eventual actuarial liabilities), this is the only private pension plan sponsored by the group. Contributions amounted to $5m, R36m (2006: $2m, R14m).

Tanzania (Geita)

Geita does not have a retirement scheme for employees. Tanzanian nationals contribute to the National Social Security Fund (NSSF) or the Parastatal Provident Fund (PPF), depending on the employee’s choice, and the company also makes a contribution on the employee’s behalf to the same fund. On leaving the group, employees may withdraw their contribution from the fund. From July 2005, the company has set up a supplemental provident fund which is administered by the Parastatal Provident Fund (PPF) with membership available to permanent national employees on a voluntary basis. The company makes no contribution towards any retirement schemes for contracted expatriate employees. AngloGold Ashanti employees seconded in Tanzania remain members of the applicable pension or retirement fund in terms of their conditions of employment with AngloGold Ashanti. The company contributes to the National Social Security Fund (NSSF) on behalf of expatriate employees. On termination of employment the company may apply for a refund of contributions from the NSSF.

SA Rands  US Dollars
20062007Figures in million20072006
  33Deferred taxation  
   Deferred taxation relating to temporary differences is made up as follows:  
   Liabilities  
11,29311,548     Tangible assets1,6961,613
107108     Inventories1615
639488     Derivatives7191
12038     Other517
12,15912,182  1,7881,736
   Assets  
1,2151,425     Provisions209173
2,3212,521     Derivatives370331
1,1171,465     Tax losses215160
216155     Other2331
4,8695,566  817695
      
7,2906,616 Net deferred taxation liability9711,041
   Included in the balance sheet as follows:  
432543     Deferred tax assets8062
7,7227,159     Deferred tax liabilities1,0511,103
7,2906,616     Net deferred taxation liability9711,041
   The movement on the deferred tax balance is as follows:  
7,0417,290 Balance at beginning of year1,0411,110
15(1) Taxation on fair value adjustments (note 28)–2
(200)(641) Income statement movement(94)(30)
(18)21 Discontinued operations (note 13)4(2)
(167)1 Taxation on cash flow hedges and hedge ineffectiveness (note 28)–(25)
102(36) Taxation on actuarial (loss) gain (note 28)(5)15
–38 Acquired properties5–
517(56) Translation20(29)
7,2906,616 Balance at end of year9711,041
   No provision has been made for South African income tax or foreign tax that may result from future remittances of undistributed earnings of foreign subsidiaries or foreign corporate joint ventures because it is expected that such earnings will not be distributed as a dividend in the foreseable future. Unrecognised taxable temporary differences pertaining to undistributed earnings totalled $427m, R2,910m at 31 December 2007 (2006: $353m, R2,471m).   
      
  34Trade, other payables and deferred income  
   Non-current  
15075 Deferred income1121
–4 Related parties1–
15079  1221
   Current  
2,0402,862 Trade creditors419292
1,1721,182 Accruals174167
136162 Deferred income2419
289291 Unearned premiums on normal sale exempted contracts4341
6452 Other creditors89
3,7014,549  668528
      
3,8514,628 Total trade, other payables and deferred income680549
   Current trade and other payables are non-interest bearing and are normally settled within 60 days.  
      
  35Taxation  
7101,234 Balance at beginning of year176112
(968)(1,664) Payments during the year(237)(143)
1,4321,680 Provision during the year239210
   Transfer to recoverable tax in non-current trade and other  
–6 receivables1–
172 Discontinued operations (note 13)–2
4311 Translation7(5)
1,2341,269 Balance at end of year186176
      
  36Cash generated from operations  
859(3,015) (Loss) profit before taxation(492)168
   Adjusted for:  
4,5907,232 Movement on non-hedge derivatives and other commodity contracts1,088627
4,0594,143 Amortisation of tangible assets (notes 4, 9 and 16)590597
822880 Finance costs and unwinding of obligations (note 7)125123
(160)287 Environmental rehabilitation and other expenditure42(22)
161168 Operating special items2522
1314 Amortisation of intangible assets (notes 4 and 17)22
(528)(431) Deferred stripping(63)(75)
(137)(333) Fair value adjustment on option component of convertible bond(47)(16)
(218)(312) Interest receivable (note 3)(45)(32)
213520 Other non-cash movements7527
(875)(1,238) Movements in working capital(179)(140)
8,7997,915  1,1211,281
   Movements in working capital:  
(1,852)(1,489) Increase in inventories(240)(211)
(27)(501) (Increase) decrease in trade and other receivables(79)19
1,004752 Increase in trade and other payables14052
(875)(1,238)  (179)(140)
      
  37Related parties  
   Material related party transactions were as follows:  
   Sales and services rendered to related parties  
89104 Joint ventures1514
–5 Associates1–
 
   Purchases from related parties  
54– Third parties–8
 
   Outstanding balances arising from sale of goods and services and other loans due by related parties  
1437 Joint ventures52
8489 Associates1312
 
   Outstanding balances arising from purchases of goods and services and other loans owed to related parties  
–4 

Third parties

Amounts owed to/due by third party and joint venture related parties are unsecured non-interest bearing and under terms that are no less favourable than those with third parties. Terms relating to associate related parties are detailed in note 18.

AngloGold Ashanti, who holds an equity investment of 29.8% in Trans-Siberian Gold plc (TSG), entered into a significant transaction during the June 2007 quarter with TSG in which two exploration companies were acquired for a cash consideration of $40m, R284m. The companies acquired consist of Amikan (which holds the Veduga deposit and related exploration and mining licences) and AS APK (which holds the Bogunay deposit and related exploration and mining licences).

Details of guarantees to associates are included in note 38.

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:		1–
90133 – short-term employee benefits1913
–8 – post-employment benefits1–
3154 – share-based payments85
121195  2818
   In connection with the relocation of Roberto Carvalho Silva, an executive director of the company since 2005, to Nova Lima, Brazil, in 2000, Mr Carvalho Silva commenced renting a house in Nova Lima from a Brazilian subsidiary of the company. Mr Carvalho Silva purchased the house from the company’s subsidiary in January 2005. The total purchase price of the house was BRL1,150,000 ($429,923). Mr Carvalho agreed to pay the purchase price of the house in 60 instalments, the first being BRL19,168 and 59 instalments of BRL19,167 each starting on 28 January 2005. Such monthly instalments were adjusted annually by the cumulative INPC (a Consumer Price Index in Brazil) in lieu of interest.

As at 31 December 2006, BRL728,580 ($340,458) of the purchase price remained to be paid to the company’s subsidiary with BRL657,717 ($341,352) remaining to be paid as at 20 June 2007. The remaining balance was repaid on or about 31 August 2007.

A Brazilian subsidiary of the company received marketing, communications and corporate affairs services from a Brazilian company in which a son of Roberto Carvalho Silva owns a one-third interest. The amounts paid by the company’s subsidiary to this company in respect of such services during the years were: 2006: BRL903,465 ($414,433); 2005: BRL311,923 ($127,837) and BRL634,023 ($329.055) was paid in 2007. The company subsequently terminated the agreement with the Brazilian marketing, communications and corporate affairs services company with effect July 2007.

Shareholders

The major shareholders of the company are detailed under shareholder information.

Refer to Investment in principal subsidiaries and joint ventures for the list of principal subsidiaries and joint ventures.

  
      
  38Contractual commitments and contingencies  
   

Operating leases

At 31 December 2007, the group was committed to making the following payments in respect of operating leases for among 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  
304246 – one year3643
18158 – between one and two years826
7611 – between two and five years211
51 – after five years–1
566316  4681
   

Finance leases

The group has finance leases for plant and equipment, buildings and motor vehicles. The leases for plant and equipment and buildings have terms of renewal but no purchase options. The motor vehicle leases have no purchase options. Renewals are at the option of the specific entity that holds the lease. Future minimum lease payments under finance lease contracts together with the present value of the net minimum lease payments are as follows:

  
SA Rands  US Dollars
Present
value of
payments		Minimum
payments		  Minimum
payments		Present
value of
payments
2007 Figures in million2007
3762 Within one year95
38142 Within one year but not more than five years216
244411 More than five years6036
319615 Total minimum lease payments9047
–(296) Amounts representing finance charges(43)–
319319 Present value of minimum lease payments4747
      
2006  2006
3545 Within one year75
6780 Within one year but not more than five years1110
102125 Total minimum lease payments1815
–(23) Amounts representing finance charges(3)–
102102 Present value of minimum lease payments1515
      
20062007  20072006
   Capital commitments  
    Acquisition of tangible assets  
2,4752,968 Contracted for436354
5,1205,511 Not contracted for809731
7,5958,479 Authorised by the directors1,2451,085
   Allocated to:  
   Project expenditure  
2,5722,874 – within one year422367
1,8552,119 – thereafter311265
4,4274,993  733632
   Stay-in-business expenditure  
2,9253,208 – within one year471418
243278 – thereafter4135
3,1683,486  512453
124113 Share of underlying capital commitments of joint ventures1718
      
   Purchase obligations  
   Contracted for  
1,9202,975 – within one year437274
1,3272,524 – thereafter370190
3,2475,499  807464
906392 Share of underlying purchase obligations of joint ventures58129

Purchase obligations represent contractual obligations for the purchase of mining contract services, power, supplies, consumables, inventories, explosives and activated carbon.

To service these capital commitments, purchase obligations and other operational requirements, the group 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 group'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 group believes that these facilities can be refinanced on terms similar to those currently in place.

Summary of contracted uranium sales as at 31 December 2007

The group has the following forward pricing uranium commitments.

Year000 lbs (1)Average
contracted
price ($/lbs) (2)
20081,75118.13
200991929.91
201098833.46
2011-20131,48235.94

Great Noligwa, Kopanang and Tau Lekoa produced 1.23 million pounds of uranium oxide in 2007 (2006: 1.38 million pounds).

(1)Certain contracts allow the buyer to adjust the purchase quantity within a specified range.
(2)Certain contracts are subject to market related price adjustment mechanisms. In these cases the price disclosed indicates the previous periodic price reset.

In addition, the group has gold sale commitments as disclosed in note 39.

SA Rands US Dollars
Liabilities
included
on
balance
sheet		Guaran-
tees
and
contin-
gencies		Liabilities
included
on
balance
sheet		Guaran-
tees
and
contin-
gencies		 Guaran-
tees
and
contin-
gencies		Liabilities
included
on
balance
sheet		Guaran-
tees
and
contin-
gencies		Liabilities
included
on
balance
sheet
20062007Figures in million20072006
    Contingent liabilities    
––––Groundwater pollution – South Africa (1)––––
–329–429Sales tax on gold deliveries – Brazil (2)63–47–
–71–108Other tax disputes – Brazil (3)16–11–
–33–57Other immaterial contingencies (4)8–5–
    Guarantees    
    Financial guarantees    
–100–100Oro Africa (5)15–14–
    Hedging guarantees (6)    
1,7567,3343,38210,176Ashanti Treasury Services (7)1,4944971,047251
1,7412,0323,5393,539Geita Management Company (8)520520290249
9599591,5011,501AngloGold South America (9)220220137137
4591,5761,5472,610AngloGold USA Trading Company (9)38322722566
584584542542Cerro Vanguardia S.A. (9)80808383
5,49913,01810,51119,062 2,7991,5441,859786
(1)AngloGold Ashanti Limited has identified a number of groundwater pollution sites at its current operations in South Africa and has investigated a number of different technologies and methodologies that could possibly be used to remediate the groundwater pollution. The geology of the area is typified by a dolomite rock formation that is prone to solution cavities. Polluted process water from the operations has percolated from pollution sources to this rock formation and has been transported three dimensionally, creating pollution plumes in the dolomite aquifer. Numerous scientific, technical and legal reports have been produced and the remedying of the polluted soil and groundwater is the subject of a continued research programme between the University of the Witwatersrand and AngloGold Ashanti. Subject to the technology being developed as a proven remediation technique, no reliable estimate can be made for the obligation.
(2)Mineração Serra Grande S.A.(MSG), the operator of the Crixas mine in Brazil, has received two tax assessments from the State of Goiás related to payments of sales taxes on gold deliveries for export, one for the period between February 2004 and June 2005 and the other for the period between July 2005 and May 2006. The tax authorities maintain that whenever a taxpayer exports gold mined in the State of Goiás through a branch located in a different Brazilian State, it must obtain an authorisation from the Goiás State Treasury by means of a Special Regime Agreement (Termo de Acordo re Regime Especial – TARE). The MSG operation is co-owned with Kinross Gold Corporation. AngloGold Ashanti Brasil Mineração manages the operation and its attributable share of the first assessment is approximately $39m, R266m. Although MSG requested the TARE in early 2004, it was only granted and executed in May 2006. In November 2006 the administrative council’s second chamber ruled in favour of MSG and fully cancelled the tax liability related to the first period. The State of Goiás has appealed to the full board of the State of Goiás’s tax administrative council. The second assessment was issued by the State of Goiás in October 2006 on the same grounds as the first assessment, and the attributable share of the assessment is approximately $24m, R163m. AngloGold Ashanti Limited believes both assessments are in violation of Federal legislation on sales taxes.
(3) VAT Disputes – Brazil – MSG received a tax assessment in October 2003 from the State of Minas Gerais related to sales taxes on gold allegedly returned from the branch in Minas Gerais to the company head office in the State of Goiás. The tax administrators rejected the company's appeal against the assessment. The company is now dismissing the case at the judicial sphere. The company’s attributable share of the assessment is approximately $8m, R54m. Other tax disputes – Morro Velho and AngloGold Ashanti Brasil Mineração are involved in disputes with tax authorities. These disputes involve eleven federal tax assessments including income tax, social contributions and annual property tax based on ownership of properties outside of urban perimeters (ITR). The amount involved is approximately $8m, R54m.
(4) The group has several other insignificant contingent liabilities, including uncertainty around various tax assessments received by Sadiola from the government of Mali.
(5)The group has provided surety in favour of the lender in respect of gold loan facilities with two wholly owned subsidiaries of Oro Group (Pty) Ltd, an associate of the group. The group has a total maximum liability, in terms of the suretyships of $15m, R100m.
The suretyship agreements have a termination notice period of 90 days. The group receives a fee from the associate for providing the surety.
(6) The difference between the amounts stated under guarantees and contingencies, and liabilities included on balance sheet, is the NPSE hedges which are covered by guarantees but not included on the balance sheet.
(7)The group, together with its wholly owned subsidiary, AngloGold Ashanti Holdings plc, has provided guarantees to several counterparty banks for the hedging commitments of its wholly owned subsidiary Ashanti Treasury Services Limited (ATS).
(8) AngloGold Ashanti Limited and 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 agreements entered into by GMC, and to the payment of all money owing or incurred by GMC as and when due.
(9) The group 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.
  
39Financial risk management activities
 

In the normal course of its operations, the group 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 group may enter into transactions which make use of both on-and off-balance sheet derivatives. The group does not acquire, hold or issue derivatives for trading purposes. The group 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, counterpart limits, controlling and reporting structures.

Controlling risk in the group

The Executive Committee and the Treasury Committee are responsible for risk management activities within the group. The Treasury Committee, chaired by the independent chairman of the AngloGold Ashanti Audit and Corporate Governance Committee, comprising executive members and treasury executives, reviews and recommends to the Executive Committee treasury counterparts, limits, instruments and hedge strategies. The treasurer is responsible for managing gold price, foreign exchange, interest rate, liquidity and credit risk. Within the treasury function, there is an independent risk function, which monitors adherence to treasury risk management policy and counterpart limits and provides regular and detailed management reports.

The financial risk management objectives of the group are defined as follows:

  • safeguarding the group’s core earnings stream from its major assets through the effective control and management of gold price risk, other commodity price 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 counterparts; and
  • ensuring that all contracts and agreements related to risk management activities are coordinated and consistent throughout the group 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 group has transactional foreign exchange exposures. Such exposure arises from sales or purchases by an operating unit in currencies other than the unit’s functional currency. The gold market is predominately priced in US dollars which exposes the group to the risk that fluctuations in the SA rand/US dollar, Brazilian real/US dollar, Argentinean peso/US dollar and Australian dollar/US dollar exchange rates may also have an adverse effect on current or future earnings. The group is also exposed to certain byproduct commodity price risk.

A number of products, including derivatives, are used to manage the gold and silver price and foreign exchange risks that arise out of the group's core business activities. Forward sales contracts and call and put options are used by the group to manage these risks. At year end, the volume of outstanding forward sales contracts was 108,403kg (2006: 122,133kg).

As the group does not enter into financial instruments for trading purposes, the risks inherent to financial instruments are always offset by the underlying risk being hedged. The group further manage such risks by ensuring that the level of hedge cover does not exceed expected sales in future periods, that the tenor of instruments does not exceed the life of mine and that no basis risk exists.

Cash flow hedges

The group’s cash flow hedges consist of commodity and foreign exchange forward contracts that are used to protect against exposures to variability in future commodity and foreign exchange 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 equity (other comprehensive income) and are transferred to earnings when the forecast cash flows affect the income statement.

The cash flow hedge forecast transactions are expected to occur over the next three years, in line with the maturity dates of the hedging instruments and will affect profit and loss simultaneously in an equal and opposite way.

The gains and losses on ineffective portions of such derivatives are recognised immediately in the income statement. During the year to 31 December 2007, a loss of $10m, R69m (2006: nil) was recognised due to hedge ineffectiveness.

Non-hedge derivatives
Loss on non-hedge derivatives and other commodity contracts is summarised as follows:

Figures in million20072006
US Dollars
Loss on non-hedge derivatives(808)(215)
Unrealised gain (loss) on other commodity physical borrowings7(1)
Provision reversed (raised) for loss on future deliveries and other commodities21(23)
Loss on non-hedge derivatives and other commodity contracts per the income statement(780)(239)
   
SA Rands
Loss on non-hedge derivatives(5,272)(1,791)
Unrealised gain (loss) on other commodity physical borrowings49(9)
Provision reversed (raised) for loss on future deliveries and other commodities142(155)
Loss on non-hedge derivatives and other commodity contracts per the income statement(5,081)(1,955)

Loss on non-hedge derivatives and other commodity contracts was $780m in 2007 compared to a loss of $239m in the previous year. The loss is primarily the result of the revaluation of non-hedge derivatives resulting from changes in the prevailing spot gold price, exchange rates, interest rates and greater volatilities compared to the previous year.

Net open hedge position as at 31 December 2007

The marked-to-market value of all derivatives, irrespective of accounting designation, making up the hedge position was negative $4.27bn (negative R29.10bn) as at 31 December 2007 (as at 31 December 2006: negative $2.9bn, negative R20.32bn). These values were based on a gold price of $836.30 per ounce, exchange rates of $1 = R6.8104 and A$1 = $0.8798 and the prevailing market interest rates and volatilities at 31 December 2007. The values as at 31 December 2006 were based on a gold price of $636.30 per ounce, exchange rates of $1 = R7.0010 and A$1 = $0.7886 and the market interest rates and volatilities prevailing at that date.

The group had the following net forward-pricing commitments outstanding against future production.

Summary: All open contracts in the group's commodity hedge position as at 31 December 2007

Year200820092010201120122013-
2015		Total
US Dollar/Gold
Forward contracts
Amount (kg)22,81721,73814,46212,93111,94412,36496,256
$/oz$314$316$347$397$404$432$357
Forward contracts (Long)
Amount (kg)11,304(1)     11,304(1)
$/oz$647     $647
Put options sold       
Amount (kg)25,9623,7481,8821,8821,8823,76439,120
$/oz$682$530$410$420$430$445$607
Call options purchased
Amount (kg)9,813     9,813
$/oz$427     $427
Call options sold
Amount (kg)58,57045,95036,80439,38524,46039,924245,093
$/oz$521$498$492$517$622$604$535
 
Rand/Gold
Forward contracts
Amount (kg) 933    933
R/kg R116,335    R116,335
Call options sold
Amount (kg) 2,9862,9862,986  8,958
R/kg R202,054R216,522R230,990  R216,522
 
Australian Dollar/Gold
Forward contracts
Amount (kg)16,0183,3903,110   22,518
A$/ozA$848A$644A$685   A$795
Put options sold
Amount (kg)7,465     7,465
A$/ozA$882     A$882
Call options purchased
Amount (kg)3,1101,2443,110   7,464
A$/ozA$680A$694A$712   A$696
Call options sold       
Amount (kg)5,599     5,599
A$/ozA$954     A$954
Total net gold       
Delta (kg) (2)(69,805)(70,154)(51,200)(51,137)(33,123)(47,702)(323,121)
Delta (oz) (2)(2,244,280)(2,255,500)(1,646,116)(1,644,090)(1,064,928)(1,533,653)(10,388,567)
The open delta hedge position of the group at 31 December 2006 was 10.16Moz or 316t.
(1)Indicates a long position resulting from forward purchase contracts. The group enters into forward purchase contracts as part of its strategy to actively manage and reduce the size of the hedge book.
(2)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 2007.
US Dollar/Silver
Put options purchased       
Amount (kg) 43,545     43,545
$/oz$7.66     $7.66
Put options sold       
Amount (kg) 43,545     43,545
$/oz$6.19     $6.19
Call options sold       
Amount (kg)43,545     43,545
$/oz$8.64     $8.64
Certain of the hedging positions reported in the tables above are governed by early termination clauses in favour of certain counterparts.

Summary: All open contracts in the group’s currency hedge position as at 31 December 2007
      2013- 
 200820092010201120122015Total
Rand/US Dollar (000) 
Forward contracts       
Amount ($)35,000     35,000
R per $ R6.94     R6.94
Put options purchased       
Amount ($)120,000     120,000
R per $ R6.98     R6.98
Put options sold       
Amount ($)120,000     120,000
R per $ R6.65     R6.65
Call options sold       
Amount ($)135,000     135,000
R per $ R7.35     R7.35
 
Australian Dollar/US Dollar (000)  
Forward contracts       
Amount ($)190,000     190,000
$ per A$$0.84     $0.84
Put options purchased       
Amount ($)140,000     140,000
$ per A$$0.83     $0.83
Put options sold       
Amount ($)140,000     140,000
$ per A$$0.87     $0.87
Call options sold       
Amount ($)140,000     140,000
$ per A$$0.81     $0.81
 
Brazilian Real/US Dollar (000)  
Forward contracts       
Amount ($)31,000     31,000
BRL per $ BRL1.99      BRL1.99
Put options purchased       
Amount ($)24,000     24,000
BRL per $ BRL1.87     BRL1.87
Call options sold       
Amount ($)68,000     68,000
BRL per $ BRL1.92     BRL1.92
 

The mix of hedging instruments, the volume of production hedged and the tenor of the hedging book is continually reviewed in the light of changes in operational forecasts, market conditions and the group'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

Fluctuations in interest rates impact on the value of short-term cash investments and financing activities, giving rise to interest rate risk.

In the ordinary course of business, the group receives cash from the proceeds of its gold sales and is required to fund working capital requirements. This cash is managed to ensure surplus funds are invested in a manner to achieve market-related returns while minimising risks. The group is able to actively source financing at competitive rates. The counterparts are financial and banking institutions of good credit standing.

The group has sufficient undrawn borrowing facilities available to fund working capital requirements (note 30).

The following are the contractual maturities of financial liabilities, including interest payments

Non-derivative financial liabilities

 Within one yearBetween
one and two years		Between
two and five years		After five years 
 MillionEffective
rate %		MillionEffective
rate%		MillionEffective
rate %		MillionEffective
rate %		Total
2007         
Borrowings418 1,042 573 60 2,093
– In USD905.81,0382.44108.5– 1,538
– ZAR in USD equivalent32710.539.9129.9609.8402
– AUD in USD equivalent17.717.71507.7– 152
– BRL in USD equivalent– – 15.0– 1
Trade and other payables601 1 – – 602
2006         
Borrowings143 559 1,008 2 1,712
– In USD955.82445.91,0082.427.41,349
– ZAR in USD equivalent4010.531510.5– – 355
– GHC in USD equivalent819.0– – – 8
Trade and other payables468 – – – 468

The following are the undiscounted forecast principal cash flows arising from all on balance sheet derivative contracts (cash flow hedges and non-hedges)

Derivative financial assets and (liabilities)

 Within
one year		Between
one and two
years		Between
two and five
years		After five
years		Total
US Dollars million     
At 31 December 2007     
Cash inflows from assets381725944556
Cash outflows from liabilities(697)(575)(1,113)(685)(3,070)
Net cash outflows(316)(503)(1,054)(641)(2,514)
At 31 December 2006     
Cash inflows from assets4231728146722
Cash outflows from liabilities(482)(364)(767)(592)(2,205)
Net cash outflows(59)(192)(686)(546)(1,483)
      
SA Rands million     
At 31 December 2007     
Cash inflows from assets2,5954904023003,787
Cash outflows from liabilities(4,747)(3,916)(7,580)(4,665)(20,908)
Net cash outflows(2,152)(3,426)(7,178)(4,365)(17,121)
At 31 December 2006     
Cash inflows from assets2,9651,2035683215,057
Cash outflows from liabilities(3,377)(2,545)(5,370)(4,142)(15,434)
Net cash outflows(412)(1,342)(4,802)(3,821)(10,377)

Credit risk

Credit risk arises from the risk that a counterpart may default or not meet its obligations timeously. The group minimises credit risk by ensuring that credit risk is spread over a number of counterparts. These counterparts are financial and banking institutions of good credit quality. Where possible, management tries to ensure that netting agreements are in place. No set-off is applied to the balance sheet due to the different maturity profiles of assets and liabilities. The combined maximum credit risk exposure at the balance sheet date by class of derivative financial instrument is $516m, R3,516m (2006: $655m, R4,591m) on a contract by contract basis.

The combined maximum credit risk exposure of the group is as follows:

 US DollarsSA Rands
Figures in million2007200620072006
Commodity option contract2002421,3651,697
Foreign exchange option contracts1429413
Forward sale commodity contracts2553671,7362,572
Forward foreign exchange contracts1248229
Gold interest rate swap3540239280
All derivatives5166553,5164,591
Other investments (note 19)6982470572
Other non-current assets251633
Trade and other receivables6056411388
Cash restricted for use (note 24)391126475
Cash and cash equivalents (note 25)4964953,3813,467
Total financial assets1,1821,3048,0589,126
Financial guarantees – Oro Africa1514100100
Total1,1971,3188,1589,226

In addition, the group has also guaranteed the hedging commitments of several subsidiary companies as disclosed in note 38.

Credit risk exposure netted by counterparts amounts to $123m, R839m (2006: $68m, R477m). Trade and other receivables that are past due but not impaired totalled $1m, R5m (2006: $1m, R6m). No other financial assets are past due but not impaired.

Trade debtors mainly comprise banking institutions purchasing gold bullion. Normal market settlement terms are two working days. No impairment was recognised as the principal debtors continue to be in a sound financial position.

The group does not generally obtain collateral or other security to support financial instruments subject to credit risk, but monitors the credit standing of counterparts. The group's reserves and financial strength has allowed it to arrange unmargined credit lines of up to 10 years with counterparties.

Fair value of financial instruments

The estimated fair values of financial instruments are determined at discrete points in time based on relevant market information. These estimates involve uncertainties and cannot be determined with precision. The estimated fair values of the group's financial instruments as at 31 December 2007 are as follows:

Type of instrument

 Carrying
amount		Fair
value		Carrying
amount		Fair
value
Figures in million20072006
US Dollars
Financial assets    
Other investments (note 19)117117126126
Other non-current assets2255
Trade and other receivables60605655
Cash restricted for use (note 24)39391111
Cash and cash equivalents (note 25)496496495495
Derivatives516570655698
Financial liabilities    
Borrowings (note 30)1,8721,9031,4821,551
Trade and other payables602602468468
Derivatives2,9184,9372,0193,724
SA Rands
Financial assets    
Other investments (note 19)795796884884
Other non-current assets16163332
Trade and other receivables411411388385
Cash restricted for use (note 24)2642647575
Cash and cash equivalents (note 25)3,3813,3813,4673,467
Derivatives3,5163,8844,5914,889
Financial liabilities    
Borrowings (note 30)12,75012,96510,37610,859
Trade and other payables4,1004,1003,2763,276
Derivatives19,87333,62314,13626,074

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.

Borrowings

The fair values of listed fixed rate debt and the convertible bonds are shown at their closing market value as at 31 December 2007. The interest rate on the remaining borrowings is reset on a short-term floating rate basis, and accordingly the carrying amount is considered to approximate fair value.

Derivatives

The fair values of derivatives are estimated based on the ruling market prices, volatilities and interest rates as at 31 December 2007. The fair value amounts for derivatives include off balance sheet normal sale exempted gold contracts, which are not carried on the balance sheet and are excluded from the carrying amount. All other derivatives are carried on balance sheet at fair value.

The group 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 and are not observable generally in the market. The group uses volatility inputs supplied by leading market participants (international banks). The group believes that no other possible alternative would result in significantly different fair value estimations.

Derivative assets (liabilities) comprise the following:

 AssetsLiabilities
 Normal
sale
exempted		Cash flow
hedge
accounted		Non-
hedge
accounted		TotalNormal
sale
exempted		Cash flow
hedge
accounted		Non-
hedge
accounted		Total
Figures in million20072007
US Dollars 
Commodity option contracts––200200(708)–(2,230)(2,938)
Foreign exchange option contracts––1414––(20)(20)
Forward sale commodity contracts543252309(1,284)(339)(302)(1,925)
Forward foreign exchange contracts–4812––(1)(1)
Gold interest rate swaps––3535(27)–(1)(28)
Sub-total hedging547509570(2,019)(339)(2,554)(4,912)
Option component of convertible bonds––––––(25)(25)
All derivatives547509570(2,019)(339)(2,579)(4,937)
         
 20062006
Commodity option contracts––242242(567)–(1,298)(1,865)
Foreign exchange option contracts––22––(14)(14)
Forward sale commodity contracts4334333410(1,104)(409)(225)(1,738)
Forward foreign exchange contracts–224––––
Gold interest rate swaps––4040(34)–(1)(35)
Sub-total hedging4336619698(1,705)(409)(1,538)(3,652)
Option component of convertible bonds––––––(72)(72)
All derivatives4336619698(1,705)(409)(1,610)(3,724)
         
SA Rands
Commodity option contracts––1,3651,365(4,822)–(15,190)(20,012)
Foreign exchange option contracts––9494––(136)(136)
Forward sale commodity contracts368191,7172,104(8,745)(2,307)(2,056)(13,108)
Forward foreign exchange contracts–285482––(9)(9)
Gold interest rate swaps––239239(181)–(5)(186)
Sub-total hedging368473,4693,884(13,748)(2,307)(17,396)(33,451)
Option component of convertible bonds––––––(170)(170)
All derivatives368473,4693,884(13,748)(2,307)(17,566)(33,621)
         
 20062006
Commodity option contracts––1,6971,697(3,971)–(9,085)(13,056)
Foreign exchange option contracts––1313––(97)(97)
Forward sale commodity contracts2982402,3322,870(7,730)(2,867)(1,574)(12,171)
Forward foreign exchange contracts–131629––––
Gold interest rate swaps––280280(238)–(10)(248)
Sub-total hedging2982534,3384,889(11,939)(2,867)(10,766)(25,572)
Option component of convertible bonds––––––(504)(504)
All derivatives2982534,3384,889(11,939)(2,867)(11,270)(26,076)

Sensitivity analysis

Derivatives

A principal part of the group'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 dollars marked-to-market value of the hedge book to key underlying factors at 31 December 2007 (actual changes in the timing and amount of the following variables may differ from the assumed changes below).

The table below sets out the impact on the marked-to-market value of the hedge book of an incremental parallel fall or rise in the respective yield curves at the beginning of each month, quarter or year (as is appropriate) from 1 January 2008. The yield curves match the maturity dates of the individual derivative positions in the hedge book. These figures incorporate the impact of any option features in the underlying exposures.

 Change
in rate (+)		Normal
sale
exempted
(million)		Cash flow
hedge
accounted
(million)		Non-
hedge
accounted
(million)		Total
change
in fair
value
(million)		Total
change
in fair
value
(million)
US Dollars  2007  2006
Currency (R/$)1.00–(10)(24)(34)(17)
Currency (A$/$)0.1022139623
Currency (BRL/$)0.10––(4)(4)(1)
Gold price ($/oz)200.00(792)(147)(1,156)(2,095)(2,016)
USD interest rate (%)1.00(25)(2)(74)(101)(91)
ZAR interest rate (%)1.50–(1)(5)(6)(3)
AUD interest rate (%)1.50(4)–2(2)(1)
Gold interest rate (%)0.503937311574

 Change
in rate (–)		Normal
sale
exempted
(million)		Cash flow
hedge
accounted
(million)		Non-
hedge
accounted
(million)		Total
change
in fair
value
(million)		Total
change
in fair
value
(million)
US Dollars  2007  2006
Currency (R/$)1.00–14152911
Currency (A$/$)0.10(22)(1)(52)(75)(3)
Currency (BRL/$)0.10––441
Gold price ($/oz)200.007901479911,9281,982
USD interest rate (%)1.002627610491
ZAR interest rate (%)1.50–1563
AUD interest rate (%)1.504–(2)21
Gold interest rate (%)0.50(39)(3)(76)(118)(74)

Interest rate risk on other financial assets and liabilities (excluding derivatives)

The group also monitors interest rate risk on other financial assets and liabilities.

The following table shows the approximate interest rate sensitivities of the other financial assets and liabilities at 31 December 2007 (actual changes in the timing and amount of the following variables may differ from the assumed changes below). As the sensitivity is the same (linear) for both increases and decreases in interest rates only absolute numbers are presented.

 Change in
interest
rate
(%)		Change in
interest
amount in
currency
(million)		Change in
interest
amount
US dollars
(million)		Change in
interest
rate
(%)		Change in
interest
amount in
currency
(million)		Change in
interest
amount
US dollars
(million)
 20072006
Financial assets      
USD denominated (%)1.00111.0011
ZAR denominated (%) (1)1.501321.50132
AUD denominated (%)1.50111.5011
BRL denominated (%)2.50212.501–
NAD denominated (%)1.501––––
  
Financial liabilities      
USD denominated (%)1.00441.0022
AUD denominated (%)1.5032–––
GHC denominated (%)–––2.501,842–

(1) This is the only interest rate risk for the company.

40Capital management
 The primary objective of managing the group's capital is to ensure that there is sufficient capital available to support the funding requirements of the group, including capital expenditure, in a way that optimises the cost of capital, maximises shareholders' returns and ensures that the group remains in a sound financial position. There were no changes to the group's overall capital management approach during the current year.

The group manages and make adjustments to the capital structure as opportunities arise in the market place, as and when borrowings mature or as and when funding is required. This may take the form of raising equity, market or bank debt or hybrids thereof.

The group monitors capital using a gearing ratio, which is defined as net debt divided by equity and capital employed. While the group does not set absolute limits on the ratio, the group believes a ratio of between 15% and 35% is optimal in the current market conditions. The elements considered to form part of capital are as listed in Non-GAAP disclosure note 9.

Figures in million20072006
US Dollars  
Borrowings (note 30)1,8721,482
Cash and cash equivalents (note 25)(496)(495)
Net debt1,376987
Net capital employed (1)5,3625,588
Gearing ratio26%18%
   
SA Rands  
Borrowings (note 30)12,75010,376
Cash and cash equivalents (note 25)(3,381)(3,467)
Net debt9,3696,909
Net capital employed (1)36,51839,119
Gearing ratio26%18%

(1) Refer to Non-GAAP note 9.

41Recent developments
 

Golden Cycle acquisition

On 14 January 2008, AngloGold Ashanti announced that it had agreed to acquire 100% of Golden Cycle Gold Corporation (GCGC) through a merger transaction in which GCGC’s shareholders will receive 29 AngloGold Ashanti ADRs for every 100 shares of GCGC common stock held. GCGC holds a 33% shareholding in Cripple Creek & Victor while AngloGold Ashanti holds the remaining 67%. The transaction is subject to a number of regulatory and statutory approvals, including approval by GCGC shareholders. The transaction, at the date of announcement, was valued at approximately $149m, R1,003m.

Eskom power supply

Following the announcement made on 25 January 2008, in which AngloGold Ashanti advised that Eskom would be interrupting power supplies to the company’s South African operations, AngloGold Ashanti halted mining and gold recovery at these operations. Subsequently, AngloGold Ashanti announced on 29 January 2008, that it had begun the process to restart production at its South African operations following a meeting with Eskom and industrial electricity consumers at which Eskom had agreed to provide AngloGold Ashanti with 90% of its electricity demand prior to the shut down so as to return the operations to normal production. At this stage the company estimates the effect of the reduction in the available power supply to negatively affect production by approximately 400,000 ounces (12,440 kilograms). The estimated financial effect of a 400,000 ounce (12,440 kilograms) decrease in production is lower revenue of $348 million (R2,501 million) at an assumed average spot price of $870/oz (R201,000/kg). Total cash costs in South Africa, which includes the effect of lower uranium production, are likely to increase from $309/oz to $402/oz (R77,000/kg to R 100,000/kg).

Change in South African Income Taxation Rates

The Minister of Finance announced on 20 February 2008 a reduction to the gold mining taxation formula from Y = 45-225/X to Y = 43-215/X and a non-mining rate reduction from 37% to 36%. The impact of this is a net reduction to the deferred taxation liability of $17m, R117m and a lower income statement taxation charge of $20m, R138m. The financial impact of the rate changes are calculated based on the results for the year ended 31 December 2007.

Investment in B2Gold

AngloGold Ashanti announced on 14 February 2008 the signing of an agreement with B2Gold, in which B2Gold will have the option to earn 51% of the Gramalote Project. AngloGold Ashanti will be issued, subject to certain conditions precedent, with 25 million shares at a deemed price of Canadian $2.50 per share and 21.4 million warrants in B2Gold in exchange for this an additional interest in mineral concessions in Colombia. The interest in B2Gold including the warrants, if exercised, will be 26%.

^ Top of page
Notes to the financial statementsNext > Company financial statements

AngloGold Ashanti Annual Report 2007 – Annual Financial Statements