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Executives

Stewart Bailey

Mark Cutifani - Chief Executive, Executive Director, Member of Safety, Health & Sustainable Development Committee, Member of Investment Committee, Member of Transformation & Human Resources Development Committee, Member of Risk & Information Integrity Committee and Member of Party Political Donations Committee

Srinivasan Venkatakrishnan - Chief Financial Officer, Director, Member of Investment Committee and Member of Risk & Information Integrity Committee

Analysts

Tanya M. Jakusconek - Scotiabank Global Banking and Markets, Research Division

Patrick T. Chidley - HSBC, Research Division

AngloGold Ashanti (AU) Q4 2012 Earnings Call February 20, 2013 9:00 AM ET

Operator

Good day, and welcome to the AngloGold Ashanti Fourth Quarter and Year End 2012 Conference. [Operator Instructions] Please also note that this conference is being recorded. I would now like to hand the conference over to Stewart Bailey. Please go ahead, sir.

Stewart Bailey

Thanks, Dylan, and apologies for the short delay here. We just had a slight technical hitch here in Johannesburg. But welcome to the fourth quarter and full year 2012 results presentation. As is customary, we've got Mark Cutifani who will make some introductory comments; Venkat will talk us through the financials; and then Mark is going to offer some concluding comments and as well as the outlook numbers as well. As we normally do, I'm going to quickly whiz through the disclaimers, Safe Harbor statement, and then we'll get right into it.

Certain statements made in this communication, other than statements of historical fact, including, without limitation, those concerning economic outlook for the -- of the gold mining industry, expectations regarding gold prices, production, cash costs and other operating results, growth prospects and outlook of AngloGold Ashanti's operations, individually or in the aggregate, including the achievements of project milestones, completion and commencement of commercial operations of certain of AngloGold Ashanti's exploration and production projects, and completion of acquisitions and dispositions, AngloGold Ashanti's liquidity and capital resources and capital expenditure and the outcome and consequence of any potential and pending litigation or regulatory proceedings or environmental issues are forward-looking statements regarding AngloGold Ashanti's operations, economic performance and financial condition.

These forward-looking statements and forecasts involve known and unknown risks, uncertainties and other factors that may cause AngloGold Ashanti's actual results, performance or achievements to differ materially from the anticipated results, performance or achievements expressed or implied in these forward-looking statements or forecasts.

Although AngloGold Ashanti believes that the expectations reflected in such forward-looking statements or forecasts are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in forward-looking statements as a result of, among other factors, changes in the economic, social, political and market conditions; success in business and operating initiatives; changes in regulatory environment and other government actions, including environmental approvals; fluctuations in gold price and exchange rates, and business and operational risk management.

For a discussion of certain of these and other factors, refer to our annual report for the year ended 31st December 2011, distributed to shareholders on April 4, 2012, our 2011 annual report on Form 20-F filed with the SEC in the U.S. on 23rd of April, and the prospectus supplement to the company's prospectus dated July 17 that was filed with the SEC on July 25.

These factors are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in forward-looking statements. Other unknown and unpredictable factors could also have material adverse effect on future results. Consequently, stakeholders are cautioned not to place undue reliance on forward-looking statements.

AngloGold Ashanti undertakes no obligation to update publicly or release any revision to these forward-looking statements to reflect events or circumstances after today's date or to reflect the occurrence of unanticipated events except to the extent required by applicable law. All subsequent written or oral forward-looking statements attributable to AngloGold Ashanti or any person acting on its behalf are qualified by the cautionary statements herein.

This communication may contain non-GAAP financial measures. We utilize these non-GAAP financial measures and ratios in managing our business. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the reported operating results or cash flow from operations or any other measures of performance prepared in accordance with IFRS.

In addition, the presentation of these measures may not be comparable to similarly titled measures other companies use. We post our information important to investors on the main page of the website at anglogoldashanti.com and under the Investors tab on the main page. They -- it's updated regularly. Please visit the website to obtain important information

Over to you, Mark.

Mark Cutifani

Thanks very much, Stewart. Again, sorry about the delay guys, we had to shift rooms due to a technical glitch.

I just want to start off obviously in talking to the fact that [indiscernible] mostly making a move. We do have a global switch process underway led by the board, and that process has started and the board will update the market at the next quarterly results in terms of where we are and how quickly they believe the process will be completed.

In the meantime, Venkat and Tony O'Neill are in the joint CEO chair, sharing responsibilities: Tony, focusing on operations and explorations; and Venkat on finance and corporate affairs. Given the continuity of the team, Venkat and Tony's understanding and actual central roles in developing and executing the strategy, there shouldn't be any major changes other than we continue to focus on how we can get more value through to our share price, which we'll talk about a little bit later in terms of the things that we're doing and what we're trying to do improve and stimulate the performance in that direction.

As I said, the strategic direction remains in place and the deep bench of executive talent that we do have in place remains secure. And the good news is in the last 4 years, we've had less than 2.9% turnover in the team, so we've been able to build a good team. We've kept them to get strategic directions pretty well set. Obviously, there are things we got to think about, put the teams in place and certainly continuing to build the foundations for the future and in delivery today.

On the fourth quarter results, and I'm on Page 5 or Overhead 5 in your presentations. The highlights for the quarter: Lowest injury frequency rate on record, however, from an operations point of view, obviously, the strikes in South Africa hit the business. We had about 6-week strikes. We also took some extra day at the end of those strikes to sort out some issues that when people did return to work, they weren't following instructions. We had some damage to some surface installations, so we literally sent them back home without pay. And as a consequence, we were able to discuss and sign an accord in terms of binding our behaviors from all points of view, treating each other with dignity and respect. And certainly, we think that's made a big difference in our return to work. We see that others are following the lead. We talked on that front and it's good to say that the harmony issues have now been resolved with the groups signing a similar accord.

And with the events we've seen in the platinum industry in the last couple of days, the Minister acted very quickly. A number of us were there with her, talking to the unions in working out a way that we can come together as an industry and support the unions talking on a more appropriate basis. We think that was a very successful day yesterday. They're, in fact, detailing a high-level industry accord today that one hopes that's another positive step in making sure that we don't go back to the sort of things we saw back in the last quarter last year.

Other things that were important: Continental Africa, the Americas and Australia delivered to plan, so that's very encouraging. We started the transition to own a development at Obuasi that obviously impacted the results in the fourth quarter. We have commenced and we're well down project review. We've slowed some projects up. We're making other interventions in terms of cash flows to make sure that we preserve our cash, we manage our balance sheet, but at the same time, continue to build our 3 key projects being Tropicana, Kibali, and Cripple Creek in the U.S. And they're all going well and probably quite rare in the industry at the moment to say that we're on budget and on schedule with those 3 major projects, and for us, that's absolutely critical. We're on track to commission early fourth quarter for Tropicana and probably towards the end of the fourth quarter at Kibali. Although at AngloGold Ashanti, we've not provided for production this year from Kibali. We've scheduled it in the first quarter next year. But that's not to say the team won't make it. They're doing a good job. The costs will certainly be higher from their numbers, but certainly, we're well within the budget numbers that we've put into the plan and the ones that we went public on. So we're very comfortable with our costs that we've got to the project.

We've declared a fourth quarter dividend of ZAR 0.50 per share, making it ZAR 3 per share for the full year. We're still in strong shape in terms of the dividend. We're committed to continuing to pay dividends. And certainly, the underlying performance for the business was strong for the full year, being our second best earnings performance on record despite the fourth quarter challenges, and certainly, the underlying business is still very strong, and still very strong even with the gold price weakening a little bit in the last couple of weeks.

Finally, we will manage to protect our investment grade debt rating, the only South African corporate to do so and that was based on the demonstration and quality of our portfolio and our consistent execution of our strategy in terms of the major projects, preserving the balance sheet, delivery of industry-leading returns. And so I think that was a great effort and compliments to Venkat and the rest of the team that supported him in the process and certainly an important one for us.

In terms of the full year, and I'm on Page 6. You'll see that the earnings for the year at 942 -- $924 million. The strike impact estimated around $208 million, that reflects a 235,000 ounce shortfall reflected in the strike. Don't forget we lost in more -- we lost more than 150,000 ounces earlier in the year with those safety stoppages, so it has been a tough year in South Africa. And the EBITDA impact was somewhere around $300 million for the year. So that's why we've come in lower than we did in 2011. Our returns are still pretty solid, but obviously, disappointed with a tough fourth quarter.

On the safety front, we continue to track the improvement overall on the safety side and the monthly fatals. We had actually seen almost a 70% improvement, but the frustrating thing is, we've not taken that next step. We believe we've got the right things in place to take that next step with the implementation of the major hazard protocols that are progressively being implemented this year, as well as the work that we're doing with crews, particularly in South Africa. The good metric that I always look at very closely is the all-accident frequency rate. We continued to improve and we've seen a 70% improvement on that since 2007. And for me, that's always a good measure of the cultural change [ph] or the impact of the cultural [ph] changes that we've been implementing in the business, which is usually a good lead indicator on the more serious incidents. So we think we're tracking well on that front and that sure helped us improve our more serious injuries, and obviously, still a lot of work to be done but very pleased with where we've come from.

On the Continental Africa side, you'll see on that slide we've indicated all the current operations. We haven't got the project Kibali in there, that'll obviously chime in, we'll have by the end of the year. In terms of production, around 376,000 ounces, cash costs impacted by the Obuasi changes, however, good performance at Geita. We hit the target of 500,000 ounces, and you'll see the operations performance in the next slide. Siguiri has also done exceptionally well, 30% improvement on operating throughputs, 25% on mine development and mine extraction with no capital being spent, that's why our returns are as good as they are. And Sadiola, reasonably stable production given the circumstances, a pretty good effort. We should see a much better performance from the group in the next couple of quarters as we start to see Geita come out of its shutdown mode and post better results as we go forward.

If you look at the next page, this shows you where we've actually come from on Geita. We were losing actually, over $100 million cashback in 2009. You can see there the EBITDA trends have been very strong and our EBITDA margins are also very strong. Literally, that's on a cash basis, a $500 million turnaround, and so I'm very pleased -- and this was the first site that we implemented our Project ONE operating model, and the operation continues to go from the strength of the strength. We're drilling now for potential underground operation, and I would hope that we'd be developing an underground operation within the next 2 to 3 years. But Geita has been a real great success story, very proud of what the team has achieved.

In the Americas, solid operating performance from North and South America. I'm on Page 12 at the moment. 258,000 ounces, up against last quarter's 234,000 ounces. Costs around $720 is solid. We continue to see growth. We have commissioned CDS, good performance across the asset, and we've also secured and bedded in the acquisition of Serra Grande. And I'll talk to that a bit later, but again, continuing the strong performance in the Americas and the continuing growth story has been a real success story for the organization.

In Australia, 5 years ago, we had 5 years life. I'm pleased to report that whilst the costs are obviously challenging at the moment, that will turn around as we continue to improve in the underground operation, and I'll show you that in a minute. And so those costs should drop some $300 to $400 an ounce as we progress through the year. Don't forget we lost high-grade open cut operations, delivering around 150,000 ounces a quarter, and we're in a transition to our underground operation, which we are hoping now, based on recent exploration work, will be a 15 to 20 year life. So as we bring that through and the exploration works so far has been very successful. And as I said, we expect to see better performance improvement. As the quarter goes on, we'll start to bring in the crown pillar extraction below the open pit.

On Page 15, you will see another one of our control charts. One of the more recent areas that we've been implementing is in Australia. And you can see an almost doubling of underground production from Sunrise Dam, and those trends are expected to continue, which will continue to see improvement in the operations. And again, a very successful implementation of Project ONE. Still a lot of volatility in daily production numbers, but a continuing improvement overall, very encouraging, and we do expect to see continuing performance improvement on the costs.

In South Africa, a tough quarter, strikes more than 6 weeks with a bit of tail on that production as we had to then gear the dig mines up. Very happy with the recovery, and in fact, in January, we've actually hit our budget numbers in South Africa so that guys [ph] will come back well. We've had a couple of small incidents in terms of industrial relations conversations, nothing major, managed well and people are holding to the protocols that we agreed. It's important that we engage effectively in the next 3 or 4 months as we lead up into the negotiation from an industry basis. And as I said, the interactions with the Minister in the last couple of days have been very encouraging, demonstrating the government's commitment to engage quickly and to move swiftly if there are issues.

At the same time, we've integrated Mine Waste Solutions into the operations, and I'll talk about how successful that's been a little bit later, but certainly, looks like it's been a great acquisition for us.

In terms of South Africa, one of the things we talked about in reflecting on the past, some 12 years ago, our production rate 12 years ago, our production was around 3 million ounces even though we halved production, our earnings are up a factor of 500%. And so from our point of view, it's about focusing on quality. EBITDA and cash flows have been very strong. Obviously, the strike had a significant impact, taking out part of Q3 and Q4. And when we adjust for the strike, still not as good as we would have liked, but at a $600 million equivalent cash contribution, that's after capital, very solid business. North of 20% returns, very solid contributor and a great asset for us. And certainly, I would think ranked the best operations in the country.

In terms of long-term strategies, we will focus and continue to focus on the development of Mponeng and Moab and the extensions via the long-term 30-year underpins. We're maximizing margins on those mature mines, and the good thing about those 2 operations, they're known entities. We continue to improve the basic operating productivity. We should see great improvements. And if you look at the technology line there, with the new technologies, we took the board underground 2 weeks ago. I think they've now become as excited as us in terms of the horizontal raise drilling work. And whilst we still have got a couple of years to bed that in, we will have a fully function operating unit by the end of the year. And I think that's probably about 2 years before anybody thought we could. It's gone that well. The backfill technologies that we're trialing are going very well. So we think the current plan looks very strong, and with the potential to augment that with the drilling technologies first in remnants to see if we can up the production by 20%, very solid future and very excited with what we see happening. And then we can add the uranium business coming out of -- out of the MWS acquisition. The future looks pretty solid.

Over the past 5 years, and I guess, this is a little bit of a summary of what we've achieved in the time that we've all been together. Safety and sustainability, we've made significant changes. We've more than halved fatalities. Accident rates are down 70%, and the environmental incident, something we don't report a lot on, but we've made a more than 70% improvement and in through Continental Africa that's been a significant achievement.

From the operations side, across 21 of our operations, we've made improvements, that includes the cost-reduction program at Obuasi. The only disappointment, I think, we can talk about or the only disappointment that we see as a team is that we've not got Obuasi tracking up the development curve and improving the operations to where we think it should be, and that's a work in progress and certainly a key focus of Venkat and Tony.

On the financial side, removal of the hedge book was a great success. If I look at the numbers and assume we would've continued to deliver at the planned rates that we had back when we did the hedge book removal, we had $4.5 billion in the black on that transaction. And if you consider that our 5 acquisitions are all well in the money, and the sale of Boddington looks like it was a smart deal as well, then all of our major transactions and deals have created significant value for our shareholders. And I think in terms of differentiating our performance, the fact we've not done anything stupid or one consider a major stupid event in the last 5 years, probably differentiate us from most of our peers in the industry. That has been through a process of careful consideration and discipline in the evaluation process. We don't chase projects or ounces for the sake of chasing ounces. We look at the fundamentals in terms of finance. And if we can't see how we will demonstrably add value to shareholders, we will not do the deal, and that will not change. That discipline has been driven through the organization and we've held to that discipline, and I think that's the one thing that's held us in good stead.

And you can see from that last bullet point, the return on net capital employed has averaged 16% since 2010, obviously, last year impacted by the strike, but we were up near 20% when I back out the strike numbers, so a positive outcome. We could do better. We will do better as we start developing those projects. But at the same time, we've got lots of challenges, and it's obviously contingent on gold price as well. But I think with Venkat and Tony and the rest of team, we've got people to continue that good work on.

Finally on Slide 20, I was asked a question, what do you see as the most significant positive? It's the team. We build a quality team across all of our jurisdictions. And when people say, "How have you been able to turn those assets around so quickly compared to what others are doing?" It's the depth and strength of that team where we look beyond our own backyards and help each other make sure we deliver the results. That has been the secret, and certainly, we're very proud. And as I said earlier today, the turnover in the leadership team has been less than 2.9%, so that's also a key that's keeping the team together.

With that, I'll have hand across to Venkat, then pick up some other observations after Venkat

Srinivasan Venkatakrishnan

Thank you very much, Mark. Good morning, ladies and gentlemen. I'd like to cover the following 4 areas in today's presentation: Fourth quarter and full year financial results; then moving on to cash flow for the fourth quarter and full year 2012; then balance sheet; and conclude with other financial and accounting matters.

Starting off with the fourth quarter and full year financial results. As flagged during our third quarter results call, the fourth quarter 2012 financial result took the brunt of the unprotected strike in South Africa and the adverse financial impact of mine development contracted change at Obuasi. Adjusted headline earnings were therefore down at $7 million or USD 0.02 per share. This level of adjusted headline earnings was after taking into account the adverse impact of the 2 events mentioned above. One, the impact of the strike in South Africa, which eroded $208 million of earnings on an after-tax basis, and the change-over of mine development contract toward Obuasi and other specific one-off costs at Obuasi that had an impact of $44 million.

For the full year, our adjusted headline earnings were $924 million or $2.39. In addition to the impact of the strike and the contract change at Obuasi, the full year adjusted headline earnings were also impacted by the high incidence of safety stoppages which we experienced in South Africa during the first half of the year. If one were to exclude the impact of the South African strike only, our adjusted headline earnings on a pro forma basis would have been USD 1.13 billion or USD 2.94. Because typically, when we have a strike, you just don't lose the margin on the ounces, you lose the revenue and you continue to incur a large number of standing costs.

For the full year 2012, our return on net capital employed and equity were 14% and 17% (sic) [18%], respectively, lower than our expectation of 16% and 20% due primarily to the strike.

The gold production for the fourth quarter was lower at 859,000 ounces at a higher total cash cost of $1,009 per ounce, reflecting the impact of the strike. The pro forma total cash cost without the strike impact would have been $852 an ounce, some $14 an ounce lower than the third quarter cash costs of $866 an ounce.

For the full year, total cash costs of $862 an ounce reflect a lower production of 3.94 million ounces. The pro forma cash costs for the year without the strike impact will have been $829 an ounce.

Now turning to the cash flow for the fourth quarter, our metrics were as follows: EBITDA $333 million, which would have been $642 million without the strike impact; cash inflow from operating activities was $454 million, $662 million without the strike impact; free cash flow, outflow of $447 million on an outflow of $239 million without the strike impact and due to the high capital expenditure on our key anchor growth projects.

For the full year, cash flow metrics were lower as compared to 2011 due to lower production, impact of the SA strike, and additionally, in the case of free cash flow, due to significant investment in the key projects, Tropicana, Kibali, CC&V and Mponeng.

EBITDA for the year was $2.4 billion, cash flow inflow from operating activities of $1.8 billion, free cash outflow, $666 million. Net debt level as of 31st December '12, was in line with our guidance at $2.06 billion, but was $1.4 billion higher than the level of $610 million at the start of the year.

The principal 3 factors that accounted for the increase in net debt during the year were the following: Firstly, project capital of $1.1 billion of which Tropicana, Kibali and the DRC, CC&V and Mponeng accounted for close to 80% of the spend; consideration paid in cash for the Serra Grande and Mine Waste Solutions acquisitions was $555 million; lost earnings as a consequence of the South African strike, $208 million.

As guided during our last earnings call, our 2012 capital expenditure was cut by $150 million in the fourth quarter to finish the year at USD 2.15 billion. Mark will walk you through shortly on further costs that have been affected in the planned expenditures for 2013.

Now turning to the balance sheet. As a result of the protracted strike at our South African mines, during the fourth quarter, we raised ZAR 1 billion from our domestic Medium-Term Notes Programme. ZAR 700 million of this debt matures in January 2014 whilst the balance ZAR 300 million matures in April 2013 but can be rolled over in the local bond market. Those numbers are all in South African rand.

Now turning to the group's principal U.S. dollar and Australian dollar debt facilities. They include the following: 4 fully drawn-rated bonds aggregating $1.75 billion that mature in 2020, '22 and 2040; a $1 billion revolving credit facility that matures in July 2017 that is currently not drawn at all and is held as a standby facility to meet any project capital needs or other unforeseen requirements that cannot be serviced from cash on hand and operating cash flows; and AUD 600 million credit facility dedicated for the construction of the Tropicana project that matures in December 2015, of which AUD 260 million was drawn at the year-end; then we have a $733 million convertible bond that matures in May 2014.

Although none of the above dollar-denominated facilities mature within a 12-month period, as always, we have been proactive in removing any imminent or the perception of any imminent refinancing risk that could face AngloGold Ashanti.

With this in mind, we have obtained the term facility for up to 27 months from a syndicate of 3 banks for $750 million for the sole purpose of backstopping the redemption of the $733 million convertible bond should we need it when it matures in May 2014. This facility provides us with cost-effective insurance and full flexibility to refinance the $733 million convertible bonds on timings, structure and terms that are most suited to us. The terms of this facility are similar to our revolving credit facility, up until drawdown date, which is May 2014, and should we draw down on this facility in May 2014, the terms will resemble that of any other bridge facility.

This proactive and prudent move on our part addresses any refinancing concerns that may arise over the next few months around our ability to redeem the 2014 convertible without eroding the headroom under our revolving credit facility.

And just to remind people that this is not additional gross on net debt. What AngloGold Ashanti's is taking on, it's purely a dedicated facility which swaps 1 debt for another potentially in May 2014.

You will recall that in September 2010, the group issued $789 million worth of mandatory convertible bonds that fall due for conversion into equity in September 2013. When this conversion occurs in the third quarter at current share prices, 18.14 million shares will be issued as consideration for the bonds converting into equity. The total number of shares in issue, including A ordinary shares at that point will increase to 403 million shares from the current 385 million shares, and the 6% interest coupon that is currently being paid on the mandatory convertible bond will cease to be paid.

Looking at other financial and accounting matters.

At the time of releasing our third quarter results in November, we flagged that our fourth quarter results will be impacted by year-end accounting adjustments, such as reassessment of useful life of assets and other adjustments.

During the fourth quarter, following a detailed reassessment of useful lives of certain mine development assets, we booked a non-cash accounting charge to net profits of 248 million net of tax due to the derecognition and abandonment of certain assets. These relate primarily to Obuasi, and to a lesser extent, Great Noligwa, Kopanang and Siguiri and these -- although, charge to net profits are of a capital nature and are reversed out for the purpose of headline earnings and adjusted headline earnings.

We deferred from 1 January 2013, AngloGold Ashanti will be adopting IFRIC 20 in relation to capitalization of qualified deferred stripping costs and amortizing the same with adequate componentization. IFRIC 20 provides for a transition adjustment in respect of certain brought-forward balances, and such balances will be returned off against reserves, and we will disclose the same in our first quarter 2013 financials.

Included within the capital expenditure guidance for 2013 of $2.1 billion, which Mark will elaborate on, is $118 million of qualified deferred stripping costs.

We are currently working with other member companies within the World Gold Council to streamline the method of reporting all-in sustaining and all-in costs. Once this project is completed by the World Gold Council, AngloGold Ashanti will adopt the gold industry's common approach to reporting such costs. The group's total cash cost in the interim for 2012 were $862 an ounce. And the notional cash expenditure, including just sustaining capital, was around $1,115 an ounce, and $1,390 an ounce if one were to include all project capital expenditure in respect of both existing operations and new investments and projects such as Tropicana and Kibali.

Finally, before handing the microphone back to Mark, if I can make some observations for 2012.

Our fourth quarter earnings, and consequentially, the full year metrics were hit by the SA strike, and to a lesser extent, by events at Obuasi. However, the rest of the portfolio taken as a whole performed broadly in line with expectations and we shouldn't forget that.

Cash generated by the business during 2012 before project capital despite the strike impact was around $441 million. Of this cash generation, we returned $236 million to our shareholders and invested the balance in projects. Had we not taken the strike -- had we not had the strike in South Africa, the cash generation will have been at least $200 million better.

During the year, we self-funded 2 cash-generated acquisitions, kept our full balance sheet flexibility to fund the project capital at our key anchor projects and successfully defended our investment grade credit ratings.

Finally, a personal tribute to Mark with whom we have done close to 50 quarterly calls given that we do 1 in the morning and 1 in the afternoon. He has been a great inspirational leader for both myself and the rest of the team, a very good and charismatic CEO, excellent friend and advisor. Certainly speaking for myself and the rest of the team, we have learned a lot over the last 5 years from him. He's been extremely approachable and has never stopped us from expressing our view fairly vocally. We will certainly miss you, Mark, but we look forward to making the transition arrangement a success for both you and the team.

I'll now pass you over to Mark.

Mark Cutifani

Thanks, Venkat. Ladies and gentlemen, I'm just going to do a few -- just talk very briefly to some projects and how we're going on integrating some of the recent acquisitions.

As I said earlier, we've made 5 significant acquisitions, and for us, significant is something that is all relative compared to what some people have paid, one would argue that, they're significant or insignificant, but I would argue that in terms of value creation, they are being very significant compared to relative valuations. So in looking at our first -- our most recent one, the Mine Waste Solutions acquisition, you'll see on Page 28, there are a couple of charts there. The top chart shows you production performance since we took over the asset. And in that case, we are running -- you can see, we're running about 1,200 tonnes a day. Since we took over, we've improved that operation by 20% with the application of our operating models. So we've made a significant improvement in the production. At the same time, when you look at the bottom chart, what we want is the dots to be low because that actually reflects cyanide consumption. And you'll see that we've made, based on where we were, around a 25% reduction in cyanide and other reagent consumptions. So we've seen a 20% production kick-up and a 15% unit costs reduction in the very short time that we've been managing the asset. So the team's done a great job, Mike O'Hare and the crew have done a great job. And we expect the asset to require some capital and some moneys in the first 2 years. Well the great news is we're cash positive already based on that improving performance. And whilst the asset will take some cleaning up on the environmental side, it looks like we're going to be able to fund those additional requirements from internal capital and be posting a relatively modest return in the first 18 months. But once that's done, the returns will be very strong, and quite frankly, we see the value more than twice what we paid and that number is continuing to increase. So I'm very happy with how that's going.

At Serra Grande, another good acquisition. We had a hunch on the geology, and the drilling we've done so far continues to give us confidence that we've got it right. We have added, I think, about around 880,000 ounces to inferred resources this year. It's still too early to call it is a success, but certainly, everything we've seen so far is very encouraging. We've got the operation about 140,000 ounces. Total cash costs of around $705 an ounce, and the team is working on the next level of improvement but already the Project ONE 1 step that we've done over the last couple of years has yielded real benefits. So I'm very pleased with what we're looking up here, and again, we think we're going to end up in the right side of the ledger in terms of the value equation for that asset.

To take a broader view, we've not been silly. We've not been out there spending like drunken sailors in terms of acquisitions. You'll see that we've sold 3 assets. We've generated about $1.2 billion cash flow. And in the case of Boddington, when we look at the money we would have had to have spend finishing the project of that number on a net basis. It's actually even lower than $1.2 billion. And we put back $1 billion in terms of adding to the portfolio, and net-net, we think we've added $3 billion to $4 billion worth of value for what is effectively a nil [ph] some gain in terms of cash inflows and outflows in terms of assets bought and sold and we've created $4 billion worth of value. And if you remember that the NPV or the net present value or net asset value in rough terms was about $7 billion when we started this work at the end of 2007. That's not a bad balance book, balance sheet in terms of our acquisition and major transactions. And if I then add the $4.5 billion created from the take out of the hedge book, we certainly have the money and the key decisions we've made across the portfolio, so very pleased with where that's going.

In terms of current projects, Tropicana very pleased to report on track. In fact, we're probably tracking a couple of months ahead of schedule. We're still forecasting a start of Q4 commissioning. We could do a little bit better than that, but we'll stick with that for the moment and have a look at the next quarter. The forecasts are actually just inside the board contingent allowing figures that we provided in the budget. The key issue there has been labor productivity has been a little disappointing across the West Australian scene, although we are seeing a pickup with projects being canceled in Australia, we're seeing better quality trades coming to the projects, so that's helping us. So I'm very pleased where that is. I'm very excited and we've continue to build our resource base which gives us more upside in terms of our operating models. Remember, that sort of project was going to deliver returns in the range of 24%, 25%, so very excited. I'm happy with the way that's going.

Kibali is not one we're managing ourselves. That's being managed by friends at Randgold. We think they're doing a job via forecasting gold by the end of the year. We're still expecting probably more likely to see gold in the first quarter, but at the same time, we still think it's possible. We're doing everything we can to support Mark and his team deliver on their objectives, very happy that we're tracking inside our cost numbers. And again, we're happy that we actually provided some contingency on whether those sorts of things and union activities and infrastructure, but certainly, we believe we're tracking inside our provisions, which is encouraging. And again, I'd like to commend Mark and his team for doing a very good job. And I think that joint venture for all its trials and tribulations is actually working very well and we're certainly expecting to see good outcome.

At CC&V, 100%, again, AngloGold Ashanti, we're tracking ahead of schedule and under budget, so we're happy with the way that's going, although it's a little too early to say that's a solid trend, certainly, the early signs are good. The Americas team has a very good track record on delivering projects, so I'm very confident that we'll be putting gold through our plant in 2014.

In terms of outlooks, we have been prudent in forecasting both quarterly and annual guidance. You'll see full year guidance, 4.1 million to 4.4 million ounces. There are some commentary points there around Geita mill replacement which is underway as we speak, making sure that we continue on the Obuasi recovery work. And obviously, the work in replacing the contractor has been important, and that has been a bit slow, but certainly, the key changes have been made. We've not had any major pushback from the political side, so we're very happy with the way that's going in general. Now the challenge will be to get up that curve as quickly as we can.

In terms of -- and continuing on the outlook. You'll see from capital, the original ask was actually around $2.55 billion. We've trimmed that back to $2.1 billion. We want cut -- make sure that we only spend within our means. Corporate costs, we've trimmed $50 million, and I think there's more to be done but the guys have done a very good job in attacking those costs and we'll keep working on those. And there's a lot of that capacity building working there that we're starting to roll off.

Expansion, exploration and studies, there's about $200 million of that $377 million dedicated to Gramalote and Colombia, that is a big number. But even with that, we've almost trimmed them $100 million out of those provisions. So we're pushing projects back, getting the timing right, making sure that what we do is affordable.

Depreciation and amortization is starting to reflect some of the new stuff coming on stream and the new acquisitions that we've announced. Interest and financing costs, reflecting the higher net debt from the new projects, we'll turn that back around as we start to pull the lines back as we generate cash flow from the projects.

And the other project that we haven't mentioned in there is our implementation of SAP or our ERP project. We went live with our first site in South Africa this month, on schedule and under budget. And so far, it looks like it's gone very well, and that's been a global -- that's a global implementation project. And as the people at SAP say to us we're probably being the best prepared mining company they've seen given the work we did with Project ONE and the BPF. I said we already had our business processes well set out, and so they said that from their point of view it's not a surprise that we're one of the only groups that have come in so well in terms of timing and costs. Still a fair way to go and still a lot of water to flow under the bridge on that one but certainly very encouraging from what we've seen so far.

Now finally, my last 2 overheads, I'll make a very simple observation. I'm on Page 36 in terms of the presentation.

If you look at that chart, the 2 top lines in that chart show the gold price starting from 2008 and our earnings performance or our EBITDA performance. We track EBITDA because that's a lead indicator on cash flow once our projects are completed. And you'll see that we've improved EBITDA, we've almost peaked at about 300% of where we were. Obviously, 2012 is impacted by the strikes. We'd expect that to start picking back up, with a little bit of help from the gold price in 2013, 2014, particularly, with the additional volumes from the new projects, so we'd outperform the gold price over that period. Frustratingly, we've performed in the first 2.5, 3 years ahead of the gold price, but once we saw a flow of bad news from South Africa, we have performed a bit behind actually our peers. Obviously, we're working hard in South Africa to manage expectations and make sure that we stem that flow of bad news, and that's important to us. The other thing is we are taking the issue of the gold price very seriously. We're looking at all of our options including assets, splits and other things we believe we can do to make sure people can see that value. All options remain on the table.

I did make a comment this morning that we are watching the Goldfields experience very closely. We've actually outperformed Goldfield since they did their split, but there's not much in it, so one wouldn't take pleasure or credit that we're doing any better. I think we're all performing around the same. So for us, there's not an obvious value uplift but we'll watch it and consider how it performs over the next 3 months. The board, the executive are looking at all options. And as I said earlier this morning, all options remain on the table.

Now irrespective of the structural issues, we are prepared to consider -- the first thing is to make sure the business is operating to its optimum.

And in terms of this last slide, there you'll see that we're continuing to drive the 3 main projects, make sure we get those commissioned, get the production, and in particular, get the cash flows running to demonstrate that we've made the right calls.

We've actually gone into our operating and corporate costs both in terms of the overheads and our operating costs. We are looking to strip $100 an ounce out of our operating costs over the next 18 months, that's the focus of the team. And based on the good performance and the 20% real cost reduction we've delivered in the last 4 years, we believe that's possible working from the Project ONE improvements we've delivered and the foundations we've delivered. We're working hard in South Africa and making sure that we're focusing on cash flow and financial returns as opposed production-for-production site. We're simplifying the portfolio. We have already commenced the sale process on Navachab. And we want to see Colombia come forward and literally brought the book in terms of share value. And for us, and for the good work Charles Carter has done in leading that team. We've seen a significant improvement in the community side.

Gramalote is starting to fast-track. We'd expect it to flip into feasibility study by midyear, and certainly from then, people will be able to start and put numbers to Colombia, which we think will make a real impact in terms of share price and the people's perceptions of value.

So with that, I'm happy to take questions.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from Tanya Jakusconek of Scotiabank.

Tanya M. Jakusconek - Scotiabank Global Banking and Markets, Research Division

And just a few questions that I have, either yourself or maybe Venkat can answer some of these. Just on some of the targets that were provided on production and capital, could you give us a bit more in terms of the breakdown per region for 2013? So that's my first part of my question. And then the second part would be, just the tax rate. And then just a comment on the dividend, where you see that going?

Srinivasan Venkatakrishnan

If I can pick it up, Tanya, in terms of the total production guidance of between 4.1 and 4.4, we're looking at South Africa at around roughly 1.4 million ounces. Continental Africa, again, roughly a similar sort of number; Australia, around the 400 mark, and America is around 1 million mark. That's really the split in terms of the regional production between those 4 regions. Then your second question was around -- if you remind me again, after production was around...

Tanya M. Jakusconek - Scotiabank Global Banking and Markets, Research Division

Yes. Just on the CapEx, 2.1 billion, maybe you can give us some of the key items in there.

Srinivasan Venkatakrishnan

Yes. If I can give you the breakdown at the high level on CapEx of $2.1 billion, $1.1 billion is project capital and the rest of it is basically between sustaining capital asset integrity, deferred stripping, which is capitalized at around $118 million, and the other normal staying business, CapEx, et cetera. If the balance -- if you look at the project capital, the bulk of the amount is actually in the DRC and Tropicana around roughly $400 million is in respect to Congo and around $250 million is in respect of Tropicana. Americas has around roughly $260 million and the balance of around $199 million is in respect of South Africa. With term of effective tax rate, which is your final question, there is -- we are not anticipating any material change in the tax rates. The only thing you've got to bear in mind is this particular year, 2012, the year just gone, benefited from some certain tax credits both from a legislation point of view and also in terms of some of the tax planning we have done. So I would basically say, in 2013, around 35% could be a good factor, but bear in mind, South Africa doesn't follow a linear tax rate, it follows the gold tax curve, so you will see some swings and roundabouts there. But around about 35%-ish, you are not going to be too far out.

Tanya M. Jakusconek - Scotiabank Global Banking and Markets, Research Division

And sorry, I had a question on the dividend. I know it was cut with the -- in Q3, the announcement was made. Just maybe how you see the dividend going forward given your cash flow. And then I had a last question. I think the guidance or the view last year had been that by 2015, we would be towards the 5.4 to 5.6 million ounce range in production, and I just wonder how you see 2015 going out?

Mark Cutifani

Tanya, it's Mark here. On dividends, Tanya, what we've said is we want to continue to pay dividends. We have -- I would expect that you'll see the dividends held in the accounted range, although obviously, the board will opine again on that against the progress on the projects, but everything looks good so far. If you get a bid of a run on the gold price, then I believe that the team will look favorably on, obviously, throwing a bit more the shareholders' way, but the focus is on delivering dividends. Once we get through these projects, the idea will be to kick the dividends up. Because we believe that with the quality of the portfolio as we get these projects bidded in, then yield becomes a very important conversation here. That's why we're going the way we're going in terms of the projects, so steady as she goes. If we get a bit of a run on the gold price, we'll kick it up. We certainly wouldn't pull the dividends too quickly with a bit of weakening because, don't forget, we're on the bottom half of the total cost curve in the industries. So we're one of the best protected, but we are spending money on some new projects at the moment, so we've got to be -- we've got to steer carefully. And...

Tanya M. Jakusconek - Scotiabank Global Banking and Markets, Research Division

But would it be safe to say -- sorry, Mark, that once Kibali comes in and once Tropicana comes in and the capital there is behind you, then you'd be at a better place to increase the dividend?

Mark Cutifani

Absolutely, Tanya. We're at about a 1.3% yield off a very low share price. So we'd be looking to improve both absolute and yield terms once those 2 projects are in. So we understand the sensitivity and the desire [indiscernible] will be better on that front. On the 5.5, Tanya, I think you've got to -- there has been a few moving parts. Don't forget we've not committed to Mali on the basis of the political changes and our desire as a company not to jump in with both feet given the changing circumstance in Mali. So there's 200 pushback there. Mongbwalu, we've slowed right up, again, because of the gold price weakening, and obviously, the strikes in South Africa caused us to react very quickly so we pushed that back and we actually believe that's prudent to do that, so there is about 130,000 to 150,000 ounces there. And in terms of South Africa, what we said very publicly, against the original production targets, we are more focused on EBITDA or financial returns, and the need to make sure we're making real production. So a 1.4 target this year, declines on an annual basis around 100,000 ounces in the next couple of years, so you can pull that back somewhere between 300 and 500, so those -- they're the main adjustments that we see to the 2015 numbers. So it's a little bit early to give you a new number, but they are the things that we've been very clear on in terms of what's adjusted. What we are focused on is protecting the balance sheet, making sure our returns are solid, that our financial delivery is solid, that we're throwing money back to the shareholders. And so the key number is not, for us, the production number, it's actually trying to get that EBITDA base from $3 billion to $4 billion is a more important focus for us than the absolute production number. But just to answer your question, that's where the key movements have been.

Tanya M. Jakusconek - Scotiabank Global Banking and Markets, Research Division

And just, Mark, just some the South African perspective, so going down to about 1 million ounces, you would say, in about 2 15, 2 16, will that be fair?

Mark Cutifani

We are looking at about 1.2, Tanya. The one thing that we think might help us that is turning out to be -- when we took the Board on the ground to have a look at the new horizontal raise drilling, and so if we put that stuff into remnants where we've got very high-grade gold that we would not have otherwise recovered. We think that gives us some potential but we're not forecasting it. We will have an operating unit by the end of the year, but it's turning out to be very interesting. And so I think that's one you should track because if that's successful, it will be our most successful exploration project because we're chasing 100 million ounces. And if we can get that working, and I don't think there's any reason why it shouldn't work, then there's a whole range of remnant pillars we can access that changes the game in South Africa quite significantly.

Operator

Our next question comes from Patrick Chidley of the HSBC.

Patrick T. Chidley - HSBC, Research Division

Mark, I just -- going back to your comments about watching carefully what's going on with Goldfields and Sibanye and the obvious implications for AngloGold. Do you think that AngloGold maybe has a better case to split than Goldfields? And in many ways, you've got significant international business and maybe it would be a possibility to have a cleaner split there that would maybe excite investors in looking at the relative valuation of your company versus North American companies, it would seem to be an obvious thing to pursue.

Mark Cutifani

Patrick, I'm going to be very careful the way I answer this because I'm an outgoing CEO opining on what the Board and the executives might consider as appropriate strategies going forward. But I will make a comment that's consistent with what I've been saying, so it's no different than what I've said. In looking at the Goldfields, they are 2 -- they've still got South African businesses in both parts of the portfolio. If we were to consider this as a good option, we would, I would think, look at a much cleaner split of the businesses to try and derive value from that type of split. So I do differentiate, and I made that comment some months ago, because we couldn't see where the value lift would come apart from the different character of the assets. They have, obviously, one that needs a fair bit of restructuring and the other was South Deep in their -- gives them some resources and reserves to work with. So we would probably think differently about that type of split in our context because we've got a much bigger, and quite frankly, competitive portfolio. I mean, if you look at our Americas business against Humana, holy moley, I know which one I'd like to own. And having the time right in [indiscernible] at about 11 billion. So I've been very clear on that. If you look at our -- we'll be up near 1 million ounces. And we've got Colombia, it's a great asset, that in its own right should be trading north of 11 billion in my view. So we're being aware of those possibilities could go. But to be fair to the Board, there's a range of options the team is looking at, including the existing strategy and getting better traction on elements within that. Irrespective of what we do, we're going to try and improve the business. We're going to continue to improve the business. If somebody said to me 5 years ago, you're going to triple earnings and see the share price go backwards, I would have said, you got to be kidding. So we've got to do something different to get at that share price. And the one thing I want shareholders to know, if they take John Paulson's observations extremely seriously as we take all shareholders observations seriously. And we are weighing all of those up and we are weighing our own views. We won't jump into something that's half baked. And as I've said as a Chief Executive for 5.5 years, I've had many shareholders give us feedback that would, in my view, damage the company. We won't do that. But at the same time, we listen carefully. And we see merit in some things that have been put to us that we're working through. The Board will make the right call with the team and we will look at how we unlock that value. And one thing is for sure, it's not business as usual, we have to do something different. The key is, what's the right thing to do, because once you've done it, you can't undo it. And the one thing we've done as a team is when we've moved, we've moved deliberately with effectiveness and we've delivered, and that won't change.

Patrick T. Chidley - HSBC, Research Division

Great. Just one little follow-up then on the technology, the horizontal raise board drilling technology. When -- if you got an operating unit by the end of the year, how soon do you think you'd be able to sort of say, well, this is the economics of this process and we've got it down pat 5 years away or?

Mark Cutifani

No, no, I think much shorter than that, Patrick. What we saw -- I think when we started this, like all things, we started with a clean sheet of paper 2 years ago, today, what I saw I think we've got something that's going to work. If for nothing else, for taking the remnants, we've got remnant there 4 and 5 ounces to the ton. And so even though it might have a high unit costs, the fact we can go in there, extract the gold, put back fill in there at the same strength of the extracted rock tells me that we can go back to all of those old pillars and start extracting this without increasing any operating risks whatsoever. So we'll have an operating unit by the end of the year, might have a schedule to introduce operating units over the next 3 years such that the technology will make a material contribution. Now, you can't book that, they still have to go through the work. But I think by the end of the year, the team will be able to tell you what to expect from this strategy, whether it will work and how quickly they will be able to start delivering production by the end of the year.

Operator

Our final question comes from Diana Kinch of Dow Jones.

Diana Kinch

I'd like to ask if AngloGold foresees any further strike problems or union disputes at AngloGold installations in South Africa this year. And how can the industry-wide accord you mentioned

[Technical difficulty]

Operator

My apologies, I'm going to reconnect Diana now if you'll just give me 2 seconds.

Srinivasan Venkatakrishnan

I think, Dylan, I think we got the gist of the question, it's really just an outlook on what the labor situation looks like in South Africa, and I think we'll go ahead with that.

Mark Cutifani

To answer Diana's question, I think there is no doubt that as a country, everybody's sensitive as they should be to what happened in the strikes, and in particular, Americano. The fact that the Minister reacted within 24 hours at the most recent platinum dispute was important. Wearing my President of the Chamber hat, I was part of those conversations with the National Union of Mineworkers and MCU [ph]. I was there with colleagues from the industry, including representatives from Anglo Platts where we walked through the protocols we believe that should be observed. And there's a verification process when new unions are involved in the strike, but they are protected by the Constitution, they're protected by industrial law and they are protected by the regulations in the mining industry. That would stress people understood the need to respect those conventions and those laws. And certainly, I think the dollar was a very positive one, and we agreed to a set of protocols in principle. Those protocols are being designed in detail today with the leadership of the 3 unions. And I believe it's the right step and I believe the government's response has been appropriate. Now as we go forward in the next 3 or 4 months, I think things will remain tender, but the fact is that the government is now in the game as we are in a very different way in the chamber to see if we can make sure that when we get to the negotiations, then all the issues that have the potential to be inflammatory have been dealt with in a constructive way. And I'll tell you now, no one, and I mean no one, not even new unions want to see last year repeated. Because at the end of the day, if it is, I believe it threatens their existence along with all of their existence if those things happen again. So I think we're in the right conversations. It doesn't guarantee a better result but it certainly makes sure that everybody's in the game and has got skin in the game literally looking to make sure it's the right result. So I think we've got a better chance of being successful. But I wouldn't be as bold to predict that we're not going to have a bit of activity at that time. But everybody's bruised, everybody lost a lot of money, including the miners that were on strike, so I think we're on the right conversations, and hopefully, it will turn out to be a good outcome.

Diana Kinch

But could you say, what are these protocols? I mean they're on safety, they're on union rights, what exactly are the protocols that you are discussing?

Mark Cutifani

It's on safety. It's on the recognition of the rights enshrined in the constitution and that is the right of association. And so simply put, both unions recognize the right of the other union to exist, and that each has an obligation to make sure their members are aware because they have a personal obligation to make sure members of the union behave in an appropriate way. And so for the country, it's important, it's a peace accord between the 2 unions, essentially with everyone else party to that accord with the responsibility to make sure we're doing everything we can to make sure there is no violence and that we go forward in a constructive way.

Diana Kinch

And when can it be expected to be completed, this agreement?

Mark Cutifani

I'd say. I'm talking this week. We're talking this week. And by the way, South Africa has a history with peace accords. And these sort of things, in moments of crisis, unlike any other country in the world, and I'm relying on that commitment when Nelson Mandela's name was invoked yesterday and the constitution and what this country has fought for over 18 years, there was a few tears in the eyes of everybody in that room, people are committed to make sure we don't go the low road.

Operator

Gentlemen, we have no further questions. Do you have any closing comments?

Mark Cutifani

Ladies and gentlemen, I'd like to say thank you for your participation today, and thank you for the support that you've given all of us at AngloGold Ashanti. As you know, leaders come and go. For me, it's been a privilege to be with the team. We have a great team here. They will take it forward and continue to build on the foundations. I'd like to thank all of the AngloGold Ashanti people for the great support, from the Board, in particular. And I'm excited. I've got shares in AngloGold Ashanti, and I'm going to keep my shares because the gold where it is, with the great results these guys are going to deliver, I think will be a good investment for the long term. Thank you.

Operator

Thank you very much, sir. On behalf of AngloGold Ashanti, that concludes this conference. Thank you for joining us. You may now disconnect your lines.

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