Stewart Bailey -
Mark Cutifani - Chief Executive Officer, Executive Director, Chairman of Executive Committee, Member of Safety, Health & Sustainable Development Committee, Member of Investment Committee, Member of Risk & Information Integrity Committee, Member of Party Political Donations Committee and Member of Transformation & Human Resources Development Committee
Srinivasan Venkatakrishnan - Chief Financial Officer and Member of Finance Committee
Sabrina Grandchamps - HSBC, Research Division
AngloGold Ashanti (AU) Q4 2011 Earnings Call February 15, 2012 9:00 AM ET
Good day, and welcome to the AngloGold Ashanti Q4 2011 Results Conference Call. [Operator Instructions] Please also note that this conference is being recorded. I would now like to turn the conference over to Mr. Stewart Bailey. Please go ahead, sir.
Thanks, Dylan. And everybody, good morning and welcome to the presentation by AngloGold Ashanti's Executive Team of our results for the quarter ended -- quarter and full year ended 31st of December 2011.
The presentation format will be as usual: Mark Cutifani will review the company's performance over the quarter, Venkat will then contextualize the financials and Mark will conclude by highlighting key projects and exploration progress before taking your questions.
We do have members of our executive team present, and we're also joined by Frank Arisman, a nonexecutive director on the board.
As usual, well read the Safe Harbor statement. Certain statements made in this communication, including, without limitation, those concerning the economic outlook for 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 completion and commencement of commercial operations of certain of AngloGold Ashanti's exploration and production targets and the completion of announced mergers and acquisition transactions, AngloGold Ashanti's liquidity, capital resources and capital expenditure and the outcome and consequences of any litigation or regulatory proceedings or environmental issues, contain certain forward-looking statements regarding AngloGold Ashanti's operations, economic performance and financial condition.
Although AngloGold Ashanti believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of, among other factors, changes in the economic and market conditions, success of business and operating initiatives, changes in the regulatory environment and other government actions, including environmental approval and actions, fluctuations in gold prices and exchange rates and business and operational risk management.
of certain of these and other factors, refer to AngloGold Ashanti's annual report for the year ended 31st of December 2010, which was distributed to shareholders on 29 March 2011, and the company's 2010 annual report on Form 20-F, filed with the SEC in the U.S. on May 31, 2011.
These factors are not necessarily all of the important factors that could cause AngloGold Ashanti's actual results to differ materially from those expressed in any forward-looking statements. Other unknown or unpredictable factors could also have material adverse effects on future results. AngloGold Ashanti undertakes no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after today's date or to reflect the occurrence of an unanticipated events.
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.
The communications -- this communication contains certain non-GAAP financial measures. AngloGold Ashanti uses certain non-GAAP financial measures and ratios in managing its 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 may use.
AngloGold Ashanti posts information important to investors on the main page of its website, www.anglogoldashanti.com, and under the investors tab on the main page. This information is updated regularly. Investors should visit the website to obtain important information about AngloGold Ashanti. And with that, I'll hand over to Mark Cutifani. Mark?
Thanks very much, Stewart. Ladies and gentlemen, I will start with a couple of comments on the gold price. Certainly, since the pullback in the gold price late last year, we've certainly had a much more positive start to 2012 with the price up a healthy 10% since the beginning of January. We believe the fundamentals for a strong gold price remain intact. Inflation across many of the key emerging markets is a reality. The euro crisis continues to rage across the continent, and the Fed has created certainly near-0 interest rates for the foreseeable future.
The long-term resolution to the expanded U.S. balance sheet, however, is a little less obvious. And while demand remains robust from investors and consumers alike, the industry is finding it tough as ever to respond to record price levels, notwithstanding AngloGold Ashanti's very prominent pipeline or great pipeline that will kick in over the next 2 years.
Consistent with gold's revitalized value proposition in our uncertain world, we believe the AngloGold story is one of a revitalized business, leveraging value for shareholders over both the short and the long-term by -- and through 3 key areas: firstly, growing the size and quality of our resource base; second, improving margins and returns on investment; and third, by providing a clear pathway to value growth for shareholders both in terms of capital and cash flow appreciation direct to our shareholders.
With the full year and the fourth quarter results behind us -- or time periods behind us, I'm happy to report an exceptionally strong set of results for the full year with significant gains across several key metrics. Most notably, we posted record adjusted headline earnings of $1.3 billion, up 65% from last year.
Yet, that earnings figure was built on cash flow from operating activities of more than $2.6 billion, an increase of almost 60% from last year, and if one reflects back to 2008 of a $600 million base, it's more than a 300% improvement over that timeframe.
So that improvement talks not only to the improvements within the operations, but also the overall improvement in the market for our product.
Free cash flow after all outgoing expenditures from capital expenditures and finance charges was a robust $833 million, an impressive number that has been reflected in the halving of our net debt to around $600 million at year end.
With the earnings pad demonstrated from the interim of the business and with a strengthening balance sheet even with increased investment in our growth projects, the board has declared another significant increase in our final dividend of ZAR 2 per share. This is more than double the level we flagged at our Q3 results in November and provides a clear indication of our intent to improve direct returns to shareholders once we provided for our growth pipeline and preserved our investment grade credit rating.
Now into the fourth quarter, we saw strong performances from the Continental Africa portfolio, and good cost containment in South Africa helped us to hit a production -- helped us -- helping us to hit the production guidance number of 1.114 million ounces at a total cost of $762 an ounce, which was actually better than our target set in November.
Crucially, the year ahead is the bridge for us as we return to growth in 2013 in the first phase of our target step up to our 5.4 million to 5.6 million ounce 2014 production range.
Adjusted headline earnings for the 3-month period were $295 million, impacted primarily, as we flagged in November, by noncash rehabilitation charges. This compares with adjusted headline earnings of $457 million the previous quarter, which you remember, had a once-off benefit from a $70 million tax credit. Venkat will go into the details, but I should make the point that, that once-off noncash charge is a provision that goes over 30 years predominantly at Obuasi and so, on an annual basis, is almost negligible compared to the baseline $400 million profit level that we're operating at as we go forward.
In terms of gold price. So just to cast a look back to the year we had last year and how far we've come as a business, I think it's important to look at the year-on-year picture, and it shows that the financial leverage that exists across all key earnings and cash flow metrics relative to the rise in the gold price is quite significant.
Earnings have almost doubled and free cash flow that's calculated after all capital expenditure has also seen a strong increase.
As we have demonstrated on the ground, if you want ultimate leverage to the gold price, look no further than AngloGold Ashanti. In shorthand, for every 1% increase in the gold price, we are delivering more than a 2% increase in our key financial metrics.
On dividends, you'll recall after that last quarter, we moved to a quarterly dividend schedule and declared a maiden third quarter dividend of ZAR 0.90 per share.
While we flagged our intention to do the same again in the fourth quarter, the board has elected to pay a significantly high ZAR 2 dividend in recognition of the strong cash flow and earnings performance in 2011, as well as the strong fundamental outlook for the business. That takes the full year dividend payout in 2011 to ZAR 3.80, which is 162% more than was paid in 2010.
Importantly, this represents a compound average growth of 56% since 2008 when we launched our new business strategy and our change model.
Looking forward to 2012 and taking into account not only the increased project capital expenditure but also the health of the business, we will target a quarterly payout of around ZAR 1 per share for the year.
While this will be obviously contingent on a number of factors, not least of all is the gold price, cash flow and other growth opportunities that may present themselves, we believe this is a sustainable level to pitch the dividend for the year ahead.
On the downside, we've had an extremely difficult quarter from a safety perspective. We lost 3 colleagues at Kopanang and the Vaal River region in addition to 2 contract employees at Obuasi and an employee at Gramalote.
We continue to push ahead with our systemic initiatives aimed at eliminating fatalities across all our operations, and we have made a number of adjustments to the key programs to try and accelerate that improvement to go further ahead.
Having said all of that, we must acknowledge the good work and the operation because it actually was, on a full year basis, our best ever safety performance, representing a 15% improvement on our all accident frequency rate and actually a 10% improvement on a year-on-year fatality frequencies rate. So yes, it was a tough quarter, but at the same time, we must acknowledge the best ever annual performance, and we've got to do a lot more work to make sure that this year is better again.
On operations. Richard Duffy's team in Continental Africa turned in another solid quarter with production up 2%. While we did see an 8% increase in cost, we are still investing heavily in reliability and maintenance improvements across the organization.
Most importantly, and I think indicative of the management improvements, the region delivered a 42% improvement in safety performance for the year.
One of the more encouraging stories for the quarter was the success we've seen at Siguiri where the project -- where the rollout of Project ONE has resulted in an outstanding performance from the mill, which saw record throughput to mitigate some of the lower grades we've been dealing with of late from the mining operations.
Our aggressive exploration -- I meant production, was up 20% and again, basically, no capital achieved that result. Our aggressive exploration campaign is continuing with almost 14,000 meters of RC drilling, reverse circulation drilling, done in December alone. I'll talk to some of these results in our exploration discussion, but suffice to say, the hits in the potential oxide resource that we spoke to last quarter have kept coming.
Once we have the Project ONE success married with improvement -- improved grade reconciliation and potentially some new high-grade surface oxide, the significant upside continues to unfold for this great asset in Guinea.
Navachab in Namibia also provided a good case study during the quarter with the Project ONE improvements to plant availability and improved grade together helping the mine achieving 19% boost to production and a 16% cost reduction.
At Geita, another great result. It was the outstanding performer within the Continental Africa portfolio, delivering 144,000 ounces at a cash cost of $486 an ounce, despite repairs undertaken to the SAG mill gearbox.
For the year, the team delivered 494,000 ounces at $536 an ounce, making it the second largest contributor in the group, only slightly behind Mponeng. If we step back for a second and look at where this operation has come from, in 2008, Geita's production had dropped to 264,000 ounces and costs ended the year at $921 an ounce. And in fact, we peaked at well over $1,000 an ounce in one quarter.
Since then, we've undoubtedly had the benefit from improved grade, but it's the fundamental operating performance that's given us the biggest lift. And remarkably, in almost doubling production and significantly reducing costs, we've invested minimal capital.
Now looking forward, we're seeing extremely encouraging underground grades coming through that -- coming through that speak to the long-term future for what is a global Tier 1 gold asset.
If you recall, we've set a target of 500,000 ounces at $500 an ounce as our twin objectives. We have now unequivocally delivered on the production target, and we've done better on cost after taking 3 years of inflation into account. So very proud of what the team's achieved, and certainly it augurs well for the future, and it augurs well for the future in terms of the underground potential as well.
In Ghana, we continue to see signs of our 2 operations making strong recoveries. Iduapriem continued to deliver on its targets and continues to deliver records on records on a weekly basis with an increase in production through improved operation stability and control.
The reported costs were higher due to an increase in payroll cost and continuation of some of the maintenance program that have helped us deliver on this improved production. And that's been part of our Project ONE strategy to invest in maintenance, get the assets performing to their potential and then holding those assets at that high production level.
At Obuasi, we again saw encouraging signs of stability at the operation that undoubtedly provides a significant value opportunity for the business. Better
and underground equipment availability helped the 4% increase in production while the uptick in costs was largely due to preventive maintenance, again as part of our overall improvement program.
You'll remember a similar pattern at Geita as we were bidding down the improvement programs back in 2010 and getting a handle on stability through the operation by working the maintenance backlog. So we're in that early phase as part of the Obuasi rollout of Project ONE. And don't forget, Geita was the first project that we rolled out Project ONE, and Obuasi was actually the last operation in the queue.
While the full year production of 330,000 ounces is not a big number for a resource of this size, it is significant in that it represents for the first time in our ownership history of the asset that it's actually met its production targets and budgets. And even more important than this, it is that it made a contribution of almost $40 million to the business after providing for all capital and working capital. That compares to an outflow of almost $100 million in 2008, so the $140 million cash flow swing goes with $188 million EBITDA swing, and certainly that's a true -- I think it's a true reflection on the good work the task force has done, but certainly, only starts to scratch at the real potential we see in the asset.
With the depth of detail that comes along with this improvement work, we feel like we've made good progress getting to the heart of the issues on site.
Consequently, based on this better understanding, we've made a noncash rehabilitation provision of some $71 million to fund the ultimate closure costs for this 30 million-ounce resource. This will be paid over the life of the operation, which is longer than 30 years, and while we're not yet making any wild predictions for growth, what we have now is -- what we believe we now have is an asset making a real contribution that can start pushing towards 400,000 ounces by next year on its way to its next milestone of 500,000 ounces from the existing mine footprint.
In the Americas, Ron Largent and the team have delivered another solid result, despite a 2% decline in contribution at an earnings level
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Notwithstanding the increase in production cost, we were up
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past year has shown some early signs of easing, with some rain in recent months. The team and the boys has done a great job under those conditions. Despite the
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remain one of the largest risk to forecasting production from South Africa, and we will, as usual, offer quarterly updates on their impact.
Section 54 stoppages are an important tool for the state mine inspector to improve overall workplace standards. We have and will continue to support this and any measure that is reasonable to improve safety. We are, however, working closely with regulators to make sure we have a more collaborative approach, so that we can see if we can reduce the impact on production, so that we can realize, certainly, the real potential we see in the operation.
At West Wits, the operations had a standout quarter, with each delivering significant production in cost improvements. Mponeng, the group's flagship mine, delivered an 18% increase in production of 138,000 ounces while costs were 12% lower.
This was principally on the back of a 26% increase in the area mined following fewer operating disruptions. TauTona produced 24% more ounces and a commensurate drop in costs after a smoother operating quarter with a marked drop in interruptions. So we can get that Vaal River operations back into balance, we certainly -- we believe we'll see significant upside.
Credit must also go to Bryan Penny's surface operations team, which turned in a 16% rise in gold production and a 19% drop in cash costs to $714 an ounce on the back of process consistency and grade improvements.
The Vaal River operations struggled, as I mentioned a moment ago, with 31 full days of production, and that's by mine, not for the total division, stoppages across the region hitting our port hard even in comparison with previous quarter, which was disrupted by the industry-wide strike. All 3 mines registered double-digit percentage drops in output, but nonetheless managed good cost containment under tough circumstances.
The output of uranium, principally a by-product in the Vaal River's gold production, showed a 12% drop from the previous quarter, largely due to the mining volumes for the region, lower mining volumes for the region.
For the year, production was 1.38 million pounds and a processing cost of $26.68 per pound.
Given the average received price in 2011 of $54.69 a pound, it's clear that this is a highly profitable [indiscernible], which will increase importance as recoveries and tonnages expand in coming years.
I'll now hand it across to Venkat to take you through the financials before taking you back to the projects and our exploration activities.
Thank you, Mark. Good morning, ladies and gentlemen. I'll be covering the following 4 areas in today's presentation, starting with the fourth quarter financial results, and then full year financial results, moving onto free cash flow and balance sheet, and then concluding with the outlook for 2012.
Starting with the fourth quarter financial results, adjusted headline earnings of $295 million for the fourth quarter were adversely impacted by the following 3 factors, all of the amounts post-tax: lower spot prices as compared to the previous quarter and higher unit cash cost, $42 million; profit lock-up in higher levels of unsold gold at the quarter end, $8 million; and as Mark mentioned, annual reset of environmental rehabilitation provisions of $105 million.
The above factors and higher quarterly expenditure profile resulted in lower adjusted headline earnings as compared to the $457 million recorded in the third quarter, which, if you remember, included the benefit of a $70 million once-off deferred tax credit.
Adjusted headline earnings per share was USD $0.76 or ZAR 6.15 for the quarter.
For the benefit of analysts on the call, a breakdown of the year-on-year increase in the rehabilitation provision is as follows: inflation and discount rate assumptions amounted to 40% of the increase; change in design of the tailing storage facility amounted to 23% and, as Mark mentioned, primarily Obuasi; change in methodology following request from the EPA, 20%; revision of life of mine plants resulting in accelerated cash flows, 17%.
Net profit attributable to equity shareholders for the quarter amounted to $385 million, and this included the $95 million post-tax benefit of the impairment reversal at Geita following the asset turnaround.
It's important to note that the impairment reversal benefit is not included in headline earnings or adjusted headline earnings given its capital nature.
Margins calculator of both cash cost and cash cost plus capital expenditure remains healthy at 45.2% and 27.6% respectively, notwithstanding a higher capital spend in the fourth quarter.
For those listening on the call, a slide shown on Slide #17 will be a helpful reconciliation as it identifies the impact of once-off tax credits and the environmental provisions charge in the third and the fourth quarter adjusted headline earnings, respectively.
Turning to the full year financial results. 2011 was AngloGold Ashanti's first year without a hedge book. Adjusted headline earnings rose on the back of a better spot price and improved performance from Geita to a record $1.3 billion. Adjusted headline earnings per share were USD $3.36 and ZAR 24.40. Net profit attributable to shareholders for the full year was USD $1.55 billion.
Our full year returns on net capital employed and equity were 20% and 25%, respectively. And as Mark mentioned, these metrics are well ahead of those recorded in 2010.
Turning to free cash flow and balance sheet. The fourth quarter's cash generation was better than anticipated, notwithstanding the highest capital expenditure, tax payments and the payment of the maiden third quarter dividend during the fourth quarter.
Cash inflow from operating activities was $644 million and free cash inflow, that is after all outgoings other than dividends, was $97 million.
Net debt levels were slightly lower at $610 million as compared to the previous quarter.
For the full year 2011, all cash flow metrics were strong as follows: EBITDA, USD $3 billion; cash inflow from operating activities, USD $2.65 billion; and free cash inflow, USD $833 million.
In addition, $29 million post-tax was realized from the sale of non-core assets during the year.
This healthy cash generation helped us both increase the 2011 dividend payout significantly when compared to last year and at the same time achieve a prudent dividend cover of just over 4x free cash flow for the year.
In December, a dedicated AUD $600 million full year unsecured revolving credit facility was obtained from a syndicate of 11 banks at competitive terms to assist with the funding of the Tropicana project.
The primary reason for obtaining this facility was to remove any currency volatility when amounts are drawn from our USD $1 billion revolver to fund Australian dollar requirements.
None of AngloGold Ashanti's principal debt facilities, which include the 2 rated bonds maturing in 2020 and 2040, 3.25% convertible bonds and the 2 revolving credit facilities, mature until the second quarter of 2014.
Looking at the 2012 outlook. Group's gold production for 2012 is currently estimated at between 4.3 million to 4.4 million ounces. Total cash costs are estimated at $780 to $805 an ounce, and average exchange rates against the U.S. dollar of ZAR 7.40 to the dollar, ZAR 1.70 for the real [ph], ZAR 1.01 for the Aussie dollar and ZAR 4.43 for the Argentinian peso and fuel at $110 per barrel.
Both production and total cash cost estimates will be reviewed quarterly in the light of safety-related stoppages currently being experienced in South Africa and any other unforeseen factors.
Gold production for the first quarter of 2012 is estimated at 1.03 million ounces. Total cash cost are estimated at $820 to $835 an ounce at similar exchange rates for the year. Both estimates would key some downside risk in light of safety-related stoppages currently being experienced in South Africa.
Other line items are currently estimated as follows for 2012: Depreciation and amortization, $880 million; corporate, marketing, Project ONE and capacity building costs, $300 million; and the SA technology project, $15 million; expensed exploration, $230 million; and studies, $150 million; interest and finance costs P&L, $195 million; and after eliminating accounting increase in the finance costs line, cash outflow of $140 million, that includes the coupon on the mandatory convertible bonds; capital expenditure of $2.2 billion to $2.3 billion, of which $1.1 billion relates to project capital, 60% of which is being spent on the 3 projects, 2 in the DRC and one in Australia being Tropicana.
The number of shares that qualify for basic EPS as of 31st December 2011 was 386 million shares.
I will now hand you back to Mark Cutifani.
Thanks very much, Venkat. We continue to make very good headway on project development, and a notable indicator here is not only our focus on staying within budgets on projects, but also our improving capacity internally to fully invest the capital expenditure budgeted for each year.
Our total capital bill last year was $1.53 billion against guidance of $1.6 billion. Good progress in all our major growth projects, which accounts to more than $500 million of that expenditure. As Venkat mentioned in his outlook phase, we will significantly step up the growth portion of our expenditure in the coming year as we move into development in the DRC and Mali and continue to progress Tropicana towards production.
I'm pleased to announce approval, as we flagged at our Analyst Day in November, of our [indiscernible] Phase 2 project at Moab Khotsong at a capital cost -- and this is a life of mine capital cost -- of $395 million, and the first phase of the below 120 CLR project at Mponeng of $416 million, again a life of project estimate. And in fact, our project expenditures in South Africa are about $170 million for the year, about 17% of our project capital spend, both large-scale, very important projects, but at the same time, extremely cash generative and will be self-funded by the South African business, and they will still have good cash flows above and beyond those projects. So again, low risk, high return projects that extend the life of the 2 cornerstone mines in South Africa on a relatively low commitment in terms of the full project capital portfolio allocation.
At Tropicana, the project remains on budget and on track to go full scale in Q4 2013. We expect to be -- that will be the first of our major projects to start delivering gold to the expanded AngloGold Ashanti. The 220 kilometer access road to site need completion during the quarter, and work continue on earth works on the plant site, internal roads and the airstrip. Engineering and procurement is now substantially complete, and all key positions in the new operating management team were filled. Drawing of the borefield 40 kilometers north of the project was wrapped up during the quarter.
At Mongbwalu in the DRC, the optimized feasibility study is complete and will be submitted to the joint venture board next month. The good news is our board and the joint venture board have continued to support our pre-project funding of critical project items, so that will maintain our focus on the timeline to deliver production beginning 2014, so that timeline won't be compromised.
Meanwhile, our team on the ground at Mongbwalu has made significant progress on the physical developments. Staff accommodation was upgraded and good headway was made on the construction of the road to Buna. This remains an important beach head project for us in a very prospective key load built region where active greenfield and brownfield exploration continued on our extensive tenements.
Similarly, at our Kibali joint venture with Randgold, the board supports continuing commitment to critical project expenditures, and Randgold's team has continued to successfully drive the project's momentum. A further 250 families were relocated from the first of 14 villages identified in the relocation plan.
As of year-end, about 500 houses had already been built. The design of the tailings facility, the mid-plant, shared service facilities and general mine infrastructure was completed, while work on the detailed mine design continued.
Importantly, major long lead items as I see it continue to be purchased and are progressively being to deliver this to site. As with Mongbwalu, funding for critical path items have been released and supported by our board, allowing Mark Bristow and his team to continue according to their public stated timelines ahead of final approvals from our board.
And finally, at Córrego do Sítio, the most advanced of our projects, the mine ramp phase continued according to plan. The second entrance to the underground mine was connected to the surface during December and the [indiscernible] commissioned last month. That amounts to a successful execution for this 140,000 ounce a year project on time and substantially on budget given the exchange rate fluctuations throughout the development period. So our track record of delivering on our commitments on projects after the -- over the last 3 years remains on track and will certainly underpin, we believe, the success of our new projects going forward.
On reserves and resources, we've seen a significant effort in building the resource base with excellent progress during the year, more than offsetting and -- with increases more than offsetting production and other depletion. We've used fairly conservative prices in these calculations when compared to the current stock price, sticking close to the levels midway through 2011 of $1,100 an ounce for reserves and $1,600 an ounce for resources.
As you can see, we saw a 6% net growth in reserves and a 5% net increase in our reserves -- resource base further expanding an already impressive mine life profile. As in the slide, if you take the last 3 years average gold price at $1,280 that $1,100 looks to be an extremely conservative figure in that context.
Through the work done by our South African team on developing technology in house to improve recovery from our tailings den, we've added 3.2 million ounces to our reserve base.
Importantly, these are low risk, low complexity ounces in our tailings facilities, which come with a potentially lucrative uranium byproduct to help offset rising labor and power cost in the country.
Other notable success on the resource front from our extensive drillings program came at La Colossa, where we added another 3.8 million ounces, taking the total -- the project to a 16.3 million-ounce. And at Gramalote, we bagged almost 1 million additional ounces.
In brownfields exploration, the drilling has again yielded a good crop of results with the work on extending the lift at Geita looking particularly promising.
In our campaign during the quarter, which saw more than 11,000 meters drilled, we continued to hit good, thick high-grade sections, which confirm and extend underground potential. The base intersection for us during December was 24.2 meters at more than 22 grams per tonne at a relatively shallow depth of 262 meters. With this mine now fulfilling its potential from an operating perspective, and I mean that as a current operating perspective, notching 500,000 ounces a year mark, these results take on increased significance and certainly increased economic significance for the group.
Similarly, at Siguiri, we are aggressively targeting the Silakoro oxide target, which lies within 2 kilometers of the plant. That is 2 kilometers. Among a good set of results were 7.7 meters at 4.4 grams per tonne and almost 14 meters at 5.6 grams per tonne. This is potentially a very rich feed for the plant, which is setting new operating records and -- but with grade constrained, so this drilling has a real potential to give us a sweetener that will certainly improve our capacity in 2012, probably more significantly in 2013.
At Tropicana, we added another 1 million ounces to the resources during Q4, given the success of drilling the Havana Deeps portion of the ore body, which lies between the Tropicana and Havana pit areas. Again, this vindicates Graham Ehm and his team, who have long believed the additional potential exits -- the additional potential exists to increase the reserve and maintain the elevated levels of production envisaged by the mine plant in the first 3 years of production.
At Cerro Vanguardia in Argentina, drilling of the bank structures continues to show stellar results, albeit at a narrow width associated with the vein structures typical of the region. One intercept returned grades of 151 grams of gold per tonne and 94 grams of silver per tonne over less than a meter. Another over a true width of 20 meters, returned grades of 1.23 grams of gold and 3.8 grams of silver.
As this operation ramps up its heap leach and underground projects, the options to increase the size of the mine continue to be evaluated by a project team seconded from our Denver office.
And finally, at Colossa, 5 drill rigs continue working around the clock to build the resource still further. A look at these results shows good grade in the sections over wide areas, and we're talking about 100 meters over 2 grams along the northern edge of the concession. This will almost certainly add a very large source during the coming year while also enhancing the average grade of the resource as well.
On greenfields, it may be worthwhile to point to you to some key areas worth looking out for in 2012 as we again step up a level from 2011 when we drilled in excess of 200,000 meters across our key areas along with an enormous amount of target generation and early-stage discovery. Key areas of focus for us will be the so-called blocks 2, 3 and 4 adjoining our Siguiri mine in Guinea where the Kounkoun and Saraya targets bode well for our overall expansion ambitions in the region.
At Saraya, the main resource results includes 9 meters at 2 grams and 4 meters at 17 grams from a 66-meter hole. Areas outside of the immediate Tropicana project area will also get more attention as they did last year as we search for another significant deposit in this area that we control along a strike length of several hundred kilometers.
Similarly, in Colombia, where we hold a dormant land position of 60,000 square kilometers across several provinces in the country's most prospective regions. [indiscernible], an early-stage target, is showing copper-gold potential from early drill testing and will be one that we'll be reporting on in the next quarters.
And finally, the other area is Egypt, where the greenfields team is becoming increasingly enthused at what they're seeing at the Hutite target, where drilling was successfully intersected up and down, deep extensions of the targeted line. You can also expect to hear more about this project as the year progresses.
And now, on cash flow improvements. It is a worthwhile look at the record earnings and cash flow generated in a difficult operations year. The chart that we've shown in the pack makes clear -- or demonstrates the clear gains that we've made in improving the underlying health of the business since launching our new strategy 3 years ago. And the games have built on 3 -- have been built on 3 legs: the rising gold price, the hedge book removal and, of course, the internally generated prudence through the implementation of our Project ONE change model, all roughly in -- and all of those 3 contributions are in equal measure across the business.
Before I close, I would -- I think it's important to acknowledge Robbie Lazare, our former head of the South African operations will retire before the time -- before we report our next set of quarterly reserves. We'd like to all take the opportunity to thank Robbie for his wonderful contribution over 30 years, and it's also very important to advise the market that we have completed a very smooth leadership transition period to Michael here, and we all wish Robbie the best in his future career at Jeffreys Bay. He will be missed by his colleagues in AngloGold as well as the Chamber of Mines and our other many stakeholders across the industry.
So we start 2012 with an optimistic outlook and a very clear sense of purpose. What we present is clear. The company emerging from several tough years, which is finally in a position of strength from which to reinvest in its own portfolio. That reinvestment from record earnings and cash flow will fund our growth to 5.5 million ounces by 2014, a target we are absolutely focused on delivering and a plan to achieve from projects -- and we have a plan to achieve from projects that are either in construction, have been nearly approved or set to go to the board in the next few months.
The value creation we aim to deliver, all things being equal, will be an effective 25% increase in production per share and associated cash flow per share.
And finally, after financing that growth from our internal sources and securing our investment grade credit rating, we are committed to ensuring our shareholders are rewarded through a balance of both capital and dividend depreciation.
With that, we'll be more than happy to take questions.
[Operator Instructions] Our first question comes from Sabrina Grandchamps of the HSBC.
Sabrina Grandchamps - HSBC, Research Division
My first question is on Kibali. Can you maybe provide some details on what is required for board approvals and how that differs from what has been done so far? And hypothetically speaking, when could the holdup in approvals be negative to the project timeline?
The holdup in project approvals will not be negative to project timelines. The board approved commitment on critical part expenditures. It will not have an impact on timelines. What we're actually doing is finalizing the detail in the feasibility study that our board requires to sign off that all risk measures have been appropriately addressed. We've already demonstrated in material form that those issues are under control. The board was satisfied and supported the continued commitment to the timelines that we've put forward. I expect the approval will occur in the next few weeks, certainly probably before the next set of board meetings. But one must remember that we have made a massive change to our project execution strategies in the group. Unlike most other groups, we are not reporting drags in timeline delivery or capital estimates, and we're going to make sure that we don't change that with Kibali and Mongbwalu. I think Mark and his team have done a [indiscernible] job at Kibali and there should be no impact, certainly from our end, with respect to the delivery of the Kibali project and for Mongbwalu on the same regard -- in the same regard.
Sabrina Grandchamps - HSBC, Research Division
And can you provide an update on your South Africa technology project?
Yes. We're very pleased with the way that's going. The team is actually putting together a proposal for a prototype implementation to be installed at Great Noligwa. They are hoping to have that completed by the end of 2013, so that we've actually got an operating product up in 2014. And for us, that's a really important milestone. It's both a safety project, it's a productivity project, it's a cost reduction project, it's an energy reduction project, and it will change the face of mining in South Africa. So we're very excited. We expect to see a prototype in place, and we will, in fact, be presenting some key elements of that project in Brazil in April as part of the Kellogg Global Innovation Network meeting that I'll be chairing with the head of the Mining Innovation Group out of the Kellogg University from Chicago. I'm very proud to be lead player in that program.
I have no further questions. Sir, would you like to make some closing comments?
Very happy, as we said from the outset. The last 3.5 years, the organization has been through a major restructure. We've seen record earnings results, return on capital employed is 25%, return on equity, 20%. We're investing cash flows in high return projects that will add value for our shareholders. And at the same time, we are continuing to build our dividend return to our shareholders on the basis of a very solid balance sheet, a very conservatively geared balance sheet. We believe that 2012 will be another significant improvement year. And as we move into 2014, that growth, as we grow both production base per share and our cash flow per share, we think, provides compelling value and demonstrated leverage compared to the physical gold where a 1% increase in gold price, in our case, represents a 2% improvement in our key financial metrics and, for us, with our improving dividend yield, we think, presents a compelling case for the purchase of equities and, in particular, AngloGold Ashanti equities. And thanks for listening.
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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