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AngloGold Ashanti (NYSE:AU)

Q4 2005 Earnings Conference Call

February 10th 2006, 8:00 AM.

Executives:

Charles Carter, Vice President Investor Relations

Bobby Godsell, Chief Executive Officer

Kelvin Williams, Marketing Director

Srinivasan Venkatakrishnan, Finance Director

Neville Nicolau, Chief Operating Officer, Africa

Roberto Carvalho Silva, Chief Executive Officer Americas and Australia

Richard Duffy, Business Management

Analysts:

Victor Flores, HSBC

Heather Douglas, BMO Nesbitt Burns, Inc

Muneer Ismail, Deutsche Securities

Peter Townsend, BJM

Brenton Saunders, Craton Capital

Brendan Ryan, The Financial Mail

Leon Esterhuizen, Investec Securities

Operator

Good afternoon, and welcome to the AngloGold Ashanti Results Conference Call. All participants will be in listen-only mode. There will be an opportunity for you to ask your questions at the end of today’s presentation. If you should need assistance during the conference, please signal an operator by pressing *, and then 0 on your touchtone phone. Please note that this conference is being recorded. At this time, I would like to turn the conference over to Charles Carter. Please go ahead, sir.

Charles Carter, Vice President Investor Relations

Thank you, Dylan, and welcome to this presentation by the AngloGold Ashanti Executive team of our results for the fourth quarter and year ended 31st December, 2005. The format of the presentation will be as follows. Bobby Godsell, our Chief Executive Officer, will review AngloGold Ashanti’s performance over this period, and offer a production outlook for the Company. Kelvin Williams, our marketing director, will briefly summarize the gold market conditions and comments on the management of our hedge book during the quarter. Venkat, our Finance Director, will unpack the numbers and address key aspects of the financials. This will be followed by brief presentations by our two Chief Operating Officers, with Neville Nicolau discussing the operations in Africa, and Roberto Carvalho Silva covering the international operations. Finally, Richard Duffy, who heads our business development and exploration, will outline our exploration plans for 2006. After these presentations, we will take your questions.

Before we begin, it is necessary for me to read a declaration regarding forward-looking statements that maybe made during this presentation. Certain statements made during this presentation 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 the outlook for AngloGold Ashanti’s operations including the completion and commencement of commercial operations of certain of AngloGold Ashanti’s exploration and production project, and its liquidity and capital resources and expenditure 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 be incorrect. Accordingly, results could differ materially from those set out in the forward-looking statements. As a result of many other factors: changes in economic and market conditions, success of business and operating initiatives, changes in the regulatory environment and other government actions, fluctuations in gold prices and exchange rates, and business and operational risk-management. For a discussion of such factors, refer to AngloGold Ashanti’s Annual Report on Form 20F for the year ended 31 December 2004, which was filed with the Securities and Exchange Commission on 14 July 2005. 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 unanticipated events. With that, let me hand it over to Bobby Godsell.

Bobby Godsell, Chief Executive Officer

Thank you, Charles. The December quarter saw a steady operational performance, with production down slightly to 1.5 million ounces, and excellent cost-control in spite of rising external cost pressures. Good participation in the gold rally helped lift the adjusted headline earnings some 86% from $22 million in the third quarter to $41 million in this last quarter noting that the third quarter’s earnings have been restated to reflect the removal of the fair-value adjustment on the option component of the convertible bond.

Operationally, the South African region reported production nearly inline with that of last quarter. And importantly, a 5% improvement in cash costs which, at 56,000 rands a kilogram represents the 8th consecutive quarter that these have been managed to around the 60,000 rands a kilogram level. Our African assets also reported mostly steady operational performances marked by improvements at Obuasi in Ghana, Siguri in Guinea, and Yatela in Mali. In Tanzania, the greater mine production declined inline with expectations, although cash costs improved 8%, highlighting the good work the team on the ground is doing to realize the benefits associates with the transition to owner mining at that mine.

Turning to the international assets, operational performance at our South American mines was generally in line with that of third quarter. Although, cash costs at our Brazilian operations were higher in part, due to significant depreciation of the Brazilian Real. This is currently the strongest by some way of our local operating currencies. Sunrise Dam in Australia continued to mine lower grades in the Sunrise Shear Zone, as we indicated. Although the operation saw a 27% improvement in total cash costs this quarter. Cripple Creek and Victor in the United States reported decreased production due to lower heap leach recoveries but this operation remained in steady state.

In the spirit of the year 2005, I'd like to turn firstly to safety. This year the Company achieved a 19% decrease in fatal accidents, and a 26% improvement in its fatality-frequency rate, which at 14 per million hours worked, compares well with industry figures in both Australia and America. The lost-time injury frequency rate deteriorated marginally to 6,75 per million man-hours worked this year. This rate, however, is well within site of the international benchmark we are aiming at which is a rate of 6.

The Company’s strong overall safety performance for the year quenched the ongoing commitment of our operating teams to put safety first. Cripple Creek and Victor have operated without a lost-time injury since November 2003. And 7 of our other mines reported improved lost-time injury rates for the year. This is a clear indication of this commitment.

Gold mining production, 2005 saw a 6% increase year-on-year to 6.2 million ounces. The increase was due to the inclusion of a full-year’s production from the former Ashanti assets, and also to the real good performance from Sunrise Dam, in the first two quarters of the year. Significant improvements from Morila and Mponeng also contributed to the increase, thereby offsetting production declines from Great Noligwa and TauTona in South Africa.

Turning to costs, it’s worth taking up that as the gold price has climbed, so too have the costs of oil and other key mining inputs putting pressure on profit margins for the industry as a whole. Together with the continued strength of many of our local operating currencies, this has required us to focus on managing down our fixed-cost base through a rigorous savings program. Originally designed to eliminate some $110 million of costs in 2005, which we announced earlier this year. I'm pleased to say that the type of savings realized from these initiatives, in fact was $160 million, which has helped to limit cash costs escalation to 6% for the year-end total cash costs for the group of $281 an ounce. Larger part of savings were achieved in the South African region through increased operational efficiency with savings of $108 million, an improved procurement strategy producing $23 million, and restructuring producing $13 million.

Going forward, we will continue to roll out the cost-management success realized in South Africa across the group and particularly at our African operations, thereby virtue of their remote location and heavier reliance on diesel, costs must remain a key management focus. This quarter, you will notice that in addition to our year-end numbers, we have included in our report to shareholders an abbreviated ore-reserve statement. A full statement will be published with our annual report.

In accordance with the US SEC requirements, based on an estimated average gold price and exchange rates for the 3 years ended 31st December 2005, this requirement yields a gold price of $400 US Australian 556, or 86,000 rands a kilogram in South African currency. In accordance with this price line, the company’s proved-and-probable reserves are 63 million ounces compared to 79 million ounces for 2004. This represents a decline of 15,6 million ounces. Of this decline, 7 million ounces is due to depletion. 6,4 million ounces is due to the use of a lower gold price. And the remaining 2,2 million ounces is the result of geological model and scope changes.

In regard to this last 2,2 million ounces, the change has primarily occurred at the Moab Khotsong, Mponeng and Tau Lekoa mines in South Africa due to lower mine-call factors as well as the use of a lower rand or local-currency gold price. This, in particular, necessitated the removal of Moab Phase II and Mponeng below 120 VCR Projects from our SEC compliant reserves. In contrast to the three average gold prices mentioned above, we've used the sensitivity analysis, carried out in the ore reserves, using gold prices that reflect more recent spot prices that is, prices of 530 US dollars, 700 Australian dollars, and a rand price of 105,000 rands per kilogram.

This sensitivity analysis, together with anticipated reserve-ounce generation expected in 2006 expiration program indicates that the current ore-reserve position could potentially be increased by some 9 million ounces. Thereby, more than replacing depletion in 2006. Also included in our published report today is a production outlook for 2006. We anticipate a slight decline for the year to 5,9 million ounces from 6,1. Partly as a consequence of reduced production at the Bibiani mine in Ghana, and Savuka in South Africa, both mines essentially in closure mode.

Based on currency assumptions of 6 rand 50 to the US dollar, Australian 76 cents, and Brazilian reals 240, and Argentinean peso 296, we're forecasting cash costs for the year in the range of 285 to 293 dollars per ounce. Importantly, we note in our report that production its forecast to increase in 2007. This is the result of the incremental buildup at the Moab mine in South Africa, the Cuiabá deepening project in Brazil, and mining at Sunrise Dam in Australia, and Geita in Tanzania, that is going to move to higher-grade areas.

Production improvements of between 10 and 15% are also anticipated at the Iduapriem and Obuasi mines in Ghana. I'm therefore pleased that into next year, we will start to see the benefits of our strong organic growth pipeline, which could deliver production growth of between 6 and 8% in 2007. In this regard I'm also pleased to indicate that we took the Boddington expansion project to our board yesterday, and have gained approval for our participation in this important project. The final bearhead for Boddington is of course conditional on joint venture partners also approving the project.

Boddington, on 100% basis, has project resources of some 25 million ounces of gold, and just have 1,000 kilogram tonnes of copper with reserves of 17 million ounces of gold and 658 kilogram tonnes of copper. In respect of our 33% share, we're looking at a current project life of more than 15 years, with gold production of approximately 330 ounces per year, at an assumed real cash cost of 209 US dollars per ounce for the first 5 years. Our intention is to commence production in the third quarter of 2008.

As you will see from our operational forecast published in our earnings report, we're assuming project capital in 2006 for Boddington of 82 million US dollars. Our attributable share of the project capital expenditure for Boddington over the next three years is 432 million US dollars, set against our significant capital commitments, which for 2006 are estimated to be between $786 and 818 million.

Let me comment on our dividend declaration for the 6 months ended 31st of December 2005. A dividend of 62 South African cents or 10 US cents per share, has been declared for the 6 months ended 31 December 2005. This represents a similar payout level of dividends to the adjusted headline earnings, as per the mid-year declaration, and results in a total dividend for the year of 232 South African cents, or 35 US cents per share. Given that the group is in its highest-ever capital expenditure phase, we will continue to manage our capital expenditure in line with profitability and cash flow, and our approach to the dividend and capital allocation, on the basis of prudent financial management.

Lastly, before handing it over to Kelvin Williams, note that Kelvin will be retiring as an executive in May of this year, after a long and very distinguished career both in AngloGold Ashanti and also in the AngloAmerican group of companies prior to that. While his last earnings call will therefore be next quarter at which time we will more appropriately recognize his significant contribution to the Company, the handover of his portfolio will be undertaken during the next 3 months. In respect to the hedge book, Mark Lynam, our treasurer who has worked alongside Kelvin for the past 14 years, in the management of the hedge book will take leadership of this important aspect of our business.

In respect of our gold-marketing activities, which include our ownership and direction of Rand Refinery, our membership of the World Gold Council together with our investments in the jewelry manufacturing company, Oro Africa and our global gold jewelry-design and promotional activities Tera Cittriani (phonetics) will take leadership of this important aspect of our business. Tera has worked alongside Kelvin in his marketing capacity for the last 3 years. Tera’s currently the Chairman of the board of Rand Refinery, and prior to joining AngloGold Ashanti, he was an Executive Director with Real Africa Holdings. Tera will also be joining our executive committee.

We have 2 other recent changes to our top management team. Donnie McGiven, who’s headed up our North American activities for sometime, has moved to Johannesburg to take up the position of Executive Officer, Legal, Safety and Environment. Similarly, Peter Rowe, who headed up our Australian activities, has moved to Johannesburg to take up responsibility for our corporate technical group. I'm delighted with these 2 new additions to our Johannesburg-based team. Richard Duffy will later in this presentation also introduce our new head of explorations, Eric Graf.

I'm very pleased to hand it over to Kelvin.

Kelvin Williams, Marketing Director

Thank you, Bobby. We've noted in our comments in writing, in the shareholders report on the gold market, and these are comments that you yourselves will have observed in the gold market in the past quarter. That gold has had a most-remarkable quarter. On the back of a spot price, which written almost 25% during a 3-month period, and having touched price levels not seen in the past 25 years, we are living firmly in what are particularly exciting times in our market.

The gold market’s become all the more interesting, for it's delinking from the other markets that have driven the gold price higher during the past 3-4 years. In particular, the significant increases in the gold price during this past quarter have not depended upon a weaker dollar, nor upon increased buying on the New York Commodities Exchange. In fact, the price rose, in spite of both a firmer dollar and firm-but-flat investor positions oncoming.

Factors outside of the currency market and New York trading, which operated favorably toward gold in this quarter included the strong resurgence of investor buying of gold ETF shares. And this occurred both in late 2005, and strongly throughout January, 2006. And the record buying of gold on the Tokyo Commodity Exchange during November and December at the end of last year in response to a 10% fall in the value of the yen against the dollar. These 2 together, along with oil-price volatility and the sum measure of international tension in the Middle East helped the gold price to current record levels.

Turning to the hedge the Company’s strategy of active management of maturing hedge positions and of the hedge book has a whole has not changed during this more-positive gold market. We have continued to allow all maturing forwards to roll off the book, and to manage trading activities around the existing hedge positions in a manner aimed at generating higher received prices for the Company.

As a result, the Company achieved a received price of $476 per ounce for the final quarter of 2005, compared to the average spot price of gold during that quarter of $485 per ounce. Our shortfall against spot rose to $9 per ounce compared to the $6 per ounce during the third quarter of 2005. If we were to put that differently, of the $46 per ounce increase in the average spot price for the quarter, the Company enjoyed $43 of the $46 rise.

Looking forward in a continually rising gold price, we will again continue to manage the book to secure as much benefit as possible of the spot-price increase from quarter-to-quarter. The gap between received-price and spot-price obviously stretches and increases in a rising market. But we will manage our commitments in order to allow our shareholders still to receive the lion’s share of a rising gold price.

Regarding the quarter-end evaluation of the hedge the increase of some 160 ounces, or 5 tonnes in the delta size of the hedge, and the increase and the negative evaluation of the hedge are both due entirely to the increase of $51 per ounce in the spot price of gold, on which the hedge was mark-to-market. Had the spot-price of gold at the end of December 2005 remained unchanged from the price of $465 at the end of September, the hedge would have reduced in size to 10,29 million ounces, or 320 tonnes with a mark-to-market value of 1.4 billion or little change from the end of third quarter.

The Company continues to manage its hedge positions actively, and to reduce overall levels of the pricing commitments, in respect to future gold production by the Company. Thank you.

Srinivasan Venkatakrishnan, Finance Director

Thank you, Kelvin. Let me start with the gold price received, which climbed 10%, quarter-on-quarter to $476 an ounce. This compares to an average spot price for the quarter of $495 an ounce. This represents, as Kelvin pointed out, strong participation in the gold price valley.

Total cash cost decreased by 2%. This was primarily achieved through increased efficiencies and continued implementation of cost-savings initiatives. A higher price and lower costs boosted our adjusted headline earnings to $41 million. We have recently relooked at our definition of adjusted headline earnings in order to be able to use that number as an approximate proxy for cash earnings. As in the past, the fourth quarter’s adjusted headline earnings strips out impairments, costs associated with discontinued operations, profit-or-loss related to asset disposals, and importantly, the volatility associated with our hedge book.

From this quarter, as we promised you during the last call, you will note that we have also begun to exclude the volatility of the convertible bond in the calculation of adjusted headline earnings. For ease-of-comparison, we have therefore restated last quarter’s adjusted headline earnings upwards from 1 million to 22 million to take account of the volatility of the bond. Despite this upward restatement, our quarter-on-quarter comparison showed an 86% increase from 22 million achieved in the third quarter of 2005 to 41 million in the fourth quarter.

In addition, it is worth noting that the $41 million of adjusted headline earnings is after emphasize, "after," deducting three significant and largely once-off charges. First, this quarter saw the full implementation of the new International Accounting Standard 16, which carried with it a 13 million increase in depreciation charge related to a redefinition of "Useful Life of Fixed Assets," and the associated catch-up.

Secondly, a 28 million increase in the estimates of our rehabilitation provisions at mines in Tanzania, Australia, Ghana and Namibia. And third, a 52 million increase in the tax provisions in Africa and South America, although this increase was mostly offset by a $48 million tax credit in Ghana, after a further reduction in that country’s corporate tax rates from 28% to 25%.

Looking at the year as a whole, adjusted headline earnings stands at $200 million, or 76 cents per share. Bobby has provided you with the outlook for production, total cash costs and capital expenditure for 2006. I'd just like to add to it our estimates of depreciation and amortization charges, which are forecast to be around $577 million for 2006. This is due to more upcoming on-stream. The transition to owner-mining at Geita and the reassessment of the useful life of some of our assets.

I will now hand it over to Neville, who will discuss our operating performance in Africa.

Neville Nicolau, Chief Operating Officer, Africa

Thank you, Mr. Venkatakrishnan. In respect to the African assets, this quarter was operationally solid. Turning first to South Africa the total gold production was slightly lower, at 669,000 ounces due primarily to decreases at Kopanang, Savuka and Tau Lekoa. Mponeng however, had an excellent quarter with production up 12% and cash costs 9% lower. And TauTona also showed production and cost improvements of 3 and 4%, respectively. The region’s major achievement for the quarter, however, was as Bobby mentioned a 5% decline in the total cash costs, which came in at just over 56,000 rand a kilogram. This is testament to a continuing solid commitment to cost control, in spite of globally increasing costs of consumables.

Looking ahead, South African production in the first quarter of 2006 is expected to decline by approximately 7% on that of the fourth quarter of 2005, primarily due to a reduced number of production shifts associated with the Christmas break, and several public holidays, which seized quarter-on-quarter, 5 fewer production days in the West Wits, and 8 fewer production days in the Vaal River operations. Additionally, as we had flagged in the quarterly, Tau Lekoa is undergoing a restructuring in the first quarter, with a view toward downscaling production and significantly decreasing costs, which should return the operation to profitability. Mponeng is also as much as we would like not scheduled to repeat its exceptional fourth quarter performance in the next quarter.

Finally, we have recently reduced our buildup rate plan at Moab Khotsong. The geology in this area is more complex than we anticipated. And this has resulted in a delay in achieving the volumes we had planned for. Although, we are confident that these levels are still attainable. Grades at Moab are still initially lower than we expected in the initial buildup although, as mining East grade will gradually increase through the year and going forward, as we complete the buildup. Just as Great Noligwa was mined from high-grade to low-grade over its life, so is the buildup on the adjacent Moab mine starts with the low-grade and works toward high-grade.

Moving beyond South Africa, commendable performances across Africa in the fourth quarter included Yatela in Mali, where production was up 48%, and cash cost declined 27% after the heavy rains of the third quarter subsided allowing tonnage expected to return to normal levels. At Obuasi in Ghana, I'm pleased to report production increased 2%, quarter-on-quarter. And Siguiri, in Guinea, also reported a slightly higher production after an improved plant performance resulted in a 16% increase in the tonnage.

At Geita in Tanzania, production declined, as we indicated it would in the last quarter to 120,000 ounces due to an 11% decrease in the recovered grade. Both production and grades at Geita should remain at this level, while the current cutback in the Nayankanga purchase is completed, and should begin to gradually increase in the fourth quarter of this year. In the context of this production decline, it is pleasing that the total cash costs at Geita nevertheless decreased 8% quarter-on-quarter. This reflects the ongoing benefit we are obtaining from the transition to owner-mining. Although, the full gains of this will only be realized in mid-to-late year.

Oh, Dr. Roberto, (foreign language) international.

Roberto Carvalho Silva, Chief Executive Officer Americas and Australia

Let me first talk North America operations, Serra Grande and AngloGold Ashanti Mineracao in Brazil, both reported once again solid results, with production more or less in line with that of the previous quarter. The total cash costs, however, for these operations increased between 9 and 10 cents partially as a result of the 13% depreciation of the Brazilian Real over the quarter in addition to several mine operational issues.

Total volume in – reporting a 14% improvement in cash costs owing to a higher grade for both gold and silver in spite of a slight production decline, as predicted, to 41,000 ounces. In North America, production at the Cripple Creek and Victor was 8% lower, at 85,000 ounces, as a result of lower heap-leach recovery while cash costs increased 3%, primarily as a result of external cost pressures. Including higher diesel price and component-part price the effects of which continue to be actively managed by the team onsite.

Finally, at Sunrise Dam in Australia, production is estimated an anticipated decrease of 9% to 92,000 ounces, as mining continues in the lower grades Sunrise Shear Zone where it will remain for the next 9 months, before enjoying higher grades at the beginning of the fourth quarter of this year. The underground project, which is beginning to supplement the current lower-grade commercial production, is proceeding as planned. During the quarter, 1,300 meters of underground capital development, and 225 meters of operational development were completed. I will now hand it over to Richard Duffy.

Richard Duffy, Business Management

Thanks, Roberto. As Bobby mentioned, one of our key aims going forward is to continue to replace depleted ounce in part to exploration. The full exploration budget for 2006 is approximately $91 million, with 55 million of this allotted for Brownfield’s exploration, and the balance of 36 million for Greenfields. As Bobby had mentioned earlier, I'm pleased to welcome Eric Graf as the new head of our exploration team, who joined us as AngloGold Ashanti in 2002, and has until now been running our exploration activities in Peru. Eric and I have recently refined our Greenfield strategy to ensure that we optimize the funding of our most-respective projects, which are located in 4 key areas. The Democratic Republic of the Congo, Colombia, Australia and Alaska. Beyond these project areas, which I will take you through in a minute, the Greenfields approach focuses on our joint-venture and minority-equity stakes in companies working in Lao, the Philippines and Russia, as well as broader business-development areas mainly, China and Greater Russia where we continue to look at potential opportunities.

Our most-perspective Greenfields exploration project is located in the Mongbwalu region of the Northeastern DRC. As we've mentioned before, the initial drilling supports historical tonnage and grade estimates of 1.2 million ounces of 9.9 grams a tonne. And we are targeting a 5-million ounce resource in the area. In 2006, at the Adidi Kanga, we expect to delineate around 3 million ounces of a third resource. We will also begin resource-definition drilling in the 10x15 kilometer Mongbwalu Ridge region, in addition to drill-testing both high-grade, underground and low-grade, open targets. An evaluation of the regional upside will also commence in 2006, as our concession covers virtually the entire kilo of Greenstone belt, in the area of some 3,000 square kilometers.

In South America, our Greenfields exploration efforts are focused in Colombia, where we hold a significant tenement position over the country’s most-perspective gold and copper belts. In 2006, work in this area is central and drill-testing our high-priority targets, as well as generating new targets through our regional reconnaissance program. In Western Australia, we've obtained encouraging initial drill results from our joint-venture Tropicana project, which is located in a previously unrecognized mineralized belt, which we believe multi-million opps potential.

In addition to defining additional targets within our 7,500 square kilometer holdings this year, we will look to delineate the resources potential to the central Tropicana area from which first cost drilling has obtained positive results. If successful, this could result in us reaching pre-feasibility in about 2 years. In North America, our Greenfields exploration program is targeting high-grade gold systems in Alaska given its exciting potential and limited modern exploration in the area, to date. So far, our work here has yielded a number of new gold discoveries including, most recently, the very prospective LMS anterior project. In 2006, further drill-testing of high-priority targets at these new projects is flat. New-target generation will also remain a focus.

I will now hand you back to Charles.

Charles Carter, Vice President Investor Relations

Thank you, Richard. I should just note that the slide presentation is on our website. And in respect of Richard's and other colleague’s presentations, you’ll find more detailed graphics. At this point, we'd be delighted to take your questions.

Questions-and-Answer Session

Operator

Thank you very much. Ladies and gentlemen, at this time if you would like to ask a question, please dial * and then 1 on your touchtone phone. If you then decide you would like to withdraw your question, please dial * and then 2. Our first question comes from Victor Flores of the HSBC. Please go ahead, sir.

Q - Victor Flores

My first question is for Richard and Eric, on the exploration. You budgeted $91 million for this year. If you expect to replace reserves, that would imply that you can find an ounce of gold for about $13 a piece. Is that an achievable goal? Or do you actually need to increase your exploration budget in order to achieve reserve replacement this year?

A - Richard Duffy

It’s Richard. I think it is realistic because what you need to remember is we are expecting to see some reserves come back into our reserves, as a result of improved typing. As Bobby explained, around 6 million ounces came out of our reserves for last year largely or entirely as a result of the rand gold price. So you will see a slight of reserves come back. And the balance, which is around 3-4 million ounces will come from Brownfields reserve growth in our business plan, this year. So I think the budget allocation would support the reserve replacement.

Q - Victor Flores

Great. Thank you. Next question is a financial question. And I'm just curious as to what plans or goals you have this year for ongoing cost-cutting, given the success you had last year. Does that mean you've kind of taken out of what you might have achieved, this year? Or are there plans to get even more cost savings this year?

A - Srinivasan Venkatakrishnan

Well, Victor if I can pick this up and then Neville can comment on South Africa. As part of our budgeting process, we build in cost reductions to beat inflation. We are targeting a similar sort of level for the current year, which we are putting into the budget. And Neville can expand on South Africa.

A - Neville Nicolau

I'm not sure whether I would expand any on South Africa, but for Africa as a continent. The methodology of managing costs, which we've implemented and have rolled out across the continent should continue to show benefits. Cost-management is a sort of a continual improvement process. The streamlining of logistics channels and the simplification of procurement contracts and so on across the content should continue to realize the savings. And then on the operations, we have specific plans in place to improve the productivity of each of our mines across the continent. And we put all of these action plans in the form of a project-management schedule. We’ll manage that across the year. And the bottomline of all of that is that the cost improvements, which we are forecasting are improvements that we are not hoping for but that we are actually planning for.

Q - Victor Flores

Sorry just to pin down a number…does that put you in the neighborhood of $100 million, as it did originally, for 2005? Or do you think it could be more than that?

A - Srinivasan Venkatakrishnan

No, I think $100 million is a pretty good number. That’s what our target is for the year.

Operator

Our next question comes from Heather Douglas, of BMO Nesbitt Burns.

Q - Heather Douglas

I have a couple questions about your 2006 guidance. I’ll start with Moab Khotsong. I noticed that costs are really, for the first year, are quite high. Can you tell us where you think costs may level out, once it’s more at steady state? Or is it certainly even in 2007?

A - Neville Nicolau

Heather, it’s Neville, here. Moab Khotsong you have to look at in terms of the overall buildup. I said in my presentation a few key things. It’s important to look at Moab Khotsong in terms of what we've been telling the market for some time, now. Moab is an ore body which is very similar to Great Noligwa body. The reason that we were able to develop this mine with very little drill data was because of a geological exercise called, "Paleos Best-Agree Construction," which puts the ore bodies together and tells us that the Great Noligwa ore body is very similar to the Moab Khotsong ore body.

With that, you have all of the information that you actually need, to be able to look at the complete life of mine of Moab Khotsong. The buildup that you talk about…One has to look at the shape of the ore bodies. A simple view of the shareholders plan will tell you that we are in sort of a triangle to the waist of the ore body. That mans that the buildup is actually slower than what typically are able to achieve in the deep-level South African mines. We have limited rise access, to start with. We have to start in the corner of the triangle, simply because of logistics and location and seismicity issues. So the buildup is over several years, and not over a year or two as we've been able to achieve.

The second point is that Great Noligwa, as we've told the market, mines with a yield going from about 12-13 grams a tonne. And we've told the market it will end at 8 grams a tonne. Moab actually mines from the other side. So it starts off with a lower grade, and builds up in a higher grade. A mistake would be to take the average reserve-grade that we've published for Moab Khotsong and use that to forecast the model. If you take all of that, you've got a gold buildup which is slightly slower than what we typically are able to achieve. It takes us a few years to get to the full gold production. And the costs start off quite high and come down over the next 3-4-5 years down to the levels that we expect in the medium- to long-term. I think I hope that answers your question.

Q - Heather Douglas

So, if Great Noligwa went from 12 to 8, what are the numbers for this coming year? What grades should we look at that, that will be at the low end?

A - Neville Nicolau

They will be at the low end, as I say. The ore body’s being mined from West to East. It’s mined from where we're going to in-grade the ore body in terms of grade. The start of the mine is very complex, geologically. It’s an intersection of 2 major faults. It drags the ore body up and down. There's a whole lot of sympathetic and smaller faulting in that area. So the off-reef component of what we mine is quite high, to start with. This all sort of stabilizes, as we get into the rays, as proper and as we start to mine into the future.

Q - Heather Douglas

So the reserve grade at Moab Khotsong is that 14. Does low mean it’s going to start around 10 or even lower?

A - Neville Nicolau

No. It’s going to be about 8 grams a tonne.

Q - Heather Douglas

Okay. So it’s the same. I didn’t understand that, because of the… So it’ll go 8 to back up toward 14. I'm sorry.

A - Neville Nicolau

Yes.

Operator

Thank you very much. Our next question comes from Muneer Ismail of Deutsche Securities. Go ahead.

Q - Muneer Ismail

I just wanted to wish Kelvin Williams all the best. He’s been really good to us analysts allowing us the time to meet with him, as well as to try and understand what was a very difficult hedge book. I expect, Kelvin, you’ll give it a few months before you join the Mining Board. Take a bit of a break. Just starting off with… Well… It’s one question, with regards to the balance sheet. Your net debt position. I could appreciate that it’s only moved up 2.7% higher. The net debt equity looks really… I mean it’s bumped up quite a bit, there. I think the ratio’s around 62%, if my memory serves me correctly. That’s following a significant reduction in shareholder equity. I'm just trying to understand. I think, if you could help with this, the reduction in shareholder equity. Why such a big knock, there?

A - Srinivasan Venkatakrishnan

Yes. If I can just come in, Manier, quickly. Let me address that. There are 2 parts to the question. 1, the movement in shareholder equity. What you've got to understand is that a chunk of our hedge contracts are mark-to-market on the balance sheet. And given the rally in the spot price, you've got to account for that leg of that movement, on the balance sheet. But given the very stringent accounting rules, we can’t bring the other leg on the asset side of the balance sheet, which is valuing those ounces, which are mark-to-market on the balance sheet at the relevant prices on the asset side. That’s a chunk of the movement. In addition to that, obviously, the movement of the volatility on the convertible bonds is another factor. Just commenting on your net debt question if I can make a couple of points. Firstly, the cash-generation at $441 is what you see in last year’s cash flow. The gold is currently trading at about $550 per ounce. There's quite a lot of cash coming through the door. We are certainly going through a high capex phase, and that cash generation will help us. And this, in terms of net debt, we've got significant room, in terms of our covenants, which is required by our banking facility. We're not suggesting that they are going to raise more debt, we're watching it quite carefully. But certainly, there is enough headroom both in terms of covenants and cash-generation of the business.

Q - Muneer Ismail

So there's nothing to be concerned about. It’s just mark-to-market movements, mainly movements on the convertible…

A - Srinivasan Venkatakrishnan

And there's also a detailed note in there, Muneer, on page, just give me 2 seconds. On page 27, which breaks it down by individual components.

Q - Muneer Ismail

Perfect, perfect, I see it, I missed it sorry. Okay great, that’s my question, thank you.

Operator

Our next question comes from Peter Townsend of BJM. Go ahead, sir.

Q - Peter Townsend

Just one question on the reserve side. I understand what the SEC requires you to do, in terms of your reserve calculations. But just on the Moab Khotsong Phase II, and at Mponeng and other projects, are you actually changing anything in terms of the gold price you're using to evaluate those projects? And what gold price are you using internally?

A - Richard Duffy

It’s Richard Duffy. I think in terms of the reserves, particularly at the project operations you mentioned in South Africa, we used a lower planning price, and we are obliged to use a lower price, in terms of the SEC guidelines. So that defined or dictated the reserve. But for this year, we are using a higher gold price. We're using a planning price of $500 an ounce. And we're looking at a rand of 625. Obviously, in terms of SEC guidelines, we’ll still have to carry out an exercise of the average price, over the last 3 years. But for the purposes of compliant-reserves, we will be running prices around those levels. So, in effect, we could potentially be able to calculate two reserves. One, on the basis of the SEC and 1 that follows the normal guidelines.

Q - Peter Townsend

Right. Just to clarify, then… If you were to go ahead with a particular project and sort of forget… wouldn’t necessarily be on the back of the gold price that you're using in your SEC filing?

A - Richard Duffy

No. We would use the price that we think is the most-relevant and realistic for our business, going forward.

A - Srinivasan Venkatakrishnan

And if I could just come in here to clarify, that is perfectly acceptable to the SEC. We have clarified that with them.

Operator

Our next question comes from Brenton Saunders of Craton Capital. Please go ahead.

Q - Brenton Saunders

I think this one’s for Venkat. I just wanted to find out what was the reason behind the removal of the option components of the convertible. And if you could, also just remind me what the conversion price is on the convert?

A - Srinivasan Venkatakrishnan

The convert price is at $65 per share. And for the conversion to take place, obviously, the bondholder can convert at any time. For a mandatory convert to take place, it needs to trade at 30% premium, to $65 per share, for a 20-day period within a 13-consecutive-day period. Now, just in terms of the reasons behind why we removed the convertible bond element was… At the end of the day, you want investors and analysts to understand what the cash-earnings of a Company are. The volatility of the convertible bond particularly given sort of market movement in the share price, and the associated vols, was making the income statement meaningless. Therefore, we promised that we would actually strip that out, in our definition of, "adjusted headline earnings," to best represent our cash earnings measure for the Company.

Q - Brenton Saunders

If I could just follow up. I mean with all due respect… Income statements have been quite unrepresentative of that for some time. And, I mean if there's going to be additional equity coming into the Company at a later stage, if this bond does convert, if this market continues, I think analysts and shareholders should be just as aware of that.

A - Srinivasan Venkatakrishnan

That’s correct. But then, should the bonds convert, these amounts do come back into our income statement and balance sheet, that's out.

Q - Brenton Saunders

How much equity could it convert into?

A - Srinivasan Venkatakrishnan

It’s basically 15.5 million shares, or thereabouts. It’s 1 billion divided by 65.

Operator

Ladies and gentlemen, just a reminder, that if you would like to ask a question, please dial * and then 1 on your touchtone phone.

Operator

Our next question comes from Brendan Ryan from The Financial Mail. Please go ahead.

Q - Brendan Ryan

Bobby, have you had any clarification from AngloAmerican, regarding how they propose to reduce their equity holding in AngloGold Ashanti?

A - Bobby Godsell

No.

Q - Brendan Ryan

If I may follow up on that, do you think that AngloAmerican is wise to be wanting to reduce its exposure to AngloGold Ashanti, given the way the gold price has moved over the last month, and given the outlook for the middle?

A - Bobby Godsell

When they announced it on the 27th of October, we made a comment. We understand the underlying reason for their decision to decontrol and not to maintain 51% is the fact that gold equities have a distinctive and data credit of shareholders, and that gold equities trade at different multiples, to any measure of underlying value-diversified miners. I think those 2 reasons hold true at any gold price.

Operator

Our final question comes from Leon Esterhuizen of Investec Securities. Please go ahead.

Q - Leon Esterhuizen

Just a question for Neville, quickly, please. The performances of Africa is really fantastic, in my view. It’s very commendable. But I sort of don’t understand exactly how you achieved this over the last 2 years. We've had dropping volumes, reduction in churns mine. We've had declining yields. And even though the ramp at some cost is down a little, it’s nowhere near the sort of drop equal to the drop in tonnage or yield. Have you been reducing labor aggressively? Or could you just give us some sort of hint of how you achieved this?

A - Neville Nicolau

Well, I'm glad you put it that way, Leon. Because our board should take note of the outstanding effort achieved, in this regard. The reality is that we put business plans in place, which we try to simulate the business. These have given us early-warning of problems ahead. In others words, when the rand continued to weaken, at a time when many people expected it not to weaken, and the rand price for gold dropped down to the low 18,000 rand a kilogram. We had forewarning of that in our business-planning process. We put in the 4 action plans, which are repeated regularly. We've put cost-management into place. We removed overhead from the region before we closed operations. In other words, before Ergo closed and before Savuka closed, we actually removed the overheads associated with those. And we removed a bit more than that. We have managed escalation down by looking at the contracts that we deal with. And we have managed productivity very closely. Productivity is a nice cost-management tool for operating managers. Particularly, where you have a high component of labor costs. And we've been able to improve productivity in this time. To say that we haven’t reduced labor would be lying. We have reduced labor. It’s been well-managed. In some cases, it’s been moving labor to operations that are in build-up. For example, to Moab Khotsong. In other cases, it’s been removal of contractors, and replacing them with mine labor. And in many cases, it’s been actually reducing or retrenching and voluntary retrenching people out of the operations. All of that has been managed very, very carefully, so that it hasn’t made a great deal of noise.

Q - Leon Esterhuizen

Yes. It’s a phenomenal performance. You reflect about 43,000 people employed in South Africa, last year. Can you give me an indication for 2005?

A - Neville Nicolau

I'm going to give you the wrong number. It’s about 32,000. But then there are some contractors, on top of that.

Q - Leon Esterhuizen

I’ll give you a shout later. Thanks.

Operator

Gentlemen, we have no further questions. Would you like to make some closing comments?

Charles Carter, Vice President Investor Relations

No. Thank you, Dylan. And thank you to all the participants on the call.

Operator

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

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Source: AngloGold Ashanti Q4 2005 Earnings Conference Call Transcript (AU)
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