6-K 1 d370662d6k.htm FORM 6-K Form 6-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 6-K

 

 

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 or 15d-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

Report on Form 6-K dated June 27, 2012

This Report on Form 6-K shall be incorporated by reference in

our automatic shelf Registration Statement on Form F-3 as amended (File No. 333-161634) and our Registration

Statements on Form S-8 (File Nos. 333-10990 and 333-113789) as amended, to the extent not superseded by

documents or reports subsequently filed by us under the Securities Act of 1933 or the Securities Exchange Act of

1934, in each case as amended

Commission file number: 1-14846

 

 

AngloGold Ashanti Limited

(Name of Registrant)

 

 

76 Jeppe Street

Newtown, Johannesburg, 2001

(P O Box 62117, Marshalltown, 2107)

South Africa

(Address of Principal Executive Offices)

 

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F:  x            Form 40-F:  q

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):

Yes:  q             No:  x

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):

Yes:  q             No:  x

Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes:  q            No:   x

 

Enclosures:    Unaudited condensed consolidated financial statements as of March 31, 2012 and December 31, 2011 and for each of the three month periods ended March 31, 2012 and 2011, prepared in accordance with U.S. GAAP, and related management’s discussion and analysis of financial condition and results of operations.

 

 

 


ANGLOGOLD ASHANTI LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Prepared in accordance with US GAAP

 

     Three months ended March 31,  
     2012     2011  
     (unaudited)     (unaudited)  
     (in US Dollars, millions, except for share data)  

Sales and other income

     1,720       1,435  

Product sales

     1,706       1,422  

Interest, dividends and other

     14       13  

Cost and expenses

     1,068       1,077  

Production costs

     785       708  

Exploration costs

     75       57  

Related party transactions

     (4     (4

General and administrative

     70       68  

Royalties

     48       40  

Market development costs

     1       3  

Depreciation, depletion and amortization

     189       192  

Impairment of assets

     —          1  

Interest expense

     44       44  

Accretion expense

     8       7  

Employment severance costs

     3       4  

Profit on sale of assets, realization of loans, indirect taxes and other (see note E)

     (27     (2

Non-hedge derivative gain and movement on bonds (see note F)

     (124     (41

Income from continuing operations before income tax and equity income in associates

     652       358  

Taxation expense (see note G)

     (265     (124

Equity income in associates

     10       9  
  

 

 

   

 

 

 

Net income

     397       243  

Less: Net income attributable to noncontrolling interests

     (13     (6
  

 

 

   

 

 

 

Net income—attributable to AngloGold Ashanti

     384       237  
  

 

 

   

 

 

 

Income per share attributable to AngloGold Ashanti common stockholders: (cents) (see note I)

    

Net income

    

Ordinary shares

     100       62  

E Ordinary shares

     50       31  

Ordinary shares—diluted

     68       53  

E Ordinary shares—diluted

     47       29  
  

 

 

   

 

 

 

Weighted average number of shares used in computation

    

Ordinary shares

     384,276,242       382,859,559  

Ordinary shares—diluted

     418,771,725       417,218,627  

E Ordinary shares—basic and diluted

     2,569,675       2,782,784  
  

 

 

   

 

 

 

Dividend declared per ordinary share (cents)

     26       11  

Dividend declared per E ordinary share (cents)

     13       6  
  

 

 

   

 

 

 

 

2


ANGLOGOLD ASHANTI LIMITED

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Prepared in accordance with US GAAP

     Three months ended March 31,  
     2012      2011  
     (unaudited)      (unaudited)  
     (in US Dollars, millions)  

Net income

     397        243  

Other comprehensive income consists of the following:

     

Translation gain/(loss)

     102        (52

Net gain/(loss) on available-for-sale financial assets arising during the period, net of tax of $nil million and $nil million, respectively

     1        (2

Reclassification of other-than-temporary impairment on available-for-sale financial assets to Net income during the period, net of tax of $nil million

     1        —     
  

 

 

    

 

 

 

Other comprehensive income

     104        (54
  

 

 

    

 

 

 

Comprehensive income

     501        189  
  

 

 

    

 

 

 

Total comprehensive income attributable to:

     

AngloGold Ashanti

     486        184  

Noncontrolling interests

     15        5  
  

 

 

    

 

 

 
     501        189  
  

 

 

    

 

 

 

 

3


ANGLOGOLD ASHANTI LIMITED

CONDENSED CONSOLIDATED BALANCE SHEETS

Prepared in accordance with US GAAP

          At March 31,     At December 31,      
          2012     2011      
          (unaudited)            
          (in US Dollars, millions)      

ASSETS

         

Current assets

        2,822       2,631    

Cash and cash equivalents

          1,216       1,112      

Restricted cash

        54       35      

Receivables

        408       351      

Trade

        62       46      

Recoverable taxes, rebates, levies and duties

        181       170      

Other

        165       135      

Inventories (see note C)

        973       959      

Materials on the leach pad (see note C)

        103       98      

Deferred taxation assets

        66       75      

Assets held for sale

          2       1      

Property, plant and equipment, net

        6,359       6,123    

Acquired properties, net

        785       779    

Goodwill and other intangibles, net

        221       213    

Other long-term inventory (see note C)

        31       31    

Materials on the leach pad (see note C)

        404       393    

Other long-term assets (see note K)

        1,070       1,001    

Deferred taxation assets

        6       14    
     

 

 

   

 

 

   

Total assets

        11,698       11,185    
     

 

 

   

 

 

   

LIABILITIES AND EQUITY

         

Current liabilities

        959       919    

Accounts payable and other current liabilities

          743       779      

Short-term debt

        51       30      

Short-term debt at fair value (see note D)

        2       2      

Tax payable

          163       108      

Other non-current liabilities

        67       63    

Long-term debt (see note D)

        1,722       1,715    

Long-term debt at fair value (see note D)

        676       758    

Derivatives

        50       93    

Deferred taxation liabilities

        1,370       1,242    

Provision for environmental rehabilitation

        667       653    

Provision for labor, civil, compensation claims and settlements

        36       35    

Provision for pension and other post-retirement medical benefits

        214       185    

Commitments and contingencies

        —          —       

Equity

        5,937       5,522    

Common stock

                         

Share capital—600,000,000 (2011—600,000,000) authorized ordinary shares of 25 ZAR cents each. Share capital—4,280,000 (2011—4,280,000) authorized E ordinary shares of 25 ZAR cents each. Ordinary shares issued 2012—382,075,676 (2011—381,915,437). E ordinary shares issued 2012—1,050,000 (2011—1,050,000)

        13       13      

Additional paid in capital

        8,755       8,740      

Accumulated deficit

        (2,292     (2,575    

Accumulated other comprehensive income

        (730     (832    

Other reserves

        36       36      
     

 

 

   

 

 

     

Total AngloGold Ashanti stockholders’ equity

        5,782       5,382      

Noncontrolling interests

          155       140      

Total liabilities and equity

        11,698       11,185    
     

 

 

   

 

 

   

 

4


ANGLOGOLD ASHANTI LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Prepared in accordance with US GAAP

     Three months ended
March 31,
 
     2012     2011  
     (unaudited)     (unaudited)  
     (in US Dollars, millions)  

Net cash provided by operating activities

     576       503  

Net income

     397       243  

Reconciled to net cash provided by operations:

      
   

(Profit)/loss on sale of assets, realization of loans, indirect taxes and other

     (8     6  

Depreciation, depletion and amortization

     189       192  

Impairment of assets

     —          1  

Deferred taxation

     102       69  

Movement in non-hedge derivatives and bonds

     (124     (41

Equity income in associates

     (10     (9

Dividends received from associates

     20       30  

Other non cash items

     16       4  

Net increase in provision for environmental rehabilitation, pension and other post-retirement medical benefits

     22       7  

Effect of changes in operating working capital items:

      

Receivables

     (56     (66

Inventories

     (23     1  

Accounts payable and other current liabilities

     51       66  

Net cash used in investing activities

     (381     (269

Available for sale investments acquired

     —          (3

Held to maturity investments acquired

     (39     (28

Contributions to associates and equity accounted joint ventures

     (45     (24

Additions to property, plant and equipment

     (312     (234

Interest capitalized and paid

     (2     —     

Expenditure on intangible assets

     (7     —     

Proceeds on sale of mining assets

     1       2  

Proceeds on sale of available for sale investments

     —          1  

Proceeds on redemption of held to maturity investments

     36       14  

Proceeds on disposal of equity accounted joint ventures

     20       —     

Proceeds on disposal of subsidiary

     —          9  

Loans advanced to associates and equity accounted joint ventures

     (15     —     

Cash of subsidiary disposed

     —          (11

Change in restricted cash

     (18     5  

Net cash used by financing activities

     (113     (194

Repayments of debt

     (4     (152

Issuance of stock

     —          1  

Debt issue costs

     (8     —     

Dividends paid to common stockholders

     (101     (43
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

     82       40  

Effect of exchange rate changes on cash

     22       (7

Cash and cash equivalents—January 1,

     1,112       586  
  

 

 

   

 

 

 

Cash and cash equivalents—March 31,

     1,216       619  
  

 

 

   

 

 

 

 

5


ANGLOGOLD ASHANTI LIMITED

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Prepared in accordance with US GAAP

FOR THE THREE MONTHS ENDED MARCH 31, 2012

(unaudited)

(In millions, except share information)

 

     AngloGold Ashanti stockholders                
     Common stock      Common
stock

$
     Additional paid
in capital

$
     Accumulated
other
comprehensive
income*

$
    Accumulated
deficit

$
    Other
reserves
$
     Noncontrolling
interests

$
     Total
$
 
Balance—December 31, 2011      382,965,437        13        8,740        (832     (2,575     36        140        5,522  

Net income

                384          13        397  

Other comprehensive income

              102              2        104  

Stock issues as part of Share Incentive Scheme

     154,406        —           6                  6  

Stock issues in exchange for E Ordinary shares cancelled

     2,269        —           —                     —     

Stock issues transferred from Employee Share Ownership Plan to exiting employees

     3,564        —           —                     —     

Stock based compensation expense

           9                  9  

Dividends

                (101           (101
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 
Balance—March 31, 2012      383,125,676        13        8,755        (730     (2,292     36        155        5,937  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

 

* The cumulative charge, net of deferred taxation of $1 million (2011: $1 million), included in accumulated other comprehensive income in respect of cash flow hedges amounted to $2 million (2011: $2 million).

 

6


ANGLOGOLD ASHANTI LIMITED

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Prepared in accordance with US GAAP

FOR THE THREE MONTHS ENDED MARCH 31, 2011

(unaudited)

(In millions, except share information)

 

      AngloGold Ashanti stockholders               
     Common stock      Common
stock

$
     Additional
paid in
capital

$
     Accumulated
other
comprehensive
income*

$
    Accumulated
deficit

$
    Other
reserves
$
     Noncontrolling
interests

$
    Total
$
 

Balance—December 31, 2010

     381,889,139        13        8,670        (385     (3,869     37        123       4,589  

Net income

                237          6       243  

Other comprehensive income

              (53          (1     (54

Stock issues as part of Share Incentive Scheme

     199,875        —           8                 8  

Stock issues in exchange for E Ordinary shares cancelled

     —           —           1                 1  

Stock issues transferred from Employee Share Ownership Plan to exiting employees

     8,085        —           1                 1  

Stock based compensation expense

           5                 5  

Dividends

                (43          (43
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Balance—March 31, 2011

     382,097,099        13        8,685        (438     (3,675     37        128       4,750  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

 

* The cumulative charge, net of deferred taxation of $1 million (2010: $1 million), included in accumulated other comprehensive income in respect of cash flow hedges amounted to $2 million (2010: $2 million).

 

7


ANGLOGOLD ASHANTI LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Prepared in accordance with US GAAP

Note A. Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by US GAAP for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month period ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.

The balance sheet as at December 31, 2011 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by US GAAP for complete financial statements.

For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s annual report on Form 20-F for the year ended December 31, 2011.

Note B. Accounting developments

Recently adopted pronouncements

Goodwill impairment testing

In September 2011, the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“the Codification” or “ASC”) guidance was issued which simplifies how an entity tests goodwill for impairment. The guidance allows both public and nonpublic entities an option to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test. Under that option, an entity no longer would be required to calculate the fair value of a reporting unit unless the entity determines, based on that qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. The adoption of the updated guidance on January 1, 2012 had no impact on the Company’s financial statements.

Presentation of comprehensive income

In June 2011, the FASB issued guidance for disclosures about comprehensive income. The guidance is intended to increase the prominence of other comprehensive income in financial statements. The main provisions of the guidance provide that an entity that reports items of other comprehensive income has the option to present comprehensive income in either one statement or two consecutive statements. The Company adopted the two consecutive statement approach on January 1, 2012. Except for presentation changes, the adoption had no impact on the Company’s financial statements.

Fair value measurements

In May 2011, the FASB issued updated guidance on fair value measurement and disclosure requirements. The requirements do not extend the use of fair value accounting, but provide guidance on how it should be applied where its use is already required or permitted by other standards within US GAAP. The update will supersede most of the FASB ASC guidance for fair value measurements, although many of the changes are clarifications of existing guidance or wording changes. The adoption of the updated guidance on January 1, 2012 had no impact on the Company’s financial statements.

 

8


ANGLOGOLD ASHANTI LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Prepared in accordance with US GAAP

 

Note C. Inventories

 

     At March 31,
2012
    At December 31,
2011
 
     (unaudited)        
     (in US Dollars, millions)  
       

The components of inventory consist of the following:

    
       

Short-term

    

Metals in process

     207       189  

Gold on hand (doré/bullion)

     64       94  

Ore stockpiles

     475       454  

Uranium oxide and sulfuric acid

     25       24  

Supplies

     305       296  
     

 

 

   

 

 

 
     1,076       1,057  

Less: Materials on the leach pad(1)

     (103     (98
     

 

 

   

 

 

 
        973       959  
     

 

 

   

 

 

 

 

(1) 

Short-term portion relating to heap leach inventory classified separately, as materials on the leach pad.

     At March 31,
2012
    At December
31, 2011
 
     (unaudited)        
     (in US Dollars, millions)  
       

Long-term

    

Metals in process

     404       393  

Ore stockpiles

     31       31  
     

 

 

   

 

 

 
     435       424  

Less: Materials on the leach pad(1)

     (404     (393
     

 

 

   

 

 

 
        31       31  
     

 

 

   

 

 

 
  

 

(1) 

Long-term portion relating to heap leach inventory classified separately, as materials on the leach pad.

 

9


ANGLOGOLD ASHANTI LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Prepared in accordance with US GAAP

 

Note D. Debt

The Company’s outstanding debt includes:

Debt carried at amortized cost

Rated bonds

On April 22, 2010, the Company announced the pricing of an offering of 10-year and 30-year notes. The offering closed on April 28, 2010. The notes were issued by AngloGold Ashanti Holdings plc, a wholly-owned subsidiary of AngloGold Ashanti Limited, and are fully and unconditionally guaranteed by AngloGold Ashanti Limited. The notes are unsecured and interest is payable semi-annually.

Details of the rated bonds are summarized as follows:

 

      At March 31, 2012  
     Coupon rate      Total offering      Unamortized
discount
    Accrued
interest
     Total carrying
value
 
     %      (unaudited)  
     (in US Dollars, millions)  

10-year unsecured notes

     5.375          700          (1     17        716  

30-year unsecured notes

     6.500          300          (5     9        304  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 
        1,000          (6     26        1,020  
     

 

 

    

 

 

   

 

 

    

 

 

 
      At December 31, 2011  
    

Coupon rate

%

     Total offering      Unamortized
discount
    Accrued
interest
     Total carrying
value
 
     (in US Dollars, millions)  

10-year unsecured notes

     5.375          700          (1     8        707  

30-year unsecured notes

     6.500          300          (5     4        299  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

 
        1,000          (6     12        1,006  
     

 

 

    

 

 

   

 

 

    

 

 

 

Loan facilities

On April 20, 2010, AngloGold Ashanti Holdings plc and AngloGold Ashanti USA Inc., each a wholly-owned subsidiary of AngloGold Ashanti Limited, as borrowers, and AngloGold Ashanti Limited entered into a $1.0 billion four-year revolving credit facility with a syndicate of lenders. AngloGold Ashanti Limited, AngloGold Ashanti Holdings plc and AngloGold Ashanti USA Inc. each guaranteed the obligations of the borrowers and other guarantors under the facility. Amounts may be repaid and reborrowed under the facility during its four-year term. No draw down was made during the three months ended March 31, 2012 under the facility.

Details of the syndicated revolving credit facility are summarized as follows:

 

      At March 31, 2012  
    

Interest

rate (1)

    Commitment
fee (2)
     Total
facility
     Undrawn
facility
     Total drawn
facility
 
     %     %      (unaudited)  
                  (in US Dollars, millions)  

$1.0 billion syndicated revolving credit facility

     LIBOR + 1.75        0.7          1,000        1,000        —     
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 
          1,000        1,000        —     
       

 

 

    

 

 

    

 

 

 
     At December 31, 2011  
     Interest rate (1)     Commitment
fee (2)
     Total
facility
     Undrawn
facility
     Total drawn
facility
 
     %     %      (in US Dollars, millions)  

$1.0 billion syndicated revolving credit facility

     LIBOR + 1.75        0.7          1,000        1,000        —     
  

 

 

   

 

 

    

 

 

    

 

 

    

 

 

 
          1,000        1,000        —     
       

 

 

    

 

 

    

 

 

 

 

(1) 

Outstanding amounts bear interest at a margin over the London Interbank Offered Rate (“LIBOR”).

(2) 

Commitment fees are payable quarterly in arrears on the undrawn portion of the facility.

 

10


ANGLOGOLD ASHANTI LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Prepared in accordance with US GAAP

 

Note D. Debt (continued)

Debt carried at amortized cost (continued)

Syndicated revolving credit facility (A$600 million)

On December 22, 2011, AngloGold Ashanti Australia Limited entered into a four-year revolving credit facility of A$600 million with a syndication of banks. Interest is charged at the Bank Bill Swap Bid Rate (“BBSY”) plus two percent per annum. AngloGold Ashanti Limited together with AngloGold Ashanti Holdings plc has each guaranteed all payments and other obligations of AngloGold Ashanti Australia Limited under the facility. Amounts may be repaid and reborrowed under the facility during its four-year term. No draw down was made during the three months ended March 31, 2012 under the facility. A commitment fee of 50 percent of the applicable margin is payable quarterly in arrears on the undrawn portion of the facility.

Convertible bonds

The issue of convertible bonds in the aggregate principal amount of $732.5 million at an interest rate of 3.5 percent was concluded on May 22, 2009. These bonds are convertible into ADSs at an initial conversion price of $47.6126. The conversion price is subject to standard weighted average anti-dilution protection. The convertible bonds were issued by AngloGold Ashanti Holdings Finance plc, a finance company wholly-owned by AngloGold Ashanti Limited. AngloGold Ashanti Limited has fully and unconditionally guaranteed the convertible bonds issued by AngloGold Ashanti Holdings Finance plc. There are no significant restrictions on the ability of AngloGold Ashanti Limited to obtain funds from its subsidiaries by dividend or loan.

The convertible bonds mature on May 22, 2014. However, at any time on or after June 12, 2012 the Company has the right, but not the obligation, to redeem all (but not part) of the convertible bonds at their principal amount together with accrued interest if the volume weighted average price of the ADSs that would be delivered by the Company on the conversion of a convertible bond of a principal amount of $100,000 exceeds $130,000 on each of at least 20 consecutive dealing days ending not earlier than five days prior to the date that the Company gives notice of the redemption.

Upon the occurrence of a change of control of the Company, each convertible bond holder will have the right to require the Company to redeem its convertible bonds at their principal amount plus accrued interest thereon. If the convertible bond holder elects to convert its convertible bonds in connection with such change of control, the Company will pay a “make whole” premium to such convertible bond holder in connection with such conversion. The conversion price is subject to adjustment on occurrence of certain events, as described in the terms and conditions of the bonds.

The Company is separately accounting for the conversion features of the convertible bonds at fair value as a derivative liability with subsequent changes in fair value recorded in earnings each period. The total fair value of the derivative liability on May 22, 2009 (date of issue) amounted to $142.2 million. The difference between the initial carrying value and the stated value of the convertible bonds is being accreted to interest expense using the effective interest method over the 5 year term of the bonds.

The convertible bonds and associated derivative liability (which has been accounted for separately) are summarized as follows:

 

      At March 31,
2012
    At December 31,
2011
 
     (unaudited)        
     (in US Dollars, millions)  

Convertible bonds

    

Senior unsecured fixed rate bonds

     664       656  

Accrued interest

     9       3  
  

 

 

   

 

 

 
     673       659  
  

 

 

   

 

 

 

Convertible bond derivative liability

    

Balance at beginning of period

     92       176  

Fair value movements on conversion features of convertible bonds

     (43     (84
  

 

 

   

 

 

 

Balance at end of period

     49       92  
  

 

 

   

 

 

 

 

11


ANGLOGOLD ASHANTI LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Prepared in accordance with US GAAP

 

Note D. Debt (continued)

Debt carried at fair value

Mandatory convertible bonds

In September 2010, the Company issued mandatory convertible bonds at a coupon rate of 6 percent due in September 2013. The conversion of the mandatory convertible bonds into ADSs was subject to shareholder approval, which was granted in October 2010. These bonds are convertible into a variable number of ADSs, ranging from 18,140,000 at a share price equal to or lesser than $43.50, to 14,511,937 at a share price equal to or greater than $54.375, each as calculated in accordance with the formula set forth in the indenture and subject to adjustment.

The mandatory convertible bonds contain certain embedded derivatives relating to change in control and anti-dilution protection provisions. The FASB ASC guidance contains an election for the Company to record the entire instrument at fair value as opposed to separating the embedded derivatives from the instrument. The shareholders have authorized that the convertible bonds will be settled in equity and not have any cash settlement potential except if a fundamental change or conversion rate adjustment causes the number of ADSs deliverable upon conversion to exceed the number of shares reserved for such purpose, among other circumstances provided in the indenture, and therefore the Company has chosen to recognize the instrument, in its entirety, at fair value. Depending on the final calculated share price on the date of conversion, the liability recognized may differ from the principal amount.

Other convertible bonds that have been issued by the Company will only be settled in equity if future events, outside of the control of the Company, result in equity settlement and thus have a potential cash settlement at maturity that will not exceed the principal amount, in those circumstances the liabilities are recognized at amortized cost.

In determining the fair value liability of the mandatory convertible bonds, the Company has measured the effect based on the ex interest NYSE closing price on the reporting date. The ticker code used by the NYSE for the mandatory convertible bonds is AUPRA. The accounting policy of the Company is to recognize interest expense separately from the fair value adjustments in the income statement. Interest is recognized at a quarterly coupon rate of 6 percent per annum. Fair value adjustments are included in Non-hedge derivative gain and movement on bonds in the income statement. See note F.

The contractual principal amount of the mandatory convertible bonds is $789 million, provided the calculated share price of the Company is within the range of $43.50 to $54.375. If the calculated share price is below $43.50, the Company will recognize a gain on the principal amount and above $54.375 a loss. As at March 31, 2012, the actual share price was $36.92.

The mandatory convertible bonds were issued by AngloGold Ashanti Holdings Finance plc, a finance company wholly-owned by AngloGold Ashanti Limited. AngloGold Ashanti Limited has fully and unconditionally guaranteed the mandatory subordinated convertible bonds issued by AngloGold Ashanti Holdings Finance plc. There are no significant restrictions on the ability of AngloGold Ashanti Limited to obtain funds from its subsidiaries by dividend or loan.

The mandatory convertible bonds are summarized as follows:

 

      At March 31,
2012
     At December 31,
2011
 
     (unaudited)         
     (in US Dollars, millions)  

Mandatory convertible bonds

     

Long-term debt at fair value

     676        758  

Accrued interest included in short-term debt at fair value

     2        2  
  

 

 

    

 

 

 
     678        760  
  

 

 

    

 

 

 

 

12


ANGLOGOLD ASHANTI LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Prepared in accordance with US GAAP

 

Note E. (Profit)/loss on sale of assets, realization of loans, indirect taxes and other

 

      Three months ended March 31,  
     2012     2011  
     (unaudited)     (unaudited)  
     (in US Dollars, millions)  

Indirect tax expenses and legal claims (1)

     6       5  

Loss on disposal of land, equipment and assets in South Africa, mineral rights and exploration properties

     2       2  

Impairment of investments

     1       —     

Impairment of other receivables

     —          1  

Profit on disposal of AGA-Polymetal Strategic Alliance (2)

     (20     —     

Royalties received (3)

     (16     (8

Profit on disposal of the Company’s subsidiary ISS International Limited (4)

     —          (2
       
     

 

 

   

 

 

 
        (27     (2
     

 

 

   

 

 

 

Taxation expense/(benefit) on above items

     4       —     

(1)

   Indirect taxes and legal claims are in respect of:     
  

Ghana

       5  
  

Guinea

     3    
  

United States of America

     2    
  

Argentina

     1    

(2)

   On February 8, 2012, the transaction to dispose of the AGA-Polymetal Strategic Alliance consisting of AGA-Polymetal Strategic Alliance Management Company Holdings Limited, Amikan Holding Limited, AS APK Holdings Limited, Imitzoloto Holdings Limited and Yeniseiskaya Holdings Limited to Polyholding Limited was completed. These assets were fully impaired as at December 31, 2011.     

(3)

   Royalties received include:     
  

Newmont Mining Corporation (2009 Boddington Gold mine sale)

     (14     (6
  

Simmers & Jack Mines Limited (2010 sale of Tau Lekoa Gold mine)

     (1     (1
  

Other royalties

     (1     (1

(4)

   ISS International Limited (“ISSI”) was classified as held for sale in 2010. The sale was concluded on February 28, 2011.     

 

13


ANGLOGOLD ASHANTI LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Prepared in accordance with US GAAP

 

Note F. Non-hedge derivative gain and movement on bonds

 

      Three months ended
March 31,
 
     2012      2011  
     (unaudited)      (unaudited)  
     (in US dollars, millions)  

Non-hedge derivative gain

     

Gain on non-hedge derivatives

     43        17  
  

 

 

    

 

 

 

The net gain recorded in the three months ended March 31, 2012 relates to the fair value movements of the conversion features of convertible bonds.

 

     Three months ended
March  31,
 
     2012      2011   
     (unaudited)      (unaudited)
 
     (in US Dollars, millions)  

Movement on bonds

  

Fair value gain on mandatory convertible bonds (See Note D)

     81        24    
  

 

 

    

 

 

 

 

14


ANGLOGOLD ASHANTI LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Prepared in accordance with US GAAP

 

Note G. Taxation

The net taxation expense in the three months ended March 31, 2012 compared to a net expense for the same period in 2011, constitutes the following:

 

      Three months ended
March 31,
 
      2012      2011  
     (unaudited)      (unaudited)  
     (in US Dollars, millions)  

Charge for current taxation (1)

     163        55  

Charge for deferred taxation (2)

     102        69  
     

 

 

    

 

 

 
        265        124  
     

 

 

    

 

 

 

Income from continuing operations before income tax and equity income in associates

     652        358  

 

(1) 

The higher current taxation is mainly due to higher earnings in Tanzania, South Africa and South America for the three months ended March 31, 2012.

(2) 

The higher deferred taxation in 2012 mainly relates to the reversal of timing differences in North America and the taxation rate change in Ghana from 25 percent to 35 percent, which is limited to 30 percent for AngloGold Ashanti in terms of the stability agreement between the Company and the Ghanaian government.

Uncertain taxes

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

 

      At March 31,
2012
     At December 31,
2011
 
     (unaudited)         
     (in US Dollars, millions)  

Balance at beginning of period

     78        52  

Additions for tax positions identified in prior years

     9        38  

Reductions for tax positions identified in prior years

     —           (3

Translation

     2        (9
  

 

 

    

 

 

 

Balance at end of period

     89        78  
  

 

 

    

 

 

 

Unrecognized tax benefits are summarized as follows:

     

Recognized as a reduction of deferred tax assets

     36        29  

Recognized in other non-current liabilities (1)

     53        49  
  

 

 

    

 

 

 

Balance at end of period

     89        78  
  

 

 

    

 

 

 

 

(1)

Unrecognized tax benefits which, if recognized, would affect the Company’s effective tax rate.

 

     (in US Dollars, millions)  

The Company’s continuing practice is to recognize interest and penalties related to unrecognized tax benefits as part of its income tax expense. For the three months ended and as at March 31, 2012, interest recognized and interest accrued amounted to:

  

Interest recognized during the three months ended March 31, 2012

     1  

Interest accrued as at March 31, 2012

     13  

 

15


ANGLOGOLD ASHANTI LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Prepared in accordance with US GAAP

 

Note H. Segment information

The Company produces gold as its primary product and does not have distinct divisional segments in terms of principal business activity, but manages its business on the basis of different geographic segments. This information is consistent with the information used by the Company’s Chief Operating Decision Maker, defined as the Executive Management team, in evaluating operating performance of, and making resource allocation decisions among operations.

 

     Three months ended March 31,  
     2012     2011  
     (unaudited)     (unaudited)  
     (in US Dollars, millions)  

Revenues by area

    

South Africa

     529       564  

Continental Africa

     728       543  

Australasia

     115       98  

Americas

     427       305  

Other, including Corporate and Non-gold producing subsidiaries

     7       5  
  

 

 

   

 

 

 
     1,806       1,515  

Less: Equity method investments included above

     (86     (80
  

 

 

   

 

 

 

Total revenues

     1,720       1,435  
  

 

 

   

 

 

 
    

Segment income/(loss)

    

South Africa

     156         197  

Continental Africa

     302         157  

Australasia

     33         8  

Americas

     222         146  

Other, including Corporate and Non-gold producing subsidiaries

     (29 )       (54
  

 

 

   

 

 

 

Total segment income

     684         454  
  

 

 

   

 

 

 
    

The following are included in segment income/(loss):

    

Interest revenue

    

South Africa

     7       4  

Continental Africa

     2       1  

Australasia

     1       2  

Americas

     1       1  

Other, including Corporate and Non-gold producing subsidiaries

     1       —     
  

 

 

   

 

 

 

Total interest revenue

     12       8  
  

 

 

   

 

 

 
    

Interest expense

    

South Africa

     1       2  

Continental Africa

     1       —     

Other, including Corporate and Non-gold producing subsidiaries

     42       42  
  

 

 

   

 

 

 

Total interest expense

     44       44  
  

 

 

   

 

 

 

 

16


ANGLOGOLD ASHANTI LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Prepared in accordance with US GAAP

 

Note H. Segment information (continued)

 

     Three months ended March 31,  
     2012     2011  
     (unaudited)     (unaudited)  
     (in US Dollars, millions)  

Equity income/(loss) in associates

    

Continental Africa

     12       15  

Other, including Corporate and Non-gold producing subsidiaries

     (2     (6
  

 

 

   

 

 

 

Total equity income in associates

     10       9  
  

 

 

   

 

 

 
    

Reconciliation of segment income to Net income - attributable to AngloGold Ashanti

    

Segment total

     684       454  

Exploration costs

     (75     (57

General and administrative expenses

     (70     (68

Market development costs

     (1     (3

Non-hedge derivative gain and movement on bonds

     124       41  

Taxation expense

     (265     (124

Noncontrolling interests

     (13     (6
  

 

 

   

 

 

 

Net income—attributable to AngloGold Ashanti

     384       237  
  

 

 

   

 

 

 
    
     At March 31,
2012
    At December 31,
2011 
 
     (unaudited)        
     (in US Dollars, millions)  

Segment assets

    

South Africa (1)

     3,091       2,974    

Continental Africa

     4,562       4,365    

Australasia

     731       714    

Americas

     2,636       2,527    

Other, including Corporate and Non-gold producing subsidiaries

     678       605    
  

 

 

   

 

 

 

Total segment assets

     11,698       11,185    
  

 

 

   

 

 

 

(1) Includes the following which have been classified as assets held for sale: Rand Refinery Limited

     2         

 

17


ANGLOGOLD ASHANTI LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Prepared in accordance with US GAAP

 

Note I. Income per share data

 

      Three months ended March 31,  
     

2012

   

2011

 
     (unaudited)     (unaudited)  

The following table sets forth the computation of basic and diluted income per share (in US dollars millions, except per share data):

    

Ordinary shares undistributed income

     282       193  

E Ordinary shares undistributed income

     1       1  
  

 

 

   

 

 

 

Total undistributed income

     283       194  
  

 

 

   

 

 

 

Ordinary shares distributed income

     101       43  

E Ordinary shares distributed income

     —          —     
  

 

 

   

 

 

 

Total distributed income

     101       43  
  

 

 

   

 

 

 

Numerator—Net income

    

Attributable to Ordinary shares

     383       236  

Attributable to E Ordinary shares

     1       1  
  

 

 

   

 

 

 

Total attributable to AngloGold Ashanti

     384       237  
  

 

 

   

 

 

 

In calculating diluted income per ordinary share, the following were taken into consideration:

    

Income attributable to equity shareholders

     383       236  

Interest expense on convertible bonds

     18       —     

Amortization of issue cost and discount on convertible bonds

     8       —     

Fair value adjustment on convertible bonds included in income

     (124     —     
  

 

 

   

 

 

 

Income used in calculation of diluted earnings per ordinary share

     285       236  
  

 

 

   

 

 

 

 

      Three months ended March 31,  
     

2012

    

2011

 
     (unaudited)      (unaudited)  

Denominator for basic income per ordinary share

     

Ordinary shares

     382,305,903        381,272,542  

Fully vested options(1)

     1,970,339        1,587,017  
  

 

 

    

 

 

 

Weighted average number of ordinary shares

     384,276,242        382,859,559  

Effect of dilutive potential ordinary shares

     

Dilutive potential of stock incentive options

     970,868        834,453  

Dilutive potential of convertible bonds

     33,524,615        33,524,615  

Dilutive potential of E Ordinary shares

     —           —     
  

 

 

    

 

 

 

Denominator for diluted income per share – adjusted weighted average number of ordinary shares and assumed conversions

     418,771,725        417,218,627  
  

 

 

    

 

 

 

Weighted average number of E Ordinary shares used in calculation of basic and diluted income per E Ordinary share

     2,569,675        2,782,784  
  

 

 

    

 

 

 

 

(1) 

Compensation awards are included in the calculation of basic income per common share from when the necessary conditions have been met, and it is virtually certain that shares will be issued as a result of employees exercising their options.

The mandatory convertible bonds issued during 2010 are not included in basic income per common share as they contain features that could result in their settlement in cash and therefore do not meet the definition of an equity instrument.

 

18


ANGLOGOLD ASHANTI LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Prepared in accordance with US GAAP

 

Note J. Employee benefit plans

The Company has made provision for pension and provident schemes covering substantially all employees.

 

            Three months ended March 31,  
           

2012

          

2011

 
           (unaudited)            (unaudited)  
           (in US Dollars, millions)  
     Pension
benefits
    Other
benefits
     Pension
benefits
    Other
benefits
 

Service cost

     1       19        2       —     

Interest cost

     5       4        5       4  

Expected return on plan assets

     (6     —           (7     —     
  

 

 

   

 

 

    

 

 

   

 

 

 

Net periodic benefit cost

     —          23        —          4  
  

 

 

   

 

 

    

 

 

   

 

 

 

Employer contributions

 

     (in US Dollars, millions)  

Expected contribution for 2012 (1)

     5   

Actual contribution for the three months ended March 31, 2012

     2   

 

(1) 

The Company’s expected contribution to its pension plan in 2012 as disclosed in the Company’s Form 20-F for the year ended December 31, 2011.

 

19


ANGLOGOLD ASHANTI LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Prepared in accordance with US GAAP

 

Note K. Other long-term assets

 

     At March  31,
2012
    At December  31,
2011
 
     (unaudited)        
     (in US Dollars, millions)  

Investments in associates—unlisted

     5       5  

Investments in associates—listed

     20       15  

Investments in equity accounted joint ventures

     720       671  
  

 

 

   

 

 

 

Carrying value of equity method investments

     745       691  

Investment in marketable equity securities—available for sale

     85       82  

Investment in marketable debt securities—held to maturity

     8       8  

Investment in non-marketable assets—held to maturity

     2       2  

Cost method investment

     9       9  

Investment in non-marketable debt securities—held to maturity

     92       85  

Restricted cash

     24       23  

Other non-current assets

     105       101  
  

 

 

   

 

 

 
     1,070       1,001  
  

 

 

   

 

 

 

Investment in marketable equity securities—available for sale

    

Available for sale investments in marketable equity securities consists of investments in ordinary shares.

    

Cost

     52        51   

Gross unrealized gains

     35        34   

Gross unrealized losses

     (2 )       (3 )  
  

 

 

   

 

 

 

Fair value (net carrying value)

     85        82   
  

 

 

   

 

 

 
     Three months ended March 31,  
     2012     2011  
     (unaudited)     (unaudited)  
     (in US Dollars, millions)  

Other-than-temporary impairments of marketable equity securities—available for sale

    

First Uranium Corporation (South Africa)

     1        —     
  

 

 

   

 

 

 

The impairment recognized resulted in a transfer of fair value adjustments to the income statement.

In addition, the Company holds various equities as strategic investments in gold exploration companies. Three of the strategic investments are in an unrealized loss position and the Company has the intent and ability to hold these investments until the losses are recovered.

 

20


ANGLOGOLD ASHANTI LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Prepared in accordance with US GAAP

 

Note K. Other long-term assets (continued)

The following tables present the gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by length of time that the individual securities have been in a continuous unrealized loss position:

 

    

Less than 12

months

   

More than 12

months

    Total  
     (in US Dollars, millions)  

At March 31, 2012

      

Aggregate fair value of investments with unrealized losses

     —          1       1  

Aggregate unrealized losses

     —          (2     (2

At December 31, 2011

      

Aggregate fair value of investments with unrealized losses

     8       —          8  

Aggregate unrealized losses

     (3     —          (3

 

         At March 31,
2012
     At December 31,
2011
 
         (unaudited)         
         (in US Dollars, millions)  
       
 

Investment in marketable debt securities—held to maturity

     8        8  
 

Investments in marketable debt securities represent held to maturity government bonds held by the Environmental Rehabilitation Trust Fund with a total fair value of $11 million (2011: $11 million) and gross unrealized gains of $3 million (2011: $3 million).

     
 

Investment in non-marketable assets—held to maturity

     2        2  
 

Investments in non-marketable assets represent secured loans and receivables secured by pledge of assets.

     
 

Cost method investment

     9        9  
 

The cost method investment mainly represent shares held in XDM Resources Limited. (1)

     
 

Investment in non-marketable debt securities—held to maturity

     92        85  
 

Investments in non-marketable debt securities represent the held to maturity fixed-term deposits required by legislation for the Environmental Rehabilitation Trust Fund and Nufcor Uranium Trust Fund.

     

As at March 31, 2012 the contractual maturities of debt securities were as follows:

  

 

Marketable debt securities

     
 

Three to seven years

     8     
    

 

 

    
 

Non-marketable debt securities

     
 

Less than one year

     92     
    

 

 

    

Restricted cash

     24        23  

Restricted cash mainly represent cash balances held by Environmental Rehabilitation Trust Fund and Environmental Protection Bond.

Financing receivables

Loans of $42 million (2011: $29 million) to equity accounted joint ventures and associates are included in Other long-term assets. There are no allowances for credit losses relating to these loans. Credit quality of loans is monitored on an ongoing basis.

 

(1)

The fair value is not estimated as there are no identified events or changes in circumstances that may have a significant adverse effect on the fair value of the investment and it is not practicable to estimate the fair value of the investment.

 

21


ANGLOGOLD ASHANTI LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Prepared in accordance with US GAAP

 

Note L. Financial and derivative instruments

In the normal course of its operations, the Company is exposed to gold and other commodity price, currency, interest rate, equity price, liquidity and non-performance risk, which includes credit risk. The Company is also exposed to certain by-product commodity price risk. In order to manage these risks, the Company may enter into transactions which make use of derivatives. The Company has developed a risk management process to facilitate, control and monitor these risks. The board has approved and monitors this risk management process, inclusive of documented treasury policies, counterpart limits, controlling and reporting structures. The Company does not acquire, hold or issue derivatives for speculative purposes.

Contracts that meet the criteria for hedge accounting are designated as the hedging instruments hedging the variability of forecasted cash flows from the sale of production into the spot market and from capital expenditure denominated in a foreign currency and are classified as cash flow hedges under the FASB ASC guidance on derivatives and hedging. Cash flows related to these instruments designated as qualifying hedges are reflected in the consolidated statement of cash flows in the same category as the cash flow from the items being hedged. Accordingly, cash flows relating to the settlement of forward sale commodity derivatives contracts hedging the forecasted sale of production into the spot market as well as the forward sale currency derivative contracts hedging the forecasted capital expenditure, have been reflected upon settlement as a component of operating cash flows. As at March 31, 2012, the Company does not have any open cash flow hedge contracts relating to product sales or forecasted capital expenditure. Cash flow hedge losses pertaining to capital expenditure of $3 million as at March 31, 2012 are expected to be reclassified from accumulated other comprehensive income and recognized as an adjustment to depreciation expense until 2019.

A gain on non-hedge derivatives of $124 million was recorded in the three months ended March 31, 2012 (2011:$41 million). See note F “Non-hedge derivative gain and movement on bonds” for additional information.

Gold price management activities

Gold price risk arises from the risk of an adverse effect of current or future earnings resulting from fluctuations in the price of gold. The Company historically utilized derivatives as part of its hedging of the risk. At March 31, 2012, there were no net forward sales contracts, net call options sold and net put options sold.

Foreign exchange price risk protection agreements

The Company, from time to time, may enter into currency forward exchange and currency option contracts to hedge certain anticipated transactions denominated in foreign currencies. The objective of the Company’s foreign currency hedging activities is to protect the Company from the risk that the eventual cash flows resulting from transactions denominated in US dollars will be adversely affected by changes in exchange rates.

As at March 31, 2012, the Company had no open forward exchange or currency option contracts in its currency hedge position.

Interest and liquidity risk

Fluctuations in interest rates impacts interest paid and received on the short-term cash investments and financing activities, giving rise to interest rate risk.

In the ordinary course of business, the Company receives cash from the proceeds of its gold sales and is required to fund working capital requirements. This cash is managed to ensure surplus funds are invested in a manner to achieve market related returns while minimizing risks.

The Company is able to actively source financing at competitive rates. The counterparts are financial and banking institutions and their credit ratings are regularly monitored by the Company.

 

22


ANGLOGOLD ASHANTI LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Prepared in accordance with US GAAP

 

Note L. Financial and derivative instruments (continued)

Non-performance risk

Realization of contracts is dependent upon counterparts’ performance. The Company has not obtained collateral or other security to support the financial instruments subject to non-performance risk, but the credit standing of counterparts was monitored on a regular basis throughout the period. The Company spreads it business over a number of financial and banking institutions to minimize the risk of potential non-performance risk. Furthermore, the approval process of counterparts and the limits applied to each counterpart were monitored by the board of directors. Where possible, ISDA netting agreements were put into place by management.

The combined maximum credit risk exposure at March 31, 2012 amounts to $242 million. Credit risk exposure netted by open derivative positions with counterparts was $nil million as at March 31, 2012. No set-off is applied to balance sheet amounts due to the different maturity profiles of assets and liabilities.

Fair value of financial instruments

The estimated fair values of financial instruments are determined at discrete points in time based on relevant market information. The estimated fair values of the Company’s financial instruments, as measured at March 31, 2012 and December 31, 2011, are as follows (assets (liabilities)):

 

     March 31, 2012     December 31, 2011  
     (unaudited)              
     (in US Dollars, millions)  
     Carrying
amount
    Fair Value     Carrying
amount
    Fair
Value
 

Cash and cash equivalents

     1,216        1,216        1,112        1,112    

Restricted cash

     78        78        58        58    

Short-term debt

     (51     (51     (30     (30 )  

Short-term debt at fair value

     (2     (2     (2     (2 )  

Long-term debt

     (1,722     (1,861     (1,715     (1,857

Long-term debt at fair value

     (676     (676     (758     (758 )  

Derivatives

     (50     (50     (93     (93 )  

Marketable equity securities—available for sale

     85        85        82        82    

Marketable debt securities—held to maturity

     8        11        8        11    

Non-marketable assets—held to maturity

     2        2        2          

Non-marketable debt securities—held to maturity

     92        92        85        85    

 

23


ANGLOGOLD ASHANTI LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Prepared in accordance with US GAAP

 

Note L. Financial and derivative instruments (continued)

The following methods and assumptions were used to estimate the fair value of each class of financial instrument:

Cash restricted for use, cash and cash equivalents and short-term debt

The carrying amounts approximate fair value because of the short-term duration of these instruments.

Long-term debt

The mandatory convertible bonds are carried at fair value. The fair value of the convertible and rated bonds are shown at their quoted market value. Other long-term debt re-prices on a short-term floating rate basis, and accordingly the carrying amount approximates fair value.

Derivatives

The fair value of volatility-based instruments (i.e. options) are estimated based on market prices, volatilities, credit risk and interest rates for the periods under review.

Investments

Marketable equity securities classified as available-for-sale are carried at fair value. Marketable debt securities classified as held to maturity are measured at amortized cost. Non-marketable assets classified as held to maturity are measured at amortized cost. The fair value of marketable debt securities and non-marketable assets has been calculated using market interest rates. Investments in non-marketable debt securities classified as held to maturity are measured at amortized cost. The cost method investment is carried at cost. There is no active market for the investment and the fair value cannot be reliably measured.

Fair value of the derivative liabilities split by accounting designation

 

           At March 31, 2012  
          (unaudited)  
          (in US Dollars, millions)  
Liabilities                  
     Balance Sheet location    Non-hedge
accounted
    Total  

Option component of convertible bonds

   Non-current liabilities—derivatives      (49     (49

Embedded derivatives

   Non-current liabilities—derivatives      (1     (1
     

 

 

   

 

 

 

Total derivatives

        (50     (50
     

 

 

   

 

 

 
          At December 31, 2011  
          (in US Dollars, millions)  
Liabilities                  
     Balance Sheet location    Non-hedge
accounted
    Total  

Option component of convertible bonds

   Non-current liabilities—derivatives      (92     (92

Embedded derivatives

   Non-current liabilities—derivatives      (1     (1
     

 

 

   

 

 

 

Total derivatives

        (93     (93
     

 

 

   

 

 

 

 

24


ANGLOGOLD ASHANTI LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Prepared in accordance with US GAAP

 

Note L. Financial and derivative instruments (continued)

Non-hedge derivative gain and movement on bonds recognized

 

      Three months ended March 31,  
     2012      2011  
     (unaudited)      (unaudited)  
     (in US Dollars, millions)  

Unrealized (1)

     

Option component of convertible bonds

     43        14  

Warrants on shares

     —           3  

Fair value movement on mandatory convertible bonds

     81        24  
  

 

 

    

 

 

 

Non-hedge derivative gain and movement on bonds

     124        41  
  

 

 

    

 

 

 

 

(1) 

Unrealized gains on non-hedge derivatives are included in “Non-hedge derivative gain and movement on bonds” in the income statement.

Other comprehensive income

 

     Accumulated other
comprehensive income
as of January 1, 2012
    Changes in fair
value  and other
movements
recognized  in
2012
     Reclassification
adjustments
     Accumulated other
comprehensive income
as of March 31, 2012
 
    

(unaudited)

(in US Dollars, millions)

 

Derivatives designated as Capital expenditure

     (3     —           —           (3
  

 

 

   

 

 

    

 

 

    

 

 

 

Before tax totals

     (3     —           —           (3
  

 

 

   

 

 

    

 

 

    

 

 

 

After tax totals

     (2     —           —           (2
  

 

 

   

 

 

    

 

 

    

 

 

 
     Accumulated other
comprehensive income
as of January 1, 2011
    Changes in fair
value and  other
movements
recognized in
2011
     Reclassification
adjustments
     Accumulated other
comprehensive income
as of March 31, 2011
 
    

(unaudited)

(in US Dollars, millions)

 

Derivatives designated as Capital expenditure

     (3     —           —           (3
  

 

 

   

 

 

    

 

 

    

 

 

 

Before tax totals

     (3     —           —           (3
  

 

 

   

 

 

    

 

 

    

 

 

 

After tax totals

     (2     —           —           (2
  

 

 

   

 

 

    

 

 

    

 

 

 

 

25


ANGLOGOLD ASHANTI LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Prepared in accordance with US GAAP

 

Note M. Commitments and contingencies

Capital expenditure commitments:

 

     At March 31,  
     2012  
     (unaudited)  
     (in US Dollars, millions)  

Contracts for capital expenditure

     370  

Authorized by the directors but not yet contracted for

     1,444  
  

 

 

 
     1,814  

The Company intends to finance these capital expenditures from cash on hand, cash flow from operations, existing and new replacement credit facilities and long-term debt financing and, potentially if deemed appropriate, the issuance of equity and equity linked instruments.

Contingencies and guarantees are summarized as follows for disclosure purposes. Amounts represent possible losses for loss contingencies, where an estimate can be made, and quantification of guarantees:

 

     At March 31,  
     2012  
     (unaudited)  
     (in US Dollars, millions)  

Contingent liabilities

  

Groundwater pollution (1)

     —     

Deep groundwater pollution—South Africa (2)

     —     

Sales tax on gold deliveries—Brazil (3)

     91  

Other tax disputes—Brazil (4)

     42  

Indirect taxes—Ghana (5)

     14  

Tax disputes—Tanzania (6)

     —     

Occupational Diseases in Mines and Works Act (“ODMWA”) litigation (7)

     —     

Contingent assets

  

Royalty—Boddington Gold Mine (8)

     —     

Royalty—Tau Lekoa Gold Mine (9)

     —     

Financial guarantees

  

Oro Group surety (10)

     13  

AngloGold Ashanti USA reclamation bonds (11)

     101  

AngloGold Ashanti Australia environmental bonds (12)

     33  

AngloGold Ashanti environmental guarantees (13)

     175  

Guarantee provided for syndicated revolving credit facility (14)

     —     

Guarantee provided for mandatory convertible bonds (15)

     791  

Guarantee provided for rated bonds (16)

     1,026  

Guarantee provided for convertible bonds (17)

     742  

Guarantee provided for A$ syndicated revolving credit facility (18)

     —     

Hedging guarantees

  

Gold delivery guarantees (19)

     —     

Ashanti Treasury Services Limited (“ATS”) hedging guarantees (20)

     —     

Geita Management Company Limited (“GMC”) hedging guarantees (21)

     —     
  

 

 

 
     3,028  
  

 

 

 

 

26


ANGLOGOLD ASHANTI LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Prepared in accordance with US GAAP

 

Note M. Commitments and contingencies (continued)

 

(1)        Ground water pollution

  

The Company has identified groundwater contamination plumes at certain of its operations, which have occurred primarily as a result of seepage from mine residue stockpiles. Numerous scientific, technical and legal studies have been undertaken to assist in determining the magnitude of the contamination and to find sustainable remediation solutions. The Company has instituted processes to reduce future potential seepage and it has been demonstrated that Monitored Natural Attenuation (“MNA”) by the existing environment will contribute to improvement in some instances. Furthermore, literature reviews, field trials and base line modeling techniques suggest, but are not yet proven, that the use of phyto-technologies can address the soil and groundwater contamination. Subject to the completion of trials and the technology being a proven remediation technique, no reasonable estimate can be made for the obligation.

  

(2)        Deep ground water pollution—South Africa

  

The Company has identified a flooding and future pollution risk posed by deep groundwater in the Klerksdorp and Far West Rand gold fields. Various studies have been undertaken by AngloGold Ashanti since 1999. Due to the interconnected nature of mining operations, any proposed solution needs to be a combined one supported by all the mines located in these gold fields. As a result, the Department of Mineral Resources and affected mining companies are involved in the development of a “Regional Mine Closure Strategy”. In view of the limitation of current information for the estimation of a liability, no reasonable estimate can be made for the obligation.

  
     At March 31,  
     2012  
     (unaudited)  
     (in US Dollars, millions)  

(3)        Sales tax on gold deliveries—Brazil

  

In 2006, Mineração Serra Grande S.A. (“MSG”) received two tax assessments from the State of Goiás related to payments of state sales taxes at the rate of 12 percent on gold deliveries for export from one Brazilian state to another during the period from February 2004 to the end of May 2006. AngloGold Ashanti Córrego do Sitío Mineração S.A. manages the operation. In November 2006, the administrative council’s second chamber ruled in favor of MSG and fully cancelled the tax liability related to the first period. In July 2011, the administrative council’s second chamber ruled in favor of MSG and fully cancelled the tax liability related to the second period. The State of Goiás has appealed to the full board of the State of Goiás tax administrative council. In November 2011, the administrative council’s second chamber approved the suspension of proceedings and the remittance of the matter to the Department of Supervision of Foreign Trade (“Comex”) for review and verification. The Company believes both assessments are in violation of federal legislation on sales taxes.

  

The Company’s attributable share of the assessments are as follows:

  

First assessment

     56  

Second assessment

     35  
  

 

 

 
     91   

(4)        Other tax disputes—Brazil

  

MSG received a tax assessment in October 2003 from the State of Minas Gerais related to sales taxes on gold. The tax administrators rejected the Company’s appeal against the assessment. The Company is now appealing the dismissal of the case. The Company’s attributable share of the assessment is approximately:

     10  

In addition, in November 2007, the Departamento Nacional de Produçâo Mineral (“DNPM”), a Brazilian federal mining authority, issued a tax assessment against AngloGold Ashanti Brazil Mineração (“AABM”) relating to the calculation and payment by AABM of the financial contribution on mining exploitation (“CFEM”) in the period from 1991 to 2006. The amount involved is approximately:

     23  

Subsidiaries of the Company in Brazil are involved in various other disputes with tax authorities. These disputes involve federal tax assessments including income tax, royalties, social contributions and annual property tax. The amount involved is approximately:

     9  
  

 

 

 
     42  

 

27


ANGLOGOLD ASHANTI LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Prepared in accordance with US GAAP

 

Note M. Commitments and contingencies (continued)

 

     At March 31,  
     2012  
     (unaudited)  
     (in US Dollars, millions)  

(5)        Indirect taxes—Ghana

  

AngloGold Ashanti (Ghana) Limited received a tax assessment during September 2009 in respect of the 2006, 2007 and 2008 tax years following an audit by the tax authorities related to indirect taxes on various items. Management is of the opinion that the indirect taxes are not payable and the Company has lodged an objection.

  

The assessment is approximately:

     14  

(6)        Tax disputes—Tanzania

  

Geita Gold Mine Limited (“GGML”) and Samax Resources Limited (Tanzania Branch) received a letter from the Tanzania Revenue Authority (“TRA”) dated March 15, 2012.

  

The TRA advised that it intends to issue assessments or demands in relation to a number of tax matters. The Company intends to defend the assessments and demands. As no assessments or demands have been received to date, no reasonable estimate can be made for the obligation.

  

(7)        ODMWA litigation

  

The case of Mr Thembekile Mankayi was heard in the High Court of South Africa in June 2008, and an appeal heard in the Supreme Court of Appeal in 2010. In both instances judgment was awarded in favor of AngloGold Ashanti Limited on the basis that an employer is indemnified against such a claim for damages by virtue of the provisions of section 35 of the Compensation for Occupational Injuries and Diseases Act, 1993 (“COIDA”). A further appeal that was lodged by Mr Mankayi was heard in the Constitutional Court in 2010. Judgment in the Constitutional Court was handed down on March 3, 2011. The Constitutional Court held that section 35 of COIDA does not indemnify the employer against such claims.

  

Mr Mankayi passed away subsequent to the hearing in the Supreme Court of Appeal. Following the Constitutional Court judgment, Mr Mankayi’s executor may proceed with his case in the High Court. This will comprise, amongst others, providing evidence showing that Mr Mankayi contracted silicosis as a result of negligent conduct on the part of AngloGold Ashanti Limited.

  

The Company will defend the case and any subsequent claims on their merits. Should other individuals or groups lodge similar claims, these too will be defended by the Company and adjudicated by the Courts on their merits. In view of the limitation of current information for the estimation of a possible liability, no reasonable estimate can be made of this possible obligation.

  

(8)        Royalty—Boddington Gold Mine

  

As a result of the sale of the interest in the Boddington Gold Mine during 2009, the Company is entitled to receive a royalty on any gold recovered or produced by the Boddington Gold Mine, where the gold price is in excess of Boddington Gold Mine’s cash costs plus $600 per ounce. The royalty is payable in each quarter from and after the second quarter in 2010, within forty five days of reporting period close and is capped at a total amount of $100 million.

  

Details of the royalty are as follows:

  

Total royalties received and receivable to date

     56  

(9)        Royalty—Tau Lekoa Gold Mine

  

As a result of the sale of the Tau Lekoa Gold Mine during 2010, the Company is entitled to receive a royalty on the production of a total of 1.5 million ounces by the Tau Lekoa Gold Mine and in the event that the average monthly rand price of gold exceeds R180,000 per kilogram (subject to an inflation adjustment). Where the average monthly rand price of gold does not exceed R180,000 per kilogram (subject to an inflation adjustment), the ounces produced in that quarter do not count towards the total 1.5 million ounces upon which the royalty is payable. The royalty will be determined at 3 percent of the net revenue (being gross revenue less state royalties) generated by the Tau Lekoa assets. Royalties on 219,005 ounces produced have been received to date.

  

Royalties received in cash during the three months ended March 31, 2012

     1  

 

28


ANGLOGOLD ASHANTI LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Prepared in accordance with US GAAP

 

Note M. Commitments and contingencies (continued)

 

     At March 31,  
     2012  
     (unaudited)  
     (in US Dollars, millions)  

(10)      Oro Group surety

          13            

The Company has provided surety in favor of a lender on a gold loan facility with its associate Oro Group (Proprietary) Limited and one of its subsidiaries. The Company has a total maximum liability, in terms of the suretyships, of R100 million. The probability of the non-performance under the suretyships is considered minimal.

  

(11)      AngloGold Ashanti USA reclamation bonds

       101      

Pursuant to US environmental and mining requirements, gold mining companies are obligated to close their operations and rehabilitate the lands that they mine in accordance with these requirements. AngloGold Ashanti USA has posted reclamation bonds with various federal and state governmental agencies to cover potential rehabilitation obligations. The Company has provided a guarantee for these obligations which would be payable in the event of AngloGold Ashanti USA not being able to meet its rehabilitation obligations. The obligations will expire upon completion of such rehabilitation and release of such areas by the applicable federal and/or state agency. AngloGold Ashanti is not indemnified by third parties for any of the amounts that may be paid by AngloGold Ashanti under its guarantee.

  

(12)      AngloGold Ashanti Australia environmental bonds

          33            

Pursuant to Australia environmental and mining requirements, gold mining companies are obligated to close their operations and rehabilitate the lands that they mine in accordance with these requirements. AngloGold Ashanti Australia has posted bonds with state governmental agencies to cover potential rehabilitation obligations. The Company has provided a guarantee for these obligations which would be payable in the event of AngloGold Ashanti Australia not being able to meet its rehabilitation obligations. The obligations will expire upon completion of such rehabilitation and release of such areas by the applicable state agency. AngloGold Ashanti is not indemnified by third parties for any of the amounts that may be paid by AngloGold Ashanti under its guarantee.

  

(13)      AngloGold Ashanti environmental guarantees

       175      

Pursuant to South African mining laws, mining companies are obligated to close their operations and rehabilitate the lands that they mine in accordance with these laws. In order to cover against premature closure costs, the Company has secured bank guarantees to cover potential rehabilitation obligations of certain mines in South Africa. The Company has provided a guarantee for these obligations which would be payable in the event of the South African mines not being able to meet such rehabilitation obligations. The obligations will expire upon compliance with all provisions of the environment management program in terms of South African mining laws. AngloGold Ashanti is not indemnified by third parties for any of the amounts that may be paid by AngloGold Ashanti under its guarantee.

  

(14)      Guarantee provided for syndicated revolving credit facility

  

AngloGold Ashanti Limited, AngloGold Ashanti Holdings plc and AngloGold Ashanti USA Incorporated, as guarantors, have each guaranteed all payments and other obligations of the borrowers and the other guarantors under the $1.0 billion four-year revolving credit facility.

  

The total amount outstanding under this facility as at March 31, 2012 amounted to:

     —     

 

29


ANGLOGOLD ASHANTI LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Prepared in accordance with US GAAP

 

Note M. Commitments and contingencies (continued)

 

         At March 31,  
         2012  
         (unaudited)  
         (in US Dollars, millions)  
    
(15)   Guarantee provided for mandatory convertible bonds      791  
  AngloGold Ashanti Limited has fully and unconditionally guaranteed all payments and other obligations of AngloGold Ashanti Holdings Finance plc regarding the issued $789 million 6 percent mandatory convertible bonds due 2013.   
(16)   Guarantee provided for rated bonds      1,026  
  AngloGold Ashanti Limited has fully and unconditionally guaranteed all payments and other obligations of AngloGold Ashanti Holdings plc regarding the issued $700 million 5.375 percent rated bonds due 2020 and the issued $300 million 6.5 percent rated bonds due 2040.   
(17)   Guarantee provided for convertible bonds      742  
  AngloGold Ashanti Limited has fully and unconditionally guaranteed all payments and other obligations of AngloGold Ashanti Holdings Finance plc regarding the issued $732.5 million 3.5 percent convertible bonds due 2014.   
(18)   Guarantee provided for A$ syndicated revolving credit facility   
  AngloGold Ashanti Limited together with AngloGold Ashanti Holdings plc, as guarantors, has each guaranteed all payments and other obligations of AngloGold Ashanti Australia Limited under the A$600 million four-year revolving credit facility entered into during December 2011.   
  The total amount outstanding under this facility as at March 31, 2012 amounted to:      —     
(19)   Gold delivery guarantees      —    
  The Company has issued gold delivery guarantees to several counterpart banks pursuant to which it guarantees the due performance of its subsidiaries AngloGold (USA) Trading Company, AngloGold South America Limited and Cerro Vanguardia S.A. under their respective gold hedging agreements. At March 31, 2012 the Company had no open gold hedge contracts.   
(20)   ATS hedging guarantees      —     
  The Company together with its wholly-owned subsidiary AngloGold Ashanti Holdings plc has provided guarantees to several counterpart banks for the hedging commitments of its wholly-owned subsidiary ATS. The maximum potential amount of future payments is all moneys due, owing or incurred by ATS under or pursuant to the hedging agreements. At March 31, 2012 the Company had no open gold hedge contracts. The guarantee was cancelled subsequent to quarter end.   
(21)   GMC hedging guarantees      —     
  The Company and its wholly-owned subsidiary AngloGold Ashanti Holdings plc have issued hedging guarantees to several counterpart banks in which they have guaranteed the due performance by GMC of its obligations under or pursuant to the hedging agreements entered into by GMC, and to the payment of all money owing or incurred by GMC as and when due. The maximum potential amount of future payments is all moneys due, owing or incurred by GMC under or pursuant to the hedging agreements. At March 31, 2012 the Company had no open gold hedge contracts. The guarantee was cancelled subsequent to quarter end.   

 

30


ANGLOGOLD ASHANTI LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Prepared in accordance with US GAAP

 

Note N. Recent developments

Announcements made after March 31, 2012:

On May 29, 2012, AngloGold Ashanti, which currently holds, through a subsidiary, a 50 percent interest in the Serra Grande (“Crixás”) mine in Brazil, agreed to acquire the remaining 50 percent stake in the mine from Kinross Gold Corporation for $220 million in cash. The transaction which will be funded from existing cash reserves and debt facilities; is expected to be completed during the second quarter of 2012, and is subject to the fulfillment of various conditions.

On June 14, 2012, AngloGold Ashanti announced that the First Uranium Corporation shareholders and security holders approved, in a general meeting, the proposed acquisition by AngloGold Ashanti of First Uranium (Pty) Ltd, the owner of Mine Waste Solutions in South Africa, for a cash consideration of $335 million. The transaction which was originally announced on March 2, 2012 is expected to close before the end of June 2012, subject to the remaining conditions precedent being fulfilled. Mine Waste Solutions is a recently commissioned tailings retreatment operation located in South Africa’s Vaal River region and in the immediate proximity of AngloGold Ashanti’s own tailings facilities.

Note O. Declaration of dividends

Details of the final dividends of 2011 and interim dividends of 2012 are set forth in the table below:

 

      Ordinary shareholders     E ordinary shareholders  
     Final dividend      Interim dividends     Final dividend      Interim dividends  
     2011      2012     2011      2012  

Declaration date

     Feb 14, 2012         May 8, 2012        Feb 14, 2012         May 8, 2012   

Record date

     Mar 9, 2012         Jun 1, 2012        Mar 9, 2012         Jun 1, 2012   

Payment date—Ordinary / E ordinary shareholders

     Mar 16, 2012         Jun 8, 2012        Mar 16, 2012         Jun 8, 2012   

Payment date—CDIs

     Mar 16, 2012         Jun 8, 2012        —           —     

Payment date—GhDSs

     Mar 19, 2012         Jun 11, 2012        —           —     

Payment date—ADSs

     Mar 26, 2012         Jun 18, 2012        —           —     

Dividend amount per share—declared (US cents)

     26.401        11.806        13.201        5.903   

Dividend amount per share—declared (South African cents)

     200.0        100.0        100.0        50.0   

Dividend amount per share—paid (US cents)

     26.401        10.035 (1)      13.201        5.018 (1) 

Dividend amount per share—paid (South African cents)

     200.0        85.0 (1)      100.0        42.5 (1) 

 

(1) 

Net of 15 percent withholding tax.

During the third quarter of 2011, the Company changed its frequency of dividend payments to quarterly rather than half-yearly.

Withholding tax on dividends and other distributions to shareholders of 15 percent became effective on April 1, 2012. The withholding tax, which was announced by the South African government on February 21, 2007, replaces the Secondary Tax on Companies.

Dividends are declared in South African cents. Dollar cents per share figures have been calculated based on exchange rates prevailing on each of the respective payment dates.

In addition to the cash dividend, an amount equal to the dividend paid to holders of E ordinary shares will be offset when calculating the strike price of E ordinary shares.

Each CDI represents one-fifth of an ordinary share and 100 GhDSs represents one ordinary share. Each ADS represents one ordinary share.

 

31


ANGLOGOLD ASHANTI LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Prepared in accordance with US GAAP

 

Note P. Fair value measurements

The FASB ASC guidance establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company utilizes the market approach to measure fair value. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

The following table sets out the Company’s financial assets and (liabilities) measured at fair value, by level, within the hierarchy as at March 31, 2012 (in US Dollars, millions):

Items measured at fair value on a recurring basis

 

Description

   Level 1     Level 2     Level 3    Total  

Cash and cash equivalents

     1,216            1,216  

Marketable equity securities

     85            85  

Mandatory convertible bonds

     (678          (678

Embedded derivatives

       (1        (1

Option component of convertible bonds

       (49        (49

The Company’s cash equivalents are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. The cash instruments that are valued based on quoted market prices in active markets are primarily money market securities. Due to the short maturity of cash, carrying amounts approximate fair values.

The Company’s marketable equity securities are included in Other long-term assets in the Company’s consolidated balance sheet. They consist of investments in ordinary shares and are valued using quoted market prices in active markets and as such are classified within Level 1 of the fair value hierarchy. The fair value of the marketable equity securities is calculated as the quoted market price of the marketable equity security multiplied by the quantity of shares held by the Company.

The Company’s mandatory convertible bonds are included in debt in the Company’s consolidated balance sheet. The bonds are valued using quoted market prices in an active market and as such are classified within Level 1 of the fair value hierarchy. The fair value of the bonds is calculated as the quoted market price of the bond multiplied by the quantity of bonds issued by the Company.

Embedded derivatives and the conversion features of convertible bonds are included as derivatives on the balance sheet. Such instruments are typically classified within Level 2 of the fair value hierarchy.

The following inputs were used in the valuation of the conversion features of convertible bonds as at March 31:

 

     2012  

Market quoted bond price (percent)

     109.625  

Fair value of bond excluding conversion feature (percent)

     102.930  

Fair value of conversion feature (percent)

     6.695  

Total issued bond value ($ million)

     732.5  
  

 

 

 

The option component of the convertible bonds is calculated as the difference between the price of the bond including the option component (bond price) and the price excluding the option component (bond floor price).

 

32


ANGLOGOLD ASHANTI LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Prepared in accordance with US GAAP

 

Note Q. Supplemental condensed consolidating financial information

AngloGold Ashanti Holdings plc (“IOMco”), a wholly-owned subsidiary of AngloGold Ashanti, has issued debt securities which are fully and unconditionally guaranteed by AngloGold Ashanti Limited (being the “Guarantor”). Refer to Notes D “Debt” and M “Commitments and Contingencies”. IOMco is an Isle of Man registered company that holds certain of AngloGold Ashanti’s operations and assets located outside South Africa (excluding certain operations and assets in the United States of America and Namibia). The following is condensed consolidating financial information for the Company as of March 31, 2012 and December 31, 2011 and for the three months ended March 31, 2012 and 2011, with a separate column for each of AngloGold Ashanti Limited as Guarantor, IOMco as Issuer and the other subsidiaries of the Company combined (the “Non-Guarantor Subsidiaries”). For the purposes of the condensed consolidating financial information, the Company carries its investments under the equity method. The following supplemental condensed consolidating financial information should be read in conjunction with the Company’s condensed consolidated financial statements.

 

33


ANGLOGOLD ASHANTI LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Prepared in accordance with US GAAP

 

Note Q. Supplemental condensed consolidating financial information (continued)

Condensed consolidating statements of income

FOR THE THREE MONTHS ENDED MARCH 31, 2012

(unaudited)

(in US dollars, millions)

 

     AngloGold  Ashanti
(the “Guarantor”)
    IOMco
(the  “Issuer”)
    Other subsidiaries     Consolidation
adjustments
    Total  
         (the “Non-Guarantor
Subsidiaries”)
     

Sales and other income

     554       1       1,201       (36     1,720  

Product sales

     524       —          1,182       —          1,706  

Interest, dividends and other

     30       1       19       (36     14  

Costs and expenses

     437       25       644       (38     1,068  

Production costs

     281       —          504       —          785  

Exploration costs

     8       2       65       —          75  

Related party transactions

     (4     —          —          —          (4

General and administrative expenses/(recoveries)

     50       (3     15       8       70  

Royalties paid

     12       —          36       —          48  

Market development costs

     —          —          1       —          1  

Depreciation, depletion and amortization

     80       —          109       —          189  

Interest expense

     1       17       26       —          44  

Accretion expense

     3       —          5       —          8  

Employment severance costs

     2       —          1       —          3  

Loss/(profit) on sale of assets, realization of loans, indirect taxes and other

     4       9       6       (46     (27

Non-hedge derivative gain and movement on bonds

     —          —          (124     —          (124

Income/(loss) before income tax provision

     117       (24     557       2       652  

Taxation expense

     (38     (1     (226     —          (265

Equity income in associates

     5       5       —          —          10  

Equity income/(loss) in subsidiaries

     310       185       —          (495     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income/(loss) from continuing operations

     394       165       331       (493     397  

Preferred stock dividends

     (10     —          (10     20       —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income/(loss)

     384       165       321       (473     397  

Less: Net income attributable to noncontrolling interests

     —          —          (13     —          (13
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income/(loss)—attributable to AngloGold Ashanti

     384       165       308       (473     384  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

     486       171       333       (489     501  

Comprehensive income attributable to noncontrolling interests

     —          —          (15     —          (15
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income attributable to AngloGold Ashanti

     486       171       318       (489     486  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

34


ANGLOGOLD ASHANTI LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Prepared in accordance with US GAAP

 

Note Q. Supplemental condensed consolidating financial information (continued)

Condensed consolidating statements of income

FOR THE THREE MONTHS ENDED MARCH 31, 2011

(unaudited)

(in US dollars, millions)

 

     AngloGold Ashanti
(the “Guarantor”)
    IOMco
(the  “Issuer”)
    Other subsidiaries              
         (the “Non-Guarantor
Subsidiaries”)
    Consolidation
adjustments
    Total  

Sales and other income

     591       —          884       (40     1,435  

Product sales

     560       —          862       —          1,422  

Interest, dividends and other

     31       —          22       (40     13  

Costs and expenses

     412       30       627       8       1,077  

Production costs

     251       —          457       —          708  

Exploration costs

     4       4       49       —          57  

Related party transactions

     (4     —          —          —          (4

General and administrative expenses/(recoveries)

     56       9       6       (3     68  

Royalties paid

     14       —          26       —          40  

Market development costs

     1       —          2       —          3  

Depreciation, depletion and amortization

     94       —          98       —          192  

Impairment of assets

     1       —          —          —          1  

Interest expense

     2       17       25       —          44  

Accretion expense

     3       —          4       —          7  

Employment severance costs

     3       —          1       —          4  

(Profit)/loss on sale of assets, realization of loans, indirect taxes and other

     (13     —          —          11       (2

Non-hedge derivative gain and movement on bonds

     —          —          (41     —          (41

Income/(loss) before income tax provision

     179       (30     257       (48     358  

Taxation expense

     (59     —          (65     —          (124

Equity income in associates

     7       2       —          —          9  

Equity income/(loss) in subsidiaries

     123       111       —          (234     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income/(loss) from continuing operations

     250       83       192       (282     243  

Preferred stock dividends

     (13     —          (13     26       —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income/(loss)

     237       83       179       (256     243  

Less: Net income attributable to noncontrolling interests

     —          —          (6     —          (6
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income/(loss)—attributable to AngloGold Ashanti

     237       83       173       (256     237  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

     184       83       192       (270     189  

Comprehensive income attributable to noncontrolling interests

     —          —          (5     —          (5
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income attributable to AngloGold Ashanti

     184       83       187       (270     184  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

35


ANGLOGOLD ASHANTI LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Prepared in accordance with US GAAP

 

Note Q. Supplemental condensed consolidating financial information (continued)

Condensed consolidating balance sheets

AT MARCH 31, 2012

(unaudited)

(in US dollars, millions)

 

     AngloGold Ashanti
(the “Guarantor”)
    IOMco
(the  “Issuer”)
    Other subsidiaries     Consolidation
adjustments
    Total  
         (the “Non-Guarantor
Subsidiaries”)
     

ASSETS

          

Current Assets

     943       2,575       3,708       (4,404     2,822  

Cash and cash equivalents

     295       521       400       —          1,216  

Restricted cash

     1       —          53       —          54  

Receivables, inter-group balances and other current assets

     647       2,054       3,255       (4,404     1,552  

Property, plant and equipment, net

     2,070       —          4,289       —          6,359  

Acquired properties, net

     174       —          611       —          785  

Goodwill

     —          —          199       (16     183  

Other intangibles, net

     15       —          23       —          38  

Other long-term inventory

     —          —          31       —          31  

Materials on the leach pad

     —          —          404       —          404  

Other long-term assets and deferred taxation assets

     4,779       4,141       853       (8,697     1,076  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

     7,981       6,716       10,118       (13,117     11,698  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES AND EQUITY

          

Current liabilities including inter-group balances

     1,077       1,571       3,078       (4,767     959  

Other non-current liabilities

     53       —          47       (33     67  

Long-term debt

     35       994       1,369       —          2,398  

Derivatives

     —          —          50       —          50  

Deferred taxation liabilities

     675       —          690       5       1,370  

Provision for environmental rehabilitation

     159       —          508       —          667  

Other accrued liabilities

     —          —          36       —          36  

Provision for pension and other post-retirement medical benefits

     200       —          14       —          214  

Commitments and contingencies

     —          —          —          —          —     

Equity

     5,782       4,151       4,326       (8,322     5,937  

Stock issued

     13       5,320       897       (6,217     13  

Additional paid in capital

     8,755       460       219       (679     8,755  

Accumulated (deficit)/profit

     (2,292     (1,629     (1,046     2,675       (2,292

Accumulated other comprehensive income and reserves

     (694     —          4,102       (4,102     (694

Total AngloGold Ashanti stockholders’ equity

     5,782       4,151       4,172       (8,323     5,782  

Noncontrolling interests

     —          —          154       1       155  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

     7,981       6,716       10,118       (13,117     11,698  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

36


ANGLOGOLD ASHANTI LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Prepared in accordance with US GAAP

 

Note Q. Supplemental condensed consolidating financial information (continued)

Condensed consolidating balance sheets

AT DECEMBER 31, 2011

(in US Dollars, millions)

 

     AngloGold Ashanti
(the “Guarantor”)
    IOMco
(the “Issuer”)
    Other subsidiaries
(the  “Non-Guarantor
Subsidiaries”)
    Consolidation
adjustments
    Total  

ASSETS

        

Current Assets

     833       2,469       3,486       (4,157     2,631  

Cash and cash equivalents

     388       458       266       —          1,112  

Restricted cash

     1       —          34       —          35  

Receivables, inter-group balances and other current assets

     444       2,011       3,186       (4,157     1,484  

Property, plant and equipment, net

     1,940       —          4,183       —          6,123  

Acquired properties, net

     167       —          612       —          779  

Goodwill

     —          —          198       (16     182  

Other intangibles, net

     9       —          22       —          31  

Other long-term inventory

     —          —          31       —          31  

Materials on the leach pad

     —          —          393       —          393  

Other long-term assets and deferred taxation assets

     4,362       3,558       815       (7,720     1,015  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

     7,311       6,027       9,740       (11,893     11,185  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

LIABILITIES AND EQUITY

          

Current liabilities including inter-group balances

     889       1,550       2,992       (4,512     919  

Other non-current liabilities

     49       —          46       (32     63  

Long-term debt

     33       994       1,446       —          2,473  

Derivatives

     —          —          93       —          93  

Deferred taxation liabilities

     641       —          596       5       1,242  

Provision for environmental rehabilitation

     147       —          506       —          653  

Other accrued liabilities

     —          —          35       —          35  

Provision for pension and other post-retirement medical benefits

     170       —          15       —          185  

Commitments and contingencies

     —          —          —          —          —     

Equity

     5,382       3,483       4,011       (7,354     5,522  

Stock issued

     13       5,269       897       (6,166     13  

Additional paid in capital

     8,740       435       219       (654     8,740  

Accumulated (deficit)/profit

     (2,575     (2,220     (3,521     5,741       (2,575

Accumulated other comprehensive income and reserves

     (796     (1     6,277       (6,276     (796

Total AngloGold Ashanti stockholders’ equity

     5,382       3,483       3,872       (7,355     5,382  

Noncontrolling interests

     —          —          139       1       140  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

     7,311       6,027       9,740       (11,893     11,185  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

37


ANGLOGOLD ASHANTI LIMITED

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 2012

Prepared in accordance with US GAAP

 

Note Q. Supplemental condensed consolidating financial information (continued)

Condensed consolidating statements of cash flows

FOR THE THREE MONTHS ENDED MARCH 31, 2012

(unaudited)

(in US Dollars, millions)

 

     AngloGold Ashanti
(the “Guarantor”)
    IOMco
(the  “Issuer”)
    Other subsidiaries
(the “Non-Guarantor
Subsidiaries”)
    Consolidation
adjustments
    Total  

Net cash provided by/(used) in operating activities

     108       (38     526       (20     576  

Net income/(loss)

     384       165       321       (473     397  

Reconciled to net cash provided by/(used) in operations:

            

Loss/(profit) on sale of assets, realization of loans, indirect taxes and other

     5       9       24       (46     (8

Depreciation, depletion and amortization

     80       —          109       —          189  

Impairment of assets

     —          —          —          —          —     

Deferred taxation

     5       —          97       —          102  

Other non cash items

     (404     (190     (3     499       (98

Net increase in provision for environmental rehabilitation, pension and other post-retirement medical benefits

     20       —