AngloGold Ashanti Plc (AU) Q2 2014 Earnings Report, Transcript and Summary

Good morning, everybody and welcome to the presentation of our results for the three months to June 30. As is customary, safety is our first value. In the unlikely event of an emergency, sirens will sound. Please move to the nearest exits, which are behind me and to my right. If you can assemble in the car park directly behind the building and safety wardens will take care of you from there. A quick look at our Safe Harbor statement, certain statements contained in this document other than statements of historical fact including without limitation, those concerning the economic outlook for the gold mining industry, expectations regarding gold price, production, cash costs, all-in sustaining costs, cost savings and other operating results, return on equity, productivity improvements and growth prospects and outlook of AngloGold Ashanti’s operations individually or in the aggregate, including achievement of project milestones, commencement and completion of commercial operations of certain of our exploration and production projects, and the completion of acquisitions and dispositions, AngloGold Ashanti’s liquidity and capital resources and capital expenditures and the outcome and consequences of any potential and pending litigation or regulatory proceedings or environmental health and safety issues are forward-looking statements regarding our operations, economic performance and financial condition. Although AngloGold Ashanti believes that expectations reflected in such forward-looking statements and forecasts are reasonable, no assurance can be given that such expectations will prove to have been correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of, among other factors, changes in economic, social, and political and market conditions, success of business and operating initiatives, changes in the regulatory environment and other government actions, including environmental approvals, fluctuations in gold prices and exchange rates, the outcome of pending or future litigation proceedings and business and operational risk management. For a discussion of these factors, refer to our Annual Report on Form 20-F for the year ended December 31, 2013 filed with the U.S. SEC on the April 14, 2014. These factors are not necessarily all of the important factors that could cause our actual results to differ materially from those expressed in any forward-looking statements. Other known or unpredictable factors could have material adverse effects on future results. Consequently, readers are cautioned not to place undue reliance on forward-looking statements. We undertake no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except to the extent required by applicable law. All subsequent written or oral forward-looking statements attributable to us or any person acting on behalf of the company are qualified by these cautionary statements. This communication may contain certain non-GAAP financial measures. We utilize these measures and ratios in managing our business. Non-GAAP financial measures should be viewed in addition to and not as an alternative for, the reported operating results or cash flow from operations or any other measure of performance prepared in accordance with IFRS. In addition, the presentation of these measures may not be comparable to similarly titled measures other companies use. AngloGold Ashanti posts information that is important to investors on the main page of the website at anglogoldashanti.com under the Investors tab on the main page. This information is updated regularly. You should look at it. The lineup today, Venkat will talk to the highlights of the quarter. He will pass on to Mike O’Hare who will talk to the South African operations and also to the earthquake and the recovery efforts that follow on from that which happened on August 5. Ron Largent will talk to the international operations, Graham Ehm to projects and exploration, and Richard Duffy to the financials before Venkat wraps up with some concluding comments. Venkat, over to you.

Thank you, Stewart. Good morning, ladies and gentlemen. If we can kick off with the slide which recaps on our strategy. If you remember, we put this out during the early part of last year and we have been steadily implementing the strategy. There are five building blocks to the strategy, one around foundation, which is ensuring that we have got – continued to improve our safety record, have good and capable people in right roles, and improve our sustainability and our social license to operate. The second pillar is ensuring proactively that we have got the financial flexibility we need to implement the strategy. The third is around optimizing all forms of costs whether it’s direct costs, overheads and exploration expenditure, and capital expenditure. The fourth leg of the pillar is improving the quality of the portfolio by bringing on stream new mines and making the assets work harder. And the final pillar obviously is always reminding ourselves that mining is a long-term game and therefore not to take simple short-term issues, but keeping our long-term optionality alive. The end result is a solid business with strong foundation and fundamentals, a team that is focused on delivery and commitment, ensuring sustainability of our cash flows from a diversified quality portfolio. If I can kick off with safety, it’s an area which we spend quite a lot of time in our presentations. You will recall it’s an area where we have worked hard over many years to try and improve as we get to zero harm. Our approach has had four parts to it, relentless and steadfast leadership commitment, whether you take it from the Board level going all the way down to the rock face. In addition to that, improving our systems, processes and procedures and bringing about a behavioral change, where everyone looks out for the other when it comes to safety. Use of technology to remove people from harm, Mike will elaborate on these in his presentation and getting a better understanding and management of the major hazards, which cause high potential incidents, injuries or fatality. Importantly, we had our first fatality-free quarter in four years. This is the third time in the company’s history that none of our 20 operations and other business units went through without a single fatality. The last time it happened was in 2010, and the one before was in 2008. This was our best second quarter all-injury frequency rate on record at 6.79% and the second best overall. And as you can see from the slide, whilst recognizing one fatality is one fatality too many, you can see the marked reduction in the number of fatalities over the three-year period comparing it to the first six months. Importantly, none of the three fatalities, which took place in the first quarter of this year and there were none in the second quarter happened at the productions areas. They were either in the maintenance and refurbishment areas or project areas thereby telling us that we need to do better in those areas. We had 26% fewer injuries this time around and a number of operations broke their own previous best records. Importantly, South Africa posted a record safety performance and a marked turnaround as compared to where they were same time last year. As a group, if you were to take the last four quarters, starting from Q3 2013 to Q2 2014, out of these four quarters, three of them represent the best in terms of all-injury frequency rate for AngloGold Ashanti for any non-strike impacted quarter. And importantly, couple of days ago, we broke the longest period without a single fatality in the group running at 143 days. Having said all of that, we still have high potential incidents at our mines and the operating team and the safety teams and the leadership are working harder to learn what happened in these high potential incidents so that we can eliminate the cause rather than simply treat that symptom as Tuesday, August 5, 2014 humbly reminded us that we can never afford to be complacent. When we were struck with an earthquake of magnitude 5.3, when we were in the middle of our presentation to the Board, the South African team led by Mike did an excellent job in evacuating every one of our 3,300 colleagues and contractors safely to the surface without any material injury not to mention fatality. Turning around to the results, another solid quarter’s performance across all of the mines in our regions, had it not been for teething issues at the Kibali sulfide circuit ramp up, the numbers would have been better. The good news is we are starting to see good recovery in terms of the sulfide circuit at Kibali and Graham will elaborate on it. Production for the second quarter was close to 1.1 million ounces ahead of guidance. It was up 17% year-on-year and 4% on the previous quarter. Even if you strip out the production bought in by the two new mines, Kibali and Tropicana, improvement was about 3% from the other mines combined. Our total cash cost at $836 an ounce was the lower end of market guidance and 7% lower year-on-year. Our all-in sustaining cost at $1,060 and all-in cost of $1,192 per ounce represents a 19% reduction and a 29% reduction for the same period last year. Net debt has reduced further primarily due to the asset sale proceeds from Navachab and our net debt to EBITDA covenant has improved to 1.73 times and Richard will talk about the refinancing that was implemented recently. The quarter has been noisy when it comes to earnings. On a normalized basis, the earnings were $76 million for the quarter, coming on the back of production despite lower gold price and inflation, and winter power tariffs. The impact of Kibali on our earnings compared to the same quarter – compared to the first quarter of 2014 was around $20 million and on cost was around $17 an ounce. We hope to claw that back as we go into the third and the fourth quarters. Graham will cover in his presentation, we have signed up a new gas pipeline project for the Australian operations, that will reduce our cash cost in the Australian operations by between AUD25 to AUD30 an ounce and opens up very good upside for us. And at this stage, subject to any further inspection that Mike needs to implement and look at in terms of the ore process at the South African operations, full year production outlook remains intact. Moving on to the next table and this is a table which we put up at each presentation. It says a thousand words. It compares year-on-year performance both with regard to quarter just gone and the same (Technical Difficulty). We have managed to keep a lid on the nominal cost, but we are starting to see inflation come through, which will impact our nominal costs going forward, but the P500 team is working very hard to pull (Technical Difficulty) and our all-in cost is down (Technical Difficulty).

I will come back to safety on the next slide, but let me first deal with production and costs for the South African region. The South African underground operations improved markedly over the first quarter in terms of the production output that was some 26% higher in volume than they were in Q1. This is to be expected given the amount of shifts we are able to work in Q1 versus Q2. So the product improvement – productivity improvement there was fairly significant. We also had lower than Q1 safety stoppages which helped the production. We did have a grade decrease. The production levels offset this. And our gold production from underground was 15% higher than the previous quarter. Turning to Moab Khotsong, Moab Khotsong’s grade declined slightly during the quarter. And as we have said over a number of quarters, we will fluctuate within this range some 5% to 10% higher and then coming off the same amount. But we should remain within this range for a number of quarters going forward. The big work at Moab remains the integration between the Moab Khotsong mine and the Great Noligwa mine primarily in order to ensure that the Great Noligwa mine remains profitable. And next quarter, I will give a little bit more detail on how that work is progressing. Suffice to say that all of the employees at Great Noligwa are now going underground by the Moab Khotsong infrastructure. Turning to mine waste solutions, mining grade and recovery remain our key challenges at that operation. However, the uranium circuit is now being reconfigured. If you remember, we did commissioned uranium circuit. We then had an element of preg-robbing occurring because of the chemicals we were using in the uranium circuit, we have now reconfigured that uranium circuit and we should be producing uranium at the end of this quarter and into Q4. That not only produces additional uranium but it also should give us an increase on the gold recovery and also improve the margins at that operation. If I turn to safety now, just following on from what Venkat has said, certainly the time is always set at the top of the organization and Venkat mentioned the involvement of the Board, but I need to make specific mention of Venkat’s personal involvement. Setting a vision is the easy part, showing everybody how much care and how passionate you are about getting towards zero harm is incredibly important and certainly the South Africa team, thanks Venkat for his personal input into making sure we have a leader who really believes and supports us in going this way. We have had 14 months now without a fall of ground fatality. And we always say touch wood. In that period, we however, had two fatalities which is certainly two too many. We had a number of high-potential incidence which could have resulted in fatalities, but I think the harder we practice, the luckier we are going to get. And what I have been saying consistently around introducing technology, whether that be the more longer-term technology or whether it be quite simple technology in terms of bolts, meshing and lacing, nets, locomotives that can detect other locomotives, whether that be auto coupling or technology that allows us to determine where people actually are underground in case of an event like we had with the earthquake, all of those technologies help us. Our systems work. Our BPF work continues to give us an element of improvement within the safety, work around analyzing the key elements of critical controls that management needs to be watching continuously to ensure that our perils don’t get out of hand are certainly well in place and largely, but certainly beyond leadership, probably the most important piece is our engagement. It’s working with people. That work continues together with incentive systems that employees can really see in their pockets the benefit of working safely. This has allowed us to achieve many milestones across the South African region and long may they continue. If I turn to the earthquake, what I have here is a map of the Vaal River mines. The earthquake occurred in about a three kilometer zone at about anywhere between 3 and 6 kilometers below our operations. A 5.3 event, this size event and the depth of this event lead us to believe that this is an earthquake-type event. Clearly, the work that we had to put in place to evacuate our people was the most critical work we did. And the sequence of events, if I move to the next slide, was around really getting the Eskom infrastructure back up and running. And they did a fantastic job in that because a number of their substations were damaged by the event as well, ensuring that our shaft infrastructure was intact, so that we could hoist our employees. Then successfully hoisting all of our people, a number of minor injuries and certainly a number of cases where we needed to do immediate trauma counseling. These were the events that we immediately undertook as part of our normal safety protocols. We then have to look at the next steps in the process, leading up to where we are today and that’s the work that we are busy with at the moment, which really goes around primarily ensuring that our key infrastructure the shafts are intact, which they are, we have examined them in detail. Secondly, understanding that it’s safe enough to put people back underground and the way we do that is to have a look at how the seismic response post the event decays. You will be aware that you have a number of seismic post-events. There is a rule that’s followed in Japan called Aomori rule and our seismic response post this earthquake is following that. And we now believe it’s safe to put people back underground. And in fact, this morning, we have our first crews going back into the working places to examine whether they are still intact or what work would need to be done to make them safe. The next response is around working with the community and the local municipality to ensure we work well with them and then making sure that our employees are aware that we do have counseling services available. Our supervisors have been specifically briefed to ensure that they know what to look for from the point of view of posttraumatic stress. We estimate a loss of around 30,000 ounces as a result of this event. Our Mine Waste Solutions Complex was knocked out due to the fact that the Eskom power stations were down. Certainly, our Kopanang mine stopped for a day and Moab Khotsong, Great Noligwa complex will only start producing in a ramp up fashion during this week. Key infrastructure we haven’t been able to examine yet to our ore passes as Venkat mentioned and we will only know whether there has been damage to those once we start to pull rock through them again. So, we put an estimate of 30,000 ounces. Clearly, we will have to revisit this as we ramp up to normal production. Okay. The well still continues at the West Wits. We continue with our technology implementation. As reported last quarter, we are busy ramping up on sites. We now have four sites running in the TauTona shaft pillar area and we have another site running in the very narrow reefs at Great Noligwa. This reef is a reef that we haven’t been able to mine successfully due to its narrowness. We hope that this technology will show us that we are mining only the gold, but all of the gold that we would be able to bring this reef band to account, so very exciting times there. The backfill, backfill plant is now commissioned underground, semi-automated. For those of you who have been underground, you saw that our backfilling was a really live intensive business and that plant is now operating fairly well. So, happy to report that, that work is going quite nicely. With that, I would like to hand over to Ron Largent to take you through the international operations.

Thank you, Mike and good morning. I would like to take you through the quarter two operating results for Continental Africa, Australia and the Americas region. But before I comment on them, I guess I would like to make a statement around safety. It was previously covered by Venkat, but wanted to reemphasize the fatal-free quarter and the best quarter two performance on record for AGA. We must enjoy these metrics, but I would just want everybody to understand, we do understand the work that it takes to continue meeting and exceeding our targeted improvements in safety. Secondly, each quarter, I make comments around the cost rationalization work and ask you to continue to watch quarter-on-quarter the outputs. As I do each quarter, try to set a context of where we are at. This work was communicated in mid 2013 and had a target of removing $500 million from our operating cost. The timeframe we gave was an 18-month timeframe to remove these costs ending in December 2014. At the end of 2013, we had documented removal of a certain value and we defined the remaining value and put that into our operating plan. Currently, our comparisons to our expenditure plan, is 3% better than planned. So, with that said, our current business plans contain the $500 million reduction. And if we can continue on that path, as you will see by the comparison to second quarter 2013, we will have met our commitments. There is however one area that I think we should point out is that over the last year and a half, we have been able to contain by this work and this process, the inflationary increases. They are beginning to creep back into our operations, through labor, power, and fuel costs primarily. So, we continue to create this positive outcome in the operations, but I know it can’t last forever as the inflationary cost start keeping up with this. So, to go over Continental Africa region, production for quarter two was 395,000 ounces at a cash cost of $846 compared to 343,000 ounces at $883 for second quarter 2013. The contribution for this improvement was primarily from Kibali mine and the improved grades and throughputs at the Siguiri mine in Guinea for this quarter-on-quarter comparison difference. But at Siguiri, we produced 80,000 ounces in quarter two at cash cost of $777 compared to 62,000 in quarter two 2013 at $850 an ounce. Iduapriem mine had a respectable second quarter producing 47,000 ounces at a cash cost of $911 an ounce. And at the Geita mine in Tanzania, second quarter was also successful at 110,000 ounces at $667 an ounce. Now, the Americas region, production for quarter two was 229,000 ounces at a cash cost of $765 an ounce compared with 235,000 ounces at $733 an ounce in quarter two 2013. We had two primary impacts in the region. We had to alter a stacking plan at the Cripple Creek mine in Colorado, changing the ounce production profile that will be regained in the second half of 2014. And we had a geotechnical challenge at the Cuiaba mine in Brazil that we will be recovering those grids in the second half of 2014 also. But in Brazil, AngloGold Ashanti Mineração operations produced 80,000 ounces at a cash cost of $717 an ounce compared to 76,000 ounces at $858 an ounce in quarter two 2013. And Serra Grande in the north of Brazil produced 30,000 ounces at $879 an ounce. We are continuing to process lower grades at Serra Grande as planned, 17% year-on-year lower grade. And this is primary due to the depletion of the Mina III mine, the quartz ore body that has been in depletion for years. Considerable work is on the new high-grade ore body known as Ingá, which has similar geologic characteristics and is currently in our production profile for 2016. In Argentina, Cerro Vanguardia mine produced 62,000 ounces at $682 an ounce. And the work there is to increase the availability and volume of underground ore tons in the coming quarters of 2014. The Australia region, production for quarter two 2014 was 155,000 ounces at a cash cost of $850 compared to 50,000 ounces at cash cost of greater than $1,800 in quarter two 2013. This improvement was primarily due to bringing the Tropicana mine on that wasn’t in production one year ago, but production at Sunrise Dam was 62,000 ounces this quarter versus 50,000 ounces a year ago. Production costs at Sunrise have also come down significantly from $1,700 to around $1,300 during quarter two. These costs will continue to improve as the new production profile from the underground mine are maximized and the ore body grades are realized. Grade improvements were 12% higher than the previous quarter at Sunrise and was very important as the site has met its 200,000 tons per month ore extraction for the last three months. Sunrise Dam is on a good run and we are working on this cost very aggressively. Attributable production from the Tropicana mine was 93,000 ounces for quarter two 2014 at a cash cost of $498 per ounce. Although the site has had associated startup challenges, the productivity rates are being achieved. I know July isn’t the quarter we are talking about, but July was a tough month for Tropicana, but with the planned or unplanned scheduled downtime and a geotechnical challenge in the pit, we will still meet our quarterly objectives in quarter three. I say that because as things come out, if we stop a lot of work to do at Tropicana and I think the team here is very excited about the ultimate outcome of Tropicana. We are meeting the objectives we have stated with the capital investment we have put in, even though we have had a couple of tough months at Tropicana. So, with that said, I will turn it over to Graham.

Thanks, Ron. This morning, I will provide an update on our projects and also on our greenfields exploration. Firstly, in regard to Kibali, solid progress continues to be made at Kibali. During quarter two, the prime focus has been on the completion and the commissioning of the plant sulfide circuit. The secondary crushing circuit, flotation circuit, regrind mill, and pump cells were completed and commissioning. And ramp-up commenced, resulting in gold production of 91,000 ounces on 100% basis. Nzoro hydropower station was completed and commissioned and is being integrated with the diesel power station at a pace that’s commensurate with the stabilization of the process plant. Development of the underground mine is going especially well. Lateral development of the first load level of the shaft is just being completed, and sinking has resumed. The depth of the shaft now is about approximately 520 meters, with a target depth of 760 meters. A notable milestone has been achieved with the development of the declines in the cross cuts into the top of the 5,000 load, and that’s the diagram included on the slide here. The ore body has been intercepted where expected and at the same tenor as expected. In regard to Cripple Creek, you will recall that Cripple Creek, the mine life extension project actually consists of two elements, the construction of a mill to treat higher grade and partially refractory ore that is within the ore body and the construction of a new valley leach facility. Mill construction remains on schedule for first gold at the end of this year and approximately 500,000 ton of ore has been mined in preparation for commissioning and ramp up. The valley leach facility construction remains on schedule for completion in mid-2016. Both the mill and the valley leach expansion are on budget and on schedule. Our overall budget for the project was about $585 million. In regard to Obuasi, last quarter I spoke about the change in approach of Obuasi that Obuasi has moved from an operation to a project in order to deal with this change. During the quarter, we have made considerable progress in putting the plans in place ready for action. The amendment to the program of mining operations has been submitted to the minister for lands and natural resources. The environmental management plan that accompanies this amendment has been submitted to the EPA. As you would appreciate, this is going to be and is a very substantial change, consequently very close communication is being made with key stakeholders. And this work is being led by David Noko, our EVP-Sustainability. The program involves a very substantial slowdown in activity and a commensurate reduction in the workforce. The footprint of the operation is being rationalized and contracted to the Southern end of the mine. The works are progressing quite well. A particular milestone, if I move to the next slide, was achieved this month. We are continuing with the Obuasi decline development. And the decline broke through just this month. So we – now we have decline access from surface through to the upper levels of the underground mine, whereas previously all access, men and materials was by the shaft. Now, turning to greenfields exploration, and here I will only talk about Colombia. In Colombia, at the new Nuevo Chaquiro copper gold discovery, impressive drill results continue to be made. This plan shows the surface projection of the 0.45% copper envelope in the gray dash line and the surface prediction of what appears to be a high-grade core is shown in the red dash line. Drill results from the last quarter were quite impressive with 810 meters at 0.78 grams per ton and 1.65% copper and 852 meters at 0.61 grams per ton at 1.19% copper. These intercepts when compared with other porphyry deposits are quite significant. The cross section in the next slide, though this is early days and based on relative limited drilling, is showing the outline of the 0.45% copper load, in the light yellow and in more of a gold color, with the colors are coming out very well there shows the higher-grade component. You'll note that Nuevo Chaquiro is a blind discovery and is about 250 meters below surface. The drill results here support the potential for about 200 million ton of a high-grade capital at about 2% copper, between about 350 meters and 450 meters of depth. To try and put that in perspective and please appreciate it, that it is early days, but it appears that Nuevo Chaquiro is shaping up into a 10 million to 20 million ounce gold equivalent ore body but interestingly, a 7 billion to 10 billion pound copper equivalent ore body. We hope to be able to announce an amazing resource for Nuevo Chaquiro towards the end of the year. Thanks very much. And now, I will pass over to Richard for the financial update.

Thank you, Graham. Our ongoing focus on costs across the business is evident in the 19% decrease in our all-in sustaining cost from $1,302 an ounce in quarter two last year to $1,060 an ounce in this second quarter, driven by lower operating, corporate and exploration costs and lower sustaining CapEx. All-in sustaining cost increased by 7% over quarter one. And quarter one we were at $993 an ounce. I had indicated in our last quarter release that we expected our all-in sustaining cost to increase to between $1,100 and $1,145 an ounce as a result of stronger local currencies and increased operating costs relating to power increases, winter tariffs and higher fuel costs, together with adverse ore inventory and consumable store movements. I would also flag some timing differences or some timing around our stay-in business capital and indicated that we would see stay-in business spillover from Q1 into the remainder of the year. Lower than anticipated movements in our inventory services and stay-in-business spend coupled with a benefit of higher production enabled us to deliver a lower Q2 all-in sustaining cost than we had guided at the end of quarter one. The 29% year-on-year reduction in all-in cost from $1,679 an ounce to $1,192 an ounce this quarter reflects the all-in sustaining cost improvement and also the reduced project capital following the completion of Tropicana and the first phase of Kibali. Turning to earnings, there were a number of abnormal transactions that impacted on our earnings during this quarter. In order to provide a better understanding of our underlying earnings performance for the quarter, we have normalized our adjusted headline earnings. The major adjustments made in moving from the negative $4 million Q2 adjusted headline earnings to our normalized adjusted headline earnings of $76 million related to operational and corporate redundancies of $27 million, primarily as a result of our ongoing restructuring at Obuasi and closure and termination costs of $27 million, $24 million of which related to Yatela. A reconciliation of our adjusted headline earnings to normalized adjusted headline earnings is set out on Page 3 of our quarterly report. Earnings this quarter improved by $67 million over the same period in 2013 with higher production and lower corporate, marketing and exploration costs more than offsetting the lower gold price and inflation. Our quarter two normalized adjusted headline earnings of $76 million are $43 million lower than the first quarter this year driven largely by higher operating costs, stronger local currencies and lower income from associates mainly at Kibali. You will have seen the announcement around the provision of a ZAR1.2 billion facility that we extended to Rand Refinery along with the other shareholders. We have adopted a conservative accounting approach relating to this. In that we have assumed the facility will be drawn, but will not be repaid and have accordingly made a provision of ZAR546 million against this. This amount is included in our headline earnings but has been stripped off of adjusted headline earnings. So if you are looking for where that number appears, it’s in the $85 million against our share of associates and joint venture line in the group income statement. Stronger operational performance coupled with the refinancing of our bank facilities has further improved our financial flexibility – not on our financial flexibility, I think. Thank you, next slide. We generated free cash of $34 million in quarter two and reduced our net debt by $101 million compared to the beginning of the year or end of 2013. Our net debt to EBITDA has improved from 1.86 times at the end of 2013 to 1.73 times at the end of June this year. You would have seen that we recently signed new revolving credit facilities for both our U.S. dollar and A dollar facilities for a further five-year period. The U.S. dollar RCF will remain at $1 billion and continues to be undrawn. The Aussie RCF facility will reduce from AUD600 million to AUD500 million and is currently AUD370 million drawn. We are in the process of finalizing an amendment to our South African ZAR1.5 billion facility to reflect the same terms as we have in the U.S. and A dollar facilities. All of these facilities incorporate a lucid financial covenant, which is now set at 3.5 times as compared to 3 times previously and we also have a one period waiver of up to 4.5 times subject to certain conditions. The U.S. and A dollar facilities have also been priced more tightly, which reflects the current market. At the end of July, Moody’s completed their credit review of AngloGold Ashanti and left our rating unchanged at Baa3 but on a negative outlook. Notwithstanding our significant operational improvement and cash generation, which totaled $56 million in the first six months of this year and that excludes the $105 million from the sale of Navachab. The funding requirements associated with the completion of our capital projects and that’s primarily CC&V mine life extension and Phase 2 of Kibali, together with the funding requirement to implement the Obuasi amended program of mining operations that Graham spoke to earlier preclude us from the clearing and interim dividend. My final slide talks to our outlook for the third quarter. Production is forecast to be slightly down on Q2 at between 1,060 ounces and 1,090 ounces as a result of Navachab’s production being excluded following its sale, Obuasi production winding down and the impact of the recent earthquake at our Vaal River operations, which Mike spoke to during his presentation. Total cash costs are expected to be slightly up on quarter two at between $850 to $890 an ounce primarily due to mid-year wage increases, stronger local currencies and higher cost profiles in South Africa with a full quarter of winter power tariffs. All-in sustaining costs are projected to be between $1,100 and $1,150 an ounce negatively impacted by our stay-in business spend profile. Importantly, our guidance for the year remains unchanged based on our current understanding of the impact of the SA earthquake at 4.2 million ounces to 4.5 million ounces and $740 to $790 an ounce based on the assumptions provided. It is just worth noting that these costs are based on a weaker rand assumption than is currently prevailing. I will now hand you back to Venkat. Thank you.

Just in terms of conclusion, wrapping up on a few slides, without compromising safety, we have pulled together six quarters of consistent good delivery as a management team. Over the past six quarters, we have shown safety improvements. We have shown production growth, not just from the two new mines coming on stream, but even from our existing assets. We have shown cost decline in a number of areas and importantly, the turnaround in the cash burn rate to more a modest amount of cash generation. Having said all of that, whilst recognizing that as a team and as every one of our 60,000 employees have done a wonderful job in helping us get through these six quarters, headwinds continue to remain formidable in a business like ours with 20 operations spread across the globe. So, there maybe events, which may cause us to miss a quarter here or there, but certainly the overall trend is heading in the right direction. Just recapping on some of the cost reductions, which we have achieved, it just gives you a looking back the scale of the reductions, which we have had to do. The cost saving efforts have been marked. This has been possible as a result of a focused exploration strategy to deliver best value, which has been implemented by Graham and the two operating teams led by Ron and Mike. On the corporate cost side, the restructuring, removing inefficiencies, eliminating duplication and keeping a lid on the indirect spend headed by both Italia and by Ria, have actually certainly paid off. And you can see that we have taken our corporate cost in particular back to levels that prevailed several years ago. In terms of our half year, if you recall, we did say that the first half of 2014 tends to have some timing benefits. So, our annual numbers still stand. Exploration and evaluation cost of between $150 million to $175 million for the year and corporate costs of between $120 million to $140 million for the year. On capital expenditure, to recap 2012 and ‘13 were heavy capital spend years as we were building Tropicana and Kibali. We are starting to see the project capital reduce and cash flows come in from the two projects. Whilst our sustaining capital for 2014 is broadly at the levels at 2013, the project capital of $400 million for the year, which is a significant reduction from the previous year is focused on Cripple Creek and Victor mine life extension project, Mponeng below 120 level, Kibali underground, and the Obuasi decline projects, some of which Graham spoke to. Finally, if we can take a look at the scorecard, if you remember when we set out our strategy, it was as early as the early part of last year. This scorecard shows what we have been able to achieve together as a team in the past 18 months despite some tough conditions. It has been certainly a baptism of fire for every one of us. But clearly, it shows that more work remains in certain areas. On safety and environment, we have had some very good trends and our environmental incidents have certainly reduced. On the balance sheet, Richard, Rob and the team along with good legal support have been able to pull down the debt levels from where they would have otherwise been had the expenditure rates continued and importantly get more tenor, liquidity, and flexibility in terms of our existing facilities. But we would be the first one to admit that the high debt levels and interest burden continued to engage our attention and financial flexibility is going to be a continued area of focus for us going forward. On the cost side, our all-in sustaining costs and all-in costs have improved significant year-on-year. Our overhead and exploration costs have come down significantly. And our CapEx has fallen markedly as compared to 2014. Then in terms of looking at our portfolio, certainly the operating team led by Ron, Mike and Graham have certainly done a wonderful job in holding the projects together, getting them on stream to pour gold and also getting the best out of our assets. Charles and the team executed the sale of Navachab. We have received $104 million of net proceed. As at June 30, the agreement provides for a purchase adjustment, which will be reviewed during the third quarter based on events that transpire as of the closing date. Cripple Creek & Victor expansion is on track and on schedule. Our focus in terms of portfolio is around the Obuasi restructuring and we continue to implement the amendment to the program of mining operations. We have submitted the approval as Graham mentioned. A stakeholder group has now been informed and we will engage with them in terms of the detail. In terms of the long-term, the focus on greenfields is still there. As Graham would have outlined some very good discoveries in Colombia, Ron has outlined some good discoveries in Brazil as well. And we have exited from certain countries, where we didn’t see good value for money. And the South African Technology and Innovation project makes progress and we are now increasing the number of production sites and number of holes, which we are drilling to extract as we say safely all of the gold, only the gold all the time. Just before we hand over to Q&A, this is Richard Duffy’s last quarterly presentation as CFO in AngloGold Ashanti. Richard has had a number of roles within the company and at a critical time when we needed a CFO at short notice, he stepped in to do the role of CFO until a long-term successor was found by the board. He fulfilled his role exceptionally well during challenging circumstances and we thank him for all of his help and wish him well in his future efforts. On the same note, we would like to welcome Christine Ramon to the role of CFO, effective October 1, 2014. Christine is here in the front row. She brings to the team significant experience as CEO, CFO and good experience both in terms of the accounting and finance profession. She started to go through her induction at AngloGold Ashanti before her start date and I am pleased to see that the file, the CFO file, is getting bigger every trip she makes to the office. So, with those few words, happy to take any Q&A.

Alright. If we can start with Johann, Citibank.

Thanks. Good morning, guys. Just quickly on Obuasi, three months ago, we sat here and I asked the same question, you basically say we are going to focus on the southern part of the mine. But how is production cost CapEx is going to look for the mine over the next 18 to 24 months?

Johann, the answer hasn’t changed as compared to what I gave you. It may not be the most helpful answer for you at the current stage. We did say we will actually update you in terms of our guidance when we announce our year end results for 2014 in February. At that stage, the team would be better informed in terms of what consents we have got and where we are taking the production going out in the future. But initial indications based on the approval of the plan, you have got to factor an element of quietening down of the mine with production coming in primarily from surface sources from just one particular surface source. But the numbers which you can safely put in is around $220 million for retrenchment costs for the full year as of the end of the last quarter that can be factored in and we did say as the production winds down, there is about $70 million to $80 million of working capital that needs to get paid up. But what you can see in the slide and unfortunately it might have missed everybody’s attention is the production has been improving at Obuasi in the last two quarters and the costs have been coming down. That has helped pull down the bleed rate and that always helps. But certainly, we won’t keep you waiting in patience beyond February of next year.

Thank you. Kane, UBS.

Hi. Good morning. Kane Slutzkin, UBS. Just Richard, on your net debt to EBITDA, what is sort of long-term target multiple? What are you sort of ideally comfortable with? And are you confident the sort of current measures you sort of got in place have been sort of reduced gearing levels?

So, I think if you look at our historical net debt and the net debt to EBITDA gearing levels, we have typically been below 1.5 times in terms of the net debt to EBITDA. So, I would say if we are looking at what is more comfortable, I think less than 1.5 times and from a net debt point of view, we would probably be looking more comfortable at $2 billion net debt rather than something close to $3 billion which is where we are currently.

Okay. So I mean, you are sort of getting some positive cash flow, but I mean that number has been pretty sticky. Just wondering what sort of measures outside of what you are doing now are you potentially looking at or will be looking at to sort of get that down, because it’s clearly been a headwind for you and you have just mentioned it now. So, yes, just interested to see how you think of that going forward?

So, I think the current measures will continue implementing and we are seeing benefit from the costs coming down. So, that will continue unabated and Ron continues to do his work with the team on that. Venkat has mentioned and it’s one of the key focuses in the strategy is to also continue to look at the portfolio. So, that will continue as well in terms of ensuring we have a portfolio that can generate sustainable free cash. I don’t know if you want to add to that?

I think in reality we have covered it and I don’t want to sort of keep going back to the same point. We continue to look at options in terms of how we can reduce the debt, but importantly, we are on a volatile gold price environment. So, what we want to have is adequate flexibility from a covenant point of view and a liquidity point of view was to do that. It just gives you time to look at all conceivable options.

Anyone else? Adrian, Standard Bank.

Good morning, gentlemen. Three questions if I may. Firstly, there was an article this morning in the Business Day concerning Goldfields they are non-compliant with 6093 of the MPRDA. Have you received anything similar from the DMR and does it pose a real risk to you? Second question around your corporate refinancing, you have opted for more flexible debt covenant ratio, is that going to be more expensive and then could you answer that in terms of interest charges in dollars per ounce? And then third question for Mike, you talked about Great Noligwa and now you are accessing it through Moab. Is that including ore tonnages and does that play say capacity constraint on Moab and what does that mean for PZ, Project Zaaiplaats if you were to go ahead with it? Thanks.

If I can pickup the first question, no, we haven’t received a letter. We can’t comment on Goldfields’ individual circumstances. We read the report the same time as you read it this morning. What we can comment though is that we have had certainly three audits by the department, one was as part of Moloto Solutions audit back in 2013 – at the end of ‘13. In addition to that, we had audits during May and also in August. And you would be able to pickup booklets out here, which shows what a stealthy commitment we have made, including our own self-assessment of the scorecards. In addition, as part of Mandela Day celebration, our Chairman went out to the production sites and the feedback we have had from the communities has been extremely positive. So we have not picked up any company negative nuisance. On the other hand, we have just had positive feedback come through from the communities in the ground and the department.

Then Adrian, on the looser covenant, the refinancing of the revolving credit facilities, that has actually come down in terms of cost, so we priced it more tightly than we had the previous facility. So that’s costing us less rather than more for slightly looser covenant. And your last question on interest costs, look we are paying around $250 million annually in interest cost, so call it $55 an ounce as a round number in terms of interest cost.

That cost coming down, is it just a function of the market?

Primarily a function of the market, so we were able to price more tightly as a result of that.

Adrian around the Great Noligwa and Moab Khotsong integration, do you remember that Moab was actually developed from Great Noligwa and it’s virtually one mine. So from an infrastructure point of view, it’s pretty easy to put the two mines together. The long-term plan which we will finish by the middle of next year is to have the rock and services coming out at Moab Khotsong as well and the barrels at Great Noligwa will really be able to go into care and maintenance, and obviously we will be able to remove a significant amount of cost. So the people are really going down at Moab Khotsong, by the middle of next year, we will have the rock coming out at Moab as well and be able to go into care and maintenance at Noligwa. The second part of the question is the effect in terms of capacity at Zaaiplaats. There is a number of ways you can access the Zaaiplaats ore body. At the previous presentations we have shown an option that accesses from Moab Khotsong, you can however access via Kopanang as well. We decided that we postponed the Zaaiplaats expansion we announced that I think, just over a year ago and we continue to look at options, which include the capacity constraints on whether and when we start the Zaaiplaats project. What’s complicating that is there is a nice resource developing directly below the Moab Khotsong ore body which we currently are drilling, which seems to have quite a lot of potential. We are just not sure of the scale or the depth. So, we need to consider whether it’s Zaaiplaats or whether we go deeper directly below Moab Khotsong. But I will firm up on that once we have done enough drilling to choose between the two projects.

Any numbers on the size of that resource potential?

No. it’s too early.

Thanks.

Anyone else?

Yeah. Sorry. Johann Steyn again, maybe Richard, what’s your next job going to be…?

You will have to watch this space.

Still within AngloGold?

I am going to take a little bit of time out to look at options. I am not rushing back into anything immediately.

Thanks.

Patrick Mann, Deutsche Bank.

Hi. Good morning. Just on the conversion of the plant to natural gas in Australia, is that funded by the provider and what sort of capital cost there in modifying the plant to run on 100% natural gas, if any?

If I can pick that up, broadly, the project involves a pipeline which steps off from the Murrin Murrin gas lateral and about 60 kilometers through the Sunrise Dam and then about another 220 after Tropicana. The project involves three elements. One is the pipeline of construction then through Australian pipeline association. And it involves no capital cost to AngloGold. And the capital costs and operating costs are paid through a transport fee during the – for the delivery of gas, so on a dollar per gigajoule basis for delivery to both Sunrise and Tropicana. The other element is the purchase of gas from the well head and that’s done on a gigajoule basis. And then the third element is the conversion of the existing power stations to gas. And that will be done through the IPP providers at each of the mines. So none of the conversion to gas involves any capital cost and it’s covered in operating cost. The net-net of that is about $25 to $30 an ounce for both of those mines. Importantly...

It would be in – sorry, go on Richard.

Importantly, converting to gas is a comparison to the current cost of power generation now. Converting to gas will be in Australian dollar terms to a proportion of CPI takes out any volatility in regard to diesel price movements or exchange rate movements on fuel for the long-term. It also removes about 50% of our trucking of fuel out to both of those operations.

There will be an impact on the balance sheet from an accounting point of view. Richard will elaborate on that.

Yes. So, just when that facility is handed over from an accounting treatment point of view, about $80 million will come through as capital in terms of the treatment. So, whenever that – so I think that’s in 2016 or – so just to flag an $80 million capital impact.

Is that non-cash?

Yes, effectively you gross up both sites and you amortize one and the debt comes down.

Great, thanks.

Similar to the lease of this building.