CFO’s report

Delivered on consistent production and cost guidance amidst continuing adverse market conditions. Our focus remains on strengthening the balance sheet in the medium term and creating a prudent buffer for volatility.


  • Production of 4.436Moz – up 8% year-on-year
  • Total cash costs of $787/oz – 5% lower year-on-year
  • All-in sustaining cost of $1,026/oz – 13% lower year-on-year
  • Capital expenditure of $1.2bn – 39% below 2013
  • Exploration and evaluation costs $144m – 44% lower year-on-year
  • Adjusted EBITDA stable at $1,665m despite a 10% drop in gold price
  • Self-help measures progressed to deleverage in medium term
  • Free cash outflow shows strong improvement to $112m from $1,058m


The year under review was marked by a further fall in the gold price, which decreased by $137/oz or 10% over the course of the year. The impact of the drop in the gold price has been proactively managed and the 2014 results reflect consistent operational and cost performance. It is the second consecutive year of growth in gold production, with an overall 8% increase being recorded year-on-year. At the same time, all-in sustaining costs per ounce improved by 13% year-on-year.

Significantly lower year-on-year total cash and all-in sustaining costs were achieved through the combination of production and overall cost improvements reflecting the first full year of operations at our two new low-cost mines (Kibali and Tropicana). In addition, our efforts to tackle costs across a broad front underpinned the improvement in margins, through the Project 500 (P500) initiative, reductions in direct operating costs, corporate overheads and exploration costs, and strict capital allocation.

We continue to focus on ‘self-help measures’ in three areas:

  • Review of the asset portfolio while actively seeking joint-venture partnerships in Colombia and at Obuasi as well as pursuing the potential sale or joint venture of an operating asset
  • Cash flow improvements through the optimisation of business plans and consolidation of regional hubs
  • Leverage to exploit weaker currencies, and the consequently higher price in terms of these currencies, and lower fuel prices.

One of our five core strategic focus areas is to ‘ensure financial flexibility’ which means structuring our balance sheet to allow us to meet our core funding requirements and to provide a reasonable buffer for gold price volatility as well as other adverse unforeseen events. To ensure continued flexibility in the debt maturities schedule, refinancing of the group’s revolving credit facilities (RCFs) was completed mid-year. The new $1bn RCF and A$500m RCF were agreed during July 2014 for a further five-year period. In addition, a looser financial covenant was concluded, with the net debt to adjusted EBITDA covenant at 3.5 times (previously 3 times), with one six month period waiver of up to 4.5 times, subject to certain conditions. The $ and A$ RCFs have also been priced tightly, to reflect the current financial market conditions. The looser covenant is also applicable to the ZAR RCF.

AngloGold Ashanti’s credit rating was reviewed by both Moody’s Investor Service and Standard and Poor’s (S&P), to Baa3 with a negative outlook and BB+ with a negative outlook, respectively. The Moody’s rating places the company at the lowest level of investment credit grade and S&P has the company at the top level of sub-investment credit grade. These ratings remained unchanged.

The group’s balance sheet is highly geared and efficiently structured and the debt has longdated maturities. Apart from the R750m bond maturing in 2016 and the R1.5bn RCF which matures in December 2018, the earliest international bond maturity date is in April 2020. The high-yield bond ($1.25bn: 8.5%) issuers’ call can only be exercised from July 2016 onwards, at the group’s discretion, allowing sufficient time for the group to explore any ‘self-help measures’ ahead of any options around refinancing or early redemption being assessed. The conclusion of a potential asset sale and joint venture partnerships should help the group determine whether or not to exercise the high yield bond call option.

Debt typeInternational debt facilities US$m*Maturity dateBase currency
Jul 2019AUD
Jul 2019USD
Dec 2018ZAR
5.375% bond
Apr 2020USD
8.500% bond
Jul 2020USD
5.125% bond
Aug 2022USD
6.50% bond
Apr 2040USD
  • Drawn
  • Facility amount

* Excludes DMTNP and local bond amounts outstanding at 31 December of $80m, ZAR calculated at R11.6/$, A$ facility calculated at A$0.8/$.

Our medium term leverage target is 1.5 times net debt to adjusted EBITDA. We would like to reduce our debt by approximately $1bn to take us to our comfort threshold which would include a reasonable buffer for volatility, including the gold price risk and production disruptions.

Our aim is to achieve this debt reduction through a variety of 'self-help measures' as elaborated above. Importantly we are under no external pressure to achieve this. This is an aspirational target that can be achieved over the next few years.

Delivery against 2014 financial objectives

Continue to maintain sufficient balance sheet liquidity and flexibility in a lower gold price environment

The temporary relaxation of the banking covenant of 4.5 times net debt to adjusted EBITDA expired with the June 2014 testing period, while the $ and A$ revolving credit facilities are set to mature within the next five-year period. The group therefore moved prudently and proactively to manage its financial flexibility and steps taken in this regard included:

  • Successful re-financing in July 2014 of the group’s RCFs for another five years, including the $1bn RCF (which was due to mature in July 2017) and the A$500m RCF (replacing the previous A$600m RCF which was due to mature in December 2015)
  • Improved financial flexibility – the new banking covenant of 3.5 times – previously 3 times net debt to adjusted EBITDA (with a one six month period waiver of up to 4.5 times subject to certain conditions) – is applicable to all of the group’s RCFs. This adds further flexibility to the balance sheet liquidity especially in the light of the ongoing gold price volatility and prevailing labour uncertainty in South Africa
  • Managed net debt levels in 2014 – the group’s net debt to adjusted EBITDA covenant ratio was 1.88 times at year end and was in line with the 1.86 of a year earlier, despite the reduction in the gold price, additional funding required for the Obuasi redundancies and a loan to Rand Refinery. Subsequent to year end, external audit procedures confirmed that the gold gap at Rand Refinery has not increased. Therefore any additional loan funding requirements from shareholders are not envisaged at this stage

Maintaining our focus on the management of costs to deliver competitive all-in sustaining and all-in costs and continuing to target sustainable cash generation

Management’s initiatives to deliver on competitive all-in sustaining and all-in costs included:

  • The initial stated purpose of P500 was to deliver specific targeted cost reductions. These have now been achieved and exceeded, and are reconciled with the financial reporting systems
  • The organisational redesign was completed and corporate costs as well as exploration costs were significantly reduced from 2013’s levels
  • Capital expenditure has reduced by 39% compared to 2013 reflecting project completion and capital prioritisation
  • We delivered free cash flow of $142m for 2014 which excludes the proceeds of $105m from the sale of Navachab, despite a 10% drop in the gold price compared to 2013, before taking into account the once-off non-operational cash outflows relating to the Obuasi redundancy payments and the Rand Refinery loan funding

Our 2015 objectives

Looking ahead to 2015, the key financial objectives are to:

  • Continue to focus on self-help measures (including the potential sale or joint venture of an operating asset) to deleverage the balance sheet in order to maintain sufficient liquidity and flexibility in a lower gold price environment
  • Focus on financial and project risk mitigation by seeking joint venture partners for Colombia and Obuasi
  • Review the asset portfolio with a view to rebalancing the portfolio with more-profitable ounces
  • Maintain our focus on cost and capital discipline to deliver competitive all-in sustaining costs and all-in costs
  • Continue to target sustainable cash generation. For 2015, significant cost reductions have been included in the annual business plans

We are expecting our debt levels to remain steady at the end of 2015, taking into account our estimated production, planned expenditures at budgeted exchange rates and commodity and fuel price assumptions, although it may increase slightly in the first half due to free cash flow profiling in South Africa from production and capital expenditure fluctuations. This excludes any proceeds from asset sales or joint venture partnerships that we may consider pursuing or the impact of any operational or other disruptions.

In addition to a strong leverage to the gold price, our group’s operations also leveraged to both the weaker average global currencies and the lower average oil price, which benefits our cash costs. In 2014, the drop in the gold price was partially offset by weaker global currencies and the lower average oil price. In addition, the combination of just over 70% of the group’s adjusted EBITDA from our international operations emphasises our geographical diversification and resilience to unforseen production disruptions in the South African region.

Events subsequent to year end

AngloGold Ashanti currently considers joint venturing or selling of its interest in the CC&V mine

The company has initiated a plan to identify a joint venture partner or a purchaser in respect of its interest in the CC&V mine in Colorado in the United States for full value. The CC&V gold mine is a surface mining operation which provides oxidised ore to a crusher and valley leach facility, one of the largest in the world. It is included in the Americas reporting segment and was acquired by AngloGold Ashanti in 1999. The mine produced 211,000 ounces of gold in 2014. There can be no assurance, however, that a sale and purchase agreement for this transaction will be entered into or that any sales transaction will be completed.

AngloGold Ashanti currently considers selling its interests in Société d’Exploitation des Mines d’Or de Sadiola S.A. (Sadiola) and Société d’Exploitation des Mines d’Or de Yatela S.A. (Yatela)

The company currently intends to dispose of its 41% stake in Sadiola and its 40% stake in Yatela. The mines are both situated in western Mali and are included in the Continental Africa reporting segment. The Sadiola and Yatela mines produced 85,000 and 11,000 attributable ounces of gold, respectively, in 2014.

Management was approached by a potential buyer for both mines who meets management’s qualifying criteria and has asked for a binding bid. There can be no assurance, however, that a sale and purchase agreement for these transactions will be entered into or that any sales transactions will be completed.


I took over the role of Chief Financial Officer at AngloGold Ashanti with effect from 1 October 2014. The transition from my predecessor Richard Duffy was seamless, thanks to a strong and diligent financial team in the group. Our team, through their understanding of the challenging economic and financial pressures, has helped us proactively manage the financial position of the company. In addition, we have been able to deliver quality financial information to our stakeholders which reflects our objectives and values for long-term success. I would like to thank our strong and enthusiastic financial team in the group for their ongoing support and look forward to the year ahead.

Best regards

Christine Ramon
Chief Financial Officer
19 March 2015

CEO's review Audit and Risk chairman's letter