Capital expenditure during the three months ended March 31, 2003 was $58 million compared with $51
million in the same period of 2002, a $7 million, or 14 percent, increase in capital expenditure. Compared
with the three months ended December 31, 2002, capital expenditures were approximately one third lower in
the first quarter of 2003.
Commenting on the results for the three months ended March 31, 2003, Russell Edey, AngloGold's
Chairman, and Bobby Godsell, AngloGold's CEO said: "The first quarter of 2003 was notable for operating
results which were on target but lower than the two previous quarters. Lower production reflects a return to
more normal grades at Morila and lower grades at the Great Noligwa mine. The stronger local currencies in
seven of the eight countries in which we operate, in relation to the US dollar, the currency in which we sell
our product, has had a significant negative impact on costs, margins and earnings. These effects were at
least partially offset by an increased average gold price during the period.
Looking ahead to the rest of this year, we anticipate that the currencies in which our costs are predominantly
denominated, particularly the South African rand will maintain their strength in relation to the US dollar for the
remainder of the year and have revised our planning assumptions accordingly. We expect AngloGold's
earnings for the June quarter to remain under pressure as a result of the exchange rate together with lower
grades and mining volume. We do, however, anticipate a gradual recovery by the fourth quarter. "
Financial review
Revenues from product sales and other income increased from $381 million in the three months ended
March 31, 2002 to $484 million in the same period of 2003, a 27 percent increase. This was primarily due to
the increase in the gold price in 2003 when compared with 2002 and, to a lesser extent, higher production in
2003 compared to 2002. The average spot price of gold was $352 per ounce during the three months ended
March 31, 2003, $61 per ounce, or 21 percent, higher than $291 per ounce, the average spot price in the first
three months of 2002. When compared with the quarter ended December 31, 2002, revenues from product
sales and other income were lower (by 6 percent from $513 million) in the first quarter of 2003 mainly due to
the 9 percent decrease in gold production from the quarter ended December 31, 2002 due to lower grades.
Production costs increased from $196 million in the three months ended March 31, 2002 to $287 million in
the same period of 2003, which represents a $91 million or 46 percent increase. Higher production costs
were mainly the result of substantially higher production costs at the South African operations of $182 million
in the three months ended March 31, 2003, compared with $111 million in the same period of 2002. This
increase of $71 million was primarily due to the strengthening of the South African rand relative to the US
dollar. Production costs also increased (by 17 percent from $245 million) when compared with the quarter
ended December 31, 2002 mainly for the same reasons as discussed above.
Depreciation, depletion and amortization also increased, from $67 million in the three months ended March
31, 2002 to $75 million in the same period of 2003, a 12 percent increase. This increase can be attributed to
the South American operations where depreciation, depletion and amortization expense amounted to $14
million in the three months ended March 31, 2003, compared to $10 million for the same period in 2002.
This increase of $4 million was mainly due to the acquisition during the third quarter of 2002 of an additional
46.25 percent interest in the Cerro Vanguardia mine located in Argentina.
General and administrative expenses increased from $5 million in the three months ended March 31, 2002 to
$10 million in the same period of 2003, mainly as a result of annual salary increments, approved scope
changes relating to information technology infrastructure upgrades, and additional and previously vacant
positions filled at the corporate office in South Africa. The strengthening of the South African rand relative to
the US dollar also negatively impacted on general and administrative expenses as the majority of these costs
are South African rand denominated.
Interest expense decreased from $12 million recorded in the three months ended March 31, 2002 to $8
million in the same period of 2003, a 33 percent decrease. The decrease in interest expense from 2002 was
due to both lower prevailing LIBOR rates to which most of AngloGold's debt is pegged and the refinancing by
AngloGold of its debt with lower interest rate facilities.
A gain on derivatives of $23 million was recorded in the three months ended March 31, 2003 compared with
a loss of $23 million incurred in the same period of 2002.
In the three months ended March 31, 2003, income before equity income and income tax amounted to $101
million compared to $50 million in the same period of 2002.
Deferred income and mining tax expense increased from a net tax benefit of $41 million recorded in the first
three months of 2002 which included tax credits of $50 million relating to the disposal of the Free State
assets, to a net tax charge of $39 million in the same period of 2003. The Free state assets were disposed of
at book value, effective January 1, 2002 to Harmony Gold Mining Company Limited and African Rainbow
Minerals Gold Limited ("ARM").
Net income applicable to common stockholders decreased by 34 percent to $58 million in the three months
ended March 31, 2003 from $88 million recorded in the same period of 2002 and by 37 percent compared to
$92 million for the three months ended December 31, 2002.
Net cash provided by operating activities during the three months ended March 31, 2003 amounted to $162
million compared with $157 million in the same period of 2002.
In the three months ended March 31, 2003, AngloGold used $58 million comprising mainly of payments for
capital expenditure and $187 million cash in investing and financing activities, respectively. Cash used in
financing activities included dividends paid of $185 million. A final dividend of 675 South African cents per
ordinary share for the year ended December 31, 2002 was paid to registered shareholders on February 28,
2003 and a dividend of 82.12 US cents per each American Depositary Share (ADS) was paid to holders of
ADSs on March 10, 2003. Each ADS represents one ordinary share. The effect of exchange rate changes
on cash was a positive $10 million during the three months ended March 31, 2003.
As a result of the factors discussed above, AngloGold had cash and cash equivalents of $340 million at
March 31, 2003 compared with $413 million at December 31, 2002, representing a decrease in cash and
cash equivalents of $73 million from 2002. At March 31, 2003, AngloGold had available but undrawn a total
of $301 million under its credit facilities.
During 2003, approximately $89 million of AngloGold's debt is scheduled to mature. AngloGold expects to
finance the repayment of debt scheduled to mature in 2003 from existing cash resources, cash generated
from future operations and its present and future debt facilities.
Gold market
During the first quarter of 2003, the gold price appeared to have been influenced most directly by the
evolving international conflict over Iraq, and to a lesser degree, by movements from time to time in the value
of the US dollar. The correlation observed by AngloGold between trading activity in gold futures on the New
York Comex and the spot price of gold became even more direct.
Speculators were reported to continue to increase their long positions in gold during the first weeks of 2003
as international conflict over Iraq continued to escalate. As a result, Comex open positions were reported to
reach a peak net long position in gold in early February 2003, equivalent to just over 14 million ounces. In
AngloGold's view, the removal of uncertainty about US intentions in Iraq saw that long position reverse
steadily from early February 2003, starting from the occasion of US Secretary of State Colin Powell's address
to the United Nations General Assembly on February 5, 2003, which saw the spot gold price fall by some $20
per ounce in the following week. The net long position on Comex was reported to have fallen to some 5.2
million ounces in early April 2003, taking the gold price down with it to a low of $318 per ounce. In
AngloGold's view, this level of net long positions is close to what has been a core net long position on that
exchange for the past 18 months. If this core position does not change, AngloGold expects the market to
settle around these levels, with likely price recovery on the upside.
As far as the impact of the conflict in Iraq is concerned, it would seem to AngloGold that this has now passed
through the gold market, and that the market is back to a more or less neutral state in regard to Iraq.
AngloGold believes that, in the medium term, however, important economic factors will continue to favor gold.
Most important of these appear to be the health of the US dollar and the state of major equity markets. In
AngloGold's view, the US economy will remain vulnerable, and the US dollar is likely to continue to lose value
in the medium term; only the weak condition of the European and Japanese economies seems to have
delayed this correction. Aside from the price spike in February 2003 induced by heightened international
tension over Iraq, the gold price appeared to have continued to move in line with the weakening of the US
dollar and should encourage investor interest in gold.
The physical market for the metal appears to remain weak, and 2002 was a disappointing year for gold
demand in a number of sectors. Indian imports of gold were reported to be down by over 20 percent for 2002
by comparison with 2001. Although gold demand in India was reported to be strong in late 2002, this
strength does not appear to have carried through to 2003. However, AngloGold believes that there is reason
to expect an improvement in Indian demand as 2003 progresses, as the current lower spot gold prices
should encourage buying, and the balance of this year contains a high proportion of propitious dates for
marriage in the Hindu calendar. AngloGold believes that physical gold offtake in the Middle East remains
fragile due to the conflict in Iraq, and unfavorable economic circumstances in the developed economies
generally have not helped gold offtake during the past year. All in all, in AngloGold's view, this has not been
an encouraging period for physical demand, and underlies the need for some effort to support and promote
the metal in the important markets for gold.
The spot price opened at $348 per ounce in January 2003 and closed at $337 per ounce in March 2003,
compared with $279 per ounce in January 2002 and $303 per ounce in March 2002. The average spot price
of gold was $352 per ounce during the three months ended March 31, 2003, $61 per ounce, or 21 percent,
higher than $291 per ounce, the average spot price in the first three months of 2002. During the first three
months of 2003, the highest spot price of gold was $389 per ounce compared to a high of $308 per ounce for
the same period in 2002. The lowest spot price of gold was $326 per ounce during the three months ended
March 31, 2003, 18 percent higher than $277 per ounce, the lowest spot price of gold for the same period
ended March 31, 2002.
Hedging overview
AngloGold manages its revenue risk through an actively directed forward sales program. The board of
directors has given management a mandate to sell forward no more than 50 percent of five years' production
spread over a ten-year period. AngloGold has seldom been close to this limit and then mainly through
acquisitions and debt financing of new assets where the terms of loans have required that a portion of
production from these assets is sold forward.
At March 31, 2003, the net hedge position of AngloGold was at 9.34 million ounces, almost 1 million ounces
lower than the hedge position at December 31, 2002 and 28 percent lower than the net hedge position at
12.90 million ounces as at March 31, 2002. The marked-to market-valuation of this position at March 31,
2003 was negative $251.5 million. These figures reflect an ongoing reduction in overall forward price
commitments of AngloGold. For the remaining period of 2003, AngloGold has outright forward price
commitments in respect of 1.05 million ounces or some 23 percent of the forecast production of 2003.
AngloGold's net delta open hedge position at March 31, 2003
At March 31, 2003, AngloGold had outstanding the following forward-pricing commitments against future
production. The total net delta tonnage of the hedge on this date was 9.34 million ounces (at December 31,
2002: 10.28 million ounces). The delta position indicated reflects the nominal amount of the option multiplied
by the mathematical probability of the option being exercised. This is calculated using the Black-Scholes
option formula with the ruling market prices, interest rates and volatilities as at March 31, 2003.
The marked-to-market value of all hedge transactions making up the hedge positions was a negative
US$251.5 million at March 31, 2003 (at December 31, 2002: negative US$446.6 million). These values were
based on a gold price of US$336.75 per ounce, exchange rates of R/US$7.85 and A$/US$0.602 and the
prevailing market interest rates and volatilities at the time.
At April 29, 2003, the marked-to-market value of the hedge book was a negative US$154.9 million based on
a gold price of US$332.75 per ounce and exchange rates of R/US$7.2550 and A$/US$0.6183 and the
prevailing market interest rates and volatilities at the time.
These marked-to-market valuations are not predictive of the future value of the hedge position, or of the
future impact on the revenue, of AngloGold. The valuation represents the cost of buying all hedge contracts
at the time of valuation, at market prices and rates available at the time.
AngloGold's hedge position as at March 31, 2003
The following table indicates AngloGold's gold hedge position at a weighted average settlement price as at March 31, 2003
(references in the table to "$" are to the US dollar and references to "A$" are to the Australian dollar):
Year 2003 2004 2005 2006 2007
7,899 16,811 26,576 19,862 18,974 25,878
$302 $311 $324 $333 $337 $355 $331
$350 $334 $322 $329 $336 $363 $347
9,638 4,696 10,811 9,562 9,327 35,319 79,353
R79,777 R94,277 R116,891 R108,426 R114,915 R119,580 R100,621
oz R100,545 R115,284 R131,944 R132,647 R173,119 R209,288 R147,714
2,285 1,604 1,747 2,110 721 3,625 12,092
A$523 A$544 A$674 A$652 A$623 A$639 A$607
883 2,990 1,981 6,633 12,869
38,242 38,073 54,157 44,674 40,114 75,264 290,525
1,229,518 1,224,062 1,741,189 1,436,314 1,289,706 2,419,789 9,340,579
The following table indicates the group's currency hedge position at March 31, 2003
Year 2003 2004 2005 2006 2007
The Delta position indicated above reflects the nominal amount of the option multiplied by the mathematical probability of the
option being exercised. This is calculated using the Black-Scholes option formula with the ruling market prices, interest rates
and volatilities as at March 31, 2003.
Recent developments
During the three months ended March 31, 2003 AngloGold made the following announcements:
On March 13, 2003, AngloGold announced that its wholly-owned subsidiary, AngloGold Australia Limited had
signed a new joint venture agreement with Striker Resources NL and De Beers Australia Exploration Limited,
to undertake further exploration work covering an area in excess of 17,000 square kilometres in the east
Kimberley region of Western Australia. An expenditure of $4.61 million (A$7.75 million) entitles AngloGold to
a 51 percent return on income.
On April 7, 2003, the Jerritt Canyon Joint Venture partners, AngloGold and Meridian Gold, gave notice of the
termination of agreement, following a release on February 27, 2003, in which AngloGold announced that it
had entered into a purchase and sale agreement with Queenstake Resources USA Inc. for its interest in the
Jerritt Canyon Joint Venture. Queenstake failed to meets its obligations under the agreement prior to the
scheduled closing on March 31, 2003.
On April 8, 2003, AngloGold announced that it had reached agreement with Helix Resources Limited, for the
sale of its interests in the Gawler Craton and Tarcoola Joint Ventures in South Australia. Under the terms of
the agreement, consideration will comprise a $0.9 million (A$1.5 million) cash payment, 2.5 million fully-paid
Helix shares issued at A$0.20 per share, and 2.5 million Helix options of A$0.25 per option, exercisable on or
before November 30, 2003. The offer is subject to various conditions being met.
On April 30, 2003, AngloGold announced that at the company's annual general meeting held on April 30,
2003, all the ordinary and special resolutions, as specified in the notice of meeting dated March 27, 2003,
were passed by the requisite majority of shareholders. The special resolutions will be lodged with the
Registrar of Companies for registration.
Retiring Director
As previously disclosed, Dr. V K Fung, one of the company's directors who retired by rotation at the annual
general meeting held on April 30, 2003, did not wish to offer himself for re-election. As no new director was
appointed at the annual general meeting, the company's board of directors now comprises 14 directors, four
executive directors and thirteen non-executive directors, three of whom are alternates. Of the 10 non-
executive directors, five non-executive directors are affiliated with the company's parent, Anglo American plc,
and five are independent of management and free from any business relationship which could materially
interfere with the exercise of their independent judgment.
Draft Mineral and Petroleum Royalty Bill
Following the publication by the South African Government of the draft Mineral and Petroleum Royalty Bill, in
March 2003, which proposes prospecting, mining and mineral rights to be subject to a State royalty
calculated as 3 percent of gross revenue in the case of gold, AngloGold is preparing its representation to the
Government. While AngloGold accept the general proposition of a charge for the extraction of the country's
non-renewable mineral resources, AngloGold believe that this should be done in a way that does not cause
the already high mining tax burden in South Africa to make mining here internationally uncompetitive. In
particular, AngloGold favor a profit-based system of calculating royalties, rather than the currently proposed
revenue-based approach and AngloGold will also be advocating a review of the overall tax burden borne by
the gold mining industry, including the proposed royalties, to ensure the continued competitiveness of the
sector. AngloGold will be pursuing these and other concerns in the open debate, which is anticipated to take
place in the near future.
AngloGold Fund supports Ginsberg Primary School in the Eastern Cape
AngloGold's social investment vehicle in South Africa is The AngloGold Fund which makes grants to the
value of some $1.8 million each year. In evaluating the hundreds of proposals that come its way, the Fund
looks for community-initiated projects, believing that development works best where people are empowered
to work towards their own advancement, and for projects that contribute to the longer-term benefit of the
region in which they are situated. Ginsberg Primary School meets these criteria admirably.
An independent school situated in Ginsberg, King William's Town, Ginsberg Primary is a remarkable
institution. In the midst of an impoverished community, it is providing superior education and the reputation
of the school is such that each year many applicants have to be turned away. The principal, Henry Kachoka,
explains the Ginsberg philosophy: "We want our learners to be given a holistic training that attends to their
physical, mental and spiritual development and that will enable them to lead useful lives in society."
While pupils are given a sound grounding in their school subjects by a staff of well-qualified and dedicated
teachers, they can also sign on for a range of extra-mural activities music, needlework, art, technology and
gardening.
What makes the achievements of Ginsberg Primary so noteworthy is that the school embarked on its
enrichment programme under the most difficult of circumstances. For instance, when needlework was
introduced in 2000, there were just two sewing machines with teachers having to manage in crowded
classrooms. Music was started in 2001 with one violin and one piano in the principal's office.
But all of that has changed for Ginsberg Primary now boasts a new double-storey classroom block, built with
a grant of $0.1 million from The AngloGold Fund. The block comprises four regular classrooms and four
"special" classrooms a science laboratory, a computer room, a music room and a needlework room, all fully
Mr Kachoka commented: "The new building is a beacon of hope to those of us involved in teaching here.
Our learners are being given the privilege of an education that they wouldn't otherwise get in this part of the
And it is not only the pupils of the school who will benefit from the additional facilities. For a modest fee,
members of the community will be able to access these in the afternoons when staff members will be on
The township of Ginsberg is the birthplace and final resting place of Black Consciousness leader Steve Biko.
It is certain that he would have been proud of the achievements of the principal and staff of Ginsberg
Primary, and of the community in which a school of this calibre has flourished.
Forward-looking statements
Except for historical information, there may be matters discussed in this report of financial and operating
performance that are forward-looking statements. In particular, the statements made under "Outlook for
2003" regarding AngloGold's operating and financial performance and under "Gold market" regarding the
future performance of the gold market are forward looking statements. Any such statement is only a
prediction and actual results, costs or events may differ materially. For a discussion of important factors
including, but not limited to, development of AngloGold's business, the economic outlook in the gold industry,
expectations regarding gold prices and production, and other factors which could cause actual results, costs
and events to differ materially from such forward-looking statements, refer to AngloGold's annual report on
Form 20-F for the year ended December 31, 2002 which was filed with the United States Securities and
Exchange Commission (SEC) on April 7, 2003.
Condensed Consolidated Financial Information for the three months ended March 31, 2003
Basis of presentation
The unaudited condensed consolidated financial information of AngloGold Limited included in this review
have been prepared in accordance with accounting principles generally accepted in the United States ("US
GAAP"). The balance sheet information at December 31, 2002, has been derived from AngloGold's annual
report on Form 20-F for the year ended December 31, 2002, which was filed with the SEC on April 7, 2003.
Dividends paid
A final dividend of 675 South African cents per ordinary share for the year ended December 31, 2002 was
paid to registered shareholders on February 28, 2003 and a dividend of 82.12 US cents per each American
Depositary Share (ADS) was paid to holders of ADSs on March 10, 2003. Each ADS represents one
ordinary share.
CONDENSED CONSOLIDATED INCOME STATEMENT
Prepared in accordance with US GAAP
Three months ended March 31,
(in US Dollars, millions, except for share data)
Interest, dividends and other income
Related party transactions
General and administrative
Depreciation, depletion and amortization
Employment severance costs
(Gain)/loss on derivatives
Income before equity income and income tax
Equity income in affiliates
Income before income tax provision
Deferred income and mining tax (expensed)/benefit
Income before minority interest
Net income applicable to common stockholders
Basic earnings per common share : (cents)
Weighted average number of common shares used in computation
Dividend per common share (cents)
ANGLOGOLD LIMITED
CONDENSED CONSOLIDATED BALANCE SHEET
Prepared in accordance with US GAAP
(in US Dollars, millions)
Cash and cash equivalents
Property, plant and equipment
Liabilities and Stockholders' equity
Accounts payables and accrued liabilities
Income and mining tax payable
Deferred income and mining tax
Provision for environmental rehabilitation
Other accrued liabilities
Provision for post-retirement medical benefits
Commitments and contingencies
Share capital and reserves
Stock issued 2003 222,763,754 (2002 222,622,022)
Additional paid in capital
Accumulated other comprehensive income
Total liabilities and stockholders' equity
ANGLOGOLD LIMITED
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Prepared in accordance with US GAAP
Three months ended March 31,
(in US Dollars, millions)
Net cash provided by operating activities
Income after tax and minority interest
Reconciled to net cash provided by operations:
Depreciation, depletion and amortization
Net increase in provision for environmental
rehabilitation and post-retirement medical
Deferred income and mining tax
Effect of changes in operating working capital items:
Accounts payable and accrued liabilities
Net cash (used)/generated in investing activities
Increase in non-current investments
Additions to property, plant and equipment
Proceeds on sale of investments
Loans receivable advanced
Net cash used in financing activities
Decrease in short-term debt
Increase in long-term debt
Net (decrease)/increase in cash and cash equivalents
Effect of exchange rate changes on cash
Cash and cash equivalents - December 31,
Cash and cash equivalents March 31,
