SECURITIES AND EXCHANGE COMMISSION
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
Form 6-K dated July 31, 2003
This Report on Form 6-K shall be incorporated by reference in
our Registration Statement on Form F-3 as amended (File No. 333-101891)
to the extent not superseded by documents or reports subsequently filed by us under the Securities Act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
(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 
Form 40-F 
(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 No
(If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82-_____)
Enclosure[s]: AngloGold unaudited condensed consolidated financial
statements as of June 30, 2003 and December 31, 2002 and for each of the six
month periods ended June 30, 2003 and 2002, prepared in accordance with
U.S. GAAP, and related management's discussion and analysis of financial
condition and results of operations.
INTERIM REPORT FOR THE SIX MONTHS ENDED JUNE 30, 2003
Condensed consolidated financial statements
CONDENSED CONSOLIDATED INCOME STATEMENT
Prepared in accordance with US GAAP
Six months ended June 30,
(in US Dollars, millions, except for share data)
Interest, dividends and other
Related party transactions
General and administrative
Depreciation, depletion and amortization
Impairment of assets (see note E)
Accretion expense (see note D)
Employment severance costs
(Profit)/loss on sale of assets (see note F)
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
Income before cumulative effect of accounting change
Cumulative effect of accounting change (see note D)
Net income applicable to common stockholders
Basic earnings per common share : (cents)
Before cumulative effect of accounting change
Cumulative effect of accounting change
Net income - applicable to common stockholders
Diluted earnings per common share : (cents)
Before cumulative effect of accounting change
Cumulative effect of accounting change
Net income applicable to common stockholders
Weighted average number of common shares used in computation
Dividend per common share (cents)
CONDENSED CONSOLIDATED BALANCE SHEET
Prepared in accordance with US GAAP
(in US Dollars, millions)
Cash and cash equivalents
Property, plant and equipment
Materials on the leach pad (see note B)
Liabilities and Stockholders' equity
Accounts payable 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 - 222,785,154 (2002 - 222,622,022)
Additional paid in capital
Accumulated other comprehensive income (see note J)
Total liabilities and stockholders' equity
Certain amounts have been reclassified to conform with the current period presentation.
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Prepared in accordance with US GAAP
Six months ended June 30,
(in US Dollars, millions)
Net cash provided by operating activities
Income before cumulative effect of accounting change
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 mining assets
Proceeds on sale of investments
Cash received as part of disposal
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 - January 1,
Cash and cash equivalents - June 30,
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE
30, 2003
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 complete 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 six-month period ended June
30, 2003 are not necessarily indicative of the results that may be expected for the year ending
December 31, 2003. The balance sheet at December 31, 2002 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, 2002.
(in US Dollars, millions)
The components of inventory consists of the following :
Uranium oxide and sulfuric acid
Less: Long-term portion relating to heap leach inventory
Long-term portion relating to heap leach inventory reclassified as materials on the leach pad.
Note C. Deferred stripping costs
Movements in the deferred stripping costs balance were as follows:
Deferred stripping costs are classified as a component of Property, plant and equipment and are
considered to be insignificant to the balance sheet on a cumulative basis and the amounts
deferred or amortized are included in production costs in the condensed consolidated statements
of income for all periods presented.
Note D. Accounting change
The Company has adopted SFAS143 "Accounting for Asset Retirement Obligations (AROs)" with
effect from 1 January 2003 as follows:
The statement provides accounting and reporting guidance for legal obligations associated with
the retirement of long-lived assets that result from the acquisition, construction or normal
operations of long-lived assets. SFAS143 applies to legal obligations associated with the
retirement of long-lived assets that result from the acquisition, construction and/or the normal
operation of a long-lived asset.
Under SFAS143 the fair value of a liability for an asset retirement obligation is recorded in the
period in which it is incurred. When the liability is initially recorded, the cost is capitalized by
increasing the carrying amount of the related long-lived asset. Over time, the liability is increased
to reflect an interest element (accretion) considered in its initial measurement at fair value, and
the capitalized cost is amortized over the useful life of the related asset. Upon settlement of the
liability, a gain or loss will be recorded if the actual cost incurred is different than the liability
recorded.
The adoption of SFAS143 on January 1, 2003 resulted in an increase in Property, plant and
equipment of $12 million, an increase in Provision for environmental rehabilitation of $6 million
and a cumulative effect of adoption which increased net income and stockholder's equity by $6
million. No increase in Deferred income and mining tax was recorded upon the adoption of
SFAS143.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30,
2003...continued
Prepared in accordance with US GAAP
Note D. Accounting change (continued)
The following is a reconciliation of the total liabilities for asset retirement obligations:
Balance as at December 31, 2002
Impact of adoption of SFAS143
Balance as at June 30, 2003
Includes $21 million relating to the disposal of Jerritt Canyon to Queenstake Resources USA Inc.
effective June 30, 2003. (Refer to Note F)
Upon adoption of SFAS143, the total amount of recognized liabilities for asset retirement obligations
was $146 million. These liabilities mainly relate to obligations at the Group's active and inactive
mines to perform reclamation and remediation activities in order to meet applicable existing
environmental laws and regulations. Using the principles of SFAS143, current information,
assumptions and interest rates, the comparative amount of these total liabilities would have been
$142 million at December 31, 2001.
There were no assets that were legally restricted for purposes of settling asset retirement obligations
as at June 30, 2003.
The results for the six months ended June 30, 2002 on an historical basis, do not reflect the
provisions of SFAS143. Had AngloGold adopted SFAS143 on January 1, 2002, the historical net
income (loss) and basic and diluted net income (loss) per common share before cumulative effect of
accounting change, would have been changed to the adjusted amounts indicated below:
Six Months Ended June 30, 2002
(in US Dollars, millions, except for share data)
As reported historical basis
Less: Impact on earnings before tax
Note E. Impairment of assets
In the six months ended June 30, 2003 the Company recorded an impairment of assets of $12
million relating to the abandonment of exploration activities in the Australian region. No impairment
of assets was recorded in the six months ended June 2002.
Note F. (Profit)/loss on sale of assets
Following the sale of its 70 percent interest in the Jerritt Canyon Joint Venture in North America to
Queenstake Resources USA Inc. effective June 30, 2003, AngloGold recorded a profit on disposal of
$6 million. The profit had no tax effect. On May 23, 2003, AngloGold announced that it had signed
an agreement to sell its wholly owned Amapari Project to Minerao Pedra Branca do Amapari. The
Amapari project is located in the State of Amap, North Brazil. AngloGold realized a loss of $3
million (before taxation expense of $1 million) on the sale.
As disclosed in the Company's annual report on Form 20-F for the year ended December 31, 2002,
the Company disposed of its holding of 159,703,481 Normandy shares during January 2002, for a
gross amount of $158 million. The carrying amount was $158 million and costs related to the
transaction amounted to $10 million, resulting in a loss of $10 million. The Company exchanged
$147 million of its own stock for Normandy shares.
Note G. Stock-based compensation plans
The Company has adopted the disclosure-only provisions of SFAS123 and applies Accounting
Principles Board Opinion No. 25 (APB No. 25) and related interpretations in accounting for its
employee stock-based compensation plans.
At June 30, 2003, the Company has two stock-based employee compensation plans, which consists
of time-based awards and the performance related awards as disclosed in the Company's annual
report on Form 20-F for the year ended December 31, 2002. During the six months ended June 30,
2003 and 2002 there was no compensation expense recognized related to time-based awards as
the exercise price of all awards was greater than or equal to the fair market value of the underlying
stock on the date of grants.
No compensation expense was recognized as of June 30, 2003 related to the performance related
awards under APB No. 25, as the exercise price was greater than or equal to the fair market value at
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30,
2003............continued
Prepared in accordance with US GAAP
Note G. Stock-based compensation plans (continued)
the date of grant and the end of the interim reporting period. The performance
related options are accounted for as variable compensation awards, accordingly
the compensation expense is calculated at the end of each reporting period until
the performance obligation has been met or waived. Compensation expense will
vary based on the fluctuations of the underlying stock price in excess of the
exercise price. The following table illustrates the effect on net income and earnings
per share if the Company had applied the fair value recognition provisions of
SFAS123 to stock-based employee compensation.
Six months ended June 30,
(in US Dollars, millions)
Deduct: Total stock-based employee compensation expense determined under fair
value based method for all awards, net of related tax effects
Earnings per share (cents)
Six months ended June 30,
Note H. Segment information
(in US Dollars, millions)
Segment income/(loss) before deferred income and mining tax
Total segment income/(loss)
Reconciliation of segment income/(loss) to Net income
General and administrative expenses
Deferred income and mining tax (expensed)/benefit
Cumulative effect of accounting change
(in US Dollars, millions)
Six months ended June 30,
Note I. Earnings per share data
The following table sets forth the computation of basic and diluted
Earnings per share for the periods indicated.
(in US Dollars, millions)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30,
2003............continued
Prepared in accordance with US GAAP
Note I. Earnings per share data (continued)
Income before cumulative effect of accounting change
Cumulative effect of accounting change
Net income applicable to common stockholders
Denominator for basic earnings per common share
Weighted average number of common shares
Basic earnings per common share (cents)
Dilutive potential common shares
Weighted average number of common shares
Dilutive potential of stock incentive options
Denominator for diluted earnings per common share
Adjusted weighted average number of common shares and assumed conversions
Diluted earnings per common share (cents)
Note J. Accumulated other comprehensive income
Other comprehensive income, consists of the following:
The derivatives of $261 million (current assets), $79 million (long-term assets), $307 million
(current liabilities) and $160 million (long-term liabilities) resulted from recording the
derivatives on the balance sheet in accordance with SFAS133.
The Company does not acquire, hold or issue derivatives for economic trading purposes. A
number of products, including derivatives, are used to manage gold price and foreign
exchange risks, that arise out of the Company's core business activities. Forward sales
contracts and call and put options are used by the Company to manage its exposure to gold
price and currency fluctuations. The board of directors sets limits for the volume of
production to be hedged, the nature of instruments utilized and the maximum tenor of
hedging structures.
The estimated fair values of financial instruments are determined at discrete points in time
based on relevant market information. These estimates involve uncertainties and cannot be
determined with precision.
Six months ended June 30,
(in US Dollars, millions)
Translation gain / (loss)
Translation gain / (loss)
Total other comprehensive income is:
The fair value including normal purchase or sale type contracts, and carrying value of the
derivatives are :
(in US Dollars, millions)
(in US Dollars, millions)
Forward sales type agreements
Foreign exchange contracts
Forward sales type agreements
Foreign exchange contracts
Foreign exchange option contracts
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30,
2003............continued
Prepared in accordance with US GAAP
Note K. Derivatives (continued)
The derivatives are categorized as follows:
(in US Dollars, millions)
Note L. Commitments and contingencies
In November 2002, the FASB issued FASB Interpretation ("FIN") 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others, an Interpretation of FASB Statements 5, 57, 107 and Rescission of
FASB Interpretation No. 34." FIN45 requires recognition and measurement of guarantees
entered into or modified beginning on January 1, 2003 and requires expanded disclosure of
guarantees as of December 31, 2002. The Company has conformed its disclosures with
respect to guarantees to the requirements of FIN45 as detailed below. Pursuant to US environmental regulations, gold mining companies are obligated to close
their operations and rehabilitate the lands that they mine in accordance with these
regulations. AngloGold North America has posted reclamation bonds with various federal
and governmental agencies to cover potential environmental obligations in amounts
aggregating approximately $79 million. The bonded amounts will be reduced by
approximately $33 million in July 2003, as a result of the sale of Jerritt Canyon to
Queenstake Resources USA Inc. effective June 30, 2003. (Refer to Note F)
AngloGold has provided a guarantee for these obligations which would be payable in the
event of AngloGold North America not being able to meet their environmental obligations. As
at June 30, 2003 the carrying value of these environmental obligations relating to AngloGold
North America amounted to $30 million and are included in the Provision for environmental
rehabilitation in the Company's consolidated balance sheet. The environmental obligations
will expire upon completion of such rehabilitation. There are no recourse provisions that
would enable AngloGold to recover from third parties any of the amounts paid under the
guarantee.
Pursuant to the assignment of equipment leases to Queenstake Resources USA Inc., as a
result of the sale of Jerritt Canyon effective June 30, 2003, AngloGold North America has
become secondarily liable in the event of a default by Queenstake Resources USA Inc. in
performance of any of the lessee's obligations arising under the Lease. These agreements
have a approximate term of 3 years and the maximum potential amount of future payments
amounts to $2 million.
AngloGold has provided a letter of credit in favor of the Geita project finance lenders for $19
million.
The letter of credit may be called if Geita Gold Mining Limited fails to perform under their
project finance agreement and has a potential maximum tenor in accordance with this
agreement. The Geita Project Finance loan is included in Long-term debt in the Company's
consolidated balance sheet. In this event, Geita Gold Mining Limited would be liable to
AngloGold.
AngloGold has signed as surety in favor of the bankers on the Yatela loan for $7 million. This
loan is included in Long-term debt in the Company's consolidated balance sheet.
Note M. Recent developments
During the six months ended June 30, 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.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30,
2003............continued
Prepared in accordance with US GAAP
Note M. Recent developments (continued)
On May 16, 2003, AngloGold issued a cautionary announcement to shareholders in which it
confirmed that the boards of Ashanti Goldfields Company Limited and AngloGold were in
discussion regarding the proposed merger of the two companies at a ratio of 26 AngloGold
shares for every 100 Ashanti ordinary shares and global depositary securities. These
proposals may or may not lead to a proposal being made for the entire issued share capital
of Ashanti. This announcement was followed by a further cautionary announcement on June
13, 2003 in which AngloGold advised that the Government of Ghana, a substantial
shareholder and regulator of Ashanti, was taking appropriate professional advice in
considering the proposed merger. A further cautionary announcement, advising shareholders
to exercise caution in dealing in AngloGold's shares was issued on June 13, 2003.
On May 23, 2003, AngloGold announced that it had signed an agreement to sell its wholly-
owned Amapari Project to Minerao Pedra Branca do Amapari, for the total consideration of
$18.2 million. The Amapari project is located in the State of Amap, North Brazil. Since
acquiring the property as part of the Minorco transaction, the Company has sought to prove
up additional reserve ounces in order to get it to a size and life that would justify the
management resources needed to run it effectively. This was not achieved and AngloGold,
on receiving a fair offer from a purchaser who could constructively turn this orebody to
account, agreed to sell.
On June 6, 2003, AngloGold announced that it had finalized the sale of its 49 percent stake
in the Gawler Craton Joint Venture, including the Tunkillia project located in South Australia
to Helix Resources Limited. Consideration for the sale comprised cash of $500,000
(A$750,000), 1.25 million fully-paid Helix shares issued at A$0.20 per share and 1.25 million
Helix options exercisable at A$0.25 per option before November 30, 2003 with an additional
payment of $335,000 (A$500,000) deferred to the delineation of a mineable resource of
350,000 ounces. Helix's proposed acquisition of AngloGold's rights to the Tarcoola Project,
60 kilometres to the south, was excluded from the final agreement. This resulted in a
restructure of the original agreement terms, as announced on April 8, 2003.
On July 2, 2003, AngloGold announced that it had concluded the sale of its interest in the
Jerritt Canyon Joint Venture to Queenstake Resources USA Inc. effective June 30, 2003.
This followed negotiations originally announced on February 27, 2003. Queenstake paid the
Jerritt Canyon Joint Venture partners, AngloGold and Meridian Gold, $1.5 million in cash and
32 million shares of Queenstake stock, with $6 million in deferred payments and $4 million in
future royalty payments. Queenstake accepted full closure and reclamation liabilities. The
shares acquired by AngloGold in this transaction were issued by Queenstake Resources
Limited, a subsidiary of Queenstake, and represents approximately 9.2 percent of that
company's issued share capital.
Note N. Declaration of dividends
On January 30, 2003 AngloGold declared a final dividend of 675 South African cents (82 US
cents) per ordinary share for the year ended December 31, 2002 with a record date of
February 21, 2003 and a payment date of February 28, 2003 and on July 30, 2003
AngloGold declared an interim dividend of 375 South African cents (approximately 51 US
cents) per ordinary share for the six months ended June 30, 2003 with a record date of
August 22, 2003 and a payment date of August 29, 2003 for holders of ordinary shares and
CDIs, and September 12, 2003 for holders of ADSs.
Note O. Supplemental condensed consolidating financial information
Subject to the necessary regulatory approvals, AngloGold intends to transfer all of its
operations and assets in North and South America, East and West Africa and Australia to
AngloGold International Holdings SA (formerly Walsdon Limited) ("Luxco"), its wholly-owned
subsidiary. Luxco is a Luxembourg registered company. It is AngloGold's intention that from time to time Luxco may assume or issue debt securities
which will be fully and unconditionally guaranteed by AngloGold Limited (being the
"Guarantor"). The following is condensed consolidating financial information for the
AngloGold group as of June 30, 2003 and December 31, 2002 and for the six months ended
June 30, 2003 and 2002, with a separate column for each of Luxco as Issuer, AngloGold
Limited as Guarantor, and the other businesses of the AngloGold group combined (the "Non-
Guarantor Subsidiaries"). For the purposes of the condensed consolidating financial
information, AngloGold carries its investments under the equity method.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2003............continued
Prepared in accordance with US GAAP
Note O. Supplemental condensed consolidating financial information (continued)
Condensed consolidating statements of income
FOR THE SIX MONTHS ENDED JUNE 30, 2003
(In million US dollars, except share information)
Interest, dividends and other
Related party transactions
General and administrative
Royalties paid/(received)
Depreciation, depletion and amortization
Employment severance costs
Loss/(profit) on sale of assets
(Gain)/loss on derivatives
Income/(loss) before equity income and income tax
Equity income in affiliates
Equity income/(loss) in subsidiaries
Income/(loss) before income tax provision
Deferred income and mining tax expensed
Income/(loss) before minority interest
Income/(loss) after minority interest
Preferred stock dividends
Income/(loss) before cumulative effect of accounting change
Cumulative effect of accounting change
Net income/(loss) - applicable to common stockholders
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2003............continued
Prepared in accordance with US GAAP
Note O. Supplemental condensed consolidating financial information (continued)
Condensed consolidating statements of income
FOR THE SIX MONTHS ENDED JUNE 30, 2002
Interest, dividends and other
Related party transactions
General and administrative
Royalties paid/(received)
Depreciation, depletion and amortization
(In million US dollars, except share information)
Employment severance costs
Income/(loss) before equity income and income tax
Equity income in affiliates
Equity income/(loss) in subsidiaries
Income/(loss) before income tax provision
Deferred income and mining tax benefit /(expensed)
Income/(loss) before minority interest
Income/(loss) after minority interest
Preferred stock dividends
Income/(loss) before cumulative effect of accounting change
Cumulative effect of accounting change
Net income/(loss) - applicable to common stockholders
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2003............continued
Prepared in accordance with US GAAP
Note O. Supplemental condensed consolidating financial information (continued)
Condensed consolidating balance sheets
(In million US dollars, except share information)
Cash and cash equivalents
Property, plant and equipment
Materials on the leach pad
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable 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
Additional paid in capital
Accumulated other comprehensive income
Total liabilities and stockholders' equity
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2003............continued
Prepared in accordance with US GAAP
Note O. Supplemental condensed consolidating financial information (continued)
Condensed consolidating balance sheets
(In million US dollars, except share information)
Cash and cash equivalents
Property, plant and equipment
Materials on the leach pad
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable 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
Additional paid in capital
Accumulated other comprehensive income
Total liabilities and stockholders' equity
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2003............continued
Prepared in accordance with US GAAP
Note O. Supplemental condensed consolidating financial information (continued)
Condensed consolidating statements of cash flow
FOR THE SIX MONTHS ENDED JUNE 30, 2003
(In million US dollars, except share information)
(the "Non-Guarantor Subsidiaries")
Net cash provided by/(used in) operating activities
Income/(loss) after minority interest
Reconciled to net cash provided by/(used in) operations:
Loss/(profit) on sale of assets
Depreciation, depletion and amortization
Net increase in provision for environmental rehabilitation
and post-retirement medical benefits
Deferred income and mining tax
Effect of changes in operating working capital items:
Net movement in inter-group receivables and payables
Accounts payable and accrued liabilities
Net cash used in investing activities
Increase in non-current investments
Additions to property, plant and equipment
Proceeds on sale of mining assets
Proceeds on sale of investments
Cash received as part of disposal
Loans receivable advanced
Net cash (used)/generated 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 January 1,
Cash and cash equivalents June 30,
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2003............continued
Prepared in accordance with US GAAP
Note O. Supplemental condensed consolidating financial information (continued)
Condensed consolidating statements of cash flow
FOR THE SIX MONTHS ENDED JUNE 30, 2002
(In million US dollars, except share information)
Net cash provided by/(used in) operating activities
Income/(loss) after minority interest
Reconciled to net cash provided by/(used in) operations:
Depreciation, depletion and amortization
Net increase in provision for environmental rehabilitation
and post-retirement medical benefits
Deferred income and mining tax
Effect of changes in operating working capital items:
Net movement in inter-group receivables and payables
Accounts payable and accrued liabilities
Net cash generated/(used) in investing activities
Increase in non-current investments
Additions to property, plant and equipment
Proceeds on sale of mining assets
Proceeds on sale of investments
Cash received as part of disposal
Loans receivable advanced
Net cash (used)/generated in financing activities
Decrease in short-term debt
Increase in long-term debt
Net increase in cash and cash equivalents
Effect of exchange rate changes on cash
Cash and cash equivalents January 1,
Cash and cash equivalents June 30,
Operating and financial review and prospects
Introduction
Impact of exchange rate fluctuations
In line with the global trend of a weaker US dollar, the rand strengthened against the US dollar by 13 percent
in the first six months of 2003 (based on the exchange rates of R8.58 and R7.48 per US dollar on January 1,
2003 and June 30, 2003, respectively). In addition, when comparing the average exchange rates of the rand
against the US dollar of R8.03 and R10.99 during the first six months of 2003 and 2002, respectively, the
value of the rand gained 27 percent against the US dollar. The Australian dollar also strengthened against
the US dollar by 13 percent based on the average exchange rates of A$1.62 and A$1.87 per US dollar during
the first six months of 2003 and 2002, respectively. Over the first half of 2003, about 73% of AngloGold's
production costs were denominated in these currencies, while revenues from product sales were realized in
US dollars predominantly. Similarly, local currencies in South America and Mali have gained value against
the US dollar over the period. As a result of the strong local currencies, production costs expressed in US
dollars increased during the six-month period ended June 30, 2003 when compared with the same period of
2002 which negatively impacted on the profitability of AngloGold.
Acquisitions and dispositions
The global gold mining industry has experienced active consolidation and rationalization activities in recent
years. Accordingly, AngloGold has been, and expects to continue to be, involved in acquisitions and
dispositions as part of this global trend if and where this is value adding.
In November 2001, AngloGold announced the sale of its Free State operations (the Free State assets) in
South Africa effective January 1, 2002. The sale closed in April 2002. AngloGold also announced the sale of
its Normandy shares in January 2002 after its offer to purchase all of the outstanding share capital of
Normandy Mining Limited in Australia expired without it obtaining control of Normandy.
On May 16, 2003, AngloGold issued a cautionary announcement to shareholders in which it confirmed that
the boards of Ashanti Goldfields Company Limited and AngloGold were in discussion regarding the proposed
merger of the two companies at a ratio of 26 AngloGold shares for every 100 Ashanti ordinary shares and
global depositary securities. These proposals may or may not lead to a proposal being made for the entire
issued share capital of Ashanti. A further cautionary announcement, advising shareholders to exercise
caution in dealing in AngloGold's shares was issued on June 13, 2003.
On May 23, 2003, AngloGold announced that it had signed an agreement to sell its wholly-owned Amapari
Project to Minerao Pedra Branca do Amapari, for the total consideration of $18.2 million. The Amapari
project is located in the State of Amap, North Brazil. Since acquiring the property as part of the Minorco
transaction, the Company has sought to prove up additional reserve ounces in order to get it to a size and life
that would justify the management resources needed to run it effectively. This was not achieved and
AngloGold, on receiving a fair offer from a purchaser who could constructively turn this orebody to account,
agreed to sell.
On June 6, 2003, AngloGold announced that it had finalized the sale of its 49 percent stake in the Gawler
Craton Joint Venture, including the Tunkillia project located in South Australia to Helix Resources Limited.
Consideration for the sale comprised cash of $500,000 (A$750,000), 1.25 million fully-paid Helix shares
issued at A$0.20 per share and 1.25 million Helix options exercisable at A$0.25 per option before November
30, 2003 with an additional payment of $335,000 (A$500,000) deferred to the delineation of a mineable
resource of 350,000 ounces. Helix's proposed acquisition of AngloGold's rights to the Tarcoola Project, 60
kilometres to the south, was excluded from the final agreement. This resulted in a restructure of the original
agreement terms, as announced on April 8, 2003.
On July 2, 2003, AngloGold announced that it had concluded the sale of its interest in the Jerritt Canyon Joint
Venture to Queenstake Resources USA Inc. effective June 30, 2003. This followed negotiations originally
announced on February 27, 2003. Queenstake paid the Jerritt Canyon Joint Venture partners, AngloGold
and Meridian Gold, $1.5 million in cash and 32 million shares of Queenstake stock, with $6 million in deferred
payments and $4 million in future royalty payments. Queenstake accepted full closure and reclamation
liabilities. The shares acquired by AngloGold in this transaction were issued by Queenstake Resources
Limited, a subsidiary of Queenstake, and represents approximately 9.2 percent of that company's issued
share capital.
Gold market
In AngloGold's view, activity in the gold market reflected ongoing interest in gold in a period of widespread
financial, economic and political uncertainty. With the exception of the spur to the spot price at the time of
the announcement of Newmont Mining Corporation's offer of settlement to the Yandal creditors, the gold
price appeared to be driven mostly by movement of the US dollar against the Euro. In AngloGold's
observation, the weakening US dollar has been good for a range of commodities, including base metals and
oil, but investor and speculator interest has been particularly focused on gold as the most consistent
beneficiary of the weaker US dollar.
AngloGold's expectations of the gold price for the next 12 to 24 months are tied closely to the fate of the US
dollar and, more broadly, of the US economy. As the US dollar weakens, so AngloGold expects the gold
price to rise.
The overwhelming consensus of commentators on currency markets is for a continued weakening of the US
currency, specifically against the Euro, with some major players looking for exchange rates as low as $1.40
against the Euro by the end of 2004. These forecasts seem to ignore some of the fundamental weaknesses
in the European economies today (particularly as a stronger Euro will continue to squeeze growth in Europe),
which would argue against further strengthening of the common European currency. However, the reality is
that many of the Asian economies Japan and China especially seem to resist the re-valuation of their
currencies against the US dollar by actively buying US bonds, and as a result, in AngloGold's view, the Euro
might well have to bear a disproportionate burden of the markets concerns over the US dollar. For that
reason, AngloGold believes that the Euro could move to an overvalued exchange rate against the US dollar.
Whilst the weakening of the US dollar has been the indicator for gold price movements, the vehicle for
effecting those price movements has been the New York Comex. Speculators and investors who trade gold
on the Comex have so far shown a consistent pattern in gold buying, with a core net long holding since 2001
of some 45 million ounces, and opportunistic trading up to aggregate net long positions of 1014 million
ounces. AngloGold believes that it will be important for gold that Comex continue to support the price by
sustained buying as the economic indicators continue to favor gold.
The physical market appears to continue to react negatively to higher prices. Ongoing spot price volatility
has also not helped the physical markets to adjust their buying thresholds to new price ranges. During May
2003, Indian imports all but ceased, and offtake is unlikely to resume until post-monsoon seasonal buying in
August 2003. Italian offtake for the first quarter of 2003 was reported to decline by 27 percent year-on-year,
and there are indications that consumer offtake of gold jewellery in the USA has been weak.
This fall in offtake has been offset by sustained de-hedging from producers. After a reduction of some 430
tonnes in net gold producer hedge positions reported for 2002, the first quarter of 2003 saw hedges fall by a
further 143 tonnes according to public reports. This, in AngloGold's view, has provided an important offset to
weaker physical demand, as well as assisting to balance sharply higher flows of scrap gold onto the physical
markets throughout 2002. This was particularly so in the first quarter of 2003, when scrap flows were
reported to reach a rate equivalent to almost 1,000 tonnes per annum. The current reported levels of scrap
sales or recycling of gold exceed by a significant margin the previous record levels of selling seen during the
Asian currency crises of late 1997 1998. With producer sales reduced by de-hedging, these scrap sales
appear to have been absorbed by the market, but AngloGold believes that some long-term equilibrium will be
required in the physical market in order for this level of selling not to weigh on the price of the metal.
The spot price opened at $346 per ounce in January 2003 and closed at $345 per ounce in June 2003,
compared with $279 per ounce in January 2002 and $314 per ounce in June 2002. The average spot price
of gold was $349 per ounce during the six months ended June 30, 2003, $47 per ounce, or 16 percent,
higher than $302 per ounce, the average spot price in the first six months of 2002. During the first six
months of 2003, the highest spot price of gold was $389 per ounce compared to a high of $328 per ounce for
the same period in 2002. The lowest spot price of gold was $319 per ounce during the six months ended
June 30, 2003, 15 percent higher than $277 per ounce, the lowest spot price of gold for the same period
ended June 30, 2002.
Operating review
Presented in the table below is selected operating data for AngloGold for the six months ended June 30,
2003 and 2002. The operating data gives effect to the acquisitions and dispositions discussed above:
Operating data for AngloGold
Six months ended June 30,
Total production cost ($/oz)
Capital expenditure ($ million)
For the six months ended June 30, 2003, AngloGold's total gold production increased by 33,000 ounces, or
about 1 percent, to 2.84 million ounces from 2.80 million ounces produced in the same period in 2002. Gold
production from operations located in South Africa decreased from 1,687,000 ounces produced in the six
months to June 30, 2002, to 1,612,000 ounces produced over the same period of 2003. This was mainly the
result of lower recovered grades and area mined at Great Noligwa, Ergo and Savuka, which was partly offset
by an improvement in recovered grade at Mponeng and Tau Lekoa. Gold production in East and West Africa
increased from 450,000 ounces produced in the six months to June 30, 2002, to 485,000 ounces over the
same period of 2003. This increase in production of 35,000 ounces was mainly due to a higher recovered
grade and tonnage throughput at Morila which was partially offset by lower grades at Geita. Gold production
in the North America region increased by 39,000 ounces from 209,000 ounces in the six months ended June
30, 2002 to 248,000 ounces produced over the same period during 2003. This was largely due to Cripple
Creek & Victor which increased capacity arising from the commissioning of a new crushing facility,
improvements in leach solution chemistry and leach pad transport timing. Gold production in South America
increased by 59,000 ounces from 206,000 ounces in the six months ended June 30, 2002 to 265,000 ounces
produced over the same period during 2003. This was mainly due to the impact of the additional 46.25
percent interest acquired during July 2002 in the Cerro Vanguardia mine in Argentina on the production of
the current half year when compared with 2002. The Australian operations recorded gold production of
226,000 ounces during the six months ended June 30, 2003, compared with 251,000 ounces over the same
period of 2002. This decrease in production of 25,000 ounces was mainly due to lower recovered grades at
Union Reefs as the operation nears closure.
In the quarter ended June 30, 2003, gold production increased by 32,000 ounces, or 2 percent to 1,434,000
ounces from 1,402,000 ounces produced during the quarter ended March 31, 2003. This increase was
mainly due to higher production from the South African, East and West African and North American
operations. Anticipated lower grades at some operations were more than offset by higher volumes mined.
Looking ahead to the operations for the rest of the year, AngloGold expects performance to improve as the
grade at Geita in Tanzania strengthens and production levels at Cripple Creek and Victor in the U.S. increase
during the third and fourth quarters of 2003.
Total cash cost and total production cost
Total cash cost for the six months ended June 30, 2003 was $217 per ounce, $61 per ounce, or 39 percent,
higher than the cash cost of $156 per ounce recorded in the same period in 2002.
This change was mainly due to substantially higher cash costs for South African and Australian operations in
the six months ended June 30, 2003, which increased by 64 percent and 27 percent respectively, when
compared to the same period in 2002. This increase in total cash costs at the South African and Australian
operations were mainly due to the strengthening of the South African rand and Australian dollar relative to
the US dollar (based on the average exchange rates of the rand against the US dollar of R8.03 and R10.99
and the Australian dollar against the US dollar of A$1.62 and A$1.87, during the six months ended June 30,
2003 and 2002, respectively). Similarly, local currencies in South America and Mali have gained value
against the US dollar which contributed to higher dollar-denominated costs.
Total cash costs for the three months ended June 30, 2003 also increased by 6 percent compared to the
quarter ended March 31, 2003 mainly as a result of exchange rate movements discussed in the previous
paragraph.
Total production costs for the six months ended June 30, 2003 were $272 per ounce, $62 per ounce, or 30
percent, higher than the total production costs of $210 per ounce recorded in the same period of 2002.
Reconciliation of total cash costs and total production costs to the condensed consolidated
financial information
Total cash costs and total production costs are calculated in accordance with the guidelines of the Gold
Institute industry standard and are not US GAAP measures. The Gold Institute is a non-profit international
association of miners, refiners, bullion suppliers and manufacturers of gold products, which has developed a
uniform format for reporting total production costs on a per ounce basis. The standard was first adopted in
1996 and revised in November 1999.
Total cash costs, as defined in the Gold Institute industry standard are production costs as recorded in the
statement of operations, less offsite (i.e. central), general and administrative expenses (including head office
costs charged to the mines, central training expenses, industry association fees, refinery charges and social
development costs) and rehabilitation costs, plus royalties and employee termination costs.
Total cash costs as calculated and reported by AngloGold include costs for all mining, processing,
administration, royalties and production taxes, as well as contributions from by-products, but exclusive of
depreciation, depletion and amortization, rehabilitation, employment severance costs, corporate
administration costs, capital costs and exploration costs. Total cash costs per ounce are calculated by
dividing total cash costs by ounces of gold produced. Total cash costs have been calculated on a consistent
basis for all periods presented.
Total production costs, as defined in the Gold Institute industry standard are total cash costs, as calculated
using the Gold Institute industry standard, plus amortization, depreciation and rehabilitation costs. Total
production costs as calculated and reported by AngloGold include total cash costs, plus depreciation,
depletion and amortization, employee severance costs and rehabilitation and other non-cash costs. Total
production costs per ounce are calculated by dividing total production costs by ounces of gold produced.
Total production costs have been calculated on a consistent basis for all periods presented.
Total cash costs and total production costs should not be considered by investors in isolation or as
alternatives to production costs, net income/(loss) applicable to common stockholders, income/(loss) before
income tax provision, net cash provided by operating activities or any other measure of financial performance
presented in accordance with US GAAP or as an indicator of the Company's performance. While the Gold
Institute has provided definitions for the calculation of total cash costs and total production costs, the
calculation of total cash costs, total cash costs per ounce, total production costs and total production costs
per ounce may vary significantly among gold mining companies, and by themselves do not necessarily
provide a basis for comparison with other gold mining companies. However, the Company believes that total
cash costs and total production costs in total and per ounce are useful indicators to investors and
management as they provide:
* an indication of profitability, efficiency and cash flows;
* the trend in costs as the mining operations mature over time on a consistent basis; and
* an internal benchmark of performance to allow for comparison against other mining companies.
A reconciliation of production costs as included in the Company's unaudited condensed consolidated
financial information to total cash costs and to total production costs for each of the six months ended
June 30, 2003 and 2002 is presented below. In addition the Company has also provided below detail of the
ounces of gold produced in total for each of those periods.
For the six months ended June 30,
(in $ millions, except as otherwise noted)
Production costs per condensed consolidated financial information
Rehabilitation costs & other non-cash costs
Related party transactions
Non-gold producing companies and adjustments
Depreciation, depletion and amortization
Rehabilitation and other non-cash costs
Non-gold producing companies and adjustments
Gold produced (000' ounces)
Total cash costs per ounce
Total production costs per ounce
In addition to the operational performances of the mines, total cash costs per ounce and total production costs per ounce are
affected by fluctuations in the currency exchange rate. AngloGold reports total cash costs per ounce and total production
costs per ounce calculated to the nearest US dollar amount and gold produced in ounces.
Related party transactions is a separately disclosed item on AngloGold's condensed consolidated statements of income.
However, this expense relates solely to production costs as included in the Company's condensed consolidated financial
statements and has, accordingly, been included in total production costs and total cash costs.
Adjusting for minority interest of items included in calculation, to disclose the attributable portions only.
Attributable production only.
Capital expenditure during the six months ended June 30, 2003 was $126 million compared with $118 million
for the same period in 2002. This $8 million, or 7 percent, increase is primarily the result of two factors: first,
the $36 million increase in capital expenditure in South Africa, from $40 million spent in the six months to
June 2002 to $76 million for the same period in 2003, mainly due to the Moab Khotsong and Mponeng shaft
deepening projects and, second, the $31 million decrease in capital expenditure in the North America region
from $47 million recorded in the first six months of 2002 to $16 million spent in the six months ended June
30, 2003, mainly due to the completion of the expansion projects at Cripple Creek and Victor during 2002.
East and West African, South American and Australian regions recorded capital expenditures of $12 million,
$16 million and $6 million in the six months to June 2003, compared to $11 million, $14 million and $6 million
in the same period in 2002.
On July 30, 2003, the directors of AngloGold have approved capital expenditure on two organic growth
projects. Approval has been given for the R1.2 billion (approximately $130 million) projects at TauTona two
VCR and one CLR extension. These are expected to deliver approximately 1.8 million ounces over the next
ten years. In addition, A$87 million has been set aside for the underground feasibility study at Sunrise Dam.
This cost is expected to be more than offset by revenue generated from the 300,000 ounces produced from
the trial mining that will form part of this study.
Comparison of financial performance on a segment basis for the six months ended June 30, 2003 and
2002
AngloGold 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 five different geographic segments.
Six months ended June 30,
Interest, dividends and other
In the first six months of 2003, 55 percent of AngloGold's total revenues were derived from operations in
South Africa, compared to 56 percent in the same period in 2002. Operations in East and West Africa
accounted for 16 percent of AngloGold's total revenues during the six months ended June 30, 2003
compared to 16 percent during the same period in 2002. During the six months ended June 30, 2003, North
America, South America and Australia each accounted for approximately 8 percent, 11 percent and 10
percent of total revenues compared with 9 percent, 11 percent and 8 percent, respectively, during the six
months ended June 30, 2002.
At June 30, 2003, 49 percent of AngloGold's total assets were located in South Africa compared with 49
percent as at December 31, 2002. East and West African assets of AngloGold represented 18 percent of
AngloGold's total assets at June 30, 2003 while at the end of December 2002 this share the same. North
American assets accounted for 9 percent of total assets at June 30, 2003 compared with 12 percent at
December 31, 2002. The decrease in the value of the North American assets as a percentage of total assets
was mainly due to the disposal by AngloGold of its 70 percent interest in the Jerritt Canyon Joint Venture in
North America to Queenstake Resources USA Inc. effective June 30, 2003. South American and Australian
assets both accounted for 12 percent of total assets at June 30, 2003 compared with 10 percent and 11
percent, respectively, at December 31, 2002.
Comparison of financial performance for the six months ended June 30, 2003 and 2002
Revenues from product sales and other income increased from $798 million in the first six months of 2002 to
$991 million in the comparable period in 2003, representing a 24 percent increase over the period. 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 $349 per ounce during the
six months ended June 30, 2003, $47 per ounce, or 16 percent, higher than $302 per ounce, the average
spot price in the first six months of 2002. The majority of product sales consisted of US dollar-denominated
gold sales.
Revenues from the South African operations increased by $109 million to $536 million over the six months
ended June 30, 2003 from $427 million realized in the same period in 2002, as a direct result of the higher
gold price. This was achieved despite a total decrease in gold production from operations located in South
Africa by 75,000 ounces from 1,687,000 ounces produced in the six months to June 30, 2002, to 1,612,000
ounces produced over the same period of 2003.
Revenues derived from East and West African operations increased by $31 million to $160 million over the
six months ended June 30, 2003 from $129 million realized in the same period in 2002, mainly as a result of
a $27 million increase in revenue from Morila due to a higher recovered grade and tonnage throughput.
Revenues derived from the South American operations increased by $26 million to $112 million over the six
months ended June 30, 2003 from $86 million realized in the same period in 2002, mainly due to the impact
of the additional 46.25 percent interest acquired during July 2002 in the Cerro Vanguardia mine in Argentina.
Cerro Vanguardia recorded a $15 million increase in revenue in the first six months of 2003 when compared
with 2002.
Revenues from North America and Australia both amounted to $82 million during the first six months of 2003,
compared to $69 million and $68 million, respectively, during the same period in 2002.
During the six month period ended June 30, 2003, AngloGold incurred production costs of $600 million
representing an increase of $188 million, or 46 percent, over $412 million recorded for the comparable period
in 2002.
This increase is primarily due to higher production costs in AngloGold's South Africa operations, which
increased by $145 million to $382 million in the first six months of 2003 from $237 million in the comparable
period in 2002. The reason for this increase is twofold: first, the strengthening of the South African rand
against the US dollar and, second, increase in support costs, additional labour, contractor and consumables
and higher bonus and overtime payments. About 64 percent of AngloGold's production costs were
denominated in South African rands in the first six months of 2003.
During the six months ended June 30, 2003, the biennial wage negotiations with the South African trade
unions were completed The agreement reached is expected to have the effect of increasing employment
costs at AngloGold's South African operations by approximately 10 percent per annum, including the
provisions for increased leave and employer contributions to retirement funding. It remains AngloGold's
commitment to ensure that this increase does not lead to a material increase in unit labour costs on
AngloGold's South African operations, through continuing productivity improvement programmes, which have
seen individual employee productivity improve by 18 percent over the last five years. Employment cost is the
largest component of production costs because AngloGold's mining operations are labor intensive.
Approximately 87 percent of AngloGold's workforce is located in South Africa, of which approximately 70
percent belongs to registered and unregistered trade unions in South Africa.
East and West African operations recorded production costs of $70 million in the first six months of 2003
compared with $54 million during the same period in 2002. This increase of $16 million over 2002, was
mainly the result of the treatment of harder rock at Semos and higher costs associated with deeper mining
and longer haulage distances at Geita.
Production costs recorded from the Australian operations increased by $12 million from $44 million recorded
during the first six months of 2002 to $56 million during the same period in 2003, mainly as a result of the
strengthening of the Australian dollar against the US dollar as well as an unfavorable inventory variance,
which resulted from a significant build up in stocks, particularly gold in circuit, during the half year in 2002.
The extension of mining activities at Union Reefs also resulted in additional production costs in the current
period.
North American and South American operations recorded production costs of $54 million and $38 million
during the first six months of 2003, compared to $44 million and $33 million during the same period in 2002.
Exploration costs increased from $13 million in the six months ended June 30, 2002 to $18 million in the
same period in 2003, mainly as a result of increased levels of exploration in Mali and Tanzania in the East
and West African region, Brazil and Peru in the South American region as well as exploration drilling in the
Australian region.
Related party transactions
In the first six months of 2003, charges for related party transactions with subsidiaries of Anglo American plc
(AA plc) and with associates of AngloGold amounted to $10 million compared with $9 million recorded in the
six months ended June 30, 2002. The additional charges of $10 million included under related party
transactions for the six months ended June 30, 2002 relate to the settlement by AngloGold of a claim in
respect of an alleged breach of contract.
General and administrative
General and administrative expenses increased from $10 million in the six months ended June 30, 2002 to
$23 million in the same period of 2003, mainly as a result of annual salary increments and approved scope
changes relating to information technology infrastructure upgrades. The strengthening of the South African
rand relative to the US dollar also negatively impacted on general and administrative expenses as
approximately 90 percent of these costs are South African rand denominated.
Royalties paid by AngloGold increased from $9 million for the six months ended June 30, 2002, to $14 million
paid in the comparable period in 2003, with royalties paid in East and West Africa, North and South America
and Australia amounting to $8 million, $4 million and $2 million, respectively, in 2003 compared with $6
million, $2 million and $1 million, respectively, in 2002. This increase from 2002 is due in part to the increase
in production and higher gold prices and resultant revenues in East and West Africa with royalties payable to
the Malian and Tanzanian governments calculated as a percentage of revenues.
Market development costs of $8 million recorded in the six months ended June 30, 2003, remained
unchanged from the same period in 2002.
Depreciation, depletion and amortization
Depreciation, depletion and amortization expense increased to $155 million in the first six months of 2003
when compared to $150 million recorded in the same period in 2002. In South Africa, depreciation, depletion
and amortization expense decreased by $2 million from $53 million incurred in the six months ended
June 30, 2002 to $51 million in the same period for 2003. Lower depreciation, depletion and amortization
expense recorded at the South African operations during the first six months of 2003 was partially offset by
higher depreciation, depletion and amortization charges for the East and West African and South American
operations ($32 million and $28 million, respectively, in the six months ended June 30, 2003 compared with
$30 million and $20 million, respectively, in the same period in 2002) mainly due to an increase in production.
The North American and Australian operations recorded depreciation, depletion and amortization expenses
of $28 million and $16 million, respectively, in the six months ended June 30, 2003, compared to $29 million
and $18 million, respectively, for the same period in 2002.
In the six months ended June 30, 2003 AngloGold recorded an impairment of assets of $12 million relating to
the abandonment of exploration activities in the Australian region. No impairment of assets was recorded in
the six months ended June 2002.
Interest expense decreased from $24 million recorded in the six months ended June 30, 2002 to $17 million
in the same period of 2003, a 29 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.
In the six months ended June 30, 2003 AngloGold recorded an accretion expense of $3 million relating to the
adoption of SFAS 143 "Accounting for Asset Retirement Obligations (ARO's)", with effect from January 1,
2003 as described by note D "Accounting change" to the condensed consolidated financial statements
contained in this interim report. Accretion relates to the unwinding of discounted future reclamation
obligations to present values and increases the reclamation obligations to its future estimated payout.
Employment severance cost
Employment severance costs decreased to $1 million during the six months ended June 30, 2003 from $2
million in the same period in 2002.
Profit/loss on sale of assets
The profit on sale of assets of $3 million recorded in the six months ended June 2003 relates to the sale by
AngloGold of its 70 percent interest in the Jerritt Canyon Joint Venture in North America to Queenstake
Resources USA Inc. and its wholly owned Amapari Project in North Brazil. The loss on sale of assets of $10
million recorded in the six months ended June 2002 relates to the sale of the investment in Normandy, during
January 2002 as described by note F "(Profit)/loss on sale of assets" to the condensed consolidated financial
statements contained in this interim report.
A gain on derivatives of $39 million was recorded in the first six months of 2003 compared to a gain of $40
million in the same period in 2002 relating to the use of commodity instruments that are not classified as
hedging instruments for financial reporting purposes.
Deferred income and mining tax expense/benefit
Deferred income and mining tax expense increased from a net tax benefit of $11 million recorded in the first
six 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 $67 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"). The increase in mining taxation charges in the first half of 2003 is also due to lower
profit to revenue ratios in the South African region in the comparable period in 2002.
Cumulative effect of accounting change
AngloGold adopted SFAS 143 "Accounting for Asset Retirement Obligations (ARO's)" with effect from
January 1, 2003. This resulted in a cumulative change in accounting policy effect of $6 million (net of
provision for deferred taxation) reflected in the six-month period ended June 30, 2003.
As a result of the factors detailed above, net income decreased by $81 million from $187 million in the first
six months of 2002 to $106 million in the same period in 2003.
Liquidity and capital resources
Net cash provided by operating activities was $224 million in the first six months of 2003, $22 million, or
11 percent, higher than $202 million for the comparable period in 2002. This is mainly the result of higher
unit prices of gold which was partially offset by higher unit cash costs per ounce over the first six months of
2003 compared with the same period in 2002. A detailed discussion of the movement in net income is
included under "Comparison of financial performance for six months ended June 30, 2003 and 2002" above.
Investing activities during the first six months of 2003 resulted in a net cash outflow of $123 million compared
with an inflow of $159 million in the first six months in 2002. This increase in cash outflows was the net result
of acquisitions and disposals of operations and the additions to property, plant and equipment. During the six
months ended June 30, 2002, AngloGold received net cash consideration of $141 million for the disposal of
the Free State assets in April 2002 and proceeds of $158 million for the Normandy investment it sold in
January 2002.
Additional cash outflows for investing activities during the six months ended June 30, 2003 relate to capital
expenditures of $126 million, compared to $118 million in the same period in 2002. A majority of total capital
expenditures of $126 million recorded in the six months ended June 30, 2003 relate to the following ongoing
or recently completed capital projects:
Six months ended June 30,
Mponeng Shaft Deepening Project
Cripple Creek & Victor Expansion
Net cash used in financing activities over the first six months of 2003 amounted to $221 million, a decrease
of $25 million from $246 million recorded in the comparable period of 2002, comprising normal scheduled
repayments in terms of loan agreements of $51 million and drawings under various long-term loan
agreements of AngloGold totaling $18 million during the first half of 2003. AngloGold made dividend
payments of $190 million (82 US cents per ordinary share) in the six months ended June 30, 2003 compared
with dividends of $109 million (49 US cents per ordinary share) paid in the same period in 2002, a 74 percent
increase. Higher dividends were financed from higher cash generated from operations.
As a result of the items discussed above, at June 30, 2003, AngloGold had $311 million of cash and cash
equivalents compared with $413 million at December 31, 2002. At June 30, 2003, AngloGold had available
but undrawn a total of $302 million under its credit facilities.
During 2003, approximately $88 million of AngloGold's debt is scheduled to mature. The $400 million
unsecured syndicated loan facility becomes due in May 2004. The amount drawn under this facility was $264
million as at June 30, 2003. AngloGold expects to finance the repayment of debt scheduled to mature in
2003 and 2004 from existing cash resources, cash generated from future operations and its present and
future debt facilities.
Critical accounting policies
The preparation of AngloGold's financial statements in conformity with accounting principles generally
accepted in the United States of America require management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during the year. In the
six months ended June 30, 2003, the following are considered to be a change to the accounting policies that
are most critical to AngloGold's results of operations, financial condition and cash flows, as disclosed in the
Company's annual report on Form 20-F for the year ended December 31, 2002.
Asset Retirement Obligations
The Company has adopted SFAS143 "Accounting for Asset Retirement Obligations (AROs)" with effect from
1 January 2003 as follows:
The statement provides accounting and reporting guidance for legal obligations associated with the
retirement of long-lived assets that result from the acquisition, construction or normal operations of long-lived
assets. SFAS143 applies to legal obligations associated with the retirement of long-lived assets that result
from the acquisition, construction and/or the normal operation of a long-lived asset.
Under SFAS143 the fair value of a liability for an asset retirement obligation is recorded in the period in which
it is incurred. When the liability is initially recorded, the cost is capitalized by increasing the carrying amount
of the related long-lived asset. Over time, the liability is increased to reflect an interest element (accretion)
considered in its initial measurement at fair value, and the capitalized cost is amortized over the useful life of
the related asset. Upon settlement of the liability, a gain or loss will be recorded if the actual cost incurred is
different than the liability recorded.
The adoption of SFAS143 on January 1, 2003 resulted in an increase in Property, plant and equipment of
$12 million, an increase in Provision for environmental rehabilitation of $6 million and a cumulative effect of
adoption which increased net income and stockholder's equity by $6 million. No increase in Deferred income
and mining tax was recorded upon the adoption of SFAS143.
Hedging overview
AngloGold manages its revenue risk through an actively directed forward sales program. At a meeting of the
AngloGold board on July 30, 2003, a decision was taken to review the current hedging limit of 50 percent of
five years gold production. In the light of the enduring strength of the dollar spot gold price and the stability of
AngloGold's operations, it was decided to change the targeted level of forward-price commitments to 30
percent of five years production. In addition, it was confirmed that management would continue to have the
latitude to put new forward-pricing contracts in place where the gold price and operating circumstances make
this necessary or prudent. 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 June 30, 2003, the net delta hedge position of AngloGold was at 8.73 million ounces, 1.55 million ounces
lower than the net delta hedge position at December 31, 2002 and 17 percent lower than the net delta hedge
position at 10.53 million ounces as at June 30, 2002. The marked-to-market valuation of this position at June
30, 2003 was negative $179 million. These figures reflect the ongoing reduction in forward price
commitments of AngloGold.
AngloGold's net delta open hedge position at June 30, 2003
At June 30, 2003, AngloGold had outstanding the following forward-pricing commitments against future
production. The total net delta tonnage of the hedge on this date was 8.73 million ounces (at December 31,
2002: 10.28 million ounces). This is calculated using the Black-Scholes option formula with the ruling market
prices, interest rates and volatilities as at June 30, 2003.
The marked-to-market value of all hedge transactions making up the hedge positions was a negative
US$179 million at June 30, 2003 (at December 31, 2002: negative US$447 million). These values were
based on a gold price of US$346 per ounce, exchange rates of R/US$7.55 and A$/US$0.6761 and the
prevailing market interest rates and volatilities at the time.
AngloGold's hedge position as at June 30, 2003
The following table indicates AngloGold's gold hedge position at a weighted average settlement price as at June 30,
2003 (references in the table to "$" are to the US dollar and references to "A$" are to the Australian dollar):
$311 $324 $333 $337 $355 $333
$349 $337 $322 $329 $336 $363 $347
8,005 5,716 11,614 10,030 9,568 35,115 80,048
1,176 1,273 1,448 1,744 379 2,615 8,635
17,202 39,050 55,239 44,002 40,571 75,498 271,562
553,058 1,255,473 1,775,977 1,414,706 1,304,399 2,427,312 8,730,925
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 June 30, 2003.
The following table indicates the group's currency hedge position at June 30, 2003
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 June 30, 2003.
Recent developments
On May 16, 2003, AngloGold issued a cautionary announcement to shareholders in which it confirmed that
the boards of Ashanti Goldfields Company Limited and AngloGold were in discussion regarding the proposed
merger of the two companies at a ratio of 26 AngloGold shares for every 100 Ashanti ordinary shares and
global depositary securities. These proposals may or may not lead to a proposal being made for the entire
issued share capital of Ashanti. A further cautionary announcement, advising shareholders to exercise
caution in dealing in AngloGold's shares was issued on June 13, 2003.
On May 23, 2003, AngloGold announced that it had signed an agreement to sell its wholly-owned Amapari
Project to Minerao Pedra Branca do Amapari, for the total consideration of $18.2 million. The Amapari
project is located in the State of Amap, North Brazil. Since acquiring the property as part of the Minorco
transaction, the Company has sought to prove up additional reserve ounces in order to get it to a size and life
that would justify the management resources needed to run it effectively. This was not achieved and
AngloGold, on receiving a fair offer from a purchaser who could constructively turn this orebody to account,
agreed to sell.
On June 6, 2003, AngloGold announced that it had finalized the sale of its 49 percent stake in the Gawler
Craton Joint Venture, including the Tunkillia project located in South Australia to Helix Resources Limited.
Consideration for the sale comprised cash of $500,000 (A$750,000), 1.25 million fully-paid Helix shares
issued at A$0.20 per share and 1.25 million Helix options exercisable at A$0.25 per option before November
30, 2003 with an additional payment of $335,000 (A$500,000) deferred to the delineation of a mineable
resource of 350,000 ounces. Helix's proposed acquisition of AngloGold's rights to the Tarcoola Project, 60
kilometres to the south, was excluded from the final agreement. This resulted in a restructure of the original
agreement terms, as announced on April 8, 2003.
On July 2, 2003, AngloGold announced that it had concluded the sale of its interest in the Jerritt Canyon Joint
Venture to Queenstake Resources USA Inc. effective June 30, 2003. This followed negotiations originally
announced on February 27, 2003. Queenstake paid the Jerritt Canyon Joint Venture partners, AngloGold
and Meridian Gold, $1.5 million in cash and 32 million shares issued by a subsidiary, Queenstake Resources
Limited, with $6 million in deferred payments and $4 million in future royalty payments. Queenstake accepted
full closure and reclamation liabilities. AngloGold's shareholding represents approximately 9.2 percent of
Queenstake Resources Limited's issued share capital and, although it does not currently have any intention
to acquire additional shares in Queenstake, depending on the market price of Queenstake shares, general
economic and industry conditions and other factors, and subject to applicable securities laws, AngloGold may
either sell its shares in Queenstake or acquire additional shares.
On July 30, 2003 the directors of AngloGold declared an interim dividend of 375 South African cents
(approximately 51 US cents) per ordinary share for the six months ended June 30, 2003 with a record date of
August 22, 2003 and a payment date of August 29, 2003 for holders of ordinary shares and CDIs, and
September 12, 2003 for holders of ADSs.
AngloGold Riches of Africa Jewellery Design Competition
A leader in gold marketing internationally, AngloGold is involved in a range of projects to increase consumer
demand for gold jewellery through enhancing its image and desirability. These have included the
sponsorship of a number of gold jewellery competitions, which the company has found to be an effective way
of encouraging designers to experiment with new styles and techniques in gold.
When AngloGold established the Riches of Africa gold jewellery design competition in South Africa in 1998,
there were further objectives in mind. These were to use the competition to enhance local skills and to
support the local gold jewellery industry, and to use the event to showcase the design and goldsmithing
capabilities of South Africans.
With the recent unveiling of the fifth gold jewellery collection Riches of Africa 2003 in Johannesburg, it
seems appropriate to reflect on what has been achieved since the competition was launched. Support for
the event has grown, with the number of entries growing from 204 in 1999 to 1,112 in 2003. Unquestionably,
if the collections of the first and fifth competitions are compared the pieces of 2003 are more innovative,
more visually arresting and definitely bolder than those of 1999.
This does not detract from the achievements of the first winners. The progress is testimony to the great
value of competitions, challenging people to try ever harder to improve standards and to innovate. It is also
a consequence of changes to the rules every year. These changes have been made in the interests of fine-
tuning competition conditions to give entrants every chance to produce the best work possible. Important
changes that have been made are the introduction of a theme; the holding of workshops for all entrants; the
opening of the competition to non-jewellers, making the event accessible to people involved in all design
disciplines; and the scrapping of separate categories for professionals and amateurs. The most significant
development in 2003 has been to allow participants to include both white and coloured gold in their designs.
The Riches of Africa collections are exhibited throughout South Africa and abroad, either in fashion shows
where they are teamed with designer garments or in exhibitions.
AngloGold is proud of the role that Riches of Africa has played in bringing the talents of South African
jewellery designers and goldsmiths to the attention of a wide audience.
Forward-looking statements
Except for historical information, there may be matters discussed in this interim report that are forward-
looking statements. In particular, the statements made under "Gold market" regarding the future
performance of the gold market, "Operating review Gold production" and " Capital expenditures"
regarding the future operating performance and "Financial review Production costs" regarding the future
financial performance of AngloGold 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.
