Filed pursuant to Rule 424(b)(5)

Registration Nos. 333-161634; 333-161634-01

SUBJECT TO COMPLETION, DATED SEPTEMBER 14, 2010

Prospectus Supplement to Prospectus dated April 20, 2010

 

 

AngloGold Ashanti Holdings Finance plc

 

$          % Mandatory Convertible Subordinated Bonds due 2013

Mandatorily Convertible into American Depositary Shares,

each representing one ordinary share of AngloGold Ashanti Limited

 

Fully and Unconditionally Guaranteed on a Subordinated Basis by AngloGold Ashanti Limited

 

 

AngloGold Ashanti Holdings Finance plc, or Holdings Finance, is offering $      aggregate principal amount of its     % mandatory convertible subordinated bonds fully and unconditionally guaranteed on a subordinated basis by AngloGold Ashanti Limited, or AngloGold Ashanti (the “bonds”). Interest will be payable quarterly in arrears on March 15, June 15, September 15 and December 15 of each year, commencing on December 15, 2010.

 

The bonds will be mandatorily converted into American Depositary Shares, or ADSs each representing as at the date hereof one ordinary share, par value ZAR0.25 per share of AngloGold Ashanti (or, in certain circumstances, the cash value thereof). Mandatory conversion will be on September 15, 2013 (subject to postponement in certain limited circumstances, the “stated maturity date,” and such date or any earlier date to which repayment of the bonds is accelerated, the “maturity”). The conversion rate per $50 principal amount of the bonds will be not more than      ADSs and not less than      ADSs, depending on the market value of the ADSs as described in this prospectus supplement. At any time from the earlier of (i) 90 calendar days following the first original issuance date of the bonds and (ii) the date (the “approval date”) on which the shareholders of AngloGold Ashanti in a general meeting shall have approved the issue of ordinary shares upon an exercise of conversion rights under the bonds and placed a sufficient number of ordinary shares of AngloGold Ashanti under control of its directors as a specific authority for that purpose, until the 25th scheduled trading day immediately preceding September 15, 2013, you may elect to convert your bonds, in whole or in part, at the minimum conversion rate, together with a cash payment in respect of deferred interest to, but excluding, the immediately preceding interest payment date. Holdings Finance may convert the bonds at its option, in whole but not in part, at any time after the approval date and on or before the 25th scheduled trading day immediately preceding September 15, 2013 at the maximum conversion rate, together with a cash payment in respect of accrued and unpaid interest on the bonds (including any deferred interest), and a cash payment in respect of the present value of all remaining interest payments on the bonds. If a fundamental change occurs, you will be permitted to convert your bonds at the fundamental change conversion rate, together with a cash payment in respect accrued and unpaid interest on the bonds (including any deferred interest) and a cash payment in respect of the present value of all remaining interest payments on the bonds. Each of the fixed conversion rates (as defined in this prospectus supplement) is subject to certain adjustments as described under “Description of Bonds — Conversion Rate Adjustments.”

 

The bonds will be unsecured subordinated obligations of Holdings Finance. The guarantee will be unsecured and subordinated, as described under “Description of Bonds — Ranking”.

 

We have granted the underwriters an option exercisable for a period of 30 days from the date of this prospectus supplement to purchase up to an additional $      principal amount of the bonds at the initial price to investors, less the underwriting discount, to cover over-allotments, if any.

 

The bonds will initially be convertible into a maximum of 15,773,914 ADSs (or a maximum of 18,140,000 ADSs in total if the underwriters exercise their over-allotment option in full).

 

AngloGold Ashanti’s ADSs, each currently representing one ordinary share, are listed on the New York Stock Exchange, or NYSE, under the symbol “AU”. AngloGold Ashanti’s ordinary shares are listed on the JSE Limited, or the JSE, under the symbol “ANG” and on other stock exchanges in London, Paris and Ghana and in the form of depositary interests in Brussels, Ghana and Australia. On September 13, 2010 the closing price of AngloGold Ashanti’s ordinary shares on the JSE was ZAR 321.90 per ordinary share and the closing price of AngloGold Ashanti’s ADSs on the NYSE was $44.59 per ADS. Holdings Finance will apply to list the bonds on the NYSE.

 

Concurrently with this offering of bonds, under a separate prospectus supplement, AngloGold Ashanti is offering 15,773,914 ordinary shares (or 18,140,000 ordinary shares in total if the underwriters of that offering exercise their over-allotment option with respect to that offering in full), in the form of ordinary shares or ADSs, in a public offering. Neither the completion of this offering nor of the offering of ordinary shares and ADSs will be contingent on the completion of the other.

 

See “Risk Factors” starting on page S-20 of this prospectus supplement to read about factors you should consider before investing in the bonds.

 

Neither the Securities and Exchange Commission, or SEC, nor any other regulatory body has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus supplement and the accompanying prospectus. Any representation to the contrary is a criminal offense.

 

 

 

 

 

The bonds will be ready for delivery in book-entry form only through The Depository Trust Company on or about          , 2010.

 

Joint Bookrunners

 

Co-Bookrunners

 

 

Prospectus Supplement dated          , 2010

 

TABLE OF CONTENTS

 

Prospectus Supplement

 

 

This document consists of two parts. The first part is this prospectus supplement, which describes the specific terms of this offering of bonds to be issued by AngloGold Ashanti Holdings Finance plc, guaranteed by AngloGold Ashanti Limited, or AngloGold Ashanti. The second part, the accompanying base prospectus, presents more general information. Generally, when we refer only to the “prospectus”, we are referring to the base prospectus, including the documents incorporated by reference in the base prospectus.

 

If the description of this offering varies between this prospectus supplement and the accompanying prospectus, you should rely on the information in this prospectus supplement.

 

You should rely only on the information contained in this document or in one to which we have referred you in this prospectus supplement and the accompanying prospectus. We have not authorized anyone to provide you with information that is different. This document may be used only where it is legal to sell these securities. The information in this document may be accurate only on the date hereof.

 

Unless the context requires otherwise, in this prospectus supplement, “Holdings Finance” refers to AngloGold Ashanti Holdings Finance plc and the “Company”, the “Group”, “we” or “us” refers to AngloGold Ashanti Limited and its consolidated subsidiaries.

 

In this prospectus supplement, references to rands, ZAR and R are to the lawful currency of the Republic of South Africa, references to Australian dollars and A$ are to the lawful currency of Australia, references to US dollars, dollars and $ are to the lawful currency of the United States, references to British pounds are to the lawful currency of the United Kingdom, references to cedis are to the lawful currency of Ghana, references to Brazilian real and BRL are to the lawful currency of Brazil and references to Argentinean pesos are to the lawful currency of Argentina.

 

In connection with the offering, the underwriters are not acting for anyone other than us and they will not be responsible to anyone other than us for providing the protections afforded to their clients or for providing advice in relation to the offering.

 

We file annual and other reports with the SEC. The SEC maintains a website (http://www.sec.gov) on which our annual and other reports are made available. Such reports may also be read and copied at the SEC’s public reference room at 100 F Street, N.E., Washington DC 20549. Please call the SEC at +1-800-SEC-0330 for further information on the public reference room. You may also read and copy these documents at the offices of the New York Stock Exchange, 20 Broad Street, New York, New York 10005.

 

This prospectus supplement includes and incorporates by reference “forward-looking information” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the “Securities Act”, and Section 21E of the Securities Exchange Act of 1934, as amended, or the “Exchange Act”. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements, including, without limitation, those concerning: our strategy to reduce our gold hedging positions including the extent and effect of the reduction of our gold hedging positions; the economic outlook for the gold mining industry; expectations regarding gold prices, production, cash costs and other operating results; growth prospects and outlook of our operations, individually or in the aggregate, including the completion and commencement of commercial operations at our exploration and production projects; the completion of announced mergers and acquisitions transactions; our liquidity and capital resources and expenditures; the outcome and consequences of any pending litigation proceedings; and our Project One performance targets. These forward-looking statements

are not based on historical facts, but rather reflect our current expectations concerning future results and events and generally may be identified by the use of forward-looking words or phrases such as “believe”, “aim”, “expect”, “anticipate”, “intend”, “foresee”, “forecast”, “likely”, “should”, “planned”, “may”, “estimated”, “potential”, or other similar words and phrases. Similarly, statements that describe our objectives, plans or goals are or may be forward-looking statements.

 

These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to differ materially from the anticipated results, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in these forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct.

 

The risk factors described herein could affect our future results, causing these results to differ materially from those expressed in any forward-looking statements. These factors are not necessarily all of the important factors that could cause our actual results to differ materially from those expressed in any forward-looking statements. Other unknown or unpredictable factors could also have material adverse effects on the future results.

 

You should review carefully all information, including the financial statements and the notes to the financial statements, included in this prospectus supplement and all documents incorporated herein by reference. The forward-looking statements included in this prospectus supplement are made only as of the last practicable date and the forward-looking statements in the documents incorporated by reference are made only as of the last practicable date before the filing of such documents. We undertake no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this prospectus supplement or to reflect the occurrence of unanticipated events. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are qualified by the cautionary statement in this section.

 

This prospectus supplement is for distribution only to persons who (i) have professional experience in matters relating to investments falling within Article 19(5) of the United Kingdom Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) (the “Financial Promotion Order”), (ii) are persons falling within Article 49(2)(a) to (d) of the Financial Promotion Order, being, among other things, high net worth companies and/or unincorporated associations, (iii) are outside the United Kingdom, or (iv) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the United Kingdom Financial Services and Markets Act 2000 (as amended) (the “FSMA”) in connection with the issue or sale of any securities may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as “relevant persons”). This prospectus supplement is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this prospectus supplement relates is available only to relevant persons and will be engaged in only with relevant persons.

 

This prospectus supplement has been prepared on the basis that any offer of securities in any Member State of the European Economic Area (“EEA”) which has implemented the Prospectus Directive (2003/71/EC) (each, a “Relevant Member State”) will be made pursuant to an exemption under the Prospectus Directive, as implemented in that Relevant Member State, from the requirement to publish a prospectus for offers of securities. Accordingly, any person making or intending to make any offer in that Relevant Member State of securities which are the subject of the offering contemplated in this prospectus supplement may only do so in circumstances in which no obligation

arises for us or any of the underwriters to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive, in each case, in relation to such offer. Neither the Company, nor the underwriters have authorized, nor do they authorize, the making of any offer of securities in circumstances in which an obligation arises for the Company or any underwriter to publish or supplement a prospectus for such offer.

 

Holdings Finance is organized under the laws of the Isle of Man and AngloGold Ashanti Limited is incorporated under the laws of South Africa. All of the directors and officers of Holdings Finance reside outside the United States and all except one of AngloGold Ashanti Limited’s directors and one of AngloGold Ashanti Limited’s officers, and the experts named herein, reside outside the United States, principally in South Africa. You may not be able, therefore, to effect service of process within the United States upon those directors and officers with respect to matters arising under the federal securities laws of the United States.

 

In addition, substantially all of our and Holdings Finance’s respective assets and the assets of our and Holdings Finance’s respective directors and officers are located outside the United States. As a result, you may not be able to enforce against us or Holdings Finance or our or Holding Finance’s respective directors and officers judgments obtained in US courts predicated on the civil liability provisions of the federal securities laws of the United States.

 

We have been advised by Cains Advocates Limited, our Isle of Man counsel, that there is no statutory procedure in the Isle of Man for the recognition or enforcement of judgments of the US courts. However, under Isle of Man common law, a judgment in personam given by a US court may be recognized and enforced by an action for the amount due under it provided that the judgment: (i) is for a debt or definite sum of money (not being a sum payable in respect of taxes or other changes of a like nature or in respect of a fine or other penalty); (ii) is final and conclusive; (iii) was not obtained by fraud; (iv) is not one whose enforcement would be contrary to public policy in the Isle of Man; and (v) was not obtained in proceedings which were opposed to natural justice in the Isle of Man.

 

Based on the foregoing, we have been advised by our counsel in the Isle of Man that there is no certainty as to the enforceability in the Isle of Man, either in original actions or in actions for enforcement of judgments of US courts, of liabilities predicated upon the civil liability provisions of the US federal securities laws.

 

We have been advised by Taback & Associates (Pty) Limited, our South African counsel, that there is doubt as to the enforceability in South Africa, in original actions or in actions for enforcement or judgments of US courts, of liabilities predicated on the US federal securities laws.

 

In this prospectus supplement and in documents incorporated by reference herein, we present financial items such as “total cash costs”, “total cash costs per ounce”, “total production costs” and “total production costs per ounce” that have been determined using industry standards promulgated by the Gold Institute and are not measures under US GAAP. An investor should not consider these items in isolation or as alternatives to any measure of financial performance presented in accordance with US GAAP either in this document or in any document incorporated by reference herein.

 

While the Gold Institute has provided definitions for the calculation of “total cash costs”, “total cash costs per ounce”, “total production costs” and “total production costs per ounce”, the definitions of certain non-GAAP financial measures included herein may vary significantly from those of other gold mining companies, and by themselves do not necessarily provide a basis for comparison with other gold mining companies. However, we believe that total cash costs and total production costs in

total by mine and per ounce by mine are useful indicators to investors and management of a mine’s performance because they provide:

 

 

The SEC allows us to “incorporate by reference” the information we submit to it, which means that we can disclose important information to you by referring you to certain documents filed with or furnished to the SEC that are considered part of this prospectus through incorporation by reference. Information that we file with or furnish to the SEC in the future and incorporate by reference will automatically update and supersede the previously filed or furnished information. We incorporate by reference the documents listed below and any future filings made with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act other than any portions of the respective filings that were furnished, under applicable SEC rules, rather than filed, until we complete our offering:

 

 

You may obtain a copy of these filings at no cost by writing or telephoning us at the following address:

 

 

AngloGold Ashanti North America Inc.
7400 E. Orchard Road
Suite 350
Greenwood Village, CO 80111
Telephone: +1 303-889-0753
Fax: +1 303-889-0707
Email: MPatterson@AngloGoldAshantiNA.com

 

PROSPECTUS SUPPLEMENT SUMMARY

	•	production from 20 operations in ten countries: Argentina, Australia, Brazil, Ghana, Guinea, Mali, Namibia, South Africa, Tanzania and the United States;
	•	gold production and reserves for the year ended December 31, 2009 of 61% and 56%, respectively, from operations outside South Africa; and
	•	gold production from a broad variety of ore body types as well as a variety of open-pit and heap-leach (42%), underground (54%) and surface and dump reclamation (4%) operations.

	•	managing the business;
	•	portfolio optimization and capital deployment; and
	•	growing the business.

	•	ensure safe work practices and a healthy workforce (safety is our first value, which is reflected in all leadership behaviors and is the foundation on which we build all value-enhancing processes in our business);
	•	increase and consistently generate returns on capital of above 15%;
	•	meet production targets on time and within budget;
	•	manage our costs and associated escalations (we intend to manage our input costs in order to maximize margins and returns on capital employed over the life cycle of each of our projects); and
	•	maximize revenues, including by reducing our hedge book. See “Hedge Book Reduction” below.

	•	a 70% reduction in accident rates;
	•	a 30% improvement in overall productivity (in terms of ounces of gold produced per employee);
	•	a 60% reduction in reportable environmental incidents;
	•	a 20% increase in gold production;
	•	a 25% reduction in real IFRS total cash costs per ounce; and
	•	an increase in average return on capital to above 15%.

	•	Portfolio Optimization.  We analyze our portfolio on both an absolute basis and relative to other gold companies in our peer group. When conducting this analysis, we identify the strengths and weaknesses of our portfolio, with a particular focus on portfolio risk.
	•	Optimizing Capital Deployment.  We seek to allocate capital to leverage maximum value and returns from existing assets and growth opportunities. We review and rank internally each asset and project as part of the annual business planning process with the goal of most efficiently and effectively deploying capital across our existing assets. Assets that no longer meet our criteria may be targeted for sale, but only at attractive valuations.

	•	leveraging our current ground holdings and asset positions through greenfields exploration and brownfields exploration and development;
	•	selectively pursuing merger and acquisition opportunities; and
	•	maximizing the value of other commodities within our existing and developing asset portfolio.
	•	Greenfields Exploration and Brownfields Exploration and Project Development.  We prioritize organic growth through greenfields exploration, brownfields exploration and project development, leveraging our current ground holding and asset position as the most value-efficient path to growth.

	•	Australia.  The Tropicana joint venture, in which we hold a 70% interest, covers approximately 12,500 square kilometers and is located to the east and northeast of Kalgoorlie in Western Australia. Together with ongoing exploration, a pre-feasibility study was completed for Tropicana in the second quarter of 2009 and the favorable outcome of this study has resulted in a decision to proceed with a feasibility study which is scheduled for completion in the fourth quarter of 2010 when the partners will make an investment decision. In July 2010, the Western Australia Environmental Protection Agency released its report and recommendation on the project and it is anticipated that the State and Federal ministers will announce their decisions by year-end. If the necessary regulatory and board approvals are obtained by the end of 2010, we expect that construction will start in early 2011 and gold production would begin in the first half of 2013. Finalization of capital and operating costs are in progress and development of the implementation schedule and construction contracting strategies is underway. We have estimated that Tropicana would produce between 330,000 and 410,000 ounces per annum (70% of which is attributable to us) over its life. As part of the Tropicana project, scoping studies are expected to be completed in the second half of this year at both the Havana Deeps deposit and at the Boston Shaker deposit. The Havana Deeps prospect represents the potential higher grade underground extension of the Havana open-pit ore body which already forms part of the Tropicana project. The Boston Shaker deposit, located approximately 500 meters northeast of Tropicana, has now been defined over a 700-meter strike length, is open down dip and may be included in the Tropicana project. In addition to the Tropicana project, reconnaissance exploration drilling is also continuing in parallel within parts of the remaining 12,500 square kilometers area of the Tropicana joint venture.
	•	Colombia.  In Colombia, we have developed a “3 level participation model” comprising our own exploration initiatives, exploration joint ventures with established players and equity positions in other exploration companies that are also active in Colombia. Our land holding position in Colombia, which includes tenements held and under application and including tenements held with our joint venture partners, is approximately 16,100 square kilometers. Principal exploration

		initiatives in Colombia include our wholly-owned La Colosa deposit as well as the Gramalote joint venture with B2Gold Corp. (in which we now own a 51% interest following our recent acquisition of an additional 2% interest from B2Gold Corp pursuant to the Gramalote joint venture agreement). On October 20, 2009, we received a resolution from the Ministry of the Environment and Territorial Development of Colombia, which allowed for initiation of exploration permitting procedures for La Colosa before the regional environmental authority, Cortolima. Drill preparation work and regional exploration (including mapping and sampling) is in progress and further exploration drilling as part of ongoing pre-feasibility studies commenced in August 2010. Also in August 2010, we entered into an amendment agreement to the Gramalote joint venture agreement with B2Gold Corp. pursuant to which we assumed operatorship of the Gramalote joint venture. See “— Recent Developments — Amendment of the Gramalote Joint Venture Agreement”. Feasibility studies and further exploration drilling will now commence at Gramalote in September 2010 and are planned to continue into 2011 and 2012 with the goal of completing a final feasibility study by the end of 2012.

	•	DRC.  After the findings of the DRC Mineral Review Commission were completed in February 2009, we engaged with the DRC government and L’Office des Mines d’Or de Kilo-Moto, or OKIMO (the DRC state gold mining company and shareholder with us in Ashanti Goldfields Kilo (AGK)). We negotiated a definitive joint venture agreement and supporting documentation with OKIMO for the development, in accordance with the DRC mining code, of the AGK project in which we hold an 86.22% interest, as well as the transfer of exploitation permits covering an area of 5,866 square kilometers as part of the original Concession 40 tenement to AGK. We entered into these agreements on March 20, 2010. Following the conclusion of these agreements, we, in partnership with OKIMO, are scheduled to complete a feasibility study at the Mongbwalu-Adidi project in the first quarter of 2011. A 20,000 meter combined drilling program is currently underway at Mongbwalu-Adidi and a further 5,000 meter program is planned for early phase drill-testing of regional targets within the broader 5,866 square kilometer area and is expected to commence during 2010. In addition to our 86.22% interest in AGK, we also hold a 45% interest in the Kibali gold project (45% held by Rangold Resources Limited and 10% by OKIMO) where, as at December 31, 2009, our 45% attributable share of the ore reserves of Kibali was 4.14 million ounces and where exploration and feasibility studies continue. An updated feasibility study, which will optimize the mining plan and the size of the plant, is on track for completion by the end of 2010. Pre-construction preparations have run ahead of schedule given positive interaction with local communities and rapid development of associated infrastructure allowing the start of construction to be brought-forward by six months to mid-2011. The project is on track to begin gold production in January 2014.

	•	Mponeng Ventersdorp Contact Reef, or VCR, below 120 Level project (South Africa): Approved in February 2007, this project entails exploiting the VCR ore reserves located from 120 Level to 126 Level at Mponeng and is estimated to recover 2.7 million ounces of gold with first production scheduled for 2013 and full production in 2015.

	•	Mponeng Carbon Leader Reef, or CLR, below 120 Level project (South Africa):  A feasibility study is in progress to exploit the CLR ore reserves located below 120 Level at Mponeng. Estimates are that 14.7 million ounces of gold could be recovered from this project, which we expect will be developed in the medium term, with annual production of approximately 450,000 ounces.
	•	Moab Khotsong phase II (Zaaiplaats) (South Africa):  A feasibility study has been completed on the optimal extraction of the ore body within the lower mine area of Moab Khotsong which, if developed, will further extend the life of Moab Khotsong recovering an estimated 5.1 million ounces of gold with an average annual production of approximately 370,000 ounces. We expect that this project will be developed in the medium term with further underground exploration and some pre-development approved by our board of directors in August 2010 to commence in the second half of 2010.
	•	Cerro Vanguardia (Argentina):  The underground mining project at Cerro Vanguardia in Argentina will involve underground mining below seven of the deeper high-grade open pits that have been or are currently being mined by way of open-pit techniques. Underground mining is expected to be cheaper than open pit mining in these deeper pits. A feasibility study, including trial mining below one of the existing pits, is scheduled to be completed in the second half of 2010. If approved by our board of directors in the short term following the completion of the feasibility study, we expect that this project, which could produce 613,000 ounces of gold and 6.1 million ounces of silver over the anticipated life of the project, will be developed from early 2011. We may also consider similar underground production at other pits at Cerro Vanguardia in the future. In addition, a feasibility study for a heap leach project at Cerro Vanguardia, based on the treatment of low grade ore through a small heap leaching operation, was completed in 2009. The feasibility study indicated that Cerro Vanguardia’s annual gold production could rise by an additional 20,000 ounces per annum through the employment of this process. The project was approved by our board of directors in February 2010 and production is scheduled to begin in the second quarter of 2011.
	•	Córrego do Sítio (including the Saõ Bento mine) (Brazil):  We acquired the former Saõ Bento property from Eldorado Gold Corporation in December 2008 and subsequently renamed it AngloGold Ashanti Córrego do Sítio Mineraçaõ. This acquisition resulted in the consolidation and doubling in size of the Córrego do Sítio project (Phase II), adding mineral potential and infrastructure. The project plan for Phase I of the project (which includes only the original Córrego do Sítio property) covers potential mining of the Cachorro Bravo, Laranjeiras and Carvoaria Velha ore bodies. The Córrego do Sítio Phase I feasibility study, which included an assessment of the metallurgical process for production of 140,000 ounces of gold annually and 1.9 million ounces over the life of the project, has been finalized and the project was approved by our board of directors in May 2010. Detailed engineering on the Córrego do Sítio project commenced immediately after the project was approved. Underground development is progressing on schedule and various environmental licenses have been obtained. The refurbishment and upgrade of the Saõ Bento plant (also part of the 2008 acquisition) is currently in process, while the contracts for the design and manufacture of the autoclaves have already been awarded. Production is expected to commence in early 2012.
	•	Lamego (Brazil):  A feasibility study for the Lamego project was approved by our board of directors in September 2009 and is currently being implemented. The planned ramp up in production at Lamego resulted in production of 18,000 ounces in 2009, with 33,000 ounces expected in 2010 and full production of 48,000 ounces expected in 2011. We estimate that Lamego will produce approximately 469,000 ounces of gold over nine years.
	•	Nova Lima Sul (Brazil):  The objective of this project is to mine a number of target areas in the vicinity of AngloGold Ashanti Brazil Mineraçaõ’s current operations and process the ore utilizing idle capacity at AngloGold Ashanti Brazil Mineraçaõ’s Queiroz processing plant.

		The project consists of three phases and a feasibility study for phase 1 of the project, which we estimate has the potential to produce approximately 880,000 ounces of gold, is expected to be completed in early 2011. If phase 1 is approved by our board of directors following completion of the feasibility study, development of this phase of the project will then commence. The feasibility studies for phases 2 and 3 of the project are expected to be completed by the end of 2013.

	•	Obuasi and Obuasi Deeps (Ghana):  Brownfields exploration and studies for the exploitation of the vast ore body below 50 Level at Obuasi continue, in addition to business improvement initiatives and other mine design and operating plans to establish sustained improvements in operational performance and efficiencies in existing operations above 50 level at Obuasi.
	•	Sadiola Deeps (Mali):  The objective of this project is to treat the hard sulphide ore from the main pit through a new plant in parallel with the current oxide plant thus increasing the overall processing capacity at Sadiola. Iamgold, our 41% partner in Sadiola, is currently managing a feasibility study for Sadiola Deeps, which is expected to be completed in late 2010.
	•	Mine Life Extension projects at Cripple Creek & Victor, or CC&V (United States):  The required permits have been granted from the State of Colorado and Teller County and construction has begun on the first mine life extension project at the Cripple Creek & Victor mine as approved by our board of directors in October 2008, which includes the development of new sources of ore and an extension to the existing heap-leach facility. This project has been accelerated and it is now scheduled to be commissioned by the end of 2010 and is expected to increase the mine life, resulting in the recovery of 1.4 million ounces of gold. In addition, development drilling continues to define areas of interest for which engineering analysis and permitting requirements are being evaluated in a feasibility study for a second mine life extension project at the Cripple Creek & Victor mine.

	•	Mergers and Acquisitions.  We continue to pursue value-accretive acquisition opportunities with a view to enhancing our ground-holding asset positions and our regional presence as well as achieving further growth in our business. Recent acquisitions have included transactions that have resulted in our acquisition of a 45% interest in the Kibali gold project (completed in August 2009 and December 2009) and the acquisition of an additional 3% interest in the Sadiola gold mine (completed in December 2009).
	•	Other Commodities.  We produce uranium, silver and sulfuric acid as byproducts of our existing gold production. We are increasing our uranium production with the upgrade of our existing uranium plant located at our Vaal River operations in South Africa, which is expected to be completed in 2012, as well as the ramp-up of gold production at Moab Khotsong (with a similar increase and ramp-up of uranium production from this mine).

	•	We would be fully exposed from 2011 to the spot price of gold in what we expect to be a strong gold price environment.
	•	We expect to realize higher profit margins and cash flows from 2011, as a result of the low committed prices under existing contracts that would be removed.
	•	Our strategic position would be enhanced with a more robust capital structure to fund the growth initiatives described under “— Strategy — Growing the Business” above as a result of the expected improvement in profitability and cash flow. On a combined basis, we believe that these growth initiatives, which we estimate will require project capital expenditure (excluding stay in business and ore reserve development capital expenditure) of approximately $2,450 million over the next three years, have the potential to add significantly to our ore reserves as well as the potential to increase our annual gold production from current levels. See “Risk Factors — Risks related to our results of operations and our financial condition as a result of factors specific to us and our operations — We expect to have significant financing requirements.”

	•	R600 million payable at completion of the transaction, as R450 million in cash and the remaining R150 million in cash or shares in Simmers (such balance being subject to an offset

		adjustment (up to a maximum of R150 million) based on the free cash flow generated by Tau Lekoa between January 1, 2009 and July 31, 2010 and including an offset for the royalty payable from January 1, 2010 to June 30, 2010 (this balancing amount will be determined based upon a final audit of the July 2010 production figures)); and

	•	a royalty determined at 3% of the net revenue (gross revenue less state royalties) generated by the Tau Lekoa mine and any operations developed at Weltevreden and Goedgenoeg. The royalty will be payable quarterly, from January 1, 2010, until the total production from Tau Lekoa, Weltevreden or Goedgenoeg upon which the royalty is paid is equal to 1.5 million ounces and provided that the average quarterly rand price of gold is equal to or exceeds R180,000/kg (in January 1, 2010 terms).

														Six Months Ended
		Year Ended December 31,												June 30,
		2007				2008				2009				2009				2010
Total attributable gold production (000 ounces)(1)			5,477				4,982				4,599				2,230				2,205
Total cash costs ($ per ounce)(1)(2)			367				465				534				n/a				n/a
Total production costs ($ per ounce)(1)(2)			504				592				683				n/a				n/a
Production costs ($ million)			1,917	(3)			2,159	(3)			2,229	(3)			955				1,196
Capital expenditure ($ million)(1)			1,059				1,239				1,027				502				397

(1)		Including equity accounted joint ventures for management reporting purposes.
(2)		“Total cash costs per ounce” and “total production costs per ounce” have been determined using industry standards promulgated by the Gold Institute and are not measures under US GAAP. We believe that total cash costs and total production costs per ounce, expressed in the aggregate or on a mine-by-mine basis, are useful indicators to investors and management of a mine’s performance because 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 mines, both within our group and of other gold mining companies.

(3)		Audited.

																						Six Months Ended
		Year Ended December 31,																				June 30,
		2005				2006				2007(1)				2008(2)				2009				2009				2010
																						(Unaudited)				(Unaudited)
		(In $ millions, except per share amounts)
Consolidated statement of income
Sales and other income			2,485				2,715				3,095				3,730				3,954				1,501				2,406
Product sales(3)			2,453				2,683				3,048				3,655				3,784				1,441				2,370
Interest, dividends and other			32				32				47				75				170				60				36
Costs and expenses			2,848				2,811				3,806				4,103				4,852				1,148				2,312
Operating costs(4)			1,842				1,785				2,167				2,452				2,543				1,084				1,397
Royalties			39				59				70				78				84				36				58
Depreciation, depletion and amortization			593				699				655				615				615				285				336
Impairment of assets			141				6				1				670				8				—				19
Interest expense			80				77				75				72				123				57				67
Accretion expense			5				13				20				22				17				8				10
(Profit)/loss on sale of assets, realization of loans, indirect taxes and other			(3	)			(36	)			10				(64	)			10				(83	)			16
Mining contractor termination costs			9				—				—				—				—				—				—
Non-hedge derivative loss/(gain)			142				208				808				258				1,452				(239	)			409
(Loss)/income from continuing operations before income tax, equity income in affiliates and cumulative effect of accounting change			(363	)			(96	)			(711	)			(373	)			(898	)			353				94
Taxation benefit/(expense)			121				(122	)			(118	)			(22	)			33				(154	)			(106	)
Equity income/(loss) in affiliates			39				99				41				(149	)			88				44				39
Net (loss)/income from continuing operations before cumulative effect of accounting change			(203	)			(119	)			(788	)			(544	)			(777	)			243				27
Discontinued operations			(44	)			6				2				23				—				—				—
Net (loss)/income			(247	)			(113	)			(786	)			(521	)			(777	)			243				27
Net income attributable to noncontrolling interests			(23	)			(29	)			(28	)			(42	)			(48	)			(13	)			(23	)
Cumulative effect of accounting change			(22	)			—				—				—				—				—				—
Net (loss)/income — attributable to AngloGold Ashanti Limited			(292	)			(142	)			(814	)			(563	)			(825	)			230				4
(Loss)/income from continuing operations			(248	)			(148	)			(816	)			(586	)			(825	)			230				4
Discontinued operations			(44	)			6				2				23				—				—				—
Net (loss)/income — attributable to AngloGold Ashanti Limited			(292	)			(142	)			(814	)			(563	)			(825	)			230				4

																						Six Months Ended
		Year Ended December 31,																				June 30,
		2005				2006				2007(1)				2008(2)				2009				2009				2010
																						(Unaudited)				(Unaudited)
		(In $ millions, except per share amounts)
Other financial data
Basic (loss)/income per ordinary share (in $)(5)
From continuing operations			(0.85	)			(0.54	)			(2.93	)			(1.86	)			(2.30	)			0.65				0.02
Discontinued operations			(0.17	)			0.02				0.01				0.07				—				—				—
Before cumulative effect of accounting change			(1.02	)			(0.52	)			(2.92	)			(1.79	)			(2.30	)			0.65				0.02
Cumulative effect of accounting change			(0.08	)			—				—				—				—				—				—
Net (loss)/income — attributable to AngloGold Ashanti Limited ordinary stockholders			(1.10	)			(0.52	)			(2.92	)			(1.79	)			(2.30	)			0.65				0.02
Diluted (loss)/income per ordinary share (in $)(5)
From continuing operations			(0.85	)			(0.54	)			(2.93	)			(1.86	)			(2.30	)			0.64				0.02
Discontinued operations			(0.17	)			0.02				0.01				0.07				—				—				—
Before cumulative effect of accounting change			(1.02	)			(0.52	)			(2.92	)			(1.79	)			(2.30	)			0.64				0.02
Cumulative effect of accounting change			(0.08	)			—				—				—				—				—				—
Net (loss)/income — attributable to AngloGold Ashanti Limited ordinary stockholders			(1.10	)			(0.52	)			(2.92	)			(1.79	)			(2.30	)			0.64				0.02
Dividend per ordinary share (cents)			56				39				44				13				13				5				10

		As at December 31,																				As at June 30,
		2005				2006				2007(1)				2008(2)				2009				2010
																						(Unaudited)
		(In $ millions, except share amounts)
Consolidated balance sheet data
Cash and cash equivalents and restricted cash			204				482				514				585				1,112				880
Other current assets			1,197				1,394				1,599				2,328				1,646				1,591
Property, plant and equipment, and acquired properties, net			6,439				6,266				6,807				5,579				6,285				6,235
Goodwill and other intangibles, net			550				566				591				152				180				170
Materials on the leach pad (long-term)			116				149				190				261				324				307
Other long-term assets, derivatives, deferred taxation assets and other long-term inventory			607				656				680				546				1,115				1,086
Total assets			9,113				9,513				10,381				9,451				10,662				10,269
Current liabilities			1,874				2,467				3,795				3,458				4,475				3,195
Provision for environmental rehabilitation			325				310				394				302				385				393
Deferred taxation liabilities			1,152				1,275				1,345				1,008				1,171				1,145
Other long-term liabilities, and derivatives			2,539				2,092				2,232				1,277				1,186				2,123
Equity(6)			3,223				3,369				2,615				3,406				3,445				3,413
Total liabilities and equity			9,113				9,513				10,381				9,451				10,662				10,269
Capital stock (exclusive of long-term debt and redeemable preferred stock)			10				10				10				12				12				12
Number of ordinary shares as adjusted to reflect changes in capital stock			264,938,432				276,236,153				277,457,471				353,483,410				362,240,669				362,752,860
Net assets			3,223				3,369				2,615				3,406				3,445				3,413

(1)		Includes the acquisition of 15% minority interest acquired in the Iduapriem and Terebie mine with effect from September 1, 2007.
(2)		2008 results include the acquisition of the remaining 33% shareholding in the Cripple Creek & Victor Gold Mining Company with effect from July 1, 2008. In prior years, the investment was consolidated as a subsidiary. The 2008 treatment is therefore consistent with that of prior years.
(3)		Product sales represent revenue from the sale of gold.
(4)		Operating costs include production costs, exploration costs, related party transactions, general and administrative, market development costs, research and development, employment severance costs and other.
(5)		The calculations of basic and diluted loss per ordinary share are described in note 9 to our consolidated financial statements included in our 2009 US GAAP Results Release. Amounts reflected exclude E ordinary shares.
(6)		Includes noncontrolling interests.

 

THE OFFERING

Issuer		AngloGold Ashanti Holdings Finance plc.
Guarantor		AngloGold Ashanti Limited.
Amount of Bonds Offered		$           aggregate principal amount (or $           aggregate principal amount if the underwriters exercise their over-allotment option in full) of     % mandatory convertible subordinated bonds due 2013. The bonds will initially be convertible into a maximum of 15,773,914 ADSs (or a maximum of 18,140,000 ADSs in total if the underwriters exercise their over-allotment option in full).
Guarantee		We have fully and unconditionally guaranteed, on a subordinated basis, the performance and full and punctual payment of all of Holdings Finance’s obligations under the indenture and the bonds, whether for delivery of ADSs or for payment of interest or any other amounts that may become due and payable in respect of the bonds.
Ranking
Bonds		The bonds will be unsecured and will be subordinated in right of payment to all of the existing and future senior indebtedness of Holdings Finance (including its 3.50% guaranteed convertible bonds due 2014) and senior in right of payment to all of the existing and future share capital of Holdings Finance.
Guarantee		The guarantee will be unsecured and will be subordinated to all of our existing and future indebtedness.
		Upon our liquidation, dissolution or winding up, the claims of the holders of bonds under the guarantee will be subordinated to other claims against our assets as follows:
		• with respect to principal, a holder of bonds shall be entitled to participate in the liquidation of our proceeds to the same extent as a holder of a number of our ordinary shares equal to the number of ordinary shares underlying the ADSs the holder of bonds would have received upon conversion of such bonds at the maximum conversion rate; and
		• with respect to the payment of interest, including deferred interest and additional amounts under the bonds and any make-whole or present value payment for future interest, the holder’s claim for such amounts will rank (i) junior to all indebtedness of, and guarantees of indebtedness by, us; (ii) senior to all of our guarantees in respect of share capital issued by our subsidiaries; and (iii) senior to all of our share capital.
Initial Offering Price		$50 per bond.

Principal Amount		$50 per bond.
Interest Rate		The bonds will bear interest at a rate of     % annually from September   , 2010, based on a 360-day year of twelve 30-day months.
Interest Payment Dates		Interest will be payable quarterly in arrears on March 15, June 15, September 15 and December 15 of each year, commencing on December 15, 2010.
Deferral of Interest Payments		Holdings Finance may elect to defer interest payments, in which case the deferred interest will accrue interest at the stated interest rate, as described under “Description of Bonds — Deferral of Interest Payments.”
Redemption		The bonds are not redeemable by Holdings Finance prior to the stated maturity date. See “Description of Bonds — Early Conversion at Holdings Finance’s Option.”
Stated Maturity Date		September 15, 2013, subject to postponement in limited circumstances.
Mandatory Conversion		On the stated maturity date, each bond will automatically convert into a number of ADSs, each currently representing one of our ordinary shares, equal to the sum of the daily conversion amounts over a twenty consecutive trading day observation period beginning on the 25th scheduled trading day immediately preceding September 15, 2013.
		The daily conversion amount for each trading day of the observation period will be calculated as follows:
		(i) if the daily VWAP (as defined under “Description of Bonds — Mandatory Conversion” below) of our ADSs on such trading day is equal to or greater than $      (the “threshold appreciation price”), then the daily conversion amount per bond will equal 1/20th of the minimum conversion rate;
		(ii) if the daily VWAP of our ADSs on such trading day is less than the threshold appreciation price but greater than $      (the “initial price”), then the daily conversion amount per bond will equal $2.50 divided by the daily VWAP on such trading day; and
		(iii) if the daily VWAP of our ADSs on such trading day is less than or equal to the initial price, then the daily conversion amount per bond will equal 1/20th of the maximum conversion rate.
		“Minimum conversion rate” means          ($50.00 divided by the threshold appreciation price).
		“Maximum conversion rate” means          ($50.00 divided by the initial price).
Conversion at the Option of the Holder		Holders of the bonds have the right to convert their bonds, in whole or in part, at any time from the optional conversion commencement date (as defined below) until the 25th

		scheduled trading day immediately preceding September 15, 2013 at the minimum conversion rate of           ADSs per bond, subject to adjustment as described under “Description of Bonds — Conversion Rate Adjustments” below.
		Optional conversion commencement date means the earlier of (i) 90 calendar days following the first original issuance date of the bonds and (ii) the date (the “approval date”) on which our shareholders shall have approved in a general meeting the issue of ordinary shares by us upon an exercise of conversion rights under the bonds and placed a sufficient number of ordinary shares under control of our directors as a specific authority for that purpose.
		In addition to the number of ADSs issuable upon such conversion, each holder that elects to convert its bonds early as described in the second immediately preceding paragraph at the minimum conversion rate will have the right to receive an amount payable in cash equal to any deferred interest through the interest payment date immediately preceding the date of the optional conversion as described under “Description of Bonds — Conversion at the Option of the Holder” below.
Early Conversion at Holdings Finance’s Option		The bonds may be converted into ADSs at the option of Holdings Finance, in whole but not in part, at any time after the approval date and on or before the 25th scheduled trading day immediately preceding September 15, 2013, upon not less than 20 trading days’ nor more than 30 trading days’ prior notice to the holders of the bonds. Upon such early conversion, a holder of the bonds shall receive (i) a number of ADSs per bond equal to the maximum conversion rate (and cash in lieu of any fractional ADS); (ii) an amount of cash equal to any accrued and unpaid interest (including any deferred interest) on the bonds to, but excluding, the date of conversion; and (iii) an amount of cash equal to the present value of all remaining interest payments on the bonds, including the interest payment due on September 15, 2013 (but excluding any accrued interest to the date of conversion).
Conversion Upon Fundamental Change		If a fundamental change (as defined under “Description of Bonds — Conversion Upon Fundamental Change”) occurs at any time after the initial issuance of the bonds up to, and including, the 25th scheduled trading day immediately preceding September 15, 2013, then, regardless whether shareholder conversion approval (as defined below) has been obtained, holders will be permitted to convert their bonds at any time during the period beginning on, and including, the effective date of such fundamental change (the “effective date”) and ending on, but excluding, the earlier of (i) September 15, 2013 and (ii) the date that is 20 business days after the effective date at the conversion rate determined as described under “Description of Bonds —

		Conversion Upon Fundamental Change”, plus accrued and unpaid interest (including any deferred interest) to, but excluding, the date of conversion payable in cash, plus the present value of all remaining interest payments on the bonds, including the interest payment due on September 15, 2013 (but excluding any accrued interest to the date of conversion) payable in cash.
Automatic Cash Settlement; Cash True-Up in Certain Circumstances		Until our shareholders in a general meeting shall have approved the issue of ordinary shares by us upon an exercise of conversion rights under the bonds and placed a sufficient number of ordinary shares under control of our directors as a specific authority for that purpose (the “shareholder conversion approval”), the bonds are subject to automatic cash settlement as described under “Description of Bonds — Automatic Cash Settlement; Cash True-Up in Certain Circumstances.” Once we obtain shareholder conversion approval, Holdings Finance will promptly notify the trustee that automatic cash settlement will no longer apply.
		The shareholder conversion approval will be in respect of the maximum number of ordinary shares underlying ADSs deliverable upon conversion of the bonds, without giving effect to any conversion rate adjustments. In the event that, following shareholder conversion approval, a fundamental change or conversion rate adjustment causes the maximum number of ADSs deliverable upon conversion of all then-outstanding bonds to exceed the number of ADSs that can be issued upon the deposit of the then-remaining ordinary shares we have reserved for such purpose, then upon any subsequent conversion, Holdings Finance may satisfy its obligation to deliver ADSs upon such conversion by delivering a combination of ADSs and a true-up cash amount determined as described under “Description of Bonds — Automatic Cash Settlement; Cash True-Up in Certain Circumstances.”
Conversion Rate Adjustments		The minimum conversion rate and the maximum conversion rate are referred to as the fixed conversion rates. Each of the fixed conversion rates, the threshold appreciation price and the initial price will be adjusted in certain events but will not be adjusted for accrued and unpaid interest on the bonds. See “Description of Bonds — Conversion Rate Adjustments.”
Voting Rights		Holders of the bonds will have no voting rights.
Events of Default		Certain events of default applicable to the bonds are described in detail under the heading “Description of Debt Securities — Events of Default” in the accompanying prospectus, and certain additional events of default applicable to the bonds are described in this prospectus supplement under “Description of Bonds — Events of Default.” Upon a default and acceleration of the bonds, to the extent permitted by law, the bonds will automatically convert into ADSs at the

		maximum conversion rate and the holders thereof shall be entitled to receive an amount in cash equal to accrued and unpaid interest (including any deferred interest) to, but excluding, the date of acceleration, plus the present value of all remaining interest payments on the bonds, including the interest payment due on September 15, 2013 (but excluding any accrued interest to the date of conversion).
Use of Proceeds		We intend to use the net proceeds from this offering and the net proceeds from the concurrent Equity Offering, together with funds drawn from our existing credit facilities, to effectively eliminate our gold hedging position while maintaining a strong balance sheet to fund our development projects and exploration initiatives, as described under “— Hedge Book Reduction” and “— Strategy — Growing the Business,” respectively.
Listing		Holdings Finance will apply to list the bonds on the New York Stock Exchange.
Book-entry, delivery and form		The bonds will be represented by one or more permanent global certificates in definitive, fully registered form deposited with a custodian for, and registered in the name of, a nominee of The Depository Trust Company, or DTC. You will hold beneficial interests in the bonds through DTC and DTC and its direct and indirect participants will record your beneficial interest on their books. Certificated bonds will not be issued except in certain limited circumstances.
Delayed Settlement Cycle		The underwriters expect that delivery of the bonds will be made against payment therefor on the settlement date specified on the cover page of this prospectus supplement, which will be the fifth business day following the pricing of the bonds (this settlement cycle being referred to as “T+5”). Under Rule 15c6-1 under the Exchange Act, trades in the secondary market generally are required to settle in three business days, unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade bonds on the pricing date or the immediately following business day will be required, by virtue of the fact that the bonds initially will settle on a delayed basis, to agree to a delayed settlement cycle at the time of any such trade to prevent a failed settlement and should consult their own advisors.
Concurrent Offering		Concurrently with this offering of bonds, under a separate prospectus supplement, we are offering 15,773,914 ordinary shares (or 18,140,000 ordinary shares in total if the underwriters of that offering exercise their over-allotment option with respect to that offering in full), whether in the form of ordinary shares or ADSs, in a public offering. Neither the completion of this offering nor of the Equity Offering will be contingent on the completion of the other.

 

This section describes some of the risks that could materially affect an investment in the bonds being offered. You should read these risk factors in conjunction with the detailed discussion of risk factors starting on page 16 in our 2009 Form 20-F, and those identified in our future filings with the SEC, incorporated herein by reference. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business operations.

 

Risks related to our results of operations and our financial condition as a result of factors that impact the gold mining industry generally

 

Commodity market price fluctuations could adversely affect the profitability of our operations.

 

Our revenues are primarily derived from the sale of gold and, to a lesser extent, uranium, silver and sulphuric acid. The market prices for these commodities fluctuate widely. These fluctuations are caused by numerous factors beyond our control. For example, the market price of gold may fluctuate for a variety of reasons, including:

 

 

The market price of gold has recently experienced significant volatility. During 2009, the gold price traded from a high of $1,226.10 per ounce to a low of $801.65 per ounce. On September 13, 2010, the afternoon fixing price of gold on the London Bullion Market was $1,243.75 per ounce.

 

The price of gold is often subject to sharp, short-term changes resulting from speculative activities. While the overall supply of and demand for gold can affect its market price, because of the considerable size of above-ground stocks of the metal in comparison to other commodities, these factors typically do not affect the gold price in the same manner or degree that the supply of and demand for other commodities tends to affect their market price. In addition, the recent shift in gold demand from physical demand to investment and speculative demand may exacerbate the volatility of gold prices.

 

A sustained period of significant gold price volatility may adversely affect our ability to evaluate the feasibility of undertaking new capital projects or continuing existing operations or to make other long-term strategic decisions.

 

If revenue from gold sales falls below the cost of production for an extended period, we may experience losses and be forced to curtail or suspend some or all of our capital projects or existing

operations, particularly those operations having operating costs that are flexible to such short- to medium-term curtailment or closure, or change our dividend payment policies. In addition, we would have to assess the economic impact of low gold prices on our ability to recover any losses that may be incurred during that period and on our ability to maintain adequate cash reserves.

 

Foreign exchange fluctuations could have a material adverse effect on our operational results and financial condition.

 

Gold is principally a dollar-priced commodity, and most of our revenues are realized in, or linked to, dollars while production costs are largely incurred in the local currency where the relevant operation is located. As a result of our global operations and local foreign exchange regulations, some of our funds are held in local currencies, such as the South African rand and the Australian dollar. The weakening of the dollar, without a corresponding increase in the dollar price of gold against these local currencies, results in lower revenues and higher production costs in dollar terms. Conversely, the strengthening of the dollar, without a corresponding decrease in the dollar price of gold against these local currencies, yields significantly higher revenues and lower production costs in dollar terms. Exchange rate movements may have a material effect on our operating results. For example, a 1% strengthening of the South African rand, Brazilian real, the Argentinean peso and the Australian dollar against the US dollar will, other factors remaining equal, result in an increase in total cash costs under IFRS of nearly $5 per ounce or approximately 1% of our total cash costs. The impact on cash costs determined under US GAAP may be different.

 

The profitability of our operations, and the cash flows generated by these operations, are significantly affected by fluctuations in input production prices, many of which are linked to the prices of oil and steel.

 

Fuel, energy and consumables, including diesel, heavy fuel oil, chemical reagents, explosives, tires, steel and mining equipment consumed in mining operations form a relatively large part of the operating costs and/or capital expenditures of any mining company. We have no influence over the cost of these consumables, many of which are linked to some degree to the price of oil and steel.

 

The price of oil has recently been volatile, reaching a high of $88.37 per barrel and a low of $65.99 per barrel in the first half of 2010 as compared to an all-time high oil price of $145.11 per barrel on July 11, 2008. We have estimated that for each $1 per barrel rise in the oil price, other factors remaining equal, the average cash costs under IFRS of all our operations increases by about $0.50 per ounce with the cash costs of certain of our mines, particularly Geita, Cripple Creek & Victor, Siguiri and Sadiola, which, being more dependent on fuel, are more sensitive to changes in the price of oil. Furthermore, the price of steel which is used in the manufacture of most forms of fixed and mobile mining equipment is also a relatively large contributor to the operating costs and capital expenditure of a mining company and has also been volatile recently. For example, the price of flat HRC (North American Domestic FOB) steel reached a high of $763 per ton and a low of $639 per ton in the first half of 2010 as compared to an all time high price of $1,240 per ton during May 2008.

 

Fluctuations in the price of oil and steel have a significant impact upon operating cost and capital expenditure estimates and, in the absence of other economic fluctuations, could result in significant changes in the total expenditure estimates for new mining projects or render certain projects non-viable.

 

Energy cost increases, and power fluctuations and stoppages, could adversely affect our results of operations and our financial condition.

 

Our mining operations are dependent upon electrical power generated by local utilities or by power plants situated at some of our operations.

 

In South Africa, our operations are substantially dependent on electricity supplied by Eskom, the state-owned utility. Eskom and the National Energy Regulator of South Africa, or the NERSA, continue to recognize the need for new supply capacity and a series of tariff increases and proposals have

been tabled. In the third quarter of 2009, Eskom applied to NERSA for a tariff review to obtain an additional 45% increase annually for the next three years, which was later reduced to 35% annually for three years. On February 24, 2010, NERSA approved an increase of about 25% per year for three years and as energy prices represent a large portion of our operating costs in South Africa, the resulting increases are having an adverse impact on the cash costs of our South African operations.

 

In addition, generating capacity was severely impaired in early 2008 when Eskom warned that it could no longer guarantee the availability of its supply of electrical power to the South African mining industry. Consequently, we, along with other mining companies with South African operations, were forced temporarily to suspend mining operations at our South African mines. We have since implemented various initiatives at our South African mines to reduce our electrical power demand. As a result of these initiatives, our South African mines continue to work at full capacity while drawing approximately 85% of the power consumption that we drew prior to 2008. We cannot give assurance that power supply to our South African operations will not experience future interruptions as the South African economic situation further improves, thereby potentially increasing the demand on the national grid system in South Africa.

 

In Ghana, our operations depend on hydroelectric power supplied by the Volta River Authority, or the VRA, an entity controlled by the government of Ghana which is supplemented by thermal power from the Takoradi plant as well as the smaller unit recently commissioned at Tema. The VRA’s principal electricity generating facility is the Akosombo Dam and during periods of below average inflows from the Volta reservoir, electricity supplies from the Akosombo Dam may be curtailed, as occurred in 1998, 2006 and the first half of 2007. In addition, during periods of limited electricity availability, the national power system is subject to system disturbances and voltage fluctuations, which can damage our equipment. The VRA has in the past also obtained power from neighboring Côte d’Ivoire, which has intermittently experienced some political instability and civil unrest.

 

From January 2009, and after negotiation, Ghana increased electricity charges at Obuasi from 9.2 to 9.3 US cents per kilowatt hour and at Iduapriem from 9.2 to 10.2 US cents per kilowatt hour. Even though these rates are expected to remain at these levels in the short term, they could be impacted by any significant spike in the crude oil price given the country’s dependence on light crude oil for firing the thermal power plants. The power tariffs in Ghana are currently under review. If this review and related negotiations are concluded resulting in an increase in these power tariffs, this could have a negative impact upon the operating costs and cash flow of our Ghanaian operations.

 

Our mining operations in Guinea, Tanzania and Mali are dependent on power supplied by outside contractors and supplies of fuel being delivered by road. Our power supply has been disrupted in the past and we have suffered resulting production losses as a result of equipment failure.

 

Global economic conditions could adversely affect the profitability of our operations.

 

Our operations and performance depend significantly on worldwide economic conditions. During 2009, following the global financial crisis that had severe negative impacts upon banking systems, financial institutions and financial and credit markets, general economic indicators continued to deteriorate, including declining consumer sentiment and business confidence, increased unemployment, reduced levels of capital expenditure, ongoing disruption in financial and credit markets and uncertainty regarding corporate earnings. In recent months, certain indices and economic data have shown some signs of improvement and stabilization. However, there can be no assurance that these improvements will be broad-based or sustainable and how they will affect the markets relevant for us remains uncertain.

 

A continuation of the global economic downturn may have follow-on effects on our business. For example:

 

 

 

In addition, uncertainty regarding global economic conditions may also increase the volatility or negatively impact the value of the market value of our securities.

 

Inflation may have a material adverse effect on our operational results.

 

Most of our operations are located in countries that have experienced high rates of inflation during certain periods.

 

Since we are unable to influence the market price at which we sell gold it is possible that significantly higher future inflation in the countries in which we operate may result in an increase in future operational costs in local currencies (without a concurrent devaluation of the local currency of operations against the dollar or an increase in the dollar price of gold). This could have a material adverse effect upon our results of operations and our financial condition.

 

While none of our operations are currently materially adversely affected by inflation, significantly higher and sustained inflation in the future, with a consequent increase in operational costs, could result in operations being reduced or rationalized at higher cost mines.

 

We face many risks related to the development of our mining projects that may adversely affect our results of operations and profitability.

 

The profitability of mining companies depends, in part, on the actual costs of developing and operating mines, which may differ significantly from estimates determined at the time a relevant mining project was approved following the completion of the relevant feasibility studies. The development of mining projects may also be subject to unexpected problems and delays that could increase the cost of development and the ultimate operating cost of the relevant project.

 

Our decision to develop a mineral property is typically based, in the case of an extension or, in the case of a new development, on the results of a feasibility study. Feasibility studies estimate the expected or anticipated project economic returns. These estimates are based on assumptions regarding:

 

 

Actual cash operating costs, production and economic returns may differ significantly from those anticipated by such studies and estimates. Operating costs and capital expenditure are driven to a significant extent by the costs of the commodity inputs, including the cost of fuel, chemical reagents,

explosives, tires and steel, consumed in mining activities and credits from byproducts, such as silver and uranium.

 

There are a number of uncertainties inherent in the development and construction of an extension to an existing mine, or in the development and construction of any new mine. In addition to those discussed above, these uncertainties include:

 

 

The cost, timing and complexities of mine development and construction can increase because of the remote location of many mining properties. New mining operations could experience unexpected problems and delays during development, construction and mine start-up. In addition, delays in the commencement of mineral production could occur. Finally, operating cost and capital expenditure estimates could fluctuate considerably as a result of changes in the prices of commodities consumed in the construction and operation of mining projects.

 

Accordingly, our future development activities may not result in the expansion or replacement of current production with new production, or one or more new production sites or facilities may be less profitable than currently anticipated or may not be profitable at all. Our operating results and financial conditions are directly related to the success of our project developments. A failure in our ability to develop and operate mining projects in accordance with, or in excess of, expectations could negatively affect our results of operations and our financial condition and prospects.

 

We face uncertainty and risks in our exploration, feasibility studies and other project evaluation activities.

 

Exploration activities are speculative in nature and feasibility studies and other project evaluation activities necessary to determine whether a viable mining operation exists or can be developed are often unproductive. These activities also often require substantial expenditure to establish the presence, and to quantify the extent and grades (metal content), of mineralized material through exploration drilling. We undertake feasibility studies to estimate the technical and economic viability of mining projects, including the determination of appropriate mining methods and metallurgical recovery processes to mine and extract gold from the ore. These activities are undertaken in order to estimate the ore reserve.

 

Once mineralization is discovered it can take several years to determine whether adequate ore reserves exist. During this time, the economic feasibility of production may change owing to fluctuations in factors that affect revenue, as well as cash and other operating costs, including:

 

 

Feasibility studies also include activities to estimate:

 

 

 

These estimates depend upon the data available and the assumptions made at the time the relevant estimate is made. Ore reserve estimates are not precise calculations and depend on the interpretation of limited information on the location, shape and continuity of the occurrence and on the available sampling results. Further exploration and feasibility studies can result in new data becoming available that may change previous ore reserve estimates which will impact upon both the technical and economic viability of production from the relevant mining project. Changes in the forecast prices of commodities, exchange rates, production costs or recovery rates may change the economic status of reserves resulting in revisions to previous ore reserve estimates. These revisions could impact depreciation and amortization rates, asset-carrying values provisions for closedown, restoration and environmental clean-up costs.

 

We undertake annual revisions to our ore reserve estimates based upon actual exploration and production results, depletion, new information on geology and fluctuations in production, operating and other costs and economic assumptions. These factors may result in reductions in our ore reserve estimates, which could adversely affect the life-of-mine plans and consequently the total value of our mining asset base. Ore reserve restatements could negatively affect our results, financial condition and prospects, as well as our reputation.

 

The increased demand for gold and other commodities, combined with a declining rate of discovery, has resulted in existing reserves being depleted at an accelerated rate in recent years. We therefore face intense competition for the acquisition of attractive mining properties. From time to time, we evaluate the acquisition of ore reserve, development properties and operating mines, either as stand-alone assets or as part of companies. Our decisions to acquire these properties have historically been based on a variety of factors including historical operating results, estimates of and assumptions regarding the extent of ore reserve, cash and other operating costs, gold prices and projected economic returns and evaluations of existing or potential liabilities associated with the relevant property and our operations and how these factors may change in the future. Other than historical operating results, all of these factors are uncertain and could have an impact upon revenue, cash and other operating issues, as well as the uncertainties related to the process used to estimate ore reserve.

 

As a result of these uncertainties, the exploration programs and acquisitions engaged in by us may not result in the expansion or replacement of the current production with new ore reserve or operations. Our operating results and financial condition are directly related to the success of our exploration and acquisition efforts and our ability to replace or increase existing ore reserve. If we are not able to maintain or increase our reserves, our results of operations and our financial condition and prospects could be adversely affected.

 

We face many risks related to our operations that may adversely affect our cash flows and overall profitability.

 

Gold mining is susceptible to numerous events that may have an adverse impact on a mining business, our ability to produce gold and meet our production targets. These events include, but are not limited to:

 

 

 

Seismic activity is of particular concern in underground mining operations, particularly in South Africa due to the extent and extreme depth of mining, and also in Australia and Brazil due to the depth of mining and residual tectonic stresses. For example, seismic activity at Savuka in 2009 led to damage to the shaft infrastructure, which contributed to a decline in production in 2009 and production is currently suspended pending consideration of the best way to access the ore body. Despite the implementation of technology and modifications to mine layouts and support technology with a view to minimizing the incidence and impact of seismic activity, seismic events have in the past, and may in the future, cause the death of, or injury to, employees and contractors.

 

Seismic activity may also cause the loss of mining equipment, damage to, or destruction of, mineral properties or production facilities, monetary losses, environmental damage and potential legal liabilities in South Africa and elsewhere where seismic activity may be a factor. As a result, these events may have a material adverse effect on our results of operations and our financial condition.

 

We are subject to extensive health and safety laws and regulations.

 

Gold mining operations are subject to a variety of industry-specific health and safety laws and regulations depending upon the jurisdiction in which they are located. These laws and regulations are designed to improve and to protect the safety and health of employees.

 

From time to time, new health and safety laws and regulations, or amendments to existing health and safety laws and regulations, are introduced in the jurisdictions in which we operate. Should compliance with new standards require a material increase in expenditure or material interruptions to our operations or production, including as a result of any temporary failure to comply with applicable regulations, our results of operations and our financial condition could be adversely affected. For example, in South Africa the government has introduced compulsory shutdowns of operations to enable investigations into the cause of accidents that have occurred at those operations and certain of our operations have been temporarily suspended for this reason in the past.

 

In addition, our reputation as a responsible company and employer could be damaged by any significant governmental investigation or enforcement of health and safety standards. Any of these factors could have a material adverse effect on our results of operations and financial condition.

Mining companies are increasingly required to consider and ensure the sustainable development of, and provide benefits to, the communities and countries in which they operate, and are subject to extensive environmental laws and regulations.

 

As a result of public concern about the perceived ill effects of economic globalization, business generally and large multinational corporations, such as AngloGold Ashanti, in particular, face increasing public scrutiny of their activities.

 

These businesses are under pressure to demonstrate that, as they seek to generate satisfactory returns on investment to shareholders, other stakeholders, including employees, communities surrounding operations and the countries in which they operate, benefit and will continue to benefit from their commercial activities. Such pressures tend to be particularly focused on companies whose activities are perceived to have a high impact on their social and physical environment. The potential consequences of these pressures include reputational damage, legal suits and social spending obligations.

 

The location of existing and proposed mining operations often coincides with the location of existing towns and villages, natural water courses and other infrastructure. Mining operations must therefore be designed to minimize their impact on such communities and the environment, either by changing mining plans to avoid any such impact, modifying mining plans and operations, or relocating the relevant people to an agreed location. These measures may include agreed levels of compensation for any adverse impact the mining operation may continue to have upon the community. The cost of these measures could increase capital and operating costs and therefore could have an adverse impact upon our results of operations.

 

We are subject to the above factors at certain of our existing and proposed mining sites and at all of our exploration sites.

 

Mining companies are also subject to extensive environmental laws and regulations in the various jurisdictions in which they operate. These regulations establish limits and conditions on producers’ ability to conduct their operations. The cost of our compliance with environmental laws and regulations has been, and is expected to continue to be, significant.

 

Environmental laws and regulations are continually changing and are generally becoming more restrictive. If our environmental compliance obligations alter as a result of changes in laws and regulations, or in certain assumptions we make to estimate liabilities, or if unanticipated conditions arise at our operations, including any temporary failure to comply with regulations, standards or operating procedures requiring our operations to be suspended, our expenses and provisions would increase and our rate of production and revenue could be adversely impacted. If material, these expenses and provisions could adversely affect our results of operations and our financial condition.

 

Mining companies are required by law to close their operations, and rehabilitate the lands that they mine, at the end of the life of the mine. Estimates of the total ultimate closure and rehabilitation costs for gold mining operations are significant and based principally on current legal and regulatory requirements that may change materially. Environmental liabilities are accrued when they become known, probable and can be reasonably estimated. Increasingly, regulators are seeking security in the form of cash collateral or bank guarantees in respect of environmental obligations, which could have an adverse effect on our financial condition.

 

Costs associated with rehabilitating land disturbed by the mining processes and addressing the environmental, health and community issues are estimated and financial provision made based upon information available currently. Estimates may however be insufficient and further costs may be identified at any stage. Any underestimated or unidentified rehabilitation costs would reduce earnings and could materially and adversely affect our asset values, earnings and cash flows.

Compliance with emerging climate change regulation could result in significant costs to us, and climate change may present physical risks to our operations.

 

Greenhouse gases, or GHGs, are emitted directly by our operations and indirectly as a result of the consumption of electricity purchased from external utilities. Emissions from electricity consumption are indirectly attributable to our operations. Currently, a number of international and national measures to address or limit GHG emissions, including the Kyoto Protocol and the Copenhagen Accord, are in various phases of discussion or implementation in the countries in which we operate. These measures could result in requirements for us to reduce our direct and indirect GHG emissions. For example:

 

 

Some of these measures already result in increased compliance costs for our power suppliers and are passed through to us in the form of price increases. For instance, in South Africa since 2009, we pay a levy of ZAR0.02 per kilowatt hour for electricity generated from fossil fuels. These levies may increase over time and additional levies may be introduced in the future in South Africa or other countries, which could result in a significant increase in our costs.

 

In addition, our operations could be exposed to a number of physical risks from climate change, such as increased rainfall, reduced water availability, higher temperatures and extreme weather events. Events or conditions such as flooding or inadequate water supplies could disrupt our mining and transport operations, mineral processing and rehabilitation efforts, and could increase health and safety risks onsite. In addition, such events or conditions could have adverse effects such as increased disease prevalence in our workforce and in communities in close proximity to our operations.

 

Mining operations and projects are vulnerable to supply chain disruption and our operations and development projects could be adversely affected by shortages of, as well as lead times to deliver, strategic spares, critical consumables, mining equipment or metallurgical plant.

 

Our operations and development projects could be adversely affected by shortages of, as well as lead times to deliver, strategic spares, critical consumables, mining equipment and metallurgical plant. In the past, we and other gold mining companies have experienced shortages in critical consumables, particularly as production capacity in the global mining industry has expanded in response to increased demand for commodities, and we have experienced increased delivery times for these items. These shortages have also resulted in unanticipated increases in the price of certain of these

items. Shortages of strategic spares, critical consumables, mining equipment or metallurgical plant, which could occur in the future, could result in production delays and production shortfalls, and increases in prices result in an increase in both operating costs and the capital expenditure to maintain and develop mining operations.

 

We and other gold mining companies, individually, have limited influence over manufacturers and suppliers of these items. In certain cases there are only limited suppliers for certain strategic spares, critical consumables, mining equipment or metallurgical plant who command superior bargaining power relative to us, or we could at times face limited supply or increased lead time in the delivery of such items.

 

Our procurement policy is to only source our mining and processing equipment and consumables from suppliers that meet our corporate values and ethical standards. In certain locations where a limited number of suppliers meet these standards, this places further strain upon our supply chain, thereby increasing our cost of supply and time of delivery.

 

If we experience shortages, or increased lead times in delivery of strategic spares, critical consumables, mining equipment or processing plant, our results of operations and our financial condition could be adversely affected.

 

Diversity in interpretation and application of accounting literature in the mining industry may impact our reported financial results.

 

The mining industry has limited industry-specific accounting literature. As a result, diversity exists in the interpretation and application of accounting literature to mining specific issues. For example, we capitalize the drilling and related costs incurred to define and delineate a residual mineral deposit that has not been classified as proved and probable reserves at a development stage or production stage mine, whereas some companies expense such costs. As and when diversity in interpretation and application is addressed, it may impact our reported results should the adopted interpretation differ from the position followed by us.

 

Risks related to our results of operations and our financial condition as a result of factors specific to us and our operations

 

We also face many specific risks related to our operations that may affect our cash flows and overall profitability.

 

We use gold hedging instruments and have entered into long-term sales contracts, which may prevent us from realizing potential gains resulting from subsequent commodity price increases in the future.

 

We have used gold hedging instruments to hedge the selling price of some of our anticipated production. The use of such instruments prevents full participation in subsequent increases in the market price for the commodity with respect to covered production. Since 2001, we have been reducing our hedge commitments through hedge buy-backs (limited to non-hedge derivatives until 2008), deliveries into contracts and restructuring in order to provide greater participation in a rising gold price environment. As a result of these measures, we have, and expect to continue to have, substantially less protection against declines in the market price of gold as compared with previous years.

 

We continue to hold gold hedging instruments to hedge the selling price of a portion of our anticipated gold production and to protect revenues against unfavorable gold price and exchange rate movements. While the use of these instruments may protect against a drop in gold prices and exchange rate movements, it will do so for only a limited period of time and only to the extent that the hedge remains in place. The use of these instruments may also prevent us from fully realizing the positive impact on income from any subsequent favorable increase in the price of gold on the portion of production covered by the hedge and of any subsequent favorable exchange rate movements.

During 2009, we continued executing our strategy to reduce our outstanding gold derivatives position, which resulted in our decision to accelerate the settlement of certain outstanding gold derivative positions. These accelerated settlements, together with the normal scheduled deliveries and maturities of other gold derivatives positions during 2009 and the first half of 2010, reduced the total committed ounces from 5.99 million ounces as at December 31, 2008 to 3.22 million ounces as at June 30, 2010 and 2.72 million ounces as at September 14, 2010.

 

Although the hedge restructurings and reductions referred to above have significantly reduced our hedge book, the current gold price results in a gap between the spot price and our received price of gold for ounces still hedged, and this may continue as we close out our existing hedge positions.

 

We face risks and uncertainties in the execution of our planned gold hedge restructuring.

 

Through the planned gold hedge restructuring, we intend to effectively eliminate our residual gold hedging position by early 2011, including by procuring early settlement of existing contracts that mature beyond 2010 in addition to purchasing off-setting derivatives and to settling contracts already due to mature. However, the exact nature and extent and execution of the gold hedge restructuring will depend upon the successful completion of this offering and the Equity Offering. The execution of the gold hedge restructuring will also depend or be affected by our ability to obtain consents from certain of our hedge counterparties, shareholder approval for the issuance of our ordinary shares underlying the ADSs issuable upon conversion of the bonds, the consent of our lenders under our revolving credit facility to amend the financial covenants such that the principal amount of the bonds is not treated as debt and the fair value adjustments of the bonds are not included in the calculation of EBITDA for purposes of the financial covenants, as well as prevailing and anticipated market conditions at the time of restructuring, particularly prevailing gold prices, exchange rates and other relevant economic factors. Should these conditions become unfavorable at any stage during the restructuring, this may delay or frustrate the implementation of the restructuring. In addition, should the outlook for gold prices, exchange rates and other economic factors materially change, it is possible that our plans for the execution of the gold hedge restructuring may be modified so as to minimize the adverse impact from such changes or maximize the benefits from them. If we are not able to successfully execute the planned gold hedge restructuring then we will be prevented from fully participating in higher gold prices should they continue to prevail.

 

Our mining rights in the countries in which we operate could be altered, suspended or cancelled for a variety of reasons, including if we breach our obligations in respect of our mining rights.

 

Our rights to own and exploit mineral reserves and deposits are governed by the laws and regulations of the jurisdictions in which the mineral properties are located. Currently, a significant portion of our mineral reserves and deposits are located in countries where mining rights could be suspended or cancelled should we breach our obligations in respect of the acquisition of these rights.

 

In all of the countries where we operate, the formulation or implementation of government policies may be unpredictable on certain issues, including changes in laws relating to mineral rights and ownership of mining assets and the rights to prospect and mine and in extreme cases, nationalization. Any existing and new mining and exploration operations and projects are subject to various national and local laws, policies and regulations governing the ownership and the right to prospect or mine or develop proposed projects. If we are not able to obtain or maintain necessary permits, authorizations or agreements to prospect or mine or to implement planned projects, or continue our operations under conditions, or within time frames, that make such plans and operations economically viable, or if the laws impacting our ownership of our mineral rights, or our right to prospect or mine were to change materially, our results of operations and our financial condition could be adversely affected.

 

In South Africa, mining rights are linked to meeting various obligations that include the Broad-Based Socio-Economic Empowerment Charter for the South African Mining Industry, or the Mining

Charter. Compliance with the Mining Charter, measured using a designated scorecard, requires that every mining company achieve 15% ownership by historically disadvantaged South Africans, or “HDSAs”, of its South African mining assets by May 2009, and 26% ownership by May 2014, and achieves participation by HDSAs in various other aspects of management.

 

We believe that we have made significant progress towards meeting the requirements of the Mining Charter, the scorecard and our own undertakings in terms of human resource development, employment equity, mine community and rural development, housing and living conditions, procurement and beneficiation. We will incur expenses in giving further effect to the Mining Charter and the scorecard.

 

The Mining Charter provides that it should be reviewed five years after becoming law. The outcome of the first phase of the review was made public in June 2010 and the outcome of the final review was made public in September 2010. According to the Mining Charter review, we are in compliance with the Mining Charter’s requirements relating to ownership by HDSAs of our mining assets and currently we are in compliance with the Mining Charter’s requirements relating to, among others, human resource development, mine community development, and sustainable development and growth. Whilst we are in compliance with the Mining Charter’s ownership targets to be achieved by May 2014, we must make further progress to achieve future targets set under the Mining Charter, in particular, further participation by HDSAs in various aspects of management, the upgrade of housing and accommodation at our mines, further human resource development, further mine community development, further sustainable development and growth and further procurement and enterprise development, certain of which are also included under the Code and Standard, as defined and discussed below and which targets must also be achieved by May 2014. We expect to be in compliance with these provisions by May 2014.

 

As required by the South African Mineral and Petroleum Resources Development Act, or the “MPRDA”, the Minister of Mineral Resources published a Code of Good Practice for the Minerals Industry, or the Code, and the Housing and Living Conditions Standard, or the Standard, in April 2009. The Code was developed to create principles which would facilitate the effective implementation of minerals and mining legislation and enhance the implementation of the Mining Charter applicable to the mining industry. The Standard aims to include the provision of housing as an integral part of infrastructure during the development of a mine. Both the Code and the Standard provide that non-compliance equates to non-compliance with the MPRDA. It is unclear whether non-compliance with the Code or the Standard would lead to the cancellation or suspension of a mining right or whether they would be considered legislation under the MPRDA. Subsequent to the publication of the Code and the Standard, representatives of the Department of Mineral Resources, organized labor and the South African mining industry have engaged in discussions in an effort to address the concerns of the mining industry and to possibly amend the Code and the Standard. Furthermore, discussions related to the Code and Standard have also become related to the review of the Mining Charter. It is anticipated that the contents of the Code and Standard will ultimately be amended in line with the amendments to the Mining Charter that have resulted from its review. Details of the final Code and Standard are currently uncertain.

 

Our mining rights in South Africa can be suspended or cancelled by the Minister of Mineral Resources if, upon notice of a breach from the Minister, we breach our obligations in complying with the MPRDA. The MPRDA also imposes additional responsibilities on mining companies relating to environmental management and to environmental damage, degradation or pollution resulting from their prospecting or mining activities. We have a policy of evaluating, minimizing and addressing the environmental consequences of our activities and, consistent with this policy and the MPRDA, conduct an annual review of the environmental costs and liabilities associated with our South African operations in light of applicable requirements.

We may experience unforeseen difficulties, delays or costs in successfully implementing our business strategy, and our strategy may not result in the anticipated benefits.

 

The successful implementation of our business strategy depends upon a number of factors, including factors that are outside our control. For example, the successful management of costs will depend upon prevailing market prices for input costs and the ability to grow the business will depend on the successful implementation of our existing and proposed project development initiatives and continued exploration success as well as on the availability of attractive merger and acquisition opportunities, all of which are subject to the relevant mining and company specific risks as outlined in these risk factors. We cannot give assurance that unforeseen difficulties, delays or costs will not adversely affect the successful implementation of our business strategy, or that our strategy will result in the anticipated benefits.

 

Our level of indebtedness could adversely affect our business.

 

As at June 30, 2010, we had gross borrowings of approximately $1.7 billion. In this offering, AngloGold Ashanti Holdings Finance plc, our indirect wholly-owned subsidiary, is offering up to $           aggregate principle amount (or $           aggregate principal amount if the underwriters exercise their over-allotment option in full) of bonds, which we will guarantee on a subordinated basis.

 

Our indebtedness could have adverse effects on our flexibility to do business. For example, we may be required to utilize a large portion of our cash flow to pay the principal and interest on our debt which will reduce the amount of funds available to finance existing operations, the development of new organic growth opportunities and further acquisitions. In addition, under the terms of our borrowing facilities from our banks, we are obliged to meet certain financial and other covenants. Our ability to continue to meet these covenants will depend upon our future financial performance which will be affected by our operating performance as well as by financial and other factors, certain of which are beyond our control.

 

Under our revolving credit facility, we are required not to exceed a specified net debt to EBITDA ratio (as defined in the facility). The issuance of the bonds and the use of the proceeds thereof will increase our net debt, as the bonds will be treated as debt for this purpose, and make our EBITDA (defined by reference to our IFRS financial statements for purposes of the financial covenants in our revolving credit facility) more volatile as we will be required to record future changes in the fair value of the option component of the Mandatory Convertible Bonds, which could be material, in our IFRS income statement.

 

We intend to seek the consent of our lenders under the revolving credit facility to amend the financial covenants such that the principal amount of the bonds is not treated as debt and the fair value adjustments of the bonds are not included in the calculation of EBITDA for purposes of the financial covenants. If we fail to obtain such consent, the exact nature and extent of, and our ability to execute, the gold hedge restructuring, our capacity to incur indebtedness and our ability to fund our development projects and exploration initiatives, or spend cash on hand, may be materially affected or we may be required to refinance our revolving credit facility.

 

Should the cash flow from operations be insufficient, we could breach our financial and other covenants and may be required to refinance all or part of our existing debt, use existing cash balances, issue additional equity or sell assets. We cannot be sure that we will be able to do so on commercially reasonable terms, if at all.

 

We expect to have significant financing requirements.

 

Our development projects and exploration initiatives, including the Mponeng Ventersdorp Contact Reef Projects in South Africa, Córrego do Sítio and Lamego in Brazil, the mine life extension project at Cripple Creek & Victor in the United States and the heap leach project at Cerro Vanguardia in Argentina and, if approved, the development of Tropicana in Australia, La Colosa in Colombia, the

Kibali gold project and the Mongbwalu project in the DRC, the Mponeng CLR project and project Zaaiplaats in South Africa, the Cerro Vanguardia underground mining project in Argentina, the Nova Lima Sul project in Brazil, the Sadiola Deeps project in Mali as well as various other greenfields and brownfields exploration projects and feasibility studies, will require significant funding. We estimate that these growth initiatives will require project capital expenditure (excluding stay in business and ore reserve development capital expenditure) of approximately $2,450 million over the next three years. Our capital expenditure plans and requirements are subject to a number of risks, contingencies and other factors, some of which are beyond our control, and therefore our actual future capital expenditure and investments may differ significantly from their current planned amounts. Our operating cash flow and credit facilities may be insufficient to meet all of these expenditures, depending on the timing and costs of development of these and other projects as well as our operating performance and available headroom under our credit facilities. As a result, new sources of capital may be needed to meet the funding requirements of these developments, to fund ongoing business activities and to pay dividends. Our ability to raise and service significant new sources of capital will be a function of macroeconomic conditions, future gold prices, our operational performance and operating cash flow and debt position, among other factors. Our ability to raise further debt financing in the future and the cost of such financing will depend on, among other factors, our prevailing credit rating, which may be affected by our ability to maintain our outstanding debt and financial ratios at levels acceptable to the credit ratings agencies, our business prospects or other factors. As a result, in the event of lower gold prices, unanticipated operating or financial challenges, or new funding limitations, our ability to pursue new business opportunities, invest in existing and new projects, fund our ongoing business activities, retire or service our outstanding debt and pay dividends could be significantly constrained, all of which could adversely affect our results of operations and our financial condition.

 

If our shareholders do not approve the issuance of ordinary shares underlying the ADSs issuable upon conversion of the bonds, the bonds will be subject to automatic cash settlement.

 

If our shareholders do not approve the issuance of the ordinary shares underlying the ADSs issuable upon conversion of the bonds, the bonds will be subject to automatic cash settlement. Cash settlement of the bonds will require significant cash reserves, which could further constrain our ability to pursue new business opportunities, invest in existing and new projects, fund our ongoing business activities, retire or service our outstanding debt and pay dividends, all of which could adversely affect our results of operations and our financial condition.

 

Furthermore, the rating agencies that rate us may revise our credit rating outlook from “stable” to “negative watch” as a result of the need to convene shareholder meeting to obtain the approval of the shareholders to allot and issue our shares upon the conversion of the Mandatory Convertible Bonds and may take further rating action, including a downgrade, if we fail to obtain such shareholder approval.

 

We do not operate two of our significant joint venture projects. If the operators of these projects do not perform effectively and efficiently, our investment in these projects could be adversely affected and/or our reputation could be harmed.

 

Our joint ventures at Morila in Mali and at Kibali in the DRC are operated by our joint venture partners. While we provide strategic management and operational advice to our joint venture partners in respect of these projects, we cannot ensure that these projects are operated in compliance with the standards that we apply in our other operations. If these joint ventures are not operated effectively or efficiently, including as a result of weaknesses in the policies, procedures and controls implemented by the joint venture partners, our investment in the relevant project could be adversely affected. In addition, negative publicity associated with ineffective and inefficient operatorship, particularly relating to any resulting accidents or environmental incidents, could harm our reputation.

Our mineral reserves, deposits and mining operations are located in countries that face political, economic and/or security risks.

 

Some of our mineral deposits and mining and exploration operations are located in countries that have experienced political instability and economic uncertainty. In all of the countries where we operate, the formulation or implementation of government policies may be unpredictable on certain issues including regulations which impact our operations and changes in laws relating to issues such as mineral rights and asset ownership, taxation, royalties, import and export duties, currency transfers, restrictions on foreign currency holdings and repatriation of earnings.

 

Any existing and new mining and exploration operations and projects we carry out in these countries are, and will be subject to, various national and local laws, policies and regulations governing the ownership, prospecting, development and mining of mineral reserves, taxation and royalties, exchange controls, import and export duties and restrictions, investment approvals, employee and social community relations and other matters.

 

If, in one or more of these countries, we were not able to obtain or maintain necessary permits, authorizations or agreements to implement planned projects or continue our operations under conditions or within time frames that make such plans and operations economic, or if legal, ownership, fiscal (including all royalties and duties), exchange control, employment, environmental and social laws and regimes, or the governing political authorities change materially, resulting in changes to such laws and regimes, our results of operations and our financial condition could be adversely affected.

 

Certain of the countries in which we have mineral deposits or mining or exploration operations, including the DRC and Colombia, have in the past experienced, and in certain cases continue to experience, a difficult security environment as well as political instability. In particular, various illegal groups active in regions in which we are present may pose a credible threat of terrorism, extortion and kidnapping, which could have an adverse effect on our operations in such regions. In the event that continued operations in these countries compromise our security or business principles, we may withdraw from these countries on a temporary or permanent basis. Furthermore, we have at times experienced strained relationships with some of the communities in which we operate. This could have an adverse impact upon our results of operations.

 

In December 2008, the National Council for Democracy and Development, or “CNDD”, seized power in Guinea after the death of the country’s long-standing president, Lasana Conte. Moussa Dadis Camara, president of the CNDD, announced on December 27, 2008 the creation of a committee to examine and revise all existing mining agreements in Guinea. The committee’s review process has not yet commenced and we are currently unable to predict the timing and outcome of the committee’s examination. Pursuant to the direction of president Moussa Dadis Camara or his ministers, production at our Siguiri mine in Guinea and the export of gold from Guinea were temporarily interrupted during 2009, following a demand by the government to cash settle our environmental provisions. Production at the Siguiri mine resumed after we made a partial payment against our environmental provisions to the government of Guinea. We cannot give any assurance that future stoppages of this nature may not occur, or that further payments in advance of future liabilities will not be demanded by the government of Guinea. Such stoppages, if prolonged, could have a material adverse effect on the Siguiri mine. On December 3, 2009, president Moussa Dadis Camara was shot in an apparent assassination attempt and subsequently signed a transition agreement allowing for the end of military rule, presidential elections and the transfer of Guinea back to civilian rule. A new transitional government was appointed while elections are held. A first round of elections was held but, as a clear winner did not emerge, a second round of elections will take place at a date which is yet to be announced. President Moussa Dadis Camara has ruled himself out of running the presidential elections and the key figures in Guinea’s military hierarchy have all publicly vowed their support for the end to military rule. It is not certain what impact any future political instability in Guinea may have on our ability to manage and operate our mining operations in Guinea.

In Guinea, Mali and Tanzania, we are due refunds of input tax and fuel duties which remain outstanding for periods longer than those provided for in the respective statutes. In addition, we have other outstanding assessments and unresolved tax disputes in a number of countries, including Brazil, Argentina and Ghana. If the outstanding VAT input taxes are not received, the tax disputes are not resolved and assessments are not made in a manner favorable to us, it could have an adverse effect upon our results of operations and our financial condition. We may also be impacted by the outcome of elections in jurisdictions in which we have operations and ancillary political processes leading up to elections. We expect elections to occur in Tanzania in 2010, in the DRC in 2011 and in South Africa in 2014.

 

In February 2010, we and other mining companies operating in Ghana received notice that the government of Ghana was considering a review and various amendments to the Ghanaian mining fiscal regime. We have indicated to the government of Ghana that we substantially reject their proposals in light of the stability agreement we entered into with the government of Ghana in December 2003 and which was subsequently ratified by the parliament of Ghana in early 2004. If the government of Ghana prevails with its proposed amendment to the Ghanaian mining fiscal regime, then the royalties and income tax that we pay would increase significantly, which would have an adverse impact upon our results of operations in Ghana and our financial condition.

 

In May 2010, the government of Australia proposed a Resource Super Profit Tax, or “RSPT”, which would have required extractive industries, including the gold mining industry, to pay a tax of 40% on profits from Australian operations above certain levels determined by the government. Had the RSPT been implemented as proposed it would have had an adverse impact upon our financial results from our existing operations in Australia as well as from the Tropicana project when it becomes operational. However, in July 2010, the government of Australia proposed to replace the RSPT with the Mineral Resource Rent Tax, or “MRRT”, which will require companies to pay a tax of 30% on profits above certain levels determined by the government from the mining of iron ore and coal in Australia from July 1, 2012.

 

Should the government of Australia reintroduce the RSPT or extend the MRRT to the gold mining industry, or if similar “super profit” taxes are introduced in Australia or any other country in which we operate by governments seeking to capture a greater share of the economic benefits from their natural resources, our results of operations and financial position could be adversely affected.

 

Labor disruptions and/or increased labor costs could have an adverse effect on our results of operations and financial condition.

 

Our employees in South Africa, some South American countries, Ghana and Guinea are highly unionized. Trade unions therefore have a significant impact on our labor relations climate, as well as on social and political reforms, most notably in South Africa. There is a risk that strikes or other types of conflict with unions or employees may occur at any of our operations, particularly where the labor force is unionized. Labor disruptions may be used to advocate labor, political or social goals in the future. For example, labor disruptions may occur in sympathy with strikes or labor unrest in other sectors of the economy. Material labor disruptions could have an adverse effect on our results of operations and our financial condition.

 

As at December 31, 2009, approximately 67% of our workforce excluding contractors, or approximately 59% of our total workforce, was located in South Africa. In South Africa, it has become established practice to negotiate wages and conditions of employment with the unions every two years through the Chamber of Mines of South Africa. An agreement was signed with the unions in July 2009, following negotiations among the National Union of Mineworkers, the United Associations of South Africa, or “UASA” (on behalf of some clerical and junior management staff) and Solidarity (on behalf of a small number of miners) and the Chamber of Mines. This two-year wage agreement was reached without resort to any industrial action. We have agreed to an increase that has a 9.7% impact on payroll costs for our South African operations in the first year and 1% above inflation, with a

guaranteed minimum of 7.5%, in the second year. These wage increases were effective July 1, 2009. The next round of negotiations is expected to take place in 2011. We cannot give assurance that we will be able to renegotiate this agreement on satisfactory terms when it expires in July 2011.

 

As at December 31, 2009, approximately 11% of our workforce excluding contractors, or approximately 12% of our total workforce, was located in Ghana. In Ghana, a three-year wage agreement for the years 2009 to 2011, effective from January 1, 2009, was reached towards the end of 2009. We have agreed to increases that have a 10%, 12% and 12% impact on payroll costs for our Ghanaian operations for 2009, 2010 and 2011, respectively. The next round of negotiations is expected to take place in 2011. We cannot give assurance that we will be able to renegotiate this agreement on satisfactory terms when it expires at the end of December 2011.

 

Labor costs represent a substantial proportion of our total operating costs, and in many operations, including our South African, Ghanaian and Tanzanian operations, is our single largest operating cost component. Any increases in labor costs have to be off-set by greater productivity efforts by all operations and employees.

 

Certain factors may affect our ability to support the carrying amount of our property, plant and equipment, acquired properties, investments and goodwill on our balance sheet. If the carrying amount of our assets is not recoverable, we may be required to recognize an impairment charge, which could be significant.

 

We review and test the carrying value of our assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. We value individual mining assets at the lowest level for which identifiable cash flows are identifiable as independent of cash flows of other mining assets and liabilities.

 

If there are indications that impairment may have occurred, we prepare estimates of expected future cash flows for each group of assets. Expected future cash flows are inherently uncertain, and could materially change over time. They are significantly affected by reserve and production estimates, together with economic factors such as spot and forward gold prices, discount rates, currency exchange rates, estimates of costs to produce reserves and future capital expenditure.

 

If any of these uncertainties occur either alone or in combination, it could require management to recognize an impairment, which could adversely affect our financial condition.

 

The use of mining contractors at certain of our operations may expose us to delays or suspensions in mining activities and increases in mining costs.

 

We use mining contractors at certain of our operations to mine and deliver ore to processing plants. Consequently, at these mines, we do not own all of the mining equipment, and contracting costs represent a significant proportion of the total operating costs of these operations. Our operations could be disrupted, resulting in additional costs and liabilities, if the mining contractors at these mines have financial difficulties, or should there be a dispute in renegotiating a mining contract, or a delay in replacing an existing contractor. Increases in contract mining rates, in the absence of associated productivity increases, will also have an adverse impact on our results of operations and financial condition.

 

We compete with mining and other companies for key human resources.

 

We compete with mining and other companies on a global basis to attract and retain key human resources at all levels with appropriate technical skills and operating and managerial experience necessary to continue to operate our business. This is further exacerbated in the current environment of increased mining activity across the globe, combined with the global shortage of key mining industry human resource skills, including geologists, mining engineers, metallurgists and skilled artisans.

The retention of staff is particularly challenging in South Africa, where, in addition to the impacts of global industry shortages of skilled labor, we are also required to achieve employment equity targets of participation by HDSAs in management and other positions.

 

We compete with all companies in South Africa to attract and retain a small but growing pool of HDSAs with the necessary skills and experience.

 

There can be no assurance that we will attract and retain skilled and experienced employees and, should we fail to do so or lose any of our key personnel, our business and growth prospects may be harmed and our results of operations and our financial condition could be adversely affected.

 

The treatment of occupational health diseases and the potential liabilities related thereto may have an adverse effect upon the results of our operations and our financial condition.

 

The primary areas of focus in respect of occupational health within our operations in terms of employee welfare are noise induced hearing loss, or NIHL, occupational lung diseases, or OLD, which includes pulmonary and tuberculosis, or TB, in silica dust exposed individuals. We provide occupational health services to our employees at our occupational health centers and we continue to improve preventative occupational hygiene initiatives. If the costs associated with providing such occupational health services increase, the increase could have an adverse effect on our results of operations and our financial condition.

 

The South African government, by way of a cabinet resolution in 1999, has proposed a possible combination and alignment of benefits of the Occupational Diseases in Mines and Works Act, or ODMWA, that provides for compensation to miners who have OLD, TB and combinations thereof, and the Compensation for Occupational Injuries and Diseases Act, or COIDA, that provides for compensation to non-miners who have OLD. It appears less likely that the proposed combination of the two acts will occur but some alignment of benefits may be considered. COIDA provides for compensation payments to workers suffering permanent disabilities from OLD, which are classified as pension liabilities if the permanent disability is above a certain threshold, or a lump sum compensation payment if the permanent disability is below a certain threshold. ODMWA only provides for a lump sum compensation payment to workers suffering from OLD. The capitalized value of a pension liability (in accordance with COIDA) is usually greater than that of a lump sum compensation payment (under ODMWA). in addition, under COIDA compensation becomes payable at a lower threshold of permanent disability than under ODMWA. It is estimated that under COIDA about two to three times more of our employees would be compensated as compared with those eligible for compensation under ODMWA.

 

If the proposed combination of COIDA and ODMWA were to occur, this could further increase the level of compensation claims we could be subject to and consequently could have an adverse effect on our financial condition.

 

Mr. Thembekile Mankayi instituted a legal action against us in October 2006 in the South Gauteng High Court. Mr. Mankayi claimed approximately ZAR2.6 million for damages allegedly suffered by him as a result of silicosis allegedly contracted while working on mines now owned by us. The case was heard and a judgment in the exception action was rendered on June 26, 2008 in our favor on the basis that mine employers are insured under ODMWA and COIDA against compensable diseases, which precludes common law delictual claims by employees against employers. The appeal of Mr. Mankayi to the Supreme Court of Appeal of South Africa was dismissed. On August 17, 2010, Mr. Mankayi applied for leave to appeal to the Constitutional Court of South Africa, which is expected to permit or reject the application within four to six weeks from the date of the application. The Constitutional Court had previously found in another case that COIDA compensation is constitutional. If we are ultimately unsuccessful in defending this suit, we could be subject to numerous similar claims which could have an adverse effect on our financial condition.

 

In response to the effects of silicosis in labor sending communities, a number of mining companies (under the auspices of the Chamber of Mines), together with the NUM, which is the largest union in the mining sector and the national and regional departments of health have embarked on a

project to assist in the delivery of compensation and relief by mining companies under the ODMWA to communities that have been affected.

 

We face certain risks in dealing with HIV/AIDS, particularly at our South African operations, and with tropical disease outbreaks such as malaria, which may have an adverse effect on our results of operations.

 

AIDS and associated diseases remain the major health care challenge faced by our South African operations. Accurate prevalence data for AIDS is not available owing to doctor-patient confidentiality. The South African workforce prevalence studies indicate that the percentage of our South African workforce that may be infected by HIV may be as high as 30%. We are continuing to develop and implement various programs aimed at helping those who have been infected with HIV and preventing new infections. Since 2001, we have offered a voluntary counseling and HIV testing program for employees in South Africa. In 2002, we began to offer anti-retroviral therapy, or ART, to HIV positive employees who met the current medical criteria for the initiation of ART. From April 2003, we commenced a rollout of the treatment to all eligible employees desiring it. As of December 2009, approximately 2,200 employees were receiving treatment using anti-retroviral drugs.

 

We do not expect the cost that it will incur related to the prevention of HIV infection and the treatment of AIDS to materially and adversely affect our results of operations. Nevertheless, it is not possible to determine with certainty the costs that we may incur in the future in addressing this issue, and consequently our results of operations and our financial condition could be adversely affected.

 

Malaria and other tropical diseases pose significant health risks at all of our operations in Central, West and East Africa where such diseases may assume epidemic proportions because of ineffective national control programs. Malaria is a major cause of death in young children and pregnant women but also gives rise to fatalities and absenteeism in adult men. Consequently, if uncontrolled, the disease could have an adverse effect upon productivity and profitability levels of our operations located in these regions.

 

The costs associated with the pumping of water inflows from closed mines adjacent to our operations could have an adverse effect upon our results of operations.

 

Certain of our mining operations are located adjacent to the mining operations of other mining companies. The closure of a mining operation may have an impact upon continued operations at the adjacent mine if appropriate preventative steps are not taken. In particular, this can include the ingress of underground water where pumping operations at the adjacent closed mine are suspended. Such ingress could have an adverse effect upon any one of our mining operations as a result of property damage, disruption to operations and additional pumping costs and consequently could have an adverse impact upon our results of operations and our financial condition.

 

Regulation of over the counter (OTC) derivatives may adversely affect our financial condition and results of operations.

 

There is new legislation in the United States and there are proposals in the European Union to introduce laws and regulations that affect OTC derivatives, including rules that would increase collateralization and push many so-called standardized OTC derivatives into central clearing and exchange trading. This new or proposed legislation could:

 

 

 

We make use of financial derivatives in our treasury activities, particularly for gold, interest rate and foreign exchange hedging, and as a result any of the foregoing could adversely affect our financial condition and results of operations.

 

The occurrence of events for which we are not insured or for which our insurance is inadequate may adversely affect our cash flows and overall profitability.

 

We maintain insurance to protect only against catastrophic events which could have a significant adverse effect on our operations and profitability. This insurance is maintained in amounts that we believe to be reasonable depending upon the circumstances surrounding each identified risk. However, our insurance does not cover all potential risks associated with our business. In addition, we may elect not to insure certain risks, due to the high premiums associated with insuring those risks or for various other reasons, including an assessment that the risks are remote.

 

We may not be able to obtain insurance coverage at acceptable premiums. The availability and cost of insurance coverage can vary considerably from year to year as a result of events beyond our control or from claims, and this can result in higher premiums and periodically being unable to maintain the levels or types of insurance carried.

 

The occurrence of events for which we are not insured may adversely affect our cash flows and overall profitability and our financial condition.

 

Risks related to the bonds, our ordinary shares and our ADSs

 

We and Holdings Finance are not required to make payments to you under the bonds or the guarantee of the bonds unless we first make other required payments.

 

The obligations of Holdings Finance under the bonds and our obligations under the guarantee of the bonds are subordinated as described under “Description of Bonds — Ranking”. In a liquidation, dissolution or winding up of Holdings Finance, the assets of Holdings Finance would be available to pay obligations under the bonds only after Holdings Finance has made all payments due on senior indebtedness, including its 3.50% guaranteed convertible bonds due 2014. In a liquidation, dissolution or winding up of us, (i) our assets would be available to pay claims with respect to interest on the bonds only after we have made all payments due on our indebtedness and guarantees of indebtedness and (ii) with respect to principal, a holder would be entitled to participate in the liquidation of our proceeds to the same extent as a holder of a number of ordinary shares equal to the number of our ordinary shares underlying the ADSs the holder would have received upon conversion of such bonds at the maximum conversion rate.

 

Sales of large quantities of our ordinary shares and ADSs, the perception that these sales may occur or other dilution of our equity could adversely affect the prevailing market price of such securities.

 

The market price of our ordinary shares or ADSs could fall if large quantities of ordinary shares or ADSs are sold in the public market, or there is the perception in the marketplace that such sales could occur. Subject to applicable securities laws, holders of our ordinary shares or ADSs may sell them at any time. The market price of our ordinary shares or ADSs could also fall as a result of any future offerings we make of our ordinary shares, ADSs, or securities exchangeable or exercisable for our ordinary shares or ADSs, or the perception in the market place that these sales might occur. We may make such offerings, including offerings of additional ADS rights, share rights or similar securities, at any time or from time to time in the future. In addition, concurrently with this offering, we are offering an aggregate of 15,773,914 ordinary shares and ADSs (or 18,140,000 ordinary shares

and ADSs in total if the underwriters of that offering exercise their over-allotment option with respect to that offering in full) in a public offering.

 

As part of this offering, we expect to issue $      aggregate principal amount of bonds (or $      aggregate principal amount if the underwriters exercise their over-allotment option in full) which are mandatorily convertible into ADSs (or, in certain circumstances, the cash value thereof), and as at July 31, 2010, up to 15,384,615 of our ADSs (representing up to 15,384,615 of our ordinary shares) were issuable upon conversion of $732,500,000 principal amount of guaranteed convertible bonds issued by Holdings Finance in May 2009. The conversion of the bonds or the guaranteed convertible bonds will dilute the ownership interest of our existing shareholders. In addition, the price of our ordinary shares or ADSs could also be negatively affected by possible sales of our ordinary shares or ADSs by investors who view the bonds as a more attractive means of equity participation in us and by hedging or arbitrage trading activity that we expect to develop involving our ordinary shares or ADSs as a result of the issuance of the bonds.

 

There may not be a liquid trading market for the bonds.

 

The bonds are a new issue of securities for which there is currently no trading market. We cannot assure you that a trading market for the bonds will develop or be maintained in the United States or elsewhere. If an active market for the bonds fails to develop or be sustained, the trading price of the bonds could fall, and even if an active trading market were to develop, the bonds could trade at prices that may be lower than the initial offering price. There can be no assurance as to the liquidity of any market that may develop for the bonds, the ability of holders to sell their bonds, or the prices at which holders might be able to sell their bonds.

 

Certain terms of this offering may adversely impact our liquidity.

 

This offering will increase the amount of debt we have outstanding and the required on-going payments of interest we are required to make, which already are significant. As adjusted to give effect to this offering, we estimate that as of July 31, 2010 we would have had approximately $      billion of outstanding debt, which we will be required to service.

 

Our financial performance and other factors could adversely impact our ability to make payments on the bonds.

 

Our ability to make scheduled payments with respect to our indebtedness, including the bonds and the guarantees of the bonds, will depend on our financial and operating performance, which, in turn, is subject to prevailing economic conditions and to financial, business and other factors beyond our control.

 

The bonds do not restrict our ability to incur additional debt, including debt of Holdings Finance or our other subsidiaries, or prohibit us from taking other action that could negatively impact holders of the bonds. Your right to receive payments on the bonds is structurally subordinated to other liabilities of our subsidiaries other than Holdings Finance.

 

We are not restricted under the terms of the indenture or the bonds from incurring additional indebtedness including indebtedness of Holdings Finance or our other subsidiaries. None of our subsidiaries will guarantee the bonds. As such, the bonds will be structurally subordinated to any existing or future indebtedness of our subsidiaries other than Holdings Finance to the extent of the assets of such subsidiaries.

 

The terms of the indenture and the bonds do not require us to achieve or maintain any minimum financial results relating to our financial position or results of operations. Our ability to recapitalize, incur additional debt, secure existing or future debt or take a number of other actions that are not limited by the terms of the indenture and the bonds could have the effect of diminishing our ability to make payments on the bonds when due.

On conversion of the bonds, the ADSs you receive may be worth less than you expect, because the value of the ADSs may decline after the conversion rate is determined.

 

The number of ADSs that you will receive on mandatory conversion of your bonds on the stated maturity date is in part determined by the volume-weighted price of the ADSs on each of the 20 consecutive trading days beginning on, and including, the 25th scheduled trading day immediately preceding September 15, 2013. Accordingly, if the price of the ADSs decreases during the observation period or thereafter, the ADSs you receive on the stated maturity date may be worth less than the ADSs you would have received had the number of ADSs been calculated based on the price on the stated maturity date.

 

As a holder of the bonds, you will not be entitled to any rights with respect to the ADSs or ordinary shares, but you will be subject to all changes made with respect to the ADSs or ordinary shares.

 

An investor in a bond will not be a holder of the ADSs or the underlying ordinary shares. No bondholder will have any voting rights, any right to receive dividends or other distributions or any other rights with respect to the ADSs or the underlying shares. A bondholder will have rights with respect to the ADSs only if and when the bondholder becomes the holder of record of the ADSs delivered upon conversion. For example, in the event that an amendment is proposed to our memorandum and articles of association requiring shareholder approval, and the record date for determining the shareholders of record entitled to vote on the amendment occurs prior to the conversion date, a bondholder will not be entitled to vote on the amendment, although the bondholder will nevertheless be subject to any changes in the powers, preferences or special rights of the ordinary shares.

 

The fixed conversion rates for the bonds may not be adjusted for all dilutive events, which may adversely affect the trading price of the bonds and dilute bondholders’ ownership of ADSs upon conversion of the bonds.

 

Each of the fixed conversion rates (as defined in this prospectus supplement) for the bonds is subject to adjustment for certain events, including the payment of share dividends, the issuance of certain rights or warrants, subdivisions, combinations, distributions of capital stock, indebtedness or assets and certain tender or exchange offers as described under “Description of Bonds — Conversion Rate Adjustments.” However, the fixed conversion rates will not be adjusted for other events that may adversely affect the trading price of the bonds or the ADSs, such as the issuance of any ordinary shares for cash, or to acquire another company, or pursuant to any option, warrant, right or exercisable, exchangeable or convertible security outstanding as of the date the applicable bonds were first issued. An event that adversely affects the value of the bonds may occur, and the event may not result in an adjustment to the fixed conversion rates.

 

The conversion rate applicable for bonds converted in connection with a fundamental change may not adequately compensate bondholders for the lost option time value of their bonds as a result of such fundamental change and may not be enforceable.

 

If a fundamental change occurs, we may be required to increase the conversion rate for any bonds converted in connection with such fundamental change. The extent to which the conversion rate will be increased will be based on the date on which the fundamental change becomes effective and the price paid, or deemed to be paid, in respect of one ADS, in the fundamental change, as described under “Description of Bonds — Conversion Upon Fundamental Change” While this adjustment is designed to compensate you for the lost option time value of your bonds as a result of a fundamental change, the adjustment is only an approximation of such lost value and may not adequately compensate you for such loss. In addition, if the price paid, or deemed to be paid, in respect of an ADS in connection with such fundamental change is less than $      or more than $      (subject to adjustment), we will not increase the conversion rate in connection with such fundamental change.

Holdings Finance’s obligation to deliver shares at the fundamental change conversion rate could be considered a penalty, in which case the enforceability thereof would be subject to general principles of reasonableness of economic remedies.

 

Purchasers of the bonds may not realize any or all of the benefit of an increase in the market price of the ADSs.

 

The market value of the ADSs that you will receive upon mandatory conversion of the bonds on the stated maturity date will exceed the stated amount of $50 per bond only if the daily VWAP of the ADSs on some or all of the trading days during a 20 trading day observation period as described under “Description of Bonds — Mandatory Conversion” exceeds the threshold appreciation price of $     . The threshold appreciation price for the bonds represents an appreciation of approximately     % over the initial price. This means that the opportunity for equity appreciation provided by an investment in the bonds is more limited than that provided by a direct investment in the ADSs.

 

If the daily VWAP of the ADSs on each trading day of the observation period exceeds the initial price but is less than the threshold appreciation price, a holder of the bonds will realize no equity appreciation on the ADSs. Furthermore, if the daily VWAP of the ADSs exceeds the threshold appreciation price on each day during the observation period, then (a) Holdings Finance would receive 100% of the appreciation in market price between the initial price and the threshold appreciation price and you would receive none of the appreciation in market price between the initial price and the threshold appreciation price and (b) Holdings Finance would receive     % of the appreciation in market price above the threshold appreciation price and you would receive     % of the appreciation in market price above the threshold appreciation price.

 

You will bear the entire risk of a decline in the price of our ADSs below the initial price.

 

The number of ADSs that you will receive upon conversion of your bonds on the stated maturity date is not fixed, but is based on a formula that will depend on the volume-weighted average price of our ADSs on each trading day of a specified 20-consecutive trading day period. If such volume-weighted average price on each trading day in the observation period is less than the initial price of the bonds, the market value of the ADSs we deliver to you at maturity will be less than the principal amount of your bonds. You will bear the full risk of a decline in the market price of our ADSs below the initial price.

 

Any market that develops for the bonds will influence, and will be influenced by, the market for the ADSs.

 

The price of the ADSs could become more volatile and could fall (i) based on investors’ expectations that a large number of additional ADSs will be issued after the bonds have reached maturity, (ii) based on early conversion by the bondholders, (iii) due to sales of ADSs by investors who consider the bonds as a more attractive means of equity participation in us, or (iv) through hedging or arbitrage transactions that could increasingly include the bonds and ADSs.

 

The US tax treatment of the bonds could differ from what we expect in ways that could adversely affect US holders.

 

As described in more detail under “Taxation — United States Federal Income Taxation” below, we believe it is reasonable to treat the purchase, ownership and conversion of the bonds as producing US federal income tax consequences comparable to a prepaid forward purchase of ADSs. Except where specifically indicated otherwise, the discussion under “Taxation — United States Federal Income Taxation” assumes such treatment. However, the Internal Revenue Service, or IRS, could assert that the bonds should be treated differently for US federal income tax purposes. For example, under one alternative treatment, the IRS could seek to treat the bonds as subject to the Treasury regulations governing contingent payment debt instruments, which would affect the timing and

character of income, gain and loss recognized by a US holder. Such treatment could result in adverse tax consequences and thus could adversely affect the value of the bonds. US holders are urged to consult their own tax advisors regarding possible alternative characterizations of the bonds, and the resulting tax consequences.

 

The bonds will initially be held in book-entry form and therefore you must rely on the procedures of the relevant clearing systems to exercise any rights and remedies.

 

Unless and until definitive registered bonds are issued in exchange for book-entry interests in the bonds, owners of the book-entry interests will not be considered owners or holders of the bonds. Instead, the registered holder, or their respective nominee, will be the sole holder of the bonds. Payments of principal, interest and other amounts owing on or in respect of the bonds in global form will be made to The Bank of New York Mellon (as paying agent for the bonds), which will make payments to the common depositary, which will in turn distribute payments to DTC. Thereafter, payments will be made by DTC to participants in these systems and then by such participants to indirect participants. After payment to the common depositary neither we, the trustee nor the paying agent will have any responsibility or liability of any aspect of the records related to, or payments of, interest, principal or other amounts to DTC or to owners of book-entry interests.

 

Unlike holders of the bonds themselves, owners of book-entry interests will not have the direct right to act upon our solicitations or consents or requests for waivers or other actions from holders of the bonds that we may choose to make in the future. Rather, owners of book-entry interests will be permitted to act only to the extent that they have received appropriate proxies to do so from DTC or, if applicable, from a participant. We cannot assure you that procedures implemented for the granting of such proxies will be sufficient to enable you to vote on any such solicitations or requests for actions on a timely basis.

 

You may be unable to recover in civil proceedings for US securities laws violations.

 

Holdings Finance is organized under the laws of the Isle of Man and AngloGold Ashanti Limited is incorporated under the laws of South Africa. All of the directors and officers of Holdings Finance reside outside the United States and all except one of AngloGold Ashanti Limited’s directors and one of AngloGold Ashanti Limited’s officers, and the experts named herein, reside outside the United States, principally in South Africa. You may not be able, therefore, to effect service of process within the United States upon those directors and officers with respect to matters arising under the federal securities laws of the United States. In addition, substantially all of our and Holdings Finance’s respective assets and the assets of our and Holdings Finance’s respective directors and officers are located outside the United States. As a result, you may not be able to enforce against us or Holdings Finance or our or Holdings Finance’s respective directors and officers judgments obtained in US courts predicated on the civil liability provisions of the federal securities laws of the United States. See “Enforcement of Certain Civil Liabilities”.

 

Fluctuations in the exchange rate of currencies may reduce the market value of our securities, as well as the market value of any dividends or distributions paid by us.

 

We have historically declared all dividends in South African rands. As a result, exchange rate movements may have affected and may continue to affect the Australian dollar, the British pound, the Ghanaian cedi and the US dollar value of these dividends, as well as of any other distributions paid by the relevant depositary to investors that hold our securities. This may reduce the value of these securities to investors.

 

Our memorandum and articles of association allows for dividends and distributions to be declared in any currency at the discretion of our board of directors, or our shareholders at a general meeting. If and to the extent that we opt to declare dividends and distributions in US dollars, exchange rate movements will not affect the US dollar value of any dividends or distributions; nevertheless, the value

of any dividend or distribution in Australian dollars, British pounds, Ghanaian cedis or South African rands will continue to be affected. If and to the extent that dividends and distributions are declared in South African rands, exchange rate movements will continue to affect the Australian dollar, British pound, Ghanaian cedi and US dollar value of these dividends and distributions. Furthermore, the market value of our securities as expressed in Australian dollars, British pounds, Ghanaian cedis, US dollars and South African rands will continue to fluctuate in part as a result of foreign exchange fluctuations.

 

The announced proposal by the South African Government to replace the Secondary Tax on Companies with a withholding tax on dividends and other distributions may impact the amount of dividends or other distributions received by our shareholders.

 

On February 21, 2007, the South African Government announced a proposal to replace Secondary Tax on Companies with a 10% withholding tax on dividends and other distributions payable to shareholders. Although this may reduce the tax payable by our South African operations, thereby increasing distributable earnings, the withholding tax will generally reduce the amount of dividends or other distributions received by our shareholders.

 

The proposal was expected to be implemented in 2010, but its implementation has been delayed due to difficulties in renegotiating double tax agreements in various jurisdictions. No final date for the implementation of the proposal has been announced.

 

We estimate the net proceeds to us from our sale of bonds under this prospectus supplement to be $      million after deducting the underwriting discount and our offering expenses (assuming the underwriters’ do not exercise their over-allotment option). We intend to use the net proceeds from this offering and the net proceeds from the Equity Offering, together with funds drawn from our existing credit facilities and cash on hand, to effectively eliminate our gold hedging position while maintaining a strong balance sheet to fund our development projects and exploration initiatives, as described under “Prospectus Supplement Summary — Hedge Book Reduction” and “Prospectus Supplement Summary — Strategy — Growing the Business”, respectively.

 

Pending such use, we intend to reduce our short-term borrowing and the borrowing outstanding under our revolving credit facility, if any, or hold the net proceeds in cash. The weighted average maturity and interest rate of our borrowings was approximately 11.1 years and 4.97%, respectively, at June 30, 2010. For a further discussion regarding our borrowings, see “Review of Financial and Operating Performance for the Six Months Ended June 30, 2010 Prepared in Accordance with US GAAP — Liquidity and capital resources” in our 2010 Second Quarter Report.

 

Total cash costs as calculated and reported by us include costs for all mining, processing, onsite administration costs, royalties and production taxes, as well as contributions from by-products, but exclusive of depreciation, depletion and amortization, rehabilitation costs, employment severance costs, corporate administration costs, capital costs and exploration costs. Total cash costs per ounce are calculated by dividing attributable total cash costs by attributable ounces of gold produced.

 

Total production costs as calculated and reported by us include total cash costs, plus depreciation, depletion and amortization, employee severance costs and rehabilitation and other noncash costs. Total production costs per ounce are calculated by dividing attributable total production costs by attributable ounces of gold produced.

 

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 ordinary 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 our performance. Furthermore, 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, we believe that total cash costs and total production costs in total by mine and per ounce by mine are useful indicators to investors and management as they provide:

 

 

A reconciliation of production costs as included in our audited financial statements to total cash costs and to total production costs for each of the three years in the period ended December 31, 2009 is presented below.

 

AngloGold Ashanti operations — Total
(In $ millions, except as otherwise noted)

 

 

 

 

Our ratio of earnings to fixed charges for the periods indicated below were as follows:

 

 

 

 

We computed the ratio of earnings to fixed charges (which excludes interest on income tax liabilities as our interest and penalties related to income taxes are included in taxation expense/benefit) by dividing the amount of earnings by the amount of fixed charges. For the purposes of calculating this ratio, and the deficiency, if any, of earnings available to cover fixed charges, we have calculated earnings by adding (i) pre-tax income from continuing operations before income from affiliates, tax and noncontrolling interests; (ii) fixed charges; (iii) amortization of capitalized interest; (iv) distributed income of equity investees (dividends received); and (v) our share of any pre-tax losses of equity investees for which charges from guarantees are included in fixed charges. Interest capitalized, preference security dividend requirements of consolidated subsidiaries, and the noncontrolling interest in pre-tax income of subsidiaries that have not incurred fixed charges were subtracted from the total of the added items to give earnings. For the purposes of calculating the ratio of earnings to fixed charges and the deficiency, if any, of earnings available to cover fixed charges, fixed charges consist of the total of (i) interest expensed; (ii) interest capitalized; (iii) amortized premiums, discounts and capitalized expenses related to indebtedness; (iv) estimates of interest within rental expense; and (v) preference security dividend requirements of consolidated subsidiaries.

 

Ordinary Share and ADS Trading

 

The following table sets out, for the periods indicated, the reported intra-day high and low market quotations for our ordinary shares on the JSE and for our ADSs on the NYSE:

 

Annual Dividends

 

The table below sets forth the amounts of interim, final and total dividends paid in respect of the years 2005 through 2009 and 2010 (through September 13, 2010), in each case in cents per ordinary share.

 

 

 

 

Future dividends will be dependent on our cash flow, earnings, planned capital expenditures, financial condition and other factors. We do not currently intend to substantially change our practice of paying out dividends from funds available after providing for capital expenditure and long-term growth. Under South African law, we may declare and pay dividends from any capital and reserves included in total shareholders’ equity calculated in accordance with IFRS, subject to our solvency and liquidity. Dividends are payable to shareholders registered at a record date that is after the date of declaration. We will continue to manage capital expenditure in line with profitability and cash flow and our approach to the dividend on the basis of prudent financial management.

 

Under the terms of our memorandum and articles of association adopted on December 5, 2002, dividends may be declared in any currency at the discretion of our board of directors or our shareholders at a general meeting. Currently, dividends are declared in South African rands and paid in Australian dollars, South African rands, British pounds and Ghanaian cedis. Dividends paid to registered holders of our ADSs are paid in US dollars converted from South African rands by The Bank of New York Mellon, as depositary, in accordance with the deposit agreement related to our ADS program.

Exchange Rate Information

 

The following table sets forth, for the periods and dates indicated, certain information concerning US dollar/South African rand exchange rates expressed in rands per $1.00. On September 13, 2010, the interbank rate between rands and US dollars as reported by OANDA Corporation was ZAR7.24 = $1.00.

 

 

 

 

The following table sets forth, for the months indicated, average, high and low data as reported by OANDA Corporation.

 

 

 

 

The following table sets forth our consolidated capitalization at July 31, 2010, unless otherwise stated, on:

 

 

This table does not reflect the application of the net proceeds of the sale of the bonds offered hereby or the Equity Offering for the purposes described in “Use of Proceeds”. You should read this table together with our US GAAP financial statements and related discussion and analysis included in our 2009 US GAAP Results Release and our 2010 Second Quarter Report.