AngloGold Ashanti Limited
Q4 2013 Earnings Call Transcript

Published: 19 Feb 2014

[Operator:]

Good afternoon, ladies and gentlemen, and welcome to the AngloGold Ashanti results. [Operator Instructions] Please also note that this conference is being recorded. I would now like to hand the conference over to Stewart Bailey. Please go ahead, sir.

[Stewart Bailey:]

Thanks, Dylan. And welcome, everybody, to the results for the fourth quarter and the year ended 31st of December 2013. We've got a pretty full slate today, just to cover the quarter and also the full year results, to look at reserves and resources and what not. So a little longer than usual, but hopefully not too much. I'm just going to kick off with a speedy read of the Safe Harbor statement, as is usual. Certain statements contained in this document, other than statements of historical fact, including without limitation, those concerning the economic outlook for the gold mining industry, expectations regarding gold prices, production, cash costs, cash savings and other operating results, return on equity, productivity improvements, growth prospects and outlook of AngloGold Ashanti's operations, individually or in the aggregate, including achievements of project milestones, commencement and completion of commercial operations of certain of our exploration and production projects, and the completion of acquisitions and dispositions, AngloGold Ashanti's liquidity and capital resources and capital expenditures, and the outcome and consequences of any potential or pending litigation, or regulatory proceedings or environmental issues are forward-looking statements regarding our operations, economic performance and financial condition. These forward-looking statements or forecasts involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to differ materially from those -- from the anticipated results, performance or achievements expressed or implied in these forward-looking statements. Although AngloGold Ashanti believes that the expectations reflected in these statements and forecasts are reasonable, no assurances can be given that such expectations will prove to be correct. Accordingly, results could differ materially from those set out in the forward-looking statements as a result of, among other factors, changes in the economic, social and political and market conditions, the success of business and operating initiatives, changes in the regulatory environment, and other government actions, including environmental improvement, fluctuations in gold price and exchange rates, the outcome of pending or future litigation proceedings and business and operational risk management. For a discussion of these factors, refer to the prospectus supplement to our prospectus dated 17th of July 2012, filed with the U.S. SEC on 26th of July 2013. These factors are not necessarily all of the important factors that 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 future results. Consequently, readers are cautioned not to place undue reliance on forward-looking statements. AngloGold Ashanti undertakes no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except to the extent required by applicable law. All subsequent forward and oral-looking statements attributable to AngloGold Ashanti or any person acting on its behalf are qualified by the cautionary statements herein. This communication may contain certain non-GAAP financial measures. We use these measures and ratios in managing our business. Non-GAAP financial measures should be viewed in addition to and not as an alternative for the reported operating results or cash flow from operations or any measures or performance prepared -- measures of performance prepared in accordance with the IFRS. In addition, the presentation of these measures may not be comparable to similarly titled measures other companies may use. We post information important to investors on the main tab of our -- main page of our website, under the Investors tab. It's important information, you should read it. I'm going to hand over to Venkat. Thank you.

[Srinivasan Venkatakrishnan:]

Thank you, Stewart. And good morning, or good afternoon, ladies and gentlemen. If we can go straight into our fourth quarter and year results, if we can start with Slide #6. When we spoke previously at our previous earnings presentation and certainly for those of you who attended the Denver Gold Show, our message has been simple, and it takes the business back to basics with the cash flow improvements and sustainable returns. We're doing that using 5 pillars in terms of our strategy. The first, which involves our people, safety and sustainability during these tough times, we have a core and committed management team, which is focused on improving our safety and sustainability record. As you would have seen during the course of the year, we have also proactively and decisively moved to address our balance sheet and financial flexibility and Richard will cover that in greater detail. The third aspect is around the whole area of costs. We're tackling head-on the tough decisions around direct costs, overheads and capital expenditure to improve sustainable cash flow. Then moving on to improving portfolio quality, the 2 new mines that came online in, at the end of the third quarter, plus the asset improvements, which we are effecting in the business, will enhance the quality of our portfolio, giving us the flexibility to remove marginal ounces from the mix. And finally, this is not all about the short or the medium-term, we're keeping our focus on the longer-term optionality of the business to ensure it's in tact by using lower-cost options and a focused exploration portfolio. These will help AngloGold Ashanti ride the gold price shocks, improve cash generation and preserve our long-term future. So when the gold price surprises us on the upside, we can cream that extra cash flow for our shareholders. If I can then turn to Slide #7 and start off with safety. Safety is our first value, and our focus is even greater at these tough times. Lots of good work has gone in over the past 6 years, and we continue to build on the foundation. We strive to achieve zero harm, and as you can see from this slide, the progress has been good under most metrics. Whilst recognizing that one fatality is one fatality too many, it should be noted that the number of fatalities which were recorded in 2013 was the lowest in AngloGold Ashanti's history. We also registered the best-ever all injury frequency rate and lost-time injury frequency rate on record, and 80% of our operations set new safety records in 2013. Sadly 2 of our colleagues, Edward McCurry[ph] at Moab in South Africa and Richard Eidu[ph] at Obuasi, lost their lives in the fourth quarter. The accidents have been investigated, corrective actions have been identified and are being implemented, not just at those operations, but at other operations where similar accidents can happen. The 3 focus areas on safety remain changing behavior, ensuring we have correct systems, processes, methods and training in place, and removing people from risk areas using technology. But we fully recognize that any safety record is only as good or bad as our last incident, and therefore, we continue to focus on major hazard control work, and look at our high potential incidents, which we call near-misses, to see what we can learn from them and improve our safety record further. Turning to the highlights for the quarter, Slide #8. Looking at the year in question. The AngloGold Ashanti team, here I'm not just referring to the executive team, but all members of our workforce, have done a fantastic job by registering the first annual production growth since 2005, with the first year of annual cost decline over that period. This is in line with our commitment, but we'll only be adding ounces if they're profitable ounces. For the year, production at 4.105 million ounces exceeded the top end of our guidance of 4 million to 4.1 million ounces that was given in May, and the total cash cost of $830 an ounce came in within the guided range. We're anticipating further growth in 2014, and we will cover that later on in the presentation. Cash flow was prioritized for debt reduction and completion of projects, therefore, the board when it met on Monday concluded that it would not be declaring a final dividend. We do not believe borrowing money to pay dividends is a smart strategy. And as you can see from the next few slides, our cash flow is improving quarter-on-quarter and looks promising as we go into 2014. For the fourth quarter, production of 1.229 million ounces was above the 1.13 million to 1.17 million ounces, which we guided. If you compare it to the same quarter the previous year, it was up 43%, recognizing that, that quarter was impacted by the South African strike, but it went up 18% quarter-on-quarter, when in fact the third quarter was also an improvement on the second quarter. If you recall, we did say 2013 was going to be a year of 2 halves. And the improvement in the second half of the year from existing and new operations have actually enabled us to get to this production profile. All 4 regions improved output

[Richard N. Duffy:]

Thank you, Venkat. And I am on Slide 16, where I'll start at the breakdown of our improved quarter-on-quarter all-in sustaining costs, which reduced from $1,155 an ounce in quarter 3 to $1,015 an ounce in quarter 4, a reduction of $140 an ounce. The biggest contribution came from improved operating performance, as outlined by Venkat, the result of higher production and the benefits of lower corporate costs, assisted by favorable inventory movements. Our all-in sustaining costs for the full year was $1,174 an ounce, nearly 10% better than our all-in sustaining costs over the first 6 months in 2013, and this compares favorably to the target of $1,200 an ounce that we announced in our June quarterlies. Turning to Slide 17 and looking at our quarter-on-quarter earnings reconciliation, we have again shown normalized adjusted headline earnings given the significant realized fair value gain of $567 million on the conversion of our mandatory bond in quarter 3, and other ones-off adjustments in quarter 3 and quarter 4, as set out in the table on Page 3 of our quarterly report. The improved operational performance is reflected in normalized adjusted headline earnings increasing by $54 million to $164 million, a 49% improvement over quarter 3, despite a 4% lower gold price. The improved operational performance was driven by increased volumes and higher grades, which Mike and Ron, will touch on in their respective presentations. Lower net finance costs of $14 million are the result of bonds maturing and being early settled in quarter 3, together with capitalized interest, partially offset by the increased finance costs on the new $1.25 billion 7-year bond. Lower corporate and exploration costs further contributed to our improved normalized adjusted headline earnings for quarter 4. Turning to Slide 18, and looking at our improving financial flexibility. Quarter 4 saw us continuing our prudent and proactive balance sheet management. The improvement in our EBITDA in quarter 4 from $327 million to $544 million, a 66% improvement, resulted in our net debt-to-EBITDA improving from 2.02x to 1.86x, despite a nominal increase in our net debt of $100 million. This remains well within our loan covenant of 3x, temporarily eased to 4.5x for our June testing period, but reverting to 3x at the end of the year. Our net cash outflow in quarter 4 at $82 million was considerably lower than quarter 3's outflow of $205 million. Importantly, and as highlighted by Venkat earlier, nearly 2/3 of our $224 million of project capital in quarter 4 was funded from our operations. In addition to funding a significant portion of our project capital in quarter 4, we also started repaying the balance drawn on our AUD 600 million revolving credit facility, which was put in place to fund our Tropicana project. The drawn balance was reduced to AUD 548 million by the end of 2013 and is expected to reduce to around AUD 400 million by the end of this quarter 1. This facility matures at the end of 2015. In quarter 4, we also addressed both the tenor and structure of our South African borrowings through a ZAR 1.5 billion, 5-year revolving credit facility and a ZAR 750 million, 3-year floating-rate bond. These complement our existing domestic medium-term note program in South Africa. Turning to our outlook on Slide 19. The focus on cash flow in our business is reflected in our 2014 outlook numbers. Capital expenditure is projected to reduce from $2 billion in 2013 to between $1.3 billion and $1.45 billion this year. This includes $400 million for the major capital -- major project capital spend that Venkat highlighted in his introduction. It also includes all stay-in business capital and all reserve development spend, as well as $113 million for capitalized deferred stripping. Corporate costs are projected to reduce to between $120 million and $140 million, and the expense to exploration and studies to between $150 million and $175 million in 2014, in line with our earlier guidance and a further significant step down from 2013. Depreciation and amortization for the year is guided at $800 million. Interest and finance cost guidance is provided against both income statement and cash flow measures at $290 million and $250 million, respectively for the year. Importantly, our cash interest payments are higher in quarters 1 and 3, at around $83 million in each of these quarters, and lower at $40 million in quarters 2 and 4. Our outlook for all-in sustaining costs in 2014 is between $1,025 and $1,075 an ounce, $100 an ounce better than 2013 at the higher end of our outlook range. The assumptions behind these outlook numbers are set out in my final slide, which I will get to shortly. Turning to Slide 20. From the graph you see on that slide, you will see that our quarterly profile, with production stepping up through the year, is repeated and was particularly marked in 2013, with our 2 new projects at Tropicana and Kibali coming onstream towards the end of the year. A similar impact is again expected in the -- in this first quarter, given the typically slow startup in South Africa, stepping up through the year and assisted by the continued ramp-up at Tropicana and Kibali. Turning to Slide 21. Our production outlook for quarter 1 is between 950,000 and 1 million ounces, at a cash cost of between $800 to $850 an ounce. The production outlook for the full year is between 4.2 million to 4.5 million ounces, at a unit cash cost of between $750 to $790 an ounce. The assumptions used to arrive at these cash cost outlook numbers, as well as the outlook numbers, that were set out on Slide 19 are detailed in the third column on this slide, Slide 21. I will now hand over to Mike O'Hare to take us through our SA operations.

[Mike P. O'hare:]

Thanks, Richard. I'm on Slide 23. The region had a good final quarter and I think that rounded off an improved year. We ticked the 4 big boxes, with safety much improved, our cash flow, our production and our costs down. We'll look at those 4 boxes in a little bit more detail. We are running mines now [indiscernible] for years without fatalities, particularly in the Vaal River area. This helped us achieve a record run of 198 days without a fatality, and as Venkat said, even 1 fatality is too many, and we had 6 of those too many during the year. Under the production, a slight decrease in volume mined over the quarter was offset by the grade increase, and this was due to mining a higher grade, much lower dilution, as we control stope width and cleaner mining. Costs, the sustainable reductions in our costs are coming from our restructuring. Our management restructuring is now complete. Our voluntary separation programs have run their course, and we'll been looking at the next levels of restructuring as we go into the year, together with our union partners. The low flation -- the low inflation increases are being managed by our procurement guys and we're certainly targeting to have our inflation increases from our supply chain on or below inflation during year. Our energy projects, designed to decrease the amount of energy we use, continued to deliver significant savings. Our uranium production at 1.4 million pounds for the quarter was 14% up on last year and we expect another increase to around 1.8 million pounds in 2014, as Mine Waste Solutions begins to produce uranium. We had a number of questions around the grade increase at Moab Khotsong, so on Slide 24, what we're trying to do is explain what's happening at Moab. You see the picture to the right, showing that our development over the last number of years has targeted the high-grade area which are the warmer colors, and we actually expect the grade to be increasing over the following quarters. We're mining right on our reserve grade at the moment, so I don't believe that we are doing any form of high grading at Moab. If you move to Slide 25, on our technology drive, our key achievements for the quarter were that our new reamer head is now allowing us to do single-pass holes at 3.5 days, which is still a little bit off where we would like to be, which is close to 2 and 2.5 days. You will see from the picture at the bottom that we've also managed now to drill holes next to each other and completely remove all of the reef, which fits into our mantra of mining "all of the reef, but only the reef, but doing it all of the time." If I move to Slide 26, it's a summary, if you will, of the work that we've done during 2013. And I think you will note there we've drilled 18 holes, and we're down to 3.2 days from the spot of 8.8 days. And we are mining in an -- we're testing in an exceptionally high-grade area, as you can see, with the average grades coming out at 90 grams a ton, with holes having grades as high as 207 grams a ton. Our program ramps up, as we have been talking about. And if I move to the next slide, Slide 27, you'll that our site constructions at the different mines are progressing well, and we start production in those sites from Q2 this year. You also see that we've targeted specific areas, the high grade pillars, which we have left behind. These are shaft pillar areas, which we had to pull out of a number of years ago due to the safety constraints. We're setting up 2 sites there. Narrow reef areas at Kopanang, which -- that together with the C reef area at Great Noligwa, are designed to test whether we can take uneconomic reef, if you mine it conventionally, and mine it with this equipment and take out only the reef, thereby increasing the grade significantly and making these reefs payable. Our last site is designed to take out a vertical, high-grade piece of reef at Moab Khotsong, which is challenging to mine in the conventional way. So I think for 2014, we're looking at quite an increase in the amount of holes and sites we're drilling at. We will have an understanding by the end of the year of what kind of costs would apply to this mining method. And during the year, we will be able to make a decision on how big our ramp-up is going forward into '15, '16 and '17. Thanks. With that, I will pass you on to Ron Largent.

[Ron W. Largent:]

Thanks, Mike. Good morning, everyone. Before I give an overview of the Q4 operational outcomes for the international operations, I'd like to take a minute to update you on the work that we have been discussing over the past 2 quarters. In August, I asked that you watch the outcomes, as this would be the best way to measure our progress as it relates to the changes that have been implemented focusing on cost containment. We committed to take $100 to $120 per ounce out of our business in an 18-month period. As you can see from the information already presented, cash costs have reduced from quarter 2 2013 from approximately $900 an ounce, to quarter 4 2013 to about $750 an ounce. We have calculated and kept track of the improvements from the cash cost optimization process that we are working on, and we estimate that, that is somewhere between $50 and $55 per ounce of the $150 an ounce reduction. Taking these outcomes into account, and the outlook for 2014 presented by Richard, which was between $1,025 and $1,075 per ounce, all-in sustainable, the $100 to $120 per ounce commitment is contained within the outlook of 2014. So I think that work -- we're not saying it's completed, because we're not at the end of 2014, but it has been very successful throughout the organization. Now to touch on the regional or the regional outcomes for quarter 4, 2013. Safety performance was presented by Venkat, but I think we must give the accomplishment to the -- or the kudos to the accomplishment by the operators for 2013. If we start at Slide 29, Continental Africa. Production increased by 74,000 ounces in quarter 4 compared to quarter 3. 40,000 of this improvement is attributable to the Kibali mine in the DRC under the JV reached with us and Randgold. The other production improvements come from Geita, Siguiri and Iduapriem. The Obuasi decline work is on schedule, meeting, I'll say, international standards of 200 meters per month with a single phase, while engagement continues with key stakeholders on developing options that will enhance the execution of this plan. For 2014, Kibali will produce for a full calendar year, and we anticipate a very strong cash flow from Geita. Additionally, the costs management is in progress that positively impacts our cash flow profile in the region. These include, but are not limited to working capital inventory scrutiny, which will really impact our balance sheet, contract mining agreement and labor rationalization. Considerable work to be done in '14, but we believe that the work that has been the foundation will lead us into being successful in 2014. Slide #30 is the Americas region. Production was steady at 262,000 ounces, giving the region its first one million production year. This is a -- was a stated goal over the past 3 years, and finally met in 2013. Cerro Vanguardia had its highest production in a decade, and CC&V's production was 15% improved from quarter 3. Cash per costs were impacted positively from the site cost management as mentioned earlier, and exchange rates in Brazil and Argentina. [indiscernible] mine has seen improvements to the ore body extraction efficiency, and ultimately, we resulted in improved grades in quarter 4. For 2014, the startup of the mill at CC&V in quarter 4, 2014 will eventually -- or in 2015 will be positively -- will positively add to the production profile to the Americas region. Slide 31, Australia. The region's seen the anticipated increases in quarter 4 from both the newly constructed Tropicana mine and from Sunrise Dam, as the extraction of the crown pillar continued. Production increased by 107,000 ounces for the 2 operations, and attributed to the 50% reduction in cash costs. The quarterly results for Tropicana are in line with the project expectation for both production and cash costs. For 2014, Sunrise Dam ore production will be primarily from the underground mine, with open pit ceasing early in '14. 2014 will also be Tropicana's first year of full production at designed rates. Very exciting time for the Australian team. In summary, all 3 regions had very good metrics in quarter 4, with safety, environmental, production and cost metrics. And looking forward to seeing where we can take these in 2014. I would like to move right on. I think, probably assumes Graham Ehm is presenting the next area, but I'll take that on, if that's all right. If we go to slide, I think, it's 33, 33, we're going to talk about the projects. The first one is, Kibali, following the first gold pour in September of last year, the ramp-up of the oxide circuit has gone very well, resulting in production of 88,000 ounces in quarter 4 or 40,000 for AngloGold Ashanti. The construction of the hard rock sulphide circuit is proceeding well and will be commissioned in quarter 2 of this year. During the year, exploration has been very successful and resources have increased 17% to almost 10 million ounces, AngloGold Ashanti's share. Development at the Twin declines is progressing well, with first underground work expected in quarter 4 of 2014. The shaft reached a depth of 195 meter at year end. This is a long-term project, which continues to a depth of 760 meters with full fit, which is completed in 2017. The Kibali is going well, and look forward to its future. Slide 34, the Tropicana mine. We touched a little bit about the production, but the ramp-up has gone well, with 95,000 ounces produced in the fourth quarter. Plant run time is about 90%, and we plan to steadily improve that to 95% over the next 6 months. There has been no surprises during the project closeout, so costs remain on budget, and reconciliation from a resource model through to gold production are good, it was shown no surprises. I'll update on Slide 35 of the -- for CC&V. This project adds about 2 billion ounces of production over the next 12 years at the operation. The project should be looked at almost in 2 parts

[Srinivasan Venkatakrishnan:]

Thank you, Ron. If we can get to the last slide concluding the presentation where we started off. We remain on course regarding our strategy. And we've delivered what we promised at the start of the year end in May. We've seen some very good runs on the board, and as you can see, we have put a little score card outlining some of the successes we have had during the year. Starting with people, we have reestablished the leadership team pretty quickly, and they have moved into new roles. And we have ensured that the ship has been steady through this entire process. In addition to that, safety performance has been improving steadily quarter-on-quarter, recording the best-ever performance in the company's history, with 80% of the operations breaking and setting new improved records. On the sustainability front, environmental incidents are being reduced progressively and sustainability is being better integrated into the operations. On the financial side, we did our capital raising last year in terms of the 7-year bond. It provides us a mix of very good tenor, and the facilities, the debt covenants have been relaxed temporarily, but we have not had to use those. And as Richard has outlined, the Australian dollar facility is being repaid quickly, with the U.S. dollar facility untouched. On the cost optimization side, our all-in sustaining costs have dropped dramatically. Our overhead and exploration costs have declined. And this year, 2014, sees the capital expenditure bill fall as well. On the portfolio side, Kibali and Tropicana were commissioned ahead of time in the third quarter, and on budget, and the sale of Navachab for $110 million has been agreed, with completion anticipating in the second quarter. CC&V expansion is on track and on schedule and the Obuasi ramp project is making very good progress. All of this has been done without compromising long-term optionality. As Mike alluded, South African technology continues to be on track and significant progress is being made, as we moved into setting up new sites at additional mines, and we have a focused greenfields exploration program, targeting most prospective areas in a few countries to get the best bang for the buck. With that concluding slide, I'll pass you over to Stewart Bailey.

[Stewart Bailey:]

Dylan, we'll take questions as soon as you're ready.

[Operator:]

[Operator Instructions] Our first question comes from Andrew Byrne of Barclays.

[Andrew Byrne:]

A couple of quick questions, just on kind of asset specific. I know it's not something that we've really touched on in the presentation. Sadiola continues to still really struggle, can you highlight what the challenges are there and how you plan to address them over the next few years, or how we should think about that asset? And same is on Iduapriem, could you just run through exactly kind of how we should model that next year in terms of production and costs for the next 24 months? And then just finally on Kibali, if you could just clarify what your share of CapEx is for the next 2 years, please?

[Srinivasan Venkatakrishnan:]

Actually, if I can pick up the initial [ph] part of it in terms of our share of capital, for Kibali, we outlined what the total project capital expenditure is for 2014, that was around $400 million. And the Kibali portion of the capital in that $400 million is around $142 million. And at this stage, we are only giving the outlook for 2014, and bear in mind, that the Kibali project is in line with budget. So that hasn't changed. Then your second question in terms of Iduapriem and Sadiola, let me pass you across to Ron. What we have not made available at this stage is asset-specific guidance, and that normally comes out when we put out our annual report, and we provide either access-specific guidance or country-specific guidance, but Ron, on Sadiola and Iduapriem?

[Ron W. Largent:]

I will start with Sadiola, which has been at the end of its oxide life over the past couple of years, got caught in the downturn in gold price, and has forced us to relook at the Sadiola Deeps project, or Sadiola sulfide project. Between us and Iamgold, we're actively trying to define what the next step is. So if you look at our plan for 2014, if the mine stockpiles in a small amount out of that -- the pit. That will -- at the end of this year, you will have your -- you will be very limited on sulfide. So it's in a transition period, being driven by gold price and economics. So that isn't much of an answer, but that's where we sit with Sadiola. Iduapriem, this year is in a transition year. We have, and actually, we do a considerable amount of mining at Iduapriem and running stockpiles and mine material from the pit, and have decisions to make this year on where we take Iduapriem into 2015. Fortunately, we were right at the end of a contract with our mining contractor, so we were able to vary it for one year. So both of them, you hit it right on, are decision-making assets in 2014. [indiscernible]

[Andrew Byrne:]

Yes, yes. So kind of -- just in terms of how we should think about them, one option is, if we saw a low gold price prevail throughout the next 12 months, we could see them actually close over the next 2 to 3 years?

[Ron W. Largent:]

I wouldn't go there with Iduapriem, and it's a decision we have to make on stripping and ore body capability. So I don't agree with that comment. We have to make decisions this year. Sadiola is in the same vein, we have to manage both I guess, us and Iamgold, have to manage our balance sheets, but it had a -- it's a fairly robust project, we've got to just understand how we build it or not build it or somebody else build it, in the next time frame. So it's not that easy, as far as it, $1,100, $1,200, they're not sub-economic.

[Operator:]

Our next question comes from Patrick Mann of Deutsche Bank.

[Patrick Mann:]

Just 2 questions. Your production profile, taking into account that you, that Tropicana and Kibali are coming online this year, we are obviously seeing sort of like-for-like decreases, I suppose it follows on from Andrew's question, but if you could kind of just give us a sense of which regions are most affected or most -- you're removing marginal mining from the most? And then just quickly on the dividend policy, I understand that you said that debts are worrying and you're not going to pay dividends at this point. In the future, how are you thinking about it? Would it be on a cover basis and sort of a fixed amount every 6 months or so? And then maybe just one last one, if you don't mind, any thought of acquisitions or is your focus really just on deleveraging at this point?

[Srinivasan Venkatakrishnan:]

Let me answer the last question first, no focus in terms of acquisitions, et cetera. We've got enough growth coming from within our portfolio. And we have just delivered 2 new projects as they ramp up. So let's kill that one first. The second one, in terms of your question in terms of dividend policy and the like, you made a comment that debt is a worry. Debt is not a worry, if I can make that point up front. Debt may be higher to our personal liking, but at a level which is not keeping us awake at night. Our net debt-to-EBITDA is around, the covenant is 3.1. And at the end of the day, the debt levels are currently manageable. The Australian dollar revolver is getting repaid, the U.S. dollar revolver is not touched. We're working on our ways to improve our costs and cash flow. And importantly, we have a very supportive bank group, as you would have seen over the last couple of years. The key in terms of dividend is what experience has taught us is not to lock ourselves to any particular formula driven, whether it's gold price-driven or whether it's yield-driven, et cetera. It's purely going to be a function of what the free cash flow from the business is, and what we're looking in terms of debt levels and also in terms of capital expenditure levels. And the profile going into '14, if you see from the slide that Richard referred to, Q1 tends to be seasonally our weak quarter. Every year, you have had Q1 start off slow, particularly given the slow startup in South Africa after the holiday period. It than ramps up in Q2, with the biggest ramp up coming in Q3 and Q4. 2014 is going to be no different. You've seen that happen for over 4 or 5 years. So certainly, the second half of the year, combined with Tropicana and Kibali coming fully onstream at that point, is really the period to watch out for. Your first question, and here we've been fairly open with the market. The fact that we're getting 550,000 to 600,0000 ounces, please don't add that to 4.1 million ounces to get to the production profile of 2014, because we will be removing marginal ounces. And to give you a flavor, that some of them will come from South Africa, some of them will come from Continental Africa, and Ron has touched upon on Iduapriem in particular. And with regard to Navachab, we have only assumed production there for 6 months of the year. Australia, obviously, is improving, but bear in mind that Sunrise Dam has actually mined the crown pillar completely, and it's going fully underground. But Tropicana kicks in and America reasonably holding steady. So the shift here are in South Africa and also in Continental Africa, and within Continental Africa, it's Iduapriem, an element of Ghana, as well covered in that regard. Hope that answers your question.

[Operator:]

Our next question comes from Leon Esterhuizen of CIBC.

[Leon Esterhuizen:]

Just a quick one on your planning, reserve planning. You're using $1,100 per ounce as your reserve planning base. But I find it amazing then that your cost, all-in sustaining cost, is still forecast to be in the same order, $1,050 roughly speaking. Clearly, you're making a margin at $1,300, which should be in the order of 20% or so, given that cost level. But if you're running a reserve calculation at $1,100, your cost number, all-in sustaining cost number should be well below that, so that you could lock in a margin at $1,100 gold. So am I missing something, or should that cost be coming down below that number?

[Srinivasan Venkatakrishnan:]

No, you're not. Particularly with regard to the reserve calculations, as you would appreciate, it has to be effectively economical at that reserve price. You're picking our all-in sustaining cost at a particular point in time, in terms of 2014, and there are an element of overheads, which sits outside the mines as well, in terms of the reserve calculation. So it's fully costed, in terms of sustaining capital, in terms of corporate costs, and in terms of overhead, it's all in there. In terms of the numbers, but you have picked 2014 as a point in time, whereas the reserve is over the life of the mine.

[Leon Esterhuizen:]

Okay. So what I'm trying to figure out, there is no potential for that cost to actually come down further than the $1,050 that you're guiding?

[Srinivasan Venkatakrishnan:]

Potentially, there could be, but at this stage, we are sticking to our guidance.

[Operator:]

[Operator Instructions] Our next question comes from Harry Mateer of Barclays.

[Harry Mateer:]

Given that you're holding off on the dividend for the time being to pay down debt, how should we think about what your debt target is? I mean your, as you said, your net debt-to-EBITDA is already quite low. So is there a targeted debt balance that you have in mind that you want to achieve?

[Srinivasan Venkatakrishnan:]

Not really, in fact, from our net debt-to-EBITDA covenant as we have said, at around 2 or slightly north of 2, we're comfortable. It does give us flexibility to manage our debt levels in that regard, and we are below 2 currently, and that certainly doesn't keep the CFO or the CEO awake at night, but Richard can comment.

[Richard N. Duffy:]

I don't have anything to add.

[Srinivasan Venkatakrishnan:]

And to look at it -- if you compare our EBITDA for the fourth quarter, for example, of $534 million give or take, the net debt covenant is 3x. So one quarter of EBITDA effectively covers half your debt level currently sitting on the balance sheet. So 2 quarters provide you the cover you need, with, you then have 2 quarters left to spare.

[Harry Mateer:]

Okay, and then in terms of further debt reduction, should we think of the, the Aussie bank facility as remaining a priority for debt reduction in the near term?

[Srinivasan Venkatakrishnan:]

That's correct. Primarily, it's the Aussie dollar facility, which is drawn, which will get repaid. That's correct.

[Operator:]

Gentlemen, we have no further questions. Do you have any closing comments?

[Stewart Bailey:]

Dylan, I think that's it. Thanks everybody for your time and attention today. And we look forward to chatting to you next quarter.

[Operator:]

Thank you, sir. On behalf of AngloGold Ashanti, that concludes this conference. Thank you for joining us.