Filed pursuant to Rule 424(b)(5)

Registration No. 333-161634

SUBJECT TO COMPLETION, DATED SEPTEMBER 14, 2010

 

Prospectus Supplement to Prospectus dated April 20, 2010

 

15,773,914 Ordinary Shares

 

 

AngloGold Ashanti Limited

 

 

 

 

We, AngloGold Ashanti Limited, are offering an aggregate of 15,773,914 of our ordinary shares, whether in the form of ordinary shares or American depositary shares representing ordinary shares, or ADSs. The public offering price per ordinary share is ZAR   and the public offering price per ADS is $      .

 

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 2,366,086 additional ordinary shares, in the form of ordinary shares or ADSs, at the initial price to investors, less the underwriting discounts, to cover over-allotments, if any.

 

Our ADSs, each currently representing one ordinary share, are listed on the New York Stock Exchange, or NYSE, under the symbol “AU”. Our 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 our ordinary shares on the JSE was ZAR 321.90 per ordinary share and the closing price of our ADSs on the NYSE was $44.59 per ADS.

 

Concurrently with this offering of ordinary shares and ADSs, under a separate prospectus supplement, AngloGold Ashanti Holdings Finance plc, our indirect wholly-owned subsidiary, is offering $     million aggregate principal amount (or $     million aggregate principal amount if the underwriters of that offering exercise their over-allotment option with respect to that offering in full) of     % mandatory convertible subordinated bonds due 2013 that will be fully and unconditionally guaranteed by us on a subordinated basis and mandatorily convertible into our ADSs (or, in certain circumstances, the cash value thereof). The mandatory convertible 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 in that offering exercise their over-allotment option with respect to that offering in full). Neither the completion of this offering nor of the mandatory convertible subordinated bonds offering will be contingent on the completion of the other.

 

See “Risk Factors” starting on page S-16 of this prospectus supplement to read about factors you should consider before buying our ordinary shares.

 

 

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.

 

 

 

 

 

Delivery of the ordinary shares and ADSs against payment is expected to occur on     , 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 ordinary shares and ADSs of 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, the “Company”, “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; 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.

 

We are incorporated under the laws of South Africa. All except one of our directors and one of our 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 assets and the assets of our directors and officers are located outside the United States. As a result, you may not be able to enforce against us or our 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 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.

 

SUMMARY OF THE OFFERING

		Per ADS				Total(1)(2)
Initial price to investors		$				$
Underwriting discount		$				$
Proceeds, before expenses, to us		$				$

(1)		Assuming all ordinary shares offered hereby are sold in the form of ADSs.
(2)		Assuming the underwriters do not exercise their over-allotment option.

 

This section describes some of the risks that could materially affect an investment in the ordinary shares and ADSs 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 Mandatory Convertible Bonds 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 Mandatory Convertible Bonds, the consent of our lenders under our revolving credit facility to amend the financial covenants such that the principal amount of the Mandatory Convertible Bonds is not treated as debt and the fair value adjustments of the Mandatory Convertible 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 connection with the Mandatory Convertible Bonds Offering, AngloGold Ashanti Holdings Finance plc, our indirect wholly-owned subsidiary, is also offering up to $     aggregate principle amount (or $     aggregate principal amount if the underwriters of that offering exercise their over-allotment option with respect to that offering in full) of     % mandatory convertible subordinated bonds due 2013, 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 Mandatory Convertible Bonds and the use of the proceeds thereof will increase our net debt, as the Mandatory Convertible 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 Mandatory Convertible Bonds is not treated as debt and the fair value adjustments of the Mandatory Convertible 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 Mandatory Convertible Bonds, the Mandatory Convertible 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 Mandatory Convertible Bonds, the Mandatory Convertible Bonds will be subject to automatic cash settlement. Cash settlement of the Mandatory Convertible 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 a shareholder meeting to obtain the approval of the shareholders to allot and issue our shares upon 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 our ordinary shares and our ADSs

 

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, AngloGold Ashanti Holdings Finance plc, our indirect wholly-owned subsidiary, is also offering up to $     aggregate principal amount (or $     aggregate principal amount if the underwriters of that offering exercise their over-allotment option with respect to that offering in full) of the Mandatory Convertible Bonds, which are mandatorily convertible into our 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 AngloGold Ashanti Holdings Finance plc in May 2009. The conversion of the Mandatory Convertible Bonds or the guaranteed convertible bonds will dilute the ownership interest of our existing shareholders. For a description of the Mandatory Convertible Bonds, please see “Prospectus Supplement Summary — Recent Developments — Concurrent Offering of Mandatory Convertible Bonds”.

 

In addition, the price of our ordinary shares and/or ADSs could also be negatively affected by possible sales (including short sales) of our ordinary shares or ADSs by investors who view the Mandatory Convertible Bonds as a more attractive means of equity participation in us and by the hedging or arbitrage trading activity that we expect to develop involving our ordinary shares or ADSs as a result of the issuance of the Mandatory Convertible Bonds.

 

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 ordinary shares 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 Mandatory Convertible Bonds 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.

 

Our net tangible book value as of June 30, 2010 was $3,243 million, or $887 per ordinary share. Net tangible book value per share represents the amount of our total tangible assets, less total liabilities, divided by the number of ordinary shares outstanding.

 

After giving effect to our issue of 15,773,914 ordinary shares in the offering (assuming no exercise of the underwriters’ over-allotment option) at an offering price of $      per ordinary share and after deducting the estimated offering expenses payable by us, our net tangible book value as of June 30, 2010, would have been $      million, or $      per ordinary share. This represents an immediate increase of $      per share to new investors in the offering, as illustrated by the following table:

 

 

After giving effect to our issue of 15,773,914 ordinary shares (assuming no exercise of the underwriters’ over-allotment option) in the offering, existing ADS holders or shareholders will be diluted such that a shareholder holding 10% of our outstanding ordinary share capital prior to the offering will have its shareholding reduced to 9.58% of our outstanding ordinary share capital following the issuance of 15,773,914 million ordinary shares.

 

In addition, concurrently with this offering, AngloGold Ashanti Holdings Finance plc, our indirect wholly-owned subsidiary, is also offering up to $           aggregate principal amount (or $          aggregate principal amount if the underwriters of that offering exercise their over-allotment option with respect to that offering in full) of the Mandatory Convertible Bonds, which are mandatorily convertible into our ADSs (or, in certain circumstances, the cash value thereof). The conversion of the Mandatory Convertible Bonds would further dilute the ownership interest of our existing shareholders. The Mandatory Convertible 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 in that offering exercise their over-allotment option with respect to that offering in full). For a description of the Mandatory Convertible Bonds, please see “Prospectus Supplement Summary — Concurrent Offering of Mandatory Convertible Bonds”.

 

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)

 

 

 

 

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 issue of ordinary shares offered hereby or the Mandatory Convertible Bonds 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.

 

 

 

 

There has been no material change in our consolidated capitalization or indebtedness since July 31, 2010.

 

South African Taxation

 

The following discussion summarizes South African tax consequences of ownership and disposition of shares or ADSs by a US holder (as defined below). This summary is based upon current South African tax law and South African Revenue Service practice, the convention between the Government of the United States of America and the Republic of South Africa for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains, signed February 17, 1997, or the “Treaty”, and in part upon representations of the depositary, and assumes that each obligation provided for in, or otherwise contemplated by, the deposit agreement and any related agreement will be performed in accordance with its respective terms.

 

The following summary of South African tax considerations does not address the tax consequences to a US holder that is resident in South Africa for South African tax purposes, whose holding of shares or ADSs is effectively connected with a permanent establishment in South Africa through which such US holder carries on business activities or, in the case of an individual who performs independent personal services, with a fixed base situated therein, or who is otherwise not entitled to full benefits under the Treaty.

 

The statements of law set forth below are subject to any changes (which may be applied retroactively) in South African law or in the interpretation thereof by the South African tax authorities, or in the Treaty, occurring after the date hereof. It should be expressly noted that South African tax law does not specifically address the treatment of ADSs. However, it is reasonable to assume (although no assurance can be made) that the tax treatment of US holders of shares is also applicable to US holders of ADSs.

 

Holders are strongly urged to consult their own tax advisors as to the consequences under South African, US federal, state and local, and other applicable laws, of the ownership and disposition of shares or ADSs.

 

Taxation of dividends

 

South Africa imposes a corporate tax known as Secondary Tax on Companies, or “STC”, on the distribution of earnings in the form of dividends. Under the terms of an option granted to gold mining corporations, we have elected not to be subject to STC. As a result, although our dividend payments are not subject to STC, we pay corporate income tax at a slightly higher rate than would otherwise have been the case. This election resulted in the overall tax paid by us being lower than the tax payable using the standard corporate tax rate together with STC.

 

South Africa does not currently impose any withholding tax or any other form of tax on dividends paid to US holders with respect to shares, but there has been a recent announcement (as set out below) that this could change with the introduction of a proposed withholding tax on dividends.

 

On February 21, 2007, the then-South African Minister of Finance, Mr. Trevor Manuel, delivered his 2007 Budget Speech in which he stated that the STC currently levied at 10% will be replaced by a 10% withholding tax that will be levied on shareholders in respect of dividends distributed by South African companies. The second draft of the legislation giving effect to this withholding tax on dividends was finalized in 2009 but a commencement date has not been announced. If and when this provision comes into effect, it will reduce the tax payable by our South African operations thereby increasing distributable earnings of these operations, but the withholding tax will generally reduce the amount of dividends or other distributions received by our shareholders.

 

In the case of a South African withholding tax on dividends paid to a US holder with respect to shares or ADSs, the Treaty limits the rate of this tax to 5% of the gross amount of the dividends if a

US holder is a company that holds directly at least 10% of our voting stock and 15% of the gross amount of the dividends in all other cases. The above provisions shall not apply if the beneficial owner of the dividends is a US resident who carries on business in South Africa through a permanent establishment situated in South Africa, or performs in South Africa independent personal services from a fixed base situated in South Africa, and the dividends are attributable to such permanent establishment or fixed base.

 

Taxation of gains on sale or other disposition

 

South Africa imposes a tax on capital gains, which applies mainly to South African residents and only to a limited extent to non-residents. The meaning of the word “residents” is different for individuals and corporations and is governed by the South African Income Tax Act of 1962 and by the Treaty. Gains on the disposal of securities which are not capital in nature are usually subject to income tax. In either case, a US holder will not be subject to South African tax on the disposal of shares or ADSs unless the US holder carries on business in South Africa through a permanent establishment situated therein to which the shares or ADSs are attributable.

 

Securities Transfer Tax (“STT”)

 

The change of beneficial ownership of shares listed on an exchange in South Africa is subject to STT at the rate of 0.25% of the taxable amount of the shares. Any change of beneficial ownership of shares listed on an exchange outside South Africa and/or the transfer of ADSs is not subject to STT or to any other South African tax. Where a change in beneficial ownership on a purchase of shares listed on an exchange in South Africa:

 

 

United States Federal Income Taxation

 

The following is a general summary of the material US federal income tax consequences of the ownership and disposition of shares or ADSs to a US holder (as defined below) that holds its shares or ADSs as a capital asset. This summary is based on US tax laws, including the Internal Revenue Code of 1986, as amended, or the Code, final and proposed Treasury regulations promulgated thereunder, rulings, judicial decisions, administrative pronouncements, and the Treaty, all at the date of this prospectus supplement, and all of which are subject to change or changes in interpretation, possibly with retroactive effect. In addition, this summary is based in part upon the representations of the depositary and the assumption that each obligation in the deposit agreement relating to the ADSs and any related agreement will be performed in accordance with its terms.

 

This summary does not address all aspects of US federal income taxation that may apply to holders that are subject to special tax rules, including certain US expatriates, insurance companies, tax-exempt entities, certain financial institutions, persons subject to the alternative minimum tax, regulated investment companies, securities broker-dealers, traders in securities who elect to apply a mark-to-market method of accounting, investors that own (directly or indirectly) 10% or more of our outstanding share capital or voting stock, partnerships, persons holding their shares or ADSs as part of a straddle, hedging or conversion transaction, or persons whose functional currency is not the US dollar. Such holders may be subject to US federal income tax consequences different from those set forth below.

As used herein, the term “US holder” means a beneficial owner of shares or ADSs that is (a) a citizen or individual resident of the United States for US federal income tax purposes; (b) a corporation (or other entity taxable as a corporation for US federal income tax purposes) created or organized in or under the laws of the United States or any state thereof (including the District of Columbia); (c) an estate, the income of which is subject to US federal income taxation regardless of its source; or (d) a trust if a court within the United States can exercise primary supervision over the administration of the trust and one or more US persons are authorized to control all substantial decisions of the trust. If a partnership (including for this purpose, any entity treated as a partnership for US federal income tax purposes) holds shares or ADSs, the tax treatment of a partner generally will depend upon the status of the partner and the activities of the partnership. If a US holder is a partner in a partnership that holds shares or ADSs, the partnership and its partners are urged to consult their own tax advisors regarding the specific tax consequences of the ownership and disposition of the shares or ADSs.

 

US holders should consult their own tax advisors regarding the specific South African and US federal, state and local tax consequences of owning and disposing of shares or ADSs in light of their particular circumstances as well as any consequences arising under the laws of any other taxing jurisdiction. In particular, US holders are urged to consult their own tax advisors regarding whether they are eligible for benefits under the Treaty.

 

For US federal income tax purposes, a US holder of ADSs should be treated as owning the underlying shares represented by those ADSs. Therefore, deposits or withdrawals by a US holder of shares for ADSs or of ADSs for shares should not be subject to US federal income tax. The following discussion (except where otherwise expressly noted) applies equally to US holders of shares and US holders of ADSs.

 

This discussion assumes that we are not, and will not become, a passive foreign investment company (a “PFIC”) for US federal income tax purposes, as described below.

 

Taxation of dividends

 

The gross amount of any distribution (including the amount of South African withholding tax (if any) thereon) paid to a US holder by us generally will be taxable as dividend income to the US holder for US federal income tax purposes on the date the distribution is actually or constructively received by the US holder, in the case of shares, or by the depositary, in the case of ADSs. Corporate US holders will not be eligible for the dividends-received deduction in respect of dividends paid by us. For foreign tax credit limitation purposes, dividends paid by us will be income from sources outside the United States. At present, South Africa does not impose a withholding tax or any other form of tax on dividends paid to US holders with respect to shares. The South African government, however, has announced its intent to impose a 10% dividend withholding tax. See “Taxation — South African Taxation — Taxation of dividends”.

 

The amount of any distribution paid in foreign currency (including the amount of South African withholding tax (if any) thereon) generally will be includible in the gross income of a US holder in an amount equal to the US dollar value of the foreign currency calculated by reference to the spot rate in effect on the date of receipt by the US holder, in the case of shares, or by the depositary, in the case of ADSs, regardless of whether the foreign currency is converted into US dollars on such date. If the foreign currency is converted into US dollars on the date of receipt, a US holder generally should not be required to recognize foreign currency gain or loss in respect of the dividend. If the foreign currency received is not converted into US dollars on the date of receipt, a US holder generally will have a tax basis in the foreign currency equal to its US dollar value on the date of receipt. Any gain or loss recognized upon a subsequent conversion or other disposition of the foreign currency generally will be treated as US source ordinary income or loss. In the case of a US holder of ADSs, the amount of any distribution paid in a foreign currency generally will be converted into US dollars by the

depositary upon its receipt. Accordingly, a US holder of ADSs generally will not be required to recognize foreign currency gain or loss in respect of the distribution.

 

Subject to certain limitations, South African withholding taxes (if any) generally will be treated as foreign taxes eligible for credit against a US holder’s US federal income tax liability. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. Dividend income generally will constitute “passive category” income, or in the case of certain US holders, “general category” income. The use of foreign tax credits is subject to complex conditions and limitations. In lieu of a credit, a US holder who itemizes deductions may elect to deduct all of such holder’s foreign taxes in the taxable year. A deduction does not reduce US tax on a dollar-for-dollar basis like a tax credit, but the deduction for foreign taxes is not subject to the same limitations applicable to foreign tax credits. US holders are urged to consult their own tax advisors regarding the availability of foreign tax credits.

 

Certain non-corporate US holders (including individuals) are eligible for reduced rates of US federal income tax (currently a maximum of 15%) in respect of “qualified dividend income” received in taxable years beginning before January 1, 2011. For this purpose, qualified dividend income generally includes dividends paid by a non-US corporation if, among other things, the US holders meet certain minimum holding period and other requirements and the non-US corporation satisfies certain requirements, including that the corporation is not a PFIC and either that (i) the ordinary shares (or ADSs) with respect to which the dividend has been paid are readily tradable on an established securities market in the United States, or (ii) the non-US corporation is eligible for the benefits of a comprehensive US income tax treaty (such as the Treaty) which provides for the exchange of information. We believe that dividends paid with respect to our shares and ADSs in tax years beginning prior to January 1, 2011 should constitute qualified dividend income for US federal income tax purposes. We anticipate that such dividends will be reported as qualified dividends on Forms 1099-DIV delivered to US holders. Each individual US holder of our shares or ADSs is urged to consult his own tax advisor regarding the availability to him of the reduced dividend tax rate in light of his own particular situation.

 

The US Treasury has expressed concern that parties to whom depositary shares are pre-released and intermediaries in the chain of ownership between holders and the issuer of the securities underlying depositary shares may be taking actions that are inconsistent with the claiming of foreign tax credits for US holders of depositary shares. Such actions would also be inconsistent with the claiming of the reduced rate of tax described above, applicable to dividends received by certain non-corporate holders. Accordingly, the analysis of the creditability of South African withholding taxes or the availability of qualified dividend treatment could be affected by future actions that may be taken by such parties.

 

Taxation of capital gains

 

In general, upon a sale, exchange or other disposition of shares or ADSs, a US holder will recognize capital gain or loss for US federal income tax purposes in an amount equal to the difference between the US dollar value of the amount realized on the disposition and the holder’s tax basis, determined in US dollars, in the shares or ADSs. Such gain or loss generally will be US source gain or loss, and will be treated as a long-term capital gain or loss if the holder’s holding period in the shares or ADSs exceeds one year at the time of disposition. If the US holder is an individual, any capital gain generally will be subject to US federal income tax at preferential rates if specified minimum holding periods are met. The deductibility of capital losses is subject to significant limitations.

 

A US holder’s tax basis in a share will generally be its US dollar cost. The US dollar cost of a share purchased with foreign currency will generally be the US dollar value of the purchase price on the date of purchase, or the settlement date for the purchase in case of shares traded on an established securities market that are purchased by a cash basis US holder or an electing accrual basis US holder. The amount realized on a sale or other disposition of shares for an amount in foreign currency will be the US dollar value of this amount on the date of sale or disposition. On the settlement date, the US

holder will recognize US source foreign currency gain or loss (taxable as ordinary income or loss) equal to the difference (if any) between the US dollar value of the amount received based on the exchange rates in effect on the date of sale or other disposition and the settlement date. However, in the case of shares traded on an established securities market that are sold by a cash basis US holder (or an accrual basis US holder that so elects), the amount realized will be based on the exchange rate in effect on the settlement date for the sale, and no exchange gain or loss will be recognized at that time. If an accrual basis US holder makes either of the elections described above, it must be applied consistently from year to year and cannot be revoked without the consent of the IRS.

 

Foreign currency received on the sale or other disposition of a share will have a tax basis equal to its US dollar value on the settlement date. Any gain or loss recognized on a sale or other disposition of foreign currency (including its use to purchase shares or upon exchange for US dollars) will be US source ordinary income or loss.

 

Passive foreign investment company considerations

 

A non-US corporation will be classified a PFIC for any taxable year if at least 75% of its gross income consists of passive income (such as dividends, interest, rents or royalties (other than rents or royalties derived in the active conduct of a trade or business and received from an unrelated person), certain commodities income, or gains on the disposition of certain minority interests), or at least 50% of the average value of its assets consists of assets that produce, or are held for the production of, passive income. We believe that we will not be a PFIC for the taxable year ending December 31, 2010 and do not expect to become a PFIC in the foreseeable future. If we were a PFIC for any taxable year, a US holder would suffer adverse tax consequences.

 

These consequences may include having gains realized on the disposition of shares or ADSs treated as ordinary income rather than capital gains and being subject to punitive interest charges on the receipt of certain dividends and on the proceeds of the sale or other disposition of the shares or ADSs. Furthermore, dividends paid by us would not be “qualified dividend income” and would be taxed at the higher rates applicable to other items of ordinary income. US holders should consult their own tax advisors regarding the potential application of the PFIC rules to their ownership of the shares or ADSs.

 

US information reporting and backup withholding

 

Dividend payments made to a holder and proceeds paid from the sale, exchange, or other disposition of shares or ADSs may be subject to information reporting to the Internal Revenue Service (the “IRS”). US federal backup withholding generally is imposed at a current rate of 28% on specified payments to persons who fail to furnish required information. Backup withholding will not apply to a US holder who furnishes a correct taxpayer identification number and makes any other required certification, or who is otherwise exempt from backup withholding. US persons who are required to establish their exempt status generally must provide IRS Form W-9 (Request for Taxpayer Identification Number and Certification).

 

Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against a holder’s US federal income tax liability. A holder may obtain a refund of any excess amounts withheld under the backup withholding rules by timely filing the appropriate claim for refund with the IRS and furnishing any required information.

 

We and the underwriters for the offering named below, for whom UBS AG (London Branch) and Morgan Stanley & Co. Incorporated are acting as representatives, have entered into an underwriting agreement with respect to the ordinary shares (in the form of ordinary shares or ADSs) being offered. Subject to certain conditions, each underwriter has severally agreed to procure purchasers for or, failing that, purchase the number of ordinary shares (whether in the form of ordinary shares or ADSs) indicated in the table below. UBS AG (London Branch) may be contacted at 1 Finsbury Avenue, London EC2M 2PP, United Kingdom. Morgan Stanley & Co. Incorporated may be contacted at 1585 Broadway, New York, NY 10036, United States of America.

 

 

The underwriters are committed to take and pay for all of the ordinary shares being offered, if any are taken, other than the additional ordinary shares covered by the option described below and until such option is exercised. The underwriting agreement provides that the obligation of the underwriters to procure purchasers for, or, failing that, purchase themselves, the ordinary shares being offered is subject to approval of legal matters by counsel and to other conditions.

 

The underwriters have the option to procure purchasers for or, failing that, purchase up to an additional 2,366,086 ordinary shares (whether in the form of ordinary shares or ADSs) from us solely in respect of over-allotments on the same terms as the initial ordinary shares (the “over-allotment option”). The underwriters may exercise the over-allotment option for 30 days following the date of this prospectus supplement. To the extent that the over-allotment option is exercised, each underwriter will become severally obligated to procure purchasers for, or, failing that, to purchase themselves, approximately the same proportion of such additional ordinary shares as the number set forth next to such underwriter’s name in the table above bears to the total number of ordinary shares set forth in such table.

 

The following table shows the per ordinary share and total underwriting discounts, commissions and fees to be paid by us to the underwriters pursuant to the underwriting agreement.

 

 

 

 

The total underwriting discounts and commissions to be paid by us to the underwriters represents     % of the proceeds of the offer, before any other fees and expenses.

 

Ordinary shares sold by the underwriters to purchasers procured by the underwriters or otherwise to the public will initially be offered at the initial price to investors set forth on the cover of this prospectus supplement. If all the ordinary shares are not sold at the initial price to the purchasers procured by the underwriters or otherwise to the public, the underwriters may change the offering price and the other selling terms in respect of sales to investors for its account.

 

We have agreed to pay all fees and expenses in connection with this offering. Set forth below is an itemization of the estimated total fees and expenses, excluding underwriting discounts and