AngloGold hit by currency exposure (April 30, 2003)

Vancouver — South Africa’s biggest gold producer felt the impact of a falling US dollar in the first quarter of 2003. AngloGold (AU-N) saw net profit slump to US$66 million in the three months ended March 31, a 7% drop from the US$71 million profit tallied a year earlier and a 34% shortfall from the US$100 million hit in the fourth quarter of 2002. Earning per share came in at US$0.33, down from the US$0.81 recorded in the first three months of 2002.

The major is the latest global miner to blame appreciating currencies for eating into revenues. Stronger local currencies against US dollar in seven of the eight countries in which it operates negatively impacted costs, margins and earnings. The bulk of AngloGold’s production comes from South Africa, where the local currency, the rand, is trading near 3 year highs against the US dollar, impacting South African mining firms, which draw most of their earnings in international currencies but pay costs in rand. The South African currency averaged R8.35 to the US dollar during the first quarter and has strengthened even further in recent weeks and, at R7.25 to the US dollar, is about 40% higher against the US dollar than at the beginning of 2002.

AngloGold actually received a higher gold price in US dollar terms, up 9.2% to US$344 per oz, from US$315 per oz in the year ago period. However, in rand terms it slumped to 91,962 rand per kg, from 96,911 in the previous quarter.

Gold production fell 9% in the quarter to 1.4 million oz, from 1.5 million ounces in the fourth quarter 2002. Driving the shortfall was lower mining grades, particularly from its Morila and Geita mines. The firmer local currencies and lower grades also forced total cash costs up by 21% to US$210 an oz., from the US$151 per oz tallied a year ago.

Going forward AngloGold expects that the currencies in which its costs were predominantly denominated, would maintain their strength in relation to the US dollar for the remainder of the year.

"We expect AngloGold’s earnings for the June quarter to remain under pressure as a result of the exchange rate together with lower grades and mining volume," says Chief Executive Officer, Bobby Godsell. "We do, however, anticipate a gradual recovery by the fourth quarter."

AngloGold, which is the most hedged of the three major South African gold producers, reduced its hedge book by a further 9% during the quarter to 9.34 million oz. The marked-to-market value of all hedge transactions stood at a negative US$251.5 million as at March 31, and a negative $154.9 million as at April 29.

The company is a 51%-held subsidiary of Anglo American (AAUK-Q).