• Hedge book restructured to give greater exposure to spot gold price and to improve value of future forward sales

• Production increased by 4% to 1.699Moz

• Total cash costs increased by 2% to $278/oz, largely due to a further weakening in the dollar

• Total cash costs in South Africa reduced by almost 2% in rand terms to R59,541/kg

• Adjusted headline earnings

• Gold production increased 8% to 6.052Moz, largely due to the merger with Ashanti

• Total cash

• Adjusted headline earnings

• Final dividend declared at R1.80 per share or 30 US cents per share, resulting in a total dividend of R3.50 or

Financial and operating review

OVERVIEW OF THE QUARTER AND THE YEAR

In addition to a generally sound operational performance, this quarter is characterised by two key issues - the restructuring of the hedge book and the underperformance of the Ashanti assets.

Regarding the hedge book, and in light of the company's view that the gold price is likely to trade in the current range or higher in the medium term, management has taken steps to reduce and improve the hedge position for 2005 and 2006 by delivering into a larger-than-usual number of contracts during the quarter, together with partially restructuring the hedge book. This has resulted in a reduction in the net delta of the hedge of some 2.2Moz, to a net hedge of 10.49Moz at 31 December 2004, down substantially from the 12.7Moz reported at the end of the last quarter, following the inclusion of the Ashanti hedge into AngloGold's book.

The restructured hedge now represents cover equal to 31% of five years' production of AngloGold Ashanti. The 2.2Moz reduction in this one quarter is of the same magnitude as the substantial reduction achieved in hedge restructuring by AngloGold through the second quarter of 2002.

The combined effect of these actions has been to increase the proportion of AngloGold Ashanti's gold production that is exposed to the higher spot price of gold and to improve the value of forward sales contracts in future years.

The second defining feature of the quarter is the continued underperformance of the Ashanti assets, although a number of key indicators are improving and these should lead to better production and lower costs. Both of these issues are covered in more detail later in the report.

Turning to operations, the gold price received, for the reasons referred to, was 1% higher while gold production increased by 4%. Total cash costs increased by $6/oz to $278/oz and total production costs increased by $14/oz to $354/oz.

Consequently, adjusted operating profit was virtually unchanged at $97m.

The leading production gains were: Morila (53,000oz) following the resolution of the plant expansion problems; Siguiri (20,000oz) which is recovering from the embargo on gold exports; and Geita (42,000oz) which met its planned increase in production. These increases in ounces were offset by a reduction in production in South Africa

(27,000oz), as well as at Bibiani (12,000oz) and Iduapriem (13,000oz). The major reduction in South Africa came from TauTona (13,000oz) while the other mines, with the exception of Kopanang and Tau

Lekoa, reported slight

decreases.

Total cash costs increased by 2% from $272/oz to $278/oz, largely as a result of the weakening of the dollar, which increased costs by $10/oz. Costs in South Africa continued to be well controlled, decreasing by 2% in rand terms to R59,541/kg, while the currency strengthened by 5%. At Morila, costs declined substantially as a result of the higher production. In Australia, however, total cash costs increased by A$43/oz ($49/oz) and in Ghana by $50/oz as a result of lower grade at Obuasi and production problems at Bibiani and Iduapriem.

Amortisation increased in line with production except at the former Ashanti operations, where it has been adjusted by $5m after a review of the allocation of the purchase price.

This quarter, there was an abnormal tax credit of $59m, primarily as a result of a change to the estimated deferred tax rate. This credit had a substantial, positive effect on adjusted headline earnings which from $43m to $110m.

The unrealised loss on non-hedge derivatives, partially offset by the tax gain, was the primary reason for a decline in net profit for the quarter to $16m.

The AngloGold Ashanti board approved the $121m Cuiabá deepening project in Brazil, which will increase production from that mine from 190,000oz per year to 250,000oz per year within two years of the project's completion. The Cuiabá life of mine will be extended by six years and production over this period will increase by 1.86Moz.

The company this week signed a new three year loan facility agreement for $700m to replace the $600m facility that matures in February. The facility will be used to repay the maturing facility and for general corporate purposes. The new facility will reduce the group's cost of borrowing, as the borrowing margin over Libor will reduce from 70 basis points to 40 basis points.

AngloGold Ashanti, both for the fourth quarter and the year, saw its best ever safety

1

performance. For the quarter, lost time injuries declined by 26% to 6.56 per million man hours (1.31 per 200,000 man hours), and for the year, the number of fatal accidents and the rate of fatal accidents declined by 26% and 34%, respectively. Safety improved in all of the company's operating regions and an increasing number of mines are achieving significant periods of time without a lost time injury: Iduapriem (16 months), Cripple Creek & Victor (13 months), Bibiani (9 months), Navachab (8 months), Sunrise Dam (6 months), Yatela (4 months) and Geita (4 months).

For the year ended 31

December 2004, gold

production was 8% higher at 6.05Moz, attributable largely to the Ashanti merger, as well as to higher production at Sunrise Dam and Cripple Creek & Victor. This increase was offset to some degree by the disposal of Jerritt Canyon and the closure of Union Reefs, as well as reduced production from all of the South African underground operations.

Total cash costs, at $268/oz, were $54/oz higher than those of the previous year, mainly due to stronger operating currencies and lower grades. Adjusted headline earnings for the year decreased by 7% to $263m.

A dividend of 180 South African cents (30 US cents) per share has been declared for the six months ended 31 December 2004. This has been based on the adjusted headline earnings, which excludes unrealised non-hedge derivatives.

Looking ahead, production for the first quarter is estimated to be 1.6Moz at an average total cash cost of $280/oz, assuming the following exchange rates: R/$6.05:1, A$/$0.77:1, BRL/$2.7:1 and Argentinean Peso/$3:1. Capital expenditure for the quarter is estimated at $174m but will be managed in line with profitability and cash generation.

For the year, production is estimated to be 6.5Moz at an average total cash cost of $273/oz, assuming the following exchange rates: R/$6.20:1, A$/$0.77:1, BRL/$2.8:1 and Argentinean Peso/$3:1. Capital expenditure for the year is estimated at $701m.

OPERATING RESULTS FOR THE QUARTER

SOUTH AFRICA

At Great Noligwa, gold production fell 2% to

6,314kg (203,000oz) due to a 4% drop in yield to

10.21g/t, as mining moved toward the extremities of

the lease area. Volume mined, however, increased

4% as a consequence of improved blasting

efficiencies.

Total cash costs decreased 4% to R45,517/kg

($234/oz) due to the lower summer power tariffs

and the implementation of several new cost

saving initiatives. These lower total cash costs,

combined with favourable inventory movements,

meant adjusted operating profit improved by 6%

to R196m ($33m).

The Lost Time Injury Frequency Rate (LTIFR)

improved by 8% to 9.8 lost time injuries per

million hours worked. Regrettably, two

employees lost their lives due to falls of ground.

At Kopanang, volume mined was 8% higher

this quarter due to five additional shifts. Yield

was slightly down at 7.23g/t. Gold production

increased 3% to 3,825kg (123,000oz). Total

cash costs, at R55,491/kg ($285/oz), decreased

10% from the previous quarter, mainly due to

the higher production, lower summer power

charges, lower treatment costs, improved

efficiencies and the implementation of various

cost saving initiatives. Adjusted operating profit

increased 29% to R72m ($12m), reflecting the

improved gold output.

The mine achieved 500,000 fatality-free shifts

on 23 November 2004, although the LTIFR

deteriorated by 23% to 14.45 for the quarter.

Tau Lekoa's volume mined increased 5% this

quarter, following a particularly strong

performance in October and November. Gold

production, favourably impacted by the

increased volumes and a marginal improvement

in yield, closed 7% higher at 2,335kg

(75,000oz). Total cash costs reduced 7% to

R77,233/kg ($397/oz), reflecting the lower

summer power costs and cost saving initiatives

focused on mine overheads. Tau Lekoa's

operating loss was consistent with that of the

previous quarter, at R21m ($3m).

LTIFR deteriorated 22% to 15.29, although the

mine achieved 500,000 fatality-free shifts on

16 November 2004.

Moab Khotsong's improved gold production of 91kg (3,000oz) is not included in the South Africa region's production, as the revenue continues to be capitalised against pre- production costs. Commercial production is scheduled for 2006.

The LTIFR deteriorated 28% to 8.41.

Improved face advance at Savuka translated

into a 2% increase in volume mined this quarter.

Despite the higher volumes and 3% improved

yield however, a drop in tonnes milled resulted

in a 3% decrease in gold production to 1,302kg

(42,000oz). Total cash costs, which benefited

from the lower summer power tariffs and new

2

cost saving initiatives, were 3% lower at R88,981/kg

($458/oz). Operating losses decreased by 43% to

R17m ($4m), predominantly from lower

rehabilitation charges related to a two-year

extension to the life of mine plan.

The LTIFR improved 51% to 8.85, although one

employee died in a shaft accident.

At Mponeng, volume mined increased 6% to assist

in countering the impact of high grade lock-up from

recently commenced ledging operations. The lock-

up resulted in an 11% yield reduction and a 5%

decrease in gold production to 3,477kg (112,000oz),

although grade at Mponeng is expected to improve

in the first quarter.

Total cash costs increased marginally to R64,994/kg

($334/oz) due to the lower gold output, though this

increase was partially offset by the lower summer

power tariffs and the cost saving initiatives.

Adjusted operating profit decreased 32% to R13m

($2m), reflecting the impact of the lower gold

production.

The LTIFR deteriorated by 17% to 10.77.

At TauTona, volume mined decreased 11% after

mining was impeded on several panels by seismicity

and face advance declined on the basis of rock

engineering recommendations. Yield fell 4% from

higher dilution in the tonnages and increased levels

of off-reef mining. Gold production, down 9% to

4,081kg (131,000oz), was negatively impacted by

the lower tonnages and decreased yield. Total cash

costs were consequently impacted by the lower gold

output, rising 5% to R54,011/kg ($278/oz). Adjusted

operating profit decreased 44% to R48m ($8m).

Two employees lost their lives in heavy machinery accidents this quarter and two employees died from falls of ground.

The LTIFR deteriorated 16% to 14.53.

At Ergo, which is due to close during 2005, tonnes treated declined by 11% as a result of a decrease in available high face material for reclamation. Yield, at 0.25g/t, was marginally above that of the previous period. Gold production declined 9% to 1,493kg (48,000oz), in line with planned lower tonnage profiles, while total cash costs improved 1% to R78,651/kg ($404/oz) due to lower throughput, more efficient cyanide usage and reduced by-product losses from the closure of the acid plant. Operating losses increased R13m to R24m ($4m).

Ergo had no lost time injuries.

ARGENTINA

At Cerro Vanguardia (92.5% attributable), gold production increased as expected by 11% to 68,000oz due to a 12% increase in ore treated.

Total cash costs were 10% lower at $130/oz, mainly owing to improved production and higher silver by-product revenue. Adjusted operating profit climbed to $16m as a result of a 28% increase in gold revenue following a 9% improvement in the received price.

The LTIFR improved slightly to 4.61.

AUSTRALIA

Sunrise Dam reported its highest-ever quarterly production of 114,000oz. Although mining continued in the higher grade areas as planned, recovered grade, at 3.73g/t, was marginally lower than last quarter's level and total cash costs increased 13% to A$383/oz ($282/oz) due to increased ore movement, higher mining costs and crusher maintenance requirements.

Adjusted operating profit improved 50% to A$27m ($20m), as a result of increased inventory.

The underground project at Sunrise Dam is well underway, with 397m of underground capital development and 1,058m of operational development completed. As anticipated, the first underground gold was produced this quarter.

There were no lost time injuries at Sunrise Dam.

Work continued this quarter on the November 2000 Boddington Expansion Feasibility Study update. All three parties involved remain committed to completing the study and optimising the project.

BRAZIL

At AngloGold Ashanti Brazil, gold production declined 8% to 59,000oz, mainly due to a planned decrease in tonnage treated at Córrego do Sítio (a heap leach mine) and lower feed grade at Cuiabá mine.

Total cash costs were 4% higher at $135/oz, as a consequence of the lower gold production and the 6% appreciation of the Brazilian real. The increased total cash costs and an 8% decrease in gold sold resulted in a 23% decline in adjusted operating profit to $10m.

3

Cuiaba mine and the Queiroz plant experienced significant improvements in health and safety this quarter, with LTIFR improving to 0.75. The Queiroz plant was awarded an ISO 14001 certification.

At Serra Grande (50% attributable), gold production was maintained at last quarter's level of 24,000oz. Total cash costs were 8% higher at $147/oz due to local currency appreciation and higher power costs and adjusted operating profit reduced marginally to $4m.

The LTIFR for the quarter was 2.46.

GHANA

At Bibiani, production decreased 26% to 34,000oz, largely due to problems with plant availability and expected constraints related to the south pit wall failure reported last quarter. Buttressing of the pit wall was successfully completed during the fourth quarter and mining resumed in the main pit in November. Total cash costs increased 20% to $283/oz, mainly due to lower production levels.

Bibiani had no lost time injuries this quarter.

At Iduapriem (85% attributable), gold production decreased 24% to 42,000oz due to lower-than- anticipated throughput levels and problems with plant availability related to the new gearbox installation, as detailed last quarter. Total cash costs increased significantly to $354/oz, primarily as a result of lower production.

Work is currently in progress on the Iduapriem mine- to-mill study reported last quarter.

Iduapriem had no lost time injuries this quarter.

At Obuasi, gold production declined 4% to 90,000oz, primarily due to the continued effect of insufficient developed and drilled underground reserves, coupled with ground instability and rock transfer problems, which are being resolved. Total cash costs increased to $320/oz, mainly as a result of lower production levels.

The LTIFR was 2.56 for the quarter.

The reorganisation of the planning and technical functions at Obuasi was completed during the quarter as planned. This reorganisation, combined with focused management attention on increasing development rates and improving underground production rates, should continue to strengthen the operating base on which to plan and develop the longer-term value of the mine.

REPUBLIC OF GUINEA

At Siguiri (85% attributable), production

increased 87% quarter-on-quarter to 43,000oz, although, as previously reported, the mine continued to be impacted by the cement shortage during the first part of the quarter, the delay in the carbon-in-pulp (CIP) plant construction, and the relocation of one cement silo in December. In spite of these constraints, total cash costs decreased 14% to $434/oz as a result of the increased production.

The LTIFR for the quarter was 0.46.

The CIP plant is on track for commissioning during the first quarter of 2005 and production is expected to increase. As previously reported, the gold embargo was lifted in the third quarter of 2004, although discussions with the Guinean government to resolve the impassse regarding withholding and other taxes are ongoing.

MALI

At Morila (40% attributable), production

increased 143% to 90,000oz, reflecting a 93% increase in recovered grade and a 28% increase in tonnage throughput, as the plant expansion realised full operational capacity in the last quarter of the year. Mining progressed as planned into the higher zones of Phase Three, formerly Pit Three, giving rise to Morila's significant grade increase.

Total cash costs declined by 40% quarter-on- quarter to $150/oz, mainly due to the improved gold production. Adjusted operating profit also improved to $19m from the break-even position of the previous quarter.

The LTIFR for the quarter was 3.71.

The productivity bonus dispute was successfully resolved during the quarter, as both parties have agreed to implement a productivity bonus scheme going forward.

Looking ahead, Morila's grades in the first quarter of 2005 are expected to be lower as mining moves away from the high grade zones but, overall, grades are likely to be higher for the year than they were in 2004.

At Sadiola (38% attributable), gold production improved 24% to 47,000oz due to increases in both the recovered grade and tonnage throughput.

4

Total cash costs decreased by 4% to $255/oz, while adjusted operating profit was consistent with that of the previous quarter at $3m, as increased revenue was offset by higher operating costs.

The LTIFR for the quarter was 2.32.

Production at Yatela (40% attributable), at 28,000oz, was 17% above that of the previous quarter. The improved production performance resulted from increased tonnage stacked due to improved footing conditions on the leach pad.

Total cash costs increased by 18% to $276/oz after a higher estimated life-of-mine stripping ratio in the Alamoutala pit led to increased mining costs.

Adjusted operating profit was in line with that of the previous quarter at $2m, as increased revenue at Yatela was offset by higher operating costs.

There were no lost time injuries during the quarter.

NAMIBIA

At Navachab, gold production dropped 6% to 17,000oz due to a 21% decrease in tonnage throughput, although the effect of this decline was partially offset by a 17% improvement in recovered grade. Tonnage throughput was adversely affected by a crusher breakdown in November that resulted in considerable plant downtime. Total cash costs increased by 53% to $462/oz as a result of the reduced production volume, the cost of repairing the crusher and the effect of the US dollar exchange rate. Increased production costs led to an adjusted operating loss of $2m.

The mine recorded no lost time injuries.

TANZANIA

At Geita, as anticipated, production increased 28% to 190,000oz. Tonnage throughput increased 6% and recovered grade improved 21% in line with

expectations reported last quarter. Total cash costs, at $264/oz, were lower than those of the previous quarter, due to the positive impact of the improved grade.

Adjusted operating profit rose to $5m, compared to the break-even position of the previous quarter. This was chiefly due to improved production and cost performance.

The mine recorded a LTIFR of 1.02.

USA

At Cripple Creek & Victor (67% ownership with 100% interest in production until initial loans are repaid), production, at 91,000oz, was marginally higher than that of the previous quarter, due to the continued improvement of the head grade solution through the processing plant. Total cash costs, at $240/oz, were 10% higher than those of the previous quarter and adjusted operating profit decreased from $2m to a loss of $1m, as the benefit of the improved grade was more than offset by inventory movement and higher costs.

CC&V had no lost time injuries this quarter.

The processing facilities at CC&V met design capacity for the year, although levels for the quarter were slightly lower than expected. Crusher throughput was negatively impacted in December for ten operating days during major repairs to the gyratory portion; haul truck hours ended the quarter below planned levels.

Phase 4C of the leach pad construction was finished in October. The leach pad drilling programme completed in the third quarter confirmed that the recoverable ounces in the leach pad inventory are reflected in the financials and require no adjustments.

Notes:

• All references to price received include the realised non-hedge derivatives.

• All references to adjusted operating profit refer to operating profit excluding unrealised non-hedge derivatives.

• All references to adjusted headline earnings refer to headline earnings excluding unrealised non-hedge derivatives and fair value gains on interest rate swaps.

• In the case of joint venture operations, all production and financial results are attributable to AngloGold Ashanti. 

• Rounding of figures may result in computational discrepancies.

5

Exploration

In South Africa, assay results of surface borehole MMB4 drilled at Moab Khotsong was completed during the quarter. This borehole returned encouraging grades and confirmed the existing geological model, with an average grade of 32.46g/t over a channel width of 119.68cm for six deflections.

At Geita in Tanzania, diamond drilling of the Geita Hill down-dip extension continued in order to optimise the open-pit and potential underground interphase. Step-out drilling continued in the North East Extension area at Geita Hill, tracing gold mineralisation along strike and down-dip to define areas for infill drilling in 2005.

At Sadiola in Mali, an additional hole was drilled in the Hard Sulphide Drilling Project, which verified the mineralisation previously encountered 100m below the exisitng Mineral Resource model. Satellite Mineral Resource oxide modelling focused on FE3 South and drilling intersected mineralisation 300m further south. Infill drilling was completed over the western edge of the FE4 pit.

At Yatela, four holes were drilled to investigate the sulphide potential below the Alamoutala pit. Assay results received from the first two holes intersected uneconomic mineralisation.

At Morila, drill intercepts at Samacline to the west of the pit remain encouraging but deep. A regional target generation study within the lease area identified several targets for follow-up drilling but no significant mineralisation was intercepted.

At Obuasi in Ghana, underground exploration continues to focus on the below 50 Level Deeps project where results from drilling remain encouraging. The tender has been awarded for the drilling of two 3,000m holes from surface in the Deeps project. A further six deep holes are anticipated during the course of this exploration project. Drilling of the West Lode sulphide orebody on the 32 Level project also yielded positive results.

At Bibiani North, drilling continued to focus on the delineation of additional underground Mineral Resources with moderate results.

At Siguiri in Guinea, drilling for depth extensions in the Kami pit has intersected narrow but relatively high grade zones. Mineral Resource definition

drilling continued south west of the Kozan pit and to the south of the Kosise pit.

The start of the planned diamond drilling campaign at the Kimin project in Democratic Republic of Congo is due to commence during January 2005.

In Namibia at Navachab, drilling at Anomaly 16, situated 5km from the current pit, delineated an Inferred Mineral Resource of 5.4Mt at 1.03g/t for 178,000oz. Further drilling is required to test additional mineralisation along strike and down- dip.

At Cripple Creek & Victor in the United States, efforts focused on evaluating the metallurgical character of the Mineral Resource at the Wildhorse Extension project, where results are pending. Mineral Resource expansion drilling continued on this project with positive results. Drill testing of the Hoosier Pass target, a sheeted vein system, continued with drill intersections of 1g/t to 2g/t.

In Alaska, drilling at Livengood delineated a stratigraphically controlled, shallow-dipping gold system, and further drilling is warranted. In the Pogo district, the ER and Eagle projects will be farmed out in 2005, with exploration focusing on three new targets identified during the 2004 regional geochemical programme.

In Brazil, Mineral Resource definition drilling continued at Lamego. Drilling confirmed multiple mineralised horizons at the southern extremity of the Cabeça da Pedra fold hinge and the Carruagem exploration ramp advanced 227m during the quarter to 242m.

At Córrego do Sítio, drilling at Carvoaria Velha- Bocaina (situated 2km north-east of Cachorro Bravo) confirmed the presence of multiple narrow, locally high grade, mineralised sulphide horizons. Drilling at Bocaina at the northern end of the property has extended the known oxide Mineral Resource to the north and confirmed the down-plunge continuity of the sulphide mineralisation. Ongoing underground drilling at Cachorro Bravo continues to intersect high grade mineralisation within the 300 ore horizon.

6

Seven holes drilled to test the Biquinha target adjacent to the Cuiabá mine failed to intersect significant mineralisation.

At Serra Grande, drilling concentrated on potential open-pit targets and Mineral Resource modeling is in progress.

At Cerro Vanguardia, in Argentina, drilling at the Zorro, Gabriela and Liliana veins highlighted continued upside in under-explored veins within the licence area.

Diamond drilling was completed on one target in Peru, with further drilling planned for early in 2005. A further three targets will be drill tested in 2005. The Pichacani property in southern Peru was farmed out to Bear Creek Mining in December.

In Colombia, target definition work continues and fieldwork is in progress.

At Sunrise Dam in Australia, drilling from surface and underground continued to focus on the underground targets of Astro, Cosmo, GQ and Hammerhead. At Neville, located 1km north of the underground portal, drilling intersected narrow, high- grade mineralisation. At Lord Byron, located approximately 60km east of Sunrise Dam, Reverse Circulation (RC) drilling targeted zones of higher- grade mineralisation within the known mineralised area.

At Yamarna, diamond drilling tested priority targets in the southern portions of the project area, intersecting extensive alteration with low gold values. Aircore drilling in the northern portions

defined a large geochemical anomaly requiring further testing.

At Tropicana East, diamond drilling was undertaken to provide detailed geological controls of the recently discovered gold mineralisation. Extensive geochemical sampling along strike defined broad anomalous areas, which require further infill sampling in order to define drill targets.

In the Northern Territory, AngloGold Ashanti and Newmont Australia have agreed that AngloGold Ashanti will exit the Tanami Mine Joint Venture and the Central Desert Joint Venture. The Tanami Mine Joint Venture includes the Tanami Mill and associated infrastructure and tenements.

In December, an exploration alliance was established with Oxiana Resources, targeting new mineralisation in Laos.

In Mongolia, two new targets were drill tested this quarter. Drill results are awaited from the Tsagaan Tolgoi and Altan Uul projects.

In China, target generation and project reviews continue.

In Russia, AngloGold Ashanti continues to provide Trans-Siberian Gold with geological input at both the Veduga and Asacha projects. where drilling is in progress to increase the Mineral Resource.

7

Review of the gold market

The return of investor interest to gold produced a

sustained rise in the gold price during the latter half

of 2004. The gold price rose almost uninterruptedly

for three months to early December. The quarter

produced a high spot gold price of $457/oz (see

Graph 1), the highest price seen in almost 17 years.

The price closed the quarter at $435/oz, up by 5%

from the beginning of 2004. The market has

corrected further since the end of the year to a low

of $416/oz, but buying interest returned in January

2005 and the price rally of the past three years still

appears intact.

The average spot price of $434/oz for the last

quarter of 2004 was $33/oz or 8% stronger than the

average price for the previous quarter. However,

the rand strengthened against the dollar by some

13% during this period, and the South African gold

price hardly benefited from the higher dollar prices.

The average local price of R83,983/kg was only 2%

higher than the rand price in the previous quarter.

The gold price in rands of R79,442/kg at the end of

2004 was over 10% or R9,000/kg lower than the

local gold price at the beginning of the year.

GOLD

The gold price driver for the quarter was definitively

the weakening of the US dollar, particularly against

the euro, but also against the Japanese ¥en. The

weakening of the US currency has been the primary

driver of the gold price rise over the past three and a

half years, and the correlation between the rising US

dollar spot price of gold and the weakening of the

dollar against the euro reached a remarkable 97%

over a three month period to December 2004. This

does not mean that other factors will not have some

effect on the gold market and the price of gold from

time to time. It does, however, underline the

primary influence of the health of the US currency

on the gold price in this current market cycle for

gold.

In this respect, the gold market differs from the

parallel cycle of rising base metal and commodity

prices. Unlike the industrial metals, the price of gold

is not a bet on Chinese demand, on which many

commodity prices depend. The gold price

correlation with the US dollar is an important one for

the year ahead. With market commentators and

analysts uniformly forecasting a weaker US dollar at

the end of 2005, these forecasts have translated to

a forecast of higher spot prices of gold as well. Any

stabilisation or recovery in the US currency would

have the opposite effect on the gold price in the

current market.

Investment demand remains the vehicle through

which this influence on the gold price is

exercised. During the past quarter, the role

played by investors and speculators in gold on

the New York Comex was supplemented by the

launch in the USA of the gold exchange-traded

fund, the streetTRACKS Gold Shares. The fund

was created by the World Gold Council in

partnership with State Street Global Markets. By

early 2005, this fund had purchased on behalf

of its investors over 140t of physical gold in the

market. This level of investment is equal to over

25% of the net long position in gold on the New

York Comex. On the Comex itself, during the

quarter the total open position in gold reached a

record high of over 56Moz, or 1,750t. The net

long position remained consistently strong (at

around 20Moz) throughout the final quarter of

2004, although it failed to reach the record high

levels seen in early April.

PHYSICAL DEMAND

The physical market for gold for the first half of

2004 showed some positive adjustment, and

some acceptance of higher gold prices. The

upshot has been a slight recovery in aggregate

demand, and some slippage in supply, and a

physical market more in balance for that.

In the important area of demand for gold in

jewellery, latest reports show improved offtake

in the Middle East (particularly in Turkey) and in

South East Asia (particularly in Vietnam), and

sustained demand in India. Set against this

demand, the market has seen lower official

sales of gold in 2004, due in part to the process

of renegotiation and extension of the

Washington Agreement for a further five years,

and lower gold scrap sales, as the temptation of

a higher dollar spot price of gold has been

dampened by the weakening of the US currency

and consequently generally lower local prices of

gold in many countries.

A further contribution to an improved

supply/demand balance is likely to come from

improving gold offtake in jewellery in China, for

the first time in several years. This

improvement has come with the completion in

2003 of the deregulation of the gold jewellery

market in China, and the subsequent

introduction by the World Gold Council of

modern, 18 carat gold jewellery to metropolitan

markets in China. This new product is able to

compete with platinum jewellery on price, colour

and design and it has been interesting to see

growing sales of this new product and a

8

simultaneous fall in platinum jewellery sales in the

China mainland market during 2004.

CURRENCIES

The recovery in the US dollar which commenced

early in the first quarter of 2004 lasted well into the

third quarter of the year. For over six months, the

US currency traded most of the time between $1.20

and $1.25 to the euro, and reached ¥115 during

May 2004. The dollar's strength during this time

was a product largely of purchases of US dollar

instruments by monetary authorities of China and

Japan. As this Asian intervention ended, so did the

recovery in the US currency. The dollar's

devaluation resumed late in the third quarter, and

continued unbroken for four months, to close 2004

at almost $1.36 to the euro, and ¥102. By the end

of the year, the euro had gained 8% and the ¥en 5%

against the US dollar compared with their exchange

rates at the beginning of 2004.

The cycle of dollar weakness continued as the

market took the view that the challenge of the US

budget deficit was unlikely to be resolved and the

US currency would have to weaken in order to set in

train the economic corrections necessary to reduce

the US deficits. This market view was reinforced by

the public announcement in mid-November by Alan

Greenspan, Chairman of the US Federal Reserve

Bank, that the current account deficit of the USA

was unsustainable and the willingness of foreign

investors to finance that deficit through investments

in the US currency was finite. After that

announcement, the US currency went on to touch a

record low of over $1,37 to the euro, and to lose

ground also against the Japanese ¥en. With the

weaker dollar came a stronger gold price, and the

behaviour of gold as a currency trade against the

US dollar was reinforced.

Since the end of 2004, the dollar has recovered

somewhat against both the Euro and the ¥en, this

time without the support of US Treasury bonds by

Japan and China that triggered and sustained the

dollar recovery during the first half of 2004. Whilst

this looks in part like profit-taking by the forex

markets, the dollar's revival does raise the issue of

an appropriate exchange rate for the US currency,

given the healthier economic growth rates projected

for 2005 for the USA by comparison with the

alternative economies of Japan and Europe. For

the moment, the dollar recovery remains intact.

However, it is likely to be only a matter of time

before the economic reality of the massive US

current account deficit reasserts itself, and market

sentiment again turns against the US dollar.

Against this background, the turn in the US interest

rate policy is likely to be maintained into 2005. Five

rate increases during the second half of 2004 have

brought US rates up to 2.25%p.a. The rate

increases have been implemented steadily and

with a degree of caution to avoid damaging US

economic growth. The balance is a delicate

one, but the Federal Reserve seems committed

to further interest rate increases in 2005 as a

means of improving the ability of the US dollar

to attract foreign investment flows to address

the deficits of the US economy.

Turning to the rand, the local currency has

strengthened against the US dollar by

significantly more than the dollar has weakened

against the euro and the ¥en. At their peak in

2004, the European and Japanese currencies

had strengthened by 8% and 5% against the

opening exchange rates against the US dollar at

the beginning of 2004. By comparison, the rand

gained fully 17% against the US dollar. The

local currency also showed significantly higher

volatility during the year than did the two other

currencies (see Graph 2). The rand benefited

from strong commodity prices and from

sustained investor interest in the South African

economy. In addition, sound economic policies

in recent years have translated to sustained

growth in the country and to a further upgrading

of the country's sovereign risk rating by

international rating agencies. Whilst the value

of the rand remains vulnerable to a recovery in

the US dollar, or to specific event-driven

reactions, it is otherwise likely to sustain its

strength against major currencies into 2005.

HEDGING

As at 31 December 2004, the net delta hedge

position of AngloGold Ashanti was 10.49Moz or

326t, valued at the spot price of gold on that

date of $435/oz. This net delta position reflects

a decrease of just under 2.2Moz or 69t in the

net size of the AngloGold Ashanti hedge

compared with the position at the end of the

previous quarter. This decrease has been

achieved by the restructuring of the combined

hedge position of AngloGold and Ashanti.

The marked-to-market value of the hedge

position as at 31 December 2004 was negative

$1,161m, little changed from the negative value

of $1,139m recorded at the end of

30 September 2004, notwithstanding the fact

that the spot gold price of $435/oz, on which

this value is based, was $16/oz higher than the

spot price at 30

September 2004. The

company continues to manage its hedged

positions actively, and to reduce overall levels

of pricing commitments in respect of future gold

production by the company.

9

Restructuring the AngloGold Ashanti Hedge Book

This company has an established practice of

actively managing its hedged commitments under

changing market circumstances. This is reflected in

the reduction of the book from its high of 17.8Moz at

31 December 2000 to 7.01Moz at 30 June 2004. At

the level of 7.01Moz, the hedge had been reduced

to cover an average of 22% of the annual production

from AngloGold assets over the next five years.

Following the merger with Ashanti, the combined

hedge books amounted to 12.7Moz at the end of

last quarter, and the level of cover increased to 40%

of five years' production of the combined company.

The company has previously indicated its intention

to continue with the reduction in hedging levels.

The argument for this reduction has been further

supported by the company's positive view of the

gold price in the current market cycle. The company

believes that the market circumstances favourable

for the gold price are likely to remain in place for

some time, and that the gold price will continue to

trade in its current range, or higher.

A substantial restructuring of the hedge was

commenced in late December 2004 and completed

in January 2005. This has resulted in a reduction in

the net delta of the combined hedge by some

2.2Moz or 69t of gold, down to a net hedge delta of

10.49Moz at 31 December 2004. The restructured

hedge now represents cover equal to 31% of five

years' production spread over a ten-year period.

The reduction of 2.2Moz in this one quarter is of the

same order of magnitude as the substantial

reduction achieved in hedge restructuring by

AngloGold through the second quarter of 2002.

Notwithstanding a spot price at 31 December 2004

that was $16/oz higher than that at 30 September

2004, the marked-to-market valuation of the hedge

book at the end of the year is almost unchanged

quarter-on-quarter at negative $1,161m, compared

with negative $1,139m at the end of the third

quarter. By comparison, the marked-to-market

value of the now restructured book at the same spot

price of $418.80/oz at which the 30 September

valuation was undertaken, would result in a value of

negative $922m, reflecting a positive variance of

$217m.

This improvement was achieved through a

combination of the elimination from the hedge of

lower-priced contracts and the cash injection of

$83m into the book in the final quarter of 2004,

followed by a further $76m in January 2005.

The level of cover for 2005 is at approximately 10%

of projected production for that year, while in 2006 it

is at approximately 17% of projected production.

In broad terms, the steps undertaken in the

restructuring included: 
•     the effective buy-back of poorly-priced

forward and call option contracts in years

2005, 2006 and 2007 in order to remove the

concentration of hedging in these years

following the incorporation of the Ashanti

hedge book, and to increase exposure to

the spot price of gold in this period; and

•     the sale of new forward and call options

contracts in the years beyond 2007 at

higher gold prices than had been the case

in the previous hedge structure, and spread

more evenly than in the previous hedge

structure.

Because of the nature of the current accounting

treatment of derivative contracts, much of the

restructuring of the hedge has been effected by

overlaying the existing hedge commitments with

new contracts in order to achieve the effect of

buying-back and replacing with new contracts at

different dates and rates. The cash earnings

will reflect the significantly greater exposure of

the company to the spot price during 2005 and

2006 in particular. Beyond these years, the

significantly higher contracted prices in the

restructured forward positions will provide

further benefit. It is the intention of management to continue to

actively manage the hedge book. This includes

delivering into contracts, continuing to reduce

the size of the book, and continuing to seek the

maximum economic benefit from the book. As much of the impact of the restructuring as

possible has been taken in the fourth quarter of

2004. What remained to be concluded of the

restructuring after the year-end was the

apportionment of the net long position against

existing short forward positions, and the rollout

of the balance of the longer-dated new forward

and option positions that complete the

restructuring. The shortfall in the received price

in relation to the average spot price for the

fourth quarter of 2004 was a consequence of

both the bunching of Ashanti hedge contracts at

year-end and the restructuring of the hedge

book, and a gap of this magnitude, is not

expected to recur in anticipated market

conditions. For the year ahead, it is the company's intention

to track the spot price more closely than in this

previous quarter, and to manage the hedge

book actively with the goal of moderating any

negative impact on the price received of the

remaining lower-priced hedge positions in the

year.

11