DBRS Confirms AngloGold Ashanti Limited at A (low)

Dominion Bond Rating Service (“DBRS”) has today confirmed the Senior Unsecured Debt of AngloGold Ashanti Limited (“AngloGold” or the “Company”) at A (low). The trend is Stable. AngloGold’s recent profitability has been disappointing. However, DBRS is comfortable with the rating, as DBRS believes the drop in profitability is temporary, and will increase as the Company’s operational and financial position improves.

The benefits of the Ashanti Goldfields Company Ltd. (“Ashanti”) acquisition in April 2004 are taking longer than expected to be achieved, although improvements are being realized. In 2004, total cash costs rose by 25% to $268/oz. from 2003. This was mainly the result of the underperformance of some assets (e.g. Obuasi production bottomed out at 340,000 oz. in 2004, due to lack of development and investment prior to AngloGold ownership; 2005 production forecast is 400,000 oz. rising to 490,000 oz. in 2006), continued strength of the South African rand versus the U.S. dollar, and inflationary pressures (e.g. increasing consumables, labour, and energy costs). On the back of these higher costs, 2004 net income decreased to $68 million from $320 million in 2003. Profitability, as measured by ROE, decreased from 20.8% in 2003 to 2.8% in 2004 (five-year average of 16.9%), the result of higher costs and large non-hedge derivative losses.

As AngloGold moves forward, DBRS expects its operational and financial position to improve for the following reasons: (1) efficiency improvements and production increases at a number of mines; (2) a new low-cost mine commencing production in 2006 (Moab Khotsong); (3) the closing of two high-cost mines in 2005; and (4) the Company’s cost-saving program which is projected at over $100 million for 2005 (coming from operational efficiency, better procurement, and restructuring). In addition, the restructuring of the hedge book (in early 2005) reduced the book’s size by 2.2 million oz. to 10.5 million oz.

AngloGold has a consistent record of producing strong cash flows (operating cash flow has averaged $530 million and cash flow to total debt has averaged 0.47 over the last five years) and maintains good liquidity ($244 million in cash at September 30, 2005). AngloGold is moderately leveraged with gross debt in the capital structure of 38.4% at September 30, 2005 (down from a pre-acquisition 40.8% in 2003). Capital expenditures, which will peak this year at $750 million (due in part to the recapitalization of the Ashanti assets), are expected to average $550 million for the next couple of years (five-year average of approximately $365 million) as AngloGold pursues internal growth, and modernizes and develops the acquired Ashanti operations.

Recently, Anglo American plc (“Anglo”) announced that it intends to reduce its 50.8% interest in AngloGold below 50%, as it focuses on its core holdings. However, Anglo has indicated that it intends to remain a significant shareholder in the medium term. DBRS would revisit the rating if Anglo ceased being a significant shareholder.

Going forward, DBRS believes that the Company’s operational and financial performance should improve as the benefits of its investment program and optimization of the Ashanti assets are realized. The balance sheet is expected to weaken slightly (driven mainly by the high capex spending) in the near term, but should remain satisfactory for the rating.

Note: This rating is based on public information.