.
.
.
EXHIBIT 3
GROUP PROFIT AND LOSS ACCOUNT
For the year ended December 31,
2003 2002 2001
INTEREST Interest Interest
IN JOINT in joint in joint 2001
GROUP VENTURE TOTAL Group venture Total Group venture Total
Note US$m US$m US$m US$m US$m US$m US$m US$m US$m
- ---------------------------------------------------------------------------------------------------------------------------
TURNOVER 2 456.9 108.0 564.9 467.5 84.7 552.2 477.7 76.7 554.4
----- ----- ----- ----- ---- ----- ----- ---- -----
Cash operating costs (300.0) (56.3) (356.3) (275.9) (47.2) (323.1) (276.3) (38.9) (315.2)
Other costs (30.3) (3.9) (34.2) (26.8) (4.8) (31.6) (31.7) (2.8) (34.5)
Royalties (14.0) (3.6) (17.6) (11.9) (2.7) (14.6) (10.8) (2.2) (13.0)
Depreciation and amortisation (66.9) (12.9) (79.8) (75.1) (13.3) (88.4) (82.3) (12.6) (94.9)
Exceptional operating costs 3 (20.5) - (20.5) (23.5) (8.8) (32.3) - - -
----- ----- ----- ----- ---- ----- ----- ---- -----
TOTAL COSTS 6 (431.7) (76.7) (508.4) (413.2) (76.8) (490.0) (401.1) (56.5) (457.6)
Other income 4 - - - 12.1 - 12.1 - - -
----- ----- ----- ----- ---- ----- ----- ---- -----
OPERATING PROFIT 5 25.2 31.3 56.5 66.4 7.9 74.3 76.6 20.2 96.8
----- ----- ---- ----- ---- -----
Share of operating profit of
joint venture 31.3 7.9 20.2
----- ----- -----
TOTAL OPERATING PROFIT 5 56.5 74.3 96.8
PROFIT ON SALE OF INVESTMENTS 3 8.3 - -
PROFIT ON SALE OF FIXED ASSETS 3 4.7 - -
----- ----- -----
PROFIT BEFORE INTEREST AND TAXATION 69.5 74.3 96.8
Net interest payable: group 8 (9.7) (17.5) (21.6)
joint venture 8 (4.5) (5.1) (7.8)
----- ----- -----
PROFIT BEFORE TAXATION 55.3 51.7 67.4
Tax: group 9 (0.3) (3.0) (9.6)
joint venture 9 (4.6) 6.7 -
----- ----- -----
PROFIT AFTER TAXATION 50.4 55.4 57.8
MINORITY INTEREST (1.2) 0.8 2.1
----- ----- -----
PROFIT ATTRIBUTABLE TO SHAREHOLDERS 49.2 56.2 59.9
----- ----- -----
RETAINED PROFIT FOR THE YEAR 49.2 56.2 59.9
===== ===== =====
BASIC EARNINGS PER SHARE (US$) 10 0.38 0.47 0.53
DILUTED EARNINGS PER SHARE (US$) 10 0.37 0.44 0.52
===== ===== =====
See notes to the financial statements
1
BALANCE SHEETS
As at December 31,
2003 2002
Note US$m US$m
- --------------------------------------------------------------------------------------------
FIXED ASSETS
Intangible assets 11 15.4 17.3
Tangible fixed assets 12 603.4 602.7
Investments
- Geita joint venture 13 113.4 91.2
- Share of gross assets and goodwill 193.2 205.1
- Share of gross liabilities (79.8) (113.9)
- Loans to joint venture and other
investments 13 1.1 32.6
----- -----
733.3 743.8
----- -----
CURRENT ASSETS
Stocks 14 68.4 76.6
Debtors due within one year 15 39.2 14.0
Debtors due after more than one year 15 - 8.8
Cash 16 72.8 41.3
----- -----
180.4 140.7
----- -----
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Creditors 17 (131.3) (131.1)
Borrowings 18 (24.9) (2.7)
----- -----
(156.2) (133.8)
----- -----
NET CURRENT ASSETS 24.2 6.9
TOTAL ASSETS LESS CURRENT LIABILITIES 757.5 750.7
CREDITORS: AMOUNTS FALLING DUE OVER ONE YEAR
Creditors 17 (3.6) (24.0)
Borrowings 18 (217.4) (254.2)
PROVISIONS FOR LIABILITIES AND CHARGES 20 (27.8) (25.0)
----- -----
508.7 447.5
===== =====
CAPITAL AND RESERVES
Stated capital 21 599.0 588.2
Reserves 23 (92.7) (141.9)
----- -----
EQUITY SHAREHOLDERS' FUNDS 506.3 446.3
Equity minority interests 2.4 1.2
----- -----
508.7 447.5
===== =====
See notes to the financial statements
2
CASH FLOW STATEMENTS
For the year ended December 31,
2003 2002 2001
Note US$m US$m US$m
- --------------------------------------------------------------------------------------------------------------------
CASH INFLOW FROM OPERATING ACTIVITIES 24 86.3 95.2 95.4
- --------------------------------------------------------------------------------------------------------------------
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received 0.8 0.8 2.0
Interest paid (9.1) (19.6) (24.4)
- --------------------------------------------------------------------------------------------------------------------
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE (8.3) (18.8) (22.4)
- --------------------------------------------------------------------------------------------------------------------
TAXATION
Tax paid (1.2) (2.0) (2.9)
- --------------------------------------------------------------------------------------------------------------------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets (83.0) (64.5) (49.6)
Proceeds from sale of fixed assets 3.0 - -
Proceeds from sale of investments 13.3 - -
Loans repaid by joint venture 30.0 - -
- --------------------------------------------------------------------------------------------------------------------
NET CASH OUTFLOW FROM CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT (36.7) (64.5) (49.6)
- --------------------------------------------------------------------------------------------------------------------
CASH INFLOW BEFORE USE OF LIQUID RESOURCES AND FINANCING 40.1 9.9 20.5
MANAGEMENT OF LIQUID RESOURCES 3.1 6.0 9.7
- --------------------------------------------------------------------------------------------------------------------
CASH INFLOW BEFORE FINANCING 43.2 15.9 30.2
FINANCING
Issue of ordinary shares 10.8 41.8 -
Decrease in debt (19.4) (61.0) (40.6)
- --------------------------------------------------------------------------------------------------------------------
NET CASH OUTFLOW FROM FINANCING 25 (8.6) (19.2) (40.6)
- --------------------------------------------------------------------------------------------------------------------
INCREASE/(DECREASE) IN CASH 34.6 (3.3) (10.4)
====================================================================================================================
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
Increase/(decrease) in cash 34.6 (3.3) (10.4)
Decrease in liquid resources (3.1) (6.0) (9.7)
- --------------------------------------------------------------------------------------------------------------------
31.5 (9.3) (20.1)
Cash outflow from decrease in debt 19.4 61.0 40.6
Other (4.8) 3.4 0.9
- --------------------------------------------------------------------------------------------------------------------
MOVEMENT IN NET DEBT 46.1 55.1 21.4
Net debt at January 1 (215.6) (270.7) (292.1)
- --------------------------------------------------------------------------------------------------------------------
NET DEBT AT DECEMBER 31 26 (169.5) (215.6) (270.7)
====================================================================================================================
See notes to the financial statements
3
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
For the year ended December 31,
2003 2002 2001
Note US$m US$m US$m
- -------------------------------------------------------------------------------------------------------------
Retained profit for the year 49.2 56.2 59.9
New share capital issued 21 10.8 43.0 0.9
- -------------------------------------------------------------------------------------------------------------
NET ADDITIONS TO SHAREHOLDERS' FUNDS 60.0 99.2 60.8
Opening shareholders' funds 446.3 347.1 286.3
- -------------------------------------------------------------------------------------------------------------
CLOSING SHAREHOLDERS' FUNDS 506.3 446.3 347.1
- -------------------------------------------------------------------------------------------------------------
There are no recognised gains and losses other than as disclosed in the Profit
and Loss Accounts.
See notes to the financial statements
4
NOTES TO THE FINANCIAL STATEMENTS
1 ACCOUNTING POLICIES
THE COMPANY AND ITS OPERATIONS
Ashanti Goldfields Company Limited ("Ashanti") and its subsidiaries
(collectively, "the Company") are primarily engaged in the mining and
processing of gold ores and the exploration and development of gold
properties in Africa. The Company's operations are principally in
Ghana, Guinea, the Geita mine in Tanzania (which is a 50% joint venture
with AngloGold Limited ("AngloGold")) and Zimbabwe. Gold bullion
produced by the Company is used primarily for fabrication and bullion
investment. Fabricated gold has a wide variety of uses including
jewelery (the largest fabrication use for gold), electronics,
dentistry, decorations, medals, medallions and official coins. Gold for
bullion investment is primarily sold to central banks as part of their
national investment strategies.
The principal accounting policies used by the Company in the
preparation of these financial statements are set out below. The
accounting policies used in preparing the financial statements are
consistent with those used by the Company in its financial statements
for the years ended December 31, 2002 and December 31, 2001.
GOING CONCERN
In June 2002, Ashanti issued US$75 million of Mandatorily Exchangeable
Notes ("MENs"). The MENs will mandatorily exchange into ordinary shares
of Ashanti when Ashanti effects a rights issue. Ashanti agreed with its
banks and the holders of the MENs to complete the rights issue prior to
December 28, 2003. It was intended that as a part of the rights issue
Ashanti would raise additional funds to fund completion of the Siguiri
carbon-in-pulp ("CIP") project.
During the course of the 2003, Ashanti entered into merger discussions
with AngloGold and subsequently entered into a transaction agreement to
effect a merger of Ashanti and AngloGold ("the Merger"). As a
consequence of entering into the transaction agreement, Ashanti had to
delay completing the rights issue. Since the MENs will become repayable
on the Merger being completed, Ashanti has secured agreement of its
banks and the holders of the MENs to delay the timeframe for
completion of the rights issue until December 28, 2004.
Given the delay in the rights issue, the postponement/cancellation of
the Siguiri CIP project was considered. However, following discussions
with AngloGold, Ashanti decided to continue with the Siguiri CIP
project, notwithstanding the substantial increase in the anticipated
capital cost of this project. The increased capital expenditure
required for this project, together with the reduced cash in flows
received by the Company due to poorer operating performance in 2003
compared to 2002, has led to the Company seeking alternative sources of
financing to fund its cash requirements until the consummation of the
Merger.
With the agreement of AngloGold, a US$30 million distribution paid by
the Geita mine on December 31,2003 has been paid in full to the
Company. AngloGold has also agreed to provide an additional US$14.1
million to the Company by purchasing at face value the residual
inter-company loan provided by the Company in respect of the Geita
joint venture. In addition, AngloGold has agreed to provide an
unsecured loan facility of up to US$20 million to Ashanti (see Note
18). These arrangements are not conditional on the Merger completing.
The Ashanti Board considers that these arrangements, together with the
undrawn amounts under its revolving credit facility, are sufficient to
enable it to meet its cash requirements in the period prior to the
Merger becoming effective, currently anticipated to be around April
2004. If the Merger is not completed, or if there is a substantial
delay in completing the Merger, Ashanti will need to proceed with its
rights issue or review alternative forms of financing. If the Merger is
not completed and alternative forms of financing cannot be implemented,
then there will be uncertainty as to whether the Company will be able
to continue as a going concern.
Having taken into account the progress which AngloGold and Ashanti have
achieved in relation to the Merger, the financial support being
provided by AngloGold and other relevant factors, the Directors of
Ashanti have formed the judgement that, at the time of approving these
financial statements, it is appropriate to use the going concern basis
in preparing these financial statements.
The financial statements do not include any adjustments that might
result should the Group be unable to continue as a going concern.
BASIS OF ACCOUNTING
The financial statements have been prepared under the historical cost
convention and in accordance with accounting principles generally
accepted in the United Kingdom ("UK GAAP").
BASIS OF CONSOLIDATION
The Company's financial statements comprise a consolidation of the
results, assets and liabilities of Ashanti, its subsidiary undertakings
and joint ventures. The results and cash flows of subsidiaries acquired
or disposed of in the year are included in the consolidated profit and
loss account and the consolidated cash flow statement from the date of
acquisition or up to the date of disposal.
USE OF ESTIMATES
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenue and expenses during the period. Actual results could differ
from those estimates.
GOODWILL
Goodwill arising from the purchase of subsidiary undertakings and
interests in associates and joint ventures represents the excess of the
fair value of the purchase consideration over the fair value of the net
assets acquired, in accordance with Financial Reporting Standard
("FRS") 10, Goodwill and Intangible Assets ("FRS 10"). Goodwill is
capitalised and amortised over the life of the underlying mine assets.
Prior to January 1, 1998, goodwill was charged to reserves in the year
of acquisition.
On the subsequent disposal or termination of a previously acquired
business, the profit or loss on disposal or termination is calculated
after charging or crediting the amount of any goodwill previously
charged to reserves or capitalised and not yet charged to the profit
and loss account.
Joint ventures
A joint venture is an entity in which the Company holds a long-term
interest and which is jointly controlled by the Company and one or more
venturers under a contractual arrangement. The results of joint
ventures are accounted for using the gross equity method of accounting.
Transactions in other currencies
Transactions denominated in currencies other than the US dollar are
measured at the rates of exchange ruling at the dates of the
transactions. Monetary assets and liabilities denominated in currencies
other than US dollars are remeasured at the rates of exchange ruling at
year end. All remeasurement differences are taken to the profit and
loss account.
5
NOTES TO THE FINANCIAL STATEMENTS
REVENUE RECOGNITION
Sale of bullion is recognised when dore is produced in the gold room.
The proceeds from sales of bullion produced prior to the year end but
which have not been received are included as 'gold in transit' within
cash balances.
EXPLORATION COSTS
Exploration costs incurred prior to the establishment of a commercially
mineable deposit are charged against profits.
TANGIBLE FIXED ASSETS
Tangible fixed assets are recorded at cost less accumulated
depreciation, which includes provision for impairment. Repairs and
maintenance expenditures are charged against profits as incurred. Major
improvements and replacements that extend the useful life of an asset
are capitalised.
Once it has been established that a commercially mineable deposit
exists, mine development costs, including interest costs, are
capitalised as tangible fixed assets. Mine development costs consist of
those expenditures necessary to gain access to ore bodies prior to
production and to extend production in an existing ore body, including
costs of removing overburden, constructing underground shaft stations,
and extending tunnels.
Tangible fixed assets are depreciated as follows:
Development costs, plant and equipment and processing plants are
depreciated over the life of the mine using the unit of production
method, or on a straight-line basis over their estimated useful lives
if shorter. Under the unit of production method, the Company estimates
the amortisation rate based on actual production over total proven and
probable reserves. For mining operations with both underground and
surface mining, amortisation rates are calculated separately for the
respective assets. This rate is then applied to actual costs incurred
to arrive at the amortisation expense for the period.
Buildings are depreciated on a straight-line basis. Following are the
estimated useful lives of assets that are depreciated using the
straight-line basis:
Externally purchased software 3 years
Vehicles 5 years
Plant and equipment 5 to 15 years
Buildings up to 30 years
Estimated useful lives are reviewed on an annual basis in conjunction
with the life-of-mine plans. Tangible fixed assets are reviewed for
impairment if events or changes in circumstances indicate that the
carrying amount may not be recoverable. At such time, in accordance
with FRS 11, Impairment of fixed and assets and goodwill ("FRS 11") the
net present value of the expected future cash flows attributable to the
asset or its disposal value, if higher, is compared to the carrying
value of the income-generating unit and an impairment charge is
recorded if necessary. The Company considers hedging gains and losses
in calculating the net present value of expected future cash flows
for mines, unless there are any mine-specific issues that render such
allocation unreasonale and unsupportable.
STOCKS
Stocks are valued at the lower of cost and net realisable value (which
includes an appropriate proportion of production overheads). Costs are
assigned to stocks on hand by the method most appropriate to each class
of stock with the majority being valued on an average cost basis. Cost
of production include fixed and variable direct costs and an
appropriate portion of fixed overhead expenditure.
INTEREST AND FINANCE COSTS
Interest is capitalised in respect of mine developments as part of
tangible fixed assets from the time that it has been determined that a
commercially minable deposit exists up to the commencement of
production. All other interest costs are charged against profits as
incurred.
Front-end fees, commitment fees and other costs associated with the
initial loan are deferred and amortised over the life of the loan to
give a constant rate of return on the outstanding loan balance.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses derivative instruments to hedge its exposures to
fluctuations in gold prices. In order to protect against the impact of
falling gold prices, the Company enters into hedging transactions which
provide a minimum price for production and allow the Company to take
advantage of increases in gold prices. Instruments are accounted for as
a hedge when they have been entered into to manage gold prices and are
within limits established by the Board of Directors.
Hedging transactions are used as part of the Company's protection and
commitment programme. Protected ounces represent future sales of gold
for which the future price of gold has been fixed. Committed ounces
represent future obligations of the Company to deliver gold at an
agreed upon maximum price.
Receipts and payments on interest rate instruments are recognised on an
accruals basis over the life of the instrument. Gains or losses on
other hedging contracts, including premiums receivable and payable on
options, are recognised in the profit and loss account as designated
production is delivered. In the case of earlier settlement of hedge
contracts, gains or losses are deferred and brought into income at the
originally designated delivery date.
DEFERRED TAXATION
The Company provides for deferred tax assets and liabilities arising
from timing differences between the recognition of gains and losses in
the financial statements and their recognition for tax purposes.
Deferred tax assets are recognised only to the extent that it is more
likely than not that they will be recovered. Deferred tax assets and
liabilities are not discounted.
ENVIRONMENTAL AND SITE RESTORATION OBLIGATIONS
The expected costs of any committed decommissioning or other site
restoration programmes incurred during the construction phase,
discounted at the weighted average cost of capital, are provided for
and capitalised at the beginning of each project and amortised over the
life of the mine using the units of production method. Additional
provisions are recorded during the production phase as environmental
liabilities arise with a corresponding charge to operating results.
Such costs are estimated based on studies performed by independent
environmental specialists and represent management's best current
estimate of amounts that are expected to be incurred when the
remediation work is performed within current laws and regulations or
the terms of respective mining licenses.
6
NOTES TO THE FINANCIAL STATEMENTS
It is reasonably possible that, due to uncertainties associated with
defining the nature and extent of environmental contamination,
application of laws and regulations by regulatory authorities, and
changes in remediation technology, the ultimate cost of remediation
could change in the future. The Company periodically reviews its
accrued liabilities for such remediation costs, as evidence becomes
available indicating that its remediation liability has potentially
changed. Ashanti currently carries public liability insurance coverage.
However, there is no specific coverage available for environmental
liabilities which either arise gradually or otherwise than as a result
of an insurable event.
PRE-STRIPPING AND STRIPPING COSTS
Pre-stripping costs are the costs of removing overburden to expose ore
after it has been determined that a commercially minable deposit
exists, prior to the commencement of production. These costs are
capitalised as tangible fixed assets and, upon commencement of
production, depreciated using the unit of production method based on
proved and probable reserves.
Stripping costs are costs associated with the removal of waste
materials after gold production has commenced. Over the life of the
mine, stripping costs are deferred when the actual stripping ratio is
above the average and then charged to operations when the actual
stripping ratio falls below the average. This policy results in the
smoothing of mine production costs over the life of the mine, which is
a practice unique to the mining industry. The full amount of deferred
stripping costs may not be expensed until the end of the mine life.
Stripping costs are assessed for recoverability on an annual basis
based on current factors surrounding the mine and adjustments made to
the life of mine plan. If the recoverable value has fallen below cost,
the asset is written down to its recoverable value. If the actual
stripping ratio falls below the average stripping ratio, a deferred
liability is recorded.
LEASES
Assets held under finance leases and hire purchase contracts are
capitalised at their fair value on the inception of the leases and
depreciated over the shorter of the period of the lease and the
estimated useful economic lives of the assets. The finance charges are
allocated over the period of the lease in proportion to the capital
amount outstanding and are charged to the profit and loss account.
Operating lease rentals are charged to the profit and loss account in
equal annual amounts over the lease term.
2003 2002 2001
2 TURNOVER US$m US$m US$m
- ------------------------------------------------------------------------------------------
GROUP
Bullion revenue 464.8 416.3 381.7
Cash (paid)/realised on maturing hedging contracts (20.8) 16.9 39.0
Deferred hedging income 12.9 34.3 57.0
- ------------------------------------------------------------------------------------------
456.9 467.5 477.7
- ------------------------------------------------------------------------------------------
JOINT VENTURE
Bullion revenue 122.0 90.1 74.1
Cash (paid)/realised on maturing hedging contracts (14.0) (5.4) 2.6
- ------------------------------------------------------------------------------------------
108.0 84.7 76.7
- ------------------------------------------------------------------------------------------
TOTAL 564.9 552.2 554.4
==========================================================================================
2003 2002 2001
3 EXCEPTIONAL ITEMS BEFORE TAXATION US$m US$m US$m
- ------------------------------------------------------------------------------------------
Depreciation and amortisation (note a.) (15.1) - -
Redundancy costs (note b.) (5.4) - -
Refinancing and restructuring costs (note c.) - (23.5) -
Share of operating loss of joint venture (note d.) - (8.8) -
- ----------------------------------------------------------------------------------------
EXCEPTIONAL OPERATING COSTS (20.5) (32.3) -
Other income (note d. and note 4) - 8.8 -
Profit on sale of investments (note e.) 8.3 - -
Profit on sale of fixed assets (note f.) 4.7 - -
Net interest payable - group (note g.) 2.7 - -
- ----------------------------------------------------------------------------------------
(4.8) (23.5) -
- ----------------------------------------------------------------------------------------
a. Having reviewed the challenging environment in which the Freda-Rebecca
mine operates, Ashanti has recognised an impairment charge of US$15.1
million.
b. During the fourth quarter of 2003, the Company established a plan to
restructure its Obuasi mine operations which entailed the
rationalization of 358 employees. In connection with this
restructuring, the Company recorded provisions US$5.4 million. The
following amounts have been recorded in respect of the restructuring
plan:
US$M
Amount initially established 5.4
Utilized to December 31, 2003 1.1
---
Balance at December 31, 2003 4.3
---
By December 31, 2003, all 358 employees had been terminated. All costs
outstanding at December 31, 2003 were paid by January 31, 2004.
7
NOTES TO THE FINANCIAL STATEMENTS
c. Costs incurred in refinancing the Company's debt during 2002, including
fees paid to financial advisers, legal fees and fees relating to the
extinguishment of the Company's previous revolving credit facility.
d. As provided for in the sale and purchase agreement entered into in 2000
in respect of the Geita mine, AngloGold transferred the neighbouring
Ridge 8 property to Geita during 2002. The consideration of
US$17.6 million will be left outstanding until the project finance
loans are fully repaid by Geita. AngloGold has transferred to Ashanti
for no consideration, its 50% share of the receivable which resulted in
an exceptional gain of US$8.8 million. In line with Ashanti's
accounting policy on exploration costs, the cost of this property was
expensed (Ashanti's share US$8.8 million).
e. Ashanti sold its interest in the Mampon property near Obuasi to Bogoso
Gold Limited and Golden Star Resources Limited for a cash consideration
of US$9.5 million which resulted in a gain before taxes of US$8.3
million. Ashanti realised a further US$0.5 million from the debenture
held in Birim Goldfields ("Birim"), which it sold back to Birim at its
carrying value.
f. The investment held in the joint venture in respect of the Youga
property in Burkina Faso was sold for US$3.3 million resulting in a
gain of US$2.7 million. Ashanti received insurance proceeds of US$3.0
million for the Company's damaged aircraft, which has since been
scrapped. This resulted in a gain of US$2.0 million.
g. The Kilo-Moto Mining Corporation ("Kimin"), a wholly-owned subsidiary
of Ashanti, has outstanding loans with third-party lenders. During 2003
the Company re-negotiated the terms of the Kimin loans. In
consideration for Ashanti guaranteeing the Kimin loans, the Company
secured a reduction in the amounts owed from US$7.7 million to
US$5.0 million. This reduction of US$2.7 million has been recognised as
an exceptional gain within net interest payable - group.
4 OTHER INCOME
2003 2002 2001
US$m US$m US$m
- --------------------------------------------------------------------------------------
HEAD OFFICE
Exceptional gain arising on transfer of receivable
from AngloGold for no consideration (see note 3d.) - 8.8 -
Additional consideration received in respect of the
Golden Pride mine sold in 1999 - 3.3 -
- ------------------------------------------------------------------------------------
- 12.1 -
- ------------------------------------------------------------------------------------
5 OPERATING PROFIT ANALYSIS BY BUSINESS AREA
12 months to December 31, 2003
FREDA- HEDGING EXPLOR- CORP. GEITA
OBUASI IDUAPRIEM BIBIANI SIGUIRI REBECCA INCOME ATION ADMIN. GROUP (50%) TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
US$ million
Revenue 187.1 89.8 77.6 91.7 18.6 (7.9) - - 456.9 108.0 564.9
Operating costs (111.2) (59.7) (46.3) (72.9) (13.7) - (4.5) (22.0) (330.3) (60.2) (390.5)
Royalties (6.0) (2.7) (2.3) (3.0) - - - - (14.0) (3.6) (17.6)
- ----------------------------------------------------------------------------------------------------------------------------------
Operating cash flow 69.9 27.4 29.0 15.8 4.9 (7.9) (4.5) (22.0) 112.6 44.2 156.8
Depreciation and amortisation (30.8) (6.0) (11.2) (12.6) (5.6) - - (0.7) (66.9) (12.9) (79.8)
Exceptional operating costs (5.4) - - - (15.1) - - - (20.5) - (20.5)
- ----------------------------------------------------------------------------------------------------------------------------------
OPERATING PROFIT/(LOSS) 33.7 21.4 17.8 3.2 (15.8) (7.9) (4.5) (22.7) 25.2 31.3 56.5
==================================================================================================================================
12 months to December 31, 2002
FREDA- HEDGING EXPLOR- CORP. GEITA
OBUASI IDUAPRIEM BIBIANI SIGUIRI REBECCA INCOME ATION ADMIN. GROUP (50%) TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
US$ million
Revenue 167.8 57.8 76.1 83.9 30.7 51.2 - - 467.5 84.7 552.2
Operating costs (106.9) (43.9) (43.9) (66.7) (21.0) - (3.8) (16.5) (302.7) (52.0) (354.7)
Royalties (5.0) (1.7) (2.3) (2.9) - - - - (11.9) (2.7) (14.6)
Other income - - - - - - - 12.1 12.1 - 12.1
- ----------------------------------------------------------------------------------------------------------------------------------
Operating cash flow 55.9 12.2 29.9 14.3 9.7 51.2 (3.8) (4.4) 165.0 30.0 195.0
Depreciation and amortisation (33.0) (7.6) (11.7) (17.7) (3.7) - (0.1) (1.3) (75.1) (13.3) (88.4)
Exceptional operating costs - - - - - - - (23.5) (23.5) (8.8) (32.3)
OPERATING PROFIT/(LOSS) 22.9 4.6 18.2 (3.4) 6.0 51.2 (3.9) (29.2) 66.4 7.9 74.3
==================================================================================================================================
12 months to December 31, 2001
FREDA- HEDGING EXPLOR- CORP. GEITA
OBUASI AYANFURI IDUAPRIEM BIBIANI SIGUIRI REBECCA INCOME ATION ADMIN. GROUP (50%) TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
US$ million
Revenue 143.5 3.1 55.8 68.7 76.6 34.0 96.0 - - 477.7 76.7 554.4
Operating costs (101.4) (3.8) (44.8) (45.3) (62.2) (22.8) - (6.5) (21.2) (308.0) (41.7) (349.7)
Royalties (4.3) (0.1) (1.7) (2.1) (2.6) - - - - (10.8) (2.2) (13.0)
- -----------------------------------------------------------------------------------------------------------------------------------
Operating cash flow 37.8 (0.8) 9.3 21.3 11.8 11.2 96.0 (6.5) (21.2) 156.9 32.8 191.7
Depreciation and
amortisation (37.5) (0.5) (4.9) (13.8) (18.6) (3.9) - (1.9) (1.2) (82.3) (12.6) (94.9)
- -----------------------------------------------------------------------------------------------------------------------------------
OPERATING PROFIT/(LOSS) 0.3 (1.3) 4.4 7.5 (6.8) 7.3 96.0 (8.4) (22.1) 76.6 20.2 96.8
===================================================================================================================================
Costs include audit fees of US$0.6 million (2002: US$0.5 million; 2001:
US$0.4 million).
8
NOTES TO THE FINANCIAL STATEMENTS
6 RECONCILIATION OF TOTAL COSTS
2003 2002 2001
US$m US$m US$m
- ---------------------------------------------------------------------------------
CASH OPERATING COSTS
Obuasi 111.2 106.4 101.4
Iduapriem 58.5 43.0 44.0
Bibiani 46.0 43.6 43.1
Ayanfuri - - 2.8
Siguiri 70.6 61.9 62.2
Freda-Rebecca 13.7 21.0 22.8
Geita (50%) 56.3 47.2 38.9
- ---------------------------------------------------------------------------------
TOTAL CASH OPERATING COSTS 356.3 323.1 315.2
Corporate administration costs 22.0 16.5 21.2
Exploration costs 4.5 3.8 6.5
Other costs 7.7 11.3 6.8
Royalties 17.6 14.6 13.0
Depreciation and amortisation 79.8 88.4 94.9
Exceptional costs 20.5 32.3 -
- ---------------------------------------------------------------------------------
TOTAL COSTS 508.4 490.0 457.6
=================================================================================
7 EMPLOYEES
2003 2002 2001
- ----------------------------------------------------------------------------------
THE AVERAGE NUMBER OF EMPLOYEES OF THE COMPANY
DURING THE YEAR WAS AS FOLLOWS:
Underground mining 4,384 4,602 4,777
Surface mining 678 447 543
Processing 1,878 1,978 1,896
Administration 2,564 2,914 2,973
- ----------------------------------------------------------------------------------
9,504 9,941 10,189
==================================================================================
Remuneration paid to directors of Ashanti (excluding amounts paid to
Lonmin Plc in respect of Technical Services and the services of Mr S E
Jonah) amounted to US$2.7 million (2002: US$2.9 million; 2001: US$2.5
million).
8 NET INTEREST PAYABLE
2003 2002 2001
US$m US$m US$m
- ---------------------------------------------------------------------------------------------
Enlarged Revolving Credit Facility 8.0 5.0 -
Mandatorily Exchangeable Notes 2.2 1.4 -
Revolving Credit Facility - 3.3 8.0
51/2% Exchangeable Notes - 6.3 12.0
Other loans and finance charges 3.8 3.3 7.0
- ---------------------------------------------------------------------------------------------
14.0 19.3 27.0
Interest receivable (1.6) (1.8) (5.4)
Exceptional gain on re-negotiation of the Kimin loans (note 3g.) (2.7) - -
- ---------------------------------------------------------------------------------------------
9.7 17.5 21.6
Share of interest payable by joint venture 4.5 5.1 7.8
- ---------------------------------------------------------------------------------------------
14.2 22.6 29.4
=============================================================================================
9
NOTES TO THE FINANCIAL STATEMENTS
9 TAXATION
2003 2002 2001
US$m US$m US$m
- -----------------------------------------------------------------------------------------------------------
CORPORATE TAX - Current year - group 0.3 0.2 6.6
- joint venture 1.7 0.1 -
- Prior years - group (0.8) (8.5) 8.2
- joint venture - 0.2 -
DEFERRED TAX - group - 11.3 (5.2)
- joint venture 2.9 (7.0) -
- -----------------------------------------------------------------------------------------------------------
TAX CHARGE/(CREDIT) ON PROFIT ON ORDINARY ACTIVITIES BEFORE EXCEPTIONAL ITEMS 4.1 (3.7) 9.6
Tax on exceptional items 0.8 - -
- -----------------------------------------------------------------------------------------------------------
Tax charge/(credit) on profit on ordinary activities 4.9 (3.7) 9.6
- -----------------------------------------------------------------------------------------------------------
Deferred tax assets are recognised to the extent that it is considered more
likely than not that there will be suitable taxable profits from which the
future reversal of the underlying timing differences can be deducted. In
certain circumstances where it is expected to take some time for tax losses
to be relieved, it may not be appropriate to recognise the deferred tax
assets at all. The total amount of deferred tax assets in respect of tax
losses not recognised as at December 31, 2003 amounted to US$30.8 million
(2002: US$46.1 million; 2001: US$60.1 million).
No deferred tax is recognised on the unremitted earnings of overseas
subsidiaries and joint ventures.
Reconciliation of total corporate tax
The standard rate of tax for the year, based on the Ghanaian tax rate for
listed companies is 30% (for all reporting periods). The difference from
the standard corporate tax charge to the actual current corporate tax
charge is set out in the following reconciliation.
2003 2002 2001
US$m US$m US$m
- -----------------------------------------------------------------------------------------------------------
Profit before taxation 55.3 51.7 67.4
Tax on profit on ordinary activities at standard rate 16.6 15.5 20.3
- -----------------------------------------------------------------------------------------------------------
Factors affecting charge for the year
Capital allowances for the period in excess of depreciation (2.4) (1.9) (1.0)
Other short-term timing differences 2.2 0.3 2.5
Tax losses (utilised)/incurred in the year (17.4) (3.7) 6.8
Profits arising in foreign jurisdictions with different tax rates 2.3 (12.9) (29.1)
Group goodwill amortisation 1.7 1.9 (2.2)
Capital allowance uplifts (1.3) (1.0) (0.1)
Other permanent differences 0.3 2.1 (5.0)
- -----------------------------------------------------------------------------------------------------------
TOTAL ACTUAL CURRENT YEAR CORPORATE TAX CHARGE
(GROUP AND JOINT VENTURE) 2.0 0.3 6.6
- -----------------------------------------------------------------------------------------------------------
10 EARNINGS PER SHARE
The calculation of earnings per share is based on earnings after tax and
minority interests and the weighted average number of shares outstanding
during the year (after deducting treasury shares which do not qualify for
dividends) of 128.5 million (2002: 119.1 million; 2001: 112.1 million).
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares in issue on the assumption of conversion of all
dilutive potential ordinary shares. The Company has three categories of
dilutive potential ordinary shares being warrants (under the agreement with
the Company's hedge counterparties), share options (under the Senior
Management Share Option Scheme) where the exercise price is less than the
average price of the Company's ordinary shares during the period, and
shares, issued free of charge to senior management, pursuant to the
employee share incentive plans, provided certain criteria are met.
2003 2002 2001
- -----------------------------------------------------------------------------------------------------------
BASIC AND DILUTED EARNINGS ATTRIBUTABLE TO ORDINARY SHAREHOLDERS (US$m) 49.2 56.2 59.9
Weighted average number of ordinary shares (millions) - basic earnings 128.5 119.1 112.1
per share
Dilutive warrants (millions) 2.3 5.3 0.8
Dilutive share options (millions) 2.1 1.6 0.8
Dilutive employee share plans (millions) 0.8 0.6 0.5
- -----------------------------------------------------------------------------------------------------------
ADJUSTED WEIGHTED NUMBER OF ORDINARY SHARES (MILLIONS) - DILUTED EARNINGS
PER SHARE 133.7 126.6 114.2
- -----------------------------------------------------------------------------------------------------------
BASIC EARNINGS PER SHARE (US$) 0.38 0.47 0.53
DILUTED EARNINGS PER SHARE (US$) 0.37 0.44 0.52
- -----------------------------------------------------------------------------------------------------------
10
NOTES TO THE FINANCIAL STATEMENTS
11 INTANGIBLE ASSETS
GOODWILL
US$m
- ----------------------------------------------------------------
COST
At January 1, 2002 21.9
Additions 0.2
- ----------------------------------------------------------------
At December 31, 2002 22.1
Additions 0.7
Reductions (1.1)
- ----------------------------------------------------------------
AT DECEMBER 31, 2003 21.7
================================================================
AMORTISATION
At January 1, 2002 3.1
Charge for the year 1.7
- ----------------------------------------------------------------
At December 31, 2002 4.8
Charge for the year 1.5
- ----------------------------------------------------------------
AT DECEMBER 31, 2003 6.3
================================================================
NET BOOK VALUE
AT DECEMBER 31, 2003 15.4
At December 31, 2002 17.3
- ----------------------------------------------------------------
The balance as at December 31, 2003 of US$15.4 million is in respect of the
acquisition of Pioneer Goldfields Company Limited ("Pioneer"). The
additional goodwill in 2003 and 2002 relates to additional consideration
which has become payable in respect of the acquisition of Pioneer
Goldfields Limited (Tebererie mine) in 2000. Further consideration may
become payable in the future depending on the gold price level.
11
NOTES TO THE FINANCIAL STATEMENTS
12 TANGIBLE FIXED ASSETS
MINE SHAFTS, ASSETS IN THE
DEVELOPMENT AND PLANT AND PROCESSING COURSE OF
PRE-PRODUCTION EQUIPMENT PLANTS BUILDINGS CONSTRUCTION TOTAL
US$m US$m US$m US$m US$m US$m
- --------------------------------------------------------------------------------------------------------------------
COST
At January 1, 2002 836.3 537.9 419.3 91.1 2.4 1,887.0
Additions 29.5 11.1 2.4 0.4 21.1 64.5
Disposals (2.8) (0.7) - (1.4) - (4.9)
Transfers (21.5) 2.3 16.0 13.9 (10.7) -
- --------------------------------------------------------------------------------------------------------------------
At December 31, 2002 841.5 550.6 437.7 104.0 12.8 1,946.6
Additions 26.5 13.0 5.3 0.3 39.3 84.4
Disposals (1.7) (12.9) - - - (14.6)
Transfers 2.8 1.0 11.9 - (15.7) -
- --------------------------------------------------------------------------------------------------------------------
AT DECEMBER 31, 2003 869.1 551.7 454.9 104.3 36.4 2,016.4
====================================================================================================================
DEPRECIATION
At January 1, 2002 592.9 364.2 260.1 56.9 - 1,274.1
Charges 19.0 27.7 20.2 6.5 - 73.4
Disposals (1.9) (0.7) - (1.0) - (3.6)
- --------------------------------------------------------------------------------------------------------------------
At December 31, 2002 610.0 391.2 280.3 62.4 - 1,343.9
Charges 17.3 22.4 21.8 3.9 - 65.4
Provision for impairment (note 3a.) - 1.2 8.0 5.9 - 15.1
Disposals (0.5) (10.9) - - - (11.4)
- --------------------------------------------------------------------------------------------------------------------
AT DECEMBER 31, 2003 626.8 403.9 310.1 72.2 - 1,413.0
====================================================================================================================
NET BOOK VALUE
AT DECEMBER 31, 2003 242.3 147.8 144.8 32.1 36.4 603.4
At December 31, 2002 231.5 159.4 157.4 41.6 12.8 602.7
- --------------------------------------------------------------------------------------------------------------------
The net book value of tangible fixed assets includes US$2.1 million (2002:
US$3.5 million) in respect of assets held under finance leases included
within buildings.
2003 2002
US$m US$m
- ---------------------------------------------------------------------
CAPITAL COMMITMENTS
Contracts placed but not provided for 49.3 13.1
- ---------------------------------------------------------------------
12
NOTES TO THE FINANCIAL STATEMENTS
13 INVESTMENTS
The Company's investment in joint ventures is in respect of its 50%
interest in the Geita mine in Tanzania. This interest is accounted for
under the gross equity basis of accounting.
INVESTMENT LOANS TO
IN JOINT JOINT OTHER
VENTURE VENTURE INVESTMENTS TOTAL
US$M US$M US$M US$M
- -------------------------------------------------------------------------------------
COST
At January 1, 2002 81.7 31.1 1.5 114.3
Share of retained profit for the year 9.5 - - 9.5
- -------------------------------------------------------------------------------------
At December 31, 2002 91.2 31.1 1.5 123.8
Share of retained profit for the year 22.2 - - 22.2
Loans repaid by joint venture - (30.0) - (30.0)
Sale of investments - - (1.5) (1.5)
- -------------------------------------------------------------------------------------
AT DECEMBER 31,2003 113.4 1.1 - 114.5
=====================================================================================
In December 2003, Geita made a US$30.0 million distribution to the
joint venture partners. With the agreement of AngloGold, this US$30.0
million distribution was paid in full to the Company. In consideration
for the above, the Company agreed that it would not participate in
future distributions of Geita, until such time as the equivalent
amounts owed to AngloGold have been repaid in full.
The Company's share of net assets of the Geita joint venture can be
analysed as follows:
2003 2002
US$m US$m
- ---------------------------------------------------------------------
Goodwill 50.9 54.8
Share of fixed assets 110.4 103.5
Share of current assets 31.9 46.8
Share of liabilities due within one year (28.3) (30.5)
Share of liabilities due after more than one year (51.5) (83.4)
- ---------------------------------------------------------------------
SHARE OF NET ASSETS 113.4 91.2
=====================================================================
The principal subsidiary and associated undertakings are:
CLASS OF GROUP INTEREST
COMPANY AND COUNTRY OF INCORPORATION PRINCIPAL ACTIVITIES SHARES HELD PER CENT
- --------------------------------------------------------------------------------------------------------
SUBSIDIARY UNDERTAKINGS
GHANA
Ashanti Godfields (Bibiani) Limited Gold Mining Ordinary 100
No par value
Ghanaian-Australian Goldfields Limited Gold Mining Ordinary 80
No par value
Teberebie Goldfields Limited Gold Mining Ordinary 90
No par value
- --------------------------------------------------------------------------------------------------------
GUINEA
Societe Ashanti Goldfields de Guinee S.A. Gold Mining Ordinary 85
- --------------------------------------------------------------------------------------------------------
ZIMBABWE
Ashanti Goldfields Zimbabwe Limited Gold Mining Ordinary 100
- --------------------------------------------------------------------------------------------------------
ISLE OF MAN
Ashanti Treasury Services Limited Treasury Ordinary 100
Geita Treasury Services Limited Treasury Ordinary 100
- --------------------------------------------------------------------------------------------------------
CAYMAN ISLANDS
Ashanti Capital Limited Financing Ordinary 100
Ashanti Finance (Cayman) Limited Financing Ordinary 100
Ashanti Capital (Second) Limited Financing Ordinary 100
- --------------------------------------------------------------------------------------------------------
UNITED KINGDOM
Ashanti Goldfields Services Limited Holding Company Ordinary 100
- --------------------------------------------------------------------------------------------------------
ASSOCIATED UNDERTAKINGS
Geita Gold Mining Limited (Tanzania) Gold Mining Ordinary 50
Geita Management Company Limited (Isle of Man) Treasury Ordinary 50
- --------------------------------------------------------------------------------------------------------
13
NOTES TO THE FINANCIAL STATEMENTS
14 STOCKS
2003 2002
US$m US$m
- ------------------------------------------------------
Mine stores 44.3 51.1
Ore in stockpiles (note a.) 17.0 20.1
Gold in process 7.1 5.4
- ------------------------------------------------------
68.4 76.6
======================================================
a. Ore is only mined and sent to the stockpile if it is
considered that the ore will have future economic benefit.
This is assessed by reviewing the estimated grade of the
stockpile, the current spot gold price and the estimated costs
of processing the stockpile. These criteria are used
consistently from period to period.
15 DEBTORS
2003 2002
US$m US$m
- ------------------------------------------------------
DUE WITHIN ONE YEAR:
Sundry debtors 5.2 10.3
Prepayments 5.3 3.7
Deferred expenses 0.7 -
Due from AngloGold (note a.) 28.0 -
- ------------------------------------------------------
39.2 14.0
DUE AFTER MORE THAN ONE YEAR:
Due from AngloGold (note a.) - 8.8
- ------------------------------------------------------
39.2 22.8
======================================================
a. Amounts due from AngloGold after more than one year of US$8.8
million as at December 31, 2002 represented a receivable from
AngloGold which arose from the transfer of the Ridge 8
property by AngloGold to the Geita mine. As at December 31,
2002, this amount was due after the Geita project finance
loans were fully repaid by the Geita mine in 2007. On February
3, 2004, AngloGold Holdings Limited, a subsidiary of
AngloGold, agreed to purchase this receivable together with
interest owed by Geita to Ashanti totalling US$13 million. The
amounts due from AngloGold also include recoverable
transaction costs relating to the Merger and the Rights Issue.
In accordance with the Transaction Agreement with AngloGold,
AngloGold will reimburse the Company for all costs incurred at
the time of the Merger.
16 CASH
2003 2002
US$m US$m
- ------------------------------------------------------
Cash at bank and in hand 52.6 17.1
Gold and cash in transit 20.2 24.2
- ------------------------------------------------------
72.8 41.3
======================================================
14
NOTES TO THE FINANCIAL STATEMENTS
17 CREDITORS
2003 2002
US$m US$m
- ----------------------------------------------------------------
AMOUNTS FALLING DUE WITHIN ONE YEAR:
Trade creditors 36.2 45.2
Deferred purchase consideration (note a.) 4.7 3.0
Deferred heding income (note b.) 11.3 14.7
Mining related accruals 5.7 12.9
Accrued interest 21.5 8.0
Taxation 5.5 4.4
Pensions 7.5 7.8
Other accruals 38.9 35.1
- ----------------------------------------------------------------
131.3 131.1
================================================================
AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR:
DEFERRED purchase consideration (note a.) - 5.8
Deferred hedging income (note b.) - 13.1
Other accruals 3.6 5.1
- ----------------------------------------------------------------
3.6 24.0
================================================================
a. The total deferred purchase consideration at December 31, 2003
of US$4.7 million (December 31, 2002: US$8.8 million) is in
respect of the acquisition of Teberebie. This is a fixed
amount payable that is not subject to any form of contingency.
b. Deferred hedging income arises from the early close-out of
hedging contracts.
18 BORROWINGS
2003 2002
US$m US$m
- ----------------------------------------------------------------
Mandatorily Exchangeable Notes (note a.) 75.0 75.0
Enlarged Revolving Credit Facility (note b.) 135.5 144.5
Project finance loans (note c.) 24.3 23.4
Bank loans and overdrafts 5.4 8.2
Finance leases 2.1 3.5
Aviation loans - 2.3
- ----------------------------------------------------------------
242.3 256.9
================================================================
Repayments falling due:
Between one year and two years 45.7 2.0
Between two and five years 91.4 136.3
After five years 80.3 115.9
- ----------------------------------------------------------------
After more than one year 217.4 254.2
Within one year 24.9 2.7
- ----------------------------------------------------------------
242.3 256.9
================================================================
a. On June 28, 2002 the Company issued US$75.0 million of MENs
which were used in part to repay the existing 5 1/2%
Exchangeable Notes. MENs are exchangeable into Ordinary Shares
on either of the following events:
(i) automatically or the completion date of the first
rights issue ("Rights Issue") by the Company
undertaken following the date of the MENs Deed Poll
of June 27, 2002; or
(ii) Ashanti serving a notice of exchange upon the holders
of the MENs at any time after the date falling 18
months after the issue of the MENs on June 28, 2002.
The MENs are exchangeable into Ordinary Shares at an exchange
price of the lower of US$5.40 and the price at which the
Company issues Ordinary Shares pursuant to the Rights Issue.
The MENs (if not already exchanged) will be redeemable for
cash on the earlier of:
(i) a takeover offer for the Company, or a scheme of
arrangement of the Company, becoming effective; or
(ii) the date of maturity, being June 30, 2008.
Interest on the MENs is being accrued at the rate of the
Enlarged Revolving Credit Facility ("Enlarged RCF") but such
interest only becomes payable if the MENs are redeemed for
cash following one of the two events above. Any interest
accrued will be deemed to be part of the consideration upon
conversion of the MENs into equity.
15
NOTES TO THE FINANCIAL STATEMENTS
18 BORROWINGS (continued)
b. As at December 31, 2003, US$139 million (December 31, 2002:
US$149 million) was drawn down under the US$200 million
enlarged RCF entered into on June 28, 2002. Offset against
this were deferred loan fees of US$3.5 million (December 31,
2002: US$4.5 million); such costs are being amortised over the
term of the loan (five years). The Enlarged RCF replaced the
Revolving Credit Facility outstanding at December 31, 2001 and
was used in part to repay the existing 5 1/2% Exchangeable
Notes. The terms of the US$200 million Enlarged RCF require
minimum repayments of eight semiannual instalments of US$20
million starting June 30, 2003 with a final instalment of
US$40 million.
The interest rate applicable to the Enlarged RCF increases
over the life of the loan. The interest rate is as follows:
(i) Years 1 and 2 - US London Interbank Offer Rate ("US
LIBOR") plus 1.75%; and
(ii) Years 3, 4 and 5 - US LIBOR plus 2.00%.
Financial covenants provide that the ratio of consolidated net
debt to consolidated EBITDA (based on the definitions in the
Enlarged RCF) is no greater than 2.50:1 for the 12-month
period ended on December 31, 2002, decreasing incrementally to
1.50:1 for any 12-month period ending after June 30, 2004 and
that the ratio of consolidated EBITDA to consolidated net
interest payable (based on the definitions in the Enlarged
RCF) is not less than 4.50:1 for the 12-month period ended
December 31, 2002, increasing incrementally to 6.00:1 for any
12-month period ending after June 30, 2004.
Additionally, consolidated tangible net worth is not to be
less than US$415.0 million at any time, and consolidated net
debt is not to exceed 50% of the consolidated tangible net
worth for the periods ending on or before June 30, 2004 and
for the relevant periods thereafter shall not exceed 40% of
the consolidated tangible net worth. The Enlarged RCF also
contains default provisions, including cross-default
provisions.
The lenders under the Enlarged RCF have security over all the
hedging contracts entered into by Ashanti Treasury Services
Limited and Geita Treasury Services Limited, gold refining and
purchasing agreements, insurance contracts, gold in transit
and bank accounts. Security has also been granted over
substantially all the assets of Ashanti and Ashanti Goldfields
(Bibiani) Limited located in Ghana including the mining leases
relating to the Obuasi and Bibiani mines. At December 31,
2003, the book value of these securing assets amounted
US$532.7 million. Ashanti also agreed to use its best
endeavours to give security over its shares in Cluff Resources
Limited, which owns the Geita Mine. In addition, Ashanti has
effected a political risk insurance policy, or PRI, of up to
US$131.0 million in relation only to Ghana for the benefit of
the lenders who, prior to the closing of syndication, elected
to take the benefit of PRI.
The Group under its Enlarged RCF had undrawn committed
borrowing facilities of US$21.0 million as at December
31,2003.
c. The project finance loans of US$24.3 million (2002: US$23.4
million) are in respect of loans provided to subsidiaries
Ghanaian-Australian Goldfields Limited and Teberebie
Goldfields Limited and are secured by fixed and floating
charges over their respective assets. At December 31, 2003,
the book value of these securing assets amounted to US$58.8
million (2002: US$52.0 million).
d. On February 3, 2004, SMI Holdings Limited, a subsidiary of
AngloGold, agreed to provide an unsecured loan facility of up
to US$20 million to Ashanti Capital Limited, payable in two
equal tranches. The first tranche can be drawn down at any
time with five days' notice. The second tranche can be drawn
down on five days' notice, subject to the Company providing
evidence that (a) it has fully utilised the existing headroom
under the Enlarged RCF; and (b) all reasonable methods of
raising finance by way of hedging and/or derivative
transactions have been exhausted (subject to remaining in
compliance with the Company's hedging policy and subject to
the terms of the transaction agreement with AngloGold). On
payment of any amount in respect of the second tranche,
AngloGold is entitled to issue a notice specifying that no
further capital expenditure shall be incurred in connection
with the Siguiri project before the second tranche has been
repaid in full, save for amounts that become due and payable
under the terms of agreements entered into before the date of
the notice. Interest is payable on the loan at the rate
(inclusive of PRI premium) applicable to the Enlarged RCF. In
certain circumstances the loan is subordinated to the terms of
the Enlarged RCF. Each tranche of the loan is repayable on the
earlier of the first anniversary of the date on which the
first advance is made and March 31, 2005, subject to such
subordination. AngloGold also agreed to provide a guarantee to
the Company of up to US$6 million in respect of certain plant
and machinery purchase agreements.
16
NOTES TO THE FINANCIAL STATEMENTS
19 FINANCIAL INSTRUMENTS
Debtors and creditors arising directly from the Company's operations
and gold in transit are excluded from the following disclosures.
INTEREST RATE PROFILE OF FINANCIAL LIABILITIES
The interest rate profiles of the Company's financial liabilities at
December 31, 2003 and December 31, 2002, which are predominately US
dollar denominated, were as follows:
Floating rate Fixed rate Total gross
borrowings borrowings borrowings
US$m US$m US$m
- ----------------------------------------------------------------
DECEMBER 31, 2003 242.3 - 242.3
- ----------------------------------------------------------------
December 31, 2002 256.9 - 256.9
================================================================
Interest on floating rate borrowings are determined primarily by
reference to US LIBOR.
INTEREST RATE PROFILE OF FINANCIAL ASSETS
The interest rate profiles of the Company's financial assets at
December 31, 2003 and December 31, 2002, which are predominately US
dollar denominated, were as follows:
Fixed rate Floating rate Interest free Total
US$m US$m US$m US$m
- -----------------------------------------------------------------------------
DECEMBER 31, 2003 - 49.1 3.5 52.6
- -----------------------------------------------------------------------------
December 31, 2002 - 16.5 0.6 17.1
=============================================================================
The financial assets of the Company comprise cash at bank and in hand.
CURRENCY EXPOSURES
The Company had no significant currency exposures given that all
revenues are US dollar denominated as are the majority of its costs,
monetary assets and financial liabilities.
FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES
Set forth below is the book value and management's best estimate of the
fair value of financial instruments:
2003 2002
BOOK VALUE Fair VALUE Book value Fair value
US$m US$m US$m US$m
- -------------------------------------------------------------------------------------------------------------
Financial instruments held or issued to finance the
Company's operations:
Long-term borrowings (217.4) (217.4) (254.2) (254.2)
Short-term borrowings (24.9) (24.9) (2.7) (2.7)
Cash at bank and in hand 52.6 52.6 17.1 17.1
- -------------------------------------------------------------------------------------------------------------
Derivative financial instruments to hedge the
Company's exposure to gold price risk:
Forward contracts - (400.8) - (56.0)
European put options - 28.4 - 24.9
European call options granted - (153.1) - (102.7)
Lease rate swaps - (6.6) - (16.2)
============================================================================================================
Fair value is the amount at which a financial instrument could be
exchanged in an arm's length transaction between informed and willing
parties. The following methods and assumptions were used by the Company
in estimating its fair value disclosure for financial instruments:
Cash at bank and in hand - The estimated fair value of these financial
instruments approximates their carrying values due to their short
maturities.
Derivative financial instruments - Market values have been used to
determine the fair value of lease rate swaps, call and put options and
forward contracts based on estimated amounts the Company would receive
or have to pay to terminate the agreements, taking into account the
current interest rate environment or current rates for similar options
on forward contracts.
Long-term debt - The estimated fair values of the Company's long-term
debt are based on current interest rates available to the Company for
debt instruments with similar terms and remaining maturities.
Short-term borrowings - The estimated fair value of these financial
instruments approximate to their carrying values due to their short
maturities.
17
NOTES TO THE FINANCIAL STATEMENTS
19 FINANCIAL INSTRUMENTS (continued)
HEDGING
It is the Company's policy to hedge the risk of movements in the gold price
using several types of derivative financial instruments.
Gains and losses on instruments used for hedging the gold price are not
recognised until the exposure that is being hedged is itself recognised.
Unrecognised gains and losses on the instruments used for hedging and the
movements therein, are as follows:
GAINS LOSSES NET GAINS
US$m US$m US$m
- ----------------------------------------------------------------------------------------------------------
Unrecognised gains and losses on hedges at January 1, 2003 38.3 (10.5) 27.8
Gains and losses arising in previous years recognised in the year (20.0) 5.3 (14.7)
- ----------------------------------------------------------------------------------------------------------
Gains and losses arising before January 1, 2003 not recognised in the year 18.3 (5.2) 13.1
Losses arising in the year and not recognised - (1.8) (1.8)
- ----------------------------------------------------------------------------------------------------------
Unrecognised gains and losses on hedges at December 31, 2003 18.3 (7.0) 11.3
- ----------------------------------------------------------------------------------------------------------
Gains and losses expected to be recognised within one year 18.3 (7.0) 11.3
==========================================================================================================
Unrecognised gains and losses on hedges at January 1, 2002 70.1 (4.5) 65.6
Gains arising in previous years recognised in the year (34.7) - (34.7)
- ----------------------------------------------------------------------------------------------------------
Gains and losses arising before January 1, 2002 not recognised in the year 35.4 (4.5) 30.9
Gains and losses arising in the year and not recognised 2.9 (6.0) (3.1)
- ----------------------------------------------------------------------------------------------------------
Unrecognised gains and losses on hedges at December 31, 2002 38.3 (10.5) 27.8
- ----------------------------------------------------------------------------------------------------------
Gains and losses expected to be recognised within one year 20.0 (5.3) 14.7
Gains and losses expected to be recognised after one year 18.3 (5.2) 13.1
==========================================================================================================
CREDIT RISK AND CONCENTRATIONS OF CREDIT RISK
Credit risk represents the accounting loss that would be recognized at the
reporting date if counterparties failed completely to perform as contracted and
from movements in gold prices. The Company does not anticipate non-performance
by counterparties.
Concentrations of credit risk (whether on or off-balance sheet) that arise from
financial instruments exist for groups of customers or counterparties when they
have similar economic characteristics that would cause their ability to meet
contractual obligations to be similarly affected by changes in economic or other
conditions. Financial instruments on the balance sheet that potentially subject
the Company to concentrations of credit risk consist primarily of cash and cash
equivalents, receivables and derivatives which are recorded at fair value. The
Company maintains a policy providing for the diversification of cash and cash
equivalent investments and places its investments in a number of high quality
financial institutions to limit the amount of credit risk exposure.
Concentrations of credit risk with respect to receivables are limited due to the
large, financially strong customers the Company does business with.
As described in Note 1, the Company enters into certain hedging transactions.
The Company attempts to minimize its credit exposure to counterparties by
entering into derivative contracts with major international financial
institutions. Although the Company's theoretical credit risk is the replacement
cost at the then estimated fair value of these instruments, management believes
that the risk of incurring losses is remote.
Management does not believe significant risk exists in connection with the
Company's concentrations of credit as at December 31, 2003.
18
NOTES TO THE FINANCIAL STATEMENTS
20 PROVISIONS FOR LIABILITIES AND CHARGES
DEFERRED SITE CLASSIFIED
TAXATION REHABILITATION AS DEBTORS TOTAL
US$m US$m US$m US$m
- --------------------------------------------------------------------------------
At January l, 2002 (6.9) 17.9 6.9 17.9
Charge for the year 11.3 2.7 (6.9) 7.1
- --------------------------------------------------------------------------------
AT DECEMBER 31,2002 4.4 20.6 - 25.0
Charge for the year - 5.6 - 5.6
Utilised during the year - (2.8) - (2.8)
- --------------------------------------------------------------------------------
AT DECEMBER 31,2003 4.4 23.4 - 27.8
================================================================================
The Company's provision for site rehabilitation as at December 31, 2003 is
US$23.4 million (December 31, 2002: US$20.6 million). These costs are
expected to be paid over a 20-year period as the mines come to the end of
their useful lives, commencing with the currently envisaged closure of the
Bibiani (provision of US$3.5 million) and Freda-Rebecca (provision of
US$2.7 million) mines during 2007 and 2006, respectively. The remaining
significant components of the provision comprise US$5.7 million and US$5.2
million related to the Obuasi and Iduapriem mines, respectively, with the
majority of such costs expected to be paid subsequent to 2007.
DEFERRED TAXATION COMPRISES:
2003 2002
US$m US$m
- ---------------------------------------------------------
Liability arising on fixed assets 144.9 141.9
Other timing differences (5.1) (5.3)
Tax losses carried forward (135.4) (132.2)
- ---------------------------------------------------------
4.4 4.4
=========================================================
21 STATED CAPITAL
NUMBER OF SHARES
- ---------------------------------------------------------------------------------
AUTHORISED
200,000,000 ordinary shares of no par value 200,000,000
1 special rights redeemable preference share of no par value 1
- ---------------------------------------------------------------------------------
200,000,001
=================================================================================
ISSUED STATED CAPITAL
SHARES US$m
- -------------------------------------------------------------------------------------------------------
ALLOTTED AND FULLY PAID
AT JANUARY 1, 2003:
Ordinary shares of no par value in issue 126,893,915 588.2
Issue of shares at US$3.00 in respect of the exercise of the warrants 3,593,053 10.8
- -------------------------------------------------------------------------------------------------------
AT DECEMBER 31, 2003:
Ordinary shares of no par value in issue 130,486,968 599.0
Ordinary shares in treasury 556,987* -
1 special rights redeemable preference share of no par value 1 -
- -------------------------------------------------------------------------------------------------------
131,043,956 599.0
=======================================================================================================
*The 556,987 ordinary shares held in treasury do not qualify for dividends
and do not have voting rights.
Based on the prices quoted on the New York Stock Exchange during 2003,
Ashanti's share price traded during the year between a high of US$14.20 and
a low of US$4.25. As at December 31, 2003, Ashanti's market capitalisation
based on a share price of US$13.04 on that date was US$1.70 billion.
The Government of Ghana holds the special rights redeemable preference
share of no par value (the "Golden Share"). The Golden Share is non-voting
but the holder is entitled to receive notice of and to attend and speak at
any general meeting of the members or at any separate meeting of the
holders of any class of shares. On winding up, the Golden Share has a
preferential right to return of capital, the value of which will be 1,000
cedis.
The Regulations of Ashanti provide that certain matters, principally
matters affecting the rights of the Golden Share, the winding up of Ashanti
or the disposal of a material part of the Company's assets, shall be deemed
to be a variation of the rights attaching to the Golden Share and shall be
effective only with the written consent of the holder of the Golden Share.
19
NOTES TO THE FINANCIAL STATEMENTS
21 STATED CAPITAL (CONTINUED)
All of the ordinary shares in issue rank pari passu in all respects.
In the April 30, 2003 general meeting of Ashanti, Ashanti passed a special
resolution renewing an existing authority to make market purchases of its
own shares up to an aggregate of 12,600,000 ordinary shares at a price per
share (exclusive of expenses) of not more that 5% above the average of the
middle market quotations for the shares taken from the Daily Official List
of the London Stock Exchange for the five business days immediately before
the date of purchase. However, Ashanti did not utilise this authority. The
authority for Ashanti to purchase its own shares obtained from the April
AGM will expire, unless renewed, on July 30, 2004 or at the conclusion of
Ashanti's Annual General Meeting if held in 2004.
In November 1999, pursuant to an agreement with Ashanti's hedge
counterparties, a wholly-owned subsidiary, Ashanti Warrants Limited, issued
unlisted warrants to subscribe for Mandatorily Exchangeable Securities
under which the securityholders have the option of converting the
securities into ordinary shares at a conversion price of US$3 per share.
The warrants were issued in three equal tranches with expiry dates of April
28, 2004, October 28, 2004 and April 28, 2005. As part of the Company's
refinancing arrangement, 13,945,122 warrants were exercised at US$3,
leaving 5,889,879 warrants outstanding as at December 31, 2002. During
2003, a total of 3,593,053 warrants were exercised at US$3 leaving
2,296,826 warrants outstanding at 31 December 2003. The conversion rights
of the remaining warrants could give rise to the issue of up to 2,296,826
ordinary shares.
In June 2002, the Company issued US$75.0 million of MENs which are
exchangeable into ordinary shares at an exchange price of the lower of
US$5.40 and the price at which Ashanti's ordinary shares will be issued
pursuant to the Rights Issue (see note 18). At a price of US$5.40, this
could give rise to an issue of 13.9 million Ashanti ordinary shares.
Pursuant to the subscription agreements for the MENs, Ashanti was obliged
to use its best efforts to complete a rights issue by December 28, 2003. In
light of the proposed merger with AngloGold, Ashanti agreed with Lonmin and
the Government that the period to effect the rights issue would be extended
to December 28, 2004. On implementation of the merger, the MENs will be
redeemed in accordance with their terms.
THE AGC SENIOR MANAGEMENT SHARE OPTION SCHEME
As at January 1 2001, options granted to directors and staff over 8,296,772
shares remained outstanding. As part of the review of the Company's
remuneration arrangements conducted prior to the Annual General Meeting on
April 25, 2001, option holders were invited to cancel all outstanding
options voluntarily. The proposal was made on the basis that for every 10
shares then under option a new option would be granted over three shares.
In the case of executive directors and certain members of the Company's
senior management, their oustanding "underwater" options were required to
be surrendered in order to receive any further awards under the company's
long-term incentive plans.
Options over 5,364,485 shares in respect of other senior management and
508,050 shares in respect of executive directors were cancelled in
accordance with the invitation. Options over 2,189,787 shares lapsed in the
year ended December 31, 2001. Options over a further 396,716 shares lapsed
under the rules of this scheme in the year ended December 31, 2002.
Following the cancellation, re-grant and lapsing of options described
above, and subsequent award of options on August 22, 2002, the total number
of ordinary shares over which executive directors and senior management
held options as at December 31, 2003 is set out below:
OPTION NUMBER OF
PRICE ORDINARY SHARES
PERIOD OF EXERCISE CODE US$ OF NO PAR VALUE
- -----------------------------------------------------------------------------------
13 July 2003-12 July 2010 A 1.66 40,000
28 August 2003-27 August 2010 B 2.55 50,000
3 May 2004-2 May 2011 (Replacement Options) C 2.29 1,445,844
3 May 2004-2 May 2011 D 2.29 906,290
22 August 2005-21 August 2012 E 4.88 599,560
- -----------------------------------------------------------------------------------
3,041,694
===================================================================================
All options granted on May 3, 2001 were granted with exercise prices of
US$2.29. They ordinarily become exercisable on May 3, 2004 and lapse on May
2, 2011. Options granted on August 22, 2002 were granted with an exercise
price of US$4.88 and ordinarily become exerciseable on August 22, 2005 and
lapse on August 21, 2012. No options were granted in 2003. An analysis of
options held by directors as at December 31, 2003 using the codes shown
above is set out below:
B C D E Total
- -----------------------------------------------------------------------
S E Jonah - 87,000 173,664 79,700 340,364
M Botsio-Phillips - 13,500 18,760 14,130 46,390
E D Ofori Atta* - 13,500 16,509 12,430 42,439
T S Schultz* - 38,415 55,229 39,000 132,644
S Venkatakrishnan 50,000 - 52,828 37,300 140,128
- -----------------------------------------------------------------------
TOTAL 50,000 152,415 316,990 182,560 701,965
=======================================================================
"Retired on December 31, 2003.
20
NOTES TO THE FINANCIAL STATEMENTS
22 DIRECTORS' INTERESTS
The beneficial interests, including family interests, of the directors
holding office at the end of the year in ordinary shares of Ashanti are set
out below:
SHARES SHARES UNDER OPTION
--------------------------- --------------------------
JANUARY 1, DECEMBER 31, JANUARY 1, DECEMBER 31,
2003 2003 2003 2003
- ------------------------------------------------------------------------------
M E Beckett 1,873 1,873 - -
S E Jonah 59,690 64,190 340,364 340,364
T E Anin 53 53 - -
M Botsio-Phillips 100 2,350 46,390 46,390
L Chalker - - - -
C A Crocker - - - -
T Gibian 20,000 20,000 - -
G E Haslam - - - -
M P Martineau - - - -
N J Morrell - - - -
E D Ofori Atta* 553 2,803 42,439 42,439
T S Schultz* 31,245 20,463 132,644 132,644
S Venkatakrishnan - 2,250 140,128 140,128
- ------------------------------------------------------------------------------
*Retired on December 31, 2003
AGC 1994 EMPLOYEE SHARE SCHEME (RESTRICTED SHARE PLAN)
The shareholder-approved AGC 1994 Employee Share Scheme replaced the
Performance Share Plan in 2001. Under the AGC 1994 Employee Share Scheme,
executive directors and key employees receive Ashanti's shares for free if
specified challenging internal and/or external performance conditions are
achieved. For the awards set out under Category 'A' below, these targets
must be met over the three year period following the making of the award.
Provided those targets are met, the shares are then transferred to
participants free of charge at the end of that period. In respect of awards
set out under Category 'B' below, such targets had to be met before the
awards were made after which the shares were awarded and are to be held in
trust for three years from the date of award, on expiry of which they will
be transferred to participants free of charge. On August 22, 2002, Ashanti
issued 234,571 new Ashanti ordinary shares under this scheme of which
129,871 ordinary shares were awarded to executive directors.
As at December 31, 2003 the following awards had been made to the directors
holding office at the end of the year under the AGC 1994 Employee Share
Scheme.
SHARES AWARDED UNDER
THE ACG 1994 EMPLOYEE SHARE SCHEME
----------------------------------
NAME CATEGORY 'A' CATEGORY 'B'
- --------------------------------------------------------
S E Jonah - 64,040
M Botsio-Phillips 12,000 9,036
E D Ofori Atta* 10,560 8,000
T S Schultz* 35,328 24,940
S Venkatakrishnan 33,792 23,855
- --------------------------------------------------------
TOTAL 91,680 129,871
========================================================
*Retired on December 31, 2003
The final tranche of shares awarded under the Performance Share Plan in
July 2000 vested on July 4, 2003. Participants, including directors holding
office, earned 75% of awards and shares were transferred to them
accordingly.
Between January 1, 2004 and February 10, 2004, there were no changes in the
above directors' interests.
21
NOTES TO THE FINANCIAL STATEMENTS
23 RESERVES
NON-DISTRIBUTABLE
PROFIT AND SHARE DEALS
LOSS ACCOUNT ACCOUNT TOTAL
US$m US$m US$m
- ------------------------------------------------------------------------------
At January 1,2002 (217.1) 19.0 (198.1)
Retained profit for 2002 56.2 - 56.2
- ------------------------------------------------------------------------------
AT DECEMBER 31,2002 (160.9) 19.0 (141.9)
==============================================================================
At January 1, 2003 (160.9) 19.0 (141.9)
Retained profit for the year 49.2 - 49.2
- ------------------------------------------------------------------------------
AT DECEMBER 31,2003 (111.7) 19.0 (92.7)
==============================================================================
In accordance with the Ghana Companies Code 1963 (Act 179), all
transactions relating to the purchase and re-issue of the Company's own
shares are recorded in a non-distributable share deals account.
Group reserves is after goodwill written off in previous years of US$476
million (2002: US$476 million) arising on the acquisition of subsidiary
undertakings.
24 RECONCILIATION OF OPERATING PROFIT BEFORE EXCEPTIONAL OPERATING COSTS TO
OPERATING CASH FLOWS
2003 2002 2001
US$m US$m US$m
- -------------------------------------------------------------------------------------------
Total operating profit before exceptional operating costs 77.0 97.8 96.8
Share of operating profit in joint venture (31.3) (16.7) (20.2)
- -------------------------------------------------------------------------------------------
OPERATING PROFIT EXCLUDING JOINT VENTURE 45.7 81.1 70.6
Depreciation and amortisation 66.9 75.1 82.3
Loss on disposal of fixed assets - - 0.6
Decrease/(increase) in stocks 8.2 (3.1) 4.3
(Increase)/decrease in debtors (16.1) 0.2 2.0
Decrease in creditors (3.6) (0.7) (16.7)
Decrease in deferred hedging income (16.5) (37.8) (57.0)
Increase in provisions 2.8 2.7 3.3
Outflows related to exceptional costs (1.1) (22.3) -
- -------------------------------------------------------------------------------------------
NET CASH INFLOW FROM OPERATING ACTIVITIES 86.3 95.2 95.4
===========================================================================================
25 FINANCING
2003 2002 2001
US$m US$m US$m
- -------------------------------------------------------------------------------
Enlarged Revolving Credit Facility - drawdowns - 190.0 -
- repayments (10.0) (41.0) -
Mandatorily Exchangeable Notes - drawdown - 75.0 -
Issue of ordinary shares 10.8 41.8 -
51/2% Exchangeable Notes - repayments - (218.6) -
Revolving Credit Facility - repayments - (55.0) (33.8)
Other - repayments (9.4) (11.4) (6.8)
- -------------------------------------------------------------------------------
CASH OUTFLOW FROM FINANCING (8.6) (19.2) (40.6)
===============================================================================
22
NOTES TO THE FINANCIAL STATEMENTS
26 ANALYSIS OF NET DEBT
OTHER OTHER OTHER
AT NON-CASH AT NON-CASH AT NON-CASH AT
JAN 1, CASH MOVE- DEC 31, CASH MOVE- DEC 31, CASH MOVE- DEC 31,
2001 FLOW MENTS- 2001 FLOW MENTS 2002 FLOW MENTS 2003
US$M US$M US$M US$M US$M US$M US$M US$M US$M US$M
- -----------------------------------------------------------------------------------------------------------------------------------
Cash at bank 32.8 (8.7) - 24.1 (7.9) - 16.2 34.6 - 50.8
Bank overdraft (3.5) (1.7) - (5.2) 4.6 - (0.6) - - (0.6)
- -----------------------------------------------------------------------------------------------------------------------------------
Cash 29.3 (10.4) - 18.9 (3.3) - 15.6 34.6 - 50.2
Short term deposits and collateralised
cash (liquid resources) 40.8 (9.7) - 31.1 (6.0) - 25.1 (3.1) - 22.0
Borrowings (362.2) 40.6 0.9 (320.7) 61.0 3.4 (256.3) 19.4 (4.8) (241.7)
- -----------------------------------------------------------------------------------------------------------------------------------
NET DEBT (292.1) 20.5 0.9 (270.7) 51.7 3.4 (215.6) 50.9 (4.8) (169.5)
===================================================================================================================================
27 RELATED PARTY TRANSACTIONS
The Company's principal shareholder is Lonmin Plc ("Lonmin"), which holds a
27.6% interest in the Company. On March 3, 2003, Ashanti announced that as
of March 1, 2003 it had terminated the Technical Services Agreement (the
"TSA") with Lonmin. Under the TSA, Lonmin had provided technical services
and the services of Mr S E Jonah to the Company for which it received
US$0.2 million in 2003 (2002: US$0.8 million; 2001: US$0.7 million).
Another major shareholder is the Government of Ghana. The Company pays
royalties, corporate and other taxes and utility charges in the normal
course of business to the Government and associated authorities. Amounts
paid during the year totalled approximately US$38 million (2002: US$48
million; 2001: US$51 million).
In June 2002, Ashanti Capital (Second) Limited issued US$75 million of
MENs. The MENs are held entirely by Lonmin, with the Government of Ghana
having an option over certain of the MENs. Pursuant to the subscription
agreements for the MENs, Ashanti was obliged to use its best efforts to
complete a rights issue by December 28, 2003. In light of the proposed
merger with AngloGold, Ashanti agreed with Lonmin and the Government that
the period to effect the rights issue would be extended to December 28,
2004. On implementation of the merger, the MENs will be redeemed in
accordance with their terms.
28 CONTINGENT LIABILITIES
US CLASS ACTIONS
The consolidated class action which was commenced in the year 2000, is
pending against the Company and one officer and director and one former
director under United States Federal Securities laws in the United States
District Court for the Eastern District of New York. The complaint alleges
non-disclosures and misstatements regarding Ashanti's hedging position and
hedging programme. The plaintiffs contend that the Company and the
individual defendants' actions violated Sections 10(b) and 20(a) of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated under that Act.
The plaintiffs seek unspecified damages, attorneys' and experts' fees and
other reliefs. The damages sought by the plaintiffs have not yet been
specified, as is common practice in US litigation at the current state of
proceedings.
The Company continues to vigorously defend the action. Depositions of key
witnesses have been taken. Certain pre-trial motions filed by both parties
have yet to be resolved by the trial court. Although the Company cannot
make any assurances regarding the ultimate result of the litigation at this
stage, based on its current knowledge, it believes that the outcome will
have no material adverse effect on the Company's financial position.
KIMIN - EMPLOYEE ACTIONS
A number of expatriate employees instituted an action against Kimin and
against the Company in the Brussels Labor Court for arrears of salary,
severance payments and payment in lieu of holiday. Other claims have been
made against the Company and Kimin by other ex-employees, consultants and
third party creditors. The Company is currently evaluating these claims.
Based on information currently available, the Company believes that this
potential liability has been reasonably provided for in its financial
statements.
SIGUIRI - TAX DEMANDS
The Government of the Republic of Guinea has demanded 22.6 billion Guinea
francs (approximately US$11.3 million) from Societe Ashanti Goldfields de
Guinee S.A. ("SAG"), a wholly-owned subsidiary of Ashanti, in respect of
withholding and other taxes. SAG has a stability agreement (Convention de
Base) with the Republic of Guinea which provides for exemptions from these
items and is therefore contesting this demand.
23
29. SUMMARY OF DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
The Company's financial statements are prepared in accordance with UK GAAP,
which differ in certain significant respects from generally accepted
accounting principles in the United States ("US GAAP").
The following is a summary of the significant adjustments to profit
attributable to shareholders and shareholders' equity when reconciling
amounts recorded in the consolidated financial statements to the
corresponding amounts in accordance with US GAAP, considering the
significant differences between UK and US GAAP.
2003 2002 2001
US$m US$m US$m
- --------------------------------------------------------------------------------------
PROFIT AND LOSS ACCOUNT
PROFIT ATTRIBUTABLE TO SHAREHOLDERS UNDER UK GAAP 49.2 56.2 59.9
US GAAP adjustments:
Amortization of goodwill and other intangibles a 1.5 1.7 -
Impairment of long-lived assets b (5.5) - (87.3)
Depreciation on impaired tangible fixed assets b 11.8 12.8 12.9
Equity investment in joint venture c (29.3) (37.5) (3.3)
Derivative financial instruments d (398.6) (276.6) 5.3
Transfer from other comprehensive income:
- - Deferred hedging income d - 62.7 51.2
Depreciation on asset write-back e 1.4 1.5 1.7
Accounting for pensions f - - 0.8
Environmental and site restoration obligations g - (0.5) 1.4
Compensation charge on variable plan options h (15.8) (3.1) (1.2)
Deferred income taxes on reconciling amounts(1) i - - (8.3)
- --------------------------------------------------------------------------------------
(Loss)/profit attributable to shareholders under US GAAP
before the cumulative effect of accounting changes (385.3) (182.8) 33.1
- - Gain on derivative financial instruments related to
impaired assets on adoption of SFAS 133 d - - 32.3
- - Cumulative effect of adoption of SFAS 143 g 4.0 - -
- --------------------------------------------------------------------------------------
(LOSS)/PROFIT ATTRIBUTABLE TO SHAREHOLDERS UNDER US GAAP (381.3) (182.8) 65.4
======================================================================================
(1) A 100% valuation allowance is provided against deferred tax assets arising
on the adjustments recorded in reconciling profit in accordance with UK
GAAP to that in accordance with US GAAP, for all periods presented.
2003 2002 2001
US$m US$m US$m
- -----------------------------------------------------------------------------------------------
STATEMENT OF COMPREHENSIVE INCOME
(Loss)/profit for the year attributable to shareholders under US GAAP (381.3) (182.8) 65.4
Other comprehensive income, net of income tax:
Cumulative effect of accounting change on
adoption of SFAS 133 - - 146.2
Transfer to earnings:
- - Gain on derivative financial instruments related to impaired assets - - (32.3)
- - Deferred hedging income - (62.7) (51.2)
- -----------------------------------------------------------------------------------------------
(381.3) (245.5) 128.1
===============================================================================================
Earnings per share (US$):
Basic:
(Loss)/earnings per share before cumulative effect of an accounting
change (3.00) (1.53) 0.30
Cumulative effect of an accounting change(1) 0.03 - 0.28
- -----------------------------------------------------------------------------------------------
(Loss)/earnings per share (2.97) (1.53) 0.58
===============================================================================================
DILUTED:
(Loss)/earnings per share before cumulative effect of an accounting
change (3.00) (1.53) 0.29
Cumulative effect of an accounting change(1) 0.03 - 0.28
- -----------------------------------------------------------------------------------------------
(Loss)/earnings per share (2.97) (1.53) 0.57
===============================================================================================
(1) The cumulative effect of an accounting change in 2003 relates to the
adoption of Statement of Financial Accounting Standards ("SFAS") No. 143,
Accounting for Asset Retirement Obligations (AROs) ("SFAS 143") (see note
29g). The cumulative effect of an accounting change in 2001 relates to the
adoption of SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities ("SFAS 133") (see note 29d).
24
2003 2002
US$m US$m
- ----------------------------------------------------------------------------------------------
SHAREHOLDERS' (DEFICIT)/EQUITY
EQUITY SHAREHOLDERS' FUNDS UNDER UK GAAP 506.3 446.3
Impact on cost of long-lived assets (including impairment and purchase
price adjustments) b 66.7 72.2
Accumulated amortization and depreciation on long-lived assets a,b (239.1) (252.4)
Equity investment in joint ventures c (44.5) (15.2)
Derivative financial instruments d (520.8) (122.2)
Asset write-back e (20.0) (20.0)
Accumulated depreciation on asset write-back e 5.8 4.4
Environmental and site restoration obligations g - (4.0)
- ----------------------------------------------------------------------------------------------
SHAREHOLDERS' (DEFICIT)/EQUITY UNDER US GAAP (245.6) 109.1
==============================================================================================
Accumu-
lated other
Retained compre-
(deficit)/ hensive Stated Other
Total earnings income capital reserves
STATEMENT OF CHANGES IN SHAREHOLDERS' (DEFICIT)/EQUITY US$m US$m US$m US$m US$m
- ----------------------------------------------------------------------------------------------------------------
BALANCE AT JANUARY 1, 2001 178.3 (385.0) - 544.3 19.0
Net profit for the year 65.4 65.4 - - -
New share capital issued 0.9 - - 0.9 -
Compensation charge on variable plan options 1.2 1.2 - - -
SFAS 133 transition adjustment 146.2 - 146.2 - -
Transfer to net income for the year (83.5) - (83.5) - -
- ----------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 2001 308.5 (318.4) 62.7 545.2 19.0
Net loss for the year (182.8) (182.8) - - -
Reclassification of compensation expense on exercise of
warrants - (4.8) - 4.8 -
New share capital issued 43.0 - - 43.0 -
Compensation charge on variable plan options 3.1 3.1 - - -
Transfer to net income for the year (62.7) - (62.7) - -
- ----------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 2002 109.1 (502.9) - 593.0 19.0
Net loss for the year (381.3) (381.3) - - -
New share capital issued 10.8 - - 10.8 -
Compensation charge on variable plan options 15.8 15.8 - - -
- ----------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 2003 (245.6) (868.4) - 603.8 19.0
================================================================================================================
a) AMORTIZATION OF GOODWILL AND INTANGIBLE ASSETS
For years prior to the year ending December 31, 1998, goodwill arising on
business combinations treated as acquisitions was written off against retained
earnings in accordance with UK GAAP. On the subsequent disposal or termination
of a previously acquired business, the profit or loss on disposal was calculated
after charging the amount of related goodwill charged to reserves. The Company
adopted FRS 10 in 1998. FRS 10 requires that goodwill be capitalized and
amortized over its expected useful life.
Under US GAAP, for periods ending on or before December 31, 2001 goodwill and
identifiable intangible assets (principally mineral rights) were amortised under
the units of production method. Goodwill and identifiable intangible assets were
evaluated for impairment when events or changes in circumstances indicated that,
in management's judgement, the carrying value of such assets might not be
recoverable. Impairments of goodwill and identifiable intangible assets were
recognised if expected undiscounted cash flows were not sufficient to recover
the carrying value of the asset. If a material impairment was identified, the
asset was written down to its estimated fair value. Fair value was determined
based on the present value of excepted net cash flows to be generated,
discounted using a rate commensurate with the risks involved.
Under US GAAP, effective January 1, 2002, the Company adopted SFAS No. 142,
Goodwill and Other Intangible Assets ("SFAS 142"). That statement directs that
goodwill and intangible assets that have indefinite useful lives will not be
amortised but rather will be tested at least annually for impairment. Intangible
assets that have finite lives will continue to be amortised over their useful
lives, but without the constraint of an arbitrary ceiling. Subsequent to
adopting SFAS 142, the Company carries out annual impairment reviews of
goodwill. No such impairments were recorded in 2002 or 2003.
25
b) IMPAIRMENT OF LONG-LIVED ASSETS
Under both UK and US GAAP, impairment reviews of long-lived assets are performed
whenever events or changes in circumstances indicate that their carrying amounts
may not be recoverable. However, measurement differences arise regarding the
determination of when a long-lived asset is impaired and the amount of
impairment loss to be recognized.
Under UK GAAP, the Company evaluates long-lived assets for impairment by
comparing the carrying value less deferred hedging income to the recoverable
amount based on discounted future cash flows. Under US GAAP (i) undiscounted
cash flows are used to evaluate for impairment, and (ii) deferred hedging income
is not subtracted from the carrying value of long-lived assets.
If an impairment exists, an impairment loss is recognized to record the
long-lived assets at their recoverable amount under UK GAAP and their fair value
under US GAAP. The Company estimates both recoverable amount and fair value
using discounted cash flow techniques. The discount rate applied is management's
estimate of the rate that the market would expect on an investment of comparable
risk. Under UK GAAP, impairment losses increase accumulated depreciation; under
US GAAP, impairment losses reduce the historical cost of the related long-lived
asset.
Differences arise between impairment assessments under UK GAAP and US GAAP as
follows: (i) hedging cash flows from all derivative instruments are included in
income generating units for impairment assessments under UK GAAP while, under US
GAAP, prior to January 1, 2001, hedging cash flows only in respect of forward
contracts and gold lease rate swaps were included and, subsequent to that date,
no expected future cash flows from derivative instruments are included in
impairment assessments; and (ii) corporate overhead costs are included in US
GAAP impairment assessments only to the extent that they are incremental costs
that are directly attributable to the operation of the mines whereas UK GAAP
permits the allocation of joint corporate costs that are not directly
attributable.
Under US GAAP, the Company recorded an impairment loss for the year ending
December 31, 2003 amounting to US$20.6 million (2002: nil; 2001: US$87.3
million). The impairment loss was allocated, by segment, as follows: US$20.6
million relating to the Freda-Rebecca mine (2002 and 2001: nil), nil relating to
the Bibiani mine (2002: nil; 2001: US$32.4 million), and nil relating to the
Siguiri mine (2002: nil; 2001: US$54.9 million). None of the segments involved
have any goodwill balances associated therewith.
The difference on depreciation of tangible fixed assets arises from the impact
of adjustments to historic cost in respect of impairment charges (see above).
c) EQUITY INVESTMENT IN JOINT VENTURE
The Company's equity investment in joint venture is in respect of its 50%
interest in the Geita mine in Tanzania. This mine became a joint venture of the
Company on December 15, 2000, following the Company's sale of 50% of its
interest in this mine to AngloGold Limited.
Under UK GAAP, the results of joint ventures are accounted for using the gross
equity method of accounting which results in the Company's share of net income
and the net assets, together with additional disclosure information relating to
these balances, being presented on the face of the profit and loss account and
balance sheet.
Under US GAAP the Company adopts the equity accounting provisions of Accounting
Principals Board ("APB") Opinion No. 18, The Equity Method of Accounting for
Investments in Common Stock ("APB 18"). Under APB 18 the Company's investment
in, and advances to, the investee, which are increased or decreased by earnings,
losses, and dividends, are combined and shown as a single-line item in its
balance sheet. Similarly, the Company's share of the investee's current net
earnings or losses is shown as a single-line item in its profit and loss
account.
Other differences arise initially from additional goodwill that is recorded
under US GAAP on the acquisition of the investment in joint ventures and
subsequently, from the non-amortization of goodwill under US GAAP following the
adoption of SFAS 142 and the impact of adjustments required to convert the
underlying accounts of the joint venture from UK to US GAAP. As at December 31,
2003, additional goodwill (net of amortization) under US GAAP was US$33.0
million (2002: US$29.1 million). Other adjustments to convert the underlying
accounts from UK GAAP to US GAAP relate solely to the Company's 50% share of the
mark-to-market liability of derivative instruments held by the joint venture,
that share being US$77.5 million (2002: US$44.3 million).
Additional disclosures in respect of the net income and net assets of the joint
venture are provided on the face of the profit and loss account and balance
sheet as required under UK GAAP.
26
d) DERIVATIVE FINANCIAL INSTRUMENTS
Under UK GAAP, the Company accounts for all derivative contracts using hedge
accounting. The impact of accounting for derivatives under US GAAP is set out
below.
POSITION TO DECEMBER 31, 2000
Under US GAAP, derivative financial instruments that are accounted for using
hedge accounting must demonstrate a high degree of hedge effectiveness at the
inception of the hedge relationship and on an ongoing basis. Hedge accounting
under US GAAP additionally requires that the hedge relationship be designated at
inception and reduce enterprise or transaction risk. Under US GAAP, prior to
December 31, 2000 the Company accounted for fixed forward sales contracts and
lease rate swaps using hedge accounting.
Under US GAAP, gains or losses (realized or unrealized) for derivative contracts
which no longer qualified as hedges for accounting purposes were recognized in
income immediately.
The Company used written and purchased put and call options, which qualify for
hedge accounting under UK GAAP, to hedge exposure to commodity price risk for
gold. The Company did not account for these instruments using hedge accounting
under US GAAP.
Specifically, written options are the writing or sale of options contracts (the
Company writes options with gold prices as the underlying risk), which obligate
the writer to fulfil the contract should the holder choose to exercise. These
contracts are not considered to reduce risk to the writer as the holder will
only choose to exercise when it is beneficial to do so. In the Company's
judgment, it is appropriate to treat these contracts as not qualifying for hedge
accounting. Written options include option contracts sold for the purchase and
sale of gold at a future date, and certain convertible structures, whereby the
written option may convert into bought put options if the gold price moves below
a specified barrier.
The adjustment relating to derivative contracts that do not qualify for hedge
accounting under US GAAP includes (i) the recognition of changes in market
values between periods, and (ii) the reversal of deferred hedging gains and
losses that were recorded on the early close out of such contracts under UK
GAAP.
POSITION FROM JANUARY 1, 2001
Effective January 1, 2001, the Company adopted SFAS 133, which establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities.
All derivatives, whether designated in hedging relationships or not, are
required to be recorded on the balance sheet at fair value. If the derivative is
designated as a fair value hedge, the changes in the fair value of the
derivative and the hedged item are recognized in earnings. If the derivative is
designated as a cash flow hedge, changes in the fair value of the derivative are
recorded in other comprehensive income and are recognized in the profit and loss
account when the hedged item affects earnings.
Under US GAAP, all financial instruments have been marked-to-market since
adoption of SFAS 133. Whilst all derivatives have been entered into for hedging
purposes, they do not qualify for hedge accounting under the provisions of SFAS
133. Accordingly the movement in fair value of derivatives is included in net
income for the years ended December 31, 2003, 2002 and 2001. The following table
sets out the fair value of the relevant derivative financial instruments at
December 31, 2003 and 2002:
2003 2002
US$m US$m
- -----------------------------------------------------
Forward contracts (400.8) (56.0)
European Put options (net bought) 28.4 24.9
European Call options (net sold) (153.1) (102.7)
Lease rate swaps (6.6) (16.2)
- -----------------------------------------------------
(532.1) (150.0)
- -----------------------------------------------------
The US$520.8 million negative adjustment to shareholders' equity at December 31,
2003 (2002: US$122.2 million) represents (i) US$532.1 million (2002: US$150.0
million), being the total adjustment to mark-to-market the relevant financial
instruments at that date; and (ii) the reversal of the deferred hedging income
balance of US$11.3 million (December 31, 2002: US$27.8 million) recorded as a
creditor under UK GAAP.
The US$398.6 million negative adjustment to net income (2002: US$276.6 million;
2001: US$5.3 million positive adjustment) represents (i) US$382.1 million (2002:
US$238.8 million; 2001: US$59.7 million positive adjustment), being the net
change in fair values of the relevant financial instruments during the year
ended December 31, 2003; and (ii) US$16.5 million (2002: US$37.8 million; 2001:
US$54.4 million) being the net change in deferred income recorded as a creditor
under UK GAAP during the year ended December 31, 2003.
27
The adoption of SFAS 133 resulted in cumulative transition adjustment gains
after tax of US$146.2 million at January 1, 2001 which was recorded in
accumulated other comprehensive income at that date. Of these gains, US$32.3
million was immediately reclassified into earnings on recognition of the
impairment charge discussed in b) above. An additional US$51.2 million was
reclassified into earnings relating to the amortization of the accumulated
deferred hedging income balance. The remaining accumulated other comprehensive
income of US$62.7 million, relating to deferred hedging income, has been
reclassified into earnings in the year ended December 31, 2002.
The Company has performed a review for embedded derivatives and has not
identified any embedded derivatives that need to be bifurcated under the
provisions of SFAS 133.
e) ASSET WRITE-BACK
In connection with the decision to close down the Iduapriem mine in 1998, the
Company wrote down certain long-lived assets under both UK and US GAAP. As
described above, in 2000 Ashanti acquired the Teberebie gold mine, which is
adjacent to the Iduapriem mine. As a result of the acquisition, management
determined that the Iduapriem and Teberebie mines could use a shared processing
plant and, consequently the operations at Iduapriem were again considered
economically feasible. Under UK GAAP, an element of the previously recognized
impairment charge was reversed. Under US GAAP, the reversal of previously
recognized impairment losses is not permitted.
f) ACCOUNTING FOR PENSIONS
During the years ended December 31, 2003, 2002 and 2001, the Company recorded
pension costs under UK GAAP amounting to US$0.8 million, US$0.9 million and
US$1.2 million respectively, related to the Scheme operated at the Obuasi mine.
The Scheme provides for a monthly payment in Ghanaian currency (indexed to the
US dollar) to retirees until death. Prior to the periods presented in these
financial statements (i) all Scheme participants had retired, and (ii) the
Scheme was closed to new employees.
Under US GAAP, the Scheme is accounted for in accordance with the provisions of
SFAS No. 87, Employers' Accounting for Pensions and presented in accordance with
SFAS No. 132, Employers' Disclosures about Pensions and Other Post Retirement
Benefits. The benefits for the Scheme are based on years of service and
compensation levels for the covered retirees. The Scheme is unfunded and
accordingly, no assets related to the Scheme are recorded. Pension expense
amounts to US$0.8 million in 2003, US$0.9 million in 2002 and US$0.4 million in
2001 of which actuarial loss was the only component.
The adjustment recorded represents the lower pension expense under US GAAP as
compared to UK GAAP, being nil for the years ended December 31, 2003 and 2002
and US$0.8 million for the year ended December 31, 2001.
The projected benefit obligation for the Scheme was determined using a weighted
average discount rate of 4.8% for each of the three years ended December 31,
2003.
Pension Benefits
2003 2002 2001
US$m US$m US$m
- --------------------------------------------------------------
Change in benefit obligation
Benefit obligation at beginning of year 7.8 7.9 8.8
Actuarial loss 0.5 0.8 0.3
Benefits paid (0.8) (0.9) (1.2)
- --------------------------------------------------------------
BENEFIT OBLIGATION AT END OF YEAR 7.5 7.8 7.9
==============================================================
g) ENVIRONMENTAL AND SITE RESTORATION OBLIGATIONS
Under UK GAAP, the expected costs of any committed decommissioning or other site
restoration programs incurred during the construction phase are capitalized and
discounted at the weighted average cost of capital at the beginning of each
project and amortized over the life of the mine using the units of production
method. Additional provisions are also recorded during the production phase as
environmental liabilities arise with a corresponding charge to operating
results.
POSITION TO JANUARY 1, 2003
Under US GAAP, the cost of decommissioning or other site restoration programs
was accrued using the unit-of-production method and charged to cost of sales and
other direct production costs over the life of mine.
POSITION FROM JANUARY 1, 2003
The Company adopted SFAS 143 on January 1, 2003. Under SFAS 143, the Company
recognizes asset retirement obligations ("AROs") at the fair value of the
ultimate closure cost associated with reclamation, demolition and stabilization
of its mining properties. Included in this liability are the costs of mine
closure and reclamation, processing plant and infrastructure demolition,
tailings pond stablization and reclamation and environmental monitoring costs.
The capitalized amount of the ARO is being
28
amortized over the life of the mine using the units of production method. The
Company has considered the differences that remain between accounting for AROs
under UK GAAP and SFAS 143 including the use of a fair value approach under US
GAAP versus the present value of expected future cashflows under UK GAAP; the
accounting for revisions to estimates (of which the Company has none in 2003);
and the difference in applicable rates at which discounts are unwound under SFAS
143 versus UK GAAP. The Company has concluded that it has no significant
adjustment to record in this regard.
h) VARIABLE PLAN OPTIONS
On April 25, 2001, Ashanti implemented an option contribution plan that gave
current option holders the ability to cancel their outstanding options in
exchange for newly issued options. For every 10 shares under option which were
cancelled by the option holders, a new option was granted over three shares.
These new options required the option holder to remain employed by Ashanti for a
period of three years from the date of grant.
Under UK GAAP, the voluntary cancellation and re-grant of options are treated as
separate events. At the date of grant, the option prices were above the market
price of Ashanti's shares. Consequently, the options had no intrinsic value and
no compensation charge was recognized pursuant to Urgent Issues Task Force 17,
Employee Share Schemes.
Under US GAAP, the voluntary cancellation and re-grant of options are also
treated as separate events. However, under US GAAP, Financial Accounting
Standards Board ("FASB") Interpretation No. 44, Accounting for Certain
Transactions Involving Stock Compensation: an Interpretation of APB Opinion No.
25, requires variable plan accounting for the newly granted options.
Consequently, compensation cost in respect of options regranted during the year
has been measured at each year-end for the difference between the quoted market
price and the exercise price to be paid by an employee. Such expense is being
recognized over the three-year service period.
i) DEFERRED INCOME TAXES
Under UK GAAP, FRS 19, Deferred tax requires that deferred tax be provided in
full on all liabilities. Deferred tax assets are recognized to the extent that
it is considered more likely than not that there will be suitable taxable
profits from which the future reversal of the underlying timing differences can
be deducted. Under US GAAP, the Company has applied SFAS No. 109, Accounting for
Income Taxes ("SFAS 109"), for all periods presented. SFAS 109 requires an asset
and liability method of accounting whereby deferred taxes are recognized for the
tax consequences of all temporary differences between the financial statement
carrying amounts and the related tax bases of assets and liabilities. Under US
GAAP, the effect on deferred taxes of a change in tax rate is recognized in
income in the period that includes the enactment date. SFAS 109 requires
deferred tax assets to be reduced by a valuation allowance if, based on the
weight of available evidence, including cumulative losses in recent years, it is
considered more likely than not that some portion or all of the deferred tax
assets will not be realized.
The following are the deferred tax assets and liabilities at December 31:
2003 2002
US$M US$m
---- ----
Deferred tax liabilities:
Long-lived assets 87.9 82.6
Deferred tax assets:
Losses carried forward (166.2) (178.3)
Other (6.3) (6.5)
------ ------
TOTAL DEFERRED TAX ASSET (84.6) (102.2)
VALUATION ALLOWANCE 89.0 106.6
------ ------
NET DEFERRED TAX LIABILITY 4.4 4.4
====== ======
During the year ended December 31, 2003, US$57.5 million of losses were utilized
or expired and the Company reduced its valuation allowance by US$12.2 million to
adjust its deferred tax assets to estimated realizable value. The total
valuation allowance primarily relates to the deferred tax assets arising from
loss carryforwards. At December 31, 2003, the Company had US$549 million in loss
carryforwards of which US$203 million can be carried forward indefinitely. The
remaining loss carryforwards amounting to US$346 million expire in 2006.
At December 31, 2003 based upon the level of historical taxable income and
projections for future taxable income over the periods in which the temporary
differences are anticipated to reverse, and prudent and feasible tax-planning
strategies, management believes it is more likely than not that the Company will
realize the benefits of these deductible differences, net of the valuation
allowances. However, the amount of the deferred tax asset considered realizable
could be adjusted in the future if estimates of taxable income are revised.
29
The components of the tax expense/(benefit) were as follows:
2003 2002 2001
US$m US$m US$m
- -----------------------------------------------------------------------------------------------------------
Current tax expense
- Ghana 1.0 (5.7) 9.2
- Overseas (0.8) (2.3) 5.6
- Interest in joint ventures 1.8 - -
Deferred tax expense/(benefit) under UK GAAP
- Group
- Ghana 0.5 4.2 (0.4)
- Overseas (0.5) 7.1 (4.8)
- Interest in joint venture 2.9 (7.0) -
Deferred tax expense of applying SFAS 109 - - 8.3
- -----------------------------------------------------------------------------------------------------------
TAX EXPENSE/(BENEFIT) FOR THE YEAR ON APPLICATION OF SFAS 109 TO UK GAAP
PROFIT BEFORE TAX 4.9 (3.7) 17.9
===========================================================================================================
The tax expense/(benefit) recorded under US GAAP differs from the amount
determined by applying the applicable Ghanaian statutory income tax rate to
pre-tax profit/(loss) attributable to shareholders under US GAAP as a result of
the following:
2003 2002 2001
US$m US$m US$m
- ------------------------------------------------------------------------------------
Tax expense/(benefit) at statutory rate* (112.6) (56.2) 24.4
Amortization of goodwill 0.4 0.1 10.5
Investment allowances (1.3) (1.0) (0.1)
Effect of foreign income taxes, net 2.3 (12.9) (29.1)
Mark to market of hedging contracts 129.5 76.7 (26.4)
Impact of change in tax rate on deferred taxes - - 8.5
Prior year tax adjustments (0.2) 3.0 11.8
Valuation allowance (17.6) (18.1) 13.0
Other permanent differences 4.4 4.7 5.3
- ------------------------------------------------------------------------------------
TAX EXPENSE/(BENEFIT) FOR THE YEAR 4.9 (3.7) 17.9
====================================================================================
*The statutory rate for 2001, 2002 and 2003 was 30%.
OTHER DISCLOSURES
The following information is provided as additional disclosure under US GAAP:
EARNINGS PER SHARE
Under US GAAP, basic earnings/(loss) per share (`EPS') is computed by dividing
net earnings/(loss) available to common shareholders by the weighted average
number of common shares outstanding for the year. The computation of diluted EPS
is similar to basic EPS, except that the denominator is increased to include the
number of additional common shares that would have been outstanding if the
potentially dilutive common shares had been issued, and the numerator may be
adjusted for the impact the outstanding security had on income available to
common shareholders used in the basic EPS calculation.
Diluted EPS is equal to basic EPS for each of the two years ended December 31,
2003 as the exercise of the Senior Management Share Options, Warrants,
Mandatorily Exchangeable Notes and conversion of 5 1/2 % Exchangeable Notes, are
excluded from the computation of diluted EPS in those years as the effect of
inclusion is anti-dilutive.
The number of potentially dilutive shares that were excluded from the
computation of diluted EPS are as follows:
2003 2002 2001
MILLIONS millions millions
- --------------------------------------------------------------------
Senior Management Share Options 3.0 3.0 2.0
5 1/2 % Convertible Notes - - 8.1
Warrants 2.3 5.9 19.0
Mandatorily Exchangeable Notes 13.9 7.0 -
- ------------------------------------------------------------------
19.2 15.9 29.1
- ------------------------------------------------------------------
30
REVENUE RECOGNITION
Under UK GAAP, the Company recognizes "estimated" revenue when gold is produced
in dore form in the gold room based on the quantity and spot price at that
date. Pursuant to the Company's refining and purchase agreements with its
customers (i) the actual sales price is the spot price at the date of delivery,
and (ii) the actual quantity invoiced is the quantity after the gold is refined
(refining is generally completed within one day of delivery.) Consequently,
under UK GAAP the Company processes an adjustment on completion of the refining
process to adjust revenues recognized at the time of producing dore to actual
revenues.
Under US GAAP, the Company recognizes revenue from sales of gold bullion at the
date of delivery to the refinery. At this point in time, delivery of third-party
refined gold to the customer has occurred, the pricing is either fixed or
determinable and collectibility is reasonably assured. Under US GAAP, revenues
were lower by US$4.0 million for the year ended December 31, 2003 (2002: US$1.8
million higher; 2001: US$2.9 million lower). The difference in accounting policy
is not material with respect to operating profit/(loss), profit/(loss)
attributable to shareholders, and shareholders equity under US GAAP for all
periods presented. Consequently, no US GAAP adjustments have been recorded.
GOLD REALIZATION RISKS
The nature of realization risks inherent in commodity inventories for which
revenue has already been recognized relate to the possibility of significant
changes in the spot price for gold between the date the gold is poured and the
delivery date and differences in quantities between the poured amount and the
refined amount.
The overall realization risk is mitigated by the following factors:
- - Estimated ounces have never varied significantly from the final quantity
declared by the refiner;
- - Theft is covered by bullion insurance; and
- - Gold is a liquid commodity recognized on international exchanges and, if a
customer does not accept delivery, Ashanti can deliver to one of its other
customers.
EXCEPTIONAL ITEMS
Under UK GAAP, for the year ended December 31, 2003:
- - Exceptional operating costs of US$20.5 million (2002: US$32.3 million;
2001: US$ nil) were recognized.
- - An exceptional profit on sale of investments of US$8.3 million was
recognized (2002 and 2001: nil).
- - An exceptional profit on sale of fixed assets of US$4.7 million was
recognized (2002 and 2001: nil), and
- - Exceptional interest income of US$2.7 million was recognized (2002 and
2001: nil).
Under US GAAP:
- - In 2002, US$23.5 million of UK GAAP exceptional operating costs would have
been treated as non-operating items. Such costs related to a debt
extinguishment.
- - In 2003, US$8.3 million and US$4.7 million of UK GAAP non-operating
exceptional items relating to profit on sale of investments and profit on
sale of fixed assets would have been treated as operating items.
- - In 2003, US$2.7 million of non-operating UK GAAP exceptional interest
income would have been treated as a non-operating item, before interest and
taxation.
- - In 2003 and 2002, all other amounts classified as exceptional items would
have been treated as operating items and not shown as exceptional items in
the profit and loss account.
There is no impact on the US GAAP net loss as a result of the treatment for UK
GAAP. Similarly, there is no impact on basic and diluted loss per share as such
amounts have been considered in the calculation of such amounts.
BUYBACK AND REISSUANCE OF SHARES
The Company holds in treasury 556,987 (December 31, 2002: 556,987) of its own
ordinary shares. The purchases of shares were accounted for in accordance with
the Ghana Companies Code 1963 (Act 179) in a non-distributable Share deals
account within shareholders' equity. Under US GAAP, the cost of the treasury
shares is generally presented as a reduction of total shareholders' equity. This
difference in presentation has no impact on shareholders' equity. The Company
made no purchases of its own shares in any of the periods presented.
31
CASH
In the UK GAAP balance sheet, `Gold-in-transit' has been included within cash
balances but have not been included as part of cash in preparing the UK GAAP
cash flow statement in accordance with FRS No.1 (revised) Cash Flow Statements
("FRS 1"). For cash flow purposes `Gold-in-transit' and `cash held as
collateral', together with short-term deposits, are classified as liquid
resources. Under US GAAP, `Gold-in-transit' and `cash held as collateral' are
classified as other assets in the balance sheet and, similar to UK GAAP, would
not be included as part of cash and cash equivalents in preparing the US GAAP
cash flow statement.
EMPLOYEE STOCK OPTIONS
The Company accounts for its stock option and stock-based compensation plans
using the intrinsic-value method prescribed in APB Opinion No. 25, Accounting
for Stock issued to Employees ("APB 25"). Accordingly, the Company computes
compensation costs for each employee stock option granted as the amount by which
the fair market value of ordinary shares on the date of the grant exceeds the
amount the employee must pay to acquire the shares. Accordingly, where options
have been granted at exercise prices equal to fair market value on the date of
grant, no compensation expense has been recognized by the Company.
Had compensation cost for the Company's stock option plans been determined
consistent with the fair value methodology prescribed under SFAS 123, the
Company's net profit/(loss) attributable to shareholders and net profit per
share under UK GAAP would have been decreased to the pro forma amounts in the
table below:
2003 2002 2001
US$M US$m US$m
(EXCEPT PER (except per (except per
SHARE AMOUNTS) share amounts) share amounts)
- ---------------------------------------------------------------------------------------
NET PROFIT/(LOSS):
As reported 49.2 56.2 59.9
Pro forma 47.0 54.5 58.8
NET PROFIT/(LOSS) PER SHARE:
Basic:
As reported (US$) 0.38 0.47 0.53
Pro forma (US$) 0.37 0.46 0.52
Diluted:
As reported (US$) 0.37 0.44 0.52
Pro forma (US$) 0.35 0.43 0.51
The following table summarizes option plan activity:
Weighted average
Shares under option Exercise price
No. of shares US$
- --------------------------------------------------------------------------------
BALANCE, JANUARY 1, 2002 2,831,850 2.29
Granted 606,560 4.88
Lapsed (396,716) 2.34
- --------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 2002 3,041,694 2.80
BALANCE, DECEMBER 31, 2003 3,041,694 2.80
================================================================================
The following table summarizes information about options outstanding at December
31, 2003:
Remaining
contractual Exercise Fair value
Number life price at grant Number
Code Date of Grant outstanding Years US$ US$ exerciseable
- -----------------------------------------------------------------------------------------------
A July 13, 2000 40,000 8.53 1.66 1.42 40,000
B August 26, 2000 50,000 8.85 2.55 2.40 50,000
C May 3, 2001 1,445,844 9.34 2.29 1.76 -
D May 3, 2001 906,290 9.34 2.29 1.76 -
E August 22, 2002 599,560 9.65 4.88 3.83 -
- -----------------------------------------------------------------------------------------------
3,041,694 90,000
===============================================================================================
No options were granted in the year ended December 31, 2003.
The weighted average fair value of options granted was US$3.83 and US$1.76 for
the years ended December 31, 2002 and 2001, respectively.
32
The fair values of options granted for fiscal years ended December 31, 2002 and
2001 have been estimated at the date of grant using the Black-Scholes option
pricing model with the following weighted average assumptions:
Options 2002 2001
- -------------------------------------------------------
Expected option life (years) 10.0 10.0
Risk-free interest rates(1) 4.5% 5.5%
Volatility(2) 60.0% 60.0%
Dividend yield - -
=======================================================
(1) The risk-free interest rate is based on US Government Benchmark STRIP at
each grant date for time period being the difference between last
exercisable date and date of grant.
(2) The volatility is estimated at each grant date for time period being the
difference between last exercisable date and date of grant. The volatility
was estimated by using historical volatility on the London International
exchange when trading on the Ghanaian stock exchange was extremely light.
The compensation cost as generated by the Black-Scholes option pricing model may
not be indicative of the future benefit, if any, that may be received by the
option holder.
CASH FLOW STATEMENT
For UK GAAP reporting purposes, the cash flow statement is prepared in
accordance with FRS 1. The objective and principles of FRS 1 are similar to
those set out in SFAS No. 95, Statement of Cash Flows ("SFAS 95"). The principle
difference between the standards relates to the classification of cash flows.
Under FRS 1, the Company presents its cash flows for operating activities,
returns on investments and servicing of finance, taxation, capital expenditure
and financial investment, acquisitions and disposals, dividends, management of
liquid resources and financing. Pursuant to SFAS 95, however, the Company's cash
flows would be analyzed between only three categories of cash flow activity,
namely operating, investing and financing.
Under SFAS 95 (i) cash flows arising from taxation, returns on investments and
servicing of finance and `Gold-in-transit' would be included as operating
activities, (ii) cash flows from acquisitions and disposals would be included in
investing activities, and (iii) dividend payments, changes in short-term credit
facilities and management of liquid resources (excluding `Gold-in-transit')
would be disclosed as part of financing activities. In addition, under UK GAAP
cash is presented net of overdrafts while under SFAS 95, bank overdrafts are
treated as short term credit facilities with movements appearing within
financing activities.
A reconciliation between the consolidated statements of cash flows presented in
accordance with UK GAAP and US GAAP is presented below for the year ended
December 31:
2003 2002 2001
US$M US$m US$m
- -----------------------------------------------------------------------------------------------
Operating activities
Cash flow from operating activities (UK GAAP) 86.3 95.2 95.4
Movement in `Gold-in-transit' 4.0 (1.8) 2.9
Corporation tax paid (1.2) (2.0) (2.9)
Interest received 0.8 0.8 2.0
Interest paid (9.1) (19.6) (24.4)
- -----------------------------------------------------------------------------------------------
Net cash provided by operating activities (US GAAP) 80.8 72.6 73.0
===============================================================================================
2003 2002 2001
US$M US$m US$m
- -----------------------------------------------------------------------------------------------
Investing activities
Net cash outflow from capital expenditure and financial
investment (UK GAAP) (83.0) (64.5) (49.6)
Disposals 16.3 - -
Loans repaid by joint venture 30.0 - -
- -----------------------------------------------------------------------------------------------
Net cash used in activities (US GAAP) (36.7) (64.5) (49.6)
===============================================================================================
2003 2002 2001
US$M US$m US$m
- -----------------------------------------------------------------------------------------------
Financing activities
Cash outflow from financing (UK GAAP) (8.6) (19.2) (40.6)
Change in short-term credit facilities - (4.6) 1.7
Movement in liquid resources (except `Gold-in-transit') (0.9) 7.8 6.8
- -----------------------------------------------------------------------------------------------
Net cash used in financing activities (US GAAP) (9.5) (16.0) (32.1)
===============================================================================================
33
INTANGIBLE ASSETS
The following reconciles the UK GAAP reported figures to US GAAP:
2003 2002
US$m US$m
- ----------------------------------------------------------------------
Intangible assets as at December 31 (UK GAAP) 15.4 17.3
Brought forward US GAAP difference 1.8 0.1
Reduction in cost (note a.) 1.1 -
Amortization reversal 1.5 1.7
- ----------------------------------------------------------------------
Intangible assets as at December 31 (US GAAP) 18.7 19.1
======================================================================
a. The reduction in cost recorded under UK GAAP (see note 11) would not be
treated as a reduction in cost under US GAAP. Accordingly, that amount of
US$1.1 million is added back here.
The Company adopted SFAS 142, with effect from January 1, 2002. Subsequent to
adoption of SFAS 142, the Company does not amortize goodwill and other
intangible assets that have an indefinite useful life but rather tests such
assets at least annually for impairment. Under US GAAP, as at December 31, 2003,
the Company had not recorded any intangible assets other than goodwill. The
goodwill balance as at December 31, 2003 related exclusively to the Iduapriem
mine. The aggregate amount of goodwill acquired in the year, being US$0.7
million, also related exclusively to that mine.
The transitional provisions of SFAS 142 require disclosure of reported net
income in all periods presented, exclusive of amortization expense recognized in
those periods related to goodwill and the effects of other accounting changes
pursuant to the adoption of SFAS 142. Those disclosures are set forth below,
presented as a reconciliation from US GAAP net (loss)/profit as stated.
2003 2002 2001
- --------------------------------------------------------------------------------------------------------
(IN US$ MILLIONS EXCEPT
PER SHARE NUMBERS)
Net (loss)/profit for the year ended December 31, as reported (381.3) (182.8) 65.4
Amortization expense - - 6.0
- --------------------------------------------------------------------------------------------------------
Adjusted net (loss)/profit for the year ended December 31 (381.3) (182.8) 71.4
========================================================================================================
(Loss)/earnings per share (US$)
Basic
(Loss)/earnings per share, as stated (2.97) (1.53) 0.58
Amortization expense, per share - - 0.05
- --------------------------------------------------------------------------------------------------------
Adjusted (loss)/earnings per share (2.97) (1.53) 0.63
- --------------------------------------------------------------------------------------------------------
Diluted
(Loss)/earnings per share, as stated (2.97) (1.53) 0.57
Amortization expense, per share - - 0.05
- --------------------------------------------------------------------------------------------------------
Adjusted (loss)/earnings per share (2.97) (1.53) 0.62
- --------------------------------------------------------------------------------------------------------
TANGIBLE FIXED ASSETS
The following reconciles the UK GAAP reported figures to US GAAP:
2003 2002
US$M US$m
- --------------------------------------------------------------------------------
Tangible fixed assets as at December 31 (UK GAAP) 603.4 602.7
Brought forward US GAAP difference (197.6) (211.9)
Additional impairment charge under US GAAP (5.5) -
Depreciation adjustment 13.2 14.3
- --------------------------------------------------------------------------------
Tangible fixed assets as at December 31 (US GAAP) 413.5 405.1
================================================================================
34
ASSET RETIREMENT OBLIGATIONS
The Company adopted SFAS 143 with effect from January 1, 2003. SFAS 143 provides
accounting and reporting guidance for obligations associated with the retirement
of tangible long-lived assets and associated asset retirement costs.
Under SFAS 143, the fair value of a liability for an asset retirement obligation
is recorded in the period in which it is incurred. When the liability is
initially recorded, the cost is capitalized by increasing the carrying amount of
the related long-lived asset. Over time, the liability is increased to reflect
an interest element (accretion) considered in its initial measurement of fair
value, and the capitalized cost is amortized over the useful life of the related
asset. Upon settlement of the liability, a gain or loss is recorded if the
actual cost incurred is different than the liability recorded.
On adoption of SFAS 143 on January 1, 2003, the Company recognized a US$4.0
million decrease in the carrying value of liabilities related to a future
reclamation and other asset retirement obligations and an increase in retained
earnings of US$4.0 million as a cumulative effect of the change in accounting
principle.
The following is a reconciliation of the total liabilities for asset retirement
obligations:
US$
- -------------------------------------------------------------------------------------------
Balance as at January 1, 2003, as adjusted by the adoption of SFAS 143 20.6
Additions to liabilities in the year 5.6
Liabilities settled in the year (2.8)
- -------------------------------------------------------------------------------------------
BALANCE AS AT DECEMBER 31, 2003 23.4
===========================================================================================
The results for the years ended December 31, 2002 and 2001 on a historical basis
do not reflect the provisions of SFAS 143. Had the Company adopted SFAS 143 on
January 1, 2001, the net loss and basic and diluted loss per share before
cumulative effect of accounting change would have been the pro forma amounts
reported below:
Year ended December 31, 2002 Year ended December 31, 2001
------------------------------------------------ ------------------------------------------------
(in US Dollars, millions, except for share data) (in US Dollars, millions, except for share data)
Net loss Net loss Net income Net income
per basic per diluted per basic per diluted
Net loss common share common share Net income common share common share
- ----------------------------------------------------------------------------------------------------------------------------------
As reported - historical basis (182.8) (1.53) (1.53) 33.1 0.30 0.29
Less: Impact on earnings
before tax 0.5 - - (1.4) - -
Income tax impact - - - - - -
- ----------------------------------------------------------------------------------------------------------------------------------
Adjusted (182.3) (1.53) (1.53) 31.7 0.28 0.28
==================================================================================================================================
35
SEGMENTAL ANALYSIS
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information ("SFAS 131"), which requires that an enterprise report financial and
descriptive information about its reportable operating segments.
The Company is primarily engaged in the exploration, development and mining of
gold on the African continent. The Company's operations are managed and
internally reported on a mine-by-mine basis on which basis the Company has
identified its reportable segments. The Company's country of domicile is Ghana.
The location of individual mines along with the relevant financial disclosures
required by SFAS 131, are identified in the following tables for the years
ending December 31, 2003, 2002 and 2001 and as at December 31, 2003 and 2002
(under UK GAAP):
12 Months to December 31, 2003
Freda-
Idua- Rebecca Corporate Geita Total
Obuasi priem Bibiani Siguiri Zim- Explor- Admini- Tanzania per financial
Ghana Ghana Ghana Guinea babwe Treasury ation stration 50% statements
US$m US$m US$m US$m US$m US$m US$m US$m US$m US$m
- ------------------------------------------------------------------------------------------------------------------------------------
Revenue (external) 187.1 89.8 77.6 91.7 18.6 (7.9) - - 108.0 564.9
Cash operating costs (111.2) (58.5) (46.0) (70.6) (13.7) - - - (56.3) (356.3)
Other operating costs - (1.2) (0.3) (2.3) - - (4.5) (22.0) (3.9) (34.2)
Depreciation and amortization (30.8) (6.0) (11.2) (12.6) (5.6) - - (0.7) (12.9) (79.8)
Royalties (6.0) (2.7) (2.3) (3.0) - - - - (3.6) (17.6)
Exceptional operating costs (5.4) - - - (15.1) - - - - (20.5)
Operating profit/(loss) 33.7 21.4 17.8 3.2 (15.8) (7.9) (4.5) (22.7) 31.3 56.5
Interest payable (0.8) (1.8) - - (0.4) - - (11.0) (4.6) (18.6)
Interest receivable/other income - - 0.1 - - 0.1 - 4.1 0.1 4.4
Property, plant and equipment (net) 451.2 32.3 22.6 93.2 - - - 4.1 110.4 603.4
Total assets 491.4 58.8 41.3 113.1 7.4 30.3 - 41.5 142.3 783.8
Capital expenditure 37.6 12.5 6.4 24.6 1.1 - - 0.8 16.1 83.0
12 Months to December 31, 2002
Freda-
Idua- Rebecca Corporate Geita Total
Obuasi priem Bibiani Siguiri Zim- Explor- Admini- Tanzania per financial
Ghana Ghana Ghana Guinea babwe Treasury ation stration 50% statements
US$m US$m US$m US$m US$m US$m US$m US$m US$m US$m
- ------------------------------------------------------------------------------------------------------------------------------------
Revenue (external) 167.8 57.8 76.1 83.9 30.7 51.2 - - 84.7 552.2
Operating costs (106.4) (43.0) (43.6) (61.9) (21.0) - - - (47.2) (323.1)
Other operating costs (0.5) (0.9) (0.3) (4.8) - - (3.8) (16.5) (4.8) (31.6)
Depreciation and amortization (33.0) (7.6) (11.7) (17.7) (3.7) - (0.1) (1.3) (13.3) (88.4)
Royalties (5.0) (1.7) (2.3) (2.9) - - - - (2.7) (14.6)
Other income - - - - - - - 3.3 - 3.3
Refinancing and restructuring costs - - - - - - - (23.5) - (23.5)
Operating profit/(loss) 22.9 4.6 18.2 (3.4) 6.0 51.2 (3.9) (38.0) 16.7 74.3
Interest payable (2.1) (1.3) - - (0.6) - - (15.3) (5.3) (24.6)
Interest receivable/other income - - 0.1 - 0.3 0.2 - 1.2 0.2 2.0
Property, plant and equipment (net) 444.2 27.4 25.8 78.0 19.5 - - 7.8 103.5 602.7
Total assets 485.4 44.6 49.6 92.6 35.0 10.0 - 26.2 150.3 743.4
Capital expenditure 35.1 10.5 2.9 9.4 6.4 - - 0.2 9.2 64.5
12 Months to December 31, 2001
Total
Freda- per
Idua- Rebecca Corporate Geita financial
Obuasi Ayanfuri priem Bibiani Siguiri Zim- Explor- Admini- Tanzania state-
Ghana Ghana Ghana Ghana Guinea babwe Treasury ation stration 50% ments
US$m US$m US$m US$m US$m US$m US$m US$m US$m US$m US$m
- ------------------------------------------------------------------------------------------------------------------------------------
Revenue (external) 143.5 3.1 55.8 68.7 76.6 34.0 96.0 - - 76.7 554.4
Operating costs (101.4) (2.8) (44.0) (43.1) (62.2) (22.8) - - - (38.9) (315.2)
Other operating costs - (1.0) (0.8) (2.2) - - - (6.5) (21.2) (2.8) (34.5)
Depreciation and amortization (37.5) (0.5) (4.9) (13.8) (18.6) (3.9) - (1.9) (1.2) (12.6) (94.9)
Royalties (4.3) (0.1) (1.7) (2.1) (2.6) - - - - (2.2) (13.0)
Operating profit/(loss) 0.3 (1.3) 4.4 7.5 (6.8) 7.3 96.0 (8.4) (22.4) 20.2 96.8
Interest payable (1.3) - (2.2) - - (0.9) - - (22.6) (8.1) (35.1)
Interest receivable/other income - - 0.2 0.3 - - 0.6 - 4.3 0.3 5.7
Each mine generates all of its revenues from sales to a single refiner. Because
of the active worldwide market for gold, the Company believes that the loss of
any of these customers will not have a material impact on the Company.
DEFERRED STRIPPING COSTS
The full amount of deferred stripping costs may not be expensed until the end of
the life of the mine. There were no deferred stripping cost liabilities as at
December 31, 2003 and 2002.
The strip ratio for each mine, calculated as the ratio of waste mined to ore
production, is as follows, for the years ended December 31:
OBUASI(*) IDUAPRIEM BIBIANI SIGUIRI GEITA
- -------------------------------------------------------------------------
2003 3.5 3.9 1.8 0.8 9.5
2002 5.8 3.4 4.2 0.9 7.4
- -------------------------------------------------------------------------
(*) Obuasi has both underground and open pit mining operations. Data relates to
the open pit mining operations of Obuasi.
36
ORE IN STOCKPILES
Under UK GAAP, ore in stockpiles of US$17.0 million and US$20.1 million as at
December 31, 2003 and 2002 respectively, are recorded in current assets, within
stocks, while under US GAAP, ore in stockpiles is included in non-current
assets. Under US GAAP the classification of ore in stockpiles in non-current
assets is appropriate given that, while it is management's current intention to
process the stockpiled ore prior to the end of the mine life, there is not
reasonable certainty that that ore will be processed within the next 12 months.
NEW ACCOUNTING STANDARDS NOT YET ADOPTED AS OF DECEMBER 31, 2003.
In May 2003 the FASB issued SFAS No. 150 Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity ("SFAS 150").
SFAS 150 modifies the accounting for certain financial instruments that, under
previous guidance, issuers could account for as equity. SFAS 150 requires that
those instruments be classified as liabilities in statements of financial
position.
SFAS 150 affects an issuer's accounting for three types of freestanding
financial instruments, namely:
- - mandatorily redeemable shares, which the issuing company is obligated to
buy back in exchange for cash or other assets.
- - instruments, other than outstanding shares, that do or may require the
issuer to buy back some of its shares in exchange for cash or other assets.
These instruments include put options and forward purchase contracts.
- - obligations that can be settled with shares, the monetary value of which is
fixed, tied solely or predominantly to a variable such as a market index,
or varies inversely with the value of the issuer's shares.
SFAS 150 does not apply to features embedded in financial instruments that are
not derivatives in their entirety.
In addition to its requirements for the classification and measurement of
financial instruments within its scope, SFAS 150 also requires disclosures about
alternative ways of settling those instruments and the capital structure of
entities, all of whose shares are mandatorily redeemable.
SFAS 150 is effective for financial instruments entered into or modified after
May 31, 2003, and otherwise is effective at the beginning of the first interim
period beginning after June 15, 2003. It is to be implemented by reporting the
cumulative effect of a change in an accounting principle for financial
instruments created before the issuance date of SFAS 150 and still existing at
the beginning of the interim period of adoption. Restatement is not permitted.
The Company is currently evaluating the impact of SFAS 150 on its results of
operations and financial position.
In December 2003, the FASB issued a revision ("FIN 46R") to Interpretation No.
46 "Consolidation of Variable Interest Entities, an Interpretation of ARB No.
51" (the "Interpretation"). FIN 46R clarifies the application of ARB No. 51,
"Consolidated Financial Statements", to certain entities in which equity
investors do not have the characteristics of a controlling financial interest or
do not have sufficient equity at risk for the entity to finance its activities
without additional subordinated financial support. FIN 46R requires the
consolidation of those entities, known as variable interest entities ("VIEs"),
by the primary beneficiary of the entity. The primary beneficiary is the entity,
if any, that will absorb a majority of the entity's expected losses, receive a
majority of the entity's residual returns, or both.
Among other changes, the revisions of FIN 46R (a) clarified some requirements of
the original FIN 46, which was issued in January 2003, (b) eased some
implementation problems, and (c) added new scope exceptions. FIN 46R deferred
the effective date of the Interpretation for public companies, to the end of the
first reporting period ending after March 15, 2004, except that all public
companies must at a minimum apply the provisions of the Interpretation to
entities that were previously considered "special-purpose entities" under the
FASB literature prior to the issuance of FIN 46R by the end of the first
reporting period ending after December 15, 2003. The Company does not currently
have any interests that it believes fall within the scope of FIN 46 or FIN 46R
and so anticipates that the adoption of FIN 46 and FIN 46R will have no impact
on its financial position, cash flows and results of operations.
37