Group – Notes to the group financial statements

2009	2010	Figures in million	2010	2009
SA Rands			US Dollars
		34 Contractual commitments and contingencies
		Operating leases
		At 31 December 2010, the group was committed to making the following payments in respect of operating leases for amongst others, the hire of plant and equipment and land and buildings. Certain contracts contain renewal options and escalation clauses for various periods of time.
		Expiry:
70	116	– within one year	18	9
13	48	– between one and two years	7	2
28	12	– between two and five years	2	4
1	3	– after five years	–	–
112	179		27	15
		Finance leases
		The group has finance leases for plant and equipment, buildings and motor vehicles. The leases for plant and equipment and buildings have terms of renewal but no purchase options. The motor vehicle leases have no purchase options. Renewals are at the option of the specific entity that holds the lease. Future minimum lease payments under finance lease contracts together with the present value of the net minimum lease payments are as follows:

Present value of payments	Minimum payments	Figures in million	Minimum payments	Present value of payments
2010			2010
SA Rands			US Dollars
37	68	Within one year	10	6
118	222	After one year but not more than five years	34	17
228	314	More than five years	48	35
383	604	Total minimum lease payments	92	58
–	(221)	Amounts representing finance charges	(34)	–
383	383	Present value of minimum lease payments	58	58

2009			2009
40	73	Within one year	10	5
149	262	After one year but not more than five years	35	20
241	350	More than five years	48	34
430	685	Total minimum lease payments	93	59
–	(255)	Amounts representing finance charges	(34)	–
430	430	Present value of minimum lease payments	59	59

2009	2010	Figures in million	2010	2009
SA Rands			US Dollars
		Capital commitments
		Acquisition of tangible assets
976	1,156	Contracted for	176	131
12,515	6,494	Not contracted for	988	1,683
13,491	7,650	Authorised by the directors	1,164	1,814
		Allocated to:
		Project capital
1,965	2,841	– within one year	433	264
4,419	702	– thereafter	107	594
6,384	3,543		540	858
		Stay-in-business capital
5,244	2,664	– within one year	404	705
1,863	1,443	– thereafter	220	251
7,107	4,107		624	956
42	81	Share of underlying capital commitments of joint ventures	12	6

		Purchase obligations
		Contracted for
2,573	2,614	– within one year	398	346
713	922	– thereafter	140	96
3,286	3,536		538	442

Purchase obligations represent contractual obligations for the purchase of mining contract services, power, supplies, consumables, inventories, explosives and activated carbon.

To service these capital commitments, purchase obligations and other operational requirements, the group is dependent on existing cash resources, cash generated from operations and borrowing facilities.

Cash generated from operations is subject to operational, market and other risks. Distributions from operations may be subject to foreign investment, exchange control laws and regulations, and the quantity of foreign exchange available in offshore countries. In addition, distributions from joint ventures are subject to the relevant board approval.

The credit facilities and other finance arrangements contain financial covenants and other similar undertakings. To the extent that external borrowings are required, the group’s covenant performance indicates that existing financing facilities will be available to meet the commitments detailed above. To the extent that any of the financing facilities mature in the near future, the group believes that sufficient measures are in place to ensure that these facilities can be refinanced.

Summary of contracted uranium sales as at 31 December 2010

The group had the following forward pricing uranium commitments:

Year	000lbs ⁽¹⁾	Average contracted price ($/lbs) ⁽²⁾
2011	494	33.97
2012	494	34.35
2013	494	34.74

Great Noligwa, Kopanang and Moab Khotsong produced 1.46m pounds of uranium oxide in 2010 (2009: 1.44m pounds).

⁽¹⁾	Certain contracts allow the buyer to adjust the purchase quantity within a specified range.
⁽²⁾	Certain contracts are subject to price adjustment mechanisms. In these cases the price disclosed indicates the previous periodic price reset.

In addition, the group had gold sale commitments as disclosed in note 35.

Liabilities included in the statement of financial position	Guaran- tees and contin- gencies	Liabilities included in the statement of financial position	Guaran- tees and contin- gencies	Figures in million	Guaran- tees and contin- gencies	Liabilities included in the statement of financial position	Guaran- tees and contin- gencies	Liabilities included in the statement of financial position
2009		2010			2010		2009
SA Rands					US Dollars
				Contingent liabilities
–	–	–	–	Groundwater pollution ⁽¹⁾	–	–	–	–
–	–	–	–	Deep groundwater pollution – South Africa ⁽²⁾	–	–	–	–
–	560	–	587	Sales tax on gold deliveries – Brazil ⁽³⁾	89	–	76	–
–	191	–	219	Other tax disputes – Brazil ⁽⁴⁾	34	–	25	–
–	67	–	70	Indirect taxes – Ghana ⁽⁵⁾	11	–	9	–
–	–	–	–	ODMWA litigation ⁽⁶⁾	–	–	–	–
				Contingent assets
–	–	–	–	Royalty – Boddington Gold Mine ⁽⁷⁾	–	–	–	–
–	–	–	–	Royalty – Tau Lekoa Gold Mine ⁽⁸⁾	–	–	–	–
				Guarantees
				Financial guarantees
–	100	–	100	Oro Group (Pty) Limited ⁽⁹⁾	15	–	13	–
3,293	3,293	–	–	Hedging guarantees Ashanti Treasury Services ⁽¹⁰⁾ ⁽¹³⁾	–	–	443	443
3,213	3,213	–	–	Geita Management Company ⁽¹¹⁾ ⁽¹³⁾	–	–	443	443
1,071	1,071	–	–	AngloGold South America ⁽¹²⁾ ⁽¹³⁾	–	–	144	144
1,679	1,679	–	–	AngloGold USA Trading Company ⁽¹²⁾ ⁽¹³⁾	–	–	226	226
–	–	–	–	Cerro Vanguardia S.A. ⁽¹²⁾ ⁽¹³⁾	–	–	–	–
9,256	10,174	–	976		149	–	1,368	1,245

Contingent liabilities
⁽¹⁾	AngloGold Ashanti has identified groundwater contamination plumes at certain of its operations, which have occurred primarily as a result of seepage from mine residue stockpiles. Numerous scientific, technical and legal studies have been undertaken to assist in determining the magnitude of the contamination and to find sustainable remediation solutions. The group has instituted processes to reduce future potential seepage and it has been demonstrated that Monitored Natural Attenuation (MNA) by the existing environment will contribute to improvement in some instances. Furthermore, literature reviews, field trials and base line modelling techniques suggest, but are not yet proven, that the use of phyto-technologies can address the soil and groundwater contamination. Subject to the completion of trials and the technology being a proven remediation technique, no reliable estimate can be made for the obligation.
⁽²⁾	The company has identified a flooding and future pollution risk posed by deep groundwater in the Klerksdorp and Far West Rand gold fields. Various studies have been undertaken by AngloGold Ashanti Limited since 1999. Due to the interconnected nature of mining operations, any proposed solution needs to be a combined one supported by all the mines located in these gold fields. As a result, the Department of Mineral Resources and affected mining companies are involved in the development of a “Regional Mine Closure Strategy”. In view of the limitation of current information for the accurate estimation of a liability, no reliable estimate can be made for the obligation.
⁽³⁾	Mineração Serra Grande S.A. (MSG), received two tax assessments from the State of Goiás related to payments of sales taxes on gold deliveries for export. AngloGold Ashanti Córrego do Sitío Mineração S.A. manages the operation and its attributable share of the first assessment is approximately $55m, R363m (2009: $47m, R347m). In November 2006, the administrative council’s second chamber ruled in favour of MSG and fully cancelled the tax liability related to the first period.
	The State of Goiás has appealed to the full board of the State of Goiás tax administrative council. The second assessment was issued by the State of Goiás in October 2006 on the same grounds as the first assessment, and the company’s attributable share of the assessment is approximately $34m, R224m (2009: $29m, R213m). The company believes both assessments are in violation of federal legislation on sales taxes.
⁽⁴⁾	MSG received a tax assessment in October 2003 from the State of Minas Gerais related to sales taxes on gold. The tax administrators rejected the company’s appeal against the assessment. The company is now appealing the dismissal of the case. The company’s attributable share of the assessment is approximately $10m, R64m (2009: $8m, R66m). AngloGold Ashanti Limited subsidiaries in Brazil are involved in various disputes with tax authorities. These disputes involve federal tax assessments including income tax, royalties, social contributions and annual property tax. The amount involved is approximately $24m, R155m (2009: $17m, R125m).
⁽⁵⁾	AngloGold Ashanti (Ghana) Limited received a tax assessment for $11m, R70m (2009: $9m, R67m) during September 2009 in respect of the 2006, 2007 and 2008 tax years, following an audit by the tax authorities related to indirect taxes on various items. Management is of the opinion that the indirect taxes are not payable and the company has lodged an objection.
⁽⁶⁾	The case of Mr Thembekile Mankayi was heard in the High Court of South Africa in June 2008, and an appeal heard in the Supreme Court of Appeals in 2010. In both instances judgement was awarded in favour of AngloGold Ashanti Limited. A further appeal that was lodged by Mr Mankayi was heard in the Constitutional Court in 2010. Judgement in the Constitutional Court was handed down on 3 March 2011.
	Following the judgement, Mr Mankayi’s executor may proceed with his case in the High Court. This will comprise, amongst others, providing evidence showing that Mr Mankayi contracted silicosis as a result of negligent conduct on the part of AngloGold Ashanti.
	The company is still studying the details of the Constitutional Court judgement and will defend the case and any subsequent claims on their merits. Should other individuals or groups lodge similar claims, these too would be defended by the company and adjudicated by the Courts on their merits. In view of the limitation of current information for the accurate estimation of a possible liability, no reliable estimate can be made for this possible obligation.
Contingent assets
⁽⁷⁾	As a result of the sale of the interest in the Boddington Gold Mine joint venture during 2009, the group is entitled to receive a royalty on any gold recovered or produced by the Boddington Gold Mine, where the gold price is in excess of Boddington Gold Mine’s cash cost plus $600/oz. The royalty commenced on 1 July 2010 and is capped at a total amount of $100m, R657m. Royalties of $4m, R30m were received during the year.
⁽⁸⁾	As a result of the sale of the interest in the Tau Lekoa Gold Mine during 2010, the group is entitled to receive a royalty on the production of a total of 1.5Moz by the Tau Lekoa Gold Mine and in the event that the average monthly rand price of gold exceeds R180,000/kg (subject to inflation adjustment). Where the average monthly rand price of gold does not exceed R180,000/kg (subject to inflation adjustment), the ounces produced in that quarter do not count towards the total 1.5Moz upon which the royalty is payable. The royalty will be determined at 3% of the net revenue (being gross revenue less state royalties) generated by the Tau Lekoa assets. Royalties of $3m, R21m were received during the year.
Guarantees
⁽⁹⁾	The company has provided sureties in favour of a lender on a gold loan facility with its affiliate Oro Group (Pty) Limited and one of its subsidiaries to a maximum value of $15m, R100m (2009: $13m, R100m). The suretyship agreements have a termination notice period of 90 days.
⁽¹⁰⁾	The group, together with its wholly owned subsidiary, AngloGold Ashanti Holdings plc, has provided guarantees to several counterparty banks for the hedging commitments of its wholly owned subsidiary Ashanti Treasury Services Limited (ATS).
⁽¹¹⁾	The group and its wholly owned subsidiary, AngloGold Ashanti Holdings plc, have issued hedging guarantees to several counterparty banks in which they have guaranteed the due performance by the Geita Management Company Limited (GMC) of its obligations under or pursuant to the hedging agreements entered into by GMC, and to the payment of all money owing or incurred by GMC as and when due.
⁽¹²⁾	The group has issued gold delivery guarantees to several counterparty banks in which it guarantees the due performance of its subsidiaries AngloGold USA Trading Company, AngloGold South America Limited and Cerro Vanguardia S.A. under their respective gold hedging agreements.
⁽¹³⁾	At 31 December 2010, the group had no open gold hedge contracts.

34 Contractual commitments and contingencies