TAX NEWS - June 2010

Australia Tax Changes AngloGold's Priorities

LONDON — AngloGold Ashanti Ltd. has changed its project priority list in light of Australia's proposed Resources Super Profits Tax and expects South Africa might be able to benefit from the tax, the mining company's chief executive said Thursday.

The miner's Tropicana gold project in western Australia, which had just "sneaked" into the company's top-10 most important projects, has now slipped on the miner's priority list because the Australian government is proposing to impose a 40% tax on miners that could endanger the economic viability of the project, AngloGold Ashanti CEO Mark Cutifani said in a written speech to the Minerals Council of Australia.

"While we are still committed [to the project], what should be a 20-year development that our industry so desperately needs, has slipped back down the project priority list," Mr. Cutifani said. "It is very difficult for the [company's] Board to accept any recommendation when we don't know what it means in terms detail, or we can't guess what great new ideas the Government has up its sleeve."

Mr. Cutifani planned to seek board approval for the project in the fourth quarter of 2010. The 600 million Australian dollar-project (US$518.2 million) was forecast to potentially start producing gold at a rate of around 400,000 troy ounces a year in 2013. AngloGold owns a 70% stake in the project.

Tropicana would have played an important role in replenishing the company's gold reserves locally. Over the past 10 years, its operations have declined in size by about 70%, Mr. Cutifani said.

The Australian government proposed the super profits tax on May 2 to claim a larger stake of the large profits generated by miners and as a way to prevent the country from developing into a two tier economy. The government is concerned that the mining industry could continue to grow at the expense of investment in other parts of the economy.

Miners have vehemently denounced the tax as something that would stymie future investment in Australia.

AngloGold Ashanti has allocated 15% of its global exploration budget to Australia, but at the moment other countries such as Guinea in Africa offer better returns.

"While we have security issues and risks, infrastructure costs and other operating costs that go with doing business in remote African locations, we don't have the absolute certainty of a super tax that will eat our shorts," Mr. Cutifani said. "The quality of the deposit in Guinea is sufficiently attractive to put it ahead of all the good things we can do in Australia."

Mr. Cutifani also said Australia's super profits tax presented an opportunity for South Africa to attract more investment to develop a pool of commodities that Australia also mines. Mr. Cutifani, the vice-president of South Africa's Chamber of Mines, said the mining body would do "everything" to encourage South Africa's government to take advantage of Australia's proposed tax to attract investment in a range of products that would place the country in direct competition with Australia.