A strong operational performance to end-September.

ALEC HOGG: Well, Mark Cutifani is a very busy man when he releases financial results, but I did catch up with him earlier and asked him if he could just explain how AngloGold Ashanti got this massive hedge book which always seems to knock their financial results.

MARK CUTIFANI: The hedge book has a lot of history. When AngloGold and Ashanti merged some five or six years ago, the Ashanti business had lots of hedges where they'd protected the forward price of gold at somewhere around $350 to $400/oz. So we had about 12m ounces of gold forward sold at about $350/oz average. So for every ounce we were selling even two years ago, we were losing about $200 or $300 an ounce. And if I took the gold price today at $1050, that would have been around $700/oz. So we've taken out about 8m ounces of those 12m ounces in the last couple of years and we did that at about $800/oz. So if I just look at what we've done in the last two years, we've created about $2bn worth of value because we sold before the price got to where it is today. So a big issue, and certainly would have been pretty tough on us today had we not already done that.

ALEC HOGG: If you look back on it, was there any reason why you didn't clear out the whole hedge book?

MARK CUTIFANI: Yeah, it was a matter of capacity, quite frankly. Two years ago we had $2bn worth of debt as well, so we had lots of risk in the business, and financially we were stretched. So we've reconstructed the balance sheet and now we're about $800m net debt, and we'll be about $1bn because of some of the new transactions that we've put in place. But we've more than halved our net debt, we've taken all this balance sheet risk off with the hedge book, and in fact if we still had the hedge book, we'd have added another $7bn worth of risk. So today we are a very different company and thankfully we made the right calls in both reconstructing the balance sheet and the hedge book when we did.

ALEC HOGG: Those are some big bets because if the gold price had gone the other way clearly you wouldn't be looking half as good.

MARK CUTIFANI: Ja, that's true, but I also made a big bet in joining the gold industry two years ago when I left base metals on the basis that I felt that base metals would probably be overcooked in terms of the price, and I felt that the gold industry had been underdone. So I think we made the right call.

ALEC HOGG: Is it still underdone, gold?

MARK CUTIFANI: I think it's about where it should be. To be frank, it's hard to call whether it will kick a bit further. If it does, I think it'll be more about the US dollar weakness than it will be about fundamentals. So I think the fundamentals at about $1000/oz are about right for the gold industry, particularly when you consider that the pressure on the supply side and the fact that in the long term we've got a declining supply base right across the global industry.

ALEC HOGG: If we can hold at $1000/oz, and the rand could just start weakening a little, you'd be in pretty good shape.

MARK CUTIFANI: Yeah, we would be. Unfortunately it's something I can't plan on and as a team we've got to be competitive whether at a rand at R5, R7 or R10/dollar, and at the moment it's putting lost of pressure on us. And that's compounded by the fact that we are starting down the gun barrel of three consecutive 45% increases by Eskom as well, which we hope we can work through and do something different about. But certainly it puts very significant pressure on our South African business.

ALEC HOGG: Mark Cutifani is the chief executive of AngloGold Ashanti.

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