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GH_AGA_Ashanti_2001 ASHANTI GOLDFIELDS CL Annual Report 2001

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  • ANNUAL REPORT 2001

  • 1.66

    1.74

    1.56

    1.55

    1.17

    Total Gold Production (millions of ounces)

    2001

    2000

    1999

    1998

    1997

    335.0

    335.0

    372.0

    385.0

    450.0

    Total Gold Price Realised (US$ per ounce)

    2001

    2000

    1999

    1998

    1997

    190.0

    187.0

    205.0

    218.0

    254.0

    Total Cash Operating Costs before exceptional items(US$ per ounce)

    2001

    2000

    1999

    1998

    1997

    158.9

    203.9

    211.2

    208.1

    171.4

    Group Operating Cash Flow before exceptional items(US$ millions)

    2001

    2000

    1999

    1998

    1997

    62.7

    30.5

    66.1

    73.9

    58.4

    Earnings before exceptional items (US$ millions)

    Cover picture: Mrs Kallo Maimouna Maga, Headmistress of the Siguiri Primary School and some of her pupils inan outdoor play session during school vacation

    2001

    2000

    1999

    1998

    1997

    ContentsChairmans Statement 2Highlights 3Chief Executives Review 4Operations Review 8Financial Review 17Production 20Ore Reserves and Mineral Resources 22Financial Statements and Corporate Information 25

    Financial CalendarAnnual General Meeting 28 May 2002First Quarter Results May 2002Second Quarter Results July 2002Third Quarter Results October 2002Full Year Results February 2003

    65Corporate Information

    Registered OfficeGold HousePatrice Lumumba RoadPO Box 2665Accra, GhanaTelephones: (+233-21) 772190

    (+233-21) 772235(+233-21) 778160(+233-21) 778167(+233-21) 761311

    (Satellite) 874 1562524Fax: (+233-21) 775947(Satellite) 874 1562525Website www.ashantigold.com

    Ernest AbankrohCompany SecretaryTelephone: (+233-21) 774977Fax: (+233-21) 778155E-Mail Address [email protected]

    London Office3rd Floor, Roman HouseWood StreetLondon EC2Y 5BAUnited KingdomTelephone: (+44-20) 7256 9938Fax: (+44-20) 7256 9939

    Investor RelationsCorporate OfficeJames AnamanManaging Director, Public AffairsTelephones: (+233-21) 778178

    (+233-21) 772190Fax: (+233-21) 778156E-Mail Address [email protected]

    London OfficeCorinne GaisieUK RepresentativeTelephone: (+44-20) 7256 9938Fax: (+44-20) 7256 9939E-Mail Address [email protected]

    Golin HarrisAllan Jordan (New York)Telephone: (+1-212) 697 9191Fax: (+1-212) 697 3720E-Mail Address [email protected]

    Bibiani MinePO Box 98, Bibiani, GhanaTelephone: (+233-51) 20118Satellite Fax: 873 761314865

    Freda-Rebecca MinePO Box 70, Bindura, ZimbabweTelephone: (+263-71) 7300/1Fax: (+263-71) 6919

    Geita MinePO Box 532Geita, TanzaniaTelephone:Fax:

    Iduapriem MinePO Box 283, Tarkwa, GhanaTelephone: (+233-362) 505(Satellite) 873 1627111Fax: (+233-362) 479(Satellite) 873 1627112

    Obuasi MinePO Box 10, Obuasi, GhanaTelephones: (+233-582) 4948

    (+233-582) 475Fax: (+233-582) 268

    Siguiri Minec/o Socit Ashanti Goldfields de GuineKM4, Cameroun B.P. 1006Conakry, GuineTelephone: (+1-301) 916 53 87Satellite 873 761333884

    873 685-51881Fax: (+1-301) 916 53 79Satellite 873 76333885

    Ashanti Exploration4, Nortei Ababio StreetRoman RidgePO Box 2665, Accra, GhanaTelephones: (+233-21) 774377

    (+233-21) 767335/6Fax: (+233-21) 778739

    Ashanti Goldfields Company Limited Registered in Ghana No. 7094 ARBN 074 370 862

    Photography by Norman Childs. Designed and produced by THE& FACTOR. Printed in England by royle corporate print

    (+255-28) 2520 500(+255-28) 2520 502

  • is an African-based international gold mining and exploration group with six producing mines in

    four African countries: Ghana, Guinea, Tanzania and Zimbabwe.

    The mines, in which the Group has interests have 44 million ounces of measured and indicated gold resources and active exploration

    projects in seven African countries. The Company is listed on five international stock exchanges.

    To be a premier precious metals mining company in Africa

    Ashantis objectives are to:

    Retain and consolidate its position as a senior tier gold producer and diversify where appropriate To enhance shareholder value for the long term Maintain appropriate levels of hedge protection to assist the Group in meeting its commitments as and when they fall due Reduce and refinance Group debt Participate in the continuing consolidation occuring within the industry Maintain the best mining practices and highest safety standards

    Ashantis strategy seeks to:

    Maximise cash generation through strong operational performance at all our mines Continue with the restructuring of the hedge book Continue to maintain cost and performance focus by setting and attaining critical measures in production, cost and profitability Secure operational and financial gains by continually improving internal resources and systems Foster good relations with key stakeholders Maintain and increase ore reserves by focusing on exploration near existing operations Increase asset portfolio with focused exploration in strategically important countries Continue with the high degree of safety-consciousness established among staff with a view to achieving a National Occupational

    Safety Award (NOSA) Five-Star rating across the Group

    Continue to provide social amenities in pursuit of our objectives of good corporate citizenship where we operate

    Corporate Profile 1

  • 2 Chairmans Statement

    In 2001, Ashanti made considerable progress in a number of key areas, notably in production and finance, despite thecontinuing challenges that faced the gold industry duringthe year. The performance of the five Ashanti mines and theGeita gold mine, which we operate and own jointly withAngloGold Limited, not only compared favourably withindustry standards of production and efficiency but alsoeither attained or maintained very high ratings by theNational Occupational and Safety Association (NOSA) ofSouth Africa. The Chief Executives Review and otherrelevant reports which follow, spell out these achievementsin greater detail.

    Stock Market PerformanceAshantis shares performed very strongly on the New YorkStock Exchange by the end of the year, having traded fromUS$1.875 on 2 January to US$4.25 on 31 December 2001.This represented a substantial improvement in a difficultinvestment climate.

    In order to concentrate on the New York Exchange as themain centre for trading our stock in North America wehave with effect from 31 January 2002 delisted from theToronto Stock Exchange. At home, the Ghana InvestmentPromotion Council presented the Company with twospecial awards for its contributions to the economy and itselection as the countrys number one in a Club of 100top corporate bodies in Ghana.

    Earnings and DividendAshanti more than doubled its earnings during 2001 fromUS$30.5 million (before exceptional items) in 2000 toUS$62.7 million. As a result of this and a programme ofcost reductions, the Group also generated cash during theyear which resulted in a reduction in its gross debt level byUS$39.8 million.

    Although the Companys liquidity position furtherimproved during the year, the Board is unable torecommend the payment of dividends this year because of its negative reserves and the prevailing restrictions under

    the banking covenants and the Boards overall objective ofreducing the Companys indebtedness.

    Gold IndustryThe gold price remained at historical lows, and a returnabove US$300 per ounce on a sustainable basis was thoughtto be optimistic. In the circumstances, we continued to pursue successful measures to drive down costs, andconsolidate what we have achieved in the immediate past.

    Debt RestructuringDuring the year, the Board reviewed the Companysrefinancing options and was pleased to announce, on25 January 2002, a conditional agreement with an ad hoccommittee of holders of the 51/2% ExchangeableGuaranteed Notes due 2003 (the Existing Notes)regarding a proposed restructuring of the Existing Notes. Afurther announcement on conditional margin freearrangements and a new revolving credit facility, was madeon 18 March 2002. Further details are set out in theFinancial Review on page 18. Upon successful completionand implementation of Ashantis debt restructuring, theCompanys financial flexibility is expected to improvesubstantially.

    Investor RelationsThe progress made on the restructuring and reports on ourstrong operations formed the thrust of the Groups investorrelations efforts during the year.

    Our two major shareholders, Lonmin Plc and the Governmentof Ghana, re-affirmed their support for the Company. HisExcellency, President Kuffour, in particular, has indicatedthat his government saw Lonmin as a strategic partner andLonmin have also confirmed that, although their focus was onplatinum their interest in Ashanti had not waned. We aregrateful to both shareholders for their continued support.Ashanti also held comprehensive briefing sessions with thePresident of Ghana and his cabinet, as well as with relevantparliamentary committees in Ghana during 2001. We counton the continued support of all our shareholders during ourrestructuring efforts and beyond.

    M E BECKETT

  • 3Board of DirectorsDuring the period under review, we appointed Mr T E Aninas a non-executive director on 27 July 2001 and Mr G EHaslam on 8 March 2002. Dr K Duffuor, Mr AAshiabor, Dr D Creed and Mr J N Robinson resigned asdirectors on 23 July, 31 July, 31 August 2001 and 8 March2002, respectively.

    We are pleased to report that the Board has requested TrevorSchultz to serve an additional year as Chief OperatingOfficer until 31 December 2003, following his attainment ofthe normal retirement age of 60 years. The extension issubject to shareholders approval.

    Employees and the CommunityThrough these difficult trading conditions Ashantisemployees have remained dedicated, loyal and veryresourceful and this has underscored our achievements onsafety, production and finance this year and we thank themfor their outstanding contribution.

    The Board maintained incentive schemes and othermeasures to reward the efforts of its employees. In addition,Ashanti joined the Global Compact of the United NationsOrganisation which seeks to promote world-class standardsin human rights, labour policies and environmentalpractices.

    FutureIn 2002, we will continue to strive to consolidate on ourachievements during 2001 with a view to ensuring thatAshanti remains a competitive and successful company ableto capitalise on its outstanding natural and human resources.

    Salient Features Earnings of US$62.7 million more than double as

    compared to last years pre-exceptional earnings

    Strong operational performance resulting in goldproduction of 1.66 million ounces at a cash operating costof US$190 per ounce

    Group gross debt levels reduced further by US$39.8 million

    Significant progress made towards refinancingAshantis debt

    All mines achieved superior NOSA safety ratings

    Highlights 2001 2000

    Financial (US$)Total Turnover 554.4m 582.2mEarnings before exceptional items 62.7m 30.5mEarnings after exceptional items 62.7m (141.1m)Operating cash flow beforeexceptional items 158.9m 203.9mEarnings per share before exceptional items 0.56 0.27Earnings per share after exceptional items 0.56 (1.25)

    Gold Production (ounces)Obuasi 528,451 640,988Bibiani 253,052 273,711Iduapriem/Teberebie 205,130 193,868Ayanfuri 11,517 36,316Siguiri 283,199 303,381Freda-Rebecca 102,654 112,164Geita (group share) 272,781 176,836Total 1,656,784 1,737,264

    Total Production Costs before exceptional items (US$ per ounce)Cash operating costs 190 187Royalties 8 8Depreciation and amortisation 55 65Total 253 260

    Mine Ore Reserves and Mineral Resources (million ounces)*Proved and Probable Ore Reserves 26.1 25.3Measured and Indicated Mineral Resources 44.0 43.3

    *includes 100% of Geita

    ASHANTI ENDED THE YEAR 2001 ON A VERY STRONG NOTE

    M E BeckettChairman

  • Chief Executives Review

    OverviewI am pleased to report that Ashanti overcame significantchallenges to end 2001 on a stronger note. Apart fromconfronting a depressed gold price environment, Ashantiinitiated moves to refinance and restructure its 2003 debtobligations.

    The Company maintained its focus on cash generation,which it applied to reduce its debt, and continued torestructure its hedge book.

    OperationsAshantis operations performed well in 2001. Groupproduction and cost targets were exceeded, particularly atIduapriem and Geita. The Groups total gold production forthe year was 1,656,784 ounces which compares with a totalgold production of 1,737,264 ounces in 2000.

    The reduced production in 2001 was mainly due to theclosure of surface mining operations at Obuasi, cessation ofmining at Ayanfuri, and reduced production at Siguiri andBibiani.

    Total cash operating costs were US$190 per ounce ascompared to US$187 per ounce in 2000, due to lowerproduction. Obuasis cash operating costs however fell by8 per cent from US$208 per ounce in 2000 to US$192 perounce in 2001. Solid operational performance has helped toreduce Group debt levels further.

    ExplorationOur exploration efforts centred on replenishing reservesand resources at our mine sites. We were able to delineatefurther reserves and resources at Geita (before depletion)and also increased the reserves at Iduapriem/Teberebie.

    While we were unable to replenish fully reserves at Siguiri, atObuasi, we found promising high-grade intersections below50 Level (5,000 feet), suggesting a significant resourcepotential at the mine. The opportunities to undertake furtherexploration to prove up the world-famous Obuasi ore body,remain an exciting prospect for us.

    Financial PerformanceDuring the year, the Groups earnings more than doubled,our hedge book was further restructured and we appliedcash generated from our business to pay down our debtsand provide the basis for growth.

    The Groups gross debt level was reduced further by US$39.8million in 2001. This included a reduction in the amountsowed under the revolving credit facility from US$88.8 millionin 2000 to US$55.0 million. To afford us greater flexibility,we negotiated a US$25.4 million working capital facility for2002 from some of our existing banks on a voluntary basis.

    Reduction in debt levels led to a 43 per cent decrease ininterest charges. Corporate administration expenditurewas 16 per cent lower at US$21.2 million. Whilst mine siterelated exploration progressed during the year, non minesite exploration was rationalised during 2001.

    Turning to the restructuring of our debt, we are pro-actively implementing a refinancing plan to restructure ourbalance sheet and provide greater financial flexibility. Thisinvolves the proposed restructuring of the Existing Notes(including an equitisation of 25%), ongoing margin freearrangements and a new revolving credit facility. Details ofthese are provided in the Financial Review.

    4

    opposite: Overview of the worlds largest BIOX plant and other installations atObuasi at night

  • 5DURING THE YEAR, THE COMPANYS EARNINGS MORE THAN DOUBLED . . .

    5

  • 6 Chief Executives Review

    Community RelationsMaintaining good community relations is essential forAshantis operations and its African franchise value. Wetherefore continued to discharge our responsibilities to thecommunities and countries in which we operate. AtBibiani, we created opportunities for farming for the localcommunity and assisted them in that regard. A micro-credit scheme and a training programme that we initiatedfor the youth have been extremely successful. A similarprogramme initiated at our Freda-Rebecca mine inZimbabwe was also instrumental in keeping employeemorale high and operations stable in the difficult economicsituation in that country.

    In 2001, Ashanti joined the Global Compact, a UnitedNations-sponsored initiative to foster greater responsibilityand participation by the worlds private sector inenhancing corporate governance. Ashanti was the firstcompany to join in Ghana and I am particularly honouredto be serving on the body which advises the UN Secretary-General on Global Compact issues.

    Safety, Health and EnvironmentThe Group safety performance in 2001 was within thecorporate target level of 0.8 injuries per 200,000 hours workedand we continue to maintain a world class safety record.

    NOSA safety audits, which are internationallyacknowledged in the mining industry, were undertaken atall our mines. With the recent upgrade at Obuasi, allAshanti operations are now internationally rated at fourstars or better.

    The Group strives to improve on its standards ofenvironmental protection. Land restoration runs parallelwith mining activities at open pit mining operations withinthe Group.

    EmployeesThe improvement in Ashantis performance during 2001would not have been possible without the tireless effortsand loyalty of our employees. I therefore take thisopportunity to thank everyone of them for their hard workand perseverance and count on their support in the future.

    S E JonahChief Executive and Group Managing Director

    left: Land reclamation after cessation of surface mining at Obuasi

    opposite: Heap leach operator at work in Siguiri, Guinea

  • 7ALL ASHANTIS OPERATIONS ARE RATED FOUR STARS OR ABOVE BY NOSA OF SOUTH AFRICA

  • Operations Review8

    opposite: The Obuasi 41 level underground train approaches a tipping point

    OverviewIn 2001, Management continued to focus on the maintenanceof world class safety and operational and cost efficiencies, whilstenhancing production and sustainability at each operationthrough the implementation of key strategic initiatives.

    ObuasiObuasi produced 528,451 ounces, principally fromunderground ore. This compared with the 640,988 ounces themine produced from both underground and surface ores theprevious year. Cash operating costs reduced to US$192 perounce as against US$208 per ounce in 2000. The improvementin cost was achieved through closure of the high cost surfaceoperations as well as cost control measures and re-engineeringof mining and processing operations.

    Underground Mining Production from underground mining reached2,507,000 tonnes, 7 per cent more than the 2,348,000 tonnesproduced in 2000. The grade for 2001 at 7.90 g/t, was slightlyahead of the 7.87 g/t achieved in 2000. Production from themain mechanised stoping areas was improved by theintroduction of new trucks and improved layouts. The portionof fully developed reserves was increased to provide greateroperational flexibility. These improvements have led to areduction in unit mining costs.

    Major underground project works in 2001 included thefurther development, support and track installation on thehigh volume railway system at the 41 Level main haulage.Development was completed from the Kwesi Mensah Shaft(KMS) through to the Brown Sub-Vertical Shaft (BSVS) in thesouth of the mine and to Blocks 5 and 6 in the north. TheSansu Ventilation Shaft was commissioned. The surfacefoundation work for the 300 south ventilation airway wascompleted in preparation for raise-boring operations in 2002.The development of the decline to the bottom of KMS tofacilitate the removal of rock spillage was completed. At theKwesi Renner Shaft (KRS) excavation for the crusher station

    was completed. A new pump station was constructed andcommissioned on 8 Level in the north of the mine to improvemine pumping capacity and water control.

    Surface MiningSurface rehabilitation work on landscaping and re-vegetatingthe old pits and waste dumps was ongoing during the year.There was no production from surface mining activity atObuasi in 2001.

    ProcessingGold clean up was started in the Pompora Treatment Plant(PTP) and the Oxide Treatment Plant (OTP) remained on careand maintenance. As a result, a total of 4.06 million tonneswere processed compared to 5.33 million tonnes in 2000 whenthe two plants were in operation. At the Sulphide TreatmentPlant (STP), new flotation cleaner cells were introducedresulting in an increase in the concentrate grade from around55 g/t to 85 g/t. Accompanying the increase in precious metalgrade is an increase in the sulphur grade of the concentrateswhich has enhanced the BIOX process. The plantmodification led to a reduction in concentrate tonnagethroughput, an increase in BIOX residence time and asignificant reduction in reagent consumption resulting inreduced operating costs. Gold production from the treatmentplant was 482,982 ounces from the processing of 2.39 milliontonnes of ore at a grade of 7.53 g/t and a plant recovery of83.5 per cent. This compares with 412,824 ounces from 2.47million tonnes at a grade of 6.32 g/t and a recovery of 82.1 percent in 2000.

    In the financial year 2001, ore throughput at the TailingsTreatment Plant (TTP) was 1.67 million tonnes at a grade of2.46 g/t compared with 1.83 million tonnes in 2000 at a gradeof 2.39g/t. Recovery at 32.7 per cent was an improvement onthe 31.1 per cent achieved in 2000. Despite the 9 per centreduction in processed tonnage, recovered gold fell by only 2 percent from 43,756 ounces in 2000 to 42,999 ounces in 2001 dueto improved grade and recovery. The reduced tonnage

  • 99

    MANAGEMENT CONTINUED TO FOCUS ON THE MAINTENANCE OF WORLD CLASS SAFETY ANDOPERATIONAL AND COST EFFICIENCIES

  • 10 Operations Review

    throughput resulted from mechanical problems with pumps andexcavators in the second half of the year.

    ExplorationAs was the case in 2000, the main objectives of theunderground diamond drilling programme were the upgradingof the resource status across the mine and the delineation ofnew resources in the south section above 41 level, the northsection of the mine above 20 level and below 50 level across thebase of the mine between the Adansi shaft and the BSVS. In thesouth, promising intersections were obtained in the previouslyweak East Lode and at Sansu. Drilling below 50 level providedconsistently good results across strike showing thatmineralisation extended down to the deepest levels drilled.Several plus 20 g/t intersections over mineable widths weremade in quartz material down to 56 level in the vicinity of theKMS. The most significant intersection occurred at 62 levelbelow KMS, where 13.3 metres of quartz with visible goldassayed 66 g/t. This hole confirmed the down dip extension ofthe ore body to at least some 400 metres below the 1,600metres elevation, currently the deepest level of the existing mineinfrastructure.

    Ayanfuri Production continued at Ayanfuri on a reduced scale for thefirst half of the year as some small deposits were extracted andold pits cleaned up. A total of 11,517 ounces were producedin 2001 at a cash operating cost of US$243 per ounce. At theend of the 2nd quarter, Ayanfuris operations ceased and themine closure plan is currently being implemented.

    Iduapriem (80% owned)Gold production for 2001 was 205,130 ounces of gold,exceeding 193,868 ounces of gold in 2000. Cash operatingcosts were reduced to US$214 per ounce from US$223 perounce in 2000.

    At 4.85 million tonnes, the ore mined in 2001 wasapproximately the same as the previous year. However, the

    mined grade at 1.58 g/t was higher than the 1.25 g/t achievedin 2000. The higher grades resulted from the mining of highergrade material from the Teberebie ore blocks.

    Gold production from the Carbon-in-Leach (CIL) plantincreased to 158,103 ounces from 128,374 ounces in 2000.This was largely due to the increased feed grade of 1.92 g/tcompared to 1.58 g/t in 2000. Mill throughput and recoverywere respectively 1.5 per cent and 1.3 per cent higher thanin 2000.

    Heap leach gold production was 47,027 ounces compared to38,518 ounces in 2000. The higher heap leach goldproduction was due to a 16 per cent increase in tonnage, anda 16 per cent increase in stacked grade. Recovery at 61.7 percent compares with 67.5 per cent the previous year reflectingthe harder and less leachable nature of the heap leach orecoming from the Teberebie pits.

    During 2001, a feasibility study was undertaken on upgradingthe CIL plant capacity to 4.0 million tonnes from its present2.9 million tonnes per annum in order to reduce unit costs.The project includes the installation of an additional SAG mill,upgrading of the elution circuit, conversion from CIL toCarbon-in-Pulp (CIP), and the relocation of crushing activitiesto a larger crusher which is already in operation close to theTeberebie pits. The installation of an overland conveyor totransfer crushed product to the Iduapriem processing plant isalso proposed. The results of the study are positive, improvingcash flow overall and expanding the ore reserves. The projectreached the approval stage at the end of the year and isexpected to be completed during 2002.

    left: Boukaria, a village near the Siguiri mine, benefits from potable waterprovided by Ashanti

    opposite: Gold pour in Obuasi

  • 1111

    THE IMPROVEMENT IN COSTS AT OBUASI WAS ACHIEVEDTHROUGH CLOSURE OF THE HIGH COST SURFACE OPERATIONS AS WELL AS EFFECTIVE COST CONTROL MEASURES

  • Operations Review12

    BibianiBibiani produced 253,052 ounces at a cash cost of US$170 perounce during 2001 compared to 273,711 ounces at a cash costof US$134 per ounce the previous year. The reduction in goldproduction at Bibiani is due to the reduced mill feed grade andlower recovery. This resulted in the higher cash operating costper ounce produced.

    Milled throughput for the year was 2.77 million tonnes at afeed grade of 3.46 g/t compared to 2.76 million tonnes at 3.70g/t the previous year. As was the case in previous years thereconciliation between the reserve model and the actual minedgrade and tonnage showed a positive variance and theoperation has continued to exceed performance levelspredicted in the feasibility study and mine plan. Metallurgicalrecovery in 2001 decreased to 83.7 per cent from 86.7 per centin 2000 due to the mining and processing of more refractorytype ore during the second half of the year.

    During the year, the evaluation of a trackless underground miningoperation to exploit extensions of the open pit resources to depthcontinued but was not finalised. This work will continue in 2002.Business initiatives to acquire prospective ground withineconomic haulage distance of the processing plant and extendmine life beyond 2004 will also be further progressed in 2002. In 2001 a small deposit, Mpesetia, containing 30,000 reserveounces was acquired and approvals to mine this ore and truckit to Bibiani are being progressed.

    Siguiri Guinea (85% owned)In 2001, Siguiri produced a total of 283,199 ounces at a cashoperating cost of US$220 per ounce compared with 303,381ounces at US$181 per ounce in 2000. Production and cashoperating costs were impacted by lower than expectedmetallurgical recovery from the material stacked during the year.

    A total of 8.52 million tonnes of ore were mined compared to10.80 million tonnes in 2000 and the heap leach plant

    processed a total of 9.06 million tonnes grading 1.33 g/tcompared with 8.88 million tonnes at 1.34 g/t the previousyear.

    Apparent plant recovery for the year reduced to 73.1 per centfrom 79.3 per cent in 2000. This was largely due to solutionreticulation and third layer stacking problems which resulted inlower than anticipated leach rates. During 2001, considerablework was undertaken to solve these problems. The third layerstacking was suspended while the solution management systemwas upgraded and the controls on blending the lateritic andsaprolitic ore types improved.

    Freda-Rebecca ZimbabweFull year production in 2001 was 102,654 ounces at a cashoperating cost of US$222 per ounce compared to 112,164ounces at US$198 per ounce in 2001.

    Underground production for the year at 1.16 million tonnes ata head grade of 3.56 g/t was 11 per cent higher than the1.04 million tonnes achieved in 2000. Some 56,000 tonnes of open pit oxide ore were also extracted from the PhoenixPrince pit, adjacent to the processing plant.

    Processed tonnage for the year was 1.12 million tonnes at 3.30g/t compared with 1.00 million tonnes at 3.89 g/t in 2000.Plant recovery in 2001, however, was 86.4 per cent comparedto 89.8 per cent the previous year. Processing operations wereaffected by a series of mechanical problems on the SAG millsin the first half of the year, whilst problems with the primarycrushers and leach tank agitator gearboxes impacted onproduction in the second half of the year. Persistentinterruptions to the processing plant combined with reducedleach tank capacity made it difficult to maintain steady stateoperating conditions and gold recovery was adversely affected.The low recovery and lower feed grade therefore accountedfor the decrease in gold production relative to 2000.

    left: Water quality tests at Iduapriem

    opposite: Medical check up at the Iduapriem mine clinic

  • 13

    AS AT 31 DECEMBER 2001, ASHANTIS HEDGE BOOK HAD A POSITIVE MARK-TO-MARKET VALUE OF US$88.8 MILLIONBASED ON A SPOT PRICE OF US$277 PER OUNCE.

  • Operations Review14

    The economic and political situation in Zimbabwe during2001 continued to pose a series of difficult problems for themanagement team. The lack of foreign exchange and the fixedexchange rate coupled with high inflation put severe pressureon the supply function and operating costs. Towards the endof the year, the foreign exchange problem was alleviatedslightly but the situation remained tight.

    Geita (50% J.V.) TanzaniaGeita mine, in its first full year of production, produced a totalof 545,562 ounces at a cash operating cost of US$143 perounce, of which 50 per cent is attributable to Ashanti.

    A total of 4.52 million tonnes of ore grading 3.80 g/t weremined at a strip ratio of 6.0:1. This compares to 1.24 milliontonnes at 3.00 g/t at a strip ratio of 9.6:1 in the previous year.

    In 2001, a total of 4.58 million tonnes were processed at agrade of 3.91 g/t and a recovery of 93.0 per cent compared to2.08 million tonnes at 2.94 g/t and a recovery of 92.0 per centin 2000.

    In the last quarter of 2001, the haul road between theKukuluma deposit and the processing plant was completedand a haulage contract was signed to commence productionfrom that deposit in the first quarter of 2002.

    left: Routine environmental tests at Geita

    opposite: The carbon-in-leach processing plant at Bibiani

    Summary of production and cash operating costs per ounceFreda- Total/

    Obuasi Ayanfuri Iduapriem* Bibiani Siguiri Rebecca Geita** Average

    Twelve months to 31 Dec 2001Production (ounces) 528,451 11,517 205,130 253,052 283,199 102,654 272,781 1,656,784Cost per ounce (US$) 192 243 214 170 220 222 143 190

    Twelve months to 31 Dec 2000Production (ounces) 640,988 36,316 193,868 273,711 303,381 112,164 176,836 1,737,264Cost per ounce (US$) 208 245 223 134 181 198 145 187

    * Iduapriem figures include those of Teberebie.

    ** This number represents 50% of Geitas production in 2001; 2000 being 100%.

  • 15

    ALL OF ASHANTIS OPERATING MINES GENERATED POSITIVE CASH FLOWS IN 2001

  • Operations Review

    Exploration Ashantis exploration effort continued to focus on and aroundits existing mining operations.

    East AfricaTanzania At Geita, exploration during the year focused onthe identification and evaluation of several prospects withinGeita Gold Mines extensive mining and prospecting licences.An indicated resource of 4.5 million tonnes grading 2.2 g/t,equivalent to 313,000 ounces of contained gold wasdelineated at Chipaka, situated 6 kilometres northwest of theplant. Significant mineralisation (including 39 metres grading9.4 g/t from 90 metres) was intersected down plunge from theGeita Hill open pit and will require follow-up. Encouragingresults were also received from the Prospect 30, Samena andNyamatigata prospects.

    Infill drilling of the Nyankanga underground resourcecommenced towards the end of the year as part of the fullfeasibility study. Pit optimisations will also be undertaken onthe Roberts and Chipaka resources to seek to delineate openpit reserves.

    Elsewhere in Tanzania, Ashanti continued its regionalassessment of the Lake Victoria Goldfields Belt during the year.

    West AfricaGuinea Exploration around the Siguiri mine site was mainlytargeted at locating and defining oxide mineralisation.Saprolite reserves were outlined at Sintroko, 4 kilometressouth of the Kosise pit. Definition drilling of both laterite andsaprolite was also completed at the newly identified andnearby Soukonu deposit and in an area immediately south ofthe current Kosise pit limits.

    Cte dIvoire Rotary Air Blast (RAB) and aircore drillingshowed that the 20 kilometre long MBasso/Bebou and the7 kilometre striking Abrabine gold-in-soil anomalies, in theAllangaou permit of south-eastern Cte dIvoire, were related

    to minor bedrock mineralisation. Exploration has re-focusedonto a package of permits subject to an agreement signed withRio Tinto in October 2001.

    Mali Follow up geochemical sampling and RAB drillingwere undertaken on a number of prospects in southeasternMali. Additional targets have been identified and are currentlybeing evaluated.

    Ghana Exploration and assessment continued on a numberof prospects on and in the vicinity of the Bibiani, Iduapriemand Obuasi operations.

    Southern AfricaZimbabwe At the RAN project near Freda-Rebecca, aninitial resource of 2.8 million tonnes grading 2.6 g/t gold and0.42 per cent copper was outlined, a portion of which shouldbe amenable to open pit mining. A feasibility study is currentlybeing undertaken. In addition a small open pit oxide reservewas delineated at the Phoenix Prince prospect.

    Central AfricaD.R.Congo During the year, Ashanti increased its Kiminconcession by 6,000 square kilometres. The concession nowcovers most of the historically productive Kilo greenstone belt.Exploration will commence as soon as the unrest in that part of the country is finally curbed to ensure the safety of our employees.

    16

    left: The Vice-President of Ghana, Alhaji Aliu Mahama, presents a special awardfor Ashantis contribution to the Ghanaian economy to James Anaman,Managing Director, Public Affairs

  • 17Financial Review

    Summary Annual gold production of 1.66 million ounces

    Average cash operating cost of US$190 per ounce

    Earnings of US$62.7 million more than doubled ascompared to last years pre-exceptional earnings

    Group gross debt level reduced by US$39.8 million toUS$325.9 million

    Working capital facility of US$25.4 million secured for 2002

    Conditional agreement reached with an ad hoc committee ofnoteholders to a proposed restructuring of the Existing Notes

    New conditional margin free trading arrangements agreedwith all but one active hedge counterparty

    Conditional agreement reached with a syndicate of four banksto underwrite a new US$100 million revolving credit facility

    RevenueTotal revenue for the year of US$554.4 million was 5 per centlower than last years level of US$582.2 million, due to lowerproduction. The average gold price realised during the year ofUS$335 per ounce was in line with the price obtained in 2000.

    Spot revenue amounted to US$455.8 million (2000: US$485.2million). Hedging income totalled US$98.6 million, comprisingUS$41.6 million realised from the close-outs of maturing hedgingcontracts and US$57.0 million released from income frompreviously closed-out hedging contracts (deferred hedging income).

    In accordance with the Groups accounting policy, income fromearly close-outs is credited to revenue for the originally designateddelivery period. At 31 December 2001, deferred hedging incometotalled US$65.6 million (2000: US$120.0 million) of whichUS$35.0 million will be credited to revenue in 2002.

    HedgingThe table given below shows the changes to Ashantis hedge bookover a two-year period from 31 December 1999:

    31 December 31 December Reduction1999 2001 achievedoz m oz m oz m

    Protection 8.1 5.1 3.0(Average price:

    US$362/oz)

    Commitments 12.2 7.5 4.7(Average price:

    US$347/oz)

    Lease rates 7.6 5.0 2.6

    Prevailing spot price US$289/oz US$277/oz

    Mark-to-Market Negative PositiveValuation (US$) 253 million 88.8 million

    During the two-year period ended on 31 December 2001, Ashantireduced its commitment levels and lease rate exposure by 4.7million ounces and 2.6 million ounces respectively.

    As at 31 December 2001, Ashantis hedge book had a positivemark-to-market value of US$88.8 million based on a spot price ofUS$277 per ounce (2000: positive mark-to-market value ofUS$29.1 million based on a spot price of US$273 per ounce).Ashantis 50 per cent share of the Geita hedge book (which ismargin free) had a negative mark-to-market value ofUS$2.4 million at the year end.

    Ashanti had 5.1 million ounces of protection at an average rate ofUS$362 per ounce at 31 December 2001. Over the life of thehedge book, Ashanti has 40 per cent of total forecast productionprotected and 61 per cent of total forecast production committed.

    The Ashanti hedge books mark-to-market has benefited significantlyover the past two years from a lower US interest rate environmentand the time decay of the book. The lease rate spike during April/May2001 did not have a material impact and cashflows generated from lease rate swaps over the year were positive.

    During 2001, two significant restructurings on the book led to an improvement in committed levels and the simplificationof the lease rate swaps. The first entailed the acceleratedconversion of a convertible structure, which led to a reduction of554,400 ounces of commitments. The second restructuring entailedthe removal of the spot indexing feature of one of the gold leaserate swaps which will benefit Ashanti at higher spot prices.

    S VENKATAKRISHNAN

  • Financial Review18

    Cash Operating CostsTotal cash operating costs were US$190 per ounce as compared toUS$187 per ounce in 2000, primarily due to lower production atSiguiri and Bibiani. Obuasis cash operating costs fell by 8 per centfrom US$208 per ounce in 2000 to US$192 per ounce in 2001.Cash operating costs for the individual mines are set out on page 14.

    Exploration and Corporate AdministrationExploration expenditure during the year was lower at US$6.5million (2000: US$14.2 million) due to rationalisation of non-mine site exploration expenditure. Corporate Administrationexpenditure for the year was also lower by 16 per cent at US$21.2million (2000: US$25.3 million) due to our cost reduction efforts.

    DepreciationTotal depreciation and amortisation charge (before exceptionalitems) for the year was lower at US$94.9 million (2000: US$114.8million) due to the asset impairment recorded in 2000.

    Total CostsTotal costs before exceptional items, but including depreciationand amortisation for the year, amounted to US$457.6 million(2000: US$493.1 million). The total cost per ounce fell fromUS$284 per ounce in 2000 to US$276 per ounce in 2001. In cashflow terms, despite lower production, total costs (excludingdepreciation and amortisation but including capital expenditure)were unchanged at US$252 per ounce.

    Financing CostsTotal interest charges fell by 43 per cent from US$51.3 million in2000 to US$29.4 million in 2001. This significant reduction wasdue primarily to lower debt levels as compared to 2000.

    TaxationTotal taxation charged to the profit and loss account amounted toUS$6.8 million (2000: US$8.8 million). This includedUS$6.6 million of corporate tax for the current year, US$8.2million in respect of prior years and a credit for release of deferredtax of US$8.0 million.

    EarningsEarnings for the year were more than double the level recorded lastyear at US$62.7 million (2000: Earnings before exceptional items atUS$30.5 million). This was due to lower depreciation and interestcharges partly off-set by lower production. Earnings per share wasUS$0.56 (2000: US$0.27 per share before exceptional items).

    DividendThe Group is in the process of strengthening its financial positionby restructuring its balance sheet. The banking covenantspresently prohibit the payment of cash dividends until grossborrowings fall below US$300 million. Given these reasons andthe deficit in Ashantis reserves, no dividend is proposed for 2001.

    Cash FlowThe net cash inflow from operating activities was US$95.4 million(2000: US$149.4 million). The reduction in 2001 was due to thenon-consolidation of Geita following the sale of a 50 per centinterest in December 2000 and lower cash flows from otheroperations. Net interest paid was US$22.4 million (2000:US$56.4 million) and capital expenditure was US$49.6 million(2000: US$145.6 million).

    Capital ExpenditureGroup capital expenditure decreased from US$145.6 million in2000 to US$49.6 million primarily due to the completion of theGeita project in 2000. The Groups capital expenditure during2001 included US$30.1 million at Obuasi and US$19.5 million atthe other mines, excluding Geita. Ashantis 50 per cent share ofGeitas 2001 capital expenditure amounted to US$7.5 million.

    Debt The Groups gross debt fell by US$39.8 million, from US$365.7million in 2000 to US$325.9 million in 2001. The Groups netdebt level as at 31 December 2001 was US$270.7 million (2000:US$292.1 million). These amounts exclude the 50 per cent shareof the US$124.3 million non-recourse Geita project finance loan.

    No drawings were made under the Groups revolving creditfacility (Existing RCF) during 2001. The amounts outstandingunder this Facility fell from US$88.8 million in 2000 to US$55.0million in 2001.

    Ashanti has also secured an extension of its working capitalfacilities, on a voluntary basis from certain of its current lendingbanks, of US$25.4 million which is available for drawing, pursuantto the terms of the Existing RCF, up to 30 December 2002.

    Proposed Restructuring, Margin Free Arrangements and New Revolving Credit FacilityOn 25 January 2002, Ashanti announced that it had agreed termsin principle with an Ad Hoc Committee (Ad Hoc Committee) ofthe holders of 512% Exchangeable Guaranteed Notes due 15March 2003 (Existing Notes) representing approximately 62 percent of the outstanding principal of US$218.6 million to aProposed Restructuring (Proposed Restructuring) of the ExistingNotes. The principal terms of the proposed restructuring are:

    Equitisation of US$54,642,750 of the Existing Notes(representing 25 per cent of the Existing Notes) by the issue ofordinary shares in Ashanti (Ashanti Shares) at US$3.70 perAshanti Share.

    Exchange of US$163,928,250 of the Existing Notes(representing 75 per cent of the Existing Notes) forUS$163,928,250 of 7.95% Exchangeable Guaranteed Notesdue 30 June 2008 (New Exchangeable Notes).

    The New Exchangeable Notes will be exchangeable by theholders into Ashanti Shares at any time at an exchange priceof US$5.75.

    The New Exchangeable Notes will be mandatorily redeemableby Ashanti in semi-annual instalments of US$12 millioncommencing on 31 December 2003 to the extent not alreadyexchanged. The balance of any New Exchangeable Notes notexercised or redeemed will be repayable in full on 30 June2008. Ashanti also has the option on each semi-annualredemption date to redeem an additional US$12 million of NewExchangeable Notes.

    Ashanti will, upon completion of the Proposed Restructuring,pay to the then holders of the Existing Notes an exchange feeof 2 per cent of the face value of the then outstanding ExistingNotes. In aggregate, this payment will amount toapproximately US$4.37 million.

    The Proposed Restructuring, which is intended to be implementedby way of a scheme of arrangement to be sanctioned by the GrandCourt of Cayman Islands, is subject to the satisfaction of anumber of conditions including: the preparation and despatch offormal documentation; listing of the new securities to be issued onthe relevant stock exchanges; the approval of the requisitemajorities of the holders of the Existing Notes, Ashantis

  • Financial Review 19

    shareholders and its hedge counterparties; and the approval of itslending banks or repayment of the Existing RCF. The members ofthe Ad Hoc Committee have undertaken to vote in favour of thescheme of arrangement to implement the Proposed Restructuring,subject to Ashanti complying with certain obligations andsatisfying certain conditions within certain time limits. Inparticular, the formal documentation to implement the ProposedRestructuring must be posted by 31 May 2002 and the relevantscheme meetings held by no later than 31 August 2002.

    A pre-condition to the Ad Hoc Committee being bound by a writtenundertaking to vote in favour of the Proposed Restructuring wasAshanti entering into appropriate ongoing margin freearrangements with its hedge counterparties, other than CreditSuisse First Boston International (CSFB). Interim margin freeagreements (Interim Margin Free Agreements) have now beensigned by all of Ashantis active hedge counterparties other thanCSFB (the Relevant Hedge Counterparties). However, one of theInterim Margin Free Agreements (signed by a Relevant HedgeCounterparty, which has agreed to novate half of its hedge book toStandard Bank London Limited conditionally only upon the InterimMargin Free Agreements becoming effective prior to 15 March2003), is being held by Ashantis lawyers subject to an escrowagreement. This Interim Margin Free Agreement will be releasedfrom escrow to Ashanti on Ashanti certifying, prior to 15 March2003, that it believes (acting in good faith) that, should the relevantInterim Margin Free Agreement be released from escrow, all theconditions to the Interim Margin Free Agreements will becomeeffective unless, prior to that date, Ashanti has been notified thatthere has been an event of default resulting in an early terminationevent under the ISDA Master Agreement between suchcounterparty and Standard Bank London Limited.

    All of the Interim Margin Free Agreements are now conditionalupon satisfaction of the following conditions (the Conditions)prior to 15 March 2003:

    the Proposed Restructuring (or such other restructuring as isapproved by an appropriate majority of hedge counterparties)being completed;

    release from escrow to Ashanti of the Interim Margin FreeAgreement currently held in escrow; and

    Ashanti having available to it loan facilities in an amount ofnot less than US$25 million available for drawing for workingcapital purposes for a period of not less than 15 months fromthe date of posting of the documentation to shareholders inrelation to the Proposed Restructuring.

    If the Conditions are satisfied at a stage when CSFB has not signedthe Interim Margin Free Agreement then, subject to Ashanticomplying with certain covenants and no events of default beingdeclared, Ashanti will benefit in the period after 31 December2002 from ongoing margin free trading arrangements unless CSFBis entitled to, and actually does, call for margin. Based on CSFBscurrent hedgebook with Ashanti and current market conditions,Ashanti believes that CSFB would only be entitled to call formargin after 31 December 2002 as a result of breaching theenhanced margin limits if the gold price exceeded approximatelyUS$370 per ounce. It should be noted however that the thresholdfor a triggering of the margin limits in respect of CSFB will alsovary as a result of changes in US interest rates, gold lease rates andgold price volatility.

    Once the Interim Margin Free Agreements have become effectiveand have been signed by CSFB, the Interim Margin FreeAgreements will terminate and the Existing Margin Free TradingLetter with its hedge counterparties dated October 2000 (Existing

    MFTL) will be amended and restated to provide for margin freetrading on an ongoing basis, subject only to certain limitedtermination rights.

    As part of the implementation of the Proposed Restructuring,Ashanti has mandated four banks to arrange a new US$100 millionfive year revolving credit facility (New RCF) for the AshantiGroup. Those banks or their affiliates have also agreed to underwritethe New RCF. The underwriting and the facility are conditional interalia on (i) Interim Margin Free Agreements being signed by all theRelevant Hedge Counterparties; (ii) execution of a facility agreementby no later than 15 June 2002; (iii) the non-occurrence of certainmaterial adverse changes; (iv) the Proposed Restructuring being completed and (v) appropriate regulatory approvals.

    The Refinance Plan (containing the Proposed Restructuring,Interim Margin Free Agreements and New RCF) which Ashantisubmitted to its hedge counterparties and its lending banks underthe terms of its Existing RCF and Existing MFTL has not beenobjected to by either the hedge counterparties or the lendingbanks within the period permitted for objections.

    The above restructuring, once implemented, will improveAshantis balance sheet (by decreasing debt and increasing equity),extend the maturity profile of Group debt and increase Ashantisfinancial flexibility.

    Going Concern Ashanti has secured an extension of its working capital facilities,within the Existing RCF, on a voluntary basis from certain of itscurrent lending banks of US$25.4 million. The working capitalfacility is available for drawing only up to 30 December 2002.This working capital facility, if drawn, falls due for repayment on30 December 2002. The outstanding balance of the Existing RCFfalls due for repayment on 15 January 2003 and the ExistingNotes fall due for repayment on 15 March 2003. Under theExisting MFTL, Ashanti benefits from margin free trading with itshedge counterparties only until 31 December 2002 and fromincreased margin thresholds until 31 December 2004, subject ineach case, to compliance with covenants and no event of defaultbeing declared. The above matters raise substantial doubt aboutthe Groups ability to continue as a going concern.

    Ashanti is proposing to implement the Proposed Restructuring,the Interim Margin Free Agreements and the New RCF in orderto ensure the Companys continued operational existence. Thereremain a number of conditions which need to be satisfied in orderfor the Proposed Restructuring to become effective and theInterim Margin Free Agreements and the New RCF to becomeunconditional. There can be no guarantees that these conditionswill be satisfied. Should any of the relevant conditions not besatisfied or if the Proposed Restructuring is withdrawn for anyreason, then it is possible that, unless a standstill or otheraccommodation is reached with its bank group, hedgecounterparties and in due course the holders of its Existing Notes,Ashanti might not be able to meet its debts as they fall due. If theProposed Restructuring is not successfully implemented duringthe current financial year, there will be uncertainty as to whetherthe Group will be able to continue in operational existence for atleast the next 12 months. However, taking into account theprogress which Ashanti has achieved in relation to the ProposedRestructuring, the Interim Margin Free Agreements and the NewRCF and other relevant factors, the Directors have formed thejudgement, at the time of approving these financial statements,that it is appropriate to continue to use the going concern basis inpreparing these financial statements.

  • 20

    12 months to 12 months to31 Dec 2001 31 Dec 2000

    ObuasiUnderground MiningOre production (000 tonnes) 2,507 2,348Ore grade (g/t) 7.90 7.87Surface MiningOre production (000 tonnes) 891Ore grade (g/t) 4.20Waste mined (000 tonnes) 8,907Strip ratio 10.0

    Sulphide Treatment PlantOre processed (000 tonnes) 2,394 2,466Head grade (g/t) 7.53 6.32Recovery (%) 83.5 82.1Gold produced (ounces) 482,982 412,824

    Pompora Treatment PlantOre processed (000 tonnes) 787Head grade (g/t) 8.01Recovery (%) 82.4Gold produced (ounces) 2,470 167,725

    Oxide Treatment PlantOre processed (000 tonnes) 245Head grade (g/t) 2.85Recovery (%) 74.2Gold produced (ounces) 16,683

    Tailings Treatment PlantOre processed (000 tonnes) 1,666 1,831Head grade (g/t) 2.46 2.39Recovery (%) 32.7 31.1Gold produced (ounces) 42,999 43,756

    Obuasi Total ProcessedOre processed (000 tonnes) 4,060 5,329Head grade (g/t) 5.45 5.06Recovery (%) 74.3 73.9Gold produced (ounces) 528,451 640,988

    Distribution of Obuasi Production (ounces)Underground 485,452 493,926Surface 103,306Tailings 42,999 43,756Total 528,451 640,988

    AyanfuriMiningOre production (000 tonnes) 332 884Ore grade (g/t) 1.50 1.50Waste mined (000 tonnes) 1,059 2,988Strip ratio 3.2 3.4

    Heap LeachOre stacked (000 tonnes) 329 1,121Head grade (g/t) 1.20 1.21Recovery (%) 90.8 83.3Gold produced (ounces) 11,517 36,316

    IduapriemMiningOre production (000 tonnes) 4,852 4,824Ore grade (g/t) 1.58 1.25Waste mined (000 tonnes) 13,839 14,954Strip ratio 2.9 3.1

    CIL PlantOre processed (000 tonnes) 2,731 2,691Head grade (g/t) 1.92 1.58Recovery (%) 94.6 93.4Gold produced (ounces) 158,103 128,374

    Gold Production Summary 2001

  • 21

    12 months to 12 months to31 Dec 2001 31 Dec 2000

    Iduapriem (continued)Heap LeachOre stacked (000 tonnes) 2,633 2,264Head grade (g/t) 0.91 0.78Recovery (%) 61.7 67.5Gold produced (ounces) 47,027 38,518Total Gold Produced (ounces) 205,130 166,892

    TeberebieGold Produced (ounces) 26,976

    BibianiMiningOre production (000 tonnes) 2,560 2,368Ore grade (g/t) 3.58 3.38Waste mined (000 tonnes) 13,981 15,223Strip ratio 5.5 6.4

    CIL PlantOre processed (000 tonnes) 2,769 2,761Head grade (g/t) 3.46 3.70Recovery (%) 83.7 86.7Gold produced (ounces) 253,052 273,711

    SiguiriMiningOre production (000 tonnes) 8,517 10,804Ore grade (g/t) 1.34 1.33Waste mined (000 tonnes) 5,268 5,333Strip ratio 0.6 0.5

    Heap LeachOre stacked (000 tonnes) 9,064 8,878Head grade (g/t) 1.33 1.34Recovery (%) 73.1 79.3Gold produced (ounces) 283,199 303,381

    Freda-RebeccaUnderground MiningOre production (000 tonnes) 1,156 1,042Ore grade (g/t) 3.56 3.69

    Surface MiningOre processed (000 tonnes) 56 Ore grade (g/t) 2.10

    ProcessingOre processed (000 tonnes) 1,121 1,003Head grade (g/t) 3.30 3.89Recovery (%) 86.4 89.8Gold produced (ounces) 102,654 112,164

    GeitaMiningOre production (000 tonnes) 4,522 1,240Ore grade (g/t) 3.80 3.00Waste mined (000 tonnes) 27,215 11,852Strip ratio 6.0 9.6

    CIL PlantOre processed (000 tonnes) 4,582 2,075Head grade (g/t) 3.91 2.94Recovery (%) 93.0 92.0Gold produced (ounces) 545,562 176,836Ashantis share (ounces) 272,781 176,836

    Group Summary (ounces)Managed gold production 1,384,003 1,737,264Geita JV 50% (ounces) 272,781 Total gold production 1,656,784 1,737,264Less minority interests 73,249 81,584

    Total Attributable (ounces) 1,583,535 1,655,680

    Gold Production Summary 2001

  • Measured and Indicated Mineral Resources as at 31 December 2001

    Measured Indicated TotalTonnes Grade Tonnes Grade Tonnes Grade

    Location (million) (g/t) (million) (g/t) (million) (g/t)

    ObuasiUnderground 22.5 11.2 34.8 9.5 57.3 10.1Surface 17.8 3.0 1.6 2.8 19.4 3.0Tailings 15.1 2.0 5.3 2.2 20.4 2.1

    Sub Total 55.4 6.1 41.8 8.3 97.2 7.0

    Other LocationsIduapriem (80%)/Teberebie (90%) 58.8 1.6 37.6 1.6 96.4 1.6Bibiani surface 1.4 1.9 6.8 3.2 8.2 3.0Bibiani tailings 4.4 1.1 0.4 0.9 4.8 1.1Siguiri (85%) 28.7 1.1 56.1 1.2 84.8 1.1Freda-Rebecca 12.3 2.5 2.8 2.8 15.1 2.5Geita (50%) 43.3 3.7 45.0 4.1 88.4 3.9Youga (45%) 7.4 3.0 7.4 3.0

    Sub Total 148.9 2.2 156.1 2.3 305.0 2.3

    Total 204.3 3.2 197.9 3.6 402.2 3.4

    2000 Total 184.3 3.4 204.0 3.6 388.3 3.5

    Proved and Probable Ore Reserves as at 31 December 2001

    Proven Probable TotalTonnes Grade Tonnes Grade Tonnes Grade

    Location (million) (g/t) (million) (g/t) (million) (g/t)

    ObuasiUnderground 5.0 7.9 37.3 8.0 42.3 8.0Surface 1.3 5.2 1.3 5.2Tailings 15.1 2.0 5.3 2.2 20.4 2.1

    Sub Total 21.4 3.6 42.6 7.3 64.0 6.0

    Other LocationsIduapriem (80%)/Teberebie (90%) 31.4 1.7 7.2 1.7 38.6 1.7Bibiani surface 1.4 1.9 6.1 3.2 7.5 3.0Bibiani tailings 4.4 1.1 0.4 1.0 4.8 1.1Siguiri (85%) 20.9 1.1 35.8 1.2 56.7 1.2Freda-Rebecca 4.3 2.5 1.1 2.4 5.4 2.5Geita (50%) 37.7 3.4 25.0 4.5 62.7 3.8Youga (45%) 5.0 3.2 5.0 3.2

    Sub Total 100.0 2.2 80.5 2.5 180.5 2.4

    Total 121.4 2.5 123.2 4.2 244.6 3.3

    2000 Total 107.5 2.6 128.3 4.0 235.8 3.3

    EquityOunces (million)

    10.90.21.3

    12.4

    1.70.70.21.80.43.90.2

    8.9

    21.3

    20.4

    GoldOunces

    (million)

    10.90.21.3

    12.4

    2.10.70.22.10.47.70.5

    13.7

    26.1

    25.3

    EquityOunces (million)

    18.71.91.4

    21.9

    4.00.80.22.61.25.50.3

    14.7

    36.6

    35.6

    GoldOunces

    (million)

    18.71.91.4

    21.9

    5.00.80.23.11.2

    11.10.7

    22.1

    44.0

    43.3

    Ore Reserves and Mineral Resources22

    Notes on the Ore Reserves and Mineral Resources Statement

    1. This ore reserve and mineral resource statement is classified according to the Australasian Code for the Reporting ofIdentified Mineral Resources and Ore Reserves issued by the Joint Committee for the Australasian Institute of Geoscientistsand the Australian Mining Industry Council (JORC).

    2. All Identified Mineral Resources are reported as in situ or contained resources utilising JORC guidelines and are inclusiveof the stated Ore Reserve.

  • Ore Reserves and Mineral Resources 23

    3. The Proved and Probable Ore Reserves contained withinthe Identified Mineral Resources have been estimated usingguidelines of the JORC code and are reported asrecoverable ore reserves to which appropriate factors havebeen applied to allow for mining loss and dilution.

    4. For economic studies and the determination of cut-offgrades, a gold price of US$300 (2000: US$300) per ouncewas assumed.

    5. The Ore Reserves and Identified Mineral Resourcesreported represent 100 per cent of the Ore Reserves andMineral Resources at the respective properties and noallowance has been made for minority interests or JointVenture interests. Ashantis percentage interest is shownin brackets for properties where Ashanti has less than 100per cent ownership and the corresponding entity ouncesare disclosed accordingly.

    6. Inferred identified mineral resources are not reported in thestatement.

    7. The competent persons who have overseen the estimationof the Ore Reserves and Identified Mineral Resources arelisted as follows:

    Mine Resources Reserves

    Obuasi J Amanor J ChamberlandIduapriem K Osei S NdedeBibiani C de Vente J SeawardSiguiri A Pardey A PardeyFreda-Rebecca J Chinyaukira V UteteGeita R Adofo/J Hill J YellandYouga D Bansah T Obiri-Yeboah

    8. At a gold price of US$275 per ounce, it is estimated that theore reserves will decrease by approximately 5 per cent.

    9. Data may not compute exactly due to rounding.

    Reconciliation for the year ending 31 December 2001

    Measured and Indicated Mineral Resources Proved and Probable Ore Reserves(Ounces million) (Ounces million)

    Net NetOpening (Depletion)/ Closing Opening (Depletion)/ Closing

    Location 31 Dec 2000 Additions 31 Dec 2001 31 Dec 2000 Additions 31 Dec 2001

    Obuasi 20.0 1.9 21.9 11.1 1.3 12.4Ayanfuri 0.1 (0.1) Iduapriem (80%) 5.1 (0.1) 5.0 2.2 (0.1) 2.1Bibiani 1.1 (0.1) 1.0 1.0 (0.1) 0.9Siguiri (85%) 3.3 (0.2) 3.1 2.3 (0.2) 2.1Freda-Rebecca 1.3 (0.1) 1.2 0.4 0.4Geita (50%) 11.7 (0.6) 11.1 7.8 (0.1) 7.7Youga (45%) 0.7 0.7 0.5 0.5

    Total 43.3 0.7 44.0 25.3 0.8 26.1

  • 24 Glossary of Terms

    adit A tunnel driven horizontally into a mountainside providing access to anore deposit.

    BIOX Gencors registered name for its bio-oxidation leaching process.

    bio-oxidation The use of bacterial activity to oxidise sulphide minerals.

    carbon-in-leach (CIL) process A modification of CIP whereby carbon is addeddirectly into the slurry during leaching as opposed to CIP where carbon is addedafter leaching is complete.

    carbon-in-pulp (CIP) process A process used to recover dissolved gold froma cyanide leach slurry. Coarse activated carbon particles are moved counter-current to the slurry, absorbing the gold as it passes through the circuit. Loadedcarbon is removed from the slurry by screening. The gold is recovered from theloaded carbon by stripping in a caustic cyanide solution followed by electrolysisor by zinc precipitation.

    cash operating cost A measure of the average cost of producing an ounce ofgold, calculated by dividing the total cash operating costs in a period by the totalgold production over the same period.

    contained ounces Represents ounces in the ground without reduction due tomining loss or dilution.

    cyanide leaching The extraction of a precious metal from an ore by itsdissolution in a cyanide solution.

    decline An inclined underground access way.

    diamond drilling or core drilling A drilling method, where the rock is cut witha diamond bit, usually to extract cores.

    dilution Waste which is commingled with ore in the mining process.

    feasibility study A detailed technical and economic analysis of the viability of aproject covering all aspects from geology, environmental and legal matters tomining, processing and operations.

    flotation A recovery process by which valuable minerals are separated fromwaste to produce a concentrate. Selected minerals are induced to becomeattached to air bubbles and to float.

    forward sales The sale of a commodity for delivery at a specified future dateand price, usually at a premium to the spot price.

    geochemical sampling Samples of soils, stream sediments or rock chips taken toensure the quantities of trace and minor elements.

    grade The relative quality or percentage of ore metal content.

    heap leaching A low-cost technique for extracting metals from ore bypercolating leaching solutions through heaps of ore placed on impervious pads.Generally used on low-grade ores.

    indicated mineral resource That part of a Mineral Resource which has beenexplored, sampled and tested through appropriate techniques at locations whichare too widely or inappropriately spaced to confirm geological and/or gradecontinuity but which are spaced closely enough for continuity to be assumed,and from which data have been collected to allow tonnage, densities, shape,physical characteristics, grade and mineral content to be estimated with areasonable level of confidence.

    inferred mineral resource That part of a Mineral Resource inferred fromgeological evidence and assumed but not verified geological and/or gradecontinuity, where information gathered through appropriate techniques fromlocations such as outcrops, trenches, pits, workings and drill holes is limited orof uncertain quality and reliability and on the basis of which tonnage, grade andmineral content can be estimated with a low level of confidence.

    measured mineral resource That part of a Mineral Resource which has beenexplored, sampled and tested through appropriate techniques at locations suchas outcrops, trenches, pits, workings and drill holes which are spaced closelyenough to confirm geological and/or grade continuity, and from which detailedreliable data have been collected to allow tonnage, densities, shape, physicalcharacteristics, grade and mineral content to be estimated with a high level ofconfidence.

    milling/mill The comminution of the ore, although the term has come to coverthe broad range of machinery inside the treatment plant where the gold isseparated from the ore.

    mineralised zone Any mass of host rock in which minerals, at least one ofwhich has commercial value occur.

    mtpa Million tonnes per annum.

    ore Material that contains one or more minerals, at least one of which hascommercial value and which can be recovered at a profit.

    open pit/open cut Surface mining in which the ore is extracted from a pit.The geometry of the pit may vary with the characteristics of the orebody.

    orebody A continuous well defined mass of material of sufficient ore content tomake extraction economically feasible.

    oxide That portion of a mineral deposit within which sulphide minerals havebeen oxidised, usually by surface weathering processes.

    pre-stripping Removal of overburden in advance of beginning operations toremove ore in an open pit operation.

    probable ore reserve That mineable part of a Measured and/or IndicatedMineral Resource, inclusive of diluting materials and allowing for losses whichmay occur when the material is mined, on which appropriate assessments havebeen carried out, including consideration of and modification by realisticallyassumed mining, metallurgical, economic, marketing, legal, environmental,social and governmental factors, to demonstrate at the time of reporting thatextraction could reasonably be justified.

    prospect A mineral deposit with insufficient data available on themineralisation to determine if it is economically recoverable, but warrantingfurther investigation.

    prospecting licence An area for which permission to explore has been granted.

    proved ore reserve That mineable part of a Measured Mineral Resource,inclusive of diluting materials and allowing for losses which may occur when thematerial is mined, on which appropriate assessments have been carried out,including consideration of and modification by realistically assumed mining,metallurgical, economic, marketing, legal, environmental, social andgovernmental factors, to demonstrate at the time of reporting that extractioncould reasonably be justified.

    reclamation The process by which lands disturbed as a result of mining activityare reclaimed back to a beneficial land use.

    recoverable ounces Represents ounces in the ground factored for mining lossand dilution.

    recovery A term used to indicate the proportion of valuable material obtainedduring the mining or processing of an ore. The recovery is generally expressedas a percentage of the material recovered compared to the total material present.

    reverse circulation drilling A drilling method employing double walled drillrods. The drilling fluid (usually air or water) is pushed down the annulusbetween the rods. The cuttings are blown up the middle.

    spot price The current price of a metal for immediate delivery.

    stope The underground excavation from which ore is extracted.

    strike length Horizontal distance along the direction that a structural surfacetakes as it intersects the horizontal.

    stripping The process of removing overburden to expose ore.

    strip ratio The ratio of overburden and segregable waste to ore in an open pitoperation.

    sulphide A mineral characterised by the linkages of sulphur with a metal orsemi-metal, iron sulphide. Also a zone in which sulphide minerals occur.

    tailings The waste material from ore after the economically recoverable metals orminerals have been extracted. Changes in the metal prices and improvements intechnology can sometimes make the tailings economic to reprocess at a later date.

    trenching Making elongated open-air excavations for the purposes of mappingand sampling.

    waste Rock lacking sufficient grade and/or other characteristics of ore to beeconomic.

    Metric Conversion

    1 tonne = 1 t = 1.10231 tons1 gramme = 1 g = 0.03215 ounces1 gramme per tonne = 1 g/t = 0.02917 ounces per ton1 hectare = 1 ha = 2.47105 acres1 kilometre = 1 km = 0.621371 miles1 metre = 1 m = 3.28084 feet

    All tons are short tons of 2,000 pounds.All ounces are troy ounces: 29.166 troy ounces equal one ton.

  • Contents of Financial Statements and Corporate Information

    Board of Directors 26Report of the Directors 27Corporate Governance 29Directors Responsibilities 31Independent Auditors Report 31Group Profit and Loss Account 32Group Balance Sheet 33Group Cash Flow Statement 34Reconciliation of Movements in

    Group Shareholders Funds 35Company Balance Sheet 36Notes to the Financial Statements 37Hedging Appendix 54Five Year Financial Summary 58Shareholder Information 59Officers 61Notice of Annual General Meeting 62Forward Looking Statements 64Corporate Information 65

    25

  • Board of Directors

    Michael Ernest Beckett* (1,2)Chairman of the Board and Chairman of the Audit andFinance Committee.Age 65. British. Appointed a director in March 1994. Chairmanof Clarkson Plc and Watts Blake Bearne Limited. Director of otherpublic companies.

    Theophilus Ernest Anin* (1,2,3)Age 69. Ghanaian. Joined the Board on 27 July 2001. Aprofessional banker and solicitor with over 30 years experience in banking, financial management, and consulting in the publicand private sectors. A director of the Bank of Ghana.

    Merene Mamaa Botsio-Phillips (5)General CounselAge 44. Ghanaian. Appointed in October 1996. Director of The Air Transport Licensing Authority of Ghana. Formerly adirector and Company Secretary of Ghana Airways Limited.

    The Rt. Hon. The Baroness Chalker of Wallasey PC* (3)Chairman of the Corporate Governance Committee.Age 60. British. She was appointed to the Board in March 2000.Advisory Director of Unilever Plc and N.V. Non-ExecutiveDirector and President of South African Business Initiative,President and Chairman of the Boards of Management of theBritish Executive Service Overseas and the London School ofHygiene and Tropical Medicine. Director of other public companies.

    Dr Chester Arthur Crocker* (1,2,3)Chairman of the Management Development and RemunerationCommittee.Age 61. American. Appointed in February 2000. Professor ofStrategic Studies at Georgetown Universitys School of ForeignService. Chairman of the Board of United States Institute of Peaceand an advisor on strategy and negotiations to a number of USand European Companies. Former US Assistant Secretary of Statefor African Affairs.

    Thomas Richard Gibian* (1,2)Age 48. American. Mr Gibian is a non-Executive Director andManaging Director of Emerging Markets Partnership and ChiefOperating Officer of AIG, African Infrastructure Fund. He is alsoa director of Interwave. He was appointed to the Board inMarch 2000.

    Gordon Edward HaslamAge 57. British. Appointed to the Board in March 2002. Directorand Chief Executive of Lonmin Plc. Director of other publiccompanies.

    Sam Esson Jonah (4) Chief Executive and Group Managing Director; Chairman of theRisk Management Committee. Age 52. Ghanaian. Appointed in May 1982. Director of LonminPlc, Commonwealth Africa Investment Fund Limited and EcobankTransnational Incorporated. Chairman of Ghana Airways Limited,Chancellor of the University of Cape Coast, Ghana. Member ofthe UN Global Compact on Governance. Member of the AdvisoryCommittee, Termite Fund which focuses on the mining and energyindustries in Africa in seeking investor interest. Member of theInternational Investment Advisory Council of the President ofSouth Africa.

    Dr Michael Peter Martineau* (2)Age 57. British. Appointed in February 2000. Director, Presidentand Chief Executive Officer of Carpathian Gold Limited and adirector of Adryx Mining & Metals Limited. Former director ofseveral mining and exploration companies in Africa, Australia,United Kingdom and USA including Cluff Resources Plc andSAMAX Resources Limited.

    Nicholas Jeremy Morrell* (2)Age 54. British. Appointed to the Board in February 1997. FormerDirector and Chief Executive of Lonmin Plc.

    Eleanor Darkwa Ofori AttaExecutive Director, Corporate RelationsAge 58. Ghanaian. Appointed in March 1994. She is responsiblefor corporate services including human resources.

    Trevor Stanley Schultz (4)Chief Operating OfficerAge 60. American/Australian. Appointed in October 1996. Director of Diamond Fields International Limited. Formerly Vice President of BHP Minerals International responsible forResources Development.

    Srinivasan Venkatakrishnan (Venkat) (4)Chief Financial OfficerAge 36. British. He joined the Board in July 2000 from Deloitte &Touche where he was a Director in the Reorganisation Services Division.

    * Non-executive

    (1) Audit and Finance Committee Member(2) Management Development and Remuneration Committee Member(3) Corporate Governance Committee Member(4) Risk Management Committee Member(5) Substitute director to E D Ofori Atta

    Board CommitteesAudit and Finance CommitteeThe Audit and Finance Commitee reviews and reports to theBoard on the compliance, integrity and major judgemental aspectsof the Groups published financial statements, the scope andquality of the internal and external audit and the adequacy of theGroups internal controls.

    Management Development and Remuneration CommitteeThe Management Development and Remuneration Committee isresponsible for the appointment of directors, determination of thelevel and structure of executive directors remumeration, and thereview of their performance and service agreements. It then makesrecommendations to the Board on these matters in accordancewith its terms of reference and reviews and approves successionprogrammes with respect to top management.

    Corporate Governance CommitteeThe Corporate Governance Committee is responsible for themonitoring of the general conduct of directors in line with bestpractice and screens individuals proposed for appointment to theBoard. It is also responsible for the non-financial aspects of theGroups safety, health and environmental issues and makesrecommendations, as appropriate, to the Board.

    Risk Management CommitteeThe Risk Management Committee reviews and monitorsexecution of risk management policies of the Group withparticular focus on financial risks, including hedging, and wherenecessary make recommendations to the Board.

    26

  • The directors present their report and the audited financialstatements for the year ended 31 December 2001.

    Principal ActivitiesThe principal activities of the Group are the exploration,development and mining of gold. The progress of the businessduring the year and likely future developments are reported in theChairmans Statement, the Chief Executives Review, OperationsReview and the Financial Review.

    Results and DividendsThe results for the year are set out on page 32. The Board does notrecommend paying a dividend for the year ended 31 December 2001(2000: nil).

    DirectorsDetails of the directors of the Company as at the date of this report are given on page 26. All the directors shown servedthroughout the year, with the exception of Mr T E Anin who wasappointed on 27 July 2001 and Mr G E Haslam who was appointedon 8 March 2002. Each of them will retire in accordance with theCompanys Regulations and being eligible, offer themselves forelection at the Annual General Meeting.

    During the year, Dr K Duffuor, Mr A Ashiabor and Dr D R Creedresigned as directors on 23 July, 31 July and 31 August 2001respectively. Mr John Neil Robinson also resigned as a director on8 March 2002.

    The directors retiring by rotation at the Annual General Meeting areThe Rt. Hon. The Baroness Chalker of Wallasey PC, Dr C A Crocker,Mr T R Gibian and Dr M P Martineau, who being eligible offerthemselves for re-election.

    Directors InterestsThe interests of the directors holding office at the end of the year inthe ordinary shares of the Company are shown in note 22 to thefinancial statements.

    None of the directors had any interests in the shares of any of theCompanys subsidiaries at any time during the year. None of thedirectors had a material interest in any contract of significance withthe Group during the year, other than Mr S E Jonah, who had aninterest in a Technical Services Agreement dated 14 March 1994between the Company and Lonmin Plc. Under this agreement,Lonmin Plc has agreed to provide, to Ashanti, technical services andthe services of Mr S E Jonah. As remuneration for such services, theCompany paid Lonmin Plc a total of US$0.7 million during the year(2000: US$1.8 million).

    Employee Relations and Employment PoliciesAshanti values its employees and attaches high importance toemployee relations and welfare. To ensure employee commitment itmaintains regular communication and consultation throughpersonal contact and the Companys internal communicationsystems. The Companys quarterly and annual reports aredisseminated to employees.

    Workers and staff are represented on Divisional Boards, the highestdecision making bodies at the operating level. The Companypractices an open door policy across the Group, which allowsworkers to discuss issues of concern to them.

    Ashanti does not discriminate on the basis of race, colour, religion, sexor disability and is committed to providing equal opportunities, safeand clean working conditions and attractive remuneration to staff.

    Policies on employment are developed and reviewed to suit prevailingconditions and the Group has comprehensive policy guidelines onHIV/AIDS awareness, prevention and control programmes.

    The Company recognises teamwork and endeavours to attract andretain the best talents by rewarding superior performance andproviding them with opportunities to develop their skills and applytheir creativity.

    Employee Incentive SchemesSince flotation in 1994, the Company has operated the AGC SeniorManagement Share Option Scheme (the Option Scheme) and the1994 Employee Share Scheme (the Employee Share Scheme). On25 April 2001, the Option Scheme and the Employee Share Schemewere re-adopted at the Annual General Meeting (each withmodifications). The Company also operates the Bonus Co-Investment Scheme that was introduced in 1999. Notes 21 and 22to the accounts on pages 48 to 51 detail the employee share schemesand other schemes currently in place.

    Share CapitalDetails of the changes in the share capital during the year, includingtreasury shares, are shown in note 21 to the financial statements.

    As has been our annual practice, the directors are seeking renewal,at the Annual General Meeting, of the authority to allot shares forcash with a disapplication of pre-emption rights. The directors haveno present intention of exercising the authority to allot additionalshares. Similarly, authority for the Company to purchase its ownshares, as and if appropriate, is being sought.

    DonationsCharitable donations for the year amounted to US$0.2 million. Nodonations were made for political purposes.

    Substantial ShareholdersDetails of the Companys 20 largest shareholders are shown onpage 59.

    Proposed Restructuring, Margin Free Arrangements and New Revolving Credit FacilityOn 25 January 2002, Ashanti announced that it had agreed termsin principle with an Ad Hoc Committee (Ad Hoc Committee) ofthe holders of 51/2% Exchangeable Guaranteed Notes due15 March 2003 (Existing Notes) representing approximately62% of the outstanding principal of US$218.6 million to aProposed Restructuring (Proposed Restructuring) of the ExistingNotes. The principal terms of the proposed restructuring are:

    Equitisation of US$54,642,750 of the Existing Notes(representing 25% of the Existing Notes) by the issue of ordinary shares in Ashanti (Ashanti Shares) at US$3.70 perAshanti Share.

    Exchange of US$163,928,250 of the Existing Notes(representing 75% of the Existing Notes) for US$163,928,250of 7.95% Exchangeable Guaranteed Notes due 30 June 2008(New Exchangeable Notes).

    The New Exchangeable Notes will be exchangeable by theholders into Ashanti Shares at any time at an exchange price ofUS$5.75.

    The New Exchangeable Notes will be mandatorily redeemableby Ashanti in semi-annual instalments of US$12 millioncommencing on 31 December 2003 to the extent not alreadyexchanged. The balance of any New Exchangeable Notes notexercised or redeemed will be repayable in full on 30 June 2008.Ashanti also has the option on each semi-annual redemptiondate to redeem an additional US$12 million of NewExchangeable Notes.

    Ashanti will, upon completion of the Proposed Restructuring,pay to the then holders of the Existing Notes an exchange fee of2% of the face value of the then outstanding Existing Notes. Inaggregate, this payment will amount to approximately US$4.37million.

    The Proposed Restructuring, which is intended to be implemented byway of a scheme of arrangement to be sanctioned by the Grand Courtof Cayman Islands, is subject to the satisfaction of a number ofconditions including: the preparation and despatch of formaldocumentation; listing of the new securities to be issued on the relevantstock exchanges; the approval of the requisite majorities of the holdersof the Existing Notes, Ashantis shareholders, and its hedgecounterparties; and the approval of its lending banks or repayment of

    Report of the Directors 27

  • Report of the Directors

    the Existing RCF. The members of the Ad Hoc Committee haveundertaken to vote in favour of the scheme of arrangement toimplement the Proposed Restructuring, subject to Ashanti complyingwith certain obligations and satisfying certain conditions within certaintime limits. In particular, the formal documentation to implement theProposed Restructuring must be posted by 31 May 2002 and therelevant scheme meetings held by no later than 31 August 2002.

    A pre-condition to the Ad Hoc Committee being bound by a writtenundertaking to vote in favour of the Proposed Restructuring wasAshanti entering into appropriate ongoing margin free arrangementswith its hedge counterparties, other than Credit Suisse First BostonInternational (CSFB). Interim margin free agreements (InterimMargin Free Agreements) have now been signed by all of Ashantisactive hedge counterparties other than CSFB (the Relevant HedgeCounterparties). However, one of the Interim Margin FreeAgreements (signed by a Relevant Hedge Counterparty, which hasagreed to novate half of its hedge book to Standard Bank LondonLimited conditionally only upon the Interim Margin Free Agreementsbecoming effective prior to 15 March 2003), is being held by Ashantislawyers subject to an escrow agreement. This Interim Margin FreeAgreement will be released from escrow to Ashanti on Ashanticertifying, prior to 15 March 2003, that it believes (acting in goodfaith) that, should the relevant Interim Margin Free Agreement bereleased from escrow, all the conditions to the Interim Margin FreeAgreements will become effective unless, prior to that date, Ashantihas been notified that there has been an event of default resulting in anearly termination event under the ISDA Master Agreement betweensuch counterparty and Standard Bank London Limited.

    All of the Interim Margin Free Agreements are now conditionalupon satisfaction of the following conditions (the Conditions)prior to 15 March 2003:

    the Proposed Restructuring (or such other restructuring as isapproved by an appropriate majority of hedge counterparties)being completed;

    release from escrow to Ashanti of the Interim Margin FreeAgreement currently held in escrow; and

    Ashanti having available to it loan facilities in an amount of notless than US$25 million available for drawing for workingcapital purposes for a period of not less than 15 months fromthe date of posting of the documentation to shareholders inrelation to the Proposed Restructuring.

    If the Conditions are satisfied at a stage when CSFB has not signed theInterim Margin Free Agreement then, subject to Ashanti complyingwith certain covenants and no events of default being declared, Ashantiwill benefit in the period after 31 December 2002 from ongoingmargin free trading arrangements unless CSFB is entitled to, andactually does, call for margin. Based on CSFBs current hedgebookwith Ashanti and current market conditions, Ashanti believes thatCSFB would only be entitled to call for margin after 31 December2002 as a result of breaching the enhanced margin limits if the goldprice exceeded approximately US$370 per ounce. It should be notedhowever that the threshold for a triggering of the margin limits inrespect of CSFB will also vary as a result of changes in US interest rates,gold lease rates and gold price volatility.

    Once the Interim Margin Free Agreements have become effectiveand have been signed by CSFB, the Interim Margin Free Agreementswill terminate and the Existing Margin Free Trading Letter with itshedge counter parties dated October 2000 (Existing MFTL) willbe amended and restated to provide for margin free trading on anongoing basis, subject only to certain limited termination rights.

    As part of the implementation of the Proposed Restructuring, Ashantihas mandated four banks to arrange a new US$100 million five yearrevolving credit facility (New RCF) for the Ashanti Group. Thosebanks or their affiliates have also agreed to underwrite the New RCF.The underwriting and the facility are conditional inter alia on (i)Interim Margin Free Agreements being signed by all the RelevantHedge Counterparties; (ii) execution of a facility agreement by nolater than 15 June 2002; (iii) on the non-occurrence of certainmaterial adverse changes; (iv) the Proposed Restructuring beingcompleted and (v) appropriate regulatory approvals.

    The Refinance Plan (containing the Proposed Restructuring, InterimMargin Free Agreements and New RCF) which Ashanti submitted

    to its hedge counterparties and its lending banks under the terms ofits Existing RCF and Existing MFTL has not been objected to byeither the hedge counterparties or the lending banks within theperiod permitted for objections.

    The above restructuring, once implemented, will improve Ashantisbalance sheet (by decreasing debt and increasing equity), extend thematurity profile of Group debt and increase Ashantis financialflexibility.

    Going Concern Ashanti has secured an extension of its working capital facilities,within the Existing RCF, on a voluntary basis from certain of itscurrent lending banks of US$25.4 million. This working capitalfacility is available for drawing only up to 30 December 2002. Thisworking capital facility, if drawn, falls due for repayment on30 December 2002. The outstanding balance of the Existing RCF fallsdue for repayment on 15 January 2003 and the Existing Notes falldue for repayment on 15 March 2003. Under the Existing MFTL,Ashanti benefits from margin free trading with its hedgecounterparties only until 31 December 2002 and from increasedmargin thresholds until 31 December 2004, subject in each case, tocompliance with covenants and no event of default being declared.The above matters raise substantial doubt about the Groups abilityto continue as a going concern.

    Ashanti is proposing to implement the Proposed Restructuring, theInterim Margin Free Agreements and the New RCF in order toensure the Companys continued operational existence. There remaina number of conditions which need to be satisfied in order for theProposed Restructuring to become effective and the Interim MarginFree Agreements and the New RCF to become unconditional. Therecan be no guarantees that these conditions will be satisfied. Shouldany of the relevant conditions not be satisfied or if the ProposedRestructuring is withdrawn for any reason, then it is possible that,unless a standstill or other accommodation is reached with its bankgroup, hedge counterparties and in due course the holders of itsExisting Notes, Ashanti might not be able to meet its debts as theyfall due. If the Proposed Restructuring is not successfullyimplemented during the current financial year, there will beuncertainty as to whether the Group will be able to continue inoperational existence for at least the next 12 months. However,taking into account the progress which Ashanti has achieved inrelation to the Proposed Restructuring, the Interim Margin FreeAgreements and the New RCF and other relevant factors, theDirectors have formed the judgement, at the time of approving thesefinancial statements that it is appropriate to continue to use the goingconcern basis in preparing these financial statements.

    AuditorsDeloitte & Touche have agreed to continue as the Companysauditors. A resolution to authorise the Board to determine theirremuneration will be proposed at the Annual General Meeting.

    Annual General MeetingThe Annual General Meeting of the Company will be held at theLen Clay Stadium, Obuasi, Ghana on Tuesday 28 May 2002 at11.00 a.m. Full details are given in the Notice of Meeting onpage 62 .

    Corporate GovernanceA statement on corporate governance under the Combined Code onCorporate Governance is set out at page 29.

    The Company has also joined the Global Compact of the UnitedNations Organisation (UNO), initiated by the UNO which isseeking wide participation from a diverse group of business andother organisations to prom