Avgold Limited – Report for the quarter ended 30 September 2001

Headline earnings for the quarter decreased as a result of a foreign exchange loss on target borrowings people on a full
ETC gold sales increase, but cash costs higher
ETC sale process continuing
target remains on schedule for full production
Exploration drilling programme in the paradise area ahead of schedule
Johannesburg, 24 October 2001: Avgold Limited has today reported a headline loss for the quarter ended 30 September 2001 of R674 000 (30 June 2001: R14,3 million – profit). The quarter’s results reflect a lower operating profit of R6,5 million (R11,8 million) and earnings were also affected by a non–capitalised foreign exchange loss of R7,3 million on Target’s borrowings.

Avgold’s revenue for the last quarter increased to R65,5 million (R58,3 million), while costs and expenses were higher at R59 million (R46,5 million). It is anticipated that a similar effect on earnings as a result of a foreign exchange loss will occur at the end of the current quarter.

Operational Review
Gold sales at ETC increased to 738kg (721kg), but cash costs were higher at R69 090/kg (R55 977/kg), or US$259/oz (US$217/oz), as a result of mining lower grades as well as higher labour and stores costs. Avgold Executive Director, Gerhard Potgieter commented, “the low block factor at ETC’s Fairview mine, and to some extent at the New Consort mine, resulted in a lower grade for the two mines and nearly 50kg less gold.” ETC’s Sheba mine, however, maintained its head grade at 12,88g/t, which resulted in ETC’s overall yield averaging 8,61g/t (8,54g/t) for the quarter. All gold sales were largely delivered against hedge commitments resulting in an average selling price of R88 791/kg (R80 819/kg), or US$333/oz (US$313/oz). ETC’s capital expenditure for the quarter amounted to R5,8 million.

Potgieter continued, “the process to assess the possibility of disposing of the ETC mining complex is continuing. Discussions are underway with various parties and final bids are expected shortly. It is anticipated that a final decision will be made during the current quarter.”

The Target mine remains on schedule to achieve full production by the first quarter of calendar 2002. Development advanced at a rate of 1 343 meters (1 009 meters) for the quarter, inclusive of reef development. As a result of higher than expected grades in the narrow reef mining area, and increased production, Target’s gold sales rose to 841kg (510kg), the proceeds of which were capitalised.

“All work,” said Potgieter, “on Target’s underground crushing, refrigeration and water handling facilities is progressing satisfactorily and the back fill plant has been commissioned. The surface metallurgical plant will start commissioning next month.”

Target, which now employs 450 people on a full time basis, spent R131 million (R181 million) on capital during the quarter and remains within budget.

Northern Free State Exploration
The surface exploration programme in the Paradise area, located immediately north of the Target mine, started during July 2001 with the percussion drilling of two pilot holes, ERO 5 and ERO 6. The exploration programme is ahead of schedule and first reef intersections are expected during the current quarter.

Hedging
The mark–to–market value of the Avgold hedge book based on a gold price of US$292/oz and an exchange rate of R8,99 : US$1,00 was a negative R326 million, and represents 58 per cent of forecast gold production to June 2006.

Julian Gwillim
General Manager, Investor Relations