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CEO discussion | Context and strategy - AngloGold Ashanti Annual Reports 2011
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CEO discussion

Mr Mark Cutifani, Chief Executive Officer [photo]

Mark Cutifani, Chief Executive Officer

PODCAST

Sustainability has been an overused word in our industry and is in danger of confusing and masking the simple things we need to do well in our business. Sustainability is about living our values, making sure we treat all of our business and social partners with dignity and respect. If we respect people, the environment and the communities in which we work we will never be far from our goal of leading a sustainable business... and living our vision of being ‘the leading mining company’.

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A POSITIVE CONTRIBUTION TO SOCIETY

Our business and sustainability strategy

AngloGold Ashanti’s vision is to be ‘The Leading Mining Company’. The vision that we share as colleagues is not meant to be a statement of final intent, but a torch that should light our way as we develop a company that is always looking to do better. It speaks to our desire to continuously improve all aspects of our business so that we are seen as positive contributors to society and exceptional managers of the assets that have been entrusted to our care and development. In the context of our vision, we have defined long-term success as the progressive improvement of our business across seven areas of focus:

  • Safety... to care for the safety and health of every employee and business stakeholder.
  • Environment... to minimise our environmental footprint in the context of our business activities.
  • People... to recognise people are more than assets and have the potential to create a business that leads the industry in terms of social and business outcomes.
  • Production... to maintain a critical mass that supports our leadership position in gold and the delivery of value to our shareholders and our social partners.
  • Costs… recognising we must be industry competitive so that we can manage and make long-term decisions that are consistent with delivering long-term sustainable value.
  • Returns… to ensure we are creating value that ensures the long-term benefit and support of our shareholders.
  • Community… to deliver value in the context of our community stakeholders that ensures the long-term support of our “partners in development”.

We believe our vision and the areas of focus that we have identified are consistent with the concept of ‘sustainable development’, as they span the three pillars of economic, social and environmental stewardship. Building our sustainability model is about building long-term competitive advantage.

At AngloGold Ashanti we see ourselves as a global company. While we are immensely proud of our South African and Ghanaian roots and respectful of the relationships we have formed in both jurisdictions, we recognise that we must be flexible and operate consistently with the cultures and values that exist within each of our local and national constituencies. As a global company we acknowledge that we are partners in development in the various jurisdictions in which we work – respectful of the cultures and the laws that we work within. We have an obligation to work constructively within our global jurisdictions and we believe that by treating all of our partners with dignity and respect we will be offered the same respect, will receive appropriate support for our business ventures and will have our rights respected in equal measure.

We believe the emerging issues of resource nationalism, increasing limitations on access to prospective ground and increasing resource rents are a partial function of a failure of the mining industry to engage effectively with its key stakeholders. To our key stakeholders it appears we may have taken our local communities and the various levels of governments for granted. AngloGold Ashanti is therefore developing its sustainability strategy around the concept of rebuilding trust with local communities, regulatory authorities and government leaders. We have taken a value-based approach – only through thoughtful engagement will we rebuild trust – and only through trust will we be provided access to properties that have significant resource potential. Agreeing fair and reasonable terms of engagement must be a function of understanding and trust. Through a broad range of sensitive development and operating practices and reasonable fiscal arrangements that deliver equitable outcomes, we will be able to access the ground necessary to sustain our business for the long term.

Our initial steps are focused on getting the basics right. This includes limiting our environmental footprint, reducing energy and input consumption, improving our connection to local communities and developing our understanding of what human rights should look like in terms of our behaviours and interactions.

Our objective is to build a company that can leave a positive legacy, as a partner in a new future with our communities and other stakeholders.

Purpose of this report

In this report, we set out where we are in our journey and we identify existing and emerging issues that we believe require greater focus and careful attention. These are the aspects that have the most significant impact on our business and we recognise that our actions on these points will define the level of success we have in creating a new and more effective partnership model for our business... a partnership built on trust.

Global sustainability themes in 2011

Turning to an account of 2011, there are a number of global sustainability themes which have shaped our thinking and our actions. The achievements that have been delivered as a result of these actions have also been detailed... both to demonstrate progress and to give a sense of what we believe success looks like.

Resource nationalism, which manifests itself in multiple jurisdictions across the globe, is seen in governments demanding more from companies that are developing natural resources, whether through revisions of mining codes and agreements, increased royalties, taxes or duties.

The reasons behind these shifting conversations are generally social and economic in nature. They are a result of poverty and income inequality, unmet expectations, youth unemployment and the lack of alternative economic activities – symptomatic in some cases of uncoordinated economic development strategies at national, regional and local levels of government. We believe we can play an effective role in bringing experience, skills and commitment to support communities in achieving the objectives they have set for themselves. Our role is not to judge what is right or wrong in terms of community aspiration – but to be a catalyst to support and foster local leadership to deliver on their vision.

Mining is a significant contributor to local economic development, through employment, payment of taxes, community investment and procurement. However, the sector has not always coordinated these contributions in a way that allows communities to obtain optimum benefit from the exploitation of mineral resources. Nor has the industry focused on reporting the substantive nature of these contributions. To succeed, we may need to clarify the boundaries within which a mining company should act and how it should relate to other parties who take the lead on developmental issues, principally governments and communities themselves.

Related to resource nationalism is increased competition for shared resources, such as access to potable water, land for agriculture and other purposes and energy. We need to ensure that we use natural resources in mining processes as efficiently and carefully as possible. In this regard we are improving environmental management at our operations by implementing company-wide standards in the areas of greatest potential impact, for example water, land use, waste and dust control. We are also developing a standard on biodiversity to meet growing concerns in this area. Meeting the requirements of these standards will enable us to make continuous improvements in our environmental performance and achieve our long-term business target of operating without reportable environmental incidents.

Unregulated artisanal mining and illegal mining activities present increasing risks in terms of environmental degradation, safety, security and increasing tensions with some communities. We will focus on constructive engagement to find solutions tailored to each community, resulting in mutually beneficial relationships and viable alternative economic livelihoods.

Achievements in 2011

In 2011 we continued to improve our safety and health performance towards our vision of ‘going beyond zero harm’. We reduced our all injury frequency rate by over 15% in 2011. The number of silicosis cases reported for compensation reduced significantly from 2010, by 43%. Progress on reducing the incidence of occupational tuberculosis at South African operations has also been substantial, with incidence dropping 31% to 1.8 cases per 100 employees in 2011 through sustained interventions such as the provision of voluntary counselling and testing (VCT) and antiretroviral therapy (ART), a continued focus on dust suppression and the introduction of mobile testing units to enable early detection of the disease.

In the area of environment and natural resource management, we have maintained the 51% improvement in the number of environmental incidents that we were able to achieve against our 2008 baseline in 2010. We are developing strategies in areas of climate change, water security and reductions in energy consumption and costs including use of technology and alternative strategies that involve governments, communities and other business partners.

An example of successful partnership is the work that is being driven in our South Africa region through the Technology and Innovation Consortium (TIC), harnessing creativity from outside the mining industry to develop innovative solutions to mining safely at greater depths. This work is being undertaken in conjunction with the design of a socio-economic development model, which is a necessary component of our strategy if we are to make a successful transition from a labour-intensive to a technology-driven mode of operating.

In the area of security, we have experienced challenges in 2011 relating primarily to the growth of illegal mining, incentivised by a higher gold price and tough economic conditions. However, our refocused security strategy is likely to yield better results in the future.

In emerging issues, such as the debate on ‘responsible gold’ and ‘conflict minerals’, we have worked together with industry partners, governments and others to develop industry-wide approaches that enhance the reputation of the industry and support human rights, social stability and development. This has required the investment of resources into supporting the various standard-setting activities that are underway on responsible gold, and for us to integrate into our thinking on sustainability.

Public policy and stakeholder engagement

Our public policy and broader stakeholder engagement work is essential to maintain our social licence to operate. We actively support the objectives of the International Council on Mining and Metals (ICMM), the United Nations Global Compact (UNGC), the Extractive Industries Transparency Initiative (EITI), and the Voluntary Principles on Security and Human Rights (VPSHR), among others, which help us improve our performance and find areas of mutual interest and cooperation to co-design solutions.

Our sustainable development framework

We set out our intention in our sustainable development framework to rebuild the way in which we work with and relate to our key stakeholders, and in particular our host communities. In terms of this framework, we are placing increased focus on developing projects in partnership with communities and governments, aiming to undertake community investment in a more consistent and coordinated way that enables communities around our operations to reach their development goals.

This approach will require us to engage with communities, governments, NGOs, other mining companies, suppliers and others to identify and co-design approaches to deliver on shared goals. To succeed, we need to build a new relationship based on trust and sustained contributions to the development of communities. Progress on delivering on objectives must be measured by performance indicators that are developed with our partners.

The sustainable development framework aims to take a holistic view of sustainability – understanding connections and the range of possible impacts on our operations. Sustainability in this sense is essential to the long-term viability of our business, and it is therefore critical that our strategy addresses issues from exploration, through projects, operations and closure.

At each stage in the operation life cycle, we will therefore define clear long-term positive outcomes in line with our strategic intent, vision, mission and values.

I look forward to reporting back on how we are progressing with this framework and further refining our strategy in 2012.

Mr Mark Cutifani
Chief Executive Officer

16 March 2012