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Our strategy and strategic objectives –
Grow the business

WE ARE DEVELOPING A RANGE OF OPTIONS FOR GROWTH, RECOGNISING THAT THIS IS A KEY DRIVER OF VALUE. OUR GROWTH FOCUS IS BALANCED BY THE IMPERATIVE TO GENERATE SUSTAINABLE RETURNS FROM CURRENT OPERATIONS.

How we are implementing this strategy

Growth is included as a core strategy as it is a key longer-term driver of cash flow and financial performance and is essential, if we are to meet our targets, for the sustained delivery of shareholder returns.

We have set ambitious targets for production growth. Our objective is to achieve a gold production base of between 5.4 and 5.6Moz by 2015, increasing current output by some 22% over the 2010 baseline. We are also targeting increased contributions from uranium.

Our growth targets will be achieved through:

  • Greenfield exploration which is a key value driver, enabling the business to generate production ounces at competitive cost. Major discoveries have been recorded by our greenfield exploration team in Colombia, Australia and the DRC. During the year, we continued to advance exploration opportunities across target areas in Colombia, the Tropicana belt in Australia, the DRC, the Middle East and North Africa, and in the Solomon Islands. Tropicana, the product of successful greenfield exploration, is scheduled to pour its first gold in late 2013. As a result of this work, we have now established an exceptional portfolio of global exploration projects, with the potential to add significantly to our production profile over the next 10 years. See Review of exploration and development for further details and Annual Financial Statements 2011Global exploration.
  • Brownfield exploration where we leverage our current infrastructure at existing operations by increasing reserves or making new discoveries in close proximity to operations. Brownfield exploration is a low-risk option for growth which generates significant value. For example, extensive brownfield exploration has taken place at Cerro Vanguardia in Argentina and Cripple Creek & Victor in the USA with good results. At the Córrego do Sítio mine in Brazil, successful brownfield exploration has led to the development of a new operation. Production at this mine began in November 2011. See Review of exploration and development for further details and Annual Financial Statements 2011Global exploration.
  • Organic growth is achieved through effective project development, bringing a range of projects to successful production. Teams are engaged in progressing heap leach and underground projects at Cerro Vanguardia; expansion at Cripple Creek & Victor, at Tropicana in Australia; in Continental Africa, advancing the Kibali and Mongbwalu projects in the DRC and the Sadiola Deep Sulphide projects in Mali, contingent on the completion of bankable feasibility studies. See Review of exploration and development for further details and Annual Financial Statements 2011Project review.
  • We will selectively pursue value-accretive merger and acquisition opportunities as they arise.
  • We will maximise the value from other commodities, including uranium, within our existing and developing asset portfolio.

The components of our growth strategy work together to create a range of options for investment in future production ounces, enabling us to define a growth path which will continue to build a portfolio of high-quality assets.

Strategy in practice: Acquiring cost-competitive ounces through greenfield exploration

AngloGold Ashanti’s greenfield exploration strategy has enabled the addition of production ounces at relatively low cost. By way of example, the acquisition cost per ounce for the Kibali Gold project was $37/oz, and our greenfield/brownfield exploration cost per ounce is in the region of $30/oz.

Our objective is to achieve a return greater than 25% on exploration investment. Discovery costs are targeted at $25/oz. We estimate that, since 2002, we have generated extensive value in our exploration portfolio from these recent discoveries. If prices paid for several recent acquisitions are applied to the ounces discovered (some in excess of $300/oz for projects still in exploration phase) the intrinsic value of these discoveries could run into billions of dollars.

Our portfolio of exploration assets is carefully managed to ensure an adequate balance between early stage and advanced projects in known and emerging exploration regions. Projects are either wholly owned or undertaken in partnership with others, to maximise the range of opportunities in which we can participate while balancing risk. Local partners bring valuable country or regional knowledge. Strategic partnerships at regional level, such as our joint venture with Thani Industries in the Middle East and North Africa, enhance our ability to add to our exploration portfolio in a way that manages risk and is value-accretive. Significant progress has been made through this partnership.

In 2009, the exploration team expanded its activities to include marine exploration, forming a partnership with De Beers to explore on the continental shelf. This programme is continuing in 2012.

For 2012, expensed exploration expenditure of $232m is planned. In addition $150m will be spent on various studies. See Review of exploration and development for further details.

We frequently review our exploration portfolio to ensure that exploration assets that do not meet our investment criteria can be sold to generate funding for future positions and opportunities and to ensure that an interim return is captured.