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Our strategy and strategic objectives –
Manage the business as an asset portfolio

Tony O’Neill, Executive Vice President - Business and Technical Development

Tony O’Neill
Executive Vice President –
Business and Technical Development

PODCAST

... Both the greenfields and brownfields [exploration] are showing great promise... greenfields in Colombia, Africa and the Middle East and brownfields in Guinea and Tanzania.

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MANAGING SHAREHOLDERS’ FUNDS OPTIMALLY REQUIRES CONTINUAL FOCUS ON CAPITAL DEPLOYMENT. WE SEE THE BUSINESS AS AN ASSET PORTFOLIO WHERE CAPITAL IS CAREFULLY MANAGED TO MAXIMISE RETURNS.

How we are implementing this strategy

Our ambitious growth targets are balanced by our approach to portfolio management which ensures that growth is delivered while securing optimal returns for shareholders.

We carefully consider the allocation of capital within the group, applying asset portfolio management principles to the evaluation of projects and the assessment of potential growth opportunities. Short- and long-term spending priorities are balanced to ensure that the quality of production ounces is continually improved. This approach also requires the evaluation and management of the constraints and risk factors that exist in relation to each production asset. Capital deployment is optimised by investing only in assets and growth opportunities which offer superior returns.

Each asset and project is regularly reviewed as part of the company’s annual business planning process. Projects are evaluated in absolute and relative terms to assess whether:

  • the risk-adjusted rates of return have been met;
  • the relative strengths and weaknesses of the portfolio have been identified, with a particular focus on risk and opportunities;
  • effective strategies have been implemented to use resources optimally;
  • operating performance is optimal and based on the most appropriate methods and design; and
  • detailed planning and scheduling has been undertaken, and best-practice operating methods are used at each asset.

While operational management continues to be heavily involved in portfolio reviews and evaluation, a long-term perspective is also required for this process. A dedicated team has been established, and this team will conduct a rolling review of all of the group’s assets as well as evaluating other potential growth opportunities.

Strategy in practice: 2008 asset assessment delivers results

Through continuous assessment and evaluation of the portfolio, actions to improve operational performance at existing assets were identified. The portfolio was also rationalised, and new opportunities identified.

An internal assessment of our asset portfolio by region was undertaken in 2008, and the same assessment was undertaken in September 2011.

All operations were assessed as to whether they had delivered:

  1. a “best performance”
  2. a “solid performance”
  3. was showing a turnaround – with good trends
  4. improvement was needed
  5. was a cash drain and a material risk as a result

In 2008, three operations – Geita, Cerro Vanguardia and Obuasi showed evidence of being a “material risk” given the cash flow drained from the company. Only two operations – in South Africa and Australia – showed “solid performance” and no best-performance assets were identified. EBITDA from each region was also charted as a fundamental measure of performance.

By 2011, the picture had significantly changed (see below). No operations evidence “material risk” and while a few still require improvement, most operations show a “solid performance” or “good trends” towards a turnaround. Free cash flow has improved significantly.

EBITDA [graph] Free cash flow [graph]
September 2011 operational performance assessment
September 2011 operational performance assessment [chart]
  1. 1
    United States

    Cripple Creek & Victor

  2. 2
    Brazil

    Serra Grande
    AGA Mineração

  3. 3
    Argentina

    Cerro Vanguardia

  4. 4
    Guinea

    Siguiri

  5. 5
    Mali

    Yatela
    Sadiola

  1. 6
    Ghana

    Iduapriem
    Obuasi

  2. 7
    Namibia

    Navachab

  3. 8
    South Africa

    TauTona
    Mponeng
    Surface operations
    Moab Khotsong
    Great Noligwa
    Kopanang

  1. 9
    Tanzania

    Geita

  2. 10
    Australia

    Sunrise Dam

  1. Best performance
  2. Solid performance
  3. Turnaround – good trends
  4. Improvement needed
  5. Cash drain – material risk