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Annual report suite 2012

Adding value

“Resource nationalism has been driven by the ambition of governments and communities to obtain more benefit from the extraction of mineral wealth from their countries and their perceived increase in resource profits. This manifests as increasing demand to control and extract maximum economic interest from their natural resources through revisions to existing mining legislation, codes and agreements, as well as through increased royalties, taxes and duties and increased state participation in mining mainly through direct equity holdings.”

{Yedwa Simelane, Senior Vice President: Corporate Affairs}
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CASE STUDY

Community development fund supports sustainable projects in Solomon Islands

Each surface landowner agreement signed for exploration in the Solomon Islands provides for a community development fund –administered via trusts – to support sustainable projects.

See case study: Greenfield exploration – Community development fund an integral part of exploration in Solomon Islands

CASE STUDY

Partnering with indigenous stakeholders to create jobs

AngloGold Ashanti Australia‛s proactive approach to stakeholder liaison is demonstrated by its approach to dealing with local, indigenous communities. To date, AngloGold Ashanti Australia has awarded some Au$30m in contracts to Aboriginal groups at the Tropicana mine.

See case study: Australasia – Partnering with indigenous stakeholders

CASE STUDY

A focus on beneficiation

In all the countries in which we operate, governments are focusing on value-adding activities that benefit the local economies, either by increasing revenue or upskilling their people. Adding value to our mineral product before export from the country of origin is a serious aspect of the business.

See case study: South Africa – A focus on beneficiation

The mining industry is faced with negative perceptions about its contribution to societies in which it operates all over the world.

Increased competition for shared natural resources, such as access to potable water, land for agriculture and other purposes, as well as energy shortages, negative impacts on the natural environment and social fabric, and unmet expectations have added further on-the-ground impetus for governments to demonstrate tangible economic benefits for communities.

Resource nationalism continues to be a significant risk facing resource companies in 2012. This rising trend was spurred by a commodities supercycle that yielded significant profits and precipitated increased competition for access to scarce resources, combined with domestic socio-economic pressures and rising community expectations. The global financial crisis, increasing youth unemployment and increasing poverty levels has exacerbated the situation.

An additional element in this debate is the challenge that is often presented by a lack of capacity within local and national governments and, indeed, a lack of co-ordination between government entities, which may result in the failure of timeous and efficient application of payments to government by mining companies. This results in governments not meeting the expectations of society, and serves to blur the lines between the expectations of delivery by mining companies with those of government.

What we said we would do

AngloGold Ashanti believes that mining can play an effective role in bringing skills and tangible experience to support and partner communities to achieve their development objectives.

Mining is a significant contributor to local economic development, through employment, payment of taxes, community investment and procurement.

In 2011, we committed to:

  • designing a group-wide framework to address sustainable development issues in a more systematic way;
  • various ongoing development and community investment initiatives, in partnership with communities and governments;
  • development of more consistent engagement strategies to support the implementation of the sustainable development framework and demonstrate the benefits of Responsible Gold;
  • demonstrating the benefits that flow from mining to communities; and
  • adding value to our product.

Key performance indicators

Payments to governments by country

Our performance in 2012

Progress has been made in designing a group-wide framework to address sustainable development issues in a more systematic way. In 2012, we appointed a social and sustainable development executive, David Noko, to progress this further. An important feature of the approach is to enable cross-learning across the company’s global operations. An example of this would be to learn from experiences in Brazil, where the incidence of new cases of silicosis has been eradicated.

Our economic value-added statement, which follows, illustrates the economic value created by the group in 2012, and the way in which this was distributed.

In our South Africa operations, the Department of Mineral Resources (DMR) has approved the Social and Labour Plans for West Wits and Vaal River operations for the period 2010 - 2014 which has also resulted in the granting of the mining rights for the Groot Draai and Magnum Farm mining areas.

The Environmental Management Plans (EMPs) for both the West Wits and Vaal River operations were also approved by the DMR.

The above mentioned achievements are the statutory requirements and conditions of our licence to operate.

Distributions made in 2012 were as follows:

  • direct contributions to regional and local development through community investment expenditure of $18.6m in 2012 ($20.6m in 2011). This excludes expenditure by our joint ventures. See Community investment under Delivering sustainable community benefits for further information;
  • employment opportunities – in 2012 AngloGold Ashanti employed 65,822 people, including 17,993 contractors. As far as possible, AngloGold Ashanti seeks to recruit and employ people from the region and country of operation;
  • employee salaries, wages and other benefits accounted for 23% of economic value distributed. The total contribution in 2012 was $1.56bn (2011: $1.46bn);
  • operating costs made up the greatest single component of economic value distributed at 40%;
  • corporate taxation in 2012, this amounted to $413m (2011: $407m). An analysis of our payments to government in line with the Extractive Industries Transparency Initiative (EITI)* is presented below. Payments to government includes direct and indirect taxes, duties and royalties. Note also our commitment to reporting in line with the Dodd-Frank Act legislation – see Responsible Gold;
  • payment of dividends to shareholders of $215m (2011: $131m); and
  • payments to providers of capital (banks, lending institutions) other than shareholders of $231m (2011: $196m).
  1. * The EITI is a global standard for extractive companies to publish what they pay and for governments to disclose what they receive in the interests of transparency and good governance. AngloGold Ashanti is an organisational supporter of the EITI. We disclose all payments made to governments whether or not the country concerned is EITI compliant. Of the countries in which we operate, Mali and Ghana are compliant with the EITI and Guinea, Tanzania and the DRC are candidate members.

Economic value added statement for the year ended 31 December
US Dollar million % 2012 % 2011
Economic value generated        
Gold sales and by-product income (1) 99 6,559 97 6,794
Interest received 1 43 1 52
Royalties received (2) 0 23 1 79
Profit from sale of assets (3) 0 14 0
Income from investments (4) 0 7 1 75
Total economic value generated 100 6,646 100 7,000
Economic value distributed        
Operating costs (5) 40 2,689 36 2,519
Employee salaries, wages and other benefits 23 1,559 21 1,459
Payments to providers of capital 7 446 5 327
– Finance costs and unwinding of obligations 4 231 3 196
– Dividends (6) 3 215 2 131
Corporate taxation        
– Current taxation 6 413 6 407
Community and social investments (7) 1 19 0 21
Loss from investments (8) 1 28 0
Total economic value distributed 78 5,154 68 4,733
Economic value retained 22 1,492 32 2,267
  1. (1) Gold sales and by-product income were lower due to less gold produced as a result of the strikes at the South African mines and operational issues at Obuasi.
  2. (2) In 2012, royalties received were $20m lower at Boddington joint venture. In 2011 royalties received included $35m from the sale of Ayanfuri.
  3. (3) AngloGold Ashanti disposed of 5% of its interest in Rand Refinery, resulting in a profit of $14m.
  4. (4) In 2012, income from investments included dividends received from Village Main Reef Gold Mining Company and First Uranium Canada Limited totalling $7m. In 2011, income from associates included share of equity-accounted investments profit of $73m.
  5. (5) Operating costs were higher in 2012 and included higher labour, power and fuel costs which were mainly inflationary related.
  6. (6) The increase in dividends was mainly due to a management decision to improve dividend yield.
  7. (7) Community and social investments exclude expenditure by equity-accounted joint ventures, social leases, social infrastructure and entities in preproduction phase.
  8. (8) In 2012, loss from investments mainly related to impairments of equity-accounted investments.

Significant financial assistance received from government (EC4)

Significant assistance received by the company in any of the jurisdictions in which it operates is detailed in the following table:

Value ($000) 2012 Description 2011
Argentina      
Cerro Vanguardia 8,007 Income tax 30% 8,991
Australia      
Sunrise Dam 11,589 Diesel fuel rebate 10,562
South Africa      
South African operations 2,893

Skills development levy  credit

Mining Qualification Authority discretionary grants

2,891
  1,475 Free TB drugs 870
AngloGold Health 114   244

Financial and in-kind contributions to political parties and related institutions by country (SO6)

Our policy in relation to political donations is available on our website. The value of financial and in-kind contributions to political parties, politicians, and related institutions by country in 2012 is reported as follows:

Country $
Brazil 379,477
USA 2,550
South Africa 21,361
Total 403,388

Apart from the donations made in Brazil, South Africa and the USA, no other donations were made to political parties, politicians and related institutions either financially or in-kind.

Policy, practices, and proportion of spending on locally-based suppliers at significant locations of operation (EC6) RA

Our policy and practice is to engage and transact with suppliers in the communities surrounding our operations and in the countries in which we operate. Through this procurement practice, AngloGold Ashanti plays an active role in the expansion of the local economy by encouraging local skill development, providing business opportunities and a platform for technology enhancements which will lead to sustainable local businesses.

Local supplier development has been identified as an important lever in increasing our contribution to local economies. This has led to our participation in business development groups and supporting training and development of local suppliers. Our approach is to source locally, if the product is available and is supported by the country’s infrastructure and supply capacity.

The summary of the local spend percentages in the table below includes goods which are indirect imports as well as locally-produced goods. They are based on best estimates. Local spend includes all spend with locally registered suppliers and companies.

In the South African region, AngloGold Ashanti has recognised the need to contribute to the transformation of the country from a socio-economic perspective by transacting with black economic empowered (BEE) suppliers, where black ownership is greater than 25% plus one vote. The spend value with BEE suppliers was approximately $359m (2011:$315.4m) of the total $797m (2011:$731.5m) measurable procurement expenditure. AngloGold Ashanti also continues to measure its performance based on the Department of Trade and Industry’s (DTI) “Codes of Good Practice” where it achieved a score of 19.42 (2011: 19.5) out of a possible 20 points, representing 98% compliance on the Broad Based Black Economic Empowerment (BBBEE) basis.

Procedures for local hiring and proportion of senior management and workforce hired from the local community at significant locations of operation (EC7)RA

Senior management is defined within the organisational hierarchy as those employees occupying the roles of Stratum IV and above, as defined by the level of work complexity ranging from Stratum I – Stratum VII. AngloGold Ashanti is committed to hiring employees from local communities as far as this is possible. The practice and requirements differ from site to site, and from country to country:

In South Africa, legislation requires that we report on the number of historically disadvantaged South Africans (HDSAs), including women, at various levels of the workforce. Although recruitment is not limited to areas local to operations, our operations in South Africa are committed to employing a workforce that is representative through employment practices that are equitable, based on ability, objectivity and fairness and aligned to relevant legislation, organisational policies and strategies such as the 5 year employment equity plan at our Corporate Office headquartered in South Africa. In 2012, 79% of our workforce was deemed to be local and 31 % of our senior management were local hires. In 2012, the South African regional workforce senior management team was comprised of 100% local hires, with 74% of the remainder of the total South African regional workforce sourced locally.

In Mali, an agreement exists between local community authorities and the mines to fill 50% of job vacancies not requiring qualifications from the surrounding local communities. In 2012, 37% of our workforce was deemed to be local, and currently none of the senior management is local.

In Guinea, country regulation allows us to employ expatriates only if positions cannot be filled by locals within a reasonable time frame. Currently no local hires could be sourced for senior management, and less than 2% of the workforce is locally hired. Training programmes, career planning and development contribute to implementing the localisation plan in order to comply with the new mining code.

In Ghana, if local citizens are not identified for career vacancies, expatriates can be recruited as appropriate. In 2012, 88% of our workforce was deemed to be local and 38% of our senior management at our Obuasi mine, and 93% of local workforce at Iduapriem with one expat appointment in the senior management category.

In Tanzania, the Tanzanian Investment Act stipulates that a maximum of five expatriates may work in Tanzania in supporting the business. Other employees must be Tanzanians. In support of the company’s localisation programme, recruitment at our Geita mine in Tanzania is undertaken locally before external searches are carried out. In 2012, 96% of our workforce was deemed to be local, and 17% of our senior management.

In Namibia, 93% of our workforce was deemed to be local and 88 % of our senior management.

In Argentina, an agreement is in place with our local partner Fomicruz (which is owned by the province of Santa Cruz), which establishes the hiring of local people as a priority. 98% of employees at the operation are Argentinean citizens, including all senior managers.

In Brazil, our policy is to hire employees from communities where we have operations. In 2012, 100% of our workforce was sourced from the local community. All senior management are Brazilian citizens.

In Australia, due to the remote locations of our mining operations in the Western Australian region, operations have no significant “local community” from which to source labour and operate on a fly-in, fly-out basis. Due to the current skills shortage facing the Australian mining industry, labour is also sourced internationally to meet demand, however all available options within the Australian labour pool are exhausted before pursuing international applicants. 95.5% of employees in the Australian region are Australian citizens or permanent residents.

In the USA 100% of the local workforce and senior management team are local citizens.

In Colombia 33% of the senior management team are local hires, with 61% of the workforce locally sourced.

Proportion of spending with locally based suppliers

(%) 2012 2011
Argentina (1) 85 85
Australia (1) 88 98
Brazil (2)44 81
Serra Grande 44  
AGA Mineração 79  
Colombia (1)  85
Gramalote (1) 8  
La Colosa (1) 10  
DRC(1) 51 60
Ghana – Obuasi (1) 69 49
Ghana – Iduapriem (1) 84 77
Guinea(1) 73 67
Mali – Sadiola(1) 59 67
Mali – Yatela(1) 92 74
Namibia (1) 82 89
South Africa (1) 85 99
Tanzania (1) 59 56
USA (2) 75 39
AngloGold Ashanti Weighted Average 72 72
  1. (1) Local spend is defined as spend in country.
  2. (2) Local spend is defined as spend in the state in which the operation is located.

Adding value to our product

Our mission statement is to create value for our shareholders, our employees and our business and social partners through safely and responsibly exploring, mining and marketing our products. Our primary focus is gold but we will pursue value creating opportunities in other minerals where we can leverage our existing assets, skills and experience to enhance the delivery of value. The marketing strategy and focus is informed by our vision.

Beneficiation, or value addition to our product, is therefore part of our belief that we need to take care of our product – from the initial exploration phase, through mining, to marketing. For us, the marketing aspect goes beyond selling the refined product and is evidenced by a number of initiatives we have undertaken over the years to demonstrate our support for downstream activities.

Jewellery accounted for 43% of gold demand in 2012. AngloGold Ashanti has been instrumental in initiatives that are aimed at supporting the gold market. India is the largest market for gold jewellery and China the fastest growing market for gold jewellery in the world.

The main focus of our activities has been in improving gold jewellery design because we believe the jewellery market provides the “floor” for support for the gold price. So by not taking care of the market that utilises the gold we produce, we will not understand one of the key drivers for our product and will see a long-term decline in gold uptake. Our other focus is research, development and innovation in the multiple uses of gold.

AuDITIONS

The Global Gold Couture Jewellery Design competition

AuDITIONS is a global gold jewellery design competition that was launched by AngloGold Ashanti in 1999. It is the largest gold design competition in the world, with competitions in Brazil, South Africa and China (in China we partner with the World Gold Council). The competition aims to increase gold’s desirability and push the envelope in gold jewellery design, by encouraging bold new designs in high gold caratage.

Our other value-add activities include strategic investments in the Rand Refinery (Pty) Limited in South Africa, and the Quiroz Plant, in Brazil. The refinery produces semi-finished products that feed into the jewellery supply chain and gold investment markets. The refineries are an important link between the gold mining activity and the end refined product, illustrating our role in the gold market beyond exploration and mining activities.

We also have a strategic investment in Oro Africa, a jewellery manufacturing company. This creates and supports jobs in the gold manufacturing industry as well as supporting skills development.